##### 



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, 2007
 Commission file number 1-13293
 The Hillman Companies, Inc.
  Delaware
    
    23-2874736(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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
   Builders Hardware
     Markets and Customers
    6




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Sales and Marketing
     Competition
   7




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Insurance Arrangements
  Employees
  Backlog
  Where You Can Find More Information
 http://www.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.
  8




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The Companys business, financial condition and results of operations may be materially adversely
affected by seasonality and general economic conditions affecting its sales.
   
    
    General business conditions,
    
    Interest rates,
    
    Inflation,
    
    The availability of consumer credit,
    
    Taxation,
    
    Fuel prices,
    
    Unemployment trends,
    
    Terrorist attacks and acts of war, and
    
    Other matters that influence consumer confidence and spending.
  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.
  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.
  9




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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.
  The inability to make timely and cost effective acquisitions may adversely affect the Companys
business.
   10




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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.
  11




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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
    
    80,500
    
    
    DistributionWilsonville, Oregon
    
    29,400
    
    
    DistributionGreen Island, New York
    
    56,000
    
    
    DistributionLaCrosse, Wisconsin
    
    48,000
    
    
    DistributionGoodlettsville, Tennessee
    
    72,000
    
    
    Mfg., DistributionPompano Beach, Florida
    
    38,800
    
    
    Office, DistributionMississauga, Ontario
    
    34,700
    
    
    Office, Distribution
  Item 3  Legal Proceedings.
  Item 4  Submission of Matters to a Vote of Security Holders.
  12




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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
  2007
    
    High
    
    LowFirst Quarter
    
    $
    30.10
    
    
    $
    28.85Second Quarter
    
    
    30.20
    
    
    
    29.15Third Quarter
    
    
    29.75
    
    
    
    28.25Fourth Quarter
    
    
    29.35
    
    
    
    28.20
 2006
    
    High
    
    LowFirst Quarter
    
    $
    29.40
    
    
    $
    28.59Second Quarter
    
    
    28.70
    
    
    
    25.50Third Quarter
    
    
    29.80
    
    
    
    27.74Fourth Quarter
    
    
    29.55
    
    
    
    27.30
  Distributions
    Issuer Purchases of Equity Securities
  13




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Item 6  Selected Financial Data.
   (dollars in thousands)Successor
    
    
    PredecessorNine
    
    
    ThreeMonths
    
    
    MonthsYear Ended
    
    Year Ended
    
    Year Ended
    
    Ended
    
    
    Ended
    
    Year Ended12/31/07
    
    12/31/06
    
    12/31/05
    
    12/31/04
    
    
    03/31/04
    
    12/31/03Income Statement Data:Net sales
    
    $
    445,628
    
    
    $
    423,901
    
    
    $
    382,512
    
    
    $
    273,374
    
    
    
    $
    78,190
    
    
    $
    317,671Gross profit
    
    
    229,895
    
    
    
    220,450
    
    
    
    206,290
    
    
    
    150,402
    
    
    
    
    42,807
    
    
    
    174,316Non-recurring expense (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,707
    
    
    
    Extinguishment of debt
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    
    (9,759
    )
    
    
    (7,648
    )
    
    
    (2,442
    )
    
    
    779
    
    
    
    
    (20,366
    )
    
    
    (5,709
    )Balance Sheet Data at December 31:Total assets
    
    $
    660,060
    
    
    $
    653,584
    
    
    $
    631,288
    
    
    $
    628,899
    
    
    
    
    N/A
    
    
    $
    354,253Long-term debt and
capitalized lease obligations (1)
    
    
    281,800
    
    
    
    284,406
    
    
    
    263,508
    
    
    
    264,101
    
    
    
    
    N/A
    
    
    
    150,338
 
 (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. 14




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Item 7  Managements Discussion and Analysis of Financial
Condition and Results of Operation .
  Forward Looking Statements
    General
  Merger Transaction
  15




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Financing Arrangements
       16




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Acquisitions
   17




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Results of Operations
 Sales and Profitability for each of the Three Years Ended December 31
 (dollars in thousands)2007
    
    
    2006
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    TotalNet sales
    
    $
    445,628
    
    
    
    100.0
    %
    
    $
    423,901
    
    
    
    100.0
    %
    
    $
    382,512
    
    
    
    100.0
    %Cost of sales (exclusive of
depreciation and amortization
shown below)
    
    
    215,733
    
    
    
    48.4
    %
    
    
    203,451
    
    
    
    48.0
    %
    
    
    176,222
    
    
    
    46.1
    %Gross profit
    
    
    229,895
    
    
    
    51.6
    %
    
    
    220,450
    
    
    
    52.0
    %
    
    
    206,290
    
    
    
    53.9
    %Operating expenses:Selling
    
    
    80,174
    
    
    
    18.0
    %
    
    
    75,868
    
    
    
    17.9
    %
    
    
    72,282
    
    
    
    18.9
    %Warehouse & delivery
    
    
    55,328
    
    
    
    12.4
    %
    
    
    55,183
    
    
    
    13.0
    %
    
    
    47,705
    
    
    
    12.5
    %General & Administrative
    
    
    21,232
    
    
    
    4.8
    %
    
    
    21,257
    
    
    
    5.0
    %
    
    
    19,078
    
    
    
    5.0
    %Stock compensation expense
    
    
    5,322
    
    
    
    1.2
    %
    
    
    1,239
    
    
    
    0.3
    %
    
    
    1,601
    
    
    
    0.4
    %Total SG&A
    
    
    162,056
    
    
    
    36.4
    %
    
    
    153,547
    
    
    
    36.2
    %
    
    
    140,666
    
    
    
    36.8
    %Depreciation
    
    
    18,224
    
    
    
    4.1
    %
    
    
    17,132
    
    
    
    4.0
    %
    
    
    15,605
    
    
    
    4.1
    %Amortization
    
    
    7,274
    
    
    
    1.6
    %
    
    
    7,748
    
    
    
    1.8
    %
    
    
    7,228
    
    
    
    1.9
    %Extinguishment of debt
    
    
    
    
    
    
    0.0
    %
    
    
    726
    
    
    
    0.2
    %
    
    
    
    
    
    
    0.0
    %Management fees
    
    
    1,023
    
    
    
    0.2
    %
    
    
    1,019
    
    
    
    0.2
    %
    
    
    1,045
    
    
    
    0.3
    %Total operating expenses
    
    
    188,577
    
    
    
    42.3
    %
    
    
    180,172
    
    
    
    42.5
    %
    
    
    164,544
    
    
    
    43.0
    %Other income (expense)
    
    
    839
    
    
    
    0.2
    %
    
    
    1,042
    
    
    
    0.2
    %
    
    
    (87
    )
    
    
    0.0
    %Income from operations
    
    
    42,157
    
    
    
    9.5
    %
    
    
    41,320
    
    
    
    9.7
    %
    
    
    41,659
    
    
    
    10.9
    %Interest expense
    
    
    25,528
    
    
    
    5.7
    %
    
    
    25,799
    
    
    
    6.1
    %
    
    
    20,974
    
    
    
    5.5
    %Interest expense on mandatorily
redeemable preferred stock &
management purchased preferred
options
    
    
    9,919
    
    
    
    2.2
    %
    
    
    8,894
    
    
    
    2.1
    %
    
    
    7,972
    
    
    
    2.1
    %Interest expense on junior
subordinated notes
    
    
    12,609
    
    
    
    2.8
    %
    
    
    12,609
    
    
    
    3.0
    %
    
    
    12,609
    
    
    
    3.3
    %Investment income on trust
common securities
    
    
    (378
    )
    
    
    -0.1
    %
    
    
    (378
    )
    
    
    -0.1
    %
    
    
    (378
    )
    
    
    -0.1
    %Income (loss) before taxes
    
    
    (5,521
    )
    
    
    -1.2
    %
    
    
    (5,604
    )
    
    
    -1.3
    %
    
    
    482
    
    
    
    0.1
    %Income tax provision
    
    
    4,238
    
    
    
    1.0
    %
    
    
    2,044
    
    
    
    0.5
    %
    
    
    2,924
    
    
    
    0.8
    %Net loss
    
    $
    (9,759
    )
    
    
    -2.2
    %
    
    $
    (7,648
    )
    
    
    -1.8
    %
    
    $
    (2,442
    )
    
    
    -0.6
    %
 18




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Years Ended December 31, 2007 and 2006
         19




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Years Ended December 31, 2006 and 2005
     20




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21




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Liquidity and Capital Resources
       AmountIncrease in cash and cash equivalents
    
    $
    9,368Increase in accounts receivable, net
    
    
    631Increase in inventories, net
    
    
    5,595Increase in other current assets
    
    
    718Increase in deferred taxes
    
    
    1,205Increase in accounts payable
    
    
    (895
    )Increase in senior term loans & capital lease obligations
    
    
    (11
    )Increase in accrued salaries and wages
    
    
    (1,134
    )Increase in accrued pricing allowances
    
    
    (283
    )Increase in accrued income and other taxes
    
    
    (233
    )Decrease in accrued interest
    
    
    1,678Decrease in other accrued liabilities
    
    
    2,626Net increase in working capital for the year ended December 31, 2007
    
    $
    19,265
 22




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Payments DueLess Than
    
    
    1 to 3
    
    
    3 to 5
    
    
    More ThanContractual Obligations
    
    Total
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Five YearsJunior Subordinated Debentures (1)
    
    $
    116,505
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    116,505Long Term Senior Term Loans
    
    
    231,475
    
    
    
    2,350
    
    
    
    172,578
    
    
    
    56,547
    
    
    
    Bank Revolving Credit Facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long Term Unsecured Subordinated Notes
    
    
    49,820
    
    
    
    
    
    
    
    
    
    
    
    49,820
    
    
    
    Interest payments (2)
    
    
    70,413
    
    
    
    23,141
    
    
    
    42,422
    
    
    
    4,850
    
    
    
    Operating Leases
    
    
    44,313
    
    
    
    8,288
    
    
    
    11,209
    
    
    
    8,445
    
    
    
    16,371Mandatorily Redeemable Preferred Stock
    
    
    87,358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,358Management Purchased Preferred Options
    
    
    5,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,298Accrued Compensation Preferred Options
    
    
    7,718
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,718Deferred Compensation Obligations
    
    
    5,641
    
    
    
    325
    
    
    
    650
    
    
    
    650
    
    
    
    4,016Capital Lease Obligations
    
    
    573
    
    
    
    304
    
    
    
    195
    
    
    
    74
    
    
    
    Purchase Obligations
    
    
    350
    
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    Other Long Term Obligations
    
    
    2,807
    
    
    
    1,172
    
    
    
    980
    
    
    
    245
    
    
    
    410FIN 48 Liabilities
    
    
    2,875
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,875Total Contractual Cash Obligations
    
    $
    625,146
    
    
    $
    35,930
    
    
    $
    228,034
    
    
    $
    120,631
    
    
    $
    240,551
 
 (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 7.875% in effect as of
December 31, 2007.       23




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Inflation
  Related Party Transactions
  Critical Accounting Policies and Estimates
  Revenue Recognition :
   24




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Accounts Receivable and Allowance for Doubtful Accounts
  Inventory Realization
  Goodwill and Other Intangible Assets
     Long-Lived Assets
  25




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Income Taxes
   Risk Insurance Reserves
   Stock Based Compensation
  Fair Value of Financial Instruments :
  26




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Recent Accounting Pronouncements
      27




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Item 7A  Quantitative and Qualitative Disclosures About Market Risk.
      28




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Item 8  Financial Statements and Supplementary Data .
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
 Page(s)Report of Management On Internal Controls Over Financial Reporting
    
    
    30Reports of Independent Registered Public Accounting Firms
    
    
    31-32Consolidated Financial Statements:Consolidated Balance Sheets
    
    
    33-34Consolidated Statements of Operations
    
    
    35Consolidated Statements of Cash Flows
    
    
    36Consolidated Statements of Changes in Stockholders Equity
    
    
    37Notes to Consolidated Financial Statements
    
    
    38-62Financial Statement Schedule:Valuation Accounts
    
    
    63
 29




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Report of Management On Internal Control Over Financial Reporting
 
 Internal Control  Integrated Framework
 
 
 
 /s/  Max W. Hillman
    
    /s/  James P. WatersMax W. Hillman
    
    James P. WatersChief Executive Officer
    
    Chief Financial OfficerDated: March 28, 2008
    
    Dated: March 28, 2008
 30




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Report of Independent Registered Public Accounting Firm
 Board of Directors and Shareholders of
The Hillman Companies, Inc.
    Share-Based Payments
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109
 /s/ GRANT THORNTON LLPGRANT THORNTON LLPCincinnati, OhioMarch 28, 2008
 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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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,919
    
    
    $
    2,551Restricted investments
    
    
    325
    
    
    
    500Accounts receivable, net
    
    
    48,962
    
    
    
    48,331Inventories, net
    
    
    97,976
    
    
    
    92,381Deferred income taxes, net
    
    
    7,780
    
    
    
    6,575Other current assets
    
    
    3,355
    
    
    
    2,637Total current assets
    
    
    170,317
    
    
    
    152,975Property and equipment, net
    
    
    56,088
    
    
    
    59,061Goodwill
    
    
    260,687
    
    
    
    260,575Other intangibles, net
    
    
    159,971
    
    
    
    167,244Restricted investments
    
    
    5,316
    
    
    
    4,867Deferred financing fees, net
    
    
    3,711
    
    
    
    5,000Investment in trust common securities
    
    
    3,261
    
    
    
    3,261Other assets
    
    
    709
    
    
    
    601Total assets
    
    $
    660,060
    
    
    $
    653,584LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    23,233
    
    
    $
    22,338Current portion of senior term loans
    
    
    2,350
    
    
    
    2,350Current portion of capitalized lease obligations
    
    
    266
    
    
    
    255Accrued expenses:Salaries and wages
    
    
    4,628
    
    
    
    3,494Pricing allowances
    
    
    5,484
    
    
    
    5,201Income and other taxes
    
    
    2,166
    
    
    
    1,933Interest
    
    
    1,241
    
    
    
    2,919Deferred compensation
    
    
    325
    
    
    
    500Other accrued expenses
    
    
    5,476
    
    
    
    8,102Total current liabilities
    
    
    45,169
    
    
    
    47,092Long term senior term loans
    
    
    229,125
    
    
    
    231,475Long term capitalized lease obligations
    
    
    239
    
    
    
    506Long term unsecured subordinated notes
    
    
    49,820
    
    
    
    49,820Junior subordinated debentures
    
    
    116,505
    
    
    
    116,900Mandatorily redeemable preferred stock
    
    
    87,358
    
    
    
    78,079Management purchased preferred options
    
    
    5,298
    
    
    
    4,659Deferred compensation
    
    
    5,316
    
    
    
    4,867Deferred income taxes, net
    
    
    43,704
    
    
    
    36,653Accrued dividends on preferred stock
    
    
    43,566
    
    
    
    30,082Other non-current liabilities
    
    
    9,353
    
    
    
    5,713Total liabilities
    
    
    635,453
    
    
    
    605,846
  33




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##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,
    
    
    December 31,2007
    
    
    2006LIABILITIES 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, 2007 and 2006
    
    
    88
    
    
    
    88Class A Common stock, $.01 par, 23,141 shares authorized,
412.0 issued and outstanding at December 31, 2007 and 2006
    
    
    417
    
    
    
    417Class B Common stock, $.01 par, 2,500 shares authorized,
1,000 issued and outstanding at December 31, 2007 and 2006
    
    
    1,635
    
    
    
    Commitments and contingencies (Note 16)Stockholders equity:Preferred Stock:Class A Preferred stock, $.01 par, 238,889 shares authorized,
82,104.8 issued and outstanding at December 31, 2007 and 2006
    
    
    1
    
    
    
    1Common Stock:Class A Common stock, $.01 par, 23,141 shares authorized,
5,805.3 issued and outstanding at December 31, 2007 and 2006
    
    
    
    
    
    
    Class C Common stock, $.01 par, 30,109 shares authorized,
2,787.1 issued and outstanding at December 31, 2007 and 2006
    
    
    
    
    
    
    Additional paid-in capital
    
    
    44,164
    
    
    
    57,599Accumulated deficit
    
    
    (21,287
    )
    
    
    (10,090
    )Accumulated other comprehensive loss
    
    
    (411
    )
    
    
    (277
    )Total stockholders equity
    
    
    22,467
    
    
    
    47,233Total liabilities and stockholders equity
    
    $
    660,060
    
    
    $
    653,584
  34




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years ended December 31, 2007, 2006, and 2005
 (dollars in thousands)
 2007
    
    
    2006
    
    
    2005Net sales
    
    $
    445,628
    
    
    $
    423,901
    
    
    $
    382,512Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    215,733
    
    
    
    203,451
    
    
    
    176,222Gross profit
    
    
    229,895
    
    
    
    220,450
    
    
    
    206,290Operating expenses:Selling, general and administrative expenses
    
    
    162,056
    
    
    
    153,547
    
    
    
    140,666Depreciation
    
    
    18,224
    
    
    
    17,132
    
    
    
    15,605Amortization
    
    
    7,274
    
    
    
    7,748
    
    
    
    7,228Extinguishment of debt
    
    
    
    
    
    
    726
    
    
    
    Management fee to related party
    
    
    1,023
    
    
    
    1,019
    
    
    
    1,045Total operating expenses
    
    
    188,577
    
    
    
    180,172
    
    
    
    164,544Other income (expense), net
    
    
    839
    
    
    
    1,042
    
    
    
    (87
    )Income from operations
    
    
    42,157
    
    
    
    41,320
    
    
    
    41,659Interest expense, net
    
    
    25,528
    
    
    
    25,799
    
    
    
    20,974Interest expense on mandatorily redeemable
preferred stock and management purchased
preferred options
    
    
    9,919
    
    
    
    8,894
    
    
    
    7,972Interest expense on junior subordinated notes
    
    
    12,609
    
    
    
    12,609
    
    
    
    12,609Investment income on trust common securities
    
    
    (378
    )
    
    
    (378
    )
    
    
    (378
    )Income (loss) before income taxes
    
    
    (5,521
    )
    
    
    (5,604
    )
    
    
    482Income tax provision
    
    
    4,238
    
    
    
    2,044
    
    
    
    2,924Net loss
    
    $
    (9,759
    )
    
    $
    (7,648
    )
    
    $
    (2,442
    )
  35




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2007, 2006, and 2005
(dollars in thousands)
 2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (9,759
    )
    
    $
    (7,648
    )
    
    $
    (2,442
    )Adjustments
to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    25,498
    
    
    
    24,880
    
    
    
    22,833Dispositions of property and equipment
    
    
    4
    
    
    
    28
    
    
    
    151Deferred income tax
    
    
    6,028
    
    
    
    1,692
    
    
    
    2,964PIK interest on unsecured subordinated notes
    
    
    
    
    
    
    648
    
    
    
    1,082Interest on mandatorily redeemable preferred stock
and management purchased options
    
    
    9,919
    
    
    
    8,893
    
    
    
    7,972Changes in operating items, net of effects of
acquisitions:Decrease (increase) in accounts receivable, net
    
    
    386
    
    
    
    (6,848
    )
    
    
    (4,113
    )Decrease (increase) in inventories, net
    
    
    1,777
    
    
    
    (15,203
    )
    
    
    (11,343
    )(Increase) decrease in other assets
    
    
    (749
    )
    
    
    324
    
    
    
    (111
    )Increase (decrease) in accounts payable
    
    
    108
    
    
    
    4,713
    
    
    
    (3,547
    )Decrease in other accrued liabilities
    
    
    (2,739
    )
    
    
    (5,218
    )
    
    
    (1,253
    )Other items, net
    
    
    6,043
    
    
    
    (712
    )
    
    
    1,756Net cash provided by operating activities
    
    
    36,516
    
    
    
    5,549
    
    
    
    13,949Cash flows from investing activities:All Points acquisition
    
    
    (9,762
    )
    
    
    
    
    
    
    SteelWorks acquisition
    
    
    
    
    
    
    (34,364
    )
    
    
    Capital expenditures
    
    
    (14,765
    )
    
    
    (14,681
    )
    
    
    (15,158
    )Other, net
    
    
    
    
    
    
    425
    
    
    
    (238
    )Net cash used for investing activities
    
    
    (24,527
    )
    
    
    (48,620
    )
    
    
    (15,396
    )Cash flows from financing activities:Borrowings of senior term loans
    
    
    
    
    
    
    22,394
    
    
    
    Repayments of senior term loans
    
    
    (2,350
    )
    
    
    (2,806
    )
    
    
    (1,632
    )Borrowings of revolving credit loans
    
    
    9,500
    
    
    
    31,091
    
    
    
    Repayments of revolving credit loans
    
    
    (9,500
    )
    
    
    (31,091
    )
    
    
    Principal payments under capitalized lease obligations
    
    
    (271
    )
    
    
    (162
    )
    
    
    (43
    )Financing fees, net
    
    
    
    
    
    
    (455
    )
    
    
    Proceeds from sale of securities
    
    
    
    
    
    
    160
    
    
    
    Net cash (used for) provided by financing activities
    
    
    (2,621
    )
    
    
    19,131
    
    
    
    (1,675
    )Net increase (decrease) in cash and cash equivalents
    
    
    9,368
    
    
    
    (23,940
    )
    
    
    (3,122
    )Cash and cash equivalents at beginning of period
    
    
    2,551
    
    
    
    26,491
    
    
    
    29,613Cash and cash equivalents at end of period
    
    $
    11,919
    
    
    $
    2,551
    
    
    $
    26,491
  36




---



##### 



AccumulatedAdditional
    
    
    Class A
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Preferred
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersClass A
    
    
    Class C
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    Income
    
    
    EquityBalance at December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    80,330
    
    
    $
    1
    
    
    $
    
    
    
    $
    (94
    )
    
    $
    80,237Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,442
    )
    
    
    
    
    
    
    (2,442
    )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
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    57,599
    
    
    
    1
    
    
    
    (10,090
    )
    
    
    (277
    )
    
    
    47,233Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,759
    )
    
    
    
    
    
    
    (9,759
    )Adoption of FIN No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,438
    )
    
    
    
    
    
    
    (1,438
    )Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    (13,484
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,484
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Change in derivative security value (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Balance at December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    44,164
    
    
    $
    1
    
    
    $
    (21,287
    )
    
    $
    (411
    )
    
    $
    22,467
 
 (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.  37




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 1. Basis of Presentation:
    Nature of Operations:
  2. Summary of Significant Accounting Policies:
 Cash Equivalents :
  Investments:
  Restricted Investments :
  38




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
 Accounts Receivable and Allowance for Doubtful Accounts
  Inventories :
  Property and Equipment :
  Depreciation :
  Goodwill and Other Intangible Assets :
   39




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
   Long-Lived Assets :
  Income Taxes :
   Risk Insurance Reserves
   40




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
 Retirement Benefits :
   Revenue Recognition :
    Shipping and Handling :
  Research and Development
  Stock Based Compensation
  41




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
  Fair Value of Financial Instruments :
  Translation of Foreign Currencies :
  Comprehensive Income (Loss):
  Year
    
    
    Year
    
    
    Yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Net loss
    
    $
    (9,759
    )
    
    $
    (7,648
    )
    
    $
    (2,442
    )Unrealized gains on investments, net (1)
    
    
    
    
    
    
    
    
    
    
    41Realized gains on investments, net (1)
    
    
    
    
    
    
    (75
    )
    
    
    Foreign currency translation adjustment, net
    
    
    (54
    )
    
    
    (13
    )
    
    
    (24
    )Change in derivative security value, net (1)
    
    
    (80
    )
    
    
    (221
    )
    
    
    109Comprehensive loss
    
    $
    (9,893
    )
    
    $
    (7,957
    )
    
    $
    (2,316
    )
 
 (1)
    
    Utilizing an income tax rate of 38.5%, 39.5%, and 39.4% for the years ended December 31,
2007, 2006, and 2005, respectively.  Use of Estimates in the Preparation of Financial Statements:
  42




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 3. Recent Accounting Pronouncements:
      43




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 4. Acquisitions:
  Cash
    
    $
    481Account receivable, net
    
    
    1,017Inventory, net
    
    
    7,372Other current assets
    
    
    77Deferred income taxes
    
    
    677Property and equipment
    
    
    435Goodwill
    
    
    1,056Total assets acquired
    
    
    11,115Less:Liabilities assumed
    
    
    872Total purchase price
    
    $
    10,243
   Customer relationships
    
    $
    11,861Trademarks
    
    
    2,624Goodwill
    
    
    19,879Total purchase price
    
    $
    34,364
   44




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 4. Acquisitions: (continued)
  2007
    
    2006
    
    2005Net sales
    
    $
    468,415
    
    
    $
    458,337
    
    
    $
    441,397Net loss (income)
    
    
    (9,225
    )
    
    
    (4,771
    )
    
    
    1,925
  5. Related Party Transactions:
  45




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes:
  Year
    
    
    Year
    
    
    Yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Current:Federal & State
    
    $
    462
    
    
    $
    271
    
    
    $
    438Foreign
    
    
    
    
    
    
    
    
    
    
    Total current
    
    
    462
    
    
    
    271
    
    
    
    438Deferred:Federal & State
    
    
    3,692
    
    
    
    1,682
    
    
    
    2,395Foreign
    
    
    84
    
    
    
    91
    
    
    
    91Total deferred
    
    
    3,776
    
    
    
    1,773
    
    
    
    2,486Provision for income taxes
    
    $
    4,238
    
    
    $
    2,044
    
    
    $
    2,924
      46




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes: (continued)
  As of December 31, 2007
    
    
    As of December 31, 2006Current
    
    
    Non-current
    
    
    Current
    
    
    Non-currentDeferred Tax Asset:Inventory
    
    $
    4,839
    
    
    $
    
    
    
    $
    4,324
    
    
    $
    Acquisition related reserve
    
    
    86
    
    
    
    
    
    
    
    299
    
    
    
    Bad debt reserve
    
    
    633
    
    
    
    
    
    
    
    606
    
    
    
    Casualty loss reserve
    
    
    455
    
    
    
    473
    
    
    
    406
    
    
    
    438Accrued bonus/Deferred compensation
    
    
    1,073
    
    
    
    2,052
    
    
    
    194
    
    
    
    1,869Medical insurance reserve
    
    
    565
    
    
    
    
    
    
    
    643
    
    
    
    Federal net operating loss
    
    
    
    
    
    
    22,719
    
    
    
    
    
    
    
    21,565State net operating loss
    
    
    
    
    
    
    2,780
    
    
    
    
    
    
    
    2,795Unrecognized tax benefit
    
    
    
    
    
    
    (2,875
    )
    
    
    
    
    
    
    Original issue discount amortization
    
    
    
    
    
    
    388
    
    
    
    
    
    
    
    404Transaction costs
    
    
    
    
    
    
    2,054
    
    
    
    
    
    
    
    2,069Federal capital loss carryforwards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275All other items
    
    
    582
    
    
    
    1,656
    
    
    
    569
    
    
    
    1,541Gross deferred tax assets
    
    
    8,233
    
    
    
    29,247
    
    
    
    7,041
    
    
    
    30,956Valuation allowance for
deferred tax assets
    
    
    (453
    )
    
    
    (1,609
    )
    
    
    (466
    )
    
    
    (2,047
    )Net deferred tax assets
    
    $
    7,780
    
    
    $
    27,638
    
    
    $
    6,575
    
    
    $
    28,909Deferred Tax Liability:Intangible asset amortization
    
    $
    
    
    
    $
    66,728
    
    
    $
    
    
    
    $
    61,084Property and equipment
    
    
    
    
    
    
    4,583
    
    
    
    
    
    
    
    4,359All other items
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    119Deferred tax liabilities
    
    $
    
    
    
    $
    71,342
    
    
    $
    
    
    
    $
    65,562
    47




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes: (continued)
  Year
    
    
    Year
    
    
    Yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Statuatory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Non-U.S. taxes and the impact of non-U.S. losses
for which a current tax benefit is not available
    
    
    1.0
    %
    
    
    -1.6
    %
    
    
    23.4
    %State and local income taxes, net of U.S. federal
income tax benefit
    
    
    -8.7
    %
    
    
    -3.9
    %
    
    
    99.4
    %Adjustment of reserve for change in uncertain tax
positions and other items
    
    
    -1.4
    %
    
    
    -1.5
    %
    
    
    -16.8
    %Adjustment for change in tax law
    
    
    -4.1
    %
    
    
    0.0
    %
    
    
    -251.5
    %Permanent differences:Interest expense on mandatorily redeemable
preferred stock
    
    
    -62.9
    %
    
    
    -55.5
    %
    
    
    578.9
    %Stock based compensation expense
    
    
    -33.4
    %
    
    
    -7.6
    %
    
    
    116.2
    %Dividends received exclusion
    
    
    0.1
    %
    
    
    0.3
    %
    
    
    -5.8
    %Meals and entertainment expense
    
    
    -2.3
    %
    
    
    -2.1
    %
    
    
    27.2
    %Other permanent differences
    
    
    -0.1
    %
    
    
    -0.3
    %
    
    
    0.6
    %Tax credits utilized
    
    
    0.0
    %
    
    
    0.7
    %
    
    
    0.0
    %Effective income tax rate
    
    
    -76.8
    %
    
    
    -36.5
    %
    
    
    606.6
    %
  Unrecognized tax benefits as of January 1, 2007
    
    $
    2,868Gross increase related to positions taken during a prior year
    
    
    7Unrecognized tax benefits as of December 31, 2007
    
    $
    2,875Amount of unrecognized tax benefit that, if recognized, would
affect the Companys effective tax rate
    
    $
    1,445
 48




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes: (continued)
   7. Property and Equipment, net:
  EstimatedUseful Life(Years)
    
    
    2007
    
    
    2006Land
    
    
    
    
    
    $
    131
    
    
    $
    131Buildings
    
    
    27
    
    
    
    781
    
    
    
    781Leasehold improvements
    
    
    3-10
    
    
    
    4,457
    
    
    
    4,277Machinery and equipment
    
    
    2-10
    
    
    
    94,402
    
    
    
    86,512Furniture and fixtures
    
    
    3-5
    
    
    
    1,435
    
    
    
    1,361Construction in process
    
    
    
    
    
    
    966
    
    
    
    307Property and equipment, gross
    
    
    
    
    
    
    102,172
    
    
    
    93,369Less: Accumulated depreciation
    
    
    
    
    
    
    46,084
    
    
    
    34,308Property and equipment, net
    
    
    
    
    
    $
    56,088
    
    
    $
    59,061
 Machinery and equipment includes capitalized software of approximately $3,507
and $3,251 as of December 31, 2007 and 2006, respectively. 8. Other Intangibles, net:
   EstimatedUseful Life2007
    
    
    2006
    
    
    (Years)Customer relationships
    
    $
    126,651
    
    
    $
    126,651
    
    
    
    23Trademarks
    
    
    47,294
    
    
    
    47,294
    
    
    IndefinitePatents
    
    
    7,960
    
    
    
    7,960
    
    
    
    9Non Compete Agreements
    
    
    5,742
    
    
    
    5,742
    
    
    
    4Intangible assets, gross
    
    
    187,647
    
    
    
    187,647Less: Accumulated amortization
    
    
    27,676
    
    
    
    20,403Other intangibles, net
    
    $
    159,971
    
    
    $
    167,244
 49




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 8. Other Intangibles, net: (continued)
  9. Long-Term Debt:
      50




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 9. Long-Term Debt: (continued)
   2007
    
    
    2006Revolving Credit Agreement
    
    $
    
    
    
    $
    Term Loan B
    
    
    231,475
    
    
    
    233,825Subordinated Debt Issuance
    
    
    49,820
    
    
    
    49,820Capital Leases
    
    
    505
    
    
    
    761281,800
    
    
    
    284,406Less: amounts due in one year
    
    
    2,616
    
    
    
    2,605Long-term debt
    
    $
    279,184
    
    
    $
    281,801
  2008
    
    $
    2,6162009
    
    
    2,4922010
    
    
    170,2582011
    
    
    106,3992012
    
    
    352013 and thereafter
    
    
    
   51




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 10. Leases:
  Capital
    
    
    
    OperatingLeases
    
    
    
    Leases2008
    
    $
    304
    
    
    
    $
    8,2882009
    
    
    157
    
    
    
    
    6,5832010
    
    
    38
    
    
    
    
    4,6262011
    
    
    37
    
    
    
    
    4,3952012
    
    
    37
    
    
    
    
    4,050Later years
    
    
    
    
    
    
    
    16,371Total minimum lease payments
    
    
    573
    
    
    
    $
    44,313Less amounts representing interest
    
    
    (68
    )Present value of net minimum lease payments
(including $266 currently payable)
    
    $
    505
  11. Deferred Compensation Plans:
     12.
    
    Guaranteed Preferred Beneficial Interest in the Companys Junior Subordinated Debentures:
  52




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 12.
    
    Guaranteed Preferred Beneficial Interest in the Companys Junior Subordinated Debentures: (continued)
    Non-current assets  junior subordinated debentures  preferred
    
    $
    113,244Non-current assets  junior subordinated debentures  common
    
    
    3,261Total assets
    
    $
    116,505Non-current liabilities  trust preferred securities
    
    $
    113,244Stockholders equity  trust common securities
    
    
    3,261Total liabilities and stockholders equity
    
    $
    116,505
    53




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 12.
    
    Guaranteed Preferred Beneficial Interest in the Companys Junior Subordinated Debentures: (continued)
  13. Common and Preferred Stock:
 Common Stock issued in connection with the Merger Transaction:
      54




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13. Common and Preferred Stock: (continued)
 Preferred Stock:
     2006 Equity Issuance:
    55




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13. Common and Preferred Stock: (continued)
 Purchased Options:
   14. Stock-Based Compensation:
    56




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 14. Stock-Based Compensation: (continued)
 Common Option Plan:
    2007
    
    
    2006
    
    
    2005Options
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, beginning of year
    
    
    112.6
    
    
    $
    1,866
    
    
    
    61.3
    
    
    $
    1,523
    
    
    
    10.0
    
    
    $
    1,000Granted
    
    
    96.3
    
    
    
    2,500
    
    
    
    51.3
    
    
    
    2,275
    
    
    
    51.3
    
    
    
    1,625Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of year
    
    
    208.9
    
    
    $
    2,158
    
    
    
    112.6
    
    
    $
    1,866
    
    
    
    61.3
    
    
    $
    1,523Exercisable, end of year
    
    
    61.3
    
    
    $
    1,523
    
    
    
    10.0
    
    
    $
    1,000
    
    
    
    10.0
    
    
    $
    1,000
   Preferred Options:
  57




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 14. Stock-Based Compensation: (continued)
     Class B Shares:
    58




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 15. Derivatives and Hedging:
     16. Commitments and Contingencies:
     59




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 16. Commitments and Contingencies: (continued)
  17. Statements of Cash Flows:
  Year
    
    
    Year
    
    
    Yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Cash paid (refunded) during the
period for:Interest on junior subordinated
debentures
    
    $
    12,231
    
    
    $
    12,231
    
    
    $
    12,231Interest
    
    
    26,117
    
    
    
    25,587
    
    
    
    18,130Income taxes
    
    
    (17
    )
    
    
    245
    
    
    
    484Non-cash investing activities:Property and equipment purchased
with capital lease
    
    
    15
    
    
    
    824
    
    
    
    Non-cash financing activities:Dividends on preferred stock (Note 13)
    
    
    13,484
    
    
    
    12,025
    
    
    
    10,736
 18. Quarterly Data (unaudited):
 2007
    
    Fourth
    
    Third
    
    Second
    
    FirstNet sales
    
    $
    104,684
    
    
    $
    118,715
    
    
    $
    121,305
    
    
    $
    100,924Gross profit
    
    
    52,944
    
    
    
    61,891
    
    
    
    62,414
    
    
    
    52,646Net (loss) income
    
    
    (4,183
    )
    
    
    (1,371
    )
    
    
    541
    
    
    
    (4,746
    )
 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
    )
 60




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 19. Concentration of Credit Risks:
   20. Segment Information:
  Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Net salesUnited States
    
    $
    429,627
    
    
    $
    412,467
    
    
    $
    372,630Canada
    
    
    7,289
    
    
    
    3,726
    
    
    
    2,792Mexico
    
    
    2,523
    
    
    
    2,158
    
    
    
    2,154Other
    
    
    6,189
    
    
    
    5,550
    
    
    
    4,936Consolidated net sales
    
    $
    445,628
    
    
    $
    423,901
    
    
    $
    382,512Long-lived assets:United States
    
    $
    489,234
    
    
    $
    500,591
    
    
    $
    477,466Canada
    
    
    509
    
    
    
    18
    
    
    
    44Mexico
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Consolidated long-lived assets
    
    $
    489,743
    
    
    $
    500,609
    
    
    $
    477,510
 61




---



##### 



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 20. Segment Information: (continued)
 Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Cash & cash equivalentsUnited States
    
    $
    11,080
    
    
    $
    1,236
    
    
    $
    25,926Canada
    
    
    288
    
    
    
    267
    
    
    
    176Mexico
    
    
    551
    
    
    
    1,048
    
    
    
    389Other
    
    
    
    
    
    
    
    
    
    
    Consolidated cash & cash equivalents
    
    $
    11,919
    
    
    $
    2,551
    
    
    $
    26,491
  Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Net salesKeys
    
    $
    79,370
    
    
    $
    72,870
    
    
    $
    71,020Engraving
    
    
    39,158
    
    
    
    35,976
    
    
    
    32,274Letters, numbers and signs
    
    
    37,711
    
    
    
    34,518
    
    
    
    33,025Fasteners
    
    
    230,857
    
    
    
    229,732
    
    
    
    224,378Threaded rod
    
    
    30,693
    
    
    
    28,156
    
    
    
    Code cutter
    
    
    5,149
    
    
    
    4,810
    
    
    
    4,962Builders hardware
    
    
    2,578
    
    
    
    
    
    
    
    Other
    
    
    20,112
    
    
    
    17,839
    
    
    
    16,853Consolidated net sales
    
    $
    445,628
    
    
    $
    423,901
    
    
    $
    382,512
 62




---



##### 



Financial Statement Schedule:
 Schedule II  VALUATION ACCOUNTS
  Deducted From Assets in Balance SheetAllowance forAllowance for
    
    
    Obsolete/Doubtful
    
    
    ExcessAccounts
    
    
    InventoryEnding Balance  December 31, 2004
    
    
    526
    
    
    
    3,558Additions charged to cost and expense
    
    
    (70
    )
    
    
    878Deductions due to:Others
    
    
    22
    (A)
    
    
    488
    (A)Ending Balance  December 31, 2005
    
    
    434
    
    
    
    3,948Additions charged to cost and expense
    
    
    46
    
    
    
    725Deductions due to:Others
    
    
    111
    (A)
    
    
    31
    (A)Ending Balance  December 31, 2006
    
    
    369
    
    
    
    4,642Additions charged to cost and expense
    
    
    200
    
    
    
    230Additions from acquired company
    
    
    124
    
    
    
    1,629Deductions due to:Others
    
    
    96
    (A)
    
    
    337
    (A)Ending Balance  December 31, 2007
    
    $
    597
    
    
    $
    6,164
 
  (A)
    
    Includes write-off of accounts receivable (net of bad debt
recoveries) and inventories. 63




---



##### 



Item 9  Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
  Item 9A  Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Item 9B  Other Information.
  64




---



##### 



PART III
 Item 10  Directors, Executive Officers, and Corporate Governance.
  Directors
 Principal Occupation; Five-YearName and Age
    
    Employment; Other DirectorshipsPeter M. Gotsch (43)
    
    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. (66)
    
    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. Mr. Andrien presently serves
on the Boards of State Industrial Products,
Inc., Cogniscape LLC and Kaba Holding AG.Max W. Hillman (61)
    
    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.
Mr. Hillman presently serves on the Boards of
State Industrial Products, Inc., Sunsource
Technology Services Inc. and Woodstream Corp.Andrew W. Code (49)
    
    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
Boards of SCP Pool Company and Woodstream
Corp.
 65




---



##### 



Principal Occupation; Five-YearName and Age
    
    Employment; Other DirectorshipsLarry Wilton (60)
    
    Mr. Wilton has been CEO of United Plastics Group
since 2007 and he was CEO of Compass Home Inc. from
2004 to 2005. From 1996 to 2002, Mr. Wilton was
President and CEO of Philips Lamps NAFTA. From 1994
to 1996, 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 (36)
    
    Mr. Dolman is a Director at the private equity arm of
the Ontario Teachers Pension Plan (OTPP).
Mr. Dolman joined OTPP in 1997 after working in
Commercial and Corporate Banking at a Canadian
chartered bank. He is a director of ALH Holding, Inc
and Easton-Bell Sports, Inc.
  Committees
    Code of Ethics
  66




---



##### 



Executive Officers
 Position with the Company;Name and Age
    
    Five-year Employment HistoryMax W. Hillman (61)
    
    President and Chief Executive Officer of The
Hillman Companies, Inc., Chief Executive Officer
of The Hillman Group, Inc., Cincinnati, Ohio. See
page 65 for five-year employment history. Mr.
Hillman is the brother of Richard P. Hillman.Richard P. Hillman (59)
    
    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 (46)
    
    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 (49)
    
    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 (53)
    
    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.
  67




---



##### 



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
  68




---



##### 



Determination of NEO Compensation
   Base Salary
      Performance Based Bonuses
   69




---



##### 



Benefits
  Amended Stock Option Plan
   Defined Contribution Plan
  70




---



##### 



Perquisites
  Executive Securities Agreement
  Compensation Committee Report
      
  71




---



##### 



Summary Compensation Table
  Change inPensionValue andNonqualifiedDeferredName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option
    
    Compensation
    
    All OtherPrincipal Position
    
    Year
    
    Salary(1)
    
    Bonus(2)
    
    Awards(3)
    
    Earnings(4)
    
    Compensation
    
    TotalMax W. Hillman
    
    
    2007
    
    
    
    413,284
    
    
    
    185,468
    
    
    
    
    
    
    
    
    
    
    
    35,041
    (6)
    
    
    633,793President and CEO
    
    
    2006
    
    
    
    399,746
    
    
    
    68,701
    
    
    
    
    
    
    
    
    
    
    
    28,689
    (7)
    
    
    497,136The Hillman Companies, Inc.
    
    
    2005
    
    
    
    391,923
    
    
    
    44,203
    
    
    
    
    
    
    
    
    
    
    
    30,253
    (8)
    
    
    466,379James P. Waters
    
    
    2007
    
    
    
    201,477
    
    
    
    48,225
    
    
    
    
    
    
    
    
    
    
    
    9,383
    (5)
    
    
    259,085CFO and Secretary
    
    
    2006
    
    
    
    194,761
    
    
    
    22,292
    
    
    
    
    
    
    
    
    
    
    
    9,207
    (5)
    
    
    226,260The Hillman Companies, Inc.
    
    
    2005
    
    
    
    188,769
    
    
    
    24,062
    
    
    
    
    
    
    
    
    
    
    
    10,263
    (5)
    
    
    223,094Richard P. Hillman
    
    
    2007
    
    
    
    279,231
    
    
    
    74,622
    
    
    
    
    
    
    
    
    
    
    
    14,359
    (5)
    
    
    368,212President
    
    
    2006
    
    
    
    269,423
    
    
    
    49,066
    
    
    
    
    
    
    
    
    
    
    
    10,808
    (5)
    
    
    329,297The Hillman Group, Inc.
    
    
    2005
    
    
    
    261,692
    
    
    
    68,725
    
    
    
    
    
    
    
    
    
    
    
    10,346
    (5)
    
    
    340,763George L. Heredia
    
    
    2007
    
    
    
    237,462
    
    
    
    44,527
    
    
    
    
    
    
    
    
    
    
    
    16,286
    (9)
    
    
    298,275Senior VP of Engraving
    
    
    2006
    
    
    
    230,500
    
    
    
    46,952
    
    
    
    
    
    
    
    
    
    
    
    17,269
    (10)
    
    
    294,721The Hillman Group, Inc.
    
    
    2005
    
    
    
    223,769
    
    
    
    62,875
    
    
    
    
    
    
    
    
    
    
    
    16,274
    (11)
    
    
    302,918Terry R. Rowe
    
    
    2007
    
    
    
    206,550
    
    
    
    48,225
    
    
    
    
    
    
    
    
    
    
    
    11,426
    (12)
    
    
    266,201Senior VP National Accounts
    
    
    2006
    
    
    
    206,238
    
    
    
    23,589
    
    
    
    
    
    
    
    
    
    
    
    7,628
    (12)
    
    
    237,455The Hillman Group, Inc.
    
    
    2005
    
    
    
    202,000
    
    
    
    46,601
    
    
    
    
    
    
    
    
    
    
    
    8,223
    (12)
    
    
    256,824
 
 (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.(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
$8,941, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, reimbursement of country club dues of $11,000 and car allowance of $12,600.(7)
    
    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.(8)
    
    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.(9)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$5,386, 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
$6,369, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, and car allowance of $8,400. 72




---



##### 



(11)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$5,744, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, and car allowance of $8,030.(12)
    
    Represents employer matching contributions to the Hillman Retirement Savings and 401(k) Plan
and car allowance and personal use of Company owned vehicles. 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
    
    
    1,948
    (1)
    
    
    1,299
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/20141,359
    (2)
    
    
    906
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014James P. Waters
    
    
    389
    (1)
    
    
    260
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014272
    (2)
    
    
    181
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014Richard P. Hillman
    
    
    833
    (1)
    
    
    556
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014581
    (2)
    
    
    388
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014George L. Heredia
    
    
    430
    (1)
    
    
    287
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014300
    (2)
    
    
    200
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014Terry R. Rowe
    
    
    409
    (1)
    
    
    273
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014286
    (2)
    
    
    191
    (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
   73




---



##### 



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
    
    $
    15,000
    
    
    $
    2,500
    
    
    $
    278,090
    
    
    $
    
    
    
    $
    4,184,974James P. Waters
    
    $
    14,747
    
    
    $
    2,500
    
    
    $
    5,866
    
    
    $
    
    
    
    $
    97,801Richard P. Hillman
    
    $
    18,868
    
    
    $
    2,500
    
    
    $
    20,289
    
    
    $
    
    
    
    $
    335,884George L. Heredia
    
    $
    46,952
    
    
    $
    2,500
    
    
    $
    3,539
    
    
    $
    (116,009
    )
    
    $
    52,892Terry 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
  74




---



##### 



James P. Waters, Chief Financial Officer
  Richard P. Hillman, President of The Hillman Group, Inc.
   75




---



##### 



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.
    
    $
    26,500
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    26,500Max W. Hillman (1)
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Andrew W. Code
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Larry Wilton
    
    $
    26,500
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    26,500Shael J. Dolman
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 
 (1)
    
    Mr. Hillman also serves as the Companys 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.  76




---



##### 



Item 12  Security Ownership of Certain Beneficial Owners and Management.
  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
    
    
    
    0.88
    %
    
    
    144.6
    
    
    
    14.46
    %
    
    
    
    
    
    
    
    
    
    
    199.2
    
    
    
    1.99
    %
    
    
    1,953.7
    
    
    
    2.04
    %(7)George L. Heredia
    
    
    23.3
    
    
    
    0.38
    %
    
    
    73.9
    
    
    
    7.39
    %
    
    
    
    
    
    
    
    
    
    
    97.2
    
    
    
    0.97
    %
    
    
    1,007.8
    
    
    
    1.05
    %(8)Terry R. Rowe
    
    
    23.9
    
    
    
    0.38
    %
    
    
    70.6
    
    
    
    7.07
    %
    
    
    
    
    
    
    
    
    
    
    94.5
    
    
    
    0.95
    %
    
    
    960.4
    
    
    
    1.01
    %(9)James P. Waters
    
    
    23.9
    
    
    
    0.38
    %
    
    
    67.3
    
    
    
    6.73
    %
    
    
    
    
    
    
    
    
    
    
    91.2
    
    
    
    0.91
    %
    
    
    912.4
    
    
    
    0.95
    %(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. 77




---



##### 



Item 13  Certain Relationships and Related Transactions.
   Item 14  Principal Accounting Fees and Services.
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
   78




---



##### 



PART IV
 Item 15  Exhibits and Financial Statement Schedules.
 (a) Documents Filed as a Part of the Report:
 1.
    
    Financial Statements.The information concerning financial statements called for by Item 15 of Form 10-K is set
forth in Part II, Item 8 of this annual report on Form 10-K.2.
    
    Financial Statement Schedules.The information concerning financial statement schedules called for by Item 15 of Form 10-K
is set forth in Part II, Item 8 of this annual report on Form 10-K.3.
    
    Exhibits, Including Those Incorporated by Reference.The following is a list of exhibits filed as part of this annual report on Form 10-K. Where
so indicated by footnote, exhibits which were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the previous filing
is indicated in parentheses.
 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)2.6
    
    Stock Purchase Agreement by and among All Points Industries, Inc., Gabrielle
Mann, Gregory Mann, and The Hillman Group, Inc. dated as of December 28, 2007.
(16)(Exhibit 2.6)3.1
    
    Bylaws as adopted by the Corporations stockholders as of March 30, 2004.
(10)(Exhibit 3.2)3.2
    
    Amendment No. 1 to the Companys Bylaws effective October 26, 2007. (15)(Exhibit
99.1)3.3
    
    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)
 79




---



##### 



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)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)
 80




---



##### 



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)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.18.1
    
    * Preferability Letter from Grant Thornton LLP, our
Independent  Registered Public Accounting Firm.21.1
    
    * Subsidiaries. (As of December 31, 2007)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.
 81




---



##### 



(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.(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.(15)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on November 1, 2007.(16)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on December 28, 2007.
 
 *
    
    Filed herewith. 82




---



##### 



SIGNATURES
  THE HILLMAN COMPANIES, INC.Date: March 28, 2008
    
    By:
    
    /s/ James P. WatersJames P. WatersTitle:
    
    Chief Financial Officer and DulyAuthorized Officer of the Registrant(Principal Financial Officer)
  Signature
    
    Capacity
    
    Date/s/ Max W. Hillman
    
    Principal Executive Officer and Director
    
    March 28, 2008Max W. Hillman/s/ Peter M. Gotsch
    
    Chairman and Director
    
    March 28, 2008Peter M. Gotsch/s/ Harold J. Wilder
    
    Principal Accounting Officer
    
    March 28, 2008Harold J. Wilder/s/ Andrew W. Code
    
    Director
    
    March 28, 2008Andrew W. Code/s/ Larry Wilton
    
    Director
    
    March 28, 2008Larry Wilton/s/ Maurice P. Andrien, Jr.
    
    Director
    
    March 28, 2008Maurice P. Andrien, Jr./s/ Shael J. Dolman
    
    Director
    
    March 28, 2008Shael J. Dolman
 83