MINNEAPOLIS, Nov. 2, 2016 /PRNewswire/ -- Hawkins, Inc.
(Nasdaq: HWKN) today announced second quarter results for fiscal
2017. Sales of $121.3 million for the
three months ended October 2, 2016 represented an increase of
28.2% from $94.6 million for the same
period of the prior year. Net income was $7.2 million, or $0.68 per diluted share, compared to net income
of $5.7 million, or $0.54 per diluted share, for the same period in
fiscal 2016.
For the six months ended October 2,
2016, Hawkins reported sales of $252.6 million as compared to $196.1 million for the same period of the prior
year. Net income for the first half of fiscal 2017 was
$14.8 million, or $1.40 per fully diluted share, compared to
$12.5 million, or $1.17 per fully diluted share, for the first half
of fiscal 2016.
"Our operating income for the quarter was up 28% over last year,
with about half of that increase coming from our Health and
Nutrition segment acquired at the end of the third quarter last
year," said Patrick Hawkins, Chief
Executive Officer and President. "While sales from this
segment were behind the previous quarter primarily due to the
timing of customer orders, we continue to see opportunities for
significant growth in this segment and have recently added sales,
marketing and operations talent as we build bench strength within
this segment. We believe these investments will allow us to
drive incremental growth in the future, particularly for our
value-added products and services, including product formulation,
processing and blending capabilities."
Mr. Hawkins continued, "Our Industrial segment reported a
significant increase in operating profit. We realized
increased profits on products carrying higher per-unit margins,
which was partially offset by reduced sales of our agricultural
products, where we believe demand from this market was weakened due
to low crop prices. This segment also benefitted from reduced
operations spending this quarter. In our Water Treatment segment,
we saw increased sales of specialized products in many of our
geographies and benefited from an acquisition we completed later
last year, partially offset by less favorable weather conditions in
certain regions. Higher staffing costs from resources we added over
the last several months also offset a portion of the product margin
gains."
For the second quarter of fiscal 2017, Industrial segment sales
were $55.8 million, a decrease of
$2.5 million, or 4.3%, from the same
period of the prior year. Lower raw material costs on certain
products drove lower selling prices and the decrease in sales
dollars. Water Treatment segment sales were $36.8 million for the most recent quarter, an
increase of $0.6 million, or 1.7%,
from the same period of the prior year. The increase in sales
dollars was largely due to the business we acquired late in the
second quarter of fiscal 2016 and increased volumes of specialized
products, partially offset by lower per-unit selling prices due to
reduced raw material costs on certain products. Sales for our
Health and Nutrition segment established in the third quarter of
fiscal 2016 were $28.5 million for
the current quarter. This compares to pro forma sales of
$29.4 million for the same period
last year and sales of $31.9 million
in the first quarter of fiscal 2017. The lower sales this
quarter were primarily due to fluctuations in the timing of
customer orders and certain customers working down inventory on
hand.
Company-wide gross profit for the second quarter of fiscal 2017
was $27.0 million, or 22.3% of sales,
an increase of $7.2 million from
$19.8 million, or 20.9% of sales, for
the same period of the prior year.
Gross profit for the Industrial segment was $10.2 million, or 18.2% of sales, for the
quarter, an increase of $1.0 million
from $9.2 million, or 15.7% of sales,
for the same period of the prior year. While sales volumes
were relatively flat in the quarter, our gross profit was improved
due to a favorable product mix shift, lower raw material costs for
certain products, and operational efficiencies as we increased our
on-hand inventories during the quarter. The improvement in
gross profit as a percentage of sales was largely due to decreased
selling prices resulting from lower raw material costs. The LIFO
method of valuing inventory increased gross profit by $0.3 million in the current year and had a
nominal impact on gross profit for the same period of the prior
year.
Gross profit for the Water Treatment segment was $11.1 million, or 30.0% of sales, for the
quarter, an increase of $0.4 million
from $10.6 million, or 29.3% of
sales, for the same period of the prior year. The increase in
gross profit dollars was primarily driven by increased sales
volumes of specialized products that have higher per-unit margins,
as well as profits from the business we acquired late in the second
quarter of fiscal 2016. The LIFO method of valuing inventory
increased gross profit by $0.1
million for the three months ended October 2, 2016 and had a nominal impact during
the same quarter of the prior year.
Gross profit for our Health and Nutrition segment was
$5.8 million, or 20.2% of sales, for
the second quarter of fiscal 2017. This is a decrease of
$1.4 million from the gross profit
reported in the first quarter primarily resulting from lower sales
with fixed production overhead costs. Inventories in this
segment are valued using the FIFO method.
Company-wide selling, general and administrative expenses
("SG&A") were $14.9 million, or
12.3% of sales, for the quarter, compared to $10.3 million, or 10.9% of sales, for the same
period of the prior year. SG&A expenses in our Health and
Nutrition Segment were $4.5 million,
accounting for the majority of the increase in the current quarter,
and included $1.2 million of
amortization expense on acquired intangible assets.
The Company borrowed $131.0
million to partially fund the acquisition of Stauber in the
third quarter of fiscal 2016. As a result, adjusted EBITDA, a
non-GAAP financial measure, has become an important performance
indicator and a key compliance measure under the terms of our new
credit agreement. An explanation of the computation of
adjusted EBITDA is presented below. Adjusted EBITDA for the
three months ended October 2, 2016
was $17.9 million, an increase of
$4.6 million, or 35%, from adjusted
EBITDA of $13.3 million for the same
period in the prior year. The increase was due primarily to the
addition of our Health and Nutrition segment and higher gross
profits, partially offset by the increase in SG&A expenses in
our other segments described earlier.
Our effective income tax rate was 37.7% for the three months
ended October 2, 2016 compared to
40.2% for the three months ended September
27, 2015. Our tax rate for the quarter ended
September 27, 2015 was impacted by
$0.3 million of state income expense
related to an audit assessment which covered multiple years.
The effective tax rate is impacted by projected levels of annual
taxable income, permanent items, and state taxes.
About Hawkins, Inc.
Hawkins, Inc. distributes, blends and manufactures bulk and
specialty chemicals and other health and nutrition products for its
customers in a wide variety of industries. Headquartered in
Roseville, Minnesota, and with 41
facilities in 19 states, the Company creates value for its
customers through superb customer service and support, quality
products and personalized applications.
Reconciliation of Non-GAAP Financial Measure
We report our consolidated financial results in accordance with
U.S. generally accepted accounting principles ("GAAP").
Because adjusted EBITDA is an important performance indicator and a
key compliance measure under our credit agreement, we are providing
this financial measure which is not computed according to GAAP.
This 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 acquisition costs, if applicable.
Adjusted
EBITDA
|
Three months
ended
|
|
Six months
ended
|
(In
thousands)
|
October 2,
2016
|
September 27,
2015
|
|
October 2,
2016
|
September 27,
2015
|
Net Income
(GAAP)
|
$
|
7,190
|
|
$
|
5,678
|
|
|
$
|
14,794
|
|
$
|
12,469
|
|
Interest expense
(income), net
|
619
|
|
15
|
|
|
1,343
|
|
(6)
|
|
Income tax
expense
|
4,352
|
|
3,815
|
|
|
9,114
|
|
7,889
|
|
Amortization of
intangibles
|
1,521
|
|
291
|
|
|
3,043
|
|
600
|
|
Depreciation
expense
|
3,688
|
|
3,095
|
|
|
7,241
|
|
6,350
|
|
Non-cash compensation
expense
|
539
|
|
412
|
|
|
1,074
|
|
869
|
|
Stauber acquisition
expenses
|
—
|
|
20
|
|
|
61
|
|
20
|
|
Adjusted
EBITDA
|
$
|
17,909
|
|
$
|
13,326
|
|
|
$
|
36,670
|
|
$
|
28,191
|
|
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 the
impact of the acquisition and other investments on our business
operations and financial condition. 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, our ability to maintain and
integrate the acquired business, changes in competition and price
pressure as a result of the pending acquisition or changes to our
business resulting from the completed acquisition, 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, and our ability to consummate and successfully
integrate other future acquisitions. 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, 2016, 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.
HAWKINS,
INC.
|
CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
|
(In thousands,
except share and per-share data)
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
October 2,
2016
|
|
September
27,
2015
|
|
October 2,
2016
|
|
September 27,
2015
|
Sales
|
|
$
|
121,250
|
|
|
$
|
94,592
|
|
|
$
|
252,624
|
|
|
$
|
196,088
|
|
Cost of
sales
|
|
(94,218)
|
|
|
(74,781)
|
|
|
(197,376)
|
|
|
(155,542)
|
|
Gross
profit
|
|
27,032
|
|
|
19,811
|
|
|
55,248
|
|
|
40,546
|
|
Selling, general and
administrative expenses
|
|
(14,871)
|
|
|
(10,303)
|
|
|
(29,997)
|
|
|
(20,194)
|
|
Operating
income
|
|
12,161
|
|
|
9,508
|
|
|
25,251
|
|
|
20,352
|
|
Interest (expense)
income, net
|
|
(619)
|
|
|
(15)
|
|
|
(1,343)
|
|
|
6
|
|
Income before income
taxes
|
|
11,542
|
|
|
9,493
|
|
|
23,908
|
|
|
20,358
|
|
Income tax
provision
|
|
(4,352)
|
|
|
(3,815)
|
|
|
(9,114)
|
|
|
(7,889)
|
|
Net income
|
|
$
|
7,190
|
|
|
$
|
5,678
|
|
|
$
|
14,794
|
|
|
$
|
12,469
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding - basic
|
|
10,536,309
|
|
|
10,545,992
|
|
|
10,524,724
|
|
|
10,563,267
|
|
Weighted average
number of shares outstanding - diluted
|
|
10,586,939
|
|
|
10,589,824
|
|
|
10,581,253
|
|
|
10,614,484
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
0.68
|
|
|
$
|
0.54
|
|
|
$
|
1.41
|
|
|
$
|
1.18
|
|
Diluted earnings per
share
|
|
$
|
0.68
|
|
|
$
|
0.54
|
|
|
$
|
1.40
|
|
|
$
|
1.17
|
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared per common share
|
|
$
|
0.42
|
|
|
$
|
0.40
|
|
|
$
|
0.42
|
|
|
$
|
0.40
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/hawkins-inc-reports-second-quarter-fiscal-2017-results-300356232.html
SOURCE Hawkins, Inc.