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8-K - 8-K - Hamilton Beach Brands Holding Co | d464680d8k.htm |
Investor Presentation September 2017 Exhibit 99 |
Safe Harbor Statement The following information includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Any and all statements regarding the Companys expected future financial position, results of operations, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth
opportunities, plans, goals and objectives of management
for future operations, as well as statements that include words such as anticipate, if, believe, plan, estimate, expect, intend, may, could, should, will, and other
similar expressions are forward-looking statements. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of the
Companys management. The Company does not undertake
a duty to update such forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include, without limitation, changes in the sales prices, product mix or levels of consumer
purchases of small electric household and specialty
housewares appliances; changes in consumer retail and credit markets, including the increasing volume of transactions made through third-party internet sellers; bankruptcy of or loss of major retail customers or suppliers; changes in costs,
including transportation costs, of sourced products;
delays in delivery of sourced products; changes in or unavailability of quality or cost effective suppliers; exchange rate fluctuations, changes in the import tariffs and monetary and other changes in the regulatory climate in the countries in which Hamilton Beach
Brands buys, operates and/or sells products; product
liability, regulatory actions or other litigation, warranty claims or returns of products; customer acceptance of, changes in costs of, or delays in the development of new products; increased competition, including consolidation within the industry; shift
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 our products; changes mandated by
federal, state and other regulation, including tax,
health, safety or environmental legislation; decreased levels of consumer visits to brick and mortar stores; increased competition, including through online channels; shift 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 number of customers visiting Kitchen Collection ® stores; changes in the sales prices, product mix or levels of consumer purchases of kitchenware and
small electric appliances; changes in costs, including transportation
costs, of inventory; delays in delivery or the unavailability of inventory; customer acceptance of new products; the anticipated impact of the opening of new stores, the ability to renegotiate existing leases and
effectively and efficiently close under-performing
stores; changes in import tariffs and monetary policies and other changes in the regulatory climate in the countries in which Kitchen Collection operates and/or buys and sells products; and other risks identified in the Companys Registration
Statement on Form S-1 and other filings with the
Securities and Exchange Commission. 1
|
Management Presenters Supported by an executive team with an average of 29 years of experience with Hamilton Beach Brands
GREG
TREPP
President & CEO
21 years with Hamilton Beach Brands
Previously employed with Pepperidge Farm
Inc. and Young & Rubicam
JIM
TAYLOR
Vice President & CFO
34 years with Hamilton Beach Brands
Previously employed with Price Waterhouse
SCOTT
TIDEY
Sr. Vice President, North America Sales & Marketing
24 years with Hamilton Beach Brands
Previously employed with Wyeth Consumer Healthcare
2 |
HBBHC Snapshot Hamilton Beach Brands Holding Company (NYSE: HBB) Hamilton Beach Brands Holding Company (HBBHC) is a holding company for two
separate businesses: consumer and commercial small appliances
(Hamilton Beach Brands or HBB)
and specialty retail (The Kitchen Collection or KC) Hamilton Beach Brands is a leading global designer, marketer and distributor of
branded small electric household and specialty housewares appliances,
as well as commercial products for restaurants, bars and
hotels The Kitchen Collection is a national specialty
retailer of kitchenware in outlet and traditional malls
throughout the U.S. Headquartered in Glen Allen,
Virginia Approximately 1,400 employees
LTM 6/30/17 revenue $740.6 million LTM 6/30/17 EBITDA $50.4 million (1) LTM 6/30/17 net income $27.2 million 6/30/17 net debt $48.9 million _____________________ (1) EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures. The discussion of
non-GAAP measures and the related reconciliations to
GAAP measures start on page 31. 3
|
Transaction Background and Rationale |
Spin-Off Transaction Summary NACCO Industries, Inc. (NACCO) is planning to effect a stock spin-off of Hamilton Beach Brands
Holding Company
Distributing
Company
........................................................................................NACCO Industries, Inc. (NYSE: NC) Distributed Company
.............................................................Hamilton Beach
Brands Holding Company (NYSE: HBB) Distributed
Securities
.......
..
100% of HBBHC Class A and Class B common stock
Distribution
Ratio
..
One Class A and one Class B share of HBBHC for every Class A or Class B share of NC HBBHC Total Shares
Outstanding
...................................................................................................................13.7 million Dividend Policy
..................................................................HBBHC
intends
to pay regular quarterly dividends 4 |
Focused Housewares Investment Provides investors with a more focused, single-industry investment option
Improve Flexibility to Pursue Growth
Create greater flexibility to pursue strategic growth opportunities,
such as acquisitions and joint ventures, in the
housewares industry and the potential to use stock to help finance
these growth opportunities Direct Access to Capital
Markets Provide direct access to equity capital markets
and greater access to debt capital markets to fund growth strategies and to establish a capital structure and dividend policy reflecting the business needs and financial position
Recruit, Motivate and Retain Employees
Strengthen the alignment of senior management incentives with the needs
and performance of HBBHC through the use of equity
compensation arrangements, improving the ability to motivate and retain current personnel and attract, retain and motivate additional qualified personnel Management Focus Reinforce managements focus on serving each market segment and customer need, and on responding flexibly to
changing market conditions and growth markets
Spin-Off Rationale
The spin-off is expected to accomplish important business objectives
for HBBHC 5 |
HBBHC Overview and Strategic Objectives |
Proven Business Model Drives Results Consistent, Market Leading Innovation + + Global Platform #1 Presence in Key Sales Channels + + Trusted, Efficient
and Low-Cost Supply Chain Strong Performance and Return on Capital Iconic Brands + Experienced Management Team + 6 |
The
Innovation Started Over
110 Years Ago! 7 |
HBBHC is a Collection of Iconic Consumer Product Brands _____________________ (1) Wolf Gourmet ® is a registered trademark of the Sub-Zero Group, Inc. (2) CHI ® is a registered trademark of Farouk Systems, Inc. (1) (2) 8 Trusted Proven Reliable Innovative CONSUMER COMMERCIAL RETAIL |
HBBHC Overview KEY BUSINESS HIGHLIGHTS SALES BY GEOGRAPHY Leading designer, marketer and distributor of branded housewares for retail and
commercial applications
Strong brands with leading market share
Hamilton Beach
®
brand ranked #1 small kitchen appliance brand in U.S.
(based on units)
Strong share in Canada, Mexico and Central America and focused on
growing in other international markets
Strong relationships with leading retail and e-commerce customers
across diverse channels
100+ year track record of innovation and product line
expansion Broad consumer price point segmentation coverage
from good to better to best Multi-layered growth
strategy includes e-commerce leadership, an increase in
premium product offerings, continued international expansion, further
penetration of commercial markets, expansion into adjacent
categories and completion of accretive
acquisitions Highly professional and experienced management
team Strong working capital management and returns on
capital SALES BY
CATEGORY
OPERATING
PROFIT BY CATEGORY 2016 FINANCIAL HIGHLIGHTS 9 United States 84% International 16% Consumer / Commercial 99% Retail 1% Consumer 75% Commercial 6% Retail 19% |
Our Vision To be the leading global supplier of branded small appliances and housewares
Our Mission
Profitable
growth from innovative solutions that improve everyday living Our Values The Customer: Consistently meet or exceed the needs of our internal and external
customers People:
Employ and develop the best Good Thinking: Encourage and cultivate inspired thinking in all areas of our
business Ethics:
Honest,
ethical
behavior
always
Quality: Ensuring the quality of our
products and services is our passion Continuous
Improvement: There is always a better way. Change is life Teamwork: We help each other to succeed. We share both successes and failures
Our Environment:
We proactively manage our business in a sustainable, socially
and environmentally responsible manner
Our Core Principles
10 |
11 Good Thinking Approach At Hamilton Beach Brands, We Practice Good Thinking Excellent Work Environment Consumer Focus Innovation Testing, Testing, Testing Best-in-Class Logistics Trusted, Ethical Work Smart Quality |
Comprehensive Product Portfolio Coffee Makers Kettles Toasters Irons Slow Cookers Hand Mixers Can Openers Blenders Toaster Ovens Meat Grinders Food Processors 12 |
Strong Portfolio of Branded Products TOTAL PRODUCT CATEGORIES OFFERED HBB HAS A TOP 3 BRAND IN 28 KEY HOUSEWARE CATEGORIES 47 40 33 30 28 23 18 16 Cuisinart Oster Black & Decker Breville Kitchen Aid Sunbeam _____________________ Source: NPD point of sales data for the 12-month period ending July, 2017.
Air purifiers
Electric knives
Ice shavers Rice cookers Blenders Espresso makers Iced tea makers Roaster ovens Bread makers Food choppers Irons Sandwich makers Burners, single and double Food processors Jar openers Single serve blenders Can openers Food steamers Juice extractors Skillets Citrus juicers Garment steamers Kettles Slow cookers Coffee grinders Griddles Kitchen systems Soda machines Coffee makers, traditional drip Grills, indoor Meat grinders / mincers Stand mixers Coffee makers, single serve Grills / griddles Microwave ovens Toaster ovens Compact refrigerators Hand blenders Odor eliminators Toasters Crepe makers Hand mixers Pizza ovens Vacuum sealers Deep fryers Hand / stand mixers Popcorn poppers Waffle makers Specialty drink makers Ice cream makers Quesadilla makers _____________________ Source: NPD for the 12-month period ending August, 2017.
13 |
Consistent Innovation in New Product Development 53 37 49 51 70 58 59 58 50 67 80 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E HBB aggregates data from 25,000+ consumers annually to introduce new, research-driven products
HBB generated more than 30% of its revenue in the last
3 years from products that are less than 3 years old
_____________________
(1) Excludes product introductions from The Kitchen Collection and gadget introductions from Weston. PRODUCT PLATFORM INTRODUCTIONS (1) SELECT 2017 PRODUCT INTRODUCTIONS Weston Pro ® Series Dehydrator Hamilton Beach ® MultiBlend Quiet Blender Proctor Silex ® Panini Press & Compact Grill Hamilton Beach ® Commercial Quantum Blender HBB protects its innovations through a robust patent renewal process 14 |
SPECIALTY RETAILERS DEPARTMENT STORES WAREHOUSE CLUBS MASS MARKET RETAILERS E-COMMERCE RETAILERS Broad Customer Base Across Diverse Channels E-Commerce 28% Other 72% 2017E U.S. SALES BY CHANNEL HBB Believes it Has the #1 Unit Share of Small Kitchen Appliances at the Top 2 U.S. E-Commerce Retailers HBB Has a Diverse Base of 2,500+ Customers GROCERY STORES INDEPENDENT RETAILERS 1,000+ Customer Accounts 2016 SALES BY CUSTOMER SPORT RETAILERS 15 Costco Sams Club PRICESMART Bodega Aurrera Family Dollar Grupo Exito Walmart TARGET JET JD.COM Wayfair TMALL.COM Amazon KOHLS Liverpool BED BATH & BEYOND El Palacio de Hierro BEST BUY Macys Bemol Harrods FAST SHOP Sur la table WILLIAMS-SONOMA Academy SPORT + OUTDOORS Kroger Wakefern FOOD CORP H.E.B Cabelas DICKS Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Customer 7 Customer 8 Customer 9 Customer 10 Other 32% 10% 5% 4% 3% 2% 2% 2% 2% 1% Other 37% |
Global Infrastructure to Support HBB Objectives Picton, Ontario Distribution Center Strategically located footprint to efficiently serve customers globally
Markham, Ontario
Canada Sales and
Administration
Headquarters
Bentonville,
Arkansas Sales Office Richmond, Virginia Corporate Headquarters Sales & Marketing Engineering Southern Pines, North Carolina Service Center for Customer Returns; Catalog Distribution Center; Parts Distribution Center Mexico City, Mexico Mexico Sales and Administrative Headquarters Tultitlan, Mexico Distribution Center Jundiai, Sao Paulo, Brazil Distribution Center Sao Paulo, Brazil Brazil Sales and Administrative Headquarters Geel, Belgium Distribution Center Shanghai, China Sales Office, Engineering, Quality Assurance Shanghai, China Distribution Center Shenzhen, China Engineering, Quality Assurance, Operations Distribution Sales Corporate HQ Sales and Administrative HQ Miami, Florida Sales Office Olive Branch, Mississippi Distribution Office Seattle, Washington Sales Office Minneapolis, Minnesota Sales Office 16 |
Market Backdrop Summary CONSUMER KITCHEN APPLIANCE MARKET BY GEOGRAPHY (1) ~$71 B ~$39 B ~$23 B ~$30 B CHANNEL OVERVIEW 2017E U.S. HOUSEWARES SALES BY CHANNEL _____________________ (1) Marketline. (2) NPD. 17 (2) Asia-Pacific 43% Europe 24% United States 14% ROW 19% E-Commerce 25% Other 75% INDUSTRY GEOGRAPHIC FOOTPRINT |
Tangible Growth Opportunities to Generate Attractive Returns E-Commerce leadership Premium Product Offerings Adjacent Categories Strategic Acquisitions International Market Penetration Commercial Product Line Expansion Long-Term HBB Objectives (excludes KC): Sales: Operating Profit Margin: $750M $1B 9% 10% 18 |
9% 14% 14% 17% 21% 28% 2012 2013 2014 2015 2016 2017E RECENT ONLINE REVIEWS Success in Growing E-Commerce Channel GLOBAL E-COMMERCE FOOTPRINT Online sales of housewares is the fastest growing segment and is
expected to account for 25% of U.S. industry sales in 2017
Consumers are more discriminating of products due to their ability to
research products online
Consumers are increasingly focused on reviews which take into
account brand reputation, product performance and
safety These habits play into HBBs favor given the
positive information available on HBBs products
online E-commerce rewards brands, innovation and
product quality above and beyond traditional
brick-and-mortar retail and HBB is leveraging its
strengths in these areas to execute its online growth
strategy Continue to drive sales and capture market share
with the top global online retailers
Deliver best-in-class communication and promotional strategies
to drive conversion
Excel in direct fulfillment business model
Expand brands into new categories to drive incremental
sales Consistently identify / evaluate new online
participants to ensure maximum channel
presence HBB
U.S. E-COMMERCE SALES (2012 2017E) _____________________ Source: Intelligent Eye, which compiled reviews from amazon.com, walmart.com and target.com during 2016.
HBBs U.S. E-Commerce Sales are Expected to
Exceed the U.S. Industry Average of 25% in 2017
19 Brand 2016 Average Star Total Reviews 4.1 189,137 4.1 21,536 Cuisinart 4.0 35,725 Oster 4.0 87,787 Mr. Coffee 3.9 28,244 Magic Bullet 3.9 4,106 Black & Decker 3.8 59,870 Rowenta 3.8 6,212 Delonghi 3.8 9,760 Bella 3.7 9,322 |
Multi-Initiative Marketing Strategy HBB delivers 3 billion+ impressions annually through its marketing strategy
Advertising
Online E-mail Everyday
Good Thinking Blog
Facebook
Pinterest
Twitter
Instagram
YouTube
500,000+ followers
1,500+ subscribers
17,000+ followers
8,000+ followers
20 |
Premium Product Market Opportunity Well-positioned to grow in the premium market Leverage brand strength, engineering, design capabilities and commercial expertise to expand premium product offering
Expansion of Hamilton Beach
®
Professional and Weston
®
brand product lines
Robust
roadmap
of new product introductions from Wolf Gourmet ® through multi-year agreement with Sub-Zero Group, Inc. Wolf is a premium brand with a reputation of innovation and quality designed to create the ultimate cooking
experience Introduction
of CHI ® branded garment care line, through multi-year licensing deal with Farouk Systems, Inc. CHI is a high-quality hair products brand with products that reflect education, the environment and innovation
Expand placements and share in the Only-the-Best
high-end market with strong brands and product lines
21 ® |
Expand internationally in the emerging Asia and Latin America markets and continue to expand in Canada and Mexico Target to increase international sales by concentrating on key growth markets, including China and Brazil o Flexible entry model includes establishing a local team and then working through distributors or directly with retailers or e-commerce partners o Also an opportunity to grow with existing customers as they expand into new markets Invest in resources to identify local consumer needs / preferences through consumer research / feedback and introduce new products for specific markets Leverage strength of brands and innovative products to expand in new geographies Commercial division has been present in global markets for decades providing a strong platform to build upon Selective licensing of HBB brands with high-quality partners
in eight countries
International Market Opportunity
_____________________
(1) Source: Marketline.
CONSUMER
KITCHEN
APPLIANCE
MARKET BY
GEOGRAPHY
(1) Significant expansion opportunity for international growth 2016 HBBHC GEOGRAPHIC SALES MIX $70.5 B $39.0 B $23.0 B $30.4 B 22 United States 84% International 16% Asia-Pacific 43% Europe 24% United States 14% ROW 19% |
Commercial Market Opportunity Opportunity to accelerate growth in the $18 billion global commercial market (1) Food service markets benefitting from changing demographics and shift to healthier food options
Increase in onsite food preparation driving demand for commercial
appliances Companys commercial brand reputation for
performance, reliability and differentiated products driving growth Investing to understand customers unmet needs for unique solutions to build a competitive advantage
Opportunity to accelerate growth through the introduction of new
product capabilities and categories Continuing to build
distribution capabilities and investing resources to establish presence in international food service market Increasing penetration of products at global and regional chains Commercial grade, innovative features, strong performance and heavy-duty durability Dependable value, commercially rated, strong performance and durability _____________________ (1) Company estimate. 23 |
Expand into New Small Appliance and Adjacent Categories Pursuing opportunities to grow outside of the small kitchen appliance category
Significant opportunity to expand outside the small kitchen appliances
category Leverage existing infrastructure and channels to
introduce adjacent products E-commerce channel enhances
ability to successfully add new products Introducing new
products in both consumer and commercial markets Compact
Refrigerators
Coffee Airpots
Kitchen Scales
Commercial
Chamber Sealers
Buffet Servers
24 |
Acquisition Growth Strategy Large, global housewares market that is highly fragmented Competitive market position that gives HBB potential to increase share / enter new product categories Opportunity in current consumer space, new consumer categories or commercial Strong brand and / or channel presence International presence / focus with differentiated customer base E-commerce expands acquisition opportunities, as the platform
makes it easier to present new products
Accelerate growth and margins
Highly-accretive when layered into current business
model Meet or exceed return on capital targets
We are thrilled to welcome the Weston team and their
consumers and vendors to the Hamilton Beach Brands
family. Through the combination of the highly talented
Weston organization along with our own dedicated
employees, we believe we can achieve significant
opportunities for future growth and profitability in line with our
strategic initiatives
Product expansion opportunity within existing product categories and beyond
HBBs small kitchen and commercial appliance
business ATTRACTIVE MARKETS
TARGET PROFILE
VALUE CREATION
HBBHC will be a more attractive acquirer as its own entity
Value Drivers for HBB
Incremental access to new consumer
markets such as outdoor enthusiast
and farm-to-table and also retail
channels such as sporting goods
Expands distribution capabilities for
existing HBB brands
25 - Greg Trepp December 2014 |
The Kitchen Collection Strategy 209 stores as of June 30, 2017 strategically located primarily in outlet malls across the U.S.
Meet the challenge of a difficult environment and evolve aggressively in
a constructive manner, focusing on the outlet mall
segment Outlet malls have a sustainable presence and
Kitchen Collection is the leading housewares player in
outlet malls Optimize store portfolio with stores in
strong outlet malls in well-positioned locations and
exit stores that do not generate acceptable returns
Average lease duration expected to be 12 months or less for
two-thirds of stores by the end of 2018
Substantial progress has already been made and in a manner that has
minimized financial impact on the business
Focus on comparable store sales growth through:
Enhancing customers store experience through improved customer
interactions to generate greater average sales
transaction size Working to enhance sales volume and
profitability by improving closure rates through
continued refinement of product offerings, merchandise mix and store displays and appearances Continued focus on gross margin, profit and cash flow improvement areas
Emphasis on increasing sales of higher-margin products
Maintain inventory efficiency and store inventory controls
Ongoing merchandising improvements through use of highly analytical
merchandising skills and disciplined operating
controls 26 |
Consolidated Financial Overview |
REVENUE Historical Financial Highlights ($ in millions) $621.0 $605.2 $604.1 2015 2016 LTM June 2017 EBITDA (1) $38.0 $46.9 $49.0 2015 2016 LTM June 2017 $151.0 $144.4 $139.9 2015 2016 LTM June 2017 $1.6 $1.9 $1.3 2015 2016 LTM June 2017 _____________________ (1) Excludes potential incremental standalone costs. EBITDA is a non-GAAP measure and should not be considered in isolation or as a
substitute for GAAP measures. The discussion of non-GAAP measures and the related reconciliations to GAAP measures start on page 31. (2) HBBHC financials net of eliminations. ($ in millions) $767.9 $745.4 $740.6 2015 2016 LTM June 2017 $40.3 $48.8 $50.4 2015 2016 LTM June 2017 % of Revenue:
6.1%
7.7% 8.1% % of Revenue:
1.1%
1.3% 0.9% % of Revenue:
5.2%
6.5% 6.8% (2) 27 |
2015 2016 June 2017 Net Income $19.7 $26.2 $27.2 EBITDA 40.3 48.8 50.4 Cash and Cash Equivalents 16.8 11.3 5.3 Consolidated Debt 58.4 38.7 54.3 Net Debt 41.6 27.4 49.0 Consolidated Debt / EBITDA 1.4x 0.8x 1.1x Net Debt / EBITDA 1.0x 0.6x 1.0x Consolidated Equity $82.8 $65.1 $63.0 Debt to Total Capitalization 41.4% 37.3% 46.3% Capital Structure and Return on Capital FLEXIBLE CAPITAL STRUCTURE (HBBHC) 19.1% 30.5% 33.4% 2015 2016 LTM June 2017 ATTRACTIVE ROTCE (HBB) _____________________ (1) Net Income and EBITDA represent last twelve months as of June 2017.
(2) Leverage doesnt reflect impact from planned dividend. (3) EBITDA, Debt to Total Capitalization and ROTCE are non-GAAP measures and should not be considered in isolation or as a
substitute for GAAP measures. The discussion of non-GAAP measures and the related reconciliations to GAAP measures start on page 31. Prior to the spin, HBBHC intends to distribute a $35 million dividend to NACCO,
an acceleration of a previously planned dividend expected to be paid in
Q4 2017 (1)
(3) (2) (2) (3) 28 (3) |
Company Outlook KC OUTLOOK HBB OUTLOOK U.S. and Canadian consumer markets for small appliances during H2 2017
expected to be comparable to H2 2016, as sales continue to shift from
in- store channels to online
HBB will continue to focus on strengthening its market position with new
products across various categories and brands; H2 2017
sales and net income are expected to be higher than levels
seen in H2 2016 Longer term, HBB will continue to focus on
improving return on sales through scale derived from
market growth and strategic initiatives along with
leveraging KCs infrastructure for future operations
Declining consumer traffic to physical retail locations and reduced
in-store transactions are reducing KCs target
consumers spending on housewares in mall
locations Given the market backdrop, KC expects financial
performance to decline during H2 2017 compared to H2
2016 Going forward, KC will aggressively manage its store
portfolio with a focus on a defined profitable product
line at more favorable mall locations; the Company
believes its small core store portfolio is well positioned to take advantage of a market turnaround 29 HBBHC expects to incur up to $2.5 million of spin-related costs in Q3 2017 |
Key Investment Highlights 30 Strong Core Business Model Leading Global Market Share in Branded Housewares Strong Cash Flows and ROTCE Global Sourcing and Distribution Platform Broad Customer Base Comprehensive Product Offering Experienced Management Team Iconic Brands Known Globally Leading Provider to the Growing E-Commerce Market Multi-Layered Growth Strategy Increase in Premium Product Offerings Continued International Expansion Further Penetration of Commercial Markets Expansion into Adjacent Markets Complete Accretive Acquisitions Business Growth will Drive Further Economies of Scale E-Commerce Leadership |
Appendix |
Non-GAAP Disclosure EBITDA is defined as net income before income taxes plus interest expense, interest income and depreciation and amortization expense; Debt to Total Capitalization is defined as consolidated debt divided by consolidated debt plus consolidated equity; Net debt is defined as total debt less cash and cash equivalents; and Return on capital employed is defined as net income before interest expense, after tax divided by LTM average capital employed. LTM average capital employed is defined as LTM average equity plus LTM average debt less LTM average cash. 31 This presentation contains non-GAAP financial measures. Included in this presentation are reconciliations of these
non-GAAP financial measures to the most directly
comparable financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). EBITDA is a measure of net income (loss) that differs from financial results measured in
accordance with GAAP.
EBITDA, debt to total capitalization, net debt and return on capital
employed in this presentation are provided
solely
as supplemental non-GAAP disclosures of operating results. Management believes these non-GAAP financial measures assist investors in understanding the results of operations of Hamilton Beach Brands Holding Company and its
subsidiaries. In addition, management evaluates
results using these non-GAAP financial measures.
Hamilton
Beach
Brands
Holding
Company
defines
non-GAAP
measures
as follows: For reconciliations from GAAP measurements to non-GAAP measurements see pages 32 and 33. |
Non-GAAP EBITDA Reconciliation ($ in millions) Note: EBITDA is provided solely as a supplemental disclosure. EBITDA does not represent net income, as defined by U.S. GAAP and
should not be considered as a substitute for net income,
or as an indicator of operating performance. The Company defines EBITDA as income (loss) before income tax provision, plus net interest expense and depreciation and amortization expense. EBITDA is not a measurement under U.S. GAAP and is not necessarily comparable with
similarly titled measures of other companies.
32 Calculation of EBITDA Net income $19.7 $26.2 $27.2 Income tax provision 12.3 15.0 15.6 Interest expense 2.0 1.4 1.5 Interest income 0.0 0.0 (0.0) Depreciation and amortization expense 6.3 6.2 6.1 EBITDA $40.3 $48.8 $50.4 Calculation of EBITDA Net loss ($0.4) ($0.3) ($0.6) Income tax provision 0.4 0.5 0.3 Interest expense 0.1 0.2 0.2 Interest income 0.0 0.0 0.0 Depreciation and amortization expense 1.5 1.5 1.4 EBITDA $1.6 $1.9 $1.3 Year Ended December 31, 2015 2016 LTM June 2017 Calculation of EBITDA Net income $19.7 $26.6 $27.8 Income tax provision 11.8 14.5 15.3 Interest expense 1.8 1.1 1.2 Interest income (0.1) 0.0 (0.0) Depreciation and amortization expense 4.8 4.7 4.7 EBITDA $38.0 $46.9 $49.0 |
Capitalization and ROTCE Reconciliation ($ in millions) CAPITALIZATION (HBBHC) ROTCE (HBB) (1) _____________________ (1) Return on capital employed is provided solely as a supplemental disclosure with respect to income generation because management
believes it provides useful information with respect to earnings in a form that is comparable to the Companys cost of capital employed, which includes both equity and debt securities, net of cash. Return on
capital employed is a non-GAAP measure and should not be considered in isolation or as a substitute for a GAAP measure. (2) Tax rate of 38% represents the Companys target marginal tax rate.
(2) (2) (2) 33 2015 2016 June 2017 Consolidated Debt $58.4 $38.7 $54.3 Plus: Consolidated Equity 82.8 65.1 63.0 Total Capitalization $141.2 $103.8 $117.3 Debt to Total Capitalization 41.4% 37.3% 46.3% 2015 Average Equity (12/31/2014 and each of 2015's quarter ends) $51.5 Average Debt (12/31/2014 and each of 2015's quarter ends) 58.9 Average Cash (12/31/2014 and each of 2015's quarter ends) (1.4) Total 2015 average capital employed $109.0 2015 Net Income, as reported 19.7 Plus: 2015 Interest expense, net 1.8 Less: Income taxes on 2015 interest expense at 38% (0.7) Actual return on capital employed = actual net income before interest expense, net, after tax
20.8 Actual return on capital employed percentage 19.1% 2016 Average Equity (12/31/2015 and each of 2016's quarter ends) $52.0 Average Debt (12/31/2015 and each of 2016's quarter ends) 40.2 Average Cash (12/31/2015 and each of 2016's quarter ends) (2.6) Total 2016 average capital employed $89.5 2016 Net Income, as reported 26.6 Plus: 2016 Interest expense, net 1.2 Less: Income taxes on 2016 interest expense at 38% (0.5) Actual return on capital employed = actual net income before interest expense, net, after tax
27.3 Actual return on capital employed percentage 30.5% Trailing 12 Months, June 2017 Average Equity (6/30/17, 3/31/17, 12/31/16, 9/30/16, 6/30/16) $50.4 Average Debt (6/30/17, 3/31/17, 12/31/16, 9/30/16, 6/30/16) 39.1 Average Cash (6/30/17, 3/31/17, 12/31/16, 9/30/16, 6/30/16) (4.2) Total Trailing 12 months average capital employed $85.3 Trailing 12 Months Net Income, as reported 27.8 Plus: Trailing 12 months Interest expense, net 1.2 Less: Income taxes on Trailing 12 months interest expense at 38%
(0.5)
Actual return on capital employed = actual net income before interest
expense, net, after tax 28.5
Actual return on capital employed percentage
33.4% |