Discontinued Operations

6 Months Ended

Jun. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

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. During the three months ended June 30, 2020 KC was deconsolidated. 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 June 30,						SIX MONTHS ENDED June 30,
	2020			2019			2020			2019
	(In thousands)
Revenue	$	—		$	18,283		631			37,536
Cost of sales	—			10,212			—			20,861
Gross profit	—			8,071			631			16,675
Selling, general and administrative expenses	299			11,235			1,346			23,468
Adjustment of lease termination liability⁽¹⁾	—			—			(16,457		)	—
Adjustment of other current liabilities⁽²⁾	—			—			(6,608		)	—
Operating income (loss)	(299		)	(3,164		)	22,350			(6,793		)
Interest expense	—			115						198
Other expense, net	88			6			88			15
Income (loss) from discontinued operations before income taxes	(387		)	(3,285		)	22,262			(7,006		)
Income tax benefit	(82		)	(769		)	(299		)	(1,767		)
Income (loss) from discontinued operations, net of tax	$	(305	)	$	(2,516	)	$	22,561		$	(5,239	)


(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 the year ended December 31, 2019 and the six months ended June 30, 2019. Due to the deconsolidation of KC, there were no assets or liabilities associated with KC as of June 30, 2020. The major classes of assets and liabilities included as part of discontinued operations are as follows:



	DECEMBER 31 2019		JUNE 30 2019

Assets
Cash and cash equivalents	$	5,022	$	102
Inventory	—		19,345
Prepaid expenses and other current assets	361		1,808
Current assets of discontinued operations	$	5,383	$	21,255

Property, plant and equipment, net	—		1,555
Deferred income taxes	$	614	$	2,733
Other non-current assets	—		132
Non-current assets of discontinued operations	$	614	$	4,420

Liabilities
Accounts payable	$	4,594	$	5,538
Revolving credit agreement	—		7,450
Lease termination liability	17,248		—
Other current liabilities	7,881		7,060
Current liabilities of discontinued operations	$	29,723	$	20,048

Other long-term liabilities	—		3,697
Non-current liabilities of discontinued operations	$	—	$	3,697

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