SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 1997
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 July 31, 1997:
6,464,271
Number of shares of Class B Common Stock outstanding at July 31, 1997:
1,688,176
<PAGE>
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - June 30, 1997
(Unaudited) and December 31, 1996
Unaudited Consolidated Statements of Income for
the Three Months Ended and Six Months Ended
June 30, 1997 and 1996
Unaudited Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1997 and 1996
Notes to Unaudited Consolidated Financial
Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Change in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security
Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signature
Exhibit Index
<PAGE>
PART I
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Audited)
JUNE 30 DECEMBER 31
1997 1996
----------- -----------
(In millions)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 31.3 $ 47.8
Accounts receivable, net 189.8 212.2
Inventories 322.8 309.6
Prepaid expenses and other 23.2 22.2
---------- ----------
567.1 591.8
Property, Plant and Equipment, Net 539.8 550.3
Deferred Charges
Goodwill, net 456.7 461.0
Deferred costs and other 61.7 59.6
Deferred income taxes 9.9 7.9
---------- ----------
528.3 528.5
Other Assets 39.6 37.5
---------- ----------
Total Assets $ 1,674.8 $ 1,708.1
========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Audited)
JUNE 30 DECEMBER 31
1997 1996
--------------- -------------
(In millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 213.6 $ 186.3
Revolving credit agreements 60.5 45.8
Current maturities of long-term debt 20.9 21.4
Income taxes 14.0 5.9
Accrued payroll 27.0 30.8
Other current liabilities 134.1 125.8
------------ ------------
470.1 416.0
Long-term Debt- not guaranteed by
the parent company 252.1 333.3
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its NACoal subsidiary 327.8 341.5
Self-insurance Reserves and Other 224.6 223.9
Minority Interest 14.8 14.1
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,464,251
shares outstanding (1996 - 6,492,059
shares outstanding) 6.5 6.5
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,688,176 shares outstanding
(1996 - 1,694,336 shares outstanding) 1.7 1.7
Capital in excess of par value --- .1
Retained earnings 372.1 359.2
Foreign currency translation adjustment
and other 5.1 11.8
------------ ------------
385.4 379.3
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,674.8 $ 1,708.1
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
1997 1996 1997 1996
----------- ----------- ------------- -------------
(In millions, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 541.1 $ 560.9 $ 1,020.8 $ 1,120.4
Cost of sales 440.7 453.3 838.3 905.9
----------- ----------- ------------- -------------
Gross Profit 100.4 107.6 182.5 214.5
Selling, administrative and
general expenses 62.6 69.8 124.8 141.8
Amortization of goodwill 4.0 3.8 7.9 7.6
----------- ----------- ------------- -------------
Operating Profit 33.8 34.0 49.8 65.1
Other income (expense)
Interest expense (9.3) (11.7) (19.3) (23.4)
Other - net 2.0 3.1 1.2 3.5
----------- ----------- ------------- -------------
(7.3) (8.6) (18.1) (19.9)
----------- ----------- ------------- -------------
Income Before Income Taxes and
Minority Interest 26.5 25.4 31.7 45.2
Provision for income taxes 11.3 10.9 13.6 17.6
----------- ----------- ------------- -------------
Income Before Minority Interest 15.2 14.5 18.1 27.6
Minority interest (.3) (.5) (.4) (.7)
----------- ----------- ------------- -------------
Net Income $ 14.9 $ 14.0 $ 17.7 $ 26.9
=========== =========== ============= =============
Weighted average common shares outstanding 8.183 8.984 8.187 8.979
=========== =========== ============= =============
Net Income per share $ 1.82 $ 1.56 $ 2.16 $ 3.00
=========== =========== ============= =============
Dividends per share $ .1950 $ .1875 $ .3825 $ .3675
=========== =========== ============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------
1997 1996
------------ ------------
(In millions)
<S> <C> <C>
Operating Activities
Net income $ 17.7 $ 26.9
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 43.6 41.8
Deferred income taxes (4.8) (3.3)
Other non-cash items .3 (1.7)
Working Capital Changes:
Accounts receivable 28.8 15.1
Inventories (15.8) (23.5)
Other current assets 3.3 .1
Accounts payable 17.0 1.6
Accrued income taxes 12.5 (4.2)
Other liabilities 2.3 (7.6)
------------ ------------
Net cash provided by operating activities 104.9 45.2
Investing Activities
Expenditures for property, plant and equipment (23.0) (41.8)
Proceeds from the sale of assets 2.0 .7
Investments in unconsolidated affiliates (1.4) (1.8)
Acquisition of business (12.2) ---
Other - Net .6 ---
------------ ------------
Net cash used for investing activities (34.0) (42.9)
Financing Activities
Additions to long-term debt and
revolving credit agreements 31.3 55.5
Reductions of long-term debt and
revolving credit agreements (96.6) (51.5)
Additions to obligations of project mining
subsidiaries 26.3 38.9
Reductions of obligations of project mining
subsidiaries (41.6) (43.2)
Cash dividends paid (3.1) (3.3)
Capital grants .6 1.5
Other - net (3.2) (.5)
------------ ------------
Net cash used for financing activities (86.3) (2.6)
Effect of exchange rate changes on cash (1.1) (.8)
------------ ------------
Cash and Cash Equivalents
Decrease for the period (16.5) (1.1)
Balance at the beginning of the period 47.8 30.9
------------ ------------
Balance at the end of the period $ 31.3 $ 29.8
============ ============
See notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Dollars in Millions)
Note 1 - Basis of Presentation
NACCO Industries, Inc. ("NACCO") is a holding company with four operating
subsidiaries: NACCO Materials Handling Group, Inc. ("NMHG"), Hamilton
BeachProctor-Silex, Inc. ("HBPS"), The North American Coal Corporation
("NACoal"), 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 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. 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 June 30, 1997 and the results of its
operations for the three and six month periods and cash flows for the six month
periods ended June 30, 1997 and 1996 have been included.
Operating results for the six month period ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the remainder of
the year ended December 31, 1997. 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 fiscal year ended December 31,
1996.
Certain amounts in the prior periods' unaudited consolidated financial
statements have been reclassified to conform to the current period's
presentation.
Note 2 - Accounting Policies
Derivative Financial Instruments: NMHG and HBPS operate internationally and
enter into transactions denominated in foreign currencies. As a result, the
Company is subject to the transaction exposures that arise from exchange rate
movements between the dates foreign currency transactions are recorded and the
dates they are consummated. NMHG and HBPS use forward foreign currency exchange
contracts to partially reduce risks related to transactions denominated in
foreign currencies, and not for trading purposes. These contracts usually have
maturities of one to twelve months and generally require the companies to buy or
sell Japanese yen, Australian dollars, Canadian dollars or various European
currencies for the U.S. dollar at rates agreed to at the inception of the
contracts.
Generally, gains and losses from changes in the market value of these contracts
are recognized in Cost of sales and offset the foreign exchange gains and losses
on the underlying transaction. Gains and losses on contracts designated as
hedges of firm commitments denominated in foreign currencies are deferred and
included in the measurement of the related transaction.
<PAGE>
Note 2 - Accounting Policies - continued
NMHG, HBPS, NACoal and KCI have entered into interest rate swap agreements for
portions of their floating rate revolving credit agreements. These interest rate
swap agreements allow the subsidiaries to enter into long-term financing
arrangements that have performance-based, floating rates of interest, and then
exchange them for fixed rates of interest, as opposed to entering into higher
cost fixed-rate credit arrangements. Terms of the interest rate swap agreements
range from six months to six and one half years, with the counterparty's option
to extend certain contracts to eight and one half years, and generally require
the subsidiaries to receive a variable interest rate and pay a fixed interest
rate. Variable rates for both the floating rate financing and the interest rate
swap agreements are predominately linked to the three-month LIBOR (London
Interbank Offered Rate). The common index promotes effectiveness of the interest
rate swap agreements as a hedging instrument.
Amounts to be paid or received under the interest rate swap agreements are
accrued as interest rates change and are recognized over the life of the swap
agreement as an adjustment to Interest expense. The related amounts payable to,
or receivable from, the counterparties are included in Other current
liabilities. Changes in the market value of the interest rate swap agreements
are not recognized in net income. However, in the event of termination or
extinguishment of the underlying debt, changes in the market value of interest
rate swap agreements that could not be designated as hedges of other assets,
liabilities or anticipated transactions would be recognized in net income over
the remaining life of the contract or upon termination of the contract.
Note 3 - Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
-------- --------
(Unaudited) (Audited)
<S> <C> <C>
Manufacturing inventories:
Finished goods and service parts-
NMHG $ 125.1 $ 113.6
HBPS 57.2 34.1
-------- --------
182.3 147.7
-------- --------
Raw materials and work in process-
NMHG 91.0 120.6
HBPS 15.9 14.0
-------- --------
106.9 134.6
-------- --------
LIFO reserve-
NMHG (13.4) (15.6)
HBPS .1 .3
-------- --------
(13.3) (15.3)
-------- --------
Total manufacturing inventories 275.9 267.0
Coal - NACoal 10.0 8.3
Mining supplies - NACoal 18.8 18.9
Retail inventories - KCI 18.1 15.4
-------- --------
$ 322.8 $ 309.6
======== ========
</TABLE>
The cost of manufacturing inventories has been determined by the last-in,
first-out (LIFO) method for 68 percent and 62 percent of such inventories as of
June 30, 1997 and December 31, 1996, respectively.
<PAGE>
Note 4 - Long-Term Commitments
In the first quarter of 1997, NACoal entered into operating lease agreements to
lease certain machinery and equipment to be used in operating a mine for San
Miguel Electric Cooperative. Mine services to San Miguel Electric Cooperative
began in July 1997. No lease expense was incurred in the six months ended June
30, 1997. The total lease commitment, beginning in July 1997 and extending to
December 2007, is estimated to be $34.0 million and will be paid as follows:
$1.6 million in 1997, $3.2 million each year in the period 1998 through 2001,
$3.4 million in 2002 and $16.2 million payable over the remaining terms of the
operating lease agreements.
Note 5 - Accounting Standards Not Yet Adopted
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," establishing standards for computing and presenting earnings per share
("EPS"). SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997 and requires restatement of all prior period EPS
data presented. Earlier application is not permitted. The implementation of SFAS
No. 128 is not expected to have a material effect on the reported EPS of the
Company.
In June 1997, the FASB issued two new Statements: SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 130 requires all items recognized
as components of other comprehensive income be reported in the financial
statements. SFAS No. 131 requires enterprises to report selected information
about operating segments and related disclosures about products and services,
geographic areas, and major customers. The Company plans to comply with the
provisions of these Statements, both of which become effective for fiscal years
beginning after December 15, 1997.
Note 6 - Accounts Receivable Securitization
On April 25, 1997, NMHG entered into a one year agreement to sell all of its
domestic accounts receivable, on a revolving basis, to Lift Truck Funding
Company, LLC ("LTF"), a wholly owned subsidiary. LTF was formed prior to the
execution of this agreement for the purpose of buying and selling accounts
receivable and is designed to be bankruptcy remote.
Also, on April 25, 1997, NMHG and LTF entered into a one year agreement with a
financial institution whereby LTF can sell, on a revolving basis, an undivided
percentage ownership interest in certain eligible accounts receivable, as
defined, up to a maximum of $60.0 million. In accordance with this agreement, at
June 30, 1997, LTF had sold $33.0 million of accounts receivable to the
financial institution, net of a discount. Second quarter losses on the sale of
receivables were not material. The proceeds from the sale of receivables were
used to retire debt outstanding under NMHG's revolving credit agreement.
This two-step transaction is accounted for as a sale of receivables.
Accordingly, the Company's Consolidated Balance Sheet reflects the portion of
receivables transferred to the financial institution as a reduction in Accounts
receivable, net. The discount and any other transaction gains and losses are
included in Other - net in the Consolidated Statement of Income. NMHG continues
to service the receivables and maintains an allowance for doubtful accounts
based upon the expected collectibility of all consolidated accounts receivable,
including the portion of receivables sold by LTF.
<PAGE>
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Tabular Amounts 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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------- ----------------
1997 1996 1997 1996
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
NMHG $ 377.4 $ 407.6 $ 709.7 $ 828.4
HBPS 87.2 82.7 162.5 150.6
NACoal 62.4 56.7 120.8 115.8
KCI 16.6 14.6 31.2 27.5
NACCO and Other -- .1 .1 .2
Eliminations (2.5) (.8) (3.5) (2.1)
----------- ----------- ------------- -------------
$ 541.1 $ 560.9 $ 1,020.8 $ 1,120.4
=========== =========== ============= =============
AMORTIZATION OF GOODWILL
NMHG $ 2.9 $ 2.8 $ 5.8 $ 5.7
HBPS 1.0 .9 2.0 1.8
KCI .1 .1 .1 .1
----------- ----------- ------------- -------------
$ 4.0 $ 3.8 $ 7.9 $ 7.6
=========== =========== ============= =============
OPERATING PROFIT (LOSS)
NMHG $ 24.7 $ 24.7 $ 36.9 $ 50.7
HBPS 2.2 4.7 .1 3.7
NACoal 9.4 7.8 18.4 17.6
KCI (.5) (.6) (1.5) (1.8)
NACCO and Other (2.0) (2.6) (4.1) (5.1
----------- ----------- ------------- -------------
$ 33.8 $ 34.0 $ 49.8 $ 65.1
=========== =========== ============= =============
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
NMHG $ 27.6 $ 27.5 $ 42.7 $ 56.4
HBPS 3.2 5.6 2.1 5.5
NACoal 9.4 7.8 18.4 17.6
KCI (.4) (.5) (1.4) (1.7)
NACCO and Other (2.0) (2.6) (4.1) (5.1)
----------- ----------- ------------- -------------
$ 37.8 $ 37.8 $ 57.7 $ 72.7
=========== =========== ============= =============
INTEREST EXPENSE
NMHG $ (3.8) $ (6.6) $ (8.5) $ (13.4)
HBPS (1.7) (1.5) (3.2) (2.8)
NACoal (.5) -- (1.0) (.1)
KCI (.1) (.1) (.2) (.3)
NACCO and Other (.6) (.4) (1.2) (.8)
Eliminations .6 .3 1.2 .8
----------- ----------- ------------- -------------
(6.1) (8.3) (12.9) (16.6)
Project mining subsidiaries (3.2) (3.4) (6.4) (6.8)
----------- ----------- ------------- -------------
$ (9.3) $ (11.7) $ (19.3) $ (23.4)
=========== =========== ============= =============
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- -----------------------
1997 1996 1997 1996
----------- ---------- ---------- -----------
OTHER-NET, INCOME (EXPENSE)
<S> <C> <C> <C> <C>
NMHG $ 2.0 $ (.6 ) $ 1.1 $ (.8)
HBPS --- --- --- (.1)
NACoal .4 3.6 1.0 4.3
NACCO and Other .2 .6 .3 .9
Eliminations (.6) (.5) (1.2) (.8)
-------- -------- -------- --------
$ 2.0 $ 3.1 $ 1.2 $ 3.5
======== ======== ======== ========
NET INCOME (LOSS)
NMHG $ 12.2 $ 9.6 $ 15.7 $ 21.8
HBPS .3 1.7 (1.7) 1.0
NACoal 3.8 5.3 7.7 10.1
KCI (.3) (.5) (1.0) (1.2)
NACCO and Other (.8) (1.6) (2.6) (4.1)
Minority interest (.3) (.5) (.4) (.7)
-------- -------- -------- --------
$ 14.9 $ 14.0 $ 17.7 $ 26.9
======== ======= ======== ========
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG $ 17.0 $ 16.6
HBPS 9.9 9.1
NACoal 1.1 1.0
KCI .6 .5
NACCO and Other .1 .1
-------- --------
28.7 27.3
Project mining subsidiaries 14.9 14.5
-------- --------
$ 43.6 $ 41.8
======== ========
CAPITAL EXPENDITURES
NMHG $ 8.5 $ 26.0
HBPS 9.2 3.9
NACoal 1.7 .7
KCI .4 .7
NACCO and Other .1 .1
-------- --------
19.9 31.4
Project mining subsidiaries 3.1 10.4
-------- --------
$ 23.0 $ 41.8
======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
------- -----------
<S> <C> <C>
TOTAL ASSETS
NMHG $ 907.9 $ 950.9
HBPS 293.4 271.8
NACoal 67.6 66.5
KCI 25.9 27.6
NACCO and Other 50.4 56.7
-------- -------
1,345.2 1,373.5
Project mining subsidiaries 417.7 433.6
-------- -------
1,762.9 1,807.1
Consolidating eliminations (88.1) (99.0)
-------- -------
$1,674.8 $1,708.1
======== ========
</TABLE>
<PAGE>
====================================
NACCO MATERIALS HANDLING GROUP, INC.
====================================
NMHG, 98 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 and six months
ended June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Americas $ 249.1 $ 269.5 $ 469.2 $ 541.7
Europe, Africa and Middle East 108.8 113.4 202.5 234.7
Asia-Pacific 19.5 24.7 38.0 52.0
-------- -------- -------- --------
$ 377.4 $ 407.6 $ 709.7 $ 828.4
======== ======== ======== ========
Operating profit
Americas $ 17.7 $ 14.9 $ 27.7 $ 30.5
Europe, Africa and Middle East 7.9 10.8 11.1 21.7
Asia-Pacific (.9) (1.0) (1.9) (1.5)
-------- -------- -------- --------
$ 24.7 $ 24.7 $ 36.9 $ 50.7
======== ======== ======== ========
Operating profit excluding
goodwill amortization
Americas $ 19.7 $ 16.9 $ 31.7 $ 34.5
Europe, Africa and Middle East 8.7 11.6 12.8 23.3
Asia-Pacific (.8) (1.0) (1.8) (1.4)
-------- -------- -------- --------
$ 27.6 $ 27.5 $ 42.7 $ 56.4
======== ======== ======== ========
Net income $ 12.2 $ 9.6 $ 15.7 $ 21.8
======== ======== ======== ========
</TABLE>
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
Second Quarter of 1997 Compared With Second Quarter of 1996
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the second quarter of 1997 compared with the
second quarter of 1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
---------- ----------- ---------
<S> <C> <C> <C>
1996 $ 407.6 $ 24.7 $ 9.6
Increase (decrease) in 1997 from:
Unit volume (29.2) (5.6) (3.6)
Sales mix (1.7) 2.4 1.5
Service parts 5.3 1.3 .8
Foreign currency (4.6) (1.7) (1.1)
Manufacturing cost -- 3.6 2.3
Other income and expense -- -- 3.5
Differences between effective
and statutory tax rates -- -- (.8)
------- -------- -------
1997 $ 377.4 $ 24.7 $ 12.2
======== ======= ========
</TABLE>
On a worldwide basis, NMHG unit volumes in the second quarter of 1997 declined
7.3 percent compared with the second quarter of 1996. Volumes decreased 8.3
percent in the Americas, 4.3 percent in Europe and 9.0 percent in Asia-Pacific.
High backlog levels at the end of March 31, 1996 allowed NMHG to manufacture and
ship units at a higher production rate in the second quarter of 1996 as compared
to the second quarter of 1997. In 1996, NMHG reduced the backlog from 17,300
units at March 31, 1996 to 14,400 units at June 30, 1996. However, in the second
quarter of 1997, increasing demand and a lower production rate resulted in the
build-up of backlog from 16,500 units at March 31, 1997 to 20,300 units at June
30, 1997. A slight decline in the European market size and a decrease in
Asia-Pacific's market share also contributed to the decline in second quarter
volumes. Sales mix favorably impacted net income due to a shift to higher margin
products in the Americas and to sales in higher margin countries in Europe.
Revenues from service parts continued to increase due to lift truck population
growth, special marketing programs and price increases of such parts.
Foreign currency negatively affected results as the strengthening of the pound
sterling against other European currencies caused price and margin pressures on
sterling-based products. This impact on operating profit was partially offset by
reduced cost of yen-based materials caused by the weakening of the Japanese yen
to the U.S. dollar. Manufacturing costs declined primarily due to reduced
material prices in the Americas and, to a lesser degree, in Europe. Also
contributing to the increase in net income was reduced interest costs due to
lower levels of borrowing.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
First Six Months of 1997 Compared With First Six Months of 1996
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the first six months of 1997 compared with
the first six months of 1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1996 $ 828.4 $ 50.7 $ 21.8
Increase (decrease) in 1997 from:
Unit volume (127.1) (21.4) (13.9)
Sales mix 9.1 5.7 3.7
Average sales price (1.0) (1.0) (.7)
Service parts 8.2 3.2 2.1
Foreign currency (7.9) (.2) (.1)
Manufacturing cost -- (2.6) (1.7)
Other operating expense -- 2.5 1.6
Other income and expense -- -- 4.5
Differences between effective
and statutory tax rates -- -- (1.6)
-------- ------- -------
1997 $ 709.7 $ 36.9 $ 15.7
======== ======= =======
</TABLE>
Unit volumes for the first six months of 1997 decreased 16.7 percent in the
Americas, 15.3 percent in Europe and 24.2 percent in Asia-Pacific compared with
the same period in 1996. These decreases reflect the cyclical nature of the
forklift truck industry and strong sales in the first six months of 1996
facilitated by a decline in backlog from a relatively high level of 21,200 units
at December 31, 1995 to 14,400 units at June 30, 1996. In contrast, the backlog
increased from 11,700 units at December 31, 1996 to 20,300 units at June 30,
1997 primarily as a result of lower, but steady, production rates and increases
in demand. Also contributing to the decrease in volumes was a slight reduction
in the European market size and a decrease in Asia-Pacific's market share due to
increased competition in that region. The variances in sales mix, service parts
and foreign currency resulted from the same factors affecting the second
quarter, as previously explained.
Manufacturing costs increased over 1996 due to unabsorbed labor and overhead
resulting from the decrease in unit volumes. The increase in these costs more
than offset the favorable material costs realized in the second quarter of 1997.
Cost containment programs in response to these lower volumes contributed to the
decrease in other operating costs. Other income and expense declined primarily
due to lower interest expense reflective of reduced borrowing levels.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
Below is a detail of other income (expense) for the three and six months ended
June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
Interest expense $ (3.8) $ (6.6) $ (8.5) $ (13.4)
Other-net 2.0 (.6) 1.1 (.8)
------ ------ ------- -------
$ (1.8) $ (7.2) $ (7.4) $ (14.2)
====== ====== ======= =======
Effective tax rate 46.7% 45.2% 47.0% 40.3%
</TABLE>
In the second quarter of 1997, NMHG used the proceeds from the sale of certain
accounts receivable to reduce the level of borrowings resulting in a decline in
interest expense. Other-net improved due to increased earnings of unconsolidated
affiliates.
During the first quarter of 1996, NMHG recorded a favorable income tax
adjustment from the resolution of tax issues from prior years which reduced the
effective tax rate for the first six months of 1996 compared with 1997.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $8.5 million during the
first six months of 1997. It is estimated that NMHG's capital expenditures for
the remainder of 1997 will be approximately $39.0 million. Planned expenditures
relate to investments in manufacturing facilities, information systems and
tooling for new products. The principal sources of financing for these capital
expenditures are internally generated funds and bank borrowings.
In the second quarter of 1997, NMHG entered into an agreement with a financial
institution to sell an undivided percentage ownership interest in certain
eligible domestic accounts receivable, on a revolving basis, up to a maximum of
$60.0 million. This agreement terminates in April 1998 and is renewable. As of
June 30, 1997, $33.0 million of NMHG's trade receivables were sold in accordance
with this agreement and reflected in the Consolidated Balance Sheet as a
reduction of Receivables, net. The proceeds from the sale of receivables were
used to reduce the level of borrowings under NMHG's revolving credit agreement.
The discount and other transaction losses were not material and have been
reflected in Other - net in the Consolidated Statement of Income in the second
quarter of 1997. In conjunction with this transaction, NMHG's revolving credit
agreement was amended to provide that the total credit availability of $350
million is reduced by the amount of receivables sold.
As of June 30, 1997, $79.7 million of trade accounts receivable have been sold
in accordance with the agreement discussed above combined with pre-existing
agreements to sell European trade accounts receivable. This compares with $21.8
million of trade receivables sold as of June 30, 1996.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NMHG 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 June 30, 1997 NMHG had available $182.0 million of its
$350.0 million revolving credit facility. The expiration date of this NMHG
revolving credit facility (which is currently June 2002) may be extended, on an
annual basis, for one additional year upon the mutual consent of NMHG and the
bank group. In addition, the NMHG facility has performance-based pricing which
sets interest rates based upon the achievement of certain financial performance
targets. NMHG also has separate credit facilities totaling $37.6 million, of
which $34.4 million was available at June 30, 1997.
NMHG's capital structure is presented below:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
-------- --------
<S> <C> <C>
Total net tangible assets $ 189.8 $ 267.9
Goodwill at cost 448.0 443.6
-------- --------
Total assets before goodwill amortization 637.8 711.5
Accumulated goodwill amortization (89.4) (82.8)
Total debt (169.9) (258.9)
-------- --------
Stockholders' equity $ 378.5 $ 369.8
======== ========
Debt to total capitalization 31% 41%
</TABLE>
The decrease in net tangible assets of $78.1 million primarily results from an
$18.1 million decline in cash and cash equivalents, an $8.9 million decrease in
accounts receivable, a $15.9 million decrease in inventory, a $16.3 million
increase in accounts payable and an $11.8 million increase in other current
liabilities.
The decrease in cash and cash equivalents results from the paydown of $88.9
million of debt and the expenditure of $20.6 million for capital improvements
and a business acquisition, partially offset by cash of $91.4 million provided
by operations. The decrease in accounts receivable results from the sale of
receivables, as previously discussed. The decline in inventory reflects a nine
day reduction in the number of days supply on hand and the increase in accounts
payable reflects an increase in the volume of inventory purchases.
<PAGE>
=================================
HAMILTON BEACHPROCTOR-SILEX, INC.
=================================
HBPS, wholly owned by NACCO, is a leading manufacturer of small electric
appliances. Because 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 to retailers increase significantly for the fall holiday
selling season.
FINANCIAL REVIEW
The results of operations for HBPS were as follows for the three and six months
ended June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 87.2 $ 82.7 $ 162.5 $ 150.6
Operating profit $ 2.2 $ 4.7 $ .1 $ 3.7
Operating profit excluding
goodwill amortization $ 3.2 $ 5.6 $ 2.1 $ 5.5
Net income (loss) $ .3 $ 1.7 $ (1.7) $ 1.0
</TABLE>
Second Quarter of 1997 Compared With Second Quarter of 1996
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the second quarter of 1997 compared with the
second quarter of 1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1996 $ 82.7 $ 4.7 $ 1.7
Increase (decrease) in 1997 from:
Unit volume and sales mix 7.1 1.9 1.2
Average sales price (2.6) (2.6) (1.7)
Manufacturing cost -- (1.2) (.8)
Other operating expense -- (.6) (.4)
Differences between effective
and statutory tax rates -- -- .3
------- ------ ------
1997 $ 87.2 $ 2.2 $ .3
======= ====== ======
</TABLE>
Revenues increased primarily as a result of increased sales of toasters,
blenders and commercial products which were partially offset by reduced sales of
can openers and irons. Despite this increase in revenues, gross margins and,
therefore, net income were adversely affected by a decline in the average sales
price resulting from an extremely competitive industry and a shift in sales mix
from the "best" product category to the typically lower-margin "good" and
"better" product categories. In addition, manufacturing costs increased due
primarily to start-up costs for a new manufacturing facility in Saltillo, Mexico
and expenses resulting from a reduction of manufacturing activities in the
United States.
<PAGE>
HAMILTON BEACHPROCTOR-SILEX, INC. - continued
FINANCIAL REVIEW - continued
First Six Months of 1997 Compared With First Six Months of 1996
The following schedule identifies the components of the changes in revenues,
operating profit and net income (loss) for the first six months of 1997 compared
with the first six months of 1996:
<TABLE>
<CAPTION>
Net
Operating Income
Revenues Profit (Loss)
-------- ------ ------
<S> <C> <C> <C>
1996 $ 150.6 $ 3.7 $ 1.0
Increase (decrease) in 1997 from:
Unit volume and sales mix 17.3 4.9 3.2
Average sales price (5.4) (5.4) (3.5)
Manufacturing cost -- (1.9) (1.3)
Other operating expense -- (1.2) (.8)
Other income and expense -- -- (.1)
Differences between effective
and statutory tax rates -- -- (.2)
-------- ------ ------
1997 $ 162.5 $ .1 $ (1.7)
======== ====== ======
</TABLE>
Revenues increased primarily as a result of increased sales of toasters,
blenders, commercial products and DrinkMasters(R) which were partially offset by
lower sales of irons, can openers and toaster ovens. However, gross margins and,
therefore, net income declined due to a decrease in the average sales price and
a shift in the sales mix from the "best" product category to the "good" and
"better" product categories. The variances in average sales price and
manufacturing cost resulted from the same factors affecting the second quarter,
as previously explained.
<PAGE>
HAMILTON BEACHPROCTOR-SILEX, INC. - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
Below is a detail of other income (expense) for the three and six months ended
June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense $ (1.7) $ (1.5) $ (3.2) $ (2.8)
Other-net -- -- -- (.1)
------- ------- ------- -------
$ (1.7) $ (1.5) $ (3.2) $ (2.9)
======= ======= ======= =======
Effective tax rate 44.1% 44.1% 44.1% 30.3%
</TABLE>
HBPS's effective tax rate for the first six months of 1996 was favorably
affected by the recognition in the first quarter of 1996 of income tax
adjustments relating to the resolution of tax issues from prior years.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $9.2 million during the
first six months of 1997 and are estimated to be $10.0 million for the remainder
of 1997. The primary purpose of these expenditures is to reduce manufacturing
costs and increase efficiency and to purchase tooling for new and existing
products. These expenditures are funded primarily from internally generated
funds and short-term borrowings.
HBPS's credit agreement provides for a revolving credit facility that permits
advances up to $160.0 million and is secured by substantially all of HBPS's
assets. At June 30, 1997, HBPS had $56.6 million available under this facility,
which expires in May 2002. The HBPS facility provides lower interest rates if
HBPS achieves a certain interest coverage ratio and allows for interest rates
quoted under a competitive bid option. At June 30, 1997, HBPS also had $22.9
million available under separate facilities.
<PAGE>
HAMILTON BEACHPROCTOR-SILEX, INC. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
HBPS's capital structure is presented below:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
-------- --------
<S> <C> <C>
Total net tangible assets $ 130.6 $ 111.1
Goodwill at cost 118.9 118.9
-------- --------
Total assets before goodwill amortization 249.5 230.0
Accumulated goodwill amortization (24.5) (22.5)
Total debt (108.9) (89.7)
-------- --------
Stockholder's equity $ 116.1 $ 117.8
======== ========
Debt to total capitalization 48% 43%
</TABLE>
Because of the seasonal nature of the housewares business, HBPS's inventory,
accounts payable and debt levels reach seasonal peaks in the second and third
quarters.
<PAGE>
===================================
THE NORTH AMERICAN COAL CORPORATION
===================================
NACoal 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 2.1 billion tons with 1.2 billion
tons committed to electric utility customers pursuant to long-term contracts.
NACoal also provides dragline mining services ("Florida dragline operations")
for a limerock quarry near Miami, Florida. The operating results for the Florida
dragline operations are included in Other mining operations.
FINANCIAL REVIEW
NACoal'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 tons sold. 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 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.
Lignite tons sold by NACoal's operating lignite mines were as follows for the
three and six months ended June 30:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------ ----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Coteau Properties 3.8 3.4 7.7 7.6
Falkirk Mining 1.6 1.5 3.1 3.4
Sabine Mining .9 .9 1.8 1.8
Red River Mining .3 .2 .5 .3
--- --- ---- ----
6.6 6.0 13.1 13.1
=== === ==== ====
</TABLE>
The Florida dragline operations mined 1.8 and 3.6 million cubic yards of
limerock in the three and six months ended June 30, 1997, respectively. This
compares to 1.6 and 3.4 million cubic yards mined during the three and six
months ended June 30, 1996, respectively.
Revenues, income before taxes, provision for taxes and net income were as
follows for the three and six months ended June 30:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------ ----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Project mines $ 55.8 $ 52.1 $ 108.6 $ 106.7
Other mining operations 5.0 4.0 9.6 7.6
------- -------- -------- --------
60.8 56.1 118.2 114.3
Royalties and other 1.6 .6 2.6 1.5
------- -------- -------- --------
$ 62.4 $ 56.7 $ 120.8 $ 115.8
======= ======== ======== ========
Income before taxes
Project mines $ 5.5 $ 5.2 $ 11.2 $ 11.5
Other mining operations .9 .5 1.6 1.1
------- -------- -------- --------
Total from operating mines 6.4 5.7 12.8 12.6
Royalties and other income, net 1.4 4.1 2.2 5.6
Other operating expenses (1.6) (1.8) (2.9) (3.2)
------- -------- -------- --------
6.2 8.0 12.1 15.0
Provision for taxes 2.4 2.7 4.4 4.9
------- -------- -------- --------
Net income $ 3.8 $ 5.3 $ 7.7 $ 10.1
======= ======== ======== ========
</TABLE>
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Second Quarter of 1997 Compared with Second Quarter of 1996
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the three months ended June 30:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
---------- --------- --------
<S> <C> <C> <C>
1996 $ 56.7 $ 8.0 $ 5.3
Increase (decrease) in 1997 from:
Project mines
Tonnage volume 4.1 .4 .3
Agreed profit per ton (.1) (.1) (.1)
Pass-through costs (.3) -- --
Other mining operations
Tonnage volume 1.5 .5 .3
Average selling price (.5) (.5) (.3)
Operating costs -- .8 .5
Other expense -- (.4) (.3)
------- ------ ------
Changes from operating mines 4.7 .7 .4
Royalties and other income, net 1.0 .9 .6
Escrow payments -- (3.6) (2.3)
Other operating expenses -- .2 .1
Differences between effective and
statutory tax rates -- -- (.3)
------- ------ ------
1997 $ 62.4 $ 6.2 $ 3.8
======= ====== ======
</TABLE>
At the project mines, increased tons sold at Coteau and Falkirk due to customer
requirements favorably affected operating results. At the other mining
operations, results improved due to increased volume and a reduction in
operating costs at the Red River mine resulting from additional labor in 1996
needed to develop a new mine area. The decrease in net income due to escrow
payments reflects the receipt in the second quarter of 1996 of a nonrecurring
escrow payment related to the sale of a previously owned eastern U.S.
underground mine.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
First Six Months of 1997 Compared with First Six Months of 1996
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the six months ended June 30:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
---------- --------- ---------
<S> <C> <C> <C>
1996 $ 115.8 $ 15.0 $ 10.1
Increase (decrease) in 1997 from:
Project mines
Tonnage volume (1.0) (.1) (.1)
Agreed profit per ton (.2) (.2) (.1)
Pass-through costs 3.1 -- --
Other mining operations
Tonnage volume 2.9 .8 .5
Average selling price (.9) (.9) (.6)
Operating costs -- 1.0 .7
Other expense -- (.4) (.3)
-------- ------- -------
Changes from operating mines 3.9 .2 .1
Royalties and other income, net 1.1 .8 .5
Escrow payments -- (4.2) (2.7)
Other operating expenses -- .3 .2
Differences between effective and
statutory tax rates -- -- (.5)
-------- ------- -------
1997 $ 120.8 $ 12.1 $ 7.7
======== ======= =======
</TABLE>
At the project mines, results from slight volume increases at Coteau and Sabine
were offset by a volume decline at Falkirk due to adverse weather conditions and
a customer's power plant outage in the first quarter of 1997. The variances in
other mining operations and escrow payments resulted from those factors
affecting the second quarter results, as previously explained.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
Items of other income (expense) for the three and six months ended June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense
Project mining subsidiaries $ (3.2) $ (3.4) $ (6.4) $ (6.8)
Other mining operations (.5) -- (1.0) (.1)
------- ------- ------- -------
$ (3.7) $ (3.4) $ (7.4) $ (6.9)
======= ======= ======= =======
Other-net
Project mining subsidiaries $ .5 $ .3 $ .9 $ .5
Other mining operations (.1) 3.3 .1 3.8
------- ------- ------- -------
$ .4 $ 3.6 $ 1.0 $ 4.3
======= ======= ======= =======
Effective tax rate 36.2% 33.6% 35.4% 32.8%
</TABLE>
The decrease in other-net relates to the previously discussed nonrecurring
escrow payment received in the second quarter of 1996. The increase in NACoal's
effective tax rate in 1997 compared with 1996 results from a lower level of
pre-tax income from mining activities which generate percentage depletion
eligible to reduce NACoal's effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $4.8 million during the
first six months of 1997 and are estimated to be $24.0 million for the remainder
of 1997. These expenditures primarily relate to the development, establishment
and improvement of the project mining subsidiaries mines and are financed or
guaranteed by the utility customers.
NACoal has in place a $50.0 million revolving credit facility. The expiration
date of this facility (which currently is September 2001) can be extended one
additional year, on an annual basis, upon the mutual consent of NACoal and the
bank group. NACoal had $19.0 million of its revolving credit facility available
at June 30, 1997. A portion of the outstanding balance is attributable to funds
loaned to NACCO to partially finance NACCO's Class A common stock repurchase
program.
The financing of the project mining subsidiaries, which is either provided or
guaranteed by the utility customers, is comprised 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-term or long-term
liquidity of NACoal and are without recourse to NACCO or NACoal. These
arrangements allow the project mining subsidiaries to pay dividends to NACoal in
amounts equal to their retained earnings.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NACoal's capital structure, excluding the project mining subsidiaries, is
presented below:
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------- -----------
<S> <C> <C>
Investment in project mining subsidiaries $ 2.2 $ 3.3
Other net tangible assets 3.8 (.8)
------- -------
Total tangible assets 6.0 2.5
Advances to parent company 41.6 41.9
Debt related to parent advances (32.4) (29.0)
Other debt (.1) (.3)
------- -------
Total debt (32.5) (29.3)
------- -------
Stockholder's equity $ 15.1 $ 15.1
======= =======
Debt to total capitalization 68% 66%
</TABLE>
<PAGE>
============================
THE KITCHEN COLLECTION, INC.
============================
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
Second Quarter of 1997 Compared With Second Quarter of 1996
The following schedule identifies the components of the changes in revenues,
operating loss and net loss for the second quarter of 1997 compared with the
second quarter of 1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Loss Loss
-------- ---- ----
<S> <C> <C> <C>
1996 $ 14.6 $ (.6) $ (.5)
Increase (decrease) in 1997 from:
Stores opened in 1997 .3 -- --
Stores opened in 1996 .5 -- --
Comparable stores 1.2 .4 .3
Other -- (.3) (.1)
------- ----- -----
1997 $ 16.6 $ (.5) $ (.3)
======= ===== =====
</TABLE>
First Six Months of 1997 Compared with First Six Months of 1996
The following schedule identifies the components of the changes in revenues,
operating loss and net loss for the first six months of 1997 compared with the
first six months of 1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Loss Loss
-------- ---- ----
<S> <C> <C> <C>
1996 $ 27.5 $ (1.8) $ (1.2)
Increase (decrease) in 1997 from:
Stores opened in 1997 .3 -- --
Stores opened in 1996 1.3 (.1) (.1)
Comparable stores 2.1 .9 .6
Other -- (.5) (.3)
- ---- ------- ------ ------
1997 $ 31.2 $ (1.5) $ (1.0)
======= ====== ======
</TABLE>
<PAGE>
THE KITCHEN COLLECTION, INC. - continued
FINANCIAL REVIEW - continued
First Six Months of 1997 Compared with First Six Months of 1996 - continued
KCI operated 145 stores at June 30, 1997 compared with 140 stores at June 30,
1996. A full six month period of operation of stores opened in 1996 contributed
favorably to revenues in 1997. Comparable stores also contributed favorably due
to a six percent increase in the average sales transaction and a three percent
increase in the number of sales transactions. These increases can be attributed
to a management incentive program, an increase in select retail pricing,
improved sales of KCI's gadget category, improved product availability and an
increase in "clearance" merchandise. Overall margins were negatively affected by
clearance actions on discontinued products and costs associated with the
discontinuation of the Hearthstone(TM) store format. The unfavorable other
variance results from increased payroll and lease costs.
Provision for Income Taxes
KCI's effective tax rate for the three months ended June 30, 1997 and 1996 was
42.0 percent and 43.1 percent, respectively. KCI's effective tax rate for the
six months ended June 30, 1997 and 1996 was 42.0 percent and 42.1 percent,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $0.4 million during the
first six months of 1997. Estimated capital expenditures for the remainder of
1997 are $0.3 million. These expenditures relate primarily to new store openings
and improvements to existing facilities. The principal source of funds for these
capital expenditures is short term borrowings. At June 30, 1997, KCI had
available $4.0 million of its $5.0 million revolving credit facility. KCI's
revolving credit facility has performance-based pricing which provides for
reduced interest rates based on the achievement of certain financial performance
measures. The expiration date of KCI's revolving credit facility is May 2000 and
may be extended, on an annual basis, for one additional year upon the mutual
consent of KCI and the bank group.
KCI's capital structure is presented below:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
------- -----------
<S> <C> <C>
Total net tangible assets $ 14.2 $ 14.6
Goodwill at cost 4.6 4.6
------- -------
Total assets before goodwill amortization 18.8 19.2
Accumulated goodwill amortization (1.0) (.9)
Total debt (6.0) (5.0)
------- -------
Stockholder's equity $ 11.8 $ 13.3
======= =======
Debt to total capitalization 34% 27%
</TABLE>
<PAGE>
===============
NACCO AND OTHER
===============
FINANCIAL REVIEW
NACCO and Other includes the parent company operations and Bellaire Corporation
("Bellaire"), a non-operating subsidiary of NACCO. While Bellaire's results are
immaterial, it has significant long-term liabilities related to closed mine
activities, primarily from former eastern U.S. underground coal-mining
activities. Cash payments related to Bellaire's obligations, net of internally
generated cash, are funded by NACCO and are anticipated to be $2.3 million for
the remainder of 1997.
The results of operations at NACCO and Other were as follows for the three and
six months ended June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ -- $ .1 $ .1 $ .2
Operating loss $ (2.0) $ (2.6) $ (4.1) $ (5.1)
Other income (expense), net $ .2 $ .6 $ .3 $ .9
Net loss $ (.8) $ (1.6) $ (2.6) $ (4.1)
</TABLE>
In the three and six months ended June 30, 1997, the favorable impact from
consolidating tax adjustments reduced the net loss compared with the same
periods of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Although NACCO's subsidiaries have entered into substantial borrowing
agreements, NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
The borrowing agreements at HBPS and KCI allow for the payment to NACCO of
dividends and advances under certain circumstances. The borrowing agreement at
NMHG allows up to $25.0 million of dividends or advances to be paid to NACCO;
there have not yet been any such transfers. (Dividends are limited to NACCO's
proportionate ownership interest in NMHG). There are no restrictions on
dividends or advances from NACoal to NACCO. Dividends and advances from
subsidiaries are the primary sources of cash for 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 and the utility customers' funding of the project
mining subsidiaries.
INTEREST RATE PROTECTION
NMHG, HBPS, NACoal and KCI have entered into interest rate swap agreements for
portions of their floating rate debt. These interest rate swaps provide
protection against significant increases in interest rates and have terms
ranging from six months to six and one half years, with the counterparty's
option to extend certain contracts to eight and one half years. The Company
evaluates its exposure to floating rate debt on an ongoing basis.
<PAGE>
EFFECTS OF FOREIGN CURRENCY
NMHG and HBPS operate internationally and enter into transactions denominated in
foreign currencies. As a result, the Company is subject to the transaction
exposures that arise from exchange rate movements between the dates foreign
currency transactions are recorded and the dates they are consummated. The
effects of foreign currency on revenues, operating income and net income at NMHG
are disclosed above. At HBPS, foreign currency effects had an immaterial impact
on operating results between comparable periods of 1997 and 1996.
NMHG and HBPS use forward foreign currency exchange contracts to partially
reduce risks related to transactions denominated in foreign currencies. These
contracts usually have maturities of one to twelve months and generally require
the companies to buy or sell Japanese yen, Australian dollars, Canadian dollars
or various European currencies for the U.S. dollar at rates agreed to at the
inception of the contracts.
OUTLOOK
Lift truck industry bookings in the Americas are anticipated to continue to be
strong based on second quarter factory bookings, which were at NMHG's highest
level since the first quarter of 1995. At NMHG, worldwide backlogs increased 41%
to 20,300 units in the second quarter of 1997, compared with 14,400 units in the
second quarter of 1996, and increased 74% compared with 11,700 units at year-end
1996.
NACoal's San Miguel Lignite mine in Texas began production and deliveries on
July 1, 1997 as planned. NACoal expects the new mine to deliver approximately
1.8 million tons of lignite in 1997 and thereafter approximately 3.0 million
tons annually through 2007. In addition, NACoal expects overall customer lignite
requirements at its other operating mines to remain firm over the next six
months.
At HBPS, the new Saltillo facility is expected to continue to increase
production capacity during 1997. As of June 30, the facility was manufacturing
selected lines of blenders and toasters. HBPS plans to phase in additional
manufacturing activities during the remainder of the year and anticipates that
the facility will provide significant cost benefits over the long term.
KCI will continue to focus on increasing each store's average sales transaction
and customer traffic through continued emphasis on employee incentive programs
as well as other marketing programs. Discontinued inventory phase-outs should
have less impact on KCI's net income for the remainder of 1997. KCI is testing a
new medium market format in two stores with two more medium-market stores
scheduled for opening in 1997.
The statements contained in this Form 10-Q that are not historical facts are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are made subject to certain risks and uncertainties
which could cause actual results to differ materially from those presented in
those forward-looking statements. Such risks and uncertainties with respect to
each subsidiary's operations include, without limitation:
NMHG: (1) changes in demand for forklift trucks on a worldwide basis, (2)
changes in sales prices, (3) delays in delivery or increased costs of raw
materials or sourced products and labor, (4) delays in manufacturing and
delivery schedules and (5) exchange rate fluctuations, changes in foreign import
tariffs and monetary policies and other changes in the regulatory climate in the
countries in which NMHG operates and/or sells products.
<PAGE>
FORWARD-LOOKING STATEMENTS - continued
NACoal: (1) weather conditions and other events that would reduce the level of
customers' fuel requirements and (2) transitional issues in assuming the
management of the San Miguel Lignite project.
HBPS: (1) delays or increased costs in the start-up of operations in Saltillo,
Mexico, (2) bankruptcy of or loss of major retail customers, (3) changes in
sales prices, product mix or levels of consumer purchasing of small electronic
appliances and (4) exchange rate fluctuations, changes in foreign import tariffs
and monetary policies and other changes in the regulatory climate in the
countries in which HBPS operates and/or sells products.
KCI: (1) weather conditions which would affect the number of customers visiting
the stores, (2) changes in sales prices, product mix or level of consumer
purchasing of kitchenware and small electric appliances and (3) delays in the
opening of proposed new stores.
<PAGE>
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
The following matters were submitted to a vote of security
holders at the Annual Meeting of Stockholders held May 14, 1997,
with the results indicated:
Outstanding Shares Entitled to Vote Number of Votes
6,512,154 Class A Common 6,512,154
1,691,226 Class B Common 16,912,260
----------
23,424,414
==========
Item A.Election of eleven directors for the ensuing year.
Votes
Director Nominee For Withheld Total
-------------------- ---------- -------- ----------
Owsley Brown II 22,158,250 59,299 22,217,549
John J. Dwyer 22,154,960 62,589 22,217,549
Robert M. Gates 22,157,350 60,199 22,217,549
Leon J. Hendrix, Jr. 21,639,397 578,152 22,217,549
Dennis W. LaBarre 22,156,209 61,340 22,217,549
Alfred M. Rankin, Jr. 22,157,895 59,654 22,217,549
Ian M. Ross 22,157,350 60,199 22,217,549
John C. Sawhill 22,157,470 60,079 22,217,549
Britton T. Taplin 22,159,770 57,779 22,217,549
David F. Taplin 22,159,770 57,779 22,217,549
John F. Turben 22,157,365 60,184 22,217,549
Item B.Confirming the appointment of Arthur Andersen LLP as the
independent certified public accountants of the Company for
the current fiscal year.
For Against Abstain Total
---------- ------- ------- ----------
22,183,252 1,375 32,922 22,217,549
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 33 of this
quarterly report on Form 10-Q.
(b) Reports on Form 8-K. The Company did not file any
reports on Form 8-K during the second quarter of 1997.
<PAGE>
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 August 12, 1997 /s/ Kenneth C. Schilling
----------------------- --------------------------------
Kenneth C. Schilling
Vice President and Controller
(Principal Financial and Accounting Officer)
<PAGE>
Exhibit Index
Exhibit
Number* Description of Exhibit
(10) Material Contracts
(lxxvii) Amendment No. 2 dated as of March 26, 1997 to the
Amended and Restated Credit Agreement dated as of June 4, 1996
among NACCO Materials Handling Group, Inc., the Banks party
thereto, the Co-arrangers and Co-agents listed therein and
Morgan Guaranty Trust Company of New York, as Agent, is
attached hereto as Exhibit 10(lxxvii).
(lxxviii) Amendment No. 3 dated as of May 19, 1997 to the
Amended and Restated Credit Agreement dated as of June 4, 1996
among NACCO Materials Handling Group, Inc., the Banks party
thereto and Morgan Guaranty Trust Company of New York, as
Agent, is attached hereto as Exhibit 10(lxxviii).
(cxviii) Amendment No. 3 dated as of April 14, 1997 to the
Second Amended and Restated Credit Agreement dated as of
October 11, 1990, amended and restated as of April 18, 1995,
among Hamilton BeachProctor Silex, Inc., Proctor-Silex Canada
Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks
signatory thereto and the Chase Manhattan Bank, as U.S. Agent,
and The Chase Manhattan Bank of Canada, as Canadian agent, is
attached hereto as Exhibit 10(cxviii).
(11) Computation of Earnings Per Common Share
(27) Financial Data Schedule
(99) Other exhibits not required to otherwise be filed.
(i) Second quarter 1997 interim report to shareholders dated
August 8, 1997, is attached hereto as Exhibit 99(i).
*Numbered in accordance with Item 601 of Regulation S-K.
Exhibit 10 (lxxvii)
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of March 26, 1997 to the Amended and Restated Credit
Agreement dated as of June 4, 1996 (as heretofore amended, the "Credit
Agreement") among NACCO MATERIALS HANDLING GROUP, INC. (the "Borrower"), the
BANKS party thereto (the "Banks"), the CO-ARRANGERS and CO-AGENTS listed therein
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower desires to (i) amend the Credit Agreement to permit
the Borrower and its Subsidiaries to sell accounts and/or notes receivable in
securitization transactions and (ii) at the same time send an Extension Request
to each Bank (which requires a waiver because such Extension Request will be
sent more than 60 days before the next Extension Date); and
WHEREAS, the undersigned Banks are willing to agree to such amendment and
waiver;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. Amendments to Definitions. Section 1.1 of the Credit Agreement
is amended as follows:
(a) The following new definition is added in the appropriate alphabetical
order:
"Permitted Asset Securitization" means a sale or other
disposition (whether in one or a series of transactions) by the
Borrower and/or its Subsidiaries of accounts and/or notes receivable.
(b) The definition of "Debt" is amended by replacing the proviso at the end
of such definition with the following new proviso:
provided that the term "Debt" shall not include
(x)obligations under the Tax Sharing Agreement or (y) obligations
incurred inconnection with Permitted Asset Securitizations.
(c) The definition of "Investment" is amended by inserting the
following immediately before clause (x) thereof:
(w) any acquisition by the Borrower or any Subsidiary of any
obligation of another Person in connection with a Permitted Asset
Securitization,
SECTION 3. Negative Pledge. Section 5.9 of the Credit Agreement is
amended by moving the word "and" at the end of clause (g) to the end of clause
(h) and adding the following new clause (i) immediately after clause (h):
(i) any Lien on accounts and/or notes receivable, cash or cash
equivalents created pursuant to a Permitted Asset Securitization.
SECTION 4. Outstanding Obligations. The following new Section 5.20 is
added immediately after Section 5.19:
SECTION 5.20. Outstanding Obligations. The Borrower will not permit the
aggregate outstanding principal amount of (i) all notes, trust certificates and
similar securities issued pursuant to Permitted Asset Securitizations by the
Borrower and/or its Subsidiaries in the United States and held by parties other
than the Borrower and its Subsidiaries and (ii) all Loans under this Agreement
to exceed $350,000,000 at any time.
SECTION 5. Waiver. The undersigned parties waive the requirements of
Section 2.2 of the Credit Agreement to the extent (and only to the extent)
required to permit the Borrower to send an Extension Request to each Bank more
than 60 days before June 30, 1997, requesting that such Bank's Termination Date
be extended from June 4, 2001 to June 4, 2002.
SECTION 6. Representations of Borrower. The Borrower represents and
warrants that (i) the representations and warranties of the Borrower set forth
in Article 4 of the Credit Agreement will be true on and as of the Amendment
Effective Date (as defined in Section 9 below) and (ii) no Default will have
occurred and be continuing on such Amendment Effective Date.
SECTION 7. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 9. Effectiveness. This Amendment shall become effective on the
date (the "Amendment Effective Date") when the Agent shall have received from
each of the Borrower and the Required Banks a counterpart hereof signed by such
party or facsimile or other written confirmation (in form satisfactory to the
Agent) that such party has signed a counterpart hereof.
IN WITNESS WHEREOF, the undersigned parties hereto have caused this
Amendment to be duly executed as of the date first above written.
NACCO MATERIALS HANDLING GROUP, INC.
By: /s/ Jeffrey C. Mattern
Name: Jeffrey C. Mattern
Title: Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Patricia P. Lunka
Name: Patricia P. Lunka
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Maria Vickroy-Peralta
Name: Maria Vickroy-Peralta
Title: Vice President
CITIBANK, N.A.
By: /s/ David L. Harris
Name: David L. Harris
Title: VP
THE BANK OF NOVA SCOTIA
By:
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By:
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ Richard E. Stahl
Name: Richard E. Stahl
Title: S.V.P. & Joint Gen. Mgr.
ROYAL BANK OF CANADA
By:
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison Amonette
Name: Alison Amonette
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Kevin McBride
Name: Kevin McBride
Title: Vice Prsident
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Chris J. Karlin
Name: Chris J. Karlin
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Kathleen S. Barnes
Name: Kathleen S. Barnes
Title: Vice President
BANK OF SCOTLAND
By: /s/ Annie Chin Tat
Name: Annie Chin Tat
Title: Vice President
THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank)
By: /s/ Timothy J. Storms
Name: Timothy J. Storms
Title: Managing Director
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Dean Balice
Name: Dean Balice
Title: SVP/Branch Manager
MELLON BANK, N.A.
By: /s/ Mark F. Johnston
Name: Mark F. Johnston
Title: AVP
THE SUMITOMO BANK, LTD.
By: /s/ H. Iwami
Name: Hiroyuki Iwami
Title: Joint General Manager
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A.
By: /s/ Carlo Persico /s/ William J. DeAngelo
Name: Carlo Persico William J.DeAngelo
Title:Deputy General FVP
Manager
Exhibit 10 (lxxviii)
AMENDMENT NO. 3 TO CREDIT AGREEMENT
AMENDMENT dated as of May 19, 1997 to the Amended and Restated Credit
Agreement dated as of June 4, 1996 (as heretofore amended, the "Credit
Agreement") among NACCO MATERIALS HANDLING GROUP, INC. (the "Borrower"), the
BANKS party thereto (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement to (i)
terminate the Commitments of The Bank of Nova Scotia, The First National Bank of
Chicago and Royal Bank of Canada and (ii) increase the Commitments of certain
other Banks by an aggregate amount equal to the aggregate amount of the
Commitments being terminated;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. Commitment Schedule. The Commitment Schedule attached hereto is
added to the Credit Agreement immediately after the signature pages thereof.
SECTION 3. Definitions. (a) The following new definition is added to
Section 1.1 of the Credit Agreement immediately after the definition of
"Commitment":
"Commitment Schedule" means the Commitment Schedule
attached hereto.
(b) The definition of "Bank" in Section 1.1 of the Credit Agreement is
amended to read as follows:
"Bank" means each bank listed on the Commitment Schedule, each
Assignee which becomes a Bank pursuant to Section 9.6(c), and their
respective successors.
(c) Clause (i) of the definition of "Commitment" in Section 1.1 of the
Credit Agreement is amended to read as follows:
(i) with respect to each Bank listed on the Commitment Schedule, the
amount set forth opposite its name on the Commitment Schedule or
SECTION 4. Repayment of Outstanding Loans. On the Amendment No. 3 Effective
Date (as defined in Section 9 below) the Borrower shall (i) prepay all Committed
Loans outstanding under the Credit Agreement immediately prior thereto and (ii)
pay all interest on such Committed Loans and all facility fees accrued under the
Credit Agreement to but excluding the Amendment No. 3 Effective Date. The
parties hereto waive any requirement in Section 2.14 of the Credit Agreement
that the Borrower give prior notice of such prepayments. The Borrower shall
compensate the Banks for any funding losses resulting from such prepayments as
and when provided in Section 2.16 of the Credit Agreement.
SECTION 5. Updated Representations as to Financial Information.
Section 4.4 of the Credit Agreement is amended to read as follows:
SECTION 4.4. Financial Information. (a) The consolidated balance sheet of
the Borrower and its Subsidiaries as of December 31, 1996 and the related
consolidated statements of income, cash flows and stockholders' equity for the
Fiscal Year then ended, reported on by Arthur Andersen LLP, a copy of which has
been delivered to each of the Banks, fairly present, in conformity with GAAP,
the consolidated financial position of the Borrower and its Subsidiaries as of
such date and their consolidated results of operations and cash flows for such
Fiscal Year.
(b) The unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as of March 31, 1997 and the related unaudited
consolidated statements of income, cash flows and stockholders'
equity for the three months then ended, a copy of which has been
delivered to each of the Banks, fairly present, on a basis consistent
with the financial statements referred to in subsection (a) of this
Section, the consolidated financial position of the Borrower and its
Subsidiaries as of such date and their consolidated results of
operations and cash flows for such three-month period (subject to
normal year-end adjustments).
(c) Since March 31, 1997 there has been no material adverse
change in the business, financial position or results of operations
of the Borrower and its Subsidiaries, considered as a whole.
SECTION 6. Additional Representations and Warranties. The Borrower
represents and warrants that as of the Amendment No. 3 Effective Date,
immediately after this Amendment becomes effective:
(a) no Default will have occurred and be continuing; and
(b) each representation and warranty of the Borrower set forth
in the Credit Agreement will be true as though made on and as of the
Amendment No. 3 Effective Date.
SECTION 7. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 9. Effectiveness. This Amendment shall become effective on
June 10, 1997 provided that the following conditions are met (the "Amendment
No. 3 Effective Date"):
(a) the Agent shall have received from each of the Borrower and
the Banks a counterpart hereof signed by such party or facsimile or
other written confirmation (in form satisfactory to the Agent) that
such party has signed a counterpart hereof; and
(b) the Agent shall have received evidence satisfactory to it
that the Borrower will make the payments required by Section 5 of
this Amendment on the Amendment No. 3 Effective Date with the
proceeds of Loans to be borrowed under the Credit Agreement
immediately after this Amendment becomes effective and/or other funds
available for such purpose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
NACCO MATERIALS HANDLING
GROUP, INC.
By: /s/ Jeffrey C. Mattern
Name: Jeffrey C. Mattern
Title: Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Patricia P. Lunka
Name: Patricia P. Lunka
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ Maria Vickroy-Peralta
Name: Maria Vickroy-Peralta
Title: Vice President
CITIBANK, N.A.
By: /s/ Marjorie Futornick
Name: Marjorie Futornick
Title: Vice President
THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By: /s/ Brady S. Sadek
Name: Brady S. Sadek
Title: Vice President & Deputy
General Manager
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison Amonette
Name: Alison Amonette
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Kevin McBride
Name: Kevin McBride
Title: Vice Prsident
UNITED STATES NATIONAL
BANK OF OREGON
By: /s/ Chris J. Karlin
Name: Chris J. Karlin
Title: Vice President
THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank)
By: /s/ Timothy J. Storms
Name: Timothy J. Storms
Title: Managing Director
WELLS FARGO BANK, N.A.
By: /s/ John R. Bean
Name: John R. Bean
Title: Asst. Vice President
BANK OF SCOTLAND
By: /s/ Annie Chin Tat
Name: Annie Chin Tat
Title: Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE
By: /s/ William Jeffers
Name: William Jeffers
Title: Vice President
MELLON BANK, N.A.
By: /s/ Mark F. Johnston
Name: Mark F. Johnston
Title: AVP
THE SUMITOMO BANK, LTD.
By: /s/ H. Iwami
Name: Hiroyuki Iwami
Title: Joint General Manager
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A.
By: /s/ Carlo Persico /s/ William J. DeAngelo
Name: Carlo Persico William J.DeAngelo
Title: Deputy General FVP
Manager
The undersigned Banks consent to the termination of their respective
Commitments pursuant to this Amendment and sign this Amendment for the purpose
of satisfying the provisions of Section 9.5 of the Credit Agreement requiring an
amendment of this type to be signed by all the Banks.
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
Name: F.C.H. Ashby
Title: Senior Manager Loan
Operations
THE FIRST NATIONAL BANK
OF CHICAGO
By: /s/ Mark A. Isley
Name: Mark A. Isley
Title: FVP
ROYAL BANK OF CANADA
By: /s/ Preston D. Jones
Name: Preston D. Jones
Title: Senior Manager
Corporate Banking
<PAGE>
COMMITMENT SCHEDULE
Banks Commitments
Morgan Guaranty Trust Company of New York $45,000,000
Bank of America National Trust and Savings Association $34,000,000
Citibank, N.A. $34,000,000
The Long-term Credit Bank of Japan, LTD. $34,000,000
Union Bank of California, N.A. $34,000,000
Keybank National Association $28,000,000
United States National Bank of Oregon $28,000,000
The Chase Manhattan Bank $25,000,000
Wells Fargo Bank, N.A. $18,000,000
Bank of Scotland $15,000,000
Caisse Nationale De Credit Agricole $15,000,000
Mellon Bank, N.A. $15,000,000
The Sumitomo Bank, LTD. $15,000,000
Istituto Bancario San Paolo Di Torino S.P.A. $10,000,000
-------------
Total $350,000,000
Exhibit 10 (cxviii)
AMENDMENT NO. 3
AMENDMENT NO. 3 dated as of April 14, 1997 to the SECOND AMENDED AND
RESTATED CREDIT AGREEMENT dated as of October 11, 1990, amended and restated as
of April 18, 1995, among HAMILTON BEACH/PROCTOR-SILEX, INC. (the "Company"),
PROCTOR-SILEX CANADA INC. ("PSC"), PROCTOR-SILEX S.A. de C.V. ("PSM", and
together with the Company and PSC, the "Obligors"), the BANKS signatory thereto
and THE CHASE MANHATTAN BANK (successor by merger to The Chase Manhattan Bank
(National Association)), as U.S. Agent (the "U.S. Agent"), and THE CHASE
MANHATTAN BANK OF CANADA, as Canadian Agent (the "Canadian Agent") and together
with the U.S. Agent, the "Agents").
W I T N E S S E T H:
WHEREAS, the Obligors, the Banks and the Agents are parties to the Second
Amended and Restated Credit Agreement referred to above as amended by Amendment
No. 1 dated as of March 29, 1996 among the Obligors, the Banks and the Agents
and as further amended by Amendment No. 2 dated as of October 4, 1996 among the
Obligors, the Banks and the Agents (as further modified, supplemented and
amended, the "Credit Agreement") pursuant to which the Banks have agreed to
extend credit to the Borrowers (as defined in the Credit Agreement) as provided
therein.
WHEREAS, the Company has requested that the Banks and the Agents agree to
amend the Credit Agreement to provide, among other things, for an extension of
the Revolving Credit Commitment Termination Date and modifications to certain
covenants.
WHEREAS, the Banks and the Agents are agreeable to such amendments on the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein its is hereby agreed as follows:
1. Definitions.
All terms defined in the Credit Agreement shall be used herein as defined
in the Credit Agreement unless otherwise defined herein.
2. Amendments to the Agreement.
(a) Section 1.01 of the Credit Agreement is hereby amended by amending the
following definitions as follows:
"Majority Interest Party Loans" shall mean loans by the Company to any
Majority Interest Party.
"Net Worth" shall mean, on any date of determination, the sum
of the following for any Person and its Subsidiaries (if any)
determined on a consolidated basis in accordance with GAAP at the
last day of the fiscal quarter ending on, or nearest to, such date of
determination: (i) the amount of share capital (less cost of treasury
shares) plus (ii) the amount of surplus and retained earnings (or, in
the case of a surplus or retained earnings deficit minus the amount
of such deficit) minus (iii) any increase (without giving effect to
any amortization) from and after the Amendment Effective Date in the
sum of the following (without duplication of deductions in respect of
items already deducted in arriving at surplus and retained earnings):
the book value of all assets which would be treated as intangibles
under GAAP, including, without limitation, good-will, trademarks,
trade-names, copyrights, patents and unamortized debt discount and
expense; minority interests in Subsidiaries; share capital discount
and expense; any excess of cost over market value of investments; and
any write-up in book value of assets resulting from a revaluation
thereof subsequent to the Amendment Effective Date minus (iv) the
aggregate unpaid principal amount of Majority Interest Party Loans.
"Restricted Payments" shall mean (a) dividends of the Company
(in cash, property or obligations) on, or other payments or
distributions on account of (whether made by the Company or any of
the Subsidiaries), or the setting apart of money for a sinking or
other analogous fund (whether made by the Company or any of the
Subsidiaries) for, or the purchase, redemption, retirement or other
acquisition of, any shares of any class of stock of the Company or
any Subordinated Indebtedness of the Company, (b) payment of
Subordinated Indebtedness or Management Fees by the Company and (c)
the making by the Company of any Majority Interest Party Loan.
"Revolving Credit Termination Date" shall mean May 8, 2002.
(b) Section 2.09 of the Credit Agreement is hereby deleted.
(c) Section 9.12 of the Credit Agreement is amended by adding
the following at the end thereof:
"For purposes of clause (b) above the "aggregate amount" of
Restricted Payments consisting of Majority Interest Party Loans made
in any fiscal year of the Company shall equal the aggregate unpaid
principal amount of such Majority Interest Party Loans made in such
fiscal year and outstanding on the date of such Restricted Payment
and after giving effect to such Restricted Payment."
(d) Section 9.15(viii) of the Credit Agreement is amended to
read in its entirety as follows:
"(viii) in addition to the transactions permitted in clauses
(i) through (vii) above (inclusive), subject to any other restriction
or limitation set forth in, or the terms of, this Agreement or any
Supplemental Agreement, the Company may enter into other transactions
with Affiliates in any fiscal year of the Company so long as the
aggregate amount of cash or other property received by Affiliates
from the Company (excluding Majority Interest Party Loans) in such
fiscal year does not exceed U.S.$500,000;"
(e) Section 9.15 of the Credit Agreement is amended by adding
the following at the end thereof:
"and (x) the Company may make Majority Interest Party Loans
permitted under Section 9.12 hereof."
(f) Section 9.17(f) of the Credit Agreement is amended to
read in its entirety as follows:
"(f) Investments consisting Majority Interest Party Loans
permitted under Section 9.12 hereof;"
3. Representations and Warranties. The Company represents and warrants to the
Banks and the Agent that:
(a) the execution and delivery by the Obligors of this
Amendment No. 3, and the performance by the Obligors of their
obligations under the Credit Agreement as amended hereby, (i) have
been duly authorized by all necessary corporate action of the
Obligors, will not violate any provision of law, or any Obligor's
charter or by-laws, or result in the breach of or constitute a
default or require a consent, under any indenture or other agreement
or instrument to which the Company or any of its Subsidiaries is a
party or by which any Obligor or any of its Property may be bound or
affected, and (ii) each of this Amendment No. 3 and the Credit
Agreement as amended hereby, constitutes the legal, valid and binding
obligation of the Obligors, in each case enforceable against the
Obligors in accordance with their respective terms;
(b) on and as of the date hereof (after giving effect to the
amendments set forth in Section 2 hereof, (i) no Default has occurred
and is continuing and (ii) the representations and warranties made by
each Obligor in Section 8 of Credit Agreement are true and correct on
and as of the date hereof with the same force and effect as if made
on and as of such date (or if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date);
(c) on and as of the date hereof (after giving effect to the
amendments set forth in Section 2 hereof, neither (i) any of the
Property encumbered by any of the Mortgages or any of the Canadian
Security Documents will be released from any provision of such
Mortgage or such Canadian Security Document nor (ii) will any of such
Mortgages or such Canadian Security Documents be invalidated or
otherwise impaired; and
(d) on and as of the date hereof (after giving effect to the
amendments set forth in Section 2 hereof, neither (i) any of
Housewares Holding Company, Precis [521] Ltd., HB-PS Holding Company,
Inc., NACCO Industries, Inc., Glen Dimplex or Glen Electric, Ltd.
will be released from their obligations under their respective
Supplemental Agreement or Supplemental Security Agreement nor (ii)
will any Supplemental Agreement or Supplemental Security Agreement be
invalidated or otherwise impaired, except as expressly contemplated
by the Override Agreement with respect to Glen Dimplex.
It shall be an Event of Default for all purposes of the Credit Agreement,
as amended hereby, if any representation, warranty or certification made by the
Company in this Amendment No. 3, or in any other writing furnished to any Bank
or the Agent pursuant to this Amendment No. 3, shall prove to have been false or
misleading as of the time made or furnished in any material respect.
4. Conditions Precedent. This Amendment No. 3 shall become effective on the date
(the "Effective Date") on which the Agent shall have received this Amendment No.
3, duly executed and delivered by each of the parties hereto.
5. Basic Documents Otherwise Unchanged. Except as herein provided, the Documents
shall remain unchanged and in full force and effect, and each reference to the
Credit Agreement in the Credit Agreement and the Notes shall be a reference to
the Credit Agreement as amended hereby and as the same may be further amended,
supplemented and otherwise modified from time to time.
6. Counterparts. This Amendment No. 3 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument, and any of the parties hereto may execute this Amendment
No. 3 by signing any such counterpart.
7. Binding Effect. This Amendment No. 3 shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
8. Governing Law. This Amendment No. 3 shall be governed by, and construed in
accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
3 to be duly executed and delivered as of the day and year first above written.
OBLIGORS
HAMILTON BEACH/PROCTOR-SILEX, INC.
By /s/ James H. Taylor
Name: James H. Taylor
Title: VP-Treasurer
PROCTOR-SILEX CANADA INC.
By /s/ James H. Taylor
Name: James H. Taylor
Title: Treasurer
By /s/ Melissa G. Hartness
Name: Melissa G. Hartness
Title: Assistant Treasurer
PROCTOR-SILEX S.A. de C.V.
By /s/ James H. Taylor
Name: James H. Taylor
Title: Sole Administrator
<PAGE>
BANKS
THE CHASE MANHATTAN BANK
By /s/ Timothy J. Storms
Name: Timothy J. Storms
Title: Managing Director
THE CHASE MANHATTAN BANK OF CANADA
By /s/ Christine Chan Arun K. Bery
Name: Christine Chan Arun K. Bery
Title: Vice President Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Gary C. Wilson
Name: Gary C. Wilson
Title: First Vice President
THE BANK OF NOVA SCOTIA
By /s/ F. C. H. Ashby
Name: F. C. H. Ashby
Title: Senior Manager Loan Operation
ISTITUTO BANCARIO SAN PAOLO DI
TORINO SPA
By /s/ Robert Wurster Carlo Persico
Name: Robert Wurster Carlo Persico
Title: FVP Deputy General Manager
CAISSE NATIONALE DE CREDIT AGRICOLE
By /s/ David Bouhl
Name: David Bouhl
Title: F.V.P., Head of Corporate Banking, Chicago
CRESTAR BANK
By /s/ Christopher B. Werner
Name: Christopher B. Werner
Title: Vice President
KEY BANK
By /s/ Marianne T. Meil
Name: Marianne T. Meil
Title: Vice President
<PAGE>
AGENTS
THE CHASE MANHATTAN BANK
as U.S. Agent
By /s/ Timothy J. Storms
Name: Timothy J. Storms
Title: Managing Director
THE CHASE MANHATTAN BANK
OF CANADA, as Canadian Agent
By /s/ Christine Chan Arun K. Bery
Name: Christine Chan Arun K. Bery
Title: Vice President Vice President
Exhibit 11
NACCO Industries, Inc. And Subsidiaries
Form 10-Q
Computation of Earnings per Share
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Dollars and shares in millions, except
per share data)
<S> <C> <C> <C> <C>
Net income $ 14.9 $ 14.0 $ 17.7 $ 26.9
========= ========= ========= ========
Per share amounts reported
to stockholders - Note 1: $ 1.82 $ 1.56 $ 2.16 $ 3.00
========= ========= ========= ========
Primary:
Weighted average shares outstanding 8.18 8.98 8.18 8.979
Dilutive stock options - Note 2 7 12 8 12
--------- --------- --------- -------
Totals 8.19 8.99 8.19 8.991
========= ========= ========= =======
Net income per share $ 1.82 $ 1.56 $ 2.16 $ 3.00
========= ========= ========= ========
Fully diluted:
Weighted average shares outstanding 8.18 8.98 8.18 8.979
Dilutive stock options - Note 2 10 12 10 12
--------- --------- --------- -------
Totals 8.19 8.99 8.19 8.991
========== ========= ========= ========
Net income per share $ 1.82 $ 1.56 $ 2.16 $ 3.00
========= ========= ========= =======
</TABLE>
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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 31
<SECURITIES> 0
<RECEIVABLES> 190
<ALLOWANCES> 0
<INVENTORY> 323
<CURRENT-ASSETS> 567
<PP&E> 540
<DEPRECIATION> 465
<TOTAL-ASSETS> 1,675
<CURRENT-LIABILITIES> 470
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 377
<TOTAL-LIABILITY-AND-EQUITY> 1,675
<SALES> 1,021
<TOTAL-REVENUES> 1,021
<CGS> 838
<TOTAL-COSTS> 838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 32
<INCOME-TAX> 14
<INCOME-CONTINUING> 18
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18
<EPS-PRIMARY> $2.16
<EPS-DILUTED> $2.16
</TABLE>
Exhibit 99 (i)
August 8, 1997
Dear Stockholder,
We believe that all of NACCO Industries stockholders should receive the most
comprehensive information possible about their company's operating performance.
With this in mind, we are implementing a new format for our interim reports to
stockholders. As a result, we have attached a copy of the second quarter
earnings release and supplemental financial information. The earnings release
replaces our traditional interim report. This change will place quarterly
operating results into your hands sooner than was previously possible, and at a
substantially reduced cost. We have also made a special effort to expand and
improve the scope of our quarterly earnings release to provide more information
on our current and future operating performance. We hope you will find this
approach both helpful and more timely.
Specifically with regard to our second quarter results, we are pleased that
earnings improved over the same quarter in 1996. We believe the results reflect
not only the strong demand for lift trucks in North America, but also the impact
of the ongoing cost-reduction and profit improvement programs in place at our
businesses, as well as the impact of our other longer term strategic programs.
Sincerely,
/s/ Alfred M. Rankin, Jr.
Alfred M. Rankin, Jr.
Chairman, President and Chief Executive Officer
<PAGE>
NACCO INDUSTRIES, INC.
ANNOUNCES SECOND QUARTER 1997 EARNINGS
Mayfield Heights, Ohio, July 18, 1997: NACCO Industries, Inc. (NC-NYSE)
today announced 1997 second quarter net income of $14.9 million, or $1.82 per
share, on revenues of $541.1 million, compared with net income of $14.0 million,
or $1.56 per share, on revenues of $560.9 million for the second quarter of
1996. For the six months ended June 30, 1997, net income was $17.7 million, or
$2.16 per share, on revenues of $1.0 billion, compared with net income of $26.9
million, or $3.00 per share, on revenues of $1.1 billion in the first half of
1996. Earnings per share in the second quarter and first half of 1997 were
favorably affected by fewer shares outstanding as a result of the Company's
ongoing share repurchase program, including the issuer tender offer completed in
December 1996. As of June 30, 1997 the Company had 8,152,000 shares of common
stock outstanding, compared with 8,985,000 shares as of June 30, 1996.
NACCO Materials Handling Group
NACCO Materials Handling Group's net income for the second quarter was
$12.2 million on revenues of $377.4 million, compared with second quarter 1996
net income of $9.6 million on revenues of $407.6 million. Lift truck units
shipped to dealers in the second quarter totaled 16,905, a 7% decrease compared
with 18,236 units shipped in the second quarter a year ago. However, shipments
in the second quarter of 1997 increased 16% over the 14,529 units shipped in the
first quarter of 1997. This increase is primarily a result of stronger
industrywide demand in the North American market. Lift truck volumes in Europe
and Asia-Pacific were down slightly in the second quarter of 1997 from a year
ago as a result of slower sales in some key European markets and continued
competitive pressures from Japanese and Korean manufacturers in Asia-Pacific.
Contributing to NMHG's improved net income in the second quarter of 1997 were
favorable material expenses, improved worldwide manufacturing efficiency, lower
overhead costs at NMHG's factories, lower administrative support costs and
stronger demand for parts. Net income for the second quarter was also positively
affected by a favorable tax adjustment and lower interest expense. Net income
for the first six months of 1997 was $15.7 million on revenues of $709.7
million, compared with net income of $21.8 million on revenues of $828.4 million
for the first half of 1996.
North American Coal
North American Coal's net income for the second quarter was $3.8 million,
compared with $5.3 million for the second quarter of 1996. The decline in net
income was attributable to a nonrecurring $2.0 million, after tax, escrow
payment received in the 1996 second quarter related to the sale of an eastern
underground mine. Net income in the second quarter of 1997 included a $0.5
million increase in royalty income compared with the second quarter last year.
During the second quarter of 1997, a total of 6.6 million tons of lignite were
sold, compared with 6.0 million tons in the second quarter of 1996. North
American Coal's Florida dragline operations sold 1.8 million cubic yards of
limerock in the second quarter versus 1.6 million cubic yards in the second
quarter last year. North American Coal's net income for the six months ended
June 30, 1997 was $7.7 million, compared with $10.1 million in the first half of
1996. Net income in the first half of 1997 was affected by reduced tons sold at
one of the company's project mining subsidiaries in North Dakota as a result of
a customer's power plant outage and adverse weather conditions during the first
quarter.
Hamilton Beach/Proctor-Silex
Hamilton Beach/Proctor-Silex reported net income of $0.3 million on
revenues of $87.2 million for the second quarter of 1997, compared with net
income of $1.7 million on revenues of $82.7 million for the second quarter of
1996. Revenues grew 5% in the second quarter due to increased unit volumes,
primarily for toasters and blenders. The increase in unit volumes, however, was
offset by an extremely competitive pricing environment, start-up costs for the
new manufacturing facility in Saltillo, Mexico, and expenses resulting from a
reduction of manufacturing activities in the United States. For the six months
ended June 30, 1997, Hamilton Beach/Proctor-Silex had a net loss of $1.7 million
on revenues of $162.5 million, compared with net income of $1.0 million on
revenues of $150.6 million for the same period in 1996.
Kitchen Collection
Kitchen Collection had a net loss of $0.3 million on revenues of $16.6
million in the second quarter of 1997 compared with a net loss of $0.5 million
on revenues of $14.6 million in the second quarter of 1996. Kitchen Collection
operated 145 stores on June 30, 1997 compared with 140 stores at the end of the
second quarter of 1996. New store openings contributed to the increase in second
quarter sales, compared with the same period a year ago. In addition, comparable
store sales rose 8% over the second quarter of 1996 primarily as a result of a
6% increase in the average sales transaction and a 3% increase in the number of
customer sales transactions. However, overall margins in the second quarter of
1997 were negatively affected by actions taken to sell discontinued inventory
and costs associated with the discontinuation of the Hearthstone(TM) store
format. For the six months ended June 30, 1997, Kitchen Collection had a net
loss of $1.0 million on revenues of $31.2 million, compared with a net loss of
$1.2 million on revenues of $27.5 million for the same period last year.
Outlook
Lift truck industry bookings in the Americas are anticipated to continue to
be strong based on second quarter factory bookings, which were at the highest
levels since the first quarter of 1995. At NMHG, worldwide backlogs increased
41% to 20,300 units in the second quarter of 1997, compared with 14,400 units in
the second quarter of 1996, and increased 74% compared with 11,700 units at
year-end 1996.
North American Coal's San Miguel Lignite mine in Texas began production and
deliveries on July 1, 1997 as planned. The company expects the new mine to
deliver approximately 1.8 million tons of lignite in 1997 and thereafter
approximately 3.0 million tons annually through 2007. In addition, the company
expects overall customer lignite requirements at its other operating mines to
remain firm over the next six months.
At Hamilton Beach/Proctor-Silex, the new Saltillo facility is expected to
continue to ramp up production during 1997. As of June 30, the facility was
manufacturing selected lines of blenders and toasters. The company plans to
phase in additional manufacturing activities during the remainder of the year.
The company anticipates that the facility will provide significant cost benefits
over the long term.
Kitchen Collection will continue to focus on increasing each store's
average sales transaction and customer traffic through continued emphasis on
employee incentive programs as well as other marketing programs. Discontinued
inventory phase-outs should have less impact on the company's net income for the
remainder of 1997. Kitchen Collection is testing a new medium-market format in
two stores with two more medium-market stores scheduled for opening in 1997.
The statements contained in this news release that are not historical facts
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are made subject to certain risks and
uncertainties which could cause actual results to differ materially from those
presented in those forward-looking statements. Such risks and uncertainties with
respect to each subsidiary's operations include without limitation:
NMHG: (1) changes in demand for forklift trucks on a worldwide basis, (2)
changes in sales prices, (3) delays in delivery or increased pricing of raw
materials or sourced products and labor, (4) delays in manufacturing and
delivery schedules and (5) exchange rate fluctuations, changes in foreign import
tariffs and monetary policies and other changes in the regulatory climate in the
countries in which NMHG operates and/or sells products.
NACoal: (1) weather conditions and other events that would reduce the level
of customers' fuel requirements and (2) transitional issues in assuming the
management of the San Miguel Lignite project.
HBPS: (1) delays or increased costs in the start-up of operations in
Saltillo, Mexico, (2) bankruptcy of or loss of major retail customers, (3)
changes in sales prices, product mix or levels of consumer purchasing of small
electronic appliances and (4) exchange rate fluctuations, changes in foreign
import tariffs or monetary policies and other changes in the regulatory climate
in the countries in which HBPS operates and/or sells products.
KCI: (1) weather conditions which would affect the number of customers
visiting the stores, (2) changes in sales prices, product mix or level of
consumer purchasing of kitchenware and small electric appliances and (3) delays
in the start-up of proposed new stores.
NACCO Industries, Inc. is a holding company with four operating
subsidiaries. The North American Coal Corporation mines and markets lignite
primarily as fuel for power generation by electric utilities. NACCO Materials
Handling Group, Inc. is a world leader in the design and manufacture of forklift
trucks, marketed under the Hyster(R) and Yale(R) brand names. Hamilton
BeachProctor-Silex, Inc. is a leading manufacturer of small electric appliances.
The Kitchen Collection, Inc. is a national specialty retailer of kitchenware and
small electric appliances.
# # #
FOR FURTHER INFORMATION, CONTACT:
NACCO Industries, Inc.
Ira I Gamm
Manager-Investor Relations
216/449-9676
<PAGE>
Selected Financial Data
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(In millions, except per share and percentage data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues $ 541.1 $ 560.9 $ 1,020.8 $ 1,120.4
Operating profit $ 33.8 $ 34.0 $ 49.8 $ 65.1
Net income $ 14.9 $ 14.0 $ 17.7 $ 26.9
Net income per share $ 1.82 $ 1.56 $ 2.16 $ 3.00
Return on equity in
properly capitalized
tangible assets (A) 30.9% 34.9%
Return on equity in total
assets (A) 10.2% 14.3%
</TABLE>
(A) - Twelve months ended June 30.
(Chart)
Return on Equity in Properly Capitalized Tangible Assets
1995* 42.5%
1996* 34.9%
1997* 30.9%
(Chart)
Return on Equity in Total Assets
1995* 15.5%
1996* 14.3%
1997* 10.2%
Minimum Internal Target 12.5%
*Twelve months ended June 30.
Note: Return calculations exclude the effect of the reserve for the UMWA
obligation.
(All amounts are subject to annual audit by independent public accountants.)
<PAGE>
Consolidated Financial and Operating Highlights
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(In millions, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
NACCO Materials Handling Group $ 377.4 $ 407.6 $ 709.7 $ 828.4
Hamilton Beach/Proctor-Silex 87.2 82.7 162.5 150.6
North American Coal 62.4 56.7 120.8 115.8
Kitchen Collection 16.6 14.6 31.2 27.5
NACCO and Other -- 0.1 0.1 0.2
Eliminations (2.5) (0.8) (3.5) (2.1)
----------- ------------- ------------- -----------
541.1 560.9 1,020.8 1,120.4
Amortization of goodwill
NACCO Materials Handling Group 2.9 2.8 5.8 5.7
Hamilton Beach/Proctor-Silex 1.0 0.9 2.0 1.8
Kitchen Collection 0.1 0.1 0.1 0.1
----------- ------------- ------------- -----------
4.0 3.8 7.9 7.6
Operating profit (loss)
NACCO Materials Handling Group 24.7 24.7 36.9 50.7
Hamilton Beach/Proctor-Silex 2.2 4.7 0.1 3.7
North American Coal 9.4 7.8 18.4 17.6
Kitchen Collection (0.5) (0.6) (1.5) (1.8)
NACCO and Other (2.0) (2.6) (4.1) (5.1)
----------- ------------- ------------- -----------
33.8 34.0 49.8 65.1
Other income (expense)
NACCO Materials Handling Group (1.8) (7.1) (7.4) (14.2)
Hamilton Beach/Proctor-Silex (1.7) (1.6) (3.2) (2.9)
North American Coal (3.3) 0.1 (6.4) (2.6)
Kitchen Collection (0.1) (0.2) (0.2) (0.3)
NACCO and Other (0.4) 0.2 (0.9) 0.1
----------- ------------- ------------- -----------
Income before income taxes and
minority interest 26.5 25.4 31.7 45.2
Provision for income taxes 11.3 10.9 13.6 17.6
----------- ------------- ------------- -----------
Income (loss) before minority interest
NACCO Materials Handling Group 12.2 9.6 15.7 21.8
Hamilton Beach/Proctor-Silex 0.3 1.7 (1.7) 1.0
North American Coal 3.8 5.3 7.7 10.1
Kitchen Collection (0.3) (0.5) (1.0) (1.2)
NACCO and Other (0.8) (1.6) (2.6) (4.1)
----------- ------------- ------------- -----------
15.2 14.5 18.1 27.6
Minority interest (0.3) (0.5) (0.4) (0.7)
----------- ------------- ------------- -----------
Net income $ 14.9 $ 14.0 $ 17.7 $ 26.9
=========== ============= ============= ===========
Net income per share $ 1.82 $ 1.56 $ 2.16 $ 3.00
=========== ============= ============= ===========
Cash dividends per share $ 0.1950 $ 0.1875 $ 0.3825 $ 0.3675
Average shares outstanding 8.183 8.984 8.187 8.979
</TABLE>
(All amounts are subject to annual audit by independent public accountants.)
<PAGE>
Consolidated Balance Sheets
NACCO INDUSTRIES, INC AND SUBSIDIARIES
(In millions)
<TABLE>
<CAPTION>
June 30 Dec. 31
1997 1996
---------- ----------
<S> <C> <C>
Assets
Current assets $ 567.1 $ 591.8
Other assets 39.6 37.5
Property, plant and equipment, net 539.8 550.3
Goodwill, net 456.7 461.0
Deferred costs and other 71.6 67.5
---------- ----------
$ 1,674.8 $ 1,708.1
========== ==========
Liabilities and stockholders' equity
Current liabilities $ 470.1 $ 416.0
Notes payable 252.1 333.3
Obligations of project mining subsidiaries 327.8 341.5
Self-insurance reserves and other 224.6 223.9
Minority interest 14.8 14.1
Stockholders' equity 385.4 379.3
---------- ----------
$ 1,674.8 $ 1,708.1
========== ==========
</TABLE>
(All amounts are subject to annual audit by indepenendt public accountants.)
<PAGE>
Subsidiary Financial Information
NACCO MATERIALS HANDLING GROUP
(In millions, except units and percentage data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Units sold 16,905 18,236 31,434 37,726
Backlog units 20,300 14,400
Revenues $ 377.4 $ 407.6 $ 709.7 $ 828.4
Operating profit $ 24.7 $ 24.7 $ 36.9 $ 50.7
Operating profit excluding goodwill amortization $ 27.6 $ 27.5 $ 42.7 $ 56.4
Interest expense $ (3.8) $ (6.6) $ (8.5) $ (13.4)
Net income $ 12.2 $ 9.6 $ 15.7 $ 21.8
Net income excluding goodwill amortization $ 15.1 $ 12.4 $ 21.5 $ 27.5
Return on equity in properly capitalized tangible assets (A) 27.4% 34.9%
Return on equity in total assets (A) 7.1% 11.9%
</TABLE>
<TABLE>
<CAPTION>
June 30 Dec. 31
Capital Structure 1997 1996
---- ----
<S> <C> <C>
Total net tangible assets $ 189.8 $ 267.9
Goodwill at cost 448.0 443.6
-------- --------
Total assets before goodwill amortization 637.8 711.5
Accumulated goodwill amortization (89.4) (82.8)
Total debt (169.9) (258.9)
-------- --------
Stockholders' equity $ 378.5 $ 369.8
======== ========
Debt to total capitalization 31% 41%
</TABLE>
(A) - Twelve months ended.
(All amounts are subject to annual audit by independent public accountants.)
<PAGE>
Subsidiary Financial Information
NORTH AMERICAN COAL
(In millions, except percentage data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Lignite tons sold 6.6 6.0 13.1 13.1
Income before tax from operating mines $ 6.4 $ 5.7 $ 12.8 $ 12.6
Royalty and other income, net $ 1.4 $ 4.1 $ 2.2 $ 5.6
Headquarters expense $ (1.6) $ (1.8) $ (2.9) $ (3.2)
Net income $ 3.8 $ 5.3 $ 7.7 $ 10.1
Return on equity in properly capitalized tangible assets (A) 293.2% 232.9%
Return on equity in total assets (A) 102.0% 115.4%
</TABLE>
<TABLE>
<CAPTION>
June 30 Dec. 31
Capital Structure (B) 1997 1996
---- ----
<S> <C> <C>
Investment in project mining subsidiaries $ 2.2 $ 3.3
Other net tangible assets 3.8 (0.8)
------- -------
Total net tangible assets 6.0 2.5
Advances to parent company 41.6 41.9
Debt related to parent advances (32.4) (29.0)
Other debt (0.1) (0.3)
------- -------
Total debt (32.5) (29.3)
------- -------
Stockholder's equity $ 15.1 $ 15.1
======= =======
Debt to total capitalization 68% 66%
</TABLE>
(A) - Twelve months ended.
(B) - Excluding project mining subsidiaries.
(All amounts are subject to annual audit by independent public accountants.)
<PAGE>
Subsidiary Financial Information
HAMILTON BEACH/PROCTOR-SILEX
(In millions, except percentage data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
------- ------- ------ ------
<S> <C> <C> <C> <C>
Units sold 7.0 6.3 12.9 11.6
Revenues $ 87.2 $ 82.7 $162.5 $150.6
Operating profit $ 2.2 $ 4.7 $ 0.1 $ 3.7
Operating profit excluding goodwill amortization $ 3.2 $ 5.6 $ 2.1 $ 5.5
Interest expense $ (1.7) $ (1.5) $ (3.2) $ (2.8)
Net income (loss) $ 0.3 $ 1.7 $ (1.7) $ 1.0
Net income excluding goodwill amortization $ 1.3 $ 2.6 $ 0.3 $ 2.8
Return on equity in properly capitalized tangible assets (A) 17.2% 19.8%
Return on equity in total assets (A) 8.3% 9.8%
</TABLE>
<TABLE>
<CAPTION>
June 30 Dec. 31
Capital Structure 1997 1996
-------- --------
<S> <C> <C>
Total net tangible assets $ 130.6 $ 111.1
Goodwill at cost 118.9 118.9
-------- --------
Total assets before goodwill amortization 249.5 230.0
Accumulated goodwill amortization (24.5) (22.5)
Total debt (108.9) (89.7)
-------- --------
Stockholder's equity $ 116.1 $ 117.8
======== ========
Debt to total capitalization 48% 43%
</TABLE>
(A) - Twelve months ended.
(All amounts are subject to annual audit by independent public accountants.)
<PAGE>
Subsidiary Financial Information
KITCHEN COLLECTION
(In millions, except store and percentage data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Number of stores 145 140
Revenues $ 16.6 $ 14.6 $ 31.2 $ 27.5
Operating loss $ (0.5) $ (0.6) $ (1.5) $ (1.8)
Operating loss excluding goodwill amortization $ (0.4) $ (0.5) $ (1.4) $ (1.7)
Net loss $ (0.3) $ (0.5) $ (1.0) $ (1.2)
Net loss excluding goodwill amortization $ (0.2) $ (0.4) $ (0.9) $ (1.1)
Return on equity in properly capitalized tangible assets (A) 20.0% 14.8%
Return on equity in total assets (A) 14.1% 10.5%
</TABLE>
<TABLE>
<CAPTION>
June 30 Dec. 31
Capital Structure 1997 1996
------- -------
<S> <C> <C>
Total net tangible assets $ 14.2 $ 14.6
Goodwill at cost 4.6 4.6
------- -------
Total assets before goodwill amortization 18.8 19.2
Accumulated goodwill amortization (1.0) (0.9)
Total debt (6.0) (5.0)
------- -------
Stockholder's equity $ 11.8 $ 13.3
======= =======
Debt to total capitalization 34% 27%
</TABLE>
(A) - Twelve months ended
(All amounts are subject to annual audit by independent public accountants.)
<PAGE>
Financial Information
NACCO (PARENT COMPANY)
(In millions)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Condensed Income Statement 1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income (loss)
NACCO Materials Handling Group $ 12.2 $ 9.6 $ 15.7 $ 21.8
Hamilton Beach/Proctor-Silex 0.3 1.7 (1.7) 1.0
North American Coal 3.8 5.3 7.7 10.1
Kitchen Collection (0.3) (0.5) (1.0) (1.2)
------- ------- ------- -------
16.0 16.1 20.7 31.7
Minority interest (0.3) (0.5) (0.4) (0.7)
------- ------- ------- -------
Equity in earnings of operating subsidiaries 15.7 15.6 20.3 31.0
NACCO and Other (0.8) (1.6) (2.6) (4.1)
------- ------- ------- -------
Net income $ 14.9 $ 14.0 $ 17.7 $ 26.9
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Condensed Statement of Cash Flows
<S> <C> <C> <C> <C>
Operating Activities
Parent company only net loss $ (0.9) $ (1.7) $ (2.6) $ (4.3)
Other operating cash flows 3.4 12.6 3.2 4.1
------ ------- ------ ------
Net cash provided (used) by operating activities 2.5 10.9 0.6 (0.2)
------ ------- ------ ------
Investing Activities
Additional investment in subsidiary -- -- -- (1.8)
Dividends and advances received from (paid to) subsidiaries 2.7 (8.5) 4.3 4.5
Note payable to Bellaire (1.2) (1.2) (0.3) (0.8)
------ ------- ------ ------
Net cash provided (used) by operating activities 1.5 (9.7) 4.0 1.9
------ ------- ------ ------
Financing Activities
Stock repurchase (2.7) -- (2.7) --
Cash dividends (1.6) (1.7) (3.1) (3.3)
Other financing cash flows 0.3 0.5 1.2 1.6
------ ------- ------ ------
Net cash used by financing activities (4.0) (1.2) (4.6) (1.7)
------ ------- ------ ------
Increase (decrease) for the period $ -- $ -- $ -- $ --
====== ======= ====== ======
</TABLE>
(All amounts are subject to annual audit by independent public accountants.)
<PAGE>
Financial Information
NACCO (PARENT COMPANY)
(In millions)
<TABLE>
<CAPTION>
June 30 Dec. 31
Condensed Balance Sheet 1997 1996
-------- --------
<S> <C> <C>
Current assets $ -- $ 0.3
Current intercompany accounts receivable, net 4.9 9.1
Other assets 0.5 0.5
Investments in subsidiaries
NACCO Materials Handling Group 369.5 361.0
Hamilton Beach/Proctor-Silex 116.1 117.8
North American Coal 15.1 15.1
Kitchen Collection 11.8 13.3
Bellaire 0.9 0.9
-------- --------
513.4 508.1
Property, plant and equipment, net 2.1 2.2
Deferred income taxes 20.7 20.0
-------- --------
Total assets $ 541.6 $ 540.2
======== ========
Current liabilities $ 9.5 $ 8.8
Reserve for future interest on obligation to UMWA 60.3 61.5
Note payable to Bellaire 40.3 40.5
Notes payable to other subsidiaries 41.6 45.6
Deferred income and other 4.5 4.5
Stockholders' equity 385.4 379.3
-------- --------
Total liabilities and stockholders' equity $ 541.6 $ 540.2
======== ========
</TABLE>
(All amounts are subject to annual audit by independent public accountants.)
