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 ~~25, 2021~~24, 2022

☐ 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: (513) 851-4900

Securities registered pursuant to Section ~~12(g)~~12(b) of the Act: ~~None~~


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, ~~and posted on its corporate Web site, if any,~~ 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 ☒

~~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~~
~~Warrants to purchase one share of common stock, each at an exercise price of $11.50 per share~~	~~HLMNW~~	~~The Nasdaq Stock Market LLC~~

On November ~~3, 2021, 187,569,511~~2, 2022, 194,476,074 shares of common stock, par value $0.0001 per share, were ~~issued and~~ outstanding.

Table of Contents

HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

INDEX


PART I. FINANCIAL INFORMATION		PAGE

Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Comprehensive Income (Loss ~~(Income)~~ ~~Loss~~)	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statement of Stockholders' Equity	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3128
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4743
Item 4.	Controls and Procedures	4743
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4844
Item 1A.	Risk Factors	4844
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4844
Item 3.	Defaults upon Senior Securities	4844
Item 4.	Mine Safety Disclosures	4844
Item 5.	Other Information	4844
Item 6.	Exhibits	4844
SIGNATURES		5046

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Table of Contents

HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands, except per share amounts)


		September 25, 2021		December 26, 2020			September 24, 2022		December 25, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	14,429	$	21,520	Cash and cash equivalents	$	29,228	$	14,605
Accounts receivable, net of allowances of $2,210 ($2,395 - 2020)		139,716		121,228
Accounts receivable, net of allowances of $2,446 ($2,891 - 2021)						Accounts receivable, net of allowances of $2,446 ($2,891 - 2021)	126,138		107,212
Inventories, net	Inventories, net	506,397		391,679		Inventories, net	534,970		533,530
Other current assets	Other current assets	15,600		19,280		Other current assets	25,852		12,962
Total current assets	Total current assets	676,142		553,707		Total current assets	716,188		668,309
Property and equipment, net of accumulated depreciation of $273,966 ($236,031 - 2020)		173,170		182,674
Property and equipment, net of accumulated depreciation of $320,767 ($284,069 - 2021)						Property and equipment, net of accumulated depreciation of $320,767 ($284,069 - 2021)	181,260		174,312
Goodwill	Goodwill	825,981		816,200		Goodwill	823,626		825,371
Other intangibles, net of accumulated amortization of $337,361 ($291,434 - 2020)		810,559		825,966
Other intangibles, net of accumulated amortization of $398,638 ($352,695 - 2021)						Other intangibles, net of accumulated amortization of $398,638 ($352,695 - 2021)	749,126		794,700
Operating lease right of use assets	Operating lease right of use assets	84,871		76,820		Operating lease right of use assets	78,220		82,269
Deferred tax assets	Deferred tax assets	2,016		2,075		Deferred tax assets	—		1,323
Other assets	Other assets	14,295		11,176		Other assets	26,698		16,638
Total assets	Total assets	$	2,587,034	$	2,468,618	Total assets	$	2,575,118	$	2,562,922
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	219,397	$	201,461	Accounts payable	$	150,620	$	186,126
Current portion of debt and capital leases		7,174		11,481
Current portion of debt and finance lease liabilities						Current portion of debt and finance lease liabilities	12,805		11,404
Current portion of operating lease liabilities	Current portion of operating lease liabilities	12,680		12,168		Current portion of operating lease liabilities	12,868		13,088
Accrued expenses:	Accrued expenses:					Accrued expenses:
Salaries and wages	Salaries and wages	11,893		29,800		Salaries and wages	16,496		8,606
Pricing allowances	Pricing allowances	9,878		6,422		Pricing allowances	9,861		10,672
Income and other taxes	Income and other taxes	4,252		5,986		Income and other taxes	3,726		4,829
Interest	Interest	940		12,988		Interest	5,236		1,519
Other accrued expenses		36,613		31,605
Other accrued liabilities						Other accrued liabilities	57,210		41,052
Total current liabilities	Total current liabilities	302,827		311,911		Total current liabilities	268,822		277,296
Long term debt		890,623		1,535,508
Warrant liabilities		81,180		—
Long-term debt						Long-term debt	913,815		906,531
Deferred tax liabilities	Deferred tax liabilities	139,547		156,118		Deferred tax liabilities	141,471		137,764
Operating lease liabilities	Operating lease liabilities	77,238		68,934		Operating lease liabilities	72,880		74,476
Other non-current liabilities	Other non-current liabilities	22,189		31,560		Other non-current liabilities	11,310		16,760
Total liabilities	Total liabilities	$	1,513,604	$	2,104,031	Total liabilities	$	1,408,298	$	1,412,827
Commitments and contingencies (Note 6)		0		0
Stockholders' Equity:
Common stock, $0.0001 par, 500,000,000 shares authorized, 187,569,511 issued and 187,481,206 outstanding at September 25, 2021 and 90,934,930 issued and outstanding at December 26, 2020		19		9
Commitments and contingencies (Note 7)						Commitments and contingencies (Note 7)
Stockholders' equity:						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						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	Additional paid-in capital	1,317,706		565,815		Additional paid-in capital	1,400,084		1,387,410
Accumulated deficit	Accumulated deficit	(216,728)		(171,849)		Accumulated deficit	(212,718)		(210,181)
Accumulated other comprehensive loss		(27,567)		(29,388)
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	(20,566)		(27,154)
Total stockholders' equity	Total stockholders' equity	1,073,430		364,587		Total stockholders' equity	1,166,820		1,150,095
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	2,587,034	$	2,468,618	Total liabilities and stockholders' equity	$	2,575,118	$	2,562,922

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

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(dollars in thousands, except per share amounts)


		Thirteen Weeks Ended September 25, 2021		Thirteen Weeks Ended September 26, 2020		Thirty-nine Weeks Ended September 25, 2021		Thirty-nine Weeks Ended September 26, 2020			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	Net sales	$	364,480	$	398,680	$	1,081,476	$	1,041,226	Net sales	$	378,538	$	364,480	$	1,135,665	$	1,081,476
Cost of sales (exclusive of depreciation and amortization shown separately below)	Cost of sales (exclusive of depreciation and amortization shown separately below)	236,999		227,481		654,264		590,294		Cost of sales (exclusive of depreciation and amortization shown separately below)	214,802		236,999		648,221		654,264
Selling, general and administrative expenses	Selling, general and administrative expenses	110,447		107,333		325,288		292,056		Selling, general and administrative expenses	133,246		110,447		366,013		325,288
Depreciation	Depreciation	14,454		15,926		46,065		50,673		Depreciation	14,312		14,454		41,738		46,065
Amortization	Amortization	15,504		14,883		45,827		44,596		Amortization	15,557		15,504		46,644		45,827
Management fees to related party	Management fees to related party	56		130		270		451		Management fees to related party	—		56		—		270
Other (income) expense		315		(2,175)		(2,232)		(2,120)
Other expense (income), net										Other expense (income), net	1,070		315		(3,124)		(2,232)
Income (loss) from operations	Income (loss) from operations	(13,295)		35,102		11,994		65,276		Income (loss) from operations	(449)		(13,295)		36,173		11,994
Loss on change in fair value of warrant liability	Loss on change in fair value of warrant liability	3,990		—		3,990		—		Loss on change in fair value of warrant liability	—		3,990		—		3,990
Interest expense, net	Interest expense, net	11,801		20,688		49,979		67,746		Interest expense, net	14,696		11,801		38,857		49,979
Interest expense on junior subordinated debentures	Interest expense on junior subordinated debentures	1,471		3,219		7,775		9,555		Interest expense on junior subordinated debentures	—		1,471		—		7,775
(Gain) loss on mark-to-market adjustments	(Gain) loss on mark-to-market adjustments	(261)		(773)		(1,685)		1,169		(Gain) loss on mark-to-market adjustments	—		(261)		—		(1,685)
Refinancing charges	Refinancing charges	8,070		—		8,070		—		Refinancing charges	—		8,070		—		8,070
Investment income on trust common securities	Investment income on trust common securities	(44)		(94)		(233)		(283)		Investment income on trust common securities	—		(44)		—		(233)
Income (loss) before income taxes	Income (loss) before income taxes	(38,322)		12,062		(55,902)		(12,911)		Income (loss) before income taxes	(15,145)		(38,322)		(2,684)		(55,902)
Income tax provision (benefit)	Income tax provision (benefit)	(5,798)		2,758		(11,023)		(2,374)		Income tax provision (benefit)	(5,679)		(5,798)		(147)		(11,023)
Net income (loss)	Net income (loss)	$	(32,524)	$	9,304	$	(44,879)	$	(10,537)	Net income (loss)	$	(9,466)	$	(32,524)	$	(2,537)	$	(44,879)

Basic income (loss) per share		$	(0.19)	$	0.10	$	(0.38)	$	(0.12)
Basic and diluted income (loss) per share										Basic and diluted income (loss) per share	$	(0.05)	$	(0.19)	$	(0.01)	$	(0.38)
Weighted average basic shares outstanding	Weighted average basic shares outstanding	168,440		89,745		116,945		89,673		Weighted average basic shares outstanding	194,370		168,440		194,171		116,945

Diluted income (loss) per share		$	(0.19)	$	0.10	$	(0.38)	$	(0.12)
Weighted average diluted shares outstanding		168,440		90,525		116,945		89,673

Net income (loss) from above	Net income (loss) from above	$	(32,524)	$	9,304	$	(44,879)	$	(10,537)	Net income (loss) from above	$	(9,466)	$	(32,524)	$	(2,537)	$	(44,879)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustments	Foreign currency translation adjustments	(4,740)		3,070		1,575		(4,500)		Foreign currency translation adjustments	(7,834)		(4,740)		(8,745)		1,575
Hedging activity	Hedging activity	246		—		246		—		Hedging activity	3,811		246		15,333		246
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(4,494)		3,070		1,821		(4,500)		Total other comprehensive income (loss)	(4,023)		(4,494)		6,588		1,821
Comprehensive income (loss)	Comprehensive income (loss)	$	(37,018)	$	12,374	$	(43,058)	$	(15,037)	Comprehensive income (loss)	$	(13,489)	$	(37,018)	$	4,051	$	(43,058)

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

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(dollars in thousands)

Thirty-nine Weeks Ended
September 25, 2021 Thirty-nine Weeks Ended
September 26, 2020
Cash flows from operating activities:
Net loss $ (44,879) $ (10,537)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 91,892 95,269
Deferred income taxes (21,538) (1,963)
Deferred financing and original issue discount amortization 3,036 2,805
Stock-based compensation expense 8,817 3,818
Increase in fair value of warrant liabilities 3,990 —
Write off of deferred financing fees, premiums and discounts associated with debt refinancing (8,372) —
Asset impairment — 210
(Gain) on disposal of property and equipment — (23)
Change in fair value of contingent consideration (1,110) (1,300)
Other non-cash interest and change in value of interest rate swap (1,685) 1,245
Changes in operating items:
Accounts receivable (17,097) (60,470)
Inventories (110,065) (16,793)
Other assets 3,003 (15,276)
Accounts payable 12,896 42,201
Other accrued liabilities (24,193) 28,402
Net cash provided by (used for) operating activities (105,305) 67,588
Cash flows from investing activities:
Acquisition of business, net of cash received (39,102) (800)
Capital expenditures (36,955) (29,182)
Net cash used for investing activities (76,057) (29,982)
Cash flows from financing activities:
Repayments of senior term loans (1,072,042) (7,956)
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 246,000 78,000
Repayments of revolving credit loans (244,000) (94,000)
Principal payments under finance and capitalized lease obligations (697) (624)
Proceeds from exercise of stock options 1,761 —
Net cash (used by) provided by financing activities 173,661 (24,580)
Effect of exchange rate changes on cash 610 (63)
Net decrease in cash and cash equivalents (7,091) 12,963
Cash and cash equivalents at beginning of period 21,520 19,973
Cash and cash equivalents at end of period $ 14,429 $ 32,936
Supplemental disclosure of cash flow information:
Interest paid on junior subordinated debentures, net $ 7,542 $ 9,272
Interest paid 55,624 59,147
Income taxes paid 1,990 475


	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 Treasury Stock
Shares Amount Shares Amount Additional Paid-in-capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Equity
Thirty-nine weeks ended September 25, 2021
Balance at December 26, 2020 90,934,930 $ 9 — $ — $ 565,815 $ (171,849) $ (29,388) $ 364,587
Net Loss — — — — — (8,970) — (8,970)
Stock-based compensation — — — — 1,741 — — 1,741
Proceeds from exercise of stock options 268,253 $ — — $ — 1,643 — — 1,643
Change in cumulative foreign currency translation adjustment — — — — — — 2,473 2,473
Balance at March 27, 2021 91,203,183 $ 9 — $ — $ 569,199 $ (180,819) $ (26,915) $ 361,474
Net Loss — — — — — (3,385) — (3,385)
Stock-based compensation — — — — 1,796 — — 1,796
Proceeds from exercise of stock options 17,718 — — — 118 — — 118
Change in cumulative foreign currency translation adjustment — — — — — — 3,842 3,842
Balance at June 26, 2021 91,220,901 $ 9 — $ — $ 571,113 $ (184,204) $ (23,073) $ 363,845
Net Loss — — — — — (32,524) — (32,524)
Stock-based compensation — — — — 5,280 — — 5,280
Vesting of restricted shares 88,305 — — — — — — —
Proceeds from exercise of stock options — — — — — — — —
Recapitalization of Landcadia, net of issuance costs and fair value of of assets and liabilities acquired 58,672,000 6 — — 378,016 — — 378,022
Shares issued to PIPE, net of issuance costs 37,500,000 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 187,481,206 $ 19 — $ — $ 1,317,706 $ (216,728) $ (27,567) $ 1,073,430
Thirty-nine weeks ended September 26, 2020
Balance at December 28, 2019 548,040 $ 5 (4,740) $ (4,320) $ 557,674 $ (147,350) $ (32,040) $ 373,969
Retroactive application of recapitalization 89,001,575 4 4,740 4,320 (4,324) — — —
Balance at December 28, 2019 - Recast 89,549,615 9 — — 553,350 (147,350) (32,040) 373,969
Net Loss — — — — — (14,804) — (14,804)
Stock-based compensation — — — — 1,145 — — 1,145
Vesting of restricted shares 88,305 — — — — — — —
Change in cumulative foreign currency translation adjustment — — — — — — (11,213) (11,213)
Balance at March 28, 2020 89,637,920 $ 9 — $ — $ 554,495 $ (162,154) $ (43,253) $ 349,097
Net Loss — — — — — (5,037) — (5,037)
Stock-based compensation — — — — 1,524 — — 1,524
Change in cumulative foreign currency translation adjustment — — — — — — 3,643 3,643
Balance at June 27, 2020 89,637,920 $ 9 — $ — $ 556,019 $ (167,191) $ (39,610) $ 349,227
Net Income — — — — — 9,304 — 9,304
Stock-based compensation — — — — 1,148 — — 1,148
Vesting of restricted shares 88,305 — — — — — — —
Change in cumulative foreign currency translation adjustment — — — — — — 3,070 3,070
Balance at September 26, 2020 89,726,225 $ 9 — $ — $ 557,167 $ (157,887) $ (36,540) $ 362,749


	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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1. Basis of Presentation:

The accompanying condensed financial statements include the consolidated accounts of the Hillman Solutions Corp., and its ~~predecessor for accounting purposes HMAN Group Holdings Inc.., and~~ wholly-owned subsidiaries ~~are collectively referred to herein as~~(collectively “Hillman” or the ~~"Company."~~“Company”). The accompanying unaudited financial statements include the condensed consolidated accounts of the Company for the thirteen and thirty-nine weeks ended September ~~25, 2021.~~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 Hillman Solutions Corp. is the newly formed parent company of HMAN Group Holdings Inc. (previously known as “Holdco”).~~

The accompanying unaudited ~~condensed consolidated financial statements~~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 ~~25, 2021~~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~~Consolidated Financial Statements for the year ended December ~~26, 2020~~25, 2021 and notes thereto included in the ~~S-1~~Form 10-K filed on ~~August 25, 2021~~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~~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~~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,”~~“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 ~~S-1~~Form 10-K filed on ~~August 25, 2021~~ March 16, 2022with the ~~Securities and Exchange Commission (“SEC”).~~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.

The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the magnitude and duration of COVID-19, the extent to which it will impact worldwide macroeconomic conditions including interest rates, employment rates and health insurance coverage, the speed of the anticipated recovery, and governmental and business reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 25, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to the carrying value inventory and the carrying value of the goodwill and other long-lived assets.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

In 2020, the pandemic had a significant impact on the Company's business, driving high demand for personal protective equipment, including face masks, disposable gloves, sanitizing wipes, and disinfecting sprays. During 2020, at the request of our customers, the Company began to sell certain categories of protective and cleaning equipment that are not a part of our core product offerings, including wipes, sprays, masks and bulk boxes of disposable gloves. High demand and limited supply of these products available for retail sale drove prices and cost up in 2020. In contrast, in 2021 the pandemic has had less of an impact on the Company's business, economic activity has generally recovered, and consumer access to personal protective equipment has normalized. By the end of the third quarter of 2021 the Company's product mix has begun to normalize back to near pre-pandemic levels. In 2021, demand for certain protective products softened as vaccines were rolled out and supply returned to a more normal level. In the third quarter of 2021, we evaluated our customers' needs and the market conditions and ultimately decided to exit certain protective product categories. In connection with the exit of these product lines, the Company recorded an inventory valuation charge of $32,026 thousand including the write off of inventory along with costs for donation and disposal of the remaining inventory on hand. Excluding the inventory valuation charge, there was not a material impact to the Company’s consolidated financial statements as of and for the quarter ended September 25, 2021, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s Consolidated Financial Statements in future reporting periods.

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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as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. ~~This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized~~The warrants were fully redeemed in the ~~Company's statement of operations.~~year ended December 25, 2021. See Note 1110 - 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 ~~consolidated financial statements~~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 25, 2021									Thirteen weeks ended September 24, 2022
		Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Total Revenue			Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Total Revenue
Fastening and Hardware	Fastening and Hardware	$	189,935	$	—	$	34,648	$	224,583	Fastening and Hardware	$	210,853	$	—	$	39,578	$	250,431
Personal Protective	Personal Protective	71,521		—		79		71,600		Personal Protective	61,000		—		322		61,322
Keys and Key Accessories	Keys and Key Accessories	—		52,586		778		53,364		Keys and Key Accessories	—		51,688		1,145		52,833
Engraving		—		14,853		20		14,873
Resharp		—		60		—		60
Engraving and Resharp										Engraving and Resharp	—		13,944		8		13,952
Consolidated	Consolidated	$	261,456	$	67,499	$	35,525	$	364,480	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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Thirteen weeks ended September 26, 2020
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
Fastening and Hardware $ 202,876 $ — $ 38,383 $ 241,259
Personal Protective 97,431 — 12 97,443
Keys and Key Accessories — 44,974 790 45,764
Engraving — 14,205 2 14,207
Resharp — 7 — 7
Consolidated $ 300,307 $ 59,186 $ 39,187 $ 398,680


	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

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 — 44,635 53 44,688
Resharp — 125 — 125
Consolidated $ 775,514 $ 189,729 $ 116,233 $ 1,081,476

Thirty-nine weeks ended September 26, 2020
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
Fastening and Hardware $ 543,832 $ — $ 98,430 $ 642,262
Personal Protective 239,151 — 78 239,229
Keys and Key Accessories — 119,001 2,039 121,040
Engraving — 38,666 5 38,671
Resharp — 24 — 24
Consolidated $ 782,983 $ 157,691 $ 100,552 $ 1,041,226

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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Thirteen weeks ended September 26, 2020
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
United States $ 295,689 $ 58,566 $ — $ 354,255
Canada 2,292 620 39,187 42,099
Mexico 2,326 — — 2,326
Consolidated $ 300,307 $ 59,186 $ 39,187 $ 398,680


	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

Thirty-nine weeks ended September 26, 2020
Hardware and Protective Solutions Robotics and Digital Solutions Canada Total Revenue
United States $ 771,064 $ 156,249 $ — $ 927,313
Canada 4,833 1,442 100,552 106,827
Mexico 7,086 — — 7,086
Consolidated $ 782,983 $ 157,691 $ 100,552 $ 1,041,226

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~~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

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

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~~Agreement:

On July 14, 2021, the Merger between ~~HMAN~~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.~~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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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 ~~was~~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~~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.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

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~~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 ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~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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(dollars in thousands)

provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. ~~In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848).~~ The ~~amendments in this ASU refine the scope of ASC 848 and clarifies some of its guidance as it relates to recent rate reform activities.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 ~~December 2019,~~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 ~~2019-12,~~ ~~Income Taxes~~2021-08, Business Combinations (Topic ~~740)~~805): ~~Simplifying the~~ Accounting for ~~Income Taxes. The amendments in this update remove certain exceptions of~~Contract Assets and

Contract Liabilities from Contracts with Customers, which amends Accounting Standards Codification ("ASC") 805 to require acquiring entities to apply Topic ~~740 including: exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or gain from other items; exception to the requirement~~606 to recognize and measure contract assets and contract liabilities in a ~~deferred tax liability~~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 ~~equity method investments when~~acquired revenue contracts with customers in a ~~foreign subsidiary becomes an equity method investment; exception~~business combination by addressing diversity in practice and inconsistency related to 1) the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. There are also additional areas of guidance in regards to: franchise and other taxes partially based on income and the interim recognition of ~~enactment of tax laws~~an acquired contract liability, and ~~rate changes.~~2) payment terms and their effect on subsequent revenue recognized by the acquirer. The ~~provisions of this ASU are~~amendment is effective ~~for~~on fiscal years beginning after December 15, ~~2020.~~2022. The Company ~~adopted this standard during fiscal 2021 and~~is currently evaluating the ~~adoption did not have a material~~ impact onprovided by the ~~Company's Condensed Consolidated Financial Statements.~~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 ~~the~~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 ~~$39,102.~~$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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The following table reconciles the fair value of the acquired assets and assumed liabilities to the ~~preliminary~~ total purchase price of OZCO. ~~The total purchase price is preliminary as the Company is in the process of finalizing certain working capital adjustments.~~


Accounts receivable	$	~~1,143~~1,341
Inventory	~~3,564~~3,435
Other current assets	2426
Property and equipment	595
Goodwill	~~9,450~~9,093
Customer relationships	23,500
Trade names	2,600
Technology	4,000
Total assets acquired	~~44,876~~44,590
Less:
Liabilities assumed	~~(5,774)~~(4,756)
Total purchase price	$	~~39,102~~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				Goodwill at			Acquisitions (1)		Dispositions			Other (2)		Goodwill at
		December 26, 2020								September 25, 2021			December 25, 2021				Acquisitions (1)					Other (2)
Hardware and Protective Solutions	Hardware and Protective Solutions	$	565,578	$	9,450	$	—	$	(32)		$	574,996		Hardware and Protective Solutions	$	574,698		$	(158)	$	—		$	72	$	574,612
Robotics and Digital Solutions	Robotics and Digital Solutions	220,936		—		—		—			220,936			Robotics and Digital Solutions	220,936			—		—			—		220,936
Canada	Canada	29,686		—		—		363			30,049			Canada	29,737			—		—			(1,659)		28,078
Total	Total	$	816,200	$	9,450	$	—	$	331		$	825,981		Total	$	825,371		$	(158)	$	—		$	(1,587)	$	823,626

(1)~~See~~The amount relates to the Ozco acquisition, see Note 5 - Acquisitions for additional ~~information regarding the OZCO acquisition.~~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.

~~Other intangibles, net, as of September 25, 2021 and December 26, 2020 consist of the following:~~

Estimated
Useful Life
(Years) September 25, 2021 December 26, 2020
Customer relationships 13 - 20 $ 965,488 $ 941,648
Trademarks - Indefinite Indefinite 85,676 85,603
Trademarks - Other 7 - 15 29,000 26,400
Technology and patents 8 - 12 67,756 63,749
Intangible assets, gross 1,147,920 1,117,400
Less: Accumulated amortization 337,361 291,434
Other intangibles, net $ 810,559 $ 825,966

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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				1,147,764		1,147,395
Less: Accumulated amortization				398,638		352,695
Other intangibles, net				$	749,126	$	794,700

The amortization expense for ~~amortizable~~intangible assets, including the adjustments resulting from fluctuations in foreign currency exchange rates for the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 was ~~$15,504~~$15,557 and ~~$45,827,~~$46,644, respectively. Amortization expense for the thirteen and thirty-nine weeks ended September ~~26, 2020~~25, 2021 was ~~$14,883~~$15,504 and ~~$44,596,~~$45,827, respectively.

The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter. Impairment is also tested when events or changes in circumstances indicate that the carrying values of the assets may be greater than their fair values. During the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirteen and thirty-nine weeks ended September ~~26, 2020,~~25, 2021, the Company did not identify any triggering events that would result in an impairment analysis outside of the annual assessment.

7. Commitments and Contingencies:

The Company self-insures its general liability including product liability, automotive and workers' compensation losses ~~up to $250 per occurrence. General liability losses are self-insured~~ up to $500 per occurrence. Catastrophic coverage has been purchased from third party insurers for occurrences ~~in excess of $250~~ 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 ~~$2,683~~$2,497 recorded for such risks is adequate as of September ~~25, 2021.~~24, 2022.

As of September ~~25, 2021,~~24, 2022, the Company has provided certain vendors and insurers letters of credit aggregating ~~$25,908~~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 ~~$250~~$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 ~~$2,300~~$2,650 recorded for such risks is adequate as of September ~~25, 2021.~~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 ~~3, 2019, The Hillman Group, Inc.~~1, 2021, Hy-Ko Products Company LLC ("~~Hillman Group"~~Hy-Ko"), a manufacturer of key duplication machines, filed a complaint for patent infringement against ~~KeyMe, LLC ("KeyMe"), a provider of self-service key duplication kiosks,~~Hillman in the United States District Court for the Eastern District of Texas (Marshall Division). The case was assigned Civil Action No. 2:~~19-cv-0209. Hillman Group’s~~21-cv-0197. Hy-Ko's complaint alleges that ~~KeyMe’s self-named~~Hillman's KeyKrafter and ~~“Locksmith in a Box”~~PKOR key duplication kiosks infringe U.S. Patent Nos. 8,979,446 and 9,914,179, which are assigned to Hillman Group, and seeks damages and injunctive relief against KeyMe. After the United States Patent and Trademark Office issued U.S. Patent No. 10,400,474 to Hillman Group on September 3, 2019, Hillman Group filed a motion the same day to amend its initial complaint to add the new patent to the litigation. The Texas court granted the motion on September 13, 2019. KeyMe filed two motions in the case on July 25, 2019, the first seeking to dismiss Hillman Group's complaint under Rule 12(b)(3) of the Federal Rules of Civil Procedure for improper venue, or in the alternative, to move the case from Marshall, Texas to the Southern District of New York. KeyMe’s second motion seeks to transfer the venue of the case from Texas to New York under 28 U.S.C. § 1404. Subsequently, Hillman Group filed a motion on September 4, 2019 to disqualify KeyMe's counsel Cooley LLP from the litigation due to Cooley's concurrent and prior representation of Hillman Group and predecessor-in-interest MinuteKey Holdings, Inc ("MinuteKey"). Hillman Group served its initial infringement contentions for the patents-in-suit on KeyMe on September 6, 2019, and KeyMe served its initial invalidity and unenforceability contentions for the patents-in-suit on Hillman Group on November 15, 2019. The parties filed a joint claim construction statement with the Court on January 31, 2020, setting forth the disputed constructions of terms and phrases recited in the asserted claims of the patents-in-suit. On February 14, 2020, the Court granted Hillman Group’s motion to disqualify Cooley LLP, and denied KeyMe’s pending venue-related motion to dismiss and motion to transfer without prejudice to refiling. The case was stayed until March 30, 2020 to permit KeyMe to retain new legal counsel. The parties filed a joint status report on March 25, 2020, and on March 27, 2020, the Texas Court set a new case schedule with a trial in early December 2020. On April 14, 2020, KeyMe re-filed a single motion to dismiss for improper venue, or in the alternative, to transfer the case to the Southern District of New York. After an oral hearing held on September 30, 2020, the Texas Court denied KeyMe’s motion to dismiss on November 13, 2020.

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The Texas Court conducted a claim construction hearing in Marshall, TX, on June 23, 2020 to construe various disputed claim terms of the three patents-in-suit, and issued a claim construction order on July 2, 2020. On August 31, 2020, KeyMe filed two motions for partial summary judgment on portions of the case, and also filed a motion objecting to portions of the testimony of one of Hillman Group’s technical expert witnesses. At a pretrial conference held March 23, 2021, the Texas Court denied KeyMe's motion to exclude expert testimony and KeyMe's motion for summary judgment of no willful infringement in full. KeyMe's motion for summary judgment of non-infringement relating to U.S. Patent No. 10,400,474 was granted in-part and denied in-part; Hillman Group was permitted to proceed with a theory of infringement under the doctrine of equivalents at trial.

On March 2, 2020, Hillman Group filed a second complaint for patent infringement against KeyMe in the same Texas Court, alleging that KeyMe’s key duplication kiosks infringe Hillman Group’s U.S. Patent No. 10,577,830. The case was assigned Civil Action No. 2:20-cv-0070. Hillman Group added a second patent to the case, U.S. Patent No. 10,628,813, upon that patent's issuance on April 21, 2020. Upon issuance of U.S. Patent No. 10,737,336 to Hillman Group on August 10, 2020, Hillman Group moved for leave of Court to add that patent to the case; however, KeyMe opposed the motion.

KeyMe filed a motion to consolidate the two Texas patent cases involving KeyMe and Hillman Group on April 14, 2020. In addition, on April 30, 2020, KeyMe filed a substantially identical motion to dismiss the case for improper venue, or in the alternative, to transfer the case to the Southern District of New York. The Texas Court heard oral argument on the motion to consolidate, the motion to dismiss, and Hillman Group’s motion to add the ’336 patent on September 30, 2020. On October 23, 2020, the Texas Court granted KeyMe’s motion to consolidate the two Texas cases, and granted Hillman Group’s motion to add the ’336 patent. The Texas Court denied KeyMe’s motion to dismiss on November 13, 2020. On November 18, 2020, the Texas Court issued a new case schedule for the consolidated case, setting a trial date of April 5, 2021 for the six-patent case. The parties stipulated in November, 2020 that no new claim construction hearing would be held, and that selected constructions from the 2:19-cv-209 action that pertained to claims in the 2:20-cv-0070 action would govern. Fact discovery closed in the consolidated case on December 21, 2020, and expert discovery closed on January 22, 2021.

On September 9, 2020, the parties conducted a mediation before Ret. District Judge David Folsom of the U.S. District Court of the Eastern District of Texas. Though substantive discussion took place, no agreement on resolution of the litigation was reached.

On January 25, 2021, KeyMe filed a second summary judgment motion for a judgment of no willful infringement, and also filed another motion objecting to portions of the testimony of one of Hillman Group's technical expert witnesses. At a pretrial conference held March 23, 2021, the Texas Court denied both of KeyMe's motions in full.

A jury trial was held in the Texas case from April 5-12, 2021 in Marshall, Texas. On April 12, 2021, the jury returned a verdict that KeyMe did not infringe any of the six asserted patents, and several of the asserted claims were invalid. Final judgment was entered on April 13, 2021. Both parties filed renewed motions for judgment as a matter of law on issues they did not prevail on at trial on May 11, 2021, and Hillman Group additionally filed a motion for a new trial on the same date.

On August 16, 2019, KeyMe filed a complaint for patent infringement against Hillman Group in the United States District Court for the District of Delaware. KeyMe alleges that Hillman Group’s KeyKrafter key duplication machines and MinuteKey self-service key duplication kiosks infringe KeyMe’s U.S. Patent No. 8,682,468 when those machines are used in conjunction with Hillman Group’s KeyHero system. Hillman Group filed an answer to KeyMe’s complaint on October 23, 2019, and asserted counterclaims seeking declaratory judgments of invalidity and noninfringement of U.S. Patent No. 8,682,468. On May 4, 2020, the Delaware Court entered a scheduling order setting trial for November 2021. KeyMe served its initial infringement contentions on June 11, 2020, with Hillman Group serving its initial invalidity contentions on July 16, 2020. The Delaware Court held a claim construction hearing on November 24, 2020, and issued its claim construction order on January 25, 2021. Fact discovery closed in the Delaware case on January 28, 2021. KeyMe served its final infringement contentions on January 4, 2021; Hillman Group served its final invalidity contentions on January 18, 2021. Expert discovery closed on April 8, 2021. Following the close of discovery, Hillman Group filed a motion for summary judgment of noninfringement and no willful infringement in the case on April 15, 2021.

~~As of June 14, 2021, Hillman Group and KeyMe have globally resolved all pending legal disputes, including the Texas and Delaware district court actions discussed above.~~

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 Group in the United States District Court for the Eastern District of Texas (Marshall

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~~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 ~~10,421,113,~~10,421,133, which are assigned to Hy-Ko, and seeks damages and injunctive relief against ~~Hillman Group.~~Hillman. Hy-Ko's complaint additionally contains allegations of unfair competition under the Federal Lanham Act and ~~conversion/receipt of stolen property,~~conversion, as well as a cause of action for "replevin" for return of ~~stolen property.~~

~~On August 2, 2021,~~alleged Hy-Ko filed an Amended Complaint which did not deviate substantially from the initial Complaint in any way. Hillman Group responded on August 16, 2021, by filing a Motion to Dismiss the conversion and replevin claims because they are barred by the statute of limitations. In its Motion to Dismiss, Hillman Group also requested that the Court strike numerous paragraphs of Hy-Ko's Amended Complaint that, on their face, have nothing to do with Hy-Ko's patent infringement, unfair competition, or conversion and replevin claims. Hillman Group also requested that the Court order Hy-Ko to provide a more definite statement regarding its unfair competition claim. Briefing on Hillman's Motion to Dismiss was completed on September 14, 2021. To date the Court has not entered an order ruling on Hillman's Motion nor has the Court set the matter for a hearing.

Discovery has begun in the case and Hy-Ko has served initial interrogatories regarding Hillman Group's knowledge of the patents in suit and Hillman Group's non-infringement position(s). Hillman Group must respond to the Interrogatories by November 18, 2021. The parties served their Initial and Additional Disclosures on October 20, 2021. Fact discovery will be on-going through February 22, 2022.

Management and legal counsel for Hillman Group are still investigating this recent suit but are initially of the opinion that Hy-Ko's claims are without merit and Hillman Group intends to vigorously defend the claims. Hillman Group is unable to estimate the possible loss or range of loss at this early stage in the case.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.

8. Related Party ~~Transactions~~

Transactions:

The Company has recorded aggregate management fee charges and expenses from CCMP Capital Advisors, LLC ~~(“CCMP”),~~and Oak Hill ~~Capital Partners III, L.P., Oak Hill Capital Management Partners III, L.P. and OHCP III HC RO, L.P. (collectively, “Oak Hill Funds”)~~Funds of $56 and $270 for the thirteen and thirty-nine weeks ended September 25, ~~2021, respectively, and $130 and $451 for the thirteen and thirty-nine weeks ended September 26, 2020, respectively. Subsequent to~~2021. Since the Business Combination on July 14, 2021, the Company is no longer being charged management ~~fees,~~fees. See Note 3 - Merger Agreement for additional details on the Business Combination. Two members of our Board of Directors, Rich Zannino and Joe Scharfenberger, are partners at CCMP. Another director, Teresa Gendron, is the CFO of Jefferies.

~~Gregory Mann~~At the Closing, Hillman, the Sponsors, CCMP Investors and ~~Gabrielle Mann~~the Oak Hill Investors entered into the A&R Registration Rights Agreement, pursuant to which, among other things, the parties to the A&R Registration Rights Agreement agreed not to effect any sale or distribution of any equity securities of Hillman held by any of them during the lock-up period described therein and were granted certain registration rights with respect to their respective shares of Hillman common stock, in each case, on the terms and subject to the conditions therein.

Sales to related parties, which are ~~employed by Hillman. The Company leases an industrial warehouse and office facility from companies under the control~~included in net sales, consist primarily of the ~~Manns. The rental expense for~~sale of excess inventory to Ollie's Bargain Outlet Holdings, Inc. ("Ollie's"). John Swygert, President and Chief Executive Officer of Ollie's, is a member of our Board of Directors. Sales to related parties were $497 in the ~~lease of this facility was $88 and $264 for~~twenty-six weeks ended June 25, 2022. There were no such sales made in the thirteen ~~and thirty-nine~~ weeks ended September ~~25, 2021, respectively,~~24, 2022 and ~~was $88 and $263 for the thirteen and thirty-nine weeks ended September 26, 2020, respectively.~~throughout 2021.

9. Income Taxes:

Accounting Standards Codification 740 (“ASC 740”) requires companies to apply their estimated annual effective tax rate on a year-to-date basis in each interim period. These rates are derived, in part, from expected annual pre-tax income or loss. In the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirteen and thirty-nine weeks ended September ~~26, 2020,~~25, 2021, the Company applied an estimated annual effective tax rate based on expected annual pre-tax income to the interim period pre-tax loss to calculate the income tax benefit.

For the thirteen and thirty-nine weeks ended September 24, 2022, the effective income tax rate was 37.5% and 5.5%, respectively. The Company recorded an income tax benefit for the thirteen weeks ended September 24, 2022 of $5,679 and an income tax benefit for the thirty-nine weeks ended September 24, 2022 of $147. The effective tax rate for the thirteen and thirty-nine weeks ended September 24, 2022 was primarily the result of an estimated increase in Global intangible low-taxed income ("GILTI") from the Company's Canadian operations. The effective tax rate also includes the impact from non-deductible stock compensation, state and foreign income taxes, and the discrete income tax benefit for the Pennsylvania income tax rate change resulting in a reduction to the Company's deferred taxes.

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For the thirteen and thirty-nine weeks ended September 25, 2021, the effective income tax rate was 15.1% and 19.7%, respectively. The Company recorded an income tax benefit for the thirteen weeks ended September 25, 2021 of $5,798, and an income tax benefit for the thirty-nine weeks ended September 25, 2021 of $11,023. The effective tax rate for the thirteen and thirty-nine weeks ended September 25, 2021 was the result of an estimated increase in GILTI from the Company's Canadian operations, state and foreign income taxes, non-deductible transaction expenses, ~~non-deductible loss on the Company's warrant liability,~~ and non-deductible stock compensation.

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For the thirteen and thirty-nine weeks ended September 26, 2020, the effective income tax rate was 22.9% and 18.4%, respectively. The Company recorded an income tax provision (benefit) for the thirteen and thirty-nine weeks ended September 26, 2020 of $2,758 and $(2,374), respectively. The effective tax rate for the thirteen and thirty-nine weeks ended September 26, 2020 was primarily due to non-deductible stock compensation, and state and foreign income taxes.

On March 27, 2020, the CARES Act was signed into law by the President of the United States. The CARES Act included, among other things, corporate income tax relief in the form of accelerated alternative minimum tax ("AMT") refunds, allowed employers to defer certain payroll tax payments throughout 2020, and provided favorable corporate interest deductions for the 2020 reporting period.

10. ~~Restructuring~~

~~Canada Restructuring~~

During 2018, the Company initiated plans to restructure the operations of the Canada segment. The restructuring seeks to streamline operations in the greater Toronto area by consolidating facilities, exiting certain lines of business, and rationalizing stock keeping units (“SKUs”). The intended result of the Canada restructuring will be a more streamlined and scalable operation focused on delivering optimal service and a broad offering of products across the Company's core categories. The Company expects restructuring activities to be completed in 2021. The following is a summary of the charges incurred:

Thirteen Weeks Ended
September 25, 2021 Thirteen Weeks Ended
September 26, 2020 Thirty-nine Weeks Ended
September 25, 2021 Thirty-nine Weeks Ended
September 26, 2020
Facility consolidation (1)
   Labor expenses $ — $ 19 $ — $ 396
   Inventory valuation adjustments — 47 — 47
   Consulting and legal fees 26 63 26 114
   Other expenses — 51 5 713
Rent and related charges — 434 — 1,523
Severance 436 37 466 569
Total $ 462 $ 651 $ 497 $ 3,362

~~(1)~~Facility consolidation includes labor expense related to organizing inventory and equipment in preparation for the facility consolidation, consulting and legal fees related to the project, and other expenses. These expenses were included in SG&A on the Condensed Consolidated Statement of Comprehensive Loss.

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~~The following represents the roll forward of Canada restructuring reserves for the current period:~~


	~~Severance and related expense~~
~~Balance as of December 28, 2019~~	$	~~1,121~~
~~Restructuring charges~~	~~707~~
~~Cash paid~~	~~(1,519)~~
~~Balance as of December 26, 2020~~	$	~~309~~
~~Restructuring charges~~	~~466~~
~~Cash paid~~	~~(468)~~
~~Balance as of September 25, 2021~~	$	~~307~~

~~United States Restructuring~~

During fiscal 2019, the Company began implementing a plan to restructure the management and operations within the United States to achieve synergies and cost savings associated with the Company's acquisition activities. This restructuring includes management realignment, integration of sales and operating functions, and strategic review of the Company's product offerings. This plan was finalized during the fourth quarter of fiscal 2019. The Company incurred additional charges in fiscal 2020 and 2021 related to the consolidation of two of our distribution centers. Charges incurred in part of the United States Restructuring Plan included:

Thirteen Weeks Ended
September 25, 2021 Thirteen Weeks Ended
September 26, 2020 Thirty-nine Weeks Ended
September 25, 2021 Thirty-nine Weeks Ended
September 26, 2020
Management realignment & integration
Severance $ — $ — $ 74 $ 880
Facility closures
Severance — 489 — 893
Inventory valuation adjustments — 1,568 — 1,568
Other — 974 — $ 1,003
Total $ — $ 3,031 $ 74 $ 4,344

~~The following represents the roll forward of United States restructuring reserves for the current period:~~


	~~Severance and related expense~~
~~Balance as of December 28, 2019~~	$	~~3,286~~
~~Restructuring charges~~	~~1,789~~
~~Cash paid~~	~~(4,250)~~
~~Balance as of December 26, 2020~~	$	~~825~~
~~Restructuring charges~~	74
~~Cash paid~~	~~(822)~~
~~Balance as of September 25, 2021~~	$	77

~~11. Warrants:~~Warrants

Each whole warrant ~~entitles~~entitled the holder thereof to purchase 1one share of common stock at an exercise price of $11.50 per share and a redemption price of $.10 a share. As of ~~September 25, 2021,~~the date of the merger, as discussed in Note 3 - Merger Agreement, there were 24,666,628 warrants outstanding consisting of 16,666,628 public warrants, which were included in the units issued in Landcadia's initial public offering ("Public Warrants"), and 8,000,000 private placement

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warrants, which were included in the units issued in the concurrent private placement at the time of Landcadia's initial public offering ("Private Placement Warrants" and, collectively with the Public Warrants, the ~~"warrants"~~"Warrants"). The Public and Private Placement Warrants were accounted for as liabilities and are presented as warrant liabilities on ~~condensed consolidated balance sheets.~~the Consolidated Balance Sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within loss on change in fair value of warrant liabilities in the ~~condensed consolidated statement~~Consolidated Statements of ~~operations.~~Comprehensive Loss. The fair market value of the warranty liabilities were recorded as $77,190 and $81,180 as of the date of the Merger and the third quarter ending September 25,2021, respectively, on the Consolidated Balance Sheets. The change in fair market value of the warranty liability was related to a $3,990 loss in the third quarter of 2021. The Public Warrants were considered part of Level 1 of the fair value hierarchy, as those securities are traded on an active public market. At the Closing Date, the Company valued the Private Warrants using Level 3 of the fair value hierarchy. The Private Warrants were valued using a Modified Black Scholes Model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants are the share price of the Company's common stock, the risk free rate, and the expected volatility of the Company’s common stock.

The Public Warrants may only be exercised for a whole number of shares. No fractional warrants were issued upon separation of the units issued in the initial public offering into their component parts of Public Warrants and shares of common stock. The Public Warrants ~~will become~~became exercisable on the later of 30 days after the completion of the Business Combination or 12 months from the closing of the Public Offering.

~~Redemption~~On November 22, 2021, the Company announced that it would redeem all of its outstanding warrants (the “Public Warrants”) to purchase shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), that were issued under the Amended and Restated Warrant Agreement (the “Warrant Agreement”), dated November 13, 2020, by and between the Company and Continental Stock Transfer & Trust Company (“CST”), as warrant agent (the “Warrant Agent”) as part of the units sold in the Company’s initial public offering (the “IPO”) and that remain outstanding at 5:00 p.m. New York City time on December 22, 2021 (the “Redemption Date”) for a redemption price of $0.10 per Public Warrant. In addition, the Company would redeem all of its outstanding warrants to purchase Common Stock that were issued under the Warrant Agreement in a private placement simultaneously with the IPO (the “Private Warrants” and, together with the Public Warrants, ~~when~~ the ~~price per share of common stock equals or exceeds $18.~~ ~~Once~~“Warrants”) on the ~~warrants become exercisable, the Company may redeem~~same terms as the outstanding ~~warrants (except with respect to the Private Placement Warrants):~~Public Warrants.

•~~in whole and not in part;~~

•Under the terms of the Warrant Agreement, the Company was entitled to redeem all of the outstanding Public Warrants at a redemption price of ~~$0.01 per warrant;~~

•~~upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and~~

•if, and only if, the reported closing price of the Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.

~~Redemption of Public Warrants when the price per share of common stock equals or exceeds $10.00.~~ ~~Once the warrants become exercisable, the Company may redeem the outstanding warrants:~~

•~~in whole and not in part;~~

•at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock to be determined by reference to an agreed table based on the redemption date and the “fair market value” of the shares of Class A common stock;

•Public Warrant if ~~and only if,~~(i) the last ~~reported sale~~sales price (the ~~“closing price”~~“Reference Value”) of the ~~Class A common stock~~Common Stock equals or exceeds $10.00 per share ~~(as adjusted) for~~on any 20twenty trading days within ~~the 30-trading day~~any thirty-day trading period ending on the third trading day prior to the date on which ~~the Company sends the~~a notice of redemption ~~to the warrant holders;~~is given and

• (ii) if the closing price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holdersReference Value is less than $18.00 per share, ~~(as adjusted),~~ the Private ~~Placement~~ Warrants must also concurrently be ~~concurrently~~ called for redemption on the same terms as the outstanding Public ~~Warrants, as described above.~~

~~The “fair market value”~~Warrants. At the direction of the ~~Class A common stock shall mean~~Company, the Warrant Agent delivered a notice of redemption to each of the registered holders of the outstanding Warrants.As the Reference Value was less than $18.00 per share, payment upon exercise of the Warrants was made either (i) in cash, at an exercise price of $11.50 per share of Common Stock or (ii) on a “cashless basis” in which the exercising holder received a number of shares of Common Stock determined in accordance with the terms of the Warrant Agreement and based on the Redemption Date and the volume weighted average price (the “Fair Market Value”) of the ~~Class A common stock~~Common Stock during the 10 trading days immediately following the date on which the notice of redemption iswas sent to ~~the~~ holders of ~~warrants.~~Warrants. The Company ~~will provide warrant~~provided holders ~~with~~ the ~~final fair market value~~Fair Market Value no later than one business day after ~~the~~such 10-trading day period ~~described above~~ ends. In no event ~~will~~did the ~~warrants be exercisable~~number of shares of Common Stock issued in connection with ~~this redemption feature for more than~~an exercise on a cashless basis exceed 0.361 shares of ~~Class A common stock~~Common Stock per ~~warrant (subject~~Warrant. If any holder of Warrants would, after taking into account all of such holder’s Warrants exercised at one time, have been entitled to ~~adjustment).~~

~~The Private Placement Warrants will be exercisable at the holder’s option, and be non-redeemable (except as described above under “Redemption of the Public Warrants when the price per~~receive a fractional interest in a share of ~~common stock equals or exceeds $10.00”) so long as they are held by~~Common Stock, the ~~initial purchasers or their permitted transferees. If~~number of shares the ~~Private Placement~~holder was entitled to receive was rounded down to the nearest whole number of shares. Any Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

that remained unexercised at 5:00 p.m. New York City time on the Redemption Date was then void and no longer exercisable, and the holders of those Warrants were entitled to receive only the redemption price of $0.10 per warrant.

~~12. Long Term~~As of December 25, 2021, the Company exercised and redeemed all of its warrants generating cash proceeds of $8 and cash paid of $47 and issuing 6,364,978 shares of Common Stock. Public and private warrant exercise activity and underlying Common Stock issued or surrendered for the year ended December 25, 2021 was:


	Public Warrants	Private Warrants	Total
Beginning balance as of July, 14 2021	16,666,628	8,000,000	24,666,628
Shares issued for cash exercises	(666)	—	(666)
Shares issued for cashless exercises	(16,199,169)	(8,000,000)	(24,199,169)
Shares redeemed by the Company	(466,793)	—	(466,793)
Ending balance as of December 25, 2021	—	—	—

11. Long-Term Debt:

The following table summarizes the Company’s debt:

September 25, 2021 December 26, 2020
Revolving loans $ 74,000 $ 72,000
Senior term loan, due 2028 851,000 —
Senior term loan, due 2025 — 1,037,044
6.375% Senior Notes, due 2022 — 330,000
11.6% Junior Subordinated Debentures - Preferred — 105,443
Junior Subordinated Debentures - Common — 3,261
Capital & finance leases 1,715 2,044
926,715 1,549,792
Unamortized premium on 11.6% Junior Subordinated Debentures — 14,591
Unamortized discount on Senior term loan (6,183) (6,532)
Current portion of long term debt, capital leases and finance leases (7,174) (11,481)
Deferred financing fees (22,735) (10,862)
Total long term debt, net $ 890,623 $ 1,535,508


	September 24, 2022		December 25, 2021
Revolving loans	$	100,000	$	93,000
Senior term loan, due 2028	844,618		851,000
Finance leases	4,826		1,782
Other financing 1	1,809		—
	951,253		945,782
Unamortized discount on Senior term loan	(5,246)		(5,948)
Current portion of long-term debt and financing lease liabilities	(12,805)		(11,404)
Deferred finance fees	(19,387)		(21,899)
Total long-term debt, net	$	913,815	$	906,531

(1)The Company entered into an agreement to finance warehouse fixtures and equipment. The agreement has an interest rate of 3.94% and will be repaid through August 31, 2027.

As of September ~~25, 2021, there was $851,000 outstanding under the Term Credit Agreement. As of September 25, 2021, the Company had $74,000 outstanding under~~24, 2022, the ABL Revolver ~~along with $25,908~~had an outstanding amount of $100,000 and outstanding letters of ~~credit.~~credit of $32,790. The Company has ~~approximately $150,092~~$195,350 of available borrowings under the ~~ABL Revolver~~revolving credit facility as a source of ~~liquidity.~~

liquidity as of September 24, 2022 based on the customary asset-backed loan borrowing base and availability provisions.

On ~~April 16, 2021,~~July 29, 2022 the Company ~~acquired Oz Post International, LLC ("OZCO"). The Company entered into an amendment ("OZCO Amendment") to~~amended the ~~term loan~~asset-based revolving credit agreement ~~dated May 31, 2018~~ (the ~~"2018 Term Loan"~~“ABL Revolver") with Barclays Bank PLC, as administrative agent, and the lenders and other parties thereto (the “ABL Credit Agreement”), increasing the aggregate commitments thereunder to $375,000 and extended the maturity. Portions of the ABL Agreement are separately available for borrowing by the Company's United States subsidiary and Canadian subsidiary for $325,000 and $50,000, respectively. The interest rate for the ABL Revolver is, at the discretion of the Company, adjusted SOFR (or a Canadian banker’s acceptance rate in the case of Canadian Dollar loans) plus a margin varying from 1.25% to 1.75% per annum based on availability or an alternate base rate (or a Canadian prime rate or alternate base rate in the case of Canadian Dollar loans) plus a margin varying from 0.25% to 0.75% per annum based on availability. The stated maturity date of the revolving credit commitments under the ABL Credit Agreement is July 29, 2027. The loans and other amounts outstanding under the ABL Credit Agreement and related documents are guaranteed by The Hillman Companies, Inc., a wholly‑owned subsidiary of the Company, and, subject to certain exceptions, the Borrower’s wholly-owned domestic subsidiaries and are secured by substantially all of the Borrower’s and the guarantors’ assets plus, solely in the case of the Canadian Borrower, its and its wholly-owned Canadian subsidiary’s assets, which ~~provided $35,000~~has guaranteed by the Canadian portion under the ABL Credit Agreement.

2021 Refinancing

Page 17

Table of ~~incremental term loan funds to be used to finance the acquisition. See Note 5 - Acquisitions for additional information regarding the OZCO acquisition.~~Contents

HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

In connection with the Closing as described in Note 1 - Basis of Presentation, the Company entered into a new credit agreement (the “Term Credit Agreement”), which provided for a new funded term loan facility of $835.0 million and a delayed draw term loan facility of $200.0 million (of which $16.0 million was drawn). The Company also ~~also~~ entered into an amendment to ~~their~~the existing ~~asset-based revolving credit agreement~~Asset-Based Revolving Credit Agreement (the “ABL Amendment”) extending the maturity and conformed certain provisions to the Term Credit Agreement. The proceeds of the funded term loans under the Term Credit Agreement and revolving credit loans under the ABL Credit Agreement were used, together with other available cash, to (1) refinance in full all outstanding term loans and to terminate all outstanding commitments under the credit agreement, dated as of May 31, 2018 ("2018 Term Loan" including the OZCO Amendment), (2) refinance outstanding revolving credit loans, and (3) redeem in full the senior notes due July 15, 2022 (the “6.375% Senior Notes”). Additionally, the Company fully redeemed the 11.6% Junior Subordinated Debentures.

The interest rate on the Term Credit Agreement is, at the discretion of the Company, either the adjusted London Interbank Offered Rate ("LIBOR") rate plus a margin varying from 2.75% and 2.50% per annum or an alternate base rate plus a margin varying from 1.75% to 1.50% per annum. The Term Credit Agreement is payable in installments equal 0.25% of the original principal amount and delayed draw with a balloon payment due on the maturity date of July 14, 2028. The term loans and other amounts outstanding under the Term Credit Agreement are guaranteed by the Company's wholly-owned domestic subsidiaries and are secured by substantially all of the Borrower’s and the guarantors’ assets. The delayed draw term loan facility under the Term Credit Agreement may be used to finance permitted acquisitions and similar investments and to replenish cash and repay revolving credit loans previously used for permitted acquisitions.

Portions of the ABL Revolver are separately available for borrowing by the Company's United States subsidiary and Canadian subsidiary for $200,000 and $50,000, respectively. The interest rate for the ABL Revolver is, at the discretion of the Company, either adjusted LIBOR (or a Canadian banker’s acceptance rate in the case of Canadian Dollar loans) plus a margin varying

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~~HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

from 1.25% to 1.75% per annum based on availability or an alternate base rate (or a Canadian prime rate or alternate base rate in the case of Canadian Dollar loans) plus a margin varying from 0.25% to 0.75% per annum based on availability. The stated maturity date of the revolving credit commitments under the ABL Credit Agreement is May 31, 2026. The loans and other amounts outstanding under the ABL Credit Agreement and related documents are guaranteed by Holdings and, subject to certain exceptions, the Borrower’s wholly-owned domestic subsidiaries and are secured by substantially all of the Borrower’s and the guarantors’ assets plus, solely in the case of the Canadian Borrower, its and its wholly-owned Canadian subsidiary’s assets, which has guaranteed by the Canadian portion under the ABL Credit Agreement.

In connection with the Term Credit Agreement, the Company recorded $23,432 in deferred financing fees and $6,380 in discount which are recorded as long term debt on the ~~Condensed~~ Consolidated Balance Sheet. In connection with the ABL Amendment, the Company recorded $3,035 in deferred financing fees which are recorded as other non-current assets on the ~~Condensed~~ Consolidated Balance Sheet.

Additionally, the Company recorded a loss (gain) on extinguishment of debt for each debt instrument included in the refinancing as detailed below. The Company amended ~~it's~~its interest rate swaps in connection with the refinancing, see Note 1716 - Derivatives and Hedging for additional details.


	Loss (gain) on extinguishment of debt
Term Credit Agreement	$	20,243
ABL Revolver	288
6.375% Senior Notes, due 2022	1,083
11.6% Junior Subordinated Debentures	(13,603)
Interest rate swaps	59
Total	$	8,070

Additional information with respect to the fair value of the Company’s fixed rate ~~senior notes~~Senior Notes and ~~junior subordinated debentures~~Junior Subordinated Debentures is included in Note 1817 - Fair Value Measurements.

~~13. Leases~~

12. Leases:

Lessee

The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both ~~(a)~~1) the right to obtain substantially all of the economic benefits from the use of the asset and ~~(b)~~2) the right to direct the use of the asset. The Company leases certain distribution center locations, vehicles, forklifts, computer equipment, and its corporate headquarters with expiration dates through ~~2032.~~2033. Certain lease arrangements include escalating rent payments and options to extend the lease term. Expected lease terms include these options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. The Company's leasing arrangements do not contain material residual value guarantees, nor material restrictive covenants.

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

The components of operating and finance lease ~~cost~~costs for the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 and thirteen and thirty-nine weeks ended September ~~26, 2020~~25, 2021 were as follows:


		Thirteen Weeks Ended September 25, 2021		Thirty-nine Weeks Ended September 25, 2021		Thirteen Weeks Ended September 26, 2020		Thirty-nine Weeks Ended September 26, 2020			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
Operating lease cost		$	5,482	$	15,724	$	4,989	$	14,283
Operating lease costs										Operating lease costs	$	5,082	$	5,482	$	15,029	$	15,724
Short term lease costs	Short term lease costs	834		2,820		633		1,682		Short term lease costs	1,563		834		5,891		2,820
Variable lease costs	Variable lease costs	576		1,334		104		775		Variable lease costs	529		576		1,066		1,334
Finance lease cost:
Finance lease costs:										Finance lease costs:
Amortization of right of use assets	Amortization of right of use assets	230		668		206		608		Amortization of right of use assets	485		230		1,082		668
Interest on lease liabilities	Interest on lease liabilities	29		96		34		106		Interest on lease liabilities	34		29		87		96

Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $7,174 and $21,986 in the thirteen and thirty-nine weeks ended September 24, 2022, respectively, and $6,892 and $19,878 in the thirteen and thirty-nine weeks ended September 25, 2021, ~~respectively, and $5,726 and $16,740 in the thirteen and thirty-nine weeks ended September 26, 2020,~~ respectively. Rent expense includes operating lease ~~cost~~costs as well as ~~expense~~expenses for non-lease components such as common area maintenance, real estate taxes, real estate insurance, variable costs related to our leased vehicles and also short-term rental expenses.

The implicit rate is not determinable in most of the Company’s leases, as such management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The weighted average remaining lease terms and discount rates for all of our operating ~~and finance~~ leases were as follows as of September ~~25, 2021~~24, 2022 and December ~~26, 2020:~~25, 2021:


		September 25, 2021		December 26, 2020			September 24, 2022		December 25, 2021
		Operating Leases	Finance Leases	Operating Leases	Finance Leases		Operating Leases	Finance Leases	Operating Leases	Finance Leases
Weighted average remaining lease term	Weighted average remaining lease term	6.81	2.55	7.19	2.61	Weighted average remaining lease term	6.30	2.82	6.60	2.60
Weighted average discount rate	Weighted average discount rate	7.91%	6.52%	8.28%	7.14%	Weighted average discount rate	7.35%	2.84%	7.88%	5.59%

Supplemental balance sheet information related to the Company's finance leases was as follows as of September ~~25, 2021~~24, 2022 and December ~~26, 2020:~~25, 2021:

September 25, 2021 December 26, 2020
Finance lease assets, net, included in property plant and equipment $ 1,629 $ 1,919
Current portion of long-term debt 791 872
Long-term debt, less current portion 924 1,172
Total principal payable on finance leases 1,715 2,044

~~Supplemental cash flow information related to the Company's operating leases was as follows for the thirty-nine weeks ended September 25, 2021 and thirty-nine weeks ended September 26, 2020:~~

Thirty-nine Weeks Ended
September 25, 2021 Thirty-nine Weeks Ended
September 26, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases $ 14,854 $ 13,821
Operating cash outflow from finance leases 99 106
Financing cash outflow from finance leases 697 624


	September 24, 2022		December 25, 2021
Finance lease assets, net, included in property plant and equipment	$	4,757	$	1,768

Current portion of long-term debt	1,818		767
Long-term debt, less current portion	3,008		1,015
Total principal payable on finance leases	$	4,826	$	1,782

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

Supplemental cash flow information related to the Company's operating leases was as follows for the thirty-nine weeks ended September 24, 2022 and thirty-nine weeks ended September 25, 2021:


	Thirty-nine Weeks Ended September 24, 2022		Thirty-nine Weeks Ended September 25, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	14,497	$	14,854
Operating cash outflow from finance leases	84		99
Financing cash outflow from finance leases	998		697

As of September 24, 2022, our future minimum rental commitments are immaterial for lease agreements beginning after the current reporting period. Maturities of our lease liabilities for all operating and finance leases are as follows as of September ~~25, 2021:~~24, 2022:


		Operating Leases		Finance Leases			Operating Leases		Finance Leases
Less than one year	Less than one year	$	19,078	$	882	Less than one year	$	18,489	$	1,934
1 to 2 years	1 to 2 years	17,362		561		1 to 2 years	17,227		1,683
2 to 3 years	2 to 3 years	16,174		300		2 to 3 years	16,638		1,095
3 to 4 years	3 to 4 years	15,562		69		3 to 4 years	15,871		266
4 to 5 years	4 to 5 years	14,680		45		4 to 5 years	14,287		17
After 5 years	After 5 years	33,339		—		After 5 years	23,361		1
Total future minimum rental commitments	Total future minimum rental commitments	116,195		1,857		Total future minimum rental commitments	105,873		4,996
Less - amounts representing interest	Less - amounts representing interest	(26,277)		(142)		Less - amounts representing interest	(20,125)		(170)
Present value of lease liabilities	Present value of lease liabilities	$	89,918	$	1,715	Present value of lease liabilities	$	85,748	$	4,826

In late 2022, the Company will have an additional operating lease for a new property located in Shannon, Georgia for the purposes of office, warehouse, and distribution. Occupancy has not yet commenced. The estimated future minimum rental commitments are approximately $26,721.

Lessor

The Company has certain arrangements for key duplication equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

~~14.~~13. Equity and Accumulated Other Comprehensive ~~Income:~~Income (Loss):

Common Stock

The Hillman Solutions Corp. has one class of common stock.

Accumulated Other Comprehensive ~~Loss~~Income (Loss)

The following is a detail of the ~~change~~changes in the Company's accumulated other comprehensive loss from December ~~28, 2019~~26, 2020 to September ~~25, 2021,~~24, 2022, including the effect of significant reclassifications out of accumulated other comprehensive income (loss) (net of tax):

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)


	~~Foreign Currency Translation~~
~~Balance at December 28, 2019~~	$	~~(32,040)~~
Accumulated Other ~~comprehensive income before reclassifications~~Comprehensive Loss	~~2,652~~
~~Amounts reclassified from other comprehensive income~~	—
~~Net current period other comprehensive income~~	~~2,652~~
Balance at December 26, 2020	$	(29,388)
Other comprehensive income before reclassifications	~~1,575~~1,849
Amounts reclassified from other comprehensive income	385
Net current period other comprehensive income 1	2,234
Balance at December 25, 2021	(27,154)
Other comprehensive income before reclassifications	7,882
Amounts reclassified from other comprehensive income 12	~~246~~ (1,294)
Net current period other comprehensive income	~~1,821~~6,588
Balance at September ~~25, 2021~~24, 2022	$	~~(27,567)~~(20,566)

1.During the ~~thirty-nine weeks~~year ended ~~September~~December 25, 2021, the Company obtained and amended its interest rate swap agreements to

hedge against effective cash flows (i.e. interest payments) on floating-rate debt associated with the Company's new Term Credit Agreement. ~~Refer to Note 12 - Long Term Debt for further details.~~ In accordance with ASC 815, derivatives designated and that qualify as cash flow hedges of interest rate risk record the associated gain or loss within other comprehensive income. For the ~~thirty-nine weeks~~year ended ~~September~~December 25, 2021, the Company deferred a gain of ~~$179,~~$2,982, reclassified a loss of ~~$150~~$385 and ~~associated~~a net of tax ~~provision~~ of ~~$83~~$850 into other comprehensive income due to hedging activities. The amounts reclassified out of other comprehensive income were recorded as interest expense. See Note 1716 - Derivatives and Hedging for additional information on the interest rate swaps.

2.During the thirty-nine weeks ended September 24, 2022, the Company deferred a gain of $21,792, reclassified a gain of $1,294 net of tax of $5,165 into other comprehensive income due to hedging activities. The amounts reclassified out of other comprehensive income were recorded as interest expense. See Note 16 - Derivatives and Hedging for additional information on the interest rate swaps.

~~15.~~14. Stock Based Compensation:

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~~HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

2014 Equity Incentive Plan

Following the Merger and in connection with the ~~business combination~~Business Combination described in Note 3 - Merger Agreement, Landcadia Holdings III, Inc. (“Landcadia”) became the direct parent company of ~~HMAN~~Old Hillman and was renamed Hillman Solutions Corp. (“New Hillman”). Shares of Class A common stock of New Hillman (“New Hillman Shares”) are publicly traded on ~~The~~the Nasdaq ~~Capital~~Stock Market. Consequently, the outstanding stock options issued under the 2014 Equity Incentive Plan (the “Prior Plan”) prior to the Merger were converted and modified to purchase New Hillman Shares.

At the Closing, each outstanding option to acquire common stock of Hillman Holdco (a “Hillman Holdco Option”), whether vested or unvested, was assumed by New Hillman and converted into an option to purchase common stock of New Hillman (“New Hillman Option”) with substantially the same terms and conditions (including expiration date and exercise provisions) as applicable to the Hillman Holdco Option immediately prior to the Closing, except both the number of shares and the exercise price were modified using the conversion ratio at ~~closing.~~Closing. Each New Hillman Option is generally subject to the same vesting conditions as the Hillman Holdco Option from which it was converted, except that the performance-based vesting conditions of any Hillman Holdco Option granted prior to 2021 were adjusted such that the performance-based portion of the associated New Hillman Option will vest upon certain pre-established stock price hurdles. For all time based options and performance options granted during 2021, the change in fair value was immaterial and as such no additional compensation cost was recognized. For the performance options granted prior, the modification of the vesting criteria resulted in ~~$11,542~~$11,482 of additional compensation expense, ~~$3,663~~$8,228 of which was recognized in 2021 and $3,254 of which was recognized in the ~~thirteen and~~ thirty-nine weeks ended September ~~25, 2021, the remainder of which will be recognized through Q1 2022.~~24, 2022, respectively.

At the Closing, (i) each share of unvested restricted Hillman Holdco common stock was cancelled and converted into the right to receive a number of shares of New Hillman restricted stock equal to the Closing Stock Per Restricted Share Amount (as defined in the Merger Agreement) with substantially the same terms and conditions as were applicable to the related share of Hillman Holdco restricted stock immediately prior to the Closing (including with respect to vesting and termination-related

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

provisions), and (ii) each Hillman Holdco restricted stock unit was assumed by New Hillman and converted into a New Hillman restricted stock unit award with substantially the same terms and conditions as were applicable to such Hillman Holdco restricted stock unit immediately prior to the Closing (including with respect to vesting and termination-related provisions).

Upon closing, the 2014 Equity Incentive Plan may grant options, stock appreciation rights, restricted stock, and other stock-based awards for up to an aggregate of 14,523,510 shares of its common stock.

~~The following table summarizes the key assumptions used in the valuation model for valuing the Company's stock compensation awards under the 2014 Equity Incentive Plan:~~

Dividend yield 0%
Risk free interest rate 0.40% - 1.81%
Expected volatility 31.50%
Expected terms 6.25 years

Stock Options

The fair value of stock options is determined at the grant date using the Black-Scholes option pricing model. The time-based stock option awards generally vest evenly over four years from the grant date and performance-based options vest based on specified targets such as Company performance and Company stock price hurdles.

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~~HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

~~A summary of the stock option activity under the 2014 Equity Inventive Plan for the thirty-nine weeks ended September 25, 2021 is presented below (share amounts in thousands):~~

Number of Shares Weighted Avg.
Exercise Price per Share
(in whole dollars) Weighted Avg.
Remaining Contractual Term
Outstanding at December 26, 2020 12,749 $ 7.66 8.0 years
Granted 2,348 0
Exercised (286) 0
Forfeited or expired (1,186) 0
Outstanding at September 25, 2021 13,625 $ 8.13 7.3 years
Exercisable at September 25, 2021 4,936 $ 7.74 6.74 years

Restricted Stock

The Company granted restricted stock at the grant date fair value of the underlying common stock securities. The restrictions lapse in one quarter increments on each of the three anniversaries of the award date, and one quarter on the completion of the relocation of the recipient to the Cincinnati area or earlier in the event of a change in control. The associated expense is recognized over the service period.

~~A summary of the restricted stock activity under the 2014 Equity Incentive Plan for the thirty-nine weeks ended September 25, 2021 is presented below (share amounts in thousands):~~

Number of Shares Weighted Avg.
Grant Date Fair Value
(in whole dollars)
Unvested at December 26, 2020 177 $ 7.09
Awarded — 0
Vested (88) 0
Forfeited or expired — 0
Unvested at September 25, 2021 89 $ 7.09

Restricted Stock Units

The restricted stock units ("RSUs") granted to employees for service generally vest ~~over four~~after three years, ~~with 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter,~~ subject to continued employment. The RSUs granted to non-employee directors generally vest in full on the first anniversary of the grant date.

~~A summary of the restricted stock unit activity under the~~The 2014 Equity Incentive Plan had stock compensation expense of $1,034 and $7,390 recognized in the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended September 24, 2022, respectively, and $5,280 and $8,817 in the thirteen and thirty-nine weeks ended September 25, 2021, ~~is presented below (share amounts in thousands):~~

Number of Shares Weighted Avg.
Grant Date Fair Value
(in whole dollars)
Outstanding at December 26, 2020 — $ —
Granted 323 $ 10.00
Exercised — 0
Forfeited or expired — 0
Outstanding at September 25, 2021 323 $ 10.00
respectively.

2021 Equity Incentive Plan

Effective July 14, 2021, the Company established the 2021 Equity Incentive Plan. Under the 2021 Equity Incentive Plan (the ~~“Plan”~~“2021 Plan”), the maximum number of shares of ~~Stock~~common stock that may be delivered in satisfaction of ~~Awards~~awards under the 2021 Plan as of the Effective Date is (i) 7,150,814 shares, plus (ii) the number of shares of ~~Stock~~stock underlying awards under the 2014 Equity

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~~HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

Incentive Plan that on or after the Effective Date expire or become unexercisable, or are forfeited, cancelled or otherwise terminated, in each case, without delivery of shares or cash therefore, and would have become available again for grant under the Prior Plan in accordance with its terms (not to exceed 14,523,510 shares of ~~Stock~~common stock in the aggregate) ~~(the “Share Pool”)~~.

Stock Options

Restricted Stock Units

The RSUs granted to employees for service generally vest ~~over four~~after three years, ~~with 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter,~~ subject to continued employment. The RSUs granted to non-employee directors generally vest in full on the sooner of (1) the first anniversary of the grant ~~date.~~date; or (2) the next annual meeting of stockholders.

~~A summary of the restricted stock unit activity under the~~The 2021 Equity Incentive Plan had stock compensation expense of $1,358 and $3,143 recognized in the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended September ~~25, 2021 is presented below (share amounts in thousands):~~24, 2022, respectively.

Number of Shares Weighted Avg.
Grant Date Fair Value
(in whole dollars)
Outstanding at December 26, 2020 — 0
Granted 50 $ 12.05
Exercised — 0
Forfeited or expired — 0
Outstanding at September 25, 2021 50 $ 12.05

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

2021 Employee Stock Purchase Plan

Our Employee Stock Purchase Plan ("ESPP") became effective on July 14, 2021, in which 1,140,754 shares of common stock were available for issuance under the ESPP. Under the ESPP, eligible employees are granted options to purchase shares of common stock at 85% of the fair market value at the time of exercise. Options to purchase shares are granted four times a year on the first payroll date in January, April, July, and October of each year and ending approximately three months later on the last business day in March, June, September or December. No employee may be granted an option under the Plan if, immediately after the option is granted, the employee would own stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company. The first option period began on January 1, 2022 and the first purchase was made in April of 2022.

Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. As of the thirteen and thirty-nine weeks ended September 24, 2022, there was approximately $93 and $256, respectively, of compensation expense related to the ESPP.

~~16.~~15. Earnings Per Share:

Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share include the dilutive effect of stock options, restricted stock awards and units, and warrants. The following is a reconciliation of the basic and diluted earnings per share ("EPS") computations for both the numerator and denominator (in thousands, except per share data):


		Thirteen Weeks Ended September 25, 2021					Thirty-nine Weeks Ended September 25, 2021						Thirteen weeks ended September 24, 2022					Thirty-nine weeks ended September 24, 2022
		Earnings (Numerator)		Shares (Denominator)	Per Share Amount		Earnings (Numerator)		Shares (Denominator)	Per Share Amount			Earnings (Numerator)		Shares (Denominator)	Per Share Amount		Earnings (Numerator)		Shares (Denominator)	Per Share Amount
Net loss	Net loss	$	(32,524)	168,440	$	(0.19)	$	(44,879)	116,945	$	(0.38)	Net loss	$	(9,466)	194,370	$	(0.05)	$	(2,537)	194,171	$	(0.01)
Dilutive effect of stock options and awards	Dilutive effect of stock options and awards	—		—	—		—		—	—		Dilutive effect of stock options and awards	—		—	—		—		—	—
Dilutive effect of warrants		—		—	—		—		—	—
Net loss per diluted common share		$	(32,524)	168,440	$	(0.19)	$	(44,879)	116,945	$	(0.38)

Net income per diluted common share												Net income per diluted common share	$	(9,466)	194,370	$	(0.05)	$	(2,537)	194,171	$	(0.01)

Thirteen Weeks Ended
September 26, 2020 Thirty-nine Weeks Ended
September 26, 2020
Earnings
(Numerator) Shares
(Denominator) Per Share
Amount Earnings
(Numerator) Shares
(Denominator) Per Share
Amount
Net loss $ 9,304 89,745 $ 0.10 $ (10,537) 89,673 $ (0.12)
Dilutive effect of stock options — 780 — — — —
Net loss per diluted common share $ 9,304 90,525 $ 0.10 $ (10,537) 89,673 $ (0.12)

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~


	Thirteen weeks ended September 25, 2021					Thirty-nine weeks ended September 25, 2021
	Earnings (Numerator)		Shares (Denominator)	Per Share Amount		Earnings (Numerator)		Shares (Denominator)	Per Share Amount
Net loss	$	(32,524)	168,440	$	(0.19)	$	(44,879)	116,945	$	(0.38)
Dilutive effect of stock options and awards	—		—	—		—		—	—
Dilutive effect of warrants	—		—	—		—		—	—
Net loss per diluted common share	$	(32,524)	168,440	$	(0.19)	$	(44,879)	116,945	$	(0.38)

Stock options and awards outstanding totaling ~~1,492,329~~9,586 and ~~2,017,795~~4,635 were excluded from the computation for the thirteen and thirty-nine weeks ended September 24, 2022 and 1,492 and 2,018 for the thirteen and thirty-nine weeks ended September 25, 2021, respectively, as they would have had an antidilutive effect under the treasury stock method. Warrants of 19,788 and 6,596 were excluded from the computation for the thirteen and thirty-nine weeks ended September 25, 2021, respectively, as they would have had an antidilutive effect under the treasury stock method. Warrants of 19,787,515 and 6,595,838 were excluded from the computation for the thirteen and thirty-nine weeks ended September 25, 2021, respectively, as they would have had an antidilutive effect under the treasury stock method. Stock options and awards outstanding totaling 7,632,030 and 6,991,911 were excluded from the computation for the thirteen and thirty-nine weeks ended September 26, 2020, respectively, as they would have had an antidilutive effect under the treasury stock method.

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

~~17.~~16. Derivatives and Hedging:

FASB ASC 815, Derivatives and Hedging ("ASC 815"), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company's objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments.

The Company uses derivative financial instruments to manage its exposures to (1) interest rate fluctuations on its floating rate ~~Term Credit Agreement.~~

senior term loan and (2) fluctuations in foreign currency exchange rates. The Company measures those instruments at fair value and recognizes changes in the fair value of derivatives in earnings in the period of change, unless ~~unless~~ the derivative ~~is designated as a cash flow hedge and~~ qualifies as an effective hedge ~~in which case those changes in fair value would be recognized on the Company's Condensed Consolidated Balance Sheets within other comprehensive income.~~that offsets certain exposures.

The Company does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes.

Interest Rate Swap Agreements

On January 8, 2018, the Company entered into a forward Interest Rate Swap Agreement ("2018 Swap 1") with three-year terms for a notional amount of $90,000. The forward start date of the 2018 Swap 1 was September 30, 2018 and the termination date iswas June 30, 2021. The 2018 Swap 1 has a determined interest rate of 2.3%. The 2018 Swap 1 was terminated on June 30, 2021. In accordance with ASC 815, the 2018 Swap 1 was not designated as a cash flow hedge and therefore changes in fair value were recorded in ~~other (income) expense~~(Gain) loss on mark-to-market adjustments on the Company's Statements of Comprehensive ~~Income.~~Income (Loss).

On November 8, 2018, the Company entered into another ~~new~~ forward Interest Rate Swap Agreement ("2018 Swap 2") ~~with three-year terms~~ for a $60,000 notional amount. The forward start date of the 2018 Swap 2 was November 30, 2018 and the termination date is November 30, 2022. The 2018 Swap 2 has ~~determined~~a pay fixed interest rate of 3.1%. The 2018 Swap 2 was effectively terminated on July 16, 2021 in connection with the Merger as described in Note 3 - Merger Agreement. In accordance with ASC 815, the 2018 Swap 2 was not designated as a cash flow hedge and therefore changes in fair value were recorded in ~~other (income) expense~~(Gain) loss on mark-to-market adjustments on the Company's Statement of Comprehensive ~~Income.~~Income (Loss).

On July 9, 2021, the Company entered into an interest swap agreement ("2021 Swap 1") ~~with three-year terms~~ for a notional amount of $144,000. The forward start date of the 2021 Swap 1 was July 30, 2021 and the termination date is July 31, 2024. The 2021 Swap 1 has a determined pay fixed interest rate of 0.75%. In accordance with ASC 815, the Company determined the 2021 Swap 1 constituted an effective cash flow hedge and therefore changes in fair value are recorded within other comprehensive income within the Company's Statement of Comprehensive Income (Loss) and the deferred gains or losses are reclassified out of ~~other~~Other comprehensive income into interest expense in the same period during which the hedged transactions affect earnings.

On July 9, 2021, the Company entered into an interest swap agreement ("2021 Swap 2") ~~with three-year terms~~ for a notional amount of $216,000. The forward start date of the 2021 Swap 2 was July 30, 2021 and the termination date is July 31, 2024. The 2021 Swap 2 has a determined pay fixed interest rate of 0.76%. In accordance with ASC 815, the Company determined the 2021 Swap 2 constituted an effective cash flow hedge and therefore changes in fair value are recorded within other comprehensive income within the Company's Statement of Comprehensive Income (Loss) and the deferred gains or losses are reclassified out of ~~other~~Other comprehensive income into interest expense in the same period during which the hedged transactions affect earnings.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

On July 16, 2021, the Company modified its original 2018 Swap 2 derivative instrument ("2021 Swap 3") for a notional amount of $60,000. The forward start date of the 2021 Swap 3 was July 30, 2021 and the termination date is November 30, 2022. The 2021 Swap 3 has a determined pay fixed interest rate of ~~3.64%~~ 3.63%. In accordance with ASC 815, the Company determined the 2021 Swap 3 constituted an effective cash flow hedge and therefore changes in fair value are recorded within accumulated other comprehensive loss within the Company's ~~Condensed~~ Consolidated Balance Sheets and the deferred gains or losses are reclassified out of other comprehensive income into interest expense in the same period during which the hedged transactions affect earnings. Due to an other-than-insignificant financing element from the modification, the swap entered into during 2021 is considered a hybrid instrument, with a financing component treated as a debt instrument with an embedded at-market derivative. Within the Company’s Condensed Consolidated Balance Sheets, the financing components are carried at amortized cost and the embedded at-market derivatives are carried at fair value.

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

The following table summarizes the Company's derivatives financial instruments:

Asset Derivatives Liability Derivatives
As of
September 25, 2021
As of
September 25, 2021
As of
December 26, 2020
Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value
Derivatives designated as hedging instruments:
2021 Swap 1 Other non-current assets $ 484 Other accrued expenses $ (330) $ —
2021 Swap 2 Other non-current assets 691 Other accrued expenses (511) —
2021 Swap 3 Other non-current assets 3
Other accrued expenses/other non-current liabilities (1)
(2,353) —
Total hedging instruments $ 1,178 $ (3,194) $ —
Derivatives not designated as hedging instruments:
2018 Swap 1 $ — $ — Other accrued expenses $ (709)
2018 Swap 2 — — Other non-current liabilities (3,484)
Total non-hedging instruments $ — $ — $ (4,193)

~~(1)~~ ~~2021 Swap 3 has $1,882 included in other accrued expenses and $471 included in other non-current liabilities.~~


	Asset Derivatives					Liability Derivatives
	As of September 24, 2022			As of December 25, 2021			As of September 24, 2022		As of December 25, 2021
	Balance Sheet Location	Fair Value		Fair Value				Balance Sheet Location	Fair Value		Fair Value
Derivatives designated as hedging instruments:
2021 Swap 1	Other current assets/other assets	$	9,426	$	1,513			Other accrued expenses	$	—	$	(170)
2021 Swap 2	Other current assets/other assets	14,135		2,250				Other accrued liabilities	—		(270)
2021 Swap 3	Other current/other non-current assets	310		59				Other accrued liabilities/other non-current liabilities	(471)		(1,880)
Total hedging instruments		$	23,871	$	3,822				$	(471)	$	(2,320)

Additional information with respect to the fair value of derivative instruments is included in Note 1817 - Fair Value Measurements.

~~18.~~17. Fair Value Measurements:

The Company uses the accounting guidance that applies to all assets and liabilities that are being measured and reported on a fair value basis. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:


Level 1:						Quoted market prices in active markets for identical assets or liabilities.
Level 2:						Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3:						Unobservable inputs reflecting the reporting entity’s own assumptions.

The accounting guidance establishes a hierarchy which requires an entity to maximize the use of quoted market prices and

minimize the use of unobservable inputs. An asset or liability's level is based on the lowest level of input that is significant to

the fair value measurement.

The following tables set forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis during the period, by ~~level,~~Level, within the fair value hierarchy:


	As of September 24, 2022
	Level 1		Level 2		Level 3		Total
Trading securities	$	1,167	$	—	$	—	$	1,167
Interest rate swaps	—		23,400		—		23,400

Contingent consideration payable	—		—		(9,305)		(9,305)

	As of December 25, 2021
	Level 1		Level 2		Level 3		Total
Trading securities	$	1,686	$	—	$	—	$	1,686
Interest rate swaps	—		1,502		—		1,502

Contingent consideration payable	—		—		(12,347)		(12,347)

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HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

As of September 25, 2021
Level 1 Level 2 Level 3 Total
Trading securities $ 1,618 $ — $ — $ 1,618
Interest rate swaps — (2,016) — (2,016)
Contingent consideration payable — — (13,061) (13,061)
Public warrants (49,500) — — (49,500)
Private warrants — — (31,680) (31,680)
As of December 26, 2020
Level 1 Level 2 Level 3 Total
Trading securities $ 1,911 $ — $ — $ 1,911
Interest rate swaps — (4,193) — (4,193)
Contingent consideration payable — — (14,197) (14,197)

Trading securities are valued using quoted prices on an active exchange. Trading securities represent assets held in a Rabbi Trust to fund deferred compensation liabilities and are included as ~~other~~Other assets on the accompanying Condensed Consolidated Balance Sheets.

The Company utilizes interest rate swap contracts to manage our targeted mix of fixed and floating rate debt, and these contracts are valued using observable benchmark rates at commonly quoted intervals for the full term of the swap contracts. As of September ~~25, 2021~~24, 2022 and December ~~26, 2020,~~25, 2021, the Company's interest rate swaps were recorded on the accompanying Condensed Consolidated Balance Sheets in accordance with ASC 815.

The contingent consideration represents future potential earn-out payments related to the Resharp acquisition in fiscal 2019 and the Instafob acquisition in the first quarter of 2020. The estimated fair value of the contingent earn-outs was determined using a Monte Carlo analysis examining the frequency and mean value of the resulting earn-out payments. The resulting value captures the risk associated with the form of the payout structure. The risk neutral method is applied, resulting in a value that captures the risk associated with the form of the payout structure and the projection risk. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the estimated value of the liability. As of September 24, 2022, the total contingent consideration was recorded as $678 in other accrued expenses and $8,627 in other non-current liabilities on the Condensed Consolidated Balance Sheets, in addition to $116 in payments made during the year. As of December 25, 2021, the total contingent consideration was recorded as ~~$472 of~~$476 in other accrued expenses and ~~$12,589~~$11,871 in other non-current liabilities on the Condensed Consolidated Balance ~~Sheets. As~~Sheets in addition to $36 of ~~December 26, 2020,~~payments made during the ~~total contingent consideration was recorded as $417 of other accrued expenses and $13,780 in other non-current liabilities on the Condensed Consolidated Balance Sheets.~~year. As of September ~~25, 2021~~24, 2022, compared to December ~~26, 2020,~~25, 2021, the Company recorded a ~~$692~~$2,718 and ~~$418~~$208 decrease in the Resharp and Instafob contingent consideration liability, respectively. The total ~~$1,110~~$2,926 gain on the revaluation was determined by using a simulation model of the Monte Carlo analysis that included updated projections applicable to the liability as of September ~~25, 2021~~24, 2022 compared to the prior valuation period and was recorded within other income in the Condensed Consolidated Statements of Comprehensive ~~Income.~~

The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s condensed consolidated balance sheets. The warrant liabilities are measured at fair value upon assumption and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed consolidated statements of operations. The Public Warrants are considered part of level 1 of the fair value hierarchy, as those securities are traded on an active public market. At the Closing Date and at September 25, 2021, the Company valued the Private Warrants using Level 3 of the fair value hierarchy. The Private Warrants were valued using a Modified Black Scholes Model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants are the share price of the Company's common stock, the risk free rate, and the expected volatility of the Company’s common stock. The expected volatility of the Company’s common stock was estimated to be approximately 35% and the risk free rate was 0.93% in the valuation as of September 25, 2021.

The fair value of the Company's fixed rate senior notes and junior subordinated debentures as of September 25, 2021 and December 26, 2020 were determined by utilizing current trading prices obtained from indicative market data. As a result, the fair value measurements of the Company's senior term notes and debentures are considered to be Level 2. The Company fully redeemed the 6.375% Senior Notes and Junior Subordinated Debentures in the third quarter of 2021. See Note 12 - Long Term Debt for additional details.

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~~HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands)~~

September 25, 2021 December 26, 2020
Carrying
Amount Estimated
Fair Value Carrying
Amount Estimated
Fair Value
6.375% Senior Notes $ — $ — $ 328,333 $ 327,525
Junior Subordinated Debentures — — 123,295 128,022

Income (Loss).

Cash, accounts receivable, short-term borrowings and accounts payable ~~and accrued liabilities~~ are reflected in the Condensed Consolidated ~~Financial Statements~~Balance Sheets at book value, which approximates fair value, due to the short-term nature of these instruments. The carrying amount of the long-term debt under the revolving credit facility approximates the fair value at September ~~25, 2021~~24, 2022 and December ~~26, 2020~~25, 2021 as the interest rate is variable and approximates current market rates. The Company also believes the carrying amount of the long-term debt under the senior term loan approximates the fair value at September ~~25, 2021~~24, 2022 and December ~~26, 2020~~25, 2021 because, while subject to a minimum LIBOR floor rate, the interest rate approximates current market rates of debt with similar terms and comparable credit risk.

Additional information with respect to the derivative instruments is included in Note 16 - Derivatives and Hedging.

~~19.~~

18. Segment Reporting:

The Company’s segment reporting structure uses the Company’s management reporting structure as the foundation for how the Company manages its business. The Company periodically evaluates its segment reporting structure in accordance with ASC 350-20-55 and has concluded that it has 3three reportable segments as of September ~~25, 2021:~~24, 2022: Hardware and Protective Solutions, Robotics and Digital Solutions, and Canada. The Company evaluates the performance of its segments based on revenue and income (loss) from operations, and does not include segment assets nor non-operating income/expense items for management reporting purposes.

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Table of Contents

HILLMAN SOLUTIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands)

The table below presents revenues and income (loss) from operations for our reportable segments for the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 and thirteen and thirty-nine weeks ended September ~~26, 2020.~~25, 2021.


		Thirteen Weeks Ended September 25, 2021		Thirteen Weeks Ended September 26, 2020		Thirty-nine Weeks Ended September 25, 2021		Thirty-nine Weeks Ended September 26, 2020			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
Revenues	Revenues									Revenues
Hardware and Protective Solutions	Hardware and Protective Solutions	$	261,456	$	300,307	$	775,514	$	782,983	Hardware and Protective Solutions	$	271,853	$	261,456	$	818,110	$	775,514
Robotics and Digital Solutions	Robotics and Digital Solutions	67,499		59,186		189,729		157,691		Robotics and Digital Solutions	65,632		67,499		192,216		189,729
Canada	Canada	35,525		39,187		116,233		100,552		Canada	41,053		35,525		125,339		116,233
Total revenues	Total revenues	$	364,480	$	398,680	$	1,081,476	$	1,041,226	Total revenues	$	378,538	$	364,480	$	1,135,665	$	1,081,476
Segment income (loss) from operations	Segment income (loss) from operations									Segment income (loss) from operations
Hardware and Protective Solutions	Hardware and Protective Solutions	$	(24,901)	$	30,107	$	(8,856)	$	63,383	Hardware and Protective Solutions	$	7,113	$	(24,901)	$	15,255	$	(8,856)
Robotics and Digital Solutions	Robotics and Digital Solutions	11,158		3,046		17,858		4,432		Robotics and Digital Solutions	(14,094)		11,158		4,198		17,858
Canada	Canada	448		1,949		2,992		(2,539)		Canada	6,532		448		16,720		2,992
Total (loss) income from operations		$	(13,295)	$	35,102	$	11,994	$	65,276
Total income (loss) from operations										Total income (loss) from operations	$	(449)	$	(13,295)	$	36,173	$	11,994

Page 3027

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion provides information which the Company’s management believes is relevant to an assessment and understanding of the Company’s operations and financial condition. This discussion should be read in conjunction with the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and accompanying notes in addition to the ~~consolidated statements~~Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December ~~26, 2020.~~25, 2021.

Forward-Looking Statements

~~Certain~~This quarterly report contains certain forward-looking statements, including, but not limited to, certain disclosures related to acquisitions, refinancing, capital expenditures, resolution of pending litigation, and realization of deferred tax assets, ~~contained in this quarterly report involve substantial~~which are not historical facts and are subject to numerous assumptions, risks, and ~~uncertainties~~uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and ~~may constitute~~expectations, are forward-looking statements.

All forward-looking statements ~~within~~are made in good faith by the ~~meaning~~company and are intended to qualify for the safe harbor from liability established by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of ~~1995, as amended. In some cases, you can identify~~1995. You should not rely on these forward-looking statements ~~by terminology~~as predictions of future events. Words such as ~~“may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” “project,” or the negative of~~"expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," “target”, “goal”, "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such ~~terms or other similar expressions.~~

forward-looking statements. These forward-looking statements ~~are not historical facts, but rather are based on management’s current~~include, without limitation, the Company’s expectations ~~assumptions, and projections about~~with respect to future ~~events. Although management believes that the expectations, assumptions, and projections on which these~~performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are ~~based~~outside the Company's control and are ~~reasonable, they nonetheless could prove~~difficult to be inaccurate, and as a result, the forward-looking statements based on those expectations, assumptions, and projections also could be inaccurate. Forward-looking statements are not guarantees of future performance. Instead, forward-looking statements are subject to known and unknown risks, uncertainties, and assumptionspredict. Factors that may cause such differences include, but are not limited to: (1) unfavorable economic conditions that may affect operations, financial condition and cash flows including spending on home renovation or construction projects, inflation, recessions, instability in the financial markets or credit markets; (2) increased supply chain costs, including raw materials, sourcing, transportation and energy; (3) the highly competitive nature of the markets that we serve (4) ability to continue to innovate with new products and services; (5) seasonality; (6) large customer concentration; (7) ability to recruit and retain qualified employees; (8) the outcome of any legal proceedings that may be instituted against the Company (9) adverse changes in currency exchange rates; (10) the impact of COVID-19 on the Company’s ~~strategy, planning, actual results, levels of activity, performance,~~business; or achievements to be materially different from any strategy, planning, future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Actual results(11) regulatory changes and potential legislation that could ~~differ materially from those currently anticipated as a result of a number~~adversely impact financial results. The foregoing list of factors ~~including the~~is not exclusive, and readers should also refer to those risks ~~and uncertainties discussed under the caption “Risk Factors” set forth in Item 1A of the Company’s annual financial statements for the year ended December 26, 2020~~that are included in the ~~S-1 filed on August 25, 2021~~Company’s filings with the Securities and Exchange Commission (“SEC”)., including the Annual Report on Form 10-K filed on March 16, 2022. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such ~~forward-looking~~forward looking statements.

~~All forward-looking statements attributable to~~

Except as required by applicable law, the Company does not undertake or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this report and the risks and uncertainties discussed under the caption “Risk Factors” set forth in Item 1A of the Company’s annual financial statements for the year ended December 26, 2020 included in the S-1 filed on August 25, 2021 with the Securities and Exchange Commission (“SEC”); they should not be regarded as a representation by the Companyaccept any obligation or undertaking to release publicly any ~~other individual. We undertake no obligation~~updates or revisions to ~~update publicly or revise~~ any forward-looking statements ~~whether as a result of new information, future events, or otherwise. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed~~ in this ~~report might not occur~~communication to reflect any change in its expectations or ~~be materially different from those discussed.~~any change in events, conditions or circumstances on which any such statement is based.

~~Page 31~~

General

Hillman Solutions ~~Corp.and~~Corp. and its wholly-owned subsidiaries (collectively, ~~"Hillman"~~“Hillman” or ~~"Company"~~“Company”) are one of the largest providers of hardware-related products and related merchandising services to retail markets in North America. Our principal business is operated through ~~the~~our wholly-owned subsidiary, The Hillman Group, Inc. and its wholly-owned subsidiaries (collectively, “Hillman Group”). Hillman Group sells its products to hardware stores, home centers, mass merchants, pet supply stores, and other retail outlets principally in the United States, Canada, Mexico, Latin America, and the Caribbean. Product lines include thousands of small parts such as fasteners and related hardware items; threaded rod and metal shapes; keys ~~key duplication systems,~~ and accessories; builder's hardware; personal protective ~~equipment;~~equipment, such as gloves and eye-wear; and identification items, such as tags and letters, numbers, and signs. We support ~~our~~ product sales with services that include design and installation of merchandising systems, ~~and~~ maintenance of appropriate in-store inventory ~~levels.~~levels, and break-fix for our robotics kiosks.

Our headquarters are located at 10590 Hamilton Avenue, Cincinnati, Ohio. We maintain a website at www.hillmangroup.com.

Information contained or linked on our website is not incorporated by reference into this quarterly report and should not be

considered a part of this quarterly report.

Page 28

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~~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”). Unless the context indicates otherwise, the discussion of the Company and ~~it's~~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 1 - Basis of Presentation of the Notes to Condensed Consolidated Financial Statements for additional information.

In connection with the Closing, the Company entered into a new credit agreement with Jefferies Finance LLC, as administrative agent, and the lenders and other parties thereto (the “Term Credit Agreement”), which provided for a new funded term loan facility of $835.0 million and a delayed draw term loan facility of $200.0 million (of which $16.0 million was drawn). The Company also ~~also~~ entered into an amendment to their existing asset-based revolving credit agreement ~~extending~~(the “ABL Amendment”) with Barclays Bank PLC, as administrative agent, and the lenders and other parties thereto (the “ABL Credit Agreement”), increasing the aggregate commitments thereunder to $250.0 million, extended the maturity and conformed certain provisions to the Term Credit Agreement. The proceeds of the funded term loans under the Term Credit Agreement and revolving credit loans under the ABL Credit Agreement were used, together with other available cash, to (1) refinance in full all outstanding term loans and to terminate all outstanding commitments under the credit agreement, dated as of May 31, 2018, (2) refinance outstanding revolving credit loans, and (3) redeem in full senior notes due July 15, 2022 (the “6.375% Senior Notes”). ~~Additionally, we fully redeemed~~

In anticipation of the Business Combination and the refinancing described above, on July 13, 2021, the Company delivered a notice to redeem in full 11.6% Junior Subordinated ~~Debentures. In connection~~Debentures due September 30, 2027 (the “Junior Subordinated Debentures”) issued under the Indenture, dated as of September 5, 1997 (as amended and supplemented, the “Debentures Indenture”), between The Hillman Companies and The Bank of New York Mellon, a New York banking corporation, as Trustee (the “Trustee”) and deposited an amount with the ~~refinancing we incurred~~Trustee sufficient to satisfy and discharge the Debentures Indenture, which is no longer in effect. Notices to redeem 4,217,837 trust preferred securities (the “Trust Preferred Securities”) issued in a ~~loss~~public offering by the Hillman Group Capital Trust ("Trust") and 130,449 of ~~$8.1 million~~trust common securities (the “Trust Common Securities”) issued by the Trust to Hillman Companies were also delivered on July 13, 2021. Upon the payment of the redemption price for the Debentures on August 12, 2021, the Trust redeemed the Trust Preferred Securities and ~~paid $21.0~~the Trust Common Securities, which as of August 12, 2021 was no longer be deemed to be outstanding. The last day of trading for the Trust Preferred Securities on the New York Stock Exchange (the “NYSE”) was August 11, 2021 and the Company voluntarily delisted the Trust Preferred Securities from the NYSE.

On July 29, 2022 the Company amended the asset-based revolving credit agreement (the “ABL Revolver") with Barclays Bank PLC, as administrative agent, and the lenders and other parties thereto (the “ABL Credit Agreement”), increasing the aggregate commitments thereunder to $375,000 and extended the maturity. Portions of the ABL Agreement are separately available for borrowing by the Company's United States subsidiary and Canadian subsidiary for $325,000 and $50,000, respectively. The interest rate for the ABL Revolver is, at the discretion of the Company, adjusted SOFR (or a Canadian banker’s acceptance rate in the case of Canadian Dollar loans) plus a margin varying from 1.25% to 1.75% per annum based on availability or an alternate base rate (or a Canadian prime rate or alternate base rate in the case of Canadian Dollar loans) plus a margin varying from 0.25% to 0.75% per annum based on availability. The stated maturity date of the revolving credit commitments under the ABL Credit Agreement is July 29, 2027. The loans and other amounts outstanding under the ABL Credit Agreement and related documents are guaranteed by The Hillman Companies, Inc., a wholly‑owned subsidiary of the Company, and, subject to certain exceptions, the Borrower’s wholly-owned domestic subsidiaries and are secured by substantially all of the Borrower’s and the guarantors’ assets plus, solely in the case of the Canadian Borrower, its and its wholly-owned Canadian subsidiary’s assets, which has guaranteed by the Canadian portion under the ABL Credit Agreement.

The jury awarded Hy-Ko $16.0 million in ~~financing fees. See~~damages, representing a one-time lump sum royalty payment. 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 (see Note 127 - ~~Long Term Debt~~Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for additional ~~information.~~information).

On April 16, 2021, the Company completed the 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 $39.1 million. The Company entered into an amendment ("OZCO Amendment") to the term loan credit agreement dated May 31, 2018 (the "2018 Term Loan"), which provided $35.0 million of incremental term loan funds to be used to finance the acquisition. Refer to Note 5 - Acquisitions for additional information.

Page 29

Current Economic Conditions

Our business is impacted by general economic conditions in the North American and international markets, particularly the U.S. and Canadian retail markets including hardware stores, home centers, mass merchants, and other retailers.

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China, and has since spread to a number of other countries, including the United States and Canada. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. In 2020, the pandemic had a significant impact on our business, driving high demand for personal protective equipment, including face masks, disposable gloves, sanitizing wipes, and disinfecting sprays. During 2020, at the request of our customers, we began to sell certain categories of protective and cleaning equipment that are not a part of our core product offerings, including wipes, sprays, masks and bulk boxes of disposable gloves. High demand and limited supply of these products available for retail sale drove prices and cost up in 2020. In contrast, in 2021 the pandemic has had less of an impact on our business, economic activity has generally recovered and consumer access to personal protective equipment has normalized. By the end of the third quarter of 2021 our product mix has begun to normalize back to near pre-pandemic levels. In 2021, demand for certain protective product categories softened as vaccines were rolled out supply returned to a more normal level. In the third quarter of 2021, we evaluated our customers' needs and the market conditions and ultimately decided to exit certain protective product categories. In connection with the exit of these product lines, we recorded

~~Page 32~~

~~an inventory valuation charge of $32.0 million including the write off of inventory along with costs for donation and disposal of the remaining inventory on hand.~~

It is possible that the COVID-19 pandemic could further impact our business, the operations of our suppliers and vendors, and the operations of our customers, especially in light of the emergence of new variants which would cause a recurrence of high levels of infection and hospitalization. If we need to close any of our facilities or a critical number of our employees become too ill to work, our distribution network could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, demand for our products could also be materially adversely affected in a rapid manner. The Company continues to experience customer demand both during the thirteen and thirty-nine weeks ended September 25, 2021 and during the subsequent period. Our teams continue to monitor demand disruption and there can be no assurance as to the level of demand that will prevail through the remainder of fiscal 2021. A large portion of our customers continue to operate and sell our products, with some customers reducing operations or restricting some access to portions of the retail space. The magnitude of the financial impact on our quarterly and annual results is dependent on the duration of the COVID-19 pandemic and how quickly the U.S. and Canada economies resume normal operations.

An extended period of global supply chain, workforce availability, and economic disruption could materially affect the Company's business, the results of operations, financial condition, access to sources of liquidity, and the carrying value of goodwill and intangible assets. While a triggering event did not occur during the thirteen and thirty-nine weeks ended September 25, 2021, a prolonged COVID-19 pandemic could negatively impact net sales growth, change key assumptions and other global and regional macroeconomic factors that could result in future impairment charges for goodwill, indefinite-lived intangible assets and definite lived intangible assets. The impact of the COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot predict the extent to which our business, results of operations, financial condition, or liquidity will ultimately be impacted.

We are exposed to the risk of unfavorable changes in foreign currency exchange rates for the U.S. dollar versus local currency of our suppliers located primarily in China and Taiwan. We purchase a significant variety of our products for resale from multiple vendors located in China and Taiwan. The purchase price of these products is routinely negotiated in U.S. dollar amounts rather than the local currency of the vendors and our suppliers' profit margins decrease when the U.S. dollar declines in value relative to the local currency. This puts pressure on our suppliers to increase prices to us. The U.S. dollar ~~increased~~declined in value relative to the CNY by approximately ~~1.7% in 2019, declined by~~ 6.5% in 2020, ~~and~~ declined by ~~1.1%~~2.6% in 2021, and increased by 11.9% during the thirty-nine weeks ended September ~~25, 2021.~~24, 2022. The U.S. dollar declined in value relative to the Taiwan dollar by approximately ~~0.2% in 2019, declined by~~ 7.9% in 2020, ~~and~~ declined by ~~1.5%~~1.4% in 2021, and increased by 14.7% during the thirty-nine weeks ended September ~~25, 2021.~~24, 2022.

In addition, the negotiated purchase price of our products may be dependent upon market fluctuations in the cost of raw materials such as steel, zinc, and nickel used by our vendors in their manufacturing processes. The final purchase cost of our products may also be dependent upon inflation or deflation in the local economies of vendors in China and Taiwan that could impact the cost of labor used in the manufacturing of our products. We identify the directional impact of changes in our product cost, but the quantification of each of these variable impacts cannot be measured as to the individual impact on our product cost with a sufficient level of precision.

Further we are exposed to transportation risk for imported products as well as the transportation and fuel costs associated with our U.S. distribution network. Increasing transportation costs increase our product cost and require us to increase price on the impacted products.

We are also exposed to risk of unfavorable changes in the Canadian dollar exchange rate versus the U.S. dollar. Our sales in Canada are denominated in Canadian dollars while a majority of the products are sourced in U.S. dollars. A weakening of the Canadian dollar versus the U.S. dollar results in lower sales in terms of U.S. dollars while the cost of sales remains unchanged. We have a practice of hedging some of our Canadian subsidiary's purchases denominated in U.S. dollars. The U.S. dollar declined in value relative to the Canadian dollar by approximately ~~4.1% in 2019, declined by~~ 1.9% in 2020, ~~and~~ declined by ~~1.2%~~0.2% in 2021, and increased by 5.9% during the thirty-nine weeks ended September ~~25, 2021.~~24, 2022. We may take pricing action, when warranted, in an attempt to offset a portion of product cost increases. The ability of our operating divisions to institute price increases and seek price concessions, as appropriate, is dependent on competitive market conditions.

We import large quantities of products which are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements and bilateral actions. The U.S. tariffs on steel and aluminum and other imported goods has increased our product costs and required us to increase prices on the affected products.

Results of Operations

The following analysis of results of operations includes a brief discussion of the factors that affected our operating results and a comparative analysis of the thirteen weeks ended September ~~25, 2021~~24, 2022 and the thirteen weeks ended September ~~26, 2020.~~25, 2021.

Page 3330

Thirteen weeks ended September ~~25, 2021~~24, 2022 vs the Thirteen weeks ended September ~~26, 2020~~25, 2021


		Thirteen Weeks Ended September 25, 2021				Thirteen Weeks Ended September 26, 2020					Thirteen Weeks Ended September 24, 2022				Thirteen Weeks Ended September 25, 2021
(dollars in thousands)	(dollars in thousands)	Amount		% of Net Sales		Amount		% of Net Sales		(dollars in thousands)	Amount		% of Net Sales		Amount		% of Net Sales
Net sales	Net sales	$	364,480	100.0	%	$	398,680	100.0	%	Net sales	$	378,538	100.0	%	$	364,480	100.0	%
Cost of sales (exclusive of depreciation and amortization shown separately below)	Cost of sales (exclusive of depreciation and amortization shown separately below)	236,999		65.0	%	227,481		57.1	%	Cost of sales (exclusive of depreciation and amortization shown separately below)	214,802		56.7	%	236,999		65.0	%
Selling, general and administrative expenses	Selling, general and administrative expenses	110,447		30.3	%	107,333		26.9	%	Selling, general and administrative expenses	133,246		35.2	%	110,447		30.3	%
Depreciation	Depreciation	14,454		4.0	%	15,926		4.0	%	Depreciation	14,312		3.8	%	14,454		4.0	%
Amortization	Amortization	15,504		4.3	%	14,883		3.7	%	Amortization	15,557		4.1	%	15,504		4.3	%
Other (income) expense	Other (income) expense	371		0.1	%	(2,045)		(0.5)	%	Other (income) expense	1,070		0.3	%	371		0.1	%
(Loss) income from operations		(13,295)		(3.6)	%	35,102		8.8	%
Income from operations										Income from operations	(449)		(0.1)	%	(13,295)		(3.6)	%
Loss on change in fair value of warrant liability	Loss on change in fair value of warrant liability	3,990		1.1	%	—		—	%	Loss on change in fair value of warrant liability	—		—	%	3,990		1.1	%
Interest expense, net of investment income	Interest expense, net of investment income	13,228		3.6	%	23,813		6.0	%	Interest expense, net of investment income	14,696		3.9	%	13,228		3.6	%
Mark-to-market adjustment of interest rate swap	Mark-to-market adjustment of interest rate swap	(261)		(0.1)	%	(773)		(0.2)	%	Mark-to-market adjustment of interest rate swap	—		—	%	(261)		(0.1)	%
Refinancing charges	Refinancing charges	8,070		52.1	%	—		—	%	Refinancing charges	—		—	%	8,070		2.2	%
Income (loss) before income taxes	Income (loss) before income taxes	(38,322)		(10.5)	%	12,062		3.0	%	Income (loss) before income taxes	(15,145)		(4.0)	%	(38,322)		(10.5)	%
Income tax expense (benefit)	Income tax expense (benefit)	(5,798)		(1.6)	%	2,758		0.7	%	Income tax expense (benefit)	(5,679)		(1.5)	%	(5,798)		(1.6)	%
Net income (loss)	Net income (loss)	$	(32,524)	(8.9)	%	$	9,304	2.3	%	Net income (loss)	$	(9,466)	(2.5)	%	$	(32,524)	(8.9)	%

Adjusted EBITDA(1)	Adjusted EBITDA(1)	$	56,528	15.5	%	$	74,983	18.8	%	Adjusted EBITDA(1)	$	58,973	15.6	%	$	56,528	15.5	%

(1)Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net income to Adjusted EBITDA.

Net Sales

Net sales for the ~~third quarter of 2021~~thirteen weeks ended September 24, 2022 were ~~$364.5~~$378.5 million, ~~a decrease~~an increase of approximately ~~$34.2~~$14.1 million compared to net sales of ~~$398.7~~$364.5 million for the ~~third quarter of 2020. Sales of personal protective equipment decreased~~thirteen weeks ended September 25, 2021. Fastening and hardware sales increased $20.9 million driven by ~~$25.9~~$24.2 million ~~due to lower demand for COVID-19 protective and cleaning products~~ in the third quarter of 2021. Sales of hardware products decreased by $12.9 million. Sales in Canada decreased $3.7 million. The decreases in hardware products and sales in Canada were primarily due to softer retail sales partially offset by price increases ~~taken in the third quarter of 2021~~ in response to inflationary pressures, ~~in the market related to the cost of products, inbound and outbound transportation costs, and personnel costs. These decreases were~~ partially offset by decreased volume driven by lower demand. Sales in Canada increased $5.5 million primarily driven by approximately $7.5 million in price increases partially offset by decreased volume driven by lower demand. Partially offsetting these increases, sales of ~~keys~~protective products decreased by $10.5 million due to lower promotional sales and ~~key accessories of $7.6 million. Key and key accessory sales were negatively impacted in the prior year by reduced~~ retail ~~foot traffic and restricted access to key duplicating kiosks as a result of COVID-19.~~softness.

Cost of Sales

Our cost of sales ("COS") was $214.8 million, or 56.7% of net sales, in the thirteen weeks ended September 24, 2022, a decrease of approximately $22.2 million compared to $237.0 million, or 65.0% of net sales, in the ~~third quarter~~thirteen weeks ended September 25, 2021. Cost of ~~2021, an increase of approximately $9.5 million compared to $227.5 million, or 57.1%~~sales as a percentage of net sales in the ~~third quarter of 2020. The increase of 7.9% in cost of sales, expressed as a percent of net sales, in the third quarter of 2021~~thirteen weeks ended September 24, 2022 decreased (8.3)% compared to the third quarter of 2020 was primarily due to an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings.thirteen weeks ended September 25, 2021. In the third quarter of 2021, we evaluated our customers' needs and the market conditions and ultimately decided to exit certain protective product categories related to COVID-19, including cleaning wipes, disinfecting sprays, face masks, and certain disposable ~~gloves. The remaining increase was primarily due to inflation.~~gloves which caused an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million.

Page 3431

Expenses

Selling, general, and administrative ("SG&A") expenses were ~~approximately~~$133.2 million in the thirteen weeks ended September 24, 2022, an increase of $22.8 million, compared to $110.4 million in the thirteen weeks ended September 25, ~~2021, an increase of approximately $3.1 million, compared to $107.3 million in the thirteen weeks ended September 26, 2020.~~2021. The following changes ~~in underlying trends~~ impacted the change in operating expenses:

•Selling expense was $44.0 million in the thirteen weeks ended September 24, 2022, an increase of $2.0 million compared to $42.0 million in the third quarter of ~~2021, an increase of $2.6 million compared to $39.4 million in the third quarter of 2020.~~2021. The increase in selling expense was primarily due to increased ~~marketing,~~ variable selling and compensation ~~and travel and entertainment expense~~costs in the ~~third quarter of 2021.~~thirteen weeks ended September 24, 2022.

•Warehouse and delivery expenses were $42.6 million in the thirteen weeks ended September 24, 2022, a decrease of $2.3 million compared to $44.9 million in the ~~third quarter of 2021, an increase of $1.0 million compared to $43.9 million in the third quarter of 2020.~~thirteen weeks ended September 25, 2021. The ~~additional~~reduced expense was primarily driven by ~~inflation.~~lower transportation costs.

•General and administrative (“G&A”) expenses were $46.7 million in the thirteen weeks ended September 24, 2022, an increase of $23.2 million compared to $23.5 million in the ~~third quarter of 2021, a decrease of $0.5~~thirteen weeks ended September 25, 2021. The $23.2 million ~~compared~~increase was primarily due to ~~$24.0 million~~higher charges related to the litigation with Hy-Ko in the ~~third quarter of 2020. The $0.5 million decrease was primarily driven by lower legal fees and acquisition related expenses along with lower variable compensation. These were~~current year partially offset by ~~increased stock based compensation~~KeyMe in prior year (see Note 27 - ~~Summary of Significant Accounting Policies~~Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for additional information).

Depreciation expense was $14.3 million in the thirteen weeks ended September 24, 2022 which was comparable to depreciation expense of $14.5 million in the ~~third quarter of 2021 compared to depreciation~~thirteen weeks ended September 25, 2021. Amortization expense ~~of $15.9~~was $15.6 million in the ~~third quarter of 2020. The decrease~~thirteen weeks ended September 24, 2022 which was ~~due~~comparable to ~~certain assets becoming fully depreciated. Amortization expense was~~ $15.5 million in the ~~third quarter of 2021 which was compared to $14.9 million in the third quarter of 2020. The increase was primarily due to the acquisition of Ozco in the current year.~~thirteen weeks ended September 25, 2021.

Other (income) expense was $1.1 million in the thirteen weeks ended September 24, 2022 compared to other (income) expense of $0.4 million in the ~~third quarter of 2021 compared to other income of $2.0 million in the third quarter of 2020.~~thirteen weeks ended September 25, 2021. Other expense in the ~~third quarter~~thirteen weeks ended September 24, 2022 was primarily comprised of ~~2021 was comprised primarily of exchange rate losses of $0.3 million along with~~ a ~~a $0.1~~$0.7 million loss on the revaluation of the contingent consideration associated with the acquisitions of Resharp and Instafob (see Note 1817 - Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements for additional information). along with exchange rate losses of $0.6 million. In the ~~third quarter of 2020~~thirteen weeks ended September 25, 2021 other income consisted primarily of $1.8 million in cash received from the Canadian government as a part of the Canada Emergency Wage Subsidy program for relief during the second quarter shutdown in Canada during the COVID-19 outbreak. We also recordedan exchange rate ~~gains~~loss of $0.3 million inalong with a $0.1 million loss on the ~~third quarter~~revaluation of ~~2020.~~

the contingent consideration associated with the acquisitions of Resharp and Instafob.

Page 3532

Thirty-nine weeks ended September ~~25, 2021~~24, 2022 vs the Thirty-nine weeks ended September ~~26, 2020~~25, 2021

Thirty-nine Weeks Ended
September 25, 2021 Thirty-nine Weeks Ended
September 26, 2020
(dollars in thousands) Amount % of
Net Sales Amount % of
Net Sales
Net sales $ 1,081,476 100.0 % $ 1,041,226 100.0 %
Cost of sales (exclusive of depreciation and amortization shown separately below) 654,264 60.5 % 590,294 56.7 %
Selling, general and administrative expenses 325,288 30.1 % 292,056 28.0 %
Depreciation 46,065 4.3 % 50,673 4.9 %
Amortization 45,827 4.2 % 44,596 4.3 %
Other income (1,962) (0.2) % (1,669) (0.2) %
Income from operations 11,994 1.1 % 65,276 6.3 %
Loss on change in fair value of warrant liability 3,990 0.4 % — — %
Interest expense, net of investment income 57,521 5.3 % 77,018 7.4 %
Mark-to-market adjustment of interest rate swap (1,685) (0.2) % 1,169 0.1 %
Refinancing charges 8,070 17.6 % — — %
Loss before income taxes (55,902) (5.2) % (12,911) (1.2) %
Income tax expense (benefit) (11,023) (1.0) % (2,374) (0.2) %
Net loss $ (44,879) (4.1) % $ (10,537) (1.0) %
Adjusted EBITDA(1)
$ 168,806 15.6 % $ 178,114 17.1 %


	Thirty-nine Weeks Ended September 24, 2022				Thirty-nine Weeks Ended September 25, 2021
(dollars in thousands)	Amount		% of Net Sales		Amount		% of Net Sales
Net sales	$	1,135,665	100.0	%	$	1,081,476	100.0	%
Cost of sales (exclusive of depreciation and amortization shown separately below)	648,221		57.1	%	654,264		60.5	%
Selling, general and administrative expenses	366,013		32.2	%	325,288		30.1	%
Depreciation	41,738		3.7	%	46,065		4.3	%
Amortization	46,644		4.1	%	45,827		4.2	%
Other (income) expense	(3,124)		(0.3)	%	(1,962)		(0.2)	%
(Loss) income from operations	36,173		3.2	%	11,994		1.1	%
Loss on change in fair value of warrant liability	—		—	%	3,990		0.4	%
Interest expense, net of investment income	38,857		3.4	%	57,521		5.3	%
Mark-to-market adjustment of interest rate swap	—		—	%	(1,685)		(0.2)	%
Refinancing charges	—		—	%	8,070		0.7	%
Income (loss) before income taxes	(2,684)		(0.2)	%	(55,902)		(5.2)	%
Income tax expense (benefit)	(147)		—	%	(11,023)		(1.0)	%
Net income (loss)	$	(2,537)	(0.2)	%	$	(44,879)	(4.1)	%

Adjusted EBITDA(1)	$	165,260	14.6	%	$	168,806	15.6	%

Net Sales

Net sales for the thirty-nine weeks ended September ~~25, 2021~~24, 2022 were ~~$1,081.5~~$1,135.7 million, an increase of approximately ~~$40.3~~$54.2 million compared to net sales of ~~$1,041.2~~$1,081.5 million for the thirty-nine weeks ended September 26, 2020. Key and engraving sales increased $31.9 million and sales in Canada increased $15.7 million. Key and engraving sales and sales in Canada were both negatively impacted by low retail foot traffic and limited access to key and engraving machines in the thirty-nine weeks ended September 26, 2020 due to COVID-19.25, 2021. Sales of hardware products increased by ~~$13.9~~$67.8 million driven by ~~strong retail demand and~~$80.2 million in price increases ~~taken in the third quarter of 2021~~ in response to inflationary pressures in the market, ~~related to the cost of products, inbound and outbound transportation costs, and personnel costs. These increases were~~ partially offset by decreased volume driven by lower demand. Net sales in our Canada operating segment increased by $9.1 million primarily driven $22.2 million in price increases partially offset by decreased volume driven by lower demand. Sales of personal protective equipment ~~which~~ decreased by ~~$21.4~~$25.2 million due to lower demand for COVID-19 protective and cleaning ~~equipment~~products in ~~2021.~~the third quarter of 2022, partially offset by price increases of $7.1 million.

Cost of Sales

Our cost of sales was $648.2 million, or 57.1% of net sales, in the thirty-nine weeks ended September 24, 2022, a decrease of approximately $6.0 million compared to $654.3 million, or 60.5% of net sales, in the thirty-nine weeks ended September 25, ~~2021, an increase~~2021. The decrease of ~~approximately $64.0 million compared to $590.3 million, or 56.7% of net sales, in the thirty-nine weeks ended September 26, 2020. The increase of 3.8%~~3.4% in cost of sales, expressed as a percent of net sales, in ~~2021~~2022 compared to the thirty-nine weeks ended September ~~26, 2020~~25, 2021 was primarily due to an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million ~~primarily related to~~in 2021 caused by the strategic review of our COVID-19 related product offerings. In the third quarter of 2021, we evaluated our customers' needs and the market conditions and ultimately decided to exit certain protective product categories related to COVID-19, including cleaning wipes, disinfecting sprays, face masks, and certain disposable gloves. The remaining increase was primarily due to inflation.

~~Page 36~~

Expenses

Selling, general, and administrative ("SG&A") expenses were approximately $366.0 million in the thirty-nine weeks ended September 24, 2022, an increase of approximately $40.7 million, compared to $325.3 million in the thirty-nine weeks ended September 25, ~~2021, an increase of approximately $33.2 million, compared to $292.1 million in the thirty-nine weeks ended September 26, 2020.~~2021. The following changes ~~in underlying trends~~ impacted the change in operating expenses:

Page 33

•Selling expense was $131.5 million in the thirty-nine weeks ended September 24, 2022, an increase of $12.0 million compared to $119.5 million in the thirty-nine weeks ended September 25, ~~2021, an increase of $8.1 million compared to $111.4 million in the thirty-nine weeks ended September 26, 2020.~~2021. The increase in selling expense was primarily due to increased ~~marketing,~~ variable selling and compensation ~~and travel and entertainment expense~~costs in the thirty-nine weeks ended September ~~25, 2021.~~24, 2022.

•Warehouse and delivery expenses were $136.3 million in the thirty-nine weeks ended September 24, 2022, an increase of $6.9 million compared to $129.4 million in the thirty-nine weeks ended September 25, ~~2021, an increase of $10.8 million compared to $118.6 million in the thirty-nine weeks ended September 26, 2020.~~2021. The additional expense was primarily driven by ~~higher sales volume~~inflation in warehouse, wages and ~~inflation.~~transportation costs.

•General and administrative (“G&A”) expenses were $98.3 million in the thirty-nine weeks ended September 24, 2022, an increase of $21.8 million compared to $76.5 million in the thirty-nine weeks ended September 25, ~~2021, an~~2021. The increase ~~of $14.5 million compared to $62.0 million in the thirty-nine weeks ended September 26, 2020. In the thirty-nine weeks ended September 25, 2021 we incurred $19.7 million of~~was primarily driven by higher legal and consulting ~~expense associated with the pending merger with Landcadia along with increased legal fees~~expenses associated with our litigation with ~~KeyMe~~HyKo (see Note 7 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for additional information). ~~We also~~Additionally, we incurred increased ~~stock based~~variable compensation ~~(see Note 2 - Summary of Significant Accounting Policies of~~in the ~~Notes to Condensed Consolidated Financial Statements for additional information). These increases were partially offset by decreased variable compensation.~~thirty-nine weeks ended September 24, 2022.

Depreciation expense was $41.7 million in the thirty-nine weeks ended September 24, 2022 compared to depreciation expense of $46.1 million in the thirty-nine weeks ended September 25, ~~2021 compared to depreciation expense of $50.7 million in the thirty-nine weeks ended September 26, 2020.~~2021. The decrease was due to certain assets becoming fully depreciated. Amortization expense was $46.6 million in the thirty-nine weeks ended September 24, 2022 compared to amortization expense of $45.8 million in the thirty-nine weeks ended September 25, ~~2021 which~~2021. The increase was ~~comparable~~primarily driven by the acquisitions of Ozco and Monkey Hook (see Note 5 - Acquisitions of the Notes to ~~$44.6~~Condensed Consolidated Financial Statements for additional information).

Other (income) expense was $(3.1) million in the thirty-nine weeks ended September ~~26, 2020. The increase was primarily due~~24, 2022 compared to ~~the acquisition of Ozco in the current year.~~

~~Other income was $2.0~~$(2.0) million in the thirty-nine weeks ended September 25, ~~2021 compared to other income of $1.7 million~~2021. Other (income) expense in the thirty-nine weeks ended September ~~26, 2020. Other income in the thirty-nine weeks ended September 25, 2021~~24, 2022 was comprised primarily of a ~~$1.1~~$2.9 million gain on the revaluation of the contingent consideration associated with the acquisitions of Resharp and Instafob, (see Note 1817 - Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements for additional information) ~~along with exchange rate gains of $0.9 million.~~. In the thirty-nine weeks ended September ~~26, 2020~~25, 2021 other income ~~consisted~~was primarily comprised of ~~$1.8~~exchange rate gains of $1.1 million ~~in cash received from the Canadian government as~~along with a ~~part of the Canada Emergency Wage Subsidy program for relief during the second quarter shutdown in Canada during the COVID-19 outbreak. We also recorded a $1.3~~$1.1 million gain on the revaluation of the contingent consideration associated with the ~~acquisitions~~acquisition of Resharp, ~~and Instafob,~~ (see Note 1817 - Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements for additional information) ~~offset by exchange rate gains of $0.3 million.~~.

~~Page 37~~

Results of Operations – Operating Segments

The following tables provides supplemental information regarding our net sales and profitability by operating segment for the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirteen and thirty-nine weeks ended September ~~26, 2020~~25, 2021 (dollars in thousands):

Hardware and Protective Solutions


		Thirteen Weeks Ended September 25, 2021		Thirteen Weeks Ended September 26, 2020		Thirty-nine Weeks Ended September 25, 2021		Thirty-nine Weeks Ended September 26, 2020			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
Hardware and Protective Solutions	Hardware and Protective Solutions									Hardware and Protective Solutions
Revenues		$	261,456	$	300,307	$	775,514	$	782,983
Segment (loss) income from operations		(24,901)		30,107		(8,856)		63,383
Segment Revenues										Segment Revenues	$	271,853	$	261,456	$	818,110	$	775,514
Segment Income from operations										Segment Income from operations	7,113		(24,901)		15,255		(8,856)
Adjusted EBITDA(1)	Adjusted EBITDA(1)	30,634		52,623		95,780		123,989		Adjusted EBITDA(1)	28,693		30,634		80,569		95,780

Page 34

Thirteen weeks ended September 24, 2022 vs the Thirteen weeks ended September 25, 2021

Net Sales

Net sales for our Hardware and Protective Solutions operating segment increased by $10.4 million in thirteen weeks ended September 24, 2022 to $271.9 million as compared to $261.5 million in the thirteen weeks ended September 25, 2021. Fastening and hardware sales increased by $20.9 million driven by $24.2 million in price increases in response to inflationary pressures in the market, partially offset by decreased volume driven by lower demand. Protective products sales decreased by $10.5 million due to higher COVID related sales of personal protective equipment in 2021.

Income from Operations

Income from operations of our Hardware and Protective Solutions operating segment increased by approximately $32.0 million in the thirteen weeks ended September 24, 2022 to $7.1 million from a loss of $24.9 million in the thirteen weeks ended September 25, 2021. The increase in sales was partially offset by increased expenses:

•Cost of sales decreased by approximately $21.6 million in the thirteen weeks ended September 24, 2022 to $172.8 million as compared to $194.4 million in the thirteen weeks ended September 25, 2021. Cost of sales as a percentage of net sales was 63.6% in the thirteen weeks ended September 24, 2022, a decrease of 10.8% from 74.3% in the thirteen weeks ended September 25, 2021. The decrease in cost of sales as a percentage of net sales was primarily due to an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings in the thirteen weeks ended September 25, 2021.

•Selling expense increased $1.7 million in the thirteen weeks ended September 24, 2022 compared to the thirteen weeks ended September 25, 2021 primarily due to increased variable selling and compensation costs.

•Warehouse expense decreased $0.8 million in the thirteen weeks ended September 24, 2022 compared to the thirteen weeks ended September 25, 2021. The reduced expense was primarily driven by lower transportation costs.

•General and administrative (“G&A”) decreased by $1.6 million in the thirteen weeks ended September 24, 2022, compared to the thirty-nine weeks ended September 25, 2021. The decrease was primarily driven by reduced stock compensation expense.

Thirty-nine weeks ended September 24, 2022 vs the Thirty-nine weeks ended September 25, 2021

Net Sales

Net sales for our Hardware and Protective Solutions operating segment increased by $42.6 million in the thirty-nine weeks ended September 24, 2022 to $818.1 million as compared to $775.5 million in the thirty-nine weeks ended September 25, 2021. Sales of hardware products increased by $67.8 million driven by $80.2 million in price increases in response to inflationary pressures in the market related to the cost of products, inbound and outbound transportation costs, and personnel costs, partially offset by decreased volume driven by lower demand. Sales of personal protective equipment decreased by $25.2 million due to lower demand for COVID-19 protective and cleaning products in the 2022, partially offset by price increases of $7.1 million.

Income from Operations

Income from operations of our Hardware and Protective Solutions operating segment increased by approximately $24.1 million in the thirty-nine weeks ended September 24, 2022 to $15.3 million as compared to a loss of $8.9 million in the thirty-nine weeks ended September 25, 2021. The increase was driven by increased sales partially offset by increased operating expenses:

•Cost of sales decreased by approximately $1.5 million in the thirty-nine weeks ended September 24, 2022 to $518.0 million as compared to $519.5 million in the thirty-nine weeks ended September 25, 2021. Cost of sales as a percentage of net sales was 63.3% in the thirty-nine weeks ended September 24, 2022, a decrease of 3.7% from 67.0% in the thirty-nine weeks ended September 25, 2021 The decrease is primarily due to an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to the strategic review of our COVID-19 related product offerings in the third quarter of 2021.

•Selling expense increased $9.2 million in the thirty-nine weeks ended September 24, 2022 compared to the thirty-nine weeks ended September 25, 2021 primarily due to increased marketing, variable compensation, and travel and entertainment expense.

Page 35

•Warehouse expense increased $8.4 million in the thirty-nine weeks ended September 24, 2022 compared to the thirty-nine weeks ended September 25, 2021. The additional expense was primarily driven by inflation in warehouse wages and transportation costs.

•G&A expense increased $1.6 million in the thirty-nine weeks ended September 24, 2022 compared to the thirty-nine weeks ended September 25, 2021. The additional expense was primarily due to increased stock compensation expense in connection with modification of awards associated with the Merger.

Robotics and Digital Solutions


	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
Robotics and Digital Solutions
Revenues	$	65,632	$	67,499	$	192,216	$	189,729
Segment income from operations	(14,094)		11,158		4,198		17,858
Adjusted EBITDA(1)	22,446		23,483		63,654		64,596

Thirteen weeks ended September ~~25, 2021~~24, 2022 vs the Thirteen weeks ended September ~~26, 2020~~25, 2021

Net Sales

Net sales ~~for~~in our ~~Hardware~~Robotics and ~~Protective~~Digital Solutions operating segment decreased by ~~$38.9 million in thirteen weeks ended September 25, 2021 to $261.5 million as compared to $300.3~~$1.9 million in the thirteen weeks ended September ~~26, 2020. Sales of personal protective equipment decreased by $25.9~~24, 2022 to $65.6 million ~~due to high demand for gloves and face masks in 2020~~ as compared to the same period in 2021. Sales of hardware products, which decreased by $12.9 million driven primarily by softer retail sales partially offset by price increases taken in the third quarter of 2021 in response to inflationary pressures in the market related to the cost of products, inbound and outbound transportation costs, and personnel costs.

~~(Loss) income from Operations~~

~~(Loss) income from operations of our Hardware and Protective Solutions operating segment decreased by approximately $55.0~~$67.5 million in the thirteen weeks ended September 25, ~~2021~~2021. The decreased sales were primarily due to a ~~loss~~decrease of ~~$24.9~~$0.9 million ~~as compared to income~~in keys sales along with a decrease of ~~$30.1~~$1.0 million in engraving. Key and engraving sales in the third quarter of 2022 were negatively impacted by lower retail foot traffic.

Income from Operations

Income from operations of our Robotics and Digital Solutions operating segment decreased by approximately $25.3 million in the thirteen weeks ended September ~~26, 2020.~~24, 2022 to a loss of $14.1 million as compared to income of $11.2 million in the thirteen weeks ended September 25, 2021. The decrease was primarily due to increased G&A expense of $24.4 million driven by higher legal expenses associated with our litigation with Hy-Ko in the ~~decreases~~current year (see Note 7 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for additional information). We also recorded a $0.7 million loss on the revaluation of the contingent consideration associated with the acquisitions of Resharp and Instafob in ~~sales along with increased costs. In~~ the ~~third quarter~~thirteen weeks ended September 24, 2022, (see Note 17 - Fair Value Measurements of ~~2021, we recorded an inventory valuation adjustment~~the Notes to Condensed Consolidated Financial Statements for additional information) as compared to a $0.1 million loss in ~~our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings. In~~ the third quarter of 2021, we evaluated our customers' needs and the market conditions and ultimately decided to exit certain protective product categories related to COVID-19, including cleaning wipes, disinfecting sprays, face masks, and certain disposable gloves.thirteen weeks ended September 25, 2021.

Thirty-nine weeks ended September ~~25, 2021~~24, 2022 vs the Thirty-nine weeks ended September ~~26, 2020~~

~~Net Sales~~

~~Net sales for our Hardware and Protective Solutions operating segment decreased by $7.5 million in thirty-nine weeks ended September~~ 25, 2021 to $775.5 million as compared to $783.0 million in the thirty-nine weeks ended September 26, 2020. Sales of personal protective equipment decreased by $21.4 million due to due to lower demand for COVID-19 protective and cleaning equipment in 2021. This decrease was partially offset by sales of hardware products, which increased by $13.9 million driven by strong retail demand along with price increases taken in the third quarter of 2021 in response to inflationary pressures in the market related to the cost of products, inbound and outbound transportation costs, and personnel costs.

~~Income from Operations~~

~~Page 38~~

Income from operations of our Hardware and Protective Solutions operating segment decreased by approximately $72.2 million in the thirty-nine weeks ended September 25, 2021 to a loss of $8.9 million as compared to income of $63.4 million in the thirty-nine weeks ended September 26, 2020. The decrease was driven by the decreases in sales along with increased expenses.

•Cost of good sold increased by approximately $46.4 million in the thirty-nine weeks ended September 25, 2021 to $519.5 million as compared to $473.0 million in the thirty-nine weeks ended September 26, 2020. Cost of sales as a percentage of net sales was 67.0% in the thirty-nine weeks ended September 25, 2021, an increase of 6.6% from 60.4% in the thirty-nine weeks ended September 26, 2020. In the third quarter of 2021, we recorded an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings. In the third quarter of 2021, after considering our customers' ongoing needs along with market demand, pricing, and more widespread product availability, we exited the market for certain products related to COVID-19 including cleaning wipes, disinfecting sprays, face masks, and certain disposable gloves. The remaining increase in cost of sales as a percentage of net sales was primarily driven by the inflation pressure described above.

•Warehouse expense increased $8.9 million in the thirty-nine weeks ended September 25, 2021 compared to the thirty-nine weeks ended September 26, 2020. The additional expense was primarily driven by inflation.

•G&A expense increased $8.7 million in the thirty-nine weeks ended September 25, 2021 compared to the thirty-nine weeks ended September 26, 2020. The additional expense was primarily due to increased legal and consulting expense associated with the pending merger with Landcadia along with increased stock compensation expense.

~~Robotics and Digital Solutions~~

Thirteen Weeks Ended
September 25, 2021 Thirteen Weeks Ended
September 26, 2020 Thirty-nine Weeks Ended
September 25, 2021 Thirty-nine Weeks Ended
September 26, 2020
Robotics and Digital Solutions
Revenues $ 67,499 $ 59,186 $ 189,729 $ 157,691
Segment income from operations 11,158 3,046 17,858 4,432
Adjusted EBITDA(1)
23,483 17,995 64,596 47,938

~~(1)~~Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net income to Adjusted EBITDA.

~~Thirteen weeks ended September 25, 2021 vs the Thirteen weeks ended September 26, 2020~~

Net Sales

Net sales in our Robotics and Digital Solutions operating segment increased by ~~$8.3~~$2.5 million in the ~~thirteen~~thirty-nine weeks ended September 24, 2022 to $192.2 million as compared to $189.7 million in the thirty-nine weeks ended September 25, ~~2021 to $67.5 million as compared to $59.2 million in the thirteen weeks ended September 26, 2020.~~2021. The increased sales were primarily due to an increase of ~~$7.6~~$4.9 million in ~~keys~~key sales ~~along with an increase~~due to new machine installations and price increases that were partially offset by a decrease of ~~$0.6~~$2.4 million in engraving ~~sales. Key~~ sales due to a reduction in ~~the third quarter of 2020 were negatively impacted by restricted access to retail key duplication services as a result of COVID-19 in certain markets.~~discretionary consumer spending and fewer pet adoptions.

Income from Operations

Income from operations of our Robotics and Digital Solutions operating segment ~~increased~~decreased by approximately ~~$8.1~~$13.7 million in the ~~thirteen~~thirty-nine weeks ended September 24, 2022 to $4.2 million as compared to $17.9 million in the thirty-nine weeks ended September 25, ~~2021 to $11.2 million as compared to $3.0 million in the thirteen weeks ended September 26, 2020.~~2021. The ~~increase~~decrease was primarily due to ~~the~~ increased ~~sales partially offset~~G&A expense of 19.2 million driven by increased ~~variable selling expenses. The increased selling expenses were offset by lower~~ legal ~~fees~~

Page 36

expense associated with our litigation with HyKo and KeyMe (see Note 7 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for additional information).

~~Page 39~~

~~Thirty-nine weeks ended September 25, 2021 vs the Thirty-nine weeks ended September 26, 2020~~

~~Net Sales~~

~~Net sales in our Robotics and Digital Solutions operating segment~~ In addition, selling expense increased by ~~$32.0~~$3.2 million primarily due to increased variable selling costs driven by higher sales. We also recorded a $2.9 million gain on the revaluation of the contingent consideration associated with the acquisitions of Resharp and Instafob in the thirty-nine weeks ended September 25, 2021 to $189.7 million as compared to $157.7 million in the thirty-nine weeks ended September 26, 2020. The increased sales were primarily due to an increase of $26.0 million in keys sales along with an increase of $6.0 million in engraving sales. Key sales in the third quarter of 2020 were negatively impacted by restricted access to retail key duplication services as a result of COVID-19 in certain markets.

~~Income from Operations~~

Income from operations of our Robotics and Digital Solutions operating segment increased by approximately $13.4 million in the thirty-nine weeks ended September 25, 2021 to $17.9 million as compared to $4.4 million in the thirty-nine weeks ended September 26, 2020. The increase was primarily due to the increased sales partially offset by increased variable selling expenses along with increased legal fees associated with our litigation with KeyMe24, 2022 (see Note 717 - ~~Commitments and Contingencies~~Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements for additional information). as compared to a $1.1 million gain in 2021.

Canada


		Thirteen Weeks Ended September 25, 2021		Thirteen Weeks Ended September 26, 2020		Thirty-nine Weeks Ended September 25, 2021		Thirty-nine Weeks Ended September 26, 2020			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
Canada	Canada									Canada
Revenues	Revenues	$	35,525	$	39,187	$	116,233	$	100,552	Revenues	$	41,053	$	35,525	$	125,339	$	116,233
Segment income (loss) from operations	Segment income (loss) from operations	448		1,949		2,992		(2,539)		Segment income (loss) from operations	6,532		448		16,720		2,992
Adjusted EBITDA(1)	Adjusted EBITDA(1)	2,411		4,365		8,430		6,187		Adjusted EBITDA(1)	7,834		2,411		21,037		8,430

Thirteen weeks ended September ~~25, 2021~~24, 2022 vs the Thirteen weeks ended September ~~26, 2020~~25, 2021

Net Sales

Net sales in our Canada operating segment ~~decreased~~increased by ~~$3.7~~$5.5 million in the thirteen weeks ended September 24, 2022 to $41.1 million as compared to $35.5 million in the thirteen weeks ended September 25, 2021 ~~to $35.5 million as compared to $39.2~~driven by $7.5 million in ~~the thirteen weeks ended September 26, 2020. The decrease was primarily due to softer retail sales partially offset by~~ price increases ~~taken in the third quarter of 2021~~ in response to inflationary pressures ~~in the market related to the cost of products, inbound and outbound transportation costs, and personnel costs.~~partially offset by decreased volume driven by lower demand.

Income from Operations

Income from operations of our Canada operating segment ~~decreased~~increased by approximately ~~$1.5~~$6.1 million in the thirteen weeks ended September 24, 2022 to $6.5 million as compared to $0.4 million in the thirteen weeks ended September 25, ~~2021 to $0.4 million as compared to $1.9 million in the thirteen weeks ended September 26, 2020. In the thirteen weeks ended September 26, 2020 we received $1.8 million in cash received~~2021. The improved operating margins resulted from ~~the Canadian government as a part of the Canada Emergency Wage Subsidy program for relief during the second quarter shutdown in Canada during the COVID-19 outbreak which was recorded as other income.~~

~~Page 40~~

restructuring and facility consolidation and from recent pricing actions.

Thirty-nine weeks ended September ~~25, 2021~~24, 2022 vs the Thirty-nine weeks ended September ~~26, 2020~~25, 2021

Net Sales

Net sales in our Canada operating segment increased by ~~$15.7~~$9.1 million in the thirty-nine weeks ended September 24, 2022 to $125.3 million as compared to $116.2 million in the thirty-nine weeks ended September 25, ~~2021 to $116.2 million as compared to $100.6 million in the thirty-nine weeks ended September 26, 2020.~~2021. The increase was primarily ~~due to strong demand for fastening and hardware products with big box retailers along with~~driven by $22.2 million in price increases ~~taken in the third quarter of 2021 in response to inflationary pressures in the market related to the cost of products, inbound and outbound transportation costs, and personnel costs.~~partially offset by decreased volume driven by lower demand.

Income from Operations

~~Driven by higher sales, income~~Income from operations of our Canada operating segment increased by approximately ~~$5.5~~$13.7 million in the thirty-nine weeks ended September 24, 2022 to $16.7 million as compared to $3.0 million in the thirty-nine weeks ended September 25, ~~2021~~2021. Increased sales, improved product margins, and a reduction in warehouse expenses primarily driven by lower transportation costs led to ~~$3.0 million as compared to a loss of $2.5 million~~the increase in the thirty-nine weeks ended September 26, 2020. Additionally, in the thirty-nine weeks ended September 26, 2020 we received $1.8 million in cash received from the Canadian government as a part of the Canada Emergency Wage Subsidy program for relief during the second quarter shutdown in Canada during the COVID-19 outbreak which was recorded as otheroperating income.

Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP financial measure and is the primary basis used to measure the operational strength and performance of our businesses as well as to assist in the evaluation of underlying trends in our businesses. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature

Page 37

of our businesses and from intangible assets recognized in business combinations. It is also unaffected by our capital and tax structures, as our management excludes these results when evaluating our operating performance. Our management and Board of Directors use this financial measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. Additionally, we believe that Adjusted EBITDA is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.

The following table presents a reconciliation of Net ~~loss,~~(loss) income, the most directly comparable financial measures under GAAP, to Adjusted EBITDA for the periods presented:

Page 4138

Thirteen Weeks Ended
September 25, 2021 Thirteen Weeks Ended
September 26, 2020 Thirty-nine Weeks Ended
September 25, 2021 Thirty-nine Weeks Ended
September 26, 2020
Net loss $ (32,524) $ 9,304 $ (44,879) $ (10,537)
Income tax benefit (5,798) 2,758 (11,023) (2,374)
Interest expense, net 11,801 20,688 49,979 67,746
Interest expense on junior subordinated debentures 1,471 3,219 7,775 9,555
Investment income on trust common securities (44) (94) (233) (283)
Depreciation 14,454 15,926 46,065 50,673
Amortization 15,504 14,883 45,827 44,596
Mark-to-market adjustment on interest rate swaps (261) (773) (1,685) 1,169
EBITDA $ 4,603 $ 65,911 $ 91,826 $ 160,545
Stock compensation expense 5,280 1,149 8,817 3,818
Management fees 56 130 270 451
Restructuring (1)
462 651 571 3,361
Litigation expense (2)
487 2,980 10,769 5,654
Acquisition and integration expense (3)
802 1,054 8,941 2,044
Buy-back expense (4)
650 — 2,000 —
Anti-dumping duties (5)
— — 2,636 —
Facility closures (6)
— 3,108 — 3,541
Loss on change in fair value of warrant liability 3,990 — 3,990 —
Refinancing charges(7)
8,070 — 8,070 —
Inventory valuation related charges(8)
32,026 — 32,026 —
Change in fair value of contingent consideration 102 — (1,110) (1,300)
Adjusted EBITDA $ 56,528 $ 74,983 $ 168,806 $ 178,114


	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 (loss) income	$	(9,466)	$	(32,524)	$	(2,537)	$	(44,879)
Income tax provision (benefit)	(5,679)		(5,798)		(147)		(11,023)
Interest expense, net	14,696		11,801		38,857		49,979
Interest expense on junior subordinated debentures	—		1,471		—		7,775
Investment income on trust common securities	—		(44)		—		(233)
Depreciation	14,312		14,454		41,738		46,065
Amortization	15,557		15,504		46,644		45,827
Mark-to-market adjustment of interest rate swap	—		(261)		—		(1,685)
EBITDA	$	29,420	$	4,603	$	124,555	$	91,826

Stock compensation expense	2,485		5,280		10,789		8,817
Management fees	—		56		—		270
Restructuring (1)	916		462		1,481		571
Litigation expense (2)	25,255		487		28,968		10,769
Acquisition and integration expense (3)	178		802		2,393		8,941
Buy-back expense (4)	—		650		—		2,000
Anti-dumping duties (5)	—		—		—		2,636
Loss on change in fair value of warrant liability	—		3,990		—		3,990
Refinancing charges(6)	—		8,070		—		8,070
Inventory valuation related charges(7)	—		32,026		—		32,026
Change in fair value of contingent consideration	719		102		(2,926)		(1,110)
Adjusted EBITDA	$	58,973	$	56,528	$	165,260	$	168,806

(1)Restructuring includes ~~restructuring costs associated with restructuring in our Canada segment announced in 2018, including facility consolidation,~~ severance, sale of property and equipment, and charges relating to exiting certain lines of business. Also included is restructuring in our United Stated business announced in 2019, including severance related to management realignment and the integration of sales and operating functions (see Note 10 - Restructuring of the Notes to Condensed Consolidated Financial Statements for additional information). Finally, includes consulting, and other costs associated with streamlining our ~~manufacturing and distribution~~ operations.

(2)Litigation expense includes legal fees and damages associated with our litigation with KeyMe, Inc. and Hy-Ko Products Company LLC. (see Note 7 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements for additional information).

(3)Acquisition and integration expense includes professional fees, non-recurring bonuses, and other costs related to the ~~pending~~ merger ~~along~~ with ~~historical acquisitions.~~Landcadia III (see Note 3 - Merger Agreement of the Notes to Condensed Consolidated Financial Statements for additional information) and the secondary offering of shares in 2022.

(4)Infrequent buy backs associated with new business wins.

(5)Anti-dumping duties assessed related to the nail business for prior year purchases.

(6)~~Facility exits include costs associated with the closure of facilities in San Antonio, Texas and Parma, Ohio.~~

~~(7)~~In connection with the merger,we refinanced our Term Credit Agreement and ABL Revolver. Proceeds from the refinancing were used to redeem in full senior notes due July 15, 2022 (the “6.375% Senior Notes”) and the 11.6% Junior Subordinated Debentures (see Note 1211 - ~~Long Term~~Long-Term Debt of the Notes to Condensed Consolidated Financial Statements for additional information).

~~(8)~~(7)In the third quarter of 2021, we recorded an inventory valuation adjustment in our Hardware and Protective Solutions segment of $32.0 million primarily related to strategic review of our COVID-19 related product offerings. We evaluated our customers' needs and the market conditions and ultimately decided to exit the following protective product categories related to COVID-19; cleaning wipes, disinfecting sprays, face masks, and certain disposable

~~Page 42~~

gloves (see the Current Economic Conditions section of Management's discussion and analysis for additional information).

The following tables presents a reconciliation of segment operating income, the most directly comparable financial measures under GAAP, to segment Adjusted EBITDA for the periods presented (amounts in thousands). ~~Certain amounts in the prior year presentation between segments were reclassified to conform to the current year’s presentation.~~

Thirteen weeks ended September 25, 2021 Hardware and Protective Solutions Robotics and Digital Solutions Canada Consolidated
Operating income (loss) $ (24,901) $ 11,158 $ 448 $ (13,295)
Depreciation and amortization 17,615 10,842 1,501 29,958
Stock compensation expense 4,535 745 — 5,280
Management fees 47 9 — 56
Restructuring — — 462 462
Inventory valuation 32,026 — — 32,026
Litigation expense — 487 — 487
Acquisition and integration expense 662 140 — 802
Buy-back expense 650 — — 650
Change in fair value of contingent consideration — 102 — 102
Adjusted EBITDA $ 30,634 $ 23,483 $ 2,411 $ 56,528

Page 39


Thirteen weeks ended September 24, 2022	Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Consolidated
Operating income (loss)	$	7,113	$	(14,094)	$	6,532	$	(449)
Depreciation and amortization	18,440		10,284		1,145		29,869

Stock compensation expense	2,131		197		157		2,485
Restructuring	831		85		—		916
Litigation expense	—		25,255		—		25,255
Acquisition and integration expense	178		—		—		178

Change in fair value of contingent consideration	—		719		—		719
Adjusted EBITDA	$	28,693	$	22,446	$	7,834	$	58,973


Thirteen weeks ended September 26, 2020		Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Consolidated
Thirteen weeks ended September 25, 2021										Thirteen weeks ended September 25, 2021	Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Consolidated
Operating income (loss)	Operating income (loss)	$	30,107	$	3,046	$	1,949	$	35,102	Operating income (loss)	$	(24,901)	$	11,158	$	448	$	(13,295)
Depreciation and amortization	Depreciation and amortization	17,146		11,898		1,765		30,809		Depreciation and amortization	17,615		10,842		1,501		29,958

Stock compensation expense	Stock compensation expense	1,003		146		—		1,149		Stock compensation expense	4,535		745		—		5,280
Management fees	Management fees	114		16		—		130		Management fees	47		9				56
Restructuring	Restructuring	—		—		651		651		Restructuring	—		—		462		462
Inventory valuation										Inventory valuation	32,026		—		—		32,026
Litigation expense	Litigation expense	—		2,980		—		2,980		Litigation expense	—		487		—		487
Acquisition and integration expense	Acquisition and integration expense	886		168		—		1,054		Acquisition and integration expense	662		140		—		802
Facility closures		3,108		—		—		3,108
Change in fair value of contingent consideration										Change in fair value of contingent consideration	—		102		—		102
Buy-back expense										Buy-back expense	650		—		—		650

Corporate and intersegment adjustments		259		(259)		—		—
Adjusted EBITDA	Adjusted EBITDA	$	52,623	$	17,995	$	4,365	$	74,983	Adjusted EBITDA	30,634		23,483		2,411		56,528


Thirty-nine weeks ended September 24, 2022	Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Consolidated
Operating income (loss)	$	15,255	$	4,198	$	16,720	$	36,173
Depreciation and amortization	53,159		31,754		3,469		88,382

Stock compensation expense	8,693		1,248		848		10,789
Restructuring	1,357		124		—		1,481
Litigation expense	—		28,968		—		28,968
Acquisition and integration expense	2,105		288		—		2,393
Change in fair value of contingent consideration	—		(2,926)		—		(2,926)
Adjusted EBITDA	$	80,569	$	63,654	$	21,037	$	165,260

Page 4340

Thirty-nine weeks ended September 25, 2021 Hardware and Protective Solutions Robotics and Digital Solutions Canada Consolidated
Operating income (loss) $ (8,856) $ 17,858 $ 2,992 $ 11,994
Depreciation and amortization 52,135 34,816 4,941 91,892
Stock compensation expense 7,591 1,226 — 8,817
Management fees 232 38 — 270
Restructuring 64 10 497 571
Inventory valuation 32,026 — — 32,026
Litigation expense — 10,769 — 10,769
Acquisition and integration expense 7,952 989 — 8,941
Buy-back expense 2,000 — — 2,000
Anti-dumping duties 2,636 — — 2,636
Change in fair value of contingent consideration — (1,110) — (1,110)
Adjusted EBITDA $ 95,780 $ 64,596 $ 8,430 $ 168,806


Thirty-nine weeks ended September 26, 2020		Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Consolidated
Thirty-nine weeks ended September 25, 2021										Thirty-nine weeks ended September 25, 2021	Hardware and Protective Solutions		Robotics and Digital Solutions		Canada		Consolidated
Operating income (loss)	Operating income (loss)	$	63,383	$	4,432	$	(2,539)	$	65,276	Operating income (loss)	$	(8,856)	$	17,858	$	2,992	$	11,994
Depreciation and amortization	Depreciation and amortization	51,608		38,296		5,365		95,269		Depreciation and amortization	52,135		34,816		4,941		91,892

Stock compensation expense	Stock compensation expense	3,333		485		—		3,818		Stock compensation expense	7,591		1,226		—		8,817
Management fees	Management fees	394		57		—		451		Management fees	232		38		—		270
Restructuring	Restructuring	—		—		3,361		3,361		Restructuring	64		10		497		571
Inventory valuation										Inventory valuation	32,026		—		—		32,026
Litigation expense	Litigation expense	—		5,654		—		5,654		Litigation expense	—		10,769		—		10,769
Acquisition and integration expense	Acquisition and integration expense	1,518		526		—		2,044		Acquisition and integration expense	7,952		989		—		8,941
Facility closures		3,541		—		—		3,541
Change in fair value of contingent consideration	Change in fair value of contingent consideration	—		(1,300)		—		(1,300)		Change in fair value of contingent consideration	—		(1,110)		—		(1,110)
Corporate and intersegment adjustments		212		(212)		—		—
Buy-back expense										Buy-back expense	2,000		—		—		2,000
Anti-dumping duties										Anti-dumping duties	2,636		—		—		2,636
Adjusted EBITDA	Adjusted EBITDA	$	123,989	$	47,938	$	6,187	$	178,114	Adjusted EBITDA	$	95,780	$	64,596	$	8,430	$	168,806

Income Taxes

~~Page 44~~ For the thirteen weeks ended September 24, 2022, the Company recorded an income tax benefit of $5.7 million based on a pre-tax loss of $15.1 million. The Company recorded an income tax benefit for the thirty-nine weeks ended September 24, 2022 of $0.1 million. The effective income tax rate was 37.5% and5.5% for the thirteen and thirty-nine weeks ended September 24, 2022, respectively.

~~Income Taxes~~The effective rate differed from the federal statutory rate due to an estimated increase in GILTI from the Company's Canadian operations, non-deductible stock compensation, state and foreign income taxes, and includes the discrete income tax benefit for the Pennsylvania income tax rate change resulting in a reduction to the Company's deferred taxes.

For the thirteen weeks ended September 25, 2021, the Company recorded an income tax benefit of $5.8 million based on a pre-tax loss of $38.3 million. The Company recorded an income tax benefit for the thirty-nine weeks ended September 25, 2021 of ~~$11.0~~$5.2 million based on a pre-tax loss of ~~$55.9~~$17.6 million. The effective income tax rate was 15.1% and 19.7% for the thirteen and thirty-nine weeks ended September 25, 2021, respectively.

The effective ~~rate differed from the federal statutory rate due to an estimated increase in GILTI from the Company's Canadian operations, state and foreign income taxes, and certain non-deductible expenses.~~

For the thirteen weeks ended September 26, 2020, the Company recorded an income tax provision of $2.8 million based on a pre-tax income of $12.1 million. The Company recorded an income tax benefit for the thirty-nine weeks ended September 26, 2020 of $2.4 million based on a pre-tax loss of $12.9 million. The effective income tax rate was 22.9% and 18.4% for the thirteen and thirty-nine weeks ended September 26, 2020, respectively.

~~The effective~~ income tax rate differed from the federal statutory tax rate in the thirteen and thirty-nine weeks ended September ~~26, 2020~~25, 2021 primarily due to certain non-deductible ~~stock compensation~~ expenses, an estimated increase in GILTI from the Company's Canadian operations, and state and foreign income taxes.

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act included, among other things, corporate income tax relief in the form of accelerated alternative minimum tax ("AMT") refunds, allowed employers to defer certain payroll tax payments throughout 2020, and provided favorable corporate interest deductions for the 2020 reporting period.

Liquidity and Capital Resources

The statements of cash flows reflect the changes in cash and cash equivalents for the thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirty-nine weeks ended September ~~26, 2020~~25, 2021 by classifying transactions into three major categories: operating, investing, and financing activities.

Net cash ~~used for~~provided by operating activities for the thirty-nine weeks ended September ~~25, 2021~~24, 2022 was ~~$105.3~~$63.1 million as compared to ~~$67.6~~$105.3 million of cash ~~provided~~used by ~~operation~~operating activities in the comparable prior year period. Operating cash flows for the thirty-nine weeks ended September ~~25, 2021~~24, 2022 were unfavorably impacted by (1) reduced accounts payable resulting from lower purchases and (2) increased accounts receivable and inventory ~~driven by inflation~~resulting from price increases and ~~higher on hand amounts to maintain service levels with extended lead times, (2) payments made for long term incentive programs and other variable compensation.~~inflation. Operating cash flows for the thirty-nine weeks ended September ~~26, 2020~~25, 2021 were ~~favorably~~unfavorably impacted by ~~the~~ increased ~~net income~~inventory in ~~the year.~~response to extended lead times and supply chain disruptions.

Page 4541

Net cash used for investing activities was ~~$76.1~~$48.9 million and ~~$30.0~~$76.1 million for the thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirty-nine weeks ended September ~~26, 2020,~~25, 2021, respectively. During the thirty-nine weeks ended September 24, 2022, we acquired Monkey Hook for approximately $2.5 million during the thirty-nine weeks ended September 25, 2021, we acquired Oz Post International, LLC ("OZCO") for approximately ~~$39.1~~$39.8 million (see Note 5 - Acquisitions of the Notes to Condensed Consolidated Financial Statements for additional information). Excluding acquisitions, the primary use of cash in both periods was our investment in new key duplicating kiosks and machines.

Net cash provided by financing activities was $1.9 million for the thirty-nine weeks ended September 24, 2022. Our revolver draws, net of repayments, provided cash of $7.0 million in the thirty-nine weeks ended September 24, 2022. We used cash to pay $6.4 million in principal payments on the senior term loan under the Senior Facilities. Additionally, the Company entered into an agreement to finance racking and warehouse equipment, net of repayments, in 2022 for $1.8 million.

Net cash provided by financing activities was $173.7 million for the thirty-nine weeks ended September 25, 2021. We received cash of $455.2 million on the recapitalization of Landcadia, net of transaction costs and $363.3 million from the issuance of common stock to the PIPE.

In connection with the Merger, we refinanced all of our outstanding debt. On July 14, 2021 we entered into a new credit agreement, which provided for a new funded term loan facility of $835.0 million and a delayed draw term loan facility of $200.0 million (of which $16.0 million was drawn). Concurrently with the Term Credit Agreement, we also entered into an amendment to their existing asset-based revolving credit agreement (the “ABL Amendment”) and extended the maturity and conformed certain provisions to the Term Credit Agreement. The proceeds were used, together with other available cash, to (1) refinance in full all outstanding term loans and to terminate all outstanding commitments under the credit agreement, dated as of May 31, 2018, (2) refinance outstanding revolving credit loans, and (3) redeem in full senior notes due July 15, 2022 (the “6.375% Senior Notes”), issued by the Borrower and as a result the 6.375% Senior Notes are redeemed, satisfied and discharged and no longer in effect. Additionally, we fully redeemed the 11.6% Junior Subordinated Debentures. In connection with the refinancing we incurred a loss of $8.1 million and paid $38.7 million in financing fees, of which $21.0 million was recorded as a financing activity. ~~See Note 12 - Long Term Debt of the Notes to Condensed Consolidated Financial Statements for additional information.~~

In the second quarter of 2021, we entered into an amendment ("OZCO Amendment") to the term loan credit agreement dated May 31, 2018, which provided $35.0 million of incremental term loan funds to be used to finance the acquisition, (see Note 5 - Acquisitions of the Notes to Condensed Consolidated Financial Statements for additional information). In the thirty-nine weeks ended September 25, 2021 we used $8.0 million to make regularly scheduled payments under our old Term Credit agreement. Our revolver draws, net of repayments, provided cash of $2.0 million in the thirty-nine weeks ended September 25, 2021. Finally, in the thirty-nine weeks ended September 25, 2021 the Company received $1.8 million on the exercise of stock options.

Net cash used by financing activities was $24.6 million for the thirty-nine weeks ended September 26, 2020. Revolver repayments were $16.0 million, net of draws, in the thirty-nine weeks ended September 26, 2020. Additionally, we used cash to pay $8.0 million in principal payments on the senior term loan under the Senior Facilities.

~~Management believes~~We believe that projected cash flows from operations and ~~revolver~~ABL Revolver availability will be sufficient to fund working capital and capital expenditure needs for the next 12 months. As of September 24, 2022, the ABL Revolver had an outstanding amount of $100.0 million and outstanding letters of credit of $32.8 million leaving $195.4 million of available borrowings as a source of liquidity based on the customary asset-backed loan borrowing base and availability provisions. Our material cash requirements for known contractual obligations include debt, lease obligations, and capital expenditures each of which are discussed in more detail earlier in this section and in the Notes to the Condensed Consolidated Financial Statements. We believe projected cash flows from operations and ABL Revolver availability will be sufficient to meet our liquidity and capital needs for these items in the short-term and also in the long-term beyond the next 12 months. We also have cash requirements for purchase orders and contracts for the purchase of inventory and other goods and services, which are based on current distribution needs and are fulfilled by our suppliers within the short term.

Our working capital (current assets minus current liabilities) position of ~~$373.3~~$447.4 million as of September ~~25, 2021~~24, 2022 represents an increase of ~~$131.5~~$56.4 million from the December ~~26, 2020~~25, 2021 level of ~~$241.8~~$391.0 million. Excluding the inventory charge discussed throughout MD&A, the COVID-19 pandemic has not, as of the date of this report, had a materially negative impact on our operations or demand for our products, it has not had a materially negative impact on the Company's liquidity position. We expect the inventory related charge to be one time in nature. We have initiated mitigating efforts to manage non-critical capital spending, assess operating spend, and preserve cash. We expect to generate sufficient operating cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets, although there can be no assurance of our ability to do so. However, ~~the continued spread of COVID-19 has led to~~ disruption and volatility in the global capital markets, ~~which, depending on future developments,~~ could impact our capital resources and liquidity in the future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet ~~arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).~~arrangements.

Page 4642

Critical Accounting Policies and Estimates

Significant accounting policies and estimates are summarized in the ~~notes~~Notes to the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements. Some accounting policies require management to exercise significant judgment in selecting the appropriate assumptions for calculating financial estimates. Such judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, known trends in our industry, terms of existing contracts, and other information from outside sources, as appropriate. Management believes that these estimates and assumptions are reasonable based on the facts and circumstances as of September ~~25, 2021,~~24, 2022, however, actual results may differ from these estimates under different assumptions and circumstances.

There have been no material changes to our critical accounting policies and estimates which are discussed in the “Critical Accounting Policies and Estimates” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report on Form 10-K for the year ended December ~~26, 2020,~~25, 2021, as filed with the Securities and Exchange ~~Commission. In addition, our most significant accounting policies are discussed in Note 2 and elsewhere in the Notes to the Consolidated Financial Statements included in the S-1 filed~~Commission on ~~August 25, 2021 with the Securities and Exchange Commission (“SEC”).~~March 16, 2022.

Recent Accounting Pronouncements

See “Note 4 - Recent Accounting Pronouncements” of the Notes to Condensed Consolidated Financial Statements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Exposure

We are exposed to the impact of interest rate changes as borrowings under the Senior Facilities bear interest at variable interest

rates. It is our policy to enter into interest rate ~~swap and interest rate cap transactions~~swaps only to the extent considered necessary to meet our objectives. Furthermore, regulatory changes, such as the announcement of the United Kingdom’s Financial Conduct Authority to phase out the London Interbank Offered Rate ("LIBOR") by the end of 2021, may adversely affect our floating rate debt and interest rate derivatives. If LIBOR ceases to exist, we may need to renegotiate any credit agreements or interest rate derivatives agreements extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate or hedge rate, which could adversely impact our cost of debt.

Based on our exposure to variable rate borrowings at September ~~25, 2021,~~24, 2022, after consideration of our LIBOR floor rate and interest rate swap agreements, a one percent (1%) change in the weighted average interest rate for a period of one year would change the annual interest expense by approximately ~~$5.1~~$5.2 million.

Foreign Currency Exchange

We are exposed to foreign exchange rate changes of the Canadian and Mexican currencies as they impact the ~~$163.5~~$171.6 million tangible and intangible net asset value of our Canadian and Mexican subsidiaries as of September ~~25, 2021.~~24, 2022. The foreign ~~subsidiaries~~subsidiaries' net tangible assets were ~~$100.0~~$113.5 million and the net intangible assets were ~~$63.5~~$58.1 million as of September ~~25, 2021.~~24, 2022.

We utilize foreign exchange forward contracts to manage the exposure to currency fluctuations in the Canadian dollar versus

the U.S. Dollar. See Note 16 - Derivatives and Hedging of the Condensed Notes to the accompanying Condensed Consolidated Financial Statements.

Commodity Price Risk

Our transportation costs are exposed to fluctuations in the price of fuel and some of our products contain commodity-priced materials. The Company regularly monitors commodity trends and works to mitigate any material exposure to commodity price risk by having alternative sourcing plans in place, limiting supplier concentrations, passing commodity-related inflation to customers, and continuing to scale its distribution networks.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ~~not~~ effective, as of September ~~25, 2021,~~24, 2022, in ensuring that material information required to be disclosed in reports that we file or submit under the

Page 43

Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~Page 47~~

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 26, 2020, management concluded that we did not design and maintain effective controls over the completeness and accuracy of the accounting for, and disclosure of, the valuation allowance against deferred income taxes. The material weakness resulted in material errors in the application of certain provisions of the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) related to the IRC §163(j) interest limitation (Interest Limitation). This material weakness resulted in material errors in our income tax benefit and deferred tax liabilities that were corrected through the restatement of the consolidated financial statements as of and for the years ended December 28, 2019 and December 29, 2018. Additionally, this material weakness could result in misstatements to the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

In response to the material weakness described above, management implemented changes to its internal control over financial reporting to remediate the control deficiencies that gave rise to the material weakness. Those changes included the engagement of third party consultants to assist with technical tax accounting research and application of guidance, the addition of a committee to review technical accounting issues and ensure we have the appropriate subject matter experts engaged, and hiring additional personnel in our tax department.

We have tested the newly implemented controls and found them to be effective, and therefore have concluded that as of September 25, 2021, the previously identified material weakness has been remediated.

Changes in Internal Control over Financial Reporting

~~Except as described above, there~~There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the thirty-nine weeks ended September ~~25, 2021~~24, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. – Legal Proceedings.

We are subject to various claims and litigation that arise in the normal course of business. ~~In the opinion~~For a description of our ~~management,~~material legal proceedings, see Note 7 - Commitments and Contingencies, to the ~~ultimate resolution of the pending litigation matters will not have a material adverse effect on our condensed consolidated financial position, operations, or cash flows.~~accompanying Condensed Consolidated Financial Statements included in this Form 10-Q.

Item 1A – Risk Factors.

There have been no material changes to the risks from those disclosed in the ~~S-1~~Form 10-K filed on ~~August 25, 2021~~March 16, 2022 with the Securities and Exchange Commission (“SEC”).

Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds.

Not Applicable.

Item 3. – Defaults Upon Senior Securities.

Not Applicable.

Item 4. – Mine Safety Disclosures.

Not Applicable.

Item 5. – Other Information.

Not Applicable.

Item 6. – Exhibits.


a)			Exhibits, including those incorporated by reference.

Page 4844


31.1 *	~~31.1~~ *	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Exchange Act
31.2 *	~~31.2~~ *	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Exchange Act
32.1 *	~~32.1~~ *	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 *	~~32.2~~ *	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September ~~25, 2021~~24, 2022 filed with the Securities and Exchange Commission on November 3, ~~2021,~~2022, formatted in eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets as of September ~~25, 2021~~24, 2022 and December ~~26, 2020,~~25, 2021, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirteen and thirty-nine weeks ended September ~~26, 2020,~~25, 2021, (iii) Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirty-nine weeks ended September ~~26, 2020,~~25, 2021, (iv) Condensed Consolidated Statements of Stockholders' Equity for the thirteen and thirty-nine weeks ended September ~~25, 2021~~24, 2022 and the thirteen and thirty-nine weeks ended September ~~26, 2020,~~25, 2021, and (v) Notes to Condensed Consolidated Financial Statements.


*			Filed herewith.

Page 4945

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HILLMAN SOLUTIONS CORP.



/s/ Robert O. Kraft						/s/ Anne S. McCalla
Robert O. Kraft						Anne S. McCalla
Chief Financial Officer						Controller
						(Chief Accounting Officer)

DATE: November 3, ~~2021~~2022

Page 5046


	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-in-capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Thirty-nine weeks ended September 25, 2021
Balance at December 26, 2020	90,934,930	$	9	—	$	—	$	565,815	$	(171,849)	$	(29,388)	$	364,587
Net Loss	—	—		—	—		—		(8,970)		—		(8,970)
Stock-based compensation	—	—		—	—		1,741		—		—		1,741
Proceeds from exercise of stock options	268,253	$	—	—	$	—	1,643		—		—		1,643
Change in cumulative foreign currency translation adjustment	—	—		—	—		—		—		2,473		2,473
Balance at March 27, 2021	91,203,183	$	9	—	$	—	$	569,199	$	(180,819)	$	(26,915)	$	361,474
Net Loss	—	—		—	—		—		(3,385)		—		(3,385)
Stock-based compensation	—	—		—	—		1,796		—		—		1,796
Proceeds from exercise of stock options	17,718	—		—	—		118		—		—		118
Change in cumulative foreign currency translation adjustment	—	—		—	—		—		—		3,842		3,842
Balance at June 26, 2021	91,220,901	$	9	—	$	—	$	571,113	$	(184,204)	$	(23,073)	$	363,845
Net Loss	—	—		—	—		—		(32,524)		—		(32,524)
Stock-based compensation	—	—		—	—		5,280		—		—		5,280
Vesting of restricted shares	88,305	—		—	—		—		—		—		—
Proceeds from exercise of stock options	—	—		—	—		—		—		—		—
Recapitalization of Landcadia, net of issuance costs and fair value of of assets and liabilities acquired	58,672,000	6		—	—		378,016		—		—		378,022
Shares issued to PIPE, net of issuance costs	37,500,000	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	187,481,206	$	19	—	$	—	$	1,317,706	$	(216,728)	$	(27,567)	$	1,073,430

Thirty-nine weeks ended September 26, 2020
Balance at December 28, 2019	548,040	$	5	(4,740)	$	(4,320)	$	557,674	$	(147,350)	$	(32,040)	$	373,969
Retroactive application of recapitalization	89,001,575	4		4,740	4,320		(4,324)		—		—		—
Balance at December 28, 2019 - Recast	89,549,615	9		—	—		553,350		(147,350)		(32,040)		373,969
Net Loss	—	—		—	—		—		(14,804)		—		(14,804)
Stock-based compensation	—	—		—	—		1,145		—		—		1,145
Vesting of restricted shares	88,305	—		—	—		—		—		—		—
Change in cumulative foreign currency translation adjustment	—	—		—	—		—		—		(11,213)		(11,213)
Balance at March 28, 2020	89,637,920	$	9	—	$	—	$	554,495	$	(162,154)	$	(43,253)	$	349,097
Net Loss	—	—		—	—		—		(5,037)		—		(5,037)
Stock-based compensation	—	—		—	—		1,524		—		—		1,524
Change in cumulative foreign currency translation adjustment	—	—		—	—		—		—		3,643		3,643
Balance at June 27, 2020	89,637,920	$	9	—	$	—	$	556,019	$	(167,191)	$	(39,610)	$	349,227
Net Income	—	—		—	—		—		9,304		—		9,304
Stock-based compensation	—	—		—	—		1,148		—		—		1,148
Vesting of restricted shares	88,305	—		—	—		—		—		—		—
Change in cumulative foreign currency translation adjustment	—	—		—	—		—		—		3,070		3,070
Balance at September 26, 2020	89,726,225	$	9	—	$	—	$	557,167	$	(157,887)	$	(36,540)	$	362,749



Dividend yield	0%
Risk free interest rate	0.40%	-	1.81%
Expected volatility	31.50%
Expected terms	6.25 years


	Number of Shares	Weighted Avg. Exercise Price per Share (in whole dollars)		Weighted Avg. Remaining Contractual Term
Outstanding at December 26, 2020	12,749	$	7.66	8.0 years
Granted	2,348	0
Exercised	(286)	0
Forfeited or expired	(1,186)	0
Outstanding at September 25, 2021	13,625	$	8.13	7.3 years
Exercisable at September 25, 2021	4,936	$	7.74	6.74 years


	Number of Shares	Weighted Avg. Grant Date Fair Value (in whole dollars)
Unvested at December 26, 2020	177	$	7.09
Awarded	—	0
Vested	(88)	0
Forfeited or expired	—	0
Unvested at September 25, 2021	89	$	7.09


	Asset Derivatives			Liability Derivatives
	As of September 25, 2021				As of September 25, 2021		As of December 26, 2020
	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
2021 Swap 1	Other non-current assets	$	484			Other accrued expenses	$	(330)		$	—
2021 Swap 2	Other non-current assets	691				Other accrued expenses	(511)			—
2021 Swap 3	Other non-current assets	3				Other accrued expenses/other non-current liabilities (1)	(2,353)			—
Total hedging instruments		$	1,178				$	(3,194)		$	—
Derivatives not designated as hedging instruments:
2018 Swap 1		$	—				$	—	Other accrued expenses	$	(709)
2018 Swap 2		—					—		Other non-current liabilities	(3,484)
Total non-hedging instruments		$	—				$	—		$	(4,193)


	As of September 25, 2021
	Level 1		Level 2		Level 3		Total
Trading securities	$	1,618	$	—	$	—	$	1,618
Interest rate swaps	—		(2,016)		—		(2,016)

Contingent consideration payable	—		—		(13,061)		(13,061)
Public warrants	(49,500)		—		—		(49,500)
Private warrants	—		—		(31,680)		(31,680)

	As of December 26, 2020
	Level 1		Level 2		Level 3		Total
Trading securities	$	1,911	$	—	$	—	$	1,911
Interest rate swaps	—		(4,193)		—		(4,193)

Contingent consideration payable	—		—		(14,197)		(14,197)


	September 25, 2021				December 26, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
6.375% Senior Notes	$	—	$	—	$	328,333	$	327,525
Junior Subordinated Debentures	—		—		123,295		128,022