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 March 31, 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 April 30, 1997:
6,514,472
Number of shares of Class B Common Stock outstanding at April 30, 1997:
1,689,916
<PAGE>
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets -
March 31, 1997 (Unaudited) and
December 31, 1996
Unaudited Consolidated Statements of
Income for the Three Months Ended
March 31, 1997 and 1996
Unaudited Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 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 6 - Exhibits and Reports on Form 8-K
Exhibit Index
<PAGE>
PART I
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
1997 1996
----------- ---------
ASSETS (In millions)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 33.3 $ 47.8
Accounts receivable, net 204.4 212.2
Inventories 305.7 309.6
Prepaid expenses and other 24.5 22.2
-------- --------
567.9 591.8
Property, Plant and Equipment, Net 539.7 550.3
Deferred Charges
Goodwill, net 456.4 461.0
Deferred costs and other 59.3 59.6
Deferred income taxes 7.7 7.9
-------- --------
523.4 528.5
Other Assets 39.6 37.5
-------- --------
Total Assets $ 1,670.6 $ 1,708.1
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
1997 1996
-------- -----------
(In millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 183.9 $ 186.3
Revolving credit agreements 96.9 45.8
Current maturities of long-term debt 22.8 21.4
Income taxes 8.2 5.9
Accrued payroll 23.7 30.8
Other current liabilities 126.9 125.8
-------- --------
462.4 416.0
Long-term Debt - not guaranteed by
the parent company 263.8 333.3
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 333.1 341.5
Self-insurance Reserves and Other 222.5 223.9
Minority Interest 13.9 14.1
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,513,462
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,
1,690,926 shares outstanding
(1996 - 1,694,336 shares outstanding) 1.7 1.7
Capital in excess of par value .9 .1
Retained income 360.5 359.2
Foreign currency translation adjustment
and other 5.3 11.8
-------- --------
374.9 379.3
-------- --------
Total Liabilities and Stockholders' Equity $ 1,670.6 $ 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
MARCH 31
------------------------------------
1997 1996
-------------- ---------------
(Dollars in millions, except per
share data; shares in thousands)
<S> <C> <C>
Revenues $ 479.7 $ 559.5
Cost of sales 397.6 452.7
------------- -----------
Gross Profit 82.1 106.8
Selling, administrative and general expenses 62.2 71.9
Amortization of goodwill 3.9 3.8
------------- ------------
Operating Profit 16.0 31.1
Other income (expense)
Interest expense (10.0) (11.7)
Other - net (.8) .4
------------- -------------
(10.8) (11.3)
------------- -------------
Income Before Income Taxes and Minority Interest 5.2 19.8
Provision for income taxes 2.3 6.7
------------- ------------
Income Before Minority Interest 2.9 13.1
Minority interest (.1) (.2)
------------- -----------
Net Income $ 2.8 $ 12.9
============= ============
Weighted average common shares outstanding 8,205 8,986
============= ============
Net Income per share $ .35 $ 1.44
============= ============
Dividends per share $ .1875 $ .1800
============= ============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
------------ -----------
(In millions)
<S> <C> <C>
Operating Activities
Net income $ 2.8 $ 12.9
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 21.5 20.8
Deferred income taxes (1.7) (2.8)
Other non-cash items (.4) (.4)
Working Capital Changes:
Accounts receivable 7.3 2.8
Inventories (.8) (25.0)
Other current assets 2.3 (.5)
Accounts payable (8.6) (3.3)
Accrued income taxes 7.9 5.9
Other liabilities (7.3) 1.8
----------- -----------
Net cash provided by operating activities 23.0 12.2
Investing Activities
Expenditures for property, plant and equipment (8.7) (18.1)
Proceeds from the sale of assets .8 .3
Investments in unconsolidated affiliates (2.5) (1.8)
----------- -----------
Net cash used for investing activities (10.4) (19.6)
Financing Activities
Additions to long-term debt and
revolving credit agreements 18.8 40.9
Reductions of long-term debt and
revolving credit agreements (33.5) (25.1)
Additions to obligations of project mining
subsidiaries 14.8 26.4
Reductions of obligations of project mining
subsidiaries (24.1) (30.8)
Cash dividends paid (1.5) (1.6)
Capital grants .3 .4
Other - net (.2) ---
----------- -----------
Net cash (used for) provided by financing activities (25.4) 10.2
Effect of exchange rate changes on cash (1.7) (.8)
----------- -----------
Cash and Cash Equivalents
Increase (decrease) for the period (14.5) 2.0
Balance at the beginning of the period 47.8 30.9
----------- -----------
Balance at the end of the period $ 33.3 $ 32.9
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Dollars in Millions)
Note A - Basis of Presentation
NACCO Industries, Inc. ("NACCO") is a holding company with four operating
subsidiaries: The North American Coal Corporation ("NACoal"), NACCO Materials
Handling Group, Inc. ("NMHG"), Hamilton BeachProctor-Silex, Inc. ("HBPS"), and
The Kitchen Collection, Inc. ("KCI").
The accompanying unaudited consolidated financial statements include the
accounts of NACCO and its majority owned subsidiaries (NACCO Industries, Inc.
and Subsidiaries - the "Company"). Intercompany accounts have been eliminated.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the financial position of the Company as of
March 31, 1997 and the results of its operations and cash flows for the three
month periods ended March 31, 1997 and 1996 have been included.
Operating results for the three month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for 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 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.
<PAGE>
Note B - Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
--------- -----------
<S> <C> <C>
Manufacturing inventories:
Finished goods and service parts-
NMHG $ 89.8 $ 113.6
HBPS 43.4 34.1
------ ------
133.2 147.7
------ ------
Raw materials and work in process-
NMHG 126.4 120.6
HBPS 15.5 14.0
------ ------
141.9 134.6
------ ------
LIFO reserve-
NMHG (13.4) (15.6)
HBPS .1 .3
------ ------
(13.3) (15.3)
------ ------
Total manufacturing inventories 261.8 267.0
Coal-NACoal 8.3 8.3
Mining supplies-NACoal 18.8 18.9
Retail inventories-Kitchen Collection 16.8 15.4
------ ------
$ 305.7 $ 309.6
====== ======
</TABLE>
The cost of manufacturing inventories has been determined by the last-in,
first-out (LIFO) method for 65 percent and 62 percent of such inventories as of
March 31, 1997 and December 31, 1996, respectively.
Note C - 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
are expected to begin during the third quarter of 1997. No lease expense has
been incurred in the first quarter of 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 D - Accounting Standard Not Yet Adopted
In February 1997, the Financial Accounting Standards Board 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.
<PAGE>
Note E - Subsequent Event
On April 25, 1997, NMHG entered into an 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. In accordance with this agreement, NMHG sold
$77.5 million of accounts receivable to LTF.
Also, on April 25, 1997, NMHG and LTF entered into an 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 $75.0 million. In accordance with this agreement, LTF sold an
undivided interest in $33.0 million of accounts receivable to the financial
institution, at a discount. Gains and losses on the sale of receivables are not
expected to have a significant effect on the Company's 1997 financial results.
This two-step transaction, which will be reflected in the Company's financial
statements in the second quarter of 1997, will be accounted for as a sale of
receivables. Accordingly, the Company's Consolidated Balance Sheet will reflect
the reduction in accounts receivable for the portion of receivables transferred
to the financial institution. The discount and any other transaction gains and
losses will be included in other income (expense) in the Consolidated Statement
of Income. NMHG will continue to service the receivables and will maintain an
allowance for doubtful accounts based upon the expected collectibility of all
consolidated accounts receivable, including receivables sold by LTF.
The Company expects to use the proceeds from the revolving sale of receivables
to retire long-term debt. As such, the Company's financial position as of March
31, 1997 reflects a reclassification of $50.0 million from long-term debt to
current revolving credit agreements.
<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 financial condition and results of operations are best discussed at the
subsidiary level as presented below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
-------- -------
<S> <C> <C>
REVENUES
NMHG $ 332.3 $ 420.8
HBPS 75.3 67.9
NACoal 58.4 59.1
KCI 14.6 12.9
NACCO and Other .1 .1
Eliminations (1.0) (1.3)
------ ------
$ 479.7 $ 559.5
====== ======
AMORTIZATION OF GOODWILL
NMHG $ 2.9 $ 2.9
HBPS 1.0 .9
------ ------
$ 3.9 $ 3.8
====== ======
OPERATING PROFIT (LOSS)
NMHG $ 12.2 $ 26.0
HBPS (2.1) (1.0)
NACoal 9.0 9.8
KCI (1.0) (1.2)
NACCO and Other (2.1) (2.5)
------ ------
$ 16.0 $ 31.1
====== ======
OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION
NMHG $ 15.1 $ 28.9
HBPS (1.1) (.1)
NACoal 9.0 9.8
KCI (1.0) (1.2)
NACCO and Other (2.1) (2.5)
------ ------
$ 19.9 $ 34.9
====== ======
INTEREST EXPENSE
NMHG $ (4.7) $ (6.8)
HBPS (1.5) (1.3)
NACoal (.5) (.1)
KCI (.1) (.1)
NACCO and Other (.6) (.2)
Eliminations .6 .2
------ ------
(6.8) (8.3)
Project mining subsidiaries (3.2) (3.4)
------ ------
$ (10.0) $ (11.7)
====== ======
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1997 1996
-------- --------
<S> <C> <C>
OTHER-NET, INCOME (EXPENSE)
NMHG $ (.9) $ (.2)
HBPS -- (.1)
NACoal .6 .7
NACCO and Other .1 .3
Eliminations (.6) (.3)
------- -------
$ (.8) $ .4
======= =======
NET INCOME (LOSS)
NMHG $ 3.5 $ 12.2
HBPS (2.0) (.7)
NACoal 3.9 4.8
KCI (.7) (.7)
NACCO and Other (1.8) (2.5)
Minority interest (.1) (.2)
------- -------
$ 2.8 $ 12.9
======= =======
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG $ 8.2 $ 8.2
HBPS 4.8 4.5
NACoal .6 .5
KCI .3 .2
------- -------
13.9 13.4
Project mining subsidiaries 7.6 7.4
------- -------
$ 21.5 $ 20.8
======= =======
CAPITAL EXPENDITURES
NMHG $ 1.6 $ 13.3
HBPS 5.3 1.5
NACoal .7 .2
KCI .3 .9
------- -------
7.9 15.9
Project mining subsidiaries .8 2.2
------- -------
$ 8.7 $ 18.1
======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
---------- -----------
TOTAL ASSETS
<S> <C> <C>
NMHG $ 927.8 $ 950.9
HBPS 274.0 271.8
NACoal 67.9 66.5
KCI 24.7 27.6
NACCO and Other 50.5 56.7
--------- ----------
1,344.9 1,373.5
Project mining subsidiaries 421.2 433.6
--------- ----------
1,766.1 1,807.1
Consolidating eliminations (95.5) (99.0)
--------- ----------
$ 1,670.6 $ 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 months ended
March 31:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Revenues
Americas $ 220.1 $ 272.2
Europe, Africa and Middle East 93.7 121.3
Asia-Pacific 18.5 27.3
-------- --------
$ 332.3 $ 420.8
======== ========
Operating profit
Americas $ 10.0 $ 15.6
Europe, Africa and Middle East 3.2 10.9
Asia-Pacific (1.0) (.5)
-------- --------
$ 12.2 $ 26.0
======== ========
Operating profit excluding
goodwill amortization
Americas $ 12.0 $ 17.7
Europe, Africa and Middle East 4.1 11.7
Asia-Pacific (1.0) (.5)
-------- --------
$ 15.1 $ 28.9
======== ========
Net income $ 3.5 $ 12.2
======== ========
</TABLE>
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
First Quarter of 1997 Compared With First Quarter of 1996
The following schedule details the components of the changes in revenues,
operating profit and net income for the first quarter of 1997 compared with
1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
---------- ----------- ---------
<S> <C> <C> <C>
1996 $ 420.8 $ 26.0 $ 12.2
Increase (decrease) in 1997 from:
Unit volume (96.3) (15.9) (10.4)
Sales mix 8.9 5.0 3.3
Average sales price (1.1) (1.1) (.7)
Service parts 2.9 1.4 .9
Foreign currency (2.9) .5 .4
Manufacturing cost (7.6) (5.0)
Other operating expense 3.9 2.7
Other income and expense .8
Differences between effective
and statutory tax rates (.7)
-------- --------- -------
1997 $ 332.3 $ 12.2 $ 3.5
======== ========= =======
</TABLE>
Declines in first quarter 1997 revenues and net income were primarily
attributable to unit volume decreases, as compared to the first quarter of 1996.
The comparisons for first quarter 1997 were affected by the cyclical nature of
the lift truck industry. Demand for forklift trucks has historically been
cyclical, driven by the economic conditions in the various geographic regions in
which the industry's customers operate. After a slight increase during 1995,
NMHG reached a peak unit sales volume in the first quarter of 1996. During the
remainder of 1996, unit volume declined, reaching its lowest point in the first
quarter of 1997 since the first quarter of 1995. In the Americas, volume
declined 24.6 percent, or 3,283 units, as compared to 1996, primarily due to
weaker retail demand. Volume declines of 25.6 percent in Europe, from 5,186
units in 1996 to 3,857 units in 1997, can be attributed to a decrease in market
size. Decreasing demand and increasing competition contributed to the 36.2
percent volume decline in Asia-Pacific.
Also contributing to the decrease in volume was a decline in backlog during the
first quarter of 1996 from 21,200 units at December 31, 1995 to 17,300 units at
March 31, 1996, as compared to an increase in backlog from 11,700 forklift truck
units at December 31, 1996 to 16,500 units at March 31, 1997. Partially
offsetting the decrease in revenues resulting from volume declines was a shift
in the mix of sales in the first quarter of 1997 to higher margin products in
the U.S. and to higher margin regions in Europe over the same period in 1996.
Manufacturing costs increased over 1996 due to lower plant volumes that resulted
in labor and overhead costs that were not capitalized as inventory. Other
operating costs were lower reflecting reduced incentive compensation expense as
well as cost containment programs in response to the lower volumes.
<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 months ended March 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Interest expense $ (4.7) $ (6.8)
Other-net (.9) (.2)
----------- -----------
$ (5.6) $ (7.0)
=========== ===========
Effective tax rate 48.0% 35.7%
</TABLE>
The decrease in interest expense reflects lower borrowing levels in the first
quarter of 1997 as compared to the same period in 1996. The increase in the
effective tax rate results from a non-recurring 1996 favorable income tax
adjustment recognized due to the resolution of tax issues from prior years and
the effect of nondeductible goodwill amortization on lower comparative levels of
pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $1.6 million during the
first three months of 1997. It is estimated that NMHG's capital expenditures for
the remainder of 1997 will be approximately $34.5 million. Planned expenditures
relate to investments in manufacturing facilities, worldwide information systems
and tooling for new products. The principal sources of financing for these
capital expenditures are internally generated funds and bank borrowings.
At March 31, 1997, NMHG had available $145.0 million of its $350.0 million
revolving credit facility. The expiration date of the NMHG facility (which is
currently June 2001) 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
achievement of certain financial performance targets. NMHG also has separate
facilities totaling $38.3 million, of which $28.9 million was available at March
31, 1997. 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.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC.- continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NMHG's capital structure is presented below:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
----------- -----------
<S> <C> <C>
Total Net Tangible Assets $ 240.8 $ 267.9
Goodwill at Cost 443.6 443.6
----------- -----------
Total Assets Before Goodwill Amortization 684.4 711.5
Accumulated Goodwill Amortization (86.3) (82.8)
Total Debt (231.6) (258.9)
----------- -----------
Stockholders' Equity $ 366.5 $ 369.8
=========== ===========
Debt to Total Capitalization 39% 41%
</TABLE>
The decrease in total net tangible assets is due to decreases in cash and cash
equivalents and inventory, partially offset by an increase in accounts
receivable. The decrease in cash results from debt paydowns, partially offset by
positive cash flows from operations. Inventory declines reflect management's
ability to reduce inventory levels at all divisions. Accounts receivable
increased due to a slight increase in the aging of receivables and a decrease in
the receivables sold by the Europe division, which is reflective of a decrease
in first quarter 1997 volume as compared to fourth quarter 1996.
<PAGE>
HAMILTON BEACHPROCTOR-SILEX, INC.
- ---------------------------------
HBPS, wholly owned by NACCO, is a leading manufacturer of small electric
appliances. The housewares business is seasonal. A majority of revenues and
operating profit occurs in the second half of the year when sales of small
electric appliances increase significantly for the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for HBPS were as follows for the three months ended
March 31:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Revenues $ 75.3 $ 67.9
Operating loss $ (2.1) $ (1.0)
Operating loss excluding
goodwill amortization $ (1.1) $ (.1)
Net loss $ (2.0) $ (.7)
</TABLE>
First Quarter of 1997 Compared With First Quarter of 1996
The following schedule details the components of the changes in revenues,
operating loss and net loss for the first quarter of 1997 compared with 1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Loss Loss
----------- --------- ---------
<S> <C> <C> <C>
1996 $ 67.9 $ (1.0) $ (.7)
Increase (decrease) in 1997 from:
Unit volume and sales mix 10.2 3.0 2.0
Average sales price (2.8) (2.8) (1.8)
Manufacturing cost (.7) (.5)
Other operating expense (.6) (.4)
Other income and expense (.1)
Differences between effective
and statutory tax rates (.5)
--------- --------- -------
1997 $ 75.3 $ (2.1) $ (2.0)
========= ========= =======
</TABLE>
Revenues grew primarily due to increased unit volumes of blenders, drinkmasters,
steam/indoor grills and toasters. The positive earnings impact from increased
volume was partially offset by a decline in the average sales price due to
competition, especially at opening price points for irons, coffeemakers and
toasters. Also contributing to the decline in net income was a non-recurring
1996 tax benefit and start-up costs in 1997 for a new manufacturing facility in
Saltillo, Mexico. The Saltillo facility, which is part of HBPS's strategic cost
reduction program, is expected to become fully operational later this year.
<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 months ended March 31:
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Interest expense $ (1.5) $ (1.3)
Other-net -- (.1)
------- -------
$ (1.5) $ (1.4)
======= =======
Effective tax rate 44.1% 69.6%
</TABLE>
The effective tax rate benefit on first quarter net loss declined due to a
non-recurring favorable income tax adjustment recognized in 1996 as a result of
the resolution of tax issues from prior years.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $5.3 million during the
first three months of 1997 and are estimated to be $13.6 million for the
remainder of 1997. The primary purpose of these expenditures is to increase
manufacturing capacity and efficiency and to acquire 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. At March 31, 1997, HBPS had $80.7 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 March
31, 1997, HBPS also had $7.0 million available under separate facilities.
HBPS's capital structure is presented below:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
--------- --------
<S> <C> <C>
Total Net Tangible Assets $ 115.6 $ 111.1
Goodwill at Cost 118.9 118.9
-------- --------
Total Assets Before Goodwill Amortization 234.5 230.0
Accumulated Goodwill Amortization (23.5) (22.5)
Total Debt (95.2) (89.7)
-------- --------
Stockholder's Equity $ 115.8 $ 117.8
======== ========
Debt to Total Capitalization 45% 43%
</TABLE>
<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 four operating mines were as follows for the three
months ended March 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Coteau Properties 3.9 4.2
Falkirk Mining 1.5 1.9
Sabine Mining 1.0 .9
Red River Mining .2 .1
--- ---
Total Lignite 6.6 7.1
=== ===
</TABLE>
The Florida dragline mined 1.8 million cubic yards of limerock in the first
quarter of 1997 versus 1.6 million cubic yards in the first quarter of 1996.
Revenues, income before taxes, provision for taxes and net income were as
follows for the three months ended March 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues
Project mines $ 52.8 $ 54.6
Other mining operations 4.6 3.6
------- -------
57.4 58.2
Royalties and other 1.0 .9
------- -------
$ 58.4 $ 59.1
======= =======
Income before taxes
Project mines $ 5.7 $ 6.4
Other mining operations .7 .5
------- -------
Total from operating mines 6.4 6.9
Royalty and other income, net .8 1.5
Headquarters expense (1.3) (1.4)
------- -------
5.9 7.0
Provision for taxes 2.0 2.2
------- -------
Net income $ 3.9 $ 4.8
======= =======
</TABLE>
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
First Quarter of 1997 Compared with First Quarter of 1996
The following schedule details the components of the changes in revenues, income
before taxes and net income for the three months ended March 31:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
--------- --------- ---------
<S> <C> <C> <C>
1996 $ 59.1 $ 7.0 $ 4.8
Increase (decrease) in 1997 from:
Project mines
Tonnage volume (4.5) (.6) (.4)
Agreed profit per ton (.1) (.1) ---
Pass-through costs 2.8 --- ---
Other mining operations
Tonnage volume 1.5 .5 .3
Average selling price (.5) (.5) (.3)
Operating costs .2 .1
-------- ------- -------
Changes from operating mines (.8) (.5) (.3)
Royalties and other income, net .1 (.7) (.5)
Headquarters expense .1 ---
Differences between effective and
statutory tax rates (.1)
-------- ------- -------
1997 $ 58.4 $ 5.9 $ 3.9
======== ======= =======
</TABLE>
Adverse winter weather conditions affecting mining operations and a customer's
power plant outage resulted in reduced tons delivered by Coteau and Falkirk.
This decline in project mine tonnage volume was slightly offset by increased
volume at Sabine. The results from other mining operations include increased
tonnage volume, offset by a decrease in the average selling price at the Red
River mine. The decline in income before taxes and net income from royalties and
other income, net was due to the receipt of escrow payments in the first quarter
of 1996 related to the sale of a previously owned eastern U.S. underground mine
that did not recur in 1997.
<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 months ended March 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Interest expense
Project mining subsidiaries $ (3.2) $ (3.4)
Other mining operations (.5) (.1)
------ ------
$ (3.7) $ (3.5)
====== ======
Other-net
Project mining subsidiaries $ .4 $ .2
Other mining operations .2 .5
------ ------
$ .6 $ .7
====== ======
Effective tax rate 34.6% 31.9%
</TABLE>
The increase in the effective tax rate results from a lower level of net income
which generates percentage depletion eligible to reduce NACoal's effective tax.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $1.5 million during the
first quarter of 1997 and are estimated to be $31.0 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 $18.0 million of its revolving credit facility available
at March 31, 1997. A portion of the outstanding balance, $29.0 million, was
loaned to the parent company in December 1996 to finance the repurchase of
800,000 shares of NACCO's Class A common stock.
The financing of the project mining subsidiaries, which is guaranteed by the
utility customers, includes long-term equipment leases, notes payable and
non-interest-bearing advances from customers. The obligations of the project
mining subsidiaries do not affect 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 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>
March 31 December 31
1997 1996
--------- -----------
<S> <C> <C>
Investment in Project Mining Subsidiaries $ 2.2 $ 3.3
Other Net Tangible Assets 4.7 (.8)
------- -------
Total Tangible Assets 6.9 2.5
Advances to Parent Company 42.8 41.9
Debt Related to Parent Advances (34.4) (29.0)
Other Debt (.2) (.3)
------- -------
Total Debt (34.6) (29.3)
------- -------
Stockholder's Equity $ 15.1 $ 15.1
======= =======
Debt to Total Capitalization 70% 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
First Quarter of 1997 Compared With First Quarter of 1996
The following schedule details the components of the changes in revenues,
operating loss and net loss for the first quarter of 1997 compared with 1996:
<TABLE>
<CAPTION>
Operating Net
Revenues Loss Loss
---------- ---------- --------
<S> <C> <C> <C>
1996 $ 12.9 $ (1.2) $ (.7)
Increase (decrease) in 1997 from:
Stores opened in 1996 .7 (.1) (.1)
Comparable stores 1.0 .5 .3
Other (.2) (.2)
--------- --------- -------
1997 $ 14.6 $ (1.0) $ (.7)
========= ========= =======
</TABLE>
KCI operated 144 stores at March 31, 1997 compared with 134 stores at the end of
the first quarter of 1996. A full quarter's results from stores opened in 1996
contributed favorably to revenues in 1997. Comparable stores also contributed
favorably to revenues primarily due to an increase in the average sales
transaction, resulting from a management incentive program, increases in select
retail pricing and improved sales from KCI's gadget category. Overall margins
were moderately reduced due to clearance actions on discontinued product lines.
The unfavorable other variance relates to higher payroll and lease costs.
Provision for Income Taxes
KCI's effective tax rate for the three months ended March 31, 1997 and 1996 was
42.0 percent and 41.5 percent, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $0.3 million during the
first three months of 1997. Estimated capital expenditures for the remainder of
1997 are $0.4 million. The principal source of funds for these capital
expenditures is short term borrowings. At March 31, 1997, KCI had available $4.5
million of its $5.0 million line of credit. This line of credit has
performance-based pricing which provides for reduced interest rates based on the
achievement of certain financial performance measures.
<PAGE>
THE KITCHEN COLLECTION, INC. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
KCI's capital structure is presented below:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
-------- -----------
<S> <C> <C>
Total Net Tangible Assets $ 13.7 $ 14.6
Goodwill at Cost 4.6 4.6
------- -------
Total Assets Before Goodwill Amortization 18.3 19.2
Accumulated Goodwill Amortization (1.0) (.9)
Total Debt (5.2) (5.0)
------- -------
Stockholder's Equity $ 12.1 $ 13.3
======= =======
Debt to Total Capitalization 30% 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 operations
are minor, 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 $3.3 million for
the remainder of 1997.
The results of operations at NACCO and Other were as follows for the three
months ended March 31:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Revenues $ .1 $ .1
Operating loss $ (2.1) $ (2.5)
Other income (expense), net $ .1 $ .3
Net loss $ (1.8) $ (2.5)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Although the subsidiaries have entered into substantial debt agreements, NACCO
has not guaranteed the long-term debt or any borrowings of its subsidiaries.
The debt agreements at HBPS and KCI allow for the payment of dividends to NACCO
under certain circumstances. The credit agreement at NMHG allows the transfer of
up to $25.0 million to NACCO; there have not yet been any such transfers. There
are no restrictions on the transfer of assets from NACoal. Dividends and
advances from NACoal, HBPS and KCI are the primary source of cash for NACCO.
The Company believes it can adequately meet all of its current and long-term
commitments and operating needs. This outlook 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 one to seven years. The Company evaluates its exposure to floating
rate debt on an ongoing basis.
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. Gains and losses from changes in the market value of
these contracts are deferred and recognized as part of the transaction being
hedged.
FORWARD-LOOKING STATEMENTS
The statements contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere throughout 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, including, but not limited to, such items as
expansion and growth of the Company's business, future capital expenditures,
availability of liquidity and cash generation. These forward-looking statements
are made subject to certain risks and uncertainties which could cause results to
differ materially from those presented in those forward-looking statements. Such
risks and uncertainties with respect to each subsidiary's operations have been
disclosed on page 39 of the Company's 1996 Annual Report on Form 10-K.
<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
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 28 of this quarterly
report on Form 10-Q
(b) Current report on Form 8-K dated and filed on February 10,
1997. This report on Form 8-K disclosed under Item 5
thereof the resignation of Frank B. O'Brien from the
position of Senior Vice President - Corporate Development
and Chief Financial Officer effective March 5, 1997.
Current report on Form 8-K dated February 11, 1997, filed
on February 13, 1997. This report on Form 8-K disclosed
under Item 5 thereof the resignation of Frank E. Taplin,
Jr. from the position of director and the subsequent
election of Frank E. Taplin, Jr. as director emeritus.
This report also disclosed the election of David F. Taplin
as director.
<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 May 15, 1997 /s/Kenneth C. Schilling
------------ -----------------------
Kenneth C. Schilling
Vice President and Controller
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
Exhibit Index
Exhibit
Number* Description of Exhibit
(11) Computation of Earnings Per Common Share
(27) Financial Data Schedule
*Numbered in accordance with Item 601 of Regulation S-K.
Exhibit 11
NACCO Industries, Inc. And Subsidiaries
Form 10-Q
Computation of Earnings per Share
<TABLE>
<CAPTION>
Three Months Ended March 31
-------------------------------------------
1997 1996
-------------- ----------------
Dollars and shares in thousands, except per
share data)
<S> <C> <C>
Net income $ 2,848 $ 12,919
============= =============
Per share amounts reported
to stockholders - Note 1: $ .35 $ 1.44
============= =============
Primary:
Weighted average shares outstanding 8,196 8,975
Dilutive stock options - Note 2 9 11
============= =============
Totals 8,205 8,986
============= =============
Net income per share $ .35 $ 1.44
============= =============
Fully diluted:
Weighted average shares outstanding 8,196 8,975
Dilutive stock options - Note 2 8 12
============= =============
Totals 8,204 8,987
============= =============
Net income per share $ .35 $ 1.44
============= =============
</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
<CIK> 0000789933
<NAME> NACCO Industries
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 33
<SECURITIES> 0
<RECEIVABLES> 204
<ALLOWANCES> 0
<INVENTORY> 306
<CURRENT-ASSETS> 568
<PP&E> 540
<DEPRECIATION> 450
<TOTAL-ASSETS> 1,671
<CURRENT-LIABILITIES> 462
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 367
<TOTAL-LIABILITY-AND-EQUITY> 1,671
<SALES> 480
<TOTAL-REVENUES> 480
<CGS> 398
<TOTAL-COSTS> 398
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 5
<INCOME-TAX> 2
<INCOME-CONTINUING> 3
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3
<EPS-PRIMARY> $0.35
<EPS-DILUTED> 0
</TABLE>
