Business context and reporting period
This is Landcadia Holdings III, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2021—not an operating-company quarterly report for Hillman Solutions Corp. Landcadia was a SPAC with no significant business operations or revenue. It had agreed to merge with HMAN Group Holdings Inc. (Hillman), which provides hardware-related products and merchandising services; the transaction was pending stockholder approval and closing.
Financial results and position
- Revenue: None reported; Landcadia had not generated revenue.
- Net income: $10.72 million, versus zero in Q1 2020. The result principally reflected an $11.21 million noncash gain from the change in fair value of warrant liabilities; operating expenses were $508,918 and trust interest income was $18,917. Basic and diluted income per share was $0.54.
- Cash flow: Operating cash used was $577,930; $71,388 was provided by withdrawals from the trust for tax payments. Cash declined from $1.02 million at year-end to $510,864.
- Assets and liquidity: Total assets were $500.66 million, including $500.03 million in the trust account. Trust funds were generally restricted pending a business combination or specified redemption/liquidation events; cash outside the trust was $510,864.
- Liabilities and equity: Total liabilities were $62.08 million, including $44.51 million in warrant derivative liabilities and $17.50 million of deferred underwriting commissions. Stockholders’ equity was $5.00 million; 43.36 million Class A shares were classified as subject to possible redemption.
- Debt and margins: No long-term debt or operating or capital lease obligations were reported. Operating margins are not meaningful because the SPAC had no revenue.
Material changes versus the prior comparable period
Q1 2020 reported no income or expenses, while Q1 2021 recorded the warrant fair-value gain and related net income. Compared with December 31, 2020, the warrant liability declined from $55.72 million to $44.51 million, largely reflecting a $12.17 million reduction in the Public Warrant liability, partly offset by a $960,000 increase in the Sponsor Warrant liability. Cash outside the trust fell by $506,542.
Transaction, outlook, and risks
- The merger agreement contemplated approximately $911.3 million of consideration plus $28.28 million representing the value of 2.828 million sponsor shares to be forfeited. Sponsors also agreed to forfeit another 1.0 million shares, for 3.828 million total shares forfeited at closing under the agreement.
- Landcadia had until October 14, 2022 to complete a business combination or redeem public shares and liquidate. Management stated there was no assurance the proposed transaction or another business combination would be completed.
- Landcadia expected ongoing public-company and transaction due-diligence costs. It had no off-balance-sheet arrangements and reported no material market or interest-rate risk at quarter-end.
- Restatement and controls: The company restated its December 31, 2020 financial statements after changing its accounting for warrants, which were reclassified as liabilities. Management concluded disclosure controls were ineffective due to a material weakness in evaluating complex accounting issues. It described plans to improve communication with personnel and outside professionals but gave no assurance of successful remediation.
- Warrant fair values can fluctuate materially and affect reported earnings. Other risks include transaction completion, public-share redemptions, and the SPAC’s limited cash outside the trust.
Investor facts to verify
- Confirm the status and final terms of the merger, including stockholder approval, closing conditions, and any subsequent amendments.
- Review the warrant valuation, related earnings impact, and the accounting restatement and remediation of the material weakness.
- Assess available cash outside the trust against anticipated transaction and operating costs, and understand restrictions on trust funds.
- Check public-share redemption levels and the resulting ownership, dilution, and sponsor-share forfeitures at closing.
- Compare the merger consideration and resulting capitalization with the final transaction disclosures; this filing does not provide Hillman’s operating results.