Hawkins(HWKN) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company's Q1 FY2026 financial statements reflect significant growth in assets and liabilities due to acquisitions, with sales up 15% to $293.3 million and net income at $29.2 million Condensed Consolidated Balance Sheets Total assets increased to $988.3 million driven by acquisitions, while liabilities rose to $503.7 million due to increased long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | March 30, 2025 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $988,274 | $769,867 | +28.4% | | Goodwill | $218,899 | $135,409 | +61.7% | | Intangible assets, net | $239,975 | $150,121 | +59.9% | | Total Liabilities | $503,702 | $309,575 | +62.7% | | Long-term debt, less current portion | $288,281 | $138,906 | +107.5% | | Total Shareholders' Equity | $484,572 | $460,292 | +5.3% | Condensed Consolidated Statements of Income Sales increased 14.6% to $293.3 million, but operating income growth was limited to 3.9% due to higher SG&A expenses Quarterly Income Statement Highlights (in thousands, except per-share data) | Metric | Q1 FY2026 (ended June 29, 2025) | Q1 FY2025 (ended June 30, 2024) | YoY Change | | :--- | :--- | :--- | :--- | | Sales | $293,272 | $255,879 | +14.6% | | Gross Profit | $72,362 | $64,655 | +11.9% | | Operating Income | $41,333 | $39,791 | +3.9% | | Net Income | $29,175 | $28,879 | +1.0% | | Diluted EPS | $1.40 | $1.38 | +1.4% | | Cash Dividends per Share | $0.18 | $0.16 | +12.5% | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $31.5 million, while investing activities used $164.5 million primarily for acquisitions, funded by $142.5 million in financing Quarterly Cash Flow Summary (in thousands) | Activity | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $31,490 | $17,586 | | Net cash used in investing activities | ($164,545) | ($35,804) | | - Acquisitions | ($151,328) | ($25,400) | | Net cash provided by financing activities | $142,454 | $19,952 | | - Proceeds from revolving loan borrowings | $160,000 | $45,000 | | Net Increase in Cash | $9,399 | $1,734 | Notes to Condensed Consolidated Financial Statements Notes detail segment realignment, the $149.9 million WaterSurplus acquisition, and the $400 million credit facility expansion to fund growth - Effective Q1 FY2026, the company realigned its reporting segments to Water Treatment, Food & Health Sciences, and Industrial Solutions to better reflect its business operations[16][53] - On April 25, 2025, the company acquired WaterSurplus for an initial purchase price of approximately $149.9 million, plus a potential earnout of up to $53.7 million, adding $82.7 million to goodwill and $94.0 million to identifiable intangible assets[21] - To fund the WaterSurplus acquisition, the company amended its credit agreement, increasing the senior secured revolving credit facility to $400.0 million, maturing on April 25, 2030[43][44] Goodwill by Segment (in thousands) | Segment | Balance at March 30, 2025 | Addition due to acquisitions | Balance at June 29, 2025 | | :--- | :--- | :--- | :--- | | Water Treatment | $83,968 | $83,490 | $167,458 | | Food & Health Sciences | $46,149 | — | $46,149 | | Industrial Solutions | $5,292 | — | $5,292 | | Total | $135,409 | $83,490 | $218,899 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 15% sales growth driven by acquisitions, limited operating income growth due to higher SG&A, and strong liquidity from an expanded $400 million credit facility Business Acquisitions The company completed six acquisitions in fiscal 2025 and Q1 FY2026, primarily in Water Treatment, with WaterSurplus being the largest at ~$149.9 million - Completed six acquisitions in fiscal 2025 and Q1 fiscal 2026, with an aggregate annual revenue of approximately $102 million, all within the Water Treatment segment[62][63] - Key acquisitions include WaterSurplus for ~$149.9 million, Amerochem for $44.0 million, and Intercoastal for $22.0 million[67] Results of Operations Total sales increased 15% to $293.3 million, led by Water Treatment's 28% growth, while gross margin declined and SG&A expenses rose 24% Segment Sales Performance (YoY) | Segment | Q1 FY2026 Sales | YoY Change | | :--- | :--- | :--- | | Water Treatment | $149.6M | +28% | | Food & Health Sciences | $89.2M | +5% | | Industrial Solutions | $54.5M | +2% | | Total | $293.3M | +15% | - Gross profit increased by $7.7 million (12%), but gross margin as a percentage of sales slightly declined to 24.7% from 25.3% in the prior year[75] - SG&A expenses rose by $6.1 million (24%), largely due to $4.9 million in added costs from acquired businesses, including $2.0 million in amortization and $0.9 million in acquisition costs[79] Liquidity and Capital Resources Cash increased by $9.4 million to $14.5 million, with $31.5 million from operations and $150.0 million net borrowings from the expanded $400 million credit facility - Cash provided by operations was $31.5 million, a significant increase from $17.6 million in the prior-year period[85] - Net borrowings were $150.0 million, primarily to fund the acquisition of WaterSurplus[87] - The company did not repurchase any common stock during the quarter ended June 29, 2025[87][89] - The revolving credit facility was increased to $400.0 million and matures on April 25, 2030, with the company in compliance with all debt covenants as of June 29, 2025[90][95] Quantitative and Qualitative Disclosures about Market Risk The company faces commodity price and interest rate risks, mitigating the latter with a $60 million interest rate swap, with minimal foreign currency exposure - The company is subject to risk from commodity chemical price volatility but attempts to pass cost changes to customers[101] - To manage interest rate risk on its variable-rate debt, the company uses a $60.0 million interest rate swap agreement that terminates on May 1, 2027[102] - A hypothetical 25-basis point change in interest rates on unhedged variable-rate debt would change annual interest expense by about $0.1 million[102] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 29, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period, June 29, 2025[104] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[105] PART II. OTHER INFORMATION Legal Proceedings The company reports no material pending legal proceedings beyond routine litigation incidental to its business - There are no material pending legal proceedings to which the company is a party[107] Risk Factors No material changes to the company's risk factors have been reported from the fiscal 2025 Form 10-K disclosure - No material changes to risk factors from the fiscal 2025 Form 10-K have been reported[108] Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the plan this quarter, with 731,544 shares remaining available for future repurchases - No shares were repurchased under the company's publicly announced plan during the quarter[109] - A total of 731,544 shares remain available for repurchase under the existing program as of June 29, 2025[109] Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and the amended credit agreement incorporated by reference - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and the iXBRL formatted financial statements (101)[113] - The Joinder, Consent and Second Amendment to the Credit Agreement dated April 25, 2025, is incorporated by reference[113][114]