v3.22.2.2
Commitments and Contingencies
9 Months Ended
Sep. 24, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
The Company self-insures its general liability including product liability, automotive and workers' compensation losses up to $500 per occurrence. Catastrophic coverage has been purchased from third party insurers for occurrences up to and aggregate limits of $60,000. The two risk areas involving the most significant accounting estimates are workers' compensation and automotive liability. Actuarial valuations performed by the Company's outside risk insurance expert were used by the Company's management to form the basis for workers' compensation and automotive liability loss reserves. The actuary contemplated the Company's specific loss history, actual claims reported, and industry trends among statistical and other factors to estimate the range of reserves required. Risk insurance reserves are comprised of specific reserves for individual claims and additional amounts expected for development of these claims, as well as for incurred but not yet reported claims. The Company believes that the liability of approximately $2,497 recorded for such risks is adequate as of September 24, 2022.

As of September 24, 2022, the Company has provided certain vendors and insurers letters of credit aggregating to $32,790 related to our product purchases and insurance coverage for product liability, workers’ compensation, and general liability.

The Company self-insures group health claims up to an annual stop loss limit of $300 per participant. Historical group insurance loss experience forms the basis for the recognition of group health insurance reserves. Provisions for losses expected under these programs are recorded based on an analysis of historical insurance claim data and certain actuarial assumptions. The Company believes that the liability of approximately $2,650 recorded for such risks is adequate as of September 24, 2022.
The Company imports large quantities of fastener products which are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements and bilateral actions. The Company could be subject to the assessment of additional duties and interest if it or its suppliers fail to comply with customs regulations or similar laws. The U.S. Department of Commerce has received requests from petitioners to conduct administrative reviews of compliance with anti-dumping duty and countervailing duty laws for certain nail products sourced from Asian countries. The Company sourced products under review from vendors in China and Taiwan during the periods selected for review. The Company accrues for the duty expense once it is determined to be probable and the amount can be reasonably estimated.
On June 1, 2021, Hy-Ko Products Company LLC ("Hy-Ko"), a manufacturer of key duplication machines, filed a complaint for patent infringement against Hillman in the United States District Court for the Eastern District of Texas (Marshall Division). The case was assigned Civil Action No. 2:21-cv-0197. Hy-Ko's complaint alleges that Hillman's KeyKrafter and PKOR key
duplication machines infringe U.S. Patent Nos. 9,656,332, 9,682,432, 9,687,920, and 10,421,133, which are assigned to Hy-Ko, and seeks damages and injunctive relief against Hillman. Hy-Ko's complaint additionally contains allegations of unfair competition under the Federal Lanham Act and conversion, as well as a cause of action for "replevin" for return of alleged Hy-Ko proprietary information.

On September 19, 2022, Hy-Ko and Hillman filed a joint stipulation dismissing the 9,682,432 patent from the litigation. In addition, at the Court pre-trial conference on September 26, 2022, Hy-Ko advised the Court that it was no longer pursuing its allegations related to the 9,656,332 patent, thus leaving two patents (the 9,687,920 and 10,421,133 patents) for trial.

Also on September 26, 2022, the Court granted Hillman’s motion for summary judgment dismissing Hy-Ko’s Federal Lanham Act claim.

On October 7, 2022, following a jury trial commencing October 3, 2022, the jury rendered a verdict finding that Hillman infringed Hy-Ko U.S. Patent Nos. 9,687,920, and 10,421,133, but also found that there was no willfulness in the infringement. The jury awarded Hy-Ko $16.0 million in damages, representing a one-time lump sum royalty payment, which was recorded in the thirteen weeks ended September 24, 2022.

Additionally, the jury rendered a verdict rejecting Hy-Ko’s conversion claim.

The Company disagrees with the infringement finding and the damages award, but believes this verdict will not have any impact on its ongoing business operations.