• Hillman Solutions Corp. Reports Fourth Quarter and Full Year 2021 Results

    Source: Nasdaq GlobeNewswire / 02 Mar 2022 07:30:01   America/New_York

    CINCINNATI, March 02, 2022 (GLOBE NEWSWIRE) -- Hillman Solutions Corp. (Nasdaq: HLMN) (the “Company” or “Hillman”) reported today selected financial results for the year ended December 25, 2021.

    Fourth Quarter 2021 Highlights

    • Net sales for the fourth quarter of 2021 increased 5.3% to $344.5 million as compared to prior year quarter net sales of $327.1 million
    • GAAP Net income for fourth quarter of 2021 was income of $6.5 million compared to a loss of $14.0 million in the prior year
    • Adjusted EBITDA1 decreased 10.4% to $38.6 million compared to $43.1 million in the prior year quarter

    Fiscal 2021 Highlights

    • Net sales for the year ended December 25, 2021 increased 4.2% to $1,426.0 million as compared to $1,368.3 million in 2020
    • GAAP Net loss for the year ended December 25, 2021 was a loss of $38.3 million compared to a loss of $24.5 million in 2020
    • Adjusted EBITDA1 for the year ended December 25, 2021 decreased 6.2% to $207.4 million compared to $221.2 million in 2020

    Doug Cahill, Chairman, President and Chief Executive Officer, stated "We closed out 2021 on sturdy footing and in line with our expectation. Our actions and investments over the past year have built a stronger Hillman and equipped our business for future growth. Now more than ever, our customers rely on Hillman to help them solve labor and logistics challenges for products that are essential to their business. We have continued to widen our moat with our customers based on our unique model of in-store service, direct to store delivery and our branded differentiated products."

    1) Adjusted EBITDA is a non-GAAP financial measure. Refer to the "Reconciliation of Adjusted EBITDA” section of this press release for additional information as well as reconciliations between the company’s GAAP and non-GAAP financial results.

    Conference Call and Webcast
    The Company will host a conference call to discuss the financial results for the thirteen weeks and fiscal year ended December 25, 2021 on Wednesday, March 2, 2022, at 8:30 am Eastern time.   Participants may join the call by dialing 1(866)-673-2033, passcode: 5693690, a few minutes before the call start time. A live audio webcast of the conference call will also be available in a listen-only mode on the Investor Info page of the Company’s website, which is located at ir.hillmangroup.com. Participants who want to access the webcast should visit the company's website about five minutes before the call. The archived webcast will be available for replay on the company's website after the call.

    About Hillman
    Founded in 1964 and headquartered in Cincinnati, Ohio, Hillman is a leading North American provider of complete hardware solutions, delivered with industry best customer service to over 40,000 locations. Hillman designs innovative product and merchandising solutions for complex categories that deliver an outstanding customer experience to home improvement centers, mass merchants, national and regional hardware stores, pet supply stores, and OEM & Industrial customers. Leveraging a world-class distribution and sales network, Hillman delivers a “small business” experience with “big business” efficiency. For more information on Hillman, visit www.hillmangroup.com.

    Forward-Looking Statements
    This press release may contain “forward-looking statements” within the meaning of the federal securities law. All statements other than statements of historical fact included in this presentation are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ from their expectations, estimates and projections and consequently, you should not rely on these forward looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the Company’s expectations with respect to future performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside the Company's control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) unfavorable economic conditions that may affect operations, financial condition and cash flows including inflation, recessions, instability in the financial markets or credit markets; (2) highly competitive markets that could adversely impact financial results (3) ability to continue to innovate with new products and services; (4) seasonality; (5) large customer concentration; (6) ability to recruit and retain qualified employees; (7) the outcome of any legal proceedings that may be instituted against the Company (8) adverse changes in currency exchange rates; (9) the impact of COVID-19 on the Company’s business; or (10) regulatory changes and potential legislation that could adversely impact financial results. The foregoing list of factors is not exclusive, and readers should also refer to those risks that will be included under the header “Risk Factors” included in the S-1 filed on August 25, 2021 with the Securities and Exchange Commission (“SEC”). Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward looking statements. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this presentation to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. All estimates of financial metrics in this presentation for fiscal 2021 and beyond are current as of March 2, 2022.

    Contact
    VP Investor Relations
    Jennifer Hills
    jennifer.hills@hillmangroup.com 
    (513) 975-5248


    HILLMAN SOLUTIONS CORP.
    Consolidated Statement of Net Income, GAAP Basis
    (dollars in thousands)
    Unaudited

     Thirteen
    Weeks Ended

    December 25,
    2021
     Thirteen
    Weeks Ended

    December 26,
    2020
     Year Ended
    December 25,
    2021
     Year Ended
    December 26,
    2020
    Net sales$344,491  $327,069  $1,425,967  $1,368,295 
    Cost of sales (exclusive of depreciation and amortization shown separately below) 205,293   191,521   859,557   781,815 
    Selling, general and administrative expenses 112,587   106,416   437,875   398,472 
    Depreciation 13,335   16,750   59,400   67,423 
    Amortization 15,502   14,896   61,329   59,492 
    Management fees to related party    126   270   577 
    Other income (546)  (3,130)  (2,778)  (5,250)
    Income (loss) from operations (1,680)  490   10,314   65,766 
    Gain on change in fair value of warrant liability (18,724)     (14,734)   
    Interest expense, net 11,258   19,028   61,237   86,774 
    Interest expense on junior subordinated debentures    3,152   7,775   12,707 
    Investment income on trust common securities    (95)  (233)  (378)
    Loss (income) on mark-to-market adjustment of interest rate swap    (568)  (1,685)  601 
    Refinancing costs       8,070    
    Income (loss) before income taxes 5,786   (21,027)  (50,116)  (33,938)
    Income tax benefit (761)  (7,065)  (11,784)  (9,439)
    Net income (loss)$6,547  $(13,962) $(38,332) $(24,499)
            
    Basic income (loss) per share$0.03  $(0.15) $(0.28) $(0.27)
    Weighted average basic shares outstanding 187,960   90,544   134,699   89,891 
            
    Diluted income (loss) per share$0.03  $(0.15) $(0.28) $(0.27)
    Weighted average diluted shares outstanding 189,822   90,544   134,699   89,891 
                    
                    

    HILLMAN SOLUTIONS CORP.
    Consolidated Balance Sheets
    (dollars in thousands)
    Unaudited

     December 25, 2021 December 26, 2020
    ASSETS   
    Current assets:   
    Cash and cash equivalents$14,605  $21,520 
    Accounts receivable, net of allowances of $2,891 ($2,395 - 2020) 107,212   121,228 
    Inventories, net 533,530   391,679 
    Other current assets 12,962   19,280 
              Total current assets 668,309   553,707 
    Property and equipment, net of accumulated depreciation of $284,069 ($236,031 - 2020) 174,312   182,674 
    Goodwill 825,371   816,200 
    Other intangibles, net of accumulated amortization of $352,695 ($291,434 - 2020) 794,700   825,966 
    Operating lease right of use assets 82,269   76,820 
    Deferred tax asset 1,323   2,075 
    Other assets 16,638   11,176 
              Total assets$2,562,922  $2,468,618 
    LIABILITIES AND STOCKHOLDER'S EQUITY   
    Current liabilities:   
    Accounts payable$186,126  $201,461 
    Current portion of debt and capital lease obligations 11,404   11,481 
    Current portion of operating lease liabilities 13,088   12,168 
    Accrued expenses:   
         Salaries and wages 8,606   29,800 
         Pricing allowances 10,672   6,422 
         Income and other taxes 4,829   5,986 
         Interest 1,519   12,988 
         Other accrued expenses 41,052   31,605 
              Total current liabilities 277,296   311,911 
    Long-term debt 906,531   1,535,508 
    Deferred tax liabilities 137,764   156,118 
    Operating lease liabilities 74,476   68,934 
    Other non-current liabilities 16,760   31,560 
              Total liabilities 1,412,827   2,104,031 
        
    Commitments and Contingencies     
    Stockholder's Equity:   
    Common stock, $0.0001 par, 500,000,000 shares authorized, 194,083,625 issued and 193,995,320 outstanding at December 25, 2021 and 90,934,930 issued and outstanding at December 26, 2020 20   9 
    Additional paid-in capital 1,387,410   565,815 
    Accumulated deficit (210,181)  (171,849)
    Accumulated other comprehensive loss (27,154)  (29,388)
              Total stockholder's equity 1,150,095   364,587 
              Total liabilities and stockholder's equity$2,562,922  $2,468,618 
     
     

    HILLMAN SOLUTIONS CORP.
    Consolidated Statement of Cash Flows
    (dollars in thousands)
    Unaudited

     Year Ended
    December 25,
    2021
     Year Ended
    December 26,
    2020
    Cash flows from operating activities:   
    Net loss$(38,332) $(24,499)
    Adjustments to reconcile net loss to net cash (used for) provided by operating activities:   
    Depreciation and amortization 120,730   126,915 
    Loss on dispositions of property and equipment 221   161 
    Impairment of long lived assets    210 
    Deferred income taxes (21,846)  (9,462)
    Deferred financing and original issue discount amortization 4,336   3,722 
    Loss on debt restructuring, net of third party fees paid (8,372)   
    Stock-based compensation expense 15,255   5,125 
    Change in fair value of warrant liabilities (14,734)   
    Change in fair value of contingent consideration (1,806)  (3,515)
    Other non-cash interest and change in value of interest rate swap (1,685)  601 
    Changes in operating items:   
         Accounts receivable 15,148   (32,417)
         Inventories (137,849)  (67,147)
         Other assets 3,064   (10,743)
         Accounts payable (20,253)  76,031 
         Other accrued liabilities (24,131)  27,098 
    Net cash (used for) provided by operating activities (110,254)  92,080 
    Cash flows from investing activities:   
    Acquisitions of businesses, net of cash acquired (38,902)  (800)
    Capital expenditures (51,552)  (45,274)
    Net cash used for investing activities (90,454)  (46,074)
    Cash flows from financing activities:   
    Borrowings on senior term loans, net of discount 883,872    
    Repayments of senior term loans (1,072,042)  (10,608)
    Borrowings of revolving credit loans 322,000   99,000 
    Repayments of revolving credit loans (301,000)  (140,000)
    Repayments of senior notes (330,000)   
    Financing fees (20,988)   
    Proceeds from recapitalization of Landcadia, net of transaction costs 455,161    
    Proceeds from sale of common stock in PIPE, net of issuance costs 363,301    
    Repayment of Junior Subordinated Debentures (108,707)   
    Principal payments under capitalized lease obligations (938)  (836)
    Proceeds from exercise of stock options 2,670   7,340 
    Net cash provided by (used for) financing activities 193,329   (45,104)
    Effect of exchange rate changes on cash 464   645 
    Net (decrease) increase in cash and cash equivalents (6,915)  1,547 
    Cash and cash equivalents at beginning of period 21,520   19,973 
    Cash and cash equivalents at end of period$14,605  $21,520 
     

    HILLMAN SOLUTIONS CORP.
    Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

    The Company uses non-GAAP financial measures to analyze underlying business performance and trends. The Company believes that providing these non-GAAP financial measures enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance. These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. The Company’s definitions of its non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies.

    Non-GAAP financial measures such as consolidated adjusted EBITDA and adjusted earnings per share (EPS) exclude from the relevant GAAP metrics items that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance.

    Reconciliation of Adjusted EBITDA (Unaudited)
    (dollars in thousands)

    Adjusted EBITDA is a non-GAAP financial measure and is the primary basis used to measure the operational strength and performance of our businesses as well as to assist in the evaluation of underlying trends in our businesses. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. It is also unaffected by our capital and tax structures, as our management excludes these results when evaluating our operating performance. Our management and Board of Directors use this financial measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. Additionally, we believe that Adjusted EBITDA is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.

     Thirteen Weeks
    Ended

    December 25,
    2021
     Thirteen Weeks
    Ended

    December 26,
    2020
     Year Ended
    December 25,
    2021
     Year Ended
    December 26,
    2020
    Net income (loss)$6,547  $(13,962) $(38,332) $(24,499)
    Income tax (benefit) (761)  (7,065)  (11,784)  (9,439)
    Interest expense, net 11,258   19,028   61,237   86,774 
    Interest expense on junior subordinated debentures    3,152   7,775   12,707 
    Investment income on trust common securities    (95)  (233)  (378)
    Depreciation 13,335   16,750   59,400   67,423 
    Amortization 15,502   14,896   61,329   59,492 
    Mark-to-market adjustment on interest rate swaps    (568)  (1,685)  601 
    EBITDA$45,881  $32,136  $137,707  $192,681 
            
    Stock compensation expense 6,438   1,307   15,255   5,125 
    Management fees    126   270   577 
    Facility exits (1)    428      3,894 
    Restructuring (2) 339   1,475   910   4,902 
    Litigation expense (3) 1,833   2,066   12,602   7,719 
    Acquisition and integration expense (4) 2,182   7,788   11,123   9,832 
    Change in fair value of contingent consideration (696)  (2,215)  (1,806)  (3,515)
    Change in fair value of warrant liability (5) (18,724)     (14,734)   
    Buy-back expense (6)       2,000    
    Refinancing costs (7)       8,070    
    Inventory revaluation charges (8)       32,026    
    Anti-dumping duties (9) 1,359      3,995    
    Adjusted EBITDA$38,612  $43,111  $207,418  $221,215 


    (1) Facility exits include costs associated with the closure of facilities in Parma, Ohio, San Antonio, Texas, and Dallas, Texas.
    (2) Restructuring includes restructuring costs associated with restructuring in our Canada segment announced in 2018, including facility consolidation, stock keeping unit rationalization, severance, sale of property and equipment, and charges relating to exiting certain lines of business. Also included is restructuring in our United Stated business announced in 2019, including severance related to management realignment and the integration of sales and operating functions. Finally, includes consulting and other costs associated with streamlining our manufacturing and distribution operations.
    (3) Litigation expense includes legal fees associated with our litigation with KeyMe, Inc. and Hy-Ko Products Company LLC.
    (4) Acquisition and integration expense includes professional fees, non-recurring bonuses, and other costs related to historical acquisitions, including the merger with Landcadia III.
    (5) The warrant liabilities are marked to market each period end.
    (6) Infrequent buy backs associated with new business wins.
    (7) In connection with the merger, we refinanced our Term Credit Agreement and ABL Revolver. Proceeds from the refinancing were used to redeem in full senior notes due July 15, 2022 (the “6.375% Senior Notes”) and the 11.6% Junior Subordinated Debentures.
    (8) In the third quarter of 2021, we recorded an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings. We evaluated our customers' needs and the market conditions and ultimately decided to exit the following protective product categories related to COVID-19; cleaning wipes, disinfecting sprays, face masks, and certain disposable gloves.
    (9) Anti-dumping duties assessed related to the nail business for prior year purchases.

    Reconciliation of Adjusted Earnings per Share (Unaudited)
    (in thousands, except per share data)

    We define adjusted diluted EPS as reported diluted EPS excluding the effect of one-time, non-recurring activity and volatility associated with our income tax expense. The Company believes that adjusted diluted EPS provides further insight and comparability in operating performance as it eliminates the effects of certain items that are not comparable from one period to the next. The following is a reconciliation of reported diluted EPS from continuing operations to adjusted diluted EPS from continuing operations:

     Thirteen Weeks
    Ended

    December 25,
    2021
     Thirteen Weeks
    Ended

    December 26,
    2020
     Year Ended
    December 25,
    2021
     Year Ended
    December 26,
    2020
    Diluted EPS, as reported$0.03  $(0.15) $(0.28) $(0.27)
    Adjustments:       
    Stock compensation expense 0.03   0.01   0.11   0.06 
    Management fees       0.00   0.01 
    Restructuring (1) 0.00   0.02   0.01   0.05 
    Litigation expense (2) 0.01   0.02   0.09   0.09 
    Acquisition and integration expense (3) 0.01   0.09   0.08   0.11 
    Buy-back expense (4)       0.01    
    Anti-dumping duties (5) 0.01      0.03    
    Facility exits (6)    0.00      0.04 
    Change in fair value of warrant liability (7) (0.10)     (0.11)   
    Mark-to-market adjustment on interest rate swaps    (0.01)  (0.01)  0.01 
    Refinancing charges (8)       0.06    
    Inventory valuation related charges (9)       0.23    
    Change in fair value of contingent consideration 0.00   (0.02)  (0.01)  (0.04)
    Amortization expense 0.08   0.16   0.45   0.66 
    Income tax adjustment (10) (0.02)  (0.03)  (0.15)  (0.10)
    Total Adjustments$0.03  $0.25  $0.79  $0.88 
    Adjusted diluted EPS$0.06  $0.09  $0.51  $0.61 
            
    Diluted Shares, as reported (11) 189,822   90,544   134,699   89,891 
    Non-GAAP dilution adjustments       
    Dilutive effect of stock options and awards    549   1,541   750 
    Dilutive effect of warrants       134    
    Adjusted Diluted Shares 189,822   91,093   136,373   90,641 


    Note: Adjusted EPS may not add due to rounding.
         
    (1) Restructuring includes restructuring costs associated with restructuring in our Canada segment announced in 2018, including facility consolidation, stock keeping unit rationalization, severance, sale of property and equipment, and charges relating to exiting certain lines of business. Also included is restructuring in our United Stated business announced in 2019, including severance related to management realignment and the integration of sales and operating functions. Finally, includes consulting and other costs associated with streamlining our manufacturing and distribution operations.
    (2) Litigation expense includes legal fees associated with our litigation with KeyMe, Inc. and Hy-Ko Products Company LLC
    (3) Acquisition and integration expense includes professional fees, non-recurring bonuses, and other costs related to historical acquisitions, including the merger with Landcadia III.
    (4) Infrequent buy backs associated with new business wins.
    (5) Anti-dumping duties assessed related to the nail business for prior year purchases.
    (6) Facility exits include costs associated with the closure of facilities in Parma, Ohio, San Antonio, Texas, and Dallas, Texas.
    (7) The warrant liabilities are marked to market each period end.
    (8) In connection with the merger, we refinanced our Term Credit Agreement and ABL Revolver. Proceeds from the refinancing were used to redeem in full senior notes due July 15, 2022 (the “6.375% Senior Notes”) and the 11.6% Junior Subordinated Debentures.
    (9)  In the third quarter of 2021, we recorded an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings. We evaluated our customers' needs and the market conditions and ultimately decided to exit the following protective product categories related to COVID-19; cleaning wipes, disinfecting sprays, face masks, and certain disposable gloves.
    (10) We have calculated the income tax effect of the non-gaap adjustments shown above at the applicable statutory rate of 25.2% for the U.S. and 26.5% for Canada except for the following items:
      a. The tax impact of stock compensation expense was calculated using the statutory rate of 25.2%, excluding certain awards that are non-deductible.
      b. The tax impact of acquisition and integration expense was calculated using the statutory rate of 25.2%, excluding certain charges that were non-deductible.
      c. There is no tax impact to adjusted EPS related to the warrant mark to market adjustment.
      d. Amortization expense for financial accounting purposes was offset by the tax benefit of deductible amortization expense using the statutory rate of 25.2%.
    (11) Diluted shares on a GAAP basis for the thirteen weeks ended December 25, 2021 includes the dilutive impact of 1,863 options and awards.

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