SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
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
(Address of principal executive offices) Zip code
Registrant's telephone number, including area code (216) 449-9600
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the last 90 days.
YES X NO
Number of shares of Class A Common Stock outstanding at October 31, 1996:
7,287,858
Number of shares of Class B Common Stock outstanding at October 31, 1996:
1,697,520
NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - September 30, 1996
and December 31, 1995
Unaudited Consolidated Statements of Income for
the Three Months Ended and Nine Months Ended
September 30, 1996 and 1995
Unaudited Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1996 and
1995
Notes to Unaudited Consolidated Financial
Statements
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition
Part II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
Exhibit Index
PART I
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
ASSETS (In thousands)
Current Assets
Cash and cash equivalents ...................... $ 32,692 $ 30,924
Accounts receivable, net ....................... 249,782 284,235
Inventories .................................... 391,124 388,819
Prepaid expenses and other ..................... 25,421 18,027
---------- ----------
699,019 722,005
Other Assets ....................................... 39,118 38,289
Property, Plant and Equipment, Net ................. 545,412 534,477
Deferred Charges
Goodwill, net .................................. 458,042 465,051
Deferred costs and other ....................... 58,653 56,725
Deferred income taxes .......................... 13,179 17,290
---------- ----------
529,874 539,066
---------- ----------
Total Assets ... $1,813,423 $1,833,837
========== ==========
See notes to unaudited consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited)
SEPTEMBER 30 DECEMBER 31
1996 1995
------------- ------------
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ................................. $ 216,702 $ 250,662
Revolving credit agreements ...................... 96,259 95,736
Current maturities of long-term obligations ...... 21,123 19,864
Income taxes ..................................... 3,442 4,672
Accrued payroll .................................. 29,849 29,827
Other current liabilities ........................ 122,138 122,961
---------- ----------
489,513 523,722
Notes Payable - not guaranteed by
the parent company ............................. 313,964 320,200
Obligations of Project Mining Subsidiaries -
not guaranteed by the parent company or
its North American Coal subsidiary ............ 341,487 346,472
Self-insurance Reserves and Other .................... 229,523 229,302
Minority Interest .................................... 41,074 44,014
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 7,279,330
shares outstanding (1995 - 7,256,971
shares outstanding) ........................ 7,279 7,257
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,706,048 shares outstanding
(1995 - 1,709,453 shares outstanding) ...... 1,706 1,709
Capital in excess of par value ................... 4,643 3,591
Retained income .................................. 380,046 350,301
Foreign currency translation adjustment
and other ..................................... 4,188 7,269
---------- ----------
397,862 370,127
---------- ----------
Total Liabilities and Stockholders' Equity .... $1,813,423 $1,833,837
========== ==========
See notes to unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(In thousands, except per share data)
Net sales .............................................. $ 535,988 $ 536,414 $ 1,654,059 $ 1,550,668
Other operating income ................................. 1,063 1,916 3,360 7,632
----------- ----------- ----------- -----------
Total Revenues ................................ 537,051 538,330 1,657,419 1,558,300
Cost of sales .......................................... 437,433 436,991 1,342,165 1,256,501
----------- ----------- ----------- -----------
Gross Profit .................................. 99,618 101,339 315,254 301,799
Selling, administrative and
general expenses ................................... 68,775 63,494 210,512 190,690
Amortization of goodwill ............................... 3,967 3,422 11,517 10,266
----------- ----------- ----------- -----------
Operating Profit .............................. 26,876 34,423 93,225 100,843
Other income (expense)
Interest income .................................... 486 287 1,170 2,578
Interest expense ................................... (12,899) (13,459) (38,892) (39,866)
Other - net ........................................ (166) 1,029 4,056 2,280
----------- ----------- ----------- -----------
(12,579) (12,143) (33,666) (35,008)
----------- ----------- ----------- -----------
Income Before Income Taxes,
Minority Interest and
Extraordinary Charge .................. 14,297 22,280 59,559 65,835
Provision for income taxes ............................. 6,072 7,526 23,674 22,852
----------- ----------- ----------- -----------
Income Before Minority
Interest and Extraordinary Charge ......... 8,225 14,754 35,885 42,983
Minority interest ...................................... (617) (1,096) (1,345) (1,788)
----------- ----------- ----------- -----------
Income Before Extraordinary Charge ............ 7,608 13,658 34,540 41,195
Extraordinary charge, net-of-tax ....................... -- (2,102) -- (3,382)
----------- ----------- ----------- -----------
Net Income .................................... $ 7,608 $ 11,556 $ 34,540 $ 37,813
=========== =========== =========== ===========
Per Share:
Income Before Extraordinary Charge ................. $ 0.85 $ 1.53 $ 3.85 $ 4.60
Extraordinary charge, net-of-tax ................... -- (0.24) -- (0.38)
----------- ----------- ----------- -----------
Net Income ......................................... $ 0.85 $ 1.29 $ 3.85 $ 4.22
=========== =========== =========== ===========
Dividends per share ................................ $ 0.1875 $ 0.1800 $ 0.5550 $ 0.5300
=========== =========== =========== ===========
See notes to unaudited consolidated financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NINE MONTHS ENDED
SEPTEMBER 30
------------
1996 1995
--------- ---------
(In thousands)
Operating Activities
Net income ....................................................................... $ 34,540 $ 37,813
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Extraordinary charge, net-of-tax ............................................. -- 2,161
Depreciation, depletion and amortization ..................................... 63,078 59,371
Deferred income taxes ........................................................ (6,104) 1,013
Other non-cash items ......................................................... (1,883) 3,255
Working Capital Changes:
Accounts receivable .......................................................... 49,534 (24,870)
Inventories .................................................................. 1,980 (121,580)
Other current assets ......................................................... (1,173) 6,598
Accounts payable ............................................................. (47,061) 18,225
Accrued income taxes ......................................................... (8,097) (6,702)
Other liabilities ............................................................ 3,868 (5,238)
--------- ---------
Net cash provided (used) by operating activities .......................... 88,682 (29,954)
Investing Activities
Expenditures for property, plant and equipment ................................... (59,190) (55,379)
Proceeds from the sale of assets ................................................. 927 640
Sale of NMHG bonds ............................................................... -- 4,394
Additional investment in subsidiary .............................................. (1,805) --
Acquisition of businesses ........................................................ (10,264) --
Other investing activities ....................................................... 246 (2,375)
--------- ---------
Net cash used by investing activities ..................................... (70,086) (52,720)
Financing Activities
Additions to long-term obligations and
revolving credit ............................................................... 59,471 392,041
Reductions of long-term obligations and
revolving credit ............................................................... (66,656) (310,928)
Additions to obligations of project mining
subsidiaries ................................................................... 53,030 45,033
Reductions of obligations of project mining
subsidiaries ................................................................... (58,925) (32,203)
Cash dividends paid .............................................................. (4,987) (4,751)
Capital grants ................................................................... 3,525 2,389
Other - net ...................................................................... (1,544) 1,518
--------- ---------
Net cash provided (used) by financing activities .......................... (16,086) 93,099
Effect of exchange rate changes on cash .......................................... (742) 904
--------- ---------
Cash and Cash Equivalents
Increase for the period .......................................................... 1,768 11,329
Balance at the beginning of the period ........................................... 30,924 19,541
--------- ---------
Balance at the end of the period ................................................. $ 32,692 $ 30,870
========= =========
See notes to unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Dollars in Millions, Except Per Share Data)
Note A - Basis of Presentation
NACCO Industries, Inc. ("NACCO") is a holding company with four operating
subsidiaries: The North American Coal Corporation ("NACoal"), NACCO Materials
Handling Group, Inc. ("NMHG"), Hamilton Beach/Proctor-Silex, Inc. ("HBPS"), and
The Kitchen Collection, Inc. ("KCI").
The accompanying unaudited consolidated financial statements include the
accounts of NACCO and its majority owned subsidiaries (NACCO Industries, Inc.
and Subsidiaries - the "Company"). Intercompany accounts have been eliminated.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the financial position of the Company as of
September 30, 1996 and the results of its operations for the three and nine
month periods and cash flows for the nine month periods ended September 30, 1996
and 1995 have been included.
Operating results for the nine month period ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. 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 year ended December 31, 1995.
Note B - Inventories
Inventories are summarized as follows:
September 30 December 31
1996 1995
------------ -----------
Manufacturing inventories:
Finished goods and service parts
NACCO Materials Handling Group ............... $ 120.8 $ 117.4
Hamilton Beach/Proctor-Silex ................. 68.9 43.3
------ ------
189.7 160.7
------ ------
Raw materials and work in process
NACCO Materials Handling Group ............... 154.9 182.0
Hamilton Beach/Proctor-Silex ................. 15.4 15.7
------ ------
170.3 197.7
------ ------
LIFO reserve
NACCO Materials Handling Group ............... (16.3) (13.3)
Hamilton Beach/Proctor-Silex ................. (.7) (.3)
------ ------
(17.0) (13.6)
------ ------
Total manufacturing inventories ................ 343.0 344.8
North American Coal:
Coal ......................................... 10.2 10.6
Mining supplies .............................. 18.1 19.1
Retail inventories - Kitchen Collection ............ 19.8 14.3
====== ======
$ 391.1 $ 388.8
====== ======
The cost of manufacturing inventories has been determined by the last-in,
first-out (LIFO) method for 65 percent and 66 percent of such inventories as of
September 30, 1996 and December 31, 1995, respectively.
Note C - Subsequent Event
On October 18, 1996, NACCO purchased the 20 percent minority ownership interest
in HBPS from Glen Dimplex, an unlimited corporation incorporated in the Republic
of Ireland, for $33.6 million. The Shareholders Agreement between NACCO and Glen
Dimplex provided Glen Dimplex with certain rights to dispose of its interest in
HBPS, including the right, at its sole option, to offer its interest to NACCO at
a purchase price determined pursuant to the Shareholders Agreement. As a result
of this purchase, NACCO now owns 100 percent of HBPS which was formed in October
1990 when Proctor-Silex, Inc., which had been wholly-owned by NACCO, was
combined with Hamilton Beach Inc., which had been wholly-owned by Glen Dimplex.
This purchase was funded utilizing borrowings under HBPS's credit agreement
which provides for a revolving credit facility ("Facility") that permits
advances up to $135.0 million. On October 10, 1996, HBPS amended this facility
increasing the permitted amount of advances to $160 million. This increase
provided HBPS with the flexibility to borrow the funds needed to effect the
purchase of Glen Dimplex's minority ownership interest. On October 31, 1996,
HBPS had $31.2 million available under this Facility, as amended.
Note D - Acquisition
On July 31, 1996, NMHG announced that it had acquired the warehouse equipment
business of ORMIC S.p.a., located near Milan, Italy, for approximately $10
million. ORMIC manufactures motorized hand trucks, order pickers and turret
trucks. This acquisition, along with the purchase in 1995 of DECA S.r.l.,
another Italian warehouse equipment manufacturer, strengthened NMHG's presence
in the European warehouse and distribution market and further enhanced its
position as the leading worldwide supplier of materials handling equipment.
Note E - Extraordinary Charge
The 1995 extraordinary charge of $3.4 million relates to the retirement of the
remaining Hyster-Yale 12 3/8% debentures and the write off of deferred financing
fees associated with the replacement of NMHG's former revolving credit facility
and senior term loan with a new long-term credit agreement.
Item 2 - Management's Discussion and Analysis of Results
of Operations and Financial Condition
(Tabular Dollars in Millions, Except Per Share Data)
FINANCIAL SUMMARY
NACCO's four operating subsidiaries function in distinct business environments,
and the results of operations and financial condition are best discussed at the
subsidiary level as presented below. The results for "North American Coal" have
been adjusted to exclude the previously combined results of Bellaire
Corporation, a non-operating subsidiary of NACCO.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ --------------------
1996 1995 1996 1995
------ -------- -------- --------
REVENUES
NACCO Materials Handling Group $ 349.5 $ 349.2 $ 1,177.9 $ 1,082.5
Hamilton Beach/Proctor-Silex .. 109.0 110.3 259.6 257.0
North American Coal ........... 61.2 62.5 177.0 178.3
Kitchen Collection ............ 19.5 18.1 47.0 43.7
NACCO and Other ............... -- -- .2 .4
Eliminations .................. (2.2) (1.8) (4.3) (3.6)
------ -------- -------- --------
$ 537.0 $ 538.3 $ 1,657.4 $ 1,558.3
====== ======== ======== ========
AMORTIZATION OF GOODWILL
NACCO Materials Handling Group $ 2.9 $ 2.7 $ 8.6 $ 8.1
Hamilton Beach/Proctor-Silex .. 1.0 .7 2.8 2.1
Kitchen Collection ............ -- -- .1 .1
------ -------- -------- --------
$ 3.9 $ 3.4 $ 11.5 $ 10.3
====== ======== ======== ========
OPERATING PROFIT (LOSS)
NACCO Materials Handling Group $ 10.3 $ 15.4 $ 62.2 $ 60.9
Hamilton BeachProctor-Silex ... 7.0 9.4 10.7 14.4
North American Coal ........... 10.5 10.8 28.1 31.8
Kitchen Collection ............ 1.0 .9 (.8) .1
NACCO and Other ............... (1.9) (2.1) (7.0) (6.4)
------ -------- -------- --------
$ 26.9 $ 34.4 $ 93.2 $ 100.8
====== ======== ======== ========
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
NACCO Materials Handling Group $ 13.2 $ 18.1 $ 70.8 $ 69.0
Hamilton Beach/Proctor-Silex .. 8.0 10.1 13.5 16.5
North American Coal ........... 10.5 10.8 28.1 31.8
Kitchen Collection ............ 1.0 .9 (.7) .2
NACCO and Other ............... (1.9) (2.1) (7.0) (6.4)
------ -------- -------- --------
$ 30.8 $ 37.8 $ 104.7 $ 111.1
====== ======== ======== ========
INTEREST EXPENSE
NACCO Materials Handling Group $ (7.6) $ (7.5) $ (23.5) $ (22.9)
Hamilton Beach/Proctor-Silex .. (1.7) (1.9) (4.5) (5.2)
North American Coal ........... (.1) (.4) (.2) (1.1)
Kitchen Collection ............ (.1) (.2) (.4) (.4)
NACCO and Other ............... -- (.4) (.4) (1.4)
Eliminations .................. -- .4 .3 1.5
------ -------- -------- --------
(9.5) (10.0) (28.7) (29.5)
Project mining subsidiaries ... (3.4) (3.5) (10.2) (10.4)
====== ======== ======== ========
$ (12.9) $ (13.5) $ (38.9) $ (39.9)
====== ======== ======== ========
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ---------------------
1996 1995 1996 1995
----- ----- ----- -----
OTHER-NET, INCOME (EXPENSE)
NACCO Materials Handling Group ................................... $ .4 $ .9 $ .8 $ 2.0
Hamilton Beach/Proctor-Silex ..................................... -- (.2) (.1) (.4)
North American Coal .............................................. (.7) .2 2.9 .4
NACCO and Other .................................................. .1 .1 .5 .3
----- ----- ----- -----
$ (.2) $ 1.0 $ 4.1 $ 2.3
===== ===== ===== =====
NET INCOME (LOSS)
Before Extraordinary Charge
NACCO Materials Handling Group ................................... $ 1.4 $ 6.0 $ 23.2 $ 24.6
Hamilton Beach/Proctor-Silex ..................................... 3.0 4.9 4.0 5.8
North American Coal .............................................. 4.4 5.4 14.5 16.0
Kitchen Collection ............................................... .5 .5 (.7) (.1)
NACCO and Other .................................................. (1.0) (2.0) (5.1) (3.3)
Minority interest ................................................ (.7) (1.1) (1.4) (1.8)
----- ----- ----- -----
7.6 13.7 34.5 41.2
Extraordinary charge, net-of-tax ................................. -- (2.1) -- (3.4)
----- ----- ----- -----
$ 7.6 $ 11.6 $ 34.5 $ 37.8
===== ===== ===== =====
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NACCO Materials Handling Group ................................... $ 24.9 $ 24.4
Hamilton Beach/Proctor-Silex ..................................... 13.9 11.9
North American Coal .............................................. 1.5 1.2
Kitchen Collection ............................................... .8 .7
NACCO and Other .................................................. .2 .2
----- -----
41.3 38.4
Project mining subsidiaries ...................................... 21.8 21.0
----- -----
$ 63.1 $ 59.4
===== =====
CAPITAL EXPENDITURES
NACCO Materials Handling Group ................................... $ 33.9 $ 28.2
Hamilton Beach/Proctor-Silex ..................................... 9.0 7.4
North American Coal .............................................. .8 2.5
Kitchen Collection ............................................... .9 1.3
NACCO and Other .................................................. -- --
----- -----
44.6 39.4
Project mining subsidiaries ...................................... 14.6 16.0
----- -----
$ 59.2 $ 55.4
===== =====
SEPTEMBER 30 DECEMBER 31
1996 1995
-------- --------
TOTAL ASSETS
NACCO Materials Handling Group ............. $ 1,046.2 $ 1,052.2
Hamilton Beach/Proctor-Silex ............... 313.7 288.0
North American Coal ........................ 37.6 40.7
Kitchen Collection ......................... 27.9 25.1
NACCO and Other ............................ 61.2 62.7
-------- --------
1,486.6 1,468.7
Project mining subsidiaries ................ 430.0 433.3
-------- --------
1,916.6 1,902.0
Consolidating eliminations ................. (103.2) (68.2)
======== ========
$ 1,813.4 $ 1,833.8
======== ========
NORTH AMERICAN COAL
NACoal mines and markets lignite for use primarily as fuel for power generation
by electric utilities. The lignite is surface mined in North Dakota, Texas and
Louisiana. Total coal reserves approximate 2.1 billion tons with 1.3 billion
tons committed to electric utility customers pursuant to long-term contracts.
NACoal operates four lignite mines, three of which are project mining
subsidiaries (Coteau, Falkirk and Sabine) and the other is a joint venture with
Phillips Coal Company named Red River.
In November 1995, NACoal began providing dragline mining services ("Florida
dragline operations") for a limerock quarry near Miami, Florida. The operating
results for the Florida dragline operations are included in other mining
operations.
FINANCIAL REVIEW
NACoal's three project mining subsidiaries (Coteau, Falkirk and Sabine) mine
lignite for utility customers pursuant to long-term contracts at a price based
on actual cost plus an agreed pretax profit per ton. Due to the cost-plus nature
of these contracts, revenues and operating profits are impacted by increases and
decreases in operating costs, as well as by sales tons. Net income of these
project mines, however, is not significantly affected by changes in such
operating costs, which include costs of operations, interest expense and certain
other items. Because of the nature of the contracts at these mines, operating
results are best analyzed in terms of income before taxes and net income.
Tons sold by NACoal's four operating lignite mines were as follows for the three
and nine months ended September 30:
THREE MONTHS NINE MONTH
------------ ----------
1996 1995 1996 1995
---- ---- ---- ----
Coteau Properties ................................... 3.8 3.8 11.4 11.2
Falkirk Mining ...................................... 1.9 1.8 5.3 5.3
Sabine Mining ....................................... 1.1 1.1 2.9 2.7
Red River Mining .................................... .3 .3 .6 .7
--- ---- ---- ----
7.1 7.0 20.2 19.9
=== ==== ==== ====
Revenues, income before taxes, provision for taxes and net income were as
follows for the three and nine months ended September 30:
THREE MONTHS NINE MONTHS
------------ -----------
1996 1995 1996 1995
----- ------ ------ ------
Revenues
Project mines ....................................... $ 54.6 $ 56.9 $ 161.3 $ 160.9
Other mining operations ............................. 5.5 3.8 13.1 11.0
----- ------ ------ ------
60.1 60.7 174.4 171.9
Royalties and other ................................. 1.1 1.8 2.6 6.4
----- ------ ------ ------
$ 61.2 $ 62.5 $ 177.0 $ 178.3
===== ====== ====== ======
Income before taxes
Project mines ....................................... $ 6.4 $ 6.2 $ 17.9 $ 17.7
Other mining operations ............................. 1.0 .3 2.1 1.1
----- ------ ------ ------
Total from operating mines .............................. 7.4 6.5 20.0 18.8
Royalty and other income, net ........................... .6 2.4 6.2 8.2
Headquarters expense .................................... (1.3) (1.2) (4.5) (4.2)
----- ------ ------ ------
6.7 7.7 21.7 22.8
Provision for taxes ..................................... 2.3 2.3 7.2 6.8
----- ------ ------ ------
Net income .......................................... $ 4.4 $ 5.4 $ 14.5 $ 16.0
===== ====== ====== ======
NORTH AMERICAN COAL - continued
FINANCIAL REVIEW - continued
Third Quarter of 1996 Compared with Third Quarter of 1995
The following schedule details the components of the changes in revenues, income
before taxes and net income for the three months ended September 30:
Income
Before Net
Revenues Taxes Income
-------- ------ ---------
1995.............................................. $ 62.5 $ 7.7 $ 5.4
Increase (decrease) in 1996 from:
Project mines
Tonnage volume ............................ .8 .2 .1
Pass-through costs ........................ (3.1) -- --
Other mining operations
Tonnage volume ............................ 1.9 1.5 1.0
Mix of tons sold .......................... (.1) (.1) (.1)
Average selling price ..................... (.1) (.1) (.1)
Operating costs ........................... -- (.6) (.4)
--- --- ---
Changes from operating mines ................. (.6) .9 .5
Escrow payments .............................. -- (.8) (.5)
Management fees .............................. (.9) (1.0) (.6)
Other ........................................ .2 -- --
Headquarters expense ......................... -- (.1) (.1)
Differences between effective and
statutory tax rates ....................... -- -- (.3)
------- ------- -------
1996.............................................. $ 61.2 $ 6.7 $ 4.4
====== ======= =======
The favorable volume variance at the other mining operations is primarily due to
the Florida dragline operations which began production in November of 1995 and,
to a lesser degree, increased volume at Red River. The increase in operating
costs at the other mining operations was due to the costs associated with
operating the Florida dragline operations. The receipt of the final management
fee relating to the Trinity project in the fourth quarter of 1995 caused the
unfavorable management fees variance. In the second quarter of 1996, NACoal
received the final payment related to the sale of a previously owned eastern
underground mining property resulting in a decrease in escrow payments received
in the third quarter of 1996 compared with the third quarter of 1995.
NORTH AMERICAN COAL - continued
FINANCIAL REVIEW - continued
First Nine Months of 1996 Compared with First Nine Months of 1995
The following schedule details the components of the changes in revenues, income
before taxes and net income for the nine months ended September 30:
Income
Before Net
Revenues Taxes Income
-------- ------ -------
1995 $ 178.3 $ 22.8 $ 16.0
Increase (decrease) in 1996 from:
Project mines
Tonnage volume .............................................. 3.6 .3 .2
Mix of tons sold ............................................ (.1) (.1) (.1)
Average selling price ....................................... .1 .1 --
Pass-through costs .......................................... (3.3) -- --
Other mining operations
Tonnage volume .............................................. 2.0 2.8 1.9
Mix of tons sold ............................................ .2 .2 .1
Operating costs ............................................. -- (2.5) (1.6)
Other income ................................................ -- .4 .3
------ ----- -----
Changes from operating mines ................................... 2.5 1.2 .8
Escrow payments ................................................ -- 2.1 1.4
Management fees ................................................ (2.9) (2.9) (2.0)
Royalties ...................................................... (1.5) (1.6) (1.1)
Other .......................................................... .6 .3 .2
Headquarters expense ........................................... -- (.2) (.2)
Differences between effective and
statutory tax rates ......................................... -- (.6)
------ ----- -----
$ 177.0 $ 21.7 $ 14.5
1996 ====== ===== =====
Increased volumes at Coteau and Sabine due to customer requirements caused the
favorable volume variance at the project mines. The impact of the Florida
dragline operations somewhat offset by reduced tonnage volume at Red River
resulted in a favorable volume variance at the other mining operations. The
increase in operating costs at the other mining operations was due to the
operating costs of the Florida dragline operations and, to a lesser degree,
increased costs at Red River. The receipt in the second quarter of 1996 of the
nonrecurring final escrow payment from the sale of a previously owned eastern
underground mining property resulted in the favorable variance relating to
escrow payments. The receipt of the final management fee relating to the Trinity
project in 1995 resulted in lower management fees in 1996. The reduction in
royalties relates to the previously announced lower level of royalty income
relating to former coal properties.
NORTH AMERICAN COAL - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
Items of other income (expense) for the three and nine months ended September
30:
Three Months Nine Months
------------ -----------
1996 1995 1996 1995
------ ------- ------- -------
Interest income
Project mining subsidiaries ........................... $ .2 $ .2 $ .7 $ .8
Other mining operations ............................... .1 .4 .4 1.3
------ ------- ------- -------
$ .3 $ .6 $ 1.1 $ 2.1
====== ======= ======= =======
Interest expense
Project mining subsidiaries ........................... $ (3.4) $ (3.5) $ (10.2) $ (10.4)
Other mining operations ............................... (.1) (.4) (.2) (1.1)
------ ------- ------- -------
$ (3.5) $ (3.9) $ (10.4) $ (11.5)
====== ======= ======= =======
Other-net
Project mining subsidiaries ........................... $-- $ .1 $-- $ .2
Other mining operations ............................... (.7) .1 2.9 .2
------ ------- ------- -------
$ (.7) $ .2 $ 2.9 $ .4
====== ======= ======= =======
Effective tax rate .................................... 33.8 % 31.0 % 33.1 % 30.0 %
The increase in other-net relates to the previously discussed nonrecurring final
payment received in the second quarter of 1996. The increase in NACoal's
effective tax rate in 1996 compared with 1995 is due primarily to the receipt in
the second quarter of 1995 of a nonrecurring tax refund.
LIQUIDITY AND CAPITAL RESOURCES
NACoal has in place a $50.0 million revolving credit facility. The expiration
date of this facility (which currently is September 2001) can be extended one
additional year, on an annual basis, upon the mutual consent of NACoal and the
bank group. NACoal had $50.0 million of its revolving credit facility available
at September 30, 1996.
The financing of the project mining subsidiaries, which is guaranteed by the
utility customers, is comprised of long-term equipment leases, notes payable and
non-interest-bearing advances from customers. The obligations of the project
mining subsidiaries do not impact the short- or long-term liquidity of the
company and are without recourse to NACCO or NACoal. These arrangements allow
the project mining subsidiaries to pay dividends in amounts equal to their
retained earnings.
NORTH AMERICAN COAL - continued
LIQUIDITY AND CAPITAL RESOURCES (continued)
NACoal's capital structure, excluding the project mining subsidiaries, is
presented below:
September 30 December 31
1996 1995
---- ----
Investment in Project Mining Subsidiaries ........... $ 2.4 $ 3.3
Other Net Tangible Assets ........................... 1.2 (2.8)
----- ------
Total Tangible Assets ........................... 3.6 .5
Advances to Parent Company .......................... 11.6 14.9
Debt Related to Parent Advances ..................... -- --
Other Debt .......................................... (0.1) (.3)
----- ------
Total Debt ...................................... (0.1) (.3)
----- ------
Stockholder's Equity ................................ $ 15.1 $ 15.1
===== ======
Debt to Total Capitalization ........................ 1% 2%
NACCO MATERIALS HANDLING GROUP
NMHG, 98 percent-owned by NACCO, designs, manufactures and markets forklift
trucks and related service parts under the Hyster(R) and Yale(R) brand names.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the three and nine months
ended September 30:
Three Months Nine Months
------------ -----------
1996 1995 1996 1995
------- --------- --------- ---------
Revenues
Americas ......................................... $ 229.1 $ 240.5 $ 770.8 $ 730.5
Europe, Africa and Middle East ................... 98.6 89.4 333.3 292.4
Asia-Pacific ..................................... 21.8 19.3 73.8 59.6
------- --------- --------- ---------
$ 349.5 $ 349.2 $ 1,177.9 $ 1,082.5
======= ========= ========= =========
Operating profit
Americas ......................................... $ 5.4 $ 10.4 $ 37.2 $ 40.5
Europe, Africa and Middle East ................... 6.4 6.3 28.0 20.3
Asia-Pacific ..................................... (1.5) (1.3) (3.0) .1
------- --------- --------- ---------
$ 10.3 $ 15.4 $ 62.2 $ 60.9
======= ========= ========= =========
Operating profit excluding
goodwill amortization
Americas ......................................... $ 7.4 $ 12.3 $ 43.2 $ 46.2
Europe, Africa and Middle East ................... 7.2 7.0 30.5 22.4
Asia-Pacific ..................................... (1.4) (1.2) (2.9) .4
------- --------- --------- ---------
$ 13.2 $ 18.1 $ 70.8 $ 69.0
======= ========= ========= =========
Net income before extraordinary charge ............... $ 1.4 $ 6.0 $ 23.2 $ 24.6
Extraordinary charge ................................. -- (2.1) -- (3.4)
------- --------- --------- ---------
Net income ....................................... $ 1.4 $ 3.9 $ 23.2 $ 21.2
======= ========= ========= =========
NACCO MATERIALS HANDLING GROUP - continued
FINANCIAL REVIEW - continued
Third Quarter of 1996 Compared With Third Quarter of 1995
The following schedule details the components of the changes in revenues,
operating profit and net income for the third quarter of 1996 compared with the
third quarter of 1995:
Operating Net
Revenues Profit Income
-------- --------- --------
1995............................................. $ 349.2 $ 15.4 $ 3.9
Increase (Decrease) in 1996 from:
Unit volume ................................. (16.5) (2.2) (1.5)
Sales mix ................................... 4.9 1.0 .6
Average sales price ......................... 2.1 2.1 1.4
Service parts ............................... 8.2 3.6 2.3
European warehouse equipment business ....... 2.9 (.8) (.5)
Foreign currency ............................ (1.3) .6 .4
Manufacturing cost .......................... -- (7.2) (4.8)
Other operating expense ..................... -- (2.2) (1.4)
Other income and expense .................... -- -- (.1)
Differences between effective
and statutory tax rates ................... -- -- (1.0)
Extraordinary charge ........................ -- -- 2.1
------ ----- -----
1996............................................. $ 349.5 $ 10.3 $ 1.4
====== ===== =====
Unit volumes in the third quarter of 1996 decreased 12 percent in the Americas,
and increased 13 percent in Europe and 14 percent in Asia-Pacific compared with
the same period in 1995. The volume decline in the Americas was due to an 8
percent reduction in industry demand (as measured by retail bookings) and a
smaller reduction in backlog in the third quarter of 1996 relative to the third
quarter of 1995. In Europe, the growth in shipments resulted from increased
market share and backlog reduction. NMHG's backlog of orders at September 30,
1996 was approximately 12,700 forklift truck units compared to 14,400 and 21,200
forklift truck units at June 30, 1996 and December 31, 1995, respectively.
Production schedules are being adjusted to current lower levels of industry
demand. Product sales mix favorably impacted revenues due to increased sales of
higher value product classes, however, margins in these product classes are
lower resulting in a minimal impact on profits. The favorable impact from
pricing was due primarily to the price increases which became effective in
Europe in late 1995 and early 1996, offset somewhat by Asia-Pacific due to
competitive pricing pressures. Pricing pressure began to intensify in the
Americas during the third quarter of 1996 as industry demand declined. The
improvement in service parts was concentrated mainly in the Americas.
Operating profit was positively affected by currency because of the strength of
the dollar relative to the yen. Increased warranty costs and higher than
expected new product costs resulted in the unfavorable manufacturing cost
variance. Other operating expenses increased in 1996 primarily due to marketing
expenditures related to share gain programs, primarily in Europe and
Asia-Pacific.
NACCO MATERIALS HANDLING GROUP - continued
FINANCIAL REVIEW - continued
First Nine Months of 1996 Compared With First Nine Months of 1995
The following schedule details the components of the changes in revenues,
operating profit and net income for the first nine months of 1996 compared with
the first nine months of 1995:
Operating Net
Revenues Profit Income
-------- ---------- ---------
1985........................................... $ 1,082.5 $ 60.9 $ 21.2
Increase (Decrease) in 1996 from:
Unit volume ............................... 39.5 8.4 5.4
Sales mix ................................. 22.5 .1 .1
Average sales price ....................... 10.5 10.5 6.8
Service parts ............................. 18.8 8.2 5.3
European warehouse equipment business ..... 8.8 (1.0) (.7)
Foreign currency .......................... (4.7) 9.2 6.0
Manufacturing cost ........................ -- (20.5) (14.0)
Other operating expense ................... -- (13.6) (9.0)
Other income and expense .................. -- -- (.5)
Differences between effective
and statutory tax rates ................. -- -- (.8)
Extraordinary charge ...................... -- -- 3.4
-------- ----- -----
1996.......................................... $ 1,177.9 $ 62.2 $ 23.2
======== ===== =====
Unit volumes for the first nine months of 1996 compared with 1995 were flat in
the Americas. In Europe and Asia-Pacific unit volumes increased 21 percent due
to gains in market shares as well as improved overall European market size in
the first half of 1996. Product sales mix favorably impacted revenues due to
increased sales of higher value product classes. However, these higher value
products yield lower margins which, along with a shift in sales to lower margin
countries in Europe resulted in only a minimal impact on profits from mix. The
improvement in service parts sales was primarily from sales in the Americas of
service parts for Hyster(R) and Yale(R) lift trucks as well as competing brands.
The strength of the dollar relative to the yen favorably impacted operating
profit. Manufacturing costs were higher due to increased warranty and new
product costs which were partially offset by lower purchased materials costs.
Other operating expenses increased in 1996 due to higher marketing expenditures
related to increased volumes and new product launches along with general
inflation.
NACCO MATERIALS HANDLING GROUP- continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
Below is a detail of other income (expense) for the three and nine months ended
September 30:
Three Months Nine Months
------------ -----------
1996 1995 1996 1995
----- ----- ----- -----
Interest income ................................ $ .2 $ .1 $ .4 $ .7
Interest expense ............................... (7.6) (7.5) (23.5) (22.9)
Other-net ...................................... .4 .9 .8 2.0
----- ----- ----- -----
$ (7.0) $ (6.5) $ (22.3) $ (20.2)
===== ===== ===== =====
Effective tax rate ............................. 57.9% 32.2% 41.8% 39.5%
NMHG's higher effective tax rate for the third quarter of 1996 as compared with
1995 was due to a year-to-date adjustment to reflect changes in income levels
and sources of income. Also, the recognition in the third quarter of 1995 of a
favorable income tax adjustment relating to the resolution of tax issues from
prior years reduced the effective tax rate in the third quarter of 1995 compared
with 1996.
The effective tax rate for the first nine months of 1995 reflects the favorable
adjustment recognized in the third quarter of 1995 as well as a nonrecurring tax
refund which was recognized in the second quarter of 1995. During the first
quarter of 1996, NMHG recorded a favorable income tax adjustment from the
resolution of tax issues from prior years which reduced the effective tax rate
for the first nine months of 1996.
Extraordinary Charge
The 1995 extraordinary charge of $3.4 million relates to the retirement of the
remaining Hyster-Yale 12 3/8% debentures and the write off of deferred financing
fees associated with the replacement of NMHG's former revolving credit facility
and senior term loan with a new long-term credit agreement.
Acquisition
On July 31, 1996, NMHG announced that it had acquired the warehouse equipment
business of ORMIC S.p.a., located near Milan, Italy, for approximately $10
million. ORMIC manufactures motorized hand trucks, order pickers and turret
trucks. This acquisition, along with the purchase in 1995 of DECA S.r.l.,
another Italian warehouse equipment manufacturer, strengthened NMHG's presence
in the European warehouse and distribution market and further enhanced its
position as the leading worldwide supplier of materials handling equipment.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $33.9 million during the
first nine months of 1996. It is estimated that NMHG's capital expenditures for
the remainder of 1996 will be approximately $14.6 million. The principal sources
of financing for these capital expenditures are internally generated funds, bank
borrowings and government assistance grants.
The company believes it can meet all of its current and long-term commitments
and operating needs from operating cash flows and funds available under
revolving credit agreements. At September 30, 1996 NMHG had available $80.0
million of its $350.0 million revolving credit facility. In addition, NMHG has
separate facilities totalling $37.7 million, of which $32.6 million was
available at September 30, 1996.
NACCO MATERIALS HANDLING GROUP- continued
FINANCIAL REVIEW - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NMHG's capital structure is presented below:
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
Total Tangible Assets ............................................................. $ 300.1 $ 305.2
Goodwill at Cost .................................................................. 443.2 438.9
------ ------
Total Assets Before Goodwill Amortization .................................... 743.3 744.1
Accumulated Goodwill Amortization ............................................ (79.9) (71.2)
Total Debt ................................................................. (302.4) (331.9)
------ ------
Stockholders' Equity .............................................................. $ 361.0 $ 341.0
====== ======
Debt to Total Capitalization ...................................................... 46% 49%
HAMILTON BEACH/PROCTOR-SILEX
HBPS, 80 percent-owned by NACCO (see Subsequent Event discussion below), is a
leading manufacturer of small electric appliances. 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 increase
significantly for the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for HBPS were as follows for the three and nine months
ended September 30:
Three Months Nine Months
---------------------------- ------------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues ........................................... $ 109.0 $ 110.3 $ 259.6 $ 257.0
Operating profit ................................... $ 7.0 $ 9.4 $ 10.7 $ 14.4
Operating profit excluding
goodwill amortization .......................... $ 8.0 $ 10.1 $ 13.5 $ 16.5
Net income ......................................... $ 3.0 $ 4.9 $ 4.0 $ 5.8
Third Quarter of 1996 Compared With Third Quarter of 1995
The following schedule details the components of the changes in revenues,
operating profit and net income for the third quarter of 1996 compared with the
third quarter of 1995:
Operating Net
Revenues Profit Income
-------- --------- ------
1995............................................................... $ 110.3 $ 9.4 $ 4.9
Increase (Decrease) in 1996 from:
Unit volume and sales mix .................................... 1.8 1.3 .9
Average sales price .......................................... (3.1) (3.1) (2.0)
Manufacturing cost ........................................... -- 1.5 1.0
Other operating expense ...................................... -- (2.1) (1.4)
Other income and expense ..................................... -- -- .2
Differences between effective
and statutory tax rates ................................... -- -- (.6)
------ ---- ----
1996............................................................... $ 109.0 $ 7.0 $ 3.0
====== ==== ====
HAMILTON BEACH/PROCTOR-SILEX - continued
FINANCIAL REVIEW - continued
The favorable unit volume and sales mix variance is due to improved sales mix
because of increased sales of products in the "better" product category somewhat
offset by reduced sales in the "good" and "best" product categories and higher
market share. The competitive pricing environment, due primarily to low-cost
Chinese imports, continues to unfavorably effect operating results. Reductions
in raw materials costs, somewhat offset by higher overhead costs, resulted in
favorable manufacturing costs in 1996. The reductions in raw materials costs
included the favorable impact from the acquisition in 1995 of Plasticos Sotec de
Mexico, S.A. de C.V. ("Sotec") which supplies plastic parts to HBPS's Mexican
operations. The unfavorable variance from other operating expenses was primarily
caused by higher marketing expenses relating to a national advertising program,
which is planned to continue into the fourth quarter, and increased amortization
related to the 1995 acquisition of Sotec.
First Nine Months of 1996 Compared With First Nine Months of 1995
The following schedule details the components of the changes in revenues,
operating profit and net income for the first nine months of 1996 compared with
the first nine months of 1995:
Operating Net
Revenues Profit Income
-------- --------- -------
1996.................................................................... $ 257.0 $ 14.4 $ 5.8
Increase (Decrease) in 1996 from:
Unit volume and sales mix ............................... 8.3 3.1 2.0
Average sales price ..................................... (5.7) (5.7) (3.7)
Manufacturing cost ...................................... -- 3.4 2.2
Other operating expense ................................. -- (4.5) (2.9)
Other income and expense ................................ -- -- .7
Differences between effective
and statutory tax rates .............................. -- -- (.1)
------ ----- ----
1996.................................................................... $ 259.6 $ 10.7 $ 4.0
====== ===== ====
Increased sales of products in the "better" category, somewhat offset by reduced
sales of products in the "best" category along with slightly improved market
shares, resulted in favorable unit volume and sales mix. The average sales
price, manufacturing cost and other operating expense variances were caused by
the same factors as explained for the third quarter.
HAMILTON BEACH/PROCTOR-SILEX - continued
FINANCIAL REVIEW - continued
Other Income and Expense and Income Taxes
Below is a detail of other income (expense) for the three and nine months ended
September 30:
Three Months Nine Months
-------------------------- --------------------------
1996 1995 1996 1995
-------- -------- -------- --------
Interest expense ............................... $ (1.7) $ (1.9) $ (4.5) $ (5.2)
Other-net ...................................... -- (.2) (.1) (.4)
----- ----- ----- -----
$ (1.7) $ (2.1) $ (4.6) $ (5.6)
===== ===== ===== =====
Effective tax rate ............................. 44.8% 33.5% 34.9% 33.5%
The reduction in interest expense in 1996 was due primarily to lower average
borrowings in 1996 compared with 1995.
In the third quarter of 1995, HBPS's effective tax rate was reduced due to the
utilization of foreign tax credits that were not repeated in 1996. These credits
were received as a result of the repatriation in 1995 of foreign earnings
previously taxed at a rate in excess of the U.S. statutory rate. HBPS's
effective tax rate for the first nine months of 1996 was substantially affected
by the favorable impact from the recognition in the first quarter of 1996 of
federal income tax adjustments relating to the resolution of tax issues from
prior years.
Subsequent Event
On October 18, 1996, NACCO purchased the 20 percent minority ownership interest
in HBPS from Glen Dimplex, an unlimited corporation incorporated in the Republic
of Ireland, for $33.6 million. The Shareholders Agreement between NACCO and Glen
Dimplex provided Glen Dimplex with certain rights to dispose of its interest in
HBPS, including the right, at its sole option, to offer its interest to NACCO at
a purchase price determined pursuant to the Shareholders Agreement. As a result
of this purchase, NACCO now owns 100 percent of HBPS which was formed in October
1990 when Proctor-Silex, Inc., which had been wholly-owned by NACCO, was
combined with Hamilton Beach Inc., which had been wholly-owned by Glen Dimplex.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $9.0 million during the
first nine months of 1996 and are estimated to be $6.0 million for the remainder
of 1996. The primary purpose of these expenditures is to increase manufacturing
capacity and efficiency and to acquire tooling for new and existing products. In
April 1996, HBPS announced plans to build a new facility in Mexico to increase
manufacturing capacity for new and existing products. Construction of the new
plant, located in Saltillo, Coahuila, has begun and production is planned to
start in the first quarter of 1997. These expenditures are funded primarily from
internally generated funds and short-term borrowings.
HBPS's credit agreement provides for a revolving credit facility ("Facility")
that permits advances up to $135.0 million. At September 30, 1996, HBPS had
$42.1 million available under this Facility. The May 1999 expiration date of
this Facility may be extended annually for one additional year upon the mutual
consent of HBPS and the bank group. On October 10, 1996 HBPS
HAMILTON BEACHP/ROCTOR-SILEX - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
amended this facility increasing the permitted amount of advances to $160
million. This increase provided HBPS with the flexibility to borrow the funds
needed to effect the purchase of Glen Dimplex's minority ownership interest. On
October 31, 1996, HBPS had $31.2 million available under this Facility, as
amended. At September 30, 1996, HBPS also had $15.6 million available under
separate facilities.
HBPS's capital structure is presented below:
PROFORMA
SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1996 1995 1996
-------------- --------------- ----------------
Total Net Tangible Assets ....... $ 148.3 $ 131.7 $ 148.3
Goodwill at Cost.................. 112.5 112.0 118.9
-------------- --------------- ----------------
Total Assets Before Goodwill
Amortization............... 260.8 243.7 267.2
Accumulated Goodwill
Amortization.................. (21.5) (18.6) (21.5)
Total Debt........................ (103.0) (82.8) (136.6)
-------------- -------------- ----------------
Stockholders' Equity.............. $ 136.3 $ 142.3 $ 109.1
============== ============== ================
Debt to Total Capitalization...... 43% 37% 56%
The proforma capital structure reflects the impact of the Glen Dimplex purchase
which was recorded in October of 1996. Because of the seasonal nature of the
housewares business, HBPS's inventory and debt levels reach seasonal peaks in
the second and third quarters.
KITCHEN COLLECTION
KCI is a national specialty retailer of kitchenware, tableware, small electric
appliances and related accessories. The specialty retail business is seasonal
with the majority of its revenues and operating profit generated in the fourth
quarter during the fall holiday selling season.
FINANCIAL REVIEW
Third Quarter of 1996 Compared With Third Quarter of 1995
The following schedule details the components of the changes in revenues,
operating profit and net income for the third quarter of 1996 compared with the
third quarter of 1995:
Operating Net
Revenues Profit Income
-------- --------- --------
1995...................................................... $ 18.1 $ .9 $ .5
Increase (decrease) in 1996 from:
Stores opened in 1996.................... .7 --- ---
Stores opened in 1995.................... .6 .1 ---
Comparable stores........................ .1 .1 .1
Other.................................... --- (.1) (.1)
--------- -------- -------
1996...................................................... $ 19.5 $ 1.0 $ .5
========= ========= =======
First Nine Months of 1996 Compared with First Nine Months of 1995
The following schedule details the components of the changes in revenues,
operating profit (loss) and net loss for the first nine months of 1996 compared
with the first nine months of 1995:
Operating
Profit Net
Revenues (Loss) Loss
---------- ---------- --------
1995....................................................... $ 43.7 $ .1 $ (.1)
Increase (decrease) in 1996 from:
Stores opened in 1996..................... .9 (.1) (.1)
Stores opened in 1995..................... 3.2 .1 .1
Comparable stores......................... (.8) (.5) (.3)
Other..................................... --- (.4) (.3)
-------- ---------- --------
1996....................................................... $ 47.0 $ (.8 ) $ (.7)
========== ========== ========
KCI operated 141 stores at September 30, 1996 compared with 131 stores at
September 30, 1995. A full nine months of operation of stores opened in 1995
contributed favorably to revenues in 1996. The results at comparable stores and
profitability at new stores were adversely affected by the continuing difficult
factory outlet retail environment evidenced by lower levels of customer traffic
in factory outlet malls. The unfavorable other variance is due to margin
compression along with higher payroll and store rent costs. The margin
compression results from an unfavorable shift in sales mix and increased
promotional markdowns.
Provision for Income Taxes
KCI's effective tax rate for the three months ended September 30, 1996 and 1995
was 42.3 percent and 40.4 percent, respectively. KCI's effective tax rate for
the nine months ended September 30, 1996 and 1995 was 41.9 percent and 42.3
percent, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $.9 million during the first
nine months of 1996. Estimated capital expenditures for the remainder of 1996
are $.2 million. These expenditures relate primarily to new store openings and
improvements to existing facilities. The principal source of funds for these
capital expenditures is short term borrowings. At September 30, 1996, KCI had
available $1.8 million of its $5.0 million line of credit.
KCI's capital structure is presented below:
SEPTEMBER 30 DECEMBER 31
1996 1995
-------------- ---------------
Total Net Tangible Assets..................... $ 15.6 $ 13.1
Goodwill at Cost.............................. 4.6 4.6
------------ -------------
Total Assets Before Goodwill Amortization. 20.2 17.7
Accumulated Goodwill Amortization............. (.9) (.9)
Total Debt.................................... (8.2) (5.0)
------------ ------------
Stockholder's Equity.......................... $ 11.1 $ 11.8
============ ===========
Debt to Total Capitalization.............. 43% 30%
Because of the seasonal nature of the retail industry, KCI's inventory and debt
levels reach their seasonal peaks in the third quarter.
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
minor, it has significant long-term liabilities related to closed mine
activities, primarily from former eastern U.S. underground coal-mining
activities. Cash payments related to Bellaire's obligations, net of internally
generated cash, are funded by NACCO and are anticipated to be $1.4 million for
the remainder of 1996.
The results of operations at NACCO and Other were as follows for the three and
nine months ended September 30:
Three Months Nine Months
-------------------------- ------------------------
1996 1995 1996 1995
---------- --------- ---------- ----------
Revenues........................ $ --- $ --- $ .2 $ .4
Operating loss.................. $ (1.9) $ (2.1) $ (7.0) $ (6.4)
Other income (expense), net..... $ .1 $ .1 $ .5 $ .3
Net loss........................ $ (1.0) $ (2.0) $ (5.1) $ (3.3)
In the third quarter of 1996 the favorable impact from consolidating tax
adjustments reduced the net loss for the quarter compared with the third quarter
of 1995. In the second quarter of 1995, a nonrecurring tax benefit with related
interest income was recorded resulting from the settlement of several prior year
tax examinations. This tax item, somewhat offset by the favorable impact from
the consolidating tax adjustments in the third quarter of 1996, caused the
variance in net loss for the nine month period in 1996 compared with 1995.
LIQUIDITY AND CAPITAL RESOURCES
Although the subsidiaries have entered into substantial debt agreements, NACCO
has not guaranteed the long-term debt or any borrowings of its subsidiaries.
The debt agreements at HBPS and KCI allow for the payment of dividends under
certain circumstances. The credit agreement at NMHG allows up to $25.0 million
of dividends to be paid to NACCO; there have not yet been any such transfers.
There are no restrictions on transfers from NACoal. Dividends and advances from
subsidiaries are the primary source of cash for NACCO.
The Company believes it can adequately meet all of its current and long-term
commitments and operating needs. This outlook stems from amounts available under
revolving credit facilities and the utility customers' funding of the project
mining subsidiaries.
Part II
Item 1 Legal Proceedings
None
Item 2 Change in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on page 31 of this
quarterly report on Form 10-Q.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NACCO Industries, Inc.
(Registrant)
Date November 12, 1996 Frank B. O'Brien
Frank B. O'Brien
Senior Vice President - Corporate
Development and Chief Financial
Officer
Date November 12, 1996 Kenneth C. Schilling
Kenneth C. Schilling
Controller
(Principal Accounting Officer)
Exhibit Index
Exhibit
Number* Description of Exhibit
(10) (cxviii) Amendment No. 2 dated as of October 4, 1996 to the
Second Amended and Restated Credit Agreement dated as of
October 11, 1990, amended and restated as of April 18,
1995, among Hamilton Beach/Proctor-Silex, Inc.,
Proctor-Silex Canada Inc., Proctor-Silex S.A. de
C.V., as Borrowers, the Banks signatory thereto and the
Chase Manhattan Bank, N.A., as U. S. Agent, and the Chase
Manhattan Bank of Canada, as Canadian agent.
(11) Computation of Earnings Per Common Share
(27) Financial Data Schedule
*Numbered in accordance with Item 601 of Regulation S-K.