SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9172
NACCO Industries, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1505819
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5875 LANDERBROOK DRIVE, MAYFIELD HEIGHTS, OHIO 44124
(Address of principal executive offices) Zip code
Registrant's telephone number, including area code (440) 449-9600
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the last 90 days.
YES X NO ____
Number of shares of Class A Common Stock outstanding at July 31, 1998:
6,503,669
Number of shares of Class B Common Stock outstanding at July 31, 1998:
1,660,355
<PAGE>
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1998 (Unaudited) and
December 31, 1997
Unaudited Condensed Consolidated Statements of Income
for the Three Months Ended and Six Months Ended
June 30, 1998 and 1997
Unaudited Condensed Consolidated Statements of
Cash Flows for the Six Months Ended June 30,
1998 and 1997
Notes to Unaudited Condensed Consolidated
Financial Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operation
Part II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Change in Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signature
Exhibit Index
<PAGE>
PART I
Item 1 - Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Audited)
JUNE 30 DECEMBER 31
1998 1997
------- -----------
(In millions)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 25.6 $ 24.1
Accounts receivable, net 263.0 240.8
Inventories 351.7 302.9
Prepaid expenses and other 37.6 31.8
------------ ------------
677.9 599.6
Property, Plant and Equipment, Net 544.1 541.7
Deferred Charges
Goodwill, net 441.7 449.3
Deferred costs and other 65.9 63.5
Deferred income taxes 21.9 24.1
------------ ------------
529.5 536.9
Other Assets 60.1 50.9
------------ ------------
Total Assets $ 1,811.6 $ 1,729.1
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Audited)
JUNE 30 DECEMBER 31
1998 1997
------- -----------
(In millions)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 248.6 $ 244.7
Revolving credit agreements 47.0 23.5
Current maturities of long-term debt 22.9 18.9
Income taxes 3.0 12.8
Accrued payroll 31.3 36.4
Other current liabilities 175.9 170.2
------------ ------------
528.7 506.5
Long-term Debt- not guaranteed by
the parent company 239.7 230.2
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 325.5 328.0
Self-insurance Reserves and Other 227.9 222.7
Minority Interest 17.9 16.6
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,502,222
shares outstanding (1997 - 6,477,414
shares outstanding) 6.5 6.5
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,661,802 shares outstanding
(1997 - 1,676,146 shares outstanding) 1.7 1.7
Capital in excess of par value .9 .1
Retained earnings 460.0 412.9
Foreign currency translation adjustment
and other 2.8 3.9
------------ ------------
471.9 425.1
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,811.6 $ 1,729.1
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
1998 1997 1998 1997
----------- ----------- ------------- -------------
(In millions, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 614.2 $ 541.1 $ 1,213.5 $ 1,020.8
Cost of sales 494.0 440.7 974.2 838.3
----------- ----------- ------------- -------------
Gross Profit 120.2 100.4 239.3 182.5
Selling, general and
administrative expenses 69.5 62.6 135.8 124.8
Amortization of goodwill 3.7 4.0 7.4 7.9
----------- ----------- ------------- -------------
Operating Profit 47.0 33.8 96.1 49.8
Other income (expense)
Interest expense (8.2) (9.3) (16.3) (19.3)
Other - net 4.2 2.0 3.4 1.2
----------- ----------- ------------- -------------
(4.0) (7.3) (12.9) (18.1)
----------- ----------- ------------- -------------
Income Before Income Taxes and
Minority Interest 43.0 26.5 83.2 31.7
Provision for income taxes 16.1 11.3 31.7 13.6
----------- ----------- ------------- -------------
Income Before Minority Interest 26.9 15.2 51.5 18.1
Minority interest (.6) (.3) (1.1) (.4)
----------- ----------- ------------- -------------
Net Income $ 26.3 $ 14.9 $ 50.4 $ 17.7
=========== =========== ============= =============
Comprehensive income $ 26.8 $ 14.7 $ 49.3 $ 11.0
=========== =========== ============= =============
Net income per share: basic $ 3.22 $ 1.82 $ 6.18 $ 2.16
=========== =========== ============= =============
Net income per share: diluted $ 3.21 $ 1.82 $ 6.16 $ 2.16
=========== =========== ============= =============
Dividends per share $ .205 $ .195 $ .400 $ .3825
=========== =========== ============= =============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
SIX MONTHS ENDED
JUNE 30
1998 1997
------- --------
(In millions)
<S> <C> <C>
Operating Activities
Net income $ 50.4 $ 17.7
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 42.4 43.6
Deferred income taxes (2.5) (4.8)
Other non-cash items 3.8 .3
Working Capital Changes:
Accounts receivable (21.1) 28.8
Inventories (49.6) (15.8)
Other current assets 4.6 3.3
Accounts payable and other liabilities (3.2) 30.4
------- --------
Net cash provided by operating activities 24.8 103.5
Investing Activities
Expenditures for property, plant and equipment (41.1) (23.0)
Proceeds from the sale of assets 1.8 2.0
Investments in unconsolidated affiliates (7.6) (1.4)
Acquisitions of businesses -- (12.2)
Other - net (.3) .6
------- --------
Net cash used for investing activities (47.2) (34.0)
Financing Activities
Additions to long-term debt and revolving credit
agreements 57.0 31.3
Reductions of long-term debt and revolving credit
agreements (22.0) (96.6)
Additions to obligations of project mining subsidiaries 41.2 26.3
Reductions of obligations of project mining subsidiaries (41.7) (41.6)
Financing of other short-term obligations (7.0) 1.4
Cash dividends paid (3.3) (3.1)
Other - net -- (2.6)
------- --------
Net cash provided by (used for) financing activities 24.2 (84.9)
Effect of exchange rate changes on cash (.3) (1.1)
------- --------
Cash and Cash Equivalents
Increase (decrease) for the period 1.5 (16.5)
Balance at the beginning of the period 24.1 47.8
------- --------
Balance at the end of the period $ 25.6 $ 31.3
======= ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions)
Note 1 - Basis of Presentation
NACCO Industries, Inc. ("NACCO") is a holding company with four operating
subsidiaries: NACCO Materials Handling Group, Inc. ("NMHG"), Hamilton
Beach/Proctor-Silex, Inc. ("HB/PS"), The North American Coal Corporation
("NACoal"), and The Kitchen Collection, Inc. ("KCI"). See a discussion of
reportable segments in Note 2, below.
The accompanying unaudited condensed consolidated financial statements include
the accounts of NACCO and its majority owned subsidiaries ("NACCO Industries,
Inc. and Subsidiaries," or the "Company"). Intercompany accounts have been
eliminated.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position of the Company as of June 30, 1998 and the results of its
operations for the three and six month periods and cash flows for the six month
periods ended June 30, 1998 and 1997 have been included.
Operating results for the six month period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the remainder of
the year ended December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
Certain amounts in the prior periods' unaudited condensed consolidated financial
statements have been reclassified to conform to the current period's
presentation.
Note 2 - Segment Reporting
In the second quarter of 1998, management made the determination that two of
NACCO's subsidiaries, HB/PS and KCI, would work more closely together under
common management to identify and maximize the benefits of such a relationship.
Operating as "The Housewares Group" ("Housewares"), financial results of HB/PS
and KCI will be evaluated by management as a combined operating unit. Due to
this change in the management of these companies and in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information," operating results of these
two subsidiaries will be combined as Housewares for purposes of segment
reporting. The composition of NACCO's other reportable segments, NMHG, NACoal
and NACCO and Other, remains consistent with prior periods' segment reporting.
SFAS No. 131, issued in June 1997, establishes standards for segment reporting
and identifies the interim and annual disclosure requirements for those
segments. Interim disclosures required by SFAS No. 131 are included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, beginning on page 10 of this Form 10-Q. Segment information for 1997
has been restated to reflect the combination of HB/PS and KCI as one reportable
segment, Housewares. This change in the composition of the Company's reportable
segments will be included in subsequent periodic reports. Any additional annual
disclosures required by SFAS No. 131 will be reflected in the Company's 1998
Annual Report on Form 10-K.
<PAGE>
Note 3 - Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which requires
disclosure of comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is defined as changes
in stockholders' equity from nonowner sources and, for the Company, includes net
income, changes in the foreign currency translation adjustment and changes in
the minimum pension liability adjustment.
Note 4 - Earnings per Share
Earnings per share is calculated in accordance with the provisions of SFAS No.
128, "Earnings per Share." For purposes of calculating the basic and diluted
earnings per share, no adjustments have been made to the reported amounts of net
income. The share amounts used are as follows:
<TABLE>
<CAPTION>
(Weighted Average Shares)
Three Months Six Months
Ended Ended
June 30 June 30
------------ ----------
1998 1997 1998 1997
---- ---- ---- -----
<S> <C> <C> <C> <C>
Basic common shares 8.164 8.183 8.161 8.187
Dilutive stock options .020 .010 .020 .010
----- ----- ----- -----
Diluted common shares 8.184 8.193 8.181 8.197
===== ===== ===== =====
</TABLE>
Note 5 - Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
-------- --------
(Unaudited) (Audited)
<S> <C> <C>
Manufacturing inventories:
Finished goods and service parts-
NMHG $ 89.6 $ 86.9
Housewares 62.3 31.8
-------- --------
151.9 118.7
-------- --------
Raw materials and work in process-
NMHG 141.7 135.6
Housewares 20.3 15.1
-------- --------
162.0 150.7
-------- --------
LIFO reserve-
NMHG (13.1) (13.4)
Housewares .8 1.1
-------- --------
(12.3) (12.3)
-------- --------
Total manufacturing inventories 301.6 257.1
Coal - NACoal 11.3 10.7
Mining supplies - NACoal 19.2 19.2
Retail inventories - Housewares 19.6 15.9
-------- --------
$ 351.7 $ 302.9
======== ========
</TABLE>
The cost of manufacturing inventories has been determined by the last-in,
first-out (LIFO) method for 70 percent of such inventories as of June 30, 1998
and December 31, 1997.
<PAGE>
Note 6 - Restructuring Accrual
In the second quarter of 1998, HB/PS recorded a pre-tax charge of $3.1 million
to recognize severance payments to be made to approximately 450 manufacturing
employees in connection with the transitioning of activities to HB/PS's
Saltillo, Mexico facility. No payments related to this accrual have been made as
of June 30, 1998. However, all severance payments related to this accrual are
expected to be made by June 30, 1999.
In the fourth quarter of 1997, NMHG approved and began implementation of a plan
to restructure certain activities. As such, NMHG recognized an accrual for lease
termination costs and for severance payments to be made to certain NMHG
employees. Severance payments were made to approximately 50 NMHG employees
during the first six months of 1998. Restructuring activities have proceeded as
anticipated. No material expenses were recognized during the first six months of
1998 as a result of NMHG's restructuring plan.
The changes to NMHG's restructuring accrual as announced in the fourth quarter
of 1997 and to HB/PS's restructuring accrual as announced in the second quarter
of 1998 are as follows:
<TABLE>
<CAPTION>
HB/PS NMHG
----- ----
Employee Employee
Severance Severance Other
--------- --------- -----
<S> <C> <C> <C>
Balance at December 31, 1997 ............. $ -- $ 5.9 $ 1.0
Payments ................................. -- (.9) (.1)
Additional provision ..................... 3.1 -- --
------ ------ ------
Balance at June 30, 1998 ................. $ 3.1 $ 5.0 $ .9
====== ====== ======
</TABLE>
Note 7 - Accounting Standards Not Yet Adopted
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires companies to recognize all derivatives on
the balance sheet as assets and liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. This Statement is effective for fiscal years beginning
after June 15, 1999. The Company will adopt this Statement on January 1, 2000
and is in the process of determining the effect that adoption will have on its
financial statements.
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which is effective for the
Company as of January 1, 1999. This SOP requires capitalization of certain
development costs of software to be used internally.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities," which is effective for the Company as of January 1, 1999. This SOP
requires start-up and organization costs to be expensed as incurred and also
requires previously deferred start-up costs to be recognized as a cumulative
effect adjustment in the statement of income upon adoption.
These SOPs, which the Company plans to adopt as of January 1, 1999, are not
expected to have a material effect on the Company's financial statements.
<PAGE>
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Per Share Data)
FINANCIAL SUMMARY
- -----------------
NACCO's operations and financial condition are best discussed in terms of its
reportable segments, which function in distinct business environments. See Note
2 to the condensed consolidated financial statements for a discussion of NACCO's
change in reportable segments and restatement of 1997 segment information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
1998 1997 1998 1997
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
NMHG $ 437.2 $ 377.4 $ 869.1 $ 709.7
Housewares 112.9 101.3 211.9 190.2
NACoal 64.0 62.4 132.4 120.8
NACCO and Other .1 -- .1 .1
-------- ---------- ---------- ----------
$ 614.2 $ 541.1 $ 1,213.5 $ 1,020.8
======== ========== ========== ==========
GROSS PROFIT
NMHG $ 87.2 $ 68.5 $ 174.7 $ 124.2
Housewares 21.5 19.9 39.4 35.0
NACoal 11.5 12.0 25.3 23.3
NACCO and Other -- -- (.1) --
-------- ---------- ---------- ----------
$ 120.2 $ 100.4 $ 239.3 $ 182.5
======== ========== ========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG $ 45.6 $ 40.9 $ 88.9 $ 81.5
Housewares 18.3 17.1 36.1 34.3
NACoal 2.9 2.6 5.8 4.9
NACCO and Other 2.7 2.0 5.0 4.1
-------- ---------- ---------- ----------
$ 69.5 $ 62.6 $ 135.8 $ 124.8
======== ========== ========== ==========
AMORTIZATION OF GOODWILL
NMHG $ 2.9 $ 2.9 $ 5.8 $ 5.8
Housewares .8 1.1 1.6 2.1
-------- ---------- ---------- ----------
$ 3.7 $ 4.0 $ 7.4 $ 7.9
======== ========== ========== ==========
OPERATING PROFIT (LOSS)
NMHG $ 38.7 $ 24.7 $ 80.0 $ 36.9
Housewares 2.4 1.7 1.7 (1.4)
NACoal 8.6 9.4 19.5 18.4
NACCO and Other (2.7) (2.0) (5.1) (4.1)
-------- ---------- ---------- ----------
$ 47.0 $ 33.8 $ 96.1 $ 49.8
======== ========== ========== ==========
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
NMHG $ 41.6 $ 27.6 $ 85.8 $ 42.7
Housewares 3.2 2.8 3.3 .7
NACoal 8.6 9.4 19.5 18.4
NACCO and Other (2.7) (2.0) (5.1) (4.1)
-------- ---------- ---------- ----------
$ 50.7 $ 37.8 $ 103.5 $ 57.7
======== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------- ----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST EXPENSE
NMHG $ (3.0) $ (3.8) $ (6.4) $ (8.5)
Housewares (1.8) (1.8) (3.2) (3.4)
NACoal (.2) (.5) (.4) (1.0)
NACCO and Other (.2) (.6) (.5) (1.2)
Eliminations .2 .6 .5 1.2
------- ------- ------- -------
(5.0) (6.1) (10.0) (12.9)
Project mining subsidiaries (3.2) (3.2) (6.3) (6.4)
------- ------- ------- -------
$ (8.2) $ (9.3) $ (16.3) $ (19.3)
======= ======= ======= =======
INTEREST INCOME
NMHG $ .4 $ 1.4 $ .8 $ 1.6
Housewares -- -- -- --
NACoal .1 .5 .3 1.1
NACCO and Other -- -- -- --
Eliminations (.2) (.6) (.5) (1.2)
------- ------- ------- -------
$ .3 $ 1.3 $ .6 $ 1.5
Project mining subsidiaries .3 .3 .6 .5
------- ------- ------- -------
$ .6 $ 1.6 $ 1.2 $ 2.0
======= ======= ======= =======
OTHER-NET, INCOME (EXPENSE)
NMHG $ 3.4 $ .6 $ 2.1 $ (.5)
Housewares .1 -- (.2) --
NACoal -- (.4) (.4) (.6)
NACCO and Other .1 .2 .7 .3
Eliminations -- -- -- --
------- ------- ------- -------
$ 3.6 $ .4 $ 2.2 $ (.8)
======= ======= ======= =======
PROVISION FOR INCOME TAXES
NMHG $ 14.9 $ 10.4 $ 29.6 $ 13.7
Housewares .3 -- (.8) (2.1)
NACoal 1.6 2.4 3.8 4.4
NACCO and Other (.7) (1.5) (.9) (2.4)
------- ------- ------- -------
$ 16.1 $ 11.3 $ 31.7 $ 13.6
======= ======= ======= =======
NET INCOME (LOSS)
NMHG $ 24.6 $ 12.2 $ 46.9 $ 15.7
Housewares .4 -- (.9) (2.7)
NACoal 4.0 3.8 9.5 7.7
NACCO and Other (2.1) (.8) (4.0) (2.6)
Minority interest (.6) (.3) (1.1) (.4)
------- ------- ------- -------
$ 26.3 $ 14.9 $ 50.4 $ 17.7
======= ======= ======= =======
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
---------------
1998 1997
------- -------
<S> <C> <C>
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG $ 17.8 $ 17.0
Housewares 8.5 10.5
NACoal 1.5 1.1
NACCO and Other .2 .1
------- -------
28.0 28.7
Project mining subsidiaries 14.4 14.9
------- -------
$ 42.4 $ 43.6
======= =======
CAPITAL EXPENDITURES
NMHG $ 24.9 $ 8.5
Housewares 9.5 9.6
NACoal 1.8 1.7
NACCO and Other -- .1
------- -------
36.2 19.9
Project mining subsidiaries 4.9 3.1
------- -------
$ 41.1 $ 23.0
======= =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
---------- ----------
<S> <C> <C>
TOTAL ASSETS
NMHG $ 1,018.7 $ 942.4
Housewares 333.9 315.7
NACoal 42.3 51.5
NACCO and Other 45.0 59.4
---------- ----------
1,439.9 1,369.0
Project mining subsidiaries 419.9 423.4
---------- ----------
1,859.8 1,792.4
Consolidating eliminations (48.2) (63.3)
---------- ----------
$ 1,811.6 $ 1,729.1
========== ==========
</TABLE>
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC.
- ------------------------------------
NMHG, 98 percent-owned by NACCO, designs, manufactures and markets forklift
trucks and related service parts under the Hyster(R) and Yale(R) brand names.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the three and six months
ended June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Americas $ 307.2 $ 249.1 $ 616.4 $ 469.2
Europe, Africa and Middle East 115.4 108.8 222.1 202.5
Asia-Pacific 14.6 19.5 30.6 38.0
-------- -------- -------- --------
$ 437.2 $ 377.4 $ 869.1 $ 709.7
======== ======== ======== ========
Operating profit (loss)
Americas $ 29.6 $ 17.7 $ 61.7 $ 27.7
Europe, Africa and Middle East 9.6 7.9 18.5 11.1
Asia-Pacific (.5) (.9) (.2) (1.9)
-------- -------- -------- --------
$ 38.7 $ 24.7 $ 80.0 $ 36.9
======== ======== ======== ========
Operating profit (loss) excluding
goodwill amortization
Americas $ 31.6 $ 19.7 $ 65.6 $ 31.7
Europe, Africa and Middle East 10.4 8.7 20.2 12.8
Asia-Pacific (.4) (.8) -- (1.8)
-------- -------- -------- --------
$ 41.6 $ 27.6 $ 85.8 $ 42.7
======== ======== ======== ========
Net income $ 24.6 $ 12.2 $ 46.9 $ 15.7
======== ======== ======== ========
</TABLE>
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
Second Quarter of 1998 Compared with Second Quarter of 1997
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the second quarter of 1998 compared with the
second quarter of 1997:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------- -------
<S> <C> <C> <C>
1997 $ 377.4 $ 24.7 $ 12.2
Increase (decrease) in 1998 from:
Unit volume 57.1 10.3 6.7
Sales mix 5.9 4.1 2.7
Average sales price .1 .1 --
Service parts 3.3 (.1) (.1)
Foreign currency (6.6) (2.1) (1.9)
Manufacturing cost -- 6.6 4.2
Other operating expense -- (4.9) (3.1)
Other income and expense -- -- 1.4
Differences between effective
and statutory tax rates -- -- 2.5
-------- ------- -------
1998 $ 437.2 $ 38.7 $ 24.6
======== ======= =======
</TABLE>
Operating results at NMHG improved primarily due to a 20 percent increase in
NMHG's worldwide unit volume to 20,334 units sold in the second quarter of 1998
compared with 16,905 units sold in the second quarter of 1997. Increased demand
in the North American market significantly contributed to this unit volume
growth. European unit volume also increased during the second quarter of 1998
due to stronger demand in countries with improved economies. Asia-Pacific
experienced a slight decline in unit volume due to the continuing weak economies
in that region. NMHG's worldwide backlog at the end of the second quarter of
1998 was 20,800 units, compared with 20,300 units at the end of the second
quarter of 1997 and 22,700 units at the end of the first quarter of 1998. The
decrease in the backlog in the second quarter of 1998 compared with the first
quarter of 1998 reflects a decrease in bookings combined with a slight increase
in unit shipments. See "Outlook."
Foreign currency fluctuations negatively affected operating results due to the
strengthening of the British pound sterling against other European currencies,
which caused price and margin pressure on pound sterling-based lift trucks. The
decrease to operating profit caused by the stronger pound sterling was partially
offset by the reduced cost of Japanese yen-based materials caused by the
weakening of the yen against the U.S. dollar and the pound sterling.
Reduced manufacturing costs as a result of product re-engineering and increased
overhead absorption from unit volume growth also contributed to improved
operating results. Other operating expenses increased due to increased
engineering, marketing and incentive compensation expense. These increased
operating expenses were slightly offset by savings from attrition due to
restructuring activities implemented since the fourth quarter of 1997. NMHG's
restructuring plan, which began in the fourth quarter of 1997, continued during
the second quarter of 1998, as anticipated. In the second quarter of 1998, NMHG
received a non-recurring legal settlement of $4.6 million, which has been
included in Other income and expense.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
First Six Months of 1998 Compared with First Six Months of 1997
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the first six months of 1998 compared with
the first six months of 1997:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------- -------
<S> <C> <C> <C>
1997 $ 709.7 $ 36.9 $ 15.7
Increase (decrease) in 1998 from:
Unit volume 148.7 24.4 15.8
Sales mix 13.0 10.8 7.0
Average sales price .9 .9 .6
Service parts 13.1 1.8 1.1
Foreign currency (16.3) (6.8) (4.4)
Manufacturing cost -- 20.3 13.2
Other operating expense -- (8.3) (5.4)
Other income and expense -- -- 2.3
Differences between effective
and statutory tax rates -- -- 1.0
-------- ------- -------
1998 $ 869.1 $ 80.0 $ 46.9
======== ======= =======
</TABLE>
Operating results at NMHG for the first six months of 1998 improved primarily
due to a 28 percent increase in NMHG's worldwide unit volume to 40,091 units
sold in the first half of 1998 compared with 31,434 units sold in the first half
of 1997. Increased demand in the North American market significantly contributed
to this unit volume growth. European unit volume also increased due to stronger
demand in countries with improved economies, while Asia-Pacific experienced a
slight decline in unit volume due to the continuing weak economies in that
region. Worldwide sales mix also contributed to operating results due to
increased sales of higher margin lift trucks. Worldwide parts sales improved
primarily due to the success of ongoing promotional programs implemented in the
North American market.
Foreign currency negatively affected operating results due to the strengthening
of the British pound sterling against other European currencies, which caused
price and margin pressure on pound sterling-based lift trucks. The decrease to
operating profit caused by the stronger pound sterling was partially offset by
the reduced cost of Japanese yen-based materials caused by the weakening of the
yen against the U.S. dollar and the pound sterling.
Reduced manufacturing costs as a result of product re-engineering and increased
overhead absorption from unit volume growth also contributed to improved
operating results. Other operating expenses increased during the first half of
1998 due to increased engineering, marketing and incentive compensation expense.
These increased operating expenses were slightly offset by savings from
attrition due to restructuring activities implemented since the fourth quarter
of 1997.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
The components of other income (expense) and the effective tax rate for the
three and six months ended June 30 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense $ (3.0) $ (3.8) $ (6.4) $ (8.5)
Other-net 3.8 2.0 2.9 1.1
------- ------- ------- -------
$ .8 $ (1.8) $ (3.5) $ (7.4)
======= ======= ======= =======
Effective tax rate 37.7% 46.7% 38.7% 47.0%
</TABLE>
For the three and six month periods ended 1998, interest expense declined
compared with the same periods of 1997 due to decreased debt levels and reduced
interest rates. Other-net improved due to a $4.6 million non-recurring legal
settlement received in the second quarter of 1998, partially offset by decreased
earnings of unconsolidated affiliates.
The decrease in the effective tax rate primarily results from a determination
made in the fourth quarter of 1997 to reinvest earnings of foreign operations in
such foreign operations for the foreseeable future. Accordingly, NMHG did not
provide for taxes on unremitted foreign earnings during the first half of 1998.
Also contributing to the decrease in the effective tax rate is the effect of a
constant level of nondeductible goodwill amortization on a higher comparable
level of pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $24.9 million during the
first six months of 1998. It is estimated that NMHG's capital expenditures for
the remainder of 1998 will be approximately $39.8 million. These planned
expenditures relate to the relocation and centralization of NMHG's marketing and
engineering organizations and to investments in manufacturing facilities,
including plant expansions in Mexico and China, worldwide information systems
and tooling for new products. The principal sources of financing for these
capital expenditures are internally generated funds and bank borrowings.
At June 30, 1998, NMHG had available $205.3 million of its $350.0 million
revolving credit facility. The expiration date of the NMHG facility, currently
June 2002, may be extended, on an annual basis, for one additional year upon the
mutual consent of NMHG and the bank group. In addition, the NMHG facility has
performance-based pricing that sets interest rates based upon the achievement of
certain financial performance targets. NMHG also has separate facilities
totaling $42.8 million, of which $27.3 million was available at June 30, 1998.
NMHG believes that funds available under its credit facilities and operating
cash flows are sufficient to finance all of its operating needs and commitments
arising during the foreseeable future.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NMHG's capital structure is presented below:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
-------- --------
<S> <C> <C>
Total net tangible assets $ 246.3 $ 188.3
Advances to parent company 13.0 --
Goodwill at cost 447.7 447.8
-------- --------
Total assets before goodwill amortization 707.0 636.1
Accumulated goodwill amortization (100.4) (94.4)
Total debt (175.6) (156.8)
-------- --------
Stockholders' equity $ 431.0 $ 384.9
======== ========
Debt to total capitalization 29% 29%
</TABLE>
The increase in net tangible assets of $58.0 million primarily results from a
$44.2 million increase in accounts receivable, a $9.0 million increase in
inventory and a $10.1 million increase in net property, plant and equipment,
partially offset by a $5.1 million increase in other current liabilities.
The increases in accounts receivable, inventory and other current liabilities
reflect an increase in sales volume toward the end of the second quarter of 1998
compared with sales volume toward the end of the fourth quarter of 1997, as well
as a slight increase in the aging of receivables, a reduction in receivable
factoring and a slight increase in the number of days supply of inventory on
hand.
Cash and cash equivalents were comparable to year-end, as cash generated from
operations and increased borrowings were used to finance expenditures for
property, plant and equipment.
<PAGE>
THE HOUSEWARES GROUP
--------------------
Beginning with this Report on Form 10-Q for the second quarter of 1998, the
results of HB/PS and KCI are being reported on a combined basis as The
Housewares Group. This reporting change better reflects the closer working
relationship between these two subsidiaries supported by a common management and
designed to maximize their available opportunities. See Note 2 to the condensed
consolidated financial statements for a discussion of NACCO's change in
reportable segments and restatement of 1997 segment information.
HB/PS, wholly owned by NACCO, is a leading manufacturer of small electric
appliances. KCI is a national specialty retailer of kitchenware, tableware,
small electric appliances and related accessories. Because the Housewares
business is seasonal, a majority of revenues and operating profit occurs in the
second half of the year when sales of small electric appliances to retailers and
consumers increase significantly for the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for The Housewares Group were as follows for the three
and six months ended June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 112.9 $ 101.3 $ 211.9 $ 190.2
Operating profit (loss) $ 2.4 $ 1.7 $ 1.7 $ (1.4)
Operating profit excluding
goodwill amortization $ 3.2 $ 2.8 $ 3.3 $ .7
Net income (loss) $ .4 $ -- $ (.9) $ (2.7)
</TABLE>
Second Quarter of 1998 Compared with Second Quarter of 1997
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the second quarter of 1998 compared with the
second quarter of 1997:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1997 $ 101.3 $ 1.7 $ --
Increase (decrease) in 1998 from:
Unit volume and sales mix 12.0 3.6 2.3
Average sales price (.2) (.2) (.1)
Retail sales (.2) (.2) (.1)
Manufacturing cost -- (1.2) (.8)
Other operating expense -- (1.3) (.8)
Differences between effective
and statutory tax rates -- -- (.1)
-------- ------ -----
$ 112.9 $ 2.4 $ .4
1998 ======== ======= ======
</TABLE>
<PAGE>
THE HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Operating results at Housewares improved primarily due to improved operating
results at HB/PS. Unit volume at HB/PS increased 11 percent to 7.8 million units
sold in the second quarter of 1998 from 7.0 million units sold in the second
quarter of 1997. Increased demand from key mass merchants, specifically for
irons, blenders, toasters and indoor grills, significantly contributed to this
unit volume growth. Manufacturing costs at HB/PS increased from the prior year
primarily due to a $3.1 million restructuring accrual recognized in the second
quarter of 1998 to accrue for costs related to transferring activities to the
manufacturing facility in Saltillo, Mexico. This increase was partially offset
by reduced costs of products manufactured in Mexican plants during the second
quarter of 1998 and by increased overhead absorption from unit volume growth.
Operating and other expenses increased primarily due to annual wage increases
and costs of additional advertising activities at HB/PS. Revenues and net income
from KCI were comparable to the prior year period. KCI operated 145 stores at
June 30, 1998 and June 30, 1997.
First Six Months of 1998 Compared with First Six Months of 1997
The following schedule identifies the components of the changes in revenues,
operating profit (loss) and net loss for the first six months of 1998 compared
with the first six months of 1997:
<TABLE>
<CAPTION>
Operating
Profit Net
Revenues (Loss) Loss
-------- ------ ----
<S> <C> <C> <C>
1997 $ 190.2 $ (1.4) $ (2.7)
Increase (decrease) in 1998 from:
Unit volume and sales mix 23.2 7.0 4.6
Average sales price (1.3) (1.3) (.8)
Retail sales (.2) -- --
Manufacturing cost -- (.3) (.2)
Other operating expense -- (2.3) (1.5)
Differences between effective
and statutory tax rates -- -- (.3)
--------- -------- ------
1998 $ 211.9 $ 1.7 $ (.9)
======== ======= ========
</TABLE>
Operating results at Housewares improved primarily due to improved operating
results at HB/PS. Unit volume at HB/PS increased 16 percent to 14.9 million
units sold in the first half of 1998 from 12.9 million units sold in the first
half of 1997. Increased demand from key mass merchants, specifically for
blenders, toasters, irons and indoor grills, significantly contributed to this
unit volume growth. The positive impact from this increased unit volume was
partially offset by a decline in the average sales price of irons, toasters, can
openers and blenders due to competition, especially from Chinese imports.
Increased manufacturing and operating costs for the first six months of 1998 as
compared with 1997 resulted from the same factors affecting the second quarter,
discussed previously. Revenues and net income from KCI were comparable to the
prior year period.
<PAGE>
THE HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
The components of other income (expense) and the effective tax rate for the
three and six months ended June 30 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense $ (1.8) $ (1.8) $ (3.2) $ (3.4)
Other-net .1 -- (.2) --
------- ------- ------- -------
$ (1.7) $ (1.8) $ (3.4) $ (3.4)
======= ======= ======= =======
Effective tax rate 45.9% 40.0% 44.6% 43.9%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Housewares' expenditures for property, plant and equipment were $9.5 million
during the first six months of 1998 and are estimated to be $12.1 million for
the remainder of 1998. The primary purpose of these capital expenditures is to
reduce manufacturing costs and increase efficiency and to purchase tooling for
new and existing products. These expenditures are funded primarily from
internally generated funds and short-term borrowings.
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 of HB/PS's assets. At June 30, 1998, HB/PS had $63.6 million
available under this facility, which expires in May 2003. 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
June 30, 1998, HB/PS also had $12.8 million available under separate facilities.
In June 1998, the HB/PS Facility was amended to allow advances of up to $10.0
million from HB/PS to KCI. At June 30, 1998, HB/PS had advances outstanding to
KCI of $2.7 million. Also during the second quarter of 1998, KCI reduced the
availability under its revolving credit facility from $5.0 million to $3.0
million. At June 30, 1998, KCI had available $2.9 million of this $3.0 million
facility. Subsequent to June 30, 1998, KCI further reduced the availability
under its revolving credit facility to approximately $0.1 million. This
availability covers the amount of outstanding letters of credit. The revolving
credit facility will be terminated when these letters of credit expire during
the third quarter of 1998. Changes to the KCI facility were made in accordance
with provisions in the existing credit agreement. Beginning in the third quarter
of 1998, KCI's cash requirements will be financed through advances from HB/PS.
Housewares believes that funds available under its credit facilities and
operating cash flows are sufficient to finance all of its operating needs and
commitments arising during the foreseeable future.
<PAGE>
THE HOUSEWARES GROUP - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
Housewares' capital structure is presented below:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
------- -----------
<S> <C> <C>
Total net tangible assets $ 158.9 $ 127.8
Goodwill at cost 123.5 123.5
-------- --------
Total assets before goodwill amortization 282.4 251.3
Accumulated goodwill amortization (29.1) (27.6)
Total debt (117.9) (85.8)
-------- --------
Stockholder's equity $ 135.4 $ 137.9
======== ========
Debt to total capitalization 47% 38%
</TABLE>
Because of the seasonal nature of the Housewares business, inventory, accounts
payable and debt levels of this segment reach seasonal peaks in the second and
third quarters.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION
- -----------------------------------
NACoal mines and markets lignite for use primarily as fuel for power generation
by electric utilities. The lignite is surface mined in North Dakota, Texas and
Louisiana. Total coal reserves approximate 2.0 billion tons, with 1.2 billion
tons committed to electric utility customers pursuant to long-term contracts.
NACoal operates five lignite mines, including three project mining subsidiaries
("Coteau," "Falkirk" and "Sabine"), a NACoal division ("San Miguel") and a joint
venture ("Red River"). NACoal also provides dragline mining services ("Florida
dragline operations") for a limerock quarry near Miami, Florida. The operating
results for the Florida dragline operations are included in Other mining
operations.
During 1997, the Mississippi Lignite Mining Company was formed as a joint
venture between NACoal and Phillips Coal Company. The new company, in which
NACoal has a 25 percent interest, will develop the Red Hills lignite mine near
Ackerman, Mississippi. Development of the mine site has begun and will continue
through 1999, with initial lignite production scheduled for the year 2000. The
mine is expected to produce approximately 3.0 million tons of lignite annually.
FINANCIAL REVIEW
NACoal's three project mining subsidiaries (Coteau, Falkirk and Sabine), which
represent a significant portion of NACoal's operations, 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 lignite tons sold, income before taxes and net income.
Lignite tons sold by NACoal's operating lignite mines were as follows for the
three and six months ended June 30:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------ ----------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Coteau Properties 3.8 3.8 8.0 7.7
Falkirk Mining 1.1 1.6 3.1 3.1
Red River Mining .3 .3 .5 .5
Sabine Mining .9 .9 1.4 1.8
San Miguel 1.0 -- 1.8 --
--- --- ---- ----
Total Lignite 7.1 6.6 14.8 13.1
=== === ==== ====
</TABLE>
The Florida dragline operations delivered 2.1 and 4.0 million cubic yards of
limerock in the three and six months ended June 30, 1998, respectively. This
compares to 1.8 and 3.6 million cubic yards delivered during the three and six
months ended June 30, 1997, respectively.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Revenues, income before taxes, provision for taxes and net income were as
follows for the three and six months ended June 30:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------ ----------
1998 1997 1998 1997
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Project mines $ 52.8 $ 55.8 $ 109.8 $ 108.6
Other mining operations 9.7 5.0 19.1 9.6
------- -------- -------- --------
62.5 60.8 128.9 118.2
Royalties and other 1.5 1.6 3.5 2.6
------- -------- -------- --------
$ 64.0 $ 62.4 $ 132.4 $ 120.8
======= ======== ======== ========
Income before taxes
Project mines $ 5.0 $ 5.5 $ 11.4 $ 11.2
Other mining operations 1.4 .9 2.8 1.6
------- -------- -------- --------
Total from operating mines 6.4 6.4 14.2 12.8
Royalties and other income, net 1.2 1.4 3.0 2.2
Other operating expenses (2.0) (1.6) (3.9) (2.9)
------- -------- -------- --------
5.6 6.2 13.3 12.1
Provision for taxes 1.6 2.4 3.8 4.4
------- -------- -------- --------
Net income $ 4.0 $ 3.8 $ 9.5 $ 7.7
======= ======== ======== ========
</TABLE>
Second Quarter of 1998 Compared with Second Quarter of 1997
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the three months ended June 30:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
-------- ----- ------
<S> <C> <C> <C>
1997 $ 62.4 $ 6.2 $ 3.8
Increase (decrease) in 1998 from:
Project mines
Tonnage volume (3.4) (.6) (.4)
Agreed profit per ton .1 .1 .1
Pass-through costs .3 -- --
Other mining operations
Tonnage volume 4.6 4.6 3.0
Average selling price .1 .1 --
Operating costs -- (4.3) (2.8)
Other expense -- .1 .1
-------- ------- -------
Changes from operating mines 1.7 -- --
Royalties and other income, net (.1) (.2) (.1)
Other operating expenses -- (.4) (.2)
Differences between effective and
statutory tax rates -- -- .5
-------- ------- -------
1998 $ 64.0 $ 5.6 $ 4.0
======== ======= =======
</TABLE>
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
At the project mines, decreased tons sold at Falkirk due to a customer's planned
power plant outage resulted in decreased revenues and net income. At the other
mining operations, operating results benefited from the results of the San
Miguel lignite mining operation. NACoal began providing mining services at San
Miguel Electric Cooperative, Inc.'s lignite mine in July 1997. Decreased royalty
income and increased operating costs due to ongoing growth initiatives
negatively affected second quarter 1998 net income, as compared with the second
quarter of 1997.
First Six Months of 1998 Compared with First Six Months of 1997
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the six months ended June 30:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
--------- -------- -------
<S> <C> <C> <C>
1997 $ 120.8 $ 12.1 $ 7.7
Increase (decrease) in 1998 from:
Project mines
Tonnage volume (2.6) (.1) --
Agreed profit per ton .5 .3 .2
Pass-through costs 3.3 -- --
Other mining operations
Tonnage volume 9.5 9.2 5.9
Operating costs -- (8.3) (5.4)
Other expense -- .3 .2
--------- -------- -------
Changes from operating mines 10.7 1.4 .9
Royalties and other income, net .9 .8 .5
Other operating expenses -- (1.0) (.7)
Differences between effective and
statutory tax rates -- -- 1.1
--------- -------- -------
1998 $ 132.4 $ 13.3 $ 9.5
========= ======== =======
</TABLE>
At the project mines, operating profit improved due to increased tons sold at
Coteau and a project mine incentive payment. The benefit from these factors was
partially offset by decreased tons sold at Sabine due to a customer's planned
power plant outage. Results from Other mining operations improved due to the
addition of the San Miguel lignite mining operation and increased volume at both
Red River and the Florida dragline operations. Increased royalty income also
contributed to operating results, whereas increased operating costs due to
ongoing growth initiatives negatively affected net income for the first half of
1998 as compared with the first half of 1997.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
The components of other income (expense) and the effective tax rate for the
three and six months ended June 30 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense
Project mining subsidiaries $ (3.2) $ (3.2) $ (6.3) $ (6.4)
Other mining operations (.2) (.5) (.4) (1.0)
------- ------- ------- -------
$ (3.4) $ (3.7) $ (6.7) $ (7.4)
======= ======= ======= =======
Other-net
Project mining subsidiaries $ .7 $ .5 $ .8 $ .9
Other mining operations (.3) (.1) (.3) .1
------- ------- ------- -------
$ .4 $ .4 $ .5 $ 1.0
======= ======= ======= =======
Effective tax rate 27.7% 36.2% 28.3% 35.4%
</TABLE>
The decrease in the effective tax rate results from additional percentage
depletion eligible to reduce NACoal's effective tax.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $6.7 million during the
first six months of 1998. It is estimated that NACoal's capital expenditures for
the remainder of 1998 will be $21.2 million, of which $19.3 million relates to
the development, establishment and improvement of the project mining
subsidiaries' mines and are financed or guaranteed by the utility customers.
Also during the first six months of 1998, NACoal invested $5.8 million in a
joint venture with Phillips Coal Company to develop a new lignite mine in
Mississippi. During the remainder of 1998, NACoal anticipates investing an
additional $5.6 million in this joint venture.
NACoal has in place a $50.0 million revolving credit facility. The expiration
date of this facility, which currently is September 2002, can be extended one
additional year, on an annual basis, upon the mutual consent of NACoal and the
bank group. All of NACoal's $50.0 million revolving credit facility was
available at June 30, 1998.
The financing of the project mining subsidiaries, which is either provided or
guaranteed by the utility customers, includes long-term equipment leases, notes
payable and non-interest-bearing advances from customers. The obligations of the
project mining subsidiaries do not affect the short-term or long-term liquidity
of NACoal and are without recourse to NACCO or NACoal. These arrangements allow
the project mining subsidiaries to pay dividends to NACoal in amounts equal to
their earnings.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NACoal's capital structure, excluding the project mining subsidiaries, is
presented below:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
------- -------
<S> <C> <C>
Investment in project mining subsidiaries $ 2.3 $ 4.3
Other net tangible assets 10.0 3.4
------- -------
Total tangible assets 12.3 7.7
Advances to parent company 3.6 21.9
Debt related to parent advances (.8) (14.4)
Other debt -- (.1)
------- -------
Total debt (.8) (14.5)
------- -------
Stockholder's equity $ 15.1 $ 15.1
======= =======
Debt to total capitalization 5% 49%
</TABLE>
The increase in Other net tangible assets is primarily due to capital
investments in the Mississippi lignite mining operation, a joint venture with
Phillips Coal Company scheduled to begin production in the year 2000. Advances
to parent company and Debt related to parent advances declined in the second
quarter as a result of repayments made by NACCO.
<PAGE>
NACCO AND OTHER
FINANCIAL REVIEW
NACCO and Other includes the parent company operations and Bellaire Corporation
("Bellaire"), a non-operating subsidiary of NACCO. While Bellaire's results are
immaterial, it has significant long-term liabilities related to closed mines,
primarily from former eastern U.S. underground coal-mining activities. Cash
payments related to Bellaire's obligations, net of internally generated cash,
are funded by NACCO and are anticipated to be $1.3 million for the remainder of
1998.
The results of operations at NACCO and Other were as follows for the three and
six months ended June 30:
<TABLE>
<CAPTION>
Three Months Six Months
------------ ----------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues $ .1 $ -- $ .1 $ .1
Operating loss $ (2.7) $ (2.0) $ (5.1) $ (4.1)
Other income (expense), net $ .1 $ .2 $ .7 $ .3
Net loss $ (2.1) $ (.8) $ (4.0) $ (2.6)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Although NACCO's subsidiaries have entered into substantial borrowing
agreements, NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
The borrowing agreements at NMHG, HB/PS and KCI allow for the payment to NACCO
of dividends and advances under certain circumstances. There are no restrictions
on the transfer of assets from NACoal. Dividends and advances from its
subsidiaries are the primary sources of cash for NACCO.
NACCO's consolidated capital structure is presented below:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
-------- --------
<S> <C> <C>
Total net tangible assets $ 416.7 $ 328.4
Goodwill at cost 571.2 571.3
-------- --------
Total assets before goodwill amortization 987.9 899.7
Accumulated goodwill amortization (129.5) (122.0)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (291.6) (257.0)
Closed mine obligations, (Bellaire), including the
United Mine Worker retirees' medical fund, net-of-tax (77.0) (79.0)
Minority interest (17.9) (16.6)
-------- --------
Stockholders' equity $ 471.9 $ 425.1
======== ========
Debt to total capitalization 37% 37%
</TABLE>
<PAGE>
NACCO AND OTHER - continued
FINANCIAL REVIEW - continued
The Company believes it can adequately meet all of its current and long-term
commitments and operating needs. This outlook stems from amounts available under
revolving credit facilities and the utility customers' funding of the project
mining subsidiaries.
INTEREST RATE PROTECTION
NMHG, 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 six years, with the counterparty's option to extend a small
portion of these contracts to eight years. The Company evaluates its exposure to
floating rate debt on an ongoing basis.
EFFECTS OF FOREIGN CURRENCY
NMHG and HB/PS operate internationally and enter into transactions denominated
in foreign currencies. As such, their financial results are subject to the
transaction exposures that arise from exchange rate movements between the dates
foreign currency transactions are committed and the dates they are consummated.
The effects of foreign currency fluctuations on revenues, operating income and
net income at NMHG are disclosed above. At HB/PS, foreign currency effects had
an immaterial impact on operating results between comparable periods of 1998 and
1997.
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 companies to buy or sell Japanese yen, Australian dollars, Canadian dollars
or various European currencies for the functional currency in which the
applicable subsidiary operates at rates agreed to at the inception of the
contracts.
YEAR 2000
The Company has developed an action plan and identified the resources needed to
convert the majority of its computer systems and software applications to
achieve a year 2000 date conversion with no effect on customers or disruption to
business operations. Implementation of the plan has begun, and the Company
anticipates completion of testing of mission critical systems by the end of
1998. The Company estimates that the cost to complete these efforts, which
primarily includes the purchase of software upgrades under normal maintenance
agreements with third party vendors, will not be material and will be expended
primarily in 1998. The Company is currently evaluating its computer-controlled
machinery and equipment for year 2000 compliance. Although the Company does not
anticipate the cost or failure to convert this machinery and equipment to be
material to the Company's operating results, the ultimate impact is unknown.
In addition, the Company has discussed with its vendors and customers the need
to be year 2000 compliant. Although the Company has no reason to believe that
its vendors and customers will not be compliant by the year 2000, the Company is
unable to determine the extent to which year 2000 issues will effect its vendors
and customers. The Company continues to discuss with its vendors and customers
the need for implementing procedures to address this issue.
<PAGE>
EURO CURRENCY CONVERSION
On January 1, 1999, the European Economic Union will begin a process that is
expected to ultimately result in conversion of the existing currencies to a
single currency, the "Euro." The Company is evaluating and implementing programs
to address the conversion to the Euro.
OUTLOOK
NMHG: Although industry lift truck bookings in the Americas are expected to
decline moderately in the second half of 1998, the rate of unit shipments is
expected to remain stable due to high backlog levels. In Europe, improving
economic conditions and stronger demand for lift trucks are expected to result
in increased unit shipments and higher backlogs in the second half of 1998.
Industry shipments in the Asia-Pacific region are expected to decline because of
continuing weak economies throughout this region. NMHG's worldwide unit
shipments are typically constrained in the third quarter by traditional summer
plant holidays. NMHG's cost reduction programs, including Value Improvement,
Demand Flow Technology and infrastructure reorganization, are expected to
continue having an increasing positive impact in 1998 and 1999.
Housewares: The Housewares Group expects to benefit from increased cost-savings
in the second half of 1998 from HB/PS's Saltillo, Mexico, plant as production
capacity continues to grow, with most of the full potential impact expected to
be realized in 1999. A closer working relationship between HB/PS and KCI is
expected to lead to enhanced opportunities for these companies.
NACoal: NACoal's mining operations are expected to continue to provide a steady
volume of lignite deliveries during the remainder of 1998. NACoal will have a
full year of lignite deliveries from its San Miguel mine in 1998, compared with
six months of operations in 1997. NACoal expects royalty income to decline
moderately in the second half of 1998.
The statements contained in this Form 10-Q that are not historical facts are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are made subject to certain risks and uncertainties
that could cause actual results to differ materially from those presented in
those forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Such risks and uncertainties
with respect to each subsidiary's operations include without limitation:
NMHG: (1) changes in demand for forklift trucks and related service parts on a
worldwide basis, (2) changes in sales prices, (3) delays in delivery or
increased costs of raw materials or sourced products and labor, (4) delays in
manufacturing and delivery schedules, (5) exchange rate fluctuations, changes in
foreign import tariffs and monetary policies and other changes in the regulatory
climate in the foreign countries in which NMHG operations and/or sells products,
(6) product liability or other litigation, warranty claims or other returns of
products and (7) delays or increased costs of employee relocations and/or in the
execution of the restructuring program.
<PAGE>
OUTLOOK - continued
Housewares: (1) delays or increased costs in the start-up of operations in
Saltillo and/or in the execution of the restructuring program, (2) bankruptcy of
or loss of major retail customers, (3) changes in the sales price, product mix
or levels of consumer purchases of kitchenware and small electric appliances,
(4) exchange rate fluctuations, changes in foreign import tariffs and monetary
policies and other changes in the regulatory climate in the foreign countries in
which HB/PS buys, operates and/or sells products, (5) product liability or other
litigation, warranty claims or other returns of products and (6) weather
conditions that would affect the number of customers visiting KCI stores.
NACoal: (1) weather conditions and other events that would change the level of
customers' fuel requirements and (2) equipment problems that could affect
lignite deliveries to customers.
<PAGE>
Part II
Item 1 Legal Proceedings
None
Item 2 Change in Securities and Use of Proceeds
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security
holders at the Annual Meeting of Stockholders held May 13, 1998,
with the results indicated:
Outstanding Shares Entitled to Vote Number of Votes
Class A Common 6,495,254
Class B Common 16,679,630
----------
23,174,884
==========
Item A. Election of ten directors for the ensuing year.
Votes
Director Nominee For Withheld Total
---------------------- ---------- ------ -----------
Owsley Brown II 19,658,094 14,091 19,672,185
Robert M. Gates 19,656,474 15,711 19,672,185
Leon J. Hendrix, Jr. 19,654,194 17,991 19,672,185
Dennis W. LaBarre 19,655,558 16,627 19,672,185
Alfred M. Rankin, Jr. 19,655,944 16,241 19,672,185
Ian M. Ross 19,652,474 19,711 19,672,185
John C. Sawhill 19,657,944 14,241 19,672,185
Britton T. Taplin 19,658,094 14,091 19,672,185
David F. Taplin 19,658,094 14,091 19,672,185
John F. Turben 19,656,474 15,711 19,672,185
Item B. Confirming the appointment of Arthur Andersen LLP as
the independent certified public accountants of
the Company for the current fiscal year.
For Against Abstain Total
------------- ----------- ----------- ------------
19,659,313 2,572 10,300 19,672,185
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 33 of this
quarterly report on Form 10-Q.
(b) Reports on Form 8-K. The Company did not file any
reports on Form 8-K during the second quarter of 1998.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NACCO Industries, Inc.
(Registrant)
Date August 14, 1998 /s/ Kenneth C. Schilling
------------------------------ --------------------------------------
Kenneth C. Schilling
Vice President and Controller
(Principal Financial and Accounting Officer)
<PAGE>
Exhibit Index
Exhibit
Number* Description of Exhibits
(10) Material Contracts
(cxxii) Amendment No. 5 dated as of June 10, 1998 to the
Second Amended and Restated Credit Agreement dated as of
October 11, 1990, amended and restated as of April 18, 1995,
among Hamilton Beach/Proctor Silex, Inc., Proctor-Silex Canada
Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks
signatory thereto and the Chase Manhattan Bank NA, as U.S.
Agent, and The Chase Manhattan Bank of Canada, as Canadian
agent, is attached hereto as Exhibit 10(cxxii).
(27) Financial Data Schedule
*Numbered in accordance with Item 601 of Regulation S-K.
Exhibit 10 (cxxii)
AMENDMENT NO. 5 TO CREDIT AGREEMENT
AMENDMENT NO. 5 dated as of June 10, 1998 to the SECOND AMENDED AND
RESTATED CREDIT AGREEMENT dated as of October 11, 1990 and amended and restated
as of April 18, 1995 among Hamilton Beach/Proctor-Silex, Inc. (the "Company"),
Proctor-Silex Canada Inc. ("PSC") and Proctor-Silex S.A. de C.V. ("PSM", and
together with the Company and PSC, the "Obligors"); each of the Banks signatory
thereto; and The Chase Manhattan Bank (successor by merger of The Chase
Manhattan Bank (National Association)), as U.S. Agent (in such capacity, the
"U.S. Agent") and The Chase Manhattan Bank of Canada, as Canadian Agent (in such
capacity, the "Canadian Agent", and together with the U.S. Agent, the "Agents").
The Obligors, the Banks and the Agents are parties to the Second Amended
and Restated Credit Agreement referred to above, as amended and modified by (i)
Amendment No. 1 dated as of March 29, 1996, (ii) Amendment No. 2 dated as of
October 4, 1996, (iii) Amendment No. 3 dated as of April 14, 1997 and (iv)
Amendment No. 4 dated as of April 22, 1998 (as so amended and modified and in
effect on the date hereof, the "Credit Agreement"). The Obligors, the Banks and
the Agents wish to amend the Credit Agreement in certain respects and,
accordingly, the parties hereto agree as follows:
Section 1. Definitions. Except as otherwise defined in this Amendment No.
5, terms defined in the Credit Agreement are used herein as defined therein.
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date hereof, the
Credit Agreement shall be amended as follows:
2.01 Definitions. Section 1.01 of the Credit Agreement shall be amended by
adding (to the extent not already included in said Section 1.01) or amending (to
the extent already included in said Section 1.01) the following definitions to
read in their entirety as follows:
"Kitchen Advances" shall mean advances made to Kitchen Collection, Inc. by
the Company.
"Interest Expense" shall mean, for any period, for the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP, the sum
of (i) all interest accrued during such period on Indebtedness of the Company
and its Subsidiaries (whether or not paid during such period) plus (ii) the net
amounts payable by the Company and its Subsidiaries (or minus the net amounts
receivable by the Company and its Subsidiaries) under Interest Rate Protection
Agreements (whether or not actually paid or received in such period); provided
that "Interest Expense" shall exclude to the extent otherwise included (a)
accrued facility fees payable under Section 2.04(a) hereof and accrued letter of
credit fees payable under Section 2.01(II)(a)(4) hereof, in each case for the
period of determination, and (b) all interest accrued during such period on
Loans made hereunder to the extent the proceeds of such Loans are used to fund
Kitchen Advances permitted under Section 9.17(h) hereof.
"Total Debt" shall mean, as to any Person, Indebtedness that, in accordance
with GAAP, is required to be reflected as a liability on the balance sheet of
such Person; provided that, for the purposes of calculating the Leverage Ratio,
Indebtedness of the Company incurred pursuant to Loans made hereunder shall not
be included in "Total Debt" to the extent the proceeds of such Loans are used to
fund Kitchen Advances permitted under Section 9.17(h) hereof.
2.02 Reconciliation Statement.
(a) Section 1.02(a) of the Credit Agreement shall be amended by deleting in
its entirety the proviso contained in the second sentence thereof.
(b) Section 9.01 of the Credit Agreement shall be amended by (i) deleting
the parenthetical contained in clause (1)(ii) of the paragraph immediately
following clause (l) thereof, and (ii) amending Clause (1)(B) of such paragraph
to read in its entirety as follows:
"[Intentionally Omitted]".
2.03 Kitchen Advances. Section 9.17 of the Credit Agreement shall be
amended by amending clause (h) thereof to read in its entirety as follows:
"(h) so long as Kitchen Collection, Inc. is an Affiliate of the Company,
the Company may make Kitchen Advances in an aggregate amount of up to but not
exceeding $10,000,000 at any one time outstanding;"
2.04 Schedules and Exhibits. Schedule L of the Credit Agreement
shall be deleted in its entirety and the reference to Schedule L in
the Schedules and Exhibits shall be amended to read in its entirety as follows:
"Schedule L - [Intentionally Omitted]".
Section 3. Representations and Warranties. The Company represents and
warrants to the Banks that on and as of the date hereof (and, in the case of
clauses (b), (c) and (d) of this Section 3, upon giving effect to the amendments
set forth in Section 2 hereof):
(a) (i) the execution and delivery by the Obligors of this Amendment No. 5,
and the performance by the Obligors of their obligations under the Credit
Agreement, as amended hereby, have been duly authorized by all necessary
corporate action of the Obligors, and will not violate any provision of law, or
any Obligor's charter or by-laws, or result in a breach of or constitute a
default or require a consent under any indenture or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any Obligor or any of its Property may be bound or affected, and (ii) each
of this Amendment No. 5 and the Credit Agreement, as amended hereby, constitutes
the legal, valid and binding obligation of the Obligors, in each case
enforceable against the Obligors in accordance with its terms;
(b) no Default has occurred and is continuing, and the representations and
warranties set forth in Section 8 of the Credit Agreement are true and complete
on the date hereof (or if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such specific date);
(c) no Property encumbered by any of the Mortgages or any of
the Canadian Security Documents will be released from any provision of such
Mortgage or Canadian Security Document, and no Mortgage or Canadian Security
Document will be invalidated or otherwise impaired; and
(d) none of Housewares Holding Company, Precis [521] Ltd., HB/PS Holding
Company, Inc., NACCO Industries, Inc., Glen Dimplex or Glen Electric, Ltd. will
be released from their obligations under their respective Supplemental Agreement
or Supplemental Security Agreement, and no Supplemental Agreement or
Supplemental Security Agreement will be invalidated or otherwise impaired.
It shall be an Event of Default for all purposes under the Credit Agreement, as
amended hereby, if any representation or warranty made by the Company in this
Amendment No. 5 shall prove to have been false or misleading as of the time made
or furnished in any material respect.
Section 4. Conditions Precedent. The amendments to the Credit Agreement set
forth in said Section 2 shall become effective, as of the date hereof, upon the
receipt by the Agents of this Amendment No. 5, duly executed and delivered by
the Obligors, the Majority Banks and the Agents.
Section 5. Miscellaneous. Except as amended by this Amendment No. 5, the
Credit Agreement shall remain unchanged and in full force and effect. Reference
in the Credit Agreement to "this Agreement" or words of similar import shall be
deemed to be references to the Credit Agreement as amended hereby. This
Amendment No. 5 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 5 by signing any such
counterpart. This Amendment No. 5 shall be governed by, and construed in
accordance with, the law of the State of New York. This Amendment No. 5 shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 5 to be duly executed and delivered as of the day and year first
above written.
OBLIGORS
HAMILTON BEACH/PROCTOR-SILEX, INC.
By /s/James H. Taylor
Title: Vice President - Treasurer
PROCTOR-SILEX CANADA INC.
By /s/James H. Taylor
Title: Vice President - Treasurer
PROCTOR-SILEX S.A. de C.V.
By /s/James H. Taylor
Title: Vice President - Treasurer
BANKS
THE CHASE MANHATTAN BANK,
individually and as U.S. Agent
By /s/Lenard Weiner
Title: Managing Director
<PAGE>
THE CHASE MANHATTAN BANK OF CANADA,
individually and as Canadian Agent
By /s/Christine Chan
Title: Vice President
By /s/Ed Sustar
Title: Vice President - Treasurer
FIRST CHICAGO NBD
By /s/William J. McCaffrey
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/M.D. Smith
Title: Agent
ISTITUTO BANCARIO SAN PAOLO DI
TORINO SPA
By /s/Luca Sacchi
Title: Vice President
By /s/Carlo Persico
Title: Vice President - Treasurer
CREDIT AGRICOLE INDOSUEZ
By /s/David Bouhl
Title: First Vice President
By /s/Dean Balice
Title: Senior Vice President
<PAGE>
CRESTAR BANK
By /s/Christopher Werner
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By /s/Marianne Meil
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 263
<ALLOWANCES> 0
<INVENTORY> 352
<CURRENT-ASSETS> 678
<PP&E> 544
<DEPRECIATION> 514
<TOTAL-ASSETS> 1,812
<CURRENT-LIABILITIES> 529
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 464
<TOTAL-LIABILITY-AND-EQUITY> 1,812
<SALES> 1,214
<TOTAL-REVENUES> 1,214
<CGS> 974
<TOTAL-COSTS> 974
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 83
<INCOME-TAX> 32
<INCOME-CONTINUING> 50
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50
<EPS-PRIMARY> 6.18
<EPS-DILUTED> 6.16
</TABLE>
