##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 Commission file number 1-13293
 The Hillman Companies, Inc.
  Delaware
    
    23-2874736(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)10590 Hamilton AvenueCincinnati, Ohio
    
    45231(Address of principal executive offices)
    
    (Zip Code)
 (513) 851-4900
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which Registered11.6% Junior Subordinated Debentures
    
    NonePreferred Securities Guaranty
    
    None
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ




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PART I
 Item 1  Business
 General
  http://www.hillmangroup.com
 Background
     2




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Industry Overview
   The Hillman Group
     3




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Products and Suppliers
  Fasteners
 ,
   Keys and Key Accessories
  ©
 © ©
 4




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Engraving
     Letters, Numbers and Signs
    5




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Threaded Rod
 s
   Markets and Customers
      Sales and Marketing
  6




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Competition
   Insurance Arrangements
  Employees
  Backlog
  7




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Where You Can Find More Information
 http://www.sec.gov publicinfo@sec.gov
  Item 1A  Risk Factors.
  The Company operates in a highly competitive industry, which may have a material adverse effect on
its business, financial condition and results of operations.
  The Companys business, financial condition and results of operations may be materially adversely
affected by seasonality and general economic conditions affecting its sales.
  Large customer concentration and the inability to penetrate new channels of distribution could
adversely affect the business.
  Successful sales and marketing efforts depend on the Companys ability to recruit and retain
qualified employees.
  8




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The Company is exposed to adverse changes in currency exchange rates.
  The Companys results of operations could be negatively impacted by inflation in the cost of raw
materials, freight and energy.
  The Companys business is subject to risks associated with sourcing product from overseas.
   If the Company were required to write down all or part of its goodwill or indefinite-lived
tradenames, its net income could be materially adversely affected.
  The Companys success is highly dependent on information and technology systems.
  9




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The inability to make timely and cost effective acquisitions may adversely affect the Companys
business.
   The Company is subject to fluctuations in interest rates.
  The Company has significant indebtedness that could affect operations and financial condition.
  The failure to meet certain financial covenants required by our credit agreements may materially
and adversely affect assets, financial position and cash flows.
  Item 1B  Unresolved Staff Comments.
  10




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Item 2  Properties.
  ApproximateLocation
    
    Square Footage
    
    DescriptionCincinnati, Ohio
    
    
    248,200
    
    
    Office, DistributionForest Park, Ohio
    
    
    335,700
    
    
    DistributionTempe, Arizona
    
    
    184,100
    
    
    Office, Mfg., DistributionJacksonville, Florida
    
    
    96,500
    
    
    DistributionShafter, California
    
    
    84,000
    
    
    DistributionLewisville, Texas
    
    
    72,300
    
    
    DistributionWilsonville, Oregon
    
    
    29,400
    
    
    DistributionGreen Island, New York
    
    
    56,000
    
    
    DistributionLaCrosse, Wisconsin
    
    
    48,000
    
    
    DistributionGoodlettsville, Tennessee
    
    
    72,000
    
    
    Mfg., DistributionMississauga, Ontario
    
    
    11,000
    
    
    Office, Distribution
  Item 3  Legal Proceedings.
  Item 4  Submission of Matters to a Vote of Security Holders.
  11




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Part II
 Item 5 
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 Stock Exchange Listing
  2006
    
    High
    
    LowFirst Quarter
    
    $
    29.40
    
    
    $
    28.59Second Quarter
    
    
    28.70
    
    
    
    25.50Third Quarter
    
    
    29.80
    
    
    
    27.74Fourth Quarter
    
    
    29.55
    
    
    
    27.30
 2005
    
    High
    
    LowFirst Quarter
    
    $
    29.44
    
    
    $
    27.55Second Quarter
    
    
    29.25
    
    
    
    28.15Third Quarter
    
    
    29.29
    
    
    
    28.75Fourth Quarter
    
    
    29.28
    
    
    
    28.61
  Distributions
    Issuer Purchases of Equity Securities
  12




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Item 6  Selected Financial Data.
   (dollars in thousands)Successor
    
    
    PredecessorYear Ended
    
    Year Ended
    
    Nine Months Ended
    
    
    Three Months Ended
    
    Year Ended
    
    Year Ended12/31/06
    
    12/31/05
    
    12/31/04
    
    
    03/31/04
    
    12/31/03
    
    12/31/02(as restated) (3)Income Statement Data:Net sales
    
    $
    423,901
    
    
    $
    382,512
    
    
    $
    273,374
    
    
    
    $
    78,190
    
    
    $
    317,671
    
    
    $
    286,599Gross profit
    
    
    220,450
    
    
    
    206,290
    
    
    
    150,402
    
    
    
    
    42,807
    
    
    
    174,316
    
    
    
    160,503Non-recurring expense (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,707
    
    
    
    
    
    
    
    Extinguishment of debt
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    
    (7,648
    )
    
    
    (2,442
    )
    
    
    779
    
    
    
    
    (20,366
    )
    
    
    (5,709
    )
    
    
    5,243Balance Sheet Data at December 31:Total assets
    
    $
    653,584
    
    
    $
    631,288
    
    
    $
    628,899
    
    
    
    
    N/A
    
    
    $
    354,253
    
    
    $
    375,653Long-term debt and
capitalized lease obligations (1)
    
    
    284,406
    
    
    
    263,508
    
    
    
    264,101
    
    
    
    
    N/A
    
    
    
    150,338
    
    
    
    147,175
 
 (1)
    
    Includes current portion of long-term debt and capitalized lease obligations.(2)
    
    Non-recurring expenses incurred in connection with CHS merger including $24,353 for stock
options granted at an exercise price below fair market value, $4,035 in investment banking
and legal fees, $1,922 in management bonuses and $397 in payroll taxes. See Note 16,
Non-recurring Expense, of Notes to the Consolidated Financial Statements for further
details.(3)
    
    See Note 2 to the Consolidated Financial Statements. 13




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Item 7  Managements Discussion and Analysis of Financial Condition and Results of Operation .
  Forward Looking Statements
    General
  14




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Restatement of Financial Statements
   Merger Transaction
    Financing Arrangements
   15




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Acquisition
  16




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##### 



Results of Operations
 Sales and Profitability for each of the Three Years Ended December 31
 (dollars in thousands)2006
    
    
    2005
    
    
    2004 (a)% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    TotalNet sales
    
    $
    423,901
    
    
    
    100.0
    %
    
    $
    382,512
    
    
    
    100.0
    %
    
    $
    351,564
    
    
    
    100.0
    %Cost of sales (exclusive of
depreciation and amortization
shown below)
    
    
    203,451
    
    
    
    48.0
    %
    
    
    176,222
    
    
    
    46.1
    %
    
    
    158,355
    
    
    
    45.0
    %Gross profit
    
    
    220,450
    
    
    
    52.0
    %
    
    
    206,290
    
    
    
    53.9
    %
    
    
    193,209
    
    
    
    55.0
    %Operating expenses:Selling
    
    
    75,868
    
    
    
    17.9
    %
    
    
    72,282
    
    
    
    18.9
    %
    
    
    67,796
    
    
    
    19.3
    %Warehouse & delivery
    
    
    55,183
    
    
    
    13.0
    %
    
    
    47,705
    
    
    
    12.5
    %
    
    
    44,245
    
    
    
    12.6
    %General & Administrative
    
    
    21,257
    
    
    
    5.0
    %
    
    
    19,078
    
    
    
    5.0
    %
    
    
    18,221
    
    
    
    5.2
    %Stock compensation expense
    
    
    1,239
    
    
    
    0.3
    %
    
    
    1,601
    
    
    
    0.4
    %
    
    
    272
    
    
    
    0.1
    %Total SG&A
    
    
    153,547
    
    
    
    36.2
    %
    
    
    140,666
    
    
    
    36.8
    %
    
    
    130,534
    
    
    
    37.1
    %Non-recurring expense (b)
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    30,707
    
    
    
    8.7
    %Depreciation
    
    
    17,132
    
    
    
    4.0
    %
    
    
    15,605
    
    
    
    4.1
    %
    
    
    15,187
    
    
    
    4.3
    %Amortization
    
    
    7,748
    
    
    
    1.8
    %
    
    
    7,228
    
    
    
    1.9
    %
    
    
    5,748
    
    
    
    1.6
    %Extinguishment of debt
    
    
    726
    
    
    
    0.2
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Management fees
    
    
    1,019
    
    
    
    0.2
    %
    
    
    1,045
    
    
    
    0.3
    %
    
    
    1,329
    
    
    
    0.4
    %Total operating expenses
    
    
    180,172
    
    
    
    42.5
    %
    
    
    164,544
    
    
    
    43.0
    %
    
    
    183,505
    
    
    
    52.2
    %Other income (expense)
    
    
    1,042
    
    
    
    0.2
    %
    
    
    (87
    )
    
    
    0.0
    %
    
    
    277
    
    
    
    0.1
    %Income from operations
    
    
    41,320
    
    
    
    9.7
    %
    
    
    41,659
    
    
    
    10.9
    %
    
    
    9,981
    
    
    
    2.8
    %Interest expense
    
    
    25,799
    
    
    
    6.1
    %
    
    
    20,974
    
    
    
    5.5
    %
    
    
    17,539
    
    
    
    5.0
    %Interest expense on mandatorily
redeemable preferred stock &
management purchased preferred
options
    
    
    8,894
    
    
    
    2.1
    %
    
    
    7,972
    
    
    
    2.1
    %
    
    
    5,458
    
    
    
    1.6
    %Interest expense on junior
subordinated notes
    
    
    12,609
    
    
    
    3.0
    %
    
    
    12,609
    
    
    
    3.3
    %
    
    
    12,609
    
    
    
    3.6
    %Investment income on trust
common securities
    
    
    (378
    )
    
    
    -0.1
    %
    
    
    (378
    )
    
    
    -0.1
    %
    
    
    (378
    )
    
    
    -0.1
    %Income (loss) before taxes
    
    
    (5,604
    )
    
    
    -1.3
    %
    
    
    482
    
    
    
    0.1
    %
    
    
    (25,247
    )
    
    
    -7.2
    %
 
 (a)
    
    For the purpose of comparing the Companys results of operations for each of the three
years ended December 31, 2006, the results of the Predecessor Operations for the three months
ended March 31, 2004 have been combined with the results of the Successor Operations for the
nine months ended December 31, 2004.(b)
    
    Represents one-time charges for stock options, management bonuses, investment banking, and
legal fees incurred in connection with the March 31, 2004 Merger Transaction. 17




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Years Ended December 31, 2006 and 2005
         18




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Years Ended December 31, 2005 and 2004
     19




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20




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Liquidity and Capital Resources
     21




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##### 



AmountDecrease in cash and cash equivalents
    
    $
    (23,940
    )Increase in accounts receivable, net
    
    
    6,848Increase in inventories, net
    
    
    15,203Decrease in other current assets
    
    
    (211
    )Decrease in deferred taxes
    
    
    964Increase in accounts payable
    
    
    (4,713
    )Increase in senior term loans & capital lease obligations
    
    
    (386
    )Decrease in accrued pricing allowances
    
    
    4,402Increase in accrued income and other taxes
    
    
    (194
    )Decrease in accrued interest
    
    
    1,284Decrease in other accrued liabilities
    
    
    2,362Other items, net
    
    
    (116
    )Net increase in working capital for the year
ended December 31, 2006
    
    $
    1,503
  Payments DueLess Than
    
    
    1 to 3
    
    
    3 to 5
    
    
    More ThanContractual Obligations
    
    Total
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Five YearsJunior Subordinated Debentures (1)
    
    $
    116,900
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    116,900Long Term Senior Term Loans
    
    
    233,825
    
    
    
    2,350
    
    
    
    4,700
    
    
    
    226,775
    
    
    
    Bank Revolving Credit Facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long Term Unsecured Subordinated Notes
    
    
    49,820
    
    
    
    
    
    
    
    
    
    
    
    49,820
    
    
    
    Interest payments (2)
    
    
    99,301
    
    
    
    24,782
    
    
    
    48,965
    
    
    
    25,554
    
    
    
    Operating Leases
    
    
    46,494
    
    
    
    8,309
    
    
    
    10,410
    
    
    
    7,992
    
    
    
    19,783Mandatorily Redeemable Preferred Stock
    
    
    78,079
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78,079Management Purchased Preferred Options
    
    
    4,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,659Accrued Compensation Preferred Options
    
    
    4,081
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,081Deferred Compensation Obligations
    
    
    4,867
    
    
    
    500
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    2,367Capital Lease Obligations
    
    
    892
    
    
    
    325
    
    
    
    456
    
    
    
    74
    
    
    
    37Other Long Term Obligations
    
    
    4,681
    
    
    
    3,263
    
    
    
    912
    
    
    
    228
    
    
    
    278Total Contractual Cash Obligations
    
    $
    643,599
    
    
    $
    39,529
    
    
    $
    66,443
    
    
    $
    311,443
    
    
    $
    226,184
 
 (1)
    
    The junior subordinated debentures liquidation value is approximately $108,707.(2)
    
    Interest payments for Long Term Senior Term Loans and the Long Term Unsecured
Subordinated Notes. Interest payments on the variable rate Long Term Senior Term
Loans were calculated at the LIBOR rate plus margin of 8.5% in effect as of
December 31, 2006.   22




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Inflation
  Related Party Transactions
  23




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Critical Accounting Policies and Estimates
   Revenue Recognition:
    24




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Accounts Receivable and Allowance for Doubtful Accounts
  Inventory Realization
  Property and Equipment
  Depreciation
  Goodwill and Other Intangible Assets
  Long-Lived Assets
  Investments:
  25




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Income Taxes
  Self-insurance Reserves
    Retirement Benefits
   Shipping and Handling:
  Research and Development
  26




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Stock Based Compensation
  Fair Value of Financial Instruments:
  Translation of Foreign Currencies:
  Comprehensive Income (Loss):
  Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine months
    
    
    Three monthsended
    
    
    ended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    2004(as restated,see Note 2)Net (loss) income
    
    $
    (7,648
    )
    
    $
    (2,442
    )
    
    $
    779
    
    
    $
    (20,366
    )Unrealized gains on investments, net
    
    
    
    
    
    
    41
    
    
    
    34
    
    
    
    16Realized gains on investments, net
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment, net
    
    
    (13
    )
    
    
    (24
    )
    
    
    (110
    )
    
    
    10Change in derivative security value, net
    
    
    (221
    )
    
    
    109
    
    
    
    (18
    )
    
    
    Comprehensive (loss) income
    
    $
    (7,957
    )
    
    $
    (2,316
    )
    
    $
    685
    
    
    $
    (20,340
    )
 Use of Estimates in the Preparation of Financial Statements:
  27




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Recent Accounting Pronouncements
     28




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##### 



Item 7A  Quantitative and Qualitative Disclosures About Market Risk.
      29




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##### 



Item 8  Financial Statements and Supplementary Data.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
 Page(s)Reports of Independent Registered Public Accounting Firms
    
    
    31-33Consolidated Financial Statements:Consolidated Balance Sheets
    
    
    34-35Consolidated Statements of Operations
    
    
    36Consolidated Statements of Cash Flows
    
    
    37Consolidated Statements of Changes in Stockholders Equity
    
    
    38Notes to Consolidated Financial Statements
    
    
    39-64Financial Statement Schedule:Valuation Accounts
    
    
    65
 30




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##### 



Report of Independent Registered Public Accounting Firm
 Board
of Directors and Shareholders of  The Hillman Companies, Inc.
       
 31




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##### 



Report of Independent Registered Public Accounting Firm
 To The Board of Directors and Stockholders of  The Hillman Companies, Inc.
   
   32




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##### 



Report of Independent Registered Public Accounting Firm
 To The Board of Directors and Stockholders of  The Hillman Companies, Inc.
   
 33




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##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,
    
    
    December 31,2006
    
    
    2005(as restated,see Note 2)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,551
    
    
    $
    26,491Restricted investments
    
    
    500
    
    
    
    167Accounts receivable, net
    
    
    48,331
    
    
    
    41,483Inventories, net
    
    
    92,381
    
    
    
    77,178Deferred income taxes, net
    
    
    6,575
    
    
    
    5,611Other current assets
    
    
    2,637
    
    
    
    2,848Total current assets
    
    
    152,975
    
    
    
    153,778Property and equipment, net
    
    
    59,061
    
    
    
    60,717Goodwill
    
    
    260,575
    
    
    
    241,461Other intangibles, net
    
    
    167,244
    
    
    
    160,507Restricted investments
    
    
    4,867
    
    
    
    4,642Deferred financing fees, net
    
    
    5,000
    
    
    
    5,712Investment in trust common securities
    
    
    3,261
    
    
    
    3,261Other assets
    
    
    601
    
    
    
    1,210Total assets
    
    $
    653,584
    
    
    $
    631,288LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    22,338
    
    
    $
    17,625Current portion of senior term loans
    
    
    2,350
    
    
    
    2,175Current portion of capitalized lease obligations
    
    
    255
    
    
    
    44Accrued expenses:Salaries and wages
    
    
    3,494
    
    
    
    3,378Pricing allowances
    
    
    5,201
    
    
    
    9,603Income and other taxes
    
    
    1,933
    
    
    
    1,739Interest
    
    
    2,919
    
    
    
    4,203Deferred compensation
    
    
    500
    
    
    
    167Other accrued expenses
    
    
    8,102
    
    
    
    10,464Total current liabilities
    
    
    47,092
    
    
    
    49,398Long term senior term loans
    
    
    231,475
    
    
    
    212,062Long term capitalized lease obligations
    
    
    506
    
    
    
    55Long term unsecured subordinated notes
    
    
    49,820
    
    
    
    49,172Junior subordinated debentures
    
    
    116,900
    
    
    
    117,295Mandatorily redeemable preferred stock
    
    
    78,079
    
    
    
    69,695Management purchased preferred options
    
    
    4,659
    
    
    
    4,087Deferred compensation
    
    
    4,867
    
    
    
    4,642Deferred income taxes, net
    
    
    36,653
    
    
    
    34,766Accrued dividends on preferred stock
    
    
    30,082
    
    
    
    18,057Other non-current liabilities
    
    
    5,713
    
    
    
    3,156Total liabilities
    
    
    605,846
    
    
    
    562,385
 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 34




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##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,
    
    
    December 31,2006
    
    
    2005(as restated,see Note 2)LIABILITIES AND STOCKHOLDERS EQUITY (CONTINUED)Common and Preferred stock with put options:Class A Preferred stock, $.01 par, 238,889 shares authorized,
88.0 issued and outstanding at December 31, 2006
    
    
    88
    
    
    
    Class A Common stock, $.01 par, 23,141 shares authorized, 412.0 and
407.6 issued and outstanding at December 31, 2006 and 2005, respectively
    
    
    417
    
    
    
    407Class B Common stock, $.01 par, 2,500 shares authorized,
1,000 issued and outstanding at December 31, 2006 and 2005
    
    
    
    
    
    
    1,311Commitments and contingencies (Note 18)Stockholders equity:Preferred Stock:Class A Preferred stock, $.01 par, 238,889 shares authorized,
82,104.8 issued and outstanding at December 31, 2006 and 2005
    
    
    1
    
    
    
    1Common Stock:Class A Common stock, $.01 par, 23,141 shares authorized,
5,805.3 issued and outstanding at December 31, 2006 and 2005
    
    
    
    
    
    
    Class C Common stock, $.01 par, 30,109 shares authorized,
2,787.1 issued and outstanding at December 31, 2006 and 2005
    
    
    
    
    
    
    Additional paid-in capital
    
    
    57,599
    
    
    
    69,594Accumulated deficit
    
    
    (10,090
    )
    
    
    (2,442
    )Accumulated other comprehensive income (loss)
    
    
    (277
    )
    
    
    32Total stockholders equity
    
    
    47,233
    
    
    
    67,185Total liabilities and stockholders equity
    
    $
    653,584
    
    
    $
    631,288
 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 35




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
 Successor
    
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine months
    
    
    
    Three monthsended
    
    
    ended
    
    
    ended
    
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004(as restated,see Note 2)Net sales
    
    $
    423,901
    
    
    $
    382,512
    
    
    $
    273,374
    
    
    
    $
    78,190Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    203,451
    
    
    
    176,222
    
    
    
    122,972
    
    
    
    
    35,383Gross profit
    
    
    220,450
    
    
    
    206,290
    
    
    
    150,402
    
    
    
    
    42,807Operating expenses:Selling, general and administrative expenses
    
    
    153,547
    
    
    
    140,666
    
    
    
    99,538
    
    
    
    
    30,996Non-recurring expense (Note 16)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,707Depreciation
    
    
    17,132
    
    
    
    15,605
    
    
    
    11,388
    
    
    
    
    3,799Amortization
    
    
    7,748
    
    
    
    7,228
    
    
    
    5,427
    
    
    
    
    321Extinguishment of debt
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    
    Management fee to related party
    
    
    1,019
    
    
    
    1,045
    
    
    
    805
    
    
    
    
    524Total operating expenses
    
    
    180,172
    
    
    
    164,544
    
    
    
    117,158
    
    
    
    
    66,347Other income (expense), net
    
    
    1,042
    
    
    
    (87
    )
    
    
    417
    
    
    
    
    (140
    )Income (loss) from operations
    
    
    41,320
    
    
    
    41,659
    
    
    
    33,661
    
    
    
    
    (23,680
    )Interest expense, net
    
    
    25,799
    
    
    
    20,974
    
    
    
    13,698
    
    
    
    
    3,841Interest expense on mandatorily redeemable
preferred stock and management purchased
preferred options
    
    
    8,894
    
    
    
    7,972
    
    
    
    5,458
    
    
    
    
    Interest expense on junior subordinated notes
    
    
    12,609
    
    
    
    12,609
    
    
    
    9,457
    
    
    
    
    3,152Investment income on trust common securities
    
    
    (378
    )
    
    
    (378
    )
    
    
    (284
    )
    
    
    
    (94
    )Income (loss) before income taxes
    
    
    (5,604
    )
    
    
    482
    
    
    
    5,332
    
    
    
    
    (30,579
    )Income tax provision (benefit)
    
    
    2,044
    
    
    
    2,924
    
    
    
    4,553
    
    
    
    
    (10,213
    )Net (loss) income
    
    $
    (7,648
    )
    
    $
    (2,442
    )
    
    $
    779
    
    
    
    $
    (20,366
    )
 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 36




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 Successor
    
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine months
    
    
    
    Three monthsended
    
    
    ended
    
    
    ended
    
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004(as restated,see Note 2)Cash flows from operating activities:Net (loss) income
    
    $
    (7,648
    )
    
    $
    (2,442
    )
    
    $
    779
    
    
    
    $
    (20,366
    )Adjustments to reconcile net (loss) income to net cash
provided by operating activities:Depreciation and amortization
    
    
    24,880
    
    
    
    22,833
    
    
    
    16,815
    
    
    
    
    4,120Dispositions of property and equipment
    
    
    28
    
    
    
    151
    
    
    
    75
    
    
    
    
    Deferred income tax (benefit)
    
    
    1,692
    
    
    
    2,964
    
    
    
    4,040
    
    
    
    
    (11,608
    )PIK interest on unsecured subordinated notes
    
    
    648
    
    
    
    1,082
    
    
    
    590
    
    
    
    
    506Interest on mandatorily redeemable preferred stock
and management purchased options
    
    
    8,893
    
    
    
    7,972
    
    
    
    5,458
    
    
    
    
    Stock option grant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,353Prepayment penalty
    
    
    
    
    
    
    
    
    
    
    (1,097
    )
    
    
    
    Changes in operating items, net of effects of
acquisitions:(Increase) decrease in accounts receivable, net
    
    
    (6,848
    )
    
    
    (4,113
    )
    
    
    380
    
    
    
    
    (4,599
    )(Increase) decrease in inventories, net
    
    
    (15,203
    )
    
    
    (11,343
    )
    
    
    1,123
    
    
    
    
    (1,121
    )Decrease (increase) in other assets
    
    
    324
    
    
    
    (111
    )
    
    
    1,786
    
    
    
    
    1,464Increase (decrease) in accounts payable
    
    
    4,713
    
    
    
    (3,547
    )
    
    
    95
    
    
    
    
    6,613(Decrease) increase in other accrued liabilities
    
    
    (5,218
    )
    
    
    (1,253
    )
    
    
    (2,380
    )
    
    
    
    670Other items, net
    
    
    (712
    )
    
    
    1,756
    
    
    
    955
    
    
    
    
    6Net cash provided by operating activities
    
    
    5,549
    
    
    
    13,949
    
    
    
    28,619
    
    
    
    
    38Cash flows from investing activities:SteelWorks acquisition
    
    
    (34,364
    )
    
    
    
    
    
    
    
    
    
    
    
    Capital expenditures
    
    
    (14,681
    )
    
    
    (15,158
    )
    
    
    (9,404
    )
    
    
    
    (2,586
    )Other, net
    
    
    425
    
    
    
    (238
    )
    
    
    
    
    
    
    
    (23
    )Net cash used for investing activities
    
    
    (48,620
    )
    
    
    (15,396
    )
    
    
    (9,404
    )
    
    
    
    (2,609
    )Cash flows from financing activities:Borrowings of senior term loans
    
    
    22,394
    
    
    
    
    
    
    
    217,500
    
    
    
    
    Repayments of senior term loans
    
    
    (2,806
    )
    
    
    (1,632
    )
    
    
    (62,189
    )
    
    
    
    Borrowings of revolving credit loans
    
    
    31,091
    
    
    
    
    
    
    
    4,728
    
    
    
    
    2,680Repayments of revolving credit loans
    
    
    (31,091
    )
    
    
    
    
    
    
    (52,932
    )
    
    
    
    Borrowings of unsecured subordinated notes
    
    
    
    
    
    
    
    
    
    
    47,500
    
    
    
    
    Repayments of unsecured subordinated notes
    
    
    
    
    
    
    
    
    
    
    (44,569
    )
    
    
    
    Principal payments under capitalized lease obligations
    
    
    (162
    )
    
    
    (43
    )
    
    
    (38
    )
    
    
    
    (14
    )Financing fees, net
    
    
    (455
    )
    
    
    
    
    
    
    (7,592
    )
    
    
    
    Proceeds from sale of securities
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of predecessor common stock
    
    
    
    
    
    
    
    
    
    
    (239,077
    )
    
    
    
    Receipt of successor equity proceeds
    
    
    
    
    
    
    
    
    
    
    147,980
    
    
    
    
    Merger transaction expenses
    
    
    
    
    
    
    
    
    
    
    (2,171
    )
    
    
    
    Net cash (used for) provided by financing activities
    
    
    19,131
    
    
    
    (1,675
    )
    
    
    9,140
    
    
    
    
    2,666Net (decrease) increase in cash and cash equivalents
    
    
    (23,940
    )
    
    
    (3,122
    )
    
    
    28,355
    
    
    
    
    95Cash and cash equivalents at beginning of period
    
    
    26,491
    
    
    
    29,613
    
    
    
    1,258
    
    
    
    
    1,163Cash and cash equivalents at end of period
    
    $
    2,551
    
    
    $
    26,491
    
    
    $
    29,613
    
    
    
    $
    1,258
 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 37




---



##### 



AccumulatedPredecessor
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Class A
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Successor Common Stock
    
    
    Paid-in
    
    
    Preferred
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Class A
    
    
    Class C
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    Income
    
    
    EquityBalance at December 31, 2003- Predecessor
    
    $
    71
    
    
    $
    
    
    
    $
    
    
    
    $
    52,231
    
    
    $
    
    
    
    $
    (5,709
    )
    
    $
    (53
    )
    
    $
    46,540Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,366
    )
    
    
    
    
    
    
    (20,366
    )Stock option grant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,353Net unrealized gains on investments (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10Balance at March 31, 2004 - Predecessor
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    76,584
    
    
    
    
    
    
    
    (26,075
    )
    
    
    (27
    )
    
    
    50,553Close Predecessors stockholders equity at merger date
    
    
    (71
    )
    
    
    
    
    
    
    
    
    
    
    (76,584
    )
    
    
    
    
    
    
    26,075
    
    
    
    27
    
    
    
    (50,553
    )Issuance of 5,805.3 shares of Class A Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,443
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,443Issuance of 2,787.1 shares of Class C Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,787
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,787Issuance of 82,104.8 shares of The Hillman Companies, Inc.
Class A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78,642
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    78,643Balance at March 31, 2004 - Successor
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,872
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    86,873Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    779
    
    
    
    
    
    
    
    779Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,542
    )
    
    
    
    
    
    
    (779
    )
    
    
    
    
    
    
    (7,321
    )Net unrealized gains on investments (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    34Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Change in derivative security value (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    (18
    )Balance at December 31, 2004 - Successor
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,330
    
    
    
    1
    
    
    
    
    
    
    
    (94
    )
    
    
    80,237Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,654
    )
    
    
    
    
    
    
    (3,654
    )Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,736
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,736
    )Net unrealized gains on investments (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    (24
    )Change in derivative security value (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    109Balance at December 31, 2005 - Successor (as previously reported)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,594
    
    
    
    1
    
    
    
    (3,654
    )
    
    
    32
    
    
    
    65,973Effect of restatement (see Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,212
    
    
    
    
    
    
    
    1,212Balance at December 31, 2005 - Successor (as restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,594
    
    
    
    1
    
    
    
    (2,442
    )
    
    
    32
    
    
    
    67,185Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,648
    )
    
    
    
    
    
    
    (7,648
    )Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,025
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,025
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30Net realized gains on investments (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    (75
    )Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    (13
    )Change in derivative security value (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (221
    )
    
    
    (221
    )Balance at December 31, 2006 - Successor
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    57,599
    
    
    $
    1
    
    
    $
    (10,090
    )
    
    $
    (277
    )
    
    $
    47,233
 
 (1)
    
    The realized and unrealized gains on investments, cumulative foreign translation adjustment and
change in derivative security value are net of taxes and represent the only items of other comprehensive
income.  38




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 1. Basis of Presentation:
     Accounts receivable
    
    $
    37,750Inventory
    
    
    66,958Property and equipment
    
    
    63,230Goodwill
    
    
    240,696Intangible assets
    
    
    173,162Other assets
    
    
    8,924Total assets acquired
    
    
    590,720Less:Liabilities assumed
    
    
    42,948Deferred taxes, net
    
    
    20,535Junior subordinated debentures
    
    
    117,986Total assumed liabilities
    
    
    181,469Total purchase price
    
    $
    409,251
 39




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 1. Basis of Presentation (continued):
   2005
    
    2004Net sales
    
    $
    411,169
    
    
    $
    379,449Net loss
    
    
    (483
    )
    
    
    (21,966
    )
  Nature of Operations:
  2. Restatement of Financial Statements
  40




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Restatement of Financial Statements (continued):
  Consolidated Balance SheetAs PreviouslyAs of December 31, 2005
    
    Reported
    
    Adjustments
    
    As RestatedDeferred tax assets  current
    
    
    5,659
    
    
    
    (48
    )
    
    
    5,611Total current assets
    
    
    153,826
    
    
    
    (48
    )
    
    
    153,778Total assets
    
    
    631,336
    
    
    
    (48
    )
    
    
    631,288Deferred tax liabilities  non current
    
    
    36,026
    
    
    
    (1,260
    )
    
    
    34,766Total liabilities
    
    
    563,645
    
    
    
    (1,260
    )
    
    
    562,385Accumulated deficit
    
    
    (3,654
    )
    
    
    1,212
    
    
    
    (2,442
    )Total stockholders equity
    
    
    65,973
    
    
    
    1,212
    
    
    
    67,185Consolidated Statement of OperationsAs PreviouslyYear ended December 31, 2005
    
    Reported
    
    Adjustments
    
    As RestatedIncome tax provision
    
    
    4,136
    
    
    
    (1,212
    )
    
    
    2,924Net loss
    
    
    (3,654
    )
    
    
    1,212
    
    
    
    (2,442
    )Consolidated Statement of Cash FlowsAs PreviouslyYear ended December 31, 2005
    
    Reported
    
    Adjustments
    
    As RestatedNet loss
    
    
    (3,654
    )
    
    
    1,212
    
    
    
    (2,442
    )Deferred income tax
    
    
    4,176
    
    
    
    (1,212
    )
    
    
    2,964
 3. Summary of Significant Accounting Policies:
 Cash Equivalents :
  Investments:
  Restricted Investments:
  Accounts Receivable and Allowance for Doubtful Accounts
  41




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 3. Summary of Significant Accounting Policies (continued):
 Inventories :
  Property and Equipment:
  Depreciation :
  Goodwill and Other Intangible Assets:
  Long-Lived Assets:
  Income Taxes:
  42




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 3. Summary of Significant Accounting Policies (continued):
 Self-insurance Reserves
    Retirement Benefits:
   Revenue Recognition:
    Shipping and Handling:
  43




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 3. Summary of Significant Accounting Policies (continued):
 Research and Development
  Stock Based Compensation
  Fair Value of Financial Instruments:
  Translation of Foreign Currencies:
  44




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 3. Summary of Significant Accounting Policies (continued):
 Comprehensive Income (Loss):
  Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine months
    
    
    Three monthsended
    
    
    ended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    2004(as restated)Net (loss) income
    
    $
    (7,648
    )
    
    $
    (2,442
    )
    
    $
    779
    
    
    $
    (20,366
    )Unrealized gains on investments, net (1)
    
    
    
    
    
    
    41
    
    
    
    34
    
    
    
    16Realized gains on investments, net (1)
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment, net (1)
    
    
    (13
    )
    
    
    (24
    )
    
    
    (110
    )
    
    
    10Change in derivative security value, net
    
    
    (221
    )
    
    
    109
    
    
    
    (18
    )
    
    
    Comprehensive (loss) income
    
    $
    (7,957
    )
    
    $
    (2,316
    )
    
    $
    685
    
    
    $
    (20,340
    )
 
 (1)
    
    Utilizing an income tax rate of 39.5%, 39.4%, 39.5% and 39.5% for the years ended
December 31, 2006 and 2005, nine months ended December 31, 2004 and the three months ended March 31, 2004,
respectively. Use of Estimates in the Preparation of Financial Statements:
  4. Recent Accounting Pronouncements:
    45




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 4. Recent Accounting Pronouncements (continued):
   5. Acquisition:
  Customer relationships
    
    $
    11,861Trademarks
    
    
    2,624Goodwill
    
    
    19,879Total purchase price
    
    $
    34,364
   6. Related Party Transactions
  46




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Related Party Transactions (continued):
   7. Income Taxes
  Successor
    
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine Months
    
    
    
    Three Monthsended
    
    
    ended
    
    
    ended
    
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004As RestatedCurrent:Federal & State
    
    $
    271
    
    
    $
    438
    
    
    $
    50
    
    
    
    $
    1,427Foreign
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total current
    
    
    271
    
    
    
    438
    
    
    
    50
    
    
    
    
    1,427Deferred:Federal & State
    
    
    1,682
    
    
    
    2,395
    
    
    
    4,503
    
    
    
    
    (13,389
    )Foreign
    
    
    91
    
    
    
    91
    
    
    
    
    
    
    
    
    Total deferred
    
    
    1,773
    
    
    
    2,486
    
    
    
    4,503
    
    
    
    
    (13,389
    )Valuation allowance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,749Provision (benefit)
for income taxes
    
    $
    2,044
    
    
    $
    2,924
    
    
    $
    4,553
    
    
    
    $
    (10,213
    )
  47




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 7. Income Taxes (continued):
      As of December 31, 2006
    
    
    As of December 31, 2005Current
    
    
    Non-current
    
    
    Current
    
    
    Non-currentAs Restated
    
    
    As RestatedDeferred Tax Asset:Inventory
    
    $
    4,324
    
    
    $
    
    
    
    $
    3,962
    
    
    $
    Acquisition related/severance reserve
    
    
    299
    
    
    
    
    
    
    
    784
    
    
    
    Bad debt reserve
    
    
    606
    
    
    
    
    
    
    
    1,134
    
    
    
    Casualty loss reserve
    
    
    406
    
    
    
    438
    
    
    
    482
    
    
    
    510Deferred compensation
    
    
    194
    
    
    
    1,869
    
    
    
    65
    
    
    
    1,792Medical insurance reserve
    
    
    643
    
    
    
    
    
    
    
    567
    
    
    
    Revenue recognition  shipping terms
    
    
    156
    
    
    
    
    
    
    
    384
    
    
    
    Federal net operating loss
    
    
    
    
    
    
    21,565
    
    
    
    
    
    
    
    24,695State net operating loss
    
    
    
    
    
    
    2,795
    
    
    
    
    
    
    
    3,480Original issue discount amortization
    
    
    
    
    
    
    404
    
    
    
    
    
    
    
    423Transaction costs
    
    
    
    
    
    
    2,069
    
    
    
    
    
    
    
    2,105Federal capital loss carryforwards
    
    
    
    
    
    
    275
    
    
    
    
    
    
    
    12,982All other items
    
    
    413
    
    
    
    1,541
    
    
    
    473
    
    
    
    857Gross deferred tax assets
    
    
    7,041
    
    
    
    30,956
    
    
    
    7,851
    
    
    
    46,844Valuation allowance for
deferred tax assets
    
    
    (466
    )
    
    
    (2,047
    )
    
    
    (2,240
    )
    
    
    (13,363
    )Net deferred tax assets
    
    $
    6,575
    
    
    $
    28,909
    
    
    $
    5,611
    
    
    $
    33,481Deferred Tax Liability:Intangible asset amortization
    
    $
    
    
    
    $
    61,084
    
    
    $
    
    
    
    $
    63,025Property and equipment
    
    
    
    
    
    
    4,359
    
    
    
    
    
    
    
    4,909All other items
    
    
    
    
    
    
    119
    
    
    
    
    
    
    
    313Deferred tax liabilities
    
    $
    
    
    
    $
    65,562
    
    
    $
    
    
    
    $
    68,247
 48




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 7. Income Taxes (continued):
     Successor
    
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine Months
    
    
    
    Three Monthsended
    
    
    ended
    
    
    ended
    
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004As RestatedStatuatory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    
    35.0
    %Non-U.S. taxas and the impact of non-
U.S. losses for which a current tax
benefit is not available
    
    
    -1.6
    %
    
    
    23.4
    %
    
    
    0.0
    %
    
    
    
    -0.4
    %State and local income taxes, net of
U.S. federal income tax benefit
    
    
    -3.9
    %
    
    
    99.4
    %
    
    
    9.8
    %
    
    
    
    4.9
    %Adjustment of reserve for uncertain tax
positions and other items
    
    
    -1.5
    %
    
    
    -16.8
    %
    
    
    0.7
    %
    
    
    
    -4.6
    %Adjustment for change in tax law
    
    
    0.0
    %
    
    
    -251.5
    %
    
    
    0.0
    %
    
    
    
    0.0
    %Permanent differences:Interest expense on mandatorily
redeemable preferred stock
    
    
    -55.5
    %
    
    
    578.9
    %
    
    
    35.8
    %
    
    
    
    Stock-based compensation expense
    
    
    -7.6
    %
    
    
    116.2
    %
    
    
    1.8
    %
    
    
    
    Dividends received exclusion
    
    
    0.3
    %
    
    
    -5.8
    %
    
    
    -0.2
    %
    
    
    
    Meals and entertainment expense
    
    
    -2.1
    %
    
    
    27.2
    %
    
    
    1.9
    %
    
    
    
    -0.1
    %Other permanent differences
    
    
    -0.3
    %
    
    
    0.6
    %
    
    
    0.6
    %
    
    
    
    4.3
    %Effect of change in valuation allowances
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    
    -5.7
    %Tax credits utilized
    
    
    0.7
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    
    0.0
    %Effective income tax rate
    
    
    -36.5
    %
    
    
    606.6
    %
    
    
    85.4
    %
    
    
    
    33.4
    %
 49




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 8. Property and Equipment, net:
  EstimatedUseful Life(Years)
    
    
    2006
    
    
    
    2005Land
    
    
    
    
    
    $
    131
    
    
    
    $
    131Buildings
    
    
    27
    
    
    
    781
    
    
    
    
    781Leasehold improvements
    
    
    3-10
    
    
    
    4,277
    
    
    
    
    4,183Machinery and equipment
    
    
    2-10
    
    
    
    86,512
    
    
    
    
    76,530Furniture and fixtures
    
    
    3-5
    
    
    
    1,361
    
    
    
    
    1,346Construction in process
    
    
    
    
    
    
    307
    
    
    
    
    299Property and equipment, gross
    
    
    
    
    
    
    93,369
    
    
    
    
    83,270Less: Accumulated depreciation
    
    
    
    
    
    
    34,308
    
    
    
    
    22,553Property and equipment, net
    
    
    
    
    
    $
    59,061
    
    
    
    $
    60,717
 9. Other Intangibles, net:
   EstimatedUseful Life2006
    
    
    2005
    
    
    (Years)Customer relationships
    
    $
    126,651
    
    
    $
    114,790
    
    
    
    23Trademarks
    
    
    47,294
    
    
    
    44,670
    
    
    IndefinitePatents
    
    
    7,960
    
    
    
    7,960
    
    
    
    9Non Compete Agreements
    
    
    5,742
    
    
    
    5,742
    
    
    
    4Intangible assets, gross
    
    
    187,647
    
    
    
    173,162Less: Accumulated amortization
    
    
    20,403
    
    
    
    12,655Other intangibles, net
    
    $
    167,244
    
    
    $
    160,507
  50




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 10. Long-Term Debt:
       51




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 10. Long-Term Debt (continued):
  2006
    
    
    2005Revolving Credit Agreement
    
    $
    
    
    
    $
    Term Loan B
    
    
    233,825
    
    
    
    214,237Subordinated Debt Issuance
    
    
    49,820
    
    
    
    49,172Capital Leases
    
    
    761
    
    
    
    99284,406
    
    
    
    263,508Less: amounts due in one year
    
    
    2,605
    
    
    
    2,219Long-term debt
    
    $
    281,801
    
    
    $
    261,289
  2007
    
    $
    2,6052008
    
    
    2,6112009
    
    
    2,4992010
    
    
    170,2572011
    
    
    106,3992012 and thereafter
    
    
    35
   52




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 11. Leases:
  Capital
    
    
    
    OperatingLeases
    
    
    
    Leases2007
    
    $
    325
    
    
    
    $
    8,3092008
    
    
    298
    
    
    
    
    6,3232009
    
    
    158
    
    
    
    
    4,0872010
    
    
    37
    
    
    
    
    3,9772011
    
    
    37
    
    
    
    
    4,015Later years
    
    
    37
    
    
    
    
    19,783Total minimum lease payments
    
    
    892
    
    
    
    $
    46,494Less amounts representing interest
    
    
    (131
    )Present value of net minimum lease payments
(including $255 currently payable)
    
    $
    761
  12. Deferred Compensation Plans:
    13.
    
    Guaranteed Preferred Beneficial Interest in the Companys
Junior Subordinated Debentures:
  53




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13.
    
    Guaranteed Preferred Beneficial Interest in the Companys
Junior Subordinated Debentures (continued):
    Non-current assets  junior subordinated debentures  preferred
    
    $
    113,639Non-current assets  junior subordinated debentures  common
    
    
    3,261Total assets
    
    $
    116,900Non-current liabilities  trust preferred securities
    
    $
    113,639Stockholders equity  trust common securities
    
    
    3,261Total liabilities and stockholders equity
    
    $
    116,900
    54




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13.
    
    Guaranteed Preferred Beneficial Interest in the Companys
Junior Subordinated Debentures (continued):
  14. Common and Preferred Stock:
 Common Stock issued in connection with the Merger Transaction:
      55




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 14. Common and Preferred Stock (continued):
 Preferred Stock:
     2006 Equity Issuance:
    56




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 14. Common and Preferred Stock (continued):
 Purchased Options:
   15. Stock-Based Compensation:
    57




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 15. Stock-Based Compensation (continued):
 Common Option Plan:
    2006
    
    
    2005
    
    
    2004Options
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, beginning of year
    
    
    61.3
    
    
    $
    1,523
    
    
    
    10.0
    
    
    $
    1,000
    
    
    
    
    
    
    $
    Granted
    
    
    51.3
    
    
    
    2,275
    
    
    
    51.3
    
    
    
    1,625
    
    
    
    10.0
    
    
    
    1,000Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of year
    
    
    112.6
    
    
    $
    1,866
    
    
    
    61.3
    
    
    $
    1,523
    
    
    
    10.0
    
    
    $
    1,000Exercisable, end of year
    
    
    10.0
    
    
    $
    1,000
    
    
    
    10.0
    
    
    $
    1,000
    
    
    
    
    
    
    $
    
   Preferred Options:
  58




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 15. Stock-Based Compensation (continued):
     Class B Shares:
    59




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 16. NonRecurring Expense:
  17. Derivatives and Hedging:
     18. Commitments and Contingencies:
    60




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 18. Commitments and Contingencies (continued):
  19. Statements of Cash Flows:
  Successor
    
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine Months
    
    
    
    Three Monthsended
    
    
    ended
    
    
    ended
    
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004Cash paid (refunded) during the
period for:Interest on junior subordinated
debentures
    
    $
    12,231
    
    
    $
    12,231
    
    
    $
    9,457
    
    
    
    $
    3,152Interest
    
    
    25,587
    
    
    
    18,130
    
    
    
    8,992
    
    
    
    
    4,038Income taxes
    
    
    245
    
    
    
    484
    
    
    
    22
    
    
    
    
    48Non-cash operating activities:Stock option grant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,353Non-cash investing activities:Property and equipment purchased
with capital lease
    
    
    824
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash financing activities:Dividends on preferred stock (Note 14)
    
    
    12,025
    
    
    
    10,736
    
    
    
    7,321
    
    
    
    
    
 20. Quarterly Data (unaudited):
  2006
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstNet sales
    
    $
    97,190
    
    
    $
    111,828
    
    
    $
    113,358
    
    
    $
    101,525Gross profit
    
    
    50,929
    
    
    
    59,571
    
    
    
    58,801
    
    
    
    51,149Net (loss) income
    
    
    (4,398
    )
    
    
    66
    
    
    
    554
    
    
    
    (3,870
    )
 2005
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstNet sales
    
    $
    89,385
    
    
    $
    102,593
    
    
    $
    102,934
    
    
    $
    87,600Gross profit
    
    
    46,960
    
    
    
    54,475
    
    
    
    56,356
    
    
    
    48,499Net (loss) income (as previously reported)
    
    
    (3,510
    )
    
    
    219
    
    
    
    (39
    )
    
    
    (324
    )Net (loss) income (as restated)
    
    
    (3,751
    )
    
    
    219
    
    
    
    1,414
    
    
    
    (324
    )
 61




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 20. Quarterly Data (unaudited) (continued):
  2006
    
    Third
    
    
    Second
    
    
    FirstDeferred tax assets-current (as previously reported)
    
    $
    4,999
    
    
    $
    5,399
    
    
    $
    5,475Deferred tax assets-current (as restated)
    
    
    4,951
    
    
    
    5,351
    
    
    
    5,427Deferred tax liabilities-non-current (as previously reported)
    
    
    37,891
    
    
    
    36,762
    
    
    
    35,177Deferred tax liabilities-non-current (as restated)
    
    
    36,631
    
    
    
    35,502
    
    
    
    33,917Accumulated deficit (as previously reported)
    
    
    (6,904
    )
    
    
    (6,970
    )
    
    
    (7,524
    )Accumulated deficit (as restated)
    
    
    (5,692
    )
    
    
    (5,758
    )
    
    
    (6,312
    )
 2005
    
    Third
    
    
    SecondDeferred tax assets-current (as previously reported)
    
    $
    8,347
    
    
    $
    6,310Deferred tax assets-current (as restated)
    
    
    8,299
    
    
    
    6,262Deferred tax liabilities-non-current (as previously reported)
    
    
    38,817
    
    
    
    34,435Deferred tax liabilities-non-current (as restated)
    
    
    37,316
    
    
    
    32,934Accumulated deficit (as previously reported)
    
    
    (144
    )
    
    
    (363
    )Retained earnings (as restated)
    
    
    1,309
    
    
    
    1,090
 21. Concentration of Credit Risks:
   62




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 22. Segment Information:
  Successor
    
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine Months
    
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004Net salesUnited States
    
    $
    412,467
    
    
    $
    372,630
    
    
    $
    266,909
    
    
    
    $
    76,713Canada
    
    
    3,726
    
    
    
    2,792
    
    
    
    2,296
    
    
    
    
    314Mexico
    
    
    2,158
    
    
    
    2,154
    
    
    
    895
    
    
    
    
    116Other
    
    
    5,550
    
    
    
    4,936
    
    
    
    3,274
    
    
    
    
    1,047Consolidated net sales
    
    $
    423,901
    
    
    $
    382,512
    
    
    $
    273,374
    
    
    
    $
    78,190Long-lived assets:United States
    
    $
    500,591
    
    
    $
    477,466
    
    
    $
    486,404
    
    
    
    
    n/aCanada
    
    
    18
    
    
    
    44
    
    
    
    70
    
    
    
    
    n/aMexico
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/aOther
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/aConsolidated long-lived assets
    
    $
    500,609
    
    
    $
    477,510
    
    
    $
    486,474
    
    
    
    
    n/a
 Successor
    
    
    
    PredecessorYear
    
    
    Year
    
    
    Nine Months
    
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004Cash & cash equivalentsUnited States
    
    $
    1,236
    
    
    $
    25,926
    
    
    $
    29,073
    
    
    
    
    n/aCanada
    
    
    267
    
    
    
    176
    
    
    
    535
    
    
    
    
    n/aMexico
    
    
    1,048
    
    
    
    389
    
    
    
    5
    
    
    
    
    n/aOther
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/aConsolidated cash & cash equivalents
    
    $
    2,551
    
    
    $
    26,491
    
    
    $
    29,613
    
    
    
    
    n/a
 63




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 22. Segment Information (continued):
  Year
    
    
    Year
    
    
    Nine Months
    
    
    
    Three MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    
    March 31,2006
    
    
    2005
    
    
    2004
    
    
    
    2004Net salesKeys
    
    $
    72,870
    
    
    $
    71,020
    
    
    $
    53,082
    
    
    
    $
    17,585Engraving
    
    
    35,976
    
    
    
    32,274
    
    
    
    22,582
    
    
    
    
    6,833Letters, numbers and signs
    
    
    34,518
    
    
    
    33,025
    
    
    
    23,551
    
    
    
    
    6,670Fasteners
    
    
    229,732
    
    
    
    224,378
    
    
    
    158,041
    
    
    
    
    41,442Threaded Rod
    
    
    28,156
    
    
    
    
    
    
    
    
    
    
    
    
    Code Cutter
    
    
    4,810
    
    
    
    4,962
    
    
    
    3,840
    
    
    
    
    1,427Other
    
    
    17,839
    
    
    
    16,853
    
    
    
    12,278
    
    
    
    
    4,233Consolidated net sales
    
    $
    423,901
    
    
    $
    382,512
    
    
    $
    273,374
    
    
    
    $
    78,190
 64




---



##### 



Financial Statement Schedule:
 Schedule II  VALUATION ACCOUNTS
  Deducted From Assets in Balance SheetAllowance forAllowance for
    
    
    Obsolete/Doubtful
    
    
    ExcessAccounts
    
    
    InventoryBalance, December 31, 2003  Predecessor
    
    
    524
    
    
    
    3,189Additions charged to cost and expense
    
    
    31
    
    
    
    500Deductions due to:Others
    
    
    31
    (A)
    
    
    215
    (A)Ending Balance  March 31, 2004  Predecessor
    
    
    524
    
    
    
    3,474Additions charged to cost and expense
    
    
    198
    
    
    
    397Deductions due to:Others
    
    
    196
    (A)
    
    
    313
    (A)Ending Balance  December 31, 2004  Successor
    
    
    526
    
    
    
    3,558Additions charged to cost and expense
    
    
    (70
    )
    
    
    878Deductions due to:Others
    
    
    22
    (A)
    
    
    488
    (A)Ending Balance  December 31, 2005  Successor
    
    
    434
    
    
    
    3,948Additions charged to cost and expense
    
    
    46
    
    
    
    725Deductions due to:Others
    
    
    111
    (A)
    
    
    31Ending Balance  December 31, 2006  Successor
    
    $
    369
    
    
    $
    4,642
  (A)
    
    Includes write-off of accounts receivable (net of bad debt recoveries)
and inventories.
 65




---



##### 



Item 9 
    
    Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
   Item 9A  Controls and Procedures
 Disclosure Controls and Procedures
  Prior Material Weaknesses
   66




---



##### 




    
    Deferred income tax balances related to purchase business combinations were not
appropriately determined to ensure that deferred income tax liabilities and allocated
goodwill were fairly stated in accordance with GAAP;
    
    Quarterly income tax provisions were not appropriately determined utilizing an estimate
of the annual effective tax rate;
    
    The annual income tax provision was calculated using an inappropriate estimate of
federal and state statutory tax rates;
    
    Deferred tax balances were not accurate;
    
    The income tax provision did not appropriately reflect the tax effect of stock option
exercises in accordance with GAAP;
    
    Valuation allowances for state tax operating loss carryforwards were overstated based on
loss carryforward periods and estimates of future state taxable income;
    
    Changes in valuation allowances and reserves for uncertain tax positions established in
purchase business combinations were incorrectly charged to income tax expense instead of
goodwill;
    
    State income and franchise tax provisions and the related tax payable accounts were
incorrectly calculated;
    
    Certain book versus tax basis differences were based on estimates which were not updated
on a timely basis and certain temporary differences were incorrectly treated as permanent
items; and
    
    State franchise taxes were incorrectly included as a component of income tax expense
instead of operating expenses.
      67




---



##### 



Remediation of Material Weaknesses
  
    
    Increased training and resources in the income tax accounting area. Effective January
2006, the Company retained a nationally recognized tax and accounting firm to review all of
the quarterly and annual income tax accounting.
    
    Expanded review procedures and controls related to unique and specialized transactions.
Again, the Company has retained a nationally recognized tax and accounting firm to review
the tax accounting including the accounting for specialized transactions. In addition, the
Company has retained an independent consultant to review specialized accounting
transactions including the adoption of new accounting pronouncements and the accounting for
purchase business combinations.
    
    Designed and implemented new review procedures and controls related to income tax
accounting. The Company worked with outside consultants to develop and implement a monthly
and quarterly income tax accounting control matrix.
    
    Increased review procedures and controls related to sales and marketing initiatives as
well as sales contracts and agreements.
    
    Revised the disclosure committee charter to include improved review and monitoring
controls over financial reporting. In addition, the Company expanded membership of the
committee and increased the frequency of disclosure committee meetings. Disclosure
committee members have been given new tools, including a web based accounting research tool
to keep current on accounting and financial reporting developments.
  Changes in Internal Control over Financial Reporting
  Item 9B  Other Information.
  68




---



##### 



PART III
 Item 10  Directors, Executive Officers, and Corporate Governance.
  Directors
 Principal Occupation; Five-YearName and Age
    
    Employment; Other DirectorshipsPeter M. Gotsch (42)
    
    Chairman of The Hillman Companies, Inc. since
March 31, 2004. Mr. Gotsch has been a member
of Code Hennessy & Simmons LLC since 1997 and
employed by its affiliates since 1989. Mr.
Gotsch presently serves on the Board of
Beacon Roofing Supply, Inc. and the Board of
Houston Wire & Cable Company.Maurice P. Andrien, Jr. (65)
    
    From September 2001 to March 2004, Mr.
Andrien was Chairman of The Hillman
Companies, Inc., Cincinnati, Ohio. From
April 1999 to November 2001, Mr. Andrien was
President and Chief Executive Officer of
SunSource Inc.Max W. Hillman (60)
    
    President and Chief Executive Officer of The
Hillman Companies, Inc., Chief Executive
Officer of The Hillman Group, Inc.,
Cincinnati, Ohio. From April 2000 to
November 2001, Mr. Hillman was Co-Chief
Executive Officer of The Hillman Group, Inc.
From 1999 to April 2000, Mr. Hillman held the
position of Chief Executive Officer of The
Hillman Group, Inc. From 1991 to 1999, Mr.
Hillman was a Group Vice President for
SunSource Inc.Andrew W. Code (48)
    
    Mr. Code has been a general partner of CHS
Management Limited Partnership (CHS
Management) and a general partner of Code
Hennessy & Simmons Limited Partnership
(CHS) since August 1988. Mr. Code is on the
Board of SCP Pool Company.Mark A. Dolfato (34)
    
    Mr. Dolfato joined Code Hennessy & Simmons
LLC as an Associate in 2000 and has been a
Vice President since 2003.
 69




---



##### 



Principal Occupation; Five-YearName and Age
    
    Employment; Other DirectorshipsLarry Wilton (59)
    
    Mr. Wilton was CEO of Compass Home Inc. from 2004 to
2005. From 1998 to 2002, Mr. Wilton was CEO of
Philips Lamps NAFTA. From 1996 to 1998, Mr. Wilton
was Executive Vice President of Philips Lighting
United States and Canada. From 1999 to 2002, Mr.
Wilton served on the Philips NV Lamps Board of
Directors.Shael J. Dolman (35)
    
    Mr. Dolman is a Director at the private equity arm of
OTPP. Mr. Dolman joined OTPP in 1997 after working in
Commercial and Corporate Banking at a Canadian
chartered bank. Mr. Dolman received his Bachelor of
Arts from University of Western Ontario and his MBA
from McGill University. He is a director of ALH
Holding, Inc and Worldspan LP.
  70




---



##### 



Committees
    Code of Ethics
  71




---



##### 



Executive Officers
 Position with the Company;Name and Age
    
    Five-year Employment HistoryMax W. Hillman (60)
    
    President and Chief Executive Officer of The
Hillman Companies, Inc., Chief Executive Officer
of The Hillman Group, Inc., Cincinnati, Ohio. See
page 69 for five-year employment history. Mr.
Hillman is the brother of Richard P. Hillman.Richard P. Hillman (58)
    
    President of The Hillman Group, Inc., Cincinnati,
Ohio. Mr. Hillman has held such position since
1991. Mr. Hillman is the brother of Max W.
Hillman.James P. Waters (45)
    
    Chief Financial Officer and Secretary of The
Hillman Companies, Inc., Cincinnati, Ohio and Vice
President, Chief Financial Officer and Secretary
of The Hillman Group, Inc., Cincinnati, Ohio.
From September 1999 to November 2001, Mr. Waters
was Vice President and Chief Financial Officer of
The Hillman Group, Inc.George L. Heredia (48)
    
    Senior Vice President of Engraving for The Hillman
Group, Inc., Tempe, Arizona. Mr. Heredia has held
various executive positions since April 2000.
Prior to April 2000, Mr. Heredia had held the
positions of Senior Vice President of Marketing
and Senior Vice President of Operations for Axxess
Technologies, Inc.Terry R. Rowe (52)
    
    Senior Vice President of National Account Sales
for The Hillman Group, Inc., Cincinnati, Ohio.
Mr. Rowe has held such position with The Hillman
Group, Inc. since 1992.
  72




---



##### 



Item 11  Executive Compensation
 Compensation Discussion & Analysis
 Overview of the Compensation Program
 Compensation Philosophy
  Components of Total Compensation
  
    
    Annual base salary;
    
    Performance based bonuses, determined on an annual basis; and
    
    Benefits, which consist primarily of health and welfare benefits
and retirement benefits under its Defined Contribution Plan and
its Deferred Compensation Plan.
 Establishing Compensation Levels
 Role of the Compensation Committee and Management
   Assessment of Market Data, Peer Comparisons and Benchmarking of Compensation
  Determination of NEO Compensation
 73




---



##### 



Base Salary
      Performance Based Bonuses
   74




---



##### 



Benefits
  Amended Stock Option Plan
   Defined Contribution Plan
  Perquisites
  75




---



##### 



Executive Securities Agreement
  Compensation Committee Report
      
  76




---



##### 



Summary Compensation Table
  Change inPensionValue andNonqualifiedDeferred
    
    
    All OtherName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option
    
    
    Compensation
    
    
    Compen-Principal Position
    
    Year
    
    
    Salary(1)
    
    
    Bonus(2)
    
    
    Awards (3)
    
    
    Earnings(4)
    
    
    sation
    
    
    TotalMax W. Hillman
    
    
    2006
    
    
    
    399,746
    
    
    
    68,701
    
    
    
    
    
    
    
    
    
    
    
    28,689
    (6)
    
    
    497,136President and CEO
    
    
    2005
    
    
    
    391,923
    
    
    
    44,203
    
    
    
    
    
    
    
    
    
    
    
    30,253
    (7)
    
    
    466,379The Hillman Companies, Inc.
    
    
    2004
    
    
    
    397,500
    
    
    
    690,189
    
    
    
    
    
    
    
    
    
    
    
    31,294
    (8)
    
    
    1,118,983James P. Waters
    
    
    2006
    
    
    
    194,761
    
    
    
    22,292
    
    
    
    
    
    
    
    
    
    
    
    9,207
    (5)
    
    
    226,260CFO and Secretary
    
    
    2005
    
    
    
    188,769
    
    
    
    24,062
    
    
    
    
    
    
    
    
    
    
    
    10,263
    (5)
    
    
    223,094The Hillman Companies, Inc.
    
    
    2004
    
    
    
    185,954
    
    
    
    123,300
    
    
    
    
    
    
    
    
    
    
    
    8,837
    (5)
    
    
    318,091Richard P. Hillman
    
    
    2006
    
    
    
    269,423
    
    
    
    49,066
    
    
    
    
    
    
    
    
    
    
    
    10,808
    (5)
    
    
    329,297President
    
    
    2005
    
    
    
    261,692
    
    
    
    68,725
    
    
    
    
    
    
    
    
    
    
    
    10,346
    (5)
    
    
    340,763The Hillman Group, Inc.
    
    
    2004
    
    
    
    260,885
    
    
    
    228,865
    
    
    
    
    
    
    
    
    
    
    
    9,384
    (5)
    
    
    499,134George L. Heredia
    
    
    2006
    
    
    
    230,500
    
    
    
    46,952
    
    
    
    
    
    
    
    
    
    
    
    17,269
    (9)
    
    
    294,721Senior VP of Engraving
    
    
    2005
    
    
    
    223,769
    
    
    
    62,875
    
    
    
    
    
    
    
    
    
    
    
    16,274
    (10)
    
    
    302,918The Hillman Group, Inc.
    
    
    2004
    
    
    
    220,846
    
    
    
    121,218
    
    
    
    
    
    
    
    
    
    
    
    17,656
    (11)
    
    
    359,720Terry R. Rowe
    
    
    2006
    
    
    
    206,238
    
    
    
    23,589
    
    
    
    
    
    
    
    
    
    
    
    7,628
    (12)
    
    
    237,455Senior VP National Accounts
    
    
    2005
    
    
    
    202,000
    
    
    
    46,601
    
    
    
    
    
    
    
    
    
    
    
    8,223
    (12)
    
    
    256,824The Hillman Group, Inc.
    
    
    2004
    
    
    
    202,846
    
    
    
    106,434
    
    
    
    
    
    
    
    
    
    
    
    6,587
    (12)
    
    
    315,867
 
 (1)
    
    Represents base salary including any deferral of salary into the Hillman Nonqualified
Deferred Compensation Plan.(2)
    
    Represents earned bonus for services rendered in each year. In 2004, a discretionary
management bonus was paid  in connection with the CHS acquisition of the Company. The 2004
discretionary bonus was $345,159, $113,000, $48,500, $49,308 and $49,308 for Max Hillman,
Richard Hillman, George Heredia, Terry Rowe and James Waters, respectively.(3)
    
    In connection with the 2004 acquisition by CHS all of the NEOs were issued options to
purchase Class A Preferred Stock and shares of Class A Preferred Stock in Hillman Investment
Company. The options were issued with a strike price equal to the fair market value of the
underlying securities. The option awards are classified as liability based awards, and
accordingly, no compensation would have been recognized under SFAS 123R.(4)
    
    There were no above market earnings in the Hillman Nonqualified Deferred Compensation Plan
for the NEOs.(5)
    
    Represents employer matching contributions to the Hillman Retirement Savings and 401(k) Plan,
employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan, and
personal use of Company owned vehicles.(6)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$3,214, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, reimbursement of country club dues of $10,375 and car allowance of $12,600.(7)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$4,914, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, reimbursement of country club dues of $10,239 and car allowance of $12,600.(8)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$5,694, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, reimbursement of country club dues of $10,500 and car allowance of $12,600.(9)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$6,369, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, and car allowance of $8,400.(10)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$5,743, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, and car allowance of $8,030.(11)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$6,856, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, and car allowance of $8,300.(12)
    
    Represents employer matching contributions to the Hillman Retirement Savings and 401(k) Plan
and personal use of Company owned vehicles. 77




---



##### 



Grants of Plan-Based Award Tables
  Outstanding Equity Awards at Fiscal Year-End
  Option AwardsEquityIncentivePlan Awards:Number of
    
    
    Number of
    
    
    Number ofSecurities
    
    
    Securities
    
    
    SecuritiesUnderlying
    
    
    Underlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    Option
    
    
    OptionOptions
    
    
    Options
    
    
    Unearned
    
    
    Exercise
    
    
    ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    Options
    
    
    Price
    
    
    Date(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)Max W. Hillman
    
    
    1,298
    (1)
    
    
    1,946
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014905
    (2)
    
    
    1,358
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014James P. Waters
    
    
    259
    (1)
    
    
    389
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014181
    (2)
    
    
    271
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014Richard P. Hillman
    
    
    555
    (1)
    
    
    833
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014387
    (2)
    
    
    581
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014George L. Heredia
    
    
    286
    (1)
    
    
    430
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014200
    (2)
    
    
    300
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014Terry R. Rowe
    
    
    273
    (1)
    
    
    409
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014190
    (2)
    
    
    286
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014
 
 (1)
    
    Class A Preferred Options of the Company.(2)
    
    Class A Preferred Options of The Hillman Investment Company, a wholly-owned subsidiary of the
Company.  Option Exercises and Stock Vested
  Nonqualified Deferred Compensation
  78




---



##### 



Executive
    
    
    Registrant
    
    
    Aggregate
    
    
    Aggregate
    
    
    AggregateContributions
    
    
    Contributions
    
    
    Earnings
    
    
    Withdrawals/
    
    
    Balance atName
    
    in Last FY (1)
    
    
    in Last FY (2)
    
    
    in Last FY (3)
    
    
    Distributions
    
    
    Last FYEMax W. Hillman
    
    $
    40,385
    
    
    $
    2,500
    
    
    $
    228,667
    
    
    $
    
    
    
    $
    3,889,384James P. Waters
    
    $
    15,843
    
    
    $
    2,500
    
    
    $
    4,487
    
    
    $
    
    
    
    $
    74,688Richard P. Hillman
    
    $
    20,344
    
    
    $
    2,500
    
    
    $
    21,295
    
    
    $
    
    
    
    $
    294,227George L. Heredia
    
    $
    10,000
    
    
    $
    2,500
    
    
    $
    9,681
    
    
    $
    
    
    
    $
    115,910Terry R. Rowe
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Executive Contributions represent the deferral of Base Salary and Bonuses and are also
included in the Summary Compensation Table in the Salary column.(2)
    
    The amounts in this column are also included in the Summary Compensation Table in the all
other compensation column.(3)
    
    Earnings in the deferred compensation plan are excluded from the base salary and bonus
reported in the Summary Compensation Table. Severance and Change in Control Arrangements
  Employment Contracts, Termination of Employment and Change-in-Control Arrangements
 Max W. Hillman, President and Chief Executive Officer
  79




---



##### 



James P. Waters, Chief Financial Officer
  Richard P. Hillman, President of The Hillman Group, Inc.
  80




---



##### 



Director Compensation
  Change inPensionValue andFees
    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    
    NonqualifiedEarned
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    
    Deferredor Paid
    
    
    Stock
    
    
    Option
    
    
    Plan
    
    
    Compensation
    
    
    All OtherName
    
    in Cash
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    Total(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)Peter M. Gotsch
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Maurice P. Andrien,
Jr.
    
    $
    25,000
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    25,000Max W. Hillman (1)
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Andrew W. Code
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Mark A. Dolfato
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Larry Wilton
    
    $
    25,000
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    25,000Shael J. Dolman
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 
 (1)
    
    Mr. Hillman also serves as the Companys President and Chief Executive Officer. The
compensation awarded to him in these capacities is represented in the Summary Compensation
Table. He is not compensated in his role as a Director.  Item 12  Security Ownership of Certain Beneficial Owners and Management.
  81




---



##### 



Class A Common
    
    
    Class B Common
    
    
    Class C Common
    
    
    
    
    
    
    
    
    
    
    Class A PreferredName
    
    Stock (1)
    
    
    Stock (2)
    
    
    Stock (3)
    
    
    Total Common Stock (4)
    
    
    Stock (5)5% Owners
    
    Shares
    
    
    Percent
    
    
    Shares
    
    
    Percent
    
    
    Shares
    
    
    Percent
    
    
    Shares
    
    
    Percent
    
    
    Shares
    
    
    PercentCode Hennessy &
Simmons IV LP10 South Wacker Dr.
Suite 3175
Chicago, IL 60606
    
    
    4,904.9
    
    
    
    78.89
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,904.9
    
    
    
    49.03
    %
    
    
    46,869.4
    
    
    
    49.00
    %Ontario Teachers
Pension Plan5650 Yonge St.
North York, Ontario
M2M 4H5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,787.1
    
    
    
    100.00
    %
    
    
    2,787.1
    
    
    
    27.86
    %
    
    
    26,632.3
    
    
    
    27.84
    %HarbourVest Partners
VI  Direct Fund,
L.P.One Financial Center
44th Floor
Boston, MA 02111
    
    
    871.0
    
    
    
    14.01
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    871.0
    
    
    
    8.71
    %
    
    
    8,322.6
    
    
    
    8.70
    %Directors and
Executive OfficersMax W. Hillman
    
    
    166.4
    
    
    
    2.68
    %
    
    
    343.4
    
    
    
    34.34
    %
    
    
    
    
    
    
    
    
    
    
    509.8
    
    
    
    5.10
    %
    
    
    4,565.9
    
    
    
    4.78
    %(6)Richard P. Hillman
    
    
    54.6
    
    
    
    .88
    %
    
    
    144.6
    
    
    
    14.46
    %
    
    
    
    
    
    
    
    
    
    
    199.2
    
    
    
    1.99
    %
    
    
    1,953.7
    
    
    
    2.04
    %(7)George L. Heredia
    
    
    23.3
    
    
    
    .38
    %
    
    
    73.9
    
    
    
    7.39
    %
    
    
    
    
    
    
    
    
    
    
    97.2
    
    
    
    .97
    %
    
    
    1,007.8
    
    
    
    1.05
    %(8)Terry R. Rowe
    
    
    23.9
    
    
    
    .38
    %
    
    
    70.6
    
    
    
    7.07
    %
    
    
    
    
    
    
    
    
    
    
    94.5
    
    
    
    .95
    %
    
    
    960.4
    
    
    
    1.01
    %(9)James P. Waters
    
    
    23.9
    
    
    
    .38
    %
    
    
    67.3
    
    
    
    6.73
    %
    
    
    
    
    
    
    
    
    
    
    91.2
    
    
    
    .91
    %
    
    
    912.4
    
    
    
    .95
    %(10)All Directors and
Executive Officers
as a Group (11
persons)
    
    
    412.0
    
    
    
    6.63
    %
    
    
    1,000.0
    
    
    
    100.00
    %
    
    
    
    
    
    
    
    
    
    
    1,412.0
    
    
    
    14.11
    %
    
    
    13,548.5
    
    
    
    14.16
    %
 
 (1)
    
    Each holder of Class A Common Stock is entitled at any time to convert any or all of
the shares into an equal number of shares of Class C Common Stock.(2)
    
    Class B Common Stock has no voting rights.(3)
    
    Each holder of Class C Common Stock is entitled at any time to convert any or all
of the shares into an equal number of shares of Class A Common Stock. Each share of
Class C Common Stock is entitled to one vote provided that the aggregate voting power of
Class C Common Stock (with respect to the election of directors) never exceeds 30%.(4)
    
    Total of all classes of Common Stock(5)
    
    Class A Preferred shares do not have voting rights.(6)
    
    Includes options to purchase 3,243.7 shares of Class A Preferred stock(7)
    
    Includes options to purchase 1,387.9 shares of Class A Preferred stock.(8)
    
    Includes options to purchase 716.0 shares of Class A Preferred stock.(9)
    
    Includes options to purchase 682.3 shares of Class A Preferred stock.(10)
    
    Includes options to purchase 648.2 shares of Class A Preferred stock. Item 13  Certain Relationships and Related Transactions.
  82




---



##### 



Item 14  Principal Accounting Fees and Services.
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
   83




---



##### 



PART IV
 Item 15  Exhibits and Financial Statement Schedules.
 (a) Documents Filed as a Part of the Report:
 1. Financial Statements.
  2. Financial Statement Schedules.
  3. Exhibits, Including Those Incorporated by Reference.
  2.1
    
    Unit Repurchase Agreement by and among The Hillman Companies, Inc., SunSub
Holdings LLC and GC-Sun Holdings, L.P. dated April 13, 2002. (6)(Exhibit 10.2)2.2
    
    Asset Purchase Agreement between Fastenal Company and The Hillman Group, Inc.
dated October 3, 2002. (7)(Exhibit 10.3)2.3
    
    Agreement and Plan of Merger dated as of June 18, 2001 by and among Allied
Capital Corporation, Allied Capital Lock Acquisition Corporation and SunSource Inc.
(4)(Exhibit 2.1)2.4
    
    Asset Purchase Agreement dated September 28, 2001, by and between SunSource
Technology Services, LLC, and STS Operating, Inc. (5) (Exhibit 2.1)2.5
    
    Agreement and Plan of Merger dated as of February 14, 2004 by and among the
Company, HCI Acquisition Corp. and the Common Stockholders of the Company. (2)(Exhibit
2.1)3.1
    
    Bylaws as adopted by the Corporations stockholders as of March 30, 2004.
(10)(Exhibit 3.2)3.2
    
    Restated Certificate of Incorporation of the Company as of March 30, 2004. (10)
(Exhibit 3.1)4.1
    
    HCI Stockholders Agreement dated March 31, 2004. (9)(Exhibit 4.1)
4.2 Amended and Restated Declaration of Trust (1)(Exhibit 4.1)
4.3 Indenture between the Company and the Bank of New York (1)(Exhibit 4.2)
4.4 Preferred Securities Guarantee (1) (Exhibit 4.3)4.2
    
    Amended and Restated Declaration of Trust (1)(Exhibit 4.1)4.3
    
    Indenture between the Company and the Bank of New York (1)(Exhibit 4.2)4.4
    
    Preferred Securities Guarantee (1) (Exhibit 4.3)4.5
    
    Rights Agreement between the Company and the Registrar and Transfer Company
(1)(Exhibit 10.5)4.6
    
    Amendment No. 1 to the Rights Agreement dated June 18, 2001. (8)(Exhibit 4.6)4.7
    
    Amendment No. 2 to the Rights Agreement dated February 14, 2004. (8)(Exhibit 4.7)
 84




---



##### 



4.8
    
    Hillman Investment Company Stockholders Agreement dated March 31, 2004. (9)
(Exhibit 4.2)4.9
    
    Registration Agreement dated March 31, 2004. (9) (Exhibit 4.3)10.1
    
    Credit Agreement dated as of March 31, 2004 by and among The Hillman Companies,
Inc., Hillman Investment Company, The Hillman Group, Inc., Merrill Lynch Capital as
Administrative Agent, Issuing Lender and Swingline Lender, JP Morgan Chase Bank as
Syndication Agent, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and JP Morgan Securities as Joint Lead Arrangers and Joint Lead
Bookrunners. (9) (Exhibit 10.1)10.2
    
    Loan Agreement dated as of March 31, 2004 by and among The Hillman Companies,
Inc., Hillman Investment Company, The Hillman Group, Inc., and Allied Capital
Corporation. (9) (Exhibit 10.2)10.3
    
    Subordination and Intercreditor Agreement dated March 31, 2004. (9) (Exhibit
10.3)10.4
    
    The Hillman Companies, Inc. 2004 Stock Option Plan. (9) (Exhibit 10.4)10.5
    
    The Hillman Companies, Inc. Amended and Restated 2004 Stock Option Plan. (12)
(Exhibit 10.5)10.6
    
    The Hillman Companies, Inc. Employee Securities Purchase Plan. (9) (Exhibit 10.5)10.7
    
    Hillman Investment Company Employee Securities Purchase Plan. (9) (Exhibit 10.6)10.8
    
    HCI Securities Purchase Agreement dated March 31, 2004. (9) (Exhibit 10.7)10.9
    
    Joinder to Securities Purchase Agreement dated March 31, 2004. (9) (Exhibit 10.8)10.10
    
    Hillman Investment Company Securities Purchase Agreement dated March 31, 2004.
(9) (Exhibit 10.9)10.11
    
    Management Agreement dated March 31, 2004. (9) (Exhibit 10.10)10.12
    
    Employment Agreement by and between The Hillman Group, Inc. and Max W. Hillman
dated March 31, 2004. (9) (Exhibit 10.11)10.13
    
    Executive Securities Agreement between Max W. Hillman and HCI Acquisition Corp.
dated March 31, 2004. (9) (Exhibit 10.12)10.14
    
    Employment Agreement by and between The Hillman Group, Inc. and Richard P.
Hillman dated March 31, 2004. (9) (Exhibit 10.13)10.15
    
    Executive Securities Purchase Agreement between HCI Acquisition Corp. and
Richard P. Hillman dated March 31, 2004. (9) (Exhibit 10.14)10.16
    
    Employment Agreement by and between The Hillman Group, Inc. and James P. Waters
dated March 31, 2004. (9) (Exhibit 10.15)10.17
    
    Executive Securities Agreement by and between HCI Acquisition Corp. and James
P. Waters dated March 31, 2004. (9) (Exhibit 10.16)10.18
    
    Executive Securities Agreement by and between HCI Acquisition Corp. and George
L. Heredia dated March 31, 2004. (12) (Exhibit 10.18)
 85




---



##### 



10.19
    
    Executive Securities Agreement by and between HCI Acquisition Corp. and Terry R.
Rowe dated March 31, 2004. (12) (Exhibit 10.19)10.20
    
    SunSource Inc. Nonqualified Deferred Compensation Plan dated as of August 1,
2000. (3)(Exhibit 10.1)10.21
    
    The Hillman Companies, Inc. Nonqualified Deferred Compensation Plan (amended and
restated). (11) (Exhibit 10.1)10.22
    
    First Amendment to The Hillman Companies, Inc. Nonqualified Deferred
Compensation Plan. (11) (Exhibit 10.2)10.23
    
    Asset Purchase Agreement dated January 5, 2006 between The SteelWorks
Corporation and The Hillman Group, Inc. (13) (Exhibit 10.1)10.24
    
    Supply Agreement dated January 5, 2006 between The SteelWorks Corporation and
The Hillman Group, Inc. (13) (Exhibit 10.2)10.25
    
    Amended and Restated Credit Agreement dated July 21, 2006. (14) (Exhibit 10.1)10.26
    
    Second Amendment to Loan Agreement dated July 21, 2006 (14) (Exhibit 10.2)12.1
    
    * Computation of Ratio of Income to Fixed Charges.21.1
    
    * Subsidiaries (As of December 31, 2006)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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    * Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Filed as an exhibit to Registration Statement No. 333-44733 on Form S-2.(2)
    
    Filed as an exhibit to the Form 8-K filed February 17, 2004.(3)
    
    Filed as an exhibit to Annual Report on Form 10-K for the year ended December 31,
2000.(4)
    
    Filed on June 21, 2001 as an exhibit to the Current Report on Form 8-K filed on
June 21, 2001.(5)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on October 15, 2001.(6)
    
    Filed as an exhibit to Quarterly Report on Form 10-Q for the Quarter ended June
30, 2002.(7)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on October 4, 2002.(8)
    
    Filed as an exhibit to the Annual Report on Form 10-K for the year ended December
31, 2003. 86




---



##### 



(9)
    
    Filed as an exhibit to the Quarterly Report on Form 10-Q for the Quarter ended
March 31, 2004.(10)
    
    Filed as an exhibit to the Quarterly Report on Form 10-Q for the Quarter ended
June 30, 2004.(11)
    
    Filed as an exhibit to the Quarterly Report on Form 10-Q for the Quarter ended
September 30, 2004.(12)
    
    Filed as an exhibit to the Annual Report on Form 10-K for the year ended December
31, 2004.(13)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on January 11, 2006.(14)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on August 1, 2006*
    
    Filed herewith. 87




---



##### 



SIGNATURES
  THE HILLMAN COMPANIES, INC.Date: March 30, 2007
    By:
    /s/ James P. WatersJames P. WatersTitle:
    
    Chief Financial
Officer and Duly
Authorized Officer
of the Registrant
(Principal
Financial Officer)  Signature
    
    Capacity
    
    Date/s/ Max W. Hillman
    
    Principal Executive
Officer and Director
    
    March 30, 2007Max W. Hillman/s/ Peter M. Gotsch
    
    Chairman and Director
    
    March 30, 2007Peter M. Gotsch/s/ Harold J. Wilder
    
    Principal Accounting Officer
    
    March 30, 2007Harold J. Wilder/s/ Andrew W. Code
    
    Director
    
    March 30, 2007Andrew W. Code/s/ Mark A. Dolfato
    
    Director
    
    March 30, 2007Mark A. Dolfato/s/ Larry Wilton
    
    Director
    
    March 30, 2007Larry Wilton/s/ Maurice P. Andrien, Jr.
    
    Director
    
    March 30, 2007Maurice P. Andrien, Jr./s/ Shael J. Dolman
    
    Director
    
    March 30, 2007Shael J. Dolman
 88