Hamilton Beach Brands Holding Company | 2019 Annual Report
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HAMILTON BEACH BRANDS HOLDING COMPANY
About the Company
Hamilton Beach Brands Holding Company is an operating holding company for Hamilton Beach Brands, Inc.
and The Kitchen Collection, LLC. Hamilton Beach Brands 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.
Our leading portfolio of iconic consumer brands ranges from value to luxury products, across a wide range
of price points. We participate in more than 50 product categories. The Hamilton Beach® brand continues
to hold the number one position in the U.S. small kitchen appliance industry for brand units sold in both the
brick-and-mortar and ecommerce channels.
Our brands include Hamilton Beach®, Hamilton Beach® Professional, Hamilton Beach Commercial®, Proctor
Silex®, Proctor Silex Commercial®, Weston® field-to-table and farm-to-table food preparation equipment,
TrueAir® air care products, and Brightline™ personal care products. We license the brands for Wolf
Gourmet® countertop appliances and CHI® premium garment care products. We market the Bartesian®
premium cocktail delivery system through an exclusive multiyear agreement.
Historically, our consumer business has been focused on North America. More recently, we have expanded
into Latin America, South America, China and India. Our brands participate in all of the retail channels where
consumers want to buy small kitchen appliances, including ecommerce. Our strategically important global
commercial business is a leading small appliance participant globally, serving food service and hospitality
customers around the world. At the end of 2019, all Kitchen Collection stores were closed.
Our Hamilton Beach® Professional Juicer Mixer Grinder was
introduced in India in 2019. Developed in India and the U.S.,
we leveraged over 100 years of commercial mixing, grinding
and blending expertise to provide a product with superior
performance, durability and safety. This type of appliance
is relied on daily in the Indian kitchen and can mix and
grind the toughest ingredients and spices. In 2020,
the product will be offered globally including
the U.S., Canada, U.K. and Middle East.
1
Financial Highlights
Hamilton Beach Brands Holding Company
Income Statement Data from Continuing Operations
Revenue .......................................................................................................................................
Operating profit .........................................................................................................................
Income from continuing operations, net of tax ..........................................................
Basic and diluted earnings per share .............................................................................
Shares outstanding at December 31 ..............................................................................
Balance Sheet Data at December 31
Total assets .................................................................................................................................
Debt ................................................................................................................................................
Stockholders’ equity ...............................................................................................................
Cash Flow Data from Continuing Operations
Provided by operating activities ........................................................................................
Used for investing activities ................................................................................................
Before financing activities ....................................................................................................
Provided by (used for) financing activities ...................................................................
Cash dividends paid ...............................................................................................................
Purchase of treasury stock ..................................................................................................
Year Ended December 31
2019
2018
(In thousands, except per share)
$
$
$
$
$
$
$
$
$
$
$
$
$
612,843
36,866
25,078
1.83
13,516
303,240
58,497
55,059
202
(4,122)
(3,920)
1,062
4,851
5,960
$
$
$
$
$
$
$
$
$
$
$
$
$
629,710
38,170
27,145
1.98
13,713
330,427
46,624
65,438
17,323
(7,759)
9,564
(9,255)
4,658
—
Our Vision
Our Mission
To be the leading
supplier of retail
and commercial
small appliances.
Deliver profitable
growth from innovative
solutions that improve
everyday living.
Registered Trademarks: Wolf Gourmet®- Sub-Zero Group, Inc.; CHI® - Farouk Systems, Inc.;
Bartesian® - the Bartesian company.
2019 ANNUAL REPORTHAMILTON BEACH BRANDS HOLDING COMPANYHamilton Beach Brands Holding Company is an operating holding company for Hamilton Beach Brands, Inc. and The Kitchen Collection, LLC. Hamilton Beach Brands 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. Our leading portfolio of iconic consumer brands ranges from value to luxury products, across a wide range of price points. We participate in more than 50 product categories. The Hamilton Beach® brand continues to hold the number one position in the U.S. small kitchen appliance industry for brand units sold in both the brick-and-mortar and ecommerce channels. Our brands include Hamilton Beach®, Hamilton Beach® Professional, Hamilton Beach Commercial®, Proctor Silex®, Proctor Silex Commercial®, Weston® field-to-table and farm-to-table food preparation equipment, TrueAir® air care products, and Brightline™ personal care products. We license the brands for Wolf Gourmet® countertop appliances and CHI® premium garment care products. We market the Bartesian® premium cocktail delivery system through an exclusive multiyear agreement.Historically, our consumer business has been focused on North America. More recently, we have expanded into Latin America, South America, China and India. Our brands participate in all of the retail channels where consumers want to buy small kitchen appliances, including ecommerce. Our strategically important global commercial business is a leading small appliance participant globally, serving food service and hospitality customers around the world. At the end of 2019, all Kitchen Collection stores were closed.About the CompanyOur Hamilton Beach® Professional Juicer Mixer Grinder was introduced in India in 2019. Developed in India and the U.S., we leveraged over 100 years of commercial mixing, grinding and blending expertise to provide a product with superior performance, durability and safety. This type of appliance is relied on daily in the Indian kitchen and can mix and grind the toughest ingredients and spices. In 2020, the product will be offered globally including the U.S., Canada, U.K. and Middle East. 2
To Our Stockholders
The year 2019 presented some unusual challenges
as we made the difficult but necessary decision to
wind down the Kitchen Collection business and as
we worked with our suppliers and our customers to
mitigate the adverse impact of tariffs on the finished
products we import from China. At the same time,
we achieved a number of positive results, and we
believe the Company is in a strong position to build
long-term shareholder value.
For some time, Kitchen Collection had been
taking steps to enhance its position and prospects
by reducing its store portfolio to a core that we
expected would support longer term profitability.
Despite our best efforts, further deterioration in
store traffic lowered Kitchen Collection’s prospects
of a future return to profitability and positive cash
flow generation.
We evaluated strategic alternatives to maximize
the value of Kitchen Collection and reached the
conclusion that it was in the best interests of the
Company and all of its stakeholders to wind down
the business. By the end of 2019, all retail stores
were closed and operations ceased. We deeply
appreciate all of the hard work and dedication that
our Kitchen Collection leaders and employees
devoted to the business and to our customers and
for their outstanding professionalism in conducting
an orderly wind down.
Exiting Kitchen Collection marks an important turning
point for the Company. With Kitchen Collection’s net
losses and negative cash flow behind us, we look
forward to the benefit of the wind down becoming
evident in our market value over time.
We entered 2020 focused on Hamilton Beach
Brands and our strategic priorities of revenue growth,
margin expansion and strong cash flow generation.
Hamilton Beach Brands is a strong, profitable
business that delivered $37 million of operating
profit in 2019 and has significant prospects for
future growth. Our leading portfolio of iconic brands
covers more categories and price points than
any other industry participant. Consumer-driven
innovation and new product development are key
strengths that are deeply ingrained in our culture.
We entered 2020
with significant
opportunities for
long-term profitable
growth and building
shareholder value.
We have an
experienced team
that is focused
on our customers
and consumers
and continues
to execute with
the creativity and
professionalism that
are required to win.
Operationally, we
have strong quality
metrics, we receive very good scorecards from our
customers, and we have a global infrastructure to
meet customer needs around the world.
A number of our strategic initiatives are working
well and are contributing to our other strengths.
Our ecommerce sales are growing well above
the industry in most of the markets where we
compete. Our commercial and international
businesses have been consistent growth drivers
in recent years, generating greater than 5%
compound annual growth rates, despite some
challenges in 2019. Our premium brands and
products are selling well.
2019 Financial Results
Our 2019 financial results were solid, and we were
pleased to deliver a strong bottom line despite a
top line that was not as robust as we had planned.
The tariffs imposed on U.S. imports from China
impact 25% of our annual purchases. Last year, the
tariffs caused much uncertainty and disruption with
our customers and in retail markets. Higher retail
prices caused by the tariffs eroded sell through and
encouraged retailers to tighten inventory throughout
the year. The adverse impact of tariffs also took its
toll on sales of our commercial products.
HAMILTON BEACH BRANDS HOLDING COMPANY 3
Industrywide, more than 90% of all small kitchen
appliances imported into the U.S. come from China.
We purchased substantially all of our finished
products from suppliers in China in 2019. We are
exploring alternative supply arrangements for the
future; however, no significant presence of price
competitive sources has yet been established. The
safety and quality requirements of small electrics
make the establishment of new manufacturing
operations more challenging than it is for many other
categories of consumer products so that any move
away from China will be slower for our industry.
Revenue in 2019 was $613 million, a 2.7%
decrease from 2018 when revenue was the
highest in our history. Sales volume declined
across all markets. In addition to the impact
of the tariffs, revenue declined due to fewer
low-margin placements in the dollar store and
warehouse club channels and to ongoing reduced
foot traffic at certain retailers. Further, the fall holiday
selling season was soft for most retailers due to
the late Thanksgiving holiday, which shortened the
season overall. Strong retailer investments in pre-
season promotions were not enough to get people
to shop earlier. As a result, for the industry and our
company, peak sales were delayed by several
weeks and the reorders that we had anticipated
did not fully materialize.
For the full year 2019, our net income from
continuing operations was $25.1 million, or $1.83
per diluted share, compared to $27.1 million, or
$1.98 per diluted share. Our results reflected the
lower sales volume, partially offset by gross margin
expansion, mostly due to the sale of higher priced
and higher margin products, and by lower selling,
general and administrative expenses.
We returned nearly $11 million to shareholders in
2019, including $4.9 million in dividends and
$6 million in share repurchases. The Board approved
a new share repurchase program for up to $25
million from January 1, 2020 to December 31, 2021.
Due to timing, cash provided by operating activities
fell short of our expectations. In 2019, we were near
breakeven compared to 2018 when cash provided
by operating activities was $17.3 million. While the
decline in inventory had a positive impact on cash
flows of $13.8 million in 2019, the increase in trade
receivables had a negative impact of $25.6 million
due to the late fall holiday selling season, which
shifted the timing of collection of a larger amount of
receivables into the first quarter of 2020. As a result,
net debt at year end was higher at $56.3 million
compared to $42.2 million in 2018. We expect net
working capital to improve significantly during the
first quarter of 2020 as a result of this timing.
Innovative new products include, left to
right, the Hamilton Beach® Smart 12-cup
Coffee Maker, Hamilton Beach Commercial®
Eclipse™ Blender, Hamilton Beach® Egg Bites
Maker, and Proctor Silex® air fryer.
2019 ANNUAL REPORT 4
Building On Our Strengths
and Progress
Looking to the future, we will continue to build
on our many strengths and the progress made
on many key fronts in 2019. We introduced new
products across all of our brands that are designed
to meet specific research-driven customer needs
and align with evolving consumer trends. Our
products held a top three market share in more
than 30 categories and we gained share in 25.
New products included a number of air fryers,
pressure cookers, blenders, food processors,
mixers, slow cookers and juice extractors,
among others. The Hamilton Beach® brand
continued to hold the number one position in
the U.S. small kitchen appliance industry for
brand units sold in both the brick-and-mortar
and ecommerce channels.
We plan to continue our focus on new products
as a key strategy to drive revenue growth in the
coming years, with an increased emphasis on
higher priced products and new categories. Our
new products will cross a wide range of brands,
price points and categories, leveraging our leading
brand portfolio in markets around the world.
We are focused on
Hamilton Beach Brands
and our strategic
priorities of revenue
growth, margin
expansion and strong
cash flow generation.
In addition to
generating overall
growth through
innovation, we
have six Strategic
Initiatives to drive
growth in new
areas. We have
made substantial
investments over
the past several
years in people,
products and
processes to
support our Strategic Initiatives. Over time, these
initiatives are expected to enhance our market
position and financial performance and thereby
increase long-term shareholder value.
We believe that our investments in these Strategic
Initiatives will contribute significantly to the
New Only-the-Best products include,
clockwise, the Weston® sous vide
immersion circulator, Wolf Gourmet®
stand mixer, Hamilton Beach®
Professional food processor with
spiralizer, CHI® touchscreen iron, and
Bartesian® Premium Cocktail Machine.
HAMILTON BEACH BRANDS HOLDING COMPANY
5
achievement of our long-term financial objectives.
Our goal is to reach $750 million to $1 billion in
annual revenue and 9% to 10% operating profit
margin over time.
We expect to generate results within these ranges
by increasing revenue and leveraging our current
infrastructure. Our objective is to achieve these
goals over the next few years; however, some of the
initiatives are more developed, while others will take
more time to come to fruition, and we may adjust
certain initiatives based on changes in the market
and competitive environment.
Enhancing Ecommerce Leadership Globally
We continue to generate very strong results in the
ecommerce channel globally. In 2019, our global
ecommerce sales grew 27% and accounted for
25% of total revenue. The digital space is a strength
for us as we focused on this channel early and
invested in the infrastructure needed to facilitate
online sales growth.
In 2019, Hamilton Beach continued to be the
number one brand based on units sold in the U.S.
ecommerce channel. Our products continued to
earn favorable reviews and ratings of four stars
and above, and we increased the star rating for
every brand in 2019.
Increasing Share of Only-the-Best Market
Within the U.S. small kitchen appliance industry,
premium, or the “Only-the-Best” (OTB) products,
account for approximately one-third of annual sales.
We were not a participant in this industry segment
until 2014, when we began to build what is now a
comprehensive OTB portfolio. We expect significant
upside in the OTB business and plan to add new
products, and potentially more brands.
Today, our OTB brands include Hamilton Beach®
Professional, which leverages our commercial
product expertise, and Weston®, a provider of
field-to-table and farm-to-table food preparation
equipment. We license the brands for Wolf
Gourmet® countertop appliances and CHI®
premium garment care products. We sell the
Bartesian® premium cocktail delivery system
through an exclusive multi-year agreement.
In 2019, our OTB revenue grew 7.4% and
accounted for 9% of total revenue. This followed
growth of 40% in 2018, which included the first
full year of revenue from the CHI® line, which was
launched in late 2017.
We were delighted that the Bartesian® product
and our Wolf Gourmet® precision griddle were
selected as one of “Oprah’s Favorite Things” for the
2019 holiday selling season, giving them high-
profile visibility
with consumers.
We are rounding
out our full line of
Wolf Gourmet®
countertop
appliances with a
stand mixer that we
launched last year
and a kettle that
we are introducing
later this year.
We will build on our
many strengths and
the progress made
on many key fronts
in 2019.
We also continue to round out our line of
Hamilton Beach® Professional products. Last year,
we launched a Hamilton Beach® Professional
Juicer Mixer Grinder in India, and this year we’ll
offer that product in the U.S. and other markets
for consumers who enjoy preparing Indian cuisine
at home. We are also launching a new immersion
blender, food processor with a spiralizer and a Sure
Crisp Digital Oven – all under our Hamilton Beach®
Professional brand.
Our CHI® premium garment care line is selling well,
including the touchscreen iron that we launched
last year. This year we’re introducing a CHI® hand-
held garment steamer. For Weston®, we have a
new sous vide immersion circulator, vacuum sealer,
dehydrator and smoke infuser.
Looking ahead, continued growth will be driven by
new products and expanded distribution, including
the ecommerce channel where a high percentage
of OTB products are purchased. We plan to enter
virtually every meaningful OTB category with our
existing brands, and potentially other brands, to
further increase our share of this important market.
2019 ANNUAL REPORT 6
Expanding Global Commercial Leadership
After years of more than 6% average revenue
growth, our Global Commercial sales experienced
a modest decrease in 2019, primarily due to the
adverse impact of tariffs. Commercial products
accounted for 8% of our total revenue. They
generally sell at higher price points and higher
margins than most of our consumer products.
Approximately one-half of our commercial sales are
in the U.S. and the other half is in markets across
the globe. Our international food service business
grew in 2019. We continued to increase our share
of global food service chains in 2019 by winning
several large bids and are pleased with the many
partnerships we have developed around the world.
We expect to grow revenue globally by securing
new customers in our core blending and mixing
categories, while entering new categories and
gaining a leadership position over time. We
have expanded our presence in the juicing and
vacuum sealing categories. In 2020, we will add
immersion blending to our lineup. We expect to
add additional categories through development
or acquisition.
We continue to be very optimistic about the
potential for this business and expect it to return
to growth in 2020.
Expanding International Presence
We have a long-standing presence in Canada
and Mexico and more recently have become a
participant in the Central America, South America
and China markets. Our international revenue
growth averaged more than a 5% for the five years
prior to 2019; however, last year we experienced
a downturn. Sales were flat to down in most
markets. China is our largest emerging market and
sales were off significantly due to the economic
slowdown in the country.
Revenue generated in international markets
accounted for 24% of our total revenue in 2019.
We expect a return to growth in 2020.
Entering New Categories
Our newest initiative is focused on expanding
selectively outside of the traditional small
kitchen appliance market into new categories
where we have identified opportunities to
leverage our branding, sourcing, distribution
and ecommerce expertise.
We have introduced a wide range of new
categories and have focused on distribution
through the ecommerce channel. We can
introduce new products quickly and relatively
inexpensively online and react on a timely basis
to consumer responses to new offerings.
In 2019, we established a new brand for personal
care products, called Brightline™, and launched
our first oral care product, a sonic rechargeable
toothbrush. We plan to add more personal care
products under the Brightline™ name, including
hair dryers and
a facial cleaning
brush that we
developed through
our innovation
process.
We are an asset light
business and have the
potential to generate
strong free cash flow.
We also introduced
a new Hamilton
Beach® Countertop
Ice Maker, Wine
Opener and Electric Pasta Maker, among other
new products. In 2020, our focus will be on
growing, profitable categories. While our new
categories initiative is in an early stage, we believe
it can deliver significant long-term growth.
Strategic Acquisitions
We continue to pursue opportunities to secure
strategic acquisitions that meet our business
criteria and provide the right fit at the right
valuation. Our target profile includes both
consumer and commercial businesses with
a competitive position, a strong brand or
channel presence and the potential to enter
new product categories.
This Annual Report to Stockholders contains forward-looking statements. For a discussion of the factors that may cause the
Company’s actual results to differ from these forward-looking statements, refer to page 4 in the attached Form 10-K.
HAMILTON BEACH BRANDS HOLDING COMPANY 7
We are seeking bolt-on or tuck-in opportunities
that would add revenue in the range of $50 to $100
million. We recently added the position of Vice
President, Corporate Development and Strategy
to our team. As a result, we expect our focus on
acquisitions will accelerate significantly in 2020.
Looking Ahead
We have a strong commitment to building long-
term shareholder value. The Strategic Initiatives that
have been implemented to achieve our longer term
financial objectives have gained momentum that
we plan to build on in the years to come. We expect
to increase returns as the initiatives achieve higher
levels of maturity and as we focus on growing
our brand portfolio, introducing new products,
expanding distribution channels and leveraging
our current cost structure.
high relative to industry standards. We will
continue our long-standing focus on a strong
balance sheet and financial flexibility as we work
to build long-term shareholder value.
In closing, we thank our customers and the
consumers around the world who purchase
our products and are loyal to our brands. We
appreciate and applaud our employees for
their many successes derived from hard work,
dedication and enthusiasm.
Without our dedicated team, we would not be
able to achieve our goals. We thank you, our
stockholders, for the confidence you have shown
in us by investing your valuable capital in our
Company, and we will continue to work to build
long-term value for you in the coming years.
We are an asset light business, with a relatively
low level of capital investment, and the potential to
generate strong free cash flow and strong return on
total capital employed, which has generally been
Gregory H. Trepp
President and Chief Executive Officer
February 26, 2020
New products for our commercial, international and new categories include, left to right, a line
of Hamilton Beach Commercial® immersion mixers, Hamilton Beach Commercial® Otto™ the
Juice Extractor, Brightline™ toothbrush, and the Hamilton Beach® Professional Hot & Cold
High-Performance Blender.
2019 ANNUAL REPORT
8
Directors and Officers
Hamilton Beach Brands Holding Company
Directors
Mark R. Belgya
Vice Chair and Chief Financial Officer,
The J. M. Smucker Company
J.C. Butler, Jr.
President and Chief Executive Officer,
NACCO Industries, Inc.
President and Chief Executive Officer,
The North American Coal Corporation
Paul D. Furlow
Co-founder/Co-President,
Dixon Midland Company
John P. Jumper
Retired Chief of Staff,
United States Air Force
Dennis W. LaBarre
Retired Partner,
Jones Day
Michael S. Miller
Retired Managing Director,
The Vanguard Group
Officers
Gregory H. Trepp
President and Chief Executive Officer
Michelle O. Mosier
Senior Vice President,
Chief Financial Officer and Treasurer
Gregory E. Salyers
Senior Vice President,
Global Operations
Hamilton Beach Brands, Inc.
Alfred M. Rankin, Jr.
Non-Executive Chairman,
Hamilton Beach Brands Holding Company
Non-Executive Chairman,
NACCO Industries, Inc.
Chairman, President and Chief Executive Officer,
Hyster-Yale Materials Handling, Inc.
Thomas T. Rankin
Retired Owner and President,
Cross Country Marketing
James A. Ratner
Partner,
RMS Investment Group, LLC
Gregory H. Trepp
President and Chief Executive Officer,
Hamilton Beach Brands Holding Company
President and Chief Executive Officer,
Hamilton Beach Brands, Inc.
Clara R. Williams
President and Founder,
The Clara Williams Company
Dana B. Sykes
Senior Vice President,
General Counsel and Secretary
R. Scott Tidey
Senior Vice President,
North America Sales and Marketing
Hamilton Beach Brands, Inc.
HAMILTON BEACH BRANDS HOLDING COMPANY UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-38214
HAMILTON BEACH BRANDS HOLDING COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
31-1236686
(I.R.S. Employer Identification No.)
4421 Waterfront Dr. Glen Allen, VA
(Address of principal executive offices)
23060
(Zip Code)
Registrant's telephone number, including area code: (804) 273-9777
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock, Par Value $0.01 Per Share
Trading Symbol
HBB
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, Par Value $0.01 Per Share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES
NO
YES
NO
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
NO
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).
NO
YES
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in
Rule 12b-2 of the Exchange Act.
Large accelerated
filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting
company
Emerging growth
company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
YES
NO
Aggregate market value of Class A Common Stock and Class B Common Stock held by non-affiliates as of June 30, 2019 (the last business day of the
registrant's most recently completed second fiscal quarter): $130,361,017
Number of shares of Class A Common Stock outstanding at February 21, 2020: 9,456,440
Number of shares of Class B Common Stock outstanding at February 21, 2020: 4,073,941
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 2020 annual meeting of stockholders are incorporated herein by reference in Part III of this Form 10-K.
HAMILTON BEACH BRANDS HOLDING COMPANY
TABLE OF CONTENTS
Item 1.
BUSINESS
Item 1A. RISK FACTORS
Item 1B. UNRESOLVED STAFF COMMENTS
Item 2.
PROPERTIES
Item 3.
LEGAL PROCEEDINGS
Item 4. MINE SAFETY DISCLOSURES
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Item 6.
SELECTED FINANCIAL DATA
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Item 9A. CONTROLS AND PROCEDURES
Item 9B. OTHER INFORMATION
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART I.
PART II.
PART III.
PART IV.
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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F-1
Item 1. BUSINESS
General
PART I
Hamilton Beach Brands Holding Company is an operating holding company and operates through its two wholly-owned
subsidiaries Hamilton Beach Brands, Inc. (“HBB”) and The Kitchen Collection, LLC (“KC”) (collectively “Hamilton Beach
Holding” or the “Company”). On October 10, 2019, the Company’s board of directors (the “Board”) approved the wind down
of KC and its retail operations. By December 31, 2019, all KC stores were closed and the reportable segment qualifies to be
reported as discontinued operations. On January 21, 2020, the Board approved the dissolution of the KC legal entity and a
Certificate of Dissolution of Ohio Limited Liability Company was filed with the Ohio Secretary of State.
The only material assets held by Hamilton Beach Brands Holding Company are its investments in its consolidated subsidiaries.
Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries. Hamilton Beach
Brands Holding Company has not guaranteed any obligations of its subsidiaries.
KC is reported as discontinued operations in all periods presented. HBB is the Company's single reportable segment.
HBB is a leading designer, marketer, and distributor of branded, small electric household and specialty housewares appliances,
as well as commercial products for restaurants, bars, and hotels. HBB operates in the consumer, commercial and specialty small
appliance markets.
On September 29, 2017, NACCO Industries, Inc. ("NACCO"), Hamilton Beach Holding's former parent company, spun-off the
Company to NACCO stockholders. In the spin-off, NACCO stockholders, in addition to retaining their shares of NACCO
common stock, received one share of Hamilton Beach Brands Holding Company Class A common stock ("Class A Common")
and one share of Hamilton Beach Brands Holding Company Class B common stock ("Class B Common") for each share
of NACCO Class A or Class B common stock. In accordance with applicable authoritative accounting guidance, the Company
accounted for the spin-off from NACCO based on the historical carrying value of assets and liabilities. As a result of the
distribution of one share of Class A Common and one share of Class B Common for each share of NACCO Class A or NACCO
Class B common stock, the earnings per share amounts for the Company for periods prior to the spin-off have been calculated
based upon the number of shares distributed in the spin-off. NACCO did not receive any proceeds from the spin-off.
The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports available, free of charge, through its website, www.hamiltonbeachbrands.com, as soon as
reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission
(“SEC”). The content of our website is not incorporated by reference into this annual report on Form 10-K or in any other
report or document we file with the SEC, and any references to our website is intended to be inactive textual references only.
Sales and Marketing
HBB designs, markets and distributes a wide range of branded, small electric household and specialty housewares appliances,
including, but not limited to, air fryers, blenders, coffee makers, food processors, indoor electric grills, irons, juicers, mixers,
slow cookers, toasters and toaster ovens. The Company also sells TrueAir® air purifiers. HBB also designs, markets and
distributes commercial products for restaurants, fast food chains, bars and hotels. In 2019, HBB introduced sonic rechargeable
toothbrushes under the BrightlineTM brand name through the ecommerce channel. HBB generally markets its “better” and
“best” consumer products under the Hamilton Beach® brand and uses the Proctor Silex® brand for the “good” and value price
points. HBB participates in the premium or “only-the-best” market with the Hamilton Beach® Professional brand and the
Weston® brand game and garden food processing equipment. Additionally, the Company has multiyear licensing agreements to
sell a line of countertop appliances and kitchen tools under the Wolf Gourmet® brand and a line of premium garment care
products under the CHI® brand. In 2019, HBB began selling the Bartesian® premium cocktail delivery system through an
exclusive multiyear agreement. HBB markets its commercial products under the Hamilton Beach Commercial® and the Proctor
Silex Commercial® brands. HBB supplies private label products on a limited basis. HBB also licenses certain of its
trademarks to various licensees, primarily for use with microwave ovens, compact refrigerators, and water dispensers, among
others.
Sales promotion activities are primarily focused on digital marketing channels. HBB promotes certain of its innovative
products through the use of television, internet and print advertising.
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Customers
Sales in North America are generated predominantly by a network of inside sales employees to mass
merchandisers, ecommerce retailers, national department stores, variety store chains, drug store chains, specialty home
retailers, distributors, restaurants, bars, hotels and other retail outlets. Wal-Mart Inc. and its global subsidiaries accounted for
approximately 33%, 33% and 32% of the HBB’s revenue in 2019, 2018 and 2017, respectively. Amazon.com, Inc. and its
subsidiaries accounted for approximately 14%, 10% and 12% of the HBB's revenue in 2019, 2018 and 2017, respectively.
HBB’s five largest customers accounted for approximately 58%, 53%, and 54% of the HBB’s revenue for the years ended
December 31, 2019, 2018 and 2017, respectively.
Product Warranty
HBB's warranty program to the consumer consists generally of an assurance-type limited warranty lasting for varying periods
of up to ten years for electric appliances, with the majority of products having a warranty of one to three years. There is no
guarantee to the consumer as HBB may repair or replace, at its option, those products returned under warranty.
Working Capital
The market for small electric household and specialty housewares appliances is highly seasonal in nature. The majority of
HBB's revenue and operating profit typically occurs in the second half of the year due to the fall holiday-selling season. Due to
the seasonality of purchases of its products, HBB generally uses a substantial amount of cash or short-term debt to finance
inventory in anticipation of the fall holiday-selling season.
Patents, Trademarks, Copyrights and Licenses
HBB holds patents and trademarks registered in the United States ("U.S.") and foreign countries for various products. HBB
believes its business is not dependent upon any individual patent, copyright or license, but that the Hamilton Beach®, Proctor
Silex®, Hamilton Beach® Professional, and Weston® trademarks are material to its business.
Product Design and Development
HBB incurred $12.1 million, $11.0 million and $10.4 million in 2019, 2018 and 2017, respectively, on product design and
development activities.
Key Suppliers and Raw Material
HBB’s products are supplied to its specifications by third-party suppliers located primarily in China. HBB does not maintain
long-term purchase contracts with suppliers and operates mainly on a purchase order basis. HBB generally negotiates the
purchases from its foreign suppliers in U.S. dollars.
During 2019, HBB purchased substantially all of its finished products from suppliers in China. HBB purchases its inventory
from approximately 63 suppliers, one of which represented more than 10% of purchases during the year ended December 31,
2019. HBB believes the loss of any one supplier would not have a long-term material adverse effect on its business because
there are adequate supplier choices available that can meet HBB’s production and quality requirements. However, the loss of a
supplier could, in the short term, adversely affect HBB’s business until alternative supply arrangements are secured.
The principal raw materials used by HBB’s third-party suppliers to manufacture its products are plastic, glass, steel, copper,
aluminum and packaging materials. HBB believes adequate quantities of raw materials are available from various suppliers.
Competition
The small electric household appliance industry does not have substantial entry barriers. As a result, HBB competes with many
manufacturers and distributors of housewares products. Based on publicly available information about the industry, HBB
believes it is one of the largest full-line distributors and marketers of small electric household and specialty housewares
appliances in North America based on key product categories.
To a lesser degree, HBB product lines compete in South America, Europe, and certain emerging markets such as Brazil and
China. The competition in these geographic markets is also fragmented and HBB is not yet a significant participant although
our commercial business has generated a strong position in these markets.
As brick and mortar retailers generally purchase a limited selection of branded, small electric appliances, HBB competes with
other suppliers for retail shelf space. In the ecommerce channel, HBB must compete with a broad list of competitors. HBB
believes the principal areas of competition with respect to its products are product design and innovation, quality, price, product
features, supply chain excellence, merchandising, promotion and warranty.
2
Government Regulation
HBB is subject to numerous federal and state health, safety and environmental regulations. HBB believes the impact of
expenditures to comply with such laws will not have a material adverse effect on HBB.
As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal
Hazardous Substances Act, which empower the U.S. Consumer Product Safety Commission (“CPSC”) to seek to exclude
products that are found to be unsafe or hazardous from the market. Under certain circumstances, the CPSC could require HBB
to repair, replace or refund the purchase price of one or more of HBB’s products, or HBB may voluntarily do so.
Throughout the world, electrical appliances are subject to various mandatory and voluntary standards, including requirements
in some jurisdictions that products be listed by Underwriters’ Laboratories, Inc. (“UL”) or other similar recognized laboratories.
HBB also uses Intertek Testing Services for certification and testing of compliance with UL standards, as well as other national
and industry specific standards. HBB endeavors to have its products designed to meet the certification requirements of, and to
be certified in, each of the jurisdictions in which they are sold.
Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") requires
public companies to disclose whether certain minerals, commonly known as "conflict minerals," are necessary to the
functionality or production of a product manufactured by those companies and if those minerals originated in the Democratic
Republic of the Congo ("DRC") or an adjoining country. HBB conducts supply-chain due diligence investigations required by
the conflict minerals rules and makes disclosures required by the Dodd Frank Act. Our compliance with these investigation and
disclosure requirements could adversely affect our ability to sell products to customers that HBB is unable to designate as
"DRC conflict free."
Transactions with Related Parties
Mr. Alfred M. Rankin is the former executive chairman of the Company and current non-executive chairman of the Board of
the Company. Mr. Rankin provides consulting services to the Company under the terms of a consulting agreement pursuant to
which Mr. Rankin supports the president and chief executive officer of the Company upon request. Fees for consulting services
rendered by Mr. Rankin were $0.5 million for the year ended December 31, 2019. There were no fees for consulting services
rendered by Mr. Rankin in 2018.
Employees
As of December 31, 2019, HBB’s work force consisted of approximately 680 employees.
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Information about our Executive Officers
There exists no arrangement or understanding between any executive officer and any other person pursuant to which such
executive officer was selected.
The following tables set forth, as of February 26, 2020, the name, age, current position and principal occupation and
employment during the past five years of the Company’s executive officers.
Name
Age Current Position
Other Positions
EXECUTIVE OFFICERS OF THE COMPANY
Gregory H. Trepp
Gregory E. Salyers
R. Scott Tidey
Michelle O. Mosier
Dana B. Sykes
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Item 1A. RISK FACTORS
President and Chief Executive Officer of Hamilton
Beach Holding (from September 2017); President and
Chief Executive Officer of HBB (from prior to 2014);
Chief Executive Officer of KC (from prior to 2014)
Senior Vice President, Global Operations of HBB (from
prior to 2014)
Senior Vice President, North America Sales and
Marketing of HBB (from prior to 2014)
Senior Vice President, Chief Financial Officer and
Treasurer of Hamilton Beach Holding (since January
2020); Successor Vice President and Chief Financial
Officer of HBB (since October 2018)
Chief Financial Officer of United Sporting Companies
(from September 2015 to June 2018) a subsidiary of
SportsCo Holding, Inc. which filed for Chapter 11
bankruptcy in June 2019, and Controller for Reynolds
Groups Holdings Limited (from September 2011 to
August 2015).
Senior Vice President, General Counsel and Secretary of
Hamilton Beach Holding (from January 2020); Vice
President, General Counsel and Secretary of HBB (from
September 2015); Assistant Secretary of KC (from May
2015)
From July 2014 to September 2015, Associate General
Counsel, Assistant Secretary and Senior Director,
Human Resources of HBB. From prior to 2014 to July
2014, Assistant General Counsel and Director, Human
Resources of HBB.
HBB’s business is sensitive to the strength of the North American consumer markets and weakness in these markets could
adversely affect its business.
The strength of the economy in the U.S., and to a lesser degree in Canada and Mexico, has a significant impact on HBB’s
performance. Weakness in consumer confidence and poor financial performance by mass merchandisers, ecommerce retailers,
warehouse clubs, department stores or any of HBB’s other customers could result in reduced revenue and profitability. A
general slowdown in the consumer sector could result in additional pricing and marketing support pressures on HBB.
HBB is dependent on key customers and the loss of, or significant decline in business from, one or more of its key
customers could materially reduce its revenue and profitability and its ability to sustain or grow its business.
HBB relies on several key customers. Although HBB has long-established relationships with many customers, it does not have
any long-term supply contracts with these customers, and purchases are generally made using individual purchase orders. A
loss of or significant reduction in sales to any key customer could result in significant decreases in HBB’s revenue and
profitability and an inability to sustain or grow its business.
HBB must receive a continuous flow of new orders from its large, high-volume retail customers; however, it may be unable to
continually meet the needs of those customers. In addition, failure to obtain anticipated orders or delays or cancellations of
orders or significant pressure to reduce prices from key customers could impair its ability to sustain or grow its business.
As a result of dependence on its key customers, HBB could experience a material adverse effect on its revenue and profitability
if any of the following were to occur:
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the insolvency or bankruptcy of any key customer;
a declining market in which customers materially reduce orders or demand lower prices; or
a strike or work stoppage at a key customer facility, which could affect both its suppliers and customers.
If HBB were to lose, or experience a significant decline in business from any major customer, or if any major customers were
to go bankrupt, HBB might be unable to find alternate distribution outlets.
4
HBB is subject to foreign currency exchange risk.
HBB’s products are supplied by third-party suppliers located primarily in China. HBB generally negotiates the purchases from
its foreign suppliers in U.S. dollars. A weakening of the U.S. dollar against local currencies could result in certain non-U.S.
manufacturers increasing the U.S. dollar prices for future product purchases.
As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business
operations, including risks in connection with our transactions that are denominated in foreign currencies. In addition, we
translate sales and other results denominated in foreign currencies into U.S. dollars for purposes of our consolidated financial
statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on
our reported revenues and profitability, while depreciation of the U.S. dollar against these foreign currencies will generally
have a positive effect on reported revenues and profitability.
Any hedging activities HBB engages in may only offset a portion of the adverse financial impact resulting from unfavorable
changes in foreign currency exchange rates. HBB cannot predict with any certainty changes in foreign currency exchange rates
or the degree to which HBB can mitigate these risks.
Increases in costs of products may materially reduce our profitability.
Factors that are largely beyond HBB's control, such as movements in in-bound transportation rates and commodity prices for
the raw materials needed by suppliers of HBB’s products, may affect the cost of products, and HBB may not be able to pass
those costs on to its customers. As an example, HBB’s products require a substantial amount of plastic. Because the primary
resource used in plastic is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum.
When the prices of petroleum, as well as steel, aluminum and copper, increase significantly, supplier price increases may
materially reduce our profitability.
The increasing concentration of HBB’s branded small electric household and specialty housewares appliance sales among a
few retailers and the trend toward private label brands could materially reduce revenue and profitability.
With the growing trend towards the concentration of HBB’s branded small electric household and specialty housewares
appliance sales among fewer retailers, HBB is increasingly dependent upon fewer customers whose bargaining strength is
growing as a result of this concentration. HBB sells a substantial quantity of products to mass merchandisers, ecommerce
retailers, national department stores, variety store chains, drug store chains, specialty home retailers and other retail outlets. As
a result, these retailers generally have a large selection of small electric household and specialty housewares appliance suppliers
to choose from. In addition, certain of HBB’s larger customers use their own private label brands on household appliances that
compete directly with some of HBB’s products. As the retailers in the small electric household appliance industry become more
concentrated, competition for sales to these retailers may increase, which could materially reduce our revenue and profitability.
If HBB is unable to continue to enhance existing products, as well as develop and market new products that respond to
customer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products,
which could materially reduce revenue and profitability, which have historically benefited from sales of new products.
HBB may not be able to compete as effectively with competitors, and ultimately satisfy the needs and preferences of
customers, unless HBB can continue to enhance existing products and develop new innovative products for the markets in
which HBB competes. Product development requires significant financial, technological, and other resources. Product
improvements and new product introductions also require significant research, planning, design, development, engineering, and
testing at the technological and product process levels and HBB may not be able to timely develop and introduce product
improvements or new products. Competitors’ new products may beat HBB’s products to market, be higher quality or more
reliable, be more effective with more features, obtain better market acceptance, or render HBB’s products obsolete. Any new
products that HBB develops may not receive market acceptance or otherwise generate any meaningful revenue or profit relative
to our expectations based on, among other things, commitments to fund advertising, marketing, promotional programs and
development.
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HBB’s inability to compete effectively with competitors in its industry could result in lost market share and decreased
revenue.
The small electric household, specialty housewares appliances and commercial appliance industry does not have substantial
entry barriers. As a result, HBB competes with many manufacturers and distributors of housewares products. Additional
competitors may also enter this market and cause competition to intensify. For example, some of HBB’s customers have
expressed interest in sourcing, or expanding the extent of sourcing, small electric household and commercial appliances
directly from manufacturers in Asia. We believe competition is based upon several factors, including product design and
innovation, quality, price, product features, merchandising, promotion and warranty. If HBB fails to compete effectively with
these manufacturers and distributors, it could lose market share and experience a decrease in revenue, which would adversely
affect our results of operations.
HBB also competes with established companies, a number of which have substantially greater facilities, personnel, financial
and other resources. In addition, HBB competes with its own retail customers, who use their own private label brands, and
importers and foreign manufacturers of unbranded products. Some competitors may be willing to reduce prices and accept
lower profit margins to compete. As a result of this competition, HBB could lose market share and revenue.
Changes in consumer shopping trends and changes in distribution channels could result in lost market share and decreased
revenue and profitability.
Traditional brick-and-mortar retail channels have experienced low growth or declines in recent years, while the ecommerce
channel has experienced significant growth. Consumer shopping preferences have shifted, and may continue to shift in the
future, to distribution channels other than traditional brick-and-mortar retail channels. Success in the ecommerce channel
requires providing products at the right price, products that earn strong ratings and reviews and meaningful engagement with
online shoppers. HBB has invested in industry leading selling and marketing capabilities, while maintaining its presence in
traditional brick-and-mortar retail channels. However, if we are not successful in developing and utilizing ecommerce channels
that future consumers may prefer, we may experience a loss in market share and decreased revenue and profitability.
HBB may become subject to claims under foreign laws and regulations, which may be expensive, time-consuming and
distracting.
Because HBB has employees, property and business operations outside of the U.S., HBB is subject to the laws and the court
systems of many jurisdictions. HBB may become subject to claims outside the U.S. for violations or alleged violations of laws
with respect to the current or future foreign operations of HBB. In addition, these laws may be changed or new laws may be
enacted in the future. International litigation is often expensive, time-consuming and distracting. As a result, any of these risks
could significantly reduce HBB’s profitability and its ability to operate its businesses effectively.
HBB’s obligations relating to environmental matters may exceed our expectations.
HBB is subject to laws and regulations relating to the protection of the environment, including those governing the
management and disposal of hazardous substances. HBB is investigating or remediating historical contamination at some
current and former sites related to HBB’s prior manufacturing operations or the operations of businesses HBB acquired. The
costs of investigating and remediating historical contamination may increase based on the findings of investigations and the
effectiveness of remediation methods. In addition, the discovery of additional contamination at these or other sites could result
in significant cleanup costs that could have a material adverse effect on HBB’s financial conditions and results of operations.
Future changes to environmental laws could require HBB to incur significant additional expense.
HBB could, under some circumstances, also be held financially liable for or suffer other adverse effects due to environmental
violations or contamination caused by prior owners of businesses HBB has acquired. In certain circumstances, HBB’s financial
liability for cleanup costs takes into account agreements with an unrelated third party. HBB’s liability for these costs could
increase if the unrelated third party does not, or cannot, perform its obligations under those agreements. In addition, under some
of the agreements through which HBB has sold real estate, HBB has retained responsibility for certain contingent
environmental liabilities arising from pre-closing operations. These liabilities may not arise, if at all, until years after HBB sold
these operations and could require us to incur significant additional expenses, which could materially adversely affect HBB’s
results of operations and financial condition.
6
The Company is subject to litigation risk which could adversely affect our financial condition, results of operations and liquidity.
From time to time we are subject to claims involving product liability, infringement of intellectual property and patent rights of
third parties and other matters. Any such claims, with or without merit, could be time consuming and expensive, and may require
the Company to incur substantial costs and divert the resources of management. Due to the uncertainties of litigation, unfavorable
rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the Company’s
financial position, results of operations and cash flows of the period in which the ruling occurs, or in future periods.
To the extent that HBB relies on newly acquired businesses or new product lines to expand its business, these acquisitions
or new product lines may not contribute positively to HBB’s earnings because anticipated sales volumes and synergies may
not materialize, cost savings may be less than expected or acquired businesses may carry unexpected liabilities.
HBB may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or
lines of products. The acquisition of a business or of the rights to market specific products or use specific product names may
involve a financial commitment by HBB, either in the form of cash or stock consideration. HBB may not be able to acquire
businesses and develop products that will contribute positively to HBB’s earnings. Anticipated synergies may not materialize,
cost savings may be less than expected, sales of products may not meet expectations or acquired businesses may carry
unexpected liabilities.
HBB’s business involves the potential for product recalls, which could affect HBB’s revenue and profitability.
As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal
Hazardous Substances Act, which empower the CPSC to seek to exclude from the market those products that are found to be
unsafe or hazardous. Under certain circumstances, the CPSC could require HBB to repair, replace or refund the purchase price
of one or more of our products, or HBB may voluntarily do so. Electrical appliances are subject to various mandatory and
voluntary standards. Any repurchases or recalls of our products could be costly to us and could damage our reputation or the
value of our brands. If HBB is required to remove, or HBB voluntarily removes our products from the market, our reputation or
brands could be tarnished, and HBB might have large quantities of finished products that could not be sold. Furthermore,
failure to timely notify the CPSC of a potential safety hazard can result in fines being assessed against HBB. Additionally, laws
regulating certain consumer products exist in some states, as well as in other countries in which HBB sells our products, and
more restrictive laws and regulations may be adopted in the future. HBB’s results of operations are also susceptible to adverse
publicity regarding the quality and safety of our products. In particular, product recalls may result in a decline in sales for a
particular product.
HBB’s business subjects it to product liability claims, which could affect the reputation, revenue and profitability of HBB.
HBB faces exposure to product liability claims if one of our products is alleged to have caused property damage, bodily injury
or other adverse effects up to a defined self-insured loss limit per claim and maintains product liability insurance for claims
above this self-insured level. If a product liability claim is brought against HBB, our revenue and profitability could be affected
adversely as a result of negative publicity related to the claim, costs associated with any replacement of the product or expenses
related to defending these claims. This could be true even if the claims themselves are ultimately settled for immaterial
amounts. In addition, HBB may not be able to maintain product liability insurance on terms acceptable to HBB in the future. If
the number of product liability claims HBB experiences exceeds historical amounts, if HBB is unable to maintain product
liability insurance or if HBB’s product liability claims exceed the amount of our insurance coverage, HBB’s results of
operations and financial condition could be affected adversely.
Government regulations could impose costly requirements on HBB.
The SEC adopted conflict mineral rules under Section 1502 of the Dodd-Frank Act on August 22, 2012. The rules require
disclosure of the use of certain minerals, commonly known as “conflict minerals,” which are mined from the DRC and
adjoining countries. Since HBB’s supply chain is complex, ultimately it may not be able to designate all products as “DRC
conflict free” which may adversely affect its reputation with certain customers. In such event, HBB may also face difficulties in
satisfying customers who require products purchased from HBB to be “DRC conflict free”. If HBB is not able to meet such
requirements, customers may choose not to purchase HBB products, which could adversely affect sales and the value of
portions of HBB’s inventory.
7
HBB is subject in the ordinary course of its business, in the U.S. and elsewhere, to many statutes, ordinances, rules and
regulations that, if violated by HBB or its affiliates, partners or vendors, could have a material adverse effect on HBB’s
business. HBB is required to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery, anti-
corruption and anti-kickback laws adopted in many of the countries in which HBB does business which prohibit HBB from
engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business
and also require maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions.
Under the FCPA, companies operating in the U.S. may be held liable for actions taken by their strategic or local partners or
representatives. If HBB does not properly implement and maintain practices and controls with respect to compliance with
applicable anti-corruption, anti-bribery and anti-kickback laws, or if HBB fails to enforce those practices and controls properly,
HBB may be held responsible for their actions and may become subject to regulatory sanctions, including administrative costs
related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on HBB’s business
and capital raising activities, any of which could materially and adversely affect HBB’s business, results of operations and
financial condition.
HBB may be subject to risks relating to increasing cash requirements of certain employee benefits plans, which may affect
its financial position.
Because HBB’s defined benefit pension plans are frozen and no longer provide for the accrual of future benefits, the expenses
recorded for, and cash contributions required to be made to its defined benefit pension plans are dependent on, changes in
market interest rates and the value of plan assets, which, in turn, are dependent on actual investment returns. Significant
changes in market interest rates, decreases in the value of plan assets or investment losses on plan assets may require HBB to
increase the cash contributed to its defined benefit pension plans which may affect its financial position.
HBB depends on third-party suppliers for all of our products, which subjects the Company to risks, including unanticipated
increases in expenses, decreases in revenue and disruptions in the supply chain.
HBB is dependent on third-party suppliers for the manufacturing and distribution of our products. Our ability to select reliable
suppliers that provide timely deliveries of quality products will impact our success in meeting customer demand. Any supplier
inability to timely deliver products that meet desired specifications or any unanticipated changes in suppliers could be
disruptive and costly. Any significant failure by HBB to obtain quality products, in sufficient quantities, on a timely basis, and
at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on revenue and
profitability. As certain suppliers are primarily based in China, international operations are subject to additional risks
including, among others:
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currency fluctuations;
labor unrest;
potential political, economic and social instability;
restrictions on transfers of funds;
import and export duties and quotas;
changes in domestic and international customs and tariffs, including embargoes and customs restrictions;
uncertainties involving the costs to transport products;
long distance shipping routes dependent upon a small group of shipping and rail carriers and import facilities;
unexpected changes in regulatory environments;
regulatory issues involved in dealing with foreign suppliers and in exporting and importing products;
protection of intellectual property;
difficulty in complying with a variety of foreign laws;
difficulty in obtaining distribution and administrative support;
natural or human induced disasters such as earthquakes, tsunamis, floods, hurricanes, typhoons, fires, extreme weather
conditions, power or water shortages, telecommunications failures, and medical epidemics or pandemics, including
potential consequences from the coronavirus; and
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potentially adverse tax consequences, including significant changes in tax law.
8
The foregoing factors could have a material adverse effect on our ability to maintain or increase the supply of products, which
may result in material increases in expenses and decreases in revenue and profitability.
The markets for HBB's products are highly seasonal and dependent on consumer spending, which could result in
significant variations in revenue and profitability.
Sales of HBB products are related to consumer spending, including general economic conditions affecting disposable consumer
income such as unemployment rates, business conditions, interest rates, levels of consumer confidence, energy prices, mortgage
rates, the level of consumer debt and taxation. In addition, the retail market for small electric household and specialty
housewares appliances are highly seasonal in nature. Accordingly, HBB generally recognizes a substantial portion of our
revenue in the second half of the year as sales increase significantly with the fall holiday-selling season. Accordingly, quarter-
to-quarter comparisons of past operating results of HBB are meaningful only when comparing equivalent time periods, if at all.
Any economic downturn, decrease in consumer spending or shift in consumer spending away from small electric household
and specialty housewares appliances may significantly reduce revenue and profitability.
The Company is dependent on key personnel and the loss of these key personnel could significantly reduce its consolidated
profitability.
The Company is highly dependent on the skills, experience and services of its and its subsidiaries’ key personnel and the loss of
key personnel could have a material adverse effect on its consolidated business, operating results and financial condition.
Employment and retention of qualified personnel is important to the successful conduct of Hamilton Beach Holding’s business.
Therefore, the Company's success also depends upon its ability to recruit, hire, train and retain current and additional skilled
and experienced management personnel. The Company's inability to hire and retain personnel with the requisite skills could
impair its ability to manage and operate its consolidated business effectively and could significantly reduce its consolidated
profitability.
The financing arrangement of HBB contains various restrictions that could limit operating flexibility.
HBB’s credit facility contains covenants and other restrictions that, among other things, require HBB to satisfy certain financial
tests, maintain certain financial ratios and restrict HBB’s ability to incur additional indebtedness. The restrictions and covenants
in HBB’s credit facility, and other future financing arrangements may limit HBB’s ability to respond to market conditions,
provide for capital investment needs or take advantage of business opportunities by limiting the amount of additional
borrowings HBB may incur.
The Company’s business could suffer if information technology systems are disrupted, cease to operate effectively or become
subject to a security breach.
The Company relies heavily on information technology systems to operate websites; record and process transactions; respond
to customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; and maintain cost-efficient
operations. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of
computer hardware and software systems and maintain cybersecurity. The Audit Review Committee of the Company is
regularly briefed on cybersecurity matters, however despite the cybersecurity efforts, our information technology systems may
be vulnerable from time to time to damage or interruption from computer viruses, power outages, third-party intrusions and
other technical malfunctions. If our systems are damaged, or fail to function properly, we may have to make monetary
investments to repair or replace the systems and could endure delays in operations.
In addition, we regularly evaluate information technology systems and requirements and from time to time implement
modifications and/or upgrades to our information technology systems. Modifications include replacing existing systems with
successor systems, making changes to existing systems and acquiring new systems with new functionality. HBB is currently
engaged in a multi-year implementation of an enterprise resource planning (“ERP”) system. Such an implementation is a major
undertaking from a financial, management, and personnel perspective. The implementation of the ERP system may prove to be
more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the
extent anticipated. Any disruptions, delays or deficiencies in the design and implementation of our new ERP system could
adversely affect our financial position, results of operations and cash flows in addition to the effectiveness of our internal
controls over financial reporting.
Any material disruption or slowdown of our systems, including a disruption or slowdown caused by a security breach or our
failure to successfully upgrade its systems, could cause information, including data related to customer orders, to be lost or
delayed. Such a loss or delay could reduce demand and cause our sales and/or profitability to decline.
9
Failure to maintain data privacy could have a material adverse effect on our business, financial condition and results of
operations.
The Company is subject to certain laws, rules and regulations enacted to protect businesses and personal data (“Privacy
Laws”), which may include the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act
(“CCPA”), as well as industry self-regulatory codes that create new compliance obligations. The administration, enforcement
and regulation of Privacy Laws are quickly evolving and subject to changes in interpretation. Future changes in Privacy Laws
may require the Company to incur additional and unexpected expenses and may subject the Company to additional compliance
risk. Any failure to comply with Privacy Laws could have a material adverse impact on our financial condition and results of
operations.
U.S. government trade actions could have a material adverse effect on Hamilton Beach Brands Holding Company’s
subsidiaries, financial position, and results of operation.
The U.S. government has taken a number of trade actions that impact or could impact our operations, including
imposing tariffs on certain goods imported into the United States. In addition, several governments, including the European
Union, China and India, have imposed tariffs on certain goods imported from the United States. As the majority of our products
are imported into the United States from China, many of our product lines are subject to the tariffs imposed under Section 301
of US trade law that have been applied to separate lists of Chinese goods. The Section 301 tariffs on goods covered by lists 1,
2, 3 and 4a affect approximately 25% of total HBB purchases on an annualized basis. On December 13, 2019, the United
States Trade Representative (USTR) announced a “Phase One” agreement with China pursuant to which the U.S. government
agreed to suspend the 15% tariffs on List 4b products. On January 15, 2020, USTR issued a Federal Register notice reducing
the rate of Section 301 tariffs on List 4a products to 7.5%, effective February 14, 2020. We are continually evaluating the
impact of the current and any possible new tariffs on our supply chain, costs, sales and profitability and are considering
strategies to mitigate such impact, including reviewing sourcing options, filing requests for exclusion from the tariffs for certain
product lines and working with our suppliers and customers. We can provide no assurance that any strategies we implement to
mitigate the impact of such tariffs or other trade actions will be successful. Given the uncertainty regarding the scope and
duration of these trade actions by the U.S. government or other countries, as well as the potential for additional trade actions,
the impact on our operations and results remains uncertain.
The amount and frequency of dividend payments made on Hamilton Beach Holding’s common stock could change.
The Company's Board has the power to determine the amount and frequency of the payment of dividends. Decisions regarding
whether or not to pay dividends and the amount of any dividends are based on earnings, capital, and future expense
requirements, financial conditions, contractual limitations and other factors our Board may consider.
Certain members of the Company's extended founding family own a substantial amount of Class A Common and Class B
Common, and if they were to act in concert, could control the outcome of director elections and other stockholder votes on
significant actions.
Hamilton Beach Holding has two classes of common stock: Class A Common and Class B Common. Holders of Class A
Common will be entitled to cast one vote per share and, as of December 31, 2019, accounted for approximately 18.80% of the
voting power of Hamilton Beach Holding. Holders of Class B Common are entitled to cast ten votes per share and, as of
December 31, 2019, accounted for the remaining voting power of Hamilton Beach Holding. As of December 31, 2019, certain
members of the Company's extended founding family held approximately 34.78% of Class A Common and 80.13% of Class B
Common. On the basis of this common stock ownership, certain members of the Company's extended founding family could
exercise 71.6% of the Company's total voting power. Although there is no voting agreement among such family members, in
writing or otherwise, if they were to act in concert, they would exert significant control over the outcome of director elections
and other stockholder votes on significant actions, such as certain amendments to the Company's amended and restated
certificate of incorporation and sale of the Company or substantially all of its assets. Because such family members could
prevent other stockholders from exercising significant influence over significant corporate actions, the Company may be a less
attractive takeover target, which could adversely affect the market price of its common stock.
10
The Company is an “emerging growth company” and as a result of the reduced disclosure requirements applicable to
emerging growth companies, the reduced disclosures may make it more difficult to compare our performance with other
public companies.
We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we
may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
In addition, the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period
for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the
adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not
to opt out of such extended transition period, which means that when a standard is issued or revised and it has different
application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard
at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with
those of another public company that is neither (i) an emerging growth company nor (ii) an emerging growth company that has
opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting
standards used.
We will remain an emerging growth company for up to five years, although we will lose that status sooner if our revenues
exceed $1.07 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if we are deemed to be a
large accelerated filer under the federal securities laws.
There are risks associated with the wind down of KC.
On October 10, 2019, the Board approved the wind down of KC and its retail operations. At December 31, 2019, all stores
were closed for business. The Company expects the wind down to continue through the first half of 2020 to facilitate the
settlement of remaining liabilities. KC may incur additional costs until the wind down is complete, which may include,
contract assignment and termination costs, primarily with respect to store operating leases. The final outcome is dependent
upon various factors, many of which are outside of our control, including, without limitation, the actual outcomes of
discussions and negotiations with landlords and the counterparties to the contracts we intend to terminate. In addition, the wind
down of the KC business involves numerous risks to us, including but not limited to:
•
•
•
•
potential disruption of the operations of the rest of our businesses and diversion of management’s attention from such
businesses and operations;
exposure to unknown, contingent or other liabilities, including litigation arising in connection with the KC wind
down;
negative impact on our business relationships, including current relationships with our customers, suppliers, vendors,
lessors, licensees and employees; and
unintended negative consequences from changes to our business profile.
If any of these or other factors impair the successful implementation of the wind down, we may not be able to realize other
business opportunities as we may be required to spend additional time and incur additional expense relating to the wind down
that otherwise would be used on the development and expansion of our other businesses, which could adversely impact the
Company’s business, operational results, financial position and cash flows.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
11
Item 2. PROPERTIES
The following table presents the principal distribution and office facilities owned or leased:
Facility Location
Glen Allen, Virginia
Geel, Belgium
Shenzhen, People's Republic of China
Mexico City, Mexico
Olive Branch, Mississippi
Picton, Ontario, Canada
Belleville, Ontario, Canada
Owned/
Leased
Leased
Function(s) (2)
Corporate headquarters
(1)
(1)
Distribution center
Distribution center
Leased Mexico sales and administrative headquarters
Leased Distribution center
Leased Distribution center
Leased Distribution center
Southern Pines, North Carolina
Owned
Service center for customer returns; catalog distribution center; parts distribution center
Shenzhen, People's Republic of China
Markham, Ontario, Canada
Leased Administrative office
Leased
Canada sales and administration headquarters
City of Sao Paulo, Sao Paulo, Brazil
Leased
Brazil sales and administrative headquarters
Joinville, Santa Catarina, Brazil
(1)
Distribution center
Shanghai, People's Republic of China
Leased
Sales office
Suzhou, People's Republic of China
Tultitlan, Mexico
(1)
(1)
Distribution center
Distribution center
(1)
(2)
This facility is not owned or leased by HBB. This facility is managed by a third-party distribution provider.
Sales offices are also leased in several cities in the U.S., Canada, China and Mexico.
Item 3. LEGAL PROCEEDINGS
The information required by this Item 3 is set forth in Note 11 "Contingencies" included in our Financial Statements and
Supplementary Data contained in Part IV of this Form 10-K and is hereby incorporated herein by reference to such information.
Item 4. MINE SAFETY DISCLOSURES
None.
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Company's Class A Common is traded on the New York Stock Exchange under the ticker symbol “HBB.” Because of
transfer restrictions, no trading market has developed, or is expected to develop, for the Company's Class B Common. The
Class B Common is convertible into Class A Common on a one-for-one basis.
The declaration of future dividends, record dates and payout dates for such future dividends will be at the discretion of the
Board and will depend on various factors then existing, including earnings, financial condition, results of operations, capital
requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends, restrictions imposed by
applicable law, general business conditions and other factors that the Board deems relevant.
At December 31, 2019 and 2018, there were 780 and 772, respectively, Class A Common stockholders of record and 902 and
892, respectively, Class B common stockholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In May 2018, the Company approved a stock repurchase program for the purchase of up to $25.0 million of the Company's
Class A Common Stock outstanding through December 31, 2019. As of December 31, 2019, the Company
repurchased 364,893 shares for an aggregate purchase price of $6.0 million. There were no stock repurchases during the three
months ended December 31, 2019 and the twelve months ended December 31, 2018 and 2017.
12
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.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth the Company's selected historical financial data as of and for each of the periods indicated.
Except where indicated, the results of operations, financial position, and cash flows of KC are reflected as discontinued
operations for all periods reported. This information is only a summary and should be read in conjunction with the historical
consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
Operating Statement Data:
Revenue
Operating profit
Year Ended December 31
2019
2018
2017
2016
2015
(In thousands, except per share amounts)
$ 612,843
$ 629,710
$ 612,229
$ 601,006
$ 616,874
$ 36,866
$ 38,170
$ 39,928
$ 41,204
$ 33,195
Income from continuing operations, net of tax
$ 25,078
$ 27,145
$ 20,130
$ 25,920
$ 19,166
Income (loss) from discontinued operations, net of tax
$ (28,600) $
(5,361) $
(2,225) $
259
$
545
Net income (loss)
$
(3,522) $ 21,784
$ 17,905
$ 26,179
$ 19,711
Basic and diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Basic and diluted earnings (loss) per share
Actual shares outstanding at December 31 (1)
Basic weighted average shares outstanding (1)
Diluted weighted average shares outstanding (1)
$
$
1.83
$
1.98
(2.09)
(0.39)
(0.26) $
1.59
$
$
1.47
(0.16)
1.31
$
$
1.90
0.01
1.91
$
$
1.40
0.04
1.44
13,516
13,690
13,726
13,713
13,699
13,731
13,673
13,673
13,685
13,673
13,673
13,673
13,673
13,673
13,673
(1)
On September 29, 2017, NACCO, Hamilton Beach Holding's former parent company, spun-off the Company to
NACCO stockholders. The basic and diluted earnings (loss) per share amounts for the Company for all periods prior
to the spin-off have been calculated based upon the number of shares distributed in the spin-off.
13
Balance Sheet Data at December 31:
Net working capital(2)
Total assets
Year Ended December 31
2019
2018
2017
2016
2015
(In thousands, except per share amounts and employee data)
$ 112,285
$ 104,254
$ 91,344
$ 95,088
$ 116,839
$ 303,240
$ 330,427
$ 326,233
$ 310,833
$ 310,128
Short-term portion of revolving credit agreements
$ 23,497
$ 11,624
$ 31,346
$ 12,714
$
8,365
Long-term portion of revolving credit agreements
$ 35,000
$ 35,000
$ 20,000
$ 26,000
$ 50,000
Stockholders' equity
Cash Flow Data:
Net cash provided by operating activities from continuing operations
Net cash used for investing activities from continuing operations
Net cash provided by (used for) financing activities from continuing
operations
Other Data:
Cash dividends paid to NACCO Industries, Inc.
Cash dividends paid(1)
Purchase of treasury stock
Per share data:
Cash dividends paid(1)
Market value at December 31 (1)
Stockholders' equity at December 31
$ 55,059
$ 65,438
$ 46,408
$ 65,268
$ 82,824
$
$
$
$
$
$
$
$
$
202
$ 17,323
$ 28,303
$ 58,025
$ 13,535
(4,122) $
(7,759) $
(6,177) $
(4,788) $
(4,775)
1,062
$
(9,255) $ (26,532) $ (61,837) $ (10,088)
— $
— $ 38,000
$ 42,000
$ 15,000
4,851
5,960
0.36
19.10
4.07
$
$
$
$
$
4,658
$
1,162
— $
—
0.34
23.46
4.77
$
$
$
0.09
25.69
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
3.39
$
4.77
$
6.06
Total employees at December 31 for continuing operations
680
670
650
600
600
(1)
(2)
This information is only included for periods subsequent to the spin-off from NACCO.
Net working capital is defined as trade receivables, net plus inventory less accounts payable.
14
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's
consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in
the United States (“GAAP”). The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and
liabilities (if any). Actual results could differ from those estimates.
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in
the preparation of its consolidated financial statements.
Revenue Recognition: Revenue is recognized when control of the promised goods or services is transferred to the Company's
customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or
services. Sales taxes are excluded from revenue. At contract inception, the Company assesses the goods and services promised
in its contracts with customers and identifies a performance obligation for each promised good or service that is distinct. The
Company has elected to account for shipping and handling activities performed after a customer obtains control of the goods
as activities to fulfill the promise to transfer the goods, and therefore these activities are not assessed as a separate service to
customers. The amount of revenue recognized varies primarily with changes in returns. In addition, the Company offers price
concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other
volume-based arrangements. We determine whether price concessions offered to its customers are a reduction of the
transaction price and revenue or are advertising expense, depending on whether we receive a distinct good or service from our
customers and, if so, whether we can reasonably estimate the fair value of that distinct good or service. We evaluated such
agreements with our customers and determined they should be accounted for as variable consideration. As of December 31,
2019, we have determined that customer price concessions recorded as a reduction of revenue, certain of which were
previously recorded in other current liabilities, meet all of the criteria specified in ASC 210-20, "Balance Sheet Offsetting".
Accordingly, amounts related to such arrangements have been classified as a reduction of trade receivables, net as of
December 31, 2019 (prior periods have not been adjusted as all the criteria in ASC 210-20 had not previously been met).
To estimate variable consideration, the Company applies both the expected value method and most likely amount method
based on the form of variable consideration, according to which method would provide the better prediction. The expected
value method involves a probability weighted determination of the expected amount, whereas the most likely amount method
identifies the single most likely outcome in a range of possible amounts.
The Company monitors its estimates of variable consideration, which includes returns and price concessions, and periodically
makes adjustments to the carrying amounts as appropriate. During 2019, there were no material adjustments to the aforesaid
estimates and the Company's past results of operations have not been materially affected by a change in these estimates.
Although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to
materially change these estimates in the future.
Retirement Benefit Plans: The Company maintains two defined benefit pension plans that provide benefits based on years of
service and average compensation during certain periods. The Company's policy is to periodically make contributions to fund
the defined benefit pension plans within the range allowed by applicable regulations. The defined benefit pension plan assets
consist primarily of publicly traded stocks and government and corporate bonds. There is no guarantee the actual return on the
plans’ assets will equal the expected long-term rate of return on plan assets or that the plans will not incur investment losses.
The expected long-term rate of return on defined benefit plan assets reflects management’s expectations of long-term rates of
return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-
term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is
consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return.
The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate
of return assumption are based upon the rates of return earned or expected to be earned by investments in the equivalent
benchmark market indices for each of the asset classes.
15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
Expected returns for the U.S. pension plan are based on a calculated market-related value for U.S. pension plan assets. Under
this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns which
are recognized ratably in the market-related value of assets over three years. Expected returns for the non-U.S. pension plan
are based on fair market value for non-U.S. pension plan assets.
The basis for the selection of the discount rate for each plan is determined by matching the timing of the payment of the
expected obligations under the defined benefit plans against the corresponding yield of high-quality corporate bonds of
equivalent maturities.
Changes to the estimate of any of these factors could result in a material change to the Company's pension obligation causing a
related increase or decrease in reported net operating results in the period of change in the estimate. Because the 2019
assumptions are used to calculate 2020 pension expense amounts, a one percentage-point change in the expected long-term
rate of return on plan assets would result in a change in pension expense for 2020 of approximately $0.3 million for the plans.
A one percentage-point change in the discount rate would result in a change in pension expense for 2020 by less than $0.1
million. A one percentage-point increase in the discount rate would have lowered the plans’ projected benefit obligation as of
the end of 2019 by approximately $1.6 million; while a one percentage-point decrease in the discount rate would have raised
the plans’ projected benefit obligation as of the end of 2019 by approximately $1.8 million.
Environmental Liabilities: HBB and environmental consultants are investigating or remediating historical environmental
contamination at some current and former sites operated by HBB or by businesses it acquired. Liabilities for environmental
matters are recorded in the period when it is determined to be probable and reasonably estimable that the Company will incur
costs. When only a range of amounts is reasonably estimable and no amount within the range is more probable than another,
the Company records the low end of the range. Environmental liabilities are recorded on an undiscounted basis and recorded
in selling, general, and administrative expenses. When a recovery of a portion of an environmental liability is probable, such
amounts are recognized as a reduction to selling, general, and administrative expenses and included in prepaid expenses and
other current assets (current portion) and other non-current assets until settled. If the Company's environmental liability
balance as of December 31, 2019 were to increase by one percent, the reserve and selling, general, and administrative
expenses would increase by less than $0.1 million.
16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
RESULTS OF OPERATIONS
The results of operations for Hamilton Beach Holding were as follows for the years ended December 31:
2019 Compared with 2018
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Amortization of intangible assets
Operating profit
Interest expense, net
Other expense (income), net
Income from continuing operations before income taxes
Income tax expense
Net income from continuing operations
Loss from discontinued operations, net of tax
Net income
Year Ended December 31
2019
% of
Revenue
2018
% of
Revenue
$
Change
%
Change
$
612,843
100.0 % $
629,710
100.0% $ (16,867)
483,298
129,545
91,302
1,377
36,866
2,975
78.9 %
21.1 %
14.9 %
0.2 %
6.0 %
0.5 %
(502)
(0.1)%
34,393
9,315
25,078
(28,600)
$
(3,522)
5.6 %
1.5 %
4.1 %
n/m
492,195
137,515
97,964
1,381
38,170
2,916
293
34,961
7,816
27,145
(5,361)
$
21,784
78.2%
21.8%
15.6%
0.2%
6.1%
0.5%
—%
5.6%
1.2%
4.3%
n/m
(8,897)
(7,970)
(6,662)
(4)
(1,304)
59
(795)
(568)
1,499
(2,067)
(23,239)
$ (25,306)
(2.7)%
(1.8)%
(5.8)%
(6.8)%
(0.3)%
(3.4)%
2.0 %
(271.3)%
(1.6)%
19.2 %
(7.6)%
n/m
Effective income tax rate on continuing operations
27.1%
22.4%
The following table identifies the components of the change in revenue for 2019 compared with 2018:
2018
(Decrease) increase from:
Unit volume and product mix
Foreign currency
Average sales price
2019
Revenue
629,710
(18,699)
(1,688)
3,520
612,843
$
$
Revenue - Revenue decreased $16.9 million, or 2.7%. The decline is primarily due to lower sales volume in the U.S.
consumer, international consumer and global commercial markets. Globally, our ecommerce business grew 27%; however,
these gains were more than offset by the adverse impact of tariffs, a loss of placements in the dollar store channel resulting
from HBB's decision not to maintain very low margin business, ongoing foot traffic challenges at some retailers and other
pressure points facing individual retail companies. Revenue in the global commercial market decreased due primarily to lower
volume driven by the adverse impact of tariffs.
Gross profit - The decline in gross profit of $8.0 million, or 5.8%, is primarily due to lower sales volume. As a
percentage of revenue, gross profit margin declined from 21.8% to 21.1% primarily due to increased inbound freight expenses,
the adverse impact of tariffs and unfavorable foreign currency movements.
17
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
Selling, general and administrative expenses - The decrease in selling, general and administrative expenses was
mainly attributable to a $5.2 million decline in environmental expense due to the reduction to the environmental reserve at one
site of $3.2 million related to a change in the expected type and extent of investigation and remediation activities and to a $1.5
million reduction in environmental expense due to the probable recovery of investigation and remediation costs associated
with the same site from a responsible party in exchange for release from all future obligations by that party. Additionally,
advertising expenses declined $3.1 million and employee-related costs decreased $2.0 million due to reduced incentive
compensation expense. These decreases were partially offset by a one-time charge of $3.2 million recorded in the second
quarter of 2019 for a contingent loss related to patent litigation.
Other expense (income), net - Other income in 2019 includes currency gains of $0.4 million compared with other
expense in 2018 related to currency losses of $0.5 million as the Mexican peso strengthened against the U.S. dollar.
Income tax expense - The Company recognized income tax expense of $9.3 million on income from continuing
operations before income taxes of $34.4 million, an effective tax rate of 27.1% compared to income tax expense of $7.8
million, an effective tax rate of 22.4%. The increase in the effective tax rate is primarily due to $2.0 million of deferred tax
expense related to a change in judgment regarding the valuation allowance recorded against certain deferred tax assets of KC.
2018 Compared with 2017
The results of operations for Hamilton Beach Holding were as follows for the years ended December 31:
Year Ended December 31
2018
% of
Revenue
2017
% of
Revenue
$
Change
%
Change
$
629,710
100.0% $
612,229
100.0 % $ 17,481
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Amortization of intangible assets
Operating profit
Interest expense, net
Other expense (income), net
Income from continuing operations before income taxes
Income tax expense
Net income from continuing operations
Loss from discontinued operations, net of tax
Net income
492,195
137,515
97,964
1,381
38,170
2,916
293
34,961
7,816
27,145
(5,361)
$
21,784
78.2%
21.8%
15.6%
0.2%
6.1%
0.5%
—%
5.6%
1.2%
4.3%
n/m
477,220
135,009
93,700
1,381
39,928
1,572
(692)
39,048
18,918
20,130
(2,225)
77.9 %
22.1 %
15.3 %
0.2 %
6.5 %
0.3 %
(0.1)%
6.4 %
14,975
2,506
4,264
—
(1,758)
1,344
(4,087)
3.1 % (11,102)
3.3 %
n/m
7,015
(3,136)
$
17,905
$
3,879
2.9 %
3.1 %
1.9 %
4.6 %
— %
(4.4)%
85.5 %
(10.5)%
(58.7)%
34.8 %
n/m
985
(142.3)%
Effective income tax rate on continuing operations
22.4%
48.4%
The following table identifies the components of the change in revenue for 2018 compared with 2017:
2017
Increase (decrease) from:
Unit volume and product mix
Average sales price
Foreign currency
2018
18
Revenue
612,229
12,838
6,485
(1,842)
629,710
$
$
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
Revenue - Revenue increased $17.5 million, or 2.9%, primarily due to higher sales volume in the international
consumer retail market and increased sales of new and higher-priced products, mainly in the U.S consumer and global
commercial markets. Unfavorable foreign currency movements partially offset the increase in revenue as the Mexican peso,
Brazilian Real and Canadian dollar weakened against the U.S. dollar during 2018.
Gross profit - Gross profit increased mainly due to higher sales volume in the international consumer retail market
and increased sales of new and higher-priced products, mainly in the U.S consumer and global commercial markets. As a
percentage of revenue, gross profit declined from 22.1% to 21.8% primarily due to increased warehouse, transportation, and
product costs.
Selling, general and administrative expenses - The increase in selling, general and administrative expenses was
primarily due to increased legal and professional service fees of $2.7 million, higher employee-related expenses of $2.8
million and increased advertising expenses of $2.5 million, which were partially offset by the absence of $2.5 million of one-
time costs incurred in the prior year to effect the spin-off from NACCO. Legal and professional service fees increased mainly
due to patent litigation expenses and the increase in employee-related expenses was mainly due to merit compensation
increases, as well as additional headcount to support HBB's strategic initiatives. Advertising expenses increased primarily due
to increased consumer advertising campaigns to support the fall holiday-selling season.
Interest expense, net - Interest expense, net increased $1.3 million primarily due to an increase in average borrowings
outstanding under HBB's revolving credit facility.
Other expense, net - Other expense, net increased $1.0 million primarily due to foreign currency gains as the Mexican
peso strengthened against the U.S. dollar during the period.
Income tax expense - The Company recognized income tax expense of $7.8 million on income from continuing
operations before income taxes of $35.0 million (an effective tax rate of 22.4%). The effective income tax rate on continuing
operations decreased from 48.4% in 2017 primarily due to a $4.7 million provisional tax charge resulting from the reduction in
the U.S. federal corporate tax rate in 2018 as a result of the Tax Cuts and Jobs Act (the "Tax Act") and the absence of non-
deductible spin-off related expenses incurred in the prior year to effect the spin-off from NACCO.
LIQUIDITY AND CAPITAL RESOURCES
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,
capital expenditures, and payments of principal and interest on debt. At December 31, 2019, the Company had cash and cash
equivalents for continuing operations of $2.1 million, compared to $4.4 million at December 31, 2018.
Historically, Hamilton Beach Brands Holding Company would rely on cash flows from KC as well as HBB. However, given
that all of the KC stores have been closed and the Board approved the dissolution of the KC legal entity, KC is no longer
considered a source of cash for Hamilton Beach Brands Holding Company. As of December 31, 2019, KC reported current
liabilities in excess of current assets of $24.3 million. Neither Hamilton Beach Brands Holding Company nor HBB has
guaranteed any obligations of KC.
19
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
The following table presents selected cash flow information from continuing operations:
Net cash provided by operating activities from continuing operations
Net cash used for investing activities from continuing operations
Net cash provided by (used for) financing activities from continuing operations
December 31, 2019 Compared with December 31, 2018
Year Ended December 31
2019
2018
2017
(In thousands)
$
$
$
202
$ 17,323
$ 28,303
(4,122) $
(7,759) $
(6,177)
1,062
$
(9,255) $ (26,532)
Operating activities - Net cash provided by operating activities decreased $17.1 million in 2019 compared to the prior
year primarily due to increased trade receivables, partially offset by a decline in inventory. Trade receivables increased
primarily due to the timing of collections and increased fourth quarter sales in 2019 compared with prior year. The decline in
inventory is primarily due to the continued efficient management of inventory levels.
Investing activities - Net cash used for investing activities from continuing operations decreased $3.6 million in 2019
primarily due to lower capital expenditures related to HBB internal-use software development costs and tooling for new
products.
Financing activities - Net cash provided by financing activities from continuing operations was $1.1 million in 2019
compared to a use of cash of $9.3 million in 2018 primarily due to an increase in HBB's net borrowing activity on the
revolving credit facility. The increase in borrowings was used to fund net working capital and stock repurchases.
December 31, 2018 Compared with December 31, 2017
Operating activities - Net cash provided by operating activities decreased by $11.0 million in 2018 primarily due to
the net changes in operating assets and liabilities. The decrease is primarily due to the changes in working capital and the
decline in the accounts payable to NACCO. The change in working capital is attributable to a decrease in accounts payable in
2018 compared with a large increase in 2017, which was partially offset by a decrease in accounts receivable in 2018
compared with a large increase in 2017 and a larger increase in inventory during 2017 compared with 2018. The change in
accounts payable is mainly due to the timing of purchases and the change in accounts receivable, after consideration for the
effect of the adoption of the new revenue standard in 2018, is mainly attributable to the timing of collections. The increase in
inventory is primarily due to lower sales in the second half of 2018 compared with the sales forecast and higher product costs
compared to 2017. The decline in the accounts payable to NACCO is primarily due to payments made to NACCO during 2018
under the tax allocation agreement.
Investing activities - Net cash used for investing activities increased primarily due to an increase in capital
expenditures for internal-use software development costs and corporate office leasehold improvements.
Financing activities - Net cash used for financing activities decreased $17.3 million primarily due to the absence of
the 2017 cash dividends of $38.0 million paid to NACCO, partially offset by a reduction in the revolving credit facility and
dividend payments to stockholders.
Capital Resources
HBB maintains a $115.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires in June
2021. The current portion of borrowings outstanding represents expected voluntary repayments to be made in 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 $297.2 million as of December 31, 2019. At December 31,
2019, the borrowing base under the HBB Facility was $114.4 million and borrowings outstanding were $58.3 million.
At December 31, 2019, the excess availability under the HBB Facility was $56.1 million.
20
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible
trade receivables, inventory and trademarks of the borrowers, as defined in the HBB Facility. Borrowings bear interest at a floating
rate, which can be a base rate, LIBOR or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. The
applicable margins, effective December 31, 2019, for base rate loans and LIBOR loans denominated in U.S. dollars were 0.0%
and 1.75%, respectively. The applicable margins, effective December 31, 2019, for base rate loans and bankers' acceptance loans
denominated in Canadian dollars were 0.0% and 1.75%, respectively. The HBB Facility also requires a fee of 0.25% per annum
on the unused commitment. The margins and unused commitment fee under the HBB Facility are subject to quarterly adjustment
based on average excess availability. The weighted average interest rate applicable to the HBB Facility for the year ended December
31, 2019 was 3.82%, 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 $35.0 million at December 31, 2019 at an average fixed
interest rate of 1.5%. HBB also has delayed-start interest rate swaps with notional values totaling $10.0 million as of December
31, 2019, with fixed rates of 1.7%.
The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to Hamilton Beach
Holding, subject to achieving availability thresholds. Under Amendment No. 6 to the HBB Facility, dividends to Hamilton Beach
Holding are not to exceed $5.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment
date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $15.0 million. Dividends
to Hamilton Beach Holding are discretionary to the extent that for the thirty days prior to the dividend payment date, and after
giving effect to the dividend payment, HBB maintains excess availability of not less than $25.0 million. The HBB Facility also
requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility.
At December 31, 2019, 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.
HBB believes funds available from cash on hand, the HBB Facility and operating cash flows will provide sufficient liquidity to
meet its operating needs and commitments arising during the next twelve months and until the expiration of the HBB Facility.
KC maintained a separate revolving line of credit facility (the "KC Facility") that was secured by substantially all of the assets
of KC. The Company's decision to wind down KC and its retail operations constituted an event of default under the KC
Facility. As a result, on October 23, 2019, KC and its lender entered into a Forbearance Agreement (the “Forbearance
Agreement”). Under the terms of the Forbearance Agreement, the lender agreed to forebear from exercising its rights and
remedies as a result of the events of default pending accelerated payment in full of the obligations under the KC facility on or
before December 15, 2019. All obligations under the KC Facility were paid in full in accordance with the Forbearance
Agreement and the KC Facility was terminated on December 3, 2019.
21
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
Contractual Obligations, Contingent Liabilities and Commitments
Following is a table which summarizes the contractual obligations of Hamilton Beach Holding as of December 31, 2019:
Payments Due by Period
Contractual Obligations
Total
2020
2021
2022
2023
2024
Thereafter
HBB:
Revolving credit agreements
$
58,497
192
58,305
$
— $
— $
— $
Variable interest payments on HBB
Facility
Purchase and other obligations
Operating lease obligations
4,140
2,244
212,312
209,040
31,710
6,114
KC:
Purchase and other obligations
Operating lease obligations
12,475
26,493
12,475
10,942
1,896
3,157
4,089
—
5,863
—
—
—
—
69
—
46
—
—
1,816
1,574
1,590
16,527
—
4,027
—
2,458
—
1,534
—
1,669
Total contractual cash obligations
$ 345,627
$ 241,007
$
73,310
$
5,912
$
4,078
$
3,124
$
18,196
Not included in the table above, HBB has a long-term liability of approximately $0.4 million for unrecognized tax benefits,
including interest and penalties, as of December 31, 2019. At this time, the Company is unable to make a reasonable estimate
of the timing of payments due to, among other factors, the uncertainty of the timing and outcome of its audits.
HBB’s variable interest payments are calculated based upon HBB's anticipated payment schedule and the December 31, 2019
base rate and applicable margins, as defined in the HBB Facility. A 1/8% increase in the base rate would increase HBB’s
estimated total annual interest payments on the HBB Facility by approximately $0.5 million.
HBB's purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and
incentive compensation. KC's purchase and other obligations are primarily for accounts payable and accrued employee related
costs.
An event of default, as defined in the HBB Facility and in HBB's operating lease agreements, could cause an acceleration of
the payment schedule. No such event of default for HBB has occurred or is anticipated to occur.
KC is in default of the lease agreements for KC stores, which could result in acceleration of the payment schedule for those
store leases.
Pension funding can vary significantly each year due to plan amendments, changes in the market value of plan assets,
legislation and the Company’s decisions to contribute above the minimum regulatory funding requirements. As a result,
pension funding has not been included in the table above. HBB does not expect to contribute to its pension plans in 2020.
Pension benefit payments are made from assets of the pension plans.
Off Balance Sheet Arrangements
The Company has not entered into any off balance sheet financing arrangements, other than operating leases, which are
disclosed in the contractual obligations table above.
22
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
Accounting Standards Adopted
In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the
requirements in GAAP related to the income statement presentation of the components of net periodic benefit cost for an
entity's sponsored defined benefit pension and other post-retirement plans. The Company adopted this guidance on January 1,
2019. The change in presentation of the components of net periodic pension cost was applied retrospectively which resulted in
$0.7 million and $0.9 million of net periodic pension income for the years end December 31, 2018, and 2017, respectively,
being reclassified from selling, general and administrative expenses to other expense (income), net.
Accounting Standards Not Yet Adopted
The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying
with new or revised accounting standards, which means that when a standard is issued or revised and it has different
application dates for public or nonpublic entities, the Company can adopt the new or revised standard at the time nonpublic
entities adopt the new or revised standard.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and
liabilities for the rights and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal
years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early
adoption is permitted. The Company is planning to adopt ASU 2016-02 for its year ending December 31, 2021 and is currently
evaluating to what extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and
related disclosures.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to
recognize credit losses as an allowance rather than as a write-down. For nonpublic entities, the amendments are effective for
fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2021.
Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, 2022 and is
currently evaluating to what extent ASU 2016-13 will affect the Company's financial position, results of operations, cash flows
and related disclosures.
FORWARD-LOOKING STATEMENTS
The statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
elsewhere throughout this Annual Report on Form 10-K 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 with respect to each subsidiary's
operations include, without limitation: (1) changes in the sales prices, product mix or levels of consumer purchases of small
electric and specialty housewares appliances, (2) changes in consumer retail and credit markets, including the increasing
volume of transactions made through third-party internet sellers, (3) bankruptcy of or loss of major retail customers or
suppliers, (4) changes in costs, including transportation costs, of sourced products, (5) delays in delivery of sourced products,
(6) changes in or unavailability of quality or cost effective suppliers, (7) exchange rate fluctuations, changes in the import
tariffs and monetary policies and other changes in the regulatory climate in the countries in which HBB buys, operates and/or
sells products, (8) the impact of tariffs on customer purchasing patterns, (9) product liability, regulatory actions or other
litigation, warranty claims or returns of products, (10) customer acceptance of, changes in costs of, or delays in the
development of new products, (11) increased competition, including consolidation within the industry, (12) shifts in consumer
shopping patterns, gasoline prices, weather conditions, the level of consumer confidence and disposable income as a result of
economic conditions, unemployment rates or other events or conditions that may adversely affect the level of customer
purchases of HBB products, (13) changes mandated by federal, state and other regulation, including tax, health, safety or
environmental legislation, (14) risks associated with the wind down of KC including unexpected costs, contingent liabilities
and the potential disruption of our other businesses, (15) the unpredictable nature of the coronavirus and its potential impact
23
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except as Noted and Per Share and Percentage Data)
on our business, and (16) 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, 2019.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
HBB enters into certain financing arrangements that require interest payments based on floating interest rates. As such, the
Company's financial results are subject to changes in the market rate of interest. There is an inherent rollover risk for
borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and business financing requirements. To reduce the exposure to changes in the
market rate of interest, HBB has entered into interest rate swap agreements for a portion of its floating rate financing
arrangements. The Company does not enter into interest rate swap agreements for trading purposes. Terms of the interest rate
swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial
instruments sensitive to changes in interest rates. The Company assumes that a loss in fair value is an increase to its liabilities.
The fair value of the Company's interest rate swap agreements was a payable of $0.1 million at December 31, 2019. A
hypothetical 10% decrease in interest rates would cause a decrease of $0.2 million in the fair value of interest rate swap
agreements and the resulting fair value would be a payable of $0.3 million. Additionally, a hypothetical 10% increase in
interest rates would not have a material impact to the Company's interest expense, net of $3.0 million at December 31, 2019.
FOREIGN CURRENCY EXCHANGE RATE RISK
HBB operates internationally and enters into transactions denominated in foreign currencies, principally the Canadian dollar,
the Mexican peso and, to a lesser extent, the Chinese yuan and Brazilian real. As such, HBB's financial results are subject to the
variability that arises from exchange rate movements. The fluctuation in the value of the U.S. dollar against other currencies
affects the reported amounts of revenue, expenses, assets and liabilities. The potential impact of currency fluctuation increases
as international expansion increases.
HBB uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign
currencies and not for trading purposes. These contracts generally mature within twelve months and require HBB to buy or sell
the functional currency in which the applicable subsidiary operates and buy or sell U.S. dollars at rates agreed to at the
inception of the contracts.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial
instruments sensitive to changes in foreign currency exchange rates. The Company assumes that a loss in fair value is either a
decrease to its assets or an increase to its liabilities. The fair value of the Company's foreign currency exchange contracts was a
net payable of $0.3 million at December 31, 2019. Assuming a hypothetical 10% weakening of the U.S. dollar at December 31,
2019, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange
contracts, would be decreased by $1.1 million compared with its fair value at December 31, 2019.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth in the Financial Statements and Supplementary Data contained in Part IV of
this Form 10-K and is hereby incorporated herein by reference to such information.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with accountants on accounting and financial disclosure for the three-year period ended
December 31, 2019 that would require disclosure pursuant to this Item 9.
24
Item 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures: An evaluation was carried out under the supervision and with the
participation of the Company's management, including the principal executive officer and the principal financial officer, of the
effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on
that evaluation, these officers have concluded that the Company's disclosure controls and procedures are effective.
Management's report on internal control over financial reporting: Management is responsible for establishing and
maintaining adequate internal control over financial reporting. Under the supervision and with the participation of management,
including the principal executive officer and principal financial officer, the Company conducted an evaluation of the
effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this
evaluation under the framework, management concluded that the Company's internal control over financial reporting was
effective as of December 31, 2019. The Company's effectiveness of internal control over financial reporting as of December 31,
2019 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is
included in Item 15 of this Form 10-K and incorporated herein by reference.
Changes in internal control: There have been no changes in the Company's internal control over financial reporting, that
occurred during the fourth quarter of 2019, that have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to Directors of the Company will be set forth in the 2020 Proxy Statement under the subheadings
“Part II — Proposals To Be Voted On At The 2020 Annual Meeting — Proposal 1 — Election of Directors — Director
Nominee Information,” which information is incorporated herein by reference.
Information with respect to the audit review committee and the audit review committee financial expert will be set forth in the
2020 Proxy Statement under the subheadings “Part I — Corporate Governance Information — Board Committees,” and “Part I
— Corporate Governance Information — Description of Committees,” which information is incorporated herein by reference.
Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors,
executive officers and holders of more than ten percent of the Company's equity securities will be set forth in the 2020 Proxy
Statement under the subheading “Part IV — Other Important Information — Section 16(a) Beneficial Ownership Reporting
Compliance,” which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included in this Form 10-K as Item 4A of Part I as permitted by
Instruction 3 to Item 401(b) of Regulation S-K.
The Company has adopted a code of business conduct and ethics applicable to all Company personnel, including the principal
executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar
functions. The code of business conduct and ethics, entitled the “Code of Corporate Conduct,” is posted on the Company's
website at www.hamiltonbeachbrands.com/investors/corporate-governance.
Item 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be set forth in the 2020 Proxy Statement under the headings “Part III
— Executive Compensation Information” which information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information with respect to security ownership of certain beneficial owners and management will be set forth in the 2020 Proxy
Statement under the subheading “Part IV — Other Important Information — Beneficial Ownership of Class A Common and
Class B Common,” which information is incorporated herein by reference.
25
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions will be set forth in the 2020 Proxy Statement under the
subheadings “Part I — Corporate Governance Information — Review and Approval of Related Person Transactions,” which
information is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to principal accountant fees and services will be set forth in the 2020 Proxy Statement under the
heading “Part II — Proposals To Be Voted On At The 2020 Annual Meeting — Proposal 4 — Ratification of the Appointment
of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for 2020,” which information is
incorporated herein by reference.
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)(1) Documents that are filed as part of this report
The response to Item 15(a)(1) is set forth beginning at page F-2 of this Form 10-K.
(a)(2) Financial Statement Schedules
The response to Item 15(a)(2) is set forth beginning at page F-34 of this Form 10-K.
(a)(3) and (b) Exhibits required by Item 601 of Regulation S-K
The response to Item 15(a)(3) and (b) is set forth as follows:
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession.
Separation Agreement, dated as of September 29, 2017, between NACCO Industries, Inc. and Hamilton Beach Brands Holding
Company is incorporated by reference to Exhibit 10.40 of Hamilton Beach Brands Holding Company's Current Report on Form
8-K, filed on October 4, 2017.
(3) Articles of Incorporation and By-laws.
Amended and Restated Certificate of Incorporation of Hamilton Beach Brands Holding Company (incorporated herein by
reference to Exhibit 3.1 to the Hamilton Beach Brands Holding Company Registration Statement on Form 8-A, filed by
Hamilton Beach Brands Holding Company on September 22, 2017, Commission File Number 000-55845).
Amended and Restated Bylaws of Hamilton Beach Brands Holding Company (incorporated herein by reference to Exhibit 3.2
to the Hamilton Beach Brands Holding Company Registration Statement on Form 8-A, filed by Hamilton Beach Brands
Holding Company on September 22, 2017, Commission File Number 000-55845).
(4) Instruments defining the rights of security holders, including indentures.
Specimen of Hamilton Beach Brands Holding Company Class A Common Stock certificate, is incorporated by reference to
Exhibit 4.1 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s S-1 Registration Statement filed on
September 18, 2017.
Specimen of Hamilton Beach Brands Holding Company Class B Common Stock certificate, is incorporated by reference to
Exhibit 4.2 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s S-1 Registration Statement filed on
September 18, 2017.
Description of Registrant's Securities.
2.1
3.1
3.2
4.1
4.2
4.3
26
(10) Material Contracts.
10.1
10.2
10.3
10.4
10.5*
10.6*
10.7*
10.8*
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Transition Services Agreement, dated as of September 29, 2017, between NACCO Industries, Inc. and Hamilton Beach Brands
Holding Company, is incorporated by reference to Exhibit 10.2 of Hamilton Beach Brands Holding Company's Current Report
on Form 8-K, filed on October 4, 2017.
Tax Allocation Agreement, dated as of September 29, 2017, between NACCO Industries, Inc. and Hamilton Beach Brands
Holding Company, is incorporated by reference to Exhibit 10.3 of Hamilton Beach Brands Holding Company's Current Report
on Form 8-K, filed on October 4, 2017.
Stockholders' Agreement, dated as of September 29, 2017, among Hamilton Beach Brands Holding Company, the other
signatories thereto and Hamilton Beach Brands Holding Company, as depository, is incorporated by reference to Exhibit 10.4 of
Hamilton Beach Brands Holding Company's Current Report on Form 8-K, filed on October 4, 2017.
Transfer Restriction Agreement, dated as of September 29, 2017, by and among the Issuer, NACCO and the signatories thereto,
is incorporated by reference to Exhibit 2 of Schedule 13D, filed on October 6, 2017.
Hamilton Beach Brands, Inc. Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2015) is
incorporated herein by reference to Exhibit 10.2 to NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO
Industries, Inc. on May 18, 2015, Commission File Number 1-9172.
The Hamilton Beach Brands, Inc. Annual Incentive Compensation Plan (Effective January 1, 2014) (incorporated herein by
reference to Exhibit 10.1 to the NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO Industries, Inc. on
May 9, 2014, Commission File Number 1-9172).
The Hamilton Beach Brands, Inc. Excess Retirement Plan (As Amended and Restated Effective January 1, 2015) (incorporated
herein by reference to Exhibit 10.71 to the NACCO Industries, Inc. Annual Report on Form 10-K for the fiscal year ended
December 31, 2014, Commission File Number 1-9172).
Amendment No.1 to The Hamilton Beach Brands, Inc. Excess Retirement Plan (As Amended and Restated Effective January 1,
2015) (incorporated herein by reference to Exhibit 10.77 to the NACCO Industries, Inc. Annual Report on Form 10-K for the
fiscal year ended December 31, 2015, Commission File Number 1-9172).
Credit Agreement, dated as of April 29, 2010, among The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells
Fargo Retail Finance, LLC and the other lenders thereto is incorporated herein by reference to Exhibit 10.27 to the NACCO
Industries, Inc. Quarterly Report on Form 10-Q/A, filed by NACCO Industries, Inc. on March 20, 2013, Commission File
Number 1-9172.
First Amendment to Credit Agreement, dated as of August 7, 2012, among The Kitchen Collection, LLC, as successor to The
Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Bank, National Association, as successor to Wells
Fargo Retail Finance, LLC, and the other lenders thereto is incorporated herein by reference to Exhibit 10.28 to the NACCO
Industries, Inc. Quarterly Report on Form 10-Q/A, filed by NACCO Industries, Inc. on March 20, 2013, Commission File
Number 1-9172.
Second Amendment to Credit Agreement, dated as of September 19, 2014, among The Kitchen Collection, LLC, as successor
to The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Bank, National Association, as successor to
Wells Fargo Retail Finance, LLC, is incorporated herein by reference to Exhibit 10.1 to NACCO Industries, Inc. Current Report
on Form 8-K, filed by NACCO Industries, Inc. on September 19, 2014, Commission File Number 1-9172.
Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent,
Wells Fargo Capital Finance, LLC, as Sole Lead Arranger and Sole Lead Bookrunner, the Lenders that are Parties thereto as the
Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as
Borrowers, dated as of May 31, 2012 is incorporated herein by reference to Exhibit 10.1 to NACCO Industries, Inc. Current
Report on Form 8-K, filed by NACCO Industries, Inc. on June 6, 2012, Commission File Number 1-9172.
Amended and Restated Guaranty and Security Agreement, dated as of May 31, 2012, among Hamilton Beach Brands, Inc. and
Hamilton Beach, Inc., as Grantors, and Wells Fargo Bank, National Association, as Administrative Agent is incorporated herein
by reference to Exhibit 10.2 to the NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO Industries, Inc. on
June 6, 2012, Commission File Number 1-9172.
Amended and Restated Canadian Guarantee and Security Agreement, dated as of May 31, 2012, among Hamilton Beach
Brands Canada, Inc., as Grantor, and Wells Fargo Bank, National Association, as Administrative Agent is incorporated herein by
reference to Exhibit 10.3 to the NACCO Industries, Inc. Current Report on Form 8-K, filed by NACCO Industries, Inc. on
June 6, 2012, Commission File Number 1-9172.
Amendment No.1 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and
Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as Borrowers, dated as of July 29, 2014 is incorporated herein by
reference to Exhibit 10.1 to the NACCO Industries, Inc. Quarterly Report on Form 10-Q, filed by NACCO Industries, Inc. on
July 30, 2014, Commission File Number 1-9172.
27
10.16
10.17
10.18
10.19
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29
10.30
10.31*
Amendment No.2 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and
Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as Borrowers, dated as of November 20, 2014 is incorporated
herein by reference to Exhibit 10.66 to NACCO Industries, Inc. Annual Report on Form 10-K for the fiscal year ended
December 31, 2014, Commission File Number 1-9172.
Amendment No. 3 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as Parent), and Weston
Brands, LLC (as Weston) (collectively referred to as US Borrowers), and Hamilton Beach Brands Canada, Inc. (as Canadian
Borrower), dated December 23, 2015 is incorporated herein by reference to Exhibit 10.72 to the NACCO Industries, Inc.
Annual Report on Form 10-K for the fiscal year ended December 31, 2015, Commission File 1-9172.
Amendment No. 4 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as Parent), and Weston
Brands, LLC (as Weston) (collectively referred to as US Borrowers), and Hamilton Beach Brands Canada, Inc. (as Canadian
Borrower), dated June 30, 2016 is incorporated herein by reference to Exhibit 10.1 to NACCO Industries, Inc. Quarterly Report
on Form 10-Q, file by NACCO Industries, Inc. on August 2, 2016, Commission File Number I-9172.
Amendment No. 5 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as Parent), and Weston
Brands, LLC (as Weston) (collectively referred to as US Borrowers), and Hamilton Beach Brands Canada, Inc. (as Canadian
Borrower), dated September 13, 2017, is incorporated by reference to Exhibit 10.29 of Amendment No. 2 of the Hamilton
Beach Brands Holding Company’s S-1 Registration Statement filed on September 18, 2017.
Amendment No. 1 to Hamilton Beach Brands, Inc. Long-Term Incentive Compensation Plan (Amended and Restated Effective
March 1, 2015), is incorporated by reference to Exhibit 10.31 of Amendment No. 2 of the Hamilton Beach Brands Holding
Company’s S-1 Registration Statement filed on September 18, 2017.
Amendment No. 1 The Hamilton Beach Brands, Inc. Annual Incentive Compensation Plan (Effective January 1, 2014), is
incorporated by reference to Exhibit 10.32 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s S-1
Registration Statement filed on September 18, 2017.
Amendment No.2 to The Hamilton Beach Brands, Inc. Excess Retirement Plan (As Amended and Restated Effective January 1,
2015), is incorporated by reference to Exhibit 10.33 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s
S-1 Registration Statement filed on September 18, 2017.
Hamilton Beach Brands Holding Company Executive Long-Term Equity Incentive Plan (Effective September 29, 2017), is
incorporated by reference to Exhibit 10.34 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s S-1
Registration Statement filed on September 18, 2017.
Hamilton Beach Brands Holding Company Non-Employee Director’s Equity Compensation Plan (Effective September 29,
2017), is incorporated by reference to Exhibit 10.35 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s
S-1 Registration Statement filed on September 18, 2017.
Form of Cashless Exercise Award Agreement for the Hamilton Beach Brands Holding Company Executive Long-Term Equity
Incentive Plan, is incorporated by reference to Exhibit 10.36 of Amendment No. 2 of the Hamilton Beach Brands Holding
Company’s S-1 Registration Statement filed on September 18, 2017.
Form of Non-Cashless Exercise Award Agreement for the Hamilton Beach Brands Holding Company Executive Long-Term
Equity Incentive Plan is incorporated by reference to Exhibit 10.37 of Amendment No. 2 of the Hamilton Beach Brands
Holding Company’s S-1 Registration Statement filed on September 18, 2017.
Hamilton Beach Brands Holding Company Supplemental Executive Long-Term Incentive Bonus Plan (Effective September 29,
2017), is incorporated by reference to Exhibit 10.38 of Amendment No. 2 of the Hamilton Beach Brands Holding Company’s
S-1 Registration Statement filed on September 18, 2017.
Form of Award Agreement for the Hamilton Beach Brands Holding Company Supplemental Executive Long-Term Incentive
Bonus Plan, is incorporated by reference to Exhibit 10.39 of Amendment No. 2 of the Hamilton Beach Brands Holding
Company’s S-1 Registration Statement filed on September 18, 2017.
Third Amendment to Credit Agreement by and among The Kitchen Collection, LLC, as Lead Borrower, Borrowers hereto,
Guarantors hereto, Lenders hereto and Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and
Swing Line Lender, dated as of October 20, 2017 is incorporated by reference to Exhibit 10.13 of the Hamilton Beach Brands
Holding Company’s Form 10-Q filed on November 1, 2017.
Amendment No. 6 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc., as Parent, and Weston
Brands, LLC, as US Borrowers, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated May 14, 2018, is
incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Current Report on Form 10-Q, filed
on August 1, 2018.
Amendment No. 1 to the Hamilton Beach Brands Holding Company Executive Long-Term Equity Incentive Plan, dated as of
September 29, 2017, is incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Current Report
on Form 10-Q, filed on October 30, 2018.
28
10.32*
10.33*
10.34
10.35
10.36
10.37
10.38
Amendment No. 2 to the Hamilton Beach Brands, Inc. Long-Term Incentive Compensation Plan, dated as of March 1, 2015, is
incorporated by reference to Exhibit 10.2 of Hamilton Beach Brands Holding Company's Current Report on Form 10-Q, filed
on October 30, 2018.
Amendment No. 2 to the Hamilton Beach Brands, Inc. Annual Incentive Compensation Plan, dated as of March 1, 2014, is
incorporated by reference to Exhibit 10.3 of Hamilton Beach Brands Holding Company's Current Report on Form 10-Q, filed
on October 30, 2018.
Amendment No. 1 to the Transition Services Agreement between NACCO Industries, Inc. and Hamilton Beach Brands Holding
Company, made and entered into effective as of September 29, 2018, is incorporated by reference to Exhibit 10.34 of Hamilton
Beach Brands Holding Company's Current Report on Form 10-K, filed on March 6, 2019.
Amendment No. 2 to the Transition Services Agreement between NACCO Industries, Inc. and Hamilton Beach Brands Holding
Company, made and entered into effective as of December 18, 2018, is incorporated by reference to Exhibit 10.35 of Hamilton
Beach Brands Holding Company's Current Report on Form 10-K, filed on March 6, 2019.
Forbearance Agreement, dated as of October 23, 2019, by and between Wells Fargo Bank, National Association, as
Administrative Agent, Collateral Agent, Swing Line Lender, and Lender and The Kitchen Collection, LLC is incorporated by
reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Current Report on Form 8-K, filed on October 25,
2019.
Consulting Agreement, dated as of December 14, 2018 between Alfred M. Rankin, Jr. and Hamilton Beach Brands Holding
Company, effective January 1, 2019, is incorporated by reference to Exhibit 10.37 of Hamilton Beach Brands Holding
Company's Current Report on Form 8-K, filed on December 28, 2018.
Amendment to Stockholder's Agreement, dated as of February 14, 2020 and effective February 24, 2020, among the depository,
Hamilton Beach Brands Holding Company, the new Participating Stockholder signatories thereto and the Participating
Stockholders under the Stockholders’ Agreement, dated as of September 29, 2017.
(21) Subsidiaries of the registrant.
21.1
A list of the subsidiaries of the Company is attached hereto as Exhibit 21.
(23) Consents of experts and counsel.
23.1
Consents of experts and counsel.
(31) Rule 13a-14(a)/15d-14(a) Certifications.
31(i)(1)
31(i)(2)
Certification of Gregory H. Trepp pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)
(1).
Certification of Michelle O. Mosier pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)
(2).
(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
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
*
Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item15(b) of this
Annual Report on Form 10-K.
29
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Hamilton Beach Brands Holding Company
(Registrant)
Signature
By: /s/ Michelle O. Mosier
Michelle O. Mosier
Title
Date
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)/(Principal
Accounting Officer)
February 26, 2020
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Hamilton Beach Brands Holding Company hereby
appoints Michelle O. Mosier as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation,
for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of Hamilton
Beach Brands Holding Company, a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange
Act of 1934 on Form 10-K for the fiscal year ended December 31, 2018 and to sign any and all amendments to such Annual Report,
and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Gregory H. Trepp
Gregory H. Trepp
/s/ Michelle O. Mosier
Michelle O. Mosier
/s/ Mark R. Belgya
Mark R. Belgya
/s/ J.C. Butler, Jr.
J.C. Butler, Jr.
/s/ Paul D. Furlow
Paul D. Furlow
President and Chief Executive Officer (Principal
Executive Officer), Director
February 26, 2020
Senior Vice President, Chief Financial Officer
and Treasurer (Principal Financial Officer)/
(Principal Accounting Officer)
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
Director
Director
Director
30
/s/ John P. Jumper
John P. Jumper
/s/ Dennis W. LaBarre
Dennis W. LaBarre
/s/ Michael S. Miller
Michael S. Miller
/s/ Alfred M. Rankin, Jr.
Alfred M. Rankin, Jr.
/s/ Thomas T. Rankin
Thomas T. Rankin
/s/ James A. Ratner
James A. Ratner
/s/ Clara R. Williams
Clara R. Williams
Signature
Title
Date
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
Director
Director
Director
Director
Director
Director
Director
31
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 15(a)(1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 2019
HAMILTON BEACH BRANDS HOLDING COMPANY
GLEN ALLEN, VIRGINIA
F-1
FORM 10-K
ITEM 15(a)(1) AND (2)
HAMILTON BEACH BRANDS HOLDING COMPANY
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of Hamilton Beach Brands Holding Company are incorporated by reference in
Item 8:
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
The following consolidated financial statement schedule of Hamilton Beach Brands Holding Company is included in
Item 15(a)(2):
Schedule II — Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulation of the SEC are not required under the
related instructions or are inapplicable, or the required information is shown in the consolidated financial statements, and
therefore have been omitted.
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Hamilton Beach Brands Holding Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Hamilton Beach Brands Holding Company (the Company)
as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), cash flows
and equity for each of the three years in the period ended December 31, 2019, and the related notes and the financial statement
schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 26, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2017
Cleveland, Ohio
February 26, 2020
F-3
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Hamilton Beach Brands Holding Company
Opinion on Internal Control over Financial Reporting
We have audited Hamilton Beach Brands Holding Company’s internal control over financial reporting as of December 31,
2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Hamilton Beach Brands
Holding Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2019 consolidated financial statements of the Company and our report dated February 26, 2020 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s report
on internal control over financial reporting in Item 9A. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Cleveland, Ohio
February 26, 2020
F-4
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Amortization of intangible assets
Operating profit
Interest expense, net
Other expense (income), net
Income from continuing operations before income taxes
Income tax expense
Net income from continuing operations
Loss from discontinued operations, net of tax
Net income (loss)
Basic and diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Basic and diluted earnings (loss) per share
Basic weighted average shares outstanding
Diluted weighted average shares outstanding
See notes to consolidated financial statements.
Year Ended December 31
2019
2018
2017
(In thousands, except per share data)
$
612,843
$
629,710
$
483,298
129,545
91,302
1,377
36,866
2,975
(502)
34,393
9,315
25,078
492,195
137,515
97,964
1,381
38,170
2,916
293
34,961
7,816
27,145
$
$
$
(28,600)
(5,361)
(3,522) $
21,784
$
1.83
$
(2.09)
(0.26) $
1.98
(0.39)
1.59
$
$
13,690
13,726
13,699
13,731
612,229
477,220
135,009
93,700
1,381
39,928
1,572
(692)
39,048
18,918
20,130
(2,225)
17,905
1.47
(0.16)
1.31
13,673
13,685
F-5
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
Loss on long-term intra-entity foreign currency transactions
Cash flow hedging activity
Reclassification of hedging activities into earnings
Pension plan adjustment
Reclassification of pension adjustments into earnings
Total other comprehensive income (loss), net of tax
Comprehensive income (loss)
See notes to consolidated financial statements.
2019
Year Ended December 31
2018
(In thousands)
2017
$
(3,522) $
21,784
$
17,905
1,101
(79)
(1,713)
349
1,410
254
(159)
(1,006)
244
153
(1,920)
650
1,322
$
(2,038) $
689
—
(749)
641
1,510
306
2,397
(2,200) $
19,746
$
20,302
$
$
F-6
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
Assets
Current assets
Cash and cash equivalents
Trade receivables, net
Inventory
Prepaid expenses and other current assets
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Deferred income taxes
Deferred costs
Other non-current assets
Non-current assets of discontinued operations
Total assets
Liabilities and stockholders' equity
Current liabilities
Accounts payable
Accounts payable to NACCO Industries, Inc.
Revolving credit agreements
Accrued compensation
Accrued product returns
Other current liabilities
Current liabilities of discontinued operations
Total current liabilities
Revolving credit agreements
Other long-term liabilities
Non-current liabilities of discontinued operations
Total liabilities
Stockholders’ equity
Preferred stock, par value $0.01 per share
Class A Common stock, par value $0.01 per share; 9,805 and 9,291 shares issued as of December 31,
2019 and 2018, respectively
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 4,076
and 4,422 shares issued as of December 31, 2019 and 2018, respectively
Capital in excess of par value
Treasury stock
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders' equity
See notes to consolidated financial statements.
F-7
December 31
2019
2018
(In thousands)
$
2,142
$
113,781
109,621
23,102
5,383
254,029
22,324
6,253
3,141
3,853
10,941
2,085
614
4,420
100,821
122,697
22,332
27,879
278,149
20,842
6,253
4,519
5,518
7,868
2,672
4,606
$
$
303,240
$
330,427
111,117
$
119,264
496
23,497
14,277
8,697
12,873
29,723
200,680
35,000
12,501
—
248,181
—
98
41
54,344
(5,960)
22,524
(15,988)
55,059
2,416
11,624
15,525
10,698
24,554
22,820
206,901
35,000
21,128
1,960
264,989
—
93
44
51,714
—
30,897
(17,310)
65,438
$
303,240
$
330,427
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities
Net income from continuing operations
Adjustments to reconcile net income from continuing operations to net cash provided by
operating activities:
Depreciation and amortization
Deferred income taxes
Stock compensation expense
Other
Net changes in operating assets and liabilities:
Affiliate payable
Trade receivables
Inventory
Other assets
Accounts payable
Other liabilities
Net cash provided by operating activities from continuing operations
Investing activities
Expenditures for property, plant and equipment
Other
Net cash used for investing activities from continuing operations
Financing activities
Net additions (reductions) to revolving credit agreements
Purchase of treasury stock
Cash dividends paid
Cash dividends to NACCO Industries, Inc.
Net cash provided by (used for) financing activities from continuing operations
Cash flows from discontinued operations
Net cash provided by (used for) operating activities from discontinued operations
Net cash provided by (used for) investing activities from discontinued operations
Net cash used for financing activities from discontinued operations
Cash provided by (used for) discontinued operations
Effect of exchange rate changes on cash
Cash and Cash Equivalents
(Decrease) increase for the year from continuing operations
Increase (decrease) for the year from discontinued operations
Balance at the beginning of the year
Balance at the end of the year
See notes to consolidated financial statements.
2019
Year Ended December 31
2018
(In thousands)
2017
$
25,078
$
27,145
$
20,130
4,002
3,248
2,632
471
(1,920)
(25,586)
13,756
(3,121)
(7,257)
(11,101)
202
(4,122)
—
(4,122)
11,873
(5,960)
(4,851)
—
1,062
3,953
585
(103)
4,435
(765)
4,277
5,185
3,618
868
(5,300)
16,298
(12,308)
(10,509)
(7,756)
(4,195)
17,323
(7,759)
—
(7,759)
(4,597)
—
(4,658)
—
(9,255)
(5,499)
(305)
—
(5,804)
941
(3,623)
4,435
6,352
7,164
$
1,250
(5,804)
10,906
6,352
$
$
4,072
4,107
323
(1,167)
866
(8,442)
(16,485)
(1,960)
25,009
1,850
28,303
(6,198)
21
(6,177)
12,630
—
(1,162)
(38,000)
(26,532)
5,137
(1,176)
(70)
3,891
81
(4,325)
3,891
11,340
10,906
F-8
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF 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
Balance, January 1, 2017
Net income
Issuance of common stock, net of conversions
Cash dividends to NACCO Industries, Inc.
Cash dividends, $0.085 per share
Other comprehensive income
Reclassification adjustment to net income
$
— $
— $ 75,031 $
— $
6,738 $
(16,501) $
(In thousands, except per share data)
—
88
—
—
—
—
—
48
—
(136)
—
—
17,905
—
— (27,122)
— (10,878)
—
—
—
—
—
—
—
—
—
(1,162)
—
—
—
—
—
—
1,450
947
Balance, December 31, 2017
$
88 $
48 $ 47,773 $
— $ 12,603 $
(14,104) $
Net income
Issuance of common stock, net of conversions
Stock compensation expense
Cash dividends, $0.34 per share
Reclassification due to adoption of ASU 2018-02
Other comprehensive loss
Reclassification adjustment to net income
—
5
—
—
—
—
—
—
(4)
—
—
—
—
—
—
323
3,618
—
—
—
—
—
—
—
—
—
—
—
21,784
—
—
(4,658)
1,168
—
—
—
—
—
—
(1,168)
(2,841)
803
Balance, December 31, 2018
$
93 $
44 $ 51,714 $
— $ 30,897 $
(17,310) $
Net loss
Issuance of common stock, net of conversions
Purchase of treasury stock
Stock compensation expense
Cash dividends, $0.36 per share
Other comprehensive income (loss)
Reclassification adjustment to net income
—
5
—
—
—
—
—
—
(3)
—
—
—
—
—
—
(2)
—
—
—
(5,960)
2,632
—
—
—
—
—
—
—
(3,522)
—
—
—
(4,851)
—
—
—
—
—
—
—
719
603
65,268
17,905
—
(38,000)
(1,162)
1,450
947
46,408
21,784
324
3,618
(4,658)
—
(2,841)
803
65,438
(3,522)
—
(5,960)
2,632
(4,851)
719
603
Balance, December 31, 2019
$
98 $
41 $ 54,344 $
(5,960) $ 22,524 $
(15,988) $
55,059
See notes to consolidated financial statements.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
NOTE 1 - Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Hamilton Beach Brands Holding Company is an operating holding company and operates through its two wholly-owned
subsidiaries Hamilton Beach Brands, Inc. (“HBB”) and The Kitchen Collection, LLC (“KC”) (collectively “Hamilton Beach
Holding” or the “Company”). On October 10, 2019, the Company’s board of directors (the “Board”) approved the wind down
of KC and its retail operations. By December 31, 2019, all KC stores were closed and the reportable segment qualifies to be
reported as discontinued operations. On January 21, 2020, the Board approved the dissolution of the KC legal entity and a
Certificate of Dissolution of Ohio Limited Liability Company was filed with the Ohio Secretary of State. See Note 2 for further
information on discontinued operations.
The only material assets held by Hamilton Beach Brands Holding Company are its investments in its consolidated subsidiaries.
Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries. Hamilton Beach
Brands Holding Company has not guaranteed any obligations of its subsidiaries.
HBB is a leading designer, marketer, and distributor of branded, small electric household and specialty housewares appliances,
as well as commercial products for restaurants, bars, and hotels. HBB operates in the consumer, commercial and specialty
small appliance markets.
On September 29, 2017, NACCO Industries, Inc. ("NACCO"), Hamilton Beach Holding's former parent company, spun-off the
Company to NACCO stockholders. In the spin-off, NACCO stockholders, in addition to retaining their shares of NACCO
common stock, received one share of Hamilton Beach Brands Holding Company Class A common stock ("Class A Common")
and one share of Hamilton Beach Brands Holding Company Class B common stock ("Class B Common") for each share
of NACCO Class A or Class B common stock. In accordance with applicable authoritative accounting guidance, the Company
accounted for the spin-off from NACCO based on the historical carrying value of assets and liabilities. As a result of the
distribution of one share of Class A Common and one share of Class B Common for each share of NACCO Class A or NACCO
Class B common stock, the earnings per share amounts for the Company for periods prior to the spin-off have been calculated
based upon the number of shares distributed in the spin-off. NACCO did not receive any proceeds from the spin-off.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the financial statements of the Company and have been prepared
in accordance with U.S. generally accepted accounting principles (“GAAP”). Intercompany balances and transactions have
been eliminated.
Prior period non-trade customer receivable amounts of $9.5 million have been reclassified from trade receivables, net to prepaid
expenses and other current assets to conform to the current period presentation.
Segment Information
As of December 31, 2019, HBB is the Company’s single reportable operating segment. This is supported by the operational
structure of HBB which is designed and managed to share resources across the entire suite of products offered by the business.
Such resources include research and development, product design, marketing, operations, and administrative functions. The
Company's chief operating decision maker does not regularly review financial information for individual product categories,
sales channels, or geographic regions that would allow decisions to be made about allocation of resources or performance.
Since the Company operates in one reportable segment, all required financial segment information can be found in the
consolidated financial statements.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
Discontinued Operations
A component of an entity that is disposed of by sale or abandonment is reported as discontinued operations if the transaction
represents a strategic shift that will have a major effect on an entity's operations and financial results. The results of
discontinued operations are aggregated and presented separately in the Consolidated Statement of Operations. Assets and
liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued
operations in the Consolidated Balance Sheet, including the comparative prior year period. KC’s cash flows are reflected as
cash flows from discontinued operations within the Company’s Consolidated Statements of Cash Flows for each period
presented.
Amounts presented in discontinued operations have been derived from our consolidated financial statements and accounting
records using the historical basis of assets, liabilities, and historical results of KC. The discontinued operations exclude general
corporate allocations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities (if any).
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less.
Trade Receivables
Allowances for doubtful accounts are maintained against trade receivables for estimated losses resulting from the inability of
customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a
greater credit risk as well as general trends of the entire customer pool. Accounts are written off against the allowance when it
becomes evident collection will not occur.
HBB maintains significant trade receivables balances with several large retail customers. At December 31, 2019 and 2018,
receivables from HBB’s five largest customers represented 66% and 55%, respectively, of HBB's net trade receivables. HBB’s
significant credit concentration is uncollateralized; however, historically, minimal credit losses have been incurred.
Transfer of Financial Assets
HBB has entered into an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis.
HBB utilizes this arrangement as an integral part of financing working capital. Under the terms of the agreement, HBB
receives cash proceeds and retains no rights or interest and has no obligations with respect to the sold receivables. These
transactions are accounted for as sold receivables which result in a reduction in trade receivables because the agreement
transfers effective control over and risk related to the receivables to the buyer. Under this arrangement, HBB
derecognized $162.7 million, $165.4 million, and $164.0 million of trade receivables during 2019, 2018 and 2017, respectively.
The losses incurred on sold receivables in the consolidated results of operations for the years ended December 31, 2019, 2018,
and 2017 were not material. The Company does not carry any servicing assets or liabilities. Cash proceeds from this
arrangement are reflected as operating activities.
Inventory
Inventory is stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (“FIFO”) method.
Adjustments to the carrying value are recorded for estimated obsolescence or excess inventory equal to the difference between
the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market
conditions.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation, amortization and accumulated impairment
losses. Depreciation and amortization are recorded generally using the straight-line method over the estimated useful lives of
the assets. Estimated lives for buildings are up to 40 years, and for machinery, equipment and furniture and fixtures range from
three to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the
lease. The units-of-production method is used to amortize certain tooling for sourced products. Costs incurred
to develop software for internal use are capitalized and amortized over the estimated useful life of the software. Gains or losses
from the sale of assets are included in selling, general and administrative expenses. Repairs and maintenance are charged to
expense as incurred. Interest is capitalized for qualifying long-term capital asset projects as a part of the historical cost of
acquiring the asset.
The Company evaluates long-lived assets for impairment whenever events or circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the
carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by
which the carrying amount exceeds the fair value of the asset. Fair value is estimated at the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of all acquisitions over the estimated fair value of the net assets acquired.
Goodwill is not amortized but evaluated at least annually for impairment. The Company conducts its annual test for
impairment as of October 1 of each year and it may be conducted more frequently if changes in circumstances or the occurrence
of events indicates that a potential impairment exists. Using a qualitative assessment in the current year, the Company
determined that it was not more-likely-than-not that the goodwill was impaired and a quantitative test for impairment was not
required.
Intangible assets with finite lives are amortized over their estimated useful lives, which represent the period over which the
asset is expected to contribute directly or indirectly to future cash flows. Intangible assets with finite lives are reviewed for
impairment whenever events and circumstances indicate the carrying value of such assets may not be recoverable and exceed
their fair value. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new
cost basis is amortized over the remaining useful life of the asset.
No impairment has been recognized for identifiable intangible assets or goodwill for any period presented.
Environmental Liabilities
HBB and environmental consultants are investigating or remediating historical environmental contamination at some current
and former sites operated by HBB or by businesses it acquired. Liabilities for environmental matters are recorded in the period
when it is determined to be probable and reasonably estimable that the Company will incur costs. When only a range of
amounts is reasonably estimable and no amount within the range is more probable than another, the Company records the low
end of the range. Environmental liabilities are recorded on an undiscounted basis and recorded in selling, general, and
administrative expenses. When recovery of a portion of an environmental liability is probable, such amounts are recognized as
a reduction to selling, general, and administrative expenses and included in prepaid expenses and other current assets (current
portion) and other non-current assets until settled.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount
that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales taxes are
excluded from revenue. At contract inception, the Company assesses the goods and services promised in its contracts with
customers and identifies a performance obligation for each promised good or service that is distinct. The Company has elected
to account for shipping and handling activities performed after a customer obtains control of the goods as activities to fulfill the
promise to transfer the goods, and therefore these activities are not assessed as a separate service to customers. The amount of
revenue recognized varies primarily with changes in returns. In addition, the Company offers price concessions to our
customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based
arrangements. We determine whether price concessions offered to its customers are a reduction of the transaction price and
revenue or are advertising expense, depending on whether we receive a distinct good or service from our customers and, if so,
whether we can reasonably estimate the fair value of that distinct good or service. We evaluated such agreements with our
customers and determined they should be accounted for as variable consideration. As of December 31, 2019, we have
determined that customer price concessions recorded as a reduction of revenue, certain of which were previously recorded in
other current liabilities, meet all of the criteria specified in ASC 210-20, "Balance Sheet Offsetting". Accordingly, amounts
related to such arrangements have been classified as a reduction of trade receivables, net as of December 31, 2019 (prior
periods have not been adjusted as all the criteria in ASC 210-20 had not previously been met).
To estimate variable consideration, the Company applies both the expected value method and most likely amount method based
on the form of variable consideration, according to which method would provide the better prediction. The expected value
method involves a probability weighted determination of the expected amount, whereas the most likely amount method
identifies the single most likely outcome in a range of possible amounts.
Product Development Costs
Expenses associated with the development of new products and changes to existing products are charged to expense as
incurred. These costs, included in selling, general and administrative expenses, amounted to $12.1 million, $11.0 million, and
$10.4 million in 2019, 2018, and 2017, respectively.
Foreign Currency
Assets and liabilities of foreign operations are translated into U.S. dollars at the fiscal year-end exchange rate. Revenue and
expenses of all foreign operations are translated using average monthly exchange rates prevailing during the year. The related
translation adjustments, including translation on long-term intra-entity foreign currency transactions, are recorded as a separate
component of stockholders’ equity.
Financial Instruments
Financial instruments held by the Company include cash and cash equivalents, trade receivables, accounts payable, revolving
credit agreements, interest rate swap agreements and forward foreign currency exchange contracts. The Company does not hold
or issue financial instruments or derivative financial instruments for trading purposes. Interest rate swap agreements and
forward foreign currency exchange contracts held by the Company have been designated as hedges of forecasted cash flows.
The Company holds these derivative contracts with high-quality financial institutions and limits the amount of credit exposure
to any one institution. The Company does not currently hold any nonderivative instruments designated as hedges or any
derivatives designated as fair value hedges.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in
foreign currencies. The Company offsets fair value amounts related to foreign currency exchange contracts executed with the
same counterparty. These contracts hedge firm commitments and forecasted transactions relating to cash flows associated with
sales and purchases denominated in currencies other than the subsidiaries’ functional currencies. Changes in the fair value of
forward foreign currency exchange contracts that are effective as hedges are recorded in accumulated other comprehensive
income (loss) (“AOCI”). Deferred gains or losses are reclassified from AOCI to the Consolidated Statements of Operations in
the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in cost of
sales. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and generally
recognized in cost of sales.
The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are
subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a
variable interest rate and pay a fixed interest rate. The Company’s interest rate swap agreements and its variable rate financings
are predominately based upon LIBOR (London Interbank Offered Rate). Changes in the fair value of interest rate swap
agreements that are effective as hedges are recorded in AOCI. Deferred gains or losses are reclassified from AOCI to the
Consolidated Statements of Operations in the same period as the gains or losses from the underlying transactions are recorded
and are generally recognized in interest expense, net. The ineffective portion of derivatives that are classified as hedges is
immediately recognized in earnings and included in interest expense, net. The Company periodically enters into foreign
currency exchange contracts that do not meet the criteria for hedge accounting. These derivatives are used to reduce the
Company’s exposure to foreign currency risk related to forecasted purchase or sales transactions or forecasted intercompany
cash payments or settlements. Gains and losses on these derivatives are included in other expense, net.
Cash flows from hedging activities are reported in the Consolidated Statements of Cash Flows in the same classification as the
hedged item, generally as a component of cash flows from operations.
Fair Value Measurements
The Company defines the fair value measurement of its financial assets and liabilities as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of
unobservable inputs when measuring fair value.
Described below are the three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3 - Unobservable inputs are used when little or no market data is available.
The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The
classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the
measurement.
Stock Compensation
Pursuant to the Executive Long-Term Equity Incentive Plan (the "Executive Plan") established in September 2017, the
Company grants stock of Class A Common, subject to transfer restrictions, as a means of retaining and rewarding selected
employees for long-term performance. Stock awarded under the Executive Plan are fully vested and entitle the stockholder to
all rights of common stock ownership except that shares may not be assigned, pledged or otherwise transferred during the
restriction period. In general, the restriction period ends after three, five or ten years from the award date or at the earliest of
(i) three years after the participant's retirement date, or (ii) the participant's death or permanent disability. The Company
issued 118,688 and 5,512 shares of stock of Class A Common in the years ended December 31, 2019 and 2018, respectively.
No stock was issued in the year ended December 31, 2017 under the Executive Plan. Stock compensation expense related to
the Executive Plan was $1.6 million and $2.7 million for the years ended December 31, 2019 and 2018, respectively, and was
based on the fair value of Class A Common on the grant date.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
Treasury Stock
The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a reduction to
stockholders' equity.
Income Taxes
Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial
statements. Some of these differences are permanent, such as expenses that are not deductible for tax purposes, and some
differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax
assets and liabilities using currently enacted tax rates. The objective of accounting for income taxes is to recognize the amount
of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in the financial statements or tax returns. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Management
is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future
deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for the appropriate tax
jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in the calculated deferred tax assets
and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or
changes in the Company's structure or tax status.
The Company's tax assets, liabilities, and tax expense are supported by historical earnings and losses and the Company's best
estimates and assumptions of future earnings. The Company assesses whether a valuation allowance should be established
against the Company's deferred tax assets based on consideration of all available evidence, both positive and negative, using a
more likely than not standard. This assessment considers, among other matters, scheduled reversals of deferred tax liabilities,
projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable
income require significant judgment and are consistent with the plans and estimates the Company is using to manage the
underlying businesses. When the Company determines, based on all available evidence, that it is more likely than not that
deferred tax assets will not be realized, a valuation allowance is established.
Accounting Standards Adopted
In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the
requirements in GAAP related to the income statement presentation of the components of net periodic benefit cost for an
entity's sponsored defined benefit pension and other post-retirement plans. The Company adopted this guidance on January 1,
2019. The change in presentation of the components of net periodic pension cost was applied retrospectively which resulted
in $0.7 million and $0.9 million of net periodic pension income for the years end December 31, 2018, and 2017, respectively,
being reclassified from selling, general and administrative expenses to other expense (income), net.
Accounting Standards Not Yet Adopted
The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying
with new or revised accounting standards, which means that when a standard is issued or revised and it has different application
dates for public or nonpublic entities, the Company can adopt the new or revised standard at the time nonpublic entities adopt
the new or revised standard.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and
liabilities for the rights and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal
years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early
adoption is permitted. The Company is planning to adopt ASU 2016-02 for its year ending December 31, 2021 and is currently
evaluating to what extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and
related disclosures.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to
recognize credit losses as an allowance rather than as a write-down. For nonpublic entities, the amendments are effective for
fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2021.
Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, 2022 and is
currently evaluating to what extent ASU 2016-13 will affect the Company's financial position, results of operations, cash flows
and related disclosures.
NOTE 2 - 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. Accordingly, KC meets the requirements to be reported as discontinued operations.
The Company expects the wind down to continue through the first half of 2020 to facilitate the settlement of remaining
liabilities.
KC’s operating results are reflected as discontinued operations in the Consolidated Statements of Operation for all periods
presented. The major line items constituting the loss from discontinued operations, net of tax are as follows:
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses (1)
Lease termination expense (2)
Operating loss
Interest expense
Other expense, net
Loss from discontinued operations before income taxes
Income tax benefit
Year Ended December 31
2019
2018
2017
(In thousands)
$
100,860
$
113,469
$
128,520
62,927
37,933
54,047
15,186
61,972
51,497
58,035
—
(31,300)
(6,538)
583
26
(31,909)
(3,309)
361
33
(6,932)
(1,571)
69,708
58,812
61,033
435
(2,656)
258
57
(2,971)
(746)
(2,225)
Loss from discontinued operations, net of tax
$
(28,600) $
(5,361) $
(1)
(2)
Selling, general and administrative expenses includes $1.8 million of severance termination benefits of which $0.4
remains unpaid as of December 31, 2019 and included within accrued compensation (current liabilities of discontinued
operations).
KC recognized lease termination expense of $15.2 million for the estimated costs to terminate lease agreements in
2019 as a result of the decision to wind down the business. The lease termination obligation is measured at fair value
using significant observable inputs, which is Level 2 as defined in the fair value hierarchy. The fair value of the lease
termination obligation is based on the remaining lease rentals, including common area maintenance costs, real estate
taxes, and penalties, adjusted for the effects of deferred rent, and reduced by estimated sublease rentals that could be
reasonably obtained.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
KC’s assets and liabilities are reflected as assets and liabilities of discontinued operations in the Company’s Consolidated
Balance Sheets for all periods presented. The major classes of assets and liabilities included as part of discontinued operations
are as follows:
Assets
Cash and cash equivalents
Credit card receivables
Inventory
Prepaid expenses and other current assets
Current assets of discontinued operations
Property, plant and equipment, net
Deferred income taxes
Other non-current assets
Non-current assets of discontinued operations
Liabilities
Accounts payable
Accrued compensation
Accrued product returns
Lease termination liability
Other current liabilities
Current liabilities of discontinued operations
Other long-term liabilities
Non-current liabilities of discontinued operations
December 31
2019
2018
(In thousands)
$
5,022
$
51
—
310
1,932
1,771
21,994
2,182
$
$
$
$
5,383
$
27,879
— $
614
—
614
$
1,788
2,645
173
4,606
4,594
$
13,704
1,058
—
17,248
6,823
1,498
243
—
7,375
$
29,723
$
22,820
— $
— $
1,960
1,960
$
KC has operating leases for retail stores, a distribution warehouse and corporate office that contractually expire at various dates
through 2026. Future minimum operating lease payments at December 31, 2019 are:
2020
2021
2022
2023
2024
Subsequent to 2024
Total minimum lease payments (1)
Operating
Leases
$
10,942
5,863
4,027
2,458
1,534
1,669
$
26,493
(1)
Minimum lease payments have not been reduced by minimum sublease rentals of $6.2 million due in the future under
contractual sublease agreements.
Rental expense from discontinued operations net of sublease rental income and excluding termination costs for all operating
leases, is reported in selling, general and administrative expenses of discontinued operations and was $14.3 million, $18.0
million and $19.7 million in 2019, 2018 and 2017, respectively.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
KC maintained a separate revolving line of credit facility (the "KC Facility") that was secured by substantially all of the assets
of KC. The Company's decision to wind down KC and its retail operations constituted an event of default under the KC
Facility. As a result, on October 23, 2019, KC and its lender entered into a Forbearance Agreement (the “Forbearance
Agreement”). Under the terms of the Forbearance Agreement, the lender agreed to forebear from exercising its rights and
remedies as a result of the events of default pending accelerated payment in full of the obligations under the KC facility on or
before December 15, 2019. All obligations under the KC Facility were paid in full in accordance with the Forbearance
Agreement and the KC Facility was terminated on December 3, 2019.
Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC.
NOTE 3 - Property, Plant and Equipment, Net
Property, plant and equipment, net includes the following:
Land
Furniture and fixtures
Building and improvements
Machinery and equipment
Construction in progress, including internal-use capitalized software
Property, plant and equipment, at cost
Less allowances for depreciation and amortization
December 31
2019
2018
$
226
$
13,071
10,116
32,761
11,685
67,859
45,535
$
22,324
$
226
12,583
10,084
30,728
10,626
64,247
43,405
20,842
NOTE 4 - Intangible Assets
Intangible assets other than goodwill, which are subject to amortization, consist of the following:
Balance at December 31, 2019
Customer relationships
Trademarks
Other intangibles
Balance at December 31, 2018
Customer relationships
Trademarks
Other intangibles
Gross Carrying
Amount
Accumulated
Amortization
Net
Balance
$
$
$
$
5,760
3,100
1,240
10,100
$
$
(4,840) $
(1,008)
(1,111)
(6,959) $
5,760
$
(3,880) $
3,100
1,240
(808)
(893)
10,100
$
(5,581) $
920
2,092
129
3,141
1,880
2,292
347
4,519
Amortization expense for intangible assets included in continuing operations was $1.4 million in 2019, 2018 and 2017.
Expected annual amortization expense of intangible assets for the next five years is $1.2 million in 2020 and $0.2 million in the
remaining years. The weighted average amortization period for intangible assets is approximately 8.9 years.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
NOTE 5 - Current and Long-Term Financing
Financing arrangements exist at the subsidiary level. Hamilton Beach Brands Holding Company has not guaranteed any
borrowings of its subsidiaries.
The following table summarizes HBB's available and outstanding borrowings:
Total outstanding borrowings for continuing operations:
Revolving credit agreements
Book overdrafts
Total outstanding borrowings
Current portion of borrowings outstanding
Long-term portion of borrowings outstanding
Total available borrowings, net of limitations, under revolving credit agreements
Unused revolving credit agreements
December 31
2019
2018
$
$
$
$
$
$
58,305
192
58,497
23,497
35,000
58,497
114,366
56,061
$
$
$
$
$
$
45,733
891
46,624
11,624
35,000
46,624
114,669
68,936
Weighted average stated interest rate on total borrowings
Weighted average effective interest rate on total borrowings (including interest rate swap agreements)
4.16%
3.82%
4.12%
3.45%
Including swap settlements, interest paid on total debt was $3.1 million, $3.1 million, and $1.6 million during 2019, 2018, and
2017, respectively. Interest capitalized was $0.4 million in 2019, $0.3 million in 2018 and $0.2 million 2017.
HBB maintains a $115.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires in June
2021. The current portion of borrowings outstanding represents expected voluntary repayments to be made in 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 $297.2 million as of December 31, 2019.
The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible
trade receivables, inventory and trademarks of the borrowers, as defined in the HBB Facility. Borrowings bear interest at a floating
rate, which can be a base rate, LIBOR or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. The
applicable margins, effective December 31, 2019, for base rate loans and LIBOR loans denominated in U.S. dollars were 0.0%
and 1.75%, respectively. The applicable margins, effective December 31, 2019, for base rate loans and bankers' acceptance loans
denominated in Canadian dollars were 0.0% and 1.75%, respectively. The HBB Facility also requires a fee of 0.25% per annum
on the unused commitment. The margins and unused commitment fee under the HBB Facility are subject to quarterly adjustment
based on average excess availability.
To reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a portion
of the HBB Facility. Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay a fixed
interest rate. HBB has interest rate swaps with notional values totaling $35.0 million at December 31, 2019 at an average fixed
interest rate of 1.5%. HBB also has delayed-start interest rate swaps with notional values totaling $10.0 million as of December
31, 2019, with fixed rates of 1.7%.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to Hamilton Beach
Holding, subject to achieving availability thresholds. Under Amendment No. 6 to the HBB Facility, dividends to Hamilton Beach
Holding are not to exceed $5.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment
date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $15.0 million. Dividends
to Hamilton Beach Holding are discretionary to the extent that for the 30 days prior to the dividend payment date, and after giving
effect to the dividend payment, HBB maintains excess availability of not less than $25.0 million. The HBB Facility also requires
HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. At December
31, 2019, HBB was in compliance with all financial covenants in the HBB Facility.
NOTE 6 - Fair Value Disclosure
Recurring Fair Value Measurements
The Company measures its derivatives at fair value using significant observable inputs, which is Level 2 as defined in the fair
value hierarchy. The Company uses a present value technique that incorporates the LIBOR swap curve, foreign currency spot
rates and foreign currency forward rates to value its derivatives, including its interest rate swap agreements and foreign
currency exchange contracts, and also incorporates the effect of its subsidiary and counterparty credit risk into the valuation.
Other Fair Value Measurement Disclosures
The carrying amounts of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the
short-term maturities of these instruments. The fair values of revolving credit agreements, including book overdrafts, which
approximate book value, were determined using current rates offered for similar obligations taking into account subsidiary
credit risk, which is Level 2 as defined in the fair value hierarchy.
There were no transfers into or out of Levels 1, 2 or 3 during the years ended December 31, 2019 and 2018.
NOTE 7 - Derivative Financial Instruments
Foreign Currency Derivatives
HBB held forward foreign currency exchange contracts with total notional amounts of $13.2 million and $13.0 million at
December 31, 2019, and 2018, respectively, denominated primarily in Canadian dollars and Mexican pesos. The fair value of
these contracts approximated a payable of $0.3 million at December 31, 2019 and a net receivable of $0.1 million at December
31, 2018.
Forward foreign currency exchange contracts that qualify for hedge accounting are used to hedge transactions expected to occur
within the next twelve months. The mark-to-market effect of forward foreign currency exchange contracts that are considered
effective as hedges has been included in AOCI.
Interest Rate Derivatives
HBB has interest rate swaps that hedge interest payments on its one-month LIBOR borrowings. All swaps have been designated
as cash flow hedges.
The following table summarizes the notional amounts, related rates and remaining terms of active and delayed interest rate
swap agreements for HBB at December 31 in millions:
Interest rate swaps
Interest rate swaps
Delayed start interest rate swaps
Notional Amount
2019
2018
Average Fixed Rate
2019
2018
$
$
$
20.0
15.0
10.0
$
$
$
20.0
15.0
10.0
1.4%
1.6%
1.7%
1.4%
1.6%
1.7%
Remaining Term at
December 31, 2019
Extending to January 2020
Extending to January 2024
Extending to January 2024
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
The fair value of HBB's interest rate swap agreements was a payable of $0.1 million at December 31, 2019 and a receivable of
$1.1 million at December 31, 2018. The mark-to-market effect of interest rate swap agreements that are considered effective as
hedges has been included in AOCI. The interest rate swap agreements held by HBB on December 31, 2019 are expected to
continue to be effective as hedges.
The following table summarizes the fair value of derivative instruments at December 31 as recorded in the Consolidated
Balance Sheets:
Asset Derivatives
Liability Derivatives
Balance sheet location
2019
2018
Balance sheet location
2019
2018
Interest rate swap agreements
Current
Long-term
Foreign currency exchange contracts
Current
Total derivatives
NOTE 8 - Leasing Arrangements
Prepaid expenses and other
current assets
Other non-current assets
Prepaid expenses and other
current assets
$ — $ 349 Other current liabilities
$
—
710 Other long-term liabilities
21
61
$ —
—
231 Other current liabilities
308
$ — $1,290
$ 390
$
—
87
87
HBB leases certain office and warehouse facilities as well as machinery and equipment under noncancellable operating leases
that expire at various dates through 2034. Many leases include renewal and/or fair value purchase options.
Future minimum operating lease payments at December 31, 2019 are:
2020
2021
2022
2023
2024
Subsequent to 2024
Total minimum lease payments
Operating
Leases
6,114
4,089
1,816
1,574
1,590
16,527
31,710
$
$
Rental expense from continuing operations net of sublease rental income for all operating leases, is reported in selling, general
and administrative expenses and was $5.6 million in 2019 and 2018 and $5.3 million in 2017.
NOTE 9 - Stockholders' Equity and Earnings Per Share
Capital Stock
The authorized capital stock of the Company consists of Class A Common, Class B Common and one series of Preferred stock.
Voting, dividend, conversion and liquidation rights of the Preferred stock is established by the Board upon issuance of
such preferred stock.
Hamilton Beach Brands Holding Company Class A Common is traded on the New York Stock Exchange under the ticker
symbol “HBB.” Because of transfer restrictions on Class B Common, no trading market has developed, or is expected to
develop, for the Class B Common.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
Subject to the rights of the holders of any series of preferred stock, each share of Class A Common will entitle the holder of the
share to one vote on all matters submitted to stockholders, and each share of the Company's Class B Common will entitle the
holder of the share to ten votes on all such matters. Subject to the rights of the preferred stockholders, each share of Class A
Common and Class B Common will be equal in respect of rights to dividends, except that in the case of dividends payable in
stock, only Class A Common will be distributed with respect to Class A Common and only Class B Common will be distributed
with respect to Class B Common. As the liquidation and dividend rights are identical, any distribution of earnings would be
allocated to Class A and Class B stockholders on a proportionate basis, and accordingly the net income per share for each class
of common stock is identical.
The following table sets forth the Company's authorized capital stock information:
Preferred stock, par value $0.01 per share
Preferred stock authorized
Class A Common stock(1)(2)
Class A Common stock authorized
Treasury Stock
Class B Common stock(1)
Class B Common stock authorized
December 31
2019
2018
(In thousands)
5,000
5,000
70,000
365
70,000
—
30,000
30,000
(1)
(2)
Class B Common converted to Class A Common were 345 shares during 2019 and 387 shares 2018.
The Company issued Class A Common shares of 169 during 2019 and 32 during 2018.
Stock Repurchase Program
In May 2018, the Company approved a stock repurchase program for the purchase of up to $25.0 million of the Company's
Class A Common Stock outstanding through December 31, 2019. As of December 31, 2019, the Company
repurchased 364,893 shares for an aggregate purchase price of $6.0 million. There were no share repurchases during the years
ended December 31, 2018 and 2017, respectively.
On November 5, 2019, the Company's Board adopted a new stock repurchase program for the purchase of up to $25.0
million of the Company's Class A Common outstanding starting January 1, 2020 and ending December 31, 2021.
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
Accumulated Other Comprehensive Income (Loss)
The following table summarizes changes in accumulated other comprehensive income (loss) by component and related tax
effects for periods shown:
Balance, January 1, 2017
Other comprehensive income (loss)
Reclassification adjustment to net income
Tax effects
Balance, December 31, 2017
Reclassification due to adoption of ASU 2018-02
Other comprehensive income (loss)
Reclassification adjustment to net income
Tax effects
Balance, December 31, 2018
Other comprehensive income (loss)
Reclassification adjustment to net income
Tax effects
Balance, December 31, 2019
Earnings per share
Foreign
Currency
Deferred Gain
(Loss) on Cash
Flow Hedging
Pension Plan
Adjustment
Total
(8,623) $
616 $
(8,494) $
(16,501)
689
—
—
(7,934) $
—
(1,248)
—
83
(9,099) $
1,072
—
(50)
(456)
916
(568)
508 $
118
318
213
(134)
1,023 $
(2,343)
490
489
2,446
511
(1,141)
(6,678) $
(1,286)
(2,583)
823
490
2,679
1,427
(1,709)
(14,104)
(1,168)
(3,513)
1,036
439
(9,234) $
(17,310)
1,882
633
(851)
611
1,123
(412)
(8,077) $
(341) $
(7,570) $
(15,988)
$
$
$
$
The weighted average number of shares of Class A Common and Class B Common outstanding used to calculate basic and
diluted earnings (loss) per share were as follows:
Basic weighted average shares outstanding
Dilutive effect of share-based compensation awards
Diluted weighted average shares outstanding
Basic and diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Basic and diluted earnings (loss) per share
NOTE 10 - Revenue
2019
2018
2017
13,690
13,699
13,673
36
32
12
13,726
13,731
13,685
$
$
1.83
$
1.98
$
(2.09)
(0.39)
(0.26) $
1.59
$
1.47
(0.16)
1.31
A description of the performance obligations for HBB is as follows:
•
Product revenue - Product revenue consist of sales of small electric household and specialty housewares appliances to
traditional brick and mortar and ecommerce retailers, distributors and directly to the end consumer as well as sales of
commercial products for restaurants, bars and hotels. Transactions with these customers generally originate upon the
receipt of a purchase order from the customer, which in some cases are governed by master sales agreements,
specifying product(s) that the customer desires. Contracts for product revenue have an original duration of one year or
less, and payment terms are generally standard and based on customer creditworthiness. Revenue from product sales
is recognized at the point in time when control transfers to the customer, which is either when product is shipped from
the Company's facility, or delivered to customers, depending on the shipping terms. The amount of consideration
received and revenue recognized varies primarily with changes in returns and price concessions.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
• License revenues - From time to time, HBB enters into exclusive and non-exclusive licensing agreements which grant
the right to use certain of HBB’s intellectual property (IP) in connection with designing, manufacturing, distributing,
advertising, promoting and selling the licensees’ products during the term of the agreement. The IP that is licensed
generally consists of trademarks, tradenames, trade dress, and/or logos (the “Licensed IP”). In exchange for granting
the right to use the Licensed IP, HBB receives a royalty payment, which is a function of (1) the total net sales of
products that use the Licensed IP and (2) the royalty percentage that is stated in the licensing agreement. HBB
recognizes revenue at the later of when the subsequent sales occur or satisfying the performance obligation (over
time).
HBB’s warranty program to the consumer consists generally of an assurance-type limited warranty lasting for varying periods
of up to ten years for electric appliances, with the majority of products having a warranty of one to three years. HBB may
repair or replace, at its option, those products returned under warranty. Accordingly, the Company determined that no separate
performance obligation exists.
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.
The following table presents the HBB's revenue on a disaggregated basis for the year ending:
Type of good or service:
Products
Licensing
Total revenues
Year Ended
December 31
2019
2018
$
$
608,364
4,479
612,843
$
$
626,051
3,659
629,710
Wal-Mart Inc. and its global subsidiaries accounted for approximately 33%, 33% and 32% of the HBB’s revenue in 2019, 2018,
and 2017, respectively. Amazon.com, Inc. and its subsidiaries accounted for approximately 14%, 10%, and 12% of the HBB's
revenue in 2019, 2018, and 2017 respectively. HBB’s five largest customers accounted for approximately 58%, 53%, and 54%
of the HBB’s revenue for the years ended December 31, 2019, 2018, and 2017, respectively.
NOTE 11 - Contingencies
Various legal and regulatory proceedings and claims have been or may be asserted against the Company relating to the conduct
of its businesses, including product liability, patent infringement, asbestos related claims, environmental and other claims.
These proceedings and claims are incidental to the ordinary course of business of the Company. Management believes that it
has meritorious defenses and will vigorously defend the Company in these actions. Any costs that management estimates will
be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably
estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other
amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the
liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be
only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and
which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the
possible loss.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
These matters are subject to inherent uncertainties and unfavorable rulings could occur. If an unfavorable ruling were to occur,
there exists the possibility of an adverse impact on the Company’s financial position, results of operations and cash flows of the
period in which the ruling occurs, or in future periods.
HBB is a defendant in a legal proceeding in which the plaintiff alleges that certain HBB products infringe the plaintiff’s patents.
On May 3, 2019, the jury returned its verdict finding that the Company had infringed certain patents of the plaintiff and, as a
result, awarded the plaintiff damages in the amount of $3.2 million. Accordingly, the Company recorded $3.2 million expense
in selling, general and administrative expenses during the second quarter of 2019 for the contingent loss included within other
current liabilities on the Consolidated Balance Sheet as of December 31, 2019. On September 23, 2019 the Company filed
post-trial motions challenging the jury verdict of infringement and the award of damages and the plaintiffs filed motions
seeking interest, post-trial accounting, injunctive relief, and attorneys’ fees. A hearing date on the post-trial motions has not
been set. The Company maintains that its products do not infringe on the plaintiff’s patents and will vigorously defend against
the plaintiff's post-trial motions.
KC is a defendant in a legal proceeding in which the plaintiff alleges that KC is in breach of forty-nine store leases for failing to
continue to operate the stores during the entire term of the leases and for the use of certain store sale signs. In November 2019,
KC agreed to the entry of an order preventing the use of certain store sale signs in the specified stores. All KC stores ceased
operations as of December 31, 2019. An estimate of the fair value of the future minimum lease liability obligation related to the
subject store leases has been included in the results of discontinued operations.
Environmental matters
HBB is investigating or remediating historical environmental contamination at some current and former sites operated by HBB
or by businesses it acquired. Based on the current stage of the investigation or remediation at each known site, HBB estimates
the total investigation and remediation costs and the period of assessment and remediation activity required for each site. The
estimate of future investigation and remediation costs is primarily based on variables associated with site clean-up, including,
but not limited to, physical characteristics of the site, the nature and extent of the contamination and applicable regulatory
programs and remediation standards. No assessment can fully characterize all subsurface conditions at a site. There is no
assurance that additional assessment and remediation efforts will not result in adjustments to estimated remediation costs or the
time frame for remediation at these sites.
HBB's estimates of investigation and remediation costs may change if it discovers contamination at additional sites or
additional contamination at known sites, if the effectiveness of its current remediation efforts change, if applicable federal or
state regulations change or if HBB's estimate of the time required to remediate the sites changes. HBB's revised estimates may
differ materially from original estimates.
At December 31, 2019 and December 31, 2018, HBB had accrued undiscounted obligations of $4.4 million and $8.2 million
respectively, for environmental investigation and remediation activities. The reduction in the amount accrued at December 31,
2019 compared to December 31, 2018 is the result of a reduction to the accrual recorded in the second quarter of 2019 due to a
change in the expected type and extent of investigation and remediation activities associated with one of the sites based upon
additional testing and assessment performed with respect to that site in the second quarter of 2019. HBB estimates that it is
reasonably possible that it may incur additional expenses in the range of zero to $4.0 million related to the environmental
investigation and remediation at these sites. Additionally, the Company recorded a $1.5 million receivable as of December 31,
2019 related to a probable recovery for environmental investigation and remediation costs associated with one of the sites from
a responsible party in exchange for release from all future obligations by that party.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
NOTE 12 - Income Taxes
The components of income before income taxes and the income tax provision for the years ended December 31 are as follows:
Income before income taxes
Domestic
Foreign
Income tax provision
Current income tax provision:
Federal
State
Foreign
Total current
Deferred income tax provision (benefit):
Federal
State
Foreign
Total deferred
$
$
$
2019
2018
2017
25,331
9,062
34,393
$
$
30,670
4,291
34,961
$
$
34,301
4,747
39,048
3,669
$
1,026
1,372
6,067
297
1,771
1,180
3,248
775
460
1,396
2,631
4,813
296
76
5,185
$
12,139
1,306
1,366
14,811
3,868
(17)
256
4,107
$
9,315
$
7,816
$
18,918
The Company made federal income tax payments of $1.9 million, $8.3 million, and $9.9 million during 2019, 2018, and 2017,
respectively, to the IRS and to NACCO as a member of the consolidated income tax return for periods prior to spin off. The
Company made foreign and state income tax payments of $3.6 million, $2.6 million, and $1.9 million during 2019, 2018, and
2017, respectively. During the same periods, income tax refunds totaled $0.1 million in 2019 and $0.1 million in 2018. There
were no tax refunds in 2017.
A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:
Income before income taxes
Statutory taxes at 21.0% (35.0% in 2017)
State and local income taxes
Valuation allowances
Other non-deductible expenses
Credits
Provisional effect of the Tax Cuts and Jobs Act (the "Tax Act")
Non-deductible spin-related costs
Other, net
Income tax provision
2019
2018
2017
$
$
$
34,393
7,223
1,063
2,146
346
%
$
%
$
%
$
34,961
$
39,048
21.0 % $
7,342
21.0 % $
13,667
35.0 %
3.1 %
6.2 %
1.0 %
561
233
429
1.6 %
0.7 %
1.2 %
843
369
44
2.2 %
0.9 %
0.1 %
(1,195)
(3.5)%
(348)
(1.0)%
(458)
(1.2)%
—
—
— %
— %
—
—
— %
— %
4,654
11.9 %
540
1.4 %
(268)
(0.8)%
(401)
(1.1)%
(741)
(1.9)%
$
9,315
27.1 % $
7,816
22.4 % $
18,918
48.4 %
The valuation allowances in 2019 includes $2.0 million of deferred tax expense related to a change in judgment regarding the
valuation allowances recorded against certain deferred tax assets of KC.
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from
differences in the book and tax basis of assets and liabilities follows:
Deferred tax assets
Tax carryforwards
Inventory
Accrued expenses and reserves
Other employee benefits
Other
Total deferred tax assets
Less: Valuation allowances
Deferred tax liabilities
Inventory
Accrued pension benefits
Depreciation and amortization
Total deferred tax liabilities
Net deferred tax asset
December 31
2019
2018
$
1,519
$
316
5,311
1,371
1,167
9,684
(1,157)
8,527
—
2,623
2,051
4,674
$
3,853
$
990
—
5,338
2,747
1,088
10,163
(1,295)
8,868
37
1,854
1,459
3,350
5,518
As of December 31, 2019 and 2018, respectively HBB maintained valuation allowances with respect to certain deferred tax
assets relating primarily to operating losses in certain non-U.S. jurisdictions that HBB believes are not likely to be realized.
The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances
where the Company has determined that realization is uncertain:
December 31, 2019
Net deferred tax
asset
Valuation
allowance
Carryforwards
expire during:
$
$
496
$
1,023
1,519
$
(1)
2020 - Indefinite
—
1,023
1,023
Alternative minimum tax credit
Non-U.S. net operating loss
Total
(1)
The Tax Act repealed the corporate alternative minimum tax for tax years beginning after December 31, 2017. These
credits are fully utilized in 2019 based on estimated income taxes.
Non-U.S. net operating loss
Total
December 31, 2018
Net deferred tax
asset
Valuation
allowance
$
$
990
990
$
$
990
990
Carryforwards
expire during:
2020 - Indefinite
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
The Company has valuation allowances for certain foreign deferred tax assets. Based upon the review of historical earnings and
the relevant expiration of carryforwards, the Company believes the valuation allowances are appropriate and does not expect to
release valuation allowances within the next twelve months that would have a significant effect on the Company’s financial
position or results of operations.
As of December 31, 2019, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $31.4
million. The Company has recorded the tax impact for the unremitted earnings as allowed under the Tax Act, a portion of
which is classified in other long-term liabilities as the Company has elected to make payments over eight years. The Company
continues to conclude all material entities’ foreign earnings will be indefinitely reinvested in its foreign operations and will
remain offshore in order to meet the capital and business needs outside of the U.S. As a result, the Company does not provide a
deferred tax liability with respect to the cumulative unremitted earnings. It is not practicable to determine the deferred tax
liability associated with these undistributed earnings due to the availability of foreign tax credits and the complexity of the rules
governing the utilization of such credits under the Tax Act. The Company made an accounting policy election to account for
the global intangible low-tax income as a current period expense when incurred.
The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of
differences between tax return positions and the benefits recognized in the financial statements for the years ended December
31, 2019, 2018, and 2017. Approximately $0.4 million, $0.3 million, and $0.6 million of these gross amounts as of December
31, 2019, 2018, and 2017, respectively, relate to permanent items that, if recognized, would impact the effective income tax
rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S.
federal income taxes which would occur upon the recognition of the state tax benefits included herein.
Balance at January 1
Additions based on tax positions related to prior years
Additions based on tax positions related to the current year
Reductions due to settlements with taxing authorities
Balance at December 31
2019
2018
2017
465
$
881
$
98
—
—
90
—
(506)
563
$
465
$
671
—
210
—
881
$
$
The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The
Company recorded immaterial amounts of interest and penalties as of December 31, 2019 and 2018, respectively. The Company
expects the amount of unrecognized tax benefits will change within the next 12 months; however, the change in unrecognized
tax benefits, which is reasonably possible within the next 12 months, is not expected to have a significant effect on the
Company's financial position, results of operations or cash flows.
In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five
years for the taxing authorities to review the applicable tax filings. The examination of NACCO's 2013-2016 U.S. federal tax
returns is ongoing. In addition, the Company does not have any material taxing jurisdictions in which the statute of limitations
has been extended beyond the applicable time frame allowed by law.
NOTE 13 - Retirement Benefit Plans
Defined Benefit Plans
The Company maintains two defined benefit pension plans that provide benefits based on years of service and average
compensation during certain periods.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:
U.S. Plan
Discount rate for pension benefit obligation
Discount rate for net periodic benefit income
Expected long-term rate of return on assets for net periodic pension income
Non-U.S. Plan
Discount rate for pension benefit obligation
Discount rate for net periodic benefit (income) loss
Expected long-term rate of return on assets for net periodic pension (income) loss
2019
2018
2017
2.88%
4.00%
7.50%
2.96%
3.50%
5.50%
4.00%
3.30%
7.50%
3.50%
3.50%
5.50%
3.30%
3.60%
7.50%
3.25%
3.75%
5.50%
Set forth below is a detail of the net periodic pension income for the defined benefit plans for the years ended December 31:
U.S. Plan
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Net periodic pension income
Non-U.S. Plan
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Net periodic pension (income) loss
2019
2018
2017
727
$
681
$
811
(1,987)
(2,047)
(2,074)
561
623
(699) $
(743) $
501
(762)
144
$
142
$
(263)
72
(286)
200
153
(264)
10
(47) $
56
$
(101)
$
$
$
$
Set forth below is the detail of other changes in plan assets and benefit obligations recognized in other comprehensive loss
(income) for the years ended December 31:
U.S. Plan
Current year actuarial loss (gain)
Amortization of actuarial loss
Total recognized in other comprehensive loss (income)
Non-U.S. Plan
Current year actuarial loss
Amortization of actuarial loss
Total recognized in other comprehensive loss
2019
2018
2017
$
$
$
$
(1,727) $
2,347
$
(2,506)
(561)
(623)
(501)
(2,288) $
1,724
$
(3,007)
(155) $
236
$
(72)
(200)
(227) $
36
$
60
(10)
50
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
The following table sets forth the changes in the benefit obligation and the plan assets during the year and the funded status of
the defined benefit plans at December 31:
Change in benefit obligation
Projected benefit obligation at beginning of year
$
19,131
$
4,084
$
21,716
$
4,604
2019
2018
U.S.
Plan
Non-U.S.
Plan
U.S. Plan
Non-U.S.
Plan
Interest cost
Actuarial (gain) loss
Benefits paid
Foreign currency exchange rate changes
Projected benefit obligation at end of year
Accumulated benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Foreign currency exchange rate changes
Fair value of plan assets at end of year
Funded status at end of year
Amounts recognized in the balance sheets consist of:
Non-current assets
Components of accumulated other comprehensive loss consist of:
Actuarial loss
Deferred taxes and other
727
1,266
(1,750)
—
144
311
(182)
213
681
(1,278)
(1,988)
—
19,374
19,374
$
$
4,570
4,570
$
$
19,131
19,131
$
$
142
(148)
(151)
(363)
4,084
4,084
25,671
$
4,744
$
29,237
$
5,456
4,979
(1,750)
—
726
(182)
62
(1,578)
(1,988)
—
28,900
9,526
$
$
5,350
780
$
$
25,671
6,540
$
$
(111)
(151)
(450)
4,744
660
9,526
$
780
$
6,540
$
660
(9,140) $
(1,058) $
(11,427) $
(1,225)
2,280
348
2,933
(6,860) $
(710) $
(8,494) $
485
(740)
$
$
$
$
$
$
$
$
The actuarial loss included in accumulated other comprehensive loss expected to be recognized in net periodic pension income
in 2020 is $0.7 million.
The Company recognizes as a component of benefit cost (income), as of the measurement date, any unrecognized actuarial net
gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor."
Amounts outside the corridor are amortized over the average expected remaining lifetime of inactive participants for the
pension plans. The gain (loss) amounts recognized in AOCI are not expected to be fully recognized until the plan is terminated
or as settlements occur, which would trigger accelerated recognition.
The Company's policy is to make contributions to fund its pension plans within the range allowed by applicable regulations.
The Company does not expect to contribute to its U.S. and non-U.S. pension plans in 2020.
Pension benefit payments are made from assets of the pension plans.
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
Future pension benefit payments expected to be paid from assets of the pension plans are:
2020
2021
2022
2023
2024
2025 - 2029
U.S. Plan
Non-U.S. Plan
$
2,200
$
1,870
1,880
1,698
1,591
6,148
$
15,387
$
184
215
246
243
249
1,322
2,459
The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of
return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-
term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is
consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The
historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of
return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent
benchmark market indices for each of the asset classes.
Expected returns for U.S. pension plans are based on a calculated market-related value for U.S. pension plan assets. Under this
methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns are
recognized in the market-related value of assets ratably over three years. Expected returns for non-U.S. pension plans are based
on fair market value for non-U.S. pension plan assets.
The pension plans maintain investment policies that, among other things, establish a portfolio asset allocation methodology
with percentage allocation bands for individual asset classes. The investment policies provide that investments are reallocated
between asset classes as balances exceed or fall below the appropriate allocation bands.
The following is the actual allocation percentage and target allocation percentage for the U.S. pension plan assets at December
31:
U.S. equity securities
Non-U.S. equity securities
Fixed income securities
Money market
2019
Actual
Allocation
2018
Actual
Allocation
Target Allocation
Range
45.9%
20.4%
33.2%
0.5%
43.8% 36.0% - 54.0%
19.3% 16.0% - 24.0%
36.4% 30.0% - 40.0%
0.5% 0.0% - 10.0%
The following is the actual allocation percentage and target allocation percentage for the Non-U.S. pension plan assets at
December 31:
Canadian equity securities
Non-Canadian equity securities
Fixed income securities
Cash and cash equivalents
2019
Actual
Allocation
2018
Actual
Allocation
Target Allocation
Range
30.2%
32.3%
37.5%
—%
29.5%
29.9%
40.6%
—%
25.0% - 35.0%
25.0% - 35.0%
30.0% - 50.0%
0.0% - 5.0%
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
The fair value of each major category of the Company's U.S. pension plan assets are valued using quoted market prices in
active markets for identical assets, or Level 1 in the fair value hierarchy. The fair value of each major category of the
Company's Non-U.S. pension plan assets are valued using observable inputs, either directly or indirectly, other than quoted
market prices in active markets for identical assets. Following are the values as of December 31:
U.S. equity securities
Non-U.S. equity securities
Fixed income securities
Money market
Total
Defined Contribution Plans
U.S. Plan
Non-U.S. Plan
2019
2018
2019
2018
$
13,255
$
11,251
$
929
$
5,904
9,596
145
4,930
9,350
140
2,412
2,009
—
$
28,900
$
25,671
$
5,350
$
735
2,081
1,928
—
4,744
HBB maintains a defined contribution (401(k)) plan for substantially all U.S. employees and similar plans for employees
outside of the U.S. The Company provides employer matching (or safe harbor) contributions based on plan provisions. The
defined contribution retirement plans also provide for an additional minimum employer contribution. Certain plans also permit
additional contributions whereby the applicable company’s contribution to participants is determined annually based on a
formula that includes the effect of actual operating results compared with targeted operating results and the age and/or
compensation of the participants. Total costs, including Company contributions, for these plans were $5.0 million in 2019 and
$5.3 million in 2018 and 2017.
NOTE 14 - Data by Geographic Region
Revenue and property, plant and equipment related to continuing operations outside the U.S., based on customer and asset
location, are as follows:
Revenue from unaffiliated customers
Property, plant and equipment, net
Revenue from unaffiliated customers
Property, plant and equipment, net
Revenue from unaffiliated customers
Property, plant and equipment, net
2019
2018
2017
U.S.
Other
Consolidated
$
$
$
$
$
$
463,608
16,828
489,825
15,344
479,970
10,974
$
$
$
$
$
$
149,235
5,496
139,885
5,498
132,259
5,005
$
$
$
$
$
$
612,843
22,324
629,710
20,842
612,229
15,979
No single country outside of the U.S. comprised 10% or more of HBB's revenue from unaffiliated customers.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(In thousands, Except as noted and Per Share and Percentage Data)
NOTE 15 - Quarterly Results of Operations (Unaudited)
A summary of the unaudited results of operations for the year ended December 31 is as follows:
Revenue
Gross profit
Operating profit
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
Net income (loss)
Basic and diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Basic and diluted earnings (loss) per share
Revenue
Gross profit
Operating profit
Income from continuing operations, net of tax
(Loss) income from discontinued operations, net of tax
Net income (loss)
Basic and diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Basic and diluted earnings (loss) per share
2019
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
126,124
26,119
1,500
$
$
$
130,144
27,586
2,858
$
$
$
149,490
30,928
6,991
962
$
1,572
$
(2,723)
(1,761) $
(2,516)
(944) $
$
0.07
(0.20)
(0.13) $
$
0.11
(0.18)
(0.07) $
2018
3,150
(2,753)
397
0.23
(0.20)
0.03
First
Quarter
Second
Quarter
Third
Quarter
124,533
27,510
3,590
$
$
$
135,179
30,323
4,065
$
$
$
171,017
38,120
12,975
$
$
$
$
$
$
$
$
$
$
2,659
$
1,892
$
9,933
$
(3,077)
(2,766)
(1,889)
(418) $
(874) $
8,044
$
207,085
44,912
25,517
19,394
(20,608)
(1,214)
1.43
(1.52)
(0.09)
Fourth
Quarter
198,981
41,562
17,540
12,661
2,371
15,032
0.19
$
0.14
$
0.72
$
(0.22)
(0.20)
(0.13)
(0.03) $
(0.06) $
0.59
$
0.93
0.17
1.10
$
$
$
$
$
$
$
$
$
$
$
$
$
$
F-33
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
HAMILTON BEACH BRANDS HOLDING COMPANY
YEAR ENDED DECEMBER 31, 2019, 2018, AND 2017
Description
2019
Reserves deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax valuation allowances
2018
Reserves deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax valuation allowances
2017
Reserves deducted from asset accounts:
Allowance for doubtful accounts
Allowance for discounts, adjustments and returns
Deferred tax valuation allowances
Additions
Balance at
Beginning
of Period
(In thousands)
Charged to
Costs and
Expenses
Charged to
Other
Accounts
— Describe
Deductions
— Describe
Balance at
End of
Period (C)
$
$
$
$
$
$
$
713
1,300
1,177
1,916
862
14,650
1,614
$
$
$
$
$
$
$
309
6,553
$
$
— $
— $
(1)
(A)
139
(D)
11
$
— $
— $
— $
475
616
(A)
(D)
405
21,358
302
$
$
$
— $
90
(A)
— $ 21,844
(B)
— $
—
$
$
$
$
$
$
$
1,023
7,714
713
1,300
1,177
14,164
1,916
(A)
(B)
(C)
(D)
Write-offs, net of recoveries and foreign exchange rate adjustments.
Payments and customer deductions for product returns, discounts and allowances.
Balances which are not required to be presented and those which are immaterial have been omitted.
Foreign exchange rate adjustments and utilization of foreign entity losses.
F-34
SUBSIDARIES OF HAMILTON BEACH BRANDS HOLDING COMPANY
The following is a list of active subsidiaries as of the date of the filing with the Securities and Exchange Commission of the
Annual Report on Form 10 K to which this is an Exhibit. Except as noted, all of these subsidiaries are wholly-owned, directly
or indirectly.
Exhibit 21
Name
Altoona Services, Inc.
Grupo HB/PS S.A. de C.V.
Hamilton Beach Brands Canada, Inc.
Hamilton Beach Brands de Mexico S.A. de C.V.
Hamilton Beach Brands Do Brasil Comercializacao de Produtos Electricos Ltda
Hamilton Beach Brands, (HK) Limited
Hamilton Beach Brands, Inc.
Hamilton Beach Electrical Appliances (Shenzhen) Co. Ltd.
Hamilton Beach, Inc.
The Kitchen Collection, LLC
Weston Brands, LLC
Incorporation
Pennsylvania
Mexico (99.98%)
Canada
Mexico (99.98%)
Brazil (99.9%)
Hong Kong (PRC)
Delaware
China
Delaware
Ohio
Ohio
I, Gregory H. Trepp, certify that:
Certifications
Exhibit 31(i)(1)
1.
I have reviewed this annual report on Form 10-K of Hamilton Beach Brands Holding Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 26, 2020
/s/ Gregory H. Trepp
Gregory H. Trepp
President and Chief Executive
Officer (Principal Executive
Officer)
I, Michelle O. Mosier, certify that:
Certifications
Exhibit 31(i)(2)
1.
I have reviewed this annual report on Form 10-K of Hamilton Beach Brands Holding Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 26, 2020
/s/ Michelle O. Mosier
Michelle O. Mosier
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)/(Principal
Accounting Officer)
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Hamilton Beach Holding Company (the “Company”) on Form 10-K for the year
ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the
undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-
Oxley Act of 2002, that, to such officer's knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company as of the dates and for the periods expressed in the Report.
Date:
February 26, 2020
/s/ Gregory H. Trepp
Gregory H. Trepp
President and Chief Executive Officer (Principal Executive Officer)
Date:
February 26, 2020
/s/ Michelle O. Mosier
Michelle O. Mosier
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)/(Principal Accounting Officer)
The following information related to the Company's stock performance was not included in or
incorporated by reference into, and shall not be deemed to constitute a part of, the Company's Annual
Report on Form 10-K filed with the SEC.
Stock Price Performance Presentation
The following graph compares the Company's total stock price performance on Class A Common Stock
against the total stock price performance of the Russell 2000 Index and the Russell 2000 Producer
Durables Index for the periods indicated. The graph presents the value of a $100 investment, at the base
point, for each index assuming the reinvestment of dividends.
In accordance with the regulations promulgated by the SEC, the following graph compares the stock price
performance based upon the difference between the stock price since the Company’s stock began trading
and the stock price at the end of each month commencing September 30, 2017 (base point) and ending
December 31, 2019.
Corporate Information
Stock Exchange Listing
The New York Stock Exchange
Symbol: HBB
Investor Relations Contact
Investor questions may be addressed to:
Investor Relations
Hamilton Beach Brands Holding Company
4421 Waterfront Drive
Glen Allen, Virginia 23060
(804) 418-7745
Email: ir@hamiltonbeach.com
Hamilton Beach Brands Holding Company’s Website
Additional information on Hamilton Beach Brands
Holding Company may be found at its website,
www.hamiltonbeachbrands.com. The Company
considers this website to be one of the primary
sources of information for investors.
Subsidiary Company Websites
The websites for the Company’s subsidiaries
are as follows:
Hamilton Beach Brands
www.hamiltonbeach.com
www.hamiltonbeachcommercial.com
www.proctorsilex.com
www.westonbrands.com
www.brightlineproducts.com
Annual Meeting
The Annual Meeting of Stockholders of Hamilton Beach
Brands Holding Company will be held at 11:00 a.m. on
May 12, 2020, at 5875 Landerbrook Drive, Cleveland,
Ohio 44124.
Form 10-K
Additional copies of the Company’s Annual Report
on Form 10-K filed with the Securities and Exchange
Commission are available free of charge through the
Company’s website, www.hamiltonbeachbrands.com or
by request to:
Investor Relations
Hamilton Beach Brands Holding Company
4421 Waterfront Drive
Glen Allen, Virginia 23060
(804) 418-7745
Email: ir@hamiltonbeach.com
Stock Transfer Agent and Registrar
Stockholder Correspondence:
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
Overnight Correspondence:
Computershare
462 South 4th St., Suite 1600
Louisville, KY 40202
(800) 622-6757 (U.S., Canada and Puerto Rico)
(781) 575-4735 (International)
Legal Counsel
McDermott Will & Emery LLP
444 West Lake Street
Chicago, Illinois 60606
Independent Registered Public Accounting Firm
Ernst & Young LLP
950 Main Ave., Suite 1800
Cleveland, Ohio 44113
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4421 Waterfront Drive, Glen Allen, VA 23060
hamiltonbeachbrands.com
An Equal Opportunity Employer