ROSEVILLE, Minn., Jan. 31, 2024 (GLOBE NEWSWIRE) — Hawkins, Inc. (Nasdaq: HWKN) today announced results for the three and nine months ended December 31, 2023, its third quarter of fiscal 2024.

Third Quarter Fiscal Year 2024 Highlights:

• Third quarter sales of $208.5 million, with Water Treatment segment sales growth of 20% over the same quarter in the prior year.
• Record third quarter gross profit of $42.2 million, a 16% increase over the same period of the prior year, contributing to record third quarter operating income of $18.5 million, a 21% increase over the same period of the prior year.
• Third quarter diluted earnings per share (“EPS”) of $0.71, an increase of 39% over the same period of the prior year.
• Record third quarter Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), a non-GAAP measure, of $29.7 million, a 25% increase over the same period of the prior year.
• As previously announced, added six Water Treatment locations in the quarter with two acquisitions, Water Solutions Unlimited, Inc. and The Miami Products & Chemical Co.
• Year-to-date operating cash flow of $117.6 million allowed us to fund three acquisitions while still decreasing our debt by $11.0 million from the same time a year ago and reducing our leverage ratio to under 1x EBITDA.
• Named to Newsweek’s 2024 list of America’s Most Responsible Companies for the fourth year in a row.

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

“Following the strong first half of the year, our third quarter performance was highlighted by our bottom-line results, as net income grew 39% in the quarter, and we saw continued momentum in our Water Treatment segment that had revenue growth of 20% and operating income growth of over 80%. As we continue to execute on our strategies for this segment, we are pleased with our many successes, including the completion of the previously-announced acquisitions of Water Solutions Unlimited and Miami Products & Chemicals, as well as the continued profit growth in the segment’s legacy business. In our Industrial segment, operating income was up 15% despite some sales softness, showing disciplined margin management. Sales in our Health and Nutrition segment in the third quarter showed improved performance as compared to the first two quarters.”

Mr. Hawkins continued, “As a result of the strong results in the first nine months, along with disciplined inventory management, we were able to fund the current year acquisitions of nearly $80 million while still bringing down our debt from the same time a year ago. With one quarter remaining in the fiscal year, we expect the diversity of our businesses and overall strength of the Company will allow us to continue to generate free cash flow and execute on our growth strategy.”

Third Quarter Financial Highlights:

NET INCOME

For the third quarter of fiscal 2024, the Company reported net income of $14.9 million, or $0.71 per diluted share, compared to net income for the third quarter of fiscal 2023 of $10.7 million, or $0.51 per diluted share.

REVENUE

Sales were $208.5 million for the third quarter of fiscal 2024, a decrease of $10.7 million, or 5%, from sales of $219.2 million in the same period a year ago. Increased sales in our Water Treatment segment were more than offset by decreased sales in our Industrial and Health and Nutrition segments. Industrial segment sales decreased $21.4 million, or 19%, to $93.0 million for the current quarter, from $114.4 million in the same period a year ago. The sale of our consumer bleach packaging business at the end of fiscal 2023 resulted in $2.7 million lower sales in the current quarter. In addition, sales declined due to overall lower volumes as well as lower selling prices on certain products driven by lower raw material costs and competitive pricing pressures. Water Treatment segment sales increased $13.5 million or 20%, to $82.0 million for the current quarter, from $68.5 million in the same period a year ago. Water Treatment sales increased as a result of increased selling prices on many of our products as well as increased sales volumes of certain of our products, including $8.2 million of added sales from our acquired businesses. Health and Nutrition segment sales decreased $2.7 million, or 7%, to $33.5 million for the current quarter, from $36.2 million in the same period a year ago. Health and Nutrition sales decreased as a result of lower sales of our manufactured products, offset somewhat by increased sales of our specialty distributed products.

GROSS PROFIT

Gross profit increased $5.9 million, or 16%, to $42.2 million, or 20% of sales, for the current quarter, from $36.3 million, or 17% of sales, in the same period a year ago. During the current quarter, the LIFO reserve decreased, and gross profit increased, by $2.5 million due primarily to decreasing raw material prices. In the same quarter a year ago, the LIFO reserve increased, and gross profit decreased, by $3.7 million due primarily to rising raw material prices. Gross profit for the Industrial segment increased $0.5 million, or 3%, to $16.5 million, or 18% of sales, for the current quarter, from $16.0 million, or 14% of sales, in the same period a year ago. Industrial segment gross profit increased as the LIFO benefit offset declined unit margins on certain products. Gross profit for the Water Treatment segment increased $6.9 million, or 52%, to $20.2 million, or 25% of sales, for the current quarter, from $13.3 million, or 19% of sales, in the same period a year ago. Water Treatment segment gross profit increased as a result of improved per-unit margins on many of our products as well as increased sales, including the added sales from our acquired businesses. Gross profit for our Health and Nutrition segment decreased $1.5 million, or 21%, to $5.5 million, or 16% of sales, for the current quarter, from $7.0 million, or 19% of sales, in the same period a year ago. Health and Nutrition segment gross profit decreased as a result of decreased sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $2.8 million, or 13%, to $23.8 million, or 11% of sales, for the current quarter, from $21.0 million, or 10% of sales, in the same period a year ago. Expenses increased due to acquisition costs of $0.7 million as well as added costs from the acquired businesses in our Water Treatment segment of $2.2 million, including $0.7 million of amortization of intangibles.

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 December 31, 2023 was $29.7 million, an increase of $5.8 million, or 25%, from $23.8 million in the same period a year ago.

INCOME TAXES

Our effective income tax rate was 18% for the current quarter and 24% for the same period a year ago. The effective tax rate in the third quarter of both years was impacted by favorable tax provision adjustments recorded. 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 25-26%.

BALANCE SHEET

During the third quarter, our working capital was relatively stable and was approximately $26 million lower than the end of fiscal 2023 due to favorable cash collections on accounts receivable and disciplined management of our inventory levels. During the quarter, we borrowed $75 million to fund the acquisitions of Water Solutions and Miami Products, and subsequently paid down $15 million. Our year-to-date net borrowings of $8 million resulted in total debt outstanding of $120 million and a leverage ratio of 0.84x our trailing twelve-month proforma adjusted EBITDA, as compared to 0.96x of trailing twelve-month adjusted EBITDA at the end of fiscal 2023.

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 58 facilities in 26 states and creates value for its customers through superb customer service and support, quality products and personalized applications. Hawkins, Inc. generated $935 million of revenue in fiscal 2023 and has approximately 950 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						Nine months ended
(In thousands)	December 31, 2023			January 1, 2023			December 31, 2023			January 1, 2023
Net Income (GAAP)	$	14,885		$	10,733		$	61,531		$	48,428
Interest expense, net		1,168			1,546			3,033			3,858
Income tax expense		3,274			3,453			20,289			16,637
Amortization of intangibles		2,392			1,741			5,786			5,247
Depreciation expense		5,951			5,261			17,063			15,126
Non-cash compensation expense		1,287			1,084			3,506			2,764
Non-recurring acquisition expenses		710						832			—
Adjusted EBITDA	$	29,667		$	23,818		$	112,040		$	92,060

HAWKINS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per-share data)
		Three Months Ended								Nine Months Ended
		December 31, 2023				January 01, 2023				December 31, 2023				January 01, 2023
Sales		$	208,496			$	219,218			$	696,142			$	706,953
Cost of sales			(166,248	)			(182,947	)			(548,017	)			(577,559	)
Gross profit			42,248				36,271				148,125				129,394
Selling, general and administrative expenses			(23,774	)			(21,004	)			(64,173	)			(59,727	)
Operating income			18,474				15,267				83,952				69,667
Interest expense, net			(1,168	)			(1,546	)			(3,033	)			(3,858	)
Other income (expense)			853				465				901				(744	)
Income before income taxes			18,159				14,186				81,820				65,065
Income tax expense			(3,274	)			(3,453	)			(20,289	)			(16,637	)
Net income		$	14,885			$	10,733			$	61,531			$	48,428
Weighted average number of shares outstanding – basic			20,781,632				20,818,347				20,864,349				20,847,285
Weighted average number of shares outstanding – diluted			20,907,321				20,974,264				21,004,077				21,004,849
Basic earnings per share		$	0.72			$	0.52			$	2.95			$	2.32
Diluted earnings per share		$	0.71			$	0.51			$	2.93			$	2.31
Cash dividends declared per common share		$	0.16			$	0.14			$	0.47			$	0.42

HAWKINS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
		December 31, 2023			April 2, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	5,741		$	7,566
Trade accounts receivables, net			113,016			129,252
Inventories			68,805			88,777
Prepaid expenses and other current assets			7,442			6,449
Total current assets			195,004			232,044
PROPERTY, PLANT, AND EQUIPMENT:			376,952			344,753
Less accumulated depreciation			173,457			158,950
Net property, plant, and equipment			203,495			185,803
OTHER ASSETS:
Right-of-use assets			13,400			10,199
Goodwill			101,495			77,401
Intangible assets, net of accumulated amortization			116,728			73,060
Deferred compensation plan asset			9,617			7,367
Other			4,308			4,661
Total other assets			245,548			172,688
Total assets		$	644,047		$	590,535
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable — trade		$	42,857		$	53,705
Accrued payroll and employee benefits			17,753			17,279
Income tax payable			1,504			3,329
Current portion of long-term debt			9,913			9,913
Other current liabilities			7,651			6,645
Total current liabilities			79,678			90,871
LONG-TERM DEBT, LESS CURRENT PORTION			109,797			101,731
LONG-TERM LEASE LIABILITY			11,107			8,687
PENSION WITHDRAWAL LIABILITY			3,633			3,912
DEFERRED INCOME TAXES			23,698			23,800
DEFERRED COMPENSATION LIABILITY			11,437			9,343
OTHER LONG-TERM LIABILITIES			10,943			2,175
Total liabilities			250,293			240,519
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock; authorized: 60,000,000 shares of $0.01 par value; 20,790,292 and 20,850,454 shares issued and outstanding as of December 31, 2023 and April 2, 2023, respectively			208			209
Additional paid-in capital			36,781			44,443
Retained earnings			354,069			302,424
Accumulated other comprehensive income			2,696			2,940
Total shareholders’ equity			393,754			350,016
Total liabilities and shareholders’ equity		$	644,047		$	590,535

HAWKINS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
		Nine Months Ended
		December 31, 2023				January 1, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	61,531			$	48,428
Reconciliation to cash flows:
Depreciation and amortization			22,849				20,373
Operating leases			1,884				1,442
(Gain) loss on deferred compensation assets			(901	)			744
Stock compensation expense			3,506				2,764
Other			70				225
Changes in operating accounts providing (using) cash:
Trade receivables			22,500				(2,336	)
Inventories			25,665				(6,596	)
Accounts payable			(14,334	)			(16,231	)
Accrued liabilities			(610	)			(3,652	)
Lease liabilities			(1,804	)			(1,453	)
Income taxes			(1,824	)			1,762
Other			(922	)			(929	)
Net cash provided by operating activities			117,610				44,541
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment			(28,248	)			(32,307	)
Acquisitions			(78,855	)			—
Other			723				352
Net cash used in investing activities			(106,380	)			(31,955	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends declared and paid			(9,886	)			(8,843	)
New shares issued			2,243				2,014
Payroll taxes paid in exchange for shares withheld			(2,140	)			(1,550	)
Shares repurchased			(11,272	)			(6,557	)
Payments on revolving loan			(67,000	)			(40,000	)
Proceeds from revolving loan borrowings			75,000				45,000
Net cash used in financing activities			(13,055	)			(9,936	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(1,825	)			2,650
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			7,566				3,496
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	5,741			$	6,146
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes		$	22,125			$	14,847
Cash paid for interest		$	3,252			$	3,345
Noncash investing activities – capital expenditures in accounts payable		$	2,887			$	3,844

HAWKINS, INC.
REPORTABLE SEGMENTS (UNAUDITED)
(In thousands)
		Industrial			Water Treatment			Health and Nutrition			Total
Three months ended December 31, 2023:
Sales		$	92,990		$	82,019		$	33,487		$	208,496
Gross profit			16,495			20,241			5,512			42,248
Selling, general, and administrative expenses			7,292			12,470			4,012			23,774
Operating income			9,203			7,771			1,500			18,474
Three months ended January 1, 2023:
Sales		$	114,436		$	68,549		$	36,233		$	219,218
Gross profit			15,994			13,268			7,009			36,271
Selling, general, and administrative expenses			7,978			9,003			4,023			21,004
Operating income			8,016			4,265			2,986			15,267
Nine months ended December 31, 2023:
Sales		$	312,398		$	276,595		$	107,149		$	696,142
Gross profit			53,645			75,957			18,523			148,125
Selling, general and administrative expenses			20,673			31,741			11,759			64,173
Operating income			32,972			44,216			6,764			83,952
Nine months ended January 1, 2023:
Sales		$	353,085		$	233,527		$	120,341		$	706,953
Gross profit			53,716			52,725			22,953			129,394
Selling, general and administrative expenses			21,254			26,786			11,687			59,727
Operating income			32,462			25,939			11,266			69,667

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 April 2, 2023, 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
	[email protected]

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