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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 October 1, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-7647
HAWKINS, INC.
(Exact name of registrant as specified in its charter) 
Minnesota 41-0771293
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
2381 Rosegate, Roseville, Minnesota
55113
(Address of principal executive offices)
(Zip code)
(612) 331-6910
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareHWKNNasdaq Stock Market LLC
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  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   ☒    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
CLASS Shares Outstanding at October 27, 2023
Common Stock, par value $.01 per share 20,943,750




HAWKINS, INC.
INDEX TO FORM 10-Q
  Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

i


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
HAWKINS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
October 1,
2023
April 2,
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$10,974 $7,566 
Trade accounts receivables, net124,813 129,252 
Inventories68,500 88,777 
Prepaid expenses and other current assets2,966 6,449 
Total current assets207,253 232,044 
PROPERTY, PLANT, AND EQUIPMENT:361,362 344,753 
Less accumulated depreciation168,504 158,950 
Net property, plant, and equipment192,858 185,803 
OTHER ASSETS:
Right-of-use assets11,323 10,199 
Goodwill77,401 77,401 
Intangible assets, net of accumulated amortization71,491 73,060 
Deferred compensation plan asset8,917 7,367 
Other6,054 4,661 
Total other assets175,186 172,688 
Total assets$575,297 $590,535 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable — trade$61,192 $53,705 
Accrued payroll and employee benefits12,416 17,279 
Income tax payable4,319 3,329 
Current portion of long-term debt9,913 9,913 
Other current liabilities6,622 6,645 
Total current liabilities94,462 90,871 
LONG-TERM DEBT, LESS CURRENT PORTION49,775 101,731 
LONG-TERM LEASE LIABILITY9,522 8,687 
PENSION WITHDRAWAL LIABILITY3,726 3,912 
DEFERRED INCOME TAXES24,190 23,800 
DEFERRED COMPENSATION LIABILITY10,317 9,343 
OTHER LONG-TERM LIABILITIES649 2,175 
Total liabilities192,641 240,519 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock; authorized: 60,000,000 shares of $0.01 par value; 20,787,626 and 20,850,454 shares issued and outstanding as of October 1, 2023 and April 2, 2023, respectively
208 209 
Additional paid-in capital35,918 44,443 
Retained earnings342,535 302,424 
Accumulated other comprehensive income3,995 2,940 
Total shareholders’ equity382,656 350,016 
Total liabilities and shareholders’ equity$575,297 $590,535 
See accompanying notes to condensed consolidated financial statements.
1


HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per-share data)
 
 Three Months EndedSix Months Ended
 October 1,
2023
October 2,
2022
October 1,
2023
October 2,
2022
Sales$236,526 $241,192 $487,646 $487,735 
Cost of sales(182,640)(194,818)(381,769)(394,612)
Gross profit53,886 46,374 105,877 93,123 
Selling, general and administrative expenses(20,895)(19,838)(40,399)(38,723)
Operating income32,991 26,536 65,478 54,400 
Interest expense, net(717)(1,383)(1,865)(2,312)
Other (expense) income (289)(446)48 (1,209)
Income before income taxes31,985 24,707 63,661 50,879 
Income tax expense(8,769)(6,707)(17,015)(13,184)
Net income$23,216 $18,000 $46,646 $37,695 
Weighted average number of shares outstanding - basic20,903,690 20,814,686 20,905,707 20,861,754 
Weighted average number of shares outstanding - diluted21,026,428 20,956,897 21,034,153 21,004,454 
Basic earnings per share$1.11 $0.86 $2.23 $1.81 
Diluted earnings per share$1.10 $0.86 $2.22 $1.79 
Cash dividends declared per common share$0.16 $0.14 $0.31 $0.28 
See accompanying notes to condensed consolidated financial statements.

2


HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
 
 Three Months EndedSix Months Ended
 October 1,
2023
October 2,
2022
October 1,
2023
October 2,
2022
Net income$23,216 $18,000 $46,646 $37,695 
Other comprehensive income, net of tax:
Unrealized gain on interest rate swap306 1,977 1,055 2,442 
Total comprehensive income$23,522 $19,977 $47,701 $40,137 
See accompanying notes to condensed consolidated financial statements.

3


HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share data)
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Total
Shareholders’
Equity
SharesAmount
BALANCE — April 2, 202320,850,454 $209 $44,443 $302,424 $2,940 $350,016 
Cash dividends declared and paid ($0.15 per share)
   (3,160) (3,160)
Share-based compensation expense  959   959 
Vesting of restricted stock105,600 1 (1)   
Shares surrendered for payroll taxes(48,478)(1)(2,139)  (2,140)
ESPP shares issued35,281  1,147   1,147 
Other comprehensive income, net of tax    749 749 
Net income   23,430  23,430 
BALANCE — July 2, 202320,942,857 $209 $44,409 $322,694 $3,689 $371,001 
Cash dividends declared and paid ($0.16 per share)
   (3,375) (3,375)
Share-based compensation expense  1,260   1,260 
Vesting of restricted stock12,565      
Shares repurchased(167,796)(1)(9,751)  (9,752)
Other comprehensive income, net of tax   306 306 
Net income   23,216  23,216 
BALANCE — October 1, 202320,787,626 $208 $35,918 $342,535 $3,995 $382,656 
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Total
Shareholders’
Equity
SharesAmount
BALANCE — April 3, 202220,889,777 $209 $46,717 $254,384 $1,291 $302,601 
Cash dividends declared and paid ($0.14 per share)
   (2,958) (2,958)
Share-based compensation expense  595   595 
Vesting of restricted stock102,860 1 (1)   
Shares surrendered for payroll taxes(36,410) (1,550)  (1,550)
ESPP shares issued32,768  986   986 
Shares repurchased(181,657)(2)(6,555)  (6,557)
Other comprehensive income, net of tax    465 465 
Net income   19,695  19,695 
BALANCE — July 3, 202220,807,338 $208 $40,192 $271,121 $1,756 $313,277 
Cash dividends declared and paid ($0.14 per share)
   (2,942) (2,942)
Share-based compensation expense  1,085   1,085 
Vesting of restricted stock10,287      
ESPP shares issued  17   17 
Other comprehensive income, net of tax    1,977 1,977 
Net income   18,000  18,000 
BALANCE — October 2, 202220,817,625 $208 $41,294 $286,179 $3,733 $331,414 
See accompanying notes to condensed consolidated financial statements.
4


HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 
 Six Months Ended
 October 1,
2023
October 2,
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$46,646 $37,695 
Reconciliation to cash flows:
Depreciation and amortization14,506 13,371 
Operating leases1,115 945 
(Gain) loss on deferred compensation assets(48)1,208 
Stock compensation expense2,219 1,680 
Other(34)187 
Changes in operating accounts providing (using) cash:
Trade receivables4,909 (8,481)
Inventories20,752 (18,077)
Accounts payable6,421 (4,609)
Accrued liabilities(7,149)(8,600)
Lease liabilities(1,127)(972)
Income taxes990 2,031 
Other3,430 2,425 
Net cash provided by operating activities92,630 18,803 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment(16,922)(20,668)
Acquisitions(3,355) 
Other 335 296 
Net cash used in investing activities(19,942)(20,372)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends declared and paid(6,535)(5,900)
New shares issued1,147 1,004 
Payroll taxes paid in exchange for shares withheld(2,140)(1,550)
Shares repurchased(9,752)(6,557)
Payments on revolving loan(52,000)(30,000)
Proceeds from revolving loan borrowings 45,000 
Net cash (used in) provided by financing activities(69,280)1,997 
NET INCREASE IN CASH AND CASH EQUIVALENTS3,408 428 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD7,566 3,496 
CASH AND CASH EQUIVALENTS, END OF PERIOD$10,974 $3,924 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes$16,025 $11,148 
Cash paid for interest$2,002 $1,879 
Noncash investing activities - capital expenditures in accounts payable$2,970 $2,535 
See accompanying notes to condensed consolidated financial statements.

5


HAWKINS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Summary of Significant Accounting Policies

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 financial statements should be read in conjunction with the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended April 2, 2023, 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 condensed consolidated financial statements were of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the six months ended October 1, 2023 are not necessarily indicative of the results that may be expected for the full year.
References to fiscal 2023 refer to the fiscal year ended April 2, 2023 and references to fiscal 2024 refer to the fiscal year ending March 31, 2024.
Use of Estimates. The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, particularly receivables, inventories, property, plant and equipment, right-of-use assets, goodwill, intangibles, accrued expenses, short-term and long-term lease liability, income taxes and related accounts and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounting Policies. The accounting policies we follow are set forth in Note 1 – Nature of Business and Significant Accounting Policies to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 2, 2023, previously filed with the SEC. There has been no significant change in our accounting policies since the end of fiscal 2023.
 
Note 2 — Acquisitions and Asset Sales
Acquisition of EcoTech Enterprises, Inc.: On July 14, 2023, we acquired substantially all the assets of EcoTech Enterprises, Inc. ("EcoTech") for $3.4 million, under the terms of a purchase agreement with EcoTech and its shareholders. EcoTech was a water treatment chemical distribution company operating primarily in Arkansas. The $3.4 million purchase price was allocated primarily to customer lists, to be amortized over 10 years, property, plant and equipment, and net working capital. The results of operations since the acquisition date and the assets are included in our Water Treatment segment. Costs associated with this transaction were not material and were expensed as incurred.
Sale of bleach packaging assets: In the fourth quarter of fiscal 2023, we sold certain assets in our Industrial segment related to our consumer bleach packaging business for $7 million. These assets were not core to our Industrial segment operations, where we tend to focus our manufacturing operations on bulk products. The assets sold included plant equipment, inventory and intangible assets, all related to the packaging of bleach. We realized a gain of $3 million on this sale, which has been recorded within selling, general and administrative expenses.

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Note 3 - Revenue
Our revenue arrangements generally consist of a single performance obligation to transfer promised goods or services. We disaggregate revenues from contracts with customers by operating segments as well as types of products sold. Reporting by operating segment is pertinent to understanding our revenues, as it aligns to how we review the financial performance of our operations. Types of products sold within each operating segment help us to further evaluate the financial performance of our segments. The following tables disaggregate external customer net sales by major revenue stream for the six months ended October 1, 2023 and October 2, 2022:
Three months ended October 1, 2023
(In thousands)IndustrialWater
Treatment
Health and
Nutrition
Total
Manufactured, blended or repackaged products (1)
$83,890 $90,964 $10,858 $185,712 
Distributed specialty products (2)
  26,113 26,113 
Bulk products (3)
13,149 8,560  21,709 
Other1,496 1,401 95 2,992 
Total external customer sales$98,535 $100,925 $37,066 $236,526 
Three months ended October 2, 2022
(In thousands)IndustrialWater
Treatment
Health and
Nutrition
Total
Manufactured, blended or repackaged products (1)
$93,548 $77,172 $11,736 $182,456 
Distributed specialty products (2)
  28,677 28,677 
Bulk products (3)
18,132 7,720  25,852 
Other2,259 1,596 352 4,207 
Total external customer sales$113,939 $86,488 $40,765 $241,192 
Six months ended October 1, 2023
(In thousands)IndustrialWater
Treatment
Health and
Nutrition
Total
Manufactured, blended or repackaged products (1)
$186,565 $175,749 $21,099 $383,413 
Distributed specialty products (2)
  52,267 52,267 
Bulk products (3)
28,359 16,081  44,440 
Other4,484 2,746 296 7,526 
Total external customer sales$219,408 $194,576 $73,662 $487,646 
Six months ended October 2, 2022
(In thousands)IndustrialWater
Treatment
Health and
Nutrition
Total
Manufactured, blended or repackaged products (1)
$195,160 $147,529 $23,697 $366,386 
Distributed specialty products (2)
  59,766 59,766 
Bulk products (3)
38,587 14,510  53,097 
Other4,902 2,939 645 8,486 
Total external customer sales$238,649 $164,978 $84,108 $487,735 

(1)For our Industrial and Water Treatment segments, this line includes our non-bulk specialty products that we either manufacture, blend, repackage, resell in their original form, or direct ship to our customers in smaller quantities, and services we provide for our customers. For our Health and Nutrition segment, this line includes products manufactured, processed or repackaged in our facility and/or with our equipment.
(2)This line includes non-manufactured distributed specialty products in our Health and Nutrition segment, which may be sold out of one of our facilities or direct shipped to our customers.
(3)This line includes bulk products in our Industrial and Water Treatment segments that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities.

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Note 4 – Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net earnings by the weighted-average number of common shares outstanding. Diluted EPS includes the dilutive impact of incremental shares assumed to be issued as performance units and restricted stock.
Basic and diluted EPS were calculated using the following:
 Three Months EndedSix Months Ended
October 01, 2023October 02, 2022October 01, 2023October 02, 2022
Weighted-average common shares outstanding—basic20,903,690 20,814,686 20,905,707 20,861,754 
Dilutive impact of performance units and restricted stock122,738 142,211 128,446 142,700 
Weighted-average common shares outstanding—diluted21,026,428 20,956,897 21,034,153 21,004,454 
For each of the periods presented, there were no shares excluded from the calculation of weighted-average common shares for diluted EPS.

Note 5 – Fair Value Measurements
Our financial assets and liabilities are measured at fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The carrying value of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the short-term nature of these instruments. Because of the variable-rate nature of our debt under our credit facility, our debt also approximates fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis.  The fair value hierarchy requires the use of observable market data when available. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.
 
Our financial assets that are measured at fair value on a recurring basis are an interest rate swap and assets held in a deferred compensation retirement plan. Both of these assets are classified as long-term assets on our balance sheet, with the portion of the deferred compensation retirement plan assets expected to be paid within twelve months classified as current assets. The fair value of the interest rate swap is determined by the respective counterparties based on interest rate changes. Interest rate swaps are valued based on observable interest rate yield curves for similar instruments. The deferred compensation plan assets relate to contributions made to a non-qualified compensation plan on behalf of certain employees who are classified as “highly compensated employees” as determined by IRS guidelines. The assets are part of a rabbi trust and the funds are held in mutual funds. The fair value of the deferred compensation is based on the quoted market prices for the mutual funds at the end of the period.
The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of October 1, 2023 and April 2, 2023.

 0
(In thousands)October 1, 2023April 2, 2023
Assets
Deferred compensation plan assets Level 1$9,058 $7,659 
Interest rate swapLevel 2$5,473 $4,028 

Note 6 – Inventories
Inventories at October 1, 2023 and April 2, 2023 consisted of the following:
October 1,
2023
April 2,
2023
(In thousands)
Inventory (FIFO basis)$104,878 $128,589 
LIFO reserve(36,378)(39,812)
Net inventory$68,500 $88,777 
The first in, first out (“FIFO”) value of inventories accounted for under the last in, first out (“LIFO”) method was $83.9 million at October 1, 2023 and $101.4 million at April 2, 2023. The remainder of the inventory was valued and accounted for under the FIFO method.
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Note 7 – Goodwill and Intangible Assets
The carrying amount of goodwill was $77.4 million as of October 1, 2023 and April 2, 2023, of which $44.9 million was related to our Health and Nutrition segment, $26.0 million was related to our Water Treatment segment, and $6.5 million was related to our Industrial segment.
A summary of our intangible assets as of October 1, 2023 and April 2, 2023 is as follows:
 October 1, 2023April 2, 2023
(In thousands)Gross
Amount
Accumulated
Amortization
NetGross 
Amount
Accumulated
Amortization
Net
Finite-life intangible assets
Customer relationships$110,894 $(41,561)$69,333 $109,107 $(38,377)$70,730 
Trademarks and trade names$6,370 $(5,467)$903 $6,370 $(5,267)$1,103 
Other finite-life intangible assets3,941 (3,913)28 3,904 (3,904) 
Total finite-life intangible assets121,205 (50,941)70,264 119,381 (47,548)71,833 
Indefinite-life intangible assets1,227 — 1,227 1,227 — 1,227 
Total intangible assets$122,432 $(50,941)$71,491 $120,608 $(47,548)$73,060 

Note 8 – Debt
Debt at October 1, 2023 and April 2, 2023 consisted of the following:
October 1,
2023
April 2,
2023
(In thousands)
Senior secured revolving loan$60,000 $112,000 
Less: unamortized debt issuance costs(312)(356)
Total debt, net of debt issuance costs59,688 111,644 
Less: current portion of long-term debt(9,913)(9,913)
Total long-term debt$49,775 $101,731 
We were in compliance with all covenants of our credit agreement as of October 1, 2023.

Note 9 – Income Taxes
We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The tax years prior to our fiscal year ended March 29, 2020 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local income tax jurisdictions. Our effective income tax rate was 27% for the six months ended October 1, 2023, compared to 26% for the six months ended October 2, 2022. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.

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Note 10 – Share-Based Compensation
Performance-Based Restricted Stock Units. Our Board of Directors (the “Board”) approved a performance-based equity compensation arrangement for our executive officers during the first quarters of each of fiscal 2024 and fiscal 2023. These performance-based arrangements provide for the grant of performance-based restricted stock units that represent a possible future issuance of restricted shares of our common stock based on a pre-tax income target for the applicable fiscal year. The actual number of restricted shares to be issued to each executive officer is determined when our final financial information becomes available after the applicable fiscal year and will be between zero shares and 70,859 shares in the aggregate for fiscal 2024. The restricted shares issued, if any, will fully vest approximately 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 the converted restricted stock over the life of the awards.

The following table represents the restricted stock activity for the six months ended October 1, 2023:
SharesWeighted-
Average Grant
Date Fair Value
Unvested at beginning of period189,258 $34.64 
Granted61,819 43.06 
Vested(105,600)31.74 
Unvested at end of period145,477 $40.33 
We recorded compensation expense related to performance share units and restricted stock of $1.0 million and $1.6 million for the three and six months ended October 1, 2023, respectively. We recorded compensation expense related to performance share units and restricted stock of $0.8 million and $1.2 million for the three and six months ended October 2, 2022, respectively. Substantially all of the compensation expense was recorded in selling, general and administrative expenses in the condensed consolidated statements of income.
Restricted Stock Awards. As part of their retainer, our directors, other than the Chief Executive Officer, receive restricted stock for their Board services. The restricted stock awards are generally expensed over a one-year vesting period, based on the market value on the date of grant. As of October 1, 2023, there were 10,647 shares of restricted stock with an average grant date fair value of $46.00 outstanding under this program. Compensation expense for both the three months ended October 1, 2023 and October 2, 2022 related to restricted stock awards to the Board was $0.1 million. Compensation expense for both the six months ended October 1, 2023 and October 2, 2022 related to restricted stock awards to the Board was $0.2 million.
Note 11 – Share Repurchase Program
Our Board had authorized the repurchase of up to 2.6 million shares of our outstanding common shares. The shares may be repurchased on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. Upon purchase of the shares, we reduce our common stock for the par value of the shares with the excess applied against additional paid-in capital. During the three and six months ended October 1, 2023, we repurchased 167,796 shares at an aggregate purchase price of $9.8 million. During the three months ended October 2, 2022, no shares were repurchased, and during the six months ended October 2, 2022, we repurchased 181,657 shares at an aggregate purchase price of $6.6 million. As of October 1, 2023, 961,552 shares remained available to be repurchased under the share repurchase program.

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Note 12 – Segment Information
We have three reportable segments: Industrial, Water Treatment, and Health and Nutrition. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in our Annual Report on Form 10-K for the fiscal year ended April 2, 2023.
We evaluate performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses. Reportable segments are defined primarily by product and type of customer. Segments are responsible for the sales, marketing and development of their products and services. We allocate certain corporate expenses to our operating segments. There are no intersegment sales and no operating segments have been aggregated. No single customer’s revenues amounted to 10% or more of our total revenue. Sales are primarily within the United States and all assets are located within the United States.
 
(In thousands)IndustrialWater
Treatment
Health and NutritionTotal
Three months ended October 1, 2023:
Sales$98,535 $100,925 $37,066 $236,526 
Gross profit17,844 29,308 6,734 53,886 
Selling, general, and administrative expenses6,806 10,145 3,944 20,895 
Operating income11,038 19,163 2,790 32,991 
Three months ended October 2, 2022:
Sales$113,939 $86,488 $40,765 $241,192 
Gross profit17,713 20,504 8,157 46,374 
Selling, general, and administrative expenses6,891 9,082 3,865 19,838 
Operating income 10,822 11,422 4,292 26,536 
Six months ended October 1, 2023:
Sales$219,408 $194,576 $73,662 $487,646 
Gross profit37,150 55,716 13,011 105,877 
Selling, general and administrative expenses13,381 19,271 7,747 40,399 
Operating income23,769 36,445 5,264 65,478 
Six months ended October 2, 2022:
Sales$238,649 $164,978 $84,108 $487,735 
Gross profit37,722 39,457 15,944 93,123 
Selling, general and administrative expenses13,276 17,783 7,664 38,723 
Operating income 24,446 21,674 8,280 54,400 

No significant changes to identifiable assets by segment occurred during the six months ended October 1, 2023.

Note 13 – Subsequent Events
In October 2023, we acquired substantially all the assets of Water Solutions Unlimited, Inc. ("Water Solutions") for $60 million and up to an additional $15 million to be paid after three years based on achieving certain targets, under the terms of an asset purchase agreement with Water Solutions and its shareholders. Water Solutions is a manufacturer and distributor of water treatment chemicals serving customers primarily throughout Indiana, Illinois and Michigan. The results of operations and the assets, including goodwill associated with this acquisition, if any, will be included as part of our Water Treatment segment from the date of acquisition forward. The purchase accounting for this acquisition has not yet been completed.
In October 2023, we acquired substantially all the assets of Miami Products & Chemical Company ("Miami Products") for $15.5 million, under the terms of an asset purchase agreement with Miami Products and its shareholders. Miami Products is a bleach manufacturer and distributor serving customers primarily throughout Ohio and the surrounding region. The results of operations and the assets, including goodwill associated with this acquisition, if any, will be included as part of our Water Treatment segment from the date of acquisition forward. The purchase accounting for this acquisition has not yet been completed.
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ITEM 2.    MANAGEMENT’S 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 six months ended October 1, 2023 as compared to the similar period ended October 2, 2022. This discussion should be read in conjunction with the condensed consolidated financial statements and notes to condensed consolidated financial statements included in this quarterly report on Form 10-Q and Item 8 of our Annual Report on Form 10-K for the fiscal year ended April 2, 2023.
Overview
We derive substantially all of our revenues from the sale of chemicals and specialty ingredients to our customers in a wide variety of industries. We began our operations primarily as a distributor of bulk chemicals with a strong customer focus. Over the years, we have maintained the strong customer focus and have expanded our business by increasing our sales of value-added chemicals and specialty ingredients, including manufacturing, blending, and repackaging certain products.

Business Acquisitions and Asset Sales
In October 2023, after the end of our second quarter, we acquired substantially all the assets of Water Solutions Unlimited, Inc. ("Water Solutions") for $60 million and up to an additional $15 million to be paid after three years based on achieving certain targets, under the terms of an asset purchase agreement with Water Solutions and its shareholders. Water Solutions is a manufacturer and distributor of water treatment chemicals serving customers primarily throughout Indiana, Illinois and Michigan. The results of operations and the assets, including goodwill associated with this acquisition, if any, will be included as part of our Water Treatment segment from the date of acquisition forward.
In October 2023, after the end of our second quarter, we acquired substantially all the assets of Miami Products & Chemical Company ("Miami Products") for $15.5 million, under the terms of an asset purchase agreement with Miami Products and its shareholders. Miami Products is a bleach manufacturer and distributor serving customers primarily throughout Ohio and the surrounding region. The results of operations and the assets, including goodwill associated with this acquisition, if any, will be included as part of our Water Treatment segment from the date of acquisition forward.
On July 14, 2023, we acquired substantially all the assets of EcoTech Enterprises, Inc. ("EcoTech") for $3.4 million, under the terms of an asset purchase agreement with EcoTech and its shareholders. EcoTech was a manufacturer and distributor of water treatment chemicals serving customers throughout Arkansas and surrounding states. The results of operations and the assets will be included as part of our Water Treatment segment from the date of acquisition forward.

In the fourth quarter of fiscal 2023, we sold certain assets in our Industrial segment related to our consumer bleach packaging business for $7 million. These assets were not deemed core to our Industrial segment operations. The assets sold included plant equipment, inventory, and intangible assets, all related to the packaging of bleach. We realized a gain of $3 million on this sale, which was recorded as a reduction to selling, general and administrative expenses.

Share Repurchase Program
We have in place a share repurchase program for up to 2.6 million shares of our common shares. As of October 1, 2023, 961,552 shares remain available to be repurchased under this program.

Financial Results
We focus on total profitability dollars when evaluating our financial results as opposed to profitability as a percentage of sales, as sales dollars tend to fluctuate as raw material prices rise and fall, particularly in our Industrial and Water Treatment segments. The costs for certain of our raw materials can rise or fall rapidly, causing fluctuations in gross profit as a percentage of sales.

We use the last in, first out (“LIFO”) method of valuing the majority of our inventory in our Industrial and Water Treatment segments, which causes the most recent product costs to be recognized in our income statement. The LIFO inventory valuation method and the resulting cost of sales are consistent with our business practices of pricing to current chemical raw material prices. Inventories in our Health and Nutrition segment are valued using the first-in, first-out (“FIFO”) method.

We disclose the sales of our bulk commodity products as a percentage of total sales dollars for our Industrial and Water Treatment segments. Our definition of bulk commodity products includes products that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities. We disclose the percentage of our overall sales that consist of sales of bulk commodity products as these products are generally distributed and we do not add significant value to these products in comparison to our non-bulk products. Sales of these products are generally highly competitive and price sensitive. As a result, bulk commodity products generally have our lowest margins.
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Results of Operations
The following table sets forth the percentage relationship of certain items to sales for the period indicated:
 
 Three Months EndedSix Months Ended
October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Sales100.0 %100.0 %100.0 %100.0 %
Cost of sales(77.2)%(80.8)%(78.3)%(80.9)%
Gross profit22.8 %19.2 %21.7 %19.1 %
Selling, general and administrative expenses(8.8)%(8.2)%(8.3)%(7.9)%
Operating income14.0 %11.0 %13.4 %11.2 %
Interest expense, net(0.3)%(0.6)%(0.4)%(0.6)%
Other (expense) income(0.1)%(0.2)%— %(0.2)%
Income before income taxes13.6 %10.2 %13.0 %10.4 %
Income tax expense(3.7)%(2.7)%(3.5)%(2.7)%
Net income9.9 %7.5 %9.5 %7.7 %


Three Months Ended October 1, 2023 Compared to Three Months Ended October 2, 2022

Sales
Sales were $236.5 million for the three months ended October 1, 2023, a decrease of $4.7 million, or 2%, from sales of $241.2 million in the same period a year ago. Decreased sales in our Industrial and Health and Nutrition segments more than offset increased sales in our Water Treatment segment.

Industrial Segment. Industrial segment sales decreased $15.4 million or 14%, to $98.5 million for the three months ended October 1, 2023, from sales of $113.9 million in the same period a year ago. Sales of bulk commodity products in the Industrial segment were approximately 13% of sales dollars in the three months ended October 1, 2023 and 16% in the same period of the prior year. The sale of our consumer bleach packaging business at the end of fiscal 2023 resulted in $4.0 million lower sales in the current quarter. In addition, sales declined due to overall lower volumes.

Water Treatment Segment. Water Treatment segment sales increased $14.4 million, or 17%, to $100.9 million for the three months ended October 1, 2023, from sales of $86.5 million in the same period a year ago. Sales of bulk commodity products in the Water Treatment segment were approximately 8% of sales dollars in the three months ended October 1, 2023 and 9% in the same period a year ago. Sales increased as a result of increased selling prices on many of our products as well as increased sales volumes of certain of our products.

Health & Nutrition Segment. Health and Nutrition segment sales decreased $3.7 million, or 9%, to $37.1 million for the three months ended October 1, 2023, from sales of $40.8 million in the same period a year ago. The sales decrease was primarily due to decreased sales of specialty distributed products due to lower demand from our customers, which we believe was driven by excess inventory at some of our customers as well as lower consumer demand for health and immunity products.

Gross Profit
Gross profit increased $7.5 million, or 16%, to $53.9 million, or 23% of sales, for the three months ended October 1, 2023, from $46.4 million, or 19% of sales, in the same period a year ago. During the three months ended October 1, 2023, the LIFO reserve decreased, and gross profit increased, by $3.2 million due primarily to decreasing raw material prices. In the same quarter a year ago, the LIFO reserve increased, and gross profit decreased, by $5.3 million due primarily to rising raw material prices.

Industrial Segment. Gross profit for the Industrial segment increased $0.1 million, or 1%, to $17.8 million, or 18% of sales, for the three months ended October 1, 2023, from $17.7 million, or 16% of sales, in the same period a year ago. During the three months ended October 1, 2023, the LIFO reserve decreased, and gross profit increased, by $2.6 million due primarily to decreasing raw material costs. In the same quarter a year ago, the LIFO reserve increased, and gross profit decreased, by $3.9 million due primarily to rising raw material prices. Gross profit increased slightly due to improved unit margins on certain products.

Water Treatment Segment. Gross profit for the Water Treatment segment increased $8.8 million, or 43%, to $29.3 million, or 29% of sales, for the three months ended October 1, 2023, from $20.5 million, or 24% of sales, in the same period a year ago. During the three months ended October 1, 2023, the LIFO reserve decreased, and gross profit increased, by $0.6 million due primarily to decreasing raw material costs. In the same quarter a year ago, the LIFO reserve increased, and gross profit decreased, by $1.4 million due primarily to rising raw material prices. Gross profit increased as a result of improved per-unit margins on many of our products as well as increased sales.

Health and Nutrition Segment. Gross profit for our Health and Nutrition segment decreased $1.5 million, or 18%, to $6.7 million, or 18% of sales, for the three months ended October 1, 2023, from $8.2 million, or 20% of sales, in the same period a year ago. Gross profit decreased as a result of lower sales and lower per-unit margins on certain products.

Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses increased $1.1 million, or 6%, to $20.9 million, or 9% of sales, for the three months ended October 1, 2023, from $19.8 million, or 8% of sales, in the same period a year ago. Expenses increased largely due to increased variable pay as well as added costs from acquired businesses.

Operating Income
Operating income increased $6.5 million, or 25%, to $33.0 million, or 14% of sales, for the three months ended October 1, 2023, from $26.5 million, or 11% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Interest Expense, Net
Interest expense was $0.7 million for the three months ended October 1, 2023 and $1.4 million the same period a year ago. The decrease was due to a decrease in outstanding borrowings.

Other (Expense) Income
Other expense was $0.3 million for the three months ended October 1, 2023 compared to $0.4 million in the same period a year ago. The expense represents losses recorded on investments held for our non-qualified deferred compensation plan. The amounts recorded as a loss were offset by similar amounts recorded as an increase to compensation expense within SG&A expenses.

Income Tax Provision
Our effective income tax rate was 27% for both the three months ended October 1, 2023 and the three months ended October 2, 2022. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes. Our effective tax rate for the full year is currently expected to be approximately 26 to 27%.

Six Months Ended October 1, 2023 Compared to Six Months Ended October 2, 2022

Sales
Sales were $487.6 million for the six months ended October 1, 2023, a decrease of $0.1 million, or less than 1%, from sales of $487.7 million in the same period a year ago. Decreased sales in our Industrial and Health and Nutrition segments were nearly offset by increased sales in our Water Treatment segment.

Industrial Segment. Industrial segment sales decreased $19.2 million or 8%, to $219.4 million for the six months ended October 1, 2023, from sales of $238.6 million in the same period a year ago. Sales of bulk commodity products in the Industrial segment were approximately 13% of sales dollars in the six months ended October 1, 2023 and 16% in the same period of the prior year.The sale of our consumer bleach packaging business at the end of fiscal 2023 resulted in $8.8 million lower sales in the six months ended October 1, 2023. In addition, sales declined due to overall lower volumes.

Water Treatment Segment. Water Treatment segment sales increased $29.6 million, or 18%, to $194.6 million for the six months ended October 1, 2023, from sales of $165.0 million in the same period a year ago. Sales of bulk commodity products in the Water Treatment segment were approximately 8% of sales dollars in the six months ended October 1, 2023 and 9% in the same period a year ago. Sales increased as a result of increased selling prices on many of our products as well as increased sales volumes of certain of our products.

Health & Nutrition Segment. Health and Nutrition segment sales decreased $10.4 million, or 12%, to $73.7 million for the six months ended October 1, 2023, from sales of $84.1 million in the same period a year ago. The sales decrease was primarily due to decreased sales of specialty distributed products due to lower demand from our customers, which we believe was driven by excess inventory at some of our customers as well as lower consumer demand for health and immunity products. The sales decline experienced in the second quarter of fiscal 2023 was about half the decline experienced in the first quarter of fiscal 2023.

Gross Profit
Gross profit increased $12.8 million, or 14%, to $105.9 million, or 22% of sales, for the six months ended October 1, 2023, from $93.1 million, or 19% of sales, in the same period a year ago. During the six months ended October 1, 2023, the LIFO reserve decreased, and gross profit increased, by $3.4 million due primarily to decreasing raw material prices. In the same quarter a year ago, the LIFO reserve increased, and gross profit decreased, by $9.0 million due primarily to rising raw material prices.

Industrial Segment. Gross profit for the Industrial segment decreased $0.5 million, or 1%, to $37.2 million, or 17% of sales, for the six months ended October 1, 2023, from $37.7 million, or 16% of sales, in the same period a year ago. During the six months ended October 1, 2023, the LIFO reserve decreased, and gross profit increased, by $3.0 million due primarily to decreasing raw material costs. In the same quarter a year ago, the LIFO reserve increased, and gross profit decreased, by $6.6 million due primarily to rising raw material prices. Gross profit decreased due to lower sales volumes.

Water Treatment Segment. Gross profit for the Water Treatment segment increased $16.2 million, or 41%, to $55.7 million, or 29% of sales, for the six months ended October 1, 2023, from $39.5 million, or 24% of sales, in the same period a year ago. During the six months ended October 1, 2023, the LIFO reserve decreased, and gross profit increased, by $0.5 million due primarily to decreasing raw material costs. In the same quarter a year ago, the LIFO reserve increased, and gross profit decreased, by $2.4 million due primarily to rising raw material prices. Gross profit increased as a result of improved per-unit margins on many of our products as well as increased sales.

Health and Nutrition Segment. Gross profit for our Health and Nutrition segment decreased $2.9 million, or 18%, to $13.0 million, or 18% of sales, for the six months ended October 1, 2023, from $15.9 million, or 19% of sales, in the same period a year ago. Gross profit decreased as a result of lower sales and lower per-unit margins on certain products.

Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses increased $1.7 million, or 4%, to $40.4 million, or 8% of sales, for the six months ended October 1, 2023, from $38.7 million, or 8% of sales, in the same period a year ago. In the current period, we recorded compensation expense of $0.1 million as a result of gains recorded on investments held for our non-qualified deferred compensation plan, as compared to $1.2 million decrease in compensation expense in the same period a year ago as a result of losses incurred. These amounts were offset by similar amounts recorded in other (expense) income. In addition to this unfavorable year-over-year impact of $1.3 million, expenses increased largely due to increased variable pay as well as added costs from acquired businesses.

Operating Income
Operating income increased $11.1 million, or 20%, to $65.5 million, or 13% of sales, for the six months ended October 1, 2023, from $54.4 million, or 11% of sales, in the same period a year ago due to the combined impact of the factors discussed above.

Interest Expense, Net
Interest expense was $1.9 million for the six months ended October 1, 2023 and $2.3 million the same period a year ago. The increase was due to decrease in outstanding borrowings, offset somewhat due to an increase in borrowing interest rates.

Other (Expense) Income
Other income was nominal for the six months ended October 1, 2023 compared to other expense of $1.2 million in the same period a year ago. The prior year expense represents losses recorded on investments held for our non-qualified deferred compensation plan. The amounts recorded as a loss were offset by similar amounts recorded as a decrease to compensation expense within SG&A expenses.

Income Tax Provision
Our effective income tax rate was 27% for the six months ended October 1, 2023 and 26% the six months ended October 2, 2022. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes. Our effective tax rate for the full year is currently expected to be approximately 26 to 27%.

Liquidity and Capital Resources

Cash was $11.0 million at October 1, 2023, an increase of $3.4 million as compared with the $7.6 million available as of April 2, 2023.

Cash provided by operating activities was $92.6 million for the six months ended October 1, 2023, compared to cash provided by operating activities of $18.8 million in the same period a year ago. The year-over-year increase in cash provided by operating activities in the first six months of the current year was primarily driven by decreased cash expended for inventory and accounts payable, along with increased customer collections and increased net income compared to the same period a year ago. Due to the nature of our operations, which includes purchases of large quantities of bulk chemicals, timing of purchases can result in significant changes in working capital investment and the resulting operating cash flow.

Cash used in investing activities was $19.9 million for the six months ended October 1, 2023, compared to $20.4 million in the same period a year ago. Capital expenditures were $16.9 million for the six months ended October 1, 2023, compared to $20.7 million in the same period a year ago. In the first six months of the current year, we invested $5.1 million to complete an expansion of one of our Minnesota manufacturing facilities. In the prior year, we invested $1.1 million to complete an expansion of our Illinois manufacturing facility, purchased a previously leased facility for $0.9 million, and had larger investments in vehicles, safety equipment and new and replacement equipment compared to the first six months of the current year. In addition, we we acquired substantially all the assets of EcoTech for $3.4 million in the first six months of the current year.

Cash used in financing activities was $69.3 million for the six months ended October 1, 2023, compared to $2.0 million of cash provided by financing activities in the same period a year ago. Included in financing activities in the first six months of the current year were net debt repayments of $52.0 million, compared to net debt proceeds of $15.0 million in the first six months of the prior year. In addition, we repurchased $9.8 million shares of our common stock in the first six months of the current year, compared to $6.6 million in the same period of the prior year.

We expect our cash balances and funds available under our credit facility, discussed below, along with cash flows generated from operations, will be sufficient to fund the cash requirements of our ongoing operations for the foreseeable future.

Our Board has authorized the repurchase of up to 2.6 million shares of our outstanding common shares. The shares may be purchased on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. The primary objective of the share repurchase program is to offset the impact of dilution from issuances relating to employee and director equity grants and our employee stock purchase program. During the six months ended October 1, 2023, we repurchased 167,796 shares of common stock with an aggregate purchase price of $9.8 million. During the six months ended October 2, 2022, we repurchased 181,657 shares at an aggregate purchase price of $6.6 million. As of October 1, 2023, 961,552 shares remained available to be repurchased under the share repurchase program.

We are party to a second amended and restated credit agreement (the “Credit Agreement”) with U.S. Bank National Association (“U.S. Bank”) as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto (collectively, the “Lenders”), whereby U.S. Bank is also serving as Administrative Agent. The Credit Agreement refinanced the revolving loan under our previous credit agreement with U.S. Bank and provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $250 million. The Revolving Loan Facility includes a $10 million letter of credit subfacility and $25 million swingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing on April 30, 2027. The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries. We may use the amount available under the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes.

Borrowings under the Revolving Loan Facility bear interest at a rate per annum equal to one of the following, plus, in both cases, an applicable margin based upon our leverage ratio: (a) Term SOFR, which includes a credit spread adjustment of 0.10%, for an interest period of one, three or six months as selected by us, reset at the end of the selected interest period, or (b) a base rate determined by reference to the highest of (1) U. S. Bank’s prime rate, (2) the Federal Funds Effective Rate plus 0.5%, or (3) one-month Term SOFR for U.S. dollars plus 1.0%. The Term SOFR margin is between 0.85% and 1.35%, depending
on our leverage ratio. The base rate margin is between 0.00% and 0.35%, depending on our leverage ratio. At October 1, 2023, the effective interest rate on our borrowings was 3.0%.

In addition to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unutilized commitments thereunder. The commitment fee is between 0.15% and 0.25%, depending on our leverage ratio.

Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement. As of October 1, 2023, the unamortized balance of these costs was $0.3 million, and is reflected as a reduction of debt on our balance sheet.

The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.0 to 1.0. The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict our ability to incur additional indebtedness, dispose of significant assets, make certain investments, including any acquisitions other than permitted acquisitions, make certain payments, enter into sale and leaseback transactions, grant liens on our assets or enter into rate management transactions, subject to certain limitations. We are permitted to make distributions, pay dividends and repurchase shares so long as no default or event of default exists or would exist as a result thereof. We were in compliance with all covenants of the Credit Agreement as of October 1, 2023 and expect to remain in compliance with all covenants for the next 12 months.

The Credit Agreement contains customary events of default, including failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness, failure by us to pay or discharge material judgments, bankruptcy, and change of control. The occurrence of an event of default would permit the lenders to terminate their commitments and accelerate loans under the Credit Facility.

We have in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt. We do not utilize derivative instruments for speculative purposes. The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated. The notional amount of the swap agreement is $60 million and it will terminate on May 1, 2027.

As part of our growth strategy, we have acquired businesses and may pursue acquisitions or other strategic relationships in the future that we believe will complement or expand our existing businesses or increase our customer base. We believe we could borrow additional funds under our current or new credit facilities or sell equity for strategic reasons or to further strengthen our financial position.

Critical Accounting Estimates
There were no material changes in our critical accounting estimates since the filing of our Annual Report on Form 10-K for the fiscal year ended April 2, 2023.
13


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. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “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 2, 2023. We caution you not to place undue reliance on these forward-looking statements, which reflect our management’s 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.

14


ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to the risk inherent in the cyclical nature of commodity chemical prices. However, we do not currently purchase forward contracts or otherwise engage in hedging activities with respect to the purchase of commodity chemicals. We attempt to pass changes in the cost of our materials to our customers. However, there are no assurances that we will be able to pass on the increases in the future.

We are exposed to market risks related to interest rates. Our exposure to changes in interest rates is primarily related to borrowings under our Revolving Loan Facility. We have in place an interest rate swap agreement to manage the risk associated with a portion of our variable-rate long-term debt. The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated. The notional amount of the swap agreement is $60.0 million and it will terminate on May 1, 2027. As of October 1, 2023, we had no unhedged variable-rate debt, limiting our interest rate risk.

Other types of market risk, such as foreign currency risk, do not arise in the normal course of our business activities.

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 were effective as of October 1, 2023. 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 SEC’s 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 second quarter of fiscal 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
15


PART II. OTHER INFORMATION
 
ITEM 1.        LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries are a party or of which any of our property is the subject.
 
ITEM 1A.    RISK FACTORS
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 2, 2023.

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Our Board has authorized the repurchase of up to 2.6 million shares of our outstanding common stock. The shares may be purchased on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. The following table sets forth information concerning purchases of our common stock for the three months ended October 1, 2023:
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of a Publicly Announced Plan or ProgramMaximum Number of Shares that May Yet be Purchased under Plans or Programs
07/03/2023-07/30/2023— $— — 1,129,348 
07/31/2023-08/27/202358,614 — 58,614 1,070,734 
08/28/2023-10/01/2023109,182 — 109,182 961,552 
         Total167,796 167,796 

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.        MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.        OTHER INFORMATION

None.

16


ITEM 6.        EXHIBITS
ExhibitDescriptionMethod of Filing
3.1 Incorporated by Reference
3.2 Incorporated by Reference
31.1 Filed Electronically
31.2 Filed Electronically
32.1 Filed Electronically
32.2 Filed Electronically
101 Financial statements from the Quarterly Report on Form 10-Q of Hawkins, Inc. for the period ended October 1, 2023 filed with the SEC on November 1, 2023 formatted in Inline Extensible Business Reporting Language (iXBRL); (i) the Condensed Consolidated Balance Sheets at October 1, 2023 and April 2, 2023, (ii) the Condensed Consolidated Statements of Income for the three and six months ended October 1, 2023 and October 2, 2022, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended October 1, 2023 and October 2, 2022, (iv) the Condensed Consolidated Statements of Shareholder's Equity for the three and six months ended October 1, 2023 and October 2, 2022, (v) the Condensed Consolidated Statements of Cash Flows for the six months ended October 1, 2023 and October 2, 2022, and (vi) Notes to Condensed Consolidated Financial Statements.Filed Electronically
104 Cover Page Interactive Data File (embedded within the inline XBRL document)Filed Electronically


(1)Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated February 26, 2021 and filed March 2, 2021.
(2)Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated October 28, 2009 and filed November 3, 2009.

17


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.
 
HAWKINS, INC.
By: /s/ Jeffrey P. Oldenkamp
 Jeffrey P. Oldenkamp
 Executive Vice President and Chief Financial Officer
 (On behalf of the registrant and as principal financial and accounting officer)
Dated: November 1, 2023

Document

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 registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.
Date: November 1, 2023
 
/s/ Patrick H. Hawkins
Patrick H. Hawkins
Chief Executive Officer and President


Document

EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATIONS
I, Jeffrey P. Oldenkamp, 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 registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.
Date: November 1, 2023
 
/s/ Jeffrey P. Oldenkamp
Jeffrey P. Oldenkamp
Executive Vice President and Chief Financial Officer


Document

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 October 1, 2023, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Patrick H. Hawkins, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Patrick H. Hawkins
Patrick H. Hawkins
Chief Executive Officer and President
November 1, 2023


Document

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 October 1, 2023, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Jeffrey P. Oldenkamp, 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/ Jeffrey P. Oldenkamp
Jeffrey P. Oldenkamp
Executive Vice President and Chief Financial Officer
November 1, 2023