Hamilton Beach Brands Holding Company | 2020 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.,
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 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 purifiers, and Brightline™ personal care products. We license the brands for
Wolf Gourmet® countertop appliances and for CHI® premium garment care products. We market the
Bartesian® premium cocktail delivery system through an exclusive multiyear agreement.
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 US small kitchen appliance industry for brand units sold in both the
brick-and-mortar and ecommerce channels.
Our brands have a strong presence in all the retail channels where consumers want to buy small kitchen
appliances, including the fast-growing ecommerce channel. The principal market for our consumer
products is North America, including the United States, Canada, Mexico, and Latin America. Our
commercial products are sold globally, serving food service and hospitality customers around the world.
Our Brands
Registered Trademarks: Wolf Gourmet®- Sub-Zero Group, Inc.; CHI® - Farouk Systems, Inc.; Bartesian® - the Bartesian company.
2020 ANNUAL REPORT
1
Financial Highlights
Hamilton Beach Brands Holding Company
Income Statement Data
Revenue .......................................................................................................................................
Operating profit .........................................................................................................................
Income from continuing operations, net of tax .........................................................
Basic and diluted earnings per share from continuing operations ...................
Shares outstanding at December 31 ..............................................................................
Balance Sheet Data at December 31
Total assets .................................................................................................................................
Debt ................................................................................................................................................
Stockholders’ equity ...............................................................................................................
Cash Flow Data
(Used for) provided by operating activities ..................................................................
(Used for) investing activities .............................................................................................
Before financing activities ....................................................................................................
Provided by financing activities .........................................................................................
Cash dividends paid ...............................................................................................................
Purchase of treasury stock ..................................................................................................
Year Ended December 31
2020
2019
(In thousands, except per share)
$
$
$
$
$
$
$
$
$
$
$
$
$
603,713
37,415
24,067
1.76
13,686
391,168
98,360
80,105
(27,934)
(3,812)
(31,746)
34,180
5,053
-
$
$
$
$
$
$
$
$
$
$
$
$
$
611,786
26,794
15,093
1.10
13,516
288,663
58,497
36,266
222
(4,122)
(3,900)
1,062
4,851
5,960
Use of cash in 2020 was primarily due to timing of trade receivables shifting into the first quarter of 2021 and to building
inventory to support anticipated first-half 2021 sales.
Our Vision
Our Mission
Achieve leadership positions
in retail and commercial
appliances with our consumer-
preferred portfolio of brands
and products.
Deliver profitable
growth from
innovative solutions
that improve
everyday living.
2
To Our Stockholders
Celebrating 110 Years
In 2020, our Company marked 110 years serving
as a leading provider of consumer and commercial
small appliances. Throughout this time, we have
been a trusted, resilient and enduring partner for
the consumers and customers that we serve.
Leadership in customer-driven innovation has kept
us at the forefront of our industry. Our talented,
experienced, creative, and dedicated employees
are the power behind our success, and we are
proud of our team.
Insight into our longevity may be found in one of
our earliest innovations. In 1911, we introduced
a drink mixer that used a small, high-powered
motor to rotate a spindle at high speed, which was
developed under the leadership of our founders
Louis Hamilton and Chester Beach. The same type
of drink mixer is still in use today. Moreover, the
motor’s legacy continues to power a broad array
of small kitchen electrics.
Our heritage, culture and core values have stood
the test of time, even as we have evolved and
changed with the times. We have a long history of
financial strength. These influences have helped
guide us through the Covid-19 pandemic and what
was undoubtedly one of the most challenging years
in our history.
Navigating the Pandemic
Our priorities during the pandemic have been to
protect the health and safety of our employees
as we strive to meet the needs of our customers
and consumers. I am very proud of how well our
employees have worked together during this
unprecedented set of circumstances, supporting
our customers, and keeping themselves and
others safe.
While we have not dealt with a pandemic before,
we’re fortunate to have experienced team members
who have managed through challenging situations
in the past. We emerged from those challenges
as a stronger company and expect to this time as
well. We are well positioned to maintain a strong
business while vaccines are administered and the
pandemic begins to diminish.
2020 Financial Results
Our Company is fortunate to be a leader in an
industry that is providing essential products to
people who are sheltering at home during the
pandemic and
engaging in a
higher level of
food and beverage
preparation than
ever before. This
development
has spurred
robust consumer
demand for
small appliances,
particularly in the
US and Canada.
We are focused
on our strategic
priorities of revenue
growth, margin
expansion and
strong cash flow
generation.
At the same time,
the pandemic
caused much disruption with some of our retail
partners that faced store closures and decreased
foot traffic. Many of our international consumer
markets felt the impact even more severely, and
the food service and hospitality industries that
use our commercial products were devastated.
Our investments in talent, new products and
global infrastructure enabled our team to keep
our company strong during these challenging
conditions and will continue to propel us forward
as the pandemic recedes.
We also faced two internal challenges in 2020.
First, we were deeply disappointed to discover that
certain employees at our Mexican subsidiaries
engaged in unauthorized transactions, which
resulted in non-cash write-offs and a financial
HAMILTON BEACH BRANDS HOLDING COMPANY 3
restatement. Secondly, we experienced greater than
expected shipping hurdles with a long-planned
implementation of a new ERP system in the US,
which had a temporary unfavorable impact on our
shipping capabilities. In 2021, we expect improved
performance as a result of putting these challenges
behind us.
Additionally, as with all importers, we experienced
difficulties moving product from our third-party
suppliers in China to our distribution centers in the
US and Canada and out to retailers and consumers
due to demand-driven congestion in all parts of the
global transportation system. Shipping challenges
related to congestion persist.
Our team worked tirelessly to address these
challenges. I am extremely grateful for their
exceptional efforts.
While we continue to feel the unfavorable impact
of the pandemic on certain parts of our business,
we ended the year on a strong note. Fourth-quarter
revenue grew in the double-digits, and operating
profit was 49% higher than the prior year period.
Strong consumer demand has continued into 2021,
especially in the US and Canada.
For the full year 2020, revenue decreased 1.3% to
$603.7 million due to the impact of Covid-19 on
our international consumer and global commercial
markets, both of which declined significantly, and
to the ERP-related shipping challenges. Revenue
increased in our US and Canadian consumer markets.
Operating profit increased 40% to $37.4 million due
to gross margin expansion and a small decrease in
selling, general and administrative expenses.
Use of cash before financing activities was $31.7
million compared to a use of $3.9 million in 2019
due to an increase in net working capital. We built
inventory in anticipation of sales growth in the first
half of 2021, in combination with longer shipping
lead times due to congestion in the freight supply
chain globally and the need to source product in
advance of the annual Chinese New Year shutdown.
Trade receivables increased due to the timing of
collections shifting into the first quarter of 2021
as some of our third-quarter sales moved into the
fourth quarter. We expect net working capital to
improve significantly in the first half of 2021.
The Board increased our regular quarterly dividend
by 6% and we paid $5.1 million in dividends for the
year. There were no share repurchases in 2020.
Health & Wellness
We are increasing our participation in the large and fast-growing health and wellness market.
New products to support this initiative include our AquaFusion™ Water Filtration+Flavor System,
Compact Air Purifier with HEPA Filter, and Ultra Air Purifier.
2020 ANNUAL REPORT 4
Premium Products
New products in our line of premium brands
include the Bartesian® Cocktail Dispenser,
CHI® Mini Iron, Wolf Gourmet® True
Temperature Electric Kettle, Hamilton
Beach Professional® Stand Mixer, and
Weston® Butcher Series Meat Grinder.
We said our final goodbye to Kitchen Collection
on April 3, 2020 with a pro-rata distribution of
its remaining assets to creditors. Its liabilities at
March 31 were adjusted to the amounts distributed
and reflected as income from discontinued
operations. As a result, Kitchen Collection’s net losses
and negative cash flow no longer have an impact
on the Company. While we were disappointed we
could not find a path to profitability for Kitchen
Collection, the timing of our difficult choice to
close was fortunate as it would have been far
more challenging to execute during the pandemic.
Building on Our Strengths
We entered 2021 well positioned to build on our
strengths as we focus on our commitment to build
long-term shareholder value.
Our strong and experienced team has deep
industry, customer and consumer knowledge.
We’re a leader in an industry with proven durable
demand. We believe important underlying trends
will continue to drive future demand, even as
consumers begin to return to more normal activity.
Many consumers learned new food and beverage
preparation skills that we anticipate will continue
to be used post-pandemic. Demographic trends
related to millennials forming new households and
boomers moving into new homes or remodeling are
expected to benefit us for years to come.
We’ve built a portfolio of leading, trusted brands,
covering a wide range of price points, from value to
luxury, which enables us to meet the needs of most
retailers and consumers. We’ve invested to ensure
we participate in over 50 categories. Our diversified
coverage provides a portfolio that is unlikely to be
disrupted even if market forces impact one category.
We have a broad customer base. As consumers
move from channel to channel or customer to
customer, we have a very strong presence across
the marketplace. We have a global infrastructure and
efficient supply chain. Our asset light model allows
us to minimize capital investments. Historically,
we have generated strong cash flow and a strong
return on total capital employed.
HAMILTON BEACH BRANDS HOLDING COMPANY 5
We’re a proven innovator. One of our key competitive
advantages is that year after year we continue to
bring out new on-trend and innovative products
that consumers want. In 2020, we introduced
nearly 70 new products, even with employees
working remotely. We plan to introduce 100 more
new products over the next 24 months. Our new
products will cross a wide range of brands, price
points and categories, leveraging our leading brand
portfolio in markets around the world.
Strategic Initiatives
We’re executing on several strategic initiatives
that are designed to build long-term shareholder
value. In 2020, we reviewed all our initiatives and
refreshed some of them. Over time, we expect our
initiatives to drive revenue growth and operating
margin expansion.
We expect to grow revenue through new product
development and a focus on higher priced products
as well as by adding new brands from licensing and
partnerships. We expect to expand operating profit
margin by leveraging existing operating expenses
as we grow our revenue.
Accelerating Flagship Brand Growth
In Our Core North American Market
A key to our continued success is our ability to
leverage our trusted, well recognized flagship
brands, Hamilton Beach® and Proctor Silex®,
particularly in the North American marketplace
where they have competed successfully for over
100 years.
Demand in our US and Canadian consumer
markets is expected to remain strong as consumers
continue to shelter at home and engage in meal
and beverage preparation. We expect the Mexican
and Latin American markets to rebound in 2021
as more people gain access to vaccines and
economies begin to recover.
In 2020, Hamilton Beach® was once again the
number one brand in both the brick-and-mortar
and ecommerce channels, based on units sold.
We intend to maintain and grow this position. The
key elements of our strategy include new product
development, refreshed packaging and online
content, new digital marketing and social media
campaigns, all with the aim of driving conversion.
We plan to drive growth of the Proctor Silex® brand
with a new ‘Simply Better’ positioning. We recently
launched four products in core categories and will
have more coming in 2021 and beyond. This new
product family merges sleek design with superior
performance and durability. A key supporting
element is investments in digital marketing.
We entered 2021
with significant
opportunities for
long-term profitable
growth.
Certain emerging
markets have
experienced
greater challenges
from the pandemic
and their outlook
is uncertain.
After assessing
the potential for
growth in emerging
markets, we are
pivoting to a licensing model from a company
managed model in countries such as Brazil, China,
and India. This change will result in reallocating
certain resources to our focus on North America
while others will be eliminated.
Accelerating Our Digital Transformation
We’re fortunate that our team recognized the shift
by consumers to ecommerce channels many years
ago. The ecommerce channel represents a very
strong and fast-growing part of our business and this
trend accelerated significantly during the pandemic.
Our ecommerce sales increased 30% in 2020 and
accounted for 32% of total revenue. Online sales are
expected to continue to grow significantly in 2021.
We’re supporting growth in this channel with digital
marketing programs, expansion of our direct to
consumer distribution operation, and increasing
our participation with pure-play and omnichannel
customers. Hamilton Beach® remains the number
one selling brand in the US ecommerce channel
based on units. Online ratings and reviews are the
lifeblood of ecommerce sales and all nine of our
brands average a four-star rating or better.
2020 ANNUAL REPORT 6
While we have positioned ourselves to be a leader
in this important channel, we’re accelerating our
investment in people, capabilities, content and
digital marketing to increase our leadership role
in 2021 and beyond.
Growing in the Premium Market
Premium products account for approximately
one-third of US small kitchen appliance industry
annual sales. We were not a participant in this part
of the industry until 2014 when we began to build
a premium portfolio and have since added several
new brands.
water filtration category. We’re pursuing additional
opportunities that we expect to be able to discuss
in the coming months.
Increasing Commercial Leadership
We continue to expand our product offerings in
the global commercial small appliance market. Our
commercial products generally sell at higher prices
and higher margins than most of our consumer
products. Pre-pandemic, our global commercial
products had achieved a compound annual growth
rate of more than 5% since 2010 and accounted for
8% of total revenue.
Our premium owned 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. Our licensed brands
include Wolf Gourmet® countertop appliances
and CHI®, premium garment care products.
We market the Bartesian® premium cocktail
dispensing machine through an exclusive
multiyear agreement.
In 2020, our revenue from the sale of premium
products increased 12% and accounted for
11% of total revenue. Our newest entrant in the
premium market, Bartesian®, is the first to use
flavor capsules to create a premier mixed drink
at home. In its first full year, Bartesian® received
very strong consumer response and is poised for
continued growth in 2021.
We plan to further expand our presence in the
premium market with continued new product
development and by pursuing additional
partnerships and licensing agreements.
Broadening into New Categories
In 2021, we’re increasing our investment in
new opportunities in the home, particularly in
the large and fast-growing health and wellness
space. Two examples of this include expanding
our air purification offerings and entering the
We have a strong
commitment to
building long-term
shareholder value.
In 2020, our sales
of commercial
products
decreased 37%
and the share
of total revenue
dropped to 5%
as the pandemic
forced many of our
customers to close or dramatically curtail
their food service and hospitality businesses.
Certain global commercial markets began to
recover in the second half of 2020. Quick service
restaurants have adjusted well, and many casual
and fine dining restaurants have been successful
with takeout and delivery models, while bars
continue to struggle due to Covid-19 restrictions.
Our food service customers are ordering our
products at an increased rate, particularly in the
US and in Asia, and we’re starting to see an uptick
in hospitality sales.
While we expect the global commercial market
recovery to take some time, we continue to be very
optimistic about the potential for this business and
expect it to return to growth in 2021. We continue to
invest in new commercial products and expand our
offerings across the kitchen. We’ve also invested
in digital marketing and ecommerce as well
as strengthened our partnerships with regional
and global chains, all of which position us well to
participate in the rebound of these industries.
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
Strategic Acquisitions and Partnerships
In 2020, we increased our focus on identifying
acquisitions that would provide the right fit at the
right value. Our focus is on tuck-ins that would add
revenue in the range of $50 to $100 million. We’re
pursuing partnerships that will allow us to combine
the strengths of our team with the capabilities
and assets of other companies to create mutually
beneficial value and profitable growth.
We prioritize opportunities that will provide entry
into consumer or commercial markets where we
can become stronger participants. Our aim is to
accelerate revenue growth and margin expansion
and ensure that we meet or exceed our return on
capital targets.
We serve a diversified group of large and successful
retailers. I thank our customers and the consumers
who purchase our products for their loyalty to our
brands. We greatly appreciate their business.
We’re very fortunate to have a committed Board of
Directors whose members bring a broad diversity
of experience to our deliberations. I thank the
directors for their engagement and wisdom as
we worked through the many issues we faced in
2020. We believe the challenges of the past year
strengthened us in many ways.
We value the investment our shareholders have
made as we work to create long-term value for you.
We’re excited about the many opportunities we see
for profitable growth in 2021 and beyond.
Looking Ahead
As discussed throughout this letter, our team is
committed to building long-term value for our
shareholders. We’ve proven our resilience in tough
times. I am deeply grateful to our employees for their
extraordinarily hard work and dedication last year.
Gregory H. Trepp
President and Chief Executive Officer
Commercial Products
New commercial products include our Hamilton Beach Commercial® BigRig™ Family of Immersion
Blenders, augmenting our position as a back-of-house supplier, and three new Hamilton Beach
Commercial® Bar Blender lines offering enhanced performance.
2020 ANNUAL REPORT 8
HAMILTON BEACH BRANDS HOLDING COMPANY
Hamilton Beach Brands Holding Company
Directors and Officers
Directors
Mark R. Belgya
Retired 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 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 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.
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, 2020
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. Yes ¨ No þ
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 þ
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 þ 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).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in
Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer þ
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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No þ
Aggregate market value of Class A Common Stock and Class B Common Stock held by non-affiliates as of June 30, 2020 (the last business day of the
registrant's most recently completed second fiscal quarter): $81,044,593
Number of shares of Class A Common Stock outstanding at March 19, 2021: 9,814,732
Number of shares of Class B Common Stock outstanding at March 19, 2021: 4,043,637
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 2021 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
PAGE
1
4
13
14
14
14
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
14
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
15
17
26
26
26
26
28
28
28
28
29
29
29
33
F-1
Table of Contents
Item 1. BUSINESS
General
PART I
Hamilton Beach Brands Holding Company (“Hamilton Beach Holding” or the “Company”) is a holding company and operates
through its wholly-owned subsidiary Hamilton Beach Brands, Inc. (“HBB”). HBB is the Company's single reportable segment.
The only material assets held by Hamilton Beach Brands Holding Company are its investments in its consolidated subsidiaries.
Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries. Hamilton Beach
Brands Holding Company has not guaranteed any obligations of its subsidiaries.
The Company also previously operated through its former wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"),
which is reported as discontinued operations in all periods presented herein. KC completed its dissolution on April 3, 2020 with
a pro-rata distribution of its remaining assets to creditors, at which time the KC legal entity ceased to exist.
HBB is a leading designer, marketer, and distributor of a wide range of branded, small electric household and specialty
housewares appliances, as well as commercial products for restaurants, fast food chains, bars, and hotels. HBB operates in the
consumer, commercial and specialty small appliance markets.
On September 29, 2017, NACCO Industries, Inc. ("NACCO"), Hamilton Beach Holding's former parent company, spun-off the
Company to NACCO stockholders. In the spin-off, NACCO stockholders, in addition to retaining their shares of NACCO
common stock, received one share of Hamilton Beach Brands Holding Company Class A common stock ("Class A Common")
and one share of Hamilton Beach Brands Holding Company Class B common stock ("Class B Common") for each share
of NACCO Class A or Class B common stock. In accordance with applicable authoritative accounting guidance, the Company
accounted for the spin-off from NACCO based on the historical carrying value of assets and liabilities. As a result of the
distribution of one share of Class A Common and one share of Class B Common for each share of NACCO Class A or NACCO
Class B common stock, the earnings per share amounts for the Company for periods prior to the spin-off have been calculated
based upon the number of shares distributed in the spin-off. NACCO did not receive any proceeds from the spin-off.
The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports available, free of charge, through its website, www.hamiltonbeachbrands.com, as soon as
reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission
(“SEC”). The content of our website is not incorporated by reference into this Annual 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. HBB also designs, markets and distributes commercial products for restaurants, fast
food chains, bars and hotels. HBB generally markets its “good” and “better” consumer products under the Hamilton
Beach® and Proctor Silex® brands. HBB participates in the premium market with its owned brands Hamilton Beach®
Professional and Weston® farm-to-table and field-to-table food processing equipment. Additionally, the Company participates
in the premium market through multiyear licensing agreements to market and distribute a line of countertop appliances under
the Wolf Gourmet® brand, a line of premium garment care products under the CHI® brand, and the Bartesian® premium
cocktail delivery system. The Company also sells TrueAir® air purifiers and BrightlineTM brand personal care products. HBB
markets its commercial products under the Hamilton Beach Commercial® and the Proctor Silex Commercial® brands. HBB
supplies private label products on a limited basis. HBB also licenses certain of its trademarks to various licensees in categories
such as microwave ovens, among others.
Sales promotion activities are supported through print and digital marketing vehicles. 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. Walmart Inc. and its global subsidiaries accounted for approximately 35%, 33%
and 33% of the HBB’s revenue in 2020, 2019 and 2018, respectively. Amazon.com, Inc. and its subsidiaries accounted for
approximately 16%, 14% and 10% of the HBB's revenue in 2020, 2019 and 2018, respectively. HBB’s five largest customers
accounted for approximately 64%, 58%, and 53% of HBB’s revenue for the years ended December 31, 2020, 2019 and 2018,
respectively.
Product Warranty
HBB's warranty program to the consumer consists generally of an assurance-type limited warranty lasting for varying periods
of up to ten years for electric appliances, with the majority of products having a warranty of one to three years. There is no
guarantee to the consumer as HBB may repair or replace, at its option, those products returned under warranty.
Working Capital
The market for small electric household and specialty housewares appliances is highly seasonal in nature. The majority of
HBB's revenue and operating profit typically occurs in the second half of the year due to the fall holiday-selling season. Due to
the seasonality of purchases of its products, HBB generally uses a substantial amount of cash or short-term debt to finance
inventory in anticipation of the fall holiday-selling season.
Patents, Trademarks, Copyrights and Licenses
HBB holds patents and trademarks registered in the United States ("U.S.") and foreign countries for various products. HBB
believes its business is not dependent upon any individual patent, copyright or license, but that the Hamilton Beach®, Proctor
Silex®, Hamilton Beach® Professional, and Weston® trademarks are material to its business.
Product Design and Development
HBB incurred $10.0 million, $12.1 million and $11.0 million in 2020, 2019 and 2018, respectively, on product design and
development activities.
Key Suppliers and Raw Material
HBB’s products are supplied to its specifications by third-party suppliers. HBB does not maintain long-term purchase contracts
with suppliers and operates mainly on a purchase order basis. HBB generally negotiates the purchases from its foreign
suppliers in U.S. dollars.
During 2020, HBB purchased substantially all of its finished products from suppliers in China. HBB purchases its inventory
from approximately 63 suppliers, one of which represented more than 10% of purchases during the year ended December 31,
2020. HBB believes the loss of any one supplier would not have a long-term material adverse effect on its business because
there are adequate supplier choices available that can meet HBB’s production and quality requirements. However, the loss of a
supplier could, in the short term, adversely affect HBB’s business until alternative supply arrangements are secured.
The principal raw materials used by HBB’s third-party suppliers to manufacture its products are plastic, glass, steel, copper,
aluminum and packaging materials. HBB believes adequate quantities of raw materials are available from various suppliers.
Competition
HBB believes the principal areas of competition with respect to its products are product design and innovation, quality, price,
product features, supply chain excellence, merchandising, promotion and warranty. HBB competes with many manufacturers
and distributors of housewares products. 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 for brand reputation through strong ratings and reviews from consumers.
To meet these competitive challenges, the Company has focused on continued innovation in its leading brands as well as
expanding into new categories using existing core competencies. HBB’s presence in a significant number of product categories
across various price points allows the Company to meet the needs of a wide range of retailers and consumers. Based on
publicly available information about the industry, HBB believes it is one of the largest full-line distributors and marketers of
small electric household and specialty housewares appliances in North America, including the U.S., Canada, Mexico and Latin
America, based on key product categories. Hamilton Beach® is the #1 small kitchen appliance brand in the US, in brick-and-
mortar and ecommerce channels, based on units sold.
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To a lesser degree, HBB retail product lines compete outside of North America. HBB's commercial products compete globally.
The competition in these geographic markets is fragmented and HBB is not yet a significant participant although our
commercial business has generated a stronger position in these markets.
Government Regulation
HBB is subject to numerous federal and state health, safety and environmental regulations. HBB believes the impact of
expenditures to comply with such laws will not have a material adverse effect on HBB.
As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal
Hazardous Substances Act, which empower the U.S. Consumer Product Safety Commission (“CPSC”) to seek to exclude
products that are found to be unsafe or hazardous from the market. Under certain circumstances, the CPSC could require HBB
to repair, replace or refund the purchase price of one or more of HBB’s products, or HBB may voluntarily do so.
Throughout the world, electrical appliances are subject to various mandatory and voluntary standards, including requirements in
some jurisdictions that products be listed by Underwriters’ Laboratories, Inc. (“UL”) or other similar recognized laboratories.
HBB also uses Intertek Testing Services for certification and testing of compliance with UL standards, as well as other national
and industry specific standards. HBB endeavors to have its products designed to meet the certification requirements of, and to
be certified in, each of the jurisdictions in which they are sold.
Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") requires
public companies to disclose whether certain minerals, commonly known as "conflict minerals," are necessary to the
functionality or production of a product manufactured by those companies and if those minerals originated in the Democratic
Republic of the Congo ("DRC") or an adjoining country. HBB conducts supply-chain due diligence investigations required by
the conflict minerals rules and makes disclosures required by the Dodd Frank Act. Our compliance with these investigation and
disclosure requirements could adversely affect our ability to sell products to customers that HBB is unable to designate as
"DRC conflict free."
Transactions with Related Parties
Mr. Alfred M. Rankin is the former executive chairman of the Company and current non-executive chairman of the Board of
the Company. Mr. Rankin provides consulting services to the Company under the terms of a consulting agreement pursuant to
which Mr. Rankin supports the president and chief executive officer of the Company upon request. Fees for consulting services
rendered by Mr. Rankin were $0.5 million for each of the years ended December 31, 2020 and 2019. There were no fees for
consulting services rendered by Mr. Rankin in 2018.
Human Capital Management
The Company’s success is a result of its organizational culture built on and centered around Good Thinking which incorporates
teamwork and inspired thinking into all areas of our business. The Company employed approximately 700 individuals, as of
December 31, 2020, in four countries—Canada, China, Mexico, and the United States. There are approximately 500 employees
in the United States with about half of this group based at the Company’s headquarters in Richmond, Virginia, which is home
to the Company’s product design, development and marketing teams (led by long-tenured Company leaders) and its state-of-
the-art test kitchen. We pride ourselves on attracting and retaining highly dedicated and customer-focused employees at all
levels of the organization. As an example, our engineering department, which focuses on continued innovation and
development, has on average 12 years of experience with the Company.
We believe that our Good Thinking values-based culture is a core strength that provides the foundation for our employees. Our
business is about people– our employees, our customers who enjoy our appliances, and the communities in which we live. In
2020, we adopted a parental leave policy that provides four weeks of paid leave. In response to COVID-19, we enacted swift
measures to provide safe environments for our employees world-wide by implementing recommended safety protocols at all of
our locations. We also provided periods of time-off, time-away, and other increased flexibility (above and beyond federal and
state mandates) for our employees. Then, in a joint effort with our employees at our corporate headquarters, we increased our
donations in 2020 to a local foodbank that provides meals and other support to families in need. We recognize that the strength
of our relationships with our employees, customers, and other stakeholders directly contributes to our long-term success and, in
2021, will continue internal assessment of opportunities to implement corporate social responsibility initiatives.
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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 March 22, 2021, the name, age, current position and principal occupation and employment
during the past five years of the Company’s executive officers.
EXECUTIVE OFFICERS OF THE COMPANY
Name
Age Current Position
Other Positions
Gregory H. Trepp
Gregory E. Salyers
R. Scott Tidey
Michelle O. Mosier
59
60
56
55
President and Chief Executive Officer of Hamilton
Beach Holding (from September 2017); President and
Chief Executive Officer of HBB (from prior to 2015)
Senior Vice President, Global Operations of HBB (from
prior to 2015)
Senior Vice President, North America Sales and
Marketing of HBB (from prior to 2015)
Senior Vice President, Chief Financial Officer and
Treasurer of Hamilton Beach Holding (from January
2020)
Dana B. Sykes
59
Senior Vice President, General Counsel and Secretary of
Hamilton Beach Holding (from January 2020)
Chief Executive Officer of KC (from prior to 2015 to
April 2020)
Successor Vice President and Chief Financial Officer of
HBB (from October 2018 to December 2019); Chief
Financial Officer of United Sporting Companies (from
September 2015 to June 2018) a subsidiary of SportsCo
Holding, Inc. which filed for Chapter 11 bankruptcy in
June 2019, and Controller for Reynolds Groups Holdings
Limited (from September 2011 to August 2015).
Vice President, General Counsel and Secretary of HBB
(from September 2015 to December 2019); From July
2014 to September 2015, Associate General Counsel,
Assistant Secretary, Senior Director, Human Resources
of HBB, and Assistant Secretary of KC (from May 2015
to April 2020)
Item 1A. RISK FACTORS
Industry Risks
HBB’s business is sensitive to the strength of the North American consumer markets and weakness in these markets could
adversely affect its business.
The strength of the economy in the U.S., and to a lesser degree in Canada and Mexico, has a significant impact on HBB’s
performance. Weakness in consumer confidence and poor financial performance by mass merchandisers, ecommerce retailers,
warehouse clubs, department stores or any of HBB’s other customers could result in reduced revenue and profitability. A
general slowdown in the consumer sector could result in additional pricing and marketing support pressures on HBB.
HBB is dependent on key customers and the loss of, or significant decline in business from, one or more of its key customers
could materially reduce its revenue and profitability and its ability to sustain or grow its business.
HBB relies on several key customers. Although HBB has long-established relationships with many customers, it does not have
any long-term supply contracts with these customers, and purchases are generally made using individual purchase orders. A
loss of or significant reduction in sales to any key customer could result in significant decreases in HBB’s revenue and
profitability and an inability to sustain or grow its business.
HBB must receive a continuous flow of new orders from its large, high-volume retail customers; however, it may be unable to
continually meet the needs of those customers. In addition, failure to obtain anticipated orders or delays or cancellations of
orders or significant pressure to reduce prices from key customers could impair its ability to sustain or grow its business.
As a result of dependence on its key customers, HBB could experience a material adverse effect on its revenue and profitability
if any of the following were to occur:
•
•
the insolvency or bankruptcy of any key customer;
a declining market in which customers materially reduce orders or demand lower prices; or
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•
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.
The increasing concentration of HBB’s branded small electric household and specialty housewares appliance sales among a
few retailers and the trend toward private label brands could materially reduce revenue and profitability.
With the growing trend towards the concentration of HBB’s branded small electric household and specialty housewares
appliance sales among fewer retailers, HBB is increasingly dependent upon fewer customers whose bargaining strength is
growing as a result of this concentration. HBB sells a substantial quantity of products to mass merchandisers, ecommerce
retailers, national department stores, variety store chains, drug store chains, specialty home retailers and other retail outlets. As
a result, these retailers generally have a large selection of small electric household and specialty housewares appliance suppliers
to choose from. In addition, certain of HBB’s larger customers use their own private label brands on household appliances that
compete directly with some of HBB’s products. As the retailers in the small electric household appliance industry become more
concentrated, competition for sales to these retailers may increase, which could materially reduce our revenue and profitability.
If HBB is unable to continue to enhance existing products, as well as develop and market new products that respond to
customer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products,
which could materially reduce revenue and profitability, which have historically benefited from sales of new products.
HBB may not be able to compete as effectively with competitors, and ultimately satisfy the needs and preferences of customers,
unless HBB can continue to enhance existing products and develop new innovative products for the markets in which HBB
competes. Product development requires significant financial, technological, and other resources. Product improvements and
new product introductions also require significant research, planning, design, development, engineering, and testing at the
technological and product process levels and HBB may not be able to timely develop and introduce product improvements or
new products. Competitors’ new products may beat HBB’s products to market, be higher quality or more reliable, be more
effective with more features, obtain better market acceptance, or render HBB’s products obsolete. Any new products that HBB
develops may not receive market acceptance or otherwise generate any meaningful revenue or profit relative to our expectations
based on, among other things, commitments to fund advertising, marketing, promotional programs and development.
HBB’s inability to compete effectively with competitors in its industry could result in lost market share and decreased
revenue.
The small electric household, specialty housewares appliances and commercial appliance industry does not have substantial
entry barriers. As a result, HBB competes with many manufacturers and distributors of housewares products. Additional
competitors may also enter this market and cause competition to intensify. For example, some of HBB’s customers have
expressed interest in sourcing, or expanding the extent of sourcing, small electric household and commercial appliances directly
from manufacturers in Asia. We believe competition is based upon several factors, including product design and innovation,
quality, price, product features, merchandising, promotion and warranty. If HBB fails to compete effectively with these
manufacturers and distributors, it could lose market share and experience a decrease in revenue, which would adversely affect
our results of operations.
HBB also competes with established companies, a number of which have substantially greater facilities, personnel, financial
and other resources. In addition, HBB competes with its own retail customers, who use their own private label brands, and
importers and foreign manufacturers of unbranded products. Some competitors may be willing to reduce prices and accept
lower profit margins to compete. As a result of this competition, HBB could lose market share and revenue.
Changes in consumer shopping trends and changes in distribution channels could result in lost market share and decreased
revenue and profitability.
Traditional brick-and-mortar retail channels have experienced low growth or declines in recent years, while the ecommerce
channel has experienced significant growth. Consumer shopping preferences have shifted, and may continue to shift in the
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.
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HBB’s business involves the potential for product recalls, which could affect HBB’s revenue and profitability.
As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal
Hazardous Substances Act, which empower the CPSC to seek to exclude from the market those products that are found to be
unsafe or hazardous. Under certain circumstances, the CPSC could require HBB to repair, replace or refund the purchase price
of one or more of our products, or HBB may voluntarily do so. Electrical appliances are subject to various mandatory and
voluntary standards. Any repurchases or recalls of our products could be costly to us and could damage our reputation or the
value of our brands. If HBB is required to remove, or HBB voluntarily removes our products from the market, our reputation or
brands could be tarnished, and HBB might have large quantities of finished products that could not be sold. Furthermore, failure
to timely notify the CPSC of a potential safety hazard can result in fines being assessed against HBB. Additionally, laws
regulating certain consumer products exist in some states, as well as in other countries in which HBB sells our products, and
more restrictive laws and regulations may be adopted in the future. HBB’s results of operations are also susceptible to adverse
publicity regarding the quality and safety of our products. In particular, product recalls may result in a decline in sales for a
particular product.
The markets for HBB's products are highly seasonal and dependent on consumer spending, which could result in
significant variations in revenue and profitability.
Sales of HBB products are related to consumer spending, including general economic conditions affecting disposable consumer
income such as unemployment rates, business conditions, interest rates, levels of consumer confidence, energy prices, mortgage
rates, the level of consumer debt and taxation. In addition, the retail market for small electric household and specialty
housewares appliances are highly seasonal in nature. Accordingly, HBB generally recognizes a substantial portion of our
revenue in the second half of the year as sales increase significantly with the fall holiday-selling season. Accordingly, quarter-
to-quarter comparisons of past operating results of HBB are meaningful only when comparing equivalent time periods, if at all.
Any economic downturn, decrease in consumer spending or shift in consumer spending away from small electric household and
specialty housewares appliances may significantly reduce revenue and profitability.
Business Risks
Our results of operations have been adversely affected and, in the future, may be materially adversely impacted by the
coronavirus (COVID-19) pandemic.
The ongoing global COVID-19 pandemic has resulted in governments around the world implementing stringent measures to
help control the spread of the virus, including business shutdowns and limitations, travel restrictions, border closings,
restrictions on public gatherings and shelter-in-place restrictions. This has negatively impacted the global economy, disrupted
financial markets and resulted in increased unemployment levels, all of which have negatively impacted various industries. The
continued spread of COVID-19 and efforts to contain the virus could:
•
•
•
•
•
continue to impact demand for our products;
cause the Company to experience an increase in costs as a result of the Company’s emergency measures, delayed
payments from customers and increased risk of uncollectible accounts;
limit the Company’s access to further capital resources, if needed, and increase associated costs;
result in disruptions to our supply chain; and
adversely impact economies and financial markets of our international operations resulting in an economic downturn
that could affect the value of foreign currencies.
The situation surrounding the COVID-19 pandemic remains fluid and the potential for a material impact on the Company’s
results of operations, financial condition, liquidity, and stock price increases the longer the virus impacts activity levels in the
United States and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future
impact the COVID-19 pandemic may have on the Company’s results of operations, financial position, liquidity and stock price.
The extent of any impact will depend on the extent of new outbreaks, the extent to which new shutdowns may be needed, the
nature of government public health guidelines and the public’s adherence to those guidelines, the impact of government
economic relief on the US economy, unemployment levels, the success of businesses reopening fully, the timing for proven
treatments and availability of vaccines for COVID-19, consumer confidence and demand for our products. Any of these factors
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could cause or contribute to the risks and uncertainties included within this Annual Report on Form 10-K and could materially
adversely affect our business, financial condition, results of operations and/or stock price.
HBB is subject to foreign currency exchange risk.
HBB’s products are supplied by third-party suppliers located primarily in China. HBB generally negotiates the purchases from
its foreign suppliers in U.S. dollars. A weakening of the U.S. dollar against local currencies could result in certain non-U.S.
manufacturers increasing the U.S. dollar prices for future product purchases.
As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business
operations, including risks in connection with our transactions that are denominated in foreign currencies. In addition, we
translate sales and other results denominated in foreign currencies into U.S. dollars for purposes of our consolidated financial
statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on
our reported revenues and profitability, while depreciation of the U.S. dollar against these foreign currencies will generally have
a positive effect on reported revenues and profitability.
Any hedging activities HBB engages in may only offset a portion of the adverse financial impact resulting from unfavorable
changes in foreign currency exchange rates. HBB cannot predict with any certainty changes in foreign currency exchange rates
or the degree to which HBB can mitigate these risks.
Increases in costs of products may materially reduce our profitability.
Factors that are largely beyond HBB's control, such as commodity prices for the raw materials needed by suppliers of HBB’s
products, may affect the cost of products, and HBB may not be able to pass those costs on to its customers. As an example,
HBB’s products require a substantial amount of plastic. Because the primary resource used in plastic is petroleum, the cost and
availability of plastic varies to a great extent with the price of petroleum. When the prices of petroleum, as well as steel,
aluminum and copper, increase significantly, supplier price increases may materially reduce our profitability.
To the extent that HBB relies on newly acquired businesses or new product lines to expand its business, these acquisitions or
new product lines may not contribute positively to HBB’s earnings because anticipated sales volumes and synergies may not
materialize, cost savings may be less than expected or acquired businesses may carry unexpected liabilities.
HBB may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or
lines of products. The acquisition of a business or of the rights to market specific products or use specific product names may
involve a financial commitment by HBB, either in the form of cash or stock consideration. HBB may not be able to acquire
businesses and develop products that will contribute positively to HBB’s earnings. Anticipated synergies may not materialize,
cost savings may be less than expected, sales of products may not meet expectations or acquired businesses may carry
unexpected liabilities.
HBB depends on third-party suppliers for all of our products, which subjects the Company to risks, including unanticipated
increases in expenses, decreases in revenue and disruptions in the supply chain.
HBB is dependent on third-party suppliers for the manufacturing and distribution of our products. Our ability to select reliable
suppliers that provide timely deliveries of quality products will impact our success in meeting customer demand. Any supplier's
inability to timely deliver products that meet desired specifications or any unanticipated changes in suppliers could be
disruptive and costly. Any significant failure by HBB to obtain quality products, in sufficient quantities, on a timely basis, and
at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on revenue and
profitability. As certain suppliers are primarily based in China, international operations are subject to additional risks including,
among others:
•
•
•
•
•
•
•
currency fluctuations;
labor unrest;
potential political, economic and social instability;
restrictions on transfers of funds;
import and export duties and quotas;
changes in domestic and international customs and tariffs, including embargoes and customs restrictions;
uncertainties involving the costs to transport products;
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•
•
•
•
•
•
•
•
long distance shipping routes dependent upon a small group of shipping and rail carriers and import facilities;
unexpected changes in regulatory environments;
regulatory issues involved in dealing with foreign suppliers and in exporting and importing products;
protection of intellectual property;
difficulty in complying with a variety of foreign laws;
difficulty in obtaining distribution and administrative support;
natural or human induced disasters such as earthquakes, tsunamis, floods, hurricanes, typhoons, fires, extreme weather
conditions, power or water shortages, telecommunications failures, and medical epidemics or pandemics, including
potential consequences from the coronavirus; and
potentially adverse tax consequences, including significant changes in tax law.
The foregoing factors could have a material adverse effect on our ability to maintain or increase the supply of products, which
may result in material increases in expenses and decreases in revenue and profitability.
Our financial results may be negatively impacted by transportation constraints on shipping capabilities.
Our ability to meet customers’ demands depends, in part, on our ability to obtain the timely and adequate shipment of our
products. Certain transportation industry vendors may experience capacity constraints due to increases in volume. For example,
in the third and fourth quarters of 2020, congestion in several areas of the supply chain, including the supply chain from China
to our distribution facility as well as certain customers' ability to send in equipment to pick up or receive goods due to
congestion at their facilities, impacted our ability to ship inventory in a timely manner and resulted in increased freight charges.
If our transportation industry vendors become capacity constrained, then we may have to identify new vendors or explore
alternative order fulfillment methods to ensure we have sufficient shipping capabilities. We have experienced and may continue
to experience significant delays in shipping our products to customers and incur additional costs to establish alternative
shipping sources if existing vendors are unable to sufficiently handle our shipping volume. We cannot predict if we will be able
to obtain alternative shipping sources within the time frames that we require and at a comparable cost.
The Company is dependent on key personnel and the loss of these key personnel could significantly reduce its consolidated
profitability.
The Company is highly dependent on the skills, experience and services of its and its subsidiaries’ key personnel and the loss of
key personnel could have a material adverse effect on its consolidated business, operating results and financial condition.
Employment and retention of qualified personnel is important to the successful conduct of Hamilton Beach Holding’s business.
Therefore, the Company's success also depends upon its ability to recruit, hire, train and retain current and additional skilled
and experienced management personnel. The Company's inability to hire and retain personnel with the requisite skills could
impair its ability to manage and operate its consolidated business effectively and could significantly reduce its consolidated
profitability.
The Company’s business could suffer if information technology systems are disrupted, cease to operate effectively or become
subject to a security breach.
The Company relies heavily on information technology systems to operate websites; record and process transactions; respond to
customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; and maintain cost-efficient
operations. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of
computer hardware and software systems and maintain cybersecurity. In addition, we collect, store, have access to and
otherwise process certain confidential or sensitive data.
Cyber-attacks are becoming more sophisticated and include computer viruses or other malicious codes, attacks to gain
unauthorized access to data, and other security breaches that could lead to the loss of valuable business data, misappropriation
of our consumers’ or employees’ personal information, or a disruption of our critical systems. The Audit Review Committee of
the Company is regularly briefed on cybersecurity matters, however despite our security efforts, if unauthorized access does
occur, we could become the subject of regulatory action or litigation from our customers, employees, suppliers, and
shareholders, which could damage our reputation, require significant expenditures of capital, and cause us to lose business and
revenue. Additionally, unauthorized access could also cause interruptions in our operations and might require us to spend
significant management time and other resources investigating the event and dealing with local and federal law enforcement.
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While we have not experienced any material impacts from a cyber-attack, any one or more future cyber-attacks could have a
material adverse effect on our financial statements.
Our information technology systems may be vulnerable from time to time to damage and other technical malfunctions. If our
systems are damaged, or fail to function properly, we may have to make monetary investments to repair or replace the systems
and could endure delays in operations. Any material disruption or slowdown of our systems, including our failure to
successfully upgrade systems, could cause information, including data related to customer orders, to be lost or delayed. Such a
loss or delay could reduce demand and cause our sales and/or profitability to decline.
The Company’s business could suffer if the implementation of its enterprise resource planning (“ERP”) system is not
successful or is more difficult, costly or time consuming than expected.
HBB recently implemented an enterprise resource planning (“ERP”) system in the U.S and will be implementing the ERP
system at other subsidiaries over the next few years. Such an implementation is a major undertaking from a financial,
management and personnel perspective. The implementation, integration and successful operation of the ERP system may
prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be
beneficial to the extent anticipated. Any disruptions, delays or deficiencies in the implementation, integration or operation of
our new ERP system could cause information, including data related to customer orders, to be lost or delayed. Such a loss or
delay could reduce demand and cause our sales and/or profitability to decline. In addition, any significant disruption, delay or
deficiency in the design and implementation of the ERP system could adversely affect our ability to process orders, ship
products, send invoices and track payments, fulfill contractual obligations or otherwise operate our business. For example,
shipping challenges from the implementation, integration and operation of the ERP system resulted in a significant order
backlog during the third quarter of 2020. Any additional disruptions, delays or deficiencies in the implementation, integration or
operation of our new ERP system could adversely affect our financial position, results of operations and cash flows in addition
to the effectiveness of our internal controls over financial reporting.
Failure to maintain data privacy could have a material adverse effect on our business, financial condition and results of
operations.
The Company is subject to certain laws, rules and regulations enacted to protect businesses and personal data (“Privacy Laws”),
which may include the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”), as
well as industry self-regulatory codes that create new compliance obligations. The administration, enforcement and regulation
of Privacy Laws are quickly evolving and subject to changes in interpretation. Future changes in Privacy Laws may require the
Company to incur additional and unexpected expenses and may subject the Company to additional compliance risk. Any failure
to comply with Privacy Laws could have a material adverse impact on our financial condition and results of operations.
Financial Risks
HBB may be subject to risks relating to increasing cash requirements of certain employee benefits plans, which may affect
its financial position.
Because HBB’s defined benefit pension plans are frozen and no longer provide for the accrual of future benefits, the expenses
recorded for, and cash contributions required to be made to its defined benefit pension plans are dependent on, changes in
market interest rates and the value of plan assets, which, in turn, are dependent on actual investment returns. Significant
changes in market interest rates, decreases in the value of plan assets or investment losses on plan assets may require HBB to
increase the cash contributed to its defined benefit pension plans which may affect its financial position.
The financing arrangement of HBB contains various restrictions that could limit operating flexibility.
HBB’s credit facility contains covenants and other restrictions that, among other things, require HBB to satisfy certain financial
tests, maintain certain financial ratios and restrict HBB’s ability to incur additional indebtedness. The restrictions and covenants
in HBB’s credit facility, and other future financing arrangements may limit HBB’s ability to respond to market conditions,
provide for capital investment needs or take advantage of business opportunities by limiting the amount of additional
borrowings HBB may incur.
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Regulatory Risks
We restated certain of our previously issued consolidated financial statements, which resulted in unanticipated costs and
may lead to, among other things, shareholder litigation, loss of investor confidence, negative impacts on our stock price and
certain other risks.
As discussed in the Explanatory Note, Note 2, “Restatement of Previously Issued Consolidated Financial Statements” and in
Note 16 “Quarterly Results of Operations (Unaudited)” under Item 8 of the 2019 Form 10-K/A, in 2020, we restated our
previously issued consolidated financial statements as of December 31, 2019 and 2018, for the years ended December 31, 2019,
2018 and 2017, and the relevant unaudited interim financial information for each of the quarters during the years ended
December 31, 2019 and 2018. The determination that our previously issued financial statements would be restated was made
following the identification of certain misstatements arising out of the operations of our Mexican subsidiaries. Although the
Company has restated these financial statements, we have become subject to a number of additional risks and uncertainties,
including unanticipated costs for accounting and legal fees in connection with the restatement, shareholder litigation and
government investigations. Any such proceeding could result in substantial defense costs regardless of the outcome of the
litigation or investigation. If we do not prevail in any such litigation, we could be required to pay substantial damages or
settlement costs. In addition, the restatement and related matters could impair our reputation and could cause our counterparties
to lose confidence in us. Each of these occurrences could have an adverse effect on our business, results of operations, financial
condition and stock price.
We have identified material weaknesses in our internal control over financial reporting which, if not timely remediated, may
adversely affect the accuracy and reliability of our financial statements, and our reputation, business and stock price, as well
as lead to a loss of investor confidence in us.
As described under Item 9A, Controls and Procedures, we concluded that our disclosure controls and procedures were not
effective as of December 31, 2020 and that we had, as of such date, material weaknesses in our internal control over financial
reporting related to internal control deficiencies within the income tax process and material weaknesses identified in the prior
period related to our Mexican subsidiaries, which continue to exist as of December 31, 2020. A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or
detected on a timely basis. The material weakness related to income taxes identified in Item 9A, did not result in any
adjustments or restatements of our audited and unaudited consolidated financial statements or disclosures for any prior period
previously reported by the Company.
We intend to remediate these material weaknesses. While we believe the steps we take to remediate these material weaknesses
will improve the effectiveness of our internal control over financial reporting and will remediate the identified deficiencies, if
our remediation efforts are insufficient to address the material weakness or we identify additional material weaknesses in our
internal control over financial reporting in the future, our ability to analyze, record and report financial information accurately,
to prepare our financial statements within the time periods specified by the rules and forms of the SEC and to otherwise comply
with our reporting obligations under the federal securities laws may be adversely affected. The occurrence of, or failure to
remediate, these material weaknesses and any future material weaknesses in our internal control over financial reporting may
adversely affect the accuracy and reliability of our financial statements and have other consequences that could materially and
adversely affect our business, including an adverse impact on the market price of our common stock, potential actions or
investigations by the SEC or other regulatory authorities, shareholder lawsuits, a loss of investor confidence and damage to our
reputation.
HBB may become subject to claims under foreign laws and regulations, which may be expensive, time-consuming and
distracting.
Because HBB has employees, property and business operations outside of the U.S., HBB is subject to the laws and the court
systems of many jurisdictions. HBB may become subject to claims outside the U.S. for violations or alleged violations of laws
with respect to the current or future foreign operations of HBB. In addition, these laws may be changed or new laws may be
enacted in the future. International litigation is often expensive, time-consuming and distracting. As a result, any of these risks
could significantly reduce HBB’s profitability and its ability to operate its businesses effectively.
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HBB’s obligations relating to environmental matters may exceed our expectations.
HBB is subject to laws and regulations relating to the protection of the environment, including those governing the
management and disposal of hazardous substances. HBB is investigating or remediating historical contamination at some
current and former sites related to HBB’s prior manufacturing operations or the operations of businesses HBB acquired. The
costs of investigating and remediating historical contamination may increase based on the findings of investigations and the
effectiveness of remediation methods. In addition, the discovery of additional contamination at these or other sites could result
in significant cleanup costs that could have a material adverse effect on HBB’s financial conditions and results of operations.
Future changes to environmental laws could require HBB to incur significant additional expense.
HBB could, under some circumstances, also be held financially liable for or suffer other adverse effects due to environmental
violations or contamination caused by prior owners of businesses HBB has acquired. In certain circumstances, HBB’s financial
liability for cleanup costs takes into account agreements with an unrelated third party. HBB’s liability for these costs could
increase if the unrelated third party does not, or cannot, perform its obligations under those agreements. In addition, under some
of the agreements through which HBB has sold real estate, HBB has retained responsibility for certain contingent
environmental liabilities arising from pre-closing operations. These liabilities may not arise, if at all, until years after HBB sold
these operations and could require us to incur significant additional expenses, which could materially adversely affect HBB’s
results of operations and financial condition.
The Company is subject to litigation risk which could adversely affect our financial condition, results of operations and
liquidity.
From time to time we are subject to claims involving product liability, infringement of intellectual property and patent rights of
third parties and other matters. Any such claims, with or without merit, could be time consuming and expensive, and may
require the Company to incur substantial costs and divert the resources of management. Due to the uncertainties of litigation,
unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the
Company’s financial position, results of operations and cash flows of the period in which the ruling occurs, or in future periods.
HBB’s business subjects it to product liability claims, which could affect the reputation, revenue and profitability of HBB.
HBB faces exposure to product liability claims if one of our products is alleged to have caused property damage, bodily injury
or other adverse effects up to a defined self-insured loss limit per claim and maintains product liability insurance for claims
above this self-insured level. If a product liability claim is brought against HBB, our revenue and profitability could be affected
adversely as a result of negative publicity related to the claim, costs associated with any replacement of the product or expenses
related to defending these claims. This could be true even if the claims themselves are ultimately settled for immaterial
amounts. In addition, HBB may not be able to maintain product liability insurance on terms acceptable to HBB in the future. If
the number of product liability claims HBB experiences exceeds historical amounts, if HBB is unable to maintain product
liability insurance or if HBB’s product liability claims exceed the amount of our insurance coverage, HBB’s results of
operations and financial condition could be affected adversely.
Government regulations could impose costly requirements on HBB.
The SEC adopted conflict mineral rules under Section 1502 of the Dodd-Frank Act on August 22, 2012. The rules require
disclosure of the use of certain minerals, commonly known as “conflict minerals,” which are mined from the DRC and
adjoining countries. Since HBB’s supply chain is complex, ultimately it may not be able to designate all products as “DRC
conflict free” which may adversely affect its reputation with certain customers. In such event, HBB may also face difficulties in
satisfying customers who require products purchased from HBB to be “DRC conflict free”. If HBB is not able to meet such
requirements, customers may choose not to purchase HBB products, which could adversely affect sales and the value of
portions of HBB’s inventory.
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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.
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 imported into the United States. The Section 301
tariffs on goods covered by lists 1, 2, 3 and 4a affect approximately 25% of total HBB purchases on an annualized basis. On
December 13, 2019, the United States Trade Representative (USTR) announced a “Phase One” agreement with China pursuant
to which the U.S. government agreed to suspend the 15% tariffs on List 4b products. On January 15, 2020, USTR issued
a Federal Register notice reducing the rate of Section 301 tariffs on List 4a products to 7.5%, effective February 14, 2020. A
number of lawsuits and other legal challenges with respect to the Section 301 tariff actions could result in changes to the tariffs,
and the Biden Administration reportedly will be considering whether to continue, amend, or revoke these particular trade
actions. We are continually evaluating the impact of the current and any possible new tariffs on our supply chain, costs, sales
and profitability and are considering strategies to mitigate such impact, including reviewing sourcing options, filing requests for
exclusion from the tariffs for certain product lines and working with our suppliers and customers. We can provide no assurance
that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. Given the
uncertainty regarding the scope and duration of these trade actions by the U.S. government or other countries, as well as the
potential for additional trade actions, the impact on our operations and results remains uncertain.
The 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.
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Registered Securities Risk
The amount and frequency of dividend payments made on Hamilton Beach Holding’s common stock could change.
The Company's Board has the power to determine the amount and frequency of the payment of dividends. Decisions regarding
whether or not to pay dividends and the amount of any dividends are based on earnings, capital, and future expense
requirements, financial conditions, contractual limitations and other factors our Board 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, 2020, accounted for approximately 19.25% of the
voting power of Hamilton Beach Holding. Holders of Class B Common are entitled to cast ten votes per share and, as of
December 31, 2020, accounted for the remaining voting power of Hamilton Beach Holding. As of December 31, 2020, certain
members of the Company's extended founding family held approximately 34.41% of Class A Common and 80.75% of Class B
Common. On the basis of this common stock ownership, certain members of the Company's extended founding family could
exercise 71.83% of the Company's total voting power. Although there is no voting agreement among such family members, in
writing or otherwise, if they were 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.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
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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
Owned/
Function(s) (2)
Leased
Leased Corporate headquarters
(1)
(1)
Distribution center
Distribution center
Mexico City, Mexico
Leased Mexico sales and administrative headquarters
Olive Branch, Mississippi
Leased Distribution center
Belleville, Ontario, Canada
Leased Distribution center
Southern Pines, North Carolina
Owned
Service center for customer returns; catalog distribution center; parts distribution center
Shenzhen, People's Republic of China
Leased Administrative office
Markham, Ontario, Canada
Leased Canada sales and administration headquarters
Joinville, Santa Catarina, Brazil
(1)
Distribution center
Shanghai, People's Republic of China
Leased
Sales office
Suzhou, People's Republic of China
Tultitlan, Mexico
Byhalia, Mississippi
(1)
(1)
Distribution center
Distribution center
Leased 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, 2020 and 2019, there were 773 and 780, respectively, Class A Common stockholders of record and 890 and
902, respectively, Class B common stockholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In May 2018, the Company approved a stock repurchase program for the purchase of up to $25.0 million of the Company's
Class A Common Stock outstanding through December 31, 2019. On November 5, 2019, the Company's Board adopted a new
stock repurchase program for the purchase of up to $25.0 million of the Company's Class A Common Stock outstanding
starting January 1, 2020 and ending December 31, 2021. During the year ended December 31, 2019, the Company
repurchased 364,893 shares for an aggregate purchase price of $6.0 million. There were no share repurchases during the years
ended December 31, 2020 and 2018.
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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.” The selected consolidated financial information below as of December 31, 2020 and 2019, and for the
years ended December 31, 2020, 2019 and 2018, are derived from our audited consolidated financial statements included in this
Annual Report on Form 10-K. The selected financial data as of December 31, 2017 and 2016 and for the year ended December
31, 2016 are derived from unaudited consolidated financial statements, which were prepared on the same basis as our audited
consolidated financial statements and reflect the impact of adjustments to our previously filed financial information.
Operating Statement Data:
Revenue
Operating profit
Year Ended December 31
2020
2019
2018
2017
2016
(In thousands, except per share amounts)
$ 603,713 $ 611,786 $ 630,082 $ 612,056 $ 601,006
$ 37,415 $ 26,794 $ 33,550 $ 37,956 $ 39,561
Income from continuing operations, net of tax
$ 24,067 $ 15,093 $ 23,059 $ 18,109 $ 24,277
Income (loss) from discontinued operations, net of tax
$ 22,191 $ (28,600) $
(5,361) $
(2,225) $
259
Net income (loss)
$ 46,258 $ (13,507) $ 17,698 $ 15,884 $ 24,536
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Basic earnings (loss) per share
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Diluted earnings (loss) per share
$
$
$
$
1.76 $
1.10 $
1.68 $
1.32 $
1.62
(2.09)
(0.39)
(0.16)
3.39 $
(0.99) $
1.29 $
1.16 $
1.76 $
1.10 $
1.68 $
1.32 $
1.62
(2.09)
(0.39)
(0.16)
3.37 $
(0.99) $
1.29 $
1.16 $
1.78
0.01
1.79
1.78
0.01
1.79
Actual shares outstanding at December 31 (1)
Basic weighted average shares outstanding (1)
Diluted weighted average shares outstanding (1)
13,686
13,657
13,712
13,516
13,690
13,726
13,713
13,699
13,731
13,673
13,673
13,685
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.
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Balance Sheet Data at December 31:
Net working capital(2)
Total assets
Year Ended December 31
2020
2019
2018
2017
2016
(In thousands, except per share amounts and employee data)
$ 166,705 $ 106,839 $ 101,898 $ 91,111 $ 95,088
$ 391,168 $ 288,663 $ 321,419 $ 325,276 $ 310,141
Short-term portion of revolving credit agreements
$
— $ 23,497 $ 11,624 $ 31,346 $ 12,714
Long-term portion of revolving credit agreements
$ 98,360 $ 35,000 $ 35,000 $ 20,000 $ 26,000
Stockholders' equity
Cash Flow Data:
$ 80,105 $ 36,266 $ 56,819 $ 42,027 $ 62,948
Net cash provided by (used for) operating activities from continuing
operations
Net cash provided by (used for) investing activities from continuing
operations
Net cash provided by (used for) financing activities from continuing
operations
$ (27,934) $
222 $ 17,955 $ 28,303 $ 58,025
$
(3,812) $
(4,122) $
(7,759) $
(6,177) $
(4,788)
$ 34,180 $
1,062 $
(9,255) $ (26,532) $ (61,837)
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
$
$
$
$
$
$
— $
— $
— $ 38,000 $ 42,000
5,053 $
4,851 $
4,658 $
1,162
— $
5,960 $
— $
—
0.37 $
0.36 $
0.34 $
0.09
17.51 $
19.10 $
23.46 $
25.69
n/a
n/a
n/a
n/a
5.85 $
2.68 $
4.14 $
3.07 $
4.60
Total employees at December 31 for continuing operations
700
680
670
650
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.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
During the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican
subsidiaries. As a result of the investigation performed, the Company, along with the Audit Review Committee and its third
party experts, concluded that certain former employees of one of the Company’s Mexican subsidiaries engaged in
unauthorized transactions with the Company’s Mexican subsidiaries that resulted in expenditures being deferred on the
balance sheet beyond the period for which the costs pertained. The Company recorded a non-cash write-off for certain
amounts included in the Company’s historical consolidated financial statements in trade receivables and prepaid expenses and
other current assets, among other corrections, related to these transactions, and restated its consolidated financial statements as
of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018, and 2017 and each of the quarters during
the years ended December 31, 2019 and 2018. The restatement also included corrections for other errors identified as
immaterial, individually and in the aggregate, to our consolidated financial statements. These restated financial statements
were previously filed on Form 10-K/A for the year ended December 31, 2019. All amounts included herein reflect the restated
financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's
consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in
the United States (“GAAP”). The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and
liabilities (if any). Actual results could differ from those estimates.
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in
the preparation of its consolidated financial statements.
Revenue Recognition: Revenue is recognized when control of the promised goods or services is transferred to the Company's
customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or
services. Sales taxes are excluded from revenue. At contract inception, the Company assesses the goods and services
promised in its contracts with customers and identifies a performance obligation for each promised good or service that is
distinct. The Company has elected to account for shipping and handling activities performed after a customer obtains control
of the goods as activities to fulfill the promise to transfer the goods, and therefore these activities are not assessed as a separate
service to customers. The amount of revenue recognized varies primarily with changes in returns. In addition, the Company
offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or
other volume-based arrangements. We determine whether price concessions offered to our 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.
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 2020, there were no material adjustments to the aforesaid
estimates and the Company's past results of operations have not been materially affected by a change in these estimates.
Although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to
materially change these estimates in the future.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Retirement Benefit Plans: The Company maintains two defined benefit pension plans that provide benefits based on years of
service and average compensation during certain periods. The Company's policy is to periodically make contributions to fund
the defined benefit pension plans within the range allowed by applicable regulations. The defined benefit pension plan assets
consist primarily of publicly traded stocks and government and corporate bonds. There is no guarantee the actual return on the
plans’ assets will equal the expected long-term rate of return on plan assets or that the plans will not incur investment losses.
The expected long-term rate of return on defined benefit plan assets reflects management’s expectations of long-term rates of
return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-
term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is
consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return.
The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate
of return assumption are based upon the rates of return earned or expected to be earned by investments in the equivalent
benchmark market indices for each of the asset classes.
Expected returns for the U.S. pension plan are based on a calculated market-related value for U.S. pension plan assets. Under
this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns which
are recognized ratably in the market-related value of assets over three years. Expected returns for the non-U.S. pension plan
are based on fair market value for non-U.S. pension plan assets.
The basis for the selection of the discount rate for each plan is determined by matching the timing of the payment of the
expected obligations under the defined benefit plans against the corresponding yield of high-quality corporate bonds of
equivalent maturities.
Changes to the estimate of any of these factors could result in a material change to the Company's pension obligation causing a
related increase or decrease in reported net operating results in the period of change in the estimate. Because the 2020
assumptions are used to calculate 2021 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 2021 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 2021 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 2020 by approximately $1.7 million; while a one percentage-point decrease in the discount rate would have raised
the plans’ projected benefit obligation as of the end of 2020 by approximately $2.0 million.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
RESULTS OF OPERATIONS
The results of operations for Hamilton Beach Holding were as follows for the years ended December 31:
2020 Compared with 2019
Year Ended December 31
2020
% of
Revenue
2019
% of
Revenue
$ Change % Change
$ 603,713
100.0 % $ 611,786
100.0 % $ (8,073)
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Amortization of intangible assets
Operating profit (loss)
Interest expense, net
Other expense (income), net
Income (loss) from continuing operations before income
taxes
Income tax expense
Net income from continuing operations
Income (loss) from discontinued operations, net of tax
465,059
138,654
99,990
1,249
37,415
1,998
1,685
33,732
9,665
24,067
22,191
77.0 %
483,234
79.0 % (18,175)
23.0 %
128,552
21.0 % 10,102
16.6 %
100,381
16.4 %
0.2 %
1,377
0.2 %
(391)
(128)
(1.3) %
(3.8) %
7.9 %
(0.4) %
(9.3) %
6.2 %
26,794
4.4 % 10,621
39.6 %
0.3 %
0.3 %
2,975
0.5 %
(977)
(32.8) %
(358)
(0.1) %
2,043
(570.7) %
5.6 %
24,177
4.0 %
9,555
1.6 %
9,084
1.5 %
581
4.0 %
15,093
2.5 %
8,974
n/m
(28,600)
n/m 50,791
39.5 %
6.4 %
59.5 %
n/m
Net income (loss)
$
46,258
$
(13,507)
$ 59,765
Effective income tax rate on continuing operations
28.7 %
37.6 %
The following table identifies the components of the change in revenue for 2020 compared with 2019:
2019
(Decrease) increase from:
Unit volume and product mix
Foreign currency
Average sales price
2020
Revenue
$
611,786
(14,093)
(4,219)
10,239
603,713
$
Revenue - Revenue decreased $8.1 million, or 1.3%. While unprecedented demand continues for small kitchen
appliances, the cutover to our new enterprise resource planning ("ERP") system during the third quarter of 2020 reduced
shipping capabilities at the Company's US distribution center and resulted in a significant shortfall in revenue during the third
quarter. Despite a strong finish to 2020, which made up for a significant portion of the revenue shortfall in the third quarter,
revenue decreased year over year as a result of lower volumes. The lower sales volume in the US consumer market is the
result of the ERP cutover challenges, while lower volume in the international consumer and global commercial markets is
attributable to the pandemic. The impact of lower volume was partially offset by higher average sales price driven primarily
by product and customer mix. Foreign currency had a negative impact on revenue of $4.2 million.
Gross profit - The increase in gross profit of $10.1 million, or 7.9%, is primarily due to sales of higher margin
products. As a percentage of revenue, gross profit margin increased from 21.0% to 23.0% primarily due to customer and
product mix. Additionally, gross profit in 2020 includes a benefit of approximately $2.1 million for tariff relief.
19
Table of Contents
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Selling, general and administrative expenses - Included in selling, general and administrative expenses are charges
related to unauthorized transactions at our Mexican subsidiaries of $1.9 million in 2020 compared with $6.9 million in 2019.
Offsetting this decrease in 2020 is an increase in incentive compensation expense of $3.3 million primarily driven by stronger
Company performance as well as an increase in legal, other third-party fees and consulting expenses primarily related to the
accounting irregularities at our Mexican subsidiaries and the implementation of our new ERP system.
Other expense (income), net - Other expense in 2020 was $1.7 million due primarily to currency losses from the re-
measurement of liabilities related to inventory purchases denominated in US dollars by HBB’s foreign subsidiaries. Other
income in 2019 was $0.4 million and included currency gains of $0.4 million.
Income tax expense - The Company recognized income tax expense of $9.7 million on income from continuing
operations before income taxes of $33.7 million, an effective tax rate of 28.7% in 2020 compared to income tax expense of
$9.1 million on income from continuing operations before income taxes of $24.2 million, an effective tax rate of 37.6% in
2019. The higher effective tax rate in 2019 is attributable to non-cash charges to write-off unrealizable assets at our Mexican
subsidiaries for which the corresponding tax benefit has been substantially offset by an increase in unrecognized tax benefits
and $1.6 million of deferred tax expense related to a change in judgment regarding the valuation allowance recorded against
the deferred tax assets of KC.
2019 Compared with 2018
The results of operations for Hamilton Beach Holding were as follows for the years ended December 31:
Year Ended December 31
2019
% of
Revenue
2018
% of
Revenue
$ Change % Change
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
483,234
128,552
100,381
1,377
26,794
2,975
0.2 %
4.4 %
0.5 %
(358)
(0.1) %
24,177
9,084
15,093
4.0 %
1.5 %
2.5 %
$ 611,786
100.0 % $
630,082
100.0 % $ (18,296)
79.0 %
491,030
77.9 %
(7,796)
21.0 %
139,052
22.1 % (10,500)
16.4 %
104,121
16.5 %
(3,740)
(2.9) %
(1.6) %
(7.6) %
(3.6) %
(0.3) %
1,381
33,550
2,916
149
30,485
7,426
23,059
0.2 %
(4)
5.3 %
(6,756)
(20.1) %
0.5 %
59
2.0 %
— %
(507)
(340.3) %
4.8 %
(6,308)
(20.7) %
1.2 %
1,658
22.3 %
3.7 %
(7,966)
(34.5) %
Loss from discontinued operations, net of tax
(28,600)
n/m
(5,361)
n/m (23,239)
n/m
Net income (loss)
$
(13,507)
$
17,698
$ (31,205)
Effective income tax rate on continuing operations
37.6 %
24.4 %
20
Table of Contents
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table identifies the components of the change in revenue for 2019 compared with 2018:
2018
(Decrease) increase from:
Unit volume and product mix
Average sales price
Foreign currency
2019
Revenue
$
630,082
(19,613)
(1,688)
3,005
611,786
$
Revenue - Revenue decreased $18.3 million, or 2.9%. The decline is primarily due to lower sales volume in the U.S.
consumer, international consumer and global commercial markets. Globally, our ecommerce business grew 27%; however,
these gains were more than offset by the adverse impact of tariffs, a loss of placements in the dollar store channel resulting
from HBB's decision not to maintain very low margin business, ongoing foot traffic challenges at some retailers and other
pressure points facing individual retail companies. Revenue in the global commercial market decreased due primarily to lower
volume driven by the adverse impact of tariffs.
Gross profit - The decline in gross profit of $10.5 million, or 7.6%, is primarily due to lower sales volume. As a
percentage of revenue, gross profit margin declined from 22.1% to 21.0% primarily due to increased inbound freight expenses,
the adverse impact of tariffs and unfavorable foreign currency movements.
Selling, general and administrative expenses - The decrease in selling, general and administrative expenses was
mainly attributable to a $5.2 million decline in environmental expense due to the reduction to the environmental reserve at one
site of $3.2 million related to a change in the expected type and extent of investigation and remediation activities and to a $1.5
million reduction in environmental expense due to the probable recovery of investigation and remediation costs associated
with the same site from a responsible party in exchange for release from all future obligations by that party. Additionally,
advertising expenses declined $3.1 million and employee-related costs decreased $2.0 million due to reduced incentive
compensation expense. These decreases were partially offset by a one-time charge of $3.2 million recorded in the second
quarter of 2019 for a contingent loss related to patent litigation. Additionally, certain former employees of one of our Mexican
subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries and in doing so, expenditures
were deferred on the balance sheet of the Company's Mexican subsidiaries beyond the period for which the costs pertained.
Included in selling, general and administrative expenses are charges of $6.9 million in 2019 compared with charges of $4.9
million in 2018 to write-off unrealizable assets created as a result of these unauthorized transactions.
Other expense (income), net - Other income in 2019 includes currency gains of $0.4 million compared with other
expense in 2018 related to currency losses of $0.5 million as the Mexican peso strengthened against the U.S. dollar.
Income tax expense - The Company recognized income tax expense of $9.1 million on income from continuing
operations before income taxes of $24.2 million, an effective tax rate of 37.6% compared to income tax expense of $7.4
million, an effective tax rate of 24.4%. The increase in the effective tax rate is primarily due to $2.0 million of deferred tax
expense related to a change in judgment regarding the valuation allowance recorded against certain deferred tax assets of KC.
Additionally, certain former employees of one of our Mexican subsidiaries engaged in unauthorized transactions with the
Company’s Mexican subsidiaries and in doing so expenditures were deferred on the balance sheet of the Mexican subsidiaries
beyond the period for which the costs pertained. Included in selling, general and administrative expenses are non-cash charges
to write-off unrealizable assets for which the corresponding tax benefit has been substantially offset by an increase in
unrecognized tax benefits.
21
Table of Contents
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
LIQUIDITY AND CAPITAL RESOURCES
Hamilton Beach Brands Holding Company cash flows are provided by dividends paid or distributions made by its subsidiaries.
The only material assets held by it are the investments in consolidated subsidiaries. As a result, certain statutory limitations or
regulatory or financing agreements could affect the levels of distributions allowed to be made by its subsidiaries. Hamilton
Beach Brands Holding Company has not guaranteed any of the obligations of its subsidiaries.
HBB's principal sources of cash to fund liquidity needs are: (i) cash generated from operations and (ii) borrowings available
under the revolving credit facility, as defined below. HBB's primary use of funds consists of working capital requirements,
operating expenses, capital expenditures, and payments of principal and interest on debt. At December 31, 2020, the Company
had cash and cash equivalents for continuing operations of $2.4 million, compared to $2.1 million at December 31, 2019.
The ongoing global COVID-19 pandemic has resulted in governments around the world implementing stringent measures to
help control the spread of the virus, including business shutdowns and limitations, travel restrictions, border closings,
restrictions on public gatherings and shelter-in-place restrictions. This has negatively impacted the global economy, disrupted
financial markets and resulted in increased unemployment levels, all of which have negatively impacted various industries. We
believe we are well positioned to effectively navigate the COVID-19 pandemic for a number of reasons. Demand for certain
retail small kitchen appliances in the US remains strong as consumers prepare more food and beverages at home. We are
managing discretionary expenses, and have sufficient availability under the revolving credit facility to meet our future
anticipated obligations. We have demonstrated effective management of net working capital which was a major contributor to
improved borrowing activity during the year, with average debt down $11.6 million compared to the prior year ended
December 31, 2019. Additionally, the Company is no longer impacted by KC’s losses and negative cash flow. We will
continue to work with our customers, employees, suppliers and communities to address the impacts of COVID-19 and closely
monitor our liquidity.
The following table presents selected cash flow information from continuing operations:
Year Ended December 31
(In thousands)
2020
2019
2018
Net cash provided by (used for) operating activities from continuing operations
$ (27,934) $
222 $ 17,955
Net cash provided by (used for) investing activities from continuing operations
$
(3,812) $
(4,122) $
(7,759)
Net cash provided by (used for) financing activities from continuing operations
$ 34,180 $
1,062 $
(9,255)
December 31, 2020 Compared with December 31, 2019
Operating activities - Net cash used for operating activities was $27.9 million compared to cash provided by
operating activities of $0.2 million in 2019 primarily due to an increase of $59.9 million in net working capital. Trade
receivables increased primarily due to increased fourth quarter sales in 2020 compared with prior year. The increase in
inventory and accounts payable are primarily due to the earlier build of inventory to offset the impacts of longer lead times
driven by shipping congestion in our supply chain from China, as well as to support expected strong demand in the first half of
2021.
Investing activities - Net cash used for investing activities was relatively flat in 2020 compared to 2019. Capital
spending for internal-use software development costs was lower in 2020 as the Company implemented its new ERP system in
July 2020. The decline in spending on internal-use software was offset by other investments.
Financing activities - Net cash provided by financing activities increased $33.1 million in 2020 primarily due to an
increase in HBB's net borrowing activity on the revolving credit facility. The increase in borrowings was used to fund net
working capital.
22
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
December 31, 2019 Compared with December 31, 2018
Operating activities - Net cash provided by operating activities decreased $17.7 million in 2019 compared to the prior
year primarily due to increased trade receivables, partially offset by a decline in inventory. Trade receivables increased
primarily due to the timing of collections and increased fourth quarter sales in 2020 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.
Capital Resources
On November 23, 2020, HBB entered into Amendment No. 8 to its Amended and Restated Credit Agreement. The Agreement
amended and restated the Credit Agreement in its entirety and extended the term of HBB's credit facility to June 30, 2025,
increased the credit facility from $115.0 million to $125.0 million, amended the pricing grid and provided for an accordion
feature to increase the facility by an additional $25.0 million upon HBB's request, subject to Lender consent. The Company
expects to continue to borrow against the facility and make voluntary repayments within the next twelve months. As a result
of the amendment, repayment of the credit facility is due on June 30, 2025, therefore all borrowings are classified as long term
debt as of December 31, 2020. The obligations under the HBB Facility are secured by substantially all of HBB's assets.
At December 31, 2020, the borrowing base under the HBB Facility was $123.3 million and borrowings outstanding
were $98.4 million. At December 31, 2020, the excess availability under the HBB Facility was $24.9 million.
The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against
eligible trade receivables, inventory and trademarks of the borrowers, as defined in the HBB Facility. Borrowings bear interest
at a floating rate, which can be a base rate, LIBOR or bankers' acceptance rate, as defined in the HBB Facility, plus an
applicable margin. The applicable margins, effective December 31, 2020, for base rate loans and LIBOR loans denominated in
U.S. dollars were 0.0% and 1.75%, respectively. The applicable margins, effective December 31, 2020, for base rate loans and
bankers' acceptance loans denominated in Canadian dollars were 0.0% and 1.75%, respectively. The HBB Facility also
requires a fee of 0.25% per annum on the unused commitment. The margins and unused commitment fee under the HBB
Facility are subject to quarterly adjustment based on average excess availability. The weighted average interest rate applicable
to the HBB Facility for the year ended December 31, 2020 was 2.88%, 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 $25.0 million at December 31, 2020 at an
average fixed interest rate of 1.66%.
The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to Hamilton
Beach Holding, subject to achieving availability thresholds. Under Amendment No. 8 to the HBB Facility, dividends to
Hamilton Beach Holding are not to exceed $6.0 million during any calendar year to the extent that for the thirty days prior to
the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than
$15.0 million. Dividends to Hamilton Beach Holding are discretionary to the extent that for the thirty days prior to the
dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than
$25.0 million. The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain
circumstances, as defined in the HBB Facility. At December 31, 2020, HBB was in compliance with all financial covenants in
the HBB Facility.
23
Table of Contents
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The Company maintains 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.
Contractual Obligations, Contingent Liabilities and Commitments
Following is a table which summarizes the contractual obligations of Hamilton Beach Holding as of December 31, 2020:
Payments Due by Period
Contractual Obligations
Total
2021
2022
2023
2024
2025
Thereafter
Revolving credit agreements
$ 98,360 $
— $
— $
— $
— $ 98,360 $
Variable interest payments on HBB
Facility
7,960
2,587
Purchase and other obligations
284,816
284,664
Operating lease obligations
77,091
7,081
2,358
51
6,738
1,182
47
6,405
994
54
839
—
6,355
6,395
44,117
—
—
—
Total contractual cash obligations
$ 468,227 $ 294,332 $
9,147 $
7,634 $
7,403 $ 105,594 $
44,117
Not included in the table above, HBB has a long-term liability of approximately $4.7 million for unrecognized tax benefits,
including interest and penalties, as of December 31, 2020. At this time, the Company is unable to make a reasonable estimate
of the timing of payments due to, among other factors, the uncertainty of the timing and outcome of its audits.
HBB’s variable interest payments are calculated based upon HBB's anticipated payment schedule and the December 31, 2020
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 $0.3 million.
HBB's purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and
incentive compensation.
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.
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 2021.
Pension benefit payments are made from assets of the pension plans.
Off Balance Sheet Arrangements
The Company has not entered into any off balance sheet financing arrangements, other than operating leases, which are
disclosed in the contractual obligations table above.
Accounting Standards Not Yet Adopted
The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying
with new or revised accounting standards, which means that when a standard is issued or revised and it has different
application dates for public or nonpublic entities, the Company can adopt the new or revised standard at the time nonpublic
entities adopt the new or revised standard.
24
Table of Contents
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and
liabilities for the rights and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal
years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early
adoption is permitted. The Company is planning to adopt ASU 2016-02 when required and is currently evaluating to what
extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to
recognize credit losses as an allowance rather than as a write-down. For nonpublic entities, the amendments are effective for
fiscal years beginning after December 15, 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 include, without
limitation: (1) the Company’s ability to ship products to meet the anticipated increase in demand, (2) the Company’s ability to
successfully manage the anticipated transportation constraints, (3) the unpredictable nature of the COVID-19 pandemic and its
potential impact on our business; (4) changes in the sales prices, product mix or levels of consumer purchases of small electric
and specialty housewares appliances, (5) changes in consumer retail and credit markets, including the increasing volume of
transactions made through third-party internet sellers, (6) bankruptcy of or loss of major retail customers or suppliers, (7)
changes in costs, including transportation costs, of sourced products, (8) delays in delivery of sourced products, (9) changes in
or unavailability of quality or cost effective suppliers, (10) exchange rate fluctuations, changes in the import tariffs and
monetary policies and other changes in the regulatory climate in the countries in which HBB buys, operates and/or sells
products, (11) the impact of tariffs on customer purchasing patterns, (12) product liability, regulatory actions or other
litigation, warranty claims or returns of products, (13) customer acceptance of, changes in costs of, or delays in the
development of new products, (14) increased competition, including consolidation within the industry, (15) shifts in consumer
shopping patterns, gasoline prices, weather conditions, the level of consumer confidence and disposable income as a result of
economic conditions, unemployment rates or other events or conditions that may adversely affect the level of customer
purchases of HBB products, (16) changes mandated by federal, state and other regulation, including tax, health, safety or
environmental legislation, (17) the result of shareholder or governmental actions relating to the restatement of our financial
statements and accounting and legal fees that we may incur in connection with the restatement, (18) difficulties arising as a
result of our implementation, integration or operation of an enterprise resource planning system in the US, (19) our ability to
successfully remediate the material weaknesses in our internal control over financial reporting disclosed in Item 9A of the
Annual Report on Form 10-K within the time periods and in the manner currently anticipated, additional material weaknesses
or other deficiencies that may arise in the future or our ability to maintain an effective system of internal controls, and (20)
other risk factors, including those described in the Company's filings with the Securities and Exchange Commission,
including, but not limited to, this Annual Report on Form 10-K for the year ended December 31, 2020. Furthermore, the
situation surrounding COVID-19 remains fluid and the potential for a material impact on the Company’s results of operations,
financial condition, liquidity, and stock price increases the longer the virus impacts activity levels in the US and globally. For
this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on
its results of operations, financial position, liquidity and stock price. The extent of any impact will depend on the extent of new
outbreaks, the extent to which new shutdowns may be needed, the nature of government public health guidelines and the
public’s adherence to those guidelines, the impact of government economic relief on the US economy, unemployment levels,
the success of businesses reopening fully, the timing for proven treatments and the availability of vaccines for COVID-19,
consumer confidence and demand for our products.
25
Table of Contents
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
HBB enters into certain financing arrangements that require interest payments based on floating interest rates. As such, the
Company's financial results are subject to changes in the market rate of interest. There is an inherent rollover risk for
borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and business financing requirements. To reduce the exposure to changes in the
market rate of interest, HBB has entered into interest rate swap agreements for a portion of its floating rate financing
arrangements. The Company does not enter into interest rate swap agreements for trading purposes. Terms of the interest rate
swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial
instruments sensitive to changes in interest rates. The Company assumes that a loss in fair value is an increase to its liabilities.
The fair value of the Company's interest rate swap agreements was a payable of $1.2 million at December 31, 2020. A
hypothetical 10% decrease in interest rates would cause a decrease of $0.1 million in the fair value of interest rate swap
agreements and the resulting fair value would be a payable of $1.2 million. Additionally, a hypothetical 10% increase in
interest rates would not have a material impact to the Company's interest expense, net of $2.0 million at December 31, 2020.
FOREIGN CURRENCY EXCHANGE RATE RISK
HBB operates internationally and enters into transactions denominated in foreign currencies, principally the Canadian dollar,
the Mexican peso and, to a lesser extent, the Chinese yuan and Brazilian real. As such, HBB's financial results are subject to the
variability that arises from exchange rate movements. The fluctuation in the value of the U.S. dollar against other currencies
affects the reported amounts of revenue, expenses, assets and liabilities. The potential impact of currency fluctuation increases
as international expansion increases.
HBB uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign
currencies and not for trading purposes. These contracts generally mature within twelve months and require HBB to buy or sell
the functional currency in which the applicable subsidiary operates and buy or sell U.S. dollars at rates agreed to at the
inception of the contracts.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial
instruments sensitive to changes in foreign currency exchange rates. The Company assumes that a loss in fair value is either a
decrease to its assets or an increase to its liabilities. The fair value of the Company's foreign currency exchange contracts was a
net payable of $0.5 million at December 31, 2020. Assuming a hypothetical 10% weakening of the U.S. dollar at December 31,
2020, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange
contracts, would be decreased by $1.9 million compared with its fair value at December 31, 2020.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth in the Financial Statements and Supplementary Data contained in Part IV of
this Form 10-K 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, 2020 that would require disclosure pursuant to this Item 9.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures: As required by Exchange Act Rule 13a-15(b), our management,
including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our
disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this
report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls
and procedures were not effective as of December 31, 2020 because of the material weaknesses in our internal control over
financial reporting described in the "Management's Report on Internal Control over Financial Reporting." Notwithstanding the
identified material weaknesses, management, including our Chief Executive Officer and Chief Financial Officer have
determined, based on the procedures we have performed, that the consolidated financial statements included in this Annual
26
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Report on Form 10-K present fairly, in all material respects, our financial condition, results of operations and cash flows at
December 31, 2020 and for the periods presented in accordance with U.S. GAAP.
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 our Chief Executive Officer and our Chief Financial Officer, the Company conducted an evaluation of the
effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this
evaluation, management concluded that we did not maintain effective internal control over financial reporting as of December
31, 2020 due to the material weaknesses as described below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
Mexican subsidiaries
As of December 31, 2019, we identified two material weaknesses at our Mexican subsidiaries related to (1) the design and
operating effectiveness of review controls for account reconciliations and manual journal entries and (2) the design and
operating effectiveness of transaction level controls over authorization of spending with vendors, adjusting product costing and
selling prices, new customer setup and accounting for price concessions with our customers. The material weaknesses at our
Mexican subsidiaries as of December 31, 2019 were not remediated during our fiscal year ended December 31, 2020.
We are committed to remediating the control deficiencies that gave rise to the material weaknesses. Management is responsible
for implementing changes and improvements to internal control over financial reporting and for remediating the control
deficiencies that gave rise to the material weaknesses.
With oversight from the Audit Review Committee, we have taken significant steps to remediate the internal control deficiencies
at our Mexican subsidiaries by redesigning our controls, many of which operated for the first time during the fourth quarter.
Our efforts have consisted primarily of strengthening our organization and designing a suite of controls that address the material
weaknesses. Because many of our controls operated for the first time during the fourth quarter, we have not had a sufficient
period of time to demonstrate operating effectiveness in 2020. Until the remediation actions are fully implemented and the
operational effectiveness of related internal controls is validated through testing, the material weaknesses described above will
continue to exist.
Income taxes
Management determined that we did not design and maintain effective controls over our income tax accounting process to
identify and accurately measure deferred tax assets, deferred tax liabilities and income taxes payable and the related income tax
expense. While the control deficiency did not result in a misstatement of our previously issued consolidated financial
statements, the control deficiency could result in a material misstatement of the aforementioned account balances or disclosures
that would result in a material misstatement in our annual or interim consolidated financial statements that would not be
prevented or detected. Our management has concluded that the deficiency constitutes a material weakness in our internal
control over financial reporting.
With oversight from the Audit Review Committee, we have developed a plan to remediate the material weakness in internal
control over financial reporting related to our income taxes accounting process, which consists of:
a. Reviewing the organization structure, resources, processes, and controls in place to measure and record income taxes
to enhance the effectiveness of the design and operation of those controls;
b. Enhancing monitoring activities related to income taxes; and
c. Evaluating and enhancing the level of precision in the management review controls related to income taxes.
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We expect to implement the remediation actions in 2021. Until the remediation actions are fully implemented and the
operational effectiveness of related internal controls is validated through testing, the material weakness described above will
continue to exist.
We are committed to achieving and maintaining a strong internal control environment and believe the remediation measures
will strengthen our internal control over financial reporting and remediate the material weakness identified.
The Company's effectiveness of internal control over financial reporting as of December 31, 2020 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 over Financial Reporting: There have been no changes in the Company's internal control over
financial reporting, that occurred during the fourth quarter of 2020, other than described above in "Management's Report on
Internal Control over Financial Reporting", that have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to Directors of the Company will be set forth in the 2021 Proxy Statement under the subheadings “Part
II — Proposals To Be Voted On At The 2021 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
2021 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 2021 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 2021 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 2021 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.
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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 2021 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 2021 Proxy Statement under the
heading “Part II — Proposals To Be Voted On At The 2021 Annual Meeting — Proposal 4 — Ratification of the Appointment
of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for 2021,” 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-37 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.
2.1
3.1
3.2
4.1
4.2
4.3
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, is incorporated by reference to Exhibit 4.3 of Hamilton Beach Brands Holding Company's
Current Report on Form 10-K, filed on February 26, 2020
(10) Material Contracts.
10.1
10.2
10.3
10.4
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.
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.
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.
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10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
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.
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.
Amendment to Stockholders’ Agreement, dated as of December 21, 2020, by and between the Depository, the Issuer, the new
Participating Stockholders and the Participating Stockholders is incorporated by reference to Exhibit 19 to the Participating
Stockholders’ Schedule 13D/A, filed by the Participating Stockholders on February 12, 2021, Commission File Number
005-90132
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.
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.
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.
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.
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.
30
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10.21
10.22
10.23
10.24
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
10.37*
10.38*
10.39*
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. 7 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower), and
Hamilton Beach Brands Canada, Inc. (as Canadian Borrower), as Borrowers, dated as of May 15, 2020, is incorporated by
reference to Exhibit 10.2 of Hamilton Beach Brands Holding Company's Current Report on Form 10-Q, filed on July 24, 2020.
Amendment No. 8 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as
Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc., as Parent and U.S.
Borrower, and Hamilton Beach Brands Canada, Inc., as Canadian Borrower, dated November 23, 2020.
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).
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. 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.
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.
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. 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.
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.
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.
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.
Amended and Restated Hamilton Beach Brands Holding Company Executive Long-Term Equity Incentive Plan, dated as of
March 1, 2020, is incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Current Report on
Form 10-Q, filed on July 24, 2020.
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.
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.
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).
31
Table of Contents
10.40*
10.41
10.42
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.
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.
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.
(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.
32
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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)
March 22, 2021
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, 2020 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
March 22, 2021
March 22, 2021
March 22, 2021
March 22, 2021
March 22, 2021
Senior Vice President, Chief Financial Officer
and Treasurer (Principal Financial Officer)/
(Principal Accounting Officer)
Director
Director
Director
33
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/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
March 22, 2021
March 22, 2021
March 22, 2021
March 22, 2021
March 22, 2021
March 22, 2021
March 22, 2021
Director
Director
Director
Director
Director
Director
Director
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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, 2020
HAMILTON BEACH BRANDS HOLDING COMPANY
GLEN ALLEN, VIRGINIA
F-1
Table of Contents
FORM 10-K
ITEM 15(a)(1) AND (2)
HAMILTON BEACH BRANDS HOLDING COMPANY
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of Hamilton Beach Brands Holding Company are incorporated by reference in
Item 8:
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-6
F-7
F-8
F-9
F-10
F-11
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
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Hamilton Beach Brands Holding Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Hamilton Beach Brands Holding Company (the Company)
as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), cash flows
and equity for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement
schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated March 22, 2021 expressed an adverse 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
March 22, 2021
F-3
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Hamilton Beach Brands Holding Company
Opinion on Internal Control over Financial Reporting
We have audited Hamilton Beach Brands Holding Company’s internal control over financial reporting as of December 31,
2020, 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, because of the effect of the
material weaknesses described below on the achievement of the objectives of the control criteria, Hamilton Beach Brands
Holding Company (the Company) has not maintained effective internal control over financial reporting as of December 31,
2020, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be
prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's
assessment. Management has identified material weaknesses in internal controls related to (1) the design and operation of
review controls at its Mexican subsidiaries over account reconciliations and manual journal entries, (2) the design and operation
of transaction level controls at its Mexican subsidiaries over authorizations for spending with vendors, adjusting product costs
and selling prices, new customer setup and accounting for price concessions with customers, and (3) the design and operation of
controls over the company’s income tax accounting process.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2020 consolidated financial statements of the Company. These material weaknesses were considered in
determining the nature, timing and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and
this report does not affect our report dated March 22, 2021, which 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 included in Item 9A. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
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.
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Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 22, 2021
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Table of Contents
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 (loss)
Interest expense, net
Other expense (income), net
Income (loss) from continuing operations before income taxes
Income tax expense (benefit)
Net income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss)
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Basic earnings (loss) per share
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
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
2020
2019
2018
(In thousands, except per share data)
$
603,713 $
611,786 $
630,082
465,059
138,654
99,990
1,249
37,415
1,998
1,685
33,732
9,665
24,067
22,191
483,234
128,552
100,381
1,377
26,794
2,975
(358)
24,177
9,084
15,093
491,030
139,052
104,121
1,381
33,550
2,916
149
30,485
7,426
23,059
(28,600)
(5,361)
$
46,258 $
(13,507) $
17,698
$
$
$
$
1.76 $
1.10 $
1.62
(2.09)
3.39 $
(0.99) $
1.76 $
1.10 $
1.62
(2.09)
3.37 $
(0.99) $
1.68
(0.39)
1.29
1.68
(0.39)
1.29
13,657
13,712
13,690
13,726
13,699
13,731
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Table of Contents
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.
2020
Year Ended December 31
2019
(In thousands)
2018
$
46,258 $
(13,507) $
17,698
1,481
(3,035)
(540)
(463)
630
583
510
(79)
(1,569)
349
1,410
348
(73)
(1,006)
100
153
(1,920)
556
$
$
(1,344) $
969 $
(2,190)
44,914 $
(12,538) $
15,508
F-7
Table of Contents
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
Total liabilities
Stockholders’ equity
Preferred stock, par value $0.01 per share
Class A Common stock, par value $0.01 per share; 10,006 and 9,805 shares issued as of December 31,
2020 and 2019, respectively
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 4,045
and 4,076 shares issued as of December 31, 2020 and 2019, 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-8
December 31
2020
2019
(In thousands)
$
2,415
$
2,142
144,797
173,962
15,118
—
336,292
23,490
6,253
1,892
6,965
13,449
2,827
—
108,381
109,806
11,345
5,383
237,057
22,324
6,253
3,141
6,248
10,941
2,085
614
$
391,168
$
288,663
$
152,054
$
111,348
505
—
15,981
6,853
23,677
—
199,070
98,360
13,633
311,063
—
100
41
58,485
(5,960)
44,915
(17,476)
80,105
496
23,497
15,027
8,697
12,534
29,723
201,322
35,000
16,075
252,397
—
98
41
54,509
(5,960)
3,710
(16,132)
36,266
$
391,168
$
288,663
Table of Contents
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities
Net income (loss) from continuing operations
$
24,067 $
15,093 $
23,059
2020
Year Ended December 31
2019
(In thousands)
2018
Adjustments to reconcile net income (loss) from continuing operations to net cash provided
by (used for) 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 (used for) operating activities from continuing operations
Investing activities
Expenditures for property, plant and equipment
Other
Net cash provided by (used for) investing activities from continuing operations
Financing activities
Net additions (reductions) to revolving credit agreements
Purchase of treasury stock
Cash dividends paid
Financing fees paid
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 provided by (used for) financing activities from discontinued operations
Cash provided by (used for) discontinued operations
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Cash, cash equivalents and restricted cash
Increase (decrease) for the period 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
Reconciliation of cash, cash equivalents and restricted cash
Continuing operations:
Cash and cash equivalents
Restricted cash included in prepaid expenses and other current assets
Restricted cash included in other non-current assets
Cash and cash equivalents of discontinued operations
Total cash, cash equivalents, and restricted cash
See notes to consolidated financial statements.
F-9
3,907
(1,431)
3,978
2,055
9
(41,314)
(65,808)
(550)
40,215
6,938
(27,934)
(3,312)
(500)
(3,812)
39,761
—
(5,053)
(528)
34,180
(6,193)
6
—
(6,187)
25
4,002
1,487
2,797
616
(1,920)
(22,769)
13,674
1,127
(7,043)
(6,842)
222
(4,122)
—
(4,122)
11,873
(5,960)
(4,851)
—
1,062
3,953
585
(103)
4,435
(785)
2,459
(6,187)
7,164
3,436 $
(3,623)
4,435
6,352
7,164 $
4,277
5,474
3,618
837
(5,300)
18,529
(12,255)
(4,586)
(7,719)
(7,979)
17,955
(7,759)
—
(7,759)
(4,597)
—
(4,658)
—
(9,255)
(5,499)
(305)
—
(5,804)
309
1,250
(5,804)
10,906
6,352
2,415 $
208
813
—
3,436 $
2,142 $
—
—
5,022
7,164 $
4,420
—
—
1,932
6,352
$
$
$
Table of Contents
HAMILTON BEACH BRANDS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
Balance, January 1, 2018
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 income (loss)
Reclassification adjustment to net income
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
$
88 $
48 $ 47,773 $
— $
7,860 $
(13,743) $
(In thousands, except per share data)
—
5
—
—
—
—
—
—
(4)
—
—
—
—
—
—
323
3,618
—
—
—
—
—
—
—
—
—
—
—
17,698
—
—
(4,658)
1,168
—
—
—
—
—
—
(1,168)
(2,899)
709
42,026
17,698
324
3,618
(4,658)
—
(2,899)
709
Balance, December 31, 2018
$
93 $
44 $ 51,714 $
— $
22,068 $
(17,101) $
56,818
Net loss
Issuance of common stock, net of conversions
Purchase of treasury stock
Stock compensation expense
Cash dividends, $0.355 per share
Other comprehensive income (loss)
Reclassification adjustment to net income (loss)
—
5
—
—
—
—
—
—
(3)
—
—
—
—
—
—
(2)
—
—
—
(5,960)
2,797
—
—
—
—
—
—
—
(13,507)
—
—
—
(4,851)
—
—
—
—
—
—
—
272
697
Balance, December 31, 2019
$
98 $
41 $ 54,509 $
(5,960) $
3,710 $
(16,132) $
Net income
Issuance of common stock, net of conversions
Stock compensation expense
Cash dividends, $0.37 per share
Other comprehensive income (loss)
Reclassification adjustment to net income (loss)
—
2
—
—
—
—
—
—
—
—
—
—
—
(2)
3,978
—
—
—
—
—
—
—
—
—
46,258
—
—
(5,053)
—
—
—
—
—
—
(1,464)
120
(13,507)
—
(5,960)
2,797
(4,851)
272
697
36,266
46,258
—
3,978
(5,053)
(1,464)
120
Balance, December 31, 2020
$
100 $
41 $ 58,485 $
(5,960) $
44,915 $
(17,476) $
80,105
See notes to consolidated financial statements.
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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 1 - Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Hamilton Beach Brands Holding Company is a holding company and operates through its wholly-owned subsidiary, Hamilton
Beach Brands, Inc. (“HBB”) (collectively “Hamilton Beach Holding” or the “Company”).
The Company also previously operated through its other wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"), which
is reported as discontinued operations in all periods presented herein. KC completed its dissolution on April 3, 2020 with a pro-
rata distribution of its remaining assets to creditors, at which time the KC legal entity ceased to exist. See Note 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 Restatement
During the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican subsidiaries.
As a result of the investigation performed, the Company, along with the Audit Review Committee and its third party experts,
concluded that certain former employees of one of the Company’s Mexican subsidiaries engaged in unauthorized transactions
with the Company’s Mexican subsidiaries that resulted in expenditures being deferred on the balance sheet beyond the period
for which the costs pertained. The Company recorded a non-cash write-off for certain amounts included in the Company’s
historical consolidated financial statements in trade receivables and prepaid expenses and other current assets, among other
corrections, related to these transactions, and restated its consolidated financial statements as of December 31, 2019 and 2018,
and for the years ended December 31, 2019, 2018, and 2017 and each of the quarters during the years ended December 31,
2019 and 2018. The restatement also included corrections for other errors identified as immaterial, individually and in the
aggregate, to our consolidated financial statements. All amounts included herein reflect the restated financial statements.
F-11
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Segment Information
As of December 31, 2020, HBB is the Company’s single reportable operating segment. This is supported by the operational
structure of HBB which is designed and managed to share resources across the entire suite of products offered by the business.
Such resources include research and development, product design, marketing, operations, and administrative functions. The
Company's chief operating decision maker does not regularly review financial information for individual product categories,
sales channels, or geographic regions that would allow decisions to be made about allocation of resources or performance.
Since the Company operates in one reportable segment, all required financial segment information can be found in the
consolidated financial statements.
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 Statements 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 as of December 31, 2019. There are no assets and liabilities of discontinued
operations as of December 31, 2020. KC’s cash flows are reflected as cash flows from discontinued operations within the
Company’s Consolidated Statements of Cash Flows for each period presented.
Amounts presented in discontinued operations have been derived from our consolidated financial statements and accounting
records using the historical basis of assets, liabilities, and historical results of KC. The discontinued operations exclude general
corporate allocations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities (if any).
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less.
Trade Receivables
Allowances for doubtful accounts are maintained against trade receivables for estimated losses resulting from the inability of
customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a
greater credit risk as well as general trends of the entire customer pool. Accounts are written off against the allowance when it
becomes evident collection will not occur.
HBB maintains significant trade receivables balances with several large retail customers. At December 31, 2020 and 2019,
receivables from HBB’s five largest customers represented 66% and 69%, respectively, of HBB's net trade receivables. HBB’s
significant credit concentration is uncollateralized; however, historically, minimal credit losses have been incurred.
F-12
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Transfer of Financial Assets
HBB has entered into an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis.
HBB utilizes this arrangement as an integral part of financing working capital. Under the terms of the agreement, HBB
receives cash proceeds and retains no rights or interest and has no obligations with respect to the sold receivables. These
transactions are accounted for as sold receivables which result in a reduction in trade receivables because the agreement
transfers effective control over and risk related to the receivables to the buyer. Under this arrangement, HBB
derecognized $162.4 million, $162.7 million, and $165.4 million of trade receivables during 2020, 2019 and 2018,
respectively. The losses incurred on sold receivables in the consolidated results of operations for the years ended December 31,
2020, 2019, and 2018 were not material. The Company does not carry any servicing assets or liabilities. Cash proceeds from
this arrangement are reflected as operating activities.
Inventory
Inventory is stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (“FIFO”) method.
Adjustments to the carrying value are recorded for estimated obsolescence or excess inventory equal to the difference between
the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market
conditions.
Assets Held for Sale
We classify assets and liabilities as held for sale (disposal group) when management, having the authority to approve the action,
commits to a plan to sell the disposal group, the sale is probable within one year, and the disposal group is available for
immediate sale in its present condition. We also consider whether an active program to locate a buyer has been initiated,
whether the disposal group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and
whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that
the plan will be withdrawn. When we classify a disposal group as held for sale, we test for impairment. An impairment charge,
up to the carrying value of the disposal group, is recognized when the carrying value of the disposal group exceeds the
estimated fair value, less costs to sell. We also cease depreciation and amortization for assets classified as held for sale.
During the fourth quarter of 2020, we committed to a plan to sell our Brazilian subsidiary and determined that we met all of the
criteria to classify the assets and liabilities of this business as held for sale. We expect the divestiture to occur during the fiscal
year ended December 31, 2021. The carrying amounts of the major classes of assets that were classified as held for sale are as
follows: $2.6 million of Trade receivables, net, and $0.8 million of Inventory. As of December 31, 2020, the total of these
amounts are included in the Prepaid expenses and other current assets line item on the Consolidated Balance Sheet. The
carrying value of disposal group approximates the fair value, which we determined based on the expected sales price. In
addition, the disposal group had $2.3 million of accumulated other comprehensive losses at December 31, 2020, which will be
recognized in net income in 2021 upon deconsolidation.
Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation, amortization and accumulated impairment
losses. Depreciation and amortization are recorded generally using the straight-line method over the estimated useful lives of
the assets. Estimated lives for buildings are up to 40 years, and for machinery, equipment and furniture and fixtures range from
three to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the
lease. The units-of-production method is used to amortize certain tooling for sourced products. Costs incurred to develop
software for internal use are capitalized and amortized over the estimated useful life of the software. Gains or losses from the
sale of assets are included in selling, general and administrative expenses. Repairs and maintenance are charged to expense as
incurred. Interest is capitalized for qualifying long-term capital asset projects as a part of the historical cost of acquiring the
asset.
F-13
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The Company evaluates long-lived assets for impairment whenever events or circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the
carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which
the carrying amount exceeds the fair value of the asset. Fair value is estimated at the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of all acquisitions over the estimated fair value of the net assets acquired.
Goodwill is not amortized but evaluated at least annually for impairment. The Company conducts its annual test for
impairment as of October 1 of each year and it may be conducted more frequently if changes in circumstances or the occurrence
of events indicates that a potential impairment exists. Using a qualitative assessment in the current year, the Company
determined that it was more-likely-than-not that the goodwill was not impaired and a quantitative test for impairment was not
required.
Intangible assets with finite lives are amortized over their estimated useful lives, which represent the period over which the
asset is expected to contribute directly or indirectly to future cash flows. Intangible assets with finite lives are reviewed for
impairment whenever events and circumstances indicate the carrying value of such assets may not be recoverable and exceed
their fair value. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new
cost basis is amortized over the remaining useful life of the asset.
No impairment has been recognized for identifiable intangible assets or goodwill for any period presented.
Environmental Liabilities
HBB and environmental consultants are investigating or remediating historical environmental contamination at some current
and former sites operated by HBB or by businesses it acquired. Liabilities for environmental matters are recorded in the period
when it is determined to be probable and reasonably estimable that the Company will incur costs. When only a range of
amounts is reasonably estimable and no amount within the range is more probable than another, the Company records the low
end of the range. Environmental liabilities are recorded on an undiscounted basis and 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.
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 our 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.
To estimate variable consideration, the Company applies both the expected value method and most likely amount method based
on the form of variable consideration, according to which method would provide the better prediction. The expected value
method involves a probability weighted determination of the expected amount, whereas the most likely amount method
identifies the single most likely outcome in a range of possible amounts.
F-14
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Product Development Costs
Expenses associated with the development of new products and changes to existing products are charged to expense as
incurred. These costs, included in selling, general and administrative expenses, amounted to $10.0 million, $12.1 million, and
$11.0 million in 2020, 2019, and 2018, 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.
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 Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are
subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a
variable interest rate and pay a fixed interest rate. The Company’s interest rate swap agreements and its variable rate financings
are predominately based upon LIBOR (London Interbank Offered Rate). For cash flow hedges, the Company formally
assesses, both at inception and on a quarterly basis thereafter, whether the designated derivative instrument is highly effective in
offsetting changes in cash flows of the hedged item. Changes in the fair value of interest rate swap agreements that are
effective as hedges are recorded in AOCI. Deferred gains or losses are reclassified from AOCI to the Consolidated Statements
of Operations in the same period as the gains or losses from the underlying transactions are recorded and are generally
recognized in interest expense, net. The Company discontinues hedge accounting prospectively when the derivative is not
highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold,
terminated or exercised.
The Company periodically enters into foreign currency exchange contracts that do not meet the criteria for hedge accounting.
These derivatives are used to reduce the Company’s exposure to foreign currency risk related to forecasted purchase or sales
transactions or forecasted intercompany cash payments or settlements. Gains and losses on these derivatives are included in
other expense, net.
Cash flows from hedging activities are reported in the Consolidated Statements of Cash Flows in the same classification as the
hedged item, generally as a component of cash flows from operations.
F-15
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Fair Value Measurements
The Company defines the fair value measurement of its financial assets and liabilities as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of
unobservable inputs when measuring fair value.
Described below are the three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3 - Unobservable inputs are used when little or no market data is available.
The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The
classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the
measurement.
Stock Compensation
Pursuant to the Executive Long-Term Equity Incentive Plan (the "Executive Plan") established in September 2017, and
amended and restated in March 2020, the Company grants stock of Class A Common, subject to transfer restrictions, as a
means of retaining and rewarding selected employees for long-term performance. Shares awarded under the Executive Plan are
fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned,
pledged or otherwise transferred during the restriction period. In general, the restriction period ends after three, five or ten
years from the award date or at the earliest of (i) three years after the participant's retirement date, or (ii) the participant's death
or permanent disability. The Company issued 94,898, 118,688, and 5,512 shares of stock of Class A Common in the years
ended December 31, 2020, 2019, and 2018, respectively. After the issuance of these shares, there were 430,902 shares of Class
A common stock available for issuance under this plan. Stock compensation expense related to the Executive Plan was $2.9
million, $1.6 million, and $2.7 million for the years ended December 31, 2020, 2019, and 2018, respectively, and was based on
the fair value of Class A Common on the grant date.
The Company also has a stock compensation plan for non-employee directors of the Company under which a portion of the
annual retainer for each non-employee director is paid in transfer-restricted shares of Class A common stock. For the year
ended December 31, 2020, $100,000 ($150,000 for the Chairman) of the non-employee director's annual retainer of $162,000
($250,000 for the Chairman) was paid in transfer-restricted shares of Class A common stock. For the year ended December 31,
2019, $95,000 ($150,000 for the Chairman) of the non-employee director's annual retainer of $155,000 ($250,000 for the
Chairman) was paid in transfer-restricted shares of Class A common stock. Shares awarded under the plan are fully vested and
entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged or otherwise
transferred during the restriction period. In general, the transfer restriction period ends at the earliest of (i) ten years after the
Quarter Date with respect to which such Required Shares were issued or transferred, (ii) the date of the director's death or date
the director terminates service as a director due to permanent disability, (iii) five years (or earlier with the approval of the Board
of Directors) after the director's date of retirement from the Board of Directors, or (iv) the date the director has both retired from
the Board of Directors and has reached age 70. Pursuant to this plan, the Company issued 74,337 and 50,237, and 33,822 shares
in the years ended December 31, 2020, 2019 and 2018, respectively. In addition to the mandatory retainer fee received in
transfer-restricted stock, directors may elect to receive shares of Class A common stock in lieu of cash for up to 100% of the
balance of their annual retainer, committee retainer and any committee chairman's fees. These voluntary shares are not subject
to any restrictions. Total shares issued under voluntary elections were 2,343 in 2020. No shares were issued under voluntary
elections in 2019. After the issuance of these shares, there were 41,604 shares of Class A common stock available for issuance
under this plan. Stock compensation expense related to these awards was $1.1 million, $1.2 million, and $0.9 million for the
years ended December 31, 2020, 2019 and 2018, respectively. Stock compensation expense represents fair value based on the
market price of the shares of Class A common stock on the grant date.
F-16
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Treasury Stock
The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a reduction to
stockholders' equity.
Income Taxes
Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial
statements. Some of these differences are permanent, such as expenses that are not deductible for tax purposes, and some
differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax
assets and liabilities using currently enacted tax rates. The objective of accounting for income taxes is to recognize the amount
of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in the financial statements or tax returns. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Management
is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future
deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for the appropriate tax
jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in the calculated deferred tax assets
and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or
changes in the Company's structure or tax status.
The Company's tax assets, liabilities, and tax expense are supported by historical earnings and losses and the Company's best
estimates and assumptions of future earnings. The Company assesses whether a valuation allowance should be established
against the Company's deferred tax assets based on consideration of all available evidence, both positive and negative, using a
more likely than not standard. This assessment considers, among other matters, scheduled reversals of deferred tax liabilities,
projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable
income require significant judgment and are consistent with the plans and estimates the Company is using to manage the
underlying businesses. When the Company determines, based on all available evidence, that it is more likely than not that
deferred tax assets will not be realized, a valuation allowance is established.
Accounting Standards 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, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early
adoption is permitted. The Company is planning to adopt ASU 2016-02 when required and is currently evaluating to what
extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)," which requires an entity to
recognize credit losses as an allowance rather than as a write-down. For nonpublic entities, the amendments are effective for
fiscal years beginning after December 15, 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.
F-17
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 2 - Discontinued Operations
On October 10, 2019, the Board approved the wind down of KC's retail operations 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 is reported as discontinued operations in all periods presented. KC
completed its dissolution on April 3, 2020 with a pro-rata distribution of its remaining assets to creditors, at which time the KC
legal entity ceased to exist and was no longer consolidated by the Company. Neither Hamilton Beach Brands Holding Company
nor Hamilton Beach Brands, Inc. received a distribution.
KC’s operating results are reflected as discontinued operations for all periods presented. The major line items constituting the
income (loss) from discontinued operations, net of tax are as follows:
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Adjustment of lease termination liability (1)
Adjustment of other current liabilities(2)
Operating profit (loss)
Interest expense
Other expense, net
Income (loss) from discontinued operations before income taxes
Income tax expense (benefit)
Year Ended December 31
2020
2019
2018
(In thousands)
$
631 $
100,860
$
113,469
—
631
1,346
(16,457)
(6,608)
22,350
—
88
22,262
71
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)
(5,361)
Income (loss) from discontinued operations, net of tax
$
22,191 $
(28,600) $
(1)
(2)
For the year ended December 31, 2020, represents an adjustment to the lease termination obligation based on the final
distribution of KC's remaining assets on April 3, 2020.
Represents an adjustment to the carrying value of substantially all of the other current liabilities based on the final
distribution of KC's remaining assets on April 3, 2020.
F-18
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Due to the dissolution of KC, there were no assets or liabilities associated with KC as of December 31, 2020. The major classes
of assets and liabilities included as part of discontinued operations as of December 31, 2019 are as follows:
Assets
Cash and cash equivalents
Prepaid expenses and other current assets
Current assets of discontinued operations
Deferred income taxes
Non-current assets of discontinued operations
Liabilities
Accounts payable
Lease termination liability
Other current liabilities
Current liabilities of discontinued operations
Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC.
NOTE 3 - Property, Plant and Equipment, Net
Property, plant and equipment, net includes the following:
Land
Furniture and fixtures
Building and improvements
Machinery and equipment
Internal-use capitalized software
Construction in progress, including internal-use capitalized software not yet in service
Property, plant and equipment, at cost
Less allowances for depreciation and amortization
December 31
2019
(In thousands)
$
$
$
$
$
5,022
361
5,383
614
614
4,594
17,248
7,881
29,723
December 31
2020
2019
$
226 $
10,957
10,145
33,601
15,582
1,214
71,725
48,235
$
23,490 $
226
10,169
10,116
32,761
2,902
11,685
67,859
45,535
22,324
F-19
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 4 - Intangible Assets
Intangible assets other than goodwill, which are subject to amortization, consist of the following:
Balance at December 31, 2020
Customer relationships
Trademarks
Other intangibles
Balance at December 31, 2019
Customer relationships
Trademarks
Other intangibles
Gross Carrying
Amount
Accumulated
Amortization
Net
Balance
$
$
$
$
5,760 $
3,100
1,240
10,100 $
(5,760) $
(1,208)
(1,240)
(8,208) $
5,760 $
(4,840) $
3,100
1,240
(1,008)
(1,111)
10,100 $
(6,959) $
—
1,892
—
1,892
920
2,092
129
3,141
Amortization expense for intangible assets was $1.2 million in 2020, and $1.4 million in 2019 and 2018.
Expected annual amortization expense of intangible assets for the next five years is $0.2 million. The weighted average
amortization period for intangible assets is approximately 8.9 years.
NOTE 5 - Current and Long-Term Financing
Financing arrangements exist at the subsidiary level. Hamilton Beach Brands Holding Company has not guaranteed any
borrowings of its subsidiaries.
The following table summarizes HBB's available and outstanding borrowings:
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
December 31
2020
2019
$ 98,360
—
$
58,305
192
$ 98,360
$
58,497
$
—
98,360
$
23,497
35,000
$ 98,360
$
58,497
Total available borrowings, net of limitations, under revolving credit agreements
$ 123,277
$ 114,366
Unused revolving credit agreements
Weighted average stated interest rate on total borrowings
Weighted average effective interest rate on total borrowings (including interest rate swap agreements)
$ 24,917
$
56,061
2.51 %
2.88 %
4.16 %
3.82 %
Including swap settlements, interest paid on total debt was $2.1 million, $3.1 million, and $3.1 million during 2020, 2019, and
2018, respectively. Interest capitalized was $0.3 million in 2020, $0.4 million in 2019 and $0.3 million in 2018.
F-20
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
On November 23, 2020, HBB entered into Amendment No. 8 to Amended and Restated Credit Agreement. The Agreement
amended and restated the Credit Agreement in its entirety and extended the term of HBB's credit facility to June 30, 2025,
increased the credit facility from $115.0 million to $125.0 million, amended the pricing grid and provided for an accordion
feature to increase the facility by an additional $25 million upon HBB's request, subject to Lender consent. The Company
expects to continue to borrow against the facility and make voluntary repayments within the next twelve months. As a result of
the amendment, repayment of the credit facility is due on June 30, 2025, therefore all borrowings are classified as long term
debt as of December 31, 2020. The obligations under the HBB Facility are secured by substantially all of HBB's assets.
The 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, 2020, for base rate loans and LIBOR loans denominated in U.S.
dollars were 0.0% and 1.75%, respectively. The applicable margins, effective December 31, 2020, for base rate loans and
bankers' acceptance loans denominated in Canadian dollars were 0.0% and 1.75%, respectively. The HBB Facility also requires
a fee of 0.25% per annum on the unused commitment. The margins and unused commitment fee under the HBB Facility are
subject to quarterly adjustment based on average excess availability.
To reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a
portion of the HBB Facility. Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay
a fixed interest rate. HBB has interest rate swaps with notional values totaling $25.0 million at December 31, 2020 at an
average fixed interest rate 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. 8 to the HBB Facility, dividends to Hamilton
Beach Holding are not to exceed $6.0 million during any calendar year to the extent that for the thirty days prior to the dividend
payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $15.0 million.
Dividends to Hamilton Beach Holding are discretionary to the extent that for the 30 days prior to the dividend payment date,
and after giving effect to the dividend payment, HBB maintains excess availability of not less than $25.0 million. The HBB
Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB
Facility. At December 31, 2020, 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. The fair value of assets held for sale, classified as Level 3,
were determined using a market approach based on market participant inputs.
There were no transfers into or out of Levels 1 or 2 during the years ended December 31, 2020 and 2019. There was one
transfer into Level 3 related to the $3.4 million of assets held for sale during the year ended December 31, 2020.
F-21
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 7 - Derivative Financial Instruments
Foreign Currency Derivatives
HBB held forward foreign currency exchange contracts with total notional amounts of $12.3 million and $13.2 million at
December 31, 2020, and 2019, respectively, denominated primarily in Canadian dollars and Mexican pesos. The fair value of
these contracts approximated a payable of $0.5 million at December 31, 2020 and a payable of $0.3 million at December 31,
2019.
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 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
2020
Average Fixed Rate
2019
2020
$
$
$
— $
25.0 $
— $
20.0
15.0
10.0
— %
1.7 %
— %
1.4 %
1.6 %
1.7 %
Remaining Term at
December 31, 2020
n/a
Extending to January 2024
n/a
The fair value of HBB's interest rate swap agreements was a payable of $1.2 million at December 31, 2020 and a payable of
$0.1 million at December 31, 2019. 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, 2020 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
2020
2019
Balance sheet location
2020
2019
Interest rate swap agreements
Current
Long-term
Foreign currency exchange contracts
Current
Total derivatives
Prepaid expenses and other
current assets
Other non-current assets
Prepaid expenses and other
current assets
$ — $ — Other current liabilities
$ 380 $ 21
—
— Other long-term liabilities
779
61
—
— Other current liabilities
518
308
$ — $ —
$ 1,677 $ 390
F-22
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 8 - Leasing Arrangements
HBB leases certain office and warehouse facilities as well as machinery and equipment under noncancellable operating leases
that expire at various dates through 2034. Many leases include renewal and/or fair value purchase options.
Future minimum operating lease payments at December 31, 2020 are:
2021
2022
2023
2024
2025
Subsequent to 2025
Total minimum lease payments
Operating
Leases
7,081
6,738
6,405
6,355
6,395
44,117
77,091
$
$
Rental expense from continuing operations net of sublease rental income for all operating leases, is reported in selling, general
and administrative expenses and was $6.2 million in 2020 and $5.6 million in 2019 and 2018.
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.
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.
F-23
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table sets forth the Company's authorized capital stock information:
Preferred stock, par value $0.01 per share
Preferred stock authorized
Preferred stock outstanding
Class A Common stock, par value $0.01 per share
Class A Common stock authorized
Class A Common issued(1)(2)
Treasury Stock
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis
Class B Common stock authorized
Class B Common issued(1)
December 31
2020
2019
(In thousands)
5,000
—
70,000
10,006
365
30,000
4,045
5,000
—
70,000
9,805
365
30,000
4,076
(1)
(2)
compensation plan.
Class B Common converted to Class A Common were 31 shares during 2020 and 345 shares 2019.
The Company issued Class A Common shares of 170 during 2020 and 169 during 2019 related to the Company's stock
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. On November 5, 2019, the Company's Board adopted a new
stock repurchase program for the purchase of up to $25.0 million of the Company's Class A Common Stock outstanding
starting January 1, 2020 and ending December 31, 2021. During the year ended December 31, 2019, the Company repurchased
364,893 shares for an aggregate purchase price of $6.0 million. There were no share repurchases during the years ended
December 31, 2020 and 2018.
F-24
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Accumulated Other Comprehensive Income (Loss)
The following table summarizes changes in accumulated other comprehensive income (loss) by component and related tax
effects for periods shown:
Balance, January 1, 2018
$
(7,573) $
508 $
(6,678) $
(13,743)
Foreign
Currency
Deferred Gain
(Loss) on Cash
Flow Hedging
Pension Plan
Adjustment
Total
Reclassification due to adoption of ASU 2018-02
Other comprehensive income (loss)
Reclassification adjustment to net income (loss)
Tax effects
Balance, December 31, 2018
Other comprehensive income (loss)
Reclassification adjustment to net income (loss)
Tax effects
Balance, December 31, 2019
Other comprehensive income (loss)
Reclassification adjustment to net income (loss)
Tax effects
Balance, December 31, 2020
Earnings per share
—
(1,162)
—
83
$
(8,652) $
481
—
(50)
118
174
213
(134)
879 $
(2,199)
490
489
(1,286)
(2,583)
729
490
(1,168)
(3,571)
942
439
(9,328) $
(17,101)
1,882
727
(851)
164
1,217
(412)
$
(8,221) $
(341) $
(7,570) $
(16,132)
(896)
—
(658)
(718)
(642)
357
844
701
(332)
(770)
59
(633)
$
(9,775) $
(1,344) $
(6,357) $
(17,476)
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 earnings (loss) per share:
Continuing operations
Discontinued operations
Basic and diluted earnings (loss) per share
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Diluted earnings (loss) per share
2020
2019
2018
13,657
13,690
13,699
55
36
32
13,712
13,726
13,731
$
$
$
$
1.76 $
1.10 $
1.68
1.62
(2.09)
(0.39)
3.39 $
(0.99) $
1.29
1.76 $
1.10 $
1.68
1.62
(2.09)
(0.39)
3.37 $
(0.99) $
1.29
F-25
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
NOTE 10 - Revenue
Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount
that reflects the consideration the Company expects to be entitled to in exchange for those goods or services, which includes an
estimate for variable consideration.
HBB’s warranty program to the consumer consists generally of an assurance-type limited warranty lasting for varying periods
of up to ten years for electric appliances, with the majority of products having a warranty of one to three years. There is no
guarantee to the customer as HBB may repair or replace, at its option, those products returned under warranty. Accordingly,
the Company determined that no separate performance obligation exists.
HBB products are not sold with a general right of return. However, based on historical experience, a portion of products sold
are estimated to be returned due to reasons such as product failure and excess inventory stocked by the customer, which, subject
to certain terms and conditions, HBB will agree to accept. Product returns, customer programs and incentive offerings,
including special pricing agreements, price competition, promotions, and other volume-based incentives are accounted for as
variable consideration.
A description of revenue sources and performance obligations for HBB are as follows:
Consumer and Commercial product revenue
Transactions with both consumer and commercial customers generally originate upon the receipt of a purchase order from the
customer, which in some cases are governed by master sales agreements, specifying product(s) that the customer desires.
Contracts for product revenue have an original duration of one year or less, and payment terms are generally standard and based
on customer creditworthiness. Revenue from product sales is recognized at the point in time when control transfers to the
customer, which is either when product is shipped from the Company's facility, or delivered to customers, depending on the
shipping terms. The amount of revenue recognized varies primarily with changes in returns. In addition, the Company offers
price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other
volume-based arrangements. We evaluated such agreements with our customers and determined returns and price concessions
should be accounted for as variable consideration.
Consumer product revenue consists of sales of small electric household and specialty housewares appliances to traditional brick
and mortar and ecommerce retailers, distributors and directly to the end consumer. A majority of this revenue is in North
America.
Commercial product revenue consists of sales of products for restaurants, fast-food chains, bars and hotels. Approximately one-
half of our commercial sales are in the U.S. and the other half is in markets across the globe.
License revenue
From time to time, the Company enters into exclusive and non-exclusive licensing agreements which grant the right to use
certain of HBB’s intellectual property ("IP") in connection with designing, manufacturing, distributing, advertising, promoting
and selling the licensees’ products during the term of the agreement. The IP that is licensed generally consists of trademarks,
trade names, patents, trade dress, 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).
F-26
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table presents the HBB's revenue on a disaggregated basis for the year ending:
Consumer products
Commercial products
Licensing
Total revenues
Year Ended
December 31
2020
2019
2018
$
568,685
$
559,279
$
576,270
30,066
4,962
48,028
4,479
50,153
3,659
$
603,713
$
611,786
$
630,082
Walmart Inc. and its global subsidiaries accounted for approximately 35%, 33%, and 33% of HBB’s revenue in 2020, 2019, and
2018, respectively. Amazon.com, Inc. and its subsidiaries accounted for approximately 16%, 14%, and 10% of the HBB's
revenue in 2020, 2019, and 2018 respectively. HBB’s five largest customers accounted for approximately 64%, 58%, and 53%
of the HBB’s revenue in 2020, 2019, and 2018, respectively.
NOTE 11 - Contingencies
Various legal and regulatory proceedings and claims have been or may be asserted against Hamilton Beach Brands Holdings
Company and certain subsidiaries relating to the conduct of its businesses, including product liability, patent infringement,
asbestos related claims, environmental and other claims. These proceedings and claims are incidental to the ordinary course of
business of the Company. Management believes that it has meritorious defenses and will vigorously defend the Company in
these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is
considered probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no
amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company
does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be
reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an
unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the
contingency and, in some circumstances, an estimate of the possible loss.
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. The damages award was subsequently reduced to
$2.1 million because the Court determined that part of the damages award based on lost profits was speculative. On August 14,
2020, the court entered an order awarding the plaintiff additional sales post-trial and interest on the damages award through July
31, 2020 and continuing interest in a de minimis amount until the judgment is satisfied. Both parties filed a Notice of Appeal
with the US Circuit Court of Appeals for the Federal Circuit and oral argument is expected to be in the second quarter of 2021.
As of December 31, 2020, the accrual for the contingent loss is $3.1 million. HBB maintains that it does not infringe any valid
patent claim and the damages award is not supported by the evidence and continues to vigorously pursue the appeal of the
judgment and adverse lower court rulings.
Hamilton Beach Brands Holding Company is a defendant in a legal proceeding instituted in February 2020 in which the
plaintiff seeks to hold the Company liable for the unsatisfied portion of an agreed final judgment that plaintiff obtained against
KC related to KC’s failure to continue to operate forty-nine stores during the term of the store leases. All KC stores were closed
by December 31, 2019 and on January 23, 2020 a Certificate of Dissolution of Ohio Limited Liability Company was filed with
the Ohio Secretary of State, effective as of January 21, 2020. In February 2020, KC agreed to the entry of a final judgment in
favor of the plaintiff in the amount of $8.1 million and in April 2020 the plaintiff received $0.3 million in the final distribution
of KC assets to KC creditors. The Company believes that the plaintiff’s claims are without merit and will vigorously defend
against plaintiff’s claims.
F-27
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
These matters are subject to inherent uncertainties and unfavorable rulings could occur. If an unfavorable ruling were to occur,
there exists the possibility of an adverse impact on the Company's financial position, results of operations and cash flows for the
period in which the ruling occurs, or in future periods.
Environmental matters
HBB is investigating or remediating historical environmental contamination at some current and former sites operated by HBB
or by businesses it acquired. Based on the current stage of the investigation or remediation at each known site, HBB estimates
the total investigation and remediation costs and the period of assessment and remediation activity required for each site. The
estimate of future investigation and remediation costs is primarily based on variables associated with site clean-up, including,
but not limited to, physical characteristics of the site, the nature and extent of the contamination and applicable regulatory
programs and remediation standards. No assessment can fully characterize all subsurface conditions at a site. There is no
assurance that additional assessment and remediation efforts will not result in adjustments to estimated remediation costs or the
time frame for remediation at these sites.
HBB's estimates of investigation and remediation costs may change if it discovers contamination at additional sites or
additional contamination at known sites, if the effectiveness of its current remediation efforts change, if applicable federal or
state regulations change or if HBB's estimate of the time required to remediate the sites changes. HBB's revised estimates may
differ materially from original estimates.
At December 31, 2020 and December 31, 2019, HBB had accrued undiscounted obligations of $3.1 million and $4.4 million
respectively, for environmental investigation and remediation activities. The reduction in the amount accrued at December 31,
2020 compared to December 31, 2019 is due to a change in the expected type and extent of investigation and remediation
activities associated with one of the sites. HBB estimates that it is reasonably possible that it may incur additional expenses in
the range of zero to $1.7 million related to the environmental investigation and remediation at these sites. Additionally, the
Company recorded a $1.5 million receivable as of December 31, 2019 related to a probable recovery of environmental
investigation and remediation costs associated with one of the sites from a responsible party in exchange for release from all
future obligations by that party. As of December 31, 2020, the receivable has been collected and $1.0 million is restricted cash.
NOTE 12 - Income Taxes
The components of income (loss) from continuing operations before income taxes and the income tax expense for the years
ended December 31 are as follows:
Income (loss) from continuing operations before income taxes
Domestic
Foreign
Income tax expense (benefit) within continuing operations
Current income tax expense (benefit):
Federal
State
Foreign
Total current
Deferred income tax expense (benefit):
Federal
State
Foreign
Total deferred
F-28
2020
2019
2018
$
31,140 $
24,835 $
30,835
2,592
(658)
(350)
$
33,732 $
24,177 $
30,485
$
7,006 $
2,966 $
1,877
2,213
11,096
(924)
(325)
(182)
(1,431)
1,106
3,525
7,597
856
1,676
(1,045)
1,487
$
9,665 $
9,084 $
(323)
356
1,919
1,952
5,592
447
(565)
5,474
7,426
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The Company made no federal income tax payments during 2020 and made payments of $1.9 million and $8.3 million during
2019 and 2018, respectively, to the IRS and to NACCO as a member of the consolidated income tax return for periods prior to
spin off. The Company made foreign and state income tax payments of $2.9 million, $3.6 million, and $2.6 million during
2020, 2019, and 2018, respectively. During the same periods, income tax refunds totaled $1.0 million in 2020 and $0.1 million
in 2019 and 2018.
A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:
Income (loss) from continuing operations before income taxes
$ 33,732
$ 24,177
$ 30,485
Statutory taxes at 21%
$
7,092
21.0 % $
5,077
21.0 % $
6,402
21.0 %
2020
2019
2018
$
%
$
%
$
%
State and local income taxes
Valuation allowances
Other non-deductible expenses
Credits
Loss on Kitchen Collection dissolution
Unrecognized tax benefits
Other, net
Income tax provision
1,136
3.4 %
614
1.8 %
1.2 %
(2.1) %
1.8 %
415
(700)
616
708
1,031
2,190
253
(1,195)
4.3 %
9.1 %
1.0 %
(4.9) %
—
— %
729
42
429
(348)
—
2.4 %
0.1 %
1.4 %
(1.1) %
— %
4.7 %
2.1 %
2,719
11.2 %
1,427
(216)
(0.6) %
(991)
(4.1) %
(1,255)
(4.1) %
$
9,665
28.7 % $
9,084
37.6 % $
7,426
24.4 %
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
2020
2019
$
3,002 $
2,114
4,436
4,700
2,374
16,626
(2,102)
14,524
1,099
3,262
3,198
7,559
$
6,965 $
2,867
316
5,896
1,500
1,412
11,991
(1,069)
10,922
—
2,623
2,051
4,674
6,248
As of December 31, 2020 and 2019, respectively, HBB maintained valuation allowances with respect to certain deferred tax
assets relating primarily to operating losses in certain non-U.S. jurisdictions that HBB believes are not likely to be realized.
F-29
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances
where the Company has determined that realization is uncertain:
Non-U.S. net operating loss
Non-U.S. net operating loss
December 31, 2020
Net deferred tax
asset
Valuation
allowance
Carryforwards
expire during:
$
3,002 $
1,363
2021 - Indefinite
December 31, 2019
Net deferred tax
asset
Valuation
allowance
Carryforwards
expire during:
$
2,867 $
987
2020 - Indefinite
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, 2020, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $15.6
million. The Company has recorded the tax impact for the unremitted earnings as allowed under the Tax Cuts and Jobs Act (the
"Tax Act"), a portion of which is classified in other long-term liabilities as the Company has elected to make payments over
eight years. The Company continues to conclude all material entities’ foreign earnings will be indefinitely reinvested in its
foreign operations and will remain offshore in order to meet the capital and business needs outside of the U.S. As a result, the
Company does not provide a deferred tax liability with respect to the cumulative unremitted earnings. It is not practicable to
determine the deferred tax liability associated with these undistributed earnings due to the availability of foreign tax credits.
The Company made an accounting policy election to account for the global intangible low-tax income as a current period
expense when incurred. The Company recognizes any tax impacts of global intangible low-taxed income (GILTI) as period
costs similar to other special deductions, and not as deferred taxes for basis differences.
The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of
differences between tax return positions and the benefits recognized in the financial statements for the years ended December
31, 2020, 2019, and 2018. Approximately $4.0 million, $3.0 million, and $1.4 million of these gross amounts as of December
31, 2020, 2019, and 2018, respectively, relate to permanent items that, if recognized, would impact the effective income tax
rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S.
federal income taxes which would occur upon the recognition of the state tax benefits included herein.
Balance at January 1
$
4,266 $
1,576 $
Additions (reductions) based on tax positions related to prior years
Additions based on tax positions related to the current year
Reductions for lapse of statute of limitations
Reductions due to settlements with taxing authorities
Balance at December 31
(116)
130
(166)
—
97
2,593
—
—
$
4,114 $
4,266 $
881
91
1,110
—
(506)
1,576
2020
2019
2018
The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The
Company recognized expense of $0.7 million and $0.1 million related to interest and penalties as of December 31, 2020 and
2019, respectively. The total amount of interest and penalties accrued was $0.7 million and $0.1 million as of December 31,
2020 and 2019, respectively. It is reasonably possible within the next 12 months there could be a change in unrecognized tax
benefits related to the restatement which is expected to have an approximate $4.7 million effect on the Company's cash flows.
F-30
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five
years for the taxing authorities to review the applicable tax filings. The examination of NACCO's 2013-2016 U.S. federal tax
returns is ongoing, and exam years from 2017 onwards remain open for federal tax returns. The Company is generally open for
examination of state and foreign jurisdictions for the tax year 2016 and beyond. In addition, the Company does not have any
material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by
law.
NOTE 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. The Company's U.S. plan was frozen, effective December 31, 1996, for participation and
benefit accrual purposes (except cash balance interest credits required by law). Similarly, the Company’s non-U.S. plan was
frozen, effective December 31, 2008.
The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:
U.S. Plan
Discount rate for pension benefit obligation
Discount rate for net periodic benefit (income) expense
Expected long-term rate of return on assets for net periodic pension (income) expense
Non-U.S. Plan
Discount rate for pension benefit obligation
Discount rate for net periodic benefit (income) expense
Expected long-term rate of return on assets for net periodic pension (income) expense
2020
2019
2018
1.87 %
2.88 %
7.50 %
2.38 %
2.96 %
5.00 %
2.88 %
4.00 %
7.50 %
2.96 %
3.50 %
5.50 %
4.00 %
3.30 %
7.50 %
3.50 %
3.50 %
5.50 %
Set forth below is a detail of the net periodic pension (income) expense, included in other expense (income), net for the defined
benefit plans for the years ended December 31:
U.S. Plan
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Net periodic pension (income) expense
Non-U.S. Plan
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Net periodic pension (income) expense
2020
2019
2018
$
527 $
727 $
681
(2,011)
(1,987)
(2,047)
631
561
$
(853) $
(699) $
$
128 $
144 $
(253)
70
(263)
72
$
(55) $
(47) $
623
(743)
142
(286)
200
56
F-31
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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 (income)
2020
2019
2018
$
(1,080) $
(1,727) $
2,347
(631)
(561)
(623)
$
(1,711) $
(2,288) $
1,724
$
$
236 $
(155) $
(70)
(72)
166 $
(227) $
236
(200)
36
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
$
19,374 $
4,570 $
19,131 $
4,084
2020
2019
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
527
972
(1,895)
—
128
399
(205)
108
727
1,266
(1,750)
—
$
$
18,978 $
5,000 $
19,374 $
18,978 $
5,000 $
19,374 $
144
311
(182)
213
4,570
4,570
Fair value of plan assets at beginning of year
$
28,900 $
5,350 $
25,671 $
4,744
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:
4,065
(1,895)
—
428
(205)
(76)
4,979
(1,750)
—
726
(182)
62
31,070 $
5,497 $
28,900 $
5,350
12,092 $
497 $
9,526 $
780
$
$
Non-current assets
$
12,092 $
497 $
9,526 $
780
Components of accumulated other comprehensive loss consist of:
Actuarial loss
Deferred taxes
$
(7,429) $
(1,224) $
(9,140) $
(1,058)
1,901
395
2,280
$
(5,528) $
(829) $
(6,860) $
348
(710)
The actuarial loss included in accumulated other comprehensive loss expected to be recognized in net periodic pension
(income) expense in 2021 is $0.7 million.
F-32
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The Company recognizes as a component of benefit cost (income), as of the measurement date, any unrecognized actuarial net
gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor."
Amounts outside the corridor are amortized over the average expected remaining lifetime of inactive participants for the
pension plans. The gain (loss) amounts recognized in AOCI are not expected to be fully recognized until the plan is terminated
or as settlements occur, which would trigger accelerated recognition.
The Company's policy is to make contributions to fund its pension plans within the range allowed by applicable regulations.
The Company does not expect to contribute to its U.S. and non-U.S. pension plans in 2021.
Pension benefit payments are made from assets of the pension plans.
Future pension benefit payments expected to be paid from assets of the pension plans are:
2021
2022
2023
2024
2025
2026 - 2029
U.S. Plan
Non-U.S. Plan
$
1,879 $
1,860
1,713
1,553
1,461
5,606
$
14,072 $
236
240
237
246
254
1,327
2,540
The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of
return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-
term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is
consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The
historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of
return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent
benchmark market indices for each of the asset classes.
Expected returns for U.S. pension plans are based on a calculated market-related value for U.S. pension plan assets. Under this
methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns are
recognized in the market-related value of assets ratably over three years. Expected returns for non-U.S. pension plans are based
on fair market value for non-U.S. pension plan assets.
The pension plans maintain investment policies that, among other things, establish a portfolio asset allocation methodology
with percentage allocation bands for individual asset classes. The investment policies provide that investments are reallocated
between asset classes as balances exceed or fall below the appropriate allocation bands.
The following is the actual allocation percentage and target allocation percentage for the U.S. pension plan assets at December
31:
U.S. equity securities
Non-U.S. equity securities
Fixed income securities
Money market
2020
Actual
Allocation
2019
Actual
Allocation
Target Allocation
Range
45.5 %
20.3 %
33.8 %
0.4 %
45.9 % 36.0% - 54.0%
20.4 % 16.0% - 24.0%
33.2 % 30.0% - 40.0%
0.5 % 0.0% - 10.0%
F-33
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following is the actual allocation percentage and target allocation percentage for the Non-U.S. pension plan assets at
December 31:
Canadian equity securities
Non-Canadian equity securities
Fixed income securities
Cash and cash equivalents
2020
Actual
Allocation
2019
Actual
Allocation
Target Allocation
Range
29.5 %
34.4 %
36.1 %
— %
30.2 % 25.0% - 35.0%
32.3 % 25.0% - 35.0%
37.5 % 30.0% - 50.0%
— %
0.0% - 5.0%
The fair value of each major category of the Company's U.S. pension plan assets are valued using quoted market prices in
active markets for identical assets, or Level 1 in the fair value hierarchy. The fair value of each major category of the
Company's Non-U.S. pension plan assets are valued using observable inputs, either directly or indirectly, other than quoted
market prices in active markets for identical assets. Following are the values as of December 31:
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
2020
2019
2020
2019
$
14,113
$
13,255
$
1,064
$
6,321
10,510
126
5,904
9,596
145
2,445
1,988
—
929
2,412
2,009
—
$
31,070
$
28,900
$
5,497
$
5,350
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's U.S. plan provides employer safe harbor contributions based on plan provisions and both
defined contribution retirement plans provide for a separate employer contribution. These plans permit additional profit-sharing
contributions, determined annually, that are based on a formula that includes (i) the effect of actual operating profit results
compared with targeted operating profit results and (ii) the age and/or compensation of the participants. Total costs, including
Company contributions, for these plans were $5.1 million in 2020, $5.0 million in 2019 and $5.3 million in 2018.
F-34
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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
2020
2019
2018
U.S.
Other
Consolidated
$
$
$
$
$
$
493,573 $
110,140 $
603,713
18,021 $
5,469 $
23,490
463,608 $
148,178 $
611,786
16,828 $
5,496 $
22,324
488,520 $
141,562 $
630,082
15,344 $
5,498 $
20,842
No single country outside of the U.S. comprised 10% or more of HBB's revenue from unaffiliated customers.
NOTE 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 (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss)
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Basic earnings (loss) per share
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Diluted earnings (loss) per share
2020
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
120,846 $
25,040 $
503 $
138,297 $
35,254 $
10,895 $
110,549 $
23,748 $
(2,405) $
234,021
54,612
28,422
(1,354) $
22,866
21,512 $
8,065 $
(305)
7,760 $
(2,010) $
—
(2,010) $
19,366
(370)
18,996
(0.10) $
1.68
1.58 $
0.59 $
(0.02)
0.57 $
(0.15) $
—
(0.15) $
(0.10) $
1.68
1.58 $
0.59 $
(0.02)
0.57 $
(0.15) $
—
(0.15) $
1.41
(0.03)
1.39
1.40
(0.03)
1.37
$
$
$
$
$
$
$
$
$
F-35
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HAMILTON BEACH BRANDS HOLDING COMPANY
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Revenue
Gross profit
Operating profit
Income (loss) from continuing operations, net of tax
Income (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
2019
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
126,642 $
131,065 $
149,508 $
204,570
26,702 $
28,507 $
30,946 $
111 $
3,185 $
4,439 $
42,397
19,060
(662) $
1,898 $
553 $
13,304
(2,723)
(2,516)
(2,753)
(20,608)
(3,385) $
(618) $
(2,200) $
(7,304)
(0.05) $
0.14 $
0.04 $
(0.20)
(0.18)
(0.20)
(0.25) $
(0.04) $
(0.16) $
0.98
(1.52)
(0.54)
$
$
$
$
$
$
$
F-36
Table of Contents
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
HAMILTON BEACH BRANDS HOLDING COMPANY
YEAR ENDED DECEMBER 31, 2020, 2019, AND 2018
Description
2020
Reserves deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax valuation allowances
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
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
(In thousands)
Charged to
Other
Accounts
— Describe
Deductions
— Describe
Balance at
End of
Period (B)
$
$
$
$
$
$
1,023 $
412 $
— $
291
(A)
7,625 $
614
— $ 6,137
(C, D)
713 $
309 $
1,162 $
6,502 $
— $
— $
(1) (A)
39
(C)
1,177 $
1,968 $
11 $
— $
— $
475
(A)
— $
806
(C)
$
$
$
$
$
$
1,144
2,102
1,023
7,625
713
1,162
(A)
(B)
(C)
(D)
Write-offs, net of recoveries and foreign exchange rate adjustments.
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.
Utilization of Kitchen Collection losses.
F-37
Exhibit 4.3
Description of HAMILTON BEACH BRANDS HOLDING COMPANY’s Securities Registered
Pursuant To Section 12 of the Securities Exchange Act Of 1934
The following description sets forth certain material terms and provisions of the securities of Hamilton
Beach Brands Holding Company (“we,” “us” or “our”) that are registered under Section 12 of the Securities
Exchange Act of 1934, as amended. This description also summarizes relevant provisions of Delaware law. The
following summary does not purport to be complete and is subject to, and is qualified in its entirety by, the
provisions of our certificate of incorporation and bylaws, copies of which are filed as exhibits to the Annual Report
on Form 10-K of which this Exhibit 4.3 is a part, and by the applicable provisions of Delaware law.
As of the date of this filing, we are authorized to issue up to 100 million shares of common stock
(comprised of 70 million shares of our Class A Common and 30 million shares of our Class B Common), par value
$0.01 per share, and 5 million shares of preferred stock, par value $0.01 per share.
Common Stock
Voting Rights
Subject to the rights of the holders of any series of preferred stock, each share of our Class A Common
entitles the holder of the share to one vote on all matters submitted to our stockholders, and each share of our Class
B Common entitles the holder of the share to ten votes on all such matters.
Dividends and Other Distributions
Subject to the rights of the holders of any series of preferred stock, each share of our Class A Common and
our Class B Common is equal in respect of rights to dividends and other distributions in our cash, stock or property,
except that in the case of dividends or other distributions payable in our stock, including distributions pursuant to
split-ups or divisions of our stock, only our Class A Common is distributed with respect to our Class A Common
and only our Class B Common is distributed with respect to our Class B Common. In the event of a future spin-off
of one of our subsidiaries, the Hamilton Beach Brands Holding Company amended and restated certificate of
incorporation permits the Company to elect to distribute to each holder of our Class A Common shares of the Class
A common stock of such subsidiary and to each holder of our Class B Common shares of the Class B common
stock of such subsidiary. In the case of any consolidation, merger or sale of all, or substantially all, of our assets as
a result of which our stockholders will be entitled to receive cash, stock other securities or other property with
respect to or in exchange for their shares of our stock, each holder of our Class A Common and our Class B
Common will be entitled to receive an equal amount of consideration for each share of our Class A Common or our
Class B Common held by such holder.
Restrictions on Transfer of Class B Common; Convertibility of Class B Common into Class A
Common.
Our Class B Common generally is not transferable by a stockholder except to or among such holder’s
spouse, certain relatives of such holder, and spouses of such relatives, certain trusts established for their or another
permitted transferee’s benefit, certain corporations, limited liability companies and partnerships owned by them and
certain charitable organizations.
Our Class B Common is, however, convertible at all times, and without cost to the stockholder, into our
Class A Common on a share-for-share basis. Therefore, stockholders desiring to sell the equity interest in us
represented by their shares of our Class B Common may convert those shares into an equal number of shares of our
Class A Common and sell the shares of our Class A Common. A stockholder who does not wish to complete the
conversion process before a sale may effect a sale of our Class A Common into which such stockholder’s shares of
our Class B Common is convertible.
Other than pursuant to conversions into our Class A Common as described above, a holder of shares of our
Class B Common may transfer such shares (whether by sale, assignment, gift, bequest, appointment or otherwise)
only to a permitted transferee, which is defined generally as follows:
1.
to the extent such person is a natural person, any of the lineal descendants of a great, great, great, great
grandparent of such holder of our Class B Common, including children adopted before age 18 or any
spouse (including a widow or widower) of such lineal descendant, any of the spouses of a lineal
descendant of a great, great, great, great grandparent of such Class B stockholder’s spouse, any lineal
descendant of any spouse of a lineal descendant of a great, great, great, great grandparent of such Class
B stockholder (such persons, including such holder of our Class B Common, are hereinafter referred to
as such “Class B stockholder’s family members”);
2. a trust for the benefit of such Class B stockholder’s family members and certain charitable
organizations;
3. certain charitable organizations established by such Class B stockholder’s family members; and
4. a corporation whose stockholders, a partnership whose partners or a limited liability company whose
members, are made up exclusively of such Class B stockholder’s family members, any trust described
in (2) above or any other permitted transferees.
In the case of a corporation or limited liability company, shares of our Class B Common also may be
transferred to a successor by merger or consolidation, provided that each stockholder of each other corporation or
member of each other limited liability company, as applicable, which is a party to such merger or consolidation is,
at the time of such transaction, a stockholder of such corporation or a permitted transferee of at least one
stockholder of such corporation or a member of such limited liability company or a permitted transferee of at least
one member of such limited liability company. Class B Common shares being beneficially held pursuant to a trust
may be transferred to (i) any person, as of the record date, to whom or for whose benefit principal may be
distributed under the terms of the trust, (ii) the person or persons who established such trust, and (iii) permitted
transferees of any such person described in subclause (i) or (ii). Shares beneficially held by certain charitable
organizations may be transferred to the Class B stockholder who or that transferred such shares to the charitable
organization and to such holder’s permitted transferees.
The restrictions on the transferability of our Class B Common are set forth in full in Section 3 of Article IV
of our amended and restated certificate of incorporation. Each certificate representing shares of our Class B
Common will bear a legend indicating that the shares of our Class B Common are subject to restrictions on the
transfer and registration of transfer thereof.
Any purported transfer of shares of our Class B Common not permitted under our amended and restated
certificate of incorporation will be void and of no effect and the purported transferee will have no rights as our
stockholder and no other rights against or with respect to us. We may, as a condition to the transfer or registration
of transfer of shares of our Class B Common to a permitted transferee, require the furnishing of such affidavits or
other proof as we deem necessary to establish that such transferee is a permitted transferee.
Additional shares of our Class B Common will not be issued without an affirmative vote of the holders of a
majority of our outstanding voting stock, except in connection with stock splits and stock dividends. All shares of
our Class B Common received by us when stockholders convert them into our Class A Common or that are
otherwise acquired by us will be retired and not reissued.
Other Provisions
Neither our Class A Common nor our Class B Common carry any preemptive rights enabling a holder to
subscribe for or receive shares of our stock of any class or any other securities convertible into shares of our stock.
Listing
Our Class A Common is quoted on the NYSE under the symbol “HBB.” Our Class B Common is not listed
on the NYSE or any other stock exchange.
Preferred Stock
Our Board is authorized to issue one or more series of up to 5 million shares of preferred stock. With
respect to each series of the preferred stock, our Board has the authority, consistent with our amended and restated
certificate of incorporation, to determine the following terms:
1.
the number of shares and the designation of any series;
2.
3.
the voting powers, if any, of the shares of such series and whether such voting powers are full or
limited;
the redemption provisions, if any, applicable to such series, including the redemption price or prices to
be paid;
4. whether dividends, if any, will be cumulative or noncumulative, the dividend rate or rates of such series
and the dates and preferences of dividends of such series;
5.
the rights of such series upon our voluntary or involuntary dissolution, or upon any distribution of our
assets;
6. whether the shares are convertible into, or exchangeable for, any of our other stock, the price or rate of
conversion or exchange and the applicable terms and conditions;
7.
the right, if any, to subscribe for or to purchase any of our securities or of any other corporation or other
entity;
8.
the provisions, if any, of any sinking fund applicable to such series; and
9. any other relative, participating, optional or other powers, preferences or rights, and any qualifications,
limitations or restrictions, of such series;
The issuance of preferred stock may adversely affect the voting rights and other rights of the holders of
common stock.
Provisions That May Have an Anti-Takeover Effect
Our amended and restated certificate of incorporation contains provisions that may make the acquisition of
control of us by means of a tender offer, open market purchase, proxy fight or otherwise more difficult. Our
amended and restated bylaws also contain provisions that could have an anti-takeover effect.
These provisions of our amended and restated certificate of incorporation and our amended and restated
bylaws are designed to encourage persons seeking to acquire control of us to negotiate the terms with our Board.
We believe that, as a general rule, the interests of our stockholders are best served if any change in control results
from negotiations with our Board based upon careful consideration of the proposed terms, such as the price to be
paid to stockholders, the form of consideration to be paid and the anticipated tax effects of the transaction.
Stockholders are not generally permitted to call a special meeting of stockholders. However, in the future, preferred
stock may be designated that permits the holders of such preferred stock to call a special meeting of the holders of
such class of preferred stock. Subject to the rights of holders of our preferred stock, our directors must be
nominated in accordance with Section 3 of Article II of our amended and restated bylaws, which provides that
nominations for election as directors at an annual meeting of our stockholders may only be made (i) by or at the
direction of our Board or a committee thereof or (ii) by any stockholder who is entitled to vote at such annual
meeting and who complies with the additional requirements of such section.
The provisions could, however, have the effect of discouraging a prospective acquirer from making a tender
offer or otherwise attempting to obtain control of us. To the extent that these provisions discourage takeover
attempts, they could deprive stockholders of opportunities to realize takeover premiums for their shares. Moreover,
these provisions could discourage accumulations of large blocks of shares of our Class A Common, thus depriving
stockholders of any advantages that large accumulations of stock might provide. Set forth below is a summary of
the relevant provisions of our amended and restated certificate of incorporation and our amended and restated
bylaws and certain applicable sections of the Delaware General Corporation Law (“DGCL”). This summary may
not contain all of the information that is important to you and is subject to, and is qualified by reference to, all of the
provisions of our amended and restated certificate of incorporation and our amended and restated bylaws and the
DGCL.
Restrictions on Certain Transactions with Interested Persons
We are subject to Section 203 of the DGCL, which prohibits certain business combinations and transactions
between a corporation and an “interested stockholder” for at least three years after the interested stockholder
becomes an interested stockholder, unless:
•
•
•
before the interested stockholder’s share acquisition date, the board approved either the business
combination or the purchase of shares by the interested stockholder;
upon consummation of the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining the voting
stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those
shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which
employee participants do not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer; or
the transaction is approved by the board and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock,
after excluding shares controlled by the interested stockholder.
An “interested stockholder” is any person that (i) is the owner of 15% or more of our outstanding voting
stock, or (ii) is our affiliate or associate and was the owner of 15% or more of our outstanding voting stock at any
time within the 3-year period immediately before the date on which it is sought to be determined whether such
person is an interested stockholder, and the affiliates and associates of such person.
Special Vote Required for Certain Amendments to Organizational Documents
Certain provisions of our amended and restated certificate of incorporation, such as those set forth in Article
V (election and removal of directors), Article VI (amendment of bylaws) and Article IX (rights to indemnification),
may not be amended or repealed except by the affirmative vote of the holders of at least 80% of the voting power of
our outstanding voting stock, voting together as a single class. Such 80% vote is also required to adopt any
provisions inconsistent with any of the provisions of Article I, Sections 1 (time and place of meetings of
stockholders), 3 (special meetings of stockholders) and 8 (order of business at meetings of stockholders), Article II,
Sections 1 (number and term of office of directors), 2 (vacancies and new directorships), 3 (nominations and
election of directors) and 4 (powers of directors) and Article VII (amendments to bylaws) of our amended and
restated bylaws.
Other Provisions
Certain other provisions of our amended and restated certificate of incorporation and our amended and restated
bylaws may also tend to discourage attempts to acquire control of us. These include advance notice requirements
for director nominations and stockholder proposals and provisions that prohibit stockholder action being effected by
written consent.
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.
Weston Brands, LLC
Incorporation
Pennsylvania
Mexico (99.98%)
Canada
Mexico (99.98%)
Brazil (99.9%)
Hong Kong (PRC)
Delaware
China
Delaware
Ohio
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
Exhibit 23.1
(1)
(2)
(3)
Registration Statement (Form S-8 No. 333-221358) pertaining to the Hamilton Beach Brands Holding Company
Executive Long-Term Equity Incentive Plan,
Registration Statement (Form S-8 No. 333-221359) pertaining to the Hamilton Beach Brands Holding Company
Non-Employee Directors' Equity Compensation Plan, and
Registration Statement (Form S-8 No. 333-221360) pertaining to the Hamilton Beach Brands Holding Company
Supplemental Executive Long-Term Incentive Bonus Plan;
of our reports dated March 22, 2021, with respect to the consolidated financial statements and schedule of Hamilton Beach
Brands Holding Company and the effectiveness of internal control over financial reporting of Hamilton Beach Brands Holding
Company included in this Annual Report (Form 10-K) of Hamilton Beach Brands Holding Company for the year ended
December 31, 2020.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 22, 2021
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: March 22, 2021
/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: March 22, 2021
/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, 2020, 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: March 22, 2021
/s/ Gregory H. Trepp
Gregory H. Trepp
President and Chief Executive Officer (Principal Executive Officer)
Date: March 22, 2021
/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, 2020.
Comparison of 40 Month Cumulative Total Return
Assumes Initial Investment of $100
December 2020
$160
$140
$120
$100
$80
$60
$40
$20
$0
Hamilton Beach Brands Holding Company
Russell 2000
Russell 2000 Producer Durables Index
2020 ANNUAL REPORT
Corporate Information
Annual Meeting
The Annual Meeting of Stockholders of Hamilton Beach
Brands Holding Company will be held at 11:00 a.m. on
May 18, 2021, at 5875 Landerbrook Drive, Cleveland,
Ohio 44124.
Legal Counsel
McDermott Will & Emery LLP
444 West Lake Street
Chicago, Illinois 60606
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
E-mail: louanne.nabhan@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)
Independent Registered Public Accounting Firm
Ernst & Young LLP
950 Main Ave., Suite 1800
Cleveland, Ohio 44113
Stock Exchange Listing
The New York Stock Exchange
Symbol: HBB
Hamilton Beach Brands Holding Company’s Website
Additional information on Hamilton Beach Brands
Holding Company may be found at its Investor Relations
website, www.hamiltonbeachbrands.com. The Company
considers this website to be one of the primary sources
of information for investors.
Brand Websites
www.hamiltonbeach.com
www.hamiltonbeachcommercial.com
www.proctorsilex.com
www.westonbrands.com
www.brightlineproducts.com
www.wolfgourmet.com
www.chisteam.com
www.bartesian.com
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4421 Waterfront Drive, Glen Allen, VA 23060
hamiltonbeachbrands.com
An Equal Opportunity Employer