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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 2020
Commission file number 1-13293
The Hillman Companies, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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23-2874736 |
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(I.R.S. Employer Identification No.) |
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10590 Hamilton Avenue |
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45231 |
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Cincinnati |
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Ohio |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (513) 851-4900
Securities registered pursuant to Section 12(g) of the Act: None
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. (Check one):
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Large accelerated filer |
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☐ |
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Accelerated filer |
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☐ |
Non-accelerated filer |
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☒ (Do not check if a smaller reporting company)
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Smaller reporting company |
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☐ |
Emerging growth company |
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☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
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Title of Class |
Trading symbols |
Name of Each Exchange on Which Registered |
11.6% Junior Subordinated Debentures |
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None |
Preferred Securities Guaranty |
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None |
On August 6, 2020, 5,000 shares of the Registrant’s common stock were issued and outstanding and 4,217,724 Trust Preferred Securities were issued and outstanding by the Hillman Group Capital Trust. The Trust Preferred Securities trade on the NYSE Amex under symbol HLM.Pr.
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
INDEX
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PART I. FINANCIAL INFORMATION |
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PAGE |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II. OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands, except per share amounts)
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June 27, 2020 |
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December 28, 2019 |
ASSETS |
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Current assets: |
|
|
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Cash and cash equivalents |
$ |
18,604 |
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|
$ |
19,973 |
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Accounts receivable, net of allowances of $1,444 ($1,891 - 2019) |
148,798 |
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|
88,374 |
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Inventories, net |
319,395 |
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|
323,496 |
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Other current assets |
7,495 |
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|
8,828 |
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Total current assets |
494,292 |
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|
440,671 |
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Property and equipment, net of accumulated depreciation of $211,133 ($179,791 - 2019) |
192,092 |
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|
205,160 |
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Goodwill |
817,099 |
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|
819,077 |
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Other intangibles, net of accumulated amortization of $260,870 ($232,060 - 2019) |
853,400 |
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|
882,430 |
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Operating lease right of use assets |
80,405 |
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|
81,613 |
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Deferred tax asset |
1,916 |
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|
702 |
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Other assets |
11,298 |
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|
11,557 |
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Total assets |
$ |
2,450,502 |
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$ |
2,441,210 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ |
128,661 |
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$ |
125,042 |
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Current portion of debt and capital leases |
11,400 |
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11,358 |
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Current portion of operating lease liabilities |
11,844 |
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11,459 |
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Accrued expenses: |
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Salaries and wages |
18,251 |
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|
12,937 |
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Pricing allowances |
8,164 |
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|
6,553 |
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Income and other taxes |
6,287 |
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|
5,248 |
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Interest |
24,110 |
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|
14,726 |
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Other accrued expenses |
28,226 |
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|
21,545 |
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Total current liabilities |
236,943 |
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|
208,868 |
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Long term debt |
1,596,388 |
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1,584,289 |
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Deferred tax liabilities |
186,892 |
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196,437 |
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Operating lease liabilities |
72,615 |
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73,227 |
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Other non-current liabilities |
31,443 |
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|
33,287 |
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Total liabilities |
$ |
2,124,281 |
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$ |
2,096,108 |
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Commitments and contingencies (Note 6) |
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Stockholder's Equity: |
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Preferred stock, $.01 par, 5,000 shares authorized, none issued or outstanding at June 27, 2020 and December 28, 2019 |
— |
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— |
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Common stock, $.01 par, 5,000 shares authorized, issued and outstanding at June 27, 2020 and December 28, 2019 |
— |
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— |
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Additional paid-in capital |
556,028 |
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|
553,359 |
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Accumulated deficit |
(190,197) |
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|
(176,217) |
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Accumulated other comprehensive loss |
(39,610) |
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|
(32,040) |
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Total stockholder's equity |
326,221 |
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|
345,102 |
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Total liabilities and stockholder's equity |
$ |
2,450,502 |
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$ |
2,441,210 |
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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
(dollars in thousands)
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Thirteen Weeks Ended June 27, 2020 |
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Thirteen Weeks Ended June 29, 2019 |
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Twenty-six Weeks Ended June 27, 2020 |
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Twenty-six Weeks Ended June 29, 2019 |
Net sales |
$ |
346,710 |
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$ |
324,628 |
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$ |
642,546 |
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$ |
612,287 |
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Cost of sales (exclusive of depreciation and amortization shown separately below) |
196,402 |
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|
181,309 |
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362,813 |
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347,230 |
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Selling, general and administrative expenses |
94,970 |
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96,883 |
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184,723 |
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188,718 |
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Depreciation |
17,230 |
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16,655 |
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34,747 |
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32,471 |
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Amortization |
14,865 |
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14,684 |
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29,713 |
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29,449 |
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Management fees to related party |
196 |
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|
125 |
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321 |
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256 |
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Other expense |
2,319 |
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6,426 |
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55 |
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5,352 |
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Income from operations |
20,728 |
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8,546 |
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30,174 |
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8,811 |
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Interest expense, net |
23,878 |
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26,064 |
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47,058 |
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52,627 |
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Interest expense on junior subordinated debentures |
3,184 |
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3,152 |
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6,336 |
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6,304 |
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(Gain) loss on mark-to-market adjustment of interest rate swap |
(308) |
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1,789 |
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1,942 |
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2,902 |
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Investment income on trust common securities |
(94) |
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(94) |
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(189) |
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|
(189) |
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Loss before income taxes |
(5,932) |
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(22,365) |
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(24,973) |
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(52,833) |
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Income tax (benefit) expense |
(1,703) |
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|
(2,869) |
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(10,993) |
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|
1,931 |
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Net loss |
$ |
(4,229) |
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$ |
(19,496) |
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$ |
(13,980) |
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$ |
(54,764) |
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Net loss from above |
$ |
(4,229) |
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$ |
(19,496) |
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$ |
(13,980) |
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$ |
(54,764) |
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Other comprehensive loss: |
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Foreign currency translation adjustments |
3,643 |
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|
2,547 |
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(7,570) |
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|
5,326 |
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Total other comprehensive income (loss) |
3,643 |
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|
2,547 |
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(7,570) |
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|
5,326 |
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Comprehensive loss |
$ |
(586) |
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|
$ |
(16,949) |
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|
$ |
(21,550) |
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|
$ |
(49,438) |
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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(dollars in thousands)
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Twenty-six Weeks Ended June 27, 2020 |
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Twenty-six Weeks Ended June 29, 2019 |
Cash flows from operating activities: |
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Net loss |
$ |
(13,980) |
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$ |
(54,764) |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
64,460 |
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|
61,920 |
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Deferred income taxes |
(10,632) |
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|
1,326 |
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Deferred financing and original issue discount amortization |
1,879 |
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1,859 |
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Stock-based compensation expense |
2,669 |
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|
662 |
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Asset impairment |
210 |
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|
6,800 |
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Gain on disposal of property and equipment |
(337) |
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|
(121) |
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Change in fair value of contingent consideration |
(1,300) |
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— |
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Other non-cash interest and change in value of interest rate swap |
1,942 |
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|
2,902 |
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Changes in operating items: |
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Accounts receivable |
(61,318) |
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|
(13,394) |
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Inventories |
592 |
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(2,000) |
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Other assets |
1,307 |
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|
9,485 |
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Accounts payable |
4,475 |
|
|
7,540 |
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Other accrued liabilities |
12,306 |
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|
7,764 |
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Accrued interest |
9,384 |
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|
(5,206) |
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Net cash provided by operating activities |
11,657 |
|
|
24,773 |
|
Cash flows from investing activities: |
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Acquisition of business, net of cash received |
(800) |
|
|
— |
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Capital expenditures |
(22,196) |
|
|
(27,771) |
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Proceeds from sale of property and equipment |
— |
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|
7,612 |
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Net cash used in investing activities |
(22,996) |
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|
(20,159) |
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Cash flows from financing activities: |
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Repayments of senior term loans |
(5,304) |
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|
(7,956) |
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Borrowings on revolving credit loans |
66,000 |
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|
12,500 |
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Repayments of revolving credit loans |
(50,000) |
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(20,200) |
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Principal payments under finance and capitalized lease obligations |
(411) |
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(283) |
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Net cash provided by (used in) financing activities |
10,285 |
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(15,939) |
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Effect of exchange rate changes on cash |
(315) |
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44 |
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Net decrease in cash and cash equivalents |
(1,369) |
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|
(11,281) |
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Cash and cash equivalents at beginning of period |
19,973 |
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|
28,234 |
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Cash and cash equivalents at end of period |
$ |
18,604 |
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$ |
16,953 |
|
Supplemental disclosure of cash flow information: |
|
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Interest paid on junior subordinated debentures, net |
$ |
4,076 |
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$ |
6,115 |
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Interest paid |
33,922 |
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|
54,072 |
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Income taxes paid |
100 |
|
|
400 |
|
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(dollars in thousands)
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Common Stock |
|
Additional Paid-in-capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Loss |
|
Total Stockholders Equity |
Twenty-six weeks ended June 27, 2020 |
|
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Balance at December 28, 2019 |
|
$ |
— |
|
|
$ |
553,359 |
|
|
$ |
(176,217) |
|
|
$ |
(32,040) |
|
|
$ |
345,102 |
|
Net loss |
|
— |
|
|
— |
|
|
(9,751) |
|
|
— |
|
|
(9,751) |
|
Stock-based compensation |
|
— |
|
|
1,145 |
|
|
— |
|
|
— |
|
|
1,145 |
|
Change in cumulative foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
(11,213) |
|
|
(11,213) |
|
Balance at March 28, 2020 |
|
— |
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|
554,504 |
|
|
(185,968) |
|
|
(43,253) |
|
|
325,283 |
|
Net loss |
|
— |
|
|
— |
|
|
(4,229) |
|
|
— |
|
|
(4,229) |
|
Stock-based compensation |
|
— |
|
|
1,524 |
|
|
— |
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|
— |
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|
1,524 |
|
Change in cumulative foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
3,643 |
|
|
3,643 |
|
Balance at June 27, 2020 |
|
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|
556,028 |
|
|
(190,197) |
|
|
(39,610) |
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|
326,221 |
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Twenty-six weeks ended June 29, 2019 |
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Balance at December 29, 2018 |
|
$ |
— |
|
|
$ |
549,528 |
|
|
$ |
(72,831) |
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|
$ |
(37,590) |
|
|
$ |
439,107 |
|
Net loss |
|
— |
|
|
— |
|
|
(35,268) |
|
|
— |
|
|
(35,268) |
|
Stock-based compensation |
|
— |
|
|
361 |
|
|
— |
|
|
— |
|
|
361 |
|
Change in cumulative foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
2,779 |
|
|
2,779 |
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|
Balance at March 30, 2019 |
|
— |
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|
549,889 |
|
|
(108,099) |
|
|
(34,811) |
|
|
406,979 |
|
Net loss |
|
— |
|
|
— |
|
|
(19,496) |
|
|
— |
|
|
(19,496) |
|
Stock-based compensation |
|
— |
|
|
301 |
|
|
— |
|
|
— |
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
|
Change in cumulative foreign currency translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
2,547 |
|
|
2,547 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 29, 2019 |
|
$ |
— |
|
|
$ |
550,190 |
|
|
$ |
(127,595) |
|
|
$ |
(32,264) |
|
|
$ |
390,331 |
|
|
|
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|
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|
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
1. Basis of Presentation:
The accompanying unaudited financial statements include the condensed consolidated accounts of The Hillman Companies, Inc. and its wholly-owned subsidiaries (collectively “Hillman” or the “Company”) for the twenty-six weeks ended June 27, 2020. Unless the context requires otherwise, references to "Hillman," "we," "us," "our," or "our Company" refer to The Hillman Companies, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. The Hillman Companies, Inc. is a wholly-owned subsidiary of HMAN Intermediate II Holdings Corp., and a wholly-owned subsidiary of HMAN Group Holdings Inc. (“Holdco”).
The accompanying unaudited condensed consolidated financial statements present information in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X. Accordingly, they do not include all information or footnotes required by U.S. generally accepted accounting principles for complete financial statements. Operating results for the twenty-six weeks ended June 27, 2020 do not necessarily indicate the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s annual report filed on Form 10-K for the year ended December 28, 2019.
2. Summary of Significant Accounting Policies:
The significant accounting policies should be read in conjunction with the significant accounting policies included in the Form 10-K for the year ended December 28, 2019.
Use of Estimates in the Preparation of Financial Statements:
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses for the reporting periods. Actual results may differ from these estimates.
The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the magnitude and duration of COVID-19, the extent to which it will impact worldwide macroeconomic conditions including interest rates, employment rates and health insurance coverage, the speed of the anticipated recovery, and governmental and business reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts COVID-19 as of June 27, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to the carrying value of the goodwill and other long-lived assets. While there was not a material impact to the Company’s consolidated financial statements as of and for the quarter ended June 27, 2020, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.
Deferral of Trust Distributions:
On April 3, 2020, the Company announced that it is deferring the payment of distributions to holders of the Trust Preferred Securities to preserve liquidity due to the uncertainty of the financial impact of the COVID-19 pandemic, beginning with the April 2020 distribution. Pursuant to the Indenture that governs the Trust Preferred Securities, the Company is able to defer distribution payments to holders of the Trust Preferred Securities for a period that cannot exceed 60 months (the “Extension Period”). During the Extension Period, the Company is required to accrue the full amount of all distributions payable, and such deferred distributions will be immediately payable by the Company at the end of the Extension Period. As a result, the Company will accrue $0.241667 per share for each fiscal month that falls within the Extension Period. The Company will continue deferral of the distribution payments during this period of uncertainty with the COVID-19 pandemic and plans to resume distribution payments once economic and market conditions improve.
Reclassifications:
The Company reclassified the mark-to-market adjustment of our interest rate swap from other income/expense to its own line on the income statement below income from operations. The reclassifications had no impact on the prior periods’ statement of financial position, net income (loss), cash flows, or stockholder’s equity.
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Revenue Recognition:
Revenue is recognized when control of goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.
The Company offers a variety of sales incentives to its customers primarily in the form of discounts and rebates. Discounts are recognized in the consolidated financial statements at the date of the related sale. Rebates are based on the revenue to date and the contractual rebate percentage to be paid. A portion of the cost of the rebate is allocated to each underlying sales transaction. Discounts and rebates are included in the determination of net sales.
The Company also establishes reserves for customer returns and allowances. The reserve is established based on historical rates of returns and allowances. The reserve is adjusted quarterly based on actual experience. Returns and allowances are included in the determination of net sales.
The following table displays our disaggregated revenue by product category:
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Thirteen weeks ended June 27, 2020 |
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|
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Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
Fastening and Hardware |
$ |
190,572 |
|
|
$ |
— |
|
|
$ |
34,726 |
|
|
$ |
225,298 |
|
Personal Protective |
78,927 |
|
|
— |
|
|
66 |
|
|
78,993 |
|
Keys and Key Accessories |
— |
|
|
30,649 |
|
|
220 |
|
|
30,869 |
|
Engraving |
— |
|
|
11,542 |
|
|
1 |
|
|
11,543 |
|
Resharp |
— |
|
|
7 |
|
|
— |
|
|
7 |
|
Consolidated |
$ |
269,499 |
|
|
$ |
42,198 |
|
|
$ |
35,013 |
|
|
$ |
346,710 |
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Thirteen weeks ended June 29, 2019 |
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|
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Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
Fastening and Hardware |
$ |
163,889 |
|
|
$ |
— |
|
|
$ |
37,011 |
|
|
$ |
200,900 |
|
Personal Protective |
62,516 |
|
|
— |
|
|
— |
|
|
62,516 |
|
Keys and Key Accessories |
— |
|
|
46,872 |
|
|
1,033 |
|
|
47,905 |
|
Engraving |
— |
|
|
13,305 |
|
|
2 |
|
|
13,307 |
|
Resharp |
— |
|
|
— |
|
|
— |
|
|
— |
|
Consolidated |
$ |
226,405 |
|
|
$ |
60,177 |
|
|
$ |
38,046 |
|
|
$ |
324,628 |
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|
Twenty-six weeks ended June 27, 2020 |
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|
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Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
Fastening and Hardware |
$ |
340,956 |
|
|
$ |
— |
|
|
$ |
60,047 |
|
|
$ |
401,003 |
|
Personal Protective |
141,720 |
|
|
— |
|
|
66 |
|
|
141,786 |
|
Keys and Key Accessories |
— |
|
|
74,027 |
|
|
1,249 |
|
|
75,276 |
|
Engraving |
— |
|
|
24,461 |
|
|
3 |
|
|
24,464 |
|
Resharp |
— |
|
|
17 |
|
|
— |
|
|
17 |
|
Consolidated |
$ |
482,676 |
|
|
$ |
98,505 |
|
|
$ |
61,365 |
|
|
$ |
642,546 |
|
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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Twenty-six weeks ended June 29, 2019 |
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|
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Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
Fastening and Hardware |
$ |
301,664 |
|
|
$ |
— |
|
|
$ |
64,886 |
|
|
$ |
366,550 |
|
Personal Protective |
126,343 |
|
|
— |
|
|
— |
|
|
126,343 |
|
Keys and Key Accessories |
— |
|
|
90,488 |
|
|
1,813 |
|
|
92,301 |
|
Engraving |
— |
|
|
27,090 |
|
|
3 |
|
|
27,093 |
|
Resharp |
— |
|
|
— |
|
|
— |
|
|
— |
|
Consolidated |
$ |
428,007 |
|
|
$ |
117,578 |
|
|
$ |
66,702 |
|
|
$ |
612,287 |
|
The following table disaggregates our revenue by geographic location:
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Thirteen weeks ended June 27, 2020 |
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|
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Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
United States |
$ |
265,702 |
|
|
$ |
41,837 |
|
|
$ |
— |
|
|
$ |
307,539 |
|
Canada |
1,272 |
|
|
361 |
|
|
35,013 |
|
|
36,646 |
|
Mexico |
2,525 |
|
|
— |
|
|
— |
|
|
2,525 |
|
Consolidated |
$ |
269,499 |
|
|
$ |
42,198 |
|
|
$ |
35,013 |
|
|
$ |
346,710 |
|
|
|
|
|
|
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|
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|
|
|
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|
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|
Thirteen weeks ended June 29, 2019 |
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|
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|
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|
|
Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
United States |
$ |
221,672 |
|
|
$ |
59,746 |
|
|
|
|
$ |
281,418 |
|
Canada |
1,457 |
|
|
431 |
|
|
38,046 |
|
|
39,934 |
|
Mexico |
3,276 |
|
|
— |
|
|
— |
|
|
3,276 |
|
Consolidated |
$ |
226,405 |
|
|
$ |
60,177 |
|
|
$ |
38,046 |
|
|
$ |
324,628 |
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|
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|
Twenty-six weeks ended June 27, 2020 |
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|
|
Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
United States |
$ |
475,376 |
|
|
$ |
97,683 |
|
|
$ |
— |
|
|
$ |
573,059 |
|
Canada |
2,541 |
|
|
822 |
|
|
61,365 |
|
|
64,728 |
|
Mexico |
4,759 |
|
|
— |
|
|
— |
|
|
4,759 |
|
Consolidated |
$ |
482,676 |
|
|
$ |
98,505 |
|
|
$ |
61,365 |
|
|
$ |
642,546 |
|
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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|
Twenty-six weeks ended June 29, 2019 |
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|
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|
|
|
|
Fastening, Hardware, and Personal Protective Solutions |
|
Consumer Connected Solutions |
|
Canada |
|
Total Revenue |
United States |
$ |
419,737 |
|
|
$ |
116,787 |
|
|
$ |
— |
|
|
$ |
536,524 |
|
Canada |
2,423 |
|
|
791 |
|
|
66,702 |
|
|
69,916 |
|
Mexico |
5,847 |
|
|
— |
|
|
— |
|
|
5,847 |
|
Consolidated |
$ |
428,007 |
|
|
$ |
117,578 |
|
|
$ |
66,702 |
|
|
$ |
612,287 |
|
Our revenue by geography is allocated based on the location of our sales operations. Our Fastening, Hardware, and Personal Protective Solutions segment contains sales of Big Time Products ("Big Time") personal protective equipment into Canada. Our Consumer Connected Solutions segment contains sales of MinuteKey into Canada.
Fastening, Hardware, and Personal Protective Solutions revenues consist primarily of the delivery of fasteners, anchors, specialty fastening products, and personal protective equipment such as gloves and eye-wear as well as in-store merchandising services for the related product category.
Consumer Connected Solutions revenues consist primarily of sales of keys and identification tags through self service key duplication and engraving kiosks. It also includes our associate-assisted key duplication systems and key accessories.
Canada revenues consist primarily of the delivery to Canadian customers of fasteners and related hardware items, threaded rod, keys, key duplicating systems, accessories, personal protective equipment, and identification items as well as in-store merchandising services for the related product category.
The Company’s performance obligations under its arrangements with customers are providing products, in-store merchandising services, and access to key duplicating and engraving equipment. Generally, the price of the merchandising services and the access to the key duplicating and engraving equipment is included in the price of the related products. Control of products is transferred at the point in time when the customer accepts the goods. The Company’s obligation to provide in-store service and access to key duplicating and engraving equipment is satisfied when control of the related products is transferred. Therefore, the entire amount of consideration related to the sale of products, in-store merchandising services, and access to key duplicating and engraving equipment is recognized upon the customer’s acceptance of the products. The revenues for all performance obligations are recognized upon the customer's acceptance of the products.
The costs to obtain a contract are insignificant, and generally contract terms do not extend beyond one year. Therefore, these costs are expensed as incurred. Freight and shipping costs and the cost of our in-store merchandising services teams are recognized in selling, general, and administrative expense when control over products is transferred to the customer.
3. Recent Accounting Pronouncements:
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. The ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this ASU in the first quarter of fiscal 2020, and it did not have a material impact on the Company's Condensed Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating contracts and the optional expedients provided by the new standard.
THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
4. Acquisitions
On February 19, 2020, the Company acquired the assets of Instafob LLC ("Instafob") for a cash payment of $800 and a total purchase price of $2,618, which includes $1,818 in contingent and non-contingent considerations that remains payable to the seller. The financial results of Instafob reside within the Company's Consumer Connected Solutions segment and have been determined to be immaterial for purposes of additional disclosure.
5. Goodwill and Other Intangible Assets:
Goodwill amounts by reportable segment are summarized as follows:
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Goodwill at |
|
Acquisitions |
|
Dispositions |
|
Adjustments |
|
Other (1)
|
|
Goodwill at |
|
December 28, 2019 |
|
|
|
|
|
|
|
|
|
June 27, 2020 |
Fastening, Hardware, and Personal Protection |
$ |
567,847 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(704) |
|
|
$ |
567,143 |
|
Consumer Connected Solutions |
222,096 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
222,096 |
|
Canada |
29,134 |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,274) |
|