What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-02-27 compared with 2022-03-16 · 69 added, 65 removed, 162 unchanged (45% of the section changed)

2 unchanged sentences

and its wholly-owned subsidiaries (collectively, “Hillman” or “Company”) are one of the largest providers of hardware-related products and related merchandising services to retail markets in North America.

Our principal business is operated through our wholly-owned subsidiary, The Hillman Group, Inc.

Our principal business is operated through our wholly-owned subsidiary, The Hillman Solutions Corp.

and its wholly-owned subsidiaries (collectively, “Hillman Group”), which had net sales of approximately $1,486.3 million in 2022.

7 unchanged sentences

We support product sales with services that include design and installation of merchandising systems, maintenance of appropriate in-store inventory levels, and break-fix for our robotics kiosks.

Our headquarters are located at 10590 Hamilton Avenue, Cincinnati, Ohio.

2 | December 31, 2022 Form 10-K

In November 2022, Hillman's corporate headquarters moved from 10590 Hamilton Avenue, Cincinnati, Ohio to 1280 Kemper Meadow Drive, Forest Park, Ohio.

We maintain a website at www.hillmangroup.com .

Information contained or linked on our website is not incorporated by reference into this annual report and should not be considered a part of this annual report.

In 1964, Max Hillman established Hillman Bolt & Screw Corporation in Cincinnati, Ohio when he purchased a franchise operation from Sharon Bolt & Screw, a hardware fastener company.

Max began distributing fasteners to independent hardware stores in southern Ohio and northern Kentucky, with a relentless commitment to service.

Max’s two sons, Mick Hillman and Rick Hillman, joined their father’s company in 1969, as Hillman’s customer base and distribution network continued to grow.

In 1982, Hillman Bolt & Screw was purchased by Sun Distributors followed by Max’s retirement shortly thereafter.

Mick and Rick took over the day-to-day operations of the business in 1984.

During the early 1990s, the Company developed its National Field Service Group, which today includes 1,100 field service and sales representatives, to manage the complex assortment of Hillman products on its customers’ shelves.

Over the next three decades Hillman continued to win new business, expanding from traditional hardware stores to big box and home improvement retailers, and into adjacent product categories through multiple strategic acquisitions.

During the 2000s, Hillman was purchased three separate times by private equity firms (2001, 2004 and 2010).

During 2012 and 2013, Rick and Mick Hillman retired, respectively, after more than 40 years of actively managing the Company.

Thereafter in 2014, CCMP Capital Advisors acquired the majority interest in Hillman.

In 2021, Hillman became a publicly traded company, listing its shares on the Nasdaq stock exchange under the ticker symbol “HLMN” by virtue of a merger with a Special Purpose Acquisition Company ("SPAC").

See Note 3 - Merger Agreement of the Notes to Consolidated Financial Statements for additional information.

Hillman’s legacy of service has remained unchanged throughout its history, and it continues to take care of its customers first.

Nasdaq listing - 2021

During 2021, the Company began exploring ways to further expand is access to the capital markets by becoming a publicly-traded entity.

On July 14, 2021, privately held HMAN Group Holdings Inc.

("Old Hillman"), and Landcadia Holdings III, Inc.

(“Landcadia” and after the Business Combination described herein, “New Hillman”), a special purpose acquisition company ("SPAC") consummated the previously announced business combination (the “Closing”) pursuant to the terms of the Agreement and Plan of Merger, dated as of January 24, 2021 (as amended on March 12, 2021, the "Merger Agreement”).

Unless the context indicates otherwise, the discussion of the Company and it's financial condition and results of operations is with respect to New Hillman following the closing date and Old Hillman prior to the closing date.

(“Landcadia” and after the Business Combination described herein, “New Hillman”), a SPAC consummated the previously announced business combination (the “Closing”) pursuant to the terms of the Agreement and Plan of Merger, dated as of January 24, 2021 (as amended on March 12, 2021, the "Merger Agreement”).

Unless the context indicates otherwise, the discussion of the Company and its financial condition and results of operations is with respect to New Hillman following the closing date and Old Hillman prior to the closing date.

See Note 3 - Merger Agreement of the Notes to Consolidated Financial Statements for additional information.

In connection with the Closing, the Company entered into a new credit agreement (the “Term Credit Agreement”), which provided for a new funded term loan facility of $835.0 million and a delayed draw term loan facility of $200.0 million (of which $16.0 million was drawn).

The Company also also entered into an amendment to their existing asset-based revolving credit agreement, extending the maturity and conformed certain provisions to the Term Credit Agreement.

The Company also entered into an amendment to their existing asset-based revolving credit agreement, extending the maturity and conformed certain provisions to the Term Credit Agreement.

The proceeds of the funded term loans under the Term Credit Agreement and revolving credit loans under the ABL Credit Agreement were used, together with other available cash, to (1) refinance in full all outstanding term loans and to terminate all outstanding commitments under the credit agreement, dated as of May 31, 2018, (2) refinance outstanding revolving credit loans, and (3) redeem in full senior notes due July 15, 2022 (the “6.375% Senior Notes”).

Additionally, we fully redeemed the 11.6% Junior Subordinated Debentures.

In connection with the refinancing we incurred a loss of $8.1 million and paid $38.7 million in financing fees, of which $21.0 million was recorded as a financing activity.

In connection with the refinancing, we incurred a loss of $8.1 million and paid $38.7 million in financing fees, of which $21.0 million were recorded as a financing activity.

See Note 9 - Long-Term Debt of the Notes to Consolidated Financial Statements for additional information.

On April 16, 2021, the Company completed the acquisition of Oz Post International, LLC ("OZCO"), a leading manufacturer of superior quality hardware that offers structural fasteners and connectors used for decks, fences and other outdoor structures, for a total purchase price of $38.9 million.

The Company entered into an amendment ("OZCO Amendment") to the term loan credit agreement dated May 31, 2018 (the "2018 Term Loan"), which provided $35.0 million of incremental term loan funds to be used to finance the acquisition.

Ozco has business operations in the United States and its financial results reside within our Hardware and Protective Solutions segment.

On August 16, 2019, we acquired the assets of Sharp Systems, LLC ("Resharp"), a California-based innovative developer of automated knife sharpening systems, for a cash payment of $3.0 million and contingent consideration valued at $18.1 million.

The maximum payout for the contingent consideration is $25.0 million plus 1.8% of net knife-sharpening revenues for five years after the $25.0 million is fully paid.

Resharp has business operations in the United States and its financial results reside within our Robotics and Digital Solutions segment.

On July 1, 2019, the Company acquired the assets of West Coast Washers, Inc for a total purchase price of $3.1 million.

The financial results of West Coast Washers, Inc.

reside within the Company's Hardware and Protective Solutions segment.

Hillman Group

8 unchanged sentences

We complement our extensive product selection with regular retailer visits by our field sales and service organization.

3 | December 31, 2022 Form 10-K

We market and distribute a wide variety of Stock Keeping Units (“SKUs”) of small, hard-to-find and hard-to-manage hardware items.

5 unchanged sentences

We regularly refresh retailers' displays with new products and package designs utilizing color-coding to simplify the shopping experience for consumers and improve the attractiveness of individual store displays.

We operate from 22 strategically located distribution centers in North America.

Our main distribution centers utilize state-of-the-art Warehouse Management Systems (“WMS”) to ship customer orders within 48 hours while achieving a very high order fill rate.

We also supplement our operations with third-party logistics providers to warehouse and ship customer orders in the certain areas.

We operate from 22 strategically located distribution centers in North America and supplement our operations with third-party logistics providers to warehouse and ship customer orders in the certain areas.

Products and Suppliers

1 unchanged sentence

Our portfolio provides retailers the assurance that their shoppers can find the right product at the right price within an 'easy to shop' environment.

We currently manage a worldwide supply chain comprised of a large number of vendors, the largest of which accounted for approximately 5.7% of the Company's annual purchases and the top five of which accounted for approximately 17.0% of its annual purchases.

We currently manage a worldwide supply chain comprised of a large number of vendors, the largest of which accounted for approximately 4.9% of the Company's annual purchases and the top five of which accounted for approximately 15.5% of our annual purchases.

Our vendor quality control procedures include on-site evaluations and frequent product testing.

1 unchanged sentence

Hardware and Protective Solutions

Hardware and protective solutions segment includes a wide selection of product categories including fasteners;

Our Hardware and Protective Solutions segment includes a variety of product categories including:

Builders Hardware;

wall hanging;

threaded rod and metal shapes;

Wall Hanging, Threaded Rod and Metal Shapes;

Letters, Numbers, and Signs ("LNS");

personal protection products;

and work gear.

and Personal Protection Equipment.

Our Fastener business consists of three categories:

core fasteners, construction fasteners, and anchors, sold under a variety of brands including Hillman, FasnTite, DeckPlus, and PowerPro.

core fasteners, construction fasteners, and anchors sold under a variety of brands including Hillman, Fas-n-Tite, Deck-Plus, and Power-Pro.

Core fasteners include nuts, bolts, screws, washers, and specialty items.

1 unchanged sentence

Anchors include hollow wall and solid wall items such as plastic anchors, toggle bolts, concrete screws, and wedge anchors.

Builder's hardware includes a variety of common household items such as coat hooks, door stops, hinges, gate latches, and decorative hardware.

Builders Hardware includes a variety of common household items such as coat hooks, door stops, hinges, gate latches, and decorative hardware.

We market the builder's hardware products under the Hardware Essentials® brand and provide the retailer with innovation in both product and merchandising solutions.

The Hardware Essentials® program utilizes modular packaging, color coding, and integrated merchandising to simplify the shopping experience for consumers.

Colorful signs, packaging, and installation instructions guide the consumer quickly and easily to the correct product location in store while digital content including pictures and videos assist the on-line journey.

Colorful signs, packaging, and installation instructions guide the consumer quickly and easily to the correct product location in store, while digital content including pictures and videos assist the online journey.

Hardware Essentials® provides retailers and consumers decorative upgrade opportunities through contemporary finishes and designs.

The Wall Hanging category includes traditional picture hanging hardware, primarily marketed under the OOK® and Hillman brands, and the High & Mighty® series of tool-free wall hangers, decorative hooks and floating shelves that was launched in 2017.

We are the leading supplier of metal shapes and threaded rod in the retail market.

We are the leading supplier of Threaded Rod and Metal Shapes in the retail market.

The SteelWorks® threaded rod product includes hot and cold rolled rod, both weldable and plated, as well as a complete offering of All-Thread rod in galvanized steel, stainless steel, and brass.

1 unchanged sentence

In addition, we are the primary supplier of Metal Shapes to many wholesalers throughout the country.

Letters, numbers, and signs (“LNS”) includes product lines that target both the homeowner and commercial user.

LNS includes product lines that target both the homeowner and commercial user.

Product lines within this category include individual and/or packaged letters, numbers, signs, safety related products (e.g.

911 signs), driveway markers, and a diversity of sign accessories, such as sign frames.

Our expansive glove category covers many uses for DIYer around the house and for the pro at the job site.

We sell a full assortment of work gloves under the Firm Grip®, True Grip®, and Gorilla Grip brands, automotive gloves including Grease Monkey®, gardening gloves including Digz®, as well as cleaning and all-purpose gloves.

As a category leader in work gloves our portfolio is founded on design and consumer driven innovation.

911 signs), driveway markers, and a variety of sign accessories, such as sign frames.

Our expansive Personal Protective Equipment category covers many uses for DIYer ("Do It Yourself") around the house and for the professional at the job site.

Our products can be found at leading retailers across North America.

Our work gear category consists of tool storage, knee pads, clothing, and other accessories sold under variety of brands including AWP®, McGuire Nicholas®, and Firm Grip®.

We distribute a full assortment of work gloves under the Firm Grip®, True Grip®, and Gorilla Grip brands;

automotive gloves including Grease Monkey®;

Digz® gardening gloves and more;

as well as cleaning and all-

4 | December 31, 2022 Form 10-K

purpose gloves.

As a category leader in work gloves, our portfolio is founded on design and consumer driven innovation.

Our work-gear products consist of tool storage, knee pads, clothing, and other accessories sold under variety of brands including AWP®, McGuire Nicholas®, and Firm Grip®.

The portfolio offers a “one stop shop” for leading retailers with an expansive assortment to meet the needs of both the pro and DIYer.

Our safety category includes face masks, safety vests, and sanitizing wipes and sprays sold under a variety of brands including Firm Grip®, AWP®, and Premium Defense®.

With our focus on innovative materials and intuitive design, along with industry trends, this is a growth category for Hardware and Protective Solutions.

Our safety products include face masks, safety vests, and sanitizing wipes and sprays sold under a variety of brands including Firm Grip®, AWP®, and Premium Defense®.

Focusing on innovative materials, intuitive design, and industry trends, we expect growth in the Hardware and Protective Solutions segment.

Hardware and Protective Solutions generated approximately $1,076.8 million, $1,025.0 million and $1,024.4 million of revenues in the years ended December 31, 2022, December 25, 2021, and December 26, 2020, respectively.

1 unchanged sentence

Our Robotics and Digital Solutions segment consists primarily of software-enabled robotic key duplication and engraving solutions that are tailored to the unique needs of the consumer.

We provide our offerings in retail and other high-traffic locations providing customized licensed and unlicensed key and engraving products targeted to consumers in the respective

Our offerings include self-service robotic engraving and robotic self service key duplication kiosks, as well as store associate assisted key duplication kiosks together with related software and systems, keys and key accessories sold in proximity to the kiosks.

Robotics and Digital Solutions products are located in high-traffic environments where retailers can provide consumers with on-the-spot, customized licensed and unlicensed key and engraving options.

Our offerings include store associated assisted and self-service robotic engraving and key duplication kiosks;

together with related software, systems, keys, and key accessories sold in proximity to the kiosks.

Our services include product and category management, merchandising services, and access to our proprietary robotic key duplicating and engraving software platforms and equipment.

We design proprietary software and engineer, design and manufacture our proprietary equipment in our Boulder, Colorado and Tempe, Arizona facilities, which forms the cornerstone for our key duplication business.

Our key duplication system is offered in various retail channels including mass merchants, home centers, automotive parts retailers, franchise and independent hardware stores, and grocery/drug chains.We believe we provide the most complete key duplication systems in the industry, through our unique combination of self-service kiosk technology and store associate assisted duplication systems.

Our self- service solutions are driven by our MinuteKey technology, while store associate assisted duplication currently uses the state of the art KeyKrafter equipment and other legacy duplication machines depending on the retail channel to fit that channel’s specific needs.

We design and manufacture proprietary software and equipment in our Boulder, Colorado and Tempe, Arizona facilities;

housing the cornerstone for our key duplication business.

We believe we provide the most diverse key duplication systems in the industry, through our unique combination of self-service kiosk technology and store associate assisted duplication systems.

Equipment diversity allows us to meet the individual needs of retailers.

Our self-service solutions are driven by our MinuteKey technology, while store associate assisted duplication currently uses the state-of-the-art KeyKrafter® equipment and other legacy duplication machines.

In 2018, we completed the acquisition of MinuteKey, the world’s first self-service robotic key duplication machine.

The accuracy of robotics technology put to work in an innovative way makes MinuteKey machines easy to use, convenient, fast and highly reliable.

We utilize a propriety network integration software with our MinuteKey kiosks to maintain high levels of machine up-time and ensure machines have the optimal mix of key types available for duplication.

We utilize a proprietary network integration software within our MinuteKey kiosks to maintain high levels of machine up-time and ensure machines have the optimal mix of key types available for duplication.

The kiosk is completely self-service and has a 100% customer satisfaction guarantee.

We manufacture and support the Minute Key kiosk out of our Boulder, Colorado and Tempe, Arizona facilities.

The Hillman KeyKrafter® is our most popular, innovative, and effective store associate assisted key duplication kiosk.

We manufacture and support the MinuteKey kiosk out of our Boulder, Colorado and Tempe, Arizona facilities.

Hillman KeyKrafter® is our most popular, innovative, and effective store associate assisted key duplication kiosk.

It provides significant reduction in duplication time while increasing accuracy and ease of use for unskilled store associates.

Additionally, with the KeyKrafter® solution, the capability exists for consumers to securely store and retrieve digital back-ups of their key without the original through the revolutionary Hillman KeyHero® Technology.

Our Precision Laser Key System™ system uses a digital optical camera, lasers, and proprietary software to scan a customer’s key.

Our Precision Laser Key System™ uses a digital optical camera, lasers, and proprietary software to scan a customer’s key.

The system identifies the key and retrieves the key’s specifications, including the appropriate blank and cutting pattern, from a comprehensive database.

3 unchanged sentences

Our proprietary key offering features the universal blank which uses a “universal” keyway to replace up to five original equipment keys.

This innovative system allows a retailer to duplicate 99% of the key market while stocking less than 100 SKUs.

We continually refresh the retailer’s key offerings by introducing decorated and licensed keys and accessories.

7 unchanged sentences

Innovation has played a major role in the development of our engraving business unit.

From the original Quick-Tag® consumer-operated Kiosk system to the proprietary laser system of TagWorks®, we continue to lead the industry with consumer-friendly engraving solutions.

5 | December 31, 2022 Form 10-K

original Quick-Tag® consumer-operated kiosk system to the proprietary laser system of TagWorks®, we continue to lead the industry with consumer-friendly engraving solutions.

As in our key business, we retain ownership of the key engraving equipment and market and sell blank tags.

We have continued to build out our robotics and digital solutions segment with two recent acquisitions.

In August 2019, we acquired the assets of Sharp Systems, LLC (“Resharp”), a California-based innovative developer of robotic automated knife sharpening systems, for a cash payment of $3.0 million and contingent consideration valued at $18.1 million.

The maximum payout for the contingent consideration is $25.0 million plus 1.8% of net knife-sharpening revenues for five years after the $25.0 million is fully paid.

We will continue rolling out knife sharpening systems to customers into 2022.

In February 2020, we acquired the assets of Instafob, LLC (“Instafob”), a California-based innovative developer of RFID ("Radio Frequency

Identification") key duplication systems and a cloud based platform, for a cash payment of $800 and a total purchase price of $2,618, which includes $1,818 in contingent contingent consideration that remain payable to the seller.

Contingent consideration is based on 5% of the net sales from 2020 through 2022 plus 1% of net sales from 2023 through 2029.

Robotics and Digital Solutions generated approximately $249.9 million, $249.5 million, and $209.3 million of revenues in the years ended December 31, 2022, December 25, 2021, and December 26, 2020, respectively.

14 unchanged sentences

This problem is compounded by the necessity of receiving small shipments of inventory at different times and stocking the goods.

The failure to have these small items available will have an adverse effect on store traffic, thereby possibly denying the retailer the opportunity to sell items that generate higher dollar sales.

We sell our products to a large volume of customers, the top two of which accounted for approximately $679.1 million, or approximately 48%, of our total revenue in 2021.

The failure to have these small items available will have an adverse effect on store traffic, thereby possibly denying the retailer the opportunity to sell items that generate higher dollar profits.

We sell our products to a large volume of customers, the top two of which accounted for approximately $678.7 million, or approximately 46% of our total revenues in 2022.

For the year ended December 31, 2022, Home Depot was the single largest customer, representing approximately $356.8 million or 24.0% of our total revenues.

9 unchanged sentences

We partner with our customers to understand the unmet needs of consumers, design creative solutions, and commercialize those solutions, bringing them to life in both physical and digital channels through a tight alignment between the product management, marketing communications, and channel marketing functions.

We provide best in class support and customer service at every touch point for our retail partners, and service is the hallmark of Hillman company-wide.

We provide best in class support and customer service at every touch point for our retail partners.

Service is the hallmark of Hillman company-wide, employing 1,101 full-time and 122 part-time people on our sales and service team.

The national accounts field service organization consists of approximately 745 employees and 72 field managers focusing on big box retailers, pet super stores, large national discount chains, and grocery stores.

1 unchanged sentence

Many of our largest customers use Electronic Data Interchange (“EDI”) for processing of orders and invoices.

6 | December 31, 2022 Form 10-K

We employ what we believe to be the largest direct sales force in the industry.

6 unchanged sentences

Our primary competitors in the national accounts marketplace for fasteners are Primesource Building Products, Inc., Midwest Fastener Corporation, Illinois Tool Works Inc., Spectrum Brands, and competition from direct import by our customers.

Our national competitors for gloves and personal protective equipment include West Chester Protective Gear, PIP, Iron Clad, and MidWest Quality Gloves, Inc.

Our national competitors for gloves and personal protective equipment include Techtronic Industries, West Chester Protective Gear, PIP, Iron Clad, and MidWest Quality Gloves, Inc.

Competition is primarily based on sourcing and price.

20 unchanged sentences

We regularly conduct self-assessments to examine our safety culture and processes.

In response to COVID-19, we have taken and continue to take measures to protect our workforce.

We have modified practices at our distribution facilities and offices to adhere to guidance from the U.S.

Centers for Disease Control and Prevention and local health and governmental authorities.

In addition, we have invested in our safety team to provide oversight and ensure robust safety protocols are present across all of our operations.

4 unchanged sentences

We offer employees resources to continuously improve their skills and performance with the goal of further cultivating the diverse talent on our team.

We seek people who are demonstrate our core values;

absolute integrity, accountability to our team and customers, the ability to build on difference, and trust and respect.

We seek people who are demonstrate our core values, absolute integrity, accountability to our team and customers, the ability to build on difference, trust and respect.

Diversity and Inclusion

7 | December 31, 2022 Form 10-K

We are committed to actions that build an inclusive and equitable workplace where diversity is valued and leveraged.

We ask our employees to bring their authentic selves to work every day and this shows in both our products and our services.

It's this authenticity that allows us to fulfill our mission.

We are committed to creating equal opportunities for employment, and creating inclusive and diverse workplaces that allow are team to perform to their fullest potential.

We are committed to creating equal opportunities for employment, and creating inclusive and diverse workplaces that allow our team to perform to their fullest potential.

We do not consider the sales backlog to be a significant indicator of future performance due to the short order cycle of our business.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business