SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549



                                    FORM 10-Q

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2003

                                       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)

                                      N/A
- --------------------------------------------------------------------------------
 (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  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                                           YES   X       NO ____

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                                           YES   X       NO ____


Number of shares of Class A Common Stock outstanding at July 31, 2003
                6,581,499

Number of shares of Class B Common Stock outstanding at July 31, 2003
                 1,623,110






                             NACCO INDUSTRIES, INC.



                                TABLE OF CONTENTS

Part I.   FINANCIAL INFORMATION
                                                                                   
          Item 1     Financial Statements                                                Page Number
          ------     --------------------                                                -----------

                     Unaudited Condensed Consolidated Balance Sheets -                         3
                     June 30, 2003 and December 31, 2002

                     Unaudited Condensed Consolidated Statements of Income for                 4
                     the Three Months and Six Months Ended June 30, 2003 and
                     2002

                     Unaudited Condensed Consolidated Statements of Cash Flows                 5
                     for the Six Months Ended June 30, 2003 and 2002

                     Unaudited Condensed Consolidated Statements of Changes                    6
                     in Stockholders' Equity for the Six Months Ended
                     June 30, 2003 and 2002

                     Notes to Unaudited Condensed Consolidated Financial                      7-17
                     Statements

          Item 2     Management's Discussion and Analysis of Financial                       18-35
          ------     ------------------------------------------------
                     Condition and Results of Operations
                     -----------------------------------

          Item 3     Quantitative and Qualitative Disclosures About Market Risk                35
          ------     ---------------------------------------------------------

          Item 4     Controls and Procedures                                                   35
          ------     -----------------------

Part II.  OTHER INFORMATION

          Item 1     Legal Proceedings                                                         36
          ------     -----------------

          Item 2     Changes in Securities and Use of Proceeds                                 36
          ------     -----------------------------------------

          Item 3     Defaults Upon Senior Securities                                           36
          ------     ------------------------------

          Item 4     Submission of Matters to a Vote of Security Holders                       36
          ------     ---------------------------------------------------

          Item 5     Other Information
          ------     -----------------                                                         36

          Item 6     Exhibits and Reports on Form 8-K                                          36
          ------     --------------------------------

          Signature                                                                            37

          Exhibit Index                                                                        38






                                       2





                                     PART I

                              FINANCIAL INFORMATION

                          Item 1. Financial Statements

                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                     NACCO INDUSTRIES, INC. AND SUBSIDIARIES



                                                                            JUNE 30      DECEMBER 31
                                                                             2003           2002
                                                                          ----------     ----------
                                                                       (In millions, except share data)
                                                                                   
ASSETS
Current Assets
    Cash and cash equivalents                                             $     43.6     $     64.1
    Accounts receivable, net                                                   289.4          278.8
    Inventories                                                                396.1          357.0
    Deferred income taxes                                                       30.6           29.0
    Prepaid expenses and other                                                  51.2           54.1
                                                                          ----------     ----------
       Total Current Assets                                                    810.9          783.0
Property, Plant and Equipment, Net                                             670.7          658.0
Goodwill                                                                       431.2          427.4
Coal Supply Agreements and Other Intangibles, Net                               83.3           85.0
Other Non-current Assets                                                       184.8          170.5
                                                                          ----------     ----------
       Total Assets                                                       $  2,180.9     $  2,123.9
                                                                          ==========     ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Accounts payable                                                      $    266.8     $    257.2
    Revolving credit agreements                                                 32.0           33.2
    Current maturities of long-term debt                                        37.3           35.0
    Current obligations of project mining subsidiaries                          34.5           35.0
    Other current liabilities                                                  229.4          235.8
                                                                          ----------     ----------
       Total Current Liabilities                                               600.0          596.2
Long-term Debt - not guaranteed by the parent company                          411.5          406.5
Obligations of Project Mining Subsidiaries - not guaranteed by
    the parent company or its North American Coal subsidiary                   268.1          275.1
Self-insurance Liabilities and Other                                           315.0          285.6
Minority Interest                                                                 .7            1.1
Stockholders' Equity
    Common stock:
       Class A, par value $1 per share, 6,581,399 shares outstanding
          (2002 - 6,576,936 shares outstanding)                                  6.6            6.6
       Class B, par value $1 per share, convertible into Class A
          on a one-for-one basis, 1,623,210 shares outstanding
          (2002 - 1,623,651 shares outstanding)                                  1.6            1.6
    Capital in excess of par value                                               5.1            4.9
    Retained earnings                                                          615.3          605.7
    Accumulated other comprehensive income (loss):
       Foreign currency translation adjustment                                   5.6          (11.6)
       Deferred loss on cash flow hedging                                      (14.1)         (13.3)
       Minimum pension liability adjustment                                    (34.5)         (34.5)
                                                                          ----------     ----------
                                                                               585.6          559.4
                                                                          ----------     ----------
       Total Liabilities and Stockholders' Equity                         $  2,180.9     $  2,123.9
                                                                          ==========     ==========


See notes to unaudited condensed consolidated financial statements.



                                       3



              UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                     NACCO INDUSTRIES, INC. AND SUBSIDIARIES



                                                             THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                   JUNE 30                       JUNE 30
                                                         -------------------------     -----------------------------
                                                            2003           2002            2003             2002
                                                         ----------     ----------     ------------     ------------
                                                                     (In millions, except per share data)

                                                                                            
Net sales                                                $    633.0     $    607.3     $    1,250.4     $    1,179.0
Other revenues                                                  4.5            2.3              7.0              7.1
                                                         ----------     ----------     ------------     ------------
Revenues                                                      637.5          609.6          1,257.4          1,186.1

Cost of sales                                                 520.6          495.8          1,027.7            971.9
                                                         ----------     ----------     ------------     ------------

Gross Profit                                                  116.9          113.8            229.7            214.2

Selling, general and administrative expenses                   87.3           88.2            179.5            169.8
                                                         ----------     ----------     ------------     ------------

Operating Profit                                               29.6           25.6             50.2             44.4

Other income (expense)
    Interest expense                                          (16.8)         (17.2)           (33.6)           (31.7)
    Loss on interest rate swap agreements                       (.3)          (3.1)             (.7)            (2.8)
    Income from unconsolidated affiliates                       1.0             .1              1.7              1.1
    Other - net                                                 ---           (1.7)             (.3)            (1.3)
                                                         ----------     ----------     ------------     ------------
                                                              (16.1)         (21.9)           (32.9)           (34.7)
                                                         ----------     ----------     ------------     ------------
Income Before Income Taxes, Minority Interest
         and Cumulative Effect of Accounting
         Change                                                13.5            3.7             17.3              9.7

Provision for income taxes                                      4.1            1.2              5.3              1.1
                                                         ----------     ----------     ------------     ------------

Income Before Minority Interest and Cumulative
         Effect of Accounting Change                            9.4            2.5             12.0              8.6

Minority interest income                                         .2             .3               .5               .5
                                                         ----------     ----------     ------------     ------------

Income Before Cumulative Effect of Accounting
         Change                                                 9.6            2.8             12.5              9.1

Cumulative effect of accounting change (net of $0.7
          tax expense)                                          ---            ---              ---              ---
                                                         ----------     ----------     ------------     ------------

Net Income                                               $      9.6     $      2.8     $       13.7     $        9.1
                                                         ==========     ==========     ============     ============

Comprehensive Income                                     $     23.8     $     10.3     $       30.1     $       22.2
                                                         ==========     ==========     ============     ============

Earnings per Share:
Income Before Cumulative Effect of Accounting
          Change                                         $     1.17     $      .34     $       1.52     $       1.11
Cumulative effect of accounting change (net-of-tax)             ---            ---              .15              ---
                                                         ----------     ----------     ------------     ------------
Net Income                                               $     1.17     $      .34     $       1.67     $       1.11
                                                         ==========     ==========     ============     ============

Dividends per share                                      $     .255     $     .245     $       .500     $       .480
                                                         ==========     ==========     ============     ============

Weighted average shares outstanding                           8.204          8.197            8.203            8.196
                                                         ==========     ==========     ============     ============



See notes to unaudited condensed consolidated financial statements.



                                       4




            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     NACCO INDUSTRIES, INC. AND SUBSIDIARIES




                                                                        SIX MONTHS ENDED
                                                                             JUNE 30
                                                                        ----------------
                                                                        2003        2002
                                                                      -------     --------
                                                                          (In millions)
                                                                            
Operating Activities
    Net income                                                        $  13.7     $    9.1
    Adjustments to reconcile net income
      to net cash provided by operating activities:
        Depreciation, depletion and amortization                         45.8         46.7
        Deferred income taxes                                             5.0         11.0
        Minority interest                                                 (.5)         (.5)
        Cumulative effect of accounting change (net-of-tax)              (1.2)         ---
        Other non-cash items                                              3.1          3.8
        Working capital changes
           Accounts receivable                                           (5.5)       (15.7)
           Inventories                                                  (28.2)        (6.6)
           Other current assets                                         (17.6)         (.2)
           Accounts payable and other liabilities                        (2.3)        23.2
                                                                      -------     --------
           Net cash provided by operating activities                     12.3         70.8

Investing Activities
    Expenditures for property, plant and equipment                      (40.1)       (20.6)
    Proceeds from the sale of assets                                     14.4          2.9
    Proceeds from unconsolidated affiliates                               ---           .7
    Other - net                                                           (.3)        (1.1)
                                                                      -------     --------
           Net cash used for investing activities                       (26.0)       (18.1)

Financing Activities
    Additions to long-term debt and revolving credit agreements          42.2        299.3
    Reductions of long-term debt and revolving credit agreements        (36.8)      (338.1)
    Additions to obligations of project mining subsidiaries                .7         35.4
    Reductions of obligations of project mining subsidiaries             (9.0)       (42.2)
    Cash dividends paid                                                  (4.1)        (3.9)
    Financing fees paid                                                   (.2)       (14.0)
    Other - net                                                           ---          (.2)
                                                                      -------     --------
           Net cash used for financing activities                        (7.2)       (63.7)

    Effect of exchange rate changes on cash                                .4          2.5
                                                                      -------     --------

Cash and Cash Equivalents
    Decrease for the period                                             (20.5)        (8.5)
    Balance at the beginning of the period                               64.1         71.9
                                                                      -------     --------

    Balance at the end of the period                                  $  43.6     $   63.4
                                                                      =======     ========


See notes to unaudited condensed consolidated financial statements.



                                       5




 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     NACCO INDUSTRIES, INC. AND SUBSIDIARIES



                                                          SIX MONTHS ENDED JUNE 30
                                                          ------------------------
                                                             2003         2002
                                                           --------     --------
                                                          (In millions, except per
                                                                 share data)
                                                                  
Class A Common Stock
  Beginning balance                                        $    6.6     $    6.5
  Shares issued under stock compensation plans                  ---           .1
                                                           --------     --------
                                                                6.6          6.6
                                                           --------     --------

Class B Common Stock                                            1.6          1.6
                                                           --------     --------

Capital in Excess of Par Value
  Beginning balance                                             4.9          4.7
  Shares issued under stock compensation plans                   .2           .1
                                                           --------     --------
                                                                5.1          4.8
                                                           --------     --------

Retained Earnings
  Beginning balance                                           605.7        571.3
  Net income                                                   13.7          9.1
  Cash dividends on Class A and Class B common stock:
        2003 $0.500 per share                                  (4.1)         ---
        2002 $0.480 per share                                   ---         (3.9)
                                                           --------     --------
                                                              615.3        576.5
                                                           --------     --------

Accumulated Other Comprehensive Income (Loss)
  Beginning balance                                           (59.4)       (54.8)
  Foreign currency translation adjustment                      17.2         11.8
  Reclassification of hedging activity into earnings            2.9          4.7
  Current period cash flow hedging activity                    (3.7)        (3.4)
                                                           --------     --------
                                                              (43.0)       (41.7)
                                                           --------     --------
    Total Stockholders' Equity                             $  585.6     $  547.8
                                                           ========     ========



See notes to unaudited condensed consolidated financial statements.



                                       6




         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     NACCO INDUSTRIES, INC. AND SUBSIDIARIES
                                  JUNE 30, 2003
                          (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.  The
Company's  subsidiaries  operate in three  principal  industries:  lift  trucks,
housewares and lignite mining. The Company manages its subsidiaries primarily by
industry;  however,  the  Company  manages  its  lift  truck  operations  as two
reportable segments: 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 comprehensive line of lift trucks and aftermarket parts and service
marketed  globally  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,  leasing  and  service of Hyster and Yale lift
trucks and related  service parts by wholly owned retail  dealerships and rental
companies.   NACCO   Housewares  Group   ("Housewares")   consists  of  Hamilton
Beach/Proctor-Silex,  Inc.  ("HB/PS"),  a  leading  manufacturer,  marketer  and
distributor  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.

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 June 30, 2003 and the results of its  operations for the three and
six month periods ended June 30, 2003 and 2002 and the results of its cash flows
and changes in stockholders equity for the six month periods ended June 30, 2003
and 2002 have been included.

The  balance  sheet at  December  31,  2002 has been  derived  from the  audited
financial statements at that date but does not include all of the information or
notes required by accounting  principles generally accepted in the United States
for complete financial statements.

Operating  results for the three and six month  periods  ended June 30, 2003 are
not necessarily indicative of the results that may be expected for the remainder
of the year  ending  December  31,  2003.  Because  the  housewares  business is
seasonal,  a majority of revenues and operating profit occurs in the second half
of the calendar  year when sales of small  electric  appliances to retailers and
consumers  increase  significantly  for the fall  holiday  selling  season.  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, 2002.

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.



                                       7

<


Note 2 - Inventories

Inventories are summarized as follows:




                                                JUNE 30    DECEMBER 31
                                                 2003          2002
                                               --------     --------
                                                      
Manufactured inventories:
  Finished goods and service parts -
    NMHG Wholesale                             $  112.1     $   99.9
    Housewares                                     75.4         66.8
                                               --------     --------
                                                  187.5        166.7
  Raw materials and work in process -
    NMHG Wholesale                                121.2        110.3
    Housewares                                      6.8          6.5
                                               --------     --------
                                                  128.0        116.8
                                               --------     --------

    Total manufactured inventories                315.5        283.5

Retail inventories:
    NMHG Retail                                    30.2         23.4
    Housewares                                     20.9         21.4
                                               --------     --------
    Total retail inventories                       51.1         44.8

    Total inventories at FIFO                     366.6        328.3

Coal - NACoal                                      15.5         14.5
Mining supplies - NACoal                           22.9         22.3
                                               --------     --------
    Total inventories at weighted average          38.4         36.8

LIFO reserve -
    NMHG                                          (13.6)       (11.6)
    Housewares                                      4.7          3.5
                                               --------     --------
                                                   (8.9)        (8.1)
                                               --------     --------
                                               $  396.1     $  357.0
                                               ========     ========



The cost of certain  manufactured  and  retail  inventories,  including  service
parts, has been determined using the LIFO method.  At June 30, 2003 and December
31, 2002, 59% of total  inventories  were determined  using the LIFO method.  An
actual  valuation of inventory under the LIFO method can be made only at the end
of the year based on the inventory  levels and costs at that time.  Accordingly,
interim LIFO calculations must necessarily be based on management's estimates of
expected  year-end  inventory  levels and costs.  Because  these  estimates  are
subject to change and may be  different  than the  actual  inventory  levels and
costs at  year-end,  interim  results  are  subject to the final  year-end  LIFO
inventory valuation.

Housewares'  LIFO inventory  value exceeds its FIFO value primarily due to price
deflation experienced by HB/PS.



                                       8





Note 3 - Restructuring Charges

The changes to the Company's restructuring accruals since December 31, 2002 are
as follows:



                                               Asset      Lease
                                   Severance Impairment Impairment  Other     Total
                                   --------- ---------- ----------  -----     -----
                                                              
NMHG Wholesale
 Balance at December 31, 2002      $  9.3     $  3.8    $  ---     $  .9     $  14.0(a)
  Foreign currency effect              .2        ---       ---       ---          .2
  Reversal                            (.3)       ---       ---       ---         (.3)
  Payments                           (1.6)       ---       ---       ---        (1.6)
                                   -------------------------------------------------
 Balance at June 30, 2003          $  7.6     $  3.8    $  ---     $  .9     $  12.3
                                   =================================================

NMHG Retail
 Balance at December 31, 2002      $  1.5     $  ---    $   .1     $ ---     $   1.6
  Reversal                            (.4)       ---       ---       ---         (.4)
  Payments                            (.3)       ---       (.1)      ---         (.4)
                                   -------------------------------------------------
 Balance at June 30, 2003          $   .8     $  ---    $  ---     $ ---     $    .8
                                   =================================================

Housewares
 Balance at December 31, 2002      $  ---     $  ---    $  1.2     $  .4     $   1.6
  Payments                            ---        ---       (.5)      (.1)        (.6)
                                   -------------------------------------------------
 Balance at June 30, 2003          $  ---     $  ---    $   .7     $  .3     $   1.0
                                   =================================================


(a) The December 31, 2002 balance  indicated in the table above does not include
$7.6 million in curtailment losses relating to pension and other post-retirement
benefits  which will not be paid until  employees  reach  retirement  age. These
amounts were  accrued in the fiscal year ended  December 31, 2000 as part of the
restructuring of the Danville, Illinois assembly plant. Final severance payments
for the Danville restructuring plan were made in 2002.

NMHG 2002 Restructuring Program

As announced in December 2002,  NMHG Wholesale is phasing out its Lenoir,  North
Carolina,  lift truck component facility and restructuring  other  manufacturing
and  administrative  operations,  primarily  its  Irvine,  Scotland,  lift truck
assembly  and  component  facility.  During  the fourth  quarter  of 2002,  NMHG
Wholesale  recognized a  restructuring  charge of  approximately  $12.5  million
pre-tax.  Of this amount,  $3.8 million  relates to a non-cash asset  impairment
charge for building,  machinery and tooling,  which was determined  based on the
then current  market values for similar  assets and broker quotes as compared to
the net book value of these  assets;  and $8.7 million  relates to severance and
other  employee  benefits  to be paid to  approximately  615  manufacturing  and
administrative  employees.  Payments began during the second quarter of 2003. As
of June 30,  2003,  payments  of $0.7  million  were made to  approximately  100
employees.  Payments are expected to continue  through 2005.  In addition,  $0.3
million of the amount  accrued at December  31,  2002 was  reversed in the first
half of 2003.  Approximately  $2.5  million  of  pre-tax  costs  which  were not
eligible  for  accrual in  December  2002 and are not shown in the table  above,
primarily  related to manufacturing  inefficiencies,  were expensed in the first
half of 2003. Of the $2.5 million  additional  costs incurred  during 2003, $2.3
million  is  classified  as cost of sales  and $0.2  million  is  classified  as
selling,  general,  and  administrative  expenses  in  the  Unaudited  Condensed
Consolidated Statement of Income for the six months ended June 30, 2003.

NMHG 2001 Restructuring Programs

During 2001,  management committed to the restructuring of certain operations in
Europe for both the Wholesale and Retail segments of the business. As such, NMHG
Wholesale  recognized  a  restructuring  charge of  approximately  $4.5  million
pre-tax for severance and other  employee  benefits to be paid to  approximately
285 direct and indirect factory labor and administrative personnel in Europe. As
of December 31, 2002,  payments of $3.4 million to  approximately  245 employees
had been made and $0.2 million of the amount originally  accrued was reversed in
2002. Although the majority of the headcount  reductions were made by the end of
2002,  payments of $0.9 million to 16  employees  were made during the first six
months of 2003.


                                       9



NMHG Retail  recognized a  restructuring  charge of  approximately  $4.7 million
pre-tax in 2001, of which $0.4 million  related to lease  termination  costs and
$4.3 million  related to  severance  and other  employee  benefits to be paid to
approximately 140 service technicians,  salesmen and administrative personnel at
wholly owned dealers in Europe. As of December 31, 2002,  severance  payments of
$2.8 million had been made to approximately 110 employees. Although the majority
of the headcount  reductions were made by the end of 2002, during the first half
of 2003,  severance  payments of $0.3  million  were made to six  employees.  In
addition,  $0.4 million of the amount  accrued at December 31, 2002 was reversed
in the first six months of 2003.

Housewares:  In 2001,  the  Board of  Directors  approved  management's  plan to
restructure HB/PS' manufacturing  activities in Mexico by outsourcing certain of
the company's products and consolidating  production from three of the company's
Mexican   manufacturing   plants  in  the  Juarez  area  into  one  plant.  This
restructuring was substantially  completed during 2002. However,  lease payments
on idle facilities are expected to continue through 2003.

Note 4 - Accounting Changes

Accounting for Asset Retirement Obligations

On January 1, 2003,  the  Company  adopted  Statement  of  Financial  Accounting
Standards ("SFAS") No. 143, "Accounting for Asset Retirement  Obligations." SFAS
No. 143 provides accounting  requirements for retirement  obligations associated
with  tangible  long-lived  assets,  including:  (i)  the  timing  of  liability
recognition;  (ii) initial  measurement  of the liability;  (iii)  allocation of
asset retirement cost to expense; (iv) subsequent  measurement of the liability;
and (v) financial statement  disclosures.  SFAS No. 143 requires that an asset's
retirement  cost  should  be  capitalized  as  part of the  cost of the  related
long-lived  asset and  subsequently  allocated to expense using a systematic and
rational method.

A cumulative effect of a change in accounting  principle ("CECAP") adjustment of
$1.2 million,  net of a tax expense of $0.7 million,  to increase net income has
been recognized in the accompanying  Unaudited Condensed  Consolidated Statement
of Income for the six months ended June 30, 2003, as a result of the adoption of
SFAS No. 143 on January 1, 2003. This adjustment  consists of a CECAP adjustment
to decrease net income by $1.3  million,  net of a tax benefit of $0.7  million,
recorded  by  NACoal  and a CECAP  adjustment  to  increase  net  income by $2.5
million,  net of $1.4  million tax  expense,  recorded  by Bellaire  Corporation
("Bellaire").  Bellaire's  results  are  included in the  non-operating  segment
"NACCO & Other."

Bellaire is a  non-operating  subsidiary of the Company with legacy  liabilities
relating to closed mining operations,  primarily former Eastern U.S. underground
mining  operations.  These  legacy  liabilities  include  obligations  for water
treatment and other environmental  remediation which arose as part of the normal
course of closing these underground mining operations.  Prior to the adoption of
SFAS No.  143,  an  accrual  for these  legacy  liabilities  was  estimated  and
discounted using an applicable  risk-free rate of return. As of January 1, 2003,
these  obligations have been remeasured to their estimated fair market value and
discounted using a credit-adjusted risk-free rate, as required per SFAS No. 143.
This change in the measurement of these liabilities as required per SFAS No. 143
resulted in a CECAP adjustment to increase net income,  primarily as a result of
the change in the discount rate used to measure these liabilities.  As a result,
future accretion  expense is expected to increase as compared with the Company's
previous methodology for measuring this obligation.  Since Bellaire's properties
are no longer active operations, no associated asset was capitalized as a result
of the adoption of SFAS No. 143.

NACoal's asset  retirement  obligations are for costs to close its surface mines
and  reclaim  the  land  it has  disturbed  as a  result  of its  normal  mining
activities.  As a result of the adoption of SFAS No. 143,  NACoal has  estimated
these costs and recognized  that  liability and associated  assets in accordance
with the Statement.  The associated  assets  established in connection  with the
implementation of SFAS No. 143 are recorded in property,  plant and equipment in
the  accompanying  Unaudited  Condensed  Consolidated  Balance Sheet at June 30,
2003. Prior to the adoption of SFAS No. 143,  NACoal's  accounting policy was to
accrue for mine-closing  costs over the five-year period prior to the closing of
the mine.  Since none of NACoal's mines were  forecasted to be closed within the
next five years,  NACoal did not have an accrual recognized for asset retirement
obligations prior to the adoption of this Statement.

For NACoal and Bellaire,  there are no assets legally restricted for purposes of
settling the asset retirement obligations.  The asset retirement obligations for
the project mining  subsidiaries will be funded by the


                                       10



respective project mining  subsidiaries'  customer.  NACoal's non-project mining
operations  and Bellaire's  asset  retirement  obligation  will be funded out of
general  corporate funds. A reconciliation of the beginning and ending aggregate
carrying amount of the asset retirement obligation is as follows:




                                             NACoal      NACoal
                                             Project    Non-Project        NACoal                            NACCO
                                              Mines       Mines          Consolidated      Bellaire       Consolidated
                                             --------   -----------      ------------     ------------    -------------
                                                                                               
  Balance at December 31, 2002               $   ---     $   ---          $     ---       $   15.9            $   15.9
    Increase (decrease) to liabilities
        recorded as a result of the
        adoption of SFAS No. 143                40.8          3.5              44.3           (3.9)              40.4
    Liabilities   settled   during   the
        period                                   ---          ---               ---            (.2)               (.2)
    Accretion expense                            1.4           .2               1.6             .5                2.1
                                             -------     --------         ---------       --------            -------
  Balance at June 30, 2003                   $  42.2     $    3.7         $    45.9       $   12.3            $  58.2
                                             =======     ========         =========       ========            =======



Assuming the  adoption of SFAS No. 143 in the prior year,  the December 31, 2002
liabilities  recorded on the balance  sheet for the project  mines,  non-project
mines and  Bellaire  would  have been  $40.8  million,  $3.5  million  and $12.0
million,  respectively.  The effect of  adopting  SFAS No.  143 was to  decrease
income before the cumulative  effect of accounting change and net income by $0.1
million in both the three and six months ended June 30, 2003, respectively.  The
effect on earnings  per share was a decrease of $0.01 and $0.02 in the three and
six months ended June 30, 2003, respectively.

Additional pro forma information, assuming the adoption of this Statement in the
prior year, is as follows:




                                                                  THREE           SIX
                                                                  MONTHS         MONTHS
                                                                  ENDED          ENDED
                                                              JUNE 30, 2002   JUNE 30, 2002
                                                              -------------   -------------
                                                                     (in millions)
                                                                          
Reported net income                                             $   2.8         $    9.1
Deduct additional expense assuming the adoption
      of SFAS No. 143 on 12/31/01                                    .1               .1
                                                                --------        --------
Adjusted net income                                             $   2.7         $    9.0
                                                                ========        ========

                                                                      (in dollars)
Reported earnings per share                                     $    .34        $   1.11
Deduct additional expense per share assuming
      the adoption of SFAS No. 143 on 12/31/01                       .01             .01
                                                                --------        --------
Adjusted earnings per share                                     $    .33        $   1.10
                                                                ========        ========



Accounting for Guarantees

In November  2002, the Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation   ("FIN")  No.  45,   "Guarantor's   Accounting   and  Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others." FIN No. 45 requires  guarantors  to  recognize,  at the  inception of a
guarantee,  a  liability  for the fair  value of the  obligation  undertaken  in
issuing the guarantee for those guarantees  initiated or modified after December
31,  2002.  However,  certain  guarantees,   including  product  warranties  and
guarantees  between parties under common control (i.e.,  parent and subsidiary),
are not required to be recognized  at fair value at  inception.  FIN No. 45 also
requires additional disclosures of guarantees,  including product warranties and
guarantees  between  parties  under common  control,  beginning  with interim or
annual  periods ending after December 15, 2002.  Guarantees  initiated  prior to
December 31, 2002 are not  recognized as a liability  measured at fair value per
this Interpretation, but are subject to the disclosure requirements. The Company
has made the required  disclosures  in these  financial  statements.  Also,  the
Company  has   recognized   guarantees   included   within  the  scope  of  this
Interpretation and initiated after December 31, 2002 as liabilities  measured at
fair value. The adoption of the fair value provisions of this Interpretation did
not have a material  impact on the  Company's  financial  position or results of
operations for the three or six months ended June 30, 2003.


                                       11



Under  various   financing   arrangements  for  certain   customers,   including
independently owned retail dealerships, NMHG provides guarantees of the residual
values of lift  trucks,  or recourse or  repurchase  obligations  such that NMHG
would  be  obligated  in the  event of  default  by the  customer.  Terms of the
third-party  financing  arrangements  for which NMHG is  providing  a  guarantee
generally range from one to five years.  Total guarantees and amounts subject to
recourse or repurchase  obligations  at June 30, 2003 and December 31, 2002 were
$168.2 million and $153.6 million,  respectively.  Losses  anticipated under the
terms of the  guarantees,  recourse  or  repurchase  obligations,  which are not
significant,  have been  reserved for in the  accompanying  Unaudited  Condensed
Consolidated Financial Statements.  Generally,  NMHG retains a security interest
in the related  assets  financed  such that, in the event that NMHG would become
obligated under the terms of the recourse or repurchase obligations,  NMHG would
take title to the assets financed. The fair value of collateral held at June 30,
2003 was approximately $180.7 million, based on Company estimates.

NMHG has a 20% ownership  interest in NMHG Financial  Services,  Inc. ("NFS"), a
joint venture with GE Capital  Corporation  ("GECC"),  formed  primarily for the
purpose of providing  financial  services to Hyster and Yale lift truck  dealers
and national account customers in the United States.  NMHG's ownership in NFS is
accounted for using the equity method of accounting.  Generally, NMHG sells lift
trucks through its  independent  dealer network or directly to customers.  These
dealers and customers may enter into a financing transaction with NFS or another
unrelated  third-party.  NFS  provides  debt  financing  to  dealers  and  lease
financing to both dealers and customers.  On occasion, the credit quality of the
customer or  concentration  issues  within GECC  necessitate  providing  standby
recourse or repurchase  obligations  or a guarantee of the residual value of the
lift trucks  purchased by customers and financed  through NFS. At June 30, 2003,
$122.2  million of the $168.2 million of guarantees  discussed  above related to
transactions  with NFS. In addition,  in  connection  with the  formation of the
current joint venture agreement that expires in April 2004, NMHG also provides a
guarantee  to GECC for 20% of NFS' debt with GECC,  such that NMHG would  become
liable under the terms of NFS' debt  agreements with GECC in the case of default
by NFS. At June 30, 2003, the amount of NFS' debt  guaranteed by NMHG was $101.2
million.  NFS has not  defaulted  under the terms of this debt  financing in the
past and NMHG does not expect NFS to default in the foreseeable future.

NMHG  provides a standard  warranty  on its lift  trucks,  generally  for six to
twelve months or 1,000 to 2,000 hours. In addition, NMHG sells extended warranty
agreements which provide additional  warranty up to three to five years or up to
3,600 to 10,000 hours.  The specific  terms and  conditions of those  warranties
vary  depending  upon the  product  sold and the  country  in  which  NMHG  does
business.  Revenue  received  for the sale of  extended  warranty  contracts  is
deferred and  recognized in the same manner as the costs are incurred to perform
under the warranty  contracts,  in accordance with FASB Technical Bulletin 90-1,
"Accounting  for Separately  Priced  Extended  Warranty and Product  Maintenance
Contracts."  HB/PS  provides a standard  warranty  to  consumers  for all of its
products.  The specific terms and conditions of those  warranties vary depending
upon the product brand. In general,  if a product is returned under warranty,  a
refund is provided to the consumer by HB/PS' customer, the retailer.  Generally,
the retailer returns those products to HB/PS for a credit. The Company estimates
the costs that may be incurred  under its warranty  programs,  both standard and
extended,  and records a liability for such costs at the time product revenue is
recognized.  Factors that affect the Company's  warranty  liability  include the
number of units sold,  historical and  anticipated  rates of warranty claims and
the cost per claim.  The  Company  periodically  assesses  the  adequacy  of its
recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company's current and long-term warranty  obligations,  including
deferred  revenue on extended  warranty  contracts,  during the six months ended
June 30, 2003 are as follows:

      Balance at December 31, 2002                   $     43.9
      Warranties issued                                    18.1
      Settlements made                                    (17.6)
      Changes in estimates                                 (2.2)
      Foreign currency effect                                .2
                                                     ----------
      Balance at June 30, 2003                       $     42.4
                                                     ==========

The Company's  periodic  review of the estimates  used to calculate its warranty
obligations  resulted in an  adjustment  of $2.2 million  recognized  in the six
months ended June 30, 2003 to reduce the estimated  required accrual at June 30,
2003.  This  adjustment  is not  necessarily  indicative  of  future  trends  or
adjustments  that may be  required  to adjust the  warranty  accrual  during the
remainder of 2003.


                                       12



Note 5 - Accounting Standards Not Yet Adopted

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities." FIN No. 46 clarifies the application of Accounting  Research Bulletin
("ARB") No. 51,  "Consolidated  Financial  Statements"  for certain  entities in
which  equity  investors  do  not  have  the  characteristics  of a  controlling
financial  interest or do not have  sufficient  equity at risk for the entity to
finance its activities  without additional  subordinated  financial support from
other parties. FIN No. 46 requires that variable interest entities,  as defined,
should be  consolidated  by the  primary  beneficiary,  which is  defined as the
entity that is expected to absorb the majority of the expected losses, receive a
majority of the expected gains, or both.

The Company will adopt this Interpretation for the reporting period beginning on
July 1, 2003,  as required.  The Company has  determined  that three of NACoal's
wholly owned subsidiaries, the "project mining subsidiaries" meet the definition
of a variable  interest entity pursuant to FIN No. 46. Although NACoal owns 100%
of the equity  interest  of the  project  mining  subsidiaries,  the Company has
concluded  that  NACoal  is  not  the  primary   beneficiary   and  thus,   must
deconsolidate these entities.  The project mining  subsidiaries  operate lignite
mines under long-term  contracts with various utility  customers to sell lignite
at a price  based on actual  cost plus an agreed  pre-tax  profit  per ton.  The
utility customers have arranged and guaranteed the financing for the development
and  operation of the project  mining  subsidiaries.  The  obligations  of these
project mining subsidiaries are currently included in the Company's consolidated
balance sheets,  but do not affect the short-term or long-term  liquidity of the
Company  and are  without  recourse  to NACCO and  NACoal.  These  entities  are
capitalized  primarily  with debt  financing;  the  equity  investment  in these
entities at June 30,  2003 was $5.0  million,  which  supports  total  assets of
$418.7  million at June 30, 2003.  NACoal owns 100% of the stock and manages the
daily operations of these entities.

As a result of the  deconsolidation of these entities,  the financial  statement
presentation of the Company will change  significantly.  As of July 1, 2003, the
Company will account for its 100%  ownership  investment in these entities using
the equity method of accounting.  This change in accounting,  however,  will not
affect the reported net earnings of the Company.

The Company's risk of loss relating to these entities is limited to its invested
capital, which was $5.0 million at June 30, 2003. Selected financial information
for the project mining subsidiaries is as follows:


                                        AS OF AND                AS OF AND
                                    FOR THE SIX MONTHS       FOR THE YEAR ENDED
                                   ENDED JUNE 30, 2003       DECEMBER 31, 2002
                                   -------------------       ------------------
    Revenues                          $     130.5               $    263.1
    Net income                        $      13.0               $     24.7
    Total assets                      $     418.7               $    381.2
    Stockholder's equity              $       5.0               $      4.9


In addition,  NMHG does have an interest in a variable interest entity, NFS. The
Company, however, has concluded that NMHG is not the primary beneficiary and the
Company does not consider NMHG's variable interest to be significant.  NMHG will
continue to use the equity  method to account for its 20%  interest in NFS.  The
Company  continues to review two other entities with which NMHG is affiliated to
determine if they meet the definition of a variable interest entity. The Company
expects  to have its  analysis  complete  and adopt FIN No. 46 during  the third
quarter of 2003.

On April 30, 2003, the FASB issued SFAS No. 149,  "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  This  Statement  amends and
clarifies  accounting for  derivatives  and hedging based on decisions made: (a)
previously  as part  of the  Derivative  Implementation  Group  process,  (b) in
connection  with other FASB  projects and (c)  regarding  other  issues  raised,
including  the  characteristics  of  a  derivative  that  contains  a  financing
component.  This  Statement is effective for contracts  entered into or modified
after June 30, 2003 and should be applied  prospectively,  with the exception of
certain  transactions.  The Company has not yet determined what impact,  if any,
the  adoption  of this  Statement  will have on its  results  of  operations  or
financial position.

On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
provides  guidance on how an entity  classifies and measures  certain  financial
instruments with  characteristics of both liabilities and equity. This Statement
is


                                       13


effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after June 15, 2003.  This  Statement  requires the  recognition of a
cumulative effect of a change in accounting  transition adjustment for financial
instruments  existing at adoption date. The Company has not yet determined  what
impact,  if any,  the  adoption  of this  Statement  will have on its results of
operations or financial position.

Note 6 - Current and Long-term Financing

In April 2003, NACoal refinanced $15.8 million of equipment  previously financed
under  operating  leases with  collateralized  debt. The equipment  consisted of
mining equipment, such as trucks, bulldozers, graders and a backhoe. These April
2003  purchases  were  financed  with three  collateralized  notes  payable that
expire,  in accordance with their  respective  terms, in either 2007 or 2008 and
require  monthly  principal and interest  payments at a  weighted-average  fixed
interest rate of 5.46%.

Note 7 - Contingent Obligation

As a  result  of the Coal  Industry  Retiree  Health  Benefit  Act of 1992,  the
Company's  non-operating  subsidiary,   Bellaire  Corporation  ("Bellaire"),  is
obligated  to the United  Mine  Workers of America  Combined  Benefit  Fund (the
"Fund") for the medical  expenses of certain United Mine Worker  retirees.  As a
result,  the Company  established an estimate of this obligation in 1992 and has
continued to revise this estimate as new facts arise. See additional  discussion
in the Company's  Annual Report on Form 10-K for the fiscal year ended  December
31, 2002, on pages F-10,  F-17,  F-28 and F-29.  Revisions to this liability are
recognized in the statement of operations as an  extraordinary  item pursuant to
the requirement of EITF 92-13,  "Accounting for Estimated Payments in Connection
with the Coal Industry  Retiree  Health  Benefit Act of 1992." On July 15, 2003,
the Fund  filed suit  against  214  companies,  including  Bellaire,  seeking an
increase in  premiums  paid to the Fund.  If the Fund  prevails,  the  Company's
estimate of this accrual could increase  within an estimated range of $0 to $6.2
million pre-tax. Since the outcome of this proceeding is uncertain,  the Company
has not revised its accrual.



                                       14




Note 8 - Segment Information

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 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           SIX MONTHS ENDED
                                                            JUNE 30                     JUNE 30
                                                   -----------------------     -------------------------
                                                     2003          2002           2003           2002
                                                   --------     ----------     ----------     ----------
                                                                                  
 REVENUES FROM EXTERNAL CUSTOMERS
     NMHG Wholesale                                $  389.2     $    347.2     $    771.8     $    674.9
     NMHG Retail                                       57.5           58.6          111.4          114.8
     NMHG Eliminations                                (18.3)         (17.1)         (35.8)         (29.2)
                                                   --------     ----------     ----------     ----------
   NMHG Consolidated                                  428.4          388.7          847.4          760.5
   Housewares                                         118.3          134.5          234.3          256.1
   NACoal                                              90.7           86.3          175.6          169.4
   NACCO and Other                                       .1             .1             .1             .1
                                                   --------     ----------     ----------     ----------
                                                   $  637.5     $    609.6     $  1,257.4     $  1,186.1
                                                   ========     ==========     ==========     ==========
GROSS PROFIT
     NMHG Wholesale                                $   64.3     $     57.6     $    128.4     $    106.4
     NMHG Retail                                       11.5           10.6           21.8           22.9
     NMHG Eliminations                                  (.3)            .3             .1             .9
                                                   --------     ----------     ----------     ----------
   NMHG Consolidated                                   75.5           68.5          150.3          130.2
   Housewares                                          26.9           29.5           48.4           49.8
   NACoal                                              14.4           15.7           31.0           34.2
   NACCO and Other                                       .1             .1            ---            ---
                                                   --------     ----------     ----------     ----------
                                                   $  116.9     $    113.8     $    229.7     $    214.2
                                                   ========     ==========     ==========     ==========
 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
     NMHG Wholesale                                $   48.8     $     43.8     $     99.2     $     85.6
     NMHG Retail                                       11.2           14.0           22.9           27.0
     NMHG Eliminations                                  (.1)           (.3)           (.1)           (.6)
                                                   --------     ----------     ----------     ----------
   NMHG Consolidated                                   59.9           57.5          122.0          112.0
   Housewares                                          22.5           26.3           47.8           49.2
   NACoal                                               4.8            3.3            9.6            6.8
   NACCO and Other                                       .1            1.1             .1            1.8
                                                   --------     ----------     ----------     ----------
                                                   $   87.3     $     88.2     $    179.5     $    169.8
                                                   ========     ==========     ==========     ==========





                                       15







                                      THREE MONTHS ENDED       SIX MONTHS ENDED
                                             JUNE 30                JUNE 30
                                      ------------------       ------------------
                                       2003         2002        2003       2002
                                      -------     -------     -------     -------
                                                              
OPERATING PROFIT (LOSS)
    NMHG Wholesale                    $  15.5     $  13.8     $  29.2     $  20.8
    NMHG Retail                            .3        (3.4)       (1.1)       (4.1)
    NMHG Eliminations                     (.2)         .6          .2         1.5
                                      -------     -------     -------     -------
  NMHG Consolidated                      15.6        11.0        28.3        18.2
  Housewares                              4.4         3.2          .6          .6
  NACoal                                  9.6        12.4        21.4        27.4
  NACCO and Other                         ---        (1.0)        (.1)       (1.8)
                                      -------     -------     -------     -------
                                      $  29.6     $  25.6     $  50.2     $  44.4
                                      =======     =======     =======     =======
INTEREST EXPENSE
    NMHG Wholesale                    $  (7.3)    $  (6.6)    $ (14.5)    $ (10.2)
    NMHG Retail                           (.9)        (.9)       (1.8)       (1.7)
    NMHG Eliminations                     (.5)       (1.1)       (1.0)       (2.2)
                                      -------     -------     -------     -------
  NMHG Consolidated                      (8.7)       (8.6)      (17.3)      (14.1)
  Housewares                             (1.7)       (1.9)       (3.3)       (3.8)
  NACoal                                 (2.4)       (2.7)       (4.7)       (5.9)
  NACCO and Other                         ---         ---         (.3)        ---
  Eliminations                             .1          .1          .2          .2
                                      -------     -------     -------     -------
                                        (12.7)      (13.1)      (25.4)      (23.6)
  Project mining subsidiaries            (4.1)       (4.1)       (8.2)       (8.1)
                                      -------     -------     -------     -------
                                      $ (16.8)    $ (17.2)    $ (33.6)    $ (31.7)
                                      =======     =======     =======     =======
INTEREST INCOME
    NMHG Wholesale                    $    .7     $    .6     $   1.2     $   1.2
    NMHG Retail                           ---         ---          .1         ---
                                      -------     -------     -------     -------
  NMHG Consolidated                        .7          .6         1.3         1.2
  NACoal                                   .1          .1          .3          .1
  NACCO and Other                          .1          .1          .2          .2
  Eliminations                            (.1)        (.1)        (.2)        (.2)
                                      -------     -------     -------     -------
                                      $    .8     $    .7     $   1.6     $   1.3
                                      =======     =======     =======     =======
OTHER-NET, INCOME (EXPENSE)
    NMHG Wholesale                    $    .3     $  (4.2)    $   ---     $  (3.3)
    NMHG Retail                            .4        (1.0)         .6        (1.0)
                                      -------     -------     -------     -------
  NMHG Consolidated                        .7        (5.2)         .6        (4.3)
  Housewares                              (.1)        (.7)        (.4)        (.8)
  NACoal                                  ---         (.1)        (.1)        (.3)
  NACCO and Other                         (.7)         .6        (1.0)        1.1
                                      -------     -------     -------     -------
                                      $   (.1)    $  (5.4)    $   (.9)    $  (4.3)
                                      =======     =======     =======     =======
  INCOME TAX PROVISION (BENEFIT)
      NMHG Wholesale                  $   3.1     $   1.4     $   5.4     $    .9
      NMHG Retail                         ---        (1.9)        (.7)       (2.2)
      NMHG Eliminations                   (.3)        (.2)        (.3)        (.3)
                                      -------     -------     -------     -------
    NMHG Consolidated                     2.8         (.7)        4.4        (1.6)
    Housewares                            1.1          .2        (1.2)       (1.6)
    NACoal                                ---         1.4          .9         2.6
    NACCO and Other                        .2          .3         1.2         1.7
                                      -------     -------     -------     -------
                                      $   4.1     $   1.2     $   5.3     $   1.1
                                      =======     =======     =======     =======




                                       16







                                   THREE MONTHS ENDED        SIX MONTHS ENDED
                                           JUNE 30                 JUNE 30
                                   -------------------     -------------------
                                     2003        2002        2003        2002
                                   -------     -------     -------     -------
                                                           
NET INCOME (LOSS)
    NMHG Wholesale                 $   6.3     $   2.5     $  11.0     $   8.1
    NMHG Retail                        (.2)       (3.4)       (1.5)       (4.6)
    NMHG Eliminations                  (.4)        (.3)        (.5)        (.4)
                                   -------     -------     -------     -------
NMHG Consolidated                      5.7        (1.2)        9.0         3.1
Housewares                             1.5          .4        (1.9)       (2.4)
NACoal                                 3.2         4.2         6.5        10.6
NACCO and Other                        (.8)        (.6)         .1        (2.2)
                                   -------     -------     -------     -------
                                   $   9.6     $   2.8     $  13.7     $   9.1
                                   =======     =======     =======     =======
DEPRECIATION, DEPLETION AND
    AMORTIZATION EXPENSE
    NMHG Wholesale                 $   6.6     $   7.6     $  13.2     $  15.2
    NMHG Retail                        2.4         2.5         4.3         5.5
                                   -------     -------     -------     -------
  NMHG Consolidated                    9.0        10.1        17.5        20.7
  Housewares                           3.2         2.9         6.4         7.1
  NACoal                               2.9         2.0         5.4         4.1
  NACCO and Other                      ---         ---          .1         ---
                                   -------     -------     -------     -------
                                      15.1        15.0        29.4        31.9
  Project mining subsidiaries          8.2         7.1        16.4        14.8
                                   -------     -------     -------     -------
                                   $  23.3     $  22.1     $  45.8     $  46.7
                                   =======     =======     =======     =======
CAPITAL EXPENDITURES
    NMHG Wholesale                 $   5.6     $   2.4     $   8.4     $   7.8
    NMHG Retail                        1.7          .5         2.4         1.3
                                   -------     -------     -------     -------
  NMHG Consolidated                    7.3         2.9        10.8         9.1
  Housewares                           1.9         1.5         3.3         2.5
  NACoal                              19.0         1.9        20.7         3.1
  NACCO and Other                      ---          .3         ---          .7
                                   -------     -------     -------     -------
                                      28.2         6.6        34.8        15.4
  Project mining subsidiaries          2.4         3.6         5.3         5.2
                                   -------     -------     -------     -------
                                   $  30.6     $  10.2     $  40.1     $  20.6
                                   =======     =======     =======     =======







                                     JUNE 30      DECEMBER 31
                                      2003           2002
                                   ----------     ----------
                                            
TOTAL ASSETS
    NMHG Wholesale                 $  1,117.7     $  1,070.7
    NMHG Retail                         172.0          187.7
    NMHG Parent/Eliminations            (81.2)         (54.9)
                                   ----------     ----------
  NMHG Consolidated                   1,208.5        1,203.5
  Housewares                            328.1          331.5
  NACoal                                240.4          224.2
  NACCO and Other                        81.4           75.5
                                   ----------     ----------
                                      1,858.4        1,834.7
  Project mining subsidiaries           418.7          381.2
                                   ----------     ----------
                                      2,277.1        2,215.9
  Consolidating Eliminations            (96.2)         (92.0)
                                   ----------     ----------
                                   $  2,180.9     $  2,123.9
                                   ==========     ==========





                                       17





                  Item 2 - Management's Discussion and Analysis
                of Financial Condition and Results of Operations
                          (Tabular Amounts in Millions)

==========================================
Critical Accounting Policies and Estimates
==========================================


Please refer to the discussion of the Company's Critical Accounting Policies and
Estimates  as disclosed  on pages 21 and 22 in the  Company's  Form 10-K for the
fiscal year ended December 31, 2002.

=================
FINANCIAL SUMMARY
=================

The parent  company  charges  fees to its  operating  subsidiaries  for services
provided by the corporate  headquarters.  These  services  represent most of the
parent company's operating expenses.  The classification in the income statement
by the  segments,  however,  has  changed to reflect all of the fees in selling,
general and  administrative  expenses,  as  directed  by the parent  company for
purposes of internal  analysis.  Following is a table for  comparison  of parent
company fees year over year:




                                                 THREE MONTHS ENDED   SIX MONTHS ENDED
                                                       JUNE 30             JUNE 30
                                                  ---------------    -----------------
                                                  2003      2002      2003      2002
                                                 ------    ------    ------    ------
                                                                   
NACCO fees included in selling, general and
   administrative expenses
  NMHG Wholesale                                 $  2.1    $  1.1    $  4.1    $  2.3
  Housewares                                         .8        .5       1.6       1.0
  NACoal                                             .3        .2        .6        .3
                                                 ------    ------    ------    ------
                                                 $  3.2    $  1.8    $  6.3    $  3.6
                                                 ======    ======    ======    ======
NACCO fees included in other-net, income
   (expense)
  NMHG Wholesale                                 $  ---    $   .6    $  ---    $  1.2
  Housewares                                        ---        .2       ---        .4
  NACoal                                            ---        .1       ---        .2
                                                 ------    ------    ------    ------
                                                 $  ---    $   .9    $  ---    $  1.8
                                                 ======    ======    ======    ======
Total NACCO fees charged to segments
  NMHG Wholesale                                 $  2.1    $  1.7    $  4.1    $  3.5
  Housewares                                         .8        .7       1.6       1.4
  NACoal                                             .3        .3        .6        .5
                                                 ------    ------    ------    ------
                                                 $  3.2    $  2.7    $  6.3    $  5.4
                                                 ======    ======    ======    ======





                                       18





================
NMHG HOLDING CO.
================

NMHG   designs,   engineers,   manufactures,   sells,   services  and  leases  a
comprehensive 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 and six months ended June 30:




                                                THREE MONTHS               SIX MONTHS
                                          ---------------------     ---------------------
                                            2003         2002         2003         2002
                                          --------     --------     --------     --------
                                                                     
Revenues
    Wholesale
      Americas                            $  251.7     $  237.6     $  507.9     $  465.9
      Europe, Africa and Middle East         111.5         92.2        214.2        176.8
      Asia-Pacific                            26.0         17.4         49.7         32.2
                                          --------     --------     --------     --------
                                             389.2        347.2        771.8        674.9
                                          --------     --------     --------     --------
    Retail (net of eliminations)
      Americas                                  .5          6.4          1.2         14.0
      Europe, Africa and Middle East          19.9         16.2         37.4         32.3
      Asia-Pacific                            18.8         18.9         37.0         39.3
                                          --------     --------     --------     --------
                                              39.2         41.5         75.6         85.6
                                          --------     --------     --------     --------
      NMHG Consolidated                   $  428.4     $  388.7     $  847.4     $  760.5
                                          ========     ========     ========     ========
Operating profit (loss)
    Wholesale
      Americas                            $   13.0     $   12.2     $   26.2     $   22.0
      Europe, Africa and Middle East           1.6          1.8          2.1         (1.0)
      Asia-Pacific                              .9          (.2)          .9          (.2)
                                          --------     --------     --------     --------
                                              15.5         13.8         29.2         20.8
                                          --------     --------     --------     --------
    Retail (net of eliminations)
      Americas                                 (.1)         (.4)          .1          (.2)
      Europe, Africa and Middle East           (.8)          .7         (2.3)         1.0
      Asia-Pacific                             1.0         (3.1)         1.3         (3.4)
                                          --------     --------     --------     --------
                                                .1         (2.8)         (.9)        (2.6)
                                          --------     --------     --------     --------
      NMHG Consolidated                   $   15.6     $   11.0     $   28.3     $   18.2
                                          ========     ========     ========     ========
Interest expense
      Wholesale                           $   (7.3)    $   (6.6)    $  (14.5)    $  (10.2)
      Retail (net of eliminations)            (1.4)        (2.0)        (2.8)        (3.9)
                                          --------     --------     --------     --------
      NMHG Consolidated                   $   (8.7)    $   (8.6)    $  (17.3)    $  (14.1)
                                          ========     ========     ========     ========
Other-net
      Wholesale                           $    1.0     $   (3.6)    $    1.2     $   (2.1)
      Retail (net of eliminations)              .4         (1.0)          .7         (1.0)
                                          --------     --------     --------     --------
      NMHG Consolidated                   $    1.4     $   (4.6)    $    1.9     $   (3.1)
                                          ========     ========     ========     ========

Net income (loss)
      Wholesale                           $    6.3     $    2.5     $   11.0     $    8.1
      Retail (net of eliminations)             (.6)        (3.7)        (2.0)        (5.0)
                                          --------     --------     --------     --------
      NMHG Consolidated                   $    5.7     $   (1.2)    $    9.0     $    3.1
                                          ========     ========     ========     ========



                                       19



NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued




                                                        THREE MONTHS               SIX MONTHS
                                                      ---------------           -----------------
                                                      2003       2002            2003        2002
                                                      ----       ----            ----        ----
                                                                                 
  Effective tax rate
        Wholesale                                     33.7%      38.9%           34.0%      10.6%
        Retail (net of eliminations)                  33.3%      36.2%           33.3%      33.3%
        NMHG Consolidated                             33.7%      31.8%           34.1%       (a)




(a) The  effective  tax rate for the six  months  ended  June 30,  2002 for NMHG
Consolidated is not meaningful. See below.

The  effective tax rate for the six months ended June 30, 2002 is 10.6% for NMHG
Wholesale and is not meaningful for NMHG  Consolidated due to a $1.9 million tax
benefit  recognized in the first quarter of 2002 related to the  recognition  of
previously  generated  losses in China,  combined with a relatively low level of
pre-tax income. These factors resulted in a net tax benefit generated on pre-tax
income for NMHG Consolidated.

Second Quarter of 2003 Compared with Second Quarter of 2002

NMHG  Wholesale:  Revenues  increased to $389.2 million in the second quarter of
2003, up 12.1% from $347.2  million in the second  quarter of 2002. The increase
in revenues was largely due to increased unit volume  worldwide,  a shift in mix
to  higher-priced  lift trucks and favorable  foreign currency  movements.  Lift
truck  shipments  increased  5.1% to 16,961 units in the second  quarter of 2003
from 16,135 units in the second quarter of 2002.

Operating  profit  increased to $15.5 million in the second quarter of 2003 from
$13.8 million in the second quarter of 2002. Operating profit improved primarily
due to (i) a favorable shift in mix to  higher-margin  lift trucks,  (ii) a $1.6
million favorable  adjustment related to favorable product liability  experience
and  (iii) a $1.1  million  gain on the sale of idle  property  recorded  in the
second  quarter of 2003.  In  addition,  operating  profit in 2002  included  an
impairment loss of approximately $0.8 million,  included in selling, general and
administrative  expenses in the  accompanying  statement  of income,  on certain
property,  consisting  primarily  of  land,  owned in  South  America  due to an
estimated decline in value based on broker quotes.  These increases in operating
profit were partially offset by (i) unfavorable foreign currency effects largely
as a result of the  weakening  U.S.  dollar  against  the euro,  (ii)  increased
product  development  expenses  and (iii)  additional  expenses,  which were not
eligible for accrual in 2002, related to the previously  announced  phase-out of
the  Lenoir,  North  Carolina  lift truck  component  facility.  See  additional
discussion of the NMHG Wholesale  restructuring programs under the heading "NMHG
Restructuring Plans" in this Form 10-Q.

The  increase  in  operating  profit  was also  partially  offset by a change in
classification  of management  fees charged to NMHG  Wholesale by NACCO.  In the
first quarter of 2003, the parent company began  classifying all management fees
charged  to NMHG  Wholesale  and the other  segments  as  selling,  general  and
administrative expenses for purposes of internal analysis. In comparison, in the
three and six months ended June 30,  2002,  a portion of the fees,  $0.6 million
and $1.2 million, respectively, for NMHG Wholesale, were recorded as a component
of other income (expense).

Net income  increased  to $6.3  million in the second  quarter of 2003 from $2.5
million  in the  second  quarter of 2002  primarily  as a result of the  factors
affecting operating profit plus increased income from unconsolidated  affiliates
and  certain  favorable  foreign  currency  transactions.   Also  affecting  the
comparability  of net income is a  decrease  in the loss on  interest  rate swap
agreements:  the second quarter of 2002 net income includes a pre-tax expense of
$3.1 million related to (i) the  mark-to-market of interest rate swap agreements
that no longer  qualified for hedge  accounting due to the refinancing of NMHG's
debt and (ii) the  recognition of previously  deferred  losses on these interest
rate swap agreements.



                                       20




NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued


The  worldwide  backlog  level  increased  to 19,400 units at June 30, 2003 from
17,500 units at June 30, 2002 and 17,300  units at the end of the first  quarter
of 2003 primarily due to an increase in demand.

NMHG Retail (net of  eliminations):  Revenues  decreased to $39.2 million in the
second  quarter of 2003 from $41.5 million in the second  quarter of 2002.  This
decrease  is  primarily  due to the January 3, 2003 sale of NMHG  Retail's  only
wholly owned U.S. dealer. NMHG Retail-Americas revenues were $0.5 million in the
second quarter of 2003 compared with $6.4 million in the second quarter of 2002.
This  decrease  in  Americas  revenues  was  partially  offset by an increase in
revenues due to favorable  foreign  currency  effects.  NMHG Retail generated an
operating  profit of $0.1 million in the second quarter of 2003 compared with an
operating  loss of $2.8  million  in the  second  quarter  of  2002,  which  was
primarily  the  result of  stronger  operating  results  in  Asia-Pacific.  NMHG
Retail's  net loss  improved to $0.6  million from a net loss of $3.7 million in
the second quarter of 2002 due to the factors  affecting  operating profit and a
decrease in interest  expense  allocated  to NMHG Retail and  favorable  foreign
currency movements included in other-net expenses.

First Six Months of 2003 Compared with First Six Months of 2002

NMHG Wholesale:  Revenues increased to $771.8 million in the first six months of
2003 from  $674.9  million  in the first six  months of 2002.  The  increase  in
revenues was primarily the result of increased  unit volume,  favorable  foreign
currency  movements  and,  to a  lesser  degree,  a  favorable  shift  in mix to
higher-priced lift trucks. Unit shipments increased 10.6% to 34,413 units in the
first six  months of 2003 as  compared  with  31,106 in the first six  months of
2002.

Operating profit increased to $29.2 million in the first half of 2003 from $20.8
million  in the  first  half of 2002.  The  increase  in  operating  profit  was
primarily the result of a favorable  shift in mix to  higher-margin  lift trucks
and increased  volume,  partially  offset by increased  product  development and
marketing expenses and unfavorable  foreign currency effects largely as a result
of the weakening U.S. dollar against the euro. Also affecting the year over year
comparability is the change in  classification  of the management fee charged to
NMHG Wholesale from NACCO.  See discussion of this change in  classification  in
the second quarter operating results, above.

Net income  increased to $11.0 million in the first six months of 2003 from $8.1
million  in the first six  months of 2002 as a result of the  factors  affecting
operating  profit and  additional  income from  unconsolidated  affiliates and a
decrease  in the loss on  interest  rate swap  agreements.  These  factors  were
partially offset by an increase in interest expense,  including the amortization
of deferred financing fees.

NMHG Retail (net of  eliminations):  Revenues  decreased to $75.6 million in the
first six  months of 2003 from  $85.6  million  in the first six months of 2002.
This decrease is primarily due to the January 3, 2003 sale of NMHG Retail's only
wholly  owned U.S.  dealer,  partially  offset by an  increase  in units sold in
Europe. NMHG Retail-Americas  revenues were $1.2 million in the first six months
of 2003 compared with $14.0 million in the first six months of 2002. NMHG Retail
generated  an  operating  loss of $0.9  million  in the first six months of 2003
compared with an operating loss of $2.6 million in the first six months of 2002,
primarily  as a result of  stronger  operating  results  in  Asia-Pacific.  NMHG
Retail's net loss improved to $2.0 million in the six months ended June 30, 2003
from a net loss of $5.0  million  in the  first  six  months  of 2002 due to the
factors affecting  operating profit and a decrease in interest expense allocated
to NMHG Retail and favorable  foreign currency  movements  included in other-net
expenses.



                                       21




NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued

NMHG Restructuring Plans

NMHG 2002 Restructuring Program

As announced in December 2002,  NMHG Wholesale is phasing out its Lenoir,  North
Carolina,  lift truck component facility and restructuring  other  manufacturing
and  administrative  operations,  primarily  its  Irvine,  Scotland,  lift truck
assembly  and  component  facility.  During  the fourth  quarter  of 2002,  NMHG
Wholesale  recognized a  restructuring  charge of  approximately  $12.5  million
pre-tax.  Of this amount,  $3.8 million  relates to a non-cash asset  impairment
charge for building,  machinery and tooling,  which was determined  based on the
then current  market values for similar  assets and broker quotes as compared to
the net book value of these  assets;  and $8.7 million  relates to severance and
other  employee  benefits  to be paid to  approximately  615  manufacturing  and
administrative  employees.  Payments began during the second quarter of 2003. As
of June 30,  2003,  payments  of $0.7  million  were made to  approximately  100
employees.  Payments are expected to continue  through 2005.  In addition,  $0.3
million of the amount  accrued at December  31,  2002 was  reversed in the first
half of 2003.

Approximately  $2.5 million of pre-tax costs primarily  related to manufacturing
inefficiencies,  which were not  eligible  for  accrual in December  2002,  were
expensed  in the first six  months of 2003.  Of the  additional  costs  incurred
during 2003,  $2.3 million is classified as cost of sales and the remaining $0.2
million is classified  as selling,  general and  administrative  expenses in the
Unaudited  Condensed  Consolidated  Statement of Income for the six months ended
June 30, 2003.  Additional costs for severance and manufacturing  inefficiencies
are expected to be  approximately  $8.1 million for the remainder of 2003,  $8.5
million  in 2004 and $5.7  million  in 2005.  Initial  net  benefits  from  this
restructuring  program  are  expected  to be realized in 2004 with a full twelve
months of estimated  annual  pre-tax  benefits of  approximately  $14.3  million
expected beginning in 2005.  Although a majority of the projected savings is the
result of a reduction in fixed  factory  costs,  the overall  benefit  estimates
could vary depending on unit volumes and the resulting  impact on  manufacturing
efficiencies.  In addition, outlays for capital expenditures,  primarily for new
tooling and  equipment,  of  approximately  $4.3  million are  expected  for the
remainder of 2003.

This  restructuring  program will allow the Company to re-focus its product line
manufacturing  activities,  including  the  manufacture  of new product lines in
Europe.  As a result,  the Company expects to receive  government  grants during
2003  through 2005  totaling  approximately  $6.5  million over that  three-year
period. Of this total amount, $1.1 million is expected to be received in 2003.


                                       22



NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued

NMHG 2001 Restructuring Programs

During 2001,  management committed to the restructuring of certain operations in
Europe for both the Wholesale and Retail segments of the business. As such, NMHG
Wholesale  recognized  a  restructuring  charge of  approximately  $4.5  million
pre-tax for severance and other  employee  benefits to be paid to  approximately
285 direct and indirect factory labor and administrative personnel in Europe. As
of December 31, 2002,  payments of $3.4 million to  approximately  245 employees
had been made and $0.2 million of the amount originally  accrued was reversed in
2002.  Payments of $0.9 million to 16  employees  were made during the first six
months of 2003. The majority of the headcount reductions were made by the end of
2002. As a result of the reduced  headcount in Europe,  NMHG Wholesale  realized
pre-tax cost savings  primarily from reduced employee wages and benefits of $4.6
million for the first six months of 2003 and estimates  pre-tax  savings of $4.6
million for the  remainder of 2003.  Annual  pre-tax cost saving of $9.2 million
are  expected  to  continue  subsequent  to 2003 as a  result  of this  program.
Although a majority of the  projected  savings is the result of a  reduction  in
fixed factory costs, the overall benefit  estimates could vary depending on unit
volumes and the resulting impact on manufacturing efficiencies or due to changes
in foreign currency rates.

NMHG Retail  recognized a  restructuring  charge of  approximately  $4.7 million
pre-tax in 2001, of which $0.4 million  related to lease  termination  costs and
$4.3 million  related to  severance  and other  employee  benefits to be paid to
approximately 140 service technicians,  salesmen and administrative personnel at
wholly owned dealers in Europe. As of December 31, 2002, severance payments, net
of  currency  effects,  of $2.8  million  had  been  made to  approximately  110
employees.  During  the first six  months of 2003,  severance  payments  of $0.3
million  were made to six  employees.  In  addition,  $0.4 million of the amount
accrued at December 31, 2002 was  reversed in the first six months of 2003.  The
majority of the headcount  reductions were made by the end of 2002. Cost savings
primarily  from reduced  employee  wages,  employee  benefits and lease costs of
approximately $1.6 million pre-tax were realized in the first six months of 2003
and are  expected to be  approximately  $1.6  million for the  remainder of 2003
related to this program. Annual pre-tax cost saving of $3.1 million are expected
to continue  subsequent to 2003 as a result of this program.  Estimated benefits
could be reduced by  additional  severance  payments,  if any, made to employees
above the statutory or contractually required amount that was accrued in 2001 or
due to changes in foreign currency rates.

LIQUIDITY AND CAPITAL RESOURCES

Expenditures  for  property,  plant and  equipment  were $8.4  million  for NMHG
Wholesale  and $2.4 million for NMHG Retail during the first six months of 2003.
These  capital  expenditures  include  tooling  for  new  products,   machinery,
equipment  and lease and rental  fleet.  It is  estimated  that  NMHG's  capital
expenditures for the remainder of 2003 will be  approximately  $20.8 million for
NMHG Wholesale and $0.8 million for NMHG Retail.  Planned  expenditures  for the
remainder of 2003 include tooling for new products, capital expenditures arising
as  a  result  of  the  manufacturing  restructuring  programs,  replacement  of
machinery and  equipment  and  additions to retail lease and rental  fleet.  The
principal sources of financing for these capital expenditures will be internally
generated funds and bank borrowings.

Since  December 31, 2002,  there have been no  significant  changes in the total
amount of NMHG's  contractual  obligations  or  commercial  commitments,  or the
timing of cash flows in accordance  with those  obligations,  as reported in the
Company's 10-K for the year ended December 31, 2002.

During  2002,  NMHG issued  $250.0  million of 10%  unsecured  Senior Notes that
mature on May 15, 2009.  The Senior Notes are senior  unsecured  obligations  of
NMHG Holding Co. and are  guaranteed  by  substantially  all of NMHG's  domestic
subsidiaries.  NMHG Holding Co. has the option to redeem all or a portion of the
Senior Notes on or after May 15, 2006 at the redemption  prices set forth in the
Indenture  governing the Senior  Notes.  The proceeds from the Senior Notes were
reduced by an original issue discount of $3.1 million.



                                       23




NMHG HOLDING CO. - continued

LIQUIDITY AND CAPITAL RESOURCES - continued

Additionally,  NMHG has a secured, floating-rate revolving credit facility which
expires in May 2005.  Availability  under the revolving credit facility is up to
$175.0  million and is governed by a borrowing  base derived from advance  rates
against the inventory and accounts  receivable of the  borrowers,  as defined in
the revolving  credit  facility.  Adjustments  to reserves  booked against these
assets,  including inventory  reserves,  will change the eligible borrowing base
and thereby impact the liquidity provided by the facility. At June 30, 2003, the
borrowing base under the revolving  credit  facility was $105.3  million,  which
reflects  reductions for the commitments or  availability  under certain foreign
credit facilities and for an excess  availability  requirement of $15.0 million.
Borrowings  outstanding  under this facility were $2.0 million at June 30, 2003.
Therefore,  at June 30, 2003, the excess availability under the revolving credit
facility was $103.3  million.  The floating rate of interest  applicable to this
facility on June 30, 2003 was 5.875%,  including  the  applicable  floating rate
margin.

In addition to the amount  outstanding  under the Senior Notes and the revolving
credit facility,  NMHG had borrowings of approximately $33.0 million outstanding
at June 30, 2003 under various  foreign  working  capital  facilities  and other
domestic term loans.

NMHG believes that funds available under the revolving  credit  facility,  other
available lines of credit and operating cash flows are sufficient to finance all
of its operating needs and commitments arising during the foreseeable future.

NMHG's capital structure is presented below:




                                                              JUNE 30     DECEMBER 31
                                                               2003          2002
                                                             --------      --------
                                                                     
Total net tangible assets                                    $  361.2      $  362.8
Goodwill and other intangibles at cost                          494.7         487.7
                                                             --------      --------
    Net assets before amortization of intangibles               855.9         850.5
Accumulated goodwill and other intangibles amortization        (145.6)       (142.3)
Total debt                                                     (307.0)       (324.8)
Minority interest                                                 (.7)         (1.1)
                                                             --------      --------

Stockholder's equity                                         $  402.6      $  382.3
                                                             ========      ========
Debt to total capitalization                                     43%           46%



The  decrease in total net  tangible  assets of $1.6 million is in part due to a
$26.2  million  decrease in cash,  an $8.6  million  decrease in net assets as a
result of the sale of NMHG Retail's  wholly owned U.S.  dealership on January 3,
2003, an $11.9 million increase in trade and intercompany accounts payable and a
$9.1  million  increase  in other  current  liabilities.  These  decreases  were
partially  offset  by  increases  of $24.1  million  in trade  and  intercompany
accounts  receivable  and a $27.9 million  increase in inventory.  Stockholder's
equity at June 30,  2003  increased  $20.3  million as a result of net income of
$9.0 million and a favorable  foreign currency  translation  adjustment of $16.4
million  partially  offset  by a  dividend  to  NACCO  of  $5.0  million  and an
unfavorable adjustment to the deferred loss on hedges of $0.1 million.


                                       24



======================
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 six
months ended June 30:



                             THREE MONTHS                  SIX MONTHS
                        ----------------------      -----------------------
                          2003          2002          2003           2002
                        --------      --------      --------      --------
Revenues                $  118.3      $  134.5      $  234.3      $  256.1
Operating profit        $    4.4      $    3.2      $     .6      $     .6
Interest expense        $   (1.7)     $   (1.9)     $   (3.3)     $   (3.8)
Other-net               $    (.1)     $    (.7)     $    (.4)     $    (.8)
Net income (loss)       $    1.5      $     .4      $   (1.9)     $   (2.4)

Effective tax rate          42.3%         33.3%         38.7%         40.0%


Second Quarter of 2003 Compared with Second Quarter of 2002

Housewares'  revenues  decreased to $118.3 million in the second quarter of 2003
from  $134.5  million in the second  quarter  of 2002  primarily  due to reduced
consumer  spending as a result of the weak retail  environment  in the U.S.  and
Canada. HB/PS was also affected by certain retail customers' inventory reduction
programs as a result of the weak  economy.  The decline in revenues at HB/PS was
partially offset by a shift in mix to higher price-point  products and increased
volume of home health  products.  In  addition,  revenues  at KCI  declined as a
result of reduced  customer visits due to the weak economy,  partially offset by
an increase in the number of stores from 170 at June 30, 2002 to 178 at June 30,
2003.  Although the total store transactions  declined at KCI, the average sales
transaction increased slightly.

Operating profit in the seasonally weak second quarter increased to $4.4 million
in the second  quarter of 2003 compared with $3.2 million in the second  quarter
of 2002, primarily as a result of a $3.6 million charge in the second quarter of
2002 related to the partial write-down of pre-bankruptcy receivables from Kmart.
Excluding  this charge,  operating  profit  decreased $2.4 million in the second
quarter of 2003 as  compared  with the second  quarter  of 2002.  This  decrease
resulted  from  declines in the average  sales  price,  reduced unit volumes and
resulting  reductions in the absorption of manufacturing  overhead costs.  These
declines were partially offset by lower manufacturing costs.

Net income of $1.5 million for the second  quarter of 2003  improved as compared
with net income of $0.4 million for the second  quarter of 2002 primarily due to
the factors affecting operating profit.


                                       25



NACCO HOUSEWARES GROUP - continued

FINANCIAL REVIEW - continued

First Six Months of 2003 Compared with First Six Months of 2002

Housewares'  revenues  decreased  to $234.3  million  in the first six months of
2003, down 8.5% from $256.1 million in the first six months of 2002. The decline
in  revenues  resulted  from the  same  factors  affecting  the  second  quarter
discussed above.

Operating  profit  of $0.6  million  for the  period  ended  June  30,  2003 was
unchanged  from the  operating  profit  for the  period  ended  June  30,  2002.
Operating  results for the six months ended June 30, 2003  improved $2.3 million
as a result of the  year-over-year  change in net  charges  to  write-off  Kmart
pre-petition bankruptcy receivables. However, this benefit was completely offset
by the effects of reduced unit volume.

Net loss of $1.9 million for the first six months of 2003  decreased as compared
with a net loss of $2.4 million for the first six months of 2002  primarily  due
to the  factors  affecting  operating  profit  and a $0.5  million  decrease  in
interest expense primarily due to decreased debt levels.

LIQUIDITY AND CAPITAL RESOURCES

Housewares'  expenditures  for property,  plant and equipment  were $3.3 million
during the first six months of 2003 and are estimated to be $7.0 million for the
remainder of 2003. These planned capital  expenditures are primarily for tooling
and  equipment  designed  for new  products,  as well as tooling  and  equipment
intended  to  reduce   manufacturing  costs  and  increase   efficiency.   These
expenditures  will be funded primarily from internally  generated funds and bank
borrowings.

HB/PS'  credit   agreement   provides  for  a  revolving  credit  facility  with
availability  of up to $140.0  million,  which is governed  by a borrowing  base
derived  from advance  rates  against the  inventory,  accounts  receivable  and
certain trademarks of HB/PS. A portion of the availability can be denominated in
Canadian dollars to provide funding to HB/PS' Canadian subsidiary. The borrowing
base is  reduced  by  specific  reserves  for  inventory,  accounts  receivable,
obligations  outstanding  under letters of credit and interest rate derivatives,
among  others,  and  an  excess  availability   requirement  of  $10.0  million.
Adjustments to reserves  booked against  inventory and accounts  receivable will
change the eligible  borrowing base and thereby impact the liquidity provided by
the facility.

Borrowings bear interest at a floating rate,  which can be either a base rate or
LIBOR, as defined, plus an applicable margin. The applicable margins,  effective
June 30,  2003,  for base rate  loans  and LIBOR  loans  were  0.50% and  1.75%,
respectively.  This is a decline  from the  applicable  margins  effective as of
December  31,  2002,  which were 1.50% and 2.75%,  respectively.  The  revolving
credit facility also requires the payment of a fee on the unused commitment. The
unused  commitment fee has declined from 0.50% per annum at December 31, 2002 to
0.375% per annum at June 30,  2003.  The margins and unused  commitment  fee are
subject to quarterly  adjustment based on a leverage ratio. The revolving credit
facility is secured by substantially all of HB/PS' assets.  The facility expires
in December 2005.

At June 30, 2003,  the borrowing  base under the revolving  credit  facility was
$81.4  million,   which   reflects   reductions  for  reserves  and  the  excess
availability  requirement of $10.0 million.  Borrowings  outstanding  under this
facility were $60.1 million at June 30, 2003.  Therefore,  at June 30, 2003, the
excess  availability under the revolving credit facility was $21.3 million.  The
floating  rate of  interest  applicable  to this  facility  on June 30, 2003 was
3.34%, including the applicable floating rate margin.



                                       26




NACCO HOUSEWARES GROUP - continued

LIQUIDITY AND CAPITAL RESOURCES - continued

KCI's credit agreement provides for a secured,  floating-rate  revolving line of
credit (the "KCI  Facility") with  availability up to $15.0 million,  based on a
formula  using KCI's  eligible  inventory,  as defined.  At June 30,  2003,  the
borrowing  base as  defined  in the  agreement  was  $10.2  million.  Borrowings
outstanding at June 30, 2003 were $8.3 million at an effective  interest rate of
LIBOR plus 1.35%, or 2.38%.

Since  December 31, 2002,  there have been no  significant  changes in the total
amount of Housewares' contractual obligations or commercial commitments,  or the
timing of cash flows in accordance  with those  obligations,  as reported in the
Company's 10-K for the year ended December 31, 2002.

Housewares  believes  that  funds  available  under its  credit  facilities  and
operating  cash flows are  sufficient to finance all of its operating  needs and
commitments arising during the foreseeable future.

Housewares' capital structure is presented below:




                                                              JUNE 30     DECEMBER 31
                                                               2003         2002
                                                             --------     --------

                                                                    
Total net tangible assets                                    $  134.7     $  127.6
Goodwill and other intangibles at cost                          124.1        124.1
                                                             --------     --------
    Net assets before goodwill amortization                     258.8        251.7
Accumulated goodwill and other intangibles amortization         (40.0)       (39.9)
Total debt                                                      (68.7)       (57.9)
                                                             --------     --------

Stockholder's equity                                         $  150.1     $  153.9
                                                             ========     ========

Debt to total capitalization                                     31%           27%




Total net tangible assets increased $7.1 million primarily due to a $9.6 million
increase in inventory,  an $8.7 decrease in other current liabilities and a $4.8
million decrease in trade and intercompany accounts payable, partially offset by
a $12.4 million  decrease in accounts  receivable and a $3.6 million decrease in
property,  plant,  and  equipment.  Inventory  increased  primarily  due  to the
seasonality  of the  Housewares  business.  Other current  liabilities  declined
primarily due to the payment of payroll and incentive  compensation in the first
quarter of 2003  relating to amounts  accrued at  December  31,  2002.  Accounts
receivable  declined  primarily as a result of lower sales in the second quarter
of 2003 as compared with sales in the seasonally higher fourth quarter of 2002.



                                       27



===================================
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,  Louisiana and Mississippi.
Total  coal  reserves  approximate  2.5  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. The operating results of Coteau, Falkirk and Sabine are included
in "project mining  subsidiaries." The operating results of all other operations
are included in "other mining operations."

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.

FINANCIAL REVIEW

Lignite tons sold by NACoal's operating lignite mines were as follows for the
three and six months ended June 30:




                                          THREE MONTHS               SIX MONTHS
                                     ------------------------  ------------------------
                                        2003         2002         2003         2002
                                     -----------  -----------  -----------  -----------

                                                                       
Coteau                                      3.4          3.4          7.7          7.5
Falkirk                                     1.9          1.5          3.9          3.4
Sabine                                      1.1           .9          2.1          2.0
San Miguel                                   .8           .8          1.5          1.6
MLMC                                         .8           .9          1.8          1.2
Red River                                    .1           .2           .3           .3
                                     -----------  -----------  -----------  -----------
  Total lignite                             8.1          7.7         17.3         16.0
                                     ===========  ===========  ===========  ===========




The Florida  dragline  operations  delivered  2.4 million and 5.2 million  cubic
yards of limerock in the three and six months ended June 30, 2003, respectively.
This  compares  with 2.8 million and 5.2 million  cubic yards of limerock in the
three and six months ended June 30, 2002, respectively.



                                       28




THE NORTH AMERICAN COAL CORPORATION - continued

FINANCIAL REVIEW - continued

Revenues,  income  before  taxes,  provision  for taxes and net  income  were as
follows for the three and six months ended June 30:




                                                                   THREE MONTHS             SIX MONTHS
                                                              --------------------     ---------------------
                                                                2003        2002         2003         2002
                                                              -------     --------     --------     --------
                                                                                        
Revenues
    Project mining subsidiaries                               $  68.7     $   63.8     $  130.5     $  128.2
    Other mining operations                                      21.4         21.8         44.0         36.2
                                                              -------     --------     --------     --------
                                                                 90.1         85.6        174.5        164.4
    Liquidated damage payments recorded by MLMC                   ---          ---          ---          3.3
    Royalties and other                                            .6           .7          1.1          1.7
                                                              -------     --------     --------     --------
                                                              $  90.7     $   86.3     $  175.6     $  169.4
                                                              =======     ========     ========     ========
Income before taxes
    Project mining subsidiaries                               $   6.9     $    6.1     $   14.4     $   13.5
    Other mining operations                                        .9          2.5          2.9          6.8
                                                              -------     --------     --------     --------
Total from operating mines                                        7.8          8.6         17.3         20.3
Royalties and other expenses, net                                (2.1)        (1.1)        (3.7)        (3.6)
Other operating expenses                                         (2.5)        (1.9)        (4.8)        (3.5)
                                                              -------     --------     --------     --------
    Income before tax provision                                   3.2          5.6          8.8         13.2
Provision for taxes                                               ---          1.4          1.0          2.6
                                                              -------     --------     --------     --------
    Income before cumulative effect of accounting change          3.2          4.2          7.8         10.6
Cumulative effect of accounting change, net-of tax                ---          ---         (1.3)         ---
                                                              -------     --------     --------     --------
    Net income                                                $   3.2     $    4.2     $    6.5     $   10.6
                                                              =======     ========     ========     ========

Effective tax rate(a)                                            (b)          25.0%       10.3%        19.7%




(a) The effective  tax rate for NACoal is lower than the  statutory  federal tax
rate of 35% primarily due to the benefit received from percentage depletion.

(b) The  effective  tax rate for the three months ended June 30, 2003 for NACoal
is not meaningful.

Second Quarter of 2003 Compared with Second Quarter of 2002

Revenues in the second quarter of 2003 increased to $90.7 million,  up 5.1% from
$86.3 million in the second  quarter of 2002.  Increased  revenues in the second
quarter of 2003 as compared with the second  quarter of 2002 is primarily due to
an increase in tons sold at Falkirk  and  Sabine,  partially  offset by a slight
decrease in tonnage volume at  Mississippi,  decreased  cubic yards delivered at
the Florida dragline  operations and a decrease in pass-through  costs billed to
the project mining subsidiaries' customers.

Income before taxes decreased to $3.2 million in the second quarter of 2003 from
$5.6 million in the second  quarter of 2002.  This  decrease is primarily due to
(i) a $1.4 million gain  recorded in the second  quarter of 2002 for the sale of
undeveloped   Eastern  coal   reserves  that  were  not  aligned  with  NACoal's
development  strategies,  (ii) lower  volumes  at MLMC due to  reduced  customer
requirements and (iii) increased  operating costs at MLMC and San Miguel.  These
decreases were partially  offset by the favorable  effect of increased volume at
Falkirk and due to decreased  interest expense as a result of lower debt levels.
Net income in the second  quarter of 2003  decreased  to $3.2  million from $4.2
million in the second  quarter of 2002 as a result of these  factors and a lower
effective tax rate.

The decrease in the  effective  tax rate for the three and six months ended June
30,  2003 as  compared  with the three and six months  ended June 30,  2002,  is
primarily  due to a greater  proportion  of income from  operations  eligible to
record a benefit from percentage depletion when compared to losses at operations
not eligible for percentage depletion.  In addition,  the second quarter of 2003
includes a favorable  tax  adjustment  related to the  revision of the full year
estimated effective tax rate.



                                       29




THE NORTH AMERICAN COAL CORPORATION - continued

FINANCIAL REVIEW - continued

First Six Months of 2003 Compared with First Six Months of 2002

Revenues in the first six months of 2003  increased to $175.6  million,  up 3.7%
from $169.4 million in the first six months of 2002.  Increased  revenues in the
first six  months  of 2003 as  compared  with the  first  six  months of 2002 is
primarily  due to a full six months of commercial  operations of the  customer's
power plant in 2003 at MLMC and an  increase in tons sold by the project  mines,
partially  offset by (i) a decrease in pass-through  costs billed to the project
mining subsidiaries'  customers,  (ii) a decrease in liquidated damages payments
which  were  received  by MLMC in the  first  half of 2002  due to the  delay of
commercial  operations  of the  customer's  power  plant and (iii) a decrease in
royalty income.

Income  before  taxes  decreased to $8.8 million in the first six months of 2003
from $13.2  million in the first six months of 2002.  This decrease is primarily
due to (i)  unfavorable  operating  results  at MLMC as a  result  of  increased
operating  costs from the  significant  increase in  production  and delivery of
lignite to the  customer  during the first six months of 2003 as  compared  with
operating costs incurred when receiving  liquidated  damages payments during the
first six months of 2002,  (ii)  increased  maintenance  costs at San Miguel and
(iii) a $1.4  million  gain on the sale of  undeveloped  Eastern  coal  reserves
recognized  in the first six months of 2002.  Net  income in the second  half of
2003  decreased to $6.5 million from $10.6 million in the second half of 2002 as
a result of these  factors and due to a $1.3  million  after-tax  charge for the
cumulative effect of a change in accounting  related to the adoption of SFAS No.
143. See Note 4 to the Unaudited Condensed Consolidated Financial Statements for
a discussion related to the adoption of SFAS No. 143.

LIQUIDITY AND CAPITAL RESOURCES

Expenditures  for property,  plant and equipment  were $26.0 million  during the
first six months of 2003. In April 2003,  $15.8 million of equipment  previously
financed under  operating  leases was refinanced with  collateralized  debt. The
equipment consisted of mining equipment, such as trucks, bulldozers, graders and
a backhoe.  These April 2003 purchases  were financed with three  collateralized
notes payable that expire,  in accordance with their respective terms, in either
2007  or  2008  and  require  monthly  principal  and  interest  payments  at  a
weighted-average fixed interest rate of 5.46%. NACoal estimates that its capital
expenditures  for the  remainder of 2003 will be $20.1  million,  of which $15.5
million relates to the development, establishment and improvement of the project
mining  subsidiaries'  mines and will be financed or  guaranteed  by the utility
customers.

In  addition  to  the  new   collateralized   debt  discussed  above,   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 with a principal balance of $85.0 million at
June 30, 2003 (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 line of credit of up to $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.  The margins and
commitment fee are subject to quarterly adjustment based on the level of debt to
EBITDA.  At June 30, 2003, the stated  interest  rate,  including the applicable
margin,  for the  revolving  line of credit and for the term loan was LIBOR plus
1.45% and LIBOR plus 1.75%,  respectively.  The  applicable  margins at June 30,
2003 have declined from those in effect at December 31, 2002 of 1.85% and 2.25%,
respectively.  The revolving credit facility fee has also declined from 0.40% at
December  31,  2002 to 0.30% at June 30,  2003.  At June 30,  2003,  NACoal  had
borrowings  outstanding  under its  revolving  line of  credit of $5.0  million,
leaving $55.0 million available.



                                       30





THE NORTH AMERICAN COAL CORPORATION - continued

LIQUIDITY AND CAPITAL RESOURCES - continued

Since  December 31, 2002,  there have been no  significant  changes in the total
amount of NACoal's  contractual  obligations or commercial  commitments,  or the
timing of cash flows in  accordance  with those  obligations  as reported in the
Company's 10-K for the year ended December 31, 2002.

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.

NACoal  believes  that  funds  available  under its  revolving  line of  credit,
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:




                                                JUNE 30     DECEMBER 31
                                                 2003          2002
                                               --------      --------

                                                       
Investment in project mining subsidiaries      $    5.0      $    4.9
Other net tangible assets                         109.7          93.2
Coal supply agreements, net                        81.3          82.8
                                               --------      --------
    Net assets                                    196.0         180.9

Advances from NACCO                               (24.4)        (25.7)
Other debt                                       (105.1)        (92.0)
                                               --------      --------
    Total debt                                   (129.5)       (117.7)
                                               --------      --------
Stockholder's equity                           $   66.5      $   63.2
                                               ========      ========

Debt to total capitalization                         66%          65 %




The increase in other net tangible assets and debt is primarily due to the April
2003 $15.8 million  refinancing of several  equipment  operating  leases at MLMC
with  collateralized  debt.  As a result  of the  refinancing,  these  pieces of
equipment  are now  included in  property,  plant and  equipment  on the balance
sheet.  Total  contractual  obligations of NACoal and the timing of payments did
not  change  significantly  as a  result  of this  refinancing.  The  change  in
stockholder's  equity is the  result of net  income of $6.5  million  and a $0.8
million increase in accumulated  other  comprehensive  income related to hedging
activity, partially offset by $4.0 million in dividends paid to NACCO.



                                       31





===============
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.  See
additional  discussion  in  Note  7  to  the  Unaudited  Condensed  Consolidated
Financial Statements.  Cash payments related to Bellaire's  obligations,  net of
internally  generated cash, are funded by NACCO and  historically  have not been
material.

The results of  operations  at NACCO and Other were as follows for the three and
six months ended June 30:


                                THREE MONTHS           SIX MONTHS
                              ----------------     -----------------
                               2003      2002       2003       2002
                              -----     ------     ------     ------

Revenues                      $  .1     $   .1     $   .1     $   .1
Operating loss                $ ---     $ (1.0)    $  (.1)    $ (1.8)
Other income (loss), net      $ (.6)    $   .7     $ (1.1)    $  1.3
Net income (loss)             $ (.8)    $  (.6)    $   .1     $ (2.2)

The change in  operating  loss and other  income  (loss) is  primarily  due to a
change in the classification of certain of NACCO's fees charged to the operating
segments.  In 2002,  $0.9  million and $1.8 million for the three and six months
ended June 30, 2002, respectively,  of income from fees charged to the operating
segments was included in other income  (loss).  In 2003, all fees charged to the
operating  segments  are  included in operating  loss.  In addition,  total fees
charged to the operating  segments increased by $0.5 million and $0.9 million in
the three and six months  ended June 30, 2003 as compared  with the same periods
of 2002.

The  increase  in net income  (loss) for the six months  ended June 30,  2003 as
compared with the six months ended June 30, 2002 is primarily due a $2.5 million
after-tax  cumulative  effect  benefit  recorded by Bellaire for the adoption of
SFAS No. 143 in the first quarter of 2003. See Note 4 to the Unaudited Condensed
Consolidated  Financial  Statements for a discussion of the adoption of SFAS No.
143.

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.



                                       32




NACCO AND OTHER - continued

FINANCIAL REVIEW - continued

NACCO's consolidated capital structure is presented below:




                                                                JUNE 30       DECEMBER 31
                                                                 2003            2002
                                                              ----------      ----------
                                                                        
Total net tangible assets                                     $    596.9      $    570.8
Coal supply agreements and other intangibles, net                   83.3            85.0
Goodwill at cost                                                   615.5           609.0
                                                              ----------      ----------
   Net assets before goodwill amortization                       1,295.7         1,264.8
Accumulated goodwill amortization                                 (184.3)         (181.6)
Total debt, excluding current and long-term portion of
   obligations of project mining subsidiaries                     (480.8)         (474.7)
Closed mine obligations (Bellaire), including the
   United Mine Worker retirees' medical fund, net-of-tax           (44.3)          (48.0)
Minority interest                                                    (.7)           (1.1)
                                                              ----------      ----------

Stockholders' equity                                          $    585.6      $    559.4
                                                              ==========      ==========

Debt to total capitalization                                        45%             46%



EFFECTS OF FOREIGN CURRENCY

NMHG  and  Housewares  operate   internationally  and  enter  into  transactions
denominated in foreign currencies.  As such, the Company's financial results are
subject to the variability that arises from exchange rate movements. The effects
of foreign  currency  fluctuations on revenues,  operating profit (loss) and net
income (loss) at NMHG and Housewares  have either been  discussed  above or were
not  material in the three and six months  ended June 30, 2003 as compared  with
the three and six months ended June 30, 2002. See also Item 3, "Quantitative and
Qualitative Disclosures About Market Risk."

OUTLOOK

NMHG Wholesale

NMHG Wholesale  expects overall lift truck  shipments to increase  moderately in
the second  half of 2003  compared  with the second half of 2002.  While  global
market prospects continue to be more uncertain than usual, lift truck markets in
the Americas are anticipated to improve in the second half of 2003 while markets
in Europe and Asia-Pacific are expected to remain relatively flat.

NMHG Wholesale  expects that results in the second half of 2003 will be affected
by ongoing costs for a product development program that is expected to mature in
2004-2006  and  additional  costs  related to the Lenoir,  North  Carolina,  and
Irvine,  Scotland,  manufacturing  restructuring  program  announced in December
2002.

NMHG Retail

NMHG Retail  expects to continue its programs to improve the  performance of its
wholly owned dealerships in 2003 as part of its objective to achieve and sustain
at least break-even results.



                                       33




OUTLOOK - continued

Housewares

Housewares is  cautiously  optimistic  that the current weak retail  environment
will improve in the second half of 2003.

HB/PS  continues  to  implement  programs,  begun in  earlier  years,  which are
designed to reduce  operating costs and enhance  manufacturing  and distribution
efficiencies.  Also,  HB/PS  believes  that new product  offerings,  such as the
Hamilton   Beach(R)   BrewStation(TM)   coffeemaker,   the   Hamilton   Beach(R)
WaffleStix(TM)  waffle  baker and an expanded  line of  TrueAir(TM)  home health
products, will enhance revenues over the remainder of 2003.

KCI expects to continue  programs  designed  to enhance its  operating  results,
including  improving its  merchandise  mix,  closing  non-performing  stores and
prudently  opening new stores,  expanding the offerings of Hamilton Beach(R) and
Proctor-Silex(R)-branded products and aggressively managing its costs.

NACoal

NACoal  anticipates  increased  lignite coal  deliveries in 2003,  compared with
2002,  primarily due to an expected increase in lignite coal production at MLMC.
However,  certain  favorable  items which  improved  financial  results in 2002,
including liquidated damages payments and related settlements,  are not expected
to be repeated in 2003.  Further,  maintenance  requirements and the adoption of
SFAS No. 143 will continue to increase costs in 2003 compared to 2002.

In the first  quarter of 2003,  NACoal  reached an  agreement  on a new limerock
mining  contract  which  has  minimum  deliveries  of 3.0  million  cubic  yards
annually.  This  operation is expected to begin late in 2003.  NACoal expects to
continue its efforts to develop other new domestic mining projects.

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  aftermarket  parts and
service on a worldwide basis, especially in the U.S. where the Company derives a
majority of its sales,  (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)  product  liability  or other  litigation,  warranty  claims or  returns  of
products,  (7) delays in or increased costs of restructuring  programs,  (8) the
effectiveness of the cost reduction programs implemented globally, including the
successful  implementation of procurement  initiatives,  (9) customer acceptance
of,  changes in costs of, or delays in the  development  of new  products,  (10)
acquisitions  and/or dispositions of dealerships by NMHG, and (11) the uncertain
impact on the  economy or the  public's  confidence  in general  from  terrorist
activities and the impact of the situation in Iraq.



                                       34





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 or sourced products,  (4) delays in delivery or the  unavailability of
raw materials 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 actions or other litigation,
warranty claims or returns of products, (7) increased competition,  (8) customer
acceptance  of,  changes  in costs  of,  or  delays  in the  development  of new
products, (9) weather conditions or other events that would affect the number of
customers  visiting KCI stores and (10) the  uncertain  impact on the economy or
the public's  confidence in general from terrorist  activities and the impact of
the situation in Iraq.

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 and develop new mining  opportunities
and (5) changes in the U.S. economy, in U.S.  regulatory  requirements or in the
power industry that would affect demand for NACoal's reserves.

       Item 3. Quantitative and Qualitative Disclosures About Market Risk

See pages 47, F-11, F-25 and F-26 of the Company's Form 10-K for the fiscal year
ended December 31, 2002, 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, 2002.

                         Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures: The Company maintains a set of
disclosure controls and procedures designed to ensure that information  required
to be  disclosed  by the Company in reports  that it files or submits  under the
Securities Exchange Act of 1934 is recorded, processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and forms.  An  evaluation  was carried out under the  supervision  and with the
participation  of the Company's  management,  including the Principal  Executive
Officer  and  the  Principal  Financial  Officer,  of the  effectiveness  of the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation, these officers have concluded that the
Company's disclosure controls and procedures are effective.

Changes in internal controls: Subsequent to the date of their evaluation, there
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weaknesses.



                                       35




                                     Part II

                                OTHER INFORMATION

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
              ---------------------------------------------------
              The following matters were submitted to a vote of security
              holders at the Annual Meeting of Stockholders held May 14, 2003,
              with the results indicated:

              Outstanding Shares Entitled to Vote              Number of Votes
              ------------------------------------             -----------------
                  Class A Common                                    6,578,328
                  Class B Common                                   16,234,100
                                                               -----------------
                                                                   22,812,428
                                                               =================

              Item A.   Election of twelve directors for the ensuing year.
              ------




                                                  Votes                 Votes
              Director Nominee                     For                 Withheld             Total
              --------------------------     -----------------      ---------------    -----------------

                                                                                 
              Owsley Brown II                      21,743,815            54,349           21,798,164
              Robert M. Gates                      21,724,540            73,624           21,798,164
              Leon J. Hendrix, Jr.                 21,716,940            81,224           21,798,164
              David H. Hoag                        21,717,040            81,124           21,798,164
              Dennis W. LaBarre                    21,715,006            83,158           21,798,164
              Richard de J. Osborne                20,824,281           973,883           21,798,164
              Alfred M. Rankin, Jr.                21,716,820            81,344           21,798,164
              Ian M. Ross                          21,741,125            57,039           21,798,164
              Michael E. Shannon                   21,723,046            75,118           21,798,164
              Britton T. Taplin                    21,712,986            85,178           21,798,164
              David F. Taplin                      21,742,101            56,063           21,798,164
              John F. Turben                       21,743,995            54,169           21,798,164






              Item B.   Confirming the appointment of Ernst & Young LLP as
              ------
              independent auditors of the Company for the current fiscal year.

                                                                                   
                       For                     Against                   Abstain                   Total
              ----------------------     --------------------      --------------------     ---------------
                   21,745,019                  49,228                   3,917                   21,798,164




Item 5.         Other Information
- ------          -----------------
                None

Item 6.         Exhibits and Reports on Form 8-K
- ------          --------------------------------
                (a) Exhibits. See Exhibit Index on page 38 of this quarterly
                    report on Form 10-Q.
                (b) Reports on Form 8-K.
                    Current Report on Form 8-K filed with the Commission on
                    April 23, 2003 (Item 9)
                    Current Report on Form 8-K filed with the Commission on
                    May 8, 2003 (Item 5)



                                       36




                                    Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                   NACCO Industries, Inc.
                                              ----------------------------------
                                                         (Registrant)



Date          August 13, 2003                         /s/ Kenneth C. Schilling
       ------------------------------         ----------------------------------
                                                     Kenneth C. Schilling
                                                 Vice President and Controller
                                               (Authorized Officer and Principal
                                               Financial and Accounting Officer)



                                       37





Exhibit Index
- -------------

Exhibit
Number*           Description of Exhibits
- -------           -----------------------

31.1              Certification of Alfred M. Rankin pursuant to
                  Rule 13a-14(a)/15d-14(a) of the Exchange Act

31.2              Certification of Kenneth C. Schilling pursuant to
                  Rule 13a-14(a)/15d-14(a) of the Exchange Act

32                Certifications  pursuant to 18 U.S.C. Section 1350, as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002, signed and dated by Alfred M. Rankin and
                  Kenneth C. Schilling



*Numbered in accordance with Item 601 of Regulation S-K.


                                       38