Form: 8-K

Current report filing

July 30, 2019

Documents



hillman20logo.jpg
Exhibit 99.1
News Release

The Hillman Companies, Inc. Reports Second Quarter and Year-to-Date 2019 Financial Results

CINCINNATI, July 30, 2019 -- The Hillman Companies, Inc. (NYSE-AMEX: HLM.PR) (the “Company” or “Hillman”) reported today financial results for its thirteen and twenty-six weeks ended June 29, 2019.

Second Quarter Highlights:
•
Net sales increased 31.9% to $324.6 million compared to prior year net sales of $246.2 million
•
Income from operations was $6.8 million compared to the prior year income from operations of $13.4 million
•
Net loss was $19.5 million compared to the prior year net loss of $13.5 million
•
Adjusted EBITDA1 increased 46.9% to $57.2 million compared to the prior year Adjusted EBITDA1 of $38.9 million

Year-to-Date Results
•
Net sales increased 34.9% to $612.3 million compared to prior year net sales of $453.7 million
•
Income from operations was $5.9 million compared to the prior year income from operations of $22.5 million
•
Net loss was $54.8 million compared to the prior year net loss of $23.8 million
•
Adjusted EBITDA1 increased 48.0% to $96.3 million compared to the prior year Adjusted EBITDA1 of $65.1 million
•
Net working capital (current assets minus current liabilities) was $248.5 at June 29, 2019 compared to $280.0 at December 29, 2018

“We are pleased with the performance of the legacy Hillman business as well as the recent acquisitions that together produced strong cash flows from operations in the second quarter,” said Greg Gluchowski, President and CEO. “We are optimistic that the positive momentum that we generated in the first half will continue to produce profitable growth and healthy operating cash flows as we look to the future.”

Conference Call Information
Date/Time: 9:00 a.m. EDT, Wednesday, July 31, 2019
Dial-In for U.S. and Canada: 1-866-673-2033
Audience Passcode: 8669035

Replay
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 38,000 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 Loss, GAAP Basis
(dollars in thousands)
Unaudited
 
Thirteen Weeks Ended
June 29, 2019
 
Thirteen Weeks Ended
June 30, 2018
 
Twenty-six Weeks Ended
June 29, 2019
 
Twenty-six Weeks Ended
June 30, 2018
Net sales
$
324,628

 
$
246,154

 
$
612,287

 
$
453,749

Cost of sales (exclusive of depreciation and amortization shown separately below)
181,309

 
134,027

 
347,230

 
243,617

Selling, general and administrative expenses
96,883

 
78,797

 
188,718

 
149,873

Depreciation
16,655

 
9,535

 
32,471

 
18,477

Amortization
14,684

 
9,712

 
29,449

 
19,435

Management fees to related party
125

 
134

 
256

 
262

Other expense (income)
8,215

 
578

 
8,254

 
(403
)
Income from operations
6,757

 
13,371

 
5,909

 
22,488

Interest expense, net
26,064

 
14,361

 
52,627

 
27,932

Interest expense on junior subordinated debentures
3,152

 
3,152

 
6,304

 
6,304

Investment income on trust common securities
(94
)
 
(94
)
 
(189
)
 
(189
)
Refinancing costs
—

 
8,542

 
—

 
8,542

Loss before income taxes
(22,365
)
 
(12,590
)
 
(52,833
)
 
(20,101
)
Income tax (benefit) expense
(2,869
)
 
941

 
1,931

 
3,747

Net loss
$
(19,496
)
 
$
(13,531
)
 
$
(54,764
)
 
$
(23,848
)
Net loss from above
$
(19,496
)
 
$
(13,531
)
 
$
(54,764
)
 
$
(23,848
)
Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustments
2,547

 
(3,643
)
 
5,326

 
(6,682
)
Total other comprehensive (loss) income
2,547

 
(3,643
)
 
5,326

 
(6,682
)
Comprehensive loss
$
(16,949
)
 
$
(17,174
)
 
$
(49,438
)
 
$
(30,530
)




THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
Unaudited


 
June 29,
2019
 
December 29,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
16,953

 
$
28,234

Accounts receivable, net of allowances of $1,097 ($846 - 2018)
125,056

 
110,799

Inventories, net
324,585

 
320,281

Other current assets
7,299

 
18,727

Total current assets
473,893

 
478,041

Property and equipment, net of accumulated depreciation of $149,434 ($131,169 - 2018)
203,037

 
208,279

Goodwill
806,031

 
803,847

Other intangibles, net of accumulated amortization of $202,561 ($176,677 - 2018)
900,273

 
930,525

Operating lease right of use assets
70,854

 
—

Other assets
10,498

 
10,778

Total assets
$
2,464,586

 
$
2,431,470

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
143,397

 
$
135,059

Current portion of debt and capital leases
11,235

 
10,985

Accrued expenses:
 
 
 
Salaries and wages
15,969

 
9,881

Pricing allowances
6,959

 
5,404

Income and other taxes
5,079

 
3,325

Interest
10,217

 
15,423

Current portion of operating lease liabilities
11,600

 
—

Other accrued expenses
20,970

 
17,941

Total current liabilities
225,426

 
198,018

Long term debt
1,572,775

 
1,586,084

Deferred income taxes, net
202,739

 
200,696

Other non-current liabilities
11,422

 
7,565

Operating lease liabilities
61,893

 
—

Total liabilities
$
2,074,255

 
$
1,992,363

Commitments and contingencies (Note 5)

 

Stockholder's Equity:
 
 
 
Preferred stock, $.01 par, 5,000 shares authorized, none issued or outstanding at June 29, 2019 and December 29, 2018
—

 
—

Common stock, $.01 par, 5,000 shares authorized, issued and outstanding at June 29, 2019 and December 29, 2018
—

 
—

Additional paid-in capital
550,190

 
549,528

(Accumulated deficit) retained earnings
(127,595
)
 
(72,831
)
Accumulated other comprehensive loss
(32,264
)
 
(37,590
)
Total stockholder's equity
390,331

 
439,107

Total liabilities and stockholder's equity
$
2,464,586

 
$
2,431,470





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


 
Twenty-six Weeks Ended
June 29, 2019
 
Twenty-six Weeks Ended
June 30, 2018
Cash flows from operating activities:
 
 
 
Net loss
$
(54,764
)
 
$
(23,848
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
61,920

 
37,912

Deferred income taxes
1,326

 
3,847

Deferred financing and original issue discount amortization
1,859

 
1,142

Stock-based compensation expense
662

 
992

Loss on debt restructuring
—

 
8,542

Asset impairment
6,800

 
—

(Gain) loss on disposal of property and equipment
(121
)
 
53

Other non-cash interest and change in value of interest rate swap
2,902

 
(1,418
)
Changes in operating items:
 
 
 
Accounts receivable
(13,394
)
 
(17,687
)
Inventories
(2,000
)
 
(33,069
)
Other assets
9,485

 
(5
)
Accounts payable
7,540

 
46,237

Other accrued liabilities
2,558

 
(6,828
)
Net cash provided by operating activities
24,773

 
15,870

Cash flows from investing activities:
 
 
 
Capital expenditures
(27,771
)
 
(40,065
)
Proceeds from sale of property and equipment
7,612

 
—

Net cash used for investing activities
(20,159
)
 
(40,065
)
Cash flows from financing activities:
 
 
 
Repayments of senior term loans
(7,956
)
 
(530,750
)
Borrowings on senior term loans
—

 
530,000

Financing fees
—

 
(11,752
)
Borrowings on revolving credit loans
12,500

 
92,000

Repayments of revolving credit loans
(20,200
)
 
(54,500
)
Principal payments under finance and capitalized lease obligations
(283
)
 
(73
)
Proceeds from exercise of stock options
—

 
200

Net cash (used for) provided by financing activities
(15,939
)
 
25,125

Effect of exchange rate changes on cash
44

 
(208
)
Net (decrease) increase in cash and cash equivalents
(11,281
)
 
722

Cash and cash equivalents at beginning of period
28,234

 
9,937

Cash and cash equivalents at end of period
$
16,953

 
$
10,659

Supplemental disclosure of cash flow information:
 
 
 
Interest paid on junior subordinated debentures, net
$
6,115

 
$
6,115

Interest paid
54,072

 
24,364

Income taxes paid
400

 
632





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 loss to Adjusted EBITDA is presented below.

 
 
Thirteen Weeks Ended
 
Twenty-six Weeks Ended
 
 
June 29,
 
June 30,
 
June 29,
 
June 30,
 
 
2019
 
2018
 
2019
 
2018
Net loss
 
$
(19,496
)
 
$
(13,531
)
 
$
(54,764
)
 
$
(23,848
)
Income tax provision (benefit)
 
(2,869
)
 
941

 
1,931

 
3,747

Interest expense, net
 
26,064

 
14,361

 
52,627

 
27,932

Interest expense on junior subordinated debentures
 
3,152

 
3,152

 
6,304

 
6,304

Investment income on trust common securities
 
(94
)
 
(94
)
 
(189
)
 
(189
)
Depreciation
 
16,655

 
9,535

 
32,471

 
18,477

Amortization
 
14,684

 
9,712

 
29,449

 
19,435

EBITDA
 
38,096

 
24,076

 
67,829

 
51,858

 
 
 
 
 
 
 
 
 
   Stock compensation expense
 
301

 
505

 
662

 
992

   Management fees
 
125

 
134

 
256

 
262

   Acquisition and integration expense
 
1,370

 
2,368

 
2,468

 
2,462

Retention and long term incentive bonuses
 
2,030

 
—

 
4,059

 
—

   Canada Restructuring (1)
 
1,301

 
—

 
1,237

 
—

   Restructuring and other costs (2)
 
5,396

 
3,667

 
10,122

 
6,513

   Asset impairment costs(3) 
 
6,800

 
—

 
6,800

 
—

   Refinancing costs
 
—

 
8,542

 
—

 
8,542

   Anti-dumping duties
 
—

 
—

 
—

 
(4,128
)
   Mark-to-market adjustment on interest rate swaps
 
1,789

 
(361
)
 
2,902

 
(1,418
)
Adjusted EBITDA
 
$
57,208

 
$
38,931

 
$
96,335

 
$
65,083




1.
Includes charges related to a restructuring plan announced in our Canada segment in 2018, including facility consolidation 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 one time charges associated with new business wins.
3.
Impairment losses for the disposal of FastKey self-service key duplicating kiosks and related assets.