Hillman Solutions Corp

Previous wording

Hillman Solutions Corp. and its wholly-owned subsidiaries (collectively, “Hillman” or “Company”) are one of the largest providers of hardware-related products and related merchandising services to retail markets in North America. Our principal business is operated through our wholly-owned subsidiary, Hillman Solutions Corp. and its wholly-owned subsidiaries (collectively, “Hillman Group”), which had net sales of $350.3 million in the thirteen weeks ended March 30, 2024. Hillman sells its products to hardware stores, home improvement centers, mass merchants, pet supply stores, and other retail outlets principally in the United States, Canada, and Mexico. Product lines include thousands of small hardware parts such as fasteners and related items; threaded rod and metal shapes; keys and accessories; builder's hardware; personal protective equipment, such as gloves and eyewear; and

Current wording

Hillman Solutions Corp. and its wholly-owned subsidiaries (collectively, “Hillman” or “Company”) are one of the largest providers of hardware-related products and related merchandising services to retail markets in North America. Our principal business is operated through our wholly-owned subsidiary, Hillman Solutions Corp. and its wholly-owned subsidiaries (collectively, “Hillman Group”), which had net sales of $379.4 million in the thirteen weeks ended June 29, 2024 and $729.7 million in the twenty-six weeks ended June 29, 2024. Hillman sells its products to hardware stores, home improvement centers, mass merchants, pet supply stores, and other retail outlets principally in the United States, Canada, and Mexico. Product lines include thousands of small hardware parts such as fasteners and related items; threaded rod and metal shapes; keys and accessories; builder's

Previous wording

identification items, such as tags and letters, numbers, and signs. We support product sales with services that include design and installation of merchandising systems, maintenance of appropriate in-store inventory levels, and break-fix for our robotics kiosks.

Current wording

hardware; personal protective equipment, such as gloves and eyewear; and identification items, such as tags and letters, numbers, and signs. We support product sales with services that include design and installation of merchandising systems, maintenance of appropriate in-store inventory levels, and break-fix for our robotics kiosks.

Previous wording

On January 11, 2024, we completed the acquisition of Koch Industries, Inc ("Koch"), a premier provider and merchandiser of rope and twine, chain and wire rope, and related hardware products for a total purchase price of $24.0 million. Koch has business operations throughout North America and its financial results reside in our Hardware and Protective Solutions reportable segment.

Current wording

On January 11, 2024, we completed the acquisition of Koch Industries, Inc. ("Koch"), a provider and merchandiser of rope and twine, chain and wire rope, and related hardware products for a total purchase price of $23.8 million. Koch has business operations throughout North America and its financial results reside in our Hardware and Protective Solutions reportable segment.

Previous wording

We are exposed to the risk of unfavorable changes in foreign currency exchange rates for the U.S. dollar versus local currency of our suppliers located primarily in China and Taiwan. We purchase a majority of our products for resale from multiple vendors located in China and Taiwan. The purchase price of these products is routinely negotiated in U.S. dollar amounts rather than the local currency of the vendors and our suppliers' profit margins decrease when the U.S. dollar declines in value relative to the local currency. This puts pressure on our suppliers to increase prices to us. The U.S. dollar increased in value relative to the CNY by approximately 1.7% in the thirteen weeks ended March 30, 2024, increased by 2.9% in 2023, and increased by 8.3% during 2022. The U.S. dollar increased in value relative to the Taiwan dollar by approximately 4.3% in the thirteen weeks ended March 30, 2024, declined by 0.4% in 2023, and increased by 10.8% in 2022.

Current wording

We are exposed to the risk of unfavorable changes in foreign currency exchange rates for the U.S. dollar versus local currency of our suppliers, particularly those located in China and Taiwan, because we purchase a majority of our products for resale from multiple vendors located in these countries. The purchase price of these products is routinely negotiated in U.S. dollar amounts rather than the local currency of the vendors and our suppliers' profit margins decrease when the U.S. dollar declines in value relative to the local currency. This puts pressure on our suppliers to increase prices to us. The U.S. dollar Increased in value relative to the CNY by approximately 2.4% in the twenty-six weeks ended June 29, 2024, increased by 2.9% in 2023, and increased by 8.3% during 2022. The U.S. dollar Increased in value relative to the Taiwan dollar by approximately 6.0% in the twenty-six weeks ended June 29, 2024, declined by 0.4% in 2023, and increased by 10.8% in 2022.

Previous wording

We are also exposed to risk of unfavorable changes in the Canadian dollar exchange rate versus the U.S. dollar. Our sales in Canada are denominated in Canadian dollars, while a majority of the products are sourced in U.S. dollars. A weakening of the Canadian dollar versus the U.S. dollar results in lower sales in terms of U.S. dollars while the cost of sales remains unchanged. We have a practice of hedging some of our Canadian subsidiary's purchases denominated in U.S. dollars. The U.S. dollar increased in value relative to the Canadian dollar by approximately 2.5% in the thirteen weeks ended March 30, 2024, declined by 2.4% in 2023, and increased by 5.7% in 2022.

Current wording

We are also exposed to risk of unfavorable changes in the Canadian dollar exchange rate versus the U.S. dollar. Our sales in Canada are denominated in Canadian dollars, while a majority of the products are sourced in U.S. dollars. A weakening of the Canadian dollar versus the U.S. dollar results in lower sales in terms of U.S. dollars while the cost of sales remains unchanged. We have a practice of hedging some of our Canadian subsidiary's purchases denominated in U.S. dollars. The U.S. dollar increased in value relative to the Canadian dollar by approximately 3.5% in the twenty-six weeks ended June 29, 2024, declined by 2.4% in 2023, and increased by 5.7% in 2022.

Previous wording

In addition, the negotiated purchase price of our products may be dependent upon market fluctuations in the cost of raw materials (i.e. steel, zinc, and nickel) used by our vendors in their manufacturing processes. The final purchase cost of our products may also be dependent upon inflation or deflation in the local economies of vendors in China and Taiwan that could impact the cost of labor and materials used in the manufacturing of our products. We identify the directional impact of changes in our product cost, but the quantification of each of these variable impacts cannot be measured as to the individual impact on our product cost with a sufficient level of precision. We may take pricing action, when warranted, in an attempt to offset a portion of product cost increases. The ability of our operating divisions to implement price increases and seek price concessions, as appropriate, is dependent on competitive market conditions.

Current wording

In addition, the negotiated purchase price of our products may be dependent upon market fluctuations in the cost of raw materials (i.e. steel, zinc, and nickel) used by our vendors in their manufacturing processes. The final purchase cost of our products may also be dependent upon inflation or deflation in the local economies of vendors that could impact the cost of labor and materials used in the manufacturing of our products. We identify the directional impact of changes in our product cost, but the quantification of each of these variable impacts cannot be measured as to the individual impact on our product cost with a sufficient level of precision. We may take pricing action, when warranted, in an attempt to offset a portion of product cost increases. The ability of our operating divisions to implement or maintain price increases and seek price concessions, as appropriate, is dependent on competitive market conditions.

Previous wording

•Net sales for the thirteen weeks ended March 30, 2024 were $350.3 million compared to net sales of $349.7 million for the thirteen weeks ended April 1, 2023, an increase of approximately $0.6 million or 0.2%.

Current wording

•Net sales for the thirteen weeks ended June 29, 2024 were $379.4 million compared to net sales of $380.0 million for the thirteen weeks ended July 1, 2023, a decrease of approximately $0.6 million or 0.2%.

Previous wording

•Net loss for the thirteen weeks ended March 30, 2024 was $1.5 million, or $(0.01) per diluted share, compared to a net loss of $9.1 million, or $(0.05) per diluted share for the thirteen weeks ended April 1, 2023.

Current wording

•Net income for the thirteen weeks ended June 29, 2024 was $12.5 million, or $0.06 per diluted share, compared to net income of $4.5 million, or $0.02 per diluted share for the thirteen weeks ended July 1, 2023.

Previous wording

•Adjusted EBITDA(1) totaled $52.3 million versus $40.2 million in the thirteen weeks ended March 30, 2024 and in the thirteen weeks ended April 1, 2023, respectively.

Current wording

•Adjusted EBITDA(1) totaled $68.4 million versus $58.0 million in the thirteen weeks ended June 29, 2024 and in the thirteen weeks ended July 1, 2023, respectively.

Previous wording

The increase in total net sales during the first quarter of 2024 was driven primarily driven by the factors described below:

Current wording

The decrease in total net sales during the second quarter of 2024 was driven primarily driven by the factors described below:

Previous wording

Hardware and Protective Solutions net sales increased by $6.0 million in the thirteen weeks ended March 30, 2024 due to the following:

Current wording

Hardware and Protective Solutions net sales increased by $9.3 million in the thirteen weeks ended June 29, 2024 due to the following:

Previous wording

•Hardware net sales increased by $9.4 million primarily driven by $9.2 million in additional sales related to the Koch acquisition as well as $2.4 million of volume increases driven by new business wins offset by $2.0 million in price decreases and product mix.

Current wording

•Hardware net sales increased by $6.0 million primarily driven by $12.3 million in additional sales related to the Koch acquisition, offset by a decrease in volume.

Previous wording

•Protective equipment net sales decreased by $3.4 million primarily due to a $3.5 million decrease in volume driven by the timing of promotional and seasonal sales along with lower demand.

Current wording

•Protective equipment net sales increased by $3.3 million primarily due to an increase in volume driven by new business wins and timing of promotional sales.

Previous wording

Robotics and Digital Solutions net sales in the thirteen weeks ended March 30, 2024 decreased by $5.6 million primarily driven by decreased volume of full-service key and engraving sales.

Current wording

Robotics and Digital Solutions net sales in the thirteen weeks ended June 29, 2024 decreased by $5.0 million primarily driven by decreased volume of key and engraving sales.

Previous wording

•General and administrative (“G&A”) increased by $2.6 million. The increase was primarily driven by increased variable compensation along with increased investment into information technology.

Current wording

•General and administrative (“G&A”) increased $4.8 million. The increase was primarily driven by an increase in compensation and benefit expense and an increased investment into information technology.

Previous wording

•Selling expense increased by $0.5 million primarily due to increased variable selling expenses.

Current wording

•Selling expense increased by $0.5 million primarily due to increased variable compensation expenses.

Previous wording

In the thirteen weeks ended March 30, 2024, other income (expense) consisted primarily of a $0.3 million loss on the revaluation of the contingent consideration associated with the acquisition of Resharp and Instafob (see Note 15 - Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements for additional information). We also recorded exchange rate gains of $0.2 million in the thirteen weeks ended March 30, 2024.

Current wording

In the thirteen weeks ended June 29, 2024, other income (expense) consisted primarily of a $0.4 million loss on the revaluation of the contingent consideration associated with the acquisition of Resharp and Instafob (see Note 15 - Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements for additional information).

Previous wording

Income from operations in our Hardware and Protective Solutions segment increased $13.1 million due to the changes in sales, cost of sales, and SG&A expenses described above.

Current wording

Income from operations in our Hardware and Protective Solutions segment increased $15.7 million due to the changes in net sales, cost of sales, and SG&A expenses described above.

Previous wording

Canada's income from operations increased by $0.8 million primarily due to the changes in sales and offsetting changes in cost of sales and SG&A expenses described above in addition to exchange rate losses of $0.1 million. In the thirteen weeks ended April 1, 2023 Canada recorded exchange rate gains of $0.1 million.

Current wording

Canada's income from operations decreased by $1.8 million primarily due to the changes in net sales, cost of sales and SG&A expenses described above. In the thirteen weeks ended June 29, 2024, Canada recorded exchange rate losses of $0.2 million and in the thirteen weeks ended July 1, 2023, Canada recorded exchange rate gains of $0.2 million.

Previous wording

Interest expense, net, decreased $2.8 million in the thirteen weeks ended March 30, 2024 primarily due to a reduction in outstanding debt.

Current wording

Interest expense, net, decreased $4.1 million in the thirteen weeks ended June 29, 2024 primarily due to a reduction in outstanding debt and a reduction in interest rate spreads driven by the debt repricing in the first quarter of 2024 (see Note 9 - Long-term Debt of the Notes to Condensed Consolidated Financial Statements for additional information).

Previous wording

For the thirteen weeks ended March 30, 2024 and thirteen weeks ended April 1, 2023, the effective income tax rate was 24.5% and 46.2%, respectively. The Company recorded an income tax benefit for the thirteen weeks ended March 30, 2024 of $0.5 million based on a pre-tax loss of $2.0 million, and an income tax benefit for the thirteen weeks ended April 1, 2023 of $7.9 million based on a pre-tax loss of $17.0 million.

Current wording

For the thirteen weeks ended June 29, 2024 and thirteen weeks ended July 1, 2023, the effective income tax rate was 29.0% and (67.0)%, respectively. The Company recorded an income tax provision for the thirteen weeks ended June 29, 2024 of $5.1 million based on a pre-tax income of $17.6 million, and an income tax benefit for the thirteen weeks ended July 1, 2023 of $1.8 million based on a pre-tax income of $2.7 million.

Previous wording

(1)Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net loss to Adjusted EBITDA.

Current wording

(1)Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net income (loss) to Adjusted EBITDA.

Previous wording

Canada net sales increased by $0.2 million primarily due to volume increases of $1.2 million offset by the unfavorable impact of the exchange rate from Canadian dollars to U.S. dollars along with price decreases of $0.9 million.

Current wording

Canada net sales decreased by $4.8 million primarily due to price decreases of $2.9 million, volume decreases of $1.2 million, and an unfavorable impact of the exchange rate from Canadian dollars to U.S. dollars.

Previous wording

•Warehouse expense increased $1.8 million due to inflation in labor and shipping costs.

Current wording

•Warehouse expense increased $1.3 million due to inflation in labor and shipping costs.

Previous wording

In the thirteen weeks ended April 1, 2023, other income (expense) consisted primarily of a $1.7 million loss on the revaluation of the contingent consideration associated with the acquisition of Resharp and Instafob. We also received $0.5 million in benefits from the state and local governments associated with our new facilities in the thirteen weeks ended April 1, 2023. In addition, we recorded exchange rate losses of $0.1 million in the thirteen weeks ended April 1, 2023.

Current wording

In the twenty-six weeks ended July 1, 2023, other income (expense) consisted primarily of a $4.2 million loss on the revaluation of the contingent consideration associated with the acquisition of Resharp and Instafob. We also received $0.6 million in benefits from the state and local governments associated with our new facilities in the twenty-six weeks ended July 1, 2023. In addition, we recorded exchange rate gains of $0.4 million in the twenty-six weeks ended July 1, 2023.

Previous wording

Income from operations in our Robotics and Digital Solutions segment increased $1.3 million. The $1.3 million increase is primarily due to the changes in sales, cost of sales, and SG&A expenses described above, offset by a decrease in depreciation expense of $2.1 million due to certain assets becoming fully depreciated and a decrease of $1.4 million in other expense driven by the changes in revaluation of the contingent consideration described above.

Current wording

Income from operations in our Robotics and Digital Solutions segment decreased $1.8 million. The $1.8 million decrease is primarily due to the changes in net sales, cost of sales, and SG&A expenses described above, including a decrease in depreciation expense of $1.1 million due to certain assets becoming fully depreciated and a decrease of $1.9 million in other expense driven by the changes in revaluation of the contingent consideration described above.

Previous wording

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 uses 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.

Current wording

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 uses this financial measure to evaluate our consolidated operating performance and the operating performance of our operating segments as well as to

Previous wording

The following table presents a reconciliation of net loss, the most directly comparable financial measure under GAAP, to Adjusted EBITDA for the periods presented:

Current wording

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure under GAAP, to Adjusted EBITDA for the periods presented:

Previous wording

The following tables presents a reconciliation of segment operating income (loss), the most directly comparable financial measure under GAAP, to segment Adjusted EBITDA for the periods presented.

Current wording

The following tables presents a reconciliation of segment operating income, the most directly comparable financial measure under GAAP, to segment Adjusted EBITDA for the periods presented.

Previous wording

Our working capital (current assets minus current liabilities) position of $351.0 million as of March 30, 2024 represents an increase of $26.1 million from the December 30, 2023 level of $324.9 million. $16.3 million of the increase is related the acquisition of Koch Industries that occurred in January 2024. We expect to generate sufficient operating cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets, although there can be no assurance of our ability to do so. However, disruption and volatility in the global capital markets, could impact our capital resources and liquidity in the future.

Current wording

Our working capital position, which we define as current assets minus current liabilities, of $351.2 million as of June 29, 2024 represents an increase of $26.3 million from the December 30, 2023 level of $324.9 million. $18.3 million of the increase is related the acquisition of Koch Industries Inc. that occurred in January 2024. We expect to generate sufficient operating cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets, although there can be no assurance of our ability to do so. However, disruption and volatility in the global capital markets, could impact our capital resources and liquidity in the future.

Previous wording

The following table presents the key categories of our consolidated statements of cash flows:

Current wording

The following table presents the key categories of our condensed consolidated statements of cash flows:

Previous wording

Net Cash provided by operating activities for the thirteen weeks ended March 30, 2024 was unfavorably impacted by an increase in accounts receivable due to higher sales.

Current wording

Net cash provided by operating activities for the twenty-six weeks ended June 29, 2024 was unfavorably impacted by increases in accounts receivable due to the seasonality of our business, and increased inventory driven by demand as we normalize our inventory levels. Additionally, we saw increased accounts payable due to the timing of inventory purchases and payments.

Previous wording

Net cash provided by operating activities for the thirteen weeks ended April 1, 2023 was favorably impacted by reduced inventory as part of the Company's strategic initiative to lower inventory on hand during 2023 following the build up of inventory in prior years due to inflation and recent supply chain challenges. This was partially offset by reduced accounts payable resulting from lower inventory purchases.

Current wording

Net cash provided by operating activities for the twenty-six weeks ended July 1, 2023 was favorably impacted by reduced inventory as part of the company's ongoing strategic initiative to lower inventory on hand during 2023 following the build up of inventory in prior years due to inflation and supply chain challenges. Additionally, we saw increased accounts payable due to the timing of inventory purchases and payments.

Previous wording

Cash of $17.8 million and $18.1 million was used in the thirteen weeks ended March 30, 2024 and thirteen weeks ended April 1, 2023, respectively, to invest in new key duplicating and engraving kiosks, machines and merchandising racks in the Hardware and Protective Solutions segment.

Current wording

Cash of $40.1 million and $37.0 million was used in the twenty-six weeks ended June 29, 2024 and twenty-six weeks ended July 1, 2023, respectively, to invest in new key duplicating and engraving kiosks and merchandising racks.

Previous wording

On January 11, 2024, we completed the acquisition of Koch Industries, Inc. ("Koch"), a premier provider and merchandiser of rope and twine, chain and wire rope, and related hardware products for a total purchase price of $24.0 million. See Note 4 - Acquisitions of the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

On January 11, 2024, we completed the acquisition of Koch Industries, Inc. ("Koch"), a premier provider and merchandiser of rope and twine, chain and wire rope, and related hardware products for a total purchase price of $23.8 million. See Note 4 - Acquisitions of the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

The Company used $2.1 million of cash for principal payments on the senior term loan. As of March 30, 2024, we have outstanding borrowings of $749.7 million on the term loan. See Note 9 - Long-term Debt of the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

The Company used $4.3 million of cash for principal payments on the senior term loan. As of June 29, 2024, we have outstanding borrowings of $747.6 million on the term loan. See Note 9 - Long-term Debt of the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

Our revolver repayments, net of draws, used cash of $18.0 million in the thirteen weeks ended March 30, 2024 primarily to fund the acquisition of Koch Industries, Inc, referenced above. In the thirteen weeks ended April 1, 2023, revolver draws, net of repayments, used $5.0 million of cash.

Current wording

In the twenty-six weeks ended July 1, 2023, revolver repayments, net of draws, used $64.0 million of cash.

Previous wording

In the thirteen weeks ended March 30, 2024 the Company received $5.9 million from the exercise of stock options. There were no stock options exercised in the thirteen weeks ended April 1, 2023.

Current wording

In the twenty-six weeks ended June 29, 2024 and twenty-six weeks ended July 1, 2023 the Company received $6.4 million and $0.6 million from the exercise of stock options, respectfully.