What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-05-18 compared with 2021-06-02 · 232 added, 175 removed, 622 unchanged (40% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

We have audited the internal control over financial reporting of Hawkins, Inc.

(a Minnesota corporation) and subsidiaries (the “Company”) as of March 28, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 28, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended March 28, 2021, and our report dated June 2, 2021 expressed an unqualified opinion on those financial statements.

(a Minnesota corporation) and subsidiaries (the “Company”) as of April 3, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 3, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended April 3, 2022, and our report dated May 18, 2022 expressed an unqualified opinion on those financial statements.

Basis for opinion

7 unchanged sentences

We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of C&L Aqua Professionals, Inc and LC Blending, Inc., two wholly-owned subsidiaries, whose financial statements reflect total assets and revenues constituting 3.5 and less than 1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended March 28, 2021.

As indicated in Management’s Report, C&L Aqua Professionals, Inc and LC Blending, Inc.

were acquired during 2021.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting C&L Aqua Professionals, Inc and LC Blending, Inc.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of NAPCO Chemical Company, Inc.

(“NAPCO”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting less than 4% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended April 3, 2022.

As indicated in Management’s Report, NAPCO was acquired during fiscal 2022.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of NAPCO.

Definition and limitations of internal control over financial reporting

7 unchanged sentences

Minneapolis, Minnesota

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

1 unchanged sentence

Opinion on the financial statement s

We have audited the accompanying consolidated balance sheet of Hawkins, Inc.

(a Minnesota corporation) and subsidiaries (the “Company”) as of March 28, 2021, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for year then ended, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 28, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 28, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated June 2, 2021 expressed an unqualified opinion.

We have audited the accompanying consolidated balance sheets of Hawkins, Inc.

(a Minnesota corporation) and subsidiaries (the “Company”) as of April 3, 2022 and March 28, 2021 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 3, 2022 and March 28, 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of April 3, 2022 based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated May 18, 2022 expressed an unqualified opinion.

Basis for opinion

16 unchanged sentences

Minneapolis, Minnesota

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

1 unchanged sentence

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Hawkins, Inc.

and subsidiaries (the Company) as of March 29, 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the two‑year period ended March 29, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 29, 2020, and the results of its operations and its cash flows for each of the years in the two‑year period ended March 29, 2020, in conformity with U.S.

We have audited the accompanying consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows of Hawkins, Inc.

and subsidiaries (the Company) for the year ended March 29, 2020 and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended March 29, 2020, in conformity with U.S.

generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of April 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842), and related amendments.

Basis for Opinion

3 unchanged sentences

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 2009 to 2020.

4 unchanged sentences

(In thousands, except share and per-share data)

March 28, 2021 March 29, 2020

April 3, 2022 March 28, 2021

CURRENT ASSETS:

2 unchanged sentences

Inventories 94,985 63,864

Income taxes receivable 175 —

Prepaid expenses and other current assets 6,431 5,542

13 unchanged sentences

Intangible assets, net 80,193 76,368

Deferred compensation plan asset 6,783 5,726

Other 2,761 487

24 unchanged sentences

Retained earnings 254,384 213,898

Accumulated other comprehensive income (loss) — ( 79 )

Accumulated other comprehensive income 1,291 —

Total shareholders’ equity 302,601 265,246

5 unchanged sentences

Fiscal Year Ended

March 28, 2021 March 29, 2020 March 31, 2019

April 03, 2022 March 28, 2021 March 29, 2020

Sales $ 774,541 $ 596,871 $ 540,198

18 unchanged sentences

Fiscal Year Ended

March 28, 2021 March 29, 2020 March 31, 2019

April 3, 2022 March 28, 2021 March 29, 2020

Net income $ 51,542 $ 40,980 $ 28,367

1 unchanged sentence

Unrealized gain (loss) on interest rate swap 1,291 79 ( 396 )

Unrealized gain on post-retirement liability — — 1

Total other comprehensive income (loss) 1,291 79 ( 396 )

9 unchanged sentences

Shares Amount

BALANCE — April 1, 2018 21,263,984 $ 213 $ 54,196 $ 147,242 $ 596 $ 202,247

BALANCE — March 31, 2019 21,184,900 $ 212 $ 52,927 $ 164,405 $ 317 $ 217,861

Cash dividends declared — — — ( 9,825 ) — ( 9,825 )

24 unchanged sentences

Net income — — — 51,542 — 51,542

BALANCE — March 28, 2021 20,969,746 $ 210 $ 51,138 $ 213,898 $ — $ 265,246

BALANCE — April 3, 2022 20,889,777 $ 209 $ 46,717 $ 254,384 $ 1,291 $ 302,601

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Fiscal Year Ended

March 28, 2021 March 29, 2020 March 31, 2019

April 3, 2022 March 28, 2021 March 29, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

27 unchanged sentences

Payments for debt issuance costs ( 287 ) — —

Payments on senior secured term loan — — ( 85,000 )

Payments on senior secured revolving credit facility ( 37,000 ) ( 44,000 ) ( 24,000 )

Proceeds from revolver borrowings 76,000 19,000 93,000

Payments on senior secured revolving loan ( 15,000 ) ( 37,000 ) ( 44,000 )

Borrowings on senior secured revolving loan 42,000 76,000 19,000

Net cash provided by (used in) financing activities 7,417 26,360 ( 39,621 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 1,279 ) ( 4,922 ) 4,209

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 498 ( 1,279 ) ( 4,922 )

CASH AND CASH EQUIVALENTS - beginning of year 2,998 4,277 9,199

12 unchanged sentences

This group also manufactures and sells certain food-grade products, including liquid phosphates, lactates and other blended products.

The Water Treatment Group specializes in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water.

The Water Treatment Group specializes in providing chemicals, products, equipment, services and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water.

This group has the resources and flexibility to treat systems ranging in size from a single small well to a multi-million-gallon-per-day facility.

2 unchanged sentences

Fiscal Year - Our fiscal year is a 52 or 53-week year ending on the Sunday closest to March 31.

Our fiscal years ended March 28, 2021 (“fiscal 2021”), March 29, 2020 (“fiscal 2020”) and March 31, 2019 (“fiscal 2019”) were 52 weeks.

The fiscal year ending April 3, 2022 (“fiscal 2022”) will be 53 weeks.

Our fiscal 2022 was 53 weeks and our fiscal 2021 fiscal 2020 were both 52 weeks.

Fiscal 2023 will be 52 weeks.

Principles of Consolidation - The consolidated financial statements include the accounts of Hawkins, Inc.

16 unchanged sentences

Costs incurred related to the shipping and the handling of products are included in cost of sales.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair Value Measurements - The financial assets and liabilities that are re-measured and reported at fair value for each reporting period are an interest rate swap and marketable securities.

3 unchanged sentences

Valuation is based on quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for the asset or liability.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Valuation is based upon unobservable inputs for the asset or liability that are supported by little or no market activity.

6 unchanged sentences

We sell our principal products to a large number of customers in many different industries.

As of March 28, 2021, we had a significant concentration of credit risk, with a single customer representing approximately 20% of our total trade receivables.

As of April 3, 2022, we had a significant concentration of credit risk, with a single customer representing approximately 13% of our total trade receivables.

There are no other concentrations of credit risk with other single customers from a particular service or geographic area that would significantly impact us in the near term.

4 unchanged sentences

Cost for the other 27 % of our total inventory is determined using the first-in, first-out (“FIFO”) method.

Leases - The Company determines if an arrangement is a lease at inception.

Leases - We determine if an arrangement is a lease at inception.

Right-of-use ("ROU") assets include operating leases.

Lease liabilities for operating leases are classified in "short-term lease liabilities" and "long-term lease liabilities" in our condensed consolidated balance sheet.

Lease liabilities for operating leases are classified in "short-term lease liabilities" and "long-term lease liabilities" in our consolidated balance sheet.

ROU assets and related liabilities are recognized at commencement date based on the present value of the lease payments over the lease term.

4 unchanged sentences

For non-real estate leases, we account for the lease and non-lease components as a single lease component.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property, Plant and Equipment - Property is stated at cost and depreciated or amortized over the lives of the assets, using the straight-line method.

9 unchanged sentences

When property is retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any related gains or losses are included in income.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset group may not be recoverable, such as prolonged industry downturn or significant reductions in projected future cash flows.

2 unchanged sentences

The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets.

We incurred asset write-off charges of $ 0.2 million during fiscal 2021 and $ 0.6 million during fiscal 2020.

We did not incur any asset write-off charge in fiscal 2022 related to the impairment of long-lived assets.

Asset write-off charges were $ 0.2 million during fiscal 2021 and $ 0.6 million during fiscal 2020.

Goodwill and Identifiable Intangible Assets - Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased.

6 unchanged sentences

Identifiable intangible assets with finite lives are amortized whereas identifiable intangible assets with indefinite lives are not amortized.

The values assigned to the intangible assets with finite lives are being amortized on average over approximately 14 years.

The values assigned to the intangible assets with finite lives are being amortized on average over a remaining useful life of approximately 12 years.

Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

2 unchanged sentences

The impairment test consists of a qualitative assessment to determine whether it is more likely than not that the asset is impaired.

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform an annual quantitative impairment test for fiscal 2021.

Impairment assessments were also completed in the fourth quarters of fiscal 2020 and 2019 which resulted in no impairment charges for either of these fiscal years.

Income Taxes - The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform an annual quantitative impairment test for fiscal 2022, 2021 or 2020.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income Taxes - We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

2 unchanged sentences

We record any interest and penalties related to income taxes as income tax expense in the consolidated statements of income.

The effects of income tax positions are recognized only if those positions are more likely than not of being sustained.

Changes in recognition or measurement are made as facts and circumstances change.

We recognize the effect of income tax positions only if those positions are more-likely-than-not to be sustained.

Recognized income tax positions are measured at the largest amount of tax with a greater than 50 percent likelihood of being realized upon ultimate settlement with the related tax authority.

Changes in recognition or measurement are reflected in the period in which the facts and circumstances change.

Stock-Based Compensation - We account for stock-based compensation on a fair value basis.

1 unchanged sentence

Non-vested share awards are recorded as expense over the requisite service periods based on the stock price on the date of grant.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Earnings Per Share - Basic earnings per share (“EPS”) are computed by dividing net income by the weighted-average number of common shares outstanding.

1 unchanged sentence

Basic and diluted EPS were calculated using the following:

March 28, 2021 March 29, 2020 March 31, 2019

April 03, 2022 March 28, 2021 March 29, 2020

Weighted average common shares outstanding — basic 20,947,234 21,024,344 21,159,978

2 unchanged sentences

There were no shares or stock options excluded from the calculation of weighted average common shares for diluted EPS for fiscal 2022, 2021 or 2020.

Stock Split - On March 1, 2021, we effected a two-for-one stock split of our common stock and adjusted the par value of our common stock to $.01 par value.

Stock Split - In fiscal 2021, we effected a two-for-one stock split of our common stock and adjusted the par value of our common stock to $.01 par value.

Our consolidated financial statements, related notes, and other financial data contained in this report have been adjusted to give retroactive effect to the stock split for all periods presented.

Derivative Instruments and Hedging Activities - We are subject to interest rate risk associated with our variable rate debt.

We had an interest rate swap agreement which was designated as a cash flow hedge, the purpose of which was to eliminate the cash flow impact of interest rate changes on a portion of our variable-rate debt.

The interest rate swap agreement terminated on December 23, 2020.

The hedge was measured at fair value on the contract date and was subsequently remeasured to fair value at each reporting date.

We have in place an interest rate swap agreement which has been designated as a cash flow hedge, the purpose of which is to eliminate the cash flow impact of interest rate changes on a portion of our variable-rate debt.

The interest rate swap is measured at fair value on the contract date and is subsequently remeasured to fair value at each reporting date.

Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow hedge, are recorded in other comprehensive income, until the consolidated statement of income is affected by the variability in cash flows of the designated hedged item.

1 unchanged sentence

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes , removing certain exceptions for investments, intra-period allocations and interim calculations and adding guidance to reduce complexity in accounting for income taxes.

The accounting standard will be effective for reporting periods beginning after December 15, 2020.

Early adoption of this guidance is permitted.

The accounting standard is effective for reporting periods beginning after December 15, 2020 and is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

We do not expect that any other recently issued accounting pronouncements will have a material effect on our financial statements.

We do not expect that any recently issued accounting pronouncements will have a material effect on our financial statements.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

The amendments in this update replaced the incurred loss impairment methodology in previous GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables.

This update is intended to provide financial statement users with more decision-useful information about the expected credit losses.

We adopted this guidance on March 30, 2020.

Our adoption of this ASU impacted our method for calculating and estimating our allowance for doubtful accounts but did not have a material impact to our financial position or results of operations.

We adopted this guidance at the beginning of fiscal 2022.

Our adoption of this ASU did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 2 — Acquisitions

Acquisition of American Development Corporation of Tennessee, Inc.

On July 28, 2020, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc.

(“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders.

We paid $ 25 million for the acquisition, using funds available under our revolving credit facility with U.S.

Bank National Association to fund the acquisition.

ADC was a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky.

Acquisition of NAPCO Chemical Company, Inc.:

On December 30, 2021, we acquired substantially all the assets of NAPCO Chemical Company, Inc.

("NAPCO"), under the terms of an asset purchase agreement with NAPCO and certain other parties thereto, to further the geographic reach of our Water Treatment segment.

We paid $ 18.5 million at closing for the acquisition, and an additional $ 0.5 million for a working capital adjustment.

NAPCO manufactures and distributes water treatment chemicals from three locations in Texas.

The results of operations since the acquisition date, and the assets, including the goodwill associated with this acquisition, are included in our Water Treatment segment.

Costs associated with this transaction were not material and were expensed as incurred.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The acquisition has been accounted for as a business combination, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of ADC acquired in connection with the acquisition based on their estimated fair values.

The acquisition has been accounted for as a business combination, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of NAPCO acquired in connection with the acquisition based on their estimated fair values.

We estimated the fair values of the assets acquired and liabilities assumed using a discounted cash flow analysis (income approach).

Of the $ 25 million purchase price, we allocated $ 13.3 million to finite-lived intangible assets, primarily customer relationships to be amortized over 17 years, $ 1.6 million to property, plant and equipment, and $ 0.9 million to net working capital.

Of the total $ 19 million purchase price, we allocated $ 9.4 million to finite-lived intangible assets, primarily customer relationships to be amortized over 18 years, $ 3.6 million to property, plant and equipment and $ 1.5 million to net working capital.

The residual amount of $ 4.5 million was allocated to goodwill.

2 unchanged sentences

The purchase price allocation is final.

Acquisition of Property :

On December 16, 2020, we acquired a manufacturing facility on 28 acres located adjacent to our facility in Rosemount, Minnesota to allow further expansion and growth in both our Industrial and Water Treatment segments.

We paid $ 10 million for the property.

The purchase of this facility adds approximately 40,000 square feet of manufacturing and warehouse space to bring us to a total of 105,000 square feet of space on 56 acres of land in the area, with rail access at both of the sites to allow for future growth and provide for supply chain flexibility on certain raw materials to better serve our customers.

This acquisition has been accounted for as an asset acquisition, under which the total purchase price is allocated to the net tangible assets acquired based on their estimated fair values.

Of the $ 10 million purchase price, $ 4.6 million was allocated to buildings, $ 3.7 million was allocated to land, $ 1.4 million was allocated to equipment, and $ 0.3 million was allocated to site improvements.

Acquisition of Water and Waste Specialties, Inc.:

On October 29, 2021, we acquired substantially all the assets of Water and Waste Specialties, Inc., under the terms of a purchase agreement with Water and Waste Specialties and its shareholders, to further the geographic reach of our Water Treatment segment.

We paid $ 1.4 million at closing for the acquisition.

Water and Waste Specialties was a water treatment chemical distribution company operating primarily in Alabama.

The results of operations since the acquisition date, and the assets, including the goodwill associated with this acquisition, are included in our Water Treatment segment.

Costs associated with this transaction were not material and were expensed as incurred.

The acquisition has been accounted for as a business combination, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of Water and Waste Specialties acquired in connection with the acquisition based on their estimated fair values.

We estimated the fair values of the assets acquired and liabilities assumed using a discounted cash flow analysis (income approach).

Of the total $ 1.4 million purchase price, we allocated $ 0.5 million to finite-lived intangible assets, primarily customer relationships to be amortized over 11 years, and $ 0.4 million to property, plant and equipment.

The residual amount of $ 0.5 million was allocated to goodwill.

The goodwill recognized as a result of this acquisition is primarily attributable to strategic and synergistic benefits, as well as the assembled workforce.

Such goodwill is expected to be deductible for tax purposes.

The purchase price allocation is final.

Acquisition of Southeast Water Systems LLC:

On September 20, 2021, we acquired substantially all the assets of Southeast Water Systems LLC, under the terms of an asset purchase agreement with Southeast Water Systems and its shareholders, to further the geographic reach of our Water Treatment segment.

We paid $ 1.2 million at closing for the acquisition and may pay up to an additional $ 1.0 million over the next three years based on achieving certain goals.

Southeast Water Systems supplied and installed water treatment chemical equipment to its customers located primarily in Alabama, southern Georgia and the Florida panhandle.

The results of operations since the acquisition date, and the assets, including the goodwill associated with this acquisition, are included in our Water Treatment segment.

Costs associated with this transaction were not material and were expensed as incurred.

The acquisition has been accounted for as a business combination, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of Southeast Water Systems acquired in connection with the acquisition based on their estimated fair values.

We estimated the fair values of the assets acquired and liabilities assumed using a discounted cash flow analysis (income approach).

Of the total $ 2.2 million purchase price, which includes a contingent consideration liability of $ 1.0 million, we allocated $ 0.4 million to finite-lived intangible assets, primarily customer relationships to be amortized over 10 years, and $ 0.1 million to property, plant and equipment.

The residual amount of $ 1.7 million was allocated to goodwill.

The goodwill recognized as a result of this acquisition is primarily attributable to strategic and synergistic benefits, as well as the assembled workforce.

Such goodwill is expected to be deductible for tax purposes.

The purchase price allocation is final.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Acquisition of C&L Aqua Professionals, Inc.

and LC Blending, Inc.

On December 30, 2020, we acquired substantially all the assets of C&L Aqua Professionals, Inc.

In fiscal 2021, we acquired substantially all the assets of C&L Aqua Professionals, Inc.

and LC Blending, Inc.

(together, "C&L Aqua") under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders.

We paid $ 16 million for the acquisition, using funds available under our revolving credit facility with U.S.

Bank National Association to fund the acquisition.

(together, "C&L Aqua") under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders, to further the geographic reach of our Water Treatment segment.

We paid $ 16 million for the acquisition.

C&L Aqua was a water treatment chemical distribution company operating primarily in Louisiana.

7 unchanged sentences

Such goodwill is expected to be deductible for tax purposes.

The purchase price allocation is preliminary pending finalization of a construction project at the acquired property.

Acquisition of Property :

In fiscal 2021, we acquired a manufacturing facility on 28 acres located adjacent to our facility in Rosemount, Minnesota to allow further expansion and growth in both our Industrial and Water Treatment segments.

We paid $ 10 million for the property.

This acquisition has been accounted for as an asset acquisition, under which the total purchase price is allocated to the net tangible assets acquired based on their estimated fair values.

Acquisition of American Development Corporation of Tennessee, Inc.

In fiscal 2021, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc.

(“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders, to further the geographic reach of our Water Treatment segment.

We paid $ 25 million for the acquisition.

ADC was a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky.

The results of operations since the acquisition date, and the assets, including the goodwill associated with this acquisition, are included in our Water Treatment segment.

Costs associated with this transaction were not material and were expensed as incurred.

We estimated the fair values of the assets acquired and liabilities assumed using a discounted cash flow analysis (income approach).

The residual amount of $ 9.2 million was allocated to goodwill.

The goodwill recognized as a result of this acquisition is primarily attributable to strategic and synergistic benefits, as well as the assembled workforce.

Such goodwill is expected to be deductible for tax purposes.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 3 — Revenue

3 unchanged sentences

Types of products sold within each operating segment help us to further evaluate the financial performance of our segments.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table disaggregates external customer net sales by major revenue stream:

Fiscal Year Ended March 28, 2021:

Fiscal Year Ended April 3, 2022:

(In thousands) Industrial Water

1 unchanged sentence

Nutrition Total

Bulk / Distributed specialty products (1)

$ 38,378 $ 16,067 $ 115,317 $ 169,762

Manufactured, blended or repackaged products (1)

$ 318,514 $ 205,350 $ 34,690 $ 558,554

Distributed specialty products (2)

— — 124,312 124,312

Bulk products (3)

61,443 20,211 — 81,654

Other 6,981 2,572 468 10,021

4 unchanged sentences

Nutrition Total

Bulk / Distributed specialty products (1)

$ 49,864 $ 18,481 $ 90,065 $ 158,410

Manufactured, blended or repackaged products (1)

$ 231,427 $ 152,694 $ 38,270 $ 422,391

Distributed specialty products (2)

— — 115,317 115,317

Bulk products (3)

38,378 16,067 — 54,445

Other 3,556 1,243 ( 81 ) 4,718

4 unchanged sentences

Nutrition Total

Bulk / Distributed specialty products (1)

$ 60,947 $ 21,813 $ 109,067 $ 191,827

Manufactured, blended or repackaged products (1)

$ 222,161 $ 139,917 $ 14,770 $ 376,848

Distributed specialty products (2)

— — 90,065 90,065

Bulk products (3)

49,864 18,481 — 68,345

Other 3,199 1,497 244 4,940

Total external customer sales $ 275,224 $ 159,895 $ 105,079 $ 540,198

(1) For our Industrial and Water Treatment segments, this line includes our bulk products that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities.

For our Health and Nutrition segment, this line includes our non-manufactured distributed specialty products, which may be sold out of one of our facilities or direct shipped to our customers.

(1) For our Industrial and Water Treatment segments, this line includes our non-bulk specialty products that we either manufacture, blend, repackage, resell in their original form, or direct ship to our customers in smaller quantities, and services we provide for our customers.

For our Health and Nutrition segment, this line includes products manufactured, processed or repackaged in our facility and/or with our equipment

(2) This line includes non-manufactured distributed specialty products in our Health and Nutrition segment, which may be sold out of one of our facilities or direct shipped to our customers

(3) This line includes bulk products in our Industrial and Water Treatment segments that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4 — Derivative Instruments

We previously had in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt.

We have in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt.

We do not utilize derivative instruments for speculative purposes.

The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated.

The notional amount of the swap agreement is $ 60 million and it will terminate on May 1, 2027.

We have designated this swap as a cash flow hedge and have determined that it qualified for hedge accounting treatment.

For so long as the hedge is effective, changes in fair value of the cash flow hedge are recorded in other comprehensive income or loss (net of tax) until income or loss from the cash flows of the hedged item is realized.

We previously had in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt.

The $ 20 million swap agreement terminated on December 23, 2020.

1 unchanged sentence

For so long as the hedge was effective, changes in fair value of the cash flow hedge were recorded in other comprehensive income or loss (net of tax) until income or loss from the cash flows of the hedged item was realized.

For the year ended March 28, 2021, we recorded $ 0.1 million in other comprehensive income related to unrealized gains (net of tax) on the cash flow hedge.

For the years ended March 29, 2020 and March 31, 2019, we recorded $ 0.4 million and $ 0.3 million in other comprehensive income related to unrealized losses (net of tax) on the cash flow hedge described above.

Included in other current liabilities on our condensed consolidated balance sheet was $ 0.1 million as of March 29, 2020.

Included in other long-term assets on our condensed consolidated balance sheet was $ 0.4 million as of March 31, 2019.

For the years ended April 3, 2022 and March 28, 2021, we recorded $ 1.3 million and $ 0.1 million in other comprehensive income related to unrealized gains (net of tax) on the cash flow hedge.

For the year ended March 29, 2020, we recorded $ 0.4 million in other comprehensive income related to unrealized losses (net of tax) on the cash flow hedge described above.

Included in other other long-term assets on our consolidated balance sheet was $ 1.8 million as of April 3, 2022.

Included in other current liabilities on our consolidated balance sheet was $ 0.1 million as of March 29, 2020.

By their nature, derivative instruments are subject to market risk.

1 unchanged sentence

Credit risk associated with derivatives is measured based on the replacement cost should the counterparty with a contract in a gain position to us fail to perform under the terms of the contract.

While the interest rate swap was in effect, we did not anticipate nonperformance by the counterparty.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

While the current interest rate swap is in effect, we do not anticipate nonperformance by the counterparty.

Note 5 – Fair Value Measurements

6 unchanged sentences

Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Our financial assets that are measured at fair value on a recurring basis are an interest rate swap, which term ended in fiscal 2021, and assets held in a deferred compensation retirement plan.

As of March 28, 2021, the assets held in a deferred compensation retirement plan is classified as other long-term assets on our balance sheet, with the portion of the plan assets expected to be paid within twelve months classified as current assets.

As of March 29, 2020, the assets held in a deferred compensation retirement plan is classified as other long-term assets on our balance sheet, with the portion of the plan assets expected to be paid within twelve months classified as current assets and the interest rate swap is classified as other current liabilities on our balance sheet.

The fair value of the interest rate swap was determined by the respective counterparties based on interest rate changes.

Our financial assets that are measured at fair value on a recurring basis are an interest rate swap and assets held in a deferred compensation retirement plan.

Both of these assets are classified as other long-term assets on our balance sheet, with the portion of the deferred compensation retirement plan assets expected to be paid within twelve months classified as current assets.

The fair value of the interest rate swap is determined by the respective counterparties based on interest rate changes.

Interest rate swaps are valued based on observable interest rate yield curves for similar instruments.

2 unchanged sentences

The fair value of the deferred compensation is based on the quoted market prices for the mutual funds at the end of the period.

The following table summarizes the balances of assets or liabilities measured at fair value on a recurring basis as of March 28, 2021 and March 29, 2020.

(In thousands) March 28, 2021 March 29, 2020

The following table summarizes the balances of assets measured at fair value on a recurring basis as of April 3, 2022 and March 28, 2021.

(In thousands) April 3, 2022 March 28, 2021

Deferred compensation plan assets Level 1 $ 7,038 $ 5,946

Interest rate swap Level 2 1,769 —

Note 6 – Assets Held for Sale

Included in assets held for sale as of March 28, 2021 is $ 0.7 million for an office building in St.

Louis, Missouri currently utilized in the administration of our Industrial segment, which is expected to be sold in the first quarter of fiscal 2022, and $ 0.2 million for a water treatment branch located in Eldridge, Iowa, which has been relocated to another owned facility and was sold in the first quarter of fiscal 2022.

At March 29, 2020, $ 0.9 million was included in assets held for sale pertaining to the St.

Louis building.

These amounts are recorded as assets held for sale within prepaid expenses and other current assets on our balance sheet.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 6 – Assets Held for Sale

We have no assets classified as held for sale as of April 3, 2022.

Included in assets held for sale as of March 28, 2021 was $ 0.7 million for an office building in St.

Louis, Missouri that was utilized in the administration of our Industrial segment, and $ 0.2 million for a water treatment branch located in Eldridge, Iowa, which has been relocated to another owned facility.

Both were sold in the first quarter of fiscal 2022.

These amounts were recorded as assets held for sale within prepaid expenses and other current assets on our balance sheet.

Note 7 — Inventories

Inventories at March 28, 2021 and March 29, 2020 consisted of the following:

Inventories at April 3, 2022 and March 28, 2021 consisted of the following:

(In thousands)

2 unchanged sentences

Net inventory $ 94,985 $ 63,864

The FIFO value of inventories accounted for under the LIFO method was $ 46.8 million at March 28, 2021 and $ 43.3 million at March 29, 2020.

The FIFO value of inventories accounted for under the LIFO method was $ 83.7 million at April 3, 2022 and $ 46.8 million at March 28, 2021.

The remainder of the inventory was valued and accounted for under the FIFO method.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 8 — Goodwill and Other Identifiable Intangible Assets

1 unchanged sentence

(In thousands) Industrial Water Treatment Health and Nutrition Total

Balance as of March 31, 2019 and March 29, 2020 $ 6,495 $ 7,000 $ 44,945 $ 58,440

Balance as of March 29, 2020 $ 6,495 $ 7,000 $ 44,945 $ 58,440

Addition due to acquisitions — 12,280 — 12,280

Balance as of March 28, 2021 $ 6,495 $ 19,280 $ 44,945 $ 70,720

Addition due to acquisitions — 6,681 — 6,681

Balance as of April 3, 2022

$ 6,495 $ 25,961 $ 44,945 $ 77,401

The following is a summary of our identifiable intangible assets as of March 28, 2021 and March 29, 2020:

The following is a summary of our identifiable intangible assets as of April 3, 2022 and March 28, 2021:

Gross Amount Accumulated

19 unchanged sentences

Intangible asset amortization expense was $ 6.5 million during fiscal 2022, $ 5.8 million during fiscal 2021, and $ 5.1 million during fiscal 2020.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated future amortization expense for identifiable intangible assets is as follows:

7 unchanged sentences

Total $ 78,966

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 9 – Debt

We have in place an amended and restated credit agreement (the “Credit Agreement”) with U.S.

On March 31, 2022, we entered into a second amended and restated credit agreement (the “Credit Agreement”) with U.S.

Bank National Association (“U.S.

1 unchanged sentence

Bank is also serving as Administrative Agent.

The Credit Agreement provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $ 150 million.

The Credit Agreement refinanced the revolving loan under our previous credit agreement with U.S.

Bank and provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $ 250.0 million.

The Revolving Loan Facility includes a $ 15 million letter of credit subfacility and $ 25 million swingline subfacility.

The Revolving Loan Facility has a five-year maturity date, maturing on November 30, 2023.

The Revolving Loan Facility has a five-year maturity date, maturing on April 30, 2027.

The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries.

We may use the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes.

At March 28, 2021, the effective interest rate on our borrowings was 1.1 %.

We used $ 126.0 million of the proceeds from the Revolving Loan Facility to refinance the obligations under the previous credit facility.

We may use the remaining amount of the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes.

At April 3, 2022, the effective interest rate on our borrowings was 1.2 %.

In addition to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unutilized commitments thereunder.

1 unchanged sentence

Debt issuance costs of $ 0.3 million paid to the lenders in connection with the Credit Agreement, as well as unamortized debt issuance costs of $ 0.1 million paid in connection with the previous credit facility, are reflected as a reduction of debt and are being amortized as interest expense over the term of the Revolving Loan Facility.

Debt at March 28, 2021 and March 29, 2020 consisted of the following:

(In thousands) March 28, 2021 March 29, 2020

The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.0 to 1.0 .

The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict our ability to incur additional indebtedness, dispose of significant assets, make certain investments, including any acquisitions other than permitted acquisitions, make certain payments, enter into sale and leaseback transactions, grant liens on our assets or enter into rate management transactions, subject to certain limitations.

We are permitted to make distributions, pay dividends and repurchase shares so long as no default or event of default exists or would exist as a result thereof.

As of April 3, 2022, we were in compliance with all required covenants.

Debt at April 3, 2022 and March 28, 2021 consisted of the following:

(In thousands) April 3, 2022 March 28, 2021

Senior secured revolving loan $ 126,000 $ 99,000

3 unchanged sentences

Total long-term debt $ 115,644 $ 88,845

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 10 — Share-Based Compensation

5 unchanged sentences

We record the compensation expense for the outstanding performance share units and then-converted restricted stock over the life of the awards.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table represents the restricted stock activity for fiscal 2021 and 2022:

5 unchanged sentences

Vested ( 55,240 ) 23.01

Forfeited or expired ( 3,022 ) 23.75

Forfeited — —

Outstanding at end of fiscal 2020 149,030 $ 17.13

1 unchanged sentence

Vested ( 10,526 ) 15.68

Forfeited or expired — —

Forfeited ( 29,010 ) 17.92

Outstanding at end of fiscal 2021 239,120 $ 17.94

1 unchanged sentence

Vested ( 123,002 ) 17.25

Forfeited or expired ( 29,010 ) 17.92

Forfeited ( 13,258 ) 18.69

Outstanding at end of fiscal 2022 214,478 $ 25.48

4 unchanged sentences

Upon issuance of restricted stock, we record compensation expense over the remaining vesting period using the award date closing price.

Unrecognized compensation expense related to non-vested restricted stock and non-vested restricted share units as of March 28, 2021 was $ 3.0 million and is expected to be recognized over a weighted average period of 1.3 years.

Unrecognized compensation expense related to non-vested restricted stock and non-vested restricted share units as of April 3, 2022 was $ 3.9 million and is expected to be recognized over a weighted average period of 1.2 years.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock Awards.

8 unchanged sentences

Vested ( 16,704 ) 17.95

Forfeited or expired — —

Forfeited — —

Outstanding at end of fiscal 2020 16,016 $ 21.84

1 unchanged sentence

Vested ( 16,016 ) 21.84

Forfeited or expired — —

Forfeited ( 1,958 ) 25.53

Outstanding at end of fiscal 2021 11,228 $ 25.60

1 unchanged sentence

Vested ( 11,228 ) 25.60

Forfeited or expired ( 1,958 ) 25.53

Forfeited — —

Outstanding at end of fiscal 2022 10,287 $ 32.80

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Annual expense related to the value of restricted stock was $ 0.3 million in fiscal 2022, 2021 and 2020, and was recorded in SG&A expense in the Consolidated Statements of Income.

Unrecognized compensation expense related to non-vested restricted stock awards as of March 28, 2021 was $ 0.1 million and is expected to be recognized over a weighted average period of 0.3 years.

Unrecognized compensation expense related to non-vested restricted stock awards as of April 3, 2022 was $ 0.1 million and is expected to be recognized over a weighted average period of 0.3 years.

Note 11 — Share Repurchases

2 unchanged sentences

Upon repurchase of the shares, we reduce our common shares for the par value of the shares with the excess applied against additional paid-in capital.

We repurchased 166,088 of common shares at an aggregate purchase price of $ 4.1 million during fiscal 2021.

We repurchased 291,166 of common shares at an aggregate purchase price of $ 5.9 million during fiscal 2020.

We repurchased 216,332 of common shares at an aggregate purchase price of $ 4.4 million during fiscal 2019.

As of March 28, 2021, the number of shares available to be purchased under the share repurchase program was 551,506 .

We repurchased 240,501 common shares at an aggregate purchase price of $ 8.5 million during fiscal 2022.

We repurchased 166,088 common shares at an aggregate purchase price of $ 4.1 million during fiscal 2021.

We repurchased 291,166 common shares at an aggregate purchase price of $ 5.9 million during fiscal 2020.

As of April 3, 2022, the number of shares available to be purchased under the share repurchase program was 311,005 .

Note 12 — Profit Sharing, Employee Stock Ownership, Employee Stock Purchase and Pension Plans

9 unchanged sentences

Contributions to both plans are subject to a maximum amount allowed under the IRC, and were 2.5 % or 5.0 % of each employee’s eligible wages, depending on each eligible employee’s hire date, for fiscal 2022, 2021 and 2020.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We have a nonqualified deferred compensation plan covering employees who are classified as “highly compensated employees” as determined by IRS guidelines for the plan year and who were hired on or before April 1, 2012.

15 unchanged sentences

In 2013, we withdrew from a collectively bargained multiemployer pension plan and recorded a liability for our share of the unfunded vested benefits.

Payments of $ 467,000 per year are being made through 2034.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Payments of approximately $ 0.5 million per year are being made through 2034.

Note 13 — Commitments and Contingencies

As of March 28, 2021, there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries are a party or of which any of our property is the subject.

As of April 3, 2022, there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries are a party or of which any of our property is the subject.

Legal fees associated with such matters are expensed as incurred.

8 unchanged sentences

and because it is more likely than not that the buildings will have value at the end of the lease life and therefore, may not be removed by either the lessee or the lessor.

Therefore, in accordance with accounting guidance related to asset retirement and environmental obligations, we have not recorded an asset retirement obligation as of March 28, 2021.

Therefore, in accordance with accounting guidance related to asset retirement and environmental obligations, we have not recorded an asset retirement obligation as of April 3, 2022.

We will continue to monitor the factors surrounding the requirement to record an asset retirement obligation and will recognize the fair value of a liability in the period in which it is incurred and a reasonable estimate can be made.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 14 — Income Taxes

16 unchanged sentences

Total 26.3 % 26.6 % 27.2 %

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of items comprising our net deferred tax liability as of March 28, 2021 and March 29, 2020 are as follows:

The tax effects of items comprising our net deferred tax liability as of April 3, 2022 and March 28, 2021 are as follows:

(In thousands) 2022 2021

4 unchanged sentences

Lease liability 2,916 3,191

Unrealized loss on interest rate swap — 29

Other 3,097 2,882

6 unchanged sentences

ROU asset ( 2,864 ) ( 3,140 )

Unrealized gain on interest rate swap ( 478 ) —

Total deferred tax liabilities $ ( 32,607 ) $ ( 33,337 )

Net deferred tax liabilities $ ( 23,422 ) $ ( 24,445 )

As of March 28, 2021, the Company has determined that it is more likely than not that the deferred tax assets at March 28, 2021 will be realized either through future taxable income or reversals of taxable temporary differences.

As of April 3, 2022, the Company has determined that it is more likely than not that the deferred tax assets at April 3, 2022 will be realized either through future taxable income or reversals of taxable temporary differences.

We are subject to U.S.

federal income tax as well as income tax of multiple state jurisdictions.

The tax years prior to our fiscal year ended April 1, 2018 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local

income tax jurisdictions.

The tax years prior to our fiscal year ended March 31, 2019 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local income tax jurisdictions.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 15 – Leases

Lease Obligations.

As of March 28, 2021, we were obligated under operating lease agreements for certain manufacturing facilities, warehouse space, the land on which some of our facilities sit, vehicles and information technology equipment.

As of April 3, 2022, we were obligated under operating lease agreements for certain manufacturing facilities, warehouse space, the land on which some of our facilities sit, vehicles and information technology equipment.

Our leases have remaining lease terms of 1 year to 23 years, some of which include options to extend the lease for up to 15 years .

As of March 28, 2021 and March 29, 2020, our operating lease components with initial or remaining terms in excess of one year were classified on the consolidated balance sheet within right of use assets, short-term lease liability and long-term lease liability.

Total lease expense was $ 2.8 million for the both twelve months ended March 28, 2021 and March 29, 2020, and includes leases less than 12 months in duration.

Our facility in Fullerton, California is leased from a party related to Daniel Stauber, one of our Board members.

The total amount of lease expense related to this lease in fiscal 2021 was $ 0.5 million, of which less than $ 0.1 million was attributable to Mr.

We have included $ 5.7 million on our balance sheet as a right-of-use asset, with a corresponding equal amount of lease liabilities, related to this lease.

As of April 3, 2022 and March 28, 2021, our operating lease components with initial or remaining terms in excess of one year were classified on the consolidated balance sheet within right-of-use assets, short-term lease liability and long-term lease liability.

Total lease expense was $ 2.9 million for the twelve months ended April 3, 2022 and $ 2.8 million for the twelve months ended March 28, 2021, and includes leases less than 12 months in duration.

Other information related to our operating leases was as follows:

March 29, 2021 March 29, 2020

April 3, 2022 March 28, 2021

Lease Term and Discount Rate

1 unchanged sentence

Weighted average discount rate 2.6 % 2.7 %

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Maturities of lease liabilities as of March 28, 2021 were as follows:

Maturities of lease liabilities as of April 3, 2022 were as follows:

(In thousands) Operating Leases

8 unchanged sentences

Present value of lease liabilities $ 10,800

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 16 — Segment Information

3 unchanged sentences

Product costs and expenses for each segment are based on actual costs incurred along with cost allocations of shared and centralized functions.

We evaluate performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses.

We evaluate performance based on operating income.

Reportable segments are defined primarily by product and type of customer.

Segments are responsible for the sales, marketing and development of their products and services.

Other than our Health and Nutrition segment, the segments do not have separate accounting, administration, customer service or purchasing functions.

Other than our Health and Nutrition segment, the segments do not have separate customer service or purchasing functions.

There are no intersegment sales and no operating segments have been aggregated.

2 unchanged sentences

(In thousands)

Fiscal Year Ended March 28, 2021:

Fiscal Year Ended April 3, 2022:

Sales $ 386,938 $ 228,133 $ 159,470 $ 774,541

8 unchanged sentences

Selling, general, and administrative expenses 27,033 24,453 16,398 67,884

Operating income (loss) 14,813 22,101 4,757 41,671

Operating income 16,304 22,340 17,234 55,878

Identifiable assets* $ 181,478 $ 109,761 $ 166,558 $ 457,797

7 unchanged sentences

Capital expenditures $ 14,933 $ 9,160 $ 456 $ 24,549

* Unallocated assets not included, consisting primarily of cash and cash equivalents, investments and prepaid expenses, were $ 14.8 million at March 28, 2021, $ 13.0 million at March 29, 2020 and $ 18.4 million at March 31, 2019.

* Unallocated assets not included, consisting primarily of cash and cash equivalents, investments and prepaid expenses, were $ 19.5 million at April 3, 2022, $ 14.8 million at March 28, 2021 and $ 13.0 million at March 29, 2020.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data