0001709164us-gaap:RestrictedStockMemberus-gaap:ShareBasedPaymentArrangementNonemployeeMembersrt:DirectorMember2020-01-012020-12-31








UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
Amendment No. 1
10-K
(Mark One)
þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 20192020
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File No. 001-38214
HAMILTON BEACH BRANDS HOLDING COMPANY
(Exact name of registrant as specified in its charter)
Delaware
31-1236686
(State or other jurisdiction of incorporation or organization)
31-1236686
(I.R.S. Employer Identification No.)
4421 Waterfront Dr.Glen AllenVA
23060
(Address of principal executive offices)
23060
(Zip Code)
Registrant's telephone number, including area code: (804) 273-9777
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, Par Value $0.01 Per ShareHBBNew York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, Par Value $0.01 Per Share
(Title of class)


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes ¨Noþ
     YES ¨NOþ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
     YES   Yes ¨NONoþ
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.
YESYesþ     No ¨     NO þ
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YESYesþ     NO      No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
¨Accelerated filerþ
Accelerated filer þ

Non-accelerated filer¨  
(Do not check if a smaller reporting company)
¨
Smaller reporting companyþ
Emerging growth company þ

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. o


Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes Noþ
     YES ¨NOþ
Aggregate market value of Class A Common Stock and Class B Common Stock held by non-affiliates as of June 30, 20192020 (the last business day of the registrant's most recently completed second fiscal quarter): $130,361,017$81,044,593
Number of shares of Class A Common Stock outstanding at July 17, 2020: 9,607,176March 19, 2021: 9,814,732
Number of shares of Class B Common Stock outstanding at July 17, 2020: 4,062,422March 19, 2021: 4,043,637
DOCUMENTS INCORPORATED BY REFERENCE


Portions of the Company's Proxy Statement for its 20202021 annual meeting of stockholders are incorporated herein by reference in Part III of this Form 10-K/A.
10-K.


1



HAMILTON BEACH BRANDS HOLDING COMPANY
TABLE OF CONTENTS
PAGE
 


2


PART I
Explanatory Note

This Amendment No. 1 to Form 10-K (this "Amendment" or "Form 10-K/A") amends the Hamilton Beach Brands Holding Company's Annual Report on Form 10-K for the year ended December 31, 2019 originally filed with the Securities and Exchange Commission ("SEC") on February 26, 2020 by the Company (the "Original Filing"). This Amendment restates the Company's previously issued consolidated financial statements as of and for the years ended December 31, 2019, 2018 and 2017. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information. The relevant unaudited interim financial information for each of the quarters during the years ended December 31, 2019 and 2018 has also been restated. See Note 16, Quarterly Results of Operations (Unaudited), in Item 8, Financial Statements and Supplementary Data, for such restated information.

In connection with such restatement, the Company has also revised the selected financial information for the fiscal years ended December 31, 2016 and 2015, to correct errors that the Company has determined to be immaterial, both individually and in the aggregate. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data and Item 6, Selected Financial Data.

Restatement Background
During the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican subsidiaries. The Company’s Audit Review Committee of the Board of Directors (the “Audit Review Committee”) commenced an internal investigation, with the assistance of outside counsel and other third party experts.
The Audit Review Committee, after discussion with management of the Company and Ernst & Young LLP, the Company’s independent registered public accounting firm, concluded that the Company’s previously issued consolidated financial statements as of December 31, 2019 and 2018, for the years ended December 31, 2019, 2018 and 2017, each of the quarters during the years ended December 31, 2019 and 2018, and other financial data relating to these periods, including the financial data tables furnished to the SEC on Form 8-K, should no longer be relied upon.
Impact of the Restatement
As a result of this investigation, the Company, along with the Audit Review Committee and its third party experts, concluded that certain former employees at one of the Company’s Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries that resulted in expenditures being deferred on the balance sheet beyond the period for which the costs pertained. As a result, the Company recorded a non-cash write-off for certain amounts included in the Company’s historical consolidated financial statements in trade receivables and prepaid expenses and other current assets, among other corrections, related to these transactions, and restated its consolidated financial statements as of December 31, 2019 and 2018, for the years ended December 31, 2019, 2018, and 2017, and each of the quarters during the years ended December 31, 2019 and 2018. The impact of these adjustments was a reduction to net income from continuing operations of $10.0 million for the year ended December 31, 2019, $4.1 million for the year ended December 31, 2018, and $2.0 million for the year ended December 31, 2017. The findings from the internal investigation did not identify any misconduct by any member of the Company's senior management team. During the course of the investigation, certain expenses at the Mexican subsidiaries were found to be incorrectly classified within the consolidated statement of operations and have also been corrected in the restatement.
Other Adjustments

The restatement also includes corrections for other errors identified as immaterial, individually and in the aggregate, to our consolidated financial statements. See Note 2, Restatement of Previously Issued Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data for additional information regarding the corrections.

Control Considerations

In connection with the restatement that resulted from wrongdoing by certain former employees at one of the Company's Mexican subsidiaries and the deficiencies identified at the Mexican subsidiaries, management of the Company has determined that material weaknesses existed in the Company’s internal control over financial reporting as of December 31, 2019. As a result, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2019, and the Company’s management has concluded that its

1


internal control over financial reporting was not effective as of December 31, 2019. See Item 9A, Controls and Procedures, for additional information related to these material weaknesses in internal control over financial reporting and the related remedial measures.
Items Amended in this Form 10-K/A

For reasons discussed above, we are filing this Amendment in order to amend the following items in our Original Filing to the extent necessary to reflect the adjustments discussed above and make corresponding revisions to our financial data cited elsewhere in this Amendment.

Part I, Item 1A. Risk Factors.
Part II, Item 6. Selected Financial Data.
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Part II, Item 8. Financial Statements and Supplementary Data.
Part II, Item 9A. Controls and Procedures.

However, for the convenience of the reader, this Amendment sets forth the Original Filing in its entirety, as amended to reflect the restatement.

This Amendment speaks as of the filing date of the Original Filing and does not reflect events occurring after the filing date of the Original Filing.

The Company has not filed, and does not intend to file, amendments to (i) the Annual Reports on Form 10-K for the years ended December 31, 2018 or 2017, or (ii) the Quarterly Reports on Form 10-Q for the quarters of the years ended December 31, 2019 or 2018. Accordingly, investors should rely only on the financial information and other disclosures regarding the restated periods in this Form 10-K/A or in future filings with the SEC (as applicable), and not on any previously issued or filed reports, earnings releases or similar communications relating to these periods.
In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by the Company’s principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment pursuant to Rule 13a-14(a) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).




Item 1. BUSINESS
General


Hamilton Beach Brands Holding Company (“Hamilton Beach Holding” or the “Company”) is an operatinga holding company and operates through its two wholly-owned subsidiariessubsidiary Hamilton Beach Brands, Inc. (“HBB”) and The Kitchen Collection, LLC (“KC”) (collectively “Hamilton Beach Holding” or. HBB is the “Company”). On October 10, 2019, the Company’s board of directors (the “Board”) approved the wind down of KC and its retail operations. By December 31, 2019, all KC stores were closed and theCompany's single reportable segment qualifies to be reported as discontinued operations. On January 21, 2020, the Board approved the dissolution of the KC legal entity and a Certificate of Dissolution of Ohio Limited Liability Company was filed with the Ohio Secretary of State.segment.


The only material assets held by Hamilton Beach Brands Holding Company are its investments in its consolidated subsidiaries. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries. Hamilton Beach Brands Holding Company has not guaranteed any obligations of its subsidiaries.


KCThe Company also previously operated through its former wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"), which is reported as discontinued operations in all periods presented. HBB ispresented herein. KC completed its dissolution on April 3, 2020 with a pro-rata distribution of its remaining assets to creditors, at which time the Company's single reportable segment.KC legal entity ceased to exist.


HBB is a leading designer, marketer, and distributor of a wide range of branded, small electric household and specialty housewares appliances, as well as commercial products for restaurants, fast food chains, bars, and hotels. HBB operates in the consumer, commercial and specialty small appliance markets.


2



On September 29, 2017, NACCO Industries, Inc. ("NACCO"), Hamilton Beach Holding's former parent company, spun-off the Company to NACCO stockholders. In the spin-off, NACCO stockholders, in addition to retaining their shares of NACCO common stock, received one share of Hamilton Beach Brands Holding Company Class A common stock ("Class A Common") and one share of Hamilton Beach Brands Holding Company Class B common stock ("Class B Common") for each share of NACCO Class A or Class B common stock. In accordance with applicable authoritative accounting guidance, the Company accounted for the spin-off from NACCO based on the historical carrying value of assets and liabilities. As a result of the distribution of one share of Class A Common and one share of Class B Common for each share of NACCO Class A or NACCO Class B common stock, the earnings per share amounts for the Company for periods prior to the spin-off have been calculated based upon the number of shares distributed in the spin-off. NACCO did not receive any proceeds from the spin-off.


The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports available, free of charge, through its website, www.hamiltonbeachbrands.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The content of our website is not incorporated by reference into this annual reportAnnual Report on Form 10-K/A10-K or in any other report or document we file with the SEC, and any references to our website is intended to be inactive textual references only.
Sales and Marketing
HBB designs, markets and distributes a wide range of branded, small electric household and specialty housewares appliances, including, but not limited to, air fryers, blenders, coffee makers, food processors, indoor electric grills, irons, juicers, mixers, slow cookers, toasters and toaster ovens. The Company also sells TrueAir® air purifiers. HBB also designs, markets and distributes commercial products for restaurants, fast food chains, bars and hotels. In 2019, HBB introduced sonic rechargeable toothbrushes under the BrightlineTM brand name through the ecommerce channel. HBB generally markets its “better”“good” and “best”“better” consumer products under the Hamilton Beach® brand and uses the Proctor Silex® brand for the “good” and value price points.brands. HBB participates in the premium or “only-the-best” market with theits owned brands Hamilton Beach® Professional brand and the Weston® brand gamefarm-to-table and gardenfield-to-table food processing equipment. Additionally, the Company hasparticipates in the premium market through multiyear licensing agreements to sellmarket and distribute a line of countertop appliances and kitchen tools under the Wolf Gourmet® brand, and a line of premium garment care products under the CHI® brand. In 2019, HBB began sellingbrand, and the Bartesian® premium cocktail delivery system through an exclusive multiyear agreement.system. The Company also sells TrueAir® air purifiers and BrightlineTM brand personal care products. HBB markets its commercial products under the Hamilton Beach Commercial® and the Proctor Silex Commercial® brands. HBB supplies private label products on a limited basis. HBB also licenses certain of its trademarks to various licensees primarily for use within categories such as microwave ovens, compact refrigerators, and water dispensers, among others.
Sales promotion activities are primarily focused onsupported through print and digital marketing channels.vehicles. HBB promotes certain of its innovative products through the use of television, internet and print advertising.
1

Table of Contents
Customers
Sales in North America are generated predominantly by a network of inside sales employees to mass merchandisers, ecommerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers, distributors, restaurants, bars, hotels and other retail outlets. Wal-MartWalmart Inc. and its global subsidiaries accounted for approximately 33%35%, 33% and 32%33% of the HBB’s revenue in 2020, 2019 2018 and 2017,2018, respectively. Amazon.com, Inc. and its subsidiaries accounted for approximately 14%16%, 10%14% and 12%10% of the HBB's revenue in 2020, 2019 2018 and 2017,2018, respectively. HBB’s five largest customers accounted for approximately 58%64%, 53%58%, and 54%53% of the HBB’s revenue for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively.
Product Warranty
HBB's warranty program to the consumer consists generally of an assurance-type limited warranty lasting for varying periods of up to ten years for electric appliances, with the majority of products having a warranty of one to three years. There is no guarantee to the consumer as HBB may repair or replace, at its option, those products returned under warranty.
Working Capital
The market for small electric household and specialty housewares appliances is highly seasonal in nature. The majority of HBB's revenue and operating profit typically occurs in the second half of the year due to the fall holiday-selling season. Due to the seasonality of purchases of its products, HBB generally uses a substantial amount of cash or short-term debt to finance inventory in anticipation of the fall holiday-selling season.
Patents, Trademarks, Copyrights and Licenses
HBB holds patents and trademarks registered in the United States ("U.S.") and foreign countries for various products. HBB believes its business is not dependent upon any individual patent, copyright or license, but that the Hamilton Beach®, Proctor Silex®, Hamilton Beach® Professional, and Weston® trademarks are material to its business.

3


Product Design and Development
HBB incurred $10.0 million, $12.1 million and $11.0 million in 2020, 2019 and $10.4 million in 2019, 2018, and 2017, respectively, on product design and development activities.
Key Suppliers and Raw Material
HBB’s products are supplied to its specifications by third-party suppliers located primarily in China.suppliers. HBB does not maintain long-term purchase contracts with suppliers and operates mainly on a purchase order basis. HBB generally negotiates the purchases from its foreign suppliers in U.S. dollars.
During 2019,2020, HBB purchased substantially all of its finished products from suppliers in China. HBB purchases its inventory from approximately 63 suppliers, one of which represented more than 10% of purchases during the year ended December 31, 2019.2020. HBB believes the loss of any one supplier would not have a long-term material adverse effect on its business because there are adequate supplier choices available that can meet HBB’s production and quality requirements. However, the loss of a supplier could, in the short term, adversely affect HBB’s business until alternative supply arrangements are secured.
The principal raw materials used by HBB’s third-party suppliers to manufacture its products are plastic, glass, steel, copper, aluminum and packaging materials. HBB believes adequate quantities of raw materials are available from various suppliers.
Competition
The small electric household appliance industry does not have substantial entry barriers. As a result,HBB believes the principal areas of competition with respect to its products are product design and innovation, quality, price, product features, supply chain excellence, merchandising, promotion and warranty. HBB competes with many manufacturers and distributors of housewares products. Based on publicly available information about the industry, HBB believes it is one of the largest full-line distributors and marketers of small electric household and specialty housewares appliances in North America based on key product categories.
To a lesser degree, HBB product lines compete in South America, Europe, and certain emerging markets such as Brazil and China. The competition in these geographic markets is also fragmented and HBB is not yet a significant participant although our commercial business has generated a strong position in these markets.
As brick and mortar retailers generally purchase a limited selection of branded, small electric appliances, HBB competes with other suppliers for retail shelf space. In the ecommerce channel, HBB must compete with a broad list of competitors.competitors for brand reputation through strong ratings and reviews from consumers.

To meet these competitive challenges, the Company has focused on continued innovation in its leading brands as well as expanding into new categories using existing core competencies. HBB’s presence in a significant number of product categories across various price points allows the Company to meet the needs of a wide range of retailers and consumers. Based on publicly available information about the industry, HBB believes it is one of the principal areaslargest full-line distributors and marketers of small electric household and specialty housewares appliances in North America, including the U.S., Canada, Mexico and Latin America, based on key product categories. Hamilton Beach® is the #1 small kitchen appliance brand in the US, in brick-and-mortar and ecommerce channels, based on units sold.
2

Table of Contents

To a lesser degree, HBB retail product lines compete outside of North America. HBB's commercial products compete globally. The competition with respect to its products are product designin these geographic markets is fragmented and innovation, quality, price, product features, supply chain excellence, merchandising, promotion and warranty.HBB is not yet a significant participant although our commercial business has generated a stronger position in these markets.
Government Regulation
HBB is subject to numerous federal and state health, safety and environmental regulations. HBB believes the impact of expenditures to comply with such laws will not have a material adverse effect on HBB.
As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal Hazardous Substances Act, which empower the U.S. Consumer Product Safety Commission (“CPSC”) to seek to exclude products that are found to be unsafe or hazardous from the market. Under certain circumstances, the CPSC could require HBB to repair, replace or refund the purchase price of one or more of HBB’s products, or HBB may voluntarily do so.
Throughout the world, electrical appliances are subject to various mandatory and voluntary standards, including requirements in some jurisdictions that products be listed by Underwriters’ Laboratories, Inc. (“UL”) or other similar recognized laboratories. HBB also uses Intertek Testing Services for certification and testing of compliance with UL standards, as well as other national and industry specific standards. HBB endeavors to have its products designed to meet the certification requirements of, and to be certified in, each of the jurisdictions in which they are sold.


Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") requires public companies to disclose whether certain minerals, commonly known as "conflict minerals," are necessary to the functionality or production of a product manufactured by those companies and if those minerals originated in the Democratic Republic of the Congo ("DRC") or an adjoining country. HBB conducts supply-chain due diligence investigations required by the conflict minerals rules and makes disclosures required by the Dodd Frank Act. Our compliance with these investigation and disclosure requirements could adversely affect our ability to sell products to customers that HBB is unable to designate as "DRC conflict free."
Transactions with Related Parties


Mr. Alfred M. Rankin is the former executive chairman of the Company and current non-executive chairman of the Board of the Company. Mr. Rankin provides consulting services to the Company under the terms of a consulting agreement pursuant to

4


which Mr. Rankin supports the president and chief executive officer of the Company upon request. Fees for consulting services rendered by Mr. Rankin were $0.5 million for each of the yearyears ended December 31, 2020 and 2019. There were no fees for consulting services rendered by Mr. Rankin in 2018.
EmployeesHuman Capital Management
As
The Company’s success is a result of its organizational culture built on and centered around Good Thinking which incorporates teamwork and inspired thinking into all areas of our business. The Company employed approximately 700 individuals, as of December 31, 2019, HBB’s work force consisted2020, in four countries—Canada, China, Mexico, and the United States. There are approximately 500 employees in the United States with about half of approximately 680this group based at the Company’s headquarters in Richmond, Virginia, which is home to the Company’s product design, development and marketing teams (led by long-tenured Company leaders) and its state-of-the-art test kitchen. We pride ourselves on attracting and retaining highly dedicated and customer-focused employees at all levels of the organization. As an example, our engineering department, which focuses on continued innovation and development, has on average 12 years of experience with the Company.

We believe that our Good Thinking values-based culture is a core strength that provides the foundation for our employees. Our business is about people– our employees, our customers who enjoy our appliances, and the communities in which we live. In 2020, we adopted a parental leave policy that provides four weeks of paid leave. In response to COVID-19, we enacted swift measures to provide safe environments for our employees world-wide by implementing recommended safety protocols at all of our locations. We also provided periods of time-off, time-away, and other increased flexibility (above and beyond federal and state mandates) for our employees. Then, in a joint effort with our employees at our corporate headquarters, we increased our donations in 2020 to a local foodbank that provides meals and other support to families in need. We recognize that the strength of our relationships with our employees, customers, and other stakeholders directly contributes to our long-term success and, in 2021, will continue internal assessment of opportunities to implement corporate social responsibility initiatives.




3

Table of Contents

Information about our Executive Officers
There exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was selected.
The following tables set forth, as of February 26, 2020,March 22, 2021, the name, age, current position and principal occupation and employment during the past five years of the Company’s executive officers.
EXECUTIVE OFFICERS OF THE COMPANY
NameAgeCurrent PositionOther Positions
Gregory H. Trepp5859
President and Chief Executive Officer of Hamilton Beach Holding (from September 2017); President and Chief Executive Officer of HBB (from prior to 2014); 2015)Chief Executive Officer of KC (from prior to 2014)2015 to April 2020)
Gregory E. Salyers5960
Senior Vice President, Global Operations of HBB (from prior to 2014)2015)
R. Scott Tidey5556
Senior Vice President, North America Sales and Marketing of HBB (from prior to 2014)2015)
Michelle O. Mosier5455
Senior Vice President, Chief Financial Officer and Treasurer of Hamilton Beach Holding (since(from January 2020); Successor Vice President and Chief Financial Officer of HBB (since(from October 2018)2018 to December 2019); Chief Financial Officer of United Sporting Companies (from September 2015 to June 2018) a subsidiary of SportsCo Holding, Inc. which filed for Chapter 11 bankruptcy in June 2019, and Controller for Reynolds Groups Holdings Limited (from September 2011 to August 2015).
Dana B. Sykes5859
Senior Vice President, General Counsel and Secretary of Hamilton Beach Holding (from January 2020); Vice President, General Counsel and Secretary of HBB (from September 2015)2015 to December 2019); Assistant Secretary of KC (from May 2015)From July 2014 to September 2015, Associate General Counsel, Assistant Secretary, and Senior Director, Human Resources of HBB. From priorHBB, and Assistant Secretary of KC (from May 2015 to 2014 to July 2014, Assistant General Counsel and Director, Human Resources of HBB.April 2020)


Item 1A. RISK FACTORS



Industry Risks
The restatement of our financial statements may lead to, among other things, shareholder litigation, loss of investor confidence, negative impacts on our stock price and certain other risks.

We have restated our previously issued consolidated financial statements as of December 31, 2019 and 2018, for the years ended December 31, 2019, 2018 and 2017, and the relevant unaudited interim financial information for each of the quarters during the years ended December 31, 2019 and 2018 to correct misstatements principally related to the write-off of unrealizable assets. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information. As a result of the circumstances giving rise to the restatement, we have become subject to a number of additional risks and uncertainties, including unanticipated costs for accounting and legal fees in connection with or related to the restatement, shareholder litigation and government investigations. Any such proceeding could result in substantial defense costs regardless of the outcome of the litigation or investigation. If we do not prevail in any such litigation, we could be required to pay substantial damages or settlement costs. In addition, the restatement and related matters could impair our reputation and could cause our counterparties to lose confidence in us. Each of these occurrences could have an adverse effect on our business, results of operations, financial condition and stock price.

We have identified material weaknesses in our internal control over financial reporting which, if not timely remediated, may adversely affect the accuracy and reliability of our financial statements, and our reputation, business and stock price, as well as lead to a loss of investor confidence in us.

As described under Item 9A, Controls and Procedures, below, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that material weaknesses in our internal control over financial reporting existed at our Mexican

5


subsidiaries as of December 31, 2019 and, accordingly, our internal control over financial reporting and our disclosure controls and procedures were not effective as of such date. We intend to remediate these material weaknesses. While we believe these steps will improve the effectiveness of our internal control over financial reporting and remediate the identified deficiencies, if our remediation efforts are insufficient to address the material weaknesses or we identify additional material weaknesses in our internal control over financial reporting in the future, our ability to analyze, record and report financial information accurately, to prepare our financial statements within the time periods specified by the rules and forms of the SEC and to otherwise comply with our reporting obligations under the federal securities laws will likely be adversely affected. The occurrence of, or failure to remediate, these material weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect the accuracy and reliability of our financial statements and have other consequences that could materially and adversely affect our business, including an adverse impact on the market price of our common stock, potential actions or investigations by the SEC or other regulatory authorities, shareholder lawsuits, a loss of investor confidence and damage to our reputation.


HBB’s business is sensitive to the strength of the North American consumer markets and weakness in these markets could
adversely affect its business.


The strength of the economy in the U.S., and to a lesser degree in Canada and Mexico, has a significant impact on HBB’s performance. Weakness in consumer confidence and poor financial performance by mass merchandisers, ecommerce retailers, warehouse clubs, department stores or any of HBB’s other customers could result in reduced revenue and profitability. A general slowdown in the consumer sector could result in additional pricing and marketing support pressures on HBB.


HBB is dependent on key customers and the loss of, or significant decline in business from, one or more of its key customers could materially reduce its revenue and profitability and its ability to sustain or grow its business.


HBB relies on several key customers. Although HBB has long-established relationships with many customers, it does not have any long-term supply contracts with these customers, and purchases are generally made using individual purchase orders. A loss of or significant reduction in sales to any key customer could result in significant decreases in HBB’s revenue and profitability and an inability to sustain or grow its business.


HBB must receive a continuous flow of new orders from its large, high-volume retail customers; however, it may be unable to continually meet the needs of those customers. In addition, failure to obtain anticipated orders or delays or cancellations of orders or significant pressure to reduce prices from key customers could impair its ability to sustain or grow its business.
    
As a result of dependence on its key customers, HBB could experience a material adverse effect on its revenue and profitability if any of the following were to occur:
the insolvency or bankruptcy of any key customer;
a declining market in which customers materially reduce orders or demand lower prices; or
4

Table of Contents
a strike or work stoppage at a key customer facility, which could affect both its suppliers and customers.
If HBB were to lose, or experience a significant decline in business from any major customer, or if any major customers were to go bankrupt, HBB might be unable to find alternate distribution outlets.

HBB is subject to foreign currency exchange risk.

HBB’s products are supplied by third-party suppliers located primarily in China. HBB generally negotiates the purchases from its foreign suppliers in U.S. dollars. A weakening of the U.S. dollar against local currencies could result in certain non-U.S. manufacturers increasing the U.S. dollar prices for future product purchases.

As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks in connection with our transactions that are denominated in foreign currencies. In addition, we translate sales and other results denominated in foreign currencies into U.S. dollars for purposes of our consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on our reported revenues and profitability, while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenues and profitability.

Any hedging activities HBB engages in may only offset a portion of the adverse financial impact resulting from unfavorable changes in foreign currency exchange rates. HBB cannot predict with any certainty changes in foreign currency exchange rates or the degree to which HBB can mitigate these risks.

6



Increases in costs of products may materially reduce our profitability.

Factors that are largely beyond HBB's control, such as movements in in-bound transportation rates and commodity prices for the raw materials needed by suppliers of HBB’s products, may affect the cost of products, and HBB may not be able to pass those costs on to its customers. As an example, HBB’s products require a substantial amount of plastic. Because the primary resource used in plastic is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum. When the prices of petroleum, as well as steel, aluminum and copper, increase significantly, supplier price increases may materially reduce our profitability.


The increasing concentration of HBB’s branded small electric household and specialty housewares appliance sales among a few retailers and the trend toward private label brands could materially reduce revenue and profitability.


With the growing trend towards the concentration of HBB’s branded small electric household and specialty housewares appliance sales among fewer retailers, HBB is increasingly dependent upon fewer customers whose bargaining strength is growing as a result of this concentration. HBB sells a substantial quantity of products to mass merchandisers, ecommerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers and other retail outlets. As a result, these retailers generally have a large selection of small electric household and specialty housewares appliance suppliers to choose from. In addition, certain of HBB’s larger customers use their own private label brands on household appliances that compete directly with some of HBB’s products. As the retailers in the small electric household appliance industry become more concentrated, competition for sales to these retailers may increase, which could materially reduce our revenue and profitability.


If HBB is unable to continue to enhance existing products, as well as develop and market new products that respond to customer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products,
which could materially reduce revenue and profitability, which have historically benefited from sales of new products.


HBB may not be able to compete as effectively with competitors, and ultimately satisfy the needs and preferences of customers, unless HBB can continue to enhance existing products and develop new innovative products for the markets in which HBB competes. Product development requires significant financial, technological, and other resources. Product improvements and new product introductions also require significant research, planning, design, development, engineering, and testing at the technological and product process levels and HBB may not be able to timely develop and introduce product improvements or new products. Competitors’ new products may beat HBB’s products to market, be higher quality or more reliable, be more effective with more features, obtain better market acceptance, or render HBB’s products obsolete. Any new products that HBB develops may not receive market acceptance or otherwise generate any meaningful revenue or profit relative to our expectations based on, among other things, commitments to fund advertising, marketing, promotional programs and development.


HBB’s inability to compete effectively with competitors in its industry could result in lost market share and decreased revenue.


The small electric household, specialty housewares appliances and commercial appliance industry does not have substantial entry barriers. As a result, HBB competes with many manufacturers and distributors of housewares products. Additional competitors may also enter this market and cause competition to intensify. For example, some of HBB’s customers have expressed interest in sourcing, or expanding the extent of sourcing, small electric household and commercial appliances directly from manufacturers in Asia. We believe competition is based upon several factors, including product design and innovation, quality, price, product features, merchandising, promotion and warranty. If HBB fails to compete effectively with these manufacturers and distributors, it could lose market share and experience a decrease in revenue, which would adversely affect our results of operations.
 
HBB also competes with established companies, a number of which have substantially greater facilities, personnel, financial and other resources. In addition, HBB competes with its own retail customers, who use their own private label brands, and importers and foreign manufacturers of unbranded products. Some competitors may be willing to reduce prices and accept lower profit margins to compete. As a result of this competition, HBB could lose market share and revenue.


Changes in consumer shopping trends and changes in distribution channels could result in lost market share and decreased revenue and profitability.


Traditional brick-and-mortar retail channels have experienced low growth or declines in recent years, while the ecommerce channel has experienced significant growth. Consumer shopping preferences have shifted, and may continue to shift in the

7


future, to distribution channels other than traditional brick-and-mortar retail channels. Success in the ecommerce channel requires providing products at the right price, products that earn strong ratings and reviews and meaningful engagement with online shoppers. HBB has invested in industry leading selling and marketing capabilities, while maintaining its presence in traditional brick-and-mortar retail channels. However, if we are not successful in developing and utilizing ecommerce channels that future consumers may prefer, we may experience a loss in market share and decreased revenue and profitability.

HBB may become subject to claims under foreign laws and regulations, which may be expensive, time-consuming and distracting.

Because HBB has employees, property and business operations outside of the U.S., HBB is subject to the laws and the court systems of many jurisdictions. HBB may become subject to claims outside the U.S. for violations or alleged violations of laws with respect to the current or future foreign operations of HBB. In addition, these laws may be changed or new laws may be enacted in the future. International litigation is often expensive, time-consuming and distracting. As a result, any of these risks could significantly reduce HBB’s profitability and its ability to operate its businesses effectively.

HBB’s obligations relating to environmental matters may exceed our expectations.

HBB is subject to laws and regulations relating to the protection of the environment, including those governing the
management and disposal of hazardous substances. HBB is investigating or remediating historical contamination at some current and former sites related to HBB’s prior manufacturing operations or the operations of businesses HBB acquired. The costs of investigating and remediating historical contamination may increase based on the findings of investigations and the effectiveness of remediation methods. In addition, the discovery of additional contamination at these or other sites could result in significant cleanup costs that could have a material adverse effect on HBB’s financial conditions and results of operations. Future changes to environmental laws could require HBB to incur significant additional expense.

HBB could, under some circumstances, also be held financially liable for or suffer other adverse effects due to environmental violations or contamination caused by prior owners of businesses HBB has acquired. In certain circumstances, HBB’s financial liability for cleanup costs takes into account agreements with an unrelated third party. HBB’s liability for these costs could increase if the unrelated third party does not, or cannot, perform its obligations under those agreements. In addition, under some of the agreements through which HBB has sold real estate, HBB has retained responsibility for certain contingent environmental liabilities arising from pre-closing operations. These liabilities may not arise, if at all, until years after HBB sold these operations and could require us to incur significant additional expenses, which could materially adversely affect HBB’s results of operations and financial condition.

The Company is subject to litigation risk which could adversely affect our financial condition, results of operations and liquidity.

From time to time we are subject to claims involving product liability, infringement of intellectual property and patent rights of third parties and other matters. Any such claims, with or without merit, could be time consuming and expensive, and may require the Company to incur substantial costs and divert the resources of management. Due to the uncertainties of litigation, unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the Company’s financial position, results of operations and cash flows of the period in which the ruling occurs, or in future periods.
To the extent that HBB relies on newly acquired businesses or new product lines to expand its business, these acquisitions or new product lines may not contribute positively to HBB’s earnings because anticipated sales volumes and synergies may not materialize, cost savings may be less than expected or acquired businesses may carry unexpected liabilities.

HBB may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or lines of products. The acquisition of a business or of the rights to market specific products or use specific product names may involve a financial commitment by HBB, either in the form of cash or stock consideration. HBB may not be able to acquire businesses and develop products that will contribute positively to HBB’s earnings. Anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet expectations or acquired businesses may carry unexpected liabilities.



8
5

Table of Contents


HBB’s business involves the potential for product recalls, which could affect HBB’s revenue and profitability.


As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal Hazardous Substances Act, which empower the CPSC to seek to exclude from the market those products that are found to be unsafe or hazardous. Under certain circumstances, the CPSC could require HBB to repair, replace or refund the purchase price of one or more of our products, or HBB may voluntarily do so. Electrical appliances are subject to various mandatory and voluntary standards. Any repurchases or recalls of our products could be costly to us and could damage our reputation or the value of our brands. If HBB is required to remove, or HBB voluntarily removes our products from the market, our reputation or brands could be tarnished, and HBB might have large quantities of finished products that could not be sold. Furthermore, failure to timely notify the CPSC of a potential safety hazard can result in fines being assessed against HBB. Additionally, laws regulating certain consumer products exist in some states, as well as in other countries in which HBB sells our products, and more restrictive laws and regulations may be adopted in the future. HBB’s results of operations are also susceptible to adverse publicity regarding the quality and safety of our products. In particular, product recalls may result in a decline in sales for a particular product.


The markets for HBB's products are highly seasonal and dependent on consumer spending, which could result in significant variations in revenue and profitability.

Sales of HBB products are related to consumer spending, including general economic conditions affecting disposable consumer income such as unemployment rates, business conditions, interest rates, levels of consumer confidence, energy prices, mortgage rates, the level of consumer debt and taxation. In addition, the retail market for small electric household and specialty housewares appliances are highly seasonal in nature. Accordingly, HBB generally recognizes a substantial portion of our revenue in the second half of the year as sales increase significantly with the fall holiday-selling season. Accordingly, quarter-to-quarter comparisons of past operating results of HBB are meaningful only when comparing equivalent time periods, if at all. Any economic downturn, decrease in consumer spending or shift in consumer spending away from small electric household and specialty housewares appliances may significantly reduce revenue and profitability.

Business Risks

Our results of operations have been adversely affected and, in the future, may be materially adversely impacted by the coronavirus (COVID-19) pandemic.

The ongoing global COVID-19 pandemic has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including business shutdowns and limitations, travel restrictions, border closings, restrictions on public gatherings and shelter-in-place restrictions. This has negatively impacted the global economy, disrupted financial markets and resulted in increased unemployment levels, all of which have negatively impacted various industries. The continued spread of COVID-19 and efforts to contain the virus could:

continue to impact demand for our products;
cause the Company to experience an increase in costs as a result of the Company’s emergency measures, delayed payments from customers and increased risk of uncollectible accounts;
limit the Company’s access to further capital resources, if needed, and increase associated costs;
result in disruptions to our supply chain; and
adversely impact economies and financial markets of our international operations resulting in an economic downturn that could affect the value of foreign currencies.
The situation surrounding the COVID-19 pandemic remains fluid and the potential for a material impact on the Company’s results of operations, financial condition, liquidity, and stock price increases the longer the virus impacts activity levels in the United States and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact the COVID-19 pandemic may have on the Company’s results of operations, financial position, liquidity and stock price. The extent of any impact will depend on the extent of new outbreaks, the extent to which new shutdowns may be needed, the nature of government public health guidelines and the public’s adherence to those guidelines, the impact of government economic relief on the US economy, unemployment levels, the success of businesses reopening fully, the timing for proven treatments and availability of vaccines for COVID-19, consumer confidence and demand for our products. Any of these factors
6

Table of Contents
could cause or contribute to the risks and uncertainties included within this Annual Report on Form 10-K and could materially adversely affect our business, financial condition, results of operations and/or stock price.

HBB is subject to foreign currency exchange risk.

HBB’s products are supplied by third-party suppliers located primarily in China. HBB generally negotiates the purchases from its foreign suppliers in U.S. dollars. A weakening of the U.S. dollar against local currencies could result in certain non-U.S. manufacturers increasing the U.S. dollar prices for future product purchases.

As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks in connection with our transactions that are denominated in foreign currencies. In addition, we translate sales and other results denominated in foreign currencies into U.S. dollars for purposes of our consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on our reported revenues and profitability, while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenues and profitability.

Any hedging activities HBB engages in may only offset a portion of the adverse financial impact resulting from unfavorable changes in foreign currency exchange rates. HBB cannot predict with any certainty changes in foreign currency exchange rates or the degree to which HBB can mitigate these risks.

Increases in costs of products may materially reduce our profitability.

Factors that are largely beyond HBB's control, such as commodity prices for the raw materials needed by suppliers of HBB’s products, may affect the cost of products, and HBB may not be able to pass those costs on to its customers. As an example, HBB’s products require a substantial amount of plastic. Because the primary resource used in plastic is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum. When the prices of petroleum, as well as steel, aluminum and copper, increase significantly, supplier price increases may materially reduce our profitability.

To the extent that HBB relies on newly acquired businesses or new product lines to expand its business, these acquisitions or new product lines may not contribute positively to HBB’s earnings because anticipated sales volumes and synergies may not materialize, cost savings may be less than expected or acquired businesses may carry unexpected liabilities.

HBB may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or lines of products. The acquisition of a business or of the rights to market specific products or use specific product names may involve a financial commitment by HBB, either in the form of cash or stock consideration. HBB may not be able to acquire businesses and develop products that will contribute positively to HBB’s earnings. Anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet expectations or acquired businesses may carry unexpected liabilities.

HBB depends on third-party suppliers for all of our products, which subjects the Company to risks, including unanticipated increases in expenses, decreases in revenue and disruptions in the supply chain.

HBB is dependent on third-party suppliers for the manufacturing and distribution of our products. Our ability to select reliable suppliers that provide timely deliveries of quality products will impact our success in meeting customer demand. Any supplier's inability to timely deliver products that meet desired specifications or any unanticipated changes in suppliers could be disruptive and costly. Any significant failure by HBB to obtain quality products, in sufficient quantities, on a timely basis, and at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on revenue and profitability. As certain suppliers are primarily based in China, international operations are subject to additional risks including, among others:

currency fluctuations;
labor unrest;
potential political, economic and social instability;
restrictions on transfers of funds;
import and export duties and quotas;
changes in domestic and international customs and tariffs, including embargoes and customs restrictions;
uncertainties involving the costs to transport products;
7

Table of Contents
long distance shipping routes dependent upon a small group of shipping and rail carriers and import facilities;
unexpected changes in regulatory environments;
regulatory issues involved in dealing with foreign suppliers and in exporting and importing products;
protection of intellectual property;
difficulty in complying with a variety of foreign laws;
difficulty in obtaining distribution and administrative support;
natural or human induced disasters such as earthquakes, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, power or water shortages, telecommunications failures, and medical epidemics or pandemics, including potential consequences from the coronavirus; and
potentially adverse tax consequences, including significant changes in tax law.

The foregoing factors could have a material adverse effect on our ability to maintain or increase the supply of products, which may result in material increases in expenses and decreases in revenue and profitability.

Our financial results may be negatively impacted by transportation constraints on shipping capabilities.

Our ability to meet customers’ demands depends, in part, on our ability to obtain the timely and adequate shipment of our products. Certain transportation industry vendors may experience capacity constraints due to increases in volume. For example, in the third and fourth quarters of 2020, congestion in several areas of the supply chain, including the supply chain from China to our distribution facility as well as certain customers' ability to send in equipment to pick up or receive goods due to congestion at their facilities, impacted our ability to ship inventory in a timely manner and resulted in increased freight charges. If our transportation industry vendors become capacity constrained, then we may have to identify new vendors or explore alternative order fulfillment methods to ensure we have sufficient shipping capabilities. We have experienced and may continue to experience significant delays in shipping our products to customers and incur additional costs to establish alternative shipping sources if existing vendors are unable to sufficiently handle our shipping volume. We cannot predict if we will be able to obtain alternative shipping sources within the time frames that we require and at a comparable cost.

The Company is dependent on key personnel and the loss of these key personnel could significantly reduce its consolidated profitability.

The Company is highly dependent on the skills, experience and services of its and its subsidiaries’ key personnel and the loss of key personnel could have a material adverse effect on its consolidated business, operating results and financial condition. Employment and retention of qualified personnel is important to the successful conduct of Hamilton Beach Holding’s business. Therefore, the Company's success also depends upon its ability to recruit, hire, train and retain current and additional skilled and experienced management personnel. The Company's inability to hire and retain personnel with the requisite skills could impair its ability to manage and operate its consolidated business effectively and could significantly reduce its consolidated profitability.

The Company’s business could suffer if information technology systems are disrupted, cease to operate effectively or become subject to a security breach.

The Company relies heavily on information technology systems to operate websites; record and process transactions; respond to customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; and maintain cost-efficient operations. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of computer hardware and software systems and maintain cybersecurity. In addition, we collect, store, have access to and otherwise process certain confidential or sensitive data.

Cyber-attacks are becoming more sophisticated and include computer viruses or other malicious codes, attacks to gain unauthorized access to data, and other security breaches that could lead to the loss of valuable business data, misappropriation of our consumers’ or employees’ personal information, or a disruption of our critical systems. The Audit Review Committee of the Company is regularly briefed on cybersecurity matters, however despite our security efforts, if unauthorized access does occur, we could become the subject of regulatory action or litigation from our customers, employees, suppliers, and shareholders, which could damage our reputation, require significant expenditures of capital, and cause us to lose business and revenue. Additionally, unauthorized access could also cause interruptions in our operations and might require us to spend significant management time and other resources investigating the event and dealing with local and federal law enforcement.
8

Table of Contents
While we have not experienced any material impacts from a cyber-attack, any one or more future cyber-attacks could have a material adverse effect on our financial statements.

Our information technology systems may be vulnerable from time to time to damage and other technical malfunctions. If our systems are damaged, or fail to function properly, we may have to make monetary investments to repair or replace the systems and could endure delays in operations. Any material disruption or slowdown of our systems, including our failure to successfully upgrade systems, could cause information, including data related to customer orders, to be lost or delayed. Such a loss or delay could reduce demand and cause our sales and/or profitability to decline.

The Company’s business could suffer if the implementation of its enterprise resource planning (“ERP”) system is not successful or is more difficult, costly or time consuming than expected.

HBB recently implemented an enterprise resource planning (“ERP”) system in the U.S and will be implementing the ERP system at other subsidiaries over the next few years. Such an implementation is a major undertaking from a financial, management and personnel perspective. The implementation, integration and successful operation of the ERP system may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the extent anticipated. Any disruptions, delays or deficiencies in the implementation, integration or operation of our new ERP system could cause information, including data related to customer orders, to be lost or delayed. Such a loss or delay could reduce demand and cause our sales and/or profitability to decline. In addition, any significant disruption, delay or deficiency in the design and implementation of the ERP system could adversely affect our ability to process orders, ship products, send invoices and track payments, fulfill contractual obligations or otherwise operate our business. For example, shipping challenges from the implementation, integration and operation of the ERP system resulted in a significant order backlog during the third quarter of 2020. Any additional disruptions, delays or deficiencies in the implementation, integration or operation of our new ERP system could adversely affect our financial position, results of operations and cash flows in addition to the effectiveness of our internal controls over financial reporting.

Failure to maintain data privacy could have a material adverse effect on our business, financial condition and results of operations.

The Company is subject to certain laws, rules and regulations enacted to protect businesses and personal data (“Privacy Laws”), which may include the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”), as well as industry self-regulatory codes that create new compliance obligations. The administration, enforcement and regulation of Privacy Laws are quickly evolving and subject to changes in interpretation. Future changes in Privacy Laws may require the Company to incur additional and unexpected expenses and may subject the Company to additional compliance risk. Any failure to comply with Privacy Laws could have a material adverse impact on our financial condition and results of operations.

Financial Risks

HBB may be subject to risks relating to increasing cash requirements of certain employee benefits plans, which may affect its financial position.

Because HBB’s defined benefit pension plans are frozen and no longer provide for the accrual of future benefits, the expenses recorded for, and cash contributions required to be made to its defined benefit pension plans are dependent on, changes in market interest rates and the value of plan assets, which, in turn, are dependent on actual investment returns. Significant changes in market interest rates, decreases in the value of plan assets or investment losses on plan assets may require HBB to increase the cash contributed to its defined benefit pension plans which may affect its financial position.

The financing arrangement of HBB contains various restrictions that could limit operating flexibility.

HBB’s credit facility contains covenants and other restrictions that, among other things, require HBB to satisfy certain financial tests, maintain certain financial ratios and restrict HBB’s ability to incur additional indebtedness. The restrictions and covenants in HBB’s credit facility, and other future financing arrangements may limit HBB’s ability to respond to market conditions, provide for capital investment needs or take advantage of business opportunities by limiting the amount of additional borrowings HBB may incur.





9

Table of Contents
Regulatory Risks

We restated certain of our previously issued consolidated financial statements, which resulted in unanticipated costs and may lead to, among other things, shareholder litigation, loss of investor confidence, negative impacts on our stock price and certain other risks.

As discussed in the Explanatory Note, Note 2, “Restatement of Previously Issued Consolidated Financial Statements” and in Note 16 “Quarterly Results of Operations (Unaudited)” under Item 8 of the 2019 Form 10-K/A, in 2020, we restated our previously issued consolidated financial statements as of December 31, 2019 and 2018, for the years ended December 31, 2019, 2018 and 2017, and the relevant unaudited interim financial information for each of the quarters during the years ended December 31, 2019 and 2018. The determination that our previously issued financial statements would be restated was made following the identification of certain misstatements arising out of the operations of our Mexican subsidiaries. Although the Company has restated these financial statements, we have become subject to a number of additional risks and uncertainties, including unanticipated costs for accounting and legal fees in connection with the restatement, shareholder litigation and government investigations. Any such proceeding could result in substantial defense costs regardless of the outcome of the litigation or investigation. If we do not prevail in any such litigation, we could be required to pay substantial damages or settlement costs. In addition, the restatement and related matters could impair our reputation and could cause our counterparties to lose confidence in us. Each of these occurrences could have an adverse effect on our business, results of operations, financial condition and stock price.

We have identified material weaknesses in our internal control over financial reporting which, if not timely remediated, may adversely affect the accuracy and reliability of our financial statements, and our reputation, business and stock price, as well as lead to a loss of investor confidence in us.

As described under Item 9A, Controls and Procedures, we concluded that our disclosure controls and procedures were not effective as of December 31, 2020 and that we had, as of such date, material weaknesses in our internal control over financial reporting related to internal control deficiencies within the income tax process and material weaknesses identified in the prior period related to our Mexican subsidiaries, which continue to exist as of December 31, 2020. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis. The material weakness related to income taxes identified in Item 9A, did not result in any adjustments or restatements of our audited and unaudited consolidated financial statements or disclosures for any prior period previously reported by the Company.

We intend to remediate these material weaknesses. While we believe the steps we take to remediate these material weaknesses will improve the effectiveness of our internal control over financial reporting and will remediate the identified deficiencies, if our remediation efforts are insufficient to address the material weakness or we identify additional material weaknesses in our internal control over financial reporting in the future, our ability to analyze, record and report financial information accurately, to prepare our financial statements within the time periods specified by the rules and forms of the SEC and to otherwise comply with our reporting obligations under the federal securities laws may be adversely affected. The occurrence of, or failure to remediate, these material weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect the accuracy and reliability of our financial statements and have other consequences that could materially and adversely affect our business, including an adverse impact on the market price of our common stock, potential actions or investigations by the SEC or other regulatory authorities, shareholder lawsuits, a loss of investor confidence and damage to our reputation.

HBB may become subject to claims under foreign laws and regulations, which may be expensive, time-consuming and distracting.

Because HBB has employees, property and business operations outside of the U.S., HBB is subject to the laws and the court systems of many jurisdictions. HBB may become subject to claims outside the U.S. for violations or alleged violations of laws with respect to the current or future foreign operations of HBB. In addition, these laws may be changed or new laws may be enacted in the future. International litigation is often expensive, time-consuming and distracting. As a result, any of these risks could significantly reduce HBB’s profitability and its ability to operate its businesses effectively.

10

Table of Contents
HBB’s obligations relating to environmental matters may exceed our expectations.

HBB is subject to laws and regulations relating to the protection of the environment, including those governing the
management and disposal of hazardous substances. HBB is investigating or remediating historical contamination at some current and former sites related to HBB’s prior manufacturing operations or the operations of businesses HBB acquired. The costs of investigating and remediating historical contamination may increase based on the findings of investigations and the effectiveness of remediation methods. In addition, the discovery of additional contamination at these or other sites could result in significant cleanup costs that could have a material adverse effect on HBB’s financial conditions and results of operations. Future changes to environmental laws could require HBB to incur significant additional expense.

HBB could, under some circumstances, also be held financially liable for or suffer other adverse effects due to environmental violations or contamination caused by prior owners of businesses HBB has acquired. In certain circumstances, HBB’s financial liability for cleanup costs takes into account agreements with an unrelated third party. HBB’s liability for these costs could increase if the unrelated third party does not, or cannot, perform its obligations under those agreements. In addition, under some of the agreements through which HBB has sold real estate, HBB has retained responsibility for certain contingent environmental liabilities arising from pre-closing operations. These liabilities may not arise, if at all, until years after HBB sold these operations and could require us to incur significant additional expenses, which could materially adversely affect HBB’s results of operations and financial condition.

The Company is subject to litigation risk which could adversely affect our financial condition, results of operations and liquidity.

From time to time we are subject to claims involving product liability, infringement of intellectual property and patent rights of third parties and other matters. Any such claims, with or without merit, could be time consuming and expensive, and may require the Company to incur substantial costs and divert the resources of management. Due to the uncertainties of litigation, unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the Company’s financial position, results of operations and cash flows of the period in which the ruling occurs, or in future periods.

HBB’s business subjects it to product liability claims, which could affect the reputation, revenue and profitability of HBB.


HBB faces exposure to product liability claims if one of our products is alleged to have caused property damage, bodily injury or other adverse effects up to a defined self-insured loss limit per claim and maintains product liability insurance for claims above this self-insured level. If a product liability claim is brought against HBB, our revenue and profitability could be affected adversely as a result of negative publicity related to the claim, costs associated with any replacement of the product or expenses related to defending these claims. This could be true even if the claims themselves are ultimately settled for immaterial amounts. In addition, HBB may not be able to maintain product liability insurance on terms acceptable to HBB in the future. If the number of product liability claims HBB experiences exceeds historical amounts, if HBB is unable to maintain product liability insurance or if HBB’s product liability claims exceed the amount of our insurance coverage, HBB’s results of operations and financial condition could be affected adversely.


Government regulations could impose costly requirements on HBB.


The SEC adopted conflict mineral rules under Section 1502 of the Dodd-Frank Act on August 22, 2012. The rules require disclosure of the use of certain minerals, commonly known as “conflict minerals,” which are mined from the DRC and adjoining countries. Since HBB’s supply chain is complex, ultimately it may not be able to designate all products as “DRC conflict free” which may adversely affect its reputation with certain customers. In such event, HBB may also face difficulties in satisfying customers who require products purchased from HBB to be “DRC conflict free”. If HBB is not able to meet such requirements, customers may choose not to purchase HBB products, which could adversely affect sales and the value of portions of HBB’s inventory.


11

Table of Contents
HBB is subject in the ordinary course of its business, in the U.S. and elsewhere, to many statutes, ordinances, rules and regulations that, if violated by HBB or its affiliates, partners or vendors, could have a material adverse effect on HBB’s business. HBB is required to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery, anti-corruption and anti-kickback laws adopted in many of the countries in which HBB does business which prohibit HBB from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business and also require maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions. Under the FCPA, companies operating in the U.S. may be held liable for actions taken by their strategic or local partners or representatives. If HBB does not properly implement and maintain practices and controls with respect to compliance with applicable anti-corruption, anti-bribery and anti-kickback laws, or if HBB fails to enforce those practices and controls properly, HBB may be held responsible for their actions and may become subject to regulatory sanctions, including administrative costs related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on HBB’s business and capital raising activities, any of which could materially and adversely affect HBB’s business, results of operations and financial condition.

HBB may be subject to risks relating to increasing cash requirements of certain employee benefits plans, which may affect its financial position.

Because HBB’s defined benefit pension plans are frozen and no longer provide for the accrual of future benefits, the expenses recorded for, and cash contributions required to be made to its defined benefit pension plans are dependent on, changes in market interest rates and the value of plan assets, which, in turn, are dependent on actual investment returns. Significant changes in market interest rates, decreases in the value of plan assets or investment losses on plan assets may require HBB to increase the cash contributed to its defined benefit pension plans which may affect its financial position.

9



HBB depends on third-party suppliers for all of our products, which subjects the Company to risks, including unanticipated increases in expenses, decreases in revenue and disruptions in the supply chain.

HBB is dependent on third-party suppliers for the manufacturing and distribution of our products. Our ability to select reliable suppliers that provide timely deliveries of quality products will impact our success in meeting customer demand. Any supplier inability to timely deliver products that meet desired specifications or any unanticipated changes in suppliers could be disruptive and costly. Any significant failure by HBB to obtain quality products, in sufficient quantities, on a timely basis, and at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on revenue and profitability. As certain suppliers are primarily based in China, international operations are subject to additional risks including, among others:

currency fluctuations;
labor unrest;
potential political, economic and social instability;
restrictions on transfers of funds;
import and export duties and quotas;
changes in domestic and international customs and tariffs, including embargoes and customs restrictions;
uncertainties involving the costs to transport products;
long distance shipping routes dependent upon a small group of shipping and rail carriers and import facilities;
unexpected changes in regulatory environments;
regulatory issues involved in dealing with foreign suppliers and in exporting and importing products;
protection of intellectual property;
difficulty in complying with a variety of foreign laws;
difficulty in obtaining distribution and administrative support;
natural or human induced disasters such as earthquakes, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, power or water shortages, telecommunications failures, and medical epidemics or pandemics, including potential consequences from the coronavirus; and
potentially adverse tax consequences, including significant changes in tax law.
The foregoing factors could have a material adverse effect on our ability to maintain or increase the supply of products, which may result in material increases in expenses and decreases in revenue and profitability.

The markets for HBB's products are highly seasonal and dependent on consumer spending, which could result in significant variations in revenue and profitability.

Sales of HBB products are related to consumer spending, including general economic conditions affecting disposable consumer income such as unemployment rates, business conditions, interest rates, levels of consumer confidence, energy prices, mortgage rates, the level of consumer debt and taxation. In addition, the retail market for small electric household and specialty housewares appliances are highly seasonal in nature. Accordingly, HBB generally recognizes a substantial portion of our revenue in the second half of the year as sales increase significantly with the fall holiday-selling season. Accordingly, quarter-to-quarter comparisons of past operating results of HBB are meaningful only when comparing equivalent time periods, if at all. Any economic downturn, decrease in consumer spending or shift in consumer spending away from small electric household and specialty housewares appliances may significantly reduce revenue and profitability.

The Company is dependent on key personnel and the loss of these key personnel could significantly reduce its consolidated profitability.

The Company is highly dependent on the skills, experience and services of its and its subsidiaries’ key personnel and the loss of key personnel could have a material adverse effect on its consolidated business, operating results and financial condition. Employment and retention of qualified personnel is important to the successful conduct of Hamilton Beach Holding’s business. Therefore, the Company's success also depends upon its ability to recruit, hire, train and retain current and additional skilled

10


and experienced management personnel. The Company's inability to hire and retain personnel with the requisite skills could impair its ability to manage and operate its consolidated business effectively and could significantly reduce its consolidated profitability.

The financing arrangement of HBB contains various restrictions that could limit operating flexibility.

HBB’s credit facility contains covenants and other restrictions that, among other things, require HBB to satisfy certain financial tests, maintain certain financial ratios and restrict HBB’s ability to incur additional indebtedness. The restrictions and covenants in HBB’s credit facility, and other future financing arrangements may limit HBB’s ability to respond to market conditions, provide for capital investment needs or take advantage of business opportunities by limiting the amount of additional borrowings HBB may incur.

The Company’s business could suffer if information technology systems are disrupted, cease to operate effectively or become subject to a security breach.

The Company relies heavily on information technology systems to operate websites; record and process transactions; respond to customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; and maintain cost-efficient operations. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of computer hardware and software systems and maintain cybersecurity. The Audit Review Committee of the Company is regularly briefed on cybersecurity matters, however despite the cybersecurity efforts, our information technology systems may be vulnerable from time to time to damage or interruption from computer viruses, power outages, third-party intrusions and other technical malfunctions. If our systems are damaged, or fail to function properly, we may have to make monetary investments to repair or replace the systems and could endure delays in operations.

In addition, we regularly evaluate information technology systems and requirements and from time to time implement modifications and/or upgrades to our information technology systems. Modifications include replacing existing systems with successor systems, making changes to existing systems and acquiring new systems with new functionality. HBB is currently engaged in a multi-year implementation of an enterprise resource planning (“ERP”) system. Such an implementation is a major undertaking from a financial, management, and personnel perspective. The implementation of the ERP system may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the extent anticipated. Any disruptions, delays or deficiencies in the design and implementation of our new ERP system could adversely affect our financial position, results of operations and cash flows in addition to the effectiveness of our internal controls over financial reporting.

Any material disruption or slowdown of our systems, including a disruption or slowdown caused by a security breach or our failure to successfully upgrade its systems, could cause information, including data related to customer orders, to be lost or delayed. Such a loss or delay could reduce demand and cause our sales and/or profitability to decline.

Failure to maintain data privacy could have a material adverse effect on our business, financial condition and results of operations.

The Company is subject to certain laws, rules and regulations enacted to protect businesses and personal data (“Privacy Laws”), which may include the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”), as well as industry self-regulatory codes that create new compliance obligations. The administration, enforcement and regulation of Privacy Laws are quickly evolving and subject to changes in interpretation. Future changes in Privacy Laws may require the Company to incur additional and unexpected expenses and may subject the Company to additional compliance risk. Any failure to comply with Privacy Laws could have a material adverse impact on our financial condition and results of operations.


U.S. government trade actions could have a material adverse effect on Hamilton Beach Brands Holding Company’s subsidiaries, financial position, and results of operation.


The U.S. government has taken a number of trade actions that impact or could impact our operations, including imposing tariffs on certain goods imported into the United States. In addition, several governments, including the European Union, China and India, have imposed tariffs on certain goods imported from the United States. As the majority of our products are imported into the United States from China, many of our product lines are subject to the tariffs imposed under Section 301 of US trade law that have been applied to separate lists of Chinese goods.goods imported into the United States. The Section 301 tariffs on goods covered by lists 1, 2, 3 and 4a affect approximately 25% of total HBB purchases on an annualized basis. On December 13, 2019, the United States Trade Representative (USTR) announced a “Phase One” agreement with China pursuant to which the U.S. government

11


agreed to suspend the 15% tariffs on List 4b products. On January 15, 2020, USTR issued a Federal Register notice reducing the rate of Section 301 tariffs on List 4a products to 7.5%, effective February 14, 2020. A number of lawsuits and other legal challenges with respect to the Section 301 tariff actions could result in changes to the tariffs, and the Biden Administration reportedly will be considering whether to continue, amend, or revoke these particular trade actions. We are continually evaluating the impact of the current and any possible new tariffs on our supply chain, costs, sales and profitability and are considering strategies to mitigate such impact, including reviewing sourcing options, filing requests for exclusion from the tariffs for certain product lines and working with our suppliers and customers. We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. Given the uncertainty regarding the scope and duration of these trade actions by the U.S. government or other countries, as well as the potential for additional trade actions, the impact on our operations and results remains uncertain.

The amount and frequency of dividend payments made on Hamilton Beach Holding’s common stock could change.

The Company's Board has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on earnings, capital, and future expense requirements, financial conditions, contractual limitations and other factors our Board may consider.

Certain members of the Company's extended founding family own a substantial amount of Class A Common and Class B Common, and if they were to act in concert, could control the outcome of director elections and other stockholder votes on significant actions.

Hamilton Beach Holding has two classes of common stock: Class A Common and Class B Common. Holders of Class A Common will be entitled to cast one vote per share and, as of December 31, 2019, accounted for approximately 18.80% of the voting power of Hamilton Beach Holding. Holders of Class B Common are entitled to cast ten votes per share and, as of December 31, 2019, accounted for the remaining voting power of Hamilton Beach Holding. As of December 31, 2019, certain members of the Company's extended founding family held approximately 34.78% of Class A Common and 80.13% of Class B Common. On the basis of this common stock ownership, certain members of the Company's extended founding family could exercise 71.6% of the Company's total voting power. Although there is no voting agreement among such family members, in writing or otherwise, if they were to act in concert, they would exert significant control over the outcome of director elections and other stockholder votes on significant actions, such as certain amendments to the Company's amended and restated certificate of incorporation and sale of the Company or substantially all of its assets. Because such family members could prevent other stockholders from exercising significant influence over significant corporate actions, the Company may be a less attractive takeover target, which could adversely affect the market price of its common stock.


The Company is an “emerging growth company” and as a result of the reduced disclosure requirements applicable to emerging growth companies, the reduced disclosures may make it more difficult to compare our performance with other public companies.


We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.


In addition, the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with those of another public company that is neither (i) an emerging growth company nor (ii) an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.


We will remain an emerging growth company for up to five years, although we will lose that status sooner if our revenues exceed $1.07 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if we are deemed to be a large accelerated filer under the federal securities laws.

There are risks associated with the winddown of KC.


12

Table of Contents


On October 10, 2019,Registered Securities Risk

The amount and frequency of dividend payments made on Hamilton Beach Holding’s common stock could change.

The Company's Board has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on earnings, capital, and future expense requirements, financial conditions, contractual limitations and other factors our Board approvedmay consider.

Certain members of the wind downCompany's extended founding family own a substantial amount of KCClass A Common and its retail operations. AtClass B Common, and if they were to act in concert, could control the outcome of director elections and other stockholder votes on significant actions.

Hamilton Beach Holding has two classes of common stock: Class A Common and Class B Common. Holders of Class A Common will be entitled to cast one vote per share and, as of December 31, 2019, all stores2020, accounted for approximately 19.25% of the voting power of Hamilton Beach Holding. Holders of Class B Common are entitled to cast ten votes per share and, as of December 31, 2020, accounted for the remaining voting power of Hamilton Beach Holding. As of December 31, 2020, certain members of the Company's extended founding family held approximately 34.41% of Class A Common and 80.75% of Class B Common. On the basis of this common stock ownership, certain members of the Company's extended founding family could exercise 71.83% of the Company's total voting power. Although there is no voting agreement among such family members, in writing or otherwise, if they were closed for business. The Company expectsto act in concert, they would exert significant control over the wind down to continue through the first halfoutcome of 2020 to facilitate the settlement of remaining liabilities. KC may incur additional costs until the wind down is complete, which may include, contract assignmentdirector elections and termination costs, primarily with respect to store operating leases. The final outcome is dependent upon various factors, many of which are outside of our control, including, without limitation, the actual outcomes of discussions and negotiations with landlords and the counterpartiesother stockholder votes on significant actions, such as certain amendments to the contracts we intend to terminate. In addition, the wind downCompany's amended and restated certificate of incorporation and sale of the KC business involves numerous risks to us, including but not limited to:

potential disruptionCompany or substantially all of its assets. Because such family members could prevent other stockholders from exercising significant influence over significant corporate actions, the operations of the rest of our businesses and diversion of management’s attention from such businesses and operations;
exposure to unknown, contingent or other liabilities, including litigation arising in connection with the KC wind down;
negative impact on our business relationships, including current relationships with our customers, suppliers, vendors, lessors, licensees and employees; and
unintended negative consequences from changes to our business profile.
If any of these or other factors impair the successful implementation of the wind down, we may not be able to realize other business opportunities as weCompany may be required to spend additional time and incur additional expense relating to the wind down that otherwise would be used on the development and expansion of our other businesses,a less attractive takeover target, which could adversely impactaffect the Company’s business, operational results, financial position and cash flows.market price of its common stock.









Item 1B. UNRESOLVED STAFF COMMENTS
    
None.



13

Table of Contents

Item 2. PROPERTIES
The following table presents the principal distribution and office facilities owned or leased:
Owned/
Facility LocationLeased
Function(s) (2)
Glen Allen, VirginiaLeasedCorporate headquarters
Geel, Belgium(1)Distribution center
Shenzhen, People's Republic of China(1)Distribution center
Mexico City, MexicoLeasedMexico sales and administrative headquarters
Olive Branch, MississippiLeasedDistribution center
Picton, Ontario, CanadaLeasedDistribution center
Belleville, Ontario, CanadaLeasedDistribution center
Southern Pines, North CarolinaOwnedService center for customer returns; catalog distribution center; parts distribution center
Shenzhen, People's Republic of ChinaLeasedAdministrative office
Markham, Ontario, CanadaLeasedCanada sales and administration headquarters
City of Sao Paulo, Sao Paulo, BrazilLeasedBrazil sales and administrative headquarters
Joinville, Santa Catarina, Brazil(1)Distribution center
Shanghai, People's Republic of ChinaLeasedSales office
Suzhou, People's Republic of China(1)Distribution center
Tultitlan, Mexico(1)Distribution center
Byhalia, MississippiLeasedDistribution center

(1)This facility is not owned or leased by HBB. This facility is managed by a third-party distribution provider.
(2)Sales offices are also leased in several cities in the U.S., Canada, China and Mexico.


(1)This facility is not owned or leased by HBB. This facility is managed by a third-party distribution provider.
(2)Sales offices are also leased in several cities in the U.S., Canada, China and Mexico.

Item 3. LEGAL PROCEEDINGS
The information required by this Item 3 is set forth in Note 1211 "Contingencies" included in our Financial Statements and Supplementary Data contained in Part IV of this Form 10-K/A10-K and is hereby incorporated herein by reference to such information.
Item 4. MINE SAFETY DISCLOSURES
    
None.


PART II


Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's Class A Common is traded on the New York Stock Exchange under the ticker symbol “HBB.” Because of transfer restrictions, no trading market has developed, or is expected to develop, for the Company's Class B Common. The Class B Common is convertible into Class A Common on a one-for-one basis.
The declaration of future dividends, record dates and payout dates for such future dividends will be at the discretion of the Board and will depend on various factors then existing, including earnings, financial condition, results of operations, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends, restrictions imposed by applicable law, general business conditions and other factors that the Board deems relevant.
At December 31, 20192020 and 2018,2019, there were 780773 and 772,780, respectively, Class A Common stockholders of record and 902890 and 892,902, respectively, Class B common stockholders of record.


Purchases of Equity Securities by the Issuer and Affiliated Purchasers


In May 2018, the Company approved a stock repurchase program for the purchase of up to $25.0 million of the Company's Class A Common Stock outstanding through December 31, 2019. As of December 31, 2019, the Company repurchased 364,893 shares for an aggregate purchase price of $6.0 million. There were no stock repurchases during the three months ended December 31, 2019 and the twelve months ended December 31, 2018 and 2017.

14

Table of Contents


On November 5, 2019, the Company's Board adopted a new stock repurchase program for the purchase of up to $25.0 million of the Company's Class A Common Stock outstanding starting January 1, 2020 and ending December 31, 2021. During the year ended December 31, 2019, the Company repurchased 364,893 shares for an aggregate purchase price of $6.0 million. There were no share repurchases during the years ended December 31, 2020 and 2018.

14

Table of Contents

Item 6. SELECTED FINANCIAL DATA


The following table sets forth the Company's selected historical financial data as of and for each of the periods indicated. Except where indicated, the results of operations, financial position, and cash flows of KC are reflected as discontinued operations for all periods reported. Certain amounts have been restated for the correction of misstatements discussed in Note 2, Restatement of Previously Issued Consolidated Financial Statements and corrected for additional identified out-of-period and uncorrected errors that were not material. This information is only a summary and should be read in conjunction with the “Explanatory Note” immediately preceding Item 1 of this Annual Report on Form 10-K/A, with Item 7, Management'shistorical consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations, and with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10- K/A.Operations.” The selected consolidated financial information below as of December 31, 20192020 and 2018,2019, and for the years ended December 31, 2020, 2019 2018 and 2017,2018, are derived from our audited consolidated financial statements included in this Annual Report on Form 10-K/A.10-K. The selected financial data as of December 31, 2017 2016 and 20152016 and for the yearsyear ended December 31, 2016 and 2015 are derived from unaudited consolidated financial statements, which were prepared on the same basis as our audited consolidated financial statements and reflect the impact of adjustments to our previously filed financial information.


 Year Ended December 31
 20202019201820172016
 (In thousands, except per share amounts)
Operating Statement Data:   
Revenue$603,713 $611,786 $630,082 $612,056 $601,006 
Operating profit$37,415 $26,794 $33,550 $37,956 $39,561 
Income from continuing operations, net of tax$24,067 $15,093 $23,059 $18,109 $24,277 
Income (loss) from discontinued operations, net of tax$22,191 $(28,600)$(5,361)$(2,225)$259 
Net income (loss)$46,258 $(13,507)$17,698 $15,884 $24,536 
Basic earnings (loss) per share:
Continuing operations$1.76 $1.10 $1.68 $1.32 $1.78 
Discontinued operations1.62 (2.09)(0.39)(0.16)0.01 
Basic earnings (loss) per share$3.39 $(0.99)$1.29 $1.16 $1.79 
Diluted earnings (loss) per share:
Continuing operations$1.76 $1.10 $1.68 $1.32 $1.78 
Discontinued operations1.62 (2.09)(0.39)(0.16)0.01 
Diluted earnings (loss) per share$3.37 $(0.99)$1.29 $1.16 $1.79 
Actual shares outstanding at December 31 (1)
13,686 13,516 13,713 13,673 13,673 
Basic weighted average shares outstanding (1)
13,657 13,690 13,699 13,673 13,673 
Diluted weighted average shares outstanding (1)
13,712 13,726 13,731 13,685 13,673 
 
As Restated (2)
 
As Revised (3)
 Year Ended December 31
 2019 2018 2017 2016 2015
 (In thousands, except per share amounts)
Operating Statement Data:         
Revenue$611,786
 $630,082
 $612,056
 $601,006
 $616,874
Operating profit$26,794
 $33,550
 $37,956
 $39,561
 $32,115
 

 

 

 

  
Income from continuing operations, net of tax$15,093
 $23,059
 $18,109
 $24,277
 $18,086
Income (loss) from discontinued operations, net of tax$(28,600) $(5,361) $(2,225) $259
 $545
Net income (loss)$(13,507) $17,698
 $15,884
 $24,536
 $18,631
 
 
 
 
  
Basic and diluted earnings (loss) per share:
 
 
 
  
Continuing operations$1.10
 $1.68

$1.32

$1.78

$1.32
Discontinued operations(2.09) (0.39)
(0.16)
0.01

0.04
Basic and diluted earnings (loss) per share$(0.99) $1.29

$1.16

$1.79

$1.36
 
 
 
 
  
Actual shares outstanding at December 31 (1)
13,516
 13,713
 13,673
 13,673
 13,673
Basic weighted average shares outstanding (1)
13,690
 13,699
 13,673
 13,673
 13,673
Diluted weighted average shares outstanding (1)
13,726
 13,731
 13,685
 13,673
 13,673


(1)    On September 29, 2017, NACCO, Hamilton Beach Holding's former parent company, spun-off the Company to NACCO stockholders. The basic and diluted earnings (loss) per share amounts for the Company for all periods prior to the spin-off have been calculated based upon the number of shares distributed in the spin-off.
(1)On September 29, 2017, NACCO, Hamilton Beach Holding's former parent company, spun-off the Company to NACCO stockholders. The basic and diluted earnings (loss) per share amounts for the Company for all periods prior to the spin-off have been calculated based upon the number of shares distributed in the spin-off.


(2)The Company restated previously disclosed consolidated financial data for fiscal years 2019, 2018 and 2017, as well as the related balance sheet dates, to correct misstatements principally related to the write-off of unrealizable assets. The restatement also includes corrections for other errors previously identified as immaterial, individually and in the aggregate, to our consolidated financial statements. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information.


(3)In connection with the restatement, the Company has also revised the selected financial information for the fiscal years ended December 31, 2016 and 2015, to correct for misstatements identified during the investigation. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and


15

Table of Contents

 Year Ended December 31
 20202019201820172016
 (In thousands, except per share amounts and employee data)
Balance Sheet Data at December 31:   
Net working capital(2)
$166,705 $106,839 $101,898 $91,111 $95,088 
Total assets$391,168 $288,663 $321,419 $325,276 $310,141 
Short-term portion of revolving credit agreements$ $23,497 $11,624 $31,346 $12,714 
Long-term portion of revolving credit agreements$98,360 $35,000 $35,000 $20,000 $26,000 
Stockholders' equity$80,105 $36,266 $56,819 $42,027 $62,948 
Cash Flow Data:
Net cash provided by (used for) operating activities from continuing operations$(27,934)$222 $17,955 $28,303 $58,025 
Net cash provided by (used for) investing activities from continuing operations$(3,812)$(4,122)$(7,759)$(6,177)$(4,788)
Net cash provided by (used for) financing activities from continuing operations$34,180 $1,062 $(9,255)$(26,532)$(61,837)
Other Data:
Cash dividends paid to NACCO Industries, Inc.$ $— $— $38,000 $42,000 
Cash dividends paid(1)
$5,053 $4,851 $4,658 $1,162 n/a
Purchase of treasury stock$ $5,960 $— $— n/a
Per share data:
Cash dividends paid(1)
$0.37 $0.36 $0.34 $0.09 n/a
Market value at December 31 (1)
$17.51 $19.10 $23.46 $25.69 n/a
Stockholders' equity at December 31$5.85 $2.68 $4.14 $3.07 $4.60 
Total employees at December 31 for continuing operations700 680 670 650 600 
Supplementary Data,
(1)    This information is only included for additional information regarding the nature of the misstatements. Revisionsperiods subsequent to the consolidated statement of operations decreased operating profit andspin-off from NACCO.

(2)    Net working capital is defined as trade receivables, net income by $1.6 million and decreased diluted earnings per share by $0.12 for the year ended December 31, 2016. Revisions to the consolidated statement of operations decreased operating profit and net income by $1.1 million and decreased diluted earnings per share by $0.08 for the year ended December 31, 2015.plus inventory less accounts payable.









 
As Restated (3)
 
As Revised (4)
 Year Ended December 31
 2019 2018 2017 2016 2015
 (In thousands, except per share amounts and employee data)
Balance Sheet Data at December 31:         
Net working capital(2)
$106,839

$101,898

$91,111

$95,088

$116,839
Total assets$288,664

$321,419

$325,276

$310,141

$310,643
Short-term portion of revolving credit agreements$23,497

$11,624

$31,346

$12,714

$8,365
Long-term portion of revolving credit agreements$35,000

$35,000

$20,000

$26,000

$50,000
Stockholders' equity$36,267

$56,819

$42,027

$62,948

$81,970
 








Cash Flow Data:








Net cash provided by operating activities from continuing operations$221

$17,955

$28,303

$58,025

$13,535
Net cash used for investing activities from continuing operations$(4,122)
$(7,759)
$(6,177)
$(4,788)
$(4,775)
Net cash provided by (used for) financing activities from continuing operations$1,062

$(9,255)
$(26,532)
$(61,837)
$(10,088)
 








Other Data:








Cash dividends paid to NACCO Industries, Inc.$

$

$38,000

$42,000

$15,000
Cash dividends paid(1)
$4,851

$4,658

$1,162

n/a

n/a
Purchase of treasury stock$5,960

$

$

n/a

n/a
Per share data:








Cash dividends paid(1)
$0.36

$0.34

$0.09

n/a

n/a
Market value at December 31 (1)
$19.10

$23.46

$25.69

n/a

n/a
Stockholders' equity at December 31$2.68

$4.14

$3.07

$4.60

$6.00
 













Total employees at December 31 for continuing operations680

670

650

600

600



(1)This information is only included for periods subsequent to the spin-off from NACCO.

(2)Net working capital is defined as trade receivables, net plus inventory less accounts payable.

(3)The Company restated previously disclosed consolidated financial data for fiscal years 2019, 2018 and 2017, as well as the related balance sheet dates, to correct misstatements principally related to the write-off of unrealizable assets. The restatement also includes corrections for other errors previously identified as immaterial, individually and in the aggregate, to our consolidated financial statements. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information.

(4)In connection with the restatement, the Company has also revised the selected financial information for the fiscal years ended December 31, 2016 and 2015, to correct for misstatements identified during the investigation. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information regarding the nature of the misstatements. The impact of restatement was a decrease to total assets of $1.0 million and a decrease to stockholders' equity of $4.4 million as of December 31, 2017. The impact of revisions was a decrease to total assets of $0.7 million and a decrease to stockholders' equity of

16

Table of Contents


$2.3 million as of December 31, 2016 million and an increase to total assets of $0.5 million and a decrease to stockholders' equity of $1.1 million as of December 31, 2015.Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY








17

Table of Contents

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)


RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS


The following discussion and analysis should be read in conjunctionDuring the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican subsidiaries. As a result of the investigation performed, the Company, along with the auditedAudit Review Committee and its third party experts, concluded that certain former employees of one of the Company’s Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries that resulted in expenditures being deferred on the balance sheet beyond the period for which the costs pertained. The Company recorded a non-cash write-off for certain amounts included in the Company’s historical consolidated financial statements in trade receivables and notes theretoprepaid expenses and other current assets, among other corrections, related to these transactions, and restated its consolidated financial statements as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018, and 2017 included elsewhere in this Annual Report on Form 10-K/A. This Annual Report on Form 10-K/A restates amounts included in the 2019 Annual Report as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information. The relevant unaudited interim financial information for each of the quarters during the years ended December 31, 2019 and 2018 has also been restated. See Note 16, Quarterly Results of Operations (Unaudited), in Item 8, Financial Statements and Supplementary Data, for such restated information.

2018. The restatement also includesincluded corrections for other errors previously identified as immaterial, individually and in the aggregate, to our consolidated financial statements. The impact ofThese restated financial statements were previously filed on Form 10-K/A for the restatement is reflected in Management’s Discussion and Analysis of Financial Condition and Results of Operations below.year ended December 31, 2019. All amounts included herein reflect the restated financial statements.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES


The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities (if any). Actual results could differ from those estimates.


The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.


Revenue Recognition: Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales taxes are excluded from revenue. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service that is distinct. The Company has elected to account for shipping and handling activities performed after a customer obtains control of the goods as activities to fulfill the promise to transfer the goods, and therefore these activities are not assessed as a separate service to customers. The amount of revenue recognized varies primarily with changes in returns. In addition, the Company offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements. We determine whether price concessions offered to itsour customers are a reduction of the transaction price and revenue or are advertising expense, depending on whether we receive a distinct good or service from our customers and, if so, whether we can reasonably estimate the fair value of that distinct good or service. We evaluated such agreements with our customers and determined they should be accounted for as variable consideration. As of December 31, 2019, we have determined that customer price concessions recorded as a reduction of revenue, certain of which were previously recorded in other current liabilities, meet all of the criteria specified in ASC 210-20, "Balance Sheet Offsetting". Accordingly, amounts related to such arrangements have been classified as a reduction of trade receivables, net as of December 31, 2019 (prior periods have not been adjusted as all the criteria in ASC 210-20 had not previously been met).


To estimate variable consideration, the Company applies both the expected value method and most likely amount method based on the form of variable consideration, according to which method would provide the better prediction. The expected value method involves a probability weighted determination of the expected amount, whereas the most likely amount method identifies the single most likely outcome in a range of possible amounts.


The Company monitors its estimates of variable consideration, which includes returns and price concessions, and periodically makes adjustments to the carrying amounts as appropriate. During 2019,2020, there were no material adjustments to the aforesaid estimates and the Company's past results of operations have not been materially affected by a change in these estimates. Although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change these estimates in the future.





18
17

Table of Contents


Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)


Retirement Benefit Plans: The Company maintains two defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. The Company's policy is to periodically make contributions to fund the defined benefit pension plans within the range allowed by applicable regulations. The defined benefit pension plan assets consist primarily of publicly traded stocks and government and corporate bonds. There is no guarantee the actual return on the plans’ assets will equal the expected long-term rate of return on plan assets or that the plans will not incur investment losses.
The expected long-term rate of return on defined benefit plan assets reflects management’s expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of return assumption are based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes.
Expected returns for the U.S. pension plan are based on a calculated market-related value for U.S. pension plan assets. Under this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns which are recognized ratably in the market-related value of assets over three years. Expected returns for the non-U.S. pension plan are based on fair market value for non-U.S. pension plan assets.
The basis for the selection of the discount rate for each plan is determined by matching the timing of the payment of the expected obligations under the defined benefit plans against the corresponding yield of high-quality corporate bonds of equivalent maturities.
Changes to the estimate of any of these factors could result in a material change to the Company's pension obligation causing a related increase or decrease in reported net operating results in the period of change in the estimate. Because the 20192020 assumptions are used to calculate 20202021 pension expense amounts, a one percentage-point change in the expected long-term rate of return on plan assets would result in a change in pension expense for 20202021 of approximately $0.3 million for the plans. A one percentage-point change in the discount rate would result in a change in pension expense for 20202021 by less than $0.1 million. A one percentage-point increase in the discount rate would have lowered the plans’ projected benefit obligation as of the end of 20192020 by approximately $1.6$1.7 million; while a one percentage-point decrease in the discount rate would have raised the plans’ projected benefit obligation as of the end of 20192020 by approximately $1.8$2.0 million.


Environmental Liabilities: HBB and environmental consultants are investigating or remediating historical environmental contamination at some current and former sites operated by HBB or by businesses it acquired. Liabilities for environmental matters are recorded in the period when it is determined to be probable and reasonably estimable that the Company will incur costs. When only a range of amounts is reasonably estimable and no amount within the range is more probable than another, the Company records the low end of the range. Environmental liabilities are recorded on an undiscounted basis and recorded in selling, general, and administrative expenses. When a recovery of a portion of an environmental liability is probable, such amounts are recognized as a reduction to selling, general, and administrative expenses and included in prepaid expenses and other current assets (current portion) and other non-current assets until settled. If the Company's environmental liability balance as of December 31, 2019 were to increase by one percent, the reserve and selling, general, and administrative expenses would increase by less than $0.1 million.


19
18

Table of Contents


Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

RESULTS OF OPERATIONS

The restatement did not significantly impact the drivers of our consolidated results of operations. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information.

Discussion related to the restated quarterly information is included in Note 16, Quarterly Results of Operations (Unaudited).


The results of operations for Hamilton Beach Holding were as follows for the years ended December 31:


2020 Compared with 2019
Year Ended December 31
2020% of Revenue2019% of Revenue$ Change% Change
Revenue$603,713 100.0 %$611,786 100.0 %$(8,073)(1.3)%
Cost of sales465,059 77.0 %483,234 79.0 %(18,175)(3.8)%
Gross profit138,654 23.0 %128,552 21.0 %10,102 7.9 %
Selling, general and administrative expenses99,990 16.6 %100,381 16.4 %(391)(0.4)%
Amortization of intangible assets1,249 0.2 %1,377 0.2 %(128)(9.3)%
Operating profit (loss)37,415 6.2 %26,794 4.4 %10,621 39.6 %
Interest expense, net1,998 0.3 %2,975 0.5 %(977)(32.8)%
Other expense (income), net1,685 0.3 %(358)(0.1)%2,043 (570.7)%
Income (loss) from continuing operations before income taxes33,732 5.6 %24,177 4.0 %9,555 39.5 %
Income tax expense9,665 1.6 %9,084 1.5 %581 6.4 %
Net income from continuing operations24,067 4.0 %15,093 2.5 %8,974 59.5 %
Income (loss) from discontinued operations, net of tax22,191 n/m(28,600)n/m50,791 n/m
Net income (loss)$46,258 $(13,507)$59,765 
Effective income tax rate on continuing operations28.7 %37.6 %
The following table identifies the components of the change in revenue for 2020 compared with 2019:
 Revenue
2019$611,786 
(Decrease) increase from:
Unit volume and product mix(14,093)
Foreign currency(4,219)
Average sales price10,239 
2020$603,713 

Revenue- Revenue decreased $8.1 million, or 1.3%. While unprecedented demand continues for small kitchen appliances, the cutover to our new enterprise resource planning ("ERP") system during the third quarter of 2020 reduced shipping capabilities at the Company's US distribution center and resulted in a significant shortfall in revenue during the third quarter. Despite a strong finish to 2020, which made up for a significant portion of the revenue shortfall in the third quarter, revenue decreased year over year as a result of lower volumes. The lower sales volume in the US consumer market is the result of the ERP cutover challenges, while lower volume in the international consumer and global commercial markets is attributable to the pandemic. The impact of lower volume was partially offset by higher average sales price driven primarily by product and customer mix. Foreign currency had a negative impact on revenue of $4.2 million.

Gross profit - The increase in gross profit of $10.1 million, or 7.9%, is primarily due to sales of higher margin products. As a percentage of revenue, gross profit margin increased from 21.0% to 23.0% primarily due to customer and product mix. Additionally, gross profit in 2020 includes a benefit of approximately $2.1 million for tariff relief.
19

Table of Contents

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Selling, general and administrative expenses - Included in selling, general and administrative expenses are charges related to unauthorized transactions at our Mexican subsidiaries of $1.9 million in 2020 compared with $6.9 million in 2019. Offsetting this decrease in 2020 is an increase in incentive compensation expense of $3.3 million primarily driven by stronger Company performance as well as an increase in legal, other third-party fees and consulting expenses primarily related to the accounting irregularities at our Mexican subsidiaries and the implementation of our new ERP system.

Other expense (income), net - Other expense in 2020 was $1.7 million due primarily to currency losses from the re-measurement of liabilities related to inventory purchases denominated in US dollars by HBB’s foreign subsidiaries. Other income in 2019 was $0.4 million and included currency gains of $0.4 million.

Income tax expense - The Company recognized income tax expense of $9.7 million on income from continuing operations before income taxes of $33.7 million, an effective tax rate of 28.7% in 2020 compared to income tax expense of $9.1 million on income from continuing operations before income taxes of $24.2 million, an effective tax rate of 37.6% in 2019. The higher effective tax rate in 2019 is attributable to non-cash charges to write-off unrealizable assets at our Mexican subsidiaries for which the corresponding tax benefit has been substantially offset by an increase in unrecognized tax benefits and $1.6 million of deferred tax expense related to a change in judgment regarding the valuation allowance recorded against the deferred tax assets of KC.

2019 Compared with 2018

 As Restated
 Year Ended December 31
 2019 % of Revenue 2018 % of Revenue $ Change % Change
Revenue$611,786

100.0 %
$630,082

100.0%
$(18,296)
(2.9)%
Cost of sales483,234

79.0 %
491,030

77.9%
(7,796)
(1.6)%
Gross profit128,552

21.0 %
139,052

22.1%
(10,500)
(7.6)%
Selling, general and administrative expenses100,381

16.4 %
104,121

16.5%
(3,740)
(3.6)%
Amortization of intangible assets1,377

0.2 %
1,381

0.2%
(4)
(0.3)%
Operating profit (loss)26,794

4.4 %
33,550

5.3%
(6,756)
(20.1)%
Interest expense, net2,975

0.5 %
2,916

0.5%
59

2.0 %
Other expense (income), net(358)
(0.1)%
149

%
(507)
(340.3)%
Income (loss) from continuing operations before income taxes24,177

4.0 %
30,485

4.8%
(6,308)
(20.7)%
Income tax expense9,084

1.5 %
7,426

1.2%
1,658

22.3 %
Net income from continuing operations15,093

2.5 %
23,059

3.7%
(7,966)
(34.5)%
Loss from discontinued operations, net of tax(28,600)
n/m

(5,361)
n/m

(23,239)
n/m
Net (loss) income$(13,507)



$17,698




$(31,205)


The results of operations for Hamilton Beach Holding were as follows for the years ended December 31:
Year Ended December 31
2019% of Revenue2018% of Revenue$ Change% Change
Revenue$611,786 100.0 %$630,082 100.0 %$(18,296)(2.9)%
Cost of sales483,234 79.0 %491,030 77.9 %(7,796)(1.6)%
Gross profit128,552 21.0 %139,052 22.1 %(10,500)(7.6)%
Selling, general and administrative expenses100,381 16.4 %104,121 16.5 %(3,740)(3.6)%
Amortization of intangible assets1,377 0.2 %1,381 0.2 %(4)(0.3)%
Operating profit26,794 4.4 %33,550 5.3 %(6,756)(20.1)%
Interest expense, net2,975 0.5 %2,916 0.5 %59 2.0 %
Other expense (income), net(358)(0.1)%149 — %(507)(340.3)%
Income from continuing operations before income taxes24,177 4.0 %30,485 4.8 %(6,308)(20.7)%
Income tax expense9,084 1.5 %7,426 1.2 %1,658 22.3 %
Net income from continuing operations15,093 2.5 %23,059 3.7 %(7,966)(34.5)%
Loss from discontinued operations, net of tax(28,600)n/m(5,361)n/m(23,239)n/m
Net income (loss)$(13,507)$17,698 $(31,205)
Effective income tax rate on continuing operations37.6 %24.4 %






20

Table of Contents

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table identifies the components of the change in revenue for 2019 compared with 2018:
As Restated
Revenue Revenue
2018$630,082
2018$630,082 
(Decrease) increase from:
(Decrease) increase from:
Unit volume and product mix(19,613)Unit volume and product mix(19,613)
Average sales priceAverage sales price(1,688)
Foreign currency(1,688)Foreign currency3,005 
Average sales price3,005
2019$611,786
2019$611,786 


Revenue - Revenue decreased $18.3 million, or 2.9%. The decline is primarily due to lower sales volume in the U.S. consumer, international consumer and global commercial markets. Globally, our ecommerce business grew 27%; however, these gains were more than offset by the adverse impact of tariffs, a loss of placements in the dollar store channel resulting from HBB's decision not to maintain very low margin business, ongoing foot traffic challenges at some retailers and other pressure points facing individual retail companies. Revenue in the global commercial market decreased due primarily to lower volume driven by the adverse impact of tariffs.



20

Table of Contents

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Gross profit - The decline in gross profit of $10.5 million, or 7.6%, is primarily due to lower sales volume. As a percentage of revenue, gross profit margin declined from 22.1% to 21.0% primarily due to increased inbound freight expenses, the adverse impact of tariffs and unfavorable foreign currency movements.


Selling, general and administrative expenses - The decrease in selling, general and administrative expenses was mainly attributable to a $5.2 million decline in environmental expense due to the reduction to the environmental reserve at one site of $3.2 million related to a change in the expected type and extent of investigation and remediation activities and to a $1.5 million reduction in environmental expense due to the probable recovery of investigation and remediation costs associated with the same site from a responsible party in exchange for release from all future obligations by that party. Additionally, advertising expenses declined $3.1 million and employee-related costs decreased $2.0 million due to reduced incentive compensation expense. These decreases were partially offset by a one-time charge of $3.2 million recorded in the second quarter of 2019 for a contingent loss related to patent litigation. Additionally, certain former employees of one of our Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries and in doing so, expenditures were deferred on the balance sheet of the Company's Mexican subsidiaries beyond the period for which the costs pertained. Included in selling, general and administrative expenses are charges of $6.9 million in 2019 compared with charges of $4.9 million in 2018 to write-off unrealizable assets created as a result of these unauthorized transactions. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information.


Other expense (income), net - Other income in 2019 includes currency gains of $0.4 million compared with other expense in 2018 related to currency losses of $0.5 million as the Mexican peso strengthened against the U.S. dollar.


Income tax expense - The Company recognized income tax expense of $9.1 million on income from continuing operations before income taxes of $24.2 million, an effective tax rate of 37.6% compared to income tax expense of $7.4 million, an effective tax rate of 24.4%. The increase in the effective tax rate is primarily due to $2.0 million of deferred tax expense related to a change in judgment regarding the valuation allowance recorded against certain deferred tax assets of KC.
Additionally, certain former employees of one of our Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries and in doing so expenditures were deferred on the balance sheet of the Mexican subsidiaries beyond the period for which the costs pertained. Included in selling, general and administrative expenses are non-cash charges to write-off unrealizable assets for which the corresponding tax benefit has been substantially offset by an increase in unrecognized tax benefits.



21

Table of Contents


Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)


2018 Compared with 2017

The results of operations for Hamilton Beach Holding were as follows for the years ended December 31:
 Year Ended December 31
 As Restated   As Restated      
 2018 % of Revenue 2017 % of Revenue $ Change % Change
Revenue$630,082

100.0%
$612,056

100.0 %
$18,026

2.9 %
Cost of sales491,030

77.9%
475,939

77.8 %
15,091

3.2 %
Gross profit139,052

22.1%
136,117

22.2 %
2,935

2.2 %
Selling, general and administrative expenses104,121

16.5%
96,780

15.8 %
7,341

7.6 %
Amortization of intangible assets1,381

0.2%
1,381

0.2 %


 %
Operating profit33,550

5.3%
37,956

6.2 %
(4,406)
(11.6)%
Interest expense, net2,916

0.5%
1,572

0.3 %
1,344

85.5 %
Other expense (income), net149

%
(692)
(0.1)%
841

(121.5)%
Income from continuing operations before income taxes30,485

4.8%
37,076

6.1 %
(6,591)
(17.8)%
Income tax expense7,426

1.2%
18,967

3.1 %
(11,541)
(60.8)%
Net income from continuing operations23,059

3.7%
18,109

3.0 %
4,950

27.3 %
Loss from discontinued operations, net of tax(5,361)
n/m

(2,225)
n/m

(3,136)
n/m
Net income$17,698




$15,884




$1,814



            
Effective income tax rate on continuing operations24.4%


51.2%      
The following table identifies the components of the change in revenue for 2018 compared with 2017:
 As Restated
 Revenue
2017$612,056
Increase (decrease) from:
Unit volume and product mix12,910
Average sales price6,485
Foreign currency(1,369)
2018$630,082

Revenue - Revenue increased $18.0 million, or 2.9%, primarily due to higher sales volume in the international consumer retail market and increased sales of new and higher-priced products, mainly in the U.S consumer and global commercial markets. Unfavorable foreign currency movements partially offset the increase in revenue as the Mexican peso, Brazilian Real and Canadian dollar weakened against the U.S. dollar during 2018.
Gross profit - Gross profit increased mainly due to higher sales volume in the international consumer retail market and increased sales of new and higher-priced products, mainly in the U.S consumer and global commercial markets. As a percentage of revenue, gross profit declined from 22.2% to 22.1% primarily due to increased warehouse, transportation, and product costs.

Selling, general and administrative expenses - The increase in selling, general and administrative expenses was primarily due to increased legal and professional service fees of $2.7 million, higher employee-related expenses of $2.8

22

Table of Contents

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

million and increased advertising expenses of $2.5 million, which were partially offset by the absence of $2.5 million of one-time costs incurred in the prior year to effect the spin-off from NACCO. Legal and professional service fees increased mainly due to patent litigation expenses and the increase in employee-related expenses was mainly due to merit compensation increases, as well as additional headcount to support HBB's strategic initiatives. Advertising expenses increased primarily due to increased consumer advertising campaigns to support the fall holiday-selling season. Included in selling, general and administrative expenses are charges of $4.9 million in 2018 compared with charges of $1.3 million in 2017 to write-off expenditures deferred on the balance sheet as a result of unauthorized transactions entered into by certain former employees of one of our Mexican subsidiaries. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information.

Interest expense, net - Interest expense, net increased $1.3 million primarily due to an increase in average borrowings outstanding under HBB's revolving credit facility.

Other expense, net - Other expense, net increased $0.8 million primarily due to foreign currency gains as the Mexican peso strengthened against the U.S. dollar during the period.

Income tax expense - The Company recognized income tax expense of $7.4 million on income from continuing operations before income taxes of $30.5 million (an effective tax rate of 24.4%). The effective income tax rate on continuing operations decreased from 51.2% in 2017 primarily due to a $4.7 million provisional tax charge resulting from the reduction in the U.S. federal corporate tax rate in 2018 as a result of the Tax Cuts and Jobs Act (the "Tax Act") and the absence of non-deductible spin-off related expenses incurred in the prior year to effect the spin-off from NACCO.
LIQUIDITY AND CAPITAL RESOURCES


Hamilton Beach Brands Holding Company cash flows are provided by dividends paid or distributions made by its subsidiaries. The only material assets held by it are the investments in consolidated subsidiaries. As a result, certain statutory limitations or regulatory or financing agreements could affect the levels of distributions allowed to be made by its subsidiaries. Hamilton Beach Brands Holding Company has not guaranteed any of the obligations of its subsidiaries.


HBB's principal sources of cash to fund liquidity needs are: (i) cash generated from operations and (ii) borrowings available under the revolving credit facility, as defined below. HBB's primary use of funds consists of working capital requirements, operating expenses, capital expenditures, and payments of principal and interest on debt. At December 31, 2019,2020, the Company had cash and cash equivalents for continuing operations of $2.1$2.4 million, compared to $4.4$2.1 million at December 31, 2018.2019. 


Historically, Hamilton Beach Brands Holding Company would relyThe ongoing global COVID-19 pandemic has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including business shutdowns and limitations, travel restrictions, border closings, restrictions on cash flows from KC as well as HBB.  However, given thatpublic gatherings and shelter-in-place restrictions. This has negatively impacted the global economy, disrupted financial markets and resulted in increased unemployment levels, all of which have negatively impacted various industries. We believe we are well positioned to effectively navigate the KC storesCOVID-19 pandemic for a number of reasons. Demand for certain retail small kitchen appliances in the US remains strong as consumers prepare more food and beverages at home. We are managing discretionary expenses, and have been closed andsufficient availability under the Board approvedrevolving credit facility to meet our future anticipated obligations. We have demonstrated effective management of net working capital which was a major contributor to improved borrowing activity during the dissolution ofyear, with average debt down $11.6 million compared to the KC legal entity, KCprior year ended December 31, 2019. Additionally, the Company is no longer considered a sourceimpacted by KC’s losses and negative cash flow. We will continue to work with our customers, employees, suppliers and communities to address the impacts of cash for Hamilton Beach Brands Holding Company.   As of December 31, 2019, KC reported current liabilities in excess of current assets of $24.3 million.   Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC. COVID-19 and closely monitor our liquidity.


The following table presents selected cash flow information from continuing operations:
Year Ended December 31
(In thousands)
 202020192018
Net cash provided by (used for) operating activities from continuing operations$(27,934)$222 $17,955 
Net cash provided by (used for) investing activities from continuing operations$(3,812)$(4,122)$(7,759)
Net cash provided by (used for) financing activities from continuing operations$34,180 $1,062 $(9,255)
 As Restated
 Year Ended December 31
 2019 2018 2017
 (In thousands)
Net cash provided by operating activities from continuing operations$222

$17,955

$28,303
Net cash used for investing activities from continuing operations$(4,122)
$(7,759)
$(6,177)
Net cash provided by (used for) financing activities from continuing operations$1,062

$(9,255)
$(26,532)
December 31, 2020 Compared with December 31, 2019

    Operating activities - Net cash used for operating activities was $27.9 million compared to cash provided by operating activities of $0.2 million in 2019 primarily due to an increase of $59.9 million in net working capital. Trade receivables increased primarily due to increased fourth quarter sales in 2020 compared with prior year. The increase in inventory and accounts payable are primarily due to the earlier build of inventory to offset the impacts of longer lead times driven by shipping congestion in our supply chain from China, as well as to support expected strong demand in the first half of 2021.

    Investing activities - Net cash used for investing activities was relatively flat in 2020 compared to 2019. Capital spending for internal-use software development costs was lower in 2020 as the Company implemented its new ERP system in July 2020. The decline in spending on internal-use software was offset by other investments.

Financing activities - Net cash provided by financing activities increased $33.1 million in 2020 primarily due to an increase in HBB's net borrowing activity on the revolving credit facility. The increase in borrowings was used to fund net working capital.

23
22

Table of Contents


Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

December 31, 2019 Compared with December 31, 2018

Operating activities - Net cash provided by operating activities decreased $17.7 million in 2019 compared to the prior year primarily due to increased trade receivables, partially offset by a decline in inventory. Trade receivables increased primarily due to the timing of collections and increased fourth quarter sales in 20192020 compared with prior year. The decline in inventory is primarily due to the continued efficient management of inventory levels.


Investing activities - Net cash used for investing activities from continuing operations decreased $3.6 million in 2019 primarily due to lower capital expenditures related to HBB internal-use software development costs and tooling for new products.


Financing activities - Net cash provided by financing activities from continuing operations was $1.1 million in 2019 compared to a use of cash of $9.3 million in 2018 primarily due to an increase in HBB's net borrowing activity on the revolving credit facility. The increase in borrowings was used to fund net working capital and stock repurchases.

December 31, 2018 Compared with December 31, 2017

Operating activities - Net cash provided by operating activities decreased by $10.3 million in 2018 primarily due to the net changes in operating assets and liabilities. The decrease is primarily due to the changes in working capital and the decline in the accounts payable to NACCO. The change in working capital is attributable to a decrease in accounts payable in 2018 compared with a large increase in 2017, which was partially offset by a decrease in accounts receivable in 2018 compared with a large increase in 2017 and a larger increase in inventory during 2017 compared with 2018. The change in accounts payable is mainly due to the timing of purchases and the change in accounts receivable, after consideration for the effect of the adoption of the new revenue standard in 2018, is mainly attributable to the timing of collections. The increase in inventory is primarily due to lower sales in the second half of 2018 compared with the sales forecast and higher product costs compared to 2017. The decline in the accounts payable to NACCO is primarily due to payments made to NACCO during 2018 under the tax allocation agreement.

Investing activities - Net cash used for investing activities increased primarily due to an increase in capital expenditures for internal-use software development costs and corporate office leasehold improvements.

Financing activities - Net cash used for financing activities decreased $17.3 million primarily due to the absence of the 2017 cash dividends of $38.0 million paid to NACCO, partially offset by a reduction in the revolving credit facility and dividend payments to stockholders.


Capital Resources


On November 23, 2020, HBB maintains aentered into Amendment No. 8 to its Amended and Restated Credit Agreement. The Agreement amended and restated the Credit Agreement in its entirety and extended the term of HBB's credit facility to June 30, 2025, increased the credit facility from $115.0 million senior secured floating-rate revolving creditto $125.0 million, amended the pricing grid and provided for an accordion feature to increase the facility (the “HBB Facility”) that expires in June 2021.by an additional $25.0 million upon HBB's request, subject to Lender consent. The current portion of borrowings outstanding represents expectedCompany expects to continue to borrow against the facility and make voluntary repayments to be made inwithin the next twelve months. As a result of the amendment, repayment of the credit facility is due on June 30, 2025, therefore all borrowings are classified as long term debt as of December 31, 2020. The obligations under the HBB Facility are secured by substantially all of HBB's assets. The approximate book value of HBB's assets held as collateral under the HBB Facility was $297.2 million as of December 31, 2019. At December 31, 2019,2020, the borrowing base under the HBB Facility was $114.4was $123.3 million andand borrowings outstanding were $58.3$98.4 million. AtAt December 31, 2019,2020, the excess availability under the HBB Facility was $56.1$24.9 million.


The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible trade receivables, inventory and trademarks of the borrowers, as defined in the HBB Facility. Borrowings bear interest at a floating rate, which can be a base rate, LIBOR or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. TheThe applicable margins, effective December 31, 2019,2020, for base rate loans and LIBOR loans denominated in U.S. dollars were 0.0% and 1.75%, respectively. The applicable margins, effective December 31, 2019,2020, for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.0% and 1.75%, respectively. The HBB Facility also requires a fee of 0.25% per annum on the unused commitment. The margins and unused commitmentcommitment fee under the HBB Facility are subject to quarterly adjustment based on average excess availability. The weighted average interest rate applicable to the HBB Facility for the year ended DecemberDecember 31, 20192020 was 3.82%2.88%, includingincluding the floating rate margin and the effect of the interest rate swap agreements described below.


24

Table of Contents

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)


To reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a portion of the HBB Facility. Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate. HBB has interest rate swaps with notional values totaling $35.0$25.0 million at December 31, 20192020 at an average fixed interest rate of 1.5%. HBB also has delayed-start interest rate swaps with notional values totaling $10.0 million as of December 31, 2019, with fixed rates of 1.7%1.66%.


The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to Hamilton Beach Holding, subject to achieving availability thresholds. Under Amendment No. 68 to the HBB Facility, dividends to Hamilton Beach Holding are not to exceed $5.0$6.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $15.0 million. Dividends to Hamilton Beach Holding are discretionary to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $25.0 million. The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. At December 31, 2019,2020, HBB was in compliance with all financial covenants in the HBB Facility.


In December 2015, the
23

Table of Contents

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The Company entered intomaintains an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis. The Company utilizes this arrangement as an integral part of financing working capital. 


HBB believes funds available from cash on hand, the HBB Facility and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments arising during the next twelve months and until the expiration of the HBB Facility.

KC maintained a separate revolving line of credit facility (the "KC Facility") that was secured by substantially all of the assets of KC. The Company's decision to wind down KC and its retail operations constituted an event of default under the KC Facility. As a result, on October 23, 2019, KC and its lender entered into a Forbearance Agreement (the “Forbearance Agreement”). Under the terms of the Forbearance Agreement, the lender agreed to forebear from exercising its rights and remedies as a result of the events of default pending accelerated payment in full of the obligations under the KC facility on or before December 15, 2019. All obligations under the KC Facility were paid in full in accordance with the Forbearance Agreement and the KC Facility was terminated on December 3, 2019.


Contractual Obligations, Contingent Liabilities and Commitments


Following is a table which summarizes the contractual obligations of Hamilton Beach Holding as of December 31, 2019:2020:
 Payments Due by Period
Contractual ObligationsTotal20212022202320242025Thereafter
Revolving credit agreements$98,360 $— $— $— $— $98,360 $— 
Variable interest payments on HBB Facility7,960 2,587 2,358 1,182 994 839 — 
Purchase and other obligations284,816 284,664 51 47 54 — — 
Operating lease obligations77,091 7,081 6,738 6,405 6,355 6,395 44,117 
Total contractual cash obligations$468,227 $294,332 $9,147 $7,634 $7,403 $105,594 $44,117 
 Payments Due by Period
Contractual ObligationsTotal 2020 2021 2022 2023 2024 Thereafter
HBB:             
Revolving credit agreements$58,497
 192
 58,305
 $
 $
 $
 $
Variable interest payments on HBB Facility4,140
 2,244
 1,896
 
 
 
 
Purchase and other obligations212,312
 209,040
 3,157
 69
 46
 
 
Operating lease obligations31,710
 6,114
 4,089
 1,816
 1,574
 1,590
 16,527
KC:             
Purchase and other obligations12,475
 12,475
 
 
 
 
 
Operating lease obligations26,493
 10,942
 5,863
 4,027
 2,458
 1,534
 1,669
Total contractual cash obligations$345,627
 $241,007
 $73,310
 $5,912
 $4,078
 $3,124
 $18,196


Not included in the table above, HBB has a long-term liability of approximately $0.4$4.7 million for unrecognized tax benefits, including interest and penalties, as of December 31, 2019.2020. At this time, the Company is unable to make a reasonable estimate of the timing of payments due to, among other factors, the uncertainty of the timing and outcome of its audits.


25

Table of Contents

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)


HBB’s variable interest payments are calculated based upon HBB's anticipated payment schedule and the December 31, 20192020 base rate and applicable margins, as defined in the HBB Facility. A 1/8% increase in the base rate would increase HBB’s estimated total annual interest payments on the HBB Facility by approximately $0.5$0.3 million.


HBB's purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and incentive compensation. KC's purchase and other obligations are primarily for accounts payable and accrued employee related costs.


An event of default, as defined in the HBB Facility and in HBB's operating lease agreements, could cause an acceleration of the payment schedule. No such event of default for HBB has occurred or is anticipated to occur.

KC is in default of the lease agreements for KC stores, which could result in acceleration of the payment schedule for those store leases.


Pension funding can vary significantly each year due to plan amendments, changes in the market value of plan assets, legislation and the Company’s decisions to contribute above the minimum regulatory funding requirements. As a result, pension funding has not been included in the table above. HBB does not expect to contribute to its pension plans in 2020.2021. Pension benefit payments are made from assets of the pension plans.


Off Balance Sheet Arrangements


The Company has not entered into any off balance sheet financing arrangements, other than operating leases, which are disclosed in the contractual obligations table above.

Accounting Standards Adopted

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the requirements in GAAP related to the income statement presentation of the components of net periodic benefit cost for an entity's sponsored defined benefit pension and other post-retirement plans. The Company adopted this guidance on January 1, 2019. The change in presentation of the components of net periodic pension cost was applied retrospectively which resulted in $0.7 million and $0.9 million of net periodic pension income for the years end December 31, 2018, and 2017, respectively, being reclassified from selling, general and administrative expenses to other expense (income), net.


Accounting Standards Not Yet Adopted


The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public or nonpublic entities, the Company can adopt the new or revised standard at the time nonpublic entities adopt the new or revised standard.


24

Table of Contents

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and liabilities for the rights and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, 2020,2021, and interim periods within fiscal years beginning after December 15, 2021.2022. Early adoption is permitted. The Company is planning to adopt ASU 2016-02 for its year ending December 31, 2021when required and is currently evaluating to what extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.


In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to recognize credit losses as an allowance rather than as a write-down. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, 2022 and is currently evaluating to what extent ASU 2016-13 will affect the Company's financial position, results of operations, cash flows and related disclosures.


26

Table of Contents

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)


FORWARD-LOOKING STATEMENTS


The statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere throughout this Annual Report on Form 10-K/A10-K that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-lookingforward looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Such risks and uncertainties with respect to each subsidiary's operations include, without limitation: (1) the Company’s ability to ship products to meet the anticipated increase in demand, (2) the Company’s ability to successfully manage the anticipated transportation constraints, (3) the unpredictable nature of the COVID-19 pandemic and its potential impact on our business; (4) changes in the sales prices, product mix or levels of consumer purchases of small electric and specialty housewares appliances, (2)(5) changes in consumer retail and credit markets, including the increasing volume of transactions made through third-party internet sellers, (3)(6) bankruptcy of or loss of major retail customers or suppliers, (4)(7) changes in costs, including transportation costs, of sourced products, (5)(8) delays in delivery of sourced products, (6)(9) changes in or unavailability of quality or cost effective suppliers, (7)(10) exchange rate fluctuations, changes in the import tariffs and monetary policies and other changes in the regulatory climate in the countries in which HBB buys, operates and/or sells products, (8)(11) the impact of tariffs on customer purchasing patterns, (9)(12) product liability, regulatory actions or other litigation, warranty claims or returns of products, (10)(13) customer acceptance of, changes in costs of, or delays in the development of new products, (11)(14) increased competition, including consolidation within the industry, (12)(15) shifts in consumer shopping patterns, gasoline prices, weather conditions, the level of consumer confidence and disposable income as a result of economic conditions, unemployment rates or other events or conditions that may adversely affect the level of customer purchases of HBB products, (13)(16) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, (14) risks associated with the wind down of KC including unexpected costs, contingent liabilities and the potential disruption of our other businesses, (15) the unpredictable nature of the coronavirus and its potential impact on our business, (16)(17) the result of shareholder or governmental actions relating to the restatement of our financial statements and accounting and legal fees that we may incur in connection with the restatement, (17)(18) difficulties arising as a result of our implementation, integration or operation of an enterprise resource planning system in the US, (19) our ability to successfully remediate the material weaknesses in our internal control over financial reporting disclosed in thisItem 9A of the Annual Report on Form 10-K/A10-K within the time periods and in the manner currently anticipated, additional material weaknesses or other deficiencies that may arise in the future or our ability to maintain an effective system of internal controls, and (18)(20) other risk factors, including those described in the Company's filings with the Securities and Exchange Commission, including, but not limited to, thethis Annual Report on Form 10-K/A10-K for the year ended December 31, 2019.2020. Furthermore, the situation surrounding COVID-19 remains fluid and the potential for a material impact on the Company’s results of operations, financial condition, liquidity, and stock price increases the longer the virus impacts activity levels in the US and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on its results of operations, financial position, liquidity and stock price. The extent of any impact will depend on the extent of new outbreaks, the extent to which new shutdowns may be needed, the nature of government public health guidelines and the public’s adherence to those guidelines, the impact of government economic relief on the US economy, unemployment levels, the success of businesses reopening fully, the timing for proven treatments and the availability of vaccines for COVID-19, consumer confidence and demand for our products.

25

Table of Contents
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
HBB enters into certain financing arrangements that require interest payments based on floating interest rates. As such, the Company's financial results are subject to changes in the market rate of interest. There is an inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements. To reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a portion of its floating rate financing arrangements. The Company does not enter into interest rate swap agreements for trading purposes. Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in interest rates. The Company assumes that a loss in fair value is an increase to its liabilities. The fair value of the Company's interest rate swap agreements was a payable of $0.1$1.2 million at December 31, 2019.2020. A hypothetical 10% decrease in interest rates would cause a decrease of $0.2$0.1 million in the fair value of interest rate swap agreements and the resulting fair value would be a payable of $0.3$1.2 million. Additionally, a hypothetical 10% increase in interest rates would not have a material impact to the Company's interest expense, net of $3.0$2.0 million at December 31, 2019.

27

Table of Contents

2020.
FOREIGN CURRENCY EXCHANGE RATE RISK
HBB operates internationally and enters into transactions denominated in foreign currencies, principally the Canadian dollar, the Mexican peso and, to a lesser extent, the Chinese yuan and Brazilian real. As such, HBB's financial results are subject to the variability that arises from exchange rate movements. The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of revenue, expenses, assets and liabilities. The potential impact of currency fluctuation increases as international expansion increases.
HBB uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies and not for trading purposes. These contracts generally mature within twelve months and require HBB to buy or sell the functional currency in which the applicable subsidiary operates and buy or sell U.S. dollars at rates agreed to at the inception of the contracts.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in foreign currency exchange rates. The Company assumes that a loss in fair value is either a decrease to its assets or an increase to its liabilities. The fair value of the Company's foreign currency exchange contracts was a net payable of $0.3$0.5 million at December 31, 2019.2020. Assuming a hypothetical 10% weakening of the U.S. dollar at December 31, 2019,2020, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange contracts, would be decreased by $1.1$1.9 million compared with its fair value at December 31, 2019.2020.


Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth in the Financial Statements and Supplementary Data contained in Part IV of this Form 10-K/A10-K and is hereby incorporated herein by reference to such information.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


There were no disagreements with accountants on accounting and financial disclosure for the three-year period ended December 31, 20192020 that would require disclosure pursuant to this Item 9.


Item 9A. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures:OurProcedures: As required by Exchange Act Rule 13a-15(b), our management, with the participation ofincluding our Chief Executive Officer and Chief Financial Officer, has evaluatedconducted an evaluation of the effectiveness of our disclosure controls and procedures, as of December 31, 2019. At the time of our Original Filing, our Chief Executive Officer and Chief Financial Officer had concluded that our disclosure controls and procedures were effectivedefined in Exchange Act Rule 13a-15(e), as of December 31, 2019. Subsequent to the evaluation made in connection withend of the Original Filing, our Chief Executive Officer and Chief Financial Officer have re-evaluated the effectiveness of our disclosure controls and procedures in connection with the restatement of our consolidated financial statements that resulted from wrongdoingperiod covered by certain former employees of one of our Mexican subsidiaries.this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2019, due to the existence2020 because of the material weaknesses in our internal control over financial reporting atdescribed in the "Management's Report on Internal Control over Financial Reporting." Notwithstanding the identified material weaknesses, management, including our Mexican subsidiaries as described below, our disclosure controlsChief Executive Officer and Chief Financial Officer have determined, based on the procedures were not effective to provide reasonable assurancewe have performed, that the information required to be disclosedconsolidated financial statements included in this Annual
26

Table of Contents
Report on Form 10-K present fairly, in all material respects, our financial condition, results of operations and cash flows at December 31, 2020 and for the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specifiedpresented in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.accordance with U.S. GAAP.

Management’s Report on Internal Control over Financial Reporting: Reporting: Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this evaluation, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 20192020 due to the material weaknesses at our Mexican subsidiariesas described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.


Mexican subsidiaries
28

TableAs of Contents

WeDecember 31, 2019, we identified deficienciestwo material weaknesses at our Mexican subsidiaries as follows:
Reviewrelated to (1) the design and operating effectiveness of review controls performed at our Mexican subsidiaries did not operate effectively asfor account reconciliations and manual journal entries were not supported by accurate and complete information, which resulted in expenditures being deferred on(2) the balance sheet beyond the period for which the costs pertaineddesign and the failure to detect unauthorized transactions deferred on the balance sheet as a resultoperating effectiveness of wrongdoing by certain former employees of one of our Mexican subsidiaries; and

Transactiontransaction level controls over authorization of spending with vendors, adjusting product costing and selling prices, new customer setup and accounting for price concessions with our customerscustomers.The material weaknesses at our Mexican subsidiaries as of December 31, 2019 were not sufficiently designed or operating effectively to provide reasonable assurance regarding the prevention and timely detection of misappropriation of assets.remediated during our fiscal year ended December 31, 2020.


We are committed to remediating the control deficiencies that gave rise to the material weaknesses. Management is responsible for implementing changes and improvements to internal control over financial reporting and for remediating the control deficiencies that gave rise to the material weaknesses.

With oversight from the Audit Review Committee, we have concluded that each of thesetaken significant steps to remediate the internal control deficiencies at our Mexican subsidiaries by redesigning our controls, many of which operated for the first time during the fourth quarter. Our efforts have consisted primarily of strengthening our organization and designing a suite of controls that address the material weaknesses. Because many of our controls operated for the first time during the fourth quarter, we have not had a sufficient period of time to demonstrate operating effectiveness in 2020.Until the remediation actions are fully implemented and the operational effectiveness of related internal controls is validated through testing, the material weaknesses described above will continue to exist.

Income taxes

Management determined that we did not design and maintain effective controls over our income tax accounting process to identify and accurately measure deferred tax assets, deferred tax liabilities and income taxes payable and the related income tax expense. While the control deficiency did not result in a misstatement of our previously issued consolidated financial statements, the control deficiency could result in a material misstatement of the aforementioned account balances or disclosures that would result in a material misstatement in our annual or interim consolidated financial statements that would not be prevented or detected. Our management has concluded that the deficiency constitutes a material weakness in our internal control over financial reporting.

With oversight from the Audit Review Committee, we have developed a plan to remediate the material weakness in internal control over financial reporting related to our income taxes accounting process, which consists of:

a.Reviewing the organization structure, resources, processes, and controls in place to measure and record income taxes to enhance the effectiveness of the design and operation of those controls;
b.Enhancing monitoring activities related to income taxes; and
c.Evaluating and enhancing the level of precision in the management review controls related to income taxes.

27

Table of Contents
We expect to implement the remediation actions in 2021. Until the remediation actions are fully implemented and the operational effectiveness of related internal controls is validated through testing, the material weakness described above will continue to exist.

We are committed to achieving and maintaining a strong internal control environment and believe the remediation measures will strengthen our internal control over financial reporting and remediate the material weakness identified.

The Company's effectiveness of internal control over financial reporting as of December 31, 20192020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is included in Item 15 of this Form 10-K/A10-K and incorporated herein by reference.


Remediation of Material Weaknesses: We have evaluated the material weaknesses and have developed a plan of remediation to strengthen our internal controls over financial reporting at our Mexican subsidiaries which include the remediation efforts summarized below. Some remediation efforts have been implemented, while others are in the process of being implemented. The remediation efforts are intended to address the deficiencies and enhance our overall internal control environment:
Personnel Actions - We have terminated employees of one of our Mexican subsidiaries found to have engaged in misconduct, which included collusion between these employees and vendors and customers of our Mexican subsidiaries in which such employees had an interest. Additional training on our code of conduct will be implemented for all employees of our Mexican subsidiaries.

Organizational Enhancements - We have implemented and are in the process of implementing organizational enhancements as follows: (i) augmenting our local accounting team for our Mexican subsidiaries with additional professionals with the relevant levels of accounting and controls knowledge, experience and training in the area of account reconciliations and manual journal entries to validate that account reconciliations and manual journal entries are supported by accurate and complete information; (ii) developing a more comprehensive review process and monitoring controls over the approval for vendor payments, changes to product cost and selling prices, approval for new customer setup including related terms and accounting for price concessions with our customers at our Mexican subsidiaries; and (iii) outsourcing functions at our Mexican subsidiaries where third-party service providers provide expertise or technical skillset, as appropriate.

We believe the measures described above along with other elements of our remediation plan will remediate the material weaknesses identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and have begun to implement the steps described above. We will also continue to review, optimize and enhance our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies or we may modify certain of the remediation measures described above. We will not consider our material weaknesses remediated until the applicable remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting: Reporting: There have been no changes in the Company's internal control over financial reporting, that occurred during the fourth quarter of 2019,2020, other than described above in "Management's Report on Internal Control over Financial Reporting", that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.



Item 9B. OTHER INFORMATION
None.



29

Table of Contents

PART III


Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to Directors of the Company will be set forth in the 20202021 Proxy Statement under the subheadings “Part II — Proposals To Be Voted On At The 20202021 Annual Meeting — Proposal 1 — Election of Directors — Director Nominee Information,” which information is incorporated herein by reference.
Information with respect to the audit review committee and the audit review committee financial expert will be set forth in the 20202021 Proxy Statement under the subheadings “Part I — Corporate Governance Information — Board Committees,” and “Part I — Corporate Governance Information — Description of Committees,” which information is incorporated herein by reference.
Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors, executive officers and holders of more than ten percent of the Company's equity securities will be set forth in the 20202021 Proxy Statement under the subheading “Part IV — Other Important Information — Section 16(a) Beneficial Ownership Reporting Compliance,” which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included in this Form 10-K/A10-K as Item 4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.
The Company has adopted a code of business conduct and ethics applicable to all Company personnel, including the principal executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar functions. The code of business conduct and ethics, entitled the “Code of Corporate Conduct,” is posted on the Company's website at www.hamiltonbeachbrands.com/investors/corporate-governance.
Item 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be set forth in the 20202021 Proxy Statement under the headings “Part III — Executive Compensation Information” which information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information with respect to security ownership of certain beneficial owners and management will be set forth in the 20202021 Proxy Statement under the subheading “Part IV — Other Important Information — Beneficial Ownership of Class A Common and Class B Common,” which information is incorporated herein by reference.


28

Table of Contents
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions will be set forth in the 20202021 Proxy Statement under the subheadings “Part I — Corporate Governance Information — Review and Approval of Related Person Transactions,” which information is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to principal accountant fees and services will be set forth in the 20202021 Proxy Statement under the heading “Part II — Proposals To Be Voted On At The 20202021 Annual Meeting — Proposal 4 — Ratification of the Appointment of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for 2020,2021,” which information is incorporated herein by reference.


PART IV

30

Table of Contents

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Documents that are filed as part of this report
The response to Item 15(a)(1) is set forth beginning at page F-2 of this Form 10-K/A.10-K.
(a)(2) Financial Statement Schedules
The response to Item 15(a)(2) is set forth beginning at page F-34F-37 of this Form 10-K/A.10-K.
(a)(3) and (b) Exhibits required by Item 601 of Regulation S-K


The response to Item 15(a)(3) and (b) is set forth as follows:


(2) Plan of acquisition, reorganization, arrangement, liquidation or succession.
2.1
(3) Articles of Incorporation and By-laws.
3.1
3.2
(4) Instruments defining the rights of security holders, including indentures.
4.1
4.2
4.3

31

Table of Contents

(10) Material Contracts.
10.1
10.2
10.3
10.4
29

Table of Contents
10.310.5
10.410.6
10.7
10.8
10.5*10.9
10.6*
10.7*
10.8*
10.9
10.10
10.11
10.12
10.13
10.1310.14
10.1410.15
10.1510.16





32

Table of Contents

10.17
10.16
10.1710.18
10.1810.19
10.1910.20
30

Table of Contents
10.20*10.21
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29
10.30
10.31*10.22
10.23
10.24
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*


33

Table of Contents

10.34*
10.32*
10.33*10.35*
10.36*
10.37*
10.38*
10.39*

31

Table of Contents
10.40*
10.41
10.3410.42
10.35
10.36
10.37
10.38

(21) Subsidiaries of the registrant.
(21) Subsidiaries of the registrant.
21.1
21.1


(23) Consents of experts and counsel.
23.1


(31) Rule 13a-14(a)/15d-14(a) Certifications.
31(i)(1) 
31(i)(2) 
(32)
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
*Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item15(b) of this Annual Report on Form 10-K/A.10-K.

32
34

Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Hamilton Beach Brands Holding Company
(Registrant)
Hamilton Beach Brands Holding CompanySignatureTitleDate
By:  (Registrant)
SignatureTitleDate
By:  /s/ Michelle O. Mosier
Senior Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)/(Principal Accounting Officer)
July 23, 2020March 22, 2021
Michelle O. Mosier


POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Hamilton Beach Brands Holding Company hereby appoints Michelle O. Mosier as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of Hamilton Beach Brands Holding Company, a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K/A10-K for the fiscal year ended December 31, 20192020 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SignatureTitleDate
SignatureTitleDate
/s/ Gregory H. Trepp
Gregory H. TreppPresident and Chief Executive Officer (Principal Executive Officer), DirectorJuly 23, 2020March 22, 2021
/s/ Michelle O. Mosier
Michelle O. MosierSenior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)/(Principal Accounting Officer)July 23, 2020
/s/ Mark R. Belgya
Mark R. BelgyaDirectorJuly 23, 2020
/s/ J.C. Butler, Jr.
J.C. Butler, Jr.DirectorJuly 23, 2020
/s/ Paul D. Furlow
Paul D. FurlowDirectorJuly 23, 2020


35

Table of Contents

March 22, 2021
Signature/s/ Mark R. BelgyaTitleDate
Mark R. BelgyaDirectorMarch 22, 2021
/s/ J.C. Butler, Jr.
J.C. Butler, Jr.DirectorMarch 22, 2021
/s/ Paul D. Furlow
Paul D. FurlowDirectorMarch 22, 2021
33

Table of Contents
SignatureTitleDate
/s/ John P. Jumper
John P. JumperDirectorJuly 23, 2020March 22, 2021
/s/ Dennis W. LaBarre
Dennis W. LaBarreDirectorJuly 23, 2020March 22, 2021
/s/ Michael S. Miller
Michael S. MillerDirectorJuly 23, 2020March 22, 2021
/s/ Alfred M. Rankin, Jr.
Alfred M. Rankin, Jr.DirectorJuly 23, 2020March 22, 2021
/s/ Thomas T. Rankin
Thomas T. RankinDirectorJuly 23, 2020March 22, 2021
/s/ James A. Ratner
James A. RatnerDirectorJuly 23, 2020March 22, 2021
/s/ Clara R. Williams
Clara R. WilliamsDirectorJuly 23, 2020March 22, 2021

34
36

Table of Contents

ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 15(a)(1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 20192020


HAMILTON BEACH BRANDS HOLDING COMPANY
GLEN ALLEN, VIRGINIA



F-1

Table of Contents

FORM 10-K
ITEM 15(a)(1) AND (2)
HAMILTON BEACH BRANDS HOLDING COMPANY
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of Hamilton Beach Brands Holding Company are incorporated by reference in Item 8:
The following consolidated financial statement schedule of Hamilton Beach Brands Holding Company is included in Item 15(a)(2):
All other schedules for which provision is made in the applicable accounting regulation of the SEC are not required under the related instructions or are inapplicable, or the required information is shown in the consolidated financial statements, and therefore have been omitted.



F-2

Table of Contents



Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of Hamilton Beach Brands Holding Company


Opinion on the Financial Statements


We have audited the accompanying consolidated balance sheets of Hamilton Beach Brands Holding Company (the Company) as of December 31, 20192020 and 2018,2019, the related consolidated statements of operations, comprehensive income (loss), cash flows and equity for each of the three years in the period ended December 31, 2019,2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2020, in conformity with U.S. generally accepted accounting principles.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2020, except for the effect of the material weaknesses described in the second and third paragraphs as to which the date is July 23, 2020,March 22, 2021 expressed an adverse opinion thereon.

Restatement of 2019, 2018 and 2017 Financial Statements

As discussed in Note 2 to the consolidated financial statements, the 2019, 2018 and 2017 consolidated financial statements have been restated to correct certain misstatements.


Basis for Opinion


These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ Ernst & Young LLP


We have served as the Company’s auditor since 2017


Cleveland, Ohio
February 26, 2020, except for the effect of the restatement disclosed in Note 2,March 22, 2021
as to which the date is July 23, 2020





F-3

Table of Contents

Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of Hamilton Beach Brands Holding Company


Opinion on Internal Control over Financial Reporting


We have audited Hamilton Beach Brands Holding Company’s internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-IntegratedControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, Hamilton Beach Brands Holding Company (the Company) has not maintained effective internal control over financial reporting as of December 31, 2019,2020, based on the COSO criteria.

In our report dated February 26, 2020, we expressed an unqualified opinion that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria. Management has subsequently identified deficiencies in the design and operating effectiveness of its controls related to (1) the Company’s Mexican subsidiaries' review controls as account reconciliations and manual journal entries were not supported by accurate and complete information and failed to detect unauthorized transactions and (2) controls at the Company’s Mexican subsidiaries over authorizations for spending with vendors, adjusting product costs and selling prices, new customer setup and accounting for price concessions with customers, and has further concluded that such deficiencies represented material weaknesses as of December 31, 2019. As a result, management has revised its assessment, as presented in the accompanying Management's Report on Internal Control over Financial Reporting; to conclude that the Company’s internal control over financial reporting was not effective as of December 31, 2019. Accordingly, our present opinion on the effectiveness of December 31, 2019’s internal control over financial reporting as of December 31, 2019, as expressed herein, is different from that expressed in our previous report.


A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment. Management has identified material weaknesses in internal controls related to (1) the Company's Mexican subsidiaries' (1)design and operation of review controls at its Mexican subsidiaries over account reconciliations and manual journal entries, (2) the design and (2)operation of transaction level controls at its Mexican subsidiaries over authorizations for spending with vendors, adjusting product costs and selling prices, new customer setup and accounting for price concessions with customers.customers, and (3) the design and operation of controls over the company’s income tax accounting process.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 20192020 consolidated financial statements of the Company. These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 20192020 consolidated financial statements, and this report does not affect our report dated February 26, 2020, except for the effect of the restatement disclosed in Note 2 as to which the date is July 23, 2020,March 22, 2021, which expressed an unqualified opinion on those financial statements.thereon.


Basis for Opinion


The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s reportReport on internal controlInternal Control over financial reportingFinancial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.


Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



F-4

Table of Contents


Definition and Limitations of Internal Control Over Financial Reporting


A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

F-4

Table of Contents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ Ernst & Young LLP


Cleveland, Ohio
February 26, 2020, except for the effect of the material weaknessesMarch 22, 2021
described in the second and third paragraphs above,
as to which the date is July 23, 2020










F-5

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
As Restated
Year Ended December 31 Year Ended December 31
2019 2018 2017 202020192018
(In thousands, except per share data) (In thousands, except per share data)
Revenue$611,786
 $630,082
 $612,056
Revenue$603,713 $611,786 $630,082 
Cost of sales483,234
 491,030
 475,939
Cost of sales465,059 483,234 491,030 
Gross profit128,552
 139,052
 136,117
Gross profit138,654 128,552 139,052 
Selling, general and administrative expenses100,381
 104,121
 96,780
Selling, general and administrative expenses99,990 100,381 104,121 
Amortization of intangible assets1,377
 1,381
 1,381
Amortization of intangible assets1,249 1,377 1,381 
Operating profit26,794
 33,550
 37,956
Operating profit (loss)Operating profit (loss)37,415 26,794 33,550 
Interest expense, net2,975
 2,916
 1,572
Interest expense, net1,998 2,975 2,916 
Other expense (income), net(358) 149
 (692)Other expense (income), net1,685 (358)149 
Income from continuing operations before income taxes24,177
 30,485
 37,076
Income tax expense9,084
 7,426
 18,967
Net income from continuing operations15,093
 23,059
 18,109
Loss from discontinued operations, net of tax(28,600) (5,361) (2,225)
Income (loss) from continuing operations before income taxesIncome (loss) from continuing operations before income taxes33,732 24,177 30,485 
Income tax expense (benefit)Income tax expense (benefit)9,665 9,084 7,426 
Net income (loss) from continuing operationsNet income (loss) from continuing operations24,067 15,093 23,059 
Income (loss) from discontinued operations, net of taxIncome (loss) from discontinued operations, net of tax22,191 (28,600)(5,361)
Net income (loss)$(13,507) $17,698
 $15,884
Net income (loss)$46,258 $(13,507)$17,698 

 
 
Basic and diluted earnings (loss) per share:

 

 

Basic earnings (loss) per share:Basic earnings (loss) per share:
Continuing operations$1.10

$1.68

$1.32
Continuing operations$1.76 $1.10 $1.68 
Discontinued operations(2.09)
(0.39)
(0.16)Discontinued operations1.62 (2.09)(0.39)
Basic and diluted earnings (loss) per share$(0.99)
$1.29

$1.16
Basic earnings (loss) per shareBasic earnings (loss) per share$3.39 $(0.99)$1.29 
Diluted earnings (loss) per share:Diluted earnings (loss) per share:
Continuing operationsContinuing operations$1.76 $1.10 $1.68 
Discontinued operationsDiscontinued operations1.62 (2.09)(0.39)
Diluted earnings (loss) per shareDiluted earnings (loss) per share$3.37 $(0.99)$1.29 








Basic weighted average shares outstanding13,690
 13,699
 13,673
Basic weighted average shares outstanding13,657 13,690 13,699 
Diluted weighted average shares outstanding13,726
 13,731
 13,685
Diluted weighted average shares outstanding13,712 13,726 13,731 
See notes to consolidated financial statements.



F-6

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
As Restated
Year Ended December 31 Year Ended December 31
2019 2018 2017 202020192018
(In thousands) (In thousands)
Net income (loss)$(13,507) $17,698
 $15,884
Net income (loss)$46,258 $(13,507)$17,698 
Other comprehensive income (loss), net of tax:
 
 
Other comprehensive income (loss), net of tax: 
Foreign currency translation adjustment510
 (73) 648
Foreign currency translation adjustment1,481 510 (73)
Loss on long-term intra-entity foreign currency transactions(79) (1,006) 
Loss on long-term intra-entity foreign currency transactions(3,035)(79)(1,006)
Cash flow hedging activity(1,569) 100
 (749)Cash flow hedging activity(540)(1,569)100 
Reclassification of hedging activities into earnings349
 153
 641
Reclassification of hedging activities into earnings(463)349 153 
Pension plan adjustment1,410
 (1,920) 1,510
Pension plan adjustment630 1,410 (1,920)
Reclassification of pension adjustments into earnings348
 556
 306
Reclassification of pension adjustments into earnings583 348 556 
Total other comprehensive income (loss), net of tax$969
 $(2,190) $2,356
Total other comprehensive income (loss), net of tax$(1,344)$969 $(2,190)
Comprehensive income (loss)$(12,538) $15,508
 $18,240
Comprehensive income (loss)$44,914 $(12,538)$15,508 
See notes to consolidated financial statements.



F-7

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
 As Restated
 December 31
 2019 2018
 (In thousands)
Assets   
Current assets   
Cash and cash equivalents$2,142
 $4,420
Trade receivables, net108,381
 98,361
Inventory109,806
 122,808
Prepaid expenses and other current assets11,345
 15,396
Current assets of discontinued operations5,383
 27,879
Total current assets237,057
 268,864
Property, plant and equipment, net22,324
 20,842
Goodwill6,253
 6,253
Other intangible assets, net3,141
 4,519
Deferred income taxes6,248
 5,794
Deferred costs10,941
 7,868
Other non-current assets2,085
 2,672
Non-current assets of discontinued operations614
 4,606
Total assets$288,663
 $321,418
Liabilities and stockholders' equity
 
Current liabilities
 
Accounts payable$111,348
 $119,271
Accounts payable to NACCO Industries, Inc.496
 2,416
Revolving credit agreements23,497
 11,624
Accrued compensation15,027
 15,878
Accrued product returns8,697
 10,698
Other current liabilities12,534
 22,922
Current liabilities of discontinued operations29,723
 22,820
Total current liabilities201,322
 205,629
Revolving credit agreements35,000
 35,000
Other long-term liabilities16,075
 22,011
Non-current liabilities of discontinued operations
 1,960
Total liabilities252,397
 264,600
Stockholders’ equity
 
Preferred stock, par value $0.01 per share
 
Class A Common stock, par value $0.01 per share; 9,805 and 9,291 shares issued as of December 31, 2019 and 2018, respectively98
 93
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 4,076 and 4,422 shares issued as of December 31, 2019 and 2018, respectively41
 44
Capital in excess of par value54,509
 51,714
Treasury stock(5,960) 
Retained earnings3,710
 22,068
Accumulated other comprehensive loss(16,132) (17,101)
Total stockholders’ equity36,266
 56,818
Total liabilities and stockholders' equity$288,663
 $321,418
    
    


F-8

Table of Contents

December 31
 20202019
 (In thousands)
Assets  
Current assets  
Cash and cash equivalents$2,415 $2,142 
Trade receivables, net144,797 108,381 
Inventory173,962 109,806 
Prepaid expenses and other current assets15,118 11,345 
Current assets of discontinued operations0 5,383 
Total current assets336,292 237,057 
Property, plant and equipment, net23,490 22,324 
Goodwill6,253 6,253 
Other intangible assets, net1,892 3,141 
Deferred income taxes6,965 6,248 
Deferred costs13,449 10,941 
Other non-current assets2,827 2,085 
Non-current assets of discontinued operations0 614 
Total assets$391,168 $288,663 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$152,054 $111,348 
Accounts payable to NACCO Industries, Inc.505 496 
Revolving credit agreements0 23,497 
Accrued compensation15,981 15,027 
Accrued product returns6,853 8,697 
Other current liabilities23,677 12,534 
Current liabilities of discontinued operations0 29,723 
Total current liabilities199,070 201,322 
Revolving credit agreements98,360 35,000 
Other long-term liabilities13,633 16,075 
Total liabilities311,063 252,397 
Stockholders’ equity
Preferred stock, par value $0.01 per share0 
Class A Common stock, par value $0.01 per share; 10,006 and 9,805 shares issued as of December 31, 2020 and 2019, respectively100 98 
Class B Common stock, par value $0.01 per share, convertible into Class A on a 1-for-1 basis; 4,045 and 4,076 shares issued as of December 31, 2020 and 2019, respectively41 41 
Capital in excess of par value58,485 54,509 
Treasury stock(5,960)(5,960)
Retained earnings44,915 3,710 
Accumulated other comprehensive loss(17,476)(16,132)
Total stockholders’ equity80,105 36,266 
Total liabilities and stockholders' equity$391,168 $288,663 
See notes to consolidated financial statements.

F-8

F-9

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
As Restated
Year Ended December 31Year Ended December 31
2019 2018 2017 202020192018
(In thousands) (In thousands)
Operating activities     Operating activities   
Net income from continuing operations$15,093
 $23,059
 $18,109
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
 
 
Net income (loss) from continuing operationsNet income (loss) from continuing operations$24,067 $15,093 $23,059 
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used for) operating activities:Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used for) operating activities:
Depreciation and amortization4,002
 4,277
 4,072
Depreciation and amortization3,907 4,002 4,277 
Deferred income taxes1,487
 5,474
 3,475
Deferred income taxes(1,431)1,487 5,474 
Stock compensation expense2,797
 3,618
 323
Stock compensation expense3,978 2,797 3,618 
Other616
 837
 (1,167)Other2,055 616 837 
Net changes in operating assets and liabilities:
 
 
Net changes in operating assets and liabilities:
Affiliate payable(1,920) (5,300) 866
Affiliate payable9 (1,920)(5,300)
Trade receivables(22,769) 18,529
 (8,128)Trade receivables(41,314)(22,769)18,529 
Inventory13,674
 (12,255) (16,566)Inventory(65,808)13,674 (12,255)
Other assets1,127
 (4,586) (1,295)Other assets(550)1,127 (4,586)
Accounts payable(7,043) (7,719) 25,009
Accounts payable40,215 (7,043)(7,719)
Other liabilities(6,842) (7,979) 3,605
Other liabilities6,938 (6,842)(7,979)
Net cash provided by operating activities from continuing operations222
 17,955
 28,303
Net cash provided by (used for) operating activities from continuing operationsNet cash provided by (used for) operating activities from continuing operations(27,934)222 17,955 
Investing activities
 
 
Investing activities
Expenditures for property, plant and equipment(4,122) (7,759) (6,198)Expenditures for property, plant and equipment(3,312)(4,122)(7,759)
Other
 
 21
Other(500)
Net cash used for investing activities from continuing operations(4,122) (7,759) (6,177)
Net cash provided by (used for) investing activities from continuing operationsNet cash provided by (used for) investing activities from continuing operations(3,812)(4,122)(7,759)
Financing activities
 
 
Financing activities
Net additions (reductions) to revolving credit agreements11,873
 (4,597) 12,630
Net additions (reductions) to revolving credit agreements39,761 11,873 (4,597)
Purchase of treasury stock(5,960) 
 
Purchase of treasury stock0 (5,960)
Cash dividends paid(4,851) (4,658) (1,162)Cash dividends paid(5,053)(4,851)(4,658)
Cash dividends to NACCO Industries, Inc.
 
 (38,000)
Financing fees paidFinancing fees paid(528)
Net cash provided by (used for) financing activities from continuing operations1,062
 (9,255) (26,532)Net cash provided by (used for) financing activities from continuing operations34,180 1,062 (9,255)
Cash flows from discontinued operations

 

 

Cash flows from discontinued operations
Net cash provided by (used for) operating activities from discontinued operations3,953
 (5,499) 5,137
Net cash provided by (used for) operating activities from discontinued operations(6,193)3,953 (5,499)
Net cash provided by (used for) investing activities from discontinued operations585
 (305) (1,176)Net cash provided by (used for) investing activities from discontinued operations6 585 (305)
Net cash used for financing activities from discontinued operations(103) 
 (70)
Net cash provided by (used for) financing activities from discontinued operationsNet cash provided by (used for) financing activities from discontinued operations0 (103)
Cash provided by (used for) discontinued operations4,435
 (5,804) 3,891
Cash provided by (used for) discontinued operations(6,187)4,435 (5,804)
Effect of exchange rate changes on cash(785) 309
 81
Cash and Cash Equivalents
 
 
(Decrease) increase for the year from continuing operations(3,623) 1,250
 (4,325)
Effect of exchange rate changes on cash, cash equivalents, and restricted cashEffect of exchange rate changes on cash, cash equivalents, and restricted cash25 (785)309 
Cash, cash equivalents and restricted cashCash, cash equivalents and restricted cash
Increase (decrease) for the period from continuing operationsIncrease (decrease) for the period from continuing operations2,459 (3,623)1,250 
Increase (decrease) for the year from discontinued operations4,435
 (5,804) 3,891
Increase (decrease) for the year from discontinued operations(6,187)4,435 (5,804)
Balance at the beginning of the year6,352
 10,906
 11,340
Balance at the beginning of the year7,164 6,352 10,906 
Balance at the end of the year$7,164
 $6,352
 $10,906
Balance at the end of the year$3,436 $7,164 $6,352 
Reconciliation of cash, cash equivalents and restricted cashReconciliation of cash, cash equivalents and restricted cash
Continuing operations:Continuing operations:
Cash and cash equivalentsCash and cash equivalents$2,415 $2,142 $4,420 
Restricted cash included in prepaid expenses and other current assetsRestricted cash included in prepaid expenses and other current assets208 
Restricted cash included in other non-current assetsRestricted cash included in other non-current assets813 
Cash and cash equivalents of discontinued operationsCash and cash equivalents of discontinued operations0 5,022 1,932 
Total cash, cash equivalents, and restricted cashTotal cash, cash equivalents, and restricted cash$3,436 $7,164 $6,352 
See notes to consolidated financial statements.

F-9
F-10

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
Class A Common StockClass B Common Stock
Capital in Excess of Par Value (1)
Treasury Stock
Retained Earnings (1)
Accumulated Other Comprehensive Income (Loss)(1)
Total Stockholders' Equity (1)
Class A Common StockClass B Common StockCapital in Excess of Par ValueTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
(In thousands, except per share data)(In thousands, except per share data)
Balance, January 1, 2017 (As previously reported)$
$
$75,031
$
$6,738
$(16,501)$65,268
Cumulative restatement adjustments$
$
$
$
$(2,722)$402
$(2,320)
Balance as Restated, January 1, 2017$
$
$75,031
$
$4,016
$(16,099)$62,948
Net income



15,884

15,884
Issuance of common stock, net of conversions88
48
(136)



Cash dividends to NACCO Industries, Inc.

(27,122)
(10,878)
(38,000)
Cash dividends, $0.085 per share



(1,162)
(1,162)
Other comprehensive income




1,409
1,409
Reclassification adjustment to net income




947
947
Balance as Restated, December 31, 2017$88
$48
$47,773
$
$7,860
$(13,743)$42,026
Balance, January 1, 2018Balance, January 1, 2018$88 $48 $47,773 $$7,860 $(13,743)$42,026 
Net income



17,698

17,698
Net income— — — — 17,698 — 17,698 
Issuance of common stock, net of conversions5
(4)323



324
Issuance of common stock, net of conversions(4)323 — — — 324 
Stock compensation expense

3,618



3,618
Stock compensation expense— — 3,618 — — — 3,618 
Cash dividends, $0.34 per share



(4,658)
(4,658)Cash dividends, $0.34 per share— — — — (4,658)— (4,658)
Reclassification due to adoption of ASU 2018-02



1,168
(1,168)
Reclassification due to adoption of ASU 2018-02— — — — 1,168 (1,168)— 
Other comprehensive loss




(2,899)(2,899)
Other comprehensive income (loss)Other comprehensive income (loss)— — — — — (2,899)(2,899)
Reclassification adjustment to net income




709
709
Reclassification adjustment to net income— — — — — 709 709 
Balance as Restated, December 31, 2018$93
$44
$51,714
$
$22,068
$(17,101)$56,818
Balance, December 31, 2018Balance, December 31, 2018$93 $44 $51,714 $$22,068 $(17,101)$56,818 
Net loss



(13,507)
(13,507)Net loss— — — — (13,507)— (13,507)
Issuance of common stock, net of conversions5
(3)(2)



Issuance of common stock, net of conversions(3)(2)— — — 
Purchase of treasury stock


(5,960)

(5,960)Purchase of treasury stock— — — (5,960)— — (5,960)
Stock compensation expense

2,797



2,797
Stock compensation expense— — 2,797 — — — 2,797 
Cash dividends, $0.355 per share



(4,851)
(4,851)Cash dividends, $0.355 per share— — — — (4,851)— (4,851)
Other comprehensive income




272
272
Other comprehensive income (loss)Other comprehensive income (loss)— — — — — 272 272 
Reclassification adjustment to net income (loss)




697
697
Reclassification adjustment to net income (loss)— — — — — 697 697 
Balance as Restated, December 31, 2019$98
$41
$54,509
$(5,960)$3,710
$(16,132)$36,266
Balance, December 31, 2019Balance, December 31, 2019$98 $41 $54,509 $(5,960)$3,710 $(16,132)$36,266 
Net incomeNet income    46,258  46,258 
Issuance of common stock, net of conversionsIssuance of common stock, net of conversions2  (2)   0 
Stock compensation expenseStock compensation expense  3,978    3,978 
Cash dividends, $0.37 per shareCash dividends, $0.37 per share    (5,053) (5,053)
Other comprehensive income (loss)Other comprehensive income (loss)     (1,464)(1,464)
Reclassification adjustment to net income (loss)Reclassification adjustment to net income (loss)     120 120 
Balance, December 31, 2020Balance, December 31, 2020$100 $41 $58,485 $(5,960)$44,915 $(17,476)$80,105 
See notes to consolidated financial statements.
(1) As Restated


F-11
F-10

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)












NOTE 1 - Nature of Operations and Summary of Significant Accounting Policies


Nature of Operations


Hamilton Beach Brands Holding Company is an operatinga holding company and operates through its two wholly-owned subsidiariessubsidiary, Hamilton Beach Brands, Inc. (“HBB”) and The Kitchen Collection, LLC (“KC”) (collectively “Hamilton Beach Holding” or the “Company”). On October 10, 2019, the Company’s board of directors (the “Board”) approved the wind down of KC and

The Company also previously operated through its retail operations. By December 31, 2019, all KC stores were closed and the reportable segment qualifies to beother wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"), which is reported as discontinued operations. On January 21,operations in all periods presented herein. KC completed its dissolution on April 3, 2020 the Board approved the dissolutionwith a pro-rata distribution of its remaining assets to creditors, at which time the KC legal entity and a Certificate of Dissolution of Ohio Limited Liability Company was filed with the Ohio Secretary of State.ceased to exist. See Note 32 for further information on discontinued operations.


The only material assets held by Hamilton Beach Brands Holding Company are its investments in its consolidated subsidiaries. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries. Hamilton Beach Brands Holding Company has not guaranteed any obligations of its subsidiaries.


HBB is a leading designer, marketer, and distributor of branded, small electric household and specialty housewares appliances, as well as commercial products for restaurants, bars, and hotels. HBB operates in the consumer, commercial and specialty small appliance markets.


On September 29, 2017, NACCO Industries, Inc. ("NACCO"), Hamilton Beach Holding's former parent company, spun-off the Company to NACCO stockholders. In the spin-off, NACCO stockholders, in addition to retaining their shares of NACCO common stock, received one1 share of Hamilton Beach Brands Holding Company Class A common stock ("Class A Common") and one1 share of Hamilton Beach Brands Holding Company Class B common stock ("Class B Common") for each share of NACCO Class A or Class B common stock. In accordance with applicable authoritative accounting guidance, the Company accounted for the spin-off from NACCO based on the historical carrying value of assets and liabilities. As a result of the distribution of one1 share of Class A Common and one1 share of Class B Common for each share of NACCO Class A or NACCO Class B common stock, the earnings per share amounts for the Company for periods prior to the spin-off have been calculated based upon the number of shares distributed in the spin-off. NACCO did not receive any proceeds from the spin-off.


Basis of Presentation and Principles of Consolidation


The accompanying consolidated financial statements include the financial statements of the Company and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Intercompany balances and transactions have been eliminated.


Prior Period Restatement

During the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican subsidiaries.As a result of the investigation performed, the Company, along with the Audit Review Committee and its third party experts, concluded that certain former employees of one of the Company’s Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries that resulted in expenditures being deferred on the balance sheet beyond the period non-trade customer receivablefor which the costs pertained.The Company recorded a non-cash write-off for certain amounts of $9.5 million have been reclassified fromincluded in the Company’s historical consolidated financial statements in trade receivables net toand prepaid expenses and other current assets, among other corrections, related to conformthese transactions, and restated its consolidated financial statements as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018, and 2017 and each of the quarters during the years ended December 31, 2019 and 2018. The restatement also included corrections for other errors identified as immaterial, individually and in the aggregate, to our consolidated financial statements. All amounts included herein reflect the current period presentation.restated financial statements.






F-11

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




Segment Information


As of December 31, 2019,2020, HBB is the Company’s single reportable operating segment. This is supported by the operational structure of HBB which is designed and managed to share resources across the entire suite of products offered by the business. Such resources include research and development, product design, marketing, operations, and administrative functions. The Company's chief operating decision maker does not regularly review financial information for individual product categories, sales channels, or geographic regions that would allow decisions to be made about allocation of resources or performance. Since the Company operates in one1 reportable segment, all required financial segment information can be found in the consolidated financial statements.


F-12

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







Discontinued Operations


A component of an entity that is disposed of by sale or abandonment is reported as discontinued operations if the transaction represents a strategic shift that will have a major effect on an entity's operations and financial results. The results of discontinued operations are aggregated and presented separately in the Consolidated StatementStatements of Operations. Assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the Consolidated Balance Sheet including the comparative prior year period.as of December 31, 2019. There are no assets and liabilities of discontinued operations as of December 31, 2020. KC’s cash flows are reflected as cash flows from discontinued operations within the Company’s Consolidated Statements of Cash Flows for each period presented.


Amounts presented in discontinued operations have been derived from our consolidated financial statements and accounting records using the historical basis of assets, liabilities, and historical results of KC. The discontinued operations exclude general corporate allocations.


Use of Estimates


The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities (if any). Actual results could differ from those estimates.


Cash and Cash Equivalents


Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less.


Trade Receivables


Allowances for doubtful accounts are maintained against trade receivables for estimated losses resulting from the inability of customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. Accounts are written off against the allowance when it becomes evident collection will not occur.
HBB maintains significant trade receivables balances with several large retail customers. At December 31, 20192020 and 2018,2019, receivables from HBB’s five largest customers represented 69%66% and 57%69%, respectively, of HBB's net trade receivables. HBB’s significant credit concentration is uncollateralized; however, historically, minimal credit losses have been incurred.












F-12

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




Transfer of Financial Assets


HBB has entered into an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis. HBB utilizes this arrangement as an integral part of financing working capital.  Under the terms of the agreement, HBB receives cash proceeds and retains no rights or interest and has no obligations with respect to the sold receivables.  These transactions are accounted for as sold receivables which result in a reduction in trade receivables because the agreement transfers effective control over and risk related to the receivables to the buyer.  Under this arrangement, HBB derecognized $162.4 million, $162.7 million, $165.4 million, and $164.0$165.4 million of trade receivables during 2020, 2019 2018 and 2017,2018, respectively.  The losses incurred on sold receivables in the consolidated results of operations for the years ended December 31, 2020, 2019, 2018, and 20172018 were not material. The Company does not carry any servicing assets or liabilities. Cash proceeds from this arrangement are reflected as operating activities.


Inventory


Inventory is stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (“FIFO”) method. Adjustments to the carrying value are recorded for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.



Assets Held for Sale

F-13

TableWe classify assets and liabilities as held for sale (disposal group) when management, having the authority to approve the action, commits to a plan to sell the disposal group, the sale is probable within one year, and the disposal group is available for immediate sale in its present condition. We also consider whether an active program to locate a buyer has been initiated, whether the disposal group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When we classify a disposal group as held for sale, we test for impairment. An impairment charge, up to the carrying value of Contentsthe disposal group, is recognized when the carrying value of the disposal group exceeds the estimated fair value, less costs to sell. We also cease depreciation and amortization for assets classified as held for sale.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDuring the fourth quarter of 2020, we committed to a plan to sell our Brazilian subsidiary and determined that we met all of the criteria to classify the assets and liabilities of this business as held for sale. We expect the divestiture to occur during the fiscal year ended December 31, 2021. The carrying amounts of the major classes of assets that were classified as held for sale are as follows: $2.6 million of Trade receivables, net, and $0.8 million of Inventory. As of December 31, 2020, the total of these amounts are included in the Prepaid expenses and other current assets line item on the Consolidated Balance Sheet. The carrying value of disposal group approximates the fair value, which we determined based on the expected sales price. In addition, the disposal group had $2.3 million of accumulated other comprehensive losses at December 31, 2020, which will be recognized in net income in 2021 upon deconsolidation.
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







Property, Plant and Equipment


Property, plant and equipment are measured at cost less accumulated depreciation, amortization and accumulated impairment losses. Depreciation and amortization are recorded generally using the straight-line method over the estimated useful lives of the assets. Estimated lives for buildings are up to 40 years, and for machinery, equipment and furniture and fixtures range from three to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the lease. The units-of-production method is used to amortize certain tooling for sourced products. Costs incurred to develop software for internal use are capitalized and amortized over the estimated useful life of the software. Gains or losses from the sale of assets are included in selling, general and administrative expenses. Repairs and maintenance are charged to expense as incurred. Interest is capitalized for qualifying long-term capital asset projects as a part of the historical cost of acquiring the asset.


F-13

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




The Company evaluates long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. Fair value is estimated at 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.


Goodwill and Intangible Assets


Goodwill represents the excess of the purchase price of all acquisitions over the estimated fair value of the net assets acquired. Goodwill is not amortized but evaluated at least annually for impairment. The Company conducts its annual test for impairment as of October 1 of each year and it may be conducted more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists.  Using a qualitative assessment in the current year, the Company determined that it was not more-likely-than-not that the goodwill was not impaired and a quantitative test for impairment was not required.


Intangible assets with finite lives are amortized over their estimated useful lives, which represent the period over which the asset is expected to contribute directly or indirectly to future cash flows. Intangible assets with finite lives are reviewed for impairment whenever events and circumstances indicate the carrying value of such assets may not be recoverable and exceed their fair value. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new cost basis is amortized over the remaining useful life of the asset.


NoNaN impairment has been recognized for identifiable intangible assets or goodwill for any period presented.


Environmental Liabilities


HBB and environmental consultants are investigating or remediating historical environmental contamination at some current and former sites operated by HBB or by businesses it acquired. Liabilities for environmental matters are recorded in the period when it is determined to be probable and reasonably estimable that the Company will incur costs. When only a range of amounts is reasonably estimable and no amount within the range is more probable than another, the Company records the low end of the range. Environmental liabilities are recorded on an undiscounted basis and recorded in selling, general, and administrative expenses. When recovery of a portion of an environmental liability is probable, such amounts are recognized as a reduction to selling, general, and administrative expenses and included in prepaid expenses and other current assets (current portion) and other non-current assets until settled.


F-14

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







Revenue Recognition


Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales taxes are excluded from revenue. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service that is distinct. The Company has elected to account for shipping and handling activities performed after a customer obtains control of the goods as activities to fulfill the promise to transfer the goods, and therefore these activities are not assessed as a separate service to customers. The amount of revenue recognized varies primarily with changes in returns. In addition, the Company offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements. We determine whether price concessions offered to itsour customers are a reduction of the transaction price and revenue or are advertising expense, depending on whether we receive a distinct good or service from our customers and, if so, whether we can reasonably estimate the fair value of that distinct good or service. We evaluated such agreements with our customers and determined they should be accounted for as variable consideration. As of December 31, 2019, we have determined that customer price concessions recorded as a reduction of revenue, certain of which were previously recorded in other current liabilities, meet all of the criteria specified in ASC 210-20, "Balance Sheet Offsetting". Accordingly, amounts related to such arrangements have been classified as a reduction of trade receivables, net as of December 31, 2019 (prior periods have not been adjusted as all the criteria in ASC 210-20 had not previously been met).


To estimate variable consideration, the Company applies both the expected value method and most likely amount method based on the form of variable consideration, according to which method would provide the better prediction. The expected value method involves a probability weighted determination of the expected amount, whereas the most likely amount method identifies the single most likely outcome in a range of possible amounts.


F-14

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




Product Development Costs


Expenses associated with the development of new products and changes to existing products are charged to expense as incurred. These costs, included in selling, general and administrative expenses, amounted to $10.0 million, $12.1 million, and $11.0 million in 2020, 2019, and $10.4 million in 2019, 2018, and 2017, respectively.


Foreign Currency


Assets and liabilities of foreign operations are translated into U.S. dollars at the fiscal year-end exchange rate. Revenue and expenses of all foreign operations are translated using average monthly exchange rates prevailing during the year. The related translation adjustments, including translation on long-term intra-entity foreign currency transactions, are recorded as a separate component of stockholders’ equity.


Financial Instruments


Financial instruments held by the Company include cash and cash equivalents, trade receivables, accounts payable, revolving credit agreements, interest rate swap agreements and forward foreign currency exchange contracts. The Company does not hold or issue financial instruments or derivative financial instruments for trading purposes. Interest rate swap agreements and forward foreign currency exchange contracts held by the Company have been designated as hedges of forecasted cash flows. The Company holds these derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one institution. The Company does not currently hold any nonderivative instruments designated as hedges or any derivatives designated as fair value hedges.


F-15

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. The Company offsets fair value amounts related to foreign currency exchange contracts executed with the same counterparty. These contracts hedge firm commitments and forecasted transactions relating to cash flows associated with sales and purchases denominated in currencies other than the subsidiaries’ functional currencies. Changes in the fair value of forward foreign currency exchange contracts that are effective as hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”). Deferred gains or losses are reclassified from AOCI to the Consolidated Statements of Operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in cost of sales. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and generally recognized in cost of sales.


The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company’s interest rate swap agreements and its variable rate financings are predominately based upon LIBOR (London Interbank Offered Rate). For cash flow hedges, the Company formally assesses, both at inception and on a quarterly basis thereafter, whether the designated derivative instrument is highly effective in offsetting changes in cash flows of the hedged item. Changes in the fair value of interest rate swap agreements that are effective as hedges are recorded in AOCI. Deferred gains or losses are reclassified from AOCI to the Consolidated Statements of Operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in interest expense, net. The ineffective portion of derivatives that are classifiedCompany discontinues hedge accounting prospectively when the derivative is not highly effective as hedgesa hedge, the underlying hedged transaction is immediately recognized in earnings and included in interest expense, net. no longer probable, or the hedging instrument expires, is sold, terminated or exercised.

The Company periodically enters into foreign currency exchange contracts that do not meet the criteria for hedge accounting. These derivatives are used to reduce the Company’s exposure to foreign currency risk related to forecasted purchase or sales transactions or forecasted intercompany cash payments or settlements. Gains and losses on these derivatives are included in other expense, net.


Cash flows from hedging activities are reported in the Consolidated Statements of Cash Flows in the same classification as the hedged item, generally as a component of cash flows from operations.





F-15

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




Fair Value Measurements


The Company defines the fair value measurement of its financial assets and liabilities 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.


A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.


Described below are the three levels of inputs that may be used to measure fair value:


Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3 - Unobservable inputs are used when little or no market data is available.


The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.


Stock Compensation


Pursuant to the Executive Long-Term Equity Incentive Plan (the "Executive Plan") established in September 2017, and amended and restated in March 2020, the Company grants stock of Class A Common, subject to transfer restrictions, as a means of retaining and rewarding selected employees for long-term performance. StockShares awarded under the Executive Plan are fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged or otherwise transferred during the restriction period. In general, the restriction period ends after three, five or ten years from the award date or at the earliest of (i) three years after the participant's retirement date, or (ii) the participant's death or permanent disability. The Company issued 94,898, 118,688, and 5,512 shares of stock of Class A Common in the years ended December 31, 2020, 2019, and 2018, respectively. NoAfter the issuance of these shares, there were 430,902 shares of Class A common stock was issued in the year ended December 31, 2017available for issuance under the Executive Plan.this plan. Stock compensation expense related to the Executive Plan was $2.9 million, $1.6 million, and $2.7 million for the years ended December 31, 2020, 2019, and 2018, respectively, and was based on the fair value of Class A Common on the grant date.


The Company also has a stock compensation plan for non-employee directors of the Company under which a portion of the annual retainer for each non-employee director is paid in transfer-restricted shares of Class A common stock. For the year ended December 31, 2020, $100,000 ($150,000 for the Chairman) of the non-employee director's annual retainer of $162,000 ($250,000 for the Chairman) was paid in transfer-restricted shares of Class A common stock. For the year ended December 31, 2019, $95,000 ($150,000 for the Chairman) of the non-employee director's annual retainer of $155,000 ($250,000 for the Chairman) was paid in transfer-restricted shares of Class A common stock. Shares awarded under the plan are fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged or otherwise transferred during the restriction period. In general, the transfer restriction period ends at the earliest of (i) ten years after the Quarter Date with respect to which such Required Shares were issued or transferred, (ii) the date of the director's death or date the director terminates service as a director due to permanent disability, (iii) five years (or earlier with the approval of the Board of Directors) after the director's date of retirement from the Board of Directors, or (iv) the date the director has both retired from the Board of Directors and has reached age 70. Pursuant to this plan, the Company issued 74,337 and 50,237, and 33,822 shares in the years ended December 31, 2020, 2019 and 2018, respectively. In addition to the mandatory retainer fee received in transfer-restricted stock, directors may elect to receive shares of Class A common stock in lieu of cash for up to 100% of the balance of their annual retainer, committee retainer and any committee chairman's fees. These voluntary shares are not subject to any restrictions. Total shares issued under voluntary elections were 2,343 in 2020. NaN shares were issued under voluntary elections in 2019. After the issuance of these shares, there were 41,604 shares of Class A common stock available for issuance under this plan. Stock compensation expense related to these awards was $1.1 million, $1.2 million, and $0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. Stock compensation expense represents fair value based on the market price of the shares of Class A common stock on the grant date.


F-16

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)











Treasury Stock


The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a reduction to stockholders' equity.


Income Taxes


Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible for tax purposes, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities using currently enacted tax rates. The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in the calculated deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or changes in the Company's structure or tax status.


The Company's tax assets, liabilities, and tax expense are supported by historical earnings and losses and the Company's best estimates and assumptions of future earnings. The Company assesses whether a valuation allowance should be established against the Company's deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company is using to manage the underlying businesses. When the Company determines, based on all available evidence, that it is more likely than not that deferred tax assets will not be realized, a valuation allowance is established.

Accounting Standards Adopted

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the requirements in GAAP related to the income statement presentation of the components of net periodic benefit cost for an entity's sponsored defined benefit pension and other post-retirement plans. The Company adopted this guidance on January 1, 2019. The change in presentation of the components of net periodic pension cost was applied retrospectively which resulted in $0.7 million and $0.9 million of net periodic pension income for the years end December 31, 2018, and 2017, respectively, being reclassified from selling, general and administrative expenses to other expense (income), net.


Accounting Standards Not Yet Adopted


The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public or nonpublic entities, the Company can adopt the new or revised standard at the time nonpublic entities adopt the new or revised standard.


In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and liabilities for the rights and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, 2020,2021, and interim periods within fiscal years beginning after December 15, 2021.2022. Early adoption is permitted. The Company is planning to adopt ASU 2016-02 for its year ending December 31, 2021when required and is currently evaluating to what extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.


F-17

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to recognize credit losses as an allowance rather than as a write-down. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, 2022 and is currently evaluating to what extent ASU 2016-13 will affect the Company's financial position, results of operations, cash flows and related disclosures.

NOTE 2 - Restatement of Previously Issued Consolidated Financial Statements

Restatement
During the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican subsidiaries. The Company’s Audit Review Committee commenced an internal investigation, with the assistance of outside counsel and other third party experts. As a result of this investigation, the Company, along with the Audit Review Committee and its third party experts, concluded that certain former employees of one of the Company’s Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries that resulted in expenditures being deferred on the balance sheet beyond the period for which the costs pertained. As a result, the Company recorded a non-cash write-off for certain amounts included in the Company’s historical consolidated financial statements in trade receivables and prepaid expenses and other current assets, among other corrections, related to these transactions, and restated its consolidated financial statements as of and for the years ended December 31, 2019, 2018, and 2017 and each of the quarters during the years ended December 31, 2019 and 2018. During the course of the investigation, certain expenses at the Company's Mexican subsidiaries were found to be incorrectly classified within the consolidated statement of operations and have also been corrected in the restatement. These misstatements are described in restatement reference (a) through (d) below. The restated interim financial information for the relevant unaudited interim financial information for the quarterly periods of 2019 and 2018, is included in Note 16, Quarterly Results of Operations (Unaudited).
The restatement also includes corrections for other errors identified as immaterial, individually and in the aggregate, to our consolidated financial statements.


Description of Misstatements

(a) Write-off of Assets: Certain former employees of one of the Company's Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries and vendors in which the employees had an interest. In doing so, expenditures were deferred on the balance sheet beyond the period for which the costs pertained. The amounts were recorded as trade receivables, prepaid expenses and other current assets, and reductions in accrued liabilities. The amounts have been written off to selling, general and administrative expenses. Where these write-offs caused the balance in prepaid expenses and other current assets to become a liability, the balance has been reclassified from prepaid expenses and other assets to other current liabilities.

(b) Reversal of Revenue: Certain former employees of one of our Mexican subsidiaries engaged in sales activities to customers in which the employees had an interest. The Company concluded that these unauthorized transactions did not meet the criteria for revenue recognition at the time of sale and the revenue has been reversed.

(c) Correction of misclassification of Selling and Marketing Expenses: Certain former employees of one of our Mexican subsidiaries engaged a third-party, in which the employees had an interest, to perform selling and marketing activities on behalf of the Mexican subsidiaries. Amounts paid for the selling and marketing activities had previously been treated as variable consideration and reflected as a reduction to revenue; however, the amounts should be reflected as selling, general and administrative expenses.

(d) Correction for the timing of recognition of customer price concessions: Customer price concessions at our Mexican subsidiaries were not accrued timely in order to obscure the increased expenses due to unauthorized transactions as described above.



F-18
F-17

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










(e) Tax adjustments for corrections: The tax impacts of the corrections have been recorded.

(f) Correction of other immaterial errors

Description of Restatement Tables

The following tables present the impact of the restatement on our previously reported consolidated statements of operations, statements of comprehensive income (loss), balance sheets, statements of equity, and statements of cash flows for the years ended December 31, 2019 and December 31, 2018 and the impact of the restatement on our previously reported consolidated statements of operations, statements of comprehensive income (loss), statements of equity, and statements of cash flows for the year ended December 31, 2017. The values as previously reported were derived from our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on February 26, 2020.


F-19

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31, 2019
 As Previously Reported Restatement Impacts Restatement References As Restated
 (In thousands, except per share data)
Revenue$612,843
 $(1,057) a,b,c,d,f $611,786
Cost of sales483,298
 (64) f 483,234
Gross profit129,545
 (993) 
 128,552
Selling, general and administrative expenses91,302
 9,079
 a,c,f 100,381
Amortization of intangible assets1,377
 
 
 1,377
Operating profit36,866
 (10,072) 
 26,794
Interest expense, net2,975
 
 
 2,975
Other expense (income), net(502) 144
 f (358)
Income from continuing operations before income taxes34,393
 (10,216) 
 24,177
Income tax expense9,315
 (231) e 9,084
Net income from continuing operations25,078
 (9,985) 
 15,093
Loss from discontinued operations, net of tax(28,600) 
 
 (28,600)
Net income (loss)$(3,522) $(9,985) 
 $(13,507)
 
 
 
 
Basic and diluted earnings (loss) per share:

 

 
 

Continuing operations$1.83
 $(0.73) 
 $1.10
Discontinued operations(2.09) 
 
 (2.09)
Basic and diluted earnings (loss) per share$(0.26) $(0.73) 
 $(0.99)
 

 

 
 

Basic weighted average shares outstanding13,690
 

 
 13,690
Diluted weighted average shares outstanding13,726
 

 
 13,726
(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to revenue of $0.4 million and an increase to selling, general and administrative ("SG&A") expense of $6.9 million
(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to revenue of $1.1 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $1.6 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in a decrease to revenue of $1.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to income tax expense of $0.2 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.1 million, a decrease to cost of sales of $0.1 million, an increase to SG&A expense of $0.6 million, and an increase in other expense of $0.1 million



F-20

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31, 2018
 As Previously Reported Restatement Impacts Restatement References As Restated
Revenue$629,710
 $372
 c,f $630,082
Cost of sales492,195
 (1,165) f 491,030
Gross profit137,515
 1,537
   139,052
Selling, general and administrative expenses97,964
 6,157
 a,c,f 104,121
Amortization of intangible assets1,381
 
   1,381
Operating profit38,170
 (4,620)   33,550
Interest expense, net2,916
 
   2,916
Other expense (income), net293
 (144) f 149
Income from continuing operations before income taxes34,961
 (4,476)   30,485
Income tax expense7,816
 (390) e 7,426
Net income from continuing operations27,145
 (4,086)   23,059
Loss from discontinued operations, net of tax(5,361) 
   (5,361)
Net income (loss)$21,784
 $(4,086)   $17,698
 
 

   
Basic and diluted earnings (loss) per share:

 


   

Continuing operations$1.98
 $(0.30)   $1.68
Discontinued operations(0.39) 
   (0.39)
Basic and diluted earnings (loss) per share$1.59
 $(0.30)   $1.29
 

 


   

Basic weighted average shares outstanding13,699
 

   13,699
Diluted weighted average shares outstanding13,731
 

   13,731

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $4.9 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $1.5 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to income tax expense of $0.4 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to revenue of $1.1 million, a decrease to cost of sales of $1.2 million, a decrease to SG&A expense of $0.2 million, and a decrease in other expense of $0.1 million



F-21

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31, 2017
 As Previously Reported Restatement Impacts Restatement References As Restated
Revenue$612,229
 $(173) c,d,f $612,056
Cost of sales477,220
 (1,281) f 475,939
Gross profit135,009
 1,108
   136,117
Selling, general and administrative expenses93,700
 3,080
 a,c,f 96,780
Amortization of intangible assets1,381
 
   1,381
Operating profit39,928
 (1,972)   37,956
Interest expense, net1,572
 
   1,572
Other expense (income), net(692) 
   (692)
Income from continuing operations before income taxes39,048
 (1,972)   37,076
Income tax expense18,918
 49
 e 18,967
Net income from continuing operations20,130
 (2,021)   18,109
Loss from discontinued operations, net of tax(2,225) 
   (2,225)
Net income (loss)$17,905
 $(2,021)   $15,884
 
 

   
Basic and diluted earnings (loss) per share:

 


   

Continuing operations$1.47
 $(0.15)   $1.32
Discontinued operations(0.16) 
   (0.16)
Basic and diluted earnings (loss) per share$1.31
 $(0.15)   $1.16
 

 


   

Basic weighted average shares outstanding13,673
 

   13,673
Diluted weighted average shares outstanding13,685
 

   13,685
(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.3 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $1.6 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in a decrease to revenue of $0.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to revenue of $1.5 million, a decrease to cost of sales of $1.3 million, and an increase to SG&A expense of $0.2 million


F-22

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Year Ended December 31, 2019
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(3,522) $(9,985) $(13,507)
Other comprehensive income (loss), net of tax:

 
 

Foreign currency translation adjustment1,101
 (591) 510
(Loss) gain on long-term intra-entity foreign currency transactions(79) 
 (79)
Cash flow hedging activity(1,713) 144
 (1,569)
Reclassification of hedging activities into earnings349
 
 349
Pension plan adjustment1,410
 
 1,410
Reclassification of pension adjustments into earnings254
 94
 348
Total other comprehensive income (loss), net of tax1,322
 (353) 969
Comprehensive income (loss)$(2,200) $(10,338) $(12,538)
See description of the net income (loss) impacts in the consolidated statement of operations for the year ended December 31, 2019 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.
The increases to cash flow hedging and the reclassification of pension adjustments are from the correction of other immaterial errors.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Year Ended December 31, 2018
 As Previously Reported Restatement Impacts As Restated
Net income (loss)$21,784
 $(4,086) $17,698
Other comprehensive income (loss), net of tax:

 
 

Foreign currency translation adjustment(159) 86
 (73)
(Loss) gain on long-term intra-entity foreign currency transactions(1,006) 
 (1,006)
Cash flow hedging activity244
 (144) 100
Reclassification of hedging activities into earnings153
 
 153
Pension plan adjustment(1,920) 
 (1,920)
Reclassification of pension adjustments into earnings650
 (94) 556
Total other comprehensive loss, net of tax(2,038) (152) (2,190)
Comprehensive income (loss)$19,746
 $(4,238) $15,508

See description of the net income (loss) impacts in the consolidated statement of operations for the year ended December 31, 2018 section above.
The increase to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets category.
The decreases to cash flow hedging and the reclassification of pension adjustments are from the correction of other immaterial errors.

F-23

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)









F-24

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Year Ended December 31, 2017
 As Previously Reported Restatement Impacts As Restated
Net income (loss)$17,905
 $(2,021) $15,884
Other comprehensive income (loss), net of tax:

 
 

Foreign currency translation adjustment689
 (41) 648
(Loss) gain on long-term intra-entity foreign currency transactions
 
 
Cash flow hedging activity(749) 
 (749)
Reclassification of hedging activities into earnings641
 
 641
Pension plan adjustment1,510
 
 1,510
Reclassification of pension adjustments into earnings306
 
 306
Total other comprehensive income (loss), net of tax2,397
 (41) 2,356
Comprehensive income (loss)$20,302
 $(2,062) $18,240
See description of the net income (loss) impacts in the consolidated statement of operations for the year ended December 31, 2017 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets category.


F-25

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED BALANCE SHEETS

December 31, 2019
 As Previously Reported
Restatement Impacts
Restatement Reference
As Restated
 (In thousands)
Assets 
 



Current assets 
 



Cash and cash equivalents$2,142

$



$2,142
Trade receivables, net113,781

(5,400)
a,b,d
108,381
Inventory109,621

185

f
109,806
Prepaid expenses and other current assets23,102

(11,757)
a,b,f
11,345
Current assets of discontinued operations5,383





5,383
Total current assets254,029

(16,972)


237,057
Property, plant and equipment, net22,324





22,324
Goodwill6,253





6,253
Other intangible assets, net3,141





3,141
Deferred income taxes3,853

2,395

e
6,248
Deferred costs10,941





10,941
Other non-current assets2,085





2,085
Non-current assets of discontinued operations614





614
Total assets$303,240

$(14,577)


$288,663
Liabilities and stockholders' equity






Current liabilities






Accounts payable$111,117

$231

f
$111,348
Accounts payable to NACCO Industries, Inc.496





496
Revolving credit agreements23,497





23,497
Accrued compensation14,277

750

f
15,027
Accrued product returns8,697





8,697
Other current liabilities12,873

(339)
a,e
12,534
Current liabilities of discontinued operations29,723





29,723
Total current liabilities200,680

642



201,322
Revolving credit agreements35,000





35,000
Other long-term liabilities12,501

3,574

e
16,075
Total liabilities248,181

4,216



252,397
Stockholders’ equity






Preferred stock, par value $0.01 per share






Class A Common stock, par value $0.01 per share; 9,805 shares issued as of December 31, 201998





98
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 4,076 shares issued as of December 31, 201941





41
Capital in excess of par value54,344

165

f
54,509
Treasury stock(5,960)




(5,960)
Retained earnings22,524

(18,814)
a,b,d,e,f
3,710
Accumulated other comprehensive loss(15,988)
(144)
a,b,d,e
(16,132)
Total stockholders’ equity55,059

(18,793)


36,266
Total liabilities and stockholders' equity$303,240

$(14,577)


$288,663

F-26

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $2.5 million, a reduction to prepaid expenses and other current assets of $12.4 million, and an increase to other current liabilities of $0.9 million
(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to trade receivables of $1.3 million and an increase to prepaid expenses and other current assets of $0.2 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in a decrease to trade receivables of $1.6 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $2.4 million, a decrease to other current liabilities of $1.2 million, and an increase to other long-term liabilities of $3.6 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to prepaid expenses and other current assets of $0.5 million, an increase to inventory of $0.2 million, an increase to accounts payable of $0.2 million, an increase to accrued compensation of $0.7 million, and an increase to capital in excess of par of $0.2 million



F-27

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED BALANCE SHEETS
`December 31, 2018
 As Previously Reported Restatement Impacts Restatement Reference As Restated
Assets       
Current assets       
Cash and cash equivalents$4,420
 $
   $4,420
Trade receivables, net100,821
 (2,460) a,f 98,361
Inventory122,697
 111
 f 122,808
Prepaid expenses and other current assets22,332
 (6,936) a 15,396
Current assets of discontinued operations27,879
 
   27,879
Total current assets278,149
 (9,285) 
 268,864
Property, plant and equipment, net20,842
 
   20,842
Goodwill6,253
 
   6,253
Other intangible assets, net4,519
 
   4,519
Deferred income taxes5,518
 276
 e 5,794
Deferred costs7,868
 
   7,868
Other non-current assets2,672
 
   2,672
Non-current assets of discontinued operations4,606
 
   4,606
Total assets$330,427
 $(9,009)   $321,418
Liabilities and stockholders' equity
 
   
Current liabilities
 
   
Accounts payable$119,264
 $7
 f $119,271
Accounts payable to NACCO Industries, Inc.2,416
 
   2,416
Revolving credit agreements11,624
 
   11,624
Accrued compensation15,525
 353
 f 15,878
Accrued product returns10,698
 
   10,698
Other current liabilities24,554
 (1,632) a,d,e,f 22,922
Current liabilities of discontinued operations22,820
 
   22,820
Total current liabilities206,901
 (1,272)   205,629
Revolving credit agreements35,000
 
   35,000
Other long-term liabilities21,128
 883
 e 22,011
Non-current liabilities of discontinued operations1,960
 
   1,960
Total liabilities264,989
 (389)   264,600
Stockholders’ equity
 
   
Preferred stock, par value $0.01 per share
 
   
Class A Common stock, par value $0.01 per share; 9,291 shares issued as of December 31, 201893
 
   93
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 4,422 shares issued as of December 31, 201844
 
   44
Capital in excess of par value51,714
 
   51,714
Treasury stock
 
   
Retained earnings30,897
 (8,829) a,d,e,f 22,068
Accumulated other comprehensive loss(17,310) 209
 a,d,e,f (17,101)
Total stockholders’ equity65,438
 (8,620)   56,818
Total liabilities and stockholders' equity$330,427
 $(9,009)   $321,418

F-28

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $0.6 million, a reduction to prepaid expenses and other current assets of $6.9 million, and an increase to other current liabilities of $0.6 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.2 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $0.3 million, a decrease to other current liabilities of $0.4 million, and an increase to other long-term liabilities of $0.9 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to trade receivables of $1.9 million, an increase to inventory of $0.1 million, an increase to accrued compensation of $0.4 million, and a decrease to other current liabilities of $2.0 million



F-29

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2019
 As Previously Reported
Restatement Impacts
As Restated
 (In thousands)
Operating activities 
 

Net income from continuing operations$25,078

$(9,985)
$15,093
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:




Depreciation and amortization4,002



4,002
Deferred income taxes3,248

(1,761)
1,487
Stock compensation expense2,632

165

2,797
Other471

145

616
Net changes in operating assets and liabilities:




Affiliate payable(1,920)


(1,920)
Trade receivables(25,586)
2,817

(22,769)
Inventory13,756

(82)
13,674
Other assets(3,121)
4,248

1,127
Accounts payable(7,257)
214

(7,043)
Other liabilities(11,101)
4,259

(6,842)
Net cash provided by operating activities from continuing operations202

20

222
Investing activities




Expenditures for property, plant and equipment(4,122)


(4,122)
Other




Net cash used for investing activities from continuing operations(4,122)


(4,122)
Financing activities




Net additions (reductions) to revolving credit agreements11,873



11,873
Purchase of treasury stock(5,960)


(5,960)
Cash dividends paid(4,851)


(4,851)
Cash dividends to NACCO Industries, Inc.




Net cash provided by (used for) financing activities from continuing operations1,062



1,062
Cash flows from discontinued operations







Net cash provided by (used for) operating activities from discontinued operations3,953



3,953
Net cash provided by (used for) investing activities from discontinued operations585



585
Net cash used for financing activities from discontinued operations(103)


(103)
Cash provided by (used for) discontinued operations4,435



4,435
Effect of exchange rate changes on cash(765)
(20)
(785)
Cash and Cash Equivalents




(Decrease) increase for the year from continuing operations(3,623)


(3,623)
Increase (decrease) for the year from discontinued operations4,435



4,435
Balance at the beginning of the year6,352



6,352
Balance at the end of the year$7,164

$

$7,164
See description of the net income impacts in the consolidated statement of operations for the year ended December 31, 2019 section above.

F-30

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






The only impact of the corrections for misstatements on net cash provided by operating activities from continuing operations was due to the effect of exchange rate changes on cash.

F-31

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31, 2018
 As Previously Reported Restatement Impacts As Restated
Operating activities     
Net income from continuing operations$27,145
 $(4,086) $23,059
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
 
 
Depreciation and amortization4,277
 
 4,277
Deferred income taxes5,185
 289
 5,474
Stock compensation expense3,618
 
 3,618
Other868
 (31) 837
Net changes in operating assets and liabilities:
 
 
Affiliate payable(5,300) 
 (5,300)
Trade receivables16,298
 2,231
 18,529
Inventory(12,308) 53
 (12,255)
Other assets(10,509) 5,923
 (4,586)
Accounts payable(7,756) 37
 (7,719)
Other liabilities(4,195) (3,784) (7,979)
Net cash provided by operating activities from continuing operations17,323
 632
 17,955
Investing activities
 
 
Expenditures for property, plant and equipment(7,759) 
 (7,759)
Other
 
 
Net cash used for investing activities from continuing operations(7,759) 
 (7,759)
Financing activities
 
 
Net additions (reductions) to revolving credit agreements(4,597) 
 (4,597)
Purchase of treasury stock
 
 
Cash dividends paid(4,658) 
 (4,658)
Cash dividends to NACCO Industries, Inc.
 
 
Net cash provided by (used for) financing activities from continuing operations(9,255) 
 (9,255)
Cash flows from discontinued operations

 
 

Net cash provided by (used for) operating activities from discontinued operations(5,499) 
 (5,499)
Net cash provided by (used for) investing activities from discontinued operations(305) 
 (305)
Net cash used for financing activities from discontinued operations
 
 
Cash provided by (used for) discontinued operations(5,804) 
 (5,804)
Effect of exchange rate changes on cash941
 (632) 309
Cash and Cash Equivalents
 
 
(Decrease) increase for the year from continuing operations1,250
 
 1,250
Increase (decrease) for the year from discontinued operations(5,804) 
 (5,804)
Balance at the beginning of the year10,906
 
 10,906
Balance at the end of the year$6,352
 $
 $6,352
See description of the net income impacts in the consolidated statement of operations for the year ended December 31, 2018 section above.

F-32

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






The only impact of the corrections for misstatements on net cash provided by operating activities from continuing operations was due to the effect of exchange rate changes on cash.


F-33

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31, 2017
 As Previously Reported Restatement Impacts As Restated
Operating activities     
Net income from continuing operations$20,130
 $(2,021) $18,109
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
 
 
Depreciation and amortization4,072
 
 4,072
Deferred income taxes4,107
 (632) 3,475
Stock compensation expense323
 
 323
Other(1,167) 
 (1,167)
Net changes in operating assets and liabilities:
 
 
Affiliate payable866
 
 866
Trade receivables(8,442) 314
 (8,128)
Inventory(16,485) (81) (16,566)
Other assets(1,960) 665
 (1,295)
Accounts payable25,009
 
 25,009
Other liabilities1,850
 1,755
 3,605
Net cash provided by operating activities from continuing operations28,303
 
 28,303
Investing activities
 
 
Expenditures for property, plant and equipment(6,198) 
 (6,198)
Other21
 
 21
Net cash used for investing activities from continuing operations(6,177) 
 (6,177)
Financing activities
 
 
Net additions (reductions) to revolving credit agreements12,630
 
 12,630
Purchase of treasury stock
 
 
Cash dividends paid(1,162) 
 (1,162)
Cash dividends to NACCO Industries, Inc.(38,000) 
 (38,000)
Net cash provided by (used for) financing activities from continuing operations(26,532) 
 (26,532)
Cash flows from discontinued operations

 

 

Net cash provided by (used for) operating activities from discontinued operations5,137
 
 5,137
Net cash provided by (used for) investing activities from discontinued operations(1,176) 
 (1,176)
Net cash used for financing activities from discontinued operations(70) 
 (70)
Cash provided by (used for) discontinued operations3,891
 
 3,891
Effect of exchange rate changes on cash81
 
 81
Cash and Cash Equivalents
 
 
(Decrease) increase for the year from continuing operations(4,325) 
 (4,325)
Increase (decrease) for the year from discontinued operations3,891
 
 3,891
Balance at the beginning of the year11,340
 
 11,340
Balance at the end of the year$10,906
 $
 $10,906
See description of the net income impacts in the consolidated statement of operations for the year ended December 31, 2017 section above.

F-34

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






The only impact of the corrections for misstatements on net cash provided by operating activities from continuing operations was due to the effect of exchange rate changes on cash.

F-35

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 Class A common stockClass B common stockCapital in excess of par valueTreasury stockRetained earningsAccumulated other comprehensive income (loss)Total stockholders' equity
 (In thousands, except per share data)
As Previously Reported       
Balance, January 1, 2019$93
$44
$51,714
$
$30,897
$(17,310)$65,438
Net loss



(3,522)
(3,522)
Issuance of common stock, net of conversions5
(3)(2)



Purchase of treasury stock


(5,960)

(5,960)
Share-based compensation expense

2,632



2,632
Cash dividends, $0.355 per share



(4,851)
(4,851)
Other comprehensive loss




719
719
Reclassification adjustment to net loss




603
603
Balance, December 31, 2019$98
$41
$54,344
$(5,960)$22,524
$(15,988)$55,059
Restatement Impacts













Balance, January 1, 2019$
$
$
$
$(8,829)$209
$(8,620)
Net loss



(9,985)
(9,985)
Issuance of common stock, net of conversions






Purchase of treasury stock






Share-based compensation expense

165



165
Cash dividends, $0.355 per share






Other comprehensive loss




(447)(447)
Reclassification adjustment to net loss




94
94
Balance, December 31, 2019$
$
$165
$
$(18,814)$(144)$(18,793)
As Restated













Balance, January 1, 2019$93
$44
$51,714
$
$22,068
$(17,101)$56,818
Net loss



(13,507)
(13,507)
Issuance of common stock, net of conversions5
(3)(2)



Purchase of treasury stock


(5,960)

(5,960)
Share-based compensation expense

2,797



2,797
Cash dividends, $0.355 per share



(4,851)
(4,851)
Other comprehensive loss




272
272
Reclassification adjustment to net loss




697
697
Balance, December 31, 2019$98
$41
$54,509
$(5,960)$3,710
$(16,132)$36,266
See description of the net income and other comprehensive income (loss) impacts in the consolidated statement of operations and consolidated statement of comprehensive income (loss) for the year ended December 31, 2019 sections above.
The increase to share-based compensation expense and reclassification adjustment to net loss is the result of the correction of other immaterial errors.


F-36

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 Class A common stockClass B common stockCapital in excess of par valueTreasury stockRetained earningsAccumulated other comprehensive income (loss)Total stockholders' equity
As Previously Reported       
Balance, January 1, 2018$88
$48
$47,773
$
$12,603
$(14,104)$46,408
Net loss



21,784

21,784
Issuance of common stock, net of conversions5
(4)323



324
Purchase of treasury stock






Share-based compensation expense

3,618



3,618
Cash dividends, $0.34 per share



(4,658)
(4,658)
Reclassification due to adoption of ASU 2018-02



1,168
(1,168)
Other comprehensive loss




(2,841)(2,841)
Reclassification adjustment to net loss




803
803
Balance, December 31, 2018$93
$44
$51,714
$
$30,897
$(17,310)$65,438
Restatement Impacts













Balance, January 1, 2018$
$
$
$
$(4,743)$361
$(4,382)
Net loss



(4,086)
(4,086)
Issuance of common stock, net of conversions






Purchase of treasury stock






Share-based compensation expense






Cash dividends, $0.34 per share






Reclassification due to adoption of ASU 2018-02






Other comprehensive loss




(58)(58)
Reclassification adjustment to net loss




(94)(94)
Balance, December 31, 2018$
$
$
$
$(8,829)$209
$(8,620)
As Restated













Balance, January 1, 2018$88
$48
$47,773
$
$7,860
$(13,743)$42,026
Net loss



17,698

17,698
Issuance of common stock, net of conversions5
(4)323



324
Purchase of treasury stock






Share-based compensation expense

3,618



3,618
Cash dividends, $0.34 per share



(4,658)
(4,658)
Reclassification due to adoption of ASU 2018-02



1,168
(1,168)
Other comprehensive loss




(2,899)(2,899)
Reclassification adjustment to net income




709
709
Balance, December 31, 2018$93
$44
$51,714
$
$22,068
$(17,101)$56,818
See description of the net income and other comprehensive income (loss) impacts in the consolidated statement of operations and consolidated statement of comprehensive income (loss) for the year ended December 31, 2018 sections above.
The decrease to the reclassification adjustment to net loss is the result of the correction of other immaterial errors.

F-37

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)








F-38

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 Class A common stockClass B common stockCapital in excess of par valueTreasury stockRetained earningsAccumulated other comprehensive income (loss)Total stockholders' equity
As Previously Reported       
Balance, January 1, 2017$
$
$75,031
$
$6,738
$(16,501)$65,268
Net loss



17,905

17,905
Issuance of common stock, net of conversions88
48
(136)



Purchase of treasury stock






Share-based compensation expense






Cash dividends to NACCO Industries, Inc.

(27,122)
(10,878)
(38,000)
Cash dividends, $0.085 per share



(1,162)
(1,162)
Other comprehensive loss




1,450
1,450
Reclassification adjustment to net loss




947
947
Balance, December 31, 2017$88
$48
$47,773
$
$12,603
$(14,104)$46,408
Restatement Impacts













Balance, January 1, 2017$
$
$
$
$(2,722)$402
$(2,320)
Net loss



(2,021)
(2,021)
Issuance of common stock, net of conversions






Purchase of treasury stock






Share-based compensation expense






Cash dividends to NACCO Industries, Inc.






Cash dividends, $0.085 per share






Other comprehensive loss




(41)(41)
Reclassification adjustment to net loss






Balance, December 31, 2017$
$
$
$
$(4,743)$361
$(4,382)
As Restated













Balance, January 1, 2017$
$
$75,031
$
$4,016
$(16,099)$62,948
Net loss



15,884

15,884
Issuance of common stock, net of conversions88
48
(136)



Purchase of treasury stock






Share-based compensation expense






Cash dividends to NACCO Industries, Inc.

(27,122)
(10,878)
(38,000)
Cash dividends, $0.085 per share



(1,162)
(1,162)
Other comprehensive loss




1,409
1,409
Reclassification adjustment to net income




947
947
Balance, December 31, 2017$88
$48
$47,773
$
$7,860
$(13,743)$42,026
See description of the net income and other comprehensive income (loss) impacts in the consolidated statement of operations and consolidated statement of comprehensive income (loss) for the year ended December 31, 2017 sections above.


F-39

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






NOTE 32 - Discontinued Operations


On October 10, 2019, the Board approved the wind down of KC's retail operationoperations due to further deterioration in foot traffic which lowered the Company's outlook for the prospect of a future return to profitability. By December 31, 2019, all retail stores were closed and operations ceased. Accordingly, KC meets the requirements to beis reported as discontinued operations.operations in all periods presented. KC completed its dissolution on April 3, 2020 with a pro-rata distribution of its remaining assets to creditors, at which time the KC legal entity ceased to exist and was no longer consolidated by the Company. Neither Hamilton Beach Brands Holding Company nor Hamilton Beach Brands, Inc. received a distribution.


The Company expects the wind down to continue through the first half of 2020 to facilitate the settlement of remaining liabilities.

KC’s operating results are reflected as discontinued operations in the Consolidated Statements of Operation for all periods presented. The major line items constituting the lossincome (loss) from discontinued operations, net of tax are as follows:
 Year Ended December 31
 2019 2018 2017
 (In thousands)
Revenue$100,860
 $113,469
 $128,520
Cost of sales62,927
 61,972
 69,708
Gross profit37,933
 51,497
 58,812
Selling, general and administrative expenses (1)
54,047
 58,035
 61,033
Lease termination expense (2)
15,186
 
 435
Operating loss(31,300) (6,538) (2,656)
Interest expense583
 361
 258
Other expense, net26
 33
 57
Loss from discontinued operations before income taxes(31,909) (6,932) (2,971)
Income tax benefit(3,309) (1,571) (746)
Loss from discontinued operations, net of tax$(28,600) $(5,361) $(2,225)


(1)Selling, general and administrative expenses includes $1.8 million of severance termination benefits of which $0.4 remains unpaid as of December 31, 2019 and included within accrued compensation (current liabilities of discontinued operations).

(2)KC recognized lease termination expense of $15.2 million for the estimated costs to terminate lease agreements in 2019 as a result of the decision to wind down the business. The lease termination obligation is measured at fair value using significant observable inputs, which is Level 2 as defined in the fair value hierarchy. The fair value of the lease termination obligation is based on the remaining lease rentals, including common area maintenance costs, real estate taxes, and penalties, adjusted for the effects of deferred rent, and reduced by estimated sublease rentals that could be reasonably obtained.

 Year Ended December 31
 202020192018
 (In thousands)
Revenue$631 $100,860 $113,469 
Cost of sales0 62,927 61,972 
Gross profit631 37,933 51,497 
Selling, general and administrative expenses1,346 54,047 58,035 
Adjustment of lease termination liability (1)
(16,457)15,186 
Adjustment of other current liabilities(2)
(6,608)
Operating profit (loss)22,350 (31,300)(6,538)
Interest expense0 583 361 
Other expense, net88 26 33 
Income (loss) from discontinued operations before income taxes22,262 (31,909)(6,932)
Income tax expense (benefit)71 (3,309)(1,571)
Income (loss) from discontinued operations, net of tax$22,191 $(28,600)$(5,361)



(1)    For the year ended December 31, 2020, represents an adjustment to the lease termination obligation based on the final distribution of KC's remaining assets on April 3, 2020.

(2)    Represents an adjustment to the carrying value of substantially all of the other current liabilities based on the final distribution of KC's remaining assets on April 3, 2020.









F-40
F-18

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)











KC’sDue to the dissolution of KC, there were no assets andor liabilities are reflectedassociated with KC as assets and liabilities of discontinued operations in the Company’s Consolidated Balance Sheets for all periods presented.December 31, 2020. The major classes of assets and liabilities included as part of discontinued operations as of December 31, 2019 are as follows:

 December 31
 2019 2018
 (In thousands)
Assets   
Cash and cash equivalents$5,022
 $1,932
Credit card receivables51
 1,771
Inventory
 21,994
Prepaid expenses and other current assets310
 2,182
Current assets of discontinued operations$5,383
 $27,879
    
Property, plant and equipment, net$
 $1,788
Deferred income taxes614
 2,645
Other non-current assets
 173
Non-current assets of discontinued operations$614
 $4,606
    
Liabilities   
Accounts payable$4,594
 $13,704
Accrued compensation1,058
 1,498
Accrued product returns
 243
Lease termination liability17,248
 
Other current liabilities6,823
 7,375
Current liabilities of discontinued operations$29,723
 $22,820
    
Other long-term liabilities
 $1,960
Non-current liabilities of discontinued operations$
 $1,960

KC has operating leases for retail stores, a distribution warehouse and corporate office that contractually expire at various dates through 2026. Future minimum operating lease payments at December 31, 2019 are:
 
Operating
Leases
2020$10,942
20215,863
20224,027
20232,458
20241,534
Subsequent to 20241,669
Total minimum lease payments (1)
$26,493

(1)Minimum lease payments have not been reduced by minimum sublease rentalsDecember 31
2019
(In thousands)
Assets
Cash and cash equivalents$5,022 
Prepaid expenses and other current assets361 
Current assets of $6.2 million due in the future under contractual sublease agreements.discontinued operations$5,383 
Deferred income taxes614 
Non-current assets of discontinued operations$614 
Liabilities
Accounts payable$4,594 
Lease termination liability17,248 
Other current liabilities7,881 
Current liabilities of discontinued operations$29,723 

Rental expense from discontinued operations
Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC.

NOTE 3 - Property, Plant and Equipment, Net

Property, plant and equipment, net of sublease rental income and excluding termination costs for all operating leases, is reported in selling, general and administrative expenses of discontinued operations and was $14.3 million, $18.0 million and $19.7 million in 2019, 2018 and 2017, respectively.includes the following:

 December 31
 20202019
Land$226 $226 
Furniture and fixtures10,957 10,169 
Building and improvements10,145 10,116 
Machinery and equipment33,601 32,761 
Internal-use capitalized software15,582 2,902 
Construction in progress, including internal-use capitalized software not yet in service1,214 11,685 
Property, plant and equipment, at cost71,725 67,859 
Less allowances for depreciation and amortization48,235 45,535 
 $23,490 $22,324 












F-41
F-19

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










KC maintained a separate revolving line of credit facility (the "KC Facility") that was secured by substantially all of the assets of KC. The Company's decision to wind down KC and its retail operations constituted an event of default under the KC Facility. As a result, on October 23, 2019, KC and its lender entered into a Forbearance Agreement (the “Forbearance Agreement”). Under the terms of the Forbearance Agreement, the lender agreed to forebear from exercising its rights and remedies as a result of the events of default pending accelerated payment in full of the obligations under the KC facility on or before December 15, 2019. All obligations under the KC Facility were paid in full in accordance with the Forbearance Agreement and the KC Facility was terminated on December 3, 2019.

Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC.

NOTE 4 - Property, Plant and Equipment, Net

Property, plant and equipment, net includes the following:
 December 31
 2019 2018
Land$226
 $226
Furniture and fixtures13,071
 12,583
Building and improvements10,116
 10,084
Machinery and equipment32,761
 30,728
Construction in progress, including internal-use capitalized software11,685
 10,626
Property, plant and equipment, at cost67,859
 64,247
Less allowances for depreciation and amortization45,535
 43,405
 $22,324
 $20,842

NOTE 5 - Intangible Assets
Intangible assets other than goodwill, which are subject to amortization, consist of the following:
Gross Carrying
Amount
Accumulated
Amortization
Net
Balance
Balance at December 31, 2020Balance at December 31, 2020   
Customer relationshipsCustomer relationships$5,760 $(5,760)$0 
TrademarksTrademarks3,100 (1,208)1,892 
Other intangiblesOther intangibles1,240 (1,240)0 
$10,100 $(8,208)$1,892 
Gross Carrying
Amount
 Accumulated
Amortization
 Net
Balance
Balance at December 31, 2019     Balance at December 31, 2019   
Customer relationships$5,760
 $(4,840) $920
Customer relationships$5,760 $(4,840)$920 
Trademarks3,100
 (1,008) 2,092
Trademarks3,100 (1,008)2,092 
Other intangibles1,240
 (1,111) 129
Other intangibles1,240 (1,111)129 
$10,100
 $(6,959) $3,141
$10,100 $(6,959)$3,141 
     
Balance at December 31, 2018     
Customer relationships$5,760
 $(3,880) $1,880
Trademarks3,100
 (808) 2,292
Other intangibles1,240
 (893) 347
$10,100
 $(5,581) $4,519
Amortization expense for intangible assets includedwas $1.2 million in continuing operations was2020, and $1.4 million in 2019 2018 and 2017.2018.

Expected annual amortization expense of intangible assets for the next five years is $1.2 million in 2020 and $0.2 million in the remaining years.million. The weighted average amortization period for intangible assets is approximately 8.9 years.


NOTE 5 - Current and Long-Term Financing

Financing arrangements exist at the subsidiary level. Hamilton Beach Brands Holding Company has not guaranteed any borrowings of its subsidiaries.

The following table summarizes HBB's available and outstanding borrowings:
 December 31
 20202019
Total outstanding borrowings for continuing operations:  
Revolving credit agreements$98,360 $58,305 
Book overdrafts0 192 
Total outstanding borrowings$98,360 $58,497 
Current portion of borrowings outstanding$0 $23,497 
Long-term portion of borrowings outstanding98,360 35,000 
$98,360 $58,497 
  
Total available borrowings, net of limitations, under revolving credit agreements$123,277 $114,366 
  
Unused revolving credit agreements$24,917 $56,061 
  
Weighted average stated interest rate on total borrowings2.51 %4.16 %
Weighted average effective interest rate on total borrowings (including interest rate swap agreements)2.88 %3.82 %
Including swap settlements, interest paid on total debt was $2.1 million, $3.1 million, and $3.1 million during 2020, 2019, and 2018, respectively. Interest capitalized was $0.3 million in 2020, $0.4 million in 2019 and $0.3 million in 2018.

F-42
F-20

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










NOTE 6 - CurrentOn November 23, 2020, HBB entered into Amendment No. 8 to Amended and Long-Term Financing

Financing arrangements exist atRestated Credit Agreement. The Agreement amended and restated the subsidiary level. Hamilton Beach Brands Holding Company has not guaranteed any borrowingsCredit Agreement in its entirety and extended the term of its subsidiaries.

The following table summarizes HBB's available and outstanding borrowings:
 December 31
 2019 2018
Total outstanding borrowings for continuing operations:   
Revolving credit agreements$58,305
 $45,733
Book overdrafts192
 891
Total outstanding borrowings$58,497
 $46,624
    
Current portion of borrowings outstanding$23,497
 $11,624
Long-term portion of borrowings outstanding35,000
 35,000
 $58,497
 $46,624
  
  
Total available borrowings, net of limitations, under revolving credit agreements$114,366
 $114,669
  
  
Unused revolving credit agreements$56,061
 $68,936
    
Weighted average stated interest rate on total borrowings4.16% 4.12%
Weighted average effective interest rate on total borrowings (including interest rate swap agreements)3.82% 3.45%
Including swap settlements, interest paid on total debt was $3.1 million, $3.1 million, and $1.6 million during 2019, 2018, and 2017, respectively. Interest capitalized was $0.4 million in 2019, $0.3 million in 2018 and $0.2 million 2017.
HBB maintains acredit facility to June 30, 2025, increased the credit facility from $115.0 million senior secured floating-rate revolving creditto $125.0 million, amended the pricing grid and provided for an accordion feature to increase the facility (the “HBB Facility”) that expires in June 2021. by an additional $25 million upon HBB's request, subject to Lender consent. The current portion of borrowings outstanding represents expectedCompany expects to continue to borrow against the facility and make voluntary repayments to be made inwithin the next twelve months. As a result of the amendment, repayment of the credit facility is due on June 30, 2025, therefore all borrowings are classified as long term debt as of December 31, 2020. The obligations under the HBB Facility are secured by substantially all of HBB's assets. The approximate book value of HBB's assets held as collateral under the HBB Facility was $297.2 million as of December 31, 2019.


The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible trade receivables, inventory and trademarks of the borrowers, as defined in the HBB Facility. Borrowings bear interest at a floating rate, which can be a base rate, LIBOR, or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. The applicable margins, effective December 31, 2019,2020, for base rate loans and LIBOR loans denominated in U.S. dollars were 0.0% and 1.75%, respectively. The applicable margins, effective December 31, 2019,2020, for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.0% and 1.75%, respectively. The HBB Facility also requires a fee of 0.25% per annum on the unused commitment. The margins and unused commitment fee under the HBB Facility are subject to quarterly adjustment based on average excess availability.


To reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a portion of the HBB Facility. Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate. HBB has interest rate swaps with notional values totaling $35.0$25.0 million at December 31, 20192020 at an average fixed interest rate of 1.5%. HBB also has delayed-start interest rate swaps with notional values totaling $10.0 million as of December 31, 2019, with fixed rates of 1.7%.


F-43

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to Hamilton Beach Holding, subject to achieving availability thresholds. Under Amendment No. 68 to the HBB Facility, dividends to Hamilton Beach Holding are not to exceed $5.0$6.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $15.0 million. Dividends to Hamilton Beach Holding are discretionary to the extent that for the 30 days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $25.0 million. The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. At December 31, 2019,2020, HBB was in compliance with all financial covenants in the HBB Facility.


NOTE 76 - Fair Value Disclosure


Recurring Fair Value Measurements


The Company measures its derivatives at fair value using significant observable inputs, which is Level 2 as defined in the fair value hierarchy. The Company uses a present value technique that incorporates the LIBOR swap curve, foreign currency spot rates and foreign currency forward rates to value its derivatives, including its interest rate swap agreements and foreign currency exchange contracts, and also incorporates the effect of its subsidiary and counterparty credit risk into the valuation.


Other Fair Value Measurement Disclosures


The carrying amounts of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements, including book overdrafts, which approximate book value, were determined using current rates offered for similar obligations taking into account subsidiary credit risk, which is Level 2 as defined in the fair value hierarchy. The fair value of assets held for sale, classified as Level 3, were determined using a market approach based on market participant inputs.


There were no transfers into or out of Levels 1 2 or 32 during the years ended December 31, 20192020 and 2018.2019. There was one transfer into Level 3 related to the $3.4 million of assets held for sale during the year ended December 31, 2020.


F-21

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




NOTE 87 - Derivative Financial Instruments
Foreign Currency Derivatives
HBB held forward foreign currency exchange contracts with total notional amounts of $13.2$12.3 million and $13.0$13.2 million at December 31, 2019,2020, and 2018,2019, respectively, denominated primarily in Canadian dollars and Mexican pesos. The fair value of these contracts approximated a payable of $0.5 million at December 31, 2020 and a payable of $0.3 million at December 31, 2019 and a net receivable of $0.1 million at December 31, 2018.2019.
Forward foreign currency exchange contracts that qualify for hedge accounting are used to hedge transactions expected to occur within the next twelve months. The mark-to-market effect of forward foreign currency exchange contracts that are considered effective as hedges has been included in AOCI.
Interest Rate Derivatives
HBB has interest rate swaps that hedge interest payments on its one-month LIBOR borrowings. All swaps have been designated as cash flow hedges.
The following table summarizes the notional amounts, related rates and remaining terms of active and delayed interest rate swap agreements for HBB at December 31 in millions:
Notional Amount Average Fixed Rate Remaining Term at Notional AmountAverage Fixed RateRemaining Term at
2019 2018 2019 2018 December 31, 2019 2020201920202019December 31, 2020
Interest rate swaps$20.0
 $20.0
 1.4% 1.4% Extending to January 2020Interest rate swaps$0 $20.0 0 %1.4 %n/a
Interest rate swaps$15.0
 $15.0
 1.6% 1.6% Extending to January 2024Interest rate swaps$25.0 $15.0 1.7 %1.6 %Extending to January 2024
Delayed start interest rate swaps$10.0
 $10.0
 1.7% 1.7% Extending to January 2024Delayed start interest rate swaps$0 $10.0 0 %1.7 %n/a

F-44

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






The fair value of HBB's interest rate swap agreements was a payable of $1.2 million at December 31, 2020 and a payable of $0.1 million at December 31, 2019 and a receivable of $1.1 million at December 31, 2018.2019. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in AOCI. The interest rate swap agreements held by HBB on December 31, 20192020 are expected to continue to be effective as hedges.
The following table summarizes the fair value of derivative instruments at December 31 as recorded in the Consolidated Balance Sheets:
 Asset DerivativesLiability Derivatives
 Balance sheet location20202019Balance sheet location20202019
Interest rate swap agreements      
CurrentPrepaid expenses and other current assets$0 $Other current liabilities$380 $21 
Long-termOther non-current assets0 Other long-term liabilities779 61 
Foreign currency exchange contracts      
CurrentPrepaid expenses and other current assets0 Other current liabilities518 308 
Total derivatives $0 $ $1,677 $390 

 Asset Derivatives Liability Derivatives
 Balance sheet location 2019 2018 Balance sheet location 2019 2018
Interest rate swap agreements           
CurrentPrepaid expenses and other current assets $
 $349
 Other current liabilities $21
 $
Long-termOther non-current assets 
 710
 Other long-term liabilities 61
 
Foreign currency exchange contracts           
CurrentPrepaid expenses and other current assets 
 231
 Other current liabilities 308
 87
Total derivatives  $
 $1,290
   $390
 $87









F-22

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




NOTE 98 - Leasing Arrangements


HBB leases certain office and warehouse facilities as well as machinery and equipment under noncancellable operating leases that expire at various dates through 2034. Many leases include renewal and/or fair value purchase options.


Future minimum operating lease payments at December 31, 20192020 are:
Operating
Leases
Operating
Leases
2020$6,114
20214,089
2021$7,081 
20221,816
20226,738 
20231,574
20236,405 
20241,590
20246,355 
Subsequent to 202416,527
202520256,395 
Subsequent to 2025Subsequent to 202544,117 
Total minimum lease payments$31,710
Total minimum lease payments$77,091 


Rental expense from continuing operations net of sublease rental income for all operating leases, is reported in selling, general and administrative expenses and was $6.2 million in 2020 and $5.6 million in 2019 and 2018 and $5.3 million in 2017.2018.


NOTE 109 - Stockholders' Equity and Earnings Per Share


Capital Stock


The authorized capital stock of the Company consists of Class A Common, Class B Common and one series of Preferred stock. Voting, dividend, conversion and liquidation rights of the Preferred stock is established by the Board upon issuance of such preferred stock.


Hamilton Beach Brands Holding Company Class A Common is traded on the New York Stock Exchange under the ticker symbol “HBB.” Because of transfer restrictions on Class B Common, no trading market has developed, or is expected to develop, for the Class B Common.


F-45

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







Subject to the rights of the holders of any series of preferred stock, each share of Class A Common will entitle the holder of the share to one1 vote on all matters submitted to stockholders, and each share of the Company's Class B Common will entitle the holder of the share to ten10 votes on all such matters. Subject to the rights of the preferred stockholders, each share of Class A Common and Class B Common will be equal in respect of rights to dividends, except that in the case of dividends payable in stock, only Class A Common will be distributed with respect to Class A Common and only Class B Common will be distributed with respect to Class B Common. As the liquidation and dividend rights are identical, any distribution of earnings would be allocated to Class A and Class B stockholders on a proportionate basis, and accordingly the net income per share for each class of common stock is identical.

F-23

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)





The following table sets forth the Company's authorized capital stock information:
December 31December 31
2019 201820202019

(In thousands)(In thousands)
Preferred stock, par value $0.01 per share   Preferred stock, par value $0.01 per share
Preferred stock authorized5,000
 5,000
Preferred stock authorized5,000 5,000 
   
Class A Common stock(1)(2)
   
Preferred stock outstandingPreferred stock outstanding0 
Class A Common stock, par value $0.01 per shareClass A Common stock, par value $0.01 per share
Class A Common stock authorized70,000
 70,000
Class A Common stock authorized70,000 70,000 
Class A Common issued(1)(2)
Class A Common issued(1)(2)
10,006 9,805 
Treasury Stock365
 
Treasury Stock365 365 
   
Class B Common stock(1)
   
Class B Common stock, par value $0.01 per share, convertible into Class A on a 1-for-1 basisClass B Common stock, par value $0.01 per share, convertible into Class A on a 1-for-1 basis
Class B Common stock authorized30,000
 30,000
Class B Common stock authorized30,000 30,000 
Class B Common issued(1)
Class B Common issued(1)
4,045 4,076 
(1)    Class B Common converted to Class A Common were 31 shares during 2020 and 345 shares during 2019 and 387 shares 2018.2019.
(2)     The Company issued Class A Common shares of 170 during 2020 and 169 during 2019 and 32 during 2018.related to the Company's stock compensation plan.


Stock Repurchase Program


In May 2018, the Company approved a stock repurchase program for the purchase of up to $25.0 million of the Company's Class A Common Stock outstanding through December 31, 2019. As of December 31, 2019, the Company repurchased 364,893 shares for an aggregate purchase price of $6.0 million. There were no share repurchases during the years ended December 31, 2018 and 2017, respectively.

On November 5, 2019, the Company's Board adopted a new stock repurchase program for the purchase of up to $25.0 million of the Company's Class A Common Stock outstanding starting January 1, 2020 and ending December 31, 2021. During the year ended December 31, 2019, the Company repurchased 364,893 shares for an aggregate purchase price of $6.0 million. There were 0 share repurchases during the years ended December 31, 2020 and 2018.



F-46
F-24

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










Accumulated Other Comprehensive Income (Loss)


The following table summarizes changes in accumulated other comprehensive income (loss) by component and related tax effects for periods shown:
Foreign CurrencyDeferred Gain (Loss) on Cash Flow HedgingPension Plan AdjustmentTotal
Balance, January 1, 2018$(7,573)$508 $(6,678)$(13,743)
Reclassification due to adoption of ASU 2018-02118 (1,286)(1,168)
Other comprehensive income (loss)(1,162)174 (2,583)(3,571)
Reclassification adjustment to net income (loss)213 729 942 
Tax effects83 (134)490 439 
Balance, December 31, 2018$(8,652)$879 $(9,328)$(17,101)
Other comprehensive income (loss)481 (2,199)1,882 164 
Reclassification adjustment to net income (loss)490 727 1,217 
Tax effects(50)489 (851)(412)
Balance, December 31, 2019$(8,221)$(341)$(7,570)$(16,132)
Other comprehensive income (loss)(896)(718)844 (770)
Reclassification adjustment to net income (loss)0 (642)701 59 
Tax effects(658)357 (332)(633)
Balance, December 31, 2020$(9,775)$(1,344)$(6,357)$(17,476)
 Foreign CurrencyDeferred Gain (Loss) on Cash Flow HedgingPension Plan AdjustmentTotal
Balance, January 1, 2017 (As Restated)$(8,221)$616
$(8,494)$(16,099)
Other comprehensive income (loss)648
(456)2,446
2,638
Reclassification adjustment to net income
916
511
1,427
Tax effects
(568)(1,141)(1,709)
Balance, December 31, 2017 (As Restated)$(7,573)$508
$(6,678)$(13,743)
Reclassification due to adoption of ASU 2018-02
118
(1,286)(1,168)
Other comprehensive income (loss)(1,162)174
(2,583)(3,571)
Reclassification adjustment to net income
213
729
942
Tax effects83
(134)490
439
Balance, December 31, 2018 (As Restated)$(8,652)$879
$(9,328)$(17,101)
Other comprehensive income (loss)481
(2,199)1,882
164
Reclassification adjustment to net loss
490
727
1,217
Tax effects(50)489
(851)(412)
Balance, December 31, 2019 (As Restated)$(8,221)$(341)$(7,570)$(16,132)


Earnings per share


The weighted average number of shares of Class A Common and Class B Common outstanding used to calculate basic and diluted earnings (loss) per share were as follows:
 202020192018
Basic weighted average shares outstanding13,657 13,690 13,699 
Dilutive effect of share-based compensation awards55 36 32 
Diluted weighted average shares outstanding13,712 13,726 13,731 
Basic earnings (loss) per share:
Continuing operations$1.76 $1.10 $1.68 
Discontinued operations1.62 (2.09)(0.39)
Basic and diluted earnings (loss) per share$3.39 $(0.99)$1.29 
Diluted earnings (loss) per share:
Continuing operations$1.76 $1.10 $1.68 
Discontinued operations1.62 (2.09)(0.39)
Diluted earnings (loss) per share$3.37 $(0.99)$1.29 

F-25
 As Restated
 2019 2018 2017
Basic weighted average shares outstanding13,690
 13,699
 13,673
Dilutive effect of share-based compensation awards36
 32
 12
Diluted weighted average shares outstanding13,726
 13,731
 13,685
      
Basic and diluted earnings (loss) per share:    

Continuing operations$1.10

$1.68

$1.32
Discontinued operations(2.09)
(0.39)
(0.16)
Basic and diluted earnings (loss) per share$(0.99)
$1.29

$1.16

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




NOTE 1110 - Revenue


Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services, which includes an estimate for variable consideration.

HBB’s warranty program to the consumer consists generally of an assurance-type limited warranty lasting for varying periods of up to ten years for electric appliances, with the majority of products having a warranty of one to three years. There is no guarantee to the customer as HBB may repair or replace, at its option, those products returned under warranty.  Accordingly, the Company determined that no separate performance obligation exists.

HBB products are not sold with a general right of return. However, based on historical experience, a portion of products sold are estimated to be returned due to reasons such as product failure and excess inventory stocked by the customer, which, subject to certain terms and conditions, HBB will agree to accept. Product returns, customer programs and incentive offerings, including special pricing agreements, price competition, promotions, and other volume-based incentives are accounted for as variable consideration.

A description of therevenue sources and performance obligations for HBB isare as follows:


ProductConsumer and Commercial product revenue - Product revenue consist of sales of small electric household and specialty housewares appliances to traditional brick and mortar and ecommerce retailers, distributors and directly to the end consumer as well as sales of commercial products for restaurants, bars and hotels.
Transactions with theseboth consumer and commercial customers generally originate upon the receipt of a purchase order from the customer, which in some cases are governed by master sales agreements, specifying product(s) that the customer desires. Contracts for product revenue have an original duration of one year or less, and payment terms are generally standard and based on customer creditworthiness. Revenue from product sales is recognized at the point in time when control transfers to the customer, which is either when product is shipped from

F-47

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






the Company's facility, or delivered to customers, depending on the shipping terms. The amount of consideration received and revenue recognized varies primarily with changes in returns. In addition, the Company offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements. We evaluated such agreements with our customers and determined returns and price concessions.concessions should be accounted for as variable consideration.


Consumer product revenue consists of sales of small electric household and specialty housewares appliances to traditional brick and mortar and ecommerce retailers, distributors and directly to the end consumer. A majority of this revenue is in North America.

Commercial product revenue consists of sales of products for restaurants, fast-food chains, bars and hotels. Approximately one-half of our commercial sales are in the U.S. and the other half is in markets across the globe.

License revenues - revenue
From time to time, HBBthe Company enters into exclusive and non-exclusive licensing agreements which grant the right to use certain of HBB’s intellectual property (IP)("IP") in connection with designing, manufacturing, distributing, advertising, promoting and selling the licensees’ products during the term of the agreement. The IP that is licensed generally consists of trademarks, tradenames,trade names, patents, trade dress, and/or logos (the “Licensed IP”). In exchange for granting the right to use the Licensed IP, HBB receives a royalty payment, which is a function of (1) the total net sales of products that use the Licensed IP and (2) the royalty percentage that is stated in the licensing agreement. HBB recognizes revenue at the later of when the subsequent sales occur or satisfying the performance obligation (over time).


HBB’s warranty program to the consumer consists generally







F-26

Table of an assurance-type limited warranty lasting for varying periods of up to ten years for electric appliances, with the majority of products having a warranty of one to three years.  HBB may repair or replace, at its option, those products returned under warranty.  Accordingly, the Company determined that no separate performance obligation exists.Contents


HBB products are not sold with a general right of return. However, based on historical experience, a portion of products sold are estimated to be returned due to reasons such as product failureNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and excess inventory stocked by the customer, which, subject to certain terms and conditions, HBB will agree to accept. Product returns, customer programs and incentive offerings, including special pricing agreements, price competition, promotions, and other volume-based incentives are accounted for as variable consideration.Percentage Data)






The following table presents the HBB's revenue on a disaggregated basis for the year ending:

Year Ended
As RestatedDecember 31
Year Ended 2020 20192018
December 31
2019 2018
Type of good or service:   
Products$607,307
 $626,423
Consumer productsConsumer products$568,685 $559,279 $576,270 
Commercial productsCommercial products30,066 48,028 50,153 
Licensing4,479
 3,659
Licensing4,962 4,479 3,659 
Total revenues$611,786
 $630,082
Total revenues$603,713 $611,786 $630,082 
   


Wal-MartWalmart Inc. and its global subsidiaries accounted for approximately 35%, 33%, and 33% and 32% of the HBB’s revenue in 2020, 2019, 2018, and 2017,2018, respectively. Amazon.com, Inc. and its subsidiaries accounted for approximately 14%16%, 10%14%, and 12%10% of the HBB's revenue in 2020, 2019, 2018, and 20172018 respectively. HBB’s five largest customers accounted for approximately 58%64%, 53%58%, and 54%53% of the HBB’s revenue for the years ended December 31,in 2020, 2019, 2018, and 2017,2018, respectively.


NOTE 1211 - Contingencies


Various legal and regulatory proceedings and claims have been or may be asserted against theHamilton Beach Brands Holdings Company and certain subsidiaries relating to the conduct of its businesses, including product liability, patent infringement, asbestos related claims, environmental and other claims. These proceedings and claims are incidental to the ordinary course of business of the Company. Management believes that it has meritorious defenses and will vigorously defend the Company in these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss.


F-48

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






These matters are subject to inherent uncertainties and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the Company’s financial position, results of operations and cash flows of the period in which the ruling occurs, or in future periods.


HBB is a defendant in a legal proceeding in which the plaintiff alleges that certain HBB products infringe the plaintiff’s patents. On May 3, 2019, the jury returned its verdict finding that the Company had infringed certain patents of the plaintiff and, as a result, awarded the plaintiff damages in the amount of $3.2 million. Accordingly,The damages award was subsequently reduced to $2.1 million because the Company recorded $3.2 million expenseCourt determined that part of the damages award based on lost profits was speculative. On August 14, 2020, the court entered an order awarding the plaintiff additional sales post-trial and interest on the damages award through July 31, 2020 and continuing interest in selling, generala de minimis amount until the judgment is satisfied. Both parties filed a Notice of Appeal with the US Circuit Court of Appeals for the Federal Circuit and administrative expenses duringoral argument is expected to be in the second quarter of 20192021. As of December 31, 2020, the accrual for the contingent loss included within other current liabilities on the Consolidated Balance Sheet as of December 31, 2019. On September 23, 2019 the Company filed post-trial motions challenging the jury verdict of infringementis $3.1 million. HBB maintains that it does not infringe any valid patent claim and the damages award is not supported by the evidence and continues to vigorously pursue the appeal of damagesthe judgment and the plaintiffs filed motions seeking interest, post-trial accounting, injunctive relief, and attorneys’ fees.  A hearing date on the post-trial motions has not been set.  Theadverse lower court rulings.

Hamilton Beach Brands Holding Company maintains that its products do not infringe on the plaintiff’s patents and will vigorously defend against the plaintiff's post-trial motions.

KC is a defendant in a legal proceeding instituted in February 2020 in which the plaintiff allegesseeks to hold the Company liable for the unsatisfied portion of an agreed final judgment that plaintiff obtained against KC is in breach of forty-nine store leases for failingrelated to KC’s failure to continue to operate theNaN stores during the entire term of the leasesstore leases. All KC stores were closed by December 31, 2019 and foron January 23, 2020 a Certificate of Dissolution of Ohio Limited Liability Company was filed with the useOhio Secretary of certain store sale signs.State, effective as of January 21, 2020. In November 2019,February 2020, KC agreed to the entry of an order preventinga final judgment in favor of the use of certain store sale signsplaintiff in the specified stores. All KC stores ceased operations asamount of December 31, 2019. An estimate of$8.1 million and in April 2020 the fair value of the future minimum lease liability obligation related to the subject store leases has been includedplaintiff received $0.3 million in the final distribution of KC assets to KC creditors. The Company believes that the plaintiff’s claims are without merit and will vigorously defend against plaintiff’s claims.


F-27

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




These matters are subject to inherent uncertainties and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the Company's financial position, results of discontinued operations.operations and cash flows for the period in which the ruling occurs, or in future periods.


Environmental matters


HBB is investigating or remediating historical environmental contamination at some current and former sites operated by HBB or by businesses it acquired. Based on the current stage of the investigation or remediation at each known site, HBB estimates the total investigation and remediation costs and the period of assessment and remediation activity required for each site. The estimate of future investigation and remediation costs is primarily based on variables associated with site clean-up, including, but not limited to, physical characteristics of the site, the nature and extent of the contamination and applicable regulatory programs and remediation standards. No assessment can fully characterize all subsurface conditions at a site. There is no assurance that additional assessment and remediation efforts will not result in adjustments to estimated remediation costs or the time frame for remediation at these sites.


HBB's estimates of investigation and remediation costs may change if it discovers contamination at additional sites or additional contamination at known sites, if the effectiveness of its current remediation efforts change, if applicable federal or state regulations change or if HBB's estimate of the time required to remediate the sites changes. HBB's revised estimates may differ materially from original estimates.


At December 31, 20192020 and December 31, 2018,2019, HBB had accrued undiscounted obligations of $4.4$3.1 million and $8.2$4.4 million respectively, for environmental investigation and remediation activities. The reduction in the amount accrued at December 31, 20192020 compared to December 31, 20182019 is the result of a reduction to the accrual recorded in the second quarter of 2019 due to a change in the expected type and extent of investigation and remediation activities associated with one of the sites based upon additional testing and assessment performed with respect to that site in the second quarter of 2019.sites. HBB estimates that it is reasonably possible that it may incur additional expenses in the range of zero0 to $4.0$1.7 million related to the environmental investigation and remediation at these sites. Additionally, the Company recorded a $1.5 million receivable as of December 31, 2019 related to a probable recovery forof environmental investigation and remediation costs associated with one of the sites from a responsible party in exchange for release from all future obligations by that party. As of December 31, 2020, the receivable has been collected and $1.0 million is restricted cash.



NOTE 12 - Income Taxes

The components of income (loss) from continuing operations before income taxes and the income tax expense for the years ended December 31 are as follows:
 202020192018
Income (loss) from continuing operations before income taxes  
Domestic$31,140 $24,835 $30,835 
Foreign2,592 (658)(350)
 $33,732 $24,177 $30,485 
Income tax expense (benefit) within continuing operations  
Current income tax expense (benefit):  
Federal$7,006 $2,966 $(323)
State1,877 1,106 356 
Foreign2,213 3,525 1,919 
Total current11,096 7,597 1,952 
Deferred income tax expense (benefit):  
Federal(924)856 5,592 
State(325)1,676 447 
Foreign(182)(1,045)(565)
Total deferred(1,431)1,487 5,474 
 $9,665 $9,084 $7,426 
F-49
F-28

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










NOTE 13 - Income Taxes

The components of income before income taxes and the income tax provision for the years ended December 31 are as follows:
 As Restated
 2019 2018 2017
Income (loss) before income taxes     
Domestic$24,835
 $30,835
 $34,136
Foreign(658) (350) 2,940
 $24,177
 $30,485
 $37,076
Income tax provision (benefit)     
Current income tax provision (benefit):     
Federal$2,966
 $(323) $12,647
State1,106
 356
 1,396
Foreign3,525
 1,919
 1,449
Total current7,597
 1,952
 15,492
Deferred income tax provision (benefit):     
Federal856
 5,592
 3,417
State1,676
 447
 (96)
Foreign(1,045) (565) 154
Total deferred1,487
 5,474
 3,475
 $9,084
 $7,426
 $18,967


The Company made 0 federal income tax payments during 2020 and made payments of $1.9 million $8.3 million, and $9.9$8.3 million during 2019 2018, and 2017,2018, respectively, to the IRS and to NACCO as a member of the consolidated income tax return for periods prior to spin off. The Company made foreign and state income tax payments of $2.9 million, $3.6 million, and $2.6 million during 2020, 2019, and $1.9 million during 2019, 2018, and 2017, respectively. During the same periods, income tax refunds totaled $1.0 million in 2020 and $0.1 million in 2019 and $0.1 million in 2018. There were no tax refunds in 2017.


A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:
202020192018
 $%$%$%
Income (loss) from continuing operations before income taxes$33,732 $24,177 $30,485 
Statutory taxes at 21%$7,092 21.0 %$5,077 21.0 %$6,402 21.0 %
State and local income taxes1,136 3.4 %1,031 4.3 %729 2.4 %
Valuation allowances614 1.8 %2,190 9.1 %42 0.1 %
Other non-deductible expenses415 1.2 %253 1.0 %429 1.4 %
Credits(700)(2.1)%(1,195)(4.9)%(348)(1.1)%
Loss on Kitchen Collection dissolution616 1.8 %%%
Unrecognized tax benefits708 2.1 %2,719 11.2 %1,427 4.7 %
Other, net(216)(0.6)%(991)(4.1)%(1,255)(4.1)%
Income tax provision$9,665 28.7 %$9,084 37.6 %$7,426 24.4 %
 As Restated
 2019 2018 2017
 $ % $ % $ %
Income before income taxes$24,177
 

 $30,485
 

 $37,076
 

Statutory taxes at 21.0% (35.0% in 2017)$5,077
 21.0 % $6,402
 21.0 % $12,976
 35.0 %
State and local income taxes1,031
 4.3 % 729
 2.4 % 824
 2.2 %
Valuation allowances2,190
 9.1 % 42
 0.1 % 344
 0.9 %
Other non-deductible expenses253
 1.0 % 429
 1.4 % 
  %
Credits(1,195) (4.9)% (348) (1.1)% (458) (1.2)%
Provisional effect of the Tax Cuts and Jobs Act (the "Tax Act")
  % 
  % 4,654
 12.6 %
Non-deductible spin-related costs
  % 
  % 540
 1.5 %
Unrecognized tax benefits2,719
 11.2 % 1,427
 4.7 % (12)  %
Other, net(991) (4.1)% (1,255) (4.1)% 99
 0.3 %
Income tax provision$9,084
 37.6 % $7,426
 24.4 % $18,967
 51.2 %

The valuation allowances in 2019 includes $2.0 million of deferred tax expense related to a change in judgment regarding the valuation allowances recorded against certain deferred tax assets of KC.


F-50

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows:
 December 31
 20202019
Deferred tax assets  
Tax carryforwards$3,002 $2,867 
Inventory2,114 316 
Accrued expenses and reserves4,436 5,896 
Other employee benefits4,700 1,500 
Other2,374 1,412 
Total deferred tax assets16,626 11,991 
Less: Valuation allowances(2,102)(1,069)
 14,524 10,922 
Deferred tax liabilities  
Inventory1,099 
Accrued pension benefits3,262 2,623 
Depreciation and amortization3,198 2,051 
Total deferred tax liabilities7,559 4,674 
Net deferred tax asset$6,965 $6,248 
 As Restated
 December 31
 2019 2018
Deferred tax assets   
Tax carryforwards$2,867
 $1,456
Inventory316
 
Accrued expenses and reserves5,896
 5,505
Other employee benefits1,500
 2,349
Other1,412
 996
Total deferred tax assets11,991
 10,306
Less: Valuation allowances(1,069) (1,162)
 10,922
 9,144
Deferred tax liabilities   
Inventory
 37
Accrued pension benefits2,623
 1,854
Depreciation and amortization2,051
 1,459
Total deferred tax liabilities4,674
 3,350
Net deferred tax asset$6,248
 $5,794


As of December 31, 20192020 and 2018,2019, respectively, HBB maintained valuation allowances with respect to certain deferred tax assets relating primarily to operating losses in certain non-U.S. jurisdictions that HBB believes are not likely to be realized.




F-29

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:
 As Restated
 December 31, 2019
 
Net deferred tax
asset
 
Valuation
allowance
 
Carryforwards
expire during:
Non-U.S. net operating loss$2,867
 $987
 2020 - Indefinite
Total$2,867
 $987
  
 December 31, 2020
 Net deferred tax
asset
Valuation
allowance
Carryforwards
expire during:
Non-U.S. net operating loss$3,002 $1,363 2021 - Indefinite



 December 31, 2019
 Net deferred tax
asset
Valuation
allowance
Carryforwards
expire during:
Non-U.S. net operating loss$2,867 $987 2020 - Indefinite
 As Restated
 December 31, 2018
 
Net deferred tax
asset
 
Valuation
allowance
 
Carryforwards
expire during:
Non-U.S. net operating loss$1,456
 $917
 2020 - Indefinite
Total$1,456
 $917
  

F-51

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






The Company has valuation allowances for certain foreign deferred tax assets. Based upon the review of historical earnings and the relevant expiration of carryforwards, the Company believes the valuation allowances are appropriate and does not expect to release valuation allowances within the next twelve months that would have a significant effect on the Company’s financial position or results of operations.
As of December 31, 2019,2020, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $13.2$15.6 million. The Company has recorded the tax impact for the unremitted earnings as allowed under the Tax Cuts and Jobs Act (the "Tax Act"), a portion of which is classified in other long-term liabilities as the Company has elected to make payments over eight years. The Company continues to conclude all material entities’ foreign earnings will be indefinitely reinvested in its foreign operations and will remain offshore in order to meet the capital and business needs outside of the U.S. As a result, the Company does not provide a deferred tax liability with respect to the cumulative unremitted earnings. It is not practicable to determine the deferred tax liability associated with these undistributed earnings due to the availability of foreign tax credits and the complexity of the rules governing the utilization of such credits under the Tax Act.credits. The Company made an accounting policy election to account for the global intangible low-tax income as a current period expense when incurred. The Company recognizes any tax impacts of global intangible low-taxed income (GILTI) as period costs similar to other special deductions, and not as deferred taxes for basis differences.
The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2020, 2019, 2018, and 2017.2018. Approximately $4.0 million, $3.0 million, $1.4 million, and $0.6$1.4 million of these gross amounts as of December 31, 2020, 2019, 2018, and 2017,2018, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.
 202020192018
Balance at January 1$4,266 $1,576 $881 
Additions (reductions) based on tax positions related to prior years(116)97 91 
Additions based on tax positions related to the current year130 2,593 1,110 
Reductions for lapse of statute of limitations(166)
Reductions due to settlements with taxing authorities0 (506)
Balance at December 31$4,114 $4,266 $1,576 
 As Restated
 2019 2018 2017
Balance at January 1$1,576
 $881
 $671
Additions based on tax positions related to prior years97
��91
 
Additions based on tax positions related to the current year2,593
 1,110
 210
Reductions due to settlements with taxing authorities
 (506) 
Balance at December 31$4,266
 $1,576
 $881


The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recorded immaterial amountsrecognized expense of $0.7 million and $0.1 million related to interest and penalties as of December 31, 20192020 and 2018,2019, respectively. The Company expects thetotal amount of unrecognized tax benefits will change within the next 12 months; however, the change in unrecognized tax benefits, whichinterest and penalties accrued was $0.7 million and $0.1 million as of December 31, 2020 and 2019, respectively. It is reasonably possible within the next 12 months there could be a change in unrecognized tax benefits related to the restatement which is not expected to have a significantan approximate $4.7 million effect on the Company's financial position, results of operations or cash flows.



F-30

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The examination of NACCO's 2013-2016 U.S. federal tax returns is ongoing.ongoing, and exam years from 2017 onwards remain open for federal tax returns. The Company is generally open for examination of state and foreign jurisdictions for the tax year 2016 and beyond. In addition, the Company does not have any material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by law.


NOTE 1413 - Retirement Benefit Plans

Defined Benefit Plans

The Company maintains two2 defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. The Company's U.S. plan was frozen, effective December 31, 1996, for participation and benefit accrual purposes (except cash balance interest credits required by law). Similarly, the Company’s non-U.S. plan was frozen, effective December 31, 2008.

The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:
 202020192018
U.S. Plan  
Discount rate for pension benefit obligation1.87 %2.88 %4.00 %
Discount rate for net periodic benefit (income) expense2.88 %4.00 %3.30 %
Expected long-term rate of return on assets for net periodic pension (income) expense7.50 %7.50 %7.50 %
Non-U.S. Plan
Discount rate for pension benefit obligation2.38 %2.96 %3.50 %
Discount rate for net periodic benefit (income) expense2.96 %3.50 %3.50 %
Expected long-term rate of return on assets for net periodic pension (income) expense5.00 %5.50 %5.50 %
Set forth below is a detail of the net periodic pension (income) expense, included in other expense (income), net for the defined benefit plans for the years ended December 31:
 202020192018
U.S. Plan
Interest cost$527 $727 $681 
Expected return on plan assets(2,011)(1,987)(2,047)
Amortization of actuarial loss631 561 623 
Net periodic pension (income) expense$(853)$(699)$(743)
  
Non-U.S. Plan
Interest cost$128 $144 $142 
Expected return on plan assets(253)(263)(286)
Amortization of actuarial loss70 72 200 
Net periodic pension (income) expense$(55)$(47)$56 
F-52
F-31

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:
 2019 2018 2017
U.S. Plan     
Discount rate for pension benefit obligation2.88% 4.00% 3.30%
Discount rate for net periodic benefit income4.00% 3.30% 3.60%
Expected long-term rate of return on assets for net periodic pension income7.50% 7.50% 7.50%
Non-U.S. Plan     
Discount rate for pension benefit obligation2.96% 3.50% 3.25%
Discount rate for net periodic benefit (income) loss3.50% 3.50% 3.75%
Expected long-term rate of return on assets for net periodic pension (income) loss5.50% 5.50% 5.50%
Set forth below is a detail of the net periodic pension income for the defined benefit plans for the years ended December 31:
 2019 2018 2017
U.S. Plan     
Interest cost$727
 $681
 $811
Expected return on plan assets(1,987) (2,047) (2,074)
Amortization of actuarial loss561
 623
 501
Net periodic pension income$(699) $(743) $(762)
      
Non-U.S. Plan     
Interest cost$144
 $142
 $153
Expected return on plan assets(263) (286) (264)
Amortization of actuarial loss72
 200
 10
Net periodic pension (income) loss$(47) $56
 $(101)
Set forth below is the detail of other changes in plan assets and benefit obligations recognized in other comprehensive loss (income) for the years ended December 31:
2019 2018 2017 202020192018
U.S. Plan     U.S. Plan  
Current year actuarial loss (gain)$(1,727) $2,347
 $(2,506)Current year actuarial loss (gain)$(1,080)$(1,727)$2,347 
Amortization of actuarial loss(561) (623) (501)Amortization of actuarial loss(631)(561)(623)
Total recognized in other comprehensive loss (income)$(2,288) $1,724
 $(3,007)Total recognized in other comprehensive loss (income)$(1,711)$(2,288)$1,724 
Non-U.S. Plan     Non-U.S. Plan
Current year actuarial loss$(155) $236
 $60
Current year actuarial loss$236 $(155)$236 
Amortization of actuarial loss(72) (200) (10)Amortization of actuarial loss(70)(72)(200)
Total recognized in other comprehensive loss$(227) $36
 $50
Total recognized in other comprehensive loss (income)Total recognized in other comprehensive loss (income)$166 $(227)$36 


F-53

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






The following table sets forth the changes in the benefit obligation and the plan assets during the year and the funded status of the defined benefit plans at December 31:
31:
2019 2018 20202019
U.S.
Plan
 
Non-U.S.
Plan
 U.S. Plan 
Non-U.S.
Plan
U.S.
Plan
Non-U.S.
Plan
U.S. PlanNon-U.S.
Plan
Change in benefit obligation       Change in benefit obligation    
Projected benefit obligation at beginning of year$19,131
 $4,084
 $21,716
 $4,604
Projected benefit obligation at beginning of year$19,374 $4,570 $19,131 $4,084 
Interest cost727
 144
 681
 142
Interest cost527 128 727 144 
Actuarial (gain) loss1,266
 311
 (1,278) (148)Actuarial (gain) loss972 399 1,266 311 
Benefits paid(1,750) (182) (1,988) (151)Benefits paid(1,895)(205)(1,750)(182)
Foreign currency exchange rate changes
 213
 
 (363)Foreign currency exchange rate changes0 108 213 
Projected benefit obligation at end of year$19,374
 $4,570
 $19,131
 $4,084
Projected benefit obligation at end of year$18,978 $5,000 $19,374 $4,570 
Accumulated benefit obligation at end of year$19,374
 $4,570
 $19,131
 $4,084
Accumulated benefit obligation at end of year$18,978 $5,000 $19,374 $4,570 
Change in plan assets       Change in plan assets    
Fair value of plan assets at beginning of year$25,671
 $4,744
 $29,237
 $5,456
Fair value of plan assets at beginning of year$28,900 $5,350 $25,671 $4,744 
Actual return on plan assets4,979
 726
 (1,578) (111)Actual return on plan assets4,065 428 4,979 726 
Benefits paid(1,750) (182) (1,988) (151)Benefits paid(1,895)(205)(1,750)(182)
Foreign currency exchange rate changes
 62
 
 (450)Foreign currency exchange rate changes0 (76)62 
Fair value of plan assets at end of year$28,900
 $5,350
 $25,671
 $4,744
Fair value of plan assets at end of year$31,070 $5,497 $28,900 $5,350 
Funded status at end of year$9,526
 $780
 $6,540
 $660
Funded status at end of year$12,092 $497 $9,526 $780 
Amounts recognized in the balance sheets consist of:       Amounts recognized in the balance sheets consist of:    
Non-current assets$9,526
 $780
 $6,540
 $660
Non-current assets$12,092 $497 $9,526 $780 
Components of accumulated other comprehensive loss consist of:       Components of accumulated other comprehensive loss consist of:  
Actuarial loss$(9,140) $(1,058) $(11,427) $(1,225)Actuarial loss$(7,429)$(1,224)$(9,140)$(1,058)
Deferred taxes and other2,280
 348
 2,933
 485
Deferred taxesDeferred taxes1,901 395 2,280 348 
$(6,860) $(710) $(8,494) $(740) $(5,528)$(829)$(6,860)$(710)
The actuarial loss included in accumulated other comprehensive loss expected to be recognized in net periodic pension income(income) expense in 20202021 is $0.7 million.
F-32

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)




The Company recognizes as a component of benefit cost (income), as of the measurement date, any unrecognized actuarial net gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor." Amounts outside the corridor are amortized over the average expected remaining lifetime of inactive participants for the pension plans. The gain (loss) amounts recognized in AOCI are not expected to be fully recognized until the plan is terminated or as settlements occur, which would trigger accelerated recognition.
The Company's policy is to make contributions to fund its pension plans within the range allowed by applicable regulations. The Company does not expect to contribute to its U.S. and non-U.S. pension plans in 2020.2021.
Pension benefit payments are made from assets of the pension plans.

F-54

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






Future pension benefit payments expected to be paid from assets of the pension plans are:
U.S. PlanNon-U.S. Plan
U.S. Plan Non-U.S. Plan
2020$2,200
 $184
20211,870
 215
2021$1,879 $236 
20221,880
 246
20221,860 240 
20231,698
 243
20231,713 237 
20241,591
 249
20241,553 246 
2025 - 20296,148
 1,322
202520251,461 254 
2026 - 20292026 - 20295,606 1,327 
$15,387
 $2,459
$14,072 $2,540 
The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes.
Expected returns for U.S. pension plans are based on a calculated market-related value for U.S. pension plan assets. Under this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns are recognized in the market-related value of assets ratably over three years. Expected returns for non-U.S. pension plans are based on fair market value for non-U.S. pension plan assets.
The pension plans maintain investment policies that, among other things, establish a portfolio asset allocation methodology with percentage allocation bands for individual asset classes. The investment policies provide that investments are reallocated between asset classes as balances exceed or fall below the appropriate allocation bands.
The following is the actual allocation percentage and target allocation percentage for the U.S. pension plan assets at December 31:
2019
Actual
Allocation
 2018
Actual
Allocation
 
Target Allocation
Range
2020
Actual
Allocation
2019
Actual
Allocation
Target Allocation
Range
U.S. equity securities45.9% 43.8% 36.0% - 54.0%U.S. equity securities45.5 %45.9 %36.0% - 54.0%
Non-U.S. equity securities20.4% 19.3% 16.0% - 24.0%Non-U.S. equity securities20.3 %20.4 %16.0% - 24.0%
Fixed income securities33.2% 36.4% 30.0% - 40.0%Fixed income securities33.8 %33.2 %30.0% - 40.0%
Money market0.5% 0.5% 0.0% - 10.0%Money market0.4 %0.5 %0.0% - 10.0%
The following is the actual allocation percentage and target allocation percentage for the Non-U.S. pension plan assets at December 31:

 2019
Actual
Allocation
 2018
Actual
Allocation
 
Target Allocation
Range
Canadian equity securities30.2% 29.5% 25.0% - 35.0%
Non-Canadian equity securities32.3% 29.9% 25.0% - 35.0%
Fixed income securities37.5% 40.6% 30.0% - 50.0%
Cash and cash equivalents% % 0.0% - 5.0%


F-55
F-33

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










The following is the actual allocation percentage and target allocation percentage for the Non-U.S. pension plan assets at December 31:
 2020
Actual
Allocation
2019
Actual
Allocation
Target Allocation
Range
Canadian equity securities29.5 %30.2 %25.0% - 35.0%
Non-Canadian equity securities34.4 %32.3 %25.0% - 35.0%
Fixed income securities36.1 %37.5 %30.0% - 50.0%
Cash and cash equivalents0 %%0.0% - 5.0%
The fair value of each major category of the Company's U.S. pension plan assets are valued using quoted market prices in active markets for identical assets, or Level 1 in the fair value hierarchy. The fair value of each major category of the Company's Non-U.S. pension plan assets are valued using observable inputs, either directly or indirectly, other than quoted market prices in active markets for identical assets. Following are the values as of December 31:
31:
U.S. Plan Non-U.S. PlanU.S. PlanNon-U.S. Plan
2019 2018 2019 2018 2020201920202019
U.S. equity securities$13,255
 $11,251
 $929
 $735
U.S. equity securities$14,113 $13,255 $1,064 $929 
Non-U.S. equity securities5,904
 4,930
 2,412
 2,081
Non-U.S. equity securities6,321 5,904 2,445 2,412 
Fixed income securities9,596
 9,350
 2,009
 1,928
Fixed income securities10,510 9,596 1,988 2,009 
Money market145
 140
 
 
Money market126 145 0 
Total$28,900
 $25,671
 $5,350
 $4,744
Total$31,070 $28,900 $5,497 $5,350 


Defined Contribution Plans


HBB maintains a defined contribution (401(k)) plan for substantially all U.S. employees and similar plans for employees outside of the U.S. The CompanyCompany's U.S. plan provides employer matching (or safe harbor)harbor contributions based on plan provisions. Theprovisions and both defined contribution retirement plans also provide for an additional minimuma separate employer contribution. CertainThese plans also permit additional profit-sharing contributions, whereby the applicable company’s contribution to participants is determined annually, that are based on a formula that includes (i) the effect of actual operating profit results compared with targeted operating profit results and (ii) the age and/or compensation of the participants. Total costs, including Company contributions, for these plans were $5.1 million in 2020, $5.0 million in 2019 and $5.3 million in 2018 and 2017.2018.



NOTE 15 - Data by Geographic Region
F-34
Revenue and property, plant and equipment related to continuing operations outside the U.S., based on customer and asset location, are as follows:
 U.S. Other Consolidated
2019     
Revenue from unaffiliated customers (As Restated)$463,608
 $148,178
 $611,786
Property, plant and equipment, net$16,828
 $5,496
 $22,324
2018
 
 
Revenue from unaffiliated customers (As Restated)$488,520
 $141,562
 $630,082
Property, plant and equipment, net$15,344
 $5,498
 $20,842
2017

 

 

Revenue from unaffiliated customers (As Restated)$478,770
 $133,286
 $612,056
Property, plant and equipment, net$10,974
 $5,005
 $15,979
No single country outside of the U.S. comprised 10% or more of HBB's revenue from unaffiliated customers.


F-56



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










NOTE 14 - Data by Geographic Region
Revenue and property, plant and equipment related to continuing operations outside the U.S., based on customer and asset location, are as follows:
 U.S.OtherConsolidated
2020   
Revenue from unaffiliated customers$493,573 $110,140 $603,713 
Property, plant and equipment, net$18,021 $5,469 $23,490 
2019
Revenue from unaffiliated customers$463,608 $148,178 $611,786 
Property, plant and equipment, net$16,828 $5,496 $22,324 
2018
Revenue from unaffiliated customers$488,520 $141,562 $630,082 
Property, plant and equipment, net$15,344 $5,498 $20,842 
No single country outside of the U.S. comprised 10% or more of HBB's revenue from unaffiliated customers.

NOTE 1615 - Quarterly Results of Operations (Unaudited)


In the fourth quarter of 2019, KC met the requirements to be reported as a discontinued operation. The following consolidated financial tables reflect KC as a discontinued operation for all periods presented and are labeled "Recast". See Note 3, Discontinued Operations for more information.

A summary of the unaudited results of operations for the year ended December 31 is as follows:
 2020
 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Revenue$120,846 $138,297 $110,549 $234,021 
Gross profit$25,040 $35,254 $23,748 $54,612 
Operating profit$503 $10,895 $(2,405)$28,422 
Income (loss) from continuing operations, net of tax$(1,354)$8,065 $(2,010)$19,366 
Income (loss) from discontinued operations, net of tax22,866 (305)0 (370)
Net income (loss)$21,512 $7,760 $(2,010)$18,996 
Basic earnings (loss) per share:
Continuing operations$(0.10)$0.59 $(0.15)$1.41 
Discontinued operations1.68 (0.02)0 (0.03)
Basic earnings (loss) per share$1.58 $0.57 $(0.15)$1.39 
Diluted earnings (loss) per share:
Continuing operations$(0.10)$0.59 $(0.15)$1.40 
Discontinued operations1.68 (0.02)0 (0.03)
Diluted earnings (loss) per share$1.58 $0.57 $(0.15)$1.37 
F-35
 2019
 As Restated and Recast
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Revenue$126,642

$131,065

$149,508

$204,570
Gross profit$26,702

$28,507

$30,946

$42,397
Operating profit$111

$3,185

$4,439

$19,060
 










Income (loss) from continuing operations, net of tax$(662)
$1,898

$553

$13,304
Loss from discontinued operations, net of tax(2,723)
(2,516)
(2,753)
(20,608)
Net income (loss)$(3,385)
$(618)
$(2,200)
$(7,304)
 










Basic and diluted earnings (loss) per share:










Continuing operations$(0.05)
$0.14

$0.04

$0.98
Discontinued operations(0.20)
(0.18)
(0.20)
(1.52)
Basic and diluted earnings (loss) per share$(0.25)
$(0.04)
$(0.16)
$(0.54)

 2018
 As Restated and Recast
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Revenue$125,032

$135,583

$171,301

$198,166
Gross profit$27,928

$30,727

$38,404

$41,993
Operating profit$1,794

$3,944

$11,763

$16,050
 










Income from continuing operations, net of tax$894

$1,645

$9,030

$11,490
(Loss) income from discontinued operations, net of tax(3,077)
(2,766)
(1,889)
2,371
Net income (loss)$(2,183)
$(1,121)
$7,141

$13,861
 










Basic and diluted earnings (loss) per share:










Continuing operations$0.07

$0.12

$0.66

$0.84
Discontinued operations(0.22)
(0.20)
(0.14)
0.17
Basic and diluted earnings (loss) per share$(0.15)
$(0.08)
$0.52

$1.01

Quarterly Discussion and Analysis

Revenue

Revenue for the first quarter of 2019 increased $1.6 million, or 1.3% compared to the first quarter of 2018 due to sales of new and higher priced products in the U.S. consumer market partially offset by lower sales volume in the international consumer market and unfavorable foreign currency movements.

F-57

Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)










 2019
 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Revenue$126,642 $131,065 $149,508 $204,570 
Gross profit$26,702 $28,507 $30,946 $42,397 
Operating profit$111 $3,185 $4,439 $19,060 
Income (loss) from continuing operations, net of tax$(662)$1,898 $553 $13,304 
Income (loss) from discontinued operations, net of tax(2,723)(2,516)(2,753)(20,608)
Net income (loss)$(3,385)$(618)$(2,200)$(7,304)
Basic and diluted earnings (loss) per share:
Continuing operations$(0.05)$0.14 $0.04 $0.98 
Discontinued operations(0.20)(0.18)(0.20)(1.52)
Basic and diluted earnings (loss) per share$(0.25)$(0.04)$(0.16)$(0.54)


Revenue for the second quarter of 2019 decreased $4.5 million, or 3.3% compared to the second quarter of 2018 primarily due to lower sales volume in the U.S. consumer and global commercial markets, partially offset by increased sales in the international consumer market.


Revenue for the third quarter of 2019 decreased $21.8 million, or 12.7% compared to the third quarter of 2018 primarily due to lower sales volume in the U.S. and international consumer markets. The lower sales volume in the U.S. was primarily due to a significant change in retailer order patterns and lower direct import sales driven by the adverse impact of tariffs. Also contributing to the third-quarter revenue shortfall was a loss of placements in the dollar store channel resulting from HBB's decision to not maintain this low margin business, ongoing foot traffic challenges at some retailers and other pressure points facing individual retail companies. HBB's international consumer markets reported lower sales volume due in large part to a one-time special purchase in 2018 by a customer in Latin America and to a lesser degree to reduced demand in several markets.


Gross profit


Gross profit for the first quarter of 2019 decreased $1.2 million, or 4.4% compared to the first quarter of 2018. As a percentage of revenue, gross profit declined from 22.3% to 21.1%. Gross profit margin declined primarily due to higher product costs arising from increased inbound freight expenses and unfavorable foreign currency movements.

Gross profit for the second quarter of 2019 decreased $2.2 million, or 7.2% compared to the second quarter of 2018 primarily due to lower sales volume. As a percentage of revenue, gross profit declined from 22.7% to 21.8% due to increased inbound freight expenses and unfavorable foreign currency movements.

Gross profit for the third quarter of 2019 decreased $7.5 million, or 19.4% compared to the third quarter of 2018 primarily due to lower sales volume. As a percentage of revenue, gross profit declined from 22.4% to 20.7% primarily due to to higher inbound freight, transportation and warehousing expenses, and the adverse impact of tariffs.

Selling, general and administrative expenses

Selling, general and administrative expenses for the first quarter of 2019 increased $0.4 million, or 1.8% compared to first quarter of 2018 due to increased legal and professional service fees.

Selling, general and administrative expenses for the second quarter decreased $1.5 million, or 5.5% compared to second quarter of 2018 primarily due to a $3.7 million decline in the environmental reserve at one site and lower employee-related costs, partially offset by a one-time charge of $3.2 million for a contingent loss related to patent litigation.

Selling, general and administrative expenses for the third quarter of 2019 decreased $0.1 million, or 0.5% compared to the third quarter of 2018, including a decline of $1.2 million primarily due to lower legal and professional services fees and a decrease in employee-related costs due to reduced incentive compensation expense.

Certain former employees of one of the Company's Mexico subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries and in doing so expenditures were deferred on the balance sheet of the Mexican subsidiaries beyond the period for which the costs pertained. Included in selling, general and administrative expenses are non-cash charges to write-off unrealizable assets created as a result of these unauthorized transactions as follows:
Expenses of $1.8 million and $2.0 million for the three months ended March 31, 2019 and 2018, respectively;
Expenses of $0.6 million and $1.0 million for the three months ended June 30, 2019 and 2018, respectively; and
Expenses of $2.7 million and $1.5 million for the three months ended September 30, 2019 and 2018, respectively.

Interest expense, net
During the first quarter of 2019, interest expense, net increased $0.2 million from the first quarter of 2018 primarily due to an increase in average borrowings outstanding under HBB's revolving credit facility and higher average interest rates.



F-58
F-36

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






In the second quarter of 2019, interest expense, net remained consistent with the prior year. A decrease in average borrowings outstanding under HBB's revolving credit facility was offset by higher average interest rates.

In the third quarter of 2019 interest expense, net decreased $0.1 million from the third quarter of 2018 primarily due to decreased average borrowings outstanding under HBB's revolving credit facility.

Other expense, net
In the first quarter of 2019, other income, net decreased $0.3 million compared with other income in 2018 primarily due to unfavorable foreign currency movements as the Mexican peso weakened against the U.S. dollar during the period.

Other income for the second quarter of 2019 includes currency gains of $0.1 million compared with other expense in 2018 related to currency losses of $0.7 million.

Other expense for the third quarter of 2019 includes currency losses of $0.8 million compared with other income in 2018 related to currency gains of $0.2 million.

Income tax expense

The Company recognized $0.3 income tax expense in the first quarter of 2019 on a loss before income taxes of $0.4 million. The expense in 2019 is primarily attributable to non-cash charges to write-off unrealizable assets for which the corresponding tax benefit has been substantially offset by an increase in unrecognized tax benefits. The first quarter of 2018 included an insignificant one-time tax benefit recorded in the first three months of 2019 related to the non-U.S. pension plan. The Company recognized an income tax expense of $0.6 million in the second quarter of 2019 on income from continuing operations before income taxes of $2.5 million, an effective tax rate of 43.1% for the six months ended June 30, 2019. The effective tax rate increased from 40.5% in the first six months of 2018 primarily due to increased tax credits reflected in the forecasted 2019 effective tax rate. During the third quarter of 2019, the Company recognized income tax expense of $2.4 million on income from continuing operations before income taxes of $3.0 million.

Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements

In lieu of filing amended quarterly reports on Form 10-Q, the following tables represent our restated unaudited condensed consolidated financial statements for each of the quarters during the years ended December 31, 2019 and 2018. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, for additional information.

Following the restated consolidated financial statement tables, we have presented a reconciliation from our prior periods, as previously reported, to the restated values. The values as previously reported were derived from our Quarterly Reports on Form 10-Q for the interim periods of 2019 and from the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on February 26, 2020. In the fourth quarter of 2019, KC met the requirements to be reported as a discontinued operation. The following consolidated financial tables reflect KC as a discontinued operation for all periods presented and are labeled "Recast".



F-59


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 As Restated and Recast
 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019
 Three Months Ended Three Months Ended Nine Months Ended Three Months Ended Six Months Ended Three Months Ended
 (In thousands, except per share data)
Revenue$204,570

$149,508

$407,216

$131,065

$257,707

$126,642
Cost of sales162,173

118,562

321,060

102,558

202,498

99,940
Gross profit42,397

30,946

86,155

28,507

55,209

26,702
Selling, general and administrative expenses22,996

26,165

77,385

24,976

51,222

26,246
Amortization of intangible assets341

345

1,036

346

691

345
Operating profit (loss)19,060

4,439

7,734

3,185

3,296

111
Interest expense, net767

756

2,208

789

1,452

663
Other expense (income), net(710)
681

352

(132)
(329)
(197)
Income (loss) from continuing operations before income taxes19,003

3,002

5,174

2,528

2,173

(355)
Income tax expense (benefit)5,699

2,449

3,385

630

937

307
Net income (loss) from continuing operations13,304

553

1,789

1,898

1,236

(662)
Loss from discontinued operations, net of tax(20,608)
(2,753)
(7,992)
(2,516)
(5,239)
(2,723)
Net loss$(7,304)
$(2,200)
$(6,203)
$(618)
$(4,003)
$(3,385)
 










Basic and diluted earnings (loss) per share:














Continuing operations$0.98

$0.04

$0.13

$0.14

$0.09

$(0.05)
Discontinued operations(1.52)
(0.20)
(0.58)
(0.18)
(0.38)
(0.20)
Basic and diluted earnings (loss) per share$(0.54)
$(0.16)
$(0.45)
$(0.04)
$(0.29)
$(0.25)
 
















Basic weighted average shares outstanding13,518

13,579

13,726

13,813

13,800

13,786
Diluted weighted average shares outstanding13,625

13,595

13,731

13,826

13,813

13,786

F-60


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 As Restated and Recast
 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
 Three Months Ended Three Months Ended Nine Months Ended Three Months Ended Six Months Ended Three Months Ended
 (In thousands, except per share data)
Revenue$198,166

$171,301

$431,916

$135,583

$260,615

$125,032
Cost of sales156,173

132,897

334,857

104,856

201,960

97,104
Gross profit41,993

38,404

97,059

30,727

58,655

27,928
Selling, general and administrative expenses25,599

26,296

78,522

26,437

52,225

25,789
Amortization of intangible assets345

345

1,036

346

691

345
Operating profit16,050

11,763

17,501

3,944

5,738

1,794
Interest expense, net711

886

2,205

809

1,319

510
Other expense (income), net429

(433)
(280)
679

153

(526)
Income from continuing operations before income taxes14,910

11,310

15,576

2,456

4,266

1,810
Income tax expense3,420

2,280

4,007

811

1,727

916
Net income from continuing operations11,490

9,030

11,569

1,645

2,539

894
Income (loss) from discontinued operations, net of tax2,371

(1,889)
(7,732)
(2,766)
(5,843)
(3,077)
Net income (loss)$13,861

$7,141

$3,837

$(1,121)
$(3,304)
$(2,183)
 










Basic and diluted earnings (loss) per share:














Continuing operations$0.84

$0.66

$0.84

$0.12

$0.19

$0.07
Discontinued operations0.17

(0.14)
(0.56)
(0.20)
(0.43)
(0.22)
Basic and diluted earnings (loss) per share$1.01

$0.52

$0.28

$(0.08)
$(0.24)
$(0.15)
 
















Basic weighted average shares outstanding13,714

13,704

13,694

13,695

13,689

13,683
Diluted weighted average shares outstanding13,844

13,713

13,697

13,704

13,693

13,692



F-61


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 As Restated
 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019
 Three Months Ended Three Months Ended Nine Months Ended Three Months Ended Six Months Ended Three Months Ended
 (In thousands)
Net income (loss)$(7,304)
$(2,200)
$(6,203)
$(618)
$(4,003)
$(3,385)
Other comprehensive income (loss), net of tax:
















Foreign currency translation adjustment201

(18)
309

113

327

214
(Loss) gain on long-term intra-entity foreign currency transactions294

(509)
(373)
121

136

15
Cash flow hedging activity(143)
(127)
(1,426)
(877)
(1,299)
(422)
Reclassification of hedging activities into earnings81

122

268

144

146

2
Pension plan adjustment1,410










Reclassification of pension adjustments into earnings35

127

313

102

186

84
Total other comprehensive income (loss), net of tax1,878

(405)
(909)
(397)
(504)
(107)
Comprehensive income (loss)$(5,426)
$(2,605)
$(7,112)
$(1,015)
$(4,507)
$(3,492)

 As Restated
 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
 Three Months Ended Three Months Ended Nine Months Ended Three Months Ended Six Months Ended Three Months Ended
 (In thousands)
Net income (loss)$13,861

$7,141

$3,837

$(1,121)
$(3,304)
$(2,183)
Other comprehensive income (loss), net of tax:
















Foreign currency translation adjustment(1,135)
902

1,063

(412)
161

573
(Loss) gain on long-term intra-entity foreign currency transactions60

(53)
(1,066)
(1,013)
(1,013)

Cash flow hedging activity(352)
(301)
452

464

753

289
Reclassification of hedging activities into earnings48

(102)
105

41

207

166
Pension plan adjustment(1,920)









Reclassification of pension adjustments into earnings141

115

415

142

300

158
Total other comprehensive income (loss), net of tax(3,158)
561

969

(778)
408

1,186
Comprehensive income (loss)$10,703

$7,702

$4,805

$(1,899)
$(2,896)
$(997)


F-62


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED BALANCE SHEETS
`As Restated and Recast
 September 30, 2019 June 30, 2019 March 31, 2019
 (In thousands)
Assets     
Current assets     
Cash and cash equivalents$1,559

$1,029

$1,636
Trade receivables, net103,091

86,268

79,102
Inventory161,043

121,472

120,707
Prepaid expenses and other current assets14,086

16,412

17,379
Current assets of discontinued operations22,830

21,255

24,692
Total current assets302,609

246,436

243,516
Property, plant and equipment, net22,193

21,649

20,984
Goodwill6,253

6,253

6,253
Other intangible assets, net3,483

3,828

4,174
Deferred income taxes5,640

3,754

3,166
Deferred costs8,804

8,564

8,316
Other non-current assets1,553

1,984

2,403
Non-current assets of discontinued operations1,744

4,420

4,446
Total assets$352,279

$296,888

$293,258
Liabilities and stockholders' equity




Current liabilities




Accounts payable$140,011

$86,199

$73,720
Accounts payable to NACCO Industries, Inc.220

220

2,425
Revolving credit agreements50,152

51,505

54,812
Accrued compensation14,650

11,725

8,398
Accrued product returns8,266

8,224

9,314
Other current liabilities25,880

21,382

17,705
Current liabilities of discontinued operations24,713

20,048

21,473
Total current liabilities263,892

199,303

187,847
Revolving credit agreements30,000

30,000

30,000
Other long-term liabilities14,258

14,699

18,619
Non-current liabilities of discontinued operations1,585

3,697

3,834
Total liabilities309,735

247,699

240,300
Stockholders’ equity




Class A Common stock95

95

95
Class B Common stock44

44

44
Capital in excess of par value54,143

53,342

52,520
Treasury stock(5,960)
(2,334)

Retained earnings12,231

15,646

17,506
Accumulated other comprehensive loss(18,009)
(17,604)
(17,207)
Total stockholders’ equity42,544

49,189

52,958
Total liabilities and stockholders' equity$352,279

$296,888

$293,258
      



F-63


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)








CONDENSED CONSOLIDATED BALANCE SHEETS
`As Restated and Recast
 September 30, 2018 June 30, 2018 March 31, 2018
 (In thousands)
Assets     
Current assets     
Cash and cash equivalents$1,567

$1,393

$1,784
Trade receivables, net112,309

76,132

79,358
Inventory155,744

138,721

132,749
Prepaid expenses and other current assets12,595

14,569

14,615
Current assets of discontinued operations32,185

30,704

29,086
Total current assets314,400

261,519

257,592
Property, plant and equipment, net20,988

19,088

17,643
Goodwill6,253

6,253

6,253
Other intangible assets, net4,864

5,209

5,555
Deferred income taxes7,704

8,877

10,419
Deferred costs10,153

9,825

10,187
Other non-current assets3,282

3,178

3,068
Non-current assets of discontinued operations5,313

5,688

5,661
Total assets$372,957

$319,637

$316,378
Liabilities and stockholders' equity




Current liabilities




Accounts payable$131,620

$92,488

$96,924
Accounts payable to NACCO Industries, Inc.2,480

2,769

7,814
Revolving credit agreements60,083

66,326

63,308
Accrued compensation15,421

11,984

9,238
Accrued product returns9,601

9,648

10,815
Other current liabilities22,488

15,769

21,227
Current liabilities of discontinued operations29,693

26,830

21,509
Total current liabilities271,386

225,814

230,835
Revolving credit agreements30,000

30,000

20,000
Other long-term liabilities22,343

21,654

21,831
Non-current liabilities of discontinued operations2,293

2,416

2,565
Total liabilities326,022

279,884

275,231
Stockholders’ equity




Class A Common stock92

92

92
Class B Common stock45

45

45
Capital in excess of par value51,366

50,721

49,051
Treasury stock




Retained earnings9,373

3,397

5,683
Accumulated other comprehensive loss(13,941)
(14,502)
(13,724)
Total stockholders’ equity46,935

39,753

41,147
Total liabilities and stockholders' equity$372,957

$319,637

$316,378


F-64


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







The restatement corrections impact certain components within operating cash flows of the Consolidated Statements of Cash Flows. Total operating cash flows was unchanged, except for the impact of exchange rate changes resulting from the adjustments. Total investing activities, financing activities, and cash and cash equivalents are unchanged as a result of the restatements.







F-65


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Year Ended December 31, 2019
 Class A common stockClass B common stock
Capital in excess of par value (1)
Treasury stock
Retained earnings (1)
Accumulated other comprehensive income (loss) (1)
Total stockholders' equity (1)
 (In thousands, except per share data)
Balance as Restated, January 1, 2019$93
$44
$51,714
$
$22,068
$(17,101)$56,818
Net loss



(3,385)
(3,385)
Issuance of common stock, net of conversions2

(1)


1
Purchase of treasury stock






Share-based compensation expense

807



807
Cash dividends, $0.085 per share



(1,177)
(1,177)
Other comprehensive loss




(192)(192)
Reclassification adjustment to net loss




86
86
Balance as Restated, March 31, 2019$95
$44
$52,520
$
$17,506
$(17,207)$52,958
Net loss



(618)
(618)
Issuance of common stock, net of conversions






Purchase of treasury stock


(2,334)

(2,334)
Share-based compensation expense

822



822
Cash dividends, $0.09 per share



(1,242)
(1,242)
Other comprehensive loss




(643)(643)
Reclassification adjustment to net loss




246
246
Balance as Restated, June 30, 2019$95
$44
$53,342
$(2,334)$15,646
$(17,604)$49,189
Net loss



(2,200)
(2,200)
Issuance of common stock, net of conversions






Purchase of treasury stock


(3,626)

(3,626)
Share-based compensation expense

801



801
Cash dividends, $0.09 per share



(1,215)
(1,215)
Other comprehensive loss




(654)(654)
Reclassification adjustment to net loss




249
249
Balance as Restated, September 30, 2019$95
$44
$54,143
$(5,960)$12,231
$(18,009)$42,544
Net loss



(7,304)
(7,304)
Issuance of common stock, net of conversions3
(3)(1)


(1)
Purchase of treasury stock






Share-based compensation expense

367



367
Cash dividends, $0.09 per share



(1,217)
(1,217)
Other comprehensive loss




1,761
1,761
Reclassification adjustment to net loss




116
116
Balance as Restated, December 31, 2019$98
$41
$54,509
$(5,960)$3,710
$(16,132)$36,266
















(1) As Restated. The restatement impacts on net income are described in the reconciliation of the consolidated statement of operations. The restatement impacts on other comprehensive loss are described in the reconciliation of the consolidated statement of

F-66


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






comprehensive income (loss) for the corresponding periods of the year ended December 31, 2019. The quarter ended March 31, 2019 included a change to the reclassification adjustment to net loss of $0.1 million.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 For the Year Ended December 31, 2018
 Class A common stockClass B common stockCapital in excess of par value
Retained earnings (1)
Accumulated other comprehensive income (loss) (1)
Total stockholders' equity (1)
 (In thousands, except per share data)
Balance as Restated, January 1, 2018$88
$48
$47,773
$7,860
$(13,743)$42,026
Net loss


(2,183)
(2,183)
Issuance of common stock, net of conversions4
(3)323


324
Share-based compensation expense

955


955
Cash dividends, $0.085 per share


(1,162)
(1,162)
Reclassification due to adoption of ASU 2018-02


1,168
(1,168)
Other comprehensive loss



863
863
Reclassification adjustment to net loss



324
324
Balance as Restated, March 31, 2018$92
$45
$49,051
$5,683
$(13,724)$41,147
Net loss


(1,121)
(1,121)
Issuance of common stock, net of conversions

198


198
Share-based compensation expense

1,472


1,472
Cash dividends, $0.085 per share


(1,165)
(1,165)
Other comprehensive loss



(961)(961)
Reclassification adjustment to net loss



183
183
Balance as Restated, June 30, 2018$92
$45
$50,721
$3,397
$(14,502)$39,753
Net loss


7,141

7,141
Issuance of common stock, net of conversions

246


246
Share-based compensation expense

399



399
Cash dividends, $0.085 per share


(1,165)
(1,165)
Other comprehensive loss



548
548
Reclassification adjustment to net loss



13
13
Balance as Restated, September 30, 2018$92
$45
$51,366
$9,373
$(13,941)$46,935
Net loss


13,861

13,861
Issuance of common stock, net of conversions1
(1)(444)

(444)
Share-based compensation expense

792


792
Cash dividends, $0.085 per share


(1,166)
(1,166)
Other comprehensive loss



(3,349)(3,349)
Reclassification adjustment to net loss



189
189
Balance as Restated, December 31, 2018$93
$44
$51,714
$22,068
$(17,101)$56,818
       


F-67


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






(1) As Restated. The restatement impacts on net income are described in the reconciliation of the consolidated statement of operations. The restatement impacts on other comprehensive loss are described in the reconciliation of the consolidated statement of comprehensive income (loss) for the corresponding periods of the year ended December 31, 2018.

F-68


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended December 31, 2019
 As Previously Reported Restatement Impacts Restatement References As Restated
 (In thousands)
Revenue$207,085

$(2,515)
a,b,c,d
$204,570
Cost of sales162,173





162,173
Gross profit44,912

(2,515)


42,397
Selling, general and administrative expenses19,054

3,942

a,c,f
22,996
Amortization of intangible assets341





341
Operating profit (loss)25,517

(6,457)


19,060
Interest expense, net767





767
Other expense (income), net(710)




(710)
Income (loss) from continuing operations before income taxes25,460

(6,457)


19,003
Income tax expense (benefit)6,066

(367)
e
5,699
Net income (loss) from continuing operations19,394

(6,090)


13,304
Loss from discontinued operations, net of tax(20,608)




(20,608)
Net income (loss)$(1,214)
$(6,090)


$(7,304)
 






Basic and diluted earnings (loss) per share:









Continuing operations$1.43

$(0.45)


$0.98
Discontinued operations(1.52)




(1.52)
Basic and diluted earnings (loss) per share$(0.09)
$(0.45)


$(0.54)
 









Basic weighted average shares outstanding13,518





13,518
Diluted weighted average shares outstanding13,625





13,625

(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to revenue of $0.4 million, and an increase to selling, general and administrative ("SG&A") expense of $3.7 million
(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to revenue of $0.6 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in a decrease to revenue and a decrease to SG&A expense of $0.2 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in a decrease to revenue of $1.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to income tax expense of $0.4 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to SG&A expense of $0.5 million


F-69


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended September 30, 2019
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$169,778

$18

b,c
$169,796
$(20,288)$149,508
Cost of sales129,194



 
129,194
(10,632)118,562
Gross profit40,584

18

 
40,602
(9,656)30,946
Selling, general and administrative expenses36,182

2,573

a,c,f
38,755
(12,590)26,165
Amortization of intangible assets345



 
345

345
Operating profit (loss)4,057

(2,552)
 
1,505
2,934
4,439
Interest expense, net864



 
864
(108)756
Other expense (income), net688



 
688
(7)681
Income (loss) from continuing operations before income taxes2,505

(2,552)
 
(47)3,049
3,002
Income tax expense (benefit)2,108

45

e
2,153
296
2,449
Net income (loss) from continuing operations397

(2,597)
 
(2,200)2,753
553
Loss from discontinued operations, net of tax



 

(2,753)(2,753)
Net income (loss)$397

$(2,597)
 
$(2,200)$
$(2,200)
 



 



Basic and diluted earnings (loss) per share:





 






Continuing operations$0.03

$(0.19)
 
$(0.16)$0.20
$0.04
Discontinued operations



 

(0.20)(0.20)
Basic and diluted earnings (loss) per share$0.03

$(0.19)
 
$(0.16)$
$(0.16)
 





 






Basic weighted average shares outstanding13,579



 
13,579

13,579
Diluted weighted average shares outstanding13,595



 
13,595

13,595

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $2.2 million
(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to revenue of $0.5 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.5 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to SG&A expense of $0.1 million


F-70


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






 For the Nine Months Ended September 30, 2019
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$463,582

$1,458

b,c,f
$465,040
$(57,824)$407,216
Cost of sales352,618

(65)
f
352,553
(31,493)321,060
Gross profit110,964

1,522

 
112,486
(26,331)86,155
Selling, general and administrative expenses108,306

5,137

a,c,f
113,443
(36,058)77,385
Amortization of intangible assets1,036



 
1,036

1,036
Operating profit (loss)1,622

(3,615)
 
(1,993)9,727
7,734
Interest expense, net2,514



 
2,514
(306)2,208
Other expense (income), net230

144

f
374
(22)352
Income (loss) from continuing operations before income taxes(1,122)
(3,759)
 
(4,881)10,055
5,174
Income tax expense (benefit)1,186

136

e
1,322
2,063
3,385
Net income (loss) from continuing operations(2,308)
(3,895)
 
(6,203)7,992
1,789
Loss from discontinued operations, net of tax



 

(7,992)(7,992)
Net income (loss)$(2,308)
$(3,895)
 
$(6,203)$
$(6,203)
 



 



Basic and diluted earnings (loss) per share:





 






Continuing operations$(0.17)
$(0.28)
 
$(0.45)$0.58
$0.13
Discontinued operations



 

(0.58)(0.58)
Basic and diluted earnings (loss) per share$(0.17)
$(0.28)
 
$(0.45)$
$(0.45)
 





 






Basic weighted average shares outstanding13,726



 
13,726

13,726
Diluted weighted average shares outstanding13,726



 
13,726
5
13,731

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $3.3 million
(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to revenue of $0.5 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $1.8 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.2 million, a decrease to cost of sales of $0.1 million, and an increase to other expense of $0.1 million.


F-71


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended June 30, 2019
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$148,427

$921

c
$149,348
$(18,283)$131,065
Cost of sales112,770



 
112,770
(10,212)102,558
Gross profit35,657

921

 
36,578
(8,071)28,507
Selling, general and administrative expenses35,617

594

a,c
36,211
(11,235)24,976
Amortization of intangible assets346



 
346

346
Operating profit (loss)(306)
327

 
21
3,164
3,185
Interest expense, net904



 
904
(115)789
Other expense (income), net(126)


 
(126)(6)(132)
Income (loss) from continuing operations before income taxes(1,084)
327

 
(757)3,285
2,528
Income tax expense(140)
1



(139)769
630
Net income (loss) from continuing operations(944)
326

 
(618)2,516
1,898
Loss from discontinued operations, net of tax



 

(2,516)(2,516)
Net income (loss)$(944)
$326

 
$(618)$
$(618)
 



 



Basic and diluted earnings (loss) per share:





 






Continuing operations$(0.07)
$0.03

 
$(0.04)$0.18
$0.14
Discontinued operations



 

(0.18)(0.18)
Basic and diluted earnings (loss) per share$(0.07)
$0.02

 
$(0.05)$
$(0.04)
 





 






Basic weighted average shares outstanding13,813



 
13,813

13,813
Diluted weighted average shares outstanding13,813



 
13,813
13
13,826

(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to selling, general and administrative ("SG&A") expense of $0.3 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.9 million



F-72


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






 For the Six Months Ended June 30, 2019
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$293,804

$1,439

c,f
$295,243
$(37,536)$257,707
Cost of sales223,424

(65)
f
223,359
(20,861)202,498
Gross profit70,380

1,504

 
71,884
(16,675)55,209
Selling, general and administrative expenses72,124

2,566

a,c,f
74,690
(23,468)51,222
Amortization of intangible assets691



 
691

691
Operating profit (loss)(2,435)
(1,062)
 
(3,497)6,793
3,296
Interest expense, net1,650



 
1,650
(198)1,452
Other expense (income), net(458)
144

f
(314)(15)(329)
Income (loss) from continuing operations before income taxes(3,627)
(1,206)
 
(4,833)7,006
2,173
Income tax expense (benefit)(922)
92

e
(830)1,767
937
Net income (loss) from continuing operations(2,705)
(1,298)
 
(4,003)5,239
1,236
Loss from discontinued operations, net of tax



 

(5,239)(5,239)
Net loss$(2,705)
$(1,298)
 
$(4,003)$
$(4,003)
 



 



Basic and diluted earnings (loss) per share:





 






Continuing operations$(0.20)
$(0.09)
 
$(0.29)$0.38
$0.09
Discontinued operations



 

(0.38)(0.38)
Basic and diluted earnings (loss) per share$(0.20)
$(0.09)
 
$(0.29)$
$(0.29)
 





 






Basic weighted average shares outstanding13,800



 
13,800

13,800
Diluted weighted average shares outstanding13,800



 
13,800
13
13,813

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.1 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $1.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.1 million, a decrease to cost of sales of $0.1 million, an increase to SG&A of $0.2 million, and an increase to other expense of $0.1 million


F-73


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended March 31, 2019

As Previously Reported
Restatement Impacts
Restatement References
As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$145,377

$518

c,f
$145,895
$(19,253)$126,642
Cost of sales110,654

(65)
f
110,589
(10,649)99,940
Gross profit34,723

583



35,306
(8,604)26,702
Selling, general and administrative expenses36,507

1,972

a,c,f
38,479
(12,233)26,246
Amortization of intangible assets345





345

345
Operating profit (loss)(2,129)
(1,389)


(3,518)3,629
111
Interest expense, net746





746
(83)663
Other expense (income), net(332)
144

f
(188)(9)(197)
Income (loss) from continuing operations before income taxes(2,543)
(1,533)


(4,076)3,721
(355)
Income tax expense (benefit)(782)
91

e
(691)998
307
Net income (loss) from continuing operations(1,761)
(1,624)


(3,385)2,723
(662)
Loss from discontinued operations, net of tax






(2,723)(2,723)
Net loss$(1,761)
$(1,624)


$(3,385)$
$(3,385)










Basic and diluted earnings (loss) per share:













Continuing operations$(0.13)
$(0.12)


$(0.25)$0.20
$(0.05)
Discontinued operations






(0.20)(0.20)
Basic and diluted earnings (loss) per share$(0.13)
$(0.12)


$(0.25)$
$(0.25)















Basic weighted average shares outstanding13,786





13,786

13,786
Diluted weighted average shares outstanding13,786





13,786

13,786

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.4 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.4 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.1 million, a decrease to cost of sales of $0.1 million, an increase to SG&A expense of $0.2 million, and an increase in other expense of $0.1 million


F-74


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended December 31, 2018
 As Previously Reported Restatement Impacts Restatement References As Restated
 (In thousands, except per share data)
Revenue$198,981

$(815)
c,f
$198,166
Cost of sales157,419

(1,246)
f
156,173
Gross profit41,562

431



41,993
Selling, general and administrative expenses23,677

1,922

a,c,f
25,599
Amortization of intangible assets345





345
Operating profit17,540

(1,490)


16,050
Interest expense, net711





711
Other expense (income), net573

(144)
f
429
Income from continuing operations before income taxes16,256

(1,346)


14,910
Income tax expense3,595

(175)
e
3,420
Net income from continuing operations12,661

(1,171)


11,490
Loss from discontinued operations, net of tax2,371





2,371
Net income (loss)$15,032

$(1,171)


$13,861
 






Basic and diluted earnings (loss) per share:









Continuing operations$0.93

$(0.09)


$0.84
Discontinued operations0.17





0.17
Basic and diluted earnings (loss) per share$1.10

$(0.09)


$1.01
 









Basic weighted average shares outstanding13,714





13,714
Diluted weighted average shares outstanding13,844





13,844

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.4 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.6 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to income tax expense of $0.2 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to revenue of $1.4 million, a decrease to cost of sales of $1.2 million, and a decrease in other income of $0.1 million


F-75


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended September 30, 2018
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$196,901

$284

c
$197,185
$(25,884)$171,301
Cost of sales146,550





146,550
(13,653)132,897
Gross profit50,351

284



50,635
(12,231)38,404
Selling, general and administrative expenses39,211

1,496

a,c
40,707
(14,411)26,296
Amortization of intangible assets345





345

345
Operating profit10,795

(1,212)


9,583
2,180
11,763
Interest expense, net1,001





1,001
(115)886
Other expense (income), net(426)




(426)(7)(433)
Income from continuing operations before income taxes10,220

(1,212)


9,008
2,302
11,310
Income tax expense2,176

(309)
e
1,867
413
2,280
Net income from continuing operations8,044

(903)


7,141
1,889
9,030
Loss from discontinued operations, net of tax






(1,889)(1,889)
Net income (loss)$8,044

$(903)


$7,141
$
$7,141
 








Basic and diluted earnings (loss) per share:













Continuing operations$0.59

$(0.07)


$0.52
$0.14
$0.66
Discontinued operations






(0.14)(0.14)
Basic and diluted earnings (loss) per share$0.59

$(0.07)


$0.52
$
$0.52
 













Basic weighted average shares outstanding13,704





13,704

13,704
Diluted weighted average shares outstanding13,713





13,713

13,713

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.2 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to income tax expense of $0.3 million



F-76


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






 For the Nine Months Ended September 30, 2018  
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$501,475

$1,187

c.f
$502,662
$(70,746)$431,916
Cost of sales372,478

81

f
372,559
(37,702)334,857
Gross profit128,997

1,106



130,103
(33,044)97,059
Selling, general and administrative expenses117,328

4,235

a,c,f
121,563
(43,041)78,522
Amortization of intangible assets1,036





1,036

1,036
Operating profit10,633

(3,129)


7,504
9,997
17,501
Interest expense, net2,422





2,422
(217)2,205
Other expense (income), net(253)




(253)(27)(280)
Income from continuing operations before income taxes8,464

(3,129)


5,335
10,241
15,576
Income tax expense1,712

(214)
e
1,498
2,509
4,007
Net income from continuing operations6,752

(2,915)


3,837
7,732
11,569
Loss from discontinued operations, net of tax






(7,732)(7,732)
Net income (loss)$6,752

$(2,915)


$3,837
$
$3,837
 








Basic and diluted earnings (loss) per share:













Continuing operations$0.49

$(0.21)


$0.28
$0.56
$0.84
Discontinued operations






(0.56)(0.56)
Basic and diluted earnings (loss) per share$0.49

$(0.21)


$0.28
$
$0.28
 













Basic weighted average shares outstanding13,694





13,694

13,694
Diluted weighted average shares outstanding13,697





13,697

13,697

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $3.5 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.9 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to income tax expense of $0.2 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.3 million, an increase to cost of sales of $0.1 million, and a decrease to SG&A of $0.2 million

F-77


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended June 30, 2018  
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$157,941

$404

c
$158,345
$(22,762)$135,583
Cost of sales117,088





117,088
(12,232)104,856
Gross profit40,853

404



41,257
(10,530)30,727
Selling, general and administrative expenses40,123

525

a,c,f
40,648
(14,211)26,437
Amortization of intangible assets346





346

346
Operating profit384

(121)


263
3,681
3,944
Interest expense, net889





889
(80)809
Other expense (income), net687





687
(8)679
Income from continuing operations before income taxes(1,192)
(121)


(1,313)3,769
2,456
Income tax expense(318)
126

e
(192)1,003
811
Net income from continuing operations(874)
(247)


(1,121)2,766
1,645
Loss from discontinued operations, net of tax






(2,766)(2,766)
Net income (loss)$(874)
$(247)


$(1,121)$
$(1,121)
 








Basic and diluted earnings (loss) per share:













Continuing operations$(0.06)
$(0.02)


$(0.08)$0.20
$0.12
Discontinued operations






(0.20)(0.20)
Basic and diluted earnings (loss) per share$(0.06)
$(0.02)


$(0.08)$
$(0.08)
 













Basic weighted average shares outstanding13,695





13,695

13,695
Diluted weighted average shares outstanding13,695





13,695
9
13,704

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $0.5 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.4 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to SG&A of $0.4 million


F-78


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






 For the Six Months Ended June 30, 2018  
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$304,574

$903

c,f
$305,477
$(44,862)$260,615
Cost of sales225,928

81

f
226,009
(24,049)201,960
Gross profit78,646

822



79,468
(20,813)58,655
Selling, general and administrative expenses78,117

2,738

a,c,f
80,855
(28,630)52,225
Amortization of intangible assets691





691

691
Operating profit(162)
(1,917)


(2,079)7,817
5,738
Interest expense, net1,421





1,421
(102)1,319
Other expense (income), net173





173
(20)153
Income from continuing operations before income taxes(1,756)
(1,917)


(3,673)7,939
4,266
Income tax expense(464)
95

e
(369)2,096
1,727
Net income from continuing operations(1,292)
(2,012)


(3,304)5,843
2,539
Loss from discontinued operations, net of tax






(5,843)(5,843)
Net income (loss)$(1,292)
$(2,012)


$(3,304)$
$(3,304)
 









Basic and diluted earnings (loss) per share:














Continuing operations$(0.09)
$(0.15)


$(0.24)$0.43
$0.19
Discontinued operations






(0.43)(0.43)
Basic and diluted earnings (loss) per share$(0.09)
$(0.15)


$(0.24)$
$(0.24)
 














Basic weighted average shares outstanding13,689





13,689

13,689
Diluted weighted average shares outstanding13,689





13,689
4
13,693

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $2.3 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.6 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.3 million, an increase to cost of sales of $0.1 million, and a decrease to SG&A of $0.2 million



F-79


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended March 31, 2018
 As Previously Reported Restatement Impacts Restatement References As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Revenue$146,633

$499

c,f
$147,132
$(22,100)$125,032
Cost of sales108,840

81

f
108,921
(11,817)97,104
Gross profit37,793

418



38,211
(10,283)27,928
Selling, general and administrative expenses37,994

2,214

a,c,f
40,208
(14,419)25,789
Amortization of intangible assets345





345

345
Operating profit(546)
(1,796)


(2,342)4,136
1,794
Interest expense, net532





532
(22)510
Other expense (income), net(514)




(514)(12)(526)
Income from continuing operations before income taxes(564)
(1,796)


(2,360)4,170
1,810
Income tax expense(146)
(31)


(177)1,093
916
Net income from continuing operations(418)
(1,765)


(2,183)3,077
894
Loss from discontinued operations, net of tax






(3,077)(3,077)
Net income (loss)$(418)
$(1,765)


$(2,183)$
$(2,183)
 








Basic and diluted earnings (loss) per share:













Continuing operations$(0.03)
$(0.12)


$(0.15)$0.22
$0.07
Discontinued operations






(0.22)(0.22)
Basic and diluted earnings (loss) per share$(0.03)
$(0.12)


$(0.15)$
$(0.15)
 













Basic weighted average shares outstanding13,683





13,683

13,683
Diluted weighted average shares outstanding13,683





13,683
9
13,692

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.7 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.2 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.3 million, and increase to cost of sales of $0.1 million, an increase to SG&A of $0.3 million


F-80


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended December 31, 2019
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(1,214)
$(6,090)
$(7,304)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment857

(656)
201
(Loss) gain on long-term intra-entity foreign currency transactions294



294
Cash flow hedging activity(143)


(143)
Reclassification of hedging activities into earnings81



81
Pension plan adjustment1,410



1,410
Reclassification of pension adjustments into earnings35



35
Total other comprehensive loss, net of tax2,534

(656)
1,878
Comprehensive income (loss)$1,320

$(6,746)
$(5,426)

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended December 31, 2019 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.


F-81


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended September 30, 2019
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$397

$(2,597)
$(2,200)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment(312)
294

(18)
(Loss) gain on long-term intra-entity foreign currency transactions(509)


(509)
Cash flow hedging activity(127)


(127)
Reclassification of hedging activities into earnings122



122
Pension plan adjustment




Reclassification of pension adjustments into earnings127



127
Total other comprehensive loss, net of tax(699)
294

(405)
Comprehensive income (loss)$(302)
$(2,303)
$(2,605)

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended September 30, 2019 section above.
The increase to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.

 For the Nine Months Ended September 30, 2019
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(2,308)
$(3,895)
$(6,203)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment244

65

309
(Loss) gain on long-term intra-entity foreign currency transactions(373)


(373)
Cash flow hedging activity(1,570)
144

(1,426)
Reclassification of hedging activities into earnings268



268
Pension plan adjustment




Reclassification of pension adjustments into earnings219

94

313
Total other comprehensive loss, net of tax(1,212)
303

(909)
Comprehensive income (loss)$(3,520)
$(3,592)
$(7,112)

See description of the net income (loss) impacts in the consolidated statement of operations for the nine months ended September 30, 2019 section above.
The increase to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.
The increases to cash flow hedging and the reclassification of pension adjustments are from the correction of other immaterial errors.


F-82


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended June 30, 2019
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(944)
$326

$(618)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment226

(113)
113
(Loss) gain on long-term intra-entity foreign currency transactions121



121
Cash flow hedging activity(877)


(877)
Reclassification of hedging activities into earnings144



144
Pension plan adjustment




Reclassification of pension adjustments into earnings102



102
Total other comprehensive loss, net of tax(284)
(113)
(397)
Comprehensive income (loss)$(1,228)
$213

$(1,015)

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended June 30, 2019 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.
The increases to the reclassification of pension adjustments are from the correction of other immaterial errors.

 For the Six Months Ended June 30, 2019
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(2,705)
$(1,298)
$(4,003)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment556

(229)
327
(Loss) gain on long-term intra-entity foreign currency transactions136



136
Cash flow hedging activity(1,443)
144

(1,299)
Reclassification of hedging activities into earnings146



146
Pension plan adjustment




Reclassification of pension adjustments into earnings92

94

186
Total other comprehensive loss, net of tax(513)
9

(504)
Comprehensive income (loss)$(3,218)
$(1,289)
$(4,507)

See description of the net income (loss) impacts in the consolidated statement of operations for the six months ended June 30, 2019 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets and timing of recognition of customer pricing concessions categories.
The increase to cash flow hedging and the reclassification of pension adjustments is from the correction of other immaterial errors.


F-83


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended March 31, 2019

As Previously Reported
Restatement Impacts
As Restated
 (In thousands)
Net income (loss)$(1,761)
$(1,624)
$(3,385)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment330

(116)
214
(Loss) gain on long-term intra-entity foreign currency transactions15



15
Cash flow hedging activity(566)
144

(422)
Reclassification of hedging activities into earnings2



2
Pension plan adjustment




Reclassification of pension adjustments into earnings(10)
94

84
Total other comprehensive loss, net of tax(229)
122

(107)
Comprehensive income (loss)$(1,990)
$(1,502)
$(3,492)

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended March 31, 2019 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.
The increase to cash flow hedging is from the correction of other immaterial errors.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended December 31, 2018
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$15,032

$(1,171)
$13,861
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment(1,441)
306

(1,135)
(Loss) gain on long-term intra-entity foreign currency transactions60



60
Cash flow hedging activity(208)
(144)
(352)
Reclassification of hedging activities into earnings48



48
Pension plan adjustment(1,920)


(1,920)
Reclassification of pension adjustments into earnings235

(94)
141
Total other comprehensive loss, net of tax(3,226)
68

(3,158)
Comprehensive income (loss)$11,806

$(1,103)
$10,703

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended December 31, 2018 section above.
The increase to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.
The decrease to cash flow hedging and the reclassification of pension adjustments are from the correction of other immaterial errors.


F-84


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended September 30, 2018
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$8,044

$(903)
$7,141
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment1,257

(355)
902
(Loss) gain on long-term intra-entity foreign currency transactions(53)


(53)
Cash flow hedging activity(301)


(301)
Reclassification of hedging activities into earnings(102)


(102)
Pension plan adjustment




Reclassification of pension adjustments into earnings115



115
Total other comprehensive loss, net of tax916

(355)
561
Comprehensive income (loss)$8,960

$(1,258)
$7,702

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended September 30, 2018 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.

 For the Nine Months Ended September 30, 2018
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$6,752

$(2,915)
$3,837
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment1,282

(219)
1,063
(Loss) gain on long-term intra-entity foreign currency transactions(1,066)


(1,066)
Cash flow hedging activity452



452
Reclassification of hedging activities into earnings105



105
Pension plan adjustment




Reclassification of pension adjustments into earnings415



415
Total other comprehensive loss, net of tax1,188

(219)
969
Comprehensive income (loss)$7,940

$(3,135)
$4,805

See description of the net income (loss) impacts in the consolidated statement of operations for the nine months ended September 30, 2018 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.


F-85


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended June 30, 2018
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(874)
$(247)
$(1,121)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment(892)
480

(412)
(Loss) gain on long-term intra-entity foreign currency transactions(1,013)


(1,013)
Cash flow hedging activity464



464
Reclassification of hedging activities into earnings41



41
Pension plan adjustment




Reclassification of pension adjustments into earnings142



142
Total other comprehensive loss, net of tax(1,258)
480

(778)
Comprehensive income (loss)$(2,132)
$233

$(1,899)

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended June 30, 2018 section above.
The increase to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.

 For the Six Months Ended June 30, 2018
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(1,292)
$(2,012)
$(3,304)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment25

136

161
(Loss) gain on long-term intra-entity foreign currency transactions(1,013)


(1,013)
Cash flow hedging activity753



753
Reclassification of hedging activities into earnings207



207
Pension plan adjustment




Reclassification of pension adjustments into earnings300



300
Total other comprehensive loss, net of tax272

136

408
Comprehensive income (loss)$(1,020)
$(1,876)
$(2,896)

See description of the net income (loss) impacts in the consolidated statement of operations for the six months ended June 30, 2018 section above.
The increase to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.


F-86


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended March 31, 2018
 As Previously Reported Restatement Impacts As Restated
 (In thousands)
Net income (loss)$(418)
$(1,765)
$(2,183)
Other comprehensive income (loss), net of tax:







Foreign currency translation adjustment917

(344)
573
(Loss) gain on long-term intra-entity foreign currency transactions




Cash flow hedging activity289



289
Reclassification of hedging activities into earnings166



166
Pension plan adjustment




Reclassification of pension adjustments into earnings158



158
Total other comprehensive loss, net of tax1,530

(344)
1,186
Comprehensive income (loss)$1,112

$(2,109)
$(997)

See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended March 31, 2018 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.


F-87


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED BALANCE SHEETS
`September 30, 2019
 As Previously Reported Restatement Impacts Restatement Reference As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Assets         
Current assets         
Cash and cash equivalents$1,866

$



$1,866
$(307)$1,559
Trade receivables, net106,135

(2,179)
a,b
103,956
(865)103,091
Inventory181,847





181,847
(20,804)161,043
Prepaid expenses and other current assets22,445

(7,505)
a,b
14,940
(854)14,086
Current assets of discontinued operations






22,830
22,830
Total current assets312,293

(9,684)


302,609

302,609
Property, plant and equipment, net22,653





22,653
(460)22,193
Goodwill6,253





6,253

6,253
Other intangible assets, net3,483





3,483

3,483
Deferred income taxes6,161

634

e
6,795
(1,155)5,640
Deferred costs8,925





8,925
(121)8,804
Other non-current assets1,561





1,561
(8)1,553
Non-current assets of discontinued operations






1,744
1,744
Total assets$361,329

$(9,050)


$352,279
$
$352,279
Liabilities and stockholders' equity








Current liabilities








Accounts payable$147,206

$16



$147,222
$(7,211)$140,011
Accounts payable to NACCO Industries, Inc.220





220

220
Revolving credit agreements59,702





59,702
(9,550)50,152
Accrued compensation15,568

389

f
15,957
(1,307)14,650
Accrued product returns8,266





8,266

8,266
Other current liabilities30,651

1,874

a,d,e
32,525
(6,645)25,880
Current liabilities of discontinued operations






24,713
24,713
Total current liabilities261,613

2,279



263,892

263,892
Revolving credit agreements30,000





30,000

30,000
Other long-term liabilities14,961

882

e
15,843
(1,585)14,258
Non-current liabilities of discontinued operations






1,585
1,585
Total liabilities306,574

3,161



309,735

309,735
Stockholders’ equity








Class A Common stock95





95

95
Class B Common stock44





44

44
Capital in excess of par value54,143





54,143

54,143
Treasury stock(5,960)




(5,960)
(5,960)
Retained earnings24,955

(12,724)
a,b,c,d,e,f
12,231

12,231
Accumulated other comprehensive loss(18,522)
513

a,b,d
(18,009)
(18,009)
Total stockholders’ equity54,755

(12,211)


42,544

42,544
Total liabilities and stockholders' equity$361,329

$(9,050)


$352,279
$
$352,279


F-88


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $1.6 million, a reduction to prepaid expenses and other current assets of $7.6 million, and an increase to other current liabilities of $2.1 million
(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to trade receivables of $0.6 million and an increase to prepaid expenses and other current assets of $0.1 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.2 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $0.6 million, a decrease to other current liabilities of $0.4 million, and an increase to other long-term liabilities of $0.9 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to accrued compensation of $0.4 million



F-89


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED BALANCE SHEETS
`June 30, 2019  
 As Previously Reported Restatement Impacts Restatement Reference As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Assets         
Current assets         
Cash and cash equivalents$1,131

$



$1,131
$(102)$1,029
Trade receivables, net89,579

(2,446)
a,f
87,133
(865)86,268
Inventory140,817





140,817
(19,345)121,472
Prepaid expenses and other current assets24,078

(6,723)
a
17,355
(943)16,412
Current assets of discontinued operations






21,255
21,255
Total current assets255,605

(9,169)


246,436

246,436
Property, plant and equipment, net23,204





23,204
(1,555)21,649
Goodwill6,253





6,253

6,253
Other intangible assets, net3,828





3,828

3,828
Deferred income taxes6,169

318

e
6,487
(2,733)3,754
Deferred costs8,683





8,683
(119)8,564
Other non-current assets1,997





1,997
(13)1,984
Non-current assets of discontinued operations






4,420
4,420
Total assets$305,739

$(8,851)


$296,888
$
$296,888
Liabilities and stockholders' equity








Current liabilities








Accounts payable$91,737

$



$91,737
$(5,538)$86,199
Accounts payable to NACCO Industries, Inc.220





220

220
Revolving credit agreements58,955





58,955
(7,450)51,505
Accrued compensation12,091

387

f
12,478
(753)11,725
Accrued product returns8,224





8,224

8,224
Other current liabilities27,930

(241)
a,d,e,f
27,689
(6,307)21,382
Current liabilities of discontinued operations






20,048
20,048
Total current liabilities199,157

146



199,303

199,303
Revolving credit agreements32,000





32,000
(2,000)30,000
Other long-term liabilities15,485

911

e
16,396
(1,697)14,699
Non-current liabilities of discontinued operations






3,697
3,697
Total liabilities246,642

1,057



247,699

247,699
Stockholders’ equity








Class A Common stock95





95

95
Class B Common stock44





44

44
Capital in excess of par value53,342





53,342

53,342
Treasury stock(2,334)




(2,334)
(2,334)
Retained earnings25,773

(10,127)
a,d,e,f
15,646

15,646
Accumulated other comprehensive loss(17,823)
219

a,d
(17,604)
(17,604)
Total stockholders’ equity59,097

(9,908)


49,189

49,189
Total liabilities and stockholders' equity$305,739

$(8,851)


$296,888
$
$296,888


F-90


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $1.3 million, a reduction to prepaid expenses and other current assets of $6.7 million, and an increase in other current liabilities of $1.4 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.2 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $0.3 million, a decrease to other current liabilities of $0.4 million, and an increase to other long-term liabilities of $0.9 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to trade receivables of $1.1 million, an increase to accrued compensation of $0.4 million, and a decrease to other current liabilities of $1.4 million


F-91


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED BALANCE SHEETS
`March 31, 2019

 As Previously Reported
Restatement Impacts
Restatement Reference
As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Assets 
 





Current assets 
 





Cash and cash equivalents$1,721

$



$1,721
$(85)$1,636
Trade receivables, net92,534

(2,768)
a,f
89,766
(10,664)79,102
Inventory142,261





142,261
(21,554)120,707
Prepaid expenses and other current assets16,373

(6,605)
a
9,768
7,611
17,379
Current assets of discontinued operations






24,692
24,692
Total current assets252,889

(9,373)


243,516

243,516
Property, plant and equipment, net22,566





22,566
(1,582)20,984
Goodwill6,253





6,253

6,253
Other intangible assets, net4,174





4,174

4,174
Deferred income taxes5,493

385

e
5,878
(2,712)3,166
Deferred costs8,447





8,447
(131)8,316
Other non-current assets2,424





2,424
(21)2,403
Non-current assets of discontinued operations






4,446
4,446
Total assets$302,246

$(8,988)


$293,258
$
$293,258
Liabilities and stockholders' equity








Current liabilities








Accounts payable$80,649

$



$80,649
$(6,929)$73,720
Accounts payable to NACCO Industries, Inc.2,425





2,425

2,425
Revolving credit agreements62,212





62,212
(7,400)54,812
Accrued compensation8,903

370

f
9,273
(875)8,398
Accrued product returns9,314





9,314

9,314
Other current liabilities24,109

(135)
a,d,e,f
23,974
(6,269)17,705
Current liabilities of discontinued operations






21,473
21,473
Total current liabilities187,612

235



187,847

187,847
Revolving credit agreements32,000





32,000
(2,000)30,000
Other long-term liabilities19,555

898

e
20,453
(1,834)18,619
Non-current liabilities of discontinued operations






3,834
3,834
Total liabilities239,167

1,133



240,300

240,300
Stockholders’ equity








Class A Common stock95





95

95
Class B Common stock44





44

44
Capital in excess of par value52,520





52,520

52,520
Retained earnings27,959

(10,453)
a,d,e,f
17,506

17,506
Accumulated other comprehensive loss(17,539)
332

a,d
(17,207)
(17,207)
Total stockholders’ equity63,079

(10,121)


52,958

52,958
Total liabilities and stockholders' equity$302,246

$(8,988)


$293,258
$
$293,258

(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $1.6 million, a reduction to prepaid expenses and other current assets of $6.6 million, and an increase to other current liabilities of $1.4 million

F-92


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.2 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to other current assets of $0.1 million, an increase to deferred income taxes of $0.4 million, a decrease to other current liabilities of $0.3 million, and an increase to other long-term liabilities of $0.9 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to trade receivables of $1.1 million, an increase to accrued compensation of $0.4 million and a decrease to other current liabilities of $1.4 million



F-93


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED BALANCE SHEETS
`September 30, 2018
 As Previously Reported Restatement Impacts Restatement Reference As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Assets         
Current assets         
Cash and cash equivalents$2,139

$



$2,139
$(572)$1,567
Trade receivables, net113,683

(351)
a
113,332
(1,023)112,309
Inventory183,831





183,831
(28,087)155,744
Prepaid expenses and other current assets20,766

(5,668)
a
15,098
(2,503)12,595
Current assets of discontinued operations






32,185
32,185
Total current assets320,419

(6,019)


314,400

314,400
Property, plant and equipment, net23,309





23,309
(2,321)20,988
Goodwill6,253





6,253

6,253
Other intangible assets, net4,864





4,864

4,864
Deferred income taxes10,450

53

e
10,503
(2,799)7,704
Deferred costs10,306





10,306
(153)10,153
Other non-current assets3,322





3,322
(40)3,282
Non-current assets of discontinued operations






5,313
5,313
Total assets$378,923

$(5,966)


$372,957
$
$372,957
Liabilities and stockholders' equity








Current liabilities








Accounts payable$143,955

$



$143,955
$(12,335)$131,620
Accounts payable to NACCO Industries, Inc.2,480





2,480

2,480
Revolving credit agreements69,883





69,883
(9,800)60,083
Accrued compensation16,575

356

f
16,931
(1,510)15,421
Accrued product returns9,601





9,601

9,601
Other current liabilities27,139

1,397

a,d,e
28,536
(6,048)22,488
Current liabilities of discontinued operations






29,693
29,693
Total current liabilities269,633

1,753



271,386

271,386
Revolving credit agreements30,000





30,000

30,000
Other long-term liabilities24,840

(204)
e
24,636
(2,293)22,343
Non-current liabilities of discontinued operations






2,293
2,293
Total liabilities324,473

1,549



326,022

326,022
Stockholders’ equity








Class A Common stock92





92

92
Class B Common stock45





45

45
Capital in excess of par value51,366





51,366

51,366
Treasury stock








Retained earnings17,031

(7,658)
a,d,e,f
9,373

9,373
Accumulated other comprehensive loss(14,084)
143

a,b,d
(13,941)
(13,941)
Total stockholders’ equity54,450

(7,515)


46,935

46,935
Total liabilities and stockholders' equity$378,923

$(5,966)


$372,957
$
$372,957


F-94


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $0.4 million, a reduction to prepaid expenses and other current assets of $5.7 million, and an increase to other current liabilities of $1.0 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $0.1 million, a decrease to other long-term liabilities of $0.2 million and an increase to other current liabilities of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to accrued compensation of $0.4 million

F-95


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED BALANCE SHEETS
`June 30, 2018
 As Previously Reported Restatement Impacts Restatement Reference As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Assets         
Current assets         
Cash and cash equivalents$1,962

$



$1,962
$(569)$1,393
Trade receivables, net77,623

(411)
a
77,212
(1,080)76,132
Inventory165,237





165,237
(26,516)138,721
Prepaid expenses and other current assets20,996

(3,888)
a
17,108
(2,539)14,569
Current assets of discontinued operations






30,704
30,704
Total current assets265,818

(4,299)


261,519

261,519
Property, plant and equipment, net21,839





21,839
(2,751)19,088
Goodwill6,253





6,253

6,253
Other intangible assets, net5,209





5,209

5,209
Deferred income taxes10,894

668

e
11,562
(2,685)8,877
Deferred costs9,973





9,973
(148)9,825
Other non-current assets3,282





3,282
(104)3,178
Non-current assets of discontinued operations






5,688
5,688
Total assets$323,268

$(3,631)


$319,637
$
$319,637
Liabilities and stockholders' equity








Current liabilities








Accounts payable$103,461

$



$103,461
$(10,973)$92,488
Accounts payable to NACCO Industries, Inc.2,769





2,769

2,769
Revolving credit agreements75,476





75,476
(9,150)66,326
Accrued compensation12,531

325

f
12,856
(872)11,984
Accrued product returns9,648





9,648

9,648
Other current liabilities19,099

2,505

a,d,e,f
21,604
(5,835)15,769
Current liabilities of discontinued operations






26,830
26,830
Total current liabilities222,984

2,830



225,814

225,814
Revolving credit agreements30,000





30,000

30,000
Other long-term liabilities24,274

(204)
e
24,070
(2,416)21,654
Non-current liabilities of discontinued operations






2,416
2,416
Total liabilities277,258

2,626



279,884

279,884
Stockholders’ equity








Class A Common stock92





92

92
Class B Common stock45





45

45
Capital in excess of par value50,721





50,721

50,721
Treasury stock








Retained earnings10,152

(6,755)
a,d,e,f
3,397

3,397
Accumulated other comprehensive loss(15,000)
498

a,e,f
(14,502)
(14,502)
Total stockholders’ equity46,010

(6,257)


39,753

39,753
Total liabilities and stockholders' equity$323,268

$(3,631)


$319,637
$
$319,637



F-96


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $0.4 million, a reduction to prepaids and other assets of $3.9 million, and an increase to other current liabilities of $1.3 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.2 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $0.7 million, an increase to other current liabilities of $0.2 million, and a decrease to other long-term liabilities of $0.2 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to accrued compensation of $0.3 million, and an increase to other current liabilities of $0.8 million






F-97


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)






CONDENSED CONSOLIDATED BALANCE SHEETS
`March 31, 2018
 As Previously Reported Restatement Impacts Restatement Reference As RestatedRecasting ImpactsAs Restated and Recast
 (In thousands)
Assets         
Current assets         
Cash and cash equivalents$2,389

$



$2,389
$(605)$1,784
Trade receivables, net88,579

(191)
a
88,388
(9,030)79,358
Inventory157,622





157,622
(24,873)132,749
Prepaid expenses and other current assets11,848

(2,655)
a
9,193
5,422
14,615
Current assets of discontinued operations






29,086
29,086
Total current assets260,438

(2,846)


257,592

257,592
Property, plant and equipment, net20,597





20,597
(2,954)17,643
Goodwill6,253





6,253

6,253
Other intangible assets, net5,555





5,555

5,555
Deferred income taxes12,200

610

e
12,810
(2,391)10,419
Deferred costs10,347





10,347
(160)10,187
Other non-current assets3,224





3,224
(156)3,068
Non-current assets of discontinued operations






5,661
5,661
Total assets$318,614

$(2,236)


$316,378
$
$316,378
Liabilities and stockholders' equity








Current liabilities








Accounts payable$108,185

$



$108,185
$(11,261)$96,924
Accounts payable to NACCO Industries, Inc.9,285





9,285
(1,471)7,814
Revolving credit agreements65,508





65,508
(2,200)63,308
Accrued compensation9,833

338

f
10,171
(933)9,238
Accrued product returns10,815





10,815

10,815
Other current liabilities22,751

4,120

a,d,e,f
26,871
(5,644)21,227
Current liabilities of discontinued operations






21,509
21,509
Total current liabilities226,377

4,458



230,835

230,835
Revolving credit agreements20,000





20,000

20,000
Other long-term liabilities24,600

(204)
e
24,396
(2,565)21,831
Non-current liabilities of discontinued operations






2,565
2,565
Total liabilities270,977

4,254



275,231

275,231
Stockholders’ equity








Class A Common stock92





92

92
Class B Common stock45





45

45
Capital in excess of par value49,051





49,051

49,051
Treasury stock








Retained earnings12,191

(6,508)
a,d,e,f
5,683

5,683
Accumulated other comprehensive loss(13,742)
18

a,e,f
(13,724)
(13,724)
Total stockholders’ equity47,637

(6,490)


41,147

41,147
Total liabilities and stockholders' equity$318,614

$(2,236)


$316,378
$
$316,378



F-98


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)







(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $0.2 million, a reduction to prepaids and other assets of $2.6 million, and an increase to other current liabilities of $2.6 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $0.6 million, and a decrease to other long-term liabilities of $0.2 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to accrued compensation of $0.3 million, and an increase to other current liabilities of $1.2 million


F-99


SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
HAMILTON BEACH BRANDS HOLDING COMPANY
YEAR ENDED DECEMBER 31, 2020, 2019, 2018, AND 20172018
  Additions  
DescriptionBalance at Beginning of PeriodCharged to
Costs and
Expenses
Charged to
Other Accounts
— Describe
Deductions
— Describe
Balance at
End of
Period (B)
(In thousands)
2020      
Reserves deducted from asset accounts:      
Allowance for doubtful accounts$1,023 $412 $0 $291 (A) $1,144 
Deferred tax valuation allowances$7,625 $614 $6,137 (C, D)$2,102 
2019
Reserves deducted from asset accounts:      
Allowance for doubtful accounts$713 $309 $$(1)(A) $1,023 
Deferred tax valuation allowances$1,162 $6,502 $$39 (C)$7,625 
2018
Reserves deducted from asset accounts:
Allowance for doubtful accounts$1,177 $11 $$475 (A) $713 
Deferred tax valuation allowances$1,968 $$$806 (C)$1,162 

(A)Write-offs, net of recoveries and foreign exchange rate adjustments.
(B)Balances which are not required to be presented and those which are immaterial have been omitted.
(C)Foreign exchange rate adjustments and utilization of foreign entity losses.
(D)Utilization of Kitchen Collection losses.



    Additions      
Description Balance at Beginning of Period 
Charged to
Costs and
Expenses
 
Charged to
Other Accounts
— Describe
 
Deductions
— Describe
 
Balance at
End of
Period (C)
(In thousands)
2019            
Reserves deducted from asset accounts:            
Allowance for doubtful accounts $713
 $309
 $
 $(1) (A)  $1,023
Deferred tax valuation allowances (as Restated) $1,162
 $6,502
 $
 $39
 (D) $7,625
2018            
Reserves deducted from asset accounts:            
Allowance for doubtful accounts $1,177
 $11
 $
 $475
 (A)  $713
Deferred tax valuation allowances (as Restated) $1,968
 $
 $
 $806
 (D) $1,162
2017            
Reserves deducted from asset accounts:          �� 
Allowance for doubtful accounts $862
 $405
 $
 $90
 (A)  $1,177
Allowance for discounts, adjustments and returns $14,650
 $21,358
 $
 $21,844
 (B)  $14,164
Deferred tax valuation allowances (as Restated) $1,686
 $295
 $
 $13
   $1,968

(A)Write-offs, net of recoveries and foreign exchange rate adjustments.
(B)Payments and customer deductions for product returns, discounts and allowances.
(C)Balances which are not required to be presented and those which are immaterial have been omitted.
(D)Foreign exchange rate adjustments and utilization of foreign entity losses.




F-100F-37