What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-05-15 compared with 2023-05-17 · 181 added, 115 removed, 653 unchanged (31% of the section changed)

13 unchanged sentences

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

(a Minnesota corporation) and subsidiaries (the “Company”) 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”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 2, 2023, 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 2, 2023, and our report dated May 17, 2023 expressed an unqualified opinion on those financial statements.

(a Minnesota corporation) and subsidiaries (the “Company”) as of March 31, 2024, 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 31, 2024, 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 31, 2024, and our report dated May 15, 2024 expressed an unqualified opinion on those financial statements.

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.

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

5 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 Water Solutions, Miami Products, or Industrial Research, wholly-owned subsidiaries, whose financial statements reflect total assets and revenues constituting 15 and 2 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended March 31, 2024.

As indicated in Management’s Report, Water Solutions, Miami Products, and Industrial Research were acquired during fiscal 2024.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Water Solutions, Miami Products, and Industrial Research.

Definition and limitations of internal control over financial reporting

12 unchanged sentences

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

(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.

(a Minnesota corporation) and subsidiaries (the “Company”) as of March 31, 2024 and April 2, 2023 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2024, 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 31, 2024 and April 2, 2023, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2024, 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 31, 2024, 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 15, 2024 expressed an unqualified opinion.

Basis for opinion

10 unchanged sentences

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Customer relationships acquired with the Water Solutions Unlimited acquisition

As described further in Note 2 to the financial statements, on October 27, 2023 the Company acquired substantially all of the assets of Water Solutions Unlimited, Inc.

The total purchase price consideration was $70.7 million, which allocated $39.0 million to separately identified intangible assets, including customer relationships of $32.4 million.

The determination of the fair value of the customer relationships requires management to make significant estimates and assumptions related to forecasts of future revenues, expenses, and the discount rate applied.

Changes to these assumptions could materially affect the determination of the fair value of the customer relationships.

We identified the fair value assigned to the customer relationships included on the opening balance sheet as a critical audit matter.

The principal considerations for our determination that the valuation of the acquired customer relationships is a critical audit matter is that management utilized significant judgement when estimating the fair value assigned to the customer relationships.

In turn, auditing management’s judgements regarding the assigned fair value involved a high degree of subjectivity due to the estimation uncertainty of management’s significant judgements.

Our audit procedures related to the estimated fair value assigned to the acquired customer relationships included the following, among others.

• We obtained an understanding and tested the design of relevant controls within the Company’s process to value acquired customer relationship assets, including the Company’s control over the selection and review of the reasonableness of assumptions used in determining fair value.

• We evaluated the reasonableness of management’s significant assumptions, which included forecasted revenues and operating expenses.

We tested whether these forecasts were reasonable and consistent with historical performance.

• We involved our valuation professionals with specialized skills and knowledge, to evaluate key inputs and assumptions used to determine fair value.

Our valuation professionals compared the discount rate used to value the customer relationships to independently developed discount rates derived from publicly available data for comparable companies.

/s/ GRANT THORNTON LLP

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

April 2, 2023 April 3, 2022

March 31, 2024 April 2, 2023

CURRENT ASSETS:

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Income tax payable 1,943 3,329

Environmental remediation 7,700 —

Other current liabilities 7,832 6,645

5 unchanged sentences

DEFERRED COMPENSATION LIABILITY 11,764 9,343

EARNOUT LIABILITY 11,235 —

OTHER LONG-TERM LIABILITIES 1,310 2,175

15 unchanged sentences

Fiscal Year Ended

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

March 31, 2024 April 02, 2023 April 03, 2022

Sales $ 919,162 $ 935,098 $ 774,541

4 unchanged sentences

Interest expense, net ( 4,282 ) ( 5,234 ) ( 1,404 )

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

Other income (expense) 1,391 ( 334 ) 189

Income before income taxes 101,145 82,582 69,979

5 unchanged sentences

Diluted earnings per share $ 3.59 $ 2.86 $ 2.44

Cash dividends declared per common share $ 0.57000 $ 0.52250 $ 0.47125

Cash dividends declared and paid per common share $ 0.6300 $ 0.5700 $ 0.5225

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Fiscal Year Ended

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

March 31, 2024 April 2, 2023 April 3, 2022

Net income $ 75,363 $ 60,041 $ 51,542

21 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

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

15 unchanged sentences

Net income — — — 75,363 — 75,363

BALANCE — April 2, 2023 20,850,454 $ 209 $ 44,443 $ 302,424 $ 2,940 $ 350,016

BALANCE — March 31, 2024 20,790,261 $ 208 $ 38,154 $ 364,549 $ 3,115 $ 406,026

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Fiscal Year Ended

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

March 31, 2024 April 2, 2023 April 3, 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

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Depreciation and amortization 31,803 27,440 24,129

Change in fair value of earnout liability 571 — —

Operating leases 2,708 1,971 1,899

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

(Gain) loss on deferred compensation assets ( 1,391 ) 334 ( 189 )

Deferred income taxes ( 1,459 ) ( 232 ) ( 1,501 )

25 unchanged sentences

Net cash (used in) provided by financing activities ( 37,408 ) ( 32,100 ) 7,417

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

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 413 ) 4,070 498

CASH AND CASH EQUIVALENTS - beginning of year 7,566 3,496 2,998

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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.

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, marketable securities held in a deferred compensation retirement plan, and the earnout liability recorded in conjunction with the acquisition of Water Solutions.

There are no fair value measurements with respect to nonfinancial assets or liabilities that are recognized or disclosed at fair value in our consolidated financial statements on a recurring basis.

10 unchanged sentences

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

As of April 2, 2023, we had a significant concentration of credit risk, with a single customer representing approximately 15 % of our total trade receivables.

As of March 31, 2024, no single customer represented more than 10 % 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.

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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.

Property acquired in a business combination is recorded at the fair value of the assets on the date of acquisition.

Estimated lives are generally:

3 unchanged sentences

Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining lease term.

Depreciation and amortization expense is recorded in our Consolidated Statement of Income within cost of goods sold and selling, general and administrative expense, depending on the use of the underlying asset.

Depreciation and amortization expense is recorded in our Consolidated Statements of Income within cost of goods sold and selling, general and administrative expense, depending on the use of the underlying asset.

We recorded depreciation expense of $ 23.3 million for fiscal 2024, $ 20.5 million for fiscal 2023 and $ 17.7 million for fiscal 2022.

6 unchanged sentences

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 2023 or fiscal 2022 related to the impairment of long-lived assets, and incurred immaterial write-off charges in fiscal 2021.

We did not incur any asset write-off charges in fiscal 2024, fiscal 2023, or fiscal 2022 related to the impairment of long-lived assets.

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.

12 unchanged sentences

Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform an annual quantitative impairment test for fiscal 2024, 2023 or 2022.

Business Combinations - We record business combinations using the acquisition method of accounting.

Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values.

The excess of the purchase price over the estimated fair value is recorded as goodwill.

Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill.

Measurement period adjustments are reflected in the period in which they occur.

HAWKINS, INC.

9 unchanged sentences

Basic and diluted EPS were calculated using the following:

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

March 31, 2024 April 02, 2023 April 3, 2022

Weighted average common shares outstanding — basic 20,864,348 20,848,077 20,947,234

6 unchanged sentences

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.

To the extent that the hedge is ineffective, changes in the fair value are recognized in the Statement of Income.

To the extent that the hedge is ineffective, changes in the fair value are recognized in the Consolidated Statements of Income.

Recently Issued Accounting Pronouncements

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

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU No.2023-09)

In December 2023, the Financial Accounting Standards Board ("FASB") issued accounting standards update No.

2023-09 to enhance the transparency and decision-usefulness of income tax disclosures and to provide information to better assess how an entity's operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows.

For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024.

We are in the process of evaluating the impact of this standard on the disclosures in our financial statements.

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07)

In November 2023, the FASB issued accounting standards update No.

2023-07 to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The update requires public entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The amendments in this update are effective for public entities in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and are to be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is permitted.

We are in the process of evaluating the impact of this standard on the disclosures in our financial statements.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.:

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.

Note 2 — Acquisitions and Asset Sales

Acquisition of Industrial Research Corporation:

On March 8, 2024, we acquired substantially all the assets of Industrial Research Corporation ("Industrial Research") for $ 4.6 million under the terms of a purchase agreement with Industrial Research and its shareholders.

Industrial Research distributed water treatment chemicals and equipment to customers primarily in central to northern Louisiana, eastern Texas and southern Arkansas.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

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

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.

The acquisition has been accounted for under the acquisition method of accounting, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of Industrial Research 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 $ 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.

Of the $ 4.6 million purchase price, $ 2.2 million was allocated to customer relationships, to be amortized over 10 years.

The remaining amount was allocated to net working capital and property, plant and equipment, with the residual amount of $ 1.7 million 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 Water and Waste Specialties, Inc.:

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.

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.

Acquisition of Southeast Water Systems LLC:

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.

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.

Acquisition of The Miami Products & Chemical Company:

On October 31, 2023, we acquired substantially all the assets of The Miami Products & Chemical Company ("Miami Products") for $ 15.5 million under the terms of a purchase agreement with Miami Products and its shareholders.

Miami Products was a bleach manufacturer and distributor serving customers primarily throughout Ohio and the surrounding region.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

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

Acquisition of C&L Aqua Professionals, Inc.

and LC Blending, 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, 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.

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.

The acquisition has been accounted for under the acquisition method of accounting, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of Miami Products 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 $ 15.5 million purchase price, $ 8.2 million was allocated to customer relationships, to be amortized over 11 years, and $ 0.8 million was allocated to trade names, to be amortized over 10 years.

The remaining amount was allocated to net working capital and property, plant and equipment, with the residual amount of $ 3.2 million 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 Water Solutions Unlimited, Inc.:

On October 27, 2023, we acquired substantially all the assets of Water Solutions Unlimited, Inc.

("Water Solutions") under the terms of a purchase agreement with Water Solutions and its shareholders.

We paid $ 60 million at closing and may be obligated to pay an additional amount based on achieving a certain earnings target three years after the acquisition.

Water Solutions was a manufacturer and distributor of water treatment chemicals serving customers primarily throughout Indiana, Illinois and Michigan.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

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

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.

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.

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.

The acquisition has been accounted for under the acquisition method of accounting, under which the total purchase price is allocated to the net tangible and intangible assets and liabilities of Water Solutions 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).

The total purchase price was estimated to be $ 70.7 million, including the estimated potential earnout to be paid of $ 10.7 million.

Of the $ 70.7 million purchase price, $ 32.4 million was allocated to customer relationships, to be amortized over 13 years, $ 6.4 million was allocated to trade names, to be amortized over 10 years, and $ 0.2 million was allocated to non-compete agreements, to be amortized over five years.

The remaining amount was allocated to net working capital and property, plant and equipment, with the residual amount of $ 21.0 million 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 EcoTech Enterprises, Inc.:

On July 14, 2023, we acquired substantially all the assets of EcoTech Enterprises, Inc.

("EcoTech") for $ 3.4 million, under the terms of a purchase agreement with EcoTech and its shareholders.

EcoTech was a water treatment chemical distribution company operating primarily in Arkansas.

The $ 3.4 million purchase price was allocated primarily to customer relationships, to be amortized over 10 years, property, plant and equipment, and net working capital.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 was recorded within selling, general and administrative expenses.

Note 3 — Revenue

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

Fiscal Year Ended April 2, 2023:

Fiscal Year Ended March 31, 2024:

(In thousands) Industrial Water

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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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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.

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

For fiscal 2024, 2023 and 2022, we recorded $ 0.2 million, $ 1.6 million, and $ 1.3 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.

Included in other long-term assets on our consolidated balance sheet was $ 4.3 million as of March 31, 2024 and $ 4.0 million as of April 2, 2023.

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

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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 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.

Our financial assets that are re-measured and reported at fair value for each reporting period are an interest rate swap, marketable securities held in a deferred compensation retirement plan, and the earnout liability recorded in conjunction with the acquisition of Water Solutions.

The interest rate swap and assets held in a deferred compensation retirement plan 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 earnout liability is classified as a long-term liability on our balance sheet.

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

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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 2, 2023 and April 3, 2022.

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

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

Interest rate swap Level 2 4,028 1,769

The earnout liability recorded in conjunction with the Water Solutions acquisition is based upon achieving certain targets.

The earnout is based on a target of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in year three of the acquisition.

The earnout liability was valued based upon a risk-neutral pricing analysis within a Monte Carlo simulation framework, which is a Level 3 input.

The Monte Carlo simulation assumptions used to estimate the fair value of the earnout included forecasted EBITDA, an estimated EBITDA-specific required rate of return, term period, risk-free rate, and an estimated EBITDA-specific volatility.

Other key inputs included an estimate of our credit-adjusted discount rate and an appropriate risk-free rate over the term of the simulation period.

The earnout liability is adjusted to fair value at each reporting date until settled.

Changes in fair value are included in selling, general and administrative expenses in our Consolidated Statements of Income.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the balances of assets measured at fair value on a recurring basis as of March 31, 2024 and April 2, 2023.

(In thousands) March 31, 2024 April 2, 2023

Deferred compensation plan assets Level 1 $ 10,042 $ 7,659

Interest rate swap Level 2 4,268 4,028

Earnout liability Level 3 11,235 —

Changes in the earnout liability measured at fair value using Level 3 inputs were as follows:

(In thousands)

Earnout liability at April 2, 2023

Addition for acquisition 10,664

Fair value adjustments 571

Earnout liability at March 31, 2024

Note 6 — Inventories

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

Inventories at March 31, 2024 and April 2, 2023 consisted of the following:

(In thousands)

2 unchanged sentences

Net inventory $ 74,600 $ 88,777

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 FIFO value of inventories accounted for under the LIFO method was $ 76.2 million at March 31, 2024 and $ 101.4 million at April 2, 2023.

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

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(In thousands) Industrial Water Treatment Health and Nutrition Total

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 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 2, 2023 and April 3, 2022:

Addition due to acquisitions — 25,998 — 25,998

Balance as of March 31, 2024

$ 6,495 $ 51,959 $ 44,945 $ 103,399

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of our identifiable intangible assets as of March 31, 2024 and April 2, 2023:

Gross Amount Accumulated

19 unchanged sentences

Intangible asset amortization expense was $ 8.5 million during fiscal 2024, $ 6.9 million during fiscal 2023, and $ 6.5 million during fiscal 2022.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

15 unchanged sentences

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

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

At March 31, 2024, the effective interest rate on our borrowings was 4.3 %.

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.

The commitment fee is between 0.15 % and 0.25 %, depending on our leverage ratio.

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.

Unamortized debt issuance costs of $ 0.3 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.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 .

1 unchanged sentence

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

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

As of March 31, 2024, we were in compliance with all required covenants.

Debt at March 31, 2024 and April 2, 2023 consisted of the following:

(In thousands) March 31, 2024 April 2, 2023

Senior secured revolving loan $ 99,000 $ 112,000

17 unchanged sentences

Outstanding at beginning of fiscal 2022

239,120 $ 17.94

Granted 111,618 31.74

2 unchanged sentences

Outstanding at end of fiscal 2022

214,478 $ 25.48

Granted 88,524 38.31

2 unchanged sentences

Outstanding at end of fiscal 2023

189,258 $ 34.64

Granted 61,819 43.06

Vested ( 105,600 ) 31.74

Forfeited ( 10,884 ) 34.68

Outstanding at end of fiscal 2024

145,477 $ 40.33

We recorded compensation expense on performance-based restricted stock of approximately $ 3.7 million for fiscal 2024, $ 2.8 million for fiscal 2023 and $ 2.9 million for fiscal 2022, substantially all of which was recorded in SG&A expense in the Consolidated Statements of Income.

2 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 April 2, 2023 was $ 2.8 million and is expected to be recognized over a weighted average period of 0.9 years.

Unrecognized compensation expense related to non-vested restricted stock and non-vested restricted share units as of March 31, 2024 was $ 4.5 million and is expected to be recognized over a weighted average period of 1.2 years.

HAWKINS, INC.

8 unchanged sentences

Outstanding at beginning of fiscal 2022

11,228 $ 25.60

Granted 10,287 32.80

Vested ( 11,228 ) 25.60

Forfeited ( 1,958 ) 25.53

Outstanding at end of fiscal 2022

10,287 $ 32.80

Granted 12,565 38.98

1 unchanged sentence

Outstanding at end of fiscal 2023

12,565 $ 38.98

Granted 10,647 46.00

1 unchanged sentence

Outstanding at end of fiscal 2024

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.

10,647 $ 46.00

Annual expense related to the value of restricted stock was $ 0.5 million in fiscal 2024, $ 0.4 million in fiscal 2023, and $ 0.3 million in fiscal 2022, 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 31, 2024 was $ 0.2 million and is expected to be recognized over a weighted average period of 0.3 years.

Note 10 — Share Repurchases

5 unchanged sentences

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

As of April 2, 2023, the number of shares available to be purchased under the share repurchase program was 1,129,348 .

Note 11 — Profit Sharing, Employee Stock Ownership, Employee Stock Purchase and Pension Plans

As of March 31, 2024, the number of shares available to be purchased under the share repurchase program was 937,487 .

Note 11 — Retirement Plans

Company Sponsored Plans .

29 unchanged sentences

Note 12 — Commitments and Contingencies

As of April 2, 2023, 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 March 31, 2024, 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.

Environmental Remediation.

In the fourth quarter of fiscal 2024, we recorded a liability of $ 7.7 million related to estimated remediation expenses associated with perchlorinated biphenyls ("PCBs") discovered in the soil at our Rosemount, MN facility during our expansion project.

This expense was recorded as an operating expense within cost of goods sold in our Consolidated Statements of Income.

We acquired the property, which had prior heavy industrial use, in fiscal 2012.

While the source of the PCBs is unknown, we have never brought PCBs onto the property or used PCBs on the site.

The liability is not discounted as management expects to incur these expenses within the next twelve months.

Given the many uncertainties involved in assessing environmental claims, our reserves may prove to be insufficient.

While it is possible that additional expense related to the remediation will be incurred in future periods if currently unknown issues arise, we are unable to estimate the extent of any further financial impact.

Asset Retirement Obligations.

7 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 April 2, 2023.

Therefore, in accordance with accounting guidance related to asset retirement and environmental obligations, we have not recorded an asset retirement obligation as of March 31, 2024.

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.

16 unchanged sentences

State income taxes, net of federal deduction 5.4 % 6.8 % 5.6 %

ESOP dividend deduction on allocated shares ( 0.2 ) % ( 0.2 ) % ( 0.2 ) %

Other — net ( 0.9 ) % ( 0.5 ) % ( 0.3 ) %

Total 25.5 % 27.3 % 26.3 %

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

The tax effects of items comprising our net deferred tax liability as of March 31, 2024 and April 2, 2023 are as follows:

(In thousands) 2024 2023

8 unchanged sentences

Deferred tax liabilities:

Inventories $ — $ ( 1,288 )

Prepaid expenses $ ( 1,119 ) $ ( 1,089 )

5 unchanged sentences

Net deferred tax liabilities $ ( 22,406 ) $ ( 23,799 )

As of April 2, 2023, the Company has determined that it is more likely than not that the deferred tax assets at April 2, 2023 will be realized either through future taxable income or reversals of taxable temporary differences.

As of March 31, 2024, the Company has determined that it is more likely than not that the deferred tax assets at March 31, 2024 will be realized either through future taxable income or reversals of taxable temporary differences.

We are subject to U.S.

5 unchanged sentences

Lease Obligations.

As of April 2, 2023, 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 March 31, 2024, 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 21 years, some of which include options to extend the lease for up to 15 years .

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.

As of March 31, 2024 and April 2, 2023, 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 $ 4.0 million for the twelve months ended March 31, 2024 and $ 3.1 million for the twelve months ended April 2, 2023, and includes leases less than 12 months in duration.

Other information related to our operating leases was as follows:

April 2, 2023 April 3, 2022

March 31, 2024

April 2, 2023

Lease Term and Discount Rate

1 unchanged sentence

Weighted average discount rate 4.0 % 2.8 %

Maturities of lease liabilities as of April 2, 2023 were as follows:

Maturities of lease liabilities as of March 31, 2024 were as follows:

(In thousands) Operating Leases

23 unchanged sentences

(In thousands)

Fiscal Year Ended April 2, 2023:

Fiscal Year Ended March 31, 2024:

Sales $ 409,465 $ 363,289 $ 146,408 $ 919,162

11 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

4 unchanged sentences

Capital expenditures $ 18,812 $ 8,939 $ 761 $ 28,512

* 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

* Unallocated assets not included, consisting primarily of cash and cash equivalents, prepaid expenses, and non-qualified deferred compensation plan assets of $ 28.2 million at March 31, 2024, $ 26.0 million at April 2, 2023 and $ 19.5 million at April 3, 2022

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