SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
....................................
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9172
............
NACCO Industries, Inc.
......................................................
(Exact name of registrant as specified in its charter)
DELAWARE 34-1505819
.......................................................................
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5875 LANDERBROOK DRIVE, MAYFIELD HEIGHTS, OHIO 44124
........................................................................
(Address of principal executive offices) Zip code
Registrant's telephone number, including area code (216) 449-9600
.................
......................................
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the last 90 days.
YES X NO
..... .....
Number of shares of Class A Common Stock outstanding at April 30, 1994:
7,186,087
.........
Number of shares of Class B Common Stock outstanding at April 30, 1994:
1,761,388<PAGE>
.........
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
PAGE
NO.
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets - March 31, 1994 3-4
and December 31, 1993
Unaudited Consolidated Statements of Income - 5
for the Three Months Ended March 31,
1994 and 1993
Unaudited Consolidated Statements of Cash Flows- 6
for the Three Months Ended March 31, 1994 and 1993
Notes to Unaudited Consolidated Financial 7-8
Statement
Item 2 - Management's Discussion and Analysis of Results 9-19
of Operations and Financial Condition
Part II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 20
Exhibit Index 22
- 2 - <PAGE>
PART I
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
1994 1993
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 16,552 $ 29,149
Accounts receivable, net 180,557 200,112
Inventories 284,927 238,168
Prepaid expenses and other 35,674 37,373
517,710 504,802
Other Assets 44,115 45,438
Property, Plant and Equipment, Net 491,401 496,213
Deferred Charges
Goodwill, net 481,841 487,963
Deferred costs and other 65,008 64,663
Deferred income taxes 37,491 43,414
584,340 596,040
Total Assets $1,637,566 $1,642,493
See notes to unaudited consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
1994 1993
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 162,791 $ 148,397
Revolving credit agreements 47,784 35,178
Current maturities of long-term obligations 64,686 55,016
Income taxes 14,950 27,198
Other current liabilities 116,230 131,666
406,441 397,455
Notes Payable - not guaranteed by
the parent company 344,209 357,788
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 336,410 338,504
Obligation to United Mine Workers of America
Combined Benefit Fund 158,043 163,217
Self-insurance Reserves and Other 114,434 108,648
Minority Interests 40,467 41,255
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 7,183,362
shares outstanding (1993--7,177,075 shares
outstanding) 7,183 7,177
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,762,813 shares outstanding
(1993--1,763,503 shares outstanding) 1,763 1,764
Capital in excess of par value 2,582 2,548
Retained income 227,506 226,212
Foreign currency translation adjustment
and other (1,472) (2,075)
237,562 235,626
Total Liabilities and Stockholders' Equity $1,637,566 $1,642,493
See notes to unaudited consolidated financial statements.
- 4 - <PAGE>
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
1994 1993
(In thousands, except
per share data)
Net sales $381,051 $341,895
Other operating revenues 2,197 1,926
Total Revenues 383,248 343,821
Cost of sales 305,444 275,969
Gross Profit 77,804 67,852
Selling, administrative and
general expenses 54,054 48,503
Amortization of goodwill 3,448 3,455
Operating Profit 20,302 15,894
Other income (expense)
Interest income 338 439
Interest expense (14,793) (16,366)
Other - net (1,284) (777)
(15,739) (16,704)
Income (Loss) Before Income Taxes and Minority
Interest 4,563 (810)
Income tax provision (benefit) 2,001 (336)
Net Income (Loss) Before Minority Interest 2,562 (474)
Minority interest 208 468
Net Income (Loss) $ 2,770 $ (6)
Net Income (Loss) per share $ .31 $ .00
Dividends per share $ .165 $ .160
See notes to unaudited consolidated financial statements.
- 5 - <PAGE>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
1994 1993
(In thousands)
Operating Activities
Net income (loss) $ 2,770 $ (6)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and amortization 20,021 19,149
Deferred income taxes 527 1,984
Other non-cash items (1,128) 1,217
Working Capital Changes
Accounts receivable 22,084 10,629
Inventories (45,683) (11,449)
Other current assets 2,317 (1,063)
Accounts payable 10,389 (8,476)
Accrued income taxes (10,946) (9,595)
Other liabilities (9,289) (12,085)
Net cash used by operating activities (8,938) (9,695)
Investing Activities
Expenditures for property, plant and equipment (11,328) (13,253)
Proceeds from the sale of assets 1,835 338
Net cash used by investing activities (9,493) (12,915)
Financing Activities
Additions to long-term obligations and
revolving credit 43,034 60,576
Reductions of long-term obligations and
revolving credit (36,650) (56,328)
(Reductions of) additions to advances from
customers (1,596) 3,713
Cash dividends paid (1,475) (1,430)
Other - net 2,833 4,132
Net cash provided by financing activities 6,146 10,663
Effect of exchange rate changes on cash (312) 33
Cash and Cash Equivalents
Decrease for the period (12,597) (11,914)
Balance at the beginning of the period 29,149 33,847
Balance at the end of the period $16,552 $21,933
See notes to unaudited consolidated financial statements.
- 6 - <PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Dollars in Millions, Except Per Share Data)
Note A - Basis of Presentation
NACCO Industries, Inc. ("NACCO") is a holding company with
four operating subsidiaries: The North American Coal Corporation ("North
American Coal"), NACCO Materials Handling Group, Inc. ("NMHG"), Hamilton
Beach/Proctor-Silex, Inc. ("Hamilton Beach/Proctor-Silex"), and The
Kitchen Collection, Inc. ("Kitchen Collection").
The accompanying unaudited consolidated financial
statements include the accounts of NACCO and its majority owned
subsidiaries (NACCO Industries, Inc. and Subsidiaries - the "Company").
Intercompany accounts have been eliminated.
These financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the financial position of the
Company as of March 31, 1994, and the results of its operations and cash
flows for the three month periods ended March 31, 1994 and 1993 have been
included.
Operating results for the three month period ended March
31, 1994 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1994. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1993.
The operating profit (loss) for the three month period
ended March 31, 1993 has been restated to reflect the reclassification in
the third quarter of 1993 of amortization of intangibles as an operating
expense. Certain other amounts in the prior periods' unaudited
consolidated financial statements have been reclassified to conform to
the current period's presentation.
Note B - Inventories
Inventories are summarized as follows:
March 31 December 31
1994 1993
Manufacturing inventories:
Finished goods and service parts $140.2 $117.6
Raw materials and work in process 120.6 95.6
LIFO reserve (11.1) (10.2)
Total manufacturing inventories 249.7 203.0
Coal and mining supplies 23.7 23.8
Retail inventories 11.6 11.4
$285.0 $238.2
The cost of manufacturing inventories has been determined
by the last-in, first-out (LIFO) method for 70% and 69% of such
inventories as of March 31, 1994 and December 31, 1993, respectively.
- 7 - <PAGE>
Note C Subsequent Event
On May 10, 1994 the Company's Hamilton Beach/Proctor-Silex
and Kitchen Collection subsidiaries modified their respective credit
arrangements. These revisions provide improved pricing and liquidity and
adjust the covenants and restrictions.
At Hamilton Beach/Proctor-Silex the revised credit
arrangement provides for a $135.0 million revolving credit facility. The
expiration date of this facility (which currently is May 1997) can be
extended one additional year, on an annual basis, upon the mutual consent
of Hamilton Beach/Proctor-Silex and the bank group, beginning in 1995.
This agreement, secured by all assets of Hamilton Beach/Proctor-Silex,
allows borrowings to be made at either LIBOR or lender's prime rate plus
a margin. The borrowing rates are subject to reductions based upon
achievement of predetermined interest coverage ratios. At the end of the
first quarter the stated interest rate was LIBOR plus 1.75%. As of May
10, 1994 the stated interest rate is LIBOR plus 1.00%. In addition, this
modification allows Hamilton Beach/Proctor-Silex to pay dividends, under
certain conditions, to its stockholders.
The revised credit arrangement at Kitchen Collection allows
for an increase to the outstanding balance on its term loan to $5.0
million. At March 31, 1994 the outstanding balance was $1.9 million. In
addition, the scheduled repayments, which currently are in annual
installments through 1997, are now in two equal installments due January
1, 1999 and January 1, 2000. This modification also reduces Kitchen
Collection's stated interest rate to LIBOR plus 0.75% from LIBOR plus
1.50% and allows for increased levels of dividends to its stockholder.
- 8 - <PAGE>
Item 2 - Management's Discussion and Analysis of Results
of Operations and Financial Condition
(Tabular Dollars in Millions, Except Per Share Data)
FINANCIAL SUMMARY
NACCO's four operating subsidiaries operate in distinct
business environments, and the results of operations and financial
condition are best discussed at the subsidiary level. Information
relating to the Company's operations is presented below. The results for
"North American Coal" have been adjusted to exclude the previously
combined results of Bellaire Corporation, a non-operating subsidiary of
NACCO.
THREE MONTHS ENDED
MARCH 31
1994 1993
REVENUES
NMHG $245.3 $214.7
Hamilton Beach/Proctor-Silex 68.6 65.8
North American Coal 58.9 53.8
Kitchen Collection 10.7 9.1
Bellaire .5 1.2
Eliminations (.8) (.8)
$383.2 $343.8
AMORTIZATION OF GOODWILL
NMHG $ 2.7 $ 2.7
Hamilton Beach/Proctor-Silex .7 .8
$ 3.4 $ 3.5
OPERATING PROFIT (LOSS)
NMHG $ 11.1 $ 9.6
Hamilton Beach/Proctor-Silex (.4) (2.7)
North American Coal 11.6 11.0
Kitchen Collection (.2) (.1)
Bellaire .4 .2
NACCO (2.2) (2.1)
$ 20.3 $ 15.9
INTEREST INCOME
NMHG $ .1 $ .1
North American Coal .6 .5
Bellaire .3 .3
NACCO .2 .7
Eliminations (.9) (1.2)
$ .3 $ .4
INTEREST EXPENSE
NMHG $ (8.7) $(10.5)
Hamilton Beach/Proctor-Silex (1.4) (1.6)
North American Coal (.3) (.2)
NACCO (.7) (.9)
Eliminations .9 1.3
(10.2) (11.9)
Project mining subsidiaries (4.6) (4.4)
$(14.8) $(16.3)
- 9 - <PAGE>
FINANCIAL SUMMARY (Continued)
THREE MONTHS ENDED
MARCH 31
1994 1993
OTHER-NET, INCOME (EXPENSE)
NMHG $ (.6) $ (.6)
Hamilton Beach/Proctor-Silex (.4)
North American Coal (.6) (.3)
Bellaire .1
NACCO .2 .1
$ (1.3) $ (.8)
NET INCOME (LOSS)
NMHG $ .9 $ (.8)
Hamilton Beach/Proctor-Silex (1.2) (2.2)
North American Coal 4.5 4.5
Kitchen Collection (.1) (.1)
Bellaire .5 .4
NACCO (2.0) (2.3)
Minority interest .2 .5
$ 2.8 $ 0.0
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG $ 8.1 $ 8.0
Hamilton Beach/Proctor-Silex 3.9 4.0
North American Coal .4 .4
Kitchen Collection .2 .2
NACCO .3
12.6 12.9
Project mining subsidiaries 7.4 6.2
$20.0 $19.1
CAPITAL EXPENDITURES
NMHG $ 6.3 $ 4.5
Hamilton Beach/Proctor-Silex 2.3 4.0
North American Coal .1 .1
Kitchen Collection .3 .3
9.0 8.9
Project mining subsidiaries 2.3 4.4
$11.3 $13.3
MARCH 31 DECEMBER 31
1994 1993
TOTAL ASSETS
NMHG $ 844.7 $ 833.0
Hamilton Beach/Proctor-Silex 295.1 300.3
North American Coal 72.7 63.7
Kitchen Collection 19.1 23.3
Bellaire 95.2 97.0
NACCO 20.6 22.8
1,347.4 1,340.1
Project mining subsidiaries 411.3 416.7
1,758.7 1,756.8
Consolidating eliminations (121.1) (114.3)
$1,637.6 $1,642.5
- 10 - <PAGE>
NORTH AMERICAN COAL
North American Coal mines and markets lignite for use
primarily as fuel for power generation by electric utilities and general
industry. The lignite is surface mined in North Dakota, Texas and
Louisiana. Total coal reserves approximate 2.2 billion tons with 1.4
billion tons committed to electric utility customers pursuant to long-
term contracts.
FINANCIAL REVIEW
First Quarter of 1994 Compared With First Quarter of 1993
The following schedule details the components of the
changes in revenues, operating profit and net income for the first
quarter of 1994 compared with 1993:
Operating Net
Revenues Profit Income
1993 $53.8 $11.0 $4.5
Volume (tons) 5.0 .9 .6
Mix of tons sold (1.1) (1.1) (.8)
Agreed profit per ton (.1) (.1) (.1)
Average selling price (.2) (.2) (.1)
Royalties received (.1) (.1)
Pass-through costs 1.6 .1
Operating costs 1.1 .7
Other income (expense) (.3)
1994 $58.9 $11.6 $4.5
The favorable impact from volume reflects increased sales
tons at three of the four operating mines. During the first quarter of
1994 North American Coal sold 6.9 million tons of lignite compared with
6.6 million tons in 1993. While sales tons were higher the mix of tons
sold was unfavorable because Red River sold its additional tons at lower
prices in 1994. Increases in pass-through costs at the project mines,
which are included in the cost of coal to the utility customer, increased
revenues $1.6 million. These pass-through costs include costs of
operations, interest expense and certain other income and expense items.
Increases and decreases in pass-through costs have no significant impact
on net income. The favorable operating profit impact from operating
costs relate primarily to reduced costs at the Red River mine.
Other Income and Expense
Items of other income (expense) for North American Coal were
as follows for the three months ended March 31:
1994 1993
Interest income $ .6 $ .5
Interest expense $(4.9) $(4.6)
Other-net $ (.6) $ (.3)
- 11 - <PAGE>
Provision for Income Taxes
Income before income taxes, provision for income taxes and
the effective tax rate for North American Coal were as follows for the
three months ended March 31:
1994 1993
Income before income taxes $6.7 $6.6
Provision for income taxes $2.2 $2.1
Effective tax rate 32.6% 31.7%
LIQUIDITY AND CAPITAL RESOURCES
North American Coal has in place a $50.0 million revolving
credit facility. The expiration date of this facility (which currently
is September 1996) can be extended one additional year, on an annual
basis, upon the mutual consent of North American Coal and the bank group,
beginning in 1994. North American Coal had $32.0 million of its
revolving credit facility available at March 31, 1994.
The financing of the project mining subsidiaries, which is
guaranteed by the utility customers, consists of long-term equipment
leases, notes payable and non-interest-bearing advances from customers.
The obligations of the project mining subsidiaries do not impact the
short- or long-term liquidity of the Company and are without recourse to
NACCO or North American Coal. These arrangements do not prevent the
project mining subsidiaries from paying dividends in amounts up to their
retained earnings.
Supplemental operating data for North American Coal is
presented below:
THREE MONTHS ENDED
MARCH 31
1994 1993
Income before tax from operating mines $ 6.4 $ 6.1
Royalty and other income, net $ 1.6 $ 1.7
Headquarters expense $(1.3) $(1.2)
Net income $ 4.5 $ 4.5
Supplemental financial data for North American Coal,
excluding the project mining subsidiaries, is presented below:
MARCH 31 DECEMBER 31
1994 1993
Total assets net of current
liabilities (excluding debt) $69.1 $59.0
Debt $21.7 $17.0
Stockholder's equity $35.3 $33.7
Debt to total capitalization 38% 33%
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NACCO MATERIALS HANDLING GROUP
NMHG, 97% owned by NACCO, designs, manufactures and markets
forklift trucks and related service parts under the Hyster and Yale
brand names.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the
three months ended March 31:
1994 1993
Revenues
Americas $174.1 $155.5
Europe, Africa and Middle East 58.2 49.1
Australia and Far East 13.0 10.1
$245.3 $214.7
Operating profit
Americas $ 9.7 $ 9.7
Europe, Africa and Middle East .7 (1.4)
Australia and Far East 1.1 .5
Corporate and Eliminations (.4) .8
$11.1 $ 9.6
Operating profit excluding goodwill amortization
Americas $11.7 $11.7
Europe, Africa and Middle East 1.4 (.7)
Australia and Far East 1.1 .5
Corporate and Eliminations (.4) .8
$13.8 $12.3
First Quarter of 1994 Compared With First Quarter of 1993
The following schedule details the components of the changes
in revenues, operating profit and net income (loss) for the first quarter
of 1994 compared with 1993:
Net
Operating Income
Revenues Profit (Loss)
1993 $214.7 $ 9.6 $(.8)
Increase (Decrease) in 1994 from:
Unit volume 24.6 4.5 3.0
Sales mix 2.0 1.1 .7
Average sales price 1.5 1.5 1.0
Service parts 4.0 1.4 .9
Manufacturing cost 1.1 .7
Other operating expense (4.1) (2.7)
Foreign currency translation (1.5) (4.0) (3.0)
Other income and expense .9
Differences between effective
and statutory tax rates .5
Change in statutory tax rate (.3)
1994 $245.3 $11.1 $ .9
- 13 - <PAGE>
Increased unit volume in 1994 reflects the continued
economic improvement in North America and improvements in global market
share. Most European markets continue to be in recession. While price
discounting continues to be prevalent in the forklift industry, pricing
has been favorable in 1994 compared with 1993. Sales mix changes to
higher margin products have positively affected results of operations in
1994. The service parts business continues to improve in North America
and Europe due to the improving economy in North America and the addition
of new dealers in Europe.
Manufacturing costs have decreased in 1994 due to higher
production volumes which have led to increased overhead absorption. New
product introductions in 1993 increased manufacturing costs in Europe
during 1993 which did not recur in 1994. Other operating expenses
increased in 1994 due to additional marketing programs and new dealer
promotion costs. Operating profit was adversely affected by a stronger
Japanese Yen which increased the cost of purchases sourced from Japan.
NMHG's backlog of orders at March 31, 1994 was approximately
18,500 units compared to the 12,000 units at December 31, 1993. Backlog
has increased due to a significant increase in orders from dealers both
in North America and Europe.
Other Income and Expense
Items of other income (expense) for NMHG were as follows for
the three months ended March 31:
1994 1993
Interest income $ .1 $ .1
Interest expense $(8.7) $(10.5)
Other-net $ (.6) $ (.6)
The reduction in interest expense in 1994 is due to lower
levels of debt in 1994 after the 1993 debt restructuring.
Provision for Income Taxes
Income (loss) before income taxes, provision (benefit) for
income taxes and the effective tax rate for NMHG were as follows for the
three months ended March 31:
1994 1993
Income (loss) before income taxes $ 1.9 $(1.4)
Provision (benefit) for income taxes $ 1.0 $ (.6)
Effective tax rate 53.5% 45.5%
The higher tax rate in 1994 compared with 1993 is primarily
due to tax benefits received in 1993 on the sale of property which are
not repeated in 1994. In addition, the tax rate in 1994 reflects
increased domestic and foreign statutory tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $6.3
million during the first three months of 1994. The majority of these
expenditures were for manufacturing expansion and tooling related to the
future production of new products. It is estimated that NMHG's capital
expenditures for the remainder of 1994 will be approximately $18.7
million. The principal sources of financing for these capital
expenditures are internally generated funds, bank borrowings and
assistance grants from local development boards.
- 14 - <PAGE>
NMHG's management believes it can adequately meet all of its
current and long-term commitments and operating needs. This is a result
of its cash flow from operations and additional funds available under
revolving credit agreements. NMHG had available $89.3 million of its
$100.0 million revolving credit facility at March 31, 1994.
Supplemental financial data for NMHG is presented below:
MARCH 31 DECEMBER 31
1994 1993
Total assets net of current
liabilities (excluding debt) $651.0 $644.0
Goodwill, net $381.2 $383.9
Debt $332.2 $326.6
Stockholders' equity $259.0 $257.1
Debt to total capitalization 56% 56%
HAMILTON BEACH/PROCTOR-SILEX
Hamilton Beach/Proctor-Silex, 80% owned by NACCO, is a
leading manufacturer of small electric appliances. The housewares
business is seasonal. A majority of revenues and operating profit occurs
in the second half of the year when sales of small electric appliances
increase significantly for the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for Hamilton Beach/Proctor-Silex
were as follows for the three months ended March 31:
1994 1993
Revenues $68.6 $65.8
Operating loss $ (.4) $(2.7)
Operating profit (loss) excluding
goodwill amortization $ .3 $(1.9)
Net loss $(1.2) $(2.2)
First Quarter of 1994 Compared With First Quarter of 1993
The following schedule details the components of the changes
in revenues, operating loss and net loss for the first quarter of 1994
compared with 1993:
Operating Net
Revenues Loss Loss
1993 $65.8 $(2.7) $(2.2)
Increase (Decrease) in 1994 from:
Unit volume 3.3 .8 .5
Sales mix (.3) (.1)
Average sales price .2 .2 .1
Foreign currency translation (.4) (.4) (.3)
Manufacturing cost 2.2 1.4
Other operating expense (.4) (.3)
Other income and expense (.1)
Differences between effective
and statutory tax rates (.3)
1994 $68.6 $ (.4) $(1.2)
- 15 - <PAGE>
The favorable impact from volume is due primarily to
increased sales of blenders, toasters, coffeemakers and food processors
somewhat offset by reduced iron sales. The increased volumes in
blenders, food processors and toasters were primarily in lower priced
models resulting in an unfavorable sales mix. The drop in the value of
the Canadian dollar to the U.S. dollar in the first quarter of 1994
compared with the first quarter of 1993 negatively influenced operating
results in 1994. The favorable impact from manufacturing costs related
primarily to lower material costs and increased manufacturing
efficiencies and throughput.
Other Income and Expense
Items of other income (expense) for Hamilton Beach/Proctor-
Silex were as follows for the three months ended March 31:
1994 1993
Interest expense $(1.4) $(1.6)
Other-net $(.4) ----
Other-net in 1994 consisted primarily of a loss from the
sale of certain equipment and tooling during the quarter. The reduced
interest expense in 1994 is the result of lower average interest rates
offset somewhat by higher average borrowings.
Provision for Income Taxes
Loss before income taxes, benefit for income taxes and the
effective tax rate for Hamilton Beach/Proctor-Silex were as follows for
the three months ended March 31:
1994 1993
Loss before income taxes $(2.2) $(4.3)
Benefit for income taxes $(1.0) $(2.1)
Effective tax rate 45.1% 47.7%
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $2.3
million during the first three months of 1994 and are estimated to be
$11.7 million for the remainder of 1994. The primary purpose of these
expenditures is to increase manufacturing efficiency and to acquire
tooling for new and existing products. These expenditures are funded
primarily from internally generated funds and short-term borrowings.
Hamilton Beach/Proctor-Silex has a revolving credit facility
of up to $95.0 million, the availability of which is based on percentages
of eligible accounts receivable and inventory. As of March 31, 1994,
$12.1 million of the revolving credit facility was available.
On May 10, 1994 Hamilton Beach/Proctor-Silex modified its
credit arrangement to provide for a $135.0 million revolving credit
facility. The expiration date of this facility (which currently is May
1997) can be extended one additional year, on an annual basis, upon the
mutual consent of Hamilton Beach/Proctor-Silex and the bank group,
beginning in 1995. This agreement, secured by all assets of Hamilton
Beach/Proctor-Silex, allows borrowings to be made at either LIBOR or
lender's prime rate plus a margin. The borrowing rates are subject to
reductions based upon achievement of predetermined interest coverage
ratios. At the end of the first quarter the stated interest rate was
LIBOR plus 1.75%. As of May 10, 1994 the stated interest rate is LIBOR
plus 1.00%. In addition, this modification allows Hamilton
Beach/Proctor-Silex to pay dividends, under certain conditions, to its
stockholders.
- 16 - <PAGE>
Supplemental financial data for Hamilton Beach/Proctor-Silex
is presented below:
MARCH 31 DECEMBER 31
1994 1993
Total assets net of current
liabilities (excluding debt) $232.4 $237.9
Goodwill, net $ 96.7 $100.1
Debt $ 85.4 $ 86.5
Stockholders' equity $134.3 $138.6
Debt to total capitalization 39% 39%
KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of
kitchenware, tableware, small electric appliances and related
accessories. The specialty retail business is seasonal with the majority
of its revenues and operating profit being generated in the fourth
quarter during the fall holiday selling season.
FINANCIAL REVIEW
First Quarter of 1994 Compared With First Quarter of 1993
The following schedule details the components of the changes
in revenues, operating loss and net loss for the first quarter of 1994
compared with 1993:
Operating Net
Revenues Loss Loss
1993 $ 9.1 $(.1) $(.1)
Increase (decrease) in 1994 from:
Stores opened in 1993 1.7 .1 .1
Comparable stores (.1) (.1) (.1)
Other (.1)
1994 $10.7 $(.2) $(.1)
Provision for Income Taxes
Loss before income taxes, benefit for income taxes and the
effective tax rate for Kitchen Collection were as follows for the three
months ended March 31:
1994 1993
Loss before income taxes $(.2) $(.1)
Benefit for income taxes $(.1) ----
Effective tax rate 40.7% 40.0%
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $0.3
million during the first three months of 1994. Estimated capital
expenditures for the remainder of 1994 are $1.1 million. These
expenditures are primarily for new
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store openings and improvements to existing facilities. The principal
source of funds for these capital expenditures is internally generated
funds. At March 31, 1994, Kitchen Collection had available all of its
$2.5 million line of credit. This credit line is renewable annually in
May and has currently been extended through May, 1995.
On May 10, 1994 Kitchen Collection modified its credit
arrangement to allow for an increase in the outstanding balance on its
term loan to $5.0 million. At March 31, 1994 the outstanding balance was
$1.9 million. In addition, the scheduled repayments, which currently are
in annual installments through 1997, are now in two equal installments
due January 1, 1999 and January 1, 2000. This modification also reduces
Kitchen Collection's stated interest rate to LIBOR plus 0.75% from LIBOR
plus 1.50% and allows for increased levels of dividends to its
stockholder.
Supplemental financial data for Kitchen Collection is
presented below:
MARCH 31 DECEMBER 31
1994 1993
Total assets net of current
liabilities (excluding debt) $14.5 $15.0
Goodwill, net $ 3.9 $ 4.0
Debt $ 1.9 $ 2.4
Stockholder's equity $12.5 $12.6
Debt to total capitalization 13% 16%
NACCO AND OTHER
FINANCIAL REVIEW
First Quarter of 1994 Compared with First Quarter of 1993
The following schedule details the components of the changes
in operating loss and net loss for the first quarter of 1994 compared
with 1993:
Operating Net
Loss Loss
1993 $(2.1) $(2.3)
Administrative general expenses
Payroll related (.2) (.1)
Outside services .1
Interest income (.2)
Interest expense .1
Other-net .1
Differences between effective and
statutory tax rates .4
1994 $(2.2) $(2.0)
The reduction in interest income relates to NMHG's Hyster-
Yale 12 3/8% subordinated debentures. In the first quarter of 1993,
NACCO owned $23.7 million, face value, of these debentures and received
interest income on them. These debentures were contributed to NMHG
during the third quarter of 1993. In the first quarter of 1994 NACCO
owned $7.9 million, face value, of these debentures and as a result NACCO
has earned less interest income during the first quarter of 1994 compared
with 1993. The variance in differences between effective and statutory
tax rates reflects a reduction in 1994 in the consolidating income tax
adjustment recognized at the reporting entity level.
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LIQUIDITY AND CAPITAL RESOURCES
Although the subsidiaries have entered into substantial debt
agreements, NACCO has not guaranteed the long-term debt or any borrowings
of its subsidiaries.
As previously noted in this Management's Discussion and
Analysis, the debt arrangements at Hamilton Beach/Proctor-Silex and
Kitchen Collection were modified on May 10, 1994. These modifications
permit the payment of dividends by Hamilton Beach/Proctor-Silex to NACCO
under certain circumstances and increases the level of dividends that can
be paid by Kitchen Collection. North American Coal continues to be
allowed to pay dividends to NACCO.
The Company believes it can adequately meet all of its
current and long-term commitments and operating needs. This outlook
stems from amounts available under revolving credit facilities, the
substantial prepayment of scheduled debt payments and the utility
customers' funding of the project mining subsidiaries.
BELLAIRE CORPORATION
Bellaire Corporation ("Bellaire") is a non-operating
subsidiary of NACCO. Bellaire's operating results primarily include
royalty payments received on certain coal reserves and mine closing
activities related to the Indian Head Mine, which ceased mining
operations in April 1992. During the first quarter of 1994 Bellaire had
revenues and operating profit of $0.5 million and $0.4 million,
respectively, compared with revenues of $1.2 million and operating profit
of $0.2 million in 1993. Bellaire's net income in the first quarter of
1994 and 1993 is $0.5 million and $0.4 million, respectively. Because
Bellaire's operating results during the first quarter of 1994 and 1993
are not significant they will not be discussed in detail.
The condensed balance sheets for Bellaire were as follows:
MARCH 31 DECEMBER 31
1994 1993
Net current assets $ 18.0 $ 18.2
Property, plant and equipment, net .5 .5
Deferred taxes and other assets 66.1 67.0
Obligation to United Mine Workers of
America Combined Benefit Fund (158.0) (163.2)
Other liabilities (24.9) (21.2)
Deficit $(98.3) $(98.7)
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Part II
Item 1 - Legal Proceedings
None
Item 2 - Change in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 22 of this
quarterly report on Form 10-Q.
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Signature
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NACCO Industries, Inc.
(Registrant)
Date May 13, 1994 Frank B. O'Brien
Frank B. O'Brien
Senior Vice President -Corporate
Development and Chief Financial
Officer
Date May 13, 1994 Steven M. Billick
Steven M. Billick
Vice President and Controller
(Principal Accounting Officer)
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Exhibit Index
Exhibit
Page
Number* Description of Exhibit Number
(11) Computation of Earnings Per Common Share 23
*Numbered in accordance with Item 601 of Regulation S-K.
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Exhibit 11
NACCO Industries, Inc. And Subsidiaries
Form 10-Q
Computation of Earnings per Share
THREE MONTHS
MARCH 31
1994 1993
(In thousands, except
per share data)
Net income (loss): $2,770 $ (6)
Per share amounts reported
to stockholders Note 1: $ .31 $ 0.0
Primary:
Weighted average shares outstanding 8,942 8,936
Dilutive stock options Note 2 15 16
Totals 8,957 8,952
Per share amounts $ .31 $ 0.0
Fully diluted Note 3:
Weighted average shares outstanding 8,936
Dilutive stock options Note 2 18
Totals 8,954
Per share amounts $ 0.0
Note 1 Per share earnings have been computed and reported to the
stockholders pursuant to APB Opinion No. 15, which provides that "any
reduction of less than 3% in the aggregate need not be considered as
dilution in the computation and presentation of earnings per share data."
Note 2 Dilutive stock options are calculated based on the treasury
stock method. For primary per share earnings the average market price is
used. For fully diluted per share earnings the quarter-end market price,
if higher than the average market price for the period, is used.
Note 3 Fully diluted per share earnings for the three months ended
March 31, 1994 are not disclosed because the quarter-end market price was
lower than the average market price for the quarter.
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