What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-05-17 compared with 2022-05-18 · 74 added, 160 removed, 694 unchanged (25% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”).

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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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 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

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Hawkins, Inc.

Opinion on the financial statement s

Opinion on the financial statements

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.

(a Minnesota corporation) and subsidiaries (the “Company”) as of April 2, 2023 and April 3, 2022 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended April 2, 2023, 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 2, 2023 and April 3, 2022, and the results of its operations and its cash flows for each of the three years in the period ended April 2, 2023, 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 2, 2023, 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 17, 2023 expressed an unqualified opinion.

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Minneapolis, Minnesota

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

HAWKINS, INC.

Opinion on the Consolidated Financial Statements

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.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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

Minneapolis, Minnesota

May 20, 2020, except as to the stock split and par value adjustments as described in Note 1, which are as of June 2, 2021

HAWKINS, INC.

CONSOLIDATED BALANCE SHEETS

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

April 3, 2022 March 28, 2021

April 2, 2023 April 3, 2022

CURRENT ASSETS:

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Current portion of long-term debt 9,913 9,913

Short-term lease liability 1,657 1,587

Container deposits 1,558 1,452

Income tax payable 3,329 39

Other current liabilities 6,645 5,787

Total current liabilities 90,871 101,466

LONG-TERM DEBT, LESS CURRENT PORTION 115,644 88,845

LONG-TERM DEBT 101,731 115,644

LONG-TERM LEASE LIABILITY 8,687 9,143

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Fiscal Year Ended

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

April 02, 2023 April 03, 2022 March 28, 2021

Sales $ 935,098 $ 774,541 $ 596,871

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Interest expense, net ( 5,234 ) ( 1,404 ) ( 1,467 )

Other income (expense) 189 1,440 ( 204 )

Other (expense) income ( 334 ) 189 1,440

Income before income taxes 82,582 69,979 55,851

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Fiscal Year Ended

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

April 2, 2023 April 3, 2022 March 28, 2021

Net income $ 60,041 $ 51,542 $ 40,980

Other comprehensive income, net of tax:

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

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

Unrealized gain on interest rate swap 1,649 1,291 79

Total other comprehensive income 1,649 1,291 79

Total comprehensive income $ 61,690 $ 52,833 $ 41,059

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BALANCE — March 29, 2020 21,024,458 $ 211 $ 50,405 $ 182,947 $ ( 79 ) $ 233,484

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

Cash dividends declared and paid — — — ( 10,029 ) — ( 10,029 )

Share-based compensation expense — — 3,343 — — 3,343

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Shares repurchased ( 240,501 ) ( 2 ) ( 8,543 ) — — ( 8,545 )

Other comprehensive loss, net of tax — — — — 79 79

Other comprehensive income, net of tax — — — — 1,291 1,291

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

Cash dividends declared and paid — — — ( 12,001 ) — ( 12,001 )

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Fiscal Year Ended

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

April 2, 2023 April 3, 2022 March 28, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

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Operating leases 1,971 1,899 1,896

(Gain) loss on deferred compensation assets ( 189 ) ( 1,440 ) 233

Loss (gain) on deferred compensation assets 334 ( 189 ) ( 1,440 )

Deferred income taxes ( 232 ) ( 1,501 ) ( 689 )

Stock compensation expense 3,825 3,818 3,343

(Gain) loss from asset disposals ( 2,950 ) 452 110

Other 87 93 93

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Acquisitions — ( 21,546 ) ( 51,000 )

Other 302 362 346

Proceeds from asset disposals 7,091 302 362

Net cash used in investing activities ( 41,230 ) ( 49,756 ) ( 71,432 )

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Borrowings on senior secured revolving loan 45,000 42,000 76,000

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

Net cash (used in) provided by financing activities ( 32,100 ) 7,417 26,360

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,070 498 ( 1,279 )

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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, 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.

Our Health and Nutrition Group specializes in providing ingredient distribution, processing and formulation solutions to manufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritional food, health and wellness products.

This group offers a diverse product portfolio including minerals, botanicals and herbs, vitamins and amino acids, excipients, joint products, sweeteners and enzymes.

This group offers a diverse product portfolio including minerals, vitamins and amino acids, excipients, joint products, botanicals and herbs, sweeteners and enzymes.

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

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

Our fiscal 2023 was 52 weeks, fiscal 2022 was 53 weeks, and fiscal 2021 was 52 weeks.

Fiscal 2024 will be 52 weeks.

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Estimates - The preparation of financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, particularly receivables, inventories, property, plant and equipment, right-of-use assets, goodwill, intangibles, accrued expenses, short-term and long-term lease liability, income taxes and related accounts and the reported amounts of revenues and expenses during the reporting period.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, particularly receivables, inventories, property, plant and equipment, right-of-use assets, goodwill, intangibles, accrued expenses, short-term and long-term lease liabilities, income taxes and related accounts and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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Cash Equivalents - Cash equivalents include all liquid debt instruments (primarily cash funds and money market accounts) purchased with an original maturity of three months or less.

The cash balances, maintained at large commercial banking institutions with strong credit ratings, may, at times, exceed federally insured limits.

The cash balances, maintained at large commercial banking institutions with strong credit ratings, typically exceed federally insured limits.

Trade Receivables and Concentrations of Credit Risk - Financial instruments, which potentially subject us to a concentration of credit risk, principally consist of trade receivables.

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Receivables are reported net of an allowance for credit losses as determined by management at the end of each reporting period.

Our receivable allowance in based on an estimate of expected credit losses, with the estimate based on a number of qualitative and quantitative factors that, based on collection experience, may have an impact on repayment risk and ability to collect.

Our receivable allowance is based on an estimate of expected credit losses, with the estimate based on a number of qualitative and quantitative factors that, based on collection experience, may have an impact on repayment risk and ability to collect.

Inventories - Inventories, consisting primarily of finished goods, are primarily valued at the lower of cost or net realizable value, with cost for approximately 79 % of our inventory determined using the last-in, first-out (“LIFO”) method.

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

Estimated lives are:

Estimated lives are generally:

10 to 40 years for buildings and improvements;

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

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.

We did not incur any asset write-off charge in fiscal 2023 or fiscal 2022 related to the impairment of long-lived assets, and incurred immaterial write-off charges in fiscal 2021.

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.

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Our annual test for impairment is as of the first day of our fourth fiscal quarter.

As of December 27, 2021, we performed an analysis of qualitative factors for our Industrial, Water Treatment and Health and Nutrition reporting units to determine whether it is more likely than not that the fair value of either of these reporting units was less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

As of January 2, 2023, we performed an analysis of qualitative factors for our Industrial, Water Treatment and Health and Nutrition reporting units to determine whether it is more likely than not that the fair value of either of these reporting units was less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform a quantitative goodwill impairment test for any of these reporting units.

Goodwill impairment assessments were also completed in the fourth quarters of fiscal 2022 and 2021 and, similarly, we did not record a goodwill impairment charge.

Our primary identifiable intangible assets include customer lists, trade secrets, non-competition agreements, trademarks and trade names acquired in previous business acquisitions.

Our primary identifiable intangible assets include customer relationships, trademarks and tradenames acquired in previous business acquisitions.

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

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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.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax expense in the period that includes the enactment date.

The deferred tax assets and liabilities are analyzed regularly, and management assesses the likelihood that deferred tax assets will be recovered from future taxable income.

Income Taxes - Deferred taxes are provided for differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

A valuation allowance is provided to offset deferred tax assets if, based on the available evidence, it is more likely than not that some or all of the value of the deferred tax assets will not be realized.

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

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.

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Basic and diluted EPS were calculated using the following:

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

April 02, 2023 April 03, 2022 March 28, 2021

Weighted average common shares outstanding — basic 20,848,077 20,947,234 21,024,344

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There were no shares or stock options excluded from the calculation of weighted average common shares for diluted EPS for fiscal 2023, 2022 or 2021.

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.

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

Recently Adopted 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.

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

Note 2 — Asset Sales and Acquisitions

Sale of bleach packaging assets:

On March 30, 2023, we sold certain assets in our Industrial segment related to our consumer bleach packaging business for $ 7 million.

These assets were not core to our Industrial segment operations, where we tend to focus our manufacturing operations on bulk products.

The assets sold included plant equipment, inventory and intangible assets, all related to the packaging of bleach.

We realized a gain of $ 3 million on this sale, which has been recorded within selling, general and administrative expenses.

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.

In the fourth quarter of fiscal 2022, we acquired substantially all the assets of NAPCO Chemical Company, Inc.

("NAPCO") for $ 19.0 million, 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.

NAPCO manufactured and distributed 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.

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.

The acquisition was 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).

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Such goodwill is expected to be deductible for tax purposes.

The purchase price allocation is final.

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.

In the third quarter of fiscal 2022, 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.

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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.

In the second quarter of fiscal 2022, 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 three years following the acquisition date 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.

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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.

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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 C&L Aqua 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 $ 16 million purchase price, we preliminarily allocated $ 8.2 million to finite-lived intangible assets, primarily customer relationships to be amortized over 18 years, $ 3.6 million to property, plant and equipment, and $ 1.1 million to net working capital.

The residual amount of $ 3.1 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.

Acquisition of Property :

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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.

The purchase of this facility added approximately 40,000 square feet of manufacturing and warehouse space to bring us to a total of 105,000 square feet of space at that time 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.

Acquisition of American Development Corporation of Tennessee, Inc.

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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 ADC 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.

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.

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Total external customer sales $ 470,760 $ 304,925 $ 159,413 $ 935,098

Fiscal Year Ended March 28, 2021:

Fiscal Year Ended April 3, 2022:

(In thousands) Industrial Water

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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.

We have designated this swap as a cash flow hedge and have determined that it qualifies 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.

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

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 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.

For fiscal 2023, 2022 and 2021, we recorded $ 1.6 million, $ 1.3 million, and $ 0.1 million, respectively, in other comprehensive income related to unrealized gains (net of tax) on the cash flow hedge.

Included in other long-term assets on our consolidated balance sheet was $ 4.0 million as of April 2, 2023 and $ 1.8 million as of April 3, 2022.

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

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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 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

The following table summarizes the balances of assets measured at fair value on a recurring basis as of April 2, 2023 and April 3, 2022.

(In thousands) April 2, 2023 April 3, 2022

Deferred compensation plan assets Level 1 $ 7,659 $ 7,038

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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 6 — Inventories

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

Inventories at April 2, 2023 and April 3, 2022 consisted of the following:

(In thousands)

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Net inventory $ 88,777 $ 94,985

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 FIFO value of inventories accounted for under the LIFO method was $ 101.4 million at April 2, 2023 and $ 83.7 million at April 3, 2022.

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

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7 — Goodwill and Other Identifiable Intangible Assets

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

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

Balance as of April 3, 2022 and April 2, 2023

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

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

The following is a summary of our identifiable intangible assets as of April 2, 2023 and April 3, 2022:

Gross Amount Accumulated

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Intangible asset amortization expense was $ 6.9 million during fiscal 2023, $ 6.5 million during fiscal 2022, and $ 5.8 million during fiscal 2021.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Total $ 71,833

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 8 – Debt

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.

Bank”) as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto (collectively, the “Lenders”), whereby U.S.

We have in place a Credit Agreement with U.S.

Bank as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto, whereby U.S.

Bank is also serving as Administrative Agent.

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 Credit Agreement provides us with a “Revolving Loan Facility” totaling $ 250.0 million.

The Revolving Loan Facility includes a $ 10 million letter of credit subfacility and $ 25 million swingline subfacility.

1 unchanged sentence

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

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 2, 2023, the effective interest rate on our borrowings was 4.3 %.

5 unchanged sentences

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

Debt at April 2, 2023 and April 3, 2022 consisted of the following:

(In thousands) April 2, 2023 April 3, 2022

Senior secured revolving loan $ 112,000 $ 126,000

29 unchanged sentences

Outstanding at end of fiscal 2023 189,258 $ 34.64

The weighted average grant date fair value of performance-based restricted shares issued in fiscal 2022 was $ 31.74 , fiscal 2021 was $ 18.69 and fiscal 2020 was $ 17.25 .

We recorded compensation expense on performance-based restricted stock of approximately $ 2.9 million for fiscal 2022, $ 2.5 million for fiscal 2021 and $ 1.5 million for fiscal 2020, substantially all of which was recorded in selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Income.

We recorded compensation expense on performance-based restricted stock of approximately $ 2.8 million for fiscal 2023, $ 2.9 million for fiscal 2022 and $ 2.5 million for fiscal 2021, substantially all of which was recorded in SG&A expense in the Consolidated Statements of Income.

The total fair value of performance-based restricted stock units vested was $ 1.9 million in fiscal 2023, $ 2.1 million in fiscal 2022 and $ 0.2 million in fiscal 2021.

5 unchanged sentences

Restricted Stock Awards.

As part of their retainer, our non-employee directors receive restricted stock for their Board services.

As part of their retainer, our directors, other than the Chief Executive Officer, receive restricted stock for their Board services.

The restricted stock awards are expensed over a one-year vesting period, based on the market value on the date of grant.

10 unchanged sentences

Vested ( 11,228 ) 25.60

Forfeited ( 1,958 ) 25.53

Outstanding at end of fiscal 2022 10,287 $ 32.80

1 unchanged sentence

Vested ( 10,287 ) 32.80

Forfeited — —

Outstanding at end of fiscal 2023 12,565 $ 38.98

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.

Annual expense related to the value of restricted stock was $ 0.4 million in fiscal 2023, and $ 0.3 million in fiscal 2022 and 2021, 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 April 2, 2023 was $ 0.2 million and is expected to be recognized over a weighted average period of 0.3 years.

72 unchanged sentences

Total 27.3 % 26.3 % 26.6 %

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

The tax effects of items comprising our net deferred tax liability as of April 2, 2023 and April 3, 2022 are as follows:

(In thousands) 2023 2022

4 unchanged sentences

Lease liability 2,820 2,916

Inventories 2,437 —

Other 3,335 3,097

19 unchanged sentences

Our leases have remaining lease terms of 1 year to 22 years, some of which include options to extend the lease for up to 15 years .

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.

As of April 2, 2023 and April 3, 2022, 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 $ 3.1 million for the twelve months ended April 2, 2023 and $ 2.9 million for the twelve months ended April 3, 2022, and includes leases less than 12 months in duration.

Other information related to our operating leases was as follows:

April 3, 2022 March 28, 2021

April 2, 2023 April 3, 2022

Lease Term and Discount Rate

34 unchanged sentences

Capital expenditures $ 31,635 $ 16,311 $ 375 $ 48,321

Fiscal Year Ended March 28, 2021:

Fiscal Year Ended April 3, 2022:

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

11 unchanged sentences

Capital expenditures $ 13,713 $ 6,732 $ 349 $ 20,794

* 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.

* Unallocated assets not included, consisting primarily of cash and cash equivalents,prepaid expenses, and non-qualified deferred compensation plan assets of $ 26.0 million at April 2, 2023, $ 19.5 million at April 3, 2022 and $ 14.8 million at March 28, 2021

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