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What changed in Hamilton Beach Brands Holding Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Hamilton Beach Brands Holding Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+263 added−239 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-09)

Top changes in Hamilton Beach Brands Holding Co's 2023 10-K

263 paragraphs added · 239 removed · 199 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

38 edited+16 added−15 removed13 unchanged
Biggest changeAs of December 31, 2022, the Company employed approximately 700 employees in four countries—Canada, China, Mexico, and the United States, of which approximately 95% were full time and the remaining were part time. Approximately 3% of our workforce is covered by collective bargaining agreements, all of whom are based in Canada or Mexico.
Biggest changeOur policies and programs—including our Code of Corporate Conduct and other compliance policies, our employment-related policies and our Human Rights Policy—are designed to support this effort. 3 Table of Contents As of December 31, 2023, we employed approximately 700 employees in four countries—Canada, China, Mexico and the United States, of which approximately 98% were full time and the remaining were part time.
Through our total rewards programs, we strive to offer competitive compensation, benefits and services to our full-time employees including, incentive plans, recognition plans, defined contribution plans, healthcare benefits, tax-advantaged spending accounts, employee assistance programs and other programs such as sick leave and paid vacation and holidays.
Through our total rewards programs, we strive to offer competitive compensation, benefits and services to our full-time employees including, incentive plans, recognition plans, defined contribution plans, healthcare benefits, tax-advantaged spending accounts, employee assistance programs and other programs such as sick leave, paid vacation and holidays.
To meet our talent objectives, we utilize key strategies and processes related to recruitment while we remain focused on continuing to strengthen our onboarding and ongoing learning development. We monitor market compensation and benefits to be able to attract, retain and promote employees and reduce turnover and its associated costs.
To meet our talent objectives, we utilize key strategies and processes related to recruitment while we remain focused on continuing to strengthen our onboarding and ongoing learning development. We monitor market compensation and benefits to be able to attract, retain and promote employees and reduce turnover and our associated costs.
We are committed to maintaining a safe work environment and operating in a safe, secure and responsible manner. We require all Company personnel to perform their work in a manner that complies with legal requirements protecting the safety and health of all persons from unreasonable risks.
We are committed to maintaining a safe work environment and operating in a safe, secure and responsible manner. We require all of our personnel to perform their work in a manner that complies with legal requirements protecting the safety and health of all persons from unreasonable risks.
There are approximately 500 employees in the United States with about half of those based at the Company’s headquarters in Richmond, Virginia, which is home to the Company’s product design, development and marketing teams as well as its state-of-the-art test kitchen and UL-certified test laboratory.
There are approximately 500 employees in the United States with about half of those based at our headquarters in Richmond, Virginia, which is home to our product design, development and marketing teams as well as our state-of-the-art test kitchen and UL-certified test laboratory.
Based on publicly available information about the industry, HBB is one of the largest full-line distributors and marketers of small electric household and specialty housewares appliances in North America, including the U.S., Canada, Mexico and Latin America, based on key product categories.
Based on publicly available information about the industry, we are one of the largest full-line distributors and marketers of small electric household and specialty housewares appliances in North America, including the U.S., Canada, Mexico and Latin America, based on key product categories.
Additionally, the Company participates in the premium market through multiyear licensing agreements to market and distribute a line of countertop appliances under the Wolf Gourmet® brand, a line of premium garment care products under the CHI® brand and the Bartesian® premium cocktail delivery system.
Additionally, we participate in the premium market through multiyear licensing agreements to market and distribute a line of countertop appliances under the Wolf Gourmet ® brand, a line of premium garment care products under the CHI ® brand and the Bartesian ® premium cocktail delivery system.
There is no guarantee to the consumer as HBB may repair or replace, at its option, those products returned under warranty. Working Capital The market for small electric household and specialty housewares appliances is highly seasonal in nature.
There is no guarantee to the consumer as we may repair or replace, at our option, those products returned under warranty. Seasonality and Working Capital The market for small electric household and specialty housewares appliances is highly seasonal in nature.
HBB believes the loss of any one supplier would not have a long-term material adverse effect on its business because there are adequate supplier choices available that can meet HBB’s production and quality requirements. However, the loss of a supplier could, in the short term, adversely affect HBB’s business until alternative supply arrangements are secured.
We believe the loss of any one supplier would not have a long-term material adverse effect on our business because there are adequate supplier choices available that can meet our production and quality requirements. However, the loss of a supplier could, in the short term, adversely affect our business until alternative supply arrangements are secured.
Sales and Marketing HBB designs, markets and distributes a wide range of branded, small electric household and specialty housewares appliances, including air fryers, blenders, coffee makers, food processors, indoor electric grills, irons, juicers, mixers, slow cookers, toasters and toaster ovens. HBB also designs, markets and distributes commercial products for restaurants, fast food chains, bars and hotels.
Sales and Marketing We design, market and distribute a wide range of branded, small electric household and specialty housewares appliances, including air fryers, blenders, coffee makers, food processors, indoor electric grills, irons, juicers, mixers, slow cookers, toasters and toaster ovens. We also design, market and distribute commercial products for restaurants, fast food chains, bars and hotels.
HBB generally markets its “good” and “better” consumer products under the Hamilton Beach® and Proctor Silex® brands. HBB participates in the premium market with its owned brands Hamilton Beach® Professional and Weston® farm-to-table and field-to-table food processing equipment.
We generally market our “good” and “better” consumer products under the Hamilton Beach ® and Proctor Silex ® brands. We participate in the premium market with our owned brands Hamilton Beach ® Professional and Weston ® farm-to-table and field-to-table food processing equipment.
The principal raw materials used by HBB’s third-party suppliers to manufacture its products are plastic, glass, steel, copper, aluminum and packaging materials. HBB believes adequate quantities of raw materials are available from various suppliers.
The principal raw materials used by our third-party suppliers to manufacture our products are plastic, glass, steel, copper, aluminum and packaging materials. We believe adequate quantities of raw materials are available from various suppliers.
Competition HBB believes the principal areas of competition with respect to its products are product design and innovation, quality, price, product features, supply chain excellence, merchandising, promotion and warranty. HBB competes with many manufacturers and distributors of housewares products.
Competition We believe the principal areas of competition with respect to our products are product design and innovation, quality, price, product features, supply chain excellence, merchandising, promotion and warranty. We compete with many manufacturers and distributors of housewares products.
HBB negotiates the purchases from its foreign suppliers in U.S. dollars. During 2022, HBB purchased substantially all of its finished products from suppliers in China. HBB purchases its inventory from approximately 65 suppliers, one of which represented more than 10% of purchases during the year ended December 31, 2022.
We negotiate the purchases from our foreign suppliers in U.S. dollars. During 2023, we purchased substantially all of our finished products from suppliers in China. We purchase our inventory from approximately 60 suppliers, one of which represented more than 10% of purchases during the year ended December 31, 2023.
The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports available, free of charge, through its website, www.hamiltonbeachbrands.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) available, free of charge, through our website, www.hamiltonbeachbrands.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
Product Design and Development HBB incurred $11.8 million, $8.6 million and $10.0 million in 2022, 2021 and 2020, respectively, on product design and development activities. Key Suppliers and Raw Material HBB’s products are produced to its specifications by third-party suppliers. HBB does not maintain long-term purchase contracts with suppliers and operates mainly on a purchase order basis.
Product Design and Development We incurred $12.4 million, $11.8 million and $8.6 million in 2023, 2022 and 2021, respectively, in expenses on product design and development activities. Key Suppliers and Raw Material Our products are produced to our specifications by third-party suppliers. We do not maintain long-term purchase contracts with suppliers and operate mainly on a purchase order basis.
HBB promotes certain of its innovative products primarily through the use of digital and print advertising. 1 Table of Contents Customers Sales in North America are generated predominantly by a network of inside sales employees to mass merchandisers, ecommerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers, distributors, restaurants, bars, hotels and other retail outlets.
Customers Sales in North America are generated predominantly by a network of inside sales employees to mass merchandisers, ecommerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers, distributors, restaurants, bars, hotels and other retail outlets.
Hamilton Beach® is the #1 small kitchen appliance brand in the US, in brick-and-mortar and ecommerce channels, based on units sold. To a lesser degree, HBB retail product lines compete outside of North America. HBB's commercial products compete globally and have generated a strong position in these markets.
Hamilton Beach® is the #1 small kitchen appliance brand in the U.S., in brick-and-mortar and ecommerce channels, based on units sold. To a lesser degree, our retail product lines compete outside of North America.
HBB also licenses certain of its trademarks to various licensees in categories such as microwave ovens, among others. Sales promotion activities are supported through print and digital marketing vehicles.
We also license certain of our trademarks to various licensees in categories such as microwave ovens, among others. Sales promotion activities are supported through print and digital marketing vehicles. We promote certain of our innovative products primarily through the use of digital and print advertising.
Walmart Inc. and its global subsidiaries accounted for approximately 26%, 28% and 35% of HBB’s revenue in 2022, 2021 and 2020, respectively. Amazon.com, Inc. and its subsidiaries accounted for approximately 23%, 22% and 16% of HBB's revenue in 2022, 2021 and 2020, respectively.
Walmart Inc. and its global subsidiaries (“Walmart”) accounted for approximately 27%, 26% and 28% of our revenue in 2023, 2022 and 2021, respectively. Amazon.com, Inc. and its subsidiaries (“Amazon.com”) accounted for approximately 24%, 23% and 22% of our revenue in 2023, 2022 and 2021, respectively.
We are committed to achieving the highest standards of legal and ethical conduct, including by protecting the human rights and fair treatment of our employees. Our policies and programs—including our Code of Corporate Conduct and other compliance policies, our employment-related policies, and our Human Rights Policy—are designed to support this effort.
We are committed to achieving the highest standards of legal and ethical conduct, including by protecting the human rights and fair treatment of our employees.
HBB is a leading designer, marketer, and distributor of a wide range of branded small electric household and specialty housewares appliances, as well as commercial products for restaurants, fast food chains, bars, and hotels. HBB operates in the consumer, commercial and specialty small appliance markets. On September 29, 2017, NACCO Industries, Inc.
We are a leading designer, marketer and distributor of a wide range of branded small electric household and specialty housewares appliances, as well as commercial products for restaurants, fast food chains, bars and hotels.
(from September 2017 to March 2019) Lawrence K. Workman, Jr. 53 Senior Vice President, General Counsel and Secretary of Hamilton Beach Holding (from July 2021) Vice President, Business Development and Corporate Counsel of Coca-Cola Consolidated, Inc. (from prior to 2017 to July 2021)
(a steel and chemical production and distribution company), (from June 2020 to August 2021), Vice President, Corporate Administration of Ascent Industries Co. (from prior to 2019 to June 2020) Lawrence K. Workman, Jr. 54 Senior Vice President, General Counsel and Secretary of Hamilton Beach Holding (from July 2021), Vice President, Business Development and Corporate Counsel of Coca-Cola Consolidated, Inc.
To empower our employees to reach their full potential, we offer certain training, learning experiences and resources, such as “Hamilton Beach University”—an ongoing, cross-functional learning program designed not only to help employees learn about our Company, our products and our industry but also to stay abreast of emerging trends and to develop job-specific skills. 4 Table of Contents Diversity and Inclusion As an equal opportunity employer, we make decisions without regard to race, color, religion, creed, gender, sexual orientation, gender identity, marital status, national origin, age, veteran status, disability, or any other protected class.
To empower our employees to reach their full potential, we offer certain training, learning experiences and resources, such as “Hamilton Beach University”—an ongoing, cross-functional learning program designed not only to help employees learn about our Company, our products and our industry but also to stay abreast of emerging trends and to develop job-specific skills.
Product Warranty HBB's warranty program to the consumer consists generally of an assurance-type limited warranty lasting for varying periods of up to ten years for electric appliances, with the majority of products having a warranty of one to three years.
Our five largest customers accounted for approximately 64%, 61% and 61% of our revenue for the years ended December 31, 2023, 2022 and 2021, respectively. 1 Table of Contents Product Warranty Our 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.
Patents, Trademarks, Copyrights and Licenses HBB holds patents and trademarks registered in the United States ("U.S.") and foreign countries for various products. HBB believes its business is not dependent upon any individual patent, copyright or license, but that the Hamilton Beach ® , Proctor Silex ® , Hamilton Beach ® Professional, and Weston ® trademarks are material to its business.
We believe that our business is not dependent upon any individual patent, copyright or license, but that the Hamilton Beach ® , Proctor Silex ® , Hamilton Beach ® Professional and Weston ® trademarks are material to our business.
Item 1. BUSINESS General Hamilton Beach Brands Holding Company (“Hamilton Beach Holding” or the “Company”) is a holding company and operates through its wholly-owned subsidiary Hamilton Beach Brands, Inc. (“HBB”). HBB is the Company's single reportable segment. The only material assets held by Hamilton Beach Holding is the investment in its consolidated subsidiary.
Hamilton Beach Brands Holding Company is a holding company and operates through its indirect, wholly owned subsidiary, Hamilton Beach Brands, Inc., a Delaware corporation (“HBB”). HBB is the Company’s single reportable segment.
The majority of HBB's revenue and operating profit typically occurs in the second half of the year due to the fall holiday-selling season. Due to the seasonality of purchases of its products, HBB generally uses a substantial amount of cash or borrowings under our revolving credit facility to finance inventory in anticipation of the fall holiday-selling season.
Due to the seasonality of purchases of our products, we generally use a substantial amount of cash or borrowings under our $150.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) to finance inventory in anticipation of the fall holiday-selling season.
As brick and mortar retailers generally purchase a limited selection of branded, small electric appliances, HBB competes with other suppliers for retail shelf space.
As brick-and-mortar retailers generally purchase a limited selection of branded, small electric appliances, we compete with other suppliers for retail shelf space. In the ecommerce channel, we must compete with a broad list of competitors for brand reputation through compelling content, strong ratings and reviews from consumers.
HBB’s presence in a significant number of product categories across various price points allows the Company to meet the needs of a wide range of retailers and consumers.
To meet these competitive challenges, we have focused on continued innovation in our leading brands as well as expanding into new categories using existing core competencies. Our presence in a significant number of housewares product categories across various price points allows us to meet the needs of a wide range of retailers and consumers.
The Company continues to expand in the home, health and wellness market, selling air purifiers under the Clorox® and TrueAir® brands, Hamilton Beach® Health smart Injection Care Management Systems, and Brita® water filtration systems. HBB markets its commercial products under the Hamilton Beach Commercial® and the Proctor Silex Commercial® brands. HBB supplies private label products on a limited basis.
Prior to the acquisition, we had an existing strategic alliance to sell Hamilton Beach Health ® smart Injection Care Management Systems under our Hamilton Beach Health ® brand. We market our commercial products under the Hamilton Beach Commercial ® and the Proctor Silex Commercial ® brands. We supply private label products on a limited basis.
Scott Tidey 58 Senior Vice President, Global Sales of HBB (from January 2023) Senior Vice President, Consumer Sales & Marketing of HBB (from March 2021 to January 2023), Senior Vice President, North America Sales and Marketing of HBB (from prior to 2017 to March 2021) Linda Woermer 62 Senior Director, Controller of HBB (from April 2020) Director of Fahrenheit Advisors, LLC (from April 2019 to March 2020), Senior Manager of Financial Planning and Analysis, Global Commercial Operations of Indivior, Inc.
Scott Tidey 59 President of Hamilton Beach Holding (from February 2024), Senior Vice President, Global Sales of HBB (from January 2023 to February 2024), Senior Vice President, Consumer Sales & Marketing of HBB (from March 2021 to January 2023), Senior Vice President, North America Sales and Marketing of HBB (from prior to 2019 to March 2021) Sally M.
Trepp 61 President and Chief Executive Officer of Hamilton Beach Holding (from September 2017); President and Chief Executive Officer of HBB (from prior to 2017) Chief Executive Officer of KC (from prior to 2017 to April 2020) R.
EXECUTIVE OFFICERS OF THE COMPANY Name Age Positions Gregory H. Trepp 62 Director and Chief Executive Officer of Hamilton Beach Holding (from February 2024), Director, President and Chief Executive Officer of Hamilton Beach Holding (from prior to 2019 to February 2024) R.
Under certain circumstances, the CPSC could require HBB to repair, replace or refund the purchase price of one or more of HBB’s products, or HBB may voluntarily do so. Throughout the world, electrical appliances are subject to various mandatory and voluntary standards, including requirements in some jurisdictions that products be listed by Underwriters’ Laboratories, Inc.
Consumer Product Safety Commission (“CPSC”) to seek to exclude products that are found to be unsafe or hazardous from the market. Under certain circumstances, the CPSC could require us to repair, replace or refund the purchase price of one or more of our products, or we may voluntarily do so.
(“UL”) or other similar recognized laboratories. HBB also uses Intertek Testing Services for certification and testing of compliance with UL standards, as well as other national and industry specific standards. HBB endeavors to design its products to meet the certification requirements of, and to be certified in, each of the jurisdictions in which they are sold.
We endeavor to design our products to meet the certification requirements of, and to be certified in, each of the jurisdictions in which they are sold.
Rankin were $0.5 million for each of the years ended December 31, 2022, 2021, and 2020. 3 Table of Contents Human Capital Resources Our business is dependent upon, and focused on, people—our employees, our customers and the consumers who enjoy our appliances, and the communities in which we live.
For more information about the risks we face regarding regulatory requirements, see Part I, Item 1A of this Annual Report titled, “Risk Factors - Government regulations could impose costly requirements on our business.” Human Capital Resources Our business is dependent upon, and focused on, people—our employees, our customers and the consumers who enjoy our appliances, and the communities in which we live.
All employees participate in training intended to enhance our awareness of the benefits of a diverse and inclusive workforce, to encourage more meaningful collaboration, and to strengthen team effectiveness. COVID-19 Throughout the pandemic we have monitored the changing landscape of local requirements and guidelines for all locations and have made changes to our workplace protocols as necessary.
All employees participate in training intended to enhance our awareness of the benefits of a diverse and inclusive workforce, to encourage more meaningful collaboration and to strengthen team effectiveness. 4 Table of Contents Information about our Executive Officers The following table sets forth, as of March 6, 2024, the name, age, current position and principal occupation and employment during the past five years of the Company’s executive officers.
As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal Hazardous Substances Act, which empower the U.S. Consumer Product Safety Commission (“CPSC”) to seek to exclude products that are found to be unsafe or hazardous from the market.
Based on current information, we do not expect compliance with environmental requirements to have a material adverse effect on our financial condition or results of operations. As a marketer and distributor of consumer products, we are subject to the Consumer Products Safety Act and the Federal Hazardous Substances Act, which empowers the U.S.
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Substantially all of its cash flows are provided by dividends paid or distributions made by its subsidiary. Hamilton Beach Brands Holding Company has not guaranteed any obligations of its subsidiary. The Company also previously operated through its former wholly-owned subsidiary, The Kitchen Collection, LLC ("KC"), which is reported as discontinued operations in all periods presented herein.
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Item 1. BUSINESS General Throughout this Annual Report on Form 10-K and the notes to consolidated financial statements, references to “Hamilton Beach Holding”, “the Company”, “we”, “us” and “our” and similar references are to Hamilton Beach Brands Holding Company and its subsidiaries on a consolidated basis unless otherwise noted or as the context otherwise requires.
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KC completed its dissolution on April 3, 2020 with a pro-rata distribution of its remaining assets to creditors, at which time the KC legal entity ceased to exist.
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Recent Developments On February 5, 2024, we announced that our Hamilton Beach Health ® subsidiary acquired HealthBeacon PLC (“HealthBeacon”), a medical technology firm and strategic partner of the Company. HealthBeacon develops connected devices that enable patients with chronic conditions to manage their injectable medication regimens at home and provides other health services.
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("NACCO"), Hamilton Beach Holding's former parent company, spun-off the Company to NACCO stockholders.
Added
This acquisition is a key step in growing our Hamilton Beach Health ® business, which empowers people to take control of their health and wellness through innovative solutions.
Removed
In the spin-off, NACCO stockholders, in addition to retaining their shares of NACCO common stock, received one share of Hamilton Beach Brands Holding Company Class A common stock ("Class A Common") and one share of Hamilton Beach Brands Holding Company Class B common stock ("Class B Common") for each share of NACCO Class A or Class B common stock.
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We continue to expand in the home, health and wellness market, selling air purifiers under the Clorox ® and TrueAir ® brands and Brita ® water filtration systems. Our acquisition of HealthBeacon represents a key expansion in our home medical category.
Removed
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.
Added
The majority of our revenue and operating profit typically occurs in the second half of the year due to the fall holiday-selling season.
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HBB’s five largest customers accounted for approximately 61%, 61%, and 64% of HBB’s revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
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Patents, Trademarks, Copyrights and Licenses We hold patents and trademarks registered in the United States (“U.S.”) and foreign countries for various products.
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In the ecommerce channel, HBB must compete with a broad list of competitors for brand reputation through compelling content, strong ratings and reviews from consumers. 2 Table of Contents To meet these competitive challenges, the Company has focused on continued innovation in its leading brands as well as expanding into new categories using existing core competencies.
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Our commercial products compete globally and have generated a strong position in these markets. 2 Table of Contents Government Regulation Our operations are subject to various laws and regulations administered by federal, state, local and foreign government agencies, including laws and regulations related to health, safety and environmental matters.
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Government Regulation HBB is subject to numerous federal and state health, safety and environmental regulations. HBB believes the impact of expenditures to comply with such laws will not have a material adverse effect on HBB.
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In addition, the Food and Drug Administration (“FDA”), and other governmental authorities regulate the development, manufacture, sale and distribution of certain of our products.
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Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") requires public companies to disclose whether certain minerals, commonly known as "conflict minerals," are necessary to the functionality or production of a product manufactured by those companies and if those minerals originated in the Democratic Republic of the Congo ("DRC") or an adjoining country.
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For certain products in our Hamilton Beach Health ® business, government regulations may require detailed inspection of, and controls over, research and development, clinical investigations, product approvals and manufacturing, marketing and promotion, sampling, distribution, record-keeping, storage and disposal practices.
Removed
HBB conducts supply-chain due diligence investigations required by the conflict minerals rules and makes disclosures required by the Dodd Frank Act. Our compliance with these investigation and disclosure requirements could adversely affect our ability to sell products to customers that HBB is unable to designate as "DRC conflict free." Transactions with Related Parties Mr. Alfred M.
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We are also subject to data privacy and security regulations, tax and securities regulations, accounting and reporting standards and other financial laws and regulations. Past, current or future regulations, their interpretation, or their application could have a material adverse impact on our operations.
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Rankin is the former executive chairman of the Company and current non-executive chairman of the Board of the Company. Mr. Rankin provides consulting services to the Company under the terms of a consulting agreement pursuant to which Mr. Rankin supports the president and chief executive officer of the Company upon request. Fees for consulting services rendered by Mr.
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For example, current or future regulations may be passed that could prevent, delay, revoke or result in the rejection of regulatory clearance of certain of our products. We cannot predict the effect on our operations resulting from current or future governmental regulation or the interpretation or application of these regulations.
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We continue to monitor diligently the developments related to COVID-19 and to adjust as needed to perform our business requirements while providing a safe environment for our workforce. We have been impressed by the resiliency and adaptability demonstrated by our employees throughout the pandemic.
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In addition, if we fail to comply with any applicable regulatory requirements, penalties could be imposed on us. In addition, electrical appliances are subject to various mandatory and voluntary standards, including requirements in some jurisdictions that products be listed by Underwriters’ Laboratories, Inc. (“UL”) or other similar recognized laboratories.
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We believe that their ability to remain flexible and to work productively and collaboratively and, in many cases, remotely during such stressful and unpredictable times is a testament to the strength of our Good Thinking ® culture.
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Approximately 2% of our workforce is covered by collective bargaining agreements, all of whom are based in Canada.
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We also believe that the pandemic-related challenges have strengthened us and that we now are better positioned to adjust work locations and patterns if other disruptive events were to occur. Information about our Executive Officers There exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was selected.
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Diversity and Inclusion As an equal opportunity employer, we make decisions without regard to race, color, religion, creed, gender, sexual orientation, gender identity, marital status, national origin, age, veteran status, disability or any other protected class.
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The following tables set forth, as of March 9, 2023, the name, age, current position and principal occupation and employment during the past five years of the Company’s executive officers. EXECUTIVE OFFICERS OF THE COMPANY Name Age Current Position Other Positions Gregory H.
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Cunningham 49 Senior Vice President, Chief Financial Officer and Treasurer of Hamilton Beach Holding (from May 2023), Senior Vice President and Chief Financial Officer of Hamilton Beach Holding (from March 2023 to May 2023), Finance Consultant of Azurite, LLC (from November 2021 to February 2023), Senior Vice President and Chief Financial Officer of Ascent Industries Co.
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(a Coca-Cola manufacturing and bottling company), (from prior to 2019 to July 2021)

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

86 edited+33 added−14 removed13 unchanged
Biggest changeIf our systems are damaged, or fail to function properly, we may have to make monetary investments to repair or replace the systems and could endure delays in operations. Any material disruption or slowdown of our systems, including our failure to successfully upgrade systems, could cause information, including data related to customer orders, to be lost or delayed.
Biggest changeAdditionally, the increase in hybrid working where employees, including third-party employees, access technology infrastructure remotely may create additional information technology and data security risks.If our systems are damaged, or fail to function properly, we may have to make monetary investments to repair or replace the systems and could endure delays in operations.
If a product liability claim is brought against HBB, our revenue and profitability could be affected adversely as a result of negative publicity related to the claim, costs associated with any replacement of the product or expenses related to defending these claims. This could be true even if the claims themselves are ultimately settled for immaterial amounts.
If a product liability claim is brought against us, our revenue and profitability could be affected adversely as a result of negative publicity related to the claim, costs associated with any replacement of the product or expenses related to defending these claims. This could be true even if the claims themselves are ultimately settled for immaterial amounts.
For example, some of HBB’s customers have expressed interest in sourcing, or expanding the extent of sourcing, small electric household and commercial appliances directly from manufacturers in Asia. We believe competition is based upon several factors, including product design and innovation, quality, price, product features, merchandising, promotion and warranty.
For example, some of our customers have expressed interest in sourcing, or expanding the extent of sourcing, small electric household and commercial appliances directly from manufacturers in Asia. We believe competition is based upon several factors, including product design and innovation, quality, price, product features, merchandising, promotion and warranty.
Because such family members could prevent other stockholders from exercising significant influence over significant corporate actions, the Company may be a less attractive takeover target, which could adversely affect the market price of its common stock. 12 Table of Contents Item 1B. UNRESOLVED STAFF COMMENTS None.
Because such family members could prevent other stockholders from exercising significant influence over significant corporate actions, the Company may be a less attractive takeover target, which could adversely affect the market price of its common stock. Item 1B. UNRESOLVED STAFF COMMENTS None. 13 Table of Contents
Consumer shopping preferences have shifted, and may continue to shift in the future, to distribution channels other than traditional brick-and-mortar retail channels. Success in the ecommerce channel requires providing products at the right price, products that earn strong ratings and reviews and meaningful engagement with online shoppers.
Consumer shopping preferences have shifted, and may continue to shift in the future, to distribution channels other than traditional brick-and-mortar retail channels. Success in the ecommerce channel requires providing products at the right price, products that earn strong ratings and reviews and meaningful engagement with online consumers.
The Company is subject to certain laws, rules and regulations enacted to protect businesses and personal data (“Privacy Laws”), which may include the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”), as well as industry self-regulatory codes that create new compliance obligations.
The Company is subject to certain laws, rules and regulations enacted to protect businesses and personal data (“Privacy Laws”), which may include the General Data Protection Regulation and the California Consumer Privacy Act, as well as industry self-regulatory codes that create new compliance obligations.
Product improvements and new product introductions also require significant research, planning, design, development, engineering, and testing at the technological and product process levels and HBB may not be able to timely develop and introduce product improvements or new products.
Product improvements and new product introductions also require significant research, planning, design, development, engineering and testing at the technological and product process levels, and we may not be able to timely develop and introduce product improvements or new products.
These liabilities may not arise, if at all, until years after HBB sold these operations and could require us to incur significant additional expenses, which could materially adversely affect HBB’s results of operations and financial condition. The Company is subject to litigation risk which could adversely affect our financial condition, results of operations and liquidity.
These liabilities may not arise, if at all, until years after we sold these operations and could require us to incur significant additional expenses, which could materially adversely affect our results of operations and financial condition. The Company is subject to litigation risk which could adversely affect our financial condition, results of operations and liquidity.
If HBB were to lose, or experience a significant decline in business from any major customer, or if any major customers were to go bankrupt, HBB might be unable to find alternate distribution outlets.
If we were to lose, or experience a significant decline in business from any major customer, or if any major customers were to go bankrupt, we might be unable to find alternate distribution outlets.
In addition, certain of HBB’s larger customers use their own private label brands on household appliances that compete directly with some of HBB’s products. As the retailers in the small electric household appliance industry become more concentrated, competition for sales to these retailers may increase, which could materially reduce our revenue and profitability.
In addition, certain of our larger customers use their own private label brands on household appliances that compete directly with some of our products. As the retailers in the small electric household appliance industry become more concentrated, competition for sales to these retailers may increase and cause pricing pressures, which could materially reduce our revenue and profitability.
HBB is dependent on third-party suppliers for the manufacturing and distribution of our products. Our ability to select reliable suppliers that provide timely deliveries of quality products will impact our success in meeting customer demand. Any supplier's inability to timely deliver products that meet desired specifications or any unanticipated changes in suppliers could be disruptive and costly.
We are dependent on third-party suppliers for the manufacturing and distribution of our products. Our ability to select reliable suppliers that provide timely deliveries of quality products will impact our success in meeting customer demand. Any supplier’s inability to timely deliver products that meet desired specifications or any unanticipated changes in suppliers could be disruptive and costly.
Competitors’ new products may beat HBB’s products to market, be higher quality or more reliable, be more effective with more features, obtain better market acceptance, or render HBB’s products obsolete.
Competitors’ new products may beat our products to market, be higher quality or more reliable, be more effective with more features, obtain better market acceptance or render our products obsolete.
Given the uncertainty regarding the scope and duration of these trade actions by the U.S. government or other countries, as well as the potential for additional trade actions, the impact on our operations and results remains uncertain. Risks Related to Our Common Stock The amount and frequency of dividend payments made on Hamilton Beach Holding’s common stock could change.
Given the uncertainty regarding the scope and duration of these trade actions by the U.S. government or other countries, as well as the potential for additional trade actions, the impact on our operations and results remains uncertain. Risks Related to Our Common Stock The amount and frequency of dividend payments made on the Company’s common stock could change.
Sales of HBB products are related to consumer spending, including general economic conditions affecting disposable consumer income such as unemployment rates, business conditions, interest rates, levels of consumer confidence, energy prices, mortgage rates, the level of consumer debt and taxation.
Sales of our products are related to consumer spending, including general economic conditions affecting disposable consumer income such as unemployment rates, business conditions, inflation rates, interest rates, levels of consumer confidence, energy prices, mortgage rates, the level of consumer debt and taxation.
Any significant failure by HBB to obtain quality products, in sufficient quantities, on a timely basis, and at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on revenue and profitability.
Any significant failure to obtain quality products, in sufficient quantities, on a timely basis, and at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on our revenue and profitability.
HBB sells a substantial quantity of products to mass merchandisers, ecommerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers and other retail outlets. As a result, these retailers generally have a large selection of small electric household and specialty housewares appliance suppliers from which to choose.
We sell a substantial quantity of products to mass merchandisers, ecommerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers and other retail outlets. As a result, these retailers generally have a large selection of small electric household and specialty housewares appliance suppliers from which to choose.
The small electric household, specialty housewares appliances and commercial appliance industry does not have substantial entry barriers. As a result, HBB competes with many manufacturers and distributors of housewares products. Additional competitors may also enter this market and cause competition to intensify.
The small electric household, specialty housewares appliances and commercial appliance industry does not have substantial entry barriers. As a result, we compete with many manufacturers and distributors of housewares products. Additional competitors may also enter this market and cause competition to intensify.
In addition, the retail market for small electric household and specialty housewares appliances is highly seasonal in nature. Accordingly, HBB generally recognizes a substantial portion of our revenue in the second half of the year as sales increase significantly with the fall holiday-selling season.
In addition, the retail market for small electric household and specialty housewares appliances is highly seasonal in nature. Accordingly, we generally recognize a substantial portion of our revenue in the second half of the year as sales increase significantly with the fall holiday-selling season.
Accordingly, quarter-to-quarter comparisons of past operating results of HBB are meaningful only when comparing equivalent time periods, if at all. 7 Table of Contents Business Risks Uncertain or unfavorable global economic conditions may have an adverse effect on our business, operating results and financial condition.
Accordingly, quarter-to-quarter comparisons of our past operating results are meaningful only when comparing equivalent time periods, if at all. Business Risks Uncertain or unfavorable global economic conditions may have an adverse effect on our business, operating results and financial condition.
The restrictions and covenants in HBB’s credit facility, and other future financing arrangements may limit HBB’s ability to respond to market conditions, provide for capital investment needs, pay dividends or take advantage of business opportunities by limiting the amount of additional borrowings HBB may incur.
The restrictions and covenants in our credit facility, and other future financing arrangements may limit our ability to respond to market conditions, provide for capital investment needs, pay dividends or take advantage of business opportunities by limiting the amount of additional borrowings we may incur.
Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery, anti-corruption and anti-kickback laws adopted in many of the countries in which HBB does business which prohibit HBB from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business and also require maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions.
Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery, anti-corruption and anti-kickback laws adopted in many of the countries in which we do business which prohibit the Company from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business and also require maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions.
Any hedging activities HBB engages in may only offset a portion of the adverse financial impact resulting from unfavorable changes in foreign currency exchange rates. HBB cannot predict with any certainty changes in foreign currency exchange rates or the degree to which HBB can mitigate these risks.
Any hedging activities we engage in may only offset a portion of the adverse financial impact resulting from unfavorable changes in foreign currency exchange rates. We cannot predict with any certainty changes in foreign currency exchange rates or the degree to which we can mitigate these risks.
Our business has in the past been, and may continue to be, adversely affected by changes in global economic conditions including inflation, rising interest rates, consumer spending rates, availability and costs of raw materials, and availability of capital markets.
Our business has in the past been, and may continue to be, adversely affected by changes in global economic conditions including inflation, rising interest rates, consumer spending rates, availability and costs of raw materials and availability of capital markets and impacts from global military conflicts.
If HBB is unable to continue to enhance existing products, as well as develop and market new products that respond to customer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products, which could materially reduce revenue and profitability, which have historically benefited from sales of new products.
If we are unable to continue to enhance existing products, as well as develop and market new products that respond to consumer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products, which could materially reduce revenue and profitability, which have historically benefited from sales of new products.
HBB may not be able to compete as effectively with competitors, and ultimately satisfy the needs and preferences of customers, unless HBB can continue to enhance existing products and develop new innovative products for the markets in which HBB competes. Product development requires significant financial, technological, and other resources.
We may not be able to compete as effectively with competitors, and ultimately satisfy the needs and preferences of consumers, unless we can continue to enhance existing products and develop new innovative products for the markets in which we compete. Product development requires significant financial, technological and other resources.
HBB has invested in industry leading selling and marketing capabilities, while maintaining its presence in traditional brick-and-mortar retail channels. However, if we are not successful in utilizing ecommerce channels that consumers may prefer, we may experience a loss in market share and decreased revenue and profitability.
We have invested in industry-leading selling and marketing capabilities, while maintaining our presence in traditional brick-and-mortar retail channels. However, if we are not successful in utilizing ecommerce channels that consumers may prefer, we may experience a loss in market share and decreased revenue and profitability.
Any repurchases or recalls of our products could be costly to us and could damage our reputation or the value of our brands. If HBB is required to remove, or HBB voluntarily removes our products from the market, our reputation or brands could be tarnished, and HBB might have large quantities of finished products that could not be sold.
Any repurchases or recalls of our products could be costly to us and could damage our reputation or the value of our brands. If we are required to remove, or we voluntarily remove our products from the market, our reputation or brands could be tarnished, and we might have large quantities of finished products that could not be sold.
Anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet expectations or acquired businesses may carry unexpected liabilities. 8 Table of Contents HBB depends on third-party suppliers for all of our products, which subjects the Company to risks, including unanticipated increases in expenses, decreases in revenue and disruptions in the supply chain.
Anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet expectations or acquired businesses may carry unexpected liabilities. We depend on third-party suppliers for all of our products, which subjects the Company to risks, including unanticipated increases in expenses, decreases in revenue and disruptions in the supply chain.
As a majority of suppliers are based in China, international operations are subject to additional risks including, among others: • currency fluctuations; • labor unrest; • potential political, economic and social instability, including the repercussions of the conflict in Ukraine; • restrictions on transfers of funds; • import and export duties and quotas; • changes in domestic and international customs and tariffs, including embargoes and customs restrictions; • uncertainties involving the costs to transport products; • long distance shipping routes dependent upon a small group of shipping and rail carriers and import facilities; • unexpected changes in regulatory environments; • regulatory issues involved in dealing with foreign suppliers and in exporting and importing products; • protection of intellectual property; • difficulty in complying with a variety of foreign laws; • difficulty in obtaining distribution and administrative support; • natural or human induced disasters such as earthquakes, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, power or water shortages, telecommunications failures, and medical epidemics or pandemics, including potential consequences from the coronavirus; and • potentially adverse tax consequences, including significant changes in tax law.
Our supply chain is subject to additional risks including, among others: • currency fluctuations; • labor unrest; • potential political, economic or social instability and government restrictions; • restrictions on transfers of funds; • import and export duties and quotas; • changes in domestic and international customs and tariffs, including embargoes and customs restrictions; • uncertainties involving the costs and ability to transport products; • long distance shipping routes dependent upon a small group of shipping and rail carriers and import facilities; • unexpected changes in regulatory environments; • regulatory issues involved in dealing with foreign suppliers and in exporting and importing products; • protection of intellectual property; • difficulty in complying with a variety of foreign laws; • difficulty in obtaining distribution and administrative support; • natural or human induced disasters such as earthquakes, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, power or water shortages, telecommunications failures and medical epidemics or pandemics; and • potentially adverse tax consequences, including significant changes in tax law.
With the growing trend towards the concentration of the industry and HBB’s branded small electric household and specialty housewares appliance sales among fewer retailers, HBB is increasingly dependent upon fewer customers whose bargaining strength is growing as a result of this concentration.
With the growing trend towards the concentration of the industry and our branded small electric household and specialty housewares appliance sales among fewer retailers, we are increasingly dependent upon fewer customers whose bargaining strength is growing as a result of this concentration.
If HBB fails to compete effectively with these manufacturers and distributors, it could lose market share and experience a decrease in revenue, which would adversely affect our results of operations. HBB also competes with established companies, a number of which have substantially greater facilities, personnel, financial and other resources.
If we fail to compete effectively with these manufacturers and distributors, we could lose market share and experience a decrease in revenue, which would adversely affect our results of operations. We also compete with established companies, a number of which have substantially greater facilities, personnel, financial and other resources.
HBB faces exposure to product liability claims if one of our products is alleged to have caused property damage, bodily injury or other adverse effects up to a defined self-insured loss limit per claim and maintains product liability insurance for claims above this self-insured level.
We face exposure to product liability claims if one of our products is alleged to have caused property damage, bodily injury or other adverse effects up to a defined self-insured loss limit per claim and maintain product liability insurance for claims above this self-insured level.
The Company's Board has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on earnings, capital, and future expense requirements, financial conditions, contractual limitations and other factors our Board may consider.
The Company’s Board of Directors (“Board”) has the authority to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on earnings, capital, future expense requirements, financial conditions, contractual limitations, credit instruments and other factors our Board may consider.
HBB’s credit facility contains covenants and other restrictions that, among other things, require HBB to satisfy certain financial tests, maintain certain financial ratios and restrict HBB’s ability to incur additional indebtedness.
Our credit facility contains covenants and other restrictions that, among other things, require us to satisfy certain financial tests, maintain certain financial ratios and restrict our ability to incur additional indebtedness.
If HBB does not properly implement and maintain practices and controls with respect to compliance with applicable anti-corruption, anti-bribery and anti-kickback laws, or if HBB fails to enforce those practices and controls properly, 11 Table of Contents HBB may be held responsible for their actions and may become subject to regulatory sanctions, including administrative costs related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on HBB’s business and capital raising activities, any of which could materially and adversely affect HBB’s business, results of operations and financial condition.
If we do not properly implement and maintain practices and controls with respect to compliance with applicable anti-corruption, anti-bribery and anti-kickback laws, or if we fail to enforce those practices and controls properly, we may be held responsible for their actions and may become subject to regulatory sanctions, including administrative costs related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on our business and capital raising activities, any of which could materially and adversely affect our business, results of operations and financial condition.
In addition, HBB may not be able to maintain product liability insurance on terms acceptable to HBB in the future.
In addition, we may not be able to maintain product liability insurance on terms acceptable to us in the future.
To the extent that HBB relies on newly acquired businesses or new product lines to expand its business, these acquisitions or new product lines may not contribute positively to HBB’s earnings because anticipated sales volumes and synergies may not materialize, cost savings may be less than expected or acquired businesses may carry unexpected liabilities.
To the extent that we rely on newly acquired businesses or new product lines to expand our business, these acquisitions or new product lines may not contribute positively to our earnings because anticipated sales volumes and synergies may not materialize, cost savings may be less than expected or acquired businesses may carry unexpected liabilities.
Certain members of the Company's extended founding family own a substantial amount of Class A Common and Class B Common, and if they were to act in concert, could control the outcome of director elections and other stockholder votes on significant actions. Hamilton Beach Holding has two classes of common stock: Class A Common and Class B Common.
Certain members of the Company’s extended founding family own a substantial amount of Class A Common and Class B Common, and if they were to act in concert, could control the outcome of director elections and other stockholder votes on significant actions.
Any failure to comply with Privacy Laws could have a material adverse impact on our financial condition and results of operations. Financial Risks The financing arrangement of HBB contains various restrictions that could limit operating flexibility.
Any failure to comply with Privacy Laws could have a material adverse impact on our financial condition and results of operations. Financial Risks Our financing arrangements contain various restrictions that could limit operating flexibility.
On the basis of this common stock ownership, certain members of the Company's extended founding family could exercise 76.13% of the Company's total voting power.
On the basis of this common stock ownership, certain members of the Company’s extended founding family could exercise 79.56% of the Company’s total voting power.
Any new products that HBB develops may not receive market acceptance or otherwise generate any meaningful revenue or profit relative to our expectations based on, among other things, commitments to fund advertising, marketing, promotional programs and development. 6 Table of Contents HBB’s inability to compete effectively with competitors in its industry could result in lost market share and decreased revenue.
Any new products that we develop may not receive market acceptance or otherwise generate any meaningful revenue or profit relative to our expectations based on, among other things, commitments to fund advertising, marketing, promotional programs and development. Our inability to compete effectively with competitors in our industry could result in lost market share and decreased revenue.
Additionally, in periods of uncertain economic conditions, such as inflation, rising interest rates, recessions or economic slowdowns, HBB's customers may purchase less of our products as they manage their inventory levels to adjust to changes in consumers’ spending habits in response to such economic conditions.
Additionally, in periods of uncertain economic conditions, such as inflation, rising interest rates, recessions or economic slowdowns, our customers may purchase less of our products as they manage their inventory levels to adjust to changes in consumers’ spending habits in response to such economic conditions. These circumstances could adversely impact our revenue and profitability.
Changes in consumer shopping trends and changes in distribution channels could result in lost market share and decreased revenue and profitability. Traditional brick-and-mortar retail channels have experienced low growth or declines in recent years, while the ecommerce channel has experienced significant growth.
As a result of this competition, we could lose market share and revenue. 6 Table of Contents Changes in consumer shopping trends and changes in distribution channels could result in lost market share and decreased revenue and profitability. Traditional brick-and-mortar retail channels have experienced low growth or declines in recent years, while the ecommerce channel has experienced significant growth.
The foregoing factors could have a material adverse effect on our ability to maintain or increase the supply of products, which may result in material increases in expenses and decreases in revenue and profitability. Our financial results may be negatively impacted by transportation constraints on shipping capabilities.
The foregoing factors could have a material adverse effect on our ability to maintain or increase the supply of products, which may result in material increases in our expenses and decreases in our revenue and profitability.
Holders of Class B Common are entitled to cast ten votes per share and, as of December 31, 2022, accounted for the remaining voting power of Hamilton Beach Holding. As of December 31, 2022, certain members of the Company's extended founding family held approximately 32.72% of Class A Common and 87.47% of Class B Common.
Holders of Class B Common are entitled to cast ten votes per share and, as of December 31, 2023, accounted for the remaining voting power of the Company. As of December 31, 2023, certain members of the Company’s extended founding family held approximately 32.34% of Class A Common and 92.99% of Class B Common.
As an example, HBB’s products require a substantial amount of plastic. Because the primary resource used in plastic is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum. When the prices of petroleum, as well as steel, aluminum and copper, increase significantly, supplier price increases may materially reduce our profitability.
Because the primary resource used in plastic is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum. When the prices of petroleum, as well as steel, aluminum and copper, increase significantly, supplier price increases may materially reduce our profitability if we are unable to pass price increases on to our customers.
As a result of dependence on its key customers, HBB could experience a material adverse effect on its revenue and profitability if any of the following were to occur: • the insolvency or bankruptcy of any key customer; • a declining market in which customers materially reduce orders or demand lower prices; or • a strike or work stoppage at a key customer facility, which could affect both its suppliers and customers.
In addition, we may be unable to continually meet the needs of those customers, which could damage our customer relationships and result in reduced new orders. 5 Table of Contents As a result of dependence on key customers, we could experience a material adverse effect on our revenue and profitability if any of the following were to occur: • the insolvency or bankruptcy of any key customer; • a declining market in which customers materially reduce orders or demand lower prices; or • a strike or work stoppage at a key customer facility, which could affect both its suppliers and customers.
These circumstances could adversely impact our revenue and profitability. 5 Table of Contents HBB is dependent on key customers and the loss of, or significant decline in business from, one or more of its key customers could materially reduce its revenue and profitability and its ability to sustain or grow its business. HBB relies on several key customers.
Our business is dependent on key customers and the loss of, or significant decline in business from, one or more of our key customers could materially reduce our revenue and profitability and our ability to sustain or grow our business. We rely on several key customers.
The Audit Review Committee of the Company is regularly briefed on cybersecurity matters, however despite our security efforts, if unauthorized access does occur, we could become the subject of regulatory action or litigation from our customers, employees, suppliers, and shareholders, which could damage our reputation, require significant expenditures of capital, and cause us to lose business and revenue.
If unauthorized access does occur, we could also become the subject of regulatory action or litigation from our customers, employees, suppliers and shareholders, which could damage our reputation, require significant expenditures of capital and cause us to lose business and revenue.
Although we take measures to mitigate the impact of increased product and transportation costs through pricing, if inflationary pressures are sustained, or if pricing strategies are ineffective or are not implemented in a timely manner, we may only be able to recover a portion of our increased costs in future periods which may have a material adverse effect on our businesses, financial condition, results of operations and cash flows.
If operations at the Byhalia, Mississippi distribution center are disrupted, it could result in a material loss of revenue and additional costs to bring the facility back to full operating capacity. 7 Table of Contents Although we take measures to mitigate the impact of increased product and transportation costs through pricing, if inflationary pressures are sustained, or if pricing strategies are ineffective or are not implemented in a timely manner, we may only be able to recover a portion of our increased costs in future periods which may have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, HBB competes with its own retail customers, who use their own private label brands, and importers and foreign manufacturers of unbranded products. Some competitors may be willing to reduce prices and accept lower profit margins to compete. As a result of this competition, HBB could lose market share and revenue.
In addition, we compete with our retail customers, who use their own private label brands, and importers and foreign manufacturers of unbranded products. Some competitors may be willing to reduce prices and accept lower profit margins to compete.
Factors that are largely beyond HBB's control, such as inflation and commodity prices for the raw materials needed by suppliers of HBB’s products, may affect the cost of products. While, historically, the costs of our products have fluctuated, we experienced higher than expected product costs during 2022, largely due to cost pressures resulting from economic conditions.
Factors that are largely beyond our control, such as inflation and commodity prices for the raw materials needed by suppliers of our products, may affect the cost of products. Historically, the costs of our products have fluctuated due to cost pressures resulting from economic conditions. As an example, our products require a substantial amount of plastic.
The increasing concentration of HBB’s branded small electric household and specialty housewares appliance sales among a few retailers and the trend toward private label brands could materially reduce revenue and profitability.
The increasing concentration of our branded small electric household and specialty housewares appliance sales among a few retailers and the trend toward private label brands could materially reduce revenue and profitability. During fiscal 2023, our five largest customers accounted for a total of approximately 64% of our revenue.
We have experienced and could again experience significant delays in shipping our products to customers and incur additional costs to establish alternative shipping sources if existing vendors are unable to sufficiently handle our shipping volume. We cannot predict if we will be able to obtain alternative shipping sources within the time frames that we require and at a comparable cost.
We cannot predict if we will be able to obtain alternative shipping sources within the time frames that we require and at a comparable cost, which could lead to significant delays in shipping our products and additional costs.
HBB’s business subjects it to product liability claims, which could affect the reputation, revenue and profitability of HBB.
Our business subjects us to product liability claims, which could affect our reputation, revenue and profitability.
While we have not experienced any material impacts from a cyber-attack, any one or more future cyber-attacks could have a material adverse effect on our financial condition and results of operations. Our information technology systems may be vulnerable from time to time to damage and other technical malfunctions.
While we have not experienced any material impacts from a cyber attack, any one or more future cyber attacks could have a material adverse effect on our financial condition and results of operations. Failure to maintain data privacy could have a material adverse effect on our business, financial condition and results of operations.
If our transportation industry vendors become capacity constrained, then we may have to identify new vendors or explore alternative order fulfillment methods to ensure we have sufficient shipping capabilities.
Certain transportation industry vendors may experience capacity constraints due to increases in volume, shipping availability, port congestion, labor shortages or other factors. If our transportation industry vendors become capacity constrained, then we may have to identify new vendors or explore alternative order fulfillment methods to ensure we have sufficient shipping capabilities.
HBB’s business involves the potential for product recalls, which could affect HBB’s revenue and profitability. As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal Hazardous Substances Act, which empower the CPSC to seek to exclude from the market those products that are found to be unsafe or hazardous.
The products that we sell are subject to various mandatory and voluntary standards. As a marketer and distributor of consumer products, we are subject to the Consumer Products Safety Act and the Federal Hazardous Substances Act, which empower the CPSC to seek to exclude from the market those products that are found to be unsafe or hazardous.
U.S. government trade actions could have a material adverse effect on Hamilton Beach Brands Holding Company’s subsidiaries, financial position, and results of operation. Over the past several years, the U.S. government has taken a number of trade actions that impact or could impact our operations, including imposing tariffs on certain goods imported into the United States.
Over the past several years, the U.S. government has taken a number of trade actions that impact or could impact our operations, including imposing tariffs on certain goods imported into the United States. In addition, several governments, including the European Union, China and India, have imposed tariffs on certain goods imported from the United States.
HBB may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or lines of products. The acquisition of a business or of the rights to market specific products or use specific product names may involve a financial commitment by HBB, either in the form of cash or stock consideration.
The acquisition of a business, or of the rights to market specific products or use specific product names, may involve a financial commitment by us, either in the form of cash or stock consideration. We may not be able to acquire businesses and develop products that will contribute positively to our earnings.
Holders of Class A Common will be entitled to cast one vote per share and, as of December 31, 2022, accounted for approximately 20.70% of the voting power of Hamilton Beach Holding.
Hamilton Beach Holding has two classes of common stock: Company Class A common stock (“Class A Common”) and Class B common stock (“Class B Common”). Holders of Class A Common are entitled to cast one vote per share and, as of December 31, 2023, accounted for approximately 22.14% of the voting power of the Company.
The costs of investigating and remediating historical contamination may increase based on the findings of investigations and the effectiveness of remediation methods. In addition, the discovery of additional contamination at these or other sites could result in significant cleanup costs that could have a material adverse effect on HBB’s financial conditions and results of operations.
In addition, the discovery of additional contamination at these or other sites could result in significant cleanup costs that could have a material adverse effect on our financial conditions and results of operations. Future changes to environmental laws could require us to incur significant additional expense.
Weakness in consumer confidence and poor financial performance by mass merchandisers, ecommerce retailers, warehouse clubs, department stores or any of HBB’s other customers could result in reduced revenue and profitability. A general slowdown in the consumer sector could result in additional pricing and marketing support pressures on HBB.
The strength of the economy in the U.S., and to a lesser degree in Canada and Mexico, has a significant impact on our performance. Weakness in consumer confidence and poor financial performance by mass merchandisers, ecommerce retailers, warehouse clubs, department stores or any of our other customers could result in reduced revenue and profitability.
If the number of product liability claims HBB experiences exceeds historical amounts, if HBB is unable to maintain product liability insurance or if HBB’s product liability claims exceed the amount of our insurance coverage, HBB’s results of operations and financial condition could be affected adversely. Government regulations could impose costly requirements on HBB.
If the number of product liability claims we experience exceeds historical amounts, if we are unable to maintain product liability insurance or if our product liability claims exceed the amount of our insurance coverage, our results of operations and financial condition could be affected adversely. Our business involves the potential for product recalls, which could affect our revenue and profitability.
Additionally, unauthorized access could also cause interruptions in our operations and might require us to spend significant management time and other resources investigating the event and dealing with local and federal law enforcement.
Additionally, unauthorized access could also cause interruptions in our operations and might require us to spend significant management time and other resources investigating the event and dealing with local and federal law enforcement. 9 Table of Contents There is no assurance that the measures we have taken to protect our information systems will prevent or limit the impact of a future cyber incident.
In addition, we translate sales and other results denominated in foreign currencies into U.S. dollars for purposes of our consolidated financial statements.
As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks in connection with our transactions that are denominated in foreign currencies. In addition, we translate sales and other results denominated in foreign currencies into U.S. dollars for purposes of our consolidated financial statements.
HBB is subject in the ordinary course of its business, in the U.S. and elsewhere, to many statutes, ordinances, rules and regulations that, if violated by HBB or its affiliates, partners or vendors, could have a material adverse effect on HBB’s business. HBB is required to comply with the U.S.
Compliance with multiple, and potentially conflicting, international laws and regulations, including anti-corruption laws, may be difficult, burdensome or expensive. We are subject to many statutes, ordinances, rules and regulations in the U.S. and elsewhere that, if violated by us or our affiliates, partners or vendors, could have a material adverse effect on our business.
HBB’s results of operations are also susceptible to adverse publicity regarding the quality and safety of our products. In particular, product recalls may result in a decline in sales for a particular product. The markets for HBB's products are highly seasonal and dependent on consumer spending, which could result in significant variations in revenue and profitability.
The markets for our products are highly seasonal and dependent on consumer spending, which could result in significant variations in revenue and profitability.
In addition, under some of the agreements through which HBB has sold real estate, HBB has retained responsibility for certain contingent environmental liabilities arising from pre-closing operations.
Our liability for these costs could increase if the unrelated third party does not, or cannot, perform its obligations under those agreements. In addition, under some of the agreements through which we have sold real estate, we have retained responsibility for certain contingent environmental liabilities arising from pre-closing operations.
Under certain circumstances, the CPSC could require HBB to repair, replace or refund the purchase price of one or more of our products, or HBB may voluntarily do so. Electrical appliances are subject to various mandatory and voluntary standards.
In addition, the FDA and other governmental authorities regulate the development, manufacture, sale and distribution of certain of our products. Under certain circumstances, the CPSC, the FDA or other government agencies could require us to repair, replace or refund the purchase price of one or more of our products, or we may voluntarily do so.
In addition, these laws may be changed or new laws may be enacted in the future. International litigation is often expensive, time-consuming and distracting. As a result, any of these risks could significantly reduce HBB’s profitability and its ability to operate its businesses effectively. 10 Table of Contents HBB’s obligations relating to environmental matters may exceed our expectations.
As a result, any of these risks could significantly reduce our profitability and our ability to operate our businesses effectively. 10 Table of Contents Our obligations relating to environmental matters may exceed our expectations. We are subject to laws and regulations relating to the protection of the environment, including those governing the management and disposal of hazardous substances.
Furthermore, failure to timely notify the CPSC of a potential safety hazard can result in fines being assessed against HBB. Additionally, laws regulating certain consumer products exist in some states, as well as in other countries in which HBB sells our products, and more restrictive laws and regulations may be adopted in the future.
Additionally, laws regulating certain of our products exist in some states, as well as in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the future. Our results of operations are also susceptible to adverse publicity regarding the quality and safety of our products.
Future changes to environmental laws could require HBB to incur significant additional expense. HBB could, under some circumstances, also be held financially liable for or suffer other adverse effects due to environmental violations or contamination caused by prior owners of businesses HBB has acquired.
We could, under some circumstances, also be held financially liable for or suffer other adverse effects due to environmental violations or contamination caused by prior owners of businesses we have acquired. In certain circumstances, our financial liability for cleanup costs takes into account agreements with an unrelated third party.
Additionally, our exposure to rising interest rates subjects us to increased debt obligations with respect to existing floating rate debt during periods where such rates are in effect, particularly in light of the significant increase in interest rates during 2022. Regulatory Risks HBB may become subject to claims under foreign laws and regulations, which may be expensive, time-consuming and distracting.
Additionally, our exposure to rising interest rates subjects us to increased debt obligations with respect to existing floating rate debt during periods where such rates are in effect. We are subject to foreign currency exchange risk.
The Company relies heavily on information technology systems to operate websites; record and process transactions; respond to customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; and maintain cost-efficient operations. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of computer hardware and software systems and maintain cybersecurity.
We rely on information technology systems to operate websites, record and process transactions, respond to customer inquiries, manage inventory, purchase, sell and ship merchandise on a timely basis, maintain cost-efficient operations, and to comply with regulatory, legal, and tax requirements.
Because HBB has employees, property and business operations outside of the U.S., HBB is subject to the laws and the court systems of many jurisdictions. HBB may become subject to claims outside the U.S. for violations or alleged violations of laws with respect to the current or future foreign operations of HBB.
Regulatory Risks We may become subject to claims under foreign laws and regulations, which may be expensive, time-consuming and distracting. Because we have employees, property and business operations outside of the U.S., we are subject to the laws and the court systems of many jurisdictions.
Employment and retention of qualified personnel is important to the successful conduct of our business. Therefore, the Company's success also depends upon its ability to recruit, hire, train and retain current and additional skilled and experienced management personnel.
Therefore, our success also depends upon our ability to recruit, hire, train and retain current and additional skilled and experienced management personnel. Our inability to hire and retain personnel with the requisite skills could impair our ability to manage and operate our consolidated business effectively and could significantly reduce our consolidated profitability.
HBB must receive a continuous flow of new orders from its large, high-volume retail customers; however, it may be unable to continually meet the needs of those customers. In addition, failure to obtain anticipated orders or delays or cancellations of orders or significant pressure to reduce prices from key customers could impair its ability to sustain or grow its business.
Failure to obtain anticipated orders or delays or cancellations of orders or significant pressure to reduce prices from key customers could impair our ability to sustain or grow our business.
In addition, we collect, store, have access to and otherwise process certain confidential or sensitive data.
Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of computer hardware and software systems and maintain cybersecurity. In addition, we collect, store, have access to and otherwise process certain confidential or sensitive data.
Such a loss or delay could reduce demand and cause our sales and/or profitability to decline. Failure to maintain data privacy could have a material adverse effect on our business, financial condition and results of operations.
Any material disruption or slowdown of our systems, including our failure to successfully upgrade systems, could cause information, including data related to customer orders, to be lost or delayed. Such a loss or delay could reduce demand and cause our sales and/or profitability to decline.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES The following table presents the principal distribution and office facilities owned or leased: Owned/ Facility Location Leased Function(s) (3) Glen Allen, Virginia Leased Corporate headquarters Geel, Belgium (1) Distribution center Shenzhen, People's Republic of China (1) Distribution centers Mexico City, Mexico Leased Mexico sales and administrative headquarters Belleville, Ontario, Canada Leased Distribution center Southern Pines, North Carolina Owned Service center for customer returns; parts distribution center; call center Shenzhen, People's Republic of China Leased Administrative office Markham, Ontario, Canada Leased Canada sales and administration headquarters Shanghai, People's Republic of China Leased Sales office Tultitlan, Mexico (1) Distribution center Byhalia, Mississippi Leased Distribution centers (2) (1) This facility is not owned or leased by HBB.
Biggest changePROPERTIES The following table presents the principal distribution and office facilities owned or leased: Owned/ Facility Location Leased Function(s) (3) Glen Allen, Virginia Leased Corporate headquarters Geel, Belgium (1) Distribution center Shenzhen, People’s Republic of China (1) Distribution center Mexico City, Mexico Leased Mexico sales and administrative headquarters Belleville, Ontario, Canada Leased Distribution center Southern Pines, North Carolina Owned Service center for customer returns; parts distribution center; call center Shenzhen, People’s Republic of China Leased Administrative office Markham, Ontario, Canada Leased Canada sales and administration headquarters Shanghai, People’s Republic of China Leased Sales office Tultitlan, Mexico (1) Distribution center Byhalia, Mississippi Leased Distribution centers (2) (1) This facility is not owned or leased by HBB.
This facility is managed by a third-party distribution provider. (2) The Company leases two distribution facilities in Byhalia, Mississippi (3) Sales offices are also leased in several cities in the U.S., Canada, China and Mexico.
This facility is managed by a third-party distribution provider. (2) The Company leases two distribution facilities in Byhalia, Mississippi (3) Sales offices are also leased in several cities in the U.S., Canada and Mexico.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. LEGAL PROCEEDINGS The information required by this Item 3 is set forth in Note 11 "Contingencies" included in our Financial Statements and Supplementary Data contained in Part IV of this Form 10-K and is hereby incorporated herein by reference to such information. Item 4. MINE SAFETY DISCLOSURES None. PART II
Biggest changeItem 3. LEGAL PROCEEDINGS The information required by this Item 3 is set forth in Note 10 “Contingencies” included in our Financial Statements and Supplementary Data contained in Part IV of this Form 10-K and is hereby incorporated herein by reference to such information. Item 4. MINE SAFETY DISCLOSURES None. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the year ended December 31, 2022, the Company repurchased 261,049 shares for an aggregate purchase price of $3.0 million. There were no share repurchases during the fourth quarter of 2022. There were no share repurchases during the years ended December 31, 2021 and 2020. 13 Table of Contents Item 6. RESERVED 14 Table of Contents Item 7.
Biggest changeDuring the years ended December 31, 2023 and 2022, we repurchased 250,772 and 261,049 shares for an aggregate purchase price of $3.1 million and $3.0 million, respectively. There were no share repurchases during the year ended December 31, 2021.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) Historically, the Company employed a total return on investment approach whereby a mix of equities and fixed income investments were used to maximize the long-term return of plan assets for a prudent level of risk.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) Historically, we employed a total return on investment approach whereby a mix of equities and fixed income investments were used to maximize the long-term return of plan assets for a prudent level of risk.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's Class A Common is traded on the New York Stock Exchange under the ticker symbol “HBB.” Because of transfer restrictions, no trading market has developed, or is expected to develop, for the Company's Class B Common.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A Common is traded on the New York Stock Exchange under the ticker symbol “HBB.” Because of transfer restrictions, no trading market has developed, or is expected to develop, for our Class B Common.
Because the 2022 assumptions are used to calculate 2023 pension expense amounts, a one percentage-point change in the expected long-term rate of return on plan assets would result in a change in pension expense for 2023 of approximately $0.3 million for the plans.
Because the 2023 assumptions are used to calculate 2024 pension expense amounts, a one percentage-point change in the expected long-term rate of return on plan assets would result in a change in pension expense for 2024 of approximately $0.3 million for the plans.
The historical and forward-looking rates of return are used to determine the Company's estimated rate of return assumption. Expected returns for the U.S. pension plan are based on a calculated market-related value for U.S. pension plan assets. Expected returns for the non-U.S. pension plan are based on fair market value for non-U.S. pension plan assets.
The historical and forward-looking rates of return are used to determine our estimated rate of return assumption. Expected returns for the U.S. pension plan are based on a calculated market-related value for U.S. pension plan assets. Expected returns for the non-U.S. pension plan are based on fair market value for non-U.S. pension plan assets.
The fixed income investments that were chosen under this strategy, while not precisely the same, are meant to parallel the investments selected in determining the discount rate used to calculate the Company’s pension liability. For the Non-U.S.
The fixed income investments that were chosen under this strategy, while not precisely the same, are meant to parallel the investments selected in determining the discount rate used to calculate our pension liability. For the Non-U.S.
There is no guarantee the actual return on the plans’ assets will equal the expected long-term rate of return on plan assets or that the plans will not incur investment losses. 15 Table of Contents Item 7.
There is no guarantee the actual return on the plans’ assets will equal the expected long-term rate of return on plan assets or that the plans will not incur investment losses. 17 Table of Contents Item 7.
Under this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns which are recognized ratably in the market-related value of assets over three years.
Under this methodology, asset gains and losses resulting from actual returns that differ from our expected returns which are recognized ratably in the market-related value of assets over three years.
Plan, the expected long-term rate of return on defined benefit plan assets reflects the Company's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations.
Plan, the expected long-term rate of return on defined benefit plan assets reflects our expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations.
We evaluated such agreements with our customers and determined they should be accounted for as variable consideration. To estimate variable consideration, the Company applies both the expected value method and most likely amount method based on the form of variable consideration, according to which method would provide the better prediction.
We evaluated such agreements with our customers and determined they should be accounted for as variable consideration. To estimate variable consideration, we apply 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 following discussion and analysis focuses on our financial results for the years ended December 31, 2022 and 2021 and year-to-year comparisons between these years.
The following discussion and analysis focuses on our financial results for the years ended December 31, 2023 and 2022 and year-to-year comparisons between these years.
The Company has elected to account for shipping and handling activities performed after a customer obtains control of the goods as activities to fulfill the promise to transfer the goods, and therefore these activities are not assessed as a separate service to customers. The amount of revenue recognized varies primarily with price concessions and changes in returns.
We have elected to account for shipping and handling activities performed after a customer obtains control of the goods as activities to fulfill the promise to transfer the goods, and therefore these activities are not assessed as a separate service to customers. The amount of revenue recognized varies primarily with price concessions and changes in returns.
A one percentage-point change in the discount rate would result in a change in pension expense for 2023 of less than $0.1 million.
A one percentage-point change in the discount rate would result in a change in pension expense for 2024 of less than $0.1 million.
Changes to the estimate of any of these factors could result in a material change to the Company's pension obligation causing a related increase or decrease in reported net operating results in the period of change in the estimate.
Changes to the estimate of any of these factors could result in a change to our pension obligation causing a related increase or decrease in reported net operating results in the period of change in the estimate.
In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return.
In establishing the expected long-term rate of return assumption for plan assets, we consider the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return.
A one percentage-point increase in the discount rate would have lowered the plans’ projected benefit obligation as of the end of 2022 by approximately $1.0 million; while a one percentage-point decrease in the discount rate would have raised the plans’ projected benefit obligation as of the end of 2022 by approximately $1.1 million. 16 Table of Contents
A one percentage-point increase in the discount rate would have lowered the plans’ projected benefit obligation as of the end of 2023 by approximately $1.0 million; while a one percentage-point decrease in the discount rate would have raised the plans’ projected benefit obligation as of the end of 2023 by approximately $1.1 million. 18 Table of Contents
Retirement Benefit Plans: The Company maintains two defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. The Company's policy is to periodically make contributions to fund the defined benefit pension plans within the range allowed by applicable regulations. The defined benefit pension plan assets consist primarily of government and corporate bonds.
Retirement Benefit Plans: We maintain two defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. Our policy is to periodically make contributions to fund the defined benefit pension plans within the range allowed by applicable regulations. The defined benefit pension plan assets consist primarily of government and corporate bonds.
A discussion of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 is included in Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
A discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).
Revenue Recognition: Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales taxes are excluded from revenue.
Revenue Recognition: Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Sales taxes are excluded from revenue.
During 2022, there were no material adjustments to the aforesaid estimates and the Company's past results of operations have not been materially affected by a change in these estimates. Although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change these estimates in the future.
During 2023, there were no material adjustments to the aforesaid estimates and our past results of operations have not been materially affected by a change in these estimates. Although there can be no assurances, we are not aware of any circumstances that would be reasonably likely to materially change these estimates in the future.
The expected value method involves a probability weighted determination of the expected amount, whereas the most likely amount method identifies the single most likely outcome in a range of possible amounts. The Company monitors its estimates of variable consideration, which includes returns and price concessions, and periodically makes adjustments to the carrying amounts as appropriate.
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. We monitor our estimates of variable consideration, which includes returns and price concessions, and periodically make adjustments to the carrying amounts as appropriate.
The Company offers price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements.
We offer price concessions to our customers for incentive offerings, special pricing agreements, price competition, promotions or other volume-based arrangements.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In February 2022, the Company's Board approved a stock repurchase program for the purchase of up to $25 million of the Company's Class A Common outstanding starting February 22, 2022 and ending December 31, 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In November 2023, our Board approved a stock repurchase program for the purchase of up to $25 million of our Class A Common outstanding starting January 1, 2024 and ending December 31, 2025.
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
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.
At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promised good or service that is distinct.
At March 3, 2023, there were 727 Class A Common stockholders of record and 771 Class B Common stockholders of record.
As of March 1, 2024, there were 773 Class A Common stockholders of record and 746 Class B Common stockholders of record.
During the second quarter of 2022, the Board of Directors of HBB approved the termination of the Company's U.S. defined benefit pension plan (the "Plan") with an effective date of September 30, 2022.
During 2022, our Board approved the termination of our U.S. defined benefit pension plan (the “Plan”) with an effective date of September 30, 2022. The termination process is still ongoing and is expected to be completed in 2024.
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Our previously authorized share buyback program was approved by our Board in February 2022 for the purchase of up to $25 million of our Class A Common outstanding starting February 22, 2022 and ending December 31, 2023.
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During the fourth quarter of 2023, we repurchased 111,123 shares for an aggregate purchase price of $1.6 million. 15 Table of Contents Issuer Purchases of Equity Securities (a) (b) (c) (d) Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of the Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program Month #1 October 1 to 31, 2023 19,769 $ 12.14 19,769 $ 20,310,913 Month #2 November 1 to 30, 2023 44,800 $ 13.99 44,800 $ 19,684,324 Month #3 December 1 to 31, 2023 46,554 $ 15.83 46,554 $ 18,947,187 111,123 $ 14.43 111,123 $ 18,947,187 Item 6.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. RESERVED 14 Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 22 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 22
Biggest changeItem 6. RESERVED 16 Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 24

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) RESULTS OF OPERATIONS The results of operations for Hamilton Beach Holding were as follows for the years ended December 31: 2022 Compared with 2021 Year Ended December 31 2022 % of Revenue 2021 % of Revenue $ Change % Change Revenue $ 640,949 100.0 % $ 658,394 100.0 % $ (17,445) (2.6) % Cost of sales 511,835 79.9 % 521,892 79.3 % (10,057) (1.9) % Gross profit 129,114 20.1 % 136,502 20.7 % (7,388) (5.4) % Selling, general and administrative expenses 90,120 14.1 % 104,763 15.9 % (14,643) (14.0) % Amortization of intangible assets 200 — % 200 — % — — % Operating profit (loss) 38,794 6.1 % 31,539 4.8 % 7,255 23.0 % Interest expense, net 4,589 0.7 % 2,854 0.4 % 1,735 60.8 % Other expense (income), net 1,776 0.3 % (272) — % 2,048 (752.9) % Income (loss) from continuing operations before income taxes 32,429 5.1 % 28,957 4.4 % 3,472 12.0 % Income tax expense 7,162 1.1 % 7,651 1.2 % (489) (6.4) % Net income from continuing operations 25,267 3.9 % 21,306 3.2 % 3,961 18.6 % Income (loss) from discontinued operations, net of tax — — % — — % — — % Net income 25,267 4.1 % 21,306 3.2 % 3,961 18.6 % Effective income tax rate on continuing operations 22.1 % 26.4 % The following table identifies the components of the change in revenue for 2022 compared with 2021: Revenue 2021 $ 658,394 (Decrease) increase from: Unit volume and product mix (58,530) Foreign currency (1,777) Average sales price 42,862 2022 $ 640,949 Revenue - Revenue decreased $17.4 million, or 2.6% over the prior year due primarily to lower unit volume in the US, Canadian and Latin American markets.
Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) RESULTS OF OPERATIONS Our results of operations were as follows for the years ended December 31: 2023 Compared with 2022 Year Ended December 31 2023 % of Revenue 2022 % of Revenue $ Change % Change Revenue $ 625,625 100.0 % $ 640,949 100.0 % $ (15,324) (2.4) % Cost of sales 481,949 77.0 % 511,835 79.9 % (29,886) (5.8) % Gross profit 143,676 23.0 % 129,114 20.1 % 14,562 11.3 % Selling, general and administrative expenses 108,395 17.3 % 90,120 14.1 % 18,275 20.3 % Amortization of intangible assets 200 — % 200 — % — — % Operating profit (loss) 35,081 5.6 % 38,794 6.1 % (3,713) (9.6) % Interest expense, net 3,000 0.5 % 4,589 0.7 % (1,589) (34.6) % Other expense (income), net 385 0.1 % 1,776 0.3 % (1,391) (78.3) % Income (loss) before income taxes 31,696 5.1 % 32,429 5.1 % (733) (2.3) % Income tax expense 6,454 1.0 % 7,162 1.1 % (708) (9.9) % Net income (loss) 25,242 4.0 % 25,267 3.9 % (25) (0.1) % Effective income tax rate 20.4 % 22.1 % The following table identifies the components of the change in revenue for 2023 compared with 2022: Revenue 2022 $ 640,949 (Decrease) increase from: Unit volume and product mix 9,527 Foreign currency 3,254 Average sales price (28,105) 2023 $ 625,625 Revenue - Revenue decreased $15.3 million, or 2.4% over the prior year due primarily to lower average selling price.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) FORWARD-LOOKING STATEMENTS The statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere throughout this Annual Report on Form 10-K that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) FORWARD-LOOKING STATEMENTS The statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere throughout this Annual Report on Form 10-K that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act.
Recently Issued and Adopted Accounting Standards Refer to Note 1 to the consolidated financial statements for discussion of recently issued and adopted accounting standards. 20 Table of Contents Item 7.
Recently Issued and Adopted Accounting Standards Refer to Note 1 to the consolidated financial statements for discussion of recently issued and adopted accounting standards. 22 Table of Contents Item 7.
A 0.25% increase in the base rate would increase HBB’s estimated total annual interest payments on the HBB Facility by approximately $0.2 million. HBB's purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and incentive compensation.
A 0.25% increase in the base rate would increase our estimated total annual interest payments on the HBB Facility by approximately $0.3 million. Our purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and incentive compensation.
The applicable margins, effective December 31, 2022, for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.00% and 2.05%, respectively. The HBB Facility also requires a fee of 0.25% per annum on the unused commitment. The margins and unused com mitment fee under the HBB Facility are subject to quarterly adjustment based on average excess availability.
The applicable margins, effective December 31, 2023, for base rate loans and bankers’ acceptance loans denominated in Canadian dollars were 0.00% and 1.55%, respectively. The HBB Facility also requires a fee of 0.25% per annum on the unused commitment. The margins and unused com mitment fee under the HBB Facility are subject to quarterly adjustment based on average excess availability.
Borrowings bear interest at a floating rate, which can be a base rate, Secured Overnight Financing Rate ("SOFR") or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. T he applicable margins, effective December 31, 2022, for base rate loans and SOFR loans denominated in U.S. dollars were 0.00% and 2.05%, respectively.
Borrowings bear interest at a floating rate, which can be a base rate, Secured Overnight Financing Rate (SOFR) or bankers’ acceptance rate, as defined in the HBB Facility, plus an applicable margin. T he applicable margins, effective December 31, 2023, for base rate loans and SOFR loans denominated in U.S. dollars were 0.00% and 1.55%, respectively.
An event of default, as defined in the HBB Facility and in HBB's operating lease agreements, could cause an acceleration of the payment schedule. No such event of default for HBB has occurred or is anticipated to occur.
An event of default, as defined in the HBB Facility and in our operating and finance lease agreements, could cause an acceleration of the payment schedule. No such event of default for us has occurred or is anticipated to occur.
To reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a portion of the HBB Facility. Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate.
To reduce the exposure to changes in the market rate of interest, we have entered into interest rate swap agreements for a portion of the HBB Facility. Terms of the interest rate swap agreements require us to receive a variable interest rate and pay a fixed interest rate.
The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to Hamilton Beach Holding, subject to achieving availability thresholds.
The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends, subject to achieving availability thresholds.
Such risks and uncertainties include, without limitation: (1) the Company’s ability to source and ship products to meet anticipated demand, (2) the Company’s ability to successfully manage constraints throughout the global transportation supply chain, (3) uncertain or unfavorable global economic conditions, including those resulting from the COVID-19 pandemic and its downstream impacts and the ongoing conflict in Ukraine; (4) changes in the sales prices, product mix or levels of consumer purchases of small electric and specialty housewares appliances, (5) changes in consumer retail and credit markets, including the increasing volume of transactions made through third-party internet sellers, (6) bankruptcy of or loss of major retail customers or suppliers, (7) changes in costs, including transportation costs, of sourced products, (8) delays in delivery of sourced products, (9) changes in or unavailability of quality or cost effective suppliers, (10) exchange rate fluctuations, changes in the import tariffs and monetary policies and other changes in the regulatory climate in the countries in which the Company operates or buys and/or sells products, (11) the impact of tariffs on customer purchasing patterns, (12) product liability, regulatory actions or other litigation, warranty claims or returns of products, (13) customer acceptance of, changes in costs of, or delays in the development of new products, (14) increased competition, including consolidation within the industry, (15) shifts in consumer shopping patterns, gasoline prices, weather conditions, the level of consumer confidence and disposable income as a result of economic conditions, unemployment rates or other events or conditions that may adversely affect the level of customer purchases of HBB products, (16) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (17) other risk factors, including those described in the Company's filings with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2022.
Such risks and uncertainties include, without limitation: (1) uncertain or unfavorable global economic conditions and impacts from global military conflicts; (2) the Company’s ability to source and ship products to meet anticipated demand; (3) the Company’s ability to successfully manage constraints throughout the global transportation supply chain; (4) changes in the sales prices, product mix or levels of consumer purchases of small electric and specialty housewares appliances; (5) changes in consumer retail and credit markets, including the increasing volume of transactions made through third-party internet sellers; (6) bankruptcy of or loss of major retail customers or suppliers; (7) changes in costs, including transportation costs, of sourced products; (8) delays in delivery of sourced products; (9) changes in or unavailability of quality or cost effective suppliers; (10) exchange rate fluctuations, changes in the import tariffs and monetary policies and other changes in the regulatory climate in the countries in which the Company operates or buys and/or sells products; (11) the impact of tariffs on customer purchasing patterns; (12) product liability, regulatory actions or other litigation, warranty claims or returns of products; (13) customer acceptance of, changes in costs of or delays in the development of new products; (14) increased competition, including consolidation within the industry; (15) changes in customers’ inventory management strategies; (16) shifts in consumer shopping patterns, gasoline prices, weather conditions, the level of consumer confidence and disposable income as a result of economic conditions, unemployment rates or other events or conditions that may adversely affect the level of customer purchases of the Company’s products; (17) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation; (18) the Company’s ability to identify, acquire or develop, and successfully integrate, new businesses or new product lines; and (19) other risk factors, including those described in the Company’s filings with the Securities and Exchange Commission, including, but not limited to, this Annual Report on Form 10-K.
Dividends to Hamilton Beach Holding are not to exceed $7.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $18.0 million.
Dividends are not to exceed $7.0 million during any calendar year to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of at least $18.0 million.
In uncertain economic environments, the Company cannot predict whether or when such circumstances may improve or worsen, or what impact, if any, such circumstances could have on its business, results of operations, cash flows and financial position. 21 Table of Contents
In uncertain economic environments, we cannot predict whether or when such circumstances may improve or worsen, or what impact, if any, such circumstances could have on our business, results of operations, cash flows and financial position. 23 Table of Contents
The weighted average interest rate applicable to the HBB Facility for the year ended December 31, 2022 was 3.49%, includi ng the floating rate margin and the effect of the interest rate swap agreements described below.
The weighted average interest rate applicable to the HBB Facility for the year ended December 31, 2023 was 4.25%, includi ng the floating rate margin and the effect of the interest rate swap agreements described below.
Given the funded status of the two defined benefit pension plans, HBB does not expect to contribute to its pension plans in 2023. Pension benefit payments are made from assets of the pension plans. Off Balance Sheet Arrangements The Company has not entered into any off balance sheet financing arrangements.
Given the funded status of the two defined benefit pension plans, we do not expect to contribute to the pension plans in 2024. Pension benefit payments are made from assets of the pension plans. Off Balance Sheet Arrangements We have not entered into any off balance sheet financing arrangements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) December 31, 2022 Compared with December 31, 2021 Operating activities - Net cash used for operating activities was $3.4 million compared to cash provided by operating activities of $17.9 million in 2021 primarily due to net working capital which was a use of cash of $39.0 million in 2022 compared to a use of cash of $1.5 million in 2021.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) December 31, 2023 Compared with December 31, 2022 Operating activities - Net cash provided by operating activities was $88.6 million compared to cash used for operating activities of $3.4 million in 2022 primarily due to our focus on net working capital improvement.
The following table presents selected cash flow information from continuing operations: Year Ended December 31 (In thousands) 2022 2021 Net cash provided by (used for) operating activities from continuing operations $ (3,418) $ 17,857 Net cash provided by (used for) investing activities from continuing operations $ (2,279) $ (11,844) Net cash provided by (used for) financing activities from continuing operations $ 5,575 $ (7,266) 18 Table of Contents Item 7.
The following table presents selected cash flow information: Year Ended December 31 (In thousands) 2023 2022 Net cash provided by (used for) operating activities $ 88,636 $ (3,418) Net cash provided by (used for) investing activities $ (5,174) $ (2,279) Net cash provided by (used for) financing activities $ (70,072) $ 5,575 20 Table of Contents Item 7.
This increase is driven by the liquidation of the Brazilian subsidiary, which resulted in $2.1 million of accumulated other comprehensive losses being released into other expense (income), net during the first quarter of 2022. Additionally, during 2022, the Company recorded a $0.3 million pension settlement charge.
In 2023, other expense (income), net includes currency gains of $0.3 million in the current year compared to currency losses of $1.9 million in 2022. This decrease is driven by the liquidation of the Brazilian subsidiary, which resulted in $2.1 million of accumulated other comprehensive losses being released into other expense (income), net during the first quarter of 2022.
Repayment of the credit facility is due on June 30, 2025, therefore all borrowings are classified as long term debt as of December 31, 2022. The obligations under the HBB Facility are secured by substantially all of HBB's assets.
We expect to continue to borrow against the facility and make voluntary repayments within the next twelve months. Repayment of the HBB Facility is due on June 30, 2025 , therefore all borrowings are classified as long term debt as of December 31, 2023. The obligations under the HBB Facility are secured by substantially all of HBB’s assets.
HBB's primary use of funds consists of working capital requirements, operating expenses, capital expenditures, and payments of principal and interest on debt. At December 31, 2022, the Company had cash and cash equivalents for continuing operations of $0.9 million, compared to $1.1 million at December 31, 2021.
Our primary use of funds consists of working capital requirements, operating expenses, payment of dividends, repurchase of shares, capital expenditures and payments of principal and interest on debt. As of December 31, 2023, we had cash and cash equivalents of $15.4 million, compared to $0.9 million as of December 31, 2022.
At December 31, 2022, the borrowing base under the HBB Facility w as $149.2 million a nd borrowings outstanding were $110.9 million. A t December 31, 2022, the excess availability under the HBB Facility was $38.3 million.
As of December 31, 2023, the borrowing base under the HBB Facility w as $148.1 million a nd borrowings outstanding were $50.0 million. As of December 31, 2023, the excess availability under the HBB Facility was $98.1 million.
Furthermore, the future impact of unfavorable economic conditions, including inflation, rising interest rates, availability of capital markets, consumer spending rates, negative impacts resulting from the COVID-19 pandemic and its downstream impacts and the ongoing conflict in Ukraine remain uncertain.
Furthermore, the future impact of unfavorable economic conditions, including inflation, changing interest rates, availability of capital markets and consumer spending rates remains uncertain.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) Selling, general and administrative expenses - Selling, general and administrative expenses decreased $14.6 million due primarily to the $10.0 million insurance recovery recognized during the first quarter of 2022.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) Other expense (income), net - Other expense (income), net decreased $1.4 million.
Dividends to Hamilton Beach Holding are discretionary to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $30.0 million.
Dividend amounts are discretionary to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of at least $30.0 million. The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility.
Financing activities - Net cash provided by financing activities was $5.6 million in 2022 compared to cash used by financing activities of $7.3 million. The change is due to an increase in HBB's net borrowing activity on the revolving credit facility to fund net working capital.
Financing activities - Net cash used for financing activities was $70.1 million in 2023 compared to cash provided by financing activities of $5.6 million in 2022. The change is due to our focus on net working capital improvement and a significant reduction in borrowings outstanding on the HBB Facility. Capital Resources The HBB Facility expires in June 2025 .
In 2022, trade receivables provided net cash of $4.5 million compared to net cash provided of $27.6 million in the prior year due to the timing of collections. Net cash used for inventory and accounts payable combined was $43.5 million in 2022 compared to $29.1 million in 2021. The Company significantly reduced inventory levels compared to the prior year.
Trade receivables used net cash of $18.8 million during 2023 compared to $4.5 million provided in the prior year due to timing of collections. Investing activities - Net cash used for investing activities increased in 2023 compared to 2022 related to $1.6 million in secure loan payments made to HealthBeacon and internal-use software development costs.
Contractual Obligations, Contingent Liabilities and Commitments Following is a table which summarizes the contractual obligations of Hamilton Beach Holding as of December 31, 2022: Payments Due by Period Contractual Obligations Total 2023 2024 2025 2026 2027 Thereafter Revolving credit agreements $ 110,895 $ — $ — $ 110,895 $ — $ — $ — Variable interest payments on HBB Facility 11,277 5,645 3,878 1,754 — — — Purchase and other obligations 172,737 172,574 61 51 51 — — Operating lease obligations 66,952 8,265 8,010 6,235 5,701 5,509 33,232 Total contractual cash obligations $ 361,861 $ 186,484 $ 11,949 $ 118,935 $ 5,752 $ 5,509 $ 33,232 HBB’s variable interest payments are calculated based upon HBB's anticipated payment schedule and the December 31, 2022 base rate and applicable margins, as defined in the HBB Facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) Contractual Obligations, Contingent Liabilities and Commitments Following is a table which summarizes the contractual obligations of Hamilton Beach Holding as of December 31, 2023: Payments Due by Period Contractual Obligations Total 2024 2025 2026 2027 2028 Thereafter Revolving credit agreements $ 50,000 $ — $ 50,000 $ — $ — $ — $ — Variable interest payments on HBB Facility 3,537 2,474 1,063 — — — — Purchase and other obligations 214,549 214,364 62 54 69 — — Operating lease obligations 59,769 8,306 6,517 5,970 5,677 5,519 27,780 Finance lease obligations 414 92 92 92 91 47 — Total contractual cash obligations $ 328,269 $ 225,236 $ 57,734 $ 6,116 $ 5,837 $ 5,566 $ 27,780 Our variable interest payments are calculated based upon our anticipated payment schedule and the December 31, 2023 base rate and applicable margins, as defined in the HBB Facility.
Hamilton Beach Brands Holding Company has not guaranteed any of the obligations of its subsidiary. HBB's principal sources of cash to fund liquidity needs are: (i) cash generated from operations and (ii) borrowings available under the revolving credit facility, as defined below.
As a result, certain statutory limitations or regulatory or financing agreements could affect the levels of distributions allowed to be made by its subsidiary. We have not guaranteed any of the obligations of HBB. Our principal sources of cash to fund liquidity needs are: (1) cash generated from operations and (2) borrowings available under the HBB Facility.
The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. As of December 31, 2022, HBB was in compliance with all financial covenants in the HBB Facility. 19 Table of Contents Item 7.
As of December 31, 2023, we were in compliance with all financial covenants in the HBB Facility. We maintain an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis. 21 Table of Contents Item 7.
Income tax expense - The effective tax rate on income from continuing operations was 22.1% and 26.4% for the twelve months ended December 31, 2022 and 2021, respectively. The effective tax rate was higher for the twelve months ended December 31, 2021 due to the inclusion of interest and penalties on unrecognized tax benefits as a discrete expense item.
Additionally, during 2022, we recorded a $0.3 million pension settlement charge which did not recur. Income tax expense - The effective tax rate on income was 20.4% and 22.1% for the twelve months ended December 31, 2023 and 2022, respectively.
Partially offsetting these decreases was a $20.5 million, or 50.0% increase in revenue in the Global Commercial market compared to the prior year due to the continued rebound of customer demand from pandemic-driven softness. The Mexican Consumer market had an increase in sales volume and revenue compared to the prior year.
The Global Commercial market had decreased revenue compared to 2022, when revenue grew 50% due to a continued strong rebound in the food service and hospitality industries from pandemic-driven demand softness, as well as the Company's new products, line extensions and sales initiatives.
LIQUIDITY AND CAPITAL RESOURCES Hamilton Beach Brands Holding Company cash flows are provided by dividends paid or distributions made by its subsidiary. The only material assets held by it are the investment in its consolidated subsidiary. As a result, certain statutory limitations or regulatory or financing agreements could affect the levels of distributions allowed to be made by its subsidiary.
The effective tax rate was lower for the twelve months ended December 31, 2023 due to the favorable impact of foreign operations in the current year. LIQUIDITY AND CAPITAL RESOURCES Our cash flows are provided by dividends paid or distributions made by HBB. The only material assets held by us are the investment in our consolidated subsidiary.
Removed
Price increases and favorable product mix partially offset these volume decreases. Additionally, revenue decreased compared to the prior year due to the Company's decision to move to a licensing model from a company-managed model for its consumer business in Brazil and China.
Added
Revenue decreased in the U.S., Canadian, and Latin American Consumer markets. Partially offsetting these revenue decreases was an increase in the Mexican Consumer market.
Removed
Gross profit - Gross profit margin was 20.1% in the current year compared to 20.7% in the prior year. Price increases implemented during 2022 partially offset the higher product and transportation costs. Additionally, in 2022 there was a reduction in carrier storage charges as compared to 2021. 17 Table of Contents Item 7.
Added
Gross profit - Gross profit margin increased to 23.0% in the current year compared to 20.1% in the prior year due to lower product costs and favorable product mix.
Removed
Compared to the prior year, outside services decreased, and incremental expenses incurred during the relocation to the Company's new distribution center did not recur. Interest expense - Interest expense, net increased $1.7 million due primarily to rising interest rates, as well as increased average borrowings outstanding under HBB's revolving credit facility.
Added
Selling, general and administrative expenses - Selling, general and administrative expenses increased $18.3 million due primarily to the $10.0 million insurance recovery recognized during the first quarter of 2022 which did not recur. Additionally, there was an increase in employee-related costs in the current year that was partially offset by a decrease in outside services.
Removed
Other expense (income), net - Other expense (income), net in 2022 includes currency losses of $1.9 million in the current year compared to currency losses of $0.6 million in 2021.
Added
Interest expense - Interest expense, net decreased $1.6 million due to decreased average borrowings outstanding under the HBB Facility, partially offset by higher interest rates. 19 Table of Contents Item 7.
Removed
The interest and penalties on unrecognized tax benefits were reversed during the second quarter of 2022 due to a change in the Company's position on an unresolved Mexico tax matter, favorably impacting the effective tax rate for the twelve months ended December 31, 2022, partially offset by a valuation allowance on certain foreign deferred tax assets related to the Brazil liquidation.
Added
We believe our liquidity and access to capital markets will be adequate to fund our cash requirements for the next 12 months and for the foreseeable future.
Removed
This cash inflow was offset by a larger cash outflow related to accounts payable due to the timing of payments. Investing activities - Net cash used for investing activities decreased in 2022 compared to 2021 due to capital spending for the Company's new leased distribution center facility in 2021 that did not recur.
Added
The Company has an agreement with a third-party administrator to provide an accounts payable tracking system which facilitates a participating supplier’s ability to monitor and voluntarily elect to sell payment obligations owed by the Company to the designated third-party financial institution. Participating suppliers can sell one or more of the Company’s payment obligations at their sole discretion.
Removed
Capital Resources HBB has a $150.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires in June 2025. The Company expects to continue to borrow against the facility and make voluntary repayments within the next twelve months.
Added
The Company has no economic interest in a supplier’s decision to sell one or more of its payment obligations. The Company’s rights and obligations with respect to such payment obligations, including amounts due and scheduled payment terms, are not impacted by suppliers’ decisions to sell amounts under these arrangements.
Removed
HBB has interest rate swaps with notional values totaling $50.0 million at December 31, 2022 at an average fixed interest rate of 0.9%. HBB also entered into delayed-start interest rate swaps. These swaps have notional values totaling $50.0 million as of December 31, 2022, with an average fixed interest rate of 1.6%.
Added
The agreement has a limit of $60.0 million in payment obligations ($85.0 million during peak season from August to January). There is no requirement to provide assets pledged as security or other forms of guarantees under the agreement. The Company pays the third-party administrator based upon the original payment terms negotiated with participating suppliers.
Removed
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAMILTON BEACH BRANDS HOLDING COMPANY (Tabular Amounts in Thousands, Except Per Share and Percentage Data) The Company maintains an arrangement with a financial institution to sell certain U.S. trade receivables on a non-recourse basis. The Company utilizes this arrangement as an integral part of financing working capital.
Added
The payment of these obligations by the Company is included in cash used in operating activities in the Consolidated Statement of Cash Flows. As of December 31, 2023 and 2022, the Company has $55.0 million and $23.3 million, respectively, in outstanding payment obligations that are presented in Accounts payable on the Consolidated Balance Sheets.
Removed
HBB believes funds available from cash on hand, the HBB Facility and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments arising during the next twelve months and until the expiration of the HBB Facility.
Added
Of these totals, the third-party financial institution has made payments to participating suppliers to settle $48.9 million and $23.3 million, respectively, of our outstanding payment obligations.
Added
We do not rely on the supplier finance program as a means to manage our cash flow, as our payment terms to the third-party financial institution are the same as our terms to our participating suppliers. Therefore, we do not face a material risk if any party terminates the agreement.
Added
Our participation has not had a material impact on our Consolidated Balance Sheets, Statement of Cash Flows or liquidity.
Added
Net working capital provided cash of $49.5 million in 2023 compared to a use of cash of $39.0 million in 2022. Net cash provided by accounts payable was $37.5 million in 2023 compared to $69.9 million used in 2022. Net cash provided by inventory was $30.8 million in 2023 compared to $26.4 million provided in 2022.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+0 added−1 removed0 unchanged
Biggest changeTo reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a portion of its floating rate financing arrangements. The Company does not enter into interest rate swap agreements for trading purposes.
Biggest changeThe extent of this risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements. To reduce the exposure to changes in the market rate of interest, we have entered into interest rate swap agreements for a portion of its floating rate financing arrangements.
These contracts generally mature within twelve months and require HBB to buy or sell the functional currency in which the applicable subsidiary operates and buy or sell U.S. dollars at rates agreed to at the inception of the contracts.
These contracts generally mature within twelve months and require us to buy or sell the functional currency in which the applicable subsidiary operates and buy or sell U.S. dollars at rates agreed to at the inception of the contracts.
The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of revenue, expenses, assets and liabilities. The potential impact of currency fluctuation increases as international expansion increases. HBB uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies and not for trading purposes.
The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of revenue, expenses, assets and liabilities. The potential impact of currency fluctuation increases as international expansion increases. We use forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies and not for trading purposes.
A hypothetical 10% relative decrease in interest rates would cause a decrease of $0.3 million in the fair value of interest rate swap agreements and the resulting fair value would be a receivable of $5.1 million.
A hypothetical 10% relative decrease in interest rates would cause a decrease of $0.2 million in the fair value of interest rate swap agreements and the resulting fair value would be a receivable of $3.8 million.
Assuming a hypothetical 10% weakening of the U.S. dollar at December 31, 2022, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange contracts, would be decreased by $1.2 million compared with its fair value at December 31, 2022.
Assuming a hypothetical 10% weakening of the U.S. dollar as of December 31, 2023, the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange contracts, would be decreased by $2.5 million compared with its fair value as of December 31, 2023.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in foreign currency exchange rates. The Company assumes that a loss in fair value is either a decrease to its assets or an increase to its liabilities.
For the purpose of risk analysis, we use sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in foreign currency exchange rates. We assume that a loss in fair value is either a decrease to its assets or an increase to its liabilities.
Additionally, a hypothetical 10% relative increase in interest rates would cause an increase of $0.3 million in the fair value of interest rate swap agreements and the resulting fair value would be a receivable of $5.7 million. Neither would have a material impact to the Company's interest expense, net of $4.6 million at December 31, 2022.
Additionally, a hypothetical 10% relative increase in interest rates would cause an increase of $0.2 million in the fair value of interest rate swap agreements and the resulting fair value would be a receivable of $4.2 million. Neither would have a material impact to our interest expense, net of $3.0 million as of December 31, 2023.
FOREIGN CURRENCY EXCHANGE RATE RISK HBB operates internationally and enters into transactions denominated in foreign currencies, principally the Canadian dollar, the Mexican peso and, to a lesser extent, the Chinese yuan and Brazilian real. As such, HBB's financial results are subject to the variability that arises from exchange rate movements.
FOREIGN CURRENCY EXCHANGE RATE RISK We operate internationally through our foreign operating subsidiaries and enter into transactions denominated in foreign currencies, principally the Canadian dollar, the Mexican peso and, to a lesser extent, the Chinese yuan and Brazilian real. As such, our financial results are subject to the variability that arises from exchange rate movements.
Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate. For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in interest rates.
We do not enter into interest rate swap agreements for trading purposes. Terms of the interest rate swap agreements require us to receive a variable interest rate and pay a fixed interest rate. For the purpose of risk analysis, we use sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in interest rates.
The Company assumes that a loss in fair value is an increase to its liabilities. The fair value of the Company's interest rate swap agreements was a receivable of $5.4 million at December 31, 2022.
We assume that a loss in fair value is an increase to its liabilities. The fair value of our interest rate swap agreements was a receivable of $4.0 million as of December 31, 2023.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK HBB enters into certain financing arrangements that require interest payments based on floating interest rates. As such, the Company's financial results are subject to changes in the market rate of interest.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK We enter into certain financing arrangements that require interest payments based on floating interest rates. As such, our financial results are subject to changes in the market rate of interest. There is an inherent rollover risk for borrowings as they mature and are renewed at current market rates.
The fair value of the Company's foreign currency exchange contracts was a net receivable of $0.1 million at December 31, 2022.
The fair value of our foreign currency exchange contracts was a net payable of $0.5 million as of December 31, 2023.
Removed
There is an inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements.

Other HBB 10-K year-over-year comparisons