The accompanying unaudited Condensed Consolidated Financial Statements present information in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X. Accordingly, they do not include all information or footnotes required by U.S. generally accepted accounting principles for complete financial statements. Operating results for the thirteen and twenty-six weeks ended July 1, 2023March 30, 2024 do not necessarily indicate the results that may be expected for the full year. For further information, refer to the Consolidated Financial Statements for the year ended December 31, 202230, 2023 and notes thereto included in the Form 10-K filed on February 27, 202322, 2024 with the Securities and Exchange Commission (“SEC”).

The Company is comprised of three separate operating business segments: (1) Hardware and Protective Solutions, (2) Robotics and Digital Solutions, and (3) Canada.

Hillman provides and, on a limited basis, produces products such as fasteners and related hardware items; threaded rod and metal shapes; keys, key duplication systems, and accessories; personal protective equipment such as gloves and eyewear; builder's hardware; and identification items, such as tags and letters, numbers, and signs, to retail outlets, primarily hardware stores, home improvement centers and mass merchants, pet supply stores, grocery stores, and drug stores. The Canada segment also produces fasteners, stampings, fittings, and processes threaded parts for automotive suppliers, industrial Original Equipment Manufacturers (“OEMs”), and industrial distributors.

Hardware and Protective Solutions revenues consist primarily of the delivery of fasteners, anchors, specialty fastening products, and personal protective equipment such as gloves and eyewear, as well as in-store merchandising services for the related product category.

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

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

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

The costs to obtain a contract are insignificant, and generally contract terms do not extend beyond one year. Therefore, these costs are expensed as incurred. Freight and shipping costs and the cost of our in-store merchandising services teams are recognized in selling, warehouse, 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.

In March 2020,On November 27, 2023, the FASB ("Financial Accounting Standards Board ("FASB"Board") issued ASU ("Accounting Standards Update ("ASU"Update") 2020-04, Reference Rate Reform2023-07, Segment Reporting (Topic 848)280): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional guidance for a limited timeImprovements to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024. As of July 1, 2023, the Company does not have any receivables, hedging relationships, lease agreements, or debt agreements that reference LIBOR or another reference rate expected to be discontinued. On June 30, 2023, we amended and restated our term loan and interest rate swap agreements. As a result of those amendments, our floating rate debt no longer references a LIBOR based benchmark rate.

On March 7, 2022,December 5, 2023, the Company completed its acquisition of the Irvine, California-based Monkey Hook, LLC ("Monkey Hook")Ajustlock, an innovative adjustable barrel bolt lock used on gates, doors or windows which self-adjusts vertically to eliminate door shift issues, for a total purchase price of $2,800,$1,400, which included $300 inincludes a $100 hold-back that remained payable to the seller as of December 31, 2022. During the first quarter of 2023, the hold-back of $300 was paid to satisfy the full purchase price. Monkey Hook products are designed to hang artwork on drywall where no stud is present. Monkey Hookdue one year after closing. Ajustlock sells its products throughout North America and its financial results reside in the Company's Hardware and Protective Solutions reportable segment and have been determined to be immaterial for purposes of additional disclosure.

price of $23,956. Koch has business operations throughout North America and its financial results will reside in the Company's Hardware and Protective Solutions reportable segment.

Goodwill amounts by reportable segment are summarized as follows:

Other intangibles, net, as of July 1, 2023March 30, 2024 and December 31, 202230, 2023 consist of the following: 

The amortization expense for intangible assets, including the adjustments resulting from fluctuations in foreign currency exchange rates for the thirteen and twenty-six weeks ended July 1, 2023March 30, 2024 was $15,578 and $31,150.$15,254. Amortization expense for the thirteen and twenty-six weeks ended June 25, 2022April 1, 2023 was $15,566 and $31,087.$15,572.

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 twenty-six weeks ended July 1, 2023March 30, 2024 and the thirteen and twenty-six weeks ended June 25, 2022,April 1, 2023, the Company did not identify any triggering events that would result in an impairment analysis outside of the annual assessment.

The Company self-insures its general liability including product liability, automotive and workers' compensation losses up to $500 per occurrence. Catastrophic coverage has been purchased from third party insurers for occurrences up to $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 $2,603$2,593 recorded for such risks is adequate as of July 1, 2023.March 30, 2024.

As of July 1, 2023,March 30, 2024, the Company has provided certain vendors and insurers letters of credit aggregating to $35,890$40,890 related to our product purchases and insurance coverage for product liability, workers’ compensation, and general liability.

The Company self-insures group health claims up to an annual stop loss limit of $300 per participant. Historical group insurance loss experience forms the basis for the recognition of group health insurance reserves. Provisions for losses expected under these programs are recorded based on an analysis of historical insurance claim data and certain actuarial assumptions. The Company believes that the liability of approximately $2,910$3,001 recorded for such risks is adequate as of July 1, 2023.March 30, 2024.

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 (the "Department”) 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.

We are involved in litigation arising in the normal course of business. In management’s opinion, any such litigation is not expected to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

Hillman, Jefferies Financial Group Inc., certain other financial sponsors, CCMP Investors and the Oak Hill Investors entered into the Amended and Restated Registration Rights Agreement (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

stock, in each case, on the terms and subject to the conditions therein. Richard Zannino and Joe Scharfenberger, both partners at CCMP, were members of our Board at the time Hillman entered into the A&R Registration Rights Agreement. Mr. Zannino and Mr. Scharfenberger each resigned from the Hillman Board in May 2023 following CCMP's complete exit of its investment in Hillman during the second quarter of 2023. Another director, Teresa Gendron, was the CFO of Jefferies Financial Group until March 2023. Additionally, Oak Hill owned in excess of 5% of the Company’s outstanding securities at certain times in fiscal 2022.

Sales to related parties, which are included in net sales, consist primarily of the 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 $383$18 and $648 for the thirteen and twenty-six weeks ended July 1, 2023. Sales to related parties were $334 and $497$265 in the thirteen and twenty-six weeks ended June 25, 2022, respectively.March 30, 2024 and in the thirteen weeks ended April 1, 2023, respectfully.

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 twenty-six weeks ended JulyMarch 30, 2024 and the thirteen weeks ended April 1, 2023, 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. Given that the Company is forecasting positive income for the full fiscal year, the Company anticipates that the income tax benefit recorded through July 1, 2023as of March 30, 2024 will reverse to an income tax provision by the end of the fiscal year. For the thirteen and twenty-six weeks ended June 25, 2022, the Company applied an estimated annual effective tax rate based on expected annual pre-tax income to the interim period pre-tax income to calculate the income tax expense.

For the thirteen and twenty-six weeks ended July 1, 2023,March 30, 2024, the effective income tax rate was (67.0)% and 67.8%, respectively.24.5%. The Company recorded an income tax benefit for the thirteen and twenty-six weeks ended July 1, 2023March 30, 2024 of $1,823 and $9,679, respectfully.$483. The effective tax rate for the thirteen and twenty-six weeks ended JulyMarch 30, 2024 was the result of certain non-deductible expenses and state and foreign income taxes.

For the thirteen weeks ended April 1, 2023, the effective income tax rate was 46.2%. The Company recorded an income tax benefit for the thirteen weeks ended April 1, 2023 of $7,856. The effective tax rate for the thirteen weeks ended April 1, 2023 was the result of Global intangible low-taxed income ("GILTI")GILTI from the Company's Canadian operations, certain non-deductible expenses, and state and foreign income taxes.

The following table summarizes the Company’s debt:

As of July 1, 2023,March 30, 2024, the ABLAsset-Backed Loan ("ABL") Revolver had an outstanding amount of $8,000$18,000 and outstanding letters of credit of $35,890.$40,890. The Company has $283,069$211,619 of available borrowings under the revolving credit facility as a source of liquidity as of July 1, 2023March 30, 2024 based on the customary asset-backed loanABL borrowing base and availability provisions.

Conversionwithout the CSA and (ii) implements a 1% prepayment premium for the existing Term Loan to apply to Repricing Transactions that occur within six months after the effective date of Debt from LIBOR Interest Rate to SOFR Interest Rate

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 1) the right to obtain substantially all of the economic benefits from the use of the asset and 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 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.

The components of operating and finance lease costs for the thirteen and twenty-six weeks ended JulyMarch 30, 2024 and thirteen weeks ended April 1, 2023 and thirteen and twenty-six weeks ended June 25, 2022 were as follows:

Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $7,980 and $15,111$6,962 in the thirteen and twenty-six weeks ended July 1, 2023March 30, 2024 and $7,639 and $14,812$7,131 in the thirteen and twenty-six weeks ended June 25, 2022.April 1, 2023. Rent expense includes operating lease costs as well as 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 leases were as follows as of July 1, 2023March 30, 2024 and December 31, 2022:30, 2023:

Supplemental balance sheet information related to the Company's finance leases was as follows as of July 1, 2023March 30, 2024 and December 31, 2022:30, 2023:

Supplemental cash flow information related to the Company's operating and finance leases was as follows for the twenty-sixthirteen weeks ended July 1, 2023March 30, 2024 and twenty-sixthirteen weeks ended June 25, 2022:April 1, 2023:

As of July 1, 2023,March 30, 2024, 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 July 1, 2023:March 30, 2024:

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.

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

The following is detail of the changes in the Company's accumulated other comprehensive income (loss) from December 25, 202131, 2022 to July 1, 2023,March 30, 2024, including the effect of significant reclassifications out of accumulated other comprehensive income (loss) (net of tax):

The 2014 Equity Incentive Plan had stock compensation expense of $1,336 and $2,627$407 recognized in the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss) for the thirteen and twenty-six weeks ended July 1, 2023, respectively,March 30, 2024 and $1,258 and $6,355$1,291 for the thirteen and twenty-six weeks ended June 25, 2022, respectively.April 1, 2023.

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 Company stock price hurdles.

The Restricted Stock Units ("RSUs") granted to employees for service generally vest after three years, subject to continued employment. The RSUs granted

During the thirteen weeks ended March 30, 2024, 847,779 outstanding options under the 2014 were exercised providing aggregate proceeds to non-employee directors generally vestthe Company of approximately $5,899. There were not any options exercised in full on the first anniversary of the grant date.thirteen weeks ended April 1, 2023.

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

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.

The RSUs granted to employees for service generally vest after three years, subject to continued employment. The RSUs granted to non-employee directors generally vest in full on sooner of the first anniversary of the grant date or the Company's next annual meeting of stockholders.

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.

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 and restricted stock awards and units. 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):