• Hillman Reports Fourth Quarter 2023 Results; Provides 2024 Guidance

    Source: Nasdaq GlobeNewswire / 22 Feb 2024 07:30:00   America/New_York

    CINCINNATI, Feb. 22, 2024 (GLOBE NEWSWIRE) -- Hillman Solutions Corp. (Nasdaq: HLMN) (the “Company” or “Hillman”), a leading provider of hardware products and merchandising solutions, reported financial results for the thirteen and fifty-two weeks ended December 30, 2023.

    Fiscal 2023 consisted of fifty-two weeks compared to fifty-three weeks during fiscal 2022 and the fourth quarter of fiscal 2023 consisted of thirteen weeks compared to fourteen weeks during fiscal 2022.

    Fourth Quarter 2023 Highlights (Thirteen Weeks Ended December 30, 2023)

    • Net sales decreased 0.8% to $347.8 million compared to $350.7 million in the prior year quarter; excluding the 14th week during 2022, net sales increased 3.8% from $335.0 million in 2022
    • Net loss totaled $(10.1) million, or $(0.05) per diluted share, compared to net loss of $(13.9) million, or $(0.07) per diluted share, in the prior year quarter
    • Adjusted Diluted EPS1 was $0.10 per diluted share compared to $0.05 per diluted share in the prior year quarter
    • Adjusted EBITDA1 totaled $54.4 million compared to $45.0 million in the prior year quarter

    Full Year 2023 Highlights (Fifty-Two Weeks Ended December 30, 2023)

    • Net sales decreased 0.7% to $1.48 billion as compared to $1.49 billion in the prior year period; excluding the 53rd week during 2022, net sales increased 0.4% from $1.47 billion in 2022
    • Net loss totaled $(9.6) million, or $(0.05) per diluted share, compared to a loss of $(16.4) million, or $(0.08) per diluted share, in the prior year period
    • Adjusted Diluted EPS1 was $0.41 per diluted share compared to $0.43 per diluted share in the prior year period
    • Adjusted EBITDA1 totaled $219.4 million compared to $210.2 million in the prior year period
    • Net cash provided by operating activities totaled $238.0 million compared to $119.0 million in the prior year period
    • Free Cash Flow1 totaled $172.3 million compared to $49.4 million in the prior year period

    Balance Sheet and Liquidity at December 30, 2023

    • Gross debt was $761 million, compared to $919 million at the end of 2022; net debt1 outstanding was $722 million, compared to $888 million at the end of 2022
    • Liquidity available totaled approximately $285 million, consisting of $247 million of available borrowing under the revolving credit facility and $39 million of cash and equivalents
    • Net debt1 to trailing twelve month Adjusted EBITDA improved to 3.3x times from 4.2x at the end of 2022

    Management Commentary

    “2023 was a remarkable operational year for the Hillman team," commented Doug Cahill, Chairman, President and Chief Executive Officer of Hillman. “During the year we paid down $160 million of debt and reduced our inventory by $100 million while maintaining fill rates over 94% for our customers - all while moving into our new Kansas City distribution hub. This is some of the best work I have seen a team do in my career and sets us up to be more efficient during 2024 and beyond."

    "Because of our success reducing inventory and generating cash, we improved our net debt to adjusted EBITDA ratio to 3.3 times, a reduction over nearly a full turn during the year. We were also able to execute new business wins with some of our biggest customers which helped offset the macro environment.

    "Subsequent to the end of the year, we acquired Koch Industries, a leading provider of rope and chain, marking our entrance into a new product category. We are thrilled to welcome Koch to the Hillman family, and our sales and service team is already off to the races seeking out opportunities to grow that segment.

    "During 2024 Hillman celebrates its 60th year in business - and we expect to continue to take great care of our customers seeing Adjusted EBITDA margins expand and cash flows normalize following a record cash flow year in 2023. We are confident we can drive strong results for our shareholders during 2024 and beyond."

    Full Year 2024 Guidance

    Hillman has provided the following guidance based on its current view of the market and its performance expectations during the fifty-two weeks ended December 28, 2024.

     Full Year 2024 Guidance
    Net Sales$1.475 to $1.555 billion
    Adjusted EBITDA1$230 to $240 million
    Free Cash Flow1$100 to $120 million
    1. Adjusted EBITDA, Adjusted Diluted EPS, Net Debt, and Free Cash Flow are non-GAAP financial measures. Refer to the "Reconciliation of Adjusted EBITDA”, "Reconciliation of Adjusted Earnings per Share", "Reconciliation of Net Debt" and "Reconciliation of Free Cash Flow" sections of this press release for additional information as well as reconciliations between the company’s GAAP and non-GAAP financial results.

    Fourth Quarter and Full Year 2023 Results Presentation

    Hillman plans to host a conference call and webcast presentation today, February 22, 2024, at 8:30 a.m. Eastern Time to discuss its results and guidance. Chairman, President, and Chief Executive Officer Doug Cahill, Chief Financial Officer Rocky Kraft, and Chief Operating Officer Jon Michael Adinolfi will host the results presentation.

    Date: February 22, 2024

    Time: 8:30 am Eastern Time

    Listen-only Webcast: https://edge.media-server.com/mmc/p/m89p3d4r/

    A webcast replay will be available approximately one hour after the conclusion of the call using the Audio-Only Webcast link above.

    Hillman’s earnings release, results presentation, and 10-K are expected to be filed with the SEC and posted to its website, https://ir.hillmangroup.com, before the webcast presentation begins.

    About Hillman Solutions Corp.

    Founded in 1964 and headquartered in Cincinnati, Ohio, Hillman Solutions Corp. (“Hillman”) and its subsidiaries are leading North American providers of complete hardware solutions, delivered with outstanding customer service to over 46,000 locations. 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 its leading distribution and sales network, Hillman delivers a “small business” experience with “big business” efficiency. For more information on Hillman, visit www.hillmangroup.com.

    Forward Looking Statements

    You should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," “target”, “goal”, "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the Company’s expectations with respect to future performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside the Company's control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) unfavorable economic conditions that may affect operations, financial condition and cash flows including spending on home renovation or construction projects, inflation, recessions, instability in the financial markets or credit markets; (2) increased supply chain costs, including raw materials, sourcing, transportation and energy; (3) the highly competitive nature of the markets that we serve; (4) the ability to continue to innovate with new products and services; (5) direct and indirect costs associated with the May 2023 ransomware attack, and our receipt of expected insurance receivables associated with that cyber security incident; (6) seasonality; (7) large customer concentration; (8) the ability to recruit and retain qualified employees; (9) the outcome of any legal proceedings that may be instituted against the Company; (10) adverse changes in currency exchange rates; or (11) regulatory changes and potential legislation that could adversely impact financial results.. The foregoing list of factors is not exclusive, and readers should also refer to those risks that are included in the Company’s filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 30, 2023. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward looking statements.

    Except as required by applicable law, the Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this communication to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.

    Contact:

    Michael Koehler
    Vice President of Investor Relations & Treasury
    513-826-5495
    IR@hillmangroup.com

    HILLMAN SOLUTIONS CORP.

    Condensed Consolidated Statement of Net Income, GAAP Basis 
    (dollars in thousands) 
    Unaudited

     Thirteen Weeks
    Ended
    December 30,
    2023
     Fourteen Weeks
    Ended
    December 31,
    2022
     Fifty-two Weeks
    Ended
    December 30,
    2023
     Fifty-three Weeks
    Ended
    December 31,
    2022
    Net sales$347,808  $350,663  $1,476,477  $1,486,328 
    Cost of sales (exclusive of depreciation and amortization shown separately below) 185,304   198,330   828,956   846,551 
    Selling, warehouse, general and administrative expenses 116,234   114,980   452,110   480,993 
    Depreciation 14,392   16,077   59,331   57,815 
    Amortization 15,576   15,551   62,309   62,195 
    Other expense (income), net 12,002   2,005   12,843   (1,119)
    Income from operations 4,300   3,720   60,928   39,893 
    Interest expense, net 15,430   15,703   68,310   54,560 
    Loss before income taxes (11,130)  (11,983)  (7,382)  (14,667)
    Income tax (benefit) expense (1,071)  1,916   2,207   1,769 
    Net loss$(10,059) $(13,899) $(9,589) $(16,436)
            
    Basic and dilutive loss per share$(0.05) $(0.07) $(0.05) $(0.08)
    Weighted average basic and dilutive shares outstanding 194,903   194,468   194,722   194,249 

    HILLMAN SOLUTIONS CORP.

    Condensed Consolidated Balance Sheets 
    (dollars in thousands) 
    Unaudited

     December 30,
    2023
     December 31,
    2022
    ASSETS   
    Current assets:   
    Cash and cash equivalents$38,553  $31,081 
    Accounts receivable, net of allowances of $2,770 ($2,405 - 2021) 103,482   86,985 
    Inventories, net 382,710   489,326 
    Other current assets 23,235   24,227 
    Total current assets 547,980   631,619 
    Property and equipment, net of accumulated depreciation of $333,875 ($333,452 - 2021) 200,553   190,258 
    Goodwill 825,042   823,812 
    Other intangibles, net of accumulated amortization of $470,791 ($414,275 - 2021) 655,293   734,460 
    Operating lease right of use assets 87,479   66,955 
    Other assets 14,754   23,586 
    Total assets$2,331,101  $2,470,690 
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Accounts payable$140,290  $131,751 
    Current portion of debt and finance lease liabilities 9,952   10,570 
    Current portion of operating lease liabilities 14,407   12,285 
    Accrued expenses:   
    Salaries and wages 22,548   15,709 
    Pricing allowances 8,145   9,246 
    Income and other taxes 6,469   5,300 
    Interest 343   697 
    Other accrued liabilities 20,966   29,854 
    Total current liabilities 223,120   215,412 
    Long-term debt 731,708   884,636 
    Deferred tax liabilities 131,552   140,091 
    Operating lease liabilities 79,994   61,356 
    Other non-current liabilities 10,198   12,456 
    Total liabilities$1,176,572  $1,313,951 
    Commitments and contingencies   
    Stockholders' equity:   
    Common stock, 0.0001 par, 500,000,000 shares authorized, 194,913,124 issued and outstanding at December 30, 2023 and 194,548,411 issued and outstanding at December 31, 2022 20   20 
    Additional paid-in capital 1,418,535   1,404,360 
    Accumulated deficit (236,206)  (226,617)
    Accumulated other comprehensive loss (27,820)  (21,024)
    Total stockholders' equity 1,154,529   1,156,739 
    Total liabilities and stockholders' equity$2,331,101  $2,470,690 

    HILLMAN SOLUTIONS CORP.

    Condensed Consolidated Statement of Cash Flows 
    (dollars in thousands) 
    Unaudited

     Fifty-two Weeks
    Ended December 30,
    2023
     Fifty-three Weeks
    Ended December 31,
    2022
    Cash flows from operating activities:   
    Net loss$(9,589) $(16,436)
    Adjustments to reconcile net loss to net cash provided by (used for) operating activities:   
    Depreciation and amortization 121,640   120,010 
    Gain on dispositions of property and equipment (34)  (26)
    Impairment of long lived assets 24,600    
    Deferred income taxes (8,693)  (873)
    Deferred financing and original issue discount amortization 5,323   3,582 
    Stock-based compensation expense 12,004   13,524 
    Change in fair value of contingent consideration (4,936)  (1,128)
    Changes in operating items:   
    Accounts receivable, net (15,898)  19,889 
    Inventories, net 103,660   38,813 
    Other assets 3,068   566 
    Accounts payable 8,029   (53,760)
    Other accrued liabilities (1,139)  (5,150)
    Net cash provided by operating activities 238,035   119,011 
    Cash flows from investing activities:   
    Acquisition of business, net of cash received (1,700)  (2,500)
    Capital expenditures (65,769)  (69,589)
    Other investing activities (383)  (733)
    Net cash used for investing activities (67,852)  (72,822)
    Cash flows from financing activities:   
    Repayments of senior term loans (88,510)  (10,638)
    Borrowings of revolving credit loans 178,000   244,000 
    Repayments of revolving credit loans (250,000)  (265,000)
    Principal payments under finance lease obligations (2,410)  (1,470)
    Proceeds from exercise of stock options 2,167   2,609 
    Payments of contingent consideration (1,232)   
    Other financing activities 9   1,777 
    Net cash used for financing activities (161,976)  (28,722)
    Effect of exchange rate changes on cash (735)  (991)
    Net increase in cash and cash equivalents 7,472   16,476 
    Cash and cash equivalents at beginning of period 31,081   14,605 
    Cash and cash equivalents at end of period$38,553  $31,081 

    HILLMAN SOLUTIONS CORP.

    Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

    The Company uses non-GAAP financial measures to analyze underlying business performance and trends. The Company believes that providing these non-GAAP financial measures enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance. These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. The Company’s definitions of its non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, reconciliations to GAAP financial measures are not provided for forward-looking non-GAAP measures. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

    Non-GAAP financial measures such as consolidated adjusted EBITDA and Adjusted Diluted Earnings per Share (EPS) exclude from the relevant GAAP metrics items that neither relate to the ordinary course of the Company’s business, nor reflect the Company’s underlying business performance.

    Reconciliation of Adjusted EBITDA (Unaudited)

    (dollars in thousands)

    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 and Board of Directors use 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.

     Thirteen Weeks
    Ended
    December 30,
    2023
     Fourteen Weeks
    Ended
    December 31,
    2022
     Fifty-two Weeks
    Ended
    December 30,
    2023
     Fifty-three Weeks
    Ended
    December 31,
    2022
    Net loss$(10,059) $(13,899) $(9,589) $(16,436)
    Income tax (benefit) expense (1,071)  1,916   2,207   1,769 
    Interest expense, net 15,430   15,703   68,310   54,560 
    Depreciation 14,392   16,077   59,331   57,815 
    Amortization 15,576   15,551   62,309   62,195 
    EBITDA$34,268  $35,348  $182,568  $159,903 
            
    Stock compensation expense 2,893   2,735   12,004   13,524 
    Restructuring and other(1) 4   1,136   3,031   2,617 
    Litigation expense(2)    3,889   339   32,856 
    Transaction and integration expense(3) 155   84   1,754   2,477 
    Change in fair value of contingent consideration (7,550)  1,798   (4,936)  (1,128)
    Impairment charges(4) 24,600      24,600    
    Total adjusting items$20,102  $9,642  $36,792  $50,346 
    Adjusted EBITDA$54,370  $44,990  $219,360  $210,249 

    (1) Restructuring and other includes consulting and other costs associated with severance related to our distribution center relocations and corporate restructuring activities. 2023 includes costs associated with the Cybersecurity Incident that occurred in May 2023.

    (2) Litigation expense includes legal fees associated with our litigation with Hy-Ko Products Company LLC.

    (3) Transaction and integration expense includes professional fees, non-recurring bonuses, and other costs related to acquisitions and the secondary offerings of shares in 2022 and 2023.

    (4) In the fourth quarter of 2023, we recorded an impairment charge in our Hardware and Protective Solutions segment of $24.6 million, primarily related to review of certain product offerings. In the fourth quarter of 2023, we evaluated a specific product line and decided to exit certain retail locations and markets, which reduced the future cash flows from this product line and impacted the lower of cost or market valuation of inventory. As a result of this review we impaired $19.6 million of intangible assets and recorded inventory revaluation charges of $5.0 million.

    Reconciliation of Adjusted Diluted EPS 
    (in thousands, except per share data) 
    Unaudited

    We define Adjusted Diluted EPS as reported diluted EPS excluding the effect of one-time, non-recurring activity and volatility associated with our income tax expense. The Company believes that Adjusted Diluted EPS provides further insight and comparability in operating performance as it eliminates the effects of certain items that are not comparable from one period to the next. The following is a reconciliation of reported diluted EPS from continuing operations to Adjusted Diluted EPS from continuing operations:

      Thirteen Weeks
    Ended
    December 30,
    2023
     Fourteen Weeks
    Ended
    December 31,
    2022
     Fifty-two Weeks
    Ended
    December 30,
    2023
     Fifty-three Weeks
    Ended
    December 31,
    2022
    Reconciliation to Adjusted Net Income        
    Net loss $(10,059) $(13,899) $(9,589) $(16,436)
    Remove adjusting items(1)  20,102   9,642   36,792   50,346 
    Remove amortization expense  15,576   15,551   62,309   62,195 
    Remove tax benefit on adjusting items and amortization expense(3)  (5,145)  (2,272)  (10,052)  (12,991)
    Adjusted Net Income $20,474  $9,022  $79,460  $83,114 
             
    Reconciliation to Adjusted Diluted Earnings per Share        
    Diluted Earnings per Share $(0.05) $(0.07) $(0.05) $(0.08)
    Remove adjusting items(1)  0.10   0.05   0.19   0.26 
    Remove amortization expense  0.08   0.08   0.32   0.32 
    Remove tax benefit on adjusting items and amortization expense(2)  (0.03)  (0.01)  (0.05)  (0.07)
    Adjusted Diluted Earnings per Share $0.10  $0.05  $0.41  $0.43 
             
    Reconciliation to Adjusted Diluted Shares Outstanding        
    Diluted Shares, as reported  194,903   194,468   194,722   194,249 
    Non-GAAP dilution adjustments        
    Dilutive effect of stock options and awards  1,034   382   1,136   1,190 
    Adjusted Diluted Shares  195,937   194,850   195,858   195,440 

    Note: Adjusted EPS may not add due to rounding.

    (1) Please refer to "Reconciliation of Adjusted EBITDA" table above for additional information on adjusting items. See "Per share impact of Adjusting Items" table below for the per share impact of each adjustment.

    (2) We have calculated the income tax effect of the non-GAAP adjustments shown above at the applicable statutory rate of 25.1% for the U.S. and 26.2% for Canada except for the following items:

    1. The tax impact of stock compensation expense was calculated using the statutory rate of 25.1%, excluding certain awards that are non-deductible.
    2. The tax impact of acquisition and integration expense included in "Other" was calculated using the statutory rate of 25.1%, excluding certain charges that were non-deductible.
    3. Amortization expense for financial accounting purposes was offset by the tax benefit of deductible amortization expense using the statutory rate of 25.1%.

    Per Share Impact of Adjusting Items

      Thirteen Weeks
    Ended
    December 30,
    2023
     Fourteen Weeks
    Ended
    December 31,
    2022
     Fifty-two Weeks
    Ended
    December 30,
    2023
     Fifty-three Weeks
    Ended
    December 31,
    2022
    Stock compensation expense $0.01  $0.01 $0.06  $0.07 
    Restructuring and other     0.01  0.02   0.01 
    Litigation expense     0.02     0.17 
    Acquisition and integration expense       0.01   0.01 
    Change in fair value of contingent consideration  (0.04)   0.01  (0.03)   (0.01) 
    Impairment charges  0.13     0.13    
    Total adjusting items $0.10  $0.05 $0.19  $0.26 

    Note: Adjusting items may not add due to rounding.

    Reconciliation of Net Debt

    We define Net Debt as reported gross debt less cash on hand. Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company believes that Net Debt provides further insight and comparability into liquidity and capital structure. The following is the calculation of Net Debt:

     December 30, 2023 December 31, 2022
    Revolving loans$ $72,000
    Senior term loan, due 2028 751,852  840,363
    Finance leases and other obligations 9,097  6,406
    Gross debt$760,949 $918,769
    Less cash 38,553  31,081
    Net debt$722,396 $887,688

    Reconciliation of Free Cash Flow

    We calculate free cash flow as cash flows from operating activities less capital expenditures. Free cash flow is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. We believe free cash flow is an important indicator of how much cash is generated by our business operations and is a measure of incremental cash available to invest in our business and meet our debt obligations.

     Fifty-two Weeks
    Ended
    December 30,
    2023
     Fifty-three Weeks
    Ended
    December 31,
    2022
    Net cash provided by operating activities$238,035  $119,011 
    Capital expenditures (65,769)  (69,589)
    Free cash flow$172,266  $49,422 

    Source: Hillman Solutions Corp.

     


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