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What changed in HAWKINS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HAWKINS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+117 added−121 removedSource: 10-K (2024-05-15) vs 10-K (2022-05-18)

Top changes in HAWKINS INC's 2024 10-K

117 paragraphs added · 121 removed · 85 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Health and Nutrition Group relies on a specially trained sales and product development staff that works directly with customers on their specific needs. The group’s extensive product portfolio combined with value-added services, including product formulation, sourcing and distribution, processing and blending and quality control and compliance, positions this group as a one-stop ingredient solutions provider to its customers.
Biggest changeThe group’s extensive product portfolio combined with value-added services, including product formulation, sourcing and distribution, and processing and blending, positions this group as a one-stop ingredient solutions provider to its customers. The group also follows rigorous quality control and compliance processes to provide reliable, high-quality products to its customers.
As a result, we may not be able to supply or manufacture products for our customers. Intellectual Property. Our intellectual property portfolio is of economic importance to our business. When appropriate, we have pursued, and we will continue to pursue, patents covering our products. We also have obtained certain trademarks for our products to distinguish them from our competitors’ products.
As a result, we may not be able to supply or manufacture products for our customers. Intellectual Property. Our intellectual property portfolio is of economic importance to our business. When appropriate, we have pursued, and we will continue to pursue, patents covering our products. We have also obtained certain trademarks for our products to distinguish them from our competitors’ products.
In particular, the FDA’s current good manufacturing practices (“GMPs”) describe policies and procedures designed to ensure that nutraceuticals, pharmaceuticals and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled and cover the manufacturing, packaging, labeling and storing of supplements, with requirements for quality control, design and construction of manufacturing plants, testing of ingredients and final products, record keeping, and complaints processes.
In particular, the FDA’s current good manufacturing practices (“GMPs”) describe policies and procedures designed to ensure that nutraceuticals, pharmaceuticals and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled and cover the manufacturing, packaging, labeling and storing of products, with requirements for quality control, design and construction of manufacturing plants, testing of ingredients and final products, record keeping, and complaints processes.
We are subject to numerous federal, state and local environmental, health and safety laws and regulations in the jurisdictions in which we operate, including the management, storage, transportation and disposal of chemicals and wastes; product regulation; air water and soil contamination; and the investigation and cleanup of any spills or releases that may result from our management, handling, storage, sale, or transportation of chemicals and other products.
We are subject to numerous federal, state and local environmental, health and safety laws and regulations in the jurisdictions in which we operate, including laws and regulations relating to the management, storage, transportation and disposal of chemicals and wastes; product regulation; air, water and soil contamination; and the investigation and cleanup of any spills or releases that may result from our management, handling, storage, sale, or transportation of chemicals and other products.
We have made available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports, as soon as reasonably practicable after we electronically file these materials with, or furnish them to, the Securities and Exchange Commission.
We have made available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports, as soon as reasonably practicable after we electronically file these materials with, or furnish them to, the Securities and Exchange Commission ("SEC").
We regard many of the formulas, information and processes that we generate and use in the conduct of our business as proprietary and protectable under applicable copyright, patent, trademark, trade secret and unfair competition laws. Customer Concentration. In fiscal 2022, none of our customers accounted for 10% or more of our total sales. Competition.
We regard many of the formulas, information and processes that we generate and use in the conduct of our business as proprietary and protectable under applicable copyright, patent, trademark, trade secret and unfair competition laws. Customer Concentration. In fiscal 2024, none of our customers accounted for 10% or more of our total sales. Competition.
The Industrial Group: • Manufactures sodium hypochlorite (bleach), agricultural products and certain food-grade and pharmaceutical products, including liquid phosphates, lactates and other blended products; • Receives, stores and distributes various chemicals in bulk quantities, including liquid caustic soda, sulfuric acid, hydrochloric acid, urea, phosphoric acid, aqua ammonia and potassium hydroxide; • Repackages water treatment chemicals for our Water Treatment Group and bulk industrial chemicals to sell in smaller quantities to our customers; • Performs custom blending of chemicals according to customer formulas and specifications; and • Performs contract and private label bleach packaging.
The Industrial Group: • Manufactures sodium hypochlorite (bleach), certain food-grade and pharmaceutical products, including liquid phosphates, lactates and other blended products, and agricultural products; • Receives, stores and distributes various chemicals in bulk quantities, including liquid caustic soda, sulfuric acid, hydrochloric acid, urea, phosphoric acid, aqua ammonia and potassium hydroxide; • Repackages water treatment chemicals for our Water Treatment Group and bulk industrial chemicals to sell in smaller quantities to our customers; and • Performs custom blending of chemicals according to customer formulas and specifications.
In addition, we operate a fleet of more than 200 commercial vehicles, primarily in our Water Treatment Group, which are highly regulated, including by the U.S. Department of Transportation (“DOT”).
In addition, we operate a fleet of more than 350 commercial vehicles, primarily in our Water Treatment Group, which are highly regulated, including by the U.S. Department of Transportation (“DOT”).
We also believe that there are significant synergies between our Water Treatment and Industrial Groups in 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.
We also believe that there are significant synergies between our Water Treatment and Industrial Groups that allow us to obtain a competitive cost position on many of the chemicals sold by the Water Treatment Group due to the volumes of these chemicals purchased by our Industrial Group.
The group’s sales are concentrated primarily in the central United States, while the group’s products sold into the food and pharmaceutical markets are sold nationally. The Industrial Group relies on a specially trained sales staff that works directly with customers on their specific needs. The group conducts its business primarily through manufacturing locations and terminal operations.
The group’s sales are concentrated primarily in the central United States, while the group sells food and pharmaceutical products, as well as some agricultural products, nationally. The Industrial Group relies on a specially trained sales staff that works directly with customers on their specific needs. The group conducts its business primarily through manufacturing locations and terminal operations.
Agricultural sales within this group tend to be seasonal, with higher sales due to the application of fertilizer during the planting season of March through June given the regions of the country where we are located. Water Treatment Segment.
Agricultural sales within this group tend to be seasonal, with higher sales during the typical planting season of March through June given the regions of the country we serve. Water Treatment Segment.
We expect 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. 1 Health and Nutrition Segment.
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. Health and Nutrition Segment.
Approximately 38% of our employees were female or racially and ethnically diverse, and approximately 10% were covered by a collective bargaining agreement. Of the eight members of our Board of Directors, two are female, six are male, one is Asian American and seven are white. Available Information. Our Internet address is www.hawkinsinc.com.
Of the eight members of our Board of Directors, two are female, six are male, one is Asian American and seven are white. Available Information. Our Internet address is www.hawkinsinc.com.
Our Health and Nutrition Group specializes in providing ingredient distribution, processing and formulation solutions to manufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritional food, health and wellness products. This group offers a diverse product portfolio including minerals, vitamins and amino acids, excipients, joint products, botanicals and herbs, sweeteners and enzymes.
Our Health and Nutrition Group specializes in providing ingredient distribution, processing and formulation solutions to manufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritional food, health and wellness products.
Full-time employees are eligible for health, dental and vision insurance, paid and unpaid leaves, 401(K) plan, retirement plans, life and disability/accident coverage and our employee assistance program. As of April 3, 2022, we had 813 employees across the United States, of which 807 were full-time employees,.
We strive to provide employees with competitive wages commensurate with their skill levels, experience, knowledge and the regional market. Full-time employees are eligible for health, dental and vision insurance, paid and unpaid leaves, 401(K) plan, retirement plans, life and disability/accident coverage and our employee assistance program.
In addition, our Industrial and Water Treatment groups share certain resources, which leverage fixed costs across both groups. The Water Treatment group operates out of 37 warehouses supplying products and services to customers primarily in the central United States, and along the south from Florida to Texas. In fiscal 2022, we added four locations, all by acquisition.
In addition, our Industrial and Water Treatment groups share certain resources, which leverage fixed costs across both groups. The Water Treatment group operates out of 47 warehouses supplying products and services to customers in 46 states. We expect to continue to invest in existing and new branches to expand the group’s geographic coverage.
Removed
We have ensured the safety of our employees and our customers during the COVID-19 pandemic by implementing contingency and continuity plans to respond quickly and appropriately to identified risks, safe work practices in accordance with the guidance provided by the US Centers for Disease Control and Prevention ("CDC").
Added
This group offers a diverse product portfolio including minerals, vitamins and amino acids, excipients, joint products, botanicals and herbs, sweeteners and enzymes. 1 The Health and Nutrition Group relies on a specially trained sales staff that works directly with customers on their specific needs.
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Through communication, enhanced resources and leadership, we were able to support our employees, serve our customers and keep our facilities operating and safe during the pandemic. We strive to provide employees with competitive wages commensurate with their skill levels, experience, knowledge and the regional market.
Added
As of March 31, 2024, we had 934 employees across the United States, of which 928 were full-time employees. Approximately 41% of our employees were female or racially and ethnically diverse, and approximately 10% were covered by a collective bargaining agreement.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBarge shipments are delayed or impossible under certain circumstances, including during times of high or low water levels, when waterways are frozen and when locks and dams are inoperable. The availability and reliability of truck transportation has been negatively impacted by a number of factors, including limited availability of qualified drivers and equipment, and limitations on drivers’ hours of service.
Biggest changeBarge shipments are delayed or impossible under certain circumstances, including during times of high or low water levels, when waterways are frozen and when locks and dams are inoperable.
ITEM 1A. RISK FACTORS You should consider carefully the following material factors regarding risks relating to an investment in our securities and when reading the information, including the financial information, contained in this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS You should carefully consider the following material factors regarding risks relating to an investment in our securities and when reading the information, including the financial information, contained in this Annual Report on Form 10-K.
In particular, the FDA’s current GMPs describe policies and procedures designed to ensure that nutraceuticals, pharmaceuticals and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled and cover the manufacturing, packaging, labeling and storing of supplements, with requirements for quality control, design and construction of manufacturing plants, testing of ingredients and final products, record keeping, and complaints processes.
In particular, the FDA’s current GMPs describe policies and procedures designed to ensure that nutraceuticals, pharmaceuticals and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled and cover the manufacturing, packaging, labeling and storing of products, with requirements for quality control, design and construction of manufacturing plants, testing of ingredients and final products, record keeping, and complaints processes.
Our business is subject to hazards common to chemical manufacturing, blending, storage, handling and transportation, including explosions, fires, severe weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, traffic accidents involving our delivery vehicles, chemical spills, discharges or releases of toxic or hazardous substances or gases and other risks.
Our business is subject to hazards common to chemical manufacturing, blending, storage, handling and transportation, including explosions, fires, severe weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, traffic accidents involving our delivery vehicles, derailments, chemical spills, discharges or releases of toxic or hazardous substances or gases and other risks.
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. 9 Our food, pharmaceutical and health and nutrition products are subject to government regulation, both in the United States and abroad, which could increase our costs significantly and limit or prevent the sale of such products.
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. 9 Many of our products, particularly our food, pharmaceutical and health and nutrition products are subject to government regulation, both in the United States and abroad, which could increase our costs significantly and limit or prevent the sale of such products.
The cost of investigation, remediation or removal of such substances may be substantial. In the conduct of our operations, we have handled and do handle materials that are considered hazardous, toxic or volatile under federal, state and local laws. The accidental release of such products cannot be completely eliminated.
The cost of investigation, remediation or removal of such substances may be substantial. In the conduct of our operations, we have handled and do handle materials that are considered hazardous, toxic or volatile under federal, state and local laws. The potential for the accidental release of such products cannot be completely eliminated.
If our products fail to meet the customers’ specifications or comply with applicable laws or regulations, perform in a manner inconsistent with the customers’ expectations or have a shorter useful life than required, a customer could seek replacement of the product or damages for costs incurred as a result of the product failure.
If our products fail to meet the customers’ requirements or comply with applicable laws or regulations, perform in a manner inconsistent with the customers’ expectations or have a shorter useful life than required, a customer could seek replacement of the product or damages for costs incurred as a result of the product failure.
We may not be able to renew our leases of land where four of our operations facilities reside. We lease the land where our three main terminals are located and where another significant manufacturing plant is located. These leases, including all renewal periods, have expiration dates from 2023 to 2044.
We may not be able to renew our leases of land where four of our operations facilities reside. We lease the land where our three main terminals are located and where another significant manufacturing plant is located. These leases, including all renewal periods, have expiration dates from 2024 to 2044.
A product recall or a partially or completely uninsured judgment against us could have a material adverse effect on our business, financial condition and results of operations. Changes in our customers’ needs or failure of our products to meet customers’ specifications could adversely affect our sales and profitability.
A product recall or a partially or completely uninsured judgment against us could have a material adverse effect on our business, financial condition and results of operations. Changes in our customers’ needs or failure of our products to meet customers’ requirements could adversely affect our sales and profitability.
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. Failure to comply with the covenants under our credit facility may have a material adverse effect. We are party to a credit agreement (the “Credit Agreement”) with U.S.
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. Failure to comply with the covenants under our credit facility may have a material adverse effect. We are party to a credit agreement (the “Credit Agreement”) with U.S. Bank National Association ("U.S.
The occurrence of extraordinary events, including future terrorist attacks, wars, global health developments and pandemics (including the COVID-19 outbreak), or escalation of hostilities, cannot be predicted, but their occurrence can be expected to negatively affect the economy in general, and specifically the markets for our products.
The occurrence of extraordinary events, including future terrorist attacks, wars, global health developments and pandemics, or escalation of hostilities, cannot be predicted, but their occurrence can be expected to negatively affect the economy in general, and specifically the markets for our products.
The manufacture, packaging, labeling, advertising, promotion, distribution and sale of our food, pharmaceutical pesticide and health and nutrition products are subject to regulation by numerous national and local governmental agencies in the United States and other countries.
The manufacture, packaging, labeling, advertising, promotion, distribution and sale of many of our products, but our food, pharmaceutical, pesticide and health and nutrition products in particular, are subject to regulation by numerous national and local governmental agencies in the United States and other countries.
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.
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 or via certain modes of transportation could adversely affect the efficiency of our logistical operations.
We are subject to numerous federal, state and local environmental, health and safety laws and regulations in the jurisdictions in which we operate, including the management, storage, transportation and disposal of chemicals and wastes; product regulation; air water and soil contamination; and the investigation and cleanup of any spills or releases that may result from our management, handling, storage, sale, or transportation of chemicals and other products.
We are subject to numerous federal, state and local environmental, health, safety and land use laws and regulations in the jurisdictions in which we operate, including the management, storage, transportation and disposal of chemicals and wastes; product regulation; air water and soil contamination; land use, fire code and zoning; and the investigation and cleanup of any spills or releases that may result from our management, handling, storage, sale, or transportation of chemicals and other products.
Any of these government agencies, as well as legislative bodies, can change existing regulations, or impose new ones, or could take aggressive measures, causing or contributing to a variety of negative consequences, including: • stopping the sale of products, • requirements for the reformulation of certain or all products to meet new standards, • the recall or discontinuance of certain or all products, • additional record-keeping requirements, • expanded documentation of the properties of certain or all products, • expanded or different labeling, • adverse event tracking and reporting, and • additional scientific substantiation.
Any of these government agencies, as well as legislative bodies, can change existing regulations, or impose new ones, or could take aggressive measures, causing or contributing to a variety of negative consequences, which may include one or more of the following: • stopping the sale of products, • requirements for the reformulation of certain or all products to meet new standards, • the recall or discontinuance of certain or all products, • additional record-keeping requirements, • expanded documentation of the properties of certain or all products, • expanded or different labeling, • adverse event tracking and reporting, and • additional scientific substantiation.
In addition, we operate a fleet of more than 200 commercial vehicles, primarily in our Water Treatment Group, which are highly regulated, including by the U.S. Department of Transportation (“DOT”). The DOT governs transportation matters including authorization to engage in motor carrier service, including the necessary permits to conduct our businesses, equipment operation, and safety.
In addition, we operate a fleet of more than 350 commercial vehicles, primarily in our Water Treatment Group, which are highly regulated, including by the DOT. The DOT governs transportation matters including authorization to engage in motor carrier service, including the necessary permits to conduct our businesses, equipment operation, and safety.
Rail limitations, such as limitations in rail capacity, availability of railcars, workforce shortages and adverse weather conditions have disrupted or delayed rail shipments in the past and could do so in the future.
Rail limitations, such as limitations in rail capacity, availability of railcars, workforce shortages, threats of strikes, derailments, embargoes and adverse weather conditions have disrupted or delayed rail shipments in the past and could do so in the future.
In addition, these concerns could influence public perceptions, impact the commercial viability of the products we sell and increase the costs to comply with increasingly complex regulations, which could have a negative impact on our business, financial condition and results of operations.
These concerns have led to, and could continue to result in, more stringent regulatory intervention by governmental authorities. In addition, these concerns could influence public perceptions, impact the commercial viability of the products we sell and increase the costs to comply with increasingly complex regulations, which could have a negative impact on our business, financial condition and results of operations.
Bank National Association and other lenders (collectively, the “Lenders”), which includes secured revolving credit facilities (the “Revolving Loan Facility”) totaling $250.0 million. The Revolving Loan Facility includes a $10.0 million letter of credit subfacility and $25.0 million swingline subfacility. At April 3, 2022, we had $126.0 million outstanding under the Revolving Loan Facility.
Bank") and other lenders (collectively, the “Lenders”), which includes secured revolving credit facilities (the “Revolving Loan Facility”) totaling $250.0 million. The Revolving Loan Facility includes a $10.0 million letter of credit subfacility and $25.0 million swingline subfacility. At March 31, 2024, we had $99.0 million outstanding under the Revolving Loan Facility.
In addition, societal concerns regarding the safety of chemicals in commerce and their potential impact on the environment have resulted in a growing trend towards increasing levels of product safety and environmental protection regulations. These concerns have led to, and could continue to result in, more stringent regulatory intervention by governmental authorities.
In addition, societal concerns regarding the safety of chemicals in commerce and their potential impact on the environment have resulted in a growing trend towards increasing levels of product safety and environmental protection regulations and restrictions on the locations and operations of chemical facilities.
Recently, the unprecedented congestion in ocean shipping has, and will continue to, adversely impact the reliability of our imported raw materials, and transport driver shortages have caused extended lead times for domestic shipments. In addition, rail shipments have become increasingly unreliable, with significant delays in service and increased costs.
In recent years, unprecedented congestion in ocean shipping adversely impacted the reliability of our imported raw materials, and transport driver shortages caused extended lead times for domestic shipments. In addition, rail shipments can be unreliable, with significant delays in service and increased costs. The impacts of high-profile derailments could further degrade service levels and cause railroads to increase costs.
Added
The availability and reliability of truck transportation has been negatively impacted by a number of factors, including limited availability of qualified drivers and equipment, limitations on drivers’ hours of service and failures of critical infrastructure, such as bridges.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(5) The land for this manufacturing and packaging facility is leased from a third party, with the lease expiring in May 2023.
Biggest changeThis facility includes outside storage tanks for the storage of liquid bulk chemicals, as well as smaller tanks for storing and mixing chemicals. (4) The land for this facility is leased from a third party. The lease expires in May 2024, with automatic one-year renewal periods.
ITEM 2. PROPERTIES Our facilities material to our operations consist of our locations described below. In addition to the facilities listed below, our Water Treatment group operates out of 33 additional warehouse locations, the majority of which are owned by us. We believe that our facilities are adequate and suitable for the purposes they serve.
ITEM 2. PROPERTIES Our facilities material to our operations consist of our locations described below. In addition to the facilities listed below, our Water Treatment group operates out of several additional warehouse locations, the majority of which are owned by us. We believe that our facilities are adequate and suitable for the purposes they serve.
Unless noted, each facility is owned by us and is primarily used as office and warehouse space. We believe that we carry customary levels of insurance covering the replacement of damaged property. Group Location Approx.
Unless noted, each facility listed below is owned by us and is primarily used as office and warehouse space. We believe that we carry customary levels of insurance covering the replacement of damaged property. Group Location Rail/Barge Access Approx.
(2) This is comprised of (i) a 79,000 square foot manufacturing plant which sits on approximately 16 acres and (ii) a leased 28,000 square foot warehouse located in close proximity that is leased until December 2022. (3) This manufacturing location sits on approximately 11 acres of land. (4) This manufacturing facility includes 12 acres of land owned by the Company.
(2) This is comprised of (i) a 79,000 square foot manufacturing plant which sits on approximately 16 acres and (ii) a leased 28,000 square foot warehouse located in close proximity that is leased until December 2025. (3) This is a manufacturing and/or distribution facility owned by the Company.
Square Feet Corporate headquarters Roseville, MN 50,000 Health and Nutrition Fullerton, CA (1) 55,800 Florida, NY (2) 107,000 Industrial Minneapolis, MN (3) 177,000 Centralia, IL (4) 77,000 Dupo, IL (5) 64,000 St. Paul, MN (6) 32,000 Rosemount, MN (7) 105,000 Industrial and Water Treatment St.
Square Feet Corporate headquarters Roseville, MN 50,000 Health and Nutrition Fullerton, CA (1) 56,000 Florida, NY (2) 107,000 Industrial Minneapolis, MN (3) Rail 177,000 Centralia, IL (3) Rail 121,000 Dupo, IL (3) (4) Rail 64,000 St. Paul, MN (3) (5) Rail/Barge 32,000 Rosemount, MN (3) Rail 153,000 Industrial and Water Treatment St.
Paul, MN (8) 59,000 Camanche, IA 95,000 Memphis, TN 41,000 Water Treatment Apopka, FL 32,100 (1) This is a leased facility comprising administrative offices and a distribution facility. The lease runs through January 2026.
Paul, MN (3) (5) Rail/Barge 59,000 Camanche, IA (3) Rail/Barge 95,000 Memphis, TN (3) Rail/Barge 41,000 Water Treatment Apopka, FL (3) Rail 32,000 Camby, IN (3) 41,000 Fairborn, OH (6) Rail 7,000 Fayetteville, TN (3) 54,000 Sulphur, LA (3) 30,000 (1) This is a leased facility comprising administrative offices and a distribution facility. The lease runs through January 2026.
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(6) These 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.
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(5) The land for these facilities is leased from the Port Authority of the City of St. Paul, Minnesota. One of the applicable leases runs through July 2024 with a letter of intent in place to extend the term, one runs through 2028, and one runs through 2044 including all available lease extensions.
Removed
One of the applicable leases runs through 2033, while the other one runs through 2044 including all available lease extensions. (7) This includes two adjacent facilities comprising a total of 56 acres of land owned by the Company.
Added
(6) This is a bleach manufacturing facility owned by the Company.
Removed
These manufacturing facilities have outside storage tanks for the storage of bulk chemicals, as well as numerous smaller tanks for storing and mixing chemicals. (8) This 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.
Removed
The land is leased from the Port Authority of the City of St. Paul, Minnesota and runs until 2029.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes the investment of $100 in our stock and each of those indices on April 2, 2017, and reinvestment of all dividends. 13 ITEM 6. RESERVED
Biggest changeThe graph assumes the investment of $100 in our stock and each of those indices on March 31, 2019, and reinvestment of all dividends. 14 ITEM 6. RESERVED
ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common shares are listed on the Nasdaq Global Select Market under the symbol “HWKN.” As of May 13, 2022, shares of our common shares were held by approximately 387 shareholders of record.
ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common shares are listed on the Nasdaq Global Select Market under the symbol “HWKN.” As of May 10, 2024, shares of our common shares were held by approximately 353 shareholders of record.
Added
Our Board of Directors authorized the repurchase of up to 2.6 million shares of our outstanding common stock. The shares may be purchased on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. We did not purchase any shares of our common stock during the three months ended March 31, 2024.
Added
As of March 31, 2024, the number of shares available to be purchased under the share repurchase program was 937,487.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs our operations and products are essential to critical national infrastructure, it is imperative that we continue to supply materials including the products needed to maintain safe drinking water, ingredients essential for large-scale food, pharmaceutical and other health product manufacturing and nutrition products needed to support our country's critical infrastructure. 15 Results of Operations The following table sets forth certain items from our statement of income as a percentage of sales for fiscal 2022 and 2021: Fiscal 2022 Fiscal 2021 Sales 100.0 % 100.0 % Cost of sales (81.1) % (79.3) % Gross profit 18.9 % 20.7 % Selling, general and administrative expenses (9.7) % (11.3) % Operating income 9.2 % 9.4 % Interest expense, net (0.2) % (0.2) % Other income — % 0.2 % Income before income taxes 9.0 % 9.4 % Income tax provision (2.3) % (2.5) % Net income 6.7 % 6.9 % Fiscal 2022 Compared to Fiscal 2021 Sales Sales were $774.5 million for fiscal 2022, an increase of $177.7 million, or 30%, from sales of $596.9 million for fiscal 2021.
Biggest changeWe realized a gain of $3 million on this sale, which has been recorded as a reduction to selling, general and administrative expenses. 16 Results of Operations The following table sets forth certain items from our statement of income as a percentage of sales for fiscal 2024 and 2023: Fiscal 2024 Fiscal 2023 Sales 100.0 % 100.0 % Cost of sales (78.9) % (82.3) % Gross profit 21.1 % 17.7 % Selling, general and administrative expenses (9.8) % (8.3) % Operating income 11.3 % 9.4 % Interest expense, net (0.5) % (0.6) % Other income 0.2 % — % Income before income taxes 11.0 % 8.8 % Income tax provision (2.8) % (2.4) % Net income 8.2 % 6.4 % Fiscal 2024 Compared to Fiscal 2023 Sales Sales were $919.2 million for fiscal 2024, a decrease of $15.9 million, or 2%, from sales of $935.1 million for fiscal 2023.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis.
We are permitted to make distributions, pay dividends and repurchase shares so long as no default or event of default exists or would exist as a result thereof. We were in compliance with all covenants of the Credit Agreement as of April 3, 2022 and expect to remain in compliance with all covenants for the next 12 months.
We are permitted to make distributions, pay dividends and repurchase shares so long as no default or event of default exists or would exist as a result thereof. We were in compliance with all covenants of the Credit Agreement as of March 31, 2024 and expect to remain in compliance with all covenants for the next 12 months.
You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for fiscal 2020 compared to fiscal 2021.
You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for fiscal 2023 compared to fiscal 2022.
Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. We have determined we have no critical accounting estimates material to our consolidated financial position, results of operations or cash flow. 20
Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. We have determined the following is a critical accounting estimate material to our consolidated financial position, results of operations or cash flow. Acquisition accounting.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2021 , filed with the SEC on June 2, 2021.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2023 , filed with the SEC on May 17, 2023.
At April 3, 2022, the effective interest rate on our borrowings was 1.2%. In addition to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unutilized commitments thereunder. The commitment fee is between 0.15% and 0.25%, depending on our leverage ratio.
At March 31, 2024, the effective interest rate on our borrowings was 4.3%. In addition to paying interest on the outstanding principal under the Revolving Loan Facility, we are required to pay a commitment fee on the unutilized commitments thereunder. The commitment fee is between 0.15% and 0.25%, depending on our leverage ratio.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of our financial condition and results of operations for fiscal 2022 and 2021.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of our financial condition and results of operations for fiscal 2024 and 2023.
Income Tax Provision Our effective tax rate was approximately 26.5% for both fiscal 2022 and fiscal 2021. The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes. 17 Selected Quarterly Financial Data Selected financial data for our fiscal quarters is shown below. No changes have been made to previously reported information.
The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes. 18 Selected Quarterly Financial Data Selected financial data for our fiscal quarters is shown below. No changes have been made to previously reported information.
Historically, our cash requirements for working capital increase during the period from March through November as caustic soda inventory levels increase as most of our barges are received during this period. 18 Cash used in investing activities was $49.8 million in fiscal 2022 compared to $71.4 million in fiscal 2021.
Historically, our cash requirements for working capital increase during the period from March through November as caustic soda inventory levels increase as most of our barges are received during this period. Cash used in investing activities was $122.5 million in fiscal 2024 compared to $41.2 million in fiscal 2023.
Bank and provides us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $250 million. The Revolving Loan Facility includes a $10 million letter of credit subfacility and $25 million swingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing on April 30, 2027.
Bank is also serving as Administrative Agent. The Credit Agreement provides us with a Revolving Loan Facility totaling $250.0 million. The Revolving Loan Facility includes a $10 million letter of credit subfacility and $25 million swingline subfacility. The Revolving Loan Facility has a five-year maturity date, maturing on April 30, 2027.
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 and the resulting operating cash flow.
This, combined with improved net income, resulted in the year-over-year increase in net cash provided by operating activities. 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 and the resulting operating cash flow.
Water Treatment segment sales increased $58.1 million, or 34%, to $228.1 million for fiscal 2022, as compared to $170.0 million for fiscal 2021. Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both fiscal 2022 and fiscal 2021.
Water Treatment Segment. Water Treatment segment sales increased $58.4 million, or 19%, to $363.3 million for fiscal 2024, as compared to $304.9 million for fiscal 2023. Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both fiscal 2024 and fiscal 2023.
The results of operations since the acquisition date are included in our Water Treatment segment. 14 On September 20, 2021, we acquired substantially all the assets of Southeast Water Systems LLC, under the terms of an asset purchase agreement with Southeast Water Systems and its shareholders.
The results of operations since the acquisition date and the assets are included in our Water Treatment segment. 15 On October 27, 2023, we acquired substantially all the assets of Water Solutions Unlimited, Inc. ("Water Solutions") under the terms of a purchase agreement with Water Solutions and its shareholders.
Interest Expense, Net Interest expense was $1.4 million for fiscal 2022, a decrease of $0.1 million from interest expense of $1.5 million for fiscal 2021. Lower borrowing rates compared to the prior year more than offset the increase in outstanding borrowings in the current year.
Interest Expense, Net Interest expense was $4.3 million for fiscal 2024, a decrease of $0.9 million from interest expense of $5.2 million for fiscal 2023. Interest expense decreased due to lower outstanding borrowings in the current year as compared to the prior year, offset slightly by higher borrowing rates.
Gross profit for the Water Treatment segment increased $7.8 million, or 17%, to $54.6 million, or 24% of sales, for fiscal 2022, from $46.8 million, or 28% of sales, for fiscal 2021. During fiscal 2022, the LIFO reserve increased, and gross profits decreased, by $5.4 million, primarily due to rising raw material costs.
Gross Profit Gross profit increased $28.5 million, or 17%, to $193.6 million, or 21% of sales, for fiscal 2024, from $165.1 million, or 18% of sales, for fiscal 2023. During fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $15.4 million, primarily due to decreased raw material costs.
Gross profit for the Industrial segment increased $16.3 million, or 38%, to $59.6 million, or 15% of sales, for fiscal 2022, from $43.3 million, or 16% of sales, for fiscal 2021. During fiscal 2022, the LIFO reserve increased, and gross profits decreased, by $10.4 million, primarily due to rising raw material costs.
Gross profit for the Industrial segment decreased $0.6 million, or 1%, to $67.5 million, or 16% of sales, for fiscal 2024, from $68.1 million, or 14% of sales, for fiscal 2023. During fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $12.1 million, primarily due to decreased raw material costs.
As of April 3, 2022, the unamortized balance of these costs was $0.4 million, and is reflected as a reduction of debt on our balance sheet. 19 The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.0 to 1.0.
The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.0 to 1.0.
The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries. We used $126.0 million of the proceeds from the Revolving Loan Facility to refinance the obligations under the previous credit facility.
The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries.
Contractual Obligations and Commercial Commitments The following table provides aggregate information about our contractual payment obligations and the periods in which payments are due: Payments Due by Fiscal Period Contractual Obligation 2023 2024 2025 2026 2027 More than 5 Years Total (In thousands) Senior secured revolver (1) $ — $ — $ — $ — $ — $ 126,000 $ 126,000 Interest payments (2) $ 1,833 $ 1,833 $ 1,833 $ 1,833 $ 1,833 $ 152 $ 9,317 Operating lease obligations (3) $ 1,889 $ 1,515 $ 1,450 $ 1,388 $ 1,359 $ 5,171 $ 12,772 Pension withdrawal liability (4) $ 467 $ 467 $ 467 $ 467 $ 467 $ 3,037 $ 5,372 (1) Represents balance outstanding as of April 3, 2022, and assumes such amount remains outstanding until its maturity date, as periodic payments are not required under the terms of our Credit Agreement.
We believe we could borrow additional funds under our current or new credit facilities or sell equity for strategic reasons or to further strengthen our financial position. 20 Material Cash Requirements The following table provides aggregate information about our contractual payment obligations and the periods in which payments are due: Payments Due by Fiscal Period Contractual Obligation 2025 2026 2027 2028 2029 More than 5 Years Total (In thousands) Senior secured revolver (1) $ — $ — $ — $ 99,000 $ — $ — $ 99,000 Interest payments (2) $ 4,353 $ 4,353 $ 4,353 $ 363 $ — $ — $ 13,422 Operating lease obligations (3) $ 2,870 $ 2,548 $ 2,079 $ 1,819 $ 1,475 $ 2,819 $ 13,610 Pension withdrawal liability (4) $ 467 $ 467 $ 467 $ 467 $ 467 $ 2,103 $ 4,438 (1) Represents balance outstanding as of March 31, 2024, and assumes such amount remains outstanding until its maturity date, as periodic payments are not required under the terms of our Credit Agreement.
Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement.
Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement. As of March 31, 2024, the unamortized balance of these costs was $0.3 million, and is reflected as a reduction of debt on our balance sheet.
Gross Profit Gross profit increased $22.8 million, or 18%, to $146.5 million, or 19% of sales, for fiscal 2022, from $123.8 million, or 21% of sales, for fiscal 2021. During fiscal 2022, the LIFO reserve increased, and gross profits decreased, by $15.8 million, primarily due to rising input costs.
Gross profit for the Water Treatment segment increased $31.3 million, or 47%, to $98.5 million, or 27% of sales, for fiscal 2024, from $67.2 million, or 22% of sales, for fiscal 2023. During fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $3.3 million, primarily due to decreased raw material costs.
Liquidity and Capital Resources Cash provided by operating activities in fiscal 2022 was $42.8 million compared to $43.8 million in fiscal 2021.
Liquidity and Capital Resources Cash provided by operating activities in fiscal 2024 was $159.5 million compared to $77.4 million in fiscal 2023. Our net cash provided by operating activities increased $82.1 million compared to fiscal 2023.
Financial Overview Highlights of fiscal 2022 include: • Sales of $774.5 million, a 30% increase from fiscal 2021; • Gross profit of $146.5 million, an increase of $22.8 million, or 18% from fiscal 2021; • An increase in selling, general and administrative (“SG&A”) expenses of $7.4 million year over year, but a decrease of 160 basis points as a percentage of sales when compared to fiscal 2021; We focus on total profitability dollars when evaluating our financial results as opposed to profitability as a percentage of sales, as sales dollars tend to fluctuate as raw material prices rise and fall, particularly in our Industrial and Water Treatment segments.
We focus on total profitability dollars when evaluating our financial results as opposed to profitability as a percentage of sales, as sales dollars tend to fluctuate as raw material prices rise and fall, particularly in our Industrial and Water Treatment segments.
However, it is our intention to pay down our debt with available excess cash flow. See Note 9 of our consolidated Financial Statements for further information. (2) Represents interest payments and commitment fees payable on outstanding balances under our revolver, and assumes interest rates remain unchanged from the rate as of April 3, 2022.
However, it is our intention to pay down our debt with available excess cash flow. See Note 8 of our consolidated Financial Statements for further information.
Operating Income Operating income was $71.2 million, or 9% of sales, for fiscal 2022, as compared to $55.9 million, or 9% of sales, for fiscal 2021 due to the combined impact of the factors discussed above. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $3 million in additional operating income.
Operating Income Operating income increased $15.8 million, or 18%, to $104.0 million, or 11% of sales, for fiscal 2024, as compared to $88.2 million, or 9% of sales, for fiscal 2023 due to the combined impact of the factors discussed above.
We paid out cash dividends of $11.1 million in fiscal 2022 and $10.0 million in fiscal 2021. In fiscal 2022, we used $8.5 million to repurchase shares under our board-authorized share repurchase program, and in fiscal 2021, we used $4.1 million to repurchase shares under the program.
In fiscal 2024, we used $11.3 million to repurchase shares under our board-authorized share repurchase program, and in fiscal 2023, we used $6.6 million to repurchase shares under the program. 19 Our cash balance was $7.2 million at March 31, 2024, a decrease of $0.4 million as compared with April 2, 2023.
The results of operations are included as part of our Water Treatment segment from the date of acquisition forward. On October 29, 2021, we acquired substantially all the assets of Water and Waste Specialties, LLC, under the terms of an asset purchase agreement with Water and Waste Specialties and its shareholders.
("EcoTech") under the terms of a purchase agreement with EcoTech and its shareholders. EcoTech was a water treatment chemical distribution company operating primarily in Arkansas. The results of operations since the acquisition date and the assets are included in our Water Treatment segment.
Southeast Water Systems supplied and installed water treatment chemical equipment to its customers located primarily in Alabama, southern Georgia and the Florida panhandle. The results of operations since the acquisition date are included in our Water Treatment segment.
Industrial Research was a distributor of water treatment chemicals and equipment for its customers in central to northern Louisiana, eastern Texas and southern Arkansas. The results of operations since the acquisition and the assets are included in our Water Treatment segment.
Capital expenditures were $28.5 million in fiscal 2022 and $20.8 million in fiscal 2021. Total cash used in investing activities in fiscal 2022 included an aggregate of $21.5 million for Water Treatment group acquisitions compared to $51.0 million in Water Treatment group acquisition spending in fiscal 2021.
Cash used in investing activities included Water Treatment group acquisition spending of $83.5 in fiscal 2024 compared to no acquisition spending for acquisitions in fiscal 2023. Cash used in investing activities also included proceeds from asset disposals of $1.1 million in fiscal 2024 compared to $7.1 million in fiscal 2023.
We estimated the impact of the 53rd week in fiscal 2022 to be approximately $3.9 million in additional sales in our Water Treatment segment. In addition, sales increased as a result of increased demand for our products as well as the added sales from acquisitions. Health and Nutrition Segment.
In addition to $23.9 million in sales from acquired businesses, sales increased as a result of increased selling prices on many of our products as well as increased sales volumes of certain of our products. Health and Nutrition Segment.
We were party to an amended and restated credit agreement (the “Prior Credit Agreement”) with U.S. Bank as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto (collectively, the “Lenders”), whereby U.S. Bank was also serving as Administrative Agent.
Cash flows generated by operations during fiscal 2024 were offset by the cash expended for acquisitions, capital expenditures, repayments of debt, dividend payments and share repurchases in fiscal 2024. We are party to a Credit Agreement with U.S. Bank as Sole Lead Arranger and Sole Book Runner, and other lenders from time to time party thereto, whereby U.S.
Sales of bulk commodity products in the Industrial segment were approximately 16% of sales dollars in fiscal 2022 and 14% of sales dollars in fiscal 2021. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $10.0 million in additional sales in our Industrial segment.
Sales of bulk commodity products in the Industrial segment were approximately 14% of sales dollars in fiscal 2024 and 16% of sales dollars in fiscal 2023. The sale of our consumer bleach packaging business at the end of fiscal 2023 resulted in $14.5 million lower sales in the current year. In addition, sales declined due to overall lower volumes.
Gross profit for our Health and Nutrition segment decreased $1.3 million, or 4%, to $32.3 million, or 20% of sales, for fiscal 2022, from $33.6 million, or 22% of sales, for fiscal 2021. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $0.7 million in additional gross profit in our Health and Nutrition segment.
Gross profit for our Health and Nutrition segment decreased $2.2 million, or 7%, to $27.6 million, or 19% of sales, for fiscal 2024, from $29.8 million, or 19% of sales, for fiscal 2023. Gross profit decreased due to lower sales.
Selling, General and Administrative Expenses SG&A expenses increased $7.4 million to $75.3 million, or 10% of sales, for fiscal 2022, from $67.9 million, or 11% of sales, for fiscal 2021. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $1.0 million in additional SG&A expense.
Selling, General and Administrative Expenses SG&A expenses increased $12.6 million, or 16% to $89.6 million, or 10% of sales, for fiscal 2024, from $77.0 million, or 8% of sales, for fiscal 2023.
ADC was a water treatment chemical distribution company operating primarily in Tennessee, Georgia and Kentucky. The results of operations since the acquisition date are included in our Water Treatment segment. The aggregate annual revenue of the three businesses acquired in fiscal 2022 totaled approximately $17 million, as determined using the applicable twelve-month period preceding each respective acquisition date.
The aggregate annual revenue of these four businesses acquired in fiscal 2024 totaled approximately $70 million, as determined using the applicable twelve-month period preceding each respective acquisition date. In the fourth quarter of fiscal 2023, we sold certain assets in our Industrial segment related to our consumer bleach packaging business for $7 million.
During fiscal 2021, the LIFO reserve increased, and gross profit decreased, by $0.1 million. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $1.0 million in additional gross profit in our Water Treatment segment. In addition, gross profit increased as a result of the increase in sales. Health and Nutrition Segment.
During fiscal 2023, the LIFO reserve increased, and gross profit decreased, by $6.2 million, primarily due to rising raw material costs. Gross profit increased as a result of improved per-unit margins on many of our products as well as increased sales, including the added sales from acquired businesses. Health and Nutrition Segment.
Health and Nutrition segment sales increased $6.0 million, or 4%, to $159.5 million for fiscal 2022, as compared to $153.5 million for fiscal 2021. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $3.6 million in additional sales in our Health and Nutrition segment.
Health and Nutrition segment sales decreased $13.0 million, or 8%, to $146.4 million for fiscal 2024, as compared to $159.4 million for fiscal 2023. Sales decreased primarily due to decreased sales of our manufactured products, which we believe was driven by customers destocking inventory in the first half of the current fiscal year.
In fiscal 2021, the LIFO reserve decreased, and gross profits increased, by $0.1 million. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $3.6 million in additional gross profit. 16 Industrial Segment.
In fiscal 2023, the LIFO reserve increased, and gross profits decreased, by $12.3 million, primarily due to rising raw material costs.
Removed
Business and Property Acquisitions On December 30, 2021, we acquired substantially all the assets of NAPCO Chemical Company, Inc. and its affiliates ("NAPCO") under the terms of an asset purchase agreement among us, NAPCO and certain other parties thereto. NAPCO manufactures and distributes water treatment chemicals from three locations in Texas.
Added
Financial Overview Highlights of fiscal 2024 include: • Sales of $919.2 million, a 2% decrease from fiscal 2023; • Gross profit of $193.6 million, an increase of $28.5 million, or 17% from fiscal 2023; and • Diluted earnings per share (EPS) of $3.59, an increase of $0.73, or 26%, from fiscal 2023.
Removed
Water and Waste Specialties was a water treatment chemical distribution company operating primarily in Alabama.
Added
We disclose the percentage of our overall sales that consist of sales of bulk commodity products as these products are generally distributed and we do not add significant value to these products in comparison to our non-bulk products. Sales of these products are generally highly competitive and price sensitive. As a result, bulk commodity products generally have our lowest margins.
Removed
In the fourth quarter of fiscal 2021, we acquired substantially all the assets of C & L Aqua Professionals, Inc. and LC Blending, Inc. (together, “C&L Aqua”) under the terms of an asset purchase agreement among us, C&L Aqua and its shareholders. C&L Aqua was a water treatment chemical distribution company operating primarily in Louisiana.
Added
Factors Affecting Comparability of Results Business Acquisitions and Asset Sales On March 8, 2024, we acquired substantially all the assets of Industrial Research Corporation ("Industrial Research") under the terms of a purchase agreement with Industrial Research and its shareholders.
Removed
The results of operations since the acquisition date are included in our Water Treatment segment. In the third quarter of fiscal 2021, we acquired a manufacturing facility to allow further expansion and growth in both our Industrial and Water Treatment segments.
Added
On October 31, 2023, we acquired substantially all the assets of The Miami Products & Chemical Company ("Miami Products") under the terms of a purchase agreement with Miami Products and its shareholders. Miami Products was a bleach manufacturer and distributor serving customers primarily throughout Ohio and the surrounding region.
Removed
This site is adjacent to our facility in Rosemount, Minnesota, adding 40,000 square feet of manufacturing and warehouse space on 28 acres of land to bring us to a total of 105,000 square feet of space on 56 acres of land, with rail access at both of the sites.
Added
Water Solutions was a manufacturer and distributor of water treatment chemicals serving customers primarily throughout Indiana, Illinois and Michigan. The results of operations since the acquisition date and the assets are included in our Water Treatment segment. On July 14, 2023, we acquired substantially all the assets of EcoTech Enterprises, Inc.
Removed
The expansion will allow for future growth and provide supply chain flexibility on certain raw materials to better serve our customers. In the second quarter of fiscal 2021, we acquired substantially all the assets of American Development Corporation of Tennessee, Inc. (“ADC”) under the terms of an asset purchase agreement among us, ADC and its shareholders.
Added
These assets were not deemed core to our Industrial segment operations. The assets sold included plant equipment, inventory, and intangible assets, all related to the packaging of bleach.
Removed
The aggregate annual revenue from the fiscal 2021 acquisitions totaled approximately $25 million, as determined using the applicable twelve-month period preceding each respective acquisition date. Stock Split On March 1, 2021, we effected a two-for-one split of our common stock and adjusted the par value from $.05 per share to $0.01 per share.
Added
Increased sales in our Water Treatment segment were more than offset by decreased sales in our Industrial and Health & Nutrition segments. Industrial Segment. Industrial segment sales decreased $61.3 million, or 13%, to $409.5 million for fiscal 2024, as compared to $470.8 million for fiscal 2023.
Removed
At the same time, we increased the number of authorized shares from 30 million to 60 million. Our consolidated financial statements, related notes, and other financial data contained in this report have been adjusted to give retroactive effect to the stock split for all periods presented.
Added
In fiscal 2023, the LIFO reserve increased, and gross profits decreased, by $18.5 million, primarily due to rising raw material costs.
Removed
Statement on COVID-19 During the pandemic caused by COVID-19, federal, state and local governments around the world implemented stringent measures to help control the spread of the virus, including, from time to time, quarantines, “shelter in place” and “stay at home” orders, travel restrictions or bans, business curtailments, school closures, and other protective measures.
Added
Included as a reduction to gross profit in the current year was a $7.7 million charge to operating expense for an environmental liability related to perchlorinated biphenyls (PCBs) discovered in the soil at our Rosemount, MN facility. 17 Industrial Segment.
Removed
While most restrictions have eased since the start of the COVID-19 pandemic, certain restrictions remain in place or new restrictions may be implemented in the future. All of our manufacturing facilities have qualified as essential operations (or the equivalent) under applicable federal and state orders.
Added
Offsetting the impact of the favorable year-over-year LIFO change, gross profit decreased as a result of the $7.7 million charge to operating expense for an environmental liability related to PCBs discovered in the soil at our Rosemount, MN facility as well as lower sales. Water Treatment Segment.
Removed
As a result, all of our manufacturing sites and facilities have continued to operate, with no significant impact to our output levels. During the public health crisis, we remained focused on the health and safety of our employees, customers and suppliers and maintaining safe and reliable operations of our manufacturing sites.
Added
Included in SG&A expenses for the prior year was a gain of approximately $3.0 million related to the sale of certain assets related to our consumer bleach packaging business. In addition, a year-over-year increase in compensation expense of $1.4 million related to our non-qualified deferred compensation plan reduced SG&A expenses, with the offset in Other Expense.
Removed
We estimated the impact of the 53rd week in fiscal 2022 to be approximately $17.5 million in additional sales. Industrial Segment. Industrial segment sales increased $113.6 million, or 42%, to $386.9 million for fiscal 2022, as compared to $273.4 million for fiscal 2021.
Added
Additionally, expenses increased due to the added costs from the acquired businesses in our Water Treatment segment of $5.8 million, including $1.8 million of amortization of intangibles, as well as increased variable expenses, most notably variable pay.
Removed
In addition, the increase in sales was driven by increased selling prices on many of our products driven by higher costs on many of our raw materials, as well as increased sales of our bulk and our manufactured, blended and repackaged products. Water Treatment Segment.
Added
Income Tax Provision Our effective tax rate was approximately 26% for fiscal 2024 and 27% for fiscal 2023. The current year decrease in the effective tax rate was primarily driven by favorable tax provision adjustments recorded.
Removed
In addition, sales increased as a result of an increase in sales of our specialty distributed products, which was partially offset by the normalizing of demand for our manufactured products when compared to the temporary COVID-driven increase in demand these products experienced in the prior year.
Added
(In thousands, except per share data) Fiscal 2024 First Second Third Fourth Total Sales $ 251,120 $ 236,526 $ 208,496 $ 223,020 $ 919,162 Gross profit 51,991 53,886 42,248 45,511 193,636 Selling, general, and administrative expenses 19,504 20,895 23,774 25,427 89,600 Operating income 32,487 32,991 18,474 20,084 104,036 Net income 23,430 23,216 14,885 13,832 75,363 Basic earnings per share $ 1.12 $ 1.11 $ 0.72 $ 0.67 $ 3.61 Diluted earnings per share $ 1.12 $ 1.10 $ 0.71 $ 0.66 $ 3.59 Fiscal 2023 First Second Third Fourth Total Sales $ 246,543 $ 241,192 $ 219,218 $ 228,145 $ 935,098 Gross profit 46,749 46,374 36,271 35,725 165,119 Selling, general, and administrative expenses 18,885 19,838 21,004 17,242 76,969 Operating income 27,864 26,536 15,267 18,483 88,150 Net income 19,695 18,000 10,733 11,613 60,041 Basic earnings per share $ 0.94 $ 0.86 $ 0.52 $ 0.56 $ 2.88 Diluted earnings per share $ 0.94 $ 0.86 $ 0.51 $ 0.55 $ 2.86 Earnings per share may not equal the face of the Consolidated Statements of Income due to rounding.
Removed
In fiscal 2021, the LIFO reserve decreased, and gross profits increased, by $0.2 million. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $1.9 million in additional gross profit in our Industrial segment.
Added
In fiscal 2024, our operating cash flow was improved by $47 million in the aggregate due primarily to favorable year-over-year changes in trade receivables and inventory. In the prior fiscal year, we expended a net of $13 million in the aggregate for working capital primarily as a result of lower year-over-year payables.
Removed
In addition, gross profit increased as a result of the increase in sales, partially offset by the negative impact resulting from the increase in the LIFO reserve. Water Treatment Segment.
Added
Capital expenditures for property, plant and equipment were $40.2 million in fiscal 2024 and $48.3 million in fiscal 2023. The current year decrease in capital expenditures was primarily driven by decreased expenditures for facility improvements and expansions.
Removed
This increase from the 53rd week was more than offset by a decrease in gross profit resulting from a decline in sales of our manufactured products which generally have higher per-unit margins than our specialty distributed products.
Added
The proceeds received in fiscal 2023 related primarily to our sale of certain assets related to our consumer bleach packaging business. Cash used in financing activities was $37.4 million in fiscal 2024 compared to $32.1 million in fiscal 2023. Cash used in financing activities included net debt repayments of $13.0 million in fiscal 2024 and $14.0 million in fiscal 2023.
Removed
In addition, expenses increased in part due to the added costs from the acquired businesses in the Water Treatment segment, an increase in variable incentive compensation, increased costs due to added personnel and other resources as we invest to grow the business, and normalization of travel and other variable expenses to pre-COVID levels.
Added
We paid out cash dividends of $13.2 million in fiscal 2024 and $12.0 million in fiscal 2023.
Removed
(In thousands, except per share data) Fiscal 2022 First Second Third Fourth Total Sales $ 181,241 $ 183,277 $ 187,050 $ 222,973 $ 774,541 Gross profit 38,974 37,287 33,940 36,319 146,520 Selling, general, and administrative expenses 16,856 17,679 19,681 21,110 75,326 Operating income 22,118 19,608 14,259 15,209 71,194 Net income 16,628 14,133 10,204 10,577 51,542 Basic earnings per share $ 0.79 $ 0.67 $ 0.49 $ 0.51 $ 2.46 Diluted earnings per share $ 0.79 $ 0.67 $ 0.48 $ 0.50 $ 2.44 Fiscal 2021 First Second Third Fourth Sales $ 143,172 $ 147,801 $ 142,927 $ 162,971 $ 596,871 Gross profit 30,976 32,797 28,239 31,750 123,762 Selling, general, and administrative expenses 15,038 16,221 17,750 18,875 67,884 Operating income 15,938 16,576 10,489 12,875 55,878 Net income 11,788 12,190 7,921 9,081 40,980 Basic earnings per share $ 0.56 $ 0.58 $ 0.38 $ 0.43 $ 1.95 Diluted earnings per share $ 0.55 $ 0.57 $ 0.37 $ 0.43 $ 1.93 Fiscal 2020 First Second Third Fourth Sales $ 147,336 $ 140,043 $ 120,406 $ 132,413 $ 540,198 Gross profit 28,797 27,994 21,478 22,648 100,917 Selling, general, and administrative expenses 14,836 14,817 14,702 14,891 59,246 Operating income 13,961 13,177 6,776 7,757 41,671 Net income 9,807 9,250 4,547 4,763 28,367 Basic earnings per share $ 0.46 $ 0.44 $ 0.22 $ 0.23 $ 1.34 Diluted earnings per share $ 0.46 $ 0.43 $ 0.21 $ 0.22 $ 1.33 Earnings per share may not equal the face of the Consolidated Statements of Income due to rounding.
Added
(2) Represents interest payments and commitment fees payable on outstanding balances under our revolver, net of the expected receivable from our interest rate swap agreement, and assumes interest rates remain unchanged from the rate as of March 31, 2024. (3) As reported under ASC Topic 842. (4) This relates to our withdrawal from a multiemployer pension plan.
Removed
The decrease in cash provided by operating activities in fiscal 2022 as compared to fiscal 2021 was driven by higher inventory levels and increases in customer receivables resulting from higher sales, mostly offset by an increase in net income and accounts payable.
Added
Payments on this obligation will continue through 2034. In addition to the above contractual obligations, in the ordinary course of business we have routine cash requirements related to capital expenditures for new trucks, facility improvements and expansions, safety equipment and other additions of property, plant and equipment.
Removed
The inventory increase was driven by increased raw material costs as well as a conscious management decision to increase inventory levels due to increased customer demand and supply chain issues.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 25-basis point change in interest rates on the variable-rate portion of debt not covered by the interest rate swap would potentially increase or decrease annual interest expense by approximately $0.3 million. Other types of market risk, such as foreign currency risk, do not arise in the normal course of our business activities. 21
Biggest changeA 25-basis point change in interest rates on the variable-rate portion of debt not covered by the interest rate swap would potentially increase or decrease annual interest expense by approximately $0.1 million. Other types of market risk, such as foreign currency risk, do not arise in the normal course of our business activities. 22

Other HWKN 10-K year-over-year comparisons