Hamilton Beach Brands Holding Company — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the provided text does not give a clear Q4-only financial breakdown. Hamilton Beach Brands, Inc. (HBB) is the company’s single reportable segment, designing, marketing and distributing consumer and commercial appliances. The former Kitchen Collection business is reported as discontinued operations and was dissolved in 2020.
Financial performance
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $658.4 million | $603.7 million |
| Gross profit / margin | $136.5 million / 20.7% | $138.7 million / 23.0% |
| Operating profit / margin | $31.5 million / 4.8% | $37.4 million / 6.2% |
| Continuing-operations net income | $21.3 million | $24.1 million |
| Net income, including discontinued operations | $21.3 million | $46.3 million |
| Diluted EPS from continuing operations | $1.53 | $1.76 |
| Net cash from operating activities, continuing operations | $17.9 million | $(27.9) million |
- Revenue rose 9.1%. Growth reflected higher unit volume and product mix, foreign currency effects and higher average selling prices. Management said price increases were implemented in the second half of 2021.
- Consumer product revenue was $612.8 million, commercial product revenue $41.0 million and licensing revenue $4.6 million. Commercial revenue rose from $30.1 million as demand recovered from pandemic-related softness.
- E-commerce represented 37.5% of sales and increased 22.4% year over year.
- Gross margin fell to 20.7%, principally because sharply higher freight and supply-chain costs were not fully offset by price increases. The 2020 comparison also included about $2.1 million of tariff relief.
- SG&A increased to $104.8 million, including $2.9 million of distribution-center relocation costs, higher employee costs and a full year of ERP software depreciation. 2020 included a $1.9 million write-off related to unauthorized transactions at the Mexico subsidiary, partly offset by reserve reductions.
- Interest expense, net, increased to $2.9 million from $2.0 million. The effective tax rate on continuing operations declined to 26.4% from 28.7%.
Cash, debt and liquidity
- Cash and cash equivalents were $1.1 million at year-end, down from $2.4 million. Current assets were $318.4 million and current liabilities $164.2 million.
- Operating cash flow from continuing operations improved to $17.9 million from cash use of $27.9 million in 2020, mainly as working-capital use moderated. Investing cash use was $11.8 million, including spending associated with the new distribution-center facility. Financing cash use was $7.3 million, largely reflecting lower net revolving borrowings.
- Revolving debt was $96.8 million, compared with $98.4 million a year earlier. The amended facility has a $150 million commitment; year-end borrowing-base availability was $149.0 million, with $52.2 million of excess availability. The facility matures June 30, 2025 and is secured by substantially all of HBB’s assets.
- The weighted-average effective borrowing rate, including swaps, was 3.38%. HBB reported compliance with its financial covenants. Interest-rate swaps covered $25 million of borrowings and included $75 million of delayed-start swaps.
- Management said cash, operating cash flows and facility availability should be sufficient for operating needs and commitments. Dividends to the holding company are subject to facility availability conditions and limits.
Changes, outlook and risks
- Revenue improved, but operating profit and continuing-operations earnings declined as cost of sales rose faster than sales. The company attributed margin pressure primarily to freight congestion and transportation expense.
- Management cited continued demand for certain U.S. small kitchen appliances, price increases, discretionary-spending controls and available credit as measures supporting its ability to navigate ongoing pandemic effects. The filing provides no quantitative earnings or revenue guidance and says the future effect of COVID-19 cannot be estimated reliably.
- Key risks include supply and shipping disruption, elevated freight and input costs, reliance on third-party suppliers—substantially all finished products were sourced from China in 2021—and U.S. tariffs affecting about 25% of annualized HBB purchases. The filing also flags uncertainty from the conflict in Ukraine and possible further trade measures.
- Customer concentration is significant: Walmart accounted for about 28% of 2021 revenue and Amazon about 22%; the five largest customers accounted for 61%. Purchases are generally based on purchase orders rather than long-term supply contracts.
- Environmental investigation and remediation liabilities were accrued at $3.4 million, with a reasonably possible additional cost range of $0 to $1.6 million. A lawsuit seeks to hold the holding company liable for an $8.1 million judgment against the dissolved Kitchen Collection; the company says it believes the claims are without merit and will defend them.
- 2020 net income included $22.2 million from discontinued operations, so the year-over-year decline in total net income is not directly comparable to continuing operating performance. The 2021 continuing-operations comparison is more informative.
- Management and the auditor concluded internal control over financial reporting was effective as of year-end. A material weakness in income-tax controls identified in 2020 was reported as remediated in 2021.
Most important facts for investors to verify
- Whether price increases can offset ongoing freight, product and other supply-chain cost inflation without materially weakening demand or sales volume.
- Whether shipping capacity, sourcing and inventory availability improve, particularly given dependence on China-based suppliers.
- Customer concentration and the sustainability of sales through Walmart, Amazon and other large retailers.
- Facility borrowing-base availability, covenant compliance, variable-rate exposure and restrictions on dividends.
- Potential outcomes and costs of the environmental matters and Kitchen Collection-related litigation.
- How the wind-down of the Brazilian subsidiary and related accumulated currency losses affect subsequent results; the filing expected substantial liquidation in the first half of 2022.