Hamilton Beach 2013 Annual Report Download - page 14

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HAMILTON BEACH BRANDS
2013 Results
HBB had an exceptional 2013. The company
delivered a 14 percent improvement in operating
profit on a 5 percent revenue increase despite continued
weak demand in the middle-market segment of the
consumer market and higher operating expenses.
Sales of HBB’s new products, strong placements
and promotions, particularly in the fourth-quarter
holiday season, and the company’s ability to sell
products with higher price points resulted in revenues
increasing from $521.6 million in 2012 to $547.8
million in 2013, which included substantially higher
sales volumes in the U.S. consumer business. Sales of
higher-margin products throughout the year and stable
commodity costs allowed the company to offset higher
operating expenses from increased employee-related
and advertising expenses as well as additional costs
associated with HBB’s strategic initiatives, resulting
in an operating profit margin which increased to 7.5
percent in 2013 from 6.9 percent in 2012. The improve-
ment in operating profit and reduced interest expense
on substantially lower levels of debt contributed to the
increase in net income to $25.1 million in 2013 from
$21.2 million in 2012. In addition, HBB ended the year
with a significant improvement in cash flow before
financing activities by generating $38.5 million in
2013 compared with $24.2 million in 2012.
Outlook for 2014
HBB maintains a strong position in the mass
market, but growth in sales to its target customer in that
market has been challenging. HBB’s target consumer,
the middle-market mass consumer, continues to
struggle with financial and economic concerns. As a
result, sales volumes in the middle-market portion of
the U.S. small kitchen appliance market in which HBB
participates are projected to grow only moderately in
2014. International and commercial product markets
in which HBB participates are also anticipated to grow
in 2014 compared with 2013.
HBB expects sales volumes to grow more
favorably than the market due to improved place-
ments and sales volumes in 2014 compared with 2013.
HBB continues to focus on strengthening its North
American consumer market position through product
innovation, promotions, increased placements and
branding programs, together with appropriate levels
of advertising for the company’s highly successful and
innovative product lines. HBB expects the FlexBrewTM
coffee maker, launched in late 2012, and the Hamilton
Beach® Breakfast Sandwich Maker, launched in early
2013, to continue to gain market position. The company
is continuing to introduce innovative products and
upgrades to certain products in several small appliance
categories. These products, as well as other new product
introductions in the pipeline for 2014, are expected
to affect both revenues and operating profit positively.
As a result of these new products and execution of the
company’s strategic initiatives, both domestically and
internationally, HBB expects an increase in revenues
in 2014 compared with 2013 at more than the 2014
market forecast rate of increase.
Overall, HBB expects full-year 2014 net income to
be comparable to the very robust results in 2013. The
anticipated increase in sales volumes attributable to
the continued implementation and execution of HBB’s
strategic initiatives is expected to be substantially
offset by the costs to implement these initiatives and by
increased advertising and promotional costs. Product
and transportation costs, as well as the negative effects
of foreign currency fluctuations, are currently expected
to increase modestly in 2014 compared with 2013.
Left to Right: Hamilton Beach®Breakfast
Sandwich Maker, Hamilton Beach®Single Clip
Stay or Go®6-quart Portable Slow Cooker