Form: 8-K

Current report filing

March 20, 2019

Documents



hillman20logo.jpg
Exhibit 99.1
News Release

The Hillman Companies, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

CINCINNATI, March 20, 2019 -- The Hillman Companies, Inc. (NYSE-AMEX: HLM.PR) (the “Company” or “Hillman”) reported today financial results for its fourth quarter and year ended December 29, 2018.

Fourth Quarter Highlights:
•
Net sales increased 34.0% to $276.6 million compared to prior year net sales of $206.4 million
•
Loss from operations was $2.6 million compared to the prior year income from operations of $1.4 million
•
Loss before income taxes was $35.2 million compared to the prior year loss before taxes of $14.7 million
•
Adjusted EBITDA1 increased 46.6% to $43.1 million compared to the prior year Adjusted EBITDA1 of $29.4 million

Year-to-Date Results
•
Net sales increased 16.2% to $974.2 million compared to prior year net sales of $838.4 million
•
Income from operations was $26.8 million compared to the prior year income from operations of $37.0 million
•
Loss before income taxes was $67.6 million compared to the prior year loss before taxes of $26.3 million
•
Adjusted EBITDA1 increased 10.1% to $146.0 million compared to the prior year Adjusted EBITDA1 of $132.6 million
•
Net working capital (current assets minus current liabilities) was $280.0 million at December 29, 2018 compared to $191.0 million at December 30, 2017


“We completed the acquisition of Big Time Products in the fourth quarter of 2018 and are thrilled that Hillman will now provide the most comprehensive selection of personal protection and work gear products in addition to our vast selection of innovative hardware solutions and merchandising systems,” commented Greg Gluchowski, President and CEO.  “We are confident that the integration of the recent strategic acquisitions will benefit our customers and position Hillman well for future success.”

Conference Call Information
Date/Time: 10:00 a.m. EDT, Thursday, March 21, 2019
Dial-In for U.S. and Canada: 1-866-673-2033
Audience Passcode: 1545579

Replay
Date/Time: Available until 10:00 a.m. EDT, March 21, 2020
Webcast link: http://www.hillmangroup.com


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


Forward-Looking Statements

This press release includes certain statements related to acquisitions, refinancing, capital expenditures, resolution of pending litigation, and realization of deferred tax assets that involve substantial risks and uncertainties and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements include statements regarding our future financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” “project,” or the negative of such terms or other similar expressions.

These forward-looking statements are not historical facts, but rather are based on our current expectations, assumptions, and projections about future events. Although we believe that the expectations, assumptions, and projections on which these forward-looking statements are based are reasonable, they nonetheless could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations, assumptions, and projections also could be inaccurate. Forward-looking statements are not guarantees of future performance. Instead, forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions that may cause our strategy, planning, actual results, levels of activity, performance, or achievements to be materially different from any strategy, planning, future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Actual results could differ materially from those currently anticipated as a result of a number of factors, including the risks and uncertainties discussed under the caption “Risk Factors” set forth in Item 1A of our annual report filed on Form 10-K. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements.

All forward-looking statements attributable to the Company or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this press release; they should not be regarded as a representation by the Company or any other individual. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed in this press release might not occur or might be materially different from those discussed.

The Hillman Companies, Inc.

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 26,000 customers. 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 the Company, please visit our website at http://www.hillmangroup.com or call Investor Relations at (513) 851-4900, ext. 68284.




THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statement of Comprehensive Income (Loss), GAAP Basis
(dollars in thousands)
Unaudited
 
Thirteen Weeks Ended
December 29, 2018
 
Thirteen Weeks Ended
December 30, 2017
 
Year Ended
December 29, 2018
 
Year Ended
December 30, 2017
Net sales
$
276,587

 
$
206,374

 
$
974,175

 
$
838,368

Cost of sales (exclusive of depreciation and amortization shown separately below)
163,947

 
114,402

 
537,885

 
455,717

Selling, general and administrative expenses
87,096

 
70,953

 
320,543

 
274,044

Depreciation
15,580

 
8,543

 
46,060

 
34,016

Amortization
14,700

 
9,667

 
44,572

 
38,109

Management fees to related party
150

 
129

 
546

 
519

Other (income) expense
(2,328
)
 
1,281

 
(2,267
)
 
(1,022
)
Income (loss) from operations
(2,558
)
 
1,399

 
26,836

 
36,985

Interest expense, net
26,491

 
13,058

 
70,545

 
51,018

Interest expense on junior subordinated debentures
3,152

 
3,152

 
12,608

 
12,608

Investment income on trust common securities
(94
)
 
(94
)
 
(378
)
 
(378
)
Refinancing costs
3,090

 
—

 
11,632

 
—

Loss before income taxes
(35,197
)
 
(14,717
)
 
(67,571
)
 
(26,263
)
Income tax (benefit) expense
(112
)
 
(80,152
)
 
2,070

 
(84,911
)
Net (loss) income
$
(35,085
)
 
$
65,435

 
$
(69,641
)
 
$
58,648

Net (loss) income from above
$
(35,085
)
 
$
65,435

 
$
(69,641
)
 
$
58,648

Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(7,161
)
 
(2,189
)
 
(11,053
)
 
7,845

Total other comprehensive (loss) income
(7,161
)
 
(2,189
)
 
(11,053
)
 
7,845

Comprehensive (loss) income
$
(42,246
)
 
$
63,246

 
$
(80,694
)
 
$
66,493





THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
Unaudited
 
December 29, 2018
 
December 30, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
28,234

 
$
9,937

Accounts receivable, net of allowances of $846 ($1,121 - 2017)
110,799

 
78,994

Inventories, net
320,281

 
219,479

Other current assets
18,727

 
11,850

Total current assets
478,041

 
320,260

Property and equipment, net of accumulated depreciation of $131,169 ($98,674 - 2017)
208,279

 
153,143

Goodwill
803,847

 
620,503

Other intangibles, net of accumulated amortization of $176,677 ($132,659 - 2017)
930,525

 
693,195

Other assets
10,778

 
12,116

Total assets
$
2,431,470

 
$
1,799,217

LIABILITIES AND STOCKHOLDER'S EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
135,059

 
$
74,051

Current portion of debt and capital lease obligations
10,985

 
5,706

Accrued expenses:
 
 
 
Salaries and wages
9,881

 
9,784

Pricing allowances
5,404

 
5,908

Income and other taxes
3,325

 
4,146

Interest
15,423

 
9,717

Other accrued expenses
17,941

 
19,911

Total current liabilities
198,018

 
129,223

Long-term debt
1,586,084

 
989,674

Deferred income taxes, net
200,696

 
145,728

Other non-current liabilities
7,565

 
7,189

Total liabilities
1,992,363

 
1,271,814

 
 
 
 
Commitments and Contingencies (Note 15)
—

 
—

Stockholder's Equity:
 
 
 
Preferred stock, $.01 par, 5,000 shares authorized, none issued and outstanding at December 29, 2018 and December 30, 2017
—

 
—

Common stock, $.01 par, 5,000 shares authorized, issued and outstanding at December 29, 2018 and December 30, 2017
—

 
—

Additional paid-in capital
549,528

 
551,518

Retained earnings (accumulated deficit)
(72,831
)
 
2,422

Accumulated other comprehensive loss
(37,590
)
 
(26,537
)
Total stockholder's equity
439,107

 
527,403

Total liabilities and stockholder's equity
$
2,431,470

 
$
1,799,217





THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(dollars in thousands)
Unaudited


 
Year Ended
December 29, 2018
 
Year Ended
December 30, 2017
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(69,641
)
 
$
58,648

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
90,632

 
72,125

(Gain) loss on dispositions of property and equipment
(5,988
)
 
1,140

Impairment of long lived assets
837

 
1,569

Deferred income taxes
394

 
(85,874
)
Deferred financing and original issue discount amortization
2,455

 
2,530

Loss on debt restructuring
11,632

 
—

Stock-based compensation expense
1,590

 
2,484

Gain on disposition of Australia assets
—

 
(638
)
Other non-cash interest and change in value of interest rate swap
607

 
(1,481
)
Changes in operating items:
 
 
 
Accounts receivable
7,934

 
(2,777
)
Inventories
(68,978
)
 
13,800

Other assets
(1,496
)
 
517

Accounts payable
41,092

 
9,305

Other accrued liabilities
(3,523
)
 
11,562

Net cash provided by operating activities
7,547

 
82,910

Cash flows from investing activities:
 
 
 
Acquisitions of businesses, net of cash acquired
(500,989
)
 
(47,188
)
Capital expenditures
(71,621
)
 
(51,410
)
Other investing activities
—

 
(1,500
)
Net cash used for investing activities
(572,610
)
 
(100,098
)
Cash flows from financing activities:
 
 
 
Borrowings on senior term loans, net of discount
1,050,050

 
—

Repayments of senior term loans
(532,488
)
 
(5,500
)
Borrowings of revolving credit loans
165,550

 
35,500

Repayments of revolving credit loans
(76,850
)
 
(16,000
)
Financing fees
(20,520
)
 
—

Principal payments under capitalized lease obligations
(235
)
 
(124
)
Dividend to Holdco
(3,780
)
 
—

Proceeds from exercise of stock options
200

 
—

Proceeds from sale of Holdco stock
—

 
500

Net cash provided by financing activities
581,927

 
14,376

Effect of exchange rate changes on cash
1,433

 
(1,357
)
Net increase (decrease) in cash and cash equivalents
18,297

 
(4,169
)
Cash and cash equivalents at beginning of period
9,937

 
14,106

Cash and cash equivalents at end of period
$
28,234

 
$
9,937





THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA (Unaudited)
(dollars in thousands)

EBITDA and Adjusted EBITDA are not measures made in accordance with U.S. generally accepted accounting principles (“GAAP”), and as such, should not be considered a measure of financial performance or condition, liquidity, or profitability. It should not be considered an alternative to GAAP-based net income or income from operations or operating cash flows. Further, because not all companies use identical calculations, amounts reflected by Hillman as EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is included to satisfy a reporting obligation under our indenture. Adjusted EBITDA as presented herein does not include certain adjustments and pro forma run rate measures contemplated by our senior secured credit facilities and our indenture and may also include additional adjustments that were not applicable at the time of the offering of the senior notes governed by our indenture. Adjusted EBITDA is also one of the performance criteria for the Company's annual performance-based bonus plan. The reconciliation of Net income (loss) to Adjusted EBITDA is presented below.

 
 
Thirteen Weeks Ended
Year Ended
 
 
December 29,
December 30,
December 29,
December 30,
 
 
2018
2017
2018
2017
Net income (loss)
 
$
(35,085
)
$
65,435

$
(69,641
)
$
58,648

Income tax provision (benefit)
 
(112
)
(80,152
)
2,070

(84,911
)
Interest expense, net
 
26,491

13,058

70,545

51,018

Interest expense on junior subordinated debentures
 
3,152

3,152

12,608

12,608

Investment income on trust common securities
 
(94
)
(94
)
(378
)
(378
)
Depreciation
 
15,580

8,543

46,060

34,016

Amortization
 
14,700

9,667

44,572

38,109

EBITDA
 
24,632

19,609

105,836

109,110

 
 
 
 
 
 
   Stock compensation expense
 
371

459

1,590

2,484

   Management fees
 
150

129

546

519

   Acquisition and integration expense
 
5,180

881

12,358

934

   Canada Restructuring (1)
 
5,587

—

8,261

—

   Restructuring and other costs (2)
 
1,528

8,833

9,016

14,794

   Refinancing costs
 
3,090

—

11,632

—

   Anti-dumping duties
 
300

—

(3,829
)
6,274

   Mark-to-market adjustment on interest rate swaps
 
2,284

(497
)
607

(1,481
)
Adjusted EBITDA
 
$
43,122

$
29,414

$
146,017

$
132,634




1.
Includes charges related to a restructuring plan announced in our Canada segment in 2018, including facility consolidation, stock keeping unit rationalization, severance, sale of property and equipment, and charges relating to exiting certain lines of business.
2.
Includes restructuring and other costs associated with the implementation of a new pricing program, cost associated with implementing our ERP system in Canada, costs to relocate our distribution center in Edmonton, Canada, costs associated with relocating our distribution center in Dallas, Texas, and start up costs for the hub facility located on the U.S. West Coast.