Hawkins, Inc. (HWKN) - Q1 Fiscal 2027 Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 28, 2026 (Q1 Fiscal 2027). Hawkins, Inc. operates in three segments: Water Treatment, Food & Health Sciences, and Industrial Solutions. The company provides chemicals, filtration media, equipment, and services for water treatment, as well as ingredient distribution for nutrition, food, pharmaceutical, and agricultural markets.
Key Financial Metrics
| Metric | Q1 2027 (Ended June 28, 2026) | Q1 2026 (Ended June 29, 2025) |
|---|---|---|
| Sales | $315.7 million | $293.3 million |
| Gross Profit | $74.0 million (23.4% margin) | $72.4 million (24.7% margin) |
| Operating Income | $38.7 million (12.2% margin) | $41.3 million (14.1% margin) |
| Net Income | $28.3 million | $29.2 million |
| Diluted EPS | $1.35 | $1.40 |
| Operating Cash Flow | $35.2 million | $31.5 million |
| Cash & Equivalents | $8.0 million | $14.5 million |
| Long-Term Debt | $244.0 million | $244.0 million |
Material Changes vs. Prior Period
- Revenue Growth: Sales increased 8% year-over-year, driven by growth across all segments. Water Treatment sales rose 6% ($158.3M), Food & Health Sciences rose 9% ($97.3M), and Industrial Solutions rose 10% ($60.1M). Acquired businesses contributed approximately $6.9 million to Water Treatment sales.
- Margin Compression: Gross margin declined to 23.4% from 24.7%. This was primarily due to a $1.9 million negative impact from the LIFO reserve (compared to $0.6 million in the prior year) and higher freight costs not fully recovered through pricing.
- Operating Expenses: SG&A expenses increased 14% to $35.3 million. This included $2.1 million in costs from acquired businesses and the absence of a $1.9 million favorable fair value adjustment on earnout liabilities recorded in the prior year.
- Acquisitions: The company completed an immaterial acquisition of Aqua-Chem, Inc. for $3.6 million in Q1 2027. This contrasts with the significant $151.3 million acquisition spending in Q1 2026 (WaterSurplus).
- Shareholder Returns: The company repurchased 45,196 shares for $7.0 million and declared a dividend of $0.19 per share (up from $0.18).
Guidance, Outlook, and Risks
- Outlook: Management expects the full-year effective tax rate to be approximately 25% to 27%. No specific revenue or earnings guidance was provided in this filing.
- Liquidity: The company maintains a $400 million senior secured revolving credit facility with $244 million outstanding. Management believes cash balances and available borrowings are sufficient for the next 12 months.
- Risks:
- Commodity Prices: The company is exposed to cyclical chemical prices and does not hedge commodity purchases, relying on passing costs to customers.
- Interest Rates: Borrowings are variable-rate (Term SOFR + margin). A 25-basis point change in rates could impact annual interest expense by approximately $0.5 million on unhedged debt.
- Environmental: A $7.7 million liability remains for PCB remediation at the Rosemount, MN facility, with potential for additional unquantifiable costs.
Investor Verification Checklist
- Verify the sustainability of gross margin recovery given the $1.9 million LIFO charge and rising freight costs.
- Monitor the integration and performance of the WaterSurplus acquisition (closed Q1 2026) and Aqua-Chem (closed Q1 2027) in the Water Treatment segment.
- Review the status of the $7.7 million environmental remediation liability for any updates on estimated costs.
- Track the utilization of the $400 million credit facility and the impact of variable interest rates on net income.
- Confirm the progress of the share repurchase program, with 686,348 shares remaining available under the current authorization.