Supplemental Condensed Consolidating Guarantor and Non-Guarantor Financial Information

9 Months Ended

Sep. 30, 2012

Supplemental Condensed Consolidating Guarantor and Non-Guarantor Financial Information

17. Supplemental Condensed Consolidating Guarantor and Non-Guarantor Financial Information:

The 10.875% Senior Notes, of which $200,000 aggregate principal amount were outstanding as of September 30, 2012, were issued by Hillman Group and are fully and unconditionally guaranteed on a joint and several basis by the Company and certain of Company’s wholly owned subsidiaries. The non-guarantor information presented represents our Australian, Canadian and Mexican subsidiaries.

The following financial information presents condensed consolidating statements of comprehensive income, balance sheets, and cash flows for Hillman Group, all guarantor subsidiaries, all non-guarantor subsidiaries and the eliminations necessary to provide the consolidated results for Hillman Companies and subsidiaries. For purposes of this presentation, we have accounted for investments in our subsidiaries using the equity method of accounting. The principal consolidating adjustments eliminate investment in subsidiary and intercompany balances and transactions.

Condensed Consolidating Statements of Comprehensive Income (Unaudited)

For the three months ended September 30, 2012

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
Net sales	$	—		$	137,215		$	5,992		$	4,962		$	—		$	148,169
Cost of sales		—			64,826			4,590			3,898			(23	)		73,291
Selling, general and administrative expenses		137			47,872			949			1,854			—			50,812
Acquisition and integration expense		—			343			—			—			—			343
Depreciation		—			4,905			20			20			—			4,945
Amortization		4,515			853			—			98			—			5,466
Intercompany administrative (income) expense		—			(87	)		—			87			—			—
Management fees to related party		—			122			—			—			—			122
Other (income) expense, net		(166	)		284			(10	)		(499	)		—			(391	)
Income (loss) from operations		(4,486	)		18,097			443			(496	)		23			13,581
Intercompany interest (income) expense		(3,058	)		3,058			—			—			—			—
Interest expense, net		(43	)		10,305			—			4			—			10,266
Interest expense on junior subordinated debentures		3,152			—			—			—			—			3,152
Investment income on trust common securities		(95	)		—			—			—			—			(95	)
Income (loss) before equity in subsidiaries’ income		(4,442	)		4,734			443			(500	)		23			258
Equity in subsidiaries’ income (loss)		4,173			(172	)		—			—			(4,001	)		—
Income (loss) before income taxes		(269	)		4,562			443			(500	)		(3,978	)		258
Income tax provision (benefit)		(1,353	)		389			195			(80	)		—			(849	)
Net income (loss)	$	1,084		$	4,173		$	248		$	(420	)	$	(3,978	)	$	1,107
Other comprehensive income (loss):
Foreign currency translation adjustments		—			—			—			697			—			697
Total comprehensive income (loss)	$	1,084		$	4,173		$	248		$	277		$	(3,978	)	$	1,804

Condensed Consolidating Statements of Comprehensive Income (Unaudited)

For the three months ended September 30, 2011

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
Net sales	$	—		$	121,990		$	10,113		$	5,474		$	—		$	137,577
Cost of sales		—			60,113			5,444			3,188			(60	)		68,685
Selling, general and administrative expenses		(256	)		38,437			1,394			1,870			—			41,445
Acquisition and integration expense		—			305			—			27			—			332
Depreciation		—			4,613			959			18			—			5,590
Amortization		4,608			206			483			—			—			5,297
Intercompany administrative (income) expense		—			(60	)		—			58			2			—
Management and transaction fees to related party		—			55			—			—			—			55
Other (income) expense, net		256			76			(2	)		990			(2	)		1,318
Income (loss) from operations		(4,608	)		18,245			1,835			(677	)		60			14,855
Intercompany interest (income) expense		(3,058	)		3,058			—			—			—			—
Interest expense, net		(106	)		10,113			—			—			—			10,007
Interest expense on junior subordinated debentures		3,152			—			—			—			—			3,152
Investment income on trust common securities		(95	)		—			—			—			—			(95	)
Income (loss) before equity in subsidiaries’ income		(4,501	)		5,074			1,835			(677	)		60			1,791
Equity in subsidiaries’ income (loss)		5,650			576			—			—			(6,226	)		—
Income (loss) before income taxes		1,149			5,650			1,835			(677	)		(6,166	)		1,791
Income tax provision (benefit)		(245	)		—			755			(173	)		—			337
Net income (loss)	$	1,394		$	5,650		$	1,080		$	(504	)	$	(6,166	)	$	1,454
Other comprehensive income (loss):
Foreign currency translation adjustments		—			—			—			(157	)		—			(157	)
Total comprehensive income (loss)	$	1,394		$	5,650		$	1,080		$	(661	)	$	(6,166	)	$	1,297

Condensed Consolidating Statements of Comprehensive Income (Unaudited)

For the nine months ended September 30, 2012

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
Net sales	$	—		$	393,564		$	15,616		$	14,603		$	—		$	423,783
Cost of sales		—			188,111			11,946			9,771			2			209,830
Selling, general and administrative expenses		305			134,372			2,755			5,474			—			142,906
Acquisition and integration expense		—			807			—			—			—			807
Depreciation		—			16,321			70			61			—			16,452
Amortization		13,544			2,526			—			296			—			16,366
Intercompany administrative (income) expense		—			(260	)		—			260			—			—
Management fees to related party		—			122			—			—			—			122
Other (income) expense, net		(334	)		757			(11	)		(469	)		—			(57	)
Income (loss) from operations		(13,515	)		50,808			856			(790	)		(2	)		37,357
Intercompany interest (income) expense		(9,174	)		9,174			—			—			—			—
Interest expense, net		(235	)		30,824			—			4			—			30,593
Interest expense on junior subordinated debentures		9,457			—			—			—			—			9,457
Investment income on trust common securities		(284	)		—			—			—			—			(284	)
Income (loss) before equity in subsidiaries’ income		(13,279	)		10,810			856			(794	)		(2	)		(2,409	)
Equity in subsidiaries’ income (loss)		9,383			(232	)		—			—			(9,151	)		—
Income (loss) before income taxes		(3,896	)		10,578			856			(794	)		(9,153	)		(2,409	)
Income tax provision (benefit)		(3,474	)		1,195			393			(99	)		—			(1,985	)
Net income (loss)	$	(422	)	$	9,383		$	463		$	(695	)	$	(9,153	)	$	(424	)
Other comprehensive income (loss):
Foreign currency translation adjustments		—			—			—			1,186			—			1,186
Total comprehensive income (loss)	$	(422	)	$	9,383		$	463		$	491		$	(9,153	)	$	762

Condensed Consolidating Statements of Comprehensive Income (Unaudited)

For the nine months ended September 30, 2011

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group,  Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
Net sales	$	—		$	340,300		$	29,992		$	13,975		$	—		$	384,267
Cost of sales		—			167,675			15,038			7,957			(104	)		190,566
Selling, general and administrative expenses		(124	)		113,497			7,369			5,070			—			125,812
Acquisition and integration expense		—			1,951			—			161			—			2,112
Depreciation		—			13,495			2,282			54			—			15,831
Amortization		13,825			326			1,223			—			—			15,374
Intercompany administrative (income) expense		—			(180	)		—			178			2			—
Management and transaction fees to related party		—			55			—			—			—			55
Other (income) expense, net		124			158			—			600			(2	)		880
Income (loss) from operations		(13,825	)		43,323			4,080			(45	)		104			33,637
Intercompany interest (income) expense		(9,174	)		9,174			—			—			—			—
Interest expense, net		(319	)		30,852			(1	)		—			—			30,532
Interest expense on junior subordinated debentures		9,457			—			—			—			—			9,457
Investment income on trust common securities		(284	)		—			—			—			—			(284	)
Income (loss) before equity in subsidiaries’ income		(13,505	)		3,297			4,081			(45	)		104			(6,068	)
Equity in subsidiaries’ income (loss)		5,788			2,491			—			—			(8,279	)		—
Income (loss) before income taxes		(7,717	)		5,788			4,081			(45	)		(8,175	)		(6,068	)
Income tax provision (benefit)		(3,317	)		—			1,462			83			—			(1,772	)
Net income (loss)	$	(4,400	)	$	5,788		$	2,619		$	(128	)	$	(8,175	)	$	(4,296	)
Other comprehensive income (loss):
Foreign currency translation adjustments		—			—			—			(115	)		—			(115	)
Change in derivative security value		—			624			—			—			—			624
Total comprehensive income (loss)	$	(4,400	)	$	6,412		$	2,619		$	(243	)	$	(8,175	)	$	(3,787	)

Condensed Consolidating Balance Sheet (Unaudited)

As of September 30, 2012

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	1		$	1,893	$	989		$	2,267		$	—		$	5,150
Restricted investments		762			—		—			—			—			762
Accounts receivable		—			80,536		5,973			(9,494	)		—			77,015
Inventories		—			109,885		4,594			4,682			(262	)		118,899
Deferred income taxes		7,743			1,744		612			230			(799	)		9,530
Other current assets		—			5,017		135			1,955			—			7,107
Total current assets		8,506			199,075		12,303			(360	)		(1,061	)		218,463
Intercompany notes receivable		105,446			—		—			—			(105,446	)		—
Intercompany interest receivable		9,174			—		—			—			(9,174	)		—
Investments in subsidiaries		(643,005	)		26,452		—			—			616,553			—
Property and equipment		—			66,493		203			358			—			67,054
Goodwill		419,752			24,937		58			11,674			280			456,701
Other intangibles		316,347			46,917		250			8,709			—			372,223
Restricted investments		3,362			—		—			—			—			3,362
Deferred income taxes		25,340			14		(479	)		866			(25,741	)		—
Deferred financing fees		—			11,099		—			—			—			11,099
Investment in trust common securities		3,261			—		—			—			—			3,261
Other assets		—			2,725		25			717			—			3,467
Total assets	$	248,183		$	377,712	$	12,360		$	21,964		$	475,411		$	1,135,630
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	—		$	32,593	$	551		$	298		$	—		$	33,442
Current portion of senior term loans		—			3,200		—			—			—			3,200
Current portion of capitalized lease and other obligations		—			62		—			—			—			62
Interest payable on junior subordinated debentures		1,019			—		—			—			—			1,019
Accrued expenses:
Salaries and wages		—			4,633		108			210			—			4,951
Pricing allowances		—			5,554		2			846			—			6,402
Income and other taxes		(356	)		2,514		118			502			—			2,778
Interest		—			7,659		—			—			—			7,659
Deferred compensation		762			—		—			—			—			762
Other accrued expenses		—			14,466		38			240			—			14,744
Total current liabilities		1,425			70,681		817			2,096			—			75,019

Condensed Consolidating Balance Sheet (Unaudited)

As of September 30, 2012

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc.			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
LIABILITIES AND STOCKHOLDERS’ EQUITY(CONTINUED)
Intercompany debt payable		—			105,446			—		—			(105,446	)		—
Intercompany interest payable		—			9,174			—		—			(9,174	)		—
Long term senior term loans		—			308,431			—		—			—			308,431
Bank revolving credit		—			12,000			—		—			—			12,000
Long term portion of capitalized leases		—			172			—		—			—			172
Long term senior notes		—			203,866			—		—			—			203,866
Junior subordinated debentures		115,176			—			—		—			—			115,176
Deferred compensation		3,362			—			—		—			—			3,362
Deferred income taxes, net		143,621			—			199		3,488			(26,540	)		120,768
Other non-current liabilities		—			5,280			—		—			—			5,280
Total liabilities		263,584			715,050			1,016		5,584			(141,160	)		844,074
Common stock with put options:
Common stock, $.01 par, 5,000 shares authorized, 198.3issued and outstanding at September 30, 2012		12,247			—			—		—			—			12,247
Commitments and Contingencies
Stockholders’ Equity:
Preferred Stock:
Preferred stock, $.01 par, 5,000 shares authorized, noneissued and outstanding at September 30, 2012		—			—			—		—			—			—
Common Stock:
Common stock, $.01 par, 5,000 shares authorized, 4,801.7 issued and outstanding at September 30, 2012		—			—			50		—			(50	)		—
Additional paid-in capital		118,378			(132,394	)		10,306		16,437			283,817			296,544
Accumulated deficit		(146,026	)		(204,944	)		988		(582	)		332,323			(18,241	)
Accumulated other comprehensive income		—			—			—		525			481			1,006
Total stockholders’ equity		(27,648	)		(337,338	)		11,344		16,380			616,571			279,309
Total liabilities and stockholders’ equity	$	248,183		$	377,712		$	12,360	$	21,964		$	475,411		$	1,135,630

Condensed Consolidating Balance Sheet (Unaudited)

As of December 31, 2011

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	1		$	8,852	$	547		$	2,627		$	—		$	12,027
Restricted investments		364			—		—			—			—			364
Accounts receivable		—			59,429		1,273			2,863			—			63,565
Inventories		—			95,757		5,117			3,361			(260	)		103,975
Deferred income taxes		8,176			1,676		587			211			(742	)		9,908
Other current assets		—			10,620		3,976			(8,950	)		—			5,646
Total current assets		8,541			176,334		11,500			112			(1,002	)		195,485
Intercompany notes receivable		105,446			—		—			—			(105,446	)		—
Investments in subsidiaries		(628,481	)		91,378		—			—			537,103			—
Property and equipment		—			65,897		174			271			—			66,342
Goodwill		419,752			26,409		58			10,944			280			457,443
Other intangibles		329,891			47,655		250			8,406			—			386,202
Restricted investments		3,390			—		—			—			—			3,390
Deferred income taxes		28,200			321		(108	)		561			(28,974	)		—
Deferred financing fees		—			13,055		—			—			—			13,055
Investment in trust common securities		3,261			—		—			—			—			3,261
Other assets		—			1,676		25			972			—			2,673
Total assets	$	270,000		$	422,725	$	11,899		$	21,266		$	401,961		$	1,127,851
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	—		$	29,997	$	655		$	621		$	—		$	31,273
Current portion of senior term loans		—			3,200		—			—			—			3,200
Current portion of capitalized lease and other obligations		—			31		—			—			—			31
Additional acquisition consideration		—			12,387		—			—			—			12,387
Accrued expenses:
Salaries and wages		—			5,303		110			215			—			5,628
Pricing allowances		—			5,291		—			437			—			5,728
Income and other taxes		(549	)		2,342		15			445			—			2,253
Interest		—			2,203		—			—			—			2,203
Deferred compensation		364			—		—			—			—			364
Other accrued expenses		—			8,762		39			406			—			9,207
Total current liabilities		(185	)		69,516		819			2,124			—			72,274

Condensed Consolidating Balance Sheet (Unaudited)

As of December 31, 2011

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc.			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Consol- idating Adjust - ments			Consolidated
LIABILITIES AND STOCKHOLDERS’ EQUITY(CONTINUED)
Intercompany debt payable		—			105,446			—		—			(105,446	)		—
Long term senior term loans		—			310,550			—		—			—			310,550
Long term portion of capitalized lease and other obligations		—			103			—		—			—			103
Long term senior notes		—			204,248			—		—			—			204,248
Junior subordinated debentures		115,411			—			—		—			—			115,411
Deferred compensation		3,390			—			—		—			—			3,390
Deferred income taxes, net		149,704			448			199		3,253			(29,716	)		123,888
Other non-current liabilities		—			7,193			—		—			—			7,193
Total liabilities		268,320			697,504			1,018		5,377			(135,162	)		837,057
Common stock with put options:
Common stock, $.01 par, 5,000 shares authorized, 198.4 issued and outstanding at December 31, 2011		12,247			—			—		—			—			12,247
Commitments and Contingencies
Stockholders’ Equity:
Preferred Stock:
Preferred stock, $.01 par, 5,000 shares authorized,none issued and outstanding at December 31, 2011		—			—			—		—			—			—
Common Stock:
Common stock, $.01 par, 5,000 shares authorized, 4,801.6 issued and outstanding at December 31, 2011		—			—			50		—			(50	)		—
Additional paid-in capital		117,221			(68,624	)		10,306		16,437			221,204			296,544
Accumulated deficit		(127,788	)		(206,155	)		525		113			315,488			(17,817	)
Accumulated other comprehensive loss		—			—			—		(661	)		481			(180	)
Total stockholders’ equity		(10,567	)		(274,779	)		10,881		15,889			537,123			278,547
Total liabilities and stockholders’ equity	$	270,000		$	422,725		$	11,899	$	21,266		$	401,961		$	1,127,851

Condensed Consolidating Statement of Cash Flows (Unaudited)

For the nine months ended September 30, 2012

(Amounts in thousands)

	Guarantors The Hillman Companies, Inc.			Issuer The Hillman Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust- ments			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(9,805	)	$	9,615		$	463		$	(695	)	$	(2	)	$	(424	)
Adjustments to reconcile net income (loss) to net cash providedby (used for) operating activities:
Depreciation and amortization		13,544			18,847			70			357			—			32,818
Dispositions of property and equipment		—			270			4			—			—			274
Deferred income tax provision (benefit)		(2,790	)		(72	)		346			(89	)		—			(2,605	)
Deferred financing and original issue discount amortization		(235	)		1,851			—			—			—			1,616
Other non-cash interest and change in value of interest rate swap		—			(578	)		—			—			—			(578	)
Changes in operating items:
Accounts receivable		—			(11,712	)		(905	)		(783	)		—			(13,400	)
Inventories		—			(14,531	)		523			(1,321	)		2			(15,327	)
Other assets		—			(4,791	)		46			2,490			—			(2,255	)
Accounts payable		—			2,596			(104	)		(323	)		—			2,169
Interest payable on junior subordinated debentures		1,019			—			—			—			—			1,019
Other accrued liabilities		194			20,099			102			295			(9,175	)		11,515
Other items, net		(1,927	)		(8,673	)		18			(153	)		9,175			(1,560	)
Net cash provided by (used for) operating activities		—			12,921			563			(222	)		—			13,262
Cash flows from investing activities:
Proceeds from sale of property and equipment		—			—			3			—			—			3
Capital expenditures		—			(17,193	)		(124	)		(138	)		—			(17,455	)
Net cash used for investing activities		—			(17,193	)		(121	)		(138	)		—			(17,452	)
Cash flows from financing activities:
Repayments of senior term loans		—			(2,400	)		—			—			—			(2,400	)
Borrowings of revolving credit loans		—			19,000			—			—			—			19,000
Repayments of revolving credit loans		—			(7,000	)		—			—			—			(7,000	)
Payment of additional acquisition consideration		—			(12,387	)		—			—			—			(12,387	)
Borrowings of capitalized lease obligations		—			130			—			—			—			130
Principal payments under capitalized lease obligations		—			(30	)		—			—			—			(30	)
Net cash used for financing activities		—			(2,687	)		—			—			—			(2,687	)
Net (decrease) increase in cash and cash equivalents		—			(6,959	)		442			(360	)		—			(6,877	)
Cash and cash equivalents at beginning of period		1			8,852			547			2,627			—			12,027
Cash and cash equivalents at end of period	$	1		$	1,893		$	989		$	2,267		$	—		$	5,150

Condensed Consolidating Statement of Cash Flows (Unaudited)

For the nine months ended September 30, 2011

(Amounts in thousands)

	Guarantors The  Hillman Companies, Inc.			Issuer The  Hillman Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consol- idating Adjust- ments			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(10,188	)	$	3,297		$	2,619		$	(128	)	$	104		$	(4,296	)
Adjustments to reconcile net loss to net cash (used for)provided by operating activities:
Depreciation and amortization		13,825			13,821			3,505			54			—			31,205
Dispositions of property and equipment		—			42			11			—			—			53
Deferred income tax provision (benefit)		(3,586	)		(425	)		2,288			(113	)		—			(1,836	)
Deferred financing and original issue discount amortization		(320	)		1,802			—			—			—			1,482
Other non-cash interest and change in value of interest rate swap		—			1,274			—			—			—			1,274
Changes in operating items:
Accounts receivable		—			(14,839	)		1,463			(1,601	)		—			(14,977	)
Inventories		—			(5,076	)		5,792			(56	)		(104	)		556
Other assets		—			1,145			(3,778	)		1,311			—			(1,322	)
Accounts payable		—			186			(379	)		(37	)		—			(230	)
Other accrued liabilities		(195	)		14,247			(1,468	)		445			(9,175	)		3,854
Other items, net		464			(557	)		(8,980	)		(101	)		9,175			1
Net cash provided by (used for) operating activities		—			14,917			1,073			(226	)		—			15,764
Cash flows from investing activities:
TagWorks acquisition		—			(40,359	)		—			—			—			(40,359	)
Capital expenditures		—			(12,866	)		(522	)		(92	)		—			(13,480	)
Net cash used for investing activities		—			(53,225	)		(522	)		(92	)		—			(53,839	)
Cash flows from financing activities:
Repayments of senior term loans		—			(2,175	)		—			—			—			(2,175	)
Borrowings of revolving credit loans		—			9,444			—			—			—			9,444
Repayments of revolving credit loans		—			(14,444	)		—			—			—			(14,444	)
Principal payments under capitalized lease obligations		—			(22	)		—			—			—			(22	)
Borrowings of senior notes		—			50,000			—			—			—			50,000
Premium on senior notes		—			4,625			—			—			—			4,625
Financing fees, net		—			(2,622	)		—			—			—			(2,622	)
Net cash provided by financing activities		—			44,806			—			—			—			44,806
Net (decrease) increase in cash and cash equivalents		—			6,498			551			(318	)		—			6,731
Cash and cash equivalents at beginning of period		1			5,166			1,119			1,299			—			7,585
Cash and cash equivalents at end of period	$	1		$	11,664		$	1,670		$	981		$	—		$	14,316