HAMILTON BEACH BRANDS HOLDING CO, 10-Q filed on 8/5/2020
Quarterly Report
v3.20.2
Cover Page - shares
6 Months Ended
Jun. 30, 2020
Jul. 31, 2020
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 001-38214  
Entity Registrant Name HAMILTON BEACH BRANDS HOLDING COMPANY  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 31-1236686  
Entity Address, Address Line One 4421 WATERFRONT DR.  
Entity Address, City or Town GLEN ALLEN  
Entity Address, State or Province VA  
Entity Address, Postal Zip Code 23060  
City Area Code (804)  
Local Phone Number 273-9777  
Title of 12(b) Security Class A Common Stock, Par Value $0.01 Per Share  
Trading Symbol HBB  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Shell Company false  
Entity Central Index Key 0001709164  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Shares Outstanding Class A    
Entity Information [Line Items]    
Shares Outstanding (in shares)   9,607,226
Shares Outstanding Class B    
Entity Information [Line Items]    
Shares Outstanding (in shares)   4,062,372
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Current assets      
Cash and cash equivalents $ 1,616 $ 2,142 $ 1,029
Trade receivables, net 85,209 108,381 86,268
Inventory 90,572 109,806 121,472
Prepaid expenses and other current assets 13,358 11,345 16,412
Current assets of discontinued operations 0 5,383 21,255
Total current assets 190,755 237,057 246,436
Property, plant and equipment, net 23,064 22,324 21,649
Goodwill 6,253 6,253 6,253
Other intangible assets, net 2,494 3,141 3,828
Deferred income taxes 5,830 6,248 3,754
Deferred costs 11,532 10,941 8,564
Other non-current assets 2,673 2,085 1,984
Non-current assets of discontinued operations 0 614 4,420
Total assets 242,601 288,663 296,888
Current liabilities      
Accounts payable 92,282 111,348 86,199
Accounts payable to NACCO Industries, Inc. 496 496 220
Revolving credit agreements 41,785 23,497 51,505
Accrued compensation 11,362 15,027 11,725
Accrued product returns 7,383 8,697 8,224
Other current liabilities 15,242 12,534 21,382
Current liabilities of discontinued operations 0 29,723 20,048
Total current liabilities 168,550 201,322 199,303
Revolving credit agreements 0 35,000 30,000
Other long-term liabilities 12,499 16,075 14,699
Non-current liabilities of discontinued operations 0 0 3,697
Total liabilities 181,049 252,397 247,699
Stockholders' equity      
Capital in excess of par value 56,325 54,509 53,342
Treasury stock (5,960) (5,960) (2,334)
Retained earnings 30,528 3,710 15,646
Accumulated other comprehensive loss (19,481) (16,132) (17,604)
Total stockholders' equity 61,552 36,266 49,189
Total liabilities and stockholders' equity 242,601 288,663 296,888
Class A Common Stock      
Stockholders' equity      
Common stock 99 98 95
Class B Common Stock      
Stockholders' equity      
Common stock $ 41 $ 41 44
Capital in excess of par value     53,342
Treasury stock     $ (2,334)
v3.20.2
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Statement [Abstract]            
Revenue $ 138,297   $ 131,065   $ 259,143 $ 257,707
Cost of sales 103,043   102,558   198,849 202,498
Gross profit 35,254   28,507   60,294 55,209
Selling, general and administrative expenses 24,035   24,976   48,248 51,222
Amortization of intangible assets 324   346   648 691
Operating profit 10,895   3,185   11,398 3,296
Interest expense, net 366   789   969 1,452
Other expense (income), net (193)   (132)   1,509 (329)
Income (loss) from continuing operations before income taxes 10,722   2,528   8,920 2,173
Income tax expense (benefit) 2,657   630   2,209 937
Net income (loss) from continuing operations 8,065   1,898   6,711 1,236
Income (loss) from discontinued operations, net of tax (305)   (2,516)   22,561 (5,239)
Net income (loss) $ 7,760 $ 21,512 $ (618) $ (3,385) $ 29,272 $ (4,003)
Earnings Per Share, Basic and Diluted [Abstract]            
Basic and diluted earnings (loss) per share, continuing operations (in usd per share) $ 0.59   $ 0.14   $ 0.49 $ 0.09
Basic and diluted earnings (loss) per share, discontinued operations (in usd per share) (0.02)   (0.18)   1.65 (0.38)
Basic and diluted earnings (loss) per share (in usd per share) $ 0.57   $ (0.04)   $ 2.14 $ (0.29)
Basic weighted average shares outstanding (in shares) 13,644,000   13,813,000   13,635,000 13,800,000
Diluted weighted average shares outstanding (in shares) 13,670,000   13,826,000   13,657,000 13,813,000
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]            
Net income (loss) $ 7,760 $ 21,512 $ (618) $ (3,385) $ 29,272 $ (4,003)
Foreign currency translation adjustment 488   113   1,545 327
(Loss) gain on long-term intra-entity foreign currency transactions 31   121   (4,879) 136
Cash flow hedging activity 137   (877)   (25) (1,299)
Reclassification of hedging activities into earnings (392)   144   (282) 146
Reclassification of pension adjustments into earnings 97   102   292 186
Total other comprehensive loss, net of tax 361   (397)   (3,349) (504)
Comprehensive income (loss) $ 8,121   $ (1,015)   $ 25,923 $ (4,507)
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Including Disposal Group and Discontinued Operations [Abstract]    
Cash and cash equivalents $ 1,616 $ 1,029
Restricted cash included in prepaid expenses and other current assets 194 0
Restricted cash included in other non-current assets 760 0
Cash and cash equivalents of discontinued operations 0 102
Total cash, cash equivalents, and restricted cash $ 2,570 $ 1,131
v3.20.2
Condensed Consolidated Statements of Changes in Equity - USD ($)
$ in Thousands
Total
Capital in Excess of Par Value
Treasury Stock
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Class A Common Stock
Common Stock
Class B Common Stock
Common Stock
Balance, beginning of period at Dec. 31, 2018 $ 56,818 $ 51,714 $ 0 $ 22,068 $ (17,101) $ 93 $ 44
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (3,385)     (3,385)      
Issuance of common stock, net of conversions 1 (1)       2  
Share-based compensation expense 807 807          
Cash dividends on Class A Common and Class B Common (1,177)     (1,177)      
Other comprehensive income (loss) (192)       (192)    
Reclassification adjustment to net income 86       86    
Balance, end of period at Mar. 31, 2019 52,958 52,520 0 17,506 (17,207) 95 44
Balance, beginning of period at Dec. 31, 2018 56,818 51,714 0 22,068 (17,101) 93 44
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (4,003)     (4,003)      
Issuance of common stock, net of conversions 1 (1)       2  
Purchase of treasury stock 2,334   2,334        
Share-based compensation expense 1,629 1,629          
Other comprehensive income (loss) (835)       (835)    
Reclassification adjustment to net income 332       332    
Balance, end of period at Jun. 30, 2019 49,189 53,342 (2,334) 15,646 (17,604) 95 44
Balance, beginning of period at Mar. 31, 2019 52,958 52,520 0 17,506 (17,207) 95 44
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) (618)     (618)      
Purchase of treasury stock (2,334)   (2,334)        
Share-based compensation expense 822 822          
Cash dividends on Class A Common and Class B Common (1,242)     (1,242)      
Other comprehensive income (loss) (643)       (643)    
Reclassification adjustment to net income 246       246    
Balance, end of period at Jun. 30, 2019 49,189 53,342 (2,334) 15,646 (17,604) 95 44
Balance, beginning of period at Dec. 31, 2019 36,266 54,509 (5,960) 3,710 (16,132) 98 41
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) 21,512     21,512      
Issuance of common stock, net of conversions 0 (1)       1  
Share-based compensation expense 554 554          
Cash dividends on Class A Common and Class B Common (1,226)     (1,226)      
Other comprehensive income (loss) (4,015)       (4,015)    
Reclassification adjustment to net income 305       305    
Balance, end of period at Mar. 31, 2020 53,396 55,062 (5,960) 23,996 (19,842) 99 41
Balance, beginning of period at Dec. 31, 2019 36,266 54,509 (5,960) 3,710 (16,132) 98 41
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) 29,272            
Balance, end of period at Jun. 30, 2020 61,552 56,325 (5,960) 30,528 (19,481) 99 41
Balance, beginning of period at Mar. 31, 2020 53,396 55,062 (5,960) 23,996 (19,842) 99 41
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net income (loss) 7,760     7,760      
Share-based compensation expense 1,263 1,263          
Cash dividends on Class A Common and Class B Common (1,228)     (1,228)      
Other comprehensive income (loss) 656       656    
Reclassification adjustment to net income (295)       (295)    
Balance, end of period at Jun. 30, 2020 $ 61,552 $ 56,325 $ (5,960) $ 30,528 $ (19,481) $ 99 $ 41
v3.20.2
Condensed Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares
3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2019
Statement of Stockholders' Equity [Abstract]          
Cash Dividends on Class A Common and Class B Common per share (in usd per share) $ 0.085 $ 0.09 $ 0.09 $ 0.085 $ 0.085
v3.20.2
Basis of Presentation
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation Basis of Presentation and Recently Issued Accounting Standards

Basis of Presentation

Hamilton Beach Brands Holding Company is a holding company and operates through its wholly-owned subsidiary, Hamilton Beach Brands, Inc. (“HBB”) (collectively “Hamilton Beach Holding” or the “Company”). HBB is a leading designer, marketer, and distributor of branded, small electric household and specialty housewares appliances, as well as commercial products for restaurants, fast food chains, bars, and hotels. HBB participates in the consumer, commercial and specialty small kitchen appliance markets.

The Company previously operated through its other wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"), which is reported as discontinued operations in all periods presented herein. KC completed its dissolution on April 3, 2020 with a pro-rata distribution of its remaining assets to creditors, at which time the KC legal entity ceased to exist. See Note 3 for further information on discontinued operations.

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

Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the remainder of the year due to the highly seasonal nature of our primary markets. A majority of revenue and operating profit typically occurs in the second half of the calendar year when sales of our products to retailers and consumers historically increase significantly for the fall holiday-selling season.

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

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 currently 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, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, 2023 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.
v3.20.2
Restatement of Previously Issued Financial Statements
6 Months Ended
Jun. 30, 2020
Accounting Changes and Error Corrections [Abstract]  
Restatement of Previously Issued Financial Statements Restatement of Previously Issued Financial Statements

During the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican subsidiaries. The Company’s Audit Review Committee commenced an internal investigation, with the assistance of outside counsel and other third party experts. As a result of this investigation, 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. As a result, 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 on Form 10-K/A for the year ended December 31, 2019. During the course of the investigation, certain expenses at the Company's Mexican subsidiaries were found to be incorrectly classified within the consolidated statement of operations and have also been corrected in the restatement. These misstatements are described in restatement reference (a) through (d) below.

The restatement also includes corrections for other errors previously identified as immaterial, individually and in the aggregate, to our consolidated financial statements.

Description of Misstatements

(a) Write-off of Assets: Certain former employees of one of the Company's Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries and vendors in which the employees had an interest. In doing so, expenditures were deferred on the balance sheet beyond the period for which the costs pertained. The amounts were recorded as trade receivables, prepaid expenses and other current assets, and reductions in accrued liabilities. The amounts have been written off to selling, general and administrative expenses. Where these write-offs caused prepaid assets and other current assets balance to become a liability, the balance has been reclassed from prepaid expenses and other assets to other current liabilities.

(b) Reversal of Revenue: Certain former employees of one of our Mexican subsidiaries engaged in sales activities to customers in which the employees had an interest. The Company concluded that these unauthorized transactions did not meet the criteria for revenue recognition at the time of sale and the revenue has been reversed.

(c) Correction of misclassification of Selling and Marketing Expenses: Certain former employees of one of the Mexican subsidiaries engaged a third-party, in which the employees had an interest, to perform selling and marketing activities on behalf of the Mexican subsidiaries. Amounts paid for the selling and marketing activities had previously been treated as variable consideration and reflected as a reduction to revenue; however, the amounts should be reflected as selling, general and administrative expenses.

(d) Correction for the timing of recognition of customer price concessions: Customer price concessions at our Mexican subsidiaries were not accrued timely in order to obscure the increased expenses due to unauthorized transactions as described above.

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

(f) Correction of other immaterial errors.

Restatement Tables

The restatement tables below present a reconciliation from the previously reported to the restated values as of and for the three and six months ended June 30, 2019 and as of December 31, 2019. The values as previously reported were derived from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 filed on July 31, 2019 and from our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on February 26, 2020.

Additionally, in the fourth quarter of 2019, KC met the requirements to be reported as a discontinued operation. The following consolidated financial tables present a reconciliation to reflect KC as a discontinued operation for all periods presented and are labeled "Recast". See Note 3, Discontinued Operations for more information.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
December 31, 2019
 
As Previously Reported
 
Restatement Impacts
 
Restatement Reference
 
As Restated
 
(In thousands)
Assets
 
 
 
 
 
 
 
Current assets
 
 
 

 
 
 
 
Cash and cash equivalents
$
2,142

 
$

 
 
 
$
2,142

Trade receivables, net
113,781

 
(5,400
)
 
a,b,d
 
108,381

Inventory
109,621

 
185

 
f
 
109,806

Prepaid expenses and other current assets
23,102

 
(11,757
)
 
a,b,f
 
11,345

Current assets of discontinued operations
5,383

 

 
 
 
5,383

Total current assets
254,029

 
(16,972
)
 
 
 
237,057

Property, plant and equipment, net
22,324

 

 
 
 
22,324

Goodwill
6,253

 

 
 
 
6,253

Other intangible assets, net
3,141

 

 
 
 
3,141

Deferred income taxes
3,853

 
2,395

 
e
 
6,248

Deferred costs
10,941

 

 
 
 
10,941

Other non-current assets
2,085

 

 
 
 
2,085

Non-current assets of discontinued operations
614

 

 
 
 
614

Total assets
$
303,240

 
$
(14,577
)
 
 
 
$
288,663

Liabilities and stockholders' equity
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Accounts payable
$
111,117

 
$
231

 
f
 
$
111,348

Accounts payable to NACCO Industries, Inc.
496

 

 
 
 
496

Revolving credit agreements
23,497

 

 
 
 
23,497

Accrued compensation
14,277

 
750

 
f
 
15,027

Accrued product returns
8,697

 

 
 
 
8,697

Other current liabilities
12,873

 
(339
)
 
a,e
 
12,534

Current liabilities of discontinued operations
29,723

 

 
 
 
29,723

Total current liabilities
200,680

 
642

 
 
 
201,322

Revolving credit agreements
35,000

 

 
 
 
35,000

Other long-term liabilities
12,501

 
3,574

 
e
 
16,075

Total liabilities
248,181

 
4,216

 
 
 
252,397

Stockholders’ equity
 
 
 
 
 
 
 
Preferred stock, par value $0.01 per share

 

 
 
 

Class A Common stock, par value $0.01 per share; 9,805 shares issued as of December 31, 2019
98

 

 
 
 
98

Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 4,076 shares issued as of December 31, 2019
41

 

 
 
 
41

Capital in excess of par value
54,344

 
165

 
f
 
54,509

Treasury stock
(5,960
)
 

 
 
 
(5,960
)
Retained earnings
22,524

 
(18,814
)
 
a,b,d,e,f
 
3,710

Accumulated other comprehensive loss
(15,988
)
 
(144
)
 
a,b,d,e
 
(16,132
)
Total stockholders’ equity
55,059

 
(18,793
)
 
 
 
36,266

Total liabilities and stockholders' equity
$
303,240

 
$
(14,577
)
 
 
 
$
288,663




(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $2.5 million, a reduction to prepaid expenses and other current assets of $12.4 million, and an increase to other current liabilities of $0.9 million
(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to trade receivables of $1.3 million and an increase to prepaid expenses and other current assets of $0.2 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in a decrease to trade receivables of $1.6 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $2.4 million, a decrease to other current liabilities of $1.2 million, and an increase to other long-term liabilities of $3.6 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to prepaid expenses and other current assets of $0.5 million, an increase to inventory of $0.2 million, an increase to accounts payable of $0.2 million, an increase to accrued compensation of $0.7 million, and an increase to capital in excess of par of $0.2 million


CONDENSED CONSOLIDATED BALANCE SHEETS
`
June 30, 2019
 
 
 
As Previously Reported
 
Restatement Impacts
 
Restatement Reference
 
As Restated
Recasting Impacts
As Restated and Recast
 
(In thousands)
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,131

 
$

 
 
 
$
1,131

$
(102
)
$
1,029

Trade receivables, net
89,579

 
(2,446
)
 
a,f
 
87,133

(865
)
86,268

Inventory
140,817

 

 
 
 
140,817

(19,345
)
121,472

Prepaid expenses and other current assets
24,078

 
(6,723
)
 
a
 
17,355

(943
)
16,412

Current assets of discontinued operations

 

 
 
 

21,255

21,255

Total current assets
255,605

 
(9,169
)
 
 
 
246,436


246,436

Property, plant and equipment, net
23,204

 

 
 
 
23,204

(1,555
)
21,649

Goodwill
6,253

 

 
 
 
6,253


6,253

Other intangible assets, net
3,828

 

 
 
 
3,828


3,828

Deferred income taxes
6,169

 
318

 
e
 
6,487

(2,733
)
3,754

Deferred costs
8,683

 

 
 
 
8,683

(119
)
8,564

Other non-current assets
1,997

 

 
 
 
1,997

(13
)
1,984

Non-current assets of discontinued operations

 

 
 
 

4,420

4,420

Total assets
$
305,739

 
$
(8,851
)
 
 
 
$
296,888

$

$
296,888

Liabilities and stockholders' equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Accounts payable
$
91,737

 
$

 
 
 
$
91,737

$
(5,538
)
$
86,199

Accounts payable to NACCO Industries, Inc.
220

 

 
 
 
220


220

Revolving credit agreements
58,955

 

 
 
 
58,955

(7,450
)
51,505

Accrued compensation
12,091

 
387

 
f
 
12,478

(753
)
11,725

Accrued product returns
8,224

 

 
 
 
8,224


8,224

Other current liabilities
27,930

 
(241
)
 
a,d,e,f
 
27,689

(6,307
)
21,382

Current liabilities of discontinued operations

 

 
 
 

20,048

20,048

Total current liabilities
199,157

 
146

 
 
 
199,303


199,303

Revolving credit agreements
32,000

 

 
 
 
32,000

(2,000
)
30,000

Other long-term liabilities
15,485

 
911

 
e
 
16,396

(1,697
)
14,699

Non-current liabilities of discontinued operations

 

 
 
 

3,697

3,697

Total liabilities
246,642

 
1,057

 
 
 
247,699


247,699

Stockholders’ equity
 
 
 
 
 
 
 
 
 
Class A Common stock
95

 

 
 
 
95


95

Class B Common stock
44

 

 
 
 
44


44

Capital in excess of par value
53,342

 

 
 
 
53,342


53,342

Treasury stock
(2,334
)
 

 
 
 
(2,334
)

(2,334
)
Retained earnings
25,773

 
(10,127
)
 
a,d,e,f
 
15,646


15,646

Accumulated other comprehensive loss
(17,823
)
 
219

 
a,d
 
(17,604
)

(17,604
)
Total stockholders’ equity
59,097

 
(9,908
)
 
 
 
49,189


49,189

Total liabilities and stockholders' equity
$
305,739

 
$
(8,851
)
 
 
 
$
296,888

$

$
296,888




(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $1.3 million, a reduction to prepaid expenses and other current assets of $6.7 million, and an increase in other current liabilities of $1.4 million
(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.2 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $0.3 million, a decrease to other current liabilities of $0.4 million, and an increase to other long-term liabilities of $0.9 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to trade receivables of $1.1 million, an increase to accrued compensation of $0.4 million, and a decrease to other current liabilities of $1.4 million



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


 
For the Three Months Ended June 30, 2019
 
As Previously Reported
 
Restatement Impacts
 
Restatement References
 
As Restated
Recasting Impacts
As Restated and Recast
 
(In thousands)
Revenue
$
148,427

 
$
921

 
c
 
$
149,348

$
(18,283
)
$
131,065

Cost of sales
112,770

 

 
 
 
112,770

(10,212
)
102,558

Gross profit
35,657

 
921

 
 
 
36,578

(8,071
)
28,507

Selling, general and administrative expenses
35,617

 
594

 
a,c
 
36,211

(11,235
)
24,976

Amortization of intangible assets
346

 

 
 
 
346


346

Operating profit (loss)
(306
)
 
327

 
 
 
21

3,164

3,185

Interest expense, net
904

 

 
 
 
904

(115
)
789

Other expense (income), net
(126
)
 

 
 
 
(126
)
(6
)
(132
)
Income (loss) from continuing operations before income taxes
(1,084
)
 
327

 
 
 
(757
)
3,285

2,528

Income tax expense (benefit)
(140
)
 
1

 
 
 
(139
)
769

630

Net income (loss) from continuing operations
(944
)
 
326

 
 
 
(618
)
2,516

1,898

Loss from discontinued operations, net of tax

 

 
 
 

(2,516
)
(2,516
)
Net income (loss)
$
(944
)
 
$
326

 
 
 
$
(618
)
$

$
(618
)
 
 
 
 
 
 
 
 
 
 
Basic and diluted earnings (loss) per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(0.07
)
 
$
0.03

 
 
 
$
(0.04
)
$
0.18

$
0.14

Discontinued operations

 

 
 
 

(0.18
)
(0.18
)
Basic and diluted earnings (loss) per share
$
(0.07
)
 
$
0.03

 
 
 
$
(0.04
)
$

$
(0.04
)
 
 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
13,813

 

 
 
 
13,813


13,813

Diluted weighted average shares outstanding
13,813

 

 
 
 
13,813

13

13,826




(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to selling, general and administrative ("SG&A") expense of $0.3 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.9 million


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
For the Six Months Ended June 30, 2019
 
As Previously Reported
 
Restatement Impacts
 
Restatement References
 
As Restated
Recasting Impacts
As Restated and Recast
 
(In thousands)
Revenue
$
293,804

 
$
1,439

 
c,f
 
$
295,243

$
(37,536
)
$
257,707

Cost of sales
223,424

 
(65
)
 
f
 
223,359

(20,861
)
202,498

Gross profit
70,380

 
1,504

 
 
 
71,884

(16,675
)
55,209

Selling, general and administrative expenses
72,124

 
2,566

 
a,c,f
 
74,690

(23,468
)
51,222

Amortization of intangible assets
691

 

 
 
 
691


691

Operating profit (loss)
(2,435
)
 
(1,062
)
 
 
 
(3,497
)
6,793

3,296

Interest expense, net
1,650

 

 
 
 
1,650

(198
)
1,452

Other expense (income), net
(458
)
 
144

 
f
 
(314
)
(15
)
(329
)
Income (loss) from continuing operations before income taxes
(3,627
)
 
(1,206
)
 
 
 
(4,833
)
7,006

2,173

Income tax expense (benefit)
(922
)
 
92

 
e
 
(830
)
1,767

937

Net income (loss) from continuing operations
(2,705
)
 
(1,298
)
 
 
 
(4,003
)
5,239

1,236

Loss from discontinued operations, net of tax

 

 
 
 

(5,239
)
(5,239
)
Net loss
$
(2,705
)
 
$
(1,298
)
 
 
 
$
(4,003
)
$

$
(4,003
)
 
 
 
 
 
 
 
 
 
 
Basic and diluted earnings (loss) per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(0.20
)
 
$
(0.09
)
 
 
 
$
(0.29
)
$
0.38

$
0.09

Discontinued operations

 

 
 
 

(0.38
)
(0.38
)
Basic and diluted earnings (loss) per share
$
(0.20
)
 
$
(0.09
)
 
 
 
$
(0.29
)
$

$
(0.29
)
 
 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
13,800

 

 
 
 
13,800


13,800

Diluted weighted average shares outstanding
13,800

 

 
 
 
13,800

13

13,813



(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.1 million
(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $1.3 million
(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to income tax expense of $0.1 million
(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.1 million, a decrease to cost of sales of $0.1 million, an increase to SG&A of $0.2 million, and an increase to other expense of $0.1 million









CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 
For the Three Months Ended June 30, 2019
 
As Previously Reported
 
Restatement Impacts
 
As Restated
 
(In thousands)
Net income (loss)
$
(944
)
 
$
326

 
$
(618
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
Foreign currency translation adjustment
226

 
(113
)
 
113

Gain on long-term intra-entity foreign currency transactions
121

 

 
121

Cash flow hedging activity
(877
)
 

 
(877
)
Reclassification of hedging activities into earnings
144

 

 
144

Pension plan adjustment

 

 

Reclassification of pension adjustments into earnings
102

 

 
102

Total other comprehensive loss, net of tax
(284
)
 
(113
)
 
(397
)
Comprehensive income (loss)
$
(1,228
)
 
$
213

 
$
(1,015
)


See description of the net income (loss) impacts in the consolidated statement of operations for the three months ended June 30, 2019 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.
The increases to the reclassification of pension adjustments are from the correction of other immaterial errors.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 
For the Six Months Ended June 30, 2019
 
As Previously Reported
 
Restatement Impacts
 
As Restated
 
(In thousands)
Net income (loss)
$
(2,705
)
 
$
(1,298
)
 
$
(4,003
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
Foreign currency translation adjustment
556

 
(229
)
 
327

Gain on long-term intra-entity foreign currency transactions
136

 

 
136

Cash flow hedging activity
(1,443
)
 
144

 
(1,299
)
Reclassification of hedging activities into earnings
146

 

 
146

Pension plan adjustment

 

 

Reclassification of pension adjustments into earnings
92

 
94

 
186

Total other comprehensive loss, net of tax
(513
)
 
9

 
(504
)
Comprehensive income (loss)
$
(3,218
)
 
$
(1,289
)
 
$
(4,507
)


See description of the net income (loss) impacts in the consolidated statement of operations for the six months ended June 30, 2019 section above.
The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets and timing of recognition of customer pricing concessions categories.
The increase to cash flow hedging and the reclassification of pension adjustments is from the correction of other immaterial errors.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
June 30, 2019
 
As Previously Reported
 
Restatement Impacts
 
As Restated
 
Recasting Impacts
 
As Restated and Recast
Operating activities
 
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
(2,705
)

$
(1,298
)

$
(4,003
)

$
5,239


$
1,236

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:









Depreciation and amortization
2,153




2,153


(312
)

1,841

Deferred income taxes
1,800


57


1,857


43


1,900

Stock compensation expense
1,629




1,629




1,629

Other
117


(11
)

106


(29
)

77

Net changes in operating assets and liabilities:









Affiliate payable
(2,199
)

(1
)

(2,200
)

5


(2,195
)
Trade receivables
13,956


(128
)

13,828


(906
)

12,922

Inventory
4,375


210


4,585


(2,649
)

1,936

Other assets
(133
)

(214
)

(347
)

(1,255
)

(1,602
)
Accounts payable
(41,259
)

(9
)

(41,268
)

8,166


(33,102
)
Other liabilities
(19,841
)

1,412


(18,429
)

2,141


(16,288
)
Net cash provided by (used for) operating activities from continuing operations
(42,107
)

18


(42,089
)

10,443


(31,646
)
Investing activities









Expenditures for property, plant and equipment
(2,091
)



(2,091
)

119


(1,972
)
Other
36




36


(36
)


Net cash used for investing activities from continuing operations
(2,055
)



(2,055
)

83


(1,972
)
Financing activities









Net additions (reductions) to revolving credit agreements
44,302




44,302


(9,450
)

34,852

Purchase of treasury stock
(2,334
)



(2,334
)



(2,334
)
Cash dividends paid
(2,419
)



(2,419
)



(2,419
)
Net cash provided by (used for) financing activities from continuing operations
39,549




39,549


(9,450
)

30,099

Cash flows from discontinued operations














Net cash used for operating activities from discontinued operations






(10,443
)

(10,443
)
Net cash used for investing activities from discontinued operations






(83
)

(83
)
Net cash used for financing activities from discontinued operations






9,450


9,450

Cash provided by (used for) discontinued operations






(1,076
)

(1,076
)
Effect of exchange rate changes on cash
(608
)

(18
)

(626
)



(626
)
Cash and Cash Equivalents









(Decrease) increase for the year from continuing operations
(5,221
)



(5,221
)

1,076


(4,145
)
Increase (decrease) for the year from discontinued operations






(1,076
)

(1,076
)
Balance at the beginning of the year
6,352




6,352




6,352

Balance at the end of the period
$
1,131


$


$
1,131


$


$
1,131


See description of the net income (loss) impacts in the consolidated statement of operations for the six months ended June 30, 2019 section above.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
 
 
 
 
 
 
 
 
Class A common stock
Class B common stock
Capital in excess of par value
Treasury stock
Retained earnings
Accumulated other comprehensive income (loss)
Total stockholders' equity
As Previously Reported
 
 
 
 
 
 
 
  Balance, January 1, 2019
$
93

$
44

$
51,714

$

$
30,897

$
(17,310
)
$
65,438

   Net loss




(2,705
)

(2,705
)
Issuance of common stock, net of conversions
2


(1
)



1

Purchase of treasury stock



(2,334
)


(2,334
)
Share-based compensation expense


1,629




1,629

Cash dividends, $0.085 per share




(2,419
)

(2,419
)
Other comprehensive loss





(751
)
(751
)
Reclassification adjustment to net loss





238

238

Balance, June 30, 2019
$
95

$
44

$
53,342

$
(2,334
)
$
25,773

$
(17,823
)
$
59,097

Restatement Impacts
 
 
 
 
 
 
 
  Balance, January 1, 2019
$

$

$

$

$
(8,829
)
$
209

$
(8,620
)
   Net loss




(1,298
)

(1,298
)
Issuance of common stock, net of conversions







Purchase of treasury stock







Share-based compensation expense







Cash dividends, $0.085 per share







Other comprehensive loss





(85
)
(85
)
Reclassification adjustment to net loss





94

94

Balance, June 30, 2019
$

$

$

$

$
(10,127
)
$
218

$
(9,909
)
As Restated
 
 
 
 
 
 
 
  Balance, January 1, 2019
$
93

$
44

$
51,714

$

$
22,068

$
(17,101
)
$
56,818

   Net loss




(4,003
)

(4,003
)
Issuance of common stock, net of conversions
2


(1
)



1

Purchase of treasury stock



(2,334
)


(2,334
)
Share-based compensation expense


1,629




1,629

Cash dividends, $0.085 per share




(2,419
)

(2,419
)
Other comprehensive loss





(835
)
(835
)
Reclassification adjustment to net loss





332

332

Balance, June 30, 2019
$
95

$
44