Hillman Reports Third Quarter 2022 Results
CINCINNATI, November 3, 2022 -- 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 thirty-nine weeks ended September 24, 2022.
Third Quarter 2022 Highlights (Thirteen Weeks Ended September 24, 2022)
•Net sales increased 3.9% to $378.5 million compared to $364.5 million in the prior year quarter
•Net loss totaled $(9.5) million, or $(0.05) per diluted share, compared to a loss of $(32.5) million, or $(0.19) per diluted share, in the prior year quarter
•Adjusted diluted EPS1 was $0.14 per diluted share compared to $0.13 per diluted share in the prior year quarter
•Adjusted EBITDA1 totaled $59.0 million compared to $56.5 million in the prior year quarter
Third Quarter YTD 2022 Highlights (Thirty-Nine Weeks Ended September 24, 2022)
•Net sales increased 5.0% to $1.14 billion as compared to $1.08 billion in the prior year period
•Net loss totaled $(2.5) million, or $(0.01) per diluted share, compared to a loss of $(44.9) million, or $(0.38) per diluted share, in the prior year period
•Adjusted diluted EPS1 was $0.38 per diluted share compared to $0.49 per diluted share in the prior year period
•Adjusted EBITDA1 totaled $165.3 million compared to $168.8 million in the prior year period
“Our best-in-class field sales and service team continue to solve complex labor and supply chain issues for our blue chip customer base," commented Doug Cahill, chairman, president and chief executive officer of Hillman. "With our fill rates for the year at 96%, we are gaining market share and strengthening customer relationships by keeping the shelves stocked at over 40,000 locations. Third quarter net sales increased and Adjusted EBITDA improved year-over-year as we realized the benefit of several price increases to offset higher costs."
“Looking forward, we see several catalysts that reinforce our competitive moat and our expectation for further growth. Near record homeowner’s equity in homes and an aging U.S. housing stock provide a meaningful driver of home improvement projects for years to come, which bodes well for our estimated 90% exposure to repair, remodel and maintenance activity. Our direct-to-store model is minimizing the impact of customer de-stocking while sourcing lead times have continued to improve since the beginning of the year. Further, our multiple price actions offset increased costs for the full year 2022 on a dollar-for-dollar basis. As we look toward 2023, we are positioned well to continue delivering unmatched performance to our customers while working down inventory and generating solid returns in our business.”
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.
1
Balance Sheet and Liquidity at Quarter-End
•Total long-term debt was $914 million, compared to $907 million at the end of 2021. Net debt1 outstanding was $922 million, compared to $931 million at the end of 2021
•Liquidity available totaled approximately $225 million, consisting of $195 million of available borrowing under the revolving credit facility and $29 million of cash and equivalents
•Net debt1 to trailing twelve month Adjusted EBITDA was 4.5 times, unchanged from the end of 2021, and improved from 4.7 times at the end of the second quarter of 2022
Full Year 2022 Guidance - Update
Based on year-to-date performance and improved visibility on the remainder of the year, management is providing additional information on its full year 2022 guidance originally provided on March 2, 2022 with Hillman's fourth quarter 2021 results.
Original Full Year 2022 Guidance | Updated Full Year 2022 Guidance | |||||||
| Net Sales | $1.5 billion - $1.6 billion | $1.46 billion - $1.50 billion | ||||||
Adjusted EBITDA1 | $207 million - $227 million | $207 million - $211 million | ||||||
Free Cash Flow1, 2 | $120 million - $130 million | $75 million - $85 million | ||||||
2. Note that the Free Cash Flow guidance excludes $16 million of royalty fee litigation judgement related to the Hy-Ko case as the payment timing is still to be determined.
Rocky Kraft, Hillman's chief financial officer, added: “Our team continues to serve our customers well, implement price increases, and control costs in this dynamic environment. Sales growth and solid margin performance were in part made possible by securing inventory in early 2022. That strategy has been successful and resulted in continuity of service to our customers and new business wins."
"However, sales volume has been softer than expectations, which ultimately impacted the timing of our planned inventory reductions. Additionally, we incurred one-time cash expenses related to patent litigation. In consideration of these factors, we have adjusted our net sales and free cash flow expectations for 2022 - while refining our Adjusted EBITDA guidance within our original range.
"With supply chains and lead times returning to more manageable levels, we are poised to generate stronger cash flow and further reduce leverage in 2023 as we continue to grow our business and bring working capital back in line with historical levels.”
Third Quarter 2022 Results Presentation
Hillman plans to host a conference call and webcast presentation today, November 3, 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: November 3, 2022
Time: 8:30 am Eastern Time
Listen-only Webcast: https://edge.media-server.com/mmc/p/ot8hfiec
A webcast replay will be available approximately one hour after the conclusion of the call using the link above.
Hillman’s earnings release, quarterly presentation, and Form 10-Q were filed with the SEC and are accessible on its Investor Relations website, https://ir.hillmangroup.com.
2
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 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 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
This communication contains certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements, which are not historical facts and are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. All forward-looking statements 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) ability to continue to innovate with new products and services; (5) seasonality; (6) large customer concentration; (7) 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 the Annual Report on Form 10-K filed on March 16, 2022. 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
3
HILLMAN SOLUTIONS CORP.
Condensed Consolidated Statement of Net Income, GAAP Basis
(dollars in thousands)
Unaudited
| Thirteen Weeks Ended September 24, 2022 | Thirteen Weeks Ended September 25, 2021 | Thirty-nine Weeks Ended September 24, 2022 | Thirty-nine Weeks Ended September 25, 2021 | ||||||||||||||||||||
| Net sales | $ | 378,538 | $ | 364,480 | $ | 1,135,665 | $ | 1,081,476 | |||||||||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 214,802 | 236,999 | 648,221 | 654,264 | |||||||||||||||||||
| Selling, general and administrative expenses | 133,246 | 110,447 | 366,013 | 325,288 | |||||||||||||||||||
| Depreciation | 14,312 | 14,454 | 41,738 | 46,065 | |||||||||||||||||||
| Amortization | 15,557 | 15,504 | 46,644 | 45,827 | |||||||||||||||||||
| Management fees to related party | — | 56 | — | 270 | |||||||||||||||||||
| Other (income) expense, net | 1,070 | 315 | (3,124) | (2,232) | |||||||||||||||||||
| Income (loss) from operations | (449) | (13,295) | 36,173 | 11,994 | |||||||||||||||||||
| Loss on change in fair value of warrant liability | — | 3,990 | — | 3,990 | |||||||||||||||||||
| Interest expense, net | 14,696 | 11,801 | 38,857 | 49,979 | |||||||||||||||||||
| Interest expense on junior subordinated debentures | — | 1,471 | — | 7,775 | |||||||||||||||||||
| (Gain) loss on mark-to-market adjustments | — | (261) | — | (1,685) | |||||||||||||||||||
| Refinancing charges | — | 8,070 | — | 8,070 | |||||||||||||||||||
| Investment income on trust common securities | — | (44) | — | (233) | |||||||||||||||||||
| Income (loss) before income taxes | (15,145) | (38,322) | (2,684) | (55,902) | |||||||||||||||||||
| Income tax provision (benefit) | (5,679) | (5,798) | (147) | (11,023) | |||||||||||||||||||
| Net income (loss) | $ | (9,466) | $ | (32,524) | $ | (2,537) | $ | (44,879) | |||||||||||||||
| Basic and diluted income (loss) per share | $ | (0.05) | $ | (0.19) | $ | (0.01) | $ | (0.38) | |||||||||||||||
| Weighted average basic shares outstanding | 194,370 | 168,440 | 194,171 | 116,945 | |||||||||||||||||||
4
HILLMAN SOLUTIONS CORP.
Condensed Consolidated Balance Sheets
(dollars in thousands)
Unaudited
| September 24, 2022 | December 25, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 29,228 | $ | 14,605 | |||||||
Accounts receivable, net of allowances of $2,446 ($2,891 - 2021) | 126,138 | 107,212 | |||||||||
| Inventories, net | 534,970 | 533,530 | |||||||||
| Other current assets | 25,852 | 12,962 | |||||||||
| Total current assets | 716,188 | 668,309 | |||||||||
Property and equipment, net of accumulated depreciation of $320,767 ($284,069 - 2021) | 181,260 | 174,312 | |||||||||
| Goodwill | 823,626 | 825,371 | |||||||||
Other intangibles, net of accumulated amortization of $398,638 ($352,695 - 2021) | 749,126 | 794,700 | |||||||||
| Operating lease right of use assets | 78,220 | 82,269 | |||||||||
| Deferred tax assets | — | 1,323 | |||||||||
| Other assets | 26,698 | 16,638 | |||||||||
| Total assets | $ | 2,575,118 | $ | 2,562,922 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 150,620 | $ | 186,126 | |||||||
| Current portion of debt and finance lease liabilities | 12,805 | 11,404 | |||||||||
| Current portion of operating lease liabilities | 12,868 | 13,088 | |||||||||
| Accrued expenses: | |||||||||||
| Salaries and wages | 16,496 | 8,606 | |||||||||
| Pricing allowances | 9,861 | 10,672 | |||||||||
| Income and other taxes | 3,726 | 4,829 | |||||||||
| Interest | 5,236 | 1,519 | |||||||||
| Other accrued liabilities | 57,210 | 41,052 | |||||||||
| Total current liabilities | 268,822 | 277,296 | |||||||||
| Long-term debt | 913,815 | 906,531 | |||||||||
| Deferred tax liabilities | 141,471 | 137,764 | |||||||||
| Operating lease liabilities | 72,880 | 74,476 | |||||||||
| Other non-current liabilities | 11,310 | 16,760 | |||||||||
| Total liabilities | $ | 1,408,298 | $ | 1,412,827 | |||||||
| Commitments and contingencies | |||||||||||
| Stockholders' equity: | |||||||||||
Common stock, $0.0001 par, 500,000,000 shares authorized, 194,394,767 issued and outstanding at September 24, 2022 and 194,083,625 issued and 193,995,320 outstanding at December 25, 2021 | 20 | 20 | |||||||||
| Additional paid-in capital | 1,400,084 | 1,387,410 | |||||||||
| Accumulated deficit | (212,718) | (210,181) | |||||||||
| Accumulated other comprehensive income (loss) | (20,566) | (27,154) | |||||||||
| Total stockholders' equity | 1,166,820 | 1,150,095 | |||||||||
| Total liabilities and stockholders' equity | $ | 2,575,118 | $ | 2,562,922 | |||||||
5
HILLMAN SOLUTIONS CORP.
Condensed Consolidated Statement of Cash Flows
(dollars in thousands)
Unaudited
| Thirty-nine Weeks Ended September 24, 2022 | Thirty-nine Weeks Ended September 25, 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | (2,537) | $ | (44,879) | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 88,382 | 91,892 | |||||||||
| Deferred income taxes | 5,670 | (21,538) | |||||||||
| Deferred financing and original issue discount amortization | 2,251 | 3,036 | |||||||||
| Stock-based compensation expense | 10,789 | 8,817 | |||||||||
| Increase in fair value of warrant liabilities | — | 3,990 | |||||||||
| Write off of deferred financing fees, premiums and discounts associated with debt refinancing | — | (8,372) | |||||||||
| Change in fair value of contingent consideration | (2,926) | (1,110) | |||||||||
| Other non-cash interest and change in fair value of interest rate swap | — | (1,685) | |||||||||
| Changes in operating items: | |||||||||||
| Accounts receivable, net | (19,482) | (17,097) | |||||||||
| Inventories, net | (6,004) | (110,065) | |||||||||
| Other assets | (5,549) | 3,003 | |||||||||
| Accounts payable | (34,648) | 12,896 | |||||||||
| Other accrued liabilities | 27,171 | (24,193) | |||||||||
| Net cash provided by (used for) operating activities | 63,117 | (105,305) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition of business, net of cash received | (2,500) | (39,102) | |||||||||
| Capital expenditures | (46,431) | (36,955) | |||||||||
| Net cash used for investing activities | (48,931) | (76,057) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repayments of senior term loans | (6,384) | (1,072,042) | |||||||||
| Borrowings on senior term loans | — | 883,872 | |||||||||
| Proceeds from recapitalization of Landcadia, net of transaction costs | — | 455,161 | |||||||||
| Proceeds from sale of common stock in PIPE, net of issuance costs | — | 363,301 | |||||||||
| Repayments of senior notes | — | (330,000) | |||||||||
| Repayment of Junior Subordinated Debentures | — | (108,707) | |||||||||
| Financing fees | — | (20,988) | |||||||||
| Borrowings on revolving credit loans | 161,000 | 246,000 | |||||||||
| Repayments of revolving credit loans | (154,000) | (244,000) | |||||||||
| Principal payments under finance lease obligations | (998) | (697) | |||||||||
| Proceeds from exercise of stock options | 1,885 | 1,761 | |||||||||
| Cash payments related to hedging activities | (1,421) | — | |||||||||
| Other financing activities | 1,809 | — | |||||||||
| Net cash provided by financing activities | 1,891 | 173,661 | |||||||||
| Effect of exchange rate changes on cash | (1,454) | 610 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 14,623 | (7,091) | |||||||||
| Cash and cash equivalents at beginning of period | 14,605 | 21,520 | |||||||||
| Cash and cash equivalents at end of period | $ | 29,228 | $ | 14,429 | |||||||
6
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.
7
| Thirteen Weeks Ended September 24, 2022 | Thirteen Weeks Ended September 25, 2021 | Thirty-nine Weeks Ended September 24, 2022 | Thirty-nine Weeks Ended September 25, 2021 | ||||||||||||||||||||
| Net income (loss) | $ | (9,466) | $ | (32,524) | $ | (2,537) | $ | (44,879) | |||||||||||||||
| Income tax provision (benefit) | (5,679) | (5,798) | (147) | (11,023) | |||||||||||||||||||
| Interest expense, net | 14,696 | 11,801 | 38,857 | 49,979 | |||||||||||||||||||
| Interest expense on junior subordinated debentures | — | 1,471 | — | 7,775 | |||||||||||||||||||
| Investment income on trust common securities | — | (44) | — | (233) | |||||||||||||||||||
| Depreciation | 14,312 | 14,454 | 41,738 | 46,065 | |||||||||||||||||||
| Amortization | 15,557 | 15,504 | 46,644 | 45,827 | |||||||||||||||||||
| Mark-to-market adjustment of interest rate swap | — | (261) | — | (1,685) | |||||||||||||||||||
| EBITDA | $ | 29,420 | $ | 4,603 | $ | 124,555 | $ | 91,826 | |||||||||||||||
| Stock compensation expense | 2,485 | 5,280 | 10,789 | 8,817 | |||||||||||||||||||
| Management fees | — | 56 | — | 270 | |||||||||||||||||||
Restructuring (1) | 916 | 462 | 1,481 | 571 | |||||||||||||||||||
Litigation expense (2) | 25,255 | 487 | 28,968 | 10,769 | |||||||||||||||||||
Acquisition and integration expense (3) | 178 | 802 | 2,393 | 8,941 | |||||||||||||||||||
| Change in fair value of contingent consideration | 719 | 102 | (2,926) | (1,110) | |||||||||||||||||||
Buy-back expense (4) | — | 650 | — | 2,000 | |||||||||||||||||||
Anti-dumping duties (5) | — | — | — | 2,636 | |||||||||||||||||||
| Loss on change in fair value of warrant liability | — | 3,990 | — | 3,990 | |||||||||||||||||||
Refinancing charges(6) | — | 8,070 | — | 8,070 | |||||||||||||||||||
Inventory valuation related charges(7) | — | 32,026 | — | 32,026 | |||||||||||||||||||
| Total adjusting items | $ | 29,553 | $ | 51,925 | $ | 40,705 | $ | 76,980 | |||||||||||||||
| Adjusted EBITDA | $ | 58,973 | $ | 56,528 | $ | 165,260 | $ | 168,806 | |||||||||||||||
(1)Restructuring includes severance, consulting, and other costs associated with streamlining our operations.
(2)Litigation expense includes legal fees associated with our litigation with KeyMe, Inc. and Hy-Ko Products Company LLC.
(3)Acquisition and integration expense includes professional fees, non-recurring bonuses, and other costs related to the merger with Landcadia III and the secondary offering of shares in 2022.
(4)Infrequent buy backs associated with new business wins.
(5)Anti-dumping duties assessed related to the nail business for prior year purchases.
(6)In connection with the merger,we refinanced our Term Credit Agreement and ABL Revolver. Proceeds from the refinancing were used to redeem in full senior notes due July 15, 2022 (the “6.375% Senior Notes”) and the 11.6% Junior Subordinated Debentures.
(7)In the third quarter of 2021, we recorded an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings. We evaluated our customers' needs and the market conditions and ultimately decided to exit the following protective product categories related to COVID-19; cleaning wipes, disinfecting sprays, face masks, and certain disposable gloves.
8
Reconciliation of Adjusted Diluted EPS (Unaudited)
(in thousands, except per share data)
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 September 24, 2022 | Thirteen Weeks Ended September 25, 2021 | Thirty-nine Weeks Ended September 24, 2022 | Thirty-nine Weeks Ended September 25, 2021 | |||||||||||||||||||||||
| Reconciliation to Adjusted Net Income | ||||||||||||||||||||||||||
| Net Income | $ | (9,466) | $ | (32,524) | $ | (2,537) | $ | (44,879) | ||||||||||||||||||
Remove adjusting items (1) | 29,553 | 51,925 | 40,705 | 76,980 | ||||||||||||||||||||||
Mark-to-Market adjustment on interest rate swaps (2) | — | (261) | — | (1,685) | ||||||||||||||||||||||
| Remove amortization expense | 15,557 | 15,504 | 46,644 | 45,827 | ||||||||||||||||||||||
Remove tax benefit on adjusting items and amortization expense (3) | (7,685) | (12,142) | (10,720) | (17,803) | ||||||||||||||||||||||
| Adjusted Net Income | $ | 27,959 | $ | 22,502 | $ | 74,092 | $ | 58,440 | ||||||||||||||||||
| Reconciliation to Adjusted Diluted Earnings per Share | ||||||||||||||||||||||||||
| Diluted Earnings per Share | $ | (0.05) | $ | (0.19) | $ | (0.01) | $ | (0.38) | ||||||||||||||||||
Remove adjusting items (1) | 0.15 | 0.30 | 0.21 | 0.65 | ||||||||||||||||||||||
| Impact of adjusted diluted shares | 0.00 | 0.00 | 0.00 | 0.01 | ||||||||||||||||||||||
Mark-to-Market adjustment on interest rate swaps (2) | — | 0.00 | — | (0.01) | ||||||||||||||||||||||
| Remove amortization expense | 0.08 | 0.09 | 0.24 | 0.39 | ||||||||||||||||||||||
Remove tax benefit on adjusting items and amortization expense (3) | (0.04) | (0.07) | (0.05) | (0.15) | ||||||||||||||||||||||
| Adjusted Diluted Earnings per Share | $ | 0.14 | $ | 0.13 | $ | 0.38 | $ | 0.49 | ||||||||||||||||||
| Reconciliation to Adjusted Diluted Shares Outstanding | ||||||||||||||||||||||||||
| Diluted Shares, as reported | 194,370 | 168,440 | 194,171 | 116,945 | ||||||||||||||||||||||
| Non-GAAP dilution adjustments | ||||||||||||||||||||||||||
| Dilutive effect of stock options and awards | 655 | 2,446 | 1,456 | 1,433 | ||||||||||||||||||||||
| Dilutive effect of warrants | — | 539 | — | 180 | ||||||||||||||||||||||
| Adjusted Diluted Shares | 195,025 | 171,425 | 195,627 | 118,558 | ||||||||||||||||||||||
Note: Adjusted EPS may not add due to rounding.
(1)Please refer to "Reconciliation of Adjusted EBTIDA" 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.
9
Per Share Impact of Adjusting Items
| Thirteen Weeks Ended September 24, 2022 | Thirteen Weeks Ended September 25, 2021 | Thirty-nine Weeks Ended September 24, 2022 | Thirty-nine Weeks Ended September 25, 2021 | |||||||||||||||||||||||
| Stock compensation expense | $0.01 | $0.03 | $0.06 | $0.07 | ||||||||||||||||||||||
| Management fees | — | 0.00 | — | 0.00 | ||||||||||||||||||||||
| Restructuring | 0.00 | 0.00 | 0.01 | 0.00 | ||||||||||||||||||||||
| Litigation expense | 0.13 | 0.00 | 0.15 | 0.09 | ||||||||||||||||||||||
| Acquisition and integration expense | 0.00 | 0.00 | 0.01 | 0.08 | ||||||||||||||||||||||
| Change in fair value of contingent consideration | 0.00 | 0.00 | (0.01) | (0.01) | ||||||||||||||||||||||
| Buy-back expense | — | 0.00 | — | 0.02 | ||||||||||||||||||||||
| Anti-dumping duties | — | — | — | 0.02 | ||||||||||||||||||||||
| Loss on change in fair value of warrant liability | — | 0.02 | — | 0.03 | ||||||||||||||||||||||
Refinancing charges(6) | — | 0.05 | — | 0.07 | ||||||||||||||||||||||
Inventory valuation related charges(7) | — | 0.19 | — | 0.27 | ||||||||||||||||||||||
| Total adjusting items | $0.15 | $0.30 | $0.21 | $0.65 | ||||||||||||||||||||||
Note: Adjusting items may not add due to rounding.
(2)Reflects the mark to market adjustment on the interest rate swaps. Subsequent to the merger in 2021, the Company qualifies for hedge accounting on the swaps, which eliminates the mark to market adjustment.
(3)We have calculated the income tax effect of the non-GAAP adjustments shown above at the applicable statutory rate of 25.2% for the U.S. and 26.5% for Canada except for the following items:
a.The tax impact of stock compensation expense was calculated using the statutory rate of 25.2%, excluding certain awards that are non-deductible.
b.The tax impact of acquisition and integration expense included in "Other" was calculated using the statutory rate of 25.2%, excluding certain charges that were non-deductible.
c.Amortization expense for financial accounting purposes was offset by the tax benefit of deductible amortization expense using the statutory rate of 25.2%.
Reconciliation of Net Debt (Unaudited)
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:
| September 24, 2022 | December 25, 2021 | ||||||||||
| Revolving loans | $ | 100,000 | $ | 93,000 | |||||||
| Senior term loan, due 2028 | 844,618 | 851,000 | |||||||||
| Finance leases | 4,826 | 1,782 | |||||||||
| Other financing | 1,809 | $ | — | ||||||||
| Gross debt | $ | 951,253 | $ | 945,782 | |||||||
| Less cash | 29,228 | 14,605 | |||||||||
| Net debt | $ | 922,025 | $ | 931,177 | |||||||
10
Reconciliation of Free Cash Flow (Unaudited)
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.
| Thirty-nine Weeks Ended September 24, 2022 | Thirty-nine Weeks Ended September 25, 2021 | ||||||||||
| Net cash provided by (used for) operating activities | $ | 63,117 | $ | (105,305) | |||||||
| Capital expenditures | (46,431) | (36,955) | |||||||||
| Free cash flow | $ | 16,686 | $ | (142,260) | |||||||
Source: Hillman Solutions Corp.
###
11
