SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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)
(440)449-9600
(Registrant's telephone number, including area code)
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 past 90 days.
YES X NO ____
Number of shares of Class A Common Stock outstanding at April 30, 2001:
6,551,550
Number of shares of Class B Common Stock outstanding at April 30, 2001:
1,641,232
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 2001 (Unaudited) and December 31, 2000
Unaudited Condensed Consolidated Statements of Income
for the Three Months Ended March 31, 2001 and 2000
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2001 and 2000
Unaudited Condensed Consolidated Statements of Changes
in Stockholders' Equity for the Three Months Ended
March 31, 2001 and 2000
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)
MARCH 31 DECEMBER 31
2001 2000
---------- ----------
(In millions)
ASSETS
Current Assets
Cash and cash equivalents $ 37.9 $ 33.7
Accounts receivable, net 289.0 315.4
Inventories 432.8 411.8
Prepaid expenses and other 55.5 54.8
---------- ----------
815.2 815.7
Property, Plant and Equipment, Net 705.9 710.7
Deferred Charges
Goodwill, net 439.8 442.9
Coal supply agreement, net 86.3 86.4
Deferred costs and other 60.1 62.1
Deferred income taxes 17.8 12.8
---------- ----------
604.0 604.2
Other Assets 66.8 63.3
---------- ----------
Total Assets $ 2,191.9 $ 2,193.9
========== ==========
See notes to unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
MARCH 31 DECEMBER 31
2001 2000
-------------- --------------
(In millions, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 271.1 $ 263.0
Revolving credit agreements 64.0 66.3
Current maturities of long-term debt 31.2 45.4
Current obligations of project mining subsidiaries 38.2 37.7
Accrued payroll 33.0 53.2
Other current liabilities 187.8 184.6
-------------- --------------
625.3 650.2
Long-term Debt- not guaranteed by
the parent company 477.7 450.0
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary 274.7 282.7
Self-insurance Reserves and Other 212.1 200.4
Minority Interest 4.0 4.2
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,551,150
shares outstanding (2000 - 6,529,143
shares outstanding) 6.6 6.5
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,641,632 shares outstanding
(2000 - 1,641,937 shares outstanding) 1.6 1.6
Capital in excess of par value 4.4 3.6
Retained earnings 626.2 614.9
Accumulated other comprehensive loss:
Foreign currency translation adjustment (31.4) (18.8)
Cumulative effect of change in accounting for derivatives
and hedging (3.4) --
Deferred loss on cash flow hedging (4.5) --
Minimum pension liability adjustment (1.4) (1.4)
-------------- --------------
598.1 606.4
-------------- --------------
Total Liabilities and Stockholders' Equity $ 2,191.9 $ 2,193.9
============== ==============
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
----------------------
2001 2000
---------- ----------
(In millions, except per
share data)
Net sales $ 710.2 $ 681.5
Other revenues 7.0 .4
---------- ----------
Revenues 717.2 681.9
Cost of sales 586.9 561.7
---------- ----------
Gross Profit 130.3 120.2
Selling, general and administrative expenses 93.2 89.4
Amortization of goodwill 4.0 4.0
---------- ----------
Operating Profit 33.1 26.8
Other expenses
Interest expense (11.4) (10.7)
Other - net 1.4 (1.6)
---------- ----------
(10.0) (12.3)
---------- ----------
Income Before Income Taxes, Minority Interest and Cumulative 23.1 14.5
Effect of Accounting Changes
Provision for income taxes 8.9 5.6
---------- ----------
Income Before Minority Interest and Cumulative Effect of
Accounting Changes 14.2 8.9
Minority interest .2 .3
---------- ----------
Income Before Cumulative Effect of Accounting Changes 14.4 9.2
Cumulative effect of accounting changes (net of $0.8 tax benefit) (1.3) ---
---------- ----------
Net Income $ 13.1 $ 9.2
========== ==========
Comprehensive Income $ (7.4) $ 4.7
========== ==========
Earnings per Share:
Income Before Cumulative Effect of Accounting Changes $ 1.76 $ 1.13
Cumulative effect of accounting changes (net-of-tax) (.16) ---
---------- ----------
Net Income $ 1.60 $ 1.13
========== ==========
Dividends per share $ 0.225 $ 0.215
========== ==========
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
------------------
2001 2000
------- --------
(In millions)
Operating Activities
Net income $ 13.1 $ 9.2
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 29.2 25.8
Deferred income taxes .7 (2.6)
Minority interest (.2) (.3)
Cumulative effect of accounting changes 1.3 --
Other non-cash items (.6) .9
Working capital changes, excluding the effects of business
acquisitions:
Accounts receivable 13.4 9.8
Inventories (25.7) (21.4)
Other current assets 1.6 5.7
Accounts payable and other liabilities (6.8) (11.1)
------- --------
Net cash provided by operating activities 26.0 16.0
Investing Activities
Expenditures for property, plant and equipment (20.9) (24.2)
Proceeds from the sale of assets 2.6 8.9
Acquisitions of businesses, net of cash acquired -- (3.8)
Investments in unconsolidated affiliates (.1) (2.9)
Other - net (4.5) (.3)
------- --------
Net cash used for investing activities (22.9) (22.3)
Financing Activities
Additions to long-term debt and revolving credit agreements 36.5 11.1
Reductions of long-term debt and revolving credit agreements (20.6) (2.5)
Additions to obligations of project mining subsidiaries 12.8 11.6
Reductions of obligations of project mining subsidiaries (24.0) (21.3)
Cash dividends paid (1.8) (1.7)
Deferred financing costs (.4) --
Other - net .7 .8
------- --------
Net cash provided by (used for) financing activities 3.2 (2.0)
Effect of exchange rate changes on cash (2.1) .2
------- --------
Cash and Cash Equivalents
Increase (decrease) for the period 4.2 (8.1)
Balance at the beginning of the period 33.7 36.2
------- --------
Balance at the end of the period $ 37.9 $ 28.1
======= ========
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
------------------
2001 2000
-------- --------
(In millions, except per share data)
Class A Common Stock
Beginning balance $ 6.5 $ 6.5
Shares issued under stock option and compensation plans .1 --
-------- --------
6.6 6.5
-------- --------
Class B Common Stock
Beginning balance 1.6 1.6
Other -- .1
-------- --------
1.6 1.7
-------- --------
Capital in Excess of Par Value
Beginning balance 3.6 2.7
Shares issued under stock option and compensation plans .8 .7
-------- --------
4.4 3.4
-------- --------
Retained Earnings
Beginning balance 614.9 554.4
Net income 13.1 9.2
Cash dividends on Class A and Class B common stock:
2001 $.225 per share (1.8) --
2000 $.215 per share -- (1.7)
-------- --------
626.2 561.9
-------- --------
Accumulated Other Comprehensive Income (Loss)
Beginning balance (20.2) (3.0)
Foreign currency translation adjustment (12.6) (4.5)
Cumulative effect of change in accounting for derivatives and
hedging (3.4) --
Reclassification of hedging activity into earnings .1 --
Current period cash flow hedging activity (4.6) --
-------- --------
(40.7) (7.5)
-------- --------
Total Stockholders' Equity $ 598.1 $ 566.0
======== ========
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," the parent company) and its
wholly owned subsidiaries ("NACCO Industries, Inc. and Subsidiaries," or the
"Company"). Intercompany accounts and transactions have been eliminated. NACCO
is a holding company with subsidiaries that operate in three principal
industries: lift trucks, housewares and lignite mining. The Company manages its
subsidiaries by industry; however, the Company segments its lift truck
operations into two components: wholesale manufacturing and retail distribution.
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, services
and leases a full line of lift trucks and service parts marketed worldwide under
the Hyster(R) and Yale(R) brand names. 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,
service and rental of Hyster and Yale lift trucks and related service parts by
wholly owned retail dealerships. NACCO Housewares Group ("Housewares") consists
of Hamilton BeachoProctor-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 providers. 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 accounting principles generally accepted in the United States. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial position of the
Company as of March 31, 2001 and the results of its operations, cash flows and
changes in stockholders' equity for the three month periods ended March 31, 2001
and 2000 have been included.
Operating results for the three month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the remainder of
the year ended December 31, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto incorporated by
reference into the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000. Certain amounts in the prior period's Unaudited
Condensed Consolidated Statement of Income have been reclassified to conform to
the current period's presentation.
Note 2 - Inventories
Inventories are summarized as follows:
(UNAUDITED) (AUDITED)
MARCH 31 DECEMBER 31
2001 2000
-------- --------
Manufactured inventories:
Finished goods and service parts -
NMHG $ 111.2 $ 103.1
Housewares 69.1 53.2
-------- --------
180.3 156.3
Raw materials and work in process -
NMHG Wholesale 157.5 157.9
Housewares 16.8 17.8
-------- --------
174.3 175.7
-------- --------
Total manufactured inventories 354.6 332.0
Retail inventories:
NMHG Retail 32.3 36.8
Housewares 20.7 19.4
-------- --------
Total retail inventories 53.0 56.2
Coal - NACoal 12.7 12.0
Mining supplies - NACoal 23.1 23.7
-------- --------
Total inventories at FIFO 443.4 423.9
LIFO reserve -
NMHG (13.1) (14.8)
Housewares 2.5 2.7
-------- --------
(10.6) (12.1)
-------- --------
$ 432.8 $ 411.8
======== ========
The cost of certain manufactured and retail inventories has been determined
using the LIFO method. At March 31, 2001 and December 31, 2000, 65 percent and
66 percent, respectively, of total inventories were determined using the LIFO
method.
Note 3 - Restructuring Charge
NMHG: In 2000, the Board of Directors approved management's plan to transfer
manufacturing activities from NMHG's Danville, Illinois, assembly plant to its
other global manufacturing plants. The adoption of this plan resulted in $11.7
million of costs accrued in 2000, relating to retirement costs, medical costs
and employee severance to be paid to approximately 425 manufacturing and office
personnel. All costs were accrued as a result of existing contractual
obligations. No payments have been made during the first quarter of 2001. In
addition, no other adjustments have been made to the amount accrued as of
December 31, 2000. However, approximately $1.8 million of costs associated with
the Danville phase-out, which were not eligible for accrual as of December 31,
2000, were expensed during the first quarter of 2001.
The Company estimates that additional costs of $12.4 million will be recognized
during the remainder of 2001 and $2.3 million will be recognized during 2002
related to employee benefits, relocation, plant reconfiguration and productivity
losses during the transition of manufacturing activities from Danville,
Illinois, to other manufacturing plants. These additional estimated costs have
not been accrued as of March 31, 2001. Upon complete implementation of the
phase-out plan, which is expected to be in 2002, annual cost savings are
estimated to be $15.0 million as a result of anticipated improved manufacturing
efficiencies. However, these estimates could change during the phase-out period.
Housewares: During the first quarter of 2001, HB/PS made severance payments of
$0.3 million to approximately 10 manufacturing employees related to
restructuring programs initiated prior to January 1, 2001. See additional
discussion of these restructuring programs on page 50 of the Company's 2000
Annual Report, which is incorporated by reference into the Company's Form 10-K
for the fiscal year ended December 31, 2000. The Company expects to finalize
payments relating to these restructuring programs during the first half of 2001.
Note 4 - Accounting Changes
Derivatives and Hedging
On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain 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 are accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting.
As a result of the adoption of SFAS No. 133, the Company recognized a cumulative
effect of a change in accounting charge to the Unaudited Condensed Consolidated
Statement of Income for the first quarter of 2001 of $0.9 million, net of $0.5
million of tax benefit, relating primarily to certain interest rate swap
agreements held by NMHG Wholesale which did not qualify for hedge accounting
treatment at January 1, 2001. In addition, effective January 1, 2001, the
Company recognized a cumulative effect of a change in accounting charge against
the accumulated other comprehensive loss section ("OCL") of stockholders' equity
included in the Unaudited Condensed Consolidated Balance Sheet at March 31, 2001
of $3.4 million, net of $2.0 million of tax benefit, relating to net deferred
losses on derivative instruments that qualify for hedge accounting treatment
under SFAS No. 133.
See Note 2, "Accounting Policies - Financial Instruments and Derivative
Financial Instruments," on pages 48 and 49 of the Company's 2000 Annual Report,
which is incorporated by reference into the Company's Form 10-K for the fiscal
year ended December 31, 2000, for a discussion of the Company's use of, and
objectives for, holding derivative financial instruments. Interest rate swap
agreements and foreign currency forward contracts held by the Company have been
designated as hedges of forecasted cash flows. The Company does not currently
hold any nonderivative instruments designated as hedges or any derivatives
designated as fair value hedges as defined in SFAS No. 133.
NMHG Wholesale holds certain interest rate swap agreements that do not qualify
for hedge accounting treatment according to the strict guidance of SFAS No. 133.
As such, the change in the mark-to-market amount of these swaps will be
recognized in the income statement every quarter. Although these interest rate
swap agreements to not qualify for hedge accounting, the Company believes that
these interest rate swap agreements are reasonably effective at economically
hedging the Company's risk to changes in the variable rate of interest. The
post-cumulative effect adjustment to the Unaudited Condensed Consolidated
Statement of Income for the first quarter of 2001 for those interest rate swap
agreements that did not qualify for hedge treatment and for the ineffective
portion of certain interest rate swap agreements was included in other-net and
amounted to $0.9 million ($0.5 million after-tax).
For those interest rate swap agreements that qualify for hedge accounting
treatment, the mark-to-market effect has been included in OCL. Based upon market
valuations at March 31, 2001, approximately $3.0 million of the net deferred
loss in OCL is expected to be reclassified into the statement of income over the
next 12 months, as cash flow payments are made in accordance with the interest
rate swap agreements.
For the first quarter of 2001, there was no ineffectiveness of foreign currency
forward contracts that would have resulted in income statement recognition.
Foreign currency forward contracts are used to hedge transactions expected to
occur within the next 12 months. Based on market valuations at March 31, 2001,
the amount of net deferred gain included in OCL at March 31, 2001 of $0.7
million is expected to be reclassified into the statement of income over the
next 12 months, as those transactions occur.
Defined Benefit Pension Plans
On January 1, 2001, the Company recognized a cumulative effect of a change in
accounting charge of $0.4 million, net of $0.3 million tax benefit, relating to
a change in the method of calculating pension costs for the defined benefit
pension plan in the United Kingdom. Prior to January 1, 2001, actuarially
determined net gains and losses of the United Kingdom plan were recognized in
full as a component of net pension cost in the year incurred. However,
actuarially determined net gains and losses of all other defined benefit pension
plans of the Company are amortized and included as a component of net pension
cost over four years. Both of these methods are permissible pursuant to SFAS No.
87, "Employers' Accounting for Pensions." However, effective January 1, 2001,
the Company changed the method of recognition of actuarially determined net
gains and losses of the United Kingdom plan to conform with the methodology
utilized by all other defined benefit plans of the Company. This change in
accounting was made to achieve consistency of application of this accounting
principle among all members of the consolidated group, which the Company
believes is the preferred application of accounting principles generally
accepted in the United States.
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 derived based on current market
prices 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.
THREE MONTHS ENDED
MARCH 31
------------------
2001 2000
-------- --------
REVENUES FROM EXTERNAL CUSTOMERS
NMHG Wholesale $ 442.9 $ 438.0
NMHG Retail 75.3 72.8
NMHG Eliminations (22.6) (28.3)
-------- --------
NMHG Consolidated 495.6 482.5
Housewares 138.3 127.9
NACoal 83.3 71.5
-------- --------
$ 717.2 $ 681.9
======== ========
GROSS PROFIT
NMHG Wholesale $ 72.6 $ 72.9
NMHG Retail 15.5 14.3
NMHG Eliminations .7 .2
-------- --------
NMHG Consolidated 88.8 87.4
Housewares 21.8 21.5
NACoal 19.8 11.3
NACCO and Other (.1) ---
-------- --------
$ 130.3 $ 120.2
======== ========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 43.9 $ 45.5
NMHG Retail 19.6 17.3
NMHG Eliminations (.3) (.1)
-------- --------
NMHG Consolidated 63.2 62.7
Housewares 24.0 21.2
NACoal 2.9 3.1
NACCO and Other 3.1 2.4
-------- --------
$ 93.2 $ 89.4
======== ========
AMORTIZATION OF GOODWILL
NMHG Wholesale $ 2.9 $ 2.9
NMHG Retail .3 .3
-------- --------
NMHG Consolidated 3.2 3.2
Housewares .8 .8
-------- --------
$ 4.0 $ 4.0
======== ========
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED
MARCH 31
-----------------
2001 2000
------- -------
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 25.8 $ 24.5
NMHG Retail (4.4) (3.3)
NMHG Eliminations 1.0 .3
------- -------
NMHG Consolidated 22.4 21.5
Housewares (3.0) (.5)
NACoal 16.9 8.2
NACCO and Other (3.2) (2.4)
------- -------
$ 33.1 $ 26.8
======= =======
OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION
NMHG Wholesale $ 28.7 $ 27.4
NMHG Retail (4.1) (3.0)
NMHG Eliminations 1.0 .3
------- -------
NMHG Consolidated 25.6 24.7
Housewares (2.2) .3
NACoal 16.9 8.2
NACCO and Other (3.2) (2.4)
------- -------
$ 37.1 $ 30.8
======= =======
INTEREST EXPENSE
NMHG Wholesale $ (2.6) $ (3.4)
NMHG Retail (1.5) (1.0)
NMHG Eliminations (1.1) (.5)
------- -------
NMHG Consolidated (5.2) (4.9)
Housewares (1.7) (1.6)
NACoal (.3) ---
NACCO and Other --- (.2)
Eliminations --- .2
------- -------
(7.2) (6.5)
Project mining subsidiaries (4.2) (4.2)
------- -------
$ (11.4) $ (10.7)
======= =======
INTEREST INCOME
NMHG Wholesale $ .9 $ .3
NMHG Eliminations --- .1
------- -------
NMHG Consolidated .9 .4
NACoal .2 .2
Eliminations --- (.2)
------- -------
$ 1.1 $ .4
======= =======
OTHER-NET, INCOME (EXPENSE), EXCLUDING INTEREST INCOME
NMHG Wholesale $ (.9) $ (3.5)
Housewares (.7) (.6)
NACoal (.3) (.2)
NACCO and Other 2.2 2.3
------- -------
$ .3 $ (2.0)
======= =======
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED
MARCH 31
-----------------
2001 2000
------- -------
INCOME TAX PROVISION (BENEFIT)
NMHG Wholesale $ 9.7 $ 7.4
NMHG Retail (1.9) (1.3)
NMHG Eliminations --- (.1)
------- -------
NMHG Consolidated 7.8 6.0
Housewares (2.3) (1.1)
NACoal 3.1 .7
NACCO and Other .3 ---
------- -------
$ 8.9 $ 5.6
======= =======
NET INCOME (LOSS)
NMHG Wholesale $ 12.4 $ 10.8
NMHG Retail (4.0) (3.0)
NMHG Eliminations (.1) ---
------- -------
NMHG Consolidated 8.3 7.8
Housewares (3.1) (1.6)
NACoal 9.2 3.3
NACCO and Other (1.3) (.3)
------- -------
$ 13.1 $ 9.2
======= =======
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG Wholesale $ 11.0 $ 10.3
NMHG Retail 3.7 3.2
------- -------
NMHG Consolidated 14.7 13.5
Housewares 5.6 4.6
NACoal 1.2 .7
NACCO and Other .1 ---
------- -------
21.6 18.8
Project mining subsidiaries 7.6 7.0
------- -------
$ 29.2 $ 25.8
======= =======
CAPITAL EXPENDITURES
NMHG Wholesale $ 9.2 $ 11.4
NMHG Retail .5 4.8
------- -------
NMHG Consolidated 9.7 16.2
Housewares 4.4 5.9
NACoal 5.2 1.5
NACCO and Other --- .1
------- -------
19.3 23.7
Project mining subsidiaries 1.6 .5
------- -------
$ 20.9 $ 24.2
======= =======
FINANCIAL SUMMARY - continued
MARCH 31 DECEMBER 31
2001 2000
---------- ----------
TOTAL ASSETS
NMHG Wholesale $ 1,197.1 $ 1,167.2
NMHG Retail 213.3 232.8
NMHG Eliminations (168.3) (158.3)
---------- ----------
NMHG Consolidated 1,242.1 1,241.7
Housewares 365.6 366.4
NACoal 205.9 204.1
NACCO and Other 35.8 41.8
---------- ----------
1,849.4 1,854.0
Project mining subsidiaries 383.9 389.9
---------- ----------
2,233.3 2,243.9
Consolidating Eliminations (41.4) (50.0)
---------- ----------
$ 2,191.9 $ 2,193.9
========== ==========
================
NMHG HOLDING CO.
================
NMHG designs, engineers, manufactures, sells, services and leases a full line of
lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R)
brand names.
FINANCIAL REVIEW
The segment and geographic results of operations for NMHG were as follows for
the three months ended March 31:
2001 2000
-------------- --------------
Revenues
Wholesale
Americas $ 327.5 $ 320.9
Europe, Africa and Middle East 99.6 99.1
Asia-Pacific 15.8 18.0
--------- ---------
442.9 438.0
--------- ---------
Retail (net of eliminations)
Americas 8.4 7.9
Europe, Africa and Middle East 24.9 21.1
Asia-Pacific 19.4 15.5
--------- ---------
52.7 44.5
--------- ---------
NMHG Consolidated $ 495.6 $ 482.5
========= =========
Operating profit (loss)
Wholesale
Americas $ 25.8 $ 24.3
Europe, Africa and Middle East .7 .9
Asia-Pacific (.7) (.7)
--------- ---------
25.8 24.5
--------- ---------
Retail (net of eliminations)
Americas (.9) (.8)
Europe, Africa and Middle East (3.9) (2.4)
Asia-Pacific 1.4 .2
--------- ---------
(3.4) (3.0)
--------- ---------
NMHG Consolidated $ 22.4 $ 21.5
========= =========
Operating profit (loss) excluding
goodwill amortization
Wholesale
Americas $ 27.8 $ 26.2
Europe, Africa and Middle East 1.5 1.8
Asia-Pacific (.6) (.6)
--------- ---------
28.7 27.4
--------- ---------
Retail (net of eliminations)
Americas (.8) (.6)
Europe, Africa and Middle East (3.8) (2.3)
Asia-Pacific 1.5 .2
--------- ---------
(3.1) (2.7)
--------- ---------
NMHG Consolidated $ 25.6 $ 24.7
========= =========
Interest Expense
Wholesale $ (2.6) $ (3.4)
Retail (net of eliminations) (2.6) (1.5)
--------- ---------
NMHG Consolidated $ (5.2) $ (4.9)
========= =========
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
2001 2000
-------- -------
Other-net
Wholesale $ --- $ (3.2)
Retail (net of eliminations) --- .1
-------- -------
NMHG Consolidated $ --- $ (3.1)
======== =======
Net Income (loss)
Wholesale $ 12.4 $ 10.8
Retail (net of eliminations) (4.1) (3.0)
-------- -------
NMHG Consolidated $ 8.3 $ 7.8
======== =======
Effective tax rate
Wholesale 41.8% 41.3%
Retail (including eliminations) 31.7% 31.8%
NMHG Consolidated 45.3% 44.4%
First Quarter of 2001 Compared with First Quarter of 2000
NMHG Wholesale: Revenues increased to $442.9 million in the first quarter of
2001, up 1.1 percent from $438.0 million in the first quarter of 2000. Revenue
growth was primarily driven by increased unit volume in the Americas and Europe
and price increases in the Americas. However, revenue growth was largely offset
by adverse currency effects in Europe and, to a lesser extent, by reduced parts
sales in the Americas. Worldwide unit volume increased 2.0 percent to 21,624
units shipped in the first quarter of 2001 from 21,193 units shipped in the
first quarter of 2000.
Operating profit increased to $25.8 million in the first quarter of 2001 from
$24.5 million in the first quarter of 2000. Operating profit as a percentage of
sales increased to 5.8 percent in the first quarter of 2001 up from 5.6 percent
in the first quarter of 2000. Increased operating profit was primarily driven by
increased operating profit in the Americas which resulted from favorable pricing
and currency effects, somewhat offset by unfavorable product mix and reduced
sales of service parts.
Net income improved to $12.4 million in the first quarter of 2001 from $10.8
million in the first quarter of 2000 as a result of the factors affecting
operating profit and due to an increase other income and decreased interest
expense allocated to NMHG Wholesale, partially offset by a $1.3 million
after-tax charge for the cumulative effect of accounting changes in the first
quarter of 2001. See Note 4 to the Unaudited Condensed Consolidated Financial
Statements for a discussion of these accounting changes. Other-net improved in
the first quarter of 2001 primarily due to insurance proceeds received in the
first quarter of 2001 relating to flood damage in September 2000 at NMHG's
Sumitomo-NACCO joint venture in Japan and increased equity earnings from
unconsolidated affiliates.
The worldwide backlog level decreased to 17,800 units at March 31, 2001 from
23,200 units at March 31, 2000 and 21,800 units at December 31, 2000. The
backlog has declined due to a reduction in incoming orders in the Americas and,
to a lesser degree, in Europe. NMHG believes that the decline in incoming orders
in the Americas is primarily due to reduced demand resulting from the slowing of
the U.S. economy.
NMHG HOLDING CO. - continued
FINANCIAL REVIEW - continued
NMHG Retail: Revenues increased to $52.7 million in the first quarter of 2001
from $44.5 million in the first quarter of 2000. This increase is primarily due
to revenues generated by retail dealerships acquired during the last nine months
of 2000. Operating loss and net loss in the first quarter of 2001 were $3.4
million and $4.1 million, respectively, compared with operating loss and net
loss of $3.0 million and $3.0 million, respectively, in the first quarter of
2000. The increased operating loss and net loss was primarily due to increased
price competition and reduced parts and rental income in Europe, partially
offset by improved results in Asia-Pacific. Increased net loss was also driven
by an increase in interest expense allocated to NMHG Retail.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $9.2 million for NMHG
Wholesale and $0.5 million for NMHG Retail during the first three months of
2001. These capital expenditures include investments in information systems,
tooling for new products, machinery, equipment, and lease and rental fleet. It
is estimated that NMHG's capital expenditures for the remainder of 2001 will be
approximately $38.8 million for NMHG Wholesale and $3.2 million for NMHG Retail.
Planned expenditures for the remainder of 2001 include manufacturing capacity
expansion at existing facilities resulting from the phase-out of the Danville
manufacturing plant, investments in worldwide information systems, tooling for
new products and additions to retail lease and rental fleet. The principal
sources of financing for these capital expenditures and acquisitions are
internally generated funds and bank borrowings.
NMHG Wholesale has a $350.0 million revolving credit facility (the "Facility")
that expires June 2002, but may be extended annually, for one-year periods, with
the consent of the bank group. In addition, the Facility has performance-based
pricing which sets interest rates based upon the achievement of certain
financial performance targets. The Facility permits NMHG Wholesale to advance
funds to NMHG Retail. Advances from NMHG Wholesale are the primary sources of
financing for NMHG Retail. At March 31, 2001, NMHG had available $80.0 million
of its $350.0 million revolving credit facility. NMHG also has separate
facilities with availability, net of limitations, of $53.0 million, of which
$24.5 million was available at March 31, 2001 and maintains additional
uncommitted lines of credit, of which $11.0 million was available at March 31,
2001. NMHG believes that funds available under its credit facilities at March
31, 2001 of $115.5 million and operating cash flows are sufficient to finance
all of its operating needs and commitments arising during the foreseeable
future.
NMHG Wholesale's capital structure is presented below:
MARCH 31 DECEMBER 31
2001 2000
-------- --------
NMHG Wholesale:
Total net tangible assets $ 300.9 $ 283.2
Advances to NMHG Retail 135.1 127.0
Advances to NACCO 10.2 3.0
Goodwill at cost 446.1 446.1
-------- --------
Net assets before goodwill amortization 892.3 859.3
Accumulated goodwill amortization (132.9) (129.6)
Total debt (305.4) (277.8)
Minority interest (2.9) (3.1)
-------- --------
Stockholder's equity $ 451.1 $ 448.8
======== ========
Debt to total capitalization 40% 38%
NMHG HOLDING CO. - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
The increase in net tangible assets of $17.7 million is primarily due to a $10.4
million increase in cash and cash equivalents and a $10.3 million decrease in
other current liabilities, partially offset by a $4.6 million decrease to net
tangible assets relating to the mark-to-market of derivatives held at March 31,
2001, as required by SFAS No. 133, which became effective January 1, 2001.
Debt increased to support increases in total net tangible assets, advances to
NMHG Retail and advances to NACCO. Stockholder's equity increased only slightly
as net income was almost entirely offset by adverse currency movements
recognized in the accumulated foreign currency translation adjustment and a
reduction in other accumulated comprehensive income relating to the adoption of
SFAS No. 133. See Note 4 to the Unaudited Condensed Consolidated Financial
Statements for a discussion of the adoption of SFAS No. 133.
NMHG Retail's capital structure is presented below:
MARCH 31 DECEMBER 31
2001 2000
-------- --------
NMHG Retail:
Total net tangible assets $ 115.2 $ 133.0
Advances from NMHG Wholesale (135.1) (127.0)
Goodwill at cost 46.4 44.2
-------- --------
Net assets before goodwill amortization 26.5 50.2
Accumulated goodwill amortization (5.9) (4.6)
Total debt (11.4) (27.1)
-------- --------
Stockholder's equity $ 9.2 $ 18.5
======== ========
Debt to total capitalization 55% 59%
The decrease in total net tangible assets of $17.8 million is primarily due to a
$9.3 million decrease in accounts receivable and a $4.5 million decrease in
inventory. The decreases in accounts receivable and inventory primarily result
from efforts to improve working capital. Total debt decreased due to the
decrease in net tangible assets and due to an increase in advances from NMHG
Wholesale.
======================
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 months
ended March 31:
2001 2000
-------- --------
Revenues $ 138.3 $ 127.9
Operating loss $ (3.0) $ (.5)
Operating profit (loss) excluding
goodwill amortization $ (2.2) $ .3
Interest expense $ (1.7) $ (1.6)
Other-net $ (.7) $ (.6)
Net loss $ (3.1) $ (1.6)
Effective tax rate 42.6% 40.7%
First Quarter of 2001 Compared with First Quarter of 2000
Housewares' revenues increased to $138.3 million in the first quarter of 2001,
up 8.1 percent from $127.9 million in the first quarter of 2000. Revenue growth
was primarily due to an 18.5 percent growth in unit volume at HB/PS primarily
resulting from additional sales of General Electric-branded products to Wal*Mart
and the nationwide introduction of TrueAir(R) home odor eliminators. Increased
revenues at KCI, which was primarily driven by an increase in the number of
stores (158 at March 31, 2001 compared with 150 at March 31, 2000), also
contributed slightly to Housewares' revenues growth.
Operating loss in the seasonally weak first quarter was $3.0 million in the
first quarter of 2001 compared with $0.5 million in the first quarter of 2000.
Improved operating profit from volume growth was completely offset by increased
operating and manufacturing costs and, to a lesser degree, a decrease in the
average sales price. Increased operating and manufacturing costs were driven by
(i) advertising costs incurred to support the TrueAir product introduction, (ii)
manufacturing inefficiencies resulting from late vendor deliveries of a key
component part at HB/PS, (iii) increased transportation and warehousing costs
and (iv) a weak retail environment at KCI. The effect of these increased costs
was partially offset by favorable materials pricing and favorable Mexican peso
exchange rates at HB/PS.
Net loss of $3.1 million for the first quarter of 2001 increased as compared
with a net loss of $1.6 million for the first quarter of 2000 primarily due to
the factors discussed above and from a nonrecurring gain on the sale of assets
in the first quarter of 2000.
NACCO HOUSEWARES GROUP - continued
LIQUIDITY AND CAPITAL RESOURCES
Housewares' expenditures for property, plant and equipment were $4.4 million
during the first three months of 2001 and are estimated to be $17.6 million for
the remainder of 2001. These planned capital expenditures are primarily for
tooling and equipment designed for new products, including the General
Electric-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 March 31, 2001, HB/PS had $48.3 million available under this facility. In
addition, HB/PS has separate uncommitted facilities of which $27.3 million was
available at March 31, 2001.
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 at March 31, 2001 of $75.6
million 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:
MARCH 31 DECEMBER 31
2001 2000
-------- --------
Total net tangible assets $ 191.2 $ 195.1
Goodwill at cost 123.5 123.5
-------- --------
Net assets before goodwill amortization 314.7 318.6
Accumulated goodwill amortization (37.4) (36.7)
Total debt (113.2) (111.0)
-------- --------
Stockholder's equity $ 164.1 $ 170.9
======== ========
Debt to total capitalization 41% 39%
The decline in stockholder's equity at March 31, 2001 compared with December 31,
2000 is due to the $3.1 million net loss, a reduction in other accumulated
comprehensive income relating to the adoption of SFAS No. 133 and dividends paid
to NACCO. See Note 4 to the Unaudited Condensed Consolidated Financial
Statements for a discussion of the adoption of SFAS No. 133.
===================================
THE NORTH AMERICAN COAL CORPORATION
===================================
NACoal mines and markets lignite for use primarily as fuel for power providers.
The lignite is surface mined in North Dakota, Texas, Mississippi and Louisiana.
Total coal reserves approximate 2.8 billion tons, with 1.3 billion tons
committed to customers pursuant to long-term contracts. NACoal operates six
wholly owned lignite mines: The Coteau Properties Company ("Coteau"), The
Falkirk Mining Company ("Falkirk"), The Sabine Mining Company ("Sabine"), San
Miguel Lignite Mine ("San Miguel"), Red River Mining Company ("Red River") and
Mississippi Lignite Mining Company ("MLMC"). NACoal also provides dragline
mining services ("Florida dragline operations") for a limerock quarry near
Miami, Florida.
NACoal's subsidiaries, Coteau, Falkirk and Sabine, are termed "project mining
subsidiaries" because they 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 the project mining subsidiaries, 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 and because the operating results of the
project mining subsidiaries represent a substantial portion of NACoal's revenues
and profits, operating results are best analyzed in terms of lignite tons sold,
income before taxes and net income.
The operating results for the Florida dragline operations, San Miguel, Red River
and MLMC, which do not operate on a cost-plus basis, are included in other
mining operations.
During the first quarter of 2001, MLMC delivered a relatively small amount of
lignite to the Red Hills power plant, which is in the final stages of
construction, for testing purposes. The power plant is expected to become fully
operational by mid-2001.
FINANCIAL REVIEW
Lignite tons sold by NACoal's operating lignite mines were as follows for the
three months ended March 31:
2001 2000
----------- -----------
Coteau 4.3 4.4
Falkirk 1.8 2.0
Sabine .7 1.0
San Miguel .6 .6
Red River .3 .1
MLMC .1 ---
----------- -----------
Total lignite 7.8 8.1
=========== ===========
The Florida dragline operations delivered 1.9 million cubic yards of limerock in
each of the three months ended March 31, 2001 and March 31, 2000.
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 months ended March 31:
2001 2000
------- --------
Revenues
Project mines $ 64.9 $ 63.2
Other mining operations 11.4 7.9
------- --------
76.3 71.1
Liquidated damage payments recorded by MLMC 5.1 ---
Arbitration award received by San Miguel 1.1 ---
Royalties and other .8 .4
------- --------
$ 83.3 $ 71.5
======= ========
Income before taxes
Project mines $ 6.8 $ 6.8
Other mining operations 6.9 (.7)
------- --------
Total from operating mines 13.7 6.1
Royalties and other income, net .1 (.3)
Other operating expenses (1.5) (1.8)
------- --------
12.3 4.0
Provision for taxes 3.1 .7
------- --------
Net income $ 9.2 $ 3.3
======= ========
First Quarter of 2001 Compared with First Quarter of 2000
Revenues for the first quarter of 2001 increased to $83.3 million, up 16.5
percent from $71.5 million in the first quarter of 2000. Increased revenues in
the first quarter of 2001 as compared with the first quarter of 2000 is
primarily due to (i) $5.1 million of contractual liquidated damage payments
recorded by MLMC due to a delay of the commercial operating start-up date of the
Red Hills power plant, (ii) increased tons sold at Red River and (iii) an
arbitration award received by San Miguel relating to tons sold in prior periods
in excess of contractual limits. Revenues from other mining operations also
increased as a result of initial tons of lignite sold by MLMC. Tonnage volume
decreased at each of the project mining subsidiaries due to a customer's plant
outage at Falkirk and reduced customer requirements at Coteau and Sabine.
Although tonnage volume decreased, revenues from the project mining subsidiaries
increased primarily as a result of an increase in pass through costs.
Income before taxes increased to $13.7 million in the first quarter of 2001, up
from $6.1 million in the first quarter of 2000. This increase is primarily due
to (i) the contractual liquidated damage payments recorded by MLMC, (ii)
increased tonnage volume at Red River, (iii) the arbitration award received by
San Miguel and (iv) initial lignite tons sold by MLMC. Net income in the first
quarter of 2001 increased to $9.2 million from $3.3 million in the first quarter
of 2000 as a result of these factors.
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 months ended March 31 are as follows:
2001 2000
------- -------
Interest expense
Project mining subsidiaries $ (4.2) $ (4.2)
Other mining operations (.3) ---
------- -------
$ (4.5) $ (4.2)
======= =======
Other-net
Project mining subsidiaries $ .1 $ .1
Other mining operations (.2) (.1)
------- -------
$ (.1) $ ---
======= =======
Effective tax rate 25.2% 17.5%
Interest expense at other mining operations increased slightly due to debt
allocated to Red River as a result of the October 2000 acquisition of the
remaining 50 percent interest in Red River. Interest expense on debt allocated
to finance MLMC is capitalized as part of the mine development activities. In
the first quarter of 2001, $3.2 million of interest was capitalized compared
with $0.3 million in the first quarter of 2000. The increase in interest
capitalized is due to the increase in debt allocated to MLMC as a result of the
October 2000 acquisition of the remaining 75 percent interest in MLMC. Over the
next year, as activities at MLMC shift from development to production, the
amount of interest expensed is expected to increase as the amount of interest
eligible to be capitalized decreases.
The increase in the effective tax rate in the first quarter of 2001 as compared
with the first quarter of 2000 is primarily due to a greater proportion of
income from operations not currently eligible to book a benefit from percentage
depletion.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $6.8 million during the
first three months of 2001. NACoal estimates that its capital expenditures for
the remainder of 2001 will be $20.4 million, of which $12.4 million relates to
the development, establishment and improvement of the project mining
subsidiaries' mines and are financed or guaranteed by the utility customers. The
remaining $8.0 million of capital expenditures for 2001 primarily relates to
continued development at MLMC.
NACoal's non-project-mine financing needs are provided by a revolving line of
credit of up to $60.0 million and a term loan of $115.0 million (the "NACoal
Facility"). The NACoal Facility requires annual term loan repayments of $15.0
million, with a final term loan repayment of $55.0 million in October 2005. The
revolving credit facility of $60.0 million is available until the facility's
expiration in October 2005. The NACoal Facility has performance-based pricing
which sets interest rates based upon achieving various levels of Debt to EBITDA
ratios, as defined therein. At March 31, 2001, NACoal had $32.3 million of its
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 based on
their earnings.
THE NORTH AMERICAN COAL CORPORATION - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NACoal believes that funds available under its revolving credit facility,
operating cash flows and financing provided by the project mining subsidiaries'
customers are sufficient to finance all of its term loan principal repayments
and its operating needs and commitments arising during the foreseeable future.
NACoal's capital structure, excluding the project mining subsidiaries, is
presented below:
MARCH 31 DECEMBER 31
2001 2000
-------- --------
Investment in project mining subsidiaries $ 3.7 $ 3.8
Other net tangible assets 92.5 95.2
Coal supply agreement, net 86.3 86.4
-------- --------
Net tangible assets 182.5 185.4
Advances from NACCO (2.8) (8.4)
Debt (142.9) (145.8)
-------- --------
Stockholder's equity $ 36.8 $ 31.2
======== ========
Debt to total capitalization 80% 82%
The increase in stockholder's equity is due to $9.2 million of net income for
the first quarter of 2001 partially offset by a reduction in other accumulated
comprehensive income relating to the adoption of SFAS No. 133. See Note 4 to the
Unaudited Condensed Consolidated Financial Statements for a discussion of the
adoption of SFAS No. 133.
===============
NACCO AND OTHER
===============
FINANCIAL REVIEW
NACCO and Other includes the parent company operations and Bellaire Corporation
("Bellaire"), a non-operating subsidiary of NACCO. While Bellaire's results are
immaterial, it has significant long-term liabilities related to closed mines,
primarily from former eastern U.S. underground coal-mining activities. Cash
payments related to Bellaire's obligations, net of internally generated cash,
are funded by NACCO and historically have not been material.
The results of operations at NACCO and Other were as follows for the three
months ended March 31:
2001 2000
------ ------
Revenues $ -- $ --
Operating loss $ (3.2) $ (2.4)
Other income, net $ 2.2 $ 2.1
Net loss $ (1.3) $ (.3)
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, Housewares and NACoal allow for
the payment to NACCO of dividends and advances under certain circumstances.
Dividends, advances and management fees from its subsidiaries are the primary
sources of cash for NACCO.
The Company believes that funds available under credit facilities, anticipated
funds to be generated from operations and the utility customers' funding of the
project mining subsidiaries are sufficient to finance all of its scheduled
principal repayments, operating needs and commitments arising during the
foreseeable future.
NACCO's consolidated capital structure is presented below:
MARCH 31 DECEMBER 31
2001 2000
---------- ----------
Total net tangible assets $ 691.4 $ 688.1
Coal supply agreement, net 86.3 86.4
Goodwill at cost 616.0 613.8
---------- ----------
Net assets before goodwill amortization 1,393.7 1,388.3
Accumulated goodwill amortization (176.2) (170.9)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (572.9) (561.7)
Closed mine obligations (Bellaire), including the
United Mine Worker retirees' medical fund, net-of-tax (42.5) (45.1)
Minority interest (4.0) (4.2)
---------- ----------
Stockholders' equity $ 598.1 $ 606.4
========== ==========
Debt to total capitalization 49% 48%
NACCO AND OTHER - continued
FINANCIAL REVIEW - continued
EFFECTS OF FOREIGN CURRENCY
NMHG and Housewares operate internationally and enter into transactions
denominated in foreign currencies. As such, the Company' financial results are
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 and Housewares are disclosed above. See also Item 3, "Quantitative and
Qualitative Disclosures About Market Risk."
EURO CONVERSION
See pages 39 and 40 of the Company's 2000 Annual Report, which is incorporated
by reference into the Company's Form 10-K for the fiscal year ended December 31,
2000, 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 Wholesale
Americas: NMHG Wholesale expects lift truck shipments in the Americas in 2001 to
decline from 2000 record levels as lift truck bookings are affected by a
weakening U.S. economy. Previous pricing actions, lower product costs and
manufacturing initiatives are expected to offset to some degree the effect of
lower shipments on operating results. Worldwide, NMHG Wholesale expects to
continue to incur expenses estimated at $7.7 million after-tax for the remainder
of 2001 and $1.5 million after-tax for 2002 as part of the previously announced
phase-out of its Danville, Illinois, assembly plant. Estimated worldwide cost
savings as a result of the Danville plant phase-out are expected to total $9.3
million after-tax in 2002 and thereafter.
Europe: NMHG Wholesale expects lift truck demand to remain within the range of
current levels for 2001, although the continued weakness of the euro against the
British pound sterling is expected to affect results adversely in Europe,
particularly in the United Kingdom and the Middle East.
Asia-Pacific: NMHG Wholesale expects lift truck shipments in the Asia-Pacific
region to remain comparable to 2000 levels. A weak Australian dollar could
continue to have a negative effect on the margins of lift trucks imported into
Australia.
NMHG Retail
NMHG Retail expects to continue focusing on improving the performance of its
wholly owned dealerships. Europe is expected to continue incurring losses due
primarily to competitive pricing pressures, a weak euro and planned investments
in building a stronger dealer network while results at NMHG's Asia-Pacific
retail operations are expected to improve in 2001.
OUTLOOK - continued
Housewares
HB/PS expects revenue growth in 2001 primarily as a result of the introduction
of additional General Electric-branded products to be sold to Wal*Mart and
growing sales of TrueAir(R) home odor eliminators driven by a nationwide
marketing campaign. HB/PS expects to continue focusing on operational
improvements in 2001, including improving working capital and manufacturing
efficiency. KCI expects to continue testing new store formats and focusing on
improving store profitability.
NACoal
NACoal expects the Red Hills power plant in Mississippi to reach full operation
in mid-2001. Once the power plant becomes fully operational, annual lignite
production at MLMC is expected to reach 3.5 million tons. The company expects
overall lignite production in 2001 will increase compared to 2000 levels as a
result of production at MLMC. NACoal anticipates increased royalty income in
2001, compared to 2000, from its eastern underground properties.
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. 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, including reduced demand resulting from a downturn in the U.S.
economy, (2) changes in sales prices, (3) delays in delivery or changes in 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) delays in or
increased costs of the Danville, Illinois, manufacturing plant phase-out, (7)
product liability or other litigation, warranty claims or other returns of
products, (8) acquisitions of dealerships by NMHG, (9) costs related to the
integration of acquisitions and (10) increased competition, foreign currency
exchange movements and/or changes in operating costs attributable to the euro.
Housewares: (1) changes in the sales prices, product mix or levels of consumer
purchases of kitchenware and small electric appliances, (2) bankruptcy of or
loss of major retail customers or suppliers, (3) changes in costs of raw
materials, including petroleum-based resins used in manufacturing, or sourced
products, (4) delays in delivery of, or the unavailability of, raw material or
key component parts, (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 HB/PS buys, operates and/or sells products,
(6) product liability, regulatory reviews or other litigation, warranty claims
or returns of products, (7) increased competition, (8) customer acceptance,
changes in costs or delays in the development of the GE-branded products to be
sold to Wal*Mart and of new home environment products and (9) weather conditions
or further changes in gasoline prices that would affect the number of customers
visiting Kitchen Collection 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) changes in maintenance, fuel or
other similar costs, (4) costs to pursue international opportunities, (5) delays
in lignite production at MLMC or further delays in the start-up of the Red Hills
power plant and (6) changes in the economy or in the power industry that would
affect demand for NACoal's Eastern underground reserves.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See pages 41, 42, 48, 49, 57 and 58 of the Company's 2000 Annual Report, which
is incorporated by reference into the Company's Form 10-K for the fiscal year
ended December 31, 2000, 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, 2000.
Part II
Item 1 Legal Proceedings
None
Item 2 Changes in Securities and Use of Proceeds
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 32 of this
quarterly report on Form 10-Q.
(b) Reports on Form 8-K. The Company did not file any
reports on Form 8-K during the first quarter of 2001.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NACCO Industries, Inc.
-------------------------------------------
(Registrant)
Date May 14, 2001 /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
(18) Letter Re Change in Accounting Principles
(99.1) Other Exhibits Not Required To Otherwise Be Filed
(1) Comments of Alfred M. Rankin, Jr., Chairman, President and
Chief Executive Officer, at the NACCO Industries, Inc. Annual
Meeting of Stockholders May 9, 2001, is attached hereto as
Exhibit 99.1.
*Numbered in accordance with Item 601 of Regulation S-K.