Hillman Solutions (US:HLMN)2026-02-17 12:39Financial Performance - Net sales for the year ended December 27, 2025, were $1,552.2 million, an increase of approximately $79.6 million or 5.4% compared to $1,472.6 million in 2024[180]. - Net income improved to $40.3 million, or $0.20 per diluted share, compared to net income of $17.3 million, or $0.09 per diluted share for the year ended December 28, 2024[186]. - Adjusted EBITDA totaled $275.3 million, an increase from $241.8 million in the year ended December 28, 2024[186]. - Total net sales increased by $79.6 million in 2025, driven primarily by a $86.0 million increase in Hardware and Protective Solutions[189]. - Adjusted EBITDA for 2025 was $275.3 million, up from $241.8 million in 2024 and $219.4 million in 2023, reflecting a growth of 13.8% year-over-year[208]. - Operating cash flows decreased to $105.2 million in 2025 from $183.3 million in 2024, primarily due to increased inventory costs and accrued liabilities[213][215]. Segment Performance - The Hardware and Protective Solutions segment, which accounts for 76.9% of net sales, saw a growth of 7.8% in 2025[167]. - The Robotics and Digital Solutions segment returned to growth in 2025, contributing 1.6% to net sales[167]. - Hardware and Protective Solutions accounted for 76.9% of net sales in 2025, while Robotics and Digital Solutions represented 14.2%[187]. - Income from operations for Hardware and Protective Solutions rose by $30.4 million, reaching $90.6 million in 2025[198]. - Robotics and Digital Solutions experienced a decrease in income from operations by $3.2 million, totaling $17.3 million[199]. Cost and Expenses - The cost of sales as a percentage of net sales decreased to 51.3% in 2025 from 51.9% in 2024[182]. - Cost of sales for Hardware and Protective Solutions increased by $37.1 million, with a cost of sales percentage of 54.8% in 2025[191]. - Selling, general, and administrative expenses (SG&A) increased by $13.3 million in 2025, totaling $502.0 million[194]. - The company expects higher tariff expenses to impact cost of sales as inventory transitions to products purchased after new tariffs[191]. Tax and Financial Management - The effective income tax rate decreased from 35.0% in 2024 to 28.8% in 2025, with an income tax provision of $16.3 million[202]. - The company authorized a share repurchase program of up to $100.0 million, having repurchased 1.4 million shares for $12.4 million as of December 27, 2025[179]. - The company repurchased $12.4 million of its common stock in the year ended December 27, 2025, as part of its capital management strategy[221]. Working Capital and Borrowings - Working capital increased to $388.9 million as of December 27, 2025, up by $69.4 million from $319.5 million in 2024, driven by tariff costs and increased receivables[225]. - As of December 27, 2025, the company had outstanding borrowings of $637.0 million on its senior term loan, with $8.5 million used for principal payments in 2025[219]. - The ABL Revolver had an outstanding balance of $36.0 million as of December 27, 2025, with $279.1 million available for borrowings, indicating strong liquidity[223]. Impairment and Fair Value - The company recorded an impairment charge of $24.6 million in the fourth quarter of 2023, primarily related to certain product offerings, impacting future cash flows[211]. - The fair value of each reporting unit exceeded its carrying value as of the annual impairment assessment conducted on October 1 for the years 2023, 2024, and 2025[230]. - The carrying value of the largest reporting unit, Hardware Solutions, goodwill was $450.9 million as of December 27, 2025[233]. - Significant assumptions for fair value estimates include projected net sales and EBITDA growth rates, which are influenced by market growth rates and competitive environment[231]. - The discount rate used for fair value estimates is based on the weighted average cost of capital, which may be affected by macroeconomic changes and market volatility[232]. Currency and Economic Exposure - The U.S. dollar decreased in value relative to the Chinese yuan by approximately 4.0% in 2025, impacting supplier pricing[173]. - The U.S. dollar decreased in value relative to the Canadian dollar by approximately 5.2% in 2025, affecting sales reported in U.S. dollars[175]. - The company estimates sourcing approximately 33% of its products from China, which has been affected by recent tariffs, increasing net working capital and cost of sales[177]. - The company utilizes foreign exchange forward contracts to manage exposure to currency fluctuations between the Canadian dollar and the U.S. dollar[238]. - The company is exposed to interest rate changes due to variable interest rate borrowings and enters into interest rate swaps as necessary[235]. - Future economic conditions could adversely impact growth rates, potentially leading to impairment charges if cash flows decline[232].