Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 3, 2022

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 2022
OR
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 001-39609
Hillman Solutions Corp.
(Exact name of registrant as specified in its charter)
Delaware 85-2096734
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
10590 Hamilton Avenue 45231
Cincinnati , Ohio
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (513851-4900
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share HLMN The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. (Check one):
Large accelerated filer      Accelerated filer  
Non-accelerated filer  
  (Do not check if a smaller reporting company)
   Smaller reporting company  
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
On November 2, 2022, 194,476,074 shares of common stock, par value $0.0001 per share, were outstanding.


Table of Contents
HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
INDEX
 
PART I. FINANCIAL INFORMATION PAGE
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

Page 2 

Table of Contents
HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands, except per share amounts)

  September 24,
2022
December 25,
2021
ASSETS
Current assets:
Cash and cash equivalents $ 29,228  $ 14,605 
Accounts receivable, net of allowances of $2,446 ($2,891 - 2021)
126,138  107,212 
Inventories, net 534,970  533,530 
Other current assets 25,852  12,962 
Total current assets 716,188  668,309 
Property and equipment, net of accumulated depreciation of $320,767 ($284,069 - 2021)
181,260  174,312 
Goodwill 823,626  825,371 
Other intangibles, net of accumulated amortization of $398,638 ($352,695 - 2021)
749,126  794,700 
Operating lease right of use assets 78,220  82,269 
Deferred tax assets   1,323 
Other assets 26,698  16,638 
Total assets $ 2,575,118  $ 2,562,922 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 150,620  $ 186,126 
Current portion of debt and finance lease liabilities 12,805  11,404 
Current portion of operating lease liabilities 12,868  13,088 
Accrued expenses:
Salaries and wages 16,496  8,606 
Pricing allowances 9,861  10,672 
Income and other taxes 3,726  4,829 
Interest 5,236  1,519 
Other accrued liabilities 57,210  41,052 
Total current liabilities 268,822  277,296 
Long-term debt 913,815  906,531 
Deferred tax liabilities 141,471  137,764 
Operating lease liabilities 72,880  74,476 
Other non-current liabilities 11,310  16,760 
Total liabilities $ 1,408,298  $ 1,412,827 
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, $0.0001 par, 500,000,000 shares authorized, 194,394,767 issued and outstanding at September 24, 2022 and 194,083,625 issued and 193,995,320 outstanding at December 25, 2021
20  20 
Additional paid-in capital 1,400,084  1,387,410 
Accumulated deficit (212,718) (210,181)
Accumulated other comprehensive income (loss) (20,566) (27,154)
Total stockholders' equity 1,166,820  1,150,095 
Total liabilities and stockholders' equity $ 2,575,118  $ 2,562,922 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Page 3 

Table of Contents
HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(dollars in thousands, except per share amounts)


Thirteen Weeks Ended
September 24, 2022
Thirteen Weeks Ended
September 25, 2021
Thirty-nine Weeks Ended
September 24, 2022
Thirty-nine Weeks Ended
September 25, 2021
Net sales $ 378,538  $ 364,480  $ 1,135,665  $ 1,081,476 
Cost of sales (exclusive of depreciation and amortization shown separately below) 214,802  236,999  648,221  654,264 
Selling, general and administrative expenses 133,246  110,447  366,013  325,288 
Depreciation 14,312  14,454  41,738  46,065 
Amortization 15,557  15,504  46,644  45,827 
Management fees to related party   56    270 
Other expense (income), net 1,070  315  (3,124) (2,232)
Income (loss) from operations (449) (13,295) 36,173  11,994 
Loss on change in fair value of warrant liability   3,990    3,990 
Interest expense, net 14,696  11,801  38,857  49,979 
Interest expense on junior subordinated debentures   1,471    7,775 
(Gain) loss on mark-to-market adjustments   (261)   (1,685)
Refinancing charges   8,070    8,070 
Investment income on trust common securities   (44)   (233)
Income (loss) before income taxes (15,145) (38,322) (2,684) (55,902)
Income tax provision (benefit) (5,679) (5,798) (147) (11,023)
Net income (loss) $ (9,466) $ (32,524) $ (2,537) $ (44,879)
Basic and diluted income (loss) per share $ (0.05) $ (0.19) $ (0.01) $ (0.38)
Weighted average basic shares outstanding 194,370 168,440 194,171 116,945
Net income (loss) from above $ (9,466) $ (32,524) $ (2,537) $ (44,879)
Other comprehensive income (loss):
Foreign currency translation adjustments (7,834) (4,740) (8,745) 1,575 
Hedging activity 3,811  246  15,333  246 
Total other comprehensive income (loss) (4,023) (4,494) 6,588  1,821 
Comprehensive income (loss) $ (13,489) $ (37,018) $ 4,051  $ (43,058)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


Page 4 

Table of Contents
HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(dollars in thousands)
  Thirty-nine Weeks Ended
September 24, 2022
Thirty-nine Weeks Ended
September 25, 2021
Cash flows from operating activities:
Net income (loss) $ (2,537) $ (44,879)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 88,382  91,892 
Deferred income taxes 5,670  (21,538)
Deferred financing and original issue discount amortization 2,251  3,036 
Stock-based compensation expense 10,789  8,817 
Increase in fair value of warrant liabilities   3,990 
Write off of deferred financing fees, premiums and discounts associated with debt refinancing   (8,372)
Change in fair value of contingent consideration (2,926) (1,110)
Other non-cash interest and change in fair value of interest rate swap   (1,685)
Changes in operating items:
Accounts receivable, net (19,482) (17,097)
Inventories, net (6,004) (110,065)
Other assets (5,549) 3,003 
Accounts payable (34,648) 12,896 
Other accrued liabilities 27,171  (24,193)
Net cash provided by (used for) operating activities 63,117  (105,305)
Cash flows from investing activities:
Acquisition of business, net of cash received (2,500) (39,102)
Capital expenditures (46,431) (36,955)
Net cash used for investing activities (48,931) (76,057)
Cash flows from financing activities:
Repayments of senior term loans (6,384) (1,072,042)
Borrowings on senior term loans   883,872 
Proceeds from recapitalization of Landcadia, net of transaction costs   455,161 
Proceeds from sale of common stock in PIPE, net of issuance costs   363,301 
Repayments of senior notes   (330,000)
Repayment of Junior Subordinated Debentures   (108,707)
Financing fees   (20,988)
Borrowings on revolving credit loans 161,000  246,000 
Repayments of revolving credit loans (154,000) (244,000)
Principal payments under finance lease obligations (998) (697)
Proceeds from exercise of stock options 1,885  1,761 
Cash payments related to hedging activities (1,421)  
Other financing activities 1,809   
Net cash provided by financing activities 1,891  173,661 
Effect of exchange rate changes on cash (1,454) 610 
Net increase (decrease) in cash and cash equivalents 14,623  (7,091)
Cash and cash equivalents at beginning of period 14,605  21,520 
Cash and cash equivalents at end of period $ 29,228  $ 14,429 
Supplemental disclosure of cash flow information:
Interest paid on junior subordinated debentures, net $   $ 7,542 
Interest paid 30,597  55,624 
Income taxes paid 2,550  1,990 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(dollars in thousands)


Common Stock
Shares (in thousands) Amount Additional Paid-in-capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity
Thirty-nine weeks ended September 24, 2022
Balance at December 25, 2021 193,995  $ 20  $ 1,387,410  $ (210,181) $ (27,154) $ 1,150,095 
Net income (loss) —  —  —  (1,887) —  (1,887)
Stock option activity, stock awards and employee stock purchase plan 53  —  6,018  —  —  6,018 
Hedging activity —  —  —  —  8,413  8,413 
Change in cumulative foreign currency translation adjustment  —  —  —  —  3,735  3,735 
Balance at March 26, 2022 194,048  $ 20  $ 1,393,428  $ (212,068) $ (15,006) $ 1,166,374 
Net income (loss) —  —  —  8,816  —  8,816 
Stock option activity, stock awards and employee stock purchase plan 223  —  3,435  —  —  3,435 
Hedging activity —  —  —  —  3,109  3,109 
Change in cumulative foreign currency translation adjustment  —  —  —  —  (4,646) (4,646)
Balance at June 25, 2022 194,271  $ 20  $ 1,396,863  $ (203,252) $ (16,543) $ 1,177,088 
Net income (loss) —  —  —  (9,466) —  (9,466)
Stock option activity, stock awards and employee stock purchase plan 124  —  3,221  —  —  3,221 
Hedging Activity —  —  —  —  3,811  3,811 
Change in cumulative foreign currency translation adjustment  —  —  —  —  (7,834) (7,834)
Balance at September 24, 2022 194,395  $ 20  $ 1,400,084  $ (212,718) $ (20,566) $ 1,166,820 
Thirty-nine weeks ended September 25, 2021
Balance at December 26, 2020 90,935  $ 9  $ 565,815  $ (171,849) $ (29,388) $ 364,587 
Net income (loss) —  —  —  (8,970) —  (8,970)
Stock option activity, stock awards and employee stock purchase plan 268  —  3,384  —  —  3,384 
Change in cumulative foreign currency translation adjustment  —  —  —  —  2,473  2,473 
Balance at March 27, 2021 91,203  $ 9  $ 569,199  $ (180,819) $ (26,915) $ 361,474 
Net income (loss) —  —  —  (3,385) —  (3,385)
Stock option activity, stock awards and employee stock purchase plan 18  —  1,914  —  —  1,914 
Change in cumulative foreign currency translation adjustment  —  —  —  —  3,842  3,842 
Balance at June 26, 2021 91,221  $ 9  $ 571,113  $ (184,204) $ (23,073) $ 363,845 
Net income (loss) —  —  —  (32,524) —  (32,524)
Stock option activity, stock awards and employee stock purchase plan —  —  5,280  —  —  5,280 
Vesting of restricted shares 88 —  —  —  —  — 
Proceeds from exercise of stock options —  —  —  —  —  — 
Recapitalization of Landcadia, net of issuance costs and fair value of assets and liabilities acquired 58,672  6  378,016  —  —  378,022 
Shares issued to PIPE, net of issuance costs 37,500  4  363,297  —  —  363,301 
Hedging activity —  —  —  —  246  246 
Change in cumulative foreign currency translation adjustment  —  —  —  —  (4,740) (4,740)
Balance at September 25, 2021 187,481  $ 19  $ 1,317,706  $ (216,728) $ (27,567) $ 1,073,430 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 

1. Basis of Presentation:

The accompanying condensed financial statements include the consolidated accounts of the Hillman Solutions Corp. and its wholly-owned subsidiaries (collectively “Hillman” or the “Company”). The accompanying unaudited financial statements include the condensed consolidated accounts of the Company for the thirteen and thirty-nine weeks ended September 24, 2022. Unless the context requires otherwise, references to "Hillman," "we," "us," "our," or "our Company" refer to Hillman Solutions Corp. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

The accompanying unaudited Condensed Consolidated Financial Statements present information in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X. Accordingly, they do not include all information or footnotes required by U.S. generally accepted accounting principles for complete financial statements. Operating results for the thirteen and thirty-nine weeks ended September 24, 2022 do not necessarily indicate the results that may be expected for the full year. For further information, refer to the Consolidated Financial Statements for the year ended December 25, 2021 and notes thereto included in the Form 10-K filed on March 16, 2022 with the Securities and Exchange Commission (“SEC”).

On July 14, 2021, privately held HMAN Group Holdings Inc. ("Old Hillman"), and Landcadia Holdings III, Inc. (“Landcadia” and after the business combination described herein, “New Hillman”), a special purpose acquisition company ("SPAC"), consummated the previously announced business combination (the “Closing”) pursuant to the terms of the Agreement and Plan of Merger, dated as of January 24, 2021 (as amended on March 12, 2021, the "Merger Agreement”) by and among Landcadia, Helios Sun Merger Sub, a wholly-owned subsidiary of Landcadia (“Merger Sub”), HMAN Group Holdings Inc., a Delaware corporation (“Hillman Holdco”) and CCMP Sellers’ Representative, LLC, a Delaware Limited Liability Company in its capacity as the Stockholder Representative thereunder (the “Stockholder Representative”). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Hillman Holdco with Hillman Holdco surviving the merger as a wholly owned subsidiary of New Hillman, which was renamed “Hillman Solutions Corp.” (the “Merger” and together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). Unless the context indicates otherwise, the discussion of the Company and its financial condition and results of operations is with respect to New Hillman following the closing date and Old Hillman prior to the closing date. See Note 3 - Merger Agreement for more information.

“Hillman Solutions Corp.,” “HMAN Group Holdings Inc.,” and “The Hillman Companies, Inc.” are holding companies with no other operations, cash flows, material assets or liabilities other than the equity interests in “The Hillman Group, Inc.,” which is the borrower under our credit facility.

In connection with the closing of the Business Combination on July 14, 2021, Landcadia changed its name from “Landcadia Holdings III, Inc." to “Hillman Solutions Corp.” and the Company’s common stock and warrants began trading on The Nasdaq Stock Market under the trading symbols “HLMN” and “HLMNW”, respectively. As of December 25, 2021, the Company exercised and redeemed all outstanding warrants.

2. Summary of Significant Accounting Policies:
The significant accounting policies should be read in conjunction with the significant accounting policies included in the Form 10-K filed on March 16, 2022 with the SEC.
Use of Estimates in the Preparation of Financial Statements:
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses for the reporting periods. Actual results may differ from these estimates.

Warrant Liabilities:

The Company accounts for the warrants in accordance with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants
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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. The warrants were fully redeemed in the year ended December 25, 2021. See Note 10 - Warrants for additional information.

Revenue Recognition:

Revenue is recognized when control of goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.
The Company offers a variety of sales incentives to its customers primarily in the form of discounts and rebates. Discounts are
recognized in the Condensed Consolidated Financial Statements at the date of the related sale. Rebates are based on the revenue to date and the contractual rebate percentage to be paid. A portion of the cost of the rebate is allocated to each underlying sales transaction. Discounts and rebates are included in the determination of net sales.

The Company also establishes reserves for customer returns and allowances. The reserve is established based on historical rates
of returns and allowances. The reserve is adjusted quarterly based on actual experience. Returns and allowances are included
in the determination of net sales.

The following table displays our disaggregated revenue by product category:

Thirteen weeks ended September 24, 2022
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
Fastening and Hardware $ 210,853  $   $ 39,578  $ 250,431 
Personal Protective 61,000    322  61,322 
Keys and Key Accessories   51,688  1,145  52,833 
Engraving and Resharp   13,944  8  13,952 
Consolidated $ 271,853  $ 65,632  $ 41,053  $ 378,538 
Thirteen weeks ended September 25, 2021
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
Fastening and Hardware $ 189,935  $   $ 34,648  $ 224,583 
Personal Protective 71,521    79  71,600 
Keys and Key Accessories   52,586  778  53,364 
Engraving and Resharp   14,913  20  14,933 
Consolidated $ 261,456  $ 67,499  $ 35,525  $ 364,480 


Thirty-nine weeks ended September 24, 2022
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
Fastening and Hardware $ 625,537  $   $ 121,710  $ 747,247 
Personal Protective 192,573    984  193,557 
Keys and Key Accessories   149,901  2,611  152,512 
Engraving and Resharp   42,315  34  42,349 
Consolidated $ 818,110  $ 192,216  $ 125,339  $ 1,135,665 
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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

Thirty-nine weeks ended September 25, 2021
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
Fastening and Hardware $ 557,745  $   $ 114,565  $ 672,310 
Personal Protective 217,769    270  218,039 
Keys and Key Accessories   144,969  1,345  146,314 
Engraving and Resharp   44,760  53  44,813 
Consolidated $ 775,514  $ 189,729  $ 116,233  $ 1,081,476 


The following table disaggregates our revenue by geographic location:

Thirteen weeks ended September 24, 2022
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
United States $ 265,446  $ 64,372  $   $ 329,818 
Canada 1,941  1,260  41,053  44,254 
Mexico 4,466      4,466 
Consolidated $ 271,853  $ 65,632  $ 41,053  $ 378,538 

Thirteen weeks ended September 25, 2021
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
United States $ 256,407  $ 66,563  $   $ 322,970 
Canada 1,866  936  35,525  38,327 
Mexico 3,183      3,183 
Consolidated $ 261,456  $ 67,499  $ 35,525  $ 364,480 

Thirty-nine weeks ended September 24, 2022
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
United States $ 800,925  $ 189,066  $   $ 989,991 
Canada 5,794  3,150  125,339  134,283 
Mexico 11,391      11,391 
Consolidated $ 818,110  $ 192,216  $ 125,339  $ 1,135,665 

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Thirty-nine weeks ended September 25, 2021
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
United States $ 760,946  $ 187,602  $   $ 948,548 
Canada 5,145  2,127  116,233  123,505 
Mexico 9,423      9,423 
Consolidated $ 775,514  $ 189,729  $ 116,233  $ 1,081,476 


Our revenue by geography is allocated based on the location of our sales operations. Our Hardware and Protective Solutions segment contains sales of Big Time Products personal protective equipment into Canada. Our Robotics and Digital Solutions segment contains sales of MinuteKey Canada.
Hardware and Protective Solutions revenues consist primarily of the delivery of fasteners, anchors, specialty fastening products, and personal protective equipment such as gloves and eye-wear, as well as in-store merchandising services for the related product category.

Robotics and Digital Solutions revenues consist primarily of sales of keys and identification tags through self-service key duplication and engraving kiosks. It also includes our associate-assisted key duplication systems and key accessories.

Canada revenues consist primarily of the delivery to Canadian customers of fasteners and related hardware items, threaded rod, keys, key duplicating systems, accessories, personal protective equipment, and identification items as well as in-store merchandising services for the related product category.

The Company’s performance obligations under its arrangements with customers are providing products, in-store merchandising services, and access to key duplicating and engraving equipment. Generally, the price of the merchandising services and the access to the key duplicating and engraving equipment is included in the price of the related products. Control of products is transferred at the point in time when the customer accepts the goods, which occurs upon delivery of the products. Judgment is required in determining the time at which to recognize revenue for the in-store services and the access to key duplicating and engraving equipment. Revenue is recognized for in-store service and access to key duplicating and engraving equipment as the related products are delivered, which approximates a time-based recognition pattern. Therefore, the entire amount of consideration related to the sale of products, in-store merchandising services, and access to key duplicating and engraving equipment is recognized upon the delivery of the products.

The costs to obtain a contract are insignificant, and generally contract terms do not extend beyond one year. Therefore, these costs are expensed as incurred. Freight and shipping costs and the cost of our in-store merchandising services teams are recognized in selling, general, and administrative expense when control over products is transferred to the customer.

The Company used the practical expedient regarding the existence of a significant financing component as payments are due in less than one year after delivery of the products.

3. Merger Agreement:

On July 14, 2021, the Merger between Old Hillman and Landcadia was consummated. Pursuant to the Merger Agreement, at the closing date of the Merger, the outstanding shares of Old Hillman common stock were converted into 91,220,901 shares of New Hillman common stock as calculated pursuant to the Merger Agreement.

The Merger was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP ("Generally Accepted Accounting Principles"). Under this method of accounting, Landcadia is treated as the “acquired” company for financial reporting purposes.

This determination was based primarily on Old Hillman having the ability to appoint a majority of the initial Board of Directors of the combined entity, Old Hillman's senior management comprising the majority of the senior management of the combined company, and the ongoing operations of Old Hillman comprising the ongoing operations of the combined company.
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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Accordingly, for accounting purposes, the Merger was treated as the equivalent of New Hillman issuing shares for the net assets of Landcadia, accompanied by a recapitalization. The net assets of Landcadia were stated at carrying value, with no goodwill or other intangible assets recorded. The historical statements of the combined entity prior to the Merger are presented as those of Old Hillman with the exception of the shares and par value of equity recast to reflect the exchange ratio on the Closing Date, adjusted on a retroactive basis. A summary of the impact of the reverse recapitalization on the cash, cash equivalents and restricted cash, change in net assets and the change in common shares is included in the tables below.

Landcadia cash and cash equivalents (1)
$ 479,602 
PIPE investment proceeds (2)
375,000
Less cash paid to underwriters and other transaction costs, net of tax(3)
(36,140)
Net change in cash and cash equivalents as a result of recapitalization $ 818,462 
Prepaid expenses and other current assets (1)
132
Accounts payable and other accrued expenses (1)
(81)
Warrant liabilities (1)(4)
(77,190)
Change in net assets as a result of recapitalization $ 741,323 

The change in number of shares outstanding as a result of the reverse recapitalization is summarized as follows:

Common shares issued to New Hillman Shareholders (5)
91,220,901 
Shares issued to SPAC sponsors and public shareholders (6)
58,672,000 
Common shares issued to PIPE investors (2)
37,500,000 
Common Shares outstanding immediately after the Business Combination 187,392,901 

1.These assets and liabilities represent the reported balances as of the Closing Date immediately prior to the Business
Combination. The recapitalization of the assets and liabilities from Landcadia's balance sheet was a non-cash financing
activity.
2.In connection with the Business Combination, Landcadia entered into subscription agreements with certain investors (the “PIPE Investors”), pursuant to which it issued 37,500,000 shares of common stock at $10.00 per share (the “PIPE Shares”) for an aggregate purchase price of $375,000 (the “PIPE Financing”), which closed simultaneously with the consummation of the Business Combination.
3.In connection with the Business Combination, the Company incurred $36,140 of transaction costs, net of tax, consisting of underwriting, legal and other professional fees which were recorded as accumulated deficit as a reduction of proceeds.
4.The warrants acquired in the Merger include (a) redeemable warrants issued by Landcadia and sold as part of the units in the Landcadia IPO (whether they were purchased in the Landcadia IPO or thereafter in the open market), which are exercisable for an aggregate of 16,666,628 shares of common stock at a purchase price of $11.50 per share (the “Public Warrants”) and (b) warrants issued by Landcadia to the sponsors in a private placement simultaneously with the closing of the Landcadia IPO, which are exercisable for an aggregate of 8,000,000 shares of common stock at a purchase price of $11.50 per share (the “Private Placement Warrants”).
5.The Company issued 91,220,901 common shares in exchange for 553,439 Old Hillman common shares resulting in an exchange ratio of 164.83. This exchange ratio was applied to Old Hillman's common shares which further impacted common stock held at par value and additional paid in capital, as well as the calculation of weighted average shares outstanding and loss per common share.
6.The Company issued 50,000,000 shares to the public shareholders and 8,672,000 shares to the SPAC sponsor shareholders at the Closing Date.


4. Recent Accounting Pronouncements:

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which
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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by the new standard.

In January 2021, FASB issued ASU 2021-01, Reference Rate Reform, to expand the scope of ASU 2020-04 by allowing an entity to apply the optional expedients, by stating that a change to the interest rate used for margining, discounting or contract price alignment for a derivative is not considered to be a change to the critical terms of the hedging relationship that requires designation. The entity may apply the contract modification relief provided in ASU 2020-04 and continue to account for the derivative in the same manner that existed prior to the changes resulting from reference rate reform or the discounting transition. The Company is currently evaluating its contracts and the optional expedients provided by the new standard.

On October 28, 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers, which amends Accounting Standards Codification ("ASC") 805 to require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. This update is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to 1) the recognition of an acquired contract liability, and 2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendment is effective on fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact provided by the new standard.

On March 28, 2022, the FASB issued ASU 2022-01, which clarifies the guidance in ASC Topic 815, Derivatives and Hedging on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-12 which established the "last-of-layer" method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the "portfolio layer'' method. Under current guidance, the last-of-layer method enables an entity to apply fair value hedging to a stated amount of a closed portfolio of prepayable financial assets without having to consider prepayment risk or credit risk when measuring those assets. ASU 2022-01 expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and non-prepayable financial assets. The amendment is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact provided by the new standard.


5. Acquisitions:

On April 16, 2021, the Company completed its acquisition of Oz Post International, LLC ("OZCO"), a leading manufacturer of superior quality hardware that offers structural fasteners and connectors used for decks, fences and other outdoor structures, for a total purchase price of $39,834. The Company entered into an amendment ("OZCO Amendment") to the term loan credit agreement dated May 31, 2018 (the "2018 Term Loan"), which provided $35,000 of incremental term loan funds to be used to finance the acquisition. OZCO has business operations throughout North America and its financial results reside in the Company's Hardware and Protective Solutions reportable segment.

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
The following table reconciles the fair value of the acquired assets and assumed liabilities to the total purchase price of OZCO.

Accounts receivable $ 1,341 
Inventory 3,435 
Other current assets 26 
Property and equipment 595
Goodwill 9,093 
Customer relationships 23,500 
Trade names 2,600 
Technology 4,000 
Total assets acquired 44,590 
Less:
Liabilities assumed (4,756)
Total purchase price $ 39,834 

Pro forma financial information has not been presented for OZCO as their associated financial results are insignificant to the financial results of the Company on a standalone basis.

On March 7, 2022, the Company completed its acquisition of the Irvine, California-based Monkey Hook, LLC ("Monkey Hook") for a total purchase price of $2,800, which includes $300 in holdback that remains payable to the seller. Monkey Hook products are designed to hang artwork on drywall where no stud is present. Monkey Hook sells its products throughout North America and its financial results reside in the Company's Hardware and Protective Solutions reportable segment. The total purchase price is preliminary as the Company is in the process of finalizing certain working capital adjustments.

6. Goodwill and Other Intangible Assets:
Goodwill amounts by reportable segment are summarized as follows:
Goodwill at
Acquisitions (1)
Dispositions
Other (2)
Goodwill at
December 25, 2021 September 24, 2022
Hardware and Protective Solutions $ 574,698  $ (158) $   $ 72  $ 574,612 
Robotics and Digital Solutions 220,936        220,936 
Canada 29,737      (1,659) 28,078 
Total $ 825,371  $ (158) $   $ (1,587) $ 823,626 
 
(1)The amount relates to the Ozco acquisition, see Note 5 - Acquisitions for additional information.
(2)The "Other" change to goodwill relates to adjustments resulting from fluctuations in foreign currency exchange rates for the Canada and Mexico reporting units.
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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Other intangibles, net, as of September 24, 2022 and December 25, 2021 consist of the following: 
Estimated
Useful Life
(Years)
September 24, 2022 December 25, 2021
Customer relationships 13 - 20 $ 963,418  $ 965,054 
Trademarks - Indefinite Indefinite 85,242  85,591 
Trademarks - Other 7 - 15 31,387  29,000 
Technology and patents 8 - 12 67,717  67,750 
Intangible assets, gross