Home appliance company Hamilton Beach Brands said it would restate financial results due to accounting irregularities involving its Mexican subsidiary.
In a regulatory filing Thursday, Hamilton Beach said a previously disclosed internal investigation determined that employees of the 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 Glen Allen, Va.-based company will write off 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 full 2018 and 2019 years and for each of the quarters during those years.
Hamilton Beach estimates the adjustments will reduce net income from continuing operations in the range of approximately $6 million to $9 million for 2019 and $4 million to $6 million for 2018.
“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,” CEO Gregory Trepp said in a news release. “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.”
On news of the restatement, Hamilton Beach shares fell 2.6% to $10.07 in trading Thursday.
The stock dropped 9% after the company disclosed on May 11 that it would be late in reporting its first-quarter results because it had “discovered certain accounting irregularities with respect to the timing of recognition of selling and marketing expenses and the classification of certain expenditures within the statement of operations at its Mexican subsidiary.”
The subsidiary accounted for approximately 7% of Hamilton Beach’s total net sales in 2019.
Hamilton Beach also warned Thursday that its estimates of the impact of the restatements “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.”