UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
Amendment No. 1
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þ | ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | | For the fiscal year ended | December 31, 20192022 | |
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¨ | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | |
For the transition period from to .
Commission File No. 001-38214
HAMILTON BEACH BRANDS HOLDING COMPANY
(Exact name of registrant as specified in its charter)
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Delaware | | 31-1236686 |
| (State or other jurisdiction of incorporation or organization) | | 31-1236686
(I.R.S. Employer Identification No.) |
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| 4421 Waterfront Dr. | Glen Allen | VA | | 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:
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| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Class A Common Stock, Par Value $0.01 Per Share | HBB | New 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 ¨Noþ
YES ¨NOþ
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.Yesþ No ¨
YES¨ 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.
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Large accelerated filer | ¨ | Accelerated filer | þ | 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. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 20192022 (the last business day of the registrant's most recently completed second fiscal quarter): $130,361,017$84,623,678
Number of shares of Class A Common Stock outstanding at July 17, 2020: 9,607,176March 3, 2023: 10,274,263
Number of shares of Class B Common Stock outstanding at July 17, 2020: 4,062,422March 3, 2023: 3,629,264
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 20202023 annual meeting of stockholders are incorporated herein by reference in Part III of this Form 10-K/A.
HAMILTON BEACH BRANDS HOLDING COMPANY
TABLE OF CONTENTS
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
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 investmentsis the investment in its consolidated subsidiaries.subsidiary. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries.subsidiary. Hamilton Beach Brands Holding Company has not guaranteed any obligations of its subsidiaries.subsidiary.
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.
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 continues to expand in the home, health and wellness market, selling air purifiers under the Clorox® and TrueAir® brands, Hamilton Beach® Health smart Injection Care Management Systems, and Brita® water filtration systems. 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 primarily through the use of television, internetdigital and print advertising.
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%26%, 33%28% and 32%35% of the HBB’s revenue in 2019, 20182022, 2021 and 2017,2020, respectively. Amazon.com, Inc. and its subsidiaries accounted for approximately 14%23%, 10%22% and 12%16% of the HBB's revenue in 2019, 20182022, 2021 and 2017,2020, respectively. HBB’s five largest customers accounted for approximately 58%61%, 53%61%, and 54%64% of the HBB’s revenue for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, 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 debtborrowings under our revolving credit facility 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.
Product Design and Development
HBB incurred $12.1$11.8 million, $11.0$8.6 million and $10.4$10.0 million in 2019, 20182022, 2021 and 2017,2020, respectively, on product design and development activities.
Key Suppliers and Raw Material
HBB’s products are suppliedproduced 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 2019,2022, HBB purchased substantially all of its finished products from suppliers in China. HBB purchases its inventory from approximately 6365 suppliers, one of which represented more than 10% of purchases during the year ended December 31, 2019.2022. 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 compelling content, 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 believesis one of the principal areaslargest full-line distributors and marketers of competition with respect to itssmall 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.
To a lesser degree, HBB retail product lines compete outside of North America. HBB's commercial products are product designcompete globally and innovation, quality, price, product features, supply chain excellence, merchandising, promotion and warranty.have generated a strong 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 havedesign 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
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, 2019. There were no fees2022, 2021, and 2020.
Human Capital Resources
Our business is dependent upon, and focused on, people—our employees, our customers and the consumers who enjoy our appliances, and the communities in which we live. Our culture is built on and centered around Good Thinking®, which incorporates teamwork, service and inspired thinking into all areas of our business. We believe that this values-based culture is a core strength that provides the foundation for consulting services renderedour working environment and our employees. Good Thinking ® is more than developing new products; it inspires everything we do.
Within this culture, our people are our most valuable resource, and we expect them to remain the key to our success for decades to come. We strive to create an environment that attracts, engages and develops the talent necessary to enable our performance and growth, including by Mr. Rankinoffering competitive compensation and benefits, providing attractive professional growth opportunities, and insisting that everyone be treated with dignity and respect and be afforded equal opportunity. We also recognize the basic human need to feel a sense of inclusion, belonging, and meaning. So, we strive to foster an environment in 2018.which our people are passionate about our business and our Good Thinking ® culture, have a seat at the table, and genuinely believe that they are doing meaningful work. We believe that employees with diverse backgrounds, experiences and viewpoints bring value to our Company, especially when coupled with a strong culture of trust in which competing ideas are not only allowed but encouraged to emerge. We strongly believe that this type of environment drives discretionary effort, morale, creativity, initiative and retention—and, in turn, long-term competitive advantage and value creation. Within the framework of our Good Thinking ® culture, we operate as One Team and strive to enrich the lives of our customers and consumers by delivering innovative solutions that improve everyday living, all while having a positive, lasting impact on our people and the communities in which we operate.
Employees
We are committed to achieving the highest standards of legal and ethical conduct, including by protecting the human rights and fair treatment of our employees. Our policies and programs—including our Code of Corporate Conduct and other compliance policies, our employment-related policies, and our Human Rights Policy—are designed to support this effort.
As of December 31, 2019, HBB’s2022, the Company employed approximately 700 employees in four countries—Canada, China, Mexico, and the United States, of which approximately 95% were full time and the remaining were part time. Approximately 3% of our workforce is covered by collective bargaining agreements, all of whom are based in Canada or Mexico. There are approximately 500 employees in the United States with about half of those based at the Company’s headquarters in Richmond, Virginia, which is home to the Company’s product design, development and marketing teams as well as its state-of-the-art test kitchen and UL-certified test laboratory. Most of the remaining employees in the United States support the operation of our Byhalia, Mississippi distribution centers. We consider employee relations to be good.
Occupational Health and Safety
One of our top priorities is protecting the health and safety of our workforce. We are committed to maintaining a safe work force consistedenvironment and operating in a safe, secure and responsible manner. We require all Company personnel to perform their work in a manner that complies with legal requirements protecting the safety and health of approximately 680 employees.all persons from unreasonable risks. In addition to maintaining property and equipment in safe operating conditions, our occupational health and safety framework includes certain safety training programs and safety-related processes and procedures as we strive to ensure the health and safety of our workforce. Employees are encouraged to initiate safety improvements, participate in safety committees, and always reinforce safe behaviors.
Talent Acquisition, Development and Retention
The long-term success and growth of our business depend in large part on our ability to execute an effective talent strategy that attracts, engages and grows a highly talented and committed workforce capable of enabling and leading our performance. To meet our talent objectives, we utilize key strategies and processes related to recruitment while we remain focused on continuing to strengthen our onboarding and ongoing learning development. We monitor market compensation and benefits to be able to attract, retain and promote employees and reduce turnover and its associated costs. Through our total rewards programs, we strive to offer competitive compensation, benefits and services to our full-time employees including, incentive plans, recognition plans, defined contribution plans, healthcare benefits, tax-advantaged spending accounts, employee assistance programs and other programs such as sick leave and paid vacation and holidays.
We are a learning organization committed to the goal of continuous improvement and the development of our workforce. To empower our employees to reach their full potential, we offer certain training, learning experiences and resources, such as “Hamilton Beach University”—an ongoing, cross-functional learning program designed not only to help employees learn about our Company, our products and our industry but also to stay abreast of emerging trends and to develop job-specific skills.
Diversity and Inclusion
As an equal opportunity employer, we make decisions without regard to race, color, religion, creed, gender, sexual orientation, gender identity, marital status, national origin, age, veteran status, disability, or any other protected class. We strive to cultivate diversity of perspective in our workforce and believe teammates with diverse backgrounds, experiences and viewpoints bring value to our organization and improve our Good Thinking ® and, in turn, our decision-making. We strive to create a workplace in which employee differences are embraced and competing perspectives are encouraged to emerge, allowing robust collaboration and teamwork to drive better decision making and more favorable results for all stakeholders. All employees participate in training intended to enhance our awareness of the benefits of a diverse and inclusive workforce, to encourage more meaningful collaboration, and to strengthen team effectiveness.
COVID-19
Throughout the pandemic we have monitored the changing landscape of local requirements and guidelines for all locations and have made changes to our workplace protocols as necessary. We continue to monitor diligently the developments related to COVID-19 and to adjust as needed to perform our business requirements while providing a safe environment for our workforce.
We have been impressed by the resiliency and adaptability demonstrated by our employees throughout the pandemic. We believe that their ability to remain flexible and to work productively and collaboratively and, in many cases, remotely during such stressful and unpredictable times is a testament to the strength of our Good Thinking® culture. We also believe that the pandemic-related challenges have strengthened us and that we now are better positioned to adjust work locations and patterns if other disruptive events were to occur.
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 9, 2023, 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 |
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| Name | | Age | | Current Position | | Other Positions |
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| Gregory H. Trepp | | 5861 |
| | President and Chief Executive Officer of Hamilton Beach Holding (from September 2017); President and Chief Executive Officer of HBB (from prior to 2014); 2017) | | Chief Executive Officer of KC (from prior to 2014) | | 2017 to April 2020) |
Gregory E. SalyersR. Scott Tidey | | 5958 |
| | Senior Vice President, Global OperationsSales of HBB (from priorJanuary 2023) | | Senior Vice President, Consumer Sales & Marketing of HBB (from March 2021 to 2014) | | |
R. Scott Tidey | | 55 |
| | January 2023), Senior Vice President, North America Sales and Marketing of HBB (from prior to 2014) | | 2017 to March 2021) |
Michelle O. MosierLinda Woermer | | 5462 |
| | Senior Vice President, Chief Financial Officer and Treasurer of Hamilton Beach Holding (since January 2020); Successor Vice President and Chief Financial OfficerDirector, Controller of HBB (since October 2018)(from April 2020) | | ChiefDirector of Fahrenheit Advisors, LLC (from April 2019 to March 2020), Senior Manager of Financial OfficerPlanning and Analysis, Global Commercial Operations of United Sporting CompaniesIndivior, Inc. (from September 20152017 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).March 2019) |
Dana B. SykesLawrence K. Workman, Jr. | | 5853 |
| | Senior Vice President, General Counsel and Secretary of Hamilton Beach Holding (from January 2020); July 2021) | | Vice President, GeneralBusiness Development and Corporate Counsel and Secretary of HBBCoca-Cola Consolidated, Inc. (from September 2015); 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 prior to 20142017 to July 2014, Assistant General Counsel and Director, Human Resources of HBB.2021) |
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
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. Additionally, in periods of uncertain economic conditions, such as inflation, rising interest rates, recessions or economic slowdowns, HBB's customers may purchase less of our products as they manage their inventory levels to adjust to changes in consumers’ spending habits in response to such economic conditions. These circumstances could adversely impact our revenue and profitability.
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
•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.
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 the industry and 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 from which to choose from.choose. 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
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.
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. Declines in consumer spending or a shift in consumer spending away from small electric household and specialty housewares appliances may significantly reduce demand for our products and reduce orders from retailers for our products, which could lead to increased inventories. Additionally, this may result in lower sales volume, higher price concessions, and lower gross margins.
In addition, the retail market for small electric household and specialty housewares appliances is 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.
Business Risks
Uncertain or unfavorable global economic conditions may have an adverse effect on our business, operating results and financial condition.
Our business has in the past been, and may continue to be, adversely affected by changes in global economic conditions including inflation, rising interest rates, consumer spending rates, availability and costs of raw materials, and availability of capital markets. Further, the negative impacts from the COVID-19 pandemic and its downstream impacts, as well as the ongoing war in Ukraine could negatively impact our business, financial condition, results of operations and cash flows. Inflationary pressures negatively impacted our net revenues, operating margin and net income in fiscal year 2022.
Factors that are largely beyond HBB's control, such as inflation and commodity prices for the raw materials needed by suppliers of HBB’s products, may affect the cost of products. While, historically, the costs of our products have fluctuated, we experienced higher than expected product costs during 2022, largely due to cost pressures resulting from economic conditions. 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. In addition, due to ongoing global supply chain challenges, the Company experienced increased transportation costs which have negatively impacted our results in 2022, and could continue to adversely affect our operating results in the future.
Although we take measures to mitigate the impact of increased product and transportation costs through pricing, if inflationary pressures are sustained, or if pricing strategies are ineffective or are not implemented in a timely manner, we may only be able to recover a portion of our increased costs in future periods which may have a material adverse effect on our businesses, financial condition, results of operations and cash flows. Our ability to raise prices to reflect increased costs may also be limited by competitive conditions in the market for our products. Conversely, because our sales are at prices that are based upon product and transportation costs, our operating profit may be negatively impacted during periods of product cost deflation even though our gross profit as a percentage of net sales may remain relatively constant. If these pressures continue, our revenue, operating margins and net income may continue to be negatively impacted in fiscal year 2023.
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.
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 a majority of suppliers are based in China, international operations are subject to additional risks including, among others:
•currency fluctuations;
•labor unrest;
•potential political, economic and social instability, including the repercussions of the conflict in Ukraine;
•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.
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. 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 could again 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 our 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. 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 condition and results of operations.
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.
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
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, pay dividends or take advantage of business opportunities by limiting the amount of additional borrowings HBB may incur. Additionally, our exposure to rising interest rates subjects us to increased debt obligations with respect to existing floating rate debt during periods where such rates are in effect, particularly in light of the significant increase in interest rates during 2022.
Regulatory Risks
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.
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.
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.
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
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.
TheOver the past several years, 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 USU.S. trade law that have been applied to separate lists of Chinese goods.goods imported into the United States, beginning during the Trump Administration and continuing in the Biden Administration. 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. OnIn December 13, 2019, the United States Trade Representative (USTR) announced a “Phase One” agreement with China pursuant to which the U.S. government
agreed to suspend the 15% tariffs on List 4b products. OnIn January 15, 2020, USTR issued a Federal Register notice reducing the rate of Section 301 tariffs on List 4a products to 7.5%, effective in February 14, 2020. A number of lawsuits and other legal challenges with respect to the Section 301 tariff actions have been filed and remain pending, which could result in changes to the tariffs. To date, the Biden Administration has effectively maintained and has continued to defend and to enforce 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.
Risks Related to Our Common Stock
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. Accordingly, holders of our common stock should not rely on past payment of dividends in a particular amount as an indication of the amount of dividends, if any, that will be paid in the future.
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, 2019,2022, accounted for approximately 18.80%20.70% 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, 2019,2022, accounted for the remaining voting power of Hamilton Beach Holding. As of December 31, 2019,2022, certain members of the Company's extended founding family held approximately 34.78%32.72% of Class A Common and 80.13%87.47% 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%76.13% 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.
On October 10, 2019, the Board approved the wind down of KC and its retail operations. At December 31, 2019, all stores were closed for business. The Company expects the wind down to continue through the first half of 2020 to facilitate the settlement of remaining liabilities. KC may incur additional costs until the wind down is complete, which may include, contract assignment 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 counterparties to the contracts we intend to terminate. In addition, the wind down of the KC business involves numerous risks to us, including but not limited to:
potential disruption of 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 we 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, which could adversely impact the Company’s business, operational results, financial position and cash flows.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
The following table presents the principal distribution and office facilities owned or leased:
| | | | | | | | | | | | | | |
| | Owned/ | | |
| Facility Location | | Leased | | Function(s) (3) |
| Glen Allen, Virginia | | Leased | | Corporate headquarters |
| Geel, Belgium | | (1) | | Distribution center |
| Shenzhen, People's Republic of China | | (1) | | Distribution centers |
| Mexico City, Mexico | | Leased | | Mexico sales and administrative headquarters |
| Belleville, Ontario, Canada | | Leased | | Distribution center |
| Southern Pines, North Carolina | | Owned | | Service center for customer returns; parts distribution center; call center |
| Shenzhen, People's Republic of China | | Leased | | Administrative office |
| Markham, Ontario, Canada | | Leased | | Canada sales and administration headquarters |
| | | | |
| | Owned/ | | |
Facility Location | | Leased | | Function(s) (2)
|
Glen Allen, Virginia | | Leased | | Corporate headquarters |
Geel, Belgium | | (1) | | Distribution center |
Shenzhen, People's Republic of China | | (1) | | Distribution center |
Mexico City, Mexico | | Leased | | Mexico sales and administrative headquarters |
Olive Branch, Mississippi | | Leased | | Distribution center |
Picton, Ontario, Canada | | Leased | | Distribution center |
Belleville, Ontario, Canada | | Leased | | Distribution center |
Southern Pines, North Carolina | | Owned | | Service center for customer returns; catalog distribution center; parts distribution center |
Shenzhen, People's Republic of China | | Leased | | Administrative office |
Markham, Ontario, Canada | | Leased | | Canada sales and administration headquarters |
City of Sao Paulo, Sao Paulo, Brazil | | Leased | | Brazil sales and administrative headquarters |
Joinville, Santa Catarina, Brazil | | (1) | | Distribution center |
| Shanghai, People's Republic of China | | Leased | | Sales office |
Suzhou, People's Republic of ChinaTultitlan, Mexico | | (1) | | Distribution center |
Tultitlan, MexicoByhalia, Mississippi | | (1)Leased | | Distribution centercenters (2) |
| |
(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)The Company leases two distribution facilities in Byhalia, Mississippi (3)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, 2019 and 2018,March 3, 2023, there were 780 and 772, respectively,727 Class A Common stockholders of record and 902 and 892, respectively,771 Class B commonCommon stockholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In May 2018,February 2022, the CompanyCompany's Board 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.
On November 5, 2019, the Company's Board adopted a new stock repurchase program for the purchase of up to $25.0$25 million of the Company's Class A Common outstanding starting January 1, 2020February 22, 2022 and ending December 31, 2021.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth2023. During 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 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'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. The selected consolidated financial information below as ofyear ended December 31, 2019 and 2018, and2022, the Company repurchased 261,049 shares for an aggregate purchase price of $3.0 million. There were no share repurchases during the fourth quarter of 2022. There were no share repurchases during the years ended December 31, 2019, 20182021 and 2017, are derived from our audited consolidated financial statements included in this Annual Report on Form 10-K/A. The selected financial data as of December 31, 2017, 2016 and 2015 and for the years 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.2020.
|
| | | | | | | | | | | | | | | | | | | |
| | 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. |
| |
(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 |
Item 6. RESERVED
Supplementary Data, for additional information regarding the nature of the misstatements. Revisions to the consolidated statement of operations decreased operating profit and 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.
|
| | | | | | | | | | | | | | | | | | | |
| | 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 operations | 680 |
|
| 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 |
$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
| |
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 followingManagement’s discussion and analysis of financial condition and results of operations should be read in conjunction with the audited consolidatedour historical financial statements and related notes thereto as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018, and 2017, includedother disclosures contained elsewhere in this Annual Report on Form 10-K/A. This Annual Report10-K. The following discussion and analysis focuses on Form 10-K/A restates amounts included in the 2019 Annual Report as of December 31, 2019 and 2018, andour financial results for the years ended December 31, 2019, 20182022 and 2017. See Note 2, Restatement2021 and year-to-year comparisons between these years. A discussion of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data,our results of operations for additional information. The relevant unaudited interim financial information for each of the quarters during the yearsyear ended December 31, 2019 and 2018 has also been restated. See Note 16, Quarterly Results of Operations (Unaudited),2021 compared to the year ended December 31, 2020 is included in Part II, Item 8, Financial Statements and Supplementary Data, for such restated information.
The restatement also includes corrections for other errors previously identified as immaterial, individually and in the aggregate, to our consolidated financial statements. The impact of the restatement is reflected in Management’s7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations below.Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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 price concessions and changes in returns. In addition, theThe 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 2019,2022, 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.
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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.
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)
Historically, the Company employed a total return on investment approach whereby a mix of equities and fixed income investments were used to maximize the long-term return of plan assets for a prudent level of risk. During the second quarter of 2022, the Board of Directors of HBB approved the termination of the Company's U.S. defined benefit pension plan (the "Plan") with an effective date of September 30, 2022. In light of the Plan termination process, volatility in the market, and the funding status, the Plan transferred a significant portion of its assets to lower risk investments in 2022 to move towards a liability driven investing strategy whereby the assets are primarily fixed income investments. The fixed income investments that were chosen under this strategy, while not precisely the same, are meant to parallel the investments selected in determining the discount rate used to calculate the Company’s pension liability.
For the Non-U.S. Plan, the expected long-term rate of return on defined benefit plan assets reflects management’sthe Company'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 classesare 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.assumption.
Expected returns for the U.S. pension plan are based on a calculated market-related value for U.S. pension plan assets. Expected returns for the non-U.S. pension plan are based on fair market value for non-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 20192022 assumptions are used to calculate 20202023 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 20202023 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 2020 by2023 of 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 20192022 by approximately $1.6$1.0 million; while a one percentage-point decrease in the discount rate would have raised the plans’ projected benefit obligation as of the end of 20192022 by approximately $1.8$1.1 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.
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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:
20192022 Compared with 20182021
| | | | As Restated | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31 | | Year Ended December 31 |
| | 2019 | | % of Revenue | | 2018 | | % of Revenue | | $ Change | | % Change | | 2022 | | % of Revenue | | 2021 | | % of Revenue | | $ Change | | % Change |
| Revenue | $ | 611,786 |
|
| 100.0 | % |
| $ | 630,082 |
|
| 100.0 | % |
| $ | (18,296 | ) |
| (2.9 | )% | Revenue | $ | 640,949 | | | 100.0 | % | | $ | 658,394 | | | 100.0 | % | | $ | (17,445) | | | (2.6) | % |
| Cost of sales | 483,234 |
|
| 79.0 | % |
| 491,030 |
|
| 77.9 | % |
| (7,796 | ) |
| (1.6 | )% | Cost of sales | 511,835 | | | 79.9 | % | | 521,892 | | | 79.3 | % | | (10,057) | | | (1.9) | % |
| Gross profit | 128,552 |
|
| 21.0 | % |
| 139,052 |
|
| 22.1 | % |
| (10,500 | ) |
| (7.6 | )% | Gross profit | 129,114 | | | 20.1 | % | | 136,502 | | | 20.7 | % | | (7,388) | | | (5.4) | % |
| Selling, general and administrative expenses | 100,381 |
|
| 16.4 | % |
| 104,121 |
|
| 16.5 | % |
| (3,740 | ) |
| (3.6 | )% | Selling, general and administrative expenses | 90,120 | | | 14.1 | % | | 104,763 | | | 15.9 | % | | (14,643) | | | (14.0) | % |
| Amortization of intangible assets | 1,377 |
|
| 0.2 | % |
| 1,381 |
|
| 0.2 | % |
| (4 | ) |
| (0.3 | )% | Amortization of intangible assets | 200 | | | — | % | | 200 | | | — | % | | — | | | — | % |
| Operating profit (loss) | 26,794 |
|
| 4.4 | % |
| 33,550 |
|
| 5.3 | % |
| (6,756 | ) |
| (20.1 | )% | Operating profit (loss) | 38,794 | | | 6.1 | % | | 31,539 | | | 4.8 | % | | 7,255 | | | 23.0 | % |
| Interest expense, net | 2,975 |
|
| 0.5 | % |
| 2,916 |
|
| 0.5 | % |
| 59 |
|
| 2.0 | % | Interest expense, net | 4,589 | | | 0.7 | % | | 2,854 | | | 0.4 | % | | 1,735 | | | 60.8 | % |
| Other expense (income), net | (358 | ) |
| (0.1 | )% |
| 149 |
|
| — | % |
| (507 | ) |
| (340.3 | )% | Other expense (income), net | 1,776 | | | 0.3 | % | | (272) | | | — | % | | 2,048 | | | (752.9) | % |
| Income (loss) from continuing operations before income taxes | 24,177 |
|
| 4.0 | % |
| 30,485 |
|
| 4.8 | % |
| (6,308 | ) |
| (20.7 | )% | Income (loss) from continuing operations before income taxes | 32,429 | | | 5.1 | % | | 28,957 | | | 4.4 | % | | 3,472 | | | 12.0 | % |
| Income tax expense | 9,084 |
|
| 1.5 | % |
| 7,426 |
|
| 1.2 | % |
| 1,658 |
|
| 22.3 | % | Income tax expense | 7,162 | | | 1.1 | % | | 7,651 | | | 1.2 | % | | (489) | | | (6.4) | % |
| Net income from continuing operations | 15,093 |
|
| 2.5 | % |
| 23,059 |
|
| 3.7 | % |
| (7,966 | ) |
| (34.5 | )% | Net income from continuing operations | 25,267 | | | 3.9 | % | | 21,306 | | | 3.2 | % | | 3,961 | | | 18.6 | % |
| 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 | ) |
|
|
| |
| Income (loss) from discontinued operations, net of tax | | Income (loss) from discontinued operations, net of tax | — | | | — | % | | — | | | — | % | | — | | | — | % |
| Net income | | Net income | 25,267 | | | 4.1 | % | | 21,306 | | | 3.2 | % | | 3,961 | | | 18.6 | % |
|
|
| | | | | | | | | | | | | |
| Effective income tax rate on continuing operations | 37.6 | % |
|
|
| 24.4 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Effective income tax rate on continuing operations | 22.1 | % | | | | 26.4 | % | | | | | | |
The following table identifies the components of the change in revenue for 2019 2022compared with 2018:2021: | | | | | | Revenue | |
| | As Restated | |
| | Revenue | |
| 2018 | $ | 630,082 |
| |
| 2021 | | 2021 | $ | 658,394 | | |
| (Decrease) increase from: |
| (Decrease) increase from: | | |
| Unit volume and product mix | (19,613 | ) | Unit volume and product mix | (58,530) | | |
| Foreign currency | (1,688 | ) | Foreign currency | (1,777) | | |
| Average sales price | 3,005 |
| Average sales price | 42,862 | | |
| 2019 | $ | 611,786 |
| |
| 2022 | | 2022 | $ | 640,949 | | |
Revenue- Revenue decreased $18.3$17.4 million, or 2.9%. The decline is primarily due to lower sales volume in2.6% over 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 decreasedprior year due primarily to lower unit volume driven byin the adverse impactUS, Canadian and Latin American markets. Price increases and favorable product mix partially offset these volume decreases. Additionally, revenue decreased compared to the prior year due to the Company's decision to move to a licensing model from a company-managed model for its consumer business in Brazil and China. Partially offsetting these decreases was a $20.5 million, or 50.0% increase in revenue in the Global Commercial market compared to the prior year due to the continued rebound of tariffs.customer demand from pandemic-driven softness. The Mexican Consumer market had an increase in sales volume and revenue compared to the prior year.
Gross profit - Gross profit margin was 20.1% in the current year compared to 20.7% in the prior year. Price increases implemented during 2022 partially offset the higher product and transportation costs. Additionally, in 2022 there was a reduction in carrier storage charges as compared to 2021.
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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)
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.
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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 sales | 491,030 |
|
| 77.9 | % |
| 475,939 |
|
| 77.8 | % |
| 15,091 |
|
| 3.2 | % |
| Gross profit | 139,052 |
|
| 22.1 | % |
| 136,117 |
|
| 22.2 | % |
| 2,935 |
|
| 2.2 | % |
| Selling, general and administrative expenses | 104,121 |
|
| 16.5 | % |
| 96,780 |
|
| 15.8 | % |
| 7,341 |
|
| 7.6 | % |
| Amortization of intangible assets | 1,381 |
|
| 0.2 | % |
| 1,381 |
|
| 0.2 | % |
| — |
|
| — | % |
| Operating profit | 33,550 |
|
| 5.3 | % |
| 37,956 |
|
| 6.2 | % |
| (4,406 | ) |
| (11.6 | )% |
| Interest expense, net | 2,916 |
|
| 0.5 | % |
| 1,572 |
|
| 0.3 | % |
| 1,344 |
|
| 85.5 | % |
| Other expense (income), net | 149 |
|
| — | % |
| (692 | ) |
| (0.1 | )% |
| 841 |
|
| (121.5 | )% |
| Income from continuing operations before income taxes | 30,485 |
|
| 4.8 | % |
| 37,076 |
|
| 6.1 | % |
| (6,591 | ) |
| (17.8 | )% |
| Income tax expense | 7,426 |
|
| 1.2 | % |
| 18,967 |
|
| 3.1 | % |
| (11,541 | ) |
| (60.8 | )% |
| Net income from continuing operations | 23,059 |
|
| 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 operations | 24.4 | % |
|
|
| 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 mix | 12,910 |
|
| Average sales price | 6,485 |
|
| 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 wasdecreased $14.6 million due primarily due to increased legal and professional service feesthe $10.0 million insurance recovery recognized during the first quarter of $2.7 million, higher employee-related expenses of $2.8
| |
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 in2022. Compared to the prior year, outside services decreased, and incremental expenses incurred during the relocation 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.Company's new distribution center did not recur.
Interest expense net - Interest expense, net increased $1.3$1.7 million due primarily due to an increase inrising interest rates, as well as increased average borrowings outstanding under HBB's revolving credit facility.
Other expense (income), net - Other expense (income), net increased $0.8in 2022 includes currency losses of $1.9 million primarily duein the current year compared to foreign currency gains aslosses of $0.6 million in 2021. This increase is driven by the Mexican peso strengthened againstliquidation of the U.S. dollarBrazilian subsidiary, which resulted in $2.1 million of accumulated other comprehensive losses being released into other expense (income), net during the period.first quarter of 2022. Additionally, during 2022, the Company recorded a $0.3 million pension settlement charge.
Income tax expense - The Company recognized incomeeffective tax expense of $7.4 millionrate on income from continuing operations before income taxes of $30.5 million (anwas 22.1% and 26.4% for the twelve months ended December 31, 2022 and 2021, respectively. The effective tax rate was higher for the twelve months ended December 31, 2021 due to the inclusion of 24.4%).interest and penalties on unrecognized tax benefits as a discrete expense item. The effective incomeinterest and penalties on unrecognized tax rate on continuing operations decreased from 51.2% in 2017 primarilybenefits were reversed during the second quarter of 2022 due to a $4.7 million provisional tax charge resulting from the reductionchange in the U.S. federal corporateCompany's position on an unresolved Mexico tax matter, favorably impacting the effective tax rate in 2018 asfor the twelve months ended December 31, 2022, partially offset by a result ofvaluation allowance on certain foreign deferred tax assets related to 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.Brazil liquidation.
LIQUIDITY AND CAPITAL RESOURCES
Hamilton Beach Brands Holding Company cash flows are provided by dividends paid or distributions made by its subsidiaries.subsidiary. The only material assets held by it are the investmentsinvestment in its consolidated subsidiaries.subsidiary. As a result, certain statutory limitations or regulatory or financing agreements could affect the levels of distributions allowed to be made by its subsidiaries.subsidiary. Hamilton Beach Brands Holding Company has not guaranteed any of the obligations of its subsidiaries.subsidiary.
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, 2019,2022, the Company had cash and cash equivalents for continuing operations of $2.1$0.9 million, compared to $4.4$1.1 million at December 31, 2018.2021.
Historically, Hamilton Beach Brands Holding Company would rely on cash flows from KC as well as HBB. However, given that all of the KC stores have been closed and the Board approved the dissolution of the KC legal entity, KC is no longer considered a source 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.
The following table presents selected cash flow information from continuing operations:
|
| | | | | | | | | | | |
| | 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 | ) |
| | | | | | | | | | | | | | | |
| Year Ended December 31 |
| (In thousands) |
| | 2022 | | 2021 | | |
| Net cash provided by (used for) operating activities from continuing operations | $ | (3,418) | | | $ | 17,857 | | | |
| Net cash provided by (used for) investing activities from continuing operations | $ | (2,279) | | | $ | (11,844) | | | |
| Net cash provided by (used for) financing activities from continuing operations | $ | 5,575 | | | $ | (7,266) | | | |
| |
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, 20192022 Compared with December 31, 20182021
Operating activities - Net cash used for operating activities was $3.4 million compared to cash provided by operating activities decreased $17.7of $17.9 million in 2019 compared to the prior year2021 primarily due to increasednet working capital which was a use of cash of $39.0 million in 2022 compared to a use of cash of $1.5 million in 2021. In 2022, trade receivables partially offset by a declineprovided net cash of $4.5 million compared to net cash provided of $27.6 million in inventory. Trade receivables increased primarilythe prior year due to the timing of collectionscollections. Net cash used for inventory and increased fourth quarter salesaccounts payable combined was $43.5 million in 20192022 compared withto $29.1 million in 2021. The Company significantly reduced inventory levels compared to the prior year. The decline in inventory is primarilyThis cash inflow was offset by a larger cash outflow related to accounts payable due to the continued efficient managementtiming of inventory levels.payments.
Investing activities - Net cash used for investing activities from continuing operations decreased $3.6 million in 2019 primarily2022 compared to 2021 due to lower capital expenditures related to HBB internal-use software development costs and toolingspending for the Company's new products.leased distribution center facility in 2021 that did not recur.
Financing activities - Net cash provided by financing activities from continuing operations was $1.1$5.6 million in 20192022 compared to a usecash used by financing activities of cash of $9.3 million in 2018 primarily$7.3 million. The change is due to an increase in HBB's net borrowing activity on the revolving credit facility. The increase in borrowings was usedfacility to fund net working capital and stock repurchases.capital.
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
HBB maintainshas a $115.0$150.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires in June 2021.2025. 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. Repayment of the credit facility is due on June 30, 2025, therefore all borrowings are classified as long term debt as of December 31, 2022. 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, 2019,2022, the borrowing base under the HBB Facility was $114.4was $149.2 million andand borrowings outstanding were $58.3$110.9 million. AtAt December 31, 2019,2022, the excess availability under the HBB Facility was $56.1$38.3 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, LIBORSecured Overnight Financing Rate ("SOFR") or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. TheThe applicable margins, effective December 31, 2019,2022, for base rate loans and LIBORSOFR loans denominated in U.S. dollars were 0.0%0.00% and 1.75%2.05%, respectively. The applicable margins, effective December 31, 2019,2022, for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.0%0.00% and 1.75%2.05%, 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 December 31, 20192022 was 3.82%3.49%, includingincluding the floating rate margin and the effect of the interest rate swap agreements described below.
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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$50.0 million at December 31, 20192022 at an average fixed interest rate of 1.5%0.9%. HBB also hasentered into delayed-start interest rate swaps. These swaps withhave notional values totaling $10.0$50.0 million as of December 31, 2019,2022, with an average fixed ratesinterest rate of 1.7%1.6%.
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. 6 to the HBB Facility, dividendsDividends to Hamilton Beach Holding are not to exceed $5.0$7.0 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$18.0 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$30.0 million. The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. AtAs of December 31, 2019,2022, HBB was in compliance with all financial covenants in the HBB Facility.
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, 2019:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
| Contractual Obligations | Total | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter |
| | | | | | | | | | | | | |
| Revolving credit agreements | $ | 110,895 | | | $ | — | | | $ | — | | | $ | 110,895 | | | $ | — | | | $ | — | | | $ | — | |
| Variable interest payments on HBB Facility | 11,277 | | | 5,645 | | | 3,878 | | | 1,754 | | | — | | | — | | | — | |
| Purchase and other obligations | 172,737 | | | 172,574 | | | 61 | | | 51 | | | 51 | | | — | | | — | |
| Operating lease obligations | 66,952 | | | 8,265 | | | 8,010 | | | 6,235 | | | 5,701 | | | 5,509 | | | 33,232 | |
| Total contractual cash obligations | $ | 361,861 | | | $ | 186,484 | | | $ | 11,949 | | | $ | 118,935 | | | $ | 5,752 | | | $ | 5,509 | | | $ | 33,232 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
| Contractual Obligations | Total | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter |
| HBB: | | | | | | | | | | | | | |
| Revolving credit agreements | $ | 58,497 |
| | 192 |
| | 58,305 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Variable interest payments on HBB Facility | 4,140 |
| | 2,244 |
| | 1,896 |
| | — |
| | — |
| | — |
| | — |
|
| Purchase and other obligations | 212,312 |
| | 209,040 |
| | 3,157 |
| | 69 |
| | 46 |
| | — |
| | — |
|
| Operating lease obligations | 31,710 |
| | 6,114 |
| | 4,089 |
| | 1,816 |
| | 1,574 |
| | 1,590 |
| | 16,527 |
|
| KC: | | | | | | | | | | | | | |
| Purchase and other obligations | 12,475 |
| | 12,475 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Operating lease obligations | 26,493 |
| | 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 million for unrecognized tax benefits, including interest and penalties, as of December 31, 2019. 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.
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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, 20192022 base rate and applicable margins, as defined in the HBB Facility. A 1/8%0.25% increase in the base rate would increase HBB’s estimated total annual interest payments on the HBB Facility by approximately $0.5$0.2 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 defaultGiven the funded status 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,two defined benefit pension funding has not been included in the table above.plans, HBB does not expect to contribute to its pension plans in 2020.2023. 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.arrangements.
Recently Issued and Adopted Accounting Standards Adopted
In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the requirements in GAAP relatedRefer to Note 1 to the income statement presentationconsolidated financial statements for discussion of the components of net periodic benefit cost for an entity's sponsored defined benefit pensionrecently issued 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.
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, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is planning to adopt ASU 2016-02 for its year ending December 31, 2021 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.
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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)
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 source and ship products to meet anticipated demand, (2) the Company’s ability to successfully manage constraints throughout the global transportation supply chain, (3) uncertain or unfavorable global economic conditions, including those resulting from the COVID-19 pandemic and its downstream impacts and the ongoing conflict in Ukraine; (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 HBBthe Company operates or 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) 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) our ability to successfully remediate the material weaknesses in our internal control over financial reporting disclosed in this Form 10-K/A 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) other risk factors, including those described in the Company's filings with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K/A10-K for the year ended December 31, 2019.2022. Furthermore, the future impact of unfavorable economic conditions, including inflation, rising interest rates, availability of capital markets, consumer spending rates, negative impacts resulting from the COVID-19 pandemic and its downstream impacts and the ongoing conflict in Ukraine remain uncertain. In uncertain economic environments, the Company cannot predict whether or when such circumstances may improve or worsen, or what impact, if any, such circumstances could have on its business, results of operations, cash flows and financial position.
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 payablereceivable of $0.1$5.4 million at December 31, 2019.2022. A hypothetical 10% relative decrease in interest rates would cause a decrease of $0.2$0.3 million in the fair value of interest rate swap agreements and the resulting fair value would be a payablereceivable of $0.3$5.1 million. Additionally, a hypothetical 10% relative increase in interest rates would notcause an increase of $0.3 million in the fair value of interest rate swap agreements and the resulting fair value would be a receivable of $5.7 million. Neither would have a material impact to the Company's interest expense, net of $3.0$4.6 million at December 31, 2019.2022.
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 payablereceivable of $0.3$0.1 million at December 31, 2019.2022. Assuming a hypothetical 10% weakening of the U.S. dollar at December 31, 2019,2022, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange contracts, would be decreased by $1.1$1.2 million compared with its fair value at December 31, 2019.2022.
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-yeartwo-year period ended December 31, 20192022 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 ChiefInterim Principal Financial Officer, has evaluatedconducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of December 31, 2019. At the timeend of our Original Filing,the period covered by this report. Based on that evaluation, our Chief Executive Officer and ChiefInterim Principal Financial Officer had concluded that our disclosure controls and procedures were effective as of December 31, 2019. Subsequent to the evaluation made in connection with 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 wrongdoing by certain former employees of one of our Mexican subsidiaries. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2019, due to the existence of the material weaknesses in our internal control over financial reporting at our Mexican subsidiaries as described below, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified 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.2022.
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 ChiefInterim Principal 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 maintainmaintained effective internal control over financial reporting as of December 31, 2019 due to the material weaknesses at our Mexican subsidiaries 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.
We identified deficiencies at our Mexican subsidiaries as follows:
Review controls performed at our Mexican subsidiaries did not operate effectively as account reconciliations and manual journal entries were not supported by accurate and complete information, which resulted in expenditures being deferred on the balance sheet beyond the period for which the costs pertained and the failure to detect unauthorized transactions deferred on the balance sheet as a result of wrongdoing by certain former employees of one of our Mexican subsidiaries; and
Transaction level controls over authorization of spending with vendors, adjusting product costing and selling prices, new customer setup and accounting for price concessions with our customers at our Mexican subsidiaries were not sufficiently designed or operating effectively to provide reasonable assurance regarding the prevention and timely detection of misappropriation of assets.
We have concluded that each of these deficiencies at our Mexican subsidiaries constitutes a material weakness in our internal control over financial reporting.
2022. The Company's effectiveness of internal control over financial reporting as of December 31, 20192022 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 beenwere no changes in the Company'sCompany’s internal control over financial reporting that occurredidentified during the fourth quarter of 2019,2022, in connection with the evaluation by the Company’s management required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to Directors of the Company will be set forth in the 20202023 Proxy Statement under the subheadings “Part II — Proposals To Be Voted On At The 20202023 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 20202023 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 20202023 Proxy Statement under the subheading “Part IV — Other Important Information — Delinquent Section 16(a) Beneficial Ownership Reporting Compliance,Reports,” which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included in this Form 10-K/A as Item 4A10-K under the subheading “Information about our Executive Officers” of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.I.
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.corporate-governance .If we make any amendments to, or grant any waiver from, the code that are required to be disclosed pursuant to the Securities Exchange Act of 1934, we will make such disclosure on our website.
Item 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be set forth in the 20202023 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 20202023 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.
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 20202023 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 20202023 Proxy Statement under the heading “Part II — Proposals To Be Voted On At The 20202023 Annual Meeting — Proposal 4 — Ratification of the Appointment of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for 2020,2023,” which information is incorporated herein by reference.
PART IV
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-2F-1 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-36 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.
(3) Articles of Incorporation and By-laws.
(4) Instruments defining the rights of security holders, including indentures.
(10) Material Contracts.
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| | | | | | | |
| 10.1 | | |
10.2 | | |
10.3 | | |
10.410.2 | | Transfer RestrictionAmendment to Stockholder's Agreement, dated as of September 29, 2017, by andFebruary 24, 2020, among the Issuer, NACCOdepository, Hamilton Beach Brands Holding Company, the new Participating Stockholder signatories thereto and the signatories thereto,Participating Stockholders is incorporated by reference to Exhibit 210.38 of Schedule 13D, filed on October 6, 2017. |
10.5* | | |
| 10.3 | | Amendment to Stockholders’ Agreement, dated as of December 21, 2020, by and Restated Effective March 1, 2015)between the Depository, the Issuer, the new Participating Stockholders and the Participating Stockholders is incorporated herein by reference to Exhibit 10.219 to NACCO Industries, Inc. Current Report on Form 8-K,the Participating Stockholders’ Schedule 13D/A, filed by NACCO Industries, Inc.the Participating Stockholders on May 18, 2015,February 12, 2021, Commission File Number 1-9172.005-90132. |
10.6*10.4 | | TheAmendment to Stockholders' Agreement, dated as of February 11, 2022, by and among the Depository, Hamilton Beach Brands Inc. Annual Incentive Compensation Plan (Effective January 1, 2014) (incorporated hereinHolding Company, the new Participating Stockholder signatories thereto and the Participating Stockholders is incorporated by reference to Exhibit 10.118 to the NACCO Industries, Inc. Current Report on Form 8-K,Participating Stockholders’ Schedule 13D/A, filed by NACCO Industries, Inc.the Participating Stockholders on May 9, 2014,February 11, 2022, Commission File Number 1-9172).005-90132. |
10.7*10.5 | | |
10.8* | | |
10.9 | | Credit Agreement, dated as of April 29, 2010, among The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Retail Finance, LLC and the other lenders thereto is incorporated herein by reference to Exhibit 10.27 to the NACCO Industries, Inc. Quarterly Report on Form 10-Q/A, filed by NACCO Industries, Inc. on March 20, 2013, Commission File Number 1-9172. |
10.10 | | First Amendment to Credit Agreement, dated as of August 7, 2012, among The Kitchen Collection, LLC, as successor to The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Bank, National Association, as successor to Wells Fargo Retail Finance, LLC, and the other lenders thereto is incorporated herein by reference to Exhibit 10.28 to the NACCO Industries, Inc. Quarterly Report on Form 10-Q/A, filed by NACCO Industries, Inc. on March 20, 2013, Commission File Number 1-9172. |
10.11 | | Second Amendment to Credit Agreement, dated as of September 19, 2014, among The Kitchen Collection, LLC, as successor to The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Bank, National Association, as successor to Wells Fargo Retail Finance, LLC, is incorporated herein by reference to Exhibit 10.1 to NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO Industries, Inc. on September 19, 2014, Commission File Number 1-9172. |
10.12 | | Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, Wells Fargo Capital Finance, LLC, as Sole Lead Arranger and Sole Lead Bookrunner,Book runner, the Lenders that are Parties thereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as Borrowers, dated as of May 31, 2012 is incorporated herein by reference to Exhibit 10.1 to NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO Industries, Inc. on June 6, 2012, Commission File Number 1-9172. |
10.1310.6 | | Amended and Restated Guaranty and Security Agreement, dated as of May 31, 2012, among Hamilton Beach Brands, Inc. and Hamilton Beach, Inc., as Grantors, and Wells Fargo Bank, National Association, as Administrative Agent is incorporated herein by reference to Exhibit 10.2 to the NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO Industries, Inc. on June 6, 2012, Commission File Number 1-9172. |
10.1410.7 | | Amended and Restated Canadian Guarantee and Security Agreement, dated as of May 31, 2012, among Hamilton Beach Brands Canada, Inc., as Grantor, and Wells Fargo Bank, National Association, as Administrative Agent is incorporated herein by reference to Exhibit 10.3 to the NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO Industries, Inc. on June 6, 2012, Commission File Number 1-9172. |
10.1510.8 | | Amendment No.1 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as Borrowers, dated as of July 29, 2014 is incorporated herein by reference to Exhibit 10.1 to the NACCO Industries, Inc. Quarterly Report on Form 10-Q, filed by NACCO Industries, Inc. on July 30, 2014, Commission File Number 1-9172. |
|
| 10.9 | | |
10.16 | | Amendment No.2 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as Borrowers, dated as of November 20, 2014 is incorporated herein by reference to Exhibit 10.66 to NACCO Industries, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172. |
10.1710.10 | | Amendment No. 3 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as Parent), and Weston Brands, LLC (as Weston) (collectively referred to as US Borrowers), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), dated December 23, 2015 is incorporated herein by reference to Exhibit 10.72 to the NACCO Industries, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2015, Commission File 1-9172. |
10.1810.11 | | Amendment No. 4 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as Parent), and Weston Brands, LLC (as Weston) (collectively referred to as US Borrowers), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), dated June 30, 2016 is incorporated herein by reference to Exhibit 10.1 to NACCO Industries, Inc. Quarterly Report on Form 10-Q, file by NACCO Industries, Inc. on August 2, 2016, Commission File Number I-9172. |
10.1910.12 | | Amendment No. 5 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as Parent), and Weston Brands, LLC (as Weston) (collectively referred to as US Borrowers), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), dated September 13, 2017, is incorporated by reference to Exhibit 10.29 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s S-1 Registration Statement filed on September 18, 2017. |
10.20*10.13 | | |
10.21* | | |
10.22* | | |
10.23* | | |
10.24* | | |
10.25* | | |
10.26* | | |
10.27* | | |
10.28* | | |
10.29 | | Third Amendment to Credit Agreement by and among The Kitchen Collection, LLC, as Lead Borrower, Borrowers hereto, Guarantors hereto, Lenders hereto and Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and Swing Line Lender, dated as of October 20, 2017 is incorporated by reference to Exhibit 10.13 of the Hamilton Beach Brands Holding Company’s Form 10-Q filed on November 1, 2017. |
10.30 | | Amendment No. 6 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc., as Parent, and Weston Brands, LLC, as US Borrowers, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated May 14, 2018, is incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's CurrentQuarterly Report on Form 10-Q, filed on August 1, 2018. |
10.31*10.14 | | Amendment No. 7 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as Borrowers, dated as of May 15, 2020, is incorporated by reference to Exhibit 10.2 of Hamilton Beach Brands Holding Company's Quarterly Report on Form 10-Q, filed on July 24, 2020. |
| 10.15 | | Amendment No. 8 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc., as Parent and U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated November 23, 2020, incorporated by reference to Exhibit 10.23 of Hamilton Beach Brands Holding Company's Annual Report on Form 10-K, filed on March 22, 2021. |
| | | | | | | | |
| 10.16 | | Amendment No. 9 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc., as Parent and U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated April 9, 2021, incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Quarterly Report on Form 10-Q, filed on May 5, 2021. |
| 10.17 | | Amendment No. 10 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties thereto as the Lenders, Hamilton Beach Brands, Inc., as U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated September 17, 2021 is incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Quarterly Report on Form 10-Q, filed on November 3, 2021. |
| 10.18 | | Amendment No. 11 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties thereto as the Lenders, Hamilton Beach Brands, Inc., as U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated June 28, 2022 is incorporated by reference to Exhibit 10.2 of Hamilton Beach Brands Holding Company's Quarterly Report on Form 10-Q, filed on August 3, 2022. |
| 10.19 | | Amendment No. 12 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties thereto as the Lenders, Hamilton Beach Brands, Inc., as U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated August 15, 2022 is incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Current Report on Form 8-K, filed on August 18, 2022. |
| 10.20 | | Consent regarding the Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties thereto as the Lenders, Hamilton Beach Brands, Inc., as U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated November 15, 2022 is incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Current Report on Form 8-K, filed on November 15, 2022. |
| 10.21* | | |
| 10.22* | | |
| 10.23* | | |
| 10.24* | | |
| 10.25* | | |
| 10.26* | | |
| 10.27* | | |
| 10.28* | | |
| 10.29* | | |
| 10.30* | | |
|
| 10.31* | | |
10.32* | | |
| 10.32* | | |
| 10.33* | | |
10.33*10.34* | | |
10.3410.35* | | |
10.3510.36* | | |
| | | | | | | | |
10.3610.37* | | Forbearance Agreement, dated as of October 23, 2019, byHamilton Beach Brands Holding Company Non-Employee Directors’ Equity Compensation Plan (Amended and between Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent, Swing Line Lender, and Lender and The Kitchen Collection, LLC isRestated Effective May 18, 2021), incorporated herein by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's CurrentQuarterly Report on Form 8-K,10-Q, filed on October 25, 2019.August 4, 2021. |
10.3710.38* | | |
| 10.39* | | |
| 10.40* | | |
| 10.41* | | |
10.38 | | |
(21) Subsidiaries of the registrant.
(23) Consents of experts and counsel.
(31) Rule 13a-14(a)/15d-14(a) Certifications.
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| | | | | | | |
| 101.INS | | XBRL Instance Document |
| 101.SCH | | XBRL Taxonomy Extension Schema Document |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
| | | | | | | |
| * | | Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item15(b)Item 15(b) of this Annual Report on Form 10-K/A.10-K. |
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 CompanySignature | | Title | | Date |
| By: | (Registrant)/s/ Gregory H. Trepp | | President and Chief Executive Officer, Director | | March 9, 2023 |
| Gregory H. Trepp | | | | |
| Signature | | Title | | Date |
By: | /s/ Michelle O. Mosier | | Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)/(Principal Accounting Officer)
| | July 23, 2020 |
| Michelle O. Mosier | | | | |
POWER OF ATTORNEY
KNOW ALL MENPERSONS BY THESE PRESENTS, that the undersigned director of Hamilton Beach Brands Holding Company hereby appoints Michelle O. MosierGregory H. Trepp 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/A for the fiscal year ended December 31, 2019 and to sign any and all amendments to suchthis Annual Report on Form 10-K, 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.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
Signature | | Title | | Date |
| | | | |
| /s/ Gregory H. Trepp | | | | |
| Gregory H. Trepp | | President and Chief Executive Officer (Principal Executive Officer), Director | | July 23, 2020 |
| | | | |
/s/ Michelle O. Mosier | | | | |
Michelle O. Mosier | | Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)/(Principal Accounting Officer) | | July 23, 2020 |
| | | | |
/s/ Mark R. Belgya | | | | |
Mark R. Belgya | | Director | | July 23, 2020 |
| | | | |
/s/ J.C. Butler, Jr. | | | | |
J.C. Butler, Jr. | | Director | | July 23, 2020 |
| | | | |
/s/ Paul D. Furlow | | | | |
Paul D. Furlow | | Director | | July 23, 2020 |
| March 9, 2023 |
| | | | |
Signature/s/ Linda Woermer | | Title | | Date |
| Linda Woermer | | Senior Director, Controller of Hamilton Beach Brands, Inc. (Interim Principal Financial Officer)/(Interim Principal Accounting Officer) | | March 9, 2023 |
| | | | |
| /s/ Mark R. Belgya | | | | |
| Mark R. Belgya | | Director | | March 9, 2023 |
| | | | |
| /s/ J.C. Butler, Jr. | | | | |
| J.C. Butler, Jr. | | Director | | March 9, 2023 |
| | | | |
| /s/ Paul D. Furlow | | | | |
| Paul D. Furlow | | Director | | March 9, 2023 |
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
| /s/ John P. Jumper | | | | |
| John P. Jumper | | Director | | July 23, 2020March 9, 2023 |
| | | | |
| /s/ Dennis W. LaBarre | | | | |
| Dennis W. LaBarre | | Director | | July 23, 2020March 9, 2023 |
| | | | |
| /s/ Michael S. Miller | | | | |
| Michael S. Miller | | Director | | July 23, 2020March 9, 2023 |
| | | | |
| /s/ Alfred M. Rankin, Jr. | | | | |
| Alfred M. Rankin, Jr. | | Director | | July 23, 2020March 9, 2023 |
| | | | |
| /s/ Thomas T. Rankin | | | | |
| Thomas T. Rankin | | Director | | July 23, 2020March 9, 2023 |
| | | | |
| /s/ James A. Ratner | | | | |
| James A. Ratner | | Director | | July 23, 2020March 9, 2023 |
| | | | |
| /s/ Clara R. Williams | | | | |
| Clara R. Williams | | Director | | July 23, 2020March 9, 2023 |
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, 20192022
HAMILTON BEACH BRANDS HOLDING COMPANY
GLEN ALLEN, VIRGINIA
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.
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, 20192022 and 2018,2021, 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, 2019,2022, and the related notes and the financial statement scheduleFinancial 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, 20192022 and 2018,2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2022, 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, 2019,2022, 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 9, 2023 expressed an adverseunqualified opinion thereon.
RestatementAdoption of 2019, 2018 and 2017 Financial StatementsASU No. 2016-02
As discussed in Note 21 to the consolidated financial statements, the 2019, 2018Company changed its method of accounting for leases in 2022 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and 2017 consolidated financial statements have been restated to correct certain misstatements.the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’sCompany'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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| | | | | |
| Valuation of customer price concession accrual |
| Description of the matter | As described in Notes 1 and 10 to the consolidated financial statements, the Company offers price concessions to certain of its customers, which results in variable consideration. The Company recognizes a reduction to revenue and a corresponding accrual for price concessions as the related products are sold based on the estimated amount of customer sales incentives to be deducted by trade customers. This estimate is made by applying either the expected value method or most likely amount method according to which method would provide the better prediction.
Auditing the valuation of the customer price concession accrual was complex and involved especially challenging judgment because the calculation involves subjective management assumptions about estimates of expected price concessions. For example, the adjustment to the customer price concession accrual reflects management's assumptions about future deductions to be taken by customers which is subjective in nature as it relies upon retrospective analysis of price concessions claimed by customers and management’s knowledge of its customer base, and changes in those assumptions can have a material effect on the customer price concession accrual.
|
| How we addressed the matter in our audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls that address the risk of material misstatement relating to the valuation of the customer price concession accrual. For example, we tested controls over management’s review of adjustments to the customer price concession accrual, as well as their review of significant assumptions such as the amount of future deductions to be taken by customers. We also tested controls over the completeness and accuracy of data underlying the accrual including the validation of third-party sales data.
Our audit procedures included, among others, testing a sample of the underlying data used by management in development of the customer price concession accrual, testing a sample of credit memos issued subsequent to year-end, evaluated the significant assumptions made by management by performing a hindsight analysis, and performing inquiries of executives within the Company responsible for the respective customer relationships.
|
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 20172017.
Cleveland, Ohio
February 26, 2020, except for the effect of the restatement disclosed in Note 2,March 9, 2023
as to which the date is July 23, 2020
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Hamilton Beach Brands Holding Company
Opinion on Internal Control overOver Financial Reporting
We have audited Hamilton Beach Brands Holding Company’s internal control over financial reporting as of December 31, 2019,2022, 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, 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, 2019,2022, 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 controls related to the Company's Mexican subsidiaries' (1) review controls over account reconciliations and manual journal entries and (2) 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.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 20192022 consolidated financial statements of the Company. These material weaknesses were considered in determining the nature, timingCompany and extent of audit tests applied in our audit of the 2019 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, whichMarch 9, 2023 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 reporting in Item 9A.Financial Reporting. Our responsibility is to express an opinion on the Company’sCompany'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.
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.
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 9, 2023
described in the second and third paragraphs above,
as to which the date is July 23, 2020
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | As Restated | | | | | | | | | | | | | | | |
| | Year Ended December 31 | | Year Ended December 31 |
| | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 |
| | (In thousands, except per share data) | | (In thousands, except per share data) |
| Revenue | $ | 611,786 |
| | $ | 630,082 |
| | $ | 612,056 |
| Revenue | $ | 640,949 | | | $ | 658,394 | | | $ | 603,713 | |
| Cost of sales | 483,234 |
| | 491,030 |
| | 475,939 |
| Cost of sales | 511,835 | | | 521,892 | | | 465,059 | |
| Gross profit | 128,552 |
| | 139,052 |
| | 136,117 |
| Gross profit | 129,114 | | | 136,502 | | | 138,654 | |
| Selling, general and administrative expenses | 100,381 |
| | 104,121 |
| | 96,780 |
| Selling, general and administrative expenses | 90,120 | | | 104,763 | | | 99,990 | |
| Amortization of intangible assets | 1,377 |
| | 1,381 |
| | 1,381 |
| Amortization of intangible assets | 200 | | | 200 | | | 1,249 | |
| Operating profit | 26,794 |
| | 33,550 |
| | 37,956 |
| |
| Operating profit (loss) | | Operating profit (loss) | 38,794 | | | 31,539 | | | 37,415 | |
| Interest expense, net | 2,975 |
| | 2,916 |
| | 1,572 |
| Interest expense, net | 4,589 | | | 2,854 | | | 1,998 | |
| Other expense (income), net | (358 | ) | | 149 |
| | (692 | ) | Other expense (income), net | 1,776 | | | (272) | | | 1,685 | |
| Income from continuing operations before income taxes | 24,177 |
| | 30,485 |
| | 37,076 |
| |
| Income tax expense | 9,084 |
| | 7,426 |
| | 18,967 |
| |
| Net income from continuing operations | 15,093 |
| | 23,059 |
| | 18,109 |
| |
| Loss from discontinued operations, net of tax | (28,600 | ) | | (5,361 | ) | | (2,225 | ) | |
| Income (loss) from continuing operations before income taxes | | Income (loss) from continuing operations before income taxes | 32,429 | | | 28,957 | | | 33,732 | |
| Income tax expense (benefit) | | Income tax expense (benefit) | 7,162 | | | 7,651 | | | 9,665 | |
| Net income (loss) from continuing operations | | Net income (loss) from continuing operations | 25,267 | | | 21,306 | | | 24,067 | |
| Income (loss) from discontinued operations, net of tax | | Income (loss) from discontinued operations, net of tax | — | | | — | | | 22,191 | |
| Net income (loss) | $ | (13,507 | ) | | $ | 17,698 |
| | $ | 15,884 |
| Net income (loss) | $ | 25,267 | | | $ | 21,306 | | | $ | 46,258 | |
| |
| |
| |
| | | | | | |
| 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 | $ | 1.81 | | | $ | 1.54 | | | $ | 1.76 | |
| Discontinued operations | (2.09 | ) |
| (0.39 | ) |
| (0.16 | ) | Discontinued operations | — | | | — | | | 1.62 | |
| Basic and diluted earnings (loss) per share | $ | (0.99 | ) |
| $ | 1.29 |
|
| $ | 1.16 |
| |
| Basic earnings (loss) per share | | Basic earnings (loss) per share | $ | 1.81 | | | $ | 1.54 | | | $ | 3.39 | |
| | Diluted earnings (loss) per share: | | Diluted earnings (loss) per share: | |
| Continuing operations | | Continuing operations | $ | 1.81 | | | $ | 1.53 | | | $ | 1.76 | |
| Discontinued operations | | Discontinued operations | — | | | — | | | 1.62 | |
| Diluted earnings (loss) per share | | Diluted earnings (loss) per share | $ | 1.81 | | | $ | 1.53 | | | $ | 3.37 | |
| |
|
|
|
|
|
|
|
| | | | | | |
| Basic weighted average shares outstanding | 13,690 |
| | 13,699 |
| | 13,673 |
| Basic weighted average shares outstanding | 13,970 | | | 13,880 | | | 13,657 | |
| Diluted weighted average shares outstanding | 13,726 |
| | 13,731 |
| | 13,685 |
| Diluted weighted average shares outstanding | 13,996 | | | 13,930 | | | 13,712 | |
See notes to consolidated financial statements.
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| | | | As Restated | | | | | | | | | | | | | | | |
| | Year Ended December 31 | | Year Ended December 31 |
| | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 |
| | (In thousands) | | (In thousands) |
| Net income (loss) | $ | (13,507 | ) | | $ | 17,698 |
| | $ | 15,884 |
| Net income (loss) | $ | 25,267 | | | $ | 21,306 | | | $ | 46,258 | |
| Other comprehensive income (loss), net of tax: |
| |
| |
| Other comprehensive income (loss), net of tax: | | |
| Foreign currency translation adjustment | 510 |
| | (73 | ) | | 648 |
| Foreign currency translation adjustment | (2,997) | | | 726 | | | 1,481 | |
| Loss on long-term intra-entity foreign currency transactions | (79 | ) | | (1,006 | ) | | — |
| |
| Gain (loss) on long-term intra-entity foreign currency transactions | | Gain (loss) on long-term intra-entity foreign currency transactions | 1,865 | | | (828) | | | (3,035) | |
| Cash flow hedging activity | (1,569 | ) | | 100 |
| | (749 | ) | Cash flow hedging activity | 4,450 | | | 320 | | | (540) | |
| Reclassification of foreign currency adjustments into earnings | | Reclassification of foreign currency adjustments into earnings | 2,085 | | | — | | | — | |
| Reclassification of hedging activities into earnings | 349 |
| | 153 |
| | 641 |
| Reclassification of hedging activities into earnings | 346 | | | 386 | | | (463) | |
| Pension plan adjustment | 1,410 |
| | (1,920 | ) | | 1,510 |
| Pension plan adjustment | (4,053) | | | 2,210 | | | 630 | |
| Reclassification of pension adjustments into earnings | 348 |
| | 556 |
| | 306 |
| Reclassification of pension adjustments into earnings | 629 | | | 419 | | | 583 | |
| Total other comprehensive income (loss), net of tax | $ | 969 |
| | $ | (2,190 | ) | | $ | 2,356 |
| Total other comprehensive income (loss), net of tax | $ | 2,325 | | | $ | 3,233 | | | $ | (1,344) | |
| Comprehensive income (loss) | $ | (12,538 | ) | | $ | 15,508 |
| | $ | 18,240 |
| Comprehensive income (loss) | $ | 27,592 | | | $ | 24,539 | | | $ | 44,914 | |
See notes to consolidated financial statements.
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, net | 108,381 |
| | 98,361 |
|
| Inventory | 109,806 |
| | 122,808 |
|
| Prepaid expenses and other current assets | 11,345 |
| | 15,396 |
|
| Current assets of discontinued operations | 5,383 |
| | 27,879 |
|
| Total current assets | 237,057 |
| | 268,864 |
|
| Property, plant and equipment, net | 22,324 |
| | 20,842 |
|
| Goodwill | 6,253 |
| | 6,253 |
|
| Other intangible assets, net | 3,141 |
| | 4,519 |
|
| Deferred income taxes | 6,248 |
| | 5,794 |
|
| Deferred costs | 10,941 |
| | 7,868 |
|
| Other non-current assets | 2,085 |
| | 2,672 |
|
| Non-current assets of discontinued operations | 614 |
| | 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 agreements | 23,497 |
| | 11,624 |
|
| Accrued compensation | 15,027 |
| | 15,878 |
|
| Accrued product returns | 8,697 |
| | 10,698 |
|
| Other current liabilities | 12,534 |
| | 22,922 |
|
| Current liabilities of discontinued operations | 29,723 |
| | 22,820 |
|
| Total current liabilities | 201,322 |
| | 205,629 |
|
| Revolving credit agreements | 35,000 |
| | 35,000 |
|
| Other long-term liabilities | 16,075 |
| | 22,011 |
|
| Non-current liabilities of discontinued operations | — |
| | 1,960 |
|
| Total liabilities | 252,397 |
| | 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, respectively | 98 |
| | 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, respectively | 41 |
| | 44 |
|
| Capital in excess of par value | 54,509 |
| | 51,714 |
|
| Treasury stock | (5,960 | ) | | — |
|
| Retained earnings | 3,710 |
| | 22,068 |
|
| Accumulated other comprehensive loss | (16,132 | ) | | (17,101 | ) |
| Total stockholders’ equity | 36,266 |
| | 56,818 |
|
| Total liabilities and stockholders' equity | $ | 288,663 |
| | $ | 321,418 |
|
| | | | |
| | | | |
| | | | | | | | | | | |
| December 31 |
| | 2022 | | 2021 |
| | (In thousands) |
| Assets | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 928 | | | $ | 1,125 | |
| Trade receivables, net | 115,135 | | | 119,580 | |
| Inventory | 156,038 | | | 183,382 | |
| Prepaid expenses and other current assets | 12,643 | | | 14,273 | |
| | | |
| Total current assets | 284,744 | | | 318,360 | |
| Property, plant and equipment, net | 27,830 | | | 30,485 | |
| Right-of-use lease assets | 44,000 | | | — | |
| Goodwill | 6,253 | | | 6,253 | |
| Other intangible assets, net | 1,492 | | | 1,692 | |
| Deferred tax assets | 3,117 | | | 4,006 | |
| Deferred costs | 14,348 | | | 18,703 | |
| Other non-current assets | 7,166 | | | 3,005 | |
| | | |
| Total assets | $ | 388,950 | | | $ | 382,504 | |
| Liabilities and stockholders' equity | | | |
| Current liabilities | | | |
| Accounts payable | $ | 61,759 | | | $ | 131,912 | |
| | | |
| | | |
| Accrued compensation | 11,310 | | | 11,719 | |
| Accrued product returns | 6,474 | | | 6,429 | |
| Lease liabilities | 5,875 | | | — | |
| Other current liabilities | 16,150 | | | 14,116 | |
| | | |
| Total current liabilities | 101,568 | | | 164,176 | |
| Revolving credit agreements | 110,895 | | | 96,837 | |
| Lease liabilities, non-current | 46,801 | | | — | |
| Other long-term liabilities | 5,152 | | | 19,212 | |
| | | |
| | | |
| Total liabilities | 264,416 | | | 280,225 | |
| Stockholders’ equity | | | |
| Preferred stock, par value $0.01 per share | — | | | — | |
| Class A Common stock, par value $0.01 per share; 10,663 and 10,267 shares issued as of December 31, 2022 and 2021, respectively | 107 | | | 103 | |
| Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 3,844 and 4,000 shares issued as of December 31, 2022 and 2021, respectively | 38 | | | 40 | |
| Capital in excess of par value | 65,008 | | | 61,586 | |
| Treasury stock | (8,939) | | | (5,960) | |
| Retained earnings | 80,238 | | | 60,753 | |
| Accumulated other comprehensive loss | (11,918) | | | (14,243) | |
| Total stockholders’ equity | 124,534 | | | 102,279 | |
| Total liabilities and stockholders' equity | $ | 388,950 | | | $ | 382,504 | |
| | | |
See notes to consolidated financial statements.
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | As Restated | | | | | | | | | | | | | | | |
| | Year Ended December 31 | | Year Ended December 31 |
| | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 |
| | (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 operations | | Net income (loss) from continuing operations | $ | 25,267 | | | $ | 21,306 | | | $ | 24,067 | |
| 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 amortization | 4,002 |
| | 4,277 |
| | 4,072 |
| Depreciation and amortization | 4,883 | | | 4,913 | | | 3,907 | |
| Deferred income taxes | 1,487 |
| | 5,474 |
| | 3,475 |
| Deferred income taxes | 372 | | | 2,110 | | | (1,431) | |
| Stock compensation expense | 2,797 |
| | 3,618 |
| | 323 |
| Stock compensation expense | 3,424 | | | 3,237 | | | 3,978 | |
| | Brazil foreign currency loss | | Brazil foreign currency loss | 2,085 | | | — | | | — | |
| Other | 616 |
| | 837 |
| | (1,167 | ) | Other | (129) | | | 1,025 | | | 2,055 | |
| Net changes in operating assets and liabilities: |
| |
| |
| Net changes in operating assets and liabilities: | |
| Affiliate payable | (1,920 | ) | | (5,300 | ) | | 866 |
| Affiliate payable | — | | | (505) | | | 9 | |
| Trade receivables | (22,769 | ) | | 18,529 |
| | (8,128 | ) | Trade receivables | 4,532 | | | 27,631 | | | (41,314) | |
| Inventory | 13,674 |
| | (12,255 | ) | | (16,566 | ) | Inventory | 26,399 | | | (9,077) | | | (65,808) | |
| Other assets | 1,127 |
| | (4,586 | ) | | (1,295 | ) | Other assets | 6,274 | | | (4,729) | | | (550) | |
| Accounts payable | (7,043 | ) | | (7,719 | ) | | 25,009 |
| Accounts payable | (69,911) | | | (20,037) | | | 40,215 | |
| Other liabilities | (6,842 | ) | | (7,979 | ) | | 3,605 |
| Other liabilities | (6,614) | | | (8,017) | | | 6,938 | |
| Net cash provided by operating activities from continuing operations | 222 |
| | 17,955 |
| | 28,303 |
| |
| Net cash provided (used for) by operating activities from continuing operations | | Net cash provided (used for) by operating activities from continuing operations | (3,418) | | | 17,857 | | | (27,934) | |
| Investing activities |
| |
| |
| Investing activities | | | | | |
| Expenditures for property, plant and equipment | (4,122 | ) | | (7,759 | ) | | (6,198 | ) | Expenditures for property, plant and equipment | (2,279) | | | (11,844) | | | (3,312) | |
| Other | — |
| | — |
| | 21 |
| Other | — | | | — | | | (500) | |
| Net cash used for investing activities from continuing operations | (4,122 | ) | | (7,759 | ) | | (6,177 | ) | |
| Net cash (used for) provided by investing activities from continuing operations | | Net cash (used for) provided by investing activities from continuing operations | (2,279) | | | (11,844) | | | (3,812) | |
| Financing activities |
| |
| |
| Financing activities | | | | | |
| Net additions (reductions) to revolving credit agreements | 11,873 |
| | (4,597 | ) | | 12,630 |
| Net additions (reductions) to revolving credit agreements | 14,383 | | | (1,550) | | | 39,761 | |
| Purchase of treasury stock | (5,960 | ) | | — |
| | — |
| Purchase of treasury stock | (2,979) | | | — | | | — | |
| Cash dividends paid | (4,851 | ) | | (4,658 | ) | | (1,162 | ) | Cash dividends paid | (5,782) | | | (5,468) | | | (5,053) | |
| Cash dividends to NACCO Industries, Inc. | — |
| | — |
| | (38,000 | ) | |
| Net cash provided by (used for) financing activities from continuing operations | 1,062 |
| | (9,255 | ) | | (26,532 | ) | |
| Financing fees paid | | Financing fees paid | (47) | | | (114) | | | (528) | |
| Other financing | | Other financing | — | | | (134) | | | — | |
| Net cash (used for) provided by financing activities from continuing operations | | Net cash (used for) provided by financing activities from continuing operations | 5,575 | | | (7,266) | | | 34,180 | |
| Cash flows from discontinued operations |
|
| |
|
| |
|
| Cash flows from discontinued operations | | | | | |
| Net cash provided by (used for) operating activities from discontinued operations | 3,953 |
| | (5,499 | ) | | 5,137 |
| Net cash provided by (used for) operating activities from discontinued operations | — | | | — | | | (6,193) | |
| Net cash provided by (used for) investing activities from discontinued operations | 585 |
| | (305 | ) | | (1,176 | ) | Net cash provided by (used for) investing activities from discontinued operations | — | | | — | | | 6 | |
| Net cash used for financing activities from discontinued operations | (103 | ) | | — |
| | (70 | ) | |
| Cash provided by (used for) discontinued operations | 4,435 |
| | (5,804 | ) | | 3,891 |
| |
| 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 | ) | |
| | Cash (used for) provided by discontinued operations | | Cash (used for) provided by discontinued operations | — | | | — | | | (6,187) | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | | Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (123) | | | (33) | | | 25 | |
| Cash, cash equivalents and restricted cash | | Cash, cash equivalents and restricted cash | |
| Increase (decrease) for the period from continuing operations | | Increase (decrease) for the period from continuing operations | (245) | | | (1,286) | | | 2,459 | |
| Increase (decrease) for the year from discontinued operations | 4,435 |
| | (5,804 | ) | | 3,891 |
| Increase (decrease) for the year from discontinued operations | — | | | — | | | (6,187) | |
| Balance at the beginning of the year | 6,352 |
| | 10,906 |
| | 11,340 |
| Balance at the beginning of the year | 2,150 | | | 3,436 | | | 7,164 | |
| Balance at the end of the year | $ | 7,164 |
| | $ | 6,352 |
| | $ | 10,906 |
| Balance at the end of the year | $ | 1,905 | | | $ | 2,150 | | | $ | 3,436 | |
| | Reconciliation of cash, cash equivalents and restricted cash | | Reconciliation of cash, cash equivalents and restricted cash | |
| | Cash and cash equivalents | | Cash and cash equivalents | $ | 928 | | | $ | 1,125 | | | $ | 2,415 | |
| Restricted cash included in prepaid expenses and other current assets | | Restricted cash included in prepaid expenses and other current assets | 62 | | | 48 | | | 208 | |
| Restricted cash included in other non-current assets | | Restricted cash included in other non-current assets | 915 | | | 977 | | | 813 | |
| | Total cash, cash equivalents, and restricted cash | | Total cash, cash equivalents, and restricted cash | $ | 1,905 | | | $ | 2,150 | | | $ | 3,436 | |
See notes to consolidated financial statements.
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EQUITY |
| | | | | | | | | | | | | | | | | | | | | |
| | Class A Common Stock | Class 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, 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 conversions | 88 |
| 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 |
|
| Net income | — |
| — |
| — |
| — |
| 17,698 |
| — |
| 17,698 |
|
| Issuance of common stock, net of conversions | 5 |
| (4 | ) | 323 |
| — |
| — |
| — |
| 324 |
|
| Stock 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 as Restated, December 31, 2018 | $ | 93 |
| $ | 44 |
| $ | 51,714 |
| $ | — |
| $ | 22,068 |
| $ | (17,101 | ) | $ | 56,818 |
|
| Net loss | — |
| — |
| — |
| — |
| (13,507 | ) | — |
| (13,507 | ) |
| Issuance of common stock, net of conversions | 5 |
| (3 | ) | (2 | ) | — |
| — |
| — |
| — |
|
| Purchase of treasury stock | — |
| — |
| — |
| (5,960 | ) | — |
| — |
| (5,960 | ) |
| Stock compensation expense | — |
| — |
| 2,797 |
| — |
| — |
| — |
| 2,797 |
|
| Cash dividends, $0.355 per share | — |
| — |
| — |
| — |
| (4,851 | ) | — |
| (4,851 | ) |
| Other comprehensive income | — |
| — |
| — |
| — |
| — |
| 272 |
| 272 |
|
| 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Class A Common Stock | Class B Common Stock | Capital in Excess of Par Value | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity |
| (In thousands, except per share data) |
| Balance, January 1, 2020 | $ | 98 | | $ | 41 | | $ | 54,509 | | $ | (5,960) | | $ | 3,710 | | $ | (16,132) | | $ | 36,266 | |
| Net income (loss) | — | | — | | — | | — | | 46,258 | | — | | 46,258 | |
| Issuance of common stock, net of conversions | 2 | | — | | (2) | | — | | — | | — | | — | |
| | | | | | | |
| Stock compensation expense | — | | — | | 3,978 | | — | | — | | — | | 3,978 | |
| Cash dividends, $0.37 per share | — | | — | | — | | — | | (5,053) | | — | | (5,053) | |
| | | | | | | |
| Other comprehensive income (loss) | — | | — | | — | | — | | — | | (1,464) | | (1,464) | |
| Reclassification adjustment to net income | — | | — | | — | | — | | — | | 120 | | 120 | |
| Balance, December 31, 2020 | $ | 100 | | $ | 41 | | $ | 58,485 | | $ | (5,960) | | $ | 44,915 | | $ | (17,476) | | $ | 80,105 | |
| Net income (loss) | — | | — | | — | | — | | 21,306 | | — | | 21,306 | |
| Issuance of common stock, net of conversions | 3 | | (1) | | (2) | | — | | — | | — | | — | |
| | | | | | | |
| Stock compensation expense | — | | — | | 3,103 | | — | | — | | — | | 3,103 | |
| Cash dividends, $0.395 per share | — | | — | | — | | — | | (5,468) | | — | | (5,468) | |
| Other comprehensive income (loss) | — | | — | | — | | — | | — | | 2,428 | | 2,428 | |
| Reclassification adjustment to net income (loss) | — | | — | | — | | — | | — | | 805 | | 805 | |
| Balance, December 31, 2021 | $ | 103 | | $ | 40 | | $ | 61,586 | | $ | (5,960) | | $ | 60,753 | | $ | (14,243) | | $ | 102,279 | |
| Net income (loss) | — | | — | | — | | — | | 25,267 | | — | | 25,267 | |
| Issuance of common stock, net of conversions | 4 | | (2) | | (2) | | — | | — | | — | | — | |
| Purchase of treasury stock | — | | — | | — | | (2,979) | | — | | — | | (2,979) | |
| Stock compensation expense | — | | — | | 3,424 | | — | | — | | — | | 3,424 | |
| Cash dividends, $0.415 per share | — | | — | | — | | — | | (5,782) | | — | | (5,782) | |
| Other comprehensive income (loss) | — | | — | | — | | — | | — | | (735) | | (735) | |
| Reclassification adjustment to net income (loss) | — | | — | | — | | — | | — | | 3,060 | | 3,060 | |
| Balance, December 31, 2022 | $ | 107 | | $ | 38 | | $ | 65,008 | | $ | (8,939) | | $ | 80,238 | | $ | (11,918) | | $ | 124,534 | |
See notes to consolidated financial statements.
(1) As Restated
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 (“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 Company also previously operated through its other wholly-owned subsidiary, The Kitchen Collection, LLC (“KC”("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 its retail operations. By December 31, 2019, all KC stores were closed and the reportable segment qualifies to be, 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.subsidiary. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries.subsidiary. Hamilton Beach Brands Holding Company has not guaranteed any obligations of its subsidiaries.subsidiary.
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 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.
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 non-trade customer receivable amounts of $9.5 million have been reclassified from trade receivables, net to prepaid expenses and other current assets to conform to the current period presentation.
Segment Information
As of December 31, 2019,2022, HBB is the Company’s single reportable operating segment. ThisThe Company’s reportable segment is supporteddetermined based on (i) financial information reviewed by the chief operating decision maker ("CODM") (ii) 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 researchbusiness, 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(iii) the basis upon which the CODM makes resource allocation of resources or performance.decisions. Since the Company operates in one reportable segment, all required financial segment information can be found in the consolidated financial statements.
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 operationsThere are aggregated and reported separately asno assets and liabilities of discontinued operations in the Consolidated Balance Sheet, including the comparative prior year period.as of December 31, 2022 and 2021. 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires managementthe Company 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, 20192022 and 2018,2021, receivables from HBB’s five largest customers represented 69%73% and 57%61%, respectively, of HBB's net trade receivables. HBB’s significant credit concentration is uncollateralized; however, historically, minimal credit losses have been incurred.
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 $162.7$118.5 million, $165.4$140.7 million , and $164.0$162.4 million of trade receivables during 2019, 20182022, 2021 and 2017,2020, respectively. The losses incurred on sold receivables in the consolidated results of operations for the years ended December 31, 2019, 2018,2022, 2021, and 20172020 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
During the fourth quarter of 2020, the Company committed to a plan to sell its Brazilian subsidiary and determined that it met all of the criteria to classify the assets and liabilities of this business as held for sale. In April 2021, the Company made the decision to wind down the Brazilian subsidiary and enter into a licensing agreement with a third party to service the Brazilian market. The carrying amounts of the assets were reclassified to held and used during the second quarter of 2021. During the first quarter of 2022, the criteria for substantially complete liquidation were met, and $2.1 million of accumulated other comprehensive losses were released into other expense (income), net in the consolidated results of operations during the three months ended March 31, 2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
No 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 associated expense is 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.
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 price concessions and changes in returns. In addition, theThe Company offers price concessions to ourits customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements. We determineThe Company determines whether price concessions offered to its customers are a reduction of the transaction price and revenue or are advertising expense, depending on whether we receivethe Company receives a distinct good or service from our customers and, if so, whether wethe Company can reasonably estimate the fair value of that distinct good or service. WeThe Company 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.
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 $12.1$11.8 million, $11.0$8.6 million, and $10.4$10.0 million in 2019, 2018,2022, 2021, and 2017,2020, 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.
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in earningsThousands, Except Per Share and generally recognized in cost of sales.Percentage Data)
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 OfferedSOFR (Secured Overnight Financing 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.
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 2022, the Company grants stockshares 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 118,688150,062, 158,272, and 5,51294,898 shares of stock of Class A Common in the years ended December 31, 20192022, 2021, and 2018,2020, respectively. No stock was issued inAfter the year ended December 31, 2017issuance of these shares, there were 722,568 shares of Class A Common available for issuance under the Executive Plan.this plan. Stock compensation expense related to the Executive Plan was $1.6$2.3 million, $2.1 million, and $2.7$2.9 million for the years ended December 31, 20192022, 2021, and 2018,2020, respectively, and was based on the fair value of Class A Common on the grant date.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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. For the year ended December 31, 2022, $110,000 ($150,000 for the Chairman) of the non-employee director's annual retainer of $175,000 ($250,000 for the Chairman) was paid in transfer-restricted shares of Class A Common. For the year ended December 31, 2021, $105,000 ($150,000 for the Chairman) of the non-employee director's annual retainer of $167,000 ($250,000 for the Chairman) was paid in transfer-restricted shares of Class A Common. 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 90,223, 57,735, and 74,337 shares in the years ended December 31, 2022, 2021 and 2020, respectively. In addition to the mandatory retainer fee received in transfer-restricted stock, directors may elect to receive shares of Class A Common 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. There were no shares issued under voluntary elections in 2022. Total shares issued under voluntary elections were 1,768 and 2,343 in 2021 and 2020, respectively. After the issuance of these shares, there were 193,646 shares of Class A Common available for issuance under this plan. Stock compensation expense related to these awards was $1.1 million, $1.1 million, and $1.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. Stock compensation expense represents fair value based on the market price of the shares of Class A Common on the grant date.
Leases
The Company adopted Topic 842 on January 1, 2022. The Company determines whether an arrangement is a lease at inception, considering whether the contract conveys a right to control the use of the identified asset for a period of time in exchange for consideration. Leases are classified as operating or finance leases at the commencement date of the lease. Operating leases are included in Right-of-use lease assets, Lease liabilities, and Lease liabilities, non-current on the Consolidated Balance Sheets.
Right-of-use lease assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. Lease liabilities are classified between current and non-current liabilities based on their contractual payment terms. The right-of-use lease asset includes prepaid rent and reflects the unamortized balance of lease incentives. The Company’s leases may include renewal options, and the renewal option is included in the lease term if it is concluded that it is reasonably certain that we will exercise that option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company has operating leases for real estate, equipment, and production specific tooling assets used by our third-party suppliers. The Company does not have finance leases. The Company has elected not to record short-term leases with initial terms of twelve months or less in our Consolidated Balance Sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or a rate, such as the Company’s proportionate share of actual costs for utilities, common area maintenance, insurance, and property taxes, are excluded from the measurement of the lease liability, unless subject to fixed minimum requirements, and are recognized as variable lease cost when the obligation for that payment is incurred. The Company combines lease and non-lease components as a single component for all asset classes. Lease expense is classified as cost of sales or selling, general and administrative expenses in our Consolidated Statements of Operations based on the use of the leased item.
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Our estimated incremental borrowing rate reflects a secured rate based on recent debt issuances, our estimated credit rating, lease term, as well as publicly available data for instruments with similar characteristics.
Treasury Stock
The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a reduction to stockholders' equity.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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. ManagementThe Company 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.earnings by jurisdiction. 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 AdoptedInsurance Recovery
In the first quarter of 2022, the Company recognized $10.0 million of insurance recovery associated with unauthorized transactions by former employees at our Mexican subsidiaries, which were identified in the quarter ended March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the requirements in GAAP related31, 2020. The Company maintains fidelity insurance and filed a claim to recover losses incurred up to the income statement presentationpolicy maximum of $10.0 million. The insurance recovery was received during the componentssecond quarter of net periodic2022, and the 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 fromrecognized as a reduction to selling, general and administrative expenses to other expense (income), net.in our Consolidated Statement of Operations during the first quarter of 2022.
Accounting Standards Not Yet Adopted
The Company is an emerging growth company and has elected not to opt outIn March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the extended transition periodEffects of Reference Rate Reform on Financial Reporting.” The new accounting rules provide optional expedients and exceptions for complying with new or revisedapplying generally accepted accounting standards, which means that when a standard is issued or revisedprinciples to contracts, hedging relationships, and it has different application dates for public or nonpublic entities,other transactions affected by reference rate reform. During the third quarter of 2022, the Company can adoptadopted certain optional expedients provided under Topic 848 that permit its hedging relationships to continue without de-designation upon changes due to reference rate reform. The adoption of this guidance resulted in no material impact to the new or revised standard at the time nonpublic entities adopt the new or revised standard.Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases"Leases, (Topic 842)," which requires an entitywas subsequently amended when FASB issued: ASU 2018-01, "Land Easement Practical Expedient for Transition to Topic 842"; ASU 2018-10, "Codification Improvements to Topic 842"; ASU 2018-11, "Targeted Improvements". Topic 842 modifies lease accounting by requiring lessees to recognize lease right-of-use assets and liabilities for the rightsoperating leases and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted.disclosing key information about leasing arrangements. The Company is planningadopted Topic 842 utilizing the effective date transition method, which does not require restatement of prior periods, on January 1, 2022 and as part of the process made the following permitted accounting policy elections:
a.The package of practical expedients, which allowed the Company not to adopt ASU 2016-02reassess prior conclusions reached related to lease existence, lease classification, and initial direct costs.
b.The Company will not recognize right-of-use assets or lease liabilities for its year ending December 31, 2021 and is currently evaluating to what extent ASU 2016-02leases with a stated term of 12 months or less.
c.The Company will affectnot separate non-lease components from lease components for all asset classes.
d.The Company did not elect the Company's financial position, resultshindsight practical expedient for any of operations, cash flows and related disclosures.the asset classes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Upon adoption, the Company recorded $44.0 million of right-of-use lease assets and $52.5 million of lease liabilities within the Consolidated Balance Sheet. The adoption of the standard did not have a material impact to the Consolidated Statements of Operations or Cash Flows.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The new accounting rules reduce complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. The new accounting rules also simplify accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The Company adopted ASU 2019-12 for the fiscal year ended December 31, 2022 and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Standards
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 and smaller reporting companies, the amendments are effective for fiscal years beginning after December 15, 2021, and2022, including interim periods within those fiscal years beginning after December 15, 2021.years. Early adoption is permitted. The Company is planning to adopt ASU 2016-032016-13 for its year ending December 31, 2022beginning January 1, 2023 and subsequent interim periods. Although the assessment is currently evaluatingongoing, the Company does not expect the adoption of this guidance to what extent ASU 2016-13 will affecthave a material impact on the Company'sCompany’s financial position,condition, results of operations or cash flows and related disclosures.flows.
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.
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.
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 sales | 483,298 |
| | (64 | ) | | f | | 483,234 |
|
| Gross profit | 129,545 |
| | (993 | ) | |
| | 128,552 |
|
| Selling, general and administrative expenses | 91,302 |
| | 9,079 |
| | a,c,f | | 100,381 |
|
| Amortization of intangible assets | 1,377 |
| | — |
| |
| | 1,377 |
|
| Operating profit | 36,866 |
| | (10,072 | ) | |
| | 26,794 |
|
| Interest expense, net | 2,975 |
| | — |
| |
| | 2,975 |
|
| Other expense (income), net | (502 | ) | | 144 |
| | f | | (358 | ) |
| Income from continuing operations before income taxes | 34,393 |
| | (10,216 | ) | |
| | 24,177 |
|
| Income tax expense | 9,315 |
| | (231 | ) | | e | | 9,084 |
|
| Net income from continuing operations | 25,078 |
| | (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 outstanding | 13,690 |
| |
|
| |
| | 13,690 |
|
| Diluted weighted average shares outstanding | 13,726 |
| |
|
| |
| | 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
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 sales | 492,195 |
| | (1,165 | ) | | f | | 491,030 |
|
| Gross profit | 137,515 |
| | 1,537 |
| | | | 139,052 |
|
| Selling, general and administrative expenses | 97,964 |
| | 6,157 |
| | a,c,f | | 104,121 |
|
| Amortization of intangible assets | 1,381 |
| | — |
| | | | 1,381 |
|
| Operating profit | 38,170 |
| | (4,620 | ) | | | | 33,550 |
|
| Interest expense, net | 2,916 |
| | — |
| | | | 2,916 |
|
| Other expense (income), net | 293 |
| | (144 | ) | | f | | 149 |
|
| Income from continuing operations before income taxes | 34,961 |
| | (4,476 | ) | | | | 30,485 |
|
| Income tax expense | 7,816 |
| | (390 | ) | | e | | 7,426 |
|
| Net income from continuing operations | 27,145 |
| | (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 outstanding | 13,699 |
| |
|
| | | | 13,699 |
|
| Diluted weighted average shares outstanding | 13,731 |
| |
|
| | | | 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
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 sales | 477,220 |
| | (1,281 | ) | | f | | 475,939 |
|
| Gross profit | 135,009 |
| | 1,108 |
| | | | 136,117 |
|
| Selling, general and administrative expenses | 93,700 |
| | 3,080 |
| | a,c,f | | 96,780 |
|
| Amortization of intangible assets | 1,381 |
| | — |
| | | | 1,381 |
|
| Operating profit | 39,928 |
| | (1,972 | ) | | | | 37,956 |
|
| Interest expense, net | 1,572 |
| | — |
| | | | 1,572 |
|
| Other expense (income), net | (692 | ) | | — |
| | | | (692 | ) |
| Income from continuing operations before income taxes | 39,048 |
| | (1,972 | ) | | | | 37,076 |
|
| Income tax expense | 18,918 |
| | 49 |
| | e | | 18,967 |
|
| Net income from continuing operations | 20,130 |
| | (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 outstanding | 13,673 |
| |
|
| | | | 13,673 |
|
| Diluted weighted average shares outstanding | 13,685 |
| |
|
| | | | 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
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 adjustment | 1,101 |
| | (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 earnings | 349 |
| | — |
| | 349 |
|
| Pension plan adjustment | 1,410 |
| | — |
| | 1,410 |
|
| Reclassification of pension adjustments into earnings | 254 |
| | 94 |
| | 348 |
|
| Total other comprehensive income (loss), net of tax | 1,322 |
| | (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 activity | 244 |
| | (144 | ) | | 100 |
|
| Reclassification of hedging activities into earnings | 153 |
| | — |
| | 153 |
|
| Pension plan adjustment | (1,920 | ) | | — |
| | (1,920 | ) |
| Reclassification of pension adjustments into earnings | 650 |
| | (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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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 adjustment | 689 |
| | (41 | ) | | 648 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | — |
| | — |
| | — |
|
| Cash flow hedging activity | (749 | ) | | — |
| | (749 | ) |
| Reclassification of hedging activities into earnings | 641 |
| | — |
| | 641 |
|
| Pension plan adjustment | 1,510 |
| | — |
| | 1,510 |
|
| Reclassification of pension adjustments into earnings | 306 |
| | — |
| | 306 |
|
| Total other comprehensive income (loss), net of tax | 2,397 |
| | (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.
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, net | 113,781 |
|
| (5,400 | ) |
| a,b,d |
| 108,381 |
|
| Inventory | 109,621 |
|
| 185 |
|
| f |
| 109,806 |
|
| Prepaid expenses and other current assets | 23,102 |
|
| (11,757 | ) |
| a,b,f |
| 11,345 |
|
| Current assets of discontinued operations | 5,383 |
|
| — |
|
|
|
| 5,383 |
|
| Total current assets | 254,029 |
|
| (16,972 | ) |
|
|
| 237,057 |
|
| Property, plant and equipment, net | 22,324 |
|
| — |
|
|
|
| 22,324 |
|
| Goodwill | 6,253 |
|
| — |
|
|
|
| 6,253 |
|
| Other intangible assets, net | 3,141 |
|
| — |
|
|
|
| 3,141 |
|
| Deferred income taxes | 3,853 |
|
| 2,395 |
|
| e |
| 6,248 |
|
| Deferred costs | 10,941 |
|
| — |
|
|
|
| 10,941 |
|
| Other non-current assets | 2,085 |
|
| — |
|
|
|
| 2,085 |
|
| Non-current assets of discontinued operations | 614 |
|
| — |
|
|
|
| 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 agreements | 23,497 |
|
| — |
|
|
|
| 23,497 |
|
| Accrued compensation | 14,277 |
|
| 750 |
|
| f |
| 15,027 |
|
| Accrued product returns | 8,697 |
|
| — |
|
|
|
| 8,697 |
|
| Other current liabilities | 12,873 |
|
| (339 | ) |
| a,e |
| 12,534 |
|
| Current liabilities of discontinued operations | 29,723 |
|
| — |
|
|
|
| 29,723 |
|
| Total current liabilities | 200,680 |
|
| 642 |
|
|
|
| 201,322 |
|
| Revolving credit agreements | 35,000 |
|
| — |
|
|
|
| 35,000 |
|
| Other long-term liabilities | 12,501 |
|
| 3,574 |
|
| e |
| 16,075 |
|
| Total liabilities | 248,181 |
|
| 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, 2019 | 98 |
|
| — |
|
|
|
| 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, 2019 | 41 |
|
| — |
|
|
|
| 41 |
|
| Capital in excess of par value | 54,344 |
|
| 165 |
|
| f |
| 54,509 |
|
| Treasury stock | (5,960 | ) |
| — |
|
|
|
| (5,960 | ) |
| Retained earnings | 22,524 |
|
| (18,814 | ) |
| a,b,d,e,f |
| 3,710 |
|
| Accumulated other comprehensive loss | (15,988 | ) |
| (144 | ) |
| a,b,d,e |
| (16,132 | ) |
| Total stockholders’ equity | 55,059 |
|
| (18,793 | ) |
|
|
| 36,266 |
|
| Total liabilities and stockholders' equity | $ | 303,240 |
|
| $ | (14,577 | ) |
|
|
| $ | 288,663 |
|
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
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, net | 100,821 |
| | (2,460 | ) | | a,f | | 98,361 |
|
| Inventory | 122,697 |
| | 111 |
| | f | | 122,808 |
|
| Prepaid expenses and other current assets | 22,332 |
| | (6,936 | ) | | a | | 15,396 |
|
| Current assets of discontinued operations | 27,879 |
| | — |
| | | | 27,879 |
|
| Total current assets | 278,149 |
| | (9,285 | ) | |
| | 268,864 |
|
| Property, plant and equipment, net | 20,842 |
| | — |
| | | | 20,842 |
|
| Goodwill | 6,253 |
| | — |
| | | | 6,253 |
|
| Other intangible assets, net | 4,519 |
| | — |
| | | | 4,519 |
|
| Deferred income taxes | 5,518 |
| | 276 |
| | e | | 5,794 |
|
| Deferred costs | 7,868 |
| | — |
| | | | 7,868 |
|
| Other non-current assets | 2,672 |
| | — |
| | | | 2,672 |
|
| Non-current assets of discontinued operations | 4,606 |
| | — |
| | | | 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 agreements | 11,624 |
| | — |
| | | | 11,624 |
|
| Accrued compensation | 15,525 |
| | 353 |
| | f | | 15,878 |
|
| Accrued product returns | 10,698 |
| | — |
| | | | 10,698 |
|
| Other current liabilities | 24,554 |
| | (1,632 | ) | | a,d,e,f | | 22,922 |
|
| Current liabilities of discontinued operations | 22,820 |
| | — |
| | | | 22,820 |
|
| Total current liabilities | 206,901 |
| | (1,272 | ) | | | | 205,629 |
|
| Revolving credit agreements | 35,000 |
| | — |
| | | | 35,000 |
|
| Other long-term liabilities | 21,128 |
| | 883 |
| | e | | 22,011 |
|
| Non-current liabilities of discontinued operations | 1,960 |
| | — |
| | | | 1,960 |
|
| Total liabilities | 264,989 |
| | (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, 2018 | 93 |
| | — |
| | | | 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, 2018 | 44 |
| | — |
| | | | 44 |
|
| Capital in excess of par value | 51,714 |
| | — |
| | | | 51,714 |
|
| Treasury stock | — |
| | — |
| | | | — |
|
| Retained earnings | 30,897 |
| | (8,829 | ) | | a,d,e,f | | 22,068 |
|
| Accumulated other comprehensive loss | (17,310 | ) | | 209 |
| | a,d,e,f | | (17,101 | ) |
| Total stockholders’ equity | 65,438 |
| | (8,620 | ) | | | | 56,818 |
|
| Total liabilities and stockholders' equity | $ | 330,427 |
| | $ | (9,009 | ) | | | | $ | 321,418 |
|
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
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 amortization | 4,002 |
|
| — |
|
| 4,002 |
|
| Deferred income taxes | 3,248 |
|
| (1,761 | ) |
| 1,487 |
|
| Stock compensation expense | 2,632 |
|
| 165 |
|
| 2,797 |
|
| Other | 471 |
|
| 145 |
|
| 616 |
|
| Net changes in operating assets and liabilities: |
|
|
|
|
|
| Affiliate payable | (1,920 | ) |
| — |
|
| (1,920 | ) |
| Trade receivables | (25,586 | ) |
| 2,817 |
|
| (22,769 | ) |
| Inventory | 13,756 |
|
| (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 operations | 202 |
|
| 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 agreements | 11,873 |
|
| — |
|
| 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 operations | 1,062 |
|
| — |
|
| 1,062 |
|
| Cash flows from discontinued operations |
|
|
|
|
|
|
|
|
| Net cash provided by (used for) operating activities from discontinued operations | 3,953 |
|
| — |
|
| 3,953 |
|
| Net cash provided by (used for) investing activities from discontinued operations | 585 |
|
| — |
|
| 585 |
|
| Net cash used for financing activities from discontinued operations | (103 | ) |
| — |
|
| (103 | ) |
| Cash provided by (used for) discontinued operations | 4,435 |
|
| — |
|
| 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 operations | 4,435 |
|
| — |
|
| 4,435 |
|
| Balance at the beginning of the year | 6,352 |
|
| — |
|
| 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.
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.
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 amortization | 4,277 |
| | — |
| | 4,277 |
|
| Deferred income taxes | 5,185 |
| | 289 |
| | 5,474 |
|
| Stock compensation expense | 3,618 |
| | — |
| | 3,618 |
|
| Other | 868 |
| | (31 | ) | | 837 |
|
| Net changes in operating assets and liabilities: |
| |
| |
|
| Affiliate payable | (5,300 | ) | | — |
| | (5,300 | ) |
| Trade receivables | 16,298 |
| | 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 operations | 17,323 |
| | 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 cash | 941 |
| | (632 | ) | | 309 |
|
| Cash and Cash Equivalents |
| |
| |
|
| (Decrease) increase for the year from continuing operations | 1,250 |
| | — |
| | 1,250 |
|
| Increase (decrease) for the year from discontinued operations | (5,804 | ) | | — |
| | (5,804 | ) |
| Balance at the beginning of the year | 10,906 |
| | — |
| | 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.
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.
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 amortization | 4,072 |
| | — |
| | 4,072 |
|
| Deferred income taxes | 4,107 |
| | (632 | ) | | 3,475 |
|
| Stock compensation expense | 323 |
| | — |
| | 323 |
|
| Other | (1,167 | ) | | — |
| | (1,167 | ) |
| Net changes in operating assets and liabilities: |
| |
| |
|
| Affiliate payable | 866 |
| | — |
| | 866 |
|
| Trade receivables | (8,442 | ) | | 314 |
| | (8,128 | ) |
| Inventory | (16,485 | ) | | (81 | ) | | (16,566 | ) |
| Other assets | (1,960 | ) | | 665 |
| | (1,295 | ) |
| Accounts payable | 25,009 |
| | — |
| | 25,009 |
|
| Other liabilities | 1,850 |
| | 1,755 |
| | 3,605 |
|
| Net cash provided by operating activities from continuing operations | 28,303 |
| | — |
| | 28,303 |
|
| Investing activities |
| |
| |
|
| Expenditures for property, plant and equipment | (6,198 | ) | | — |
| | (6,198 | ) |
| Other | 21 |
| | — |
| | 21 |
|
| Net cash used for investing activities from continuing operations | (6,177 | ) | | — |
| | (6,177 | ) |
| Financing activities |
| |
| |
|
| Net additions (reductions) to revolving credit agreements | 12,630 |
| | — |
| | 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 operations | 5,137 |
| | — |
| | 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 operations | 3,891 |
| | — |
| | 3,891 |
|
| Effect of exchange rate changes on cash | 81 |
| | — |
| | 81 |
|
| Cash and Cash Equivalents |
| |
| |
|
| (Decrease) increase for the year from continuing operations | (4,325 | ) | | — |
| | (4,325 | ) |
| Increase (decrease) for the year from discontinued operations | 3,891 |
| | — |
| | 3,891 |
|
| Balance at the beginning of the year | 11,340 |
| | — |
| | 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.
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.
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 stock | Class B common stock | Capital in excess of par value | Treasury stock | Retained earnings | Accumulated 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 conversions | 5 |
| (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 conversions | 5 |
| (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.
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 stock | Class B common stock | Capital in excess of par value | Treasury stock | Retained earnings | Accumulated 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 conversions | 5 |
| (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 conversions | 5 |
| (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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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 stock | Class B common stock | Capital in excess of par value | Treasury stock | Retained earnings | Accumulated 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 conversions | 88 |
| 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 conversions | 88 |
| 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 3 - 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 HBB 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 sales | 62,927 |
| | 61,972 |
| | 69,708 |
|
| Gross profit | 37,933 |
| | 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 expense | 583 |
| | 361 |
| | 258 |
|
| Other expense, net | 26 |
| | 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) | | Year Ended December 31 |
| | | 2020 | | |
| | |
| Revenue | | | $ | 631 | | | |
| Cost of sales | | | — | | | |
| Gross profit | | | 631 | | | |
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). |
| | 1,346 | | | |
(2) | KC recognizedAdjustment of lease termination liability (1) | | | (16,457) | | | |
Adjustment of other current liabilities(2) | | | (6,608) | | | |
| Operating profit (loss) | | | 22,350 | | | |
| Interest expense | | | — | | | |
| Other expense, net | | | 88 | | | |
| Income (loss) from discontinued operations before income taxes | | | 22,262 | | | |
| Income tax expense (benefit) | | | 71 | | | |
Income (loss) from discontinued operations, net 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.tax | | | $ | 22,191 | | | |
(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.
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. The major classes of assets and liabilities included as part of discontinued operations are as follows:
|
| | | | | | | |
| | December 31 |
| | 2019 | | 2018 |
| | (In thousands) |
| Assets | | | |
| Cash and cash equivalents | $ | 5,022 |
| | $ | 1,932 |
|
| Credit card receivables | 51 |
| | 1,771 |
|
| Inventory | — |
| | 21,994 |
|
| Prepaid expenses and other current assets | 310 |
| | 2,182 |
|
| Current assets of discontinued operations | $ | 5,383 |
| | $ | 27,879 |
|
| | | | |
| Property, plant and equipment, net | $ | — |
| | $ | 1,788 |
|
| Deferred income taxes | 614 |
| | 2,645 |
|
| Other non-current assets | — |
| | 173 |
|
| Non-current assets of discontinued operations | $ | 614 |
| | $ | 4,606 |
|
| | | | |
| Liabilities | | | |
| Accounts payable | $ | 4,594 |
| | $ | 13,704 |
|
| Accrued compensation | 1,058 |
| | 1,498 |
|
| Accrued product returns | — |
| | 243 |
|
| Lease termination liability | 17,248 |
| | — |
|
| Other current liabilities | 6,823 |
| | 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:2022 and 2021. Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC.
NOTE 3 - Property, Plant and Equipment, Net
|
| | | |
| | Operating Leases |
| 2020 | $ | 10,942 |
|
| 2021 | 5,863 |
|
| 2022 | 4,027 |
|
| 2023 | 2,458 |
|
| 2024 | 1,534 |
|
| Subsequent to 2024 | 1,669 |
|
Total minimum lease payments (1) | $ | 26,493 |
|
| |
(1) | Minimum lease payments have not been reduced by minimum sublease rentals of $6.2 million due in the future under contractual sublease agreements. |
Property, plant and equipment, net includes the following:
Rental | | | | | | | | | | | |
| | December 31 |
| | 2022 | | 2021 |
| Land | $ | 226 | | | $ | 226 | |
| Furniture and fixtures | 11,617 | | | 11,485 | |
| Building and improvements | 9,713 | | | 9,737 | |
| Machinery and equipment | 32,660 | | | 32,392 | |
| Internal-use capitalized software | 14,921 | | | 14,615 | |
| Construction in progress, including internal-use capitalized software not yet in service | 959 | | | 1,240 | |
| Property, plant and equipment, at cost | 70,096 | | | 69,695 | |
| Less allowances for depreciation and amortization | 42,266 | | | 39,210 | |
| | $ | 27,830 | | | $ | 30,485 | |
NOTE 4 - 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, 2022 | | | | | |
| | | | | |
| Trademarks | $ | 3,100 | | | $ | (1,608) | | | $ | 1,492 | |
| | | | | |
| $ | 3,100 | | | $ | (1,608) | | | $ | 1,492 | |
| | | | | |
| Balance at December 31, 2021 | | | | | |
| | | | | |
| Trademarks | 3,100 | | | (1,408) | | | 1,692 | |
| | | | | |
| $ | 3,100 | | | $ | (1,408) | | | $ | 1,692 | |
Amortization expense from discontinued operations netfor intangible assets was $0.2 million in 2022 and 2021.
Expected annual amortization expense of sublease rental income and excluding termination costsintangible assets for all operating leases,the next five years is reported in selling, general and administrative expenses$0.2 million. The remaining useful life of discontinued operations and was $14.3 million, $18.0 million and $19.7 million in 2019, 2018 and 2017, respectively.the trademark intangible asset is approximately 7.5 years.
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 fixtures | 13,071 |
| | 12,583 |
|
| Building and improvements | 10,116 |
| | 10,084 |
|
| Machinery and equipment | 32,761 |
| | 30,728 |
|
| Construction in progress, including internal-use capitalized software | 11,685 |
| | 10,626 |
|
| Property, plant and equipment, at cost | 67,859 |
| | 64,247 |
|
| Less allowances for depreciation and amortization | 45,535 |
| | 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, 2019 | | | | | |
| Customer relationships | $ | 5,760 |
| | $ | (4,840 | ) | | $ | 920 |
|
| Trademarks | 3,100 |
| | (1,008 | ) | | 2,092 |
|
| Other intangibles | 1,240 |
| | (1,111 | ) | | 129 |
|
| | $ | 10,100 |
| | $ | (6,959 | ) | | $ | 3,141 |
|
| | | | | | |
| Balance at December 31, 2018 | | | | | |
| Customer relationships | $ | 5,760 |
| | $ | (3,880 | ) | | $ | 1,880 |
|
| Trademarks | 3,100 |
| | (808 | ) | | 2,292 |
|
| Other intangibles | 1,240 |
| | (893 | ) | | 347 |
|
| | $ | 10,100 |
| | $ | (5,581 | ) | | $ | 4,519 |
|
Amortization expense for intangible assets included in continuing operations was $1.4 million in 2019, 2018 and 2017.
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. The weighted average amortization period for intangible assets is approximately 8.9 years.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 6 - 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.subsidiary.
The following table summarizes HBB's available and outstanding borrowings: | | | | December 31 | | December 31 |
| | 2019 | | 2018 | | 2022 | | 2021 |
| Total outstanding borrowings for continuing operations: | | | | Total outstanding borrowings for continuing operations: | | | |
| Revolving credit agreements | $ | 58,305 |
| | $ | 45,733 |
| Revolving credit agreements | $ | 110,895 | | | $ | 96,837 | |
| Book overdrafts | 192 |
| | 891 |
| |
| | Total outstanding borrowings | $ | 58,497 |
| | $ | 46,624 |
| Total outstanding borrowings | $ | 110,895 | | | $ | 96,837 | |
| | | | | | | | |
| Current portion of borrowings outstanding | $ | 23,497 |
| | $ | 11,624 |
| |
| Long-term portion of borrowings outstanding | 35,000 |
| | 35,000 |
| |
| | | $ | 58,497 |
| | $ | 46,624 |
| |
| | |
| | | |
| Total available borrowings, net of limitations, under revolving credit agreements | $ | 114,366 |
| | $ | 114,669 |
| Total available borrowings, net of limitations, under revolving credit agreements | $ | 149,227 | | | $ | 149,015 | |
| | |
| | | | | | |
| Unused revolving credit agreements | $ | 56,061 |
| | $ | 68,936 |
| |
| Unused available borrowings | | Unused available borrowings | $ | 38,332 | | | $ | 52,178 | |
| | | | | | | | |
| Weighted average stated interest rate on total borrowings | 4.16 | % | | 4.12 | % | Weighted average stated interest rate on total borrowings | 3.80 | % | | 2.18 | % |
| Weighted average effective interest rate on total borrowings (including interest rate swap agreements) | 3.82 | % | | 3.45 | % | Weighted average effective interest rate on total borrowings (including interest rate swap agreements) | 3.49 | % | | 3.38 | % |
Including swap settlements, interest paid on total debt was $3.1$4.5 million, $3.1$2.8 million, and $1.6$2.1 million during 2019, 2018,2022, 2021, and 2017,2020, respectively. Interest capitalized was $0.4 millionnot material in 2019, $0.3 million in 20182022, 2021 and $0.2 million 2017.2020.
HBB maintainshas a $115.0$150 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires in June 2021. The current portion2025. Repayment of the credit facility is due on June 30, 2025, therefore all borrowings outstanding represents expected voluntary repayments to be made in the next twelve months.are classified as long-term debt as of December 31, 2022. The obligations under the HBB Facility are secured by substantially all of HBB's assets. The approximate book value of HBB's assets heldHBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as collateral underdefined in the HBB Facility was $297.2 million asFacility. As of December 31, 2019.2022, HBB was in compliance with all financial covenants in the HBB Facility.
The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible trade receivables, inventoryinventory and trademarks of the borrowers, as defined in the HBB Facility. Borrowings bear interest at a floating rate, which can be a base rate, LIBORSOFR, or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. The applicable margins, effective December 31, 2019,2022, for base rate loans and LIBORSOFR loans denominated in U.S. dollars were 0.0%0.00% and 1.75%2.05%, respectively. The applicable margins, effective December 31, 2019,2022, for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.0%0.00% and 1.75%2.05%, 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$50.0 million at December 31, 20192022 at an average fixed interest rate of 1.5%0.9%. HBB also hasentered into delayed-start interest rate swaps withduring 2021. These swaps have notional values totaling $10.0$50.0 million as of December 31, 2019,2022, with an average fixed ratesinterest rate of 1.7%1.6%.
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 dividendsDividends to Hamilton Beach Brands Holding subject to achieving availability thresholds. Under Amendment No. 6 to the HBB Facility, dividends to Hamilton Beach HoldingCompany are not to exceed $5.0$7.0 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$18.0 million. Dividends to Hamilton Beach Brands Holding Company are discretionary to the extent that for the 30thirty 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$30 million. The HBB Facility also requires HBBCompany expects to achieve a minimum fixed charge coverage ratiocontinue to borrow against the facility and make voluntary repayments within the next twelve months.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in certain circumstances, as defined in the HBB Facility. At December 31, 2019, HBB was in compliance with all financial covenants in the HBB Facility.Thousands, Except Per Share and Percentage Data)
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 LIBORSOFR 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.
There were no transfers into or out of Levels 1 2 or 32 during the years ended December 31, 20192022 and 2018.2021. 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. These assets were transferred out of Level 3 during the year ended December 31, 2021. There were no transfers into or out of Level 3 during the year ended December 31, 2022.
NOTE 87 - Derivative Financial Instruments
Foreign Currency Derivatives
HBB held forward foreign currency exchange contracts with total notional amounts of $13.2$11.3 million and $13.0$15.1 million at December 31, 2019,2022, and 2018,2021, respectively, denominated primarily in Canadian dollars and Mexican pesos. The fair value of these contracts approximated a payablereceivable of $0.3$0.1 million at December 31, 20192022 and a net receivable of $0.1less than $0.1 million at December 31, 2018.2021.
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 LIBORSOFR 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 Amount | | Average Fixed Rate | | Remaining Term at | | 2022 | | 2021 | | 2022 | | 2021 | | December 31, 2022 |
| | 2019 | | 2018 | | 2019 | | 2018 | | December 31, 2019 | |
| Interest rate swaps | $ | 20.0 |
| | $ | 20.0 |
| | 1.4 | % | | 1.4 | % | | Extending to January 2020 | Interest rate swaps | $ | 50.0 | | | $ | 25.0 | | | 0.9 | % | | 1.7 | % | | Extending to January 2024 |
| Interest rate swaps | $ | 15.0 |
| | $ | 15.0 |
| | 1.6 | % | | 1.6 | % | | Extending to January 2024 | |
| Delayed start interest rate swaps | $ | 10.0 |
| | $ | 10.0 |
| | 1.7 | % | | 1.7 | % | | Extending to January 2024 | Delayed start interest rate swaps | $ | 50.0 | | | $ | 75.0 | | | 1.6 | % | | 1.2 | % | | Extending to January 2029 |
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 payablereceivable of $0.1$5.4 million at December 31, 20192022 and a receivablepayable of $1.1$0.9 million at December 31, 2018.2021. 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, 20192022 are expected to continue to be effective as hedges.
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 fair value of derivative instruments at December 31, as recorded in the Consolidated Balance Sheets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Asset Derivatives | | Liability Derivatives |
| | Balance sheet location | | 2022 | | 2021 | | Balance sheet location | | 2022 | | 2021 |
| Interest rate swap agreements | | | | | | | | | | | |
| Current | Prepaid expenses and other current assets | | $ | 837 | | | $ | — | | | Other current liabilities | | $ | — | | | $ | 216 | |
| Long-term | Other non-current assets | | 4,539 | | | — | | | Other long-term liabilities | | — | | | 655 | |
| Foreign currency exchange contracts | | | | | | | | | | | |
| Current | Prepaid expenses and other current assets | | 174 | | | 73 | | | Other current liabilities | | 101 | | | 41 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total derivatives | | | $ | 5,550 | | | $ | 73 | | | | | $ | 101 | | | $ | 912 | |
|
| | | | | | | | | | | | | | | | | | | |
| | Asset Derivatives | | Liability Derivatives |
| | Balance sheet location | | 2019 | | 2018 | | Balance sheet location | | 2019 | | 2018 |
| Interest rate swap agreements | | | | | | | | | | | |
| Current | Prepaid expenses and other current assets | | $ | — |
| | $ | 349 |
| | Other current liabilities | | $ | 21 |
| | $ | — |
|
| Long-term | Other non-current assets | | — |
| | 710 |
| | Other long-term liabilities | | 61 |
| | — |
|
| Foreign currency exchange contracts | | | | | | | | | | | |
| Current | Prepaid expenses and other current assets | | — |
| | 231 |
| | Other current liabilities | | 308 |
| | 87 |
|
| Total derivatives | | | $ | — |
| | $ | 1,290 |
| | | | $ | 390 |
| | $ | 87 |
|
NOTE 98 - Leasing Arrangements
HBBOn January 1, 2022, the Company adopted ASU 2016-02, "Leases (Topic 842)", which at commencement of the Company’s operating leases, requires recognition of right-of-use assets and corresponding liabilities based on the present value of future lease payments over the lease term. Some of the Company’s leases, primarily those for real estate assets, may contain both lease and non-lease components, the Company has elected to combine and account for lease and non-lease components as a single lease component. Leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets and lease expense for these leases are recognized on a straight-line basis over the lease term. The Company does not have any finance leases. The Company’s leases have remaining lease terms of one month to 12 years, some of which include options to extend the leases for up to 5 years. The renewal option is included in the lease term if it is concluded that it is reasonably certain that we will exercise that option.
The assets associated with the Company’s operating leases primarily consist of real estate and equipment. Real estate leases are comprised of warehouses, corporate headquarters and sales offices. Equipment leases include office and warehouse facilitiesequipment as well as machinery and equipmentCompany specific tooling used by third-party suppliers in the production process. Payments under noncancellablethese lease arrangements may be fixed or variable.
Lease costs associated with fixed payments on the Company’s operating leases were $7.8 million for the year ended December 31, 2022. Variable lease costs, which are primarily related to production specific tooling assets provided by third-party suppliers, are included in product purchases which consisted of $357.6 million for the year ended December 31, 2022. Short-term lease costs for the year ended December 31, 2022 were $0.8 million.
The following table presents supplemental cash flow and non-cash information related to leases: | | | | | | |
| December 31 |
| 2022 | |
| Cash paid for amounts included in the measurement of lease liabilities – operating cash flows from leases | $ | 7,750 | | |
| Right-of-use assets obtained in exchange for lease obligations – non-cash activity | $ | 5,430 | | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the Consolidated Balance Sheet at December 31, 2022:
| | | | | |
| Undiscounted Future Operating Lease Payments |
| 2023 | $ | 8,265 | |
| 2024 | 8,010 | |
| 2025 | 6,235 | |
| 2026 | 5,701 | |
| 2027 | 5,509 | |
| Thereafter | 33,232 | |
| Total lease payments | 66,952 | |
| Less: impact of discounting | 14,276 | |
| Present value of lease payments | $ | 52,676 | |
The weighted average remaining lease term and discount rate related to the Company’s lease liabilities as of December 31, 2022 is 9.7 years and 4.8% respectively. The discount rates used to present value the operating lease liabilities are based on estimates of the Company’s incremental borrowing rate.
As of December 31, 2022, the Company did not have any additional material operating or finance leases that expire at various dates through 2034. Many leases include renewal and/or fair value purchase options.had not yet commenced.
Future minimum operating lease payments at December 31, 2019 are:2021 were: | | | | | | Operating
Leases |
| | Operating Leases | |
| 2020 | $ | 6,114 |
| |
| 2021 | 4,089 |
| |
| 2022 | 1,816 |
| 2022 | $ | 7,619 | |
| 2023 | 1,574 |
| 2023 | 7,929 | |
| 2024 | 1,590 |
| 2024 | 7,765 | |
| Subsequent to 2024 | 16,527 |
| |
| 2025 | | 2025 | 5,887 | |
| 2026 | | 2026 | 5,404 | |
| Subsequent to 2026 | | Subsequent to 2026 | 38,592 | |
| Total minimum lease payments | $ | 31,710 |
| Total minimum lease payments | $ | 73,196 | |
Rental expense from continuing operations net of sublease rental income for all operating leases is reported in selling, general and administrative expenses and was $5.6$9.0 million in 20192021 and 2018 and $5.3$6.2 million in 2017.2020.
NOTE 109 - Stockholders' Equity and Earnings Per Share
Capital Stock
The authorized capital stock of theHamilton Beach Brands Holding 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 isare established by the Board upon issuance of such preferredPreferred 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.
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 one 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 ten 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.
The following table sets forth the Company's authorized capital stock information:
|
| | | | | |
| | December 31 |
| | 2019 | | 2018 |
| (In thousands) |
| Preferred stock, par value $0.01 per share | | | |
| Preferred stock authorized | 5,000 |
| | 5,000 |
|
| | | | |
Class A Common stock(1)(2) | | | |
| Class A Common stock authorized | 70,000 |
| | 70,000 |
|
| Treasury Stock | 365 |
| | — |
|
| | | | |
Class B Common stock(1) | | | |
| Class B Common stock authorized | 30,000 |
| | 30,000 |
|
| | | | | | | | | | | |
| December 31 |
| 2022 | | 2021 |
| |
| Preferred stock, par value $0.01 per share | | | |
| Preferred stock authorized | 5,000 | | | 5,000 | |
| Preferred stock outstanding | — | | | — | |
| Class A Common stock, par value $0.01 per share | | | |
| Class A Common authorized | 70,000 | | | 70,000 | |
Class A Common issued(1)(2) | 10,663 | | | 10,267 | |
| Treasury Stock | 626 | | | 365 | |
| Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis | | | |
| Class B Common authorized | 30,000 | | | 30,000 | |
Class B Common issued(1) | 3,844 | | | 4,000 | |
(1) Class B Common converted to Class A Common were 345156 shares during 20192022 and 38745 shares 2018.2021.
(2) The Company issued Class A Common shares of 169240 during 20192022 and 32216 during 2018.2021 related to the Company's stock compensation plan.
Stock Repurchase Program
In May 2018,February 2022, the CompanyCompany's Board approved a stock repurchase program for the purchase of up to $25.0$25 million of the Company's Class A Common Stock outstanding throughstarting February 22, 2022 and ending December 31, 2019. As of2023. During the year ended December 31, 2019,2022, the Company repurchased 364,893261,049 shares for an aggregate purchase price of $6.0$3.0 million. There were no share repurchases during the years ended December 31, 20182021 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 outstanding starting January 1, 2020 and ending December 31, 2021.
2020.
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 Currency | Deferred Gain (Loss) on Cash Flow Hedging | Pension Plan Adjustment | Total |
| Balance, January 1, 2020 | $ | (8,221) | | $ | (341) | | $ | (7,570) | | $ | (16,132) | |
| | | | |
| Other comprehensive income (loss) | (896) | | (718) | | 844 | | (770) | |
| Reclassification adjustment to net income (loss) | — | | (642) | | 701 | | 59 | |
| Tax effects | (658) | | 357 | | (332) | | (633) | |
| Balance, December 31, 2020 | $ | (9,775) | | $ | (1,344) | | $ | (6,357) | | $ | (17,476) | |
| Other comprehensive income (loss) | (181) | | 418 | | 2,970 | | 3,207 | |
| Reclassification adjustment to net income (loss) | — | | 557 | | 654 | | 1,211 | |
| Tax effects | 79 | | (269) | | (995) | | (1,185) | |
| Balance, December 31, 2021 | $ | (9,877) | | $ | (638) | | $ | (3,728) | | $ | (14,243) | |
| Other comprehensive income (loss) | (865) | | 5,950 | | (5,444) | | (359) | |
| Reclassification adjustment to net income (loss) | 1,267 | | 478 | | 851 | | 2,596 | |
| Tax effects | 551 | | (1,632) | | 1,169 | | 88 | |
| Balance, December 31, 2022 | $ | (8,924) | | $ | 4,158 | | $ | (7,152) | | $ | (11,918) | |
|
| | | | | | | | | | | | |
| | Foreign Currency | Deferred Gain (Loss) on Cash Flow Hedging | Pension Plan Adjustment | Total |
| 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 effects | 83 |
| (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:
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Basic weighted average shares outstanding | 13,970 | | | 13,880 | | | 13,657 | |
| Dilutive effect of share-based compensation awards | 26 | | | 50 | | | 55 | |
| Diluted weighted average shares outstanding | 13,996 | | | 13,930 | | | 13,712 | |
| | | | | |
| Basic earnings (loss) per share: | | | | | |
| Continuing operations | $ | 1.81 | | | $ | 1.54 | | | $ | 1.76 | |
| Discontinued operations | — | | | — | | | 1.62 | |
| Basic and diluted earnings (loss) per share | $ | 1.81 | | | $ | 1.54 | | | $ | 3.39 | |
| | | | | |
| Diluted earnings (loss) per share: | | | | | |
| Continuing operations | $ | 1.81 | | | $ | 1.53 | | | $ | 1.76 | |
| Discontinued operations | — | | | — | | | 1.62 | |
| Diluted earnings (loss) per share | $ | 1.81 | | | $ | 1.53 | | | $ | 3.37 | |
| | | | | |
|
| | | | | | | | | | | |
| | As Restated |
| | 2019 | | 2018 | | 2017 |
| Basic weighted average shares outstanding | 13,690 |
| | 13,699 |
| | 13,673 |
|
| Dilutive effect of share-based compensation awards | 36 |
| | 32 |
| | 12 |
|
| Diluted weighted average shares outstanding | 13,726 |
| | 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 |
|
NOTE 11 - Revenue
A description of the performance obligations for HBB is as follows:
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 these 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 10 - Revenue
Revenue is recognized when control of the promised goods or services is transferred to the Company's facility, or deliveredcustomers, in an amount that reflects the consideration the Company expects to customers, depending on the shipping terms. The amount of consideration received and revenue recognized varies primarily with changesbe entitled to in returns and price concessions.
License revenues - From time to time, HBB enters into exclusive and non-exclusive licensing agreements which grant the right to use certain of HBB’s intellectual property (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 dress, and/or logos (the “Licensed IP”). In exchange for granting the right to use the Licensed IP, HBB receives a royalty payment,those goods or services, 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).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 revenue sources and performance obligations for HBB are as follows:
Consumer and Commercial product revenue
Transactions with both 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 a product is shipped from the Company's facility, or delivered to customers, depending on the shipping terms. The amount of revenue recognized varies primarily with price concessions and changes in returns. The Company offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements. The Company evaluated such agreements with our customers and determined returns and price 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 is in the U.S. and the other half is in markets across the globe.
License revenue
From time to time, the Company enters into exclusive and non-exclusive licensing agreements which grant the right to use certain of HBB’s intellectual property ("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, trade names, patents, trade dress, logos and/or products (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).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table presents the HBB's revenue on a disaggregated basis for the year ending:
| | | | | | | | | | | | | | | | | |
| Year Ended |
| December 31 |
| | 2022 | | 2021 | | 2020 |
| | | | | |
| Consumer products | $ | 573,898 | | | $ | 612,795 | | | $ | 568,685 | |
| Commercial products | 61,455 | | | 40,978 | | | 30,066 | |
| Licensing | 5,596 | | | 4,621 | | | 4,962 | |
| Total revenues | $ | 640,949 | | | $ | 658,394 | | | $ | 603,713 | |
| | | | | |
|
| | | | | | | |
| | As Restated |
| | Year Ended |
| | December 31 |
| | 2019 | | 2018 |
| Type of good or service: | | | |
| Products | $ | 607,307 |
| | $ | 626,423 |
|
| Licensing | 4,479 |
| | 3,659 |
|
| Total revenues | $ | 611,786 |
| | $ | 630,082 |
|
| | | | |
Wal-MartWalmart Inc. and its global subsidiaries accounted for approximately 33%26%, 33%28%, and 32%35% of the HBB’s revenue in 2019, 2018,2022, 2021, and 2017,2020, respectively. Amazon.com, Inc. and its subsidiaries accounted for approximately 14%23%, 10%22%, and 12%16% of the HBB's revenue in 2019, 2018,2022, 2021, and 20172020 respectively. HBB’s five largest customers accounted for approximately 58%61%, 53%61%, and 54%64% of the HBB’s revenue for the years ended December 31, 2019, 2018,in 2022, 2021, and 2017,2020, respectively.
NOTE 1211 - Contingencies
VariousHamilton Beach Holding and its subsidiary are involved in various legal and regulatory proceedings and claims that have been or may be asserted againstarisen in the Company relating to the conductordinary course of its businesses,business, including product liability, patent infringement, asbestos related claims, environmental and other claims. TheseAlthough it is difficult to predict the ultimate outcome of these proceedings and claims, are incidental to the ordinary courseCompany believes the ultimate disposition of businessthese matters will not have a material adverse effect on the financial condition, results of operation or cash flows of the Company. Management believes that it has meritorious defenses and will vigorously defend the Company in these actions. Any costs that managementthe Company 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per ShareProceedings and Percentage Data)
These mattersclaims asserted against the Company or its subsidiary 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’sCompany's financial position, results of operations and cash flows offor the period in which the ruling occurs, or in future periods.
HBB is Hamilton Beach Brands Holding Company was previously 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 thatlawsuit seeking to hold the Company had infringed certain patentsliable for the unsatisfied portion of an agreed final judgment that plaintiff obtained against KC related to KC’s discontinuing operations during the plaintiff and, as a result, awarded the plaintiff damagesterm of various store leases. Plaintiff voluntarily dismissed its lawsuit in the amount of $3.2 million. Accordingly, the Company recorded $3.2 million expense in selling, general and administrative expenses during the secondfourth quarter of 2019 for2022 without any settlement or payment by 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 infringement and the award of damages 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. The Company maintains that its products do not infringe on the plaintiff’s patents and will vigorously defend against the plaintiff's post-trial motions.Company.
KC is a defendant in a legal proceeding in which the plaintiff alleges that KC is in breach of forty-nine store leases for failing to continue to operate the stores during the entire term of the leases and for the use of certain store sale signs. In November 2019, KC agreed to the entry of an order preventing the use of certain store sale signs in the specified stores. All KC stores ceased operations as of December 31, 2019. An estimate of the fair value of the future minimum lease liability obligation related to the subject store leases has been included in the results of discontinued operations.
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, 2019 and December 31, 2018, HBB had accrued undiscounted obligations of $4.4 million and $8.2 million respectively, for environmental investigation and remediation activities. The reduction in the amount accrued at December 31, 2019 compared to December 31, 2018 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. HBB estimates that it is reasonably possible that it may incur additional expenses in the range of zero to $4.0 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 for 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
At December 31, 2022 and December 31, 2021, HBB had accrued undiscounted obligations of $3.2 million and $3.4 million respectively, for environmental investigation and remediation activities. The decrease in the amount accrued at December 31, 2022 compared to December 31, 2021 is due to a change in the expected type and extent of investigation and remediation activities associated with one of the sites. HBB estimates that it is reasonably possible that it may incur additional expenses in the range of zero to $1.5 million related to the environmental investigation and remediation at these sites. As of December 31, 2022, HBB has $1.0 million, classified as restricted cash, associated with reimbursement of environmental investigation and remediation costs from a responsible party in exchange for release from all future obligations for one site. Additionally, HBB has a $1.2 million asset associated with the reimbursement of costs associated with two sites.
NOTE 1312 - Income Taxes
The components of income (loss) from continuing operations before income taxes and the income tax provisionexpense (benefit) for the years ended December 31 are as follows:
| | | | | | | | | | 2022 | | 2021 | | 2020 |
| | As Restated | |
| | 2019 | | 2018 | | 2017 | |
| Income (loss) before income taxes | | | | | | |
| Income (loss) from continuing operations before income taxes | | Income (loss) from continuing operations before income taxes | | | | | |
| Domestic | $ | 24,835 |
| | $ | 30,835 |
| | $ | 34,136 |
| Domestic | $ | 34,400 | | | $ | 27,187 | | | $ | 31,140 | |
| Foreign | (658 | ) | | (350 | ) | | 2,940 |
| Foreign | (1,971) | | | 1,770 | | | 2,592 | |
| | $ | 24,177 |
| | $ | 30,485 |
| | $ | 37,076 |
| | $ | 32,429 | | | $ | 28,957 | | | $ | 33,732 | |
| Income tax provision (benefit) | | | | | | |
| Current income tax provision (benefit): | | | | | | |
| Income tax expense (benefit) within continuing operations | | Income tax expense (benefit) within continuing operations | | | | |
| Current income tax expense (benefit): | | Current income tax expense (benefit): | | | | |
| Federal | $ | 2,966 |
| | $ | (323 | ) | | $ | 12,647 |
| Federal | $ | 6,297 | | | $ | 2,520 | | | $ | 7,006 | |
| State | 1,106 |
| | 356 |
| | 1,396 |
| State | 2,463 | | | 1,015 | | | 1,877 | |
| Foreign | 3,525 |
| | 1,919 |
| | 1,449 |
| Foreign | (1,970) | | | 2,006 | | | 2,213 | |
| Total current | 7,597 |
| | 1,952 |
| | 15,492 |
| Total current | 6,790 | | | 5,541 | | | 11,096 | |
| Deferred income tax provision (benefit): | | | | | | |
| Deferred income tax expense (benefit): | | Deferred income tax expense (benefit): | | | | | |
| Federal | 856 |
| | 5,592 |
| | 3,417 |
| Federal | (669) | | | 1,815 | | | (924) | |
| State | 1,676 |
| | 447 |
| | (96 | ) | State | (153) | | | 556 | | | (325) | |
| Foreign | (1,045 | ) | | (565 | ) | | 154 |
| Foreign | 1,194 | | | (261) | | | (182) | |
| Total deferred | 1,487 |
| | 5,474 |
| | 3,475 |
| Total deferred | 372 | | | 2,110 | | | (1,431) | |
| | $ | 9,084 |
| | $ | 7,426 |
| | $ | 18,967 |
| | $ | 7,162 | | | $ | 7,651 | | | $ | 9,665 | |
The Company made $5.3 million and $6.4 million federal income tax payments of $1.9 million, $8.3 million,during 2022 and $9.9 million during 2019, 2018, and 2017,2021, respectively, to the IRS and to NACCO as a member of the consolidatedIRS. No federal income tax return for periods prior to spin off.payments were made during 2020. The Company made foreign and state income tax payments of $3.6$4.0 million, $2.6 million, and $1.9$2.9 million during 2019, 2018,2022, 2021, and 2017,2020, respectively. During the same periods,Income tax refunds totaled $0.5 million in 2022 and $1.0 million in 2020. No income tax refunds totaled $0.1 millionwere received 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:2021.
|
| | | | | | | | | | | | | | | | | | | | |
| | 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 taxes | 1,031 |
| | 4.3 | % | | 729 |
| | 2.4 | % | | 824 |
| | 2.2 | % |
| Valuation allowances | 2,190 |
| | 9.1 | % | | 42 |
| | 0.1 | % | | 344 |
| | 0.9 | % |
| Other non-deductible expenses | 253 |
| | 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 benefits | 2,719 |
| | 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| 2022 | | 2021 | | 2020 |
| | $ | | % | | $ | | % | | $ | | % |
| Income (loss) from continuing operations before income taxes | $ | 32,429 | | | | | $ | 28,957 | | | | | $ | 33,732 | | | |
| Statutory taxes at 21% | $ | 6,810 | | | 21.0 | % | | $ | 6,081 | | | 21.0 | % | | $ | 7,092 | | | 21.0 | % |
| State and local income taxes | 1,850 | | | 5.7 | % | | 1,357 | | | 4.7 | % | | 1,136 | | | 3.4 | % |
| Valuation allowances | 642 | | | 2.0 | % | | 297 | | | 1.0 | % | | 614 | | | 1.8 | % |
| Other non-deductible expenses | 384 | | | 1.2 | % | | 579 | | | 2.0 | % | | 415 | | | 1.2 | % |
| Credits | (900) | | | (2.8) | % | | (681) | | | (2.4) | % | | (700) | | | (2.1) | % |
| Effect of foreign operations | (526) | | | (1.6) | % | | (399) | | | (1.4) | % | | 120 | | | 0.4 | % |
| Loss on Kitchen Collection dissolution | — | | | — | % | | — | | | — | % | | 616 | | | 1.8 | % |
| Unrecognized tax benefits | (1,179) | | | (3.6) | % | | 687 | | | 2.4 | % | | 708 | | | 2.1 | % |
| Other, net | 81 | | | 0.2 | % | | (270) | | | (0.9) | % | | (336) | | | (1.0) | % |
| Income tax provision | $ | 7,162 | | | 22.1 | % | | $ | 7,651 | | | 26.4 | % | | $ | 9,665 | | | 28.7 | % |
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 | | |
| | 2022 | | 2021 | | |
| Deferred tax assets | | | | | |
| Tax carryforwards | $ | 2,195 | | | $ | 2,841 | | | |
| Inventory | 1,216 | | | 2,084 | | | |
| Accrued expenses and reserves | 3,846 | | | 7,338 | | | |
| Other employee benefits | 2,835 | | | 2,852 | | | |
| Other | 1,155 | | | 1,046 | | | |
| Total deferred tax assets | 11,247 | | | 16,161 | | | |
| Less: Valuation allowances | (2,153) | | | (2,095) | | | |
| | 9,094 | | | 14,066 | | | |
| Deferred tax liabilities | | | | | |
| Inventory | — | | | 550 | | | |
| Accrued pension benefits | 3,130 | | | 4,119 | | | |
| Depreciation and amortization | 2,847 | | | 5,355 | | | |
| Total deferred tax liabilities | 5,977 | | | 10,024 | | | |
| Net deferred tax asset | $ | 3,117 | | | $ | 4,042 | | | |
|
| | | | | | | |
| | As Restated |
| | December 31 |
| | 2019 | | 2018 |
| Deferred tax assets | | | |
| Tax carryforwards | $ | 2,867 |
| | $ | 1,456 |
|
| Inventory | 316 |
| | — |
|
| Accrued expenses and reserves | 5,896 |
| | 5,505 |
|
| Other employee benefits | 1,500 |
| | 2,349 |
|
| Other | 1,412 |
| | 996 |
|
| Total deferred tax assets | 11,991 |
| | 10,306 |
|
| Less: Valuation allowances | (1,069 | ) | | (1,162 | ) |
| | 10,922 |
| | 9,144 |
|
| Deferred tax liabilities | | | |
| Inventory | — |
| | 37 |
|
| Accrued pension benefits | 2,623 |
| | 1,854 |
|
| Depreciation and amortization | 2,051 |
| | 1,459 |
|
| Total deferred tax liabilities | 4,674 |
| | 3,350 |
|
| Net deferred tax asset | $ | 6,248 |
| | $ | 5,794 |
|
As of December 31, 20192022 and 2018,2021, 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.
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, 2022 |
| | Net deferred tax
asset | | Valuation
allowance | | Carryforwards
expire during: |
| | | | | |
| Non-U.S. net operating loss | $ | 1,923 | | | $ | 1,923 | | | 2023 - Indefinite |
| | | | | |
| | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | Net deferred tax
asset | | Valuation
allowance | | Carryforwards
expire during: |
| Non-U.S. net operating loss | $ | 2,841 | | | $ | 1,399 | | | 2022 - 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 |
| | |
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, 2019,2022, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $13.2$20.1 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 new rules under the Tax Act. 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, 2019, 2018,2022, 2021, and 2017.2020. Approximately $3.0$0.2 million, $1.4$3.8 million, and $0.6$4.0 million of these gross amounts as of December 31, 2019, 2018,2022, 2021, and 2017,2020, 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.
The balances in the table below as of December 31, 2020 and December 31, 2021 include unrecognized tax benefits, including interest and penalties, related to an unresolved Mexico tax matter. The interest and penalties on these unrecognized tax benefits were reversed during the second quarter of 2022 due to a change in the Company's position on the matter. | | | | As Restated | | | | | | | | | | | | | | | |
| | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 |
| Balance at January 1 | $ | 1,576 |
| | $ | 881 |
| | $ | 671 |
| Balance at January 1 | $ | 3,855 | | | $ | 4,114 | | | $ | 4,266 | |
| Additions based on tax positions related to prior years | 97 |
| �� | 91 |
| | — |
| |
| Additions (reductions) based on tax positions related to prior years | | Additions (reductions) based on tax positions related to prior years | (3,476) | | | (110) | | | (116) | |
| Additions based on tax positions related to the current year | 2,593 |
| | 1,110 |
| | 210 |
| Additions based on tax positions related to the current year | 71 | | | 40 | | | 130 | |
| Reductions for lapse of statute of limitations | | Reductions for lapse of statute of limitations | (194) | | | — | | | (166) | |
| Reductions due to settlements with taxing authorities | — |
| | (506 | ) | | — |
| Reductions due to settlements with taxing authorities | — | | | (189) | | | — | |
| Balance at December 31 | $ | 4,266 |
| | $ | 1,576 |
| | $ | 881 |
| Balance at December 31 | $ | 256 | | | $ | 3,855 | | | $ | 4,114 | |
The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recorded immaterial amountsrecognized income of $1.5 million related to the reversal of interest and penalties as of December 31, 20192022 and 2018,expense of $1.1 million and $0.7 million related to interest and penalties as of December 31, 2021 and 2020, respectively. The Company expects thetotal amount of unrecognized tax benefits will change within the next 12 months; however, the changeinterest and penalties accrued was $1.9 million and $0.7 million as of December 31, 2021 and 2020, respectively. There were no accruals for interest and penalties as of December 31, 2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in unrecognized tax benefits, which is reasonably possible within the next 12 months, is not expected to have a significant effect on the Company's financial position, results of operations or cash flows.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 two 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.
During the second quarter of 2022, the Board of Directors of HBB approved the termination of the Company's U.S. defined benefit pension plan (the "Plan") with an effective date of September 30, 2022. The Plan was previously frozen, effective December 31, 1996, for participation and benefit accrual purposes (except cash balance interest credits required by law). The Company has started the process to terminate and settle the Plan, which could take up to an estimated 24 months to complete. Benefit obligations under the Plan will be settled through a combination of lump sum payments to eligible plan participants and the purchase of a group annuity contract, under which future benefit obligations will be transferred to a third-party insurance company. We currently expect that all surplus assets remaining after the Plan termination will be transferred to a qualified replacement plan.
The weighted-average assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| U.S. Plan | | | | | |
| Discount rate for pension benefit obligation | 5.34 | % | | 2.46 | % | | 1.87 | % |
| Discount rate for net periodic benefit (income) expense | 3.22 | % | | 1.87 | % | | 2.88 | % |
| Expected long-term rate of return on assets for net periodic pension (income) expense | 6.44 | % | | 7.25 | % | | 7.50 | % |
| Non-U.S. Plan | | | | | |
| Discount rate for pension benefit obligation | 5.15 | % | | 2.90 | % | | 2.38 | % |
| Discount rate for net periodic benefit (income) expense | 2.90 | % | | 2.38 | % | | 2.96 | % |
| Expected long-term rate of return on assets for net periodic pension (income) expense | 4.75 | % | | 4.75 | % | | 5.00 | % |
In the third quarter of 2022, the Company remeasured the Plan which was triggered by the level of lump sum distributions from the Plans' assets exceeding the Plan's service and interest cost threshold. The discount rate for net periodic benefit (income) expense used during the period January 1, 2022 to September 30, 2022 was 2.46%. Due to the remeasurement in the third quarter, the discount rate used for the settlement charge and for the net periodic benefit (income) expense for the period October 1, 2022 to December 31, 2022 period was 5.49%. A discount rate of 5.34% was used for the fourth quarter 2022 settlement charge. The expected long-term rate of return on assets used for the net periodic benefit (income) expense used during the period January 1, 2022 to September 30, 2022 was 7.25%. The expected long-term rate of return on assets used for the net periodic benefit (income) expense for the period October 1, 2022 to December 31, 2022 period was 4.00%. For determining our U.S. plan and non-U.S. plan 2023 pension net periodic benefit (income) expense, our expected rate of return assumptions are 4.0% and 6.0%, respectively.
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 obligation | 2.88 | % | | 4.00 | % | | 3.30 | % |
| Discount rate for net periodic benefit income | 4.00 | % | | 3.30 | % | | 3.60 | % |
| Expected long-term rate of return on assets for net periodic pension income | 7.50 | % | | 7.50 | % | | 7.50 | % |
| Non-U.S. Plan | | | | | |
| Discount rate for pension benefit obligation | 2.96 | % | | 3.50 | % | | 3.25 | % |
| Discount rate for net periodic benefit (income) loss | 3.50 | % | | 3.50 | % | | 3.75 | % |
| Expected long-term rate of return on assets for net periodic pension (income) loss | 5.50 | % | | 5.50 | % | | 5.50 | % |
Set forth below is a detail of the net periodic pension income(income) expense, included in other expense (income), net for the defined benefit plans for the years ended December 31: | | | | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 |
| U.S. Plan | | | | | | U.S. Plan | | | | | |
| Interest cost | $ | 727 |
| | $ | 681 |
| | $ | 811 |
| Interest cost | $ | 478 | | | $ | 338 | | | $ | 527 | |
| Expected return on plan assets | (1,987 | ) | | (2,047 | ) | | (2,074 | ) | Expected return on plan assets | (1,820) | | | (2,033) | | | (2,011) | |
| Amortization of actuarial loss | 561 |
| | 623 |
| | 501 |
| Amortization of actuarial loss | 520 | | | 591 | | | 631 | |
| Net periodic pension income | $ | (699 | ) | | $ | (743 | ) | | $ | (762 | ) | |
| Settlement loss | | Settlement loss | 347 | | | — | | | — | |
| Net periodic pension (income) expense | | Net periodic pension (income) expense | $ | (475) | | | $ | (1,104) | | | $ | (853) | |
| | | | | | | | | | | | |
| Non-U.S. Plan | | | | | | Non-U.S. Plan | |
| Interest cost | $ | 144 |
| | $ | 142 |
| | $ | 153 |
| Interest cost | $ | 127 | | | $ | 118 | | | $ | 128 | |
| Expected return on plan assets | (263 | ) | | (286 | ) | | (264 | ) | Expected return on plan assets | (261) | | | (260) | | | (253) | |
| Amortization of actuarial loss | 72 |
| | 200 |
| | 10 |
| |
| Net periodic pension (income) loss | $ | (47 | ) | | $ | 56 |
| | $ | (101 | ) | |
| Amortization of actuarial loss (gain) | | Amortization of actuarial loss (gain) | (16) | | | 63 | | | 70 | |
| Net periodic pension (income) expense | | Net periodic pension (income) expense | $ | (150) | | | $ | (79) | | | $ | (55) | |
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 | | 2022 | | 2021 | | 2020 |
| U.S. Plan | | | | | | U.S. Plan | | | | | |
| Current year actuarial loss (gain) | $ | (1,727 | ) | | $ | 2,347 |
| | $ | (2,506 | ) | Current year actuarial loss (gain) | $ | 5,558 | | | $ | (2,228) | | | $ | (1,080) | |
| Settlement loss | | Settlement loss | (347) | | | — | | | — | |
| Amortization of actuarial loss | (561 | ) | | (623 | ) | | (501 | ) | Amortization of actuarial loss | (520) | | | (591) | | | (631) | |
| Total recognized in other comprehensive loss (income) | $ | (2,288 | ) | | $ | 1,724 |
| | $ | (3,007 | ) | Total recognized in other comprehensive loss (income) | $ | 4,691 | | | $ | (2,819) | | | $ | (1,711) | |
| Non-U.S. Plan | | | | | | Non-U.S. Plan | | | | | |
| Current year actuarial loss | $ | (155 | ) | | $ | 236 |
| | $ | 60 |
| |
| Amortization of actuarial loss | (72 | ) | | (200 | ) | | (10 | ) | |
| Total recognized in other comprehensive loss | $ | (227 | ) | | $ | 36 |
| | $ | 50 |
| |
| Current year actuarial loss (gain) | | Current year actuarial loss (gain) | $ | (114) | | | $ | (742) | | | $ | 236 | |
| Amortization of actuarial (loss) gain | | Amortization of actuarial (loss) gain | 16 | | | (63) | | | (70) | |
| Total recognized in other comprehensive loss (income) | | Total recognized in other comprehensive loss (income) | $ | (98) | | | $ | (805) | | | $ | 166 | |
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 | | 2022 | | 2021 |
| | U.S. Plan | | Non-U.S. Plan | | U.S. Plan | | Non-U.S. Plan | | U.S.
Plan | | Non-U.S.
Plan | | U.S. Plan | | Non-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 | $ | 17,004 | | | $ | 4,607 | | | $ | 18,978 | | | $ | 5,000 | |
| Interest cost | 727 |
| | 144 |
| | 681 |
| | 142 |
| Interest cost | 478 | | | 127 | | | 338 | | | 118 | |
| Actuarial (gain) loss | 1,266 |
| | 311 |
| | (1,278 | ) | | (148 | ) | Actuarial (gain) loss | (952) | | | (979) | | | (649) | | | (309) | |
| Benefits paid | (1,750 | ) | | (182 | ) | | (1,988 | ) | | (151 | ) | Benefits paid | (1,497) | | | (265) | | | (1,663) | | | (228) | |
| Settlements | | Settlements | (538) | | | — | | | — | | | — | |
| Foreign currency exchange rate changes | — |
| | 213 |
| | — |
| | (363 | ) | Foreign currency exchange rate changes | — | | | (252) | | | — | | | 26 | |
| Projected benefit obligation at end of year | $ | 19,374 |
| | $ | 4,570 |
| | $ | 19,131 |
| | $ | 4,084 |
| Projected benefit obligation at end of year | $ | 14,495 | | | $ | 3,238 | | | $ | 17,004 | | | $ | 4,607 | |
| Accumulated benefit obligation at end of year | $ | 19,374 |
| | $ | 4,570 |
| | $ | 19,131 |
| | $ | 4,084 |
| Accumulated benefit obligation at end of year | $ | 14,495 | | | $ | 3,238 | | | $ | 17,004 | | | $ | 4,607 | |
| 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 | $ | 33,019 | | | $ | 5,772 | | | $ | 31,070 | | | $ | 5,497 | |
| Actual return on plan assets | 4,979 |
| | 726 |
| | (1,578 | ) | | (111 | ) | Actual return on plan assets | (4,690) | | | (598) | | | 3,612 | | | 676 | |
| Benefits paid | (1,750 | ) | | (182 | ) | | (1,988 | ) | | (151 | ) | Benefits paid | (1,497) | | | (265) | | | (1,663) | | | (228) | |
| Settlements | | Settlements | (538) | | | — | | | — | | | — | |
| Other | | Other | — | | | (178) | | | — | | | — | |
| Foreign currency exchange rate changes | — |
| | 62 |
| | — |
| | (450 | ) | Foreign currency exchange rate changes | — | | | (330) | | | — | | | (173) | |
| 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 | $ | 26,294 | | | $ | 4,401 | | | $ | 33,019 | | | $ | 5,772 | |
| Funded status at end of year | $ | 9,526 |
| | $ | 780 |
| | $ | 6,540 |
| | $ | 660 |
| Funded status at end of year | $ | 11,799 | | | $ | 1,163 | | | $ | 16,015 | | | $ | 1,165 | |
| 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 |
| |
| Deferred costs | | Deferred costs | $ | 11,799 | | | $ | 1,163 | | | $ | 16,015 | | | $ | 1,165 | |
| 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 | $ | (9,301) | | | $ | (321) | | | $ | (4,610) | | | $ | (419) | |
| Deferred taxes and other | 2,280 |
| | 348 |
| | 2,933 |
| | 485 |
| |
| Deferred taxes | | Deferred taxes | 2,378 | | | 92 | | | 1,179 | | | 122 | |
| | $ | (6,860 | ) | | $ | (710 | ) | | $ | (8,494 | ) | | $ | (740 | ) | | $ | (6,923) | | | $ | (229) | | | $ | (3,431) | | | $ | (297) | |
During 2022, the Company recognized a pre-tax pension settlement loss in Other expense (income), net of $0.3 million, triggered by the level of lump sum distributions from the Plans' assets exceeding the Plan's service and interest cost threshold. The actuarial loss included in accumulated other comprehensive loss expected to be recognized in net periodic pension income(income) expense in 20202023 is $0.7$0.4 million.
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 2020.2023.
Pension benefit payments are made from assets of the pension plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Given the Company's plan to terminate the Plan, the below reflects the timing and value of the estimated benefit payments for lump sums expected to be paid out to participants and the amount expected to be paid for annuity contracts in anticipation of terminating the plan. Future pension benefit payments expected to be paid from assets of the pension plans are: |
| | | | | | | |
| | U.S. Plan | | Non-U.S. Plan |
| 2020 | $ | 2,200 |
| | $ | 184 |
|
| 2021 | 1,870 |
| | 215 |
|
| 2022 | 1,880 |
| | 246 |
|
| 2023 | 1,698 |
| | 243 |
|
| 2024 | 1,591 |
| | 249 |
|
| 2025 - 2029 | 6,148 |
| | 1,322 |
|
| | $ | 15,387 |
| | $ | 2,459 |
|
| | | | | | | | | | | |
| | U.S. Plan | | Non-U.S. Plan |
| 2023 | $ | 3,795 | | | $ | 223 | |
| 2024 | 11,375 | | | 231 | |
| 2025 | — | | | 238 | |
| 2026 | — | | | 246 | |
| 2027 | — | | | 257 | |
| 2028-2032 | — | | | 1,226 | |
| | $ | 15,170 | | | $ | 2,421 | |
Historically, the Company employed a total return on investment approach whereby a mix of equities and fixed income investments were used to maximize the long-term return of plan assets for a prudent level of risk. In light of the Plan termination process, volatility in the market, and the Plan's funding status, the Plan transferred a significant portion of its assets to lower risk investments in 2022 to move towards a liability driven investing strategy whereby the assets are primarily fixed income investments. The fixed income investments that were chosen under this strategy, while not precisely the same, are meant to parallel the investments selected in determining the discount rate used to calculate the Company’s pension liability.
For the Non-U.S. Plan, the expected long-term rate of return on defined benefit plan assets reflects management'sthe Company'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 classesare 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 |
| U.S. equity securities | 45.9 | % | | 43.8 | % | | 36.0% - 54.0% |
| Non-U.S. equity securities | 20.4 | % | | 19.3 | % | | 16.0% - 24.0% |
| Fixed income securities | 33.2 | % | | 36.4 | % | | 30.0% - 40.0% |
| Money market | 0.5 | % | | 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 securities | 30.2 | % | | 29.5 | % | | 25.0% - 35.0% |
| Non-Canadian equity securities | 32.3 | % | | 29.9 | % | | 25.0% - 35.0% |
| Fixed income securities | 37.5 | % | | 40.6 | % | | 30.0% - 50.0% |
| Cash and cash equivalents | — | % | | — | % | | 0.0% - 5.0% |
| | | | | | | | | | | | | | | | | |
| | 2022 Actual Allocation | | 2021 Actual Allocation | | Target Allocation
Range |
| U.S. equity securities | — | % | | 48.3 | % | | 0.0% - 5.0% |
| Non-U.S. equity securities | — | % | | 19.8 | % | | 0.0% - 5.0% |
| Fixed income securities | 95.9 | % | | 31.3 | % | | 95.0% - 100.0% |
| Money market | 4.1 | % | | 0.6 | % | | 0.0% - 5.0% |
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:
| | | | | | | | | | | | | | | | | |
| | 2022 Actual Allocation | | 2021 Actual Allocation | | Target Allocation
Range |
| Canadian equity securities | 40.0 | % | | 34.2 | % | | 25.0% - 35.0% |
| Non-Canadian equity securities | 40.6 | % | | 38.3 | % | | 25.0% - 35.0% |
| Fixed income securities | 19.4 | % | | 27.5 | % | | 30.0% - 50.0% |
| Money market | — | % | | — | % | | 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. Plan | | U.S. Plan | | Non-U.S. Plan |
| | 2019 | | 2018 | | 2019 | | 2018 | | 2022 | | 2021 | | 2022 | | 2021 |
| U.S. equity securities | $ | 13,255 |
| | $ | 11,251 |
| | $ | 929 |
| | $ | 735 |
| U.S. equity securities | $ | — | | | $ | 15,957 | | | $ | 1,060 | | | $ | 1,325 | |
| Non-U.S. equity securities | 5,904 |
| | 4,930 |
| | 2,412 |
| | 2,081 |
| Non-U.S. equity securities | — | | | 6,535 | | | 2,488 | | | 2,857 | |
| Fixed income securities | 9,596 |
| | 9,350 |
| | 2,009 |
| | 1,928 |
| Fixed income securities | 25,213 | | | 10,330 | | | 853 | | | 1,590 | |
| Money market | 145 |
| | 140 |
| | — |
| | — |
| Money market | 1,081 | | | 197 | | | — | | | — | |
| Total | $ | 28,900 |
| | $ | 25,671 |
| | $ | 5,350 |
| | $ | 4,744 |
| Total | $ | 26,294 | | | $ | 33,019 | | | $ | 4,401 | | | $ | 5,772 | |
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 $5.2 million in 2022, $5.0 million in 20192021 and $5.3$5.1 million in 2018 and 2017.2020.
NOTE 1514 - 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. | | 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 |
|
| | | | | | | | | | | | | | | | | |
| | U.S. | | Other | | Consolidated |
| 2022 | | | | | |
| Revenue from unaffiliated customers | $ | 504,449 | | | $ | 136,500 | | | $ | 640,949 | |
| Property, plant and equipment, net | $ | 24,207 | | | $ | 3,623 | | | $ | 27,830 | |
| 2021 | | | | | |
| Revenue from unaffiliated customers | $ | 524,093 | | | $ | 134,301 | | | $ | 658,394 | |
| Property, plant and equipment, net | $ | 26,604 | | | $ | 3,881 | | | $ | 30,485 | |
| 2020 | | | | | |
| Revenue from unaffiliated customers | $ | 493,573 | | | $ | 110,140 | | | $ | 603,713 | |
| Property, plant and equipment, net | $ | 18,021 | | | $ | 5,469 | | | $ | 23,490 | |
No single country outside of the U.S. comprised 10% or more of HBB's revenue from unaffiliated customers.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 16 - 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:
|
| | | | | | | | | | | | | | | |
| | 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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.
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".
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 sales | 162,173 |
|
| 118,562 |
|
| 321,060 |
|
| 102,558 |
|
| 202,498 |
|
| 99,940 |
|
| Gross profit | 42,397 |
|
| 30,946 |
|
| 86,155 |
|
| 28,507 |
|
| 55,209 |
|
| 26,702 |
|
| Selling, general and administrative expenses | 22,996 |
|
| 26,165 |
|
| 77,385 |
|
| 24,976 |
|
| 51,222 |
|
| 26,246 |
|
| Amortization of intangible assets | 341 |
|
| 345 |
|
| 1,036 |
|
| 346 |
|
| 691 |
|
| 345 |
|
| Operating profit (loss) | 19,060 |
|
| 4,439 |
|
| 7,734 |
|
| 3,185 |
|
| 3,296 |
|
| 111 |
|
| Interest expense, net | 767 |
|
| 756 |
|
| 2,208 |
|
| 789 |
|
| 1,452 |
|
| 663 |
|
| Other expense (income), net | (710 | ) |
| 681 |
|
| 352 |
|
| (132 | ) |
| (329 | ) |
| (197 | ) |
| Income (loss) from continuing operations before income taxes | 19,003 |
|
| 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 operations | 13,304 |
|
| 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 outstanding | 13,518 |
|
| 13,579 |
|
| 13,726 |
|
| 13,813 |
|
| 13,800 |
|
| 13,786 |
|
| Diluted weighted average shares outstanding | 13,625 |
|
| 13,595 |
|
| 13,731 |
|
| 13,826 |
|
| 13,813 |
|
| 13,786 |
|
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 sales | 156,173 |
|
| 132,897 |
|
| 334,857 |
|
| 104,856 |
|
| 201,960 |
|
| 97,104 |
|
| Gross profit | 41,993 |
|
| 38,404 |
|
| 97,059 |
|
| 30,727 |
|
| 58,655 |
|
| 27,928 |
|
| Selling, general and administrative expenses | 25,599 |
|
| 26,296 |
|
| 78,522 |
|
| 26,437 |
|
| 52,225 |
|
| 25,789 |
|
| Amortization of intangible assets | 345 |
|
| 345 |
|
| 1,036 |
|
| 346 |
|
| 691 |
|
| 345 |
|
| Operating profit | 16,050 |
|
| 11,763 |
|
| 17,501 |
|
| 3,944 |
|
| 5,738 |
|
| 1,794 |
|
| Interest expense, net | 711 |
|
| 886 |
|
| 2,205 |
|
| 809 |
|
| 1,319 |
|
| 510 |
|
| Other expense (income), net | 429 |
|
| (433 | ) |
| (280 | ) |
| 679 |
|
| 153 |
|
| (526 | ) |
| Income from continuing operations before income taxes | 14,910 |
|
| 11,310 |
|
| 15,576 |
|
| 2,456 |
|
| 4,266 |
|
| 1,810 |
|
| Income tax expense | 3,420 |
|
| 2,280 |
|
| 4,007 |
|
| 811 |
|
| 1,727 |
|
| 916 |
|
| Net income from continuing operations | 11,490 |
|
| 9,030 |
|
| 11,569 |
|
| 1,645 |
|
| 2,539 |
|
| 894 |
|
| Income (loss) from discontinued operations, net of tax | 2,371 |
|
| (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 operations | 0.17 |
|
| (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 outstanding | 13,714 |
|
| 13,704 |
|
| 13,694 |
|
| 13,695 |
|
| 13,689 |
|
| 13,683 |
|
| Diluted weighted average shares outstanding | 13,844 |
|
| 13,713 |
|
| 13,697 |
|
| 13,704 |
|
| 13,693 |
|
| 13,692 |
|
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 adjustment | 201 |
|
| (18 | ) |
| 309 |
|
| 113 |
|
| 327 |
|
| 214 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | 294 |
|
| (509 | ) |
| (373 | ) |
| 121 |
|
| 136 |
|
| 15 |
|
| Cash flow hedging activity | (143 | ) |
| (127 | ) |
| (1,426 | ) |
| (877 | ) |
| (1,299 | ) |
| (422 | ) |
| Reclassification of hedging activities into earnings | 81 |
|
| 122 |
|
| 268 |
|
| 144 |
|
| 146 |
|
| 2 |
|
| Pension plan adjustment | 1,410 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 35 |
|
| 127 |
|
| 313 |
|
| 102 |
|
| 186 |
|
| 84 |
|
| Total other comprehensive income (loss), net of tax | 1,878 |
|
| (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 transactions | 60 |
|
| (53 | ) |
| (1,066 | ) |
| (1,013 | ) |
| (1,013 | ) |
| — |
|
| Cash flow hedging activity | (352 | ) |
| (301 | ) |
| 452 |
|
| 464 |
|
| 753 |
|
| 289 |
|
| Reclassification of hedging activities into earnings | 48 |
|
| (102 | ) |
| 105 |
|
| 41 |
|
| 207 |
|
| 166 |
|
| Pension plan adjustment | (1,920 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 141 |
|
| 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 | ) |
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, net | 103,091 |
|
| 86,268 |
|
| 79,102 |
|
| Inventory | 161,043 |
|
| 121,472 |
|
| 120,707 |
|
| Prepaid expenses and other current assets | 14,086 |
|
| 16,412 |
|
| 17,379 |
|
| Current assets of discontinued operations | 22,830 |
|
| 21,255 |
|
| 24,692 |
|
| Total current assets | 302,609 |
|
| 246,436 |
|
| 243,516 |
|
| Property, plant and equipment, net | 22,193 |
|
| 21,649 |
|
| 20,984 |
|
| Goodwill | 6,253 |
|
| 6,253 |
|
| 6,253 |
|
| Other intangible assets, net | 3,483 |
|
| 3,828 |
|
| 4,174 |
|
| Deferred income taxes | 5,640 |
|
| 3,754 |
|
| 3,166 |
|
| Deferred costs | 8,804 |
|
| 8,564 |
|
| 8,316 |
|
| Other non-current assets | 1,553 |
|
| 1,984 |
|
| 2,403 |
|
| Non-current assets of discontinued operations | 1,744 |
|
| 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 agreements | 50,152 |
|
| 51,505 |
|
| 54,812 |
|
| Accrued compensation | 14,650 |
|
| 11,725 |
|
| 8,398 |
|
| Accrued product returns | 8,266 |
|
| 8,224 |
|
| 9,314 |
|
| Other current liabilities | 25,880 |
|
| 21,382 |
|
| 17,705 |
|
| Current liabilities of discontinued operations | 24,713 |
|
| 20,048 |
|
| 21,473 |
|
| Total current liabilities | 263,892 |
|
| 199,303 |
|
| 187,847 |
|
| Revolving credit agreements | 30,000 |
|
| 30,000 |
|
| 30,000 |
|
| Other long-term liabilities | 14,258 |
|
| 14,699 |
|
| 18,619 |
|
| Non-current liabilities of discontinued operations | 1,585 |
|
| 3,697 |
|
| 3,834 |
|
| Total liabilities | 309,735 |
|
| 247,699 |
|
| 240,300 |
|
| Stockholders’ equity |
|
|
|
|
|
| Class A Common stock | 95 |
|
| 95 |
|
| 95 |
|
| Class B Common stock | 44 |
|
| 44 |
|
| 44 |
|
| Capital in excess of par value | 54,143 |
|
| 53,342 |
|
| 52,520 |
|
| Treasury stock | (5,960 | ) |
| (2,334 | ) |
| — |
|
| Retained earnings | 12,231 |
|
| 15,646 |
|
| 17,506 |
|
| Accumulated other comprehensive loss | (18,009 | ) |
| (17,604 | ) |
| (17,207 | ) |
| Total stockholders’ equity | 42,544 |
|
| 49,189 |
|
| 52,958 |
|
| Total liabilities and stockholders' equity | $ | 352,279 |
|
| $ | 296,888 |
|
| $ | 293,258 |
|
| | | | | | |
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, net | 112,309 |
|
| 76,132 |
|
| 79,358 |
|
| Inventory | 155,744 |
|
| 138,721 |
|
| 132,749 |
|
| Prepaid expenses and other current assets | 12,595 |
|
| 14,569 |
|
| 14,615 |
|
| Current assets of discontinued operations | 32,185 |
|
| 30,704 |
|
| 29,086 |
|
| Total current assets | 314,400 |
|
| 261,519 |
|
| 257,592 |
|
| Property, plant and equipment, net | 20,988 |
|
| 19,088 |
|
| 17,643 |
|
| Goodwill | 6,253 |
|
| 6,253 |
|
| 6,253 |
|
| Other intangible assets, net | 4,864 |
|
| 5,209 |
|
| 5,555 |
|
| Deferred income taxes | 7,704 |
|
| 8,877 |
|
| 10,419 |
|
| Deferred costs | 10,153 |
|
| 9,825 |
|
| 10,187 |
|
| Other non-current assets | 3,282 |
|
| 3,178 |
|
| 3,068 |
|
| Non-current assets of discontinued operations | 5,313 |
|
| 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 agreements | 60,083 |
|
| 66,326 |
|
| 63,308 |
|
| Accrued compensation | 15,421 |
|
| 11,984 |
|
| 9,238 |
|
| Accrued product returns | 9,601 |
|
| 9,648 |
|
| 10,815 |
|
| Other current liabilities | 22,488 |
|
| 15,769 |
|
| 21,227 |
|
| Current liabilities of discontinued operations | 29,693 |
|
| 26,830 |
|
| 21,509 |
|
| Total current liabilities | 271,386 |
|
| 225,814 |
|
| 230,835 |
|
| Revolving credit agreements | 30,000 |
|
| 30,000 |
|
| 20,000 |
|
| Other long-term liabilities | 22,343 |
|
| 21,654 |
|
| 21,831 |
|
| Non-current liabilities of discontinued operations | 2,293 |
|
| 2,416 |
|
| 2,565 |
|
| Total liabilities | 326,022 |
|
| 279,884 |
|
| 275,231 |
|
| Stockholders’ equity |
|
|
|
|
|
| Class A Common stock | 92 |
|
| 92 |
|
| 92 |
|
| Class B Common stock | 45 |
|
| 45 |
|
| 45 |
|
| Capital in excess of par value | 51,366 |
|
| 50,721 |
|
| 49,051 |
|
| Treasury stock | — |
|
| — |
|
| — |
|
| Retained earnings | 9,373 |
|
| 3,397 |
|
| 5,683 |
|
| Accumulated other comprehensive loss | (13,941 | ) |
| (14,502 | ) |
| (13,724 | ) |
| Total stockholders’ equity | 46,935 |
|
| 39,753 |
|
| 41,147 |
|
| Total liabilities and stockholders' equity | $ | 372,957 |
|
| $ | 319,637 |
|
| $ | 316,378 |
|
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.
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 stock | Class 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 conversions | 2 |
| — |
| (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 conversions | 3 |
| (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
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 stock | Class B common stock | Capital 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 conversions | 4 |
| (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 conversions | 1 |
| (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 |
|
| | | | | | | |
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.
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 sales | 162,173 |
|
| — |
|
|
|
| 162,173 |
|
| Gross profit | 44,912 |
|
| (2,515 | ) |
|
|
| 42,397 |
|
| Selling, general and administrative expenses | 19,054 |
|
| 3,942 |
|
| a,c,f |
| 22,996 |
|
| Amortization of intangible assets | 341 |
|
| — |
|
|
|
| 341 |
|
| Operating profit (loss) | 25,517 |
|
| (6,457 | ) |
|
|
| 19,060 |
|
| Interest expense, net | 767 |
|
| — |
|
|
|
| 767 |
|
| Other expense (income), net | (710 | ) |
| — |
|
|
|
| (710 | ) |
| Income (loss) from continuing operations before income taxes | 25,460 |
|
| (6,457 | ) |
|
|
| 19,003 |
|
| Income tax expense (benefit) | 6,066 |
|
| (367 | ) |
| e |
| 5,699 |
|
| Net income (loss) from continuing operations | 19,394 |
|
| (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 outstanding | 13,518 |
|
| — |
|
|
|
| 13,518 |
|
| Diluted weighted average shares outstanding | 13,625 |
|
| — |
|
|
|
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 169,778 |
|
| $ | 18 |
|
| b,c |
| $ | 169,796 |
| $ | (20,288 | ) | $ | 149,508 |
|
| Cost of sales | 129,194 |
|
| — |
|
| |
| 129,194 |
| (10,632 | ) | 118,562 |
|
| Gross profit | 40,584 |
|
| 18 |
|
| |
| 40,602 |
| (9,656 | ) | 30,946 |
|
| Selling, general and administrative expenses | 36,182 |
|
| 2,573 |
|
| a,c,f |
| 38,755 |
| (12,590 | ) | 26,165 |
|
| Amortization of intangible assets | 345 |
|
| — |
|
| |
| 345 |
| — |
| 345 |
|
| Operating profit (loss) | 4,057 |
|
| (2,552 | ) |
| |
| 1,505 |
| 2,934 |
| 4,439 |
|
| Interest expense, net | 864 |
|
| — |
|
| |
| 864 |
| (108 | ) | 756 |
|
| Other expense (income), net | 688 |
|
| — |
|
| |
| 688 |
| (7 | ) | 681 |
|
| Income (loss) from continuing operations before income taxes | 2,505 |
|
| (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 operations | 397 |
|
| (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 outstanding | 13,579 |
|
| — |
|
| |
| 13,579 |
| — |
| 13,579 |
|
| Diluted weighted average shares outstanding | 13,595 |
|
| — |
|
| |
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 463,582 |
|
| $ | 1,458 |
|
| b,c,f |
| $ | 465,040 |
| $ | (57,824 | ) | $ | 407,216 |
|
| Cost of sales | 352,618 |
|
| (65 | ) |
| f |
| 352,553 |
| (31,493 | ) | 321,060 |
|
| Gross profit | 110,964 |
|
| 1,522 |
|
| |
| 112,486 |
| (26,331 | ) | 86,155 |
|
| Selling, general and administrative expenses | 108,306 |
|
| 5,137 |
|
| a,c,f |
| 113,443 |
| (36,058 | ) | 77,385 |
|
| Amortization of intangible assets | 1,036 |
|
| — |
|
| |
| 1,036 |
| — |
| 1,036 |
|
| Operating profit (loss) | 1,622 |
|
| (3,615 | ) |
| |
| (1,993 | ) | 9,727 |
| 7,734 |
|
| Interest expense, net | 2,514 |
|
| — |
|
| |
| 2,514 |
| (306 | ) | 2,208 |
|
| Other expense (income), net | 230 |
|
| 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 outstanding | 13,726 |
|
| — |
|
| |
| 13,726 |
| — |
| 13,726 |
|
| Diluted weighted average shares outstanding | 13,726 |
|
| — |
|
| |
| 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.
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 148,427 |
|
| $ | 921 |
|
| c |
| $ | 149,348 |
| $ | (18,283 | ) | $ | 131,065 |
|
| Cost of sales | 112,770 |
|
| — |
|
| |
| 112,770 |
| (10,212 | ) | 102,558 |
|
| Gross profit | 35,657 |
|
| 921 |
|
| |
| 36,578 |
| (8,071 | ) | 28,507 |
|
| Selling, general and administrative expenses | 35,617 |
|
| 594 |
|
| a,c |
| 36,211 |
| (11,235 | ) | 24,976 |
|
| Amortization of intangible assets | 346 |
|
| — |
|
| |
| 346 |
| — |
| 346 |
|
| Operating profit (loss) | (306 | ) |
| 327 |
|
| |
| 21 |
| 3,164 |
| 3,185 |
|
| Interest expense, net | 904 |
|
| — |
|
| |
| 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 outstanding | 13,813 |
|
| — |
|
| |
| 13,813 |
| — |
| 13,813 |
|
| Diluted weighted average shares outstanding | 13,813 |
|
| — |
|
| |
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 293,804 |
|
| $ | 1,439 |
|
| c,f |
| $ | 295,243 |
| $ | (37,536 | ) | $ | 257,707 |
|
| Cost of sales | 223,424 |
|
| (65 | ) |
| f |
| 223,359 |
| (20,861 | ) | 202,498 |
|
| Gross profit | 70,380 |
|
| 1,504 |
|
| |
| 71,884 |
| (16,675 | ) | 55,209 |
|
| Selling, general and administrative expenses | 72,124 |
|
| 2,566 |
|
| a,c,f |
| 74,690 |
| (23,468 | ) | 51,222 |
|
| Amortization of intangible assets | 691 |
|
| — |
|
| |
| 691 |
| — |
| 691 |
|
| Operating profit (loss) | (2,435 | ) |
| (1,062 | ) |
| |
| (3,497 | ) | 6,793 |
| 3,296 |
|
| Interest expense, net | 1,650 |
|
| — |
|
| |
| 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 outstanding | 13,800 |
|
| — |
|
| |
| 13,800 |
| — |
| 13,800 |
|
| Diluted weighted average shares outstanding | 13,800 |
|
| — |
|
| |
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 145,377 |
|
| $ | 518 |
|
| c,f |
| $ | 145,895 |
| $ | (19,253 | ) | $ | 126,642 |
|
| Cost of sales | 110,654 |
|
| (65 | ) |
| f |
| 110,589 |
| (10,649 | ) | 99,940 |
|
| Gross profit | 34,723 |
|
| 583 |
|
|
|
| 35,306 |
| (8,604 | ) | 26,702 |
|
| Selling, general and administrative expenses | 36,507 |
|
| 1,972 |
|
| a,c,f |
| 38,479 |
| (12,233 | ) | 26,246 |
|
| Amortization of intangible assets | 345 |
|
| — |
|
|
|
| 345 |
| — |
| 345 |
|
| Operating profit (loss) | (2,129 | ) |
| (1,389 | ) |
|
|
| (3,518 | ) | 3,629 |
| 111 |
|
| Interest expense, net | 746 |
|
| — |
|
|
|
| 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 outstanding | 13,786 |
|
| — |
|
|
|
| 13,786 |
| — |
| 13,786 |
|
| Diluted weighted average shares outstanding | 13,786 |
|
| — |
|
|
|
| 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
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 sales | 157,419 |
|
| (1,246 | ) |
| f |
| 156,173 |
|
| Gross profit | 41,562 |
|
| 431 |
|
|
|
| 41,993 |
|
| Selling, general and administrative expenses | 23,677 |
|
| 1,922 |
|
| a,c,f |
| 25,599 |
|
| Amortization of intangible assets | 345 |
|
| — |
|
|
|
| 345 |
|
| Operating profit | 17,540 |
|
| (1,490 | ) |
|
|
| 16,050 |
|
| Interest expense, net | 711 |
|
| — |
|
|
|
| 711 |
|
| Other expense (income), net | 573 |
|
| (144 | ) |
| f |
| 429 |
|
| Income from continuing operations before income taxes | 16,256 |
|
| (1,346 | ) |
|
|
| 14,910 |
|
| Income tax expense | 3,595 |
|
| (175 | ) |
| e |
| 3,420 |
|
| Net income from continuing operations | 12,661 |
|
| (1,171 | ) |
|
|
| 11,490 |
|
| Loss from discontinued operations, net of tax | 2,371 |
|
| — |
|
|
|
| 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 operations | 0.17 |
|
| — |
|
|
|
| 0.17 |
|
| Basic and diluted earnings (loss) per share | $ | 1.10 |
|
| $ | (0.09 | ) |
|
|
| $ | 1.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Basic weighted average shares outstanding | 13,714 |
|
| — |
|
|
|
| 13,714 |
|
| Diluted weighted average shares outstanding | 13,844 |
|
| — |
|
|
|
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 196,901 |
|
| $ | 284 |
|
| c |
| $ | 197,185 |
| $ | (25,884 | ) | $ | 171,301 |
|
| Cost of sales | 146,550 |
|
| — |
|
|
|
| 146,550 |
| (13,653 | ) | 132,897 |
|
| Gross profit | 50,351 |
|
| 284 |
|
|
|
| 50,635 |
| (12,231 | ) | 38,404 |
|
| Selling, general and administrative expenses | 39,211 |
|
| 1,496 |
|
| a,c |
| 40,707 |
| (14,411 | ) | 26,296 |
|
| Amortization of intangible assets | 345 |
|
| — |
|
|
|
| 345 |
| — |
| 345 |
|
| Operating profit | 10,795 |
|
| (1,212 | ) |
|
|
| 9,583 |
| 2,180 |
| 11,763 |
|
| Interest expense, net | 1,001 |
|
| — |
|
|
|
| 1,001 |
| (115 | ) | 886 |
|
| Other expense (income), net | (426 | ) |
| — |
|
|
|
| (426 | ) | (7 | ) | (433 | ) |
| Income from continuing operations before income taxes | 10,220 |
|
| (1,212 | ) |
|
|
| 9,008 |
| 2,302 |
| 11,310 |
|
| Income tax expense | 2,176 |
|
| (309 | ) |
| e |
| 1,867 |
| 413 |
| 2,280 |
|
| Net income from continuing operations | 8,044 |
|
| (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 outstanding | 13,704 |
|
| — |
|
|
|
| 13,704 |
| — |
| 13,704 |
|
| Diluted weighted average shares outstanding | 13,713 |
|
| — |
|
|
|
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 501,475 |
|
| $ | 1,187 |
|
| c.f |
| $ | 502,662 |
| $ | (70,746 | ) | $ | 431,916 |
|
| Cost of sales | 372,478 |
|
| 81 |
|
| f |
| 372,559 |
| (37,702 | ) | 334,857 |
|
| Gross profit | 128,997 |
|
| 1,106 |
|
|
|
| 130,103 |
| (33,044 | ) | 97,059 |
|
| Selling, general and administrative expenses | 117,328 |
|
| 4,235 |
|
| a,c,f |
| 121,563 |
| (43,041 | ) | 78,522 |
|
| Amortization of intangible assets | 1,036 |
|
| — |
|
|
|
| 1,036 |
| — |
| 1,036 |
|
| Operating profit | 10,633 |
|
| (3,129 | ) |
|
|
| 7,504 |
| 9,997 |
| 17,501 |
|
| Interest expense, net | 2,422 |
|
| — |
|
|
|
| 2,422 |
| (217 | ) | 2,205 |
|
| Other expense (income), net | (253 | ) |
| — |
|
|
|
| (253 | ) | (27 | ) | (280 | ) |
| Income from continuing operations before income taxes | 8,464 |
|
| (3,129 | ) |
|
|
| 5,335 |
| 10,241 |
| 15,576 |
|
| Income tax expense | 1,712 |
|
| (214 | ) |
| e |
| 1,498 |
| 2,509 |
| 4,007 |
|
| Net income from continuing operations | 6,752 |
|
| (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 outstanding | 13,694 |
|
| — |
|
|
|
| 13,694 |
| — |
| 13,694 |
|
| Diluted weighted average shares outstanding | 13,697 |
|
| — |
|
|
|
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 157,941 |
|
| $ | 404 |
|
| c |
| $ | 158,345 |
| $ | (22,762 | ) | $ | 135,583 |
|
| Cost of sales | 117,088 |
|
| — |
|
|
|
| 117,088 |
| (12,232 | ) | 104,856 |
|
| Gross profit | 40,853 |
|
| 404 |
|
|
|
| 41,257 |
| (10,530 | ) | 30,727 |
|
| Selling, general and administrative expenses | 40,123 |
|
| 525 |
|
| a,c,f |
| 40,648 |
| (14,211 | ) | 26,437 |
|
| Amortization of intangible assets | 346 |
|
| — |
|
|
|
| 346 |
| — |
| 346 |
|
| Operating profit | 384 |
|
| (121 | ) |
|
|
| 263 |
| 3,681 |
| 3,944 |
|
| Interest expense, net | 889 |
|
| — |
|
|
|
| 889 |
| (80 | ) | 809 |
|
| Other expense (income), net | 687 |
|
| — |
|
|
|
| 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 outstanding | 13,695 |
|
| — |
|
|
|
| 13,695 |
| — |
| 13,695 |
|
| Diluted weighted average shares outstanding | 13,695 |
|
| — |
|
|
|
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 304,574 |
|
| $ | 903 |
|
| c,f |
| $ | 305,477 |
| $ | (44,862 | ) | $ | 260,615 |
|
| Cost of sales | 225,928 |
|
| 81 |
|
| f |
| 226,009 |
| (24,049 | ) | 201,960 |
|
| Gross profit | 78,646 |
|
| 822 |
|
|
|
| 79,468 |
| (20,813 | ) | 58,655 |
|
| Selling, general and administrative expenses | 78,117 |
|
| 2,738 |
|
| a,c,f |
| 80,855 |
| (28,630 | ) | 52,225 |
|
| Amortization of intangible assets | 691 |
|
| — |
|
|
|
| 691 |
| — |
| 691 |
|
| Operating profit | (162 | ) |
| (1,917 | ) |
|
|
| (2,079 | ) | 7,817 |
| 5,738 |
|
| Interest expense, net | 1,421 |
|
| — |
|
|
|
| 1,421 |
| (102 | ) | 1,319 |
|
| Other expense (income), net | 173 |
|
| — |
|
|
|
| 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 outstanding | 13,689 |
|
| — |
|
|
|
| 13,689 |
| — |
| 13,689 |
|
| Diluted weighted average shares outstanding | 13,689 |
|
| — |
|
|
|
| 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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Revenue | $ | 146,633 |
|
| $ | 499 |
|
| c,f |
| $ | 147,132 |
| $ | (22,100 | ) | $ | 125,032 |
|
| Cost of sales | 108,840 |
|
| 81 |
|
| f |
| 108,921 |
| (11,817 | ) | 97,104 |
|
| Gross profit | 37,793 |
|
| 418 |
|
|
|
| 38,211 |
| (10,283 | ) | 27,928 |
|
| Selling, general and administrative expenses | 37,994 |
|
| 2,214 |
|
| a,c,f |
| 40,208 |
| (14,419 | ) | 25,789 |
|
| Amortization of intangible assets | 345 |
|
| — |
|
|
|
| 345 |
| — |
| 345 |
|
| Operating profit | (546 | ) |
| (1,796 | ) |
|
|
| (2,342 | ) | 4,136 |
| 1,794 |
|
| Interest expense, net | 532 |
|
| — |
|
|
|
| 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 outstanding | 13,683 |
|
| — |
|
|
|
| 13,683 |
| — |
| 13,683 |
|
| Diluted weighted average shares outstanding | 13,683 |
|
| — |
|
|
|
| 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
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 adjustment | 857 |
|
| (656 | ) |
| 201 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | 294 |
|
| — |
|
| 294 |
|
| Cash flow hedging activity | (143 | ) |
| — |
|
| (143 | ) |
| Reclassification of hedging activities into earnings | 81 |
|
| — |
|
| 81 |
|
| Pension plan adjustment | 1,410 |
|
| — |
|
| 1,410 |
|
| Reclassification of pension adjustments into earnings | 35 |
|
| — |
|
| 35 |
|
| Total other comprehensive loss, net of tax | 2,534 |
|
| (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.
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 earnings | 122 |
|
| — |
|
| 122 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 127 |
|
| — |
|
| 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 adjustment | 244 |
|
| 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 earnings | 268 |
|
| — |
|
| 268 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 219 |
|
| 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.
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 adjustment | 226 |
|
| (113 | ) |
| 113 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | 121 |
|
| — |
|
| 121 |
|
| Cash flow hedging activity | (877 | ) |
| — |
|
| (877 | ) |
| Reclassification of hedging activities into earnings | 144 |
|
| — |
|
| 144 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 102 |
|
| — |
|
| 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 adjustment | 556 |
|
| (229 | ) |
| 327 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | 136 |
|
| — |
|
| 136 |
|
| Cash flow hedging activity | (1,443 | ) |
| 144 |
|
| (1,299 | ) |
| Reclassification of hedging activities into earnings | 146 |
|
| — |
|
| 146 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 92 |
|
| 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.
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 adjustment | 330 |
|
| (116 | ) |
| 214 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | 15 |
|
| — |
|
| 15 |
|
| Cash flow hedging activity | (566 | ) |
| 144 |
|
| (422 | ) |
| Reclassification of hedging activities into earnings | 2 |
|
| — |
|
| 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 transactions | 60 |
|
| — |
|
| 60 |
|
| Cash flow hedging activity | (208 | ) |
| (144 | ) |
| (352 | ) |
| Reclassification of hedging activities into earnings | 48 |
|
| — |
|
| 48 |
|
| Pension plan adjustment | (1,920 | ) |
| — |
|
| (1,920 | ) |
| Reclassification of pension adjustments into earnings | 235 |
|
| (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.
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 adjustment | 1,257 |
|
| (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 earnings | 115 |
|
| — |
|
| 115 |
|
| Total other comprehensive loss, net of tax | 916 |
|
| (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 adjustment | 1,282 |
|
| (219 | ) |
| 1,063 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | (1,066 | ) |
| — |
|
| (1,066 | ) |
| Cash flow hedging activity | 452 |
|
| — |
|
| 452 |
|
| Reclassification of hedging activities into earnings | 105 |
|
| — |
|
| 105 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 415 |
|
| — |
|
| 415 |
|
| Total other comprehensive loss, net of tax | 1,188 |
|
| (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.
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 activity | 464 |
|
| — |
|
| 464 |
|
| Reclassification of hedging activities into earnings | 41 |
|
| — |
|
| 41 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 142 |
|
| — |
|
| 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 adjustment | 25 |
|
| 136 |
|
| 161 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | (1,013 | ) |
| — |
|
| (1,013 | ) |
| Cash flow hedging activity | 753 |
|
| — |
|
| 753 |
|
| Reclassification of hedging activities into earnings | 207 |
|
| — |
|
| 207 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 300 |
|
| — |
|
| 300 |
|
| Total other comprehensive loss, net of tax | 272 |
|
| 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.
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 adjustment | 917 |
|
| (344 | ) |
| 573 |
|
| (Loss) gain on long-term intra-entity foreign currency transactions | — |
|
| — |
|
| — |
|
| Cash flow hedging activity | 289 |
|
| — |
|
| 289 |
|
| Reclassification of hedging activities into earnings | 166 |
|
| — |
|
| 166 |
|
| Pension plan adjustment | — |
|
| — |
|
| — |
|
| Reclassification of pension adjustments into earnings | 158 |
|
| — |
|
| 158 |
|
| Total other comprehensive loss, net of tax | 1,530 |
|
| (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.
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Assets | | | | | | | | | |
| Current assets | | | | | | | | | |
| Cash and cash equivalents | $ | 1,866 |
|
| $ | — |
|
|
|
| $ | 1,866 |
| $ | (307 | ) | $ | 1,559 |
|
| Trade receivables, net | 106,135 |
|
| (2,179 | ) |
| a,b |
| 103,956 |
| (865 | ) | 103,091 |
|
| Inventory | 181,847 |
|
| — |
|
|
|
| 181,847 |
| (20,804 | ) | 161,043 |
|
| Prepaid expenses and other current assets | 22,445 |
|
| (7,505 | ) |
| a,b |
| 14,940 |
| (854 | ) | 14,086 |
|
| Current assets of discontinued operations | — |
|
| — |
|
|
|
| — |
| 22,830 |
| 22,830 |
|
| Total current assets | 312,293 |
|
| (9,684 | ) |
|
|
| 302,609 |
| — |
| 302,609 |
|
| Property, plant and equipment, net | 22,653 |
|
| — |
|
|
|
| 22,653 |
| (460 | ) | 22,193 |
|
| Goodwill | 6,253 |
|
| — |
|
|
|
| 6,253 |
| — |
| 6,253 |
|
| Other intangible assets, net | 3,483 |
|
| — |
|
|
|
| 3,483 |
| — |
| 3,483 |
|
| Deferred income taxes | 6,161 |
|
| 634 |
|
| e |
| 6,795 |
| (1,155 | ) | 5,640 |
|
| Deferred costs | 8,925 |
|
| — |
|
|
|
| 8,925 |
| (121 | ) | 8,804 |
|
| Other non-current assets | 1,561 |
|
| — |
|
|
|
| 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 agreements | 59,702 |
|
| — |
|
|
|
| 59,702 |
| (9,550 | ) | 50,152 |
|
| Accrued compensation | 15,568 |
|
| 389 |
|
| f |
| 15,957 |
| (1,307 | ) | 14,650 |
|
| Accrued product returns | 8,266 |
|
| — |
|
|
|
| 8,266 |
| — |
| 8,266 |
|
| Other current liabilities | 30,651 |
|
| 1,874 |
|
| a,d,e |
| 32,525 |
| (6,645 | ) | 25,880 |
|
| Current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 24,713 |
| 24,713 |
|
| Total current liabilities | 261,613 |
|
| 2,279 |
|
|
|
| 263,892 |
| — |
| 263,892 |
|
| Revolving credit agreements | 30,000 |
|
| — |
|
|
|
| 30,000 |
| — |
| 30,000 |
|
| Other long-term liabilities | 14,961 |
|
| 882 |
|
| e |
| 15,843 |
| (1,585 | ) | 14,258 |
|
| Non-current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 1,585 |
| 1,585 |
|
| Total liabilities | 306,574 |
|
| 3,161 |
|
|
|
| 309,735 |
| — |
| 309,735 |
|
| Stockholders’ equity |
|
|
|
|
|
|
|
|
|
| Class A Common stock | 95 |
|
| — |
|
|
|
| 95 |
| — |
| 95 |
|
| Class B Common stock | 44 |
|
| — |
|
|
|
| 44 |
| — |
| 44 |
|
| Capital in excess of par value | 54,143 |
|
| — |
|
|
|
| 54,143 |
| — |
| 54,143 |
|
| Treasury stock | (5,960 | ) |
| — |
|
|
|
| (5,960 | ) | — |
| (5,960 | ) |
| Retained earnings | 24,955 |
|
| (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’ equity | 54,755 |
|
| (12,211 | ) |
|
|
| 42,544 |
| — |
| 42,544 |
|
| Total liabilities and stockholders' equity | $ | 361,329 |
|
| $ | (9,050 | ) |
|
|
| $ | 352,279 |
| $ | — |
| $ | 352,279 |
|
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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Assets | | | | | | | | | |
| Current assets | | | | | | | | | |
| Cash and cash equivalents | $ | 1,131 |
|
| $ | — |
|
|
|
| $ | 1,131 |
| $ | (102 | ) | $ | 1,029 |
|
| Trade receivables, net | 89,579 |
|
| (2,446 | ) |
| a,f |
| 87,133 |
| (865 | ) | 86,268 |
|
| Inventory | 140,817 |
|
| — |
|
|
|
| 140,817 |
| (19,345 | ) | 121,472 |
|
| Prepaid expenses and other current assets | 24,078 |
|
| (6,723 | ) |
| a |
| 17,355 |
| (943 | ) | 16,412 |
|
| Current assets of discontinued operations | — |
|
| — |
|
|
|
| — |
| 21,255 |
| 21,255 |
|
| Total current assets | 255,605 |
|
| (9,169 | ) |
|
|
| 246,436 |
| — |
| 246,436 |
|
| Property, plant and equipment, net | 23,204 |
|
| — |
|
|
|
| 23,204 |
| (1,555 | ) | 21,649 |
|
| Goodwill | 6,253 |
|
| — |
|
|
|
| 6,253 |
| — |
| 6,253 |
|
| Other intangible assets, net | 3,828 |
|
| — |
|
|
|
| 3,828 |
| — |
| 3,828 |
|
| Deferred income taxes | 6,169 |
|
| 318 |
|
| e |
| 6,487 |
| (2,733 | ) | 3,754 |
|
| Deferred costs | 8,683 |
|
| — |
|
|
|
| 8,683 |
| (119 | ) | 8,564 |
|
| Other non-current assets | 1,997 |
|
| — |
|
|
|
| 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 agreements | 58,955 |
|
| — |
|
|
|
| 58,955 |
| (7,450 | ) | 51,505 |
|
| Accrued compensation | 12,091 |
|
| 387 |
|
| f |
| 12,478 |
| (753 | ) | 11,725 |
|
| Accrued product returns | 8,224 |
|
| — |
|
|
|
| 8,224 |
| — |
| 8,224 |
|
| Other current liabilities | 27,930 |
|
| (241 | ) |
| a,d,e,f |
| 27,689 |
| (6,307 | ) | 21,382 |
|
| Current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 20,048 |
| 20,048 |
|
| Total current liabilities | 199,157 |
|
| 146 |
|
|
|
| 199,303 |
| — |
| 199,303 |
|
| Revolving credit agreements | 32,000 |
|
| — |
|
|
|
| 32,000 |
| (2,000 | ) | 30,000 |
|
| Other long-term liabilities | 15,485 |
|
| 911 |
|
| e |
| 16,396 |
| (1,697 | ) | 14,699 |
|
| Non-current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 3,697 |
| 3,697 |
|
| Total liabilities | 246,642 |
|
| 1,057 |
|
|
|
| 247,699 |
| — |
| 247,699 |
|
| Stockholders’ equity |
|
|
|
|
|
|
|
|
|
| Class A Common stock | 95 |
|
| — |
|
|
|
| 95 |
| — |
| 95 |
|
| Class B Common stock | 44 |
|
| — |
|
|
|
| 44 |
| — |
| 44 |
|
| Capital in excess of par value | 53,342 |
|
| — |
|
|
|
| 53,342 |
| — |
| 53,342 |
|
| Treasury stock | (2,334 | ) |
| — |
|
|
|
| (2,334 | ) | — |
| (2,334 | ) |
| Retained earnings | 25,773 |
|
| (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’ equity | 59,097 |
|
| (9,908 | ) |
|
|
| 49,189 |
| — |
| 49,189 |
|
| Total liabilities and stockholders' equity | $ | 305,739 |
|
| $ | (8,851 | ) |
|
|
| $ | 296,888 |
| $ | — |
| $ | 296,888 |
|
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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Assets | |
| |
|
|
|
|
|
|
| Current assets | |
| |
|
|
|
|
|
|
| Cash and cash equivalents | $ | 1,721 |
|
| $ | — |
|
|
|
| $ | 1,721 |
| $ | (85 | ) | $ | 1,636 |
|
| Trade receivables, net | 92,534 |
|
| (2,768 | ) |
| a,f |
| 89,766 |
| (10,664 | ) | 79,102 |
|
| Inventory | 142,261 |
|
| — |
|
|
|
| 142,261 |
| (21,554 | ) | 120,707 |
|
| Prepaid expenses and other current assets | 16,373 |
|
| (6,605 | ) |
| a |
| 9,768 |
| 7,611 |
| 17,379 |
|
| Current assets of discontinued operations | — |
|
| — |
|
|
|
| — |
| 24,692 |
| 24,692 |
|
| Total current assets | 252,889 |
|
| (9,373 | ) |
|
|
| 243,516 |
| — |
| 243,516 |
|
| Property, plant and equipment, net | 22,566 |
|
| — |
|
|
|
| 22,566 |
| (1,582 | ) | 20,984 |
|
| Goodwill | 6,253 |
|
| — |
|
|
|
| 6,253 |
| — |
| 6,253 |
|
| Other intangible assets, net | 4,174 |
|
| — |
|
|
|
| 4,174 |
| — |
| 4,174 |
|
| Deferred income taxes | 5,493 |
|
| 385 |
|
| e |
| 5,878 |
| (2,712 | ) | 3,166 |
|
| Deferred costs | 8,447 |
|
| — |
|
|
|
| 8,447 |
| (131 | ) | 8,316 |
|
| Other non-current assets | 2,424 |
|
| — |
|
|
|
| 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 agreements | 62,212 |
|
| — |
|
|
|
| 62,212 |
| (7,400 | ) | 54,812 |
|
| Accrued compensation | 8,903 |
|
| 370 |
|
| f |
| 9,273 |
| (875 | ) | 8,398 |
|
| Accrued product returns | 9,314 |
|
| — |
|
|
|
| 9,314 |
| — |
| 9,314 |
|
| Other current liabilities | 24,109 |
|
| (135 | ) |
| a,d,e,f |
| 23,974 |
| (6,269 | ) | 17,705 |
|
| Current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 21,473 |
| 21,473 |
|
| Total current liabilities | 187,612 |
|
| 235 |
|
|
|
| 187,847 |
| — |
| 187,847 |
|
| Revolving credit agreements | 32,000 |
|
| — |
|
|
|
| 32,000 |
| (2,000 | ) | 30,000 |
|
| Other long-term liabilities | 19,555 |
|
| 898 |
|
| e |
| 20,453 |
| (1,834 | ) | 18,619 |
|
| Non-current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 3,834 |
| 3,834 |
|
| Total liabilities | 239,167 |
|
| 1,133 |
|
|
|
| 240,300 |
| — |
| 240,300 |
|
| Stockholders’ equity |
|
|
|
|
|
|
|
|
|
| Class A Common stock | 95 |
|
| — |
|
|
|
| 95 |
| — |
| 95 |
|
| Class B Common stock | 44 |
|
| — |
|
|
|
| 44 |
| — |
| 44 |
|
| Capital in excess of par value | 52,520 |
|
| — |
|
|
|
| 52,520 |
| — |
| 52,520 |
|
| Retained earnings | 27,959 |
|
| (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’ equity | 63,079 |
|
| (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
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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Assets | | | | | | | | | |
| Current assets | | | | | | | | | |
| Cash and cash equivalents | $ | 2,139 |
|
| $ | — |
|
|
|
| $ | 2,139 |
| $ | (572 | ) | $ | 1,567 |
|
| Trade receivables, net | 113,683 |
|
| (351 | ) |
| a |
| 113,332 |
| (1,023 | ) | 112,309 |
|
| Inventory | 183,831 |
|
| — |
|
|
|
| 183,831 |
| (28,087 | ) | 155,744 |
|
| Prepaid expenses and other current assets | 20,766 |
|
| (5,668 | ) |
| a |
| 15,098 |
| (2,503 | ) | 12,595 |
|
| Current assets of discontinued operations | — |
|
| — |
|
|
|
| — |
| 32,185 |
| 32,185 |
|
| Total current assets | 320,419 |
|
| (6,019 | ) |
|
|
| 314,400 |
| — |
| 314,400 |
|
| Property, plant and equipment, net | 23,309 |
|
| — |
|
|
|
| 23,309 |
| (2,321 | ) | 20,988 |
|
| Goodwill | 6,253 |
|
| — |
|
|
|
| 6,253 |
| — |
| 6,253 |
|
| Other intangible assets, net | 4,864 |
|
| — |
|
|
|
| 4,864 |
| — |
| 4,864 |
|
| Deferred income taxes | 10,450 |
|
| 53 |
|
| e |
| 10,503 |
| (2,799 | ) | 7,704 |
|
| Deferred costs | 10,306 |
|
| — |
|
|
|
| 10,306 |
| (153 | ) | 10,153 |
|
| Other non-current assets | 3,322 |
|
| — |
|
|
|
| 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 agreements | 69,883 |
|
| — |
|
|
|
| 69,883 |
| (9,800 | ) | 60,083 |
|
| Accrued compensation | 16,575 |
|
| 356 |
|
| f |
| 16,931 |
| (1,510 | ) | 15,421 |
|
| Accrued product returns | 9,601 |
|
| — |
|
|
|
| 9,601 |
| — |
| 9,601 |
|
| Other current liabilities | 27,139 |
|
| 1,397 |
|
| a,d,e |
| 28,536 |
| (6,048 | ) | 22,488 |
|
| Current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 29,693 |
| 29,693 |
|
| Total current liabilities | 269,633 |
|
| 1,753 |
|
|
|
| 271,386 |
| — |
| 271,386 |
|
| Revolving credit agreements | 30,000 |
|
| — |
|
|
|
| 30,000 |
| — |
| 30,000 |
|
| Other long-term liabilities | 24,840 |
|
| (204 | ) |
| e |
| 24,636 |
| (2,293 | ) | 22,343 |
|
| Non-current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 2,293 |
| 2,293 |
|
| Total liabilities | 324,473 |
|
| 1,549 |
|
|
|
| 326,022 |
| — |
| 326,022 |
|
| Stockholders’ equity |
|
|
|
|
|
|
|
|
|
| Class A Common stock | 92 |
|
| — |
|
|
|
| 92 |
| — |
| 92 |
|
| Class B Common stock | 45 |
|
| — |
|
|
|
| 45 |
| — |
| 45 |
|
| Capital in excess of par value | 51,366 |
|
| — |
|
|
|
| 51,366 |
| — |
| 51,366 |
|
| Treasury stock | — |
|
| — |
|
|
|
| — |
| — |
| — |
|
| Retained earnings | 17,031 |
|
| (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’ equity | 54,450 |
|
| (7,515 | ) |
|
|
| 46,935 |
| — |
| 46,935 |
|
| Total liabilities and stockholders' equity | $ | 378,923 |
|
| $ | (5,966 | ) |
|
|
| $ | 372,957 |
| $ | — |
| $ | 372,957 |
|
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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Assets | | | | | | | | | |
| Current assets | | | | | | | | | |
| Cash and cash equivalents | $ | 1,962 |
|
| $ | — |
|
|
|
| $ | 1,962 |
| $ | (569 | ) | $ | 1,393 |
|
| Trade receivables, net | 77,623 |
|
| (411 | ) |
| a |
| 77,212 |
| (1,080 | ) | 76,132 |
|
| Inventory | 165,237 |
|
| — |
|
|
|
| 165,237 |
| (26,516 | ) | 138,721 |
|
| Prepaid expenses and other current assets | 20,996 |
|
| (3,888 | ) |
| a |
| 17,108 |
| (2,539 | ) | 14,569 |
|
| Current assets of discontinued operations | — |
|
| — |
|
|
|
| — |
| 30,704 |
| 30,704 |
|
| Total current assets | 265,818 |
|
| (4,299 | ) |
|
|
| 261,519 |
| — |
| 261,519 |
|
| Property, plant and equipment, net | 21,839 |
|
| — |
|
|
|
| 21,839 |
| (2,751 | ) | 19,088 |
|
| Goodwill | 6,253 |
|
| — |
|
|
|
| 6,253 |
| — |
| 6,253 |
|
| Other intangible assets, net | 5,209 |
|
| — |
|
|
|
| 5,209 |
| — |
| 5,209 |
|
| Deferred income taxes | 10,894 |
|
| 668 |
|
| e |
| 11,562 |
| (2,685 | ) | 8,877 |
|
| Deferred costs | 9,973 |
|
| — |
|
|
|
| 9,973 |
| (148 | ) | 9,825 |
|
| Other non-current assets | 3,282 |
|
| — |
|
|
|
| 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 agreements | 75,476 |
|
| — |
|
|
|
| 75,476 |
| (9,150 | ) | 66,326 |
|
| Accrued compensation | 12,531 |
|
| 325 |
|
| f |
| 12,856 |
| (872 | ) | 11,984 |
|
| Accrued product returns | 9,648 |
|
| — |
|
|
|
| 9,648 |
| — |
| 9,648 |
|
| Other current liabilities | 19,099 |
|
| 2,505 |
|
| a,d,e,f |
| 21,604 |
| (5,835 | ) | 15,769 |
|
| Current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 26,830 |
| 26,830 |
|
| Total current liabilities | 222,984 |
|
| 2,830 |
|
|
|
| 225,814 |
| — |
| 225,814 |
|
| Revolving credit agreements | 30,000 |
|
| — |
|
|
|
| 30,000 |
| — |
| 30,000 |
|
| Other long-term liabilities | 24,274 |
|
| (204 | ) |
| e |
| 24,070 |
| (2,416 | ) | 21,654 |
|
| Non-current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 2,416 |
| 2,416 |
|
| Total liabilities | 277,258 |
|
| 2,626 |
|
|
|
| 279,884 |
| — |
| 279,884 |
|
| Stockholders’ equity |
|
|
|
|
|
|
|
|
|
| Class A Common stock | 92 |
|
| — |
|
|
|
| 92 |
| — |
| 92 |
|
| Class B Common stock | 45 |
|
| — |
|
|
|
| 45 |
| — |
| 45 |
|
| Capital in excess of par value | 50,721 |
|
| — |
|
|
|
| 50,721 |
| — |
| 50,721 |
|
| Treasury stock | — |
|
| — |
|
|
|
| — |
| — |
| — |
|
| Retained earnings | 10,152 |
|
| (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’ equity | 46,010 |
|
| (6,257 | ) |
|
|
| 39,753 |
| — |
| 39,753 |
|
| Total liabilities and stockholders' equity | $ | 323,268 |
|
| $ | (3,631 | ) |
|
|
| $ | 319,637 |
| $ | — |
| $ | 319,637 |
|
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
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 Restated | Recasting Impacts | As Restated and Recast |
| | (In thousands) |
| Assets | | | | | | | | | |
| Current assets | | | | | | | | | |
| Cash and cash equivalents | $ | 2,389 |
|
| $ | — |
|
|
|
| $ | 2,389 |
| $ | (605 | ) | $ | 1,784 |
|
| Trade receivables, net | 88,579 |
|
| (191 | ) |
| a |
| 88,388 |
| (9,030 | ) | 79,358 |
|
| Inventory | 157,622 |
|
| — |
|
|
|
| 157,622 |
| (24,873 | ) | 132,749 |
|
| Prepaid expenses and other current assets | 11,848 |
|
| (2,655 | ) |
| a |
| 9,193 |
| 5,422 |
| 14,615 |
|
| Current assets of discontinued operations | — |
|
| — |
|
|
|
| — |
| 29,086 |
| 29,086 |
|
| Total current assets | 260,438 |
|
| (2,846 | ) |
|
|
| 257,592 |
| — |
| 257,592 |
|
| Property, plant and equipment, net | 20,597 |
|
| — |
|
|
|
| 20,597 |
| (2,954 | ) | 17,643 |
|
| Goodwill | 6,253 |
|
| — |
|
|
|
| 6,253 |
| — |
| 6,253 |
|
| Other intangible assets, net | 5,555 |
|
| — |
|
|
|
| 5,555 |
| — |
| 5,555 |
|
| Deferred income taxes | 12,200 |
|
| 610 |
|
| e |
| 12,810 |
| (2,391 | ) | 10,419 |
|
| Deferred costs | 10,347 |
|
| — |
|
|
|
| 10,347 |
| (160 | ) | 10,187 |
|
| Other non-current assets | 3,224 |
|
| — |
|
|
|
| 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 agreements | 65,508 |
|
| — |
|
|
|
| 65,508 |
| (2,200 | ) | 63,308 |
|
| Accrued compensation | 9,833 |
|
| 338 |
|
| f |
| 10,171 |
| (933 | ) | 9,238 |
|
| Accrued product returns | 10,815 |
|
| — |
|
|
|
| 10,815 |
| — |
| 10,815 |
|
| Other current liabilities | 22,751 |
|
| 4,120 |
|
| a,d,e,f |
| 26,871 |
| (5,644 | ) | 21,227 |
|
| Current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 21,509 |
| 21,509 |
|
| Total current liabilities | 226,377 |
|
| 4,458 |
|
|
|
| 230,835 |
| — |
| 230,835 |
|
| Revolving credit agreements | 20,000 |
|
| — |
|
|
|
| 20,000 |
| — |
| 20,000 |
|
| Other long-term liabilities | 24,600 |
|
| (204 | ) |
| e |
| 24,396 |
| (2,565 | ) | 21,831 |
|
| Non-current liabilities of discontinued operations | — |
|
| — |
|
|
|
| — |
| 2,565 |
| 2,565 |
|
| Total liabilities | 270,977 |
|
| 4,254 |
|
|
|
| 275,231 |
| — |
| 275,231 |
|
| Stockholders’ equity |
|
|
|
|
|
|
|
|
|
| Class A Common stock | 92 |
|
| — |
|
|
|
| 92 |
| — |
| 92 |
|
| Class B Common stock | 45 |
|
| — |
|
|
|
| 45 |
| — |
| 45 |
|
| Capital in excess of par value | 49,051 |
|
| — |
|
|
|
| 49,051 |
| — |
| 49,051 |
|
| Treasury stock | — |
|
| — |
|
|
|
| — |
| — |
| — |
|
| Retained earnings | 12,191 |
|
| (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’ equity | 47,637 |
|
| (6,490 | ) |
|
|
| 41,147 |
| — |
| 41,147 |
|
| Total liabilities and stockholders' equity | $ | 318,614 |
|
| $ | (2,236 | ) |
|
|
| $ | 316,378 |
| $ | — |
| $ | 316,378 |
|
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
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
HAMILTON BEACH BRANDS HOLDING COMPANY
YEAR ENDED DECEMBER 31, 2019, 2018,2022, 2021, AND 20172020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Additions | | | | | | |
| Description | | Balance at Beginning of Period | | Charged to
Costs and
Expenses | | Charged to
Other Accounts
— Describe | | Deductions
— Describe | | Balance at
End of
Period (B) |
| (In thousands) |
| 2022 | | | | | | | | | | | | |
| Reserves deducted from asset accounts: | | | | | | | | | | | | |
| Allowance for doubtful accounts | | $ | 1,036 | | | $ | (79) | | | $ | — | | | $ | — | | | (A) | | $ | 957 | |
| Deferred tax valuation allowances | | $ | 2,095 | | | $ | 568 | | | — | | | $ | 510 | | | (C) | | $ | 2,153 | |
| 2021 | | | | | | | | | | | | |
| Reserves deducted from asset accounts: | | | | | | | | | | | | |
| Allowance for doubtful accounts | | $ | 1,144 | | | $ | (179) | | | $ | — | | | $ | (71) | | | (A) | | $ | 1,036 | |
| Deferred tax valuation allowances | | $ | 2,102 | | | $ | 170 | | | $ | — | | | $ | 177 | | | (C) | | $ | 2,095 | |
| 2020 | | | | | | | | | | | | |
| Reserves deducted from asset accounts: | | | | | | | | | | | | |
| Allowance for doubtful accounts | | $ | 1,023 | | | $ | 412 | | | $ | — | | | $ | 291 | | | (A) | | $ | 1,144 | |
| | | | | | | | | | | | |
| Deferred tax valuation allowances | | $ | 7,625 | | | $ | 614 | | | $ | — | | | $ | 6,137 | | | (C,D) | | $ | 2,102 | |
(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.
|
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| | | | | 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. |