SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 July 31, 2000:
6,524,337
Number of shares of Class B Common Stock outstanding at July 31, 2000:
1,644,526
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 2000 (Unaudited) and December 31, 1999
Unaudited Condensed Consolidated Statements of
Income for the Three and Six Months Ended June 30, 2000
and 1999
Unaudited Condensed Consolidated Statements of
Cash Flows for the Six Months Ended June 30, 2000 and
1999
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
PART I
Item 1 - Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
JUNE 30 DECEMBER 31
2000 1999
---------- ----------
(In millions)
ASSETS
Current Assets
Cash and cash equivalents $ 33.6 $ 36.2
Accounts receivable, net 289.7 292.2
Inventories 417.9 390.3
Prepaid expenses and other 44.5 53.5
---------- ----------
785.7 772.2
Property, Plant and Equipment, Net 624.2 625.4
Deferred Charges
Goodwill, net 442.1 449.4
Deferred costs and other 65.8 66.7
Deferred income taxes 25.8 29.2
---------- ----------
533.7 545.3
Other Assets 95.4 70.1
---------- ----------
Total Assets $ 2,039.0 $ 2,013.0
========== ==========
See notes to unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
JUNE 30 DECEMBER 31
2000 1999
---------- ----------
(In millions, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 261.1 $ 254.4
Revolving credit agreements 76.2 56.6
Current maturities of long-term debt 37.7 32.5
Accrued payroll 34.8 47.0
Other current liabilities 186.1 192.6
---------- ----------
595.9 583.1
Long-term Debt - not guaranteed by
the parent company 351.7 326.3
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 277.2 289.2
Self-insurance Reserves and Other 232.9 240.7
Minority Interest 11.5 11.5
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,524,127
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,
1,644,736 shares outstanding
(1999 - 1,647,428 shares outstanding) 1.6 1.6
Capital in excess of par value 3.5 2.7
Retained earnings 573.6 554.4
Accumulated other comprehensive income:
Foreign currency translation adjustment (15.4) (3.0)
---------- ----------
569.8 562.2
---------- ----------
Total Liabilities and Stockholders' Equity $ 2,039.0 $ 2,013.0
========== ==========
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
2000 1999 2000 1999
---------- ---------- ------------ ------------
(In millions, except per share data)
Revenues $ 697.3 $ 644.7 $ 1,370.5 $ 1,258.2
Cost of sales 570.6 520.6 1,123.6 1,018.4
---------- ---------- ------------ ------------
Gross Profit 126.7 124.1 246.9 239.8
Selling, general and administrative expenses 89.7 83.1 179.1 163.6
Amortization of goodwill 3.8 3.8 7.8 7.6
---------- ---------- ------------ ------------
Operating Profit 33.2 37.2 60.0 68.6
Other income (expense)
Interest expense (11.3) (10.6) (22.0) (20.8)
Other - net (.2) (.1) (1.8) (.5)
---------- ---------- ------------ ------------
(11.5) (10.7) (23.8) (21.3)
---------- ---------- ------------ ------------
Income Before Income Taxes, Minority
Interest and Cumulative Effect of
Accounting Change 21.7 26.5 36.2 47.3
Provision for income taxes 8.1 10.2 13.7 18.1
---------- ---------- ------------ ------------
Income Before Minority Interest and
Cumulative Effect of Accounting Change 13.6 16.3 22.5 29.2
Minority interest -- -- .3 --
---------- ---------- ------------ ------------
Income Before Cumulative Effect
of Accounting Change 13.6 16.3 22.8 29.2
Cumulative effect of accounting change
(net of $0.6 tax benefit) -- -- -- (1.2)
---------- ---------- ------------ ------------
Net Income $ 13.6 $ 16.3 $ 22.8 $ 28.0
========== ========== ============ ============
Comprehensive Income $ 5.7 $ 12.3 $ 10.4 $ 16.8
========== ========== ============ ============
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $ 1.67 $ 2.00 $ 2.79 $ 3.59
Cumulative effect of accounting change -- -- -- (.15)
---------- ---------- ------------ ------------
Net Income $ 1.67 $ 2.00 $ 2.79 $ 3.44
========== ========== ============ ============
Dividends per share $ .225 $ .215 $ .440 $ .420
========== ========== ============ ============
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
SIX MONTHS ENDED
JUNE 30
2000 1999
------- -------
(In millions)
Operating Activities
Net income $ 22.8 $ 28.0
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 51.3 47.8
Deferred income taxes 2.6 (1.6)
Minority interest (.3) --
Cumulative effect of accounting change -- 1.2
Other non-cash items (6.9) (1.3)
Working capital changes, excluding the effects of
business acquisitions:
Accounts receivable (4.1) (17.5)
Inventories (31.0) (7.4)
Other current assets 3.2 1.0
Accounts payable and other liabilities (1.6) (8.2)
------- -------
Net cash provided by operating activities 36.0 42.0
Investing Activities
Expenditures for property, plant and equipment (44.3) (33.2)
Proceeds from the sale of assets 11.7 1.8
Acquisitions of businesses, net of cash acquired (5.6) (41.0)
Investments in unconsolidated affiliates (6.9) (5.5)
Other - net .2 1.1
------- -------
Net cash used for investing activities (44.9) (76.8)
Financing Activities
Additions to long-term debt and revolving credit agreements 37.5 55.6
Reductions of long-term debt and revolving credit agreements (13.7) (.1)
Additions to obligations of project mining subsidiaries 26.2 9.0
Reductions of obligations of project mining subsidiaries (40.1) (21.5)
Financing of other short-term obligations -- (14.2)
Cash dividends paid (3.6) (3.4)
Other - net .3 2.0
------- -------
Net cash provided by financing activities 6.6 27.4
Effect of exchange rate changes on cash (.3) (3.6)
------- -------
Cash and Cash Equivalents
Decrease for the period (2.6) (11.0)
Balance at the beginning of the period 36.2 34.7
------- -------
Balance at the end of the period $ 33.6 $ 23.7
======= =======
See notes to unaudited condensed consolidated financial statements.
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 June 30, 2000 and the results of its
operations and cash flows for the three and six month periods ended June 30,
2000 and 1999 have been included.
Operating results for the six month period ended June 30, 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:
(Weighted Average Shares)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- -----
Basic common shares 8.168 8.155 8.165 8.145
Dilutive stock options -- -- -- .007
----- ----- ----- -----
Diluted common shares 8.168 8.155 8.165 8.152
===== ===== ===== =====
Note 3 - Inventories
Inventories are summarized as follows:
(UNAUDITED) (AUDITED)
JUNE 30 DECEMBER 31
2000 1999
-------- --------
Manufactured inventories:
Finished goods and service parts -
NMHG $ 101.7 $ 103.5
Housewares 79.0 46.4
-------- --------
180.7 149.9
Raw materials and work in process -
NMHG Wholesale 145.0 150.1
Housewares 19.6 19.5
-------- --------
164.6 169.6
-------- --------
Total manufactured inventories 345.3 319.5
Retail inventories:
NMHG Retail 33.1 30.0
Housewares 21.4 18.9
-------- --------
Total retail inventories 54.5 48.9
Coal - NACoal 8.9 9.6
Mining supplies - NACoal 21.8 22.4
-------- --------
Total inventories at FIFO 430.5 400.4
LIFO reserve -
NMHG (15.5) (13.2)
Housewares 2.9 3.1
-------- --------
(12.6) (10.1)
-------- --------
$ 417.9 $ 390.3
======== ========
The cost of certain manufactured and retail inventories has been determined
using the last-in, first-out (LIFO) method. At June 30, 2000 and December 31,
1999, 65 percent and 66 percent, respectively, 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 half of 2000, an additional $0.5 million was accrued for severance
payments to be made to approximately 40 employees and $1.5 million was expended
for severance payments made to approximately 200 employees and for related
benefits. As a result of this activity, the reserve for restructuring was
reduced to $1.7 million as of June 30, 2000.
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.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." This Statement amends the
accounting and reporting standards of SFAS No. 133 for certain derivative
instruments and hedging activities. The Company will adopt these Statements 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.
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 three and six
months ended June 30, 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 began charging fees to its operating subsidiaries for
services provided by the corporate headquarters, which represents most of the
parent company's operating expenses. In the three and six month periods ended
June 30, 2000, pre-tax fees of $2.6 million and $5.1 million, respectively, were
charged to the operating segments based on fees incurred on their behalf,
including services performed for each, as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2000
------------- -------------
NMHG Wholesale $ 1.7 $ 3.3
Housewares .7 1.3
NACoal .2 .5
------ ------
$ 2.6 $ 5.1
====== ======
Each of the segments has included this charge on the line Other-net. As a result
of these fees, the parent company recognized income before taxes of $0.1 million
for the three months ended June 30, 2000 as compared with a loss before taxes of
$2.5 million for the three months ended June 30, 1999 and recognized income
before taxes of $0.2 for the six months ended June 30, 2000 as compared with a
loss before taxes of $5.3 million for the same period in 1999. These fees are
expected to continue for the second half of 2000 in an amount that is comparable
to the first half of 2000.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
2000 1999 2000 1999
-------- ---------- ---------- ----------
REVENUES
NMHG Wholesale $ 440.9 $ 412.1 $ 870.2 $ 829.1
NMHG Retail 72.9 60.9 145.7 102.6
NMHG Eliminations (24.3) (20.4) (52.6) (40.6)
-------- ---------- ---------- ----------
NMHG Consolidated 489.5 452.6 963.3 891.1
Housewares 138.1 127.0 266.0 238.4
NACoal 69.7 65.0 141.2 128.6
NACCO and Other -- .1 -- .1
-------- ---------- ---------- ----------
$ 697.3 $ 644.7 $ 1,370.5 $ 1,258.2
======== ========== ========== ==========
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
GROSS PROFIT
NMHG Wholesale $ 74.1 $ 70.2 $ 147.0 $ 143.6
NMHG Retail 14.5 15.3 28.8 25.8
NMHG Eliminations -- (1.1) .2 (1.5)
-------- -------- -------- --------
NMHG Consolidated 88.6 84.4 176.0 167.9
Housewares 26.5 28.1 48.0 47.8
NACoal 11.6 11.6 22.9 24.1
-------- -------- -------- --------
$ 126.7 $ 124.1 $ 246.9 $ 239.8
======== ======== ======== ========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 42.7 $ 41.2 $ 88.2 $ 83.8
NMHG Retail 18.0 17.3 35.3 30.4
NMHG Eliminations (.2) -- (.3) --
-------- -------- -------- --------
NMHG Consolidated 60.5 58.5 123.2 114.2
Housewares 23.1 19.1 44.3 38.0
NACoal 3.5 3.0 6.6 6.3
NACCO and Other 2.6 2.5 5.0 5.1
-------- -------- -------- --------
$ 89.7 $ 83.1 $ 179.1 $ 163.6
======== ======== ======== ========
AMORTIZATION OF GOODWILL
NMHG Wholesale $ 2.9 $ 2.9 $ 5.8 $ 5.8
NMHG Retail .2 .2 .5 .3
-------- -------- -------- --------
NMHG Consolidated 3.1 3.1 6.3 6.1
Housewares .7 .7 1.5 1.5
-------- -------- -------- --------
$ 3.8 $ 3.8 $ 7.8 $ 7.6
======== ======== ======== ========
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 28.5 $ 26.1 $ 53.0 $ 54.0
NMHG Retail (3.7) (2.2) (7.0) (4.9)
NMHG Eliminations .2 (1.1) .5 (1.5)
-------- -------- -------- --------
NMHG Consolidated 25.0 22.8 46.5 47.6
Housewares 2.7 8.3 2.2 8.3
NACoal 8.1 8.6 16.3 17.8
NACCO and Other (2.6) (2.5) (5.0) (5.1)
-------- -------- -------- --------
$ 33.2 $ 37.2 $ 60.0 $ 68.6
======== ======== ======== ========
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
NMHG Wholesale $ 31.4 $ 29.0 $ 58.8 $ 59.8
NMHG Retail (3.5) (2.0) (6.5) (4.6)
NMHG Eliminations .2 (1.1) .5 (1.5)
-------- -------- -------- --------
NMHG Consolidated 28.1 25.9 52.8 53.7
Housewares 3.4 9.0 3.7 9.8
NACoal 8.1 8.6 16.3 17.8
NACCO and Other (2.6) (2.5) (5.0) (5.1)
-------- -------- -------- --------
$ 37.0 $ 41.0 $ 67.8 $ 76.2
======== ======== ======== ========
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
2000 1999 2000 1999
------- ------- ------- -------
INTEREST EXPENSE
NMHG Wholesale $ (3.4) $ (3.7) $ (6.8) $ (7.9)
NMHG Retail (.9) (.8) (1.9) (.9)
NMHG Eliminations (.8) .2 (1.3) .2
------- ------- ------- -------
NMHG Consolidated (5.1) (4.3) (10.0) (8.6)
Housewares (2.0) (1.6) (3.6) (3.0)
NACoal -- (.2) -- (.4)
NACCO and Other (.2) (.2) (.4) (.4)
Eliminations .2 .2 .4 .4
------- ------- ------- -------
(7.1) (6.1) (13.6) (12.0)
Project mining subsidiaries (4.2) (4.5) (8.4) (8.8)
------- ------- ------- -------
$ (11.3) $ (10.6) $ (22.0) $ (20.8)
======= ======= ======= =======
INTEREST INCOME
NMHG Wholesale $ .6 $ 1.2 $ .9 $ 2.8
NMHG Retail -- (.3) -- (1.0)
NMHG Eliminations (.1) (.1) -- (.1)
------- ------- ------- -------
NMHG Consolidated .5 .8 .9 1.7
NACoal .1 -- .3 .1
Eliminations (.2) (.2) (.4) (.4)
------- ------- ------- -------
.4 .6 .8 1.4
Project mining subsidiaries .1 .1 .1 .2
------- ------- ------- -------
$ .5 $ .7 $ .9 $ 1.6
======= ======= ======= =======
OTHER-NET, INCOME (EXPENSE)
NMHG Wholesale $ (1.8) $ (1.1) $ (5.3) $ (1.9)
NMHG Retail .1 .2 .1 --
NMHG Eliminations -- (.2) -- (.3)
------- ------- ------- -------
NMHG Consolidated (1.7) (1.1) (5.2) (2.2)
Housewares (1.4) (.4) (2.0) (.4)
NACoal (.5) .5 (.7) .3
NACCO and Other 2.9 .2 5.2 .2
------- ------- ------- -------
$ (.7) $ (.8) $ (2.7) $ (2.1)
======= ======= ======= =======
PROVISION FOR INCOME TAXES
NMHG Wholesale $ 9.5 $ 9.1 $ 16.9 $ 18.9
NMHG Retail (1.3) (.7) (2.6) (2.0)
NMHG Eliminations (.2) (.6) (.3) (.7)
------- ------- ------- -------
NMHG 8.0 7.8 14.0 16.2
Housewares (.3) 2.6 (1.4) 2.0
NACoal .6 .9 1.3 1.8
NACCO and Other (.2) (1.1) (.2) (1.9)
------- ------- ------- -------
$ 8.1 $ 10.2 $ 13.7 $ 18.1
======= ======= ======= =======
NET INCOME (LOSS)
NMHG Wholesale $ 14.7 $ 13.7 $ 25.5 $ 28.6
NMHG Retail (3.2) (2.4) (6.2) (4.8)
NMHG Eliminations (.5) (.6) (.5) (1.0)
------- ------- ------- -------
NMHG Consolidated 11.0 10.7 18.8 22.8
Housewares (.4) 3.7 (2.0) 2.9
NACoal 2.7 3.6 6.0 6.3
NACCO and Other .3 (1.7) -- (4.0)
------- ------- ------- -------
$ 13.6 $ 16.3 $ 22.8 $ 28.0
======= ======= ======= =======
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
2000 1999 2000 1999
------- ------- ------- -------
DEPRECIATION, DEPLETION AND
AMORTIZATION EXPENSE
NMHG Wholesale $ 10.2 $ 10.0 $ 20.5 $ 19.3
NMHG Retail 2.9 2.0 6.1 4.1
------- ------- ------- -------
NMHG Consolidated 13.1 12.0 26.6 23.4
Housewares 4.6 4.4 9.2 8.5
NACoal .7 .6 1.4 1.4
NACCO and Other .1 .1 .1 .2
------- ------- ------- -------
18.5 17.1 37.3 33.5
Project mining subsidiaries 7.0 7.2 14.0 14.3
------- ------- ------- -------
$ 25.5 $ 24.3 $ 51.3 $ 47.8
======= ======= ======= =======
CAPITAL EXPENDITURES
NMHG Wholesale $ 7.9 $ 8.5 $ 19.3 $ 17.3
NMHG Retail .7 1.8 5.5 3.0
NMHG Eliminations -- -- -- (.3)
------- ------- ------- -------
NMHG Consolidated 8.6 10.3 24.8 20.0
Housewares 5.4 4.0 11.3 6.2
NACoal -- 1.1 .5 2.6
NACCO and Other -- -- .1 --
------- ------- ------- -------
14.0 15.4 36.7 28.8
Project mining subsidiaries 6.1 1.8 7.6 4.4
------- ------- ------- -------
$ 20.1 $ 17.2 $ 44.3 $ 33.2
======= ======= ======= =======
JUNE 30 DECEMBER 31
2000 1999
---------- ----------
TOTAL ASSETS
NMHG Wholesale $ 1,133.5 $ 1,040.5
NMHG Retail 190.6 185.0
NMHG Eliminations (119.4) (46.9)
---------- ----------
NMHG Consolidated 1,204.7 1,178.6
Housewares 374.3 372.8
NACoal 65.3 64.3
NACCO and Other 45.6 47.6
---------- ----------
1,689.9 1,663.3
Project mining subsidiaries 381.5 392.0
---------- ----------
2,071.4 2,055.3
Consolidating Eliminations (32.4) (42.3)
---------- ----------
$ 2,039.0 $ 2,013.0
========== ==========
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 and six months ended June 30:
THREE MONTHS SIX MONTHS
------------------ -------------------
2000 1999 2000 1999
-------- -------- --------- --------
Revenues
Wholesale
Americas $ 321.6 $ 296.5 $ 635.7 $ 595.6
Europe, Africa and Middle East 102.4 100.6 199.7 201.8
Asia-Pacific 16.9 15.0 34.8 31.7
-------- -------- --------- --------
440.9 412.1 870.2 829.1
-------- -------- --------- --------
Retail (net of eliminations)
Americas 7.8 9.5 15.7 14.7
Europe, Africa and Middle East 25.1 18.0 46.2 34.3
Asia-Pacific 15.7 13.0 31.2 13.0
-------- -------- --------- --------
48.6 40.5 93.1 62.0
-------- -------- --------- --------
NMHG Consolidated $ 489.5 $ 452.6 $ 963.3 $ 891.1
======== ======== ========= ========
Operating profit (loss)
Wholesale
Americas $ 28.1 $ 22.1 $ 52.4 $ 46.2
Europe, Africa and Middle East 1.1 4.9 2.0 9.2
Asia-Pacific (.7) (.9) (1.4) (1.4)
-------- -------- --------- --------
28.5 26.1 53.0 54.0
-------- -------- --------- --------
Retail (net of eliminations)
Americas .1 .1 (.7) (1.1)
Europe, Africa and Middle East (3.4) (2.4) (5.8) (4.5)
Asia-Pacific (.2) (1.0) -- (.8)
-------- -------- --------- --------
(3.5) (3.3) (6.5) (6.4)
-------- -------- --------- --------
NMHG Consolidated $ 25.0 $ 22.8 $ 46.5 $ 47.6
======== ======== ========= ========
Operating profit (loss) excluding
goodwill amortization
Wholesale
Americas $ 30.1 $ 24.0 $ 56.3 $ 50.1
Europe, Africa and Middle East 2.0 5.4 3.8 11.0
Asia-Pacific (.7) (.4) (1.3) (1.3)
-------- -------- --------- --------
31.4 29.0 58.8 59.8
-------- -------- --------- --------
Retail (net of eliminations)
Americas -- .2 (.6) (.8)
Europe, Africa and Middle East (3.2) (2.3) (5.5) (4.3)
Asia-Pacific (.1) (1.0) .1 (1.0)
-------- -------- --------- --------
(3.3) (3.1) (6.0) (6.1)
-------- -------- --------- --------
NMHG Consolidated $ 28.1 $ 25.9 $ 52.8 $ 53.7
======== ======== ========= ========
NMHG Consolidated Net Income $ 11.0 $ 10.7 $ 18.8 $ 22.8
======== ======== ========= ========
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
Second Quarter of 2000 Compared with Second Quarter of 1999
NMHG Wholesale: The following schedule identifies the components of the changes
in revenues, operating profit and net income for the second quarter of 2000
compared with the second quarter of 1999:
Operating Net
Revenues Profit Income
-------- -------- ------
1999 $ 412.1 $ 26.1 $ 13.7
Increase (decrease) in 2000 from:
Unit volume 33.5 5.6 3.6
Sales mix .8 (3.4) (2.2)
Average sales price (2.2) (2.2) (1.4)
Service parts 5.4 1.4 .9
Foreign currency (8.7) (1.6) (1.0)
Manufacturing cost -- 4.4 2.9
Other operating expense -- (1.8) (1.2)
Other income and expense -- -- .2
Differences between effective
and statutory tax rates -- -- (.8)
-------- ------- -------
2000 $ 440.9 $ 28.5 $ 14.7
======== ======= =======
Revenues increased as a result of unit and service parts volume growth,
primarily in the Americas, partially offset by adverse currency effects and
lower sales prices. Worldwide volume increased 9.8 percent to 21,846 units
shipped during the second quarter of 2000 from 19,905 units shipped during the
second quarter of 1999. Adverse currency effects resulted primarily from
transactions denominated in a weakened Euro. Price declines in Europe due to
increased competition arising primarily from Euro-denominated competitors were
partially offset by price increases in the Americas.
Operating profit improvements from volume growth and manufacturing efficiency
were partially offset by (i) a shift in mix to lower margin units, (ii) a
reduction in the average sales price and (iii) increased operating expenses,
primarily from increased product development and marketing efforts. The increase
in operating expenses in the second quarter of 2000 as compared with the second
quarter of 1999 was partially offset by a reduction to the provision for product
liability, primarily due to recent improvements in historical trend rates.
Net income increased as a result of the above factors, partially offset by a
$1.0 million after-tax charge from NACCO for services provided by the parent
company.
The backlog level has decreased to 22,600 units at June 30, 2000 from 23,200
units at March 31, 2000 primarily due to a decrease in bookings in the second
quarter of 2000 as compared with the first quarter of 2000. The backlog level at
June 30, 2000 has increased as compared with the backlog level at June 30, 1999
of 18,000 units primarily due to increased incoming orders in the Americas
during the first six months of 2000.
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 second quarter of 2000 compared with the second quarter of 1999:
Operating Net
Revenues Loss Loss
-------- ---- ----
1999 $ 40.5 $ (3.3) $ (3.0)
Increase (decrease) in 2000 from:
Current year acquisitions 6.6 (.1) (.1)
Prior year acquisitions 7.3 .5 .3
Comparable dealerships:
Unit volume and sales mix 2.5 1.4 .9
Average sales price (2.1) (2.1) (1.4)
Foreign currency (2.4) -- --
Operating expenses -- (1.2) (.8)
Other income and expense -- -- (.2)
Eliminations between Wholesale and Retail (3.8) 1.3 .8
Differences between effective
and statutory tax rates -- -- (.2)
------- ------ ------
2000 $ 48.6 $ (3.5) $ (3.7)
======= ====== ======
Revenues increased primarily due to acquisitions of retail dealerships in Europe
and Asia-Pacific 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 increased as compared with the prior year second
quarter primarily due to increased pricing competition in Europe and continued
integration, interest, amortization and administrative costs necessary to
support NMHG Retail. At June 30, 2000, NMHG Retail owned and consolidated 26
dealerships as compared with 11 dealerships at June 30, 1999.
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
First Six Months of 2000 Compared with First Six Months of 1999
NMHG Wholesale: The following schedule identifies the components of the changes
in revenues, operating profit and net income for the first six months of 2000
compared with the first six months of 1999:
Operating Net
Revenues Profit Income
-------- ------ ------
1999 $ 829.1 $ 54.0 $ 28.6
Increase (decrease) in 2000 from:
Unit volume 66.7 11.1 7.2
Sales mix (10.0) (7.0) (4.6)
Average sales price (7.8) (7.8) (5.1)
Service parts 11.4 3.5 2.3
Foreign currency (19.2) (3.8) (2.5)
Manufacturing cost -- 8.3 5.4
Other operating expense -- (5.3) (3.4)
Other income and expense -- -- (2.2)
Differences between effective
and statutory tax rates -- -- (.2)
-------- ------- -------
2000 $ 870.2 $ 53.0 $ 25.5
======== ======= =======
Revenues increased as a result of unit and service parts volume growth,
primarily in the Americas, partially offset by adverse currency effects,
unfavorable sales mix and lower sales prices. Worldwide volume increased 9.7
percent to 43,039 units shipped during the first half of 2000 from 39,224 units
shipped during the first half of 1999. Adverse currency effects resulted
primarily from transactions denominated in a weakened Euro. Lower sales prices
resulted from aggressive competition in both Europe and 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. Increased
operating expenses were partially offset by a reduction to the provision for
product liability for the six months ended June 30, 2000 as compared with the
same period in 1999. Net income declined as a result of these factors and due to
a $2.1 million after-tax charge from NACCO for services provided by the parent
company.
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 six months of 2000 compared with the first six months of 1999:
Operating Net
Revenues Loss Loss
-------- ---- ----
1999 $ 62.0 $ (6.4) $ (5.8)
Increase (decrease) in 2000 from:
Current year acquisitions 9.0 (.1) (.1)
Prior year acquisitions 34.5 .7 --
Comparable dealerships:
Unit volume and sales mix 7.9 2.1 1.4
Average sales price (2.6) (2.6) (1.7)
Foreign currency (5.8) .3 .2
Operating expenses -- (2.5) (1.6)
Other income and expense -- -- (.2)
Eliminations between Wholesale and Retail (11.9) 2.0 1.3
Differences between effective
and statutory tax rates -- -- (.2)
------- ------ ------
2000 $ 93.1 $ (6.5) $ (6.7)
======= ====== ======
Revenues increased primarily due to acquisitions of retail dealerships in Europe
and Asia-Pacific 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 increased as compared with the prior year due to
increased pricing competition in Europe and continued integration, interest,
amortization and administrative costs necessary to support NMHG Retail.
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
NMHG HOLDING CO.
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three and six months ended June 30
are as follows:
THREE MONTHS SIX MONTHS
----------------- -----------------
2000 1999 2000 1999
------- ------- ------- -------
Interest expense
Wholesale $ (3.4) $ (3.7) $ (6.8) $ (7.9)
Retail (.9) (.8) (1.9) (.9)
Eliminations (.8) .2 (1.3) .2
------- ------- ------- -------
$ (5.1) $ (4.3) $ (10.0) $ (8.6)
======= ======= ======= =======
Other-net
Wholesale $ (1.2) $ .1 $ (4.4) $ .9
Retail .1 (.1) .1 (1.0)
Eliminations (.1) (.3) -- (.4)
------- ------- ------- -------
$ (1.2) $ (.3) $ (4.3) $ (.5)
======= ======= ======= =======
Effective tax rate
Wholesale 39.7% 40.4% 40.4% 40.2%
Retail (including eliminations) 28.8% 30.2% 30.2% 31.8%
Consolidated 42.8% 42.9% 43.5% 42.1%
Interest expense increased for both the three and six month periods ended June
30, 2000 as compared with the same periods in 1999 primarily due to increased
debt levels. Other-net expense increased for the six months ended June 30, 2000
as compared with the prior year primarily due to the management fee of $3.3
million ($2.1 million after-tax) charged by NACCO, as discussed previously.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $19.3 million for NMHG
Wholesale and $5.5 million for NMHG Retail during the first half of 2000. These
capital expenditures include investments in information systems, tooling for new
products, machinery, equipment and retail lease and rental fleet. It is
estimated that NMHG's capital expenditures for the remainder of 2000 will be
$34.6 million for NMHG Wholesale and $2.4 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. In addition to these capital expenditures, during the
remainder of 2000, NMHG anticipates continuing investments in business
acquisitions in amounts which may exceed the amount invested in the first half
of 2000 of $5.6 million. The principal sources of financing for these capital
expenditures and acquisitions are internally generated funds and bank
borrowings.
NMHG HOLDING CO. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
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 June 30, 2000, NMHG had available $108.1 million
of its $350.0 million revolving credit facility. NMHG also has separate
facilities with availability, net of limitations, of $50.0 million, of which
$24.1 million was available at June 30, 2000 and maintains additional
uncommitted lines of credit, of which $13.3 million was available at June 30,
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.
NMHG's capital structure is presented below:
JUNE 30 DECEMBER 31
2000 1999
-------- --------
Total net tangible assets $ 418.3 $ 374.0
Advances to parent company 3.0 10.0
Goodwill at cost 481.2 478.7
-------- --------
Net assets before goodwill amortization 902.5 862.7
Accumulated goodwill amortization (127.4) (119.2)
Total debt (307.1) (270.7)
Minority Interest (3.5) (4.1)
-------- --------
Stockholder's equity $ 464.5 $ 468.7
======== ========
Debt to total capitalization 40% 36%
The increase in net tangible assets of $44.3 million is primarily due to an
increase in accounts receivable of $31.4 million and acquisitions of retail
dealerships, which increased net tangible assets by approximately $8.9 million.
Accounts receivable increased primarily due to sales volume growth.
Total debt increased primarily to support retail acquisitions and growth in
current and long-term receivables.
Stockholder's equity decreased due to dividends made to the parent company and
adverse currency movements recognized in the accumulated foreign currency
translation adjustment, partially offset by net income.
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 six months ended June 30:
THREE MONTHS SIX MONTHS
------------------ -----------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenues $ 138.1 $ 127.0 $ 266.0 $ 238.4
Operating profit $ 2.7 $ 8.3 $ 2.2 $ 8.3
Operating profit excluding
goodwill amortization $ 3.4 $ 9.0 $ 3.7 $ 9.8
Net income (loss) $ (.4) $ 3.7 $ (2.0) $ 2.9
Second Quarter of 2000 Compared with Second Quarter of 1999
The following schedule identifies the components of the changes in revenues,
operating profit and net income (loss) for the second quarter of 2000 compared
with the second quarter of 1999:
Net
Operating Income
Revenues Profit (Loss)
-------- ------ ------
1999 $ 127.0 $ 8.3 $ 3.7
Increase (decrease) in 2000 from:
Unit volume and sales mix 13.5 4.5 2.9
Average sales price (3.6) (3.6) (2.3)
Retail sales 1.2 (.1) (.1)
Manufacturing cost -- (3.0) (2.0)
Other operating expense -- (3.4) (2.2)
Other income and expense -- -- (.8)
Differences between effective
and statutory tax rates -- -- .4
-------- ------ ------
2000 $ 138.1 $ 2.7 $ (.4)
======== ====== ======
NACCO HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Housewares' revenues improved in the second quarter of 2000 primarily due to
unit volume growth at HB*PS, especially for contact grills, coffeemakers,
blenders and irons. However, increased operating profit from volume growth was
completely offset by price reductions and increased manufacturing and other
operating costs. The decline in the average sales price continued in the second
quarter of 2000 as compared with the second quarter of 1999 due to increased
competition. Manufacturing costs increased primarily due to increased cost of
petroleum-based materials and increased fuel costs for transportation. Other
operating expenses increased primarily due to (i) development costs associated
with GE-brand products to be sold to Wal*Mart beginning later in 2000 and (ii)
an accrual for severance payments to be made to the final group of employees at
the Mt. Airy, NC facility. 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 increased in the second quarter of 2000 as compared with the
second quarter of 1999 as a result of increased customer transactions. KCI
operated 151 stores at June 30, 2000 compared with 143 stores at the end of the
second quarter of 1999.
First Six Months of 2000 Compared with First Six Months of 1999
The following schedule identifies the components of the changes in revenues,
operating profit and net income (loss) for the first six months of 2000 compared
with the first six months of 1999:
Net
Operating Income
Revenues Profit (Loss)
-------- ------ ------
1999 $ 238.4 $ 8.3 $ 2.9
Increase (decrease) in 2000 from:
Unit volume and sales mix 31.6 10.2 6.7
Average sales price (7.0) (7.0) (4.6)
Retail sales 3.0 -- --
Manufacturing cost -- (4.2) (2.8)
Other operating expense -- (5.1) (3.2)
Other income and expense -- -- (1.5)
Differences between effective
and statutory tax rates -- -- .5
-------- ------- ------
2000 $ 266.0 $ 2.2 $ (2.0)
======== ======= ======
NACCO HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continues
Housewares' revenues improved in the first half of 2000 primarily due to unit
volume growth at HB*PS, especially for contact 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 decline in the average sales price continued in the second half of
2000 as compared with the second half of 1999 due to increased competition.
Manufacturing costs increased primarily due to (i) increased cost of
petroleum-based materials, (ii) increased fuel costs for transportation and
(iii) continued start-up expenses, primarily in the first quarter of 2000,
associated with the new consolidated distribution center in Memphis. Other
operating expenses increased primarily due to (i) development costs associated
with GE-brand products to be sold to Wal*Mart beginning later in 2000 and (ii)
an accrual for severance payments to be made to the final group of employees at
the Mt. Airy, NC facility. Net income declined as a result of the factors
affecting operating profit and an $0.8 million after-tax charge from NACCO for
services provided by the parent company.
KCI's revenues increased in the first half of 2000 as compared with the first
half of 1999 as a result of increased customer transactions.
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three and six months ended June 30
are as follows:
THREE MONTHS SIX MONTHS
----------------- -----------------
2000 1999 2000 1999
------- ------- ------- -------
Interest expense $ (2.0) $ (1.6) $ (3.6) $ (3.0)
Other-net (1.4) (.4) (2.0) (.4)
------- ------- ------- -------
$ (3.4) $ (2.0) $ (5.6) $ (3.4)
======= ======= ======= =======
Effective tax rate 42.9% 41.7% 41.2% 41.5%
The increase in Other-net expense is due to a foreign currency exchange loss
incurred in the second quarter of 2000 on receivables denominated in a weakened
Mexican peso and due to the management fee of $1.3 million ($0.8 million
after-tax) charged by NACCO in the first half of 2000, as discussed previously.
LIQUIDITY AND CAPITAL RESOURCES
Housewares' expenditures for property, plant and equipment were $11.3 million
during the first six months of 2000 and are estimated to be $19.6 million for
the remainder of 2000. These planned capital expenditures are primarily for
tooling and equipment designed for new products, including 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.
NACCO HOUSEWARES GROUP - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
HB*PS' credit agreement provides for a revolving credit facility (the "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 June 30, 2000, HB*PS had $42.3 million available under this facility. In
addition, HB*PS has separate uncommitted facilities that permitted $15.4 million
of additional borrowings at June 30, 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:
JUNE 30 DECEMBER 31
2000 1999
-------- --------
Total net tangible assets $ 201.9 $ 183.4
Goodwill at cost 123.5 123.5
-------- --------
Net assets before goodwill amortization 325.4 306.9
Accumulated goodwill amortization (35.2) (33.6)
Total debt (130.2) (109.4)
-------- --------
Stockholder's equity $ 160.0 $ 163.9
======== ========
Debt to total capitalization 45% 40%
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.
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 half of 2000. Initial
production is expected to begin gradually 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 and six months ended June 30:
THREE MONTHS SIX MONTHS
------------ ----------
2000 1999 2000 1999
---- ---- ---- ----
Coteau Properties 3.6 3.8 8.0 8.1
Falkirk Mining 1.8 1.3 3.8 3.1
Sabine Mining .4 1.0 1.4 1.5
Red River Mining .2 .1 .3 .2
San Miguel 1.0 1.0 1.6 1.8
--- --- ---- ----
Total Lignite 7.0 7.2 15.1 14.7
=== === ==== ====
The Florida dragline operations delivered 2.1 million and 4.0 million cubic
yards of limerock in the three and six months ended June 30, 2000, respectively.
This compares to 2.0 and 4.1 million cubic yards delivered during the three and
six months ended June 30, 1999, respectively.
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Revenues, income before taxes, provision for taxes and net income were as
follows for the three and six months ended June 30:
THREE MONTHS SIX MONTHS
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenues
Project mines $ 60.3 $ 56.8 $ 123.5 $ 111.8
Other mining operations 8.9 7.2 16.8 15.3
-------- -------- -------- --------
69.2 64.0 140.3 127.1
Royalties and other .5 1.0 .9 1.5
-------- -------- -------- --------
$ 69.7 $ 65.0 $ 141.2 $ 128.6
======== ======== ======== ========
Income before taxes
Project mines $ 5.8 $ 5.5 $ 12.6 $ 12.0
Other mining operations .1 .6 (.6) 1.2
-------- -------- -------- --------
Total from operating mines 5.9 6.1 12.0 13.2
Royalties and other income, net (.5) (.2) (.8) .2
Other operating expenses (2.1) (1.4) (3.9) (4.1)
-------- -------- -------- --------
3.3 4.5 7.3 9.3
Provision for taxes .6 .9 1.3 1.8
-------- -------- -------- --------
Income before cumulative effect of accounting
change 2.7 3.6 6.0 7.5
Cumulative effect of accounting change -- -- -- (1.2)
-------- -------- -------- --------
Net income $ 2.7 $ 3.6 $ 6.0 $ 6.3
======== ======== ======== ========
Second Quarter of 2000 Compared with Second Quarter of 1999
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the second quarter of 2000 compared with
the second quarter of 1999:
Income
Before Net
Revenues Taxes Income
-------- ------ ------
1999 $ 65.0 $ 4.5 $ 3.6
Increase (decrease) in 2000 from:
Project mines
Tonnage volume (2.8) (.3) (.2)
Pass-through costs 5.9 -- --
Agreed profit per ton .4 .6 .4
Other mining operations
Tonnage volume 1.5 1.5 1.0
Average selling price .2 .2 .1
Operating costs -- (2.2) (1.4)
------- ------ ------
Changes from operating mines 5.2 (.2) (.1)
Royalties and other income, net (.5) (.3) (.2)
Other operating expenses -- (.7) (.5)
Differences between effective and
statutory tax rates -- -- (.1)
------- ------ ------
2000 $ 69.7 $ 3.3 $ 2.7
======= ====== ======
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Revenues for the second quarter of 2000 increased as compared with the second
quarter of 1999 primarily due to increased tonnage volume at Falkirk and Red
River, partially offset by decreased tons at Sabine, and due to increased
pass-through costs at Coteau. Increased tonnage volume at Falkirk and Red River
during the second quarter of 2000 resulted from higher customer demand.
Decreased tonnage volume at Sabine was due to the customer's power plant outage.
Income before taxes for the second quarter of 2000 declined as compared with the
second quarter of 1999 primarily due to increased maintenance and fuel costs at
San Miguel and reduced royalty income.
First Six Months of 2000 Compared with First Six Months of 1999
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the first six months of 2000 as compared
with the first six months of 1999:
Income
Before Net
Revenues Taxes Income
-------- ------ ------
1999 $ 128.6 $ 9.3 $ 6.3
Increase (decrease) in 2000 from:
Project mines
Tonnage volume 4.2 1.0 .7
Agreed profit per ton (.1) (.4) (.3)
Pass-through costs 7.6 -- --
Other mining operations
Tonnage volume 1.1 1.1 .7
Average selling price .4 .4 .3
Operating costs -- (3.3) (2.1)
-------- ------- ------
Changes from operating mines 13.2 (1.2) (.7)
Royalties and other income, net (.6) (1.0) (.7)
Other operating expenses -- .2 .1
Cumulative effect of accounting change -- -- 1.2
Differences between effective and
statutory tax rates -- -- (.2)
-------- ------- ------
2000 $ 141.2 $ 7.3 $ 6.0
======== ======= ======
Revenues for the six months ended June 30, 2000 increased as compared with the
same period in 1999 primarily due to increased tonnage volume at Falkirk and Red
River and due to increased pass-through costs at Coteau and Sabine.
Income before taxes for the first half of 2000 declined as compared with the
first half of 1999 primarily due to increased maintenance and fuel costs at San
Miguel and reduced royalty income.
Net income in the first quarter of 1999 included the cumulative effect of an
accounting change to write-off previously capitalized start-up costs. Net income
in the first half of 2000 includes a $0.3 million after-tax charge from the
parent company. No similar parent company charges were made in the first half of
1999.
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three and six months ended June 30
are as follows:
THREE MONTHS SIX MONTHS
----------------- -----------------
2000 1999 2000 1999
------- ------- ------- -------
Interest expense
Project mining subsidiaries $ (4.2) $ (4.5) $ (8.4) $ (8.8)
Other mining operations -- (.2) -- (.4)
------- ------- ------- -------
$ (4.2) $ (4.7) $ (8.4) $ (9.2)
======= ======= ======= =======
Other-net
Project mining subsidiaries $ -- $ .1 $ .1 $ .2
Other mining operations (.3) .5 (.4) .4
------- ------- ------- -------
$ (.3) $ .6 $ (.3) $ .6
======= ======= ======= =======
Effective tax rate 16.7% 20.0% 17.1% 19.9%
The decrease in the effective tax rate for the three and six months ended June
30, 2000 as compared with the same periods in the prior year is primarily due to
a shift in mix of income at various rates.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $8.1 million during the
first half of 2000. It is estimated that NACoal's capital expenditures for the
remainder of 2000 will be $23.4 million, of which $23.0 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 half of 2000, NACoal invested $4.6 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
$42.3 million of its revolving credit facility available at June 30, 2000.
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.
THE NORTH AMERICAN COAL CORPORATION - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NACoal's capital structure, excluding the project mining subsidiaries, is
presented below:
JUNE 30 DECEMBER 31
2000 1999
------- -------
Investment in project mining subsidiaries $ 3.1 $ 3.7
Other net tangible assets 39.6 32.0
------- -------
Net tangible assets 42.7 35.7
Advances to (from) parent company (7.3) 2.7
Debt related to parent advances -- (2.7)
Other debt (7.7) (12.5)
------- -------
Total debt (7.7) (15.2)
------- -------
Stockholder's equity $ 27.7 $ 23.2
======= =======
Debt to total capitalization 22% 40%
The increase in Other net tangible assets is primarily due to a $4.6 million
increase in the investment in the Mississippi Lignite joint venture. Total debt
decreased due to advances received from the parent company.
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
six months ended June 30:
THREE MONTHS SIX MONTHS
------------ ----------
2000 1999 2000 1999
------ ------ ------ ------
Revenues $ -- $ .1 $ -- $ .1
Operating loss $ (2.6) $ (2.5) $ (5.0) $ (5.1)
Other income (expense), net $ 2.7 $ -- $ 4.8 $ (.2)
Net income (loss) $ .3 $ (1.7) $ -- $ (4.0)
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 $2.6 and $5.1 million
pre-tax in the three and six months ended June 30, 2000, respectively.
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:
JUNE 30 DECEMBER 31
2000 1999
---------- ----------
Total net tangible assets $ 656.5 $ 593.5
Goodwill at cost 604.7 602.2
---------- ----------
Net assets before goodwill amortization 1,261.2 1,195.7
Accumulated goodwill amortization (162.6) (152.8)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (445.0) (395.3)
Closed mine obligations (Bellaire), including the
United Mine Worker retirees' medical fund, net-of-tax (72.3) (73.9)
Minority interest (11.5) (11.5)
---------- ----------
Stockholders' equity $ 569.8 $ 562.2
========== ==========
Debt to total capitalization 43% 41%
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 from funds available from operating cash flows,
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 increased shipments during the second half of 2000, compared
with the second half of 1999, particularly in the Americas market, as a result
of a higher backlog due to strong demand for lift trucks. Ongoing cost reduction
programs are expected to have a greater impact in the second half of 2000.
However, the impact of these programs is likely to be reduced by continued
adverse currency rates affecting both revenues and costs. NMHG expects to focus
on improving the profitability of its existing wholly owned retail dealerships
in the second half of 2000. However, NMHG expects to continue incurring losses
related to existing and newly acquired dealerships and the elimination of
intercompany profits in the second half of the year.
Housewares: HB*PS expects to continue incurring start-up costs for developing
General Electric-branded products for Wal*Mart in the second half of 2000 and to
begin shipping these products in the third quarter of 2000. HB*PS also expects
to increase manufacturing production and efficiencies at its Mexican facilities,
improve operating efficiency at its Memphis distribution center, and complete
the shutdown of its Mt. Airy, North Carolina manufacturing facility in the
second half of 2000. However, results in the second half of 2000 could be
reduced by rising costs for petroleum-based resins used in manufacturing and
increased fuel costs used for transportation. KCI expects to continue focusing
on increasing store sales and profitability, developing its Internet business
and testing its new Gadgets & More(R) store concept.
OUTLOOK - continued
NACoal: NACoal expects continued development costs for the new Red Hills mine in
Mississippi, in which it owns a 25 percent interest, during the second half of
2000. Production at the Red Hills mine is expected to begin gradually in the
fourth quarter of 2000. North American Coal also anticipates continued increased
costs at its San Miguel mine in the second half of 2000, compared with 1999.
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) increased costs of raw
materials or sourced products, (4) changes in the sales price, product mix or
levels of consumer purchases of kitchenware and small electric appliances, (5)
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, (6) product liability or
other litigation, warranty claims or other returns of products, (7) increased
competition, (8) increased costs or delays in the development of the GE products
to be sold to Wal*Mart and (9) weather conditions or fuel prices that would
affect the number of customers visiting KCI stores.
NACoal: (1) weather conditions and other events that would change the level of
customers' lignite requirements, (2) weather or equipment problems that could
affect lignite deliveries to customers, (3) increased maintenance, fuel or other
similar costs, (4) costs to pursue international opportunities and (5) delays in
the start-up of the Mississippi Lignite Mining Company.
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.
Part II
Item 1 Legal Proceedings
None
Item 2 Change in Securities and Use of Proceeds
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security
holders at the Annual Meeting of Stockholders held May 10, 2000,
with the results indicated:
Outstanding Shares Entitled to Vote Number of Votes
----------------------------------- ---------------
Class A Common 6,519,282
Class B Common 16,472,090
---------------
22,991,372
===============
Item A. Election of twelve directors for the ensuing year.
Votes Votes
Director Nominee For Withheld Total
---------------- ---------- ------ ----------
Owsley Brown II 21,359,192 80,833 21,440,025
Robert M. Gates 21,357,072 82,953 21,440,025
Leon J. Hendrix, Jr 21,359,192 80,833 21,440,025
David H. Hoag 21,355,735 84,290 21,440,025
Dennis W. LaBarre 21,285,246 154,779 21,440,025
Richard de J. Osborne 21,355,710 84,315 21,440,025
Alfred M. Rankin, Jr 21,358,192 81,833 21,440,025
Ian M. Ross 21,358,320 81,705 21,440,025
John C. Sawhill 21,359,267 80,758 21,440,025
Britton T. Taplin 21,359,367 80,658 21,440,025
David F. Taplin 21,358,217 81,808 21,440,025
John F. Turben 21,359,417 81,608 21,440,025
Item B. Confirming the appointment of Arthur Andersen LLP as the
independent certified public accountants of the Company
for the current fiscal year.
For Against Abstain Total
---------- ----- ------ ----------
21,390,048 5,844 44,133 21,440,025
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 36 of this quarterly
report on Form 10-Q.
(b) Reports on Form 8-K. The Company did not file any reports
on Form 8-K during the second quarter of 2000.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NACCO Industries, Inc.
----------------------
(Registrant)
Date August 11, 2000 /s/ Kenneth C. Schilling
------------------------------ ------------------------------
Kenneth C. Schilling
Vice President and Controller
(Authorized Officer and Principal
Financial and Accounting Officer)
Exhibit Index
Exhibit
Number* Description of Exhibits
- ------- -----------------------
(27) Financial Data Schedule
*Numbered in accordance with Item 601 of Regulation S-K.