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GLEN ALLEN, Va., Nov. 2, 2022 /PRNewswire/ -- Hamilton Beach Brands Holding Company (NYSE: HBB), which operates through its wholly owned subsidiary Hamilton Beach Brands, Inc., today announced results for the third quarter of 2022.
Highlights
Third Quarter 2022 Compared to Third Quarter 2021
Total revenue decreased $5.9 million, or 3.8%, to $150.8 million compared to $156.7 million, primarily due to lower unit volume partially offset by price increases and a favorable product mix. Sales decreases in the Company's Latin American, Mexican and U.S. consumer markets were partially offset by increases in the global commercial and Canadian consumer markets. Revenue also decreased in Brazil and China as the Company has transitioned to a licensing model in those markets as of the end of 2021. In the Company's consumer markets, decreased sales in the third quarter reflected continued inventory rebalancing overall by many retailers, timing of holiday build orders, and slightly softer point of sale.
In the Company's global commercial market, revenue increased $3.9 million, or 35.8%. This growth reflects a continued strong rebound in the food service and hospitality industries from pandemic-driven demand softness as well as the Company's new product introductions and line extensions.
The Company continued to make progress with its strategic initiatives in the third quarter of 2022. Ecommerce sales increased 7.8% and accounted for 34.5% of total revenue compared to 30.8% in the third quarter of 2021. Premium market sales increased 35.1%, and sales in the home health and wellness market grew 29.6%.
Gross profit was $34.8 million compared to $33.3 million. Gross profit margin expanded to 23.1% compared to 21.2%, due to the impact of pricing initiatives that offset higher product costs, favorable product mix, and lower expenses for outside warehousing and labor compared to the prior year.
Selling, general and administrative expenses decreased to $25.4 million compared to $25.8 million, primarily due to non-recurring expenses for last year's distribution center relocation.
Operating profit was $9.4 million compared to $7.4 million.
Net income was $5.9 million, or $0.43 per diluted share, compared to net income of $5.7 million, or $0.41 per diluted share.
During the three months ended September 30, 2022, the Company repurchased 109,828 shares of its Class A common stock at prevailing market prices for an aggregate purchase price of $1.4 million.
Cash Flow and Debt
For the nine months ended September 30, 2022, net cash used for operating activities was $40.2 million compared to a use of $4.1 million in the prior year, primarily due to net working capital, which was a use of cash of $62.1 million in 2022 compared to use of cash of $4.4 million in 2021. Trade receivables provided net cash of $21.4 million during 2022 compared to $26.5 million in 2021, due to the lower sales and improvement in days outstanding. Net cash used for inventory and accounts payable combined was $83.5 million in 2022 compared to $30.9 million in 2021.
Elevated inventory levels are primarily due to longer lead times in the supply chain, retailer inventory rebalancing programs, and normal variations in holiday build ordering patterns. While the Company's products are not in an overstocked position at retail, overstock levels in other categories are having an impact on retailer reorders overall. Strong placements for the holiday selling season and purchase order adjustments are expected to enable the Company to significantly reduce current inventory levels by the end of the year.
Capital expenditures through the third quarter of 2022 decreased to $1.6 million compared to $9.1 million through the third quarter of 2021, primarily due to capital spending for the Company's new distribution center in the prior year that did not recur.
At September 30, 2022, net debt, or debt minus cash and cash equivalents, was $144.5 million compared to $113.5 million at September 30, 2021, and $95.7 million at December 31, 2021, due to higher net working capital.
Outlook
Demand for small kitchen appliances in the U.S. remains significantly higher than pre-pandemic levels and modestly softer than 2021. Consumers continue to prepare a significant number of meals and beverages at home as a result of new habits formed during the pandemic, hybrid or continued remote work-from-home practices, a heightened interest in healthy eating, and as a means to control expenses during inflationary times. The global commercial market is expected to continue to rebound strongly from pandemic-driven demand softness.
The Company expects continued progress with its strategic initiatives in 2022 as it focuses on increasing sales in the premium, home health and wellness, and global commercial markets, and in the ecommerce channel. The Company has introduced a broad array of new products across all of its brands and has secured strong placements for the holiday selling season. For the fourth quarter of 2022, the Company expects that revenue will increase modestly compared to the fourth quarter of 2021. For the full year 2022, Hamilton Beach Brands expects revenue to decrease slightly compared to record revenue in 2021. Full-year operating profit is expected to increase significantly compared to 2021, including a $10 million insurance recovery in the first quarter of 2022. Final results will depend upon consumer pull-through and retailer reorders throughout the holiday selling season.
The Company's six strategic initiatives are focused on long-term growth and value creation. Following is a brief summary of each one.
Expand in Home Health and Wellness: This initiative was added in 2021. During the past year, the Company took many steps to introduce new products in the air purification, water filtration and home medical categories. New products in these categories are expected to generate revenue as they are launched in 2022 and into 2023 and gain momentum. To date, the Company has:
Gain Share in the Premium Market: New products and digital marketing are expected to drive growth of the Company's premium brand products. In 2022, the Company launched Generation 2 of the Bartesian® premium cocktail machine, introduced the Bartesian Duet, a smaller 2-bottle model, and a commercial model. The CHI® garment care brand continues to grow as consumers return to offices and engage in more out-of-home activities.
Lead in the Global Commercial Market: The Company expects to generate additional growth in the global commercial market through product development, digital marketing and increasing customer relationships with regional and global chains.
Drive Core Growth: The Company plans to drive growth of its flagship Hamilton Beach® and Proctor Silex® brands through innovative new product development, including an emphasis on higher priced products, and digital marketing.
Accelerate Digital Transformation: The Company plans to continue to invest in robust digital marketing for all of its brands and markets.
Leverage Partnerships and Acquisitions: The Company is actively engaged in the pursuit of additional trademark licensing agreements, strategic alliances and acquisitions that would drive growth in all of its markets.
Hamilton Beach Brands expects to benefit from its strengths and competitive advantages, even during periods of economic downturn. These include:
Conference Call
The Company will conduct an earnings conference call and webcast on Thursday, November 3, 2022, at 9:30 a.m. Eastern time. The call may be accessed by dialing 888-350-3452 (toll free), International 647-362-9199. Conference ID: 1809480. The conference call will also be webcast live on the Company's Investor Relations website at www.hamiltonbeachbrands.com. An archive of the webcast will be available on the website.
About Hamilton Beach Brands Holding Company
Hamilton Beach Brands Holding Company operates through its wholly owned subsidiary Hamilton Beach Brands, Inc., a leading designer, marketer, and distributor of a wide range of branded small electric household and specialty housewares appliances, as well as commercial products for restaurants, fast food chains, bars, and hotels. The Company's owned consumer brands include Hamilton Beach®, Proctor Silex®, Hamilton Beach Professional®, Weston®, TrueAir®, Brightline® and Hamilton Beach Health®. The Company's owned commercial brands include Hamilton Beach Commercial® and Proctor Silex Commercial®. Hamilton Beach Brands licenses the brands for Wolf Gourmet® countertop appliances, CHI® premium garment care products, Clorox® air purifiers, and Brita® countertop water appliances. Hamilton Beach Brands markets and distributes the Bartesian® premium cocktail delivery system through an exclusive multiyear agreement. Hamilton Beach Brands has entered the home medical market through a multiyear agreement with HealthBeacon plc and is the exclusive marketer and distributor of a smart Injection Care Management System in the U.S. and Canada under the new brand name Hamilton Beach Health®. For more information about Hamilton Beach Brands Holding Company, visit hamiltonbeachbrands.com.
Forward-Looking Statements
The statements contained in this news release that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Such risks and uncertainties include, without limitation: (1) the Company's ability to source and ship products to meet anticipated demand, (2) the Company's ability to successfully manage ongoing constraints throughout the global transportation supply chain, (3) the unpredictable nature of the COVID-19 pandemic and its potential impact on the Company's business; (4) the direct and indirect impacts of the increasingly volatile global economic conditions as a result of the conflict in Ukraine; (5) changes in the sales prices, product mix or levels of consumer purchases of small electric and specialty housewares appliances, (6) changes in consumer retail and credit markets, including the increasing volume of transactions made through third-party internet sellers, (7) bankruptcy of or loss of major retail customers or suppliers, (8) changes in costs, including transportation costs, of sourced products, (9) delays in delivery of sourced products, (10) changes in or unavailability of quality or cost effective suppliers, (11) exchange rate fluctuations, changes in the import tariffs and monetary policies and other changes in the regulatory climate in the countries in which the Company operates or buys and/or sells products, (12) the impact of tariffs on customer purchasing patterns, (13) product liability, regulatory actions or other litigation, warranty claims or returns of products, (14) customer acceptance of, changes in costs of, or delays in the development of new products, (15) increased competition, including consolidation within the industry, (16) shifts in consumer shopping patterns, gasoline prices, weather conditions, the level of consumer confidence and disposable income as a result of economic conditions, unemployment rates or other events or conditions that may adversely affect the level of customer purchases of HBB products, (17) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (18) other risk factors, including those described in the Company's filings with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2021. Furthermore, the situation surrounding COVID-19, including the mutation of variants, continues to remain fluid globally and the Company continues to manage ongoing challenges associated with the pandemic as they relate to demand, supply and operations. The potential for a material impact on the Company's results of operations, financial condition, liquidity, and stock price remains a risk. The Company cannot reasonably estimate with any degree of certainty any future impact of COVID-19. The extent of any impact will depend on the scope of any new virus mutations and outbreaks, the nature of government public health guidelines and the public's adherence to those guidelines, the success of business and economic recovery as the pandemic recedes, the easing of pandemic-driven supply chain disruptions, unemployment levels, and the extent to which new lockdowns may be needed or are required in particular countries including China.
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HAMILTON BEACH BRANDS HOLDING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||
THREE MONTHS ENDED SEPTEMBER 30 | NINE MONTHS ENDED SEPTEMBER 30 | ||||||
2022 | 2021 | 2022 | 2021 | ||||
(In thousands, except per | (In thousands, except per | ||||||
Revenue | $ 150,823 | $ 156,740 | $ 444,701 | $ 460,644 | |||
Cost of sales | 115,979 | 123,456 | 349,649 | 367,284 | |||
Gross profit | 34,844 | 33,284 | 95,052 | 93,360 | |||
Selling, general and administrative expenses | 25,425 | 25,788 | 67,361 | 79,614 | |||
Amortization of intangible assets | 50 | 50 | 150 | 150 | |||
Operating profit (loss) | 9,369 | 7,446 | 27,541 | 13,596 | |||
Interest expense, net | 1,289 | 662 | 2,889 | 2,080 | |||
Other expense (income), net | 432 | (126) | 1,646 | (179) | |||
Income (loss) before income taxes | 7,648 | 6,910 | 23,006 | 11,695 | |||
Income tax expense (benefit) | 1,741 | 1,204 | 4,837 | 3,027 | |||
Net income (loss) | $ 5,907 | $ 5,706 | $ 18,169 | $ 8,668 | |||
Basic and diluted earnings (loss) per share | $ 0.43 | $ 0.41 | $ 1.30 | $ 0.62 | |||
Basic weighted average shares outstanding | 13,869 | 13,887 | 13,999 | 13,872 | |||
Diluted weighted average shares outstanding | 13,892 | 13,902 | 14,026 | 13,888 |
HAMILTON BEACH BRANDS HOLDING COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||
SEPTEMBER 30 | DECEMBER 31 | SEPTEMBER 30 | |||
(In thousands) | |||||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $ 1,504 | $ 1,125 | $ 1,463 | ||
Trade receivables, net | 97,802 | 119,580 | 120,672 | ||
Inventory | 244,464 | 183,382 | 176,982 | ||
Prepaid expenses and other current assets | 13,295 | 14,273 | 22,755 | ||
Total current assets | 357,065 | 318,360 | 321,872 | ||
Property, plant and equipment, net | 28,363 | 30,485 | 31,699 | ||
Goodwill | 6,253 | 6,253 | 6,253 | ||
Other intangible assets, net | 1,542 | 1,692 | 1,742 | ||
Deferred income taxes | 1,800 | 4,006 | 3,088 | ||
Deferred costs | 14,465 | 18,703 | 14,785 | ||
Other non-current assets | 7,432 | 3,005 | 3,024 | ||
Total assets | $ 416,920 | $ 382,504 | $ 382,463 | ||
Liabilities and stockholders' equity | |||||
Current liabilities | |||||
Accounts payable | $ 111,485 | $ 131,912 | $ 126,231 | ||
Accrued compensation | 10,543 | 11,719 | 10,797 | ||
Accrued product returns | 4,651 | 6,429 | 6,048 | ||
Other current liabilities | 13,222 | 14,116 | 17,084 | ||
Total current liabilities | 139,901 | 164,176 | 160,160 | ||
Revolving credit agreements | 146,051 | 96,837 | 114,950 | ||
Other long-term liabilities | 13,019 | 19,212 | 19,448 | ||
Total liabilities | 298,971 | 280,225 | 294,558 | ||
Stockholders' equity | |||||
Class A Common stock | 106 | 103 | 102 | ||
Class B Common stock | 39 | 40 | 41 | ||
Capital in excess of par value | 64,117 | 61,586 | 61,233 | ||
Treasury stock | (8,939) | (5,960) | (5,960) | ||
Retained earnings | 74,597 | 60,753 | 49,505 | ||
Accumulated other comprehensive loss | (11,971) | (14,243) | (17,016) | ||
Total stockholders' equity | 117,949 | 102,279 | 87,905 | ||
Total liabilities and stockholders' equity | $ 416,920 | $ 382,504 | $ 382,463 |
HAMILTON BEACH BRANDS HOLDING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||
NINE MONTHS ENDED SEPTEMBER 30 | |||
2022 | 2021 | ||
(In thousands) | |||
Operating activities | |||
Net income (loss) | $ 18,169 | $ 8,668 | |
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating | |||
Depreciation and amortization | 3,552 | 3,077 | |
Deferred income taxes | 912 | 4,245 | |
Stock compensation expense | 2,533 | 2,883 | |
Brazil foreign currency loss | 2,085 | — | |
Other | 898 | 1,208 | |
Net changes in operating assets and liabilities: | |||
Affiliate payable | — | (505) | |
Trade receivables | 21,370 | 26,546 | |
Inventory | (63,328) | (3,082) | |
Other assets | 2,181 | (12,160) | |
Accounts payable | (20,150) | (27,868) | |
Other liabilities | (8,395) | (7,118) | |
Net cash provided by (used for) operating activities | (40,173) | (4,106) | |
Investing activities | |||
Expenditures for property, plant and equipment | (1,560) | (9,109) | |
Net cash provided by (used for) investing activities | (1,560) | (9,109) | |
Financing activities | |||
Net additions (reductions) to revolving credit agreements | 49,604 | 16,580 | |
Purchase of treasury stock | (2,979) | — | |
Cash dividends paid | (4,325) | (4,078) | |
Financing fees paid | (47) | — | |
Other financing | — | (243) | |
Net cash provided by (used for) financing activities | 42,253 | 12,259 | |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (204) | 4 | |
Cash, cash equivalents and restricted cash | |||
Increase (decrease) for the period | 316 | (952) | |
Balance at the beginning of the period | 2,150 | 3,436 | |
Balance at the end of the period | $ 2,466 | $ 2,484 | |
Reconciliation of cash, cash equivalents and restricted cash | |||
Cash and cash equivalents | $ 1,504 | $ 1,463 | |
Restricted cash included in prepaid expenses and other current assets | 58 | 208 | |
Restricted cash included in other non-current assets | 904 | 813 | |
Total cash, cash equivalents, and restricted cash | $ 2,466 | $ 2,484 |
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SOURCE Hamilton Beach Brands Holding Company