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Published on October 14, 2011
The Hillman Companies, Inc.
10590 Hamilton Avenue
Cincinatti, OH 45231-1764
October 14, 2011
VIA EDGAR
W. John Cash
Accounting Branch Chief
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
| Re: | The Hillman Companies, Inc. |
| Form 10-K for the Fiscal Year Ended December 31, 2010 |
| Filed March 31, 2011 |
| Response Letters Dated August 5, 2011 and September 19, 2011 |
| File No: 1-13293 |
Dear Mr. Cash:
The Hillman Companies, Inc. (the Company or Hillman) hereby acknowledges receipt of the comment letter, dated October 11, 2011, from the staff (the Staff) of the Securities and Exchange Commission (the Commission) concerning the Companys Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2010 (the Form 10-K) and hereby submits this letter in response. The Staffs comment is reprinted below and is followed by the Companys response.
Form 10-K for Fiscal Year Ended December 31, 2010
Executive Compensation
Compensation Discussion and Analysis
Annual Performance-Based Bonuses, page 108
| 6. | Comment: We note your disclosure that Mr. Max Hillmans gross margin dollar performance target was $236.6 million. Please also disclose your actual company-wide gross margin as a dollar amount. |
John Cash, Accounting Branch Chief
Division of Corporation Finance
October 14, 2011
Page 2
Response: The Company acknowledges the Staffs comment and will revise the tabular disclosure and notes thereto under the heading Annual Performance-Based Bonuses in future applicable filings with the Commission as follows:
The table below shows the percentage of the bonus target obtained for each criterion by each NEO for purposes of determining the 2010 Performance Based Bonus award:
| EBITDA (1) | GM$ (2) | GM% (3) | ROANTA (4) | Safety (5) | PMOs (6) | |||||||||||||||||||
| Max W. Hillman |
97.7 | % | 75.6 | % | 0.0 | % | 111.0 | % | 100 | % | 100.0 | % | ||||||||||||
| James P. Waters |
97.7 | % | n/a | 0.0 | % | 111.0 | % | 100 | % | 100.0 | % | |||||||||||||
| Richard P. Hillman |
97.7 | % | 59.2 | % | 0.0 | % | n/a | 100 | % | 78.3 | % | |||||||||||||
| George L. Heredia |
97.7 | % | 103.2 | % | 0.0 | % | n/a | 100 | % | 0.0 | % | |||||||||||||
| Albert M. Church |
97.7 | % | 139.6 | % | 0.0 | % | n/a | 100 | % | 139.1 | % | |||||||||||||
| (1) | The Company achieved EBITDA, as adjusted for certain non-recurring items, of $84.3 million on a performance bonus target of $84.4 million. |
| (2) | The gross margin dollar performance target varies by NEO. Mr. Max Hillmans gross margin performance target was based on a corporate-wide gross margin target of $236.6 million for the year ended December 31, 2010. Actual corporate-wide gross margin achieved was $236.1 million, which was adjusted, for purposes of determining Mr. Max Hillmans bonus, to $234.8 million to reflect the elimination of certain royalty expenses following the May 28, 2010 Merger Transaction. Mr. Richard Hillmans gross margin bonus target was based only on gross margin on the Companys independent, regional hardware and All Points customers. The gross margin bonus target for this group of customers was $113.2 million with actual gross margin achieved of $111.6 million. Mr. Heredias gross margin target was based on sales by the engraving business of $19.0 million and actual gross margin achieved of $19.1 million. Mr. Church had a gross margin bonus target for Lowes and Home Depot of $74.4 million. Lowes and Home Depots actual gross margin was $75.3 million for the year ended December 31, 2010. |
| (3) | The Company achieved a gross margin percentage of 51.1% on a target of 51.9%. |
| (4) | The Company achieved Return On Net Tangible Assets (ROANTA) of 55.3% on a target of 55.0%. |
| (5) | The Companys safety objective is to reduce the number of OSHA recordable safety violations. The Companys 2010 performance target and the actual number of OSHA recordable safety violations were each 37. |
| (6) | The performance management objective (PMO) for each of Mr. Max Hillman and Mr. Waters was to develop a distribution and manufacturing rationalization plan for 2011, which was achieved. Mr. Richard Hillmans PMO was to maintain 2010 field service and sales expense at 12.31% of corporate net sales. Actual field service and sales expense was 12.39% of corporate net sales. Mr. Heredias PMO was to place an additional 550 engraving machines in retail locations, which was not achieved. Mr. Churchs PMO was to maintain 2010 field service expense as a percentage of net sales for national account customers at 10.24%. The actual field service expense as a percentage of net sales for national account customers was 10.12%. |
John Cash, Accounting Branch Chief
Division of Corporation Finance
October 14, 2011
Page 3
* * *
In connection with responding to the Comment Letter, the Company acknowledges that:
| | The Company is responsible for the adequacy and accuracy of the disclosure in the filing; |
| | Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and |
| | The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
The Company further understands that the Division of Enforcement has access to all information that the Company provides to the Staff of the Division of Corporation Finance in your review of the Companys filing or in response to the Staffs comments on the Companys filing.
If you have any questions or additional comments concerning the foregoing, please contact me at (513) 851-4900, extension #2063.
| Sincerely, |
| /s/ James P. Waters |
| James P. Waters |
| Executive Vice President and Chief Operating Officer The Hillman Companies, Inc. |
| cc: | John C. Kennedy, Esq. |
Paul, Weiss, Rifkind, Wharton & Garrison LLP