Hawkins, Inc. Reports Fourth Quarter and Fiscal Year 2022 Results

·18 min read
Hawkins, Inc.
Hawkins, Inc.

ROSEVILLE, Minn., May 18, 2022 (GLOBE NEWSWIRE) -- Hawkins, Inc. (Nasdaq: HWKN), a leading specialty chemical and ingredients company, today announced fourth quarter and full-year results for its fiscal year ended April 3, 2022.

Fourth Quarter Fiscal Year 2022 Highlights:

  • Record quarterly sales in the fourth quarter of $223.0 million, a 37% year-over-year increase.

  • Gross profit of $36.3 million for the quarter, a 14% increase over the same period of the prior year, while absorbing $8.2 million in incremental LIFO expense in the quarter.

  • Record fourth quarter diluted earnings per share (EPS) of $0.50, which was 16% higher than the same period of the prior year.

  • Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), a non-GAAP measure, of $22.3 million, an 11% increase over the same period of the prior year.

Full-Year Fiscal Year 2022 Highlights:

  • Record annual sales of $774.5 million for fiscal 2022, a 30% year-over-year increase.

  • Record gross profit of $146.5 million for the year, an 18% increase over the prior year, which contributed to a 27% year-over-year increase in operating income.

  • Record diluted EPS of $2.44, which was $0.51, or 26%, higher than fiscal 2021.

  • Record adjusted EBITDA, a non-GAAP measure, of $99.7 million, an increase of 19% over fiscal 2021.

  • Full year net income increased 26% over the prior year.

  • Paid cash dividends of $0.5225 per share for the year, representing an increase of 11% over the prior year. This marks the 37th consecutive year of paying a dividend.

  • Completed three acquisitions during the year.

  • Ended the year with net debt of $123 million and a leverage ratio of 1.25x.

  • Issued our second annual ESG report, with a goal of being carbon neutral by 2040.

Executive Commentary – Patrick H. Hawkins, Chief Executive Officer and President:

“For the third year in a row we generated record operating income, net income, diluted EPS, and adjusted EBITDA, while achieving record sales of $775 million and adjusted EBITDA of $100 million in fiscal 2022. This strong three-year run has delivered compounded EPS growth of 29% over that timeframe. This performance is the result of the hard work by our many employees, our innovative solutions to the opportunities that have arisen, as well as outstanding relationships with our customers and suppliers, which we never take for granted. In fiscal 2022, we made significant investments in added personnel and other resources that we expect to leverage in the coming years to grow the business.”

Mr. Hawkins, continued, “We had 30% revenue growth for the year, which included the results of our six acquisitions over the past 18 months and a 27% organic growth from our existing business, with all three reporting segments growing over the prior year. Sales in our Industrial segment grew 42% over the prior year, with more than half of the year-over-year growth coming from our higher-margin business in agricultural, pharmaceutical and food ingredient product lines. Our margins continued to be impacted by macro-economic pressures, including inflation and global supply chain disruptions. Despite these headwinds, we generated $71 million of operating income, an increase of $15 million over the prior year and included a LIFO impact of nearly $16 million in fiscal 2022 due to unprecedented rising raw material costs. We look forward to continuing our topline growth into fiscal 2023 and managing our cost structure to drive our bottom line.”

Fourth Quarter and Fiscal Year Financial Highlights:

NET INCOME

For the fourth quarter of fiscal 2022, the Company reported net income of $10.6 million, or $0.50 per diluted share, compared to net income for the fourth quarter of fiscal 2021 of $9.1 million, or $0.43 per diluted share.

For the full year, the Company reported record net income of $51.5 million, or $2.44 per diluted share, compared to net income for fiscal 2021 of $41.0 million, or $1.93 per diluted share.

REVENUE

For the fourth quarter of fiscal 2022, sales were $223.0 million, an increase of $60.0 million, or 37%, from sales of $163.0 million a year ago. Industrial segment sales increased $41.0 million, or 54%, to $117.4 million for the current quarter, as compared to $76.3 million for the same period a year ago. We estimate the impact of the extra week in the quarter to be approximately $10.0 million in additional sales in the Industrial segment. In addition, the increase in sales was driven by increased selling prices on many of our products driven by higher costs on many of our raw materials, as well as increased sales volumes of our bulk and our manufactured, blended and repackaged products. Water Treatment segment sales increased $18.5 million, or 45%, to $60.0 million for the current quarter, as compared to $41.5 million for the same period a year ago. We estimate the impact of the extra week in the quarter to be approximately $4.0 million in additional sales in the Water Treatment segment. In addition, sales increased as a result of increased demand for our products as well as the added sales from acquisitions. Health and Nutrition segment sales increased $0.4 million, or 1%, to $45.6 million for the current quarter, as compared to $45.2 million for the same period a year ago. We estimate the impact of the extra week in the quarter to be approximately $3.5 million in additional sales in the Health and Nutrition segment, which was partially offset by the normalizing of demand for our manufactured products when compared to the temporary COVID-driven increase in demand these products experienced in the prior year.

For fiscal 2022, Industrial segment sales were $386.9 million, an increase of 42% from fiscal 2021 sales of $273.4 million. Water Treatment segment sales were $228.1 million for the year, an increase of 34% over last year’s sales of $170.0 million. Sales for our Health and Nutrition segment were $159.5 million in fiscal 2022, an increase of 4% from fiscal 2021 sales of $153.5 million. We estimate the total impact of the extra week in the year to be approximately $17.5 million.

GROSS PROFIT

Company-wide gross profit for fiscal 2022 increased $22.8 million, or 18%, to $146.5 million, or 19% of sales, from $123.8 million, or 21% of sales, for the same period of the prior year. During fiscal 2022, the LIFO reserve increased, and gross profits decreased, by $15.8 million, primarily due to rising input costs. In fiscal 2021, the LIFO reserve decreased, and gross profits increased, by $0.1 million. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $3.6 million in additional gross profit.

Gross profit for the Industrial segment increased $16.3 million, or 38%, to $59.6 million, or 15% of sales, for fiscal 2022, from $43.3 million, or 16% of sales, for fiscal 2021. During fiscal 2022, the LIFO reserve increased, and gross profits decreased, by $10.4 million, primarily due to rising raw material costs. In fiscal 2021, the LIFO reserve decreased, and gross profits increased, by $0.2 million. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $1.9 million in additional gross profit in the Industrial segment. In addition, gross profit increased as a result of the increase in sales, partially offset by the negative impact as a result of the increase in LIFO reserve.

Gross profit for the Water Treatment segment increased $7.8 million, or 17%, to $54.6 million, or 24% of sales, for fiscal 2022, from $46.8 million, or 28% of sales, for fiscal 2021. During fiscal 2022, the LIFO reserve increased, and gross profits decreased, by $5.4 million, primarily due to rising raw material costs. During fiscal 2021, the LIFO reserve increased, and gross profit decreased, by $0.1 million. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $1.0 million in additional gross profit in the Water Treatment segment. In addition, gross profit increased as a result of the increase in sales.

Gross profit for the Health and Nutrition segment decreased $1.3 million, or 4%, to $32.3 million, or 20% of sales, for fiscal 2022, from $33.6 million, or 22% of sales, for fiscal 2021. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $0.7 million in additional gross profit in the Health and Nutrition segment. This increase was more than offset by a decrease in gross profit resulting from a decline in sales of our manufactured products which generally have higher per-unit margins than our specialty distributed products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ("SG&A") expenses increased to $75.3 million, or 10% of sales, for fiscal 2022 from $67.9 million, or 11% of sales, for fiscal 2021. We estimated the impact of the 53rd week in fiscal 2022 to be approximately $1.0 million in additional SG&A expense. In addition, expenses increased in part due to the added costs from the acquired businesses in the Water Treatment segment, an increase in variable incentive compensation, increased costs due to added personnel and other resources as we invest to grow the business, and normalization of travel and other variable expenses to pre-COVID levels.

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 April 3, 2022 was $22.3 million, an increase of $2.2 million, or 11%, from adjusted EBITDA of $20.1 million for the same period in the prior year. Full-year adjusted EBITDA was $99.7 million, an increase of $15.8 million, or 19%, from adjusted EBITDA of $83.9 million for fiscal 2021. The increase was due to the impact of improved gross profits discussed above.

Our effective income tax rate was relatively flat at approximately 26.5% for both fiscal 2022 and 2021.

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, and with 49 facilities in 24 states, the Company creates value for its customers through superb customer service and support, quality products and personalized applications. Hawkins, Inc. generated $775 million of revenue in fiscal 2022 and has approximately 800 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

 

Fiscal Year Ended

(In thousands)

April 3, 2022

 

March 28, 2021

 

April 3, 2022

 

March 28, 2021

Net income (GAAP)

$

10,577

 

$

9,081

 

$

51,542

 

$

40,980

Interest expense

 

409

 

 

366

 

 

1,404

 

 

1,467

Income tax expense

 

3,864

 

 

3,586

 

 

18,437

 

 

14,871

Amortization of intangibles

 

1,758

 

 

1,602

 

 

6,462

 

 

5,839

Depreciation expense

 

4,512

 

 

4,331

 

 

17,667

 

 

16,829

Non-cash compensation expense

 

1,111

 

 

1,040

 

 

3,818

 

 

3,343

Non-recurring acquisition expense

 

73

 

 

54

 

 

369

 

 

562

Adjusted EBITDA

$

22,304

 

$

20,060

 

$

99,699

 

$

83,891


HAWKINS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per-share data)

 

 

Three Months Ended

 

Fiscal Year Ended

 

 

April 3, 2022

 

March 28, 2021

 

April 3, 2022

 

March 28, 2021

 

 

(unaudited)

 

 

 

 

Sales

 

$

222,973

 

 

$

162,971

 

 

$

774,541

 

 

$

596,871

 

Cost of sales

 

 

(186,654

)

 

 

(131,221

)

 

 

(628,021

)

 

 

(473,109

)

Gross profit

 

 

36,319

 

 

 

31,750

 

 

 

146,520

 

 

 

123,762

 

Selling, general and administrative expenses

 

 

(21,110

)

 

 

(18,875

)

 

 

(75,326

)

 

 

(67,884

)

Operating income

 

 

15,209

 

 

 

12,875

 

 

 

71,194

 

 

 

55,878

 

Interest expense, net

 

 

(409

)

 

 

(366

)

 

 

(1,404

)

 

 

(1,467

)

Other income (expense)

 

 

(359

)

 

 

158

 

 

 

189

 

 

 

1,440

 

Income before income taxes

 

 

14,441

 

 

 

12,667

 

 

 

69,979

 

 

 

55,851

 

Income tax expense

 

 

(3,864

)

 

 

(3,586

)

 

 

(18,437

)

 

 

(14,871

)

Net income

 

$

10,577

 

 

$

9,081

 

 

$

51,542

 

 

$

40,980

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding-basic

 

 

20,887,460

 

 

 

20,968,248

 

 

 

20,947,234

 

 

 

21,024,344

 

Weighted average number of shares outstanding-diluted

 

 

21,078,783

 

 

 

21,194,455

 

 

 

21,135,258

 

 

 

21,260,296

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.51

 

 

$

0.43

 

 

$

2.46

 

 

$

1.95

 

Diluted earnings per share

 

$

0.50

 

 

$

0.43

 

 

$

2.44

 

 

$

1.93

 



HAWKINS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per-share data)

 

 

April 3, 2022

 

March 28, 2021

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$

3,496

 

$

2,998

Trade accounts receivables, net

 

 

122,826

 

 

90,603

Inventories

 

 

94,985

 

 

63,864

Prepaid expenses and other current assets

 

 

6,431

 

 

5,542

Total current assets

 

 

227,738

 

 

163,007

PROPERTY, PLANT, AND EQUIPMENT:

 

 

 

 

Land

 

 

16,640

 

 

15,235

Buildings and improvements

 

 

118,369

 

 

120,410

Machinery and equipment

 

 

114,763

 

 

109,353

Transportation equipment

 

 

43,968

 

 

37,646

Office furniture and equipment

 

 

10,315

 

 

17,760

 

 

 

304,055

 

 

300,404

Less accumulated depreciation

 

 

142,209

 

 

155,792

Net property, plant, and equipment

 

 

161,846

 

 

144,612

OTHER ASSETS:

 

 

 

 

Right-of-use assets

 

 

10,606

 

 

11,630

Goodwill

 

 

77,401

 

 

70,720

Intangible assets, net

 

 

80,193

 

 

76,368

Deferred compensation plan asset

 

 

6,783

 

 

5,726

Other

 

 

2,761

 

 

487

Total other assets

 

 

177,744

 

 

164,931

Total assets

 

$

567,328

 

$

472,550

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Accounts payable — trade

 

$

66,693

 

$

37,313

Accrued payroll and employee benefits

 

 

19,034

 

 

18,048

Current portion of long-term debt

 

 

9,913

 

 

9,907

Short-term lease liability

 

 

1,657

 

 

1,587

Container deposits

 

 

1,558

 

 

1,452

Other current liabilities

 

 

2,611

 

 

2,155

Total current liabilities

 

 

101,466

 

 

70,462

LONG-TERM DEBT, LESS CURRENT PORTION

 

 

115,644

 

 

88,845

LONG-TERM LEASE LIABILITY

 

 

9,143

 

 

10,231

PENSION WITHDRAWAL LIABILITY

 

 

4,276

 

 

4,631

DEFERRED COMPENSATION LIABILITY

 

 

8,402

 

 

7,322

DEFERRED INCOME TAXES

 

 

23,422

 

 

24,445

OTHER LONG-TERM LIABILITIES

 

 

2,374

 

 

1,368

Total liabilities

 

 

264,727

 

 

207,304

COMMITMENTS AND CONTINGENCIES

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

Common shares; authorized: 60,000,000 shares of $0.01 par value; 20,889,777 and 20,969,746 shares issued and outstanding for 2022 and 2021, respectively

 

 

209

 

 

210

Additional paid-in capital

 

 

46,717

 

 

51,138

Retained earnings

 

 

254,384

 

 

213,898

Accumulated other comprehensive income

 

 

1,291

 

 

Total shareholders’ equity

 

 

302,601

 

 

265,246

Total liabilities and shareholders’ equity

 

$

567,328

 

$

472,550


HAWKINS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

 

 

Fiscal Year Ended

 

 

April 3, 2022

 

March 28, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net income

 

$

51,542

 

 

$

40,980

 

Reconciliation to cash flows:

 

 

 

 

Depreciation and amortization

 

 

24,129

 

 

 

22,669

 

Operating leases

 

 

1,899

 

 

 

1,896

 

Gain on deferred compensation assets

 

 

(189

)

 

 

(1,440

)

Deferred income taxes

 

 

(1,501

)

 

 

(689

)

Stock compensation expense

 

 

3,818

 

 

 

3,343

 

Other

 

 

545

 

 

 

203

 

Changes in operating accounts (using) providing cash, net of acquisitions:

 

 

 

 

Trade receivables

 

 

(30,526

)

 

 

(21,323

)

Inventories

 

 

(30,034

)

 

 

(7,960

)

Accounts payable

 

 

25,138

 

 

 

2,551

 

Accrued liabilities

 

 

2,723

 

 

 

7,554

 

Lease liabilities

 

 

(1,907

)

 

 

(1,837

)

Income taxes

 

 

214

 

 

 

(235

)

Other

 

 

(3,014

)

 

 

(1,919

)

Net cash provided by operating activities

 

 

42,837

 

 

 

43,793

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Additions to property, plant, and equipment

 

 

(28,512

)

 

 

(20,794

)

Acquisitions

 

 

(21,546

)

 

 

(51,000

)

Other

 

 

302

 

 

 

362

 

Net cash used in investing activities

 

 

(49,756

)

 

 

(71,432

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Cash dividends paid

 

 

(11,056

)

 

 

(10,029

)

New shares issued

 

 

1,772

 

 

 

1,583

 

Shares surrendered for payroll taxes

 

 

(1,467

)

 

 

(54

)

Shares repurchased

 

 

(8,545

)

 

 

(4,140

)

Payments for debt issuance costs

 

 

(287

)

 

 

 

Payments on senior secured revolving loan

 

 

(15,000

)

 

 

(37,000

)

Borrowings on senior secured revolving loan

 

 

42,000

 

 

 

76,000

 

Net cash provided by financing activities

 

 

7,417

 

 

 

26,360

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

498

 

 

 

(1,279

)

CASH AND CASH EQUIVALENTS - beginning of year

 

 

2,998

 

 

 

4,277

 

CASH AND CASH EQUIVALENTS - end of year

 

$

3,496

 

 

$

2,998

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-

 

 

 

 

Cash paid during the year for income taxes

 

$

19,726

 

 

$

15,783

 

Cash paid for interest

 

 

1,197

 

 

 

1,288

 

Noncash investing activities - Capital expenditures in accounts payable

 

 

3,733

 

 

 

626

 


HAWKINS, INC.
REPORTABLE SEGMENTS (UNAUDITED)
(In thousands)

 

 

Industrial

 

Water
Treatment

 

Health and Nutrition

 

Total

 

 

 

 

 

 

 

 

 

Fiscal Year Ended April 3, 2022:

 

 

 

 

 

 

 

 

Sales

 

$

386,938

 

$

228,133

 

$

159,470

 

$

774,541

Gross profit

 

 

59,606

 

 

54,571

 

 

32,343

 

 

146,520

Selling, general, and administrative expenses

 

 

28,127

 

 

31,357

 

 

15,842

 

 

75,326

Operating income

 

 

31,479

 

 

23,214

 

 

16,501

 

 

71,194

 

 

 

 

 

 

 

 

 

Fiscal Year Ended March 28, 2021:

 

 

 

 

 

 

 

 

Sales

 

$

273,361

 

$

170,004

 

$

153,506

 

$

596,871

Gross profit

 

 

43,337

 

 

46,793

 

 

33,632

 

 

123,762

Selling, general, and administrative expenses

 

 

27,033

 

 

24,453

 

 

16,398

 

 

67,884

Operating income (loss)

 

 

16,304

 

 

22,340

 

 

17,234

 

 

55,878

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 regulation, 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 March 28, 2021, 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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