SECURITIES AND EXCHANGE COMMISSION
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 23-2874736 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
10590 Hamilton Avenue | ||
Cincinnati, Ohio | 45231 | |
(Address of principal executive offices) | (Zip Code) |
Title of Class | Name of Each Exchange on Which Registered | |
11.6% Junior Subordinated Debentures | None | |
Preferred Securities Guaranty | None |
Large accelerated filero | Accelerated filero | Non-accelerated filerþ | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
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Page 2 of 43
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, | ||||||||
2010 | December 31, | |||||||
(Unaudited) | 2009 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,008 | $ | 17,164 | ||||
Restricted investments | 334 | 334 | ||||||
Accounts receivable, net | 63,285 | 51,757 | ||||||
Inventories, net | 82,887 | 83,182 | ||||||
Deferred income taxes, net | 7,901 | 8,100 | ||||||
Other current assets | 2,767 | 2,657 | ||||||
Total current assets | 169,182 | 163,194 | ||||||
Property and equipment, net | 46,163 | 47,565 | ||||||
Goodwill | 257,806 | 257,806 | ||||||
Other intangibles, net | 145,034 | 146,640 | ||||||
Restricted investments | 2,726 | 2,709 | ||||||
Deferred income taxes, net | 386 | 418 | ||||||
Deferred financing fees, net | 5,279 | 5,690 | ||||||
Investment in trust common securities | 3,261 | 3,261 | ||||||
Other assets | 1,071 | 1,198 | ||||||
Total assets | $ | 630,908 | $ | 628,481 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 24,059 | $ | 19,191 | ||||
Current portion of senior term loans | 21,365 | 9,519 | ||||||
Current portion of capitalized lease and other obligations | 324 | 349 | ||||||
Accrued expenses: | ||||||||
Salaries and wages | 2,959 | 7,624 | ||||||
Pricing allowances | 4,425 | 5,317 | ||||||
Income and other taxes | 2,245 | 1,904 | ||||||
Interest | 2,226 | 2,199 | ||||||
Deferred compensation | 334 | 334 | ||||||
Other accrued expenses | 5,322 | 6,147 | ||||||
Total current liabilities | 63,259 | 52,584 | ||||||
Long term senior term loans | 136,484 | 148,330 | ||||||
Long term capitalized lease and other obligations | 83 | 145 | ||||||
Long term unsecured subordinated notes | 49,820 | 49,820 | ||||||
Junior subordinated debentures | 115,617 | 115,716 | ||||||
Mandatorily redeemable preferred stock | 114,489 | 111,452 | ||||||
Management purchased preferred options | 6,825 | 6,617 | ||||||
Deferred compensation | 2,726 | 2,709 | ||||||
Deferred income taxes, net | 50,809 | 50,169 | ||||||
Accrued dividends on preferred stock | 80,052 | 75,580 | ||||||
Other non-current liabilities | 19,417 | 18,467 | ||||||
Total liabilities | 639,581 | 631,589 | ||||||
Page 3 of 43
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, | ||||||||
2010 | December 31, | |||||||
(Unaudited) | 2009 | |||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT (CONTINUED) | ||||||||
Common and preferred stock with put options: | ||||||||
Class A Preferred stock, $.01 par, $1,000 liquidation value, 238,889 shares authorized, none issued and outstanding | — | — | ||||||
Class A Common stock, $.01 par, 23,141 shares authorized, 395.7 issued and outstanding | 2,363 | 2,158 | ||||||
Class B Common stock, $.01 par, 2,500 shares authorized, 970.6 issued and outstanding | 5,795 | 5,293 | ||||||
Commitments and contingencies (Note 6) | ||||||||
Stockholders’ deficit: | ||||||||
Preferred Stock: | ||||||||
Class A Preferred stock, $.01 par, $1,000 liquidation value, 238,889 shares authorized, 82,104.8 issued and outstanding | 1 | 1 | ||||||
Common Stock: | ||||||||
Class A Common stock, $.01 par, 23,141 shares authorized, 5,805.3 issued and outstanding | — | — | ||||||
Class C Common stock, $.01 par, 30,109 shares authorized, 2,787.1 issued and outstanding | — | — | ||||||
Additional paid-in capital | 5,626 | 10,302 | ||||||
Accumulated deficit | (20,946 | ) | (19,377 | ) | ||||
Accumulated other comprehensive loss | (1,512 | ) | (1,485 | ) | ||||
Total stockholders’ deficit | (16,831 | ) | (10,559 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 630,908 | $ | 628,481 | ||||
Page 4 of 43
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS ENDED
(dollars in thousands)
March 31, | March 31, | |||||||
2010 | 2009 | |||||||
(As restated, | ||||||||
see Note 2) | ||||||||
Net sales | $ | 108,460 | $ | 112,213 | ||||
Cost of sales (exclusive of depreciation and amortization shown separately below) | 51,938 | 58,276 | ||||||
Gross profit | 56,522 | 53,937 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative expenses | 40,288 | 39,940 | ||||||
Depreciation | 4,290 | 4,678 | ||||||
Amortization | 1,607 | 1,728 | ||||||
Management and transaction fees to related party | 251 | 253 | ||||||
Total operating expenses | 46,436 | 46,599 | ||||||
Other income (expense), net | 82 | (633 | ) | |||||
Income from operations | 10,168 | 6,705 | ||||||
Interest expense, net | 4,180 | 3,828 | ||||||
Interest expense on mandatorily redeemable preferred stock and management purchased options | 3,246 | 2,918 | ||||||
Interest expense on junior subordinated debentures | 3,152 | 3,182 | ||||||
Investment income on trust common securities | (95 | ) | (95 | ) | ||||
Loss before income taxes | (315 | ) | (3,128 | ) | ||||
Income tax provision | 1,254 | 709 | ||||||
Net loss | $ | (1,569 | ) | $ | (3,837 | ) | ||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED
(dollars in thousands)
March 31, | March 31, | |||||||
2010 | 2009 | |||||||
(As restated, | ||||||||
see Note 2) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,569 | ) | $ | (3,837 | ) | ||
Adjustments to reconcile net loss to net cash (used for) provided by operating activities: | ||||||||
Depreciation and amortization | 5,897 | 6,406 | ||||||
Dispositions of property and equipment | — | 31 | ||||||
Deferred income tax provision | 871 | 452 | ||||||
Deferred financing and original issue discount amortization | 312 | 293 | ||||||
Interest on mandatorily redeemable preferred stock and management purchased options | 3,246 | 2,918 | ||||||
Stock-based compensation expense | 833 | 881 | ||||||
Changes in operating items: | ||||||||
Increase in accounts receivable, net | (11,528 | ) | (12,265 | ) | ||||
Decrease in inventories, net | 295 | 9,597 | ||||||
Decrease in other assets | 17 | 127 | ||||||
Increase (decrease) in accounts payable | 4,868 | (3,188 | ) | |||||
Increase in interest payable on junior subordinated debentures | — | 3,087 | ||||||
(Decrease) increase in other accrued liabilities | (6,014 | ) | 2,973 | |||||
Other items, net | 679 | 437 | ||||||
Net cash (used for) provided by operating activities | (2,093 | ) | 7,912 | |||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (2,976 | ) | (2,493 | ) | ||||
Net cash used for investing activities | (2,976 | ) | (2,493 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of senior term loans | — | (9,000 | ) | |||||
Principal payments under capitalized lease obligations | (87 | ) | (77 | ) | ||||
Borrowings under other credit obligations | — | 462 | ||||||
Net cash used for financing activities | (87 | ) | (8,615 | ) | ||||
Net decrease in cash and cash equivalents | (5,156 | ) | (3,196 | ) | ||||
Cash and cash equivalents at beginning of period | 17,164 | 7,133 | ||||||
Cash and cash equivalents at end of period | $ | 12,008 | $ | 3,937 | ||||
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Accumulated | ||||||||||||||||||||||||||||||||
Additional | Class A | Other | Total | |||||||||||||||||||||||||||||
Common Stock | Paid-in | Preferred | Accumulated | Comprehensive | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||
Class A | Class C | Capital | Stock | Deficit | Income (Loss) | Income (Loss) | Deficit | |||||||||||||||||||||||||
Balance at December 31, 2009 | $ | — | $ | — | $ | 10,302 | $ | 1 | $ | (19,377 | ) | $ | (1,485 | ) | $ | (10,559 | ) | |||||||||||||||
Net loss | — | — | — | — | (1,569 | ) | — | $ | (1,569 | ) | (1,569 | ) | ||||||||||||||||||||
Class A Common Stock FMV adjustment (2) | — | — | (205 | ) | — | — | — | — | (205 | ) | ||||||||||||||||||||||
Dividends to shareholders | — | — | (4,471 | ) | — | — | — | — | (4,471 | ) | ||||||||||||||||||||||
Change in cumulative foreign translation adjustment (1) | — | — | — | — | — | (37 | ) | (37 | ) | (37 | ) | |||||||||||||||||||||
Change in derivative security value (1) | — | — | — | — | — | 10 | 10 | 10 | ||||||||||||||||||||||||
Comprehensive loss | $ | (1,596 | ) | |||||||||||||||||||||||||||||
Balance at March 31, 2010 | $ | — | $ | — | $ | 5,626 | $ | 1 | $ | (20,946 | ) | $ | (1,512 | ) | $ | (16,831 | ) | |||||||||||||||
(1) | The cumulative foreign translation adjustment and change in derivative security value are net of taxes and represent the only items of other comprehensive income (loss). | |
(2) | Company management controls 395.7 shares of Class A common stock which contain a put feature that allows redemption at the holder’s option. These shares are classified as temporary equity and have been adjusted to fair value. See Note 10, Common and Preferred Stock, for further details. |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Condensed Consolidated Statement of Operations | ||||||||||||
For the three months | As Previously | |||||||||||
ended March 31, 2009: | Reported | Adjustments | As Restated | |||||||||
Income tax provision | $ | 1,191 | $ | (482 | ) | $ | 709 | |||||
Net loss | (4,319 | ) | 482 | (3,837 | ) |
Condensed Consolidated Statement of Cash Flows | ||||||||||||
For the three months | As Previously | |||||||||||
ended March 31, 2009: | Reported | Adjustments | As Restated | |||||||||
Net loss | $ | (4,319 | ) | $ | 482 | $ | (3,837 | ) | ||||
Deferred income tax provision | 934 | (482 | ) | 452 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Estimated | ||||||||||
Useful Life | March 31, | December 31, | ||||||||
(Years) | 2010 | 2009 | ||||||||
Customer relationships — Hillman | 23 | $ | 126,651 | $ | 126,651 | |||||
Customer relationships — All Points | 15 | 555 | 555 | |||||||
Trademarks | Indefinite | 47,394 | 47,394 | |||||||
Patents | 9 | 7,960 | 7,960 | |||||||
Non Compete Agreements | 4 | 5,742 | 5,742 | |||||||
Intangible assets, gross | 188,302 | 188,302 | ||||||||
Less: Accumulated amortization | 43,268 | 41,662 | ||||||||
Other intangibles, net | $ | 145,034 | $ | 146,640 | ||||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Hillman Investment Company Class A Preferred Stock | $ | 57,282 | $ | 57,282 | ||||
Purchased Options — Hillman Investment Company Class A Preferred Stock | 2,188 | 2,188 | ||||||
Accumulated and unpaid dividends | 55,019 | 51,982 | ||||||
Total mandatorily redeemable preferred stock | $ | 114,489 | $ | 111,452 | ||||
Purchased Options — Hillman Companies, Inc. Class A Preferred Stock | $ | 3,135 | $ | 3,135 | ||||
Accumulated and unpaid dividends | 3,690 | 3,482 | ||||||
Total management purchased preferred options | $ | 6,825 | $ | 6,617 | ||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Level 1: | Quoted market prices in active markets for identical assets or liabilities. |
Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. |
Level 3: | Unobservable inputs reflecting the reporting entity’s own assumptions. |
As of March 31, 2010 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Trading securities | $ | 3,060 | $ | — | $ | — | $ | 3,060 | ||||||||
Interest rate swap | — | (1,878 | ) | — | (1,878 | ) | ||||||||||
Fixed rate debt | — | (49,820 | ) | — | (49,820 | ) |
As of December 31, 2009 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Trading securities | $ | 3,043 | $ | — | $ | — | $ | 3,043 | ||||||||
Interest rate swap | — | (1,894 | ) | — | (1,894 | ) | ||||||||||
Fixed rate debt | — | (49,820 | ) | — | (49,820 | ) |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Page 21 of 43
AND RESULTS OF OPERATIONS
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(dollars in thousands) | ||||||||||||||||
2010 | 2009 | |||||||||||||||
% of | % of | |||||||||||||||
Amount | Total | Amount | Total | |||||||||||||
(As restated, | ||||||||||||||||
see Note 2) | ||||||||||||||||
Net sales | $ | 108,460 | 100.0 | % | $ | 112,213 | 100.0 | % | ||||||||
Cost of sales (exclusive of depreciation and amortization shown separately below) | 51,938 | 47.9 | % | 58,276 | 51.9 | % | ||||||||||
Gross profit | 56,522 | 52.1 | % | 53,937 | 48.1 | % | ||||||||||
Operating expenses: | ||||||||||||||||
Selling | 20,846 | 19.2 | % | 20,542 | 18.3 | % | ||||||||||
Warehouse & delivery | 11,824 | 10.9 | % | 11,742 | 10.5 | % | ||||||||||
General & administrative | 6,191 | 5.7 | % | 6,360 | 5.7 | % | ||||||||||
Stock compensation expense | 1,427 | 1.3 | % | 1,296 | 1.2 | % | ||||||||||
Total SG&A | 40,288 | 37.1 | % | 39,940 | 35.6 | % | ||||||||||
Depreciation | 4,290 | 4.0 | % | 4,678 | 4.2 | % | ||||||||||
Amortization | 1,607 | 1.5 | % | 1,728 | 1.5 | % | ||||||||||
Management and transaction fees to related party | 251 | 0.2 | % | 253 | 0.2 | % | ||||||||||
Total operating expenses | 46,436 | 42.8 | % | 46,599 | 41.5 | % | ||||||||||
Other income (expense), net | 82 | 0.1 | % | (633 | ) | -0.6 | % | |||||||||
Income from operations | 10,168 | 9.4 | % | 6,705 | 6.0 | % | ||||||||||
Interest expense, net | 4,180 | 3.9 | % | 3,828 | 3.4 | % | ||||||||||
Interest expense on mandatorily redeemable preferred stock & management purchased options | 3,246 | 3.0 | % | 2,918 | 2.6 | % | ||||||||||
Interest expense on junior subordinated notes | 3,152 | 2.9 | % | 3,182 | 2.8 | % | ||||||||||
Investment income on trust common securities | (95 | ) | -0.1 | % | (95 | ) | -0.1 | % | ||||||||
Loss before income taxes | (315 | ) | -0.3 | % | (3,128 | ) | -2.8 | % | ||||||||
Income tax provision | 1,254 | 1.2 | % | 709 | 0.6 | % | ||||||||||
Net loss | $ | (1,569 | ) | -1.4 | % | $ | (3,837 | ) | -3.4 | % | ||||||
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Payments Due | ||||||||||||||||||||
Contractual Obligations | Total | Less Than 1 Year | 1 to 3 Years | 3 to 5 Years | More Than 5 Years | |||||||||||||||
Junior Subordinated Debentures (1) | $ | 115,617 | $ | — | $ | — | $ | — | $ | 115,617 | ||||||||||
Long Term Senior Term Loans | 157,849 | 21,364 | 136,485 | — | — | |||||||||||||||
Bank Revolving Credit Facility | — | — | — | — | — | |||||||||||||||
Long Term Unsecured Subordinated Notes | 49,820 | — | 49,820 | — | — | |||||||||||||||
Interest Payments (2) | 29,052 | 13,348 | 15,704 | — | — | |||||||||||||||
Operating Leases | 33,952 | 7,662 | 10,724 | 5,328 | 10,238 | |||||||||||||||
Mandatorily Redeemable Preferred Stock | 114,489 | — | — | — | 114,489 | |||||||||||||||
Management Purchased Preferred Options | 6,825 | — | — | — | 6,825 | |||||||||||||||
Accrued Stock Based Compensation on Preferred Options | 14,984 | — | — | — | 14,984 | |||||||||||||||
Deferred Compensation Obligations | 3,060 | 334 | 668 | 668 | 1,390 | |||||||||||||||
Capital Lease Obligations | 424 | 334 | 86 | 4 | — | |||||||||||||||
Purchase Obligations | 1,137 | 350 | 700 | 87 | — | |||||||||||||||
Other Long Term Obligations | 2,724 | 846 | 1,009 | 384 | 485 | |||||||||||||||
Uncertain Tax Position Liabilities | 2,879 | — | — | — | 2,879 | |||||||||||||||
Total Contractual Cash Obligations (3) | $ | 532,812 | $ | 44,238 | $ | 215,196 | $ | 6,471 | $ | 266,907 | ||||||||||
(1) | The junior subordinated debentures liquidation value is approximately $108,707. | |
(2) | Interest payments for Long Term Senior Term Loans and Long Term Unsecured Subordinated Notes. Interest payments on the variable rate Long Term Senior Term Loans were calculated using actual interest rates as of March 31, 2010 and a LIBOR rate of 0.26% plus applicable margin of between 2.75% and 4.50% thereafter. | |
(3) | All of the contractual obligations noted above are reflected on the Company’s condensed consolidated balance sheet as of March 31, 2010 except for the interest payments and operating leases. In addition to the contractual obligations above, the Company has issued certain equity securities to management shareholders with terms that allow them to be put back to the Company upon termination from employment, death or disability. The terms of the equity securities held by management limit cash distributions for puttable equity securities to an aggregate of $5.0 million per annum. During 2009, equity securities with a value of $1,141 were put back to the Company by former management shareholders. See Note 10, Common and Preferred Stock, to the condensed consolidated financial statements for additional information. |
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March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Facility | Outstanding | Interest | Facility | Outstanding | Interest | |||||||||||||||||||
(dollars in 000’s) | Amount | Amount | Rate | Amount | Amount | Rate | ||||||||||||||||||
Term B-1 Loan | $ | 17,992 | 3.01 | % | $ | 17,992 | 3.02 | % | ||||||||||||||||
Term B-2 Loan | 139,857 | 4.76 | % | 139,857 | 4.77 | % | ||||||||||||||||||
Total Term Loans | 157,849 | 157,849 | ||||||||||||||||||||||
Revolving credit facility | $ | 20,000 | — | — | $ | 20,000 | — | — | ||||||||||||||||
Capital leases & other obligations | 407 | various | 494 | various | ||||||||||||||||||||
Total secured credit | 158,256 | 158,343 | ||||||||||||||||||||||
Unsecured subordinated notes | 49,820 | 12.50 | % | 49,820 | 12.50 | % | ||||||||||||||||||
Total borrowings | $ | 208,076 | $ | 208,163 | ||||||||||||||||||||
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Ratio | ||||||||
(dollars in 000’s) | Actual | Requirement | ||||||
Fixed Charge Ratio | ||||||||
Adjusted EBITDA (1) | $ | 84,966 | ||||||
Cash interest expense (2) | 14,349 | |||||||
Interest on junior subordinated debentures | 12,412 | |||||||
Capital expenditures, net of disposals | 13,242 | |||||||
Scheduled principal payments | 498 | |||||||
Tax payments, net | 1,717 | |||||||
Total fixed charges | $ | 42,218 | ||||||
Fixed charge ratio (must be above requirement) | 2.01 | 1.15 | ||||||
Interest Coverage Ratio | ||||||||
Adjusted EBITDA (1) | $ | 84,966 | ||||||
Cash interest expense (2) | $ | 14,349 | ||||||
Interest coverage ratio (must be above requirement) | 5.92 | 2.50 | ||||||
Leverage Ratio | ||||||||
Senior term loan balance | $ | 157,849 | ||||||
Capital lease and other credit obligations | 407 | |||||||
Subordinated notes | 49,820 | |||||||
Total debt | $ | 208,076 | ||||||
Adjusted EBITDA (1) | $ | 84,966 | ||||||
Leverage ratio (must be below requirement) | 2.45 | 3.00 | ||||||
(1) | Adjusted EBITDA is defined as income from operations of $52,797, plus depreciation of $16,605, amortization of $6,791, non-cash stock compensation expense of $8,868, foreign exchange (gains) or losses of ($822) and other non-recurring expenses of $727. | |
(2) | Includes cash interest expense on senior term loans, capitalized lease obligations and subordinated notes. |
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March 31, | December 31, | |||||||
(dollars in 000’s, except per share amounts) | 2010 | 2009 | ||||||
Trailing twelve fiscal months EBITDA (1) | $ | 85,974 | $ | 83,303 | ||||
Valuation Multiple (2) | 8.0 | 8.0 | ||||||
Hillman Enterprise Value | 687,792 | 666,424 | ||||||
Less: | ||||||||
Senior term loans | 157,849 | 157,849 | ||||||
Bank revolving credit | — | — | ||||||
Unsecured subordinated notes | 49,820 | 49,820 | ||||||
Junior subordinated debentures redemption value, net (3) | 105,446 | 105,446 | ||||||
Total Debt | 313,115 | 313,115 | ||||||
Plus: | ||||||||
Cash | 12,008 | 17,164 | ||||||
Less: | ||||||||
Accrued Hillman Investment Company Class A Preferred (4) | 120,841 | 117,434 | ||||||
Accrued Hillman Class A Preferred (4) | 178,609 | 173,358 | ||||||
299,450 | 290,792 | |||||||
Common Equity Value | 87,235 | 79,681 | ||||||
Liquidity & Minority Discount on Common Only (5) | 26,171 | 23,904 | ||||||
Discounted Common Equity Value | 61,064 | 55,777 | ||||||
Fully-diluted Common Shares outstanding | 10,227 | 10,227 | ||||||
Fully-diluted Discounted Common Value Per Common Share | $ | 5,971 | $ | 5,454 | ||||
(1) | - EBITDA is calculated for the most recent four fiscal quarters as follows: |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Income from operations | $ | 52,797 | $ | 49,334 | ||||
Depreciation and amortization | 23,396 | 23,905 | ||||||
Management fees | 1,008 | 1,010 | ||||||
Stock compensation expense | 8,868 | 8,737 | ||||||
Exchange rate (gain) loss | (822 | ) | (536 | ) | ||||
Restructuring charges | 473 | 838 | ||||||
Other adjustments | 254 | 15 | ||||||
EBITDA | $ | 85,974 | $ | 83,303 | ||||
The other adjustments include one time legal and professional fees. | ||
(2) | - The Company periodically reviews the valuation multiple used and notes that it is consistent with | |
comparable multiples used for distribution companies. | ||
(3) | - The value of the junior subordinated debentures is the redemption value of $25 per share. | |
(4) | - Redemption value of all preferred shares and options thereon, less any applicable strike price. | |
(5) | - Under the terms of the ESA agreement with management shareholders, the redemption of shares is subject to a | |
discount given the lack of a public market for the shares. A 30% discount has applied to the equity value to adjust | ||
for the lack of an active market for the shares. |
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OTHER INFORMATION
Legal proceedings are pending which are either in the ordinary course of business or incidental to the Company’s business. Those legal proceedings incidental to the business of the Company are generally not covered by insurance or other indemnity. In the opinion of management, the ultimate resolution of the pending litigation matters will not have a material adverse effect on the consolidated financial position, operations or cash flows of the Company. |
Except as noted below, there have been no material changes to the risks related to the Company. |
Failure to complete the Merger or delays in completing the Merger could negatively affect our future business and operations. |
On April 21, 2010, Code Hennessy & Simmons LLC, Ontario Teachers’ Pension Plan and certain members of Hillman management entered into a Merger Agreement to sell 100% of the Company’s outstanding common stock to OHCP HM Acquisition Corp., an affiliate of Oak Hill Capital Partners and certain members of management. If the Merger is not completed for any reason, the Company may be subject to certain risks, including the following: |
• | the current market price of the Company’s Trust Preferred Securities may reflect a market assumption that the Merger will occur and a failure to complete the Merger could result in a decline in the market price of the Company’s Trust Preferred Securities; and |
• | certain costs relating to the Merger, including financing, legal and accounting fees and expenses, must be paid even if the Merger is not completed, and the Company may be unable to recoup such costs if the Merger is not completed. |
Not Applicable |
Not Applicable |
Not Applicable |
a) | Exhibits, including those incorporated by reference. | ||
2.1 | Agreement and Plan of Merger by and among OHCP HM Acquisition Corp., OHCP HM Merger Sub Corp., The Hillman Companies, Inc. and the Representative named therein, dated April 21, 2010. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 23, 2010.) | ||
31.1 | * | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934. | |
31.2 | * | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934. | |
32.1 | * | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | * | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith. |
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/s/ James P. Waters | /s/ Harold J. Wilder | |
James P. Waters | Harold J. Wilder | |
Vice President — Finance | Controller | |
(Chief Financial Officer) | (Chief Accounting Officer) |
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