Hawkins, Inc. (Nasdaq: HWKN) today announced results for the six
months ended September 29, 2024, its second quarter of fiscal
2025.
Second Quarter Fiscal Year 2025
Highlights:
- Record second quarter results for revenue, gross profit,
operating income, net income, diluted earnings per share (“EPS”)
and adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (“adjusted EBITDA”), a non-GAAP measure.
- Overall revenue growth of 4%, once again driven by the Water
Treatment segment growth of 23% over the same period of the prior
year.
- Gross profit increase of 12% over the same period of the prior
year, with Water Treatment segment gross profit growth of 22%.
- Second quarter operating income of $33.7 million, our 26th
consecutive quarter of year-over-year operating income
increase.
- Diluted EPS of $1.16, an increase of $0.06, or 5%, compared to
the same period of the prior year.
- Adjusted EBITDA, a non-GAAP measure, of $46.3 million, a 12%
increase over the same period of the prior year. Trailing 12-month
adjusted EBITDA exceeded $157 million.
Executive Commentary – Patrick H. Hawkins, Chief
Executive Officer and President:
“Our record performance in the second quarter was once again
driven by our Water Treatment business, as we continued to gain
efficiencies within our recent acquisitions and made progress
towards future acquisition targets. Within the quarter we saw
strong revenue growth of 23% in our Water Treatment business driven
by our recent acquisitions, with organic volume flat due to
unfavorable weather conditions in several regions. Revenue in our
Industrial segment declined year over year due primarily to reduced
selling prices driven by lower commodity costs, with volumes up
slightly. Health and Nutrition revenues declined due to lower sales
of our manufactured products and overall softness in the market.
Overall, we saw 4% revenue growth with gross profit increasing 12%,
overcoming the $3.2 million LIFO benefit we saw in the second
quarter of fiscal 2024.”
Mr. Hawkins, continued, “Our balance sheet continues to be
strong, as we paid down $30 million of debt within the quarter,
resulting in our leverage ratio being 0.65x trailing 12-month
proforma adjusted EBITDA at the end of the quarter. Looking to the
third quarter, we expect continued growth within our Water
Treatment segment and for our Health and Nutrition segment to
resume growth. We expect to see our Industrial segment continue to
perform similar to the first half of fiscal 2025.”
Second Quarter Financial
Highlights:
NET INCOME
For the second quarter of fiscal 2025, the Company reported net
income of $24.1 million, or $1.16 per diluted share, compared to
net income for the second quarter of fiscal 2024 of $23.2 million,
or $1.10 per diluted share.
REVENUE
Sales were $247.0 million for the second quarter of fiscal 2025,
an increase of $10.5 million, or 4%, from sales of $236.5 million
in the same period a year ago. Increased sales in our Water
Treatment segment more than offset sales softness in our Industrial
and Health and Nutrition segments. Water Treatment segment sales
increased $23.6 million, or 23%, to $124.5 million for the current
quarter, from $100.9 million in the same period a year ago. Water
Treatment sales increased as a result of added sales from our
acquired businesses. Industrial segment sales decreased $8.6
million, or 9%, to $89.9 million for the current quarter, from
$98.5 million in the same period a year ago. Although overall
volumes increased slightly year over year, sales decreased as a
result of lower selling prices on certain products, driven by lower
raw material costs and competitive pricing actions. Health and
Nutrition segment sales decreased $4.5 million, or 12%, to $32.6
million for the current quarter, from $37.1 million in the same
period a year ago. Health and Nutrition sales decreased due to
lower sales of our manufactured products driven by reduced volumes
and selling prices due to decreased demand for certain of our
products.
GROSS PROFIT
Gross profit increased $6.3 million, or 12%, to $60.2 million,
or 24% of sales, for the current quarter, from $53.9 million, or
23% of sales, in the same period a year ago. During the current
quarter, the LIFO reserve was unchanged, having no impact on gross
profit. In the same quarter a year ago, the LIFO reserve decreased,
and gross profit increased, by $3.2 million. Gross profit for the
Water Treatment segment increased $6.3 million, or 22%, to $35.6
million, or 29% of sales, for the current quarter, from $29.3
million, or 29% of sales, in the same period a year ago. Water
Treatment segment gross profit increased as a result of increased
sales from our acquired businesses. Gross profit for the Industrial
segment increased $0.5 million, or 3%, to $18.3 million, or 20% of
sales, for the current quarter, from $17.8 million, or 18% of
sales, in the same period a year ago. Industrial segment gross
profit increased as a result of increased volumes of certain
products and product mix changes. Gross profit for our Health and
Nutrition segment decreased $0.3 million, or 4%, to $6.4 million,
or 20% of sales, for the current quarter, from $6.7 million, or 18%
of sales, in the same period a year ago. Health and Nutrition
segment gross profit decreased as a result of the decrease in
sales.
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
Selling, general and administrative expenses increased $5.6
million, or 27%, to $26.5 million, or 11% of sales, for the current
quarter, from $20.9 million, or 9% of sales, in the same period a
year ago. Expenses increased primarily due to $3.8 million in added
costs from the acquired businesses in our Water Treatment segment,
including amortization of intangibles of $1.5 million. In addition,
a year-over-year increase of $1.0 million in compensation expense
related to our non-qualified deferred compensation plan increased
SG&A expenses, with the offset in other income.
ADJUSTED EBITDA
Adjusted EBITDA, a non-GAAP financial measure, is an important
performance indicator and a key compliance measure under the terms
of our credit agreement. An explanation of the computation of
adjusted EBITDA is presented below. Adjusted EBITDA for the three
months ended September 29, 2024 was $46.3 million, an increase
of $4.8 million, or 12%, from $41.5 million in the same period a
year ago.
INCOME TAXES
Our effective income tax rate was 27% for both the current
quarter and for the same period a year ago. The effective tax rate
is impacted by projected levels of annual taxable income, permanent
items, and state taxes. Our effective tax rate for the full year is
currently expected to be approximately 26-27%.
BALANCE SHEET
At the end of the second quarter, our working capital was $18
million higher than the end of fiscal 2024 due primarily to
increased inventory and lower liabilities due to the payment of
certain year-end accruals in the first quarter. During the quarter,
we paid down $30 million on our line of credit. Year-to-date net
borrowings of $5.0 million and $59.2 million of operating cash flow
was used to fund $25.4 million of acquisition spending for the
acquisitions of Intercoastal Trading, Inc. and Wofford Water
Service, Inc., capital spending of $21.3 million, stock repurchases
of $9.1 million and dividend payments of $7.1 million. Our total
debt outstanding at the end of the second quarter was $104.0
million and our leverage ratio was 0.65x our trailing 12-month
proforma adjusted EBITDA, as compared to 0.66x of trailing
twelve-month adjusted EBITDA at the end of fiscal 2024.
About Hawkins, Inc.
Hawkins, Inc. was founded in 1938 and is a leading specialty
chemical and ingredients company that formulates, distributes,
blends, and manufactures products for its Industrial, Water
Treatment, and Health & Nutrition customers. Headquartered in
Roseville, Minnesota, the Company has 61 facilities in 28 states
and creates value for its customers through superb customer service
and support, quality products and personalized applications.
Hawkins, Inc. generated $919 million of revenue in fiscal 2024 and
has approximately 1,000 employees. For more information, including
registering to receive email alerts, please visit
www.hawkinsinc.com/investors.
Reconciliation of Non-GAAP Financial Measures
We report our consolidated financial results in accordance with
U.S. generally accepted accounting principles (GAAP). To assist
investors in understanding our financial performance between
periods, we have provided certain financial measures not computed
according to GAAP, including adjusted EBITDA. This non-GAAP
financial measure is not meant to be considered in isolation or as
a substitute for comparable GAAP measures. The method we use to
produce non-GAAP results is not computed according to GAAP and may
differ from the methods used by other companies.
Management uses this non-GAAP financial measure internally to
understand, manage and evaluate our business and to make operating
decisions. Management believes that this non-GAAP financial measure
reflects an additional way of viewing aspects of our operations
that, when viewed with our GAAP results, provides a more complete
understanding of the factors and trends affecting our financial
condition and results of operations.
We define adjusted EBITDA as GAAP net income adjusted for the
impact of the following: net interest expense resulting from our
net borrowing position; income tax expense; non-cash expenses
including amortization of intangibles, depreciation and charges for
the employee stock purchase plan and restricted stock grants; and
non-recurring items of income or expense, if applicable.
Adjusted
EBITDA |
Three Months Ended |
|
Six months ended |
|
Trailing 12-months ended |
(In thousands) |
September 29,2024 |
|
October 1,2023 |
|
September 29,2024 |
|
October 1,2023 |
|
September 29,2024 |
Net Income (GAAP) |
$ |
24,118 |
|
$ |
23,216 |
|
$ |
52,997 |
|
$ |
46,646 |
|
$ |
81,714 |
Interest expense, net |
|
1,427 |
|
|
717 |
|
|
2,690 |
|
|
1,865 |
|
|
5,107 |
Income tax expense |
|
8,873 |
|
|
8,769 |
|
|
18,681 |
|
|
17,015 |
|
|
27,447 |
Amortization of intangibles |
|
3,196 |
|
|
1,724 |
|
|
5,998 |
|
|
3,394 |
|
|
11,143 |
Depreciation expense |
|
6,731 |
|
|
5,675 |
|
|
13,258 |
|
|
11,112 |
|
|
25,410 |
Non-cash compensation expense |
|
1,832 |
|
|
1,260 |
|
|
3,299 |
|
|
2,219 |
|
|
5,960 |
Non-recurring acquisition expenses |
|
94 |
|
|
122 |
|
|
282 |
|
|
122 |
|
|
1,077 |
Adjusted
EBITDA |
$ |
46,271 |
|
$ |
41,483 |
|
$ |
97,205 |
|
$ |
82,373 |
|
$ |
157,858 |
HAWKINS, INC. |
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
(In thousands, except share and per-share
data) |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
September 29,2024 |
|
October 01,2023 |
|
September 29,2024 |
|
October 01,2023 |
Sales |
|
$ |
247,029 |
|
|
$ |
236,526 |
|
|
$ |
502,908 |
|
|
$ |
487,646 |
|
Cost of sales |
|
|
(186,807 |
) |
|
|
(182,640 |
) |
|
|
(378,031 |
) |
|
|
(381,769 |
) |
Gross profit |
|
|
60,222 |
|
|
|
53,886 |
|
|
|
124,877 |
|
|
|
105,877 |
|
Selling, general and
administrative expenses |
|
|
(26,477 |
) |
|
|
(20,895 |
) |
|
|
(51,341 |
) |
|
|
(40,399 |
) |
Operating income |
|
|
33,745 |
|
|
|
32,991 |
|
|
|
73,536 |
|
|
|
65,478 |
|
Interest expense, net |
|
|
(1,427 |
) |
|
|
(717 |
) |
|
|
(2,690 |
) |
|
|
(1,865 |
) |
Other income (expense) |
|
|
673 |
|
|
|
(289 |
) |
|
|
832 |
|
|
|
48 |
|
Income before income taxes |
|
|
32,991 |
|
|
|
31,985 |
|
|
|
71,678 |
|
|
|
63,661 |
|
Income tax expense |
|
|
(8,873 |
) |
|
|
(8,769 |
) |
|
|
(18,681 |
) |
|
|
(17,015 |
) |
Net income |
|
$ |
24,118 |
|
|
$ |
23,216 |
|
|
$ |
52,997 |
|
|
$ |
46,646 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - basic |
|
|
20,757,397 |
|
|
|
20,903,690 |
|
|
|
20,786,938 |
|
|
|
20,905,707 |
|
Weighted average number of shares
outstanding - diluted |
|
|
20,860,418 |
|
|
|
21,026,428 |
|
|
|
20,898,641 |
|
|
|
21,034,153 |
|
Basic earnings per share |
|
$ |
1.16 |
|
|
$ |
1.11 |
|
|
$ |
2.55 |
|
|
$ |
2.23 |
|
Diluted earnings per share |
|
$ |
1.16 |
|
|
$ |
1.10 |
|
|
$ |
2.54 |
|
|
$ |
2.22 |
|
Cash dividends declared per
common share |
|
$ |
0.18 |
|
|
$ |
0.16 |
|
|
$ |
0.34 |
|
|
$ |
0.31 |
|
HAWKINS, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) |
(In thousands, except share data) |
|
|
|
September 29,2024 |
|
March 31,2024 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
Cash and cash equivalents |
|
$ |
7,526 |
|
$ |
7,153 |
Trade accounts receivables, net |
|
|
115,221 |
|
|
114,477 |
Inventories |
|
|
81,565 |
|
|
74,600 |
Prepaid expenses and other current assets |
|
|
5,563 |
|
|
6,596 |
Total current assets |
|
|
209,875 |
|
|
202,826 |
PROPERTY, PLANT, AND
EQUIPMENT: |
|
|
402,104 |
|
|
386,648 |
Less accumulated depreciation |
|
|
184,642 |
|
|
177,774 |
Net property, plant, and equipment |
|
|
217,462 |
|
|
208,874 |
OTHER ASSETS: |
|
|
|
|
Right-of-use assets |
|
|
12,047 |
|
|
11,713 |
Goodwill |
|
|
111,566 |
|
|
103,399 |
Intangible assets, net of accumulated amortization |
|
|
123,886 |
|
|
116,626 |
Deferred compensation plan asset |
|
|
11,698 |
|
|
9,584 |
Other |
|
|
3,163 |
|
|
4,912 |
Total other assets |
|
|
262,360 |
|
|
246,234 |
Total assets |
|
$ |
689,697 |
|
$ |
657,934 |
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
Accounts payable — trade |
|
$ |
50,956 |
|
$ |
56,387 |
Accrued payroll and employee benefits |
|
|
12,701 |
|
|
19,532 |
Income tax payable |
|
|
2,284 |
|
|
1,943 |
Current portion of long-term debt |
|
|
9,913 |
|
|
9,913 |
Environmental remediation |
|
|
7,700 |
|
|
7,700 |
Other current liabilities |
|
|
8,787 |
|
|
7,832 |
Total current liabilities |
|
|
92,341 |
|
|
103,307 |
LONG-TERM DEBT, LESS CURRENT
PORTION |
|
|
93,862 |
|
|
88,818 |
LONG-TERM LEASE LIABILITY |
|
|
9,687 |
|
|
9,530 |
PENSION WITHDRAWAL
LIABILITY |
|
|
3,348 |
|
|
3,538 |
DEFERRED INCOME TAXES |
|
|
21,875 |
|
|
22,406 |
DEFERRED COMPENSATION
LIABILITY |
|
|
13,057 |
|
|
11,764 |
EARNOUT LIABILITY |
|
|
11,919 |
|
|
11,235 |
OTHER LONG-TERM
LIABILITIES |
|
|
236 |
|
|
1,310 |
Total liabilities |
|
|
246,325 |
|
|
251,908 |
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
SHAREHOLDERS’ EQUITY: |
|
|
|
|
Common stock; authorized: 60,000,000 shares of $0.01 par value;
20,766,764 and 20,790,261 shares issued and outstanding as of
September 29, 2024 and March 31, 2024, respectively |
|
|
208 |
|
|
208 |
Additional paid-in capital |
|
|
31,060 |
|
|
38,154 |
Retained earnings |
|
|
410,425 |
|
|
364,549 |
Accumulated other comprehensive income |
|
|
1,679 |
|
|
3,115 |
Total shareholders’ equity |
|
|
443,372 |
|
|
406,026 |
Total liabilities and shareholders’ equity |
|
$ |
689,697 |
|
$ |
657,934 |
HAWKINS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
(In thousands) |
|
|
|
Six Months Ended |
|
|
September 29,2024 |
|
October 1,2023 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
52,997 |
|
|
$ |
46,646 |
|
Reconciliation to cash flows: |
|
|
|
|
Depreciation and amortization |
|
|
19,256 |
|
|
|
14,506 |
|
Change in fair value of earnout liability |
|
|
684 |
|
|
|
— |
|
Operating leases |
|
|
1,607 |
|
|
|
1,115 |
|
Gain on deferred compensation assets |
|
|
(833 |
) |
|
|
(48 |
) |
Stock compensation expense |
|
|
3,299 |
|
|
|
2,219 |
|
Other |
|
|
(32 |
) |
|
|
(34 |
) |
Changes in operating accounts providing (using) cash: |
|
|
|
|
Trade receivables |
|
|
616 |
|
|
|
4,909 |
|
Inventories |
|
|
(6,403 |
) |
|
|
20,752 |
|
Accounts payable |
|
|
(4,218 |
) |
|
|
6,421 |
|
Accrued liabilities |
|
|
(7,285 |
) |
|
|
(7,149 |
) |
Lease liabilities |
|
|
(1,624 |
) |
|
|
(1,127 |
) |
Income taxes |
|
|
341 |
|
|
|
990 |
|
Other |
|
|
811 |
|
|
|
3,430 |
|
Net cash provided by operating activities |
|
|
59,216 |
|
|
|
92,630 |
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
Purchases of property, plant, and equipment |
|
|
(21,286 |
) |
|
|
(16,922 |
) |
Acquisitions |
|
|
(25,400 |
) |
|
|
(3,355 |
) |
Other |
|
|
357 |
|
|
|
335 |
|
Net cash used in investing activities |
|
|
(46,329 |
) |
|
|
(19,942 |
) |
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
Cash dividends declared and paid |
|
|
(7,121 |
) |
|
|
(6,535 |
) |
New shares issued |
|
|
1,297 |
|
|
|
1,147 |
|
Payroll taxes paid in exchange for shares withheld |
|
|
(2,541 |
) |
|
|
(2,140 |
) |
Shares repurchased |
|
|
(9,149 |
) |
|
|
(9,752 |
) |
Payments on revolving loan |
|
|
(40,000 |
) |
|
|
(52,000 |
) |
Proceeds from revolving loan borrowings |
|
|
45,000 |
|
|
|
— |
|
Net cash used in financing activities |
|
|
(12,514 |
) |
|
|
(69,280 |
) |
NET INCREASE IN CASH AND CASH
EQUIVALENTS |
|
|
373 |
|
|
|
3,408 |
|
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD |
|
|
7,153 |
|
|
|
7,566 |
|
CASH AND CASH EQUIVALENTS, END OF
PERIOD |
|
$ |
7,526 |
|
|
$ |
10,974 |
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION |
|
|
|
|
Cash paid for income taxes |
|
$ |
18,340 |
|
|
$ |
16,025 |
|
Cash paid for interest |
|
$ |
2,923 |
|
|
$ |
2,002 |
|
Noncash investing activities - capital expenditures in accounts
payable |
|
$ |
1,094 |
|
|
$ |
2,970 |
|
HAWKINS, INC. |
REPORTABLE SEGMENTS (UNAUDITED) |
(In thousands) |
|
|
WaterTreatment |
|
Industrial |
|
Health and Nutrition |
|
Total |
Three months ended September 29,
2024: |
|
|
|
|
|
|
|
Sales |
$ |
124,528 |
|
$ |
89,936 |
|
$ |
32,565 |
|
$ |
247,029 |
Gross profit |
|
35,590 |
|
|
18,268 |
|
|
6,364 |
|
|
60,222 |
Selling, general, and administrative expenses |
|
15,512 |
|
|
6,952 |
|
|
4,013 |
|
|
26,477 |
Operating income |
|
20,078 |
|
|
11,316 |
|
|
2,351 |
|
|
33,745 |
Three months ended October 1,
2023: |
|
|
|
|
|
|
|
Sales |
$ |
100,925 |
|
$ |
98,535 |
|
$ |
37,066 |
|
$ |
236,526 |
Gross profit |
|
29,308 |
|
|
17,844 |
|
|
6,734 |
|
|
53,886 |
Selling, general, and administrative expenses |
|
10,145 |
|
|
6,806 |
|
|
3,944 |
|
|
20,895 |
Operating income |
|
19,163 |
|
|
11,038 |
|
|
2,790 |
|
|
32,991 |
Six months ended September 29,
2024: |
|
|
|
|
|
|
|
Sales |
$ |
241,704 |
|
$ |
193,138 |
|
$ |
68,066 |
|
$ |
502,908 |
Gross profit |
|
70,545 |
|
|
40,144 |
|
|
14,188 |
|
|
124,877 |
Selling, general and administrative expenses |
|
29,678 |
|
|
13,591 |
|
|
8,072 |
|
|
51,341 |
Operating income |
|
40,867 |
|
|
26,553 |
|
|
6,116 |
|
|
73,536 |
Six months ended October 1,
2023: |
|
|
|
|
|
|
|
Sales |
$ |
194,576 |
|
$ |
219,408 |
|
$ |
73,662 |
|
$ |
487,646 |
Gross profit |
|
55,716 |
|
|
37,150 |
|
|
13,011 |
|
|
105,877 |
Selling, general and administrative expenses |
|
19,271 |
|
|
13,381 |
|
|
7,747 |
|
|
40,399 |
Operating income |
|
36,445 |
|
|
23,769 |
|
|
5,264 |
|
|
65,478 |
|
|
|
|
|
|
|
|
|
|
|
|
Forward-Looking Statements. Various remarks in this press
release constitute forward-looking statements 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. These
statements include those relating to consumer demand for products
containing our ingredients and the impacts of those demands,
expectations for results in our business segments and the timing of
our filings with the Securities and Exchange Commission. These
statements are not historical facts, but rather are based on our
current expectations, estimates and projections, and our beliefs
and assumptions. Forward-looking statements may be identified by
terms, including “anticipate,” “believe,” “can,” “could,” “expect,”
“intend,” “may,” “predict,” “should,” or “will” or the negative of
these terms or other comparable terms. These statements are not
guarantees of future performance and are subject to certain risks,
uncertainties and other factors, some of which are beyond our
control and are difficult to predict. Actual results may vary
materially from those contained in forward looking statements based
on a number of factors, including, but not limited to, changes in
competition and price pressures, changes in demand and customer
requirements or processes for our products, availability of product
and disruptions to supplies, interruptions in production resulting
from hazards, transportation limitations or other extraordinary
events outside our control that may negatively impact our business
or the supply chains in which we participate, changes in imported
products and tariff levels, the availability of products and the
prices at which they are available, the acceptance of new products
by our customers and the timing of any such acceptance, and changes
in product supplies. Additional information concerning potential
factors that could affect future financial results is included in
our Annual Report on Form 10-K for the fiscal year ended
March 31, 2024, as updated from time to time in amendments and
subsequent reports filed with the SEC. Investors should take such
risks into account when making investment decisions. Shareholders
and other readers are cautioned not to place undue reliance on
forward-looking statements, which reflect our management’s view
only as of the date hereof. We do not undertake any obligation to
update any forward-looking statements.
Contacts: |
|
Jeffrey P.
Oldenkamp |
|
|
Executive Vice President and Chief Financial Officer |
|
|
612/331-6910 |
|
|
ir@HawkinsInc.com |
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