HAMILTON BEACH BRANDS HOLDING CO, 10-Q filed on 11/1/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Oct. 27, 2017
Shares Outstanding Class A
Oct. 27, 2017
Shares Outstanding Class B
Entity Information [Line Items]
 
 
 
Entity Registrant Name
HAMILTON BEACH BRANDS HOLDING COMPANY 
 
 
Entity Central Index Key
0001709164 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Non-accelerated Filer 
 
 
Document Type
10-Q 
 
 
Document Period End Date
Sep. 30, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
Q3 
 
 
Amendment Flag
false 
 
 
Shares Outstanding (in shares)
 
7,015,839 
6,657,593 
Unaudited Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2016
ASSETS
 
 
 
Cash and cash equivalents
$ 3,113 
$ 11,340 
$ 5,403 
Accounts receivable, net of allowances of $12,860 at September 30, 2017, $15,512 at December 31, 2016 and $13,162 at September 30, 2016
93,019 
104,074 
83,327 
Accounts receivable from NACCO
819 
2,359 
Inventories, net
162,891 
128,415 
171,534 
Prepaid expenses and other
8,594 
8,586 
8,302 
Total current assets
268,436 
252,415 
270,925 
Property, plant and equipment, net
17,633 
15,943 
16,167 
Goodwill
6,253 
6,253 
6,253 
Other intangibles, net
6,245 
7,282 
7,626 
Deferred income taxes
19,409 
17,504 
16,700 
Deferred costs
8,494 
7,968 
8,279 
Other non-current assets
2,879 
3,468 
2,038 
Total assets
329,349 
310,833 
327,988 
LIABILITIES AND EQUITY
 
 
 
Accounts payable
136,689 
121,253 
150,189 
Accounts payable to NACCO
9,996 
9,705 
5,181 
Revolving credit agreements
35,462 
12,714 
5,250 
Accrued payroll
14,791 
17,443 
14,157 
Accrued cooperative advertising
8,900 
15,056 
10,619 
Other current liabilities
18,252 
13,779 
13,810 
Total current liabilities
224,090 
189,950 
199,206 
Revolving credit agreements
45,000 
26,000 
21,829 
Other long-term liabilities
27,960 
29,615 
28,577 
Total liabilities
297,050 
245,565 
249,612 
Stockholders' equity
 
 
 
Common stock
Preferred stock
Capital in excess of par value
47,773 
75,031 
75,031 
Retained earnings
6,738 
19,964 
Accumulated other comprehensive loss
(15,610)
(16,501)
(16,619)
Total stockholders' equity
32,299 
65,268 
78,376 
Total liabilities and equity
329,349 
310,833 
327,988 
Class A Common Stock
 
 
 
Stockholders' equity
 
 
 
Common stock
68 
Class B Common Stock
 
 
 
Stockholders' equity
 
 
 
Common stock
$ 68 
$ 0 
$ 0 
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2016
Allowance for doubtful accounts receivable
$ 12,860 
$ 15,512 
$ 13,162 
Common stock, par value (in dollars per share)
$ 1 
$ 1 
$ 1 
Common stock, shares authorized (in shares)
1,000 
1,000 
1,000 
Common stock, shares outstanding (in shares)
100 
100 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
$ 0.01 
Preferred stock, shares authorized (in shares)
5,000,000 
5,000,000 
5,000,000 
Preferred stock, shares outstanding (in shares)
Class A Common Stock
 
 
 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
$ 0.01 
Common stock, shares authorized (in shares)
70,000,000 
70,000,000 
70,000,000 
Common stock, shares outstanding (in shares)
6,836,716 
Class B Common Stock
 
 
 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
$ 0.01 
Common stock, shares authorized (in shares)
30,000,000 
30,000,000 
30,000,000 
Common stock, shares outstanding (in shares)
6,836,716 
Unaudited Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Income Statement [Abstract]
 
 
 
 
Revenues
$ 181,713 
$ 188,390 
$ 474,971 
$ 486,442 
Cost of sales
133,586 
138,329 
353,436 
364,052 
Gross profit
48,127 
50,061 
121,535 
122,390 
Operating expenses
 
 
 
 
Selling, general and administrative expenses
40,351 
36,237 
113,343 
109,081 
Amortization of intangible assets
346 
346 
1,036 
1,036 
Operating expenses
40,697 
36,583 
114,379 
110,117 
Operating profit
7,430 
13,478 
7,156 
12,273 
Other expense (income)
 
 
 
 
Interest expense
423 
286 
1,300 
1,115 
Other, net, including interest income
40 
457 
(939)
288 
Other (income) expense
463 
743 
361 
1,403 
Income before income tax provision
6,967 
12,735 
6,795 
10,870 
Income tax provision
2,708 
4,003 
2,655 
3,323 
Net income
$ 4,259 
$ 8,732 
$ 4,140 
$ 7,547 
Basic and diluted earnings per share (in dollars per share)
$ 0.31 
$ 0.64 
$ 0.30 
$ 0.55 
Basic and diluted weighted average shares outstanding (in shares)
13,673,000 
13,673,000 
13,673,000 
13,673,000 
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 4,259 
$ 8,732 
$ 4,140 
$ 7,547 
Foreign currency translation adjustment
(18)
(517)
1,725 
(1,335)
Current period cash flow hedging activity, net of $21 and $390 tax benefit in the three and nine months ended September 30, 2017, and $63 tax expense and $440 tax benefit in the three and nine months ended September 30, 2016, respectively.
(72)
145 
(931)
(837)
Reclassification of hedging activities into earnings, net of $13 and $42 tax expense in the three and nine months ended September 30, 2017, respectively, and $69 tax benefit and $5 tax expense in the three and nine months ended September 30, 2016, respectively.
(35)
163 
(116)
(42)
Reclassification of pension adjustments into earnings, net of $53 and $155 tax benefit in the three and nine months ended September 30, 2017, respectively, and $50 and $147 tax benefit in the three and nine months ended September 30, 2016, respectively.
62 
88 
213 
219 
Total other comprehensive income (loss)
(63)
(121)
891 
(1,995)
Comprehensive income
$ 4,196 
$ 8,611 
$ 5,031 
$ 5,552 
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Current period cash flow hedging activity, tax expense (benefit)
$ (21)
$ 63 
$ (390)
$ (440)
Reclassification of hedging activities into earnings, tax expense (benefit)
13 
(69)
42 
Reclassification of pension and postretirement adjustments into earnings, tax expense (benefit)
$ (53)
$ (50)
$ (155)
$ (147)
Unaudited Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Operating activities
 
 
Net income
$ 4,140 
$ 7,547 
Adjustments to reconcile from net income to net cash (used for) provided by operating activities:
 
 
Depreciation and amortization
3,709 
4,053 
Amortization of deferred financing fees
151 
170 
Deferred income taxes
(1,905)
3,343 
Other
(1,305)
(2,157)
Working capital changes:
 
 
Affiliates receivable/payable
(513)
(5,892)
Accounts receivable
11,053 
19,000 
Inventories
(34,476)
(44,925)
Other current assets
149 
(54)
Accounts payable
15,421 
55,825 
Other current liabilities
(4,124)
(2,403)
Net cash (used for) provided by operating activities
(7,700)
34,507 
Investing activities
 
 
Expenditures for property, plant and equipment
(4,366)
(4,392)
Other
21 
66 
Net cash used for investing activities
(4,345)
(4,326)
Financing activities
 
 
Net additions (reductions) to revolving credit agreements
41,747 
(31,286)
Cash dividends paid to NACCO
(38,000)
(10,000)
Other
(186)
Net cash provided by (used for) financing activities
3,747 
(41,472)
Effect of exchange rate changes on cash
71 
(104)
Cash and cash equivalents
 
 
Decrease for the period
(8,227)
(11,395)
Balance at the beginning of the period
11,340 
16,798 
Balance at the end of the period
$ 3,113 
$ 5,403 
Unaudited Condensed Consolidated Statements of Changes in Equity (USD $)
In Thousands, unless otherwise specified
Total
Capital in Excess of Par Value
Retained Earnings
Foreign Currency Translation Adjustment
Deferred Gain (Loss) on Cash Flow Hedging
Pension Plan Adjustment
Class A Common Stock
Class B Common Stock
Class B Common Stock
Balance, beginning of period at Dec. 31, 2015
$ 82,824 
$ 75,031 
$ 22,417 
$ (6,545)
$ 343 
$ (8,422)
$ 0 
$ 0 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Net income
7,547 
 
7,547 
 
 
 
 
 
Cash dividends to NACCO
(10,000)
 
(10,000)
 
 
 
 
 
Current period other comprehensive income (loss)
(2,172)
 
 
(1,335)
(837)
 
 
 
Reclassification adjustment to net income (loss)
177 
 
 
 
(42)
219 
 
 
Balance, end of period at Sep. 30, 2016
78,376 
75,031 
19,964 
(7,880)
(536)
(8,203)
Balance, beginning of period at Dec. 31, 2016
65,268 
75,031 
6,738 
(8,623)
616 
(8,494)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Issuance of common stock
(136)
 
 
 
 
68 
68 
Net income
4,140 
 
4,140 
 
 
 
 
 
Cash dividends to NACCO
(38,000)
(27,122)
(10,878)
 
 
 
 
 
Current period other comprehensive income (loss)
794 
 
 
1,725 
(931)
 
 
 
Reclassification adjustment to net income (loss)
97 
 
 
 
(116)
213 
 
 
Balance, end of period at Sep. 30, 2017
$ 32,299 
$ 47,773 
$ 0 
$ (6,898)
$ (431)
$ (8,281)
$ 68 
$ 68 
Basis of Presentation
Nature of Operations and Basis of Presentation
Nature of Operations and Basis of Presentation

Nature of Operations

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Hamilton Beach Brands Holding Company ("Hamilton Beach Holding” or the “Company”). Intercompany accounts and transactions among the consolidated companies are eliminated in consolidation. The Company's subsidiaries operate in the following principal industries: consumer, commercial and specialty small appliances and specialty retail. The Company manages its subsidiaries primarily by industry.
 
Hamilton Beach Brands, Inc. (“HBB”) is a leading designer, marketer and distributor of small branded electric household and specialty housewares appliances as well as commercial products for restaurants, bars and hotels. The Kitchen Collection, LLC (“KC”) is a national specialty retailer of kitchenware operating under the Kitchen Collection® store name in outlet and traditional malls throughout the United States.

Basis of Presentation

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 Holding Class A common stock and one share of Hamilton Beach Holding Class B common stock 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 Hamilton Beach Holding Class A common stock and one share of Hamilton Beach Holding Class B common stock for each share of NACCO Class A or NACCO Class B common stock, the earnings per share amounts for the Company have been calculated based upon the number of shares distributed in the spin-off. NACCO did not receive any proceeds from the spin-off.

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at September 30, 2017 and the results of its operations, comprehensive income (loss), cash flows and changes in equity for the nine months ended September 30, 2017 and 2016 have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Registration Statement on Form S-1 (Registration No. 333-220066) (the "Registration Statement").

The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information or notes required by U.S. GAAP for complete financial statements.

Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2017. The HBB and KC businesses are seasonal and a majority of revenues and operating profit typically occurs in the second half of the calendar year when sales of small electric household appliances to retailers and consumers increase significantly for the fall holiday selling season.
Recently Issued Accounting Standards
Recently Issued Accounting Standards
Recently Issued Accounting Standards

Accounting Standards Not Yet Adopted

The Company is an emerging growth company and has not elected 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 private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard.

In May 2014, the FASB codified in ASC 606, "Revenue Recognition - Revenue from Contracts with Customers," which supersedes most current revenue recognition guidance, including industry-specific guidance, and requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers and provide additional disclosures. The effective date for nonpublic entities is annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted. The Company plans to adopt the standard on January 1, 2018.

The Company anticipates using the modified retrospective method with the cumulative effect of initially applying the standard recognized as an adjustment to equity. The Company has developed a project plan with respect to its implementation of this standard, including identification of revenue streams and review of contracts and procedures currently in place. To date, the Company has completed its initial review of the revenue streams related to its HBB and KC subsidiaries.  The Company is also in the process of identifying and implementing any necessary changes to processes and controls to meet the standard's updated reporting and disclosure requirements. While the Company continues to assess the potential impact of the new standard, Hamilton Beach Holding’s revenue is primarily generated from the sale of finished product to customers.  Those sales are recognized at a single point in time when ownership, risks and rewards transfer. The amount and timing of revenue recognition is not materially impacted by the new standard therefore the adoption of the standard is not expected to have a material impact to the Company’s financial position, results of operations or cash flows. The adoption of this guidance will result in increased disclosures to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts.


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, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating when it will adopt ASU 2016-02 and how and to what extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.
Inventories
Inventories
Inventories

Inventories are summarized as follows:

 
SEPTEMBER 30
2017
 
DECEMBER 31
2016
 
SEPTEMBER 30
2016
Sourced inventories - HBB
$
133,018

 
$
95,008

 
$
133,396

Retail inventories - KC
29,873

 
33,407

 
38,138

 Total inventories
$
162,891

 
$
128,415

 
$
171,534

Fair Value Disclosure
Fair Value Disclosure
Fair Value Disclosure

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

 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
 
Quoted Prices in
 
 
 
Significant
 
 
 
 
Active Markets for
 
Significant Other
 
Unobservable
 
 
 
 
Identical Assets
 
Observable Inputs
 
Inputs
Description
 
Date
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
September 30, 2017
 
 
 
 
 
 
Assets:
 

 
 
 
 
 
 
Interest rate swap agreements
 
$
603

 
$

 
$
603

 
$

 
 
$
603

 
$

 
$
603

 
$

Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
694

 
$

 
$
694

 
$

 
 
$
694

 
$

 
$
694

 
$

 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
774

 
$

 
$
774

 
$

Foreign currency exchange contracts
 
147

 

 
147

 

 
 
$
921

 
$

 
$
921

 
$

 
 
 
 
 
 
 
 
 
 
 
September 30, 2016
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
15

 
$

 
$
15

 
$

 
 
$
15

 
$

 
$
15

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
745

 
$

 
$
745

 
$

 
 
$
745

 
$

 
$
745

 
$



The Company uses significant other observable inputs to value derivative instruments used to hedge foreign currency and interest rate risk; therefore, they are classified within Level 2 of the valuation hierarchy. The fair value for these contracts is determined based on exchange rates and interest rates, respectively.

There were no transfers into or out of Levels 1, 2 or 3 during the three and nine months ended September 30, 2017 and 2016.
Contingencies
Contingencies
Contingencies

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

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

Environmental matters

HBB is investigating or remediating historical environmental contamination at some current and former sites operated by HBB or by businesses it acquired. Based on the current stage of the investigation or remediation at each known site, HBB estimates the total investigation and remediation costs and the period of assessment and remediation activity required for each site. The estimate of future investigation and remediation costs is primarily based on variables associated with site clean-up, including, but not limited to, physical characteristics of the site, the nature and extent of the contamination and applicable regulatory programs and remediation standards. No assessment can fully characterize all subsurface conditions at a site. There is no assurance that additional assessment and remediation efforts will not result in adjustments to estimated remediation costs or the time frame for remediation at these sites.

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

At September 30, 2017, December 31, 2016 and September 30, 2016, HBB had accrued undiscounted obligations of $9.0 million, $8.7 million and $9.0 million, respectively, for environmental investigation and remediation activities. In addition, HBB estimates that it is reasonably possible that it may incur additional expenses in the range of zero to $5.3 million related to the environmental investigation and remediation at these sites.
Business Segments
Business Segments
Business Segments

Hamilton Beach Holding is an operating holding company with HBB and KC as reportable segments. See Note 1 for a discussion of the Company's industries and product lines. Financial information for each of Hamilton Beach Holding's reportable segments is presented in the following table. The line “Eliminations” eliminates revenues from HBB sales to KC. The amounts of these revenues are based on current market prices of similar third-party transactions. No other sales transactions occur among reportable segments.

 
THREE MONTHS ENDED
 
NINE MONTHS ENDED
 
SEPTEMBER 30
 
SEPTEMBER 30
 
2017
 
2016
 
2017
 
2016
Revenues
 
 
 
 
 
 
 
HBB
$
153,592

 
$
157,264

 
$
395,320

 
$
400,058

KC
28,644

 
32,895

 
81,177

 
89,912

Eliminations
(523
)
 
(1,769
)
 
(1,526
)
 
(3,528
)
Total
$
181,713

 
$
188,390

 
$
474,971

 
$
486,442

 
 
 
 
 
 
 
 
Operating profit (loss)
 

 
 

 
 
 
 
HBB (a)
$
9,001

 
$
14,399

 
$
14,947

 
$
19,162

KC
(1,581
)
 
(921
)
 
(7,868
)
 
(6,822
)
Eliminations
10

 

 
77

 
(67
)
Total
$
7,430

 
$
13,478

 
$
7,156

 
$
12,273



(a)     HBB's operating profit includes the recognition of $2.5 million of expenses related to the spin-off in the three and nine months ended September 30, 2017.
Income Taxes Income Taxes
Income Taxes
Income Taxes

The U.S. operating results of the Company will be included in the consolidated federal income tax return filed by NACCO through the spin-off date. The Company's allocation of taxes through the spin-off date will be in accordance with the Tax Allocation Agreement. In general, the Tax Allocation Agreement between the Company and NACCO provides that federal income taxes are computed by the Company as if it had filed a tax return on a standalone basis. Subsequent to the spin-off, the Company will file a separate federal tax return in the U.S. for the period subsequent to the spin-off date.
Nature of Operations and Basis of Presentation (Policies)
Nature of Operations

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Hamilton Beach Brands Holding Company ("Hamilton Beach Holding” or the “Company”). Intercompany accounts and transactions among the consolidated companies are eliminated in consolidation. The Company's subsidiaries operate in the following principal industries: consumer, commercial and specialty small appliances and specialty retail. The Company manages its subsidiaries primarily by industry.
 
Hamilton Beach Brands, Inc. (“HBB”) is a leading designer, marketer and distributor of small branded electric household and specialty housewares appliances as well as commercial products for restaurants, bars and hotels. The Kitchen Collection, LLC (“KC”) is a national specialty retailer of kitchenware operating under the Kitchen Collection® store name in outlet and traditional malls throughout the United States.

Basis of Presentation

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 Holding Class A common stock and one share of Hamilton Beach Holding Class B common stock 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 Hamilton Beach Holding Class A common stock and one share of Hamilton Beach Holding Class B common stock for each share of NACCO Class A or NACCO Class B common stock, the earnings per share amounts for the Company have been calculated based upon the number of shares distributed in the spin-off. NACCO did not receive any proceeds from the spin-off.

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at September 30, 2017 and the results of its operations, comprehensive income (loss), cash flows and changes in equity for the nine months ended September 30, 2017 and 2016 have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Registration Statement on Form S-1 (Registration No. 333-220066) (the "Registration Statement").

The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information or notes required by U.S. GAAP for complete financial statements.

Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2017. The HBB and KC businesses are seasonal and a majority of revenues and operating profit typically occurs in the second half of the calendar year when sales of small electric household appliances to retailers and consumers increase significantly for the fall holiday selling season.
Accounting Standards Not Yet Adopted

The Company is an emerging growth company and has not elected 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 private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard.

In May 2014, the FASB codified in ASC 606, "Revenue Recognition - Revenue from Contracts with Customers," which supersedes most current revenue recognition guidance, including industry-specific guidance, and requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers and provide additional disclosures. The effective date for nonpublic entities is annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted. The Company plans to adopt the standard on January 1, 2018.

The Company anticipates using the modified retrospective method with the cumulative effect of initially applying the standard recognized as an adjustment to equity. The Company has developed a project plan with respect to its implementation of this standard, including identification of revenue streams and review of contracts and procedures currently in place. To date, the Company has completed its initial review of the revenue streams related to its HBB and KC subsidiaries.  The Company is also in the process of identifying and implementing any necessary changes to processes and controls to meet the standard's updated reporting and disclosure requirements. While the Company continues to assess the potential impact of the new standard, Hamilton Beach Holding’s revenue is primarily generated from the sale of finished product to customers.  Those sales are recognized at a single point in time when ownership, risks and rewards transfer. The amount and timing of revenue recognition is not materially impacted by the new standard therefore the adoption of the standard is not expected to have a material impact to the Company’s financial position, results of operations or cash flows. The adoption of this guidance will result in increased disclosures to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts.


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, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating when it will adopt ASU 2016-02 and how and to what extent ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.
Inventories (Tables)
Schedule of Inventories
Inventories are summarized as follows:

 
SEPTEMBER 30
2017
 
DECEMBER 31
2016
 
SEPTEMBER 30
2016
Sourced inventories - HBB
$
133,018

 
$
95,008

 
$
133,396

Retail inventories - KC
29,873

 
33,407

 
38,138

 Total inventories
$
162,891

 
$
128,415

 
$
171,534

Fair Value Disclosure (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table presents the Company's assets and liabilities accounted for at fair value on a recurring basis:

 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
 
Quoted Prices in
 
 
 
Significant
 
 
 
 
Active Markets for
 
Significant Other
 
Unobservable
 
 
 
 
Identical Assets
 
Observable Inputs
 
Inputs
Description
 
Date
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
 
September 30, 2017
 
 
 
 
 
 
Assets:
 

 
 
 
 
 
 
Interest rate swap agreements
 
$
603

 
$

 
$
603

 
$

 
 
$
603

 
$

 
$
603

 
$

Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
694

 
$

 
$
694

 
$

 
 
$
694

 
$

 
$
694

 
$

 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
774

 
$

 
$
774

 
$

Foreign currency exchange contracts
 
147

 

 
147

 

 
 
$
921

 
$

 
$
921

 
$

 
 
 
 
 
 
 
 
 
 
 
September 30, 2016
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
15

 
$

 
$
15

 
$

 
 
$
15

 
$

 
$
15

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
745

 
$

 
$
745

 
$

 
 
$
745

 
$

 
$
745

 
$

Business Segments (Tables)
Segment Reporting Information
Financial information for each of Hamilton Beach Holding's reportable segments is presented in the following table. The line “Eliminations” eliminates revenues from HBB sales to KC. The amounts of these revenues are based on current market prices of similar third-party transactions. No other sales transactions occur among reportable segments.

 
THREE MONTHS ENDED
 
NINE MONTHS ENDED
 
SEPTEMBER 30
 
SEPTEMBER 30
 
2017
 
2016
 
2017
 
2016
Revenues
 
 
 
 
 
 
 
HBB
$
153,592

 
$
157,264

 
$
395,320

 
$
400,058

KC
28,644

 
32,895

 
81,177

 
89,912

Eliminations
(523
)
 
(1,769
)
 
(1,526
)
 
(3,528
)
Total
$
181,713

 
$
188,390

 
$
474,971

 
$
486,442

 
 
 
 
 
 
 
 
Operating profit (loss)
 

 
 

 
 
 
 
HBB (a)
$
9,001

 
$
14,399

 
$
14,947

 
$
19,162

KC
(1,581
)
 
(921
)
 
(7,868
)
 
(6,822
)
Eliminations
10

 

 
77

 
(67
)
Total
$
7,430

 
$
13,478

 
$
7,156

 
$
12,273



(a)     HBB's operating profit includes the recognition of $2.5 million of expenses related to the spin-off in the three and nine months ended September 30, 2017.
Nature of Operations and Basis of Presentation Nature of Operations and Basis of Presentation (Details)
0 Months Ended
Sep. 29, 2017
Class A Common Stock
 
Class of Stock [Line Items]
 
Shares of common stock issued in spin-off
Class B Common Stock
 
Class of Stock [Line Items]
 
Shares of common stock issued in spin-off
Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2016
Inventory Disclosure [Abstract]
 
 
 
Sourced inventories - HBB
$ 133,018 
$ 95,008 
$ 133,396 
Retail inventories - KC
29,873 
33,407 
38,138 
Total inventories
$ 162,891 
$ 128,415 
$ 171,534 
Fair Value Disclosure (On a Recurring Basis) (Details) (Fair value measurements, recurring, USD $)
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2016
Assets:
 
 
 
Interest rate swap agreements
$ 603,000 
$ 774,000 
 
Foreign currency exchange contracts
 
147,000 
15,000 
Assets at fair value
603,000 
921,000 
15,000 
Liabilities:
 
 
 
Foreign currency exchange contracts
694,000 
 
 
Interest rate swap agreements
 
 
745,000 
Liabilities at fair value
694,000 
 
745,000 
Level 1
 
 
 
Assets:
 
 
 
Interest rate swap agreements
 
Foreign currency exchange contracts
 
Assets at fair value
Liabilities:
 
 
 
Foreign currency exchange contracts
 
 
Interest rate swap agreements
 
 
Liabilities at fair value
 
Level 2
 
 
 
Assets:
 
 
 
Interest rate swap agreements
603,000 
774,000 
 
Foreign currency exchange contracts
 
147,000 
15,000 
Assets at fair value
603,000 
921,000 
15,000 
Liabilities:
 
 
 
Foreign currency exchange contracts
694,000 
 
 
Interest rate swap agreements
 
 
745,000 
Liabilities at fair value
694,000 
 
745,000 
Level 3
 
 
 
Assets:
 
 
 
Interest rate swap agreements
 
Foreign currency exchange contracts
 
Assets at fair value
Liabilities:
 
 
 
Foreign currency exchange contracts
 
 
Interest rate swap agreements
 
 
Liabilities at fair value
$ 0 
 
$ 0 
Contingencies (Narrative) (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2016
Loss Contingencies [Line Items]
 
 
 
Accrual for environmental investigation and remediation activities
$ 9,000,000 
$ 8,700,000 
$ 9,000,000 
Minimum
 
 
 
Loss Contingencies [Line Items]
 
 
 
Estimate of possible loss
 
 
Maximum
 
 
 
Loss Contingencies [Line Items]
 
 
 
Estimate of possible loss
$ 5,300,000 
 
 
Business Segments (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
$ 181,713,000 
$ 188,390,000 
$ 474,971,000 
$ 486,442,000 
Operating profit (loss)
7,430,000 
13,478,000 
7,156,000 
12,273,000 
Operating segments |
HBB
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
153,592,000 
157,264,000 
395,320,000 
400,058,000 
Operating profit (loss)
9,001,000 
14,399,000 
14,947,000 
19,162,000 
Operating segments |
KC
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
28,644,000 
32,895,000 
81,177,000 
89,912,000 
Operating profit (loss)
(1,581,000)
(921,000)
(7,868,000)
(6,822,000)
Eliminations
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
(523,000)
(1,769,000)
(1,526,000)
(3,528,000)
Operating profit (loss)
10,000 
77,000 
(67,000)
Spin-off |
Operating segments |
HBB
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Expenses related to spin-off
$ 2,500,000 
 
$ 2,500,000