Table of Contents





UNITED STATESSECURITIES AND
EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

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QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly
period ended September 30, 2007

Commission file
number 0-7647

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|                                                       
|-------------------------------------------------------
|HAWKINS, INC.                                          
|(Exact name of registrant as specified in
 its charter)

|                                                                |                                     
|--------------------------------------------------------------- | ------------------------------------
|MINNESOTA                                                       | 41-0771293                          
|(State or other jurisdiction of
 incorporation or organization) | (I.R.S. Employer Identification No.)

|                                                             
|-------------------------------------------------------------
|3100 EAST HENNEPIN AVENUE, MINNEAPOLIS, MINNESOTA 55413      
|(Address of principal executive offices,
 including zip code)
|                                                             
|(612) 331-6910                                               
|(Registrants telephone number, including
 area code)        

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Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

YES   xNOo

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).

Large Accelerated FileroAccelerated FilerxNon-Accelerated Filero

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).

YES   o    NOx

Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date.

|                                        |                                 
|--------------------------------------- | --------------------------------
|CLASS                                   | OUTSTANDING
 AT NOVEMBER 9, 2007
|                                       
|Common
 Stock, par value $.05 per share | 10,264,084                      





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HAWKINS, INC.
INDEX TO FORM 10-Q

|              |                                                                                          |      | 
|------------- | ---------------------------------------------------------------------------------------- | ---- | 
|              |                                                                                          | Page
|              |                                                                                          |      | 
|PART I.       | FINANCIAL INFORMATION                                                                    |      | 
|              |                                                                                          |      | 
|Item 1.       | Financial Statements:                                                                    |      | 
|              |                                                                                          |      | 
|              | Condensed Balance Sheets  September 30, 2007 and April 1, 2007                          | 3    | 
|              |                                                                                          |      | 
|              | Condensed Statements of Income - Three and Six Months Ended
 September 30, 2007 and 2006 | 4    | 
|              |                                                                                          |      | 
|              | Condensed Statements of Cash Flows - Six Months Ended September
 30, 2007 and 2006       | 5    | 
|              |                                                                                          |      | 
|              | Notes to Condensed Financial Statements  Unaudited                                      | 6    | 
|              |                                                                                          |      | 
|Item 2.       | Managements Discussion and Analysis of Financial Condition and
 Results of Operations   | 9    | 
|              |                                                                                          |      | 
|Item 3.       | Quantitative
 and Qualitative Disclosures about Market Risk                              | 13   | 
|              |                                                                                          |      | 
|Item 4.       | Controls and Procedures                                                                  | 14   | 
|              |                                                                                          |      | 
|PART II.      | OTHER INFORMATION                                                                        |      | 
|              |                                                                                          |      | 
|Item 1A.      | Risk Factors                                                                             | 15   | 
|              |                                                                                          |      | 
|Item 4.       | Submission of Matters to a Vote of Security Holders                                      | 15   | 
|              |                                                                                          |      | 
|Item 6.       | Exhibits                                                                                 | 15   | 
|              |                                                                                          |      | 
|Signatures    | 16                                                                                       |     
|              |                                                                                          |      | 
|Exhibit Index | 17                                                                                       |     

2

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Table of Contents

PART I. FINANCIAL INFORMATION

|        |                     
|------- | --------------------
|ITEM 1. | FINANCIAL STATEMENTS

HAWKINS,
INC.CONDENSED BALANCE SHEETS

|                                                                                                               |  |                                  |             |                                                              |   |             |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------- | ------------------------------------------------------------ | - | ----------- | -
|                                                                                                               |  | SEPTEMBER 30,
 2007
 (UNAUDITED) |             | APRIL 1,
 2007
 (DERIVED FROM AUDITED
 FINANCIAL STATEMENTS) |  
|                                                                                                               |  |                                  |             |                                                              |  
|ASSETS                                                                                                         |  |                                  |             |                                                              |   |             |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|CURRENT ASSETS:                                                                                                |  |                                  |             |                                                              |   |             |  
|Cash and cash equivalents                                                                                      |  | $                                | 13,691,042  |                                                              | $ | 11,592,939  |  
|Investments available-for-sale                                                                                 |  |                                  | 10,457,960  |                                                              |   | 13,712,540  |  
|Trade receivables - net                                                                                        |  |                                  | 19,322,925  |                                                              |   | 19,663,169  |  
|Inventories                                                                                                    |  |                                  | 19,268,112  |                                                              |   | 12,786,348  |  
|Prepaid expenses and other current assets                                                                      |  |                                  | 1,355,363   |                                                              |   | 3,214,254   |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|Total current assets                                                                                           |  |                                  | 64,095,402  |                                                              |   | 60,969,250  |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|PROPERTY, PLANT AND EQUIPMENT  net                                                                            |  |                                  | 35,636,820  |                                                              |   | 34,720,460  |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|INTANGIBLE ASSETS - less accumulated amortization of $1,822,784 and
$1,643,308, respectively                   |  |                                  | 7,140,016   |                                                              |   | 1,839,725   |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|LONG-TERM INVESTMENTS                                                                                          |  |                                  | 1,555,310   |                                                              |   | 3,013,888   |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|OTHER ASSETS                                                                                                   |  |                                  | 576,477     |                                                              |   | 725,271     |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|                                                                                                               |  | $                                | 109,004,025 |                                                              | $ | 101,268,594 |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                           |  |                                  |             |                                                              |   |             |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|CURRENT LIABILITIES:                                                                                           |  |                                  |             |                                                              |   |             |  
|Accounts payable  trade                                                                                       |  | $                                | 14,597,261  |                                                              | $ | 10,891,162  |  
|Dividends payable                                                                                              |  |                                  | 2,463,380   |                                                              |   | 2,247,686   |  
|Accrued payroll and employee benefits                                                                          |  |                                  | 4,294,530   |                                                              |   | 5,221,005   |  
|Other current liabilities                                                                                      |  |                                  | 2,739,225   |                                                              |   | 2,371,904   |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|Total current liabilities                                                                                      |  |                                  | 24,094,396  |                                                              |   | 20,731,757  |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|OTHER LONG-TERM LIABILITIES                                                                                    |  |                                  | 132,023     |                                                              |   | 138,673     |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|DEFERRED INCOME TAXES                                                                                          |  |                                  | 443,767     |                                                              |   | 420,521     |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                  |  |                                  |             |                                                              |   |             |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|SHAREHOLDERS EQUITY:                                                                                          |  |                                  |             |                                                              |   |             |  
|Common stock, par value $.05 per share; 10,211,827
and
 10,171,496 shares issued and outstanding, respectively |  |                                  | 510,591     |                                                              |   | 508,575     |  
|Additional paid-in capital                                                                                     |  |                                  | 38,150,662  |                                                              |   | 37,242,090  |  
|Accumulated other comprehensive gain
(loss)                                                                    |  |                                  | 22,894      |                                                              |   | (13,605     | )
|Retained earnings                                                                                              |  |                                  | 45,649,692  |                                                              |   | 42,240,583  |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|Total shareholders equity                                                                                     |  |                                  | 84,333,839  |                                                              |   | 79,977,643  |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  
|                                                                                                               |  | $                                | 109,004,025 |                                                              | $ | 101,268,594 |  
|                                                                                                               |  |                                  |             |                                                              |   |             |  

See accompanying notes to condensed
financial statements  unaudited.

3

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Table of Contents

HAWKINS,
INC.CONDENSED STATEMENTS OF INCOME

|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|--------------------------------------------------------- |  | --------------------------------- | ---------- | ---------------------------- | - | ---------- |  | ---- | ---------- |  | - | ---------- | 
|                                                          |  | THREE MONTHS ENDED 
 SEPTEMBER 30 |            | SIX MONTHS ENDEDSEPTEMBER 30 |  
|                                                          |  |                                   |            |                              |  
|                                                          |  | 2007                              |            | 2006                         |   | 2007       |  | 2006 |           
|                                                          |  |                                   |            |                              |   |            |  |      |           
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  | (UNAUDITED)                       |            | (UNAUDITED)                  |  
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |  
|Sales                                                     |  | $                                 | 48,143,856 |                              | $ | 42,200,162 |  | $    | 96,766,581 |  | $ | 83,660,825 | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Cost of sales                                             |  |                                   | 36,268,357 |                              |   | 31,023,515 |  |      | 73,060,531 |  |   | 61,661,093 | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Gross margin                                              |  |                                   | 11,875,499 |                              |   | 11,176,647 |  |      | 23,706,050 |  |   | 21,999,732 | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Selling, general
 and administrative expenses             |  |                                   | 7,498,645  |                              |   | 6,482,276  |  |      | 14,993,929 |  |   | 13,119,141 | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Income from operations                                    |  |                                   | 4,376,854  |                              |   | 4,694,371  |  |      | 8,712,121  |  |   | 8,880,591  | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Investment income                                         |  |                                   | 312,265    |                              |   | 347,757    |  |      | 614,568    |  |   | 649,004    | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Income before income taxes                                |  |                                   | 4,689,119  |                              |   | 5,042,128  |  |      | 9,326,689  |  |   | 9,529,595  | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Provision for income taxes                                |  |                                   | 1,767,700  |                              |   | 1,896,000  |  |      | 3,454,200  |  |   | 3,583,500  | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Net income                                                |  | $                                 | 2,921,419  |                              | $ | 3,146,128  |  | $    | 5,872,489  |  | $ | 5,946,095  | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Weighted average
 number of shares
 outstanding  basic   |  |                                   | 10,211,827 |                              |   | 10,171,496 |  |      | 10,198,531 |  |   | 10,171,496 | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Weighted average
 number of shares
 outstanding  diluted |  |                                   | 10,241,865 |                              |   | 10,171,496 |  |      | 10,223,228 |  |   | 10,171,496 | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Earnings per
 share  basic                               |  | $                                 | 0.29       |                              | $ | 0.31       |  | $    | 0.58       |  | $ | 0.58       | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Earnings per
 share  diluted                             |  | $                                 | 0.29       |                              | $ | 0.31       |  | $    | 0.57       |  | $ | 0.58       | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 
|Cash dividends declared per common share                  |  | $                                 | 0.24       |                              | $ | 0.22       |  | $    | 0.24       |  | $ | 0.22       | 
|                                                          |  |                                   |            |                              |   |            |  |      |            |  |   |            | 

See accompanying notes to condensed financial statements
- unaudited.

4

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Table of Contents

HAWKINS,
INC.CONDENSED STATEMENTS OF CASH FLOWS

|                                                                      |  | SIX MONTHS ENDED
 SEPTEMBER 30 |           
|--------------------------------------------------------------------- |  | ------------------------------ | ----------
|                                                                      |  | 2007                           |           
|                                                                      |  | (UNAUDITED)                    |           
|                                                                      |  |                                |           
|CASH FLOWS FROM OPERATING
 ACTIVITIES:                                |  |                                |           
|Net income                                                            |  | $                              | 5,872,489 
|Reconciliation to cash flows:                                         |  |                                |           
|Depreciation and amortization                                         |  |                                | 2,497,776 
|Restricted stock compensation expense                                 |  |                                | 322,588   
|Impairment of investments                                             |  |                                |          
|Loss from property disposals                                          |  |                                | 59,632    
|Changes in operating accounts providing (using) cash:                 |  |                                |           
|Trade receivables                                                     |  |                                | 1,454,984 
|Inventories                                                           |  |                                | (6,216,449
|Accounts payable                                                      |  |                                | 2,659,498 
|Other liabilities                                                     |  |                                | (1,240,409
|Other                                                                 |  |                                | 2,013,176 
|                                                                      |  |                                |           
|                                                                      |  |                                |           
|Net cash provided by operating activities                             |  |                                | 7,423,285 
|                                                                      |  |                                |           
|CASH FLOWS FROM INVESTING
 ACTIVITIES:                                |  |                                |           
|Additions to property, plant and equipment                            |  |                                | (2,626,476
|Sale and maturities of investments                                    |  |                                | 4,751,977 
|Proceeds from property disposals                                      |  |                                | 59,604    
|Payments received on notes receivable                                 |  |                                |          
|Acquisition of Trumark                                                |  |                                | (5,262,601
|                                                                      |  |                                |           
|                                                                      |  |                                |           
|Net cash used in investing activities                                 |  |                                | (3,077,496
|                                                                      |  |                                |           
|CASH FLOWS FROM FINANCING
 ACTIVITIES:                                |  |                                |           
|Cash dividends paid                                                   |  |                                | (2,247,686
|                                                                      |  |                                |           
|                                                                      |  |                                |           
|Net cash used in financing activities                                 |  |                                | (2,247,686
|                                                                      |  |                                |           
|                                                                      |  |                                |           
|INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS                     |  |                                | 2,098,103 
|                                                                      |  |                                |           
|CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD                       |  |                                | 11,592,939
|                                                                      |  |                                |           
|                                                                      |  |                                |           
|CASH AND CASH EQUIVALENTS,
 END OF PERIOD                             |  | $                              | 13,691,042
|                                                                      |  |                                |           
|                                                                      |  |                                |           
|                                                                      |  |                                |           
|SUPPLEMENTAL DISCLOSURES OF
 CASH FLOW INFORMATION:                   |  |                                |           
|                                                                      |  |                                |           
|Cash paid for income taxes                                            |  | $                              | 1,473,790 
|                                                                      |  |                                |           
|Noncash investing activities-Capital expenditures in accounts payable |  | $                              | 617,352   

See accompanying notes to condensed financial statements
- unaudited.

5

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Table of Contents

HAWKINS, INC.NOTES TO CONDENSED
FINANCIAL STATEMENTS - UNAUDITED

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | The accompanying unaudited condensed
 financial statements have been prepared in accordance with the instructions
 for Form 10-Q and, accordingly, do not include all information and footnotes
 required by generally accepted accounting principles for complete financial
 statements. These statements should be read in conjunction with the financial
 statements and footnotes included in the Companys Annual Report on Form 10-K
 for the fiscal year ended April 1, 2007, previously filed with the Securities
 and Exchange Commission (the Commission). In the opinion of management, the
 accompanying unaudited condensed financial statements contain all adjustments
 necessary to present fairly the Companys financial position and the results
 of its operations and cash flows for the periods presented. All adjustments
 made to the interim financial statements were of a normal recurring nature.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The accounting policies followed by the
 Company are set forth in Note 1 to the Companys financial statements in the
 Companys Annual Report on Form 10-K for the fiscal year ended April 1, 2007
 filed with the Commission on June 15, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In the preparation of the Companys
 financial statements, management calculates income taxes based upon the
 estimated effective rate applicable to operating results for the full fiscal
 year. This includes estimating the current tax liability as well as assessing
 differences resulting from different treatment of items for tax and book
 accounting purposes. These differences result in deferred tax assets and
 liabilities, which are recorded on the balance sheet. These assets and
 liabilities are analyzed regularly and management assesses the likelihood
 that deferred tax assets will be recovered from future taxable income. The
 Company records any interest and penalties related to income taxes as income
 tax expense in the condensed statements of income.                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company is subject to U.S. federal
 income tax as well as income tax of multiple state jurisdictions. The tax
 years beginning with 2003 remain open to examination by the Internal Revenue
 Service. The sufficient state jurisdictions of Minnesota, Iowa, North Dakota,
 South Dakota, and Wisconsin have tax years beginning with 2003 open to
 examination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | The results of operations for the
 periods ended September 30, 2007 are not necessarily indicative of the
 results that may be expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | Inventories, principally valued by the
 LIFO method, are less than current cost by approximately $3,110,000 and
 $3,170,000 at September 30, 2007 and April 1, 2007, respectively. Inventory
 consists principally of finished goods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4. | A summary of our intangible assets and goodwill is as
follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                          |  |                                               |            |  
| | ------------------------ |  | --------------------------------------------- | ---------- | -
| |                          |  | Amortizable
 Intangible Assets
 April 1, 2007 |           
| |                          |  |                                               |           
|
| | Gross                    |  | $                                             | 3,483,033  |  
| | Accumulated amortization |  |                                               | (1,643,308 | )
| |                          |  |                                               |            |  
| | Net                      |  | $                                             | 1,839,725  |  
| |                          |  |                                               |            |  

| |                          |  |                                  |           |                                |   |            |  
| | ------------------------ |  | -------------------------------- | --------- | ------------------------------ | - | ---------- | -
| |                          |  | Unamortizable
 Intangible Assets |           | Amortizable
 Intangible Assets |  
| |                          |  | September 30, 2007               |          
| |                          |  |                                  |          
|
| | Gross                    |  | $                                | 1,228,000 |                                | $ | 6,214,032  |  
| | Accumulated amortization |  |                                  |          |                                |   | (1,822,784 | )
| |                          |  |                                  |           |                                |   |            |  
| | Net                      |  | $                                | 1,228,000 |                                | $ | 4,391,248  |  
| |                          |  |                                  |           |                                |   |            |  

| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Intangible assets consist primarily of
 customer lists, trademarks, and trade names in current and previous business
 acquisitions.

6

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| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The change in the carrying amount of
 goodwill (included in Intangible Assets on the statement of financial
 condition) for the six months ended September 30, 2007 is as follows:

| |                                      |  |   |           | 
| | ------------------------------------ |  | - | --------- | 
| | Balance April 1, 2007                |  | $ |          | 
| | Goodwill associated with acquisition |  |   | 1,520,768 | 
| |                                      |  |   |           | 
| | Balance September 30, 2007           |  | $ | 1,520,768 | 
| |                                      |  |   |           | 

|   |                                                                       
|-- | ----------------------------------------------------------------------
|5. | Comprehensive income and its components,
 net of tax, were as follows:

|                                                |  |                                  |           |                                |   |           |  |      |           |  |   |           | 
|----------------------------------------------- |  | -------------------------------- | --------- | ------------------------------ | - | --------- |  | ---- | --------- |  | - | --------- | 
|                                                |  | Three months ended
 September 30 |           | Six months ended
 September 30 |  
|                                                |  |                                  |           |                                |  
|                                                |  | 2007                             |           | 2006                           |   | 2007      |  | 2006 |          
|                                               
|Net income                                      |  | $                                | 2,921,419 |                                | $ | 3,146,128 |  | $    | 5,872,489 |  | $ | 5,946,095 | 
|Available-for-sale investments
 unrealized gain |  |                                  | 57,080    |                                |   | 80,449    |  |      | 36,499    |  |   | 79,637    | 
|                                                |  |                                  |           |                                |   |           |  |      |           |  |   |           | 
|Comprehensive income                            |  | $                                | 2,978,499 |                                | $ | 3,226,577 |  | $    | 5,908,988 |  | $ | 6,025,732 | 
|                                                |  |                                  |           |                                |   |           |  |      |           |  |   |           | 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | We adopted Financial Accounting
 Standards Board (FASB) Interpretation (FIN) No. 48, Accounting for
 Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 on
 April 2, 2007. The adoption of FIN 48 resulted in no impact on our results of
 operations and financial condition. In September 2006, the FASB issued
 Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
 Measurements. This statement establishes a consistent framework for
 measuring fair value and expands disclosures on fair value measurements. SFAS
 157 is effective for the Company starting in fiscal 2009. We have not
 determined the impact, if any, the adoption of this statement will have on
 our financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | In February 2007, the FASB issued SFAS
 No. 159, The Fair Value Option for Financial Assets and Financial
 Liabilities. SFAS 159 permits entities to choose to measure many financial
 instruments and certain other items at fair value that are not currently
 required to be measured at fair value. SFAS 159 is effective for fiscal years
 beginning after November 15, 2007. We are currently evaluating the impact of
 adopting SFAS 159 on our results of operations and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | In June 2007, the FASB ratified the
 Emerging Issues Task Force (EITF) Issue No. 06-11, Accounting for Income Tax
 Benefits of Dividends on Share Based Payment Awards. EITF 06-11 requires
 companies to recognize the income tax benefit realized from dividends or
 dividend equivalents that are charged to retained earnings and paid to
 employees for nonvested equity-classified employee share-based awards as an
 increase to additional paid-in capital. EITF 06-11 is effective for fiscal years
 beginning after September 15, 2007. We are currently evaluating the impact of
 adopting EITF 06-11 on our results of operations and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | In June 2007, the FASB ratified EITF
 Issue No. 07-03, Accounting for Nonrefundable Advance Payments for Goods and
 Services Received for Use in Future Research and Development Activities.
 EITF 07-03 requires companies to defer nonrefundable advance payments for
 goods and services and to expense that advance payment as the goods are
 delivered or services are rendered. If the company does not expect to have
 the goods delivered or services performed, the advance should be expensed.
 EITF 07-03 is effective for fiscal years beginning after December 15, 2007.
 We are currently evaluating the impact of adopting EITF 07-03 on our results
 of operations and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|7. | The Company is involved in various legal
 actions arising from the normal course of business from time to time.
 Management is of the opinion that any judgment or settlement resulting from
 pending or threatened litigation would not have a material adverse effect on
 the financial position, results of operations or cash flows of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company has two leases of land, and
 at the end of the lease term (currently 2018 if the leases are not renewed),
 the Company has a specified amount of time to remove the property and
 buildings. At the end of the specified amount of time, anything that remains
 on the land becomes the property of the lessor, and the lessor has the option
 to either maintain the property or remove the property at the Companys
 expense. The Company has not been able to reasonably estimate the fair value
 of the asset retirement obligations, primarily due to the combination of the
 following factors: the leases do not expire in the near future; the Company
 has a history of extending the leases with the lessor and currently intends
 to do so at expiration of this lease period; the lessor does not have a
 history of terminating leases with its tenants; and because it is more likely
 than not that the buildings will have value at the end of the lease life and
 therefore, may not be removed by either the lessee or the lessor. Therefore, in accordance with
 SFAS No. 143, Accounting for Asset Retirement Obligations, and FIN 47,
 Accounting for Conditional Asset Retirement Obligations- an interpretation
 of FASB Statement No. 143, the Company has not recorded an asset retirement
 obligation as of September 30, 2007. The Company 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.

7

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. | On December 15, 2006, the Company issued
 45,257 shares of restricted stock to certain employees of the Company. The
 restricted stock awards are recorded as compensation cost over the requisite
 vesting period, which is one year of service, based on the market value on
 the date of grant. The grant date fair value on December 15, 2006 was $14.09.
 As of September 30, 2007, there was approximately $133,000 of total
 unrecognized compensation cost related to nonvested share-based compensation
 for this award.                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On September 18, 2007, the Company
 issued 7,000 shares of restricted stock to the Board of Directors as part of
 their annual retainer for their Board services. The restricted stock awards
 are expensed over the requisite vesting period, which is one year of service,
 based on the market value on the date of grant. The grant date fair value on
 September 18, 2007 was $14.48. As of September 30, 2007, there was
 approximately $98,000 of total unrecognized compensation cost related to
 nonvested share-based compensation for this award.                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|9. | On May 15, 2007, the Company signed an
 asset purchase agreement with Trumark, Inc., Trumark Ltd., Profloc Inc.
 (collectively Trumark) and the shareholders of each entity, under which the
 Company agreed to acquire substantially all of the assets of the entities and
 assume certain operating liabilities for approximately $6,000,000 in cash and
 stock consideration. On May 31, 2007, the acquisition was completed. The
 acquired business is a producer of antimicrobial products for the food
 industry. The acquired business is included in the Companys Industrial
 operating segment.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The assets acquired consist of assets
 used by Trumark to operate its business, including intellectual property,
 manufacturing equipment and inventory. The purchase price consisted of cash
 and shares of the Companys stock. The Company funded the cash portion of the
 transaction with existing cash and issued new shares of common stock. The
 Company is continuing to identify and quantify assets acquired and
 liabilities assumed to complete the allocation of the purchase price.                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The operations of Trumark are included
 in the Companys statement of income beginning on June 1, 2007. The proforma
 effect of this acquisition on prior period sales, operating income, and
 earnings per share was not significant.                                                                                                                                                                                                                                                                                                                                                                   

8

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. | The Company
 has three reportable segments: Industrial, Water Treatment and
 Pharmaceutical. Reportable segments are defined by product and type of
 customer. Segments are responsible for the sales, marketing and development
 of their products and services. The accounting policies of the segments are
 the same as those described in the summary of significant accounting
 policies. Product costs and expenses for each segment are based on actual
 costs incurred along with cost allocation of shared and centralized
 functions. The Company evaluates performance based on profit or loss from
 operations before income taxes not including nonrecurring gains and losses.
 The segments do not have separate accounting, administration, customer
 service or purchasing functions. There are no intersegment sales and no
 operating segments have been aggregated. Sales are primarily within the
 United States and all assets are located within the United States.

|                                       |  |            |            |                 |   |                |  |       |           |  |   |            | 
|-------------------------------------- |  | ---------- | ---------- | --------------- | - | -------------- |  | ----- | --------- |  | - | ---------- | 
|Reportable Segments                    |  | Industrial |            | Water Treatment |   | Pharmaceutical |  | Total |          
|                                       | 
|                                       | 
|Three Months Ended September 30, 2007: |  |            |            |                 |   |                |  |       |           |  |   |            | 
|Sales                                  |  | $          | 28,435,618 |                 | $ | 17,446,735     |  | $     | 2,261,503 |  | $ | 48,143,856 | 
|Gross margin                           |  |            | 5,007,679  |                 |   | 6,088,817      |  |       | 779,003   |  |   | 11,875,499 | 
|Income from operations                 |  | $          | 621,605    |                 | $ | 3,647,828      |  | $     | 107,421   |  | $ | 4,376,854  | 
|                                       |  |            |            |                 |   |                |  |       |           |  |   |            | 
|Three Months Ended September 30, 2006: |  |            |            |                 |   |                |  |       |           |  |   |            | 
|Sales                                  |  | $          | 23,027,848 |                 | $ | 16,718,530     |  | $     | 2,453,784 |  | $ | 42,200,162 | 
|Gross margin                           |  |            | 4,981,466  |                 |   | 5,417,211      |  |       | 777,970   |  |   | 11,176,647 | 
|Income from operations                 |  | $          | 1,193,901  |                 | $ | 3,376,603      |  | $     | 123,867   |  | $ | 4,694,371  | 
|                                       |  |            |            |                 |   |                |  |       |           |  |   |            | 
|Six Months Ended September 30, 2007:   |  |            |            |                 |   |                |  |       |           |  |   |            | 
|Sales                                  |  | $          | 57,720,243 |                 | $ | 34,369,784     |  | $     | 4,676,554 |  | $ | 96,766,581 | 
|Gross margin                           |  |            | 10,507,532 |                 |   | 11,641,779     |  |       | 1,556,739 |  |   | 23,706,050 | 
|Income from operations                 |  | $          | 1,585,144  |                 | $ | 6,860,940      |  | $     | 266,037   |  | $ | 8,712,121  | 
|                                       |  |            |            |                 |   |                |  |       |           |  |   |            | 
|Six Months Ended September 30, 2006:   |  |            |            |                 |   |                |  |       |           |  |   |            | 
|Sales                                  |  | $          | 46,427,190 |                 | $ | 32,387,247     |  | $     | 4,846,388 |  | $ | 83,660,825 | 
|Gross margin                           |  |            | 10,084,770 |                 |   | 10,415,231     |  |       | 1,499,731 |  |   | 21,999,732 | 
|Income from operations                 |  | $          | 2,482,655  |                 | $ | 6,248,803      |  | $     | 149,133   |  | $ | 8,880,591  | 

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING
INFORMATION

The
information contained in this Quarterly Report on Form 10-Q for the period
ended September 30, 2007 contains statements that we believe to be
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Forward-looking statements give our current
expectations or forecasts of future events. Forward-looking statements
generally can be identified by the use of forward-looking terminology such as
may, will, expect, intend, estimate, anticipate,
believe,
project, or continue, or the negative thereof or similar words. From time
to time, we also may provide oral or written forward-looking statements in
other materials we release to the public. Any or all of our forward-looking
statements in this Quarterly Report on Form 10-Q and in any public statements
we make could be materially different from actual results. They can be affected
by assumptions we might make or by known or unknown risks or uncertainties,
including those described in Item 1A Risk Factors and other factors disclosed
throughout this Quarterly Report on Form 10-Q and the Companys other filings
with the Securities and Exchange Commission. Consequently, we cannot guarantee
any forward-looking statements and undertake no obligation to revise any
forward-looking statements in order to reflect events or circumstances that may
arise after the date of this Quarterly Report on Form 10-Q. Investors are
cautioned not to place undue reliance on any forward-looking statements.
Investors should also understand that it is not possible to predict or identify
all factors that might affect actual results and should not consider these
factors to be a complete statement of all potential risks and uncertainties. We
assume no obligation and disclaim any duty to update the forward-looking
statements in this Quarterly Report on Form 10-Q or any other public statement.

9

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Table of Contents

RESULTS OF
OPERATIONS

The following
table sets forth the percentage relationship of certain items to sales for the
period indicated (in thousands, except percentages):

|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|--------------------------------------------- |  | -------------------------------------- | ------ | ------------------------------------ |  | ----- | - | - | ------ |  |  | ----- | -
|                                              |  | THREE MONTHS ENDED
 SEPTEMBER 30, 2007 |        | SIX MONTHS ENDED
 SEPTEMBER 30, 2007 | 
|                                              |  |                                        |        |                                      | 
|                                              |  |                                        |        |                                     
|Sales                                         |  | $                                      | 48,144 |                                      |  | 100.0 | % | $ | 96,767 |  |  | 100.0 | %
|Cost of sales                                 |  |                                        | 36,268 |                                      |  | 75.3  |   |   | 73,061 |  |  | 75.5  |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Gross margin                                  |  |                                        | 11,875 |                                      |  | 24.7  |   |   | 23,706 |  |  | 24.5  |  
|Selling, general and administrative
 expenses |  |                                        | 7,499  |                                      |  | 15.6  |   |   | 14,993 |  |  | 15.5  |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Income from operations                        |  |                                        | 4,377  |                                      |  | 9.1   |   |   | 8,712  |  |  | 9.0   |  
|Investment income                             |  |                                        | 312    |                                      |  | 0.6   |   |   | 615    |  |  | 0.6   |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Income before income taxes                    |  |                                        | 4,689  |                                      |  | 9.7   |   |   | 9,327  |  |  | 9.6   |  
|Provision for income taxes                    |  |                                        | 1,768  |                                      |  | 3.7   |   |   | 3,454  |  |  | 3.6   |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Net income                                    |  | $                                      | 2,921  |                                      |  | 6.1   | % | $ | 5,872  |  |  | 6.1   | %
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  

|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|--------------------------------------------- |  | -------------------------------------- | ------ | ------------------------------------ |  | ----- | - | - | ------ |  |  | ----- | -
|                                              |  | THREE MONTHS ENDED
 SEPTEMBER 30, 2006 |        | SIX MONTHS ENDED
 SEPTEMBER 30, 2006 | 
|                                              |  |                                        |        |                                      | 
|                                              |  |                                        |        |                                     
|Sales                                         |  | $                                      | 42,200 |                                      |  | 100.0 | % | $ | 83,661 |  |  | 100.0 | %
|Cost of sales                                 |  |                                        | 31,024 |                                      |  | 73.5  |   |   | 61,661 |  |  | 73.7  |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Gross margin                                  |  |                                        | 11,177 |                                      |  | 26.5  |   |   | 22,000 |  |  | 26.3  |  
|Selling, general and administrative
 expenses |  |                                        | 6,482  |                                      |  | 15.4  |   |   | 13,119 |  |  | 15.7  |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Income from operations                        |  |                                        | 4,694  |                                      |  | 11.1  |   |   | 8,881  |  |  | 10.6  |  
|Investment income                             |  |                                        | 348    |                                      |  | 0.8   |   |   | 649    |  |  | 0.8   |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Income before income taxes                    |  |                                        | 5,042  |                                      |  | 11.9  |   |   | 9,530  |  |  | 11.4  |  
|Provision for income taxes                    |  |                                        | 1,896  |                                      |  | 4.5   |   |   | 3,584  |  |  | 4.3   |  
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  
|Net income                                    |  | $                                      | 3,146  |                                      |  | 7.5   | % | $ | 5,946  |  |  | 7.1   | %
|                                              |  |                                        |        |                                      |  |       |   |   |        |  |  |       |  

Sales
increased $5,943,694, or 14.1%, in the three months ended September 30, 2007,
and increased $13,105,756, or 15.7%, in the six months ended September 30, 2007
as compared to the same periods a year ago. Sales of bulk chemicals, including
caustic soda, were approximately 35% and 33% of sales for the three and six
months ended September 30, 2007, respectively, compared to approximately 36%
and 35% in the comparable periods a year ago. Industrial segment sales
increased by $5,407,770 in the three months ended September 30, 2007 and
increased by $11,293,053 in the six-month period ended September 30, 2007 as
compared to the comparable periods in fiscal 2007. The Industrial segments
sales increase was related to the Trumark acquisition, which was completed on
May 31, 2007, increased sales within existing product lines primarily related
to higher volume, lower margin products and price increases commensurate with
rising material costs. Caustic soda volumes sold increased slightly as compared
to the prior year periods. Water Treatment segment sales increased by $728,205
in the three months ended September 30, 2007 and increased $1,982,537 in the
six-month period ended September 30, 2007, as compared to the same periods in
fiscal 2007. These increases resulted from volume increases related to
favorable weather conditions during the first quarter of fiscal 2008 and
successful expansion of existing product lines to new and existing customers.
Pharmaceutical sales decreased by 7.8% to $2,261,503 for the three months ended
September 30, 2007 and decreased by 3.5% to $4,676,554 for the six months ended
September 30, 2007 as compared to the same periods in fiscal 2007. The
Pharmaceutical segment was still under restrictions for the ability to sell
certain products by the Minneapolis District Office of the Food and Drug
Administration (the FDA) as of September 30, 2007. The FDA matter is
described in more detail below.

In September 2006, the Company
received a warning letter from the FDA. The Company responded to this letter
and subsequently received a letter from the FDA in November 2006 requesting
that the Company cease shipments of certain products until it resolved certain
issues with the FDA with respect to the validation of packaging configurations
and expiration dating for those products. The Company has been working to
resolve this matter as promptly as possible and subsequent to September 30,
2007, received clearance from the FDA to sell the majority of the products
initially affected. The Company currently has approximately $8,000 of
Pharmaceutical products in inventory that it is not permitted to sell as a
result of this matter. Although sales within the Pharmaceutical segment were
negatively impacted in the second half of fiscal 2007 and the first half of
fiscal 2008, the Company has not had a material impact to its results of
operations or cash flows.

10

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Gross margin,
as a percentage of sales, for the three and six months ended September 30, 2007
was 24.7% and 24.5%, respectively, compared to 26.5% and 26.3%, respectively,
for the comparable periods of fiscal 2007. For the Industrial segment, gross
margin, as a percentage of sales, was 17.6% and 21.6% for the three months
ended September 30, 2007 and September 30, 2006, respectively, and 18.2% for
the six months ended September 30, 2007 compared to 21.7% for the comparable
period in fiscal 2007. The decreases are primarily due to a majority of the
sales increases relating to higher volume, lower margin products. Additionally,
due to the LIFO method of valuing inventory, the prior year margin was
positively impacted by changes in the cost of caustic soda and changes in
inventory levels. The Company attempts to maintain relatively constant dollar
margins as product costs increase or decrease. By attempting to maintain
relatively stable dollar margins, the gross margin percentage will decrease
when the product costs are increasing and will increase when product costs are
decreasing. Many of the Companys products are commodity based and therefore
are subject to fluctuations, which is expected to continue in future periods.
Gross margin, as a percentage of sales, for the Water Treatment segment was
34.9% for the three months ended September 30, 2007 compared to 32.4% in the
comparable period of fiscal 2007 and 33.9% for the six-month period ended
September 30, 2007 compared to 32.2% for the comparable period of fiscal 2007.
The improvement during the six months ended September 30, 2007 was primarily
attributable to an increase in sales volumes and to a lesser extent, changes in
product mix. Gross margin, as a percentage of sales, for the Pharmaceutical
segment was 34.4% for the three months ended September 30, 2007 compared to 31.7%
in the comparable period of fiscal 2007 and was 33.3% for the six months ended
September 30, 2007 compared to 30.9% for the same period a year ago. The
increases are primarily related to a decrease in operating expenses due to a
decrease in personnel.

Selling,
general and administrative expenses, as a percentage of sales, for the three
and six months ended September 30, 2007 were 15.6% ($7,498,645) and 15.5%
($14,993,929), respectively, compared to 15.4% ($6,482,276) and 15.7%
($13,119,141) for the comparable periods a year ago. A significant portion of
the $1,874,788 increase for the six months ended September 30, 2007 was due to
system enhancements and costs associated with the Companys implementation of
an Enterprise Resource Planning (ERP) system, including consultants and
contractors, additional employees and depreciation expense. Consulting and
contractor fees were approximately $463,000 and $1,000,000 during the three and
six months ended September 30, 2007, respectively, which are expected to continue
during fiscal 2008 and gradually decrease in fiscal 2009. Additionally, the
acquisition of Trumark added additional fixed costs, and approximately $300,000
of non-recurring expenses were incurred during the six months ended September
30, 2007.

INVESTMENT
INCOME

Investment
income of $614,568 for the six months ended September 30, 2007 was comparable
to $649,004 earned during the same period a year ago.

PROVISION FOR
INCOME TAXES

The effective
income tax rate was 37.7% and 37.0% for the three and six months ended
September 30, 2007, respectively, compared to 37.6% for the three and six
months ended September 30, 2006.

LIQUIDITY AND
CAPITAL RESOURCES

For the
six-month period ended September 30, 2007, cash provided by operations was
$7,423,285 compared to $2,208,157 for the same period one year ago. The
increase in cash provided by operating activities was due primarily to
fluctuations in working capital balances, including the timing of inventory
purchases and income tax payments. Historically, the Companys cash
requirements increase during the period from April through September as caustic
soda inventory levels increase as the majority of barges are received during
this period. Cash used in investing activities increased by $1,964,949 for the
six months ended September 30, 2007 compared to the same period one year ago,
primarily due to the acquisition of Trumark. Capital expenditures during the
six months ended September 30, 2007 consisted primarily of facility improvement
projects. Capital expenditures for the remainder of this fiscal year are
expected to be relatively comparable with the three previous years and are
expected to relate primarily to facilities improvement projects.

11

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Table of Contents

Cash, cash
equivalents and investments available-for-sale decreased by $2,620,106 from
April 1, 2007 to $25,334,261 as of September 30,
2007 due primarily to dividends paid of $2,247,686 and the acquisition of
Trumark during the six-month period ended September 30, 2007. Cash equivalents
consist of money market accounts and certificates of deposit with an original
maturity of three months or less. Investments available-for-sale consist of
investment contracts with high-rated, stable insurance companies; marketable
securities consisting of corporate and municipal bonds; U.S. Government agency
securities and a mutual fund carried at fair value. The Companys investment
objectives in order of importance are the preservation of principal,
maintenance of liquidity and rate of return. The fixed income portfolio
consists primarily of investment grade securities to minimize credit risk, and
they generally mature within 10 years. The Company invests in a mutual fund
with characteristics similar to its fixed income portfolio to enhance its
investment portfolio diversification. The Company monitors the maturities of
its investments to ensure that funding is available for anticipated cash needs.
At September 30, 2007, $1,185,259 of available-for-sale investments were
classified as non-current assets as they were determined to be temporarily
impaired with an aggregate carrying value exceeding market value by
approximately $36,000 and have maturity dates of one year or longer. These
investments were not determined to be other-than-temporarily impaired as the
Company has the intent and ability to hold these investments for a period of
time sufficient to allow a recovery of fair value. Expected future cash flows
from operations, cash equivalents and investments included within current
assets are expected to fund the Companys short-term working capital needs.

At September
30, 2007, the Company had an investment portfolio of fixed income securities of
$4,410,294, a mutual fund of $7,602,976, and $13,691,042 classified as cash and
cash equivalents and variable rate securities. The fixed income securities,
like all fixed income instruments, are subject to interest rate risk and will
decline in value if market interest rates increase. However, while the value of
the investment may fluctuate in any given period, the Company intends to hold
its fixed income investments until maturity. Consequently, the Company would
not expect to recognize an adverse impact on net income or cash flows or the
amount ultimately realized on the investment. The value of the mutual fund,
like all mutual funds, may increase or decrease due to market volatility. The
mutual fund held by the Company as of September 30, 2007 is a short-term bond
fund that invests primarily in investment grade securities.

Expected
future cash flows from operations, coupled with the Companys strong financial
position, puts the Company in a position to fund both short and long-term
working capital and capital investment needs with internally generated funds.
Management does not, therefore, anticipate the need to engage in significant
financing activities in either the short or long-term. If the need to obtain
additional capital does arise, however, management is confident that the
Companys total debt to capital ratio at September 30, 2007 puts it in a
position to obtain debt financing on favorable terms, although there can be no
assurance of this.

Although
management continually reviews opportunities to enhance the value of the
Company through strategic acquisitions, other capital investments and strategic
divestitures, no material commitments for such investments or divestitures
currently exist.

CRITICAL
ACCOUNTING POLICIES

The
significant accounting policies followed by the Company are set forth in Note 1
to the Companys financial statements in the Companys Annual Report on Form
10-K for the fiscal year ended April 1, 2007. The accounting policies used in
preparing the Companys interim fiscal 2008 financial statements are the same
as those described in the Companys Annual Report.

Estimates -In
preparing the financial statements, the Company follows accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, sales and expenses, and related
disclosure of contingent assets and liabilities. The Company re-evaluates its
estimates on an on-going basis. The Companys 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. The Company considers the following
policies to involve the most judgment in the preparation of the Companys
financial statements.

Revenue Recognition
 The Company recognizes revenue when title passes to our customers, which
occurs primarily when product has been shipped, if there is evidence that the
customer has agreed to purchase the products, performance has occurred, the
price and terms of sale are fixed, and collection of the receivable is
reasonably assured.

Investments 
Statement of Financial Accounting Standard (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities, Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 59, Accounting for Noncurrent
Marketable Equity Securities, and FASB Staff Position (FSP) FAS No. 115-1 and FAS No. 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments provide guidance on determining when an
investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary
impairment. This determination requires significant judgment. In making this judgment, we evaluate, among other factors, the
duration and extent to which the fair value of an investment is less than its cost; the general market conditions, including
factors such as industry and sector performance, rating agency actions, and our intent and ability to hold the investment.
Investments with an indicator are further evaluated to determine the likelihood of a significant adverse effect on the fair value
and amount of the impairment as necessary. If market, industry and/or investee conditions deteriorate, we may incur future
impairments.

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Allowance for Doubtful Accounts
- Accounts receivable are reduced by an allowance for amounts that may become
uncollectible in the future. Substantially all of the Companys receivables are
due from customers located in the United States. The estimated allowance for
doubtful accounts is based upon the age of the outstanding receivables and the
payment history and credit worthiness of each customer. Management evaluates
the adequacy of the allowance for doubtful accounts on a quarterly basis. There
can be no assurance that our estimates will match actual amounts ultimately
written off.

Inventories 
Inventories are valued at the lower of cost or market. On a quarterly basis,
management assesses the inventory quantities on hand to estimated future usage
and sales and, if necessary, writes down the value of inventory deemed obsolete
or excess to market. Though management considers these reserves adequate and
proper, changes in sales volumes due to unexpected economic or competitive conditions
are among the factors that could materially affect the adequacy of this
reserve.

LIFO Reserve Inventories
are primarily valued with cost being determined using the last-in, first-out
(LIFO) method. We may incur significant fluctuations in our gross margins due
primarily to changes in the cost of a single, large-volume component of
inventory. The price of this inventory component may vary depending on the
balance between supply and demand. Management reviews the LIFO reserve on a
quarterly basis.

Impairment of Long-Lived Assets We
evaluate the carrying value of long-lived assets, including intangible assets
subject to amortization and property, plant, and equipment, when events and
changes in circumstances warrant such a review, such as prolonged industry
downturn or significant reductions in projected future cash flows. The carrying
value of long-lived assets is considered impaired when the projected future
undiscounted cash flows from such assets are less than their carrying value. In
that event, a loss is recognized equal to the amount by which the carrying
value exceeds the fair value of the 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.

Self Insurance  The
Company purchases insurance for employee medical benefits. Third party
insurance is carried for what is believed to be the major portion of potential
exposures that would exceed the Companys self-insured retentions. The Company
has established a liability for potential uninsured claims. The Company
considers factors such as known outstanding claims, historical experience, and
other relevant factors in setting the liability. These reserves are monitored
and adjusted when warranted by changing circumstances. Though management considers
these balances adequate, a substantial change in the number and/or severity of
claims could result in materially different amounts for this item.

Income Taxes  In
the preparation of the Companys 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. The Company routinely monitors the
potential impact of such situations and believes 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, the Companys future taxable income
levels and the results of tax audits.

|        |                                                           
|------- | ----------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September
30, 2007, the Company had an investment portfolio of fixed income securities of
$4,410,294, a mutual fund of $7,602,976, and cash and cash equivalents of
$13,691,042. The fixed income securities, like all fixed income instruments, are
subject to interest rate risks and will decline in value if market interest
rates increase. However, while the value of the investment may fluctuate in any
given period, the Company intends to hold its fixed income investments until
maturity. Consequently, the Company would not expect to recognize an adverse
impact on net income or cash flows during the holding period. The value of the
mutual fund, like all mutual funds, may increase or decrease due to market
volatility. The Company adjusts the carrying value of its investments down if
an impairment occurs that is other than temporary.

13

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Table of Contents

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

|        |                        
|------- | -----------------------
|ITEM 4. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and
Procedures

We maintain a
system of disclosure controls and procedures designed to provide reasonable
assurance as to the reliability of our published financial statements and other
disclosures included in this report. Our management evaluated, with the
participation of our Chief Executive Officer and our Chief Financial Officer,
the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the quarter ended September 30, 2007 pursuant to
Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act).
Based upon their evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that our disclosure controls and procedures were
effective as of the end of the quarter ended September 30, 2007 to ensure that
information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, processed, summarized, and reported, within
the time periods specified in the Securities and Exchange Commissions rules
and forms, and to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required
disclosures.

Changes in Internal Control

During the
quarter, there was no change in the Companys internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial reporting.

14

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Table of Contents

PART II. OTHER
INFORMATION

|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

There have been no material changes to the Companys risk factors from
those disclosed in the Companys Annual Report on Form 10-K for the fiscal year
ended April 1, 2007.

|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual
meeting of the shareholders of the Company was held on August 7, 2007. Proxies
for the annual meeting were solicited pursuant to Regulation 14A of the
Exchange Act. There was no solicitation in opposition to the Board of Director
nominees listed in the proxy statement and all of the nominees for director
were elected with the following votes:

|                       |  |     |           |          |  |           |  |                   |   |  |  |   | 
|---------------------- |  | --- | --------- | -------- |  | --------- |  | ----------------- | - |  |  | - | 
|                       |  | For |           | Withheld |  | Abstain   |  | Broker

Non-votes |  
|                       |  |     |           |          |  |           |  |                   |  
|John R. Hawkins        |  |     | 8,646,696 |          |  | 29,268    |  |                   | 0 |  |  | 0 | 
|Howard M. Hawkins      |  |     | 8,645,766 |          |  | 30,198    |  |                   | 0 |  |  | 0 | 
|John S. McKeon         |  |     | 7,572,070 |          |  | 1,103,894 |  |                   | 0 |  |  | 0 | 
|Duane M. Jergenson     |  |     | 8,656,346 |          |  | 19,618    |  |                   | 0 |  |  | 0 | 
|G. Robert Gey          |  |     | 8,656,696 |          |  | 19,268    |  |                   | 0 |  |  | 0 | 
|Daryl I. Skaar         |  |     | 8,649,567 |          |  | 26,397    |  |                   | 0 |  |  | 0 | 
|Eapen Chacko           |  |     | 8,655,596 |          |  | 20,368    |  |                   | 0 |  |  | 0 | 
|James A. Faulconbridge |  |     | 8,655,246 |          |  | 20,718    |  |                   | 0 |  |  | 0 | 

|        |         
|------- | --------
|ITEM 6. | EXHIBITS

Exhibit Index

|        |  |                                                                                                   |  |                          
|------- |  | ------------------------------------------------------------------------------------------------- |  | -------------------------
|Exhibit |  | Description                                                                                       |  | Method of Filing         
|3.1     |  | Amended and
 Second Restated Articles of Incorporation as amended through February 27,
 2001. (1) |  | Incorporated by Reference
|        |  |                                                                                                   |  |                          
|3.2     |  | Second Amended
 and Superseding By-Laws as amended through February 15, 1995. (2)                 |  | Incorporated by Reference
|        |  |                                                                                                   |  |                          
|10.1    |  | Summary of
 Non-Employee Director Compensation                                                    |  | 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     

| |     |                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated
 by reference to Exhibit 3.1 to the Companys Annual Report on Form 10-K for
 the year ended September 30, 2001.
| |     |                                                                                                                              
| | (2) | Incorporated
 by reference to Exhibit 3.2 to the Companys Annual Report on Form 10-K for
 the year ended October 1, 1995.   

15

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Table of Contents

SIGNATURES

Pursuant to
the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

|                         |                |                                                                 
|------------------------ | -------------- | ----------------------------------------------------------------
|                         | HAWKINS,
 INC.
|                         |                |                                                                 
|                         | By:            | /s/ Marvin E. Dee                                               
|                         |                |                                                                 
|                         |                |                                                                 
|                         |                | Marvin E. Dee                                                   
|                         |                |                                                                 
|                         |                | Vice President, Chief Financial Officer, Secretary and Treasurer
|                         |                | (On behalf of the Registrant and as principal financial officer)
|Dated: November
 9, 2007 |                |                                                                 

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Table of Contents

Exhibit Index

|        |  |                                                                                                   |  |                          
|------- |  | ------------------------------------------------------------------------------------------------- |  | -------------------------
|        |  |                                                                                                   |  |                          
|Exhibit |  | Description                                                                                       |  | Method of Filing         
|3.1     |  | Amended and
 Second Restated Articles of Incorporation as amended through February 27,
 2001. (1) |  | Incorporated by Reference
|        |  |                                                                                                   |  |                          
|3.2     |  | Second
 Amended and Superseding By-Laws as amended through February 15, 1995. (2)                 |  | Incorporated by Reference
|        |  |                                                                                                   |  |                          
|10.1    |  | Summary of
 Non-Employee Director Compensation                                                    |  | 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     

|    |                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated
 by reference to Exhibit 3.1 to the Companys Annual Report on Form 10-K for
 the year ended September 30, 2001.
|    |                                                                                                                              
|(2) | Incorporated
 by reference to Exhibit 3.2 to the Companys Annual Report on Form 10-K for
 the year ended October 1, 1995.   

17

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