Hillman Solutions (US:HLMN)2025-02-20 21:32Financial Performance - Net sales for the year ended December 28, 2024, were $1,472.6 million, a decrease of approximately $3.9 million or 0.3% compared to $1,476.5 million in 2023, primarily due to market softness and decreased volume, partially offset by acquisitions [188]. - Net income improved to $17.3 million, or $0.09 per diluted share, compared to a net loss of $9.6 million, or $(0.05) per diluted share for the year ended December 30, 2023 [188]. - Adjusted EBITDA totaled $241.8 million, an increase from $219.4 million in the year ended December 30, 2023 [188]. - Net sales for 2024 totaled $1,472.6 million, a decrease of $3.9 million compared to 2023, primarily driven by a $15.1 million decline in Robotics and Digital Solutions sales [195]. - Selling, warehouse, general and administrative expenses increased to $488.7 million, or 33.2% of net sales, compared to 30.6% in 2023 [189]. - Income from operations for Hardware and Protective Solutions surged to $56.8 million in 2024, a substantial increase of $48.4 million compared to 2023 [204]. - Robotics and Digital Solutions segment experienced a decline in income from operations by $19.1 million, primarily due to decreased net sales and increased SG&A expenses [205]. - Adjusted EBITDA for the year ended December 28, 2024, was $241.8 million, an increase from $219.4 million in 2023, representing a growth of 10.2% [215]. - Net income for the year ended December 28, 2024, was $17.3 million, compared to a net loss of $9.6 million in 2023, indicating a significant turnaround [215]. Acquisitions - The acquisition of Koch Industries, Inc. was completed for a total purchase price of $23.8 million, generating $39.9 million in net sales and $3.3 million in operating income for the year [178]. - The acquisition of Intex DIY, Inc. was completed for a total purchase price of $34.1 million, generating $21.1 million in net sales and $2.0 million in operating income for the year [181]. - The company completed the acquisition of Intex DIY, Inc. for $34.1 million and Koch Industries, Inc. for $23.8 million, enhancing its Hardware and Protective Solutions segment [226][227]. Bankruptcy and Financial Impact - True Value Company filed for Chapter 11 bankruptcy, accounting for approximately $8.8 million of the company's accounts receivable as of the filing date [182]. - The company recorded a charge of $8.6 million related to the True Value bankruptcy, reflecting the net receivable balances less expected recoveries [184]. - The company recorded a write-off of $8.6 million in accounts receivable due to the True Value bankruptcy, impacting G&A expenses [203]. - The company recorded a write-off of $8.6 million in receivables due to True Value's Chapter 11 filing, which was included in the revised Adjusted EBITDA figures [214]. Cost and Expenses - The company’s cost of sales for the year ended December 28, 2024, was $764.7 million, representing 51.9% of net sales, compared to 56.1% in 2023 [189]. - Cost of sales for Hardware and Protective Solutions decreased to 55.9% of net sales in 2024 from 61.4% in 2023, attributed to reduced product and shipping costs [197]. - Selling, General and Administrative (SG&A) expenses increased by $36.6 million in 2024, with significant contributions from acquisitions and increased compensation [199][200]. Currency and Market Impact - The U.S. dollar increased in value relative to the Canadian dollar by approximately 9.0% in 2024, impacting sales denominated in Canadian dollars [176]. - Hardware and Protective Solutions segment saw an increase in net sales by $19.8 million, while Canada segment net sales decreased by $8.6 million due to price reductions and unfavorable exchange rates [195][196]. Tax and Interest - The effective income tax rate for 2024 was 35.0%, compared to (29.9)% in 2023, with an income tax provision of $9.3 million recorded for 2024 [208]. - Interest expense decreased by $9.1 million in 2024, driven by reduced outstanding debt and lower interest rate spreads [207]. Capital Expenditures and Cash Flow - Capital expenditures for the year were $85.2 million, up from $65.8 million in 2023, reflecting ongoing investments in key duplicating kiosks and machines [225]. - Net cash provided by operating activities decreased to $183.3 million in 2024 from $238.0 million in 2023, a decline of 23.0% [222]. - The company expects to spend $90 million on capital expenditures in 2025, focusing on new kiosks, machines, and IT projects [232]. Goodwill and Fair Value - The carrying value of the Protective Solutions reporting unit's goodwill was $128.8 million, and the Hardware Solutions reporting unit's goodwill was $436.8 million as of December 28, 2024 [242]. - The company assesses the fair value of reporting units annually, with results indicating that fair value exceeded carrying value for 2024, 2023, and 2022 [240]. - Significant assumptions for fair value estimates include projected net sales and EBITDA growth rates, which are influenced by market growth rates and competitive environment [241]. - The company utilizes foreign exchange forward contracts to manage exposure to currency fluctuations in the Canadian dollar versus the U.S. Dollar [247]. - The company has adopted ASU 2017-04, simplifying the test for goodwill impairment by comparing fair value with carrying amount [238]. - Management's strategies may mitigate risks, but adverse changes could lead to future impairment charges for goodwill [242]. - The company’s discount rate is based on industry required rates of return and may be impacted by macroeconomic changes [241].