SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 April 30, 2000:
6,521,989
Number of shares of Class B Common Stock outstanding at April 30, 2000:
1,645,614
<PAGE>
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 2000 (Unaudited) and December 31, 1999
Unaudited Condensed Consolidated Statements
of Income for the Three Months Ended March 31, 2000
and 1999
Unaudited Condensed Consolidated Statements
of Cash Flows for the Three Months Ended March 31, 2000
and 1999
Notes to Unaudited Condensed Consolidated
Financia 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)
MARCH 31 DECEMBER 31
2000 1999
---------- ----------
(In millions)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 28.1 $ 36.2
Accounts receivable, net 278.7 292.2
Inventories 409.5 390.3
Prepaid expenses and other 44.0 53.5
---------- ----------
760.3 772.2
Property, Plant and Equipment, Net 624.1 625.4
Deferred Charges
Goodwill, net 445.6 449.4
Deferred costs and other 66.1 66.7
Deferred income taxes 30.9 29.2
---------- ----------
542.6 545.3
Other Assets 74.3 70.1
---------- ----------
Total Assets $ 2,001.3 $ 2,013.0
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
2000 1999
---------- ----------
(In millions, except share data)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 265.4 $ 254.4
Revolving credit agreements 72.6 56.6
Current maturities of long-term debt 32.7 32.5
Income taxes 4.8 4.4
Accrued payroll 30.4 47.0
Other current liabilities 180.6 188.2
---------- ----------
586.5 583.1
Long-term Debt- not guaranteed by
the parent company 319.7 326.3
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 280.7 289.2
Self-insurance Reserves and Other 236.5 240.7
Minority Interest 11.9 11.5
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,520,644
shares outstanding (1999 - 6,509,450
shares outstanding) 6.5 6.5
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis, 1,646,959
shares outstanding (1999 - 1,647,428 shares outstanding) 1.7 1.6
Capital in excess of par value 3.4 2.7
Retained earnings 561.9 554.4
Accumulated other comprehensive income:
Foreign currency translation adjustment (7.5) (3.0)
---------- ----------
566.0 562.2
---------- ----------
Total Liabilities and Stockholders' Equity $ 2,001.3 $ 2,013.0
========== ==========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
THREE MONTHS ENDED
MARCH 31
------------------
2000 1999
---------- ----------
(In millions, except per
share data)
<S> <C> <C>
Revenues $ 673.2 $ 613.5
Cost of sales 553.0 497.8
---------- ----------
Gross Profit 120.2 115.7
Selling, general and administrative expenses 89.4 80.5
Amortization of goodwill 4.0 3.8
---------- ----------
Operating Profit 26.8 31.4
Other expenses
Interest expense (10.7) (10.2)
Other - net (1.6) (.4)
---------- ----------
(12.3) (10.6)
---------- ----------
Income Before Income Taxes, Minority Interest and Cumulative
Effect of Accounting Change 14.5 20.8
Provision for income taxes 5.6 7.9
---------- ----------
Income Before Minority Interest and Cumulative Effect of
Accounting Change 8.9 12.9
Minority interest .3 --
---------- ----------
Income Before Cumulative Effect of Accounting Change 9.2 12.9
Cumulative effect of accounting change (net of $0.6 tax benefit) --- (1.2)
---------- ----------
Net Income $ 9.2 $ 11.7
========== ==========
Comprehensive Income $ 4.7 $ 4.5
========== ==========
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect of Accounting Change $ 1.13 $ 1.59
Cumulative effect of accounting change (net-of-tax) --- (.15)
---------- ----------
Net Income $ 1.13 $ 1.44
========== ==========
Dividends per share $ 0.215 $ 0.205
========== ==========
</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)
THREE MONTHS ENDED
MARCH 31
2000 1999
------- -------
(In millions)
<S> <C> <C>
Operating Activities
Net income $ 9.2 $ 11.7
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 25.8 23.5
Deferred income taxes (2.6) 1.5
Minority interest (.3) ---
Cumulative effect of accounting change --- 1.2
Other non-cash items .9 .2
Working capital changes, excluding the effects of business
acquisitions:
Accounts receivable 9.8 (4.8)
Inventories (21.4) (4.2)
Other current assets 5.7 1.5
Accounts payable and other liabilities (11.1) (12.9)
------- -------
Net cash provided by operating activities 16.0 17.7
Investing Activities
Expenditures for property, plant and equipment (24.2) (16.0)
Proceeds from the sale of assets 8.9 ---
Acquisitions of businesses, net of cash acquired (3.8) (35.4)
Investments in unconsolidated affiliates (2.9) (1.8)
Other - net (.3) 1.4
------- -------
Net cash used for investing activities (22.3) (51.8)
Financing Activities
Additions to long-term debt and revolving credit agreements 11.1 58.9
Reductions of long-term debt and revolving credit agreements (2.5) ---
Additions to obligations of project mining subsidiaries 11.6 2.2
Reductions of obligations of project mining subsidiaries (21.3) (9.5)
Financing of other short-term obligations --- (10.1)
Cash dividends paid (1.8) (1.7)
Other - net .9 1.7
------- -------
Net cash (used for) provided by financing activities (2.0) 41.5
Effect of exchange rate changes on cash .2 (1.5)
------- -------
Cash and Cash Equivalents
Increase (decrease) for the period (8.1) 5.9
Balance at the beginning of the period 36.2 34.7
------- -------
Balance at the end of the period $ 28.1 $ 40.6
======= =======
</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
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. NACCO Industries, Inc. ("NACCO") is a holding company with four
operating subsidiaries that function in three principal industries: lift trucks,
housewares and lignite mining.
NMHG Holding Co., through its wholly owned subsidiaries, NACCO Materials
Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG
Retail") (collectively "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 electrical 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.
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 March 31, 2000 and the results of
its operations and cash flows for the three month periods ended March 31, 2000
and 1999 have been included.
Operating results for the three month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the remainder of
the year ended December 31, 2000. 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,
1999.
Note 2 - Earnings per Share
Earnings per share is calculated in accordance with the provisions of Statement
of Financial Accounting Standards ("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
MARCH 31
------------------------
2000 1999
----- -----
<S> <C> <C>
Basic common shares 8.162 8.137
Dilutive stock options --- .009
----- -----
Diluted common shares 8.162 8.146
===== =====
</TABLE>
<PAGE>
Note 3 - Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
MARCH 31 DECEMBER 31
2000 1999
-------- --------
<S> <C> <C>
Manufactured inventories:
Finished goods and service parts -
NMHG $ 99.5 $ 103.5
Housewares 64.2 46.4
-------- --------
163.7 149.9
Raw materials and work in process -
NMHG Wholesale 154.8 150.1
Housewares 20.8 19.5
-------- --------
175.6 169.6
-------- --------
Total manufactured inventories 339.3 319.5
Retail inventories:
NMHG Retail 30.4 30.0
Housewares 23.9 18.9
-------- --------
Total retail inventories 54.3 48.9
Coal - NACoal 7.9 9.6
Mining supplies - NACoal 20.0 22.4
-------- --------
Total inventories at FIFO 421.5 400.4
LIFO reserve -
NMHG (15.0) (13.2)
Housewares 3.0 3.1
-------- --------
(12.0) (10.1)
-------- --------
$ 409.5 $ 390.3
======== ========
</TABLE>
The cost of certain manufactured and retail inventories has been determined
using the LIFO method. At March 31, 2000 and December 31, 1999, 66 percent of
total inventories were determined using the LIFO method.
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 1999, an
additional $1.2 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.
In 1999, $1.7 million was expended for severance payments made to approximately
350 employees and for related benefit costs. These expenditures reduced the
reserve for restructuring to $2.7 million as of December 31, 1999. During the
first three months of 2000, $0.9 million was expended for severance payments
made to approximately 200 employees and related benefits. These expenditures
reduced the reserve for restructuring to $1.8 million as of March 31, 2000.
<PAGE>
Note 5 - 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.
Note 6 - Reclassifications
Certain amounts in the prior period's Unaudited Condensed Consolidated Statement
of Cash Flows have been reclassified to conform to the current period's
presentation.
<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 the Company'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
1999, separate financial information was first provided for NMHG Wholesale and
NMHG Retail in the third quarter of 1999. Segment data for the first quarter of
1999 has been restated to show separately NMHG Wholesale and NMHG Retail. NMHG
Wholesale includes the manufacture and sale of lift trucks and related service
parts, primarily to independent and wholly owned Hyster and Yale retail
dealerships. NMHG Retail includes the sale and service of Hyster and Yale lift
trucks and related service parts by wholly owned retail dealerships.
NMHG Wholesale derives a portion of its revenues from transactions with NMHG
Retail. The amount of these revenues, which are derived based on similar third
party transactions, are indicated in the following table on the line "NMHG
Eliminations" in the revenues section. No other intersegment sales transactions
occur.
On January 1, 2000, NACCO Industries, Inc. began charging fees to its operating
subsidiaries for services provided by the corporate headquarters, which
represents most of the parent company's operating expenses. The 2000 first
quarter pre-tax fee of $2.5 million was charged to the operating segments based
on fees incurred on their behalf, including services performed for each, as
follows: NMHG Wholesale: $1.6 million, Housewares: $0.6 million and NACoal: $0.3
million. Each of the segments has included this charge on the line Other-net. As
a result of these fees, the parent company's net loss for the first quarter of
2000 was $0.3 million, compared with a net loss of $2.3 million in the first
quarter of 1999. These fees are expected to continue for the remaining quarters
of 2000 in amounts that are comparable to the first quarter of 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUES
NMHG Wholesale $ 429.3 $ 417.0
NMHG Retail 72.8 41.7
NMHG Eliminations (28.3) (20.2)
-------- --------
NMHG Consolidated 473.8 438.5
Housewares 127.9 111.4
NACoal 71.5 63.6
-------- --------
$ 673.2 $ 613.5
======== ========
GROSS PROFIT
NMHG Wholesale $ 72.9 $ 73.4
NMHG Retail 14.3 10.5
NMHG Eliminations .2 (.4)
-------- --------
NMHG Consolidated 87.4 83.5
Housewares 21.5 19.7
NACoal 11.3 12.5
-------- --------
$ 120.2 $ 115.7
======== ========
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------
2000 1999
------- -------
<S> <C> <C>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 45.5 $ 42.6
NMHG Retail 17.3 13.1
NMHG Eliminations (.1) ---
------- -------
NMHG Consolidated 62.7 55.7
Housewares 21.2 18.9
NACoal 3.1 3.3
NACCO and Other 2.4 2.6
------- -------
$ 89.4 $ 80.5
======= =======
AMORTIZATION OF GOODWILL
NMHG Wholesale $ 2.9 $ 2.9
NMHG Retail .3 .1
------- -------
NMHG Consolidated 3.2 3.0
Housewares .8 .8
------- -------
$ 4.0 $ 3.8
======= =======
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 24.5 $ 27.9
NMHG Retail (3.3) (2.7)
NMHG Eliminations .3 (.4)
------- -------
NMHG Consolidated 21.5 24.8
Housewares (.5) ---
NACoal 8.2 9.2
NACCO and Other (2.4) (2.6)
------- -------
$ 26.8 $ 31.4
======= =======
OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION
NMHG Wholesale $ 27.4 $ 30.8
NMHG Retail (3.0) (2.6)
NMHG Eliminations .3 (.4)
------- -------
NMHG Consolidated 24.7 27.8
Housewares .3 .8
NACoal 8.2 9.2
NACCO and Other (2.4) (2.6)
------- -------
$ 30.8 $ 35.2
======= =======
INTEREST EXPENSE
NMHG Wholesale $ (3.4) $ (4.2)
NMHG Retail (1.0) (.1)
NMHG Eliminations (.5) ---
------- -------
NMHG Consolidated (4.9) (4.3)
Housewares (1.6) (1.4)
NACoal --- (.2)
NACCO and Other (.2) (.2)
Eliminations .2 .2
------- -------
(6.5) (5.9)
Project mining subsidiaries (4.2) (4.3)
------- -------
$ (10.7) $ (10.2)
======= =======
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
2000 1999
------- -------
<S> <C> <C>
INTEREST INCOME
NMHG Wholesale $ .3 $ 1.6
NMHG Retail --- (.7)
NMHG Eliminations .1 ---
------- -------
NMHG Consolidated .4 .9
NACoal .2 .1
Eliminations (.2) (.2)
------- -------
.4 .8
Project mining subsidiaries --- .1
------- -------
$ .4 $ .9
======= =======
OTHER-NET, INCOME (EXPENSE), EXCLUDING INTEREST INCOME
NMHG Wholesale $ (3.5) $ (.8)
NMHG Retail --- (.2)
NMHG Eliminations --- (.1)
------- -------
NMHG Consolidated (3.5) (1.1)
Housewares (.6) ---
NACoal (.2) (.2)
NACCO and Other 2.3 ---
------- -------
$ (2.0) $ (1.3)
======= =======
PROVISION FOR INCOME TAXES
NMHG Wholesale $ 7.4 9.8
NMHG Retail (1.3) (1.3)
NMHG Eliminations (.1) (.1)
------- -------
NMHG Consolidated 6.0 8.4
Housewares (1.1) (.6)
NACoal .7 .9
NACCO and Other --- (.8)
------- -------
$ 5.6 $ 7.9
======= =======
NET INCOME (LOSS)
NMHG Wholesale $ 10.8 $ 14.9
NMHG Retail (3.0) (2.4)
NMHG Eliminations --- (.4)
------- -------
NMHG Consolidated 7.8 12.1
Housewares (1.6) (.8)
NACoal 3.3 2.7
NACCO and Other (.3) (2.3)
------- -------
$ 9.2 $ 11.7
======= =======
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG Wholesale $ 10.3 $ 9.3
NMHG Retail 3.2 2.1
------- -------
NMHG Consolidated 13.5 11.4
Housewares 4.6 4.1
NACoal .7 .8
NACCO and Other --- .1
------- -------
18.8 16.4
Project mining subsidiaries 7.0 7.1
------- -------
$ 25.8 $ 23.5
======= =======
</TABLE>
<PAGE>
FINANCIAL SUMMARY - continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------
2000 1999
------- -------
<S> <C> <C>
CAPITAL EXPENDITURES
NMHG Wholesale $ 11.4 $ 8.8
NMHG Retail 4.8 1.2
NMHG Eliminations --- (.3)
------- -------
NMHG Consolidated 16.2 9.7
Housewares 5.9 2.2
NACoal 1.5 1.5
NACCO and Other .1 ---
------- -------
23.7 13.4
Project mining subsidiaries .5 2.6
------- -------
$ 24.2 $ 16.0
======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
---------- ----------
<S> <C> <C>
TOTAL ASSETS
NMHG Wholesale $ 1,091.1 $ 1,040.5
NMHG Retail 185.5 185.0
NMHG Eliminations (89.9) (46.9)
---------- ----------
NMHG Consolidated 1,186.7 1,178.6
Housewares 358.2 372.8
NACoal 69.9 64.3
NACCO and Other 43.7 47.6
---------- ----------
1,658.5 1,663.3
Project mining subsidiaries 384.3 392.0
---------- ----------
2,042.8 2,055.3
Consolidating Eliminations (41.5) (42.3)
---------- ----------
$ 2,001.3 $ 2,013.0
========== ==========
</TABLE>
<PAGE>
NMHG HOLDING CO.
- ----------------
NMHG designs, manufactures, sells and services forklift trucks and replacement
parts marketed worldwide under the Hyster(R) and Yale(R) brand names.
FINANCIAL REVIEW
The segment and geographic results of operations for NMHG were as follows for
the three months ended March 31:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Revenues
Wholesale
Americas $ 314.1 $ 299.0
Europe, Africa and Middle East 97.3 101.2
Asia-Pacific 17.9 16.8
-------- --------
429.3 417.0
-------- --------
Retail (net of eliminations)
Americas 7.9 5.3
Europe, Africa and Middle East 21.1 16.2
Asia-Pacific 15.5 ---
-------- --------
44.5 21.5
-------- --------
NMHG Consolidated $ 473.8 $ 438.5
======== ========
Operating profit (loss)
Wholesale
Americas $ 24.3 $ 24.1
Europe, Africa and Middle East .9 4.2
Asia-Pacific (.7) (.4)
-------- --------
24.5 27.9
-------- --------
Retail (net of eliminations)
Americas (.8) (1.2)
Europe, Africa and Middle East (2.4) (1.9)
Asia-Pacific .2 ---
-------- --------
(3.0) (3.1)
-------- --------
NMHG Consolidated $ 21.5 $ 24.8
======== ========
Operating profit (loss) excluding
goodwill amortization
Wholesale
Americas $ 26.2 $ 26.0
Europe, Africa and Middle East 1.8 5.2
Asia-Pacific (.6) (.4)
-------- --------
27.4 30.8
-------- --------
Retail (net of eliminations)
Americas (.6) (1.1)
Europe, Africa and Middle East (2.3) (1.9)
Asia-Pacific .2 ---
-------- --------
(2.7) (3.0)
-------- --------
NMHG Consolidated $ 24.7 $ 27.8
======== ========
NMHG Consolidated Net Income $ 7.8 $ 12.1
======== ========
</TABLE>
<PAGE>
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
First Quarter of 2000 Compared with First Quarter of 1999
NMHG Wholesale: The following schedule identifies the components of the changes
in revenues, operating profit and net income for the first quarter of 2000
compared with the first quarter of 1999:
<TABLE>
<CAPTION>
Operating Net
Revenues Profit Income
-------- ------ -------
<S> <C> <C> <C>
1999 $ 417.0 $ 27.9 $ 14.9
Increase (decrease) in 2000 from:
Unit volume 33.2 5.5 3.6
Sales mix (10.8) (3.6) (2.3)
Average sales price (5.6) (5.6) (3.6)
Service parts 6.0 2.1 1.4
Foreign currency (10.5) (2.2) (1.4)
Manufacturing cost --- 3.9 2.6
Other operating expense --- (3.5) (2.3)
Other income and expense --- --- (2.4)
Differences between effective
and statutory tax rates --- --- .3
-------- ------- -----
2000 $ 429.3 $ 24.5 $ 10.8
======== ======= ======
</TABLE>
Revenues increased as a result of unit and service parts volume growth,
primarily in the Americas, partially offset by unfavorable sales mix, adverse
currency effects and lower sales prices. Worldwide volume increased 9.7 percent
to 21,193 units shipped during the first quarter of 2000 from 19,319 units
shipped during the first quarter of 1999. Revenues declined as a result of
adverse currency effects primarily due to transactions denominated in a weakened
Euro. Lower sales prices were primarily the result of aggressive competition in
the Americas.
Operating profit improvements from volume growth and manufacturing efficiency
were more than offset by (i) a reduction in the average sales price, (ii) a
shift in mix to lower margin units and (iii) increased operating expenses,
primarily from increased product development and marketing efforts. Net income
declined as a result of these factors and due to a $1.0 million after-tax charge
from NACCO for services provided by the parent company.
The backlog level has increased to 23,200 units at March 31, 2000 from 21,500
units at December 31, 1999 and 18,100 units at March 31, 1999. The growth is
primarily due to increased incoming orders in the Americas.
<PAGE>
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
NMHG Retail: The following schedule identifies the components of the changes in
revenues, operating loss and net loss for the retail segment, which includes the
elimination of intercompany activity between NMHG Wholesale and NMHG Retail, for
the first quarter of 2000 compared with the first quarter of 1999:
<TABLE>
<CAPTION>
Operating Net
Revenues Loss Loss
--------- ------ -------
<S> <C> <C> <C>
1999 $ 21.5 $ (3.1) $ (2.8)
Increase (decrease) in 2000 from:
Current year acquisitions 2.4 --- ---
Prior year acquisitions 27.2 .2 (.3)
Comparable dealerships:
Unit volume and sales mix 5.4 .7 .5
Average sales price (.5) (.5) (.3)
Foreign currency (3.4) .3 .2
Operating expenses --- (1.3) (.8)
Other income and expense --- --- .2
Eliminations between Wholesale and Retail (8.1) .7 .3
------- ------ -------
2000 $ 44.5 $ (3.0) $ (3.0)
======= ====== =======
</TABLE>
Revenues increased primarily due to acquisitions of retail dealerships combined
with volume growth from comparable dealerships, partially offset by lower sales
prices, adverse currency effects and an increase in the elimination of
intercompany shipments from NMHG Wholesale to NMHG Retail. Operating loss and
net loss were comparable to the prior year first quarter due to continued
integration, interest, amortization and administrative costs necessary to
support NMHG Retail.
NMHG HOLDING CO.
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three months ended March 31 are as
follows:
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Interest expense
Wholesale $ (3.4) $ (4.2)
Retail (1.0) (.1)
Eliminations (.5) ---
------- -------
$ (4.9) $ (4.3)
======= =======
Other-net
Wholesale $ (3.2) $ .8
Retail --- (.9)
Eliminations .1 (.1)
------- -------
$ (3.1) $ (.2)
======= =======
Effective tax rate
Wholesale 41.3% 40.0%
Retail (including eliminations) (31.8)% (33.3)%
Consolidated 44.4% 41.4%
</TABLE>
<PAGE>
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
Interest expense increased for both NMHG Consolidated and NMHG Retail for the
three months ended March 31, 2000 as compared with the same period last year
primarily due to increased debt levels necessary to support acquisitions of
retail dealerships. NMHG Consolidated other-net expense for the three months
ended March 31, 2000 increased primarily due to the first quarter 2000 fee of
$1.6 million ($1.0 million after-tax) charged by NACCO, as discussed previously.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $11.4 million for NMHG
Wholesale and $4.8 million for NMHG Retail during the first three months of
2000. These capital expenditures include investments in information systems,
tooling for new products, machinery, equipment and lease and rental fleet. It is
estimated that NMHG's capital expenditures for the remainder of 2000 will be
approximately $45.0 million for NMHG Wholesale and $4.8 million for NMHG Retail.
These planned expenditures relate primarily to investments in information
systems, a plant expansion in Mexico, tooling for new products, machinery,
equipment and retail lease and rental fleet. During the remainder of 2000, NMHG
anticipates continuing investments in business acquisitions in amounts which may
exceed the amount invested in the first quarter of 2000 of $3.8 million. The
principal sources of financing for these capital expenditures and acquisitions
are internally generated funds and bank borrowings.
NMHG Wholesale has a $350.0 million revolving credit facility ("the Facility")
that expires June 2002, but may be extended annually, for one-year periods, with
the consent of the bank group. In addition, the Facility has performance-based
pricing which sets interest rates based upon the achievement of certain
financial performance targets. The Facility permits NMHG Wholesale to advance
funds to NMHG Retail. Advances from NMHG Wholesale are the primary sources of
financing for NMHG Retail. At March 31, 2000, NMHG had available $123.7 million
of its $350.0 million revolving credit facility. NMHG also has separate
facilities with availability, net of limitations, of $40.8 million, of which
$25.3 million was available at March 31, 2000 and maintains additional
uncommitted lines of credit, of which $21.6 million was available at March 31,
2000. 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>
NMHG HOLDING CO. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NMHG's capital structure is presented below:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
-------- --------
<S> <C> <C>
Total net tangible assets $ 378.5 $ 374.0
Advances to parent company 10.0 10.0
Goodwill at cost 479.9 478.7
-------- --------
Net assets before goodwill amortization 868.4 862.7
Accumulated goodwill amortization (123.4) (119.2)
Total debt (269.1) (270.7)
Minority Interest (3.8) (4.1)
-------- --------
Stockholders' equity $ 472.1 $ 468.7
======== ========
Debt to total capitalization 36% 36%
</TABLE>
The increase in net tangible assets of $4.5 million is primarily due to
acquisitions of retail dealerships, which increased net tangible assets by
approximately $3.0 million.
<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 months ended March 31:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Revenues $ 127.9 $ 111.4
Operating loss $ (.5) $ ---
Operating profit excluding
goodwill amortization $ .3 $ .8
Net loss $ (1.6) $ (.8)
</TABLE>
First Quarter of 2000 Compared with First Quarter of 1999
The following schedule identifies the components of the changes in revenues,
operating loss and net loss for the first quarter of 2000 compared with the
first quarter of 1999:
<TABLE>
<CAPTION>
Operating Net
Revenues Loss Loss
-------- ---- ------
<S> <C> <C> <C>
1999 $ 111.4 $ --- $ (.8)
Increase (decrease) in 2000 from:
Unit volume and sales mix 18.2 5.8 3.8
Average sales price (3.5) (3.5) (2.3)
Retail sales 1.8 .1 ---
Manufacturing cost --- (1.2) (.8)
Other operating expense --- (1.7) (1.1)
Other income and expense --- --- (.5)
Differences between effective
and statutory tax rates --- --- .1
-------- ------ -----
2000 $ 127.9 $ (.5) $ (1.6)
======== ====== ======
</TABLE>
<PAGE>
NACCO HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Housewares' revenues improved in the first quarter of 2000 primarily due to unit
volume growth at HB*PS, especially for indoor grills, blenders and slow cookers.
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 first quarter of 2000 as
compared with the first quarter of 1999 due to increased competition.
Manufacturing costs increased primarily due to (i) increased transportation
costs and (ii) continued start-up expenses associated with the new consolidated
distribution center in Memphis. Other operating expenses increased primarily due
to (i) development costs associated with the GE-brand products to be sold to
Wal*Mart beginning later in 2000 and (ii) increased general and administrative
expenses, partially offset by gains from the sale of assets. Net income declined
as a result of the factors affecting operating profit and a $0.4 million
after-tax charge from NACCO for services provided by the parent company.
KCI's revenues and net loss improved slightly in the first quarter of 2000 as
compared with the first quarter of 1999, as a result of an increase in the
number of customer transactions and improved gross margins. KCI operated 150
stores at March 31, 2000 compared with 143 stores at the end of the first
quarter of 1999.
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three months ended March 31 are as
follows:
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Interest expense $ (1.6) $ (1.4)
Other-net (.6) ---
------- -------
$ (2.2) $ (1.4)
======= =======
</TABLE>
Effective tax rate 40.7% 42.9%
The increase in Other-net expense is due to the first quarter 2000 fee of $0.6
million ($0.4 million after-tax) charged by NACCO, as discussed previously.
LIQUIDITY AND CAPITAL RESOURCES
Housewares' expenditures for property, plant and equipment were $5.9 million
during the first three months of 2000 and are estimated to be $25.4 million for
the remainder of 2000. These planned capital expenditures are primarily for
tooling and equipment designed for new products, including the GE-brand products
to be sold to Wal*Mart, as well as tooling and equipment intended to reduce
manufacturing costs and increase efficiency. These expenditures are funded
primarily from internally generated funds and short-term borrowings.
<PAGE>
NACCO HOUSEWARES GROUP - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
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 March 31, 2000, HB*PS had $55.7 million available under this facility. In
addition, HB*PS has separate uncommitted facilities that permitted $16.2 million
of additional borrowings at March 31, 2000.
The HB*PS Facility permits HB*PS to advance up to $10.0 million to KCI. Advances
from HB*PS are the primary sources of financing for KCI. 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>
MARCH 31 DECEMBER 31
2000 1999
-------- --------
<S> <C> <C>
Total net tangible assets $ 184.7 $ 183.4
Goodwill at cost 123.5 123.5
-------- --------
Net assets before goodwill amortization 308.2 306.9
Accumulated goodwill amortization (34.4) (33.6)
Total debt (112.7) (109.4)
-------- --------
Stockholder's equity $ 161.1 $ 163.9
======== ========
Debt to total capitalization 41% 40%
</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 1.9 billion tons, with 1.0 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. This joint venture, in which
NACoal has a 25 percent interest, was formed to develop and mine lignite at the
Red Hills lignite mine near Ackerman, Mississippi. Development of the mine site
began in 1998 and has continued through the first quarter of 2000. Initial
production is expected to begin during the fourth quarter of 2000. NACoal
accounts for its minority ownership in the Mississippi Lignite Mining Company
using the equity method of accounting.
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 pre-tax 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 months ended March 31:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Coteau Properties 4.4 4.3
Falkirk Mining 2.0 1.8
Sabine Mining 1.0 .5
San Miguel .6 .8
Red River Mining .1 .1
--- ---
Total Lignite 8.1 7.5
=== ===
</TABLE>
The Florida dragline operations delivered 1.9 million and 2.1 million cubic
yards of limerock in the three months ended March 31, 2000 and March 31, 1999,
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 nine months ended March 31:
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Revenues
Project mines $ 63.2 $ 55.0
Other mining operations 7.9 8.1
------- -------
71.1 63.1
Royalties and other .4 .5
------- -------
$ 71.5 $ 63.6
======= =======
Income before taxes
Project mines $ 6.8 $ 6.5
Other mining operations (0.7) .6
------- -------
Total from operating mines 6.1 7.1
Royalties and other income, net .3 .4
Other operating expenses (2.4) (2.7)
------- -------
4.0 4.8
Provision for taxes .7 .9
------- -------
Income before cumulative effect of
accounting change 3.3 3.9
Cumulative effect of accounting change --- (1.2)
------- -------
Net income $ 3.3 $ 2.7
======= =======
</TABLE>
First Quarter of 2000 Compared with First Quarter of 1999
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the first quarter of 2000 compared with
the first quarter of 1999:
<TABLE>
<CAPTION>
Income
Before Net
Revenues Taxes Income
------- ------ ------
<S> <C> <C> <C>
1999 $ 63.6 $ 4.8 $ 2.7
Increase (decrease) in 2000 from:
Project mines
Tonnage volume 12.5 .9 .6
Pass-through costs (3.7) --- ---
Agreed profit per ton (.6) (.6) (.4)
Other mining operations
Tonnage volume (.4) (.4) (.3)
Average selling price .2 .2 .1
Operating costs --- (1.1) (.7)
------- ------ ------
Changes from operating mines 8.0 (1.0) (.7)
Royalties and other income, net (.1) (.1) (.1)
Other operating expenses --- .3 .2
Cumulative effect of accounting change --- --- 1.2
------- ------ ------
2000 $ 71.5 $ 4.0 $ 3.3
======= ====== ======
</TABLE>
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Revenues for the first quarter of 2000 increased as compared with the first
quarter of 1999 primarily due to increased tonnage volume at each of the project
mines, partially reduced by lower pass-through costs at Sabine. Increased
tonnage volume in the first quarter of 2000 was the result of higher overall
customer requirements, compared with the first quarter of 1999, when outages
occurred at two customer power plants.
Income before taxes for the first quarter of 2000 declined as compared with the
first quarter of 1999 primarily due to increased maintenance and fuel costs at
San Miguel. Net income in the first quarter of 1999 included the recognition of
an after-tax cumulative effect charge of $1.2 million for mine start-up costs
previously capitalized. Excluding this charge, net income declined primarily due
to the increased costs at the San Miguel mine.
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three months ended March 31 are as
follows:
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Interest expense
Project mining subsidiaries $ (4.2) $ (4.3)
Other mining operations --- (.2)
------- -------
$ (4.2) $ (4.5)
======= =======
Other-net
Project mining subsidiaries $ .1 $ .1
Other mining operations (.1) (.1)
------- -------
$ --- $ ---
======= =======
Effective tax rate 17.5% 18.8%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $2.0 million during the
first three months of 2000. It is estimated that NACoal's capital expenditures
for the remainder of 2000 will be $29.4 million, of which $29.2 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 three months of 2000, NACoal invested $2.9 million in the
Mississippi Lignite Mining Company.
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
annually for one additional year with the consent of the bank group. NACoal had
$27.0 million of its revolving credit facility available at March 31, 2000.
<PAGE>
THE NORTH AMERICAN COAL CORPORATION - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
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.
NACoal's capital structure, excluding the project mining subsidiaries, is
presented below:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
------- -------
<S> <C> <C>
Investment in project mining subsidiaries $ 4.0 $ 3.7
Other net tangible assets 39.6 32.0
------- -------
Net tangible assets 43.6 35.7
Advances to parent company 5.9 2.7
Debt related to parent advances (5.9) (2.7)
Other debt (17.1) (12.5)
------- -------
Total debt (23.0) (15.2)
------- -------
Stockholder's equity $ 26.5 $ 23.2
======= =======
Debt to total capitalization 46% 40%
</TABLE>
The increase in Other net tangible assets is primarily due to a $2.9 million
increase in the investment in the Mississippi Lignite joint venture and a $4.8
million reduction in accounts payable and intercompany payables. 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
months ended March 31:
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Revenues $ --- $ ---
Operating loss $ (2.4) $ (2.6)
Other income (expense), net $ 2.1 $ (.2)
Net loss $ (.3) $ (2.3)
</TABLE>
During the first quarter of 2000, the parent company began charging fees for
services provided to the operating subsidiaries. Other income (expense), net and
net loss have been reduced by these fees which totaled $2.5 million pre-tax in
the first quarter of 2000.
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>
MARCH 31 DECEMBER 31
2000 1999
---------- ----------
<S> <C> <C>
Total net tangible assets $ 610.1 $ 593.5
Goodwill at cost 603.4 602.2
---------- ----------
Net assets before goodwill amortization 1,213.5 1,195.7
Accumulated goodwill amortization (157.8) (152.8)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (404.8) (395.3)
Closed mine obligations (Bellaire), including the
United Mine Worker retirees' medical fund, net-of-tax (73.0) (73.9)
Minority interest (11.9) (11.5)
---------- ----------
Stockholders' equity $ 566.0 $ 562.2
========== ==========
Debt to total capitalization 41% 41%
</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 2000 and 1999. See
Item 3, "Quantitative and Qualitative Disclosures About Market Risk."
EURO CONVERSION
See the Company's 1999 Annual Report, which is incorporated by reference into
the Company's Form 10-K for the fiscal year ended December 31, 1999, 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 expects the lift truck industry to increase wholesale shipments in
2000 in all three geographic markets, Americas, Europe, and Asia-Pacific,
compared with 1999, as a result of worldwide economic growth. NMHG hopes to
improve product profitability in 2000 through the combination of a first quarter
across-the-board price increase in the Americas and ongoing cost reduction
programs. While NMHG expects to expand selectively its retail distribution
network in 2000, primarily in Europe and Asia-Pacific, NMHG's operational focus
will be on improving the profitability of its existing wholly owned dealerships.
However, NMHG may continue to incur losses in 2000 related to existing and newly
acquired dealerships and the elimination of intercompany profits.
Housewares: HB*PS expects to complete the transfer of production activities to
its Mexican facilities before the end of the year. HB*PS also expects increased
efficiency during the year at its Mexican manufacturing facilities and new
distribution center in Memphis. HB*PS anticipates continued start-up costs for
developing General Electric-brand products for Wal*Mart, with the first GE-brand
products expected to be introduced later in 2000. KCI expects to continue
focusing on increasing store sales and profitability, developing its Internet
business and testing its new Gadgets & More(R) store concept.
<PAGE>
OUTLOOK - continued
NACoal: NACoal expects that customer demand for lignite over the remaining nine
months of 2000 will be slightly above 1999 levels. Royalty income for the
remaining three quarters of 2000 is expected to be consistent with the first
quarter of 2000. NACoal also anticipates increased costs at its San Miguel mine
in 2000 compared with 1999, and continued expenses for the development of
international mining opportunities and the new Red Hills mine in Mississippi, in
which it owns a 25 percent interest. The Red Hills mine is expected to begin
production in the fourth quarter of 2000.
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
these 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) ability to acquire dealerships acceptable to NMHG, (8) costs
related to the integration of acquisitions and (9) increased competition,
foreign currency risk and/or operating costs resulting from the introduction of
the Euro.
Housewares: (1) delays or increased costs in the re-positioning of operations in
Mexico and/or in the completion of restructuring programs, (2) bankruptcy of or
loss of major retail customers or suppliers, (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 Housewares buys, operates and/or sells products, (5)
product liability or other litigation, warranty claims or other returns of
products, (6) increased competition, (7) increased costs or delays in the
development of the GE products to be sold to Wal*Mart and (8) 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, (2) weather or equipment problems that could
affect lignite deliveries to customers, (3) costs to pursue international
opportunities and (4) delays in the start-up of the Mississippi Lignite Mining
Company.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See pages 39, 45, 51 and 52 of the Company's 1999 Annual Report, which is
incorporated by reference into the Company's Form 10-K for the fiscal year ended
December 31, 1999, 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, 1999.
<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 32 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 first quarter of 2000.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NACCO Industries, Inc.
----------------------
(Registrant)
Date May 12, 2000 /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
(99.1) Other Exhibits Not Required To Otherwise Be Filed
(1)Comments of Alfred M. Rankin, Jr., Chairman,
President and Chief Executive Officer, at the NACCO
Industries, Inc. Annual Meeting of Stockholders May 10,
2000, is attached hereto as Exhibit 99.1.
*Numbered in accordance with Item 601 of Regulation S-K.
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<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-1-2000
<PERIOD-END> Mar-31-2000
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 279
<ALLOWANCES> 0
<INVENTORY> 410
<CURRENT-ASSETS> 760
<PP&E> 624
<DEPRECIATION> 634
<TOTAL-ASSETS> 2001
<CURRENT-LIABILITIES> 587
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 558
<TOTAL-LIABILITY-AND-EQUITY> 2001
<SALES> 673
<TOTAL-REVENUES> 673
<CGS> 553
<TOTAL-COSTS> 553
<OTHER-EXPENSES> 95
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 15
<INCOME-TAX> 6
<INCOME-CONTINUING> 9
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9
<EPS-BASIC> 1.13
<EPS-DILUTED> 1.13
</TABLE>
Comments of
Alfred M. Rankin, Jr.
Chairman, President and Chief Executive Officer
Annual Meeting of Stockholders
May 10, 2000
This morning I will summarize some of the key messages contained in my
letter in the 1999 NACCO Industries annual report and provide a perspective on
NACCO's first quarter and on NACCO's outlook. I want to emphasize that some of
my comments include forward looking statements. Factors that could cause actual
results to differ from these forward looking statements are described in
Management's Discussion and Analysis on page 38 of the annual report.
Despite record revenues of $2.6 billion, 1999 earnings fell sharply to
$53.1 million, compared with $102.3 million in 1998, a year which was by a very
long margin our best ever.
Several factors affected results in each business.
At NACCO Materials Handling Group, net income declined $51.4 million.
Changes in foreign currency exchange rates, including a strengthened yen and
weakened Euro, had a highly adverse impact on pricing and costs at NMHG's
wholesale operations, where net income was down $38.2 million. In addition, our
Greenville manufacturing facilities were shut down for 11 days due to flooding
associated with Hurricane Floyd. Further, as part of our efforts to strengthen
our wholesale market position, we incurred expenses in connection with acquiring
selected retail dealerships. These acquisitions and the associated eliminations
led to losses of $15.3 million for NMHG's retail operations in 1999, with much
of this related to acquisition costs and accounting expenses, as well as
start-up, integration and investment programs.
At NACCO Housewares Group, on the other hand, net income increased by
$6.0 million to a record $21.2 million despite expenses related to transferring
manufacturing to Mexico, the phase-in of a new distribution center and expenses
associated with developing products for the new Wal-Mart/General Electric brand
program.
At North American Coal, 1999 income decreased $3.8 million, reflecting
lower royalty payments, decreased lignite tons sold, due largely to several
customer power plant outages, increased costs at our San Miguel mine, and a $1.2
million charge required by a new accounting pronouncement to write off mine
start-up costs previously capitalized.
While many of these same factors continued to affect our businesses in
the first quarter of 2000, we have begun to see a positive upward trend,
especially compared with the fourth quarter of 1999 at NMHG and the first
quarter of 1999 at NACCO Housewares Group.
On the NMHG wholesale side, first quarter results improved by $2.2 million
over the fourth quarter of 1999. Our cost reduction programs continue to yield
significant tangible benefits. These programs in manufacturing include our Value
Improvement and Demand Flow Technology programs as well as our low-cost Mexican
component manufacturing plant, which is being expanded this year. We are also
developing new purchasing and component commonality programs, which we expect to
help reduce material and manufacturing costs in future years.
We are also dedicating more resources at NMHG to new product
development as part of our program to bring new products to market more quickly.
For example, in 1999 NMHG successfully introduced new 3.5 to 5.5 ton Yale(R) and
Hyster(R) counterbalanced lift trucks featuring improved performance, ergonomics
and ease of service. We also introduced new warehouse trucks, including reach
trucks and order pickers.
Looking forward, at the wholesale business we anticipate continued
strong demand worldwide for lift trucks -- indeed, stronger than in 1999 -- and
improved product mix in 2000. We are hopeful that our cost reduction strategies,
coupled with a first quarter 3 percent price increase in the Americas, a portion
of which appears to be holding at the retail level, will help mitigate the
impact of foreign currency valuation on profitability. However, currency
continues to remain a major issue this year with the Euro currently at a deep
low of 89 cents per Euro and the yen currently at a strong 109 to the dollar.
Our hedging programs are designed to mitigate short-term currency
fluctuations that affect purchased material costs, but not to offset the longer
term dramatic currency fluctuations that occurred in 1999. We are not assuming
currencies will improve. Rather, we are redoubling our cost reduction efforts.
On NMHG's retail side, we feel strongly that our strategy of acquiring
selected dealerships will have significant long-term benefits, especially for
increased volume on the wholesale side of the business. These acquisitions
should help improve market share in countries where we have a lower market
share, such as in Germany or France, and where either Hyster or Yale
individually have a lower market share, such as Yale in Holland and the UK.
First quarter 2000 results for NMHG's retail business also indicate a
positive trend. The loss in the first quarter of 2000 was $3.0 million, compared
with $7.2 million in the 4th quarter of 1999. And, while we expect to incur
losses in 2000, with the size dependent on the number of additional acquisitions
made during the year, we also expect to reduce retail operating losses over the
coming quarters.
At Hamilton Beach Proctor-Silex, our efforts to drive unit volume
growth have been very successful. Unit volume grew 8 percent in 1999 to 39.4
million units. Volume continued to increase in the first quarter of 2000, as
well. Significantly, much of this growth has been in the higher margin "better"
and "best" product categories.
The most significant event for NACCO Housewares Group in 1999 was
Wal-Mart's selection of Hamilton Beach/Proctor-Silex as its partner in
developing and producing a new line of General Electric branded appliances to be
sold exclusively at Wal-Mart later in 2000. This exciting program has very
significant implications for future volume and profit. We will be working
closely with Wal-Mart to realize the GE brand's potential in the small electric
appliance market.
During 1999 Hamilton Beach/Proctor-Silex continued moving manufacturing
operations to Mexico. We anticipate that these relocation programs will be
fundamentally completed before the end of the year and that efficiencies in
Mexico's new operations will improve throughout the year. In 1999, we also
opened a new distribution center in Memphis to serve our customers better, and
efficiencies are improving there as well. We anticipate substantial long-term
cost savings from these programs.
At Kitchen Collection, sales and margins are continuing to grow through
a multi-faceted strategy of ongoing marketing programs, additional factory
outlet stores, an enhanced e-commerce kitchen collection web site, and new store
formats, such as the Gadgets & More(R) store recently opened at the Mall of
America in Minnesota.
At North American Coal, our five operating mines continued to deliver a
consistent stream of earnings and cash flow in 1999. Development of the new Red
Hills lignite mine near Ackerman, Mississippi, focused on building the mine's
infrastructure. We own a 25 percent interest in this mine, which is a joint
venture with Phillips Coal Company. We expect to begin mining operations in the
fourth quarter of this year, with production eventually reaching 3 million tons
annually.
North American Coal's industry leadership in both environmental
protection and on-the-job safety was recognized with 6 awards in 1999 from
various local, state and national organizations. These awards are a strong
reaffirmation of our commitment to preserving the environment and protecting the
health and safety of our employees.
We expect North American Coal's operating mines to continue generating
steady income and substantial free cash flow in 2000. Royalty income related to
the underground mining which the company left over 10 years ago will likely
continue at its current low level over future quarters. We believe there are
significant opportunities for growth through joint ventures we are developing in
India and Turkey, and while progress is slower than we might wish, we hope to
finalize at least one of these power plant/mining projects sometime this year.
In summary, we are confident the programs in place at our operating
subsidiaries will enable them to achieve improved results later this year and in
the years ahead. The Wal-Mart-GE program at NACCO Housewares Group has the
potential for significant top and bottom line growth over the next several
years. NACCO Materials Handling Group's strengthening retail dealership network
with its prospects for increased wholesale market share should lead to sound
revenue and net income growth potential. And North American Coal's prospects
this year for financial closure on at least one of three international mining
projects are very encouraging. In addition, cost reduction programs should have
a significant impact at NMHG and Housewares as the year moves forward.
In closing, I want to emphasize that the overriding goal of NACCO
Industries management and our board of directors is delivering sound earnings
returns, and thus increased market value of our shares, to our stockholders over
the long term. At the current time, small capitalization companies in industries
such as ours are dramatically out of favor in the market. Our hope is that
eventually our current and prospective multiples will be more in line with
market multiples more fully and with the underlying value of our businesses. To
encourage this development, we are continuing an active program which outlines
the company's prospects to potential investors.
At this time I want particularly to welcome Dave Hoag to our board of
directors. Dave is chairman of the Federal Reserve Bank of Cleveland and the
retired chairman and chief executive officer of The LTV Corporation.
This concludes my formal remarks. I will be happy to answer any
questions you may have.
