Exhibit 99 (i)
August 8, 1997
Dear Stockholder,
We believe that all of NACCO Industries stockholders should receive the most
comprehensive information possible about their company's operating performance.
With this in mind, we are implementing a new format for our interim reports to
stockholders. As a result, we have attached a copy of the second quarter
earnings release and supplemental financial information. The earnings release
replaces our traditional interim report. This change will place quarterly
operating results into your hands sooner than was previously possible, and at a
substantially reduced cost. We have also made a special effort to expand and
improve the scope of our quarterly earnings release to provide more information
on our current and future operating performance. We hope you will find this
approach both helpful and more timely.
Specifically with regard to our second quarter results, we are pleased that
earnings improved over the same quarter in 1996. We believe the results reflect
not only the strong demand for lift trucks in North America, but also the impact
of the ongoing cost-reduction and profit improvement programs in place at our
businesses, as well as the impact of our other longer term strategic programs.
Sincerely,
/s/ Alfred M. Rankin, Jr.
Alfred M. Rankin, Jr.
Chairman, President and Chief Executive Officer
NACCO INDUSTRIES, INC.
ANNOUNCES SECOND QUARTER 1997 EARNINGS
Mayfield Heights, Ohio, July 18, 1997: NACCO Industries, Inc. (NC-NYSE)
today announced 1997 second quarter net income of $14.9 million, or $1.82 per
share, on revenues of $541.1 million, compared with net income of $14.0 million,
or $1.56 per share, on revenues of $560.9 million for the second quarter of
1996. For the six months ended June 30, 1997, net income was $17.7 million, or
$2.16 per share, on revenues of $1.0 billion, compared with net income of $26.9
million, or $3.00 per share, on revenues of $1.1 billion in the first half of
1996. Earnings per share in the second quarter and first half of 1997 were
favorably affected by fewer shares outstanding as a result of the Company's
ongoing share repurchase program, including the issuer tender offer completed in
December 1996. As of June 30, 1997 the Company had 8,152,000 shares of common
stock outstanding, compared with 8,985,000 shares as of June 30, 1996.
NACCO Materials Handling Group
NACCO Materials Handling Group's net income for the second quarter was
$12.2 million on revenues of $377.4 million, compared with second quarter 1996
net income of $9.6 million on revenues of $407.6 million. Lift truck units
shipped to dealers in the second quarter totaled 16,905, a 7% decrease compared
with 18,236 units shipped in the second quarter a year ago. However, shipments
in the second quarter of 1997 increased 16% over the 14,529 units shipped in the
first quarter of 1997. This increase is primarily a result of stronger
industrywide demand in the North American market. Lift truck volumes in Europe
and Asia-Pacific were down slightly in the second quarter of 1997 from a year
ago as a result of slower sales in some key European markets and continued
competitive pressures from Japanese and Korean manufacturers in Asia-Pacific.
Contributing to NMHG's improved net income in the second quarter of 1997 were
favorable material expenses, improved worldwide manufacturing efficiency, lower
overhead costs at NMHG's factories, lower administrative support costs and
stronger demand for parts. Net income for the second quarter was also positively
affected by a favorable tax adjustment and lower interest expense. Net income
for the first six months of 1997 was $15.7 million on revenues of $709.7
million, compared with net income of $21.8 million on revenues of $828.4 million
for the first half of 1996.
North American Coal
North American Coal's net income for the second quarter was $3.8 million,
compared with $5.3 million for the second quarter of 1996. The decline in net
income was attributable to a nonrecurring $2.0 million, after tax, escrow
payment received in the 1996 second quarter related to the sale of an eastern
underground mine. Net income in the second quarter of 1997 included a $0.5
million increase in royalty income compared with the second quarter last year.
During the second quarter of 1997, a total of 6.6 million tons of lignite were
sold, compared with 6.0 million tons in the second quarter of 1996. North
American Coal's Florida dragline operations sold 1.8 million cubic yards of
limerock in the second quarter versus 1.6 million cubic yards in the second
quarter last year. North American Coal's net income for the six months ended
June 30, 1997 was $7.7 million, compared with $10.1 million in the first half of
1996. Net income in the first half of 1997 was affected by reduced tons sold at
one of the company's project mining subsidiaries in North Dakota as a result of
a customer's power plant outage and adverse weather conditions during the first
quarter.
Hamilton Beach/Proctor-Silex
Hamilton Beach/Proctor-Silex reported net income of $0.3 million on
revenues of $87.2 million for the second quarter of 1997, compared with net
income of $1.7 million on revenues of $82.7 million for the second quarter of
1996. Revenues grew 5% in the second quarter due to increased unit volumes,
primarily for toasters and blenders. The increase in unit volumes, however, was
offset by an extremely competitive pricing environment, start-up costs for the
new manufacturing facility in Saltillo, Mexico, and expenses resulting from a
reduction of manufacturing activities in the United States. For the six months
ended June 30, 1997, Hamilton Beach/Proctor-Silex had a net loss of $1.7 million
on revenues of $162.5 million, compared with net income of $1.0 million on
revenues of $150.6 million for the same period in 1996.
Kitchen Collection
Kitchen Collection had a net loss of $0.3 million on revenues of $16.6
million in the second quarter of 1997 compared with a net loss of $0.5 million
on revenues of $14.6 million in the second quarter of 1996. Kitchen Collection
operated 145 stores on June 30, 1997 compared with 140 stores at the end of the
second quarter of 1996. New store openings contributed to the increase in second
quarter sales, compared with the same period a year ago. In addition, comparable
store sales rose 8% over the second quarter of 1996 primarily as a result of a
6% increase in the average sales transaction and a 3% increase in the number of
customer sales transactions. However, overall margins in the second quarter of
1997 were negatively affected by actions taken to sell discontinued inventory
and costs associated with the discontinuation of the Hearthstone(TM) store
format. For the six months ended June 30, 1997, Kitchen Collection had a net
loss of $1.0 million on revenues of $31.2 million, compared with a net loss of
$1.2 million on revenues of $27.5 million for the same period last year.
Outlook
Lift truck industry bookings in the Americas are anticipated to continue to
be strong based on second quarter factory bookings, which were at the highest
levels since the first quarter of 1995. At NMHG, worldwide backlogs increased
41% to 20,300 units in the second quarter of 1997, compared with 14,400 units in
the second quarter of 1996, and increased 74% compared with 11,700 units at
year-end 1996.
North American Coal's San Miguel Lignite mine in Texas began production and
deliveries on July 1, 1997 as planned. The company expects the new mine to
deliver approximately 1.8 million tons of lignite in 1997 and thereafter
approximately 3.0 million tons annually through 2007. In addition, the company
expects overall customer lignite requirements at its other operating mines to
remain firm over the next six months.
At Hamilton Beach/Proctor-Silex, the new Saltillo facility is expected to
continue to ramp up production during 1997. As of June 30, the facility was
manufacturing selected lines of blenders and toasters. The company plans to
phase in additional manufacturing activities during the remainder of the year.
The company anticipates that the facility will provide significant cost benefits
over the long term.
Kitchen Collection will continue to focus on increasing each store's
average sales transaction and customer traffic through continued emphasis on
employee incentive programs as well as other marketing programs. Discontinued
inventory phase-outs should have less impact on the company's net income for the
remainder of 1997. Kitchen Collection is testing a new medium-market format in
two stores with two more medium-market stores scheduled for opening in 1997.
The statements contained in this news release that are not historical facts
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are made subject to certain risks and
uncertainties which could cause actual results to differ materially from those
presented in those forward-looking statements. Such risks and uncertainties with
respect to each subsidiary's operations include without limitation:
NMHG: (1) changes in demand for forklift trucks on a worldwide basis, (2)
changes in sales prices, (3) delays in delivery or increased pricing of raw
materials or sourced products and labor, (4) delays in manufacturing and
delivery schedules and (5) exchange rate fluctuations, changes in foreign import
tariffs and monetary policies and other changes in the regulatory climate in the
countries in which NMHG operates and/or sells products.
NACoal: (1) weather conditions and other events that would reduce the level
of customers' fuel requirements and (2) transitional issues in assuming the
management of the San Miguel Lignite project.
HBPS: (1) delays or increased costs in the start-up of operations in
Saltillo, Mexico, (2) bankruptcy of or loss of major retail customers, (3)
changes in sales prices, product mix or levels of consumer purchasing of small
electronic appliances and (4) exchange rate fluctuations, changes in foreign
import tariffs or monetary policies and other changes in the regulatory climate
in the countries in which HBPS operates and/or sells products.
KCI: (1) weather conditions which would affect the number of customers
visiting the stores, (2) changes in sales prices, product mix or level of
consumer purchasing of kitchenware and small electric appliances and (3) delays
in the start-up of proposed new stores.
NACCO Industries, Inc. is a holding company with four operating
subsidiaries. The North American Coal Corporation mines and markets lignite
primarily as fuel for power generation by electric utilities. NACCO Materials
Handling Group, Inc. is a world leader in the design and manufacture of forklift
trucks, marketed under the Hyster(R) and Yale(R) brand names. Hamilton
BeachProctor-Silex, Inc. is a leading manufacturer of small electric appliances.
The Kitchen Collection, Inc. is a national specialty retailer of kitchenware and
small electric appliances.
# # #
FOR FURTHER INFORMATION, CONTACT:
NACCO Industries, Inc.
Ira I Gamm
Manager-Investor Relations
216/449-9676
Selected Financial Data
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(In millions, except per share and percentage data)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Total revenues $ 541.1 $ 560.9 $ 1,020.8 $ 1,120.4
Operating profit $ 33.8 $ 34.0 $ 49.8 $ 65.1
Net income $ 14.9 $ 14.0 $ 17.7 $ 26.9
Net income per share $ 1.82 $ 1.56 $ 2.16 $ 3.00
Return on equity in
properly capitalized
tangible assets (A) 30.9% 34.9%
Return on equity in total
assets (A) 10.2% 14.3%
(A) - Twelve months ended June 30.
(Chart)
Return on Equity in Properly Capitalized Tangible Assets
1995* 42.5%
1996* 34.9%
1997* 30.9%
(Chart)
Return on Equity in Total Assets
1995* 15.5%
1996* 14.3%
1997* 10.2%
Minimum Internal Target 12.5%
*Twelve months ended June 30.
Note: Return calculations exclude the effect of the reserve for the UMWA
obligation.
(All amounts are subject to annual audit by independent public accountants.)
Consolidated Financial and Operating Highlights
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(In millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues
NACCO Materials Handling Group $ 377.4 $ 407.6 $ 709.7 $ 828.4
Hamilton Beach/Proctor-Silex 87.2 82.7 162.5 150.6
North American Coal 62.4 56.7 120.8 115.8
Kitchen Collection 16.6 14.6 31.2 27.5
NACCO and Other -- 0.1 0.1 0.2
Eliminations (2.5) (0.8) (3.5) (2.1)
----------- ------------- ------------- -----------
541.1 560.9 1,020.8 1,120.4
Amortization of goodwill
NACCO Materials Handling Group 2.9 2.8 5.8 5.7
Hamilton Beach/Proctor-Silex 1.0 0.9 2.0 1.8
Kitchen Collection 0.1 0.1 0.1 0.1
----------- ------------- ------------- -----------
4.0 3.8 7.9 7.6
Operating profit (loss)
NACCO Materials Handling Group 24.7 24.7 36.9 50.7
Hamilton Beach/Proctor-Silex 2.2 4.7 0.1 3.7
North American Coal 9.4 7.8 18.4 17.6
Kitchen Collection (0.5) (0.6) (1.5) (1.8)
NACCO and Other (2.0) (2.6) (4.1) (5.1)
----------- ------------- ------------- -----------
33.8 34.0 49.8 65.1
Other income (expense)
NACCO Materials Handling Group (1.8) (7.1) (7.4) (14.2)
Hamilton Beach/Proctor-Silex (1.7) (1.6) (3.2) (2.9)
North American Coal (3.3) 0.1 (6.4) (2.6)
Kitchen Collection (0.1) (0.2) (0.2) (0.3)
NACCO and Other (0.4) 0.2 (0.9) 0.1
----------- ------------- ------------- -----------
Income before income taxes and
minority interest 26.5 25.4 31.7 45.2
Provision for income taxes 11.3 10.9 13.6 17.6
----------- ------------- ------------- -----------
Income (loss) before minority interest
NACCO Materials Handling Group 12.2 9.6 15.7 21.8
Hamilton Beach/Proctor-Silex 0.3 1.7 (1.7) 1.0
North American Coal 3.8 5.3 7.7 10.1
Kitchen Collection (0.3) (0.5) (1.0) (1.2)
NACCO and Other (0.8) (1.6) (2.6) (4.1)
----------- ------------- ------------- -----------
15.2 14.5 18.1 27.6
Minority interest (0.3) (0.5) (0.4) (0.7)
----------- ------------- ------------- -----------
Net income $ 14.9 $ 14.0 $ 17.7 $ 26.9
=========== ============= ============= ===========
Net income per share $ 1.82 $ 1.56 $ 2.16 $ 3.00
=========== ============= ============= ===========
Cash dividends per share $ 0.1950 $ 0.1875 $ 0.3825 $ 0.3675
Average shares outstanding 8.183 8.984 8.187 8.979
(All amounts are subject to annual audit by independent public accountants.)
Consolidated Balance Sheets
NACCO INDUSTRIES, INC AND SUBSIDIARIES
(In millions)
June 30 Dec. 31
1997 1996
---------- ----------
Assets
Current assets $ 567.1 $ 591.8
Other assets 39.6 37.5
Property, plant and equipment, net 539.8 550.3
Goodwill, net 456.7 461.0
Deferred costs and other 71.6 67.5
---------- ----------
$ 1,674.8 $ 1,708.1
========== ==========
Liabilities and stockholders' equity
Current liabilities $ 470.1 $ 416.0
Notes payable 252.1 333.3
Obligations of project mining subsidiaries 327.8 341.5
Self-insurance reserves and other 224.6 223.9
Minority interest 14.8 14.1
Stockholders' equity 385.4 379.3
---------- ----------
$ 1,674.8 $ 1,708.1
========== ==========
(All amounts are subject to annual audit by indepenendt public accountants.)
Subsidiary Financial Information
NACCO MATERIALS HANDLING GROUP
(In millions, except units and percentage data)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
---- ---- ---- ----
Units sold 16,905 18,236 31,434 37,726
Backlog units 20,300 14,400
Revenues $ 377.4 $ 407.6 $ 709.7 $ 828.4
Operating profit $ 24.7 $ 24.7 $ 36.9 $ 50.7
Operating profit excluding goodwill amortization $ 27.6 $ 27.5 $ 42.7 $ 56.4
Interest expense $ (3.8) $ (6.6) $ (8.5) $ (13.4)
Net income $ 12.2 $ 9.6 $ 15.7 $ 21.8
Net income excluding goodwill amortization $ 15.1 $ 12.4 $ 21.5 $ 27.5
Return on equity in properly capitalized tangible assets (A) 27.4% 34.9%
Return on equity in total assets (A) 7.1% 11.9%
June 30 Dec. 31
Capital Structure 1997 1996
---- ----
Total net tangible assets $ 189.8 $ 267.9
Goodwill at cost 448.0 443.6
-------- --------
Total assets before goodwill amortization 637.8 711.5
Accumulated goodwill amortization (89.4) (82.8)
Total debt (169.9) (258.9)
-------- --------
Stockholders' equity $ 378.5 $ 369.8
======== ========
Debt to total capitalization 31% 41%
(A) - Twelve months ended.
(All amounts are subject to annual audit by independent public accountants.)
Subsidiary Financial Information
NORTH AMERICAN COAL
(In millions, except percentage data)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
-------- -------- ------- -------
Lignite tons sold 6.6 6.0 13.1 13.1
Income before tax from operating mines $ 6.4 $ 5.7 $ 12.8 $ 12.6
Royalty and other income, net $ 1.4 $ 4.1 $ 2.2 $ 5.6
Headquarters expense $ (1.6) $ (1.8) $ (2.9) $ (3.2)
Net income $ 3.8 $ 5.3 $ 7.7 $ 10.1
Return on equity in properly capitalized tangible assets (A) 293.2% 232.9%
Return on equity in total assets (A) 102.0% 115.4%
June 30 Dec. 31
Capital Structure (B) 1997 1996
---- ----
Investment in project mining subsidiaries $ 2.2 $ 3.3
Other net tangible assets 3.8 (0.8)
------- -------
Total net tangible assets 6.0 2.5
Advances to parent company 41.6 41.9
Debt related to parent advances (32.4) (29.0)
Other debt (0.1) (0.3)
------- -------
Total debt (32.5) (29.3)
------- -------
Stockholder's equity $ 15.1 $ 15.1
======= =======
Debt to total capitalization 68% 66%
(A) - Twelve months ended.
(B) - Excluding project mining subsidiaries.
(All amounts are subject to annual audit by independent public accountants.)
Subsidiary Financial Information
HAMILTON BEACH/PROCTOR-SILEX
(In millions, except percentage data)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
------- ------- ------ ------
Units sold 7.0 6.3 12.9 11.6
Revenues $ 87.2 $ 82.7 $162.5 $150.6
Operating profit $ 2.2 $ 4.7 $ 0.1 $ 3.7
Operating profit excluding goodwill amortization $ 3.2 $ 5.6 $ 2.1 $ 5.5
Interest expense $ (1.7) $ (1.5) $ (3.2) $ (2.8)
Net income (loss) $ 0.3 $ 1.7 $ (1.7) $ 1.0
Net income excluding goodwill amortization $ 1.3 $ 2.6 $ 0.3 $ 2.8
Return on equity in properly capitalized tangible assets (A) 17.2% 19.8%
Return on equity in total assets (A) 8.3% 9.8%
June 30 Dec. 31
Capital Structure 1997 1996
-------- --------
Total net tangible assets $ 130.6 $ 111.1
Goodwill at cost 118.9 118.9
-------- --------
Total assets before goodwill amortization 249.5 230.0
Accumulated goodwill amortization (24.5) (22.5)
Total debt (108.9) (89.7)
-------- --------
Stockholder's equity $ 116.1 $ 117.8
======== ========
Debt to total capitalization 48% 43%
(A) - Twelve months ended.
(All amounts are subject to annual audit by independent public accountants.)
Subsidiary Financial Information
KITCHEN COLLECTION
(In millions, except store and percentage data)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Operating Results 1997 1996 1997 1996
------- ------- ------- -------
Number of stores 145 140
Revenues $ 16.6 $ 14.6 $ 31.2 $ 27.5
Operating loss $ (0.5) $ (0.6) $ (1.5) $ (1.8)
Operating loss excluding goodwill amortization $ (0.4) $ (0.5) $ (1.4) $ (1.7)
Net loss $ (0.3) $ (0.5) $ (1.0) $ (1.2)
Net loss excluding goodwill amortization $ (0.2) $ (0.4) $ (0.9) $ (1.1)
Return on equity in properly capitalized tangible assets (A) 20.0% 14.8%
Return on equity in total assets (A) 14.1% 10.5%
June 30 Dec. 31
Capital Structure 1997 1996
------- -------
Total net tangible assets $ 14.2 $ 14.6
Goodwill at cost 4.6 4.6
------- -------
Total assets before goodwill amortization 18.8 19.2
Accumulated goodwill amortization (1.0) (0.9)
Total debt (6.0) (5.0)
------- -------
Stockholder's equity $ 11.8 $ 13.3
======= =======
Debt to total capitalization 34% 27%
(A) - Twelve months ended
(All amounts are subject to annual audit by independent public accountants.)
Financial Information
NACCO (PARENT COMPANY)
(In millions)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Condensed Income Statement 1997 1996 1997 1996
------- ------- ------- -------
Income (loss)
NACCO Materials Handling Group $ 12.2 $ 9.6 $ 15.7 $ 21.8
Hamilton Beach/Proctor-Silex 0.3 1.7 (1.7) 1.0
North American Coal 3.8 5.3 7.7 10.1
Kitchen Collection (0.3) (0.5) (1.0) (1.2)
------- ------- ------- -------
16.0 16.1 20.7 31.7
Minority interest (0.3) (0.5) (0.4) (0.7)
------- ------- ------- -------
Equity in earnings of operating subsidiaries 15.7 15.6 20.3 31.0
NACCO and Other (0.8) (1.6) (2.6) (4.1)
------- ------- ------- -------
Net income $ 14.9 $ 14.0 $ 17.7 $ 26.9
======= ======= ======= =======
Condensed Statement of Cash Flows
Operating Activities
Parent company only net loss $ (0.9) $ (1.7) $ (2.6) $ (4.3)
Other operating cash flows 3.4 12.6 3.2 4.1
------ ------- ------ ------
Net cash provided (used) by operating activities 2.5 10.9 0.6 (0.2)
------ ------- ------ ------
Investing Activities
Additional investment in subsidiary -- -- -- (1.8)
Dividends and advances received from (paid to) subsidiaries 2.7 (8.5) 4.3 4.5
Note payable to Bellaire (1.2) (1.2) (0.3) (0.8)
------ ------- ------ ------
Net cash provided (used) by operating activities 1.5 (9.7) 4.0 1.9
------ ------- ------ ------
Financing Activities
Stock repurchase (2.7) -- (2.7) --
Cash dividends (1.6) (1.7) (3.1) (3.3)
Other financing cash flows 0.3 0.5 1.2 1.6
------ ------- ------ ------
Net cash used by financing activities (4.0) (1.2) (4.6) (1.7)
------ ------- ------ ------
Increase (decrease) for the period $ -- $ -- $ -- $ --
====== ======= ====== ======
(All amounts are subject to annual audit by independent public accountants.)
Financial Information
NACCO (PARENT COMPANY)
(In millions)
June 30 Dec. 31
Condensed Balance Sheet 1997 1996
-------- --------
Current assets $ -- $ 0.3
Current intercompany accounts receivable, net 4.9 9.1
Other assets 0.5 0.5
Investments in subsidiaries
NACCO Materials Handling Group 369.5 361.0
Hamilton Beach/Proctor-Silex 116.1 117.8
North American Coal 15.1 15.1
Kitchen Collection 11.8 13.3
Bellaire 0.9 0.9
-------- --------
513.4 508.1
Property, plant and equipment, net 2.1 2.2
Deferred income taxes 20.7 20.0
-------- --------
Total assets $ 541.6 $ 540.2
======== ========
Current liabilities $ 9.5 $ 8.8
Reserve for future interest on obligation to UMWA 60.3 61.5
Note payable to Bellaire 40.3 40.5
Notes payable to other subsidiaries 41.6 45.6
Deferred income and other 4.5 4.5
Stockholders' equity 385.4 379.3
-------- --------
Total liabilities and stockholders' equity $ 541.6 $ 540.2
======== ========
(All amounts are subject to annual audit by independent public accountants.)