Restatement

During the quarter ended March 31, 2020, the Company discovered certain accounting irregularities at its Mexican subsidiaries. The Company’s Audit Review Committee commenced an internal investigation, with the assistance of outside counsel and other third party experts. As a result of this investigation, the Company, along with the Audit Review Committee and its third party experts, concluded that certain former employees of one of the Company’s Mexican subsidiaries engaged in unauthorized transactions with the Company’s Mexican subsidiaries that resulted in expenditures being deferred on the balance sheet beyond the period for which the costs pertained. As a result, the Company recorded a non-cash write-off for certain amounts included in the Company’s historical consolidated financial statements in trade receivables and prepaid expenses and other current assets, among other corrections, related to these transactions, and restated its consolidated financial statements as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017 and each of the quarters during the years ended December 31, 2019 and 2018 on Form 10-K/A for the year ended December 31, 2019. During the course of the investigation, certain expenses at the Company's Mexican subsidiaries were found to be incorrectly classified within the consolidated statement of operations and have also been corrected in the restatement. These misstatements are described in restatement reference (a) through (d) below.

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

Description of Misstatements

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

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

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

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

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

(f) Correction of other immaterial errors

Restatement Tables

The restatement tables below present a reconciliation from the previously reported to the restated values as of and for the three months ended March 31, 2019 and as of December 31, 2019. The values as previously reported were derived from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed on April 25, 2019 and from our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on February 26, 2020.

Additionally, in the fourth quarter of 2019, KC met the requirements to be reported as a discontinued operation. The following consolidated financial tables present a reconciliation to reflect KC as a discontinued operation for all periods presented and are labeled "Recast". See Note 3, Discontinued Operations for more information.

CONDENSED CONSOLIDATED BALANCE SHEETS



	December 31, 2019
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated
Assets
Current assets
Cash and cash equivalents	$	2,142		$	—			$	2,142
Trade receivables, net	113,781			(5,400		)	a,b,d	108,381
Inventory	109,621			185			f	109,806
Prepaid expenses and other current assets	23,102			(11,757		)	a,b,f	11,345
Current assets of discontinued operations	5,383			—				5,383
Total current assets	254,029			(16,972		)		237,057
Property, plant and equipment, net	22,324			—				22,324
Goodwill	6,253			—				6,253
Other intangible assets, net	3,141			—				3,141
Deferred income taxes	3,853			2,395			e	6,248
Deferred costs	10,941			—				10,941
Other non-current assets	2,085			—				2,085
Non-current assets of discontinued operations	614			—				614
Total assets	$	303,240		$	(14,577	)		$	288,663
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	111,117		$	231		f	$	111,348
Accounts payable to NACCO Industries, Inc.	496			—				496
Revolving credit agreements	23,497			—				23,497
Accrued compensation	14,277			750			f	15,027
Accrued product returns	8,697			—				8,697
Other current liabilities	12,873			(339		)	a,e	12,534
Current liabilities of discontinued operations	29,723			—				29,723
Total current liabilities	200,680			642				201,322
Revolving credit agreements	35,000			—				35,000
Other long-term liabilities	12,501			3,574			e	16,075
Non-current liabilities of discontinued operations	—			—				—
Total liabilities	248,181			4,216				252,397
Stockholders’ equity
Preferred stock, par value $0.01 per share	—			—				—
Class A Common stock, par value $0.01 per share; 9,805 shares issued as of December 31, 2019	98			—				98
Class B Common stock, par value $0.01 per share, convertible into Class A on a one-for-one basis; 4,076 shares issued as of December 31, 2019	41			—				41
Capital in excess of par value	54,344			165			f	54,509
Treasury stock	(5,960		)	—				(5,960		)
Retained earnings	22,524			(18,814		)	a,b,d,e,f	3,710
Accumulated other comprehensive loss	(15,988		)	(144		)	a,b,d,e	(16,132		)
Total stockholders’ equity	55,059			(18,793		)		36,266
Total liabilities and stockholders' equity	$	303,240		$	(14,577	)		$	288,663

(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $2.5 million, a reduction to prepaid expenses and other current assets of $12.4 million, and an increase to other current liabilities of $0.9 million

(b) Reversal of Revenue: The correction of these misstatements resulted in a decrease to trade receivables of $1.3 million and an increase to prepaid expenses and other current assets of $0.2 million

(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in a decrease to trade receivables of $1.6 million

(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to deferred income taxes of $2.4 million, and a decrease to other current liabilities of $1.2 million, and an increase to other long-term liabilities of $3.6 million

(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to prepaid expenses and other current assets of $0.5 million, an increase to inventory of $0.2 million, an increase to accounts payable of $0.2 million, an increase to accrued compensation of $0.7 million, and an increase to capital in excess of par of $0.2 million

CONDENSED CONSOLIDATED BALANCE SHEETS



`	March 31, 2019
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated			Recasting Impacts			As Restated and Recast
Assets
Current assets
Cash and cash equivalents	$	1,721		$	—			$	1,721		$	(85	)	$	1,636
Trade receivables, net	92,534			(2,768		)	a,f	89,766			(10,664		)	79,102
Inventory	142,261			—				142,261			(21,554		)	120,707
Prepaid expenses and other current assets	16,373			(6,605		)	a	9,768			7,611			17,379
Current assets of discontinued operations	—			—				—			24,692			24,692
Total current assets	252,889			(9,373		)		243,516			—			243,516
Property, plant and equipment, net	22,566			—				22,566			(1,582		)	20,984
Goodwill	6,253			—				6,253			—			6,253
Other intangible assets, net	4,174			—				4,174			—			4,174
Deferred income taxes	5,493			385			e	5,878			(2,712		)	3,166
Deferred costs	8,447			—				8,447			(131		)	8,316
Other non-current assets	2,424			—				2,424			(21		)	2,403
Non-current assets of discontinued operations	—			—				—			4,446			4,446
Total assets	$	302,246		$	(8,988	)		$	293,258		$	—		$	293,258
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	80,649		$	—			$	80,649		$	(6,929	)	$	73,720
Accounts payable to NACCO Industries, Inc.	2,425			—				2,425			—			2,425
Revolving credit agreements	62,212			—				62,212			(7,400		)	54,812
Accrued compensation	8,903			370			f	9,273			(875		)	8,398
Accrued product returns	9,314			—				9,314			—			9,314
Other current liabilities	24,109			(135		)	a,d,e,f	23,974			(6,269		)	17,705
Current liabilities of discontinued operations	—			—				—			21,473			21,473
Total current liabilities	187,612			235				187,847			—			187,847
Revolving credit agreements	32,000			—				32,000			(2,000		)	30,000
Other long-term liabilities	19,555			898			e	20,453			(1,834		)	18,619
Non-current liabilities of discontinued operations	—			—				—			3,834			3,834
Total liabilities	239,167			1,133				240,300			—			240,300
Stockholders’ equity
Class A Common stock	95			—				95			—			95
Class B Common stock	44			—				44			—			44
Capital in excess of par value	52,520			—				52,520			—			52,520
Retained earnings	27,959			(10,453		)	a,d,e,f	17,506			—			17,506
Accumulated other comprehensive loss	(17,539		)	332			a,d	(17,207		)	—			(17,207		)
Total stockholders’ equity	63,079			(10,121		)		52,958			—			52,958
Total liabilities and stockholders' equity	$	302,246		$	(8,988	)		$	293,258		$	—		$	293,258

(a) Write-off of Assets: The correction of these misstatements resulted in a decrease to trade receivables of $1.6 million, a reduction to prepaid expenses and other current assets of $6.6 million, and an increase to other current liabilities of $1.4 million

(d) Correction for the timing of recognition of customer price concessions: The correction of these misstatements resulted in an increase to other current liabilities of $0.2 million

(e) Tax adjustments for corrections: The correction of these misstatements resulted in a decrease to prepaid expenses and other current assets of $0.1 million, an increase to deferred income taxes of $0.4 million, a decrease to other current liabilities of $0.3 million, and an increase to other long-term liabilities of $0.9 million

(f) Correction of other immaterial errors: The correction of these misstatements resulted in a decrease to trade receivables of $1.1 million, an increase to accrued compensation of $0.4 million and a decrease to other current liabilities of $1.4 million

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



	For the Three Months Ended March 31, 2019
	As Previously Reported			Restatement Impacts			Restatement References	As Restated			Recasting Impacts			As Restated and Recast
Revenue	$	145,377		$	518		c,f	$	145,895		$	(19,253	)	$	126,642
Cost of sales	110,654			(65		)	f	110,589			(10,649		)	99,940
Gross profit	34,723			583				35,306			(8,604		)	26,702
Selling, general and administrative expenses	36,507			1,972			a,c,f	38,479			(12,233		)	26,246
Amortization of intangible assets	345			—				345			—			345
Operating profit (loss)	(2,129		)	(1,389		)		(3,518		)	3,629			111
Interest expense, net	746			—				746			(83		)	663
Other expense (income), net	(332		)	144			f	(188		)	(9		)	(197		)
Income (loss) from continuing operations before income taxes	(2,543		)	(1,533		)		(4,076		)	3,721			(355		)
Income tax expense (benefit)	(782		)	91			e	(691		)	998			307
Net income (loss) from continuing operations	(1,761		)	(1,624		)		(3,385		)	2,723			(662		)
Loss from discontinued operations, net of tax	—			—				—			(2,723		)	(2,723		)
Net loss	$	(1,761	)	$	(1,624	)		$	(3,385	)	$	—		$	(3,385	)

Basic and diluted earnings (loss) per share:
Continuing operations	$	(0.13	)	$	(0.12	)		$	(0.25	)	$	0.20		$	(0.05	)
Discontinued operations	—			—				—			(0.20		)	(0.20		)
Basic and diluted earnings (loss) per share	$	(0.13	)	$	(0.12	)		$	(0.25	)	$	—		$	(0.25	)

Basic weighted average shares outstanding	13,786			—				13,786			—			13,786
Diluted weighted average shares outstanding	13,786			—				13,786			—			13,786

(a) Write-off of Assets: The correction of these misstatements resulted in an increase to selling, general and administrative ("SG&A") expense of $1.4 million

(c) Correction of misclassification of Selling and Marketing Expenses: The correction of these misstatements resulted in an increase to revenue and an increase to SG&A expense of $0.4 million

(e) Tax adjustments for corrections: The correction of these misstatements resulted in an increase to tax expense of $0.1 million

(f) Correction of other immaterial errors: The correction of these misstatements resulted in an increase to revenue of $0.1 million, a decrease to cost of sales of $0.1 million, an increase to SG&A expense of $0.2 million, and an increase in other expense of $0.1 million

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



	For the Three Months Ended March 31, 2019
	As Previously Reported			Restatement Impacts			As Restated
Net income (loss)	$	(1,761	)	$	(1,624	)	$	(3,385	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	330			(116		)	214
(Loss) gain on long-term intra-entity foreign currency transactions	15			—			15
Cash flow hedging activity	(566		)	144			(422		)
Reclassification of hedging activities into earnings	2			—			2
Pension plan adjustment	—			—			—
Reclassification of pension adjustments into earnings	(10		)	94			84
Total other comprehensive loss, net of tax	(229		)	122			(107		)
Comprehensive income (loss)	$	(1,990	)	$	(1,502	)	$	(3,492	)

See description of the net income impacts in the consolidated statement of operations for the three months ended March 31, 2019 section above.

The decrease to foreign currency translation adjustments is the result of the translation impacts of restatements in the write-off of assets, reversal of revenue and timing of recognition of customer pricing concessions categories.

The increase to cash flow hedging is from the correction of other immaterial errors.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	March 31, 2019
	As Previously Reported			Restatement Impacts			As Restated			Recasting Impacts			As Restated and Recast
Operating activities
Net income from continuing operations	$	(1,761	)	$	(1,624	)	$	(3,385	)	$	2,723		$	(662	)
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	1,249			—			1,249			(201		)	1,048
Deferred income taxes	2,178			110			2,288			23			2,311
Stock compensation expense	807			—			807			—			807
Other	23			(59		)	(36		)	5			(31		)
Net changes in operating assets and liabilities:
Affiliate payable	6			—			6			3			9
Trade receivables	20,323			344			20,667			(778		)	19,889
Inventory	2,593			111			2,704			(441		)	2,263
Other assets	(1,824		)	(742		)	(2,566		)	(132		)	(2,698		)
Accounts payable	(52,353		)	(15		)	(52,368		)	6,775			(45,593		)
Other liabilities	(21,376		)	1,875			(19,501		)	1,919			(17,582		)
Net cash provided by operating activities from continuing operations	(50,135		)	—			(50,135		)	9,896			(40,239		)
Investing activities
Expenditures for property, plant and equipment	(862		)	—			(862		)	8			(854		)
Other	29			—			29			(29		)	—
Net cash used for investing activities from continuing operations	(833		)	—			(833		)	(21		)	(854		)
Financing activities
Net additions (reductions) to revolving credit agreements	47,565			—			47,565			(9,400		)	38,165
Cash dividends paid	(1,177		)	—			(1,177		)	—			(1,177		)
Net cash provided by (used for) financing activities from continuing operations	46,388			—			46,388			(9,400		)	36,988
Cash flows from discontinued operations
Net cash provided by (used for) operating activities from discontinued operations	—			—			—			(9,896		)	(9,896		)
Net cash provided by (used for) investing activities from discontinued operations	—			—			—			21			21
Net cash used for financing activities from discontinued operations	—			—			—			9,400			9,400
Cash provided by (used for) discontinued operations	—			—			—			(475		)	(475		)
Effect of exchange rate changes on cash	(51		)	—			(51		)	—			(51		)
Cash and Cash Equivalents
(Decrease) increase for the year from continuing operations	(4,631		)	—			(4,631		)	475			(4,156		)
Increase (decrease) for the year from discontinued operations	—			—			—			(475		)	(475		)
Balance at the beginning of the year	6,352			—			6,352						6,352
Balance at the end of the year	$	1,721		$	—		$	1,721					$	1,721

See description of the net income impacts in the consolidated statement of operations for the year ended March 31, 2019 section above.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



	For the Three Months Ended March 31, 2019
	Class A common stock		Class B common stock		Capital in excess of par value			Retained earnings			Accumulated other comprehensive income (loss)			Total stockholders' equity
As Previously Reported
Balance, January 1, 2019	$	93	$	44	$	51,714		$	30,897		$	(17,310	)	$	65,438
Net loss	—		—		—			(1,761		)	—			(1,761		)
Issuance of common stock, net of conversions	2		—		(1		)	—			—			1
Purchase of treasury stock	—		—		—			—			—			—
Share-based compensation expense	—		—		807			—			—			807
Cash dividends, $0.085 per share	—		—		—			(1,177		)	—			(1,177		)
Other comprehensive loss	—		—		—			—			(221		)	(221		)
Reclassification adjustment to net loss	—		—		—			—			(8		)	(8		)
Balance, March 31, 2019	$	95	$	44	$	52,520		$	27,959		$	(17,539	)	$	63,079
Restatement Impacts
Balance, January 1, 2019	$	—	$	—	$	—		$	(8,829	)	$	209		$	(8,620	)
Net loss								(1,624		)	—			(1,624		)
Issuance of common stock, net of conversions	—		—		—			—			—			—
Purchase of treasury stock	—		—		—			—			—			—
Share-based compensation expense	—		—		—			—			—			—
Cash dividends, $0.085 per share	—		—		—			—			—			—
Other comprehensive loss	—		—		—			—			29			29
Reclassification adjustment to net loss	—		—		—			—			94			94
Balance, March 31, 2019	$	—	$	—	$	—		$	(10,453	)	$	332		$	(10,121	)
As Restated
Balance, January 1, 2019	$	93	$	44	$	51,714		$	22,068		$	(17,101	)	$	56,818
Net loss	—		—		—			(3,385		)	—			(3,385		)
Issuance of common stock, net of conversions	2		—		(1		)	—			—			1
Purchase of treasury stock	—		—		—			—			—			—
Share-based compensation expense	—		—		807			—			—			807
Cash dividends, $0.085 per share	—		—		—			(1,177		)	—			(1,177		)
Other comprehensive loss	—		—		—			—			(192		)	(192		)
Reclassification adjustment to net loss	—		—		—			—			86			86
Balance, March 31, 2019	$	95	$	44	$	52,520		$	17,506		$	(17,207	)	$	52,958

See description of the net income and other comprehensive income (loss) impacts in the consolidated statement of operations and consolidated statement of comprehensive income (loss) for the three months ended March 31, 2019 sections above.

The quarter ended March 31, 2019 included a change to the reclassification adjustment to net loss of $0.1 million.