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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K ANNUAL REPORT
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File No. 1-9172
NACCO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 34-1505819
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5875 Landerbrook Drive
Mayfield Heights, Ohio 44124-4017
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (216) 449-9600
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each
Exchange
Title of Each Class on Which Registered
------------------- -------------------
Class A Common Stock, New York Stock Exchange
Par Value $1.00 Per Share
Securities Registered Pursuant to Section 12(g) of the Act:
Class B Common Stock, Par Value $1.00 Per Share
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 requirement for
the past 90 days.
YES X NO
--- ---
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of Class A Common Stock and Class B Common Stock held by
non-affiliates as of February 28, 1997:
$281,774,337
Number of shares of Class A Common Stock outstanding at February 28, 1997:
6,511,054
Number of shares of Class B Common Stock outstanding at February 28, 1997:
1,692,326
DOCUMENTS INCORPORATED BY REFERENCE
(a) The Company's Proxy Statement for its 1997 annual meeting of
stockholders is incorporated herein by reference in Part III.
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ITEM 1. BUSINESS
GENERAL
NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company
which owns four principal operating subsidiaries:
(a) NACCO MATERIALS HANDLING GROUP. The Company owns approximately 98%
of the outstanding capital stock of Hyster-Yale Materials Handling, Inc.
("Hyster-Yale"), which is the parent company of NACCO Materials Handling Group,
Inc. (For convenience of reference NACCO Materials Handling Group, Inc. and
Hyster-Yale hereinafter referred to as "NMHG"). NMHG markets two full lines of
forklift trucks and related service parts under the Hyster(R) and Yale(R) brand
names. NMHG accounted for 69% and 55% of NACCO's revenues and operating profits,
respectively, in 1996.
(b) HAMILTON BEACH-PROCTOR-SILEX. The Company's wholly owned
subsidiary, Hamilton Beach-Procter-Silex, Inc. ("Hamilton
Beach-Procter-Silex"),is one of the nation's leading manufacturers and marketers
of small electric kitchen appliances. Hamilton Beach-Procter-Silex accounted for
17% and 19% of NACCO's revenues and operating profits, respectively, in 1996.
(c) NORTH AMERICAN COAL. The Company's wholly owned subsidiary, The
North American Coal Corporation, and its affiliated coal companies
(collectively, "North American Coal"), mine and market lignite for use primarily
as fuel for power generation by electric utilities. North American Coal also
provides dragline mining services for a limerock quarry near Miami, Florida.
North American Coal accounted for 11% and 31% of NACCO's revenues and operating
profits, respectively, in 1996.
(d) KITCHEN COLLECTION. The Company's wholly owned subsidiary, The
Kitchen Collection, Inc. ("Kitchen Collection"), is a national specialty
retailer of kitchenware, small electric appliances and related accessories.
Kitchen Collection accounted for 3% and 2% of NACCO's revenues and operating
profits, respectively, in 1996.
Additional information relating to financial and operating data on a
segment basis (including NACCO and Other, which reduced operating profits by 7%
in 1996) is set forth in Management's Discussion and Analysis of Results of
Operations and Financial Condition, including Notes thereto, on pages 21 through
40 contained in Part II hereof and in Note 16 to the Consolidated Financial
Statements on pages F-22 through F-25 contained in Part IV hereof.
NACCO was incorporated as a Delaware corporation in 1986 in connection
with the formation of a holding company structure for a predecessor corporation
organized in 1913.
SIGNIFICANT EVENTS
In April 1996, Hamilton Beach-Procter-Silex announced plans to build a
new facility in Mexico to increase manufacturing capacity for new and existing
products. Construction on the new facility located in the Satillo/Monterey area
began in May 1996 and the facility is scheduled to begin production during the
second quarter of 1997. The new facility is expected to allow Hamilton
Beach-Procter-Silex to compete more effectively with low-cost Chinese
manufacturers.
On July 31, 1996, NMHG completed the acquisition of ORMIC, S.p.a.
("Ormic"), an Italian manufacturer of warehouse equipment, with approximately
$36 million in sales. In combination with the 1995 acquisition of DECA, S.r.l.
("DECA"), another Italian warehouse equipment company, this provides NMHG with a
strong base of product to serve the large European warehouse equipment market.
On October 18, 1996, the Company's wholly owned subsidiary, Housewares
Holding Company, Inc. ("Houseware Holding"), purchased the 20 percent indirect
minority ownership interest in Hamilton Beach-Procter-Silex from Glen Dimplex,
an unlimited corporation incorporated in the Republic of Ireland, for $33.6
million. The Shareholders Agreement between the Company and Glen Dimplex
provided Glen Dimplex with certain rights to dispose of it's interest in
Hamilton Beach-Procter-Silex, including the right, at its sole option, to offer
its interest to Housewares Holding at a purchase price determined pursuant to
the Shareholders Agreement. As a result of this purchase, the Company now owns
100 percent of Hamilton Beach-Procter-Silex. This purchase was funded by
borrowings under the Hamilton Beach-Procter-Silex credit facility, which was
increased to $160 million to accommodate the purchase.
On November 15, 1996, the Company announced a 1.5 million share
repurchase program. The first portion of the repurchase program consisted of a
"Dutch auction" issuer tender offer to purchase up to 800,000 shares of Class A
common stock at a purchase price of not less than $43.50 and not greater than
$50.00 per share. On December 23, 1996, the Company repurchased 800,000 shares
at $50.00 per share, which represented approximately 11 percent of the
outstanding Class A common stock. As a second phase of the repurchase program,
the Company is further authorized to purchase an additional 700,000 shares of
Class A common stock pursuant to an open market purchase program during the next
two fiscal years. If fully implemented, the
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shares purchased through the repurchase program would constitute approximately
21 percent of the outstanding Class A common stock prior to the initiation of
the repurchase program.
In December 1996, North American Coal was the successful bidder for two
long-term coal mining projects, the San Miguel Lignite Project in south Texas
and Phillips Coal Company's Lignite Project in Mississippi. North American Coal
will provide mining services to the San Miguel Electric Cooperative, under a
contract for 10 1/2 years, beginning in the third quarter of 1997. In addition,
North American Coal was chosen by Phillips Coal Company to be its 25% joint
venture partner to develop a new lignite mine. The joint venture agreement and
the 30 year lignite sales contract between the joint venture and the power
facility are currently being finalized. Commencement of the commercial operation
of the facility is scheduled for the year 2000.
Effective March 4, 1997, Frank B. O'Brien resigned as Senior Vice
President - Corporate Development and Chief Financial Officer of the Company.
BUSINESS SEGMENT INFORMATION
A. NACCO MATERIALS HANDLING GROUP
NMHG is one of the leading worldwide designers, manufacturers and
marketers of forklift trucks which comprise the largest segment of the materials
handling equipment industry. NMHG accounted for 55% and 43% of NACCO's assets
and liabilities, respectively, as of December 31, 1996, while its operations
accounted for 69% and 55% of NACCO's revenues and operating profits,
respectively, in 1996.
THE INDUSTRY
Forklift trucks are used in a wide variety of business applications
including manufacturing and warehousing. The materials handling industry,
especially in industrialized nations, is generally a mature industry, which has
historically been cyclical. Fluctuations in the rate of orders for forklift
trucks reflect the capital investment decisions of the customers, which in turn
depend upon the general level of economic activity in the various industries
served by such customers.
Since 1991, the worldwide market for forklift trucks has gradually
increased to approximately 450,000 units. During this time, however, individual
geographic markets have been subject to cyclicality. The North American market
for forklift trucks peaked in 1995 and began a cyclical downturn in 1996. The
European market reversed a declining trend in 1994, peaked in 1995 and
exhibited a slight decline in 1996. The Japanese market reversed a declining
trend in 1994 and has since exhibited modest growth. The market in Asia-Pacific
(outside of Japan) continued steady growth in 1996.
COMPANY OPERATIONS
NMHG maintains product differentiation between Hyster(R) and Yale(R)
brands of forklift trucks and distributes its products through separate
worldwide dealer networks. Nevertheless, opportunities have been identified and
addressed to improve the company's results by integrating overlapping operations
and taking advantage of economies of scale in design, manufacturing and
purchasing. NMHG provides all design, manufacturing and administrative
functions. Products are marketed and sold through two separate dealer networks
which retain the Hyster and Yale identities. In Japan, NMHG has a 50% owned
joint venture with Sumitomo Heavy Industries Ltd. which is generally known as
Sumitomo-NACCO Materials Handling Group ("S-N"). S-N performs certain design
activities and produces lift trucks and components which it markets in Japan and
which are exported for sale by NMHG and its affiliates in the U.S., Europe and
Asia-Pacific.
NMHG continued to expand its presence in the European market through
the acquisition of Ormic, an Italian manufacturer of warehouse equipment. In
combination with the 1995 acquisition of DECA, another Italian warehouse
equipment company, NMHG can now provide a full line of Hyster and Yale warehouse
equipment for the European market.
PRODUCT LINES
NMHG manufactures a wide range of forklift trucks under both the
Hyster(R) and Yale(R) brand names. The principal categories of forklift trucks
include electric rider, electric narrow-aisle and electric motorized hand
forklift trucks primarily for indoor use and internal combustion engine ("ICE")
forklift trucks for indoor or outdoor use. Forklift truck sales accounted for
approximately 84%, 85% and 82% of NMHG's net sales in 1996, 1995 and 1994,
respectively.
NMHG also derives significant revenues from the sale of service parts
for its products. Profit margins on service parts are greater than those on
forklift trucks. The large population of Hyster and Yale forklift trucks now in
service provides a market for service parts. In addition to parts for its own
forklift trucks, NMHG has a program in North America (termed UNISOURCE(TM)) and
in Europe (termed MULTIQUIP(TM)) designed to supply Hyster dealers with
replacement parts for most competing brands of forklift trucks. NMHG has a
similar program (termed PREMIER(TM)) for its Yale dealers in the Americas and
Europe. Accordingly, NMHG dealers can offer their mixed fleet customers a "one
stop" supply source. Certain of these parts are manufactured by and
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purchased from third party component makers. NMHG also manufactures some of
these parts through reverse-engineering of its competitors' parts. Service parts
accounted for approximately 16%, 15% and 18% of NMHG net sales in 1996, 1995 and
1994, respectively. For further information on geographic regions see Note 16 to
the Consolidated Financial Statements on pages F-22 through F-25 contained in
Part IV hereof.
COMPETITION
The forklift truck industry is highly competitive. The worldwide
competitive structure of the industry is fragmented by product line and country;
however, the three largest manufacturers have a significantly greater market
position on a unit volume basis than the other manufacturers. The principal
methods of competition among forklift truck manufacturers are product
performance, price, service and distribution networks. The forklift truck
industry competes with alternative methods of materials handling, including
conveyor systems, automated guided vehicle systems and hand labor. Global
competition is also affected by a number of other factors, including currency
fluctuations, variations in labor costs and effective tax rates and the costs
related to compliance with applicable regulations, including export restraints,
antidumping provisions and environmental regulations.
Although there is no official source for information on the subject,
NACCO believes that NMHG is the leading manufacturer of forklift trucks in the
world, based on number of lift trucks sold.
NMHG's position is strongest in North America, where it believes it is
the leader in unit sales of electric rider and ICE forklift trucks and has a
significant share of unit sales of electric narrow-aisle and electric motorized
hand forklift trucks. Although the European market is fragmented and competitive
positions vary from country to country, NMHG believes that it has a significant
share of unit sales of electric rider and ICE forklift trucks in Western Europe.
Although NMHG's current market share in the Asia-Pacific and Japanese markets is
lower than in other geographic areas, these markets have been targeted for
additional market share growth. The Japanese market reversed a declining trend
in 1994 and has since exhibited modest growth. The market in Asia-Pacific
(outside of Japan) continued a steady growth in 1996.
TRADE RESTRICTIONS
A. UNITED STATES
Since June 1988, Japanese-built ICE forklift trucks imported into the
U.S., with lifting capacities between 2,000 and 15,000 pounds, including
finished and unfinished forklift trucks, chassis, frames and frames assembled
with one or more component parts, have been subject to an antidumping duty
order. Antidumping duty rates in effect through 1996 range from 4.48% to 56.81%
depending on manufacturer or importer. The antidumping duty rate applicable to
imports from S-N is 51.33%, and is likely to continue unchanged for the
foreseeable future, unless S-N and NMHG decide to participate in proceedings to
have it reduced. NMHG does not currently import for sale in the United States
any forklift trucks or components subject to the antidumping duty order. This
antidumping duty order will remain in effect until the Japanese manufacturers
and importers satisfy the U.S. Department of Commerce (the "Commerce
Department") that they have not individually sold merchandise subject to the
order in the United States below foreign market value for at least three
consecutive years, or unless the Commerce Department or the U.S. International
Trade Commission finds that changed circumstances exist sufficient to warrant
the revocation of the order. The legislation implementing the Uruguay round of
GATT negotiations passed in 1994 provides that the antidumping order will be
reviewed for possible revocation in 2000. All of NMHG's major Japanese
competitors have either built or acquired manufacturing or assembly facilities
in the United States. NMHG cannot predict with any certainty if there has been
or will be any negative effects to it resulting from the Japanese sourcing of
their forklift products in the United States.
B. EUROPE
From 1986 through 1994, Japanese forklift truck manufacturers were
subject to informal export restraints on Japanese-manufactured electric rider,
electric narrow-aisle and ICE forklift trucks shipped to Europe. These informal
restraints terminated in 1995. Several Japanese manufacturers have announced
either that they have established, or intend to establish, manufacturing or
assembly facilities within the European Community. The company also cannot
predict with any certainty if there has been or will be any negative effects to
NMHG resulting from the Japanese sourcing of their forklift products in Europe.
PRODUCT DESIGN AND DEVELOPMENT
NMHG spent $23.3 million, $24.2 million and $23.2 million on product
design and development activities in 1996, 1995 and 1994, respectively. The
Hyster(R) and Yale(R) products are differentiated for the specific needs of
their respective customer bases. NMHG continues to pursue opportunities to
improve product costs by engineering new Hyster(R) and Yale(R) brand products
with component commonality.
Certain product design and development activities with respect to ICE
forklift trucks and some components are performed in Japan by S-N. S-N spent
approximately $4.2 million, $3.8 million and $4.5 million on product design and
development in 1996, 1995 and 1994, respectively.
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BACKLOG
As of December 31, 1996, NMHG's backlog of unfilled orders for forklift
trucks was approximately 11,700 units, or $219 million, of which substantially
all is expected to be filled during fiscal 1997. This compares to the backlog
as of December 31, 1995 of approximately 21,200 units, or $385 million. A
softening of demand for forklift trucks in 1996 caused backlog levels to
decline as dealers sought to reduce inventory. Backlog represents unit orders
to NMHG's manufacturing plants from independent dealerships, retail customers
and contracts with the U.S. Government. Although these orders are believed to be
firm, such orders may be subject to cancellation or modification.
SOURCES
NMHG has adopted a strategy of obtaining its raw materials and
principal components on a global basis from competitively priced sources. NMHG
is dependent on a limited number of suppliers for certain of its critical
components, including diesel and gasoline engines and cast-iron counterweights
used on certain forklift trucks. There would be a material adverse effect on
NMHG if it were unable to obtain all or a significant portion of such
components, or if the cost of such components was to increase significantly
under circumstances which prevented NMHG from passing on such increases to its
customers.
DISTRIBUTION
The Hyster(R) and Yale(R) brand products are distributed through
separate highly developed worldwide dealer networks. In addition, the company
has an internal sales force for each brand to sell directly to major customers.
In Japan, forklift truck products are distributed by S-N. In 1995, Yale
reached agreement with Jungheinrich Aktiengesellschaft ("Jungheinrich"), a
German manufacturer of forklift trucks, to terminate Jungheinrich's distribution
of Yale brand products in Germany and Austria at the end of 1996. By mid-1997,
NMHG will cease to provide to Jungheinrich certain ICE and electric-powered
products for sale in other major European countries under the Jungheinrich brand
name. Yale is establishing a new distribution network in Germany and has begun
appointing German dealers. The company's management does not believe that the
termination of its relationship with Jungheinrich will have a materially adverse
effect on NMHG.
FINANCING OF SALES
Hyster U.S. dealer and direct sales of Hyster products in the U.S. are
supported by leasing and financing services provided by Hyster Credit Company, a
division of AT&T Commercial Finance Corporation, pursuant to an operating
agreement which expires in 2000.
NMHG is a 20% stockholder of Yale Financial Services, Inc., a
subsidiary of General Electric Capital Corporation, which offers U.S. dealers of
Yale products wholesale and retail financing and leasing services for its
forklift trucks. Such retail financing and leasing services are also available
to Yale national account customers.
EMPLOYEES
As of February 28, 1997, NMHG had approximately 6,350 employees.
Employees in the Danville, Illinois manufacturing and parts depot operations are
unionized, as are tool room employees located in Portland, Oregon. A three-year
contract for the Danville union employees expires in June 1997. A three-year
contract with the Portland tool room union expires in October 1997. Employees at
the facilities in Berea, Kentucky; Sulligent, Alabama; and Greenville and
Lenoir, North Carolina are not represented by unions.
In Europe, shop employees in the Craigavon, Northern Ireland facility
are unionized. Employees in the Irvine, Scotland and Nijmegen, The Netherlands
facilities are not represented by unions. The employees in Nijmegen have
organized a works council, as required by Dutch law, which performs a
consultative role on employment matters.
NMHG's management believes its current labor relations with both union
and non-union employees are generally satisfactory and that it will be able to
renew the domestic union contracts in 1997 on acceptable terms.
GOVERNMENT REGULATION
NMHG's manufacturing facilities, in common with others in the industry,
are subject to numerous laws and regulations designed to protect the
environment, particularly with respect to disposal of plant waste. NMHG's
products are also subject to various industry and governmental standards. NMHG's
management believes that the impact of expenditures to comply with such
requirements will not have a material adverse effect on NMHG.
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PATENTS, TRADEMARKS AND LICENSES
NMHG is not materially dependent upon patents or patent protection.
NMHG is the owner of the Hyster(R) trademark, which is currently registered in
approximately 55 countries. The Yale(R) trademark, which is used on a perpetual
royalty-free basis by NMHG in connection with the manufacture and sale of
forklift trucks and related components, is currently registered in approximately
150 countries. NMHG's management believes that its business is not dependent
upon any individual trademark registration or license, but that the Hyster(R)
and Yale(R) trademarks are material to its business.
FOREIGN OPERATIONS
For a description of net sales and other financial information by
geographic region, see footnote 16 to the Company's Consolidated Financial
Statements on pages F-22 through F-25 contained in Part IV hereof.
B. HAMILTON BEACH-PROCTOR-SILEX
GENERAL
Hamilton Beach-Procter-Silex believes that it is the largest full-line
manufacturer and marketer of small electric kitchen appliances in North America
based on market share of key product categories. Hamilton Beach-Procter-Silex's
products are marketed primarily to retail merchants and wholesale distributors.
Hamilton Beach-Procter-Silex accounted for 16% and 11% of NACCO's assets and
liabilities, respectively, as of December 31, 1996, while its operations
accounted for 17% and 19% of NACCO's revenues and operating profits,
respectively, in 1996.
SALES AND MARKETING
Hamilton Beach-Procter-Silex manufactures and markets a wide range of
small electric kitchen appliances, including motor driven appliances such as
blenders, food processors, mixers and electric knives, and heat-generating
appliances such as toasters, irons, coffeemakers and toaster ovens. The company
markets its "better"/"best" categories under the Hamilton Beach(R) brand and
uses the Proctor-Silex(R) brand for the "good" and "better" categories. The
company markets its products primarily in North America, but also sells products
in South America, Latin America, Asia and Europe. Sales are generated
predominantly by a network of inside sales employees to mass merchandisers,
national department stores, catalog showrooms, warehouse membership clubs,
variety store chains, drug store chains and other retail outlets. Principal
customers include Wal-Mart, Kmart, Target, Canadian Tire, Caldor, Montgomery
Ward, Zellers and SAM's Club. Sales promotional activities are primarily focused
on cooperative advertising.
Because of the seasonal nature of the markets for small electric
appliances, Hamilton Beach-Procter-Silex's management believes that backlog is
not a meaningful indicator of performance and is not a significant indicator of
annual sales. Backlog of orders as of December 31, 1996 was approximately $8.4
million. This compares with the aggregate backlog as of December 31, 1995 of
approximately $4.6 million. This backlog represents customer orders; customer
orders may be canceled at any time prior to shipment.
Hamilton Beach-Procter-Silex's warranty program to the consumer
consists generally of a limited warranty lasting for two years for electric
appliances. Under its warranty program, the company may repair or replace, at
its option, those products found to contain manufacturing defects.
Revenues and operating profit for Hamilton Beach-Procter-Silex are
traditionally greater in the second half of the year as sales of small electric
appliances increase significantly with the fall holiday selling season. Because
of the seasonality of purchases of its products, Hamilton Beach-Procter-Silex
incurs substantial short-term debt to finance inventories and accounts
receivable.
PRODUCT DESIGN AND DEVELOPMENT
Hamilton Beach-Procter-Silex spent $3.7 million in 1996, $3.3 million
in 1995 and $2.7 million in 1994 on product design and development activities.
SOURCES
The principal raw materials used to manufacture and distribute Hamilton
Beach-Procter-Silex's products are steel, aluminum, plastics and packaging
materials. The company's management believes that adequate quantities of raw
materials are available from various suppliers.
COMPETITION
The small electric kitchen appliance industry is highly competitive.
Based on publicly available information about the industry, Hamilton
Beach-Procter-Silex's management believes it is the largest full-line
manufacturer and marketer of small kitchen appliances in North America based on
key product categories.
As retailers generally purchase a limited selection of small electric
appliances, Hamilton Beach-Procter-Silex competes with other suppliers for
retail shelf space and focuses its primary marketing
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efforts on retailers rather than consumers. In 1996, the company also initiated
consumer advertising for the Hamilton Beach brand. The company's management
believes that the principal areas of competition with respect to its products
are quality, price, product design, product features, merchandising, promotion
and warranty. Hamilton Beach-Procter-Silex's management believes that it is
competitive in all of these areas.
GOVERNMENT REGULATION
Hamilton Beach-Procter-Silex, in common with other manufacturers, is
subject to numerous Federal and state health, safety and environmental
regulations. The company's management believes that the impact of expenditures
to comply with such laws will not have a material adverse effect on Hamilton
Beach-Procter-Silex. The company's products are subject to testing or regulation
by Underwriters' Laboratories, the Canadian Standards Association and various
entities in foreign countries which review product design.
PATENTS, TRADEMARKS, COPYRIGHTS, AND LICENSES
Hamilton Beach-Procter-Silex holds patents and trademarks registered in
the United States and foreign countries for various products. The company's
management believes that its business is not dependent upon any individual
patent, trademark, copyright or license, but that the Hamilton Beach(R) and
Proctor-Silex(R) trademarks are material to its business.
EMPLOYEES
As of February 28, 1997, Hamilton Beach-Procter-Silex's work force
consisted of approximately 3,700 employees, none of which is currently
represented by unions except for approximately 20 hourly employees at the
Picton, Ontario facility. The Picton, Ontario employees are represented by an
employee association which performs a consultative role on employment matters.
On January 17, 1997, a collective bargaining agreement was executed for
the Saltillo manufacturing facility currently under construction. The company
expects to hire approximately 300 employees within the next six months who will
be subject to the terms of this agreement
C. NORTH AMERICAN COAL
GENERAL
North American Coal is engaged in the mining and marketing of lignite
for use primarily as fuel for power generation by electric utilities.
Substantially all of the sales by North American Coal are made through wholly
owned project mining subsidiaries pursuant to long-term, cost plus a profit per
ton contracts. The utility customers have arranged and guaranteed the financing
of the development and operation of the project mining subsidiaries. There is no
recourse to NACCO or North American Coal for the financing of these subsidiary
mines. North American Coal also provides dragline mining services for a limerock
quarry near Miami, Florida. At December 31, 1996, North American Coal's
operating mines consisted of mines where the reserves were acquired and
developed by North American Coal, except for the South Hallsville No. 1 Mine
where reserves are owned by the customer. North American Coal also earns royalty
income from the lease of various coal and gas properties. For further
information as to the financing of the project mining subsidiaries, see Note 8
to the Consolidated Financial Statements on pages F-15 and F-16 contained in
Part IV hereof. Project mining subsidiaries accounted for 22% and 30% of NACCO's
assets and liabilities, respectively, as of December 31, 1996, while their
operations accounted for 11% and 31% of NACCO's revenues and operating profits,
respectively, in 1996.
SALES, MARKETING AND OPERATIONS
The principal customers of North American Coal are electric utilities
and a synfuels plant. In 1996, sales to one customer, which supplies coal to
four facilities, accounted for 57% of North American Coal's revenues compared
with 46% and 45% in 1995 and 1994, respectively. The distribution of sales in
the last five years has been as follows:
<TABLE>
<CAPTION>
DISTRIBUTION
------------
TOTAL
TONS SOLD ELECTRIC SYNFUELS
(MILLIONS) UTILITIES PLANT
---------- --------- -----
<S> <C> <C> <C>
1996 27.6 77% 23%
1995 26.7 76% 24%
1994 27.2 76% 24%
1993 26.5 75% 25%
1992 24.5 74% 26%
</TABLE>
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The contracts under which the project mining subsidiaries were
organized provide that, under certain conditions of default, the customer(s)
involved may elect to acquire the assets (subject to the liabilities) or the
capital stock of the subsidiary, for an amount effectively equal to book value.
In one case, the customer may elect to acquire the stock of the subsidiary after
a specified period of time without reference to default, in exchange for certain
payments on coal thereafter mined. North American Coal does not know of any
conditions of default that currently exist.
The location, mine type, reserve data, ore characteristics, customer,
sales tonnage and contract expiration date for the mines operated by North
American Coal in 1996 were as follows:
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DEVELOPED LIGNITE MINING OPERATIONS
-----------------------------------
<TABLE>
<CAPTION>
PROVEN AND PROBABLE RESERVES
(MILLIONS OF TONS)(1)
---------------------
Committed
under
Project Mining Subsidiares Mine Location Type of Mine Contract Uncommitted
-------------------------- ---- -------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
The Coteau Properties Company Freedom Mine(2) Beulah, ND Surface Lignite 526.4 ----
The Falkirk Mining Company Falkirk Mine (2) Underwood, ND Surface Lignite 566.9 ----
The Sabine Mining Company South Hallsville Hallsville, TX Surface Lignite (4) (4)
No. 1 Mine (2)
Other
-----
Red River Mining Company (5) Oxbow Mine Coushatta, LA Surface Lignite 8.7 (6) 15.9
---- ----
Total Developed 1,102.0 15.9
Undeveloped Mining Operations
-----------------------------
North Dakota ---- ---- ---- ---- 591.2
Texas ---- ---- ---- ---- 225.8
Eastern ---- ---- ---- 86.8 106.4
---- -----
Total Undeveloped 86.8 923.4
Total Developed/ 1,188.8 939.3
Undeveloped
Average Average Sulfur 1996 Sales
BTUs Content Per Unit Tonnage Contract
Project Mining Subsidiares Per Pound of Weight Customer(s) (Plant) (Millions) Expires
-------------------------- --------- --------- ------------------- ---------- -------
<S> <C> <C> <C> <C> <C>
The Coteau Properties Company 6,767 0.8% Dakota Coal Company 6.3 2007(3)
(Great Plains Synfuels Plant)
Dakota Coal Company 5.2 2007(3)
(Antelope Valley Station)
Dakota Coal Company 3.2 2007(3)
(Leland Olds Station)
Dakota Coal Company 0.9 1997
(Stanton Station of
United Power
Association)
The Falkirk Mining Company 6,200 0.6% United Power Association/ 7.2 2020
Cooperative Power Association
(Coal Creek Station)
The Sabine Mining Company (4) (4) Southwestern Electric Power 4.0 2020
Company
(Henry W. Pirkey Power Plant)
Other
-----
Red River Mining Company (5) 6,722 0.7% Central Louisiana Electric 0.8 (7) 2010
Company/ Southwestern Electric
Power Company
(Dolet Hills Power Plant)
Undeveloped Mining Operations
-----------------------------
North Dakota 6,428 0.7% ---- ---- ----
Texas 6,208 0.9% ---- ---- ----
Eastern 12,070 3.3% ---- ---- ----
</TABLE>
(1) The projected extraction loss is approximately ten percent (10%) of the
proven and probable reserves, except with respect to the reserves for the
Eastern Undeveloped Mining Operations, in which case the extraction loss is
approximately thirty percent (30%) of the proven and probable reserves.
(2) The contracts for these mines require the customer to cover the cost of the
ongoing replacement and upkeep of the plant and equipment of the mine.
(3) Although the term of the existing coal sales agreement terminates in 2007,
the term may be extended for six (6) additional periods of five years, or until
2037, at the option of The Coteau Properties Company.
(4) The reserves of the South Hallsville No. 1 Mine are owned and controlled by
the customer and, therefore, have not been listed in the table.
(5) Joint venture with Phillips Coal Company.
(6) These amounts represent the total (100%) of the joint venture reserves.
(7) These amounts represent the total (100%) of the 1996 joint venture tonnage.
9
<PAGE> 10
Under terms of a lignite mining agreement entered into in 1985 with
Houston Lighting & Power Company ("HL&P") (as successor to Utility Fuels, Inc.),
a subsidiary of Houston Industries Incorporated, North American Coal was
retained to design, develop, construct and operate the proposed Trinity Mine in
the Malakoff-Cayuga reserves near Malakoff, Texas. The Trinity Mine was expected
to produce from 4.5 to 6.5 million tons of lignite annually. After several
delays, however, the proposed Malakoff Generating Station was canceled in July
1994. North American Coal and its wholly owned subsidiary, North American Coal
Royalty Company ("Royalty Company"), have received certain management fees,
minimum royalties and other payments in connection with the future development
of the Trinity Mine project. In December 1992 the Lignite Lease and Sublease
Agreement under which the minimum royalties were received was amended. The
parties agreed that, in light of the delayed development of this mining project,
effective January 1, 1993 HL&P was no longer obligated to pay minimum royalties
to Royalty Company. Termination of this obligation reduces North American Coal's
annual net income approximately $2.4 million, after tax. Under the original
agreement, these minimum royalty payments would have terminated at the end of
2005.
Under the lignite mining agreement with HL&P, North American Coal had
been receiving annual management fees. HL&P accelerated payment of the final
management fee of $2.6 million, after-tax, into 1995. In December 1995, HL&P
also terminated the lignite mining agreement and North American Coal will no
longer receive such management fees. Termination of this obligation reduces
North American Coal's annual net income approximately $5.3 million, after-tax
compared with 1995 levels.
GOVERNMENT REGULATION
North American Coal, in common with other coal producers, continues to
be subject to Federal and state health, safety and environmental regulations.
The 1997 expenditures which will be required for compliance with the provisions
of governmental regulations, including mined land reclamation and other air and
water pollution abatement requirements, are estimated at $1.8 million for
certain closed mines and are included in the caption "Self-Insurance Reserves
and Other" in NACCO's Consolidated Financial Statements in this Annual Report on
Form 10-K. The active operations are required to make certain additional capital
expenditures to comply with such governmental regulations, which expenditures
will be recovered under the terms of the coal sales agreements with the utility
customers.
North American Coal's management believes that the Clean Air Act
Amendments, which became effective in 1990, will not have a material adverse
effect on its current operations, because substantially all of the power
generating facilities operated or supplied by North American Coal's customers
meet or exceed the requirements of the Clean Air Act.
The Federal Energy Regulatory Commission ("FERC") issued Order 636,
effective in May 1992, which requires gas pipeline companies to separate or
"unbundle" their gas sales and gas transportation functions. Effectively, order
636 forced pipelines to abandon their traditional merchant function meaning that
the nation's natural gas pipeline companies, including the four which purchase
gas produced by the Great Plains Synfuels Plant ("the Synfuels Plant"), which is
supplied by the company's Coteau mining subsidiary, have much less need for gas
supply under contract and are actively seeking to restructure or terminate many
supply contracts. In 1994, the four pipeline companies that purchase gas from
the Synfuels Plant each reached a tentative settlement agreement with the
plant's operator, Dakota Gasification Company ("DGC"), and the U.S. Department
of Energy ("DOE") over the dispute regarding the pipeline companies' gas
purchase contracts. The FERC approved these settlement agreements by order of
December 18, 1996. No requests for a rehearing were filed meaning the order
became final and unappealable. The settlements resolve all pricing disputes for
past periods and establishes a new pricing formula for future gas sales.
COMPETITION
The coal industry competes with other sources of energy, particularly
oil, gas, hydro-electric power and nuclear power. Among the factors that affect
competition are the price and availability of oil and natural gas, environmental
considerations, the time and expenditures required to develop new energy
sources, the cost of transportation, the cost of compliance with governmental
regulation of operations, the impact of Federal and State energy policies and
the current trend toward deregulation of energy markets. The ability of North
American Coal to market and develop its reserves will depend upon the
interaction of these factors.
There is no official source of information on the subject, but North
American Coal believes that it is the eighth largest commercial coal producer in
the United States.
EMPLOYEES
As of February 28, 1997, North American Coal had approximately 910
employees.
10
<PAGE> 11
D. KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of kitchenware,
small electric appliances and related accessories which operated 144 retail
stores as of February 28, 1997. Stores are located primarily in factory outlet
complexes that feature merchandise of highly recognizable name-brand
manufacturers. Kitchen Collection's product mix includes a broad line of
appliances from leading manufacturers, including Hamilton Beach(R) and
Proctor-Silex(R).
As the outlet channel of the retail industry is approaching maturity,
the management of Kitchen Collection continues to explore alternate areas of
growth and diversification. Kitchen Collection has tested several store formats
both within the outlet industry and the more traditional retail environments.
Many of these formats have failed to meet the company's rigorous financial
performance standards. Kitchen Collection continues to explore alternate
channels of distribution, including distribution through the Internet.
Kitchen Collection accounted for 1% of NACCO's assets and liabilities
as of December 31, 1996, while its operations accounted for 3% and 2% of NACCO's
revenues and operating profits, respectively, in 1996.
ITEM 2. PROPERTIES
A. NMHG
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
NMHG.
<TABLE>
<CAPTION>
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- -------- ----- ------ ---------------------------
<S> <C> <C> <C>
Basingstoke, England X Hyster forklift truck marketing
and sales operations for Europe,
the Middle East and Africa
Berea, Kentucky X Manufacture of forklift trucks
Craigavon, Northern X Manufacture of forklift trucks
Ireland
Danville, Illinois X Manufacture of forklift trucks,
components and service parts
Danville, Illinois X Distribution of service parts
for both Hyster and Yale
forklift trucks
Danville, Illinois X Hyster forklift truck marketing
and sales operations for the
Americas
Flemington, X Yale forklift truck marketing
New Jersey and sales operations for the
Americas and certain NMHG
engineering operations
Greenville, North X Manufacture of forklift trucks
Carolina and other staff operations for the
Americas
Irvine, Scotland X Manufacture of forklift trucks
and other staff operations for
the Europe
Lenoir, North X Manufacture of component
Carolina parts for forklift trucks
Masate, Italy X Manufacture of forklift trucks
Modena, Italy X Manufacture of forklift trucks
Nijmegen, The X Manufacture of forklift
Netherlands trucks and component parts;
distribution of service parts
for forklift trucks
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
Portland, Oregon X Technical center for testing
of prototype equipment and
component parts
Portland, Oregon X NMHG corporate headquarters
Portland, Oregon X Manufacture of production tooling
and prototype units
Sao Paulo, Brazil X Manufacture of forklift
trucks; distribution of service
parts for forklift trucks
Sulligent, Alabama X Manufacture of component parts
for forklift trucks
Sydney, Australia X Assembly of forklift trucks;
distribution of service parts for
forklift trucks and
staff operations for Asia-
Pacific
Wolverhampton, X Yale forklift truck
England marketing and sales operations
for Europe
</TABLE>
B. HAMILTON BEACHPROCTOR-SILEX
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
Hamilton Beach-Proctor-Silex.
<TABLE>
<CAPTION>
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- -------- ----- ------ ---------------------------
<S> <C> <C> <C>
Collierville, X Distribution center
Tennessee
El Paso, Texas X Distribution center
Glen Allen, Virginia X Corporate headquarters
Juarez, Chihuahua, X Assembly of heat driven products(two plants);
Mexico plastic molding facility (one plant)
Mt. Airy, North X Manufacture of heat driven products
Carolina
Picton, Ontario, X Distribution center
Canada
Southern Pines, X Manufacture of iron components;
North Carolina service center for customer returns;
catalog sales center; parts
distribution center
Toronto, Ontario, X Proctor-Silex, Canada sales
Canada and administration
headquarters
Washington, North X Distribution and warranty center;
Carolina manufacture of motor driven products;
plastic molding facility
Saltillo, Mexico X Manufacture of heat driven and motor
products and plastic molding facility
(operational second quarter of 1997)
</TABLE>
12
<PAGE> 13
Sales offices are also leased in several cities in the United States
and Canada.
C. NORTH AMERICAN COAL
North American Coal's proven and probable coal reserves and deposits
(owned in fee or held under leases which generally remain in effect until
exhaustion of the reserves if mining is in progress) are estimated at
approximately 2.1 billion tons, approximately 82% of which are lignite deposits
in North Dakota. Reserves are estimates of quantities of coal, made by North
American's geological and engineering staff, that are considered mineable in
the future using existing operating methods. Developed reserves are those which
have been allocated to mines which are in operation; all other reserves are
classified as undeveloped. Information concerning mine type, reserve data and
ore characteristics for North American Coal's properties are set forth on the
table on page 9 under "Item 1. Business -- C. North American Coal -- Sales,
Marketing and Operations."
D. KITCHEN COLLECTION
Kitchen Collection currently leases its corporate headquarters
building, a warehouse/distribution facility and a retail store in Chillicothe,
Ohio. The company also leases warehouse/distribution facilities in Chillicothe,
Ohio and the remainder of its retail stores. A typical store is approximately
3,300 square feet.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any
material pending legal proceeding other than ordinary routine litigation
incidental to its respective business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders of the Company.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The information under this Item is furnished pursuant to Instruction 3
to Items 401(b) of Regulation S-K.
There exists no arrangement or understanding between any executive
officer and any other person pursuant to which such executive officer was
elected. Each executive officer serves until his successor is elected and
qualified.
The table on the following pages sets forth the name, age, current
position and principal occupation and employment during the past five years of
the Company's executive officers.
13
<PAGE> 14
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
<S> <C> <C> <C>
Alfred M. Rankin, Jr. 55 Chairman, President, and From prior to 1992 to May 1994,
Chief Executive Officer President and Chief
of NACCO (since May 1994) Executive Officer of NACCO.
Charles A. Bittenbender 47 Vice President, General Counsel
and Secretary of NACCO (since
prior to 1992)
Kenneth C. Schilling 37 Controller of NACCO From July 1995 to May 1996, Manager
(since June 1996) of Tax and Budgeting of NACCO. From
prior to 1992 to May 1995, Manager
of Tax of NACCO.
J.C. Butler, Jr. 36 Manager of Corporate From May 1995 to May 1996, Manager
Development and Treasurer of Corporate Development of NACCO.
of NACCO (since June 1996) From prior to 1992 to 1995,
Associate at McFarland Dewey & Co.
(investment banking).
Suzanne Schulze Taylor 34 Senior Attorney and Assistant From February 1994 to May 1996,
Secretary of NACCO (since May Senior Attorney of NACCO. From
1996) prior to 1992 to February 1994,
Associate at Jones, Day, Reavis &
Pogue (law firm).
</TABLE>
14
<PAGE> 15
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
A. NMHG
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
<S> <C> <C> <C>
Reginald R. Eklund 56 President and Chief Executive From August 1993 to September 1993,
Officer of NMHG (since Vice President of Hyster and Yale.
September 1992) From September 1992 to August 1993,
President and Chief Executive
Officer of Hyster-Yale. From prior
to 1992 to September 1992, President
and Chief Operating Officer of NMHG.
From prior to 1992 to August 1993,
President and Chief Executive
Officer of Yale.
William C. Maxwell 50 Vice President, Finance and From March 1993 to August 1996, Vice
Chief Financial Officer of NMHG President Finance - Europe of NMHG.
(since August 1996) From prior to 1992 to February 1993,
Director of Business Planning of NMHG.
Julie C. Hui 40 Controller of NMHG (since From 1992 to January 1995,
January 1995) Controller, Burr Brown Corporation
(manufacturer of micro electronics and
systems products).
Geoffrey D. Lewis 39 Vice President, General From prior to 1992 to September 1995,
Counsel and Secretary of Senior Vice President, General Counsel
NMHG (since September 1995) and Corporate Secretary for American
Health Properties, Inc. (health care
facilities).
Jeffrey C. Mattern 44 Treasurer of NMHG (since From August 1992, Treasurer of
August 1992) Hyster and Yale. From prior to 1992 to
July 1992, Assistant Treasurer for
Harnischfeger Industries, Inc.
(manufacturer of papermaking machinery,
mining and materials handling
equipment).
Frank G. Muller 55 Vice President, President - From February 1993 to December
Americas for NMHG (since May 1993, Vice President of Hyster and Yale.
1993) From May 1992 to May 1993, Vice
President, Manufacturing, Americas for
NMHG. From prior to 1992 to May 1992,
Vice President, Manufacturing, Yale.
Victoria L. Rickey 44 Vice President, Managing From 1993 to January 1995,
Director, NMHG Europe (since Senior Vice President
January 1995) International Business Group, J.I. Case
(manufacturer of agricultural and
construction equipment). From prior to
1992 to 1993, Vice President,
Agricultural Equipment of J.I. Case.
Graham D. Tribe 54 Vice President, Managing From prior to 1992 to May 1994,
Director, NMHG Asia-Pacific Managing Director, Hyster
(since May 1994) Australia Pty. Ltd.
</TABLE>
15
<PAGE> 16
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
B. HAMILTON BEACHPROCTOR-SILEX
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
<S> <C> <C> <C>
Richard E. Posey 50 President and Chief Executive Officer From January 1993 to June 1994,
of Hamilton Beach-Procter-Silex (since Executive Vice President, Consumer
September 1995) Products, North America, S.C.
Johnson & Sons, Inc. (manufacturer
of consumer products).From prior to
1992 to December 1992, Executive Vice
President, Regional Director, Consumer
Products, S.C. Johnson & Sons, Inc.
Charles B. Hoyt 49 Senior Vice President - Finance From prior to 1992, Vice President -
and Chief Financial Officer of Finance and Chief Financial Officer of
Hamilton Beach-Procter-Silex Hamilton Beach-Procter-Silex.
(since January 1997)
Clark S. Leslie 63 Senior Vice President - Operations From March 1996 to December 1996, Vice
of Hamilton Beach-Procter-Silex President - Operations of Hamilton Beach-
(since January 1997) Proctor-Silex. From December 1993 to March
1996, General Manager, Washington, N.C.
plant, Hamilton Beach-Procter-Silex.
From prior to 1992 to December 1993,
Senior Vice President of Operations,
Esselt Pendaflex Corp. (manufacturer
of office supplies).
Michael J. Morecroft 54 Senior Vice President, Engineering/ From prior to 1992, Vice President.
President, Product Development of Engineering/ Product Development of
Hamilton Beach-Procter-Silex (since Hamilton Beach-Procter-Silex.
January Hamilton 1997)
Judith B. McBee 49 Senior Vice President - From October 1994 to December 1996,
Marketing of Hamilton Beach- Executive Vice President - Marketing
Proctor-Silex (since January 1997) of Hamilton Beach-Procter-Silex. From
prior to 1992 to September 1994,
Executive Vice President -
Marketing/Sales of Hamilton
Beach/Proctor Silex.
Paul C. Smith 50 Senior Vice President - Sales From prior to 1992 to September
of Hamilton Beach-Procter-Silex 1994, Vice President and General
(since October 1994) Manager, Consumer Markets
Division, Fuji Photo Film U.S.A.
(manufacturer of photographic
film).
George P. Manson, Jr. 43 Vice President, General Counsel and From March 1995 to July 1996, Corporate
Secretary of Hamilton Beach-Procter- Counsel of American Home Products Corp.
Silex (since July 1996) (healthcare and consumer products
manufacturer). From February 1994 to
January 1995, Assistant General Counsel,
A.T. Massey Coal Company (mining company).
From prior to 1992 to December 1993,
Corporate Counsel of American Home
Products Corp.
James H. Taylor 39 Vice President and Treasurer of
Hamilton Beach-Procter-Silex
(since prior to 1992)
</TABLE>
16
<PAGE> 17
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
C. NORTH AMERICAN COAL
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
<S> <C> <C> <C>
Clifford R. Miercort 57 President and Chief Executive Officer
of North American Coal
(since prior to 1992)
Herschell A. Cashion 54 Senior Vice President - Business From prior to 1992 to August 1994,
Development of North American Coal Vice President - Business
(since August 1994) Development of North American
Coal.
Charles B. Friley 55 Vice President and Chief Financial From April 1992 to October 1994,
Officer of North American Coal Senior Vice President of Phillips
(since February 1995) Alaska Natural Gas Company. From
prior to 1992 to April 1992, Vice
President of Phillips 66 Natural
Gas Company.
Thomas A. Koza 50 Vice President - Law and
Administration of North
American Coal; Secretary of
North American Coal
(since prior to 1992)
K. Donald Grischow 49 Controller and Treasurer of North
American Coal (since prior to 1992)
</TABLE>
17
<PAGE> 18
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
D. KITCHEN COLLECTION
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
<S> <C> <C> <C>
Randall D. Lynch 49 President and Chief Executive Officer
of Kitchen Collection (since prior to 1992)
Randolph J. Gawelek 49 Executive Vice President and Secretary
of Kitchen Collection (since prior to
1992)
</TABLE>
18
<PAGE> 19
PART II
ITEM 5. MARKET FOR NACCO INDUSTRIES, INC. COMMON STOCK AND RELATED SECURITY
HOLDERS' MATTERS
NACCO Industries, Inc. Class A common stock is traded on the New York Stock
Exchange under the ticker symbol NC. Because of transfer restrictions, no
trading market has developed, or is expected to develop, for the Company's Class
B common stock. The Class B common stock is convertible into Class A common
stock on a one-for-one basis. The high and low market prices for the Class A
common stock and dividends per share for both classes of stock for each quarter
during the past two years are presented in the table below:
<TABLE>
<CAPTION>
1996
--------------------------------------------
SALES PRICE
------------------- CASH
HIGH LOW DIVIDEND
------ ------ -----------
<S> <C> <C> <C>
First quarter $59.88 - $51.50 18.00(CENT)
Second quarter $64.00 - $54.63 18.75(CENT)
Third quarter $56.00 - $47.75 18.75(CENT)
Fourth quarter $55.00 - $43.13 18.75(CENT)
1995
--------------------------------------------
Sales Price
------------------- Cash
High Low Dividend
------ ------ -----------
<S> <C> <C> <C>
First quarter $56.75 - $46.88 17.0(CENT)
Second quarter $64.00 - $53.63 18.0(CENT)
Third quarter $63.50 - $56.00 18.0(CENT)
Fourth quarter $60.50 - $55.25 18.0(CENT)
</TABLE>
At December 31, 1996, there were approximately 700 holders of record of Class A
common stock and 500 holders of record of Class B common stock.
On February 20, 1997, the Company issued 12,985 shares of Class A common stock
to certain employees of the Company pursuant to the NACCO Industries, Inc.
Executive Long-Term Incentive Compensation Plan (the "Plan") These shares are
fully vested but are subject to a ten year restriction on transfer. The Plan is
further described in footnote 1 to the table "Item 1. Election of Directors -
Long-Term Incentive Plans" in the 1997 Proxy Statement.
19
<PAGE> 20
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
NACCO Industries, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ----------- ----------
(In millions, except per share and employee data)
<S> <C> <C> <C> <C> <C>
Total revenues $ 2,273.2 $ 2,204.5 $ 1,864.9 $ 1,549.4 $ 1,483.8
Operating profit $ 131.2 $ 148.7 $ 129.6 $ 88.5 $ 100.8
Income before extraordinary items $ 50.6 $ 65.5 $ 45.3 $ 11.6 $ 22.9
Extraordinary items:
Extraordinary gain, net-of-tax 32.3
Extraordinary charges, net-of-tax (3.4) (3.2) (3.3) (110.0)
--------- ---------- ---------- ---------- ----------
Net income (loss) $ 50.6 $ 94.4 $ 42.1 $ 8.3 $ (87.1)
========= ========== ========== ========== ==========
Total assets $ 1,708.1 $ 1,833.8 $ 1,694.3 $ 1,642.5 $ 1,684.9
Long-term debt $ 333.3 $ 320.2 $ 286.7 $ 357.8 $ 459.9
Stockholders' equity $ 379.3 $ 370.1 $ 279.4 $ 235.6 $ 238.3
Per share of stock:
Income before extraordinary items $ 5.67 $ 7.31 $ 5.06 $ 1.30 $ 2.57
Extraordinary items:
Extraordinary gain, net-of-tax 3.61
Extraordinary charges, net-of-tax (.38) (.36) (.37) (12.37)
--------- ---------- ---------- ---------- ----------
Net income (loss) $ 5.67 $ 10.54 $ 4.70 $ 0.93 $ (9.80)
========= ========== ========== ========== ==========
Cash dividends $ .743 $ .710 $ .675 $ .655 $ .635
Market value at December 31 $ 53.50 $ 55.50 $ 48.38 $ 51.50 $ 51.75
Stockholders' equity $ 46.34 $ 41.28 $ 31.21 $ 26.35 $ 26.67
Average shares outstanding 8.920 8.963 8.948 8.938 8.891
Total employees 11,800 12,300 11,100 10,900 10,500
</TABLE>
20
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Tabular Amounts in Millions, Except Per Share, Unit, Store
and Percentage Data)
FINANCIAL SUMMARY
Income before extraordinary items for 1996 was $50.6 million, or $5.67 per
share, compared with income before extraordinary items of $65.5 million, or
$7.31 per share, in 1995 and $45.3 million, or $5.06 per share, in 1994. In
1995, an extraordinary gain of $32.3 million, net-of-tax, or $3.61 per share,
was recognized as a result of an adjustment to the obligation to the United Mine
Workers of America Combined Benefit Fund. Extraordinary charges of $3.4 million
and $3.2 million net-of-tax, or $0.38 per share, and $0.36 per share,
respectively, were recognized in 1995 and 1994 to reflect debt retirement and
debt restructuring costs at NACCO Materials Handling Group, Inc. These
extraordinary items are discussed in more detail in Note 3 to the consolidated
financial statements on page F-11 and in this discussion and analysis on page 30
and page 37. Net income was $50.6 million, or $5.67 per share, in 1996, $94.4
million, or $10.54 per share, in 1995 and $42.1 million, or $4.70 per share, in
1994.
The following schedule identifies the components of the changes in consolidated
revenues, operating profit and net income for 1996 compared with 1995:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1995 $ 2,204.5 $ 148.7 $ 94.4
Increase (decrease) in 1996 from:
NMHG 50.0 (10.9) (8.4)
HB-PS 12.5 (.7) .2
NACoal 1.1 (5.5) (2.8)
KCI 5.3 (.2) (.1)
NACCO & Other (.2) (.2) (.6)
Difference between effective and
statutory tax rates (5.1)
Minority interest 1.9
Extraordinary items (28.9)
--------- ------- --------
1996 $ 2,273.2 $ 131.2 $ 50.6
========== ======= ========
</TABLE>
SEGMENT INFORMATION
NACCO Industries, Inc. ("NACCO," the parent company) has four operating
subsidiaries (collectively, the "Company"): The North American Coal Corporation
("NACoal"), NACCO Materials Handling Group, Inc. ("NMHG"), Hamilton
Beach-Proctor-Silex, Inc. ("HB-PS") and The Kitchen Collection, Inc. ("KCI").
These four subsidiaries function in distinct business environments, and the
results of operations and financial condition are best discussed at the
subsidiary level. Results by segment are summarized in Note 16 to the
consolidated financial statements on pages F-22 to F-25 of this annual report.
21
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
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.
In November 1995, NACoal began providing 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 mines were as follows for the year
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Coteau Properties 15.6 15.1 15.7
Falkirk Mining 7.2 7.1 7.3
Sabine Mining 4.0 3.7 3.4
Red River Mining .8 .8 .8
------- ------- -------
Total lignite 27.6 26.7 27.2
======= ======= =======
</TABLE>
In its first full year of operations, the Florida dragline mined 7.4 million
cubic yards of limerock.
Revenues, income before taxes, provision for taxes and net income were as
follows for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Revenues
Project mines $ 227.8 $ 221.0 $ 226.6
Other mining operations 17.8 14.7 13.9
------- ------- --------
245.6 235.7 240.5
Royalties and other 3.5 12.3 9.7
------- ------- --------
$ 249.1 $ 248.0 $ 250.2
======= ======= ========
Income before taxes
Project mines $ 25.7 $ 24.5 $ 23.6
Other mining operations 2.8 1.0 2.3
------- ------- --------
Total from operating mines 28.5 25.5 25.9
Escrow payments 4.2 2.1 1.2
Royalty and other income, net 2.5 11.9 9.3
Headquarters expense (6.1) (6.1) (6.0)
------- ------- --------
29.1 33.4 30.4
Provision for taxes 9.9 10.8 9.4
------- ------- --------
Net income $ 19.2 $ 22.6 $ 21.0
======= ======= ========
</TABLE>
22
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION - Continued
FINANCIAL REVIEW - Continued
1996 COMPARED WITH 1995
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for 1996 compared with 1995:
<TABLE>
<CAPTION>
Income Net
Revenues Before Taxes Income
-------- ------------ ------
<S> <C> <C> <C>
1995 $ 248.0 $ 33.4 $ 22.6
Increase (decrease) in 1996 from:
Project mines
Tonnage volume 9.0 .8 .6
Mix of tons sold (.2) (.2) (.1)
Agreed profit per ton 1.8 .6 .4
Pass-through costs (3.8) -- --
Other mining operations
Tonnage volume 2.9 3.5 2.3
Mix of tons sold .1 .1 .1
Average selling price .1 .1 .1
Operating costs -- (1.9) (1.3)
-------- ------- -------
Changes from operating mines 9.9 3.0 2.1
Escrow payments -- 2.1 1.3
Royalties and other income, net (.6) (1.2) (.9)
Management fees (8.2) (8.2) (5.3)
Difference between effective and
statutory tax rates -- -- (.6)
-------- ------- -------
1996 $ 249.1 $ 29.1 $ 19.2
======== ======= =======
</TABLE>
The favorable impact from tonnage volume at the project mines was due to
increased volume at Coteau, Falkirk and Sabine as a result of increased customer
demand. Because actual results exceeded benchmarks established in the long-term
sales contracts, NACoal received profit incentive payments in the fourth quarter
of 1996. These payments contributed to the increase in agreed profit per ton. In
addition, the agreed profit per ton increased at Coteau due to an annual
escalation of profit per ton as provided for in the long-term contract.
The increase in tonnage volume and operating costs from other mining operations
resulted from the Florida dragline's full year of operations in 1996 versus two
months in 1995.
23
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION - Continued
The receipt in the second quarter of 1996 of the final escrow payment from the
sale of a previously owned eastern U.S. underground mining property resulted in
an increase in income before taxes. The decrease in royalties and other, net was
due to reduced activity at former coal properties. The decrease in management
fees results from the elimination of the management fee after the accelerated
receipt of the final management fee in 1995 under a contract mining agreement
between NACoal and a public utility company.
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues, income
before taxes and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
Income Net
Revenues Before Taxes Income
-------- ------------ ------
<S> <C> <C> <C>
1994 $ 250.2 $ 30.4 $ 21.0
Increase (decrease) in 1995 from:
Project mines
Tonnage volume (2.3) (.4) (.3)
Mix of tons sold .3 .3 .2
Agreed profit per ton 1.0 1.0 .6
Pass-through costs (4.6) -- --
Other mining operations
Tonnage volume 1.8 .9 .6
Mix of tons sold 4.8 4.8 3.1
Average selling price (5.8) (5.8) (3.7)
Operating costs -- (1.7) (1.1)
Other income -- .5 .3
------- ----- ------
Changes from operating mines (4.8) (.4) (.3)
Escrow payments -- .9 .6
Royalties and other income, net 2.6 2.6 1.7
Headquarters expense -- (.1) (.1)
Difference between effective and
statutory tax rates -- -- (.3)
-------- ------ -------
1995 $ 248.0 $ 33.4 $ 22.6
======= ====== ==+====
</TABLE>
The level of customer fuel requirements produced lower demand at Coteau and
Falkirk and higher demand at Sabine, resulting in a slight reduction in overall
volume at the project mines in 1995. The favorable agreed profit per ton
variance at the project mines was the result of the annual escalation in the
agreed profit per ton as provided for in the long-term contracts with each
mine's customer.
Increased sales of base tons at Red River, which yield a higher price as
specified in the supply contract, resulted in a favorable mix variance at the
other mining operations. In addition, Red River signed a new agreement with its
customer in 1995 that extends the contract term to 2010 in exchange for lower
per-ton sales prices. This resulted in the unfavorable price variance from other
mining operations.
24
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION- Continued
The increase in royalties and other income, net relates to the accelerated
receipt of annual management fees under a contract mining agreement between
NACoal and a public utility company. The utility company accelerated the final
annual management fee payment of $2.6 million, after-tax, from 1996 into 1995.
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Interest expense
Project mines $ (13.6) $ (14.0) $ (14.3)
Other mining operations (.2) (1.3) (1.3)
------- ------- -------
$ (13.8) $ (15.3) $ (15.6)
======= ======= =======
Other-net
Project mines $ (.1) $ 1.3 $ 1.2
Other mining operations 2.7 1.6 .7
------- ------- -------
$ 2.6 $ 2.9 $ 1.9
======= ======= =======
Effective tax rate 34.0% 32.4% 31.1%
</TABLE>
The increase in other-net from other mining operations primarily relates to the
receipt of the final escrow payment from the 1988 sale of a previously owned
eastern underground mining property. The increase in the 1996 effective tax rate
is due to the receipt of a nonrecurring tax refund in 1995.
1997 OUTLOOK
In December 1996, NACoal was the successful bidder for two long-term coal mining
projects, the San Miguel Lignite Project in south Texas and Phillips Coal
Company's Lignite Project in Mississippi. NACoal will provide mining services to
San Miguel Electric Cooperative, Inc.'s lignite mine in Texas under a contract
for 10 1/2 years. NACoal expects to deliver approximately 1.8 million tons
during the second half of 1997 and approximately 3.0 million tons annually
through 2007. It is anticipated that NACoal's results of operations will begin
to be positively impacted during the second half of 1997. Also in December 1996,
NACoal was selected by Phillips Coal Company to be its 25% joint venture partner
to develop a new lignite mine in Mississippi. This mine will supply a
440-megawatt power generation facility to be constructed and operated by CRSS,
Inc. It is anticipated that the NACoal and Phillips Coal Company joint venture
will deliver approximately 3.0 million tons of lignite annually to CRSS's
facility. Mine development is in progress, and commercial operation of CRSS's
facility is scheduled for the year 2000. NACoal and Phillips Coal Company are in
the process of finalizing their joint venture agreement and also a lignite sales
contract between the joint venture and CRSS, which will run for 30 years. Costs
to develop the mine will be deferred until the commencement of commercial
operations.
NACoal's other lignite mines and the Florida dragline operations are expected to
produce about the same number of total tons in 1997 as in 1996, as customer
requirements appear level with the previous year. Sales contracts with customers
at Coteau, Falkirk, Sabine and Red River extend to 2037, 2020, 2020 and 2010,
respectively.
25
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION - Continued
FINANCIAL REVIEW - Continued
NACoal is involved in ongoing initiatives to obtain additional mining contracts.
However, the successful achievement of these contracts is uncertain at this
time. Costs to pursue these contracts are not expected to be material in 1997.
See discussion under the heading "CAUTIONARY STATEMENTS."
LIQUIDITY AND CAPITAL RESOURCES
NACoal has in place a $50.0 million revolving credit facility. The expiration
date of this facility (which was extended to September 2001 during 1996) may be
extended, on an annual basis, for one additional year upon the mutual consent of
NACoal and the bank group. NACoal had $21.0 million of its revolving credit
facility available at December 31, 1996. The outstanding balance of $29.0
million was loaned to the parent company to finance the stock repurchase
program, as discussed in Note 13 to the consolidated financial statements on
page F-18 of this annual report.
The financing of the project mining subsidiaries, which is guaranteed by the
utility customers, consists of long-term equipment leases, notes payable and
non-interest-bearing advances from customers. The obligations of the project
mining subsidiaries do not impact the short- or long-term liquidity of the
company and are without recourse to NACCO or NACoal. These arrangements allow
the project mining subsidiaries to pay dividends in amounts equal to their
retained earnings.
Expenditures for property, plant and equipment by the project mining
subsidiaries and other mining operations were $19.5 million in 1996 and $22.5
million in 1995, and are anticipated to be approximately $31.4 million in 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. The increase in 1997 expenditures primarily
relates to costs incurred to build infrastructure, as two of the mines move into
new phases of mine development. In addition, capital investments of
approximately $26.0 million necessary to establish and develop the mine for the
San Miguel Lignite Project are expected to be financed with operating lease
agreements in 1997.
26
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
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.
In July 1996, NMHG acquired the warehouse equipment business of ORMIC S.p.a.,
located near Milan, Italy. ORMIC manufactures motorized hand trucks, order
pickers and turret trucks. This acquisition, along with the 1995 acquisition of
DECA S.r.l., another Italian warehouse equipment manufacturer, strengthened
NMHG's presence in the European warehouse and distribution market.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the year ended December
31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues
Americas $1,015.5 $1,002.7 $ 828.1
Europe, Africa and Middle East 451.8 422.3 289.7
Asia - Pacific 92.8 85.1 61.1
-------- -------- ---------
$1,560.1 $1,510.1 $1 ,178.9
======== ======== =========
Operating profit (loss)
Americas $ 43.7 $ 48.8 $ 44.3
Europe, Africa and Middle East 32.5 34.4 15.1
Asia - Pacific (3.7) .2 5.2
-------- -------- ---------
$ 72.5 $ 83.4 $ 64.6
======== ======== =========
Operating profit (loss) excluding
goodwill amortization
Americas $ 51.6 $ 56.5 $ 52.2
Europe, Africa and Middle East 35.9 37.2 17.9
Asia - Pacific (3.5) .5 5.3
-------- -------- ---------
$ 84.0 $ 94.2 $ 75.4
======== ======== =========
Net income (loss) before
extraordinary charges $ 26.4 $ 36.9 $ 18.7
Extraordinary charges, net-of-tax -- (3.4) (3.2)
-------- -------- ---------
Net income $ 26.4 $ 33.5 $ 15.5
======== ======== =========
</TABLE>
27
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.--Continued
FINANCIAL REVIEW--Continued
1996 COMPARED WITH 1995
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1996 compared with 1995:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- -------- --------
<S> <C> <C> <C>
1995 $1,510.1 $ 83.4 $ 33.5
Increase (decrease) in 1996 from:
Unit volume (14.4) (2.4) (1.6)
Sales mix 43.4 5.9 3.8
Average sales price (4.0) (4.0) (2.6)
Service parts 26.5 11.6 7.5
Foreign currency (1.5) 9.6 6.2
Manufacturing cost -- (19.7) (12.5)
Other operating expense -- (11.9) (7.7)
Other income and expense -- -- (1.5)
Difference between effective and
statutory tax rates -- -- (2.1)
Extraordinary charges -- -- 3.4
-------- -------- --------
1996 $1,560.1 $ 72.5 $ 26.4
======== ======== ========
</TABLE>
During 1996, the market size of forklift trucks declined approximately 3 percent
on a worldwide basis. Nevertheless, NMHG obtained a slightly improved market
share in 1996 over 1995. Unit volume in the Americas declined 5 percent to
47,628 units due to the decline in market size and dealer inventory reductions.
This decline was partially offset by increased volume in Europe of 12 percent to
18,702 units and in Asia-Pacific of 7 percent to 3,059 units. Late 1995 and
mid-1996 acquisitions of European warehouse equipment businesses principally
contributed to the unit growth in Europe. Product sales mix favorably impacted
revenues due to increased sales of higher value product. Intensified pricing
pressures in the Americas due to decreased industry demand, slightly offset by
price increases implemented in Europe, caused the unfavorable pricing impact.
The improvement in service parts, concentrated in the Americas, resulted from
NMHG's increasing lift truck population.
Operating profit was positively affected by currency due to the strength of the
U.S. dollar against the Japanese yen, as costs of Japanese sourced goods
decreased. Manufacturing costs increased due to lower plant utilization and
labor inefficiencies resulting from the decline in market demand. In addition,
provisions to increase warranty and inventory reserves contributed to the
increase in manufacturing costs. Other operating expenses increased due to
higher marketing costs expended to generate sales volume and due to operating
expenses of recently acquired businesses.
28
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.--Continued
FINANCIAL REVIEW--Continued
1995 COMPARED WITH 1994
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1994 $1,178.9 $ 64.6 $ 15.5
Increase (decrease) in 1995 from:
Unit volume 235.0 43.0 28.0
Sales mix (7.1) (12.1) (7.9)
Average sales price 57.6 57.6 37.4
Service parts 16.0 7.4 4.8
Foreign currency 26.6 (7.7) (5.0)
DECA S.r.l. 3.1 .3 .2
Manufacturing cost -- (47.3) (29.1)
Other operating expense -- (22.4) (14.6)
Other income and expense -- -- .8
Difference between effective and
statutory tax rates -- -- 3.6
Extraordinary charges -- -- (.2)
-------- -------- --------
1995 $1,510.1 $ 83.4 $ 33.5
======== ======== ========
</TABLE>
Unit volumes during 1995 increased 20 percent to 49,953 units in the Americas,
37 percent to 16,701 units in Europe and 54 percent to 2,859 units in
Asia-Pacific when compared with 1994. The increased volumes resulted from growth
in both market size and market share. The price increases announced in mid-1994
favorably impacted pricing during all of 1995, while the price increases
announced in the spring of 1995 reached their full impact in the fourth quarter.
These price increases were enacted to offset the raw material cost increases and
currency impacts discussed below. The unfavorable sales mix resulted from a
shift to certain lower-margin markets in Europe and lower-margin products in
both the Americas and Europe. The strong markets in both the Americas and
Europe, along with price increases in the Americas, resulted in improved results
from sales of service parts.
The favorable impact from currency on revenues was due to the strength of
European currencies relative to the dollar. This favorable impact was offset by
the strength of the yen relative to the dollar, resulting in an unfavorable
impact on operating profit, particularly in the first nine months of 1995. The
strong yen increased the cost of purchases sourced from Japan. During 1995, NMHG
acquired DECA S.r.l., a manufacturer of European warehouse equipment located in
Italy. DECA's contribution to 1995 operating results is shown separately in the
above table.
Increased raw materials prices and manufacturing inefficiencies caused by vendor
parts shortages, the training of new employees and capacity constraints resulted
in higher manufacturing costs in 1995. Increases in new product introduction and
marketing programs, administrative costs and service parts distribution costs
resulted in higher other operating expenses.
29
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.--Continued
FINANCIAL REVIEW--Continued
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Interest expense $ (25.0) $ (25.9) $ (30.8)
Other-net (1.5) .7 2.0
------- ------- -------
$ (26.5) $ (25.2) $ (28.8)
======= ======= =======
Effective tax rate 42.5% 36.8% 47.7%
</TABLE>
The debt restructurings carried out in 1994 through 1995 and equity infusions in
1994 reduced the level of high-cost debt. This resulted in lower overall
effective interest rates that reduced interest expense in 1996 and 1995 compared
with 1994.
Other-net consists primarily of equity in the earnings of Sumitomo-NACCO
("S-N"), a 50 percent-owned joint venture, certain bank service fees and gains
and losses on the sale of assets. In 1996, other-net included income of $1.5
million from S-N, compared with income of $2.2 million in 1995 and $0.5 million
in 1994. The improved results at S-N in 1996 and 1995 as compared to 1994 were
due to increasing sales volumes to NMHG and continuing manufacturing cost
reductions. In 1994, other-net also included $3.2 million of employment grant
income related to additional hiring at the Craigavon, Northern Ireland,
facility.
In 1995, NMHG reached agreements with various tax authorities resulting in
non-recurring tax benefits which lowered the effective tax rate.
EXTRAORDINARY CHARGES
The extraordinary charges recognized in 1995 and 1994 relate to the write-off of
premiums and unamortized financing fees. The 1995 extraordinary charge includes
a $1.3 million charge in the first quarter for unamortized financing fees when
NMHG's former revolving credit facility and senior term loan were replaced by a
new long-term revolving credit facility. The retirement of $78.5 million and
$70.0 million face-value Hyster-Yale 12 3/8% debentures in 1995 and 1994,
respectively, resulted in charges of $2.1 million in the third quarter of 1995
and $3.2 million in 1994 due to the write-off of premiums and unamortized
financing fees. These retirements were achieved using internally generated funds
of NMHG and equity infusions from existing stockholders.
30
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.--Continued
BACKLOG
NMHG's backlog of orders at December 31, 1996 was approximately 11,700 forklift
truck units, compared with 21,200 units and 24,600 units at December 31, 1995
and 1994, respectively. This decrease reflects the impact of the decrease in
market size, as discussed above.
1997 OUTLOOK
The forklift truck industry has historically been cyclical, with industry demand
fluctuating with the economic conditions in the various geographic markets in
which the industry's customers operate. Based on external economic forecasts and
recent factory order levels, management expects 1997 demand to decline in North
America, while other world markets are expected to remain relatively stable. On
a worldwide basis, the company anticipates an overall decline in demand for lift
trucks. Consequently, NMHG anticipates a decrease in unit volume in 1997 as
compared to 1996. Furthermore, the North American market decline may create
pricing pressures and reduced plant utilization which could result in lower
profitability.
In 1997, NMHG will continue to strive for increased market share by focusing on
certain key markets in Europe and Asia-Pacific. To moderate the effect from
added pressure on margins that may result from a market decline, NMHG plans to
focus on programs designed to enhance cost efficiency. One such program is
Demand Flow Technology, which focuses on improving the manufacturing process.
See discussion under the heading "CAUTIONARY STATEMENTS."
LIQUIDITY AND CAPITAL RESOURCES
NMHG had available $120.0 million of its $350.0 million revolving credit
facility ("NMHG Facility") at December 31, 1996. The company entered into the
NMHG Facility in 1995, to replace its former bank agreement and to refinance the
majority of its previously held long-term debt. The expiration date of the NMHG
Facility (which was extended to June 2001 during 1996) 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 has separate facilities totaling $35.7 million, of which $27.9
million was available at December 31, 1996. The company believes it can meet its
current and long-term commitments and operating needs from operating cash flow
and funds available under credit agreements.
The company has agreements which allow for the sale, without recourse, of
undivided interests in certain revolving pools of its trade accounts receivable.
The maximum allowable amount of receivables to be sold was $75.6 million at
December 31, 1996. As of December 31, 1996, $56.3 million of NMHG's trade
receivables were sold and reflected as a reduction of receivables, net in the
consolidated balance sheet.
Expenditures for property, plant and equipment were $42.3 million in 1996 and
$39.4 million in 1995, and are anticipated to be approximately $35.0 million in
1997. Planned expenditures relate to investments in manufacturing facilities,
worldwide information systems and tooling for new products. Capital for these
expenditures has been and is expected to be provided primarily by internally
generated funds and short-term borrowings.
31
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
HAMILTON BEACH-PROCTOR-SILEX, INC.
HB-PS, 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.
On October 18, 1996, NACCO acquired the remaining 20 percent minority ownership
interest in HB-PS for $33.6 million. As a result, NACCO now owns 100 percent of
HB-PS, which was formed in 1990 when Proctor-Silex, Inc., which had been wholly
owned by NACCO, was combined with Hamilton Beach Inc., which had been wholly
owned by an Irish company. The 1996 acquisition of the minority interest was
financed using borrowings under HB-PS's existing revolving credit facility,
which was amended to provide borrowings up to $160.0 million. It was accounted
for as a purchase. As such, the applicable goodwill was recognized and will be
amortized over the remaining life of the goodwill acquired upon the formation of
HB-PS.
FINANCIAL REVIEW
The results of operations for HB-PS were as follows for the year ended December
31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues $ 395.1 $ 381.4 $ 377.5
Operating profit $ 24.3 $ 25.0 $ 25.3
Operating profit excluding
goodwill amortization $ 28.1 $ 27.8 $ 28.1
Net income $ 10.7 $ 11.8 $ 10.2
1996 COMPARED WITH 1995
</TABLE>
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1996 compared with 1995:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1995 $381.4 $ 25.0 $ 11.8
Increase (decrease) in 1996 from:
Unit volume and sales mix 23.3 11.1 7.2
Average sales price (9.6) (9.6) (6.3)
Manufacturing cost -- 5.1 3.3
Other operating expense -- (7.3) (4.7)
Other income and expense -- -- .7
Difference between effective and
statutory tax rates -- -- (1.3)
------ ------ ------
1996 $395.1 $ 24.3 $ 10.7
====== ====== ======
</TABLE>
32
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
HAMILTON BEACH-PROCTOR-SILEX, INC.--Continued
FINANCIAL REVIEW--Continued
Unit volume and sales mix favorably impacted results due to a shift in the
"better" and "best" categories from 46 percent of sales volume in 1995 to 49
percent of sales volume in 1996. Contributing to the favorable results were
increased sales of blenders, coffeemakers, food processors and sandwich makers
offset by reduced sales of toasters, irons and toaster ovens. In addition, unit
volume was favorably impacted as a result of an increase in overall market
share. The competitive pricing environment, due primarily to low-cost Chinese
imports, continues to unfavorably affect operating results. Favorable materials
pricing somewhat offset by higher overhead costs contributed to the reduction in
manufacturing costs. The reduction in materials pricing includes the favorable
effect of the 1995 acquisition of Plasticos Sotec de Mexico, S.A. de C.V.
("Sotec"), which supplies plastic parts to certain of HBPS's Mexican operations.
Other operating expenses increased over 1995 due to additional marketing
expenses relating to a national advertising campaign and additional amortization
related to the 1995 acquisition of Sotec.
1995 COMPARED WITH 1994
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1994 $377.5 $ 25.3 $ 10.2
Increase (decrease) in 1995 from:
Unit volume and sales mix 6.4 5.1 3.3
Average sales price (2.5) (2.5) (1.6)
Manufacturing cost -- (.2) (.1)
Other operating expense -- (2.7) (1.8)
Other income and expense -- -- (.1)
Difference between effective and
statutory tax rates -- -- 1.9
------ ------ ------
1995 $381.4 $ 25.0 $ 11.8
====== ====== ======
</TABLE>
During 1995, the size of the domestic small electric appliance market declined
approximately 4 percent. Nevertheless, HB-PS increased its market share from
27.8 percent in 1994 to 29.9 percent in 1995. Increased sales of can openers,
irons, roaster ovens and coffeemakers, slightly offset by reduced sales of
toasters, toaster ovens and blenders, resulted in overall higher volume. In
1995, approximately 46 percent of HB-PS's total sales volume was in the
"better" and "best" product categories, compared with 43 percent in 1994. This
favorable shift in sales mix resulted in improved margins on the incremental
volumes in 1995. Reduced pricing on domestic products in the "better" and
"best" categories was the primary cause of the unfavorable price variance.
Increased selling and marketing costs as well as administrative costs caused
the unfavorable impact from other operating expenses.
33
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
HAMILTON BEACH - PROCTOR-SILEX, INC.--Continued
FINANCIAL REVIEW--Continued
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Interest expense $ (6.6) $ (7.2) $ (7.5)
Other-net (.3) (.8) (.3)
------- ------- -------
$ (6.9) $ (8.0) $ (7.8)
======= ======= =======
Effective tax rate 38.5% 31.0% 41.7%
</TABLE>
Interest expense decreased in 1996 compared with 1995 and 1994 due to lower
average borrowings and interest rates during 1996. The reduction in HB-PS's tax
rate in 1995 is primarily due to the utilization of foreign tax credits
resulting from the repatriation of foreign earnings previously taxed at a rate
in excess of the U.S. statutory tax rate.
1997 OUTLOOK
HB-PS expects 1997 to remain highly competitive with the overall industry growth
projected to be less than 1%. However, planned introductions of new products in
several categories should allow HB-PS to continue its market share growth.
Growth is also expected from the significant emphasis being placed on HB-PS's
commercial and international business units. In 1997, HB-PS plans to start up a
new manufacturing facility in Saltillo, Mexico, which should improve HB-PS's
cost position. HB-PS's national advertising program that began in 1996 is
expected to continue in 1997, with continued emphasis on the Hamilton Beach
brand name.
See discussion under the heading "CAUTIONARY STATEMENTS."
LIQUIDITY AND CAPITAL RESOURCES
HB-PS's credit agreement provides for a revolving credit facility ("HB-PS
Facility") that permits advances up to $160.0 million. At December 31, 1996,
HB-PS had $72.1 million available under the HB-PS Facility. The expiration date
of the HB-PS Facility (which was extended to May 1999 during 1996) may be
extended, on an annual basis, for one additional year upon the mutual consent of
HB-PS and the bank group. The HB-PS Facility provides lower interest rates if
HB-PS achieves a certain interest coverage ratio and allows for interest rates
quoted under a competitive bid option. At December 31, 1996, HB-PS also had
$23.9 million available under separate facilities.
Expenditures for property, plant and equipment were $15.1 million in 1996, $9.7
million in 1995 and are anticipated to be approximately $19.0 million in 1997.
These planned expenditures will be used primarily for the construction of a new
facility in Mexico, to improve manufacturing efficiency and to acquire tooling
for new and existing products. Capital for these expenditures has been and is
expected to be provided primarily by internally generated funds and bank
borrowings.
34
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
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
The results of operations for KCI were as follows for the year ended December
31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Number of stores 144 134 119
Revenues $ 74.9 $ 69.6 $ 63.9
Operating profit $ 3.1 $ 3.3 $ 5.4
Net income $ 1.5 $ 1.6 $ 3.1
</TABLE>
1996 COMPARED WITH 1995
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1996 compared with 1995:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1995 $ 69.6 $ 3.3 $ 1.6
Increase (decrease) in 1996 from:
Stores opened in 1996 2.6 .1 --
Stores opened in 1995 3.1 .4 .2
Comparable stores (.4) -- --
Other -- (.7) (.3)
-------- -------- -------
1996 $ 74.9 $ 3.1 $ 1.5
======== ======== =======
</TABLE>
KCI had a net increase in new stores of 10, or approximately 8 percent, in 1996.
The increased number of stores, along with a full year's operation of the 15
stores opened in 1995, resulted in increased revenues in 1996 compared with
1995. The results at comparable stores and the profitability at new stores were
adversely affected by the continuing difficult factory outlet retail environment
evidenced by lower levels of customer traffic in factory outlet malls. The
unfavorable other variance is due to higher payroll and store rent costs.
35
<PAGE> 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE KITCHEN COLLECTION--Continued
FINANCIAL REVIEW--Continued
1995 COMPARED WITH 1994
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
<S> <C> <C> <C>
1994 $ 63.9 $ 5.4 $ 3.1
Increase (decrease) in 1995 from:
Stores opened in 1995 4.6 .2 .1
Stores opened in 1994 2.9 (.2) (.1)
Comparable stores (1.8) (.9) (.5)
Other -- (1.2) (1.0)
-------- -------- -------
1995 $ 69.6 $ 3.3 $ 1.6
======== ======== =======
</TABLE>
KCI had a net increase in new stores of 15, or approximately 13 percent, in
1995. The increased number of stores, along with a full year's operation of the
15 stores opened in 1994, resulted in increased revenues in 1995 compared with
1994. A difficult retailing environment in 1995 caused a decrease in customer
traffic, resulting in reduced sales at comparable stores. In addition, margins
were negatively impacted by this environment, along with an overall shift to
lower margin products. The unfavorable variance in other was caused primarily by
increased payroll related costs and store rent escalations.
OTHER INCOME, EXPENSE AND INCOME TAXES
Interest expense was $0.5 million, $0.5 million and $0.3 million in 1996, 1995
and 1994, respectively. KCI's effective tax rate was 42.7 percent, 41.9 percent
and 40.0 percent in 1996, 1995 and 1994, respectively.
1997 OUTLOOK
The retail factory outlet environment demands value pricing, a full selection of
merchandise as well as efficient, courteous service. Meeting these demands puts
pressure on earnings, as KCI strives to maintain low costs while providing high
levels of service. Due to high levels of competition and increased employee
costs, KCI does not anticipate 1997's sales growth, if any, to significantly
benefit net income. To address these market conditions, KCI plans to emphasize
more brand name values, offer programs that encourage repeat-customer sales and
consider diversifying beyond the factory outlet malls.
See discussion under the heading "CAUTIONARY STATEMENTS."
LIQUIDITY AND CAPITAL RESOURCES
KCI's credit agreement provides for a $5.0 million revolving credit facility
("KCI Facility"). The KCI Facility has performance-based pricing which provides
for reduced interest rates based on the achievement of certain financial
performance measures. At December 31, 1996, KCI had $5.0 million of its facility
available.
36
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE KITCHEN COLLECTION--Continued
FINANCIAL REVIEW--Continued
LIQUIDITY AND CAPITAL RESOURCES--Continued
Expenditures for property, plant and equipment were $1.1 million in 1996, $1.4
million in 1995 and are anticipated to be approximately $0.7 million in 1997.
These expenditures are primarily for new store openings and improvements to
existing facilities, and are funded by internally generated funds and short-term
borrowings.
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 amounted to $4.1 million during 1996,
$3.4 million during 1995 and are anticipated to be $4.5 million in 1997.
The results of operations at NACCO and Other were as follows for the year ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues $ .3 $ .5 $ .6
Operating loss $ (9.0) $ (8.8) $ (10.0)
Other income (expense), net $ .2 $ .9 $ (.5)
Loss before extraordinary items $ (5.8) $ (4.1) $ (5.2)
Extraordinary gain, net-of-tax -- 32.3 --
------- ------- -------
Net income (loss) $ (5.8) $ 28.2 $ (5.2)
======= ======= =======
</TABLE>
The extraordinary gain in 1995 of $32.3 million, net of $19.8 million in taxes,
relates to a downward revision in the obligation to the United Mine Workers of
America Combined Benefit Fund ("UMWA"). This obligation was recognized by
Bellaire as an extraordinary charge in 1992 to accrue for the estimated costs
associated with the Coal Industry Retiree Health Benefit Act of 1992 ("Coal
Act"). It is the Company's policy to periodically review the estimates and
assumptions upon which various liability reserves are based. As a result of a
review of the assumptions relating to the number of Company and industry covered
beneficiaries ultimately assigned to Bellaire, and the trend of health care
costs, the aggregate estimated costs associated with the Coal Act are expected
to be lower than originally anticipated. Management believes that the liability,
revised to $69.3 million, net of $33.3 million of deferred taxes, in 1995, more
accurately represents the future cost of this obligation.
37
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO AND OTHER--Continued
INTEREST RATE PROTECTION
NMHG, HB-PS, 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. The notional amounts, fixed rates paid and
remaining duration of these swaps for each subsidiary are included in Note 11 to
the consolidated financial statements on page F-17 of this annual report.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations, like those of other companies engaged in
similar businesses, involve the use, disposal and cleanup of substances
regulated under environmental protection laws. The Company's NACoal subsidiary
is affected by the regulations of agencies under which it operates, particularly
the Federal Office of Surface Mining, the United States Environmental Protection
Agency and associated state regulatory authorities. In addition, NACoal is
attentive to any changes which may arise due to proposed legislation concerning
the Clean Air Act Amendments of 1990, reauthorization of the Resource
Conservation and Recovery Act, the Clean Water Act, the Endangered Species Act
and other regulatory actions.
Compliance with these increasingly stringent standards results in higher
expenditures for both capital improvements and operating costs. The Company's
policies stress environmental responsibility and compliance with these
regulations. Based on current information, management does not expect compliance
with these regulations to have a material adverse effect on its financial
condition or results of operations.
NACCO has not yet adopted AICPA Statement of Position 96-1 ("SOP 96-1"),
"Environmental Remediation Liabilities." SOP 96-1 provides guidance on the
recognition and measurement of environmental remediation liabilities incurred as
a result of threatened litigation or actual assessment. The Company does not
expect the adoption of this statement, which is required in fiscal 1997, to have
a material impact on its financial position or results of operations.
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 of HB-PS and KCI allow for the payment of dividends to NACCO
under certain circumstances. The revised credit agreement, entered into in 1995
by 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, HB-PS 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.
38
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO AND OTHER--Continued
EFFECTS OF FOREIGN CURRENCY AND INFLATION
NMHG and HB-PS 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 discussed above. At HB-PS, foreign currency effects had an immaterial impact
on operating results year over year.
NMHG and HB-PS 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 company 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.
The Company believes that inflation has not materially affected its results of
operations in 1996 and does not expect inflation to be a significant item in
1997.
CAUTIONARY STATEMENTS
The statements contained in "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and elsewhere throughout this Form 10-K 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 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:
NACOAL: (1) weather conditions or other events that would reduce the level of
customers' fuel requirements, (2) transitional issues in assuming the management
of the San Miguel Lignite project and (3) the uncertainty of receiving incentive
payments under certain of its mining contracts comparable to the level of
payments received in 1996.
NMHG: (1) changes in sales price and demand for forklift trucks and related
service parts, (2) delays in delivery or increased pricing of raw materials or
sourced products and labor, scheduling and transportation difficulties, (3)
product liability or other litigation, warranty claims or other returns of
products, (4) exchange rate fluctuations, changes in the foreign import tariffs
or monetary policies and other changes in the regulatory climate in the foreign
countries in which NMHG operates and/or sells products.
HB-PS: (1) delays or increased costs in the start-up of the operations in
Saltillo, Mexico, (2) bankruptcy of or loss of major retail customers, (3)
product liability and other litigation, (4) changes in the sales price, product
mix or levels of consumer purchasing of small electric appliances and (5)
exchange rate fluctuations, changes in foreign import tariffs or monetary
policies and other changes in the regulatory climate in the foreign countries in
which HB-PS operates and/or sells products.
39
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS FO
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO AND OTHER--Continued
KCI: (1) weather conditions which would reduce the number of customers visiting
the stores, (2) changes in the sales price, product mix or level of consumer
purchasing of kitchenware and small electric appliances and (3) delays in
delivery or increased pricing of sourced products.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth at pages F-1 through F-34
of the Financial Statements and Supplementary Data contained in Part IV hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is set forth in
the 1997 Proxy Statement under the heading "Business to be Transacted -- 1.
Election of Directors," and "Section 16(a) Beneficial Ownership Reporting
Compliance," which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included as Item
4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth in the
1997 Proxy Statement under the headings "Business to be Transacted -- 1.
Election of Directors -- "Compensation of Executive Officers," which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial
owners and management is set forth in the 1997 Proxy Statement under the heading
"Business to be Transacted -- 1. Election of Directors -- Beneficial Ownership
of Class A Common and Class B Common," which information is incorporated herein
by reference.
40
<PAGE> 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related
transactions is set forth in the 1997 Proxy Statement under the heading
"Business to be Transacted -- 1. Election of Directors -- Compensation Committee
Interlocks and Insider Participation," which information is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to Item 14(a)(1) and (2) is set forth
beginning at page F-1 of this Annual Report on Form 10-K included in Exhibit 13.
(a) (3) Listing of Exhibits -- See the exhibit index beginning at page
X-1 of this Annual Report on Form 10-K.
(b) The Company has not filed any current reports on Form 8-K during
the fourth quarter of 1996.
(c) The response to Item 14(c) is set forth beginning at page X-1 of
this Annual Report on Form 10-K.
(d) Financial Statement Schedules -- The response to Item 14(d) is set
forth beginning at page F-30 of this Annual Report on Form 10-K included in
Exhibit 13.
41
<PAGE> 42
SIGNATURES
----------
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NACCO Industries, Inc.
By: /s/ Kenneth C. Schilling
-------------------------------
Kenneth C. Schilling
Controller
(principal financial and
accounting officer)
March 27, 1997
42
<PAGE> 43
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<S> <C> <C>
/s/Alfred M. Rankin, Jr. Chairman, President and March 27, 1997
- --------------------------- Chief Executive Officer
Alfred M. Rankin, Jr. (principal executive
officer), Director
/s/Kenneth C. Schilling Controller (principal March 27, 1997
- --------------------------- financial and accounting
Kenneth C. Schilling officer)
* Owsley Brown II Director March 27, 1997
- --------------------------
Owsley Brown II
* John J. Dwyer Director March 27, 1997
- --------------------------
John J. Dwyer
* Robert M. Gates Director March 27, 1997
- --------------------------
Robert M. Gates
* Leon J. Hendrix, Jr. Director March 27, 1997
- --------------------------
Leon J. Hendrix, Jr.
* Dennis W. LaBarre Director March 27, 1997
- --------------------------
Dennis W. LaBarre
* Ian M. Ross Director March 27, 1997
- --------------------------
Ian M. Ross
* John C. Sawhill Director March 27, 1997
- --------------------------
John C. Sawhill
* Britton T. Taplin Director March 27, 1997
- --------------------------
Britton T. Taplin
* David F. Taplin Director March 27, 1997
- --------------------------
David F. Taplin
*Kenneth C. Schilling, by signing his name hereto, does hereby sign
this Annual Report on Form 10-K on behalf of each of the above named and
designated officers and directors of the Company pursuant to a Power of Attorney
executed by such persons and filed with the Securities and Exchange Commission.
/s/ Kenneth C. Schilling
- ------------------------
Kenneth C. Schilling, Attorney-in-Fact March 27, 1997
</TABLE>
43
<PAGE> 44
EXHIBIT INDEX
(3) Articles of Incorporation and By-laws.
(i) Restated Certificate of Incorporation of the Company is
incorporated by reference to Exhibit 3(i) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172.
(ii) Restated By-laws of the Company are incorporated by reference to
Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Commission File Number 1-9172.
(4) Instruments defining the rights of security holders, including indentures.
(i) The Company by this filing agrees, upon request, to file with the
Securities and Exchange Commission the instruments defining the rights of
holders of Long-Term debt of the Company and its subsidiaries where the total
amount of securities authorized thereunder does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis.
(ii) The Mortgage and Security Agreement, dated April 8, 1976, between
The Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and
United Power Association (collectively as Mortgagee) is incorporated by
reference to Exhibit 4(ii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, Commission File Number 1-9172.
(iii) Intentionally left blank.
(iv) Stockholders' Agreement, dated as of March 15, 1990, among the
signatories thereto, the Company and Ameritrust Company National Association, as
depository, is incorporated herein by reference to Exhibit 2 to the Schedule 13D
filed on March 29, 1990 with respect to the Class B Common Stock, par value
$1.00 per share, of NACCO Industries, Inc.
(v) Amendment to Stockholders' Agreement, dated as of April 6, 1990,
among the signatories thereto, the Company and Ameritrust Company National
Association, as depository, is incorporated herein by reference to Exhibit 4 to
the Amendment No. 1 of the Schedule 13D filed on April 11, 1990 with respect to
the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(vi) Amendment to Stockholders' Agreement, dated as of April 6, 1990,
among the signatories thereto, the Company and Ameritrust Company National
Association, as depository, is incorporated herein by reference to Exhibit 5 to
the Amendment No. 1 of the Schedule 13D filed on April 11, 1990 with respect to
the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(vii) Amendment to Stockholders' Agreement, dated as of November 17,
1990, among the signatories thereto, the Company and Ameritrust Company National
Association, as depository, is incorporated herein by reference to the Amendment
No. 2 of the Schedule 13D filed on March 18, 1991 with respect to the Class B
Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(viii) Amendment to Stockholders' Agreement, dated November 14, 1996,
adding CTR Family Associates, L.P. as a Participating Stockholder, among the
signatures thereto, the Company and Key Bank, N.A. (successor to Ameritrust
Company National Association), as depository, is incorporated herein by
reference to Amendment No. 3 of the Schedule 13D filed on November 26, 1996,
with respect to the Class B Common Stock, par value $1.00 per share, of NACCO
Industries, Inc.
(ix) Amendment to Stockholders' Agreement, dated as of November 14,
1996, adding Rankin Management, Inc. as a Participating Stockholder, among the
signatories thereto, the Company and Key Bank, N.A. (successor to Ameritrust
Company National Association), as depository, is incorporated herein by
reference to Amendment
X-1
<PAGE> 45
No. 3 of the Schedule 13D filed on November 26, 1996, with respect to the Class
B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(10) Material contracts.
*(i) The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and
restated as of July 17, 1986) is incorporated herein by reference to Exhibit
10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, Commission File Number 1-9172.
*(ii) Form of Incentive Stock Option Agreement for incentive stock
options granted before 1987 under The NACCO Industries, Inc. 1975 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(ii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(iii) Form of Incentive Stock Option Agreement for incentive stock
options granted after 1986 under The NACCO Industries, Inc. 1975 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(iii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(iv) Form of Non-Qualified Stock Option Agreement under The NACCO
Industries, Inc., 1975 Stock Option Plan (as amended and restated as of July 17,
1986) is incorporated herein by reference to Exhibit 10(iv) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1991,
Commission File Number 1-9172.
*(v) The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and
restated as of July 17, 1986) is incorporated herein by reference to Exhibit
10(v) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, Commission File Number 1-9172.
*(vi) Form of Non-Qualified Stock Option Agreement under The NACCO
Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17,
1986) is incorporated herein by reference to Exhibit 10(vi) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1991,
Commission File Number 1-9172.
*(vii) Form of Incentive Stock Option Agreement for incentive stock
options granted before 1987 under The NACCO Industries, Inc. 1981 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(vii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(viii) Form of Incentive Stock Option Agreement for incentive stock
options granted after 1986 under The NACCO Industries, Inc. 1981 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(viii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(ix) The Retirement Benefit Plan for Alfred M. Rankin, Jr., effective
as of January 1, 1994 is incorporated herein by reference to Exhibit 10 (ix) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994. Commission File Number 1-9172.
*(x) Amendment No. 1 to the Retirement Benefit Plan for Alfred M.
Rankin, Jr., dated as of March 15, 1995, is incorporated herein by reference to
Exhibit 10 (x) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994. Commission File Number 1-9172.
X-2
<PAGE> 46
*(xi) Instrument of Adoption and Merger for NACCO Industries, Inc. for
the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and
Restated Effective October 1, 1994) dated December 30, 1994, is incorporated
herein by reference to Exhibit 10(xxii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994. Commission File Number 1-9172.
*(xii) Instrument of Withdrawal and Transfer of Liabilities from The
North American Coal Corporation Deferred Compensation Plan for Management
Employees, effective as of December 31, 1994, is incorporated herein by
reference to Exhibit 10(xxiii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994. Commission File Number 1-9172.
*(xiii) NACCO Industries, Inc. Annual Incentive Compensation Plan,
effective as of January 1, 1996, is incorporated herein by reference to as
Exhibit 10(xiii) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 Commission File Number 1-9172.
*(xiv) NACCO Industries, Inc. Supplemental Annual Incentive
Compensation Plan, effective as of January 1, 1996, is incorporated herein by
reference to Exhibit 10(xiv) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 Commission File Number 1-9172..
*(xv) NACCO Industries, Inc. Executive Long-Term Incentive Compensation
Plan, amended and restated as of January 1, 1996, is attached incorporated
herein by reference to Exhibit 10(xv) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996. Commission File Number 1-9172.
(xvi) Assumption Agreement, made as of December 20, 1991, between the
Company and Citicorp North America, Inc., as agent is incorporated herein by
reference to Exhibit 10(xciii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991, Commission File Number 1-9172.
(xvii) intentionally left blank.
*(xviii) NACCO Industries, Inc. Non-Employee Directors' Equity
Compensation Plan, effective January 1, 1992, is incorporated by reference to
Exhibit 10(cxi) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Commission File Number 1-9172.
*(xix) Amendment No. 2 to the Retirement Benefit Plan for Alfred M.
Rankin, Jr. (as amended and restated effective January 1, 1994) dated June 30,
1995 is incorporated herein by reference to Exhibit 10 (clxxi) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. Commission
File Number 1-9172.
*(xx) NACCO Industries, Inc. Annual Incentive Compensation Plan,
effective as of January 1, 1997, is attached hereto as Exhibit 10(xx).
*(xxi) NACCO Industries, Inc. Supplemental Annual Incentive
Compensation Plan Guidelines, effective as of January 1, 1997, is attached
hereto as Exhibit 10(xxi).
(xxii) - (xxx) Intentionally left blank.
*(xxxi) The North American Coal Annual Incentive Plan, effective as of
January 1, 1996, is incorporated herein by reference to Exhibit 10(xxxi) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
Commission File Number 1-9172.
*(xxxii) Instrument of Merger, Amendment and Transfer of Sponsorship of
Benefit Plans, effective as of August 31, 1994, is incorporated herein by
reference to Exhibit 10(xxviii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994. Commission File Number 1-9172.
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<PAGE> 47
(xxxiii) Credit Agreement, dated as of September 27, 1991, among the
North American Coal Corporation, Citibank, N.A., Ameritrust Company National
Association and Morgan Guaranty Trust Company of New York, as agent is
incorporated herein by reference to Exhibit 10(xcii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File
Number 1-9172.
(xxxiv) Subordination Agreement, dated September 27, 1991, among The
North American Coal Corporation, the Company and Morgan Guaranty Trust Company
of New York, as agent, is incorporated herein by reference to Exhibit 10(xciv)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1991, Commission File Number 1-9172.
*(xxxv) The North American Coal Corporation Value Appreciation Plan, as
amended on March 11, 1992 is incorporated herein by reference to Exhibit
10(xcviii) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, Commission File Number 1-9172.
*(xxxvi) Amendment No. 1 to The North American Coal Corporation Value
Appreciation Plan, dated as of December 14, 1994, is incorporated herein by
reference to Exhibit 10(xcix) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994. Commission File Number 1-9172.
(xxxvii) Intentionally left blank.
(xxxviii) Amendment No. 1 to the Credit Agreement dated as of July 28,
1993 among The North American Coal Corporation and the banks listed on the
signatory pages and Morgan Trust Company of New York, as Agent is incorporated
herein by reference to Exhibit 10(cxxxxiii) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, Commission File Number
1-9172.
(xxxix) Amendment No. 2 to the Credit Agreement dated as of September ,
1995 among The North American Coal Corporation and the banks listed on the
signatory pages and Morgan Trust Company of New York, as Agent is incorporated
herein by reference to Exhibit 10(xxxix) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995. Commission File Number 1-9172.
*(xl) The North American Coal Corporation Supplemental Retirement
Benefit Plan as amended and restated effective September 1, 1994 is incorporated
by reference to Exhibit 10 (clxv) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994, Commission File Number 1- 9172.
*(xli) The North American Coal Corporation Deferred Compensation Plan
for Management Employees (as amended and restated effective January 1, 1996), is
incorporated herein by reference to Exhibit 10(xli) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 Commission
File Number 1-9172.
*(xlii) Amendment No. 1, dated December 1, 1995, to The North American
Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated
effective September 1, 1994), effective as of December 31, 1994, is incorporated
herein by reference to Exhibit 10 (xlii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995. Commission file Number 1-9172.
(xliii) Amendment No. 3 to the Credit Agreement dated as of September
16, 1996 among North American Coal Corporation and the banks listed on the
signatory pages and Morgan Trust Company of New York, as Agent, is attached
hereto as Exhibit 10 (xliii).
*(xliv) Amendment No. 1, dated December 9, 1996, to The North American
Coal Corporation Deferred Compensation Plan for Management Employees (as amended
and restated effective January 1, 1996) is attached hereto as Exhibit 10(xliv).
*(xlv) The North American Coal Annual Incentive Plan, effective as of
January 1, 1997, is attached hereto as Exhibit 10(xlv).
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<PAGE> 48
(xlvi) Waiver Agreement dated November 15, 1997 by and among Morgan
Guaranty Trust Company, Citibank, N.A., Wells Fargo (Texas), N.A., Key Bank
National Association and The North American Coal Corporation.
(xlvii) - (liii) Intentionally left blank.
*(liv) Amendment No. 1 to the Hyster-Yale Long-Term Incentive
Compensation Plan, effective as of January 1, 1994, is incorporated herein by
reference to Exhibit 10(lxxxviii) to the Hyster-Yale Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, Commission File Number 33-28812.
(lv) Agreement and Plan of Merger, dated as of April 7, 1989, among
NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition I, Esco
Corporation, Hyster Company and Newesco, is incorporated herein by reference to
Exhibit 2.1 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on
Form S-1 filed May 17, 1989 (Registration Statement Number 33-28812).
(lvi) Agreement and Plan of Merger, dated as of April 7, 1989, among
NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition II,
Hyster Company and Newesco, is incorporated herein by reference to Exhibit 2.2
to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1
filed May 17, 1989 (Registration Statement Number 33-28812).
(lvii) Amendment to the Third Amended and Restated Operating Agreement,
dated as of January 31, 1990, between Hyster Company and AT&T Commercial Finance
Corporation is incorporated herein by reference to Exhibit 10(xlvii) to the
Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 33-28812.
*(lviii) NACCO Materials Handling Group, Inc. Annual Incentive
Compensation Plan for 1996 is incorporated herein by reference to Exhibit
10(lviii) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. Commission File Number 1-9172.
*(lix) Hyster-Yale Materials Handling, Inc. Long-Term Incentive
Compensation Plan, dated as of January 1, 1990, is incorporated herein by
reference to Exhibit 10(lxxxix) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, Commission File Number 1-9172.
(lx) Amendment to the Third Amended and Restated Operating Agreement,
dated as of November 7, 1991, between Hyster Company and AT&T Commercial Finance
Corporation is incorporated herein by reference to Exhibit 10(1) to the
Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31,
1991, Commission File Number 33-28812.
(lxi) Agreement and Plan of Merger dated as of December 20, 1993,
between Hyster Company, an Oregon corporation, and Hyster Company, a Delaware
corporation, is incorporated herein by reference to Exhibit 10(lxxviii) to
Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31,
1993, Commission File Number 33-28812.
*(lxii) Agreement and Plan of Merger dated as of December 20, 1993,
between Yale Materials Handling Corporation, a Delaware corporation, Hyster
Company, a Delaware corporation, and Hyster-Yale Materials Handling, Inc., a
Delaware corporation, is incorporated herein by reference to Exhibit 10(lxxix)
to Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31,
1993, Commission File Number 33-28812.
*(lxiii) NACCO Materials Handling Group, Inc. Annual Incentive Plan,
effective as of January 1, 1997, is attached hereto as Exhibit 10(lxiii).
(lxiv) Intentionally left blank.
(lxv) Intentionally left blank.
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<PAGE> 49
*(lxvi) Amendment No. 3 to the Hyster-Yale Materials Handling, Inc.
Long-Term Incentive Compensation Plan effective January 1, 1994 is incorporated
herein by reference to Exhibit 10 (lxxxxv) to the Hyster-Yale Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994, Commission File Number
33-28812.
(lxvii) Amendment to the Third Amended and Restated Operating
Agreement, dated as of January 31, 1990, between Hyster Company and PacifiCorp
Credit, Inc. is incorporated herein by reference to Exhibit 10(xlvi) to the
Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 33-28812.
*(lxviii) Amendment No. 2 effective as of December 31, 1993 to the
Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan is
incorporated herein by reference to Exhibit 10 (lxxxxiii) of the Hyster-Yale
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
Commission File Number 33-28812.
(lxix) Amendment dated as of January 1, 1994 to the Third Amendment and
Restated Operating Agreement dated as of November 7, 1991, between NACCO
Materials Handling Group and AT&T Commercial Finance Corporation is incorporated
herein by reference to Exhibit 10(c) to the Hyster-Yale Quarterly Report on Form
10-Q for the quarter ended September 30, 1994, Commission File Number 330-28812.
*(lxx) The Yale Materials Handling Corporation Deferred Incentive
Compensation Plan (also known as The Yale Materials Handling Corporation
Short-Term Incentive Compensation Deferral Plan), dated March 1, 1984, is
incorporated herein by reference to Exhibit 10(lxxi) to the Hyster-Yale Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File
Number 33-28812.
(lxxi) Intentionally left blank.
(lxxii) Credit Agreement between NACCO Materials Handling Group, Inc.
and Morgan Guaranty Trust company of New York, as Agent, and the other banks
listed thereto, dated February 28, 1995, is incorporated by reference herein to
Exhibit 10 (lxxxvii) of the Hyster-Yale Annual Report on Form 10-K for the
fiscal year ended December 31, 1994. Commission File number 33-28812.
(lxxiii) Letter Agreement between Hyster-Yale Materials Handling Group,
Inc., NACCO Materials Handling Group, Inc. and Citicorp North America, Inc. as
Agent dated February 28, 1995 is incorporated by reference herein to Exhibit 10
(lxxxviii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year
ended December 31, 1994. Commission File Number 33- 28812.
*(lxxiv) The NACCO Materials Handling Group, Inc. Unfunded Benefit Plan
(as amended and restated effective as of January 1, 1996) is incorporated by
reference as Exhibit 10 (lxxiv) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995. Commission File Number 1-9172.
(lxxv) 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 on the signature page thereto and Morgan
Guaranty Trust Company of New York, as Agent is incorporated by reference to
Exhibit 10 (lxxv) to the Company's Quarterly Statement on Form 10-Q for the
quarter ended June 30, 1996. Commission File Number 1-9172.
(lxxvi) Amendment to Credit Agreement dated as of December 16, 1996
NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-Arrangers
and Co-Agents listed on the signature page thereto and Morgan Guaranty Trust
Company of New York, as Agent is attached hereto as Exhibit 10 (lxxxvi).
(lxxvii) - (lxxxv) Intentionally left blank.
(lxxxvi) Agreement of Merger, dated as of January 20, 1988, among NACCO
Industries, Inc., Housewares Holding Company, WE-PS Merger, Inc. and
WearEver-ProctorSilex, Inc., is incorporated herein by reference to
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<PAGE> 50
pages 8 through 97 of Exhibit 2 to the Company's Current Report on Form 8-K,
dated February 1, 1988, Commission File Number 1-9172.
(lxxxvii) Shareholders Agreement, dated January 20, 1988, among NACCO
Industries, Inc. and the shareholders named therein is incorporated herein by
reference to pages 98 through 108 of Exhibit 2 to the Company's Current Report
on Form 8-K, dated February 1, 1988, Commission File Number 1-9172.
*(lxxxviii) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit
Plan (As Amended and Restated Effective as of January 1, 1996), is incorporated
herein by reference Exhibit 10(lxxxviii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996. Commission File Number 1-9172.
*(lxxxix) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan
(As Amended and Restated Effective January 1, 1997) is attached hereto as
Exhibit 10(lxxxix).
(xc) - (xci) Intentionally left blank.
(xcii) Pledge Agreement re: 66% Pledge of PSC Stock, dated as of
October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cx) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xciii) Pledge Agreement re: 66% Pledge of PSM Stock, dated as of
October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cxi) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xciv) Pledge Agreement re: 34% pledge of PSC Stock, dated as of
October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cxii) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xcv) Pledge Agreement re: 33.2% Pledge of PSM Stock, dated as of
October 11, 1990, between Hamilton Beach Proctor/Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xcvi) Pledge Agreement, dated as of October 11, 1990, between
Housewares Holding Company and The Chase Manhattan Bank (National Association)
is incorporated herein by reference to Exhibit 10(cxiv) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File
Number 1-9172.
(xcvii) Pledge Agreement, dated as of October 11, 1990, between HB-PS
Holding Company, Inc. and The Chase Manhattan Bank (National Association) is
incorporated herein by reference to Exhibit 10(cxv) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File
Number 1-9172.
(xcviii) Security Agreement, dated as of October 11, 1990, between
Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxvi) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission File Number 1-9172.
(xcix) Collateral Assignment of Patents and Trademarks and Security
Agreement, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex
and The Chase Manhattan Bank (National Association), as the
X-7
<PAGE> 51
United States agent, is incorporated herein by reference to Exhibit 10(cxvii) to
the Company s Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 1-9172.
(c) NACCO Supplemental Agreement, dated as of October 11, 1990, between
NACCO and The Chase Manhattan Bank (National Association), as the United States
agent, is incorporated herein by reference to Exhibit 10(cxviii) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 1-9172.
(ci) Housewares Supplemental Agreement, dated as of October 11, 1990,
between Housewares Holding Company and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxix) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission File Number 1-9172.
(cii) Holdings Supplemental Agreement, dated as of October 11, 1990,
between HB-PS Holding Company, Inc. and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxx) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission File Number 1-9172.
(ciii) Override Agreement, dated as of October 11, 1990, among the
Company, Housewares Holding Company, Glen Dimplex, Precis [521] Ltd., Glen
Electric, Ltd. and The Chase Manhattan Bank (National Association), as the
United States agent, is incorporated herein by reference to Exhibit 10(cxxi) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 1-9172.
(civ) General Security Agreement, dated as of October 11, 1990, by
Proctor-Silex Canada to and in favor of The Chase Manhattan Bank of Canada, as
the Canadian agent, is incorporated herein by reference to Exhibit 10(cxxii) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 1-9172.
*(cv) The Hamilton Beach/Proctor-Silex, Inc. 1996 Annual Incentive
Compensation Plan is incorporated herein by reference to Exhibit 10(cv) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995. Commission File Number 1-9172.
*(cvi) Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive
Compensation Plan, effective January 1, 1993, is incorporated by reference to
Exhibit 10(cxxiv) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, Commission File Number 1-9172.
(cvii) First Amendment to the Housewares Supplemental Agreement, dated
as of March 1, 1991, between Housewares Holding Company and The Chase Manhattan
Bank (National Association), as the United States agent, is incorporated herein
by reference to Exhibit 10(cxxv) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, Commission File Number 1-9172.
(cviii) First Amendment to the Holdings Supplemental Agreement, dated
as of March 1, 1991, between HB-PS Holding Company and The Chase Manhattan Bank
(National Association), as the United States agent, is incorporated herein by
reference to Exhibit 10(cxxvi) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, Commission File Number 1-9172.
(cvix) Consent and Authorization with reference made to the Credit
Agreement dated October 11, 1990, as amended among Hamilton Beach/Proctor-Silex,
Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., the banks named on
the signatory pages and The Chase Manhattan Bank is incorporated herein by
reference to Exhibit (cxxxvii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, Commission File Number 1-9172.
X-8
<PAGE> 52
(cx) Amended and Restated Credit Agreement, dated as of May 10, 1994
among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc.,
Proctor-Silex S.A. DE C.V., the banks named on the signatory pages and the Chase
Manhattan Bank is incorporated herein by reference to as Exhibit 10 (cxxxviii)
to the NACCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, Commission File Number 1-9172.
(cxi) Confirmation Agreement dated May 10, 1994 among Hamilton
Beach/Proctor-Silex, Inc., Housewares Holding Company, Precis [521] Ltd., HB-PS
Holding Company, Glen Dimplex, Glen Electric, Ltd., the banks named on the
signatory pages, the Chase Manhattan Bank and the Chase Manhattan Bank of Canada
is incorporated herein by reference to Exhibit 10 (cxxix) to the NACCO
Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended on June 30,
1994, Commission File Number 1-9172.
(cxii) First Amendment to the NACCO Supplemental Agreement, dated as of
March 1, 1991, between the Company and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxxi) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission File Number 1-9172.
(cxiii) Waiver Agreement, dated January 16, 1996 among Hamilton
Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de
C.V. the banks named on the signatory pages and Chase Manhattan Bank is
incorporated herein by reference to Exhibit 10 (cxiii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995. Commission File
Number 1-9172.
(cxiv) Amended and Restated Credit Agreement, dated as of April 18,
1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor- Silex, Inc.,
Proctor-Silex S.A. de C.V., the banks named on the signatory pages and The Chase
Manhattan Bank is incorporated herein by reference to Exhibit 10(cxiv) to the
Company's Annual Report on From 10-K for the fiscal year ended December 31,
1995. Commission File Number 1-9172.
(cxv) Amendment No. 1 dated as of March 29, 1996 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, N.A., as U.S. Agent, and The
Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated by reference
herein to Exhibit 10 (xvii) on the Company's quarterly Statement on Form 10-Q
for the quarter ended June 30, 1996. Commission File Number 1-9172.
(cxvi) Amendment No. 2 dated as of October 4, 1996 to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 15, 1995, among Hamilton Beach-Proctor-Silex, Inc.,
Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks
signatory thereto and the Chase Manhattan Bank, N.A., as U.S. Agent, and the
Chase Manhattan Bank of Canada, as Canadian Agent is incorporated herein by
reference to Exhibit (cxviii) to the Company's Quarterly Statement for the
quarter ended September 30, 1996. Commission File Number 1-9172.
*(cxvii) The Hamilton Beach-Proctor-Silex, Inc. 1997 Annual Incentive
Plan is attached hereto as Exhibit 10 (cxvii).
(cxviii) - (cxxviii) Intentionally left blank.
(cxxix) Credit Agreement, effective as of May 31, 1995, by and between
The Kitchen Collection, Inc. and Society National Bank, N.A., is incorporated
herein by reference to Exhibit 10 (cxvi) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995. Commission File Number
1-9172.
(11) Statement re computation of per share earnings. The computation of
earnings per share is attached hereto as Exhibit 11.
(13) Consolidated Financial Statements for NACCO Industries, Inc. and
subsidiaries for the year ended December 31, 1996 and Supplementary Data.
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<PAGE> 53
(21) Subsidiaries. A list of the subsidiaries of the Company is attached
hereto as Exhibit 21.
(23) Consents of experts and counsel.
(i) The consent of Arthur Andersen LLP, independent accountant, is
attached hereto as Exhibit 23(i).
(24) Powers of Attorney
(i) A copy of a power of attorney for Owsley Brown II is attached
hereto as Exhibit 24(i).
(ii) A copy of a power of attorney for John J. Dwyer is attached
hereto as Exhibit 24(ii).
(iii) A copy of a power of attorney for Robert M. Gates is attached as
Exhibit 24(iii).
(iv) A copy of a power of attorney for Leon J. Hendrix, Jr. is
attached hereto as Exhibit 24(iv).
(v) A copy of a power of attorney for Dennis W. LaBarre is attached
hereto as Exhibit 24(v).
(vi) A copy of a power of attorney for Ian M. Ross is attached hereto
as Exhibit 24 (vi).
(vii) A copy of a power of attorney for John C. Sawhill is attached
hereto as Exhibit 24(vii).
(viii) A copy of a power of attorney for Britton T. Taplin is attached
hereto as Exhibit 24 (viii).
(xi) A copy of a power of attorney for David F. Taplin is attached
hereto as Exhibit 24 (ix).
(27) Financial Data Schedule -- filed electronically for SEC information
purposes only.
(99) Other exhibits not required to otherwise be filed.**
(i) Audited Financial Statements for The North American Coal
Corporation for the fiscal year ended December 31, 1996, are attached as Exhibit
99(i).
(ii) Audited Financial Statements for Hamilton Beach/Proctor-Silex,
Inc. for the fiscal year ended December 31, 1996, are attached as Exhibit
99(ii).
(iii) Audited Financial Statements for The Kitchen Collection, Inc. for
the fiscal year ended December 31, 1996, are attached as Exhibit 99(iii).
(iv) Audited Financial Statements for NACCO Materials Handling Group,
Inc. for the fiscal year ended December 31, 1996, are attached as Exhibit 99
(iv).
*Management contract or compensation plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of this Annual Report on Form 10-K.
**Audited Financial Statements of subsidiary companies are not required
disclosures and are included only for information. These statements do not
reflect certain adjustments (including reclassifications and eliminations) that
are required by GAAP in the preparation of NACCO Industries, Inc. and
subsidiaries consolidated financial statements included in Part IV hereof, and
should be read accordingly.
X-10
<PAGE> 1
Exhibit 10(xx)
NACCO INDUSTRIES, INC.
1997 ANNUAL INCENTIVE COMPENSATION PLAN
1. PURPOSE OF THE PLAN
-------------------
The purpose of the NACCO Industries, Inc. 1997 Annual Incentive
Compensation Plan (the "Plan") is to further the profits and growth of NACCO
Industries, Inc. (the "Company") by enabling the Company to attract and retain
key employees of the Company by offering annual incentive compensation to those
key employees who will be in a position to help the Company to meet its
financial and business objectives.
2. DEFINITIONS
-----------
(a) "Award" means cash paid to a Participant under the Plan for the
Award Term in an amount determined in accordance with Section 4.
(b) "Award Term" means the period from January 1, 1997 through December
31, 1997.
(c) "Base Amount" means for any Participant a dollar amount, which
shall be equal to the salary midpoint for the Salary Points assigned to the
Participant by the Committee for the Award Term multiplied by 60% of the
short-term incentive compensation target percent for those Salary Points.
Attached hereto as EXHIBIT A is a schedule listing the Base Amount for each
Participant for the Award Term.
(d) "Committee" means the Nominating, Organization and Compensation
Committee of the Company's Board of Directors or any other committee appointed
by the Company's Board of Directors to administer this Plan in accordance with
Section 3, so long as any such committee consists of not less than two directors
of the Company and so long as each member of the Committee is not an employee of
the Company or any of its subsidiaries.
(e) "Participant" means any salaried employee of the Company who in the
judgment of the Committee occupies a key position in which his efforts may
significantly contribute to the profits or growth of the Company; provided,
however, that the Committee may select any employee who is expected to
contribute, or who has contributed, significantly to the Company's profitability
to participate in the Plan and receive an Award hereunder; and further provided,
however, that following the end of the Award Term the Committee may make one or
more discretionary Awards to employees of the Company who are not Participants.
Directors of the Company who are also employees of the Company are eligible
<PAGE> 2
to participate in the Plan. Employees of the Company's subsidiaries shall not be
eligible to participate in the Plan. The Committee shall have the power to add
Participants at any later date in the Award Term if individuals subsequently
become eligible to participate in the Plan. Each Participant shall be notified
that he is eligible to receive an Award for such term and the amount of his Base
Amount. If a Participant receives a change in Salary Points, salary midpoint
and/or short-term incentive compensation target percent, such change and any
resulting change in his Base Amount will be reflected on an amended EXHIBIT A.
Unless otherwise determined by the Committee, a Participant must be both
employed by the Company and a Participant on December 31 of the Award Term, and
the amount of any Award to a Participant who was not also employed by the
Company and a Participant on the first day of the Award Term shall be not more
than the pro-rated amount based upon the number of days actually employed by the
Company in the Award Term. Attached hereto as EXHIBIT A is a schedule listing
the Participants for the Award Term.
(f) "Salary Points" means the salary points assigned to a Participant
by the Committee pursuant to the Hay salary point system, or any successor
salary point system adopted by the Committee.
3. ADMINISTRATION
--------------
This Plan shall be administered by the Committee. The Committee shall
have complete authority to interpret all provisions of this Plan consistent with
law, to prescribe the form of any instrument evidencing any Award granted or
paid under this Plan, to adopt, amend and rescind general and special rules and
regulations for its administration, and to make all other determinations
necessary or advisable for the administration of this Plan. A majority of the
Committee shall constitute a quorum, and the action of members of the Committee
present at any meeting at which a quorum is present or acts unanimously approved
in writing, shall be the act of the Committee. All acts and decisions of the
Committee with respect to any questions arising in connection with the
administration and interpretation of this Plan, including the severability of
any or all of the provisions hereof, shall be conclusive, final and binding upon
the Company and all present and former Participants, all other employees of the
Company, and their respective descendants, successors and assigns. No member of
the Committee shall be liable for any such act or decision made in good faith.
4. AWARDS
------
The Committee may, from time to time and upon such conditions as it may
determine, authorize Awards for Participants, which Awards shall be not
inconsistent with, and shall be subject to all of the requirements of, the
following provisions:
2
<PAGE> 3
(a) PERFORMANCE TARGETS. The Committee shall determine performance
target descriptions, weightings and targets for the Award Term, which shall be
attached hereto as EXHIBIT B. The Committee shall have the power to add, delete
and amend target descriptions, weightings and targets during the Award Term,
which shall be reflected on an amended EXHIBIT B. No performance targets used in
this Plan shall be used in the Company's Supplemental Annual Incentive
Compensation Plan in the same year.
(b) AWARDS. Following the end of the Award Term, the Committee shall
compare the actual performance against the performance targets for each of the
performance target descriptions. Based thereupon, the Committee shall determine
the total payout percentage under the Plan (the "Payout Percentage"). The
Committee shall then determine the Award for each Participant, which shall be
equal to the Participant's Base Amount, multiplied by the Payout Percentage, and
further adjusted by such other factors, including an individual performance
factor for each Participant, as the Committee shall determine are appropriate;
provided, however, that no Award may be made to any Participant which exceeds
150% of his Base Amount. Promptly following the approval of the final Awards,
the Company shall pay the amount of such Awards to the Participants in cash,
subject to all withholdings and deductions pursuant to Section 5; provided,
however, that no Award shall be payable to a Participant except as determined by
the Committee.
5. WITHHOLDING TAXES
-----------------
Any Award paid to a Participant under this Plan, shall be subject to
standard federal, state and local income tax, social security and other standard
withholdings and deductions.
6. AMENDMENT AND TERMINATION
-------------------------
The Committee may alter or amend this Plan from time to time or
terminate it in its entirety; provided, however, that no such action shall,
without the consent of a Participant, affect the rights in an outstanding Award
of such Participant.
7. GENERAL PROVISIONS
(a) NO RIGHT OF EMPLOYMENT. Neither the adoption or operation of this
Plan, nor any document describing or referring to this Plan, or any part
thereof, shall confer upon any employee any right to continue in the employ of
the Company, or shall in any way affect the right and power of the Company
3
<PAGE> 4
to terminate the employment of any employee at any time with or without
assigning a reason therefor to the same extent as the Company might have done if
this Plan had not been adopted.
(b) GOVERNING LAW. The provisions of this Plan shall be governed by and
construed in accordance with the laws of the State of Delaware.
(c) MISCELLANEOUS. Headings are given to the sections of this Plan
solely as a convenience to facilitate reference. Such headings, numbering and
paragraphing shall not in any case be deemed in any way material or relevant to
the construction of this Plan or any provisions thereof. The use of the
masculine gender shall also include within its meaning the feminine. The use of
the singular shall also include within its meaning the plural, and vice versa.
8. EFFECTIVE DATE
--------------
This Plan shall become effective as of January 1, 1997.
4
<PAGE> 1
Exhibit 10(xxi)
NACCO INDUSTRIES, INC.
1997 SUPPLEMENTAL ANNUAL INCENTIVE COMPENSATION PLAN
GUIDELINES
1. GUIDELINES
----------
These 1997 Supplemental Annual Incentive Compensation Plan Guidelines
("Guidelines") have been approved by the Committee for the administration of the
NACCO Industries, Inc. Supplemental Annual Incentive Compensation Plan (the
"Plan") for Awards granted to Participants for the Award Term.
2. DEFINITIONS
-----------
(a) "Adjusted ROE" means the Company's adjusted return on equity,
calculated as follows:
Net Income (before extraordinary items) + Amortization of Goodwill
- --------------------------------------------------------------------------------
Weighted Average (Stockholders' Equity + Accumulated Amortization of
Goodwill + UMWA Adjustment) where:
(i) NET INCOME (BEFORE EXTRAORDINARY ITEMS) is defined as
consolidated net income for the Company and its subsidiaries for the Award Term
before extraordinary items, but including any extraordinary items related to
refinancing (net of tax), as such terms are defined by general accepted
accounting principles ("GAAP").
(ii) AMORTIZATION OF GOODWILL is defined as the consolidated
amortization expense related to the intangible asset goodwill for the Company
and its subsidiaries for the Award Term.
(iii) WEIGHTED AVERAGE STOCKHOLDERS' EQUITY is calculated by
adding the consolidated stockholders' equity for the Company, as defined by
GAAP, at the beginning of the Award Term and the end of each month of the Award
Term, and dividing by thirteen.
(iv) WEIGHTED AVERAGE ACCUMULATED AMORTIZATION OF GOODWILL is
calculated by adding consolidated accumulated amortization of goodwill, as
defined by GAAP, at the beginning of the Award Term and the end of each month of
the Award Term, and dividing by thirteen.
<PAGE> 2
(v) WEIGHTED AVERAGE UMWA ADJUSTMENT is calculated by adding the
balance in the Obligation to United Mine Workers of America Combined Benefit
Fund, net of tax, for the Company at the beginning of the Award Term and the end
of each month of the Award Term, and dividing by thirteen.
(b) "Award" means cash paid to a Participant under the Plan for the
Award Term. The amount of an Award shall be not greater than a Participant's
Base Amount, multiplied by the ROE Factor.
(c) "Award Term" means the period from January 1, 1997 through December
31, 1997.
(d) "Base Amount" means for any Participant a dollar amount, which
shall be equal to the salary midpoint for the Salary Points assigned to the
Participant by the Committee for the Award Term multiplied by 40% of the
short-term incentive compensation target percent for those Salary Points.
Attached hereto as EXHIBIT A is a schedule listing the Base Amount for each
Participant for the Award Term.
(e) "Committee" means the Committee appointed under the terms of the
Plan.
(f) "Participant" means any salaried employee of the Company who in the
judgment of the Committee occupies a key position in which his efforts may
significantly contribute to the profits or growth of the Company. Directors of
the Company who are also employees of the Company are eligible to participate in
the Plan. Employees of the Company's subsidiaries shall not be eligible to
participate in the Plan. A Participant must be both employed by the Company and
a Participant on December 31 of the Award Term, and the amount of any Award to a
Participant who was not also employed by the Company and a Participant on the
first day of the Award Term shall be not more than the pro-rated amount based
upon the number of days actually employed by the Company in the Award Term.
Attached hereto as EXHIBIT A is a schedule listing the Participants for the
Award Term.
(g) "ROE Factor" means a percentage based on Adjusted ROE for the Award
Term. Attached hereto as EXHIBIT B is a formula calculating the ROE Factor based
on Adjusted ROE for the Award Term.
(h) "Salary Points" means the salary points assigned to a Participant
by the Committee pursuant to the Hay salary point system, or any successor
salary point system adopted by the Committee.
2
<PAGE> 3
3. AWARDS
------
3.1 AWARDS
------
(a) PARTICIPANTS. EXHIBIT A lists the Participants and the Salary
Points, the salary midpoint, the short-term incentive compensation percent and
the Base Amount for each Participant for the Award Term. The Committee shall
have the power to add Participants at any later date in the Award Term if
individuals subsequently become eligible to participate in the Plan. Each
Participant shall be notified that he is eligible to receive an Award for such
term and the amount of his Base Amount. If a Participant, other than a
Participant who is, or is determined by the Committee to be likely to become, a
"covered employee" as defined in Section 162(m) of the Internal Revenue Code of
1986, as amended, receives a change in Salary Points, salary midpoint and/or
short-term incentive compensation target percent, such change and any resulting
change in his Base Amount will be reflected on an amended EXHIBIT A.
(b) Not later than the ninetieth day of the following calendar year,
the Committee shall approve:
(i) the ROE Factor for the Award Term and a preliminary
calculation of the amount of each Award based upon the application of the ROE
Factor to the Base Amount; and
(ii) a final calculation of the amount of each Award to be paid to
each Participant for the prior year, which amount shall be not greater than the
amount determined in accordance with Section 3(b)(i). The Committee shall have
the power to decrease, but not to increase, the amount of any Award below the
amount determined in accordance with Section 3(b)(i).
(c) Promptly following the approval of Awards for the Participants
pursuant to Section 3(b)(ii), the Company shall pay the amount of such Awards to
the Participants in cash, subject to all withholdings and deductions pursuant to
Section 4; provided, however, that no Award shall be payable to a Participant
except as determined by the Committee.
(d) No Award may be paid for any year to a Participant in excess of
$800,000.
4. WITHHOLDING TAXES
-----------------
Any Award paid to a Participant under this Plan, shall be subject to
standard federal, state and local income tax, social security and other standard
withholdings and deductions.
3
<PAGE> 4
5. AMENDMENT
The Committee may alter or amend these Guidelines from time to time;
provided, however, that no such action shall, without the consent of a
Participant, affect the rights in an outstanding Award of such Participant; and
further provided, however, that no amendment to these Guidelines may be made
which would cause any amount paid to a Participant who is, or is determined to
be likely to become, a "covered employee" to be includable as "applicable
employee remuneration" of such Participant, as such terms are defined in Section
162(m) of the Internal Revenue Code of 1986, as amended.
4
<PAGE> 1
Exhibit 10 (xliii)
AMENDMENT NO. 3
TO CREDIT AGREEMENT
Amendment, dated as of September 16, 1996 to the Credit Agreement dated
as of September 27, 1991, as may be amended from time to time (the "Agreement")
among The North American Coal Corporation (the "Borrower"), the Banks listed
therein and Morgan Guaranty Trust Company of New York, as Agent (the "Agent").
The parties hereto desire to amend the Agreement subject to the terms
and conditions of this Amendment, as hereinafter provided. Accordingly, the
parties hereto agree as follows:
1. DEFINITIONS. Except as otherwise defined herein, capitalized terms
used herein have the respective meanings assigned to them in the Agreement.
2. AMENDMENT:
CHANGE TO DEFINITION OF TERMINATION DATE. The definition of
"Termination Date" in Section 1.01 of the Agreement is hereby amended by
deleting the date "September 27, 2001".
3. Agreement as Amended. Except as expressly amended hereby, the
Agreement shall continue in full force and effect in accordance with the terms
thereof.
4. Governing Law. This Amendment, and the Agreement as amended hereby,
shall be construed in accordance with and governed by the laws of the State of
New York.
5. Severability. In case any one or more of the provisions contained in
this Amendment would be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
6. Counterparts; Effective Date. This amendment may be executed in any
number of counterparts, each of which shall constitute an original but all of
which when taken together shall constitute one and the same instrument. This
Amendment shall become effective as of the date first above written upon receipt
by the Bank of counterparts hereof executed by each of the parties hereto.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the day and year first above
written.
THE NORTH AMERICAN COAL CORPORATION
By: /s/ Charles B. Friley
--------------------------------------------------
Title: Vice President and Chief Financial Officer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent and a Bank
By: /s/ Patricia P. Lunka
--------------------------------------------------
Title: Vice President
CITIBANK, N.A.
By: /s/ Marjorie Futornick
--------------------------------------------------
Title: Vice President
WELLS FARGO
By: /s/ Ken Taylor
--------------------------------------------------
Title: Assistant Vice President
KEY BANK, N.A.
By: /s/ Marianne Meil
--------------------------------------------------
Title: Vice President
<PAGE> 1
Exhibit 10(xliv)
AMENDMENT NO. 1
TO THE
NORTH AMERICAN COAL CORPORATION
DEFERRED COMPENSATION PLAN
FOR MANAGEMENT EMPLOYEES
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996)
The North American Coal Corporation hereby adopts this
Amendment No. 1 to The North American Coal Corporation Deferred
Compensation Plan for Management Employees (As Amended and Restated
Effective January 1, 1996) (the "Plan"). The provisions of this
Amendment shall be effective January 1, 1997. Words and phrases used
herein with initial capital letters which are defined in the Plan are
used herein as so defined.
SECTION 1
Section 2.9(ii) of the Plan is hereby amended in its entirety
to read as follows:
"(ii) is in salary grade 14 or above"
EXECUTED this 9th day of December, 1996.
THE NORTH AMERICAN COAL CORPORATION
By: /s/ Thomas A. Koza
---------------------------------------------
Title: Vice President - Law and Administration, and
Secretary
<PAGE> 1
Exhibit 10(xlv)
THE NORTH AMERICAN COAL
CORPORATION
1997 INCENTIVE COMPENSATION
PLAN
DECEMBER, 1996
<PAGE> 2
1997 INCENTIVE COMPENSATION
PLAN
SUMMARY
The Incentive Compensation Plan (Plan) offers a strongly competitive incentive
opportunity to senior managers when all performance objectives under their
control or influence are achieved. This is accomplished through a structure
containing the following elements:
- Each participant is assigned an individual incentive target,
stated as a percentage of salary midpoint, that establishes the
incentive amount they will receive when performance objectives
are met.
- The individual target amount is allocated among the following
performance components:
- North American Coal (NAC) corporate performance.
- Bellaire Corporation cash flow.
- Business unit results.
- Individual achievement.
- Percentage weightings are assigned to each component based on the
participant's accountabilities and their impact on each
component.
- One or more performance objectives will be established at the
beginning of the year for each performance component.
- A performance range, which defines the acceptable level of
results, from threshold to maximum, is created around each
performance objective.
- A payout range is defined which provides for incentive payments
up to 150 percent of the incentive target, except to the extent
the committee elects to increase the actual pool by up to 10%, as
described below.
- A performance/payout schedule combines the two ranges into a
matrix that defines the level of payout that will result from
each level of performance.
- After audited financials are available, awards will be calculated
based on actual results against the established objectives.
- A final individual performance adjustment may be made, within a
range of + or - 10 percent of the calculated award, based on a
judgment of the participant's overall performance.
1
<PAGE> 3
1997 INCENTIVE COMPENSATION PLAN
This incentive compensation plan will allow management and the Board to
establish, in advance, the performance expectations and related incentive
potential that NAC's executives will work with for the year. At year-end, the
structure channels judgment of the managements team's performance along
predetermined lines that should convey a sense of fairness in the determination
of rewards.
PLAN STRUCTURE
INDIVIDUAL INCENTIVE TARGETS
----------------------------
The fundamental building block of the proposed Plan structure is the
individual incentive target. Each participant is assigned a target,
stated as a percentage of base salary, which will be paid when all
relevant performance objectives are achieved. The Plan provides for
payments above or below the target to reflect acceptable variances from
performance objectives.
PERFORMANCE GOALS
Four sets of goals are proposed:
INTENTIONALLY LEFT BLANK
INCENTIVE AWARD RANGE
---------------------
Actual performance results attained probably will not be exactly equal
to the established performance goals. Therefore, the Plan is designed
to provide payouts ranging up to 150 percent of the target award if
actual results fall within a predetermined range of acceptable
performance.
2
<PAGE> 4
1997 INCENTIVE COMPENSATION PLAN
The award range is defined as follows:
<TABLE>
<CAPTION>
% OF
AWARD LEVEL TARGET DESCRIPTION
<S> <C> <C>
Maximum 150% Highest level of incentive paid.
Target 100% Competitive incentive opportunity for
achieving all important goals.
Threshold 50% Incentive paid when results meet minimum
acceptable standards.
Below threshold 0% Performance does not merit incentive payment.
</TABLE>
COMPONENT WEIGHTINGS
--------------------
Participants' potential incentive awards will be allocated between
performance components based on their individual impact on results. The
allocations allow for awards to be earned based on the achievement of
the performance objectives over which each executive has the most
control. Weightings will be stated as a percentage and total 100
percent for each participant. The weightings will be established each
year to reflect current organizational accountabilities and the
relative importance of the various performance components. Our
recommended weightings are as follows:
INTENTIONALLY LEFT BLANK
When there is more than one goal for a performance component, further
percentage weightings may be assigned, within the overall weightings,
to reflect the relative priority of each goal. For
3
<PAGE> 5
1997 INCENTIVE COMPENSATION PLAN
example, if the individual component has a 40 percent weighting and
there are five individual goals, each individual goal might be assigned
a priority weighting of 20 percent.
4
<PAGE> 6
1997 INCENTIVE COMPENSATION PLAN
PERFORMANCE RANGE
-----------------
A range of performance acceptable for incentive payment will be
established around each performance objective. For quantitative goals,
the range may be set as a percentage of the objective. For goals that
cannot be quantified, the range will be defined in narrative form as
clearly as possible.
The following general definitions will apply. The percentage ranges
indicated are only guidelines; specific percentage ranges or narrative
descriptions should be determined for each goal in line with the
definitions.
<TABLE>
<CAPTION>
PERFORMANCE PERCENTAGE
LEVEL GUIDELINE DEFINITION
<S> <C>
Threshold 75% Minimum acceptable results
justifying payment of incentives.
Objective 100% Results meet high performance
demands justifying fully
competitive rewards.
Maximum 125% Highest foreseeable level of performance.
</TABLE>
PERFORMANCE/PAYOUT SCHEDULE
---------------------------
Combining the payout and performance ranges yields a performance/
payout schedule as in the following example:
<TABLE>
<CAPTION>
PERFORMANCE DEFINITION RESULTS LEVELS PAYOUT
<S> <C> <C> <C> <C>
Threshold Just bonusable 75% Threshold 50%
Objective On plan 100% Target 100%
Maximum Heavy stretch 125% Maximum 150%
</TABLE>
This schedule is applied separately to the results of each established
performance element to determine the incentive amount earned in
accordance with assigned weightings. Performance that falls between the
defined levels would result in proportionally adjusted payouts which
may be calculated mathematically or determined judgmentally.
CORPORATE PERFORMANCE THRESHOLD
-------------------------------
No incentive awards will be earned under the Plan in any year unless
the threshold level under the corporate performance component is
achieved. Once the corporate performance threshold is
5
<PAGE> 7
1997 INCENTIVE COMPENSATION PLAN
attained, each performance objective is separate and distinct. This
means that partial awards can be earned for the attainment of one
performance objective even if another is not sufficient to generate a
payout.
INDIVIDUAL ADJUSTMENT FACTOR
----------------------------
Each individual award, as calculated above, may be adjusted upward or
downward by as much as 10 percent of the total award based on
managements' perceptions of each individual's overall performance.
PARTIAL AWARDS
--------------
Executives who are hired or promoted during the year to positions
eligible for participation in the Plan may be included in the Plan on a
pro ratio basis.
COMMITTEE DISCRETION
--------------------
It is the intent of the Plan that the total incentive compensation, as
determined above, will be the final total corporate incentive
compensation to be paid. However, the committee, in its sole
discretion, may increase or decrease by up to ten percent the total
incentive compensation or may approve an incentive compensation payment
where there would normally be no payments due to corporate performance
which is below the criteria established for the year.
1997 PERFORMANCE TARGETS
See Plan Summary.
6
<PAGE> 1
Exhibit 10(xlvi)
November 15, 1996
The North American Coal Corporation
13140 Coit Road
Suite 400
Dallas, Texas 75240
Dear Sirs:
Reference is made to the Credit Agreement (the "Agreement") dated as of
September 27, 1991, among The North American Coal Corporation (the "Company"),
the banks listed therein and Morgan Guaranty Trust Company of New York, as
Agent. The defined terms used herein shall have the respective meanings set
forth in the Agreement.
Pursuant to Section 5.11 of the Agreement, the Company is prohibited
from using the proceeds of any Loan, directly or indirectly, for the purpose of
buying or carrying "margin stock". The Company has requested that the Banks
waive the provisions of such Section 5.11 to permit the Company to advance to
NACCO the proceeds of Loans borrowed by the Company, to be used by NACCO to
purchase its Class A common stock pursuant to a Dutch auction self-tender offer
to be launched by NACCO on or about November 18, 1996 and in connection with a
latter open market purchase program by NACCO. The Banks hereby consent to the
use of proceeds described in the preceeding sentence and, solely to the extent
necessary to permit the advances to NACCO referred to above, waive the
provisions of Section 5.11 of the Agreement.
The Company hereby represents and warrants that on the date hereof (i)
there exists no default, nor any other event which upon notice or lapse of time
or both would constitute a default, under the Agreement and (ii) the Company is
in compliance with all of the terms and conditions of the Agreement. This waiver
and consent shall be effective only in this specific instance and for the sole
purposes described above and shall not be effective for any other purpose or in
regard to any other transaction.
<PAGE> 2
This waiver and consent shall become effective upon receipt by the
Agent of a counterpart of this letter from the Required Bank bearing the
signature of the Company.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ John M. Mikolay
---------------------------
Title: Vice President
CITIBANK, N.A.
By: /s/ Marjorie Futornick
---------------------------
Title: Vice President
WELLS FARGO BANK (TEXAS), N.A.
By:
---------------------------
Title:
KEY BANK NATIONAL ASSOCIATION
By: /s/ Marianne Meil
---------------------------
Title: Vice President
THE NORTH AMERICAN COAL CORPORATION
By: /s/ Charles A. Bittenbender
---------------------------
Title: Assistant Secretary
<PAGE> 1
Exhibit 10(lxiii)
ANNUAL INCENTIVE COMPENSATION PLAN
----------------------------------
1997
GENERAL
- -------
NACCO Materials Handling Group, Inc., (the "Company") has established
an Annual Incentive Compensation Plan ("Plan") as part of a competitive
compensation program for the officers and key management employees of the
Company and its Subsidiaries.
PLAN OBJECTIVE
- --------------
The Company desires to attract and retain talented employees to enable
the Company to meet its financial and business objectives. The objective of the
Plan is to provide an opportunity to earn annual incentive compensation to those
employees whose performance has a significant impact on the Company's short-term
and long-term profitability.
ADMINISTRATION AND PARTICIPATION
- --------------------------------
The Plan is administered by the Nominating, Organization and
Compensation Committee of the Board of Directors of the Company (the
"Committee").
The Committee:
a. May amend, modify or discontinue the Plan.
1
<PAGE> 2
b. Will approve participation in the Plan. Generally,
participants will include all employees in NACCO Materials
Handling Group salary grades 22 and above. However, the
Committee may select any employee who has contributed
significantly to the Company's profitability to participate in
the Plan and receive an annual incentive compensation award.
c. Will determine the annual performance criteria which generate
the incentive compensation pool.
d. Will determine the total amount of both the target and actual
annual incentive compensation pool.
e. Will approve individual incentive compensation awards to
officers and employees in NACCO Materials Handling Group above
salary grade 29.
f. May delegate to the Chief Executive Officer of the Company the
approval of incentive compensation awards to NACCO Materials
Handling Group employees in salary grade 29 and below.
g. May consider at the end of each year the award of a
discretionary bonus amount to non-participants as an addition
to the regular incentive compensation pool on a special
one-time basis to motivate individuals not eligible to
participate in the Plan.
h. May approve a pro-rate incentive compensation award for
participants in the Plan whose employment is terminated (1)
due to death, disability, retirement or facility closure, such
award to be determined pursuant to the provisions of
subparagraphs (e) and (f) above, or (2) under other
2
<PAGE> 3
circumstances at the recommendation of the Chief Executive
Officer of the Company.
DETERMINATION OF CORPORATE INCENTIVE COMPENSATION POOL
- ------------------------------------------------------
Each participant in the Plan will have an individual target incentive
compensation percentage which is determined by the participant's salary grade.
This percentage is multiplied by the mid-point of the participant's salary grade
to determine his individual target incentive compensation award. The total of
the target incentive compensation awards of all participants equals the target
corporate incentive compensation pool ("Target Pool"). The Target Pool is
approved each year by the Committee.
The actual corporate incentive compensation pool ("Actual Pool") is
determined at the end of each year based on the Company's actual performance
against specific criteria established in the beginning of the year by the
Committee. The Target Pool is adjusted upwards or downwards by corporate
performance adjustment factors to determine the Actual Pool. In no event will
the Actual Pool exceed 150% of the Target Pool, except to the extent that the
Committee elects to increase the Actual Pool by up to 110%, as described below.
The Target and Actual Pools may consist of the sum of two or more
subpools, provided the subpools have individual objectives.
3
<PAGE> 4
It is the intent of the Plan that the Actual Pool, as determined above,
will be the final total corporate incentive compensation pool. However, the
Committee, in its sole discretion, may increase or decrease by up to 10% the
Actual Pool or may approve an incentive compensation pool where there would
normally be no pool due to Company performance which is below the criteria
established for the year.
The Actual and Target Pools exclude the Marketing Incentive Plan for
regional parts, service, sales and national account managers. However, total
compensation or employees covered by the Marketing Incentive Plan will be based
on competitive levels.
DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS
- ---------------------------------------------------------
Salary grades and the corresponding target incentive percentages for
each participant in the Plan will be established at the beginning of each year
and approved by the Committee. Individual target incentive compensation will
then be adjusted by the appropriate pool or subpool factor. Such adjusted
individual incentive compensation will then be further modified based on the
team performance to which an individual belongs compared to the team goals for
the year.
The total of all individual incentive compensation awards must not
exceed the Actual Pool for the Year.
Attached are examples of actual pool and individual award calculations.
4
<PAGE> 5
a. Example calculation for determination actual pool:
INTENTIONALLY LEFT BLANK
5
<PAGE> 6
b. Example calculation for determination of individual incentive
compensation award:
INTENTIONALLY LEFT BLANK
6
<PAGE> 1
Exhibit 10 (lxxvi)
AMENDMENT TO CREDIT AGREEMENT
AMENDMENT dated as of December 16, 1996 to the Amended and
Restated Credit Agreement dated as of June 4, 1996 (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 has asked the Banks to permit the Borrower
to use the proceeds of loans made to it under the Credit Agreement to make loans
and/or pay dividends for the purpose of enabling NACCO Industries, Inc. to
purchase its own common stock; and
WHEREAS, the undersigned Banks are willing to permit such use of
proceeds, PROVIDED that, so long as Sections 5.14 and 5.15 of the Credit
Agreement remain in effect, the sum of (i) the aggregate amount of Restricted
Payments declared or made pursuant to Section 5.14(c) and (ii) the aggregate
outstanding principal amount of loans made to NACCO Industries, Inc. pursuant to
Section 5.15 to enable it to purchase its own common stock shall not exceed
$25,000,000;
NOW, THEREFORE, the undersigned parties 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 Credit 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. Use of Proceeds. The last sentence of Section 5.8
of the Credit Agreement is amended to read as follows:
None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" within the meaning of Regulation U;
PROVIDED that the Borrower may use such proceeds to make loans and/or
pay dividends for the purpose of enabling NACCO Industries, Inc. to
purchase its own common stock.
<PAGE> 2
Section 3. Restricted Payments. Section 5.14(c) of the Credit
Agreement is amended to read as follows:
(c) Restricted Payments not otherwise permitted pursuant to the
preceding clauses (a) and (b); provided that the sum of (i) the
aggregate amount of all Restricted Payments declared or made after
September 30, 1994 pursuant to this clause (c) and (ii) the aggregate
outstanding principal amount of all loans made by the Borrower and its
Subsidiaries to Affiliates of the Borrower pursuant to Section 5.15(h)
shall not at any time exceed $25,000,000.
Section 4. Investments. Section 5.15 of the Credit Agreement is
amended by deleting the word "and" at the end of clause (g), redesignating
clause (h) as clause (i), changing the reference to "clause (h)" in clauses (e)
and (g) to refer instead to "clause (i)", and adding the following new clause
(h) immediately after clause (g):
(h) loans to Affiliates of the Borrower; PROVIDED that the sum of
(i) the aggregate amount of all Restricted Payments declared or made
after September 30, 1994 pursuant to Section 5.14(c) and (ii) the
aggregate outstanding principal amount of all loans made by the
Borrower and its Subsidiaries to Affiliates of the Borrower pursuant to
this clause (h) shall not at any time exceed $25,000,000; and
Section 5. Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
Section 6. 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 7. Effectiveness. This Amendment shall become effective
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 have caused this
Amendment to be duly executed as of the date first above written.
NACCO MATERIALS HANDLING
GROUP, INC.
By: /s/ Jeffrey Mattern
----------------------------
Name: Jeffrey Mattern
Title: Vice President and Treasurer
2
<PAGE> 3
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/ Richard E. Bryson
----------------------------
Name: Richard E. Bryson
Title: Managing Director
CITIBANK, N.A.
By: /s/ Marjorie Futornick
----------------------------
Name: Marjorie Futornick
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ A.S. Norsworthy
----------------------------
Name: A.S. Norsworthy
Title: Sr. Team Leader-Loan Operations
THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ L. Gene Beube
----------------------------
Name: L. Gene Beube
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By: /s/ Richard E. Stahl
----------------------------
Name: Richard E. Stahl
Title: Sr. Vice President & Joint General Manager
ROYAL BANK OF CANADA
By: /s/ Preston D. Jones
----------------------------
Name: Preston D. Jones
Title: Senior Manager Corporate Banking
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison Amonette
----------------------------
Name: Alison Amonette
Title: Vice President
KEY BANK OF WASHINGTON
By: /s/ James A. Taylor III
----------------------------
Name: James A. Taylor III
Title: Commercial Banking Officer
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/
----------------------------
Name:
Title: Vice President
BANK OF SCOTLAND
By: /s/ Annie Chin Tat
----------------------------
Name: Annie Chin Tat
Title: Assistant Vice President
THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank)
By: /s/ Timothy J. Stearns
----------------------------
Name: Timothy J. Stearns
Title: Credit Executive
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ David Bouhl, F.V.P.
----------------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking
Chicago
MELLON BANK, N.A.
By: /s/ Mark E. Johnston
----------------------------
Name: Mark E. Johnston
Title: AVP
THE SUMITOMO BANK, LTD.
By: /s/ John H. Kemper
----------------------------
Name: John H. Kemper
Title: Senior Vice President
ISTITUTO BANCARIO SAN PAOLO DI TORINO
S.P.A.
By: /s/ Jim Girolam
----------------------------
Name: Jim Girolam
Title: G. Manager, V.P.
3
<PAGE> 1
Exhibit 10(lxxxix)
THE HAMILTON BEACH/PROCTOR-SILEX, INC.
UNFUNDED BENEFIT PLAN
(As Amended and Restated Effective January 1, 1997)
<PAGE> 2
HAMILTON BEACH/PROCTOR-SILEX, INC.
UNFUNDED BENEFIT PLAN
Hamilton Beach/Proctor-Silex, Inc. (the "Company") does hereby
amend and completely restate the Hamilton Beach/Proctor-Silex, Inc. Unfunded
Benefit Plan to read as follows, effective January 1, 1997.
ARTICLE I
PREFACE
-------
SECTION 1.1. EFFECTIVE DATE. The original effective date of
this Plan was March 10, 1993. The effective date of this amendment and
restatement is January 1, 1997.
SECTION 1.2. PURPOSE OF THE PLAN. The purpose of this Plan is
to provide for certain Employees of the Company benefits they would have
received (a) under the Cash Balance Plan but for (i) the dollar limitation on
Compensation taken into account as a result of Section 401(a)(17) of the Code,
and (ii) the limitations imposed under Section 415 of the Code, and/or (b) under
the Savings Plan but for the limitations imposed under Section 402(g), 401(m),
401(a)(17), 401(k)(3) or 415 of the Code.
SECTION 1.3. GOVERNING LAW. This Plan shall be regulated,
construed and administered under the laws of the State of Ohio, except when
preempted by federal law.
SECTION 1.4. GENDER AND NUMBER. For purposes of interpreting
the provisions of this Plan, the masculine gender shall be deemed to include the
feminine, the feminine gender shall be deemed to include the masculine, and the
singular shall include the plural unless otherwise clearly required by the
context.
SECTION 1.5. CONSTRUCTION OF PLAN. The Plan provides benefits
for Employees who are Participants in two separate Qualified Plans. References
throughout this Plan to a "Qualified Plan" shall be deemed to refer to the
particular Qualified Plan in which the Participant participates.
ARTICLE II
DEFINITIONS
-----------
Except as otherwise provided in this Plan, terms defined in
the Qualified Plans as they may be amended from time to time shall have the same
meanings when used herein, unless a different meaning is clearly required by the
context of this Plan. In addition, the following words and phrases shall have
the following respective meanings for purposes of this Plan.
SECTION 2.1. ACCOUNT shall mean the record maintained in
accordance with Section 3.5 by the Company as the sum of the Participant's
Excess Profit Sharing Sub-Account, Excess 401(k) Sub-Account and Excess Matching
Sub-Account.
<PAGE> 3
SECTION 2.2. ADJUSTED ROE.
(a) For purposes of this Section, the following terms shall
have the following meanings:
(i) "NET INCOME (BEFORE EXTRAORDINARY ITEMS)" is defined as
consolidated net income, as defined by general accepted accounting principals
("GAAP"), for the Company for the subject year before extraordinary items, but
including any extraordinary items related to refinancings (net of tax);
(ii) "AMORTIZATION OF GOODWILL" is defined as the consolidated
amortization expense related to the intangible asset goodwill for the Company
for the subject year;
(iii) "WEIGHTED AVERAGE STOCKHOLDERS' EQUITY" is calculated by
adding the consolidated stockholders' equity for the Company, as defined by
GAAP, at the beginning of the subject year and the end of each month of the
subject year and dividing by thirteen;
(iv) "WEIGHTED AVERAGE ACCUMULATED AMORTIZATION OF GOODWILL"
is calculated by adding consolidated accumulated amortization of goodwill, as
defined by GAAP, at the beginning of the subject year and the end of each month
of the subject year and dividing by thirteen.
(b) "Adjusted ROE" shall mean the average return on equity of
the Company calculated for the applicable time period, based on A divided by B,
where:
A = Net Income (before extraordinary items) + Amortization of
Goodwill; and
B = Weighted Average (Shareholders' Equity + Accumulated
Amortization of Goodwill)
Adjusted ROE shall be determined at least annually by the Company.
SECTION 2.3. BENEFICIARY shall mean the person or persons
designated by the Participant as his Beneficiary under this Plan, in accordance
with the provisions of Article VII hereof.
SECTION 2.4. CASH BALANCE EMPLOYEE shall mean a participant in
the Cash Balance Plan.
SECTION 2.5. CASH BALANCE PLAN shall mean Part II of the
Combined Defined Benefit Plan for NACCO Industries, Inc. and Its Subsidiaries
(commonly known as the "Hamilton Beach/Proctor-Silex, Inc. Profit Sharing
Retirement Plan") (or any successor thereto), as the same may be amended from
time to time. Benefits under the Cash Balance Plan were permanently frozen
effective for Plan Years beginning on or after January 1, 1997.
2
<PAGE> 4
SECTION 2.6. COMPANY shall mean Hamilton Beach/Proctor-Silex,
Inc.
SECTION 2.7. COMPENSATION. For purposes of Sections 3.2 and
3.3 of the Plan, the term "Compensation" shall have the same meaning as under
the Savings Plan, except that Compensation shall be deemed to include (a) the
amount of compensation deferred by the Participant under Section 3.3 of this
Plan and (b) amounts in excess of the limitation imposed by Code Section
401(a)(17).
SECTION 2.8. EXCESS RETIREMENT BENEFIT shall mean an Excess
Pension Benefit, an Excess Profit Sharing Benefit, an Excess 401(k) Benefit or
an Excess Matching Benefit (as described in Article III) which is payable to or
with respect to a Participant under this Plan.
SECTION 2.9. FIXED INCOME FUND shall mean the Stable Asset
Fund under the Savings Plan or any equivalent fixed income fund thereunder which
is designated by the NACCO Retirement Funds Investment Committee as the
successor to the Stable Asset Fund.
SECTION 2.10. 401(k) EMPLOYEE shall mean a participant in the
Savings Plan who is eligible for Before-Tax and Matching Employer Contributions
thereunder.
SECTION 2.11. INSOLVENT. For purposes of this Plan, the
Company shall be considered Insolvent at such time as it (a) is unable to pay
its debts as they mature, or (b) is subject to a pending voluntary or
involuntary proceeding as a debtor under the United States Bankruptcy Code.
SECTION 2.12. PARTICIPANT. For purposes of Section 3.1 of the
Plan, the term "Participant" shall mean a Cash Balance Employee whose benefit
under the Cash Balance Plan is limited by the application of Section 401(a)(17)
or 415 of the Code. For purposes of Section 3.2 of the Plan, the term
"Participant" shall mean a Profit Sharing Employee whose Post-1996 Profit
Sharing Contributions are limited by the application of Section 401(a)(17) or
415 of the Code and who is classified in job grades 17 and above. For purposes
of Section 3.3 of the Plan, the term "Participant" shall mean a 401(k) Employee
(a) who is unable to make all of the Before-Tax Contributions that he has
elected to make to the Savings Plan, or who is unable to receive the maximum
amount of Post-1994 Matching Employer Contributions under the Savings Plan,
because of the limitations imposed under Section 402(g), 401(a)(17), 401(k)(3)
or 401(m) of the Code and (b) who is classified in job grades 17 and above.
SECTION 2.13. PLAN shall mean the Hamilton
Beach/Proctor-Silex, Inc. Unfunded Benefit Plan as herein set forth or as duly
amended.
SECTION 2.14. PLAN ADMINISTRATOR shall mean the Company.
3
<PAGE> 5
SECTION 2.15. PLAN YEAR shall mean the calendar year.
SECTION 2.16. PROFIT SHARING EMPLOYEE shall mean a participant
in the Savings Plan who is eligible for Post-1996 Profit Sharing Contributions.
SECTION 2.17. QUALIFIED PLAN shall mean (a) for Cash Balance
Employees, the Cash Balance Plan, (b) for Profit Sharing Employees, the
profit-sharing portion of the Savings Plan and (c) for 401(k) Employees, the
Before-Tax Contributions and Matching Employer Contributions portion of the
Savings Plan.
SECTION 2.18. SAVINGS PLAN shall mean the Hamilton
Beach/Proctor-Silex, Inc. Employees' Retirement Savings Plan (401(k)), as the
same may be amended from time to time, or any successor thereto.
SECTION 2.19. UNFORESEEABLE EMERGENCY shall mean an event
which results (or will result) in severe financial hardship to the Participant
as a consequence of an unexpected illness or accident or loss of the
Participant's property due to casualty or other similar extraordinary or
unforeseen circumstances out of the control of the Participant.
SECTION 2.20. VALUATION DATE shall mean the last business day
of each Plan Year.
ARTICLE III
EXCESS RETIREMENT BENEFITS
--------------------------
SECTION 3.1. EXCESS PENSION BENEFITS. The Excess Pension
Benefit payable to a Participant who is a Cash Balance Employee shall be a
monthly benefit equal to the excess, if any, of (a) the amount of the monthly
benefit that would be payable to such Participant under the Cash Balance Plan
(in the form actually paid) if such Plan did not contain the limitations imposed
under Sections 401(a)(17) and 415 of the Code and, effective as of January 1,
1995, the definition of Compensation under such Plan included any amounts
deferred under Section 3.3 of this Plan, OVER (b) the amount of the monthly
benefit that is actually payable to the Participant under the Cash Balance Plan.
SECTION 3.2. EXCESS PROFIT SHARING BENEFITS. At the time
described in Section 3.5(a), the Company shall credit to a Sub-Account (the
"Excess Profit Sharing Sub-Account") established for each Participant who is a
Profit Sharing Employee, an amount equal to the excess, if any, of (a) the
amount of the Company's Post-1996 Profit Sharing Contribution which would have
been made to the profit sharing portion of the Savings Plan on behalf of the
Participant if (i) such Plan did not contain the limitations imposed under
Sections 401(a)(17) and 415 of the Code and (ii) the term "Compensation" (as
defined in Section 2.7 hereof) were used for purposes of determining the amount
of profit sharing contributions under the Savings Plan, OVER (b) the amount of
the
4
<PAGE> 6
Company's Post-1996 Profit Sharing Contribution which is actually made to the
Savings Plan on behalf of the Participant for such Plan Year.
SECTION 3.3. EXCESS 401(K) BENEFITS.
(a) AMOUNT OF EXCESS 401(K) BENEFITS. Each 401(k) Employee who
is a Participant under the terms of this Plan, may, prior to the first day of
any Plan Year, by completing a Notice of Election to Defer Compensation or other
form approved by the Company ("Deferral Election Form"), direct the Company:
(i) to reduce his Compensation (as that
term is defined in Section 2.7 hereof) by the difference between (A) a certain
percentage, in 1% increments, with a maximum of 15%, of his Compensation for the
calendar year, and (B) the maximum Before-Tax Contributions actually permitted
to be contributed for him to the Savings Plan by reason of the application of
the limitations imposed under Sections 402(g), 401(a)(17), or 401(k)(3) of the
Code;
(ii) to credit the deferrals to the
Sub-Account described in Section 3.5(a) at the times described therein.
(b) DEFERRAL PERIOD. The deferral election described in
Subsection (a) above shall also contain such Participant's election regarding
the time of the commencement of payment of his Excess 401(k) Sub-Account. In the
Deferral Election Form, such Participant may elect to commence payment of his
Excess 401(k) Sub-Account on (i) the date on which he ceases to be an Employee
of a Controlled Group Member, (ii) the date on which he attains an age specified
in the Deferral Election Form, or (iii) the earlier or later of such dates.
(c) EFFECT AND DURATION OF DEFERRAL ELECTION. Any direction by
a 401(k) Employee who is a Participant in this Plan to make deferrals of Excess
401(k) Benefits hereunder shall be effective with respect to Compensation
otherwise payable to the Participant, and the Participant shall not be eligible
to receive such Excess 401(k) Benefits. Instead, such amounts shall be credited
to the Participant's Sub-Account as provided in Section 3.5(a). Any directions
made in accordance with Subsections (a) or (b) above shall be irrevocable and
shall remain in effect for subsequent Plan Years unless for subsequent Plan
Years the directions are changed or terminated by the Participant, on the
appropriate form provided by the Plan Administrator, prior to the first day of
such subsequent Plan Year. Notwithstanding the foregoing, a Participant's
direction to make deferrals of Excess 401(k) Benefits shall automatically
terminate on the earlier of the date on which (i) the Participant ceases
employment with the Company, (ii) the Company is deemed Insolvent, (iii) the
Participant is no longer eligible to make deferrals of Excess 401(k) Benefits
hereunder, or (iv) the Plan is terminated.
5
<PAGE> 7
(d) Notwithstanding the foregoing, any Participant whose
eligibility to make Before-Tax Contributions to the Savings Plan has been
suspended because he has taken a hardship withdrawal from the Savings Plan shall
not be eligible to make deferrals of Excess 401(k) Benefits under this Plan for
the period of his suspension from the Savings Plan.
SECTION 3.4. EXCESS MATCHING BENEFITS.
(a) IN GENERAL. A 401(k) Employee shall have credited to his
Excess Matching Sub-Account an amount equal to the Post-1994 Matching Employer
Contributions that he is prevented from receiving under the Savings Plan because
of the limitations imposed under Code Sections 402(g), 401(a)(17), 401(k)(3) and
401(m) (collectively, the "Excess Matching Benefits").
(b) TIME OF PAYMENT. The Excess Matching Benefits shall be
paid (or commence to be paid) at the time specified in the Deferral Election
Form for the payment of the Excess 401(k) Benefits to which the Excess Matching
Benefits relate.
SECTION 3.5. PARTICIPANT'S ACCOUNTS. The Company shall
establish and maintain on its books an Account for each Participant which shall
contain the following entries:
(a) Credits to an Excess Profit Sharing Sub-Account for the
Excess Profit Sharing Benefits described in Section 3.2, which shall be credited
to the Sub-Account at the time the Profit Sharing Contributions are otherwise
credited to Participants' Accounts under the Savings Plan;
(b) Credits to an Excess 401(k) Sub-Account for the Excess
401(k) Benefits described in Section 3.3, which shall be credited to the
Sub-Account when a 401(k) Employee is prevented from making a Before-Tax
Contribution under the Savings Plan;
(c) Credits to an Excess Matching Sub-Account for the Excess
Matching Benefits described in Section 3.4, which shall be credited to the
Sub-Account when a 401(k) Employee is prevented from receiving Post-1994
Matching Employer Contributions under the Savings Plan;
(d) Credits to such Sub-Accounts for the earnings described in
Article IV, which shall continue until the vested portions of such Sub-Accounts
have been distributed to the Participant or his Beneficiary; and
(e) Debits for any distributions made from such Sub-Accounts.
To the extent determined necessary by the Company, the Company may also
establish a "notional account" in the name of each Cash Balance Employee to
reflect the Excess Pension benefits payable to such Employees.
6
<PAGE> 8
SECTION 3.6. EFFECT ON OTHER BENEFITS. Benefits payable to or
with respect to a Participant under the Qualified Plans or any other
Company-sponsored (qualified or nonqualified) plan, if any, are in addition to
those provided under this Plan.
ARTICLE IV
EARNINGS
--------
SECTION 4.1. FOR ACTIVE PROFIT SHARING EMPLOYEES. Except as
provided in Section 4.3, at the end of each calendar month during a Plan Year,
the Excess Profit Sharing Sub-Account of each Participant shall be credited with
an amount determined by multiplying such Participant's average Excess Profit
Sharing Sub-Account balance during such month by the blended rate earned during
such month by the Fixed Income Fund under the Savings Plan. Notwithstanding the
foregoing, in the event that the Adjusted ROE determined for such Plan Year
exceeds the rate credited to the Participant's Excess Profit Sharing Sub-Account
under the preceding sentence, such Sub-Account shall retroactively be credited
with the difference between (a) the amount determined under the preceding
sentence, and (b) the amount determined by multiplying the Participant's average
Sub-Account balance during each month of such Plan Year by the Adjusted ROE
determined for such Plan Year, compounded monthly.
SECTION 4.2. FOR ACTIVE 401(K) EMPLOYEES.
(a) For purposes of determining the earnings to be credited to
401(k) Employee's Account, such Account shall be divided into two additional
Sub-Accounts, the "7% Sub-Account" and the "Additional Sub-Account." The 7%
Sub-Account shall contain Excess 401(k) Benefits and Excess Matching Benefits
attributable to amounts deferred by the 401(k) Employee of up to 7% of his
Compensation, plus any earnings attributable thereto. The Additional Sub-Account
shall contain the Excess 401(k) Benefits and Excess Matching Benefits
attributable to amounts deferred by the 401(k) Employee in excess of 7% of his
Compensation, plus any earnings attributable thereto.
(b) Except as provided in Section 4.3, at the end of each
calendar month during a Plan Year, the 7% Sub-Account of each 401(k) Employee
shall be credited with an amount determined by multiplying such Participant's
average 7% Sub-Account balance during such month by the blended rate earned
during such month by the Fixed Income Fund. Notwithstanding the foregoing, in
the event that the Adjusted ROE determined for such Plan Year exceeds the rate
credited to the Participant's 7% Sub-Account under the preceding sentence, the
Participant's 7% Sub-Account shall retroactively be credited with the difference
between (i) the amount determined under the preceding sentence, and (ii) the
amount determined by multiplying the Participant's average 7% Sub-Account
balance during each month of such Plan Year by the Adjusted ROE determined for
such Plan Year, compounded monthly.
7
<PAGE> 9
(c) At the end of each calendar month during a Plan Year, the
Additional Sub-Account of each Participant shall be credited with an amount
determined by multiplying such Participant's average Additional Sub-Account
balance during such month by the blended rate earned during such month by the
Fixed Income Fund.
SECTION 4.3. FOR TERMINATED EMPLOYEES. The Sub-Accounts of a
Participant who has terminated employment with the Controlled Group shall be
credited with earnings as described in Section 4.1 or 4.2, as modified by this
Section 4.3, until the vested portion of each Sub-Account has been distributed
in full. The Adjusted ROE calculation described in the second sentence of
Section 4.1 and in the second sentence of Section 4.2(b) shall be made during
the month in which the Participant terminates employment and shall be based on
the year-to-date Adjusted ROE for the month ending prior to the date the
Participant terminated employment, as calculated by the Company. For any
subsequent month, the Adjusted ROE calculation described in the second sentence
of Section 4.1 and in the second sentence of Section 4.2(b), shall not apply.
The Fixed Income Fund calculation described in the first sentence of Section 4.1
and 4.2(a) and in Section 4.2(c) for the month in which the Participant receives
a distribution from his Sub-Account shall be based on the blended rate earned
during the preceding month by the Fixed Income Fund.
SECTION 4.3. CHANGES IN EARNINGS ASSUMPTIONS. The Committee
(as defined in Section 9.5) may change the earnings rate credited to Accounts
hereunder at any time upon at least 30 days advance notice to Participants.
SECTION 4.4. LIMITATION ON EARNINGS ASSUMPTION.
Notwithstanding any provision of the Plan to the contrary, in no event will the
earnings rate credited to Accounts hereunder exceed 14%.
ARTICLE V
VESTING
-------
A Participant shall not become vested in his Excess Pension
Benefit or Excess Profit Sharing Benefit until he becomes vested in the
corresponding benefit under the applicable underlying Qualified Plan and the
Excess Pension Benefit and/or Excess Profit Sharing Benefit of a Participant who
is partially or fully vested under the applicable underlying Qualified Plan
shall at all times be vested hereunder to the extent he is so vested. A
Participant shall always be 100% vested in his Excess 401(k) Benefit and his
Excess Matching Benefit hereunder. The non-vested portion of any Excess
Retirement Benefit shall be forfeited and/or reinstated under this Plan in
accordance with the vesting, forfeiture and service rules contained in the
applicable underlying Qualified Plan.
8
<PAGE> 10
ARTICLE VI
DISTRIBUTION OF BENEFITS TO PARTICIPANTS
----------------------------------------
SECTION 6.1. TIME AND MANNER OF PAYMENT.
(a) EXCESS PENSION BENEFITS.
(i) TIMING. A Participant who is a Cash Balance
Employee is required to elect the time and manner of payment of his benefits
under the Cash Balance Plan before he will be eligible to receive payment of his
Excess Pension Benefit hereunder. The Excess Pension Benefit payable to a
Participant shall be paid at the same time or times and in the same manner as
the benefits payable to the Participant under the Cash Balance Plan.
(ii) FORM. Notwithstanding the foregoing, in the
event that the monthly payments of the Excess Pension Benefits payable to a
Participant hereunder following the Participant's termination of the employment
with the Controlled Group amount to less than Fifty Dollars ($50) per month,
such Excess Pension Benefits shall be paid in the form of a single lump sum
payment. Such lump sum amount shall be equal to the Actuarial Equivalent present
value of such Excess Pension Benefits.
(b) EXCESS PROFIT SHARING BENEFITS. The Excess Profit Sharing
Benefit payable to a Participant shall be paid in the form of a single lump sum
payment at the time the corresponding Post-1996 Profit Sharing Contributions
payable to the Participant under the Savings Plan commence to be paid.
(c) EXCESS 401(K) AND MATCHING BENEFITS.
(i) TIMING. A Participant's Account shall be paid (or
commence to be paid) to the Participant at the time specified in the
Participant's Deferral Election Form pursuant to Section 3.2(b).
(ii) FORM. A Participant's Account shall be
distributed in the form of ten annual installments with each installment being
based on the value of the Participant's Account on the Valuation Date
immediately preceding the date such installment is to be paid and being a
fraction of such value in which the numerator is one and the denominator is the
total number of remaining installments to be paid. Notwithstanding the
foregoing, the Participant may elect to receive his Account in the form of a
single lump sum payment or in annual installments for a period of less than 10
years by filing a notice in writing, signed by the Participant while he is alive
and filed with the Plan Administrator at least one year prior to the time he had
elected to commence receiving payment of the portion his Account to which his
election applies. Any such election of the form of benefit may be changed at any
time and from time to time, without the consent of any other person, by filing a
later election in writing that is signed by a Participant and filed with the
Plan
9
<PAGE> 11
Administrator while such Participant is alive and at least one year prior to the
time he had elected to commence receiving payment of his Account.
(iii) UNFORESEEABLE EMERGENCY DISTRIBUTIONS.
Notwithstanding the foregoing, the Company may at any time, upon written request
of the Participant cause to be paid to such Participant an amount equal to all
or any part of the Participant's Excess 401(k) Sub-Account and/or Excess
Matching Sub-Account if the Company determines, in its absolute discretion based
on such reasonable evidence that it shall require, that such a payment or
payments is necessary for the purpose of alleviating the consequences of an
Unforeseeable Emergency occurring with respect to the Participant. Payments of
amounts because of an Unforeseeable Emergency shall be permitted only to the
extent reasonably necessary to satisfy the emergency need.
SECTION 6.2. SMALL SUB-ACCOUNTS. Notwithstanding the
foregoing, in the event that the vested portion of a Participant's Account does
not exceed $5,000 at the time of such Participant's termination of employment
with the Controlled Group, such vested portion of his Account shall
automatically be paid to him in a single lump sum payment as soon as practicable
following his termination of employment.
SECTION 6.3. LIABILITY FOR PAYMENT/EXPENSES. The Company shall
be liable for the payment of the Excess Retirement Benefits which are payable
hereunder to the Participants. Expenses of administering the Plan shall be paid
by the Company.
ARTICLE VII
BENEFICIARIES
-------------
SECTION 7.1. BENEFICIARY DESIGNATIONS. A designation of a
Beneficiary hereunder may be made only by an instrument (in form acceptable to
the Plan Administrator) signed by the Participant and filed with the Plan
Administrator prior to the Participant's death. In the absence of such a
designation and at any other time when there is no existing Beneficiary
designated hereunder, the Beneficiary of a Participant for his Excess Pension
Benefits and/or his Account shall be his Beneficiary under the Cash Balance Plan
and the Savings Plan, respectively. A person designated by a Participant as his
Beneficiary who or which ceases to exist shall not be entitled to any part of
any payment thereafter to be made to the Participant's Beneficiary unless the
Participant's designation specifically provided to the contrary. If two or more
persons designated as a Participant's Beneficiary are in existence with respect
to a single Excess Retirement Benefit the amount of any payment to the
Beneficiary under this Plan shall be divided equally among such persons unless
the Participant's designation specifically provides for a different allocation.
SECTION 7.2. CHANGE IN BENEFICIARY. (a) Anything herein or in
the Qualified Plans to the contrary notwithstanding,
10
<PAGE> 12
a Participant may, at any time and from time to time, change a Beneficiary
designation hereunder without the consent of any existing Beneficiary or any
other person. A change in Beneficiary hereunder may be made regardless of
whether such a change is also made under the applicable underlying Qualified
Plan. In other words, the Beneficiary hereunder need not be the same as under
the applicable underlying Qualified Plan.
(b) Any change in Beneficiary shall be made by giving written
notice thereof to the Plan Administrator and any change shall be effective only
if received by the Plan Administrator prior to the death of the Participant.
SECTION 7.3. DISTRIBUTIONS TO BENEFICIARIES.
(a) AMOUNT OF BENEFITS.
(i) AMOUNT OF EXCESS PENSION BENEFIT. The Excess
Pension Benefit payable to a Beneficiary under this Plan shall
be a monthly benefit equal to the excess, if any, of (A) the
amount of the monthly benefit that would be payable to the
Beneficiary last effectively designated by the Participant
under the Cash Balance Plan (in the form actually paid) if
such Plan did not contain the limitations imposed under
Sections 401(a)(17) or 415 of the Code and the definition of
Compensation under such Plan included any amounts deferred
under this Plan OVER (B) the amount of the monthly benefit
that is actually paid to such Beneficiary under such Plan.
(ii) AMOUNT OF EXCESS PROFIT SHARING BENEFIT. The Excess
Profit Sharing Benefit payable to a Participant's Beneficiary
under this Plan shall be equal to such Participant's vested
Excess Profit Sharing Sub-Account balance on the date of the
distribution of the Sub-Account to the Beneficiary.
(iii) AMOUNT OF EXCESS 401(K) AND EXCESS MATCHING BENEFITS.
The Excess 401(k) and Excess Matching Benefits payable to a
Participant's Beneficiary under this Plan shall be equal to
such Participant's Excess 401(k) and Excess Matching
Sub-Account balances on the date of the distribution of the
Sub-Accounts to the Beneficiary.
(b) TIME AND MANNER OF PAYMENT.
(i) EXCESS PENSION BENEFIT. The Excess Pension
Benefit payable to a Beneficiary under this Plan shall be paid
at the same time or times and in the same manner as the
benefits payable to the Beneficiary last effectively
designated by the Participant under the Cash Balance Plan;
provided however, that the provisions of Subsection 6.1(a)(ii)
shall apply to such
11
<PAGE> 13
Benefit, treating the Beneficiary hereunder as if he were the
Participant.
(ii) EXCESS PROFIT SHARING BENEFIT/EXCESS 401(k)
BENEFIT AND EXCESS MATCHING BENEFIT. The Excess Profit Sharing
Benefit, Excess 401(k) Benefit and Excess Matching Benefit
payable to a Beneficiary under this Plan shall be paid as soon
as practicable following the death of the Participant in the
form of a lump sum payment.
(c) EFFECT OF DIFFERENT BENEFICIARIES UNDER THIS PLAN AND THE
CASH BALANCE PLAN. In the event the Beneficiary designated hereunder for the
Excess Pension Benefit is different than the Beneficiary under the Cash Balance
Plan, (i) if the Beneficiary hereunder dies after the Participant but while the
Beneficiary under the Cash Balance Plan is still living, any remaining payments
hereunder shall be payable, as they come due, to the estate of the Beneficiary
hereunder and (ii) if the Beneficiary hereunder predeceases the Beneficiary
under the Cash Balance Plan and the Participant, the Beneficiary hereunder shall
revert to the Beneficiary last effectively designated under the Cash Balance
Plan unless and until the Participant again makes a change of Beneficiary
pursuant to Section 7.2.
ARTICLE VIII
MISCELLANEOUS
-------------
SECTION 8.1. LIABILITY OF COMPANY. Nothing in this Plan shall
constitute the creation of a trust or other fiduciary relationship between the
Company and any Participant, Beneficiary or any other person.
SECTION 8.2. LIMITATION ON RIGHTS OF PARTICIPANTS AND
BENEFICIARIES - NO LIEN. The Plan is designed to be an unfunded, nonqualified
plan. Nothing contained herein shall be deemed to create a trust or lien in
favor of any Participant or Beneficiary on any assets of the Company. The
Company shall have no obligation to purchase any assets that do not remain
subject to the claims of the creditors of the Company for use in connection with
the Plan. No Participant or Beneficiary or any other person shall have any
preferred claim on, or any beneficial ownership interest in, any assets of the
Company prior to the time that such assets are paid to the Participant or
Beneficiary as provided herein. Each Participant and Beneficiary shall have the
status of a general unsecured creditor of the Company.
SECTION 8.3. NO GUARANTEE OF EMPLOYMENT. Nothing in this Plan
shall be construed as guaranteeing future employment to Participants. A
Participant continues to be an Employee of the Company solely at the will of the
Company subject to discharge at any time, with or without cause.
SECTION 8.4. PAYMENT TO GUARDIAN. If a benefit payable
hereunder is payable to a minor, to a person declared
12
<PAGE> 14
incompetent or to a person incapable of handling the disposition of his
property, the Plan Administrator may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of such
minor, incompetent or person. The Plan Administrator may require such proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate
prior to distribution of the benefit. Such distribution shall completely
discharge the Company from all liability with respect to such benefit.
SECTION 8.5. ASSIGNMENT. No right or interest under this Plan
of any Participant or Beneficiary shall be assignable or transferable in any
manner or be subject to alienation, anticipation, sale, pledge, encumbrance or
other legal process or in any manner be liable for or subject to the debts or
liabilities of the Participant or Beneficiary.
SECTION 8.6. SEVERABILITY. If any provision of this Plan or
the application thereof to any circumstance(s) or person(s) is held to be
invalid by a court of competent jurisdiction, the remainder of the Plan and the
application of such provision to other circumstances or persons shall not be
affected thereby.
ARTICLE IX
ADMINISTRATION OF PLAN
----------------------
SECTION 9.1. ADMINISTRATION. (a) IN GENERAL. The Plan shall be
administered by the Plan Administrator. The Plan Administrator shall have sole
and absolute discretion to interpret where necessary all provisions of the Plan
(including, without limitation, by supplying omissions from, correcting
deficiencies in, or resolving inconsistencies or ambiguities in, the language of
the Plan), to determine the rights and status under the Plan of Participants, or
other persons, to resolve questions or disputes arising under the Plan and to
make any determinations with respect to the benefits payable under the Plan and
the persons entitled thereto as may be necessary for the purposes of the Plan.
Without limiting the generality of the foregoing, the Plan Administrator is
hereby granted the authority (i) to determine whether a particular Employee is a
Participant, and (ii) to determine if an Employee is entitled to Excess
Retirement Benefits hereunder and, if so, the amount and duration of such
Benefits. The Plan Administrator's determination of the rights of any Employee
or former Employee hereunder shall be final and binding on all persons, subject
only to the provisions of Sections 9.3 and 9.4 hereof.
(b) DELEGATION OF DUTIES. The Plan Administrator may delegate
any of its administrative duties, including, without limitation, duties with
respect to the processing, review, investigation, approval and payment of Excess
Retirement Benefits, to a named administrator or administrators.
13
<PAGE> 15
SECTION 9.2. REGULATIONS. The Plan Administrator shall
promulgate any rules and regulations it deems necessary in order to carry out
the purposes of the Plan or to interpret the provisions of the Plan; provided,
however, that no rule, regulation or interpretation shall be contrary to the
provisions of the Plan. The rules, regulations and interpretations made by the
Plan Administrator shall, subject only to the provisions of Sections 9.3 and 9.4
hereof, be final and binding on all persons.
SECTION 9.3. CLAIMS PROCEDURES. The Plan Administrator shall
determine the rights of any Employee or former Employee to any Excess Retirement
Benefits hereunder. Any Employee or former Employee who believes that he has not
received the Excess Retirement Benefits to which he is entitled under the Plan
may file a claim in writing with the Plan Administrator. The Plan Administrator
shall, no later than 90 days after the receipt of a claim (plus an additional
period of 90 days if required for processing, provided that notice of the
extension of time is given to the claimant within the first 90 day period),
either allow or deny the claim in writing. If a claimant does not receive
written notice of the Plan Administrator's decision on his claim within the
above-mentioned period, the claim shall be deemed to have been denied in full.
A written denial of a claim by the Plan Administrator, wholly
or partially, shall be written in a manner calculated to be understood by the
claimant and shall include:
(a) the specific reasons for the denial;
(b) specific reference to pertinent Plan provisions on
which the denial is based;
(c) a description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(d) an explanation of the claim review procedure.
A claimant whose claim is denied (or his duly authorized
representative) may within 60 days after receipt of denial of a claim file with
the Plan Administrator a written request for a review of such claim. If the
claimant does not file a request for review of his claim within such 60-day
period, the claimant shall be deemed to have acquiesced in the original decision
of the Plan Administrator on his claim. If such an appeal is so filed within
such 60 day period, the Company (or its delegate) shall conduct a full and fair
review of such claim. During such review, the claimant shall be given the
opportunity to review documents that are pertinent to his claim and to submit
issues and comments in writing.
The Company shall mail or deliver to the claimant a written
decision on the matter based on the facts and the
14
<PAGE> 16
pertinent provisions of the Plan within 60 days after the receipt of the request
for review (unless special circumstances require an extension of up to 60
additional days, in which case written notice of such extension shall be given
to the claimant prior to the commencement of such extension). Such decision
shall be written in a manner calculated to be understood by the claimant, shall
state the specific reasons for the decision and the specific Plan provisions on
which the decision was based and shall, to the extent permitted by law, be final
and binding on all interested persons. If the decision on review is not
furnished to the claimant within the above-mentioned time period, the claim
shall be deemed to have been denied on review.
SECTION 9.4. REVOCABILITY OF PLAN ADMINISTRATOR/ COMPANY
ACTION. Any action taken by the Plan Administrator or the Company with respect
to the rights or benefits under the Plan of any Employee or former Employee
shall be revocable by the Plan Administrator or the Company as to payments not
yet made to such person, and acceptance of any Excess Retirement Benefits under
the Plan constitutes acceptance of and agreement to the Plan Administrator's or
the Company's making any appropriate adjustments in future payments to such
person (or to recover from such person) any excess payment or underpayment
previously made to him.
SECTION 9.5. AMENDMENT. The Nominating, Organization and
Compensation Committee of the Board of Directors of the Company (the
"Committee") may at any time amend any or all of the provisions of this Plan,
except that (a) no such amendment may adversely affect any Participant's vested
Excess Retirement Benefit as of the date of such amendment and (b) no such
amendment may suspend the crediting of earnings on the balance of a
Participant's Account, until the entire balance of such Account has been
distributed, in either case, without the prior written consent of the affected
Participant. Any amendment shall be in the form of a written instrument executed
by an officer of the Company on the order of the Committee. Subject to the
foregoing provisions of this Section, such amendment shall become effective as
of the date specified in such instrument or, if no such date is specified, on
the date of its execution.
SECTION 9.6. TERMINATION.
(a) The Committee, in its sole discretion, may terminate this
Plan at any time and for any reason whatsoever, except that (i) no such
termination may adversely affect any Participant's vested Excess Retirement
Benefit as of the date of such termination and (ii) no such termination may
suspend the crediting of earnings on the balance of a Participant's Account,
until the entire balance of such Account has been distributed, in either case,
without the prior written consent of the affected Participant. Any such
termination shall be expressed in the form of a written instrument executed by
an officer of the Company on the order of the Committee. Subject to the
foregoing provisions of this Section, such termination shall become effective as
of
15
<PAGE> 17
the date specified in such instrument or, if no such date is specified, on the
date of its execution. Written notice of any termination shall be given to the
Participants as soon as practicable after the instrument is executed.
(b) Notwithstanding anything in the Plan to the contrary, in
the event of a termination of the Plan (or any portion thereof), the Company, in
its sole and absolute discretion, shall have the right to change the time and
form of distribution of Participants' Excess Retirement Benefits.
Executed, this 23rd day of December, 1996, to be effective
January 1, 1997.
HAMILTON BEACH/PROCTOR-SILEX, INC.
By: /s/ George P. Manson
---------------------------------
Title: Vice-President, General Counsel & Secretary
16
<PAGE> 18
THE HAMILTON BEACH/PROCTOR-SILEX, INC.
UNFUNDED BENEFIT PLAN
Notice of
Form of Benefit Payment
1. ELECTION OF FORM OF BENEFIT: Pursuant to the provisions of
the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (the "Plan"), I
hereby elect that the portion of my Account attributable to my Excess 401(k)
Benefit and my Excess Matching Benefit be paid in one of the following forms:
(Elect One):
_____ A lump sum cash payment.
_____ Annual Installments over a period of ____
Years (must not exceed 9).
I understand that if I fail to make an election or if my election is for any
reason not effective, the portion of my Account attributable to my Excess 401(k)
Benefit and my Excess Matching Benefit will automatically be paid in the form of
annual installments for a period of 10 years.
2. EFFECTIVE DATE: I understand that in order for this
election to be effective, it must be received by the Plan Administrator at least
one year prior to the date on which I elected to commence payment of the portion
of my Account attributable to my Excess 401(k) Benefit and my Excess Matching
Benefit.
3. ACKNOWLEDGEMENT: I acknowledge that I have reviewed the
Plan and understand that my election will be subject to the terms and conditions
contained in the Plan. I understand
<PAGE> 19
that I may change this election by filing a new election form with my Employer
at least one year prior to the date on which I elected to commence payment of
the portion of my Account attributable to my Excess 401(k) Benefit and my Excess
Matching Benefit.
4. CONSTRUCTION: Terms used in this Notice of Election with
initial capital letters that are defined in the Plan shall have the meanings set
forth in the Plan unless a different meaning is clearly required by the context.
Executed this day of , 19 .
----- ---------------------- ---
-----------------------------------------
Signature
-----------------------------------------
Print or Type Name
Received by Employer:
-----------------------------------------
Signature
-----------------------------------------
Date
2
<PAGE> 1
Exhibit 10(cxvii)
HAMILTON BEACH/PROCTOR-SILEX, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
----------------------------------
GENERAL
- -------
Hamilton Beach/Proctor-Silex, Inc. (the "Company") has established an Annual
Incentive Compensation Plan (the "Plan") as part of a competitive compensation
program for the Officers and key management employees of the Company and its
Subsidiaries.
PLAN OBJECTIVE
- --------------
The Company desires to attract and retain talented employees to enable the
Company to meet its financial and business objectives. The objective of the Plan
is to provide an opportunity to earn annual incentive compensation to those
employees whose performance has a significant impact on the Company's short-term
and long-term profitability.
ADMINISTRATION AND PARTICIPATION
- --------------------------------
The Plan is administered by the Nominating, Organization and Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee:
a. May amend, modify, or discontinue the Plan.
b. Will approve participation in the Plan. Generally,
participants will include all employees in Hat Salary Jobs
Grades 14 and above. Employees who voluntarily terminate their
employment prior to year-end are not entitled to an award, and
employees joining the Company after August of any year will
not be entitled to an award. However, the Committee may select
any employee who has contributed significantly to the
Company's profitability to participate in the Plan and receive
an annual incentive compensation award.
c. Will determine the annual performance criteria which generates
the incentive compensation pool.
d. Will determine the total amount of both the target and actual
annual incentive compensation pool.
e. Will approve individual incentive compensation awards to
Officers and employees above Hay Salary Job Grade 17.
f. May delegate to the Chief Financial Officer of the Company the
power to approve incentive compensation awards to employees in
and below Hay Salary Job Grade 17.
g. May consider at the end of each year the award of a
discretionary bonus amount to non-participants as an addition
to the regular incentive compensation poll on a special
one-time basis to motivate individuals not eligible to
participate in the Plan.
h. May approve a pro rata incentive compensation award for
participants in the Plan whose employment is terminated (1)
due to death, disability, retirement or facility closure, such
award to be determined pursuant to the provisions of
subparagraphs e. and f. above or (2) under other circumstances
at the recommendation of the Chief Financial Officer of the
Company.
<PAGE> 2
DETERMINATION OF CORPORATE INCENTIVE COMPENSATION POOL
- ------------------------------------------------------
Each participant in the Plan will have an individual target incentive
compensation percentage which is determined by the participant's Salary Job
Grade. This percentage is multiplied by the midpoint of the participant's Salary
Job Grade to determine his individual target incentive compensation award. The
total of the target incentive compensation awards of all participants equals the
target corporate incentive compensation pool (the "Target Pool"). The Target
Pool is approved each year by the Committee.
The actual corporate incentive compensation pool (the "Actual Pool") is
determined at the end of each year based on the Company's actual performance
against specific criteria established in the beginning of the year by the
Committee. The Target Pool is adjusted upwards or downwards by corporate
performance adjustment factor to determine the Actual Pool. In no event will the
Actual Pool exceed 150% of the Target Pool, except to the extent that the
Committee elects to increase the Actual Pool by up to 10%, as described below.
It is the intent of the Plan that the Actual Pool, as determined above, will by
the final total corporate incentive compensation pool. However, the Committee,
in its sole discretion, may increase or decrease by up to 10% the Actual Pool or
may approve an incentive compensation pool where there would normally be no poll
due to Company performance which is below the criteria established for the year.
The Actual and Target Pools exclude commission personnel as salespersons,
regional general manager and manufacturing representatives.
DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS
- ---------------------------------------------------------
Salary Job Grades and the corresponding target incentive percentage for each
participant in the Plan will be established at the beginning of each year and
approved by the Committee. Individual target incentive compensation will then be
adjusted by the appropriate pool factor. Such adjusted individual incentive
compensation will then be further modified based on a participant's performance
as compared to his individual goals for the year. The total of all individual
incentive compensation awards must not exceed the Actual Pool for the year.
PERFORMANCE TARGETS - See Plan Summary.
- -------------------
<PAGE> 1
EXHIBIT 11
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
---- ---- ----
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
INCOME:
Income before extraordinary items $50,577 $65,506 $45,272
Extraordinary gain, net-of-tax -- 32,333 --
Extraordinary charges, net-of-tax -- (3,399) (3,218)
------- ------- -------
Net income $50,577 $94,440 $42,054
======= ======= =======
PER SHARE AMOUNTS REPORTED TO
STOCKHOLDERS -- Note 1
Income before extraordinary items $ 5.67 $ 7.31 $ 5.06
Extraordinary gain, net-of-tax -- 3.61 --
Extraordinary charges, net-of-tax -- (.38) (.36)
------- ------- -------
Net income $ 5.67 $ 10.54 $ 4.70
======= ======= =======
PRIMARY:
Weighted average shares outstanding 8,920 8,963 8,948
Dilutive stock options -- Note 2 11 12 12
------- ------- -------
Totals 8,931 8,975 8,960
======= ======= =======
Per share amounts
Income before extraordinary items $ 5.66 $ 7.30 $ 5.05
Extraordinary gain, net-of-tax -- 3.60 --
Extraordinary charges, net-of-tax -- (.38) (.35)
------- ------- -------
Net income $ 5.66 $ 10.52 $ 4.70
======= ======= =======
FULLY DILUTED:
Weighted average shares outstanding 8,920 8,963 8,948
Dilutive stock options -- Note 2 11 12 9
------- ------- -------
Totals 8,931 8,975 8,957
======= ======= =======
Per share amounts
Income before extraordinary items $ 5.66 $ 7.30 $ 5.05
Extraordinary gain, net-of-tax -- 3.60 --
Extraordinary charges, net-of-tax -- (.38) (.35)
------- ------- -------
Net income $ 5.66 $ 10.52 $ 4.70
======= ======= =======
</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 year-end market price, if higher than the average
market price, is used.
<PAGE> 1
EXHIBIT 13
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(A)(1) AND (2), AND ITEM 14(d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1996
NACCO INDUSTRIES, INC.
MAYFIELD HEIGHTS, OHIO
F-1
<PAGE> 2
FORM 10-K
ITEM 14(A)(1) AND (2)
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
LIST FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of NACCO Industries,
Inc. and Subsidiaries are included in Item 8:
Report of Independent Public Accountants--Year ended December 31,
1996, 1995 and 1994.
Consolidated Statements of Income--Year ended December 31, 1996, 1995
and 1994.
Consolidated Balance Sheets--December 31, 1996 and December 31, 1995.
Consolidated Statements of Cash Flows--Year ended December 31, 1996,
1995 and 1994.
Consolidated Statements of Stockholders' Equity--Year ended December
31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
NACCO Industries, Inc. Report of Management
The following consolidated financial statement schedules of NACCO
Industries, Inc. and Subsidiaries are included in Item 14(d):
Schedule I Condensed Financial Information of the Parent
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
F-2
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of NACCO Industries, Inc.:
We have audited the accompanying consolidated balance sheets of NACCO
Industries, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements and the schedules referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NACCO Industries, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in Item 14(a)(1) and (2) and
Item 14(d) of Form 10-K are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
Arthur Andersen LLP
Cleveland, Ohio
February 20, 1997
F-3
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------
1996 1995 1994
--------- --------- ---------
(In millions, except per share data)
<S> <C> <C> <C>
Revenues $ 2,273.2 $ 2,204.5 $ 1,864.9
Cost of sales 1,844.2 1,781.1 1,493.0
GROSS PROFIT 429.0 423.4 371.9
Selling, general and administrative expenses 282.4 261.0 228.6
Amortization of goodwill 15.4 13.7 13.7
--------- --------- ---------
OPERATING PROFIT 131.2 148.7 129.6
Other income (expense)
Interest expense (45.9) (47.2) (53.2)
Other - net 1.0 2.0 2.1
--------- --------- ---------
(44.9) (45.2) (51.1)
--------- --------- ---------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEMS 86.3 103.5 78.5
Provision for income taxes 34.3 34.7 30.7
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEMS 52.0 68.8 47.8
Minority interest (1.4) (3.3) (2.5)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 50.6 65.5 45.3
Extraordinary items:
Extraordinary gain, net-of-tax -- 32.3 --
Extraordinary charges, net-of-tax -- (3.4) (3.2)
--------- --------- ---------
NET INCOME $ 50.6 $ 94.4 $ 42.1
========= ========= =========
PER SHARE:
Income Before Extraordinary Items $ 5.67 $ 7.31 $ 5.06
Extraordinary items:
Extraordinary gain, net-of-tax -- 3.61 --
Extraordinary charges, net-of-tax -- (.38) (.36)
--------- --------- ---------
Net Income $ 5.67 $ 10.54 $ 4.70
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31
--------------------------
1996 1995
-------- --------
(In millions)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 47.8 $ 30.9
Accounts receivable, net of allowance of $12.5 and $11.3 212.2 284.2
Inventories 309.6 388.8
Prepaid expenses and other 22.2 18.1
-------- --------
591.8 722.0
PROPERTY, PLANT AND EQUIPMENT, NET 550.3 534.4
DEFERRED CHARGES
Goodwill, net 461.0 465.1
Deferred costs and other 59.6 56.7
Deferred income taxes 7.9 17.3
-------- --------
528.5 539.1
OTHER ASSETS 37.5 38.3
-------- --------
TOTAL ASSETS $1,708.1 $1,833.8
======== ========
</TABLE>
F-5
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31
--------------------------
1996 1995
-------- --------
(In millions)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 186.3 $ 250.7
Revolving credit agreements 45.8 95.7
Current maturities of long-term debt 21.4 19.9
Income taxes 5.9 4.7
Accrued payroll 30.8 29.8
Accrued warranty obligations 21.5 17.7
Other current liabilities 104.3 105.2
-------- --------
416.0 523.7
LONG-TERM DEBT - not guaranteed by
the parent company 333.3 320.2
OBLIGATIONS OF PROJECT MINING SUBSIDIARIES -
not guaranteed by the parent company or
its subsidiary, The North American Coal Corporation 341.5 346.5
SELF-INSURANCE RESERVES AND OTHER 223.9 229.3
MINORITY INTEREST 14.1 44.0
STOCKHOLDERS' EQUITY
Common stock:
Class A, par value $1 per share, 6,492,059
shares outstanding (1995 - 7,256,971 shares
outstanding) 6.5 7.3
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,694,336 shares outstanding
(1995 - 1,709,453 shares outstanding) 1.7 1.7
Capital in excess of par value .1 3.6
Retained earnings 359.2 350.3
Foreign currency translation adjustment and other 11.8 7.2
-------- --------
379.3 370.1
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,708.1 $1,833.8
======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
1996 1995 1994
------ ------ ------
(In millions)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 50.6 $ 94.4 $ 42.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary gain, net-of-tax -- (32.3) --
Extraordinary charges, net-of-tax -- 2.2 1.0
Depreciation, depletion and amortization 85.3 79.3 80.2
Deferred income taxes (3.2) 1.4 4.0
Other non-cash items (3.7) 2.1 (6.2)
Working capital changes:
Accounts receivable 90.0 (38.6) (31.2)
Inventories 87.3 (85.6) (54.8)
Other current assets (.6) 2.4 (5.4)
Accounts payable and other liabilities (64.3) 6.8 68.1
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 241.4 32.1 97.8
------ ------ ------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (79.4) (73.1) (52.6)
Proceeds from the sale of other assets 1.1 1.3 11.1
Acquisitions of businesses (45.1) (7.3) --
Other-net .6 .7 1.5
------ ------ ------
NET CASH USED FOR INVESTING ACTIVITIES (122.8) (78.4) (40.0)
------ ------ ------
FINANCING ACTIVITIES
Additions to long-term debt
and revolving credit agreements 115.9 328.2 122.1
Reductions of long-term debt
and revolving credit agreements (157.4) (276.5) (192.7)
Additions to obligations of project mining
subsidiaries 68.8 93.0 56.4
Reductions of obligations of project mining
subsidiaries (74.5) (102.1) (67.7)
Financing of other short-term obligations (10.6) 10.8 11.9
Stock repurchase (40.4) -- --
Cash dividends paid (6.7) (6.4) (6.0)
Capital grants 4.2 4.0 1.6
Other-net (2.8) 5.6 3.6
------ ------ ------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (103.5) 56.6 (70.8)
------ ------ ------
Effect of exchange rate changes on cash 1.8 1.1 3.4
------ ------ ------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year 16.9 11.4 (9.6)
Balance at the beginning of the year 30.9 19.5 29.1
------ ------ ------
BALANCE AT THE END OF THE YEAR $ 47.8 $ 30.9 $ 19.5
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1996 1995 1994
------ ------ ------
(In millions)
<S> <C> <C> <C>
CLASS A COMMON STOCK
Beginning balance $ 7.3 $ 7.2 $ 7.2
Purchase of treasury shares (.8) -- --
Other -- .1 --
------ ------ ------
6.5 7.3 7.2
------ ------ ------
CLASS B COMMON STOCK 1.7 1.7 1.7
------ ------ ------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance 3.6 2.8 2.5
Shares issued under stock
option and compensation plans 1.1 .8 .3
Purchase of treasury shares (4.6) -- --
------ ------ ------
.1 3.6 2.8
------ ------ ------
RETAINED EARNINGS
Beginning balance 350.3 262.3 226.2
Net income 50.6 94.4 42.1
Purchase of treasury shares (35.0) -- --
Cash dividends on Class A and Class B
common stock:
1996 $.743 per share (6.7)
1995 $.710 per share (6.4)
1994 $.675 per share (6.0)
------ ------ ------
359.2 350.3 262.3
------ ------ ------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT AND OTHER
Beginning balance 7.2 5.4 (2.1)
Foreign currency translation adjustment and other 4.6 1.8 7.5
------ ------ ------
11.8 7.2 5.4
------ ------ ------
TOTAL STOCKHOLDERS' EQUITY $379.3 $370.1 $279.4
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGE DATA)
NOTE 1--NATURE OF OPERATIONS
The Company has four operating subsidiaries which function in distinct business
environments; forklift truck manufacturing and service parts distribution, small
electric appliance manufacturing, mining and retail.
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. NMHG's manufacturing plants are
located primarily in the United States and Europe. In addition, NMHG has
manufacturing facilities in Japan through its 50-percent-owned Japanese joint
venture, Sumitomo-NACCO ("S-N"). While NMHG's market position is strongest in
North America, it also has a significant presence in Europe and a growing
position in Asia-Pacific.
Hamilton Beach-Proctor-Silex, Inc. ("HB-PS") designs, manufactures and markets
small electric appliances covering approximately 80 percent of the small kitchen
electric appliance market. Effective October 18, 1996, HB-PS became a wholly
owned subsidiary when NACCO purchased the remaining 20 percent minority interest
from the previous minority shareholder. The effect of this transaction was not
material to NACCO's financial position or results of operations. HB-PS
manufactures the majority of its products at its plants located in North America
and also sources some of its products from the Far East. The company primarily
sells its products to retailers and distributors in North America.
The North American Coal Corporation ("NACoal"), wholly owned by NACCO, mines and
markets lignite for use primarily as fuel for power generation by electric
utilities. The company operates four surface lignite mines, two in North Dakota
and one each in Texas and Louisiana. Each of these lignite mines operates under
long-term contracts to sell lignite at a price based on actual costs plus an
agreed pretax profit per ton. In addition, NACoal provides dragline mining
services at a limerock quarry in Florida.
The Kitchen Collection, Inc. ("KCI"), wholly owned by NACCO, is a national
specialty retailer of kitchenware and small electric appliances with stores
located primarily in factory outlet malls KCI operates stores under the Kitchen
Collection(R) and Hearthstone(TM) names and sells brand-name kitchenware,
tableware, small electric appliances and related accessories.
NOTE 2--ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its
majority owned subsidiaries (NACCO Industries, Inc. and Subsidiaries - the
"Company"). Intercompany accounts and transactions are eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities (if
any) at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash in banks and
highly liquid investments with original maturities of three months or less.
F-9
<PAGE> 10
NOTE 2-- ACCOUNTING POLICIES - Continued
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
determined under the last-in, first-out (LIFO) method for manufacturing
inventories in the United States and under the first-in, first-out (FIFO) method
with respect to all other inventories.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at
cost. Depreciation, depletion and amortization are provided in amounts
sufficient to amortize the cost of the assets (including assets recorded under
capital leases) over their estimated useful lives using the straight-line
method. The units-of-production method is used to amortize certain coal-related
assets based on estimated recoverable tonnages.
GOODWILL: Goodwill represents the excess purchase price paid over the fair value
of the net assets acquired. The amortization of goodwill is determined on a
straight-line basis over a 40-year period. Accumulated amortization of goodwill
was $106.2 million and $90.8 million at December 31, 1996 and 1995,
respectively. Management regularly evaluates its accounting for goodwill
considering such factors as historical and future profitability and believes
that the asset is realizable and the amortization period remains appropriate.
REVENUE RECOGNITION: Revenues are recognized when customer orders are complete
and shipped. Accruals for the cost of product warranties are maintained for
anticipated future claims.
ADVERTISING COSTS: Advertising costs are expensed as incurred and amounted to
$33.6 million in 1996, $32.6 million in 1995 and $26.2 million in 1994.
PRODUCT DEVELOPMENT COSTS: Expenses associated with the development of new
products and changes to existing products are charged to expense as incurred.
These costs amounted to $27.0 million, $27.5 million and $25.9 million in 1996,
1995 and 1994, respectively.
FOREIGN CURRENCY: Assets and liabilities of foreign operations are translated
into U.S. dollars at the fiscal year-end exchange rate. The related translation
adjustments are recorded as a separate component of stockholders' equity.
Revenues and expenses are translated using average exchange rates prevailing
during the year.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: Financial
instruments held by the Company include cash and cash equivalents, accounts
receivable, accounts payable, revolving credit agreements, long-term debt,
interest rate swap agreements and forward foreign currency exchange contracts.
The fair values of these financial instruments have been determined using quoted
market sources and management estimates. The Company does not hold or issue
financial instruments or derivative financial instruments for trading purposes.
The Company enters into forward foreign currency exchange contracts with terms
of one to twelve months. These contracts hedge certain foreign currency
denominated receivables and payables and foreign currency commitments. Gains and
losses on these contracts are deferred and recognized as part of the cost of the
underlying transaction being hedged.
The Company also enters into interest rate swap agreements with terms ranging
from three months to seven years. The difference between the floating interest
rate and fixed interest rate which is to be paid or received is recognized in
interest expense as the floating interest rate changes over the life of the
agreement.
EARNINGS PER SHARE: The calculation of net income per share is based on the
weighted average number of shares outstanding during each period.
F-10
<PAGE> 11
NOTE 2-- ACCOUNTING POLICIES - Continued
RECENTLY ISSUED ACCOUNTING STANDARD: In October 1996, the American Institute of
Certified Public Accountants ("AICPA") issued Statement of Position 96-1
"Environmental Remediation Liabilities." This statement provides guidance on the
recognition and measurement of environmental remediation liabilities incurred as
a result of threatened litigation or actual assessment. The Company does not
expect the adoption of this statement, which is required in fiscal 1997, to have
a material impact on its financial position or results of operations.
RECLASSIFICATIONS: Certain amounts in the prior periods' consolidated financial
statements have been reclassified to conform to the current period's
presentation.
NOTE 3--EXTRAORDINARY ITEMS
EXTRAORDINARY GAIN - UMWA OBLIGATION
The extraordinary gain of $32.3 million recognized in 1995, net of $19.8 million
in taxes, relates to a downward revision in the obligation to the United Mine
Workers of America Combined Benefit Fund ("UMWA"). This obligation was
recognized by The Bellaire Corporation ("Bellaire," a wholly owned non-operating
subsidiary of NACCO) as an extraordinary charge in 1992 to accrue for the
estimated costs associated with the Coal Industry Retiree Health Benefit Act of
1992 ("Coal Act"), which is discussed in more detail in Note 9 on page F-16. It
is the Company's policy to periodically review the estimates and assumptions
upon which various liability reserves are based. As a result of a review of the
assumptions relating to the number of Company and industry covered beneficiaries
ultimately assigned to Bellaire, and the trend of health care costs, the
aggregate estimated costs associated with the Coal Act are expected to be lower
than originally anticipated. Management believes that the liability, revised to
$69.3 million, net of deferred taxes, in 1995, more accurately represents the
future cost of this obligation.
EXTRAORDINARY CHARGES - EARLY EXTINGUISHMENT OF DEBT
The extraordinary charges recognized in 1995 and 1994 relate to the write-off of
premiums and unamortized financing fees. The 1995 extraordinary charge includes
a $1.3 million charge in the first quarter for unamortized financing fees when
NMHG's former revolving credit facility and senior term loan were replaced by a
new long-term revolving credit facility. The retirement of $78.5 million and
$70.0 million face-value Hyster-Yale 12 3/8% debentures in 1995 and 1994,
respectively, resulted in charges of $2.1 million in the third quarter of 1995
and $3.2 million in 1994 due to the write-off of premiums and unamoritized
financing fees. These retirements were achieved using internally generated funds
of NMHG and equity infusions from existing stockholders.
F-11
<PAGE> 12
NOTE 4--INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1996 1995
------- -------
<S> <C> <C>
Manufacturing inventories:
Finished goods and service parts -
NMHG $113.6 $117.4
HB-PS 34.1 43.3
------ ------
147.7 160.7
------ ------
Raw materials and work in process -
NMHG 120.6 182.0
HB-PS 14.0 15.7
------ ------
134.6 197.7
------ ------
LIFO reserve -
NMHG (15.6) (13.3)
HB-PS .3 (.3)
------ ------
(15.3) (13.6)
------ ------
Total manufacturing inventories 267.0 344.8
Coal - NACoal 8.3 10.6
Mining supplies - NACoal 18.9 19.1
Retail inventories - KCI 15.4 14.3
------ ------
$309.6 $388.8
====== ======
</TABLE>
The cost of manufacturing inventories has been determined by the LIFO method for
62 percent and 66 percent of such inventories at December 31, 1996 and 1995,
respectively.
NOTE 5--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes the following:
<TABLE>
<CAPTION>
December 31
------------------------
1996 1995
------- -------
<S> <C> <C>
Coal lands and real estate:
NMHG $ 6.6 $ 6.4
HB-PS 1.6 .8
NACoal 16.1 15.3
Project mining subsidiaries (Note 8) 77.9 77.1
KCI -- .1
NACCO and Other .2 .3
------- -------
102.4 100.0
------- -------
Plant and equipment:
NMHG 289.3 250.6
HB-PS 123.7 111.7
NACoal 20.7 18.2
Project mining subsidiaries (Note 8) 438.4 428.2
KCI 7.4 7.3
NACCO and Other 4.8 4.1
------- -------
884.3 820.1
------- -------
Property, plant and equipment at cost 986.7 920.1
Less allowances for depreciation, depletion
and amortization 436.4 385.7
------- -------
$ 550.3 $ 534.4
======= =======
</TABLE>
F-12
<PAGE> 13
NOTE 5--PROPERTY, PLANT AND EQUIPMENT - Continued
Total depreciation, depletion and amortization expense on property, plant and
equipment was $67.7 million, $63.9 million and $63.2 million during 1996, 1995
and 1994, respectively.
Proven and probable coal reserves approximated 2.1 billion tons at December 31,
1996 and 1995.
NOTE 6--REVOLVING CREDIT AGREEMENTS
Financing arrangements are obtained and maintained at the subsidiary level.
NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
The following table summarizes the Company's available and outstanding
borrowings. A detail of the agreements at each subsidiary follows this table.
<TABLE>
<CAPTION>
December 31
-------------------------
1996 1995
------- -------
<S> <C> <C>
Available borrowings:
NMHG $ 385.7 $ 380.5
HB-PS 185.0 160.0
NACoal 50.0 50.0
KCI 5.0 5.0
------- -------
$ 625.7 $ 595.5
======= =======
Current portion of borrowings outstanding:
NMHG $ 7.8 $ 78.6
HB-PS 9.0 17.1
NACoal 29.0 --
KCI -- --
------- -------
$ 45.8 $ 95.7
======= =======
Unused availability:
NMHG $ 133.9 $ 56.0
HB-PS 96.0 77.9
NACoal 21.0 50.0
KCI 5.0 5.0
------- -------
$ 255.9 $ 188.9
======= =======
Weighted average stated interest rate:
NMHG 6.0% 6.5%
HB-PS 5.8% 6.2%
NACoal 6.1% 6.6%
KCI 6.0% 6.6%
</TABLE>
NMHG: NMHG's credit agreement provides for an unsecured revolving credit
facility ("NMHG Facility") that permits advances up to $350.0 million. A portion
of the outstanding balance is classified as long-term because it is not expected
to be repaid during the subsequent fiscal year. The company entered into the
NMHG Facility in 1995 to replace its former bank agreement and to refinance the
majority of its previously outstanding long-term debt. The expiration date of
the NMHG Facility (which was extended to June 2001 during 1996) 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. The NMHG Facility currently provides for, at the company's
option, Euro-Dollar Loans which bear interest at LIBOR plus 0.3 percent and
Money Market Loans which bear interest at Auction Rates (as defined in the
agreement) and requires a 0.2 percent fee on the available borrowings. NMHG also
has separate facilities totaling $35.7 and $30.5 million at December 31, 1996
and 1995, respectively, of which $27.9 million and $26.5 million was available
at December 31, 1996 and 1995, respectively.
F-13
<PAGE> 14
NOTE 6--REVOLVING CREDIT AGREEMENTS - Continued
HB-PS: HB-PS's credit agreement provides for a revolving credit facility ("HB-PS
Facility") that permits advances up to $160.0 million and is secured by
substantially all assets of HB-PS. A portion of the outstanding balance is
classified as long-term because it is not expected to be repaid during the
subsequent fiscal year. The expiration date of the HB-PS Facility (which was
extended to May 1999 during 1996) may be extended, on an annual basis, for one
additional year upon the mutual consent of HB-PS and the bank group. In 1995 the
HB-PS Facility was amended to provide a lower interest rate if HB-PS achieves a
certain interest coverage ratio, and to allow for interest rates quoted under a
competitive bid option. The HB-PS Facility currently provides for interest at
LIBOR plus 0.3 percent and requires a 0.2 percent facility fee on the available
borrowings. At December 31, 1996 and December 31, 1995, HB-PS also had $25.0
million available under separate facilities, of which $23.9 million and $25.0
million was available at December 31, 1996 and 1995, respectively.
NACOAL: NACoal has in place a revolving credit facility ("NACoal Facility") that
permits advances up to $50.0 million and requires a 0.2 percent commitment and
facility fee. The expiration date of the NACoal Facility (which was extended to
September 2001 during 1996) may be extended, on an annual basis, for one
additional year upon the mutual consent of NACoal and the bank group. Borrowings
bear interest at LIBOR plus 0.4 percent.
KCI: KCI has in place a revolving credit facility ("KCI Facility") that permits
advances up to $5.0 million and requires a 0.2 percent facility fee. The
expiration date of the KCI Facility (which was extended to May 1999 during 1996)
may be extended, on an annual basis, for one additional year upon the mutual
consent of KCI and the bank group. Borrowings bear interest at the bank's prime
rate, money market rate or LIBOR rate plus a base rate margin of 0.4 to 1.2
percent, as determined by certain performance measures.
NOTE 7--LONG-TERM DEBT
Subsidiary long-term debt, less current maturities, is as follows:
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
------ ------
<S> <C> <C>
NMHG - Long-term portion of revolving credit agreement $244.0 $245.9
NMHG - Other 3.7 4.1
------ ------
247.7 250.0
HB-PS - Long-term portion of revolving credit agreement 80.0 65.0
HB-PS - Other .5 --
------ ------
80.5 65.0
KCI - Term note with a stated interest rate of 6.8% and 6.9% at
December 31, 1996 and 1995, respectively, payable 1999 to 2000 5.0 5.0
NACOAL - Other .1 .2
------ ------
$333.3 $320.2
====== ======
</TABLE>
The maturities of the subsidiary long-term debt for the next five years,
including current maturities, are as follows: $1.2 million in 1997, $0.2 million
in 1998, $2.5 million in 1999, $2.5 million in 2000 and $0 in 2001.
Interest paid was $32.1 million, $38.4 million and $41.2 million during 1996,
1995 and 1994, respectively.
F-14
<PAGE> 15
NOTE 7--LONG-TERM DEBT - Continued
The credit agreements for NMHG, HB-PS, NACoal and KCI contain certain covenants
and restrictions. Covenants require, among other things, some or all of the
following: maintenance of certain minimum amounts of net worth and certain
specified ratios of working capital, debt to capitalization, interest coverage
and fixed charge coverage. These ratios are calculated at the subsidiary level.
Restrictions include limits on capital expenditures and dividends. At December
31, 1996, the subsidiaries were in compliance with all of the covenants in their
credit agreements.
NOTE 8--OBLIGATIONS OF PROJECT MINING SUBSIDIARIES
NACoal's project mining subsidiaries have entered into long-term contracts with
various utility customers to provide lignite at a sales price based on cost plus
a profit per ton. The utility customers have arranged and guaranteed the
financing for the development and operation of these subsidiary mines. The
obligations of these project mining subsidiaries included in the Company's
consolidated balance sheets do not affect the short- or long-term liquidity of
the Company and are without recourse to NACCO or its NACoal subsidiary.
Obligations of project mining subsidiaries, less current maturities, consist of
the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Capitalized lease obligations $136.6 $146.4
Non-interest-bearing advances from customers 184.2 176.4
Promissory notes with interest rates ranging
from 5.8% to 8.7% during 1996 and 5.0% to 8.7%
during 1995 20.7 23.7
------ ------
$341.5 $346.5
====== ======
</TABLE>
The annual maturities of the promissory notes are: $6.2 million in 1997, $3.2
million in 1998, $3.1 million in 1999, $3.1 million in 2000 and $2.6 million in
2001. Advances from customers are used to develop, operate and provide for the
ongoing working capital needs of certain project mining subsidiaries.
Interest paid was $13.6 million, $14.3 million and $17.7 million during 1996,
1995 and 1994, respectively. The cost of coal, which is passed through to the
utility customers, includes interest expense.
The project mining subsidiaries' capital lease obligations for mining equipment
have the following future minimum lease payments at December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 22.6
1998 21.9
1999 21.5
2000 20.6
2001 20.3
Subsequent to 2001 120.2
-------
Total minimum lease payments 227.1
Amounts representing interest (78.9)
-------
Present value of net minimum
lease payments 148.2
Current maturities (11.6)
-------
$ 136.6
=======
</TABLE>
Interest expense and amortization in excess of annual lease payments are
deferred and recognized in years when annual lease payments exceed interest
expense and amortization.
F-15
<PAGE> 16
NOTE 8--OBLIGATIONS OF PROJECT MINING SUBSIDIARIES - Continued
Project mining assets recorded under capital leases are included in property,
plant and equipment and consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Plant and equipment $ 198.7 $ 201.0
Less accumulated amortization 87.1 78.3
------- -------
$ 111.6 $ 122.7
======= =======
</TABLE>
During 1996, 1995 and 1994, the project mining subsidiaries incurred capital
lease obligations of $1.8 million, $18.0 million and $5.2 million, respectively,
in connection with lease agreements to acquire plant and equipment.
The above obligations are secured by substantially all owned assets of the
respective project mining subsidiary and the assignment of all rights under its
coal sales agreement.
NOTE 9--SELF-INSURANCE RESERVES AND OTHER
Self-insurance reserves and other consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
Present value of closed mine obligations $ 53.1 $ 53.8
Reserve for future interest on obligation to UMWA 61.5 64.2
------- -------
114.6 118.0
Other self-insurance reserves 109.3 111.3
------- -------
$ 223.9 $ 229.3
======== ========
</TABLE>
The closed mine obligations relate to Bellaire's former eastern U.S. underground
mining operations and the Indian Head Mine, which ceased operations in 1992.
Included in these obligations is the obligation to UMWA which resulted from the
Coal Act. The Coal Act requires Bellaire to incur additional costs for retiree
medical expenses of certain United Mine Worker retirees. Annual cash payments of
up to $3.0 million after tax are expected relating to this obligation and could
continue for as long as 40 to 50 years. The Company has recorded this obligation
on an undiscounted basis. The reserve for future interest represents the portion
of this reserve comprising interest costs. In addition, the closed mine
obligations include reserves for land reclamation and site treatment at certain
closed eastern underground and western surface mines, as well as reserves for
workers compensation and black lung benefit costs.
The other self-insurance reserves primarily include product liability reserves,
employee retirement benefit obligations and other miscellaneous reserves.
NOTE 10--LEASE COMMITMENTS
Future minimum operating lease payments, excluding project mining subsidiaries,
at December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997 $ 18.7
1998 17.7
1999 15.3
2000 12.9
2001 10.6
Thereafter 14.0
------
$ 89.2
======
</TABLE>
Rental expense for all operating leases, excluding project mining subsidiaries,
amounted to $23.6 million, $20.7 million and $16.9 million during 1996, 1995 and
1994, respectively.
F-16
<PAGE> 17
NOTE 11--FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS
A financial instrument is cash or a contract that imposes an obligation to
deliver, or conveys a right to receive, cash or another financial instrument.
The fair value of financial instruments approximated carrying values at December
31, 1996 and 1995. Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of accounts receivable and
derivatives. Concentration of credit risk on accounts receivable is mitigated by
the large number of customers comprising the Company's customer base and their
dispersion across many different industries and geographies. The Company enters
into derivative contracts with high-quality institutions and limits the amount
of credit exposure to any one institution.
DERIVATIVE FINANCIAL INSTRUMENTS
INTEREST RATE DERIVATIVES: The Company's operating subsidiaries enter into
interest rate swap agreements ("swaps"). These swaps allow the subsidiaries to
enter into long-term credit agreements that have performance-based, floating
rates of interest and then exchange them for fixed rates, as opposed to entering
into higher cost fixed-rate credit arrangements. The following table summarizes
the notional amounts, related rates (including applicable margins) and remaining
terms on swaps outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Notional Fixed Rate Remaining
Amount Paid Term
----------- ---------- -----------
<S> <C> <C> <C>
NMHG $310.0 6.4% 1 to 7 Yrs.
HB-PS $ 75.0 6.3% 2 to 3 Yrs.
NACoal $ 13.9 6.8% 6 Yrs.
KC $ 5.0 8.1% 3 to 4 Yrs.
</TABLE>
FOREIGN CURRENCY DERIVATIVES: NMHG and HB-PS enter into forward foreign currency
exchange contracts for purposes of hedging their exposure to foreign currency
exchange rate fluctuations. These contracts hedge primarily firm commitments
and, to a lesser degree, forecasted commitments relating to cash flows
associated with sales and purchases denominated in foreign currencies. NMHG and
HB-PS had forward foreign currency exchange contracts outstanding in the amounts
of $61.1 million and $2.7 million, respectively, at December 31, 1996, primarily
denominated in Japanese yen, Australian dollars, French francs and Canadian
dollars. At December 31, 1995, NMHG and HB-PS had forward foreign currency
exchange contracts outstanding in the amounts of $293.2 million and $3.8
million, respectively, primarily denominated in Japanese yen, British pounds
sterling, French francs and Canadian dollars. The amount of deferred loss on
these contracts at December 31, 1996 was not material.
NOTE 12--CONTINGENCIES
Various legal proceedings and claims have been or may be asserted against NACCO
and certain subsidiaries relating to the conduct of its business, including
product liability and environmental claims. These proceedings are incidental to
their ordinary course of business. Management believes that it has meritorious
defenses and will vigorously defend itself in these actions. Any costs that
management estimates will be paid as a result of these claims are accrued when
the liability is considered probable and the amount can be reasonably estimated.
Although the ultimate disposition of these proceedings is not presently
determinable, management believes, after consultation with its General Counsel,
that the likelihood that material costs will be incurred in excess of accruals
already recognized is remote.
NMHG is subject to recourse or repurchase obligations under various financing
arrangements for certain independently owned retail dealerships at December 31,
1996. Also, certain dealer loans are guaranteed by NMHG. When NMHG is the
guarantor of the principal amount financed, a security interest is usually
maintained in certain assets of parties for whom NMHG is guaranteeing debt.
Total amounts subject to
F-17
<PAGE> 18
NOTE 12--CONTINGENCIES - Continued
recourse or repurchase obligation at December 31, 1996 and 1995 were $125.6
million and $100.8 million, respectively. Losses anticipated under the terms of
the recourse or repurchase obligations are not significant and have been
reserved for in the consolidated financial statements.
NOTE 13--COMMON STOCK
The Class A common stock has one vote per share and the Class B common stock has
10 votes per share. The total number of authorized shares of Class A common
stock and Class B common stock at December 31, 1996, was 25,000,000 shares and
6,756,176 shares, respectively. Treasury shares of Class A stock totaling
1,597,447 and 817,418 at December 31, 1996 and 1995, respectively, have been
deducted from shares issued.
STOCK REPURCHASE PROGRAM: In 1996, the board of directors authorized the
repurchase of up to 1.5 million shares of the Company's Class A common stock.
Pursuant to this authorization, the Company commenced an issuer tender offer
(the "Offer") on November 18, 1996 for the purchase of up to 800,000 Class A
common shares at prices of $43.50 to $50.00 per share. The Offer resulted in the
repurchase of 800,000 shares on December 23, 1996, at $50.00 per share. The
$40.4 million cost of this transaction, including fees and expenses, was
financed using cash on hand and the Company's revolving credit facilities. In
addition to the Offer, the Company is authorized to purchase up to 700,000
shares of Class A common stock through an open market share repurchase program
over the next two fiscal years.
The following table summarizes selected unaudited pro forma financial
information assuming that the 800,000 share Offer had occurred at the beginning
of each period presented:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Operating results
- -----------------
Income before extraordinary items $ 49.1 $ 63.9 $ 43.7
Net income $ 49.1 $ 92.8 $ 40.5
Per share
- ---------
Income before extraordinary items $ 6.00 $ 7.83 $ 5.36
Extraordinary items -- 3.54 (.39)
--------- --------- ---------
Net income $ 6.00 $ 11.37 $ 4.97
========= ========= =========
Average shares outstanding (in millions) 8.183 8.163 8.148
</TABLE>
STOCK OPTIONS: The 1975 and 1981 stock option plans as amended provide for the
granting to officers and other key employees options to purchase Class A and
Class B common stock of the Company at a price not less than the market value of
such stock at the date of grant. Options become exercisable over a four-year
period and expire 10 years from the date of the grant. At December 31, 1996,
1995 and 1994, all stock options outstanding were exercisable.
At December 31, 1996, 1995 and 1994, there were 80,701 Class A shares and 80,100
Class B shares available for grant. No options were granted or exercised during
1996 and 1995. In addition, no options were granted during 1994; however, 8,200
Class A shares and 2,700 Class B shares were exercised. At December 31, 1996,
1995 and 1994 there were options outstanding relating to 5,800 Class A shares
with an option price of $32.00 that were granted on January 12, 1989, and 25,000
Class A shares at an option price of $35.56 granted on March 1, 1989. The
Company does not intend to issue additional stock options.
The Company applies AICPA Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for stock options.
Since there have been no options granted in fiscal years 1996 and 1995, no
additional pro forma disclosures are required as provided in Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation."
F-18
<PAGE> 19
NOTE 14--INCOME TAXES
The components of income before income taxes and provision for income taxes for
the year ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Income before income taxes and extraordinary items
- --------------------------------------------------
Domestic $ 73.0 $ 79.3 $ 57.1
Foreign 13.3 24.2 21.4
------ ------ ------
$ 86.3 $103.5 $ 78.5
====== ====== ======
Provision for income taxes
- --------------------------
Current tax expense:
Federal $ 29.0 $ 28.4 $ 24.3
State 6.2 4.9 3.0
Foreign 5.6 4.2 7.8
------ ------ ------
Total current 40.8 37.5 35.1
------ ------ ------
Deferred tax expense (benefit):
Federal (.3) (3.3) (1.1)
State (.9) (.8) (.1)
Foreign (5.3) 1.3 (3.2)
------ ------ ------
Total deferred (6.5) (2.8) (4.4)
------ ------ ------
$ 34.3 $ 34.7 $ 30.7
====== ====== ======
</TABLE>
Domestic income before income taxes has been reduced by all of the amortization
of goodwill and substantially all interest expense.
The Company made income tax payments of $40.2 million, $48.9 million and $29.0
million during 1996, 1995 and 1994, respectively. During the same period, income
tax refunds totaled $3.3 million, $3.7 million and $1.2 million, respectively.
At December 31, 1996, the Company had cumulative undistributed foreign earnings
of $120.7 million, of which the Company intends to permanently reinvest $45.5
million. The Company has determined that it is not practicable to estimate the
amount of taxes on these permanently reinvested earnings. It is the Company's
policy to provide income taxes on cumulative undistributed foreign earnings
where it is anticipated that a distribution of such earnings is likely to occur.
The distributable foreign earnings of $75.2 million can be remitted without a
material charge to earnings.
The amount of withholding taxes imposed by foreign jurisdictions that would be
payable upon remittance of all undistributed foreign earnings would be $6.3
million. These withholding taxes, subject to certain limitations, may be used to
reduce U.S. income taxes.
F-19
<PAGE> 20
NOTE 14--INCOME TAXES - Continued
A reconciliation of federal statutory and effective income tax for the year
ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Income before taxes $ 86.3 $ 103.5 $ 78.5
======= ======= =======
Statutory taxes at 35% $ 30.2 $ 36.2 $ 27.5
Amortization of goodwill 5.1 5.1 5.1
State income taxes 3.3 2.7 1.8
Tax audit settlements (1.2) (3.1) --
Export benefits (1.8) (1.1) (1.0)
Percentage depletion (1.6) (1.8) (1.6)
Foreign tax items (.5) (2.3) .4
Earnings reported net of taxes (.4) (1.2) (.4)
Other-net 1.2 .2 (1.1)
------- ------- -------
Provision for income taxes $ 34.3 $ 34.7 $ 30.7
======= ======= =======
Effective rate 39.7% 33.5% 39.1%
======= ======= =======
</TABLE>
A detailed summary of the total deferred tax assets and liabilities in the
Company's consolidated balance sheets at December 31 resulting from differences
in the book and tax basis of assets and liabilities follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets
- -------------------
Accrued expenses and reserves $ 43.7 $ 38.6
Reserve for UMWA 34.5 35.9
Employee benefits 18.1 18.3
Net operating loss carryforwards 9.3 5.4
------- -------
Total deferred tax assets 105.6 98.2
------- -------
Deferred tax liabilities
- ------------------------
Depreciation & depletion 46.8 45.3
Unrepatriated earnings 16.7 11.7
Inventories 12.6 16.2
Other 16.1 14.1
------- -------
Total deferred tax liabilities 92.2 87.3
------- -------
Net deferred tax asset $ 13.4 $ 10.9
======= =======
</TABLE>
In 1996 and 1995 the Company reached agreements with various tax authorities
resulting in non-recurring tax benefits of $1.2 million and $3.1 million,
respectively. Additionally, the Company recognized a non-recurring tax benefit
of $2.5 million in 1995 from the remittance of earnings of foreign subsidiaries
subject to rates of tax in excess of the U.S. statutory rate.
The Company and certain of its subsidiaries are currently under examination by
various taxing authorities. The Company has not been informed of any material
assessment resulting from these examinations and will vigorously contest any
material assessment. Management believes that any potential adjustment would not
materially affect future earnings.
F-20
<PAGE> 21
NOTE 15--RETIREMENT BENEFIT PLANS
DEFINED BENEFIT PLANS: The Company maintains various defined benefit pension
plans covering most of its employees. These plans provide benefits based on
years of service and average compensation during certain periods. The Company's
policy is to make contributions to fund these plans within the range allowed by
the applicable regulations. Contributions to the various plans were $12.6
million in 1996, $5.6 million in 1995 and $6.9 million in 1994. Plan assets
consist primarily of publicly traded stocks, investment contracts and government
and corporate bonds.
Set forth below is a detail of consolidated worldwide net periodic pension
expense and the assumptions used in accounting for the United States defined
benefit plans for the year ended December 31. The United Kingdom plans used
assumptions that are consistent with, but not identical to, those used by the
United States plans.
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost $ 8.0 $ 7.9 $ 6.6
Interest cost on projected benefit obligation 11.4 10.4 9.4
Actual loss (gain) on plan assets (13.4) (21.2) 1.1
Curtailment gain (1.3) -- --
Net amortization and deferral of actuarial losses (gains) 2.4 11.7 (9.5)
------- ------- -------
Net periodic pension expense $ 7.1 $ 8.8 $ 7.6
======= ======= =======
Assumptions:
Weighted average discount rates 8.0% 7.5% 8.5%
Rate of increase in compensation levels 5.0% 4.5-5.0% 5.0-5.5%
Expected long-term rate of return on assets 9.0% 9.0% 9.0%
</TABLE>
The following sets forth the funded status of the defined benefit plans and
amounts recognized in the consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
Partially Fully
Funded Plans Funded Plans
------------------------- -------------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested accumulated benefit obligation $ 93.6 $ 90.0 $ 30.5 $ 26.3
Non-vested accumulated benefit obligation 6.1 5.8 1.6 1.7
------- ------- ------- -------
Total accumulated benefit obligation 99.7 95.8 32.1 28.0
Value of future salary projections 15.5 25.5 1.7 1.0
------- ------- ------- -------
Total projected benefit obligation 115.2 121.3 33.8 29.0
Fair value of plan assets 107.6 91.7 42.6 33.3
------- ------- ------- -------
Plan assets in excess of (less than)
projected benefit obligation (7.6) (29.6) 8.8 4.3
Amounts available to increase (reduce)
future pension expense:
Unamortized balance of the initial
transition amount (1.6) (2.0) (3.3) .1
Unamortized cumulative actuarial loss (gain) (12.4) 4.1 -- --
Unamortized prior service cost 2.0 3.4 1.3 1.3
Adjustment for minimum pension liability (4.7) (8.8) -- --
------- ------- ------- -------
Pension asset (liability) recognized in
consolidated balance sheets $ (24.3) $ (32.9) $ 6.8 $ 5.7
======= ======= ======= =======
</TABLE>
F-21
<PAGE> 22
NOTE 15--RETIREMENT BENEFIT PLANS - Continued
DEFINED CONTRIBUTION PLANS: NACCO and its subsidiaries have defined contribution
plans for substantially all employees. For NACCO and certain subsidiaries,
employee contributions are matched by the Company based on plan provisions. In
addition, NACCO and certain other subsidiaries have profit sharing plans whereby
the subsidiary's contribution is determined annually based on its operating
results. Total contributions to these plans were $8.8 million in 1996, $7.3
million in 1995 and $5.9 million in 1994.
NOTE 16--BUSINESS SEGMENTS
NACCO's four operating subsidiaries function in distinct business environments.
Sales between subsidiaries, which are minimal, are eliminated in consolidation.
NACCO and Other includes the accounts of the parent company and Bellaire.
Information relating to the Company's operations at the subsidiary level is
presented below.
F-22
<PAGE> 23
NOTE 16--BUSINESS SEGMENTS - Continued
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
REVENUES
NMHG $1,560.1 $1,510.1 $1,178.9
HB-PS 395.1 381.4 377.5
NACoal 249.1 248.0 250.2
KCI 74.9 69.6 63.9
NACCO and Other .3 .5 .6
Eliminations (6.3) (5.1) (6.2)
-------- -------- --------
$2,273.2 $2,204.5 $1,864.9
======== ======== ========
AMORTIZATION OF GOODWILL
NMHG $ 11.5 $ 10.8 $ 10.8
HB-PS 3.8 2.8 2.8
KCI .1 .1 .1
-------- -------- --------
$ 15.4 $ 13.7 $ 13.7
======== ======== ========
OPERATING PROFIT
NMHG $ 72.5 $ 83.4 $ 64.6
HB-PS 24.3 25.0 25.3
NACoal 40.3 45.8 44.3
KCI 3.1 3.3 5.4
NACCO and Other (9.0) (8.8) (10.0)
-------- -------- --------
$ 131.2 $ 148.7 $ 129.6
======== ======== ========
OPERATING PROFIT EXCLUDING GOODWILL AMORTIZATION
NMHG $ 84.0 $ 94.2 $ 75.4
HB-PS 28.1 27.8 28.1
NACoal 40.3 45.8 44.3
KCI 3.2 3.4 5.5
NACCO and Other (9.0) (8.8) (10.0)
-------- -------- --------
$ 146.6 $ 162.4 $ 143.3
======== ======== ========
INTEREST INCOME
NMHG $ .5 $ .9 $ .8
NACoal 1.5 2.4 3.0
NACCO and Other -- 1.9 1.1
Eliminations (.5) (3.3) (3.3)
-------- -------- --------
$ 1.5 $ 1.9 $ 1.6
======== ======== ========
INTEREST EXPENSE
NMHG $ (25.0) $ (25.9) $ (30.8)
HB-PS (6.6) (7.2) (7.5)
NACoal (.2) (1.3) (1.3)
KCI (.5) (.5) (.3)
NACCO and Other (.5) (1.6) (2.3)
Eliminations .5 3.3 3.3
-------- -------- --------
(32.3) (33.2) (38.9)
Project mining subsidiaries (13.6) (14.0) (14.3)
-------- -------- --------
$ (45.9) $ (47.2) $ (53.2)
======== ======== ========
OTHER-NET, INCOME (EXPENSE)
NMHG $ (2.0) $ (.2) $ 1.2
HB-PS (.3) (.8) (.3)
NACoal 1.1 .5 (1.1)
NACCO and Other .7 .6 .7
-------- -------- --------
$ (.5) $ .1 $ .5
======== ======== ========
</TABLE>
F-23
<PAGE> 24
NOTE 16-BUSINESS SEGMENTS - Continued
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
NET INCOME (LOSS)
BEFORE EXTRAORDINARY ITEMS
NMHG $ 26.4 $ 36.9 $ 18.7
HB-PS 10.7 11.8 10.2
NACoal 19.2 22.6 21.0
KCI 1.5 1.6 3.1
NACCO and Other (5.8) (4.1) (5.2)
Minority interest (1.4) (3.3) (2.5)
-------- -------- --------
50.6 65.5 45.3
Extraordinary gain, net-of-tax -- 32.3 --
Extraordinary charges, net-of-tax -- (3.4) (3.2)
-------- -------- --------
$ 50.6 $ 94.4 $ 42.1
======== ======== ========
TOTAL ASSETS
NMHG $ 950.9 $1,052.2 $ 906.2
HB-PS 271.8 288.0 289.6
NACoal 66.5 40.7 49.0
KCI 27.6 25.1 26.0
NACCO and Other 56.7 62.7 92.6
-------- -------- --------
1,373.5 1,468.7 1,363.4
Project mining subsidiaries 433.6 433.3 412.3
-------- -------- --------
1,807.1 1,902.0 1,775.7
Consolidating eliminations (99.0) (68.2) (81.4)
-------- -------- --------
$1,708.1 $1,833.8 $1,694.3
======== ======== ========
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG $ 33.8 $ 31.8 $ 32.2
HB-PS 19.0 15.8 15.5
NACoal 2.1 1.7 1.6
KCI 1.1 1.0 .9
NACCO and Other .2 .2 .1
-------- -------- --------
56.2 50.5 50.3
Project mining subsidiaries 29.1 28.8 29.9
-------- -------- --------
$ 85.3 $ 79.3 $ 80.2
======== ======== ========
CAPITAL EXPENDITURES
NMHG $ 42.3 $ 39.4 $ 25.9
HB-PS 15.1 9.7 13.4
NACoal 2.8 3.5 .4
KCI 1.1 1.4 1.0
NACCO and Other 1.4 .1 .2
-------- -------- --------
62.7 54.1 40.9
Project mining subsidiaries 16.7 19.0 11.7
-------- -------- --------
$ 79.4 $ 73.1 $ 52.6
======== ======== ========
</TABLE>
F-24
<PAGE> 25
NOTE 16-BUSINESS SEGMENTS - Continued
DATA BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
Europe,
United Africa and
States Middle East Other Eliminations Consolidated
------ ----------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
1996
- ----
Sales to unaffiliated
customers $ 1,560.6 $ 457.5 $ 255.1 $ -- $ 2,273.2
Transfers between
geographic areas -- 129.8 53.2 (183.0) --
--------- --------- --------- --------- ---------
Total revenues $ 1,560.6 $ 587.3 $ 308.3 $ (183.0) $ 2,273.2
========= ========= ========= ========= =========
Operating profit $ 93.5 $ 32.7 $ 5.0 $ -- $ 131.2
========= ========= ========= ========= =========
Total assets $ 1,312.1 $ 336.4 $ 59.6 $ -- $ 1,708.1
========= ========= ========= ========= =========
1995
- ----
Sales to unaffiliated
customers $ 1,568.3 $ 426.9 $ 209.3 $ -- $ 2,204.5
Transfers between
geographic areas -- 156.1 63.7 (219.8) --
--------- --------- --------- --------- ---------
Total revenues $ 1,568.3 $ 583.0 $ 273.0 $ (219.8) $ 2,204.5
========= ========= ========= ========= =========
Operating profit $ 106.0 $ 34.8 $ 7.9 $ -- $ 148.7
========= ========= ========= ========= =========
Total assets $ 1,395.3 $ 374.4 $ 64.1 $ -- $ 1,833.8
========= ========= ========= ========= =========
1994
- ----
Sales to unaffiliated
customers $ 1,445.0 $ 294.4 $ 125.5 $ -- $ 1,864.9
Transfers between
geographic areas -- 130.6 49.2 (179.8) --
--------- --------- --------- --------- ---------
Total revenues $ 1,445.0 $ 425.0 $ 174.7 $ (179.8) $ 1,864.9
========= ========= ========= ========= =========
Operating profit $ 104.3 $ 15.4 $ 9.9 $ -- $ 129.6
========= ========= ========= ========= =========
Total assets $ 1,343.6 $ 309.6 $ 41.1 $ -- $ 1,694.3
========= ========= ========= ========= =========
</TABLE>
NACCO parent company expense reduced United States operating profit by $8.9
million, $8.7 million and $9.9 million in 1996, 1995 and 1994, respectively. The
Other category above includes Canada, Mexico, South America and Asia-Pacific.
This category, however, does not include the operating results or assets of S-N,
which is accounted for using the equity method.
F-25
<PAGE> 26
NOTE 17--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations for the year ended
December 31 is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996
- ----
Revenues
NMHG $ 420.8 $ 407.6 $ 349.5 $ 382.2
HB-PS 67.9 82.7 109.0 135.5
NACoal 59.1 56.7 61.2 72.1
KCI 12.9 14.6 19.5 27.9
NACCO and Other .1 .1 -- .1
Eliminations (1.3) (.8) (2.2) (2.0)
-------- -------- -------- --------
559.5 560.9 537.0 615.8
-------- -------- -------- --------
Gross profit 106.7 107.6 98.7 116.0
-------- -------- -------- --------
Operating profit
NMHG 26.0 24.7 9.4 12.4
HB-PS (1.0) 4.7 7.0 13.6
NACoal 9.8 7.8 10.5 12.2
KCI (1.2) (.6) 1.0 3.9
NACCO and Other (2.5) (2.6) (1.9) (2.0)
-------- -------- -------- --------
31.1 34.0 26.0 40.1
-------- -------- -------- --------
Income before extraordinary items 12.9 14.0 7.6 16.1
Extraordinary items, net-of-tax -- -- -- --
-------- -------- -------- --------
Net income $ 12.9 $ 14.0 $ 7.6 $ 16.1
======== ======== ======== ========
Per share:
Income before extraordinary items $ 1.44 $ 1.56 $ 0.85 $ 1.83
Extraordinary items, net-of-tax -- -- -- --
-------- -------- -------- --------
Net income $ 1.44 $ 1.56 $ 0.85 $ 1.83
======== ======== ======== ========
</TABLE>
F-26
<PAGE> 27
NOTE 17--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - Continued
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
- ----
Revenues
NMHG $ 363.2 $ 370.2 $ 349.2 $ 427.5
HB-PS 67.0 79.7 110.3 124.4
NACoal 60.5 55.3 62.5 69.7
KCI 12.2 13.5 18.1 25.8
NACCO and Other -- .3 -- .2
Eliminations (.5) (1.4) (1.8) (1.4)
-------- -------- -------- --------
502.4 517.6 538.3 646.2
-------- -------- -------- --------
Gross profit 100.2 99.1 100.7 123.4
-------- -------- -------- --------
Operating profit
NMHG 23.2 21.3 14.6 24.3
HB-PS 1.4 3.6 9.5 10.5
NACoal 11.7 9.2 10.8 14.1
KCI (.5) (.4) .9 3.3
NACCO and Other (2.0) (2.1) (2.1) (2.6)
-------- -------- -------- --------
33.8 31.6 33.7 49.6
-------- -------- -------- --------
Income before extraordinary items 12.8 14.7 13.7 24.3
Extraordinary gain, net-of-tax -- -- -- 32.3
Extraordinary charges, net-of-tax (1.3) -- (2.1) --
-------- -------- -------- --------
Net income $ 11.5 $ 14.7 $ 11.6 $ 56.6
======== ======== ======== ========
Per share:
Income before extraordinary items $ 1.43 $ 1.64 $ 1.53 $ 2.71
Extraordinary gain, net-of-tax -- -- -- 3.61
Extraordinary charges, net-of-tax (.14) -- (.24) --
-------- -------- -------- --------
Net income $ 1.29 $ 1.64 $ 1.29 $ 6.32
======== ======== ======== ========
</TABLE>
F-27
<PAGE> 28
NOTE 18--PARENT COMPANY CONDENSED BALANCE SHEETS
The condensed balance sheets of NACCO, the parent company, at December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
ASSETS
- ------
Current assets $ .3 $ .1
Current intercompany accounts receivable, net 9.1 11.0
Other assets .5 1.6
Investment in subsidiaries
NMHG 361.0 330.3
HB-PS 117.8 114.2
NACoal 15.1 15.1
KCI 13.3 11.8
Bellaire .9 .9
------- -------
508.1 472.3
Property, plant and equipment, net 2.2 1.1
Deferred income taxes 20.0 22.2
------- -------
Total Assets $ 540.2 $ 508.3
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities $ 8.8 $ 9.9
Reserve for future interest on UMWA obligation 61.5 64.2
Note payable to Bellaire 40.5 43.3
Notes payable to other subsidiaries 45.6 16.9
Deferred income and other 4.5 3.9
Stockholders' equity 379.3 370.1
------- -------
Total Liabilities and Stockholders' Equity $ 540.2 $ 508.3
======= =======
</TABLE>
The credit agreements at NMHG, HB-PS and KCI allow the transfer of assets to
NACCO under certain circumstances. The amount of NACCO's investment in NMHG,
HB-PS and KCI that was restricted at December 31, 1996, totals approximately
$455.3 million. There are no restrictions on the transfer of assets from NACoal.
Dividends and advances from NACoal, HB-PS and KCI are the primary source of cash
for NACCO.
F-28
<PAGE> 29
NACCO INDUSTRIES, INC.
TO THE STOCKHOLDERS OF NACCO INDUSTRIES, INC.
The management of NACCO Industries, Inc. is responsible for the
preparation, content and integrity of the financial statements and related
information contained within this report. The accompanying financial statements
have been prepared in accordance with generally accepted accounting principles
and include amounts that are based on informed judgments and estimates.
The Company's code of conduct, communicated throughout the
organization, requires adherence to high ethical standards in the conduct of the
Company's business.
NACCO Industries, Inc. and each of its subsidiaries maintains a system
of internal controls designed to provide reasonable assurance as to the
protection of assets and the integrity of the financial statements. These
systems are augmented by the selection of qualified financial management
personnel. In addition, an internal audit function periodically assesses the
internal controls.
Arthur Andersen LLP, independent certified public accountants, audits
NACCO Industries, Inc. and its subsidiaries' financial statements. Its audits
are conducted in accordance with generally accepted auditing standards and
provide an objective and independent assessment that helps ensure fair
presentation of the Company's operating results and financial position. The
independent accountants have access to all financial records and related data of
the Company, as well as to the minutes of stockholders' and directors' meetings.
The Audit Committee of the Board of Directors, composed of independent
directors, meets regularly with the independent auditors and internal auditors
to review the scope of their audit reports and to discuss any action to be
taken. The independent auditors and the internal auditors have free and direct
access to the Audit Committee. The Audit Committee also reviews the financial
reporting process and accounting policies of NACCO Industries, Inc. and each of
its subsidiaries.
/s/ Alfred M. Rankin, Jr. /s/ Kenneth C. Schilling
---------------------------- ------------------------
Alfred M. Rankin, Jr. Kenneth C. Schilling
Chairman, President and Controller
Chief Executive Officer
F-29
<PAGE> 30
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
--------------------------
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Current assets $ 254 $ 99
Net amounts receivable from subsidiaries 9,135 11,035
Other assets 561 1,595
Investment in subsidiaries
NMHG 360,964 330,274
HB/PS 117,848 114,239
NACoal 15,125 15,125
KCI 13,261 11,768
Bellaire 872 900
-------- --------
508,070 472,306
Property, plant and equipment, net 2,217 1,062
Deferred income taxes 19,990 22,241
-------- --------
Total Assets $540,227 $508,338
======== ========
Current liabilities $ 8,807 $ 9,946
Reserve for future interest on UMWA obligation 61,496 64,248
Note payable to Bellaire 40,589 43,259
Notes payable to other subsidiaries 45,552 16,889
Deferred income and other 4,467 3,869
Stockholders' equity 379,316 370,127
-------- --------
Total Liabilities and Stockholders' Equity $540,227 $508,338
======== ========
</TABLE>
See notes to parent company financial statements.
F-30
<PAGE> 31
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------
1996 1995 1994
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Income (expense):
Intercompany interest income $ 149 $ 198 $ 1,068
Intercompany interest expense (482) (2,670) (3,510)
Other - net 381 2,090 464
-------- -------- --------
48 (382) (1,978)
Administrative and general expenses 8,903 8,713 9,903
-------- -------- --------
Loss before income taxes (8,855) (9,095) (11,881)
Income tax benefit (3,072) (4,502) (5,825)
-------- -------- --------
Net loss before equity in earnings of
subsidiaries and extraordinary items (5,783) (4,593) (6,056)
Equity in earnings of subsidiaries before
extraordinary items 56,360 70,099 51,328
Extraordinary gain, net-of-tax 32,333
Extraordinary charge, net-of-tax (3,399) (3,218)
-------- -------- --------
Net income $ 50,577 $ 94,440 $ 42,054
======== ======== ========
See Notes to parent company financial statements.
</TABLE>
F-31
<PAGE> 32
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
1996 1995 1994
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income $ 50,577 $ 94,440 $ 42,054
Equity in earnings of subsidiaries (56,360) (70,099) (51,328)
Extraordinary gain, net-of-tax -- (32,333) --
Extraordinary charge, net-of-tax -- 3,399 3,218
-------- -------- --------
Parent company only net loss (5,783) (4,593) (6,056)
Deferred income taxes 1,897 (23,603) (4,866)
Income taxes net of intercompany tax payments (937) (7,120) (3,442)
Working capital changes 752 1,145 983
Changes in current intercompany amounts 1,900 2,268 69
Changes in reserve for future interest on UMWA obligation (2,752) 64,486 --
Items of income or expense not requiring cash outlays 10 491 (577)
-------- -------- --------
Net cash provided by (used for) operating activities (4,913) 33,074 (13,889)
Investing Activities
Capital contributions to subsidiaries
NMHG (1,805) -- (24,273)
Bellaire -- (69,326) --
Dividends and advances received from subsidiaries, net 55,854 10,270 40,009
Note payable to Bellaire (2,670) 27,410 --
Reduction of investment in Hyster-Yale
12 3/8% debentures -- 4,394 3,946
Expenditures for equipment (1,424) (79) (85)
-------- -------- --------
Net cash provided by (used for) investing activities 49,955 (27,331) 19,597
Financing Activities
Cash dividends (6,671) (6,365) (6,040)
Purchase of treasury stock (40,415)
Treasury stock sales under stock option and
directors' compensation plans - net 1,119 817 251
Other - net 1,163 (194) 38
-------- -------- --------
Net cash used for financing activities (44,804) (5,742) (5,751)
-------- -------- --------
Cash and cash equivalents
Increase (decrease) for the period 238 1 (43)
Balance at the beginning of the period 5 4 47
-------- -------- --------
Balance at the end of the period $ 243 $ 5 $ 4
======== ======== ========
See Notes to parent company financial statements.
</TABLE>
F-32
<PAGE> 33
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
For The Year Ended December 31, 1996, 1995 and 1994
The notes to consolidated financial statements, included elsewhere in this Form
10-K, are hereby incorporated by reference into these notes to parent company
financial statements.
NOTE A - LONG-TERM OBLIGATIONS AND GUARANTEES
NACCO Industries, Inc. ("NACCO" the parent company) is a holding
company which owns four operating subsidiaries. It is NACCO's policy
not to guarantee the debt of such subsidiaries.
NOTE B - CASH DIVIDENDS AND ADVANCES TO NACCO
Dividends received from the subsidiaries were $27.2 million in 1996, $22.6
million in 1995 and $62.7 million in 1994.
NOTE C - CAPITAL CONTRIBUTIONS TO SUBSIDIARIES
The 1995 capital contribution to Bellaire of $69.3 million includes a note
payable of $27.4 million and the assumption of a reserve for future
interest on UMWA obligation, net of deferred taxes, of $41.9 million.
NOTE D - UNRESTRICTED CASH
The amount of unrestricted cash available to NACCO, included in Investment
in and advances from subsidiaries, net was $30.1 million at December 31,
1996.
F-33
<PAGE> 34
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL A. COL B. COL C. COL D. COL E.
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
----------------------------- (D)
Balance at Charged to Charged to Balance at
Beginning of Costs and Other Accounts Deductions End of
Description Period Expenses --Describe --Describe Period
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
1996
Reserves deducted from asset
accounts:
Allowance for doubtful accounts $ 4,439 $ 1,864 $ 6 (C) $ 1,306 (A) $ 5,003
Allowance for discounts,
adjustments and returns $ 6,878 $ 15,183 $ 14,563 (B) $ 7,498
1995
Reserves deducted from asset
accounts:
Allowance for doubtful accounts $ 4,472 $ 1,583 $ 148 (C) $ 1,764 (A) $ 4,439
Allowance for discounts,
adjustments and returns $ 6,168 $ 17,328 $ 16,618 (B) $ 6,878
1994
Reserves deducted from asset
accounts:
Allowance for doubtful accounts $ 5,731 $ 1,240 $ 39 (C) $ 2,538 (A) $ 4,472
Allowance for discounts,
adjustments and returns $ 5,397 $ 17,878 $ 17,107 (B) $ 6,168
</TABLE>
Note A - Accounts receivable balances written off, net of recoveries.
Note B - Payments.
Note C - Subsidiary's foreign currency translation adjustments and other.
Note D - Balances which are not required to be presented and those which are
immaterial have been omitted.
F-34
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF NACCO INDUSTRIES, INC.
As of the date of the Annual Report on Form 10-K to which this is an
Exhibit, the subsidiaries of NACCO Industries, Inc. were as follows:
<TABLE>
<CAPTION>
NAME INCORPORATION
- ---- -------------
<S> <C>
Bellaire Corporation Ohio
The Coteau Properties Company Ohio
The Falkirk Mining Company Ohio
Hamilton Beach/Proctor-Silex, Inc. Delaware (1)
Hamilton Beach/Proctor-Silex de Mexico, S.A. de C.V. Mexico (1)
Housewares Holding Company Delaware (1)
HB/PS El Paso Incorporated Delaware (1)
HBPS Foreign Sales Corp. Virgin Islands
HB-PS Holding Company, Inc. Delaware (1)
NMHG, Pty. Ltd. Australia
NACCO Materials Handling B.V. Netherlands
NACCO Materials Handling, S.r.l. Italy
Hyster Europe Limited United Kingdom
NMHG (Scotland) Limited United Kingdom
NMHG (N.I.) Ltd. Northern Ireland
NMHG Ltd. United Kingdom
Hyster-Yale Materials Handling, Inc. Delaware (2)
The Kitchen Collection, Inc. Delaware
NACCO Materials Handling Group, Inc. Delaware
The North American Coal Corporation Delaware
North American Coal Royalty Company Delaware
Powhatan Corporation Delaware
Proctor-Silex Canada, Inc. Ontario (Canada)
Proctor-Silex, S.A. de C.V. Mexico
The Sabine Mining Company Texas
Yale Europe Materials Handling Ltd. United Kingdom
</TABLE>
The Company has omitted the names of its subsidiaries which, considered in the
aggregate as a single subsidiary, would not constitute a "significant
subsidiary" within the meaning of Rule 1-02 contained in Regulation S-X.
1. NACCO owns 100% of the voting securities of Housewares Holding
Company, Housewares Holding Company owns 100% of the voting securities
of HB-PS Holding Company, Inc., HB-PS Holding Company, Inc. owns 100%
of Hamilton Beach(/)Proctor-Silex, Inc., Hamilton Beach(/)
Proctor-Silex, Inc. S.A. de C.V., Hamilton Beach/Proctor-Silex de
Mexico, S.A. de C.V. and HB/PS El Paso Incorporated (except for
directors' qualifying shares).
2. NACCO Industries, Inc. owns 98% of the voting securities of
Hyster-Yale Materials Handling Group, Inc.
<PAGE> 1
Exhibit 23(i)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of
NACCO Industries, Inc.
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the
Company's previously filed Registration Statement (No. 33-3422) on Form
S-4 and Registration Statement (No. 33-52660) on Form S-8.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
March 27, 1997
<PAGE> 1
Exhibit 24(i)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Owsley Brown II
----------------------------------------
Owsley Brown II
Date: March 12, 1997
<PAGE> 2
Exhibit 24(ii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ John J. Dwyer
-----------------------------------------
John J. Dwyer
Date: March 12, 1997
<PAGE> 3
Exhibit 24(iii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Robert M. Gates
----------------------------------
Robert M. Gates
Date: March 12, 1997
<PAGE> 4
Exhibit 24(iv)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Leon J. Hendrix, Jr.
------------------------------
Leon J. Hendrix, Jr.
Date: March 12, 1997
<PAGE> 5
Exhibit 24(v)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Dennis W. LaBarre
-----------------------------
Dennis W. LaBarre
Date: March 12, 1997
<PAGE> 6
Exhibit 24(vi)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Ian M. Ross
----------------------
Ian M. Ross
Date: March 12, 1997
<PAGE> 7
Exhibit 24(vii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ John C. Sawhill
-------------------------
John C. Sawhill
Date: March 12, 1997
<PAGE> 8
Exhibit 24(viii)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Britton T. Taplin
-----------------------------
Britton T. Taplin
Date: March 12, 1997
<PAGE> 9
Exhibit 24(ix)
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO
Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender,
Kenneth C. Schilling and Suzanne Schulze Taylor, and each of them, as the true
and lawful attorney or attorneys-in-fact, with full power of substitution and
revocation, for the undersigned and in the name, place and stead of the
undersigned, to sign on behalf of the undersigned as Director of NACCO
Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section
13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended
December 31, 1996, and to sign any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney or attorneys-in-fact, and each of them, full power and authority to do
so and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ David F. Taplin
--------------------------
David F. Taplin
Date: March 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 48
<SECURITIES> 0
<RECEIVABLES> 212
<ALLOWANCES> 13
<INVENTORY> 310
<CURRENT-ASSETS> 592
<PP&E> 550
<DEPRECIATION> 436
<TOTAL-ASSETS> 1,708
<CURRENT-LIABILITIES> 416
<BONDS> 0
<COMMON> 8
0
0
<OTHER-SE> 371
<TOTAL-LIABILITY-AND-EQUITY> 1,708
<SALES> 2,273
<TOTAL-REVENUES> 2,273
<CGS> 1,844
<TOTAL-COSTS> 2,142
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 86
<INCOME-TAX> 34
<INCOME-CONTINUING> 51
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51
<EPS-PRIMARY> 6
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99(i)
Audited Consolidated Financial Statements
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
As of December 31, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Public Accountants...............................1
Consolidated Balance Sheets............................................2
Consolidated Statements of Income......................................4
Consolidated Statements of Stockholder's Equity........................5
Consolidated Statements of Cash Flows..................................6
Notes to Consolidated Financial Statements.............................7
</TABLE>
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
The North American Coal Corporation:
We have audited the accompanying consolidated balance sheets of The North
American Coal Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholder's equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The North American Coal
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas,
February 4, 1997
<PAGE> 3
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 4
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,310 $ 4,700
Note receivable from Parent Company 41,952 14,939
Accounts receivable 27,753 23,156
Inventories 27,204 29,736
Other current assets 1,892 2,002
--------- ---------
103,111 74,533
OTHER ASSETS:
Notes receivable 2,621 3,217
Costs recoverable under sales contracts 4,895 5,785
Other investments and receivables 16,485 13,804
--------- ---------
24,001 22,806
PROPERTY, PLANT AND EQUIPMENT--at cost:
Coal lands and real estate 94,017 93,052
Plant and equipment 451,774 439,862
Construction in progress 7,346 6,485
--------- ---------
553,137 539,399
Less allowance for depreciation, depletion
and amortization (230,453) (208,330)
--------- ---------
322,684 331,069
DEFERRED CHARGES:
Advance royalties 6,326 5,952
Deferred lease costs 36,516 34,936
Other 7,452 4,654
--------- ---------
50,294 45,542
--------- ---------
$ 500,090 $ 473,950
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE> 5
<TABLE>
<CAPTION>
1996 1995
-------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 15,048 $ 19,769
Payable to affiliated companies 556 948
Accrued liabilities 26,585 25,596
Borrowings under revolving credit agreement 29,000 -
Current maturities of long-term obligations 17,861 16,489
-------- --------
89,050 62,802
NON-CURRENT LIABILITIES:
Deferred income taxes 19,852 19,156
Pension compensation and other accrued liabilities 29,138 24,955
-------- --------
48,990 44,111
LONG-TERM OBLIGATIONS:
Subsidiaries' liabilities--(not guaranteed by the
Company or the Parent Company):
Advances from customers 184,234 176,384
Notes payable 20,751 23,872
Notes payable to affiliated company 19 32
Capitalized lease obligations 136,630 146,384
-------- --------
341,634 346,672
MINORITY INTEREST 5,291 5,240
STOCKHOLDER'S EQUITY:
Common stock, par value $1 a share:
authorized 750 shares; issued and
outstanding 500 shares 1 1
Capital in excess of par value 15,124 15,124
Retained income - -
-------- --------
15,125 15,125
-------- --------
$500,090 $473,950
======== ========
</TABLE>
-3-
<PAGE> 6
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1996 and 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
TONS OF COAL SOLD 27,597 26,680
======== ========
INCOME:
Net sales $245,046 $234,354
Royalties, rental and other operating income 4,004 13,632
Interest, gain on sale of assets and miscellaneous income 4,752 4,984
-------- --------
253,802 252,970
-------- --------
COSTS AND EXPENSES:
Cost of sales 166,696 162,377
Depreciation, depletion and amortization 31,162 30,382
Selling, administrative and general expenses 10,961 9,448
Interest expense of subsidiaries 13,832 15,312
-------- --------
222,651 217,519
-------- --------
Income before income taxes and minority interest 31,151 35,451
INCOME TAXES:
Current 8,574 9,150
Deferred 1,312 1,690
-------- --------
9,886 10,840
Minority interest in income of consolidated subsidiary 2,074 2,018
-------- --------
Net income $ 19,191 $ 22,593
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 7
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1996 and 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
Capital In
Common Excess of Retained
Stock Par Value Income Total
------ ------- ---- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ 1 $15,124 $ - $ 15,125
Net income - - 22,593 22,593
Dividends - - (22,593) (22,593)
------ ------- -------- --------
Balance at December 31, 1995 $ 1 $15,124 $ - $ 15,125
Net income - - 19,191 19,191
Dividends - - (19,191) (19,191)
------ ------- -------- --------
Balance at December 31, 1996 $ 1 $15,124 $ - $ 15,125
====== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE> 8
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 and 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES: 1996 1995
-------- ---------
<S> <C> <C>
Net income $ 19,191 $ 22,593
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 31,162 30,382
Gain on sale of assets (84) (279)
Costs recovered under sales contracts 890 1,160
Deferred lease costs (1,580) (1,782)
Deferred income taxes 1,312 1,690
Pensions and other accruals 3,610 1,280
Other deferred costs (2,495) 208
-------- ---------
52,006 55,252
Working capital changes:
(Increase) decrease in accounts receivable and other assets (4,114) 113
(Increase) decrease in inventories 2,532 (2,525)
Increase (decrease) in accounts payable and other liabilities (5,538) 10,920
-------- ---------
(7,120) 8,508
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 44,886 63,760
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (19,534) (22,611)
Proceeds from property disposals 171 552
(Additions to) repayment of note receivable from Parent
Company, net (27,013) 7,770
Receipt of notes receivable 574 552
Advance royalties (428) (610)
Other - net (3,216) (1,841)
-------- ---------
NET CASH USED BY INVESTING ACTIVITIES (49,446) (16,188)
FINANCING ACTIVITIES:
Additions to (repayment of) lines of credit, net 29,000 (16,717)
Additions to advances from customers, net 7,850 40,411
Additions to long-term obligations 60,979 52,535
Repayment of long-term obligations (74,468) (102,070)
Dividends (19,191) (22,593)
-------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 4,170 (48,434)
-------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (390) (862)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,700 5,562
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,310 $ 4,700
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE> 9
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Amounts In Thousands)
December 31, 1996 and 1995
NOTE A--ORGANIZATION
The North American Coal Corporation ("Company") is a wholly owned subsidiary of
NACCO Industries, Inc. ("Parent Company"). The Company is the owner of The
Coteau Properties Company ("Coteau"), The Falkirk Mining Company ("Falkirk"),
The Sabine Mining Company ("Sabine"), Red River Mining Company, its joint
venture, ("Red River Mining"), and North American Coal Royalty Company. The
Company is principally engaged in lignite mining through the operation of
surface mines in North Dakota, Texas and Louisiana. The Company also operates a
dragline at a limestone quarry in Florida.
Three of the Company's consolidated coal mining subsidiaries were organized to
assume sales agreements with public utilities. All of the coal of these
subsidiaries is sold to these public utilities pursuant to long-term contracts
with terms up to 20 years and with extensions at the public utilities option.
The sales prices provided by such contracts are based on cost, plus a profit per
ton. As each mining subsidiary has a contract to provide coal to its customer, a
significant portion of their revenue is derived from a single source. The
financial position of the mining subsidiary and the Company could be materially
impacted if the relationship with the customer was terminated or altered.
In December 1996, the Company was the successful bidder for a long-term coal
mining project in south Texas, the San Miguel Lignite Project. The Company will
provide mining services to San Miguel Electric Cooperative, Inc.'s lignite mine
in Texas under a contract for 10.5 years, beginning on July 1, 1997. The Company
expects to deliver to San Miguel Electric Cooperative approximately 1.8 million
tons in 1997 and approximately 3 million tons annually through 2007.
NOTE B--ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company, its wholly owned subsidiaries and its joint venture.
Intercompany accounts have been eliminated.
CASH AND CASH EQUIVALENTS: Cash equivalents are investments purchased with an
original maturity of three months or less.
INVENTORIES: Supply inventories are stated at average cost. Coal inventories are
stated at the lower of cost or market.
COSTS RECOVERABLE UNDER SALES CONTRACTS: The coal sales agreements
("Agreements") of three subsidiaries provided for selling prices which allowed
a profit during the defined development period of the mines. Production costs
incurred during the development period in excess of the established selling
price, as set forth in the Agreements, were deferred and are being recovered as
a cost of coal tonnage sold after the development period. Recoveries of these
costs amounted to approximately $890,000 and $1,160,000 in 1996 and 1995,
respectively, and are included in net sales in the accompanying consolidated
statements of income.
-7-
<PAGE> 10
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE B--ACCOUNTING POLICIES --continued
DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation, depletion and
amortization are provided in amounts sufficient to amortize the cost of related
assets (including assets recorded under capitalized lease obligations) over
their estimated range of useful lives and are calculated by either the
straight-line method or the units-of-production method based on estimated
recoverable tonnage.
RECLAMATION COSTS: Under certain federal and state regulations, the Company's
subsidiaries are required to reclaim land disturbed as a result of mining.
Reclamation of disturbed land is a continuous process throughout the term of the
related Agreements. Current reclamation costs are being recovered as a cost of
coal tonnage sold. Costs to complete reclamation after mining has been completed
are reimbursed under the Agreements.
PRIOR YEAR FINANCIAL STATEMENTS: Certain reclassifications have been made to the
1995 consolidated financial statements to conform to the 1996 presentation.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: The fair values of
financial instruments have been determined through information obtained from
quoted market sources and management estimates. The Company does not hold or
issue financial instruments or derivative financial instruments for trading
purposes. The Company enters into interest rate swap agreements with terms
ranging from one to six years. The differential between the floating interest
rate and the fixed interest rate which is to be paid or received is recognized
in interest expense as the floating interest rate changes over the life of the
agreement.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
LONG-LIVED ASSETS: During fiscal year 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." This statement had no material effect on the Company's
accompanying financial statements.
CHANGE IN ACCOUNTING METHOD: In 1996, the mines converted to a new
inventory/purchasing system. The conversion resulted in a change from the
first-in, first-out method to the average cost method of the supply inventory
valuation. As of December 31, 1996, average cost approximated first-in, first
out. The cumulative effect is immaterial to the financial statements.
CHANGE IN ACCOUNTING ESTIMATE: Due to the extension of Falkirk's contract with
its customers, Falkirk extended the estimated useful lives of preproduction
costs and fixed assets.
-8-
<PAGE> 11
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE C--ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
------- -------
<S> <C> <C>
Accounts receivable $24,648 $18,783
Accounts receivable from affiliated companies 2,327 3,588
Refundable income taxes 778 785
------- -------
$27,753 $23,156
======= =======
</TABLE>
NOTE D--INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
------- -------
<S> <C> <C>
Coal $ 8,328 $10,618
Mining supplies 18,876 19,118
------- -------
$27,204 $29,736
======= =======
</TABLE>
NOTE E--ADVANCES FROM CUSTOMERS
Advances from customers represent amounts advanced to Coteau and Falkirk from
public utilities to develop, operate and provide working capital for the mines.
These advances are secured by all owned assets and assignment of all rights
under the Agreements of Coteau and Falkirk, are non interest-bearing, and are
without recourse to the Company and the Parent Company. No repayment schedule
has been established for the Falkirk advances due to the funding agreement with
the customers.
Estimated maturities for Coteau for the next five years, including current
maturities which are included in accrued liabilities in the accompanying balance
sheets, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 9,079
1998 9,750
1999 9,750
2000 9,750
2001 9,750
Thereafter 72,175
--------
$120,254
========
</TABLE>
-9-
<PAGE> 12
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
NOTE F--NOTES PAYABLE
Notes payable, less current maturities, are summarized in the following table.
Neither the Company nor the Parent Company have guaranteed these borrowings. The
promissory note for Sabine represents borrowings which the public utility
arranged for Sabine.
<TABLE>
<CAPTION>
December 31,
1996 1995
------- -------
<S> <C> <C>
THE COTEAU PROPERTIES COMPANY
Mortgage note with no interest. The note requires
eight equal quarterly payments, beginning January 5, 1996,
and is secured by the related coal lands. $ - $ 3,000
THE SABINE MINING COMPANY
Secured note payable due February 20, 2003, with
semi-annual payments and an interest rate of LIBOR plus
.25% on the unpaid balance (interest rate of 5.75% at
December 31, 1996). Under the terms of such agreement,
substantially all assets are pledged and all rights under
the Agreement are assigned. 11,786 -
Promissory note payable to a bank under a revolving
agreement providing for borrowings up to $10 million in
1996 and $25 million in 1995. Interest is based on the
bank's daily cost of funds plus .45% (6.75% and 6.45%
interest rate as of December 31, 1996 and 1995,
respectively). Under the terms of such agreement,
substantially all assets are pledged and all rights
under the Agreement are assigned. 5,298 16,172
Secured note payable due June 1, 2001, with semi-annual
payments and a fixed interest rate of 8.65% per annum
on the unpaid balance. Under the terms of such
agreement, substantially all assets are pledged and all
rights under the Agreement are assigned. 3,500 4,500
OTHER 167 200
------- -------
$20,751 $23,872
======= =======
</TABLE>
Note maturities for the next five years, including current maturities, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 6,310
1998 3,310
1999 3,143
2000 3,143
2001 2,643
Thereafter 8,512
----------------
$ 27,061
================
</TABLE>
-10-
<PAGE> 13
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
NOTE F--NOTES PAYABLE--continued
Commitment fees paid to banks were approximately $18,000 and $46,000 in 1996 and
1995, respectively, and are included in interest expense in the accompanying
consolidated statements of income.
NOTE G--REVOLVING CREDIT AGREEMENT
During 1996, the Company had a revolving credit agreement with a financial
institution which is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Amount of revolving credit agreement $50,000,000
Amount available at December 31, 1996 $21,000,000
Stated interest rate LIBOR + .4375%
Interest rate at December 31, 1996 6.06%
Commitment and facility fee .20% per annum
Expiration date (with annual renewal option) September 27, 2001
</TABLE>
The Company's revolving credit agreement includes certain financial covenants.
The Company was in compliance with such covenants at December 31, 1996.
The Company enters into interest rate swap agreements which allow the Company to
enter into long-term credit arrangements that have performance based, floating
rates of interest and then swap them into fixed rates as opposed to entering
into higher cost fixed-rate credit arrangements. These agreements are with major
commercial banks; therefore, the risk of credit loss from nonperformance by the
banks is minimal. The Company evaluates its exposure to floating rate debt on an
ongoing basis. The following table summarizes the notional amount and related
rate on the interest rate swap agreement outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Variable Fixed
Notional Rate Rate
Amount Received Paid
-------- -------- ----
<S> <C> <C> <C>
$13,929 5.75% 6.85%
</TABLE>
NOTE H--POSTRETIREMENT PLANS
The Company and its affiliates, representing the mining operations of the Parent
Company, sponsor defined benefit pension plans which cover substantially all
salaried employees of the Company and its subsidiaries. Benefits under the plans
are based on years of service and average compensation during certain periods.
The Company's funding policy is to contribute within the range allowed by the
applicable regulations. Plan assets are primarily listed stocks and U.S. bonds.
-11-
<PAGE> 14
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
The following is a detail of net periodic pension expense for all mining
operations of the Parent Company:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
------- -------
<S> <C> <C>
Service cost $ 2,192 $ 1,805
Interest cost on projected benefit obligation 2,808 2,414
Actual return on plan assets (2,697) (6,891)
Net amortization and deferral (71) 4,538
------- -------
Net periodic pension expense $ 2,232 $ 1,866
======= =======
</TABLE>
The following sets forth the funded status of the plans:
<TABLE>
<CAPTION>
Actuarial present value of benefit obligation December 31,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Vested accumulated benefit obligation $ 20,086 $ 19,034
Nonvested accumulated benefit obligation 2,780 3,313
-------- --------
Total accumulated benefit obligation 22,866 22,347
Value of future salary projections 14,948 17,738
-------- --------
Total projected benefit obligation 37,814 40,085
Fair value of plan assets 34,473 30,622
-------- --------
Projected benefit obligation in excess of plan assets (3,341) (9,463)
Amounts not recognized:
Unrecognized net transition asset (670) (838)
Unrecognized net gain (15,288) (6,578)
Prior service cost 646 705
-------- --------
Pension obligation recognized $(18,653) $(16,174)
======== ========
</TABLE>
-12-
<PAGE> 15
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
NOTE H--POSTRETIREMENT PLANS--continued
Assumptions used in accounting for the defined benefit plans:
<TABLE>
<CAPTION>
December 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Weighted average discount rates 8.00% 7.50%
Rate of increase in compensation levels 5.00% 4.50%
Expected long-term rate of return on assets 9.00% 9.00%
</TABLE>
The Company and its subsidiaries participate in a defined contribution plan
sponsored by the Company which covers substantially all salaried employees. The
plan provides for employee contributions to be matched, by the respective
company, up to a limit of 5% of the employee's salary. Company contributions to
the plan were approximately $2,773,000 and $2,515,000 in 1996 and 1995,
respectively.
NOTE I--OTHER POSTRETIREMENT BENEFITS
The expected cost of retirement benefits other than pensions is charged to
expense during the years that the employees render service. Under the provisions
of the Agreements of three subsidiaries, costs will be recovered as a cost of
coal tonnage sold. Because SFAS 106 is not material to the Company's results of
operations and financial condition, the detailed disclosures required by SFAS
106 have not been presented.
Coteau and Sabine established Voluntary Employees' Beneficiary Association
(VEBA) trusts in 1993 to provide for such future retirement benefits. Coteau and
Sabine made cash contributions to the VEBA trusts of approximately $364,000 and
$462,000 in 1996 and 1995, respectively. Contributions made to an IRS approved
VEBA trust are irrevocable and must be used for employee benefits.
NOTE J--COMMITMENTS
Certain mining equipment leased by Coteau, Falkirk, and Sabine is capitalized
for financial statement purposes. Under the provisions of the Agreements, the
customer is required to pay, as part of the cost of coal purchased, an amount
equal to the annual lease payments. Interest expense and amortization in excess
of annual lease payments are deferred and are recognized in years when annual
lease payments exceed interest expense and amortization.
Interest paid on notes and capitalized lease obligations amounted to
approximately $13,775,000 and $15,841,000 in 1996 and 1995, respectively.
Assets recorded under capitalized lease obligations are included with property,
plant and equipment and consist of the following:
-13-
<PAGE> 16
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
NOTE J--COMMITMENTS--continued
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
Plant and equipment $ 198,744 $ 201,048
Accumulated amortization (87,077) (78,291)
--------- ---------
$ 111,667 $ 122,757
========= =========
</TABLE>
Capitalized lease obligations are renewable for additional periods at terms
based upon fair market value of the leased items at the renewal dates.
During 1996 and 1995, subsidiaries of the Company incurred capitalized lease
obligations of approximately $1,839,000 and $17,985,000, respectively, in
connection with lease agreements to acquire plant and equipment.
Future minimum lease payments as of December 31, 1996, for all capitalized lease
obligations are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 22,624
1998 21,918
1999 21,518
2000 20,609
2001 20,342
Thereafter 120,061
---------------
Total minimum lease payments 227,072
Amounts representing interest (78,891)
---------------
Present value of net minimum lease payments 148,181
Current maturities (11,551)
---------------
$ 136,630
===============
</TABLE>
The Company is committed under non cancelable operating leases, The Parent
Company is not obligated under operating lease agreements of the Company.
Minimum lease payments as of December 31, 1996, as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 2,710
1998 1,788
1999 1,225
2000 1,074
2001 1,074
Thereafter 4,295
----------
$ 12,166
==========
</TABLE>
-14-
<PAGE> 17
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
Rental expenses for all operating leases amounted to approximately $2,000,000
and $992,000 during 1996 and 1995, respectively.
At December 31, 1996, the unexpended portion of capital expenditures authorized
by the respective boards of directors, and customers where required, of the
Company and its subsidiaries approximated $54,188,000, of which $49,361,000 is
being financed under the arrangements with public utilities served by the
subsidiaries.
NOTE K--INCOME TAXES
The Company and its subsidiaries are included in the consolidated federal income
tax return filed by the Parent Company. The Company and each of its subsidiaries
entered into a tax-sharing agreement with the Parent Company under which federal
income taxes are computed by the Company and each of its subsidiaries on a
separate return basis. The current portion of such tax is paid to the Parent
Company. During 1996 and 1995, the federal and state income taxes paid by the
Company were approximately $8,464,000 and $12,122,000, respectively.
The Company's effective tax rate differs from the federal statutory rate
primarily due to state income taxes and percentage depletion.
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
<S> <C> <C>
Federal $ 7,278 $8,795
State 1,296 355
------- ------
Total current tax expense $ 8,574 $9,150
======= ======
Federal $ 1,401 $1,399
State (89) 291
------- ------
Total deferred tax expense $ 1,312 $1,690
======= ======
</TABLE>
A summary of components of the net deferred tax assets (liabilities) included in
the accompanying consolidated balance sheets resulting from differences in the
book and tax bases of assets and liabilities are as follows:
-15-
<PAGE> 18
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
NOTE K--INCOME TAXES--continued
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Current portion:
Accrued expenses and reserves $ 521 $ 448
Inventory (40) (37)
-------- --------
Total current $ 481 $ 411
======== ========
Long-term portion:
Depreciation, depletion and amortization $(23,379) $(19,522)
Pensions 5,527 5,714
Installment sales (1,211) (928)
Partnership investment (1,796) (1,811)
Deferred compensation 1,700 1,327
Other - net (693) (3,936)
-------- --------
Total long-term $(19,852) $(19,156)
======== ========
</TABLE>
The current portion of deferred income taxes shown above, a net deferred tax
asset, is included in other current assets in the accompanying consolidated
balance sheets.
NOTE L--DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure about the fair value of
financial instruments. Carrying amounts for cash and cash equivalents and
revolving credit approximate fair value. The fair value of notes receivable and
payable is estimated based on the discounted value of the future cash flows
using borrowing rates currently available to the Company for bank loans with
similar terms and average maturities. The fair value compared to the carrying
value are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
FAIR VALUE:
Notes receivable $ 3,906 $ 5,023
Notes payable $27,176 $29,367
CARRYING VALUE:
Notes receivable $ 2,621 $ 3,790
Notes payable $27,061 $29,053
</TABLE>
-16-
<PAGE> 19
THE NORTH AMERICAN COAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1996 and 1995
NOTE M--TRANSACTIONS WITH AFFILIATED COMPANIES
Costs and expenses include net receipts from the Parent Company and other
subsidiaries of the Parent Company. These receipts approximated $1,185,000 in
1996 and $1,150,000 in 1995 for administrative and other services.
The note receivable from Parent Company of $41,952,000 in 1996 and $14,939,000
in 1995 is a demand note, with interest of 5.94% at December 31, 1996, and 5.78%
at December 31, 1995.
-17-
<PAGE> 1
Exhibit 99(ii)
HAMILTON BEACH/PROCTOR-SILEX, INC.,
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE> 2
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1996 and 1995 2
Consolidated Statements of Operations for the Years Ended December 31, 1996 and 1995 3
Consolidated Statements of Changes in Stockholder's Equity for the Years Ended December
31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996 and 1995 5
Notes to Consolidated Financial Statements as of December 31, 1996 and 1995 6 - 17
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hamilton Beach/Proctor-Silex, Inc.:
We have audited the accompanying consolidated balance sheets of Hamilton
Beach/Proctor-Silex, Inc. (a Delaware corporation), and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, changes in stockholder's equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Hamilton
Beach/Proctor-Silex, Inc., and subsidiaries as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
Arthur Andersen, LLP
Richmond, Virginia,
January 31, 1997
- -1-
<PAGE> 4
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 359 $ 308
Accounts receivable, net 60,054 70,193
Inventories, net 48,326 58,727
Deferred income taxes 2,368 2,085
Prepaid expenses and other 6,721 6,776
--------- ---------
Total current assets 117,828 138,089
PROPERTY, PLANT, AND EQUIPMENT, NET 52,592 51,039
DEFERRED CHARGES AND INTANGIBLE ASSETS, NET 96,679 95,750
DEFERRED INCOME TAXES 4,729 3,122
OTHER ASSETS 14 27
--------- ---------
Total assets $ 271,842 $ 288,027
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations $ 9,211 $ 17,226
Accounts payable 21,388 21,616
Other current liabilities 33,253 27,744
--------- ---------
Total current liabilities 63,852 66,586
--------- ---------
OTHER LIABILITIES 9,695 13,565
--------- ---------
LONG-TERM OBLIGATIONS:
Revolving credit agreements 80,000 65,000
Capital leases 449 542
--------- ---------
Total long-term obligations 80,449 65,542
--------- ---------
STOCKHOLDER'S EQUITY:
Common stock and paid-in capital, 100 shares authorized, issued, and outstanding at
$0.01 par value 155,609 149,268
Retained deficit (35,739) (2,816)
Minimum pension liability (393) (2,521)
Cumulative translation adjustment (1,631) (1,597)
--------- ---------
Total stockholder's equity 117,846 142,334
--------- ---------
Total liabilities and stockholder's equity $ 271,842 $ 288,027
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
- -2-
<PAGE> 5
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
NET SALES $395,046 $381,356
COST OF SALES 326,146 318,968
-------- --------
Gross profit 68,900 62,388
SELLING, ADMINISTRATIVE, AND GENERAL EXPENSES 39,502 34,293
-------- --------
Operating profit 29,398 28,095
OTHER EXPENSE:
Interest 5,959 6,573
Amortization 5,715 3,683
Other, net 345 813
-------- --------
Total other expense 12,019 11,069
-------- --------
Income before income taxes 17,379 17,026
PROVISION FOR INCOME TAXES 6,696 5,274
-------- --------
Net income $10,683 $11,752
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- -3-
<PAGE> 6
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Dollars in Thousands, Other Than Par Value)
<TABLE>
<CAPTION>
COMMON STOCK COMMON
-------------------- STOCK AND MINIMUM CUMULATIVE TOTAL
SHARES PAR PAID-IN RETAINED PENSION TRANSLATION STOCKHOLDER'S
OUTSTANDING VALUE CAPITAL DEFICIT LIABILITY ADJUSTMENT EQUITY
------------- ----- --------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES, December 31, 1994 100 $1 $149,268 $(14,568) $(2,357) $(1,974) $130,369
Minimum pension liability - - - - (164) - (164)
Net income - - - 11,752 - - 11,752
Translation adjustment - - - - - 377 377
--- -- -------- -------- ------- ------- --------
BALANCES, December 31, 1995 100 1 149,268 (2,816) (2,521) (1,597) 142,334
Minimum pension liability - - - - 2,128 - 2,128
Dividend paid for
acquisition of Glen
Dimplex shares - - 6,341 (33,606) - - (27,265)
Dividend - - - (10,000) - - (10,000)
Net income - - - 10,683 - - 10,683
Translation adjustment - - - - - (34) (34)
--- -- -------- -------- ------- ------- --------
BALANCES, December 31, 1996 100 $1 $155,609 $(35,739) $ (393) $(1,631) $117,846
=== == ======== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- -4-
<PAGE> 7
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,683 $11,752
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation 13,263 12,156
Loss on disposal of fixed assets 224 599
Amortization 5,715 3,683
Deferred income taxes (3,226) 38
Changes in assets and liabilities-
Decrease (increase) in:
Accounts receivable, net 10,139 6,086
Inventories, net 10,401 (9,670)
Prepaid expenses and other 55 (665)
Deferred charges and intangible assets (315) (2,067)
(Decrease) increase in:
Accounts payable (228) (10,219)
Other liabilities 5,118 (2,569)
------- -------
Net cash provided by operating activities 51,829 9,124
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Glen Dimplex shares (33,606) -
Capital expenditures (15,129) (9,549)
Proceeds from sale of fixed assets 41 115
Acquisition of supplier - (1,508)
Other 58 -
------- -------
Net cash used in investing activities (48,636) (10,942)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term obligations (59,937) (42,741)
Borrowings under long-term obligations 66,829 42,183
Dividend paid (10,000) -
------- -------
Net cash used in financing activities (3,108) (558)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (34) 377
------- -------
Net increase (decrease) in cash and cash equivalents 51 (1,999)
CASH AND CASH EQUIVALENTS, beginning of year 308 2,307
------- -------
CASH AND CASH EQUIVALENTS, end of year $ 359 $ 308
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- -5-
<PAGE> 8
HAMILTON BEACH/PROCTOR-SILEX, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
1. ORGANIZATION AND BUSINESS:
Hamilton Beach/Proctor-Silex, Inc., and its wholly owned subsidiaries in Canada
and Mexico (the "Company"), design, manufacture, and sell small consumer
electric appliances. The principal markets for the Company's products are the
United States and Canada. The Company's products are sold primarily to retailers
and distributors. The Company is a wholly owned subsidiary of HB/PS Holdings,
Inc. ("Holdings"). Through October 17, 1996, Holdings was owned 80 percent by
NACCO Industries, Inc. ("NACCO"), and 20 percent by Glen Dimplex. Effective
October 18, 1996, Holdings became a wholly owned subsidiary of NACCO (see Note
3).
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All intercompany transactions and balances have
been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks and highly liquid investments
with initial maturities of three months or less.
INVENTORIES, NET
Inventories are stated at the lower of cost or market. Cost has been determined
by the last-in, first-out ("LIFO") method for substantially all inventories
accounted for in the United States and under the first-in, first-out method for
all other inventories.
- -6-
<PAGE> 9
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. All property, plant, and
equipment is depreciated on a straight-line basis over estimated useful lives of
up to 40 years for buildings and 4 to 6 years for machinery and equipment.
Assets recorded under capital leases and leasehold improvements are amortized
over the lesser of their estimated useful lives or remaining lease terms on a
straight-line basis.
GOODWILL
Goodwill is being amortized on a straight-line basis over periods up to 40
years. The Company continually evaluates whether events and circumstances have
occurred subsequent to its acquisitions that indicate the remaining estimated
useful life of goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an estimate of the Company's
undiscounted cash flow over the remaining life of the goodwill in measuring
whether the goodwill is recoverable.
PRODUCT DEVELOPMENT COSTS
Costs associated with the development of new products and changes to existing
products are charged to operations as incurred. These costs amounted to $3,690
and $3,304 in 1996 and 1995, respectively.
ADVERTISING COSTS
Promotional or advertising costs associated with customer support programs are
accrued when the related revenues are recognized. All other costs incurred in
producing media advertising are expensed at the time the advertising takes
place. Promotional and advertising costs charged to expense were $26,270 and
$26,465 in 1996 and 1995, respectively.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's foreign subsidiaries are translated at
current exchange rates, while income and expense items are translated at average
rates for the period. Translation gains and losses associated with the Company's
Canadian subsidiary are reported as a component of stockholder's equity.
Translation gains and losses related to the Company's subsidiaries located in
Mexico are reported in the accompanying consolidated statements of operations.
PRODUCT LIABILITY
The Company is insured for product liability claims for amounts in excess of
established self-insured retention limits. Costs estimated to be incurred with
respect to product liability claims are accrued based on experience factors.
- -7-
<PAGE> 10
SELF-INSURANCE
The Company maintains a self-insurance program for health claims and a high
deductible insurance program for workers' compensation claims of all covered
employees. Losses are accrued based on the Company's estimate of future costs
that will be incurred for employee losses incurred prior to the balance sheet
date.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, accounts receivable, payables,
debt, interest rate agreements, and foreign currency contracts. The estimated
fair values of the Company's financial instruments at December 31, 1996 and
1995, approximate their carrying value as reflected in the consolidated balance
sheets (see Note 10). The estimated fair values of financial instruments have
been determined through information obtained from quoted market sources and
management estimates. The Company does not hold or issue financial instruments
or derivative financial instruments for trading purposes.
The Company enters into forward foreign exchange contracts in order to
hedge certain foreign currency commitments. Gains and losses from these
contracts are deferred and are recognized as part of the cost of the underlying
transaction being hedged.
The Company also enters into interest rate swap agreements with various terms
and maturity dates. The differential between the floating interest rate and the
fixed interest rate that is to be paid or received is recognized in interest
expense on a current basis.
3. ACQUISITION OF SHAREHOLDER INTEREST:
On October 18, 1996, Holdings, through its parent company, Housewares Holding
Company ("Housewares"), purchased Glen Dimplex's 20 percent ownership interest
in Holdings for $33,606. The purchase was established based upon provisions
included in the Shareholder Agreement dated October 11, 1990, among Housewares,
Holdings, and Hamilton Beach, Inc. The purchase of the Glen Dimplex shares was
effected via a dividend by the Company to Holdings in the amount of the purchase
price. The effect of this transaction on the financial statements of the Company
was an increase to retained deficit of $33,606, and an increase to goodwill and
additional paid-in capital of $6,341. The addition to goodwill is being
amortized on a straight-line basis over the remaining life of the goodwill
acquired upon the formation of the Company.
4. ACQUISITION:
On November 30, 1995, the Company acquired all the outstanding stock of
Plasticos Sotec, S.A de C.V. ("Sotec"), a Mexican supplier of molded plastic
parts, under the purchase method of accounting. The Company paid net cash of
$1,508 and assumed other liabilities of $350 for the stock and certain assets of
Sotec, plus acquisition costs. Prior to the acquisition, the Company paid $2,650
to terminate the supplier manufacturing arrangement. The goodwill associated
with the acquisition of $2,129 and the amount paid to terminate the supplier
manufacturing arrangement are being amortized over a 25 month period.
- -8-
<PAGE> 11
5. ACCOUNTS RECEIVABLE, NET:
At December 31, accounts receivable consist of the following.
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accounts receivable $68,479 $77,716
Less- Allowance for returns, discounts, and adjustments (7,498) (6,878)
Allowance for doubtful accounts (927) (645)
------- -------
Accounts receivable, net $60,054 $70,193
======= =======
</TABLE>
6. INVENTORIES, NET:
At December 31, inventories consist of the following.
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Raw materials $10,915 $12,458
Work in process 3,061 3,196
Finished goods 34,078 43,323
LIFO allowance 272 (250)
------- -------
Inventories, net $48,326 $58,727
======= =======
</TABLE>
As a result of changes in prices, and liquidation of certain LIFO inventories in
1996, operating profit increased $522 and decreased $141 for 1996 and 1995,
respectively. The cost of inventories stated under the LIFO method was 91
percent of the value of total inventories at December 31, 1996 and 1995.
7. PROPERTY, PLANT, AND EQUIPMENT, NET:
At December 31, property, plant, and equipment (including capital leases)
consists of the following.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Land, buildings, and improvements $ 17,971 $ 17,862
Machinery and equipment 97,746 89,344
Construction work in process 9,542 5,231
--------- ---------
125,259 112,437
Less- Accumulated depreciation and amortization (72,667) (61,398)
--------- ---------
Property, plant, and equipment, net $ 52,592 $ 51,039
========= =========
</TABLE>
8. DEFERRED CHARGES AND INTANGIBLE ASSETS, NET:
Goodwill amounted to $96,460 and $93,649 at December 31, 1996 and 1995,
respectively, net of accumulated amortization, and is being amortized over
periods up to 40 years on a straight-line basis. Goodwill amortization expense
amounted to $3,844 and $2,816 for 1996 and 1995, respectively. Patents,
trademarks, and other at December 31, 1996 and 1995, amounted to $25 and $1,323,
respectively, net of accumulated amortization, and are being amortized on a
straight-line basis over their remaining lives. Total amortization for 1996 and
1995 amounted to $1,287 and $284, respectively. Deferred financing costs at
December 31, 1996 and 1995, amounted to $194 and $778, respectively, net of
accumulated amortization, and are being amortized on a straight-line basis over
the life of the amended and restated credit agreement (see Note 9). Amortization
expense related to deferred financing costs for 1996 and 1995 was $584 and $583,
respectively.
9. REVOLVING CREDIT AGREEMENTS:
The Company has a bank credit facility (the "Agreement"), which includes a
revolving credit line and a letter-of-credit facility of up to $160,000 through
May 1999. In April 1995, the Agreement was amended to provide a lower interest
rate and facility fee if the Company achieves certain interest coverage ratios
and to allow for interest rates to be quoted under a competitive bid option. In
October 1996, the Agreement was amended to accommodate the dividend for the
purchase of the Glen Dimplex shares (see Note 3). This amendment increased the
amount available under the Agreement by $25,000 and modified certain required
ratios. The maturity date of the Agreement may, upon mutual consent, be extended
annually for an additional year. As amended, the Agreement allows borrowings to
be made at either (i) the lender's prime rate plus 0.25 percent or (ii) LIBOR
plus 0.75 percent. Additionally, a facility fee of 0.50 percent per annum times
the committed amount of the credit facility is paid to the lender. The borrowing
margins and facility fee rates are subject to reductions based upon the Company
achieving certain predetermined interest coverage ratios. During 1996, the
Company received an average reduction of 0.79 basis points on the combined
borrowing margin plus a facility fee resulting in an average margin over LIBOR
paid of 0.29 percent and an average facility fee paid of 0.17 percent.
- -9-
<PAGE> 12
The Agreement is secured by substantially all the Company's assets. The
Agreement includes certain covenants requiring, among other things, maintenance
of certain levels of (i) net worth, (ii) debt to total capital, and (iii)
interest coverage. At December 31, 1996, the Company was in compliance with all
the financial covenants of the Agreement. The Company also has in place
uncommitted credit lines, which are secured through and subject to the
Agreement, and which allow for borrowings of up to $20,000 on a daily basis. In
addition, the Company has an unsecured, uncommitted credit line of $5,000.
During 1996 and 1995, total average borrowings outstanding under all debt and
credit agreements were $94,762 and $99,724, at a weighted-average interest rate
of 6.12 percent and 6.58 percent, respectively. At December 31, 1996 and 1995,
the weighted average interest rate on all borrowings outstanding was 6.11
percent and 6.23 percent, respectively. In addition, at December 31, 1996 and
1995, outstanding obligations under letters of credit were $4,797 and $4,312,
respectively.
At the option of Housewares, a wholly owned subsidiary of NACCO, the Company
may, subject to certain terms and conditions of the Agreement, borrow up to
$35,000 from Housewares. No borrowings were outstanding during 1996 or 1995
under this agreement.
10. FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS:
INTEREST RATE DERIVATIVES
The primary objective of interest rate risk management is to minimize the impact
of interest rate fluctuations on the Company's cash flow and financial results.
The Company has entered into certain interest rate swap agreements to swap
floating rate for fixed rate interest payments. At December 31, 1996, the
notional amount on interest rate swap agreements in effect and expiring on
various dates from March 1999 through November 1999 was $75 million, with the
average variable rate received and the average fixed rate paid during 1996 being
5.96 percent and 6.22 percent, respectively. At December 31, 1996, the aggregate
fair market value of the Company's interest rate swap agreements was $342, based
on quoted market prices received from the Company's swap agreement counter
parties.
FOREIGN CURRENCY DERIVATIVES
The Company enters into forward foreign exchange contracts for purposes of
hedging its exposure to foreign currency exchange rate fluctuations. These
contracts hedge primarily firm commitments and relate to the Canadian dollar. At
December 31, 1996, the Company had foreign currency contracts totaling $2,700,
with various expiration dates through March 10, 1997. The amount of deferred
gain associated with these contracts was not material. All interest rate and
foreign currency derivative agreements are with major commercial banks;
therefore, the risk of credit loss from nonperformance by the banks is minimal.
The Company evaluates its exposure to credit loss on an ongoing basis.
11. CONCENTRATION OF CREDIT RISK:
The Company sells its products to retailers and distributors located primarily
in North America and, as a result, maintains significant receivable balances
with its major customers. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral from its
customers. In addition, the Company maintains allowances for potential credit
losses. The Company's five largest customers accounted for approximately 48.6
percent and 46.4 percent of net sales in 1996 and 1995, respectively, and
approximately 48.4 percent and 47.0 percent of net accounts receivable at
December 31, 1996 and 1995, respectively.
12. LEASES:
The Company leases certain facilities under noncancelable leases expiring at
various dates through 2021. Plant and equipment under capital leases has been
recorded as property, plant, and equipment in the consolidated balance sheets,
and the related amortization is included with depreciation expense. At December
31, property, plant, and equipment includes the following amounts relating to
capital leases.
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Plant and equipment $9,303 $9,323
Less- Accumulated amortization (4,282) (3,829)
------ ------
$5,021 $5,494
====== ======
</TABLE>
Future minimum lease payments for capital leases as of December 31, 1996, are as
follows: 1997 - $143; 1998- $91; 1999 - $79; 2000 - $74; 2001 - $72; and
thereafter - $688, and have a net present value of $587.
Future minimum lease payments for operating leases are as follows: 1997 -
$3,751; 1998 - $3,424; 1999 - $2,673; 2000 - $1,978, 2001 - $1,781; and
thereafter - $2,155.
Rental expense for operating leases amounted to $5,593 and $5,140 for
1996 and 1995, respectively.
13. INCOME TAXES:
The Company is included in the consolidated Federal income tax return filed by
NACCO. The Company's tax sharing agreement with NACCO provides that Federal
income taxes are computed by the Company on a separate return basis,
- -10-
<PAGE> 13
except that net operating loss and tax credit carryovers that benefit the
consolidated tax return are advanced to the Company and are repaid as utilized
on a separate return basis. To the extent that these carryovers are not used on
a separate return basis, the Company is required, under conditions pursuant to
the tax sharing agreement, to refund to NACCO the balance of carryovers advanced
and not used by the Company.
The provision for income taxes consists of the following amounts.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current:
Federal $8,208 $5,287
State 1,143 644
Foreign 538 470
------ ------
Total current provision 9,889 6,401
------ ------
Deferred:
Federal (2,663) (1,551)
State (250) 308
Foreign (280) 116
------ ------
Total deferred benefit (3,193) (1,127)
------ ------
Total provision for income taxes $6,696 $5,274
====== ======
</TABLE>
A reconciliation of Federal statutory to effective income tax provision
follows.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Statutory taxes at 35% $6,083 $5,959
Effect of:
State taxes 580 619
Foreign taxes 131 182
Acquisition accounting adjustments 1,028 964
Foreign tax credit (615) (2,784)
Other (511) 334
------ ------
Provision for income taxes $6,696 $5,274
====== ======
Effective rate 38.5% 31.0%
====== ======
</TABLE>
- -11-
<PAGE> 14
The foreign tax credit of $615 realized in 1996 resulted from repatriation of
virtually all prior earnings of a Mexican subsidiary, and additional foreign tax
credit realized from the 1995 repatriation of earnings of the Canadian
subsidiary. Such benefit is not expected to recur in 1997. The foreign tax
credit of $2,784 realized in 1995 resulted from repatriation of virtually all
prior earnings of the Canadian subsidiary.
A summary of the deferred tax assets and (liabilities) that comprise the net
deferred tax balances in the accompanying consolidated balance sheets resulting
from differences in the book and tax bases of assets and liabilities is as
follows.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Employee benefits $ 2,848 $ 3,065
Plant restructuring reserve 517 530
Environmental reserve 2,195 2,288
Product liability reserve 1,906 1,786
Net operating loss and tax credit carryovers 5,289 6,041
Other 344 213
-------- --------
Total deferred tax assets 13,099 13,923
-------- --------
Deferred tax liabilities:
Advertising, sales, and inventory related reserves (2,428) (3,120)
Accelerated depreciation (2,462) (4,007)
Other (1,112) (1,589)
-------- --------
Total deferred tax liabilities (6,002) (8,716)
-------- --------
Net deferred tax assets $ 7,097 $ 5,207
======== ========
</TABLE>
As of December 31, 1996, the Company had Federal net operating loss carryovers
of approximately $7,236, related to Hamilton Beach, Inc., and foreign tax credit
carryovers of $2,705. For Federal tax purposes, the utilization of acquired net
operating loss carryovers is limited to $1,953 on an annual basis, with any
unused limitation available for carryover to subsequent years. The Company
utilized $1,953 of the net operating loss carryovers related to Hamilton Beach,
Inc., in 1996. Loss carryovers are scheduled to expire in the years 2002 and
2003, and foreign tax credit carryovers are scheduled to expire in the years
1997 to 2000. As of December 31, 1996, the Company has recorded a deferred tax
asset of $5,238 associated with these carryforwards. Realization of the asset is
dependent on generating sufficient taxable and foreign source income prior to
expiration of the carryforwards. The amount of the deferred tax asset considered
realizable could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced. Although realization is not
assured, the Company fully expects to realize its deferred tax assets. As a
result, the Company has no valuation allowances as of December 31, 1996 and
1995.
No provision has been made for Federal income taxes on undistributed earnings of
foreign subsidiaries of approximately $945 as of December 31, 1996, as any
future remittances are expected to be substantially tax free.
- -12-
<PAGE> 15
14. RETIREMENT BENEFIT PLANS:
The Company sponsors a defined benefit plan, the Hamilton Beach/Proctor-Silex,
Inc., Profit Sharing Retirement Plan (the "Plan"). All full-time hourly and
salaried U.S. employees are eligible to participate in the Plan. The Plan
provides that participants accrue benefits annually based on age and annual
earnings. Upon retirement, participants receive their vested account balances
under the Plan plus all vested accrued benefits earned under prior frozen
benefit plans. Benefits will be paid upon normal retirement at age 65 or early
retirement after age 55. Participants become fully vested after five years of
service.
The Company's funding policy is to contribute each year an amount that satisfies
the minimum required contribution but does not exceed the maximum tax deductible
contribution. Also, the Company may make additional contributions to the Plan,
dependent upon the Company achieving certain profit and performance objectives.
In 1996 and 1995, the Company accrued $413 and $433, respectively, representing
the estimated amount of profit sharing to be contributed to the Plan in the
subsequent year. The Company contributed $2,693 and $1,658 to the Plan for the
plan years ended December 31, 1996 and 1995, respectively. Assets held by the
Plan consist mainly of common stocks, corporate and government bonds, and cash
and cash equivalents.
Effective December 31, 1996, the Company froze benefit accruals under the Plan
and established a new participant retirement account under the HBPS Employees
Retirement Savings Plan (401k) effective January 1, 1997. Accordingly, all
benefits accrued and obligations recorded under the Plan were frozen as of
December 31, 1996. The details of the components of net pension expense for the
years ended December 31, 1996 and 1995, are as follows.
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Service cost $1,373 $1,179
Interest cost on projected benefit obligation 2,595 2,597
Actual return on assets (2,299) (5,373)
Net amortization and deferral (287) 3,036
------ ------
Net pension expense $1,382 $1,439
====== ======
</TABLE>
Actuarial factors used in accounting for the Plan as of December 31, 1996 and
1995, are as follows.
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Weighted-average discount rate 8.0% 7.5%
Long-term rate of return on assets 9.0% 9.0%
Rate of increase in compensation levels:
Salaried 5.0% 4.5%
Hourly 5.0% 4.5%
</TABLE>
- -13-
<PAGE> 16
The funded status of the Plan and amounts recognized in the Company's
consolidated balance sheets as of December 31, 1996 and 1995, are as follows.
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested accumulated benefit obligation $32,015 $33,329
Nonvested accumulated benefit obligation 1,823 1,346
-------- --------
Total accumulated benefit obligation 33,838 34,675
Value of future salary projections 145 976
-------- --------
Total projected benefit obligation 33,983 35,651
Fair value of plan assets 33,059 29,570
-------- --------
Projected benefit obligation in excess of plan assets (924) (6,081)
Unrecognized net transition asset (6) (6)
Unrecognized net loss 539 4,882
Unrecognized prior service cost 23 10
Additional minimum liability (652) (4,116)
-------- --------
Pension liability recognized in consolidated balance sheets at December
31, 1996 and 1995 $ (1,020) $ (5,311)
======== ========
</TABLE>
Statement of Financial Accounting Standards No. 87 ("SFAS 87"), "Employers'
Accounting for Pensions", requires the Company to recognize a minimum pension
liability equal to the unfunded accumulated benefit obligation ("ABO"). At
December 31, 1996 and 1995, the cumulative unfunded ABO was $1,020 and $5,311,
respectively. The Company recorded an adjustment that recognized an additional
minimum liability equal to the unfunded ABO. In accordance with SFAS 87, the
portion of the unfunded ABO in excess of unrecognized prior service cost was
charged directly to stockholder's equity and is separately presented in the
consolidated statements of changes in stockholder's equity. The Company also
sponsors the HBPS Employees Retirement Savings Plan (401k), a defined
contribution retirement savings plan covering substantially all of its full-time
United States employees. Under the plan, employees may defer up to 15 percent of
pay on a pre-tax basis. Effective July 1, 1995, the Company began matching
employee contributions to the plan at the rate of 50 percent, up to the first 2
percent of employee contributions. Effective January 1, 1997, the employer match
was increased to match 50 percent of the first 4 percent of employee
contributions. Employee pre-tax and employer matching contributions are
immediately 100 percent vested.
Effective January 1, 1997, the Company added a profit sharing feature to the
plan. Under the plan, participants receive an automatic contribution based on
age, ranging between 2 percent and 6.33 percent of annual pay. The Company may
also make additional profit sharing contributions to participant accounts
dependent upon the Company's achievement of certain profit and performance
goals. Profit sharing contributions vest on a 20 percent, five year graded
schedule.
- -14-
<PAGE> 17
The Company maintains a postretirement health care plan for all retirees who
retired prior to October 1, 1992. In addition, the Company provides life
insurance benefits to all retirees who retired prior to October 1, 1992,
assuming they reached certain age and service requirements while working for the
Company. Under the Company's current policy, plan benefits are funded at the
time they are due to participants. The plan has no assets.
15. RELATED-PARTY TRANSACTIONS:
The Company sells merchandise to The Kitchen Collection, Inc. ("Kitchen
Collection"), a wholly owned subsidiary of Housewares. The Company's sales to
Kitchen Collection were $6,201 and $5,030 for 1996 and 1995, respectively.
Accounts receivable due from Kitchen Collection at December 31, 1996 and 1995,
amounted to $146 and $361, respectively, and are included in accounts
receivable.
NACCO incurs certain administrative and other expenses directly related
to the operation of the Company. These expenses are reimbursed to NACCO. The
Company expensed and paid $743 and $627 of these administrative expenses to
NACCO in 1996 and 1995, respectively. The related payable to NACCO was $48 and
$73 at December 31, 1996 and 1995, respectively.
16. CONTINGENCIES:
Various legal proceedings and claims have been or may be asserted against the
Company relating to the conduct of its business, including product liability and
environmental claims. These proceedings and claims are incidental to the
Company's ordinary course of business. Management believes that it has
meritorious defenses and will vigorously defend itself in these actions. Any
costs that management estimates may be paid as a result of these proceedings or
claims are accrued when the liability is considered probable and the amount can
be reasonably estimated. Although the ultimate disposition of these proceedings
and claims is not presently determinable, management believes, after
consultation with its general counsel, the likelihood that material costs will
be incurred in excess of accruals already recognized is remote.
17. INDUSTRY SEGMENT AND FOREIGN OPERATIONS:
The Company designs, manufactures, and sells small consumer electric appliances.
Net sales to one major customer totaled 27.5 percent in 1996 and 22.5 percent in
1995. The Company has operations in the United States, Mexico, and Canada.
Products are transferred between these geographic areas at the market value of
the products. Identifiable assets are those assets identified with the
operations in each geographic area at year-end. All deferred charges and
intangible assets are attributed to the United States. Eliminations include
amounts for intercompany sales, intercompany profits in inventory, and
intercompany investments.
- -15-
<PAGE> 18
The following table presents sales, operating profit, and other financial
information by geographic area for 1996 and 1995.
<TABLE>
<CAPTION>
UNITED
STATES CANADA MEXICO ELIMINATIONS CONSOLIDATED
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1996:
Net sales $376,982 $38,349 $14,389 $(34,674) $395,046
Sales and transfers between
geographic areas 21,220 - 13,454 (34,674) -
Operating profit 28,998 424 120 (144) 29,398
Depreciation 9,351 69 3,843 - 13,263
Identifiable assets 252,438 11,927 16,347 (8,870) 271,842
Capital expenditures 6,341 180 8,608 - 15,129
1995:
Net sales $361,749 $41,795 $ 9,508 $(31,696) $381,356
Sales and transfers between
geographic areas 22,608 - 9,088 (31,696) -
Operating profit 27,195 1,230 167 (497) 28,095
Depreciation 8,932 32 3,192 - 12,156
Identifiable assets 270,333 13,625 7,266 (3,197) 288,027
Capital expenditures 7,732 109 1,708 - 9,549
</TABLE>
18. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during 1996 and 1995 included interest of $5,588 and $6,762 and
income taxes of $4,656 and $11,771, respectively.
19. RECENTLY ISSUED ACCOUNTING STANDARDS:
In 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS 121 establishes accounting standards
for the impairment of long-lived assets, certain intangibles, and goodwill
related to those assets. SFAS 121 provides, among other things, that impairment
losses be recognized when expected future cash flows are less than the related
assets' carrying value. Impairment is recorded based on an estimate of expected
future discounted cash flows. There was no material effect on the Company's
consolidated financial statements as a result of its adoption of SFAS 121.
- -16-
<PAGE> 1
Exhibit 99(iii)
THE KITCHEN COLLECTION, INC.
----------------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
TOGETHER WITH AUDITORS' REPORT
------------------------------
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and Stockholder of
The Kitchen Collection, Inc.:
We have audited the accompanying balance sheets of THE KITCHEN COLLECTION, INC.
(a Delaware corporation) as of December 31, 1996 and 1995, and the related
statements of income, changes in stockholder's equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Kitchen Collection, Inc. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Arthur Andersen, LLP
Columbus, Ohio,
January 29, 1997.
<PAGE> 3
THE KITCHEN COLLECTION, INC.
----------------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash $ 140,235 $ 130,405
Miscellaneous receivables 131,723 175,179
Accounts receivable - affiliate 3,600,000 1,950,000
Inventories 14,915,677 14,124,708
Import inventories in-transit 480,255 145,447
Prepaid expenses and other 1,886,586 1,608,637
------------ ------------
Total current assets 21,154,476 18,134,376
------------ ------------
Property, plant and equipment:
Land -- 61,300
Building and leasehold improvements 276,446 866,459
Furniture and fixtures 7,158,482 6,376,292
Construction in progress -- 77,500
------------ ------------
7,434,928 7,381,551
Less: Accumulated depreciation and amortization (4,559,945) (4,142,388)
------------ ------------
Property, plant and equipment, net 2,874,983 3,239,163
Goodwill, net of accumulated amortization 3,616,425 3,731,536
------------ ------------
Total assets $ 27,645,884 $ 25,105,075
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Accounts payable and miscellaneous accrued liabilities $ 6,300,484 $ 5,253,026
Accounts payable - affiliates 23,884 151,330
Income taxes payable to affiliate 864,576 1,015,720
Accrued salaries and benefits 1,378,280 1,183,603
Other accrued taxes 817,521 733,632
------------ ------------
Total current liabilities 9,384,745 8,337,311
Long-term debt 5,000,000 5,000,000
------------ ------------
Total liabilities 14,384,745 13,337,311
------------ ------------
Stockholder's equity:
Common stock; $.01 par value; 100,000 shares authorized; 10,500
shares issued and outstanding 105 105
Additional paid-in capital 4,999,890 4,999,890
Retained earnings 8,261,144 6,767,769
------------ ------------
Total stockholder's equity 13,261,139 11,767,764
------------ ------------
Total liabilities and stockholder's equity $ 27,645,884 $ 25,105,075
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part
of these balance sheets.
<PAGE> 4
THE KITCHEN COLLECTION, INC.
----------------------------
STATEMENTS OF INCOME
--------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net sales $74,921,070 $69,588,640
Cost of sales 43,306,213 40,048,483
----------- -----------
Gross margin 31,614,857 29,540,157
Selling, general, administrative and other expenses 28,361,721 26,102,350
----------- -----------
Operating income 3,253,136 3,437,807
Interest expense 511,051 505,848
Amortization expense 136,710 131,183
----------- -----------
Income before provision for income taxes 2,605,375 2,800,776
Provision for income taxes 1,112,000 1,174,000
----------- -----------
Net income $ 1,493,375 $ 1,626,776
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
<PAGE> 5
THE KITCHEN COLLECTION, INC.
----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
---------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
Additional Total
Number Common Paid-in Retained Stockholder's
of Shares Stock Capital Earnings Equity
--------- ----- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 10,500 $105 $4,999,890 $5,140,993 $10,140,988
Net income -- -- -- 1,626,776 1,626,776
------ ---- ---------- ---------- -----------
Balance, December 31, 1995 10,500 105 4,999,890 6,767,769 11,767,764
Net income -- -- -- 1,493,375 1,493,375
------ ---- ---------- ---------- -----------
Balance, December 31, 1996 10,500 $105 $4,999,890 $8,261,144 $13,261,139
====== ==== ========== ========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE> 6
THE KITCHEN COLLECTION, INC.
----------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,493,375 $ 1,626,776
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,100,430 1,025,093
Loss on the disposal of assets 10,398 26,090
Decrease in miscellaneous receivables 43,456 52,527
(Increase) decrease in inventories (1,125,777) 119,050
Increase in prepaid expenses and other (277,949) (174,545)
Increase (decrease) in accounts payable and miscellaneous
accrued liabilities 1,047,458 (2,312,501)
Decrease in accounts payable - affiliates (127,446) (55,891)
Decrease in income taxes payable to affiliate (151,144) (61,640)
Increase in accrued salaries and benefits 194,677 35,305
Increase (decrease) in other accrued taxes other than income 83,889 (37,938)
----------- -----------
Net cash provided by operating activities 2,291,367 242,326
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (1,058,127) (1,459,676)
Proceeds from disposal of assets 426,590 2,450
----------- -----------
Net cash used in investing activities (631,537) (1,457,226)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (advances to) repayments on loan to affiliate (1,650,000) 1,175,000
----------- -----------
Net cash provided by (used in) financing activities (1,650,000) 1,175,000
----------- -----------
</TABLE>
(Continued on next page)
<PAGE> 7
THE KITCHEN COLLECTION, INC.
----------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
(Continued)
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
---------------------------
1996 1995
---------- -----------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH $ 9,830 $ (39,900)
CASH, beginning of the year 130,405 170,305
---------- -----------
CASH, end of the year $ 140,235 $ 130,405
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
- -------------------------------------------------
Cash paid during the year for:
Interest $ 463,689 $ 560,133
Income taxes $1,253,554 $ 1,446,353
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE> 8
THE KITCHEN COLLECTION, INC.
----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(1) ORGANIZATION
------------
The Kitchen Collection, Inc. (the Company) is a specialty retailer of
kitchenware, tableware, small electrical appliances and related
accessories. The Company operates a chain of 144 retail and factory
outlet stores throughout the United States and is a wholly-owned
subsidiary of NACCO Industries, Inc. (NII).
(2) SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INVENTORIES
-----------
Inventories are stated at the lower of cost or market as determined by
the retail inventory method.
LEASEHOLD IMPROVEMENTS, FURNITURE AND FIXTURES
----------------------------------------------
Leasehold improvements, furniture and fixtures are stated at cost.
Expenditures for maintenance and repairs are charged to operations as
incurred. For financial reporting purposes, depreciation and amortization
is provided using the straight-line method based upon the estimated
useful lives of the related assets, as follows:
Leasehold improvements 5 years
Furniture and fixtures 5 years
<PAGE> 9
GOODWILL
--------
Goodwill is associated with the purchase of the Company by NII and is
being amortized over forty years on a straight-line basis. Accumulated
amortization was $988,045 and $872,934 at December 31, 1996 and 1995,
respectively, with related amortization expense of $115,111 for each of
the years ended December 31, 1996 and 1995. Management regularly
evaluates its accounting for goodwill considering such factors as
historical and future profitability and believes that the asset is
realizable and the amortization period remains appropriate.
INCOME TAXES
------------
Deferred tax assets or liabilities are based on the difference between
the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expense or
benefit is based on the changes in the assets or liabilities from period
to period, refer to Note 5 "Income Taxes" for additional information.
ADVERTISING
-----------
The Company incurs advertising costs in the form of radio, newspaper and
other print ads. Such costs are expensed as incurred. Advertising expense
was $250,455 and $204,879 in 1996 and 1995, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The Company enters into interest rate swap agreements with terms that run
concurrent with the related debt. The differential between the floating
interest rate and the fixed interest rate, which is to be paid or
received, is recognized in interest expense as interest rates change over
the life of the related debt agreement.
The fair values of financial instruments have been determined through
information obtained from quoted market sources and management estimates.
The fair value of the financial instruments approximated their carrying
values at December 31, 1996 and 1995. The Company does not hold or issue
financial instruments or derivative financial instruments (interest rate
swap agreements) for trading purposes.
RECLASSIFICATIONS
-----------------
Certain reclassifications have been made to 1995 amounts to conform to
1996 presentation.
<PAGE> 10
(3) LINE-OF-CREDIT AGREEMENT
------------------------
The Company has an unsecured revolving line-of-credit agreement with a
commercial bank for $5,000,000. Interest accrues at the bank's prime
rate, money market rate or LIBOR rate plus a base rate margin of .425% to
1.25%, as determined by certain performance measures. The Company had no
funds drawn against the available balance at December 31, 1996 or 1995.
As of December 31, 1996, the Company had letters of credit outstanding
totaling $71,736, which reduces the available balance to $4,928,264. The
credit agreement expires on May 31, 1999.
(4) LONG-TERM DEBT
--------------
Long-term debt consists of the following, as of December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Note payable to bank at 8.06% at
December 31, 1996 and 7.81% at
December 31, 1995 $5,000,000 $5,000,000
========== ==========
</TABLE>
On May 10, 1994, the Company entered a term note agreement with a
commercial bank for $5,000,000. Interest is payable quarterly at 6.81%,
plus a base rate margin between .75% and 1.75%, determined by certain
performance measures. The note is unsecured and annual principal payments
are due on January 15 of the following years:
<TABLE>
<CAPTION>
Year Amount
-------- ------------
<S> <C>
1997 $ -
1998 -
1999 2,500,000
2000 2,500,000
------------
$ 5,000,000
============
</TABLE>
The note contains restrictive covenants regarding maintenance of minimum
net worth, interest coverage and leverage. The Company was in compliance
with all covenants as of December 31, 1996 and 1995.
<PAGE> 11
The Company entered into an interest rate swap agreement with a six year
term during 1994. The use of this agreement allowed the Company to enter
into a long-term credit agreement with a performance based, floating rate
of interest and then swap it for a fixed rate as opposed to entering into
a higher cost fixed-rate credit agreement. This agreement is with a major
commercial bank; therefore, the risk of credit loss from nonperformance
by the bank is minimal. The following summarizes the notional amount and
related rates on this interest rate swap agreement at December 31, 1996:
<TABLE>
<CAPTION>
<S> <C> <C>
Notional amount $5,000,000
Average variable rate received 6.81%
Average fixed rate paid 8.00% (8.06% at December 31, 1996)
</TABLE>
(5) INCOME TAXES
------------
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Currently payable:
Federal $ 882,000 $ 988,000
State and local 244,000 234,000
------------ -------------
1,126,000 1,222,000
------------ -------------
Deferred:
Federal (18,000) (32,000)
State and local 4,000 (16,000)
------------ -------------
(14,000) (48,000)
------------ -------------
$1,112,000 $1,174,000
============ =============
</TABLE>
The components of the net deferred income tax benefit are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Inventory uniform capitalization and volume
discounts $ 84,000 $ (36,000)
Tax over book depreciation 5,000 7,000
Vacation pay (18,000) (19,000)
Medical cost (6,000) (47,000)
State income taxes (44,000) 63,000
Other (35,000) (16,000)
============ =============
Total deferred income tax benefit, net $ (14,000) $ (48,000)
============ =============
</TABLE>
<PAGE> 12
Reconciliation of the Federal statutory and effective income tax rates is
as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Federal statutory rate 35.0% 35.0%
Amortization of goodwill 1.5 1.4
State and local income tax, net of Federal
income tax effect 6.2 5.8
Other - (0.3)
--------- ---------
Effective tax rate 42.7% 41.9%
========= =========
</TABLE>
A summary of the components of the net deferred tax asset balances,
included in the accompanying balance sheet in prepaid expenses and other,
are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Inventories $140,000 $224,000
Accrued expenses and reserves 366,000 230,000
State income taxes (18,000) (62,000)
Depreciation (226,000) (220,000)
======== ========
Deferred tax asset, net $262,000 $172,000
======== ========
</TABLE>
(6) RELATED PARTY TRANSACTIONS
--------------------------
Net purchases of inventories from Hamilton Beach<>Procter Silex (HBPS), a
related company, during the years ended December 31, 1996 and 1995, were
$6,080,255 and $5,467,375, respectively. The purchase price of this
inventory is determined by negotiations between the two companies and is
comparable to market. Related inventory levels at December 31, 1996 and
1995, were approximately $1,682,000 and $2,359,000, respectively. At
December 31, 1996 and 1995, the Company owed HBPS $415 and $126,179,
respectively, for these purchases.
The Company incurred $79,138 and $87,913 for miscellaneous services
provided by NII for the years ended December 31, 1996 and 1995,
respectively. The Company had payables for such services at December 31,
1996 and 1995, of $23,469 and $25,151, respectively.
The Company has an agreement with NII to loan NII up to $15,000,000.
Outstanding amounts are collectible on demand. Interest is payable
quarterly at the applicable short-term Federal rate. The Company has a
receivable due from NII at December 31, 1996 and 1995 of $3,600,000 and
$1,950,000, respectively. The Company recorded related interest income of
$14,184 during 1996 and $20,209 during 1995.
<PAGE> 13
The Company has a tax sharing agreement with NII, as NII and the Company
are included in the same consolidated group for Federal tax purposes. The
Company files separate tax returns for state and local tax purposes. The
Company has recorded taxes payable to NII at December 31, 1996 and 1995,
of $864,576 and $1,015,720, respectively.
(7) LEASES
------
The Company leases its home office, retail stores, warehouse space and
equipment under noncancellable operating leases which expire at various
dates through 2006. Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 5,844,388
1998 5,263,029
1999 4,324,017
2000 3,206,764
2001 1,452,642
Thereafter 1,269,623
-----------
Total minimum payments $21,360,463
===========
</TABLE>
The Company has leases with percentage of sales clauses in all but two of
its retail store locations. Percentage of sales rent expense amounted to
$552,036 for the year ended December 31, 1996 and $375,144 for the year
ended December 31, 1995. The Company's total rent expense for the years
ended December 31, 1996 and 1995, was $8,631,686 and $7,759,326,
respectively.
(8) RETIREMENT INCOME PLANS
-----------------------
The Company maintains a defined contribution savings plan for employees,
who have completed one year of service and are at least 21 years of age.
Employees can elect to defer and contribute a portion of their salary,
following the guidelines established in the plan. The Company makes
matching contributions of 50% of the employee's contribution, limited to
3% of the employee's compensation. In addition, the Company can make an
annual profit sharing contribution at its discretion.
Effective January 1, 1995, the Company established a deferred
compensation plan for management employees. The purpose of the plan is to
provide for certain employees of the Company benefits they would have
received under the retirement savings plan but for certain limitations
imposed by the INTERNAL REVENUE CODE. The plan is administrated and the
related assets are held by the Company. Earnings are accrued by the
Company based upon return on equity, as defined by the plan. The assets
of the plan are unsecured.
<PAGE> 14
The Company's matching contribution, profit sharing contribution and
earnings accrued on the plans described above was $267,443 and $317,613
for the years ended December 31, 1996 and 1995, respectively.
Effective December 20, 1995, the Company established a deferred
compensation plan for participants in the retirement savings plan not
included in the deferred compensation plan for management employees. The
purpose of the plan is to provide for certain employees of the Company
benefits they would have received under the retirement savings plan but
for certain limitations imposed by the INTERNAL REVENUE Code. The plan is
administrated and the related assets are held by the Company. Earnings
shall be accrued by the Company based upon the earnings of the retirement
savings plan, as defined by the plan. The assets of the plan shall be
unsecured. As of December 31, 1996, there are no participants nor has the
Company incurred any expense with relation to this plan.
(9) SELF INSURANCE COVERAGE
-----------------------
The Company is self insured for health insurance with stop loss coverage
for claims which exceed $45,000 per incident. Total expense for 1996 and
1995 was approximately $558,000 and $649,000, respectively.
(10) SUBSEQUENT EVENTS
-----------------
Through January 29, 1997, the Company made additional advances to NII of
$400,000 and received payments of $2,530,000, for a net receivable
balance of $1,470,000 at January 29, 1997.
<PAGE> 1
Exhibit 99(iv)
NACCO MATERIALS HANDLING GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE> 2
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
NACCO Materials Handling Group, Inc.:
We have audited the accompanying consolidated balance sheets of NACCO Materials
Handling Group, Inc. (an indirect majority-owned subsidiary of NACCO Industries,
Inc.) and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NACCO Materials Handling Group,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Portland, Oregon Arthur Andersen LLP
February 3, 1997
<PAGE> 3
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
(in thousands of dollars except share amounts)
<TABLE>
<CAPTION>
ASSETS
------
1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 42,789 $ 25,777
Accounts receivable, net 126,663 194,406
Inventories 218,644 286,085
Prepaid expenses and other 5,221 5,338
Deferred income taxes 5,390 2,714
--------- ---------
398,707 514,320
--------- ---------
OTHER ASSETS 12,556 13,360
PROPERTY, PLANT AND EQUIPMENT, net 169,687 148,347
DEFERRED CHARGES:
Goodwill, net 360,882 367,670
Other 9,054 8,462
--------- ---------
369,936 376,132
--------- ---------
Total assets $ 950,886 $1,052,159
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 148,283 $ 212,164
Short-term obligations 7,772 78,621
Current maturities of long-term obligations 3,433 3,265
Accrued expenses 91,292 89,028
Accrued income taxes 801 2,197
Deferred income taxes -- 1,793
--------- ---------
251,581 387,068
--------- ---------
LONG-TERM OBLIGATIONS, net of current maturities 247,717 250,000
OTHER LIABILITIES 64,443 56,293
DEFERRED INCOME TAXES 17,385 17,844
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share; 10,000 shares
authorized; 5,599 shares outstanding 6 6
Capital in excess of par value 198,205 198,205
Retained income 158,330 131,887
Foreign currency translation adjustment 15,006 12,810
Pension liability adjustment and other (1,787) (1,954)
--------- ---------
369,760 340,954
--------- ---------
Total liabilities and stockholders' equity $ 950,886 $1,052,159
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE> 4
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
NET SALES $ 1,560,092 $ 1,510,106
COST OF SALES 1,283,012 1,234,050
----------- -----------
Gross profit 277,080 276,056
----------- -----------
OPERATING EXPENSES:
Selling, administrative and general expenses 193,049 181,754
Goodwill amortization 11,517 10,844
----------- -----------
204,566 192,598
----------- -----------
Operating profit 72,514 83,458
OTHER INCOME (EXPENSE):
Interest income 590 923
Interest expense (24,994) (25,840)
Other, net (2,088) (160)
----------- -----------
(26,492) (25,077)
----------- -----------
Income before income taxes and
extraordinary charge 46,022 58,381
PROVISION FOR INCOME TAXES 19,579 21,490
----------- -----------
INCOME BEFORE EXTRAORDINARY CHARGE 26,443 36,891
EXTRAORDINARY CHARGE, NET OF TAX -- (3,399)
----------- -----------
NET INCOME $ 26,443 $ 33,492
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 5
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,443 $ 33,492
Adjustments to reconcile net income to net
cash provided by (used for) operating activities-
Extraordinary charge, net of tax -- 2,161
Depreciation and amortization 33,785 31,791
Deferred income taxes (5,089) (1,162)
Other 2,766 5,944
Changes in working capital:
Accounts receivable 82,029 (48,642)
Inventories 75,540 (73,543)
Prepaid expenses and other 404 5,381
Accounts payable and accrued expenses (65,274) 29,332
Accrued income taxes (1,594) (9,147)
--------- ---------
Net cash provided by (used for) operating
activities 149,010 (24,393)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (42,294) (39,432)
Acquisition of subsidiary (11,537) (5,780)
Proceeds from sale of assets 407 650
Other 2,239 1,097
--------- ---------
Net cash used for investing activities (51,185) (43,465)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term obligations 1,880 2,529
Reduction of long-term obligations (2,533) (219,650)
Revolving credit facility, net (4,378) 212,935
Short-term obligations, net (72,465) 73,060
Working capital financing, net (10,603) 10,805
Capital grants 4,154 4,017
Other 1,274 (1,567)
--------- ---------
Net cash provided by (used for) financing
activities (82,671) 82,129
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,858 743
--------- ---------
CASH AND CASH EQUIVALENTS:
Increase for the year 17,012 15,014
BALANCE AT THE BEGINNING OF THE YEAR 25,777 10,763
--------- ---------
BALANCE AT THE END OF THE YEAR $ 42,789 $ 25,777
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 6
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
COMMON STOCK $ 6 $ 6
--------- ---------
CAPITAL IN EXCESS OF PAR VALUE 198,205 198,205
--------- ---------
RETAINED INCOME:
Beginning balance 131,887 98,395
Net income 26,443 33,492
--------- ---------
158,330 131,887
--------- ---------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT:
Beginning balance 12,810 10,511
Foreign currency translation adjustment 2,196 2,299
--------- ---------
15,006 12,810
--------- ---------
PENSION LIABILITY ADJUSTMENT AND OTHER (1,787) (1,954)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY $ 369,760 $ 340,954
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE> 7
NACCO MATERIALS HANDLING GROUP, INC. AND SUBSIDIARIES
-----------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
1. ACCOUNTING POLICIES:
--------------------
Basis of Presentation
- ---------------------
The accompanying consolidated financial statements of NACCO Materials Handling
Group, Inc. and subsidiaries include the accounts of NACCO Materials Handling
Group, Inc. and subsidiaries and its parent Hyster-Yale Materials Handling,
Inc., a holding company (collectively, the Company). Hyster-Yale Materials
Handling, Inc. is a 98% owned subsidiary of NACCO Industries, Inc. (NACCO).
NACCO Materials Handling Group, Inc. and subsidiaries is the primary operating
business.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Hyster-Yale
Materials Handling, Inc. and NACCO Materials Handling Group, Inc. and its
majority-owned domestic and international subsidiaries except for Companhia
Hyster, a Brazilian subsidiary. Income from this Brazilian subsidiary is
recognized when cash is received in the form of a dividend. Investments in
Sumitomo-Yale Company, Ltd. (S-Y), a 50% owned joint venture, and Yale Financial
Services, Inc. (YFS, Inc.), a 20% owned joint venture, are accounted for by the
equity method. All significant intercompany accounts and transactions among the
consolidated companies are eliminated in consolidation.
Cash and Cash Equivalents
- -------------------------
The Company considers cash equivalents to be investments with a maturity of
three months or less.
Inventories
- -----------
Inventories are stated at the lower of cost or market. Cost has been determined
under the last-in, first-out (LIFO) method for domestic inventories and under
the first-in, first-out (FIFO) method with respect to all other inventories.
Costs for inventory valuation include labor, material and manufacturing
overhead.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are recorded at cost. Depreciation, including
amortization of equipment acquired under capital leases, is computed using the
straight-line method over the estimated useful service lives for purposes of
financial reporting. For tax purposes, an accelerated method is generally used.
Maintenance and repairs are expensed as incurred.
Advertising Costs
- -----------------
Advertising costs are expensed as incurred and reported in selling, general and
administrative expenses.
<PAGE> 8
-2-
Goodwill
- --------
Goodwill, the excess of the purchase price paid over the fair value of the net
assets acquired, relates primarily to the 1989 acquisition of Hyster Company and
is amortized on a straight-line basis over 40 years. Amortization was $11.5
million and $10.8 million in 1996 and 1995 respectively. Accumulated
amortization was $82.7 million and $71.2 million at December 31, 1996 and 1995,
respectively. Management regularly evaluates its accounting for goodwill
considering such factors as historical and future profitability and believes
that the asset is realizable and the amortization period is still appropriate.
Product Development Costs
- -------------------------
Expenditures associated with the development of new products and improvements to
existing products are expensed as incurred. These costs amounted to $23.3 and
$24.2 million in 1996 and 1995, respectively.
Foreign Currency
- ----------------
The financial statements for the Company's foreign operations are translated
into United States dollars at year-end exchange rates as to assets and
liabilities and at weighted average exchange rates as to revenues and expenses.
Gains and losses that do not impact cash flows are excluded from net income.
Effects of changes in exchange rates on the translated financial statements are
designated as "foreign currency translation adjustment," a separate component of
stockholders' equity.
Financial Instruments and Derivative Financial Instruments
- ----------------------------------------------------------
The fair values of financial instruments have been determined through
information obtained from quoted market sources and management estimates. The
Company does not hold or issue financial instruments or derivative financial
instruments for trading purposes.
The Company enters into forward foreign exchange contracts with terms of one to
twelve months. These contracts hedge certain foreign currency denominated
receivables and payables and foreign currency commitments. Gains and losses on
contracts which do not hedge firm commitments are reported currently in income,
while gains and losses from contracts related to firm commitments are deferred
and recognized as part of the cost of the underlying transaction being hedged.
The Company also enters into interest rate swap agreements with terms ranging
from eighteen months to seven years. The differential between the floating
interest rate and the fixed interest rate which is to be paid or received is
recognized in interest expense as the floating interest rate changes over the
life of the agreement.
Long-Lived Assets
- -----------------
During fiscal year 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This statement had no material effect on
the Company's accompanying financial statements.
Reclassifications
- -----------------
Certain amounts in the prior period consolidated financial statements have been
reclassified to conform to the current period's presentation.
<PAGE> 9
-3-
2. RISKS AND UNCERTAINTIES:
------------------------
Nature of Operations
- --------------------
The Company designs, manufactures and markets material handling machinery and
equipment. Its product offerings cover all categories of forklift trucks, with
electric rider and internal combustion engine (ICE) forklift trucks being the
major product lines. The Company also derives significant revenue from the sale
of service parts for its own and competitors' forklift trucks.
The Company's manufacturing operations are primarily located in the United
States and Europe. Products are differentiated between the Hyster(R) and Yale(R)
brands and each brand is distributed worldwide through separate dealer networks.
Both brands are also sold directly to certain national account customers.
The Company's market position is strongest in North America; it also has
significant presence in Europe although its competitive position varies from
country to country. The Company's market share in Asia-Pacific is relatively
low.
The forklift truck industry is highly competitive and the Company has
established alliances with a limited number of suppliers to secure sources of
competitively priced materials and components. If the supply of key components
or materials were disrupted, or if major price increases were imposed that could
not be passed onto end customers, there could be an adverse impact on the
Company's operating results.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and liabilities and
the disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
3. EXTRAORDINARY CHARGES:
----------------------
The 1995 extraordinary charge of $3.4 million, net of $2.2 million in tax
benefits, represents premiums and write-off of unamortized debt issuance costs
associated with the retirement of approximately $78 million of 12-3/8%
subordinated debentures. The Company retired these debentures in August 1995
utilizing proceeds from the Credit Agreement, as discussed in Note 10.
4. SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Interest paid $25,794 $29,553
Income taxes paid 32,900 30,239
Income tax refunds received 6,152 2,213
</TABLE>
<PAGE> 10
-4-
5. ACCOUNTS RECEIVABLE:
--------------------
Allowances for doubtful accounts of $4.1 million and $3.8 million at December
31, 1996 and 1995, respectively, were deducted from accounts receivable.
The Company has agreements which allow for the sale, without recourse, of
undivided interests in revolving pools of its trade accounts receivable. The
maximum allowable amount of receivables to be sold was $75.6 million at December
31, 1996 and $25.0 million at December 31, 1995. The amount sold at any
measurement date varies based upon the level of eligible receivables. Under
these agreements, $56.3 million and $23.2 million were sold as of December 31,
1996 and 1995, respectively. The sales are reflected as reductions of accounts
receivable in the accompanying Consolidated Balance Sheets. The costs of these
programs, which were $1.8 million in 1996 and $1.6 million in 1995, are charged
to other expense in the accompanying Consolidated Statements of Income.
6. INVENTORIES:
------------
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
------- -------
(in thousands)
<S> <C> <C>
Finished goods and service parts $113,644 $117,393
Raw materials and work in process 120,620 182,032
LIFO reserve (15,620) (13,340)
-------- --------
$218,644 $286,085
======== ========
</TABLE>
The cost of inventories has been determined by the last-in first-out (LIFO)
method for 55% of such inventories as of December 31, 1996 and 61% as of
December 31, 1995.
<PAGE> 11
-5-
7. INVESTMENTS:
------------
The Company owns a 50% interest in S-Y. The joint venture operates a facility in
Japan from which the Company purchases certain components, internal combustion
engines and electric forklift trucks. Following is S-Y's unaudited condensed
financial information on a separate company basis, before elimination of
intercompany profits.
<TABLE>
<CAPTION>
November 30,
-----------------------
Condensed Balance Sheets 1996 1995
- ------------------------ -------- -------
(in thousands)
(unaudited)
<S> <C> <C>
Assets:
Current assets $122,333 $144,966
Other assets 49,922 57,209
-------- --------
$172,255 $202,175
======== ========
Liabilities and stockholders' equity:
Notes payable $ 73,121 $ 55,700
Other current liabilities 59,484 95,898
-------- --------
Total current liabilities 132,605 151,598
Other liabilities 26,551 36,320
Stockholders' equity 13,099 14,257
-------- --------
$172,255 $202,175
======== ========
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
November 30,
----------------------
Condensed Statements of Income 1996 1995
- ------------------------------ -------- ------
(in thousands)
(unaudited)
<S> <C> <C>
Net sales $221,160 $280,853
Gross profit 54,115 71,322
Net income 1,554 4,865
</TABLE>
The Company's purchases from S-Y in 1996 and 1995 were $108.3 million and $134.4
million, respectively. Trade terms on certain payables to S-Y range from 180 to
210 days and the Company pays interest at market rates on all amounts owing
after 60 days. Payables to S-Y with terms greater than 60 days are shown as
working capital financing in the consolidated statements of cash flows. The
Company's accounts receivable and accounts payable balances with S-Y are as
follows:
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1995
------- -------
(in thousands)
<S> <C> <C>
Accounts receivable $ 578 $ 895
Accounts payable 32,398 51,696
</TABLE>
The Company reimbursed S-Y $1.2 million and $1.4 million for engineering
assistance during 1996 and 1995, respectively.
<PAGE> 12
-6-
8. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment includes the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Land $ 6,546 $ 6,421
Buildings 70,496 58,503
Machinery, tools and equipment 218,780 192,137
--------- ---------
295,822 257,061
Less- Accumulated depreciation (126,135) (108,714)
--------- ---------
$ 169,687 $ 148,347
========= =========
</TABLE>
Depreciation charged to income was $22.0 and $20.2 million in 1996 and 1995,
respectively.
9. ACCRUED EXPENSES:
-----------------
The components of accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
-------- -------
(in thousands)
<S> <C> <C>
Wages, commissions and bonuses $13,417 $13,105
Interest 2,307 3,107
Warranty 21,506 16,708
Self insurance 8,000 8,000
Sales discounts 10,605 12,104
Other 35,457 36,004
------- -------
$91,292 $89,028
======= =======
</TABLE>
10. SHORT-TERM AND LONG-TERM OBLIGATIONS:
-------------------------------------
On February 28, 1995 the Company entered into a long-term financing agreement
(the Credit Agreement) to refinance the majority of its previously outstanding
long-term debt. The Credit Agreement provides the Company with an unsecured $350
million revolving line of credit with a five year maturity and an extension
option. It is the Company's intention to exercise the extension option at
maturity. The Credit Agreement also provides the Company with reduced interest
rates upon achievement of certain financial performance targets. The Credit
Agreement allowed the Company to redeem the $78 million of 12-3/8% subordinated
debentures outstanding at December 31, 1994. This redemption caused the Company
to record an extraordinary charge of $3.4 million, net of tax, in 1995 to write
off the unamortized debt issuance costs and premiums as discussed in Note 3.
<PAGE> 13
-7-
Borrowings under the Credit Agreement were $230 million at December 31, 1996 and
are classified as a long-term obligation. Borrowings were $275 million at
December 31, 1995 of which $246 million is classified as long-term and the
remainder as short-term obligation. A facility fee, which is based upon the
total $350 million commitment of the Credit Agreement, is currently 0.2% per
annum. This facility bears interest under a variety of borrowing options with
premiums on each option subject to reductions based on favorable performance.
The weighted average effective interest rates on the revolving credit facility,
including interest rate swaps, was 6.68% and 6.25% during 1996 and 1995,
respectively. The weighted average interest rate, including interest rate swaps,
at December 31, 1996 and 1995 was 6.50% and 6.68%, respectively.
The Credit Agreement contains covenants related to minimum net worth, debt to
capitalization ratios and debt of subsidiaries. In addition, the Credit
Agreement limits capital spending, investments and dividends. As of December 31,
1996, the Company was in compliance with all the covenants in the Credit
Agreement.
In addition to the Credit Agreement, the Company has arrangements with lenders
that allow for borrowings on an uncommitted basis at current market rates. At
December 31, 1996, borrowings under these arrangements amounted to $14 million
and are classified as long-term obligations. At December 31, 1995, these
borrowings were classified as short-term obligations and amounted to $43.4
million. The weighted average interest rate on these borrowings at December 31,
1996 and 1995 was 6.875% and 6.41%, respectively.
As further discussed in Note 15 to the consolidated financial statements, the
Company has entered into unsecured interest rate swap agreements. The interest
rate swap agreements mature at varying lengths from eighteen months to seven
years and effectively changes the majority of the Company's floating interest
rate exposure on the Credit Agreement to a fixed rate. The Company evaluates its
exposure to floating rate debt on an ongoing basis.
Long-term obligations, exclusive of current maturities, consists of the
following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Revolving lines of credit $244,000 $245,935
Other, including capital leases 3,717 4,065
-------- --------
Total long-term obligations $247,717 $250,000
======== ========
</TABLE>
Maturities on long-term obligations excluding capital lease obligations for the
next five years are as follows (Note 16):
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ --------------
(in thousands)
<S> <C>
1997 $1,095
1998 51
1999 -
2000 -
2001 -
</TABLE>
<PAGE> 14
-8-
To the extent allowed under the restrictive covenants of the Credit Agreement,
foreign subsidiaries had credit lines at December 31, 1996 with an unused amount
of $27.9 million. Borrowings under these credit lines are classified as
short-term and amounted to $7.8 million and $6.2 million at December 31, 1996
and 1995, respectively. These credit lines are in various currencies and bear
interest at an average rate of 8.8% and 8.4% at December 31, 1996 and 1995,
respectively.
11. INCOME TAXES:
-------------
The Company is included in the consolidated federal income tax return of NACCO.
The Company and NACCO are parties to an income tax sharing agreement providing
for the allocation of federal income tax liabilities. Under this arrangement,
the Company will pay to NACCO an amount equal to the income taxes that would be
payable by the Company if it were a corporation filing a separate return.
Therefore, the currently payable federal portion of the provision for income
taxes is payable to NACCO. The Company files separate state income tax returns.
Components of income before income taxes and extraordinary charge are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Domestic $32,635 $35,305
International 13,387 23,076
------- -------
$46,022 $58,381
======= =======
</TABLE>
Income tax expense (credit) consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Current:
Federal $18,494 $17,814
State 3,489 3,650
Foreign 5,073 3,767
------- -------
27,056 25,231
------- -------
Deferred:
Federal (1,883) (3,570)
State (571) (1,394)
Foreign (5,023) 1,223
------- -------
(7,477) (3,741)
------- -------
$19,579 $21,490
======= =======
</TABLE>
The Company has provided for estimated United States and foreign income taxes,
less available tax credits and deductions, which would be incurred on the
remittance of undistributed earnings in its foreign subsidiaries in excess of
earnings deemed to be indefinitely reinvested. It is the Company's policy to
provide income taxes on all future accumulations of undistributed earnings for
those foreign subsidiaries where it is anticipated that distribution of earnings
is likely to occur.
<PAGE> 15
-9-
Accumulated earnings at December 31, 1996 of international subsidiaries which
have been deemed to be indefinitely reinvested totaled $45.5 million.
Determination of the amount of unrecognized deferred tax liability on these
unremitted earnings is not practicable. The amount of withholding taxes that
would be payable upon remittance of all undistributed foreign earnings would be
$6.3 million. These withholding taxes, subject to certain limitations, may be
used to reduce U.S. income taxes.
A reconciliation of the provisions for income taxes at the federal statutory
income tax rate to income taxes as reported is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------
1996 1995
------- -------
(in thousands)
<S> <C> <C>
Income before tax and extraordinary item $46,022 $58,381
Statutory rate 35% 35%
------- -------
Tax at statutory rate 16,108 20,433
Effect of:
Amortization of goodwill 4,085 4,085
State income taxes 1,638 1,391
Export benefit (1,670) (969)
Income recorded net of tax (404) (1,174)
Tax authorities settlement (1,288) (1,792)
Other differences 1,110 (484)
------- -------
Tax Provision $19,579 $21,490
======= =======
</TABLE>
A summary of the components of the net deferred tax balance in the Company's
consolidated balance sheets resulting from differences in the book and tax basis
of assets and liabilities follows:
Deferred Tax Asset (Liability) at December 31, 1996 (in thousands)
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Current Noncurrent
--------------------- -----------------------
Domestic Foreign Domestic Foreign
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Inventories $(13,161) $ 373 $ - $ -
Accrued expenses and reserves 13,397 1,446 - -
Pension - - (876) (2,454)
Net operating loss carryforwards 67 - - 6,690
Product liability 3,112 - 15,795 -
Tax credit carryforwards 436 - - -
Unrepatriated earnings - - (16,663) -
Depreciation - - (13,871) (6,367)
Other 37 (317) (86) 447
-------- ------ -------- -------
$ 3,888 $1,502 $(15,701) $(1,684)
======== ====== ======== =======
</TABLE>
<PAGE> 16
-10-
Deferred Tax Asset (Liability) at December 31, 1995 (in thousands)
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Current Noncurrent
---------------------- ------------------------
Domestic Foreign Domestic Foreign
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Inventories $(17,775) $ 1,058 $ - $ -
Accrued expenses and reserves 12,594 1,737 - -
Pension - - (1,158) (2,427)
Net operating loss carryforwards 460 1,723 - -
Product liability 3,112 14,717 -
Tax credit carryforwards 56 - - -
Unrepatriated earnings - - (11,642) -
Depreciation - - (13,267) (5,247)
Other (240) (1,804) 1,210 (30)
-------- ------- -------- -------
$ (1,793) $ 2,714 $(10,140) $(7,704)
======== ======= ======== =======
</TABLE>
12. POSTRETIREMENT BENEFITS:
------------------------
The Company maintains a variety of postretirement plans covering a majority of
its employees. A portion of the employees are participants in the defined
benefit plans discussed below. Most of the remaining covered employees
participate in the profit sharing portion of the Company's defined contribution
plan also described below. In addition, all eligible employees are included in
the 401(k) portion of the defined contribution plan. Total postretirement
expense for the Company was $11.0 million and $12.1 million for the years 1996
and 1995, respectively. Included in these amounts is the expense associated with
government sponsored plans in which the Company's international subsidiaries
participate. Cash contributions under the above plans were $16.5 million in 1996
and $7.8 million in 1995.
During 1996, the Company recognized a curtailment gain of $1.3 million which is
included in postretirement expense for the year. This gain resulted from the
suspension of a U.S. defined benefit plan effective December 31, 1996. Future
benefits to the participants of this plan will be earned under the profit
sharing portion of the Company's defined contribution plan described below. This
change is not expected to have a material impact on future annual pension costs.
The Company participates in the combined defined benefit plan of NACCO for
certain employee groups. The Company also maintains a defined benefit plan for
those employees that are covered under collective bargaining agreements. Each
defined benefit plan has a formula which is used to determine benefits upon
retirement. Most formulas take into account age, compensation, and success of
the Company in meeting certain goals, although certain hourly employees'
formulas are based primarily on years of service. The Company's current funding
policy is to contribute annually the minimum contribution calculated by the
independent actuaries. Contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future.
<PAGE> 17
-11-
The components of periodic pension cost and actuarial assumptions for the
Company's principal defined benefit plans for the years ended December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(in thousands)
<S> <C> <C>
UNITED STATES PLANS:
Interest accrued on projected benefit obligation $ 3,633 $ 3,098
Service cost-benefits earned during the year 2,892 3,693
Actual return on plan assets, net of plan expense (2,284) (5,333)
Net amortization and deferral 27 3,622
Curtailment gain (1,288) --
------- -------
Net periodic pension cost $ 2,980 $ 5,080
======= =======
Assumed discount rate 8.0% 7.5%
Rate of compensation increase (where applicable) 5.0% 4.5%
Expected long-term rate of return on plan assets 9.0% 9.0%
UNITED KINGDOM PLANS:
Interest accrued on projected benefit obligation $ 2,279 $ 2,122
Service cost-benefits earned during the year 1,081 1,256
Actual return on plan assets, net of plan expense (5,959) (3,397)
Net amortization and deferral 2,869 648
------- -------
Net periodic pension cost $ 270 $ 629
======= =======
Assumed discount rate 8.5% 8.0%
Rate of compensation increase (where applicable) 5.5% 5.0%
Expected long-term rate of return on plan assets 9.5% 9.5%
</TABLE>
<PAGE> 18
-12-
The following schedule reconciles the funded status of the Company's principal
defined benefit plans with amounts reported in the consolidated balance sheets
at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------
1996 1995
--------------------------- ---------------------------
United United United United
States Kingdom States Kingdom
Plans Plans Plans Plans
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Projected benefit obligation, based on
employment service to date and current
salary levels:
Vested accumulated benefit obligation $ 40,517 $ 30,547 $ 34,912 $ 26,261
Nonvested accumulated benefit obligation 1,382 1,614 1,027 1,758
-------- -------- -------- --------
Total accumulated benefit obligation 41,899 32,161 35,939 28,019
Additional amounts related to projected
salary increase 133 1,724 6,781 978
-------- -------- -------- --------
Total projected benefit obligation 42,032 33,885 42,720 28,997
Fair value of plan assets 39,197 42,636 29,533 33,286
-------- -------- -------- --------
Plan assets in excess of (less than)
projected benefit obligation (2,835) 8,751 (13,187) 4,289
Unrecognized net loss (gain) from past
experience different from that assumed 2,799 (2,803) 6,323 661
Unrecognized prior service cost 1,340 1,311 2,685 1,312
Unrecognized net transition obligation -- (548) -- (552)
Additional minimum liability (4,006) -- (4,523) --
-------- -------- -------- --------
Prepaid (accrued) pension cost recognized $ (2,702) $ 6,711 $ (8,702) $ 5,710
======== ======== ======== ========
</TABLE>
The Company maintains a defined contribution retirement plan for U.S. employees
which includes a profit sharing portion and a 401(k) portion. Contributions to
the profit sharing plan are based on a formula which takes into account age,
compensation, and success of the Company in meeting certain goals. Contributions
vest over a five-year period. Under the 401(k) portion, eligible employees may
contribute up to 17% of their compensation and the Company matches an amount
equal to 66-2/3% of the participants' initial 3% before tax contribution.
Participants are at all times fully vested in their contributions and those made
by the Company.
13. OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
-------------------------------------------------
The Company maintains health care and life insurance plans which provide
benefits to eligible retired employees. The Company funds these benefits on a
"pay as you go" basis, with the retirees paying a portion of the costs.
<PAGE> 19
-13-
Summary information on the Company's plans is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1995
------- -------
(in thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees $ 4,639 $ 4,452
Fully eligible active plan participants 395 326
Other active plan participants 5,188 5,577
------- -------
10,222 10,355
Unrecognized net loss (2,587) (2,483)
------- -------
Accrued postretirement benefit $ 7,635 $ 7,872
======= =======
</TABLE>
The components of net periodic other postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
Year Ended December
31,
------------------
1996 1995
------ ------
(in thousands)
<S> <C> <C>
Service cost of benefits earned $ 190 $ 167
Interest cost on accumulated postretirement benefit
obligation 814 790
Amortization of unrecognized loss 163 74
------ ------
$1,167 $1,031
====== ======
</TABLE>
The assumed health care cost trend rate for measuring the postretirement benefit
cost was 8.5% in 1996 and 9.0% in 1995, gradually reducing to 5.25% in years
2003 and after. The weighted average discount rate used to determine the benefit
obligation was 8.0% in 1996 and 7.50% in 1995. If the assumed health care trend
rate were increased by one percentage point, the effect on the APBO and expense
would be immaterial.
14. LONG-TERM INCENTIVE COMPENSATION PLAN:
--------------------------------------
The Company has a Long-Term Incentive Compensation Plan for officers and key
management employees of the Company and its subsidiaries. Awards under this plan
represent book value appreciation units and entitle the recipient, subject to
vesting and other restrictions, to receive cash equal to the difference between
the base period price for the units and the book value price as of the quarter
date coincident to or immediately preceding the date of disbursement. Awards
vest and are payable ten years from date of grant or earlier under certain
conditions. As of December 31, 1996, 1.7 million units have been awarded to key
employees and officers. The amount charged to expense was $2.4 million and $3.2
million in 1996 and 1995, respectively. The total amount accrued at December 31,
1996 and 1995 for these awards was $6.8 million and $5.2 million, respectively,
and was recorded as a long-term liability.
<PAGE> 20
-14-
15. FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS:
-----------------------------------------------------------
Financial Instruments
- ---------------------
A financial instrument is a contract that imposes or conveys a contractual
obligation, or right, to deliver or receive cash or another financial
instrument. The fair value of financial instruments approximated their carrying
values at December 31, 1996 and 1995.
Interest Rate Derivatives
- -------------------------
The Company has entered into interest rate swap agreements. The use of these
agreements allows the Company to enter into long-term credit arrangements that
have performance based floating rates of interest and swap them into fixed
rates, as opposed to entering into higher cost fixed-rate credit arrangements.
These agreements are with major commercial banks; therefore, the risk of credit
loss from nonperformance by the banks is considered minimal. As of December 31,
1996 the Company had $310 million notional principal amount of interest rate
swaps with an average effective fixed rate of 6.4%, although $135 million of the
swaps are delayed to start in 1997 and later. The carrying amount of the
interest rate swaps is $0 and the fair value is $4.7 million, which reflects the
net amount the Company would pay to terminate the contracts at December 31,
1996.
Foreign Currency Derivatives
- ----------------------------
The Company enters into forward foreign exchange contracts for purposes of
hedging exposure to foreign currency exchange rate fluctuations. These contracts
are with major financial institutions and the risk of credit loss from
nonperformance by these institutions is considered minimal. These contracts
hedge primarily firm commitments and, to a lesser degree, anticipated
commitments relating to cash flows associated with sales and purchases
denominated in foreign currencies. The Company enters into foreign exchange
contracts in a variety of foreign currencies with maturities not exceeding one
year. At December 31, 1996 the Company had $61.1 million contract value of
forward foreign exchange contracts.
16. LEASES:
-------
Future minimum annual lease payments under noncancelable lease obligations as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- -------
(in thousands)
<S> <C> <C>
1997 $ 2,338 $ 7,079
1998 2,130 6,913
1999 1,351 6,576
2000 761 6,047
2001 259 5,855
Subsequent to 2001 - 6,349
------- -------
Total Future Minimum Lease Payments 6,839 $38,819
=======
Less- Amount representing interest (835)
-------
Present value of net minimum lease payments 6,004
Less- Current maturities (2,338)
-------
$ 3,666
=======
</TABLE>
<PAGE> 21
-15-
Capital leases are for manufacturing equipment. Amounts included in property,
plant and equipment are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1996 1995
------ ------
(in thousands)
<S> <C> <C>
Plant and equipment $18,152 $12,884
Less- Accumulated amortization (9,251) (7,626)
------ ------
Net leased property, plant and equipment $ 8,901 $ 5,258
====== ======
</TABLE>
Aggregate rental expense for operating leases included in the consolidated
statements of income was $7.1 and $6.5 million in 1996 and 1995, respectively.
17. CONTINGENCIES:
--------------
The Company is subject to recourse or repurchase obligations under various
financing arrangements for certain independently owned retail dealerships. Also,
certain dealer loans are guaranteed by the Company. Total amounts subject to
recourse, guarantee or repurchase obligation at December 31, 1996 and 1995 were
$125.6 million and $100.8 million, respectively.
When the Company is the guarantor of the principal amount financed, a security
interest is usually maintained in assets of the parties for whom the Company is
guaranteeing debt. Losses anticipated under the terms of the recourse or
repurchase obligations have been provided for and are not significant.
The Company is the defendant in various product liability and other legal
proceedings incidental to its business. The majority of this litigation involves
product liability claims. The Company has recorded a reserve for potential
product liability losses at December 31, 1996 of $48.6 million, of which $8.0
million is estimated to be payable in 1997. While the resolution of litigation
cannot be predicted with certainty, management believes that the reserves are
adequate and no material adverse effect upon the financial position or results
of operations of the Company will result from such legal actions.
18. SEGMENT INFORMATION:
--------------------
The Company's business consists of the engineering, manufacturing and marketing
of materials handling machinery and equipment, under the Hyster(R) and Yale(R)
trade names. The Company's products are manufactured in plants at five locations
in the United States and eight international plants located in Scotland,
Northern Ireland, The Netherlands, Italy, Brazil, Australia and Japan. Service
parts are distributed through parts depots located in the United States, Europe,
Australia and Brazil. Generally, products assembled abroad are comprised of
parts and components manufactured or purchased locally and from U.S. plants at
established transfer prices. The transfer price of production parts and
completed units is established by a procedure designed to equate to an
arm's-length price. However, for purposes of the following financial statement
disclosure, transfers between geographic areas are presented at standard cost.
<PAGE> 22
-16-
<TABLE>
<CAPTION>
Europe,
Africa
& Middle Asia
1996 Americas East Pacific Eliminations Consolidated
------------------------- ---------- -------- ------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $ 908,793 $451,776 $ 92,863 $ - $1,453,432
Export sales to
unaffiliated customers 106,660 - - - 106,660
Transfers between
geographic areas 53,214 129,779 - (182,993) -
---------- -------- ------- --------- ----------
Total net sales $1,068,667 $581,555 $92,863 $(182,993) $1,560,092
========== ======== ======= ========= ==========
Depreciation and
amortization expense $ 20,860 $ 12,522 $ 403 $ - $ 33,785
========== ======== ======= ========= ==========
Capital expenditures $ 23,177 $ 18,728 $ 389 $ - $ 42,294
========== ======== ======= ========= ==========
Research and development
costs $ 21,318 $ 1,940 $ - $ - $ 23,258
========== ======== ======= ========= ==========
Operating profit (loss) $ 44,043 $ 32,307 $(3,836) $ - $ 72,514
========== ======== ======= ========= ==========
Identifiable assets $ 570,044 $335,493 $45,349 $ - $ 950,886
========== ======== ======= ========= ==========
</TABLE>
In 1996, the Company had sales to a single affiliated group of customers which
represented 10.3% of worldwide net sales.
<PAGE> 23
-17-
<TABLE>
<CAPTION>
Europe,
Africa &
Middle Asia
1995 Americas East Pacific Eliminations Consolidated
------------------------- ---------- -------- ------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $ 936,600 $422,308 $85,136 $ - $1,444,044
Export sales to
unaffiliated customers 66,062 - - - 66,062
Transfers between
geographic areas 63,653 156,050 - (219,703) -
---------- -------- ------- --------- ----------
Total net sales $1,066,315 $578,358 $85,136 $(219,703) $1,510,106
========== ======== ======= ========= ==========
Depreciation and
amortization expense $ 19,791 $ 11,661 $ 339 $ - $ 31,791
========== ======== ======= ========= ==========
Capital expenditures $ 24,011 $ 15,031 $ 390 $ - $ 39,432
========== ======== ======= ========= ==========
Research and development
costs $ 21,986 $ 2,233 $ - $ - $ 24,219
========== ======== ======= ========= ==========
Operating profit $ 48,780 $ 34,437 $ 241 $ - $ 83,458
========== ======== ======= ========= ==========
Identifiable assets $ 630,583 $373,437 $48,139 $ - $1,052,159
========== ======== ======= ========= ==========
</TABLE>
