e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 2011
Commission file number 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 or other jurisdiction of
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(I.R.S. Employer Identification No.) |
incorporation or organization) |
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3100 EAST HENNEPIN AVENUE, MINNEAPOLIS, MINNESOTA 55413
(Address of principal executive offices, including zip code)
(612) 331-6910
(Registrants telephone number, including area code)
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 12 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 ý 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 ý NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
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Large Accelerated Filer o
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Accelerated Filer ý
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Non-Accelerated Filer o
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Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
YES o
NO
ý
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
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CLASS
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OUTSTANDING AT JULY 29, 2011 |
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Common Stock, par value $.05 per share
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10,366,935 |
1
HAWKINS, INC.
INDEX TO FORM 10-Q
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HAWKINS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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(In thousands, except share data) |
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July 3, 2011 |
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April 3, 2011 |
ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
23,284 |
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$ |
18,940 |
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Investments available-for-sale |
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10,325 |
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15,286 |
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Trade
receivables - less allowance for doubtful
accounts: $378 as of July 3, 2011 and $406 as of
April 3, 2011 |
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36,796 |
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35,736 |
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Inventories |
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32,531 |
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29,217 |
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Income taxes receivable |
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- |
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2,197 |
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Prepaid expenses and other current assets |
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2,532 |
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2,872 |
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Total current assets |
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105,468 |
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104,248 |
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PROPERTY,
PLANT, AND EQUIPMENT - net |
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62,978 |
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62,395 |
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GOODWILL |
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6,231 |
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6,231 |
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INTANGIBLE ASSETS |
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8,650 |
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8,811 |
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LONG-TERM INVESTMENTS |
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2,693 |
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3,175 |
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OTHER |
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127 |
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145 |
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$ |
186,147 |
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$ |
185,005 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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CURRENT LIABILITIES: |
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Accounts
payable trade |
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$ |
23,112 |
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$ |
23,350 |
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Dividends payable |
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- |
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3,095 |
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Accrued payroll and employee benefits |
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4,672 |
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7,760 |
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Deferred income taxes |
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2,620 |
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2,619 |
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Container deposits |
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1,022 |
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978 |
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Income taxes payable |
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979 |
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- |
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Other accruals |
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1,522 |
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1,669 |
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Total current liabilities |
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33,927 |
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39,471 |
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OTHER LONG-TERM LIABILITIES |
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922 |
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1,215 |
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DEFERRED INCOME TAXES |
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7,872 |
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7,876 |
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Total liabilities |
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42,721 |
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48,562 |
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COMMITMENTS AND CONTINGENCIES |
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SHAREHOLDERS EQUITY: |
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Common stock, par value $0.05; 10,307,177 shares issued
and outstanding as of July 3, 2011 and April 3, 2011 |
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515 |
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515 |
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Additional paid-in capital |
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41,322 |
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41,060 |
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Retained earnings |
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101,739 |
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95,013 |
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Accumulated other comprehensive income (loss) |
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(150 |
) |
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(145 |
) |
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Total shareholders equity |
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143,426 |
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136,443 |
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$ |
186,147 |
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$ |
185,005 |
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3
HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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Quarter Ended |
(In thousands, except share and per-share data) |
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July 3, 2011 |
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June 30, 2010 |
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Sales |
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$ |
88,594 |
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$ |
74,665 |
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Cost of sales |
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(70,667 |
) |
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(56,218 |
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Gross profit |
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17,927 |
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18,447 |
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Selling, general and administrative expenses |
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(7,857 |
) |
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(6,661 |
) |
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Operating income |
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10,070 |
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11,786 |
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Investment income |
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65 |
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106 |
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Income from continuing operations before income taxes |
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10,135 |
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11,892 |
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Provision for income taxes |
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(3,782 |
) |
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(4,555 |
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Income from continuing operations |
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6,353 |
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7,337 |
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Income from discontinued operations, net of tax |
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374 |
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- |
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Net income |
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$ |
6,727 |
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$ |
7,337 |
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Weighted average number of shares outstanding-basic |
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10,307,177 |
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10,253,458 |
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Weighted average number of shares outstanding-diluted |
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10,362,172 |
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10,308,270 |
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Basic earnings per share |
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Earnings per share from continuing operations |
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$ |
0.61 |
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$ |
0.72 |
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Earnings per share from discontinued operations |
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0.04 |
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- |
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Basic earnings per share |
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$ |
0.65 |
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$ |
0.72 |
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Diluted earnings per share |
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Earnings per share from continuing operations |
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$ |
0.61 |
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$ |
0.71 |
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Earnings per share from discontinued operations |
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0.04 |
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- |
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Diluted earnings per share |
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$ |
0.65 |
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$ |
0.71 |
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Cash dividends declared per common share |
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$ |
- |
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$ |
- |
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See accompanying notes to financial statements.
4
HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Quarter Ended |
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(In thousands) |
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July 3, 2011 |
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June 30, 2010 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
6,727 |
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$ |
7,337 |
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Reconciliation to cash flows: |
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Depreciation and amortization |
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2,043 |
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1,724 |
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Stock compensation expense |
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209 |
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283 |
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Loss (gain) from property disposals |
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2 |
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(13 |
) |
Changes in operating accounts (using) providing cash: |
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Trade receivables |
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(1,060 |
) |
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(2,322 |
) |
Inventories |
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(3,314 |
) |
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(4,517 |
) |
Accounts payable |
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2,541 |
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|
2,044 |
|
Accrued liabilities |
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(3,485 |
) |
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(4,797 |
) |
Income taxes |
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3,177 |
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4,521 |
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Other |
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357 |
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363 |
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Net cash provided by operating activities |
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7,197 |
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|
4,623 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to property, plant, and equipment |
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(3,626 |
) |
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(3,301 |
) |
Purchases of investments |
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(200 |
) |
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(1,960 |
) |
Sale and maturities of investments |
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5,635 |
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4,275 |
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Acquisition of Vertex |
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(1,709 |
) |
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- |
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Proceeds from property disposals |
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89 |
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40 |
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Net cash provided by (used in) investing activities |
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189 |
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(946 |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Cash dividends paid |
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(3,095 |
) |
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(2,879 |
) |
Other |
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53 |
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- |
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Net cash used in financing activities |
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(3,042 |
) |
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(2,879 |
) |
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NET INCREASE IN CASH AND CASH EQUIVALENTS |
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4,344 |
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|
798 |
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
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18,940 |
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|
18,772 |
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CASH AND CASH EQUIVALENTS, END OF PERIOD |
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$ |
23,284 |
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$ |
19,570 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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Cash paid for income taxes |
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$ |
829 |
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$ |
34 |
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Noncash investing activities- |
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Capital expenditures in accounts payable |
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$ |
381 |
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$ |
242 |
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5
HAWKINS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the
instructions for Form 10-Q and, accordingly, do not include all information and footnotes required
by generally accepted accounting principles for complete financial statements. These statements
should be read in conjunction with the financial statements and footnotes included in our Annual
Report on Form 10-K for the fiscal year ended April 3, 2011, previously filed with the Securities
and Exchange Commission (SEC). In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present fairly our financial position and
the results of our operations and cash flows for the periods presented. All adjustments made to the
interim financial statements were of a normal recurring nature.
The accounting policies we follow are set forth in Item 8. Financial Statements and Supplementary
Data, Note 1 Nature of Business and Significant Accounting Policies to our financial statements
in our Annual Report on Form 10-K for the fiscal year ended April 3, 2011 (fiscal 2011) filed
with the SEC on June 9, 2011.
At the beginning of the current fiscal year ending April 1, 2012 (fiscal 2012), we changed our
quarterly reporting to a 4-4-5 week convention.
The results of operations for the period ended July 3, 2011 are not necessarily indicative of the
results that may be expected for the full year. During the fourth quarter of fiscal 2011 we
acquired substantially all of the assets of Vertex Chemical Corporation, Novel Wash Co. Inc. and
R.H.A. Corporation, (collectively, Vertex). Vertexs results are incorporated in the consolidated
financial statements from the date of acquisition. See Note 11 Business Combinations for additional
information.
Note 2
Earnings per Share
Basic earnings per share (EPS) are computed by dividing net earnings by the weighted-average
number of common shares outstanding. Diluted EPS includes 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:
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Quarter ended |
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July 3, 2011 |
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June 30, 2010 |
Weighted
average common shares outstanding basic |
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|
10,307,177 |
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|
10,253,458 |
|
Dilutive impact of stock options, performance units,
and restricted stock |
|
|
54,995 |
|
|
|
54,812 |
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Weighted
average common shares outstanding - diluted |
|
|
10,362,172 |
|
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|
10,308,270 |
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|
For the period ended July 3, 2011 and June 30, 2010, there were no shares or stock options
excluded from the calculation of weighted average common shares for diluted EPS.
Note 3
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. 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. Initially we
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 $0.8 million was
received in the second quarter of fiscal 2011. Amounts received in future periods in excess of the
approximately $0.9 million remaining receivable will be recorded as a gain on sale of discontinued
operations in those periods. In July 2011 we received the second year payment of $1.4 million and,
accordingly, recorded a gain of approximately $0.6 million before taxes. The results of the
Pharmaceutical segment have been reported as discontinued operations
for all periods presented.
6
Note 4 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, and indicates the fair value hierarchy of the
valuation techniques utilized to determine such fair value.
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Description |
|
July 3, |
|
|
|
|
|
|
(In thousands) |
|
2011 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
22,785 |
|
|
$ |
22,785 |
|
|
$ |
- |
|
|
$ |
- |
|
Certificates of deposit |
|
|
13,018 |
|
|
|
- |
|
|
|
13,018 |
|
|
|
- |
|
Money market securities |
|
|
499 |
|
|
|
499 |
|
|
|
- |
|
|
|
- |
|
|
Description |
|
April 3, |
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2011 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
18,485 |
|
|
$ |
18,485 |
|
|
$ |
- |
|
|
$ |
- |
|
Certificates of deposit |
|
|
18,461 |
|
|
|
- |
|
|
|
18,461 |
|
|
|
- |
|
Money market securities |
|
|
455 |
|
|
|
455 |
|
|
|
- |
|
|
|
- |
|
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 Condensed Consolidated Balance Sheets. As of July 3, 2011, the CDs in current assets
have a fair value of $10.3 million, and in noncurrent assets, the CDs have a fair value of $2.7
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 July 3, 2011.
Note 5
Inventories
Inventories at July 3, 2011 and April 3, 2011 consisted of the following:
|
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|
|
|
|
|
|
|
|
|
July 3, |
|
April 3, |
|
|
2011 |
|
2011 |
(In thousands) |
|
|
|
|
|
|
|
|
Finished goods (FIFO basis) |
|
$ |
38,680 |
|
|
$ |
35,071 |
|
LIFO reserve |
|
|
(6,149 |
) |
|
|
(5,854 |
) |
|
|
|
|
|
Net inventory |
|
$ |
32,531 |
|
|
$ |
29,217 |
|
|
|
|
|
|
The first in, first out (FIFO) value of inventories accounted for under the last in, first
out (LIFO) method was $32.0 million at July 3, 2011 and $28.6 million at April 3, 2011. The
remainder of the inventory was valued and accounted for under the FIFO method.
We increased the LIFO reserve by $0.3 million in the quarter ended July 3, 2011 and $0.8 million in
the quarter ended June 30, 2010 as a result of the changes in inventory costs and inventory product
mix. The valuation of LIFO inventory for interim periods is based on our estimates of year-end
inventory levels and costs.
7
Note 6 Goodwill and Intangible Assets
The carrying amount of goodwill as of July 3, 2011 and April 3, 2011 was $6.2 million.
Intangible assets consist primarily of customer lists, trade secrets and non-compete agreements
classified as finite life and trademarks and trade names classified as indefinite life, related to
previous business acquisitions. A summary of our intangible assets as of July 3, 2011 and April 3,
2011 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2011 |
|
|
Gross Carrying |
|
Accumulated |
|
|
|
|
Amount |
|
Amortization |
|
Net |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Finite-life intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
$ |
5,508 |
|
|
$ |
(499 |
) |
|
$ |
5,009 |
|
Trademark |
|
|
1,240 |
|
|
|
(57 |
) |
|
|
1,183 |
|
Trade secrets |
|
|
862 |
|
|
|
(440 |
) |
|
|
422 |
|
Carrier relationships |
|
|
800 |
|
|
|
(37 |
) |
|
|
763 |
|
Other finite-life intangible assets |
|
|
339 |
|
|
|
(293 |
) |
|
|
46 |
|
|
|
|
|
|
|
|
Total finite-life intangible assets |
|
|
8,749 |
|
|
|
(1,326 |
) |
|
|
7,423 |
|
Indefinite-life intangible assets |
|
|
1,227 |
|
|
|
- |
|
|
|
1,227 |
|
|
|
|
|
|
|
|
Total intangible assets, net |
|
$ |
9,976 |
|
|
$ |
(1,326 |
) |
|
$ |
8,650 |
|
|
|
|
|
|
|
|
|
|
|
April 3, 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 |
|
|
|
|
|
|
|
|
Note 7 Income Taxes
In the preparation of our 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.
We recognize the effect of income tax positions only if those positions are more likely than not of
being sustained. Changes in recognition or measurement are reflected in the period in which the
change in judgment occurs.
8
Note 8 Accumulated Other Comprehensive Income (Loss)
Components of accumulated other comprehensive income (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
July 3, |
|
April 3, |
(In thousands) |
|
2011 |
|
2011 |
Unrealized gain (loss) on: |
|
|
|
|
|
|
|
|
Available-for-sale investments |
|
$ |
(2 |
) |
|
$ |
3 |
|
Post-retirement plan liability adjustments |
|
|
(148 |
) |
|
|
(148 |
) |
|
|
|
|
|
Accumulated other comprehensive loss |
|
$ |
(150 |
) |
|
$ |
(145 |
) |
|
|
|
|
|
Note 9 Stock Based Compensation
Stock Option Awards. The following table represents the stock option activity for the quarter ended
July 3, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
Exercisable |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
|
|
|
|
Exercise |
|
|
|
|
|
Exercise |
|
|
Shares |
|
Price |
|
Shares |
|
Price |
Outstanding at beginning of period |
|
|
131,997 |
|
|
$ |
17.82 |
|
|
|
66,666 |
|
|
$ |
17.67 |
|
Granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Vested |
|
|
- |
|
|
|
- |
|
|
|
27,999 |
|
|
|
15.43 |
|
Exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited or expired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
|
131,997 |
|
|
$ |
17.82 |
|
|
|
94,665 |
|
|
$ |
17.01 |
|
|
|
|
|
|
|
|
|
|
Compensation expense for the quarter ended July 3, 2011 and June 30, 2010 related to stock
options was not material.
Performance-Based Restricted Stock Units. Our Board of Directors approved a performance-based
equity compensation arrangement for our executive officers during the first quarter of 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 45,081 shares in the
aggregate for fiscal 2012. 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.
On June 8, 2011 and June 2, 2010, we awarded performance-based restricted stock units to our
executive officers under this arrangement. The following table represents the restricted stock
activity for the quarter ended July 3, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average Grant |
|
|
Shares |
|
Date Fair Value |
Outstanding at beginning of period |
|
|
11,667 |
|
|
$ |
25.81 |
|
Granted |
|
|
33,321 |
|
|
|
35.39 |
|
Vested |
|
|
- |
|
|
|
- |
|
Forfeited or expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Outstanding at end of period |
|
|
44,988 |
|
|
$ |
32.91 |
|
|
|
|
|
|
We recorded compensation expense related to performance share units of $0.1 million for the
quarter ended July 3, 2011 and $0.2 million for the quarter ended June 30, 2010, substantially all
of which was recorded in Selling, general and administrative (SG&A) expenses in the Condensed
Consolidated Statements of Income.
9
Restricted Stock Awards. As part of their retainer, each non-employee Director 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 the quarter ended July 3, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average Grant |
|
|
Shares |
|
Date Fair Value |
Outstanding at beginning of period |
|
|
6,996 |
|
|
$ |
30.00 |
|
Granted |
|
|
- |
|
|
|
- |
|
Vested |
|
|
- |
|
|
|
- |
|
Forfeited or expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Outstanding at end of period |
|
|
6,996 |
|
|
$ |
30.00 |
|
|
|
|
|
|
Compensation expense for the quarter ended July 3, 2011 and June 30, 2010 related to
restricted stock awards to the Board was not material.
Note 10 Commitments and Contingencies
Litigation
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
both parties have moved for summary judgment in their favor. We do not know how or when the Court
might rule on the parties summary judgment motions. The jury trial for this action is scheduled
for mid November 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.
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.
Note 11 Business Combinations
On January 14, 2011, we completed the acquisition
of the assets of Vertex for $27.2 million, $25.5
million paid at closing and the remaining $1.7 million paid during the first quarter of fiscal
2012. 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.
Vertex operating results are included in our Condensed Consolidated Statements of Income in our
Industrial segment from the date of acquisition.
10
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:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
July 3, |
|
June 30, |
(In thousands, except share and per-share data) |
|
2011 |
|
2010 |
Pro forma net sales |
|
$ |
88,594 |
|
|
$ |
83,178 |
|
Pro forma net earnings |
|
|
6,727 |
|
|
|
7,712 |
|
|
|
|
|
|
|
|
|
|
Pro forma earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.65 |
|
|
$ |
0.75 |
|
Diluted |
|
|
0.65 |
|
|
|
0.75 |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
10,307,177 |
|
|
|
10,253,458 |
|
Diluted |
|
|
10,362,172 |
|
|
|
10,308,270 |
|
The results for the quarter ended July 3, 2011 shown in this table reflect actual condensed
consolidated financial results for the period, while the results for the quarter ended June 30,
2010 reflect pro forma condensed consolidated financial results. These unaudited 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 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 as
disclosed in our fiscal 2011 Annual Report on Form 10-K. 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 customer represents 10 percent or more of
our revenue. Sales are primarily within the United States and all assets are located within the
United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water |
|
|
Reportable Segments |
|
Industrial |
|
Treatment |
|
Total |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended July 3, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
63,567 |
|
|
$ |
25,027 |
|
|
$ |
88,594 |
|
Gross profit |
|
|
10,719 |
|
|
|
7,208 |
|
|
|
17,927 |
|
Operating income |
|
|
5,642 |
|
|
|
4,428 |
|
|
|
10,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
49,806 |
|
|
$ |
24,859 |
|
|
$ |
74,665 |
|
Gross profit |
|
|
10,340 |
|
|
|
8,107 |
|
|
|
18,447 |
|
Operating income |
|
|
6,412 |
|
|
|
5,374 |
|
|
|
11,786 |
|
11
|
|
|
ITEM 2. |
|
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
the quarter ended July 3, 2011 as compared to June 30, 2010. This discussion should be read in
conjunction with the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements
included in this Form 10-Q and Item 8 of our Annual Report on Form 10-K for the fiscal year ended
April 3, 2011 (fiscal 2011).
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 our 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
this specialty chemical portion of our business to continue to grow.
In the fourth quarter of fiscal 2011, we completed the
acquisition of substantially all of the
assets of 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.
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 the majority of our 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. We have
recorded a $0.3 million increase in our LIFO reserve for the quarter ended July 3, 2011 and a $0.8
million increase for the quarter ended June 30, 2010, reducing our reported gross profit by that
amount in each of the first quarters of fiscal 2012 and 2011. We anticipate material costs to
increase somewhat throughout fiscal 2012.
12
Results of Operations
The following table sets forth the percentage relationship of certain items to sales for the period
indicated:
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
|
July 3, |
|
June 30, |
|
|
2011 |
|
2010 |
Sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
(79.8 |
) % |
|
|
(75.3 |
) % |
|
|
|
|
|
Gross profit |
|
|
20.2 |
% |
|
|
24.7 |
% |
Selling, general and administrative expenses |
|
|
(8.9 |
) % |
|
|
(8.9 |
) % |
|
|
|
|
|
Operating income |
|
|
11.3 |
% |
|
|
15.8 |
% |
Investment income |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
11.4 |
% |
|
|
15.9 |
% |
Provision for income taxes |
|
|
(4.3 |
) % |
|
|
(6.1 |
) % |
|
|
|
|
|
Incoming from continuing operations |
|
|
7.1 |
% |
|
|
9.8 |
% |
Income from discontinued operations, net of tax |
|
|
0.4 |
% |
|
|
- |
% |
|
|
|
|
|
Net income |
|
|
7.5 |
% |
|
|
9.8 |
% |
|
|
|
|
|
Sales
Sales increased $13.9 million, or 18.7%, to $88.6 million in the period ended July 3, 2011 as
compared to $74.7 million in the period ended June 30, 2010. Sales of bulk chemicals, including
caustic soda, were approximately 22% of sales during the first quarter of fiscal 2012 and the 19%
during first quarter of fiscal 2011. Vertex, which we acquired during the fourth quarter of fiscal
2011, contributed approximately $11.0 million of the increase in sales during the first quarter of
fiscal 2012. The remaining increase in sales is primarily the result of higher selling prices for
bulk chemicals due to increased commodity chemical prices as well as increased sales of specialty
and manufactured chemical products, partially offset by lower bulk chemical sales volumes. We
experienced unfavorable weather conditions in the quarter ended July 3, 2011 that negatively
impacted sales volumes within both segments. The weather was unseasonably cold and wet with certain
regions experiencing flooding, reducing the consumption of chemicals needed for water treatment and
agricultural applications.
Industrial
Segment. Industrial segment sales increased $13.7 million, or 27.6%, to $63.6 million
for the quarter ended July 3, 2011 as compared to the quarter ended June 30, 2010. Vertex, which we
acquired during the fourth quarter of fiscal 2011, contributed approximately $11.0 million of the
increase in sales during the first quarter of fiscal 2012. The remaining increase in sales for the
Industrial segment was the result of higher selling prices for bulk chemical due to increased
commodity chemical prices, partially offset by lower bulk chemical sales volumes.
Water Treatment Segment. Water Treatment segment sales increased $0.2 million, or 0.7%, to $25.0
million for the quarter ended July 3, 2011 as compared to the
quarter ended June 30, 2010. Despite adverse weather conditions,
the segments
sales performance was positively impacted by increased sales across all product lines, largely offset by lower
selling prices due to competitive pricing pressures.
Gross Profit
Gross profit was $17.9 million, or 20.2% of sales, for the period ended July 3, 2011, as compared
to $18.4 million, or 24.7% of sales, for the period ended June 30, 2010. Due to projected increases
in certain raw material costs, the LIFO method of valuing inventory negatively impacted gross
profit by $0.3 million for the quarter ended July 3, 2011 and $0.8 million for the quarter ended
June 30, 2010.
Industrial Segment. Gross profit for the Industrial segment was $10.7 million, or 16.9% of sales,
for the quarter ended July 3, 2011, as compared to $10.3 million, or 20.8% of sales, for the
quarter ended June 30, 2010. The increase in gross profit resulted from adding Vertexs business to
this segment, offset by pricing pressure across all product lines. The LIFO method of valuing
inventory negatively impacted gross profit in this segment by $0.2 million during the first quarter
of fiscal 2012 and $0.6 million during the first quarter of fiscal 2011.
Water Treatment Segment. Gross profit for the Water Treatment segment was $7.2 million, or 28.8% of
sales, for the quarter ended July 3, 2011, as compared to $8.1 million, or 32.6% of sales, for the
quarter ended June 30, 2010. The decrease in gross profit was primarily due to competitive pricing
pressures, partially offset by increased sales across all product lines. The LIFO method of valuing
inventory did not have a material impact in this segment during the first quarter of fiscal 2012
and negatively impacted gross profit by $0.2 million during the
first quarter of fiscal 2011.
13
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $7.9 million, or 8.9% of sales, for the period
ended July 3, 2011 as compared to $6.7 million, or 8.9% of sales, for the period ended June 30,
2010. The increase was primarily due to the acquisition of Vertex during the fourth quarter of
fiscal 2011.
Operating Income
Operating income was $10.1 million for the period ended July 3, 2011, a decrease of $1.7 million
from the period ended June 30, 2010. The Industrial segment accounted for $0.8 million and the
Water Treatment segment accounted for the $0.9 million of the decrease. The decrease in operating
income was driven by lower gross profits and increased SG&A expenses.
Investment Income
Investment income was $0.1 million for the period ended July 3, 2011 as well as the period ended
June 30, 2010. |
Provision for Income Taxes
Our effective income tax rate was 37.3% for the period ended July 3, 2011, compared to 38.3% for
the period ended June 30, 2010. The lower effective tax rate is primarily due to a projected
increase in permanent tax benefits for fiscal 2012.
Liquidity and Capital Resources
Cash provided by operations for the period ended July 3, 2011 was $7.2 million compared to $4.6
million for the period ended June 30, 2010. The increase in cash provided by operating activities
was due primarily to reduced cash amounts used to fund working capital, including the timing of
inventory purchases and the related vendor payments and the timing of customer payments.
Historically, our cash requirements increase during the period from April through September as
caustic soda inventory levels increase as the majority of barges are received during this period.
Additionally, due to the seasonality of the water treatment business, our accounts receivable
balance generally increases during the same period.
Cash and investments available-for-sale of $36.3 million at July 3, 2011 decreased by $1.1 million
as compared with the $37.4 million available as of April 3, 2011, primarily due to higher working
capital balances and cash disbursed for capital expenditures, dividends and the final payment
related to the Vertex acquisition during the first quarter of fiscal 2012.
Capital Expenditures
Capital expenditures were $3.6 million for the quarter ended July 3, 2011 compared to $3.3 million
for the quarter ended June 30, 2010. Significant capital expenditures during the first quarter of
fiscal 2012 consisted of approximately $1.5 million for business expansion and process improvement
projects and $1.6 million for other facility, regulatory and safety improvements. We expect our
cash flows from operations will be sufficient to fund our planned capital expenditures in fiscal
2012.
Critical Accounting Policies
Our significant accounting policies are set forth in Note 1 to our financial statements in our
Annual Report on Form 10-K for the fiscal year ended April 3, 2011. The accounting policies used in
preparing our interim fiscal 2012 financial statements are the same as those described in our
Annual Report.
14
Forward-Looking Statements
The information presented in this Quarterly Report on Form 10-Q 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.
Additional information concerning potential factors that could affect future financial results is
included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2011. 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q or to reflect the occurrence of
unanticipated events.
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ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
At July 3, 2011, our investment portfolio included $13.0 million of certificates of deposit
classified as fixed income securities and cash and cash equivalents of $23.3 million. The fixed
income securities, like all fixed income instruments, are subject to interest rate risks and will
decline in value if market interest rates increase. However, while the value of the investment may
fluctuate in any given period, we intend to hold our fixed income investments until recovery.
Consequently, we would not expect to recognize an adverse impact on net income or cash flows during
the holding period. We adjust the carrying value of our investments if impairment occurs that is
other than temporary.
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 cost increases in
the future.
|
|
ITEM 4. |
CONTROLS AND PROCEDURES |
Evaluation of disclosure controls and procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, 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 and 15d-15 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.
Changes in Internal Control
There was no change in our internal control over financial reporting during the first quarter of
fiscal 2012 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
15
PART II. OTHER INFORMATION
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|
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ITEM 1. 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 both parties
have moved for summary judgment in their favor. We do not know how or when the Court might rule on
the parties summary judgment motions. The jury trial for this action is scheduled for
mid November 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.
There have been no material changes to our risk factors from those disclosed in our Annual Report
on Form 10-K for the fiscal year ended April 3, 2011.
Item 5. OTHER INFORMATION
Item 1.01. Entry into a Material Definitive Agreement
On August 2, 2011, the Board of Directors of Hawkins, Inc. (the Company) and John S. McKeon, Chairman of the
Board, agreed to amend the compensation arrangement relating to Mr. McKeons provision of consulting services to
the Company by reducing his compensation from $6,250 per month to $5,000 per month. This arrangement is
separate from the compensation paid to Mr. McKeon for his service as Chairman of the Board which was not
revised at this time. Either the Company or Mr. McKeon can terminate this arrangement at any time.
Item 5.02.
DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF
CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
On
August 2, 2011, our Compensation Committee adopted an Executive Severance Plan (the Severance
Plan) to be entered into with our Chief Executive Officer and certain other key employees
(collectively, Covered Executives).
Covered Executives will be eligible to receive specified payments and benefits if our Company
terminates their employment (i) without cause at any time or (ii) for good reason within two
years after a change in control. The Compensation Committee is responsible for assigning each
Covered Executive to one of four tiers, which determines the duration of salary continuation and
amount of change in control payments for which a Covered Executive may be eligible. Initially, the
Chief Executive Officer will be assigned to Tier 1 and the Chief Financial Officer, Vice PresidentIndustrial and Vice PresidentWater Treatment Group will be assigned to
Tier 3 and our General Counsel will be assigned to Tier 4.
The payments and benefits that will be paid to Covered Executives under the Severance Plan as a
result of a qualifying termination of employment include (i) base salary for the salary
continuation period associated with their Tier, (ii) COBRA continuation coverage for medical and
dental benefits for a maximum of 18 months (with Covered Executive to be charged the active employee rate for coverage) , and (iii) the reasonable costs of outplacement services
for a maximum of 1 year.
The additional payments and benefits that will be paid to Covered Executives under the Severance
Plan as a result of a qualifying termination of employment in connection with a change in control
include (i) six additional months of salary continuation, (ii) a
benefit equal to the annual bonus the Covered Executive would have received (measured at target) if the Covered Executive had remained
employed and eligible to receive such bonus for the entire salary continuation period,
and (iii) a benefit equal to the additional benefit, if any, that would have been received under
the Hawkins, Inc. Profit Sharing Plan if the Covered Executive had remained employed and eligible
for the Profit Sharing Plan for the entire salary continuation period.
A Covered Executive must enter into an employment agreement with the Company that contains
covenants against competition, disclosure and solicitation, and as a release of claims in order to
qualify for payments and benefits under the Severance Plan.
16
The foregoing description of the Severance Plan does not purport to be complete and is qualified in
its entirety by reference to the Severance Plan, which is attached as Exhibit 10.1 hereto and is
incorporated into this Item 5.02 by reference.
Item 5.07. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August
2, 2011, the Company held its 2011 Annual Meeting of Shareholders. The proposals that were
voted upon at the meeting and the number of votes cast as to each proposal are set forth below.
Proposal
One - Election of Directors
The shareholders elected each of the seven nominees to serve as director for a term of one
year, which term shall expire at the next annual meeting of shareholders, based on the votes listed
below:
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|
|
|
|
Director Nominee |
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For |
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Against |
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Abstain |
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John S. McKeon |
|
5,904,798 |
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1,804,159 |
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7,029 |
Patrick H. Hawkins |
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7,683,670 |
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26,068 |
|
6,248 |
James A. Faulconbridge |
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6,543,933 |
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1,146,513 |
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25,540 |
Duane M. Jergenson |
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7,530,062 |
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160,350 |
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25,574 |
Daryl I. Skaar |
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7,507,085 |
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183,989 |
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24,912 |
James T. Thompson |
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7,531,638 |
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158,038 |
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26,310 |
Jeffrey L. Wright |
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6,706,117 |
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984,051 |
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25,818 |
Proposal
Two - Approval of the Hawkins, Inc. Employee Stock Purchase Plan
The shareholders approved the Employee Stock Purchase Plan, based on the votes listed below:
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For |
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Against |
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Abstain |
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Broker Non-Votes |
7,549,941 |
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135,843 |
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30,202 |
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Proposal
Three - Non-Binding Advisory Vote on Executive Compensation
The shareholders approved, on an advisory basis, the compensation of the Companys executive
officers as disclosed in the proxy statement distributed in connection with the Annual Meeting,
based on the votes listed below:
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For |
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Against |
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Abstain |
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Broker Non-Votes |
7,272,896 |
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172,310 |
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270,780 |
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|
Proposal
Four - Non-Binding Advisory Vote on the Frequency of the Vote on Executive
Compensation
The shareholders expressed a preference for an annual non-binding advisory vote on the compensation
of the companys executive officers, based on the votes listed below:
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|
|
|
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1 Year |
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2 Year |
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3 Year |
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Abstain |
3,915,417 |
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99,874 |
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3,298,009 |
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402,686 |
In light of the voting results for this Proposal Four, the Board of Directors has determined
that it will include a non-binding advisory vote on executive compensation in the Companys proxy
materials every three years until the next required advisory vote on the frequency of shareholder
votes on executive compensation.
The above proposals are described in further detail in the Companys definitive proxy statement
filed with the Securities and Exchange Commission on June 22, 2011.
17
ITEM 6. EXHIBITS
Exhibit Index
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|
|
Exhibit |
|
Description |
|
Method of Filing |
3.1
|
|
Amended and Restated Articles of
Incorporation. (1)
|
|
Incorporated by Reference |
3.2
|
|
Amended and Restated By-Laws. (2)
|
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Incorporated by Reference |
10.1
|
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Executive Severance Plan
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Filed Electronically |
31.1
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|
Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange
Act.
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|
Filed Electronically |
31.2
|
|
Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange
Act.
|
|
Filed Electronically |
32.1
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Section 1350 Certification by Chief Executive Officer.
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|
Filed Electronically |
32.2
|
|
Section 1350 Certification by Chief Financial Officer.
|
|
Filed Electronically |
101
|
|
Financial statements from the
Quarterly Report on Form 10-Q of Hawkins, Inc. for the period ended
July 3, 2011, filed with the SEC on August 4, 2011, formatted in
Extensible Business Reporting Language (XBRL); (i) the Condensed
Consolidated Balance Sheets at July 3, 2011 and April 3, 2011, (ii) the
Condensed Consolidated Statements of Income for the Quarter Ended
July 3, 2011 and June 30, 2010, (iii) the Condensed Consolidated
Statements of Cash Flows for the Quarter Ended July 3, 2011 and June
30, 2010, and (iv) Notes to Condensed Consolidated Financial
Statements.
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|
Filed Electronically |
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this Form 10-Q.
(1) |
|
Incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30,
2010, filed on July 29, 2010. |
|
(2) |
|
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. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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HAWKINS, INC. |
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By
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:
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/s/ Kathleen P. Pepski
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|
Kathleen P. Pepski |
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Vice President, Chief Financial Officer, and Treasurer |
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(On behalf of the Registrant and as principal financial officer) |
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Dated:
August 4, 2011
18
Exhibit Index
|
|
|
|
|
Exhibit |
|
Description |
|
Method of Filing |
3.1
|
|
Amended and Restated Articles of
Incorporation. (1)
|
|
Incorporated by Reference |
3.2
|
|
Amended and Restated By-Laws. (2)
|
|
Incorporated by Reference |
10.1
|
|
Executive Severance Plan
|
|
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
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Section 1350 Certification by Chief Executive Officer.
|
|
Filed Electronically |
32.2
|
|
Section 1350 Certification by Chief Financial Officer.
|
|
Filed Electronically |
101
|
|
Financial statements from the Quarterly Report on Form 10-Q of Hawkins, Inc. for the period ended July 3, 2011,
filed with the SEC on August 4, 2011, formatted in Extensible Business Reporting Language (XBRL);
(i) the Condensed Consolidated Balance Sheets at July 3, 2011 and April 3, 2011 (ii) the Condensed Consolidated Statements of Income for the Quarter Ended July 3, 2011 and June 30, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the Quarter Ended July 3, 2011 and
June 30, 2010, and (iv) Notes to Condensed Consolidated Financial Statements.
|
|
Filed Electronically |
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this Form 10-Q.
(1) |
|
Incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30,
2010, filed on July 29, 2010. |
|
(2) |
|
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. |
19
exv10w1
EXHIBIT 10.1
HAWKINS, INC.
EXECUTIVE SEVERANCE PLAN
(Effective August 2, 2011)
Hawkins, Inc. has established this Hawkins, Inc. Executive Severance Plan (the Plan)
effective August 2, 2011 (the Effective Date).
The purpose of this Plan is to provide certain executive employees of Hawkins with severance
benefits in the event that the executives employment is involuntarily terminated under
circumstances entitling the executive to such benefits.
The Plan is intended to be an unfunded plan for a select group of management or highly
compensated employees that is intended to qualify for the exemptions provided in sections 201, 301
and 401 of ERISA, and for the alternative reporting method provided in DOL Reg. § 2520.104-23.
The Plan shall continue until such time as it is amended or terminated.
ARTICLE 1
DEFINITIONS
1.1 Affiliate means any entity with which Hawkins would be considered a single
employer under Code § 414(b) or 414(c).
1.2 Base Salary means the Covered Executives annualized rate of base salary as paid
on each regularly scheduled payday for the Covered Executives regular work schedule as of his or
her Date of Termination; provided, however, that if such rate is reduced during the 90-day period
preceding the Covered Executives Date of Termination, the Covered Executives annualized rate of
base salary shall be based upon the highest rate in effect for the Covered Executive during such
90-day period.
1.3 Beneficial Owner and Beneficial Ownership have the same meaning as in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (or any successor rule thereto).
1.4 Board means the Board of Directors of Hawkins.
1.5 Cause means:
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(a) |
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the Covered Executives willful and material failure or refusal during his or
her employment to carry out any reasonable directive of the Board; |
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(b) |
|
any willful and material failure by the Covered Executive during his or her
employment to comply with any material policy, rule or code of conduct generally
applicable to employees of Hawkins or to management employees of Hawkins, which failure
is materially and demonstratively injurious to the financial condition or business
reputation of Hawkins; |
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(c) |
|
the Covered Executives embezzlement or misappropriation of funds of Hawkins or
any other willful act or omission by the Covered Executive which is materially
injurious to the financial condition or business reputation of Hawkins; or |
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(d) |
|
the Covered Executives conviction or confession of an act or acts constituting
a felony under the |
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|
|
laws of the United States or any state thereof related to the business of Hawkins or
which is materially injurious to the financial condition or business reputation of
Hawkins. |
1.6 Change in Control means the occurrence of any of the following
events:
|
(a) |
|
the consummation of a Corporate Transaction unless, immediately following such
Corporate Transaction, all or substantially all of the persons who were the Beneficial
Owners of Voting Securities of Hawkins immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 50% of the combined voting power of
the then outstanding Voting Securities (or comparable equity interests) of the
surviving or acquiring entity (or its parent) resulting from such Corporate Transaction
in substantially the same proportions as their ownership of Voting Securities of
Hawkins immediately prior to such Corporate Transaction; or |
|
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(b) |
|
any person or group, other than (i) one or more Subsidiaries, or (ii) any
employee benefit plan (or related trust) sponsored or maintained by Hawkins or any
Affiliate, becomes the Beneficial Owner of equity securities of Hawkins representing
more than 50% of the combined voting power of the then outstanding Voting Securities of
Hawkins, except that (A) any acquisition of equity securities of Hawkins directly from
Hawkins for the purpose of providing financing to Hawkins, any formation of a group
consisting solely of Beneficial Owners of Voting Securities of Hawkins as of the
Effective Date, or any repurchase or other acquisition by Hawkins of its equity
securities that causes any person to become the beneficial owner of more than 50% of
the combined voting power of the Voting Securities of Hawkins, will not be considered a
Change in Control unless and until, in either case, such person acquires Beneficial
Ownership of additional Voting Securities of Hawkins after the person initially became
the Beneficial Owner of more than 50% of the combined voting power of the Voting
Securities of Hawkins by one of the means described in this clause (A); and (B) a
Change in Control will occur if a person or group becomes the Beneficial Owner of more
than 50% of Voting Securities of Hawkins as the result of a Corporate Transaction only
if the Corporate Transaction is itself a Change in Control pursuant to subsection (a)
of this section; or |
|
|
(c) |
|
individuals who are Continuing Directors cease for any reason to constitute a
majority of the members of the Board. |
1.7 COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
1.8 Code means the Internal Revenue Code of 1986, as amended, and the regulations
and guidance issued thereunder.
1.9 Committee means the Compensation Committee of the Board or such other committee
of the Board (including, without limitation, the full Board) to which the Board has delegated power
to act under or pursuant to the provisions of the Plan.
1.10 Continuing Director means an individual (a) who is, as of the Effective Date, a
director of Hawkins, or (b) who becomes a director of Hawkins after the Effective Date and whose
initial election, or nomination for election by Hawkins stockholders, was approved by at least a
majority of the then Continuing Directors, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the Board.
1.11 Corporate Transaction means a dissolution or liquidation of Hawkins, a sale of
substantially all of the assets of Hawkins, a merger or consolidation of Hawkins with or into any
other corporation, regardless of whether Hawkins is the surviving corporation, or a statutory share
exchange involving capital stock of Hawkins.
1.12 Covered Executive means any Employee who is specifically designated by the
Compensation Committee to participate in the Plan.
2
1.13 Date of Termination means the effective date of a Termination of Employment.
1.14 Disability means any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous period of not less
than six months, where such impairment causes the Covered Executive to be unable to perform the
duties of the Covered Executives position of employment or any substantially similar position of
employment.
1.15 Effective Date means the effective date of this Plan, which is August 2, 2011.
1.16 Employee means any common-law employee of Hawkins or an Affiliate (while it is
an Affiliate).
1.17 ERISA means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and guidance issued.
1.18 Good Reason means any of the following conditions arising without the consent
of the Covered Executive:
|
(a) |
|
a material decrease in the Covered Executives base compensation; |
|
|
(b) |
|
a material diminution in the Covered Executives authority, duties, or
responsibilities; |
|
|
(c) |
|
relocation of Covered Executives principal office more than 50 miles from its
current location; or |
|
|
(d) |
|
any other action or inaction that constitutes a material breach by Hawkins of
any terms or conditions of any agreement between Hawkins and the Covered Executive,
which breach has not been caused by the Covered Executive. |
1.19 Hawkins means Hawkins, Inc., a Minnesota corporation, or any successor to all
or substantially all of its businesses by merger, consolidation, purchase of assets or otherwise.
1.20 Profit Sharing Plan means the Hawkins, Inc. Profit Sharing Plan.
1.21 Release means a written agreement and release of claims in a form furnished by
Hawkins. In such release, the Covered Executive will be asked to release Hawkins and its
directors, officer, employees and agents from any and all claims the Covered Executive may have
against them, including but not limited to any contract, tort, or wage and hour claims, and any
claims under Title VII, the ADEA, the ADA, ERISA, and other federal, state, local or foreign laws.
Under the Release, the Covered Executive must also agree not to solicit business similar to any
business offered by Hawkins from any Hawkins customer, not to advise any entity to cancel or limit
its business with Hawkins, not to recruit, solicit or encourage any employee to leave their
employment with Hawkins, not to disclose any of Hawkins trade secrets or confidential information,
and not to disparage Hawkins or its employees in any way. These obligations are in addition to any
other non-solicitation, noncompete, nondisclosure, or confidentiality agreements the Covered
Executive may have executed while employed by Hawkins. The Release shall not diminish or terminate
the Covered Executives rights under this Plan.
1.22 Salary Continuation Period means the relevant period (which shall depend upon
the Covered Executives Tier on his or her Date of Termination and whether the Covered Executives
Termination of Employment is a Termination Due to a Change in Control) as described in Appendix
A for determining the Severance Benefits payable to a Covered Executive.
1.23 Separation Pay Plan Amount means an amount payable pursuant to an arrangement
that constitutes a separation pay plan due to involuntary separation from service under Treas.
Reg. § 1.409A-1(b)(9)(iii) (or a successor rule thereto), and which, with respect to a Covered
Executive, shall be equal to two times the lesser of (a) the maximum amount that may be taken into
account under a qualified pension plan under Code § 401(a)(17) for the year in which the Effective
Date occurs; or (b) the Covered Executives annualized compensation
3
for the calendar year prior to the calendar year in which the Date of Termination occurs (adjusted
for any increase during that year that was expected to continue indefinitely if the Covered
Executive had not separated from service).
1.24 Severance Benefits means the benefits payable under this Plan as described in
Article 3.
1.25 Target Annual Bonus means the target annual bonus established under Hawkins
annual incentive bonus program and approved by the Committee, as applicable, for the fiscal year in
which the Covered Executives Date of Termination occurs, or if such target annual bonus has not
been established for such fiscal year by the Employees Date of Termination, the target annual
bonus for the prior fiscal year.
1.26 Termination Due to Change in Control means a Termination for Good Reason or a
Termination Without Cause that occurs during the 30-day period preceding or the two-year period
commencing upon the occurrence of a Change in Control.
1.27 Termination for Good Reason means a Termination of Employment by the Covered
Executive for Good Reason; provided, however, that a Termination of Employment shall not be
considered to be a Termination for Good Reason unless the following conditions are satisfied:
|
(a) |
|
The Covered Executive has first given written notice to Hawkins of the
existence of a condition constituting Good Reason as described in Sec. 1.18 within 90
days of its first occurrence, and Hawkins has failed to remedy the condition within 30
days thereafter. |
|
|
(b) |
|
The Termination of Employment occurs not later than the expiration of the
two-year period following the initial existence of a condition constituting Good
Reason as described in Sec. 1.18. |
1.28 Termination of Employment means a termination of a Covered Executives
employment with Hawkins and its Affiliates, whether by action of the Covered Executive or by
Hawkins or an Affiliate, provided that such Termination of Employment also constitutes a
separation from service under Code § 409A and the regulations thereunder.
1.29 Termination Without Cause means a Termination of Employment for any reason
other than Cause or the Covered Executives death or Disability.
1.30 Voting Securities means, with respect to any company, the companys outstanding
securities entitled to vote generally in the election of directors.
ARTICLE 2
ELIGIBILITY
2.1 Eligibility. An Employee shall be entitled to participate in, and shall become a
Covered Executive under, the Plan upon his or her selection by the Committee for participation in
the Plan. Hawkins shall advise each Covered Executive who is selected for participation in the
Plan of his or her participation in the Plan.
2.2 Tiers. Each Covered Executive shall be assigned a Tier by the Committee for
purposes of determining the Covered Executives entitlement to certain Severance Benefits under
this Plan. However, unless the Committee makes a different assignment, the Chief Executive Officer
is assigned to Tier 1 and the President of Hawkins is assigned to Tier 2. Notwithstanding the
foregoing, if the Covered Executive was assigned to a higher Tier during the 90-day period
immediately preceding the Covered Executives Date of Termination, the Covered Executive shall be
deemed to be assigned to such higher Tier for purposes of determining the Covered Executives
Severance Benefits under this Plan.
2.3 Condition to Receiving Benefits. As a condition precedent to receiving Severance
Benefits under the Plan, a Covered Executive must complete, execute and return to Hawkins, not
later than 50 days following the
4
Covered Executives Date of Termination, a Release which has not been rescinded by the Covered
Executive prior to the expiration of all applicable rescission period(s). Such Release shall be
furnished to the Covered Executive within five days after the Covered Executives Date of
Termination.
ARTICLE 3
SEVERANCE BENEFITS
3.1 Termination Without Cause Not In Connection with a Change In Control. In the
event of the Covered Executives Termination Without Cause which is not a Termination Due to Change
in Control, the Covered Executive shall be entitled to the Severance Benefits described in this
Sec. 3.1. For purposes of determining a Covered Executives Severance Benefits under this Sec.
3.1, the Salary Continuation Period for a Covered Executive shall be the relevant period described
in Appendix A.
|
(a) |
|
Base Salary. Hawkins shall pay the Covered Executive his or her Base
Salary for the Salary Continuation Period. Such Base Salary shall be paid in equal
installments over the Salary Continuation Period in accordance with Hawkins standard
payroll practices. Notwithstanding the foregoing, the following conditions and
limitations on the payment of Base Salary shall apply: |
|
(i) |
|
It is intended that all or a portion of the amounts payable
during the six-month period following the Date of Termination will constitute
separation pay due to involuntary separation from service under Treas. Reg. §
1.409A-1(b)(9)(iii). Accordingly, the amounts in excess of the Separation Pay
Plan Amount that would otherwise have been payable during such six-month period
shall be accumulated and paid (without interest) to the Covered Executive in a
lump sum on the first day of the seventh month following the Date of
Termination (subject to satisfaction of the conditions described in Sec. 2.3 by
such date). |
|
|
(ii) |
|
Any installment payment(s) of Base Salary that otherwise would
have been paid during such six-month period to the Covered Executive pursuant
to this subsection, but solely for the fact that the conditions described in
Sec. 2.3 have not yet been satisfied, shall be accumulated and paid (without
interest) to the Covered Executive in a lump sum upon the first regularly
scheduled payroll date following the satisfaction of such conditions. |
|
(b) |
|
Medical and Dental. Hawkins shall reimburse the Covered Executive for
the amount of the employer portion of his or her premium payments for COBRA
continuation coverage for medical and dental benefits for the Salary Continuation
Period, or, if shorter, the 18-month period following the Date of Termination, if the
Covered Executive qualifies for and elects that coverage for such period.
Notwithstanding the foregoing, however, Hawkins obligation to make any payment or
further payment pursuant to this subsection will cease on the date the Covered
Executive becomes covered by another group health plan that does not impose
pre-existing condition limitations on the Covered Executives coverage. Nothing in
this subsection shall be construed to extend the period for which COBRA continuation
coverage must be provided to the Covered Executive or the Covered Executives
dependents beyond that mandated by law. Such payments are intended to be medical
reimbursements exempt from Code § 409A pursuant to Treas. Reg. § 1.409A-1(b)(9)(v)(B). |
|
|
(c) |
|
Outplacement Costs. Hawkins shall engage and pay on behalf of the
Covered Executive, the reasonable costs of outplacement services for the twelve-month
period following the Date of Termination. The payments under this subsection are
intended to be exempt from Code § 409A pursuant to Treas. Reg. § 1.409A-1(b)(9)(v)(A).
Accordingly, the costs of such outplacement services shall not be incurred beyond the
last day of the second calendar year following the calendar year in which the Covered
Executives Date of Termination falls, and Hawkins payment shall be made before the
end of the third calendar year following the calendar year in which the Covered
Executives Date of Termination for the Salary Continuation Period. |
5
3.2 Termination Due to Change in Control. In the event of a Covered Executives
Termination for Good Reason or Termination Without Cause that is also a Termination Due to Change
in Control:
|
(a) |
|
The Covered Executive shall be entitled to the Severance Benefits described in
Sec. 3.1, except that: |
|
(i) |
|
for purposes of determining the Covered Executives Severance
Benefits under this Sec. 3.2, the Salary Continuation Period shall be the
Salary Continuation Period for a Termination Due to Change in Control described
in Appendix A. |
|
|
(ii) |
|
the amounts payable during the six-month period described in
Sec. 3.1(a)(i) that constitute separation pay due to involuntary separation
from service under Treas. Reg. § 1.409A-1(b)(9)(iii) shall be paid as soon as
administratively practicable following the Date of Termination (subject to
satisfaction of the conditions described in Sec. 2.3 by such date). |
|
|
(iii) |
|
if the Change in Control constitutes a change in ownership of
a corporation under Treas. Reg. § 1.409A-3(i)(5)(v), a change in the effective
control of a corporation under Treas. Reg. § 1.409A-3(i)(5)(vi), or a change in
the ownership of a substantial portion of a corporations assets as defined in
Treas. Reg. § 1.409A-3(i)(5)(vii), the Base Salary installment payments that
would otherwise be payable for the remainder of the Salary Continuation Period
following the period described in Sec. 3.1(a)(i) shall instead be paid in a
lump sum on the first day of the seventh month following the Date of
Termination (subject to satisfaction of the conditions described in Sec. 2.3 by
such date). |
|
(b) |
|
The Covered Executive shall be entitled to the following additional Severance Benefits: |
|
(i) |
|
Bonus. The Covered Executive shall be entitled to
receive an amount equal to one-twelfth (1/12) of his or her Target Annual Bonus
multiplied by the number of months in Salary Continuation Period for a
Termination Due to a Change in Control described in Appendix A. Such
payment shall be made in a lump sum as soon as administratively practicable
after the expiration of all rescission period(s) described in Sec. 2.3, but in
any event not later than two and half months following the end of the year in
which the Date of Termination occurs. Such amount is intended to be a
short-term deferral pursuant to Treas. Reg. § 1.409A-1(b)(4). |
|
|
(ii) |
|
Profit Sharing Plan. The Covered Executive shall be
entitled to receive an amount intended to provide a benefit equal to the
additional benefit that the Executive would have received under the Profit
Sharing Plan if such Covered Executive (x) had remained employed by Hawkins for
the entire Salary Continuation Period and (y) had been entitled to Employer
Contributions (as defined in the Profit Sharing Plan) under the Profit Sharing
Plan for the Salary Continuation Period. |
|
|
|
|
The amount of such payment shall equal the additional Discretionary Employer
Profit Sharing Contribution that the Covered Executive would have received
for the Salary Continuation period if his/her Compensation had continued at
the same rate as in effect immediately prior to his/her Termination of
Employment and the rate of the Discretionary Employer Profit Sharing
Contribution had been the same rate as in effect for the most recent Plan
Year ending prior to the Termination of Employment, plus if, on the Date of
Termination, the Profit Sharing Plan permits 401(k) Contributions, such
Employer Matching Contributions the Covered Executive would have received
for the Salary Continuation Period if he/she had made 401(k) Contributions
at least at the rate that would have entitled him/her to the maximum
Employer Matching Contributions |
6
|
|
|
permitted under the Plan. |
|
|
|
|
Such payment shall be made in a lump sum as soon as administratively
practicable after the expiration of all rescission period(s) described in
Sec. 2.3, but in any event not later than two and half months following the
end of the year in which the Date of Termination occurs. Such amount is
intended to be a short-term deferral pursuant to Treas. Reg. §
1.409A-1(b)(4). |
3.3 Clawback. Any payment of a Severance Benefit hereunder shall be subject to, and
recoverable by, Hawkins under Hawkins clawback policy in effect from time to time; provided,
however, that for any attempted recovery from and after a Change in Control, such clawback policy
shall have been in effect prior to the Change in Control except as such policy has been modified to
conform to applicable law or regulation.
ARTICLE 4
PLAN ADMINISTRATION
4.1 General. The Plan is administered by the Committee. The principal duty of the
Committee is to administer the Plan in a consistent and non-discriminatory manner in accordance
with its terms. The Committee shall have full power, as provided herein, to administer the Plan in
all of its details.
4.2 Power and Authority. The Committees powers shall include, but shall not be
limited to, the following, in addition to all other powers provided by this Plan:
|
(a) |
|
to make, enforce, amend or rescind such rules and regulations relating to the
Plan, and to make any other determinations that it deems necessary or proper for the
efficient administration of the Plan; |
|
|
(b) |
|
to interpret the Plan and its terms, with the Committees interpretations
thereof to be final and conclusive on all persons claiming benefits under the Plan; |
|
|
(c) |
|
to correct any defect or supply any omission or reconcile any inconsistency in
the Plan in the manner and to the extent it deems necessary or advisable; |
|
|
(d) |
|
to decide all questions concerning the Plan and the eligibility of any person
to participate in, and to receive benefits provided under, the Plan; |
|
|
(e) |
|
to authorize the payment of benefits; and |
|
|
(f) |
|
to appoint such agents, counsel, accountants, consultants, and actuaries as may
be required to assist in administering the Plan. |
Notwithstanding the foregoing, during the two-year period following a Change in Control, the
Committee shall not have the authority to exercise discretion with respect to any aspect of the
Committees powers and duties and any other aspect of the Plans administration, including the
benefits enumerated in Article 3, with the exception of making benefits changes beneficial, but not
less favorable, to the Covered Executive, and the review of benefit claims under Article 5.
4.3 Payment. Hawkins shall make payments of Severance Benefits from its general
assets to Covered Executives in accordance with the terms of the Plan.
7
ARTICLE 5
CLAIMS PROCEDURE
5.1 Claims. All claims for benefits shall be filed in writing with the Committee.
Each such claim must be filed by the Covered Executive, or his or her duly authorized
representative, within 90 days following the Covered Executives Termination of Employment.
5.2 Determination of Claims. The Committee shall decide all claims for benefits under
the Plan within 30 days after receipt of the claim. Any denial by the Committee of a claim for
benefits shall be stated in writing and shall set forth, in a manner calculated to be understood by
the claimant, the specific reasons for denial, specific reference to pertinent Plan provisions on
which the denial is based, a description of any additional material or information necessary to
perfect the claim and an explanation of why such material or information is necessary, and the
procedure for the appeal of such denial and a statement of the claimants right to bring an action
under ERISA § 502(a) following an adverse benefit determination on appeal. In addition, the
Committee shall afford a reasonable opportunity to any claimant whose claim for benefits has been
denied a review of the decision denying the claim.
5.3 Appeals. A claimant (or his or her duly authorized representative) may, upon
written request to the Committee within 30 days of receiving a denial of his claim for benefits,
(a) request a review of the denial, (b) review pertinent documents, and (c) submit issues and
comments in writing to the Committee. A decision by the Committee shall be made promptly and shall
not ordinarily be made later than 30 days after receipt of a request for review. The Committees
decision on review shall be in writing, shall include specific reasons for the decision, written in
a manner calculated to be understood by the claimant, as well as specific references to the
pertinent Plan provisions on which the decision is based, and shall contain a statement of the
claimants right to bring a civil action under ERISA § 502(a). If the decision on review is not
furnished within the applicable time described in this section, the claim shall be deemed denied on
review.
ARTICLE 6
MISCELLANEOUS
6.1 Amendment and Termination. Notwithstanding the foregoing, the Plan may not be
amended in any manner that adversely affects any Covered Executive unless such Covered Executive
expressly consents to such amendment in writing. In the event of a Change in Control and for a
period of two years thereafter, the Plan may not be amended, suspended or discontinued in any
manner except to comply with applicable changes in the law, to prevent adverse tax consequences to
a Covered Executive, or to make benefits more favorable to a Covered Executive.
6.2 Limitation of Covered Executives Rights. Nothing in this Plan shall be construed
as conferring upon the Covered Executive any right to continue in the employment of Company, nor
shall it interfere with the rights of Company to terminate the employment of the Covered Executive
and/or to take any personnel action affecting the Covered Executive without regard to the effect
which such action may have upon the Covered Executive as a recipient or prospective recipient of
benefits under this Plan. Any amounts payable hereunder shall not be deemed salary or other
compensation to the Covered Executive for the purposes of computing benefits to which the Covered
Executive may be entitled under any other arrangement established by Company for the benefit of its
employees.
6.3 Application of Section 4999 to Severance Benefits.
|
(a) |
|
Excise Tax Adjustment to Severance Benefits. Notwithstanding any other
provisions of this Plan, in the event that any payment or benefit received or to be
received by a Covered Executive, whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement (all such payments and benefits, including the
Severance Benefits, being hereinafter referred to as the Total Payments) would be
subject (in whole or part), to an excise tax under Code § 4999 (the |
8
|
|
|
Excise Tax), then, after taking into account any reduction in the Total Payments
provided by reason of Code § 280G in such other plan, arrangement or agreement, the
payments under this Plan that do not constitute deferred compensation within the
meaning of Code § 409A shall first be reduced, and all other payments that do
constitute deferred compensation within the meaning of Code § 409A shall thereafter
be reduced (beginning with those payments last to be paid), to the extent necessary
so that no portion of the Total Payments is subject to the Excise Tax, but only if
(i) the net amount of such Total Payments, as so reduced (and after subtracting the
net amount of federal, state and local income taxes on such reduced Total Payments
and after taking into account the phase out of itemized deductions and personal
exemptions attributable to such reduced Total Payments) is greater than or equal to
(ii) the net amount of such Total Payments without such reduction (but after
subtracting the net amount of federal, state and local income taxes on such Total
Payments and the amount of Excise Tax to which the Covered Executive would be
subject in respect of such unreduced Total Payments and after taking into account
the phase out of itemized deductions and personal exemptions attributable to such
unreduced Total Payments). In no event shall the Covered Executive have the
discretion to determine the order in which payments under this Plan shall be reduced
in accordance with the preceding sentence. |
|
|
(b) |
|
Excise Tax Determination. For purposes of determining whether and the
extent to which the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which
the Covered Executive shall have waived at such time and in such manner as not to
constitute a payment within the meaning of Code § 280G(b) of the Code shall be taken
into account, (ii) no portion of the Total Payments shall be taken into account which,
in the opinion of tax counsel (Tax Counsel) reasonably acceptable to the Covered
Executive and selected by the accounting firm (the Auditor) which was, immediately
prior to the Change in Control, Hawkins independent auditor, does not constitute a
parachute payment within the meaning of Code § 280G(b)(2) (including by reason of
Code § 280G(b)(4)(A)) and, in calculating the Excise Tax, no portion of such Total
Payments shall be taken into account which, in the opinion of Tax Counsel, constitutes
reasonable compensation for services actually rendered, within the meaning of Code §
280G(b)(4)(B), in excess of the Base Amount allocable to such reasonable compensation,
and (iii) the value of any non-cash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by the Auditor in accordance with the
principles of Code §§ 280G(d)(3) and (4). For purposes of this Sec. 6.3, (i) the
Covered Executive shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the applicable Total
Payment is to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Covered Executives residence in the calendar
year in which the applicable Total Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and local
taxes and (ii) except to the extent that the Covered Executive otherwise notifies
Hawkins, the Covered Executive shall be deemed to be subject to the loss of itemized
deductions and personal exemptions to the maximum extent provided by the Code for each
dollar of incremental income. |
|
|
(c) |
|
Payments Calculation Notice. At the time that payments are made under
this Plan, Hawkins shall provide the Covered Executive with a written statement setting
forth the manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice Hawkins has
received from Tax Counsel, the Auditor or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to the statement). If the
Covered Executive objects to Hawkins calculations, Hawkins shall pay to the Covered
Executive such portion of the Severance Payments (up to 100% thereof) as the Covered
Executive determines is necessary to result in the proper application of subsection (a)
of this Sec. 6.3. |
6.4 Legal Fees and Expenses. Hawkins shall pay to the Covered Executive all legal fees
and expenses incurred by the Covered Executive in disputing in good faith any issue hereunder
relating to the termination of the Covered Executives employment, in seeking in good faith to
obtain or enforce any benefit or right provided by this
9
Plan, or in connection with any tax audit or proceeding to the extent attributable to the
application of Code § 4999 to any payment or benefit provided hereunder. Such payments shall be
made within ten business days after delivery of the Covered Executives written request for payment
accompanied with such evidence of fees and expenses incurred as Hawkins reasonably may require,
subject to the limits of Sec. 6.9. If Hawkins shall have reimbursed the Covered Executive for
legal fees and expenses and it is later determined that the Covered Executive was not acting in
good faith, all amounts paid on behalf of, or reimbursed to, the Covered Executive shall be
promptly refunded to Hawkins.
6.5 Right of Offset. Hawkins reserves the right to withhold and set off from any
payments to a Covered Executive any amount owed to Hawkins or an Affiliate by the Covered
Executive, whether such obligation is matured or unmatured and however arising, at the time of (and
with priority over) any such distribution or payment to the extent that the retention or exercise
of such right does not have adverse tax consequences to the Covered Executive under Code § 409A
(for clarity, this offset right is against amounts then due and payable and is not intended to
accelerate payment of any amount). Hawkins further reserves the right to withhold and set off from
the Covered Executives accrued benefit under the Plan (even if a payment is not then due and
payable) any amount owed to Hawkins or an Affiliate by the Participant, as satisfaction of such
obligation of the Covered Executive, where such obligation is incurred in the ordinary course of
the service relationship between the Covered Executive and Hawkins or the Affiliate, the entire
amount of reduction in any of Hawkins or the Affiliates taxable years does not exceed five
thousand dollars ($5,000), and the reduction is made at the same time and in the same amount as the
obligation otherwise would have been due and collected from the Covered Executive.
6.6 Nonalienation of Benefits. Except as expressly provided herein, the Covered
Executive shall not have the power or right to transfer, alienate or otherwise encumber his or her
interest under the Plan. Hawkins obligations under the Plan are not assignable or transferable
except to (a) any corporation or partnership which acquires all or substantially all of Hawkins
assets, or (b) any corporation or partnership into which Hawkins may be merged or consolidated.
The provisions of this Plan shall inure solely to the benefit of the Covered Executive.
6.7 Cooperation by Covered Executive. The Covered Executive shall cooperate with
Hawkins by furnishing any and all information reasonably requested by Company in order to
facilitate the payment of benefits hereunder.
6.8 Withholding Taxes. Hawkins may make such provisions and take such action as it
deems necessary or appropriate for the withholding of any taxes which Hawkins is required by any
law or regulation of any governmental authority, whether Federal, state or local, to withhold in
connection with any benefits under the Plan, including, but not limited to, the withholding of
appropriate sums from any amount otherwise payable to the Covered Executive. The Covered
Executive, however, shall be responsible for the payment of all individual tax liabilities relating
to any such benefits.
6.9 Compliance with Code § 409A. This Plan and the payments hereunder are intended to
be exempt from or to satisfy the requirements of Code § 409A(a)(2), (3) and (4), including the
exceptions for short-term deferrals, separation pay arrangements, reimbursements, and in-kind
distributions, and shall be interpreted and administered accordingly. Each payment under this Plan
is intended to be treated as one of a series of separate payments for purposes of Code § 409A and
Treas. Reg. § 1.409A-2(b)(2)(iii) (or any similar or successor provisions). To the extent that
payments under this Plan are subject to Code § 409A and the Covered Executive is a specified
employee (as defined in Code § 409A) as of the Date of Termination, distributions to the Covered
Executive may not be made before the date that is six months after the Date of Termination or, if
earlier, the date of the Covered Executives death. Payments to which the Covered Executive would
otherwise be entitled during the first six months following the date of termination will be
accumulated and paid on the first day of the seventh month following the Termination Date (or the
Covered Executives death, if earlier). To the extent that payments under this Plan are payments
under a reimbursement plan subject to Code § 409A, the right to reimbursement may not be
exchanged for cash or any other benefit, the amount of expenses eligible for reimbursement in one
calendar year shall not affect the expenses eligible for reimbursement in any other calendar year,
and the reimbursement of any eligible expense shall be made pursuant to Hawkins normal policies
and procedures for expense reimbursement, which shall be in any event no later than the last day of
the calendar year following the calendar year in which the expense was incurred.
10
6.10 Unfunded Plan. The Plan shall not be funded, and no Covered Executive shall have
any right to, or interest in, any assets of Hawkins or its affiliates or subsidiaries.
6.11 Severability. If any provision of this Plan is held unenforceable, the remainder
of the Plan shall continue in full force and effect without regard to such unenforceable provision
and shall be applied as though the unenforceable provision were not contained in the Plan.
6.12 Governing Law. This Plan shall be construed in accordance with and governed by
the laws of the State of Minnesota, without reference to the principles of conflict of laws and to
the extent not superseded by the laws of the United States.
6.13 Jurisdiction and Venue. Any action involving claims of a breach of this Plan
must be brought exclusively in the courts of the State of Minnesota and/or the United States
District Court, District of Minnesota.
6.14 Headings. Headings are inserted in this Plan for convenience of reference only
and are to be ignored in the construction of the provisions of the Plan.
6.15 Notice. Any notice or filing required or permitted to be given to Hawkins under
this Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified
mail, to the Human Resources Department, or to such other entity as Hawkins may designate from time
to time. Such notice shall be deemed given as to the date of delivery, or, if delivery is made by
mail, as of the date shown on the postmark on the receipt for registration or certification.
6.16 Successors. This Plan shall be binding upon Hawkins and its successors and
assigns. Hawkins shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to assume and agree to perform all of Hawkins obligations hereunder in
the same manner and to the same extent that Hawkins would have been required to perform if no
succession had taken place.
fb.us.7124283.02
11
Appendix A
|
|
|
|
|
Tier |
|
Salary Continuation Period |
|
|
Termination Without Cause (Not a Termination |
|
|
|
|
Due to Change In Control) |
|
Termination Due to Change In Control |
Tier 1
|
|
18 months
|
|
24 months |
Tier 2
|
|
18 months
|
|
24 months |
Tier 3
|
|
12 months
|
|
18 months |
Tier 4
|
|
12 months
|
|
18 months |
12
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 quarterly report on Form 10-Q 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 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:
August 4, 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 quarterly report on Form 10-Q 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 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:
August 4, 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 Quarterly Report of Hawkins, Inc. (the Company) on Form 10-Q for the period
ended July 3, 2011, as filed with the Securities and Exchange Commission on the date hereof (the
Report), I, Patrick H. Hawkins, Chief Executive 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/ Patrick H. Hawkins
Patrick H. Hawkins
Chief Executive Officer and President
August 4, 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 Quarterly Report of Hawkins, Inc. (the Company) on Form 10-Q for the period
ended July 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
August 4, 2011