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Hawkins (HWKN)

Filed: 20 May 21, 4:28pm


Exhibit 99.1
May 20, 2021
Hawkins, Inc.
2381 Rosegate
Roseville, MN 55113

Hawkins, Inc. Reports
Fourth Quarter and Fiscal 2021 Results

Roseville, MN, May 20, 2021 – Hawkins, Inc. (Nasdaq: HWKN) today announced fourth quarter and full-year results for its fiscal year ended March 28, 2021. Highlights include:

Record sales in the fourth quarter of $163.0 million, a 23% year-over-year increase, helped deliver full year record sales of $596.9 million for fiscal 2021, a 10% year-over-year increase.
Record gross profit of $123.8 million for the year, a 23% increase over the prior year, contributed to a 34% year-over-year increase in operating income.
Record fourth quarter diluted earnings per share (EPS) of $0.43 was 91% higher than the same period of the prior year.
Record full year diluted EPS of $1.93 was $0.60, or 45%, higher than fiscal 2020.
Net debt of $96 million and a leverage ratio of 1.2x, despite incurring $51 million of acquisition spending in the year.
Both Water Treatment Group acquisitions were accretive within the fiscal year.

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

“We are very pleased to report another year of records, with record sales, gross profit, operating income, net income, diluted EPS, and EBITDA. This comes on the heels of the last fiscal year, where many of these same records were set. All three of our reporting segments reported year-over-year growth in operating income. Health and Nutrition segment operating income was up 262% over the prior year, as demand for our products was high primarily driven by increased consumer demand for health and immunity products. Industrial segment sales were down slightly year over year, driven largely by declines in sales into the ethanol industry, but operating income was up 10% on increased sales of specialty products. Our Water Treatment segment reported modest year-over-year growth in operating income. While our two acquired businesses were accretive, our legacy business was down due to impacts from COVID-19, particularly in the first two quarters of the fiscal year. Increased sales of our specialty and manufactured products in this group helped offset the negative impact of COVID-19.”

Mr. Hawkins continued, “As we look to fiscal 2022, we will continue to execute on our long-term growth strategy. We believe that our Industrial segment remains steady and that our Water Treatment segment will rebound from the impact of the pandemic and see growth in fiscal 2022. After a record year in Health and Nutrition, we are cautious about fiscal 2022. Much of our success in this area was supported by consumer demand for health and immunity products, which was quite high in fiscal 2021, which we believe was a result of COVID-19. If consumer behaviors migrate towards pre-pandemic levels, we will likely see some contraction in this segment."

COVID-19 Update:

As our operations and products are essential to critical national infrastructure, it has been imperative that we continue to supply materials throughout the COVID-19 pandemic, including the products needed to maintain safe drinking water, ingredients essential for large-scale food, pharmaceutical and other health product manufacturing and nutrition products needed to support our critical infrastructure. All of our manufacturing facilities qualified as essential operations (or the equivalent) under applicable federal and state orders that were in place earlier in the pandemic. As a result, all of our manufacturing sites have continued to operate during the entire COVID-19 pandemic, with no significant impact to manufacturing.







Fourth Quarter and Fiscal Year Financial Highlights:

For the fourth quarter of fiscal 2021, the Company reported net income of $9.1 million, or $0.43 per diluted share, compared to net income for the fourth quarter of fiscal 2020 of $4.8 million, or $0.22 per diluted share.

For the full year, the Company reported record net income of $41.0 million, or $1.93 per diluted share, compared to net income for fiscal 2020 of $28.4 million, or $1.33 per diluted share.

For the fourth quarter of fiscal 2021, sales were $163.0 million, an increase of $30.6 million, or 23%, from sales of $132.4 million a year ago. Industrial segment sales increased $7.5 million, or 11%, to $76.3 million for the current quarter, as compared to $68.8 million for the same period a year ago. The increase in sales dollars from the prior year was driven largely by a product mix shift to more sales of our higher-priced manufactured, blended and repackaged products, in particular certain agricultural and food ingredient products. Water Treatment segment sales increased $5.6 million, or 16%, to $41.5 million for the current quarter, as compared to $35.9 million for the same period a year ago. The increase in sales dollars from the prior year was attributable to added sales from the acquisitions of ADC and C&L Aqua. Sales by our legacy business decreased slightly due to unusually high sales last year at the end of the quarter as customers filled up their tanks as a result of supply concerns due to the onset of COVID-19. Health and Nutrition segment sales increased $17.5 million, or 63%, to $45.2 million for the current quarter, as compared to $27.7 million for the same period a year ago. The increase in sales was driven by increased sales of both our manufactured and specialty distributed products largely as a result of increased consumer demand due for health and immunity products.

For fiscal 2021, Industrial segment sales were $273.4 million, a decrease of 1% from fiscal 2020 sales of $275.2 million. Water Treatment segment sales were $170.0 million for the year, an increase of 6% over last year’s sales of $159.9 million. Sales for our Health and Nutrition segment were $153.5 million in fiscal 2021, an increase of 46% from fiscal 2020 sales of $105.1 million.

Company-wide gross profit for fiscal 2021 increased $22.8 million, or 23%, to $123.8 million, or 21% of sales, from $100.9 million, or 19% of sales, for the same period of the prior year. During fiscal 2021, the LIFO reserve decreased, and gross profits increased, by $0.1 million. During fiscal 2020, the LIFO reserve increased, and gross profits decreased, by $0.6 million. Total gross profit increased due to double-digit growth in all three segments, including 68% year-over-year growth in our Health and Nutrition segment.

Gross profit for the Industrial segment increased $4.4 million, or 11%, to $43.3 million, or 16% of sales, for fiscal 2021, from $38.9 million, or 14% of sales, for fiscal 2020. During fiscal 2021, the LIFO reserve decreased, and gross profits increased, by $0.2 million. In fiscal 2020, the LIFO reserve increased, and gross profits decreased, by $0.6 million. Total gross profit, and gross profit as a percentage of sales, increased due to a product mix shift to more sales of certain higher-margin manufactured, blended and re-packaged products, partially offset by higher operating costs.

Gross profit for the Water Treatment segment increased $4.9 million, or 12%, to $46.8 million, or 28% of sales, for fiscal 2021, from $41.9 million, or 26% of sales, for fiscal 2020. During fiscal 2021, the LIFO reserve increased, and gross profits decreased, by $0.1 million. During fiscal 2020, the LIFO reserve had a nominal impact on gross profit. Gross profit increased as a result of the added gross profit from sales in the acquired businesses of ADC and C&L Aqua. Gross profit, and gross profit as a percentage of sales, also increased as a result of a product mix shift to more sales of certain of our manufactured, blended and repackaged products in our legacy business.

Gross profit for our Health and Nutrition segment increased $13.6 million, or 68%, to $33.6 million, or 22% of sales, for fiscal 2021, from $20.1 million, or 19% of sales, for fiscal 2020. The increase in gross profit was a result of higher sales compared to the prior year. Gross profit as a percentage of sales increased primarily as a result of product mix changes.

Company-wide selling, general and administrative ("SG&A") expenses increased to $67.9 million, or 11% of sales, for fiscal 2021 from $59.2 million, or 11% of sales, for fiscal 2020. Expenses increased primarily due to increased variable pay, the added costs from the acquired businesses of ADC and C&L Aqua, including $0.8 million expense for amortization of intangibles, and a year-over-year increase in compensation expense related to our non-qualified deferred compensation plan, with the expense offset in other income.

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 March 28, 2021 was $20.1 million, an increase of $7.0 million, or 53%, from adjusted



EBITDA of $13.1 million for the same period in the prior year. Full-year adjusted EBITDA was $83.9 million, an increase of $18.6 million, or 28%, from adjusted EBITDA of $65.3 million for fiscal 2020. The increase was due to the combined impact of improved gross profits discussed above.

Our effective income tax rate was relatively flat at approximately 27% for both fiscal 2021 and 2020.

About Hawkins, Inc.

Hawkins, Inc. was founded in 1938 and is a leading specialty chemical company that distributes, blends and manufactures chemicals and other specialty ingredients for its Industrial, Water Treatment, and Health & Nutrition customers. Headquartered in Roseville, Minnesota, and with 46 facilities in 22 states, the Company creates value for its customers through superb customer service and support, quality products and personalized applications. Hawkins, Inc. generated $597 million of revenue in fiscal 2021 and has approximately 750 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 EBITDAThree Months EndedFiscal Year Ended
(In thousands)March 28, 2021March 29, 2020March 28, 2021March 29, 2020
Net income (GAAP)$9,081 $4,763 $40,980 $28,367 
Interest expense366 498 1,467 2,511 
Income tax expense3,586 2,018 14,871 10,589 
Amortization of intangibles1,602 1,268 5,839 5,073 
Depreciation expense4,331 4,135 16,829 16,511 
Non-cash compensation expense1,040 443 3,343 2,273 
Non-recurring acquisition expense54 — 562 — 
Adjusted EBITDA$20,060 $13,125 $83,891 $65,324 






 
HAWKINS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per-share data)
Three Months EndedFiscal Year Ended
 March 28, 2021March 29, 2020March 28, 2021March 29, 2020
(unaudited)
Sales$162,971 $132,413 $596,871 $540,198 
Cost of sales(131,221)(109,765)(473,109)(439,281)
Gross profit31,750 22,648 123,762 100,917 
Selling, general and administrative expenses(18,875)(14,891)(67,884)(59,246)
Operating income12,875 7,757 55,878 41,671 
Interest expense, net(366)(498)(1,467)(2,511)
Other income158 (478)1,440 (204)
Income before income taxes12,667 6,781 55,851 38,956 
Income tax expense(3,586)(2,018)(14,871)(10,589)
Net income$9,081 $4,763 $40,980 $28,367 
Weighted average number of shares outstanding-basic20,968,248 21,117,684 21,024,344 21,159,978 
Weighted average number of shares outstanding-diluted21,194,455 21,249,972 21,260,296 21,308,800 
Basic earnings per share$0.43 $0.23 $1.95 $1.34 
Diluted earnings per share$0.43 $0.22 $1.93 $1.33 

 






HAWKINS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per-share data)
March 28, 2021March 29, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$2,998 $4,277 
Trade accounts receivables, net90,603 67,391 
Inventories63,864 54,436 
Income taxes receivable175 — 
Prepaid expenses and other current assets5,367 4,927 
Total current assets163,007 131,031 
PROPERTY, PLANT, AND EQUIPMENT:
Land15,235 11,045 
Buildings and improvements120,410 108,175 
Machinery and equipment109,353 98,171 
Transportation equipment37,646 32,737 
Office furniture and equipment17,760 17,093 
300,404 267,221 
Less accumulated depreciation155,792 140,877 
Net property, plant, and equipment144,612 126,344 
OTHER ASSETS:
Right-of-use assets11,630 9,090 
Goodwill70,720 58,440 
Intangible assets, net76,368 60,653 
Other6,213 3,770 
Total other assets164,931 131,953 
Total assets$472,550 $389,328 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable — trade$37,313 $34,129 
Accrued payroll and employee benefits18,048 13,538 
Current portion of long-term debt9,907 9,907 
Short-term lease liability1,587 1,523 
Container deposits1,452 1,376 
Other current liabilities2,155 1,747 
Total current liabilities70,462 62,220 
LONG-TERM DEBT, LESS CURRENT PORTION88,845 49,751 
LONG-TERM LEASE LIABILITY10,231 7,649 
PENSION WITHDRAWAL LIABILITY4,631 4,978 
DEFERRED COMPENSATION LIABILITY7,322 5,026 
DEFERRED INCOME TAXES24,445 25,106 
OTHER LONG-TERM LIABILITIES1,368 1,114 
Total liabilities207,304 155,844 
COMMITMENTS AND CONTINGENCIES— — 
SHAREHOLDERS’ EQUITY:
Common shares; authorized: 60,000,000 shares of $0.01 par value; 20,969,746 and 21,024,458 shares issued and outstanding for 2021 and 2020, respectively210 211 
Additional paid-in capital51,138 50,405 
Retained earnings213,898 182,947 
Accumulated other comprehensive income— (79)
Total shareholders’ equity265,246 233,484 
Total liabilities and shareholders’ equity$472,550 $389,328 




HAWKINS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
  
Fiscal Year Ended
 March 28, 2021March 29, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$40,980 $28,367 
Reconciliation to cash flows:
Depreciation and amortization22,669 21,584 
Operating leases1,896 2,033 
(Gain) loss on deferred compensation assets(1,440)233 
Deferred income taxes(689)(1,421)
Stock compensation expense3,343 2,273 
Other203 656 
Changes in operating accounts (using) providing cash, net of acquisitions:
Trade receivables(21,323)(3,387)
Inventories(7,960)6,045 
Accounts payable2,551 4,228 
Accrued liabilities7,554 663 
Lease liabilities(1,837)(2,025)
Income taxes(235)586 
Other(1,919)(933)
Net cash provided by operating activities43,793 58,902 
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment(20,794)(24,549)
Acquisitions(51,000)— 
Other362 346 
Net cash used in investing activities(71,432)(24,203)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid(10,029)(9,825)
New shares issued1,583 1,400 
Shares surrendered for payroll taxes(54)(343)
Shares repurchased(4,140)(5,853)
Payments on senior secured revolving credit facility(37,000)(44,000)
Proceeds from revolver borrowings76,000 19,000 
Net cash provided by (used in) financing activities26,360 (39,621)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(1,279)(4,922)
CASH AND CASH EQUIVALENTS - beginning of year4,277 9,199 
CASH AND CASH EQUIVALENTS - end of year$2,998 $4,277 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the year for income taxes$15,783 $11,415 
Cash paid for interest1,288 2,413 
Noncash investing activities - Capital expenditures in accounts payable626 1,041 




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


IndustrialWater
Treatment
Health and NutritionTotal
   
Fiscal Year Ended March 28, 2021:
Sales$273,361 $170,004 $153,506 $596,871 
Gross profit43,337 46,793 33,632 123,762 
Selling, general, and administrative expenses27,033 24,453 16,398 67,884 
Operating income16,304 22,340 17,234 55,878 
Fiscal Year Ended March 29, 2020:
Sales$275,224 $159,895 $105,079 $540,198 
Gross profit38,936 41,902 20,079 100,917 
Selling, general, and administrative expenses24,123 19,801 15,322 59,246 
Operating income (loss)14,813 22,101 4,757 41,671 




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, the impact and severity of the COVID-19 outbreak, changes in the labor markets, our available cash for investments, our business capital needs, changes in competition and price pressure, changes in demand and customer requirements or processes for our products, 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, our ability to locate suitable real estate for new branch additions, 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 29, 2020, 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