Name of exchange on which registered: Securities registered pursuant to Section 12(g) of the Act: 2011. PART I ITEM 1B. ITEM 2. ITEM 3. ITEM 4. ITEM 5. ITEM 6. ITEM 7. ITEM 7A. ITEM 8. ITEM 9. ITEM 9A. ITEM 9B. ITEM 10. ITEM 11. ITEM 12. ITEM 13. ITEM 14. ITEM 15. 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 future. You should consider carefully the following risks when reading the information,including the financial information, contained in this Annual Report onForm 10-K. can realize. Demand for our products is affected by general economic conditions and by thecyclical nature of many of the industries we serve, which could cause significantfluctuations in our sales volumes and results. Our business, particularly that of our Water Treatment Group and our agricultural product sales, is subject to seasonality andweather conditions, which could adversely affect our results of operations. operations. subject. Quarterly Stock Data Fiscal 2012 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Fiscal 2011 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Cash Dividends Fiscal 2013 1st Quarter Fiscal 2012 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Fiscal 2011 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Sales from continuing operations Gross profit from continuing operations Income from continuing operations Basic earnings per common share from continuing operations Diluted earnings per common share from continuing operations Cash dividends declared per common share Cash dividends paid per common share Total assets Total assets shown below are for the Company’s total operations. fiscal 2013 of approximately $1.7 million, which have been recorded in cost of sales in our Industrial segment. sales. any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities. This definition is more consistent with the business of a company primarily focused on bulk chemical distribution. The disclosures in this document referring to sales of bulk commodity products have been recalculated for all periods presented based on this revised definition. Sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Investment income Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Income from discontinued operations, net of tax Net income 2013 Sales tax provision taxes. Directors. position. Contractual Obligation Operating lease obligations FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ASSETS CURRENT ASSETS: Cash and cash equivalents Investments available-for-sale Trade receivables — less allowance for doubtful accounts: $460 for 2012 and $406 for 2011 Inventories Income taxes receivable Prepaid expenses and other current assets Total current assets PROPERTY, PLANT, AND EQUIPMENT: Land Buildings and improvements Machinery and equipment Transportation equipment Office furniture and equipment including computer systems Less accumulated depreciation and amortization Net property, plant, and equipment OTHER ASSETS: Goodwill Intangible assets — less accumulated amortization: $1,790 for 2012 and $1,165 for 2011 Long-term investments Other Total other assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable — trade Dividends payable Accrued payroll and employee benefits Deferred income taxes Container deposits Other accruals Total current liabilities OTHER LONG-TERM LIABILITIES DEFERRED INCOME TAXES Total liabilities 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 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders’ equity Sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Investment income Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Income from discontinued operations, net of tax Net income Weighted average number of shares outstanding-basic Weighted average number of shares outstanding-diluted Basic earnings per share Earnings per share from continuing operations Earnings per share from discontinued operations Basic earnings per share Diluted earnings per share Earnings per share from continuing operations Earnings per share from discontinued operations Diluted earnings per share Cash dividends declared per common share BALANCE — March 29, 2009 Cash dividends Stock compensation expense Vesting of restricted stock Comprehensive income: Unrealized gain on available-for-sale investments, net of tax Unrealized loss on post-retirement plan liability, net of tax Net income Comprehensive income BALANCE — March 28, 2010 Cash dividends Stock compensation expense Tax benefit on share-based compensation plans Vesting of restricted stock Shares surrendered for payroll taxes Comprehensive income: Unrealized loss on available-for-sale investments, net of tax Unrealized loss on post-retirement plan liability, net of tax Net income Comprehensive income BALANCE — April 3, 2011 Cash dividends Stock compensation expense Tax benefit on share-based compensation plans Vesting of restricted stock Shares surrendered for payroll taxes Stock Options Exercised ESPP Shares Issued Comprehensive income: Unrealized loss on available-for-sale investments, net of tax Unrealized gain on post-retirement plan liability, net of tax Net income Comprehensive income BALANCE — April 1, 2012 COMPREHENSIVE INCOME CASH FLOWS FROM OPERATING ACTIVITIES: Net income Reconciliation to cash flows: Depreciation and amortization Deferred income taxes Stock compensation expense Loss from property disposals Changes in operating accounts (using) providing cash, net of effects of acquisition: Trade receivables Inventories Accounts payable Accrued liabilities Income taxes Other Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment Purchases of investments Sale and maturities of investments Proceeds from property disposals Acquisition of Vertex Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends paid New Shares Issued Stock Options Exercised Excess tax benefit from share-based compensation Shares surrendured for payroll taxes Net cash used in financing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS- Beginning of period CASH AND CASH EQUIVALENTS- End of period SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION- Cash paid during the year for income taxes Noncash investing activities- Acquisition purchase price in accounts payable Capital expenditures in accounts payable thousands, except share data) The financial assets and liabilities that are re-measured and reported at fair value for each reporting period include marketable recognized or disclosed at fair value in our consolidated financial statements on a recurring basis. Property, Plant and Equipment 2012. it was not necessary to perform a quantitative impairment test for fiscal 2014. years. Weighted average common shares outstanding — basic Dilutive impact of stock options, performance units, and restricted stock Weighted average common shares outstanding — diluted 2012. incurred. Accounts receivable Inventories Other current assets Property, plant and equipment Goodwill Intangibles Accounts payable Accrued employee benefits Total purchase price administrative expenses. The fair value adjustments recorded during the twelve months ended March 30, 2014 were immaterial. Customer relationships Trademark Carrier relationships Intangible assets acquired intangible assets; and $0.9 million to goodwill. The goodwill recognized as a result of the Pro forma net sales Pro forma net earnings Pro forma earnings per share: Basic Diluted Weighted average common shares outstanding: Basic Diluted Water Treatment segment. Description Assets: Cash Certificates of deposit Money market securities Description Assets: Cash Certificates of deposit Money market securities assets. less Within one year Between one and two years Total available-for-sale securities Within one year Between one and two years Total available-for-sale securities below: 2012. Finished goods (FIFO basis) LIFO reserve Net inventory The FIFO value of inventories accounted for under the LIFO method Balance as of March 28, 2010 Vertex acquisition Balance as of April 3, 2011 Fiscal 2012 adjustment Balance as of April 1, 2012 Finite-life intangible assets: Customer relationships Trademark Trade secrets Carrier relationships Other finite-life intangible assets Total finite-life intangible assets Indefinite-life intangible assets Total intangible assets, net March 31, 2013: Finite-life intangible assets: Customer relationships Trademark Trade secrets Carrier relationships Other finite-life intangible assets Total finite-life intangible assets Indefinite-life intangible assets Total intangible assets, net Intangible asset amortization expense was 2012. Estimated amortization expense Unrealized gain (loss) on: Available-for-sale investments Post-retirement plan liability adjustments Accumulated other comprehensive income (loss) Dividend yield Volatility Risk-free interest rate Expected life in years Outstanding at beginning of year Granted Vested Exercised Forfeited or expired Outstanding at end of year Outstanding at beginning of year Granted Vested Exercised Forfeited or expired Outstanding at end of year Performance-Based Restricted Stock Units. Our Board of Directors has approved a performance-based equity compensation arrangement for our executive officers. This performance-based arrangement provides for the grant of performance-based restricted stock units that represent a possible future issuance of restricted shares of our common stock based on our pre-tax income target for the applicable fiscal year. The actual number of restricted shares to be issued to each executive officer will be determined when our final financial information becomes available after the applicable fiscal year and will be between zero shares and Outstanding at beginning of year Granted Vested Forfeited or expired Outstanding at end of year 2012. 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 Outstanding at beginning of period Granted Vested Forfeited or expired Outstanding at end of period 2014: Our contribution to the profit sharing plan was 15% of each employee’s eligible compensation in fiscal year 2012. for fiscal year 2012. Benefit Plan Profit sharing ESOP ESPP Vertex plan Total contribution expense plans for fiscal 2014, 2013 and 2012: 2012. Minimum lease payment Minimum rentals Contingent rentals Total rental expense certain Federal — current State — current Total current Federal — deferred State — deferred Total deferred Total provision Statutory federal income tax State income taxes, net of federal deduction ESOP dividend deduction on allocated shares Domestic production deduction Other — net Total Deferred tax assets: Trade receivables Stock compensation accruals Other accruals Other Total deferred tax assets Deferred tax liabilities: Inventories Prepaid Excess of tax over book depreciation Amortization of intangibles Total deferred tax liabilities Net deferred tax liabilities Fiscal Year Ended April 1, 2012: Sales Gross profit Operating income Identifiable assets* Fiscal Year Ended April 3, 2011: Sales Gross profit Operating income Identifiable assets* Fiscal Year Ended March 28, 2010: Sales Gross profit Operating income Identifiable assets* Sales Gross profit Operating income Income from continuing operations, net of tax Income from discontinued operations, net of tax Net income Basic net income per share Diluted net income per share Sales Gross profit Operating income Income from continuing operations, net of tax Income from discontinued operations, net of tax Net income Basic net income per share Diluted net income per share $3.2 million (pre-tax) charge related to a legal settlement (see Note 9 for further discussion). In the third quarter of fiscal 2013, we recorded a $7.2 million (pre-tax) charge related to our withdrawal from a multiemployer pension plan (see Note 8 for further discussion). Both items negatively impacted gross profit. March 30, 2014. /s/ Patrick H. Hawkins /s/ Kathleen P. Pepski Chief Executive Officer and President Name Office Patrick H. Hawkins Kathleen P. Pepski Thomas J. Keller Steven D. Matthews II John R. Sevenich Richard G. Erstadhas been “Compensation of Executive Officers and Directors” of the “Security Ownership of Management and Beneficial Ownership” and “Equity Compensation Plan Information” of the “Election of Directors” and “Related Party Transactions” of the “Independent Registered Public Accounting Firm’s Fees” of the (a)(1) (a)(2) (a)(3) Date: /s/ Patrick H. Hawkins /s/ Kathleen P. Pepski /s/ John S. McKeon /s/ Duane M. Jergenson /s/ Daryl I. Skaar /s/ James A. Faulconbridge /s/ James T. Thompson /s/ Jeffrey L. Wright Description Reserve deducted from asset to which it applies: Year Ended April 1, 2012: Allowance for doubtful accounts Year Ended April 3, 2011: Allowance for doubtful accounts Year Ended March 28, 2010: Allowance for doubtful accounts Exhibit Description Method of FilingForm 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended April 1, 2012Commission File No. 0-7647Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-7647 MINNESOTA 41-0771293MINNESOTA 41-0771293 (State of Incorporation) 3100 East Hennepin Avenue, Minneapolis, 5541355113(Address of Principal Executive Offices) (Zip Code) Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, PAR VALUE $.05 PER SHARE NASDAQ Global Market NONE þ¨Large accelerated filer ¨ Non-accelerated filer ¨ Accelerated filer þ Non-accelerated filer¨(Do not check if a smaller reporting company) Smaller reporting company ¨oOctober 2, 2011September 29, 2013 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $285.4$358.3 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.25, 2012,23, 2014, the Registrant had 10,470,31510,612,640 shares of common stock outstanding.2, 2012,7, 2014, are incorporated by reference in Part III.endingended March 31, 2013, “fiscal 2012” means our fiscal year endingended April 1, 2012 and “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.April 1, 2012March 30, 2014 PagePART IITEM 1.Business 4Page ITEM 1. ITEM 1A. 611111313PART II 1415162324474748PART III 4950505050PART IV 51bulk chemicalsblends 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 theour strong customer focus and have expanded our business by increasing our sales of value-added specialty chemical products, including repackaging, blending, manufacturing and manufacturingdiluting certain products. In recent years, we significantly expanded the sales of our higher-margin blended and manufactured products. We believe that we create value for our customers through superb service and support, quality products, personalized applications and our trustworthy, creative employees.our Financial Statements and Notes to Financial Statements. See Items 7 and 8 of this Annual Report on Form 10-K.primarily to theindustries such as agriculture, energy, electronics, food, chemical processing, pulp and paper, pharmaceutical, medical device and plating industries.plating. The group’s principal products are acids, alkalis and industrial and food-grade salts.•Manufactures sodium hypochlorite (bleach), agricultural products and certain food-grade products, including our patented Cheese-Phos® liquid phosphate, lactates and other blended products;packaging for household chemicals.bleach packaging.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 2010, we completed 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 businesses. We also opened a facility in Minneapolis, Minnesota, to handle bulk chemicals sold to pharmaceutical manufacturers. single well to a multi-million gallon-per-day treatmentmulti-million-gallon-per-day facility. 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.1820 cities supplying products and services to customers primarily in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Tennessee, Wisconsin and Wyoming. We opened one new warehouse in each of these warehouses in fiscal 2014, 2013 and 2012, two in fiscal 2011, 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 on Form 10-K.future should shortages occur.The patent for our Cheese-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. No single In fiscal 2014, none of our customers accounted for 10.0% or more of our total sales. Sales to our largest customer represents more than 10%represented 6.9% of either our total sales or thein fiscal 2014, 7.4% of our total sales in fiscal 2013 and 7.2% of our total sales in fiscal 2012. Aggregate sales to our five largest customers, all of which are in our Industrial segment, represented 20.8% of our total sales in fiscal 2014, 21.8% of our total sales in fiscal 2013 and 24.8% of our total sales in fiscal 2012. No other customer represented more than 2.0% of our total sales in fiscal 2014. The loss of any of our segments, but the losslargest customers, or a substantial portion of our five largest customerstheir business, could have a material adverse effect on our results of operations. Total aggregate sales to our five largest customers were $55.6 million in fiscal 2010, $64.3 million in fiscal 2011 and $72.2 million in fiscal 2012.handle.offer. 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.in,by sales to customers within, and long-lived assets are located in, the United States.States, with only approximately 0.5% of our total revenues to customers outside of the U.S. in fiscal 2014.343361 employees as of April 1, 2012,March 30, 2014, including 4851 covered by a collective bargaining agreement.agreements.3100 East Hennepin Avenue, Minneapolis,2381 Rosegate, Roseville, Minnesota.RISK FACTORScommodity chemicals,our chemical raw materials, which are may becyclical in nature, could have a material adverse effect on our operations and themargins we receive on sales of our products.Periodically, wesignificantregular and rapidrecurring fluctuations in the commodity pricing of our raw materials. Those fluctuations can be significant and occur rapidly. 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 chemicalschemical raw materials will favorably impact our operations or whethernegatively impact the margins we will experience a negative impact due to oversupply and lower prices.variabilitypotential variance 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, theour 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, theour 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.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.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, changes in general economic 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.productsneeds or failure of our products to meet customers’ quality specifications could adversely affect our sales and profitability.productsproduct needs 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.guaranteed,required, a customer could seek replacement of the product or damages for costs incurred as a result of the product failing to perform as expected.failure. 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.diminishmake it impossible for us to make sales to our ability to meet our output goalscustomers and may result in a negative public or political reaction. Many of our facilities are bordered bynear significant residential populations which increaseincreases the risk of negative public or political reaction should an environmental issue occur and could lead to adverse zoning or other regulatory 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.liabilities.liabilities and risks.limithalt our operations.operations, which could have a material adverse effect on our operations as a whole, including our results of operations and cash flows. Liabilities associated with the investigation and cleanup of releases of hazardous substances, as well as personal injury, property damages or natural resource damages arising out of such releases of 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 been, and may in the future be, subject to claims relating to exposure to hazardous materials and the associated liabilities may be material.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 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 of63.4% 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 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.If the collective bargaining process results in our withdrawal from the Fund, the withdrawal would likely take effect in the fourth quarter of fiscal 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 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.operations and financial condition.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.new site security requirements, specifically on chemical facilities, which requirehave increased capital spending and increase our overhead expenses. New federalFederal regulations have alreadyalso 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.aanother 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), 2023 (one lease) 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 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 believe that we carry customary levels of insurance covering the replacement of damaged property.Group Location Approx.Square Feet IndustrialGroup Location Industrial St. Paul, MN(1) 32,000 Minneapolis, MN(2) 29,0009,000 Centralia, IL(3) 77,000 Camanche, IA(4)IA 95,000 St Louis, MO(4)MO 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(6) 18,000 Superior, WI 17,000 Slater, IA 12,000 Lincoln, NE(6) 16,000 Eldridge, IA 6,000 Columbia, MO(6) 14,000 Garnett, KS 18,000 Ft. Smith, AR(6) 17,000 Muncie, IN(7)IN12,000 12,000Centralia, IL Centralia, IL(7)39,000 39,000Havana, IL 16,000 Tulsa, OK 7,300 Industrial and Water Treatment St. Paul, MN(8)MN(7)59,000 59,000Memphis, TN(4)TN 41,000 (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.2018.(2) This facility is leased from a third party to serve our bulk pharmaceutical customers.and is warehouse space.(3) This facility includes 10 acres of land located in Centralia, Illinois owned by the company. The facility became operational in July 2009includes manufacturing capacity 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 andland for this manufacturing and warehouse facilities located in Memphis, Tennessee; Camanche, Iowa; and Dupo, Illinois. All of the facilities and land are owned by the company with the exception of the land in Dupo, Illinois, whichpackaging facility is leased from a third party. Theparty, with the lease runs throughexpiring in May 2014. The2023.(5) This facility in Memphis is shared betweenincludes 28 acres of land owned by the Industrialcompany. This manufacturing facility was constructed by us and Water Treatment Groups.has outside storage tanks for the storage of bulk chemicals, as well as numerous smaller tanks for storing and mixing chemicals.(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. (7)This facility was purchased in fiscal 2011.(8)(7)Our Red Rock facility, which consists of a 59,000 square-foot building located on approximately 10 acres of land, has outside storage capacity for liquid bulk chemicals, as well as numerous smaller tanks for storing and mixing chemicals. The land is leased from the Port Authority of the City of St. Paul, Minnesota and the lease runs until 2029. ITEM 3.LEGAL PROCEEDINGSOn 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. After the completion of discovery, both parties moved for summary judgment in their 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 a legally enforceable contract, Hawkins remained obligated to purchase 50% of its requirements for 75% purified phosphoric acid from ICL in 2009. Trial is scheduled to begin on July 23, 2012. Wenot able to predict the ultimate outcome of this litigation, butno material pending legal proceedings, such as this can result in substantial costs and divertother than ordinary routine litigation incidental to the business, to which we or any of our management’s attention and resources, which may have a material adverse effect on our business and results of operations, including cash flows.Wesubsidiaries are a party from time to time in other legal proceedings arising in the ordinary courseor of which any of our business. To date, none ofproperty is the litigation has had a material effect on us.ITEM 4.MINE SAFETY DISCLOSURESITEM 5.MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES High Low $ 42.93 $ 34.36 40.89 29.05 38.66 30.14 47.48 33.30 $ 46.86 $ 36.00 50.18 34.03 37.45 24.21 29.50 23.14 Declared Paid $ 0.32 $ 0.32 $ 0.32 $ 0.32 $ 0.30 $ 0.30 $ 0.40 $ 0.40 $ 0.28 Quarterly Stock Data High Low Fiscal 2014 $ 37.29 $ 33.25 38.21 35.29 44.00 36.50 41.00 35.92 Fiscal 2013 $ 40.96 $ 37.25 42.04 36.18 42.29 35.77 38.53 31.06 Cash Dividends Declared Paid Fiscal 2015 — $ 0.36 Fiscal 2014 $ 0.36 — — $ 0.36 $ 0.36 — — $ 0.34 Fiscal 2013 $ 0.34 — — $ 0.34 $ 0.34 — — $ 0.32 April 1, 2012,May 23, 2014, shares of our common stock were held by approximately 501476 shareholders of record. In July 2010, in recognition of the Company’s strong financial performance in fiscal 2010, 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. Future dividend levels will be dependent upon our consolidated results of operations, financial position, cash flows and other factors, and will be evaluatedare subject to approval by our Board of Directors.2007,2009, and reinvestment of all dividends.ITEM 6.SELECTED FINANCIAL DATACompanyCompany’s continuing operations 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 2012 2011 2010 2009 2008 (In thousands, except per share data) $ 343,834 $ 297,641 $ 257,099 $ 284,356 $ 186,664 65,868 61,902 64,445 62,420 38,528 21,628 20,314 23,738 23,424 8,488 2.09 1.98 2.32 2.29 0.83 2.08 1.96 2.31 2.29 0.83 0.64 0.70 0.66 0.52 0.48 0.62 0.68 0.64 0.50 0.46 $ 204,081 $ 185,005 $ 160,293 $ 136,290 $ 108,943 ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal Years 2014 2013 2012 2011 2010 (In thousands, except per share data) Sales $ 348,263 $ 350,387 $ 343,834 $ 297,641 $ 257,099 Gross profit 61,600 56,936 65,868 61,902 64,445 Income from continuing operations 18,094 17,108 21,628 20,314 23,738 Basic earnings per common share 1.72 1.64 2.09 1.98 2.32 Diluted earnings per common share 1.71 1.62 2.08 1.96 2.31 Cash dividends declared per common share 0.72 0.68 0.64 0.70 0.66 Cash dividends paid per common share 0.70 0.66 0.62 0.68 0.64 Total assets $ 237,193 $ 222,148 $ 204,081 $ 185,005 $ 160,293 2012, 20112014, 2013 and 2010.2012. This discussion should be read in conjunction with the Financial Statements and Notes to Financial Statements included in Item 8 of this Annual Report on Form 10-K. 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, manufacturing and manufacturingdiluting certain products. In recent years, we significantly expanded the sales of our higher-margin blended and manufactured products, including our food-grade products.growing ourinfrastructure to support increased business. During fiscal 2012,2013, we purchased a 28-acre parcel of land in Rosemount, Minnesota and begancompleted construction of a new Industrial manufacturing facility on the site, which is expected to be operational in late fiscal 2013.Rosemount, Minnesota. The site provides capacity for future business growth and lessens our dependence on our flood-prone sites on the Mississippi River. While we expectWe incurred incremental costs to transfer some blending and manufacturing activityoperate this new facility during fiscal 2014 as compared to the Rosemount site, we do not intend to close any sites we currently operate.fourthfirst quarter of fiscal 2011,2014, we completedmoved into a new corporate headquarters located in Roseville, Minnesota. The move was necessary because we had outgrown our former corporate headquarters that had been our home for over 60 years. As a result of this move, we incurred incremental costs during fiscal 2014 as compared to fiscal 2013 of approximately $1.0 million, recorded in selling, general and administrative expenses and allocated among both our Water Treatment and Industrial segments.acquisitionleased facility used to serve our bulk pharmaceutical customers and transferred production of certain products to our other Industrial production facilities while discontinuing production of the remaining product lines. As a result, we recorded incremental costs in our Industrial segment during fiscal 2014 as compared to fiscal 2013 of approximately $0.4 million related to accelerated depreciation on leasehold improvements and manufacturing equipment related to this facility. of the assets of Vertex,Advance Chemical Solutions, Inc. (“ACS”), under the terms of an asset purchase agreement with ACS and its shareholders. We paid $2.4 million in cash, and may be obligated to pay an aggregate of $0.5 million in additional consideration to ACS over the next three years depending upon the achievement of certain financial performance targets. ACS had revenues of approximately $4.0 million for approximately $27.2 million. In addition to the manufacture12 months ended September 30, 2013. The results 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 believeits operations since the acquisition strengthens our market position in the Midwest. Operating results of Vertexdate are included in our consolidated results of operations from the date of acquisition in this Annual Report on Form 10-K as part of our IndustrialWater Treatment segment. See Note 2 to the Consolidated Financial Statements for further information.In fiscal 2010, we completed 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 businesses. We also opened a facility in Minneapolis, Minnesota, to handle bulk chemicals sold to pharmaceutical manufacturers.20122013 and two new branchesone in fiscal 20112012 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 addedcontinue to add route sales personnel to certain existing Water Treatment Group branch offices to spur growth within our existing geographic coverage area.February 2009,the third quarter of fiscal 2013, we agreed to sellrecorded a pre-tax charge of $7.2 million in our inventoryIndustrial segment (approximately $4.5 million after tax, or $0.43 per share, fully diluted). This charge represented the discounted value of our estimated withdrawal payment obligation from the Central States, Southeast and Southwest Areas Pension Fund (“CSS”), a collectively bargained multiemployer pension plan. The withdrawal liability will be paid over 20 years and our payments began in the third quarter of fiscal 2014.marketingsettlement agreement regardingwith a chemical supplier to us, pursuant to which we mutually resolved the businesspreviously disclosed litigation and all disputes among us. The settlement agreement provided for a cash payment by us to the supplier and provided that both parties enter into new contracts for the supply by the supplier of our Pharmaceutical segment, which provided pharmaceuticalcertain chemicals to retail pharmacies and small-scale pharmaceutical manufacturers. The transaction closed in May 2009 and we have no significantus. Our obligations to fulfill under the agreement. The resultssettlement agreement resulted in a $3.2 million charge to pre-tax income recorded in cost of the Pharmaceutical segment have been reported as discontinued operationssales in our Consolidated Financial Statements for all periods presentedIndustrial segment (approximately $2.0 million after tax, or $0.19 per share, fully diluted) in this Annual Report on Form 10-K.Ourthe first quarter of fiscal 2013.2012 was highlighted by:2014 is provided below:from continuing operations of $343.8$348.3 million, a 15.5% increase0.6%decrease from fiscal 2011;2013;from continuing operations of $65.9$61.6 million, or 19.2%17.7% of sales, a $4.0$4.7 millionincrease in gross profit dollars from fiscal 2011;2013. Fiscal 2013 gross profit was adversely impacted by non-recurring charges of $7.2 million related to our withdrawal from the CSS pension plan and $3.2 million related to the litigation settlement discussed above;$33.7 million;$34.6 million; andwere $45.9of $63.2 million as of the end of fiscal 2012.2014, an increase of $13.2 million from the end of fiscal 2013.decrease.decrease, subject to competitive pricing pressures that may negatively impact our gross profit dollars per unit sold. 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 stableproducts, as opposed to gross profit dollars on eachas a percentage 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.Hawkins’our inventory, which causes the most recent product costs to be recognized in our income statement. The valuation of LIFO inventory for interim periods is based on our estimates of fiscal year-end inventory levels and costs. The LIFO inventory valuation method and the resulting cost of sales are consistent with our business practices of pricing to current commodity chemical raw material prices. Our LIFO reserve increaseddecreased by $1.6$1.9 million in fiscal 2012 primarily due to volumes2014 and mix of commodity chemicals$0.4 million in inventory at the end of the year. The increased reserve decreasedfiscal 2013, increasing our reported gross profit for both of these years. The reduction in the year. Our LIFO reserve increased by $3.9 million in fiscal 20112014 was primarily due to rising costs and higherlower levels of inventory volumes on hand at year-end, maintained to meet customer requirementsdriven by unusually cold and wintry weather that resulted in rail car and barge shipment delays during an anticipated flood. Thisthe fourth quarter of fiscal 2014. We anticipate our LIFO reserve will increase in fiscal 2015, decreasing our gross profit recorded, as we anticipate our inventory will return to levels consistent with historical levels at the end of fiscal 2015. The amount of the reserve decreasedincrease will depend on our reported gross profitactual fiscal year-end inventory levels and costs.fiscal 2011. Fiscal
2012 Fiscal
2011 Fiscal
2010 100.0 % 100.0 % 100.0 % (80.8 )% (79.2 )% (74.9 )% 19.2 % 20.8 % 25.1 % (9.0 )% (10.1 )% (10.0 )% 10.2 % 10.7 % 15.1 % 0.1 % 0.1 % 0.1 % 10.3 % 10.8 % 15.2 % (4.0 )% (4.0 )% (6.1 )% 6.3 % 6.8 % 9.1 % 0.3 % 0.0 % 0.1 % 6.6 % 6.8 % 9.2 % Sales 100.0 % 100.0 % 100.0 % Cost of sales (82.3 )% (81.7 )% (80.8 )% Pension withdrawal — % (2.1 )% — % Gross profit 17.7 % 16.2 % 19.2 % Selling, general and administrative expenses (9.6 )% (9.0 )% (9.0 )% Operating income 8.1 % 7.2 % 10.2 % Interest (expense) income, net — % 0.1 % 0.1 % Income from continuing operations before income taxes 8.1 % 7.3 % 10.3 % Income tax provision (2.9 )% (2.4 )% (4.0 )% Income from continuing operations 5.2 % 4.9 % 6.3 % Income from discontinued operations, net of tax — % — % 0.3 % Net income 5.2 % 4.9 % 6.6 % 20122014 Compared to Fiscal 2011Salesincreased $46.2decreased$2.1 million, or 15.5%0.6%, to $343.8$348.3 million for fiscal 2012,2014, as compared to sales of $297.6$350.4 million for fiscal 2011. Vertex,2013. Sales of bulk commodity products, using the revised definition for these products discussed above, were approximately 21% of sales in fiscal 2014 and 23% in fiscal 2013.fourth quarter of 2011, contributed $32.9 millionmajority of the increase inspring and summer months and reduced sales volumes of bulk commodity products.2012. We2014, as compared to $56.9 million, or 16.2% of sales, for fiscal 2013. The prior year’s gross profit was adversely impacted by the $7.2 million CSS pension withdrawal charge and the $3.2 million charge resulting from the litigation settlement, both of which were recorded in our Industrial segment. Together, these charges constituted 3.0% of sales for fiscal 2013. The LIFO method of valuing inventory increased gross profit by $1.9 million for fiscal 2014 and $0.4 million for fiscal 2013, primarily due to lower levels of inventory of many of our products at year-end.experiencednegatively impacted by competitive pricing pressures andprices duegeneral and administrative expenses, more than offsetting increases in gross profit as discussed above.commodity chemical prices.$6.6 million, or 1.9%, to $350.4 million for fiscal 2013, as compared to sales of $343.8 million for fiscal 2012. Sales of bulk chemicals, including caustic soda,commodity products, using the revised definition for these products discussed above, were approximately 23% of sales compared to approximately 20% in the previous year. The increase in the bulkchemical 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.increased $42.7decreased $2.9 million, or 20.5%1.2%, to $251.4$248.6 million for fiscal 2012. Vertex contributed $32.9 million of the increase2013. While overall volumes increased year-over-year, competitive pricing pressure resulted in sales for fiscal 2012. We experienced higherlower overall per-unit selling prices due to increased commodity chemical prices.$3.5$9.4 million, or 3.9%10.2%, to $92.4$101.8 million for fiscal 2012.2013. The increase in sales increase was primarily attributable to increased sales volumes related to manufactured and specialty chemical products and higher bulk chemical selling prices due to increasedvolume growth resulting from favorable weather conditions in the first half of fiscal 2013 and additional sales of bulk commodity chemical prices for those products.2012,2012. Fiscal 2013 gross profit was adversely impacted by the $7.2 million CSS pension withdrawal and the $3.2 million charge resulting from the litigation settlement, which charges together constituted 3.0% of sales for the fiscal year. Additionally, gross profit was$61.9fiscal 2012, and $0.4 million or 20.8% of sales, foraccelerated depreciation charges related to a facility we vacated in fiscal 2011.2014. The LIFO method of valuing inventory negatively impactedincreased gross profit by $0.4 million for fiscal 2013 primarily due to reduced inventory of certain products at year end. In the prior year, LIFO reduced gross profit by $1.6 million for fiscal 2012 primarily due to volumeshigher inventory levels and the 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.$40.4$28.9 million, or 16.1%11.6% of sales, for fiscal 2012,2013, as compared to $36.9$40.4 million, or 17.7%16.0% of sales, for fiscal 2011. The increase in2012. Fiscal 2013 gross profit dollars resultedfor this segment was negatively impacted by the $7.2 million CSS pension withdrawal charge and the $3.2 million charge resulting from the additionlitigation settlement, which charges together constituted 4.2% of Industrial segment sales for the Vertex business tofiscal year. Gross profit for this segment partially offsetwas also negatively impacted by lower selling prices due toheightened competitive pricing pressurespressure, resulting in overall lower per-unit margins, $1.3 million in incremental costs for the new Rosemount facility, and lower volumes.by $0.4 million of accelerated depreciation charges related to the facility we vacated as noted above. The LIFO method of valuing inventory negatively impactedincreased gross profit by $0.4 million in this segmentfiscal 2013 and reduced gross profit by $1.5 million in fiscal 2012 and $2.9 million in fiscal 2011.2012.2012, as compared to $25.0 million, or 28.1% of sales, for fiscal 2011.2012. 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 unfavorablefavorable weather conditions during the first half of the year, andpartially offset by higher volumes of lower selling prices duemargin products sold as compared to competitive pricing pressures.the prior year. The LIFO method of valuing inventory had no significant impact on gross profit in fiscal 2013 and negatively impacted gross profit in this segment by $0.1 million in fiscal 2012 and $1.1 million in fiscal 2011.2012.(“SG&A”) expenses were $30.8$31.6 million, or 9.0% of sales, for fiscal 2012,2013, as compared to $29.9$30.8 million, or 10.1%8.9% of sales, for fiscal 2011.2012. The increase was primarily due to the addition of expenses relatedhigher selling costs due to the Vertex business, which we acquired in the fourth quarter of fiscal 2011,additional sales staff, 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 acquisitionlower administration costs.$35.1$25.3 million, or 7.2% of sales, for fiscal 2013, as compared to $35.1 million, or 10.2% of sales, for fiscal 2012, as compared to $32.02012. An $11.6 million or 10.7% of sales, for fiscal 2011. A $3.4 million increasedecrease in operating income for the Industrial segment resulted primarily from the addition of the Vertex business,was partially offset by a $0.3$1.8 million decreaseincrease in operating income for the Water Treatment segment. Both segments wereOperating income for the Industrial segment was negatively impacted by the CSS pension withdrawal, the litigation settlement agreement, heightened competitive pricing pressure, the addition of a new production facility and the accelerated depreciation related to the anticipated exit of a leased facility. The LIFO method of valuing inventory increased our operating income in fiscal 2012 and2013, but reduced our operating income in fiscal 2011.Investment Income2012.20122013 and $0.3 million in fiscal 2011. The decrease in investment income was primarily due to lower cash and investment balances.Provision for 2012.Taxes2012 compared2012. During fiscal 2013, we amended previously filed U.S. Federal tax returns resulting in an increase of $0.8 million in the benefits related to 37.1%the domestic manufacturing deduction and investment tax credits, which positively impacted our tax rate for fiscal 2011.the year. 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 2010SalesSales 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 ProfitGross 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 ExpensesSelling, 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. 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.Operating IncomeOperating 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 negativelyis generally impacted by the LIFO methodprojected levels of valuing inventory in fiscal 2011.Investment IncomeInvestment income was $0.3 million for fiscal 2011 and fiscal 2010.Provision for Income TaxesOur 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, levelspermanent items, and somewhat lower effective state tax rates.20122014 was $33.7$34.6 million compared to $28.5$35.5 million in fiscal 20112013 and $38.8$33.7 million in fiscal 2010. The increase in cash provided by operating activities in fiscal 2012 from fiscal 2011 was primarily due to increases in net income and depreciation and amortization. Higher working capital balances used $1.9 million in cash in fiscal 2012 compared to cash used of $0.4 million for working capital in fiscal 2011. The net increase in working capital balances in fiscal 2012 was primarily due to increasing commodity chemical costs and the resulting increase in selling prices, which resulted in an increase in trade receivables, lower accounts payable and income tax payable balances due to the timing of payments.. 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.$3.7$6.7 million in fiscal 20122014 compared to $6.9$4.9 million in fiscal 20112013 and $6.6$3.7 million in fiscal 2010.2012. The decreaseincrease in cash used in financing activities in fiscal 20122014 was primarily due to an increase in dividend payments, an increase in shares surrendered for payroll taxes, and lower proceeds from the exercise of employee stock options recognitionduring the fiscal year. During the second quarter of excess tax benefitsfiscal 2014, our Board of Directors increased our semi-annual cash dividend by 5.9% to $0.36 per share from share-based compensation$0.34 per share. We have paid cash dividends continuously since 1985. Future dividend levels will be dependent upon our results of operations, financial position, cash flows and proceeds from the issuanceother factors, and are subject to approval by our Board of new shares of common stock for the Company’s employee stock purchase plan.$45.9$13.2 million at April 1, 2012 increased by $8.5 million as compared with April 3, 2011,March 31,2013, primarily due to cash generated from operations proceeds from the exercise of 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. Investments available-for-sale as of April 1, 2012March 30,2014 and April 3, 2011March 31,2013 consisted of certificates of deposit and municipal bonds with maturities ranging from three months to twothree years.Capital ExpendituresCapital expenditures were $20.1 million in fiscal 2012, $12.4 million in fiscal 2011 and $8.3 million in fiscal 2010. Significant capital expenditures in fiscal 2012 consisted of approximately $12.1 million related to business expansion and process improvement projects including the new facility in Rosemount, Minnesota and Water Treatment segment expansion, $2.2 million for regulatory and safety improvements and $3.0 million for other facility improvements and returnable containers. We expect that recurring capital expenditures and safety improvements, facilities improvements and returnable containers, in fiscal 2013 will be comparable to the spending in fiscal 2012. We are projecting increased 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 $30 million. We expect cash balances and our cash flows from operations will be sufficient to fund our cash requirements in fiscal 2013.Dividends2015.Duringsecond quarter of fiscal 2012,future that we believe will complement or expand our Board of Directors increasedexisting businesses or increase our semi-annualcustomer base. We expect our cash dividend by 6.7% to $0.32 per sharebalances and cash flows from $0.30 per share. We first started paying cash dividends in 1985 and have continued to do so since. Future dividend levelsoperations will be dependent uponsufficient to fund our results of operations,cash requirements including acquisitions or other strategic relationships for the foreseeable future. We periodically evaluate opportunities to borrow funds or sell additional equity or debt securities for strategic reasons or to further strengthen our financial position, cash flows and other factors, and will be evaluated by our Board of Directors. Payments Due by Period 2013 2014 2015 2016 2017 More than
5 Years Total (In thousands) $ 709 $ 723 $ 712 $ 657 $ 598 $ 3,381 $ 6,780 Payments Due by Period Contractual Obligation 2015 2016 2017 2018 2019 Total (In thousands) Operating lease obligations $ 1,478 $ 1,254 $ 1,111 $ 1,054 — $ 1,061 $ 4,061 $ 10,019 Pension withdrawal liability (1) $ 467 $ 467 $ 467 $ 467 $ 467 $ 6,774 $ 9,109 (1) The amounts shown in the table above relate to our withdrawal from the CSS multiemployer pension plan. Payments on this obligation began in fiscal 2014 and will continue through 2034. — - 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 passeshas passed to our customer, performance has occurred, and collection of the receivable is reasonably assured. — - 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 LIFO reserve and, as a result, gross margins, due primarily to changes in the level ofmay fluctuatefluctuates depending on the balance between supply and demand. Management reviews the LIFO reserve on a quarterly basis. Vertex inventoriesInventories not valued used the LIFO method are valued at the lower of cost or market with cost being determined using the FIFO method.Goodwill —- 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 testAs of January 1, 2014, the company performed an analysis of qualitative factors to determine whether it is performed using a two-step process. In the first step,more likely than not that the fair value of thea reporting unit is compared with theless than its carrying amount of the reporting unit, including goodwill. If the estimated fair valueas a basis for determining whether it is less than the carrying amount of the reporting unit, an indication thatnecessary to perform a two-step goodwill impairment exists andtest. Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform a second step must be completed in order to determine the amount of thetwo-step goodwill impairment if any, which should be recorded. In the second step, an impairment loss would be recognizedtest for any excess of the carrying amount of theeither 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.unit.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.ITEM 7A. 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.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKRecently Issued Accounting PronouncementsSee 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 RISKmaterial pricesthe cost of our materials on to our customers,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 DATAREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMITEM 8. ShareholdersStockholders of Hawkins, Inc.:April 1, 2012March 30, 2014 and April 3, 2011,March 31, 2013, and the related consolidated statements of income, shareholders’ equity and comprehensive income, (loss),shareholders’ equity, and cash flows for each of the years in the three-year period ended April 1, 2012.March 30, 2014. In connection with our audits of the consolidated financial statements, we also have also audited the financial statement schedule for each of the years in the three-year period ended March 30, 2014, listed in the Index at Item 15, asschedule II of and for the years ended April 1, 2012, April 3, 2011 and March 28, 2010.this Form 10-K. We also have audited the Company’s internal control over financial reporting as of April 1, 2012,March 30, 2014, based on criteria established inInternal Control —- Integrated Framework (1992)issued 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.auditaudits 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 includesincluded 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 includesincluded 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 auditaudits also includesincluded performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.April 1, 2012, April 3, 2011March 30, 2014 and March 28, 2010,31, 2013, and the results of their operations and their cash flows for each of the years in the three-year period ended April 1, 2012,March 30, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, suchthe financial statement schedule referred to above, 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,therein. Also in our opinion, Hawkins, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of April 1, 2012,March 30, 2014, based on criteria established inInternal Control —- Integrated Framework (1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission.June 1, 2012(In thousands, except share data) April 1, 2012 April 3, 2011 $ 28,566 $ 18,940 12,210 15,286 38,069 35,736 27,633 29,217 2,447 2,197 1,930 2,872 110,855 104,248 7,931 4,362 55,066 47,107 39,432 35,740 14,842 14,036 10,027 11,729 127,298 112,974 54,033 50,579 73,265 62,395 6,495 6,231 8,186 8,811 5,139 3,175 141 145 19,961 18,362 $ 204,081 $ 185,005 $ 18,623 $ 23,350 3,337 3,095 8,481 7,760 3,170 2,619 987 978 1,691 1,669 36,289 39,471 763 1,215 10,422 7,876 47,474 48,562 522 515 45,169 41,060 111,039 95,013 (123 ) (145 ) 156,607 136,443 $ 204,081 $ 185,005 See accompanying notes to consolidated financial statements.HAWKINS, INC.CONSOLIDATED STATEMENTS OF INCOME Fiscal Year Ended April 1, 2012 April 3, 2011 March 28, 2010 $ 343,834 $ 297,641 $ 257,099 (277,966 ) (235,739 ) (192,654 ) 65,868 61,902 64,445 (30,759 ) (29,940 ) (25,605 ) 35,109 31,962 38,840 145 333 286 35,254 32,295 39,126 (13,626 ) (11,981 ) (15,388 ) 21,628 20,314 23,738 1,057 — 109 $ 22,685 $ 20,314 $ 23,847 10,339,391 10,260,135 10,250,978 10,408,573 10,352,633 10,282,993 $ 2.09 $ 1.98 $ 2.32 0.10 — 0.01 $ 2.19 $ 1.98 $ 2.33 $ 2.08 $ 1.96 $ 2.31 0.10 — 0.01 $ 2.18 $ 1.96 $ 2.32 $ 0.64 $ 0.70 $ 0.66 March 30, 2014 March 31, 2013 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 33,486 $ 28,715 Investments available-for-sale 13,843 15,625 Trade receivables — less allowance for doubtful accounts: $477 for 2014 and $469 for 2013 37,946 35,920 Inventories 26,192 28,208 Prepaid expenses and other current assets 3,160 2,613 Total current assets 114,627 111,081 PROPERTY, PLANT, AND EQUIPMENT: Land 8,038 8,038 Buildings and improvements 68,801 68,268 Machinery and equipment 53,089 50,389 Transportation equipment 17,764 16,156 Office furniture and equipment including computer systems 11,183 10,204 158,875 153,055 Less accumulated depreciation 68,406 62,081 Net property, plant, and equipment 90,469 90,974 OTHER ASSETS: Goodwill 7,392 6,495 Intangible assets — less accumulated amortization: $3,069 for 2014 and $2,398 for 2013 8,509 7,678 Long-term investments 15,852 5,597 Other 344 323 Total other assets 32,097 20,093 Total assets $ 237,193 $ 222,148 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable — trade $ 18,306 $ 18,516 Dividends payable 3,823 3,592 Accrued payroll and employee benefits 5,555 5,391 Deferred income taxes 2,900 2,554 Income tax payable 1,444 1,446 Other current liabilities 3,801 3,626 Total current liabilities 35,829 35,125 PENSION WITHDRAWAL LIABILITY 6,887 7,136 OTHER LONG-TERM LIABILITIES 1,878 1,653 DEFERRED INCOME TAXES 10,186 8,062 Total liabilities 54,780 51,976 COMMITMENTS AND CONTINGENCIES — — SHAREHOLDERS’ EQUITY: Common stock; authorized: 30,000,000 shares of $0.05 par value; 10,562,400 and 10,495,427 shares issued and outstanding for 2014 and 2013, respectively 528 525 Additional paid-in capital 50,502 48,779 Retained earnings 131,427 120,974 Accumulated other comprehensive loss (44 ) (106 ) Total shareholders’ equity 182,413 170,172 Total liabilities and shareholders’ equity $ 237,193 $ 222,148 SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS) Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Shareholders’
Equity Shares Amount 10,246,458 $ 512 $ 38,368 $ 64,860 $ (10 ) $ 103,730 (6,786 ) (6,786 ) 659 659 7,000 1 — 1 66 66 (19 ) (19 ) 23,847 23,847 23,894 10,253,458 $ 513 $ 39,027 $ 81,921 $ 37 $ 121,498 (7,222 ) (7,222 ) 1,952 1,952 281 281 58,653 3 (3 ) — (4,934 ) (1 ) (197 ) (198 ) (63 ) (63 ) (119 ) (119 ) 20,314 20,314 20,132 10,307,177 $ 515 $ 41,060 $ 95,013 $ (145 ) $ 136,443 (6,659 ) (6,659 ) 1,350 1,350 698 698 18,663 1 (1 ) — (3,980 ) — (150 ) (150 ) 85,332 5 1,461 1,466 23,682 1 751 752 (4 ) (4 ) 26 26 22,685 22,685 22,707 10,430,874 $ 522 $ 45,169 $ 111,039 $ (123 ) $ 156,607 Fiscal Year Ended March 30, 2014 March 31, 2013 April 1, 2012 Sales $ 348,263 $ 350,387 $ 343,834 Cost of sales (286,663 ) (286,241 ) (277,966 ) Pension withdrawal — (7,210 ) — Gross profit 61,600 56,936 65,868 Selling, general and administrative expenses (33,510 ) (31,606 ) (30,759 ) Operating income 28,090 25,330 35,109 Interest (expense) income, net (29 ) 84 145 Income from continuing operations before income taxes 28,061 25,414 35,254 Income tax provision (9,967 ) (8,306 ) (13,626 ) Income from continuing operations 18,094 17,108 21,628 Income from discontinued operations, net of tax — 18 1,057 Net income $ 18,094 $ 17,126 $ 22,685 Weighted average number of shares outstanding-basic 10,544,467 10,464,820 10,339,391 Weighted average number of shares outstanding-diluted 10,599,755 10,541,142 10,408,573 Basic earnings per share: Earnings per share from continuing operations $ 1.72 $ 1.64 $ 2.09 Earnings per share from discontinued operations — — 0.10 Basic earnings per share $ 1.72 $ 1.64 $ 2.19 Diluted earnings per share: Earnings per share from continuing operations $ 1.71 $ 1.62 $ 2.08 Earnings per share from discontinued operations — — 0.10 Diluted earnings per share $ 1.71 $ 1.62 $ 2.18 Cash dividends declared per common share $ 0.72 $ 0.68 $ 0.64 CASH FLOWSthousands) Fiscal Year Ended April 1, 2012 April 3, 2011 March 28, 2010 $ 22,685 $ 20,314 $ 23,847 8,458 7,148 6,292 3,082 (600 ) 7,152 1,350 1,952 659 2 127 12 (2,407 ) (5,929 ) 4,050 1,319 (3,141 ) 514 (1,846 ) 5,356 (462 ) 343 158 (322 ) (251 ) 2,529 (2,404 ) 947 619 (556 ) 33,682 28,533 38,782 (20,057 ) (12,421 ) (8,331 ) (14,165 ) (14,210 ) (41,240 ) 15,270 30,545 6,450 255 143 148 (1,709 ) (25,500 ) — (20,406 ) (21,443 ) (42,973 ) (6,417 ) (7,005 ) (6,573 ) 752 — — 1,466 — — 699 281 — (150 ) (198 ) — (3,650 ) (6,922 ) (6,573 ) 9,626 168 (10,764 ) 18,940 18,772 29,536 $ 28,566 $ 18,940 $ 18,772 $ 10,788 $ 9,771 $ 10,654 $ — $ 1,709 $ — $ 279 $ 1,450 $ 1,118 Fiscal Year Ended March 30, 2014 March 31, 2013 April 1, 2012 Net income $ 18,094 $ 17,126 $ 22,685 Other comprehensive income (loss), net of tax: Unrealized gain (loss) on available-for-sale investments (47 ) 12 (4 ) Unrealized gain on post-retirement liability 109 5 26 Total other comprehensive income 62 17 22 Total comprehensive income $ 18,156 $ 17,143 $ 22,707 Common Stock Accumulated Other Comprehensive Income (Loss) Shares Amount BALANCE — April 3, 2011 10,307,177 $ 515 $ 41,060 $ 95,013 $ (145 ) $ 136,443 Cash dividends declared (6,659 ) (6,659 ) Share-based 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 Other comprehensive income, net of tax 22 22 Net income 22,685 22,685 BALANCE — April 1, 2012 10,430,874 $ 522 $ 45,169 $ 111,039 $ (123 ) $ 156,607 Cash dividends declared (7,191 ) (7,191 ) Share-based compensation expense 1,630 1,630 Tax benefit on share-based compensation plans 510 510 Vesting of restricted stock 6,120 — (1 ) (1 ) Stock Options Exercised 27,999 1 514 515 ESPP Shares Issued 30,434 2 957 959 Other comprehensive income, net of tax 17 17 Net income 17,126 17,126 BALANCE — March 31, 2013 10,495,427 $ 525 $ 48,779 $ 120,974 $ (106 ) $ 170,172 Cash dividends declared (7,641 ) (7,641 ) Share-based compensation expense 1,322 1,322 Tax benefit on share-based compensation plans (214 ) (214 ) Vesting of restricted stock 41,906 2 (2 ) — Shares surrendered for payroll taxes (12,480 ) (1 ) (484 ) (485 ) Stock Options Exercised 9,333 1 185 186 ESPP Shares Issued 28,214 1 916 917 Other comprehensive income, net of tax 62 62 Net income 18,094 18,094 BALANCE — March 30, 2014 10,562,400 $ 528 $ 50,502 $ 131,427 $ (44 ) $ 182,413 Fiscal Year Ended March 30, 2014 March 31, 2013 April 1, 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 18,094 $ 17,126 $ 22,685 Reconciliation to cash flows: Depreciation and amortization 12,605 10,248 8,458 Deferred income taxes 2,150 (2,985 ) 3,082 Pension withdrawal — 7,210 — Share-based compensation expense 1,322 1,621 1,350 Loss from property disposals 111 153 2 Changes in operating accounts (using) providing cash, net of effects of acquisition: Trade receivables (1,698 ) 2,149 (2,407 ) Inventories 2,122 (573 ) 1,319 Accounts payable 335 (1,185 ) (1,846 ) Accrued liabilities 141 (1,319 ) 343 Income taxes (2 ) 3,893 (251 ) Other (568 ) (864 ) 947 Net cash provided by operating activities 34,612 35,474 33,682 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment (12,261 ) (26,660 ) (20,057 ) Purchases of investments (25,161 ) (18,755 ) (14,165 ) Sale and maturities of investments 16,612 14,900 15,270 Proceeds from property disposals 115 233 255 Acquisitions (2,416 ) (100 ) (1,709 ) Net cash used in investing activities (23,111 ) (30,382 ) (20,406 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends paid (7,410 ) (6,936 ) (6,417 ) New shares issued 917 968 752 Stock options exercised 186 515 1,466 Excess tax benefit from share-based compensation 62 510 699 Shares surrendered for payroll taxes (485 ) — (150 ) Net cash used in financing activities (6,730 ) (4,943 ) (3,650 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 4,771 149 9,626 CASH AND CASH EQUIVALENTS- Beginning of period 28,715 28,566 18,940 CASH AND CASH EQUIVALENTS- End of period $ 33,486 $ 28,715 $ 28,566 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION- Cash paid during the year for income taxes $ 7,757 $ 6,900 $ 10,788 Noncash investing activities- Capital expenditures in accounts payable $ 699 $ 1,401 $ 279 —- 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 theindustries such as agriculture, energy, electronics, food, chemical processing, pulp and paper, pharmaceutical, medical device and plating industries.plating. The group also manufactures and sells certain food-grade products, including our patented Cheese Phos®liquid phosphate,phosphates, 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 single small single well to a multi-million gallon-per-daymulti-million-gallon-per-day facility.—- Our fiscal year is a 52/53-week year ending on the Sunday closest to March 31. Our fiscal year endingyears ended March 30, 2014 (“fiscal 2014”), March 31, 2013 (“fiscal 2013”) and April 1, 2012 (“fiscal 2012”) is a 52-week year. The fiscal year ended April 3, 2011 (“fiscal 2011”) was a 53-week year,were, and the fiscal year ended March 28, 2010 (“fiscal 2010”) was a 52-week year. The fiscal year ending on March 31, 201329, 2015 (“fiscal 2013”2015”) will be, a 52-week year. Beginning in fiscal 2012, we changed our quarterly interim reporting to a 13-week convention.52 weeks.—- The consolidated financial statements include the accounts of Hawkins, Inc. and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated.— - 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.—- 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 passeshas passed to our customer, performance has occurred, and collection of the receivable is reasonably assured.—- All shipping and handling amounts billed to customers are included in revenues. Costs incurred related to the shipping and the handling of products are included in cost of sales.—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.- securities. Other thansecurities and contingent consideration payable related to the application of purchase accounting as a result of the Vertex acquisition, there wereACS Acquisition. There are no fair value measurements with respect to nonfinancial assets or liabilities that areHAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)basis subsequent to the effective date of this standard.—- Cash equivalents include all liquid debt instruments (primarily cash funds and money market accounts and certificates of deposit)accounts) purchased with an original maturity of three months or less. The balances maintained at financial institutions may, at times, exceed federally insured limits.—- Available-for-sale securities consist of certificates of deposit (“CD’s”) and municipal bonds 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.—- 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 transactedcredit risk with a particularsingle 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 depositCD’s, municipal bonds 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, consisting primarily of finished goods, are primarily valued at the lower of cost or net realizable value, with cost beingfor the vast majority of our inventory determined using the last-in, first-out (“LIFO”) method. Vertex’sThe amount of inventory cost, whichvalued using the first-in, first-out (“FIFO”) method represents approximately 10%9% of the total FIFO inventory balance at April 1, 2012, is determined using the first-in, first-out (“FIFO”) method.March 30, 2014.HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)—- Property is stated at cost and depreciated or amortized over the lives of the assets, using the 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. Leasehold improvements are depreciated over the lesser of their estimated useful lives or the remaining lease term. 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.asset group. 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,years 2014, 2013 or 2010.—- 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 testAs of January 1, 2014, the company performed an analysis of qualitative factors to determine whether it is performed using a two-step process. In the first step,more likely than not that the fair value of thea reporting unit is compared with theless than its carrying amount of the reporting unit, including goodwill. If the estimated fair valueas a basis for determining whether it is less than the carrying amount of the reporting unit, an indication thatnecessary to perform a two-step goodwill impairment exists andtest. Based on management’s analysis of qualitative factors, we determined that it was not necessary to perform a second step must be completed in order to determine the amount of thetwo-step goodwill impairment if any, which should be recorded. In the second step, an impairment loss would be recognizedtest for any excess of the carrying amount of theeither 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.unit.14 years.13 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 comparisonqualitative assessment to determine whether it is more likely than not that the asset is impaired. Based on management’s analysis 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 2012 andqualitative factors, we determined that our reporting units’ fair value substantially exceeded their carrying value. Accordingly,step two of the impairment analysis was not required. Wean impairment test of infinite-life intangible assets duringin the fourth quarter,quarters of fiscal 2013 and 2012, which resulted in which the fair value exceeded the carrying amount. Additionally, no impairment charges were required for either of these fiscal 2011 or 2010.—- In the preparation of our consolidated financial statements, management calculatesthe calculation of income taxes by management is 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 differencesDifferences that are temporary in nature result in deferred tax assets and liabilities, which are recorded on the balance sheet. Thesesheet, while the differences that are permanent in nature impact the income tax expense recorded on the income statement and impact the effective tax rate for the fiscal year. The deferred tax assets and liabilities are analyzed regularly and management assesses the likelihood that deferred tax assets will be recovered from future taxable income. We record any interest and penalties related to income taxes as income tax expense in the statements of income.—- We 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.—- 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 1, 2012 April 3, 2011 March 28, 2010 10,339,391 10,260,135 10,250,978 69,182 92,498 32,015 10,408,573 10,352,633 10,282,993 March 30, 2014 March 31, 2013 April 1, 2012 Weighted average common shares outstanding — basic 10,544,467 10,464,820 10,339,391 Dilutive impact of stock performance units, restricted stock, and stock options 55,288 76,322 69,182 Weighted average common shares outstanding — diluted 10,599,755 10,541,142 10,408,573 20122014, 2013 or fiscal 2011. Stock options totaling 70,665 in fiscal 2010 have been excluded from the calculation of diluted EPS because the effect of including the shares would be anti-dilutive.—- We do not have any freestanding or embedded derivatives and it is our policypractice to not enter into contracts that contain them.Recently Issued Accounting Pronouncements —Intangibles – Goodwill and Other — In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment” which amended the guidance on goodwill impairment testing to allow companies to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If, as a result of the qualitative assessment, an entity determines that it 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 test is required. Otherwise, no further testing is required. The amendment is effective for fiscal years beginning after December 15, 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.Multiemployer Pension Plans —In 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 potential impact of an entity’s participation in multiemployer plans on future cash flow. This guidance is effective for annual reporting periods ending after December 15, 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.In the fourth quarterfiscal 2011, we completed the acquisition of the assets of VertexAdvance Chemical Corporation, Novel Wash Co.Solutions, 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,: On October 1, 2013, we acquired substantially all of the assets used in Vertex’s business, which is primarilyof Advance Chemical Solutions, Inc. (“ACS”), under the manufactureterms of an asset purchase agreement with ACS and distribution of sodium hypochlorite and the distribution of caustic soda, hydrochloric acid and related products.its shareholders. We paid $2.4 million in cash, and may be obligated to pay an aggregate of $25.5$0.5 million at closingin additional consideration to ACS over the next three years. The amount of such additional payments will be based on the achievement of certain financial performance targets for each of the next three years. Costs associated with this transaction were not material to our company and assumed certain liabilities of Vertex. The purchase price was revised to $27.2 millionwere expensed 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.in accordance with ASC Topic 805,Business Combinations. Under the acquisition method of accounting,under which the total estimated purchase price is allocated to the net tangible and intangible assets of VertexACS acquired in connection with the acquisition, based on their estimated fair values.The allocationpurchase pricefuture contingent consideration payable and recorded $0.4 million for such consideration on our balance sheet. We have determined that this liability is a Level 3 fair value measurement within the FASB’s fair value hierarchy, and such liability is adjusted to assets acquiredfair value at each reporting date, with the adjustment reflected in selling, general and liabilities assumed follows:(In thousands) Amount $ 4,975 4,486 198 8,991 5,291 5,490 (2,012 ) (210 ) $ 27,209 The allocation ofpurchase price tofair value of the assets acquired and liabilities assumed resulted in the recognition of the following intangible assets:(In thousands) Amount Weighted
Average Life $ 3,450 20 years 1,240 10 years 800 10 years $ 5,490 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$2.8 million using a discounted cash flow analysis (income approach). Fair values of an asset. Indicationsacquired assets and liabilities include: $0.4 million of value are developed by discounting future net cash flowsworking capital and fixed assets; $1.5 million to their present value at market-based rates of return.VertexACS acquisition is primarily attributable to expected synergies, as well as Vertex’s assembled work force.Vertex operatingsynergies. Such goodwill is deductible for tax purposes.Consolidated Statements of Income in our Industrial segment from the date of acquisition.The following unaudited pro forma condensed consolidated financial results of operations for the year ended April 3, 2011 is presented as if the Vertex acquisition had been completed at the beginning of the 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) $ 343,834 $ 329,653 22,685 21,888 $ 2.19 $ 2.13 2.18 2.11 10,339,391 10,260,135 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 have been realized from the integration of the acquisition.HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) and liabilities that are measured at fair value on a recurring basis as of April 1, 2012March 30, 2014 and April 3, 2011,March 31, 2013, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. April 1,
2012 Level 1 Level 2 Level 3 (In thousands) $ 28,006 $ 28,006 $ — $ — 17,349 — 17,349 — 560 560 — — April 3,
2011 Level 1 Level 2 Level 3 (In thousands) $ 18,485 $ 18,485 $ — $ — 18,461 — 18,461 — 455 455 — — Description March 30, 2014 Level 1 Level 2 Level 3 (In thousands) Assets: Cash $ 33,486 $ 33,486 $ — $ — Certificates of deposit 24,437 — 24,437 — Municipal Bonds 5,258 — 5,258 — Description March 31, 2013 Level 1 Level 2 Level 3 (In thousands) Assets: Cash $ 28,715 $ 28,715 $ — $ — Certificates of deposit 21,222 — 21,222 — certificates of deposit (“CD’s”),CD’s and municipal bonds, with maturities ranging from three months to twothree years which fall within valuation technique Level 2. The CD’s and municipal bonds are classified as investments in current assets and noncurrent assets on the Consolidated Balance Sheets.condensed consolidated balance sheets. As of April 1, 2012,March 30, 2014, the CD’s in current assets haveand municipal bonds had a fair value of $12.2$13.8 million in current assets and$15.9 million in noncurrent assets, the CD’s have a fair value of $5.1 million.less. We did not have any financial liability instruments subject to recurring fair value measurements as of April 1, 2012 and April 3, 2011.April 1, 2012March 30, 2014 and March 31, 2013 are shown in the table below.(In thousands) Amortized
Cost Fair Value Unrealized
Gain/(loss) $ 12,205 $ 12,210 $ 5 5,145 5,139 (6 ) $ 17,350 $ 17,349 $ (1 ) The contractual maturities of available-for-sale securities at April 3, 2011 are shown in the table below.(In thousands) Amortized
Cost Fair Value Unrealized
Gain/(loss) $ 15,270 $ 15,286 $ 16 3,185 3,175 (10 ) $ 18,455 $ 18,461 $ 6 March 30, 2014 March 31, 2013 (In thousands) Fair Value Fair Value Within one year $ 13,864 $ 13,843 $ (21 ) $ 15,615 $ 15,625 $ 10 Between one and three years 15,890 15,852 (38 ) 5,590 5,597 7 Total available-for-sale securities $ 29,754 $ 29,695 $ (59 ) $ 21,205 $ 21,222 $ 17 2012, fiscal 20112014, 2013 and fiscal 2010. 2014 2013 (In thousands) Inventory (FIFO basis) $ 31,344 $ 35,281 LIFO reserve (5,152 ) (7,073 ) Net inventory $ 26,192 $ 28,208 Note 4 — InventoriesInventories at April 1, 2012 and April 3, 2011 consisted of the following: 2012 2011 (In thousands) $ 35,072 $ 35,071 (7,439 ) (5,854 ) $ 27,633 $ 29,217 were $30.6was $28.5 million at March 30, 2014 and $30.3 million at April 1, 2012 and $28.6 million at April 3, 2011.March 31, 2013. The remainder of the inventory was valued and accounted for under the FIFO method.increaseddecreased the LIFO reserve by $1.6$1.9 million in fiscal 20122014 and $0.4 million in fiscal 2013 due primarily to the volume and mixlower levels of commodity chemicals in inventory at the end of the year. In fiscal 2011 we increased the LIFO reserve by $3.9 million due primarily to rising inventory costs, as well as higher inventory volumes at the end of fiscal 2011.(In thousands) Amount $ 1,204 5,027 6,231 264 $ 6,495 (In thousands) Amount Balance as of April 1, 2012 $ 6,495 Fiscal 2013 activity — Balance as of March 31, 2013 6,495 Fiscal 2014 activity (ACS Acquisition) 897 Balance as of March 30, 2014 $ 7,392 20122014 relates to the finalizationacquisition of the determination of the fair value of inventory acquiredACS, and is recorded as part of the acquisition of Vertex.Aour Water Treatment segment.April 1, 2012March 30, 2014 and April 3, 2011 were as follows: 2012 Gross Carrying
Amount Accumulated
Amortization Net (In thousands) $ 5,508 $ (706 ) $ 4,802 1,240 (150 ) 1,090 862 (521 ) 341 800 (96 ) 704 339 (317 ) 22 8,749 (1,790 ) 6,959 1,227 — 1,227 $ 9,976 $ (1,790 ) $ 8,186 2014 2013 Gross Amount Net Gross Amount Net (In thousands) Finite-life intangible assets: Customer relationships $ 6,913 $ (1,292 ) $ 5,621 $ 5,508 $ (981 ) $ 4,527 Trademark 1,335 (421 ) 914 1,240 (274 ) 966 Trade secrets 962 (768 ) 194 962 (640 ) 322 Carrier relationships 800 (257 ) 543 800 (177 ) 623 Other finite-life intangible assets 341 (331 ) 10 339 (326 ) 13 Total finite-life intangible assets 10,351 (3,069 ) 7,282 8,849 (2,398 ) 6,451 Indefinite-life intangible assets 1,227 — 1,227 1,227 — 1,227 Total intangible assets, net $ 11,578 $ (3,069 ) $ 8,509 $ 10,076 $ (2,398 ) $ 7,678 HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 2011 Gross Carrying
Amount Accumulated
Amortization Net (In thousands) $ 5,508 $ (423 ) $ 5,085 1,240 (26 ) 1,214 862 (413 ) 449 800 (18 ) 782 339 (285 ) 54 8,749 (1,165 ) 7,584 1,227 — 1,227 $ 9,976 $ (1,165 ) $ 8,811 $0.6$0.7 million during fiscal 2012, $0.32014, $0.6 million during fiscal 2011,2013, and $0.2$0.6 million during fiscal 2010.(In thousands) 2013 2014 2015 2016 2017 $ 596 $ 592 $ 592 $ 502 $ 479 (In thousands) 2015 2016 2017 2018 2019 Estimated amortization expense $ 730 $ 616 $ 570 $ 558 $ 550 , on our balance sheet, net of tax, were as follows:(In thousands) 2012 2011 2010 $ (4 ) $ 3 $ 66 26 (148 ) (29 ) $ 22 $ (145 ) $ 37 (In thousands) 2014 2013 Unrealized gain (loss) on: Available-for-sale investments $ (36 ) $ 11 Post-retirement plan liability adjustments (8 ) (117 ) Accumulated other comprehensive loss $ (44 ) $ (106 ) Stock Option Awards. Our Board of Directors has approved a long-term incentive equity compensation arrangement for our executive 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: Fiscal 2010 grant Fiscal 2009 grant 2.5 % 3.2 % 31.4 % 28.0 % 2.1 % 3.0 % 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 2012 and fiscal 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 131,997 $ 17.82 $ 4,908 66,666 $ 17.67 $ 2,482 — — — — — — 27,999 15.43 (85,332 ) 17.18 (85,332 ) 17.18 — — 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 131,997 $ 17.82 $ 2,607 — $ — $ — — — — — — — 66,666 17.67 — — — — — — — — 131,997 $ 17.82 $ 4,908 66,666 $ 17.67 $ 2,482 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 6.1 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, 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 2012 was $0.1 million compared to $0.2 million during fiscal 2011. Unrecognized compensation expense related to outstanding stock options as of April 1, 2012 was not material and is expected to be recognized over a weighted average period of 0.2 years.HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)43,02239,833 shares in the aggregate for fiscal 2012.2014. 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 under this arrangement. Shares Outstanding at beginning of year 63,244 $ 34.26 Granted 28,648 40.25 Vested (36,182 ) 35.20 Forfeited or expired (3,606 ) 33.01 Outstanding at end of year 52,104 $ 36.99 fiscal 2011:$35.39, respectively. We recorded compensation expense 2012 2011 Shares Weighted-
Average Grant
Date Fair Value Shares Weighted-
Average Grant
Date Fair Value 11,667 $ 25.81 23,000 $ 19.90 33,321 35.39 41,320 30.02 (11,667 ) 25.81 (52,653 ) 26.53 — — — — 33,321 $ 35.39 11,667 $ 25.81 related to the shares issuedon performance-based restricted stock of approximately $0.8 million for fiscal 2010 and fiscal 2011 and the potential issuance of shares2014, $1.1 million for fiscal 2012 of approximately $0.82013 and $0.8 million for fiscal 2012, $1.6 million for fiscal 2011 and $0.4 million for fiscal 2010, substantially all of which was recorded in selling, general and administrative (“SG&A&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 20122014 was $0.3$1.3 million compared to $1.4zero in fiscal 2013 and $0.3 million in fiscal 2011.price, which was $25.81 per share on June 2, 2010 and $35.39 per share on June 8, 2011.price. Unrecognized compensation expense related to non-vested restricted stock and non-vested restricted share units as of April 1, 2012March 30, 2014 was $1.1$1.0 million and is expected to be recognized over a weighted average period of 1.41.0 years.In conjunction with the vesting of restricted stock held by certain of our executive officers, 3,980 shares were forfeited during fiscal 2012 to cover the executive officers statutory minimum income tax withholding.(excess tax benefits)from share-based compensation are recorded as a change in additional paid inpaid-in capital rather than a deduction of taxes paid. The amount of excess tax benefit (expense) recognized and recorded in additional paid inpaid-in capital resulting from share-based compensation cost was $0.7$(0.2) million in fiscal 20122014, $0.5 million in fiscal 2013 and $0.3$0.7 million during fiscal 2011. in 2012.HAWKINS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)2012 and fiscal 2011: 2012 2011 Shares Weighted-
Average Grant
Date Fair Value Shares Weighted-
Average Grant
Date Fair Value 6,996 $ 30.00 6,000 $ 18.68 6,120 34.31 6,966 30.00 (6,996 ) 30.00 (6,000 ) 18.68 — — — — 6,120 $ 34.31 6,966 $ 30.00 Shares Outstanding at beginning of period 5,724 $ 36.65 Granted 6,055 40.42 Vested (5,724 ) 36.65 Forfeited or expired — — Outstanding at end of period 6,055 $ 40.42 $0.2$0.2 million for each of fiscal 20122014, 2013 and $0.2 million for fiscal 2011 and $0.1 million for fiscal 2010,2012, all of which was recorded in SG&A expense in the Consolidated Statements of Income. Unrecognized compensation expense related to non-vestedApril 1, 2012March 30, 2014 was $0.1$0.1 million and is expected to be recognized over a weighted average period of 0.3 years. Total Outstanding Exercisable (In thousands, except share data) Shares Weighted-
Average
Exercise
Price Aggregate
Intrinsic
Value Shares Weighted-
Average
Exercise
Price Aggregate
Intrinsic
ValueOutstanding at beginning of year 18,666 $ 19.90 $ 665 18,666 $ 19.90 $ 665 Granted — — — — Vested — — — — Exercised (9,333 ) 19.90 (9,333 ) 19.90 Forfeited or expired — — — — Outstanding at end of year 9,333 $ 19.90 $ 297 9,333 $ 19.90 $ 297 Effective April 1, 2009, we converted our defined contribution pension plan covering substantially. Substantially all of our non-bargaining unit employees are eligible to participate in a company sponsored 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 forBeginning in fiscal 2013, the profit sharing plan contribution level for each employee will depend upon date of hire, with those employees hired after April 1, 2012 eligible to receive a contribution that is 50% of the contribution made for employees hired on or before April 1, 2012. Our contribution to the profit sharing plan for fiscal 2014 and pension planfiscal 2013 was 15%5% of each employee’s eligible compensation in each of the fiscal years 2012, 2011 and 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.for employees hired on or before April 1, 2012. 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.Our cost forBeginning in fiscal 2013, the ESOP contribution level for each employee will depend upon date of hire, with those employees hired after April 1, 2012 eligible to receive a contribution that is 50% of the contribution made for employees hired on or before April 1, 2012. Our contribution to the ESOP for fiscal 2014 and fiscal 2013 was 5% of each employee’s eligible compensation infor employees hired on or before April 1, 2012. Our contribution to the ESOP was 5% of each of the fiscal years 2012, 2011 and 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.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.$0.2 million.$0.2 million. Beginning in fiscal 2013, Vertex employees are included within the Company’s retirement plans outlined above.plans: 2012 2011 2010 (In thousands) $ 2,616 $ 2,675 $ 2,844 802 815 899 262 648 650 175 — — $ 3,855 $ 4,138 $ 4,393 Benefit Plan 2014 2013 2012 (In thousands) Non-bargaining unit employee plans: Profit sharing $ 1,231 $ 1,204 $ 2,616 401(K) matching contributions 980 1,206 — ESOP 1,231 1,203 802 Vertex plan — — 175 Bargaining unit employee plans 500 — — ESPP - all employees 257 289 262 Total contribution expense $ 4,199 $ 3,902 $ 3,855 We participate in a union sponsored, collectively bargained multiemployer pension plan (“Union Plan”). Contributions are determined in accordanceIn fiscal 2013, we concluded negotiations with the provisions of negotiated labor contracts and generally are based on the number of hours worked. The risks of participating in multiemployer pension plans are different from single-employer plans in the following aspects: (i) Assets contributedtwo collective bargaining units to a multiemployer plan by one employer may be used to provide benefits to 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 stop participating in the multiemployer plan, we may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.The Company’sdiscontinue our participation in the Central States, Southeast and Southwest Areas Pension Fund (“Central States”CSS” or “the plan”) is outlined in, a collectively bargained multiemployer pension plan, and as a result we recorded a pre-tax charge of $7.2 million (approximately $4.5 million after tax, or $0.43 per share, fully diluted). This charge represents the table below. The Pension Protection Act (“PPA”) Zone Status available in fiscal 2012discounted value of our estimated withdrawal payment obligation and fiscal 2011 is for the plan’s year ended December 31, 2010 and December 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 factors, 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 a rehabilitation plan (“RP”) is either pending or has been implemented.Pension FundEmployerIdentificationNumberPensionPlanNumberPPA Zone StatusFIP/RPStatusPending/ImplementedSurchargeImposedExpiration Daterecorded as a charge to cost of sales in our Industrial segment. CollectiveBargainingAgreementsApril 1,2012April 3,2011Central States, Southeast and Southwest Areas Pension Fund36-6044243001RedRedImplementedYes02/28/2013Based upon the most recent information available from the trustees managing CSS, our share of the unfunded vested benefit liability for the plan was estimated towill 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 amountmade over 20 years and is subject to change based on, among other things,a cap. At the plan’s investment returns andend of the 20-year period we will have no further liability, even if our share of the unfunded vested benefit levels, interest rates, financial difficulty of other participating employersliability had not yet been paid in full. The aggregate cash payments to be made total approximately $9.3 million, or $467,000 per year. Our payments began in the plan such as bankruptcy, and continued participation by the company and other employersthird quarter of fiscal 2014. 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, 20112013 and 2010 and expect to make contributions to the plan of approximately $0.5 million during fiscal 2013.trucksprimarily buildings 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 1, 2012March 30, 2014 are as follows:(In thousands) 2013 2014 2015 2016 2017 Thereafter $ 709 $ 723 $ 712 $ 657 $ 598 $ 3,381 (In thousands) 2015 2016 2017 2018 2019 Thereafter Minimum lease payment $ 1,478 $ 1,254 $ 1,111 $ 1,054 $ 1,061 $ 4,061 2011 and 2010 werewas as follows: 2012 2011 2010 (In thousands) $ 617 $ 552 $ 577 102 114 102 $ 719 $ 666 $ 679 2014 2013 2012 (In thousands) Minimum rentals $ 1,223 $ 818 $ 617 Contingent rentals 110 110 102 Total rental expense $ 1,333 $ 928 $ 719 — We- As of March 30, 2014 there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries are a party from time to time in litigation arising in the ordinary courseor of which any of our business. To date, none ofproperty is the litigation has had a material effect on us.subject. Legal fees associated with such matters are expensed as incurred.On November 3, 2009, ICL Performance Products, LP (“ICL”),filedpursuant to which we mutually resolved the previously disclosed litigation and all disputes among us. The settlement agreement provided for a lawsuit incash payment by us to the United States District Courtsupplier and provided that both parties enter into new contracts for the Eastern Districtsupply by the supplier 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. After the completion of discovery, both parties moved for summary judgment in their 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 a legally enforceable contract, Hawkins remained obligated to purchase 50% of its requirements for 75% purified phosphoric acid from ICL in 2009. Trial is scheduled 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 have three leases of land (two relate to Hawkins and one relates to Vertex), andwhich contain terms that state that at the end of the lease term (currently 20142023 for the Vertexone lease and 2018 for the Hawkinsother two 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 ofthat 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 itstheir 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 with ASC 410-20, “Asset Retirementaccounting guidance related to asset retirement and Environmental Obligations,”environmental obligations, we have not recorded an asset retirement obligation as of April 1, 2012.March 30, 2014. 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.2012, 20112014, 2013 and 20102012 are as follows: 2012 2011 2010 (In thousands) $ 8,632 $ 9,818 $ 6,601 2,546 2,531 1,634 11,178 12,349 8,235 2,796 (69 ) 5,739 316 (299 ) 1,413 3,112 (368 ) 7,152 $ 14,290 $ 11,981 $ 15,387 2014 2013 2012 (In thousands) Federal — current $ 7,612 $ 8,967 $ 8,632 State — current 1,255 2,417 2,546 Total current 8,867 11,384 11,178 Federal — deferred 676 (2,466 ) 2,796 State — deferred 424 (600 ) 316 Total deferred 1,100 (3,066 ) 3,112 Total provision $ 9,967 $ 8,318 $ 14,290 2012 2011 2010 35.0 % 35.0 % 35.0 % 5.0 4.7 5.0 (0.7 ) (1.2 ) (1.0 ) (0.9 ) (1.3 ) (0.6 ) 0.2 (0.1 ) 0.9 38.6 % 37.1 % 39.3 % 2014 2013 2012 Statutory federal income tax 35.0 % 35.0 % 35.0 % State income taxes, net of federal deduction 3.2 % 4.9 % 5.0 % ESOP dividend deduction on allocated shares (0.8 )% (1.0 )% (0.7 )% Domestic production deduction (2.1 )% (2.7 )% (0.9 )% Impact of amended tax returns — % (3.3 )% — % Other — net 0.2 % (0.2 )% 0.2 % Total 35.5 % 32.7 % 38.6 % April 1, 2012March 30, 2014 and April 3, 2011March 31, 2013 are as follows:(In thousands) 2012 2011 $ 184 $ 162 601 490 756 919 82 169 $ 1,623 $ 1,740 $ (3,556 ) $ (3,190 ) (703 ) (283 ) (10,807 ) (8,762 ) (149 ) — $ (15,215 ) $ (12,235 ) $ (13,592 ) $ (10,495 ) (In thousands) 2014 2013 Deferred tax assets: Trade receivables $ 191 $ 188 Stock compensation accruals 1,031 776 Pension withdrawal liability 2,872 2,902 Other 842 1,100 Total deferred tax assets $ 4,936 $ 4,966 Deferred tax liabilities: Inventories $ (3,618 ) $ (3,319 ) Prepaid (727 ) (525 ) Excess of tax over book depreciation (13,221 ) (11,385 ) Amortization of intangibles (456 ) (354 ) Total deferred tax liabilities $ (18,022 ) $ (15,583 ) Net deferred tax liabilities $ (13,086 ) $ (10,617 ) April 1, 2012,March 30, 2014, the Company has determined that it is more likely than not that the deferred tax assets at April 1, 2012March 30, 2014 will be realized either through future taxable income or reversals of taxable temporary differences. As of April 1, 2012March 30, 2014 and April 3, 2011,March 31, 2013, there were no unrecognized tax benefits. Accordingly, a tabular reconciliation from beginning to ending periods is not provided.beginning with 2007 remain openprior to our fiscal year ended March 29, 2009 are closed to examination by the Internal Revenue Service, and with few exceptions, state and local income tax jurisdictions.In FebruaryThe inventory was sold in fiscal 2010 for cash of approximately $1.8 million which approximated its carrying value. The marketing agreement provides for annual payments based on a percentage of gross profit on future sales up to a maximum of approximately $3.5 million. We have no significant remaining obligations to fulfill under the agreement. Amounts received under the marketing agreement in excess of $1.7 million, the carrying value of intangible assets related to this business at the time of sale, have been recorded as a gain on sale of discontinued operations. Through fiscal 2012, we have recorded gains of approximately $1.7 million before taxes and expect to accrue a nominal amount in 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.amountamounted to 10% or more of our total 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.Reportable Segments Industrial Water
Treatment Total (In thousands) $ 251,451 $ 92,383 $ 343,834 40,357 25,511 65,868 20,552 14,557 35,109 $ 129,782 $ 23,543 $ 153,325 $ 208,724 $ 88,917 $ 297,641 36,938 24,964 61,902 17,110 14,852 31,962 $ 121,250 $ 21,139 $ 142,389 $ 174,901 $ 82,198 $ 257,099 37,288 27,157 64,445 20,937 17,903 38,840 $ 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. 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.Reportable Segments Industrial Total (In thousands) Fiscal Year Ended March 30, 2014: Sales $ 244,888 $ 103,375 $ 348,263 Gross profit 32,041 29,559 61,600 Selling, general, and administrative expenses 19,781 13,729 33,510 Operating income 12,260 15,830 28,090 Identifiable assets* $ 141,506 $ 29,001 $ 170,507 Fiscal Year Ended March 31, 2013: Sales $ 248,556 $ 101,831 $ 350,387 Gross profit 28,878 28,058 56,936 Selling, general, and administrative expenses 19,923 11,683 31,606 Operating income 8,955 16,375 25,330 Identifiable assets* $ 143,827 $ 25,448 $ 169,275 Fiscal Year Ended April 1, 2012: Sales $ 251,451 $ 92,383 $ 343,834 Gross profit 40,357 25,511 65,868 Selling, general, and administrative expenses 19,805 10,954 30,759 Operating income 20,552 14,557 35,109 Identifiable assets* $ 129,782 $ 23,543 $ 153,325 (In thousands, except per share data) Fiscal 2014 First Second Third Fourth Sales $ 94,744 $ 86,599 $ 81,697 $ 85,223 Gross profit 17,231 16,570 13,550 14,249 Selling, general, and administrative expenses 8,970 8,293 8,167 8,080 Operating income 8,261 8,277 5,383 6,169 Income from continuing operations, net of tax 5,112 5,207 3,480 4,295 Income from discontinued operations, net of tax — — — — Net income $ 5,112 $ 5,207 $ 3,480 $ 4,295 Basic net income per share $ 0.49 $ 0.49 $ 0.33 $ 0.41 Diluted net income per share $ 0.48 $ 0.49 $ 0.33 $ 0.40 Fiscal 2013 First Second Third Fourth Sales $ 90,099 $ 87,160 $ 85,527 $ 87,601 Gross profit 15,307 19,196 8,126 14,307 Selling, general, and administrative expenses 8,227 7,455 7,617 8,307 Operating income 7,080 11,741 509 6,000 Income from continuing operations, net of tax 4,365 7,230 1,348 4,165 Income from discontinued operations, net of tax 18 — — — Net income $ 4,383 $ 7,230 $ 1,348 $ 4,165 Basic net income per share $ 0.42 $ 0.69 $ 0.13 $ 0.40 Diluted net income per share $ 0.42 $ 0.69 $ 0.13 $ 0.39 (In thousands, except per share data) Fiscal 2012 First Second Third Fourth $ 88,594 $ 87,870 $ 84,160 $ 83,210 17,927 18,750 15,679 13,512 10,070 10,906 8,516 5,617 6,353 6,717 5,285 3,273 374 184 267 232 $ 6,727 $ 6,901 $ 5,552 $ 3,505 $ 0.65 $ 0.67 $ 0.54 $ 0.34 $ 0.65 $ 0.67 $ 0.53 $ 0.34 Fiscal 2011 First Second Third Fourth $ 74,665 $ 70,398 $ 70,620 $ 81,957 18,447 17,742 13,726 11,986 11,786 10,928 6,833 2,414 7,337 6,832 4,254 1,891 — — — — $ 7,337 $ 6,832 $ 4,254 $ 1,891 $ 0.72 $ 0.67 $ 0.41 $ 0.18 $ 0.71 $ 0.66 $ 0.41 $ 0.18 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREApril 1, 2012,March 30, 2014, based on the criteria described inInternalControl —- Integrated Framework (1992) issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. Based on this assessment, management believes that our internal control over financial reporting was effective as of April 1, 2012.April 1, 2012.March 30, 2014. That attestation report is set forth immediately following this management report. Patrick H. Hawkins Kathleen P. Pepski June 1, 2012 May 29, 2014 June 1, 2012May 29, 201420122014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Beginning in fiscal 2012 management has included Vertex in management’s assessment of the effectiveness of our internal control over financial reporting.ITEM 9B.OTHER INFORMATION2, 20127, 2014 (the “2012“2014 Proxy Statement”). Except for those portions specifically incorporated in this Form 10-K by reference to the 20122014 Proxy Statement, no other portions of the 20122014 Proxy Statement are deemed to be filed as part of this Form 10-K.ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE25, 201223, 2014 are set forth below: Age 4143 Chief Executive Officer and President 5759 Vice President, Chief Financial Officer, and Treasurer Mark A. BeyerRichard G. Erstad 50 Vice President — OperationsRichard G. Erstad48 Vice President, General Counsel and Secretary 5254 Vice President — Water Treatment Group 43 Vice President — Operations Theresa R. Moran 4951 Vice President — Quality and Support 5456 Vice President — Industrial Group was appointed to serve ashas been our Chief Executive Officer and President inand member of our board since March 2011. He had previously been promoted to the position of President in March 2010 as part of the Board’sboard’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.the Company’sour 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.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.the Company’sour 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.the Company’sour Vice President —- Water Treatment Group since April 2012. Prior to attaining this position, Mr. Keller held various positions during his 32-year tenure withsince joining the Company in 1980, 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.the Company’sour 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.the Company’sour 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 1998.20112013 Proxy Statement are incorporated herein by reference.EXECUTIVE COMPENSATION20122014 Proxy Statement is incorporated herein by this reference.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS20122014 Proxy Statement are incorporated herein by this reference.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE20122014 Proxy Statement are incorporated herein by this reference.PRINCIPAL ACCOUNTANT FEES AND SERVICES20122014 Proxy Statement is incorporated herein by this reference.ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS OF THE COMPANY The following financial statements of Hawkins, Inc. are filed as part of this Annual Report on Form 10-K: ReportsReport of Independent Registered Public Accounting Firms.Firm. Consolidated Balance Sheets at April 1, 2012March 30, 2014 and April 3, 2011.March 31, 2013. Consolidated Statements of Income for the fiscal years ended March 31, 2014, March 31, 2013, and April 1, 2012, April 3, 2011, and March 28, 2010.2012.Consolidated Statements of Comprehensive Income for the fiscal years ended March 30, 2014, March 31, 2013, and April 1, 2012. Consolidated Statements of Shareholders’ Equity for the fiscal years ended March 30, 2014, March 31, 2013 and April 1, 2012, April 3, 2011, and March 28, 2010.2012. Consolidated Statements of Cash Flows for the fiscal years ended March 30, 2014, March 31, 2013 and April 1, 2012, April 3, 2011, and March 28, 2010.2012. Notes to Consolidated Financial Statements. FINANCIAL STATEMENT SCHEDULES OF THE COMPANY The additional financial data listed below is included as a schedule to this Annual Report on Form 10-K and should be read in conjunction with the financial statements presented in Part II, Item 8. Schedules not included with this additional financial data have been omitted because they are not required or the required information is included in the financial statements or the notes. The following financial statement schedule for the fiscal years 2012, 20112014, 2013 and 2010.2012. Schedule II — Valuation and Qualifying Accounts. EXHIBITS The exhibits of this Annual Report on Form 10-K included herein are set forth on the attached Exhibit Index. HAWKINS, INC. June 1, 2012May 29, 2014 By /s/ Patrick H. Hawkins Date: June 1, 2012May 29, 2014 Date: June 1, 2012May 29, 2014 Date: June 1, 2012May 29, 2014 John S. McKeon, Director, Chairman of the Board Date: June 1, 2012May 29, 2014 Duane M. Jergenson, Director Date: June 1, 2012May 29, 2014 Daryl I. Skaar, Director Date: June 1, 2012May 29, 2014 James A. Faulconbridge, Director Date: June 1, 2012May 29, 2014 James T. Thompson, Director Date: June 1, 2012May 29, 2014 Jeffrey L. Wright, Director /s/ Mary J. Schumacher Date: May 29, 2014 Mary J. Schumacher, Director Schedule SCHEDULE IIHAWKINS, INC.VALUATION AND QUALIFYING ACCOUNTS APRIL 3, 2011, AND MARCH 28, 2010 Additions Balance at
Beginning
of Year Charged to
Costs and
Expenses Charged to
Other
Accounts Deductions
Write-Offs Balance at
End of Year (In thousands) $ 406 $ 78 $ — $ 24 $ 460 $ 300 $ 120 $ — $ 14 $ 406 $ 350 $ (29 ) $ — $ 21 $ 300 Additions Description (In thousands) Reserve deducted from asset to which it applies: Year Ended March 30, 2014: Allowance for doubtful accounts $ 469 $ 44 $ — $ 36 $ 477 Year Ended March 31, 2013: Allowance for doubtful accounts $ 460 $ 201 $ — $ 192 $ 469 Year Ended April 1, 2012: Allowance for doubtful accounts $ 406 $ 78 $ — $ 24 $ 460 3.1 Amended and Second Restated Articles of Incorporation.(1) Incorporated by Reference 3.2 Amended and Restated By-Laws.(2) Incorporated by Reference 10.1* Description of Consulting Arrangement with John S. McKeon.(3)Incorporated by Reference10.2* Hawkins, Inc. 2004 Omnibus Stock Plan. (4)(3) Incorporated by Reference 10.3* Form of Restricted Stock Agreement under the Company’s 2004 Omnibus Stock Plan.(5)Incorporated by Reference10.2* 10.4*Form of Restricted Stock Agreement (Directors) under the Company’s 2004 Omnibus Stock Plan.(6)Incorporated by Reference10.5* Form of Non-Statutory Stock Option Agreement under the Company’s 2004 Omnibus Stock Plan. (7)(4) 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 Reference10.3* 10.7* Hawkins, Inc. 2010 Omnibus Incentive Plan. (9)(5) Incorporated by Reference 10.8*10.4* Form of Performance-Based Unit Award Notice and Restricted Stock Agreement under the Company’s 2010 Omnibus Incentive Plan. (10)(6) Incorporated by Reference 10.9*10.5* Form of Restricted Stock Agreement under the Company’s 2010 Omnibus Incentive Plan. (11)(7) Incorporated by Reference 10.10*10.6* Hawkins, Inc. Executive Severance Plan. (12)(8) Incorporated by Reference 21 Subsidiaries of the registrant Filed Electronically 23.1 Consent of Independent Registered Public Accounting Firm. Filed Electronically 31.1 Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act. Filed Electronically 31.2 Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act. Filed Electronically 32.1 Section 1350 Certification by Chief Executive Officer. Filed Electronically 32.2 Section 1350 Certification by Chief Financial Officer. Filed Electronically 101 Financial statements from the Annual Report on Form 10-K of Hawkins, Inc. for the period ended April 1, 2012,March 30, 2014, filed with the SEC on June 1, 2012,May 29, 2014, formatted in Extensible Business Reporting Language (XBRL); (i) the Condensed Consolidated Balance Sheets at April 1, 2012March 30, 2014 and April 3, 2011,March 31, 2013 , (ii) the Condensed Consolidated Statements of Income for the fiscal years ended March 30, 2014, March 31, 2013, and April 1, 2012 April 3, 2011 and March 28, 2010, (iii) the CondensedConsolidated Statements of Comprehensive Income (Loss) for the fiscal years ended March 30, 2014, March 31, 2013, and April 1, 2012 (iv) the Consolidated Statements of Shareholders’ Equity for the fiscal years ended March 30, 2014, March 31, 2013 and April 1, 2012 (v) Consolidated Statements of Cash Flows for the fiscal years ended March 30, 2014, March 31, 2013 and 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 on Form 10-K. (1) Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010. (2) Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated October 28, 2009 and filed November 3, 2009. (3)Incorporated by reference to Item 1.01 of the Company’s Current Report on Form 8-K dated August 5, 2009 and filed August 11, 2009.(4)(3)Incorporated by reference to Appendix B to the Company’s Proxy Statement for the 2004 Annual Meeting of Shareholders filed July 23, 2004. (5)Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30.(6)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008.(7)(4)Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008. (8)Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008.(9)(5)Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed June 6, 2011 (file no. 333-174735). (10)(6) Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010. (11)(7) Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010. (12)(8) 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.
55