Hillman Solutions Corp.HLMN
Hillman Solutions Corp. Fair Value Disclosure
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, within the fair value hierarchy:
As of December 27, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Trading securities | $ | 847 | $ | — | $ | — | $ | 847 | |||||||||||||||
| Interest rate swaps | — | (1,259) | — | (1,259) | |||||||||||||||||||
| Foreign exchange forward contracts | — | 1,504 | — | 1,504 | |||||||||||||||||||
| Contingent consideration payable | — | — | 4,358 | 4,358 | |||||||||||||||||||
| As of December 28, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Trading securities | $ | 796 | $ | — | $ | — | $ | 796 | |||||||||||||||
| Interest rate swaps | — | 2,748 | — | 2,748 | |||||||||||||||||||
| Foreign exchange forward contracts | — | 4,325 | — | 4,325 | |||||||||||||||||||
| Contingent consideration payable | — | — | 4,863 | 4,863 | |||||||||||||||||||
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 restricted investments on the accompanying 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 December 27, 2025 and December 28, 2024, the Company's interest rate swaps were recorded on the accompanying Consolidated Balance Sheets in accordance with ASC 815.
The Company utilizes foreign exchange forward contracts to manage our exposure to currency fluctuations in the Canadian dollar versus the U.S. dollar. The forward contracts were valued using observable benchmark rates at commonly quoted intervals during the term of the forward contract. As of December 27, 2025 and December 28, 2024, the foreign exchange forward contracts were included in other current liabilities on the accompanying Consolidated Balance Sheets.
The contingent consideration represents future potential earn-out payments related to the Resharp acquisition in fiscal 2019 in which the maximum payout for the contingent consideration is $25.0 million plus 1.8% of net knife-sharpening revenues for five years after the $25.0 million is fully paid and the Instafob acquisition in the first quarter of 2020 where payment is based on 5% of the net sales from 2020 through 2022 plus 1% of net sales from 2023 through 2029. 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. The current and non-current portions of these obligations are reported separately on the Consolidated Balance Sheets as other accrued expense and other non-current liabilities, respectively. Subsequent changes in the fair value of the contingent consideration liabilities, as determined by using a simulation model of the Monte Carlo analysis that includes updated projections applicable to the liability, are recorded within other expense (income), net in the Consolidated Statements of Comprehensive Income (Loss).
The table below provides a summary of the changes in fair value of the Company’s contingent considerations (Level 3) for Resharp and Instafob as of December 27, 2025.
Resharp | Instafob | ||||||||||||||||||||||||||||
Other accrued expense | Other non-current liabilities | Other accrued expense | Other non-current liabilities | Total | |||||||||||||||||||||||||
Fair value as of December 28, 2024 | $ | 226 | $ | 4,574 | $ | 23 | $ | 40 | $ | 4,863 | |||||||||||||||||||
| Fair value of cash consideration paid | (253) | — | (12) | — | (265) | ||||||||||||||||||||||||
| Change in fair value of contingent consideration | 256 | (503) | 14 | (7) | (240) | ||||||||||||||||||||||||
Fair value as of December 27, 2025 | $ | 229 | $ | 4,071 | $ | 25 | $ | 33 | $ | 4,358 | |||||||||||||||||||
Cash, restricted investments, accounts receivable, short-term borrowings and accounts payable are reflected in the Consolidated Financial Statements 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 December 27, 2025 and December 28, 2024, 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 December 27, 2025 and December 28, 2024 because, while subject to a minimum SOFR 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 13 - Derivatives and Hedging.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Mar 16, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.