UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________to ______________________
Commission file number 0-7647
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HAWKINS CHEMICAL, INC.
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(Exact name of registrant as specified in its charter)
MINNESOTA 41-0771293
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
3100 East Hennepin Avenue, Minneapolis, Minnesota 55413
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(Address of principal executive offices) Zip Code
(612)331-6910
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X____ No_______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 13, 1997
- ------------------------------------- -----------------------------------
Common Stock, par value $.05 per share 11,051,690
HAWKINS CHEMICAL, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets - December 31, 1996 and
September 29, 1996 ............................................ 3
Consolidated Condensed Statements of Income - Three Months Ended
December 31, 1996 and 1995 .................................... 4
Consolidated Condensed Statements of Cash Flows - Three Months
Ended December 31, 1996 and 1995 .............................. 4
Notes to Consolidated Condensed Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................. 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................ 9
Exhibit Index .................................................. 10
Financial Data Schedule ........................................ 11
2
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
HAWKINS CHEMICAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, 1996 September 29, 1996
---------------- ---------------------
(Unaudited) (Derived from Audited
financial statements)
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 7,269,494 $ 8,932,125
Investments (fair value approximates cost) ................ 10,624,077 10,504,603
Accounts receivable-net.................................... 9,762,299 9,740,285
Notes receivable........................................... 150,040 170,988
Inventories................................................ 8,356,680 8,584,034
Other current assets....................................... 1,156,080 924,457
---------------- ---------------------
Total current assets............................ 37,318,670 38,856,492
Property, plant and equipment-net.............................. 13,350,852 13,187,678
Notes receivable-non current................................... 1,797,706 1,797,707
Other assets................................................... 2,649,101 2,645,479
---------------- ---------------------
Total $55,116,329 $ 56,487,356
---------------- ---------------------
---------------- ---------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 4,883,806 $ 6,709,434
Current portion of long-term debt.......................... 59,928 56,008
Other current liabilities.................................. 4,761,136 5,707,529
---------------- ---------------------
Total current liabilities....................... 9,704,870 12,472,971
---------------- ---------------------
Long term debt................................................. 512,525 572,453
---------------- ---------------------
Deferred income taxes.......................................... 428,300 426,800
---------------- ---------------------
Shareholders' equity:
Common stock, par value $.05 per share; issued
and outstanding, 11,051,690 shares and
11,051,690 shares respectively....................... 552,585 552,585
Additional paid-in capital........................... 38,679,630 38,679,630
Retained earnings.................................... 5,238,419 3,782,917
---------------- ---------------------
Total shareholders' equity................. 44,470,634 43,015,132
---------------- ---------------------
Total $55,116,329 $56,487,356
---------------- ---------------------
---------------- ---------------------
See accompanying notes
3
HAWKINS CHEMICAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
December 31
1996 1995
----------- -----------
Net sales $19,936,058 $17,422,984
----------- -----------
Costs and expenses:
Cost of sales 15,771,082 13,659,310
Selling, general and administrative 2,112,200 1,961,912
----------- -----------
Total costs and expenses 17,883,282 15,621,222
----------- -----------
Income from operations 2,052,776 1,801,762
----------- -----------
Other income (deductions):
Interest income 262,181 258,500
Interest expense (11,843) (12,823)
Miscellaneous 82,888 29,073
----------- -----------
Total other income (deductions) 333,226 274,750
----------- -----------
Income before income taxes 2,386,002 2,076,512
Provision for income taxes 930,500 834,800
----------- -----------
Net income $ 1,455,502 $ 1,241,712
----------- -----------
----------- -----------
Weighted average number of shares
outstanding 11,051,690 11,051,690
----------- -----------
----------- -----------
Earnings per common share $0.13 $0.11
----------- -----------
----------- -----------
See accompanying notes
4
HAWKINS CHEMICAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
DECEMBER 31
-------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 1,455,502 $ 1,241,712
Depreciation and amortization....................... 384,600 340,800
Deferred income taxes............................... 16,500
Other............................................... (19,821) (19,659)
Changes in certain current assets and liabilities... (1,929,169) (1,096,417)
----------- -----------
Net cash used in operating activities (92,388) 466,436
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.......... (531,574) (1,355,266)
Purchases of investments............................ (119,474) (97,557)
----------- -----------
Net cash used in investing activities (651,048) (1,452,823)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid................................. (884,135) (736,804)
Debt repayment...................................... (56,008) (52,344)
Payments received on notes receivable............... 20,948 20,000
----------- -----------
Net cash used in financing activities (919,195) (769,148)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (1,662,631) (1,755,535)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,932,125 9,906,107
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,269,494 $ 8,150,572
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest.............................. $ 46,895 $ 50,559
----------- -----------
----------- -----------
Cash paid for income taxes.......................... $ 195,500 $ 187,333
----------- -----------
----------- -----------
See accompanying notes
5
HAWKINS CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions for Form 10-Q and,
accordingly, do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
These statements should be read in conjunction with the financial statements
and footnotes included in the Company's Annual Report on Form 10-K for the
year ended September 29, 1996, previously filed with the Commission. In the
opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments necessary to present fairly the
Company's financial position and the results of its operations and cash flows
for the periods presented. All adjustments made to the interim financial
statements were of a normal recurring nature.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements in the 1996 Hawkins Chemical, Inc. Annual Report
which is incorporated by reference to Form 10-K filed with the Commission on
December 30, 1996.
2. The results of operations for the period ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the full year.
3. Inventories, principally valued by the LIFO method, are less than current
cost by approximately $1,401,127 at December 31, 1996. Inventory consists
principally of finished goods. Inventory quantities fluctuate during the year.
No material amounts of interim liquidation of inventory quantities have occurred
that are not expected to be replaced by year-end.
4. Earnings per common share are based upon the weighted average number of
shares outstanding after giving retroactive effect to a 5% stock dividend
declared February 7, 1996 to shareholders of record at the close of business on
March 29, 1996.
6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales increased $2,513,074, or 14.4%, in the first quarter of this fiscal
year as compared to the same quarter a year ago. This increase is primarily due
to volume increases in all of the Company's divisions and subsidiaries.
The gross margin, as a percentage of net sales, for the first quarter of fiscal
1997 was 20.9% compared to 21.6% for the same quarter one year ago. This
decrease is due to a slight decrease in the profit margin of a single,
large-volume product and to increased costs of operations. The Company has
generally been able to, and expects to continue to, adjust its selling prices as
the cost of materials and other expenses change, thereby maintaining relatively
stable gross margins.
Selling, general and administrative expenses, as a percentage of net sales, for
the first quarter of fiscal 1997 were 10.6% compared to 11.3% for the same
quarter one year ago. Most of the expenses in this category are fixed, with the
remaining expenses fluctuating only slightly with net sales.
Income from operations increased $251,014, or 13.9%, in the first quarter of
fiscal 1997, compared to fiscal 1996. This increase is primarily attributable
to the increase in net sales, partially offset by a decrease in the gross
margin.
Interest income increased $3,681, or 1.4%, compared to the same period one year
ago. This increase is due to an increase in the amount of cash available for
investments. Interest expense decreased slightly due to the decline in
long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
For the first quarter ended December 31, 1996, cash flows used in operations
were $92,388 compared to cash provided by operations of $466,436 for the same
period one year ago. This is due mainly to decreases in certain current assets
and liability accounts discussed below. During the three months ended December
31, 1996, the Company invested $531,544 in property and equipment additions and
added $119,474 to investments. The reason for the decrease in capital
expenditures this year as compared to the same quarter one year ago was due
to completing the construction of additional warehouse space at the
Minneapolis location and additional storage capacity at the St. Paul River
Terminal.
Accounts payable and inventories decreased $1,825,628 and $227,354, respectively
during the first three months of fiscal 1997. A decrease in these accounts is
typical for the first quarter of our fiscal year. Other current assets
increased due to payments of prepaid expenses that will be charged to the
remaining quarters of this fiscal year. The Company did not issue any
securities during the quarter ended December 31, 1996.
The strong cash position puts the Company in a position to fund both short and
long-term working capital and capital investment needs with internally generated
funds. Management does not, therefore, anticipate the need to engage in
significant financing activities in either the short or long-term. If the need
to obtain additional capital does arise, however, management is confident that
the Company's total debt to capital ratio puts the Company in a position to
issue both debt and equity securities on favorable terms.
7
Although management continually reviews opportunities to enhance the value of
the Company through strategic acquisitions, other capital investments and
strategic divestitures, no material commitments for such investments or
divestitures currently exist. Until appropriate investment opportunities are
identified, the Company will continue to invest excess cash in conservative
investments. Cash equivalents consist of short-term certificates of deposit and
investments consist of low-risk investment contracts with highly rated, stable
insurance companies, and marketable securities consisting of investment grade
municipal securities, all of which are carried at fair value which approximates
cost. All cash equivalents and investments are highly liquid and are available
upon demand with a minor penalty.
Other than as discussed above, management is not aware of any matters that have
materially affected the first three months of fiscal 1997, or are expected to
materially affect future periods, nor is management aware of other matters not
affecting this period that are expected to materially affect future periods.
FORWARD-LOOKING STATEMENTS
THE INFORMATION CONTAINED IN THIS FORM 10-Q INCLUDES FORWARD-LOOKING STATEMENTS
AS DEFINED IN SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
THESE FORWARD-LOOKING STATEMENTS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES,
INCLUDING DEMAND FROM MAJOR CUSTOMERS, COMPETITION, CHANGES IN PRODUCT OR
CUSTOMER MIX OR REVENUES, CHANGES IN PRODUCT COSTS AND OPERATING EXPENSES AND
OTHER FACTORS DISCLOSED THROUGHOUT THIS REPORT. THE ACTUAL RESULTS THAT THE
COMPANY ACHIEVES MAY DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS DUE
TO SUCH RISKS AND UNCERTAINTIES. THE COMPANY UNDERTAKES NO OBLIGATION TO REVISE
ANY FORWARD-LOOKING STATEMENTS IN ORDER TO REFLECT EVENTS OR CIRCUMSTANCES THAT
MAY ARISE AFTER THE DATE OF THIS REPORT. READERS ARE URGED TO CAREFULLY REVIEW
AND CONSIDER THE VARIOUS DISCLOSURES MADE BY THE COMPANY IN THIS REPORT AND IN
THE COMPANY'S OTHER REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
THAT ATTEMPT TO ADVISE INTERESTED PARTIES OF THE RISKS AND UNCERTAINTIES THAT
MAY AFFECT THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATION.
8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following exhibits are included with this Quarterly Report on Form 10-Q
(or incorporated by reference) as required by Item 601 of Regulation S-K.
Exhibit No. Description of Exhibit
----------- ---------------------------------------------------------
3.1 Amended and Second Restated Articles of Incorporation as
amended through February 28, 1989 (Incorporated by reference
to Exhibit 3D to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1989).
3.2 Second Amended and Superseding By-Laws as amended through
February 15, 1995 (incorporated by reference to Exhibit 3.2
to the Registrant's Annual Report on Form 10-K for the year
ended October 1, 1995).
4 See Exhibits 3.1 and 3.2 above.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the fiscal quarter ended
December 31, 1996.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAWKINS CHEMICAL, INC.
BY /s/ Howard M. Hawkins
--------------------------------
Howard M. Hawkins, Treasurer,
Chief Financial and Accounting Officer
Dated: February 13, 1997
9
EXHIBIT INDEX
The following exhibits are included with this Quarterly Report on Form 10-Q (or
incorporated by reference) as required by Item 601 of Regulation S-K.
Exhibit No. Description of Exhibit Page No.
----------- -------------------------------------- ---------
3.1 Amended and Second Restated Articles of 11
Incorporation as amended through February 28,
1989 (Incorporated by reference to Exhibit 3D
to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1989).
3.2 Second Amended and Superseding By-Laws as
amended through February 15, 1995 (incorporated
by reference to Exhibit 3.2 to the Registrant's
Annual Report on Form 10-K for the year ended
October 1, 1995).
4 See Exhibits 3.1 and 3.2 above.
27 Financial Data Schedule
10
5
3-MOS
SEP-28-1997
SEP-30-1996
DEC-31-1996
7,269,494
10,624,077
9,762,299
0
8,356,680
37,318,670
13,350,852
0
55,116,329
9,704,870
0
0
0
552,585
43,918,049
55,116,329
19,936,058
19,936,058
15,771,082
17,883,282
0
0
11,843
2,386,002
930,500
1,455,502
0
0
0
1,455,502
.13
0
