Hillman Solutions Corp. (Nasdaq: HLMN) (the “Company” or
“Hillman”), a leading provider of hardware products and
merchandising solutions, reported financial results for the
thirteen weeks ended April 1, 2023.
First Quarter
2023 Highlights Thirteen
weeks ended April 1, 2023
- Net sales decreased
(3.7)% to $349.7 million compared to $363.0 million in the prior
year quarter
- Net loss totaled
$(9.1) million, or $(0.05) per diluted share, compared to net loss
of $(1.9) million, or $(0.01) per diluted share, in the prior year
quarter
- Adjusted diluted
EPS1 was $0.06 per diluted share compared to $0.09 per diluted
share in the prior year quarter
- Adjusted EBITDA1
totaled $40.2 million compared to $44.0 million in the prior year
quarter
- Net cash provided
by operating activities totaled $31.5 million compared to cash used
for operating activities of $(3.5) million in the prior year
quarter
- Free Cash Flow1
totaled $13.4 million compared to $(16.1) million in the prior year
quarter
Management Commentary
"First quarter 2023 results represent a solid start
to the year during which we produced strong Adjusted EBITDA and
free cash flow,” commented Doug Cahill, Chairman, President and
Chief Executive Officer of Hillman. “While severe weather
conditions in certain parts of the West impacted a portion of
volume, our sales performed well in our other markets and we saw
the benefit of our multiple price actions flow through our top line
results. Free cash flow came in strong as we worked down inventory
levels ahead of schedule while maintaining excellent fill rates of
97% at the shelf.”
“In our largest category, Hardware Solutions, our
hardware products are used for small-ticket repair, remodel and
maintenance projects and have negligible exposure to new housing
starts, which drives consistent results and positions us to perform
well throughout the year. Our moat, which consists of
direct-to-store shipping model and our 1,100-memeber field sales
and service teams, continues to deliver best-in-class service and
solutions to our customers, and we are proud of our team's
relentless efforts to drive our business forward. We are confident
that our differentiated strategy, experienced team, and our ability
to execute will drive strong results in 2023 and
beyond.”
Balance Sheet and Liquidity at April 1,
2023
- Gross debt was
$911.6 million, compared to $918.8 million at the end of 2022; net
debt1 outstanding was $876.9 million, compared to $887.7 million at
the end of 2022
- Liquidity available
totaled approximately $243.6 million, consisting of $208.9 million
of available borrowing under the revolving credit facility and
$34.8 million of cash and equivalents
- Net debt1 to
trailing twelve month Adjusted EBITDA1 was 4.2x times, unchanged
from December 31, 2022
Full Year 2023 Guidance -
Reiterated
Hillman reiterated the following guidance based on
its current view of the market and its performance expectations for
the fifty-two weeks ended December 30, 2023. This guidance was
originally provided on February 23, 2023 with Hillman's fourth
quarter 2022 results.
|
Full Year 2023 Guidance |
Net Sales |
$1.45 to $1.55 billion |
Adjusted EBITDA1 |
$215 to $235 million |
Free Cash Flow1 |
$125 to
$145 million |
First Quarter 2023 Results
Presentation
Hillman plans to host a conference call and webcast
presentation today, May 9, 2022, at 8:30 a.m. Eastern Time to
discuss its results. Chairman, President, and Chief Executive
Officer Doug Cahill and Chief Financial Officer Rocky Kraft will
host the results presentation.
Date:
Tuesday, May 9, 2023
Time:
8:30 a.m. Eastern Time
Listen-Only
Webcast: https://edge.media-server.com/mmc/p/38jr8v7z
A webcast replay will be available approximately
one hour after the conclusion of the call using the link above.
Hillman’s quarterly presentation and Form 10-Q are
expected to be filed with the SEC and posted to its Investor
Relations website, https://ir.hillmangroup.com, before the webcast
presentation begins.
1) Denotes Non-GAAP metric. For additional information,
including our definitions, use of, and reconciliations of these
metrics to the most directly comparable financial measures under
GAAP, please see the reconciliations toward the end of the press
release.
About Hillman
Founded in 1964 and headquartered in Cincinnati,
Ohio, Hillman is a leading North American provider of complete
hardware solutions, delivered with industry best customer service
to over 40,000 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 a
world-class 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
All statements made in this press release that are
consider to be forward-looking are made in good faith by the
Company and are intended to qualify for the safe harbor from
liability established by Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934, and the Private
Securities Litigation Reform Act of 1995. 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) seasonality; (6) large customer concentration;
(7) the ability to recruit and retain qualified employees; (8) the
outcome of any legal proceedings that may be instituted against the
Company; (9) adverse changes in currency exchange rates; (10) the
impact of COVID-19 on the Company’s business; 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 this Annual Report on Form 10-K filed on
February 27, 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 KoehlerVice President of Investor Relations
& Treasury513-826-5495IR@hillmangroup.comHILLMAN
SOLUTIONS CORP.
Condensed Consolidated Statement of
Net Income, GAAP Basis(dollars in
thousands) Unaudited
|
Thirteen weeks ended April 1, 2023 |
|
|
Thirteen weeks ended March 26, 2022 |
|
Net sales |
$ |
349,707 |
|
|
$ |
363,013 |
|
Cost of sales (exclusive of depreciation and amortization
shown separately below) |
|
204,509 |
|
|
|
213,273 |
|
Selling, warehouse, general and administrative
expenses |
|
111,065 |
|
|
|
114,538 |
|
Depreciation |
|
16,705 |
|
|
|
13,254 |
|
Amortization |
|
15,572 |
|
|
|
15,521 |
|
Other expense (income), net |
|
767 |
|
|
|
(2,422 |
) |
Income from operations |
|
1,089 |
|
|
|
8,849 |
|
Interest expense, net |
|
18,077 |
|
|
|
11,628 |
|
Loss before income taxes |
|
(16,988 |
) |
|
|
(2,779 |
) |
Income tax benefit |
|
(7,856 |
) |
|
|
(892 |
) |
Net loss |
$ |
(9,132 |
) |
|
$ |
(1,887 |
) |
|
|
|
|
|
|
Basic and diluted loss per share |
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
Weighted average basic and diluted shares
outstanding |
|
194,548 |
|
|
|
194,007 |
|
|
|
|
|
|
|
|
|
HILLMAN SOLUTIONS CORP.
Consolidated Balance
Sheets(dollars in
thousands)Unaudited
|
April 1, 2023 |
|
|
December 31, 2022 |
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
34,750 |
|
|
$ |
31,081 |
|
Accounts receivable, net of allowances of $2,303 ($2,405 -
2022) |
|
121,148 |
|
|
|
86,985 |
|
Inventories, net |
|
450,899 |
|
|
|
489,326 |
|
Other current assets |
|
30,095 |
|
|
|
24,227 |
|
Total current assets |
|
636,892 |
|
|
|
631,619 |
|
Property and equipment, net of accumulated depreciation of
$343,269 ($333,452 - 2022) |
|
191,933 |
|
|
|
190,258 |
|
Goodwill |
|
824,139 |
|
|
|
823,812 |
|
Other intangibles, net of accumulated amortization of
$430,005 ($414,275 - 2022) |
|
719,268 |
|
|
|
734,460 |
|
Operating lease right of use assets |
|
95,788 |
|
|
|
66,955 |
|
Other assets |
|
18,766 |
|
|
|
23,586 |
|
Total assets |
$ |
2,486,786 |
|
|
$ |
2,470,690 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
143,230 |
|
|
$ |
131,751 |
|
Current portion of debt and financing lease
liabilities |
|
10,884 |
|
|
|
10,570 |
|
Current portion of operating lease
liabilities |
|
13,448 |
|
|
|
12,285 |
|
Accrued expenses: |
|
|
|
|
|
Salaries and wages |
|
13,719 |
|
|
|
15,709 |
|
Pricing allowances |
|
9,967 |
|
|
|
9,246 |
|
Income and other taxes |
|
5,208 |
|
|
|
5,300 |
|
Interest |
|
480 |
|
|
|
697 |
|
Other accrued liabilities |
|
24,670 |
|
|
|
29,854 |
|
Total current liabilities |
|
221,606 |
|
|
|
215,412 |
|
Long-term debt |
|
878,224 |
|
|
|
884,636 |
|
Deferred tax liabilities |
|
137,558 |
|
|
|
140,091 |
|
Operating lease liabilities |
|
89,486 |
|
|
|
61,356 |
|
Other non-current liabilities |
|
13,780 |
|
|
|
12,456 |
|
Total liabilities |
$ |
1,340,654 |
|
|
$ |
1,313,951 |
|
Commitments and contingencies (Note 6) |
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
Common stock, $0.0001 par, 500,000,000 shares authorized,
194,548,420 issued and outstanding at April 1, 2023 and
194,548,411 issued and outstanding at December 31,
2022 |
|
20 |
|
|
|
20 |
|
Additional paid-in capital |
|
1,407,068 |
|
|
|
1,404,360 |
|
Accumulated deficit |
|
(235,749 |
) |
|
|
(226,617 |
) |
Accumulated other comprehensive loss |
|
(25,207 |
) |
|
|
(21,024 |
) |
Total stockholders' equity |
|
1,146,132 |
|
|
|
1,156,739 |
|
Total liabilities and stockholders' equity |
$ |
2,486,786 |
|
|
$ |
2,470,690 |
|
|
|
|
|
|
|
|
|
HILLMAN SOLUTIONS CORP.
Condensed Consolidated Statement of
Cash Flows(dollars in
thousands)Unaudited
|
Thirteen Weeks Ended April 1,
2023 |
|
|
Thirteen Weeks EndedMarch 26,
2022 |
|
Cash flows from operating activities: |
|
|
|
|
|
Net loss |
$ |
(9,132 |
) |
|
$ |
(1,887 |
) |
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
32,277 |
|
|
|
28,775 |
|
Deferred income taxes |
|
(2,594 |
) |
|
|
1,293 |
|
Deferred financing and original issue discount
amortization |
|
1,332 |
|
|
|
1,299 |
|
Stock-based compensation expense |
|
2,637 |
|
|
|
6,018 |
|
Loss on disposal of property and equipment |
|
82 |
|
|
|
— |
|
Change in fair value of contingent
consideration |
|
1,715 |
|
|
|
(1,470 |
) |
Changes in operating items: |
|
|
|
|
|
Accounts receivable, net |
|
(33,963 |
) |
|
|
(22,304 |
) |
Inventories, net |
|
38,871 |
|
|
|
(29,529 |
) |
Other assets |
|
(5,934 |
) |
|
|
(3,854 |
) |
Accounts payable |
|
11,406 |
|
|
|
9,910 |
|
Other accrued liabilities |
|
(5,190 |
) |
|
|
8,207 |
|
Net cash provided by (used for) operating
activities |
|
31,507 |
|
|
|
(3,542 |
) |
Net cash used for investing activities |
|
|
|
|
|
Acquisition of business, net of cash received |
|
(300 |
) |
|
|
(2,500 |
) |
Capital expenditures |
|
(18,111 |
) |
|
|
(12,541 |
) |
Other investing activities |
|
(113 |
) |
|
|
— |
|
Net cash used for investing activities |
|
(18,524 |
) |
|
|
(15,041 |
) |
Cash flows from financing activities: |
|
|
|
|
|
Repayments of senior term loans |
|
(2,128 |
) |
|
|
(2,128 |
) |
Borrowings on revolving credit loans |
|
39,000 |
|
|
|
70,000 |
|
Repayments of revolving credit loans |
|
(44,000 |
) |
|
|
(43,000 |
) |
Principal payments under finance lease
obligations |
|
(494 |
) |
|
|
(259 |
) |
Proceeds from exercise of stock options |
|
— |
|
|
|
328 |
|
Payments of contingent consideration |
|
(1,079 |
) |
|
|
(38 |
) |
Other financing activities |
|
(58 |
) |
|
|
— |
|
Cash payments related to hedging activities |
|
— |
|
|
|
(467 |
) |
Net cash (used for) provided by financing
activities |
|
(8,759 |
) |
|
|
24,436 |
|
Effect of exchange rate changes on cash |
|
(555 |
) |
|
|
(1,083 |
) |
Net increase in cash and cash equivalents |
|
3,669 |
|
|
|
4,770 |
|
Cash and cash equivalents at beginning of
period |
|
31,081 |
|
|
|
14,605 |
|
Cash and cash equivalents at end of period |
$ |
34,750 |
|
|
$ |
19,375 |
|
|
|
|
|
|
|
|
|
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 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 April 1, 2023 |
|
|
Thirteen
Weeks EndedMarch 26, 2022 |
|
Net loss |
$ |
(9,132 |
) |
|
$ |
(1,887 |
) |
Income tax benefit |
|
(7,856 |
) |
|
|
(892 |
) |
Interest expense, net |
|
18,077 |
|
|
|
11,628 |
|
Depreciation |
|
16,705 |
|
|
|
13,254 |
|
Amortization |
|
15,572 |
|
|
|
15,521 |
|
EBITDA |
$ |
33,366 |
|
|
$ |
37,624 |
|
|
|
|
|
|
|
Stock compensation expense |
|
2,637 |
|
|
|
6,018 |
|
Restructuring (1) |
|
1,408 |
|
|
|
52 |
|
Litigation expense (2) |
|
260 |
|
|
|
1,010 |
|
Acquisition and integration expense
(3) |
|
800 |
|
|
|
777 |
|
Change in fair value of contingent
consideration |
|
1,715 |
|
|
|
(1,470 |
) |
Total adjusting items |
|
6,820 |
|
|
|
6,387 |
|
Adjusted EBITDA |
$ |
40,186 |
|
|
$ |
44,011 |
|
|
|
|
|
|
|
|
|
(1) Includes consulting and other
costs associated with distribution center relocations and corporate
restructuring activities.
(2) Litigation expense includes
legal fees associated with our litigation with Hy-Ko Products
Company LLC.
(3) Acquisition and integration
expense includes professional fees and other costs related to the
secondary offerings in 2022 and 2023.
Reconciliation of Adjusted Diluted Earnings
Per Share(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 EndedApril 1,
2023 |
|
|
Thirteen Weeks EndedMarch 26,
2022 |
|
Reconciliation to Adjusted Net Income |
|
|
|
|
|
Net Income |
$ |
(9,132 |
) |
|
$ |
(1,887 |
) |
Remove adjusting items (1) |
|
6,820 |
|
|
|
6,387 |
|
Remove amortization expense |
|
15,572 |
|
|
|
15,521 |
|
Remove tax benefit on adjusting items and amortization
expense
(2) |
|
(1,661 |
) |
|
|
(1,505 |
) |
Adjusted Net Income |
$ |
11,599 |
|
|
$ |
18,516 |
|
Reconciliation to Adjusted Diluted Earnings per
Share |
|
|
|
|
|
Diluted Earnings per Share |
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
Remove adjusting items (1) |
|
0.03 |
|
|
|
0.03 |
|
Remove amortization expense |
|
0.08 |
|
|
|
0.08 |
|
Remove tax benefit on adjusting items and amortization
expense (2) |
|
(0.01 |
) |
|
|
(0.01 |
) |
Adjusted Diluted Earnings per Share |
$ |
0.06 |
|
|
$ |
0.09 |
|
Reconciliation to Adjusted Diluted Shares
Outstanding |
|
|
|
|
|
Diluted Shares, as reported |
|
194,548 |
|
|
|
194,007 |
|
Non-GAAP dilution adjustments |
|
|
|
|
|
Dilutive effect of stock options and awards |
|
845 |
|
|
|
1,171 |
|
Adjusted Diluted Shares |
|
195,394 |
|
|
|
195,178 |
|
|
|
|
|
|
|
|
|
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:
- The tax impact of
stock compensation expense was calculated using the statutory rate
of 25.1%, excluding certain awards that are non-deductible.
- The tax impact of
acquisition and integration expense was calculated using the
statutory rate of 25.1%, excluding certain charges that were
non-deductible.
- 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 April 1,
2023 |
|
|
Thirteen Weeks EndedMarch 26,
2022 |
|
Stock compensation expense |
$ |
0.01 |
|
|
$ |
0.03 |
|
Restructuring |
|
0.01 |
|
|
|
— |
|
Litigation expense |
|
— |
|
|
|
0.01 |
|
Acquisition and integration expense |
|
— |
|
|
|
— |
|
Change in fair value of contingent
consideration |
|
0.01 |
|
|
|
(0.01 |
) |
Total adjusting items |
$ |
0.03 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
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 a the calculation of Net Debt:
|
April 1, 2023 |
|
|
December 31, 2022 |
Revolving loans |
$ |
67,000 |
|
|
$ |
72,000 |
|
Senior term loan, due 2028 |
|
838,235 |
|
|
|
840,363 |
|
Finance leases and other obligations |
|
6,367 |
|
|
|
6,406 |
|
Gross debt |
$ |
911,602 |
|
|
$ |
918,769 |
|
Less cash |
|
34,750 |
|
|
|
31,081 |
|
Net debt |
$ |
876,852 |
|
|
$ |
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.
|
Thirteen Weeks Ended April 1,
2023 |
|
|
Thirteen Weeks EndedMarch 26,
2022 |
|
Net cash provided by (used for) operating
activities |
$ |
31,507 |
|
|
$ |
(3,542 |
) |
Capital expenditures |
|
(18,111 |
) |
|
|
(12,541 |
) |
Free cash flow |
$ |
13,396 |
|
|
$ |
(16,083 |
) |
|
|
|
|
|
|
|
|
Source: Hillman Solutions Corp.
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