Hamilton Beach 2008 Annual Report Download - page 11

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estimate consumer purchasing levels for 2009 or the timing of
a recovery. Consumer spending is expected to be significantly
reduced in 2009, particularly in the first half. As a result,
HBB expects revenues in 2009 to be lower than in 2008.
HBB offers high-quality, value-based products to
demanding end users. The company has an excellent pipeline
of innovative new products and has strong retail placements
at leading retailers. HBB is not significantly dependent on
higher-end segments of the market, which are currently
experiencing greater weakness.
Actions Being Taken to Move
Forward in 2009
A number of actions have
been taken at HBB to respond
to anticipated lower volumes.
Aggressive cost containment actions
taken to date include personnel
reductions, the suspension of
incentive compensation and
profit-sharing, benefit reductions,
wage freezes and spending and
travel restrictions, as well as other
cash and cost-saving initiatives. In
addition to these actions, HBB is
actively working to improve pricing
and product positioning and
reduce product costs in light of
softening commodity costs for
resins, copper, steel and aluminum, as well as reduced
transportation costs. HBB is also monitoring commodity
costs closely and is currently negotiating with suppliers and
retailers on costs, prices and product placement programs. All
of these actions are designed to bring product margins more
in line with those that prevailed in 2007 before commodity
cost increases pushed product costs up dramatically over the
course of 2008.
HBB entered the recession operationally strong with good
product placements. HBB’s targeted improvement programs,
which are now mature, are expected to be beneficial in these
challenging times. In addition, the company is reviewing
each area of the business to ensure continued focus on core
products and on strengthening its market position through
product innovation, promotions and branding programs.
HBB anticipates continued strong placements in 2009, with
increased placements and distribution at some retailers. The
company is also undertaking programs to enhance the market
position of its brands, which include the Hamilton Beach®
heritage brand and the quality, value-priced Proctor Silex®
brand. HBB’s approach is designed to improve competitiveness
during the recession so it can emerge from the downturn in
an enhanced market position.
Overall, 2009 net income and cash flow before financing
activities are currently expected to improve compared with
adjusted 2008 results because of HBB’s cost containment
actions and efforts to improve margins through reduced costs,
improved prices and new product
introductions and placements.
However, if markets deteriorate
further, revenues and earnings could
be adversely affected.
Longer-Term Perspective
Product quality, customer
service and fact-based professional
sales and marketing remain areas
of excellence for HBB. Important
promotional campaigns designed
to support HBB’s brands and new
products are expected to continue.
The company’s product and place-
ment track record is impressive due
to innovation processes centered on
understanding and meeting end-user
needs. New products introduced in 2008, as well as further
new product introductions in the pipeline for 2009 and future
years, are expected to improve revenues. However, the timing
of an upturn in U.S. consumer markets is very uncertain, which
makes overall revenues and margins very difficult to predict.
At HBB, an experienced team of professionals is
managing the challenges of the current economic environment
aggressively. The company will continue to work to improve
revenues and profitability by improving efficiencies, reducing
costs and pursuing strategic growth opportunities, including
those which may arise during the economic downturn. The
company is well positioned to continue its leadership position
in the small kitchen appliances industry and to attain its
longer-term financial objectives when increased consumer
spending returns.
Above: Clockwise from top: Hamilton Beach Brands' newest products include: Hamilton Beach® Stay or Go™ 6 quart slow cooker with lid rest, Hamilton
Beach® Big Mouth® Deluxe food processor and Hamilton Beach® Set & Forget® Grill.