Hamilton Beach 2007 Annual Report Download - page 25

2007 Results
Results in 2007, in particular during the important fourth-
quarter holiday season, were disappointing for the housewares
industry and Hamilton Beach Brands (“HBB”). Revenue
slipped 1.1 percent to $540.7 million in 2007 from $546.7
million in 2006, and net income decreased 17.1 percent to
$18.4 million in 2007 from $22.2 million in 2006. However,
HBB’s performance could still be considered favorable when
taking into account softer-than-expected retail sales
for the industry, continued pricing
pressures from retailers, rising material
costs and significant competition for
consumers’ discretionary income. The
company delivered a return on equity(1)
(“ROE”) in 2007 of 35.5 percent, up
from 18.0 percent in 2006, as a result
of the recapitalization of the company.
HBB also delivered a solid return on
total capital employed (“ROTCE”) of
14.5 percent in 2007, up from 14.2
percent in 2006. (See reconciliations of
non-GAAP ROTCE on page 43.)
HBB’s revenue benefited from additional shelf placements
and promotions by retailers in support of direct-response
television advertising, from sales of higher-priced products and
from newly introduced products. Nonetheless, these benefits
could not offset lower unit volumes as a result of reduced sales
to key retailers in a weak U.S. consumer market.
Net income benefited from increased sales of higher-margin
products and the results of the movement of all production to
third-party manufacturers. However, these benefits were fully
offset by lower unit sales volumes, higher selling, general
and administrative expenses, and higher interest expense of
$5.3 million pre-tax because of increased borrowings related to
a $110 million special cash dividend paid in May 2007.
In 2007, HBB generated cash flow before financing
activities of $15.8 million compared with $35.9 million in
2006. Included in 2006 were cash proceeds of $11.4 million
from the sale of the company’s Saltillo, Mexico facility.
Proposed Spin-Off and New
Company Name
In April 2007, NACCO
Industries announced a plan to spin
off its Hamilton Beach/Proctor-Silex
business to establish an independent
public company named Hamilton
Beach, Inc. Due to volatility and
uncertainty in capital markets, the
NACCO Board of Directors decided
in late August not to pursue the
proposed spin-off. However, in
September 2007, the company
officially changed its name to Hamilton Beach Brands, Inc.,
a name that preserves the heritage of Hamilton Beach, reflects
the company’s current ownership of multiple brand names and
positions the company appropriately for the addition of other
brand names in the future.
Vision and Goals
HBB’s vision is to be the leading North American designer,
marketer and distributor of small electric household and
[21]
In the intensely competitive
housewares market,
HBB offers a variety of
products that bring
solutions to consumers and
profits to the company.
[21][21]
(1) ROE = The respective year’s net income divided by that year’s average equity (a five-point average of equity at December 31 of the previous year and each of the respective
year’s quarter ends).
Left clockwise from top: Hamilton Beach Brands’ newest products include: Hamilton Beach® Brewstation® Pro 12 cup coffeemaker (shown in black), Proctor Silex® Space-
Saving Blender, Hamilton Beach® Set ‘n Forget® 6 quart programmable slow cooker, Proctor Silex® auto shutoff iron, Proctor Silex® Belgian waffle baker, Hamilton Beach®
ChefPrep™ 525 watt food processor.
Revenues
(In millions)
$0 $100 $200 $300 $400 $500 $600
03
04
05
06
07
$507.3
$492.8
Net Income
(In millions)
$0 $5 $10 $15 $20 $25
03
04
05
06
07
$22.2
$20.3
$15.2
$16.1
$18.4
$540.7
$546.7
$527.7