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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
For the Fiscal
Year Ended April 3, 2011
Commission File
No. 0-7647
HAWKINS, INC.
(Exact Name of Registrant as
specified in its Charter)
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MINNESOTA
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41-0771293
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(State of
Incorporation)
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(I.R.S. Employer Identification
No.)
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3100 East Hennepin Avenue, Minneapolis, Minnesota
(Address of Principal
Executive Offices)
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55413
(Zip Code)
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(612) 331-6910
(Registrants Telephone
Number, Including Area Code)
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Securities registered pursuant to Section 12(b) of the
Act:
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COMMON STOCK, PAR VALUE $.05 PER SHARE
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Name of exchange on which registered:
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NASDAQ Global Market
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Securities registered pursuant to Section 12(g) of the
Act:
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NONE
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding twelve
months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of voting stock held by
non-affiliates of the Registrant on September 30, 2010 (the
last business day of the Registrants most recently
completed second fiscal quarter) was approximately
$309.4 million based upon the closing sale price for the
Registrants common stock on that date as reported by The
NASDAQ Stock Market, excluding all shares held by officers and
directors of the Registrant and by the Trustees of the
Registrants Employee Stock Ownership Plan and Trust.
As of May 31, 2011, the Registrant had
10,325,840 shares of common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of our Proxy Statement for the annual meeting of
shareholders to be held August 2, 2011, are incorporated by
reference in Part III.
1
FORWARD-LOOKING
STATEMENTS
The information presented in this Annual Report on
Form 10-K
contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). These forward-looking
statements have been made pursuant to the provisions of the
Private Securities Litigation Reform Act of 1995. These
statements are not historical facts, but rather are based on our
current expectations, estimates and projections, and our beliefs
and assumptions. We intend words such as anticipate,
expect, intend, plan,
believe, seek, estimate,
will and similar expressions to identify
forward-looking statements. These statements are not guarantees
of future performance and are subject to certain risks,
uncertainties and other factors, some of which are beyond our
control and are difficult to predict. These factors could cause
actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and
uncertainties are described in the risk factors and elsewhere in
this Annual Report on
Form 10-K.
We caution you not to place undue reliance on these
forward-looking statements, which reflect our managements
view only as of the date of this Annual Report on
Form 10-K.
We are not obligated to update these statements or publicly
release the result of any revisions to them to reflect events or
circumstances after the date of this Annual Report on
Form 10-K
or to reflect the occurrence of unanticipated events.
As used in this Annual Report on
Form 10-K,
except where otherwise stated or indicated by the context,
Hawkins, we, us, the
Company, our, or the Registrant
means Hawkins, Inc. References to fiscal 2012 means
our fiscal year ending April 1, 2012, fiscal
2011 means our fiscal year ended April 3, 2011,
fiscal 2010 means our fiscal year ended
March 28, 2010, and fiscal 2009 means our
fiscal year ended March 29, 2009.
2
Hawkins,
Inc.
Annual
Report on
Form 10-K
For the
Fiscal Year Ended April 3, 2011
3
Hawkins, Inc. distributes bulk chemicals and blends,
manufactures and distributes specialty chemicals for our
customers in a wide variety of industries. We began our
operations primarily as a distributor of bulk chemicals with a
strong customer focus. Over the years, we have maintained the
strong customer focus and have expanded our business by
increasing our sales of value-added specialty chemical products,
including repackaging, blending and manufacturing certain
products. In recent years, we significantly expanded the sales
of our higher-margin blended and manufactured products. We
expect the specialty chemical portion of our business to
continue to grow. We believe that we create value for our
customers through superb service and support, quality products,
personalized applications and our trustworthy, creative
employees.
We currently conduct our business in two segments: Industrial
and Water Treatment. Financial information regarding these
segments is reported in our Financial Statements and Notes to
Financial Statements. See Items 7 and 8 of this Annual
Report on
Form 10-K.
Industrial Segment. Our Industrial Group
operates this segment of our business, which specializes in
providing industrial chemicals, products and services primarily
to the agriculture, energy, electronics, food, chemical
processing, pulp and paper, pharmaceutical, medical device and
plating industries. The groups principal products are
acids, alkalis and industrial and food-grade salts.
The Industrial Group:
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Receives, stores and distributes various chemicals in bulk,
including liquid caustic soda, sulfuric acid, hydrochloric acid,
phosphoric acid, potassium hydroxide and aqua ammonia;
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Manufactures sodium hypochlorite (bleach), agricultural products
and certain food-grade products, including our patented
Cheese-Phos®
liquid phosphate, lactates and other blended products;
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Repackages water treatment chemicals for our Water Treatment
Group and bulk industrial chemicals to sell in smaller
quantities to our customers;
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Performs custom blending of certain chemicals for customers
according to customer formulas; and
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Performs contract and private label packaging for household
chemicals.
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The groups sales are concentrated primarily in Illinois,
Iowa, Minnesota, Missouri, North Dakota, South Dakota,
Tennessee, and Wisconsin while the groups food-grade
products are sold nationally. The Industrial Group relies on a
specially trained sales staff that works directly with customers
on their specific needs. The group conducts its business
primarily through distribution centers and terminal operations.
In the fourth quarter of fiscal 2011, we completed the
acquisition of substantially all of the assets of Vertex
Chemical Corporation (Vertex), a manufacturer of
sodium hypochlorite in the central Midwest. In addition to the
manufacture of sodium hypochlorite bleaches, Vertex distributes
and provides terminal services for bulk liquid inorganic
chemicals, and contract and private label packaging for
household chemicals. Its corporate headquarters are located in
St. Louis, Missouri, with manufacturing sites in Dupo,
Illinois, Camanche, Iowa, and Memphis, Tennessee. In connection
with the acquisition we paid the sellers $27.2 million and
assumed certain liabilities of Vertex. Vertexs business is
part of our Industrial Group.
In fiscal 2009 and fiscal 2010, we invested in two new
facilities, which expanded the groups ability to service
its customers. Our facility in Centralia, Illinois, which
primarily serves our food-grade products business, became
operational in July 2009. We also opened a facility in
Minneapolis, Minnesota, to handle bulk chemicals sold to
pharmaceutical manufacturers. The total capital expenditures on
these two facilities were approximately $10.0 million
through fiscal 2010.
4
Water Treatment Segment. Our Water Treatment
Group operates this segment of our business, which specializes
in providing chemicals, equipment and solutions for potable
water, municipal and industrial wastewater, industrial process
water and non-residential swimming pool water. The group has the
resources and flexibility to treat systems ranging in size from
a small single well to a multi-million-gallon-per-day treatment
facility.
The group utilizes delivery routes operated by our employees who
serve as route driver, salesperson and highly trained technician
to deliver our products and diagnose our customers water
treatment needs. We believe that the high level of service
provided by these individuals allows us to serve as the trusted
water treatment expert for many of the municipalities and other
customers that we serve. We also believe that we are able to
obtain a competitive cost position on many of the chemicals sold
by the Water Treatment Group due to the volumes of these
chemicals purchased by our Industrial Group.
The group operates out of warehouses in 18 cities supplying
products and services to customers in Arkansas, Illinois,
Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana,
Nebraska, North Dakota, Oklahoma, South Dakota, Tennessee,
Wisconsin and Wyoming. We opened two of these warehouses in
fiscal 2011, one in fiscal 2010 and expect to continue to invest
in existing and new branches to expand the groups
geographic coverage. Our Water Treatment Group has historically
experienced higher sales during April to September, primarily
due to a seasonal increase in chemicals used by municipal water
treatment facilities.
Discontinued Operations. In February 2009, we
entered into two agreements whereby we agreed to sell our
inventory and enter into a marketing relationship regarding the
business of our Pharmaceutical segment, which provided
pharmaceutical chemicals to retail pharmacies and small-scale
pharmaceutical manufacturers. The transaction closed in May 2009
and we have no significant obligations to fulfill under the
agreements. The results of the Pharmaceutical segment have been
reported as discontinued operations in our consolidated
financial statements for all periods presented in this Annual
Report on
Form 10-K.
Raw Materials. We have numerous suppliers,
including many of the major chemical producers in the United
States. We typically have written distributorship agreements or
supply contracts with our suppliers that are periodically
renewed. We believe that most of the products we purchase can be
obtained from alternative sources should existing relationships
be terminated. We are dependent upon the availability of our raw
materials. In the event that certain raw materials become
generally unavailable, suppliers may extend lead times or limit
or cut off the supply of materials to us. As a result, we may
not be able to supply or manufacture products for our customers.
While we believe we have adequate sources of supply for our raw
material and product requirements, we cannot be sure that
supplies will be consistently available in the future should
shortages occur.
Intellectual Property. Our intellectual
property portfolio is of economic importance to our business.
When appropriate, we have pursued, and we will continue to
pursue, patents covering our products. We also have obtained
certain trademarks for our products to distinguish them from our
competitors products. The patent for our
Chees-Phos®
liquid phosphate product, which is manufactured by our
Industrial group, is scheduled to expire in November 2013. We
regard much of the formulae, information and processes that we
generate and use in the conduct of our business as proprietary
and protectable under applicable copyright, patent, trademark,
trade secret and unfair competition laws.
Customer Concentration. No single customer
represents more than 10% of either our total sales or the total
sales of any of our segments, but the loss of our five largest
customers could have a material adverse effect on our results of
operations. Total aggregate sales to our five largest customers
were $46.0 million in fiscal 2009, $47.1 million in
fiscal 2010 and $53.1 million in fiscal 2011.
Competition. We operate in a competitive
industry and compete with many producers, distributors and sales
agents offering chemicals equivalent to substantially all of the
products we handle. Many of our competitors are larger than we
are and may have greater financial resources, although no one
competitor is dominant in our industry. We compete by offering
quality products at competitive prices coupled with outstanding
customer service. Because of our long-standing relationships
with many of our suppliers, we are often able to leverage those
relationships to obtain products when supplies are scarce or to
obtain competitive pricing.
Geographic Information. Substantially all of
our revenues are generated in, and long-lived assets are located
in, the United States.
Employees. We had 321 employees as of
April 3, 2011, including 48 covered by a collective
bargaining agreement.
5
About Us. Hawkins, Inc. was founded in 1938
and incorporated in Minnesota in 1955. We became a
publicly-traded company in 1972. Our principal executive offices
are located at 3100 East Hennepin Avenue, Minneapolis, Minnesota.
Available Information. We have made available,
free of charge, through our Internet website
(http://www.hawkinsinc.com)
our Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
and, if applicable, amendments to those reports, as soon as
reasonably practicable after we electronically file these
materials with, or furnish them to, the Securities and Exchange
Commission. Reports of beneficial ownership filed by our
directors and executive officers pursuant to Section 16(a)
of the Exchange Act are also available on our website. We are
not including the information contained on our website as part
of, or incorporating it by reference into, this Annual Report on
Form 10-K.
You should consider carefully the following risks when
reading the information, including the financial information,
contained in this Annual Report on
Form 10-K.
Fluctuations
in the prices and availability of commodity chemicals, which are
cyclical in nature, could have a material adverse effect on our
operations and the margins of our products.
Periodically, we experience significant and rapid fluctuations
in the commodity pricing of raw materials. The cyclicality of
commodity chemical markets, such as caustic soda, primarily
results from changes in the balance between supply and demand
and the level of general economic activity. We cannot predict
whether the markets for our commodity chemicals will favorably
impact our operations or whether we will experience a negative
impact due to oversupply and lower prices.
Our principal raw materials are generally purchased under supply
contracts. The prices we pay under these contracts generally lag
the market prices of the underlying raw material. The pricing
within our supply contracts generally adjusts quarterly or
monthly. In addition, the cost of inventory we have on hand
generally will lag the current market pricing of such inventory.
While we attempt to maintain competitive pricing and stable
margin dollars, the variability in our cost of inventory from
the current market pricing can cause significant volatility in
our margins realized. In periods of rapidly increasing market
prices, the inventory cost position will tend to be favorable to
us, possibly by material amounts, which may positively impact
our margins. Conversely, in periods of rapidly decreasing market
prices, the inventory cost position will tend to be unfavorable
to us, possibly by material amounts, which may negatively impact
our margins. We do not engage in futures or other derivatives
contracts to hedge against fluctuations in future prices. We may
enter into sales contracts where the selling prices for our
products are fixed for a period of time, exposing us to
volatility in raw materials prices that we acquire on a spot
market or short-term contractual basis. We attempt to pass
commodity pricing changes to our customers, but we may be unable
to or be delayed in doing so. Our inability to pass through
price increases or any limitation or delay in our passing
through price increases could adversely affect our profit
margins.
We are also dependent upon the availability of our raw
materials. In the event that raw materials are in short supply
or unavailable, raw material suppliers may extend lead times or
limit or cut off supplies. As a result, we may not be able to
supply or manufacture products for some or all of our customers.
For example, in calendar 2008 a miners strike in Canada
significantly limited supplies of potassium chloride, a key
component of some of our products. Due to the resulting
shortage, many chemical companies were unable to supply their
customers. While we were able to obtain a supply of the product
sufficient to meet our customers needs, we cannot be
certain that such supplies would be available in the future
should other similar shortages occur. Constraints on the supply
or delivery of critical raw materials could disrupt our
operations and adversely affect the performance of our business.
6
We
operate in a highly competitive environment and face significant
competition and price pressure.
We operate in a highly competitive industry and compete with
producers, manufacturers, distributors and sales agents offering
chemicals equivalent to substantially all of the products we
handle. Competition is based
on several key criteria, including product price, product
performance and quality, product availability and security of
supply, responsiveness of product development in cooperation
with customers, and customer service. Many of our competitors
are larger than we are and may have greater financial resources.
As a result, these competitors may be better able than us to
withstand changes in conditions within our industry, changes in
the prices and availability of raw materials, and changes in
general economic conditions. Additionally, competitors
pricing decisions could compel us to decrease our prices, which
could adversely affect our margins and profitability. Our
ability to maintain or increase our profitability is dependent
upon our ability to offset competitive decreases in the prices
and margins of our products by improving production efficiency
and volume, identifying higher margin chemical products and
improving existing products through innovation and research and
development. If we are unable to maintain our profitability or
competitive position, we could lose market share to our
competitors and experience reduced profitability.
Demand
for our products is affected by general economic conditions and
by the cyclical nature of many of the industries we serve, which
could cause significant fluctuations in our sales volumes and
results.
Demand for our products is affected by general economic
conditions. A decline in general economic or business conditions
in the industries served by our customers could have a material
adverse effect on our business. Although our sales volumes have
increased in areas traditionally considered non-cyclical such as
water treatment and food products, many of our customers are in
businesses that are cyclical in nature, such as the industrial
manufacturing, surface finishing and energy industries which
include the automobile parts markets and the ethanol industry.
Downturns in these industries could adversely affect our sales
and our financial results by affecting demand for and pricing of
our products.
Our
business is subject to hazards common to chemical businesses,
any of which could interrupt our production and adversely affect
our results of operations.
Our business is subject to hazards common to chemical
manufacturing, storage, handling and transportation, including
explosions, fires, severe weather, natural disasters, mechanical
failure, unscheduled downtime, transportation interruptions,
chemical spills, discharges or releases of toxic or hazardous
substances or gases and other risks. These hazards could cause
personal injury and loss of life, severe damage to or
destruction of property and equipment, and environmental
contamination. In addition, the occurrence of material operating
problems at our facilities due to any of these hazards may
diminish our ability to meet our output goals and result in a
negative public or political reaction. Many of our facilities
are bordered by significant residential populations which
increase the risk of negative public or political reaction
should an environmental issue occur and could lead to adverse
zoning actions that could limit our ability to operate our
business in those locations. Accordingly, these hazards and
their consequences could have a material adverse effect on our
operations as a whole, including our results of operations and
cash flows, both during and after the period of operational
difficulties.
Environmental,
health and safety laws and regulations cause us to incur
substantial costs and may subject us to future
liabilities.
In the jurisdictions in which we operate, we are subject to
numerous federal, state and local environmental, health and
safety laws and regulations, including those governing the
discharge of pollutants into the air and water, and the
management and disposal of hazardous substances and wastes. The
nature of our business exposes us to risks of liability under
these laws and regulations due to the production, storage, use,
transportation and sale of materials that can cause
contamination or personal injury if released into the
environment. Ongoing compliance with such laws and regulations
is an important consideration for us and we invest substantial
capital and incur significant operating costs in our compliance
efforts. Governmental regulation has become increasingly strict
in recent years. We expect this trend to continue and anticipate
that compliance will continue to require increased capital
expenditures and operating costs.
7
If we violate environmental, health and safety laws or
regulations, in addition to being required to correct such
violations, we could be held liable in administrative, civil or
criminal proceedings for substantial fines and other sanctions
that could disrupt or limit our operations. Liabilities
associated with the investigation and
cleanup of hazardous substances, as well as personal injury,
property damages or natural resource damages arising out of such
hazardous substances, may be imposed in many situations without
regard to violations of laws or regulations or other fault, and
may also be imposed jointly and severally (so that a responsible
party may be held liable for more than its share of the losses
involved, or even the entire loss). Such liabilities can be
difficult to identify and the extent of any such liabilities can
be difficult to predict. We use, and in the past have used,
hazardous substances at many of our facilities, and have
generated, and continue to generate, hazardous wastes at a
number of our facilities. We have in the past, and may in the
future, be subject to claims relating to exposure to hazardous
materials and the associated liabilities may be material.
Changes
in our customers products or failure of our products to
meet customers quality specifications could adversely
affect our sales and profitability.
Our chemicals are used for a broad range of applications by our
customers. Changes in our customers products or processes
may enable our customers to reduce or eliminate consumption of
the chemicals that we provide. Customers may also find
alternative materials or processes that no longer require our
products. Consequently, it is important that we develop new
products to replace the sales of products that mature and
decline in use.
Our products provide important performance attributes to our
customers products. If our products fail to perform in a
manner consistent with quality specifications or have a shorter
useful life than guaranteed, a customer could seek replacement
of the product or damages for costs incurred as a result of the
product failing to perform as expected. A successful claim or
series of claims against us could have a material adverse effect
on our financial condition and results of operations and could
result in a loss of one or more customers.
Our
business, particularly our Water Treatment Group, is subject to
seasonality and weather conditions, which could adversely affect
our results of operations.
Our Water Treatment Group has historically experienced higher
sales during April to September, primarily due to a seasonal
increase in chemicals used by municipal water treatment
facilities. Demand is also affected by weather conditions, as
either higher or lower than normal precipitation or temperatures
may affect water usage and the consumption of our products. We
cannot assure you that seasonality or fluctuating weather
conditions will not have a material adverse affect on our
results of operations and financial condition.
Costs
related to a multi-employer pension plan, which has liabilities
in excess of plan assets, may have a material adverse effect on
our financial condition and results of operations.
We participate in the Central States Southeast and Southwest
Areas Pension Funds (CSS or the plan), a
multi-employer pension plan, for certain unionized employees.
Our contributions to the plan may escalate in future years
should we withdraw from the plan or upon the occurrence of
factors outside our control, including the bankruptcy or
insolvency of other participating employers, actions taken by
trustees who manage the plan, government regulations, or a
funding deficiency in the plan.
CSS adopted a rehabilitation plan as a result of its actuarial
certification for the plan year beginning January 1, 2008
which placed the plan in critical status. The plans 2010
Annual Funding Notice stated that as of January 1, 2010 the
Central States Pension Fund remained in critical status with a
funded percentage of 63.4%. The plan adopted an updated
rehabilitation plan effective December 31, 2010 which
implements additional measures to improve the plans funded
level, including establishing an increased minimum retirement
age and actuarially adjusting certain pre-age 65 benefits
for participants who retire after July 1, 2011. Despite
these changes, we can make no assurances of the extent to which
the updated rehabilitation plan will improve the funded status
of the plan.
While the underfunding of the plan is not our direct obligation
or liability, we are responsible for our portion of the
underfunded liability in certain circumstances. For instance, if
we were to cease making contributions to the plan or if our
union employees discontinued participation in the union, we
could trigger a substantial withdrawal liability. We are
currently unable to reasonably estimate any such potential
contingent liability. Any withdrawal liability will be recorded
when it is probable that a liability exists and can be
reasonably estimated.
8
The insurance that we maintain may not fully cover all
potential exposures.
We maintain property, business interruption and casualty
insurance, but such insurance may not cover all risks associated
with the hazards of our business and is subject to limitations,
including deductibles and limits on the liabilities covered. We
may incur losses beyond the limits or outside the coverage of
our insurance policies, including liabilities for environmental
remediation. In addition, from time to time, various types of
insurance for companies in the specialty chemical industry have
not been available on commercially acceptable terms or, in some
cases, have not been available at all. In the future, we may not
be able to obtain coverage at current levels, and our premiums
may increase significantly on coverage that we maintain.
If we
are unable to retain key personnel or attract new skilled
personnel, it could have an adverse impact on our
business.
Because of the specialized and technical nature of our business,
our future performance is dependent on the continued service of,
and on our ability to attract and retain, qualified management,
scientific, technical and support personnel. The unanticipated
departure of key members of our management team could have an
adverse impact on our business.
We may
not be able to successfully consummate future acquisitions or
integrate acquisitions into our business, which could result in
unanticipated expenses and losses.
As part of our business growth strategy, we have acquired
businesses and may pursue acquisitions in the future. Our
ability to pursue this strategy will be limited by our ability
to identify appropriate acquisition candidates and our financial
resources, including available cash and borrowing capacity. The
expense incurred in consummating acquisitions, the time it takes
to integrate an acquisition or our failure to integrate
businesses successfully could result in unanticipated expenses
and losses. Furthermore, we may not be able to realize the
anticipated benefits from acquisitions.
The process of integrating acquired operations into our existing
operations may result in unforeseen operating difficulties and
may require significant financial resources that would otherwise
be available for the ongoing development or expansion of
existing operations. The risks associated with the integration
of acquisitions include potential disruption of our ongoing
business and distraction of management, unforeseen claims,
liabilities, adjustments, charges and write-offs, difficulty in
conforming the acquired business standards, processes,
procedures and controls with our operations, and challenges
arising from the increased scope, geographic diversity and
complexity of the expanded operations.
Our
business is subject to risks stemming from natural disasters or
other extraordinary events outside of our control, which could
interrupt our production and adversely affect our results of
operations.
Natural disasters have the potential of interrupting our
operations and damaging our properties, which could adversely
affect our business. Since 1963, flooding of the Mississippi
River has required the Companys terminal operations to be
temporarily shifted out of its buildings seven times, including
three times since the spring of 2010. No assurance can be given
that flooding or other natural disasters will not recur or that
there will not be material damage or interruption to our
operations in the future from such disasters.
Chemical-related assets may be at greater risk of future
terrorist attacks than other possible targets in the United
States. Federal law imposes new site security requirements,
specifically on chemical facilities, which require increased
capital spending and increase our overhead expenses. New federal
regulations have already been adopted to increase the security
of the transportation of hazardous chemicals in the United
States. We ship and receive materials that are classified as
hazardous and we believe we have met these requirements, but
additional federal and local regulations that limit the
distribution of hazardous materials are being considered. Bans
on movement of hazardous materials through certain cities could
adversely affect the efficiency of our logistical operations.
Broader restrictions on hazardous material movements could lead
to additional investment and could change where and what
products we provide.
9
The occurrence of extraordinary events, including future
terrorist attacks and the outbreak or escalation of hostilities,
cannot be predicted, but their occurrence can be expected to
negatively affect the economy in general, and specifically the
markets for our products. The resulting damage from a direct
attack on our assets, or assets used by us, could include loss
of life and property damage. In addition, available insurance
coverage may not be sufficient to cover all of the damage
incurred or, if available, may be prohibitively expensive.
We may
not be able to renew our leases of land where four of our
operations facilities reside.
We lease the land where our three main terminals are located and
where a significant manufacturing plant is located. We do not
have guaranteed lease renewal options and may not be able to
renew our leases in the future. Our current lease renewal
periods extend out to 2014 (one lease), 2018 (two leases) and
2029 (one lease). The failure to secure extended lease terms on
any one of these facilities may have a material adverse impact
on our business, as they are where a significant portion of our
chemicals are manufactured and where the majority of our bulk
chemicals are stored. While we can make no assurances, based on
historical experience and anticipated future needs, we believe
that we will be able to renew our leases as the renewal periods
expire.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
We own our principal location, which consists of approximately
11 acres of land in Minneapolis, Minnesota, with six
buildings containing a total of 177,000 square feet of
office and warehouse space primarily used by our Industrial
Group. Our principal office is located in one of these
buildings, at 3100 East Hennepin Avenue. We have installed
sprinkler systems in substantially all of our warehouse
facilities for fire protection. We carry customary levels of
insurance covering the replacement of damaged property.
In addition to the facilities described previously, our other
facilities are described below. We believe that these
facilities, together with those described above, are adequate
and suitable for the purposes they serve. Unless noted, each
facility is owned by us and is primarily used as office and
warehouse.
|
|
|
|
|
|
|
|
|
|
|
Approx.
|
Group
|
|
Location
|
|
Square Feet
|
|
Industrial
|
|
St. Paul, MN(1)
|
|
|
32,000
|
|
|
|
Minneapolis, MN(2)
|
|
|
20,000
|
|
|
|
Centralia, IL(3)
|
|
|
77,000
|
|
|
|
Camanche, IA(4)
|
|
|
95,000
|
|
|
|
St Louis, MO(4)
|
|
|
6,000
|
|
|
|
Dupo, IL(4)
|
|
|
64,000
|
|
Water Treatment
|
|
Fargo, ND
|
|
|
20,000
|
|
|
|
Fond du Lac, WI
|
|
|
24,000
|
|
|
|
Washburn, ND
|
|
|
14,000
|
|
|
|
Billings, MT
|
|
|
9,000
|
|
|
|
Sioux Falls, SD
|
|
|
27,000
|
|
|
|
Rapid City, SD
|
|
|
9,000
|
|
|
|
Peotone, IL(5)
|
|
|
18,000
|
|
|
|
Superior, WI
|
|
|
17,000
|
|
|
|
Slater, IA
|
|
|
12,000
|
|
|
|
Lincoln, NE(5)
|
|
|
16,000
|
|
|
|
Eldridge, IA
|
|
|
6,000
|
|
|
|
Columbia, MO(5)
|
|
|
14,000
|
|
|
|
Garnett, KS
|
|
|
18,000
|
|
|
|
Ft. Smith, AR(5)
|
|
|
17,000
|
|
|
|
Muncie, IN(6)
|
|
|
12,000
|
|
|
|
Centralia, IL(6)
|
|
|
39,000
|
|
Industrial and Water Treatment
|
|
St. Paul, MN(7)
|
|
|
59,000
|
|
|
|
Memphis, TN(4)
|
|
|
41,000
|
|
10
|
|
|
(1) |
|
Our terminal operations, located at two sites on opposite sides
of the Mississippi River, are made up of three buildings,
outside storage tanks for the storage of liquid bulk chemicals,
including caustic soda, as well as numerous smaller tanks for
storing and mixing chemicals. The land is leased from the Port
Authority of the City of St. Paul, Minnesota. The applicable
leases run until December 2013, at which time we have an option
to renew the leases for an additional five-year period on the
same terms and conditions subject to renegotiation of rent. |
|
(2) |
|
This facility is leased from a third party to serve our bulk
pharmaceutical customers. |
|
(3) |
|
This facility includes 10 acres of land located in
Centralia, Illinois owned by the company. The facility became
operational in July 2009 and primarily serves our food-grade
products business. Prior to fiscal 2011 this facility was shared
with the Water Treatment Group. |
|
(4) |
|
The acquisition of Vertex in fiscal 2011 included an office
building located in St Louis, Missouri and manufacturing and
warehouse facilities located in Memphis, Tennessee; Camanche,
Iowa; and Dupo, Illinois. All of the facilites and land are
owned by the company with the exception of the land in Dupo,
Illinois, which is leased from a third party. The lease runs
through May, 2014. The facility in Memphis is shared between the
Industrial and Water Treatment Groups. |
|
(5) |
|
This facility is leased from a third party. |
|
(6) |
|
This facility was purchased in fiscal 2011. |
|
(7) |
|
Our Red Rock facility, which consists of a
59,000 square-foot building located on approximately
10 acres of land, has outside storage capacity for liquid
bulk chemicals, as well as numerous smaller tanks for storing
and mixing chemicals. |
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
On November 3, 2009, ICL Performance Products, LP
(ICL), a chemical supplier to us, filed a lawsuit in
the United States District Court for the Eastern District of
Missouri, asserting breach of a contract for the sale of
phosphoric acid in 2009 (the 2009 Contract). ICL
seeks to recover $7.3 million in damages and pre-judgment
interest, and additionally seeks to recover its costs and
attorneys fees. ICL also claimed that we breached a
contract for the sale of phosphoric acid in 2008 (the 2008
Contract). ICL has since dropped its claim for breach of
the 2008 Contract. We have counterclaimed against ICL alleging
that ICL falsely claimed to have a shortage of raw materials
that prevented it from supplying us with the contracted quantity
of phosphoric acid for 2008. We claim that ICL used this alleged
shortage and the threat of discontinued shipments of phosphoric
acid to force us to pay increased prices for the remainder of
2008, and to sign the 2009 Contract. Based on this alleged
conduct, we have brought four alternate causes of action
including: (1) breach of contract, (2) breach of the
implied covenant of good faith and fair dealing,
(3) negligent misrepresentation, and (4) intentional
misrepresentation. We seek to recover $1.5 million in
damages, and additionally seek to recover punitive damages, pre-
and post-judgment interest, and our costs and attorneys
fees. The discovery phase in this action is complete and this
action is scheduled for jury trial in late October 2011. We
are not able to predict the ultimate outcome of this litigation,
but legal proceedings such as this can result in substantial
costs and divert our managements attention and resources,
which may have a material adverse effect on our business and
results of operations, including cash flows.
We are a party from time to time in other legal proceedings
arising in the ordinary course of our business. To date, none of
the litigation has had a material effect on us.
|
|
ITEM 4.
|
[REMOVED
AND RESERVED]
|
11
PART II
|
|
ITEM 5.
|
MARKET
FOR THE COMPANYS COMMON EQUITY, RELATED SHAREHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
Quarterly Stock Data
|
|
High
|
|
Low
|
|
Fiscal 2011
|
|
|
|
|
|
|
|
|
4th
Quarter
|
|
$
|
46.86
|
|
|
$
|
36.00
|
|
3rd
Quarter
|
|
|
50.18
|
|
|
|
34.03
|
|
2nd
Quarter
|
|
|
37.45
|
|
|
|
24.21
|
|
1st
Quarter
|
|
|
29.50
|
|
|
|
23.14
|
|
Fiscal 2010
|
|
|
|
|
|
|
|
|
4th
Quarter
|
|
$
|
23.96
|
|
|
$
|
19.40
|
|
3rd
Quarter
|
|
|
24.43
|
|
|
|
20.27
|
|
2nd
Quarter
|
|
|
26.49
|
|
|
|
18.19
|
|
1st
Quarter
|
|
|
22.91
|
|
|
|
14.78
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends
|
|
Declared
|
|
Paid
|
|
Fiscal 2012
|
|
|
|
|
|
|
|
|
1st
Quarter
|
|
|
|
|
|
$
|
0.30
|
|
Fiscal 2011
|
|
|
|
|
|
|
|
|
4th
Quarter
|
|
$
|
0.30
|
|
|
|
|
|
3rd
Quarter
|
|
|
|
|
|
$
|
0.40
|
|
2nd
Quarter
|
|
$
|
0.40
|
|
|
|
|
|
1st
Quarter
|
|
|
|
|
|
$
|
0.28
|
|
Fiscal 2010
|
|
|
|
|
|
|
|
|
4th
Quarter
|
|
$
|
0.28
|
|
|
|
|
|
3rd
Quarter
|
|
|
|
|
|
$
|
0.38
|
|
2nd
Quarter
|
|
$
|
0.38
|
|
|
|
|
|
1st
Quarter
|
|
|
|
|
|
$
|
0.26
|
|
Our common shares are traded on The NASDAQ Global Market under
the symbol HWKN. The price information represents
closing sale prices as reported by The NASDAQ Global Market. As
of April 3, 2011, shares of our common stock were held by
approximately 526 shareholders of record.
We first started paying cash dividends in 1985 and have
continued to do so since. In July 2010 and August 2009, in
recognition of the Companys strong financial performance
in fiscal 2010 and 2009, its strong cash position and no debt,
the Board of Directors authorized a special dividend of $0.10
per share in addition to a regular semi-annual cash dividend of
$0.30 per share for July 2010 and $0.28 per share for July 2009.
Future dividend levels will be dependent upon our consolidated
results of operations, financial position, cash flows and other
factors, and will be evaluated by our Board of Directors.
12
The following graph compares the cumulative total shareholder
return on our common shares with the cumulative total returns of
the NASDAQ Industrial Index, the NASDAQ Composite Index, the
Russell 2000 Index and the Standard & Poors
(S&P) Small Cap 600 Index for our last five
completed fiscal years. The graph assumes the investment of $100
in our stock, the NASDAQ Industrial Index, the NASDAQ Composite
Index, the Russell 2000 Index and the S&P Small Cap 600
Index on March 31, 2006, and reinvestment of all dividends.
We have added the S&P Small Cap 600 Index because during
fiscal 2011, Hawkins, Inc. was added to the S&P Small Cap
600 Index based on disclosures by S&P.
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
Selected financial data for the Company is presented in the
table below and should be read in conjunction with
Managements Discussion and Analysis of Financial Condition
and Results of Operations included in Item 7 and the
Companys consolidated financial statements and notes
thereto included in Item 8 herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In thousands, except per share data)
|
|
Sales from continuing operations
|
|
$
|
297,641
|
|
|
$
|
257,099
|
|
|
$
|
284,356
|
|
|
$
|
186,664
|
|
|
$
|
151,766
|
|
Gross profit from continuing operations
|
|
|
61,902
|
|
|
|
64,445
|
|
|
|
62,420
|
|
|
|
38,528
|
|
|
|
34,709
|
|
Income from continuing operations
|
|
|
20,314
|
|
|
|
23,738
|
|
|
|
23,424
|
|
|
|
8,488
|
|
|
|
7,724
|
|
Basic earnings per common share from continuing operations
|
|
|
1.98
|
|
|
|
2.32
|
|
|
|
2.29
|
|
|
|
0.83
|
|
|
|
0.76
|
|
Diluted earnings per common share from continuing operations
|
|
|
1.96
|
|
|
|
2.31
|
|
|
|
2.29
|
|
|
|
0.83
|
|
|
|
0.76
|
|
Cash dividends declared per common share
|
|
|
0.70
|
|
|
|
0.66
|
|
|
|
0.52
|
|
|
|
0.48
|
|
|
|
0.44
|
|
Cash dividends paid per common share
|
|
|
0.68
|
|
|
|
0.64
|
|
|
|
0.50
|
|
|
|
0.46
|
|
|
|
0.42
|
|
Total assets
|
|
$
|
185,005
|
|
|
$
|
160,293
|
|
|
$
|
136,290
|
|
|
$
|
108,943
|
|
|
$
|
101,269
|
|
13
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following is a discussion and analysis of our financial
condition and results of operations for our fiscal years ended
April 3, 2011, March 28, 2010, and March 29,
2009. This discussion should be read in conjunction with the
Financial Statements and Notes to Financial Statements included
in Item 8 of this Annual Report on
Form 10-K.
Overview
We derive substantially all of our revenues from the sale of
bulk and specialty chemicals to our customers in a wide variety
of industries. We began our operations primarily as a
distributor of bulk chemicals with a strong customer focus. Over
the years we have maintained the strong customer focus and have
expanded our business by increasing our sales of value-added
specialty chemical products, including repackaging, blending and
manufacturing certain products. In recent years, we
significantly expanded the sales of our higher-margin blended
and manufactured products, including our food-grade products. We
expect this specialty chemical portion of our business to
continue to grow.
We have continued to invest in growing our business. On
January 14, 2011, we completed the acquisition of
substantially all of the assets of Vertex Chemical Corporation
(Vertex), for approximately $27.2 million. In
addition to the manufacture of sodium hypochlorite bleaches,
Vertex distributes and provides terminal services for bulk
liquid inorganic chemicals, and contract and private label
packaging for household chemicals. We believe the acquisition
strengthens our market position in the Midwest. Vertex had
revenues of approximately $39 million in calendar 2010.
While Vertexs margins have historically been somewhat
lower than ours, we expect that the acquisition will be
accretive to earnings. Operating results of Vertex are included
in our consolidated results of operations from the date of
acquisition in this Annual Report on
Form 10-K
as part of our Industrial segment. See Note 2 to the
Consolidated Financial Statements for further information.
In fiscal 2009 and fiscal 2010, we invested in two new
facilities to expand our ability to service our customers and
facilitate growth within our Industrial Group. Our facility in
Centralia, Illinois began operations in July 2009 and primarily
serves our food-grade products business. We closed our Linden,
New Jersey food-grade production facility in September 2009 and
transferred these operations to our Centralia facility. Also in
fiscal 2009, we built a facility in Minneapolis, Minnesota to
handle bulk chemicals sold to pharmaceutical manufacturers. The
total capital expenditures on these two facilities were
approximately $10.0 million through fiscal 2010 of which
approximately $7.5 million occurred during fiscal 2009 and
approximately $2.5 million occurred in the first six months
of fiscal 2010.
We opened two new branches for our Water Treatment Group in
fiscal 2011 and one new branch in fiscal 2010 and expect to
continue to invest in existing and new branches to expand our
Water Treatment Groups geographic coverage. The cost of
these branch expansions is not expected to be material. In
addition, we have selectively added route sales personnel to
certain existing Water Treatment Group branch offices to spur
growth within our existing geographic coverage area.
In February 2009, we agreed to sell our inventory and entered
into a marketing agreement regarding the business of our
Pharmaceutical segment, which provided pharmaceutical chemicals
to retail pharmacies and small-scale pharmaceutical
manufacturers. The transaction closed in May 2009 and we have no
significant obligations to fulfill under the agreement. The
results of the Pharmaceutical segment have been reported as
discontinued operations in our Consolidated Financial Statements
for all periods presented in this Annual Report on
Form 10-K.
Our financial performance in fiscal 2011 was highlighted by:
|
|
|
|
|
Sales from continuing operations of $297.6 million, a 15.8%
increase from fiscal 2010;
|
|
|
|
Gross profit from continuing operations of $61.9 million or
20.8% of sales, a $2.5 million decrease in gross profit
dollars from fiscal 2010;
|
|
|
|
Net cash provided by operating activities of
$28.5 million; and
|
|
|
|
Cash and cash equivalents and investments available for sale
were $37.4 million as of the end of fiscal 2011 after
expending $25.5 million related to the Vertex acquisition
during fiscal 2011.
|
14
We seek to maintain relatively constant gross profit dollars on
each of our products as the cost of our raw materials increase
or decrease. Since we expect that we will continue to experience
fluctuations in our raw material costs and resulting prices in
the future, we believe that gross profit dollars is the best
measure of our profitability from the sale of our products. If
we maintain relatively stable profit dollars on each of our
products, our reported gross profit percentage will decrease
when the cost of the product increases and will increase when
the cost of the product decreases. We use the last in, first out
(LIFO) method of valuing Hawkins inventory,
which causes the most recent product costs to be recognized in
our income statement. The valuation of LIFO inventory for
interim periods is based on our estimates of fiscal year-end
inventory levels and costs. The LIFO inventory valuation method
and the resulting cost of sales are consistent with our business
practices of pricing to current commodity chemical raw material
prices. Our LIFO reserve increased by $3.9 million in
fiscal 2011 due to rising costs and higher inventory volumes on
hand at year-end maintained to meet customer requirements during
an anticipated flood. The increased reserve decreased our
reported gross profit for the year. Our LIFO reserve decreased
by $12.6 million in fiscal 2010 due to rapidly declining
costs. This decrease in the reserve increased our reported gross
profit in fiscal 2010. Vertexs inventory cost, which
represents approximately 18% of the consolidated
first-in,
first-out (FIFO) inventory balance at April 3,
2011, is determined using the FIFO method.
Our raw material costs fluctuated dramatically during fiscal
2009 and fiscal 2010. The costs of the majority of our primary
raw materials began to increase rapidly and substantially in the
first quarter of fiscal 2009 due to high demand and, in some
cases, constrained supply. We continued to experience those cost
trends through the third quarter of fiscal 2009. The costs for
these raw materials leveled off in the fourth quarter of fiscal
2009, before declining significantly during fiscal 2010, with
the costs at the end of fiscal 2010 substantially lower than
they were in the at the end of fiscal 2009. Our raw material
costs have been generally increasing throughout fiscal 2011,
although they have been significantly more stable than in fiscal
years 2009 and 2010. Current raw material costs are at levels
significantly below the peak that occurred during the third and
fourth quarters of fiscal 2009.
Results
of Operations
The following table sets forth certain items from our statement
of income as a percentage of sales from period to period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
(79.2
|
)%
|
|
|
(74.9
|
)%
|
|
|
(78.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
20.8
|
%
|
|
|
25.1
|
%
|
|
|
22.0
|
%
|
Selling, general and administrative expenses
|
|
|
(10.1
|
)%
|
|
|
(10.0
|
)%
|
|
|
(8.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
10.7
|
%
|
|
|
15.1
|
%
|
|
|
13.1
|
%
|
Investment income
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
10.8
|
%
|
|
|
15.2
|
%
|
|
|
13.2
|
%
|
Provision for income taxes
|
|
|
(4.0
|
)%
|
|
|
(6.1
|
)%
|
|
|
(5.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
6.8
|
%
|
|
|
9.1
|
%
|
|
|
8.2
|
%
|
Income from discontinued operations, net of tax
|
|
|
0.0
|
%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
6.8
|
%
|
|
|
9.2
|
%
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Fiscal
2011 Compared to Fiscal 2010
Sales
Sales increased $40.5 million, or 15.8%, to
$297.6 million for fiscal 2011, as compared to sales of
$257.1 million for fiscal 2010. The sales increase was
primarily driven by higher sales of manufactured and specialty
chemical products and somewhat higher selling prices for bulk
chemicals due to increasing commodity chemical costs. Sales of
these bulk products were approximately 20% of sales compared to
approximately 19% in the previous year. Additionally, the
acquisition of Vertex, which closed in the fourth quarter of
fiscal 2011, contributed $9.2 million in revenue.
Industrial Segment. Industrial segment sales
increased $33.8 million, or 19.3%, to $208.7 million
for fiscal 2011. The sales increase was primarily attributable
to higher sales of manufactured and specialty chemical products
and somewhat higher selling prices for commodity bulk chemicals
due to increased commodity chemical costs. In addition, Vertex
revenues of $9.2 million are included in fiscal 2011
Industrial segment sales.
Water Treatment Segment. Water Treatment
segment sales increased $6.7 million, or 8.2%, to
$88.9 million for fiscal 2011. The sales increase was
primarily attributable to increased sales of manufactured and
specialty chemical products.
Gross
Profit
Gross profit was $61.9 million, or 20.8% of sales, for
fiscal 2011, as compared to $64.4 million, or 25.1% of
sales, for fiscal 2010. The LIFO method of valuing inventory
negatively impacted gross profit by $3.9 million for fiscal
2011 due to increased raw material costs and higher volumes of
inventory at year end maintained to meet customer requirements
during an anticipated flood. In the prior year, LIFO positively
impacted gross profit by $12.6 million due to decreases in
certain raw material costs during that period.
Industrial Segment. Gross profit for the
Industrial segment was $36.9 million, or 17.7% of sales,
for fiscal 2011, as compared to $37.3 million, or 21.3% of
sales, for fiscal 2010. Competitive pricing pressures and
increased operational overhead costs contributed to the lower
gross profit levels in the Industrial segment. This group
incurred $0.3 million of overhead costs associated with
flood control efforts in the fourth quarter of fiscal 2011.
These reductions in gross profit were partially offset by higher
sales of higher margin manufactured and specialty chemical
products. The LIFO method of valuing inventory negatively
impacted gross profit in this segment by $2.9 million in
fiscal 2011, as compared to positively impacting gross profit by
$10.2 million in fiscal 2010.
Water Treatment Segment. Gross profit for the
Water Treatment segment was $25.0 million, or 28.1% of
sales, for fiscal 2011, as compared to $27.2 million, or
33.0% of sales, for fiscal 2010. The decrease in gross profit
dollars was primarily due to competitive pricing pressures and
increased operational overhead costs, partially offset by
increased sales. Additionally, the LIFO method of valuing
inventory negatively impacted gross profit in this segment by
$1.1 million in fiscal 2011, as compared to positively
impacting gross profit by $2.4 million in fiscal 2010.
Selling,
General and Administrative Expenses
Selling, general and administrative (SG&A)
expenses increased $4.3 million to $29.9 million, or
10.1% of sales, for fiscal 2011, as compared to
$25.6 million, or 10.0% of sales, for fiscal 2010. We
incurred approximately $1.0 million in additional expense
as a result of the death of John Hawkins, our former Chief
Executive Officer, through the accelerated vesting of his
previously granted performance-based restricted stock units and
stock options, as well as his retention bonus agreement. Other
items driving the increased expenses include acquisition costs
of approximately $0.7 million relating to the Vertex
acquisition in addition to higher equity incentive plan costs
and litigation defense costs.
16
Operating
Income
Operating income was $32.0 million, or 10.7% of sales, for
fiscal 2011, as compared to $38.8 million, or 15.1% of
sales, for fiscal 2010. The decrease in operating income was the
result of reduced gross profits and increased SG&A
expenses. Both reporting segments saw a decline in their gross
profit dollars due to competitive pricing pressures and higher
operational overhead costs. Both segments were also negatively
impacted by the LIFO method of valuing inventory in fiscal 2011.
Investment
Income
Investment income was $0.3 million for fiscal 2011 and
fiscal 2010.
Provision
for Income Taxes
Our effective income tax rate was 37.1% for fiscal 2011 compared
to 39.3% for fiscal 2010. The lower effective tax rate for
fiscal 2011 was primarily due to increased permanent tax
differences, lower taxable income levels and somewhat lower
effective state tax rates.
Fiscal
2010 Compared to Fiscal 2009
Sales
Sales decreased $27.3 million, or 9.6%, to
$257.1 million for fiscal 2010, as compared to sales of
$284.4 million for fiscal 2009. The sales decrease was
primarily driven by lower selling prices for commodity bulk
chemicals, including caustic soda, due to lower commodity
chemical costs in fiscal 2010 as compared to the prior year.
Sales of these products were approximately 19% of sales compared
to approximately 29% in the previous year. The decline in bulk
chemical sales was partially offset by higher sales of our
manufactured and specialty chemical products.
Industrial Segment. Industrial segment sales
decreased $26.7 million, or 13.2%, to $174.9 million
for fiscal 2010. The sales decrease was primarily attributable
to lower selling prices for commodity bulk chemicals due to
lower commodity chemical costs in fiscal 2010 compared to the
prior year. This was partially offset by higher sales of
manufactured and specialty chemical products.
Water Treatment Segment. Water Treatment
segment sales decreased $0.6 million, or 0.7%, to
$82.2 million for fiscal 2010. Increased sales of
manufactured and specialty chemical products were offset by
decreases in selling prices for commodity chemicals due to lower
commodity chemical costs in fiscal 2010 compared to the prior
year.
Gross
Profit
Gross profit was $64.4 million, or 25.1% of sales, for
fiscal 2010, as compared to $62.4 million, or 22.0% of
sales, for fiscal 2009. The LIFO method of valuing inventory
increased gross profit by $12.6 million for fiscal 2010 due
to decreases in certain raw material costs, whereas LIFO
decreased gross profit by $10.0 million in the prior year
due to increases in certain raw material costs during that
period. The increase in gross profit as a percentage of sales
was primarily driven by our ability to maintain relatively
stable margin dollars on lower selling prices compared to the
prior year, in addition to an increase in sales of higher margin
manufactured and specialty chemical products and the LIFO
reserve adjustments.
Industrial Segment. Gross profit for the
Industrial segment was $37.3 million, or 21.3% of sales,
for fiscal 2010, as compared to $41.5 million, or 20.6% of
sales, for fiscal 2009. In fiscal 2009, the gross profit dollars
were significantly higher than historical levels due to the sale
of lower-cost inventory on hand during that period of rapidly
escalating commodity chemical prices as well as an increase in
profits realized on certain products where we had inventory
available to meet escalated demand during a period of
constrained supply. By contrast, in fiscal 2010, market
conditions returned to levels more in line with our historical
experience and, as a result, our gross profit dollars were lower
for that period. Increased operational overhead costs, primarily
related to the two new facilities, also contributed to the lower
gross profit levels in the Industrial segment. The reductions were partially offset by
higher profits realized from the sale of manufactured and
specialty chemical products. The increase in gross profit margin
as a percent of sales was primarily driven by our ability to
maintain relatively stable margin dollars on lower selling
prices compared to the prior year. The LIFO method of valuing
inventory positively impacted gross profit in this segment by
$10.2 million in fiscal 2010, as compared to negatively
impacting gross profit by $6.9 million in fiscal 2009.
17
Water Treatment Segment. Gross profit for the
Water Treatment segment was $27.2 million, or 33.0% of
sales, for fiscal 2010, as compared to $21.0 million, or
25.3% of sales, for fiscal 2009. The higher gross profit dollars
were primarily driven by a favorable product mix change as sales
of higher-margin manufactured and specialty chemical products
increased, and we experienced favorable weather conditions in
the first quarter of fiscal 2010 as compare to the first quarter
of fiscal 2009. The increase in gross profit margin as a percent
of sales was primarily driven by our ability to maintain
relatively stable margin dollars on lower selling prices
compared to the prior year. Additionally, the LIFO method of
valuing inventory positively impacted gross profit in this
segment by $2.4 million in fiscal 2010, as compared to
negatively impacting gross profit by $3.1 million in fiscal
2009.
Selling,
General and Administrative Expenses
SG&A expenses were $25.6 million, or 10.0% of sales,
for fiscal 2010, as compared to $25.1 million, or 8.8% of
sales, for fiscal 2009. The increase in SG&A expenses was
primarily the result of higher equity incentive plan, variable
pay plan and medical insurance costs partially offset by lower
bad debt expense. The increase as a percentage of sales was
primarily the result of the decrease in sales from fiscal 2009.
Operating
Income
Operating income was $38.8 million, or 15.1% of sales, for
fiscal 2010, as compared to $37.3 million, or 13.1% of
sales, for fiscal 2009. A $6.1 million increase in
operating income for the Water Treatment segment, which was
driven by higher sales volumes for manufactured and specialty
chemical products, was partially offset by a $4.6 million
decrease in operating income for the Industrial segment. Both
segments benefited from the LIFO method of valuing inventory in
fiscal 2010.
Investment
Income
Investment income was $0.3 million for fiscal 2010 and
fiscal 2009. Investment income remained flat
year-over-year
primarily due to lower yields on investments as compared to the
prior year.
Provision
for Income Taxes
Our effective income tax rate was 39.3% for fiscal 2010 compared
to 37.8% for fiscal 2009. The higher effective tax rate for
fiscal 2010 was primarily due to decreased permanent tax
differences that served to reduce the effective tax rate in
fiscal 2009.
Liquidity
and Capital Resources
Cash provided by operations in fiscal 2011 was
$28.5 million compared to $38.8 million in fiscal 2010
and $24.4 million in fiscal 2009. The decrease in cash
provided by operating activities in fiscal 2011 from fiscal 2010
was primarily due to a decrease in net income, fluctuations in
working capital balances and lower deferred tax liabilities.
Higher working capital balances used $0.4 million in cash
in fiscal 2011 whereas lower working capital balances provided
$0.8 million in cash in fiscal 2010. The net increase in
working capital balances in fiscal 2011 was primarily due to
increasing commodity chemical costs and the resulting increase
in selling prices, which resulted in an increase in trade
receivables and inventories partially offset by an increase in
accounts payable and income tax payable balance due to the
timing of tax payments. The increase in cash provided by
operating activities in fiscal 2010 from fiscal 2009 was
primarily due to the fluctuations in working capital balances
and increased deferred tax liabilities in fiscal 2010. Due to
the nature of our operations, which includes purchases of large
quantities of bulk chemicals, the timing of purchases can result
in significant changes in working capital investment and the
resulting operating cash flow. Historically, our cash requirements for working capital increase during the period
from April through November as caustic soda inventory levels
increase as the majority of barges are received during this
period.
18
Cash and investments
available-for-sale
of $37.4 million at April 3, 2011 decreased by
$16.3 million as compared with March 28, 2010, due to
the acquisition of Vertex, capital expenditures and dividend
payments, which were partially offset by cash generated from
operations. Investments
available-for-sale
as of April 3, 2011 and March 28, 2010 consisted of
certificates of deposit with maturities ranging from three
months to two years.
Capital
Expenditures
Capital expenditures were $12.4 million in fiscal 2011,
$8.3 million in fiscal 2010 and $14.2 million in
fiscal 2009. The total capital expenditures in fiscal 2011 for
new facilities were approximately $1.6 million compared to
$2.5 million and $7.5 million in fiscal 2010 and 2009,
respectively. Additional significant capital expenditures during
fiscal 2011 consisted of approximately $3.8 million for
business expansion and process improvement projects,
$3.2 million for other facility improvements and new
cylinders, $2.9 million for regulatory and safety
improvements and $0.9 million for new and replacement route
sales trucks for the Water Treatment segment. We expect that
recurring capital expenditures for storage, facilities
improvements, returnable containers, and route sales trucks in
fiscal 2012 will be comparable with the fiscal 2011 spend rate,
although we are projecting higher capital spending for business
expansion and project improvement processes in fiscal 2012, with
total capital spending in fiscal 2012 currently projected to be
approximately $20 million. We expect our cash flows from
operations will be sufficient to fund our capital expenditures
in fiscal 2012.
Dividends
During the second quarter of fiscal 2011, our Board of Directors
increased our semi-annual cash dividend by 7.1% to $0.30 per
share from $0.28 per share. In addition, due to the
Companys strong cash position driven by its financial
performance in fiscal 2010, the Board of Directors authorized a
special dividend of $0.10 per share to be paid concurrently with
the semi-annual regular dividend in October 2010. We first
started paying cash dividends in 1985 and have continued to do
so since. Future dividend levels will be dependent upon our
results of operations, financial position, cash flows and other
factors, and will be evaluated by our Board of Directors.
Off-Balance
Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual
Obligations and Commercial Commitments
The following table provides aggregate information about our
contractual payment obligations and the periods in which
payments are due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
|
Contractual Obligation
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
5 Years
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Operating lease obligations
|
|
$
|
669
|
|
|
$
|
668
|
|
|
$
|
682
|
|
|
$
|
670
|
|
|
$
|
622
|
|
|
$
|
3,739
|
|
|
$
|
7,050
|
|
Critical
Accounting Policies
In preparing the financial statements, we follow
U.S. generally accepted accounting principles
(GAAP). The preparation of these financial
statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, sales and
expenses, and related disclosure of contingent assets and
liabilities. We re-evaluate our estimates on an on-going basis.
Our estimates are based on historical experience and on various
other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates
under different assumptions and conditions. We consider the
following policies to involve the most judgment in the
preparation of our financial statements.
19
Revenue Recognition We recognize revenue when
there is evidence that the customer has agreed to purchase the
product, the price and terms of the sale are fixed, the product
has shipped and title passes to our customer, performance has
occurred, and collection of the receivable is reasonably assured.
Inventories Inventories are valued at the
lower of cost or market. On a quarterly basis, management
assesses the inventory quantities on hand to estimated future
usage and sales and, if necessary, writes down to net realizable
the value of inventory deemed obsolete or excess. Though
management considers these reserves adequate and proper, changes
in sales volumes due to unexpected economic or competitive
conditions are among the factors that could materially affect
the adequacy of this reserve.
LIFO Reserve Inventories, with the exception
of Vertex inventories, are primarily valued at the lower of cost
or market with cost being determined using the LIFO method. We
may incur significant fluctuations in our gross margins due
primarily to changes in the cost of a single, large-volume
component of inventory. The price of this inventory component
may fluctuate depending on the balance between supply and
demand. Management reviews the LIFO reserve on a quarterly
basis. Vertex inventories are valued at the lower of cost or
market with cost being determined using the FIFO method.
Impairment of Long-Lived Assets We review the
recoverability of long-lived assets to be held and used, such as
property, plant and equipment and intangible assets subject to
amortization, when events or changes in circumstances occur that
indicate the carrying value of the asset or asset group may not
be recoverable, such as prolonged industry downturn or
significant reductions in projected future cash flows. The
assessment of possible impairment is based on our ability to
recover the carrying value of the asset or asset group from the
expected future pre-tax cash flows (undiscounted) of the related
operations. If these cash flows are less than the carrying value
of such asset or asset group, an impairment is recognized equal
to the amount by which the carrying value exceeds the fair value
of the long-lived assets. The measurement of impairment requires
us to estimate future cash flows and the fair value of
long-lived assets. Significant judgments and assumptions are
required in the forecast of future operating results used in the
preparation of the estimated future cash flows. We periodically
review the appropriateness of the estimated useful lives of our
long-lived assets. Changes in these estimates could have a
material effect on the assessment of long-lived assets subject
to amortization. There were no triggering events that required
material assets to be evaluated for impairment during fiscal
2011.
Income Taxes In the preparation of our
financial statements, management calculates income taxes. This
includes estimating the current tax liability as well as
assessing temporary differences resulting from different
treatment of items for tax and book accounting purposes. These
differences result in deferred tax assets and liabilities, which
are recorded on the balance sheet. These assets and liabilities
are analyzed regularly and management assesses the likelihood
that deferred tax assets will be recovered from future taxable
income. A valuation allowance is established to the extent that
management believes that recovery is not likely. Reserves are
also established for potential and ongoing audits of federal and
state tax issues. We routinely monitor the potential impact of
such situations and believe that it is properly reserved.
Valuations related to amounts owed and tax rates could be
impacted by changes to tax codes, changes in statutory tax
rates, our future taxable income levels and the results of tax
audits.
Recently
Issued Accounting Pronouncements
See Item 8, Note 1 Nature of
Business and Significant Accounting Policies of the Notes
to Consolidated Financial Statements for information regarding
recently adopted accounting standards or accounting standards to
be adopted in the future.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
We are subject to the risk inherent in the cyclical nature of
commodity chemical prices. However, we do not currently purchase
forward contracts or otherwise engage in hedging activities with
respect to the purchase of commodity chemicals. We attempt to
pass changes in material prices on to our customers, however,
there are no assurances that we will be able to pass on the
increases in the future.
20
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Hawkins, Inc.:
We have audited the accompanying consolidated balance sheets of
Hawkins, Inc. and subsidiaries (the Company) as of April 3,
2011, and March 28, 2010, and the related consolidated
statements of income, shareholders equity, and cash flows
for each of the years in the two-year period ended April 3,
2011. In connection with our audits of the financial statements,
we have also audited the financial statement schedule listed in
the Index at Item 15, as of and for the years ended
April 3, 2011 and March 28, 2010. We also have audited
the Companys internal control over financial reporting as
of April 3, 2011, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Companys management is responsible
for these financial statements and financial statement schedule,
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 Managements Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion
on these financial statements and financial statement schedule
and an opinion on the Companys internal control over
financial reporting based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audit of the financial statements includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting includes obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audit also includes performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
21
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Hawkins, Inc. and subsidiaries as of April 3,
2011 and March 28, 2010, and the results of their
operations and their cash flows for each of the years in the
two-year period ended April 3, 2011, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein as of April 3, 2011 and
March 28, 2010 and for each of the years in the two-year
period ended April 3, 2011. Furthermore, in our opinion,
Hawkins, Inc. maintained, in all material respects, effective
internal control over financial reporting as of April 3,
2011, based on criteria established in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired Vertex Chemical Corporation
(Vertex) during fiscal year 2011, and management
excluded from its assessment of the effectiveness of the
Companys internal control over financial reporting as of
April 3, 2011, Vertexs internal control over
financial reporting associated with approximately 12% of total
assets and approximately 3% of total revenues included in the
consolidated financial statements of the Company as of and for
the year ended April 3, 2011. Our audit of internal control
over financial reporting for the Company also excluded an
evaluation of the internal control over financial reporting of
Vertex.
Minneapolis, Minnesota
June 9, 2011
22
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Hawkins, Inc.
Minneapolis, Minnesota
We have audited the accompanying consolidated statements of
income, shareholders equity, and cash flows of Hawkins,
Inc. (the Company) for the year ended March 29,
2009. These financial statements are the responsibility of the
Companys Management. Our audit also included the financial
statement schedule for the year ended March 29, 2009,
listed in the Index at Item 15. These financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the results of the
Companys operations and their cash flows for the year
ended March 29, 2009, in conformity with accounting
principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, present fairly, in all material respects, the
information set forth therein as of March 29, 2009.
/s/ Deloitte &
Touche LLP
Minneapolis, Minnesota
June 5, 2009
23
HAWKINS,
INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
April 3, 2011
|
|
|
March 28, 2010
|
|
|
|
(In thousands, except share data)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,940
|
|
|
$
|
18,772
|
|
Investments
available-for-sale
|
|
|
15,286
|
|
|
|
25,928
|
|
Trade receivables less allowance for doubtful
accounts:
|
|
|
|
|
|
|
|
|
$406 for 2011 and $300 for 2010
|
|
|
35,736
|
|
|
|
24,832
|
|
Inventories
|
|
|
29,217
|
|
|
|
21,327
|
|
Income taxes receivable
|
|
|
2,197
|
|
|
|
4,430
|
|
Prepaid expenses and other current assets
|
|
|
2,872
|
|
|
|
2,209
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
104,248
|
|
|
|
97,498
|
|
PROPERTY, PLANT, AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
Land
|
|
|
4,362
|
|
|
|
1,840
|
|
Buildings and improvements
|
|
|
47,107
|
|
|
|
39,235
|
|
Machinery and equipment
|
|
|
35,740
|
|
|
|
28,476
|
|
Transportation equipment
|
|
|
14,036
|
|
|
|
11,933
|
|
Office furniture and equipment including computer systems
|
|
|
11,729
|
|
|
|
11,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,974
|
|
|
|
92,721
|
|
Less accumulated depreciation and amortization
|
|
|
50,579
|
|
|
|
44,965
|
|
|
|
|
|
|
|
|
|
|
Net property, plant, and equipment
|
|
|
62,395
|
|
|
|
47,756
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
6,231
|
|
|
|
1,204
|
|
Intangible assets less accumulated amortization:
|
|
|
|
|
|
|
|
|
$1,165 for 2011 and $851 for 2010
|
|
|
8,811
|
|
|
|
3,635
|
|
Long-term investments
|
|
|
3,175
|
|
|
|
8,972
|
|
Other
|
|
|
145
|
|
|
|
1,228
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
18,362
|
|
|
|
15,039
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
185,005
|
|
|
$
|
160,293
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable trade
|
|
$
|
23,350
|
|
|
$
|
13,940
|
|
Dividends payable
|
|
|
3,095
|
|
|
|
2,879
|
|
Accrued payroll and employee benefits
|
|
|
7,760
|
|
|
|
7,908
|
|
Deferred income taxes
|
|
|
2,619
|
|
|
|
3,364
|
|
Container deposits
|
|
|
978
|
|
|
|
924
|
|
Other accruals
|
|
|
1,669
|
|
|
|
1,592
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
39,471
|
|
|
|
30,607
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
1,215
|
|
|
|
633
|
|
DEFERRED INCOME TAXES
|
|
|
7,876
|
|
|
|
7,555
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
48,562
|
|
|
|
38,795
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
Common stock; authorized: 30,000,000 shares of
$0.05 par value; 10,307,177 and 10,253,458 shares
issued and outstanding for 2011 and 2010, respectively
|
|
|
515
|
|
|
|
513
|
|
Additional paid-in capital
|
|
|
41,060
|
|
|
|
39,027
|
|
Retained earnings
|
|
|
95,013
|
|
|
|
81,921
|
|
Accumulated other comprehensive (loss) income
|
|
|
(145
|
)
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
136,443
|
|
|
|
121,498
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
185,005
|
|
|
$
|
160,293
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
24
HAWKINS,
INC.
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 3, 2011
|
|
|
March 28, 2010
|
|
|
March 29, 2009
|
|
|
|
(In thousands, except share and per-share data)
|
|
|
Sales
|
|
$
|
297,641
|
|
|
$
|
257,099
|
|
|
$
|
284,356
|
|
Cost of sales
|
|
|
(235,739
|
)
|
|
|
(192,654
|
)
|
|
|
(221,936
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
61,902
|
|
|
|
64,445
|
|
|
|
62,420
|
|
Selling, general and administrative expenses
|
|
|
(29,940
|
)
|
|
|
(25,605
|
)
|
|
|
(25,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
31,962
|
|
|
|
38,840
|
|
|
|
37,337
|
|
Investment income
|
|
|
333
|
|
|
|
286
|
|
|
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
32,295
|
|
|
|
39,126
|
|
|
|
37,675
|
|
Provision for income taxes
|
|
|
(11,981
|
)
|
|
|
(15,388
|
)
|
|
|
(14,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
20,314
|
|
|
|
23,738
|
|
|
|
23,424
|
|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
109
|
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
20,314
|
|
|
$
|
23,847
|
|
|
$
|
23,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding-basic
|
|
|
10,260,135
|
|
|
|
10,250,978
|
|
|
|
10,243,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding-diluted
|
|
|
10,352,633
|
|
|
|
10,282,993
|
|
|
|
10,249,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from continuing operations
|
|
$
|
1.98
|
|
|
$
|
2.32
|
|
|
$
|
2.29
|
|
Earnings per share from discontinued operations
|
|
|
|
|
|
|
0.01
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.98
|
|
|
$
|
2.33
|
|
|
$
|
2.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from continuing operations
|
|
$
|
1.96
|
|
|
$
|
2.31
|
|
|
$
|
2.29
|
|
Earnings per share from discontinued operations
|
|
|
|
|
|
|
0.01
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.96
|
|
|
$
|
2.32
|
|
|
$
|
2.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
|
$
|
0.70
|
|
|
$
|
0.66
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
25
HAWKINS,
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
|
(In thousands, except share data)
|
|
|
BALANCE March 30, 2008
|
|
|
10,239,458
|
|
|
$
|
512
|
|
|
$
|
38,091
|
|
|
$
|
46,428
|
|
|
$
|
(10
|
)
|
|
$
|
85,021
|
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,332
|
)
|
|
|
|
|
|
|
(5,332
|
)
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
Vesting of restricted stock
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for sale of securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
Unrealized loss on post-retirement plan liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,764
|
|
|
|
|
|
|
|
23,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE March 29, 2009
|
|
|
10,246,458
|
|
|
|
512
|
|
|
|
38,368
|
|
|
|
64,860
|
|
|
|
(10
|
)
|
|
|
103,730
|
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,786
|
)
|
|
|
|
|
|
|
(6,786
|
)
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
659
|
|
|
|
|
|
|
|
|
|
|
|
659
|
|
Vesting of restricted stock
|
|
|
7,000
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on
available-for-sale
investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
66
|
|
Unrealized loss on post-retirement plan liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
(19
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,847
|
|
|
|
|
|
|
|
23,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE March 28, 2010
|
|
|
10,253,458
|
|
|
|
513
|
|
|
|
39,027
|
|
|
|
81,921
|
|
|
|
37
|
|
|
|
121,498
|
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,222
|
)
|
|
|
|
|
|
|
(7,222
|
)
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,952
|
|
|
|
|
|
|
|
|
|
|
|
1,952
|
|
Tax benefit on share-based compensation plans
|
|
|
|
|
|
|
|
|
|
|
281
|
|
|
|
|
|
|
|
|
|
|
|
281
|
|
Vesting of restricted stock
|
|
|
58,653
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares surrendered for payroll taxes
|
|
|
(4,934
|
)
|
|
|
(1
|
)
|
|
|
(197
|
)
|
|
|
|
|
|
|
|
|
|
|
(198
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on
available-for-sale
investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(63
|
)
|
|
|
(63
|
)
|
Unrealized loss on post-retirement plan liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(119
|
)
|
|
|
(119
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,314
|
|
|
|
|
|
|
|
20,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE April 3, 2011
|
|
|
10,307,177
|
|
|
$
|
515
|
|
|
$
|
41,060
|
|
|
$
|
95,013
|
|
|
$
|
(145
|
)
|
|
$
|
136,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
26
HAWKINS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
April 3, 2011
|
|
|
March 28, 2010
|
|
|
March 29, 2009
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
20,314
|
|
|
$
|
23,847
|
|
|
$
|
23,764
|
|
Reconciliation to cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
7,148
|
|
|
|
6,292
|
|
|
|
5,581
|
|
Deferred income taxes
|
|
|
(600
|
)
|
|
|
7,152
|
|
|
|
3,046
|
|
Stock compensation expense
|
|
|
1,952
|
|
|
|
659
|
|
|
|
277
|
|
Loss (gain) on sale of investments
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Loss from property disposals
|
|
|
127
|
|
|
|
12
|
|
|
|
114
|
|
Changes in operating accounts (using) providing cash, net of
effects of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
(5,929
|
)
|
|
|
4,050
|
|
|
|
(5,095
|
)
|
Inventories
|
|
|
(3,141
|
)
|
|
|
514
|
|
|
|
(7,830
|
)
|
Accounts payable
|
|
|
5,356
|
|
|
|
(462
|
)
|
|
|
1,844
|
|
Accrued liabilities
|
|
|
158
|
|
|
|
(322
|
)
|
|
|
2,765
|
|
Income taxes
|
|
|
2,529
|
|
|
|
(2,404
|
)
|
|
|
(176
|
)
|
Other
|
|
|
619
|
|
|
|
(556
|
)
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
28,533
|
|
|
|
38,782
|
|
|
|
24,429
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment
|
|
|
(12,421
|
)
|
|
|
(8,331
|
)
|
|
|
(14,211
|
)
|
Purchases of investments
|
|
|
(14,210
|
)
|
|
|
(41,240
|
)
|
|
|
|
|
Sale and maturities of investments
|
|
|
30,545
|
|
|
|
6,450
|
|
|
|
2,841
|
|
Proceeds from property disposals
|
|
|
143
|
|
|
|
148
|
|
|
|
93
|
|
Acquisition of Vertex
|
|
|
(25,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(21,443
|
)
|
|
|
(42,973
|
)
|
|
|
(11,277
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(7,005
|
)
|
|
|
(6,573
|
)
|
|
|
(5,125
|
)
|
Excess tax benefit from share-based compensation
|
|
|
281
|
|
|
|
|
|
|
|
|
|
Shares surrendured for payroll taxes
|
|
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(6,922
|
)
|
|
|
(6,573
|
)
|
|
|
(5,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
168
|
|
|
|
(10,764
|
)
|
|
|
8,027
|
|
CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
18,772
|
|
|
|
29,536
|
|
|
|
21,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
18,940
|
|
|
$
|
18,772
|
|
|
$
|
29,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income taxes
|
|
$
|
9,771
|
|
|
$
|
10,654
|
|
|
$
|
11,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition purchase price in accounts payable
|
|
$
|
1,709
|
|
|
$
|
|
|
|
$
|
|
|
Capital expenditures in accounts payable
|
|
$
|
1,450
|
|
|
$
|
1,118
|
|
|
$
|
1,142
|
|
See accompanying notes to consolidated financial statements.
27
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1
|
Nature of
Business and Significant Accounting Policies
|
Nature of Business We have two reportable
segments: Industrial and Water Treatment. The Industrial Group
operates our Industrial segment and specializes in providing
industrial chemicals, products and services to the agriculture,
energy, electronics, food, chemical processing, pulp and paper,
pharmaceutical, medical device and plating industries. The group
also manufactures and sells certain food-grade products,
including our patented Cheese
Phos®
liquid phosphate, lactates and other blended products. The Water
Treatment Group operates our Water Treatment segment and
specializes in providing chemicals, equipment and solutions for
potable water, municipal and industrial wastewater, industrial
process water and non-residential swimming pool water. The group
has the resources and flexibility to treat systems ranging in
size from a small single well to a multi-million
gallon-per-day
facility.
Fiscal Year Our fiscal year is a 52/53-week
year ending on the Sunday closest to March 31. Our fiscal
year ending April 3, 2011 (fiscal 2011) is a
53-week year. The fiscal years ended March 28, 2010
(fiscal 2010), and March 29, 2009 (fiscal
2009) were 52-week years. The fiscal year ending on
April 1, 2012 (fiscal 2012) will be a 52-week
year. Beginning in fiscal 2012, we changed our quarters to a
4-4-5 week convention.
Principles of Consolidation The consolidated
financial statements include the accounts of Hawkins, Inc. and
its wholly-owned subsidiaries. All intercompany transactions and
accounts have been eliminated.
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 and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition We recognize revenue when
there is evidence that the customer has agreed to purchase the
product, the price and terms of the sale are fixed, the product
has shipped and title passes to our customer, performance has
occurred, and collection of the receivable is reasonably assured.
Shipping and Handling All shipping and
handling amounts billed to customers are included in revenues.
Costs incurred related to the shipping and handling of products
are included in cost of sales.
Fair Value Measurements The Financial
Accounting Standards Board (FASB) issued an
accounting standard codified in ASC 820 Fair Value
Measurements and Disclosures that provides a single
definition for fair value, establishes a framework for measuring
fair value and expands disclosures about fair value
measurements. Under this standard, fair value is defined as the
exit price, or the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants as of the measurement date. This
standard also establishes a hierarchy for inputs used in
measuring fair value that maximizes the use of observable inputs
and minimizes the use of unobservable inputs by requiring that
the most observable inputs be used when available. Observable
inputs are inputs market participants would use in valuing the
asset or liability developed based on market data obtained from
sources independent of us. Unobservable inputs are inputs that
reflect our assumptions about the factors market participants
would use in valuing the asset or liability developed based upon
the best information available in the circumstances.
We adopted the standard as amended by subsequent FASB standards
at the beginning of fiscal 2009 with respect to fair value
measurements of financial assets and liabilities and the
beginning of fiscal 2010 for nonfinancial assets and liabilities
that are recognized or disclosed at fair value in our
consolidated financial statements on a recurring basis (at least
annually).
28
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The financial assets and liabilities that are re-measured and
reported at fair value for each reporting period include
marketable securities. Other than the application of purchase
accounting as a result of the Vertex acquisition, there were 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 subsequent to the
effective date of this standard. The adoption did not have a
material impact on our consolidated financial condition, results
of operations or cash flows.
Assets and liabilities measured at fair value are classified
using the following hierarchy, which is based upon the
transparency of inputs to the valuation as of the measurement
date:
Level 1: Valuation is based on observable
inputs such as quoted market prices (unadjusted) for identical
assets or liabilities in active markets.
Level 2: Valuation is based on inputs
such as quoted market prices for similar assets or liabilities
in active markets or other inputs that are observable for the
asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument.
Level 3: Valuation is based upon other
unobservable inputs that are significant to the fair value
measurement.
In making fair value measurements, observable market data must
be used when available. When inputs used to measure fair value
fall within different levels of the hierarchy, the level within
which the fair value measurement is categorized is based on the
lowest level input that is significant to the fair value
measurement.
Cash Equivalents Cash equivalents include all
liquid debt instruments (primarily cash funds, money market
accounts and certificates of deposit) purchased with an original
maturity of three months or less. The balances maintained at
financial institutions may, at times, exceed federally insured
limits.
Investments
Available-for-sale
securities consist of certificates of deposit and are valued at
current market value, with the resulting unrealized gains and
losses excluded from earnings and reported, net of tax, as a
separate component of shareholders equity until realized.
Any impairment loss to reduce an investments carrying
amount to its fair market value is recognized in income when a
decline in the fair market value of an individual security below
its cost or carrying value is determined to be other than
temporary.
Trade Receivables and Concentrations of Credit
Risk Financial instruments, which potentially
subject us to a concentration of credit risk, principally
consist of trade receivables. We sell our principal products to
a large number of customers in many different industries. There
are no concentrations of business transacted with a particular
customer or sales from a particular service or geographic area
that would significantly impact us in the near term. To reduce
credit risk, we routinely assess the financial strength of our
customers. We record an allowance for doubtful accounts to
reduce our receivables to an amount we estimate is collectible
from our customers. Estimates used in determining the allowance
for doubtful accounts are based on historical collection
experience, current trends, aging of accounts receivable and
periodic evaluations of our customers financial condition.
We invest our excess cash balances at times in certificates of
deposit and a money market account at two separate financial
institutions where the cash balances may exceed federally
insured limits. The institutions are two of the largest
commercial banking institutions in the country and both have
maintained a AA credit rating.
Inventories Inventories, consisting primarily
of finished goods, are primarily valued at the lower of cost or
net realizable value, with cost being determined using the
last-in,
first-out (LIFO) method. Vertexs inventory
cost, which represents approximately 18% of the total FIFO
inventory balance at April 3, 2011, is determined using the
first-in,
first-out (FIFO) method.
Property, Plant and Equipment Property is
stated at cost and depreciated or amortized over the lives of
the assets, using straight-line method. Estimated lives are: 10
to 40 years for buildings and improvements; 3 to
20 years for machinery and equipment; 3 to 10 years
for transportation equipment; and 3 to 10 years for office
furniture and equipment including computer systems.
29
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Significant improvements that add to productive capacity or
extend the lives of properties are capitalized. Costs for
repairs and maintenance are charged to expense as incurred. When
property is retired or otherwise disposed of, the cost and
related accumulated depreciation or amortization are removed
from the accounts and any related gains or losses are included
in income.
We review the recoverability of long-lived assets to be held and
used, such as property, plant and equipment, when events or
changes in circumstances occur that indicate the carrying value
of the asset or asset group may not be recoverable, such as
prolonged industry downturn or significant reductions in
projected future cash flows. The assessment of possible
impairment is based on our ability to recover the carrying value
of the asset or asset group from the expected future pre-tax
cash flows (undiscounted) of the related operations. If these
cash flows are less than the carrying value of such asset or
asset group, an impairment loss would be measured by the amount
the carrying value exceeds the fair value of the long-lived
assets. The measurement of impairment requires us to estimate
future cash flows and the fair value of long-lived assets. No
material long-lived assets were determined to be impaired during
fiscal 2011, 2010, or 2009.
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. Goodwill is
tested at least annually for impairment, and is tested for
impairment more frequently if events or changes in circumstances
indicate that the asset might be impaired. The impairment test
is performed using a two-step process. In the first step, the
fair value of the reporting unit is compared with the carrying
amount of the reporting unit, including goodwill. If the
estimated fair value is less than the carrying amount of the
reporting unit, an indication that goodwill impairment exists
and a second step must be completed in order to determine the
amount of the goodwill impairment, if any, which should be
recorded. In the second step, an impairment loss would be
recognized for any excess of the carrying amount of the
reporting units goodwill over the implied fair value of
that goodwill. The implied fair value of goodwill is determined
by allocating the fair value of the reporting unit in a manner
similar to a purchase price allocation. The fair value of the
reporting unit is determined using a discounted cash flow
analysis. Projecting discounted future cash flows requires us to
make significant estimates regarding future revenues and
expenses, projected capital expenditures, changes in working
capital and the appropriate discount rate. The projections also
take into account several factors including current and
estimated economic trends and outlook, costs of raw materials,
consideration of our market capitalization in comparison to the
estimated fair values of our reporting units determined using
discounted cash flow analyses and other factors which are beyond
our control.
Our primary identifiable intangible assets include customer
lists, trade secrets, non-compete agreements, trademarks, and
trade names acquired in previous business acquisitions.
Identifiable intangibles with finite lives are amortized and
those identifiable intangibles with indefinite lives are not
amortized. The values assigned to the intangible assets with
finite lives are being amortized on average over approximately
14 years. Identifiable intangible assets that are subject
to amortization are evaluated for impairment whenever events or
changes in circumstances indicate that the carrying amount may
not be recoverable. Identifiable intangible assets not subject
to amortization are tested for impairment annually or more
frequently if events warrant. The impairment test consists of a
comparison of the fair value of the intangible asset with its
carrying amount.
We completed step one of our annual goodwill impairment
evaluation during the fourth quarter of fiscal 2011 and
determined that the reporting units fair value
substantially exceeded its carrying value. Accordingly, step two
of the impairment analysis was not required. We also completed
an impairment test of intangible assets not subject to
amortization during the fourth quarter, in which the fair value
exceeded the carrying amount. Additionally, no impairment
charges were required for fiscal 2010 or 2009.
30
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income Taxes In the preparation of our
consolidated financial statements, management calculates income
taxes based upon the estimated effective rate applicable to
operating results for the full fiscal year. This includes
estimating the current tax liability as well as assessing
differences resulting from different treatment of items for tax
and book accounting purposes. These differences result in
deferred tax assets and liabilities, which are recorded on the balance sheet. These
assets and liabilities are analyzed regularly and management
assesses the likelihood that deferred tax assets will be
recovered from future taxable income. We record any interest and
penalties related to income taxes as income tax expense in the
statements of income.
The effect of income tax positions are recognized only if those
positions are more likely than not of being sustained. Changes
in recognition or measurement are made as facts and
circumstances change.
Stock-Based Compensation We account for
stock-based compensation on a fair value basis. The estimated
grant date fair value of each stock-based award is recognized in
expense over the requisite service period (generally the vesting
period). The estimated fair value of each option is calculated
using the Black-Scholes option-pricing model. Non-vested share
awards are recorded as compensation expense over the requisite
service periods based on the market value on the date of grant.
Earnings Per Share Basic earnings per share
(EPS) are computed by dividing net income by the
weighted-average number of common shares outstanding. Diluted
EPS are computed by dividing net income by the weighted-average
number of common shares outstanding including the incremental
shares assumed to be issued upon the exercise of stock options
and the incremental shares assumed to be issued as performance
units and restricted stock. Basic and diluted EPS were
calculated using the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3,
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Weighted average common shares outstanding basic
|
|
|
10,260,135
|
|
|
|
10,250,978
|
|
|
|
10,243,970
|
|
Dilutive impact of stock options, performance units, and
restricted stock
|
|
|
92,498
|
|
|
|
32,015
|
|
|
|
5,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding diluted
|
|
|
10,352,633
|
|
|
|
10,282,993
|
|
|
|
10,249,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no shares or stock options excluded from the
calculation of weighted average common shares for diluted EPS
for fiscal 2011. Stock options totaling 70,665 in fiscal 2010
and 61,332 in fiscal 2009 have been excluded from the
calculation of diluted EPS because the effect of including the
shares would be anti-dilutive.
Derivative Instruments and Hedging Activities
We do not have any freestanding or embedded derivatives and
it is our policy to not enter into contracts that contain them.
Recently Issued Accounting Pronouncements
Intangibles Goodwill and Other In
December 2010, the FASB issued amended guidance to modify Step 1
of the goodwill impairment test for reporting units with zero or
negative carrying amounts. For those reporting units, an entity
is required to perform Step 2 of the goodwill impairment test if
it is more likely than not that a goodwill impairment exists. In
determining whether it is more likely than not that a goodwill
impairment exists, an entity should consider whether there are
any adverse qualitative factors indicating that an impairment
may exist. The modified guidance is effective for fiscal years
and interim periods within those years beginning after
December 15, 2010.
Business Combinations In December 2010, the
FASB updated guidance to clarify the acquisition date that
should be used for reporting the pro forma financial information
disclosures when comparative financial statements are presented.
The updated guidance is effective for business combinations for
which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after
December 15, 2010.
31
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair Value Measurements and Disclosures In
January 2010, the FASB issued additional disclosure requirements
for assets and liabilities held at fair value. Specifically, the
new guidance requires a gross presentation of activities within
the Level 3 roll forward and adds a new requirement to
disclose transfers in and out of Level 1 and 2
measurements. This guidance is applicable to all entities
currently required to provide disclosures about recurring and nonrecurring fair value
measurements. The effective date for these disclosures is the
first interim or annual reporting period beginning after
December 15, 2009, except for the gross presentation of the
Level 3 roll forward information, which is required for
annual reporting periods beginning after December 15, 2010
and for interim reporting periods within those years.
|
|
Note 2
|
Business
Combinations
|
On January 14, 2011, we completed the acquisition of the
assets of Vertex Chemical Corporation, Novel Wash Co. Inc. and
R.H.A. Corporation, (collectively, Vertex), pursuant
to an Asset Purchase Agreement dated as of January 10, 2011
(the Asset Purchase Agreement). As provided in the
Purchase Agreement, we acquired substantially all of the assets
used in Vertexs business, which is primarily the
manufacture and distribution of sodium hypochlorite and the
distribution of caustic soda, hydrochloric acid and related
products. We paid cash of $25.5 million at closing and
assumed certain liabilities of Vertex. The purchase price was
revised to $27.2 million as provided in the Purchase
Agreement to reflect a final working capital adjustment of
$1.7 million, which was paid in early fiscal 2012. In
connection with the acquisition we incurred acquisition related
costs of $0.7 million, which were recorded as selling,
general and administrative expenses in the Consolidated
Statements of Income.
The acquisition has been accounted for under the acquisition
method of accounting in accordance with ASC Topic 805,
Business Combinations. Under the acquisition method of
accounting, the total estimated purchase price is allocated to
the net tangible and intangible assets of Vertex acquired in
connection with the acquisition, based on their estimated fair
values.
The allocation of the purchase price to assets acquired and
liabilities assumed follows:
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Accounts receivable
|
|
$
|
4,975
|
|
Inventories
|
|
|
4,750
|
|
Other current assets
|
|
|
198
|
|
Property, plant and equipment
|
|
|
8,991
|
|
Goodwill
|
|
|
5,027
|
|
Intangibles
|
|
|
5,490
|
|
Accounts payable
|
|
|
(2,012
|
)
|
Accrued employee benefits
|
|
|
(210
|
)
|
|
|
|
|
|
Total purchase price
|
|
$
|
27,209
|
|
|
|
|
|
|
The allocation of the purchase price to the assets acquired and
liabilities assumed resulted in the recognition of the following
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Amount
|
|
|
Average Life
|
|
|
(In thousands)
|
|
Customer relationships
|
|
$
|
3,450
|
|
|
20 years
|
Trademark
|
|
|
1,240
|
|
|
10 years
|
Carrier relationships
|
|
|
800
|
|
|
10 years
|
|
|
|
|
|
|
|
Intangible assets acquired
|
|
$
|
5,490
|
|
|
|
|
|
|
|
|
|
|
32
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair value of the identified intangible assets was estimated
using an income approach. Under the income approach an
intangible assets fair value is equal to the present value
of future economic benefits to be derived from ownership of an asset. Indications of value are
developed by discounting future net cash flows to their present
value at market-based rates of return.
The goodwill recognized as a result of the Vertex acquisition is
primarily attributable to expected synergies, as well as
Vertexs assembled work force.
Vertex operating results are included in our Consolidated
Statements of Income in our Industrial segment from the date of
acquisition.
The following unaudited pro forma condensed consolidated
financial results of operations are presented as if the Vertex
acquisition had been completed at the beginning of the each
period presented:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
April 3,
|
|
March 28,
|
|
|
2011
|
|
2010
|
|
|
(In thousands, except share and per-share data)
|
|
Pro forma net sales
|
|
$
|
329,653
|
|
|
$
|
299,288
|
|
Pro forma net earnings
|
|
|
21,888
|
|
|
|
25,475
|
|
Pro forma earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.13
|
|
|
$
|
2.49
|
|
Diluted
|
|
|
2.11
|
|
|
|
2.48
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,260,135
|
|
|
|
10,250,978
|
|
Diluted
|
|
|
10,352,633
|
|
|
|
10,282,993
|
|
These unaudited pro forma condensed consolidated financial
results have been prepared for illustrative purposes only and do
not purport to be indicative of the results of operations that
actually would have resulted had the acquisition occurred on the
first day of each fiscal period presented, or of future results
of the consolidated entities. The unaudited pro forma condensed
consolidated financial information does not reflect any
operating efficiencies and cost savings that may be realized
from the integration of the acquisition.
|
|
Note 3
|
Cash and
Cash Equivalents and Investments
|
The following table presents information about our financial
assets and liabilities that are measured at fair value on a
recurring basis as of April 3, 2011 and March 28,
2010, and indicates the fair value hierarchy of the valuation
techniques utilized to determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3,
|
|
|
|
|
|
|
Description
|
|
2011
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
18,485
|
|
|
$
|
18,485
|
|
|
$
|
|
|
|
$
|
|
|
Certificates of deposit
|
|
|
18,461
|
|
|
|
|
|
|
|
18,461
|
|
|
|
|
|
Money market securities
|
|
|
455
|
|
|
|
455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
|
|
|
|
Description
|
|
2010
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
18,661
|
|
|
$
|
18,661
|
|
|
$
|
|
|
|
$
|
|
|
Certificates of deposit
|
|
|
34,900
|
|
|
|
|
|
|
|
34,900
|
|
|
|
|
|
Money market securities
|
|
|
111
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
33
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our financial assets that are measured at fair value on a
recurring basis are certificates of deposit
(CDs), with maturities ranging from three
months to two years which fall within valuation technique
Level 2. The CDs are classified as investments in
current assets and noncurrent assets on the Consolidated Balance
Sheets. As of April 3, 2011, the CDs in current
assets have a fair value of $15.3 million, and in
noncurrent assets, the CDs have a fair value of
$3.2 million.
The carrying value of cash and cash equivalents accounts
approximates fair value, as maturities are three months or less.
We did not have any financial liability instruments subject to
recurring fair value measurements as of April 3, 2011 and
March 28, 2010.
The contractual maturities of
available-for-sale
securities at April 3, 2011 are shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Cost
|
|
|
Value
|
|
|
Gain/(loss)
|
|
|
|
(In thousands)
|
|
|
Within one year
|
|
$
|
15,270
|
|
|
$
|
15,286
|
|
|
$
|
16
|
|
Between one and two years
|
|
|
3,185
|
|
|
|
3,175
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
18,455
|
|
|
$
|
18,461
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The contractual maturities of
available-for-sale
securities at March 28, 2010 are shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Cost
|
|
|
Value
|
|
|
Gains
|
|
|
|
(In thousands)
|
|
|
Within one year
|
|
$
|
25,890
|
|
|
$
|
25,928
|
|
|
$
|
38
|
|
Between one and two years
|
|
|
8,900
|
|
|
|
8,972
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
34,790
|
|
|
$
|
34,900
|
|
|
$
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains and losses were not material for fiscal 2011,
fiscal 2010 and fiscal 2009.
Inventories at April 3, 2011 and March 28, 2010
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Finished goods (FIFO basis)
|
|
$
|
35,071
|
|
|
$
|
23,258
|
|
LIFO reserve
|
|
|
(5,854
|
)
|
|
|
(1,931
|
)
|
|
|
|
|
|
|
|
|
|
Net inventory
|
|
$
|
29,217
|
|
|
$
|
21,327
|
|
|
|
|
|
|
|
|
|
|
The FIFO value of inventories accounted for under the LIFO
method were $28.6 million at April 3, 2011 and
$23.1 million at March 28, 2010. The remainder of the
inventory was valued and accounted for under the FIFO method.
We increased the LIFO reserve by $3.9 million in fiscal
2011 and decreased the reserve by $12.6 million in fiscal
2010 due primarily to significant changes in inventory costs in
both years, as well as changes in inventory product mix and
higher inventory volumes at the end of fiscal 2011.
34
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 5
|
Goodwill
and Other Identifiable Intangible Assets
|
The changes in the carrying amount of goodwill were as follows:
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Balance as of March 29, 2009
|
|
$
|
1,204
|
|
Fiscal 2010 activity
|
|
|
|
|
|
|
|
|
|
Balance as of March 28, 2010
|
|
|
1,204
|
|
Vertex acquisition
|
|
|
5,027
|
|
|
|
|
|
|
Balance as of April 3, 2011
|
|
$
|
6,231
|
|
|
|
|
|
|
A summary of our intangible assets as of April 3, 2011 and
March 28, 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Finite-life intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
5,508
|
|
|
$
|
(423
|
)
|
|
$
|
5,085
|
|
Trademark
|
|
|
1,240
|
|
|
|
(26
|
)
|
|
|
1,214
|
|
Trade secrets
|
|
|
862
|
|
|
|
(413
|
)
|
|
|
449
|
|
Carrier relationships
|
|
|
800
|
|
|
|
(18
|
)
|
|
|
782
|
|
Other finite-life intangible assets
|
|
|
339
|
|
|
|
(285
|
)
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finite-life intangible assets
|
|
|
8,749
|
|
|
|
(1,165
|
)
|
|
|
7,584
|
|
Indefinite-life intangible assets
|
|
|
1,227
|
|
|
|
|
|
|
|
1,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
9,976
|
|
|
$
|
(1,165
|
)
|
|
$
|
8,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Finite-life intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
2,058
|
|
|
$
|
(292
|
)
|
|
$
|
1,766
|
|
Trade secrets
|
|
|
862
|
|
|
|
(305
|
)
|
|
|
557
|
|
Other finite-life intangible assets
|
|
|
339
|
|
|
|
(254
|
)
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finite-life intangible assets
|
|
|
3,259
|
|
|
|
(851
|
)
|
|
|
2,408
|
|
Indefinite-life intangible assets
|
|
|
1,227
|
|
|
|
|
|
|
|
1,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
4,486
|
|
|
$
|
(851
|
)
|
|
$
|
3,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset amortization expense was $0.3 million
during fiscal 2011, $0.2 million during fiscal 2010, and
$0.5 million during fiscal 2009.
The estimated future amortization expense for identifiable
intangible assets during the next five years is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|
(In thousands)
|
|
Estimated amortization expense
|
|
$
|
619
|
|
|
$
|
596
|
|
|
$
|
592
|
|
|
$
|
592
|
|
|
$
|
502
|
|
35
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 6
|
Accumulated
Other Comprehensive Income (Loss)
|
Components of accumulated other comprehensive income (loss), net
of tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Unrealized gain (loss) on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
investments
|
|
$
|
3
|
|
|
$
|
66
|
|
|
$
|
|
|
Post-retirement plan liability adjustments
|
|
|
(148
|
)
|
|
|
(29
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
$
|
(145
|
)
|
|
$
|
37
|
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 7
|
Share-Based
Compensation
|
Stock Option Awards. Our Board of Directors
approved a long-term incentive equity compensation arrangement
for our executive officers during the first quarter of fiscal
2009. This long-term incentive arrangement provides for the
grant of nonqualified stock options that vest at the end of a
three-year period and expire no later than 10 years after
the grant date. We used the Black-Scholes valuation model to
estimate the fair value of the options at grant date based on
the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
June 10, 2009 Grant
|
|
May 13, 2008 Grant
|
|
Dividend yield
|
|
|
2.5
|
%
|
|
|
3.2
|
%
|
Volatility
|
|
|
31.4
|
%
|
|
|
28.0
|
%
|
Risk-free interest rate
|
|
|
2.1
|
%
|
|
|
3.0
|
%
|
Expected life in years
|
|
|
4
|
|
|
|
4
|
|
Volatility was calculated using the past four years of
historical stock prices of our common stock. The expected life
is estimated based on expected future trends and the terms and
vesting periods of the options granted. The risk-free interest
rate is an interpolation of the relevant U.S. Treasury Bond
Rate as of the grant date.
The following table represents the stock option activity for
fiscal 2011 and fiscal 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
Total Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
|
(In thousand, except share data)
|
|
|
Outstanding at beginning of year
|
|
|
131,997
|
|
|
$
|
17.82
|
|
|
$
|
2,607
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,666
|
|
|
|
17.67
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
131,997
|
|
|
$
|
17.82
|
|
|
$
|
4,908
|
|
|
|
66,666
|
|
|
$
|
17.67
|
|
|
$
|
2,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Total Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
|
|
|
|
(In thousand, except share data)
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
61,332
|
|
|
$
|
15.43
|
|
|
$
|
445
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Granted
|
|
|
70,665
|
|
|
|
19.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
131,997
|
|
|
$
|
17.82
|
|
|
$
|
2,607
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of options was
estimated to be $4.33 and $2.95 for options granted in fiscal
2010 and fiscal 2009, respectively. The weighted average
remaining life of all outstanding and exercisable options is
7.7 years.
Annual expense related to the value of stock options was
$0.2 million for fiscal 2011 and $0.1 million for
fiscal 2010 and fiscal 2009, substantially all of which was
recorded in SG&A expense in the Consolidated Statements of
Income. Options awarded to John Hawkins, former Chief Executive
Officer, became fully vested and exercisable upon his death in
March 2011, resulting in the acceleration of expense of
$0.1 million. The total fair value of options vested during
fiscal 2011 was $0.2 million. Unrecognized compensation
expense related to outstanding stock options as of April 3,
2011 was $0.1 million and is expected to be recognized over
a weighted average period of 0.7 years.
Performance-Based Restricted Stock Units. Our
Board of Directors approved a performance-based equity
compensation arrangement for our executive officers during
fiscal 2009. This performance-based arrangement provides for the
grant of performance-based restricted stock units that represent
a possible future issuance of restricted shares of our common
stock based on our pre-tax income target for the applicable
fiscal year. The actual number of restricted shares to be issued
to each executive officer will be determined when our final
financial information becomes available after the applicable
fiscal year and will be between zero shares and
54,824 shares in the aggregate for fiscal 2011. The
restricted shares issued will fully vest two years after the
last day of the fiscal year on which the performance is based.
We are recording the compensation expense for the outstanding
performance share units and then-converted restricted stock over
the life of the awards.
Performance-based restricted stock units were awarded to our
executive officers on June 2, 2010, June 10, 2009 and
May 13, 2008 under this arrangement. The following table
represents the restricted stock activity for fiscal 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average Grant
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
Outstanding at March 28, 2010
|
|
|
23,000
|
|
|
$
|
19.90
|
|
Granted
|
|
|
41,320
|
|
|
|
30.02
|
|
Vested
|
|
|
(52,653
|
)
|
|
|
26.53
|
|
Forfeited or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 3, 2011
|
|
|
11,667
|
|
|
$
|
25.81
|
|
|
|
|
|
|
|
|
|
|
37
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We recorded compensation expense related to the shares issued
for fiscal 2009 and fiscal 2010 and the potential issuance of
shares for fiscal 2011 of approximately $1.6 million for
fiscal 2011, $0.4 million for fiscal 2010 and
$0.1 million for fiscal 2009, substantially all of which
was recorded in SG&A expense in the Consolidated Statements
of Income. The performance-based restricted stock units
previously awarded to John Hawkins, totaling 39,820 shares,
became fully vested and payable upon his death in March 2011,
resulting in the acceleration of compensation expense of
$0.4 million. The total fair value of performance-based
restricted stock units vested in fiscal 2011 was
$1.4 million.
Until the performance-based restricted stock units result in the
issuance of restricted stock, the amount of expense recorded
each period is dependent upon our estimate of the number of
shares that will ultimately be issued and our then current
common stock price. Upon issuance of restricted stock, we record
compensation expense over the remaining vesting period using the
award date closing price, which was $19.90 per share on
June 10, 2009 and $25.81 per share on June 2, 2010.
Unrecognized compensation expense related to nonvested
restricted share units as of April 3, 2011 was
$1.1 million and is expected to be recognized over a
weighted average period of 1.8 years.
In conjunction with the vesting of restricted stock held by
certain of our executive officers, 4,934 shares were
forfeited during fiscal 2011 to cover the executive officers
statutory minimum income tax withholding.
The benefits of tax deductions in excess of recognized
compensation costs (excess tax benefits) are recorded as a
change in additional paid in capital rather than a deduction of
taxes paid. For fiscal 2011 $0.3 million of excess tax
benefit was recognized and recorded in additional paid in
capital resulting from share-based compensation cost.
Restricted Stock Awards. As part of their
retainer, the Board of Directors receives restricted stock for
their Board services. The restricted stock awards are expensed
over the requisite vesting period, which begins on the date of
issuance and ends on the date of the next Annual Meeting of
Shareholders, based on the market value on the date of grant.
The following table represents the Boards restricted stock
activity for fiscal 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average Grant
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
Outstanding at beginning of period
|
|
|
6,000
|
|
|
$
|
18.68
|
|
Granted
|
|
|
6,966
|
|
|
|
30.00
|
|
Vested
|
|
|
(6,000
|
)
|
|
|
18.68
|
|
Forfeited or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
6,966
|
|
|
$
|
30.00
|
|
|
|
|
|
|
|
|
|
|
Annual expense related to the value of restricted stock was
$0.2 million for fiscal 2011 and $0.1 million for
fiscal 2010 and fiscal 2009, all of which was recorded in
SG&A expense in the Consolidated Statements of Income.
Unrecognized compensation expense related to nonvested
restricted stock awards as of April 3, 2011 was
$0.1 million and is expected to be recognized over a
weighted average period of 0.3 years.
|
|
Note 8
|
Profit
Sharing, Employee Stock Ownership and Pension Plans
|
Effective April 1, 2009, we converted our defined
contribution pension plan covering substantially all of our
non-bargaining employees to a profit sharing plan. It is our
policy to fund all costs accrued. Contributions are made at our
discretion subject to a maximum amount allowed under the
Internal Revenue Code. Our cost for the profit sharing and
pension plan was 15% of each employees covered
compensation in each of the fiscal years 2011, 2010 and 2009.
38
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We have an employee stock ownership plan (ESOP)
covering substantially all of our non-bargaining employees,
excluding our executive officers. Contributions are made at our
discretion subject to a maximum amount allowed under the Internal Revenue Code. Our cost for the
ESOP was 5% of each employees covered compensation in each
of the fiscal years 2011, 2010 and 2009.
We have an employee stock purchase plan (ESPP)
covering substantially all of our employees, excluding officers.
We match 75% of each employees contribution, up to a
maximum of $375 per month, on a monthly basis. This plan was
discontinued as of the beginning of fiscal 2012 and replaced
with an ESPP that allows employees to purchase newly-issued
shares of the Companys common stock at a discount from
market, with no employee contribution match from the Company.
We participate in a union sponsored, collectively bargained
pension plan (Union Plan). Contributions are
determined in accordance with the provisions of negotiated labor
contracts and generally are based on the number of hours worked.
Several factors could result in potential funding deficiencies
which could cause us to make significantly higher future
contributions to these plans, including unfavorable investment
performance, changes in demographics, and increased benefits to
participants. At this time, we are unable to determine the
amount of additional contributions, if any.
The following represents the contribution expense for the profit
sharing, ESOP, ESPP and pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Plan
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Profit sharing
|
|
$
|
2,675
|
|
|
$
|
2,844
|
|
|
$
|
2,669
|
|
ESOP
|
|
|
815
|
|
|
|
899
|
|
|
|
855
|
|
ESPP
|
|
|
648
|
|
|
|
650
|
|
|
|
638
|
|
Union pension
|
|
|
383
|
|
|
|
371
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contribution expense
|
|
$
|
4,521
|
|
|
$
|
4,764
|
|
|
$
|
4,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We do not currently offer any other significant post-retirement
or post-employment benefits.
|
|
Note 9
|
Commitments
and Contingencies
|
Leases We have various operating leases for
trucks and land and buildings on which some of our operations
are located. Future minimum lease payments due under operating
leases with an initial term of one year or more at April 3,
2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
Thereafter
|
|
|
(In thousands)
|
|
Minimum lease payment
|
|
$
|
669
|
|
|
$
|
668
|
|
|
$
|
682
|
|
|
$
|
670
|
|
|
$
|
622
|
|
|
$
|
3,739
|
|
Total rental expense for the fiscal years 2011, 2010 and 2009
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Minimum rentals
|
|
$
|
552
|
|
|
$
|
577
|
|
|
$
|
538
|
|
Contingent rentals
|
|
|
114
|
|
|
|
102
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rental expense
|
|
$
|
666
|
|
|
$
|
679
|
|
|
$
|
644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation We are a party from time to
time in litigation arising in the ordinary course of our
business. To date, none of the litigation has had a material
effect on us.
39
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On November 3, 2009, ICL Performance Products, LP
(ICL), a chemical supplier to us, filed a lawsuit in
the United States District Court for the Eastern District of
Missouri, asserting breach of a contract for the sale of
phosphoric acid in 2009 (the 2009 Contract). ICL
seeks to recover $7.3 million in damages and pre-judgment
interest, and additionally seeks to recover its costs and
attorneys fees. ICL also claimed that we breached a contract for the sale of phosphoric acid in 2008 (the
2008 Contract). ICL has since dropped its claim for
breach of the 2008 Contract. We have counterclaimed against ICL
alleging that ICL falsely claimed to have a shortage of raw
materials that prevented it from supplying us with the
contracted quantity of phosphoric acid for 2008. We claim that
ICL used this alleged shortage and the threat of discontinued
shipments of phosphoric acid to force us to pay increased prices
for the remainder of 2008, and to sign the 2009 Contract. Based
on this alleged conduct, we have brought four alternate causes
of action including: (1) breach of contract,
(2) breach of the implied covenant of good faith and fair
dealing, (3) negligent misrepresentation, and
(4) intentional misrepresentation. We seek to recover
$1.5 million in damages, and additionally seek to recover
punitive damages, pre- and post-judgment interest, and our costs
and attorneys fees. The discovery phase in this action is
complete and this action is scheduled for jury trial in late
October 2011. We are not able to predict the ultimate outcome of
this litigation, but it may be costly and disruptive. Lawsuits
such as this can result in substantial costs and divert our
managements attention and resources, which may have a
material adverse effect on our business and results of
operations, including cash flows.
Asset Retirement Obligations We have three
leases of land (two relate to Hawkins and one relates to
Vertex), and at the end of the lease term (currently 2014 for
the Vertex lease and 2018 for the Hawkins leases if the leases
are not renewed), we have a specified amount of time to remove
the property and buildings. At the end of the specified amount
of time, anything that remains on the land becomes the property
of the lessor, and the lessor has the option to either maintain
the property or remove the property at our expense. We have not
been able to reasonably estimate the fair value of the asset
retirement obligations, primarily due to the combination of the
following factors: The leases do not expire in the near future;
we have a history of extending the leases with the lessors and
currently intend to do so at expiration of the lease periods;
the lessors do not have a history of terminating leases with its
tenants; 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
ASC 410-20,
Asset Retirement and Environmental Obligations, we
have not recorded an asset retirement obligation as of
April 3, 2011. 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.
The provisions for income taxes for fiscal 2011, 2010 and 2009
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Federal current
|
|
$
|
9,818
|
|
|
$
|
6,601
|
|
|
$
|
8,874
|
|
State current
|
|
|
2,531
|
|
|
|
1,634
|
|
|
|
2,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
12,349
|
|
|
|
8,235
|
|
|
|
11,205
|
|
Federal deferred
|
|
|
(69
|
)
|
|
|
5,739
|
|
|
|
2,420
|
|
State deferred
|
|
|
(299
|
)
|
|
|
1,413
|
|
|
|
626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(368
|
)
|
|
|
7,152
|
|
|
|
3,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision
|
|
$
|
11,981
|
|
|
$
|
15,387
|
|
|
$
|
14,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Reconciliations of the provisions for income taxes, based on
income from continuing operations, to the applicable federal
statutory income tax rate of 35% are listed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Statutory federal income tax
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income taxes, net of federal deduction
|
|
|
4.7
|
|
|
|
5.0
|
|
|
|
5.1
|
|
ESOP dividend deduction on allocated shares
|
|
|
(1.2
|
)
|
|
|
(1.0
|
)
|
|
|
(0.8
|
)
|
Domestic production deduction
|
|
|
(1.3
|
)
|
|
|
(0.6
|
)
|
|
|
(1.0
|
)
|
Other net
|
|
|
(0.1
|
)
|
|
|
0.9
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
37.1
|
%
|
|
|
39.3
|
%
|
|
|
37.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of items comprising our net deferred tax asset
(liability) as of April 3, 2011 and March 28, 2010 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
162
|
|
|
$
|
120
|
|
Amortization of intangibles
|
|
|
73
|
|
|
|
|
|
Accruals
|
|
|
919
|
|
|
|
720
|
|
Other
|
|
|
586
|
|
|
|
172
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
1,740
|
|
|
$
|
1,012
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
(3,190
|
)
|
|
$
|
(3,696
|
)
|
Prepaid
|
|
|
(283
|
)
|
|
|
(355
|
)
|
Excess of tax over book depreciation
|
|
|
(8,762
|
)
|
|
|
(7,743
|
)
|
Amortization of intangibles
|
|
|
|
|
|
|
(136
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$
|
(12,235
|
)
|
|
$
|
(11,930
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(10,495
|
)
|
|
$
|
(10,918
|
)
|
|
|
|
|
|
|
|
|
|
As of April 3, 2011, the Company has determined that it is
more likely than not that the deferred tax assets at
April 3, 2011 will be realized either through future
taxable income or reversals of taxable temporary differences. As
of April 3, 2011 and March 28, 2010, there were no
unrecognized tax benefits. Accordingly, a tabular reconciliation
from beginning to ending periods is not provided.
We are subject to U.S. federal income tax as well as income
tax of multiple state jurisdictions. The tax years beginning
with 2007 remain open to examination by the Internal Revenue
Service, and with few exceptions, state and local income tax
jurisdictions.
|
|
Note 11
|
Discontinued
Operations
|
In February 2009, we agreed to sell our inventory and entered
into a marketing agreement regarding the business of our
Pharmaceutical segment, which provided pharmaceutical chemicals
to retail pharmacies and small-scale pharmaceutical
manufacturers. On May 22, 2009 the majority of the
inventory was sold for cash of approximately $1.6 million
which approximated its carrying value. The remaining inventory,
with a carrying value of approximately $0.1 million, was
sold during fiscal 2010. The agreement provides for annual
payments based on a percentage of gross profit on future sales
up to a maximum of approximately $3.7 million. We have no significant remaining obligations
to fulfill under the agreement. We initially recorded a
receivable of approximately $1.7 million, equal to the
carrying value of the assets that were related to this business.
The first year payment under the agreement of approximately
$0.8 million was received in the second quarter of fiscal
2011, leaving a $0.9 million receivable remaining as of the
end of fiscal 2011, which is expected to be collected in the
second quarter of fiscal 2012. Amounts received in excess of the
remaining receivable, during fiscal 2012 and subsequent years,
will be recorded as a gain on sale of discontinued operations in
those periods. The results of the Pharmaceutical segment have
been reported as discontinued operations for all periods
presented.
41
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12
|
Segment
Information
|
We have two reportable segments: Industrial and Water Treatment.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
Product costs and expenses for each segment are based on actual
costs incurred along with cost allocation of shared and
centralized functions. We evaluate performance based on profit
or loss from operations before income taxes not including
nonrecurring gains and losses. Reportable segments are defined
by product and type of customer. Segments are responsible for
the sales, marketing and development of their products and
services. The segments do not have separate accounting,
administration, customer service or purchasing functions. There
are no intersegment sales and no operating segments have been
aggregated. Given our nature, it is not practical to disclose
revenues from external customers for each product or each group
of similar products. No single customers revenues amount
to 10% or more of our revenue. No single customer represents 10%
or more of either of our segments sales. Sales are
primarily within the United States and all assets are located
within the United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
|
|
|
|
|
Reportable Segments
|
|
Industrial
|
|
|
Treatment
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Fiscal Year Ended April 3, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
208,724
|
|
|
$
|
88,917
|
|
|
$
|
297,641
|
|
Gross profit
|
|
|
36,938
|
|
|
|
24,964
|
|
|
|
61,902
|
|
Operating income
|
|
|
17,110
|
|
|
|
14,852
|
|
|
|
31,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets*
|
|
$
|
121,250
|
|
|
$
|
21,139
|
|
|
$
|
142,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 28, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
174,901
|
|
|
$
|
82,198
|
|
|
$
|
257,099
|
|
Gross profit
|
|
|
37,288
|
|
|
|
27,157
|
|
|
|
64,445
|
|
Operating income
|
|
|
20,937
|
|
|
|
17,903
|
|
|
|
38,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets*
|
|
$
|
79,602
|
|
|
$
|
19,152
|
|
|
$
|
98,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 29, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
201,596
|
|
|
$
|
82,760
|
|
|
$
|
284,356
|
|
Gross profit
|
|
|
41,466
|
|
|
|
20,954
|
|
|
|
62,420
|
|
Operating income
|
|
|
25,520
|
|
|
|
11,817
|
|
|
|
37,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets*
|
|
$
|
78,083
|
|
|
$
|
20,896
|
|
|
$
|
98,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Unallocated assets consisting primarily of cash and cash
equivalents, investments and prepaid expenses were
$41.7 million at April 3, 2011, $60.5 million at
March 28, 2010 and $33.4 million at March 29,
2009. Additionally, assets associated with the discontinued operations
of the Pharmaceutical segment were $0.9 million at
April 3, 2011, $1.0 million at March 28, 2010 and
$3.9 million at March 29, 2009. |
42
HAWKINS,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13
|
Selected
Quarterly Financial Data
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2011
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
(In thousands, except per share data)
|
|
|
Sales
|
|
$
|
74,665
|
|
|
$
|
70,398
|
|
|
$
|
70,620
|
|
|
$
|
81,957
|
|
Gross profit
|
|
|
18,447
|
|
|
|
17,742
|
|
|
|
13,726
|
|
|
|
11,986
|
|
Operating income
|
|
|
11,786
|
|
|
|
10,928
|
|
|
|
6,833
|
|
|
|
2,414
|
|
Income from continuing operations
|
|
|
7,337
|
|
|
|
6,832
|
|
|
|
4,254
|
|
|
|
1,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
7,337
|
|
|
$
|
6,832
|
|
|
$
|
4,254
|
|
|
$
|
1,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.72
|
|
|
$
|
0.67
|
|
|
$
|
0.41
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
0.71
|
|
|
$
|
0.66
|
|
|
$
|
0.41
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Sales
|
|
$
|
73,586
|
|
|
$
|
64,976
|
|
|
$
|
60,627
|
|
|
$
|
57,910
|
|
Gross profit
|
|
|
15,856
|
|
|
|
17,416
|
|
|
|
15,855
|
|
|
|
15,318
|
|
Operating income
|
|
|
9,501
|
|
|
|
10,848
|
|
|
|
9,408
|
|
|
|
9,083
|
|
Income from continuing operations
|
|
|
5,944
|
|
|
|
6,665
|
|
|
|
5,595
|
|
|
|
5,534
|
|
Income from discontinued operations, net of tax
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,053
|
|
|
$
|
6,665
|
|
|
$
|
5,595
|
|
|
$
|
5,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.59
|
|
|
$
|
0.65
|
|
|
$
|
0.55
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
0.59
|
|
|
$
|
0.65
|
|
|
$
|
0.54
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
Not applicable.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of disclosure controls and procedures
As of the end of the period covered by this Annual Report on
Form 10-K,
we conducted an evaluation, under supervision and with the
participation of management, including the chief executive
officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures
pursuant to
Rules 13a-15(f)
and
15d-15(f) of
the Exchange Act. Based upon that evaluation, our chief
executive officer and chief financial officer concluded that our
disclosure controls and procedures are effective. Disclosure
controls and procedures are defined by
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act as controls and other procedures that are
designed to ensure that information required to be disclosed by
us in reports filed with the SEC under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms. Disclosure
controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to
be disclosed by us in reports filed under the Exchange Act is
accumulated and communicated to our management, including our
principal executive and principal financial officers, or person
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Managements
Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in
Rules 13a-15(f)
and
15d-15(f) of
the Securities Exchange Act. Our internal control over financial
reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures
that (1) pertain to maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (2) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of the financial statements in accordance
with generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of the effectiveness of internal
control over financial reporting to future periods are subject
to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal
control over financial reporting as of April 3, 2011, based
on the criteria described in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission.
Based on this assessment, management believes that our internal
control over financial reporting was effective as of
April 3, 2011.
Our independent registered public accounting firm has issued an
attestation report on our internal control over financial
reporting for April 3, 2011. That attestation report is set
forth immediately following this management report.
|
|
|
/s/ Patrick
H. Hawkins
Patrick
H. Hawkins
Chief Executive Officer and President
June 9, 2011
|
|
/s/ Kathleen
P. Pepski
Kathleen
P. Pepski
Vice President, Chief Financial Officer, and Treasurer
June 9, 2011
|
44
Attestation
Report of Registered Public Accounting Firm
The attestation report required under this Item 9A is
contained in Item 8 of this Annual Report on
10-K under
the caption Report of Independent Registered Public
Accounting Firm.
Changes
in Internal Control Procedures
Except as set forth below, there was no change in our internal
control over financial reporting during the fourth quarter of
fiscal 2011 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
In connection with the Vertex acquisition management has elected
to exclude Vertex from managements assessment of the
effectiveness of our internal control over financial reporting
for the year ended April 3, 2011 as permitted by the
Securities and Exchange Commission. As of April 3, 2011,
total net tangible assets attributable to Vertex represented
approximately $20 million or 12% of our total assets. Total
revenue attributable to Vertex represented approximately
$9 million of net revenue, or 3% of net revenue for the
fiscal year ended April 3, 2011.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
Not Applicable
PART III
Certain information required by Part III is incorporated by
reference from Hawkins definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on August 2, 2011
(the 2011 Proxy Statement). Except for those
portions specifically incorporated in this
Form 10-K
by reference to Hawkins Proxy Statement, no other portions
of the 2011 Proxy Statement are deemed to be filed as part of
this
Form 10-K.
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
|
Our executive officers, their ages and offices held, as of
May 31, 2011 are set forth below:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Office
|
|
Patrick H. Hawkins
|
|
|
40
|
|
|
Chief Executive Officer and President
|
Kathleen P. Pepski
|
|
|
56
|
|
|
Vice President, Chief Financial Officer, and Treasurer
|
Mark A. Beyer
|
|
|
49
|
|
|
Vice President Operations
|
Richard G. Erstad
|
|
|
47
|
|
|
Vice President, General Counsel and Secretary
|
Theresa R. Moran
|
|
|
48
|
|
|
Vice President Quality and Support
|
Keenan A. Paulson
|
|
|
61
|
|
|
Vice President Water Treatment Group
|
John R. Sevenich
|
|
|
53
|
|
|
Vice President Industrial Group
|
Patrick H. Hawkins was appointed to serve as our Chief
Executive Officer and President in March 2011. He had previously
been promoted to the position of President in March 2010 as part
of the Boards succession planning efforts. He joined the
Company in 1992 and served as the Business Director
Food and Pharmaceuticals, a position he held from 2009 to 2010.
Previously he served as Business Manager Food and
Co-Extrusion Products from 2007 to 2009 and Sales
Representative Food Ingredients from 2002 to 2007.
He previously served the Company in various other capacities,
including Plant Manager, Quality Director and Technical Director.
Kathleen P. Pepski has been the Companys Vice
President, Chief Financial Officer and Treasurer since February
2008 and was Secretary from February 2008 to November 2008. She
was the Executive Vice President and Chief Financial Officer of
PNA Holdings, LLC and Katun Corporation, a supplier of business
equipment parts, from 2003 to 2007, the Vice President of
Finance of Hoffman Enclosures, a manufacturer of systems
enclosures and a subsidiary of Pentair, Inc., from 2002 to 2003,
Senior Vice President and Chief Financial Officer of BMC Industries, Inc., a manufacturer of
lenses and aperture masks, from 2000 to 2001, and Vice President
and Controller at Valspar Corporation, a paint and coatings
manufacturer, from 1994 to 2000.
45
Mark A. Beyer has been the Companys Vice President
of Operations since September 2009. Mr. Beyer previously
held operations leadership positions with Boston Scientific
Corporation, a medical device manufacturer, and General Mills,
Inc., a diversified food company. He was self-employed as a
consultant from January 2005 to September 2009.
Richard G. Erstad has been the Companys Vice
President, General Counsel and Secretary since November 2008. He
was General Counsel and Secretary of BUCA, Inc., a restaurant
company, from 2005 to 2008. Mr. Erstad had previously been
an attorney with the corporate group of Faegre &
Benson LLP, a law firm, from 1996 to 2005, where his practice
focused on securities law and mergers and acquisitions. He is a
member of the Minnesota Bar.
Theresa R. Moran has been the Companys Vice
President Quality and Support since February 2010.
Since joining the Company in 1981, Ms. Moran has served the
Company in a variety of positions, including Administration
Operations Manager from 1999 to 2007 and most recently as
Director Process Improvement, a position she held
from 2007 until the time of her promotion.
Keenan A. Paulson has been the Companys Vice
President Water Treatment Group since May 2000.
Prior to attaining this position, Ms. Paulson held various
positions during her
37-year
career with the Company, most recently as its Water Treatment
General Manager.
John R. Sevenich has been the Companys Vice
President Industrial Group since May 2000. He was
the Business Unit Manager of Manufacturing from 1998 to 2000 and
was a Sales Representative with the Company from 1989 to 1998.
Election of Directors, Corporate
Governance, and Section 16(a) Beneficial
Ownership Reporting Compliance of the 2010 Proxy Statement
are incorporated herein by reference.
We have adopted a Code of Business Conduct and Ethics that
applies to all of our directors and employees, including our
principal executive officer, principal financial officer,
controller and other persons performing similar functions. We
have posted the Code of Business Conduct and Ethics on our
website located at
http://www.hawkinsinc.com.
Hawkins Code of Business Conduct and Ethics is also
available in print to any shareholder who requests it in writing
from our Corporate Secretary. We intend to post on our website
any amendment to, or waiver from, a provision of our Code of
Business Conduct and Ethics that applies to our principal
executive officer, principal financial officer, controller and
other persons performing similar functions within four business
days following the date of such amendment or waiver. We are not
including the information contained on our website as part of,
or incorporating it by reference into, this report.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Compensation of Executive Officers and Directors of
the 2011 Proxy Statement is incorporated herein by this
reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
Security Ownership of Management and Beneficial
Ownership and Equity Compensation Plan
Information of the 2011 Proxy Statement are incorporated
herein by this reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Election of Directors and Related Party
Transactions of the 2011 Proxy Statement are incorporated
herein by this reference.
46
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Independent Registered Public Accounting Firms
Fees of the 2011 Proxy Statement is incorporated herein by
this reference.
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
|
|
|
|
|
|
(a
|
)(1)
|
|
FINANCIAL STATEMENTS OF THE COMPANY
|
|
|
|
|
|
|
|
|
|
The following financial statements of Hawkins, Inc. are filed as
part of this Annual Report on
Form 10-K:
|
|
|
|
|
Reports of Independent Registered Public Accounting Firms.
|
|
|
|
|
Consolidated Balance Sheets at April 3, 2011 and
March 28, 2010.
|
|
|
|
|
Consolidated Statements of Income for the fiscal years ended
April 3, 2011, March 28, 2010, and March 29, 2009.
|
|
|
|
|
Consolidated Statements of Shareholders Equity for the
fiscal years ended April 3, 2011, March 28, 2010, and
March 29, 2009.
|
|
|
|
|
Consolidated Statements of Cash Flows for the fiscal years ended
April 3, 2011, March 28, 2010, and March 29, 2009.
|
|
|
|
|
Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
(a
|
)(2)
|
|
FINANCIAL STATEMENT SCHEDULES OF THE COMPANY
|
|
|
|
|
The additional financial data listed below is included as a
schedule to this Annual Report on
Form 10-K
and should be read in conjunction with the financial statements
presented in Part II, Item 8. Schedules not included with
this additional financial data have been omitted because they
are not required or the required information is included in the
financial statements or the notes.
|
|
|
|
|
|
|
|
|
|
The following financial statement schedule for the fiscal years
2011, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
Schedule II Valuation and Qualifying Accounts.
|
|
|
|
|
|
|
(a
|
)(3)
|
|
EXHIBITS
|
|
|
|
|
The exhibits of this Annual Report on
Form 10-K
included herein are set forth on the attached
Exhibit Index.
|
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HAWKINS, INC.
|
|
|
Date: June 9, 2011 |
By
|
/s/ Patrick
H. Hawkins
|
Patrick H. Hawkins,
Chief Executive Officer and President
POWER OF
ATTORNEY
Each of the undersigned directors of the Company, does hereby
make, constitute and appoint Patrick H. Hawkins and Kathleen P.
Pepski, and either of them, the undersigneds true and
lawful attorney-in-fact and agent, acting alone, with full power
of substitution, for the undersigned and in the
undersigneds name, place and stead, to sign and affix the
undersigneds name as such director of the Company, in any
and all capacities, to any and all amendments to this Annual
Report on
Form 10-K
and to file the same, with all exhibits thereto, and other
documents in connection wherewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact, and
either of them, full power and authority to do and perform each
and every act necessary or incidental to the performance and
execution of the powers herein expressly granted.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has also been signed below by the following
persons on behalf of the Company and in the capacities indicated
on the date set forth beside their signature.
|
|
|
|
|
|
|
|
/s/ Patrick
H. Hawkins
Patrick
H. Hawkins, Chief Executive Officer and President (Principal
Executive Officer) and Director
|
|
Date: June 9, 2011
|
|
|
|
/s/ Kathleen
P. Pepski
Kathleen
P. Pepski, Vice President, Chief Financial Officer, and
Treasurer (Principal Financial Officer and Principal Accounting
Officer)
|
|
Date: June 9, 2011
|
|
|
|
/s/ John
S. McKeon
John
S. McKeon, Director, Chairman of the Board
|
|
Date: June 9, 2011
|
|
|
|
/s/ Duane
M. Jergenson
Duane
M. Jergenson, Director
|
|
Date: June 9, 2011
|
|
|
|
/s/ Daryl
I. Skaar
Daryl
I. Skaar, Director
|
|
Date: June 9, 2011
|
|
|
|
/s/ James
A. Faulconbridge
James
A. Faulconbridge, Director
|
|
Date: June 9, 2011
|
|
|
|
/s/ James
T. Thompson
James
T. Thompson, Director
|
|
Date: June 9, 2011
|
|
|
|
/s/ Jeffrey
L. Wright
Jeffrey
L. Wright, Director
|
|
Date: June 9, 2011
|
48
SCHEDULE II
HAWKINS,
INC.
VALUATION
AND QUALIFYING ACCOUNTS
FOR THE
FISCAL YEARS ENDED APRIL 3, 2011, MARCH 28, 2010, AND MARCH 29,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
Balance at
|
|
Charged to
|
|
Charged to
|
|
|
|
|
|
|
Beginning
|
|
Costs and
|
|
Other
|
|
Deductions
|
|
Balance at
|
Description
|
|
of Year
|
|
Expenses
|
|
Accounts
|
|
Write-Offs
|
|
End of Year
|
|
|
(In thousands)
|
|
Reserve deducted from asset to which it applies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 3, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
300
|
|
|
$
|
120
|
|
|
$
|
|
|
|
$
|
14
|
|
|
$
|
406
|
|
Year Ended March 28, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
350
|
|
|
$
|
(29
|
)
|
|
$
|
|
|
|
$
|
21
|
|
|
$
|
300
|
|
Year Ended March 29, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
225
|
|
|
$
|
230
|
|
|
$
|
|
|
|
$
|
105
|
|
|
$
|
350
|
|
49
Exhibit Index
Unless otherwise indicated, all documents incorporated into this
Annual Report on
Form 10-K
by reference to a document filed with the SEC are located under
file number 0-7647.
|
|
|
|
|
|
|
Exhibit
|
|
Description
|
|
Method of Filing
|
|
|
2
|
.1
|
|
Asset Purchase Agreement, dated as of January 10, 2011,
among Vertex Chemical Corporation, Novel Wash Co., Inc., R.H.A.
Corporation, Twin Acquisition Corp. and Hawkins, Inc.(1)
|
|
Incorporated by Reference
|
|
3
|
.1
|
|
Amended and Second Restated Articles of Incorporation as amended
through February 27, 2001.(2)
|
|
Incorporated by Reference
|
|
3
|
.2
|
|
Amended and Restated By-Laws.(3)
|
|
Incorporated by Reference
|
|
10
|
.1*
|
|
Retention Bonus Agreement with John R. Hawkins
|
|
Incorporated by Reference
|
|
10
|
.2*
|
|
Description of Consulting Arrangement with John S. McKeon.(4)
|
|
Incorporated by Reference
|
|
10
|
.3*
|
|
Hawkins, Inc. 2004 Omnibus Stock Plan.(5)
|
|
Incorporated by Reference
|
|
10
|
.4*
|
|
Form of Restricted Stock Agreement under the Companys 2004
Omnibus Stock Plan.(6)
|
|
Incorporated by Reference
|
|
10
|
.5*
|
|
Form of Restricted Stock Agreement (Directors) under the
Companys 2004 Omnibus Stock Plan.(7)
|
|
Incorporated by Reference
|
|
10
|
.6*
|
|
Form of Non-Statutory Stock Option Agreement under the
Companys 2004 Omnibus Stock Plan.(8)
|
|
Incorporated by Reference
|
|
10
|
.7*
|
|
Form of Performance-Based Restricted Stock Unit Award Notice and
Restricted Stock Agreement under the Companys 2004 Omnibus
Stock Plan.(9)
|
|
Incorporated by Reference
|
|
10
|
.8*
|
|
Hawkins, Inc. 2010 Omnibus Incentive Plan.(10)
|
|
Incorporated by Reference
|
|
10
|
.9*
|
|
Form of Performance-Based Unit Award Notice and Restricted Stock
Agreement under the Companys 2010 Omnibus Incentive
Plan.(11)
|
|
Incorporated by Reference
|
|
10
|
.10*
|
|
Form of Restricted Stock Agreement under the Companys 2010
Omnibus Incentive Plan.(12)
|
|
Incorporated by Reference
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
Filed Electronically
|
|
23
|
.2
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
Filed Electronically
|
|
31
|
.1
|
|
Certification by Chief Executive Officer pursuant to
Rule 13a-14(a)
of the Exchange Act.
|
|
Filed Electronically
|
|
31
|
.2
|
|
Certification by Chief Financial Officer pursuant to
Rule 13a-14(a)
of the Exchange Act.
|
|
Filed Electronically
|
|
32
|
.1
|
|
Section 1350 Certification by Chief Executive Officer.
|
|
Filed Electronically
|
|
32
|
.2
|
|
Section 1350 Certification by Chief Financial Officer.
|
|
Filed Electronically
|
|
|
|
* |
|
Management contract or compensation plan or arrangement required
to be filed as an exhibit to this Annual Report on
Form 10-K. |
|
(1) |
|
Incorporated by reference to Exhibit 2.1 to the
Companys Current Report on
Form 8-K
dated January 10, 2011 and filed January 11, 2011 |
|
(2) |
|
Incorporated by reference to Exhibit 3.1 to the
Companys Annual Report on
Form 10-K
for the year ended September 30, 2001. |
|
(3) |
|
Incorporated by reference to Exhibit 3.1 to the
Companys Current Report on
Form 8-K
dated October 28, 2009 and filed November 3, 2009. |
|
(4) |
|
Incorporated by reference to Item 1.01 of the
Companys Current Report on
Form 8-K
dated August 5, 2009 and filed August 11, 2009. |
|
(5) |
|
Incorporated by reference to Appendix B to the
Companys Proxy Statement for the 2004 Annual Meeting of
Shareholders filed July 23, 2004. |
50
|
|
|
(6) |
|
Incorporated by reference to Exhibit 10.2 to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2004 and filed
November 9, 2004. |
|
(7) |
|
Incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2008. |
|
(8) |
|
Incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2008. |
|
(9) |
|
Incorporated by reference to Exhibit 10.2 to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2008. |
|
(10) |
|
Incorporated by reference to Exhibit 10.1 to the
Companys Registration Statement on Form
S-8 filed
June 6, 2011 (file
no. 333-174735). |
|
(11) |
|
Incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010. |
|
(12) |
|
Incorporated by reference to Exhibit 10.2 to the
Companys Quarterly Report on Form
10-Q for the
quarterly period ended June 30, 2010. |
51
exv23w1
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Hawkins, Inc.:
We consent to the incorporation by reference in the registration statements No. 333-87582 on Form
S-8 relating to the Hawkins, Inc. Employee Stock Purchase Plan, as Amended and Restated, No
333-172761 on Form S-8 relating to the Hawkins, Inc. Employee Stock Purchase Plan, 333-123080 on
Form S-8 relating to the Hawkins, Inc. 2004 Omnibus Stock Plan, and 333-174735 on Form S-8 relating
to the Hawkins, Inc. 2010 Omnibus Incentive Plan of our reports dated June 9, 2011, with respect to
the balance sheets of Hawkins, Inc. as of April 3, 2011 and March 28, 2010, the related statements
of income, shareholders equity, and cash flows for each of the years in the two-year period ended
April 3, 2011, the related financial statement schedule, and the effectiveness of internal control
over financial reporting as of April 3, 2011, which report appears in the April 3, 2011 annual
report on Form 10-K of Hawkins, Inc.
Our report dated June 9, 2011 on the effectiveness of internal control over
financial reporting as of April 3, 2011, contains an explanatory paragraph stating that the Company acquired Vertex Chemical Corporation
(Vertex) during fiscal year 2011 and that management excluded Vertex from its assessment of the effectiveness of the Companys internal control over financial reporting as of April 3, 2011. Our audit of internal control over financial reporting for the
Company also excluded an evaluation of the internal control over financial reporting of Vertex.
/s/ KPMG LLP
Minneapolis, Minnesota
June 9, 2011
exv23w2
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent
to the incorporation by reference in Registration Statements
No. 333-87582, 333-123080, 333-172761 and 333-174735 on Form S-8 of our reports dated June 5, 2009, relating to the financial statements and
financial statement schedule of Hawkins, Inc., appearing in this Annual Report on Form 10-K of
Hawkins, Inc. for the year ended April 3, 2011.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
June 9, 2011
exv31w1
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATIONS
I, Patrick H. Hawkins, certify that:
|
1. |
|
I have reviewed this annual report on Form 10-K of Hawkins, Inc.; |
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
|
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
|
|
4. |
|
The registrants other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
|
a) |
|
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
|
|
b) |
|
designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the financial statements for external purposes in accordance with
generally accepted accounting principles; |
|
|
c) |
|
evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
and |
|
|
d) |
|
disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants
internal control over financial reporting. |
|
5. |
|
The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants auditors
and the audit committee of the registrants board of directors (or persons performing the
equivalent functions): |
|
a) |
|
all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and |
|
|
b) |
|
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial reporting. |
Date: June 9, 2011
|
|
|
|
|
/s/ Patrick H. Hawkins
Patrick
H. Hawkins |
|
|
Chief Executive Officer and
President |
exv31w2
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATIONS
I, Kathleen P. Pepski, certify that:
|
1. |
|
I have reviewed this annual report on Form 10-K of Hawkins, Inc.; |
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
|
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
|
|
4. |
|
The registrants other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
|
a) |
|
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
|
|
b) |
|
designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the financial statements for external purposes in accordance with
generally accepted accounting principles; |
|
|
c) |
|
evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
and |
|
|
d) |
|
disclosed in this report any change in the registrants
internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants
internal control over financial reporting. |
|
5. |
|
The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants auditors
and the audit committee of the registrants board of directors (or persons performing the
equivalent functions): |
|
a) |
|
all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and |
|
|
b) |
|
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial reporting. |
Date: June 9, 2011
|
|
|
|
|
/s/ Kathleen P. Pepski
Kathleen
P. Pepski |
|
|
Vice President, Chief Financial
Officer, and Treasurer |
exv32w1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Hawkins, Inc. (the Company) on Form 10-K for the period ended April 3,
2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Patrick H. Hawkins, Chief
Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
|
|
|
/s/ Patrick H. Hawkins
Patrick H. Hawkins
|
|
|
Chief Executive Officer and President |
|
|
June 9, 2011 |
|
|
exv32w2
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Hawkins, Inc. (the Company) on Form 10-K for the period ended April 3,
2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Kathleen P. Pepski, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
|
|
|
/s/ Kathleen P. Pepski
Kathleen P. Pepski
|
|
|
Vice President, Chief Financial Officer, and Treasurer |
|
|
June 9, 2011 |
|
|