HAMILTON BEACH BRANDS HOLDING CO, 10-Q filed on 10/30/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Oct. 26, 2018
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  
Entity Small Business false  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Document Type 10-Q  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Shares Outstanding Class A    
Entity Information [Line Items]    
Shares Outstanding (in shares)   9,249,846
Shares Outstanding Class B    
Entity Information [Line Items]    
Shares Outstanding (in shares)   4,462,920
v3.10.0.1
Unaudited Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
ASSETS      
Cash and cash equivalents $ 2,139 $ 10,906 $ 3,113
Accounts receivable, net 121,660 114,100 93,019
Inventories 183,831 134,744 162,891
Prepaid expenses and other 12,789 8,835 9,413
Total current assets 320,419 268,585 268,436
Property, plant and equipment, net 23,309 19,083 17,633
Goodwill 6,253 6,253 6,253
Other intangibles, net 4,864 5,900 6,245
Deferred income taxes 10,450 12,825 19,409
Deferred costs 10,306 10,466 8,494
Other non-current assets 3,322 3,121 2,879
Total assets 378,923 326,233 329,349
LIABILITIES AND EQUITY      
Accounts payable 143,955 143,012 136,689
Accounts payable to NACCO Industries, Inc. 2,480 9,189 9,996
Revolving credit agreements 69,883 31,346 35,462
Accrued payroll 16,575 17,302 14,791
Accrued cooperative advertising 8,950 11,418 8,900
Other current liabilities 27,790 18,679 18,252
Total current liabilities 269,633 230,946 224,090
Revolving credit agreements 30,000 20,000 45,000
Other long-term liabilities 24,840 28,879 27,960
Total liabilities 324,473 279,825 297,050
Stockholders' equity      
Preferred stock 0 0 0
Capital in excess of par value 51,366 47,773 47,773
Retained earnings 17,031 12,603 0
Accumulated other comprehensive loss (14,084) (14,104) (15,610)
Total stockholders' equity 54,450 46,408 32,299
Total liabilities and equity 378,923 326,233 329,349
Class A Common Stock      
Stockholders' equity      
Common stock 92 88 68
Class B Common Stock      
Stockholders' equity      
Common stock $ 45 $ 48 $ 68
v3.10.0.1
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
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) 0 0 0
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) 9,238,410 8,865,207 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) 4,465,416 4,808,225 6,836,716
v3.10.0.1
Unaudited Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
Revenues $ 196,901 $ 181,713 $ 501,475 $ 474,971
Cost of sales 146,550 133,586 372,478 353,436
Gross profit 50,351 48,127 128,997 121,535
Operating expenses        
Selling, general and administrative expenses 39,003 40,351 116,702 113,343
Amortization of intangible assets 345 346 1,036 1,036
Operating expenses 39,348 40,697 117,738 114,379
Operating profit 11,003 7,430 11,259 7,156
Other (income) expense        
Interest expense 1,059 423 2,529 1,300
Other, net, including interest income (276) 40 266 (939)
Other expense (income) 783 463 2,795 361
Income before income tax provision 10,220 6,967 8,464 6,795
Income tax provision 2,176 2,708 1,712 2,655
Net income $ 8,044 $ 4,259 $ 6,752 $ 4,140
Basic and diluted earnings per share (in usd per share) $ 0.59 $ 0.31 $ 0.49 $ 0.30
Basic weighted average shares outstanding (in shares) 13,704 13,673 13,694 13,673
Diluted weighted average shares outstanding (in shares) 13,713 13,673 13,697 13,673
Cash Dividends on Class A Common and Class B Common per share $ 0.085 $ 0 $ 0.255 $ 0
v3.10.0.1
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Comprehensive Income [Abstract]        
Net income $ 8,044 $ 4,259 $ 6,752 $ 4,140
Foreign currency translation adjustment 1,257 (18) 1,282 1,725
Loss on intra-entity foreign currency transactions, net of $66 tax expense and $29 tax benefit in the three and nine months ended September 30, 2018, respectively. (53) 0 (1,066) 0
Current period cash flow hedging activity, net of $124 tax benefit and $125 tax expense in the three and nine months ended September 30, 2018, respectively, and $21 and $390 tax benefit in the three and nine months ended September 30, 2017, respectively. (301) (72) 452 (931)
Reclassification of hedging activities into earnings, net of $41 tax expense and $36 tax benefit in the three and nine months ended September 30, 2018, respectively, and $13 and $42 tax expense in the three and nine months ended September 30, 2017, respectively. (102) (35) 105 (116)
Reclassification of pension adjustments into earnings, net of $37 and $125 tax benefit in the three and nine months ended September 30, 2018, respectively, and $53 and $155 tax benefit in the three and nine months ended September 30, 2017, respectively. 115 62 415 213
Total other comprehensive income (loss) 916 (63) 1,188 891
Comprehensive income $ 8,960 $ 4,196 $ 7,940 $ 5,031
v3.10.0.1
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Comprehensive Income [Abstract]        
Loss on intra-entity foreign currency transactions, tax expense (benefit) $ 66 $ 0 $ (29) $ 0
Current period cash flow hedging activity, tax expense (benefit) (124) (21) 125 (390)
Reclassification of hedging activities into earnings, tax expense (benefit) 41 13 (36) 42
Reclassification of pension and postretirement adjustments into earnings, tax expense (benefit) $ (37) $ (53) $ (125) $ (155)
v3.10.0.1
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Operating activities    
Net income $ 6,752 $ 4,140
Adjustments to reconcile from net income to net cash used for operating activities:    
Depreciation and amortization 3,775 3,709
Deferred income taxes 1,900 (1,905)
Other 448 (1,154)
Working capital changes:    
Affiliates payable (6,709) (513)
Accounts receivable (7,560) 11,053
Inventories (49,087) (34,476)
Other current assets (3,954) 149
Accounts payable 943 15,421
Other liabilities 6,912 (4,124)
Net cash used for operating activities (46,580) (7,700)
Investing activities    
Expenditures for property, plant and equipment (7,240) (4,366)
Other 7 21
Net cash used for investing activities (7,233) (4,345)
Financing activities    
Net additions to revolving credit agreements 48,538 41,747
Net cash provided by financing activities 45,046 3,747
Effect of exchange rate changes on cash 0 71
Cash and cash equivalents    
Decrease for the period (8,767) (8,227)
Balance at the beginning of the period 10,906 11,340
Balance at the end of the period 2,139 3,113
Cash dividends to NACCO Industries, Inc.    
Financing activities    
Cash dividends to NACCO Industries, Inc. 0 (38,000)
Common class A and B    
Financing activities    
Cash dividends to NACCO Industries, Inc. $ (3,492) $ 0
v3.10.0.1
Unaudited Condensed Consolidated Statements of Changes in Equity - USD ($)
$ in Thousands
Total
Capital in Excess of Par Value
Retained Earnings
Foreign Currency
Deferred Gain (Loss) on Cash Flow Hedging
Pension Plan Adjustment
Class A Common Stock
Class B Common Stock
Class B Common Stock
Class B Common Stock
Balance, beginning of period at Dec. 31, 2016 $ 65,268 $ 75,031 $ 6,738 $ (8,623) $ 616 $ (8,494) $ 0 $ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 4,140   4,140          
Cash dividends to NACCO Industries, Inc. (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    
Issuance of common stock, net of conversions 0 (136)         68 68
Balance, end of period at Sep. 30, 2017 32,299 47,773 0 (6,898) (431) (8,281) 68 68
Balance, beginning of period at Dec. 31, 2017 46,408 47,773 12,603 (7,934) 508 (6,678) 88 48
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 6,752   6,752          
Cash dividends to NACCO Industries, Inc. (3,492)   (3,492)          
Current period other comprehensive income (loss) 668     216 452      
Reclassification adjustment to net income (loss) 520       105 415    
Issuance of common stock, net of conversions 768 767         4 (3)
Share-based compensation expense 2,826 2,826            
Reclassification due to adoption of ASU 2018-02 0   1,168   118 (1,286)    
Balance, end of period at Sep. 30, 2018 $ 54,450 $ 51,366 $ 17,031 $ (7,718) $ 1,183 $ (7,549) $ 92 $ 45
v3.10.0.1
Unaudited Condensed Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Stockholders' Equity [Abstract]        
Cash Dividends on Class A Common and Class B Common per share $ 0.085 $ 0 $ 0.255 $ 0
v3.10.0.1
Nature of Operations and Basis of Presentation
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
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”).

Hamilton Beach Holding is an operating holding company for two separate businesses. The Company includes the required intercompany eliminations between the two separate businesses and certain federal tax attributes. Costs incurred as a stand-alone public entity are allocated to the HBB segment. The only material assets held by Hamilton Beach Holding are its investments in consolidated subsidiaries. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries. 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 segment.

Hamilton Beach Brands, Inc. (“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. The Kitchen Collection, LLC (“KC”) is a national specialty retailer of kitchenware in outlet and traditional malls throughout the United States.

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 for the three and nine months ended September 30, 2017 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

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, 2018 and the results of its operations, comprehensive income (loss), cash flows and changes in equity for the nine months ended September 30, 2018 and 2017 have been included. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

The balance sheet at December 31, 2017 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, 2018 are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2018. 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. For further information regarding seasonality of these businesses, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
v3.10.0.1
Recently Issued Accounting Standards
9 Months Ended
Sep. 30, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
Recently Issued Accounting Standards
Recently Issued Accounting Standards

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 private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard.

Accounting Standards Adopted

In May 2014, the FASB codified in ASC 606, "Revenue Recognition - Revenue from Contracts with Customers" ("ASC 606"), which supersedes ASC 605, "Revenue Recognition" ("ASC 605"), 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 Company has adopted the guidance for all contracts at the date of initial application of January 1, 2018. The amount and timing of revenue recognition is not materially impacted by the new standard, thus no cumulative adjustment was recognized upon adoption. See Note 3 for further discussion on the nature, amount and timing of revenue and cash flows arising from contracts with customers.

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)". The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act (the "Tax Act") of 2017 from accumulated other comprehensive income ("AOCI") into retained earnings.  ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company elected to early adopt ASU 2018-02 as of January 1, 2018. As a result of adopting this standard, the Company reclassified $1.2 million from AOCI to retained earnings.

Accounting Standards Not Yet Adopted

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 planning to adopt ASU 2016-02 for its fiscal year ending December 31, 2020 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.
v3.10.0.1
Revenues
9 Months Ended
Sep. 30, 2018
Revenue Recognition and Deferred Revenue [Abstract]  
Revenues
Revenues

The Company accounts for revenue in accordance with ASC 606, which was adopted on January 1, 2018, using the modified retrospective method. The amount and timing of revenue recognition was not impacted by the new standard and therefore no cumulative adjustment was recognized upon adoption. Results for the reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported in accordance with historical accounting methods under ASC 605. The classification of refund liabilities, which is now reported in Other current liabilities on the Consolidated Balance Sheet, was previously classified as an allowance against Accounts Receivable.
 
Revenues are 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. A description of our performance obligations for each segment is included below.

Hamilton Beach Brands

Product revenues - Product revenues consist of sales of small electric household and specialty housewares appliances to traditional brick and mortar and e-commerce retailers, distributors and directly to the end consumer as well as sales of commercial products for restaurants, bars and hotels. Transactions with these customers generally originate upon the receipt of a purchase order from the customer, which in some cases are governed by master sales agreements, specifying product(s) that the customer desires. Contracts for product revenues generally have an original duration of one year or less, and payment terms are generally standard and based on customer creditworthiness. Revenue from product sales is recognized at the point in time when control transfers to the customer, which is either when product is shipped from the Company's facility, or delivered to customers, depending on the shipping terms. The amount of consideration received and revenue recognized varies with changes in incentives, returns and consideration paid to customers for advertising arrangements. 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.

License revenues - From time to time, the Company enters into exclusive and non-exclusive licensing agreements which grant the right to use certain of the Company’s intellectual property (IP) in connection with designing, manufacturing, distributing, advertising, promoting and selling the licensees’ products during the term of the agreement. The IP that is licensed generally consists of trademarks, tradenames, trade dress, and/or logos (the “Licensed IP”). In exchange for granting the right to use the Licensed IP, the Company 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. The Company recognizes revenue at the later of when the subsequent sales occur or satisfying the performance obligation (over time).

Kitchen Collection

Product revenues - KC sells a variety of kitchenware products from a number of highly recognizable name brands to individual consumers. Products are predominantly sold through brick and mortar retail stores whereby customers come into KC stores, explore the assortment of merchandise available for sale, select various products that they desire to purchase, bring those products to the sales register and pay the cashier the agreed-upon price using either cash, check or credit card. Once the sale is complete, a receipt is generated and provided to the customer as proof of purchase. Therefore, the sales process is both originated and completed simultaneously at the point of sale. Revenue from product sales is recognized at the point in time when control transfers to the customer, which occurs when the products are scanned at the sales register. The amount of consideration received and revenue recognized varies with changes in returns.
 
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 year.  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 the right of return. However, based on historical experience, a portion of HBB and KC products sold are estimated to be returned due to reasons such as buyer remorse, duplicate gifts received, product failure and excess inventory stocked by the customer, which, subject to certain terms and conditions, the Company will agree to accept. The Company accounts for these product returns as variable consideration. Other forms of variable consideration include customer programs and incentive offerings, including special pricing agreements, price competition, promotions and other volume-based incentives. 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 following table presents the Company's revenues on a disaggregated basis for the three and nine months ending:
 
THREE MONTHS ENDED
 
NINE MONTHS ENDED
 
SEPTEMBER 30, 2018
 
SEPTEMBER 30, 2018
 
HBB
 
KC
 
Consolidated (1)
 
HBB
 
KC
 
Consolidated (1)
Type of good or service:
 
 
 
 
 
 
 
 
 
 
 
  Products
$
171,346

 
$
25,884

 
$
195,783

 
$
430,941

 
$
70,746

 
$
498,669

  Licensing
1,118

 

 
1,118

 
2,806

 

 
2,806

     Total revenues
$
172,464

 
$
25,884

 
$
196,901

 
$
433,747

 
$
70,746

 
$
501,475

(1) Includes the required intercompany eliminations between HBB and KC.
v3.10.0.1
Inventories
9 Months Ended
Sep. 30, 2018
Inventory Disclosure [Abstract]  
Inventories
Inventories

Inventories are summarized as follows:
 
SEPTEMBER 30
2018
 
DECEMBER 31
2017
 
SEPTEMBER 30
2017
Sourced inventories - HBB
$
155,744

 
$
111,493

 
$
133,018

Retail inventories - KC
28,087

 
23,251

 
29,873

 Total inventories
$
183,831

 
$
134,744

 
$
162,891

v3.10.0.1
Fair Value Disclosure
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
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, 2018
 
 
 
 
 
 
Assets:
 

 
 
 
 
 
 
Interest rate swap agreements
 
$
1,708

 
$

 
$
1,708

 
$

Foreign currency exchange contracts
 
29

 

 
29

 

 
 
$
1,737

 
$

 
$
1,737

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
310

 
$

 
$
310

 
$

 
 
$
310

 
$

 
$
310

 
$

 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
894

 
$

 
$
894

 
$

Foreign currency exchange contracts
 
245

 

 
245

 

 
 
$
1,139

 
$

 
$
1,139

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
93

 
$

 
$
93

 
$

 
 
$
93

 
$

 
$
93

 
$

 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
603

 
$

 
$
603

 
$

 
 
$
603

 
$

 
$
603

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
694

 
$

 
$
694

 
$

 
 
$
694

 
$

 
$
694

 
$



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.

At September 30, 2018, December 31, 2017, and September 30, 2017, there were no transfers into or out of Levels 1, 2 or 3.
v3.10.0.1
Contingencies
9 Months Ended
Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
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, 2018, December 31, 2017 and September 30, 2017, HBB had accrued undiscounted obligations of $8.6 million, $8.9 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 $5.2 million related to the environmental investigation and remediation at these sites.
v3.10.0.1
Business Segments
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
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. Financial information for each of Hamilton Beach Holding’s reportable segments is presented in the following table. The line “Eliminations” in the revenues section 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
 
NINE MONTHS ENDED
 
SEPTEMBER 30
 
SEPTEMBER 30
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
HBB
$
172,464

 
$
153,592

 
$
433,747

 
$
395,320

KC
25,884

 
28,644

 
70,746

 
81,177

Eliminations
(1,447
)
 
(523
)
 
(3,018
)
 
(1,526
)
Total
$
196,901

 
$
181,713

 
$
501,475

 
$
474,971

 
 
 
 
 
 
 
 
Operating profit (loss)
 

 
 

 
 

 
 

HBB (a)
$
13,446

 
$
9,001

 
$
21,838

 
$
14,947

KC
(2,407
)
 
(1,581
)
 
(10,545
)
 
(7,868
)
Eliminations
(36
)
 
10

 
(34
)
 
77

Total
$
11,003

 
$
7,430

 
$
11,259

 
$
7,156

 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
HBB (a)
$
10,174

 
$
5,245

 
$
14,943

 
$
9,129

KC
(1,938
)
 
(1,155
)
 
(8,476
)
 
(5,268
)
Eliminations
(192
)
 
169

 
285

 
279

Total
$
8,044

 
$
4,259

 
$
6,752

 
$
4,140



(a) HBB's operating profit and net income includes the recognition of one-time transaction-related expenses of $2.5 million related to the spin-off in the three and nine months ended September 30, 2017.
v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

On December 22, 2017, the U.S. federal government enacted the Tax Act, which significantly revises U.S. tax law. The Company’s effective income tax rate was 21.3% and 20.2% for the three and nine months ended September 30, 2018, respectively, compared with 38.9% and 39.1% for the three and nine months ended September 30, 2017, respectively, primarily due to a reduction in the U.S. federal corporate tax rate from 35 percent to 21 percent during 2018 and the effect of non-deductible spin-off related expenses recognized in the three and nine months ended September 30, 2017.
Subsequent to the enactment of the Tax Act, the SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”), which provides a measurement period of up to one year after the enactment date for companies to finalize the recognition of the income tax effects of the Tax Act. As a result of the Tax Act and pursuant to SAB 118, the Company recorded a provisional net tax charge of $4.7 million during the year ended December 31, 2017; however, there is still uncertainty as to the application of the Tax Act, in particular as it relates to state income taxes. No material adjustments were recorded to the provisional amounts during the three and nine months ending September 30, 2018.

The ultimate impact of the Tax Act may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions, additional regulatory guidance that may be issued, and the computation of state income taxes as there is uncertainty on conformity to the U.S. federal tax system following the Tax Act.
v3.10.0.1
Transfer of Financial Assets
9 Months Ended
Sep. 30, 2018
Transfers and Servicing [Abstract]  
Transfer of Financial Assets
Transfer of Financial Assets
The Company has entered into an arrangement with a financial institution to sell certain U.S. accounts receivable on a non-recourse basis. The Company utilizes this arrangement as an integral part of financing working capital.  Under the terms of the agreement, the Company 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 sales and result in a reduction in accounts receivable because the agreement transfers effective control over and risk related to the receivables to the buyer.  Under this arrangement, the Company derecognized $37.0 million and $107.2 million of accounts receivable during the three and nine months ending September 30, 2018, respectively, and $36.2 million and $98.6 million of accounts receivable during the three and nine months ending September 30, 2017, respectively. The loss incurred on sold receivables in the consolidated results of operations for the three and nine months ended September 30, 2018 and 2017 was not material. The Company does not carry any servicing assets or liabilities. Cash proceeds from this arrangement are reflected as operating activities in the Unaudited Condensed Consolidated Statements of Cash Flows.
v3.10.0.1
Nature of Operations and Basis of Presentation (Policies)
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations
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”).

Hamilton Beach Holding is an operating holding company for two separate businesses. The Company includes the required intercompany eliminations between the two separate businesses and certain federal tax attributes. Costs incurred as a stand-alone public entity are allocated to the HBB segment. The only material assets held by Hamilton Beach Holding are its investments in consolidated subsidiaries. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries. 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 segment.

Hamilton Beach Brands, Inc. (“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. The Kitchen Collection, LLC (“KC”) is a national specialty retailer of kitchenware in outlet and traditional malls throughout the United States.

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 for the three and nine months ended September 30, 2017 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
Basis of Presentation

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, 2018 and the results of its operations, comprehensive income (loss), cash flows and changes in equity for the nine months ended September 30, 2018 and 2017 have been included. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

The balance sheet at December 31, 2017 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, 2018 are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2018. 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 Adopted and Not Yet Adopted
Accounting Standards Adopted

In May 2014, the FASB codified in ASC 606, "Revenue Recognition - Revenue from Contracts with Customers" ("ASC 606"), which supersedes ASC 605, "Revenue Recognition" ("ASC 605"), 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 Company has adopted the guidance for all contracts at the date of initial application of January 1, 2018. The amount and timing of revenue recognition is not materially impacted by the new standard, thus no cumulative adjustment was recognized upon adoption. See Note 3 for further discussion on the nature, amount and timing of revenue and cash flows arising from contracts with customers.

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)". The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act (the "Tax Act") of 2017 from accumulated other comprehensive income ("AOCI") into retained earnings.  ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company elected to early adopt ASU 2018-02 as of January 1, 2018. As a result of adopting this standard, the Company reclassified $1.2 million from AOCI to retained earnings.

Accounting Standards Not Yet Adopted

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 planning to adopt ASU 2016-02 for its fiscal year ending December 31, 2020 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.
v3.10.0.1
Revenues (Tables)
9 Months Ended
Sep. 30, 2018
Revenue Recognition and Deferred Revenue [Abstract]  
Disaggregation of Revenue
The following table presents the Company's revenues on a disaggregated basis for the three and nine months ending:
 
THREE MONTHS ENDED
 
NINE MONTHS ENDED
 
SEPTEMBER 30, 2018
 
SEPTEMBER 30, 2018
 
HBB
 
KC
 
Consolidated (1)
 
HBB
 
KC
 
Consolidated (1)
Type of good or service:
 
 
 
 
 
 
 
 
 
 
 
  Products
$
171,346

 
$
25,884

 
$
195,783

 
$
430,941

 
$
70,746

 
$
498,669

  Licensing
1,118

 

 
1,118

 
2,806

 

 
2,806

     Total revenues
$
172,464

 
$
25,884

 
$
196,901

 
$
433,747

 
$
70,746

 
$
501,475

(1) Includes the required intercompany eliminations between HBB and KC.
v3.10.0.1
Inventories (Tables)
9 Months Ended
Sep. 30, 2018
Inventory Disclosure [Abstract]  
Schedule of Inventories
Inventories are summarized as follows:
 
SEPTEMBER 30
2018
 
DECEMBER 31
2017
 
SEPTEMBER 30
2017
Sourced inventories - HBB
$
155,744

 
$
111,493

 
$
133,018

Retail inventories - KC
28,087

 
23,251

 
29,873

 Total inventories
$
183,831

 
$
134,744

 
$
162,891

v3.10.0.1
Fair Value Disclosure (Tables)
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
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, 2018
 
 
 
 
 
 
Assets:
 

 
 
 
 
 
 
Interest rate swap agreements
 
$
1,708

 
$

 
$
1,708

 
$

Foreign currency exchange contracts
 
29

 

 
29

 

 
 
$
1,737

 
$

 
$
1,737

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
310

 
$

 
$
310

 
$

 
 
$
310

 
$

 
$
310

 
$

 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
894

 
$

 
$
894

 
$

Foreign currency exchange contracts
 
245

 

 
245

 

 
 
$
1,139

 
$

 
$
1,139

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
93

 
$

 
$
93

 
$

 
 
$
93

 
$

 
$
93

 
$

 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
603

 
$

 
$
603

 
$

 
 
$
603

 
$

 
$
603

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
694

 
$

 
$
694

 
$

 
 
$
694

 
$

 
$
694

 
$

v3.10.0.1
Business Segments (Tables)
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Segment Reporting Information
 
THREE MONTHS
 
NINE MONTHS ENDED
 
SEPTEMBER 30
 
SEPTEMBER 30
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
HBB
$
172,464

 
$
153,592

 
$
433,747

 
$
395,320

KC
25,884

 
28,644

 
70,746

 
81,177

Eliminations
(1,447
)
 
(523
)
 
(3,018
)
 
(1,526
)
Total
$
196,901

 
$
181,713

 
$
501,475

 
$
474,971

 
 
 
 
 
 
 
 
Operating profit (loss)
 

 
 

 
 

 
 

HBB (a)
$
13,446

 
$
9,001

 
$
21,838

 
$
14,947

KC
(2,407
)
 
(1,581
)
 
(10,545
)
 
(7,868
)
Eliminations
(36
)
 
10

 
(34
)
 
77

Total
$
11,003

 
$
7,430

 
$
11,259

 
$
7,156

 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
HBB (a)
$
10,174

 
$
5,245

 
$
14,943

 
$
9,129

KC
(1,938
)
 
(1,155
)
 
(8,476
)
 
(5,268
)
Eliminations
(192
)
 
169

 
285

 
279

Total
$
8,044

 
$
4,259

 
$
6,752

 
$
4,140



(a) HBB's operating profit and net income includes the recognition of one-time transaction-related expenses of $2.5 million related to the spin-off in the three and nine months ended September 30, 2017.
v3.10.0.1
Nature of Operations and Basis of Presentation Nature of Operations and Basis of Presentation (Details)
Sep. 29, 2017
shares
Class A Common Stock  
Class of Stock [Line Items]  
Shares of common stock issued in spin-off 1
Class B Common Stock  
Class of Stock [Line Items]  
Shares of common stock issued in spin-off 1
v3.10.0.1
Recently Issued Accounting Standards (Details)
$ in Millions
9 Months Ended
Sep. 30, 2018
USD ($)
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
Amount reclassified from AOCI to retained earnings $ 1.2
v3.10.0.1
Revenues (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Disaggregation of Revenue [Line Items]        
Revenues $ 196,901 $ 181,713 $ 501,475 $ 474,971
Products        
Disaggregation of Revenue [Line Items]        
Revenues 195,783   498,669  
Licensing        
Disaggregation of Revenue [Line Items]        
Revenues 1,118   2,806  
HBB        
Disaggregation of Revenue [Line Items]        
Revenues 172,464   433,747  
HBB | Products        
Disaggregation of Revenue [Line Items]        
Revenues 171,346   430,941  
HBB | Licensing        
Disaggregation of Revenue [Line Items]        
Revenues 1,118   2,806  
KC        
Disaggregation of Revenue [Line Items]        
Revenues 25,884   70,746  
KC | Products        
Disaggregation of Revenue [Line Items]        
Revenues 25,884   70,746  
KC | Licensing        
Disaggregation of Revenue [Line Items]        
Revenues 0   0  
Operating segments | HBB        
Disaggregation of Revenue [Line Items]        
Revenues 172,464 153,592 433,747 395,320
Operating segments | KC        
Disaggregation of Revenue [Line Items]        
Revenues $ 25,884 $ 28,644 $ 70,746 $ 81,177
v3.10.0.1
Inventories (Details) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
Inventory Disclosure [Abstract]      
Sourced inventories - HBB $ 155,744 $ 111,493 $ 133,018
Retail inventories - KC 28,087 23,251 29,873
Total inventories $ 183,831 $ 134,744 $ 162,891
v3.10.0.1
Fair Value Disclosure (Details) - Fair value measurements, recurring - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
Assets:      
Interest rate swap agreements $ 1,708 $ 894 $ 603
Foreign currency exchange contracts 29 245  
Assets at fair value 1,737 1,139 603
Liabilities:      
Foreign currency exchange contracts 310 93 694
Liabilities at fair value 310 93 694
Level 1      
Assets:      
Interest rate swap agreements 0 0 0
Foreign currency exchange contracts 0 0  
Assets at fair value 0 0 0
Liabilities:      
Foreign currency exchange contracts 0 0 0
Liabilities at fair value 0 0 0
Level 2      
Assets:      
Interest rate swap agreements 1,708 894 603
Foreign currency exchange contracts 29 245  
Assets at fair value 1,737 1,139 603
Liabilities:      
Foreign currency exchange contracts 310 93 694
Liabilities at fair value 310 93 694
Level 3      
Assets:      
Interest rate swap agreements 0 0 0
Foreign currency exchange contracts 0 0  
Assets at fair value 0 0 0
Liabilities:      
Foreign currency exchange contracts 0 0 0
Liabilities at fair value $ 0 $ 0 $ 0
v3.10.0.1
Contingencies (Details) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
Loss Contingencies [Line Items]      
Accrual for environmental investigation and remediation activities $ 8,600,000 $ 8,900,000 $ 9,000,000
Minimum      
Loss Contingencies [Line Items]      
Estimate of possible loss 0    
Maximum      
Loss Contingencies [Line Items]      
Estimate of possible loss $ 5,200,000    
v3.10.0.1
Business Segments (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Segment Reporting Information [Line Items]        
Revenues $ 196,901 $ 181,713 $ 501,475 $ 474,971
Operating profit (loss) 11,003 7,430 11,259 7,156
Net income (loss) 8,044 4,259 6,752 4,140
HBB        
Segment Reporting Information [Line Items]        
Revenues 172,464   433,747  
KC        
Segment Reporting Information [Line Items]        
Revenues 25,884   70,746  
Operating segments | HBB        
Segment Reporting Information [Line Items]        
Revenues 172,464 153,592 433,747 395,320
Operating profit (loss) 13,446 9,001 21,838 14,947
Net income (loss) 10,174 5,245 14,943 9,129
Operating segments | KC        
Segment Reporting Information [Line Items]        
Revenues 25,884 28,644 70,746 81,177
Operating profit (loss) (2,407) (1,581) (10,545) (7,868)
Net income (loss) (1,938) (1,155) (8,476) (5,268)
Eliminations        
Segment Reporting Information [Line Items]        
Revenues (1,447) (523) (3,018) (1,526)
Operating profit (loss) (36) 10 (34) 77
Net income (loss) $ (192) 169 $ 285 279
Spinoff | Operating segments | HBB        
Segment Reporting Information [Line Items]        
Expenses related to the spin-off   $ 2,500   $ 2,500
v3.10.0.1
Income Taxes (Details) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Income Tax Disclosure [Abstract]          
Effective income tax rate 21.30% 38.90% 20.20% 39.10%  
Provisional net tax charge (benefit)         $ 4.7
v3.10.0.1
Transfer of Financial Assets (Details) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Transfers and Servicing [Abstract]        
Accounts receivable derecognized $ 37.0 $ 36.2 $ 107.2 $ 98.6