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 September 30, 1999
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 44124-4017
(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 October 31, 1999:
6,508,303
Number of shares of Class B Common Stock outstanding at October 31, 1999:
1,647,595
<PAGE>
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1999 (Unaudited) and
December 31, 1998
Unaudited Condensed Consolidated Statements of
Income for the Three Months and Nine
Months Ended September 30, 1999 and 1998
Unaudited Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
September 30, 1999 and 1998
Notes to Unaudited Condensed Consolidated
Financial Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About
Market Risk
Part II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes 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)
SEPTEMBER 30 DECEMBER 31
1999 1998
---------- ----------
<S> <C> <C>
(In millions)
ASSETS
Current Assets
Cash and cash equivalents $ 40.5 $ 34.7
Accounts receivable, net 288.4 275.1
Inventories 407.2 356.2
Prepaid expenses and other 44.9 37.2
---------- ----------
777.9 703.2
Property, Plant and Equipment, Net 620.8 593.4
Deferred Charges
Goodwill, net 442.8 441.0
Deferred costs and other 62.9 70.3
Deferred income taxes 33.3 31.9
---------- ----------
539.0 543.2
Other Assets 81.8 58.5
---------- ----------
Total Assets $ 2,022.6 $ 1,898.3
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Audited)
SEPTEMBER 30 DECEMBER 31
1999 1998
------------ -----------
(In millions)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 275.4 $ 252.9
Revolving credit agreements 106.8 31.2
Current maturities of long-term debt 24.3 28.4
Income taxes -- 10.9
Accrued payroll 33.1 44.7
Other current liabilities 193.3 180.5
---------- ----------
632.9 548.6
Long-term Debt- not guaranteed by
the parent company 296.5 256.4
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 295.3 313.2
Self-insurance Reserves and Other 241.2 238.9
Minority Interest 12.4 22.9
Stockholders' Equity
Common stock:
Class A, par value $1 per share 6,508,043
shares outstanding (1998 - 6,468,620
shares outstanding) 6.5 6.5
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,647,855 shares outstanding
(1998 - 1,651,615 shares outstanding) 1.6 1.6
Capital in excess of par value 2.7 .2
Retained earnings 534.7 504.9
Accumulated other comprehensive income:
Foreign currency translation adjustment 2.8 8.9
Minimum pension liability adjustment (4.0) (3.8)
---------- ----------
544.3 518.3
---------- ----------
Total Liabilities and Stockholders' Equity $ 2,022.6 $ 1,898.3
========== ==========
</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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
1999 1998 1999 1998
-------- -------- ---------- ----------
(In millions, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 614.3 $ 583.7 $ 1,872.5 $ 1,797.2
Cost of sales 501.8 465.5 1,520.2 1,439.7
-------- -------- ---------- ----------
Gross Profit 112.5 118.2 352.3 357.5
Selling, general and administrative expenses 84.1 71.1 247.7 206.9
Amortization of goodwill 3.8 3.8 11.4 11.2
-------- -------- ---------- ----------
Operating Profit 24.6 43.3 93.2 139.4
Other income (expense)
Interest expense (12.3) (8.9) (33.1) (25.2)
Other - net (.3) (1.5) (.8) 1.9
-------- -------- ---------- ----------
(12.6) (10.4) (33.9) (23.3)
Income Before Income Taxes, Minority
Interest, and Cumulative Effect
of Accounting Change 12.0 32.9 59.3 116.1
Provision for income taxes 4.6 12.2 22.7 43.9
-------- -------- ---------- ----------
Income Before Minority Interest and
Cumulative Effect of Accounting
Change 7.4 20.7 36.6 72.2
Minority interest (.4) (.3) (.4) (1.4)
-------- -------- ---------- ----------
Income Before Cumulative Effect of $ 7.0 $ 20.4 $ 36.2 $ 70.8
Accounting Change
Cumulative Effect of Accounting Change
(net of $0.6 tax benefit) -- -- (1.2) --
-------- -------- ---------- ----------
Net Income $ 7.0 $ 20.4 $ 35.0 $ 70.8
======== ======== ========== ==========
Comprehensive Income $ 11.9 $ 26.2 $ 28.7 $ 75.5
======== ======== ========== ==========
</TABLE>
<PAGE>
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- -----------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
(In millions, except per share data)
Basic Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $ .86 $ 2.50 $ 4.45 $ 8.68
Cumulative effect of accounting change (net
of $0.6 tax benefit) --- --- (.15) ---
------- ------- ------- -------
Net Income $ .86 $ 2.50 $ 4.30 $ 8.68
======= ======= ======= =======
Diluted Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $ .86 $ 2.50 $ 4.45 $ 8.66
Cumulative effect of accounting change (net
of $0.6 tax benefit) --- --- (.15) ---
------- ------- ------- -------
Net Income $ .86 $ 2.50 $ 4.30 $ 8.66
======= ======= ======= =======
Dividends per share $ .2150 $ .2050 $ .6350 $ .6050
======= ======= ======= =======
</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)
NINE MONTHS ENDED
SEPTEMBER 30
1999 1998
-------- --------
(In millions)
<S> <C> <C>
Operating Activities
Net income $ 35.0 $ 70.8
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 82.1 63.9
Deferred income taxes (.7) (7.2)
Minority interest expense .4 1.4
Cumulative effect of accounting change 1.2 --
Other non-cash items 1.4 7.8
Working Capital Changes:
Accounts receivable (9.0) (34.6)
Inventories (45.6) (81.6)
Other current assets (4.6) (2.8)
Accounts payable and other liabilities 23.1 1.1
-------- --------
Net cash provided by operating activities 83.3 18.8
Investing Activities
Expenditures for property, plant and equipment (67.1) (72.7)
Proceeds from the sale of assets 4.9 2.9
Acquisitions of businesses (66.2) (13.0)
Investments in unconsolidated affiliates (12.5) --
Other - net 1.1 (1.0)
-------- --------
Net cash used for investing activities (139.8) (83.8)
Financing Activities
Additions to long-term debt and revolving credit agreements 103.5 100.1
Reductions of long-term debt and revolving credit agreements -- (22.7)
Additions to obligations of project mining subsidiaries -- 60.2
Reductions of obligations of project mining subsidiaries (20.3) (61.0)
Financing of other short-term obligations (17.2) (5.7)
Cash dividends paid (5.2) (4.9)
Other - net 2.3 (7.9)
-------- --------
Net cash provided by financing activities 63.1 58.1
Effect of exchange rate changes on cash (.8) .3
-------- --------
Cash and Cash Equivalents
Increase (decrease) for the period 5.8 (6.6)
Balance at the beginning of the period 34.7 24.1
-------- --------
Balance at the end of the period $ 40.5 $ 17.5
======== ========
</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 that function in three principal business segments: lift trucks,
housewares and lignite mining. NACCO Materials Handling Group, Inc. ("NMHG")
designs, engineers, manufactures, sells and services a full line of lift trucks
and replacement parts marketed worldwide under the Hyster(R) and Yale(R) brand
names. NACCO Housewares Group ("Housewares") consists of Hamilton
Beach/Proctor-Silex, Inc. ("HB/PS"), a leading manufacturer and marketer of
small electric motor and heat-driven appliances as well as commercial products
for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a
national specialty retailer of brand-name kitchenware, small electric appliances
and related accessories. The North American Coal Corporation ("NACoal") mines
and markets lignite primarily as fuel for power generation by electric
utilities. See Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," for segment disclosures.
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 September 30, 1999 and the results
of its operations and cash flows for the nine month periods ended September 30,
1999 and 1998 have been included.
Operating results for the nine month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the remainder of
the year ended December 31, 1999. 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,
1998.
Note 2 - 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 ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Basic common shares 8.155 8.150 8.148 8.156
Dilutive stock options -- .01 .00 .019
----- ----- ----- -----
Diluted common shares 8.155 8.169 8.153 8.175
===== ===== ===== =====
</TABLE>
<PAGE>
Note 3 - Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
(Unaudited) (Audited)
SEPTEMBER 30 DECEMBER 31
1999 1998
-------- --------
<S> <C> <C>
Manufacturing inventories:
Finished goods and service parts-
NMHG - Wholesale $ 113.6 $ 106.2
NMHG - Retail 35.2 19.1
Housewares 65.6 41.5
-------- --------
214.4 166.8
-------- --------
Raw materials and work in process-
NMHG - Wholesale 130.6 136.6
Housewares 21.6 17.5
-------- --------
152.2 154.1
-------- --------
LIFO reserve-
NMHG - Consolidated (13.4) (12.6)
Housewares 1.8 1.8
-------- --------
(11.6) (10.8)
-------- --------
Total manufacturing inventories 355.0 310.1
Coal - NACoal 10.3 9.5
Mining supplies - NACoal 20.5 19.4
Retail inventories - Housewares 21.4 17.2
-------- --------
$ 407.2 $ 356.2
======== ========
</TABLE>
The cost of manufacturing inventories has been determined by the last-in,
first-out (LIFO) method for 74 percent and 72 percent of such inventories as of
September 30, 1999 and December 31, 1998, respectively.
Note 4 - Restructuring Charge
In 1998, HB/PS recorded a pre-tax charge of $3.2 million to recognize severance
payments to be made to approximately 450 manufacturing employees in connection
with transitioning activities to HB/PS' Mexican facilities. During the first
quarter of 1999, an additional $1.0 million pre-tax charge was made for
severance payments to be made to an additional 130 manufacturing employees in
connection with transitioning additional manufacturing activities to HB/PS'
Mexican facilities. Payments of $1.7 million have been made to approximately 365
employees during the first nine months of 1999. These payments reduced the
reserve for restructuring to $2.5 million as of September 30, 1999.
<PAGE>
Note 5 - New Accounting Standards
As of January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants' ("AICPA") Statement of Position ("SOP") 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use," and
SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-1 requires
capitalization on a prospective basis of certain development costs of software
to be used internally. The Company does not expect the change to this new
accounting standard to have a material impact on its financial position or
results of operations in the foreseeable future.
SOP 98-5 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. Prior to
January 1, 1999, the Company's NACoal subsidiary had deferred certain start-up
costs related to the development of lignite mining activities and amortized
these costs over the estimated useful life of the related coal lands. Under the
new accounting standard, these costs, which are primarily training, travel and
administrative expenses, are no longer allowed to be deferred, but, rather, they
must be expensed as incurred. As such, the Company has recognized the effect of
expensing these previously deferred start-up costs of $1.2 million, net-of-tax,
as a cumulative effect of accounting change in the accompanying Statement of
Income for the nine months ended September 30, 1999.
Note 6 - Accounting Standard 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. In June 1999, the FASB delayed the effective date of this
Statement for one year to fiscal years beginning after June 15, 2000. The FASB
cited the reason for this delay was to address concerns about a company's
ability to modify their information systems and educate their managers in time
to apply this Statement. The Company will adopt this Statement on January 1,
2001 and is in the process of determining the effect that adoption will have on
its 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
- -----------------
Financial information for each of NACCO's reportable segments, as defined by
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is presented in the following table. Because of the Company's
continued acquisitions of Hyster and Yale retail dealerships during 1998 and
during the first nine months of 1999, the operating results of the retail
segment of NMHG has met the materiality thresholds for disclosure, as provided
in SFAS No. 131. Therefore, separate financial information has been provided for
NMHG's wholesale segment and NMHG's retail segment. The wholesale operations of
NMHG include the manufacture and sale of lift trucks and related service parts,
primarily to independent and wholly owned Hyster and Yale retail dealerships.
The retail operations of NMHG include the sale and service of Hyster and Yale
lift trucks and related service parts by wholly owned retail dealerships. As of
September 30, 1998, any ownership held in retail stores was accounted for using
the equity method. Therefore, the results of retail operations during the third
quarter of 1998 and for the nine months ended September 30, 1998, was included
in the caption Other-net and was not material.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1999 1998 1999 1998
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
NMHG Wholesale $ 356.9 $ 374.6 $ 1,186.0 $ 1,243.7
NMHG Retail 55.3 -- 157.9 --
NMHG Eliminations (21.1) -- (61.7) --
-------- ---------- ---------- ----------
NMHG Consolidated 391.1 374.6 1,282.2 1,243.7
Housewares 150.6 136.8 389.0 348.7
NACoal 72.6 72.3 201.2 204.7
NACCO and Other -- -- .1 .1
-------- ---------- ---------- ----------
$ 614.3 $ 583.7 $ 1,872.5 $ 1,797.2
======== ========== ========== ==========
GROSS PROFIT
NMHG Wholesale $ 53.5 $ 72.4 $ 197.1 $ 247.1
NMHG Retail 13.1 -- 38.9 --
NMHG Eliminations (.3) -- (1.8) --
-------- ---------- ---------- ----------
NMHG Consolidated 66.3 72.4 234.2 247.1
Housewares 31.6 31.9 79.4 71.3
NACoal 14.6 14.0 38.7 39.3
NACCO and Other -- (.1) -- (.2)
-------- ---------- ---------- ----------
$ 112.5 $ 118.2 $ 352.3 $ 357.5
======== ========== ========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 42.3 $ 45.8 $ 126.1 $ 134.7
NMHG Retail 15.3 -- 45.7 --
-------- ---------- ---------- ----------
NMHG Consolidated 57.6 45.8 171.8 134.7
Housewares 20.9 19.5 58.9 55.6
NACoal 3.2 3.3 9.5 9.1
NACCO and Other 2.4 2.5 7.5 7.5
-------- ---------- ---------- ----------
$ 84.1 $ 71.1 $ 247.7 $ 206.9
======== ========== ========== ==========
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
AMORTIZATION OF GOODWILL
NMHG Wholesale $ 2.9 $ 3.0 $ 8.7 $ 8.8
NMHG Retail .1 -- .4 --
------- -------- -------- --------
NMHG Consolidated 3.0 3.0 9.1 8.8
Housewares .8 .8 2.3 2.4
------- -------- -------- --------
$ 3.8 $ 3.8 $ 11.4 $ 11.2
======= ======== ======== ========
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 8.3 $ 23.6 $ 62.3 $ 103.6
NMHG Retail (2.3) -- (7.2) --
NMHG Eliminations (.3) -- (1.8) --
------- -------- -------- --------
NMHG Consolidated 5.7 23.6 53.3 103.6
Housewares 9.9 11.6 18.2 13.3
NACoal 11.4 10.7 29.2 30.2
NACCO and Other (2.4) (2.6) (7.5) (7.7)
------- -------- -------- --------
$ 24.6 $ 43.3 $ 93.2 $ 139.4
======= ======== ======== ========
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
NMHG Wholesale $ 11.2 $ 26.6 $ 71.0 $ 112.4
NMHG Retail (2.2) -- (6.8) --
NMHG Eliminations (.3) -- (1.8) --
------- -------- -------- --------
NMHG Consolidated 8.7 26.6 62.4 112.4
Housewares 10.7 12.4 20.5 15.7
NACoal 11.4 10.7 29.2 30.2
NACCO and Other (2.4) (2.6) (7.5) (7.7)
------- -------- -------- --------
$ 28.4 $ 47.1 $ 104.6 $ 150.6
======= ======== ======== ========
INTEREST EXPENSE
NMHG Wholesale $ (4.6) $ (3.7) $ (12.5) $ (10.1)
NMHG Retail (1.7) -- (2.6) --
NMHG Eliminations .5 -- .7 --
------- -------- -------- --------
NMHG Consolidated (5.8) (3.7) (14.4) (10.1)
Housewares (1.7) (2.0) (4.7) (5.2)
NACoal (.4) (.1) (.8) (.5)
NACCO and Other (.1) (.2) (.5) (.7)
Eliminations .1 .2 .5 .7
------- -------- -------- --------
(7.9) (5.8) (19.9) (15.8)
Project mining subsidiaries (4.4) (3.1) (13.2) (9.4)
------- -------- -------- --------
$ (12.3) $ (8.9) $ (33.1) $ (25.2)
======= ======== ======== ========
INTEREST INCOME
NMHG Wholesale $ .3 $ .7 $ 3.1 $ 1.5
NMHG Retail 1.1 -- .1 --
NMHG Eliminations (1.0) -- (1.1) --
------- -------- -------- --------
NMHG Consolidated .4 .7 2.1 1.5
Housewares .1 -- .1 --
NACoal .1 -- .2 .3
Eliminations (.1) (.2) (.5) (.7)
------- -------- -------- --------
.5 .5 1.9 1.1
Project mining subsidiaries .1 .2 .3 .8
------- -------- -------- --------
$ .6 $ .7 $ 2.2 $ 1.9
======= ======== ======== ========
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
OTHER-NET, INCOME (EXPENSE), EXCLUDING
INTEREST INCOME
NMHG Wholesale $ (1.1) $ (1.2) $ (3.0) $ .9
NMHG Retail .3 -- .3 --
NMHG Eliminations .3 -- -- --
------- ------- ------- -------
NMHG Consolidated (.5) (1.2) (2.7) .9
Housewares (.1) (.1) (.5) (.3)
NACoal (.4) (.8) (.1) (1.2)
NACCO and Other .1 (.1) .3 .6
------- ------- ------- -------
$ (.9) $ (2.2) $ (3.0) $ --
======= ======= ======= =======
PROVISION FOR INCOME TAXES
NMHG Wholesale $ 1.3 $ 7.5 $ 20.2 $ 37.1
NMHG Retail (.6) -- (2.6) --
NMHG Eliminations (.2) -- (.9) --
------- ------- ------- -------
NMHG Consolidated .5 7.5 16.7 37.1
Housewares 3.2 4.2 5.2 3.4
NACoal 1.1 1.9 2.9 5.7
NACCO and Other (.2) (1.4) (2.1) (2.3)
------- ------- ------- -------
$ 4.6 $ 12.2 $ 22.7 $ 43.9
======= ======= ======= =======
NET INCOME (LOSS)
NMHG Wholesale $ 1.8 $ 11.9 $ 30.4 $ 58.8
NMHG Retail (2.0) -- (6.8) --
NMHG Eliminations (.3) -- (1.3) --
------- ------- ------- -------
NMHG Consolidated (.5) 11.9 22.3 58.8
Housewares 5.0 5.3 7.9 4.4
NACoal 4.7 5.0 11.0 14.5
NACCO and Other (2.2) (1.8) (6.2) (6.9)
------- ------- ------- -------
$ 7.0 $ 20.4 $ 35.0 $ 70.8
======= ======= ======= =======
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG Wholesale $ 9.9 $ 8.9 $ 29.1 $ 26.7
NMHG Retail 6.2 -- 16.1 --
------- ------- ------- -------
NMHG Consolidated 16.1 8.9 45.2 26.7
Housewares 4.2 4.2 12.7 12.7
NACoal .9 .9 2.3 2.4
NACCO and Other .1 .1 .3 .3
------- ------- ------- -------
21.3 14.1 60.5 42.1
Project mining subsidiaries 7.3 7.4 21.6 21.8
------- ------- ------- -------
$ 28.6 $ 21.5 $ 82.1 $ 63.9
======= ======= ======= =======
CAPITAL EXPENDITURES
NMHG Wholesale $ 14.7 $ 17.7 $ 32.0 $ 42.6
NMHG Retail .5 -- 13.2 --
NMHG Eliminations (.1) -- (.4) --
------- ------- ------- -------
NMHG Consolidated 15.1 17.7 44.8 42.6
Housewares 6.2 4.0 12.4 13.5
NACoal -- .4 2.6 2.2
NACCO and Other .1 -- .1 --
------- ------- ------- -------
21.4 22.1 59.9 58.3
Project mining subsidiaries 2.8 9.5 7.2 14.4
------- ------- ------- -------
$ 24.2 $ 31.6 $ 67.1 $ 72.7
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1999 1998
---------- ----------
<S> <C> <C>
TOTAL ASSETS
NMHG Wholesale $ 1,043.6 $ 1,064.3
NMHG Retail 169.0 87.8
NMHG Eliminations (41.1) (51.7)
---------- ----------
NMHG Consolidated 1,171.5 1,100.4
Housewares 374.3 334.0
NACoal 71.9 43.1
NACCO and Other 29.2 53.6
---------- ----------
$ 1,646.9 $ 1,531.1
Project mining subsidiaries 394.3 418.6
---------- ----------
2,041.2 1,949.7
Consolidating Eliminations (18.6) (51.4)
---------- ----------
$ 2,022.6 $ 1,898.3
========== ==========
</TABLE>
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC.
- ------------------------------------
NMHG designs, manufactures, sells and services forklift trucks and replacement
parts marketed worldwide under the Hyster(R) and Yale(R) brand names.
During the third quarter of 1999, the Company purchased the remaining 2 percent
minority interest in NMHG, held by Sumitomo Heavy Industries, for book value of
$11.3 million. As a result of this transaction, NMHG is wholly owned by NACCO.
The condensed consolidated balance sheet at September 30, 1999 included in this
Form 10-Q reflects the corresponding decrease in NACCO's minority interest
liability as a result of this transaction.
FINANCIAL REVIEW
The results of operations for NMHG, including both the wholesale and retail
operations, were as follows for the three and nine months ended September 30:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Americas $ 267.4 $ 261.2 $ 877.7 $ 877.6
Europe, Africa and Middle East 105.0 102.5 341.1 324.6
Asia-Pacific 18.7 10.9 63.4 41.5
-------- ---------- ---------- ----------
$ 391.1 $ 374.6 $ 1,282.2 $ 1,243.7
======== ========== ========== ==========
Operating profit (loss)
Americas $ 10.4 $ 17.5 $ 55.5 $ 79.2
Europe, Africa and Middle East (4.4) 6.3 .4 24.8
Asia-Pacific (.3) (.2) (2.6) (.4)
-------- ---------- ---------- ----------
$ 5.7 $ 23.6 $ 53.3 $ 103.6
======== ========== ========== ==========
Operating profit (loss) excluding
goodwill amortization
Americas $ 12.5 $ 19.6 $ 61.6 $ 85.1
Europe, Africa and Middle East (3.6) 7.2 3.2 27.5
Asia-Pacific (.2) (.2) (2.4) (.2)
-------- ---------- ---------- ----------
$ 8.7 $ 26.6 $ 62.4 $ 112.4
======== ========== ========== ==========
Net income (loss) $ (.5) $ 11.9 $ 22.3 $ 58.8
======== ========== ========== ==========
</TABLE>
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
Third Quarter of 1999 Compared with Third Quarter of 1998
The following schedule identifies the components of the changes in revenues,
operating profit and net income (loss) for the third quarter of 1999 compared
with the third quarter of 1998:
<TABLE>
<CAPTION>
Net
Operating Income
Revenues Profit (Loss)
-------- ------ ------
<S> <C> <C> <C>
1998 $ 374.6 $ 23.6 $ 11.9
Increase (decrease) in 1999 from:
Unit volume (12.1) (2.2) (1.4)
Sales mix 6.1 1.7 1.1
Average sales price (7.8) (7.8) (5.1)
Service parts (1.0) (1.8) (1.1)
Retail sales, net of eliminations 34.2 (2.6) (2.3)
Foreign currency (2.9) (10.0) (6.5)
Manufacturing cost -- 1.6 1.2
Other operating expense -- 3.2 2.1
Other income and expense -- -- (.7)
Differences between effective
and statutory tax rates -- -- .3
-------- ------- -------
$ 391.1 $ 5.7 $ (.5)
1999 ======== ======= =======
</TABLE>
At NMHG, revenues increased as a result of retail sales made by recently
acquired dealerships, partially offset by a decrease in revenue from wholesale
operations. Wholesale revenue declined largely due to a decrease in unit volume,
in both the Americas and Europe, and a decline in the average sales price,
primarily in the Americas. Excluding the effect of retail activity, NMHG's
worldwide volume decreased 6.7 percent to 16,565 units shipped during the third
quarter of 1999 from 17,759 units shipped during the third quarter of 1998. Unit
volume during the third quarter of 1999 was reduced by approximately 1,300 units
as a result of an unplanned seven-workday shutdown of NMHG's Greenville, NC
manufacturing facility in September, caused by flooding from hurricane Floyd.
There was insignificant damage to NMHG's physical facilities. The average sales
price continued to decline in the third quarter of 1999 as compared with the
prior year due to increased competition resulting primarily from adverse
currency movements.
Operating profit declined primarily due to (i) adverse currency movements,
primarily a strengthening of the Japanese yen against the U.S. dollar and the
British pound sterling resulting in increased costs of Japanese-sourced
products, (ii) a reduction in the average sales price, (iii) a loss from retail
operations due to start-up and acquisition costs at recently acquired retail
dealerships and (iv) a decrease in unit volume due to hurricane Floyd. NMHG has
partially offset its hurricane Floyd losses by $0.3 million of anticipated
initial insurance recoveries for business interruption in the third quarter of
1999. The decline in operating profit was partially offset by a reduction in
other operating expenses, primarily due to reduced incentive compensation
expense. Net income declined as a result of the above factors and an increase in
interest expense as a result of recent acquisitions.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
The backlog level has increased to 20,000 units at September 30, 1999 from
18,000 units at June 30, 1999 and 18,800 units at September 30, 1998. The
increase is primarily due to the Greenville, NC plant shutdown in September 1999
caused by flooding from hurricane Floyd in the area surrounding the Greenville
facility.
During 1998, NMHG began a strategy of acquiring Hyster and Yale retail
dealerships on a permanent basis to strengthen its position in the lift truck
business. This newly adopted strategy resulted in the acquisition and
consolidation of several lift truck dealerships in 1998 and during the first
nine months of 1999. Retail dealerships, both those acquired in 1998 and during
the first nine months of 1999, increased NMHG's revenue by $34.2 million,
decreased operating profit by $2.6 million and decreased net income by $2.3
million, net of eliminations, in the third quarter of 1999. NMHG expects that it
may be necessary to acquire additional retail dealerships over the next several
years with the goal of continuing to strengthen its distribution network.
First Nine Months of 1999 Compared with First Nine Months of 1998
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the first nine months of 1999 compared with
the first nine months of 1998:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- -------- ------
<S> <C> <C> <C>
1998 $ 1,243.7 $ 103.6 $ 58.8
Increase (decrease) in 1999 from:
Unit volume (36.8) (6.3) (4.1)
Sales mix 6.0 1.1 .8
Average sales price (24.3) (24.3) (15.8)
Service parts .6 (2.1) (1.4)
Foreign currency (3.2) (19.6) (12.9)
Retail sales, net of eliminations 96.2 (9.0) (8.1)
Manufacturing cost -- 2.1 1.2
Other operating expense -- 7.8 5.1
Other income and expense -- -- (2.6)
Differences between effective
and statutory tax rates -- -- 1.3
---------- -------- -------
1999 $ 1,282.2 $ 53.3 $ 22.3
========== ======== =======
</TABLE>
At NMHG, revenues increased as a result of retail sales made by recently
acquired dealerships, partially offset by a decrease in revenue from wholesale
operations. Wholesale revenue declined largely due to a decrease in volume, in
both the Americas and Europe, and a decrease in the average sales price,
predominately in the Americas. Excluding the effect of retail activity, NMHG's
worldwide volume decreased 3.6 percent to 55,789 units shipped during the first
nine months of 1999 from 57,850 units shipped during the first nine months of
1998. Unit volume decreased primarily due to a decline in demand in Europe
combined with an unplanned seven-workday shutdown of NMHG's Greenville, NC plant
due to flooding caused by hurricane Floyd. The average sales price has decreased
primarily due to increased competition resulting primarily from adverse currency
movements.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
FINANCIAL REVIEW - continued
Operating profit declined primarily due to: (i) a reduction in the average sales
price, (ii) adverse currency movements, primarily a strengthening of the
Japanese yen against the U.S. dollar and the British pound sterling resulting in
increased costs of Japanese-sourced products, (iii) a loss from retail
operations due to start-up and acquisition costs at recently acquired retail
dealerships and (iv) a decrease in unit volume. The decline in operating profit
was partially offset by a reduction in other operating expenses, primarily due
to reduced incentive compensation expense. Net income declined as a result of
these factors and due to non-recurring income recognized in the second quarter
of 1998 from legal settlements of $2.9 million after-tax.
Other Income and Expense and Income Taxes
The components of other income (expense) and the effective tax rate for the
three and nine months ended September 30 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense $ (5.8) $ (3.7) $ (14.4) $ (10.1)
Other-net (.1) (.5) (.6) 2.4
-------- ------- ------- -------
$ (5.9) $ (4.2) $ (15.0) $ (7.7)
======== ======= ======= =======
Effective tax rate (250)% 38.7% 43.6% 38.7%
</TABLE>
Interest expense for the three and nine month periods ended September 30, 1999
increased as compared with the same periods last year primarily due to increased
debt levels necessary to finance acquisitions of retail dealerships and an
intercompany loan to NACCO. Other-net for the nine months ended September 30,
1999 declined due to a $4.6 million pre-tax non-recurring legal settlement
received in the second quarter of 1998.
The effective tax rate for the third quarter of 1999 of (250.0%) is not
meaningful and results from the mix of income from Wholesale versus loss from
Retail at differing effective tax rates. The increase in the effective tax rate
for the nine months ended September 30, 1999 compared with the same period in
1998 is due to the effect of a higher level of nondeductible expenses, including
goodwill amortization, on a lower comparable level of pre-tax income. The
year-to-date increase is also due to the mix of income from Wholesale versus
Retail at differing effective tax rates. Note that Retail had an insignificant
effect on the effective tax rates for the three months ended 1998 and the nine
months ended 1998.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $44.8 million during the
first nine months of 1999. These capital expenditures include investments in
tooling for new products, machinery and equipment and investments in existing
retail dealerships, including $5.7 million for lease and rental fleet. It is
estimated that NMHG's capital expenditures for the remainder of 1999 will be
approximately $16.5 million. These planned expenditures relate primarily to
tooling for new products, building improvements, machinery and equipment and
investments in retail lease and rental fleet. During the remainder of 1999, NMHG
anticipates continuing investments in business acquisitions in amounts which may
exceed the average quarterly acquisition investment of $18.3 million for the
first three quarters of 1999. (Investments in retail business acquisitions for
the first nine months of 1999 totaled $54.9 million.) The principal sources of
financing for these capital expenditures are internally generated funds and bank
borrowings.
<PAGE>
NACCO MATERIALS HANDLING GROUP, INC. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NMHG has a $350.0 million revolving credit facility that expires June 2002, but
may be extended annually, for one-year periods, upon the mutual consent of NMHG
and the bank group. In addition, the NMHG facility has performance-based pricing
which sets interest rates based upon the achievement of certain financial
performance targets. At September 30, 1999, NMHG had available $120.7 million of
its $350.0 million revolving credit facility. NMHG also has separate facilities
totaling $42.7 million, of which $16.9 million was available at September 30,
1999 and maintains additional uncommitted lines of credit, of which $32.1
million was available at September 30, 1999. 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.
NMHG's capital structure is presented below:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1999 1998
-------- --------
<S> <C> <C>
Total net tangible assets $ 365.1 $ 300.0
Advances to parent company 10.0 18.0
Goodwill at cost 467.6 454.0
-------- --------
Total assets before goodwill amortization 842.7 772.0
Accumulated goodwill amortization (115.4) (105.9)
Total debt (256.6) (200.2)
Minority Interest (4.5) (3.9)
-------- --------
Stockholders' equity $ 466.2 $ 462.0
======== ========
Debt to total capitalization 35% 30%
</TABLE>
The increase in net tangible assets of $65.1 million is primarily due to
acquisitions of retail dealerships, which increased net tangible assets by
approximately $42.3 million. The remaining $22.8 million increase in net
tangible assets is primarily due to an $11.5 million increase in cash, a $6.4
million increase in inventory and a $4.9 million increase in net property, plant
and equipment. Cash increased primarily due to the inability of one of NMHG's
financial institutions in Europe to accept repayment of short-term financing
during the end of September 1999 due to system failures experienced by the
financial institution. At the time, the financial institution was trying to
replace its systems to comply with Y2K and experienced failure during this
transition. As such, both cash and short-term debt has increased at September
30, 1999. This situation was rectified subsequent to September 30, 1999.
Increases in inventory and net property are primarily due to increased retail
inventories and rental fleet.
Goodwill and debt have increased due to acquisitions of retail dealerships
during the first nine months of 1999.
<PAGE>
NACCO HOUSEWARES GROUP
- ----------------------
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 NACCO Housewares Group were as follows for the
three and nine months ended September 30:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 150.6 $ 136.8 $ 389.0 $ 348.7
Operating profit $ 9.9 $ 11.6 $ 18.2 $ 13.3
Operating profit excluding
goodwill amortization $ 10.7 $ 12.4 $ 20.5 $ 15.7
Net income $ 5.0 $ 5.3 $ 7.9 $ 4.4
</TABLE>
Third Quarter of 1999 Compared with Third Quarter of 1998
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the third quarter of 1999 compared with the
third quarter of 1998:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
1998 $ 136.8 $ 11.6 $ 5.3
<S> <C> <C> <C>
Increase (decrease) in 1999 from:
Unit volume and sales mix 15.4 3.8 2.5
Average sales price (2.3) (2.3) (1.5)
Retail sales .7 (.1) --
Manufacturing cost -- (2.2) (1.4)
Other operating expense -- (.9) (.4)
Differences between effective
and statutory tax rates -- -- .5
-------- ------- ------
1999 $ 150.6 $ 9.9 $ 5.0
======== ======= ======
</TABLE>
<PAGE>
NACCO HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Housewares' revenues improved in the third quarter of 1999 primarily due to unit
volume growth at HB/PS, especially for indoor grills, blenders, slow cookers and
irons. However, increased operating profit from volume growth was completely
offset by price reductions and increased manufacturing and other operating
costs. The average sales price continued to decline in the third quarter of 1999
as compared with the third quarter of 1998 due to continued competition from
Chinese imports. Although the standard production cost of manufacturing has
declined during the third quarter of 1999 as compared to the same period a year
ago as a result of increased production in lower-cost Mexican facilities,
unfavorable manufacturing variances resulted in an increase in total
manufacturing costs. Increased manufacturing variances were due to (i) continued
start-up inefficiencies at HB/PS' Mexican facilities, (ii) the introduction of
new product lines in Mexico and (iii) wind down expenses at HB/PS' North
Carolina plants. Manufacturing costs also increased due to increased
transportation costs and additional start-up expenses associated with the new
consolidated distribution center in Memphis. Other operating expenses increased
primarily due to higher wage expenses and advertising. Net income declined as a
result of the factors affecting operating profit, partially offset by an
improvement in the effective tax rate.
KCI's revenues and net income improved slightly in the third quarter of 1999 as
compared with the third quarter of 1998, as a result of an increase in the value
of an average sales transaction and improved gross margins. KCI operated 145
stores at September 30, 1999, compared with 148 stores at the end of the third
quarter of 1998.
First Nine Months of 1999 Compared with First Nine Months of 1998
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the first nine months of 1999 compared with
the first nine months of 1998:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ ------
<S> <C> <C> <C>
1998 $ 348.7 $ 13.3 $ 4.4
Increase (decrease) in 1999 from:
Unit volume and sales mix 43.6 13.7 8.9
Average sales price (5.7) (5.7) (3.7)
Retail sales 2.4 .7 .5
Manufacturing cost -- (1.2) (.8)
Other operating expense -- (2.6) (1.5)
Differences between effective
and statutory tax rates -- -- .1
-------- ------- ------
1999 $ 389.0 $ 18.2 $ 7.9
======== ======= ======
</TABLE>
<PAGE>
NACCO HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Housewares' revenues improved in the first nine months of 1999 primarily due to
unit volume growth at HB/PS, especially for blenders, indoor grills, irons and
coffeemakers. Operating profit and net income increased during the first nine
months of 1999 due to unit volume growth and a more profitable sales mix,
partially offset by a decrease in the average sales price as a result of
increased competition, primarily from Chinese imports, and an increase in
manufacturing and other operating costs. Manufacturing costs increased primarily
due to the factors discussed for the 1999 third quarter, as increased production
at lower-cost Mexican plants were offset by various start-up and "wind down"
inefficiencies. Increased manufacturing costs were partially offset by a
decrease in employee severance of $2.5 million year over year and favorable
Canadian exchange rates. Other operating costs increased as a result of the
factors discussed for the third quarter. KCI's revenues increased and net loss
decreased as a result of increases in the size of an average sales transaction
and improved gross margins.
Other Income and Expense and Income Taxes
The components of other income (expense) and the effective tax rate for the
three and nine months ended September 30 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense $ (1.7) $ (2.0) $ (4.7) $ (5.2)
Other-net -- (.1) (.4) (.3)
------- ------- ------- -------
$ (1.7) $ (2.1) $ (5.1) $ (5.5)
======= ======= ======= =======
Effective tax rate 39.0% 43.5% 39.6% 43.3%
</TABLE>
The decrease in interest expense for the third quarter and first nine months of
1999 as compared with the same periods in 1998 is due to lower average
borrowings outstanding.
The decrease in the effective tax rate is primarily due to the effect of a
constant level of nondeductible goodwill amortization on a higher comparable
level of pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Housewares' expenditures for property, plant and equipment were $12.4 million
during the first nine months of 1999 and are estimated to be $7.9 million for
the remainder of 1999. The primary purpose of these capital expenditures is to
purchase equipment intended 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' credit agreement provides for a revolving credit facility ("HB/PS
Facility") that: (i) permits advances up to $160.0 million, (ii) is secured by
substantially all of HB/PS' assets, (iii) provides lower interest rates if HB/PS
achieves certain interest coverage ratios and (iv) allows for interest rates
quoted under a competitive bid option. The HB/PS Facility expires in May 2003.
At September 30, 1999, HB/PS had $49.5 million available under this facility. In
addition, HB/PS has separate uncommitted facilities that permitted $13.2 million
of additional borrowings at September 30, 1999.
<PAGE>
NACCO HOUSEWARES GROUP - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
In 1998, the HB/PS Facility was amended to allow advances of up to $10.0 million
from HB/PS to KCI. Subsequent to this amendment, KCI's cash requirements have
been financed through advances from HB/PS. Accordingly, in 1998, KCI terminated
its external revolving credit facility. 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.
Housewares' capital structure is presented below:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1999 1998
-------- --------
<S> <C> <C>
Total net tangible assets $ 184.5 $ 153.3
Goodwill at cost 123.5 123.5
-------- --------
Total assets before goodwill amortization 308.0 276.8
Accumulated goodwill amortization (32.9) (30.6)
Total debt (123.8) (96.0)
-------- --------
Stockholder's equity $ 151.3 $ 150.2
======== ========
Debt to total capitalization 45% 39%
</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. In addition to the increase in inventory, total net tangible
assets at September 30, 1999 have increased as compared with December 31, 1998
due to an increase in accounts receivable related to volume growth.
<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, San Miguel and Red River 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 production scheduled for the second half of 2000.
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 affected 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 nine months ended September 30:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Coteau Properties 4.0 4.1 12.1 12.1
Falkirk Mining 2.0 1.9 5.1 5.0
Sabine Mining 1.1 1.2 2.6 2.6
Red River Mining .3 .2 .5 .7
San Miguel .9 .8 2.7 2.6
--- --- ---- ----
Total Lignite 8.3 8.2 23.0 23.0
=== === ==== ====
</TABLE>
The Florida dragline operations delivered 2.1 million and 6.2 million cubic
yards of limerock in the three and nine months ended September 30, 1999,
respectively. This compares to 2.1 million and 6.1 million cubic yards delivered
during the three and nine months ended September 30, 1998, 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 nine months ended September 30:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Project mines $ 62.2 $ 61.3 $ 174.0 $ 171.1
Other mining operations 9.8 9.8 25.1 28.9
------- -------- -------- --------
72.0 71.1 199.1 200.0
Royalties and other .6 1.2 2.1 4.7
------- -------- -------- --------
$ 72.6 $ 72.3 $ 201.2 $ 204.7
======= ======== ======== ========
Income before taxes
Project mines $ 6.9 $ 6.8 $ 18.9 $ 18.2
Other mining operations 1.0 1.6 2.2 4.4
------- -------- -------- --------
Total from operating mines 7.9 8.4 21.1 22.6
Royalties and other income, net (.1) .8 .1 3.8
Other operating expenses (2.0) (2.3) (6.1) (6.2)
------- -------- -------- --------
5.8 6.9 15.1 20.2
Provision for taxes 1.1 1.9 2.9 5.7
------- -------- -------- --------
Income before cumulative effect of
accounting change 4.7 5.0 12.2 14.5
Cumulative effect of accounting change -- -- (1.2) --
------- -------- -------- --------
Net income $ 4.7 $ 5.0 $ 11.0 $ 14.5
======= ======== ======== ========
</TABLE>
Third Quarter of 1999 Compared with Third Quarter of 1998
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the third quarter of 1999 compared with
the third quarter of 1998:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
-------- ----- ------
<S> <C> <C> <C>
1999 $ 72.3 $ 6.9 $ 5.0
Increase (decrease) in 1999 from:
Project mines
Tonnage volume .1 .1 .1
Pass-through costs .8 -- --
Other mining operations
Tonnage volume .2 (.2) (.1)
Average selling price (.2) -- --
Operating costs -- (.4) (.3)
------- ------ ------
Changes from operating mines .9 (.5) (.3)
Royalties and other income, net (.6) (.9) (.6)
Other operating expenses -- .3 .2
Differences between effective and
statutory tax rates -- -- .4
------- ------ ------
1999 $ 72.6 $ 5.8 $ 4.7
======= ====== ======
</TABLE>
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Revenues for the third quarter of 1999 increased as compared with the third
quarter of 1998 primarily due to a slight increase in overall tonnage volume,
partially offset by reduced royalties. However, income before taxes and net
income for the third quarter of 1999 declined as compared with the third quarter
of 1998 primarily due to reduced royalty income and increased administrative
costs at San Miguel, partially offset by income from increased tonnage volume.
Royalty income continued to decline due to decreased demand for coal from
NACoal's eastern underground reserves.
First Nine Months of 1999 Compared with First Nine Months of 1998
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the first nine months of 1999 as compared
with the first nine months of 1998:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
-------- ----- ------
<S> <C> <C> <C>
1998 $ 204.7 $ 20.2 $ 14.5
Increase (decrease) in 1999 from:
Project mines
Tonnage volume 1.1 .2 .1
Agreed profit per ton .5 .5 .3
Pass-through costs 1.3 -- --
Other mining operations
Tonnage volume (4.1) (4.1) (2.7)
Average selling price .3 .3 .2
Operating costs -- .7 .5
Other expense -- .9 .6
-------- ------- -------
Changes from operating mines (.9) (1.5) (1.0)
Royalties and other income, net (2.6) (3.7) (2.4)
Other operating expenses -- .1 .1
Cumulative effect of accounting change -- -- (1.2)
Differences between effective and
statutory tax rates -- -- 1.0
-------- ------- -------
1999 $ 201.2 $ 15.1 $ 11.0
======== ======= =======
</TABLE>
Revenues for the first nine months of 1999 decreased as compared with the first
nine months of 1998 primarily due to decreased tons sold at Red River and
reduced royalties, partially offset by a slight increase in tons sold at
Falkirk. Income before taxes and net income for the first nine months of 1999
also declined as compared with the first nine months of 1998 due to reduced
royalty income, a one-time cumulative effect charge recognized in the first
quarter of 1999 for a change in accounting for start-up costs and decreased tons
sold at Red River. Tons were down at Red River due to the customer's plant
outage during the second quarter of 1999, while tons increased slightly at
Falkirk due to customer requirements. Royalty income continued to decline due to
decreased demand for coal from NACoal's eastern underground reserves.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
Other Income and Expense and Income Taxes
The components of other income (expense) and the effective tax rate for the
three and nine months ended September 30 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest expense
Project mining subsidiaries $ (4.4) $ (3.1) $ (13.2) $ (9.4)
Other mining operations (.4) (.1) (.8) (.5)
------- ------- ------- -------
$ (4.8) $ (3.2) $ (14.0) $ (9.9)
======= ======= ======= =======
Other-net
Project mining subsidiaries $ .1 $ .2 $ .3 $ .8
Other mining operations (.3) (.8) .1 (.9)
------- ------- ------- -------
$ (.2) $ (.6) $ .4 $ (.1)
======= ======= ======= =======
Effective tax rate 17.5% 28.2% 18.9% 28.3%
</TABLE>
Interest expense increased for both the third quarter and first nine months of
1999 as compared with the same periods of 1998 primarily due to an increase in
the average debt outstanding at the Other mining operations and additional
interest charged on advances from customers at the Project mining subsidiaries.
The average outstanding debt balance at the Other mining operations has
increased to finance increased capital expenditures and to finance NACoal's
investment in the Mississippi lignite joint venture.
The decrease in the effective tax rate primarily results from additional
percentage depletion eligible to reduce NACoal's effective tax.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $9.8 million during the
first nine months of 1999. It is estimated that NACoal's capital expenditures
for the remainder of 1999 will be $15.7 million, of which $15.6 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 nine months of 1999, NACoal invested $12.2 million in a
joint venture with Phillips Coal Company to develop a new lignite mine in
Mississippi. During the remainder of 1999, NACoal anticipates investing an
additional $5.8 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. NACoal had $22.4 million of its revolving credit facility available
at September 30, 1999.
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>
SEPTEMBER 30 DECEMBER 31
1999 1998
------- -------
<S> <C> <C>
Investment in project mining subsidiaries $ 2.9 $ 3.6
Other net tangible assets 43.2 14.2
------- -------
Total tangible assets 46.1 17.8
Advances to (from) parent company 2.8 (2.5)
Debt related to parent advances (2.8) --
Other debt (24.8) (.2)
------- -------
Total debt (27.6) (.2)
------- -------
Stockholder's equity $ 21.3 $ 15.1
======= =======
Debt to total capitalization 56% 1%
</TABLE>
The increase in Other net tangible assets is primarily due to advances of $12.5
million related to the Mississippi Lignite joint venture, a $12.2 million
increase in the investment in the Mississippi Lignite joint venture and a $2.8
million reduction in accounts and notes payable. Borrowings increased to finance
investments in the Mississippi Lignite joint venture and loans made to 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 historically have not been material.
The results of operations at NACCO and Other were as follows for the three and
nine months ended September 30:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ .1 $ .1
Operating loss $ (2.4) $ (2.6) $ (7.5) $ (7.7)
Other income (expense), net $ -- $ (.3) $ (.2) $ (.1)
Net loss $ (2.2) $ (1.8) $ (6.2) $ (6.9)
</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 and Housewares 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, advances and management fees
from its subsidiaries are the primary sources of cash for NACCO.
NACCO's consolidated capital structure is presented below:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1999 1998
---------- ----------
<S> <C> <C>
Total net tangible assets $ 595.6 $ 473.2
Goodwill at cost 591.1 577.5
---------- ----------
Total assets before goodwill amortization 1,186.7 1,050.7
Accumulated goodwill amortization (148.3) (136.5)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (408.0) (296.4)
Closed mine obligations (Bellaire), including the
United Mine Worker retirees' medical fund, net-of-tax (73.7) (76.6)
Minority interest (12.4) (22.9)
---------- ----------
Stockholders' equity $ 544.3 $ 518.3
========== ==========
Debt to total capitalization 42% 35%
</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.
EFFECTS OF FOREIGN CURRENCY
NMHG and Housewares operate internationally and enter into transactions
denominated in foreign currencies. As such, the Company is subject to the
variability that arises from exchange rate movements. The effects of foreign
currency fluctuations on revenues, operating income and net income at NMHG are
disclosed above. At Housewares, foreign currency effects had an immaterial
impact on operating results between comparable periods of 1999 and 1998. See
Item 3, "Quantitative and Qualitative Disclosures About Market Risk."
YEAR 2000 ISSUE
Year 2000 ("Y2K") issues exist because many information technology ("IT") and
non-information technology ("non-IT") systems were designed to recognize years
by reference to only the last two digits of the year. As a result, these systems
assume the relevant year begins with "19." These systems could fail or produce
erroneous information if they are not modified to recognize dates beginning with
"20."
State of Readiness
Each of the Company's subsidiaries has developed a formal compliance plan to
address the Y2K issue. The audit committee of the Board of Directors is
periodically updated on the Company's progress in addressing the Y2K issue. The
subsidiaries' compliance plans encompass the evaluation of IT systems and non-IT
systems, as well as an assessment of third parties' compliance and the extent to
which third party representations can be relied upon. Furthermore, the execution
of the Company's compliance plans has been prioritized in terms of significance
to the Company's ability to generate revenues, income and cash flows. The
following discussion addresses IT and non-IT systems that may have a material
effect on the Company's ability to generate revenues, income and cash flows. The
compliance plans are categorized into one of four phases: (i) awareness, (ii)
assessment, (iii) renovation and (iv) validation and implementation (testing).
IT SYSTEMS The Company has completed its assessment of all of its IT systems
and the renovation and testing of substantially all of its IT systems. NMHG and
HB/PS have completed renovation and testing of all mission-critical IT systems.
NACoal has substantially completed renovation and testing of all
mission-critical IT systems. NACoal will finalize renovation and testing by
December 31, 1999.
NON-IT SYSTEMS The Company's Y2K compliance plan also addresses non-IT
systems with date-sensitive operating controls such as computer-controlled
manufacturing and mining equipment, heating, ventilating and cooling systems,
fire alarms, phone, voice mail, security and other similar systems. At NMHG, the
assessment, renovation and testing of non-IT systems is substantially complete.
Final testing and replacement of equipment at NMHG will be completed by December
31, 1999. All of HB/PS' computer-controlled manufacturing equipment and other
non-IT systems have been validated to be Y2K ready. NACoal has completed the
assessment and, to the extent possible, the testing of critical
computer-controlled equipment and other non-IT systems. Although NACoal is
unable to test some embedded processors in its mining equipment, these
processors do not perform functions that are critical to the operations of
NACoal. Therefore, no significant Y2K issues are expected.
<PAGE>
YEAR 2000 ISSUE - continued
THIRD PARTIES The Company has contacted substantially all of its
third-party, critical-component suppliers. At NMHG, supplier surveys have been
returned and evaluated, indicating that approximately 80 percent of NMHG's
critical suppliers are currently Y2K ready or have a plan in place to be ready
by the end of 1999. The remainder of NMHG's critical suppliers, primarily in
Europe, have not yet responded to the survey. NMHG plans to build a safety stock
in Europe to mitigate the risk that suppliers will not be Y2K ready. At HB/PS,
supplier surveys have been returned and evaluated, indicating that approximately
85 percent of HB/PS' critical suppliers are currently Y2K ready or have a plan
in place to be compliant by the end of 1999. HB/PS has developed contingency
plans for those suppliers who may not become Y2K ready. NACoal has surveyed its
critical vendors, but only 50 percent have responded. NACoal plans to pursue
responses and create contingency plans to mitigate any problems with critical
vendors. Of those who have responded, approximately 90 percent have indicated
that they have a plan to be Y2K ready by the end of 1999.
The Company has contacted its critical utility providers, financial institutions
and customers to assess their Y2K readiness. The majority of these third-party
partners have indicated that they are ready or have a plan in place to be Y2K
ready by December 31, 1999. The Company continues to monitor their progress and
remains in contact with critical partners, such as NACoal's power plant
customers. The Company will develop contingency plans as it becomes aware of the
potential for critical third-party partners' non-compliance.
Costs to Address Y2K Issues
The Company received and implemented computer software upgrades, under normal
maintenance agreements with third-party vendors, that enabled substantially all
of the Company's IT systems to be Y2K ready. As such, costs to address the Y2K
issue have not been, and are not expected to be, material to the Company.
Internal and external costs incurred to date have been approximately $7.1
million. The Company estimates an additional $1.3 million may be expended in the
near-term relating to this issue. These costs have been and are expected to be
funded by cash flows from operations.
Contingency Plans
While some contingency plans have been formalized, other contingency plans
continue to be formulated. Such contingency plans, both those formalized and
those under discussion, include, if necessary, building a safety stock of
critical components prior to January 1, 2000, requiring certain suppliers to
maintain a safety stock or locating alternate suppliers that are Y2K ready. The
Company may incur additional interest expense during the fourth quarter of 1999
and the first quarter of 2000 to finance any safety stock deemed necessary.
Based on information received to date, the Company has not replaced any of its
critical vendors, nor does it foresee the need to replace any of its critical
vendors. The Company will continue to monitor its vendors' compliance. The
Company has developed a risk assessment guide that will enable the Company to
identify customers who may have cash flow troubles due to non-compliance. The
Company may need to reduce the extension of credit, selling terms or amount of
shipments to those customers.
The Company's Y2K efforts are ongoing and its overall plan, as well as the
consideration of contingency plans, will continue to evolve as new information
becomes available. While the Company anticipates continuity of its business
activities, that continuity will be dependent upon its ability, and the ability
of third parties on which the Company relies, directly and indirectly, to be Y2K
ready.
<PAGE>
YEAR 2000 ISSUE - continued
Risks of the Company's Y2K Issues
Although the Company believes that it has a compliance plan that will mitigate
the risk that the Y2K issue will have a material adverse effect on the Company,
the ultimate impact of this issue on the Company is uncertain. Suppliers'
failure to deliver critical components, third-parties' failure to supply power
and/or telecommunication systems to manufacturing plants or mines, or the
Company's failure to complete, in a timely manner, the updating of
computer-controlled manufacturing equipment could result in delayed delivery of
products to customers, which could have a material adverse effect on earnings
and cash flow. In addition, customers' non-compliance could result in the loss
of customers or a customer's inability to purchase or pay for products, which
could have a material adverse effect on earnings and cash flow.
The Company has not yet fully implemented its Y2K compliance plan. Therefore,
there can be no assurance that the Y2K issue will not have a material adverse
effect on the Company's financial position, results of operations or cash flows.
See "Outlook" for additional risks and uncertainties associated with Y2K
compliance.
EURO CONVERSION
See the Company's 1998 Annual Report, which is incorporated by reference into
the Company's Form 10-K for the fiscal year ended December 31, 1998, for a
summary of the Euro Conversion. The Company does not anticipate that the use of
the Euro will materially affect the Company's foreign exchange and hedging
activities or the Company's use of derivative instruments, or will have a
material adverse effect on operating results or cash flows. However, the
ultimate effect of the Euro on competition due to price transparency and foreign
currency risk cannot yet be determined and may have an adverse effect, possibly
material, on the Company's operations, financial position or cash flows.
Conversely, the Euro may also have positive effects, such as reduced foreign
currency risk, lower costs due to reduced hedging activity, and reduced prices
of raw materials resulting from increased competition among suppliers. The
Company continues to monitor and assess the potential risks imposed by the Euro.
OUTLOOK
NMHG: NMHG anticipates a slight increase in each geographic region's industry
lift truck bookings in the fourth quarter of 1999, compared with the same period
a year ago. In addition, NMHG expects to increase lift truck production at its
Greenville manufacturing facility in the fourth quarter of 1999 to compensate
for lost production in the third quarter. NMHG expects that continued pressure
on margins is likely in the fourth quarter of 1999 if the present adverse
currency environment continues. NMHG plans to continue its retail acquisition
strategy over the next few years and may continue to incur losses related to the
acquisition costs and start-up of existing and newly acquired dealerships. These
losses, however, are expected to decline over time as related operating programs
begin to have a positive effect. The Company continues to work towards reaching
an agreement with Nissan by the end of the fourth quarter of 1999 for the
previously announced purchase of Nissan's global lift truck business, with the
transfer of the business to follow thereafter.
Houseware: HBPS' Mexican facilities are expected to increase production volume
beyond seasonal requirements in the fourth quarter as the transfer of our
assembly operations from North Carolina to Mexico is completed. HBPS expects
manufacturing efficiencies associated with its new Mexican facilities and
product lines to improve in the fourth quarter of 1999. HBPS also anticipates
that efficiencies in its new Memphis distribution center will improve in the
fourth quarter. KCI expects to open six new outlet store locations in the fourth
quarter.
<PAGE>
OUTLOOK - continued
NACoal: NACoal expects customer demand for lignite in the fourth quarter of 1999
will be consistent with 1998 levels. NACoal also expects royalty income to
decline in the fourth quarter of 1999, compared with the fourth quarter 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
which 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, which speak only as the date
hereof. 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 lift 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 operates and/or sells products,
(6) product liability or other litigation, warranty claims or other returns of
products, (7) costs related to acquisitions and integration of retail
dealerships, (8) increased competition, foreign currency risk and/or operating
costs resulting from the introduction of the Euro, and (9) delays in, costs
associated with, or failure to consummate, the acquisition of Nissan's worldwide
lift truck business.
Housewares: (1) delays or increased costs of transferring additional operations
into Mexican plants during 1999, (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 the 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, (6) increased competition from
Chinese imports, (7) weather conditions that would affect the number of
customers visiting KCI stores and (8) costs related to the start-up of General
Electric-branded products for Wal-Mart.
NACoal: (1) weather conditions and other events that would change the level of
customers fuel requirements, (2) weather or equipment problems that could affect
lignite deliveries to customers, (3) costs to pursue international mining
opportunities and (4) delays or increases in the cost of the start-up of the Red
Hills lignite mine.
Y2K Compliance: (1) delays in the completion of the Company's Y2K compliance
plan within the expected time frames disclosed above, (2) inability of the
Company's suppliers or vendors (including utility providers and financial
institutions) to be Y2K ready when necessary, (3) inability of NACoal's
customers to be Y2K ready when necessary, (4) increased costs to address Y2K
issues, (5) the Company's inability to replace vendors that are not, or that
cannot give assurances that they will be, Y2K ready and (6) the Company's
inability to formulate in a timely manner any required contingency plan that
will solve or mitigate problems arising from any of the foregoing.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See pages 37 and 38 of the Company's 1998 Annual Report, which is incorporated
by reference into the Company's Form 10-K for the fiscal year ended December 31,
1998, for a discussion of its derivative hedging policies and use of financial
instruments. There have been no material changes in the Company's market risk
exposures since December 31, 1998.
<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
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 37 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 third quarter of 1999.
<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 November 12, 1999 /s/ Kenneth C. Schilling
----------------- -------------------------------
Kenneth C. Schilling
Vice President and Controller
(Authorized Officer and Principal
Financial and Accounting Officer)
<PAGE>
Exhibit Index
Exhibit
Number* Description of Exhibits
(27) Financial Data Schedule
*Numbered in accordance with Item 601 of Regulation S-K.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Sep-30-1999
<CASH> 41
<SECURITIES> 0
<RECEIVABLES> 288
<ALLOWANCES> 0
<INVENTORY> 407
<CURRENT-ASSETS> 778
<PP&E> 621
<DEPRECIATION> 595
<TOTAL-ASSETS> 2,023
<CURRENT-LIABILITIES> 633
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 536
<TOTAL-LIABILITY-AND-EQUITY> 2,023
<SALES> 1,873
<TOTAL-REVENUES> 1,873
<CGS> 1,520
<TOTAL-COSTS> 1,520
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> 59
<INCOME-TAX> 23
<INCOME-CONTINUING> 36
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1)
<NET-INCOME> 35
<EPS-BASIC> 4.30
<EPS-DILUTED> 4.30
</TABLE>
