Hamilton Beach, in connection with its previously disclosed investigation into certain accounting irregularities at its subsidiary in Mexico, has concluded that the company’s previously issued consolidated financial statements for the years ended December 31, 2019 and 2018, each of the quarters during those years, and other financial data relating to these periods should no longer be relied upon.
The company intends to file restated consolidated financial statements for all periods referenced as soon as practicable. The company will also issue an earnings release for the 2020 first quarter and hold an investor conference call.
As disclosed on May 11, the company discovered the accounting irregularities during the quarter ended March 31, 2020. 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 the investigation, the company concluded that certain employees of the company’s Mexican subsidiary engaged in unauthorized transactions with the company’s Mexican subsidiary that resulted in the recording of assets that are not realizable. As a result, the company will record a non-cash write-off for certain amounts erroneously included in the company’s historical financial statements in trade receivables, prepaid expenses and other current assets and will restate its financial statements for the years ended December 31, 2019 and 2018 and each of the quarters during those years.
The company estimates the impact of these adjustments to be a reduction to net income from continuing operations in the range of approximately $6 million to $9 million for the year ended December 31, 2019 and $4 million to $6 million for the year ended December 31, 2018. These preliminary estimates are based on currently available information and are subject to change during the course of the ongoing investigation. The investigation is continuing and there is no assurance that additional items will not be identified.
“We were very disappointed to learn of unauthorized transactions engaged in by certain employees of our subsidiary in Mexico, and we are committed to providing restated financial statements as soon as practicable,” said Gregory Trepp, president and chief executive officer of Hamilton Beach. “The correction of the accounting errors does not impact our cash flows for the affected years, and, most importantly, none of this changes the fundamental strength of our business. We are a leader in an industry with strong consumer demand during the global pandemic. Our diversified retailer relationships and our years of investment in ecommerce, including our fast growing direct to consumer capabilities, have positioned us well in this COVID-19 environment. Our first quarter revenue was solid, and we delivered significant improvements in inventory, trade receivables, cash flow and debt.”