Hillman Solutions Corp. (10-Q) — quarter ended June 30, 2021
Important scope: The reported period is before the July 14, 2021 business combination. The statements are those of Landcadia Holdings III, the SPAC, and do not include Hillman’s operating business. Accordingly, they provide no meaningful Hillman revenue, operating margin, or operating cash-flow trend.
Financial results and liquidity
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | None reported | None reported |
| General and administrative expense | $481,780 | $990,698 |
| Loss from operations | $481,780 | $990,698 |
| Loss on warrant derivative liability | $30.33 million | $19.12 million |
| Net loss | $30.80 million | $20.08 million |
| Basic and diluted loss per share, per financial statements | $1.82 | $1.09 |
| Net cash used in operating activities | Not presented separately | $1.03 million |
- At June 30, cash outside the trust was $85,485; cash and marketable securities held in trust were $500.01 million.
- Total assets were $500.23 million. Current liabilities were $113,018; total liabilities were $92.45 million, including $74.84 million of warrant derivative liabilities and $17.50 million of deferred underwriting commissions. The filing reports no long-term debt.
- Stockholders’ equity was negative $92.22 million, while $500 million of redeemable shares was classified as temporary equity.
- There are no operating margins to assess because the SPAC reported no operating business or revenue. No Hillman-specific liquidity or debt metrics are provided for this period.
Material changes and subsequent transaction
- Compared with the prior-year quarter and half-year, when the SPAC reported no net loss, 2021 results include expenses and substantial noncash warrant remeasurement losses. The filing attributes the loss chiefly to changes in the fair value of warrants, not to Hillman operating performance.
- The warrant derivative liability rose from $55.72 million at December 31, 2020 to $74.84 million at June 30, 2021. Changes in warrant fair value are recognized in earnings and may cause significant period-to-period volatility.
- After quarter-end, the business combination closed July 14, 2021. The filing says there were no public-share redemptions. A concurrent PIPE provided for 37.5 million shares at $10 per share, or $375 million of gross proceeds. The filing reports aggregate stock consideration of approximately $911.3 million plus $28.28 million associated with sponsor share forfeitures.
Outlook, risks, and other matters
- The filing provides no Hillman operating guidance or forecast. Management’s discussion describes the pre-combination SPAC’s activities and does not provide a Hillman business outlook.
- Key unusual item: warrant liabilities were measured at fair value, with the remeasurement loss recorded in earnings. The filing identifies warrant valuation and redeemable-share classification as significant accounting matters.
- The company reported no long-term debt, lease obligations, off-balance-sheet arrangements, or legal proceedings at June 30, 2021. It reported no material change to the risks in its prior annual report.
- Management concluded disclosure controls and procedures were effective as of June 30, 2021. It also described changes to internal controls involving increased communication with personnel and third-party professionals, and cautioned that remediation efforts would take time and might not have their intended effect.
Investor facts to verify
- Use Hillman’s post-combination filings to evaluate revenue, margins, cash flow, debt, liquidity, and guidance; this 10-Q does not report the operating company’s results.
- Reconcile the loss-per-share figures: the financial statements report $1.82 for the quarter and $1.09 for six months, while MD&A gives different figures ($1.53 and $1.00).
- Review the final transaction financing, share count, warrant terms, and post-combination capitalization, including the PIPE and sponsor forfeitures.
- Assess warrant valuation volatility and the company’s internal-control changes in subsequent filings.