Discontinued Operations

On October 10, 2019, the Board approved the wind down of KC's retail operation due to further deterioration in foot traffic which lowered the Company's outlook for the prospect of a future return to profitability. By December 31, 2019, all retail stores were closed and operations ceased. Accordingly, KC is reported as discontinued operations in all periods presented. 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 and was no longer consolidated by the Company. Neither Hamilton Beach Brands Holding Company nor Hamilton Beach Brands, Inc. received a distribution.

KC’s operating results are reflected as discontinued operations for all periods presented. The major line items constituting the income (loss) from discontinued operations, net of tax are as follows:



	THREE MONTHS ENDED MARCH 31
	2020			2019
	(In thousands)
Revenue	$	631		$	19,253
Cost of sales	—			10,649
Gross profit	631			8,604
Selling, general and administrative expenses	1,047			12,233
Adjustment of lease termination liability⁽¹⁾	(16,457		)	—
Adjustment of other current liabilities⁽²⁾	(6,608		)	—
Operating income (loss)	22,649			(3,629		)
Interest expense	—			83
Other expense, net	—			9
Income (loss) from discontinued operations before income taxes	22,649			(3,721		)
Income tax benefit	(217		)	(998		)
Income (loss) from discontinued operations, net of tax	$	22,866		$	(2,723	)


(1)	Represents an adjustment to the estimated timing and amount of estimated cash flows underlying the lease termination obligation at March 31, 2020, calculated based on the final distribution of KC's remaining assets on April 3, 2020. The lease termination obligation is measured at fair value using significant observable inputs, which is Level 2 as defined in the fair value hierarchy.


(2)	Represents an adjustment to the carrying value of substantially all of the other current liabilities at March 31, 2020, calculated based on the final distribution of KC's remaining assets on April 3, 2020.

KC’s assets and liabilities are reflected as assets and liabilities of discontinued operations for all periods presented. The major classes of assets and liabilities included as part of discontinued operations are as follows:



	MARCH 31 2020		DECEMBER 31 2019		MARCH 31 2019
	(In thousands)
Assets
Cash and cash equivalents	$	145	$	5,022	$	85
Inventory	—		—		21,554
Prepaid expenses and other current assets	179		361		3,053
Current assets of discontinued operations	$	324	$	5,383	$	24,692

Deferred income taxes	$	—	$	614	$	2,712
Other non-current assets	—		—		1,734
Non-current assets of discontinued operations	$	—	$	614	$	4,446

Liabilities
Accounts payable	$	63	$	4,594	$	6,929
Revolving credit agreement	—		—		7,400
Lease termination liability	791		17,248		—
Other current liabilities	245		7,881		7,144
Current liabilities of discontinued operations	$	1,099	$	29,723	$	21,473

Other long-term liabilities	—		—		3,834
Non-current liabilities of discontinued operations	$	—	$	—	$	3,834

Neither Hamilton Beach Brands Holding Company nor HBB has guaranteed any obligations of KC.