Hawkins, Inc. Reports First Quarter Fiscal 2023 Results
Hawkins, Inc. (HWKN) reported its fiscal Q1 2023 results with record sales of $246.5 million, a 36% increase year-over-year. Gross profit reached $46.7 million, up 20%, while operating income rose to $27.9 million, a 26% increase. Diluted EPS was $0.94, reflecting a 19% improvement compared to the prior year. Adjusted EBITDA also increased to $34.3 million, an 18% gain. Despite strong performance, rising raw material costs impacted gross margins, leading to a $3.8 million LIFO expense charge. The company completed a facility expansion in Centralia, increasing production capacity by 50% for growth in food ingredients.
- Record sales of $246.5 million, a 36% year-over-year increase.
- Record gross profit of $46.7 million, up 20% from last year.
- Operating income increased to $27.9 million, a 26% increase year-over-year.
- Diluted EPS reached $0.94, a 19% improvement compared to the prior year.
- Adjusted EBITDA rose to $34.3 million, an 18% increase.
- Completion of Centralia facility expansion, enhancing production capacity by 50%.
- Rising raw material costs led to a $3.8 million LIFO expense charge, impacting gross margins.
- Gross profit margin decreased to 19% of sales from 22% in the previous year.
MINNEAPOLIS, Aug. 04, 2022 (GLOBE NEWSWIRE) -- Hawkins, Inc. (Nasdaq: HWKN) today announced results for the three months ended July 3, 2022, its first quarter of fiscal 2023.
First Quarter Fiscal Year 2023 Highlights:
- Record quarterly sales of
$246.5 million , a36% year-over-year increase. - Record quarterly gross profit of
$46.7 million , a20% increase over the prior year, contributing to record quarterly operating income of$27.9 million , a26% year-over-year increase. - Record quarterly diluted earnings per share (EPS) of
$0.94 ,19% higher than the same period last year. - Record quarterly earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), a non-GAAP measure, of
$34.3 million , an18% increase over the same period of the prior year. - Increased number of shares available to be repurchased under the Company's share repurchase program by 1 million.
- Completed expansion of our Centralia, Illinois manufacturing facility, adding
50% more capacity to support future growth mainly for our food ingredients and specialty agricultural businesses.
Executive Commentary – Patrick H. Hawkins, Chief Executive Officer and President:
“Our first quarter of fiscal 2023 showed the continued strength of our business. We generated
Mr. Hawkins continued, “While growing our top line is an important part of our strategy, we are also intensely focused on driving profitability. We demonstrated this by achieving our 17th consecutive quarter of year-over-year operating income growth. We did this in the face of operating cost inflation, rising raw materials costs, and unfavorable LIFO reserve adjustments, which all negatively impacted our profitability. We will continue to manage our cost structure over time to drive profitability and to maintain our strong balance sheet. Lastly, I want to thank our customers, suppliers, and employees, as without them this growth would not be possible.”
First Quarter Financial Highlights:
NET INCOME
For the first quarter of fiscal 2023, the Company reported net income of
REVENUE
Sales were
GROSS PROFIT
Gross profit increased
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased
ADJUSTED EBITDA
Adjusted earnings before interest, taxes, depreciation and amortization ("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 July 3, 2022 was
INCOME TAXES
Our effective income tax rate was
BALANCE SHEET
Working capital needs increased, which is typical for the first quarter, because we received a large number of shipments of raw materials on barges that increased our inventory. Accounts receivable also increased due to our revenue growth in the quarter. Combined with variable compensation payouts in the quarter, additional capital expenditures to support future growth, and share repurchases, our debt level in the quarter increased slightly. We anticipate our cash flow generated in future quarters will allow us to reduce our debt.
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 49 facilities in 24 states and creates value for its customers through superb customer service and support, quality products and personalized applications. Hawkins, Inc. generated
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 | ||||
(In thousands) | July 3, 2022 | June 27, 2021 | |||
Net Income (GAAP) | $ | 19,695 | $ | 16,628 | |
Interest expense, net | 929 | 349 | |||
Income tax expense | 6,477 | 5,373 | |||
Amortization of intangibles | 1,757 | 1,581 | |||
Depreciation expense | 4,801 | 4,354 | |||
Non-cash compensation expense | 595 | 799 | |||
Non-recurring acquisition expenses | — | 2 | |||
Adjusted EBITDA | $ | 34,254 | $ | 29,086 |
HAWKINS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per-share data)
Three Months Ended | ||||||||
July 03, 2022 | June 27, 2021 | |||||||
Sales | $ | 246,543 | $ | 181,241 | ||||
Cost of sales | (199,794 | ) | (142,267 | ) | ||||
Gross profit | 46,749 | 38,974 | ||||||
Selling, general and administrative expenses | (18,885 | ) | (16,856 | ) | ||||
Operating income | 27,864 | 22,118 | ||||||
Interest expense, net | (929 | ) | (349 | ) | ||||
Other (expense) income | (763 | ) | 232 | |||||
Income before income taxes | 26,172 | 22,001 | ||||||
Income tax expense | (6,477 | ) | (5,373 | ) | ||||
Net income | $ | 19,695 | $ | 16,628 | ||||
Weighted average number of shares outstanding - basic | 20,908,823 | 21,034,302 | ||||||
Weighted average number of shares outstanding - diluted | 21,033,549 | 21,178,320 | ||||||
Basic earnings per share | $ | 0.94 | $ | 0.79 | ||||
Diluted earnings per share | $ | 0.94 | $ | 0.79 | ||||
Cash dividends declared per common share | $ | 0.1400 | $ | 0.1225 |
HAWKINS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
July 3, 2022 | April 3, 2022 | |||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 5,995 | $ | 3,496 | ||
Trade accounts receivables, net | 138,775 | 122,826 | ||||
Inventories | 104,988 | 94,985 | ||||
Prepaid expenses and other current assets | 3,864 | 6,431 | ||||
Total current assets | 253,622 | 227,738 | ||||
PROPERTY, PLANT, AND EQUIPMENT: | 313,186 | 304,055 | ||||
Less accumulated depreciation | 146,739 | 142,209 | ||||
Net property, plant, and equipment | 166,447 | 161,846 | ||||
OTHER ASSETS: | ||||||
Right-of-use assets | 9,976 | 10,606 | ||||
Goodwill | 77,401 | 77,401 | ||||
Intangible assets, net of accumulated amortization | 78,435 | 80,193 | ||||
Deferred compensation plan asset | 7,285 | 6,783 | ||||
Other | 3,238 | 2,761 | ||||
Total other assets | 176,335 | 177,744 | ||||
Total assets | $ | 596,404 | $ | 567,328 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable — trade | $ | 56,376 | $ | 66,693 | ||
Accrued payroll and employee benefits | 9,658 | 19,034 | ||||
Income tax payable | 6,684 | 39 | ||||
Current portion of long-term debt | 9,913 | 9,913 | ||||
Short-term lease liability | 1,456 | 1,657 | ||||
Container deposits | 1,557 | 1,558 | ||||
Other current liabilities | 2,519 | 2,572 | ||||
Total current liabilities | 88,163 | 101,466 | ||||
LONG-TERM DEBT, LESS CURRENT PORTION | 149,166 | 115,644 | ||||
LONG-TERM LEASE LIABILITY | 8,665 | 9,143 | ||||
PENSION WITHDRAWAL LIABILITY | 4,186 | 4,276 | ||||
DEFERRED INCOME TAXES | 23,594 | 23,422 | ||||
DEFERRED COMPENSATION LIABILITY | 8,082 | 8,402 | ||||
OTHER LONG-TERM LIABILITIES | 1,271 | 2,374 | ||||
Total liabilities | 283,127 | 264,727 | ||||
COMMITMENTS AND CONTINGENCIES | ||||||
SHAREHOLDERS’ EQUITY: | ||||||
Common stock; authorized: 60,000,000 shares of | 208 | 209 | ||||
Additional paid-in capital | 40,192 | 46,717 | ||||
Retained earnings | 271,121 | 254,384 | ||||
Accumulated other comprehensive income | 1,756 | 1,291 | ||||
Total shareholders’ equity | 313,277 | 302,601 | ||||
Total liabilities and shareholders’ equity | $ | 596,404 | $ | 567,328 |
HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Three Months Ended | ||||||||
July 3, 2022 | June 27, 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 19,695 | $ | 16,628 | ||||
Reconciliation to cash flows: | ||||||||
Depreciation and amortization | 6,558 | 5,935 | ||||||
Operating leases | 476 | 481 | ||||||
Loss (Gain) on deferred compensation assets | 763 | (232 | ) | |||||
Stock compensation expense | 595 | 799 | ||||||
Other | 273 | 67 | ||||||
Changes in operating accounts providing (using) cash: | ||||||||
Trade receivables | (15,857 | ) | (316 | ) | ||||
Inventories | (10,003 | ) | (4,079 | ) | ||||
Accounts payable | (8,442 | ) | 868 | |||||
Accrued liabilities | (11,043 | ) | (10,159 | ) | ||||
Lease liabilities | (521 | ) | (572 | ) | ||||
Income taxes | 6,645 | 5,393 | ||||||
Other | 1,466 | 8 | ||||||
Net cash (used in) provided by operating activities | (9,395 | ) | 14,821 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant, and equipment | (11,640 | ) | (2,155 | ) | ||||
Other | 113 | 26 | ||||||
Net cash used in investing activities | (11,527 | ) | (2,129 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Cash dividends declared and paid | (2,958 | ) | (2,600 | ) | ||||
New shares issued | 986 | — | ||||||
Payroll taxes paid in exchange for shares withheld | (1,550 | ) | (1,467 | ) | ||||
Shares repurchased | (6,557 | ) | (3,401 | ) | ||||
Payments on revolving loan | (6,500 | ) | (3,000 | ) | ||||
Proceeds from revolving loan borrowings | 40,000 | — | ||||||
Net cash provided by (used in) financing activities | 23,421 | (10,468 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,499 | 2,224 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 3,496 | 2,998 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 5,995 | $ | 5,222 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid for interest | $ | 721 | $ | 292 | ||||
Noncash investing activities - capital expenditures in accounts payable | $ | 1,858 | $ | 497 |
HAWKINS, INC.
REPORTABLE SEGMENTS (UNAUDITED)
(In thousands)
Industrial | Water Treatment | Health and Nutrition | Total | |||||||||
Three months ended July 3, 2022: | ||||||||||||
Sales | $ | 124,710 | $ | 78,490 | $ | 43,343 | $ | 246,543 | ||||
Gross profit | 20,009 | 18,953 | 7,787 | 46,749 | ||||||||
Selling, general, and administrative expenses | 6,385 | 8,701 | 3,799 | 18,885 | ||||||||
Operating income | 13,624 | 10,252 | 3,988 | 27,864 | ||||||||
Three months ended June 27, 2021: | ||||||||||||
Sales | $ | 85,850 | $ | 56,238 | $ | 39,153 | $ | 181,241 | ||||
Gross profit | 14,254 | 16,234 | 8,486 | 38,974 | ||||||||
Selling, general, and administrative expenses | 6,241 | 7,062 | 3,553 | 16,856 | ||||||||
Operating income | 8,013 | 9,172 | 4,933 | 22,118 |
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 regulations, availability of technological improvements, the impact and severity of the COVID-19 outbreak, changes in the labor markets, our available cash for investments, 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 April 3, 2022, 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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