Defaults Upon Senior Securities

Item 3

Item 4

Mine Safety Disclosures

Item 5

Other Information

Item 6

Exhibits

1820

Signatures

1921

Part I

FINANCIAL INFORMATION

Item 1. Financial Statements

HAMILTON BEACH BRANDS HOLDING COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


		MARCH 31 2023		DECEMBER 31 2022		MARCH 31 2022			JUNE 30 2023		DECEMBER 31 2022		JUNE 30 2022
		(In thousands)							(In thousands)
Assets	Assets							Assets
Current assets	Current assets							Current assets
Cash and cash equivalents	Cash and cash equivalents	$	2,218	$	928	$	1,022	Cash and cash equivalents	$	2,071	$	928	$	701
Trade receivables, net	Trade receivables, net	90,310		115,135		104,230		Trade receivables, net	89,898		115,135		99,723
Inventory	Inventory	131,542		156,038		195,555		Inventory	137,224		156,038		228,353

Prepaid expenses and other current assets	Prepaid expenses and other current assets	11,618		12,643		25,639		Prepaid expenses and other current assets	13,793		12,643		13,105

Total current assets	Total current assets	235,688		284,744		326,446		Total current assets	242,986		284,744		341,882
Property, plant and equipment, net	Property, plant and equipment, net	27,216		27,830		29,555		Property, plant and equipment, net	27,241		27,830		28,680
Right-of-use lease assets	Right-of-use lease assets	42,652		44,000		46,165		Right-of-use lease assets	41,546		44,000		45,238
Goodwill	Goodwill	6,253		6,253		6,253		Goodwill	6,253		6,253		6,253
Other intangible assets, net	Other intangible assets, net	1,442		1,492		1,642		Other intangible assets, net	1,392		1,492		1,592
Deferred income taxes	Deferred income taxes	3,047		3,117		3,221		Deferred income taxes	2,853		3,117		1,364
Deferred costs	Deferred costs	14,371		14,348		19,085		Deferred costs	14,419		14,348		19,411

Other non-current assets	Other non-current assets	5,938		7,166		4,298		Other non-current assets	6,687		7,166		5,509

Total assets	Total assets	$	336,607	$	388,950	$	436,665	Total assets	$	343,377	$	388,950	$	449,929
Liabilities and stockholders' equity	Liabilities and stockholders' equity							Liabilities and stockholders' equity
Current liabilities	Current liabilities							Current liabilities
Accounts payable	Accounts payable	$	51,261	$	61,759	$	103,367	Accounts payable	$	84,098	$	61,759	$	121,552

Accrued compensation	Accrued compensation	13,464		11,310		13,709		Accrued compensation	7,729		11,310		7,376
Accrued product returns	Accrued product returns	5,551		6,474		5,094		Accrued product returns	5,605		6,474		5,286
Lease liabilities	Lease liabilities	5,918		5,875		5,105		Lease liabilities	6,088		5,875		5,417
Other current liabilities	Other current liabilities	12,072		16,150		16,229		Other current liabilities	11,980		16,150		12,249

Total current liabilities	Total current liabilities	88,266		101,568		143,504		Total current liabilities	115,500		101,568		151,880
Revolving credit agreements	Revolving credit agreements	79,333		110,895		119,302		Revolving credit agreements	59,911		110,895		127,003
Lease liabilities, non-current	Lease liabilities, non-current	45,317		46,801		49,673		Lease liabilities, non-current	44,480		46,801		48,641
Other long-term liabilities	Other long-term liabilities	5,262		5,152		11,028		Other long-term liabilities	5,120		5,152		5,603

Total liabilities	Total liabilities	218,178		264,416		323,507		Total liabilities	225,011		264,416		333,127
Stockholders' equity	Stockholders' equity							Stockholders' equity

Class A Common stock	Class A Common stock	111		107		105		Class A Common stock	111		107		106
Class B Common stock	Class B Common stock	36		38		39		Class B Common stock	36		38		39
Capital in excess of par value	Capital in excess of par value	65,803		65,008		62,349		Capital in excess of par value	66,765		65,008		63,390
Treasury stock	Treasury stock	(8,939)		(8,939)		(5,960)		Treasury stock	(9,514)		(8,939)		(7,600)
Retained earnings	Retained earnings	74,001		80,238		66,534		Retained earnings	72,563		80,238		70,145
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(12,583)		(11,918)		(9,909)		Accumulated other comprehensive loss	(11,595)		(11,918)		(9,278)
Total stockholders' equity	Total stockholders' equity	118,429		124,534		113,158		Total stockholders' equity	118,366		124,534		116,802
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	336,607	$	388,950	$	436,665	Total liabilities and stockholders' equity	$	343,377	$	388,950	$	449,929

See notes to unaudited consolidated financial statements.

HAMILTON BEACH BRANDS HOLDING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		THREE MONTHS ENDED MARCH 31				THREE MONTHS ENDED JUNE 30				SIX MONTHS ENDED JUNE 30
		2023		2022				2023		2022		2023		2022
		(In thousands, except per share data)				(In thousands, except per share data)				(In thousands, except per share data)
Revenue	Revenue	$	128,252	$	146,351		Revenue	$	137,109	$	147,527	$	265,361	$	293,878
Cost of sales	Cost of sales	107,342		118,121			Cost of sales	109,693		115,549		217,035		233,670
Gross profit	Gross profit	20,910		28,230			Gross profit	27,416		31,978		48,326		60,208
Selling, general and administrative expenses	Selling, general and administrative expenses	25,919		15,433			Selling, general and administrative expenses	26,640		26,503		52,559		41,936
Amortization of intangible assets	Amortization of intangible assets	50		50			Amortization of intangible assets	50		50		100		100
Operating profit (loss)	Operating profit (loss)	(5,059)		12,747			Operating profit (loss)	726		5,425		(4,333)		18,172
Interest expense, net	Interest expense, net	1,269		733			Interest expense, net	773		867		2,042		1,600
Other expense (income), net	Other expense (income), net	16		1,466			Other expense (income), net	(271)		(252)		(255)		1,214
Income (loss) before income taxes	Income (loss) before income taxes	(6,344)		10,548			Income (loss) before income taxes	224		4,810		(6,120)		15,358
Income tax expense (benefit)	Income tax expense (benefit)	(1,567)		3,375			Income tax expense (benefit)	114		(279)		(1,453)		3,096

Net income (loss)	Net income (loss)	$	(4,777)	$	7,173		Net income (loss)	$	110	$	5,089	$	(4,667)	$	12,262


Basic and diluted earnings (loss) per share	Basic and diluted earnings (loss) per share	$	(0.34)	$	0.51		Basic and diluted earnings (loss) per share	$	0.01	$	0.36	$	(0.33)	$	0.87

Basic weighted average shares outstanding	Basic weighted average shares outstanding	14,073		14,061			Basic weighted average shares outstanding	14,081		14,068		14,077		14,065
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	14,073		14,092			Diluted weighted average shares outstanding	14,110		14,095		14,077		14,093

See notes to unaudited consolidated financial statements.

HAMILTON BEACH BRANDS HOLDING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		THREE MONTHS ENDED MARCH 31				THREE MONTHS ENDED JUNE 30				SIX MONTHS ENDED JUNE 30
		2023		2022				2023		2022		2023		2022
		(In thousands)				(In thousands)				(In thousands)
Net income (loss)	Net income (loss)	$	(4,777)	$	7,173		Net income (loss)	$	110	$	5,089	$	(4,667)	$	12,262
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:						Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	Foreign currency translation adjustment	69		(1,190)			Foreign currency translation adjustment	410		(926)		479		(2,116)
(Loss) gain on long-term intra-entity foreign currency transactions	(Loss) gain on long-term intra-entity foreign currency transactions	452		1,458			(Loss) gain on long-term intra-entity foreign currency transactions	201		140		653		1,598
Cash flow hedging activity	Cash flow hedging activity	(1,437)		2,053			Cash flow hedging activity	(25)		1,368		(1,462)		3,421
Reclassification of foreign currency adjustments into earnings	Reclassification of foreign currency adjustments into earnings	—		2,085			Reclassification of foreign currency adjustments into earnings	—		—		—		2,085
Reclassification of hedging activities into earnings	Reclassification of hedging activities into earnings	187		(97)			Reclassification of hedging activities into earnings	342		(35)		529		(132)

Reclassification of pension adjustments into earnings	Reclassification of pension adjustments into earnings	64		25			Reclassification of pension adjustments into earnings	60		84		124		109
Total other comprehensive income (loss), net of tax	Total other comprehensive income (loss), net of tax	(665)		4,334			Total other comprehensive income (loss), net of tax	988		631		323		4,965
Comprehensive income (loss)	Comprehensive income (loss)	$	(5,442)	$	11,507		Comprehensive income (loss)	$	1,098	$	5,720	$	(4,344)	$	17,227

See notes to unaudited consolidated financial statements.

HAMILTON BEACH BRANDS HOLDING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		THREE MONTHS ENDED MARCH 31					SIX MONTHS ENDED JUNE 30
		2023		2022			2023		2022
		(In thousands)					(In thousands)
Operating activities	Operating activities					Operating activities
Net income (loss)	Net income (loss)	$	(4,777)	$	7,173	Net income (loss)	$	(4,667)	$	12,262
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:					Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	Depreciation and amortization	1,004		1,154		Depreciation and amortization	2,128		2,465
Deferred income taxes	Deferred income taxes	—		(555)		Deferred income taxes	—		1,533
Stock compensation expense	Stock compensation expense	797		764		Stock compensation expense	1,759		1,806
Brazil foreign currency loss	Brazil foreign currency loss	—		2,085		Brazil foreign currency loss	—		2,085
Other	Other	(220)		121		Other	(611)		223
Net changes in operating assets and liabilities:	Net changes in operating assets and liabilities:					Net changes in operating assets and liabilities:

Trade receivables	Trade receivables	25,292		15,547		Trade receivables	26,393		19,846
Inventory	Inventory	25,030		(12,069)		Inventory	20,390		(45,714)
Other assets	Other assets	1,082		(8,924)		Other assets	396		3,383
Accounts payable	Accounts payable	(10,392)		(28,349)		Accounts payable	22,240		(10,275)
Other liabilities	Other liabilities	(2,942)		2,298		Other liabilities	(10,768)		(13,070)
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	34,874		(20,755)		Net cash provided by (used for) operating activities	57,260		(25,456)
Investing activities	Investing activities					Investing activities
Expenditures for property, plant and equipment	Expenditures for property, plant and equipment	(464)		(406)		Expenditures for property, plant and equipment	(1,486)		(661)

Other	Other	(150)		—		Other	(150)		—
Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	(614)		(406)		Net cash provided by (used for) investing activities	(1,636)		(661)
Financing activities	Financing activities					Financing activities
Net additions (reductions) to revolving credit agreements	Net additions (reductions) to revolving credit agreements	(31,567)		22,406		Net additions (reductions) to revolving credit agreements	(51,058)		30,237

Purchase of treasury stock						Purchase of treasury stock	(575)		(1,640)
Cash dividends paid	Cash dividends paid	(1,460)		(1,392)		Cash dividends paid	(3,008)		(2,870)

Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	(33,027)		21,014		Net cash provided by (used for) financing activities	(54,641)		25,727

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	57		74		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	182		(36)
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash					Cash, cash equivalents and restricted cash
Increase (decrease) for the period	Increase (decrease) for the period	1,290		(73)		Increase (decrease) for the period	1,165		(426)

Balance at the beginning of the period	Balance at the beginning of the period	1,905		2,150		Balance at the beginning of the period	1,905		2,150
Balance at the end of the period	Balance at the end of the period	$	3,195	$	2,077	Balance at the end of the period	$	3,070	$	1,724

Reconciliation of cash, cash equivalents and restricted cash	Reconciliation of cash, cash equivalents and restricted cash					Reconciliation of cash, cash equivalents and restricted cash

Cash and cash equivalents	Cash and cash equivalents	$	2,218	$	1,022	Cash and cash equivalents	$	2,071	$	701
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	62		64		Restricted cash included in prepaid expenses and other current assets	63		62
Restricted cash included in other non-current assets	Restricted cash included in other non-current assets	915		991		Restricted cash included in other non-current assets	936		961

Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	3,195	$	2,077	Total cash, cash equivalents, and restricted cash	$	3,070	$	1,724

See notes to unaudited consolidated financial statements.

HAMILTON BEACH BRANDS HOLDING COMPANY

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			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)															(In thousands, except per share data)
Balance, January 1, 2023	Balance, January 1, 2023	$	107	$	38	$	65,008	$	(8,939)	$	80,238	$	(11,918)	$	124,534	Balance, January 1, 2023	$	107	$	38	$	65,008	$	(8,939)	$	80,238	$	(11,918)	$	124,534
Net income (loss)	Net income (loss)	—		—		—		—		(4,777)		—		(4,777)		Net income (loss)	—		—		—		—		(4,777)		—		(4,777)

Issuance of common stock, net of conversions	Issuance of common stock, net of conversions	4		(2)		(2)		—		—		—		—		Issuance of common stock, net of conversions	4		(2)		(2)		—		—		—		—
Share-based compensation expense	Share-based compensation expense	—		—		797		—		—		—		797		Share-based compensation expense	—		—		797		—		—		—		797
Cash dividends, $0.105 per share	Cash dividends, $0.105 per share	—		—		—		—		(1,460)		—		(1,460)		Cash dividends, $0.105 per share	—		—		—		—		(1,460)		—		(1,460)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—		—		—		—		—		(916)		(916)		Other comprehensive income (loss), net of tax	—		—		—		—		—		(916)		(916)
Reclassification adjustment to net income (loss)	Reclassification adjustment to net income (loss)	—		—		—		—		—		251		251		Reclassification adjustment to net income (loss)	—		—		—		—		—		251		251
Balance, March 31, 2023	Balance, March 31, 2023	$	111	$	36	$	65,803	$	(8,939)	$	74,001	$	(12,583)	$	118,429	Balance, March 31, 2023	111		36		65,803		(8,939)		74,001		(12,583)		118,429
Net income (loss)																Net income (loss)	—		—		—		—		110		—		110
Purchase of treasury stock																Purchase of treasury stock	—		—		—		(575)		—		—		(575)
Issuance of common stock, net of conversions																Issuance of common stock, net of conversions	—		—		—		—		—		—		—
Share-based compensation expense																Share-based compensation expense	—		—		962		—		—		—		962
Cash dividends, $0.11 per share																Cash dividends, $0.11 per share	—		—		—		—		(1,548)		—		(1,548)
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—		—		—		—		—		586		586
Reclassification adjustment to net income (loss)																Reclassification adjustment to net income (loss)	—		—		—		—		—		402		402
Balance, June 30, 2023																Balance, June 30, 2023	$	111	$	36	$	66,765	$	(9,514)	$	72,563	$	(11,595)	$	118,366


Balance, January 1, 2022	Balance, January 1, 2022	$	103	$	40	$	61,586	$	(5,960)	$	60,753	$	(14,243)	$	102,279	Balance, January 1, 2022	$	103	$	40	$	61,586	$	(5,960)	$	60,753	$	(14,243)	$	102,279
Net income (loss)	Net income (loss)	—		—		—		—		7,173		—		7,173		Net income (loss)	—		—		—		—		7,173		—		7,173
Issuance of common stock, net of conversions	Issuance of common stock, net of conversions	2		(1)		(1)		—		—		—		—		Issuance of common stock, net of conversions	2		(1)		(1)		—		—		—		—

Share-based compensation expense	Share-based compensation expense	—		—		764		—		—		—		764		Share-based compensation expense	—		—		764		—		—		—		764
Cash dividends, $0.10 per share	Cash dividends, $0.10 per share	—		—		—		—		(1,392)		—		(1,392)		Cash dividends, $0.10 per share	—		—		—		—		(1,392)		—		(1,392)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—		—		—		—		—		2,321		2,321		Other comprehensive income (loss), net of tax	—		—		—		—		—		2,321		2,321
Reclassification adjustment to net income (loss)	Reclassification adjustment to net income (loss)	—		—		—		—		—		2,013		2,013		Reclassification adjustment to net income (loss)	—		—		—		—		—		2,013		2,013
Balance, March 31, 2022	Balance, March 31, 2022	$	105	$	39	$	62,349	$	(5,960)	$	66,534	$	(9,909)	$	113,158	Balance, March 31, 2022	105		39		62,349		(5,960)		66,534		(9,909)		113,158
Net income (loss)																Net income (loss)	—		—		—		—		5,089		—		5,089
Issuance of common stock, net of conversions																Issuance of common stock, net of conversions	1		—		(1)		—		—		—		—
Purchase of treasury stock																Purchase of treasury stock	—		—		—		(1,640)		—		—		(1,640)
Share-based compensation expense																Share-based compensation expense	—		—		1,042		—		—		—		1,042
Cash dividends, $0.105 per share																Cash dividends, $0.105 per share	—		—		—		—		(1,478)		—		(1,478)
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—		—		—		—		—		582		582
Reclassification adjustment to net income (loss)																Reclassification adjustment to net income (loss)	—		—		—		—		—		49		49
Balance, June 30, 2022																Balance, June 30, 2022	$	106	$	39	$	63,390	$	(7,600)	$	70,145	$	(9,278)	$	116,802

See notes to unaudited consolidated financial statements.

HAMILTON BEACH BRANDS HOLDING COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~JUNE 30, 2023

(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 operates in the consumer, commercial and specialty small appliance markets.

The financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. 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 for the year ended December 31, 2022.

Operating results for the ~~three~~six months ended ~~March 31,~~June 30, 2023 are not necessarily indicative of the results that may be expected for the remainder of the year due to the highly seasonal nature of the Company's primary markets. A majority of revenue and operating profit typically occurs in the second half of the calendar year when sales of products to retailers and consumers historically increase significantly for the fall holiday-selling season.

Accounting Standards Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to recognize and present financial assets at the net amount expected to be collected. This guidance replaces the current incurred loss impairment methodology for recognizing credit losses for financial assets and requires consideration of a broader range of reasonable and supportable information for estimating credit losses. The Company considers a combination of factors, such as historical losses, the aging of trade receivables, customers’ financial strength, credit standing and payment and default history in determining the appropriate estimate of expected credit losses. The Company adopted ASU 2016-13 and related amendments for the fiscal year beginning January 1, 2023 and the adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows.

In September 2022, the FASB issued ASU 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” The new accounting rules create certain disclosure requirements for a buyer in a supplier finance program. The new accounting rules require qualitative and quantitative disclosures including key terms of the program, balance sheet presentation of related amounts, and the obligation amount the buyer has confirmed as valid to the finance provider, including a rollforward of the obligation. Only the amount of the obligation outstanding is required to be disclosed in interim periods. The accounting rules do not impact the recognition, measurement, or financial statement presentation of supplier finance program obligations. The Company adopted this guidance in the first quarter of 2023. The new accounting rules did not have an impact on our financial condition, results of operations or cash flows. The Company included a new disclosure in accordance with the new accounting rules.

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. The Company previously qualified as an emerging growth company and elected to use the extended transition period for complying with new and revised financial accounting standards. The amendments were effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. On January 1, 2022, the Company adopted Topic 842. The impacts of the adoption were reflected in the Annual Report on Form 10-K for the year ended December 31, 2022. The Company lost the emerging growth company status as of December 31, 2022, the last day of the fiscal year following the fifth anniversary of our spin-off from NACCO Industries, Inc. The Consolidated Balance Sheet as of ~~March 31,~~June 30, 2022 and the Consolidated Statement of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 have been revised to reflect the Company's adoption of Topic 842 on January 1, 2022.

U.S. Pension Plan Termination

In the second quarter of 2022, the Company began the process of terminating its U.S. defined benefit pension plan (the "Plan"), which could take up to an estimated 24 months to complete. Benefit obligations under the Plan will be settled through a combination of lump sum payments to eligible plan participants and the purchase of a group annuity contract, under which future benefit obligations will be transferred to a third-party insurance company. The Plan continues to be overfunded and the Company expects that there will be no further required minimum contributions to the Plan. We currently expect that all surplus assets remaining after the Plan termination will be transferred to a qualified replacement plan. The deferred loss within Accumulated Other Comprehensive Income will be fully recognized when the plan is terminated or as settlements occur, which would trigger accelerated recognition.

Accounts payable - Supplier Finance Program

The Company has an agreement with a third-party administrator to provide an accounts payable tracking system which facilitates participating suppliers’ ability to monitor and voluntarily elect to sell payment obligations from the Company to the designated third-party financial institution. Participating suppliers can sell one or more of our payment obligations at their sole discretion, and our rights and obligations to our suppliers are not impacted. The Company has no economic interest in a supplier’s decision to ~~enter into these agreements.~~sell one or more of our payment obligations. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted by our suppliers’ decisions to sell amounts under these arrangements. The payment of these obligations by the Company is included in cash used in operating activities in the Consolidated Statement of Cash Flows. As of ~~March 31,~~June 30, 2023, December 31, 2022 and ~~March 31,~~June 30, 2022, ~~$30.4~~$48.8 million, $23.3 million and ~~$40.2~~$52.1 million, respectively, of the Company’s outstanding payment obligations had been placed in the accounts payable tracking system.

NOTE 2—Transfer of Financial Assets

HBB has entered into an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis. HBB utilizes this arrangement as an integral part of financing working capital. Under the terms of the agreement, HBB receives cash proceeds and retains no rights or interest and has no obligations with respect to the sold receivables. These transactions are accounted for as sold receivables which result in a reduction in trade receivables because the agreement transfers effective control over and risk related to the receivables to the buyer. Under this arrangement, HBB derecognized ~~$29.7~~$29.6 million and ~~$27.6~~$59.3 million of trade receivables during the three and six months ending ~~March 31,~~June 30, 2023, respectively, $24.7 million and ~~March 31,~~$52.3 million of trade receivables during the three and six months ending June 30, 2022, respectively, and $118.5 million during the year ending December 31, 2022. The loss incurred on sold receivables in the consolidated results of operations for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 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 Consolidated Statements of Cash Flows.

NOTE 3—Fair Value Disclosure

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


Description	Description	Balance Sheet Location	MARCH 31 2023		DECEMBER 31 2022		MARCH 31 2022		Description	Balance Sheet Location	JUNE 30 2023		DECEMBER 31 2022		JUNE 30 2022
Assets:	Assets:								Assets:
Interest rate swap agreements	Interest rate swap agreements								Interest rate swap agreements
Current	Current	Prepaid expenses and other current assets	$	1,064	$	837	$	400	Current	Prepaid expenses and other current assets	$	1,067	$	837	$	685
Long-term	Long-term	Other non-current assets	3,168		4,539		1,656		Long-term	Other non-current assets	4,153		4,539		2,883
Foreign currency exchange contracts	Foreign currency exchange contracts								Foreign currency exchange contracts
Current	Current	Prepaid expenses and other current assets	49		174		—		Current	Prepaid expenses and other current assets	—		174		79
			$	4,281	$	5,550	$	2,056			$	5,220	$	5,550	$	3,647
Liabilities:	Liabilities:								Liabilities:
Interest rate swap agreements
Current		Other current liabilities	$	—	$	—	$	—
Long-term		Other long-term liabilities	—		—		—

Foreign currency exchange contracts	Foreign currency exchange contracts								Foreign currency exchange contracts
Current	Current	Other current liabilities	357		101		383		Current	Other current liabilities	807		101		154
			$	357	$	101	$	383			$	807	$	101	$	154

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 ~~SOFR~~Secured Overnight Financing Rate ("SOFR") 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 value of the revolving credit agreement, including book overdrafts, which approximate book value, 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 and six months ended ~~March 31,~~June 30, 2023.

NOTE 4—Stockholders' Equity

Capital Stock

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


		MARCH 31 2023	DECEMBER 31 2022	MARCH 31 2022		JUNE 30 2023	DECEMBER 31 2022	JUNE 30 2022

Preferred stock, par value $0.01 per share	Preferred stock, par value $0.01 per share				Preferred stock, par value $0.01 per share
Preferred stock authorized	Preferred stock authorized	5,000	5,000	5,000	Preferred stock authorized	5,000	5,000	5,000
Preferred stock outstanding	Preferred stock outstanding	—	—	—	Preferred stock outstanding	—	—	—
Class A Common stock, par value $0.01 per share	Class A Common stock, par value $0.01 per share				Class A Common stock, par value $0.01 per share
Class A Common authorized	Class A Common authorized	70,000	70,000	70,000	Class A Common authorized	70,000	70,000	70,000
Class A Common issued(1)(2)	Class A Common issued(1)(2)	11,070	10,663	10,566	Class A Common issued(1)(2)	11,094	10,663	10,592
Treasury Stock	Treasury Stock	626	626	365	Treasury Stock	683	626	516
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 Common stock on a one-for-one basis					Class B Common stock, par value $0.01 per share, convertible into Class A Common stock on a one-for-one basis
Class B Common authorized	Class B Common authorized	30,000	30,000	30,000	Class B Common authorized	30,000	30,000	30,000
Class B Common issued(1)	Class B Common issued(1)	3,629	3,844	3,869	Class B Common issued(1)	3,629	3,844	3,865

(1) Class B Common converted to Class A Common were ~~215~~0 and ~~131~~215 shares during the three and six months ending ~~March 31,~~June 30, 2023, respectively, and ~~2022, respectively.~~4 and 135 during the three and six months ending June 30, 2022.

(2) The Company issued Class A Common of ~~192~~24 and ~~168~~216 shares during the three and six months ending ~~March 31,~~June 30, 2023, respectively, and ~~2022, respectively.~~22 and 190 shares during the three and six months ending June 30, 2022.

Stock Repurchase Program: In February 2022, the Company's Board approved a stock repurchase program for the purchase of up to $25 million of the Company's Class A Common outstanding starting February 22, 2022 and ending December 31, 2023. ~~There were no share repurchases during~~During the three and six months ended ~~March 31,~~June 30, 2023, ~~or 2022.~~the Company repurchased 56,973 shares at prevailing market prices for an aggregate purchase price of $0.6 million. During the three and six months ended June 30, 2022, the Company repurchased 151,221 shares at prevailing market prices for an aggregate purchase price of $1.6 million. During the year ended December 31, 2022, the Company repurchased 261,049 shares for an aggregate purchase price of $3.0 million. As of June 30, 2023, the Company had $21.4 million remaining authorized for repurchase.

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

Balance, January 1, 2023	Balance, January 1, 2023	$	(8,924)	$	4,158	$	(7,152)	$	(11,918)	Balance, January 1, 2023	$	(8,924)	$	4,158	$	(7,152)	$	(11,918)
Other comprehensive income (loss)	Other comprehensive income (loss)	715		(1,881)		—		(1,166)		Other comprehensive income (loss)	715		(1,881)		—		(1,166)
Reclassification adjustment to net income (loss)	Reclassification adjustment to net income (loss)	—		252		87		339		Reclassification adjustment to net income (loss)	—		252		87		339
Tax effects	Tax effects	(194)		379		(23)		162		Tax effects	(194)		379		(23)		162
Balance, March 31, 2023	Balance, March 31, 2023	$	(8,403)	$	2,908	$	(7,088)	$	(12,583)	Balance, March 31, 2023	(8,403)		2,908		(7,088)		(12,583)

Other comprehensive income (loss)										Other comprehensive income (loss)	425		(59)		—		366
Reclassification adjustment to net income (loss)										Reclassification adjustment to net income (loss)	—		465		83		548
Tax effects										Tax effects	186		(89)		(23)		74
Balance, June 30, 2023										Balance, June 30, 2023	$	(7,792)	$	3,225	$	(7,028)	$	(11,595)

Balance, January 1, 2022	Balance, January 1, 2022	$	(9,877)	$	(638)	$	(3,728)	$	(14,243)	Balance, January 1, 2022	$	(9,877)	$	(638)	$	(3,728)	$	(14,243)
Other comprehensive income (loss)	Other comprehensive income (loss)	359		2,691		—		3,050		Other comprehensive income (loss)	359		2,691		—		3,050
Reclassification adjustment to net income (loss)	Reclassification adjustment to net income (loss)	1,267		(126)		50		1,191		Reclassification adjustment to net income (loss)	1,267		(126)		50		1,191
Tax effects	Tax effects	727		(609)		(25)		93		Tax effects	727		(609)		(25)		93
Balance, March 31, 2022	Balance, March 31, 2022	$	(7,524)	$	1,318	$	(3,703)	$	(9,909)	Balance, March 31, 2022	(7,524)		1,318		(3,703)		(9,909)
Other comprehensive income (loss)										Other comprehensive income (loss)	(726)		1,789		—		1,063
Reclassification adjustment to net income (loss)										Reclassification adjustment to net income (loss)	—		(49)		109		60
Tax effects										Tax effects	(60)		(407)		(25)		(492)
Balance, June 30, 2022										Balance, June 30, 2022	$	(8,310)	$	2,651	$	(3,619)	$	(9,278)

NOTE 5—Revenue

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

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

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

A description of revenue sources and performance obligations for HBB are as follows:

Consumer and Commercial product revenue

Transactions with both consumer and commercial customers generally originate upon the receipt of a purchase order from the customer, which in some cases are governed by master sales agreements, specifying product(s) that the customer desires. Contracts for product revenue have an original duration of one year or less, and payment terms are generally standard and based on customer creditworthiness. Revenue from product sales is recognized at the point in time when control transfers to the customer, which is either when a product is shipped from the Company's facility, or delivered to customers, depending on the shipping terms. The amount of revenue recognized varies primarily with price concessions and changes in returns. The Company offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements. The Company evaluated such agreements with our customers and determined returns and price concessions should be accounted for as variable consideration.

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

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

License revenue

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

The following table sets forth Company's revenue on a disaggregated basis for the three and six months ended ~~March 31:~~June 30:


		THREE MONTHS ENDED MARCH 31				THREE MONTHS ENDED JUNE 30				SIX MONTHS ENDED JUNE 30
		2023		2022				2023		2022		2023		2022
Type of good or service:	Type of good or service:						Type of good or service:
Consumer products	Consumer products	$	113,432	$	129,760		Consumer products	$	122,561	$	130,698	$	235,993	$	260,458
Commercial products	Commercial products	13,404		15,080			Commercial products	13,671		15,092		27,075		30,172
Licensing	Licensing	1,416		1,511			Licensing	877		1,737		2,293		3,248
Total revenues	Total revenues	$	128,252	$	146,351		Total revenues	$	137,109	$	147,527	$	265,361	$	293,878

NOTE 6—Contingencies

~~Hamilton Beach Holding and its subsidiary are~~The Company is involved in various legal and regulatory proceedings and claims that have arisen in the ordinary course of business, including product liability, patent infringement, asbestos related claims, environmental and other claims. Although it is difficult to predict the ultimate outcome of these proceedings and claims, the Company believes the ultimate disposition of these matters will not have a material adverse effect on the financial condition, results of operation or cash flows of the Company. Any costs that the Company estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss.

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

Environmental matters

HBB is investigating or remediating historical environmental contamination at some current and former sites operated by HBB or by businesses it acquired. Based on the current stage of the investigation or remediation at each known site, HBB estimates the total investigation and remediation costs and the period of assessment and remediation activity required for each site. The estimate of future investigation and remediation costs is primarily based on variables associated with site clean-up, including, but not limited to, physical characteristics of the site, the nature and extent of the contamination and applicable regulatory programs and remediation standards.

No assessment can fully characterize all subsurface conditions at a site. There is no assurance that additional assessment and remediation efforts will not result in adjustments to estimated remediation costs or the time frame for remediation at these sites.

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

At ~~March 31,~~June 30, 2023, December 31, 2022, and ~~March 31,~~June 30, 2022, HBB had accrued undiscounted obligations of ~~$3.3~~$3.5 million, $3.2 million and $3.4 million, respectively, for environmental investigation and remediation activities. HBB estimates that it is reasonably possible that it may incur additional expenses in the range of zero to ~~$1.5~~$1.4 million related to the environmental investigation and remediation at these sites. As of ~~March 31,~~June 30, 2023, HBB has $1.0 million, classified as restricted cash, associated with reimbursement of environmental investigation and remediation costs from a responsible party in exchange for release from all future obligations for one site. Additionally, HBB has a ~~$1.2~~$1.1 million asset associated with the reimbursement of costs associated with two sites.

NOTE 7—Income Taxes

The Company's provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.

The effective tax rate on ~~loss~~income was ~~24.7%~~50.9% and (5.8)% for three months ended June 30, 2023 and June 30, 2022, respectively. The effective tax rate was higher in the three months ended ~~March 31,~~June 30, 2023 ~~and 32.0% on income for~~due to a discrete benefit from the ~~three months ended March 31, 2022. The effective tax rate for the three months ended March 31, 2022 was unfavorably impacted by~~reversal of interest and penalties on unrecognized tax benefits in the prior year that did not recur and a discrete expense in the current year for state income tax.

The effective tax rate on loss was 23.7% for the six months ended June 30, 2023, and 20.2% on income for the six months ended June 30, 2022. The effective tax rate was lower for the six months ended June 30, 2022 due to the reversal of interest and penalties on unrecognized tax benefits partially offset by a valuation allowance on certain foreign deferred tax assets related to the Brazil ~~liquidation as discrete expense items that did not recur in 2023.~~

liquidation.

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."

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 and Estimates” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as there have been no material changes from those disclosed in the Annual Report.

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.

~~First~~Second Quarter of 2023 Compared with ~~First~~Second Quarter of 2022


		THREE MONTHS ENDED MARCH 31													THREE MONTHS ENDED JUNE 30
										Increase / (Decrease)													Increase / (Decrease)
		2023		% of Revenue		2022		% of Revenue		$ Change		% Change			2023		% of Revenue		2022		% of Revenue		$ Change		% Change
Revenue	Revenue	$	128,252	100.0	%	$	146,351	100.0	%	$	(18,099)	(12.4)	%	Revenue	$	137,109	100.0	%	$	147,527	100.0	%	$	(10,418)	(7.1)	%
Cost of sales	Cost of sales	107,342		83.7	%	118,121		80.7	%	(10,779)		(9.1)	%	Cost of sales	109,693		80.0	%	115,549		78.3	%	(5,856)		(5.1)	%
Gross profit	Gross profit	20,910		16.3	%	28,230		19.3	%	(7,320)		(25.9)	%	Gross profit	27,416		20.0	%	31,978		21.7	%	(4,562)		(14.3)	%
Selling, general and administrative expenses	Selling, general and administrative expenses	25,919		20.2	%	15,433		10.5	%	10,486		67.9	%	Selling, general and administrative expenses	26,640		19.4	%	26,503		18.0	%	137		0.5	%
Amortization of intangible assets	Amortization of intangible assets	50		—	%	50		—	%	—		—	%	Amortization of intangible assets	50		—	%	50		—	%	—		—	%
Operating profit (loss)	Operating profit (loss)	(5,059)		(3.9)	%	12,747		8.7	%	(17,806)		(139.7)	%	Operating profit (loss)	726		0.5	%	5,425		3.7	%	(4,699)		(86.6)	%
Interest expense, net	Interest expense, net	1,269		1.0	%	733		0.5	%	536		73.1	%	Interest expense, net	773		0.6	%	867		0.6	%	(94)		(10.8)	%
Other expense (income), net	Other expense (income), net	16		—	%	1,466		1.0	%	(1,450)		(98.9)	%	Other expense (income), net	(271)		(0.2)	%	(252)		(0.2)	%	(19)		7.5	%
Income (loss) before income taxes	Income (loss) before income taxes	(6,344)		(4.9)	%	10,548		7.2	%	(16,892)		(160.1)	%	Income (loss) before income taxes	224		0.2	%	4,810		3.3	%	(4,586)		(95.3)	%
Income tax expense (benefit)	Income tax expense (benefit)	(1,567)		(1.2)	%	3,375		2.3	%	(4,942)		(146.4)	%	Income tax expense (benefit)	114		0.1	%	(279)		(0.2)	%	393		(140.9)	%
Net income (loss)	Net income (loss)	$	(4,777)	(3.7)	%	$	7,173	4.9	%	$	(11,950)	(166.6)	%	Net income (loss)	$	110	0.1	%	$	5,089	3.4	%	$	(4,979)	(97.8)	%

~~Effective income tax rate 24.7 % 32.0 %~~


Effective income tax rate			50.9		%										(5.8)		%

The following table identifies the components of the change in revenue:


		Revenue			Revenue
2022	2022	$	146,351	2022	$	147,527
Increase (decrease) from:	Increase (decrease) from:			Increase (decrease) from:
Unit volume and product mix	Unit volume and product mix	(22,295)		Unit volume and product mix	(8,827)
Average sales price	Average sales price	4,269		Average sales price	(2,009)
Foreign currency	Foreign currency	(73)		Foreign currency	418
2023	2023	$	128,252	2023	$	137,109

Revenue - Revenue decreased ~~$18.1~~$10.4 million, or ~~12.4%~~7.1% compared to the prior year, primarily due to lower unit volume in the U.S. and ~~unfavorable customer~~Latin American Consumer markets and ~~product mix, partially offset by price increases.~~the Global Commercial market. The decrease in volume is related to softer consumer ~~consumption trends~~demand and continued inventory rebalancing by many retailers which impacted orders in the ~~first~~beginning of the second quarter of 2023. An increase in volume in the Mexican Consumer market partially offset these declines.

Gross profit - As a percentage of revenue, gross profit margin decreased from ~~19.3%~~21.7% in the prior year to ~~16.3%~~20.0% in the current year due to unfavorable customer and product mix resulting in lower average margin, the impact of lower volume on fixed cost coverage, and ~~deleveraging of fixed charges. These were offset slightly by lower expenses for outside warehousing and labor compared~~a $0.5 million non-cash lease impairment charge related to the ~~prior year due to lower inventory levels.~~consolidation of warehouses.

Selling, general and administrative expenses - Selling, general and administrative expenses ~~increased $10.5 million due primarily~~were flat compared to the ~~$10.0 million insurance recovery recognized during the three months ended March 31, 2022 which did not recur.~~second quarter of 2022.

Interest expense - Interest expense, net ~~increased $0.5~~decreased $0.1 million due to a significant decrease in average debt compared to June 30, 2022, offset by higher interest rates ~~offset slightly by lower average debt~~ compared to the prior year.

Other expense (income), net - Other expense (income), net was flat compared to 2022 and includes currency gains of ~~$0.1~~$0.4 million in the current year.

Income tax expense (benefit) - The effective tax rate on income was 50.9% and (5.8)% for three months ended June 30, 2023 and June 30, 2022, respectively. The effective tax rate was higher in the three months ended June 30, 2023 due to a discrete benefit from the reversal of interest and penalties on unrecognized tax benefits in the prior year that did not recur and a discrete expense in the current year for state income tax.

First Six Months of 2023 Compared with First Six Months of 2022


	SIX MONTHS ENDED JUNE 30
	2023		% of Revenue		2022		% of Revenue		$ Change		% Change
Revenue	$	265,361	100.0	%	$	293,878	100.0	%	$	(28,517)	(9.7)	%
Cost of sales	217,035		81.8	%	233,670		79.5	%	(16,635)		(7.1)	%
Gross profit	48,326		18.2	%	60,208		20.5	%	(11,882)		(19.7)	%
Selling, general and administrative expenses	52,559		19.8	%	41,936		14.3	%	10,623		25.3	%
Amortization of intangible assets	100		—	%	100		—	%	—		—	%
Operating profit (loss)	(4,333)		(1.6)	%	18,172		6.2	%	(22,505)		(123.8)	%
Interest expense, net	2,042		0.8	%	1,600		0.5	%	442		27.6	%
Other expense (income), net	(255)		(0.1)	%	1,214		0.4	%	(1,469)		(121.0)	%
Income (loss) before income taxes	(6,120)		(2.3)	%	15,358		5.2	%	(21,478)		(139.8)	%
Income tax expense (benefit)	(1,453)		(0.5)	%	3,096		1.1	%	(4,549)		(146.9)	%
Net income (loss)	$	(4,667)	(1.8)	%	$	12,262	4.2	%	$	(16,929)	(138.1)	%


Effective income tax rate			23.7		%										20.2		%

The following table identifies the components of the change in revenue:


	Revenue
2022	$	293,878
Increase (decrease) from:
Unit volume and product mix	(31,122)
Average sales price	2,260
Foreign currency	345
2023	$	265,361

Revenue - Revenue decreased by $28.5 million or 9.7% over the prior year due to lower sales volume in the U.S. and Latin American Consumer markets and the Global Commercial market. The decrease in volume is related to softer consumer demand and inventory rebalancing by many retailers which impacted orders in the first half of 2023. Partially offsetting the decreased volume was an increase in the Mexican Consumer market.

Gross profit - Gross profit margin decreased to 18.2% from 20.5% due to unfavorable customer and product mix, and the impact of lower volume on fixed cost coverage.

Selling, general and administrative expenses - Selling, general and administrative expenses increased $10.6 million due primarily to the $10.0 million insurance recovery recognized during the first quarter of 2022 which did not recur. Additionally, there was an increase in employee-related costs in the current year that was partially offset by a decrease in outside services.

Interest expense - Interest expense, net increased $0.4 million due to rising interest rates partially offset by decreased average borrowings outstanding under HBB's revolving credit facility.

Other expense (income), net - Other expense (income), net includes currency gains of $0.5 million in the current year compared to currency losses of $1.8 million in the prior year. The ~~higher prior year losses were~~net change is driven by the liquidation of the Brazilian subsidiary, which resulted in $2.1 million of accumulated other comprehensive losses being released into other expense (income), net during the first quarter of 2022.

Income tax expense (benefit) -The effective tax rate ~~on loss~~ was ~~24.7% for~~23.7% compared to 20.2% in the ~~three months ended March 31, 2023, and 32.0% on income for the three months ended March 31, 2022.~~prior year. The effective tax rate was lower for the ~~three~~six months ended ~~March 31,~~June 30, 2022 ~~was unfavorably impacted by~~due to the reversal of interest and penalties on unrecognized tax benefits ~~and~~partially offset by a valuation allowance on certain foreign deferred tax assets related to the Brazil ~~liquidation as discrete expense items that did not recur in 2023.~~

liquidation.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

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

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

HBB has a $150.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires on June 30, 2025. 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.

The following table presents selected cash flow information:


		THREE MONTHS ENDED MARCH 31					SIX MONTHS ENDED JUNE 30
		2023		2022			2023		2022
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	$	34,874	$	(20,755)	Net cash provided by (used for) operating activities	$	57,260	$	(25,456)
Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	$	(614)	$	(406)	Net cash provided by (used for) investing activities	$	(1,636)	$	(661)
Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	$	(33,027)	$	21,014	Net cash provided by (used for) financing activities	$	(54,641)	$	25,727

Operating activities - Net cash provided by operating activities was ~~$34.9~~$57.3 million compared to cash used for operating activities of ~~$20.8~~$25.5 million in the prior year primarily due to the Company's focus on net working capital ~~which~~improvement. Net working capital provided cash of ~~$39.9~~$69.0 million in 2023 compared to a use of cash of ~~$24.9~~$36.1 million in 2022. Trade receivables provided net cash of ~~$25.3~~$26.4 million during 2023 compared to ~~$15.5~~$19.8 million provided in the prior ~~year.~~year due to collection initiatives that led to days sales outstanding improvements. Net cash provided by inventory ~~and accounts payable combined~~ was ~~$14.6~~$20.4 million in 2023 compared to ~~$40.4~~$45.7 million used in ~~2022. The~~2022, as the Company effectively managed elevated inventory levels during the second half of 2022 and ~~significantly reduced inventory and~~took significant actions to reduce inventory. Net cash provided by accounts payable aswas $22.2 million in 2023 compared to ~~the quarter-ended March 31, 2022 and the year-ended December 31,~~$10.3 million used in 2022.

Investing activities - Net cash used for investing activities in 2023 ~~was flat~~increased compared to ~~2022.~~2022 related primarily to HBB internal-use software development costs.

Financing activities - Net cash used for financing activities was ~~$33.0~~$54.6 million in 2023 compared to net cash provided by financing activities of ~~$21.0~~$25.7 million in 2022. The change is due to a decrease in HBB's net borrowing activity on the ~~revolving credit facility~~HBB Facility to fund net working capital.

Capital Resources

The Company expects to continue to borrow against the HBB Facility and make voluntary repayments within the next twelve months. The obligations under the HBB Facility are secured by substantially all of HBB's assets. At ~~March 31,~~June 30, 2023, the borrowing base under the HBB Facility was ~~$132.4~~$132.3 million and borrowings outstanding were ~~$79.3~~$59.9 million. At ~~March 31,~~June 30, 2023, the excess availability under the HBB Facility was ~~$53.1~~$72.4 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, SOFR or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. The applicable margins, effective ~~March 31,~~June 30, 2023, for base rate loans and SOFR loans denominated in U.S. dollars were 0.0% and ~~2.05%~~1.55%, respectively. The applicable margins, effective ~~March 31,~~June 30, 2023, for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.0% and ~~2.05%~~1.55%, 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~~six months ended ~~March 31,~~June 30, 2023 was ~~5.10%~~4.72% including the floating rate margin and the effect of the interest rate swap agreements described below.

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 $50.0 million at ~~March 31,~~June 30, 2023 at an average fixed interest rate of 1.47%. HBB also entered into delayed-start interest rate swaps. These swaps have notional values totaling $25.0 million as of ~~March 31,~~June 30, 2023, with an average fixed interest rate of 1.78%.

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 to Hamilton Beach Holding are not to exceed $7.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of at least $18.0 million. Dividends to Hamilton Beach Holding are discretionary to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of at least $30.0 million. The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. At ~~March 31,~~June 30, 2023, 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. trade receivables on a non-recourse basis. The Company utilizes this arrangement as an integral part of financing working capital. See Note 2 of the unaudited 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.

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 for the year ended December 31, 2022, as there have been no material changes from those disclosed in the Annual Report.

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 for the year ended December 31, 2022, as there have been no material changes from those disclosed in the 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 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 source and ship products to meet anticipated demand, (2) the Company’s ability to successfully manage constraints throughout the global transportation supply chain, (3) uncertain or unfavorable global economic conditions; (4) changes in the sales prices, product mix or levels of consumer purchases of small electric and specialty housewares appliances, (5) changes in consumer retail and credit markets, including the increasing volume of transactions made through third-party internet sellers, (6) bankruptcy of or loss of major retail customers or suppliers, (7) changes in costs, including transportation costs, of sourced products, (8) delays in delivery of sourced products, (9) changes in or unavailability of quality or cost effective suppliers, (10) exchange rate fluctuations, changes in the import tariffs and monetary policies and other changes in the regulatory climate in the countries in which the Company operates or buys and/or sells products, (11) the impact of tariffs on customer purchasing patterns, (12) product liability, regulatory actions or other litigation, warranty claims or returns of products, (13) customer acceptance of, changes in costs of, or delays in the development of new products, (14) increased competition, including consolidation within the industry, (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, (16) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (17) 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 for the year ended December 31, 2022. Furthermore, the future impact of unfavorable economic conditions, including inflation, rising interest rates, availability of capital markets and consumer spending rates remains uncertain. In uncertain economic environments, the Company cannot predict whether or when such circumstances may improve or worsen, or what impact, if any, such circumstances could have on its business, results of operations, cash flows and financial position.

Item 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 an asset of ~~$4.2~~$5.2 million at ~~March 31,~~June 30, 2023. A hypothetical 10% relative decrease in interest rates would cause a decrease of ~~$0.3~~$0.2 million in the fair value of interest rate swap agreements. Additionally, a hypothetical 10% relative increase in interest rates would cause an increase of $0.2 million in the fair value of interest rate swap agreements. Neither would have a material impact to the Company's interest expense, net of ~~$1.3~~$2.0 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023.

FOREIGN CURRENCY EXCHANGE RATE RISK

HBB operates internationally and enters into transactions denominated in foreign currencies, principally the Canadian dollar, the Mexican peso and, to a lesser extent, the Chinese yuan and Brazilian real. As such, HBB's financial results are subject to the variability that arises from exchange rate movements. The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of 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. 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 net payable of ~~$0.3~~$0.8 million at ~~March 31,~~June 30, 2023. Assuming a hypothetical 10% weakening of the U.S. dollar at ~~March 31,~~June 30, 2023, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange contracts, would be decreased by ~~$1.9~~$2.8 million compared with its fair value at ~~March 31,~~June 30, 2023.

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,~~June 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2023.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified during the quarter ended ~~March 31,~~June 30, 2023, in connection with the evaluation by the Company’s management required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’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 6 "Contingencies" included in the ~~Financial Statements~~unaudited consolidated 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

NoThere are no material changes to the risk factors for ~~Hamilton Beach Holding or HBB,~~the Company from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds


Issuer Purchases of Equity Securities (1)
	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Program	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
Month #1 April 1 to 30, 2023	—	$	—	—	$	22,020,771
Month #2 May 1 to 31, 2023	23,772	$	10.08	23,772	$	21,781,078
Month #3 June 1 to 30, 2023	33,201	$	10.10	33,201	$	21,445,583
	56,973	$	10.10	56,973	$	21,445,583

(1) On February 22, 2022, the Company's Board approved a stock repurchase program for the purchase of up to $25 million of the Company's Class A Common outstanding starting February 22, 2022 and ending December 31, 2023.

During the three and six months ended June 30, 2023, the Company repurchased 56,973 shares at prevailing market prices for an aggregate purchase price of $0.6 million. During the six months ended June 30, 2022, the Company repurchased 151,221 shares at prevailing market prices for an aggregate purchase price of $1.6 million. During the year ended December 31, 2022, the Company repurchased 261,049 shares for an aggregate purchase price of $3.0 million.

~~There were no share repurchases during the three months ended March 31, 2023 and March 31, 2022.~~

Item 3 Defaults Upon Senior Securities

None.

Item 4 Mine Safety Disclosures

None.

Item 5 Other Information

None.

Item 6 Exhibits


Exhibit
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 Sally M. Cunningham 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 Sally M .M. Cunningham
101.INS						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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

1820