UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended April 3, 20111, 2012

Commission FileNo. 0-7647

HAWKINS, INC.

(Exact Name of Registrant as specified in its Charter)

MINNESOTA 41-0771293
MINNESOTA
41-0771293
(State of Incorporation) 

(I.R.S. Employer

Identification No.)

3100 East Hennepin Avenue, Minneapolis,

Minnesota

55413
(Address of Principal Executive Offices) 55413
(Zip Code)

(612) 331-6910

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

 COMMON STOCK, PAR VALUE $.05 PER SHARE

Name of exchange on which registered:

 NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:

 NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o¨    No  þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o¨    No  þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  o¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  oþ    No  o¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.    þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o¨Accelerated filerþNon-accelerated filer oþ
Non-accelerated filer¨(Do not check if a smaller reporting company)Smaller reporting companyo¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  o¨    No  þ

The aggregate market value of voting stock held by non-affiliates of the Registrant on September 30, 2010October 2, 2011 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $309.4$285.4 million based upon the closing sale price for the Registrant’s common stock on that date as reported by The NASDAQ Stock Market, excluding all shares held by officers and directors of the Registrant and by the Trustees of the Registrant’s Employee Stock Ownership Plan and Trust.

As of May 31, 2011,25, 2012, the Registrant had 10,325,84010,470,315 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for the annual meeting of shareholders to be held August 2, 2011,2012, are incorporated by reference in Part III.


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FORWARD-LOOKING STATEMENTS

The information presented in this Annual Report onForm 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but rather are based on our current expectations, estimates and projections, and our beliefs and assumptions. We intend words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will” and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. These factors could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties are described in the risk factors and elsewhere in this Annual Report onForm 10-K. 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 Annual Report onForm 10-K. We are not obligated to update these statements or publicly release the result of any revisions to them to reflect events or circumstances after the date of this Annual Report onForm 10-K or to reflect the occurrence of unanticipated events.

As used in this Annual Report onForm 10-K, except where otherwise stated or indicated by the context, “Hawkins,” “we,” “us,” “the Company,” “our,” or “the Registrant” means Hawkins, Inc. References to “fiscal 2013” means our fiscal year ending March 31, 2013, “fiscal 2012” means our fiscal year ending April 1, 2012, “fiscal 2011” means our fiscal year ended April 3, 2011, “fiscal 2010” means our fiscal year ended March 28, 2010, and “fiscal 2009” means our fiscal year ended March 29, 2009.


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Hawkins, Inc.

Annual Report onForm 10-K

For the Fiscal Year Ended April 3, 20111, 2012

      Page
 
PART I
ITEM 1.
  

ITEM 1.

Business   4  

ITEM 1A.

  Risk Factors   6  

ITEM 1B.

  Unresolved Staff Comments10
ITEM 2.
Properties10
ITEM 3.
Legal Proceedings   11  

ITEM 4.

2.

  [Removed and Reserved]Properties   11 

ITEM 3.

Legal Proceedings13  
PART II

ITEM 5.

4.

  Mine Safety Disclosures13
PART II

ITEM 5.

Market for the Company’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

   1214  

ITEM 6.

  Selected Financial Data   1315  

ITEM 7.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations   1416  

ITEM 7A.

  Quantitative and Qualitative Disclosures about Market Risk   2023  

ITEM 8.

  Financial Statements and Supplementary Data   2124  

ITEM 9.

  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   4447  

ITEM 9A.

  Controls and Procedures   4447  

ITEM 9B.

  Other Information   4548  
PART III
ITEM 10.
  

ITEM 10.

Directors, Executive Officers, and Corporate Governance   4549  

ITEM 11.

  Executive Compensation   4650  

ITEM 12.

  

Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters

   4650  

ITEM 13.

  Certain Relationships and Related Transactions, and Director Independence   4650  

ITEM 14.

  Principal Accountant Fees and Services   4750  
PART IV
ITEM 15.
  

ITEM 15.

Exhibits and Financial Statement Schedules   4751  
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2


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PART I

ITEM 1.BUSINESS

Hawkins, Inc. distributes bulk chemicals and blends, manufactures and distributes specialty chemicals for our customers in a wide variety of industries. We began our operations primarily as a distributor of bulk chemicals with a strong customer focus. Over the years, we have maintained the strong customer focus and have expanded our business by increasing our sales of value-added specialty chemical products, including repackaging, blending and manufacturing certain products. In recent years, we significantly expanded the sales of our higher-margin blended and manufactured products. We expect the specialty chemical portion of our business to continue to grow. We believe that we create value for our customers through superb service and support, quality products, personalized applications and our trustworthy, creative employees.

We currently conduct our business in two segments: Industrial and Water Treatment. Financial information regarding these segments is reported in our Financial Statements and Notes to Financial Statements. See Items 7 and 8 of this Annual Report onForm 10-K.

Industrial Segment. Our Industrial Group operates this segment of our business, which specializes in providing industrial chemicals, products and services primarily to the agriculture, energy, electronics, food, chemical processing, pulp and paper, pharmaceutical, medical device and plating industries. The group’s principal products are acids, alkalis and industrial and food-grade salts.

The Industrial Group:

Receives, stores and distributes various chemicals in bulk, including liquid caustic soda, sulfuric acid, hydrochloric acid, phosphoric acid, potassium hydroxide and aqua ammonia;

 •Receives, stores and distributes various chemicals in bulk, including liquid caustic soda, sulfuric acid, hydrochloric acid, phosphoric acid, potassium hydroxide and aqua ammonia;
 • 

Manufactures sodium hypochlorite (bleach), agricultural products and certain food-grade products, including our patented Cheese-Phos® liquid phosphate, lactates and other blended products;

• Repackages water treatment chemicals for our Water Treatment Group and bulk industrial chemicals to sell in smaller quantities to our customers;
• Performs custom blending of certain chemicals for customers according to customer formulas; and
• Performs contract and private label packaging for household chemicals.

Repackages water treatment chemicals for our Water Treatment Group and bulk industrial chemicals to sell in smaller quantities to our customers;

Performs custom blending of certain chemicals for customers according to customer formulas; and

Performs contract and private label packaging for household chemicals.

The group’s sales are concentrated primarily in Illinois, Iowa, Minnesota, Missouri, North Dakota, South Dakota, Tennessee, and Wisconsin while the group’s food-grade products are sold nationally. The Industrial Group relies on a specially trained sales staff that works directly with customers on their specific needs. The group conducts its business primarily through distribution centers and terminal operations.

During the third quarter of fiscal 2012, we purchased a 28-acre parcel of land in Rosemount, Minnesota and began construction of a new facility on the site, which is expected to be operational in late fiscal 2013. The site provides capacity for future business growth and lessens our dependence on our flood-prone sites on the Mississippi River. While we expect to transfer some blending and manufacturing activity to the Rosemount site, we do not intend to close any sites we currently operate.

In the fourth quarter of fiscal 2011, we completed the acquisition of substantially all of the assets of Vertex Chemical Corporation (“Vertex”), a manufacturer of sodium hypochlorite in the central Midwest. In addition to the manufacture of sodium hypochlorite bleaches, Vertex distributes and provides terminal services for bulk liquid inorganic chemicals, and contract and private label packaging for household chemicals. Its corporate headquarters are located in St. Louis, Missouri, with manufacturing sites in Dupo, Illinois, Camanche, Iowa, and Memphis, Tennessee. In connection with the acquisition we paid the sellers $27.2 million and assumed certain liabilities of Vertex. Vertex’s business is part of our Industrial Group.

In fiscal 2009 and fiscal 2010, we invested incompleted two new facilities which expanded the group’sto expand our ability to service its customers.our customers and facilitate growth within our Industrial Group. Our facility in Centralia, Illinois whichbegan operations in July 2009 and primarily serves our food-grade and agriculture products business, became operational in July 2009.businesses. We also opened a facility in Minneapolis, Minnesota, to handle bulk chemicals sold to pharmaceutical manufacturers. The total capital expenditures on these two facilities were approximately $10.0 million through fiscal 2010.


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Water Treatment Segment. Our Water Treatment Group operates this segment of our business, which specializes in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water. The group has the resources and flexibility to treat systems ranging in size from a small single well to a multi-million-gallon-per-daymulti-million gallon-per-day treatment facility.

The group utilizes delivery routes operated by our employees who serve as route driver, salesperson and highly trained technician to deliver our products and diagnose our customers’ water treatment needs. We believe that the high level of service provided by these individuals allows us to serve as the trusted water treatment expert for many of the municipalities and other customers that we serve. We also believe that we are able to obtain a competitive cost position on many of the chemicals sold by the Water Treatment Group due to the volumes of these chemicals purchased by our Industrial Group.

The group operates out of warehouses in 18 cities supplying products and services to customers in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Tennessee, Wisconsin and Wyoming. We opened twoone of these warehouses in fiscal 2011, one2012, two in fiscal 20102011, and expect to continue to invest in existing and new branches to expand the group’s geographic coverage. Our Water Treatment Group has historically experienced higher sales during April to September, primarily due to a seasonal increase in chemicals used by municipal water treatment facilities.

Discontinued Operations. In February 2009, we entered into two agreements whereby we agreed to sell our inventory and enter into a marketing relationship regarding the business of our Pharmaceutical segment, which provided pharmaceutical chemicals to retail pharmacies and small-scale pharmaceutical manufacturers. The transaction closed in May 2009 and we have no significant obligations to fulfill under the agreements. The results of the Pharmaceutical segment have been reported as discontinued operations in our consolidated financial statements for all periods presented in this Annual Report onForm 10-K.

Raw Materials. We have numerous suppliers, including many of the major chemical producers in the United States. We typically have written distributorship agreements or supply contracts with our suppliers that are periodically renewed. We believe that most of the products we purchase can be obtained from alternative sources should existing relationships be terminated. We are dependent upon the availability of our raw materials. In the event that certain raw materials become generally unavailable, suppliers may extend lead times or limit or cut off the supply of materials to us. As a result, we may not be able to supply or manufacture products for our customers. While we believe we have adequate sources of supply for our raw material and product requirements, we cannot be sure that supplies will be consistently available in the future should shortages occur.

Intellectual Property. Our intellectual property portfolio is of economic importance to our business. When appropriate, we have pursued, and we will continue to pursue, patents covering our products. We also have obtained certain trademarks for our products to distinguish them from our competitors’ products. The patent for our Chees-PhosCheese-Phos® liquid phosphate product, which is manufactured by our Industrial group, is scheduled to expire in November 2013. We regard much of the formulae, information and processes that we generate and use in the conduct of our business as proprietary and protectable under applicable copyright, patent, trademark, trade secret and unfair competition laws.

Customer Concentration. No single customer represents more than 10% of either our total sales or the total sales of any of our segments, but the loss of our five largest customers could have a material adverse effect on our results of operations. Total aggregate sales to our five largest customers were $46.0 million in fiscal 2009, $47.1$55.6 million in fiscal 2010, and $53.1$64.3 million in fiscal 2011.

2011 and $72.2 million in fiscal 2012.

Competition. We operate in a competitive industry and compete with many producers, distributors and sales agents offering chemicals equivalent to substantially all of the products we handle. Many of our competitors are larger than we are and may have greater financial resources, although no one competitor is dominant in our industry. We compete by offering quality products at competitive prices coupled with outstanding customer service. Because of our long-standing relationships with many of our suppliers, we are often able to leverage those relationships to obtain products when supplies are scarce or to obtain competitive pricing.

Geographic Information. Substantially all of our revenues are generated in, and long-lived assets are located in, the United States.

Employees. We had 321343 employees as of April 3, 2011,1, 2012, including 48 covered by a collective bargaining agreement.


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About Us. Hawkins, Inc. was founded in 1938 and incorporated in Minnesota in 1955. We became a publicly-traded company in 1972. Our principal executive offices are located at 3100 East Hennepin Avenue, Minneapolis, Minnesota.

Available Information. We have made available, free of charge, through our Internet website(http: (http://www.hawkinsinc.com) our Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports onForm 8-K, and, if applicable, amendments to those reports, as soon as reasonably practicable after we electronically file these materials with, or furnish them to, the Securities and Exchange Commission. Reports of beneficial ownership filed by our directors and executive officers pursuant to Section 16(a) of the Exchange Act are also available on our website. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report onForm 10-K.

ITEM 1A.RISK FACTORS

You should consider carefully the following risks when reading the information, including the financial information, contained in this Annual Report onForm 10-K.

Fluctuations in the prices and availability of commodity chemicals, which are cyclical in nature, could have a material adverse effect on our operations and the margins of our products.

Periodically, we experience significant and rapid fluctuations in the commodity pricing of raw materials. The cyclicality of commodity chemical markets, such as caustic soda, primarily results from changes in the balance between supply and demand and the level of general economic activity. We cannot predict whether the markets for our commodity chemicals will favorably impact our operations or whether we will experience a negative impact due to oversupply and lower prices.

Our principal raw materials are generally purchased under supply contracts. The prices we pay under these contracts generally lag the market prices of the underlying raw material. The pricing within our supply contracts generally adjusts quarterly or monthly. In addition,material and the cost of inventory we have on hand generally will lag the current market pricing of such inventory. The pricing within our supply contracts generally adjusts quarterly or monthly. While we attempt to maintain competitive pricing and stable margin dollars, the variability in our cost of inventory from the current market pricing can cause significant volatility in our margins realized. In periods of rapidly increasing market prices, the inventory cost position will tend to be favorable to us, possibly by material amounts, which may positively impact our margins. Conversely, in periods of rapidly decreasing market prices, the inventory cost position will tend to be unfavorable to us, possibly by material amounts, which may negatively impact our margins. We do not engage in futures or other derivatives contracts to hedge against fluctuations in future prices. We may enter into sales contracts where the selling prices for our products are fixed for a period of time, exposing us to volatility in raw materials prices that we acquire on a spot market or short-term contractual basis. We attempt to pass commodity pricing changes to our customers, but we may be unable to or be delayed in doing so. Our inability to pass through price increases or any limitation or delay in our passing through price increases could adversely affect our profit margins.

We are also dependent upon the availability of our raw materials. In the event that raw materials are in short supply or unavailable, raw material suppliers may extend lead times or limit or cut off supplies. As a result, we may not be able to supply or manufacture products for some or all of our customers. For example, in calendar 2008 a miners’ strike in Canada significantly limited supplies of potassium chloride, a key component of some of our products. Due to the resulting shortage, many chemical companies were unable to supply their customers. While we were able to obtain a supply of the product sufficient to meet our customers’ needs, we cannot be certain that such supplies would be available in the future should other similar shortages occur. Constraints on the supply or delivery of critical raw materials could disrupt our operations and adversely affect the performance of our business.


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We operate in a highly competitive environment and face significant competition and price pressure.

We operate in a highly competitive industry and compete with producers, manufacturers, distributors and sales agents offering chemicals equivalent to substantially all of the products we handle. Competition is based

on several key criteria, including product price, product performance and quality, product availability and security of supply, responsiveness of product development in cooperation with customers, and customer service. Many of our competitors are larger than we are and may have greater financial resources. As a result, these competitors may be better able than us to withstand changes in conditions within our industry, changes in the prices and availability of raw materials, and changes in general economic conditions.conditions and be able to introduce innovative products that reduce demand for or the profit of our products. Additionally, competitors’ pricing decisions could compel us to decrease our prices, which could adversely affect our margins and profitability. Our ability to maintain or increase our profitability is dependent upon our ability to offset competitive decreases in the prices and margins of our products by improving production efficiency and volume, identifying higher margin chemical products and improving existing products through innovation and research and development. If we are unable to maintain our profitability or competitive position, we could lose market share to our competitors and experience reduced profitability.

Demand for our products is affected by general economic conditions and by the cyclical nature of many of the industries we serve, which could cause significant fluctuations in our sales volumes and results.

Demand for our products is affected by general economic conditions. A decline in general economic or business conditions in the industries served by our customers could have a material adverse effect on our business. Although our sales volumes have increased inwe sell to areas traditionally considered non-cyclical such as water treatment and food products, many of our customers are in businesses that are cyclical in nature, such as the industrial manufacturing, surface finishing and energy industries which include the automobile parts marketsethanol and the ethanol industry.agriculture industries. Downturns in these industries could adversely affect our sales and our financial results by affecting demand for and pricing of our products.

Changes in our customers’ products or failure of our products to meet customers’ quality specifications could adversely affect our sales and profitability.

Our chemicals are used for a broad range of applications by our customers. Changes in our customers’ products or processes may enable our customers to reduce or eliminate consumption of the chemicals that we provide. Customers may also find alternative materials or processes that no longer require our products. Consequently, it is important that we develop new products to replace the sales of products that mature and decline in use.

Our products provide important performance attributes to our customers’ products. If our products fail to perform in a manner consistent with quality specifications or have a shorter useful life than guaranteed, a customer could seek replacement of the product or damages for costs incurred as a result of the product failing to perform as expected. A successful claim or series of claims against us could have a material adverse effect on our financial condition and results of operations and could result in a loss of one or more customers.

Our business is subject to hazards common to chemical businesses, any of which could interrupt our production and adversely affect our results of operations.

Our business is subject to hazards common to chemical manufacturing, storage, handling and transportation, including explosions, fires, severe weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, chemical spills, discharges or releases of toxic or hazardous substances or gases and other risks. These hazards could cause personal injury and loss of life, severe damage to or destruction of property and equipment, and environmental contamination. In addition, the occurrence of material operating problems at our facilities due to any of these hazards may diminish our ability to meet our output goals and result in a negative public or political reaction. Many of our facilities are bordered by significant residential populations which increase the risk of negative public or political reaction should an environmental issue occur and could lead to adverse zoning actions that could limit our ability to operate our business in those locations. Accordingly, these hazards and their consequences could have a material adverse effect on our operations as a whole, including our results of operations and cash flows, both during and after the period of operational difficulties.

Environmental, health and safety laws and regulations cause us to incur substantial costs and may subject us to future liabilities.

In the jurisdictions in which we operate, we

We are subject to numerous federal, state and local environmental, health and safety laws and regulations in the jurisdictions in which we operate, including those governing the discharge of pollutants into the air and water, and the management and disposal of hazardous substances and wastes. The nature of our business exposes us to risks of liability under these laws and regulations due to the production, storage, use, transportation and sale of materials that can cause contamination or personal injury if released into the environment. Ongoing compliance with such laws and regulations is an important consideration for us and we invest substantial capital and incur significant operating costs in our compliance efforts. Governmental regulation has become increasingly strict in recent years. We expect this trend to continue and anticipate that compliance will continue to require increased capital expenditures and operating costs.


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If we violate environmental, health and safety laws or regulations, in addition to being required to correct such violations, we could be held liable in administrative, civil or criminal proceedings for substantial fines and other sanctions that could disrupt or limit our operations. Liabilities associated with the investigation and
cleanup of hazardous substances, as well as personal injury, property damages or natural resource damages arising out of such hazardous substances, may be imposed in many situations without regard to violations of laws or regulations or other fault, and may also be imposed jointly and severally (so that a responsible party may be held liable for more than its share of the losses involved, or even the entire loss). Such liabilities can be difficult to identify and the extent of any such liabilities can be difficult to predict. We use, and in the past have used, hazardous substances at many of our facilities, and have generated, and continue to generate, hazardous wastes at a number of our facilities. We have in the past, and may in the future, be subject to claims relating to exposure to hazardous materials and the associated liabilities may be material.

ChangesCosts related to a multi-employer pension plan, which has liabilities in our customers’ products or failureexcess of our products to meet customers’ quality specifications could adversely affect our sales and profitability.

Our chemicals are used for a broad range of applications by our customers. Changes in our customers’ products or processesplan assets, may enable our customers to reduce or eliminate consumption of the chemicals that we provide. Customers may also find alternative materials or processes that no longer require our products. Consequently, it is important that we develop new products to replace the sales of products that mature and decline in use.
Our products provide important performance attributes to our customers’ products. If our products fail to perform in a manner consistent with quality specifications or have a shorter useful life than guaranteed, a customer could seek replacement of the product or damages for costs incurred as a result of the product failing to perform as expected. A successful claim or series of claims against us could have a material adverse effect on our financial condition and results of operationsoperations.

We participate in the Central States Southeast and Southwest Areas Pension Fund (“CSS” or “the Fund” or “the plan”), a multi-employer pension plan. Our participation is pursuant to two collective bargaining agreements that expire in February 2013 (the “CBAs”). Our obligation to continue to participate in the plan does not automatically expire upon expiration of the CBAs.

CSS’s actuarial certification for the plan year beginning January 1, 2008 placed the Fund in “critical status,” a legal term that essentially means that the Fund’s assets were less than 65% of its liabilities. As a result, the plan adopted a rehabilitation plan. CSS’s 2011 Annual Funding Notice stated that, as of January 1, 2011, the Fund remained in critical status with a funded percentage of 58.9%, which was down from a funded percentage of

63.4% as of January 1, 2010. This decrease in the plan’s funded percentage was despite having adopted an “updated rehabilitation plan” that implemented additional measures to improve the funded level, including requiring higher employer contributions, establishing an increased minimum retirement age, and actuarially adjusting certain pre-age-65 benefits for participants who retire after July 1, 2011. We can make no assurances of whether or to what extent the updated rehabilitation plan will improve the funded status of the plan.

We continue to contribute cash to the Fund, as required by the CBAs. We record the required cash contributions to the Fund as an expense in the period incurred and recognize a liability for any contributions due and unpaid, consistent with the accounting rules for multi-employer defined benefit plans. In addition, we are responsible for our proportional share of any unfunded vested benefits related to the Fund as a whole. However, under applicable accounting rules, we do not record a liability for our portion of any unfunded vested benefit liability until withdrawal liability has been triggered by a partial or full withdrawal from the plan.

A partial or full withdrawal from the plan may be triggered by circumstances beyond our control, such as union members voting to decertify their union. Our withdrawal from the plan as the result of collective bargaining negotiations with the unions would also trigger withdrawal liability. If a withdrawal from the plan occurs, we will record our proportional share of any unfunded vested benefit liability in the period in which the withdrawal occurs. The ultimate amount of the withdrawal liability assessed by the plan is impacted by a number of factors, including but not limited to the plan’s investment returns and benefit levels, interest rates, financial difficulty of other participating employers in the plan such as bankruptcy, and the continued participation by our company and other employers in the plan.

Based upon the most recent information available from the trustees managing CSS, our share of the unfunded vested benefit liability for the plan was estimated to be approximately $7.9 million if the withdrawal had occurred in calendar year 2011, an increase from an estimate of approximately $5.1 million if the withdrawal had occurred in calendar year 2009. These estimates were calculated by the trustees managing CSS. Although we believe the most recent plan data available from CSS was used in computing this 2011 estimate, the actual withdrawal liability amount is subject to change based on, among other things, the plan’s investment returns and benefit levels, interest rates, financial difficulty of other participating employers in the plan such as bankruptcy, and continued participation by the company and other employers in the plan, each of which could resultimpact the ultimate withdrawal liability. If withdrawal liability were to be triggered, we would have the option to make payments over a period of 20 years instead of paying the withdrawal liability in a losslump sum.

If the collective bargaining process results in our withdrawal from the Fund, the withdrawal would likely take effect in the fourth quarter of onefiscal 2013. We are currently unable to predict the ultimate outcome of those negotiations. However, if we are able to successfully withdraw from the plan, we anticipate it would trigger withdrawal liability in an amount that would have a material impact on our financial results.

A number of our employees are unionized, and our business and results of operations could be adversely affected if labor negotiations or more customers.

contracts further restrict our ability to maximize the efficiency of our operations.

A significant portion of our production employees in the Twin Cities are unionized under two separate collective bargaining agreements that have expiration dates in February 2013. As a result, we are required to collectively bargain the wages, salaries, benefits, staffing levels and other terms with the bargaining representatives of those employees. Our results could be materially adversely affected if those labor negotiations further restrict our ability to maximize the efficiency of our operations, if we experience labor unrest (including but not limited to strikes, lockouts, slowdowns or other business interruptions or interferences) in connection with labor negotiations, or if we are unable to negotiate new collective bargaining agreements on reasonable terms acceptable to the affected parties.

Our business, particularly our Water Treatment Group, is subject to seasonality and weather conditions, which could adversely affect our results of operations.

Our Water Treatment Group has historically experienced higher sales during April to September, primarily due to a seasonal increase in chemicals used by municipal water treatment facilities. Demand is also affected by weather conditions, as either higher or lower than normal precipitation or temperatures may affect water usage and the consumption of our products. We cannot assure you that seasonality or fluctuating weather conditions will not have a material adverse affecteffect on our results of operations and financial condition.

Costs related to a multi-employer pension plan, which has liabilities in excess of plan assets, may have a material adverse effect on our financial condition and results of operations.
We participate in the Central States Southeast and Southwest Areas Pension Funds (“CSS” or “the plan”), a multi-employer pension plan, for certain unionized employees. Our contributions to the plan may escalate in future years should we withdraw from the plan or upon the occurrence of factors outside our control, including the bankruptcy or insolvency of other participating employers, actions taken by trustees who manage the plan, government regulations, or a funding deficiency in the plan.
CSS adopted a rehabilitation plan as a result of its actuarial certification for the plan year beginning January 1, 2008 which placed the plan in critical status. The plan’s 2010 Annual Funding Notice stated that as of January 1, 2010 the Central States Pension Fund remained in critical status with a funded percentage of 63.4%. The plan adopted an updated rehabilitation plan effective December 31, 2010 which implements additional measures to improve the plan’s funded level, including establishing an increased minimum retirement age and actuarially adjusting certain pre-age 65 benefits for participants who retire after July 1, 2011. Despite these changes, we can make no assurances of the extent to which the updated rehabilitation plan will improve the funded status of the plan.
While the underfunding of the plan is not our direct obligation or liability, we are responsible for our portion of the underfunded liability in certain circumstances. For instance, if we were to cease making contributions to the plan or if our union employees discontinued participation in the union, we could trigger a substantial withdrawal liability. We are currently unable to reasonably estimate any such potential contingent liability. Any withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated.


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The insurance that we maintain may not fully cover all potential exposures.

We maintain property, business interruption and casualty insurance, but such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and limits on the liabilities covered. We may incur losses beyond the limits or outside the coverage of our insurance policies, including liabilities for environmental remediation. In addition, from time to time, various types of insurance for companies in the specialty chemical industry have not been available on commercially acceptable terms or, in some cases, have not been available at all. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain.

If we are unable to retain key personnel or attract new skilled personnel, it could have an adverse impact on our business.

Because of the specialized and technical nature of our business, our future performance is dependent on the continued service of, and on our ability to attract and retain, qualified management, scientific, technical and support personnel. The unanticipated departure of key members of our management team could have an adverse impact on our business.

We may not be able to successfully consummate future acquisitions or integrate acquisitions into our business, which could result in unanticipated expenses and losses.

As part of our business growth strategy, we have acquired businesses and may pursue acquisitions in the future. Our ability to pursue this strategy will be limited by our ability to identify appropriate acquisition candidates and our financial resources, including available cash and borrowing capacity. The expense incurred in consummating acquisitions, the time it takes to integrate an acquisition or our failure to integrate businesses successfully could result in unanticipated expenses and losses. Furthermore, we may not be able to realize the anticipated benefits from acquisitions.

The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. The risks associated with the integration of acquisitions include potential disruption of our ongoing business and distraction of management, unforeseen claims, liabilities, adjustments, charges and write-offs, difficulty in conforming the acquired business’ standards, processes, procedures and controls with our operations, and challenges arising from the increased scope, geographic diversity and complexity of the expanded operations.

Our business is subject to risks stemming from natural disasters or other extraordinary events outside of our control, which could interrupt our production and adversely affect our results of operations.

Natural disasters have the potential of interrupting our operations and damaging our properties, which could adversely affect our business. Since 1963, flooding of the Mississippi River has required the Company’s terminal operations to be temporarily shifted out of its buildings seven times, including three times since the spring of 2010. NoWe can give no assurance can be given that flooding or other natural disasters will not recur or that there will not be material damage or interruption to our operations in the future from such disasters.

Chemical-related assets may be at greater risk of future terrorist attacks than other possible targets in the United States. Federal law imposes new site security requirements, specifically on chemical facilities, which require increased capital spending and increase our overhead expenses. New federal regulations have already been adopted to increase the security of the transportation of hazardous chemicals in the United States. We ship and receive materials that are classified as hazardous and we believe we have met these requirements, but additional federal and local regulations that limit the distribution of hazardous materials are being considered. Bans on movement of hazardous materials through certain cities could adversely affect the efficiency of our logistical operations. Broader restrictions on hazardous material movements could lead to additional investment and could change where and what products we provide.


9

The occurrence of extraordinary events, including future terrorist attacks and the outbreak or escalation of hostilities, cannot be predicted, but their occurrence can be expected to negatively affect the economy in general, and specifically the markets for our products. The resulting damage from a direct attack on our assets, or assets used by us, could include loss of life and property damage. In addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive.

We may not be able to renew our leases of land where four of our operations facilities reside.

We lease the land where our three main terminals are located and where a significant manufacturing plant is located. We do not have guaranteed lease renewal options and may not be able to renew our leases in the future. Our current lease renewal periods extend out to 2014 (one lease), 2018 (two leases) and 2029 (one lease). The failure to secure extended lease terms on any one of these facilities may have a material adverse impact on our business, as they are where a significant portion of our chemicals are manufactured and where the majority of our bulk chemicals are stored. While we can make no assurances, based on historical experience and anticipated future needs, we intend to extend these leases and believe that we will be able to renew our leases as the renewal periods expire.

If we are unable to renew three of our leases (two relate to terminals and one to manufacturing) any property remaining on the land becomes the property of the lessor, and the lessor has the option to either maintain the property or remove the property at our expense. These asset retirement obligations and the cost to relocate our operations could have a material adverse effect on our results of operations and financial condition.

ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

We own our principal location, which consists of approximately 11 acres of land in Minneapolis, Minnesota, with six buildings containing a total of 177,000 square feet of office and warehouse space primarily used by our Industrial Group. Our principal office is located in one of these buildings, at 3100 East Hennepin Avenue. We have installed sprinkler systems in substantially all of our warehouse facilities for fire protection. We carry customary levels of insurance covering the replacement of damaged property.

In addition to the facilities described previously, our other facilities are described below. We believe that these facilities, together with those described above, are adequate and suitable for the purposes they serve. Unless noted, each facility is owned by us and is primarily used as office and warehouse.

Group

  Location Approx.
Square Feet		 
Approx.
Group
Location
Square Feet

Industrial

  St. Paul, MN(1)  32,000  
  Minneapolis, MN(2)  20,00029,000  
  Centralia, IL(3)  77,000  
  Camanche, IA(4)  95,000  
  St Louis, MO(4)  6,000  
  Dupo, IL(4)  64,000  
Rosemount, MN(5)63,000

Water Treatment

  Fargo, ND  20,000  
  Fond du Lac, WI  24,000  
  Washburn, ND  14,000  
  Billings, MT  9,000  
  Sioux Falls, SD  27,000  
  Rapid City, SD  9,000  
  Peotone, IL(5)IL(6)  18,000  
  Superior, WI  17,000  
  Slater, IA  12,000  
  Lincoln, NE(5)NE(6)  16,000  
  Eldridge, IA  6,000  
  Columbia, MO(5)MO(6)  14,000  
  Garnett, KS  18,000  
  Ft. Smith, AR(5)AR(6)  17,000  
  Muncie, IN(6)IN(7)  12,000  
  Centralia, IL(6)IL(7)  39,000  

Industrial and Water Treatment

  St. Paul, MN(7)MN(8)  59,000  
  Memphis, TN(4)  41,000  


10

(1)Our terminal operations, located at two sites on opposite sides of the Mississippi River, are made up of three buildings, outside storage tanks for the storage of liquid bulk chemicals, including caustic soda, as well as numerous smaller tanks for storing and mixing chemicals. The land is leased from the Port Authority of the City of St. Paul, Minnesota. The applicable leases run until December 2013, at which time we have an option to renew the leases for an additional five-year period on the same terms and conditions subject to renegotiation of rent.
(2)This facility is leased from a third party to serve our bulk pharmaceutical customers.
(3)This facility includes 10 acres of land located in Centralia, Illinois owned by the company. The facility became operational in July 2009 and primarily serves our food-grade products business. Prior to fiscal 2011 this facility was shared with the Water Treatment Group.
(4)The acquisition of Vertex in fiscal 2011 included an office building located in St Louis, Missouri and manufacturing and warehouse facilities located in Memphis, Tennessee; Camanche, Iowa; and Dupo, Illinois. All of the facilitesfacilities and land are owned by the company with the exception of the land in Dupo, Illinois, which is leased from a third party. The lease runs through May, 2014. The facility in Memphis is shared between the Industrial and Water Treatment Groups.
(5)In October 2011 we acquired a 28-acre parcel of land located in Rosemount, MN. We began construction of a new facility on the site during the third quarter of fiscal 2012 and expect it to be operational in late fiscal 2013.
(6)This facility is leased from a third party.
(6)(7)This facility was purchased in fiscal 2011.

(7)(8)Our Red Rock facility, which consists of a 59,000 square-foot building located on approximately 10 acres of land, has outside storage capacity for liquid bulk chemicals, as well as numerous smaller tanks for storing and mixing chemicals. The land is leased from the Port Authority of the City of St. Paul, Minnesota and the lease runs until 2029.

ITEM 3.LEGAL PROCEEDINGS

On November 3, 2009, ICL Performance Products, LP (“ICL”), a chemical supplier to us, filed a lawsuit in the United States District Court for the Eastern District of Missouri, asserting breach of a contract for the sale of 75% purified 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 75% purified 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 75% purified phosphoric acid for 2008. We claim that ICL used this alleged shortage and the threat of discontinued shipments of 75% purified 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. TheAfter the completion of discovery, phaseboth parties moved for summary judgment in this actiontheir favor. On February 7, 2012, the Court denied both parties’ motions for summary judgment. ICL moved for reconsideration of parts of its motion for summary judgment. On April 24, 2012, the Court granted ICL’s motion for reconsideration in part, and denied it in part. In its April 24, 2012 Memorandum and Order, the Court interpreted the meaning and effect of a specific phrase in the 2009 Contract, and concluded that, if the 2009 Contract is complete and this actiona legally enforceable contract, Hawkins remained obligated to purchase 50% of its requirements for 75% purified phosphoric acid from ICL in 2009. Trial is scheduled for jury trial in late October 2011.to begin on July 23, 2012. 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 management’s attention and resources, which may have a material adverse effect on our business and results of operations, including cash flows.

We are a party from time to time in other legal proceedings arising in the ordinary course of our business. To date, none of the litigation has had a material effect on us.

ITEM 4.[REMOVED AND RESERVED]MINE SAFETY DISCLOSURES


11Not applicable.

PART II

ITEM 5.MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
         
Quarterly Stock Data
 High Low
 
Fiscal 2011        
4th Quarter
 $46.86  $36.00 
3rd Quarter
  50.18   34.03 
2nd Quarter
  37.45   24.21 
1st Quarter
  29.50   23.14 
Fiscal 2010        
4th Quarter
 $23.96  $19.40 
3rd Quarter
  24.43   20.27 
2nd Quarter
  26.49   18.19 
1st Quarter
  22.91   14.78 
         
Cash Dividends
 Declared Paid
 
Fiscal 2012        
1st Quarter
     $0.30 
Fiscal 2011        
4th Quarter
 $0.30     
3rd Quarter
     $0.40 
2nd Quarter
 $0.40     
1st Quarter
     $0.28 
Fiscal 2010        
4th Quarter
 $0.28     
3rd Quarter
     $0.38 
2nd Quarter
 $0.38     
1st Quarter
     $0.26 

Quarterly Stock Data

  High   Low 

Fiscal 2012

    

4th Quarter

  $42.93    $34.36  

3rd Quarter

   40.89     29.05  

2nd Quarter

   38.66     30.14  

1st Quarter

   47.48     33.30  

Fiscal 2011

    

4th Quarter

  $46.86    $36.00  

3rd Quarter

   50.18     34.03  

2nd Quarter

   37.45     24.21  

1st Quarter

   29.50     23.14  

Cash Dividends

  Declared   Paid 

Fiscal 2013

    

1st Quarter

    $0.32  

Fiscal 2012

    

4th Quarter

  $0.32    

3rd Quarter

    $0.32  

2nd Quarter

  $0.32    

1st Quarter

    $0.30  

Fiscal 2011

    

4th Quarter

  $0.30    

3rd Quarter

    $0.40  

2nd Quarter

  $0.40    

1st Quarter

    $0.28  

Our common shares are traded on The NASDAQ Global Market under the symbol “HWKN.” The price information represents closing sale prices as reported by The NASDAQ Global Market. As of April 3, 2011,1, 2012, shares of our common stock were held by approximately 526501 shareholders of record.

We first started paying cash dividends in 1985 and have continued to do so since. In July 2010, and August 2009, in recognition of the Company’s strong financial performance in fiscal 2010, and 2009, its strong cash position and no debt, the Board of Directors authorized a special dividend of $0.10 per share in addition to a regular semi-annual cash dividend of $0.30 per share for July 2010 and $0.28 per share for July 2009.2010. Future dividend levels will be dependent upon our consolidated results of operations, financial position, cash flows and other factors, and will be evaluated by our Board of Directors.


12

The following graph compares the cumulative total shareholder return on our common shares with the cumulative total returns of the NASDAQ Industrial Index, the NASDAQ Composite Index, the Russell 2000 Index and the Standard & Poor’s (“S&P”) Small Cap 600 Index for our last five completed fiscal years. The graph assumes the investment of $100 in our stock, the NASDAQ Industrial Index, the NASDAQ Composite Index, the Russell 2000 Index and the S&P Small Cap 600 Index on March 31, 2006,30, 2007, and reinvestment of all dividends. We have added the S&P Small Cap 600 Index because during fiscal 2011, Hawkins, Inc. was added to the S&P Small Cap 600 Index based on disclosures by S&P.

ITEM 6.SELECTED FINANCIAL DATA

Selected financial data for the Company is presented in the table below and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 and the Company’s consolidated financial statements and notes thereto included in Item 8 herein.

                     
  Fiscal Years
  2011 2010 2009 2008 2007
  (In thousands, except per share data)
 
Sales from continuing operations $297,641  $257,099  $284,356  $186,664  $151,766 
Gross profit from continuing operations  61,902   64,445   62,420   38,528   34,709 
Income from continuing operations  20,314   23,738   23,424   8,488   7,724 
Basic earnings per common share from continuing operations  1.98   2.32   2.29   0.83   0.76 
Diluted earnings per common share from continuing operations  1.96   2.31   2.29   0.83   0.76 
Cash dividends declared per common share  0.70   0.66   0.52   0.48   0.44 
Cash dividends paid per common share  0.68   0.64   0.50   0.46   0.42 
Total assets $185,005  $160,293  $136,290  $108,943  $101,269 


13

   Fiscal Years 
   2012   2011   2010   2009   2008 
   (In thousands, except per share data) 

Sales from continuing operations

  $343,834    $297,641    $257,099    $284,356    $186,664  

Gross profit from continuing operations

   65,868     61,902     64,445     62,420     38,528  

Income from continuing operations

   21,628     20,314     23,738     23,424     8,488  

Basic earnings per common share from continuing operations

   2.09     1.98     2.32     2.29     0.83  

Diluted earnings per common share from continuing operations

   2.08     1.96     2.31     2.29     0.83  

Cash dividends declared per common share

   0.64     0.70     0.66     0.52     0.48  

Cash dividends paid per common share

   0.62     0.68     0.64     0.50     0.46  

Total assets

  $204,081    $185,005    $160,293    $136,290    $108,943  

ITEM 7.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 our fiscal years ended April 3,2012, 2011 March 28, 2010, and March 29, 2009.2010. This discussion should be read in conjunction with the Financial Statements and Notes to Financial Statements included in Item 8 of this Annual Report onForm 10-K.

Overview

We derive substantially all of our revenues from the sale of bulk and specialty chemicals to our customers in a wide variety of industries. We began our operations primarily as a distributor of bulk chemicals with a strong customer focus. Over the years we have maintained the strong customer focus and have expanded our business by increasing our sales of value-added specialty chemical products, including repackaging, blending and manufacturing certain products. In recent years, we significantly expanded the sales of our higher-margin blended and manufactured products, including our food-grade products. We expect this specialty chemical portion of our business to continue to grow.

We have continued to invest in growing our business. On January 14,During fiscal 2012, we purchased a 28-acre parcel of land in Rosemount, Minnesota and began construction of a new facility on the site, which is expected to be operational in late fiscal 2013. The site provides capacity for future business growth and lessens our dependence on our flood-prone sites on the Mississippi River. While we expect to transfer some blending and manufacturing activity to the Rosemount site, we do not intend to close any sites we currently operate.

In the fourth quarter of fiscal 2011, we completed the acquisition of substantially all of the assets of Vertex, Chemical Corporation (“Vertex”), for approximately $27.2 million. In addition to the manufacture of sodium hypochlorite bleaches, Vertex distributes and provides terminal services for bulk liquid inorganic chemicals, and contract and private label packaging for household chemicals. We believe the acquisition strengthens our market position in the Midwest. Vertex had revenues of approximately $39 million in calendar 2010. While Vertex’s margins have historically been somewhat lower than ours, we expect that the acquisition will be accretive to earnings. Operating results of Vertex are included in our consolidated results of operations from the date of acquisition in this Annual Report onForm 10-K as part of our Industrial segment. See Note 2 to the Consolidated Financial Statements for further information.

In fiscal 2009 and fiscal 2010, we invested incompleted two new facilities to expand our ability to service our customers and facilitate growth within our Industrial Group. Our facility in Centralia, Illinois began operations in July 2009 and primarily serves our food-grade and agriculture products business.businesses. We closed our Linden, New Jersey food-grade production facility in September 2009 and transferred these operations to our Centralia facility. Also in fiscal 2009, we builtalso opened a facility in Minneapolis, Minnesota, to handle bulk chemicals sold to pharmaceutical manufacturers. The total capital expenditures on these two facilities were approximately $10.0 million through fiscal 2010 of which approximately $7.5 million occurred during fiscal 2009 and approximately $2.5 million occurred in the first six months of fiscal 2010.

We opened twoone new branchesbranch for our Water Treatment Group in fiscal 20112012 and onetwo new branchbranches in fiscal 20102011 and expect to continue to invest in existing and new branches to expand our Water Treatment Group’s geographic coverage. The cost of these branch expansions is not expected to be material. In addition, we have selectively added route sales personnel to certain existing Water Treatment Group branch offices to spur growth within our existing geographic coverage area.

In February 2009, we agreed to sell our inventory and entered into a marketing agreement regarding the business of our Pharmaceutical segment, which provided pharmaceutical chemicals to retail pharmacies and small-scale pharmaceutical manufacturers. The transaction closed in May 2009 and we have no significant obligations to fulfill under the agreement. The results of the Pharmaceutical segment have been reported as discontinued operations in our Consolidated Financial Statements for all periods presented in this Annual Report onForm 10-K.

Our financial performance in fiscal 20112012 was highlighted by:

Sales from continuing operations of $343.8 million, a 15.5% increase from fiscal 2011;

• Sales from continuing operations of $297.6 million, a 15.8% increase from fiscal 2010;
• Gross profit from continuing operations of $61.9 million or 20.8% of sales, a $2.5 million decrease in gross profit dollars from fiscal 2010;
• Net cash provided by operating activities of $28.5 million; and
• Cash and cash equivalents and investments available for sale were $37.4 million as of the end of fiscal 2011 after expending $25.5 million related to the Vertex acquisition during fiscal 2011.


14Gross profit from continuing operations of $65.9 million or 19.2% of sales, a $4.0 million increase in gross profit dollars from fiscal 2011;

Net cash provided by operating activities of $33.7 million; and

Cash and cash equivalents and investments available for sale were $45.9 million as of the end of fiscal 2012.

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 gross 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 vast majority of Hawkins’ inventory, which causes the most recent product costs to be recognized in our income statement. The valuation of LIFO inventory for interim periods is based on our estimates of fiscal year-end inventory levels and costs. The LIFO inventory valuation method and the resulting cost of sales are consistent with our business practices of pricing to current commodity chemical raw material prices. Our LIFO reserve increased by $1.6 million in fiscal 2012 primarily due to volumes and mix of commodity chemicals in inventory at the end of the year. The increased reserve decreased our reported gross profit for the year. Our LIFO reserve increased by $3.9 million in fiscal 2011 due to rising costs and higher inventory volumes on hand at year-end maintained to meet customer requirements during an anticipated flood. The increasedThis increase in the reserve decreased our reported gross profit for the year. Our LIFO reserve decreased by $12.6 million in fiscal 2010 due to rapidly declining costs. This decrease in the reserve increased our reported gross profit in fiscal 2010. Vertex’s inventory cost, which represents approximately 18% of the consolidatedfirst-in, first-out (“FIFO”) inventory balance at April 3, 2011, is determined using the FIFO method.

Our raw material costs fluctuated dramatically during fiscal 2009 and fiscal 2010. The costs of the majority of our primary raw materials began to increase rapidly and substantially in the first quarter of fiscal 2009 due to high demand and, in some cases, constrained supply. We continued to experience those cost trends through the third quarter of fiscal 2009. The costs for these raw materials leveled off in the fourth quarter of fiscal 2009, before declining significantly during fiscal 2010, with the costs at the end of fiscal 2010 substantially lower than they were in the at the end of fiscal 2009. Our raw material costs have been generally increasing throughout fiscal 2011, although they have been significantly more stable than in fiscal years 2009 and 2010. Current raw material costs are at levels significantly below the peak that occurred during the third and fourth quarters of fiscal 2009.
2011.

Results of Operations

The following table sets forth certain items from our statement of income as a percentage of sales from period to period:

             
  Fiscal
  Fiscal
  Fiscal
 
  2011  2010  2009 
 
Sales  100.0%  100.0%  100.0%
Cost of sales  (79.2)%  (74.9)%  (78.0)%
             
Gross profit  20.8%  25.1%  22.0%
Selling, general and administrative expenses  (10.1)%  (10.0)%  (8.8)%
             
Operating income  10.7%  15.1%  13.1%
Investment income  0.1%  0.1%  0.1%
             
Income from continuing operations before income taxes  10.8%  15.2%  13.2%
Provision for income taxes  (4.0)%  (6.1)%  (5.0)%
             
Income from continuing operations  6.8%  9.1%  8.2%
Income from discontinued operations, net of tax  0.0%  0.1%  0.2%
             
Net income  6.8%  9.2%  8.4%
             


15

   Fiscal
2012		  Fiscal
2011		  Fiscal
2010		 

Sales

   100.0%   100.0%   100.0% 

Cost of sales

   (80.8)%   (79.2)%   (74.9)% 
  

 

 

  

 

 

  

 

 

 

Gross profit

   19.2%   20.8%   25.1% 

Selling, general and administrative expenses

   (9.0)%   (10.1)%   (10.0)% 
  

 

 

  

 

 

  

 

 

 

Operating income

   10.2%   10.7%   15.1% 

Investment income

   0.1%   0.1%   0.1% 
  

 

 

  

 

 

  

 

 

 

Income from continuing operations before income taxes

   10.3%   10.8%   15.2% 

Provision for income taxes

   (4.0)%   (4.0)%   (6.1)% 
  

 

 

  

 

 

  

 

 

 

Income from continuing operations

   6.3%   6.8%   9.1% 

Income from discontinued operations, net of tax

   0.3%   0.0%   0.1% 
  

 

 

  

 

 

  

 

 

 

Net income

   6.6%   6.8%   9.2% 
  

 

 

  

 

 

  

 

 

 

Fiscal 2012 Compared to Fiscal 2011

Sales

Sales increased $46.2 million, or 15.5%, to $343.8 million for fiscal 2012, as compared to sales of $297.6 million for fiscal 2011. Vertex, which we acquired during the fourth quarter of 2011, contributed $32.9 million of the increase in sales for fiscal 2012. We also experienced increased sales as a result of higher selling prices due to increased commodity chemical prices. Sales of bulk chemicals, including caustic soda, were approximately 23% of sales compared to approximately 20% in the previous year. The increase in the bulk

chemical sales percentage for fiscal 2012 was primarily attributable to a full year of Vertex sales volumes compared to a partial year of sales volumes in fiscal 2011.

Industrial Segment. Industrial segment sales increased $42.7 million, or 20.5%, to $251.4 million for fiscal 2012. Vertex contributed $32.9 million of the increase in sales for fiscal 2012. We experienced higher selling prices due to increased commodity chemical prices.

Water Treatment Segment. Water Treatment segment sales increased $3.5 million, or 3.9%, to $92.4 million for fiscal 2012. The sales increase was primarily attributable to increased sales volumes related to manufactured and specialty chemical products and higher bulk chemical selling prices due to increased commodity chemical prices for those products.

Gross Profit

Gross profit was $65.9 million, or 19.2% of sales, for fiscal 2012, as compared to $61.9 million, or 20.8% of sales, for fiscal 2011. The LIFO method of valuing inventory negatively impacted gross profit by $1.6 million for fiscal 2012 primarily due to volumes and mix of commodity chemicals in inventory at the end of the year. In the prior year, LIFO negatively impacted gross profit by $3.9 million due to rising raw material costs and higher inventory volumes on hand at year-end maintained to meet customer requirements during an anticipated flood.

Industrial Segment. Gross profit for the Industrial segment was $40.4 million, or 16.1% of sales, for fiscal 2012, as compared to $36.9 million, or 17.7% of sales, for fiscal 2011. The increase in gross profit dollars resulted from the addition of the Vertex business to this segment, partially offset by lower selling prices due to competitive pricing pressures and lower volumes. The LIFO method of valuing inventory negatively impacted gross profit in this segment by $1.5 million in fiscal 2012 and $2.9 million in fiscal 2011.

Water Treatment Segment. Gross profit for the Water Treatment segment was $25.5 million, or 27.6% of sales, for fiscal 2012, as compared to $25.0 million, or 28.1% of sales, for fiscal 2011. The increase in gross profit dollars was primarily due to increased sales volumes in the latter half of the fiscal 2012 more than offsetting lower volumes resulting from unfavorable weather conditions during the first half of the year and lower selling prices due to competitive pricing pressures. The LIFO method of valuing inventory negatively impacted gross profit in this segment by $0.1 million in fiscal 2012 and $1.1 million in fiscal 2011.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $30.8 million, or 9.0% of sales, for fiscal 2012, as compared to $29.9 million, or 10.1% of sales, for fiscal 2011. The increase was primarily due to the addition of expenses related to the Vertex business, which we acquired in the fourth quarter of fiscal 2011, partially offset by one-time costs we incurred in fiscal 2011 but did not experience in fiscal 2012. Fiscal 2011 included approximately $1.0 million in expense as a result of the death of John Hawkins, our former Chief Executive Officer, through payments due under his retention bonus agreement, and the accelerated vesting of his previously granted performance-based restricted stock units and stock options as well as approximately $0.7 million in Vertex acquisition costs.

Operating Income

Operating income was $35.1 million, or 10.2% of sales, for fiscal 2012, as compared to $32.0 million, or 10.7% of sales, for fiscal 2011. A $3.4 million increase in operating income for the Industrial segment resulted primarily from the addition of the Vertex business, partially offset by a $0.3 million decrease in operating income for the Water Treatment segment. Both segments were negatively impacted by the LIFO method of valuing inventory in fiscal 2012 and fiscal 2011.

Investment Income

Investment income was $0.1 million for fiscal 2012 and $0.3 million in fiscal 2011. The decrease in investment income was primarily due to lower cash and investment balances.

Provision for Income Taxes

Our effective income tax rate was 38.6% for fiscal 2012 compared to 37.1% for fiscal 2011. The higher effective tax rate for fiscal 2012 was primarily due to decreased permanent tax benefits and somewhat higher effective state tax rates.

Fiscal 2011 Compared to Fiscal 2010

Sales

Sales increased $40.5 million, or 15.8%, to $297.6 million for fiscal 2011, as compared to sales of $257.1 million for fiscal 2010. The sales increase was primarily driven by higher sales of manufactured and specialty chemical products and somewhat higher selling prices for bulk chemicals due to increasing commodity chemical costs. Sales of these bulk products were approximately 20% of sales compared to approximately 19% in the previous year. Additionally, the acquisition of Vertex, which closed in the fourth quarter of fiscal 2011, contributed $9.2 million in revenue.

Industrial Segment. Industrial segment sales increased $33.8 million, or 19.3%, to $208.7 million for fiscal 2011. The sales increase was primarily attributable to higher sales of manufactured and specialty chemical products and somewhat higher selling prices for commodity bulk chemicals due to increased commodity chemical costs. In addition, Vertex revenues of $9.2 million are included in fiscal 2011 Industrial segment sales.

Water Treatment Segment. Water Treatment segment sales increased $6.7 million, or 8.2%, to $88.9 million for fiscal 2011. The sales increase was primarily attributable to increased sales of manufactured and specialty chemical products.

Gross Profit

Gross profit was $61.9 million, or 20.8% of sales, for fiscal 2011, as compared to $64.4 million, or 25.1% of sales, for fiscal 2010. The LIFO method of valuing inventory negatively impacted gross profit by $3.9 million for fiscal 2011 due to increased raw material costs and higher volumes of inventory at year end maintained to meet customer requirements during an anticipated flood. In the prior year, LIFO positively impacted gross profit by $12.6 million due to decreases in certain raw material costs during that period.

Industrial Segment. Gross profit for the Industrial segment was $36.9 million, or 17.7% of sales, for fiscal 2011, as compared to $37.3 million, or 21.3% of sales, for fiscal 2010. Competitive pricing pressures and increased operational overhead costs contributed to the lower gross profit levels in the Industrial segment. This group incurred $0.3 million of overhead costs associated with flood control efforts in the fourth quarter of fiscal 2011. These reductions in gross profit were partially offset by higher sales of higher margin manufactured and specialty chemical products. The LIFO method of valuing inventory negatively impacted gross profit in this segment by $2.9 million in fiscal 2011, as compared to positively impacting gross profit by $10.2 million in fiscal 2010.

Water Treatment Segment. Gross profit for the Water Treatment segment was $25.0 million, or 28.1% of sales, for fiscal 2011, as compared to $27.2 million, or 33.0% of sales, for fiscal 2010. The decrease in gross profit dollars was primarily due to competitive pricing pressures and increased operational overhead costs, partially offset by increased sales. Additionally, the LIFO method of valuing inventory negatively impacted gross profit in this segment by $1.1 million in fiscal 2011, as compared to positively impacting gross profit by $2.4 million in fiscal 2010.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses increased $4.3 million to $29.9 million, or 10.1% of sales, for fiscal 2011, as compared to $25.6 million, or 10.0% of sales, for fiscal 2010. We incurred approximately $1.0 million in additional expense as a result of the death of John Hawkins, our former Chief Executive Officer, through payments due under his retention bonus agreement and the accelerated vesting of his previously granted performance-based restricted stock units and stock options, as well as his retention bonus agreement.options. Other items driving the increased expenses include acquisition costs of approximately $0.7 million relating to the Vertex acquisition in addition to higher equity incentive plan costs and litigation defense costs.


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Operating Income

Operating income was $32.0 million, or 10.7% of sales, for fiscal 2011, as compared to $38.8 million, or 15.1% of sales, for fiscal 2010. The decrease in operating income was the result of reduced gross profits and increased SG&A expenses. Both reporting segments saw a decline in their gross profit dollars due to competitive pricing pressures and higher operational overhead costs. Both segments were also negatively impacted by the LIFO method of valuing inventory in fiscal 2011.

Investment Income

Investment income was $0.3 million for fiscal 2011 and fiscal 2010.

Provision for Income Taxes

Our effective income tax rate was 37.1% for fiscal 2011 compared to 39.3% for fiscal 2010. The lower effective tax rate for fiscal 2011 was primarily due to increased permanent tax differences, lower taxable income levels and somewhat lower effective state tax rates.

Fiscal 2010 Compared to Fiscal 2009Liquidity and Capital Resources

Sales
Sales decreased $27.3 million, or 9.6%, to $257.1 million for

Cash provided by operating activities in fiscal 2010, as2012 was $33.7 million compared to sales of $284.4 million for fiscal 2009. The sales decrease was primarily driven by lower selling prices for commodity bulk chemicals, including caustic soda, due to lower commodity chemical costs in fiscal 2010 as compared to the prior year. Sales of these products were approximately 19% of sales compared to approximately 29% in the previous year. The decline in bulk chemical sales was partially offset by higher sales of our manufactured and specialty chemical products.

Industrial Segment.  Industrial segment sales decreased $26.7 million, or 13.2%, to $174.9 million for fiscal 2010. The sales decrease was primarily attributable to lower selling prices for commodity bulk chemicals due to lower commodity chemical costs in fiscal 2010 compared to the prior year. This was partially offset by higher sales of manufactured and specialty chemical products.
Water Treatment Segment.  Water Treatment segment sales decreased $0.6 million, or 0.7%, to $82.2 million for fiscal 2010. Increased sales of manufactured and specialty chemical products were offset by decreases in selling prices for commodity chemicals due to lower commodity chemical costs in fiscal 2010 compared to the prior year.
Gross Profit
Gross profit was $64.4 million, or 25.1% of sales, for fiscal 2010, as compared to $62.4 million, or 22.0% of sales, for fiscal 2009. The LIFO method of valuing inventory increased gross profit by $12.6 million for fiscal 2010 due to decreases in certain raw material costs, whereas LIFO decreased gross profit by $10.0 million in the prior year due to increases in certain raw material costs during that period. The increase in gross profit as a percentage of sales was primarily driven by our ability to maintain relatively stable margin dollars on lower selling prices compared to the prior year, in addition to an increase in sales of higher margin manufactured and specialty chemical products and the LIFO reserve adjustments.
Industrial Segment.  Gross profit for the Industrial segment was $37.3 million, or 21.3% of sales, for fiscal 2010, as compared to $41.5 million, or 20.6% of sales, for fiscal 2009. In fiscal 2009, the gross profit dollars were significantly higher than historical levels due to the sale of lower-cost inventory on hand during that period of rapidly escalating commodity chemical prices as well as an increase in profits realized on certain products where we had inventory available to meet escalated demand during a period of constrained supply. By contrast, in fiscal 2010, market conditions returned to levels more in line with our historical experience and, as a result, our gross profit dollars were lower for that period. Increased operational overhead costs, primarily related to the two new facilities, also contributed to the lower gross profit levels in the Industrial segment. The reductions were partially offset by higher profits realized from the sale of manufactured and specialty chemical products. The increase in gross profit margin as a percent of sales was primarily driven by our ability to maintain relatively stable margin dollars on lower selling prices compared to the prior year. The LIFO method of valuing inventory positively impacted gross profit in this segment by $10.2$28.5 million in fiscal 2010, as compared to negatively impacting gross profit by $6.9 million in fiscal 2009.


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Water Treatment Segment.  Gross profit for the Water Treatment segment was $27.2 million, or 33.0% of sales, for fiscal 2010, as compared to $21.0 million, or 25.3% of sales, for fiscal 2009. The higher gross profit dollars were primarily driven by a favorable product mix change as sales of higher-margin manufactured2011 and specialty chemical products increased, and we experienced favorable weather conditions in the first quarter of fiscal 2010 as compare to the first quarter of fiscal 2009. The increase in gross profit margin as a percent of sales was primarily driven by our ability to maintain relatively stable margin dollars on lower selling prices compared to the prior year. Additionally, the LIFO method of valuing inventory positively impacted gross profit in this segment by $2.4 million in fiscal 2010, as compared to negatively impacting gross profit by $3.1 million in fiscal 2009.
Selling, General and Administrative Expenses
SG&A expenses were $25.6 million, or 10.0% of sales, for fiscal 2010, as compared to $25.1 million, or 8.8% of sales, for fiscal 2009. The increase in SG&A expenses was primarily the result of higher equity incentive plan, variable pay plan and medical insurance costs partially offset by lower bad debt expense. The increase as a percentage of sales was primarily the result of the decrease in sales from fiscal 2009.
Operating Income
Operating income was $38.8 million, or 15.1% of sales, for fiscal 2010, as compared to $37.3 million, or 13.1% of sales, for fiscal 2009. A $6.1 million increase in operating income for the Water Treatment segment, which was driven by higher sales volumes for manufactured and specialty chemical products, was partially offset by a $4.6 million decrease in operating income for the Industrial segment. Both segments benefited from the LIFO method of valuing inventory in fiscal 2010.
Investment Income
Investment income was $0.3 million for fiscal 2010 and fiscal 2009. Investment income remained flatyear-over-year primarily due to lower yields on investments as compared to the prior year.
Provision for Income Taxes
Our effective income tax rate was 39.3% for fiscal 2010 compared to 37.8% for fiscal 2009. The higher effective tax rate for fiscal 2010 was primarily due to decreased permanent tax differences that served to reduce the effective tax rate in fiscal 2009.
Liquidity and Capital Resources
Cash provided by operations in fiscal 2011 was $28.5 million compared to $38.8 million in fiscal 2010 and $24.4 million in fiscal 2009.2010. The decreaseincrease in cash provided by operating activities in fiscal 20112012 from fiscal 20102011 was primarily due to a decreaseincreases in net income fluctuations in working capital balances and lower deferred tax liabilities.depreciation and amortization. Higher working capital balances used $0.4$1.9 million in cash in fiscal 2011 whereas lower2012 compared to cash used of $0.4 million for working capital balances provided $0.8 million in cash in fiscal 2010.2011. The net increase in working capital balances in fiscal 20112012 was primarily due to increasing commodity chemical costs and the resulting increase in selling prices, which resulted in an increase in trade receivables, and inventories partially offset by an increase inlower accounts payable and income tax payable balancebalances due to the timing of tax payments. The increase in cash provided by operating activities in fiscal 2010 from fiscal 2009 was primarily due to the fluctuations in working capital balances and increased deferred tax liabilities in fiscal 2010. Due to the nature of our operations, which includes purchases of large quantities of bulk chemicals, the timing of purchases can result in significant changes in working capital investment and the resulting operating cash flow. Historically, our cash requirements for working capital increase during the period from April through November as caustic soda inventory levels increase as the majority of barges are received during this period.


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Cash used in financing activities was $3.7 million in fiscal 2012 compared to $6.9 million in fiscal 2011 and $6.6 million in fiscal 2010. The decrease in cash used in financing activities in fiscal 2012 was primarily due to proceeds from the exercise of employee stock options, recognition of excess tax benefits from share-based compensation and proceeds from the issuance of new shares of common stock for the Company’s employee stock purchase plan.

Cash and investmentsavailable-for-sale of $37.4$45.9 million at April 3, 2011 decreased1, 2012 increased by $16.3$8.5 million as compared with March 28, 2010,April 3, 2011, primarily due to cash generated from operations, proceeds from the acquisitionexercise of Vertex,employee stock options and proceeds from the issuance of new shares of common stock through the Company’s employee stock purchase plan, partially offset by capital expenditures and dividend payments, which were partially offset by cash generated from operations.payments. Investmentsavailable-for-sale as of April 1, 2012 and April 3, 2011 and March 28, 2010 consisted of certificates of deposit with maturities ranging from three months to two years.

Capital Expenditures

Capital expenditures were $20.1 million in fiscal 2012, $12.4 million in fiscal 2011 and $8.3 million in fiscal 2010 and $14.2 million in fiscal 2009. The total2010. Significant capital expenditures in fiscal 2011 for new facilities were approximately $1.6 million compared to $2.5 million and $7.5 million in fiscal 2010 and 2009, respectively. Additional significant capital expenditures during fiscal 20112012 consisted of approximately $3.8$12.1 million forrelated to business expansion and process improvement projects $3.2 million for otherincluding the new facility improvementsin Rosemount, Minnesota and new cylinders, $2.9Water Treatment segment expansion, $2.2 million for regulatory and safety improvements and $0.9$3.0 million for newother facility improvements and replacement route sales trucks for the Water Treatment segment.returnable containers. We expect that recurring capital expenditures for storage,and safety improvements, facilities improvements and returnable containers, and route sales trucks in fiscal 20122013 will be comparable withto the spending in fiscal 2011 spend rate, although we2012. We are projecting higher capital spending for business expansion and project improvement processes in fiscal 2012, withincreased total capital spending in fiscal 2013 as compared with fiscal 2012, as we complete the Rosemount facility and make other expansion investments. Total capital spending in fiscal 2013 is currently projected to be approximately $20$30 million. We expect cash balances and our cash flows from operations will be sufficient to fund our capital expenditurescash requirements in fiscal 2012.

2013.

Dividends

During the second quarter of fiscal 2011,2012, our Board of Directors increased our semi-annual cash dividend by 7.1%6.7% to $0.30$0.32 per share from $0.28$0.30 per share. In addition, due to the Company’s strong cash position driven by its financial performance in fiscal 2010, the Board of Directors authorized a special dividend of $0.10 per share to be paid concurrently with the semi-annual regular dividend in October 2010. We first started paying cash dividends in 1985 and have continued to do so since. Future dividend levels will be dependent upon our results of operations, financial position, cash flows and other factors, and will be evaluated by our Board of Directors.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations and Commercial Commitments

The following table provides aggregate information about our contractual payment obligations and the periods in which payments are due:

                             
  Payments Due by Period 
                 More than
    
Contractual Obligation
 2012  2013  2014  2015  2016  5 Years  Total 
  (In thousands) 
 
Operating lease obligations $669  $668  $682  $670  $622  $3,739  $7,050 

   Payments Due by Period 

Contractual Obligation

  2013   2014   2015   2016   2017   More than
5  Years		   Total 
   (In thousands) 

Operating lease obligations

  $709    $723    $712    $657    $598    $3,381    $6,780  

Critical Accounting Policies

In preparing the financial statements, we follow U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. We consider the following policies to involve the most judgment in the preparation of our financial statements.


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Revenue Recognition — We recognize revenue when there is evidence that the customer has agreed to purchase the product, the price and terms of the sale are fixed, the product has shipped and title passes to our customer, performance has occurred, and collection of the receivable is reasonably assured.
Inventories — Inventories are valued at the lower of cost or market. On a quarterly basis, management assesses the inventory quantities on hand to estimated future usage and sales and, if necessary, writes down to net realizable the value of inventory deemed obsolete or excess. Though management considers these reserves adequate and proper, changes in sales volumes due to unexpected economic or competitive conditions are among the factors that could materially affect the adequacy of this reserve.

LIFO Reserve — Inventories, with the exception of Vertex inventories, are primarily valued at the lower of cost or market with cost being determined using the LIFO method. We may incur significant fluctuations in our gross margins due primarily to changes in the cost of a single, large-volume component of our inventory. The price of this inventory component may fluctuate depending on the balance between supply and demand. Management reviews the LIFO reserve on a quarterly basis. Vertex inventories are valued at the lower of cost or market with cost being determined using the FIFO method.

Impairment of Long-Lived AssetsGoodwill — We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment and intangible assets subject to amortization, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable, such as prolonged industry downturn or significant reductions in projected future cash flows. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment is recognized equal to the amount by which the carrying value exceeds the fair value of the long-lived assets. The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets. Significant judgments and assumptions are required in the forecast of future operating results used in the preparation of the estimated future cash flows. We periodically review the appropriateness of the estimated useful lives of our long-lived assets. Changes in these estimates could have a material effect on the assessment of long-lived assets subject to amortization. There were no triggering events that required material assets to be evaluated for impairment during fiscal 2011.

Income Taxes — In the preparation of our financial statements, management calculates income taxes. This includes estimating the current tax liability as well as assessing temporary differences resulting from different treatment of items for tax and book accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded on the balance sheet. These assets and liabilities are analyzed regularly and management assesses the likelihood that deferred tax assets will be recovered from future taxable income. A valuation allowance is established to the extent that management believes that recovery is not likely. Reserves are also established for potential and ongoing audits of federal and state tax issues. We routinely monitor the potential impact of such situations and believe that it is properly reserved. Valuations related to amounts owed and tax rates could be impacted by changes to tax codes, changes in statutory tax rates, our future taxable income levels and the results of tax audits.
Recently Issued Accounting Pronouncements —
See Item 8, “Note 1 — Nature of Business and Significant Accounting Policies” of the Notes to Consolidated Financial Statements for information regarding recently adopted accounting standards or accounting standards to be adopted in the future.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are subject to the risk inherent in the cyclical nature of commodity chemical prices. However, we do not currently purchase forward contracts or otherwise engage in hedging activities with respect to the purchase of commodity chemicals. We attempt to pass changes in material prices on to our customers, however, there are no assurances that we will be able to pass on the increases in the future.


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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Hawkins, Inc.:
We have audited the accompanying consolidated balance sheets of Hawkins, Inc. and subsidiaries (the Company) as of April 3, 2011, and March 28, 2010, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the two-year period ended April 3, 2011. In connection with our audits of the financial statements, we have also audited the financial statement schedule listed in the Index at Item 15, as of and for the years ended April 3, 2011 and March 28, 2010. We also have audited the Company’s internal control over financial reporting as of April 3, 2011, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also includes performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


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In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hawkins, Inc. and subsidiaries as of April 3, 2011 and March 28, 2010, and the results of their operations and their cash flows for each of the years in the two-year period ended April 3, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein as of April 3, 2011 and March 28, 2010 and for each of the years in the two-year period ended April 3, 2011. Furthermore, in our opinion, Hawkins, Inc. maintained, in all material respects, effective internal control over financial reporting as of April 3, 2011, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired Vertex Chemical Corporation (“Vertex”) during fiscal year 2011, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of April 3, 2011, Vertex’s internal control over financial reporting associated with approximately 12% of total assets and approximately 3% of total revenues included in the consolidated financial statements of the Company as of and for the year ended April 3, 2011. Our audit of internal control over financial reporting for the Company also excluded an evaluation of the internal control over financial reporting of Vertex.
/s/  KPMG LLP
Minneapolis, Minnesota
June 9, 2011


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Hawkins, Inc.
Minneapolis, Minnesota
We have audited the accompanying consolidated statements of income, shareholders’ equity, and cash flows of Hawkins, Inc. (the “Company”) for the year ended March 29, 2009. These financial statements are the responsibility of the Company’s Management. Our audit also included the financial statement schedule for the year ended March 29, 2009, listed in the Index at Item 15. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the Company’s operations and their cash flows for the year ended March 29, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein as of March 29, 2009.
/s/  Deloitte & Touche LLP
Minneapolis, Minnesota
June 5, 2009


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HAWKINS, INC.

CONSOLIDATED BALANCE SHEETS
         
  April 3, 2011  March 28, 2010 
  (In thousands, except share data) 
 
ASSETS
CURRENT ASSETS:        
Cash and cash equivalents $18,940  $18,772 
Investmentsavailable-for-sale
  15,286   25,928 
Trade receivables — less allowance for doubtful accounts:        
$406 for 2011 and $300 for 2010  35,736   24,832 
Inventories  29,217   21,327 
Income taxes receivable  2,197   4,430 
Prepaid expenses and other current assets  2,872   2,209 
         
Total current assets  104,248   97,498 
PROPERTY, PLANT, AND EQUIPMENT:        
Land  4,362   1,840 
Buildings and improvements  47,107   39,235 
Machinery and equipment  35,740   28,476 
Transportation equipment  14,036   11,933 
Office furniture and equipment including computer systems  11,729   11,237 
         
   112,974   92,721 
Less accumulated depreciation and amortization  50,579   44,965 
         
Net property, plant, and equipment  62,395   47,756 
OTHER ASSETS:        
Goodwill  6,231   1,204 
Intangible assets — less accumulated amortization:        
$1,165 for 2011 and $851 for 2010  8,811   3,635 
Long-term investments  3,175   8,972 
Other  145   1,228 
         
Total other assets  18,362   15,039 
         
  $185,005  $160,293 
         
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:        
Accounts payable — trade $23,350  $13,940 
Dividends payable  3,095   2,879 
Accrued payroll and employee benefits  7,760   7,908 
Deferred income taxes  2,619   3,364 
Container deposits  978   924 
Other accruals  1,669   1,592 
         
Total current liabilities  39,471   30,607 
OTHER LONG-TERM LIABILITIES  1,215   633 
DEFERRED INCOME TAXES  7,876   7,555 
         
Total liabilities  48,562   38,795 
COMMITMENTS AND CONTINGENCIES        
SHAREHOLDERS’ EQUITY:        
Common stock; authorized: 30,000,000 shares of $0.05 par value; 10,307,177 and 10,253,458 shares issued and outstanding for 2011 and 2010, respectively  515   513 
Additional paid-in capital  41,060   39,027 
Retained earnings  95,013   81,921 
Accumulated other comprehensive (loss) income  (145)  37 
         
Total shareholders’ equity  136,443   121,498 
         
  $185,005  $160,293 
         
See accompanying notes to consolidated financial statements.


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HAWKINS, INC.
CONSOLIDATED STATEMENTS OF INCOME
             
  Fiscal Year Ended 
  April 3, 2011  March 28, 2010  March 29, 2009 
  (In thousands, except share and per-share data) 
 
Sales $297,641  $257,099  $284,356 
Cost of sales  (235,739)  (192,654)  (221,936)
             
Gross profit  61,902   64,445   62,420 
Selling, general and administrative expenses  (29,940)  (25,605)  (25,083)
             
Operating income  31,962   38,840   37,337 
Investment income  333   286   338 
             
Income from continuing operations before income taxes  32,295   39,126   37,675 
Provision for income taxes  (11,981)  (15,388)  (14,251)
             
Income from continuing operations  20,314   23,738   23,424 
Income from discontinued operations, net of tax  —   109   340 
             
Net income $20,314  $23,847  $23,764 
             
Weighted average number of shares outstanding-basic  10,260,135   10,250,978   10,243,970 
             
Weighted average number of shares outstanding-diluted  10,352,633   10,282,993   10,249,027 
             
Basic earnings per share            
Earnings per share from continuing operations $1.98  $2.32  $2.29 
Earnings per share from discontinued operations  —   0.01   0.03 
             
Basic earnings per share $1.98  $2.33  $2.32 
             
Diluted earnings per share            
Earnings per share from continuing operations $1.96  $2.31  $2.29 
Earnings per share from discontinued operations  —   0.01   0.03 
             
Diluted earnings per share $1.96  $2.32  $2.32 
             
Cash dividends declared per common share $0.70  $0.66  $0.52 
             
See accompanying notes to consolidated financial statements.


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HAWKINS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
                         
              Accumulated
    
        Additional
     Other
  Total
 
  Common Stock  Paid-in
  Retained
  Comprehensive
  Shareholders’
 
  Shares  Amount  Capital  Earnings  Income (Loss)  Equity 
  (In thousands, except share data) 
 
BALANCE — March 30, 2008  10,239,458  $512  $38,091  $46,428  $(10) $85,021 
Cash dividends              (5,332)      (5,332)
Stock compensation expense          277           277 
Vesting of restricted stock  7,000   —   —           — 
Comprehensive income:                        
Adjustment for sale of securities, net of tax                  6   6 
Unrealized loss on post-retirement plan liability, net of tax                  (6)  (6)
Net income              23,764       23,764 
                         
Comprehensive income                      23,764 
                         
BALANCE — March 29, 2009  10,246,458   512   38,368   64,860   (10)  103,730 
Cash dividends              (6,786)      (6,786)
Stock compensation expense          659           659 
Vesting of restricted stock  7,000   1   —           1 
Comprehensive income:                        
Unrealized gain onavailable-for-sale investments, net of tax
                  66   66 
Unrealized loss on post-retirement plan liability, net of tax                  (19)  (19)
Net income              23,847       23,847 
                         
Comprehensive income                      23,894 
                         
BALANCE — March 28, 2010  10,253,458   513   39,027   81,921   37   121,498 
Cash dividends              (7,222)      (7,222)
Stock compensation expense          1,952           1,952 
Tax benefit on share-based compensation plans          281           281 
Vesting of restricted stock  58,653   3   (3)          — 
Shares surrendered for payroll taxes  (4,934)  (1)  (197)          (198)
Comprehensive income:                        
Unrealized gain onavailable-for-sale investments, net of tax
                  (63)  (63)
Unrealized loss on post-retirement plan liability, net of tax                  (119)  (119)
Net income              20,314       20,314 
                         
Comprehensive income                      20,132 
                         
BALANCE — April 3, 2011  10,307,177  $515  $41,060  $95,013  $(145) $136,443 
                         
See accompanying notes to consolidated financial statements.


26

HAWKINS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
             
  Fiscal Year Ended 
  April 3, 2011  March 28, 2010  March 29, 2009 
  (In thousands) 
 
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income $20,314  $23,847  $23,764 
Reconciliation to cash flows:            
Depreciation and amortization  7,148   6,292   5,581 
Deferred income taxes  (600)  7,152   3,046 
Stock compensation expense  1,952   659   277 
Loss (gain) on sale of investments  —   —   16 
Loss from property disposals  127   12   114 
Changes in operating accounts (using) providing cash, net of effects of acquisition:            
Trade receivables  (5,929)  4,050   (5,095)
Inventories  (3,141)  514   (7,830)
Accounts payable  5,356   (462)  1,844 
Accrued liabilities  158   (322)  2,765 
Income taxes  2,529   (2,404)  (176)
Other  619   (556)  123 
             
Net cash provided by operating activities  28,533   38,782   24,429 
CASH FLOWS FROM INVESTING ACTIVITIES:            
Additions to property, plant, and equipment  (12,421)  (8,331)  (14,211)
Purchases of investments  (14,210)  (41,240)  — 
Sale and maturities of investments  30,545   6,450   2,841 
Proceeds from property disposals  143   148   93 
Acquisition of Vertex  (25,500)  —   — 
             
Net cash used in investing activities  (21,443)  (42,973)  (11,277)
CASH FLOWS FROM FINANCING ACTIVITIES:            
Cash dividends paid  (7,005)  (6,573)  (5,125)
Excess tax benefit from share-based compensation  281   —   — 
Shares surrendured for payroll taxes  (198)  —   — 
             
Net cash used in financing activities  (6,922)  (6,573)  (5,125)
             
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  168   (10,764)  8,027 
CASH AND CASH EQUIVALENTS —            
Beginning of period  18,772   29,536   21,509 
             
CASH AND CASH EQUIVALENTS —            
End of period $18,940  $18,772  $29,536 
             
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION —            
Cash paid during the year for income taxes $9,771  $10,654  $11,588 
             
Noncash investing activities —            
Acquisition purchase price in accounts payable $1,709  $—  $— 
Capital expenditures in accounts payable $1,450  $1,118  $1,142 
See accompanying notes to consolidated financial statements.


27

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 —Nature of Business and Significant Accounting Policies
Nature of Business — We have two reportable segments: Industrial and Water Treatment. The Industrial Group operates our Industrial segment and specializes in providing industrial chemicals, products and services to the agriculture, energy, electronics, food, chemical processing, pulp and paper, pharmaceutical, medical device and plating industries. The group also manufactures and sells certain food-grade products, including our patented Cheese Phos® liquid phosphate, lactates and other blended products. The Water Treatment Group operates our Water Treatment segment and specializes in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water. The group has the resources and flexibility to treat systems ranging in size from a small single well to a multi-milliongallon-per-day facility.
Fiscal Year — Our fiscal year is a 52/53-week year ending on the Sunday closest to March 31. Our fiscal year ending April 3, 2011 (“fiscal 2011”) is a 53-week year. The fiscal years ended March 28, 2010 (“fiscal 2010”), and March 29, 2009 (“fiscal 2009”) were 52-week years. The fiscal year ending on April 1, 2012 (“fiscal 2012”) will be a 52-week year. Beginning in fiscal 2012, we changed our quarters to a 4-4-5 week convention.
Principles of Consolidation — The consolidated financial statements include the accounts of Hawkins, Inc. and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated.
Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Revenue Recognition — We recognize revenue when there is evidence that the customer has agreed to purchase the product, the price and terms of the sale are fixed, the product has shipped and title passes to our customer, performance has occurred, and collection of the receivable is reasonably assured.
Shipping and Handling — All shipping and handling amounts billed to customers are included in revenues. Costs incurred related to the shipping and handling of products are included in cost of sales.
Fair Value Measurements — The Financial Accounting Standards Board (“FASB”) issued an accounting standard codified in ASC 820 “Fair Value Measurements and Disclosures” that provides a single definition for fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. This standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances.
We adopted the standard as amended by subsequent FASB standards at the beginning of fiscal 2009 with respect to fair value measurements of financial assets and liabilities and the beginning of fiscal 2010 for nonfinancial assets and liabilities that are recognized or disclosed at fair value in our consolidated financial statements on a recurring basis (at least annually).


28

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The financial assets and liabilities that are re-measured and reported at fair value for each reporting period include marketable securities. Other than the application of purchase accounting as a result of the Vertex acquisition, there were no fair value measurements with respect to nonfinancial assets or liabilities that are recognized or disclosed at fair value in our consolidated financial statements on a recurring basis subsequent to the effective date of this standard. The adoption did not have a material impact on our consolidated financial condition, results of operations or cash flows.
Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:
Level 1:  Valuation is based on observable inputs such as quoted market prices (unadjusted) for identical assets or liabilities in active markets.
Level 2:  Valuation is based on inputs such as quoted market prices for similar assets or liabilities in active markets or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3:  Valuation is based upon other unobservable inputs that are significant to the fair value measurement.
In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Cash Equivalents —Cash equivalents include all liquid debt instruments (primarily cash funds, money market accounts and certificates of deposit) purchased with an original maturity of three months or less. The balances maintained at financial institutions may, at times, exceed federally insured limits.
Investments —Available-for-sale securities consist of certificates of deposit and are valued at current market value, with the resulting unrealized gains and losses excluded from earnings and reported, net of tax, as a separate component of shareholders’ equity until realized. Any impairment loss to reduce an investment’s carrying amount to its fair market value is recognized in income when a decline in the fair market value of an individual security below its cost or carrying value is determined to be other than temporary.
Trade Receivables and Concentrations of Credit Risk —Financial instruments, which potentially subject us to a concentration of credit risk, principally consist of trade receivables. We sell our principal products to a large number of customers in many different industries. There are no concentrations of business transacted with a particular customer or sales from a particular service or geographic area that would significantly impact us in the near term. To reduce credit risk, we routinely assess the financial strength of our customers. We record an allowance for doubtful accounts to reduce our receivables to an amount we estimate is collectible from our customers. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable and periodic evaluations of our customers’ financial condition. We invest our excess cash balances at times in certificates of deposit and a money market account at two separate financial institutions where the cash balances may exceed federally insured limits. The institutions are two of the largest commercial banking institutions in the country and both have maintained a AA credit rating.
Inventories —Inventories, consisting primarily of finished goods, are primarily valued at the lower of cost or net realizable value, with cost being determined using thelast-in, first-out (“LIFO”) method. Vertex’s inventory cost, which represents approximately 18% of the total FIFO inventory balance at April 3, 2011, is determined using thefirst-in, first-out (“FIFO”) method.
Property, Plant and Equipment —Property is stated at cost and depreciated or amortized over the lives of the assets, using straight-line method. Estimated lives are: 10 to 40 years for buildings and improvements; 3 to 20 years for machinery and equipment; 3 to 10 years for transportation equipment; and 3 to 10 years for office furniture and equipment including computer systems.


29

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Significant improvements that add to productive capacity or extend the lives of properties are capitalized. Costs for repairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any related gains or losses are included in income.
We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable, such as prolonged industry downturn or significant reductions in projected future cash flows. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss would be measured by the amount the carrying value exceeds the fair value of the long-lived assets. The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets. No material long-lived assets were determined to be impaired during fiscal 2011, 2010, or 2009.
Goodwill and Identifiable Intangible Assets —Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased. Goodwill is tested at least annually for impairment, and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is performed using a two-step process. In the first step, the fair value of the reporting unit is compared with the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, an indication that goodwill impairment exists and a second step must be completed in order to determine the amount of the goodwill impairment, if any, which should be recorded. In the second step, an impairment loss would be recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The fair value of the reporting unit is determined using a discounted cash flow analysis. Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. The projections also take into account several factors including current and estimated economic trends and outlook, costs of raw materials, consideration of our market capitalization in comparison to the estimated fair values of our reporting units determined using discounted cash flow analyses and other factors which are beyond our control.

We completed step one of our annual goodwill impairment evaluation during the fourth quarter of fiscal 2012 and determined that our reporting units’ fair value substantially exceeded their carrying value. Accordingly, step two of the impairment analysis was not required. We also completed an impairment test of infinite-life intangible assets during the fourth quarter, in which the fair value exceeded the carrying amount. Additionally, no impairment charges were required for fiscal 2011 or 2010.

Impairment of Long-Lived Assets — We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment and intangible assets subject to amortization, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable, such as prolonged industry downturn or significant reductions in projected future cash flows. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment is recognized equal to the amount by which the carrying value exceeds the fair value of the long-lived assets. The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets. Significant judgments and assumptions are required in the forecast of future operating results used in the preparation of the estimated future cash flows. We periodically review the appropriateness of the estimated useful lives of our long-lived assets. Changes in these estimates could have a material effect on the assessment of long-lived assets subject to amortization. There were no triggering events that required long-lived assets to be evaluated for impairment during fiscal 2012.

Income Taxes — In the preparation of our financial statements, management calculates income taxes. This includes estimating the current tax liability as well as assessing temporary differences resulting from different treatment of items for tax and book accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded on the balance sheet. These assets and liabilities are analyzed regularly and management assesses the likelihood that deferred tax assets will be recovered from future taxable income. A valuation allowance is established to the extent that management believes that recovery is not likely. Reserves are also established for potential and ongoing audits of federal and state tax issues. We routinely monitor the potential impact of such situations and believe that it is properly reserved. Valuations related to amounts owed and tax rates could be impacted by changes to tax codes, changes in statutory tax rates, our future taxable income levels and the results of tax audits.

Recently Issued Accounting Pronouncements

See Item 8, “Note 1 — Nature of Business and Significant Accounting Policies” of the Notes to Consolidated Financial Statements for information regarding recently adopted accounting standards or accounting standards to be adopted in the future.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are subject to the risk inherent in the cyclical nature of commodity chemical prices. However, we do not currently purchase forward contracts or otherwise engage in hedging activities with respect to the purchase of commodity chemicals. We attempt to pass changes in material prices on to our customers, however, there are no assurances that we will be able to pass on the increases in the future.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Hawkins, Inc.:

We have audited the accompanying consolidated balance sheets of Hawkins, Inc. and subsidiaries (the Company) as of April 1, 2012 and April 3, 2011, and the related consolidated statements of income, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended April 1, 2012. In connection with our audits of the financial statements, we have also audited the financial statement schedule listed in the Index at Item 15, as of and for the years ended April 1, 2012, April 3, 2011 and March 28, 2010. We also have audited the Company’s internal control over financial reporting as of April 1, 2012, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also includes performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hawkins, Inc. and subsidiaries as of April 1, 2012, April 3, 2011 and March 28, 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended April 1, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein as of April 1, 2012, April 3, 2011 and March 28, 2010 and for each of the years in the three-year period ended April 1, 2012. Furthermore, in our opinion, Hawkins, Inc. maintained, in all material respects, effective internal control over financial reporting as of April 1, 2012, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/  KPMG LLP

Minneapolis, Minnesota

June 1, 2012

HAWKINS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

    April 1, 2012  April 3, 2011 

ASSETS

   

CURRENT ASSETS:

   

Cash and cash equivalents

  $28,566   $18,940  

Investments available-for-sale

   12,210    15,286  

Trade receivables — less allowance for doubtful accounts:

   

$460 for 2012 and $406 for 2011

   38,069    35,736  

Inventories

   27,633    29,217  

Income taxes receivable

   2,447    2,197  

Prepaid expenses and other current assets

   1,930    2,872  
  

 

 

  

 

 

 

Total current assets

   110,855    104,248  

PROPERTY, PLANT, AND EQUIPMENT:

   

Land

   7,931    4,362  

Buildings and improvements

   55,066    47,107  

Machinery and equipment

   39,432    35,740  

Transportation equipment

   14,842    14,036  

Office furniture and equipment including computer systems

   10,027    11,729  
  

 

 

  

 

 

 
   127,298    112,974  

Less accumulated depreciation and amortization

   54,033    50,579  
  

 

 

  

 

 

 

Net property, plant, and equipment

   73,265    62,395  

OTHER ASSETS:

   

Goodwill

   6,495    6,231  

Intangible assets — less accumulated amortization:

   

$1,790 for 2012 and $1,165 for 2011

   8,186    8,811  

Long-term investments

   5,139    3,175  

Other

   141    145  
  

 

 

  

 

 

 

Total other assets

   19,961    18,362  
  

 

 

  

 

 

 

Total assets

  $204,081   $185,005  
  

 

 

  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

CURRENT LIABILITIES:

   

Accounts payable — trade

  $18,623   $23,350  

Dividends payable

   3,337    3,095  

Accrued payroll and employee benefits

   8,481    7,760  

Deferred income taxes

   3,170    2,619  

Container deposits

   987    978  

Other accruals

   1,691    1,669  
  

 

 

  

 

 

 

Total current liabilities

   36,289    39,471  

OTHER LONG-TERM LIABILITIES

   763    1,215  

DEFERRED INCOME TAXES

   10,422    7,876  
  

 

 

  

 

 

 

Total liabilities

   47,474    48,562  

COMMITMENTS AND CONTINGENCIES

   

SHAREHOLDERS’ EQUITY:

   

Common stock; authorized: 30,000,000 shares of $0.05 par value; 10,430,874 and 10,307,177 shares issued and outstanding for 2012 and 2011, respectively

   522    515  

Additional paid-in capital

   45,169    41,060  

Retained earnings

   111,039    95,013  

Accumulated other comprehensive loss

   (123)   (145) 
  

 

 

  

 

 

 

Total shareholders’ equity

   156,607    136,443  
  

 

 

  

 

 

 
  $204,081   $185,005  
  

 

 

  

 

 

 

See accompanying notes to consolidated financial statements.

HAWKINS, INC.

CONSOLIDATED STATEMENTS OF INCOME

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

    Fiscal Year Ended 
   April 1, 2012  April 3, 2011  March 28, 2010 

Sales

  $343,834   $297,641   $257,099  

Cost of sales

   (277,966)   (235,739)   (192,654) 
  

 

 

  

 

 

  

 

 

 

Gross profit

   65,868    61,902    64,445  

Selling, general and administrative expenses

   (30,759)   (29,940)   (25,605) 
  

 

 

  

 

 

  

 

 

 

Operating income

   35,109    31,962    38,840  

Investment income

   145    333    286  
  

 

 

  

 

 

  

 

 

 

Income from continuing operations before income taxes

   35,254    32,295    39,126  

Provision for income taxes

   (13,626)   (11,981)   (15,388) 
  

 

 

  

 

 

  

 

 

 

Income from continuing operations

   21,628    20,314    23,738  

Income from discontinued operations, net of tax

   1,057    —    109  
  

 

 

  

 

 

  

 

 

 

Net income

  $22,685   $20,314   $23,847  
  

 

 

  

 

 

  

 

 

 

Weighted average number of shares outstanding-basic

   10,339,391    10,260,135    10,250,978  
  

 

 

  

 

 

  

 

 

 

Weighted average number of shares outstanding-diluted

   10,408,573    10,352,633    10,282,993  
  

 

 

  

 

 

  

 

 

 

Basic earnings per share

    

Earnings per share from continuing operations

  $2.09   $1.98   $2.32  

Earnings per share from discontinued operations

   0.10    —    0.01  
  

 

 

  

 

 

  

 

 

 

Basic earnings per share

  $2.19   $1.98   $2.33  
  

 

 

  

 

 

  

 

 

 

Diluted earnings per share

    

Earnings per share from continuing operations

  $2.08   $1.96   $2.31  

Earnings per share from discontinued operations

   0.10    —    0.01  
  

 

 

  

 

 

  

 

 

 

Diluted earnings per share

  $2.18   $1.96   $2.32  
  

 

 

  

 

 

  

 

 

 

Cash dividends declared per common share

  $0.64   $0.70   $0.66  
  

 

 

  

 

 

  

 

 

 

See accompanying notes to consolidated financial statements.

HAWKINS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share data)

  Common Stock  Additional
Paid-in
Capital		  Retained
Earnings		  Accumulated
Other
Comprehensive
Income (Loss)		  Total
Shareholders’
Equity		 
 Shares  Amount     

BALANCE — March 29, 2009

  10,246,458   $512   $38,368   $64,860   $(10)  $103,730  

Cash dividends

     (6,786)    (6,786) 

Stock compensation expense

    659      659  

Vesting of restricted stock

  7,000    1    —      1  

Comprehensive income:

      

Unrealized gain on available-for-sale investments, net of tax

      66    66  

Unrealized loss on post-retirement plan liability, net of tax

      (19)   (19) 

Net income

     23,847     23,847  
      

 

 

 

Comprehensive income

       23,894  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

BALANCE — March 28, 2010

  10,253,458   $513   $39,027   $81,921   $37   $121,498  

Cash dividends

     (7,222)    (7,222) 

Stock compensation expense

    1,952      1,952  

Tax benefit on share-based compensation plans

    281      281  

Vesting of restricted stock

  58,653    3    (3)     —  

Shares surrendered for payroll taxes

  (4,934)   (1)   (197)     (198) 

Comprehensive income:

      

Unrealized loss on available-for-sale investments, net of tax

      (63)   (63) 

Unrealized loss on post-retirement plan liability, net of tax

      (119)   (119) 

Net income

     20,314     20,314  
      

 

 

 

Comprehensive income

       20,132  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

BALANCE — April 3, 2011

  10,307,177   $515   $41,060   $95,013   $(145)  $136,443  

Cash dividends

     (6,659)    (6,659) 

Stock compensation expense

    1,350      1,350  

Tax benefit on share-based compensation plans

    698      698  

Vesting of restricted stock

  18,663    1    (1)     —  

Shares surrendered for payroll taxes

  (3,980)   —    (150)     (150) 

Stock Options Exercised

  85,332    5    1,461      1,466  

ESPP Shares Issued

  23,682    1    751      752  

Comprehensive income:

      

Unrealized loss on available-for-sale investments, net of tax

      (4)   (4) 

Unrealized gain on post-retirement plan liability, net of tax

      26    26  

Net income

     22,685     22,685  
      

 

 

 

Comprehensive income

       22,707  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

BALANCE — April 1, 2012

  10,430,874   $522   $45,169   $111,039   $(123)  $156,607  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See accompanying notes to consolidated financial statements.

HAWKINS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

    Fiscal Year Ended 
   April 1, 2012  April 3, 2011  March 28, 2010 

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

  $22,685   $20,314   $23,847  

Reconciliation to cash flows:

    

Depreciation and amortization

   8,458    7,148    6,292  

Deferred income taxes

   3,082    (600)   7,152  

Stock compensation expense

   1,350    1,952    659  

Loss from property disposals

   2    127    12  

Changes in operating accounts (using) providing cash, net of effects of acquisition:

    

Trade receivables

   (2,407)   (5,929)   4,050  

Inventories

   1,319    (3,141)   514  

Accounts payable

   (1,846)   5,356    (462) 

Accrued liabilities

   343    158    (322) 

Income taxes

   (251)   2,529    (2,404) 

Other

   947    619    (556) 
  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   33,682    28,533    38,782  

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Additions to property, plant, and equipment

   (20,057)   (12,421)   (8,331) 

Purchases of investments

   (14,165)   (14,210)   (41,240) 

Sale and maturities of investments

   15,270    30,545    6,450  

Proceeds from property disposals

   255    143    148  

Acquisition of Vertex

   (1,709)   (25,500)   —  
  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

   (20,406)   (21,443)   (42,973) 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Cash dividends paid

   (6,417)   (7,005)   (6,573) 

New Shares Issued

   752    —    —  

Stock Options Exercised

   1,466    —    —  

Excess tax benefit from share-based compensation

   699    281    —  

Shares surrendured for payroll taxes

   (150)   (198)   —  
  

 

 

  

 

 

  

 

 

 

Net cash used in financing activities

   (3,650)   (6,922)   (6,573) 
  

 

 

  

 

 

  

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   9,626    168    (10,764) 

CASH AND CASH EQUIVALENTS-

    

Beginning of period

   18,940    18,772    29,536  
  

 

 

  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS-

    

End of period

  $28,566   $18,940   $18,772  
  

 

 

  

 

 

  

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-

    

Cash paid during the year for income taxes

  $10,788   $9,771   $10,654  
  

 

 

  

 

 

  

 

 

 

Noncash investing activities-

    

Acquisition purchase price in accounts payable

  $—   $1,709   $—  

Capital expenditures in accounts payable

  $279   $1,450   $1,118  

See accompanying notes to consolidated financial statements.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Nature of Business and Significant Accounting Policies

Nature of Business —We have two reportable segments: Industrial and Water Treatment. The Industrial Group operates our Industrial segment and specializes in providing industrial chemicals, products and services to the agriculture, energy, electronics, food, chemical processing, pulp and paper, pharmaceutical, medical device and plating industries. The group also manufactures and sells certain food-grade products, including our patented Cheese Phos® liquid phosphate, lactates and other blended products. The Water Treatment Group operates our Water Treatment segment and specializes in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water. The group has the resources and flexibility to treat systems ranging in size from a small single well to a multi-million gallon-per-day facility.

Fiscal Year —Our fiscal year is a 52/53-week year ending on the Sunday closest to March 31. Our fiscal year ending April 1, 2012 (“fiscal 2012”) is a 52-week year. The fiscal year ended April 3, 2011 (“fiscal 2011”) was a 53-week year, and the fiscal year ended March 28, 2010 (“fiscal 2010”) was a 52-week year. The fiscal year ending on March 31, 2013 (“fiscal 2013”) will be a 52-week year. Beginning in fiscal 2012, we changed our quarterly interim reporting to a 13-week convention.

Principles of Consolidation —The consolidated financial statements include the accounts of Hawkins, Inc. and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated.

Estimates—The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Revenue Recognition —We recognize revenue when there is evidence that the customer has agreed to purchase the product, the price and terms of the sale are fixed, the product has shipped and title passes to our customer, performance has occurred, and collection of the receivable is reasonably assured.

Shipping and Handling —All shipping and handling amounts billed to customers are included in revenues. Costs incurred related to the shipping and handling of products are included in cost of sales.

Fair Value Measurements —The Financial Accounting Standards Board (“FASB”) issued an accounting standard codified in ASC 820 “Fair Value Measurements and Disclosures” that provides a single definition for fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. This standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances.

The financial assets and liabilities that are re-measured and reported at fair value for each reporting period include marketable securities. Other than the application of purchase accounting as a result of the Vertex acquisition, there were no fair value measurements with respect to nonfinancial assets or liabilities that are

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

recognized or disclosed at fair value in our consolidated financial statements on a recurring basis subsequent to the effective date of this standard.

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:

Level 1: Valuation is based on observable inputs such as quoted market prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Valuation is based on inputs such as quoted market prices for similar assets or liabilities in active markets or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Cash Equivalents —Cash equivalents include all liquid debt instruments (primarily cash funds, money market accounts and certificates of deposit) purchased with an original maturity of three months or less. The balances maintained at financial institutions may, at times, exceed federally insured limits.

Investments —Available-for-sale securities consist of certificates of deposit and are valued at current market value, with the resulting unrealized gains and losses excluded from earnings and reported, net of tax, as a separate component of shareholders’ equity until realized. Any impairment loss to reduce an investment’s carrying amount to its fair market value is recognized in income when a decline in the fair market value of an individual security below its cost or carrying value is determined to be other than temporary.

Trade Receivables and Concentrations of Credit Risk —Financial instruments, which potentially subject us to a concentration of credit risk, principally consist of trade receivables. We sell our principal products to a large number of customers in many different industries. There are no concentrations of business transacted with a particular customer or sales from a particular service or geographic area that would significantly impact us in the near term. To reduce credit risk, we routinely assess the financial strength of our customers. We record an allowance for doubtful accounts to reduce our receivables to an amount we estimate is collectible from our customers. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable and periodic evaluations of our customers’ financial condition. We invest our excess cash balances at times in certificates of deposit and a money market account at two separate financial institutions where the cash balances may exceed federally insured limits. The institutions are two of the largest commercial banking institutions in the country and both have maintained a AA credit rating.

Inventories —Inventories, consisting primarily of finished goods, are primarily valued at the lower of cost or net realizable value, with cost being determined using the last-in, first-out (“LIFO”) method. Vertex’s inventory cost, which represents approximately 10% of the total FIFO inventory balance at April 1, 2012, is determined using the first-in, first-out (“FIFO”) method.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property, Plant and Equipment —Property is stated at cost and depreciated or amortized over the lives of the assets, using straight-line method. Estimated lives are: 10 to 40 years for buildings and improvements; 3 to 20 years for machinery and equipment; 3 to 10 years for transportation equipment; and 3 to 10 years for office furniture and equipment including computer systems.

Significant improvements that add to productive capacity or extend the lives of properties are capitalized. Costs for repairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any related gains or losses are included in income.

We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable, such as prolonged industry downturn or significant reductions in projected future cash flows. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss would be measured by the amount the carrying value exceeds the fair value of the long-lived assets. The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets. No material long-lived assets were determined to be impaired during fiscal 2012, 2011, or 2010.

Goodwill and Identifiable Intangible Assets —Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased. Goodwill is tested at least annually for impairment, and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is performed using a two-step process. In the first step, the fair value of the reporting unit is compared with the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, an indication that goodwill impairment exists and a second step must be completed in order to determine the amount of the goodwill impairment, if any, which should be recorded. In the second step, an impairment loss would be recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The fair value of the reporting unit is determined using a discounted cash flow analysis. Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. The projections also take into account several factors including current and estimated economic trends and outlook, costs of raw materials, consideration of our market capitalization in comparison to the estimated fair values of our reporting units determined using discounted cash flow analyses and other factors which are beyond our control.

Our primary identifiable intangible assets include customer lists, trade secrets, non-compete agreements, trademarks, and trade names acquired in previous business acquisitions. Identifiable intangibles with finite lives are amortized and those identifiable intangibles with indefinite lives are not amortized. The values assigned to the intangible assets with finite lives are being amortized on average over approximately 14 years. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. The impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount.

We completed step one of our annual goodwill impairment evaluation during the fourth quarter of fiscal 20112012 and determined that theour reporting unit’sunits’ fair value substantially exceeded itstheir carrying value. Accordingly,

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

step two of the impairment analysis was not required. We also completed an impairment test of infinite-life intangible assets not subject to amortization during the fourth quarter, in which the fair value exceeded the carrying amount. Additionally, no impairment charges were required for fiscal 20102011 or 2009.


30

2010.

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Income Taxes —In the preparation of our consolidated financial statements, management calculates income taxes based upon the estimated effective rate applicable to operating results for the full fiscal year. This includes estimating the current tax liability as well as assessing differences resulting from different treatment of items for tax and book accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded on the balance sheet. These assets and liabilities are analyzed regularly and management assesses the likelihood that deferred tax assets will be recovered from future taxable income. We record any interest and penalties related to income taxes as income tax expense in the statements of income.

The effect of income tax positions are recognized only if those positions are more likely than not of being sustained. Changes in recognition or measurement are made as facts and circumstances change.

Stock-Based Compensation —We account for stock-based compensation on a fair value basis. The estimated grant date fair value of each stock-based award is recognized in expense over the requisite service period (generally the vesting period). The estimated fair value of each option is calculated using the Black-Scholes option-pricing model. Non-vested share awards are recorded as compensation expense over the requisite service periods based on the market value on the date of grant.

Earnings Per Share —Basic earnings per share (“EPS”) are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted EPS are computed by dividing net income by the weighted-average number of common shares outstanding including the incremental shares assumed to be issued upon the exercise of stock options and the incremental shares assumed to be issued as performance units and restricted stock. Basic and diluted EPS were calculated using the following:

             
  April 3,
  March 28,
  March 29,
 
  2011  2010  2009 
 
Weighted average common shares outstanding — basic  10,260,135   10,250,978   10,243,970 
Dilutive impact of stock options, performance units, and restricted stock  92,498   32,015   5,057 
             
Weighted average common shares outstanding — diluted  10,352,633   10,282,993   10,249,027 
             

   April 1, 2012   April 3, 2011   March 28, 2010 

Weighted average common shares outstanding — basic

   10,339,391     10,260,135     10,250,978  

Dilutive impact of stock options, performance units, and restricted stock

   69,182     92,498     32,015  
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding — diluted

   10,408,573     10,352,633     10,282,993  
  

 

 

   

 

 

   

 

 

 

There were no shares or stock options excluded from the calculation of weighted average common shares for diluted EPS for fiscal 2012 or fiscal 2011. Stock options totaling 70,665 in fiscal 2010 and 61,332 in fiscal 2009 have been excluded from the calculation of diluted EPS because the effect of including the shares would be anti-dilutive.

Derivative Instruments and Hedging Activities —We do not have any freestanding or embedded derivatives and it is our policy to not enter into contracts that contain them.

Recently Issued Accounting Pronouncements —

Intangibles —– Goodwill and Other —In December 2010,September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment” which amended the guidance to modify Step 1 of theon goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is requiredtesting to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determiningallow companies to first assess qualitative factors to determine whether it is more likely than not that anecessary to perform the two-step quantitative goodwill impairment exists,test. If, as a result of the qualitative assessment, an entity should consider whether there are any adverse qualitative factors indicatingdetermines that anit is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount,

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the quantitative impairment may exist.test is required. Otherwise, no further testing is required. The modified guidanceamendment is effective for fiscal years and interim periods within those years beginning after December 15, 2010.

2011, which is our fiscal year 2013, but early adoption is permitted. We intend to adopt the amendment in fiscal 2013 and do not expect it to materially affect our financial position or results of operations.

Business CombinationsMultiemployer Pension Plans —In December 2010,September 2011, FASB issued ASU No. 2011-09, “Disclosures about an Employer’s Participation in a Multiemployer Plan”, to require expanded disclosures for entities participating in multiemployer plans. The expanded disclosures are designed to assist financial statement users in assessing the FASB updated guidance to clarify the acquisition date that should be used for reporting the pro forma financial information disclosures when comparative financial statements are presented. The updatedpotential impact of an entity’s participation in multiemployer plans on future cash flow. This guidance is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on orperiods ending after December 15, 2010.


31

2011. We adopted this ASU during fiscal 2012. This ASU does not change the accounting for an employer’s participation in a multiemployer plan. See Note 8 — Profit Sharing, Employee Stock Ownership and Employee Stock Purchase Plans for disclosures related to this ASU.

Note 2 — Business Combinations

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair Value Measurements and Disclosures —In January 2010, the FASB issued additional disclosure requirements for assets and liabilities held at fair value. Specifically, the new guidance requires a gross presentationfourth quarter of activities within the Level 3 roll forward and adds a new requirement to disclose transfers in and out of Level 1 and 2 measurements. This guidance is applicable to all entities currently required to provide disclosures about recurring and nonrecurring fair value measurements. The effective date for these disclosures is the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 roll forward information, which is required for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those years.
Note 2 —Business Combinations
On January 14,fiscal 2011, we completed the acquisition of the assets of Vertex Chemical Corporation, Novel Wash Co. Inc. and R.H.A. Corporation, (collectively, “Vertex”), pursuant to an Asset Purchase Agreement dated as of January 10, 2011 (the “Asset Purchase Agreement”). As provided in the Asset Purchase Agreement, we acquired substantially all of the assets used in Vertex’s business, which is primarily the manufacture and distribution of sodium hypochlorite and the distribution of caustic soda, hydrochloric acid and related products. We paid cash of $25.5 million at closing and assumed certain liabilities of Vertex. The purchase price was revised to $27.2 million as provided in the Asset Purchase Agreement to reflect a final working capital adjustment of $1.7 million, which was paid in early fiscal 2012. In connection with the acquisition we incurred acquisition related costs during fiscal 2011 of $0.7 million, which were recorded as selling, general and administrative expenses in the Consolidated Statements of Income.

The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC Topic 805,Business Combinations. Under the acquisition method of accounting, the total estimated purchase price is allocated to the net tangible and intangible assets of Vertex acquired in connection with the acquisition, based on their estimated fair values.

The allocation of the purchase price to assets acquired and liabilities assumed follows:

     
  Amount 
  (In thousands) 
 
Accounts receivable $4,975 
Inventories  4,750 
Other current assets  198 
Property, plant and equipment  8,991 
Goodwill  5,027 
Intangibles  5,490 
Accounts payable  (2,012)
Accrued employee benefits  (210)
     
Total purchase price $27,209 
     

(In thousands)  Amount 

Accounts receivable

  $4,975  

Inventories

   4,486  

Other current assets

   198  

Property, plant and equipment

   8,991  

Goodwill

   5,291  

Intangibles

   5,490  

Accounts payable

   (2,012) 

Accrued employee benefits

   (210) 
  

 

 

 

Total purchase price

  $27,209  
  

 

 

 

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The allocation of the purchase price to the assets acquired and liabilities assumed resulted in the recognition of the following intangible assets:

       
     Weighted
  Amount  Average Life
  (In thousands)
 
Customer relationships $3,450  20 years
Trademark  1,240  10 years
Carrier relationships  800  10 years
       
Intangible assets acquired $5,490   
       


32

(In thousands)  Amount   Weighted
Average Life		 

Customer relationships

  $3,450     20 years  

Trademark

   1,240     10 years  

Carrier relationships

   800     10 years  
  

 

 

   

Intangible assets acquired

  $5,490    
  

 

 

   

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair value of the identified intangible assets was estimated using an income approach. Under the income approach an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of an asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return.

The goodwill recognized as a result of the Vertex acquisition is primarily attributable to expected synergies, as well as Vertex’s assembled work force.

Vertex operating results are included in our Consolidated Statements of Income in our Industrial segment from the date of acquisition.

The following unaudited pro forma condensed consolidated financial results of operations arefor the year ended April 3, 2011 is presented as if the Vertex acquisition had been completed at the beginning of the each period presented:

         
  Years Ended
  April 3,
 March 28,
  2011 2010
  (In thousands, except share and per-share data)
 
Pro forma net sales $329,653  $299,288 
Pro forma net earnings  21,888   25,475 
Pro forma earnings per share:        
Basic $2.13  $2.49 
Diluted  2.11   2.48 
Weighted average common shares outstanding:        
Basic  10,260,135   10,250,978 
Diluted  10,352,633   10,282,993 
period. The amounts shown for the year ended April 1, 2012 are based on actual results for the period:

   Years Ended 
   April  1,
2012		   April  3,
2011		 
(In thousands, except share and per-share data)    

Pro forma net sales

  $343,834    $329,653  

Pro forma net earnings

   22,685     21,888  

Pro forma earnings per share:

    

Basic

  $2.19    $2.13  

Diluted

   2.18     2.11  

Weighted average common shares outstanding:

    

Basic

   10,339,391     10,260,135  

Diluted

   10,408,573     10,352,633  

These unaudited pro forma condensed consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the first day of each fiscal period presented, or of future results of the consolidated entities. The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may behave been realized from the integration of the acquisition.

Note 3 —Cash and Cash Equivalents and Investments

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 3 — Cash and Cash Equivalents and Investments

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis as of April 1, 2012 and April 3, 2011, and March 28, 2010, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

                 
  April 3,
      
Description
 2011 Level 1 Level 2 Level 3
  (In thousands)
 
Assets:                
Cash $18,485  $18,485  $—  $— 
Certificates of deposit  18,461   —   18,461   — 
Money market securities  455   455   —   — 
                 
  March 28,
      
Description
 2010 Level 1 Level 2 Level 3
  (In thousands)
 
Assets:                
Cash $18,661  $18,661  $—  $— 
Certificates of deposit  34,900   —   34,900   — 
Money market securities  111   111   —   — 


33

Description

  April 1,
2012		   Level 1   Level 2   Level 3 
(In thousands)        

Assets:

        

Cash

  $28,006    $28,006    $—      $—    

Certificates of deposit

   17,349     —       17,349     —    

Money market securities

   560     560     —       —    

Description

  April  3,
2011		   Level 1   Level 2   Level 3 
(In thousands)        

Assets:

        

Cash

  $18,485    $18,485    $—      $—    

Certificates of deposit

   18,461     —       18,461     —    

Money market securities

   455     455     —       —    

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our financial assets that are measured at fair value on a recurring basis are certificates of deposit (“CD’s”), with maturities ranging from three months to two years which fall within valuation technique Level 2. The CD’s are classified as investments in current assets and noncurrent assets on the Consolidated Balance Sheets. As of April 3, 2011,1, 2012, the CD’s in current assets have a fair value of $15.3$12.2 million, and in noncurrent assets, the CD’s have a fair value of $3.2$5.1 million.

The carrying value of cash and cash equivalents accounts approximates fair value, as maturities are three months or less. We did not have any financial liability instruments subject to recurring fair value measurements as of April 1, 2012 and April 3, 2011 and March 28, 2010.

2011.

The contractual maturities ofavailable-for-sale securities at April 1, 2012 are shown in the table below.

(In thousands)  Amortized
Cost		   Fair Value   Unrealized
Gain/(loss)		 

Within one year

  $12,205    $12,210    $5  

Between one and two years

   5,145     5,139     (6) 
  

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $17,350    $17,349    $(1) 
  

 

 

   

 

 

   

 

 

 

The contractual maturities of available-for-sale securities at April 3, 2011 are shown in the table below.

             
  Amortized
  Fair
  Unrealized
 
  Cost  Value  Gain/(loss) 
  (In thousands) 
 
Within one year $15,270  $15,286  $16 
Between one and two years  3,185   3,175   (10)
             
Totalavailable-for-sale securities
 $18,455  $18,461  $6 
             
The contractual maturities ofavailable-for-sale securities at March 28, 2010 are shown in the table below.
             
  Amortized
  Fair
  Unrealized
 
  Cost  Value  Gains 
  (In thousands) 
 
Within one year $25,890  $25,928  $38 
Between one and two years  8,900   8,972   72 
             
Totalavailable-for-sale securities
 $34,790  $34,900  $110 
             

(In thousands)  Amortized
Cost		   Fair Value   Unrealized
Gain/(loss)		 

Within one year

  $15,270    $15,286    $16  

Between one and two years

   3,185     3,175     (10) 
  

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $18,455    $18,461    $6  
  

 

 

   

 

 

   

 

 

 

Realized gains and losses were not material for fiscal 2011,2012, fiscal 20102011 and fiscal 2009.

Note 4 —Inventories
2010.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4 — Inventories

Inventories at April 1, 2012 and April 3, 2011 and March 28, 2010 consisted of the following:

         
  2011  2010 
  (In thousands) 
 
Finished goods (FIFO basis) $35,071  $23,258 
LIFO reserve  (5,854)  (1,931)
         
Net inventory $29,217  $21,327 
         

   2012  2011 
(In thousands)       

Finished goods (FIFO basis)

  $35,072   $35,071  

LIFO reserve

   (7,439)   (5,854) 
  

 

 

  

 

 

 

Net inventory

  $27,633   $29,217  
  

 

 

  

 

 

 

The FIFO value of inventories accounted for under the LIFO method were $30.6 million at April 1, 2012 and $28.6 million at April 3, 2011 and $23.1 million at March 28, 2010.2011. The remainder of the inventory was valued and accounted for under the FIFO method.

We increased the LIFO reserve by $1.6 million in fiscal 2012 due primarily to the volume and mix of commodity chemicals in inventory at the end of the year. In fiscal 2011 we increased the LIFO reserve by $3.9 million in fiscal 2011 and decreased the reserve by $12.6 million in fiscal 2010 due primarily to significant changes inrising inventory costs, in both years, as well as changes in inventory product mix and higher inventory volumes at the end of fiscal 2011.


34

Note 5 — Goodwill and Other Identifiable Intangible Assets

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 5 —Goodwill and Other Identifiable Intangible Assets
The changes in the carrying amount of goodwill were as follows:
     
  Amount 
  (In thousands) 
 
Balance as of March 29, 2009 $1,204 
Fiscal 2010 activity  — 
     
Balance as of March 28, 2010  1,204 
Vertex acquisition  5,027 
     
Balance as of April 3, 2011 $6,231 
     

(In thousands)  Amount 

Balance as of March 28, 2010

  $1,204  

Vertex acquisition

   5,027  
  

 

 

 

Balance as of April 3, 2011

   6,231  

Fiscal 2012 adjustment

   264  
  

 

 

 

Balance as of April 1, 2012

  $6,495  
  

 

 

 

The increase in goodwill during fiscal 2012 relates to the finalization of the determination of the fair value of inventory acquired as part of the acquisition of Vertex.

A summary of our intangible assets as of April 1, 2012 and April 3, 2011 and March 28, 2010 were as follows:

             
  2011 
  Gross Carrying
  Accumulated
    
  Amount  Amortization  Net 
  (In thousands) 
 
Finite-life intangible assets:            
Customer relationships $5,508  $(423) $5,085 
Trademark  1,240   (26)  1,214 
Trade secrets  862   (413)  449 
Carrier relationships  800   (18)  782 
Other finite-life intangible assets  339   (285)  54 
             
Total finite-life intangible assets  8,749   (1,165)  7,584 
Indefinite-life intangible assets  1,227   —   1,227 
             
Total intangible assets, net $9,976  $(1,165) $8,811 
             
             
  2010 
  Gross Carrying
  Accumulated
    
  Amount  Amortization  Net 
  (In thousands) 
 
Finite-life intangible assets:            
Customer relationships $2,058  $(292) $1,766 
Trade secrets  862   (305)  557 
Other finite-life intangible assets  339   (254)  85 
             
Total finite-life intangible assets  3,259   (851)  2,408 
Indefinite-life intangible assets  1,227   —   1,227 
             
Total intangible assets, net $4,486  $(851) $3,635 
             

   2012 
   Gross Carrying
Amount		   Accumulated
Amortization		  Net 
(In thousands)           

Finite-life intangible assets:

     

Customer relationships

  $5,508    $(706)  $4,802  

Trademark

   1,240     (150)   1,090  

Trade secrets

   862     (521)   341  

Carrier relationships

   800     (96)   704  

Other finite-life intangible assets

   339     (317)   22  
  

 

 

   

 

 

  

 

 

 

Total finite-life intangible assets

   8,749     (1,790)   6,959  

Indefinite-life intangible assets

   1,227     —      1,227  
  

 

 

   

 

 

  

 

 

 

Total intangible assets, net

  $9,976    $(1,790)  $8,186  
  

 

 

   

 

 

  

 

 

 

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

   2011 
   Gross Carrying
Amount		   Accumulated
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  
  

 

 

   

 

 

  

 

 

 

Intangible asset amortization expense was $0.6 million during fiscal 2012, $0.3 million during fiscal 2011, and $0.2 million during fiscal 2010, and $0.5 million during fiscal 2009.

2010.

The estimated future amortization expense for identifiable intangible assets during the next five years is as follows:

                     
  2012 2013 2014 2015 2016
  (In thousands)
 
Estimated amortization expense $619  $596  $592  $592  $502 


35

(In thousands)  2013   2014   2015   2016   2017 

Estimated amortization expense

  $596    $592    $592    $502    $479  

Note 6 — Accumulated Other Comprehensive Income (Loss)

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 6 —Accumulated Other Comprehensive Income (Loss)
Components of accumulated other comprehensive income (loss), net of tax, were as follows:
             
  2011  2010  2009 
  (In thousands) 
 
Unrealized gain (loss) on:            
Available-for-sale investments
 $3  $66  $— 
Post-retirement plan liability adjustments  (148)  (29)  (10)
             
Accumulated other comprehensive income (loss) $(145) $37  $(10)
             

(In thousands)  2012  2011  2010 

Unrealized gain (loss) on:

    

Available-for-sale investments

  $(4)  $3   $66  

Post-retirement plan liability adjustments

   26    (148)   (29) 
  

 

 

  

 

 

  

 

 

 

Accumulated other comprehensive income (loss)

  $22   $(145)  $37  
  

 

 

  

 

 

  

 

 

 

Note 7 — Share-Based Compensation

Note 7 —

Share-Based Compensation
Stock Option Awards. Our Board of Directors has approved a long-term incentive equity compensation arrangement for our executive officers during the first quarter of fiscal 2009.officers. This long-term incentive arrangement provides for the grant of nonqualified stock options that vest at the end of a three-year period and expire no later than 10 years after the grant date. We used the Black-Scholes valuation model to estimate the fair value of the options at grant date based on the following assumptions:
         
  June 10, 2009 Grant May 13, 2008 Grant
 
Dividend yield  2.5%  3.2%
Volatility  31.4%  28.0%
Risk-free interest rate  2.1%  3.0%
Expected life in years  4   4 

   Fiscal 2010 grant  Fiscal 2009 grant 

Dividend yield

   2.5%   3.2% 

Volatility

   31.4%   28.0% 

Risk-free interest rate

   2.1%   3.0% 

Expected life in years

   4    4  

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Volatility was calculated using the past four years of historical stock prices of our common stock. The expected life is estimated based on expected future trends and the terms and vesting periods of the options granted. The risk-free interest rate is an interpolation of the relevant U.S. Treasury Bond Rate as of the grant date.

The following table represents the stock option activity for fiscal 20112012 and fiscal 2010:

                         
  2011 
  Total Outstanding  Exercisable 
     Weighted-
        Weighted-
    
     Average
  Aggregate
     Average
  Aggregate
 
     Exercise
  Intrinsic
     Exercise
  Intrinsic
 
  Shares  Price  Value  Shares  Price  Value 
  (In thousand, except share data) 
 
Outstanding at beginning of year  131,997  $17.82  $2,607   —  $—  $— 
Granted  —   —       —   —     
Vested  —   —       66,666   17.67     
Exercised  —   —       —   —     
Forfeited or expired  —   —       —   —     
                         
Outstanding at end of year  131,997  $17.82  $4,908   66,666  $17.67  $2,482 
                         


36

2011:

   2012 
   Total Outstanding   Exercisable 
(In thousand, except share data)  Shares  Weighted-
Average
Exercise
Price		   Aggregate
Intrinsic
Value		   Shares  Weighted-
Average
Exercise
Price		   Aggregate
Intrinsic
Value		 

Outstanding at beginning of year

   131,997   $17.82    $4,908     66,666   $17.67    $2,482  

Granted

   —      —         —      —      

Vested

   —      —         27,999    15.43    

Exercised

   (85,332)   17.18       (85,332)   17.18    

Forfeited or expired

   —      —           
  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Outstanding at end of year

   46,665   $19.01    $1,547     9,333   $15.43    $320  
  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

   2011 
   Total Outstanding   Exercisable 
(In thousand, except share data)  Shares   Weighted-
Average
Exercise
Price		   Aggregate
Intrinsic
Value		   Shares   Weighted-
Average
Exercise
Price		   Aggregate
Intrinsic
Value		 

Outstanding at beginning of year

   131,997    $17.82    $2,607     —      $—      $—    

Granted

   —       —         —       —      

Vested

   —       —         66,666     17.67    

Exercised

   —       —         —       —      

Forfeited or expired

   —       —         —       —      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Outstanding at end of year

   131,997    $17.82    $4,908     66,666    $17.67    $2,482  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                         
  2010 
  Total Outstanding  Exercisable 
     Weighted-
        Weighted-
    
     Average
  Aggregate
     Average
  Aggregate
 
     Exercise
  Intrinsic
     Exercise
  Intrinsic
 
  Shares  Price  Value  Shares  Price  Value 
     (In thousand, except share data)    
 
Outstanding at beginning of year  61,332  $15.43  $445   —  $—  $— 
Granted  70,665   19.90       —   —     
Vested  —   —       —   —     
Exercised  —   —       —   —     
Forfeited or expired  —   —       —   —     
                         
Outstanding at end of year  131,997  $17.82  $2,607   —  $—  $— 
                         
The weighted average grant date fair value of options was estimated to be $4.33 and $2.95 for options granted in fiscal 2010 and fiscal 2009, respectively. The weighted average remaining life of all outstanding and exercisable options is 7.76.1 years.

Annual expense related to the value of stock options was $0.1 million for fiscal 2012, $0.2 million for fiscal 2011 and $0.1 million for fiscal 2010, and fiscal 2009, substantially all of which was recorded in SG&A expense in the Consolidated Statements of Income. Options awarded to John Hawkins, former Chief Executive Officer, became fully vested and exercisable upon his death in March 2011, resulting in the acceleration of expense of $0.1 million. The total fair value of options vested during fiscal 20112012 was $0.1 million compared to $0.2 million.million during fiscal 2011. Unrecognized compensation expense related to outstanding stock options as of April 3, 20111, 2012 was $0.1 millionnot material and is expected to be recognized over a weighted average period of 0.70.2 years.

Performance-Based Restricted Stock Units. Our Board of Directors has approved a performance-based equity compensation arrangement for our executive officers during fiscal 2009.officers. This performance-based arrangement provides for the grant of performance-based restricted stock units that represent a possible future issuance of restricted shares

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of our common stock based on our pre-tax income target for the applicable fiscal year. The actual number of restricted shares to be issued to each executive officer will be determined when our final financial information becomes available after the applicable fiscal year and will be between zero shares and 54,82443,022 shares in the aggregate for fiscal 2011.2012. 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.

Performance-based restricted stock units were awarded to our executive officers on June 8, 2011, June 2, 2010 and June 10, 2009 and May 13, 2008 under this arrangement. The following table represents the restricted stock activity for fiscal 2012 and fiscal 2011:

         
     Weighted-
 
     Average Grant
 
  Shares  Date Fair Value 
 
Outstanding at March 28, 2010  23,000  $19.90 
Granted  41,320   30.02 
Vested  (52,653)  26.53 
Forfeited or expired  —   — 
         
Outstanding at April 3, 2011  11,667  $25.81 
         

37

   2012   2011 
   Shares  Weighted-
Average Grant
Date Fair Value		   Shares  Weighted-
Average Grant
Date Fair Value		 

Outstanding at beginning of year

   11,667   $25.81     23,000   $19.90  

Granted

   33,321    35.39     41,320    30.02  

Vested

   (11,667)   25.81     (52,653)   26.53  

Forfeited or expired

   —      —       —      —    
  

 

 

  

 

 

   

 

 

  

 

 

 

Outstanding at end of year

   33,321   $35.39     11,667   $25.81  
  

 

 

  

 

 

   

 

 

  

 

 

 

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We recorded compensation expense related to the shares issued for fiscal 20092010 and fiscal 20102011 and the potential issuance of shares for fiscal 20112012 of approximately $0.8 million for fiscal 2012, $1.6 million for fiscal 2011 and $0.4 million for fiscal 2010, and $0.1 million for fiscal 2009, substantially all of which was recorded in SG&A expense in the Consolidated Statements of Income. The performance-based restricted stock units previously awarded to John Hawkins, totaling 39,820 shares, became fully vested and payable upon his death in March 2011, resulting in the acceleration of compensation expense of $0.4 million. The total fair value of performance-based restricted stock units vested in fiscal 20112012 was $0.3 million compared to $1.4 million.
million in fiscal 2011.

Until the performance-based restricted stock units result in the issuance of restricted stock, the amount of expense recorded each period is dependent upon our estimate of the number of shares that will ultimately be issued and our then current common stock price. Upon issuance of restricted stock, we record compensation expense over the remaining vesting period using the award date closing price, which was $19.90 per share on June 10, 2009 and $25.81 per share on June 2, 2010.2010 and $35.39 per share on June 8, 2011. Unrecognized compensation expense related to nonvestednon-vested restricted share units as of April 3, 20111, 2012 was $1.1 million and is expected to be recognized over a weighted average period of 1.81.4 years.

In conjunction with the vesting of restricted stock held by certain of our executive officers, 4,9343,980 shares were forfeited during fiscal 20112012 to cover the executive officers statutory minimum income tax withholding.

The benefits of tax deductions in excess of recognized compensation costs (excess tax benefits) are recorded as a change in additional paid in capital rather than a deduction of taxes paid. For fiscal 2011 $0.3 millionThe amount of excess tax benefit was recognized and recorded in additional paid in capital resulting from share-based compensation cost.

cost was $0.7 million in fiscal 2012 and $0.3 million during fiscal 2011.

Restricted Stock Awards. As part of their retainer, the Board of Directors receives restricted stock for their Board services. The restricted stock awards are expensed over the requisite vesting period, which begins on the

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 Board’s restricted stock activity for fiscal 2012 and fiscal 2011:

         
     Weighted-
 
     Average Grant
 
  Shares  Date Fair Value 
 
Outstanding at beginning of period  6,000  $18.68 
Granted  6,966   30.00 
Vested  (6,000)  18.68 
Forfeited or expired  —   — 
         
Outstanding at end of period  6,966  $30.00 
         

   2012   2011 
   Shares  Weighted-
Average Grant
Date Fair Value		   Shares  Weighted-
Average Grant
Date Fair Value		 

Outstanding at beginning of period

   6,996   $30.00     6,000   $18.68  

Granted

   6,120    34.31     6,966    30.00  

Vested

   (6,996)   30.00     (6,000)   18.68  

Forfeited or expired

   —      —       —      —    
  

 

 

  

 

 

   

 

 

  

 

 

 

Outstanding at end of period

   6,120   $34.31     6,966   $30.00  
  

 

 

  

 

 

   

 

 

  

 

 

 

Annual expense related to the value of restricted stock was $0.2 million for fiscal 2012 and $0.2 million for fiscal 2011 and $0.1 million for fiscal 2010, and fiscal 2009, all of which was recorded in SG&A expense in the Consolidated Statements of Income. Unrecognized compensation expense related to nonvestednon-vested restricted stock awards as of April 3, 20111, 2012 was $0.1 million and is expected to be recognized over a weighted average period of 0.3 years.

Note 8 —Profit Sharing, Employee Stock Ownership and Pension Plans

Note 8 — Profit Sharing, Employee Stock Ownership, Employee Stock Purchase and Pension Plans

Effective April 1, 2009, we converted our defined contribution pension plan covering substantially all of our non-bargaining unit employees to a profit sharing plan. It is our policy to fund all costs accrued. Contributions are made at our discretion subject to a maximum amount allowed under the Internal Revenue Code. Our cost for the profit sharing and pension plan was 15% of each employee’s coveredeligible compensation in each of the fiscal years 2012, 2011 2010 and 2009.


38

2010. Beginning in fiscal 2013, profit sharing plan contributions are variable and aligned with company performance with a targeted contribution of between 2.5% and 5% of an employee’s eligible compensation, depending upon date of hire. In addition to the changes in the profit sharing plan for fiscal 2013, we introduced a 401(k) plan that will allow employees to contribute pre-tax earnings up to the maximum amount allowed under the Internal Revenue Code, with an employer match of up to 5% of the employee’s eligible compensation.

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We have an employee stock ownership plan (“ESOP”) covering substantially all of our non-bargaining employees, excluding our executive officers.unit employees. Contributions are made at our discretion subject to a maximum amount allowed under the Internal Revenue Code. Our cost for the ESOP was 5% of each employee’s coveredeligible compensation in each of the fiscal years 2012, 2011 2010 and 2009.
2010. Beginning in fiscal 2013, ESOP contributions are variable and aligned with company performance with a targeted contribution of between 2.5% and 5% of an employee’s eligible compensation, depending upon date of hire.

We have an employee stock purchase plan (“ESPP”) covering substantially all of our employees, excluding officers. We match 75% of each employee’s contribution, up to a maximum of $375 per month, on a monthly basis. This plan was discontinued as of the beginning of fiscal 2012 and replaced with anemployees. The ESPP that allows employees to purchase newly-issued shares of the Company’s common stock at a discount from market, with no employee contribution match from the Company.

Prior to fiscal 2012, this plan had a monthly employer match of 75% of each employee’s contribution, up to a maximum of $375 per month, with the ESPP shares of the Company purchased on the open market.

In fiscal 2012, Vertex employees participated in a 401(k) plan that included an employer match of up to 3% of the employee’s eligible compensation and a discretionary Company contribution. The total company contribution to this plan was $0.2 million. Beginning in fiscal 2013, Vertex employees are included within the Company’s retirement plans outlined above.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following represents the contribution expense for the profit sharing, ESOP, ESPP and 401(k) plans:

Benefit Plan

  2012   2011   2010 
(In thousands)            

Profit sharing

  $2,616    $2,675    $2,844  

ESOP

   802     815     899  

ESPP

   262     648     650  

Vertex plan

   175     —       —    
  

 

 

   

 

 

   

 

 

 

Total contribution expense

  $3,855    $4,138    $4,393  
  

 

 

   

 

 

   

 

 

 

Multiemployer pension plan. We participate in a union sponsored, collectively bargained multiemployer pension plan (“Union Plan”). Contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked. Several factors could resultThe risks of participating in potential funding deficiencies which could cause usmultiemployer pension plans are different from single-employer plans in the following aspects: (i) Assets contributed to make significantly higher future contributionsa multiemployer plan by one employer may be used to these plans, including unfavorable investment performance, changes in demographics, and increasedprovide benefits to participants. At this time,employees of other participating employers; (ii) If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and (iii) if we are unablestop participating in the multiemployer plan, we may be required to determinepay the plan an amount based on the underfunded status of additional contributions, if any.

the plan, referred to as a withdrawal liability.

The following representsCompany’s participation in the contribution expenseCentral States, Southeast and Southwest Areas Pension Fund (“Central States”) is outlined in the table below. The Pension Protection Act (“PPA”) Zone Status available in fiscal 2012 and fiscal 2011 is for the profit sharing, ESOP, ESPPplan’s year ended December 31, 2010 and pension plans:

             
Benefit Plan
 2011  2010  2009 
  (In thousands) 
 
Profit sharing $2,675  $2,844  $2,669 
ESOP  815   899   855 
ESPP  648   650   638 
Union pension  383   371   350 
             
Total contribution expense $4,521  $4,764  $4,512 
             
We do not currently offer anyDecember 31, 2009, respectively. The zone status is based on information that we obtained from Central States and is certified by the plan’s actuary. Among other significant post-retirementfactors, plans in the red zone are generally less than 65% funded. The “FIP/RP Status Pending/Implemented” column indicates if a funding improvement plan (“FIP”) or post-employment benefits.
a rehabilitation plan (“RP”) is either pending or has been implemented.

Note 9 —Pension Fund

CommitmentsEmployer
Identification
Number		Pension
Plan
Number		PPA Zone StatusFIP/RP
Status
Pending/
Implemented		Surcharge
Imposed		Expiration  Date
of Collective
Bargaining
Agreements
April  1,
2012		April  3,
2011

Central States, Southeast and ContingenciesSouthwest Areas Pension Fund

36-6044243001RedRedImplementedYes02/28/2013

Based upon the most recent information available from the trustees managing CSS, our share of the unfunded vested benefit liability for the plan was estimated to be approximately $7.9 million if the withdrawal had occurred in calendar year 2011, an increase from an estimate of approximately $5.1 million if the withdrawal had occurred in calendar year 2009. These estimates were calculated by the trustees managing CSS. Although we believe the most recent plan data available from CSS was used in computing this 2011 estimate, the actual withdrawal liability amount is subject to change based on, among other things, the plan’s investment returns and benefit levels, interest rates, financial difficulty of other participating employers in the plan such as bankruptcy, and continued participation by the company and other employers in the plan, each of which could impact the ultimate withdrawal liability. If withdrawal liability were to be triggered, we would have the option to make payments over a period of 20 years instead of paying the withdrawal liability in a lump sum.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We made contribution to the plan of approximately $0.4 million in fiscal 2012, 2011 and 2010 and expect to make contributions to the plan of approximately $0.5 million during fiscal 2013.

Note 9 — Commitments and Contingencies

Leases —We have various operating leases for trucks and land and buildings on which some of our operations are located. Future minimum lease payments due under operating leases with an initial term of one year or more at April 3, 20111, 2012 are as follows:

                         
  2012 2013 2014 2015 2016 Thereafter
  (In thousands)
 
Minimum lease payment $669  $668  $682  $670  $622  $3,739 

(In thousands)  2013   2014   2015   2016   2017   Thereafter 

Minimum lease payment

  $709    $723    $712    $657    $598    $3,381  

Total rental expense for the fiscal years 2012, 2011 2010 and 20092010 were as follows:

             
  2011  2010  2009 
  (In thousands) 
 
Minimum rentals $552  $577  $538 
Contingent rentals  114   102   106 
             
Total rental expense $666  $679  $644 
             

   2012   2011   2010 
(In thousands)            

Minimum rentals

  $617    $552    $577  

Contingent rentals

   102     114     102  
  

 

 

   

 

 

   

 

 

 

Total rental expense

  $719    $666    $679  
  

 

 

   

 

 

   

 

 

 

Litigation — We are a party from time to time in litigation arising in the ordinary course of our business. To date, none of the litigation has had a material effect on us.


39

Legal fees associated with such matters are expensed as incurred.

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On November 3, 2009, ICL Performance Products, LP (“ICL”), a chemical supplier to us, filed a lawsuit in the United States District Court for the Eastern District of Missouri, asserting breach of a contract for the sale of 75% purified 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 75% purified 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 75% purified phosphoric acid for 2008. We claim that ICL used this alleged shortage and the threat of discontinued shipments of 75% purified 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. TheAfter the completion of discovery, phaseboth parties moved for summary judgment in this actiontheir favor. On February 7, 2012, the Court denied both parties’ motions for summary judgment. ICL moved for reconsideration of parts of its motion for summary judgment. On April 24, 2012, the Court granted ICL’s motion for reconsideration in part, and denied it in part. In its April 24, 2012 Memorandum and Order, the Court interpreted the meaning and effect of a specific phrase in the 2009 Contract, and concluded that, if the 2009 Contract is complete and this actiona legally enforceable contract, Hawkins remained obligated to purchase 50% of its requirements for 75% purified phosphoric acid from ICL in 2009. Trial is scheduled for jury trial in late October 2011.to begin on July 23, 2012. We are not able to predict the ultimate outcome of this litigation, but it may be costly and disruptive. Lawsuitslegal proceedings such as this can result in substantial costs and divert our management’s attention and resources, which may have a material adverse effect on our business and results of operations, including cash flows.

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Asset Retirement Obligations —We have three leases of land (two relate to Hawkins and one relates to Vertex), and at the end of the lease term (currently 2014 for the Vertex lease and 2018 for the Hawkins leases if the leases are not renewed), we have a specified amount of time to remove the property and buildings. At the end of the specified amount of time, anything that remains on the land becomes the property of the lessor, and the lessor has the option to either maintain the property or remove the property at our expense. We have not been able to reasonably estimate the fair value of the asset retirement obligations, primarily due to the combination of the following factors: The Hawkins leases do not expire in the near future; we have a history of extending the leases with the lessors and currently intend to do so at expiration of the lease periods; the lessors do not have a history of terminating leases with its tenants; and because it is more likely than not that the buildings will have value at the end of the lease life and therefore, may not be removed by either the lessee or the lessor. We are currently in negotiations with the landlord regarding the Vertex land lease which expires in 2014 and expect to sign a long-term extension in the near future. Therefore, in accordance withASC 410-20, “Asset Retirement and Environmental Obligations,” we have not recorded an asset retirement obligation as of April 3, 2011.1, 2012. We will continue to monitor the factors surrounding the requirement to record an asset retirement obligation and will recognize the fair value of a liability in the period in which it is incurred and a reasonable estimate can be made.

Note 10 —Income Taxes

Note 10 — Income Taxes

The provisions for income taxes for fiscal 2012, 2011 2010 and 20092010 are as follows:

             
  2011  2010  2009 
  (In thousands) 
 
Federal — current $9,818  $6,601  $8,874 
State — current  2,531   1,634   2,331 
             
Total current  12,349   8,235   11,205 
Federal — deferred  (69)  5,739   2,420 
State — deferred  (299)  1,413   626 
             
Total deferred  (368)  7,152   3,046 
             
Total provision $11,981  $15,387  $14,251 
             


40

   2012   2011  2010 
(In thousands)           

Federal — current

  $8,632    $9,818   $6,601  

State — current

   2,546     2,531    1,634  
  

 

 

   

 

 

  

 

 

 

Total current

   11,178     12,349    8,235  

Federal — deferred

   2,796     (69)   5,739  

State — deferred

   316     (299)   1,413  
  

 

 

   

 

 

  

 

 

 

Total deferred

   3,112     (368)   7,152  
  

 

 

   

 

 

  

 

 

 

Total provision

  $14,290    $11,981   $15,387  
  

 

 

   

 

 

  

 

 

 

HAWKINS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Reconciliations of the provisions for income taxes, based on income from continuing operations, to the applicable federal statutory income tax rate of 35% are listed below.
             
  2011  2010  2009 
 
Statutory federal income tax  35.0%  35.0%  35.0%
State income taxes, net of federal deduction  4.7   5.0   5.1 
ESOP dividend deduction on allocated shares  (1.2)  (1.0)  (0.8)
Domestic production deduction  (1.3)  (0.6)  (1.0)
Other — net  (0.1)  0.9   (0.5)
             
Total  37.1%  39.3%  37.8%
             

   2012  2011  2010 

Statutory federal income tax

   35.0%   35.0%   35.0% 

State income taxes, net of federal deduction

   5.0    4.7    5.0  

ESOP dividend deduction on allocated shares

   (0.7)   (1.2)   (1.0) 

Domestic production deduction

   (0.9)   (1.3)   (0.6) 

Other — net

   0.2    (0.1)   0.9  
  

 

 

  

 

 

  

 

 

 

Total

   38.6%   37.1%   39.3% 
  

 

 

  

 

 

  

 

 

 

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of items comprising our net deferred tax asset (liability) as of April 1, 2012 and April 3, 2011 and March 28, 2010 are as follows:

         
  2011  2010 
  (In thousands) 
 
Deferred tax assets:        
Trade receivables $162  $120 
Amortization of intangibles  73   — 
Accruals  919   720 
Other  586   172 
         
Total deferred tax assets $1,740  $1,012 
         
Deferred tax liabilities:        
Inventories $(3,190) $(3,696)
Prepaid  (283)  (355)
Excess of tax over book depreciation  (8,762)  (7,743)
Amortization of intangibles  —   (136)
         
Total deferred tax liabilities $(12,235) $(11,930)
         
Net deferred tax liabilities $(10,495) $(10,918)
         

(In thousands)  2012  2011 

Deferred tax assets:

   

Trade receivables

  $184   $162  

Stock compensation accruals

   601    490  

Other accruals

   756    919  

Other

   82    169  
  

 

 

  

 

 

 

Total deferred tax assets

  $1,623   $1,740  
  

 

 

  

 

 

 

Deferred tax liabilities:

   

Inventories

  $(3,556)  $(3,190) 

Prepaid

   (703)   (283) 

Excess of tax over book depreciation

   (10,807)   (8,762) 

Amortization of intangibles

   (149)   —    
  

 

 

  

 

 

 

Total deferred tax liabilities

  $(15,215)  $(12,235) 
  

 

 

  

 

 

 

Net deferred tax liabilities

  $(13,592)  $(10,495) 
  

 

 

  

 

 

 

As of April 3, 2011,1, 2012, the Company has determined that it is more likely than not that the deferred tax assets at April 3, 20111, 2012 will be realized either through future taxable income or reversals of taxable temporary differences. As of April 1, 2012 and April 3, 2011, and March 28, 2010, there were no unrecognized tax benefits. Accordingly, a tabular reconciliation from beginning to ending periods is not provided.

We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The tax years beginning with 2007 remain open to examination by the Internal Revenue Service, and with few exceptions, state and local income tax jurisdictions.

Note 11 —Discontinued Operations

Note 11 — Discontinued Operations

In February 2009, we agreed to sell our inventory and entered into a marketing agreement regarding the business of our Pharmaceutical segment, which provided pharmaceutical chemicals to retail pharmacies and small-scale pharmaceutical manufacturers. On May 22, 2009 the majority of theThe inventory was sold in fiscal 2010 for cash of approximately $1.6$1.8 million which approximated its carrying value. The remaining inventory, with a carrying value of approximately $0.1 million, was sold during fiscal 2010. Themarketing agreement provides for annual payments based on a percentage of gross profit on future sales up to a maximum of approximately $3.7$3.5 million. We have no significant remaining obligations to fulfill under the agreement. We initially recorded a receivableAmounts received under the marketing agreement in excess of approximately $1.7 million, equal to the carrying value of theintangible assets that were related to this business. The first year payment underbusiness at the agreementtime of approximately $0.8 million was received in the second quarter of fiscal 2011, leaving a $0.9 million receivable remaining as of the end of fiscal 2011, which is expected to be collected in the second quarter of fiscal 2012. Amounts received in excess of the remaining receivable, during fiscal 2012 and subsequent years, will besale, have been recorded as a gain on sale of discontinued operationsoperations. Through fiscal 2012, we have recorded gains of approximately $1.7 million before taxes and expect to accrue a nominal amount in those periods.fiscal 2013 which will finalize the agreement. To date, we have received $2.2 million in cash under this marketing agreement and expect to collect the remaining $1.3 million in fiscal 2013. The results of the Pharmaceutical segment have been reported as discontinued operations for all periods presented.


41

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 12 —Segment Information

Note 12 — Segment Information

We have two reportable segments: Industrial and Water Treatment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Product costs and expenses for each segment are based on actual costs incurred along with cost allocation of shared and centralized functions. We evaluate performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses. Reportable segments are defined by product and type of customer. Segments are responsible for the sales, marketing and development of their products and services. The segments do not have separate accounting, administration, customer service or purchasing functions. There are no intersegment sales and no operating segments have been aggregated. Given our nature, it is not practical to disclose revenues from external customers for each product or each group of similar products. No single customer’s revenues amount to 10% or more of our revenue. No single customer represents 10% or more of either of our segments’ sales. Sales are primarily within the United States and all assets are located within the United States.

             
     Water
    
Reportable Segments
 Industrial  Treatment  Total 
  (In thousands) 
 
Fiscal Year Ended April 3, 2011:            
Sales $208,724  $88,917  $297,641 
Gross profit  36,938   24,964   61,902 
Operating income  17,110   14,852   31,962 
             
Identifiable assets* $121,250  $21,139  $142,389 
             
Fiscal Year Ended March 28, 2010:            
Sales $174,901  $82,198  $257,099 
Gross profit  37,288   27,157   64,445 
Operating income  20,937   17,903   38,840 
             
Identifiable assets* $79,602  $19,152  $98,754 
             
Fiscal Year Ended March 29, 2009:            
Sales $201,596  $82,760  $284,356 
Gross profit  41,466   20,954   62,420 
Operating income  25,520   11,817   37,337 
             
Identifiable assets* $78,083  $20,896  $98,979 
             

Reportable Segments  Industrial   Water
Treatment		   Total 
(In thousands)            

Fiscal Year Ended April 1, 2012:

      

Sales

  $251,451    $92,383    $343,834  

Gross profit

   40,357     25,511     65,868  

Operating income

   20,552     14,557     35,109  
  

 

 

   

 

 

   

 

 

 

Identifiable assets*

  $129,782    $23,543    $153,325  
  

 

 

   

 

 

   

 

 

 

Fiscal Year Ended April 3, 2011:

      

Sales

  $208,724    $88,917    $297,641  

Gross profit

   36,938     24,964     61,902  

Operating income

   17,110     14,852     31,962  
  

 

 

   

 

 

   

 

 

 

Identifiable assets*

  $121,250    $21,139    $142,389  
  

 

 

   

 

 

   

 

 

 

Fiscal Year Ended March 28, 2010:

      

Sales

  $174,901    $82,198    $257,099  

Gross profit

   37,288     27,157     64,445  

Operating income

   20,937     17,903     38,840  
  

 

 

   

 

 

   

 

 

 

Identifiable assets*

  $79,602    $19,152    $98,754  
  

 

 

   

 

 

   

 

 

 

*Unallocated assets consisting primarily of cash and cash equivalents, investments and prepaid expenses were $48.0 million at April 1, 2012, $41.7 million at April 3, 2011 and $60.5 million at March 28, 2010 and $33.4 million at March 29, 2009.2010. Additionally, assets associated with the discontinued operations of the Pharmaceutical segment were $1.2 million at April 1, 2012, $0.9 million at April 3, 2011 and $1.0 million at March 28, 2010 and $3.9 million at March 29, 2009.2010.


42

HAWKINS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 13 — Selected Quarterly Financial Data (Unaudited)

(In thousands, except per share data)                
   Fiscal 2012 
   First   Second   Third   Fourth 

Sales

  $88,594    $87,870    $84,160    $83,210  

Gross profit

   17,927     18,750     15,679     13,512  

Operating income

   10,070     10,906     8,516     5,617  

Income from continuing operations, net of tax

   6,353     6,717     5,285     3,273  

Income from discontinued operations, net of tax

   374     184     267     232  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $6,727    $6,901    $5,552    $3,505  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per share

  $0.65    $0.67    $0.54    $0.34  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share

  $0.65    $0.67    $0.53    $0.34  
  

 

 

   

 

 

   

 

 

   

 

 

 
   Fiscal 2011 
   First   Second   Third   Fourth 

Sales

  $74,665    $70,398    $70,620    $81,957  

Gross profit

   18,447     17,742     13,726     11,986  

Operating income

   11,786     10,928     6,833     2,414  

Income from continuing operations, net of tax

   7,337     6,832     4,254     1,891  

Income from discontinued operations, net of tax

   —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $7,337    $6,832    $4,254    $1,891  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per share

  $0.72    $0.67    $0.41    $0.18  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share

  $0.71    $0.66    $0.41    $0.18  
  

 

 

   

 

 

   

 

 

   

 

 

 

Note 13 —Selected Quarterly Financial Data (Unaudited)

                 
  Fiscal 2011 
  First  Second  Third  Fourth 
  (In thousands, except per share data) 
 
Sales $74,665  $70,398  $70,620  $81,957 
Gross profit  18,447   17,742   13,726   11,986 
Operating income  11,786   10,928   6,833   2,414 
Income from continuing operations  7,337   6,832   4,254   1,891 
                 
Net income $7,337  $6,832  $4,254  $1,891 
                 
Basic net income per share $0.72  $0.67  $0.41  $0.18 
                 
Diluted net income per share $0.71  $0.66  $0.41  $0.18 
                 
                 
  Fiscal 2010 
  First  Second  Third  Fourth 
 
Sales $73,586  $64,976  $60,627  $57,910 
Gross profit  15,856   17,416   15,855   15,318 
Operating income  9,501   10,848   9,408   9,083 
Income from continuing operations  5,944   6,665   5,595   5,534 
Income from discontinued operations, net of tax  109   —   —   — 
                 
Net income $6,053  $6,665  $5,595  $5,534 
                 
Basic net income per share $0.59  $0.65  $0.55  $0.54 
                 
Diluted net income per share $0.59  $0.65  $0.54  $0.54 
                 


43

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of the end of the period covered by this Annual Report onForm 10-K, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant toRules 13a-15(f) and15d-15(f) of the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are defined byRules 13a-15(e) and15d-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.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRules 13a-15(f) and15d-15(f) of the Securities Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of April 3, 2011,1, 2012, based on the criteria described inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. Based on this assessment, management believes that our internal control over financial reporting was effective as of April 3, 2011.

1, 2012.

Our independent registered public accounting firm has issued an attestation report on our internal control over financial reporting for April 3, 2011.1, 2012. That attestation report is set forth immediately following this management report.

/s/  Patrick H. Hawkins

/s/  Kathleen P. Pepski

Patrick H. Hawkins
Kathleen P. Pepski

Chief Executive Officer and President

June 9, 20111, 2012

 
/s/  Kathleen P. Pepski

Kathleen P. Pepski
Vice President, Chief Financial Officer,
and Treasurer
June 9, 20111, 2012


44

Attestation Report of Registered Public Accounting Firm

The attestation report required under this Item 9A is contained in Item 8 of this Annual Report on10-K under the caption “Report of Independent Registered Public Accounting Firm.”

Changes in Internal Control Procedures

Except as set forth below, there

There was no change in our internal control over financial reporting during the fourth quarter of fiscal 20112012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In connection with the Vertex acquisition Beginning in fiscal 2012 management has elected to excludeincluded Vertex fromin management’s assessment of the effectiveness of our internal control over financial reporting for the year ended April 3, 2011 as permitted by the Securities and Exchange Commission. As of April 3, 2011, total net tangible assets attributable to Vertex represented approximately $20 million or 12% of our total assets. Total revenue attributable to Vertex represented approximately $9 million of net revenue, or 3% of net revenue for the fiscal year ended April 3, 2011.
reporting.

ITEM 9B.OTHER INFORMATION

Not Applicable

PART III

Certain information required by Part III is incorporated by reference from Hawkins’ definitive Proxy Statement for the Annual Meeting of Shareholders to be held on August 2, 20112012 (the “2011“2012 Proxy Statement”). Except for those portions specifically incorporated in thisForm 10-K by reference to Hawkins’the 2012 Proxy Statement, no other portions of the 20112012 Proxy Statement are deemed to be filed as part of thisForm 10-K.

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Our executive officers, their ages and offices held, as of May 31, 201125, 2012 are set forth below:

Name

Age   

Office

Patrick H. Hawkins

   
Name
Age
Office
Patrick H. Hawkins4041    Chief Executive Officer and President

Kathleen P. Pepski

   5657    Vice President, Chief Financial Officer, and Treasurer

Mark A. Beyer

50Vice President — Operations

Richard G. Erstad

48Vice President, General Counsel and Secretary

Thomas J. Keller

52Vice President — Water Treatment Group

Theresa R. Moran

   49    Vice President — Operations
Richard G. Erstad47Vice President, General Counsel and Secretary
Theresa R. Moran48Vice President — Quality and Support
Keenan A. Paulson

John R. Sevenich

   61Vice President — Water Treatment Group
John R. Sevenich5354    Vice President — Industrial Group

Patrick H. Hawkinswas appointed to serve as our Chief Executive Officer and President in March 2011. He had previously been promoted to the position of President in March 2010 as part of the Board’s succession planning efforts. He joined the Company in 1992 and served as the Business Director — Food and Pharmaceuticals, a position he held from 2009 to 2010. Previously he served as Business Manager — Food and Co-Extrusion Products from 2007 to 2009 and Sales Representative — Food Ingredients from 2002 to 2007. He previously served the Company in various other capacities, including Plant Manager, Quality Director and Technical Director.

Kathleen P. Pepskihas been the Company’s Vice President, Chief Financial Officer and Treasurer since February 2008 and was Secretary from February 2008 to November 2008. She was the Executive Vice President and Chief Financial Officer of PNA Holdings, LLC and Katun Corporation, a supplier of business equipment parts, from 2003 to 2007, the Vice President of Finance of Hoffman Enclosures, a manufacturer of systems enclosures and a subsidiary of Pentair, Inc., from 2002 to 2003, Senior Vice President and Chief Financial Officer of BMC Industries, Inc., a manufacturer of lenses and aperture masks, from 2000 to 2001, and Vice President and Controller at Valspar Corporation, a paint and coatings manufacturer, from 1994 to 2000.


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Mark A. Beyerhas been the Company’s Vice President of Operations since September 2009. Mr. Beyer previously held operations leadership positions with Boston Scientific Corporation, a medical device manufacturer, and General Mills, Inc., a diversified food company. He was self-employed as a consultant from January 2005 to September 2009.

Richard G. Erstadhas been the Company’s Vice President, General Counsel and Secretary since November 2008. He was General Counsel and Secretary of BUCA, Inc., a restaurant company, from 2005 to 2008. Mr. Erstad had previously been an attorney with the corporate group of Faegre & Benson LLP, a law firm, from 1996 to 2005, where his practice focused on securities law and mergers and acquisitions. He is a member of the Minnesota Bar.

Thomas J. Kellerhas been the Company’s Vice President — Water Treatment Group since April 2012. Prior to attaining this position, Mr. Keller held various positions during his 32-year tenure with the Company, most recently as its Water Treatment General Manager, a position he held since June 2011. Previously, Mr. Keller served as a Regional Manager of the Water Treatment Group from 2002 to 2011.

Theresa R. Moranhas been the Company’s Vice President — Quality and Support since February 2010. Since joining the Company in 1981, Ms. Moran has served the Company in a variety of positions, including Administration Operations Manager from 1999 to 2007 and most recently as Director — Process Improvement, a position she held from 2007 until the time of her promotion.

Keenan A. Paulsonhas been the Company’s Vice President — Water Treatment Group since May 2000. Prior to attaining this position, Ms. Paulson held various positions during her

37-year career with the Company, most recently as its Water Treatment General Manager.

John R. Sevenichhas been the Company’s Vice President — Industrial Group since May 2000. He was the Business Unit Manager of Manufacturing from 1998 to 2000 and was a Sales Representative with the Company from 1989 to 1998.

“Election of Directors,” “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the 20102011 Proxy Statement are incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics that applies to all of our directors and employees, including our principal executive officer, principal financial officer, controller and other persons performing similar functions. We have posted the Code of Business Conduct and Ethics on our website located athttp://www.hawkinsinc.com. Hawkins’ Code of Business Conduct and Ethics is also available in print to any shareholder who requests it in writing from our Corporate Secretary. We intend to post on our website any amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, controller and other persons performing similar functions within four business days following the date of such amendment or waiver. We are not including the information contained on our website as part of, or incorporating it by reference into, this report.

ITEM 11.EXECUTIVE COMPENSATION

“Compensation of Executive Officers and Directors” of the 20112012 Proxy Statement is incorporated herein by this reference.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

“Security Ownership of Management and Beneficial Ownership” and “Equity Compensation Plan Information” of the 20112012 Proxy Statement are incorporated herein by this reference.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

“Election of Directors” and “Related Party Transactions” of the 20112012 Proxy Statement are incorporated herein by this reference.


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ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

“Independent Registered Public Accounting Firm’s Fees” of the 20112012 Proxy Statement is incorporated herein by this reference.

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a
)

(a)(1)

  FINANCIAL STATEMENTS OF THE COMPANY
  The following financial statements of Hawkins, Inc. are filed as part of this Annual Report onForm 10-K:
  Reports of Independent Registered Public Accounting Firms.
  Consolidated Balance Sheets at April 1, 2012 and April 3, 2011 and March 28, 2010.2011.
  Consolidated Statements of Income for the fiscal years ended April 1, 2012, April 3, 2011, and March 28, 2010, and March 29, 2009.2010.
  Consolidated Statements of Shareholders’ Equity for the fiscal years ended April 1, 2012, April 3, 2011, and March 28, 2010, and March 29, 2009.2010.
  Consolidated Statements of Cash Flows for the fiscal years ended April 1, 2012, April 3, 2011, and March 28, 2010, and March 29, 2009.2010.
  Notes to Consolidated Financial Statements.
(a)

(a)(2)

  FINANCIAL STATEMENT SCHEDULES OF THE COMPANY
  The additional financial data listed below is included as a schedule to this Annual Report onForm 10-K and should be read in conjunction with the financial statements presented in Part II, Item 8. Schedules not included with this additional financial data have been omitted because they are not required or the required information is included in the financial statements or the notes.
  The following financial statement schedule for the fiscal years 2012, 2011 2010 and 2009.2010.
  Schedule II — Valuation and Qualifying Accounts.
(a)

(a)(3)

  EXHIBITS
  The exhibits of this Annual Report onForm 10-K included herein are set forth on the attached Exhibit Index.


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HAWKINS, INC.

HAWKINS, INC.

Date: June 9, 20111, 2012

 By

/s/  Patrick H. Hawkins

Patrick H. Hawkins,

Chief Executive Officer and President

Patrick H. Hawkins,
Chief Executive Officer and President

POWER OF ATTORNEY

Each of the undersigned directors of the Company, does hereby make, constitute and appoint Patrick H. Hawkins and Kathleen P. Pepski, and either of them, the undersigned’s true and lawful attorney-in-fact and agent, acting alone, with full power of substitution, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name as such director of the Company, in any and all capacities, to any and all amendments to this Annual Report onForm 10-K and to file the same, with all exhibits thereto, and other documents in connection wherewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact, and either of them, full power and authority to do and perform each and every act necessary or incidental to the performance and execution of the powers herein expressly granted.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has also been signed below by the following persons on behalf of the Company and in the capacities indicated on the date set forth beside their signature.

/s/  Patrick H. Hawkins


Date: June 1, 2012

Patrick H. Hawkins, Chief Executive Officer and

President (Principal Executive Officer) and Director

  Date: June 9, 2011

/s/  Kathleen P. Pepski


Date: June 1, 2012

Kathleen P. Pepski, Vice President, Chief Financial

Officer, and Treasurer (Principal Financial Officer

and Principal Accounting Officer)

  Date: June 9, 2011

/s/  John S. McKeon


Date: June 1, 2012
John S. McKeon, Director, Chairman of the Board  Date: June 9, 2011

/s/  Duane M. Jergenson


Date: June 1, 2012
Duane M. Jergenson, Director  Date: June 9, 2011

/s/  Daryl I. Skaar


Date: June 1, 2012
Daryl I. Skaar, Director  Date: June 9, 2011

/s/  James A. Faulconbridge


Date: June 1, 2012
James A. Faulconbridge, Director  Date: June 9, 2011

/s/  James T. Thompson


Date: June 1, 2012
James T. Thompson, Director  Date: June 9, 2011

/s/  Jeffrey L. Wright


Date: June 1, 2012
Jeffrey L. Wright, Director  Date: June 9, 2011


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Schedule VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II

HAWKINS, INC.

VALUATION AND QUALIFYING ACCOUNTS

FOR THE FISCAL YEARS ENDED APRIL 1, 2012, APRIL 3, 2011, AND MARCH 28, 2010 AND MARCH 29, 2009

                     
    Additions    
  Balance at
 Charged to
 Charged to
    
  Beginning
 Costs and
 Other
 Deductions
 Balance at
Description
 of Year Expenses Accounts Write-Offs End of Year
  (In thousands)
 
Reserve deducted from asset to which it applies:                    
Year Ended April 3, 2011:                    
Allowance for doubtful accounts $300  $120  $—  $14  $406 
Year Ended March 28, 2010:                    
Allowance for doubtful accounts $350  $(29) $—  $21  $300 
Year Ended March 29, 2009:                    
Allowance for doubtful accounts $225  $230  $—  $105  $350 


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       Additions         

Description

  Balance at
Beginning
of Year		   Charged to
Costs and
Expenses		  Charged to
Other
Accounts		   Deductions
Write-Offs		   Balance at
End of  Year		 
   (In thousands) 

Reserve deducted from asset to which it applies:

         

Year Ended April 1, 2012:

         

Allowance for doubtful accounts

  $406    $78   $—      $24    $460  

Year Ended April 3, 2011:

         

Allowance for doubtful accounts

  $300    $120   $—      $14    $406  

Year Ended March 28, 2010:

         

Allowance for doubtful accounts

  $350    $(29)  $—      $21    $300  

Exhibit Index

Unless otherwise indicated, all documents incorporated into this Annual Report onForm 10-K by reference to a document filed with the SEC are located under file number 0-7647.

       
Exhibit
 
Description
 
Method of Filing
 
 2.1 Asset Purchase Agreement, dated as of January 10, 2011, among Vertex Chemical Corporation, Novel Wash Co., Inc., R.H.A. Corporation, Twin Acquisition Corp. and Hawkins, Inc.(1) Incorporated by Reference
 3.1 Amended and Second Restated Articles of Incorporation as amended through February 27, 2001.(2) Incorporated by Reference
 3.2 Amended and Restated By-Laws.(3) Incorporated by Reference
 10.1* Retention Bonus Agreement with John R. Hawkins Incorporated by Reference
 10.2* Description of Consulting Arrangement with John S. McKeon.(4) Incorporated by Reference
 10.3* Hawkins, Inc. 2004 Omnibus Stock Plan.(5) Incorporated by Reference
 10.4* Form of Restricted Stock Agreement under the Company’s 2004 Omnibus Stock Plan.(6) Incorporated by Reference
 10.5* Form of Restricted Stock Agreement (Directors) under the Company’s 2004 Omnibus Stock Plan.(7) Incorporated by Reference
 10.6* Form of Non-Statutory Stock Option Agreement under the Company’s 2004 Omnibus Stock Plan.(8) Incorporated by Reference
 10.7* Form of Performance-Based Restricted Stock Unit Award Notice and Restricted Stock Agreement under the Company’s 2004 Omnibus Stock Plan.(9) Incorporated by Reference
 10.8* Hawkins, Inc. 2010 Omnibus Incentive Plan.(10) Incorporated by Reference
 10.9* Form of Performance-Based Unit Award Notice and Restricted Stock Agreement under the Company’s 2010 Omnibus Incentive Plan.(11) Incorporated by Reference
 10.10* Form of Restricted Stock Agreement under the Company’s 2010 Omnibus Incentive Plan.(12) Incorporated by Reference
 23.1 Consent of Independent Registered Public Accounting Firm. Filed Electronically
 23.2 Consent of Independent Registered Public Accounting Firm. Filed Electronically
 31.1 Certification by Chief Executive Officer pursuant toRule 13a-14(a) of the Exchange Act. Filed Electronically
 31.2 Certification by Chief Financial Officer pursuant toRule 13a-14(a) of the Exchange Act. Filed Electronically
 32.1 Section 1350 Certification by Chief Executive Officer. Filed Electronically
 32.2 Section 1350 Certification by Chief Financial Officer. Filed Electronically

Exhibit

Description

Method of Filing

*  3.1Amended and Second Restated Articles of Incorporation.(1)Incorporated by Reference
  3.2Amended and Restated By-Laws.(2)Incorporated by Reference
10.1*Description of Consulting Arrangement with John S. McKeon.(3)Incorporated by Reference
10.2*Hawkins, Inc. 2004 Omnibus Stock Plan.(4)Incorporated by Reference
10.3*Form of Restricted Stock Agreement under the Company’s 2004 Omnibus Stock Plan.(5)Incorporated by Reference
10.4*Form of Restricted Stock Agreement (Directors) under the Company’s 2004 Omnibus Stock Plan.(6)Incorporated by Reference
10.5*Form of Non-Statutory Stock Option Agreement under the Company’s 2004 Omnibus Stock Plan.(7)Incorporated by Reference
10.6*Form of Performance-Based Restricted Stock Unit Award Notice and Restricted Stock Agreement under the Company’s 2004 Omnibus Stock Plan.(8)Incorporated by Reference
10.7*Hawkins, Inc. 2010 Omnibus Incentive Plan.(9)Incorporated by Reference
10.8*Form of Performance-Based Unit Award Notice and Restricted Stock Agreement under the Company’s 2010 Omnibus Incentive Plan.(10)Incorporated by Reference
10.9*Form of Restricted Stock Agreement under the Company’s 2010 Omnibus Incentive Plan.(11)Incorporated by Reference
10.10*Hawkins, Inc. Executive Severance Plan.(12)Incorporated by Reference
23.1Consent of Independent Registered Public Accounting Firm.Filed Electronically
31.1Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act.Filed Electronically
31.2Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.Filed Electronically
32.1Section 1350 Certification by Chief Executive Officer.Filed Electronically
32.2Section 1350 Certification by Chief Financial Officer.Filed Electronically
101Financial statements from the Annual Report on Form 10-K of Hawkins, Inc. for the period ended April 1, 2012, filed with the SEC on June 1, 2012, formatted in Extensible Business Reporting Language (XBRL); (i) the Condensed Consolidated Balance Sheets at April 1, 2012 and April 3, 2011, (ii) the Condensed Consolidated Statements of Income for the fiscal years ended April 1, 2012, April 3, 2011 and March 28, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the fiscal years ended April 1, 2012, April 3, 2011 and March 28, 2010, and (iv) Notes to Condensed Consolidated Financial Statements.Filed Electronically

*Management contract or compensation plan or arrangement required to be filed as an exhibit to this Annual Report onForm 10-K.

(1)Incorporated by reference to Exhibit 2.1 to the Company’s Current Report onForm 8-K dated January 10, 2011 and filed January 11, 2011
(2)Incorporated by reference to Exhibit 3.1 to the Company’s AnnualQuarterly Report onForm 10-K10-Q for the yearquarterly period ended SeptemberJune 30, 2001.2010.
(3)(2)Incorporated by reference to Exhibit 3.1 to the Company’s Current Report onForm 8-K dated October 28, 2009 and filed November 3, 2009.
(4)(3)Incorporated by reference to Item 1.01 of the Company’s Current Report onForm 8-K dated August 5, 2009 and filed August 11, 2009.
(5)(4)Incorporated by reference to Appendix B to the Company’s Proxy Statement for the 2004 Annual Meeting of Shareholders filed July 23, 2004.


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(6)(5)Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report onForm 10-Q for the quarterly period ended September 30, 2004 and filed November 9, 2004.30.
(7)(6)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for the quarterly period ended September 30, 2008.
(8)(7)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2008.
(9)(8)Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2008.
(10)(9)Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on FormS-8 filed June 6, 2011 (fileno. 333-174735).
(11)(10)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2010.
(12)(11)Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form10-Q for the quarterly period ended June 30, 2010.
(12)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 3, 2011.


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