SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 October 31, 2000:
6,527,952
Number of shares of Class B Common Stock outstanding at October 31, 2000:
1,641,971
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2000 (Unaudited) and December 31, 1999
Unaudited Condensed Consolidated Statements of Income
for the Three Months and Nine Months Ended
September 30, 2000 and 1999
Unaudited Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended September 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
FINANCIAL INFORMATION
Item 1 - Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
SEPTEMBER 30 DECEMBER 31
2000 1999
---------- ----------
ASSETS (In millions)
Current Assets
Cash and cash equivalents $ 49.0 $ 36.2
Accounts receivable, net 307.7 292.2
Inventories 437.7 390.3
Prepaid expenses and other 52.4 53.5
---------- ----------
846.8 772.2
Property, Plant and Equipment, Net 625.3 625.4
Deferred Charges
Goodwill, net 440.4 449.4
Deferred costs and other 65.0 66.7
Deferred income taxes 21.9 29.2
---------- ----------
527.3 545.3
Other Assets 92.1 70.1
---------- ----------
Total Assets $ 2,091.5 $ 2,013.0
========== ==========
See notes to unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
SEPTEMBER 30 DECEMBER 31
2000 1999
---------- ----------
(In millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 263.3 $ 254.4
Revolving credit agreements 97.9 56.6
Current maturities of long-term debt 60.3 32.5
Accrued payroll 33.5 47.0
Other current liabilities 214.8 192.6
---------- ----------
669.8 583.1
Long-term Debt- not guaranteed by
the parent company 332.9 326.3
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 230.4 240.7
Minority Interest 11.0 11.5
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,525,867
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,
1,644,056 shares outstanding
(1999 - 1,647,428 shares outstanding) 1.6 1.6
Capital in excess of par value 3.5 2.7
Retained earnings 580.7 554.4
Accumulated other comprehensive income:
Foreign currency translation adjustment (25.6) (3.0)
---------- ----------
566.7 562.2
---------- ----------
Total Liabilities and Stockholders' Equity $ 2,091.5 $ 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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
2000 1999 2000 1999
---------- ---------- ------------ ------------
(In millions, except per share data)
Revenues $ 691.9 $ 614.3 $ 2,062.4 $ 1,872.5
Cost of sales 567.5 501.8 1,691.1 1,520.2
---------- ---------- ------------ ------------
Gross Profit 124.4 112.5 371.3 352.3
Selling, general and administrative expenses 90.4 84.1 269.5 247.7
Amortization of goodwill 3.9 3.8 11.7 11.4
---------- ---------- ------------ ------------
Operating Profit 30.1 24.6 90.1 93.2
Other income (expense)
Interest expense (12.1) (12.3) (34.1) (33.1)
Other - net (2.4) (.3) (4.2) (.8)
---------- ---------- ------------ ------------
(14.5) (12.6) (38.3) (33.9)
---------- ---------- ------------ ------------
Income Before Income Taxes, Minority
Interest, and Cumulative Effect
of Accounting Change 15.6 12.0 51.8 59.3
Provision for income taxes 6.4 4.6 20.1 22.7
---------- ---------- ------------ ------------
Income Before Minority Interest and
Cumulative Effect of Accounting
Change $ 9.2 $ 7.4 $ 31.7 $ 36.6
Minority interest (.3) (.4) -- (.4)
---------- ---------- ------------ ------------
Income Before Cumulative Effect of
Accounting Change $ 8.9 $ 7.0 $ 31.7 $ 36.2
Cumulative Effect of Accounting Change
(net of $0.6 tax benefit) -- -- -- (1.2)
---------- ---------- ------------ ------------
Net Income $ 8.9 $ 7.0 $ 31.7 $ 35.0
========== ========== ============ ============
Comprehensive Income $ (1.3) $ 11.9 $ 9.1 $ 28.7
========== ========== ============ ============
Basic and Diluted Earnings per Share:
Income Before Cumulative Effect of
Accounting Change $ 1.09 $ .86 $ 3.88 $ 4.45
Cumulative effect of accounting change (net
of tax benefit) -- -- -- (.15)
---------- ---------- ------------ ------------
Net Income $ 1.09 $ .86 $ 3.88 $ 4.30
========== ========== ============ ============
Dividends per share $ .225 $ .215 $ .665 $ .635
========== ========== ============ ============
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30
2000 1999
------- --------
(In millions)
Operating Activities
Net income $ 31.7 $ 35.0
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 77.3 76.5
Deferred income taxes .3 (.7)
Minority interest expense -- .4
Cumulative effect of accounting change -- 1.4
Other non-cash items (7.8) 1.4
Working Capital Changes, excluding the effects of business acquisitions:
Accounts receivable (29.4) (9.0)
Inventories (57.6) (45.6)
Other current assets 4.9 (4.6)
Accounts payable and other liabilities 31.5 22.8
------- --------
Net cash provided by operating activities 50.9 77.4
Investing Activities
Expenditures for property, plant and equipment (65.3) (58.1)
Proceeds from the sale of assets 12.9 1.8
Acquisitions of businesses, net of cash acquired (5.7) (66.2)
Investments in unconsolidated affiliates (8.7) (12.5)
Other - net (.4) 1.1
------- --------
Net cash used for investing activities (67.2) (133.9)
Financing Activities
Additions to long-term debt and revolving credit agreements 71.6 103.5
Reductions of long-term debt and revolving credit agreements (20.4) --
Additions to obligations of project mining subsidiaries 41.2 23.0
Reductions of obligations of project mining subsidiaries (57.3) (43.3)
Financing of other short-term obligations -- (17.2)
Cash dividends paid (5.4) (5.2)
Other - net .5 2.3
------- --------
Net cash provided by financing activities 30.2 63.1
Effect of exchange rate changes on cash (1.1) (.8)
------- --------
Cash and Cash Equivalents
Increase (decrease) for the period 12.8 5.8
Balance at the beginning of the period 36.2 34.7
------- --------
Balance at the end of the period $ 49.0 $ 40.5
======= ========
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 Industries, Inc. ("NACCO") and its majority owned
subsidiaries ("NACCO Industries, Inc. and Subsidiaries," or the "Company").
Intercompany accounts have been eliminated. 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 accounting
principles generally accepted in the United States for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the financial position of the Company as of September 30,
2000 and the results of its operations and cash flows for the three and nine
month periods ended September 30, 2000 and 1999 have been included.
Operating results for the nine month period ended September 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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ --------------
2000 1999 2000 1999
----- ----- ----- -----
Basic common shares 8.169 8.155 8.166 8.148
Dilutive stock options -- -- -- .005
----- ----- ----- -----
Diluted common shares 8.169 8.155 8.166 8.153
===== ===== ===== =====
Note 3 - Inventories
Inventories are summarized as follows:
(UNAUDITED) (AUDITED)
SEPTEMBER 30 DECEMBER 31
2000 1999
-------- --------
Manufactured inventories:
Finished goods and service parts -
NMHG $ 104.2 $ 103.5
Housewares 93.8 46.4
-------- --------
198.0 149.9
Raw materials and work in process -
NMHG Wholesale 148.2 150.1
Housewares 19.3 19.5
-------- --------
167.5 169.6
-------- --------
Total manufactured inventories 365.5 319.5
Retail inventories:
NMHG Retail 30.1 30.0
Housewares 22.9 18.9
-------- --------
Total retail inventories 53.0 48.9
Coal - NACoal 9.4 9.6
Mining supplies - NACoal 22.5 22.4
-------- --------
Total inventories at FIFO 450.4 400.4
LIFO reserve -
NMHG (15.5) (13.2)
Housewares 2.8 3.1
-------- --------
(12.7) (10.1)
-------- --------
$ 437.7 $ 390.3
======== ========
The cost of certain manufactured and retail inventories has been determined
using the last-in, first-out ("LIFO") method. At September 30, 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 nine months of 2000, an additional $0.5 million was accrued for
severance payments to be made to approximately 40 employees and $1.9 million was
expended for severance payments made to approximately 185 employees and for
related benefits. As a result of this activity, the reserve for restructuring
was reduced to $1.3 million as of September 30, 2000.
Note 5 - Accounting Standards Not Yet Adopted
In June 1998, the Financial Accounting Standards Board ("FASB") 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 does not expect the adoption to have a significant effect on
its financial statements.
In September 2000, the Emerging Issues Task Force ("EITF") reached a consensus
on Issue Number 00-10, "Accounting for Shipping and Handling Fees and Costs,"
which requires shipping and handling amounts billed to a customer to be
classified as revenue. In addition, the EITF's preference is to classify
shipping and handling costs as "cost of sales," but allows them to be classified
elsewhere, for example "selling, general and administration expense," provided
both the amount and the line item are disclosed. This consensus is required to
be adopted in the fourth quarter of 2000.
For certain shipping and handling fees, the Company nets the charge to the
customer with the cost incurred within its statement of operations on the line
"cost of sales." In the fourth quarter of 2000, the Company will change this
method of reporting to comply with this new consensus. The Company estimates
that an annual amount of approximately $35.0 million will be reclassified from
cost of sales to revenues.
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.
Note 7 - Subsequent Event
On October 11, 2000, NACoal acquired certain assets from Phillips Coal Company,
including its 75 percent joint venture interest in Mississippi Lignite Mining
Company, its 50 percent joint venture interest in Red River Mining Company and
640 million tons of undeveloped lignite reserves in Texas, Louisiana,
Mississippi and Tennessee. The purchase price for the assets acquired was
approximately $128.0 million and was financed with a new 5-year, $175.0 million
credit facility that includes a $60.0 million revolving line of credit and a
$115.0 million term loan. As a result of the acquisition, NACoal now owns 100
percent of both Mississippi Lignite Mining Company and Red River Mining Company.
The acquisition will be accounted for using the purchase method of accounting
and is not expected to have a significant effect on the Company's financial
statements in 2000.
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.
NMHG Wholesale derives a portion of its revenues from transactions with NMHG
Retail. The amount of these revenues, which are 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 represent most of the
parent company's operating expenses. In the three and nine month periods ended
September 30, 2000, pre-tax fees of $2.5 million and $7.6 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 NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------ ------------------
NMHG Wholesale $ 1.6 $ 4.9
Housewares .6 1.9
NACoal .3 .8
------ ------
$ 2.5 $ 7.6
====== ======
Each of the segments has included this charge on the line Other-net. As a result
of these fees, the parent company recognized a loss before taxes of $0.2 million
for the three months ended September 30, 2000 as compared with a loss before
taxes of $2.4 million for the three months ended September 30, 1999 and
recognized a loss before taxes of $0.4 for the nine months ended September 30,
2000 as compared with a loss before taxes of $8.3 million for the same period in
1999.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
2000 1999 2000 1999
-------- ---------- ---------- ----------
REVENUES
NMHG Wholesale $ 406.4 $ 356.9 $ 1,276.6 $ 1,186.0
NMHG Retail 67.8 55.3 213.5 157.9
NMHG Eliminations (18.6) (21.1) (71.2) (61.7)
-------- ---------- ---------- ----------
NMHG Consolidated 455.6 391.1 1,418.9 1,282.2
Housewares 162.8 150.6 428.8 389.0
NACoal 73.4 72.6 214.6 201.2
NACCO and Other .1 -- .1 .1
-------- ---------- ---------- ----------
$ 691.9 $ 614.3 $ 2,062.4 $ 1,872.5
======== ========== ========== ==========
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
2000 1999 2000 1999
-------- -------- -------- ---------
GROSS PROFIT
NMHG Wholesale $ 67.8 $ 53.5 $ 214.8 $ 197.1
NMHG Retail 13.6 13.1 42.4 38.9
NMHG Eliminations .2 (.3) .4 (1.8)
-------- -------- -------- ---------
NMHG Consolidated 81.6 66.3 257.6 234.2
Housewares 30.0 31.6 78.0 79.4
NACoal 12.8 14.6 35.7 38.7
-------- -------- -------- ---------
$ 124.4 $ 112.5 $ 371.3 $ 352.3
======== ======== ======== =========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 46.0 $ 42.3 $ 134.2 $ 126.1
NMHG Retail 16.2 15.3 51.5 45.7
NMHG Eliminations (.2) -- (.5) --
-------- -------- -------- ---------
NMHG Consolidated 62.0 57.6 185.2 171.8
Housewares 21.9 20.9 66.2 58.9
NACoal 3.5 3.2 10.1 9.5
NACCO and Other 3.0 2.4 8.0 7.5
-------- -------- -------- ---------
$ 90.4 $ 84.1 $ 269.5 $ 247.7
======== ======== ======== =========
AMORTIZATION OF GOODWILL
NMHG Wholesale $ 2.9 $ 2.9 $ 8.7 $ 8.7
NMHG Retail .2 .1 .7 .4
-------- -------- -------- ---------
NMHG Consolidated 3.1 3.0 9.4 9.1
Housewares .8 .8 2.3 2.3
-------- -------- -------- ---------
$ 3.9 $ 3.8 $ 11.7 $ 11.4
======== ======== ======== =========
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 18.9 $ 8.3 $ 71.9 $ 62.3
NMHG Retail (2.8) (2.3) (9.8) (7.2)
NMHG Eliminations .4 (.3) .9 (1.8)
-------- -------- -------- ---------
NMHG Consolidated 16.5 5.7 63.0 53.3
Housewares 7.3 9.9 9.5 18.2
NACoal 9.3 11.4 25.6 29.2
NACCO and Other (3.0) (2.4) (8.0) (7.5)
-------- -------- -------- ---------
$ 30.1 $ 24.6 $ 90.1 $ 93.2
======== ======== ======== =========
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
NMHG Wholesale $ 21.8 $ 11.2 $ 80.6 $ 71.0
NMHG Retail (2.6) (2.2) (9.1) (6.8)
NMHG Eliminations .4 (.3) .9 (1.8)
-------- -------- -------- ---------
NMHG Consolidated 19.6 8.7 72.4 62.4
Housewares 8.1 10.7 11.8 20.5
NACoal 9.3 11.4 25.6 29.2
NACCO and Other (3.0) (2.4) (8.0) (7.5)
-------- -------- -------- ---------
$ 34.0 $ 28.4 $ 101.8 $ 104.6
======== ======== ======== =========
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
2000 1999 2000 1999
------- ------- ------- --------
INTEREST EXPENSE
NMHG Wholesale $ (3.5) $ (4.6) $ (10.3) $ (12.5)
NMHG Retail (1.2) (1.7) (3.1) (2.6)
NMHG Eliminations (.7) .5 (2.0) .7
------- ------- ------- --------
NMHG Consolidated (5.4) (5.8) (15.4) (14.4)
Housewares (2.4) (1.7) (6.0) (4.7)
NACoal -- (.4) -- (.8)
NACCO and Other -- (.1) (.4) (.5)
Eliminations -- .1 .4 .5
------- ------- ------- --------
(7.8) (7.9) (21.4) (19.9)
Project mining subsidiaries (4.3) (4.4) (12.7) (13.2)
------- ------- ------- --------
$ (12.1) $ (12.3) $ (34.1) $ (33.1)
======= ======= ======= ========
INTEREST INCOME
NMHG Wholesale $ .3 $ .3 $ 1.2 $ 3.1
NMHG Retail -- 1.1 -- .1
NMHG Eliminations -- (1.0) -- (1.1)
------- ------- ------- --------
NMHG Consolidated .3 .4 1.2 2.1
Housewares -- .1 -- .1
NACoal -- .1 .3 .2
Eliminations -- (.1) (.4) (.5)
------- ------- ------- --------
.3 .5 1.1 1.9
Project mining subsidiaries .1 .1 .2 .3
------- ------- ------- --------
$ .4 $ .6 $ 1.3 $ 2.2
======= ======= ======= ========
OTHER-NET, INCOME (EXPENSE), EXCLUDING INTEREST INCOME
NMHG Wholesale $ (5.1) $ (1.1) $ (10.4) $ (3.0)
NMHG Retail .1 .3 .2 .3
NMHG Eliminations -- .3 -- --
------- ------- ------- --------
NMHG Consolidated (5.0) (.5) (10.2) (2.7)
Housewares (.2) (.1) (2.2) (.5)
NACoal (.4) (.4) (1.1) (.1)
NACCO and Other 2.8 .1 8.0 .3
------- ------- ------- --------
$ (2.8) $ (.9) $ (5.5) $ (3.0)
======= ======= ======= ========
PROVISION FOR INCOME TAXES
NMHG Wholesale $ 4.4 $ 1.3 $ 21.3 $ 20.2
NMHG Retail (1.2) (.6) (3.8) (2.6)
NMHG Eliminations (.2) (.2) (.5) (.9)
------- ------- ------- --------
NMHG Consolidated 3.0 .5 17.0 16.7
Housewares 2.0 3.2 .6 5.2
NACoal .9 1.1 2.2 2.9
NACCO and Other .5 (.2) .3 (2.1)
------- ------- ------- --------
$ 6.4 $ 4.6 $ 20.1 $ 22.7
======= ======= ======= ========
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------- -----------------
2000 1999 2000 1999
------- -------- ------- --------
NET INCOME (LOSS)
NMHG Wholesale $ 6.4 $ 1.8 $ 31.9 $ 30.4
NMHG Retail (2.7) (2.0) (8.9) (6.8)
NMHG Eliminations (.1) (.3) (.6) (1.3)
------- -------- ------- --------
NMHG Consolidated 3.6 (.5) 22.4 22.3
Housewares 2.7 5.0 .7 7.9
NACoal 3.3 4.7 9.3 11.0
NACCO and Other (.7) (2.2) (.7) (6.2)
------- -------- ------- --------
$ 8.9 $ 7.0 $ 31.7 $ 35.0
======= ======== ======= ========
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG Wholesale $ 10.3 $ 9.9 $ 30.8 $ 29.2
NMHG Retail 2.5 6.3 8.6 10.4
------- -------- ------- --------
NMHG Consolidated 12.8 16.2 39.4 39.6
Housewares 5.0 4.2 14.2 12.7
NACoal .8 .9 2.2 2.3
NACCO and Other .1 .1 .2 .3
------- -------- ------- --------
18.7 21.4 56.0 54.9
Project mining subsidiaries 7.3 7.3 21.3 21.6
------- -------- ------- --------
$ 26.0 $ 28.7 $ 77.3 $ 76.5
======= ======== ======= ========
CAPITAL EXPENDITURES
NMHG Wholesale $ 9.1 $ 14.7 $ 28.4 $ 32.0
NMHG Retail 3.3 1.3 8.8 4.3
NMHG Eliminations -- (.2) -- (.5)
------- -------- ------- --------
NMHG Consolidated 12.4 15.8 37.2 35.8
Housewares 5.6 6.2 16.9 12.4
NACoal .1 -- .6 2.6
NACCO and Other .1 .1 .2 .1
------- -------- ------- --------
18.2 22.1 54.9 50.9
Project mining subsidiaries 2.8 2.8 10.4 7.2
------- -------- ------- --------
$ 21.0 $ 24.9 $ 65.3 $ 58.1
======= ======== ======= ========
SEPTEMBER 30 DECEMBER 31
2000 1999
---------- ----------
TOTAL ASSETS
NMHG Wholesale $ 1,148.0 $ 1,040.5
NMHG Retail 192.6 185.0
NMHG Eliminations (124.5) (46.9)
---------- ----------
NMHG Consolidated 1,216.1 1,178.6
Housewares 415.0 372.8
NACoal 67.5 64.3
NACCO and Other 49.7 47.6
---------- ----------
1,748.3 1,663.3
Project mining subsidiaries 384.9 392.0
---------- ----------
2,133.2 2,055.3
Consolidating Eliminations (41.7) (42.3)
---------- ----------
$ 2,091.5 $ 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 nine months ended September 30:
THREE MONTHS NINE MONTHS
-------------------- ----------------------
2000 1999 2000 1999
-------- ---------- ---------- ----------
Revenues
Wholesale
Americas $ 303.7 $ 258.2 $ 939.4 $ 853.8
Europe, Africa and Middle East 87.9 84.4 287.6 286.2
Asia-Pacific 14.8 14.3 49.6 46.0
-------- ---------- ---------- ----------
406.4 356.9 1,276.6 1,186.0
-------- ---------- ---------- ----------
Retail (net of eliminations)
Americas 8.8 9.2 24.5 23.9
Europe, Africa and Middle East 29.3 20.6 75.5 54.9
Asia-Pacific 11.1 4.4 42.3 17.4
-------- ---------- ---------- ----------
49.2 34.2 142.3 96.2
-------- ---------- ---------- ----------
NMHG Consolidated $ 455.6 $ 391.1 $ 1,418.9 $ 1,282.2
======== ========== ========== ==========
Operating profit (loss)
Wholesale
Americas $ 21.8 $ 11.0 $ 74.2 $ 57.2
Europe, Africa and Middle East (2.7) (2.3) (.7) 6.9
Asia-Pacific (.2) (.4) (1.6) (1.8)
-------- ---------- ---------- ----------
18.9 8.3 71.9 62.3
-------- ---------- ---------- ----------
Retail (net of eliminations)
Americas .2 (.6) (.5) (1.7)
Europe, Africa and Middle East (3.2) (2.0) (9.0) (6.5)
Asia-Pacific .6 -- .6 (.8)
-------- ---------- ---------- ----------
(2.4) (2.6) (8.9) (9.0)
-------- ---------- ---------- ----------
NMHG Consolidated $ 16.5 $ 5.7 $ 63.0 $ 53.3
======== ========== ========== ==========
Operating profit (loss) excluding
goodwill amortization
Wholesale
Americas $ 23.9 $ 12.9 $ 80.2 $ 63.0
Europe, Africa and Middle East (1.9) (1.4) 1.9 9.6
Asia-Pacific (.2) (.3) (1.5) (1.6)
-------- ---------- ---------- ----------
21.8 11.2 80.6 71.0
-------- ---------- ---------- ----------
Retail (net of eliminations)
Americas .2 (.6) (.4) (1.4)
Europe, Africa and Middle East (3.1) (2.1) (8.6) (6.4)
Asia-Pacific .7 .2 .8 (.8)
-------- ---------- ---------- ----------
(2.2) (2.5) (8.2) (8.6)
-------- ---------- ---------- ----------
NMHG Consolidated $ 19.6 $ 8.7 $ 72.4 $ 62.4
======== ========== ========== ==========
NMHG Consolidated Net Income $ 3.6 $ (.5) $ 22.4 $ 22.3
======== ========== ========== ==========
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
Third Quarter of 2000 Compared with Third Quarter of 1999
NMHG WHOLESALE: The following schedule identifies the components of the changes
in revenues, operating profit and net income for the third quarter of 2000
compared with the third quarter of 1999:
Operating Net
Revenues Profit Income
------------- -------------- -----------
1999 $ 356.9 $ 8.3 $ 1.8
Increase (decrease) in 2000 from:
Unit volume 51.8 8.0 5.2
Sales mix 6.1 (.8) (.5)
Average sales price 2.4 2.4 1.6
Service parts 4.1 1.4 .9
Foreign currency (14.9) .2 .1
Manufacturing cost --- 4.1 2.7
Other operating expense --- (4.7) (3.1)
Other income and expense --- --- (2.7)
Differences between effective
and statutory tax rates --- --- .4
-------- -------- ------
2000 $ 406.4 $ 18.9 $ 6.4
======== ======== ======
Revenues increased primarily due to unit volume growth in all geographic
regions, led by growth in the Americas. This increase was partially offset by
adverse currency movements in Europe. Worldwide volume increased 18.0 percent to
19,554 units shipped during the third quarter of 2000 from 16,565 units shipped
during the third quarter of 1999. Shipments in the third quarter of 1999 were
down by approximately 1,300 units as a result of lost workdays at NMHG's
Greenville, North Carolina manufacturing facility caused by flooding from
Hurricane Floyd. Excluding this one-time event in 1999, worldwide unit volume
growth of approximately 9.5 percent was primarily due to increased demand in the
Americas. Adverse currency effects resulted primarily from translating a
weakened British pound sterling into U.S. dollars and from transactions
denominated in a weakened Euro as compared with the British pound sterling.
Operating profit as a percent of sales improved in the third quarter of 2000 as
compared with the third quarter of 1999 primarily due to (i) volume growth and
related manufacturing efficiencies and (ii) price increases in the Americas
which offset price decreases in Europe driven primarily by competition resulting
from a weaker Euro. Although foreign currency significantly reduced revenues, it
had a nominal effect on operating profit as adverse currency effects in Europe
were offset by favorable currency effects in the Americas resulting from
purchases denominated in a weaker Euro and British pound sterling as compared
with the U.S. dollar.
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 and a $1.3 million after-tax loss accrued as a result of flooding at a
lift truck manufacturing facility in Obu, Japan, a 50/50 joint venture with
Sumitomo Heavy Industries.
The backlog level has remained stable at 22,600 units at September 30, 2000 as
compared with June 30, 2000. The backlog level at September 30, 2000 has
increased as compared with the backlog level at September 30, 1999 of 20,000
units primarily due to increased incoming orders in the Americas during the
first nine 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 third quarter of 2000 compared with the third quarter of 1999:
Operating Net
Revenues Loss Loss
------------ -------------- -----------
1999 $ 34.2 $ (2.6) $ (2.3)
Increase (decrease) in 2000 from:
Current and prior year acquisitions 12.6 .5 .3
Comparable dealerships:
Sales of new and used trucks .1 .1 .1
Other sales (parts, maintenance, rentals) 1.9 .3 .2
Foreign currency (2.1) --- ---
Operating expenses --- (1.5) (1.0)
Other income and expense --- --- (.4)
Eliminations between Wholesale and Retail 2.5 .8 .1
Differences between effective
and statutory tax rates --- --- .2
------- -------- -------
2000 $ 49.2 $ (2.4) $ (2.8)
======= ======== =======
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 and adverse currency effects in Europe.
Net loss increased as compared with the prior year primarily due to increased
pricing competition in Europe and continued integration, infrastructure,
interest, amortization and administrative costs necessary to build the Retail
segment. Retail operations in the Americas and in Asia-Pacific essentially broke
even in the third quarter of 2000. At September 30, 2000, NMHG Retail owned and
consolidated 27 dealerships as compared with 16 dealerships at September 30,
1999.
First Nine Months of 2000 Compared with First Nine Months of 1999
NMHG WHOLESALE The following schedule identifies the components of the changes
in revenues, operating profit and net income for the first nine months of 2000
compared with the first nine months of 1999:
Operating Net
Revenues Profit Income
------------ -------------- -----------
1999 $ 1,186.0 $ 62.3 $ 30.4
Increase (decrease) in 2000 from:
Unit volume 115.3 18.8 12.1
Sales mix (.6) (5.1) (3.3)
Average sales price (5.3) (5.3) (3.4)
Service parts 15.5 5.0 3.3
Foreign currency (34.3) (6.1) (4.0)
Manufacturing cost --- 12.1 7.9
Other operating expense --- (9.8) (6.2)
Other income and expense --- --- (5.8)
Differences between effective
and statutory tax rates --- --- .9
--------- -------- -------
2000 $ 1,276.6 $ 71.9 $ 31.9
========= ======== =======
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
Revenues increased as a result of unit and service parts volume growth,
primarily in the Americas, partially offset by adverse currency effects and a
decrease in the worldwide average sales price. Worldwide volume increased 12.2
percent to 62,593 units shipped during the first nine months of 2000 from 55,789
units shipped during the first nine months of 1999. Adverse currency effects
resulted primarily from translating a weakened British pound sterling into U.S.
dollars and from transactions denominated in a weakened Euro as compared with
the British pound sterling. Lower sales prices resulted from aggressive
competition in Europe driven primarily from a weaker Euro as compared with the
British pound sterling.
Operating profit as a percent of sales for the first nine months of 2000
improved slightly as compared with the same period in 1999 as margin
improvements from volume growth and related manufacturing efficiencies were
mostly offset by lower sales prices and adverse currency effects. Net income
increased as a result of these factors, partially offset by the $1.3 million
after-tax loss accrued in the third quarter of 2000 as a result of the flood in
Obu, Japan and by a $3.2 million after-tax charge from NACCO for services
provided by the parent company.
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 nine months of 2000:
Operating Net
Revenues Loss Loss
------------ -------------- -----------
1999 $ 96.2 $ (9.0) $ (8.1)
Increase (decrease) in 2000 from:
Current and prior year acquisitions 35.6 .1 ---
Comparable dealerships:
Sales of new and used trucks 7.2 .3 .2
Other sales (parts, maintenance, rentals) 19.1 .8 .5
Foreign currency (6.3) .6 .4
Operating expense --- (4.4) (2.9)
Other income and expense --- --- (.4)
Eliminations between Wholesale and Retail (9.5) 2.7 .7
Differences between effective
and statutory tax rates --- --- .1
-------- -------- -------
2000 $ 142.3 $ (8.9) $ (9.5)
======== ======== =======
Revenues increased primarily due to acquisitions of retail dealerships in Europe
and Asia-Pacific combined with volume growth from comparable dealerships,
partially offset by adverse currency effects and an increase in the elimination
of intercompany shipments from NMHG Wholesale to NMHG Retail. Increased net loss
was driven by increased losses in Europe, primarily due to increased pricing
competition as a result of a weak Euro and due to continued integration,
infrastructure, interest, amortization and administrative costs necessary to
build the Retail segment. Operating results for the first nine months of 2000 in
the Americas and in Asia-Pacific improved as compared with the prior year.
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 nine months ended
September 30 are as follows:
THREE MONTHS NINE MONTHS
------------------ -----------------
2000 1999 2000 1999
------- -------- ------- -------
Interest expense
NMHG Wholesale $ (3.5) $ (4.6) $ (10.3) $ (12.5)
NMHG Retail (1.2) (1.7) (3.1) (2.6)
NMHG Eliminations (.7) .5 (2.0) .7
------- -------- ------- -------
$ (5.4) $ (5.8) $ (15.4) $ (14.4)
======= ======== ======= =======
Other-net
NMHG Wholesale $ (4.8) $ (.8) $ (9.2) $ .1
NMHG Retail .1 1.4 .2 .4
NMHG Eliminations -- (.7) -- (1.1)
------- -------- ------- -------
$ (4.7) $ (.1) $ (9.0) $ (.6)
======= ======== ======= =======
Effective tax rate
NMHG Wholesale 41.5% 44.8% 40.6% 40.5%
NMHG Retail (including eliminations) 33.3% 25.8% 31.2% 30.2%
NMHG Consolidated 46.9% (250.0)% 44.0% 43.6%
Interest expense for the nine months ended September 30, 2000 increased as
compared with the same period last year primarily due to increased debt levels.
Other-net expense for the three and nine months ended September 30, 2000
increased due to an after-tax loss accrued for flood damage at NMHG's
joint-venture in Obu, Japan and due to fees charged by the parent company, as
discussed previously.
The consolidated effective tax rate for the third quarter of 1999 of (250.0%) is
not meaningful and results from the mix of income from Wholesale at a higher
effective tax rate versus loss from Retail at a lower effective tax rate. The
decrease in the Wholesale effective tax rate for the third quarter of 2000 as
compared with the third quarter of 1999 is primarily due to the effect of a
constant level of nondeductible goodwill amortization on a higher comparable
level of pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $28.4 million for NMHG
Wholesale and $8.8 million for NMHG Retail during the first nine months of 2000.
These capital expenditures include investments in information systems, plant
expansion, 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 approximately $21.5 million. These planned expenditures relate
primarily to continuing investments in information systems, plant expansion,
tooling for new products, machinery, equipment and retail lease and rental
fleet. In addition to capital expenditures, during the remainder of 2000, NMHG
anticipates continuing investments in business acquisitions in amounts which may
exceed the average quarterly acquisition investment of $1.9 million for the
first three quarters of 2000. Investments in retail business acquisitions for
the first nine months of 2000 totaled $5.7 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 September 30, 2000, NMHG had available $121.6
million of its $350.0 million revolving credit facility. NMHG also has separate
facilities with availability, net of limitations, of $38.1 million, of which
$24.4 million was available at September 30, 2000 and maintains additional
uncommitted lines of credit, of which $9.3 million was available at September
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:
SEPTEMBER 30 DECEMBER 31
2000 1999
-------- --------
Total net tangible assets $ 415.1 $ 374.0
Advances to parent company 3.0 10.0
Goodwill at cost 483.3 478.7
-------- --------
Net assets before goodwill amortization 901.4 862.7
Accumulated goodwill amortization (130.5) (119.2)
Total debt (309.0) (270.7)
Minority Interest (3.3) (4.1)
-------- --------
Stockholder's equity $ 458.6 $ 468.7
======== ========
Debt to total capitalization 40% 36%
The increase in net tangible assets of $41.1 million is primarily due to
increased accounts receivable, related to volume growth, and due to acquisitions
of retail dealerships, which increased net tangible assets by approximately $7.1
million.
Total debt increased primarily to support retail acquisitions and growth in
current and long-term receivables.
Stockholder's equity decreased primarily due to adverse currency movements
recognized in the accumulated foreign currency translation adjustment and, to a
lesser degree, dividends made to the parent company, 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 Housewares were as follows for the three and nine
months ended September 30:
THREE MONTHS NINE MONTHS
----------------- -----------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenues $ 162.8 $ 150.6 $ 428.8 $ 389.0
Operating profit $ 7.3 $ 9.9 $ 9.5 $ 18.2
Operating profit excluding
goodwill amortization $ 8.1 $ 10.7 $ 11.8 $ 20.5
Net income $ 2.7 $ 5.0 $ .7 $ 7.9
Third Quarter of 2000 Compared with Third Quarter of 1999
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the third quarter of 2000 compared with the
third quarter of 1999:
Operating Net
Revenues Profit Income
----------- ------------ -----------
1999 $ 150.6 $ 9.9 $ 5.0
Increase (decrease) in 2000 from:
Unit volume and sales mix 15.3 5.8 3.8
Average sales price (4.2) (4.2) (2.8)
Retail sales 1.1 (.1) (.1)
Manufacturing cost --- (3.8) (2.5)
Other operating expense --- (.3) (.1)
Other income and expense --- --- (.5)
Differences between effective
and statutory tax rates --- --- (.1)
-------- ------- ------
2000 $ 162.8 $ 7.3 $ 2.7
======== ======= ======
NACCO HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Housewares' revenues improved in the third quarter of 2000 primarily due to unit
volume growth at HBPS, driven by initial shipments of General Electric-branded
products to Wal*Mart. However, increased operating profit from volume growth was
completely offset by price reductions and increased manufacturing and other
operating costs. The average sales price continued to decline in the third
quarter of 2000 as compared with the third quarter of 1999 due to intense
competition. Manufacturing costs increased primarily due to increased costs of
petroleum-based resins, transportation and packaging materials. Other operating
expenses increased primarily due to development costs related to the GE-branded
products. Net income declined as a result of the factors affecting operating
profit and due to a $0.4 million after-tax charge from NACCO for services
provided by the parent company.
KCI's revenues increased due to an increase in the size of the average sale,
while net income declined, primarily due to increased product costs. KCI
operated 152 stores at September 30, 2000 compared with 145 stores at September
30, 1999.
First Nine Months of 2000 Compared with First Nine Months of 1999
The following schedule identifies the components of the changes in revenues,
operating profit and net income for the first nine months of 2000 compared with
the first nine months of 1999:
Operating Net
Revenues Profit Income
----------- ------------ -----------
1999 $ 389.0 $ 18.2 $ 7.9
Increase (decrease) in 2000 from:
Unit volume and sales mix 46.9 16.1 10.5
Average sales price (11.3) (11.3) (7.3)
Retail sales 4.2 (.2) (.1)
Manufacturing cost --- (8.1) (5.2)
Other operating expense --- (5.2) (3.3)
Other income and expense --- --- (2.0)
Differences between effective
and statutory tax rates --- --- .2
-------- ------- ------
2000 $ 428.8 $ 9.5 $ .7
======== ======== ======
Housewares' revenues improved in the first nine months of 2000 primarily due to
unit volume growth at HBPS, especially for contact grills, blenders and
coffeemakers, and from initial shipments of GE-branded products to Wal*Mart.
Increases in operating profit and net income from unit volume growth were
completely offset by price reductions and increased manufacturing and other
operating costs. The average sales price continued to decline in the first nine
months of 2000 as compared with the first nine months of 1999 due to intense
competition. Manufacturing costs and other operating costs increased primarily
due to the factors discussed for the 2000 third quarter, as well as from
increased warehousing costs and increased administration costs, respectively.
KCI's revenues increased primarily due to an increase in the number of store
transactions. Net loss, however, increased primarily due to increased general
and administration costs.
NACCO HOUSEWARES GROUP - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three and nine months ended
September 30 are as follows:
THREE MONTHS NINE MONTHS
----------------- ------------------
2000 1999 2000 1999
------- ------- ------- -------
Interest expense $ (2.4) $ (1.7) $ (6.0) $ (4.7)
Other-net (.2) -- (2.2) (.4)
------- ------- ------- -------
$ (2.6) $ (1.7) $ (8.2) $ (5.1)
======= ======= ======= =======
Effective tax rate 42.6% 39.0% 46.2% 39.6%
Interest expense increased as a result of increased debt levels and higher
interest rates. Other-net increased as a result of the NACCO management fee,
previously discussed.
The increase in effective tax rate is primarily due to the effect of a constant
level of nondeductible goodwill amortization on a lower comparable level of
pre-tax income and due to a one-time tax credit recognized in the third quarter
of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Housewares' expenditures for property, plant and equipment were $16.9 million
during the first nine months of 2000 and are estimated to be $9.1 million for
the remainder of 2000. These planned capital expenditures are primarily for
tooling and equipment designed for new products, including GE-branded 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.
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 September 30, 2000, HB/PS had $10.1 million available under this facility. In
addition, HB/PS has separate uncommitted facilities that permitted $21.0 million
of additional borrowings at September 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.
NACCO HOUSEWARES GROUP - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
Housewares' capital structure is presented below:
SEPTEMBER 30 DECEMBER 31
2000 1999
-------- --------
Total net tangible assets $ 229.1 $ 183.4
Goodwill at cost 123.5 123.5
-------- --------
Total assets before goodwill amortization 352.6 306.9
Accumulated goodwill amortization (35.9) (33.6)
Total debt (153.9) (109.4)
-------- --------
Stockholder's equity $ 162.8 $ 163.9
======== ========
Debt to total capitalization 49% 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.
Stockholder's equity decreased primarily due to dividends made to the parent
company and, to a lesser degree, adverse currency movements recognized in the
accumulated foreign currency translation adjustment, partially offset by net
income.
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,
Louisiana and Mississippi.
On October 11, 2000, NACoal acquired certain assets from Phillips Coal Company,
including its 75 percent joint venture interest in Mississippi Lignite Mining
Company ("MLMC"), its 50 percent joint venture interest in Red River Mining
Company ("Red River") and 640 million tons of undeveloped lignite reserves in
Texas, Louisiana, Mississippi and Tennessee. Prior to this acquisition, total
NACoal coal reserves approximated 1.9 billion tons, with 1.0 billion tons
committed to electric utility customers pursuant to long-term contracts.
As a result of this acquisition, NACoal now owns 100 percent of Red River and
MLMC. Prior to this acquisition, NACoal accounted for its 25 percent interest in
MLMC using the equity method of accounting. The operating results as of
September 30, 2000, included in this Form 10-Q, includes NACoal's 50 percent
interest in Red River and its 25 percent interest in MLMC. The operating results
of Red River and MLMC will be fully consolidated beginning on October 11, 2000.
In addition to this recent acquisition, NACoal operates four other lignite
mines, including three project mining subsidiaries ("Coteau," "Falkirk" and
"Sabine"), and a NACoal division ("San Miguel"). 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, MLMC was formed as a joint venture between NACoal and Phillips Coal
Company. This joint venture 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 nine months of 2000. Delivery
of lignite to the power plant is expected to begin gradually during the fourth
quarter of 2000. Delivery of over 3.0 million tons per annum is expected once
the power plant becomes fully operational which is anticipated to be mid-2001.
FINANCIAL REVIEW
NACoal's three project mining subsidiaries (Coteau, Falkirk and Sabine), which
represent a significant portion of NACoal's operations, mine lignite for utility
customers pursuant to long-term contracts at a price based on actual cost plus
an agreed pretax profit per ton. Due to the cost-plus nature of these contracts,
revenues and operating profits are affected by increases and decreases in
operating costs, as well as by tons sold. Net income of these project mines,
however, is not significantly affected by changes in such operating costs, which
include costs of operations, interest expense and certain other items. Because
of the nature of the contracts at these mines, operating results are best
analyzed in terms of lignite tons sold, income before taxes and net income.
Lignite tons sold by NACoal's operating lignite mines were as follows for the
three and nine months ended September 30:
THREE MONTHS NINE MONTHS
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
Coteau Properties 4.0 4.0 12.0 12.1
Falkirk Mining 2.0 2.0 5.8 5.1
Sabine Mining 1.0 1.1 2.4 2.6
Red River Mining .2 .3 .5 .5
San Miguel 1.0 .9 2.6 2.7
--- --- ---- ----
Total Lignite 8.2 8.3 23.3 23.0
=== === ==== ====
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
The Florida dragline operations delivered 2.0 million and 6.0 million cubic
yards of limerock in the three and nine months ended September 30, 2000,
respectively. This compares to 2.1 million and 6.2 million cubic yards delivered
during the three and nine months ended September 30, 1999, respectively.
Revenues, income before taxes, provision for taxes and net income were as
follows for the three and nine months ended September 30:
THREE MONTHS NINE MONTHS
----------------- -------------------
2000 1999 2000 1999
------- -------- --------- --------
Revenues
Project mines $ 62.8 $ 62.2 $ 186.3 $ 174.0
Other mining operations 10.3 9.8 27.1 25.1
------- -------- --------- --------
73.1 72.0 213.4 199.1
Royalties and other .3 .6 1.2 2.1
------- -------- --------- --------
$ 73.4 $ 72.6 $ 214.6 $ 201.2
======= ======== ========= ========
Income before taxes
Project mines $ 6.3 $ 6.9 $ 18.9 $ 18.9
Other mining operations .2 1.0 (.4) 2.2
------- -------- --------- --------
Total from operating mines 6.5 7.9 18.5 21.1
Royalties and other income, net (.3) (.1) (1.1) .1
Other operating expenses (2.0) (2.0) (5.9) (6.1)
------- -------- --------- --------
4.2 5.8 11.5 15.1
Provision for taxes .9 1.1 2.2 2.9
------- -------- --------- --------
Income before cumulative effect of accounting change 3.3 4.7 9.3 12.2
Cumulative effect of accounting change -- -- -- (1.2)
------- -------- --------- --------
Net income $ 3.3 $ 4.7 $ 9.3 $ 11.0
======= ======== ========= ========
Third Quarter of 2000 Compared with Third Quarter of 1999
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the third quarter of 2000 compared with
the third quarter of 1999:
Income
Before Net
Revenues Taxes Income
------------ --------- ----------
1999 $ 72.6 $ 5.8 $ 4.7
Increase (decrease) in 2000 from:
Project mines
Tonnage volume (2.3) (.6) (.4)
Agreed profit per ton (.3) --- ---
Pass-through costs 3.2 --- ---
Other mining operations
Tonnage volume .3 .3 .2
Average selling price .2 .2 .1
Operating costs --- (1.3) (.8)
------- ----- -----
Changes from operating mines 1.1 (1.4) (.9)
Royalties and other income, net (.3) (.2) (.1)
Differences between effective and
statutory tax rates --- --- (.4)
------- ----- -----
2000 $ 73.4 $ 4.2 $ 3.3
======= ===== =====
THE NORTH AMERICAN COAL CORPORATION - continued
FINANCIAL REVIEW - continued
Although overall tonnage volume was down slightly, revenues for the third
quarter of 2000 increased as compared with the third quarter of 1999 due to
increased pass-through costs at each of the project mines. Income before taxes
and net income for the third quarter of 2000 declined as compared with the third
quarter of 1999 primarily due to increased maintenance and administrative costs
at San Miguel and reduced royalty income. Royalty income continued to decline
due to decreased demand for coal from NACoal's eastern underground reserves.
First Nine Months of 2000 Compared with First Nine Months of 1999
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for the first nine months of 2000 as compared
with the first nine months of 1999:
Income
Before Net
Revenues Taxes Income
------------ ---------- ---------
1999 $ 201.2 $ 15.1 $ 11.0
Increase (decrease) in 2000 from:
Project mines
Tonnage volume 1.9 .4 .3
Agreed profit per ton (.4) (.4) (.3)
Pass-through costs 10.8 --- ---
Other mining operations
Tonnage volume 1.4 1.4 1.0
Average selling price .6 .6 .4
Operating costs --- (4.4) (2.9)
Other expense --- (.2) (.1)
------- ------ -----
Changes from operating mines 14.3 (2.6) (1.6)
Royalties and other income, net (.9) (1.2) (.8)
Other operating expenses --- .2 .1
Cumulative effect of accounting change --- --- 1.2
Differences between effective and
statutory tax rates --- --- (.6)
-------- ------ ------
2000 $ 214.6 $ 11.5 $ 9.3
======== ====== ======
Revenues for the nine months ended September 30, 2000 increased as compared with
the same period in 1999 primarily due to increased tonnage volume at certain
project mines and due to increased pass-through costs at Coteau and Sabine.
Income before taxes for the first nine months of 2000 declined as compared with
the same period last year primarily due to increased maintenance, administration
and fuel costs at San Miguel and reduced royalty income.
Net income in the first nine months of 1999 included the cumulative effect of an
accounting change to write-off previously capitalized start-up costs. Net income
in the first nine months of 2000 includes a $0.5 million after-tax charge from
the parent company.
THE NORTH AMERICAN COAL CORPORATION - continued
Other Income and Expense and Income Taxes: The components of other income
(expense) and the effective tax rate for the three and nine months ended
September 30 are as follows:
THREE MONTHS NINE MONTHS
----------------- ------------------
2000 1999 2000 1999
------- ------- ------- -------
Interest expense
Project mining subsidiaries $ (4.3) $ (4.4) $ (12.7) $ (13.2)
Other mining operations -- (.4) -- (.8)
------- ------- ------- -------
$ (4.3) $ (4.8) $ (12.7) $ (14.0)
======= ======= ======= =======
Other-net
Project mining subsidiaries $ .1 $ .1 $ .2 $ .3
Other mining operations (.4) (.3) (.8) .1
------- ------- ------- -------
$ (.3) $ (.2) $ (.6) $ .4
======= ======= ======= =======
Effective tax rate 19.1% 17.5% 17.9% 18.9%
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $11.0 million during the
first nine months of 2000. It is estimated that NACoal's capital expenditures
for the remainder of 2000 will be $6.9 million, of which $6.2 million relates to
the development, establishment and improvement of the project mining
subsidiaries' mines and are financed or guaranteed by the utility customers. In
addition, NACoal anticipates spending approximately $6.7 million at MLMC in the
fourth quarter of 2000 as it continues to develop the mine.
As a result of NACoal's October 11, 2000 acquisition of certain assets from
Phillips Coal Company, NACoal replaced its $50.0 million revolving credit
facility with a new $175.0 million credit facility which includes a $60.0
million revolving line of credit and a $115.0 million term loan. This facility
commenced on October 11, 2000 and expires on October 11, 2005. At September 30,
2000, NACoal had $43.1 million of its $50.0 million revolving credit facility
available.
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:
SEPTEMBER 30 DECEMBER 31
2000 1999
------- -------
Investment in project mining subsidiaries $ 3.2 $ 3.7
Other net tangible assets 39.7 32.0
------- -------
Total tangible assets 42.9 35.7
Advances to (from) parent company (8.1) 2.7
Debt related to parent advances -- (2.7)
Other debt (6.9) (12.5)
------- -------
Total debt (6.9) (15.2)
------- -------
Stockholder's equity $ 27.9 $ 23.2
======= =======
Debt to total capitalization 20% 40%
The increase in Other net tangible assets is primarily due to investments made
for NACoal's 25 percent interest in MLMC. 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. These
obligations are based on estimates and assumptions, which are reviewed
periodically, and could change as the underlying facts and circumstances change.
Cash payments related to Bellaire's obligations, net of internally generated
cash, are funded by NACCO and historically have not been material.
The results of operations at NACCO and Other were as follows for the three and
nine months ended September 30:
THREE MONTHS NINE MONTHS
------------ -----------
2000 1999 2000 1999
------ ------ ------ ------
Revenues $ .1 $ -- $ .1 $ .1
Operating loss $ (3.0) $ (2.4) $ (8.0) $ (7.5)
Other income (expense), net $ 2.8 $ -- $ 7.6 $ (.2)
Net loss $ (.7) $ (2.2) $ (.7) $ (6.2)
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 and $7.6 million
pre-tax in the three and nine months ended September 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, and the new financing facility
at NACoal, allow for the payment to NACCO of dividends and advances under
certain circumstances. Previously, there were 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.
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.
NACCO AND OTHER - continued
FINANCIAL REVIEW - continued
NACCO's consolidated capital structure is presented below:
SEPTEMBER 30 DECEMBER 31
2000 1999
---------- ----------
Total net tangible assets $ 679.3 $ 593.5
Goodwill at cost 606.8 602.2
---------- ----------
Total assets before goodwill amortization 1,286.1 1,195.7
Accumulated goodwill amortization (166.4) (152.8)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (469.8) (395.3)
Closed mine obligations (Bellaire), including the
United Mine Worker retirees' medical fund, net-of-tax (72.2) (73.9)
Minority interest (11.0) (11.5)
---------- ----------
Stockholders' equity $ 566.7 $ 562.2
========== ==========
Debt to total capitalization 45% 41%
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."
COMMODITY PRICE RISK
The Company uses certain commodities, including steel, resins and diesel fuel,
in the normal course of its mining and manufacturing processes. As such, the
cost of operations is subject to variability as the market for these commodities
change. The Company monitors this risk and, from time to time, enters into
derivative contracts to hedge this risk. The Company does not currently have any
such derivative contracts outstanding.
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
conversion to the Euro.
OUTLOOK
NMHG Wholesale
Americas: NMHG Wholesale expects increased lift truck shipments in the Americas
market during the fourth quarter of 2000, compared with the same period a year
ago, as a result of a higher backlog due to strong demand for lift trucks. In
addition, a first quarter of 2000 price increase for lift trucks in Americas,
improved parts sales and manufacturing efficiencies are also expected to improve
fourth quarter results.
Europe: NMHG Wholesale expects lift truck demand in the European market to
remain strong in the fourth quarter of 2000 compared with the fourth quarter of
1999. However, if the current currency environment continues, both revenues and
costs could be negatively affected despite increased shipments and improved
manufacturing efficiencies.
Asia-Pacific: NMHG Wholesale expects its lift truck business in the Asia-Pacific
region will benefit from continued economic growth in Asia during the fourth
quarter of 2000, however, continued declines in the valuation of the Australian
dollar could negatively affect fourth quarter results.
NMHG Retail
NMHG Retail expects to continue incurring losses in the fourth quarter of 2000
related to existing and newly acquired dealerships in Europe. Losses in Europe
are primarily due to competitive pricing pressures, a weak Euro and investments
necessary to build a stronger retail dealer network.
Housewares
HB/PS expects revenue growth in the fourth quarter of 2000 compared with the
fourth quarter of 1999 due to unit volume growth of Hamilton Beach(R) and
Proctor-Silex(R) brand kitchen electric products as well as a full quarter of
shipments of General Electric-branded products to Wal*Mart. However, income may
be reduced by rising costs for petroleum-based resins used in manufacturing,
increased fuel transportation costs, as well as increased packaging costs and
continued price competition.
NACoal
NACoal expects to continue increasing production at its new Red Hills Mine in
Mississippi during the fourth quarter of 2000. NACoal expects the acquisitions
from Phillips Coal to be accretive to earnings once the Red Hills Power Plant
becomes fully operational, which is expected to be in mid-2001. NACoal also
anticipates continued cost increases at its San Miguel mine in the fourth
quarter 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
those forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as the date
hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Such risks and uncertainties with respect to each subsidiary's
operations include, without limitation:
NMHG: (1) changes in demand for lift trucks and related service parts on a
worldwide basis, (2) changes in sales prices, (3) delays in delivery or
increased costs of raw materials or sourced products and labor, (4) delays in
manufacturing and delivery schedules, (5) exchange rate fluctuations, changes in
foreign import tariffs and monetary policies and other changes in the regulatory
climate in the foreign countries in which NMHG operates and/or sells products,
(6) product liability or other litigation, warranty claims or other returns of
products, (7) ability to acquire dealerships acceptable to NMHG, (8) costs
related to the integration of acquisitions and (9) increased competition,
foreign currency exchange movements and/or changes in operating costs
attributable to the Euro.
OUTLOOK - continued
Housewares: (1) start-up costs associated with 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, including petroleum-based resins used in manufacturing, 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-branded
products being sold to Wal*Mart and (9) weather conditions or gasoline 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' fuel 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
lignite production at the Red Hills mine or delays in the start-up of the Red
Hills power plant.
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
OTHER INFORMATION
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 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 third
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NACCO Industries, Inc.
-----------------------
(Registrant)
Date November 13, 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.