Hawkins, a producer and distributor of specialty chemicals that was founded in 1938, acquired Stauber Performance Ingredients in late 2015 in a deal valued at $157 million. The deal created a major player in the contract manufacturing and ingredient supply space with an expected annual revenue approaching $500 million. Hawkins has a long history of chemical manufacturing expertise which is expected to provide a synergistic benefit to Stauber’s existing operations, and has the capital to invest further into the combined company, said Hawkins’ CEO Patrick Hawkins.
Stauber’s contribution
In a statement accompanying its recent year-end earnings release, Hawkins elaborated further:
"Fiscal 2016 was a transformational year for our company as we completed the largest acquisition in our history in late December. The Stauber Performance Ingredients acquisition provides us with a new reporting segment and has accelerated our growth through sales into the nutraceutical market and, importantly, added to our bottom line. Excluding the costs of the acquisition, this new Health and Nutrition segment generated operating income of $2.5 million in our fourth quarter. As we continue to work more closely with the Stauber team, it continues to be apparent how well our organizations are aligned in terms of focus on excellent customer service and high quality products. We plan to add resources to the Stauber team so that we can continue these offerings and to support growth,” he said.
Earnings details
For the fiscal year ended April 3, 2016, Hawkins reported sales of $414 million representing an increase of $50 million, or 13.7%, from $364 million for the prior fiscal year. Adjusted net income was $20.7 million, or $1.96 per diluted share, for fiscal 2016, compared to net income of $19.2 million, or $1.81 per diluted share, for fiscal 2015.
The contribution of Stauber shows up in the fourth quarter results, which showed sales of $129.5 million as compared to $93.3 million for the same period a year ago. Adjusted net income for the fourth quarter of fiscal 2016 was $5.3 million, or $0.50 per diluted share, compared to net income of $3.9 million, or $0.37 per diluted share, for the fourth quarter of the prior year. Hawkins noted in its release that the fourth quarter of its 2016 fiscal year did include an additional week compared to the 2015 reporting period.
Diversification strategy
The Stauber acquisition also helps Hawkins diversify into new markets that show less volatility. Hawkins in the past has been particularly strong in chemicals used in industrial water treatment, with the oil and gas industry being a big user. Recent volatility in that market has hurt Hawkins’ results. Lower crude oil and gas prices means less drilling activity. According to oil and gas industry information firm Baker Hughes, there were 445 fewer drilling rigs operating in the US in early June compared to a similar period in 2015.