SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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,
1995: 7,245,435
Number of shares of Class B Common Stock outstanding at April 30,
1995: 1,719,330
1
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994
Unaudited Consolidated Statements of
Income for the Three Months Ended
March 31, 1995 and 1994
Unaudited Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1995 and 1994
Notes to Unaudited Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Results
of Operations and Financial Condition
Part II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
Exhibit Index
2
PART I
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
1995 1994
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 15,250 $ 19,541
Accounts receivable, net 218,129 236,215
Inventories 357,019 298,987
Prepaid expenses and other 29,750 31,893
620,148 586,636
Other Assets 41,313 41,341
Property, Plant and Equipment, Net 482,679 485,314
Deferred Charges
Goodwill, net 468,835 471,574
Deferred costs and other 67,753 69,257
Deferred income taxes 39,348 40,200
575,936 581,031
Total Assets $1,720,076 $1,694,322
See notes to unaudited consolidated financial statements.
3
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
1995 1994
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $237,517 $226,892
Revolving credit agreements 51,741 30,760
Current maturities of long-term
obligations 22,158 63,509
Income taxes 14,042 20,356
Accrued payroll 22,626 28,018
Other current liabilities 102,873 111,903
450,957 481,438
Notes Payable - not guaranteed by
the parent company 326,987 286,717
Obligations of Project Mining
Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 329,280 331,876
Obligation to United Mine Workers of
America
Combined Benefit Fund 154,097 154,959
Self-insurance Reserves and Other 122,763 119,399
Minority Interest 40,739 40,542
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 7,245,121
shares outstanding (1994 - 7,228,739
shares outstanding) 7,245 7,229
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,719,644 shares outstanding
(1994 - 1,722,981 shares outstanding) 1,720 1,723
Capital in excess of par value 3,495 2,788
Retained income 272,225 262,226
Foreign currency translation adjustment
and other 10,568 5,425
295,253 279,391
Total Liabilities and Stockholders'
Equity $1,720,076 $1,694,322
See notes to unaudited consolidated financial statements.
4
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
1995 1994
(In thousands, except
per share data)
Net sales $499,966 $381,051
Other operating income 2,405 2,197
Total Revenues 502,371 383,248
Cost of sales 401,618 305,444
Gross Profit 100,753 77,804
Selling, administrative and general
expenses 63,098 54,054
Amortization of goodwill 3,422 3,448
Operating Profit 34,233 20,302
Other income (expense)
Interest income 393 338
Interest expense (14,023) (14,793)
Other - net 288 (1,284)
(13,342) (15,739)
Income Before Income Taxes, Minority
Interest and Extraordinary Charge 20,891 4,563
Provision for income taxes 7,878 2,001
Income Before Minority Interest and
Extraordinary Charge 13,013 2,562
Minority interest (208) 208
Income Before Extraordinary Charge 12,805 2,770
Extraordinary charge, net-of-tax (1,280)
Net Income $11,525 $2,770
Per Share:
Income Before Extraordinary Charge $1.43 $.31
Extraordinary charge, net-of-tax (.14)
Net Income $1.29 $.31
Dividends per share $.170 $.165
See notes to unaudited consolidated financial statements.
5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
1995 1994
(In thousands)
Operating Activities
Net income $11,525 $2,770
Adjustments to reconcile net income
to net cash provided by operating
activities:
Extraordinary charge, net-of-tax 1,280
Depreciation, depletion and
amortization 20,332 20,021
Deferred income taxes (574) 527
Other non-cash items 691 (1,128)
Working Capital Changes:
Accounts receivable 20,545 22,084
Inventories (55,762) (45,683)
Other current assets 2,247 2,317
Accounts payable 12,525 10,389
Accrued income taxes (5,214) (10,946)
Other liabilities (16,776) (9,289)
Net cash used by operating
activities (9,181) (8,938)
Investing Activities
Expenditures for property, plant and
equipment (12,813) (11,328)
Proceeds from the sale of assets 313 1,835
Net cash used by investing
activities (12,500) (9,493)
Financing Activities
Additions to long-term obligations and
revolving credit 162,789 28,645
Reductions of long-term obligations and
revolving credit (143,496) (20,076)
Additions to obligations of project
mining subsidiaries 13,680 14,389
Reductions of obligations of project
mining subsidiaries (15,778) (16,574)
Additions (reductions) to advances from
customers (959) (1,596)
Cash dividends paid (1,524) (1,475)
Capital grants 385 496
Other - net 570 2,337
Net cash provided by financing
activities 15,667 6,146
Effect of exchange rate changes on cash 1,723 (312)
Cash and Cash Equivalents
Decrease for the period (4,291) (12,597)
Balance at the beginning of the period 19,541 29,149
Balance at the end of the period $15,250 $16,552
See notes to unaudited consolidated financial statements.
6
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. ("HB/PS"), and The Kitchen Collection,
Inc. ("KCI").
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, 1995 and the results of its operations and cash flows for the three
month periods ended March 31, 1995 and 1994 have been included.
Operating results for the three month period ended March 31, 1995, are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1995. 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, 1994.
Certain amounts in the prior periods' unaudited consolidated
financial statements have been reclassified to conform to the
current period's presentation.
7
Note B - Inventories
Inventories are summarized as follows:
March 31 December 31
1995 1994
Manufacturing inventories:
Finished goods and service
parts
NACCO Materials Handling Group $ 97.5 $ 82.3
Hamilton Beach/Proctor-Silex 63.5 32.8
161.0 115.1
Raw materials and work in
process
NACCO Materials Handling Group 153.9 137.9
Hamilton Beach/Proctor-Silex 17.6 15.9
171.5 153.8
LIFO reserve
NACCO Materials Handling Group (14.3) (11.4)
Hamilton Beach/Proctor-Silex (.3) (.1)
(14.6) (11.5)
Total manufacturing inventories 317.9 257.4
North American Coal:
Coal 7.4 8.4
Mining supplies 17.8 18.8
Retail inventories - Kitchen
Collection 13.9 14.4
$357.0 $ 299.0
The cost of manufacturing inventories has been determined by the
last-in, first-out (LIFO) method for 70 percent and 69 percent of such
inventories as of March 31, 1995 and December 31, 1994, respectively.
Note C - Revolving Credit Agreements and Notes Payable
On February 28, 1995, NMHG entered into a new long-term credit
agreement to replace its previous bank agreement and to refinance
the majority of its existing long-term debt. The new agreement
provides NMHG with an unsecured $350.0 million revolving credit
facility to replace its previous senior credit facility. The new
credit facility has a five-year maturity with extension options
and performance-based pricing comparable to its previous senior credit
facility which provides NMHG with reduced interest rates upon
achievement of certain financial performance targets. With the
new credit agreement in place, NMHG has the ability to call the
remaining $78.5 million outstanding Hyster-Yale 12 3/8%
subordinated debentures. These remaining debentures will be called
in August, 1995 when the call price becomes 102.5, resulting in
an extraordinary charge of $2.1 million which will be recorded at that
time.
Note D - Extraordinary Charge
The 1995 extraordinary charge, of $1.3 million, net of $0.9 million
in tax benefits, relates to the write off of deferred financing fees
associated with NMHG's former revolving credit facility and senior
term loan which was replaced by the new long-term credit agreement
discussed in Note C above.
8
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 function in distinct business
environments, and the results of operations and financial condition
are best discussed at the subsidiary level as 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
1995 1994
REVENUES
NACCO Materials Handling Group $363.2 $245.3
Hamilton Beach/Proctor-Silex 67.0 68.6
North American Coal 60.5 59.2
Kitchen Collection 12.2 10.7
Bellaire .2
Eliminations (.5) (.8)
$502.4 $383.2
AMORTIZATION OF GOODWILL
NACCO Materials Handling Group $ 2.7 $ 2.7
Hamilton Beach/Proctor-Silex .7 .7
$ 3.4 $ 3.4
OPERATING PROFIT (LOSS)
NACCO Materials Handling Group $ 23.7 $ 11.1
Hamilton Beach/Proctor-Silex 1.4 (.4)
North American Coal 11.7 12.0
Kitchen Collection (.5) (.2)
NACCO (2.0) (2.2)
$ 34.3 $ 20.3
OPERATING PROFIT (LOSS) EXCLUDING GOODWILL
AMORTIZATION
NACCO Materials Handling Group $ 26.4 $ 13.8
Hamilton Beach/Proctor-Silex 2.1 .3
North American Coal 11.7 12.0
Kitchen Collection (.5) (.2)
NACCO (2.0) (2.2)
$ 37.7 $ 23.7
INTEREST INCOME
NACCO Materials Handling Group $ .2 $ .1
North American Coal .6 .6
Bellaire .3 .3
NACCO .1 .2
Eliminations (.9) (.9)
$ .3 $ .3
9
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED
MARCH 31
1995 1994
INTEREST EXPENSE
NACCO Materials Handling Group $ (7.5) $ (8.7)
Hamilton Beach/Proctor-Silex (1.6) (1.4)
North American Coal (.4) (.3)
NACCO (.8) (.7)
Eliminations .9 .9
(9.4) (10.2)
Project mining subsidiaries (4.6) (4.6)
$(14.0) $(14.8)
OTHER-NET, INCOME (EXPENSE)
NACCO Materials Handling Group $ .2 $ (.6)
Hamilton Beach/Proctor-Silex (.1) (.4)
North American Coal .2 (.6)
Bellaire .1
NACCO .2
$ .3 $ (1.3)
NET INCOME (LOSS)
Before Extraordinary Charge
NACCO Materials Handling Group $ 9.7 $ .9
Hamilton Beach/Proctor-Silex (.2) (1.2)
North American Coal 5.3 4.8
Kitchen Collection (.3) (.1)
Bellaire .1 .2
NACCO (1.6) (2.0)
Minority interest (.2) .2
12.8 2.8
Extraordinary charge, net-of-tax (1.3)
$ 11.5 $ 2.8
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NACCO Materials Handling Group $ 8.2 $ 8.1
Hamilton Beach/Proctor-Silex 4.0 3.9
North American Coal .4 .4
Kitchen Collection .2 .2
12.8 12.6
Project mining subsidiaries 7.4 7.4
$ 20.2 $ 20.0
CAPITAL EXPENDITURES
NACCO Materials Handling Group $ 8.2 $ 6.3
Hamilton Beach/Proctor-Silex 2.0 2.3
North American Coal .1 .1
Kitchen Collection .4 .3
10.7 9.0
Project mining subsidiaries 2.0 2.3
$ 12.7 $ 11.3
10
FINANCIAL SUMMARY - continued
MARCH 31 DECEMBER 31
1995 1994
TOTAL ASSETS
NACCO Materials Handling Group $938.1 $ 906.2
Hamilton Beach/Proctor-Silex 290.4 289.6
North American Coal 65.2 49.0
Kitchen Collection 22.0 26.0
Bellaire 85.8 87.1
NACCO 30.8 26.6
1,432.3 1,384.5
Project mining subsidiaries 405.4 412.3
1,837.7 1,796.8
Consolidating eliminations (120.9) (102.5)
$1,716.8 $1,694.3
NORTH AMERICAN COAL
North American Coal mines and markets lignite for use primarily
as fuel for power generation by electric utilities. 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
North American Coal's three project mining subsidiaries (Coteau,
Falkirk and Sabine) mine lignite for utility customers pursuant to
long-term contracts at a price based on actual cost plus an agreed
pretax profit per ton. Due to the cost-plus nature of these
contracts, revenues and operating profits are impacted by
increases and decreases in operating costs, as well as by sales
tons. Net income of these project mines, however, is not
significantly affected by changes in such operating costs, which
include costs of operations, interest expense and certain other
income and expense items. Because of the nature of the contracts
at these mines, operating results are best analyzed in terms of
income before taxes and net income.
North American Coal's results for 1994 have been adjusted to
include certain royalty and other payments previously classified
with Bellaire, a non-operating subsidiary of NACCO, that are more
appropriately classified with North American Coal.
11
NORTH AMERICAN COAL - continued
FINANCIAL REVIEW - continued
Tons sold by North American Coal's four operating mines were
as follows for the three months ended March 31:
1995 1994
Coteau Properties 4.1 4.1
Falkirk Mining 1.9 1.8
Sabine Mining .9 .8
Red River Mining .1 .2
7.0 6.9
Revenues, income before taxes, provision for taxes and net
income were as follows for the three months ended March 31:
1995 1994
Revenues
Project mining subsidiaries $54.9 $ 53.0
Red River 3.3 4.2
58.2 57.2
Royalties and other 2.3 2.0
$60.5 $ 59.2
Income before taxes
Project mining subsidiaries $ 6.4 $ 5.7
Red River .4 .7
Total from operating mines 6.8 6.4
Royalty and other income, net 2.5 2.0
Headquarters expense (1.7) (1.3)
7.6 7.1
Provision for taxes 2.3 2.3
Net income $ 5.3 $ 4.8
12
NORTH AMERICAN COAL - continued
FINANCIAL REVIEW - continued
First Quarter of 1995 Compared with First Quarter of 1994
The following schedule details the components of the changes in
revenues, income before taxes and net income for the three months
ended March 31:
Income
Before Net
Revenues Taxes Income
1994 $59.2 $ 7.1 $4.8
Project mining
subsidiaries
Tonnage volume 1.5 .1 .1
Mix of tons sold .2 .2 .1
Agreed profit per ton .1 .1 .1
Red River
Tonnage volume (.7) (.2) (.1)
Mix of tons sold 1.4 1.4 .9
Average selling price (1.5) (1.5) (1.0)
Operating costs (.2) (.1)
Other income (expense) .3 .1
Variances from operating
mines 1.0 .2 .1
Royalties and other
income, net .3 .7 .5
Headquarters expense (.4) (.3)
Differences between
effective and
statutory tax rates .2
1995 $60.5 $ 7.6 $5.3
The favorable mix variance at Red River is due to increased sales
of base tons which yield a higher price as specified in the contract.
North American Coal has an agreement in principle with its customer at
Red River that would extend the contract term nine years in exchange
for a lower sales prices per ton resulting in an unfavorable price
variance. Royalty income favorably impacted operations due to the
receipt of royalties relating to former eastern coal reserves.
13
NORTH AMERICAN COAL - continued
FINANCIAL REVIEW - continued
Other Income and Expense
Items of other income (expense) for the three months ended March 31:
1995 1994
Interest income
Project mining
subsidiaries $ .3 $ .2
Other mining operations .3 .4
$ .6 $ .6
Interest expense
Project mining
subsidiaries $(4.6) $(4.6)
Other mining operations (.4) (.3)
$(5.0) $(4.9)
Other-net
Project mining
subsidiaries $ .1 $ .1
Other mining operations .1 (.7)
$ .2 $ (.6)
Provision for Income Taxes
North American Coal's effective tax rate for the three months
ended March 31, 1995 and 1994 was 30.6 percent and 32.8 percent,
respectively.
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 1997) can be extended one additional year, on an annual
basis, upon the mutual consent of North American Coal and the bank
group. North American Coal had $25.0 million of its revolving credit
facility available at March 31, 1995.
The financing of the project mining subsidiaries, which is guaranteed
by the utility customers, comprises 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 allow the project mining
subsidiaries to pay dividends in amounts equal to their retained
earnings.
14
NORTH AMERICAN COAL - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
North American Coal's capital structure, excluding the project
mining subsidiaries, is presented below:
March 31 December 31
1995 1994
Total Tangible Assets $ 6.4 $ 9.5
Parent Company Advances 37.8 22.7
Total Assets $44.2 $32.2
Debt Related to Parent
Advances $28.5 $16.7
Other Debt .3 0.4
Total Debt 28.8 17.1
Stockholder's Equity 15.4 15.1
Total Capitalization $44.2 $32.2
Debt to Total Capitalization 65% 53%
15
NACCO MATERIALS HANDLING GROUP
NMHG, 97 percent-owned by NACCO, designs, manufactures and
markets forklift trucks and related service parts under the
Hyster(R) and Yale(R) brand names.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the three
months ended March 31:
1995 1994
Revenues
Americas $249.5 $174.1
Europe, Africa and Middle East 95.8 58.2
Asia-Pacific 17.9 13.0
$363.2 $245.3
Operating profit
Americas $ 16.9 $ 9.5
Europe, Africa and Middle East 5.8 .7
Asia-Pacific 1.0 .9
$ 23.7 $ 11.1
Operating profit excluding
goodwill amortization
Americas $ 18.8 $ 11.4
Europe, Africa and Middle East 6.5 1.4
Asia-Pacific 1.1 1.0
$ 26.4 $ 13.8
Net income before
extraordinary charge $ 9.7 $ .9
Extraordinary charge (1.3)
Net income $ 8.4 $ .9
16
NACCO MATERIALS HANDLING GROUP - continued
FINANCIAL REVIEW - continued
First Quarter of 1995 Compared With First Quarter of 1994
The following schedule details the components of the changes in
revenues, operating profit and net income for the first quarter of
1995 compared with 1994:
Operating Net
Revenues Profit Income
1994 $245.3 $11.1 $ .9
Increase (Decrease) in
1995 from:
Unit volume 85.8 16.1 10.5
Sales mix 1.6 (2.0) (1.3)
Average sales price 14.5 14.5 9.4
Service parts 6.5 3.3 2.1
Foreign currency 9.5 (1.7) (.8)
Manufacturing cost (9.2) (5.9)
Other operating
expense (8.4) (5.5)
Other income and
expense 1.0
Differences between
effective
and statutory tax rates (.7)
Extraordinary charge (1.3)
1995 $363.2 $23.7 $ 8.4
Unit volumes in the first quarter of 1995 increased 39 percent in
the Americas, 58 percent in Europe and 51 percent in Asia-Pacific
compared with the same period in 1994. Demand in the Americas
remains high while improving market conditions in Europe and
Asia-Pacific increased volumes in those regions. The price increases
announced in mid-1994 caused the favorable price variance in the
quarter. These price increases were effective on new orders after
June 1, 1994 in the Americas and after April, 1994 and October,
1994 in Europe for Hyster and Yale, respectively. The improved
economies in the Americas and Europe, and new dealers in Europe
resulted in improved results from service parts business.
Operating profit was adversely affected by the strength of the yen
relative to the dollar which increased the cost of purchases sourced
from Japan. The adverse impact of the yen was partially offset by the
strength of the British pound sterling compared with the dollar which
caused translated European results to be higher than in 1994. However,
continuation of the recent additional strengthening of the yen could
negatively affect future earnings.
17
NACCO MATERIALS HANDLING GROUP - continued
FINANCIAL REVIEW - continued
Manufacturing costs increased in the first quarter of 1995 compared with
1994 due to higher raw materials prices and manufacturing inefficiencies
caused by vendor parts shortages, partially offset by higher factory
throughput. The company anticipates resolving the vendor parts supply
problem during 1995. Other operating expenses increased in 1995 due
primarily to higher volume related customer service costs, higher
compensation and benefits based on profit improvement and general
inflation.
NMHG's backlog of orders at March 31, 1995 was approximately 25,200
forklift truck units compared to the 24,600 forklift truck
units at December 31, 1994. Backlog has increased slightly as
increased orders have outpaced the record levels of production in
1995.
Other Income and Expense
Below is a detail of other income (expense) for the three months
ended March 31:
1995 1994
Interest income $ .2 $ .1
Interest expense (7.5) (8.7)
Other-net .2 (.6)
$(7.1) $(9.2)
The lower interest expense in 1995 is primarily due to the
retirements in 1994 of subordinated debentures. The improvement
in other-net in 1995 results primarily form the Sumitomo-Yale
joint venture which had income of $0.4 million in 1995 compared
with a loss of $0.6 million in 1994.
Provision for Income Taxes
NMHG's effective tax rate for the three months ended March 31,
1995 and 1994 was 41.4 percent and 53.5 percent, respectively.
The higher level of pretax earnings in 1995 reduced the effect of
nondeductible goodwill amortization, and thus lowered the
effective tax rate compared with 1994.
Extraordinary Charge
The 1995 extraordinary charge of $1.3 million, net of $0.9
million in tax benefits, relates to the write off of deferred
financing fees associated with NMHG's former revolving credit
facility and senior term loan which was replaced by the new long-
term credit agreement discussed in the following section.
18
NACCO MATERIALS HANDLING GROUP - continued
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $8.2 million
during the first three months of 1995. The increased demand for
lift trucks has required NMHG to invest in its productive
capacity. NMHG is investing to break bottlenecks at all of its
plants and has undertaken expansion of its Craigavon, Northern
Ireland and Irvine, Scotland production facilities. It is
estimated that NMHG's capital expenditures for the remainder of
1995 will be approximately $30.0 million. The principal sources
of financing for these capital expenditures are internally
generated funds, bank borrowings and government assistance
grants.
On February 28, 1995, the company entered into a new long-term
credit agreement to replace its previous bank agreement and to
refinance the majority of its existing long-term debt. The new
agreement provides the company with an unsecured $350.0 million
revolving credit facility to replace its previous senior credit
facility. The new credit facility has a five-year maturity with
extension options and performance-based pricing comparable to its
previous senior credit facility which provides the company with
reduced interest rates upon achievement of certain financial
performance targets. With the new credit agreement in place, the
company has the ability to call the remaining $78.5 million
outstanding Hyster-Yale 12 3/8% subordinated debentures. These
remaining debentures will be called in August, 1995 when the call
price becomes 102.5, resulting in an extraordinary charge of $2.1
million which will be recorded at that time.
The company believes it can meet all of its current and long-
term commitments and operating needs from operating cash flows
and funds available under revolving credit agreements. At March
31, 1995 NMHG had available $205.0 million of its $350.0 million
revolving credit facility.
NMHG's capital structure is presented below:
MARCH 31 DECEMBER 31
1995 1994
Total Tangible Assets $214.0 $192.9
Goodwill at Cost 433.5 433.5
Total Assets Before Goodwill
Amortization 647.5 626.4
Less: Accumulated Goodwill
Amortization 63.1 60.4
Total Assets $584.4 $566.0
Total Debt $264.8 $260.1
Stockholders' Equity 319.6 305.9
Total Capitalization $584.4 $566.0
Debt to Total Capitalization 45% 46%
19
HAMILTON BEACH/PROCTOR-SILEX
HB/PS, 80 percent-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 HB/PS were as follows for the three
months ended March 31:
1995 1994
Revenues $67.0 $68.6
Operating profit $ 1.4 $ (.4)
Operating profit excluding
goodwill amortization $ 2.1 $ .3
Net loss $ (.2) $(1.2)
First Quarter of 1995 Compared With First Quarter of 1994
The following schedule details the components of the changes in
revenues, operating profit and net loss for the first quarter of
1995 compared with 1994:
Operating Net
Revenues Profit Loss
1994 $68.6 $(.4) $(1.2)
Increase (Decrease) in
1995 from:
Unit volume
Good (5.8) (.9) (.6)
Better (.3)
Best 3.8 1.5 1.0
(2.3) .6 .4
Average sales price .9 .9 .6
Foreign currency
translation (.2) (.2) (.1)
Manufacturing cost .5 .3
Differences between
effective and statutory
tax rates (.2)
1995 $67.0 $1.4 (.2)
20
HAMILTON BEACH/PROCTOR-SILEX - continued
FINANCIAL REVIEW - continued
The decrease in revenues from unit volume is due mainly to lower
sales of domestic blenders, toaster ovens, food processors and
toasters, and most all Canadian product lines. Increased unit
sales of domestic irons, coffeemakers and can openers partially
offset the decreases in other product lines. Improved pricing in
most all domestic and Canadian product lines caused the favorable
impact from average sales price.
While unit volume decreased revenues in 1995, a shift to the
better and best product categories and also to higher margin
product lines resulted in an increase to operating profit from
volume. Continued factory improvements resulted in increased
efficiencies which contributed favorably to operating results.
In addition, the decline in value of the Mexican peso also
contributed favorably to operating results by reducing
manufacturing costs. Increased costs of certain raw materials
and higher warehousing and selling expenses tempered operating
results.
Other Income and Expense
Below is a detail of other income (expense) for the three months
ended March 31:
1995 1994
Interest expense $(1.6) $(1.4)
Other-net (.1) (.4)
$(1.7) $(1.8)
Provision for Income Taxes
HB/PS's effective tax rate for the three months ended March 31,
1995 and 1994 was 43.1 percent and 45.1 percent, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $2.0 during
the first three months of 1995 and are estimated to be $10.7
million for the remainder of 1995. 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.
HB/PS's credit agreement provides for a revolving credit facility
("Facility") that permits advances up to $135.0 million. At
March 31, 1995, HB/PS had $54.5 million available under this
Facility. The expiration date of this Facility (which currently
is May 1998) may be extended annually for one additional year
upon the mutual consent of HB/PS and the bank group. On April 28,
1995 this Facility was amended to provide a lower interest rate
if HB/PS achieves a certain interest coverage ratio and to allow
for interest rates quoted under a competitive bid option. At
March 31, 1995, HB/PS also had $10.7 million available under
separate facilities.
21
HAMILTON BEACH/PROCTOR-SILEX - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
HB/PS's capital structure is presented below:
MARCH 31 DECEMBER 31
1995 1994
Total Tangible Assets $120.9 $118.3
Goodwill at Cost 110.5 110.5
Total Assets Before Goodwill
Amortization 231.4 228.8
Less: Accumulated Goodwill
Amortization 16.5 15.8
Total Assets $214.9 $213.0
Total Debt $ 84.8 $ 82.6
Stockholders' Equity 130.1 130.4
Total Capitalization $214.9 $213.0
Debt to Total Capitalization 39% 39%
KITCHEN COLLECTION
KCI 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 generated in the fourth quarter during the fall
holiday selling season.
FINANCIAL REVIEW
First Quarter of 1995 Compared With First Quarter of 1994
The following schedule details the components of the changes in
revenues, operating profit and net loss for the first quarter of
1995 compared with 1994:
Operating Net
Revenues Profit Loss
1994 $10.7 $(.2) $(.1)
Increase (decrease) in
1995 from:
Stores opened in 1995 .1
Stores opened in 1994 1.7
Comparable stores (.3) (.2) (.1)
Other (.1) (.1)
1995 $12.2 $(.5) $(.3)
22
KITCHEN COLLECTION - continued
FINANCIAL REVIEW - continued
KCI, which opened one store in the first quarter of 1995,
operated 120 stores at March 31, 1995 compared with 104 stores at
the end of the first quarter of 1994. A full quarter of
operation of stores opened in 1994 contributed favorably to
revenues in 1995. The results at comparable stores were
adversely affected by poor weather in the Western United States
as well as overall lower customer traffic.
Provision for Income Taxes
Kitchen Collection's effective tax rate for the three months
ended March 31, 1995 and 1994 was 40.8 percent and 40.7 percent,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $0.4 million
during the first three months of 1995. Estimated capital
expenditures for the remainder of 1995 are $1.5 million. These
expenditures are primarily for new store openings and
improvements to existing facilities. The principal source of
funds for these capital expenditures is internally generated
funds. At March 31, 1995, KCI had available $0.5 million of its
$2.5 million line of credit. In May, Kitchen Collection entered
into negotiations for a $5.0 million revolving credit facility.
The terms of the new facility have been approved by NACCO's Board
of Directors and the banks. A formal agreement is expected to be
executed by June 1, 1995 replacing the current line of credit.
This new facility has performance based pricing which provides
for reduced interest rates based on achievement of certain
financial performance measures. Management expects their
interest rates to be reduced by 0.33% when this agreement becomes
effective.
KCI's capital structure is presented below:
MARCH 31 DECEMBER 31
1995 1994
Total Tangible Assets $13.0 $11.3
Goodwill at Cost 4.6 4.6
Total Assets Before Goodwill
Amortization 17.6 15.9
Less: Accumulated Goodwill
Amortization .8 0.8
Total Assets $16.8 $15.1
Total Debt $ 7.0 $ 5.0
Stockholder's Equity 9.8 10.1
Total Capitalization $16.8 $15.1
Debt to Total Capitalization 42% 33%
23
NACCO AND OTHER
FINANCIAL REVIEW
First Quarter of 1995 Compared with First Quarter of 1994
The following schedule details the components of the changes
in parent company operating loss and net loss for the first
quarter of 1995 compared with 1994:
Operating Net
Loss Loss
1994 $(2.2) $(2.0)
Administrative and general
expenses .2 .1
Interest income (.1)
Interest expense (.1)
Other-net (.1)
Consolidating tax adjustments .6
1995 $(2.0) $(1.6)
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.
The debt agreements at HB/PS and KCI allow for the payment of
dividends under certain circumstances. The revised credit
agreement entered into on February 28, 1995, at NMHG will allow
the transfer of up to $25.0 million to NACCO. There are no
restrictions for North American Coal, and its dividends and
advances are the primary source of cash for NACCO.
The Company believes it can adequately meet all of its current
and long-term commitments and operating needs. This outlook is
supported by the amounts available under revolving credit
facilities and the utility customers' funding of the project
mining subsidiaries.
BELLAIRE CORPORATION
Bellaire Corporation ("Bellaire") is a non-operating subsidiary
of NACCO. Bellaire's results primarily include mine closing
activities related to the Indian Head Mine, which ceased mining
operations in April 1992. Bellaire's results for 1994 have been
adjusted to remove certain royalty and other payments that are
more appropriately classified with North American Coal's results.
Cash payments related to Bellaire's obligations, net of
internally generated cash, are funded by NACCO and amounted to
$1.1 million and $1.4 million during the first three months of
1995 and 1994, respectively.
24
NACCO AND OTHER - continued
BELLAIRE CORPORATION - continued
For the first three months of 1995 Bellaire had revenues of
$33,000 and minimal operating profit compared with revenues of
$0.2 million and minimal operating profit in 1994. Bellaire's
net income in the first three months of 1995 and 1994 is $0.1
million and $0.2 million, respectively.
The condensed balance sheets for Bellaire were as follows:
MARCH 31 DECEMBER 31
1995 1994
Net current assets $ 13.9 $ 13.1
Property, plant and
equipment, net .5 .5
Deferred taxes and other assets 64.4 64.1
Obligation to United Mine
Workers of America Combined
Benefit Fund (154.1) (155.0)
Other liabilities (25.9) (24.0)
Deficit $(101.2) $(101.3)
25
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 32 of this quarterly
report on Form 10-Q
(b) Current report on Form 8-K dated March 13, 1995, filed on
March 16, 1995. This report on Form 8-K disclosed under
Item 5 thereof the resignation of George C. Nebel from the
position of President and Chief Executive Officer of Hamilton
Beach/Proctor-Silex and the finalization by NMHG of a new
$350.0 million five year revolving credit facility as set
forth in the above referenced Form 8-K.
26
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 15, 1995 Frank B. O'Brien
Frank B. O'Brien
Senior Vice President - Corporate
Development and Chief Financial Officer
Date May 15, 1995 Steven M. Billick
Steven M. Billick
Vice President and Controller
(Principal Accounting Officer)
27
Exhibit Index
Exhibit
Number* Description of Exhibit
(11) Computation of Earnings Per Common Share
(27) Financial Data Schedule
*Numbered in accordance with Item 601 of Regulation S-K.
28
Exhibit 11
NACCO Industries, Inc. And Subsidiaries
Form 10-Q
Computation of Earnings per Share
Three Months Ended
March 31
1995 1994
(Amounts in thousands
except per share data)
Income (loss):
Income before extraordinary charge $12,805 $2,770
Extraordinary charge, net-of-tax (1,280)
Net income (loss) $11,525 $2,770
Per share amounts reported
to stockholders - Note 1:
Income before extraordinary charge $ 1.43 $ .31
Extraordinary charge, net-of-tax (.14)
Net income (loss) $ 1.29 $ .31
Primary:
Weighted average shares outstanding 8,958 8,942
Dilutive stock options - Note 2 9 15
Totals 8,967 8,957
Per share amounts
Income before extraordinary charge $ 1.43 $ .31
Extraordinary charge, net-of-tax (.14)
Net income (loss) $ 1.29 $ .31
Fully diluted - Note 3:
Weighted average shares outstanding 8,958
Dilutive stock options - Note 2 11
Totals 8,969
Per share amounts
Income before extraordinary charge $ 1.43
Extraordinary charge, net-of-tax (.14)
Net income (loss) $ 1.29
29
EXHIBIT 11 - continued
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 period-end market price, if higher than the average
market price, 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 did not exceed the average market price for the
three month period in 1994.
30
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