UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________________________________________________________________________________________________________________________________________________________________________

FORM 10-Q



(Mark One)
þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	March 31, ~~2020~~2021



o☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
						For the transition period from to

Commission File Number: 001-38214

HAMILTON BEACH BRANDS HOLDING COMPANY

(Exact name of registrant as specified in its charter)

~~DELAWARE~~

Delaware

~~31-1236686~~

31-1236686

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

4421 WATERFRONT DR.

GLEN ALLEN VA

23060

(Address of principal executive offices)

(Zip code)

(804) ~~273-9777~~

273-9777

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, Par Value $0.01 Per Share

HBB

New York Stock Exchange

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. ~~YES~~ Yes þ NO o

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). ~~YES~~ Yes þ NO o

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

~~Accelerated filer~~ þ

~~Non-accelerated filer~~ o

Smaller reporting companyþ

☑

Emerging growth companyþ

☑

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐NO þ

~~YES~~ oNO þ

Number of shares of Class A Common Stock outstanding at ~~July 17, 2020: 9,607,176~~April 30, 2021: 9,845,038

Number of shares of Class B Common Stock outstanding at ~~July 17, 2020: 4,062,422~~

April 30, 2021: 4,029,355

HAMILTON BEACH BRANDS HOLDING COMPANY

TABLE OF CONTENTS

Page Number

Part I.

FINANCIAL INFORMATION

Item 1

Financial Statements

~~Page Number~~

~~Part I.~~

~~FINANCIAL INFORMATION~~

~~Item 1~~

~~Financial Statements~~

~~Condensed~~ Consolidated Balance Sheets

~~Condensed~~ Consolidated Statements of Operations

~~Condensed~~ Consolidated Statements of Comprehensive Income ~~(Loss)~~

~~Condensed~~ Consolidated Statements of Cash Flows

~~Condensed~~ Consolidated Statements of Changes in Equity

Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements

Item 2

~~Item 2~~

Management's Discussion and Analysis of Financial Condition and Results of Operations

2415

Item 3

~~Item 3~~

Quantitative and Qualitative Disclosures About Market Risk

2920

Item 4

~~Item 4~~

Controls and Procedures

2920

Part II.

OTHER INFORMATION

Item 1

~~Item 1~~

Legal Proceedings

3123

Item 1A

~~Item 1A~~

Risk Factors

3123

Item 2

~~Item 2~~

Unregistered Sales of Equity Securities and Use of Proceeds

3123

Item 3

~~Item 3~~

Defaults Upon Senior Securities

3123

Item 4

~~Item 4~~

Mine Safety Disclosures

3123

Item 5

~~Item 5~~

Other Information

3223

Item 6

Exhibits

~~Item 6~~24

~~Exhibits~~

Signatures

3325

Part I

FINANCIAL INFORMATION

Item 1. Financial Statements

HAMILTON BEACH BRANDS HOLDING COMPANY

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

(Unaudited)


				As Restated			As Restated and Recast
	MARCH 31 2020			DECEMBER 31 2019			MARCH 31 2019				MARCH 31 2021		DECEMBER 31 2020		MARCH 31 2020
	(In thousands)										(In thousands)
Assets										Assets
Current assets										Current assets
Cash and cash equivalents	$	2,078		$	2,142		$	1,636		Cash and cash equivalents	$	1,375	$	2,415	$	2,078
Trade receivables, net	69,569			108,381			79,102			Trade receivables, net	107,934		144,797		69,569
Inventory	89,986			109,806			120,707			Inventory	163,831		173,962		89,986

Prepaid expenses and other current assets	16,427			11,345			17,379			Prepaid expenses and other current assets	13,770		15,118		16,427
Current assets of discontinued operations	324			5,383			24,692			Current assets of discontinued operations	0		0		324
Total current assets	178,384			237,057			243,516			Total current assets	286,910		336,292		178,384
Property, plant and equipment, net	22,465			22,324			20,984			Property, plant and equipment, net	24,252		23,490		22,465
Goodwill	6,253			6,253			6,253			Goodwill	6,253		6,253		6,253
Other intangible assets, net	2,818			3,141			4,174			Other intangible assets, net	1,842		1,892		2,818
Deferred income taxes	5,128			6,248			3,166			Deferred income taxes	3,416		6,965		5,128
Deferred costs	11,172			10,941			8,316			Deferred costs	13,960		13,449		11,172

Other non-current assets	2,150			2,085			2,403			Other non-current assets	2,708		2,827		2,150
Non-current assets of discontinued operations	—			614			4,446

Total assets	$	228,370		$	288,663		$	293,258		Total assets	$	339,341	$	391,168	$	228,370
Liabilities and stockholders' equity										Liabilities and stockholders' equity
Current liabilities										Current liabilities
Accounts payable	$	61,578		$	111,348		$	73,720		Accounts payable	$	102,725	$	152,054	$	61,578
Accounts payable to NACCO Industries, Inc.	496			496			2,425			Accounts payable to NACCO Industries, Inc.	10		505		496
Revolving credit agreements	34,547			23,497			54,812			Revolving credit agreements	0		0		34,547
Accrued compensation	8,126			15,027			8,398			Accrued compensation	10,894		15,981		8,126
Accrued product returns	7,536			8,697			9,314			Accrued product returns	5,860		6,853		7,536
Other current liabilities	14,097			12,534			17,705			Other current liabilities	18,465		23,677		14,098
Current liabilities of discontinued operations	1,099			29,723			21,473			Current liabilities of discontinued operations	0		0		1,099
Total current liabilities	127,478			201,322			187,847			Total current liabilities	137,954		199,070		127,480
Revolving credit agreements	35,000			35,000			30,000			Revolving credit agreements	102,555		98,360		35,000
Other long-term liabilities	12,493			16,075			18,619			Other long-term liabilities	16,133		13,633		12,494
Non-current liabilities of discontinued operations	—			—			3,834

Total liabilities	174,972			252,397			240,300			Total liabilities	256,642		311,063		174,974
Stockholders' equity										Stockholders' equity

Class A Common stock	99			98			95			Class A Common stock	102		100		99
Class B Common stock	41			41			44			Class B Common stock	41		41		41
Capital in excess of par value	55,062			54,509			52,520			Capital in excess of par value	59,456		58,485		55,062
Treasury stock	(5,960		)	(5,960		)	—			Treasury stock	(5,960)		(5,960)		(5,960)
Retained earnings	23,996			3,710			17,506			Retained earnings	46,489		44,915		23,996
Accumulated other comprehensive loss	(19,842		)	(16,132		)	(17,207		)	Accumulated other comprehensive loss	(17,429)		(17,476)		(19,842)
Total stockholders' equity	53,396			36,266			52,958			Total stockholders' equity	82,699		80,105		53,396
Total liabilities and stockholders' equity	$	228,370		$	288,663		$	293,258		Total liabilities and stockholders' equity	$	339,341	$	391,168	$	228,370

See notes to unaudited ~~condensed~~ consolidated financial statements.

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	THREE MONTHS ENDED MARCH 31
	2021		2020
	(In thousands, except per share data)
Revenue	$	149,249	$	120,846
Cost of sales	117,556		95,806
Gross profit	31,693		25,040
Selling, general and administrative expenses	26,379		24,213
Amortization of intangible assets	50		324
Operating profit	5,264		503
Interest expense, net	720		603
Other expense, net	171		1,702
Income (loss) from continuing operations before income taxes	4,373		(1,802)
Income tax expense (benefit)	1,497		(448)
Net income (loss) from continuing operations	2,876		(1,354)
Income from discontinued operations, net of tax	0		22,866
Net income	$	2,876	$	21,512

Basic and diluted earnings (loss) per share:
Continuing operations	$	0.21	$	(0.10)
Discontinued operations	0		1.68
Basic and diluted earnings (loss) per share	$	0.21	$	1.58






Basic weighted average shares outstanding	13,855		13,625
Diluted weighted average shares outstanding	13,874		13,625

THREE MONTHS ENDED
MARCH 31
As Restated and Recast
2020 2019
(In thousands, except per share data)
Revenue $ 120,846

$ 126,642
Cost of sales 95,806

99,940
Gross profit 25,040

26,702
Selling, general and administrative expenses 24,213

26,246
Amortization of intangible assets 324

345
Operating profit 503

111
Interest expense, net 603

663
Other expense (income), net 1,702

(197 )
Income (loss) from continuing operations before income taxes (1,802 )
(355 )
Income tax expense (benefit) (448 )
307
Net income (loss) from continuing operations (1,354 )
(662 )
Income (loss) from discontinued operations, net of tax 22,866

(2,723 )
Net income (loss) $ 21,512

$ (3,385 )

Basic and diluted earnings (loss) per share:

Continuing operations $ (0.10 )
$ (0.05 )
Discontinued operations 1.68

(0.20 )
Basic and diluted earnings (loss) per share $ 1.58

$ (0.25 )

Basic weighted average shares outstanding 13,625

13,786
Diluted weighted average shares outstanding 13,625

13,786

See notes to unaudited ~~condensed~~ consolidated financial statements.

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)


	THREE MONTHS ENDED MARCH 31
	2021		2020
	(In thousands)
Net income	$	2,876	$	21,512
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	678		1,057
(Loss) gain on long-term intra-entity foreign currency transactions	(1,033)		(4,910)
Cash flow hedging activity	164		(162)
Reclassification of hedging activities into earnings	125		110

Reclassification of pension adjustments into earnings	113		195
Total other comprehensive income (loss), net of tax	47		(3,710)
Comprehensive income	$	2,923	$	17,802

THREE MONTHS ENDED
MARCH 31
As Restated and Recast
2020 2019
(In thousands)
Net income (loss) $ 21,512

$ (3,385 )
Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment 1,057

214
(Loss) gain on long-term intra-entity foreign currency transactions (4,910 )
15
Cash flow hedging activity (162 )
(422 )
Reclassification of hedging activities into earnings 110

2
Reclassification of pension adjustments into earnings 195

84
Total other comprehensive loss, net of tax (3,710 )
(107 )
Comprehensive income (loss) $ 17,803

$ (3,492 )

See notes to unaudited ~~condensed~~ consolidated financial statements.

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	THREE MONTHS ENDED MARCH 31
				As Restated and Recast				THREE MONTHS ENDED MARCH 31
	2020			2019				2021		2020
	(In thousands)							(In thousands)
Operating activities							Operating activities
Net income (loss) from continuing operations	$	(1,354	)	$	(662	)	Net income (loss) from continuing operations	$	2,876	$	(1,354)
Adjustments to reconcile net income (loss) from continuing operations to net cash used for operating activities:							Adjustments to reconcile net income (loss) from continuing operations to net cash used for operating activities:
Depreciation and amortization	792			1,048			Depreciation and amortization	896		792
Deferred income taxes	1,182			2,311			Deferred income taxes	3,702		1,182
Stock compensation expense	555			807			Stock compensation expense	1,107		555
Other	343			(31		)	Other	405		343
Net changes in operating assets and liabilities:							Net changes in operating assets and liabilities:
Affiliate payable	—			9			Affiliate payable	(495)		0
Trade receivables	34,811			19,889			Trade receivables	36,853		34,811
Inventory	17,047			2,263			Inventory	9,774		17,047
Other assets	(5,637		)	(2,698		)	Other assets	926		(5,637)
Accounts payable	(49,550		)	(45,593		)	Accounts payable	(49,152)		(49,550)
Other liabilities	(8,231		)	(17,582		)	Other liabilities	(8,781)		(8,231)
Net cash used for operating activities from continuing operations	(10,042		)	(40,239		)
Net cash provided by (used for) operating activities from continuing operations							Net cash provided by (used for) operating activities from continuing operations	(1,889)		(10,042)
Investing activities							Investing activities
Expenditures for property, plant and equipment	(625		)	(854		)	Expenditures for property, plant and equipment	(1,746)		(625)
Net cash used for investing activities from continuing operations	(625		)	(854		)

Net cash provided by (used for) investing activities from continuing operations							Net cash provided by (used for) investing activities from continuing operations	(1,746)		(625)
Financing activities							Financing activities
Net additions to revolving credit agreements	11,102			38,165			Net additions to revolving credit agreements	4,129		11,102

Cash dividends paid	(1,226		)	(1,177		)	Cash dividends paid	(1,302)		(1,226)
Net cash provided by financing activities from continuing operations	9,876			36,988

Other financing							Other financing	(134)		0
Net cash provided by (used for) financing activities from continuing operations							Net cash provided by (used for) financing activities from continuing operations	2,693		9,876
Cash flows from discontinued operations							Cash flows from discontinued operations
Net cash used for operating activities from discontinued operations	(4,968		)	(9,896		)
Net cash provided by investing activities from discontinued operations	6			21
Net cash provided by financing activities from discontinued operations	—			9,400
Cash used for discontinued operations	(4,962		)	(475		)
Net cash provided by (used for) operating activities from discontinued operations							Net cash provided by (used for) operating activities from discontinued operations	0		(4,968)
Net cash provided by (used for) investing activities from discontinued operations							Net cash provided by (used for) investing activities from discontinued operations	0		6
Net cash provided by (used for) financing activities from discontinued operations							Net cash provided by (used for) financing activities from discontinued operations	0		0
Cash provided by (used for) discontinued operations							Cash provided by (used for) discontinued operations	0		(4,962)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	1,376			(51		)	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(85)		1,376
Cash, cash equivalents and restricted cash							Cash, cash equivalents and restricted cash
Increase (decrease) for the period from continuing operations	585			(4,156		)	Increase (decrease) for the period from continuing operations	(1,027)		585
Decrease for the period from discontinued operations	(4,962		)	(475		)	Decrease for the period from discontinued operations	0		(4,962)
Balance at the beginning of the period	7,164			6,352			Balance at the beginning of the period	3,436		7,164
Balance at the end of the period	$	2,787		$	1,721		Balance at the end of the period	$	2,409	$	2,787

Reconciliation of cash, cash equivalents and restricted cash							Reconciliation of cash, cash equivalents and restricted cash
Continuing operations:							Continuing operations:
Cash and cash equivalents	$	2,078		$	1,636		Cash and cash equivalents	$	1,375	$	2,078
Restricted cash included in prepaid expenses and other current assets	186			—			Restricted cash included in prepaid expenses and other current assets	210		186
Restricted cash included in other non-current assets	378			—			Restricted cash included in other non-current assets	824		378
Cash and cash equivalents of discontinued operations	145			85			Cash and cash equivalents of discontinued operations	0		145
Total cash, cash equivalents, and restricted cash	$	2,787		$	1,721		Total cash, cash equivalents, and restricted cash	$	2,409	$	2,787

See notes to unaudited ~~condensed~~ consolidated financial statements.

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	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, 2021	$	100	$	41	$	58,485	$	(5,960)	$	44,915	$	(17,476)	$	80,105
Net income (loss)	—		—		—		—		2,876		—		2,876

Issuance of common stock, net of conversions	2		—		(2)		—		—		—		0
Share-based compensation expense	—		—		973		—		—		—		973
Cash dividends, $0.095 per share	—		—		—		—		(1,302)		—		(1,302)
Other comprehensive income (loss), net of tax	—		—		—		—		—		(191)		(191)
Reclassification adjustment to net income	—		—		—		—		—		238		238
Balance, March 31, 2021	$	102	$	41	$	59,456	$	(5,960)	$	46,489	$	(17,429)	$	82,699

Class A Common Stock Class B Common Stock Capital in Excess of Par Value Treasury Stock
Retained Earnings (1)
Accumulated Other Comprehensive Income (Loss) ⁽¹⁾
Total Stockholders' Equity ⁽¹⁾
(In thousands, except per share data)
As Restated Balance, January 1, 2020 $ 98
$ 41
$ 54,509
$ (5,960 ) $ 3,710
$ (16,132 ) $ 36,266
Net income —
—
—
—
21,512
—
21,512
Issuance of common stock, net of conversions 1
—
(1 ) —
—
—
—
Share-based compensation expense —
—
554
—
—
—
554
Cash dividends on Class A Common and Class B Common $0.09 per share —
—
—
—
(1,226 ) —
(1,226 )
Other comprehensive loss —
—
—
—
—
(4,015 ) (4,015 )
Reclassification adjustment to net income —
—
—
—
—
305
305
Balance, March 31, 2020 $ 99
$ 41
$ 55,062
$ (5,960 ) $ 23,996
$ (19,842 ) $ 53,396

As Restated Balance, 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
Share-based compensation expense —
—
807
—
—
—
807
Cash dividends on Class A Common and Class B Common $0.085 per share —
—
—
—
(1,177 ) —
(1,177 )
Other comprehensive loss —
—
—
—
—
(192 ) (192 )
Reclassification adjustment to net loss —
—
—
—
—
86
86
As Restated Balance, March 31, 2019 $ 95
$ 44
$ 52,520
$ —
$ 17,506
$ (17,207 ) $ 52,958



Balance, January 1, 2020	$	98	$	41	$	54,509	$	(5,960)	$	3,710	$	(16,132)	$	36,266
Net income (loss)	—		—		—		—		21,512		—		21,512
Issuance of common stock, net of conversions	1		—		(1)		—		—		—		0

Share-based compensation expense	—		—		554		—		—		—		554
Cash dividends, $0.09 per share	—		—		—		—		(1,226)		—		(1,226)
Other comprehensive income (loss), net of tax	—		—		—		—		—		(4,015)		(4,015)
Reclassification adjustment to net loss	—		—		—		—		—		305		305
Balance, March 31, 2020	$	99	$	41	$	55,062	$	(5,960)	$	23,996	$	(19,842)	$	53,396

See notes to unaudited ~~condensed~~ consolidated financial statements.

~~(1) As Restated~~

Table of Contents

HAMILTON BEACH BRANDS HOLDING COMPANY

NOTES TO UNAUDITED ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, ~~2020~~2021

(Tabular amounts in thousands, except as noted and per share amounts)

NOTE 1—Basis of Presentation and Recently Issued Accounting Standards

Basis of Presentation

Hamilton Beach Brands Holding Company is a holding company and operates through its wholly-owned subsidiary, Hamilton Beach Brands, Inc. (“HBB”) (collectively “Hamilton Beach Holding” or the “Company”). 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 ~~participates~~operates in the consumer, commercial and specialty small ~~kitchen~~ appliance markets.

The Company previously operated through its other wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"), which is reported as discontinued operations in all periods presented herein. 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. See Note 32 for further information on discontinued operations.

The financial statements have been prepared in accordance with ~~U.S.~~US generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019.~~2020.

Operating results for the three months ended March 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the remainder of the year due to the highly seasonal nature of our primary markets. A majority of revenue and operating profit typically occurs in the second half of the calendar year when sales of our products to retailers and consumers historically increase significantly for the fall holiday-selling season.

HBB maintains a $115.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires on June 30, 2021, within one year after the issuance of these financial statements. Given the market conditions including unfavorable pricing terms, HBB has not yet completed its refinancing of the HBB Facility prior to June 30, 2020. HBB has approved and begun the refinancing process, which is considered customary. Based on the current status of the refinancing and HBB’s history of successfully refinancing its debt, HBB believes that it is probable that the HBB Facility will be refinanced before its maturity.

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. ~~In June 2020, the FASB issued ASU 2020-05 to defer the effective date by a year.~~ For nonpublic entities, the amendments are currently effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, ~~2022, however the FASB has proposed to defer the effective date by one year.~~2022. Early adoption is permitted. The Company is planning to adopt ASU 2016-02 when required and is currently evaluating to what extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to recognize credit losses as an allowance rather than as a write-down. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, ~~2022,~~2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, ~~2023~~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.

Table of Contents

~~NOTE 2— Restatement~~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 ~~Previously Issued~~goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The new accounting rules will be effective for the Company for its year ending December 31, 2022. The Company is currently in the process of evaluating the impact of adoption of the new accounting rules on the Company’s financial condition, results of operations, cash flows and disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ~~Statements~~Reporting.” The new accounting rules provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this standard can be applied anytime between the first quarter of 2020 and the fourth quarter of 2022. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows and disclosures.

~~Restatement~~

Assets Held for Sale

During the fourth quarter ~~ended March 31,~~of 2020, the Company ~~discovered certain accounting irregularities at its Mexican subsidiaries. The Company’s Audit Review Committee commenced an internal investigation, with~~committed to a plan to sell our Brazilian subsidiary and determined that we met all of the ~~assistance of outside counsel~~criteria to classify the assets and ~~other third party experts. As a result~~liabilities of this ~~investigation, the Company, along with the Audit Review Committee and its third party experts, concluded that certain former employees of one~~business as held for sale. The carrying amounts of the ~~Company’s Mexican subsidiaries engaged in unauthorized transactions with~~major classes of assets that are classified as held for sale as of March 31, 2021 are as follows: $1.6 million of trade receivables, net, and $0.5 million of inventory. As of March 31, 2021, 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 certaintotal of these amounts are 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, and for~~line item on the ~~years ended December 31, 2019, 2018 and 2017 and each~~Consolidated Balance Sheet. The carrying value of the ~~quarters~~disposal group approximates the fair value, which we determined based on the expected sales price.

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. As a result, we are no longer committed to selling the subsidiary. The carrying amounts of the assets will be reclassified to held and used during the ~~years ended December~~second quarter of 2021. The disposal group had $2.5 million of accumulated other comprehensive losses at March 31, ~~2019 and 2018 on Form 10-K/A for the year ended December 31, 2019. During the course~~2021, which will be recognized in net income upon substantial liquidation of the ~~investigation, certain expenses at the Company's Mexican subsidiaries were found~~Brazilian subsidiary which we expect to ~~be incorrectly classified within the consolidated statement of operations and have also been corrected~~occur in the ~~restatement. These misstatements are described in restatement reference (a) through (d) below.~~back half of 2021.

~~The restatement also includes corrections for other errors previously 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 expense. Where these write-offs caused prepaid assets and other current assets balance to become a liability, the balance has been reclassed 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 the 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.

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

~~(f) Correction of other immaterial errors~~

~~Restatement Tables~~

The restatement tables below present a reconciliation from the previously reported to the restated values as of and for the three months ended March 31, 2019 and as of December 31, 2019. The values as previously reported were derived from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed on April 25, 2019 and from our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on February 26, 2020.

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

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

December 31, 2019
As Previously Reported
Restatement Impacts
Restatement Reference
As Restated
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
Non-current liabilities of discontinued operations —

—

—
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

~~(a) Write-off~~Table 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 millionContents

~~(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, and 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

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

` March 31, 2019
As Previously Reported
Restatement Impacts
Restatement Reference
As Restated Recasting Impacts As Restated and Recast
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

~~(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 prepaid expenses and 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

~~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
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 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

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

For the Three Months Ended March 31, 2019

As Previously Reported
Restatement Impacts
As Restated
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 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 CASH FLOWS~~

March 31, 2019
As Previously Reported Restatement Impacts As Restated Recasting Impacts As Restated and Recast
Operating activities
Net income from continuing operations $ (1,761 ) $ (1,624 ) $ (3,385 ) $ 2,723
$ (662 )
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

Depreciation and amortization 1,249
—
1,249
(201 ) 1,048
Deferred income taxes 2,178
110
2,288
23
2,311
Stock compensation expense 807
—
807
—
807
Other 23
(59 ) (36 ) 5
(31 )
Net changes in operating assets and liabilities:

Affiliate payable 6
—
6
3
9
Trade receivables 20,323
344
20,667
(778 ) 19,889
Inventory 2,593
111
2,704
(441 ) 2,263
Other assets (1,824 ) (742 ) (2,566 ) (132 ) (2,698 )
Accounts payable (52,353 ) (15 ) (52,368 ) 6,775
(45,593 )
Other liabilities (21,376 ) 1,875
(19,501 ) 1,919
(17,582 )
Net cash provided by operating activities from continuing operations (50,135 ) —
(50,135 ) 9,896
(40,239 )
Investing activities

Expenditures for property, plant and equipment (862 ) —
(862 ) 8
(854 )
Other 29
—
29
(29 ) —
Net cash used for investing activities from continuing operations (833 ) —
(833 ) (21 ) (854 )
Financing activities

Net additions (reductions) to revolving credit agreements 47,565
—
47,565
(9,400 ) 38,165
Cash dividends paid (1,177 ) —
(1,177 ) —
(1,177 )
Net cash provided by (used for) financing activities from continuing operations 46,388
—
46,388
(9,400 ) 36,988
Cash flows from discontinued operations

Net cash provided by (used for) operating activities from discontinued operations —
—
—
(9,896 ) (9,896 )
Net cash provided by (used for) investing activities from discontinued operations —
—
—
21
21
Net cash used for financing activities from discontinued operations —
—
—
9,400
9,400
Cash provided by (used for) discontinued operations —
—
—
(475 ) (475 )
Effect of exchange rate changes on cash (51 ) —
(51 ) —
(51 )
Cash and Cash Equivalents

(Decrease) increase for the year from continuing operations (4,631 ) —
(4,631 ) 475
(4,156 )
Increase (decrease) for the year from discontinued operations —
—
—
(475 ) (475 )
Balance at the beginning of the year 6,352
—
6,352
6,352
Balance at the end of the year $ 1,721
$ —
$ 1,721
$ 1,721

~~See description of the net income impacts in the consolidated statement of operations for the year ended March 31, 2019 section above.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

For the Three Months Ended March 31, 2019
Class A common stock Class B common stock Capital in excess of par value Retained earnings Accumulated other comprehensive income (loss) Total stockholders' equity
As Previously Reported
Balance, January 1, 2019 $ 93
$ 44
$ 51,714
$ 30,897
$ (17,310 ) $ 65,438
Net loss —
—
—
(1,761 ) —
(1,761 )
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 —
—
—
—
(221 ) (221 )
Reclassification adjustment to net loss —
—
—
—
(8 ) (8 )
Balance, March 31, 2019 $ 95
$ 44
$ 52,520
$ 27,959
$ (17,539 ) $ 63,079
Restatement Impacts

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

(1,624 ) —
(1,624 )
Issuance of common stock, net of conversions —
—
—
—
—
—
Purchase of treasury stock —
—
—
—
—
—
Share-based compensation expense —
—
—
—
—
—
Cash dividends, $0.085 per share —
—
—
—
—
—
Other comprehensive loss —
—
—
—
29
29
Reclassification adjustment to net loss —
—
—
—
94
94
Balance, March 31, 2019 $ —
$ —
$ —
$ (10,453 ) $ 332
$ (10,121 )
As Restated

Balance, 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, March 31, 2019 $ 95
$ 44
$ 52,520
$ 17,506
$ (17,207 ) $ 52,958

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 three months ended March 31, 2019 sections above.

~~The quarter ended March 31, 2019 included a change to the reclassification adjustment to net loss of $0.1 million.~~

NOTE 3—2—Discontinued Operations

On October 10, 2019, the Board approved the wind down of KC's retail operation 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.operations. Accordingly, KC is reported as discontinued operations in all periods presented. KC completed its dissolution on April 3, 2020 with a pro-rata distribution of its remaining assets to creditors, at which time the KC legal entity ceased to exist and was no longer consolidated by the Company. Neither Hamilton Beach Brands Holding Company nor Hamilton Beach Brands, Inc. received a distribution.

KC’s operating results are reflected as discontinued operations for all periods presented. The major line items constituting the income (loss) from discontinued operations, net of tax are as follows:

THREE MONTHS ENDED MARCH 31
2020 2019
(In thousands)
Revenue $ 631
$ 19,253
Cost of sales —
10,649
Gross profit 631
8,604
Selling, general and administrative expenses 1,047
12,233
Adjustment of lease termination liability⁽¹⁾
(16,457 ) —
Adjustment of other current liabilities⁽²⁾
(6,608 ) —
Operating income (loss) 22,649
(3,629 )
Interest expense —
83
Other expense, net —
9
Income (loss) from discontinued operations before income taxes 22,649
(3,721 )
Income tax benefit (217 ) (998 )
Income (loss) from discontinued operations, net of tax $ 22,866
$ (2,723 )

~~(1)~~

~~Represents an adjustment to the estimated timing and amount of estimated cash flows underlying the lease termination obligation at March~~

THREE MONTHS ENDED
MARCH 31 2020, calculated based on the final distribution of KC's remaining assets on April 3, 2020. The lease termination obligation is measured at fair value using significant observable inputs, which is Level 2 as defined in the fair value hierarchy.


~~(2)~~	~~Represents an adjustment to the carrying value~~	2020

Revenue		$	631
Cost of ~~substantially all~~sales		0
Gross profit		631
Selling, general and administrative expenses		1,047
Adjustment of ~~the~~lease termination liability(1)		(16,457)
Adjustment of other current liabilities ~~at March 31, 2020, calculated based on the final distribution~~(2)		(6,608)
Operating income		22,649


Income from discontinued operations before income taxes		22,649
Income tax benefit		(217)
Income from discontinued operations, net of ~~KC's remaining assets on April 3, 2020.~~tax		$	22,866

(1) 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.

~~KC’s~~

Table of Contents

Due to the deconsolidation of KC on April 3, 2020, there are no assets or liabilities associated with KC as of March 31, 2021 and ~~liabilities are reflected as assets and liabilities of discontinued operations for all periods presented.~~December 31, 2020. The major classes of KC's assets and liabilities included as part of discontinued operations as of March 31, 2020 are as follows:


	MARCH 31 2020

Assets
Cash and cash equivalents	$	145

Prepaid expenses and other current assets	179
Current assets of discontinued operations	$	324






Liabilities
Accounts payable	$	63


Lease termination liability	791
Other current liabilities	245
Current liabilities of discontinued operations	$	1,099

MARCH 31
2020 DECEMBER 31
2019 MARCH 31
2019
(In thousands)
Assets
Cash and cash equivalents $ 145
$ 5,022
$ 85
Inventory —
—
21,554
Prepaid expenses and other current assets 179
361
3,053
Current assets of discontinued operations $ 324
$ 5,383
$ 24,692

Deferred income taxes $ —
$ 614
$ 2,712
Other non-current assets —
—
1,734
Non-current assets of discontinued operations $ —
$ 614
$ 4,446

Liabilities
Accounts payable $ 63
$ 4,594
$ 6,929
Revolving credit agreement —
—
7,400
Lease termination liability 791
17,248
—
Other current liabilities 245
7,881
7,144
Current liabilities of discontinued operations $ 1,099
$ 29,723
$ 21,473

Other long-term liabilities —
—
3,834
Non-current liabilities of discontinued operations $ —
$ —
$ 3,834

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

NOTE 4—3—Transfer of Financial Assets

The Company has entered into an arrangement with a financial institution to sell certain ~~U.S.~~US trade receivables on a non-recourse basis. The Company utilizes this arrangement as an integral part of financing working capital. Under the terms of the agreement, the Company 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, the Company derecognized ~~$36.5~~$29.8 million and ~~$34.5~~$36.5 million of trade receivables during the three months ending March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$162.7~~$162.4 million during the year ending December 31, ~~2019.~~2020. The loss incurred on sold receivables in the consolidated results of operations for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 was not material. The Company does not carry any servicing assets or liabilities. Cash proceeds from this arrangement are reflected as operating activities in the ~~Condensed~~ Consolidated Statements of Cash Flows.

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NOTE 5—4—Fair Value Disclosure

The following table presents the Company's assets and liabilities accounted for at fair value on a recurring basis:


Description	Balance Sheet Location	MARCH 31 2021		DECEMBER 31 2020		MARCH 31 2020
Assets:
Interest rate swap agreements
Current	Prepaid expenses and other current assets	$	0	$	0	$	0

Foreign currency exchange contracts
Current	Prepaid expenses and other current assets	0		0		767
		$	0	$	0	$	767
Liabilities:
Interest rate swap agreements
Current	Other current liabilities	$	333	$	380	$	362
Long-term	Other long-term liabilities	591		779		818
Foreign currency exchange contracts
Current	Other current liabilities	249		518		0
		$	1,173	$	1,677	$	1,180

Description Balance Sheet Location MARCH 31
2020 DECEMBER 31
2019 MARCH 31
2019
Assets:

Interest rate swap agreements

Current Prepaid expenses and other current assets $ —
$ —
$ 236
Long-term Other non-current assets —
—
435
Foreign currency exchange contracts

Current Prepaid expenses and other current assets 767
—
44
$ 767
$ —
$ 715
Liabilities:
Interest rate swap agreements
Current Other current liabilities $ 362
$ 21
$ —
Long-term Other long-term liabilities 818
61
—
Foreign currency exchange contracts

Current Other current liabilities —
308
34
$ 1,180
$ 390
$ 34

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

Other Fair Value Measurement Disclosures

The carrying amounts of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair ~~values~~value of the revolving credit ~~agreements,~~agreement, including book overdrafts, which approximate book value, ~~were~~was 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 3 during the three months ended March 31, 2021.

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NOTE 6— 5—Stockholders' Equity

Capital Stock

The following table sets forth the Company's authorized capital stock information:


	MARCH 31 2020	DECEMBER 31 2019	MARCH 31 2019		MARCH 31 2021	DECEMBER 31 2020	MARCH 31 2020
	(In thousands)
Preferred stock, par value $0.01 per share				Preferred stock, par value $0.01 per share
Preferred stock authorized	5,000	5,000	5,000	Preferred stock authorized	5,000	5,000	5,000
Preferred stock outstanding	—	—	—	Preferred stock outstanding	0	0	0
Class A Common stock, par value $0.01 per share				Class A Common stock, par value $0.01 per share
Class A Common stock authorized	70,000	70,000	70,000	Class A Common stock authorized	70,000	70,000	70,000
Class A Common issued⁽¹⁾⁽²⁾	9,917	9,805	9,457	Class A Common issued(1)(2)	10,186	10,006	9,917
Treasury Stock	365	365	—	Treasury Stock	365	365	365
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis
Class B Common stock, par value $0.01 per share, convertible into Class A on a 1-for-one basis				Class B Common stock, par value $0.01 per share, convertible into Class A on a 1-for-one basis
Class B Common stock authorized	30,000	30,000	30,000	Class B Common stock authorized	30,000	30,000	30,000
Class B Common issued⁽¹⁾	4,074	4,076	4,385	Class B Common issued(1)	4,037	4,045	4,074

⁽¹⁾ Class B Common converted to Class A Common were 38 and 373 shares during the three months ending March 31, 2021 and 2020, ~~and 2019,~~ respectively.

(2) The Company issued Class A Common shares of ~~108~~172 and ~~129~~108 during the three months ending March 31, 2021 and 2020, ~~and 2019,~~ respectively.

Accumulated Other Comprehensive Loss: The following table summarizes changes in accumulated other comprehensive 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, 2021	$	(9,775)	$	(1,344)	$	(6,357)	$	(17,476)
Other comprehensive income (loss)	(276)		222		0		(54)
Reclassification adjustment to net income (loss)	0		182		156		338
Tax effects	(79)		(115)		(43)		(237)
Balance, March 31, 2021	$	(10,130)	$	(1,055)	$	(6,244)	$	(17,429)









Balance, January 1, 2020	$	(8,221)	$	(341)	$	(7,570)	$	(16,132)
Other comprehensive income (loss)	(4,985)		(171)		0		(5,156)
Reclassification adjustment to net income (loss)	0		154		239		393
Tax effects	1,132		(35)		(44)		1,053
Balance, March 31, 2020	$	(12,074)	$	(393)	$	(7,375)	$	(19,842)

Foreign Currency Deferred Gain (Loss) on Cash Flow Hedging Pension Plan Adjustment Total

As Restated Balance, January 1, 2020 $ (8,221 )
$ (341 )
$ (7,570 )
$ (16,132 )
Other comprehensive loss (4,985 )
(171 )
—

(5,156 )
Reclassification adjustment to net loss —

154

239

393
Tax effects 1,132

(35 )
(44 )
1,053
Balance, March 31, 2020 $ (12,074 ) $ (393 ) $ (7,375 ) $ (19,842 )

As Restated Balance, January 1, 2019 $ (8,652 )
$ 879

$ (9,328 )
$ (17,101 )
Other comprehensive income (loss) 246

(631 )
—

(385 )
Reclassification adjustment to net loss —

4

45

49
Tax effects (17 )
207

39

229
As Restated Balance, March 31, 2019 $ (8,423 )
$ 459

$ (9,244 )
$ (17,208 )

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NOTE 7—6—Revenue

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

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

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

A description of ~~the~~revenue sources and performance obligations for HBB isare as follows:

~~Product~~Consumer and Commercial product revenue - Product revenue consist of sales of small electric household and specialty housewares appliances to traditional brick and mortar and ecommerce retailers, distributors and directly to the end consumer as well as sales of commercial products for restaurants, bars and hotels.

Transactions with ~~these~~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 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 changes in returns. In addition, the Company offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements. We evaluated such agreements with our customers and determined returns and price concessions should be accounted for as variable consideration. As

Consumer product revenue consists of ~~December 31, 2019, we have determined that customer price concessions recorded as a reduction~~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 ~~certain~~is in North America.

Commercial product revenue consists of ~~which were previously recorded~~sales of products for restaurants, fast-food chains, bars and hotels. Approximately one-half of our commercial sales are in the U.S. and the other ~~current liabilities, meet all of~~half is in markets across the criteria specified in ASC 210-20, "Balance Sheet Offsetting". Accordingly, amounts related to such arrangements have now been classified as a reduction of trade receivables (prior periods have not been adjusted as all the criteria in ASC 210-20 had not previously been met).globe.

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

The following table sets forth Company's revenue on a disaggregated basis for the three months ended March 31:


	THREE MONTHS ENDED MARCH 31
	2021		2020
Type of good or service:
Consumer products	$	139,513	$	109,717
Commercial products	8,593		9,918
Licensing	1,143		1,211
Total revenues	$	149,249	$	120,846

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THREE MONTHS ENDED MARCH 31
As Restated and Recast
2020 2019
Type of good or service:
  Products $ 119,635

$ 125,611
  Licensing 1,211

1,031
     Total revenues $ 120,846

$ 126,642

NOTE 7—Contingencies

~~NOTE 8—Contingencies~~

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

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

HBB is a defendant in a legal proceeding in which the plaintiff alleges that certain HBB products infringe the plaintiff’s patents. On May 3, 2019, the jury returned its verdict finding that the Company had infringed certain patents of the plaintiff and, as a result, awarded the plaintiff damages in the amount of $3.2 million. Accordingly, the Company recorded $3.2 million expense in selling, general and administrative expenses during the second quarter of 2019 for the contingent loss. On September 23, 2019, the Company filed post-trial motions challenging the jury verdict of infringement and the award of damages and the plaintiff filed motions seeking interest, post-trial accounting, injunctive relief, and attorneys’ fees. On May 2, 2020, the Company’s motion for judgment as a matter of law for non-infringement of certain claims of one of the patents in the case was granted. Since May 2, 2020, the court has also issued orders denying plaintiff’s motion for attorney’s fees and reducing plaintiff’s award. In August 2020, the court entered an order awarding the plaintiff additional sales posttrial and interest on the damages award ~~by $0.9 million. Accordingly,~~through July 31, 2020 and continuing interest in a de minimis amount until the ~~Company reduced~~judgment is satisfied. As of March 31, 2021, the ~~estimated~~accrual for the contingent loss ~~by $0.9 million during~~is $3.1 million. HBB continues to vigorously pursue the ~~first quarter~~appeal of ~~2020. On July 16, 2020,~~ the ~~Court issued a narrow injunction prohibiting the sale of a particular line of mixing machines used in limited applications~~judgment and ~~denied plaintiff’s motion for an injunction with respect to all other HBB machines alleged to have infringed plaintiff’s patents. HBB has filed a Notice of Appeal~~adverse lower court rulings with the ~~U.S.~~US Court of Appeals for the Federal Circuit, as HBB maintains it does not infringe any valid patent claim and the damages award is not supported by the evidence. ~~HBB also plans to move for a stay of the injunction at the Federal Circuit.~~

KCHamilton Beach Brands Holding Company (HBBHC) is a defendant in a legal proceeding instituted in February 2020 in which the plaintiff ~~alleges~~seeks to hold the Company liable for the unsatisfied portion of an agreed final judgment that plaintiff obtained against KC ~~breached forty-nine store leases for failing~~related to KC’s failure to continue to operate ~~the~~NaN stores during the ~~entire~~ term of the ~~leases and for the use of certain~~ store sale signs. By December 31, 2019, all KC stores were closed and on January 23, 2020 a Certificate of Dissolution of Ohio Limited Liability Company was filed with the Ohio Secretary of State, effective as of January 21, 2020.leases. In February 2020, KC agreed to the entry of a final judgment in favor of the plaintiff in the amount of $8.1 million and in April 2020 the plaintiff received $0.3 million in the final distribution of KC assets to KC creditors. On April 14, 2020, the plaintiff filed a discovery motion against KC in an effort to locate KC assets to satisfy the outstanding balance of the final judgment. KC will oppose the motion on the grounds that it is moot as all assets of KC have been distributed. In February 2020, the plaintiff filed a complaint against Hamilton Beach Brands Holding Company seeking to hold Hamilton Beach Brands Holding Company liable for the unsatisfied portion of the final judgment against KC. The Company believes that the plaintiff’s claims are without merit and will vigorously defend against plaintiff’s claims.

On May 21, 2020 an owner of HBBHC class A common stock filed a class action complaint against HBBHC and the Company’s Chief Executive and Chief Financial officers in the U.S. District Court for the Eastern District of New York. The complaint asserts claims under Sections 10(b) and 20 of the Securities Exchange Act on behalf of a putative class of investors who acquired HBBHC common stock between February 27, 2020 and May 8, 2020. The claims pertain to the accounting irregularities involving a Mexican subsidiary of the Company that were announced in the Form 12b-25 filed by the Company on May 8, 2020. The Company believes that the claims are without merit and has filed a motion to dismiss the claims. The Company will vigorously defend against plaintiff’s claims.

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

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 March 31, ~~2020,~~2021, December 31, ~~2019,~~2020, and March 31, ~~2019,~~2020, HBB had accrued undiscounted obligations of ~~$4.2~~$3.1 million, ~~$4.4~~$3.1 million and ~~$8.4~~$4.2 million respectively, for environmental investigation and remediation activities. The reduction in the amount accrued at March 31, 2020 compared to March 31, 2019 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~~0 to ~~$3.8~~$1.7 million related to the environmental investigation and remediation at these sites. ~~Additionally,~~

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NOTE 8—Income Taxes

The effective tax rate on income from continuing operations was 34.2% and 24.9% for the three months ended March 31, 2021 and 2020, respectively. The effective tax rate was higher for the three months ended March 31, 2021 due to the inclusion of $0.4 million related to interest and penalties on unrecognized tax benefits as a discrete expense item.

NOTE 9—Subsequent Events

On April 9, 2021, the Company ~~recorded a $1.5 million receivable~~entered into Amendment No. 9 to the Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as ~~of December 31, 2019 related~~Administrative Agent, the Lenders that are Parties thereto as the Lenders, Hamilton Beach Brands, Inc., as Parent and U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower (the “Amendment”). Due to ~~a probable recovery of environmental investigation and remediation costs associated with one~~the highly seasonal nature of the ~~sites from a responsible party~~Company’s primary markets, Amendment No. 8 dated November 23, 2020 provided for increases in ~~exchange for release from all future obligations by that party. As of March 31, 2020, $1.0 million~~advance rates used to determine the borrowing base during periods of the ~~$1.5~~second half of the calendar year. Amendment No. 9 increases the credit facility from $125 million ~~receivable had been collected with $0.6~~to $140 million ~~representing restricted cash.~~for a period of sixty days from its effective date to provide similar flexibility as demand for small kitchen appliances is expected to remain strong in the first half of 2021. The Amendment did not result in any other changes to the terms or due date of the credit facility.

Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in thousands, except as noted and per share data)

Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations and are subject to various uncertainties and changes in circumstances. Important factors that could cause actual results to differ materially from those described in these forward-looking statements are set forth below under the heading “Forward-Looking Statements."

Hamilton Beach Brands Holding Company is a holding company and operates through its wholly-owned subsidiary Hamilton Beach Brands, Inc. (“HBB”) (collectively “Hamilton Beach Holding” or the “Company”). The Company previously operated through its other wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"), which is reported as discontinued operations in all periods presented herein. 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. Neither Hamilton Beach Brands Holding Company nor Hamilton Beach Brands, Inc. received a distribution.

HBB is the Company's single reportable segment and intercompany balances and transactions have been eliminated.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For a summary of the Company's critical accounting policies, refer to “Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in the Company's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019~~2020 as there have been no material changes from those disclosed in our Annual Report.

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RESULTS OF OPERATIONS

The Company’s business is seasonal and a majority of revenue and operating profit typically occurs in the second half of the year when sales of small electric appliances and kitchenware historically increase significantly for the fall holiday-selling season. ~~As described~~Additionally, in the fourth quarter of 2019, KC met the requirements to be reported as a discontinued operation. See Note 2, ~~- Restatement of Previously Issued Financial Statements, amounts presented in prior periods have been restated. The results of operations were as follows~~Discontinued Operations for ~~the three months ended March 31:~~more information.

First Quarter of ~~2020~~2021 Compared with First Quarter of ~~2019~~

2020


	THREE MONTHS ENDED MARCH 31																THREE MONTHS ENDED MARCH 31
						As Restated and Recast																			Increase / (Decrease)
	2020			% of Revenue		2019			% of Revenue		$ Change			% Change			2021		% of Revenue		2020		% of Revenue		$ Change		% Change
Revenue	$	120,846		100.0	%	$	126,642		100.0	%	$	(5,796	)	(4.6	)%	Revenue	$	149,249	100.0	%	$	120,846	100.0	%	$	28,403	23.5	%
Cost of sales	95,806			79.3	%	99,940			78.9	%	(4,134		)	(4.1	)%	Cost of sales	117,556		78.8	%	95,806		79.3	%	21,750		22.7	%
Gross profit	25,040			20.7	%	26,702			21.1	%	(1,662		)	(6.2	)%	Gross profit	31,693		21.2	%	25,040		20.7	%	6,653		26.6	%
Selling, general and administrative expenses	24,213			20.0	%	26,246			20.7	%	(2,033		)	(7.7	)%	Selling, general and administrative expenses	26,379		17.7	%	24,213		20.0	%	2,166		8.9	%
Amortization of intangible assets	324			0.3	%	345			0.3	%	(21		)	(6.1	)%	Amortization of intangible assets	50		—	%	324		0.3	%	(274)		(84.6)	%
Operating profit	503			0.4	%	111			0.1	%	392			353.2	%	Operating profit	5,264		3.5	%	503		0.4	%	4,761		n/m
Interest expense, net	603			0.5	%	663			0.5	%	(60		)	(9.0	)%	Interest expense, net	720		0.5	%	603		0.5	%	117		19.4	%
Other expense (income), net	1,702			1.4	%	(197		)	(0.2	)%	1,899			(964.0	)%
Other expense, net																Other expense, net	171		0.1	%	1,702		1.4	%	(1,531)		(90.0)	%
Income (loss) from continuing operations before income taxes	(1,802		)	(1.5	)%	(355		)	(0.3	)%	(1,447		)	407.6	%	Income (loss) from continuing operations before income taxes	4,373		2.9	%	(1,802)		(1.5)	%	6,175		n/m
Income tax expense (benefit)	(448		)	(0.4	)%	307			0.2	%	(755		)	(245.9	)%	Income tax expense (benefit)	1,497		1.0	%	(448)		(0.4)	%	1,945		n/m
Net income (loss) from continuing operations	(1,354		)	(1.1	)%	(662		)	(0.5	)%	(692		)	104.5	%	Net income (loss) from continuing operations	2,876		1.9	%	(1,354)		(1.1)	%	4,230		n/m
Income (loss) from discontinued operations, net of tax	22,866			n/m		(2,723		)	n/m		25,589			n/m
Net income (loss)	$	21,512				$	(3,385	)			$	24,897
Income from discontinued operations, net of tax																Income from discontinued operations, net of tax	—		n/m		22,866		n/m		(22,866)		n/m
Net income																Net income	$	2,876			$	21,512			$	(18,636)

Effective income tax rate on continuing operations	24.9		%			n/m


Effective income tax rate on continuing operations			34.2		%										24.9		%

The following table identifies the components of the change in ~~revenue for the three months ended March 31:~~

revenue:


					Revenue
	Revenue
2019 As Restated and Recast	$	126,642
Decrease from:
2020				2020	$	120,846
Increase from:				Increase from:
Unit volume and product mix	(5,261		)	Unit volume and product mix	26,925
Foreign currency	(433		)	Foreign currency	652
Average sales price	(102		)	Average sales price	826
2020	$	120,846
2021				2021	$	149,249

Revenue - Revenue ~~decreased $5.8~~increased $28.4 million, or ~~4.6%~~23.5%, due primarily to higher sales volume in the ~~adverse impact of~~North American consumer market, as we continue to see strong demand for small kitchen appliances in the ~~COVID-19 pandemic globally.~~US, Canadian and Latin American markets. Revenue in the Global Commercial market decreased as compared to prior year as recovery from the ~~U.S.~~pandemic-related demand softness continues. The Company remains focused on ecommerce, as revenue from this channel increased 59% and ~~Canada Consumer markets was even with~~accounted for 35% of total revenue in the first quarter of ~~2019, while revenue from the International Consumer and Global Commercial markets decreased. The first quarter started off strong~~2021 compared to the prior year, due in part to U.S. customers increasing inventory positions in advance of expected disruptions from the supply chain in China, which has stabilized. Momentum slowed across all markets as government measures to control the spread of the virus were implemented in March. Ecommerce revenue increased 23% and accounted for 27% of total revenue in the first quarter of ~~2020 as many at-home consumers shifted buying~~2020.

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Gross profit - Gross profit increased due to the ~~online channel.~~

~~Gross profit -~~ ~~Gross profit decreased $1.7 million or 6.2% primarily due to lower~~higher sales volume. As a percentage of revenue, gross profit margin ~~declined~~increased from ~~21.1%~~20.7% in the prior year to ~~20.7%~~21.2% primarily due to ~~increased freight expenses.~~customer and product mix.

Selling, general and administrative expenses - Selling, general and administrative expenses ~~decreased $2.0 million. The year-over-year decrease is due to lower overall spend including environmental expenses, legal~~increased $2.2 million, driven primarily by an increase in third-party and consulting services fees ~~and other corporate~~

~~expenses. Selling,~~as well as increased employee-related costs. Included in selling, general and administrative expenses for the first quarter of 2020 ~~also include a reduction of $0.9 million to the accrual for the contingent loss related to the patent infringement lawsuit.~~

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 charges ofis $1.9 million ~~in the first quarter of 2020 compared with~~ charges ~~of $1.8 million in the first quarter of 2019~~ to write-off unrealizable assets created as a result of ~~these~~the Mexico unauthorized ~~transactions. See Note 2, Restatement of Previously Issued Financial Statements~~transactions, offset by a $1.6 million reduction to the accrual for ~~additional information.~~litigation and environmental reserves.

Interest expense ~~net~~ - Interest expense ~~net decreased~~increased $0.1 million ~~primarily~~ due to ~~lower average interest rates and decreased~~increased average borrowings outstanding under HBB's revolving credit facility.

Other expense, ~~(income),~~ net- For the first quarter of ~~2020,~~2021, other expense ~~net~~ includes currency losses of $0.4 million compared with currency losses of $1.9 million ~~compared with~~in 2020. The currency ~~gains of $0.2 million in 2019. The change is primarily due to~~losses arise from the remeasurement of liabilities related to inventory purchases by foreign subsidiaries denominated in ~~U.S. dollars by HBB's foreign subsidiaries located in Mexico and Brazil.~~US dollars.

Income tax expense (benefit) -~~For the first quarter~~ The Company recognized an income tax expense of ~~2020, we recognized~~$1.5 million on income from continuing operations before income taxes of $4.4 million, an effective tax rate of 34.2% compared to income tax benefit of $0.5 million on a loss from continuing operations before income taxes of $1.8 million in the prior year, an effective tax rate of 24.9%. ~~In 2019 we recognized~~The effective tax ~~expense of $0.3 million on a loss from continuing operations before income taxes~~rate was higher for the quarter ended March 31, 2021 due to the inclusion of $0.4 ~~million. The expense in 2019 is primarily attributable~~million related to ~~non-cash charges to write-off unrealizable assets for which the corresponding tax benefit has been substantially offset by an increase in~~interest and penalties on unrecognized tax ~~benefits.~~benefits as a discrete expense item.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

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

HBB's principal sources of cash to fund liquidity needs are: (i) cash generated from operations and (ii) borrowings available under the revolving credit facility, as defined below. HBB's primary use of funds consists of working capital requirements, operating expenses, capital expenditures, and payments of principal and interest on debt.

HBB maintains a ~~$115.0~~$125.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires inon June 30, ~~2021, within one year after the issuance~~2025, therefore all borrowings are classified as long term debt as of ~~these financial statements. Given the market conditions including unfavorable pricing terms,~~March 31, 2021. HBB ~~did not complete its refinancing of~~believes funds available from cash on hand, the HBB Facility ~~prior~~and operating cash flows will provide sufficient liquidity to ~~June 30, 2020. HBB has approved~~meet its operating needs and ~~begun~~commitments arising during the ~~refinancing process, which is considered customary. Based on~~next twelve months.

On April 9, 2021, the ~~current status~~Company entered into 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 thereto as the Lenders, Hamilton Beach Brands, Inc., as Parent and U.S. Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower (the “Amendment”). Due to the highly seasonal nature of the ~~refinancing and HBB’s history~~Company’s primary markets, Amendment No. 8 dated November 23, 2020 provided for increases in advance rates used to determine the borrowing base during periods of ~~successfully refinancing its debt, HBB believes that it is probable that~~ the ~~HBB Facility will be refinanced before its maturity.~~

~~The COVID-19 pandemic created significant economic uncertainty and volatility in~~second half of the calendar year. Amendment No. 9 increases the credit ~~and capital markets during the first quarter of 2020. We are well positioned~~facility from $125 million to ~~effectively navigate the COVID-19 pandemic~~$140 million for a ~~number~~period of ~~reasons. Demand~~sixty days from its effective date to provide similar flexibility as demand for ~~certain~~ small kitchen appliances is expected to remain strong in the U.S. remains strong as consumers prepare more food and beverages at home. HBB is considered an essential business that continued to operate during state and local shutdowns and continues to operate to meet the demand. We are managing discretionary expenses, and we believe we have sufficient availability under the revolving credit facility to meet our future obligations. We have demonstrated effective managementfirst half of net working capital which was a major contributor to improved borrowing activity during the first quarter with reduced net borrowings of $27.1 million as compared to prior year. Additionally, the Company is no longer impacted by KC’s losses and negative cash flow. We will continue to work with our customers, employees, suppliers and communities to address the impacts of COVID-19 and closely monitor our liquidity.2021.

On April 3, 2020, KC completed its dissolution with a pro-rata distribution of its remaining assets to creditors, at which time the KC legal entity ceased to ~~exist.~~exist and it was deconsolidated. Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC.

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The following table presents selected cash flow information from continuing operations:


	THREE MONTHS ENDED MARCH 31
	2021		2020
Net cash provided by (used for) operating activities	$	(1,889)	$	(10,042)
Net cash provided by (used for) investing activities	$	(1,746)	$	(625)
Net cash provided by (used for) financing activities	$	2,693	$	9,876

THREE MONTHS ENDED MARCH 31
2020 2019
Net cash used for operating activities $ (10,042 ) $ (40,239 )
Net cash used for investing activities $ (625 ) $ (854 )
Net cash provided by financing activities $ 9,876
$ 36,988

Operating activities - Net cash used for operating activities ~~decreased $30.2~~was $1.9 million compared to $10.0 million in the prior year. As compared to the prior year, the lower net cash used by operating activities was primarily due to ~~improvements~~higher net income and changes in ~~net working capital. Net working capital was~~other assets, which provided a source of cash of ~~$2.3~~$0.9 million in ~~the first quarter of 2020~~2021 compared ~~with~~to a use of cash of ~~$33.1~~$5.6 million in ~~2019.~~2020.

Investing activities - Net cash used for investing activities ~~decreased $0.2 million primarily~~increased in 2021 compared to 2020 due to ~~lower~~ capital ~~expenditures related to internal-use software development costs.~~spending for the Company's new distribution center lease, which will begin in the third quarter of 2021.

Financing activities - Net cash provided by financing activities ~~decreased $27.1~~was $2.7 million compared to $9.9 million in 2020. The change is due to a decrease in HBB's net borrowing activity on the revolving credit facility during the first quarter of 2021 as ~~a result~~compared to the first quarter of 2020. Borrowings on the ~~improvement in~~revolving credit facility are used to fund net working capital.

Capital Resources

HBB maintains a ~~$115.0~~$125.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires inon June ~~2021. The current portion~~30, 2025. Therefore, all borrowings are classified as long term debt as of ~~borrowings outstanding represents expected~~March 31, 2021.The Company expects to continue to borrow against the facility and make voluntary repayments ~~to be made in~~within the next twelve months. 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 $228.0 million as of March 31, 2020.~~ At March 31, ~~2020,~~2021, the borrowing base under the HBB Facility was ~~$88.3~~$123.3 million and borrowings outstanding were ~~$69.5~~$102.6 million. At March 31, ~~2020,~~2021, the excess availability under the HBB Facility was ~~$18.7~~$20.7 million.

The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible trade receivables, inventory and trademarks of the borrowers, as defined in the HBB Facility. Borrowings bear interest at a floating rate, which can be a base rate, LIBOR or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. The applicable margins, effective March 31, ~~2020,~~2021, for base rate loans and LIBOR loans denominated in ~~U.S.~~US dollars were 0.0% and ~~1.75%~~2.00%, respectively. The applicable margins, effective March 31, ~~2020,~~2021, for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.0% and ~~1.75%~~2.00%, 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. The weighted average interest rate applicable to the HBB Facility for the three months ended March 31, ~~2020~~2021 was ~~3.66%~~2.77% including the floating rate margin and the effect of the interest rate swap agreements described below.

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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 $25.0 million at March 31, ~~2020~~2021 at an average fixed interest rate of ~~1.6%~~1.66%.

The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to Hamilton Beach Holding, subject to achieving availability thresholds. ~~Dividends~~Under Amendment No. 8 to the HBB Facility, dividends to Hamilton Beach Holding are not to exceed ~~$5.0~~$6.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of ~~not less than~~at least $15.0 million. Dividends to Hamilton Beach Holding are discretionary to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of ~~not less than~~at least $25.0 million. The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. At March 31, ~~2020,~~2021, HBB was in compliance with all financial covenants in the HBB Facility.

In December 2015, the Company entered into an arrangement with a financial institution to sell certain ~~U.S.~~US trade receivables on a non-recourse basis. The Company utilizes this arrangement as an integral part of financing working capital. See Note 43 of the unaudited ~~condensed~~ consolidated financial statements.

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.~~months.

Contractual Obligations, Contingent Liabilities and Commitments

For a summary of the Company's contractual obligations, contingent liabilities and commitments, refer to “Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations, Contingent Liabilities and Commitments” in the Company's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019~~2020 as there have been no material changes ~~in contractual obligations for HBB~~ from those disclosed in our Annual Report. ~~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.~~

Off Balance Sheet Arrangements

For a summary of the Company's off balance sheet arrangements, refer to "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Off Balance Sheet Arrangements” in the Company's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019~~2020 as there have been no material changes from those disclosed in our Annual Report.

FORWARD-LOOKING STATEMENTS

The statements contained in this Form 10-Q 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-looking~~forward 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 include, without limitation: (1) the Company’s ability to ship products to meet the anticipated increase in demand, (2) the Company’s ability to successfully manage the anticipated transportation constraints, (3) the unpredictable nature of the COVID-19 pandemic and its potential impact on our business; ~~(2)~~(4) changes in the sales prices, product mix or levels of consumer purchases of small electric and specialty housewares appliances, ~~(3)~~(5) changes in consumer retail and credit markets, including the increasing volume of transactions made through third-party internet sellers, ~~(4)~~(6) bankruptcy of or loss of major retail customers or suppliers, ~~(5)~~(7) changes in costs, including transportation costs, of sourced products, ~~(6)~~(8) delays in delivery of sourced products, ~~(7)~~(9) changes in or unavailability of quality or cost effective suppliers, ~~(8)~~(10) exchange rate fluctuations, changes in the import tariffs and monetary policies and other changes in the regulatory climate in the countries in which HBB buys, operates and/or sells products, ~~(9)~~(11) the impact of tariffs on customer purchasing patterns, ~~(10)~~(12) product liability, regulatory actions or other litigation, warranty claims or returns of products, ~~(11)~~(13) customer acceptance of, changes in costs of, or delays in the development of new products, ~~(12)~~(14) increased competition, including consolidation within the industry, ~~(13)~~(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, ~~(14)~~(16) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, ~~(15) risks associated with the wind down of KC including unexpected costs, contingent liabilities and the potential disruption~~(17) difficulties arising as a result of our ~~other businesses, (16)~~implementation, integration or operation of an enterprise resource planning system in 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)~~US, (18) our ability to successfully remediate the material weaknesses in our internal control over financial reporting disclosed in Item 9A of the

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Annual Report on Form ~~10-K/A~~10-K within the time periods and in the manner currently anticipated, additional material weaknesses or other deficiencies that may arise in the future or our ability to maintain an effective system of internal controls, (19) the Company's ability to effectively plan and ~~(18)~~manage the relocation to our new distribution center, and (20) 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/A~~10-K for the year ended December ~~31, 2019 and the Quarterly Report on Form 10-Q for the quarter ended March~~ 31, 2020. Furthermore, the situation surrounding COVID-19 remains fluid and the potential for a material impact on the Company’s results of operations, financial condition, liquidity, and stock price increases the longer the virus impacts activity levels in the ~~United States~~US and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on its results of operations, financial position, liquidity and stock price. The extent of any impact will depend on the extent of new outbreaks, ~~as communities reopen,~~ the extent to which ~~returns to lockdown~~new shutdowns may be needed, the nature of government public health guidelines and the public’s adherence to those guidelines, the impact of government economic relief on the US economy, unemployment levels, the success of businesses reopening fully, the timing for proven treatments and the availability of vaccines for COVID-19, consumer confidence and demand for our products.

Item 3. 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 receivables. The fair value of the Company's interest rate swap agreements was a payable of ~~$1.2~~$0.9 million at March 31, ~~2020.~~2021. A hypothetical 10% decrease in interest rates would cause a decrease of less than $0.1 million in the fair value of interest rate swap agreements. Additionally, a hypothetical 10% increase in interest rates would not have a material impact to the Company's interest expense, net of ~~$0.6~~$0.7 million for the three months ended March 31, ~~2020.~~2021.

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~~Yuan and Brazilian ~~real.~~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.~~US dollar against other currencies affects the reported amounts of revenues, 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.~~US 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 spot 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 ~~receivable~~payable of ~~$0.8~~$0.2 million at March 31, ~~2020.~~2021. Assuming a hypothetical 10% weakening of the ~~U.S.~~US dollar at March 31, ~~2020,~~2021, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange contracts, would be ~~increased~~decreased by ~~$0.2~~$2.5 million compared with its fair value at March 31, ~~2020.~~2021.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures:Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, ~~2020.~~2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, ~~2020,~~2021, due to the existence of the material ~~weaknesseses~~weaknesses in our internal control over financial reporting at our Mexican subsidiaries and over income taxes 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.

Material Weaknesses in Internal Control over Financial Reporting: 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.

As previously disclosed in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019,~~2020, management concluded that we did not maintain effective internal control over financial reporting as of December 31, ~~2019~~2020 due to the material weaknesses as described below.

Mexican subsidiaries

As of December 31, 2019, we identified two material weaknesses at our Mexican subsidiaries ~~described below.~~

~~We identified deficiencies at our Mexican subsidiaries as follows:~~

~~Review~~related to (1) the design and operating effectiveness of review controls ~~performed at our Mexican subsidiaries did not operate effectively as~~for account reconciliations and manual journal entries ~~were not supported by accurate~~ and ~~complete information, which resulted in expenditures being deferred on~~(2) the ~~balance sheet beyond the period for which the costs pertained~~design and ~~the failure to detect unauthorized transactions deferred on the balance sheet as a result~~operating effectiveness of ~~wrongdoing by certain former employees of one of our Mexican subsidiaries; and~~

~~Transaction~~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~~customers.

Income taxes

Management determined that we did not design and maintain effective controls over our ~~Mexican subsidiaries were~~income tax accounting process to identify and accurately measure deferred tax assets, deferred tax liabilities and income taxes payable and the related income tax expense. While the control deficiency did not ~~sufficiently designed~~result in a misstatement of our previously issued consolidated financial statements, the control deficiency could result in a material misstatement of the aforementioned account balances or ~~operating effectively to provide reasonable assurance regarding the prevention and timely detection of misappropriation of assets.~~disclosures that would result in a material misstatement in our annual or interim consolidated financial statements that would not be prevented or detected.

We have concluded that each of these deficiencies ~~at our Mexican subsidiaries~~ constitutes a material weakness in our internal control over financial reporting.

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

Mexican subsidiaries

With oversight from the Audit Review Committee, we have ~~evaluated~~taken significant steps to remediate the internal control deficiencies at our Mexican subsidiaries by redesigning our controls, many of which operated for the first time during the fourth quarter of 2020. Our efforts have consisted primarily of strengthening our organization and designing a suite of controls that address the material weaknesses. Until the remediation actions are fully implemented and the operational effectiveness of related internal controls is validated through testing, the material weaknesses ~~previously identified in~~described above will continue to exist.

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Income taxes

With oversight from the ~~Annual Report on Form 10-K/A and~~Audit Review Committee, we have developed a plan ~~of remediation~~ to ~~strengthen our~~remediate the material weakness in internal ~~controls~~control over financial reporting atrelated to our ~~Mexican subsidiary~~income taxes accounting process, which ~~include~~consists of:

a.Reviewing the organization structure, resources, processes, and controls in place to measure and record income taxes to enhance the effectiveness of the design and operation of those controls;

b.Enhancing monitoring activities related to income taxes; and

c.Evaluating and enhancing the level of precision in the management review controls related to income taxes.

Until the remediation ~~efforts summarized below. Some remediation efforts have been~~actions are fully implemented ~~while others~~and the operational effectiveness of related internal controls is validated through testing, the material weakness described above will continue to exist.

We are ~~in the process of being implemented. The remediation efforts are intended~~committed to ~~address the deficiencies~~achieving and ~~enhance our overall~~maintaining a strong 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~~environment 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 the 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 remediation 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~~reporting and ~~have begun to implement~~remediate 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.~~weakness identified.

Changes in internal control over financial reporting: During the three months ended March 31, ~~2020,~~2021, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1 Legal Proceedings

The information required by this Item 1 is set forth in Note 87 "Contingencies" included in our Financial Statements contained in Part I of this Form 10-Q and is hereby incorporated herein by reference to such information.

Item 1A Risk Factors

No material changes to the risk factors for Hamilton Beach Holding ~~HBB,~~ or KCHBB, from the Company's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019,~~2020, except for the following, which should be read in conjunction with the risk factors in such Annual Report on Form 10-K.

~~Our results~~Failure to adequately plan and manage the relocation of our distribution center may interrupt our operations ~~have been adversely affected~~ and lower our operating income.

HBB has signed a lease agreement and will be relocating to a new US distribution center during the second and third quarter of 2021. The planned move entails risk that could cause delays and cost overruns, such as: reduced shipping capabilities; unforeseen construction or scheduling problems; disruptions in the ~~future, may be materially adversely impacted by the coronavirus (COVID-19) pandemic.~~

~~The ongoing global Coronavirus Disease 2019 (COVID-19) pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread~~integration of the ~~virus, including~~new distribution center with our warehouse management system; and unanticipated cost increases. There is also the risk that we will not adequately adjust our business ~~shutdowns, travel restrictions, border closings, restrictions on public gatherings, shelter-in-place restrictions~~processes or appropriately manage our work force during the transition. Failure to adequately plan and ~~limitations on business. This has negatively impacted~~manage the ~~global economy, disrupted financial markets and resulted in increased unemployment levels, all of which have negatively impacted various industries. The continued spread of COVID-19 and~~relocation efforts ~~to contain the virus could:~~

~~continue to impact demand for our products;~~

~~cause the Company to experience an increase in costs as a result of the Company’s emergency measures, delayed payments from customers and increased risk of uncollectible accounts;~~

~~limit the Company’s access to further capital resources, if needed, and increase associated costs;~~

~~result in disruptions to our supply chain; and~~

~~adversely impact economies and financial markets of our international operations resulting in an economic downturn that could affect the value of foreign currencies.~~

The situation surrounding the COVID-19 pandemic remains fluid and the potential for a material impact on the Company’s results of operations, financial condition, liquidity, and stock price increases the longer the virus impacts activity levels in the United States and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact the COVID-19 pandemic may have on the Company’s results of operations, financial position, liquidity and stock price. The extent of any impact will depend on the extent of new outbreaks as communities reopen, the extent to which returns to lockdown may be needed, the nature of government public health guidelines and the public’s adherence to those guidelines, the impact of government economic relief on the US economy, unemployment levels, the success of businesses reopening, the timing for proven treatments and vaccines for COVID-19, consumer confidence and demand for our products. ~~Any of these factors~~ could cause ~~or contribute to the risks and uncertainties enumerated~~a disruption in our ~~2019 Annual Report on Form 10-K/A~~operations and ~~could materially adversely affect~~lower our ~~business, financial condition, results of operations and/or stock price.~~operating income.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

In May 2018, the Company approved a stock repurchase program for the purchase of up to $25.0 million of the Company's Class A Common Stock outstanding through December 31, 2019. As of December 31, 2019, the Company repurchased 364,893 shares for an aggregate purchase price of $6.0 million.

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.

There were no share repurchases during the three months ended March 31, ~~2020~~2021 and ~~2019, respectively.~~2020.

Item 3 Defaults Upon Senior Securities

None.

Item 4 Mine Safety Disclosures

None.

Item 5 Other Information

None.

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Item 6 Exhibits


Exhibit
Number*		Description of Exhibits

~~Exhibit~~31(i)(1)
Number*	~~Description of Exhibits~~

~~31(i)(1)~~	Certification of Gregory H. Trepp pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act
31(i)(2)		Certification of Michelle O. Mosier pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act
32		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by Gregory H. Trepp and Michelle O. Mosier
10.1		~~Amended and Restated Hamilton Beach Brands Holding Company Executive Long-Term Equity Incentive Plan (Effective March 1, 2020).~~
~~10.2~~	Amendment No. 79 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)~~, as Parent and U.S. Borrower, and Hamilton Beach Brands Canada, Inc. ~~(as Canadian Borrower)~~, as ~~Borrowers,~~Canadian Borrower, dated ~~as of May 15, 2020.~~April 9, 2021.
~~101.INS~~10.2		Form of Cashless Exercise Award Agreement for the Hamilton Beach Brands Holding Company Executive Long-Term Equity Incentive Plan
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

* Numbered in accordance with Item 601 of Regulation S-K.

Table of Contents

Pursuant to the requirements 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)
Date:	~~July 23, 2020~~May 5, 2021	/s/ Michelle O. Mosier
		Michelle O. Mosier
		Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)/(Principal Accounting Officer)



	December 31, 2019
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated
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
Non-current liabilities of discontinued operations	—			—				—
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



`	March 31, 2019
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated			Recasting Impacts			As Restated and Recast
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