HAMILTON BEACH BRANDS HOLDING CO, 10-Q filed on 7/31/2019
Quarterly Report
v3.19.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Jul. 26, 2019
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 Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Current Reporting Status Yes  
Entity Shell Company false  
Shares Outstanding Class A    
Entity Information [Line Items]    
Shares Outstanding (in shares)   9,298,337
Shares Outstanding Class B    
Entity Information [Line Items]    
Shares Outstanding (in shares)   4,380,649
v3.19.2
Unaudited Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Jun. 30, 2018
ASSETS      
Cash and cash equivalents $ 1,131 $ 6,352 $ 1,962
Trade receivables, net 89,579 102,592 77,623
Inventories 140,817 144,691 165,237
Prepaid expenses and other current assets 24,078 24,514 20,996
Total Current assets 255,605 278,149 265,818
Property, plant and equipment, net 23,204 22,630 21,839
Goodwill 6,253 6,253 6,253
Other intangibles, net 3,828 4,519 5,209
Deferred income taxes 6,169 8,163 10,894
Deferred costs 8,683 8,012 9,973
Other non-current assets 1,997 2,701 3,282
Total Assets 305,739 330,427 323,268
LIABILITIES AND EQUITY      
Accounts payable 91,737 132,968 103,461
Accounts payable to NACCO Industries, Inc. 220 2,419 2,769
Revolving credit agreements 58,955 11,624 75,476
Accrued payroll 12,091 17,023 12,531
Accrued product returns 8,224 10,941 9,648
Accrued cooperative advertising 7,962 10,314 4,532
Other current liabilities 19,968 21,612 14,567
Total Current liabilities 199,157 206,901 222,984
Revolving credit agreements 32,000 35,000 30,000
Other long-term liabilities 15,485 23,088 24,274
Total Liabilities 246,642 264,989 277,258
Stockholders' equity      
Preferred stock 0 0 0
Capital in excess of par value 53,342 51,714 50,721
Treasury stock, at cost; 129,687 shares as of June 30,2019, no shares as of December 31, 2018 and June 30, 2018, respectively   0 0
Retained earnings 25,773 30,897 10,152
Accumulated other comprehensive loss (17,823) (17,310) (15,000)
Total Stockholders' equity 59,097 65,438 46,010
Total Liabilities and Stockholders' equity 305,739 330,427 323,268
Class A Common Stock      
Stockholders' equity      
Common stock 95 93 92
Class B Common Stock      
Stockholders' equity      
Common stock $ 44 $ 44 $ 45
v3.19.2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2019
Dec. 31, 2018
Jun. 30, 2018
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 issued (in shares) 0.0 0.0 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 issued (in shares) 9,469,372 9,291,122 9,218,372
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 issued (in shares) 4,382,843 4,421,644 4,476,796
Treasury stock, shares outstanding (in shares) 129,687,000,000 0 0
v3.19.2
Unaudited Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Revenue $ 148,427 $ 157,941 $ 293,804 $ 304,574
Cost of sales 112,770 117,088 223,424 225,928
Gross profit 35,657 40,853 70,380 78,646
Selling, general and administrative expenses 35,617 40,123 72,124 78,117
Amortization of intangible assets 346 346 691 691
Operating (loss) profit (306) 384 (2,435) (162)
Interest expense, net 904 889 1,650 1,421
Other (income) expense, net (126) 687 (458) 173
Loss before income taxes (1,084) (1,192) (3,627) (1,756)
Income tax benefit (140) (318) (922) (464)
Net loss $ (944) $ (874) $ (2,705) $ (1,292)
Basic and diluted loss per share (in usd per share) $ (0.07) $ (0.06) $ (0.20) $ (0.09)
Basic and diluted weighted average shares outstanding (in shares) 13,813 13,695 13,800 13,689
v3.19.2
Unaudited Condensed Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement of Comprehensive Income [Abstract]        
Net loss $ (944) $ (874) $ (2,705) $ (1,292)
Foreign currency translation adjustment 226 (892) 556 25
Gain (loss) on long-term intra-entity foreign currency transactions, net of tax of $13 and $30 in the three and six months ended June 30, 2019, respectively, and $94 in the three and six months ended June 30, 2018. 121 (1,013) 136 (1,013)
Current period cash flow hedging activity, net of tax of $321 and $528 in the three and six months ended June 30, 2019, respectively, and $160 and $250 in the three and six months ended June 30, 2018, respectively. (877) 464 (1,443) 753
Reclassification of hedging activities into earnings, net of tax of $58 and $57 in the three and six months ended June 30, 2019, respectively, and $13 and $77 in the three and six months ended June 30, 2018, respectively. 144 41 146 207
Reclassification of pension adjustments into earnings, net of tax of $40 and $79 in the three and six months ended June 30, 2019, respectively, and $46 and $88 in the three and six months ended June 30, 2018, respectively. 102 142 92 300
Total other comprehensive (loss) income (284) (1,258) (513) 272
Comprehensive loss $ (1,228) $ (2,132) $ (3,218) $ (1,020)
v3.19.2
Unaudited Condensed Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement of Comprehensive Income [Abstract]        
Loss on intra-entity foreign currency transactions, tax expense (benefit) $ 13 $ 30 $ (94) $ (94)
Current period cash flow hedging activity, tax expense (benefit) (321) (528) 160 250
Reclassification of hedging activities into earnings, tax expense (benefit) (58) (57) (13) (77)
Reclassification of pension and postretirement adjustments into earnings, tax expense (benefit) $ (40) $ (79) $ (48) $ (88)
v3.19.2
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Operating Activities    
Net loss $ (2,705) $ (1,292)
Adjustments to reconcile net loss to net cash used for operating activities:    
Depreciation and amortization 2,153 2,462
Deferred income taxes 1,800 1,795
Share-based compensation expense 1,629 2,625
Other 117 (4,464)
Net changes in operating assets and liabilities:    
Affiliates payable (2,199) (6,420)
Trade receivables 13,956 31,071
Inventories 4,375 (30,493)
Other assets (133) (6,755)
Accounts payable (41,259) (39,551)
Other liabilities (19,841) (5,152)
Net cash used for operating activities (42,107) (56,174)
Investing Activities    
Expenditures for property, plant and equipment (2,091) (4,555)
Other 36 6
Net cash used for investing activities (2,055) (4,549)
Financing Activities    
Net additions to revolving credit agreements 44,302 54,130
Cash dividends on Class A Common and Class B Common (2,419) (2,327)
Purchase of treasury stock (2,334) 0
Net cash provided by financing activities 39,549 51,803
Effect of exchange rate changes on cash (608) (24)
Cash and Cash equivalents    
Decrease for the period (5,221) (8,944)
Balance at the beginning of the period 6,352 10,906
Balance at the end of the period $ 1,131 $ 1,962
v3.19.2
Unaudited Condensed Consolidated Statements of Changes in Equity - USD ($)
$ in Thousands
Total
Capital in Excess of Par Value
Treasury Stock
Retained Earnings
Foreign Currency
Deferred Gain (Loss) on Cash Flow Hedging
Pension Plan Adjustment
Class A Common Stock
Class A Common Stock
Common Stock
Class B Common Stock
Class B Common Stock
Common Stock
Balance, beginning of period at Dec. 31, 2017 $ 46,408 $ 47,773 $ 0 $ 12,603 $ (7,934) $ 508 $ (6,678)   $ 88   $ 48
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net loss (418)     (418)              
Issuance of common stock, net of conversions [1],[2] 324 323             4   (3)
Share-based compensation expense 955 955                  
Cash dividends on Class A Common and Class B Common (1,162)     (1,162)              
Current period other comprehensive income 1,206       917 289          
Reclassification adjustment to net loss 324         166 158        
Balance, end of period at Mar. 31, 2018 47,637 49,051 0 12,191 (7,017) 1,081 (7,806)   92   45
Balance, beginning of period at Dec. 31, 2017 46,408 47,773 0 12,603 (7,934) 508 (6,678)   88   48
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net loss (1,292)                    
Balance, end of period at Jun. 30, 2018 46,010 50,721 0 10,152 (8,922) 1,586 (7,664)   92   45
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Class B Common converted to Class A Common (in shares)                   331,000  
Class A Common shares issued (in shares)               22,000      
Balance, beginning of period at Mar. 31, 2018 47,637 49,051 0 12,191 (7,017) 1,081 (7,806)   92   45
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net loss (874)     (874)              
Issuance of common stock, net of conversions [1],[2] 198 198                  
Share-based compensation expense 1,472 1,472                  
Cash dividends on Class A Common and Class B Common (1,165)     (1,165)              
Current period other comprehensive income (1,441)       (1,905) 464          
Reclassification adjustment to net loss 183         41 142        
Balance, end of period at Jun. 30, 2018 46,010 50,721 0 10,152 (8,922) 1,586 (7,664)   92   45
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Class B Common converted to Class A Common (in shares)                   45,000  
Class A Common shares issued (in shares)               9,000      
Balance, beginning of period at Dec. 31, 2018 65,438 51,714 0 30,897 (9,099) 1,023 (9,234)   93   44
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net loss (1,761)     (1,761)              
Issuance of common stock, net of conversions 1 [1],[2] (1)             2 [1],[2]    
Share-based compensation expense 807 807                  
Cash dividends on Class A Common and Class B Common (1,177)     (1,177)              
Current period other comprehensive income (221)       345 (566)          
Reclassification adjustment to net loss (8)         2 (10)        
Balance, end of period at Mar. 31, 2019 63,079 52,520 0 27,959 (8,754) 459 (9,244)   95   44
Balance, beginning of period at Dec. 31, 2018 65,438 51,714 0 30,897 (9,099) 1,023 (9,234)   93   44
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net loss (2,705)                    
Balance, end of period at Jun. 30, 2019 59,097 53,342 (2,334) 25,773 (8,407) (274) (9,142)   95   44
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Class B Common converted to Class A Common (in shares)                   39,000  
Class A Common shares issued (in shares)               139,000      
Balance, beginning of period at Mar. 31, 2019 63,079 52,520 0 27,959 (8,754) 459 (9,244)   95   44
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net loss (944)     (944)              
Share-based compensation expense 822 822                  
Cash dividends on Class A Common and Class B Common (1,242)     (1,242)              
Current period other comprehensive income (530)       347 (877)          
Reclassification adjustment to net loss 246         144 102        
Purchase of treasury stock (2,334)   (2,334)                
Balance, end of period at Jun. 30, 2019 $ 59,097 $ 53,342 $ (2,334) $ 25,773 $ (8,407) $ (274) $ (9,142)   $ 95   $ 44
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Class B Common converted to Class A Common (in shares)                   2,000  
Class A Common shares issued (in shares)               10,000      
[1] (1) Class B Common converted to Class A Common were 2 and 39 shares during the three and six months ending June 30, 2019, respectively, and 45 and 331 shares during the three and six months ending June 30, 2018, respectively.
[2] 2) The Company issued Class A Common shares of 10 and 139 during the three and six months ending June 30, 2019, respectively, and 9 and 22 during the three and six months ending June 30, 2018, respectively.
v3.19.2
Unaudited Condensed Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares
3 Months Ended
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2018
Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]        
Cash Dividends on Class A Common and Class B Common per share (in usd per share) $ 0.09 $ 0.085 $ 0.085 $ 0.085
v3.19.2
Nature of Operations and Basis of Presentation
6 Months Ended
Jun. 30, 2019
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 and its wholly-owned subsidiaries ("Hamilton Beach Holding” or the “Company”). The Company manages its subsidiaries primarily by reportable segment, which are Hamilton Beach Brands, Inc. (“HBB”) and The Kitchen Collection, LLC ("KC"). The Company includes the required intercompany eliminations between its reportable segments. Costs incurred as a stand-alone public entity are allocated to the HBB segment. The only material assets held by Hamilton Beach Brands Holding Company are its investments in consolidated subsidiaries. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries.

HBB is a leading designer, marketer and distributor of branded, small electric household and specialty housewares appliances, as well as commercial products for restaurants, bars and hotels. KC is a national specialty retailer of kitchenware primarily in outlet malls throughout the United States ("U.S.").  

Prior period interest income amounts have been reclassified from other (income) expense, net to interest expense, net and prior period non-trade customer receivable amounts have been reclassified from trade receivables, net to prepaid expenses and other current assets to conform to the current period 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 Company's consolidated balance sheets as of June 30, 2019 and 2018, the statements of operations, comprehensive loss, and changes in equity for the three and six months ended June 30, 2019 and 2018, and the statements of cash flows for the six months ended June 30, 2019 and 2018 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 for the year ended December 31, 2018.

The balance sheet at December 31, 2018 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 six months ended June 30, 2019 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 occurs in the second half of the calendar year when sales of our products to retailers and consumers increase significantly for the fall holiday-selling season.

These quarterly financial statements reflect the significant accounting policies that are described in Note 2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2018. The following new accounting policy is reflected in these quarterly financial statements as a result of the share repurchases made during the second quarter of 2019:

Treasury Stock

The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a reduction to equity.
v3.19.2
Recently Issued Accounting Standards
6 Months Ended
Jun. 30, 2019
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
Recently Issued Accounting Standards
Recently Issued Accounting Standards

Accounting Standards Adopted

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the requirements in U.S. GAAP related to the income statement presentation of the components of net periodic benefit cost for an entity's sponsored defined benefit pension and other post-retirement plans. The Company adopted this guidance on January 1, 2019. The change in presentation of the components of net periodic pension cost was applied retrospectively which resulted in $0.2 million and $0.4 million of net periodic pension income for the three and six months ended June 30, 2018, respectively, being reclassified from selling, general and administrative expenses to other (income) expense, net.

Accounting Standards Not Yet Adopted

The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public or nonpublic entities, the Company can adopt the new or revised standard at the time nonpublic entities adopt the new or revised standard.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and liabilities for the rights and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, 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 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.

In June 2016, the FASB issued ASU 2016-03, “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, 2020, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, 2021 and is currently evaluating to what extent ASU 2016-03 will affect the Company's financial position, results of operations, cash flows and related disclosures.
v3.19.2
Revenue
6 Months Ended
Jun. 30, 2019
Revenue Recognition and Deferred Revenue [Abstract]  
Revenue
Revenue

Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. A description of the performance obligations for each segment is as follows:

Hamilton Beach Brands

Product revenue - Product revenue 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 revenue 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.

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, patents, 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 revenue - KC sells a variety of kitchenware products from a number of highly recognizable name brands to individual consumers. Products are 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 to three years.  There is no guarantee to the customer as HBB may repair or replace, at its option, those products returned under warranty.  Accordingly, the Company determined that no separate performance obligation exists.

The following table presents the Company's revenue on a disaggregated basis for the three and six months ending:
 
THREE MONTHS ENDED JUNE 30
 
2019
 
2018
 
HBB
 
KC
 
Consolidated (1)
 
HBB
 
KC
 
Consolidated (1)
Type of good or service:
 
 
 
 
 
 
 
 
 
 
 
  Products
$
129,606

 
$
18,283

 
$
147.182

 
$
135,014

 
$
22,762

 
$
157,086

  Licensing
1,245

 

 
1,245

 
855

 

 
855

     Total revenue
$
130,851

 
$
18,283

 
$
148,427

 
$
135,869

 
$
22,762

 
$
157,941

 
 
 
 
 
 
 
 
 
 
 
 
 
SIX MONTHS ENDED JUNE 30
 
2019
 
2018
 
HBB
 
KC
 
Consolidated (1)
 
HBB
 
KC
 
Consolidated (1)
Type of good or service:
 
 
 
 
 
 
 
 
 
 
 
  Products
$
255,253

 
$
37,536

 
$
291,478

 
$
259,595

 
$
44,862

 
$
302,886

  Licensing
2,326

 

 
2,326

 
1,688

 

 
1,688

     Total revenue
$
257,579

 
$
37,536

 
$
293,804

 
$
261,283

 
$
44,862

 
$
304,574

(1) Includes the required intercompany eliminations between HBB and KC.
v3.19.2
Inventories
6 Months Ended
Jun. 30, 2019
Inventory Disclosure [Abstract]  
Inventories
Inventories

Inventories are summarized as follows:
 
JUNE 30
2019
 
DECEMBER 31
2018
 
JUNE 30
2018
Sourced inventories - HBB
$
121,472

 
$
122,697

 
$
138,721

Retail inventories - KC
19,345

 
21,994

 
26,516

 Total inventories
$
140,817

 
$
144,691

 
$
165,237

v3.19.2
Fair Value Disclosure
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Disclosure
Fair Value Disclosure

The following table presents the Company's assets and liabilities accounted for at fair value on a recurring basis:
Description
 
Balance Sheet Location
 
JUNE 30
2019
 
DECEMBER 31
2018
 
JUNE 30
2018
Assets:
 
 
 

 
 
 
 
Interest rate swap agreements
 
 
 

 

 
 
Current
 
Prepaid expenses and other current assets
 
$
69

 
$
349

 
$
383

Long-term
 
Other non-current assets
 

 
710

 
1,210

Foreign currency exchange contracts
 
 
 

 

 
 
Current
 
Prepaid expenses and other current assets
 

 
231

 
474

 
 
 
 
$
69

 
$
1,290

 
$
2,067

Liabilities:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
 
 
 
 
 
 
 
Long-term
 
Other long-term liabilities
 
$
51

 
$

 
$

Foreign currency exchange contracts
 
 
 

 

 
 
Current
 
Other current liabilities
 
357

 
87

 

 
 
 
 
$
408

 
$
87

 
$



The Company measures its derivatives at fair value using significant observable inputs, which is Level 2 as defined in the fair value hierarchy. The Company uses a present value technique that incorporates the LIBOR swap curve, foreign currency spot rates and foreign currency forward rates to value its derivatives, including its interest rate swap agreements and foreign currency exchange contracts, and also incorporates the effect of its subsidiary and counterparty credit risk into the valuation.

During the periods ended June 30, 2019, December 31, 2018 and June 30, 2018, there were no transfers into or out of Levels 1, 2 or 3.
v3.19.2
Contingencies
6 Months Ended
Jun. 30, 2019
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.

HBB is a defendant in a legal proceeding in which the plaintiff alleges that certain HBB products infringe the plaintiff’s patents. On May 3, 2019, the jury returned its verdict finding that the Company had infringed certain patents of the plaintiff and, as a result, awarded the plaintiff damages in the amount of $3.2 million. Accordingly, the Company recorded $3.2 million expense in selling, general and administrative expenses in the second quarter of 2019 for the contingent loss. The Company believes that its products do not infringe on the plaintiff’s patents and is evaluating post-trial motions and appeal of any adverse judgment.


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 June 30, 2019, December 31, 2018, and June 30, 2018, HBB had accrued undiscounted obligations of $4.6 million, $8.2 million, and $8.5 million respectively, for environmental investigation and remediation activities. The reduction in the amount accrued at June 30, 2019 compared to December 31, 2018 is the result of a change in the expected type and extent of investigation and remediation activities associated with one of the sites, due to additional testing and assessment performed with respect to that site. In addition, HBB estimates that it is reasonably possible that it may incur additional expenses in the range of zero to $3.9 million related to the environmental investigation and remediation at these sites.
v3.19.2
Business Segments
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
Business Segments
Business Segments

As described in Note 1, the Company's reportable segments include HBB and KC. The accounting policies of the reportable segments are the same as the Company described in Note 2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2018. The line “Eliminations” in the revenue section eliminates revenue from HBB sales to KC. Intercompany revenue is based on current market prices of similar third-party transactions.
 
THREE MONTHS ENDED
JUNE 30
 
SIX MONTHS ENDED
JUNE 30
 
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
HBB
$
130,851

 
$
135,869

 
$
257,579

 
$
261,283

KC
18,283

 
22,762

 
37,536

 
44,862

Eliminations
(707
)
 
(690
)
 
(1,311
)
 
(1,571
)
Total
$
148,427

 
$
157,941

 
$
293,804

 
$
304,574

 
 
 
 
 
 
 
 
Operating profit (loss)
 

 
 
 
 

 
 
HBB
$
2,974

 
$
4,190

 
$
4,614

 
$
7,974

KC
(3,220
)
 
(3,834
)
 
(6,920
)
 
(8,138
)
Eliminations
(60
)
 
28

 
(129
)
 
2

Total
$
(306
)
 
$
384

 
$
(2,435
)
 
$
(162
)
v3.19.2
Transfer of Financial Assets
6 Months Ended
Jun. 30, 2019
Transfers and Servicing [Abstract]  
Transfer of Financial Assets
The Company has entered into an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis. The Company utilizes this arrangement as an integral part of financing working capital.  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 sold receivables which result in a reduction in trade receivables because the agreement transfers effective control over and risk related to the receivables to the buyer. Under this arrangement, the Company derecognized $33.4 million and $67.9 million of trade receivables during the three and six months ending June 30, 2019, respectively, $38.8 million and $70.2 million of trade receivables during the three and six months ending June 30, 2018, respectively, and $165.4 million during the year ending December 31, 2018. The loss incurred on sold receivables in the consolidated results of operations for the three and six months ended June 30, 2019 and 2018 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.
v3.19.2
Nature of Operations and Basis of Presentation (Policies)
6 Months Ended
Jun. 30, 2019
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 and its wholly-owned subsidiaries ("Hamilton Beach Holding” or the “Company”). The Company manages its subsidiaries primarily by reportable segment, which are Hamilton Beach Brands, Inc. (“HBB”) and The Kitchen Collection, LLC ("KC"). The Company includes the required intercompany eliminations between its reportable segments. Costs incurred as a stand-alone public entity are allocated to the HBB segment. The only material assets held by Hamilton Beach Brands Holding Company are its investments in consolidated subsidiaries. Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiaries.

HBB is a leading designer, marketer and distributor of branded, small electric household and specialty housewares appliances, as well as commercial products for restaurants, bars and hotels. KC is a national specialty retailer of kitchenware primarily in outlet malls throughout the United States ("U.S.").  

Prior period interest income amounts have been reclassified from other (income) expense, net to interest expense, net and prior period non-trade customer receivable amounts have been reclassified from trade receivables, net to prepaid expenses and other current assets to conform to the current period presentation.

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 Company's consolidated balance sheets as of June 30, 2019 and 2018, the statements of operations, comprehensive loss, and changes in equity for the three and six months ended June 30, 2019 and 2018, and the statements of cash flows for the six months ended June 30, 2019 and 2018 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 for the year ended December 31, 2018.

The balance sheet at December 31, 2018 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 six months ended June 30, 2019 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 occurs in the second half of the calendar year when sales of our products to retailers and consumers increase significantly for the fall holiday-selling season.
Accounting Standards Adopted and Not Yet Adopted
Accounting Standards Adopted

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)," which amends the requirements in U.S. GAAP related to the income statement presentation of the components of net periodic benefit cost for an entity's sponsored defined benefit pension and other post-retirement plans. The Company adopted this guidance on January 1, 2019. The change in presentation of the components of net periodic pension cost was applied retrospectively which resulted in $0.2 million and $0.4 million of net periodic pension income for the three and six months ended June 30, 2018, respectively, being reclassified from selling, general and administrative expenses to other (income) expense, net.

Accounting Standards Not Yet Adopted

The Company is an emerging growth company and has elected not to opt out of the extended transition period for complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public or nonpublic entities, the Company can adopt the new or revised standard at the time nonpublic entities adopt the new or revised standard.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and liabilities for the rights and obligations created by leased assets. For nonpublic entities, the amendments are effective for fiscal years beginning after December 15, 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 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.

In June 2016, the FASB issued ASU 2016-03, “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, 2020, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is planning to adopt ASU 2016-03 for its year ending December 31, 2021 and is currently evaluating to what extent ASU 2016-03 will affect the Company's financial position, results of operations, cash flows and related disclosures.
v3.19.2
Revenue (Tables)
6 Months Ended
Jun. 30, 2019
Revenue Recognition and Deferred Revenue [Abstract]  
Disaggregation of Revenue
The following table presents the Company's revenue on a disaggregated basis for the three and six months ending:
 
THREE MONTHS ENDED JUNE 30
 
2019
 
2018
 
HBB
 
KC
 
Consolidated (1)
 
HBB
 
KC
 
Consolidated (1)
Type of good or service:
 
 
 
 
 
 
 
 
 
 
 
  Products
$
129,606

 
$
18,283

 
$
147.182

 
$
135,014

 
$
22,762

 
$
157,086

  Licensing
1,245

 

 
1,245

 
855

 

 
855

     Total revenue
$
130,851

 
$
18,283

 
$
148,427

 
$
135,869

 
$
22,762

 
$
157,941

 
 
 
 
 
 
 
 
 
 
 
 
 
SIX MONTHS ENDED JUNE 30
 
2019
 
2018
 
HBB
 
KC
 
Consolidated (1)
 
HBB
 
KC
 
Consolidated (1)
Type of good or service:
 
 
 
 
 
 
 
 
 
 
 
  Products
$
255,253

 
$
37,536

 
$
291,478

 
$
259,595

 
$
44,862

 
$
302,886

  Licensing
2,326

 

 
2,326

 
1,688

 

 
1,688

     Total revenue
$
257,579

 
$
37,536

 
$
293,804

 
$
261,283

 
$
44,862

 
$
304,574

(1) Includes the required intercompany eliminations between HBB and KC.
v3.19.2
Inventories (Tables)
6 Months Ended
Jun. 30, 2019
Inventory Disclosure [Abstract]  
Schedule of Inventories
Inventories are summarized as follows:
 
JUNE 30
2019
 
DECEMBER 31
2018
 
JUNE 30
2018
Sourced inventories - HBB
$
121,472

 
$
122,697

 
$
138,721

Retail inventories - KC
19,345

 
21,994

 
26,516

 Total inventories
$
140,817

 
$
144,691

 
$
165,237

v3.19.2
Fair Value Disclosure (Tables)
6 Months Ended
Jun. 30, 2019
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:
Description
 
Balance Sheet Location
 
JUNE 30
2019
 
DECEMBER 31
2018
 
JUNE 30
2018
Assets:
 
 
 

 
 
 
 
Interest rate swap agreements
 
 
 

 

 
 
Current
 
Prepaid expenses and other current assets
 
$
69

 
$
349

 
$
383

Long-term
 
Other non-current assets
 

 
710

 
1,210

Foreign currency exchange contracts
 
 
 

 

 
 
Current
 
Prepaid expenses and other current assets
 

 
231

 
474

 
 
 
 
$
69

 
$
1,290

 
$
2,067

Liabilities:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
 
 
 
 
 
 
 
Long-term
 
Other long-term liabilities
 
$
51

 
$

 
$

Foreign currency exchange contracts
 
 
 

 

 
 
Current
 
Other current liabilities
 
357

 
87

 

 
 
 
 
$
408

 
$
87

 
$

v3.19.2
Business Segments (Tables)
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
Segment Reporting Information
 
THREE MONTHS ENDED
JUNE 30
 
SIX MONTHS ENDED
JUNE 30
 
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
HBB
$
130,851

 
$
135,869

 
$
257,579

 
$
261,283

KC
18,283

 
22,762

 
37,536

 
44,862

Eliminations
(707
)
 
(690
)
 
(1,311
)
 
(1,571
)
Total
$
148,427

 
$
157,941

 
$
293,804

 
$
304,574

 
 
 
 
 
 
 
 
Operating profit (loss)
 

 
 
 
 

 
 
HBB
$
2,974

 
$
4,190

 
$
4,614

 
$
7,974

KC
(3,220
)
 
(3,834
)
 
(6,920
)
 
(8,138
)
Eliminations
(60
)
 
28

 
(129
)
 
2

Total
$
(306
)
 
$
384

 
$
(2,435
)
 
$
(162
)
v3.19.2
Recently Issued Accounting Standards (Details) - Restatement Adjustment - Accounting Standards Update 2017-07 - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2018
Other Income, Net    
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Reclassification of net periodic benefit income $ (0.2) $ (0.4)
Selling, General and Administrative Expenses    
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Reclassification of net periodic benefit income $ 0.2 $ 0.4
v3.19.2
Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Disaggregation of Revenue [Line Items]        
Revenue $ 148,427 $ 157,941 $ 293,804 $ 304,574
Products        
Disaggregation of Revenue [Line Items]        
Revenue 147,182 157,086 291,478 302,886
Licensing        
Disaggregation of Revenue [Line Items]        
Revenue 1,245 855 2,326 1,688
HBB        
Disaggregation of Revenue [Line Items]        
Revenue 130,851 135,869 257,579 261,283
HBB | Products        
Disaggregation of Revenue [Line Items]        
Revenue 129,606 135,014 255,253 259,595
HBB | Licensing        
Disaggregation of Revenue [Line Items]        
Revenue 1,245 855 2,326 1,688
KC        
Disaggregation of Revenue [Line Items]        
Revenue 18,283 22,762 37,536 44,862
KC | Products        
Disaggregation of Revenue [Line Items]        
Revenue 18,283 22,762 37,536 44,862
KC | Licensing        
Disaggregation of Revenue [Line Items]        
Revenue 0 0 0 0
Operating segments | HBB        
Disaggregation of Revenue [Line Items]        
Revenue 130,851 135,869 257,579 261,283
Operating segments | KC        
Disaggregation of Revenue [Line Items]        
Revenue $ 18,283 $ 22,762 $ 37,536 $ 44,862
Maximum        
Disaggregation of Revenue [Line Items]        
Warranty term     3 years  
Maximum | Electric appliances        
Disaggregation of Revenue [Line Items]        
Warranty term     10 years  
Minimum        
Disaggregation of Revenue [Line Items]        
Warranty term     1 year  
v3.19.2
Inventories (Details) - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Jun. 30, 2018
Inventory Disclosure [Abstract]      
Sourced inventories - HBB $ 121,472 $ 122,697 $ 138,721
Retail inventories - KC 19,345 21,994 26,516
Total inventories $ 140,817 $ 144,691 $ 165,237
v3.19.2
Fair Value Disclosure (Details) - Fair value measurements, recurring - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Jun. 30, 2018
Assets:      
Assets at fair value $ 69 $ 1,290 $ 2,067
Liabilities:      
Liabilities at fair value 408 87 0
Prepaid expenses and other current assets      
Assets:      
Interest rate swap agreements 69 349 383
Foreign currency exchange contracts 0 231 474
Other non-current assets      
Assets:      
Interest rate swap agreements 0 710 1,210
Other current liabilities      
Liabilities:      
Foreign currency exchange contracts 357 87 0
Other long-term liabilities      
Liabilities:      
Interest rate swap agreements $ 51 $ 0 $ 0
v3.19.2
Contingencies (Details) - USD ($)
3 Months Ended
May 03, 2019
Jun. 30, 2019
Dec. 31, 2018
Jun. 30, 2018
Loss Contingencies [Line Items]        
Damages awarded to plaintiff $ 3,200,000      
Litigation settlement expense   $ 3,200,000    
Accrual for environmental investigation and remediation activities   4,600,000 $ 8,200,000 $ 8,500,000
Minimum        
Loss Contingencies [Line Items]        
Estimate of additional expenses   0    
Maximum        
Loss Contingencies [Line Items]        
Estimate of additional expenses   $ 3,900,000    
v3.19.2
Business Segments (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Segment Reporting Information [Line Items]        
Revenues $ 148,427 $ 157,941 $ 293,804 $ 304,574
Operating profit (loss) (306) 384 (2,435) (162)
HBB        
Segment Reporting Information [Line Items]        
Revenues 130,851 135,869 257,579 261,283
KC        
Segment Reporting Information [Line Items]        
Revenues 18,283 22,762 37,536 44,862
Operating segments | HBB        
Segment Reporting Information [Line Items]        
Revenues 130,851 135,869 257,579 261,283
Operating profit (loss) 2,974 4,190 4,614 7,974
Operating segments | KC        
Segment Reporting Information [Line Items]        
Revenues 18,283 22,762 37,536 44,862
Operating profit (loss) (3,220) (3,834) (6,920) (8,138)
Eliminations        
Segment Reporting Information [Line Items]        
Revenues (707) (690) (1,311) (1,571)
Operating profit (loss) $ (60) $ 28 $ (129) $ 2
v3.19.2
Transfer of Financial Assets (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Dec. 31, 2018
Transfers and Servicing [Abstract]          
Accounts receivable derecognized $ 33.4 $ 38.8 $ 67.9 $ 70.2 $ 165.4
v3.19.2
Label Element Value
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption $ 0
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]  
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption (1,286,000)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]  
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption 0
Retained Earnings [Member]  
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption 1,168,000
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]  
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption $ 118,000