AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 2002
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
NMHG HOLDING CO.
(AND ITS SUBSIDIARIES IDENTIFIED ON THE FOLLOWING PAGE)
(Exact Name of Registrant as Specified in Its Charter)
<Table>
DELAWARE 3537 31-1637659
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</Table>
---------------------
650 N.E. HOLLADAY STREET
SUITE 1600
PORTLAND, OREGON 97232
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
MR. GEOFFREY D. LEWIS
NMHG HOLDING CO.
650 N.E. HOLLADAY STREET
SUITE 1600
PORTLAND, OREGON 97232
TELEPHONE: 503-721-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
THOMAS C. DANIELS
JONES, DAY, REAVIS & POGUE
NORTH POINT
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114-1190
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effective date of this registration statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
10% Senior Notes due 2009.............. $250,000,000(1) 100% $250,000,000 $23,000
- ---------------------------------------------------------------------------------------------------------------------------
Subsidiary guarantees of 10% Senior
Notes due 2009(2).................... n/a n/a n/a n/a
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Represents the maximum principal amount at maturity of 10% Senior Notes due
2009 that may be issued pursuant to the exchange offer described in this
registration statement.
(2) Pursuant to Rules 457(n), no fee is due with respect to the subsidiary
guarantees.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF ADDITIONAL REGISTRANTS
<Table>
<Caption>
ADDRESS, INCLUDING
ZIP CODE, AND
TELEPHONE NUMBER,
EXACT NAME OF STATE OR OTHER PRIMARY STANDARD INCLUDING AREA CODE,
REGISTRANT AS JURISDICTION OF INDUSTRIAL IRS EMPLOYER OF REGISTRANT'S
SPECIFIED IN ITS INCORPORATION OR CLASSIFICATION CODE IDENTIFICATION PRINCIPAL EXECUTIVE
CHARTER ORGANIZATION NUMBER NUMBER OFFICES
---------------- ---------------- ------------------- --------------------- -------------------------------
NMHG Distribution Co. Delaware 3537 93-1119223 650 N.E. Holladay Street
Portland, OR 97232
(503) 721-6000
NMHG Oregon, Inc. Oregon 3537 93-1320748 650 N.E. Holladay Street
Portland, OR 97232
(503) 721-6000
Hyster Overseas Delaware 3537 52-2212730 650 N.E. Holladay Street
Capital Corporation, Portland, OR 97232
LLC (503) 721-6000
Hyster-Yale Materials Delaware 3537 34-1617886 650 N.E. Holladay Street
Handling, Inc. Portland, OR 97232
(503) 721-6000
NACCO Materials Delaware 3537 93-0160700 650 N.E. Holladay Street
Handling Group, Inc. Portland, OR 97232
(503) 721-6000
</Table>
The information in this prospectus is not complete. NMHG Holding Co. may not
sell or offer these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and NMHG is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 28, 2002
PROSPECTUS
$250,000,000
OFFER TO EXCHANGE
ALL OUTSTANDING 10% SENIOR NOTES DUE 2009
FOR
10% SENIOR NOTES DUE 2009
OF
NMHG HOLDING CO.
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
2002.
----------------------
THE EXCHANGE NOTES
- The terms of the notes to be issued are substantially identical to the
outstanding notes that NMHG issued on May 9, 2002, except for transfer
restrictions, registration rights and liquidated damages provisions
relating to the outstanding notes that will not apply to the exchange
notes.
- Interest on the notes accrues at the rate of 10% per year, payable in
cash every six months on May 15 and November 15, with the first payment
on November 15, 2002.
- The notes are not secured by any collateral.
- There is no existing market for the notes, and we do not intend to apply
for their listing on any securities exchange or to seek approval for
quotation through any automated quotation system.
MATERIAL TERMS OF THE EXCHANGE OFFER
- Expires at 5:00 p.m., New York City time, on , 2002, unless
extended.
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged for an equal principal amount of notes which are
registered under the Securities Act of 1933.
- Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
- NMHG will not receive any cash proceeds from the exchange offer.
- Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The
letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933. This
prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of exchange notes
received in exchange for outstanding notes where such outstanding notes
were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, for a period
of 180 days after the expiration date of the exchange offer, we will make
this prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
---------------------
PLEASE CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 15 OF THIS
PROSPECTUS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SECURITIES TO BE DISTRIBUTED IN THE EXCHANGE OFFER,
NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IN ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this prospectus is , 2002.
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. YOU MAY
OBTAIN DOCUMENTS THAT ARE INCORPORATED BY REFERENCE IN THIS PROSPECTUS BY
REQUESTING THE DOCUMENTS, IN WRITING OR BY TELEPHONE, FROM US AT:
NMHG HOLDING CO.
650 N.E. HOLLADAY STREET
SUITE 1600
PORTLAND, OREGON 97232
ATTN: SECRETARY
IF YOU WOULD LIKE TO REQUEST COPIES OF THESE DOCUMENTS, PLEASE DO SO BY
, 2002 IN ORDER TO RECEIVE THEM BEFORE THE EXPIRATION OF THE
EXCHANGE OFFER. SEE "WHERE YOU CAN FIND MORE INFORMATION."
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Industry and Market Data.................................... ii
Prospectus Summary.......................................... 1
Risk Factors................................................ 15
Forward-Looking Statements.................................. 23
Use of Proceeds............................................. 24
Capitalization.............................................. 24
Selected Historical Financial Information................... 25
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 27
Business.................................................... 41
Management.................................................. 56
Security Ownership of Certain Beneficial Owners............. 62
Certain Relationships and Related Party Transactions........ 62
Description of Other Indebtedness........................... 63
The Exchange Offer.......................................... 66
Description of Notes........................................ 75
Federal Income Tax Consequences to Non-U.S. Holders......... 115
Federal Income Tax Consequences of the Exchange Offer....... 117
Plan of Distribution........................................ 118
Legal Matters............................................... 119
Experts..................................................... 119
Other Matters............................................... 119
Where You Can Find More Information......................... 120
Index to Financial Statements............................... F-1
</Table>
---------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS
LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE
ACCURATE ON THE DATE OF THIS PROSPECTUS.
---------------------
HYSTER(R) AND YALE(R) ARE REGISTERED TRADEMARKS OF NACCO MATERIALS HANDLING
GROUP, INC., A WHOLLY OWNED SUBSIDIARY OF NMHG HOLDING CO. YALE(R) IS USED BY
NACCO MATERIALS HANDLING GROUP, INC. ON A PERPETUAL ROYALTY FREE BASIS. NAMES OF
COMPANIES AND ASSOCIATIONS USED IN THIS PROSPECTUS ARE TRADEMARKS OR TRADE NAMES
OF THE RESPECTIVE ORGANIZATIONS.
---------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
Until , 2002, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
i
INDUSTRY AND MARKET DATA
We are a participant in the industrial lift truck industry, which we define
as comprised of Class I, Class II, Class III, Class IV and Class V lift trucks.
We do not consider Class VI lift trucks, which are also known as electric and
internal combustion engine tractors, Class VII lift trucks, which are also known
as rough terrain lift trucks, or Class VIII lift trucks, which are also known as
non-motorized hand pallet trucks, to be a part of the industrial lift truck
industry. Therefore, lift truck industry data included in this prospectus does
not include data for Class VI, Class VII or Class VIII lift trucks.
Unless otherwise indicated, market share information in this prospectus is
based on units and not dollars. We measure units in the Americas by orders. We
measure units in the rest of the world by shipments.
Unless otherwise indicated, as used in this prospectus, Americas includes
Canada, the United States, Mexico and Latin America; North America includes
Canada and the United States; and Europe includes Europe, Africa and the Middle
East.
In this prospectus, we rely on and refer to information regarding the
industrial lift truck industry from several sources, including internal
estimates and industry publications. Although we believe this information is
reliable, we cannot guarantee the accuracy and completeness of the information
and have not independently verified it.
ii
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important
to you. You should carefully read the entire prospectus, including the "Risk
Factors" section and the financial data and related notes before exchanging any
notes. As used in this prospectus, unless otherwise indicated if the context
otherwise requires, the terms "we," "our," "NMHG," and "Company" refer to NMHG
Holding Co., the issuer of the notes, and our subsidiaries. The terms "NACCO"
and "parent company" refer to NACCO Industries, Inc., our parent company.
References to our "customers" in this prospectus are references to the end-users
of our products, and not to our dealers.
OUR COMPANY
We are a leading global manufacturer of industrial lift trucks, which
comprise the largest segment of the materials handling equipment industry, with
the number one market share in the Americas and the number three market share
globally. We design, manufacture and sell a comprehensive line of industrial
lift trucks and aftermarket parts on a global basis. We estimate the lift truck
market for the Americas in 2001 at approximately $2.6 billion and 161,000 units,
and globally in 2001 at approximately $8.6 billion and 560,000 units. For the
fiscal year ended December 31, 2001, we generated revenues of $1.7 billion.
We market our lift trucks under the Hyster and Yale brand names, which we
believe are among the most widely recognized brands in the industry. Our lift
trucks have been marketed under the Hyster and Yale brand names since 1935 and
1923, respectively. Based on third-party market research we commissioned in
1999, the Hyster and Yale brands are among the top five most recognized lift
truck brands globally. According to this research, Hyster and Yale were the
number one and two most recognized brands of lift trucks in the Americas,
respectively, and Hyster was the third most recognized lift truck brand in
Europe.
Although we have combined the design, manufacturing, procurement and
selected marketing activities for our brands in order to capture operational
efficiencies and build upon our global scale, we distribute Hyster and Yale lift
trucks through two separate strong dealer networks, one dedicated to each brand.
We have maintained each of the brand identities in our distribution strategy
because the Hyster and Yale brands have distinct appeal for different customers.
Hyster is generally associated with larger, heavy-duty applications while Yale
is associated with lighter-duty, warehousing-type applications. We believe this
combination of dual brands and dual distribution has allowed us to more
effectively penetrate the customer base to establish stronger market positions,
as evidenced by our estimated installed population base of approximately 650,000
Hyster and Yale lift trucks. This installed population base provides our dealers
and us with recurring revenue from the sale of higher margin aftermarket parts
and service.
Our diversified customer base limits our exposure to individual customer or
industry risk. In 2001, our top ten customers accounted for only 10% of our new
unit volume. We market our lift trucks into over 600 different end-user
applications in approximately 900 industries. Our major customers, some of which
have chosen us to be their sole lift truck supplier, include The Coca-Cola
Company, General Motors Corp., The Lowe's Companies, Inc., Wal-Mart Stores, Inc.
and Weyerhaeuser Company.
Demand for lift trucks is cyclical and depends upon capital budgeting in
the diverse end markets where lift trucks are sold. We believe our market, like
the broader global economy, is poised for growth. Our order backlog has risen
from approximately 14,100 units at June 30, 2001 to approximately 16,300 units
at March 31, 2002. Our average adjusted EBITDA over the past five years ended
December 31, 2001 was $117.9 million, substantially higher than our 2001
adjusted EBITDA of $63.3 million. See "-- Summary Historical Financial and Other
Data" for our definition of adjusted EBITDA.
Prior to the recent downturn in the economy, we developed and began
implementing our 2001 Restructuring Program, which included the closure of our
Danville, Illinois assembly facility, labor and overhead reductions and
restructuring of our owned dealers, which resulted in non-recurring items and
one-time pre-tax charges of $47.8 million in 2001. This program reduced costs
and more closely aligned our operations with the demand for our products and
services.
1
In addition to the 2001 Restructuring Program, we have developed and are
implementing a Global Cost Reduction Program which encompasses lean
manufacturing, global procurement, the transfer of processes and sourcing to
lower cost locations, component commonality, overhead cost reduction and
improvements in our owned dealers. These programs are designed to enhance our
competitive position and improve our overall cost structure. We expect our
Global Cost Reduction Program, once fully implemented, to result in recurring
annual pre-tax cost savings of approximately $117.5 million by the end of 2006.
Of this amount, we expect to realize annual pre-tax savings of approximately
$48.0 million by the end of 2002, and $61.1 million by the end of 2003. We
believe this program has positioned us to take advantage of the anticipated
recovery in the capital goods market, and will result in reduced fixed overhead
costs, lower manufacturing costs and improvements in both our gross margins and
operating profit.
INDUSTRY OVERVIEW
The lift truck industry is the largest segment of the materials handling
equipment industry. We estimate the global lift truck market in 2001 at
approximately $8.6 billion and 560,000 units.
Lift trucks are used in a wide variety of business applications, including
manufacturing and warehousing. Lift trucks are separated into five major
classes, as set forth in the table below.
<Table>
<Caption>
GENERAL LIFTING
CLASS DESCRIPTION USE ILLUSTRATIVE APPLICATION CAPACITY RANGE
- -----------------------------------------------------------------------------------------------------
Class I Electric Indoors in warehousing Distribution center 1.0 ton to 9.0 tons
rider lift and manufacturing customers would use to
trucks operations where noise move pallets from one
or emission concerns trailer to another
are a factor
- -----------------------------------------------------------------------------------------------------
Class II Electric Indoors to handle high- Retail and warehouse 0.5 tons to 6.0 tons
narrow-aisle density storage of customers would use to
lift trucks materials in pick orders off their
narrow-aisled shelves
warehouses
- -----------------------------------------------------------------------------------------------------
Class III Electric Indoors for Retail customers would 0.5 tons to 8.0 tons
hand lift applications requiring use to move pallets of
trucks the user to select and goods to their store
transport materials aisles
- -----------------------------------------------------------------------------------------------------
Class IV Internal Indoors in warehousing Manufacturing customers 1.0 ton to 7.0 tons
combustion and manufacturing would use to move heavy
engine, or operations and parts on a pallet from
ICE, lift occasionally outdoors the machining area in a
trucks with factory to the assembly
cushion line
(solid)
tires
- -----------------------------------------------------------------------------------------------------
Class V ICE lift Indoors and outdoors in Manufacturing customers 1.0 ton to 48.0 tons
trucks with warehousing and would use to move a coil
pneumatic manufacturing of steel from the mill
(air filled) operations (this class to a storage area
tires includes the largest
capacity lift trucks)
- -----------------------------------------------------------------------------------------------------
</Table>
Class I, Class IV and Class V (with a capacity of eight tons or less) lift
trucks are referred to as counterbalanced lift trucks. Class II and Class III
lift trucks are referred to as warehouse lift trucks. Class V lift trucks with a
capacity greater than eight tons are referred to as big trucks. Counterbalanced
lift trucks are primarily used in industrial applications. Warehouse lift trucks
are primarily used in distribution applications. Big trucks are primarily used
in handling shipping containers and in specialized heavy lifting applications.
2
In recent years, we believe counterbalanced lift trucks represented
approximately 62.4% of the total global unit volume and 73.5% of the total
global dollar volume for lift trucks; warehouse lift trucks represented
approximately 36.5% of the total global unit volume and 19.5% of the total
global dollar volume for lift trucks; and big trucks represented approximately
1.1% of the total global unit volume and 7.0% of the total global dollar volume
for lift trucks. The market for warehouse lift trucks is generally less cyclical
than the market for counterbalanced lift trucks, including big trucks.
Historically, aftermarket parts sales have been less cyclical than sales of
new lift trucks. During economic downturns, customers tend to delay new lift
truck purchases and instead repair older lift trucks. During economic
recoveries, the sales of both new lift trucks and aftermarket parts have
historically increased.
Based on units, Europe has historically been the largest market for lift
trucks, followed by the Americas, Japan, Asia-Pacific and China. The market for
lift trucks, particularly in industrialized nations, is generally mature and has
historically been cyclical, although demand cycles may differ across regions.
In North America, the compound annual growth rate of the lift truck
industry over the last 20 years has been 4.3%, which is higher than the real
gross domestic product compound annual growth rate in North America of 3.2% over
the same period. In Western Europe, the compound annual growth rate of the lift
truck industry over the last 20 years has been 4.1%, which is higher than the
real gross domestic product compound annual growth rate in Western Europe of
2.3% over the same period. We expect the overall growth in the lift truck
industry to continue to exceed the overall growth in the North American and
Western European economies because the industries that use large numbers of lift
trucks are increasing as an overall percentage of these economies.
The lift truck industry is cyclical, reflective of general economic
conditions. Recoveries in the lift truck industry and in the overall economy
generally result in an increase in the number of units sold in both the Americas
and Europe. According to industry forecasts, the North American lift truck
industry is at or near the low point of the current downturn, with
quarter-on-quarter growth expected for the remainder of 2002. Our backlog has
already begun to reflect industry improvement, increasing by 15.6%, from
approximately 14,100 units in June 2001 to approximately 16,300 units in March
2002.
COMPETITIVE STRENGTHS
We believe that we have a number of strengths that differentiate us from
our competitors:
Leading Market Share Positions with a Large Installed Population Base. For
over a decade, we have been the leading manufacturer of Class I through V lift
trucks, on a combined basis, in the Americas. Our Hyster and Yale brands had a
combined North American market share of 27.4% in 2001. In addition, we are the
third largest manufacturer of lift trucks on a global unit basis. Hyster's and
Yale's long operating histories, strong market positions and our dual brand
distribution strategy have resulted in an installed population base of
approximately 650,000 Hyster and Yale lift trucks. This large installed
population base provides our dealers and us with recurring revenue from the sale
of higher margin aftermarket parts and service.
Globally Integrated Operations with Significant Economies of Scale. We have
globally integrated the design, manufacturing, procurement and selected
marketing activities for our brands. We believe this provides us with better
access to lower cost suppliers, reduced design and overhead costs, improved
manufacturing efficiencies and greater purchasing leverage. With respect to many
of our products, our global integration also allows us to cost effectively shift
production from one geographical region to another to respond to global
fluctuations in demand. Our geographically balanced manufacturing structure,
with assembly operations in the Americas, Europe and Asia-Pacific, reduces
working capital requirements, balances currency exposures and minimizes freight
costs.
Comprehensive Global Product Line. We believe we offer the most
comprehensive line of lift trucks on a global basis. We provide a comprehensive
range of lift trucks to meet the requirements of our customers' diverse
applications. We market over 100 models of lift trucks that cover a range of
lifting capacities of up to
3
48 tons for over 600 different end-user applications. We also provide
specialized engineering capabilities to tailor our standard products for
specific customer needs.
Established Brand Strength. We market our lift trucks and aftermarket parts
under two well-recognized brand names, Hyster and Yale. Hyster and Yale have
long operating histories of 67 years and 79 years, respectively. We believe that
brand recognition is particularly critical in our industry as most customers
solicit quote proposals from a limited number of preferred suppliers. Based on
third-party market research we commissioned in 1999, the Hyster and Yale brands
are among the top five most recognized lift truck brands globally. According to
this research, Hyster and Yale were recognized as the number one and two most
recognized brands of lift trucks in the Americas, respectively, and Hyster was
the third most recognized lift truck brand in Europe. In addition, based on a
separate study we commissioned in 2001, Hyster was recognized as the preferred
overall lift truck brand in North America, receiving number one rankings in
product reliability, performance, durability, availability of aftermarket parts
and dealer support.
Strong Dealer Network. Our Hyster and Yale brands are supported by the
strength of our global distribution network. Our dealers sell and rent lift
trucks, provide aftermarket parts and service lift trucks. The majority of our
dealer relationships are long-standing with an average tenure in the Americas of
26 years. We assign our dealers exclusive territories, which allows dealers to
invest in long-term relationships with customers. To maintain our dealers' focus
on our brands, we prohibit our dealers from selling lift trucks that compete
with their Hyster or Yale product offering. We believe the larger of our
independent dealers benefit from economies of scale and are able to more
effectively penetrate the customer base in their exclusive territories because
their size enables them to attract higher-quality employees, invest in more
specialized selling and service activities and develop a more professional
management structure. In addition, we believe our dual brand distribution
provides us with greater market penetration and increased market share for both
new lift truck units and higher margin aftermarket parts.
National Account Coverage. We have a strong National Accounts organization
in the Americas that is dedicated to establishing national and global account
relationships with large customers that have centralized purchasing and
geographically dispersed operations in multiple dealer territories. Our National
Accounts organization uses direct sales efforts to place large numbers of Hyster
and Yale lift trucks into our installed population base through these large
customers. Our strong dealer network supports our National Accounts customers by
providing aftermarket parts and service at the local level. Some of our key
National Accounts, such as General Motors Corp., Costco Wholesale Corp., The
Lowe's Companies, Inc. and Saturn Corporation, have entered into exclusive
relationships for total fleet management. We provide high value added services
to our total fleet management customers, including service, aftermarket parts,
planning and comprehensive management of their materials handling needs. We
believe we have the largest National Accounts organization in the Americas and
are expanding this organization globally.
BUSINESS STRATEGY
We have developed and are implementing strategic programs which we believe
will enhance our long-term competitive position. We believe this set of programs
will enable us to reduce costs, increase our market share, improve revenues and
enhance sustainable profitability while delivering high value-added products and
related services to our customers. These long-term initiatives build upon the
successes already achieved through our 2001 Restructuring Program.
Implement Global Cost Reduction Program. We have developed and are
implementing a Global Cost Reduction Program encompassing lean manufacturing,
global procurement, the transfer of processes and sourcing to lower cost
locations, component commonality, overhead cost reduction and improvements in
our owned dealers. When fully implemented in 2006, we expect this program to
result in recurring annual pre-tax cost savings of $117.5 million.
- Lean Manufacturing Strategy. We are implementing a lean manufacturing
strategy called Demand Flow(R) Technology in all of our manufacturing
facilities. Since first implementing Demand Flow(R) Technology in 1996,
we have substantially reduced cycle times, inventory requirements and
floor space requirements, and improved on-time delivery and delivered
product quality. For example, Demand
4
Flow(R) Technology has allowed us to assemble all of our lift trucks to
order, greatly reducing our finished goods inventory. In addition, recent
improvements in throughput created by implementing Demand Flow(R)
Technology have allowed us to rationalize our manufacturing operations,
resulting in the closure of our Danville, Illinois plant. The Danville
closure is expected to result in $10.1 million of pre-tax savings in
2002. In addition, we expect the ongoing implementation of Demand Flow(R)
Technology at our remaining facilities to result in $2.0 million in
pre-tax savings in 2002. These ongoing Demand Flow(R) Technology
programs, including the closure of the Danville plant, are expected to
result in an annual pre-tax savings of $21.9 million when fully
implemented.
- Global Procurement Initiative. Our global procurement initiative
leverages our global scale to capture lower material costs, improve
supplier quality, reduce lead times and enhance product innovation. Our
global procurement teams work with engineering development centers and
personnel at our manufacturing and assembly facilities to identify
requirements and secure global supplier contracts. Additionally, the
global procurement team works to enhance supplier quality and assists
suppliers in reducing their costs. In 2001, our global procurement
initiative resulted in $9.8 million of pre-tax savings. In 2002, we
expect our global procurement initiative to result in an additional $6.2
million of pre-tax savings compared to 2001. We expect annual pre-tax
savings from this initiative to reach $14.7 million in 2006.
- Transferring Processes and Sourcing to Lower Cost Locations. We believe
we can reduce product costs by transferring additional processes and
sourcing of basic components to lower cost manufacturing locations. As
part of this strategy, we continually compare the costs and benefits of
outsourcing production versus manufacturing components at our own lower
cost facilities. Our recent efforts in this area resulted in $1.7 million
of pre-tax savings in 2001. In 2002, we expect to achieve an additional
$3.0 million of pre-tax savings from low cost sourcing, with currently
planned initiatives reaching an annual pre-tax savings of $3.3 million
when fully implemented.
- Component Commonality and Value Improvement Program. As we design new
products, we are increasing the utilization of common components across
multiple lift truck classes to reduce costs and product complexity,
improve product quality, capture procurement cost savings and increase
manufacturing efficiency. These components utilize interfaces designed to
allow for quicker future design modifications. This strategy is an
extension of earlier successful actions to standardize components between
similar series of Hyster and Yale products. We have also implemented a
Value Improvement Program to support continuous cost reductions and
product quality improvements. We expect the combined impact of our
component commonality initiative and Value Improvement Program to result
in $3.7 million in pre-tax savings in 2002, $17.2 million in 2004,
reaching an annual pre-tax savings of $53.9 million when fully
implemented.
- European Overhead Cost Reduction Program. Our European overhead cost
reduction program is designed to reduce our fixed costs. This program is
related to reductions in general and administrative personnel and
indirect factory labor in Europe. We expect this program to result in
$2.1 million of pre-tax savings in 2002, reaching an annual pre-tax
savings of $2.8 million when fully implemented.
- Owned Dealer Improvements. We have implemented, and largely completed, a
restructuring of our owned dealers. This program has enhanced operating
efficiencies through standardization of systems and processes,
realignment of management structures and improved asset utilization. We
expect this program to result in $20.9 million of annual pre-tax savings
in 2002.
Design Global Products More Closely Tailored to Customer Application Needs.
In 2000, we implemented a new design philosophy focused on the development of
products tailored to the specific operating requirements of our customers.
Historically, we have offered a complex set of options for each of our lift
truck series to meet our customers' specialized needs. Our new design philosophy
utilizes a modular approach with fewer overall components to more effectively
and efficiently address our customers' application needs. This new design
approach is expected to improve our cost structure and margins by simplifying
our manufacturing operations, improving manufacturing efficiencies and reducing
prices for sourced components. In addition, we believe that our product
innovations will improve the quality of our products and provide us with
opportunities to improve our market share.
5
Strengthen Our Distribution Capability. We have been encouraging the
consolidation of our North American distribution networks around large, strong,
professionally managed, well-capitalized independent dealers. We are currently
expanding this "anchor dealer" model on a global basis for each of our brands.
We believe that anchor dealers are able to more effectively penetrate the
customer base in their exclusive territories because their size enables them to
attract higher-quality employees, invest in more specialized selling and service
activities and develop a more professional management structure. We also believe
that anchor dealers are stronger financially, better positioning them to take
advantage of dealership consolidation and to weather economic downturns. We
strengthen our dealer networks by providing sales and service training, dealer
consulting services, information systems support, product launch coordination,
direct advertising, specialized selling materials and help desks. We believe
that this support system, together with our large installed population base of
lift trucks, helps to attract and retain high quality dealers, further
strengthening our distribution network.
We are continuing to expand our National Accounts organization globally to
capture additional revenues from large customers that have centralized
purchasing and geographically dispersed operations in multiple dealer
territories. As a result of our strong National Accounts organization,
established brands and strong distribution network, we believe we are
well-positioned to continue to capitalize on the growth in this customer
segment. We expect the combination of our anchor dealer strategy and our
National Accounts organization to improve our market share and increase our
installed population base.
CORPORATE STRUCTURE AND OWNERSHIP
We are a wholly owned subsidiary of NACCO Industries, Inc., a publicly
traded holding company with principal operating subsidiaries in three distinct
industries: lift trucks, housewares and lignite coal mining. NACCO's Class A
common stock is traded on the New York Stock Exchange under the symbol "NC." As
of March 31, 2002, on a fully diluted basis NACCO's market capitalization was
approximately $543.4 million.
Yale's operations were acquired in 1985 from Eaton Corporation. In 1989, we
acquired Hyster and combined its operations with those of Yale.
[Nacco Industries Flow Chart]
6
THE EXCHANGE OFFER
THE EXCHANGE OFFER............ We are offering to exchange $250.0 million in
principal amount of our 10% senior notes due
2009, which have been registered under the
federal securities laws, for $250.0 million
principal amount of our outstanding
unregistered 10% senior notes due 2009, which
we issued on May 9, 2002 in a private offering.
You have the right to exchange your outstanding
notes for exchange notes with substantially
identical terms.
In order for your outstanding notes to be
exchanged, you must properly tender them prior
to the expiration of the exchange offer. All
outstanding notes that are validly tendered and
not validly withdrawn will be exchanged. We
will issue the exchange notes on or promptly
after the expiration of the exchange offer.
REGISTRATION RIGHTS
AGREEMENT..................... We issued the outstanding notes on May 9, 2002
to a limited number of initial purchasers. At
that time, we signed a registration rights
agreement with those initial purchasers, which
requires us to conduct this exchange offer.
This exchange offer is intended to satisfy
those rights set forth in the registration
rights agreement. After the exchange offer is
complete, you will not have any further rights
under the registration rights agreement,
including any right to require us to register
any outstanding notes that you do not exchange
or to pay you liquidated damages.
FAILURE TO EXCHANGE YOUR
OUTSTANDING NOTES............. If you do not exchange your outstanding notes
for exchange notes in the exchange offer, you
will continue to be subject to the restrictions
on transfer provided in the outstanding notes
and the indenture governing those notes. In
general, you may not offer or sell your
outstanding notes unless they are registered
under the federal securities laws or are sold
in a transaction exempt from or not subject to
the registration requirements of the federal
securities laws and applicable state securities
laws.
EXPIRATION DATE............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002,
unless we decide to extend the expiration date.
CONDITIONS TO THE EXCHANGE
OFFER......................... We will complete this exchange offer only if:
- there is no change in the laws and
regulations that would impair our ability to
proceed with this exchange offer;
- there is no change in the current
interpretation of the staff of the SEC that
permits resales of the exchange notes; and
- there is no stop order issued by the SEC that
would suspend the effectiveness of the
registration statement that includes this
prospectus or the qualification of the
exchange notes under the Trust Indenture Act
of 1939.
PROCEDURES FOR TENDERING
NOTES......................... If you wish to tender your outstanding notes
for exchange, you must:
- complete and sign the enclosed letter of
transmittal by following the related
instructions; and
7
- send the letter of transmittal, as directed
in the instructions, together with any other
required documents, to the exchange agent,
either (1) with the outstanding notes to be
tendered or (2) in compliance with the
specific procedures for guaranteed delivery
of the outstanding notes.
Brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer.
Please do not send your letter of transmittal
or certificates representing your outstanding
notes to us. Those documents should only be
sent the exchange agent. Questions regarding
how to tender and requests for information
should be directed to the exchange agent. See
"The Exchange Offer -- Exchange Agent."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. If your outstanding notes are registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee, we urge you to
contact that person promptly if you wish to
tender your outstanding notes pursuant to the
exchange offer. See "The Exchange
Offer -- Procedures for Tendering."
WITHDRAWAL RIGHTS............. You may withdraw the tender of your outstanding
notes at any time prior to the expiration date
of the exchange offer by delivering a written
notice of your withdrawal to the exchange
agent. You must also follow the withdrawal
procedures as described under the heading "The
Exchange Offer -- Withdrawal of Tenders."
FEDERAL INCOME TAX
CONSIDERATIONS................ The exchange of outstanding notes for the
exchange notes in the exchange offer should not
be a taxable event for U.S. federal income tax
purposes. See "Federal Income Tax Consequences
of the Exchange Offer."
RESALES OF EXCHANGE NOTES..... We believe that you will be able to offer for
resale, resell or otherwise transfer exchange
notes issued in the exchange offer without
compliance with the registration and prospectus
delivery requirements of the federal securities
laws, unless you are a broker-dealer receiving
exchange notes for your own account, provided
that:
- you are acquiring the exchange notes in the
ordinary course of business;
- you do not have any arrangement or
understanding with any person to participate
in the distribution of the outstanding notes
or the exchange notes;
- you are not engaged in, and do not intend to
engage in, a distribution of the exchange
notes;
- you are not one of our "affiliates," as
defined in Rule 405 of the Securities Act.
Our belief is based on interpretations by the
staff of the SEC, as set forth in no action
letters issued to third parties unrelated to
us. We have not considered this exchange offer
in the context of a no-
8
action letter, and we cannot assure you that
the staff would make a similar determination
with respect to this exchange offer.
If our belief is not accurate and you transfer
an exchange note without delivering a
prospectus meeting the requirements of the
federal securities laws or without an exemption
from these laws, you may incur liability under
the federal securities laws. We do not and will
not assume, or indemnify you against, this
liability.
Each broker-dealer that receives exchange notes
for its own account in exchange for outstanding
notes, where such outstanding notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of exchange notes. See "Plan of
Distribution."
EXCHANGE AGENT................ The exchange agent for the exchange offer is
U.S. Bank National Association. The address,
telephone number and facsimile number of the
exchange agent are set forth in "The Exchange
Offer -- Exchange Agent" and in the letter of
transmittal.
THE EXCHANGE NOTES
ISSUER........................... NMHG Holding Co.
EXCHANGE NOTES................... $250,000,000 aggregate principal amount of
10% Senior Notes due 2009.
MATURITY......................... May 15, 2009.
INTEREST PAYMENT DATES........... May 15 and November 15 of each year,
beginning November 15, 2002.
GUARANTEES....................... Our obligations under the exchange notes
will be fully and unconditionally
guaranteed on a senior basis by
substantially all of our existing and
future domestic subsidiaries. The exchange
notes will not be guaranteed by our foreign
subsidiaries. For the first three months of
2002, the subsidiary guarantors generated
approximately 52% of our adjusted EBITDA,
after elimination of intercompany
transactions. At March 31, 2002, the
subsidiary guarantors represented
approximately 66% of our total assets after
elimination of intercompany accounts and
investments. NACCO, our parent company,
will not guarantee the exchange notes.
NACCO is under no obligation with respect
to any of our or the subsidiary guarantors'
debt obligations.
RANKING.......................... The effective ranking of the exchange notes
and guarantees is as follows:
- the exchange notes will rank equally with
our senior unsecured indebtedness, and
each guarantee will rank equally with
other senior unsecured indebtedness of
the subsidiary guarantors;
- the exchange notes will be senior to all
of our subordinated indebtedness, and
each guarantee will be senior to all
subordinated indebtedness of the
subsidiary guarantors;
- the exchange notes will be effectively
junior to all of our secured indebtedness
to the extent of the value of the
9
collateral, and each guarantee will be
effectively junior to all secured
indebtedness of the subsidiary guarantors
to the extent of the value of the
collateral; and
- the exchange notes will be effectively
junior to all indebtedness and other
obligations, including trade payables, of
all our non-guarantor subsidiaries.
As of March 31, 2002, after giving effect
to the application of the net proceeds from
the offering of the outstanding notes and
amounts drawn under our new revolving
credit facility to prepay borrowings under
our existing credit facility and other
indebtedness:
- we and the subsidiary guarantors would
have had outstanding $51.0 million of
secured indebtedness that would have
effectively ranked senior to the exchange
notes and the subsidiary guarantees; and
- the non-guarantor subsidiaries would have
had outstanding $39.6 million of
indebtedness that would have effectively
ranked senior to the exchange notes.
OPTIONAL REDEMPTION.............. Prior to May 15, 2005, we can choose to
redeem up to 35% of the original principal
amount of the exchange notes, and any
additional notes issued under the same
indenture governing the exchange notes, at
a redemption price of 110% of the principal
amount thereof, plus accrued and unpaid
interest to the date of redemption, with
money we receive from specified equity
offerings of us or NACCO, as long as:
- at least 65% of the original aggregate
principal amount of the exchange notes
and any additional notes remain
outstanding after each such redemption,
other than notes held, directly or
indirectly, by us or our affiliates; and
- each redemption occurs within 60 days
after the date of the related equity
offering.
On and after May 15, 2006, we can choose to
redeem some or all of the exchange notes at
the redemption prices listed under
"Description of Notes -- Optional
Redemption," plus accrued and unpaid
interest to the date of redemption.
CHANGE OF CONTROL................ If we experience a change of control,
subject to certain conditions, we must give
holders of the exchange notes the
opportunity to sell to us their exchange
notes at 101% of the principal amount, plus
accrued and unpaid interest to the date of
the repurchase. The term "change of
control" is defined under "Description of
Notes -- Change of Control."
RESTRICTIVE COVENANTS............ The indenture governing the exchange notes
will limit our ability and our restricted
subsidiaries' ability to:
- incur additional indebtedness;
- pay dividends on our capital stock or
redeem, repurchase or retire our capital
stock or subordinated indebtedness;
- make investments;
- create restrictions on the payment of
dividends or other amounts to us from our
restricted subsidiaries;
10
- engage in transactions with our
affiliates;
- incur liens and enter into sale/leaseback
transactions;
- sell assets, including capital stock of
our subsidiaries; and
- consolidate, merge or transfer assets.
These covenants are subject to important
exceptions and qualifications, which are
described under "Description of Notes --
Certain Covenants."
USE OF PROCEEDS.................. We will not receive any cash proceeds from
the issuance of the exchange notes. See
"Use of Proceeds."
RISK FACTORS
You should consider carefully all the information set forth in this
prospectus and, in particular, should evaluate the specific factors under the
section "Risk Factors" beginning on page 15 prior to exchanging your notes.
ADDITIONAL INFORMATION
Our principal executive offices are located at 650 N.E. Holladay Street,
Suite 1600, Portland, Oregon 97232, and our telephone number is (503) 721-6000.
We were incorporated in Delaware in 1999 to serve as a holding company for
Hyster-Yale Materials Handling, Inc., which was incorporated in Delaware in 1991
as part of a holding company reorganization, and NMHG Distribution Co., which
was incorporated in Delaware in 1999.
11
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA
We have derived the following summary historical information from our
consolidated financial statements. The statement of income and other data for
each of the three years in the period ended December 31, 2001, and the balance
sheet data as of December 31, 2000 and 2001, have been derived from our audited
consolidated financial statements and related notes, which appear elsewhere in
this prospectus. The statement of income and other data for the three months
ended March 31, 2001 and 2002, and the balance sheet data as of March 31, 2002,
have been derived from our unaudited condensed consolidated financial statements
and related notes, which appear elsewhere in this prospectus. The statement of
income data for each of the years ended December 31, 1997 and 1998, and the
balance sheet data as of December 31, 1997, 1998 and 1999 have been derived from
our audited consolidated financial statements and related notes that are not
included in this prospectus. You should read the following information together
with "Selected Historical Financial Information" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
historical consolidated financial statements and related notes appearing
elsewhere in this prospectus. The following results are net of intercompany
transactions.
<Table>
<Caption>
(DOLLARS IN MILLIONS) THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------ ----------------
1997 1998 1999 2000 2001 2001 2002
----------- ----------- -------- --------- --------- ------ -------
STATEMENT OF INCOME DATA:
Revenues....................... $1,517.1 $1,746.1 $1,761.4 $1,932.1 $1,672.4 $495.6 $ 371.8
Cost of sales.................. 1,253.0 1,400.4 1,457.9 1,584.6 1,422.8 406.8 310.1
-------- -------- -------- -------- -------- ------ -------
Gross profit................... 264.1 345.7 303.5 347.5 249.6 88.8 61.7
Selling, general and
administrative expenses...... 173.9 203.4 233.0 257.8 262.4 64.9 55.1
Amortization of goodwill....... 11.7 11.7 12.2 12.6 12.9 3.2 --
Restructuring charges
(credits).................... 8.0 (1.6) -- 13.9 8.8 -- --
Loss on sale of dealers........ -- -- -- -- 10.4 -- --
-------- -------- -------- -------- -------- ------ -------
Operating profit (loss)........ $ 70.5 $ 132.2 $ 58.3 $ 63.2 $ (44.9) $ 20.7 $ 6.6
======== ======== ======== ======== ======== ====== =======
OTHER DATA:
Units sold..................... 66,833 77,636 76,055 84,825 68,929 21,624 14,971
Adjusted EBITDA(1)............. $ 113.5 $ 168.5 $ 112.4 $ 131.7 $ 63.3 $ 38.9 $ 18.6
Adjusted EBITDA margin......... 7.5% 9.7% 6.4% 6.8% 3.8% 7.8% 5.0%
Depreciation and
amortization................. $ 35.0 $ 37.9 $ 54.1 $ 54.6 $ 60.4 $ 14.7 $ 10.6
Capital expenditures........... 25.6 63.9 46.2 51.8 53.5 9.7 6.2
OTHER SUPPLEMENTAL DATA:
Ratio of net debt to adjusted
EBITDA(2).................... 1.2x 1.1x 2.1x 2.1x 4.8x 1.8x 4.0x
Ratio of adjusted EBITDA to
interest expense............. 7.8 12.0 5.9 6.2 2.7 7.5 3.4
Ratio of adjusted EBITDA to pro
forma interest expense(3).... -- -- -- -- 1.7 -- 2.1
Ratio of adjusted EBITDA minus
capital expenditures to
interest expense............. 6.1 7.5 3.5 3.8 0.4 5.6 2.3
Ratio of earnings to fixed
charges(4)................... 4.0 7.9 2.9 2.4 -- 3.1 1.2
</Table>
12
<Table>
<Caption>
(IN MILLIONS)
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------------------------------------------- ----------------------
1997 1998 1999 2000 2001 2002 2002
----------- ----------- ----------- -------- -------- -------- -----------
AS
ADJUSTED(5)
-----------
BALANCE SHEET DATA:
Cash and cash equivalents...... $ 17.1 $ 22.2 $ 31.1 $ 24.4 $ 59.6 $ 54.9 $ 18.7
Working capital(6)............. 54.5 125.8 146.3 107.4 (150.0) (159.6) 74.8
Total assets................... 942.4 1,100.4 1,178.6 1,241.7 1,205.1 1,186.6 1,183.7
Total debt..................... 156.8 200.2 270.7 304.9 362.4 349.0 346.1
Stockholder's equity........... 384.9 462.0 468.7 463.0 382.0 372.1 372.1
</Table>
- ---------------
(1) We have included adjusted EBITDA because we believe that investors find it
to be a useful tool for measuring a company's ability to generate cash.
Adjusted EBITDA does not represent cash flow from operations, as defined by
generally accepted accounting principles, and is not calculated in the same
way by all companies. We define adjusted EBITDA as operating profit (loss)
before certain unusual items, as identified in the table below, plus
depreciation and amortization. You should not consider adjusted EBITDA as a
substitute for net income or net loss, as an indicator of our operating
performance or cash flow, or as a measure of liquidity. Our definition of
adjusted EBITDA is not calculated in the same way EBITDA will be calculated
under the indenture governing the notes. In addition, the items described
below for 2001 resulted from actions we have taken that are referred to in
this offering circular as the 2001 Restructuring Program. See "Description
of Notes -- Certain Definitions" for more information on the definition of
EBITDA under the indenture governing the notes.
<Table>
<Caption>
THREE MONTHS
(IN MILLIONS) ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------
1997 1998 1999 2000 2001 2001 2002
------ ------ ------ ------ ------ ------ ------
Operating profit (loss)....... $ 70.5 $132.2 $ 58.3 $ 63.2 $(44.9) $ 20.7 $ 6.6
Adjustments:
Restructuring charges
(credits)(a)............. 8.0 (1.6) -- -- 8.8 -- --
Danville closure costs(b)... -- -- -- 13.9 12.0 1.8 0.6
Loss on sale of owned
dealers(c)............... -- -- -- -- 10.4 -- --
Operating losses of sold
operations(d)............ -- -- -- -- 9.5 1.7 --
Other non-recurring
items(e)................. -- -- -- -- 7.1 -- 0.8
------ ------ ------ ------ ------ ------ ------
Total adjustments........ 8.0 (1.6) -- 13.9 47.8 3.5 1.4
------ ------ ------ ------ ------ ------ ------
Adjusted operating profit
(loss)...................... 78.5 130.6 58.3 77.1 2.9 24.2 8.0
Add depreciation and
amortization................ 35.0 37.9 54.1 54.6 60.4 14.7 10.6
------ ------ ------ ------ ------ ------ ------
Adjusted EBITDA(f)............ $113.5 $168.5 $112.4 $131.7 $ 63.3 $ 38.9 $ 18.6
====== ====== ====== ====== ====== ====== ======
</Table>
--------------------
(a) Restructuring charges represent the following:
- In 1997, an $8.0 million charge to restructure and consolidate certain
engineering, marketing and administrative functions;
- In 1998, a $1.6 million credit representing an adjustment to the 1997
charge above; and
- In 2001, a $4.5 million charge related to restructuring certain
manufacturing, marketing and administrative functions in our European
business, a $4.7 million charge related to restructuring certain
European owned dealers and a $0.4 million credit relating to the
adjustment of the 2000 Danville, Illinois closure charge (see note b).
(b) Reflects cash and non-cash charges related to the closure of our
Danville, Illinois assembly facilities, the transfer of its assembly
activities and idle facility costs (see note a).
(c) Reflects the loss on the sale of owned dealers in Germany and related
wind-down costs.
(d) Reflects operating losses related to the German owned dealers sold in
2001.
13
(e) Reflects non-cash charges to reduce asset values and increase reserves
reflective of the weakened capital goods markets, establish full
accounting consistency among owned dealers on a global basis and to
cause those dealers previously reporting on a one-month lag to report
on months consistent with the rest of NMHG. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
(f) For each of the years in the five years ended December 31, 2001, EBITDA
before adjustments, or operating profit (loss) before depreciation and
amortization, was $105.5 million, $170.1 million, $112.4 million,
$117.8 million and $15.5 million, respectively. EBITDA before
adjustments was $35.4 million and $17.2 million for the three months
ended March 31, 2001 and 2002, respectively.
(2) Net debt is defined as total debt less cash and cash equivalents. Amounts of
adjusted EBITDA for the three month periods ended March 31, 2001 and 2002
have been annualized for purposes of calculating the ratio of net debt to
adjusted EBITDA.
(3) We have calculated the ratio of adjusted EBITDA to pro forma interest
expense as follows:
<Table>
<Caption>
(IN MILLIONS)
----------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 2001 MARCH 31, 2002
----------------- --------------
Adjusted EBITDA:............................................ $63.3 $18.6
Pro forma interest expense:
10% Senior Notes.......................................... 25.0 6.2
New revolving credit facility............................. 2.1 0.3
Other debt................................................ 6.6 1.5
Amortization of debt discount............................. 0.4 0.1
Amortization of financing costs........................... 2.8 0.7
----- -----
$36.9 $ 8.8
Ratio of adjusted EBITDA to pro forma interest expense...... 1.7x 2.1x
===== =====
</Table>
(4) The ratio of earnings to fixed charges is determined by dividing income
(loss) before income taxes, minority interest and cumulative effect of
accounting changes, adjusted for equity in earnings and distributions
received from equity investees, interest expense, debt expense amortization,
capitalized interest and the portion of rental expense deemed representative
of an interest factor by the sum of interest expense, debt expense
amortization, capitalized interest and the portion of rental expense deemed
representative of an interest factor. For the year ended December 31, 2001,
earnings were insufficient to cover fixed charges by $66.8 million.
(5) As adjusted data is calculated as if the application of the net proceeds
from the sale of the outstanding notes, together with $16.2 million of
borrowings under the new revolving credit facility and $36.2 million of
available cash, had been used to repay $265.0 million of borrowings
outstanding under our existing credit facility, $1.0 million of borrowings
outstanding under other revolving lines of credit, $20.8 million under our
European receivables discounting facility and $12.5 million in refinancing
transaction fees and expenses.
(6) As of December 31, 2001 and March 31, 2002, includes $265.0 million of debt
outstanding under our existing credit facility and classified as a current
liability in accordance with U.S. generally accepted accounting principles.
14
RISK FACTORS
An investment in the notes involves risk. In addition to the other
information contained in this prospectus, you should carefully consider the
following risk factors in deciding whether to exchange any notes.
RISKS RELATING TO OUR BUSINESS
OUR LIFT TRUCK BUSINESS IS CYCLICAL. ANY FURTHER DOWNTURN IN THE GENERAL ECONOMY
COULD ADVERSELY AFFECT OUR EARNINGS AND RESULTS OF OPERATIONS FURTHER.
Our lift truck business historically has been cyclical, especially sales of
counterbalanced lift trucks, which accounted for 68.4% of all our new unit
volume sales in 2001. Fluctuations in the rate of orders for lift trucks reflect
the capital investment decisions of our customers, which depend to a certain
extent on the general level of economic activity in the various industries that
our lift truck customers serve. During economic downturns, customers tend to
delay new lift truck purchases. As a result of this cyclicality, we have
experienced, and in the future we will experience, significant fluctuations in
our revenues and net income. For example, the downturn in the general economy in
2001 adversely affected our business and results of operations as revenues from
our customers declined 13.4% in 2001, from $1,932.1 million in 2000 to $1,672.4
million in 2001, and we had a net loss in 2001 of $49.4 million compared to net
income of $21.3 million in 2000. General economic conditions continued to
negatively impact our results in the first quarter of 2002, with revenues from
our customers declining 25% in the first quarter of 2002, from $495.6 million in
the first quarter of 2001 to $371.8 million in the first quarter of 2002, and
net income in the first quarter of 2002 decreasing to $4.3 million compared to
net income of $8.3 million in the first quarter of 2001. If there is further
degradation in the general economy, or in the industries our lift truck
customers serve, our business, results of operations and financial condition
could be adversely affected.
IF THE CAPITAL GOODS MARKET WORSENS, THE COST SAVING EFFORTS WE HAVE IMPLEMENTED
MAY NOT BE SUFFICIENT TO ACHIEVE THE BENEFITS WE EXPECT.
The 2001 Restructuring Program, which included the closure of our Danville,
Illinois assembly facility, labor and overhead reductions and the restructuring
of our owned dealers, was implemented to improve our profits and margins despite
decreased revenues. As a result of these actions, we recorded a charge to
operations of approximately $13.9 million in 2000 and $47.8 million in 2001. If
the economy continues to worsen, or the capital goods market does not improve,
our revenues could continue to decline. If revenues are lower than our
expectations, the efforts we have implemented may not achieve the benefits we
expect. We may be forced to take additional cost savings steps that could result
in additional charges and materially affect our ability to compete or implement
our business operations.
IF OUR GLOBAL COST REDUCTION PROGRAM DOES NOT PROVE EFFECTIVE, OUR RESULTS OF
OPERATIONS WILL BE ADVERSELY AFFECTED.
We have developed and are implementing a Global Cost Reduction Program
encompassing lean manufacturing, global procurement, the transfer of processes
and sourcing to lower cost locations, component commonality, overhead cost
reductions and improvements in our owned dealers. We expect that, when fully
implemented by 2006, these programs will result in annual pre-tax cost savings
of approximately $117.5 million. If we are unable to successfully implement our
Global Cost Reduction Program, our results of operations will be adversely
affected.
IF COST SAVING EFFORTS IMPLEMENTED FOR OUR OWNED DEALERS DO NOT PROVE EFFECTIVE,
OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.
Since January 1, 1998, we acquired two dealers in the Americas, 12 dealers
and one rental company in Europe and 12 dealers and two rental companies in
Asia-Pacific. In 2001, our net loss attributable to our owned dealers increased
to $35.3 million, from $15.7 million in 2000. To improve the profitability of
our owned dealers, we engaged in restructuring activities with respect to our
European owned dealers in 2001. These activities were primarily related to lease
termination costs, severance and other employee benefits to be
15
paid to approximately 140 terminated employees at owned dealers in Europe. In
the first quarter of 2002, our net loss attributable to our owned dealers
decreased to $1.3 million, from $4.1 million in the first quarter of 2001.
However, if our restructuring activities for our European owned dealers do not
continue to be effective, our results of operations may be adversely affected.
THE PRICING OF OUR PRODUCTS HAS BEEN AND MAY CONTINUE TO BE IMPACTED BY FOREIGN
CURRENCY FLUCTUATIONS, WHICH COULD ADVERSELY AFFECT OUR EARNINGS AND RESULTS OF
OPERATIONS.
Since we conduct transactions in various foreign currencies, including,
among others, the euro, the Japanese yen and the British pound sterling, our
lift truck pricing structure and that of some of our competitors is subject to
the effects of fluctuations in the value of these foreign currencies and
fluctuations in the related currency exchange rates. As a result, costs and
sales have historically been affected by, and may continue to be affected by,
these fluctuations. These fluctuations historically have adversely affected, and
in the future could continue to adversely affect, our earnings and results of
operations.
WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR SPECIFIC CRITICAL COMPONENTS.
We depend on a limited number of suppliers for some of our critical
components, including diesel and gasoline engines and cast-iron counterweights
used to counterbalance some lift trucks. Some of these critical components are
imported and subject to regulation, such as inspection by the U.S. Department of
Commerce. Our results of operations could be adversely affected if we are unable
to obtain these critical components, or if the cost of these critical components
were to increase significantly, due to costly regulatory compliance or
otherwise, and we were unable to pass the cost increases on to our customers.
COMPETITION MAY ADVERSELY AFFECT OUR EARNINGS AND RESULTS OF OPERATIONS.
We experience intense competition in the sale of our lift trucks and
aftermarket parts. Competition in the lift truck industry is based primarily on
strength and quality of dealers, brand loyalty, customer service, availability
of products and aftermarket parts, comprehensive product line offering, product
performance, product quality and features and the cost of ownership over the
life of the lift truck. We compete with several global full line manufacturers
that operate in all major markets. These manufacturers may have greater
financial resources and less debt than we have, which may enable them to commit
larger amounts of capital in response to changing market conditions. If we fail
to compete effectively, our earnings and results of operations could be
adversely affected.
WE RELY PRIMARILY ON OUR NETWORK OF DEALERS TO SELL OUR LIFT TRUCKS AND
AFTERMARKET PARTS. AS A RESULT WE HAVE NO DIRECT CONTROL OVER SALES BY THOSE
DEALERS TO CUSTOMERS.
In 2001, approximately 81% of our new lift truck volume and 99% of our
aftermarket parts sales were sold through dealers, who in turn sold the lift
trucks and aftermarket parts to the customers. Sales of our products are
therefore subject to the quality and effectiveness of the dealers, who are
generally not subject to our direct control.
THE RETIREMENT OF EXISTING ANTI-DUMPING DUTIES AND MANUFACTURING BY JAPANESE
COMPETITORS IN THE UNITED STATES COULD ADVERSELY AFFECT OUR COMPETITIVE
POSITION, REVENUES, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Certain Japanese-built ICE lift trucks imported into the United States are
currently subject to an anti-dumping duty. The anti-dumping duty rates in effect
through 2001 ranged from 7.39% to 56.81% depending on the manufacturer or
importer. If the anti-dumping duty order is retired when it is reviewed again in
2005, our Japanese competitors might be able to import lift trucks for sale at a
cost below fair market value. If we were to similarly lower our prices to
maintain market share, our results of operations and financial condition could
be materially adversely affected. If we did not lower our prices, our
competitive position, revenues, results of operation and financial condition
could be materially adversely affected. In addition, all of our major Japanese
competitors have manufacturing or assembly facilities in the United States. The
domestic sourcing of lift truck products by our Japanese competitors may
negatively impact our competitive position, revenues, operating results or
financial condition.
16
OUR ACTUAL LIABILITIES RELATING TO PENDING LAWSUITS MAY EXCEED OUR EXPECTATIONS.
We are a defendant in pending lawsuits involving, among other things,
product liability claims. We cannot assure you that we will succeed in defending
these claims, that judgments will not be rendered against us with respect to any
or all of these proceedings or that reserves we have set aside will be adequate
to cover any such judgments. We could incur a charge to our earnings if our
reserves prove to be inadequate, which could have a material adverse effect on
our results of operations and liquidity for the period in which the charge is
taken.
WE HAVE GUARANTEED, OR ARE SUBJECT TO REPURCHASE OR RECOURSE OBLIGATIONS WITH
RESPECT TO, FINANCING ARRANGEMENTS OF SOME OF OUR CUSTOMERS.
Through arrangements with General Electric Capital Corporation, or GECC, we
provide dealer and customer financing of new lift trucks in the United States
and in major countries of the world outside of the United States. Through these
arrangements, our dealers and certain customers are extended credit for the
purchase of lift trucks to be placed in the dealer's floor plan inventory or the
financing of lift trucks that are sold or leased to customers. For some of the
arrangements, we provide residual value guarantees or standby recourse or
repurchase obligations such that we would become obligated in the event of
default by the dealer or customer. Total amounts subject to these types of
obligations at December 31, 2001 and March 31, 2002 were $158.0 million and
$153.4 million, respectively. In substantially all of these arrangements we
maintain perfected security interests in the assets financed such that, in the
event that we become obligated under the terms of the guarantees or standby
recourse or repurchase obligations, we may take title to the assets financed.
However, we cannot be certain that the security interest will equal or exceed
the amount of the guarantee or recourse or repurchase obligation. In addition,
we cannot be certain that losses under the terms of the guarantees or recourse
or repurchase obligations will not exceed the reserves that we have set aside in
our consolidated financial statements. We could incur a charge to our earnings
if our reserves prove to be inadequate, which could have a material adverse
effect on our results of operations and liquidity for the period in which the
charge is taken.
WE ARE SUBJECT TO RISKS RELATING TO OUR FOREIGN OPERATIONS.
Foreign operations represent a significant portion of our business. For
2001, approximately 7.6% of our revenue was derived from sales in the Americas
outside of the United States, approximately 28.1% from sales in Europe and
approximately 8.4% from sales in Asia-Pacific. We expect revenue from foreign
markets to continue to represent a significant portion of our total revenue. We
own or lease manufacturing facilities in Brazil, Italy, Mexico, The Netherlands,
Northern Ireland and Scotland, and we own interests in joint ventures with
facilities in China, Japan and the Philippines. We also sell domestically
produced products to foreign customers. Our foreign operations are subject to
risks in addition to the risks of our domestic operations. The risks that relate
to our foreign operations include:
- potential political, economic and social instability in the foreign
countries in which we operate;
- currency risks, see "--The pricing of our products has been and may
continue to be impacted by foreign currency fluctuations, which could
adversely affect our earnings and results of operations;"
- imposition of or increases in currency exchange controls;
- potential inflation in the applicable foreign economies;
- imposition of or increases in import duties and other tariffs on our
products;
- imposition of or increases in foreign taxation of our earnings and
withholding on payments received by us from our subsidiaries;
- regulatory changes affecting our international operations; and
- stringent labor regulations.
Part of our strategy to expand our worldwide market share and decrease
costs is strengthening our international distribution network and sourcing basic
components in foreign countries. Implementation of this
17
strategy may increase the impact of the risks described above and we cannot
assure you that such risks will not have an adverse effect on our business,
results of operations or financial condition.
OUR FORMER PUBLIC ACCOUNTANTS HAVE RECENTLY BEEN INDICTED BY THE U.S. FEDERAL
GOVERNMENT, WHICH MAY ADVERSELY AFFECT OUR ABILITY TO COMPLY WITH OUR
REGISTRATION OBLIGATIONS, WHETHER CONTRACTUAL OR STATUTORY, AND THE ABILITY OF
ARTHUR ANDERSEN LLP TO SATISFY ANY CLAIMS THAT MAY ARISE OUT OF ARTHUR ANDERSEN
LLP'S AUDIT OF OUR FINANCIAL STATEMENTS.
Our former independent public accountant, Arthur Andersen LLP, has informed
us that on March 14, 2002, an indictment was unsealed charging it with federal
obstruction of justice arising from the U.S. government's investigation of Enron
Corp. We filed the registration statement of which this prospectus is a part to
comply with the provisions of a registration rights agreement we entered into on
May 9, 2002 with the initial purchasers of the outstanding notes. If we fail to
comply with the registration provisions of the registration rights agreements
within the time periods specified therein, we will be required to pay holders of
the notes special interest while the failure continues. Our ability to comply
with our registration obligations, whether contractual or statutory, in a timely
manner could be adversely affected if the SEC ceases accepting financial
statements audited by Arthur Andersen LLP, if Arthur Andersen LLP becomes unable
to make specified representations to us, as required by the SEC as a condition
to accepting Arthur Andersen LLP audited or reviewed financial statements, or if
for any reason Arthur Andersen LLP is unable to perform accounting services for
us. Further, it is possible that events arising out of the indictment may
adversely affect the ability of Arthur Andersen LLP to satisfy any claims that
may arise out of Arthur Andersen LLP's audit of our financial statements that
are contained in, or incorporated by reference to, this prospectus.
NACCO INDUSTRIES, INC. CONTROLS ALL MATTERS THAT MUST BE SUBMITTED TO A
STOCKHOLDER VOTE, AND THIS CONTROL MAY ADVERSELY AFFECT THE NOTEHOLDERS.
NACCO owns 100% of our outstanding capital stock. Therefore, NACCO controls
the vote on all matters required to be submitted to a stockholder vote,
including the election of our directors, amendments to our certificate of
incorporation and our by-laws, and approval of significant change of control
transactions. Some decisions about our operations or financial structure may
present conflicts of interest between NACCO and the holders of the notes. For
example, NACCO may be willing to approve acquisitions, divestitures or
transactions undertaken by us that it believes could increase the value of its
equity investment in us. These kinds of transactions, however, may increase the
financial risk to the noteholders.
NACCO has two classes of common stock. The Class A common stock, which is
listed on the New York Stock Exchange, is entitled to one vote per share and the
Class B common stock is entitled to ten votes per share. A majority of the NACCO
Class B common stock is beneficially owned by certain descendents and relatives
of NACCO's founder, which group includes certain executives of NACCO and certain
members of the board of directors of both us and NACCO. This concentration of
voting power at NACCO may exacerbate the risks described above.
NACCO INDUSTRIES, INC. WILL NOT GUARANTEE THE NOTES AND IS UNDER NO OBLIGATION
WITH RESPECT TO ANY OF OUR OR THE SUBSIDIARY GUARANTORS' DEBT OBLIGATIONS.
NACCO is under no obligation with respect to the notes or our subsidiary
guarantors' debt obligations. If we or the subsidiary guarantors default on our
obligations under the notes, you will have no right to seek payment or other
remedies from NACCO.
RISKS RELATING TO OUR DEBT, INCLUDING THE NOTES
OUR SIGNIFICANT AMOUNT OF DEBT MAY LIMIT OUR OPERATIONS AND FLEXIBILITY.
After giving effect to the application of the net proceeds from the sale of
the outstanding notes and amounts drawn under the new revolving credit facility,
as of March 31, 2002, our total debt would have been approximately $346.1
million.
18
The level of our indebtedness could have important consequences, including:
- limiting cash flow available for general corporate purposes, including
capital expenditures, because a substantial portion of our cash flow from
operations must be dedicated to servicing our debt;
- limiting our ability to obtain additional debt financing in the future
for working capital, capital expenditures or acquisitions;
- making us more vulnerable in the event of a further downturn in general
economic conditions or in our business;
- limiting our flexibility in reacting to competitive and other changes in
our industry;
- making it more difficult to satisfy our obligations under the notes,
including our repurchase obligation upon the occurrence of specified
change of control events; and
- exposing us to risks inherent in interest rate fluctuations because some
of our borrowings will be at variable rates of interest, which could
result in higher interest expense in the event of increases in interest
rates.
WE MAY NOT BE ABLE TO SERVICE OUR DEBT, INCLUDING THE NOTES.
Our ability to pay or to refinance our indebtedness, including the notes,
will depend upon our future operating performance, which will be affected by
general economic, financial, competitive, business and other factors beyond our
control. We cannot assure you that our business will generate sufficient cash
flow from operations, that currently anticipated revenue growth and operating
improvements will be realized on schedule or at all or that future borrowings
will be available to us under the new revolving credit facility in amounts
sufficient to enable us to service our debt obligations, to pay our
indebtedness, including the notes at maturity or otherwise, or to fund our other
liquidity needs. If we are unable to meet our debt obligations or fund our other
liquidity needs, we may need to restructure or refinance our indebtedness or
sell assets. We cannot assure you that we will be able to accomplish those
actions on satisfactory terms, if at all, which could cause us to default on our
obligations and impair our liquidity. Our ability to restructure or refinance
will depend on the capital markets and our financial condition at such time. Any
refinancing of our debt could be at higher interest rates and may require us to
comply with more onerous covenants which could further restrict our business
operations.
DESPITE OUR LEVEL OF INDEBTEDNESS, WE AND OUR SUBSIDIARIES WILL BE ABLE TO INCUR
SUBSTANTIALLY MORE DEBT. THIS COULD EXACERBATE THE RISKS DESCRIBED ABOVE.
We and our subsidiaries will be able to incur substantial additional
indebtedness in the future. Although the indenture governing the notes and the
terms of our new revolving credit facility contain restrictions on the
incurrence of additional indebtedness, these restrictions are subject to a
number of qualifications and exceptions, and the indebtedness incurred in
compliance with these restrictions could be substantial. To the extent new debt
is added to our currently anticipated debt levels, the substantial leverage
risks described above would increase. Also, these restrictions do not prevent us
from incurring obligations that do not constitute indebtedness. See "Description
of Notes" and "Description of Other Indebtedness."
OUR BUSINESS IS CONDUCTED THROUGH OUR SUBSIDIARIES AND WE WILL DEPEND ON THE
BUSINESS OF OUR SUBSIDIARIES TO SATISFY OUR OBLIGATIONS UNDER THE NOTES.
Our operations are conducted through our subsidiaries. As a result, we will
depend on dividends, loans or advances or payments from our subsidiaries to
satisfy our financial obligations and make payments on the notes. The ability of
our subsidiaries to make distributions or other payments to us will depend upon
their operating results and applicable laws and any contractual restrictions
contained in the instruments governing their indebtedness. If money generated by
our subsidiaries is not available to us, our ability to repay our indebtedness,
including the notes, may be adversely affected.
19
ALTHOUGH THE NOTES ARE REFERRED TO AS "SENIOR NOTES," THEY ARE EFFECTIVELY
SUBORDINATED TO ANY FUTURE SECURED INDEBTEDNESS OF NMHG AND THE SUBSIDIARY
GUARANTORS AND ALL OBLIGATIONS OF THE NON-GUARANTOR SUBSIDIARIES.
The notes are our unsecured obligations and are guaranteed by substantially
all of our existing and future domestic subsidiaries. The notes are not
guaranteed by our other subsidiaries. As a result of this structure, the notes
are effectively subordinated to amounts outstanding under the new revolving
credit facility and any other future secured indebtedness of NMHG and the
subsidiary guarantors, to the extent of the value of the collateral, and all
indebtedness and other obligations, including trade payables, of our
non-guarantor subsidiaries. The effect of this subordination is that, in the
event of a bankruptcy, liquidation, dissolution, reorganization or similar
proceeding involving us or a subsidiary, the assets of the affected entity could
not be used to pay you until after:
- all secured claims against the affected entity have been fully paid; and
- if the affected entity is a non-guarantor subsidiary, all other claims
against that subsidiary, including trade payables, have been fully paid.
For the three months ended March 31, 2002, our non-guarantor subsidiaries
constituted approximately 48% of our adjusted EBITDA, after elimination of
intercompany transactions, and at March 31, 2002 they represented approximately
34% of our total assets, after elimination of intercompany accounts and
investments.
THE TERMS OF OUR DEBT INSTRUMENTS IMPOSE FINANCIAL AND OPERATING RESTRICTIONS.
Our new revolving credit facility and the indenture governing the notes
contain restrictive covenants that limit our ability to engage in a variety of
transactions, including incurring or guaranteeing additional indebtedness,
paying dividends on our capital stock, redeeming, repurchasing or retiring our
capital stock, making investments, creating restrictions on the payments of
dividends from subsidiaries, engaging in transactions with affiliates, creating
liens on our assets, transferring or selling our assets or engaging in mergers,
acquisitions or consolidations. These debt instruments will prohibit us from
prepaying any subordinated indebtedness we may incur, and our new revolving
credit facility requires us to maintain specified financial ratios and satisfy
other financial condition tests. Our ability to meet those financial ratios and
tests can be affected by events beyond our control, and we cannot assure you
that we will meet those tests.
A breach of any of the covenants or other provisions in our debt
instruments could result in a default thereunder. Upon the occurrence of an
event of default under our new revolving credit facility, the lenders could
elect to declare all amounts outstanding thereunder to be immediately due and
payable and terminate all commitments to extend further credit, which would
adversely affect our ability to fund our operations. An acceleration of the
amounts due under our new revolving credit facility would cause us to be in
default under the indenture governing the notes, enabling acceleration of
amounts outstanding under the indenture. If the lenders under our new revolving
credit facility accelerate the repayment of borrowings, we cannot assure you
that we will have sufficient assets to repay all of our indebtedness. See
"Description of Notes" and "Description of Other Indebtedness."
IF A CHANGE OF CONTROL OCCURS, WE MAY NOT HAVE SUFFICIENT FUNDS TO REPURCHASE
YOUR NOTES.
Upon the occurrence of specified change of control events, you may require
us to repurchase all or a portion of your notes at 101% of their principal
amount, plus accrued interest and liquidated damages, if any. If a change of
control occurs, we may not be able to pay the repurchase price for all of the
notes submitted for repurchase. Our failure to purchase tendered notes would
constitute an event of default under the indenture and the terms of our other
debt, including our new revolving credit facility. In such circumstances, or if
a change of control would constitute an event of default under our new revolving
credit facility, we cannot assure you that we will have sufficient assets to
repay all of our indebtedness. The term "change of control" is limited to
certain specified transactions and may not include other events that may harm
our
20
financial condition. The term "change of control" is defined under "Description
of Notes -- Change of Control."
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS.
Substantially all our existing and future domestic subsidiaries guarantee
the notes. If, however, any subsidiary becomes a debtor in a case under the
United States Bankruptcy Code or encounters other financial difficulty, under
federal or state fraudulent transfer law a court might avoid (that is cancel)
its guarantee. The court might do so if it found that when the subsidiary
entered into its guarantee (or, in some states, when payments became due
thereunder), the subsidiary guarantor
- received less than reasonably equivalent value or fair consideration for
the guarantee, and
- either (1) was or was rendered insolvent, (2) was left with inadequate
capital to conduct its business, or (3) believed or should have believed
that it would incur debts beyond its ability to pay.
The court might also avoid a subsidiary's guarantee, without regard to those
factors, if it found that the subsidiary entered into its guarantee with actual
intent to hinder, delay or defraud its creditors.
A court would likely find that a subsidiary did not receive reasonably
equivalent value or fair consideration for its guarantee unless it benefited
directly or indirectly from the notes' issuance. If a court avoided a guarantee,
you would no longer have a claim against the guarantor. In addition, the court
might direct you to repay any amounts already received from the guarantor. If
the court were to avoid any subsidiary's guarantee, we cannot assure you that
funds would be available to pay the notes from another subsidiary guarantor or
from any other source.
The test for determining solvency for these purposes will depend on the law
of the jurisdiction being applied. In general, a court would consider an entity
insolvent either if the sum of its existing debts exceeds the fair value of all
of its property, or if the present fair saleable value of its assets is less
than the amount required to pay the probable liability on its existing debts as
they become due. For this analysis, "debts" includes contingent and unliquidated
debts.
The indenture states that the liability of each subsidiary on its guarantee
is limited to the maximum amount that the subsidiary can incur without risk that
the guarantee will be subject to avoidance as a fraudulent transfer. We cannot
assure you that this limitation will protect the guarantees from fraudulent
transfer attack or, if it does, that the guarantees will be in amounts
sufficient, if necessary, to pay the notes when due.
BANKRUPTCY MAY DELAY PAYMENT ON THE NOTES.
The Bankruptcy Code generally prohibits the payment of pre-bankruptcy debt
by a company that commences a bankruptcy case. If we and all our subsidiaries
became debtors in bankruptcy cases, so long as the cases were pending you would
likely not receive any payment of principal or interest due under the notes.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
There is currently no existing public market for the notes. An active
public market may never develop for the notes and we will not apply to list the
notes on any exchange or Nasdaq. As a result, you may be required to bear the
financial risk of your investment in the notes indefinitely. Any notes traded
after they are initially issued may trade at a discount from their initial
offering price. The trading price of the notes depends on prevailing interest
rates, the market for similar securities and other factors, including economic
conditions and our financial condition, performance and prospects. Historically,
the market for non-investment grade debt has been subject to disruptions that
have caused substantial fluctuations in the prices of these securities.
Although we do not intend to apply for listing or quotation of the notes,
the notes have been designated for trading in PORTAL. We have been informed by
the initial purchasers that they intend to make a market in the notes after this
offering. The initial purchasers are not obligated to do so, and may cease such
market-making without notice. See "Description of Notes" and "Plan of
Distribution."
21
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING NOTES YOU MAY HAVE DIFFICULTY IN
TRANSFERRING THEM AT A LATER TIME.
We will issue exchange notes in exchange for the outstanding notes after
the exchange agent receives your outstanding notes, the letter of transmittal
and all related documents. You should allow adequate time for delivery if you
choose to tender your outstanding notes for exchange. Outstanding notes that are
not exchanged will remain subject to restrictions on transfer and will not have
any rights to registration.
If you do participate in the exchange offer for the purpose of
participating in the distribution of the exchange notes, you must comply with
the registration and prospectus delivery requirements of the Securities Act for
any resale transaction. Each broker-dealer who holds outstanding notes for its
own account due to market-making or other trading activities and who receives
exchange notes for its own account must acknowledge that it will deliver a
prospectus in connection with any resale of the exchange notes. If any
outstanding notes are not tendered in the exchange or are tendered but not
accepted, the trading market for such outstanding notes could be negatively
affected due to the limited amount expected to remain outstanding following the
completion of the exchange offer.
22
FORWARD-LOOKING STATEMENTS
A number of statements made in this prospectus are not historical or
current facts, but deal with potential future circumstances and developments.
Those statements are qualified by the inherent risks and uncertainties
surrounding future expectations generally, and also may materially differ from
our actual future experience involving any one or more of these matters and
subject areas. We attempted to identify, in context, some of the factors that we
currently believe may cause future experience and results to differ from our
current expectations regarding the relevant matter or subject area. We have
identified some of these forward-looking statements with words such as
"anticipates," "estimates," "believes," "expects," "intends," "may," "will,"
"should" or the negative of those words or other comparable terminology. These
statements may be contained in "Prospectus Summary" and "Risk Factors," among
other places in this prospectus. The operation and results of our business also
may be subject to the effect of other risks and uncertainties, including but not
limited to:
- changes in demand for lift trucks and related aftermarket parts and
service on a worldwide basis, especially in the United States, where we
derive a majority of our sales;
- changes in sales prices;
- delays in delivery or changes in costs of raw materials or sourced
products and labor;
- delays in manufacturing and delivery schedules;
- exchange rate fluctuations, changes in foreign import tariffs and
monetary policies and other changes in the regulatory climate in the
foreign countries in which we operate and/or sell products;
- product liability or other litigation, warranty claims or returns of
products;
- delays in or increased costs of our 2001 Restructuring Program, such as
the phase-out of our Danville, Illinois manufacturing plant;
- the effectiveness of our Global Cost Reduction Program;
- acquisitions and/or dispositions of dealerships by us;
- costs related to the integration of acquisitions;
- the impact of the continuing introduction of the euro, including
increased competition, foreign currency exchange movements and/or changes
in operating costs; and
- uncertainties regarding the impact of the September 11, 2001 terrorist
activities and subsequent climate of war may have on the economy or the
public's confidence in general.
23
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. Because we are exchanging the exchange notes for the outstanding notes,
which have substantially identical terms, the issuance of the exchange notes
will not result in any increase in our indebtedness.
CAPITALIZATION
The following table presents our condensed consolidated cash and cash
equivalents and capitalization as of March 31, 2002 on an actual basis and as
adjusted to reflect completion of the offering of the outstanding notes and the
application of the net proceeds, together with borrowings under our new
revolving credit facility and available cash, to repay amounts outstanding under
our existing credit facility and European receivables discounting facility. The
information set forth in the table below should be read together with the
information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the more detailed consolidated
financial statements and related notes appearing elsewhere in this prospectus.
<Table>
<Caption>
(IN MILLIONS, EXCEPT
SHARE DATA)
AS OF MARCH 31, 2002
---------------------
ACTUAL AS ADJUSTED
------ -----------
Cash and cash equivalents................................... $ 54.9 $ 18.7
====== ======
Debt:
$350.0 million revolving credit facility.................. $265.0 $ --
Capitalized lease obligations and other term loans........ 49.7 49.7
Other revolving lines of credit........................... 34.3 33.3
New revolving credit facility............................. -- 16.2
10% Senior Notes due 2009................................. -- 246.9
------ ------
Total debt............................................. $349.0 $346.1
====== ======
Stockholder's equity:
Common stock, par value $1.00 per share (10,000 shares
authorized; 5,599 shares issued and outstanding) and
capital in excess of par value......................... $198.2 $198.2
Retained earnings and other comprehensive income (loss)... 173.9 173.9
------ ------
Total stockholder's equity............................. 372.1 372.1
------ ------
Total capitalization................................. $721.1 $718.2
====== ======
</Table>
24
SELECTED HISTORICAL FINANCIAL INFORMATION
The following tables present our selected historical financial data. The
statement of income, cash flow and other data for each of the three years in the
period ended December 31, 2001 and the balance sheet data as of December 31,
2000 and 2001 have been derived from our audited consolidated financial
statements and related notes, which appear elsewhere in this prospectus. The
statement of income, cash flow and other data for the three months ended March
31, 2001 and 2002, and the balance sheet data as of March 31, 2002, have been
derived from our unaudited consolidated financial statements and related notes,
which appear elsewhere in this prospectus. The statement of income, cash flow
and other data for each of the years ended December 31, 1997 and 1998, and the
balance sheet data as of December 31, 1997, 1998 and 1999 have been derived from
our audited consolidated financial statements and related notes that are not
included in this prospectus. The balance sheet data as of March 31, 2001 have
been derived from our unaudited consolidated financial statements and related
notes that are not included in this prospectus. You should read the following
information together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our historical consolidated financial
statements and related notes appearing elsewhere in this prospectus. The
following results are net of intercompany transactions.
<Table>
<Caption>
(DOLLARS IN MILLIONS)
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- -------------------
1997 1998 1999 2000 2001 2001 2002
----------- ----------- -------- -------- -------- -------- --------
STATEMENT OF INCOME DATA:
Revenues............................ $1,517.1 $1,746.1 $1,761.4 $1,932.1 $1,672.4 $ 495.6 $ 371.8
Cost of sales....................... 1,253.0 1,400.4 1,457.9 1,584.6 1,422.8 406.8 310.1
-------- -------- -------- -------- -------- -------- --------
Gross profit........................ 264.1 345.7 303.5 347.5 249.6 88.8 61.7
Selling, general and administrative
expenses.......................... 173.9 203.4 233.0 257.8 262.4 64.9 55.1
Amortization of goodwill............ 11.7 11.7 12.2 12.6 12.9 3.2 --
Restructuring charges (credits)..... 8.0 (1.6) -- 13.9 8.8 -- --
Loss on sale of dealers............. -- -- -- -- 10.4 -- --
-------- -------- -------- -------- -------- -------- --------
Operating profit (loss)............. $ 70.5 $ 132.2 $ 58.3 $ 63.2 $ (44.9) $ 20.7 $ 6.6
Interest expense.................... (14.5) (14.0) (19.0) (21.2) (23.1) (5.2) (5.5)
Other income (expense), net......... (3.7) 2.2 1.8 (4.4) 4.6 1.7 2.1
Minority interest income............ -- 1.0 1.0 1.1 0.8 0.2 0.2
Income tax provision (benefit)...... 13.6 46.3 18.4 17.4 (14.5) 7.8 (0.9)
Cumulative effect of accounting
changes, net-of-tax(1)............ -- -- -- -- (1.3) (1.3) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................... $ 38.7 $ 75.1 $ 23.7 $ 21.3 $ (49.4) $ 8.3 $ 4.3
======== ======== ======== ======== ======== ======== ========
CASH FLOW DATA:
Provided by operating activities.... $ 127.4 $ 81.0 $ 79.4 $ 62.6 $ 31.0 12.7 28.6
Used for investing activities....... (36.9) (77.1) (116.1) (59.7) (47.2) (10.7) (5.4)
Provided by (used for) financing
activities........................ (114.7) 0.6 47.4 (10.1) 52.3 8.1 (27.9)
OTHER DATA:
Capital expenditures................ $ 25.6 $ 63.9 $ 46.2 $ 51.8 $ 53.5 $ 9.7 $ 6.2
Product development costs........... 32.5 38.6 41.4 43.9 44.7 10.5 9.6
Dividends to NACCO.................. 15.3 -- -- 10.0 5.0 -- 15.0
Ratio of earnings to fixed
charges(2)........................ 4.0x 7.9x 2.9x 2.4x -- 3.1x 1.2x
Units sold.......................... 66,833 77,636 76,055 84,825 68,929 21,624 14,971
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents........... $ 17.1 $ 22.2 $ 31.1 $ 24.4 $ 59.6 $ 34.0 $ 54.9
Working capital(3).................. 54.5 125.8 146.3 107.4 (150.0) 135.6 (159.6)
Total assets........................ 942.4 1,100.4 1,178.6 1,241.7 1,205.1 1,242.1 1,186.6
Total debt.......................... 156.8 200.2 270.7 304.9 362.4 316.9 349.0
Stockholder's equity................ 384.9 462.0 468.7 463.0 382.0 456.1 372.1
</Table>
(footnotes on following page)
25
- ---------------
(1) As a result of the adoption of Statement of Financial Accounting Standard
No. 133, we recognized a cumulative effect of a change in accounting charge
for the year ended December 31, 2001 of $0.9 million, net of $0.5 million of
tax benefit, relating primarily to certain interest rate swap agreements
that did not qualify for hedge accounting treatment at January 1, 2001. On
January 1, 2001, we recognized a cumulative effect of a change in accounting
charge of $0.4 million, net of $0.3 million of tax benefit, relating to a
change in the method of calculating pension costs for our defined benefit
pension plan in the United Kingdom. See Note 2 in our consolidated financial
statements for the year ended December 31, 2001 included elsewhere in this
offering circular for further information on these charges.
(2) The ratio of earnings to fixed charges is determined by dividing income
(loss) before income taxes, minority interest and cumulative effect of
accounting changes, adjusted for equity in earnings and distributions
received from equity investees, interest expense, debt expense amortization,
capitalized interest and the portion of rental expense deemed representative
of an interest factor by the sum of interest expense, debt expense
amortization, capitalized interest and the portion of rental expense deemed
representative of the interest factor. For the year ended December 31, 2001,
earnings were insufficient to cover fixed charges by $66.8 million.
(3) As of December 31, 2001 and March 31, 2002, includes $265.0 million of debt
outstanding under our existing credit facility and classified as a current
liability in accordance with U.S. generally accepted accounting principles.
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Set forth below is a discussion and analysis of our financial condition and
results of operations. You should read this discussion and analysis together
with the financial statements and the related notes appearing elsewhere in this
offering circular. Historical results and percentage relationships set forth in
the consolidated financial statements, including trends that might appear,
should not be taken as indicative of future operations.
OVERVIEW
We design, manufacture and market industrial lift trucks through our
manufacturing and assembly operations and our owned dealers. We operate our
manufacturing and assembly operations, which we sometimes refer to as NMHG
Wholesale, through our wholly owned subsidiary, NACCO Materials Handling Group,
Inc. Our owned dealer operations, which we sometimes refer to as NMHG Retail,
are conducted through our wholly owned subsidiary, NMHG Distribution Co. Through
NMHG Wholesale and NMHG Retail, we design, engineer, manufacture, sell, service
and lease a comprehensive line of lift trucks and aftermarket parts and service
marketed globally under the Hyster and Yale brand names.
Demand for lift trucks is cyclical and depends upon capital budgeting in
the diverse end markets where lift trucks are sold. We believe our market, like
the broader global economy, is poised for growth. Prior to the recent downturn
in the economy, we developed and began implementing our 2001 Restructuring
Program, which included the closure of our Danville, Illinois assembly facility,
labor and overhead reductions and restructuring of our owned dealers, which
resulted in non-recurring items and one-time pre-tax charges of $47.8 million in
2001. This program reduced costs and more closely aligned our operations with
the demand for our products and services.
In addition to the 2001 Restructuring Program, we have developed and are
implementing a Global Cost Reduction Program which encompasses lean
manufacturing, global procurement, the transfer of processes and sourcing to
lower cost locations, component commonality, overhead cost reduction and
improvements in our owned dealers. These programs are designed to enhance our
competitive position and improve our overall cost structure. We believe this
program has positioned us to take advantage of the anticipated recovery in the
capital goods market, and will result in reduced fixed overhead costs, lower
manufacturing costs and improvements in both our gross margins and operating
profit.
NMHG Retail includes the elimination of intercompany revenues and profits
resulting from sales by NMHG Wholesale to NMHG Retail.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to product discounts and returns, bad debts, inventories, income taxes,
warranty obligations, product liabilities, restructuring, pensions and other
post-retirement benefits and contingencies and litigation. We base our estimates
on historical experience, actuarial valuations and on various other assumptions
that we believe are reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
Product liabilities. We provide for the estimated cost of personal and
property damage relating to our products. Reserves are made for estimates of the
costs for known claims and estimates of the costs of incidents that have
occurred but a claim has not yet been reported to us. While we engage in
extensive
27
product quality reviews and customer education programs, our product liability
provision is affected by the number and magnitude of claims of alleged
product-related damage and the cost to defend those claims. In addition, the
provision for product liabilities is also affected by changes in assumptions for
medical costs, inflation rates, trends in damages awarded by juries and
estimates of the number of claims that have been incurred but not yet reported.
Changes to the estimate of any of these factors could result in a material
change to our product liability provision causing a related increase or decrease
in reported net operating results in the period of change in the estimate.
Revenue recognition. Revenues are generally recognized when customer orders
are completed and shipped. Reserves for discounts, returns and product
warranties are maintained for anticipated future claims. The accounting policies
used to develop these product discounts, returns and warranties include:
- Product discounts. We record estimated reductions to revenues for
customer programs and incentive offerings, including special pricing
agreements, price competition, promotions and other volume-based
incentives. If market conditions were to decline or if competition was to
increase, we may take actions to increase customer incentive offerings
possibly resulting in an incremental reduction of revenues at the time
the incentive is offered.
- Product returns. Based on our historical experience, a portion of
products sold is estimated to be returned due to reasons such as buyer
remorse, product failure and excess inventory stocked by the customer
which, subject to certain terms and conditions, we will agree to accept.
We record estimated reductions to revenues at the time of sale based on
this historical experience. If future trends were to change significantly
from those experienced in the past, incremental reductions to revenues
may result based on this new experience.
- Product warranties. We provide for the estimated cost of product
warranties at the time revenues are recognized. While we engage in
extensive product quality programs and processes, including actively
monitoring and evaluating the quality of our component suppliers, our
warranty obligation is affected by product failure rates, material usage
and replacement component costs incurred in correcting a product failure.
Should actual product failure rates, material usage or replacement
component costs differ from our estimates, revisions to the estimated
warranty liability would be required.
Allowances for doubtful accounts. We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. These allowances are based on both recent trends of
certain customers estimated to be a greater credit risk as well as general
trends of the entire customer pool. If the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.
Inventory reserves. We write down our inventory for estimated obsolescence
or excess inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by our management, additional inventory write-downs may be required.
Deferred tax valuation allowances. We record a valuation allowance to
reduce our deferred tax assets to the amount that is more likely than not to be
realized. While we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event we were to determine that we would be able to realize
our deferred tax assets in the future in excess of our net recorded amount
(including the valuation allowance), an adjustment to the deferred tax asset
would increase income in the period such determination was made. Conversely,
should we determine that we would not be able to realize all or part of our net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be expensed in the period such determination was made.
28
FINANCIAL REVIEW
The segment and geographic results of our operations were as follows (in
millions):
<Table>
<Caption>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ ---------------
1999 2000 2001 2001 2002
-------- -------- -------- ------ ------
REVENUES
Wholesale
Americas......................... $1,149.5 $1,291.6 $1,031.1 $327.5 $228.3
Europe, Africa and Middle East... 406.3 394.6 363.9 99.6 84.6
Asia-Pacific..................... 63.1 63.8 68.3 15.8 14.8
-------- -------- -------- ------ ------
Total wholesale................ 1,618.9 1,750.0 1,463.3 442.9 327.7
-------- -------- -------- ------ ------
Retail (net of eliminations)
Americas......................... 32.1 33.1 30.9 8.4 7.6
Europe, Africa and Middle East... 83.0 97.3 106.8 24.9 16.1
Asia-Pacific..................... 27.4 51.7 71.4 19.4 20.4
-------- -------- -------- ------ ------
Total retail................... 142.5 182.1 209.1 52.7 44.1
-------- -------- -------- ------ ------
NMHG consolidated................... $1,761.4 $1,932.1 $1,672.4 $495.6 $371.8
======== ======== ======== ====== ======
OPERATING PROFIT (LOSS)
Wholesale
Americas......................... $ 70.4 $ 78.5 $ 10.0 $ 24.1 $ 9.2
Europe, Africa and Middle East... 7.4 2.3 (13.7) 0.7 (2.8)
Asia-Pacific..................... (3.3) (2.3) (1.8) (0.7) --
-------- -------- -------- ------ ------
Total wholesale................ 74.5 78.5 (5.5) 24.1 6.4
-------- -------- -------- ------ ------
Retail (net of eliminations)
Americas......................... (3.9) (0.9) (2.4) (0.9) 0.2
Europe, Africa and Middle East... (10.6) (15.3) (34.8) (3.9) 0.3
Asia-Pacific..................... (1.7) 0.9 (2.2) 1.4 (0.3)
-------- -------- -------- ------ ------
Total retail................... (16.2) (15.3) (39.4) (3.4) 0.2
-------- -------- -------- ------ ------
NMHG consolidated................... $ 58.3 $ 63.2 $ (44.9) $ 20.7 $ 6.6
======== ======== ======== ====== ======
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
Wholesale
Americas......................... $ 78.2 $ 86.4 $ 17.8 $ 26.1 $ 9.2
Europe, Africa and Middle East... 11.0 5.7 (10.4) 1.5 (2.8)
Asia-Pacific..................... (3.1) (2.0) (1.5) (0.6) --
-------- -------- -------- ------ ------
Total wholesale................ 86.1 90.1 5.9 27.0 6.4
-------- -------- -------- ------ ------
Retail (net of eliminations)
Americas......................... (3.6) (0.8) (2.1) (0.8) 0.2
Europe, Africa and Middle East... (10.3) (14.7) (34.4) (3.8) 0.3
Asia-Pacific..................... (1.7) 1.2 (1.4) 1.5 (0.3)
-------- -------- -------- ------ ------
Total retail................... (15.6) (14.3) (37.9) (3.1) 0.2
-------- -------- -------- ------ ------
NMHG consolidated................... $ 70.5 $ 75.8 $ (32.0) $ 23.9 $ 6.6
======== ======== ======== ====== ======
</Table>
29
<Table>
<Caption>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ ---------------
1999 2000 2001 2001 2002
-------- -------- -------- ------ ------
OTHER -- NET
Wholesale........................... $ 4.8 $ (4.6) $ 4.2 $ 1.7 $ 2.1
Retail (net of eliminations)........ (3.0) 0.2 0.4 -- --
-------- -------- -------- ------ ------
NMHG consolidated................... $ 1.8 $ (4.4) $ 4.6 $ 1.7 $ 2.1
======== ======== ======== ====== ======
NET INCOME (LOSS)
Wholesale........................... $ 39.0 $ 37.0 $ (14.1) $ 12.4 $ 5.6
Retail (net of eliminations)........ (15.3) (15.7) (35.3) (4.1) (1.3)
-------- -------- -------- ------ ------
NMHG consolidated................... $ 23.7 $ 21.3 $ (49.4) $ 8.3 $ 4.3
======== ======== ======== ====== ======
</Table>
Other -- net for NMHG Wholesale includes equity in earnings (loss) of
unconsolidated affiliates and discounts on the sale of accounts receivable.
Equity in the earnings (loss) of unconsolidated affiliates, including
Sumitomo-NACCO Materials Handling Group, or S-N, a 50%-owned joint venture with
Sumitomo Heavy Industries, Ltd., in Japan, were $2.3 million in 1999, ($0.2)
million in 2000, $2.6 million in 2001, $1.4 million for the three months ended
March 31, 2001 and $1.0 million for the three months ended March 31, 2002.
Discounts on the sale of receivables included in other -- net were $3.8 million
in 1999, $5.5 million in 2000, $4.7 million in 2001, $1.5 million for the three
months ended March 31, 2001 and $0.3 million for the three months ended March
31, 2002. For the year ended December 31, 2001, other -- net includes
non-recurring insurance proceeds of $8.0 million relating to flood damage in
September 2000 at S-N. For the year ended December 31, 1999, other -- net for
NMHG Wholesale included non-recurring income of $0.9 million for settlements
from legal proceedings.
FIRST QUARTER OF 2002 COMPARED WITH FIRST QUARTER OF 2001
Our revenues decreased 25% to $371.8 million in the first quarter of 2002
from $495.6 million in the first quarter of 2001. Revenues at NMHG Wholesale
decreased to $327.7 million in the first quarter of 2002, down 26.0% from $442.9
million in the first quarter of 2001. This decrease is primarily due to a
decline in unit volume period over period. Beginning in the second quarter of
2001, an economic slowdown in the U.S. economy, which was further recessed by
the events of September 11, 2001, caused a steep drop in the demand for lift
trucks, as well as for other capital goods, in North America. Although worldwide
lift truck shipments have increased in the first quarter of 2002 to 14,971 units
as compared with 14,452 units in the third quarter of 2001 and 14,451 units in
the fourth quarter of 2001, unit volume is down 30.8% as compared with 21,624
units shipped in the first quarter of 2001. NMHG Wholesale's revenues also
declined due to lower parts sales resulting from reduced lift truck utilization
which is typical in this stage of a capital goods recession.
Revenues at NMHG Retail decreased to $44.1 million in the first quarter of
2002 from $52.7 million in the first quarter of 2001. This decrease is primarily
due to the sale of retail dealerships in the fourth quarter of 2001 (the "sold
operations"), which were included in the results for the first quarter of 2001,
and decreased revenues from rental, service and parts, partially offset by a
decrease in the elimination of sales between wholesale and retail.
We recorded operating profit of $6.6 million in the first quarter of 2002
compared to an operating profit of $20.7 million in the first quarter of 2001.
Operating profit at NMHG Wholesale decreased to $6.4 million in the first
quarter of 2002 from $24.1 million in the first quarter of 2001. The decrease in
operating profit was primarily driven by reduced unit and parts volume and the
consequent negative impact of lower shipments on manufacturing overhead
absorption. The decline in operating profit was partially offset by a shift in
mix to higher margin lift trucks; the positive impact from improvement programs
initiated in 2001, including the completion of the Danville, Illinois plant
closure in the fourth quarter of 2001 and the benefits of procurement,
restructuring and cost control programs; and the elimination of goodwill
amortization as a
30
result of the adoption of SFAS No. 142. See Note 3 and Note 4 to the Unaudited
Condensed Consolidated Financial Statements included elsewhere in this
prospectus for a discussion of the NMHG Wholesale restructuring programs and the
adoption of SFAS No. 142, respectively.
NMHG Retail generated an operating profit of $0.2 million in the first
quarter of 2002 compared with an operating loss of $3.4 million in the first
quarter of 2001. The improved operating results are primarily due to decreased
operating expenses at comparable dealerships, the elimination of operating
losses incurred by the sold operations in the first quarter of 2001 and
operating profit from a rental company acquired subsequent to the first quarter
of 2001. These improvements were partially offset by non-cash charges of $0.8
million incurred by Asia-Pacific. Improved operating expenses at comparable
dealerships reflect the favorable impact of restructuring programs initiated in
2001, especially in Europe. See a discussion of the NMHG Retail Europe
restructuring plan in Note 3 to the Unaudited Condensed Consolidated Financial
Statements included elsewhere in this prospectus. In addition to the
restructuring program in Europe, NMHG Retail implemented other initiatives in
2001, which are expected to benefit results significantly in 2002.
Net income for the first quarter of 2002 was $4.3 million, as compared with
net income of $8.3 million in the first quarter of 2001. NMHG Wholesale's net
income decreased to $5.6 million in the first quarter of 2002 from $12.4 million
in the first quarter of 2001 as a result of the factors affecting operating
profit and increased interest expense partially offset by an increase in other
income and a favorable tax benefit of $1.9 million recognized in the first
quarter of 2002 relating to previous losses in China. In addition, NMHG
Wholesale's first quarter of 2001 net income includes a charge of $1.3 million
for the cumulative effect of changes in accounting for derivatives and certain
pension costs. Other-net improved in the first quarter of 2002 primarily due to
a favorable impact from the mark-to-market adjustment related to certain
ineffective interest rate swap agreements and a reduction in the discount on the
sale of accounts receivable as a result of the termination of the domestic NMHG
Wholesale accounts receivable securitization program during the fourth quarter
of 2001.
Net loss at NMHG Retail in the first quarter of 2002 was $1.3 million
compared to a net loss of $4.1 million in the first quarter of 2001. Improved
net results are due to the factors affecting operating profit combined with a
decrease in interest expense, partially offset by decrease in the effective tax
rate benefit.
Market demand for lift trucks improved in the first quarter of 2002
compared with the last three quarters of 2001. NMHG Wholesale's worldwide
backlog at the end of the first quarter of 2002 increased 8% to 16,300 units,
compared with 15,100 units at the end of the fourth quarter of 2001. Backlog
increased 16%, compared with 14,100 units at the end of the second quarter of
2001, and increased 13%, compared with 14,400 units at the end of the third
quarter of 2001. Backlog at the end of the first quarter of 2001 was 17,800
units.
2001 COMPARED WITH 2000
Our revenues decreased 13.4% to $1,672.4 million in 2001 from $1,932.1
million in 2000. Revenues at NMHG Wholesale decreased 16.4% to $1,463.3 million
in 2001 from $1,750.0 million in 2000. A steep drop in the lift truck segment of
the broader capital goods market in North America resulted in an 18.7% reduction
in worldwide lift truck shipments at NMHG Wholesale. A total of 68,929 units
were shipped in 2001 compared with 84,825 units shipped in 2000. The rate of
monthly retail orders in the United States and Canada declined approximately 50%
from the peak month in 2000 as compared with the lowest month in 2001. NMHG
Wholesale's revenues also declined due to lower aftermarket parts sales
resulting from reduced lift truck utilization which is typical in this stage of
a capital goods recession. The decrease in revenues, which was primarily driven
by unit volume, was partially offset by a shift in mix to higher-priced lift
trucks.
Revenues at NMHG Retail increased 14.8% to $209.1 million for 2001 from
$182.1 million for 2000 largely as a result of the effect of a full year of
revenues in 2001 from dealerships acquired in Asia-Pacific in the fourth quarter
of 2000. This revenue growth was partially offset by lower aftermarket parts and
service revenues and unfavorable pricing and product mix.
31
We recorded an operating loss of $44.9 million in 2001 compared to an
operating profit of $63.2 million in 2000. Operating profit at NMHG Wholesale
decreased to an operating loss of $5.5 million for 2001 from an operating profit
of $78.5 million for 2000. The decrease in operating profit was largely due to
reduced unit and aftermarket parts volume and resulting reductions in the
absorption of manufacturing overhead costs and related manufacturing
inefficiencies. Additionally, operating profit was adversely affected at NMHG
Wholesale by $12.0 million of expenses incurred during 2001 related to the
Danville, Illinois plant closure announced in 2000 and a restructuring charge of
$4.5 million recognized in 2001 for cost reductions in Europe. These 2001
charges compare with a restructuring charge of $13.9 million recognized in 2000
for the Danville plant closure. See below under "-- Restructuring Plans" for a
further discussion of these restructuring charges. The decline in operating
profit at NMHG Wholesale was offset somewhat by favorable foreign currency
effects, lower incentive compensation costs and an increase in the average sales
price per unit.
Operating loss at NMHG Retail in 2001 was $39.4 million compared with an
operating loss of $15.3 million in 2000. The increase in operating loss at NMHG
Retail was primarily due to several non-recurring special adjustments in 2001.
The majority of these special adjustments were recognized in Europe, which
accounted for a significant portion of NMHG Retail's 2001 operating loss. The
2001 operating loss includes a charge of $10.4 million for a loss on the sale of
certain owned dealers in Germany to ZEPPELIN GmbH and related wind down costs.
See Note 4 to the consolidated financial statements for the fiscal year ended
December 31, 2001 included elsewhere in this prospectus for a discussion of this
transaction. The 2001 operating loss also includes a $4.7 million restructuring
charge for downsizing to match current levels of demand at retail operations in
Europe that NMHG Retail had acquired over the last few years. In addition, the
2001 operating loss includes charges of approximately $7.1 million to reduce
asset values and increase reserves reflective of the weakened capital goods
markets, establish full accounting consistency among owned dealers on a global
basis and to cause those dealers previously reporting on a one-month lag to
report on months consistent with the rest of NMHG.
We recorded a net loss for 2001 of $49.4 million as compared with net
income of $21.3 million for 2000. NMHG Wholesale recorded a net loss for 2001 of
$14.1 million as compared with net income of $37.0 million for 2000. The decline
in net operating results at NMHG Wholesale was due to the factors affecting
operating profit at NMHG Wholesale, the effect of nondeductible goodwill
amortization and an increase in the valuation allowance on the tax provision and
due to a $1.3 million after-tax charge for the cumulative effect of accounting
changes in 2001. See Note 2 to the consolidated financial statements for the
fiscal year ended December 31, 2001 included elsewhere in this prospectus for a
discussion of these accounting changes. The decline in operating results at NMHG
Wholesale for 2001 as compared with 2000 was offset somewhat by insurance
proceeds resulting in income of $5.0 million after-tax recognized in 2001
relating to flood damage in September 2000 at a facility owned by S-N.
Net loss at NMHG Retail was $35.3 million for 2001 compared with $15.7
million for 2000, primarily due to the factors affecting operating loss combined
with an increase in interest expense allocated to NMHG Retail.
Our worldwide backlog level decreased to 15,100 units at December 31, 2001
from 21,800 units at December 31, 2000 primarily due to decreased demand for
lift trucks in the Americas. The backlog level at December 31, 2001 increased
slightly as compared to the level at September 30, 2001 of 14,400 units
primarily due to an increase in lift truck demand in the Americas and
Asia-Pacific.
RESTRUCTURING PLANS
In 2001, management committed to the restructuring of certain operations in
Europe. 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 manufacturing and administrative personnel in
Europe. NMHG Retail recognized a restructuring charge of approximately $4.7
million pre-tax, of which $0.4 million relates to lease termination costs and
$4.3 million relates to severance and other employee benefits to be paid to
approximately 140 service technicians, salesmen and administrative personnel at
wholly owned dealers in
32
Europe. As of March 31, 2002, $1.9 million had been paid to approximately 175
employees at NMHG Wholesale, and $1.1 million had been paid to approximately 50
employees at NMHG Retail.
NMHG Wholesale recognized $1.2 million of pre-tax benefits in the first
quarter of 2002 as a result of the reduced headcount in Europe, and estimates
pre-tax benefits for the remainder of the year at $6.8 million. NMHG Retail
recognized pre-tax benefits of approximately $0.5 million in the first quarter
of 2002 related to its European restructuring plan and estimates pre-tax
benefits for the remainder of the year at $2.3 million. These estimates of
future benefits are subject to change during the execution of the restructuring
plans.
In 2000, our board of directors approved management's plan to transfer
manufacturing activities from our Danville, Illinois, assembly plant to our
other global manufacturing plants. The adoption of this plan resulted in $11.7
million of costs accrued in 2000, relating to retirement costs, medical costs
and employee severance to be paid to approximately 425 manufacturing and office
personnel. In addition, an impairment charge of $2.2 million was recognized in
2000 as a result of the anticipated disposition of certain assets at an amount
below net book value. During 2001, payments for severance and other benefits of
$1.7 million were made to approximately 350 employees. In addition, the accrual
for severance was reduced by $0.4 million. In the first quarter of 2002,
severance payments of $1.8 million were made to approximately 200 employees.
Approximately $12.0 million of pre-tax costs associated with the Danville
phase-out, which were not eligible for accrual as of December 31, 2000, were
expensed during 2001.
During the first quarter of 2002, NMHG Wholesale recognized a charge of
approximately $0.6 million, which had not previously been accrued, related
primarily to idle facility costs for the manufacturing plant in Danville. NMHG
Wholesale recognized pre-tax benefits of approximately $3.2 million in the first
quarter of 2002 related to this program. Pre-tax benefits, net of idle facility
costs, are estimated to be $7.6 million for the remainder of 2002 and $12.5
million thereafter, as a result of anticipated improved manufacturing
efficiencies depending on unit volume. These estimates could change during the
phase-out period.
2000 COMPARED WITH 1999
Our revenues increased to $1,932.1 million in 2000 from $1,761.4 million in
1999. Revenues at NMHG Wholesale increased to $1,750.0 million in 2000 from
$1,618.9 million in 1999. Revenues at NMHG Wholesale increased as a result of
unit and service aftermarket parts volume growth, primarily in the Americas, and
a shift in mix to higher revenue units, partially offset by adverse currency
effects. Worldwide volume increased 11.5% to 84,825 units shipped during 2000
from 76,055 units shipped during 1999. Adverse currency effects on revenues
resulted primarily from (i) translating a weakened British pound sterling into
U.S. dollars and (ii) transactions denominated in a weakened euro as compared
with the British pound sterling, which caused revenues that were invoiced in
euros to decline when translated back to the British pound sterling.
Revenues at NMHG Retail increased $39.6 million, or 27.8%, due to
acquisitions of dealers in Asia-Pacific and, to a lesser degree, Europe.
Revenues from volume growth at comparable dealerships also contributed slightly
to the increase in revenues but were entirely offset by adverse currency effects
in Europe and an increase in the elimination of intercompany shipments from NMHG
Wholesale to NMHG Retail.
Our operating profit for 2000 was $63.2 million, as compared to operating
profit in 1999 of $58.3 million. Operating profit at NMHG Wholesale of $92.4
million, which excludes the Danville restructuring charge of $13.9 million
discussed above, as a percentage of revenues was 5.3% in 2000. This percentage
in 2000 compares with operating profit as a percentage of revenues at NMHG
Wholesale in 1999 of 4.6%. Improved operating profit in 2000 as compared with
1999 was primarily due to (i) volume growth and related manufacturing
efficiencies and (ii) a shift in the mix of products sold to higher margin
units, partially offset by adverse currency effects in Europe. Including the
restructuring charge, operating profit as a percentage of revenues at NMHG
Wholesale was 4.5% in 2000.
Excluding the Danville restructuring charge, net income at NMHG Wholesale
increased as a result of the factors affecting operating profit. However, the
increase was partially offset by a decrease in equity in
33
earnings of unconsolidated affiliates of $2.5 million, primarily due to losses
for flood damages at a facility owned by S-N.
Operating results at NMHG Retail for 2000 in the Americas improved as
compared with the prior year primarily due to a decrease in administrative
support costs. Operating results at NMHG Retail for 2000 in Asia-Pacific
improved as compared with the prior year primarily due to favorable operating
results contributed by current year acquisitions. Increased net loss was driven
by increased losses in Europe, primarily due to increased pricing competition as
a result of a weak euro and due to continued integration, infrastructure,
interest, amortization and administrative costs necessary to strengthen retail
distribution.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, we had available $85.0 million of our $350.0 million
revolving credit facility, which would have expired in June 2002. We also had
separate facilities with availability, net of limitations, of $63.5 million, of
which $29.2 million was available at March 31, 2002.
On May 9, 2002, we refinanced our prior financing agreement, an unsecured
floating-rate revolving line of credit with availability of $350.0 million,
certain other lines of credit with availability of $4.6 million and a program to
sell accounts receivable in Europe, with the proceeds from the sale of the
outstanding notes and borrowings under a secured, floating-rate revolving credit
facility which expires in May 2005.
Availability under the new revolving credit facility is up to $175.0
million and is governed by a borrowing base based on advance rates against the
inventory and accounts receivable of the "borrowers." The borrowers, as defined
in the new revolving credit facility, include NMHG Holding Co. and certain
domestic and foreign subsidiaries of NMHG Holding Co. Borrowings bear interest
at a floating rate, which can be either a base rate or LIBOR, as defined, plus
an applicable margin. The initial applicable margin, effective through September
30, 2002, for base rate loans and LIBOR loans is 2.00% and 3.00%, respectively.
Subsequent to September 30, 2002, the margin will be subject to adjustment based
on a leverage ratio. The new revolving credit facility also requires a fee of
0.5% per annum on the unused commitment.
At May 9, 2002, the borrowing capacity under this facility was $109.7
million and the domestic floating rate of interest applicable to this facility
was 6.75%, including the applicable margin. The new revolving credit facility
will include a subfacility for foreign borrowers to be denominated in British
pounds sterling or euro. Included in the borrowing capacity is a $15.0 million
overdraft facility available to foreign borrowers. The initial applicable
margin, effective through September 30, 2002 for overdraft loans is 3.25% above
the London base rate, as defined. The new revolving credit facility is
guaranteed by certain domestic and foreign subsidiaries of NMHG Holding Co. and
secured by substantially all of the assets, other than property, plant and
equipment, of the borrowers and guarantors, both domestic and foreign, under the
facility. See "Description of Other Indebtedness" for further information on our
new revolving credit facility.
Certain lines of credit and term loans, with availability of $40 million
Australian dollars, or approximately $21.7 million U.S. dollars, and facilities
totaling $5.5 million in China and Hong Kong, which were not refinanced, reduce
the availability under the new revolving credit facility.
As a result of the refinancing, we expect our interest expense to increase
significantly as compared with prior periods. In addition, a significant portion
of NMHG's interest rate swap agreements will no longer qualify for hedge
accounting treatment in accordance with SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." As such, the mark-to-market of these
interest rate swap agreements will be recognized in the statement of operations.
Prior to the refinancing, the mark-to-market of these interest rate swap
agreements was recognized as a component of other comprehensive income (loss) in
stockholders' equity. The balance in other comprehensive income (loss) for all
of our interest rate swap agreements was a loss of $2.4 million at March 31,
2002.
We are currently engaged in discussions with a non-U.S. financial
institution to obtain a new European revolving credit facility which would
provide up to 30 million British pounds sterling (approximately $43 million) of
borrowing availability for certain of our European subsidiaries to be used for,
among other things, working capital requirements, permitted capital expenditures
and other lawful corporate purposes of
34
those European subsidiaries. Our ability to enter into this European credit
facility is subject to the terms and conditions of the new revolving credit
facility and the notes and would replace or refinance the foreign subfacilities
under the new revolving credit facility. The obligations under this European
credit facility are expected to be secured by substantially the same assets that
will secure the obligations under the foreign subfacilities of the new revolving
credit facility and will contain other customary limitations, covenants and
restrictions.
We believe that funds available under the new revolving credit facility,
other lines of credit and operating cash flows are sufficient to finance all of
our operating needs and commitments arising during the foreseeable future.
Following is a table which summarizes our contractual obligations (in
millions) as of December 31, 2001:
<Table>
<Caption>
CONTRACTUAL OBLIGATIONS PAYMENT DUE BY PERIOD
- ----------------------------------- ------------------------------------------------------------
TOTAL 2002 2003 2004 2005 2006 THEREAFTER
------ ------ ----- ----- ----- ----- ----------
Revolving credit facility.......... $265.0 $265.0 $ -- $ -- $ -- $ -- $ --
Other lines of credit(1)........... 44.2 44.2 -- -- -- -- --
Term loans(1)...................... 16.0 13.0 1.4 1.6 -- -- --
Capital lease obligations including
principal and interest(1)........ 40.7 12.5 12.7 7.3 4.6 2.5 1.1
Off-balance-sheet operating lease
obligations(1)................... 141.6 40.4 32.1 26.0 19.0 13.3 10.8
Unconditional purchase
obligations...................... 4.3 0.4 0.8 0.6 0.9 0.2 1.4
------ ------ ----- ----- ----- ----- -----
Total contractual cash
obligations................... $511.8 $375.5 $47.0 $35.5 $24.5 $16.0 $13.3
====== ====== ===== ===== ===== ===== =====
</Table>
- ---------------
(1) An event of default under the notes, the new revolving credit facility
agreement, in our other term loan and revolving agreements or in our
operating or capital lease agreements, could cause an acceleration of the
payment schedule. No such event of default has occurred or is anticipated to
occur.
During the first quarter of 2002, NMHG Retail entered into operating lease
agreements, primarily for rental equipment, with future minimum lease payments
of approximately $5.5 million in 2002, $4.5 million in 2003, $3.3 million in
2004, $3.0 million in 2005, $2.7 million in 2006 and $1.6 million thereafter,
for a total increase in NMHG's operating lease obligations of $20.6 million
since December 31, 2001.
In addition, we had the following commitments at March 31, 2002 (in
millions):
<Table>
<Caption>
TOTAL
------
Standby recourse or repurchase obligations.......... $145.6
Guarantees.......................................... 7.8
------
Total commercial commitments...................... $153.4
======
</Table>
The guarantees and standby recourse or repurchase obligations primarily
represent contingent liabilities assumed by NMHG to support financing agreements
made between our dealers and customers and third-party finance companies for the
purchase of lift trucks from Hyster and Yale. These contingent liabilities may
take the form of guarantees of residual values or standby recourse or repurchase
obligations. For transactions involving contingent liabilities, we generally
maintain a perfected security interest in the equipment financed, such that we
could take possession of the lift truck in the event that we would become liable
under the terms of the guarantee or standby recourse or repurchase obligation.
Generally, these obligations are due upon demand in the event of default by the
dealer or customer.
We have a 20% ownership interest in NMHG Financial Services, Inc., or NFS,
a joint venture with General Electric Capital Corporation, or GECC, formed
primarily for the purpose of providing financial services to independent and
wholly owned Hyster and Yale lift truck dealers in the United States. Our
ownership in NFS is accounted for using the equity method of accounting.
Generally, we sell lift trucks
35
through our independent dealer network or directly to Hyster or Yale customers.
These dealers and customers may enter into financing arrangements with NFS or
another unrelated third-party finance company. If the dealer or customer elects
to finance lift trucks with NFS, this financing is considered a retail funding
activity transaction. The total NFS retail funding activity transactions for
2001 were $127.5 million and $123.7 million for Hyster customers and Yale
customers, respectively.
However, for certain transactions, we invoice directly to NFS so that the
dealer or customer can obtain operating lease financing from NFS. Sales to NFS
related to these types of transactions for the years ended December 31, 1999,
2000 and 2001 were $8.5 million, $17.5 million and $31.2 million, respectively,
and sales to NFS related to these types of transactions for the three months
ended March 31, 2001 and 2002 were $8.8 million and $7.4 million, respectively.
Amounts receivable from NFS at December 31, 2001 and March 31, 2002 were
immaterial. From time to time, the credit quality of the customer or
concentration issues with GECC necessitate providing standby recourse or
repurchase obligations or a guarantee of the residual values of the lift trucks
purchased by customers and financed through NFS.
We have reserved for losses under the terms of the guarantees or standby
recourse or repurchase obligations in our consolidated financial statements.
Historically, we have not had significant losses in respect of these
obligations. In the past three years, approximately three customers for which we
provided a guarantee or have a standby recourse or repurchase obligation have
defaulted under their obligations to NFS. During this period, we exercised our
rights in the lift trucks purchased with the borrowed funds on all three
occasions. The net losses resulting from these customer defaults did not have a
material impact on our results of operations or financial position.
In addition to providing financing to our independent dealers, NFS provides
both lease and debt financing to us. Operating lease obligations relate to
specific sale-leaseback-sublease transactions for certain of our customers
whereby we sell lift trucks to NFS, we lease these lift trucks back under an
operating lease agreement and we sublease those lift trucks to customers under
an operating lease agreement. Debt financing includes long-term notes payable to
NFS primarily to finance certain of our long-term notes receivable from Latin
American customers, which arise in the ordinary course of business. In addition,
NFS provides, on our behalf, installment billings to the Latin American
customers, account balance tracking and an inventory management system to track
the equipment covered by the long-term notes payable. Total obligations to NFS
under the operating lease agreements and long-term notes payable were $20.3
million and $20.1 million at December 31, 2001 and March 31, 2002, respectively.
In addition, we are reimbursed annually for certain services, primarily
administrative functions, provided to NFS. The amount of our expenses
reimbursable by NFS were $1.1 million, $1.5 million and $1.8 million for 1999,
2000 and 2001, respectively, and were $0.4 million and $0.5 million for the
three months ended March 31, 2001 and 2002, respectively.
CAPITAL EXPENDITURES
Expenditures for property, plant and equipment were $5.4 million for NMHG
Wholesale and $0.8 million for NMHG Retail during the first three months of
2002. These capital expenditures include tooling for new products, machinery,
equipment and retail lease and rental fleet. NMHG Wholesale anticipates spending
approximately $15.1 million for property, plant and equipment in the remainder
of 2002, compared with total capital expenditures of $46.6 million in 2001 and
$43.3 million in 2000. NMHG Retail anticipates spending approximately $1.7
million for property, plant and equipment in the remainder of 2002, compared
with capital expenditures of $6.9 million in 2001 and $8.5 million in 2000. Our
planned expenditures in 2002 include further investments in manufacturing
equipment, tooling for new products and retail lease and rental fleet. The
principal sources of financing for these capital expenditures are expected to be
internally generated funds and facility borrowings.
36
CAPITAL STRUCTURE
NMHG Wholesale's capital structure is presented below:
<Table>
<Caption>
(DOLLARS IN MILLIONS)
AS OF AS OF
DECEMBER 31, MARCH 31,
2001 2002
------------ ---------
NMHG Wholesale
Total net tangible assets................................. $ 375.2 $ 369.5
Advances to NMHG Retail................................... 70.2 62.1
Goodwill at cost.......................................... 446.0 445.1
------- -------
Net assets before goodwill amortization................ 891.4 876.7
Accumulated goodwill amortization......................... (141.4) (140.5)
Advances from NACCO....................................... (8.0) --
Other debt................................................ (300.9) (300.2)
Minority interest......................................... (2.3) (2.1)
------- -------
Stockholder's equity................................... $ 438.8 $ 433.9
Debt to total capitalization.............................. 41% 41%
</Table>
At NMHG Wholesale, there were no significant changes to our financial
position since December 31, 2001. However, increased cash flows before financing
in the first quarter of 2002 as compared with the first quarter of 2001 enabled
NMHG Wholesale to pay off advances from NACCO and to pay a dividend to NACCO in
the first quarter of 2002.
NMHG Retail's capital structure is presented below:
<Table>
<Caption>
(DOLLARS IN MILLIONS)
AS OF AS OF
DECEMBER 31, MARCH 31,
2001 2002
------------ ---------
NMHG Retail
Total net tangible assets................................. $109.5 $ 91.7
Advances from NMHG Wholesale.............................. (70.2) (62.1)
Goodwill and other intangibles at cost.................... 45.2 44.5
------ ------
Net assets before goodwill and other intangibles
amortization......................................... 84.5 74.1
Accumulated goodwill and other intangibles amortization... (5.6) (4.7)
Total debt................................................ (53.5) (48.8)
------ ------
Stockholder's equity................................... $ 25.4 $ 20.6
Debt to total capitalization.............................. 68% 70%
</Table>
The decrease in total net tangible assets at NMHG Retail of $17.8 million
is primarily due to an $18.2 million decrease in intercompany and other
receivables. The decrease in intercompany accounts receivable is primarily due
to the settlement of fiscal 2001 intercompany tax advances with NMHG Wholesale.
Other receivables decreased primarily due to proceeds received in the first
quarter of 2002 relating to the sale of operations in 2001. A portion of these
proceeds was used to pay down debt.
UNCONSOLIDATED SUBSIDIARY
We have a 50% ownership interest in S-N, a joint venture with Sumitomo
Heavy Industries, Inc., which was formed in 1970 to manufacture and distribute
lift trucks in Japan. In addition, we purchase Hyster and Yale branded lift
trucks and related components and aftermarket parts from S-N for sale outside of
Japan. We purchase products from S-N under normal trade terms. In 1999, 2000 and
2001, purchases from S-N were $91.2 million, $90.5 million and $63.7 million,
respectively. Amounts payable to S-N at March 31, 2001 and 2002 were $21.3
million and $14.4 million, respectively. We account for our ownership in S-N
using the equity method of accounting.
37
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." In August 2001, the FASB issued SFAS No. 143, "Accounting
for Asset Retirement Obligations," and, in October 2001, the FASB issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
SFAS No. 141 requires all business combinations completed after June 30,
2001, to be accounted for under the purchase method. This statement also
establishes, for all business combinations made after June 30, 2001, specific
criteria for the recognition of intangible assets separately from goodwill. SFAS
No. 141 also requires that the excess of the fair value of acquired assets over
cost (negative goodwill) be recognized immediately as an extraordinary gain,
rather than deferred and amortized. We will account for all future business
combinations under SFAS No. 141.
SFAS No. 142 addresses the accounting for goodwill and other intangible
assets after an acquisition. Goodwill and other intangibles that have indefinite
lives will no longer be amortized, but will be subject to annual impairment
tests. All other intangible assets will continue to be amortized over their
estimated useful lives, which is no longer limited to 40 years. We adopted this
statement effective January 1, 2002, as required. At that time, amortization of
existing goodwill ceased on the unamortized portion associated with acquisitions
and certain investments accounted for under the equity method. This is expected
to have a favorable annual impact of approximately $12.8 million, net of tax,
beginning in 2002. SFAS No. 142 also requires a new methodology for the testing
of impairment of goodwill and other intangibles that have indefinite lives.
During 2002, we will begin testing goodwill for impairment under the new rules,
applying a fair-value-based test. The transition adjustment, if any, resulting
from the adoption of the new approach to impairment testing as required by SFAS
No. 142 will be reported as a cumulative effect of a change in accounting
principle. At this time, we have not yet determined what impact, if any, the
change in the required approach to impairment testing will have on either our
financial position or results of operations.
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 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. This standard becomes effective for fiscal years
beginning after June 15, 2002. We will adopt the Statement effective January 1,
2003. The transition adjustment, if any, resulting from the adoption of SFAS No.
143 will be reported as a cumulative effect of a change in accounting principle.
At this time, we have not yet determined what impact, if any, the adoption of
this Statement will have on either our financial position or results of
operations.
SFAS No. 144 addresses the financial accounting and reporting for the
impairment or disposal of long-lived assets. This statement supersedes SFAS
No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business,
as previously defined in that Opinion. SFAS No. 144 provides a single accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale. Many of the provisions of SFAS No. 121 are retained,
however, SFAS No. 144 clarifies some of the implementation issues related to
SFAS No. 121. SFAS No. 144 also broadens the presentation of discontinued
operations to include more disposal transactions. This Statement is effective
for fiscal years beginning after December 15, 2001, with early adoption
encouraged. We adopted this Statement effective January 1, 2002, as required.
The adoption of this Statement did not result in an adjustment to our financial
statements on January 1, 2002.
38
EFFECTS OF FOREIGN CURRENCY AND INFLATION
We operate internationally and enter into transactions denominated in
foreign currencies. As a result, we are subject to the variability that arises
from exchange rate movements. Our use of foreign currency derivative contracts
is discussed under the heading, "-- Quantitative and Qualitative Disclosures
about Market Risk."
We believe that overall inflation has not materially affected our results
of operations in 2000, 2001 or the first three months of 2002, and do not expect
overall inflation to be a significant factor in 2002.
ENVIRONMENTAL MATTERS
Our manufacturing operations are subject to laws and regulations relating
to the protection of the environment, including those governing the management
and disposal of hazardous substances. Our policies stress compliance and we
believe we are currently in substantial compliance with existing environmental
laws. If we fail to comply with these laws or our environmental permits, then we
could incur substantial costs, including cleanup costs, fines and civil or
criminal sanctions. In addition, future changes to environmental laws could
require us to incur significant additional expense or restrict our operations.
Based on current information, management does not expect compliance with
environmental requirements to have a material adverse effect on our financial
condition or results of operations.
In addition, our products may be subject to laws and regulations relating
to the protection of the environment, including those governing vehicle exhaust.
Regulatory agencies in the United States and Europe have issued or proposed
various regulations and directives designed to reduce emissions from spark
ignited engines and diesel engines used in off-road vehicles, such as industrial
lift trucks. These regulations will require us and other lift truck
manufacturers to incur costs to modify designs and manufacturing processes, and
to perform additional testing and reporting. We believe that the impact of
expenditures to comply with these requirements will not have a material adverse
effect on our business.
We are investigating or remediating historical contamination caused by our
operations or those of businesses we acquired at some of our current and former
sites. We have also been named as a potentially responsible party for cleanup
costs under the so-called Superfund law at several third-party sites where we
(or our predecessors) disposed of wastes in the past. Under Superfund and often
under similar state laws, the entire cost of cleanup can be imposed on any one
of the statutorily liable parties, without regard to fault. While we are not
currently aware that any material outstanding claims or obligations exist with
regard to these sites, the discovery of additional contamination at these or
other sites could result in significant cleanup costs.
In connection with any acquisition made by us, we could under some
circumstances be held financially liable for or suffer other adverse effects due
to environmental violations or contamination caused by a prior owner of the
business. In addition, under some of the agreements through which we have sold
businesses or assets, we have retained responsibility for certain contingent
environmental liabilities arising from pre-closing operations. These liabilities
may not arise, if at all, until years later.
EURO CONVERSION
On January 1, 1999, 11 of the 15 countries that are members of the European
Union introduced a new currency unit called the "euro," which has replaced the
national currencies of these 11 countries. The conversion rates between the euro
and the participating nations' currencies were fixed irrevocably as of January
1, 1999, and participating national currencies will be removed from circulation
between January 1, 2002 and June 30, 2002 and replaced by euro notes and
coinage.
Under the regulations governing the transition to a single currency, there
was a "no compulsion, no prohibition" rule which stated that no one was
obligated to use the euro until the notes and coinage were introduced on January
1, 2002. In keeping with this rule, since January 1, 1999 we have been able to
(i) receive euro-denominated payments, (ii) invoice in euros and (iii) perform
appropriate conversion and rounding calculations. Full conversion of all
affected country operations to the euro has been completed and the cost to
achieve such conversion has not been material.
Excluding adverse affects caused by the weakening of the euro against our
functional currencies, the introduction of the euro, to date, has not had, and
we do not anticipate that the continued use of the euro will
39
have, a material effect on our foreign exchange and hedging activities or our
use of derivative instruments, or a material adverse effect on our operating
results or cash flows. However, the ultimate effect of the euro on competition
due to price transparency and foreign currency risk cannot yet be fully
determined and may have an adverse effect, possibly material, on our operations,
financial position or cash flows. Conversely, introduction of the euro may also
have positive effects, such as lower foreign currency risk and reduced prices of
raw materials resulting from increased competition among suppliers. We continue
to monitor and assess the potential risks imposed by the euro.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
We have entered into certain financing arrangements that require interest
payments based on floating interest rates. As such, our financial results are
subject to changes in the market rate of interest. To reduce the exposure to
changes in the market rate of interest, we have entered into interest rate swap
agreements for a significant portion of our floating rate financing
arrangements. We do not enter into interest rate swap agreements for trading
purposes. Terms of the interest rate swap agreements require us to receive a
variable interest rate and pay a fixed interest rate. See also Note 2 and Note
10 to the consolidated financial statements for the year ended December 31, 2001
included elsewhere in the prospectus.
For purposes of specific risk analysis, we use sensitivity analysis to
measure the potential loss in fair value of financial instruments sensitive to
changes in interest rates. Assuming a hypothetical 10% decrease in the interest
rates as of December 31, 2000 and 2001, the fair market value of interest rate
sensitive financial instruments, which primarily represents interest rate swap
agreements, would decline by $3.0 million and $1.6 million, respectively, as
compared with their fair market value at December 31, 2000 and 2001,
respectively.
There has been no material change in our interest rate risk exposure since
December 31, 2001.
FOREIGN CURRENCY EXCHANGE RATE RISK
We operate internationally and enter into transactions denominated in
foreign currencies. As such, our financial results are subject to the
variability that arises from exchange rate movements. We use forward foreign
currency exchange contracts to partially reduce risks related to transactions
denominated in foreign currencies and not for trading purposes. These contracts
mature within one year and require us to buy or sell Japanese yen, Australian
dollars, Canadian dollars, Mexican pesos, British pounds sterling or euros for
the functional currency in which our subsidiaries operate at rates agreed to at
the inception of the contracts. See also Note 2 and Note 10 to the consolidated
financial statements included elsewhere in this offering circular.
For purposes of specific risk analysis, we use sensitivity analysis to
measure the potential loss in fair value of financial instruments sensitive to
changes in foreign currency exchange rates. Assuming a hypothetical 10%
strengthening of the U.S. dollar as compared with other foreign currencies at
December 31, 2000 and 2001, the fair market value of foreign currency-sensitive
financial instruments, which primarily represents forward foreign currency
exchange contracts, would decline by $4.3 million and $3.3 million,
respectively, as compared with their fair market value at December 31, 2000 and
2001, respectively. It is important to note that the loss in fair market value
indicated in this sensitivity analysis would be somewhat offset by changes in
the fair market value of the underlying receivables, payables and net
investments in foreign subsidiaries.
There has been no material change in our foreign currency exchange rate
risk since December 31, 2001.
COMMODITY PRICE RISK
We use certain commodities, including steel, in the normal course of our
manufacturing operations. As such, our cost of operations is subject to
variability as the market for these commodities change. We monitor this risk
and, from time to time, enter into derivative contracts to hedge this risk. We
do not currently have any such derivative contracts outstanding, nor do we have
any significant purchase obligations to obtain fixed quantities of commodities
in the future.
There has been no material change in our commodity price risk since
December 31, 2001.
40
BUSINESS
OUR COMPANY
We are a leading global manufacturer of industrial lift trucks, which
comprise the largest segment of the materials handling equipment industry, with
the number one market share in the Americas and the number three market share
globally. We design, manufacture and sell a comprehensive line of industrial
lift trucks and aftermarket parts on a global basis. We estimate the lift truck
market for the Americas in 2001 at approximately $2.6 billion and 161,000 units,
and globally in 2001 at approximately $8.6 billion and 560,000 units. For the
fiscal year ended December 31, 2001, we generated revenues of $1.7 billion.
We market our lift trucks under the Hyster and Yale brand names, which we
believe are among the most widely recognized brands in the industry. Our lift
trucks have been marketed under the Hyster and Yale brand names since 1935 and
1923, respectively. Based on third-party market research we commissioned in
1999, the Hyster and Yale brands are among the top five most recognized lift
truck brands globally. According to this research, Hyster and Yale were the
number one and two most recognized brands of lift trucks in the Americas,
respectively, and Hyster was the third most recognized lift truck brand in
Europe.
Although we have combined the design, manufacturing, procurement and
selected marketing activities for our brands in order to capture operational
efficiencies and build upon our global scale, we distribute Hyster and Yale lift
trucks through two separate strong dealer networks, one dedicated to each brand.
We have maintained each of the brand identities in our distribution strategy
because the Hyster and Yale brands have distinct appeal for different customers.
Hyster is generally associated with larger, heavy-duty applications while Yale
is associated with lighter-duty, warehouseing-type applications. We believe this
combination of dual brands and dual distribution has allowed us to more
effectively penetrate the customer base to establish stronger market positions,
as evidenced by our estimated installed population base of approximately 650,000
Hyster and Yale lift trucks. This installed population base provides our dealers
and us with recurring revenue from the sale of higher margin aftermarket parts
and service.
Our diversified customer base limits our exposure to individual customer or
industry risk. In 2001, our top ten customers accounted for only 10% of our new
unit volume. We market our lift trucks into over 600 different end-user
applications in approximately 900 industries. Our major customers, some of which
have chosen us to be their sole lift truck supplier, include The Coca-Cola
Company, General Motors Corp., The Lowe's Companies, Inc., Wal-Mart Stores, Inc.
and Weyerhaeuser Company.
Demand for lift trucks is cyclical and depends upon capital budgeting in
the diverse end markets where lift trucks are sold. We believe our market, like
the broader global economy, is poised for growth. Our order backlog has risen
from approximately 14,100 units at June 30, 2001 to approximately 16,300 units
at March 31, 2002. Our average adjusted EBITDA over the past five years ended
December 31, 2001 was $117.9 million, substantially higher than our 2001
adjusted EBITDA of $63.3 million.
Prior to the recent downturn in the economy, we developed and began
implementing our 2001 Restructuring Program, which included the closure of our
Danville, Illinois assembly facility, labor and overhead reductions and
restructuring of our owned dealers, which resulted in non-recurring items and
one-time pre-tax charges of $47.8 million in 2001. This program reduced costs
and more closely aligned our operations with the demand for our products and
services.
In addition to the 2001 Restructuring Program, we have developed and are
implementing a Global Cost Reduction Program which encompasses lean
manufacturing global procurement, the transfer of processes and sourcing to
lower cost locations, component commonality, overhead cost reduction and
improvements in our owned dealers. These programs are designed to enhance our
competitive position and improve our overall cost structure. We expect our
Global Cost Reduction Program, once fully implemented, to result in recurring
annual pre-tax cost savings of approximately $117.5 million by the end of 2006.
Of this amount, we expect to realize annual pre-tax savings of approximately
$48.0 million by the end of 2002, and $61.1 million by the end of 2003. We
believe this program has positioned us to take advantage of the anticipated
recovery in the capital goods market, and will result in reduced fixed overhead
costs, lower manufacturing costs and improvements in both our gross margins and
operating profit.
41
2001 RESTRUCTURING PROGRAM
In anticipation of the recent downturn in the economy, we developed and
implemented our overall 2001 Restructuring Program. The components of the
program consist of:
- closure of our Danville, Illinois assembly facility and transfer of the
related assembly operations, resulting in costs of $12.0 million;
- sale of our owned dealers in Germany and related wind-down costs for
those dealers, resulting in losses of $10.4 million;
- elimination of operating losses of $9.5 million relating to the German
owned dealers sold in 2001;
- reductions in labor and overhead in our European manufacturing and
assembly operations resulting in net manufacturing restructuring charges
of $4.1 million;
- restructuring charges of $4.7 million related to our owned dealers in
Europe; and
- other non-cash charges of $7.1 million related to reduced asset values
and increased reserves reflective of the weakened capital goods markets,
establishing full accounting consistency among our owned dealers on a
global basis and causing owned dealers previously reporting on a
one-month lag to report on months consistent with the rest of NMHG.
INDUSTRY OVERVIEW
The lift truck industry is the largest segment of the materials handling
equipment industry. We estimate the global lift truck market in 2001 at
approximately $8.6 billion and 560,000 units.
Lift trucks are used in a wide variety of business applications, including
manufacturing and warehousing. Lift trucks are separated into five major
classes, as set forth in the table below.
<Table>
<Caption>
GENERAL LIFTING
CLASS DESCRIPTION USE ILLUSTRATIVE APPLICATION CAPACITY RANGE
- ---------------------------------------------------------------------------------------------------
Class I Electric Indoors in warehousing Distribution center 1.0 ton to 9.0 tons
rider lift and manufacturing customers would use to
trucks operations where noise move pallets from one
or emission concerns trailer to another
are a factor
- ---------------------------------------------------------------------------------------------------
Class II Electric Indoors to handle high- Retail and warehouse 0.5 tons to 6.0 tons
narrow-aisle density storage of customers would use to
lift trucks materials in pick orders off their
narrow-aisled shelves
warehouses
- ---------------------------------------------------------------------------------------------------
Class III Electric Indoors for Retail customers would 0.5 tons to 8.0 tons
hand lift applications requiring use to move pallets of
trucks the user to select and goods to their store
transport materials aisles
- ---------------------------------------------------------------------------------------------------
Class IV ICE lift Indoors in warehousing Manufacturing customers 1.0 ton to 7.0 tons
trucks with and manufacturing would use to move heavy
cushion operations and parts on a pallet from
(solid) occasionally outdoors the machining area in a
tires factory to the assembly
line
- ---------------------------------------------------------------------------------------------------
Class V ICE lift Indoors and outdoors in Manufacturing customers 1.0 ton to 48.0 tons
trucks with warehousing and would use to move a coil
pneumatic manufacturing of steel from the mill
(air filled) operations (this class to a storage area
tires includes the largest
capacity lift trucks)
- ---------------------------------------------------------------------------------------------------
</Table>
42
Class I, Class IV and Class V (with a capacity of eight tons or less) lift
trucks are referred to as counterbalanced lift trucks. Class II and Class III
lift trucks are referred to as warehouse lift trucks. Class V lift trucks with a
capacity greater than eight tons are referred to as big trucks. Counterbalanced
lift trucks are primarily used in industrial applications. Warehouse lift trucks
are primarily used in distribution applications. Big trucks are primarily used
in handling shipping containers and in specialized heavy lifting applications.
In recent years, we believe counterbalanced lift trucks represented
approximately 62.4% of the total global unit volume and 73.5% of the total
global dollar volume for lift trucks; warehouse lift trucks represented
approximately 36.5% of the total global unit volume and 19.5% of the total
global dollar volume for lift trucks; and big trucks represented approximately
1.1% of the total global unit volume and 7.0% of the total global dollar volume
for lift trucks. The market for warehouse lift trucks is generally less cyclical
than the market for counterbalanced lift trucks, including big trucks.
Historically, aftermarket parts sales have been less cyclical than sales of
new lift trucks. During economic downturns, customers tend to delay new lift
truck purchases and instead repair older lift trucks. During economic
recoveries, the sales of both new lift trucks and aftermarket parts have
historically increased.
In North America, the compound annual growth rate of the lift truck
industry over the last 20 years has been 4.3%, which is higher than the real
gross domestic product compound annual growth rate in North America of 3.2% over
the same period. In Western Europe, the compound annual growth rate of the lift
truck industry over the last 20 years has been 4.1%, which is higher than the
real gross domestic product compound annual growth rate in Western Europe of
2.3% over the same period. We expect the overall growth in the lift truck
industry to continue to exceed the overall growth in the North American and
Western European economies because the industries that use large numbers of lift
trucks are increasing as an overall percentage of these economies.
The lift truck industry is cyclical, reflective of general economic
conditions. Recoveries in the lift truck industry and in the overall economy
generally result in an increase in the number of units sold in both the Americas
and Europe. According to industry forecasts, the North American lift truck
industry is at or near the low point of the current downturn, with
quarter-on-quarter growth expected for the remainder of 2002. Our backlog has
already begun to reflect industry improvement, increasing by 15.6%, from
approximately 14,100 units in June 2001 to approximately 16,300 units in March
2002.
Based on units, Europe has historically been the largest market for lift
trucks, followed by the Americas, Japan, Asia-Pacific and China. The market for
lift trucks, particularly in industrialized nations, is generally mature and has
historically been cyclical, although demand cycles may differ across regions.
The following table shows the estimated annual number of factory shipments for
lift trucks in each geographic region (in thousands).
<Table>
<Caption>
REGION 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Europe.................. 166 150 123 135 175 176 188 220 228 258 275
Americas................ 99 116 122 155 180 162 176 197 191 219 168
Japan................... 103 85 69 69 76 83 87 71 63 69 71
Asia-Pacific............ 25 24 27 33 39 42 40 24 23 32 28
China................... 18 24 28 19 22 24 22 17 18 20 25
--- --- --- --- --- --- --- --- --- --- ---
Total................. 411 399 369 411 492 487 513 529 523 598 567
=== === === === === === === === === === ===
</Table>
COMPETITIVE STRENGTHS
We believe that we have a number of strengths that differentiate us from
our competitors:
Leading Market Share Positions with a Large Installed Population Base. For
over a decade, we have been the leading manufacturer of Class I through V lift
trucks, on a combined basis, in the Americas. Our Hyster and Yale brands had a
combined North American market share of 27.4% in 2001. In addition, we are
43
the third largest manufacturer of lift trucks on a global unit basis. Hyster's
and Yale's long operating histories, strong market positions and our dual brand
distribution strategy have resulted in an installed population base of
approximately 650,000 Hyster and Yale lift trucks. This large installed
population base provides our dealers and us with recurring revenue from the sale
of higher margin aftermarket parts and service.
Globally Integrated Operations with Significant Economies of Scale. We have
globally integrated the design, manufacturing, procurement and selected
marketing activities for our brands. Our manufacturing and aftermarket parts
distribution capabilities are supported by facilities in 12 countries on five
continents around the world. We believe this provides us with better access to
lower cost suppliers, reduced design and overhead costs, improved manufacturing
efficiencies and greater purchasing leverage. With respect to many of our
products, our global integration also allows us to cost effectively shift
production from one geographical region to another to respond to global
fluctuations in demand. Our geographically balanced manufacturing structure,
with assembly operations in the Americas, Europe and Asia-Pacific, reduces
working capital requirements, balances currency exposures and minimizes freight
costs. In addition, we have a centralized electronic design/manufacturing system
accessible by all our manufacturing facilities and engineering centers. We have
assembly plants in all major markets for lift trucks, which allows for
just-in-time production, reduced working capital requirements and lead times and
reduced infrastructure costs.
Comprehensive Global Product Line. We believe we offer the most
comprehensive line of lift trucks on a global basis. We provide a comprehensive
range of lift trucks to meet the requirements of our customers' diverse
applications. We market over 100 models of lift trucks that cover a range of
lifting capacities of up to 48 tons for over 600 different end-user
applications. We also provide specialized engineering capabilities to tailor our
standard products for specific customer needs.
Established Brand Strength. We market our lift trucks and aftermarket parts
under two well-recognized brand names, Hyster and Yale. Hyster and Yale have
long operating histories of 67 years and 79 years, respectively. We believe that
brand recognition is particularly critical in our industry as most customers
solicit quote proposals from a limited number of preferred suppliers. Based on
third-party market research we commissioned in 1999, the Hyster and Yale brands
are among the top five most recognized lift truck brands globally. According to
this research, Hyster and Yale were recognized as the number one and two most
recognized brands of lift trucks in the Americas, respectively, and Hyster was
the third most recognized lift truck brand in Europe. In addition, based on a
separate study we commissioned in 2001, Hyster was recognized as the preferred
overall lift truck brand in North America, receiving number one rankings in
product reliability, performance, durability, availability of aftermarket parts
and dealer support.
Strong Dealer Network. Our Hyster and Yale brands are supported by the
strength of our global distribution network. Our dealers sell and rent lift
trucks, provide aftermarket parts and service lift trucks. Some dealers provide
service on a 24-hour-a-day basis. In 2001, the average sales per dealer of our
products was $12.0 million. The majority of our dealer relationships are
long-standing with an average tenure in the Americas of 26 years. We assign our
dealers exclusive territories, which allows dealers to invest in long-term
relationships with customers. To maintain our dealers' focus on our brands, we
prohibit our dealers from selling lift trucks that compete with their Hyster or
Yale product offering. We believe the larger of our independent dealers benefit
from economies of scale and are able to more effectively penetrate the customer
base in their exclusive territories because their size enables them to attract
higher-quality employees, invest in more specialized selling and service
activities and develop a more professional management structure. In addition, we
believe our dual brand distribution provides us with greater market penetration
and increased market share for both new lift truck units and higher margin
aftermarket parts.
In North America, our strategy of encouraging the consolidation of our
dealers around strong anchor dealers has produced a leading distribution network
of 74 dealers, comprised of 29 Hyster and 45 Yale dealerships. In Europe, we
have achieved a significant presence in selected countries and we are growing in
strategic markets in the region through successful conversion and consolidation
of competitor dealers, such as Zeppelin (a Caterpillar construction equipment
dealer), selected Steinbock (a Jungheinrich GmbH brand) and
44
selected Clark Material Handling Co. dealers. In Australia, our products are
distributed through the largest national network of wholly owned and independent
dealers covering that market.
National Account Coverage. We have a strong National Accounts organization
in the Americas that is dedicated to establishing national and global account
relationships with large customers that have centralized purchasing and
geographically dispersed operations in multiple dealer territories. Our National
Accounts organization uses direct sales efforts to place large numbers of Hyster
and Yale lift trucks into our installed population base through these large
customers. Our strong dealer network supports our National Accounts customers by
providing aftermarket parts and service at the local level. In 2001, we had
approximately 145 national accounts. These accounts are responsible for
approximately 13,000 new lift truck sales. Some of our key National Accounts,
such as General Motors Corp., Costco Wholesale Corp., The Lowe's Companies, Inc.
and Saturn Corporation, have entered into exclusive relationships for total
fleet management. We provide high value added services to our total fleet
management customers, including service, aftermarket parts, planning and
comprehensive management of their materials handling needs. We believe we have
the largest National Accounts organization in the Americas and are expanding
this organization globally.
BUSINESS STRATEGY
We have developed and are implementing strategic programs which we believe
will enhance our long-term competitive position. We believe this set of programs
will enable us to reduce costs, improve our market share, increase revenues and
enhance sustainable profitability while delivering high value-added products and
related services to our customers. These long-term initiatives build upon the
successes already achieved through our 2001 Restructuring Program.
Implement Global Cost Reduction Program. We have developed and are
implementing a Global Cost Reduction Program encompassing lean manufacturing,
global procurement, the transfer of processes and sourcing to lower cost
locations, component commonality, overhead cost reduction and improvements in
our owned dealers. When fully implemented in 2006, we expect this program to
result in recurring annual pre-tax cost savings of $117.5 million.
- Lean Manufacturing Strategy. We are implementing a lean manufacturing
strategy called Demand Flow(R) Technology in all of our manufacturing
facilities. Since first implementing Demand Flow(R) Technology in 1996,
we have substantially reduced cycle times, inventory requirements and
floor space requirements, and improved on-time delivery and delivered
product quality. For example, Demand Flow(R) Technology has allowed us to
assemble all of our lift trucks to order, greatly reducing our finished
goods inventory. We have reduced manufacturing cycle times by 61% and
work-in-process inventory by 34%, and improved on-time delivery by 21%.
During this period we have also achieved an 11% reduction in
manufacturing floor space requirements for the same unit volume. In
addition, recent improvements in throughput created by implementing
Demand Flow(R) Technology have allowed us to rationalize our
manufacturing operations, resulting in the closure of our Danville,
Illinois plant. The Danville closure is expected to result in $10.1
million of pre-tax savings in 2002. In addition, we expect the ongoing
implementation of Demand Flow(R) Technology at our remaining facilities
to result in $2.0 million in pre-tax savings in 2002. These ongoing
Demand Flow(R) Technology programs, including the closure of the Danville
plant, are expected to result in an annual pre-tax savings of $21.9
million when fully implemented.
- Global Procurement Initiative. Our global procurement initiative
leverages our global scale to capture lower material costs, improve
supplier quality, reduce lead times and enhance product innovation. Our
global procurement teams work with engineering development centers and
personnel at our manufacturing and assembly facilities to identify
requirements and secure global supplier contracts. Additionally, the
global procurement team works to enhance supplier quality and assists
suppliers in reducing their costs. In 2001, our global procurement
initiative resulted in $9.8 million of cost savings. In 2002, we expect
our global procurement initiative to result in an additional $6.2 million
of pre-tax savings compared to 2001. We expect annual pre-tax savings
from this initiative to reach $14.7 million in 2006.
45
- Transferring Processes and Sourcing to Lower Cost Locations. We believe
we can reduce product costs by transferring additional processes and
sourcing of basic components to lower cost manufacturing locations. As
part of this strategy, we continually compare the costs and benefits of
outsourcing production versus manufacturing components at our own lower
cost facilities. For example, we fabricate frames in our Mexican facility
for our Americas plants and have chosen to outsource the fabrication of
frames to third party providers in Eastern Europe. We are exploring
additional opportunities for similar cost savings in Eastern Europe, the
Philippines and China. Our recent efforts in this area resulted in $1.7
million of pre-tax savings in 2001. In 2002, we expect to achieve an
additional $3.0 million of pre-tax savings from low cost sourcing, with
currently planned initiatives reaching an annual pre-tax savings of $3.3
million when fully implemented.
- Component Commonality and Value Improvement Program. As we design new
products, we are increasing the utilization of common components across
multiple lift truck classes to reduce costs and product complexity,
improve product quality, capture procurement cost savings and increase
manufacturing efficiency. These components utilize common interfaces
designed to allow for quicker future design modifications. This strategy
is an extension of earlier successful actions to standardize components
between similar series of Hyster and Yale products. We have also
implemented a Value Improvement Program to support continuous cost
reductions and product quality improvements. We expect the combined
impact of our component commonality initiative and Value Improvement
Program to result in $3.7 million in pre-tax savings in 2002, $17.2
million in 2004, reaching an annual pre-tax savings of $53.9 million when
fully implemented.
- European Overhead Cost Reduction Program. Our European overhead cost
reduction program is designed to reduce our fixed costs. This program is
related to reductions in general and administrative personnel and
indirect factory labor in Europe. We expect this program to result in
$2.1 million of pre-tax savings in 2002 and reach an annual pre-tax
savings of $2.8 million when fully implemented.
- Owned Dealer Improvements. We have implemented, and largely completed, a
restructuring of our owned dealers. This program has enhanced operating
efficiencies through standardization of systems and processes,
realignment of management structure and improved asset utilization. We
expect this program to result in $20.9 million of annual pre-tax savings
in 2002.
Design Global Products More Closely Tailored to Customer Application Needs.
In 2000, we implemented a new design philosophy focused on the development of
products tailored to the specific operating requirements of our customers.
Historically, we have offered a complex set of options for each of our lift
truck series to meet our customers' specialized needs. Our new design philosophy
utilizes a modular approach with fewer overall components to more effectively
and efficiently address our customers' application needs. This new design
approach is expected to improve our cost structure and margins by simplifying
our manufacturing operations, improving manufacturing efficiencies and reducing
prices for sourced components. In addition, we believe that our product
innovations will improve the quality of our products and provide us with
opportunities to improve our market share.
Strengthen Our Distribution Capability. We have been encouraging the
consolidation of our North American distribution networks around large, strong,
professionally managed, well-capitalized independent dealers. We are currently
expanding this anchor dealer model on a global basis for each of our brands. We
believe that anchor dealers are able to more effectively penetrate the customer
base in their exclusive territories because their size enables them to attract
higher-quality employees, invest in more specialized selling and service
activities and develop a more professional management structure. We also believe
that anchor dealers are stronger financially, better positioning them to take
advantage of dealership consolidation and to weather economic downturns. We
strengthen our dealer networks by providing sales and service training, dealer
consulting services, information systems support, product launch coordination,
direct advertising, specialized selling materials and help desks. We believe
that this support system, together with our large installed population base of
lift trucks helps to attract and retain high quality dealers, further
strengthening our distribution network.
46
We are continuing to expand our National Accounts organization globally to
further capture additional revenues from large customers that have centralized
purchasing and geographically dispersed operations in multiple dealer
territories. As a result of our strong National Accounts coverage, established
brands and strong distribution network, we believe we are well-positioned to
continue to capitalize on the growth in this customer segment. We expect the
combination of our anchor dealer strategy and our National Accounts organization
to improve our market share and increase our installed population base.
PRODUCTS AND SERVICES
LIFT TRUCKS
We design and manufacture a comprehensive line of lift trucks under both
the Hyster and Yale brand names for global use. Lift truck sales accounted for
82%, 81% and 81% of our net sales in 1999, 2000 and 2001, respectively. Class I,
Class IV and Class V (with a capacity of eight tons or less) lift trucks are
referred to as counterbalanced lift trucks. Class II and Class III lift trucks
are referred to as warehouse lift trucks. Class V lift trucks with a capacity
greater than eight tons are referred to as big trucks. The following table
illustrates the percentage of our global lift truck units by product line for
each of the last three years:
<Table>
<Caption>
PRODUCT LINE 1999 2000 2001
- ------------ ---- ---- ----
Counterbalanced............................................. 70.2% 68.2% 68.4%
Warehouse................................................... 28.4 30.4 30.1
Big trucks.................................................. 1.4 1.4 1.5
---- ---- ----
Total....................................................... 100% 100% 100%
==== ==== ====
</Table>
We believe that in 2001, on a global basis, we were the second largest
producer of counterbalanced lift trucks, the fifth largest producer of warehouse
lift trucks and the largest producer of big trucks. We believe that in 2001, on
a global basis, we were the third largest producer of lift trucks across all
product lines.
AFTERMARKET PARTS
We have one of the largest installed population bases of lift trucks
currently in use in the industry. We estimate our population at approximately
650,000 trucks. This installed population base provides our dealers and us with
recurring revenue from the sale of higher margin aftermarket parts and service.
We offer a comprehensive line of competitively priced aftermarket parts
generally deliverable within 24 hours. We offer online technical reference
databases to quickly reference the required aftermarket parts for a job and a
user-friendly aftermarket parts ordering system. Aftermarket parts sales
represented approximately 18%, 19% and 19% of our revenues in 1999, 2000 and
2001, respectively.
We sell Hyster and Yale branded aftermarket parts to our dealers for Hyster
and Yale lift trucks. Hyster and Yale branded aftermarket parts accounted for
72% of our revenues from the sale of aftermarket parts in 2001. In the Americas,
we believe that our Hyster and Yale dealers sell between approximately 70% to
80% of the aftermarket parts for Hyster and Yale lift trucks.
We also sell aftermarket parts under the UNISOURCE(TM), MULTIQUIP(TM) and
PREMIER(TM) brands to our Hyster and Yale dealers for the service of competitor
lift trucks. These aftermarket parts accounted for approximately 28% of our
revenues from the sale of aftermarket parts in 2001. We recently announced a
strategic alliance with Systems Material Handling Co., a distributor of
aftermarket parts, to expand the number of aftermarket parts for competitors'
lift trucks for the Hyster and Yale dealer networks in North America. To provide
a one-stop shopping capability, these parts are made available through the same
ordering system that these dealers use for Hyster and Yale aftermarket parts.
FINANCING OF SALES
We are engaged in a joint venture with General Electric Capital
Corporation, or GECC, to provide dealer and customer financing of new lift
trucks in the United States. We own 20% of the joint venture entity, NMHG
Financial Services, Inc., or NFS, and receive fees and remarketing profits under
an agreement that expires in 2003. We account for our ownership of NFS using the
equity method of accounting. We refer to
47
programs with NFS as Hyster Capital and Yale Financial Services. At March 31,
2002, NFS was providing $91.8 million of financing to dealers for lift trucks
and $543.0 million of financing to customers for lift trucks.
In addition, we have also entered into an International Operating Agreement
with GECC under which GECC provides leasing and financing services to Hyster and
Yale dealers and their customers outside of the United States. GECC pays us a
referral fee once certain financial thresholds are reached. This agreement
expires in 2003.
Under our agreements with NFS and with GECC pursuant to the International
Operating Agreement, our dealers and certain customers are extended credit for
the purchase of lift trucks to be placed in the dealer's floor plan inventory or
the financing of lift trucks that are sold or leased to customers. For some of
these arrangements, we provide residual value guarantees or standby recourse or
repurchase obligations to NFS or to GECC, which totaled approximately $149.6
million at March 31, 2002. In substantially all of these transactions, we
maintain perfected security interests in the lift trucks financed, so that in
the event of a default, we have the ability to foreclose on the leased property
and sell it through the Hyster or Yale dealer network. The residual value
guarantees or standby recourse and repurchase obligations we have provided have
not caused us to realize losses to date because we have been able to re-sell
trucks at values in excess of our gross exposures. Furthermore, we have
established reserves for exposures under these agreements.
Historically, NFS has experienced default loss rates (the ratio of annual
losses on defaults to total annual financings, expressed as a percentage) of
0.21%, 0.09% and 0.32% in 1999, 2000 and 2001, respectively. During the
1991-1992 recession, default loss rates reached 0.56%.
MARKETING
Our marketing organization is structured in three regional divisions: the
Americas; Europe, which includes the Middle East and Africa; and Asia Pacific.
In each region, certain marketing support functions for the Hyster and Yale
brands are combined into a single shared services organization to take advantage
of regional scale and best practices. These activities include sales and service
training, information systems support, product launch coordination, direct
advertising, specialized selling materials development, help desks, order entry,
marketing strategy and field service support. Only the specific aspects of our
sales and marketing activities that interact directly with our dealers and
customers, such as dealer consulting and new lift truck units and aftermarket
parts transaction support, are brand specific. This supports our dual brand
distribution strategy while taking advantage of a single marketing organization.
DISTRIBUTION NETWORK
We distribute through two channels: dealers and our National Accounts
organization. In 2001, 82% of our new lift truck volume was sold through dealers
and 18% through our National Accounts organization.
DEALERS
Independent Dealers
The majority of our dealers are independently owned and operated. We
partner primarily with strong dealers with proven track records of outstanding
customer service to create a responsive and stable dealer network.
Americas. The average tenure of our independent dealers is 26 years. In the
Americas we have 29 independent Hyster dealers and 45 independent Yale dealers.
Since 1995, we have converted six dealers with over 30 locations from
competitors to Hyster or Yale. In 2001, our independent dealers acquired eight
other dealers with 22 locations. None of our Hyster or Yale dealers have been
converted by competitive dealers since we combined Hyster and Yale in 1989.
Europe. In Europe, including the Middle East and Africa, Hyster has
approximately 80 independent dealers with locations in 97 countries and Yale has
81 independent dealers with locations in 42 countries. The
48
average tenure of our European independent dealers is 13 years. We have actively
grown our European dealer organization to add strong representation through the
conversion of competitive dealers in several key European markets. Since 2001,
we have added a net of 10 dealers to our European dealer network through
conversions -- the largest Clark Material Handling Co. dealer in Germany, three
large German Steinbock (a former Jungheinrich GmbH brand) dealers and six
Steinbock dealers in Eastern Europe and Scandinavia.
Asia-Pacific. Hyster has 15 independent dealers in Asia-Pacific with an
average length of service of 11 years. Yale is represented by nine independent
dealers in Asia-Pacific, with an average length of service of 10 years.
Owned Dealers
From time to time, we have acquired, on an interim basis, certain
independent Hyster, Yale and competitor dealers and rental companies to
strengthen or protect Hyster's and Yale's presence in select territories. We
currently own one Hyster dealer in the Americas, four Yale dealers and one
Hyster dealer in Europe, and two Yale dealers and one Hyster dealer in
Asia-Pacific. Our long-term strategy is to identify strategic buyers for our
owned dealers that represent "best-in-class" dealers to support the Hyster and
Yale brands. For example, in December 2001, we sold four owned Hyster retail
dealers in Germany to ZEPPELIN GmbH and have designated Zeppelin, a large
European Caterpillar construction equipment dealer, as our exclusive Hyster
dealer in parts of Germany, Austria and several Central and Eastern European
countries. We had acquired these Hyster dealers to maintain Hyster territory
coverage in the strategically important German market.
NATIONAL ACCOUNTS
We operate a National Accounts organization for both Hyster and Yale
focused on large customers with centralized purchasing and geographically
dispersed operations in multiple dealer territories. Our National Accounts
organization accounted for 18% of our new lift truck unit volume in 2001. Our
strong dealer network supports this effort by providing aftermarket parts and
service on a local basis. Dealers receive a commission for the support they
provide in connection with our National Accounts sales and for the preparation
and delivery of lift trucks to customer locations. In addition to selling new
lift trucks, the National Accounts organization markets many value added
services, including full maintenance leases and total fleet management. Our new
unit volume through the National Accounts channel is growing more rapidly than
our overall total unit volume, particularly in the Americas, where this volume
increased from 15% of our total lift truck unit volume in 1995 to 28% in 2001.
In the Americas, the National Accounts organization is responsible for
approximately 120 large national account customers. In Europe, the National
Accounts organization is responsible for 25 customers. Our National Accounts
coverage in the rest of the world is currently limited but growing in regions
such as Europe and Asia-Pacific.
CUSTOMERS
Our customer base is diverse and fragmented, including, among others, food
distributors, trucking and automotive companies, lumber, metal products, rental,
paper and building materials suppliers, warehouses, light and heavy
manufacturers, retailers and container handling companies. In 2001, our top ten
customers accounted for only 10% of our new unit volume. Hyster has strong
relationships with, among others, General Motors Corp., International Paper
Company, The Coca-Cola Company, the Ministry of Defense in the United Kingdom,
and Jefferson Smurfit Group plc. Yale has strong relationships with, among
others, Dynamit Nobel AG, Homebase, DaimlerChrysler and The Lowe's Companies,
Inc.
MANUFACTURING AND ASSEMBLY
We have integrated our global operations to take advantage of our global
scale in design, manufacturing and purchasing. We manufacture components, such
as masts and transmissions, and assemble products in the market of sale to
minimize freight cost and balance currency mix. In some instances, however, we
utilize one
49
worldwide location to manufacture specific components or assemble specific
products to leverage our production volumes. For example, we have centralized
the worldwide assembly of our 2.0 to 3.2 ton Class V ICE pneumatic
counterbalanced lift trucks in our Craigavon, Northern Ireland facility due to
the economies provided by dedicating an entire plant to the assembly of a
single, global, high volume product line. We operate 14 manufacturing and
assembly operations worldwide with six plants in the Americas, five in Europe
and three in Asia-Pacific. All but one of our manufacturing and assembly
facilities worldwide are ISO 9002 certified.
We are currently operating at about 60% capacity utilization as a result of
the market downturn in the Americas market. We believe we have adequate capacity
in all markets and product lines to meet our near term projected volume.
SUMITOMO-NACCO JOINT VENTURE
We have a 50% ownership interest in S-N, a joint venture with Sumitomo
Heavy Industries, Inc., which was formed in 1970 to manufacture and distribute
lift trucks in Japan. In addition, we purchase Hyster and Yale branded lift
trucks and related components and aftermarket parts from S-N for sale outside of
Japan. We purchase products from S-N under normal trade terms. In 1999, 2000 and
2001, purchases from S-N were $91.2 million, $90.5 million and $63.7 million,
respectively. Amounts payable to S-N at March 31, 2001 and 2002 were $21.3
million and $14.4 million, respectively. We account for our ownership in S-N
using the equity method of accounting.
BACKLOG
As of March 31, 2002, our backlog of unfilled orders placed with our
manufacturing and assembly operations for new lift trucks was approximately
16,300 units, or $292.4 million, of which substantially all is expected to be
filled during fiscal 2002. This compares to the backlog as of March 31, 2001 of
approximately 17,800 units, or $305.4 million. Decreased product demand,
primarily in the Americas, caused the decrease in backlog levels. Backlog
represents unfilled lift truck orders to our manufacturing and assembly
facilities from dealers, National Accounts customers and contracts with the
United States government.
KEY SUPPLIERS
In 2000, we centralized our purchasing activities around a global
procurement team reporting directly to our Senior Vice President of Engineering
and Procurement. Previously, our purchasing activities were managed within each
regional operating division. In 2001, no single supplier accounted for more than
5% of our purchases. We believe there are competitive alternatives to all our
suppliers. Some of our key suppliers and the components provided are as follows:
<Table>
<Caption>
KEY COMPONENT KEY SUPPLIER(S)
- ------------- ---------------
Axles................ Garraro Group; ArvinMeritor, Inc.
Brakes............... Akebono Brake Industry Co., Ltd.
Cabs................. Fritz Meyer Holding AG
Counterweights....... Kurdziel Industries, Inc.
Electric Motors...... General Electric Company; Iskra Autoelektrika; Schabmuller
GmbH; Thrige-Titan A/S
Electronic Curtis Industries, Inc.; General Electric Company; Zapi SpA
Controls...........
Engines.............. General Motors Corp.; Mazda Motor Corporation; Caterpillar
Inc.
Forks................ Cascade Corporation
Hydraulics........... Hasco International; Kayaba Industry Co., Ltd.
Tires................ Monarch Industrial Tires; Trelleborg AB; Watts Industrial
Tires
</Table>
RESEARCH AND DEVELOPMENT
Our research and development capability is organized around four major
engineering centers, all coordinated on a global basis from our Portland, Oregon
headquarters. Comparable products are designed for
50
each brand concurrently and generally each center is focused on the global
requirements for a single product line. Our counterbalanced development center,
which has global design responsibility for Class I, Class IV and Class V (with a
capacity of less than eight tons) lift trucks, is located in Portland, Oregon.
Our big truck development center is located in Nijmegen, The Netherlands,
adjacent to our dedicated global big truck assembly facility. Warehouse trucks
are designed based on regional differences in stacking and storage practices. As
a result, we design warehouse equipment for sale in the Americas market in
Greenville, North Carolina adjacent to the Americas assembly facility for
warehouse equipment. We design warehouse equipment for the European market in
Masate, Italy at our assembly facility for Class II lift trucks.
Our engineering centers utilize a three-dimensional CAD/CAM system and are
electronically connected to one another, to all of our manufacturing and
assembly facilities and to some of our key suppliers. This allows for global
collaboration in technical engineering designs, collaboration with our key
suppliers and leads to shorter product development cycles. Additionally, we
solicit customer feedback throughout the design phase to improve our product
development efforts. We invested $41.4 million, $43.9 million and $44.7 million
on product design and development activities in 1999, 2000 and 2001,
respectively, which represented 2.4%, 2.3% and 2.7% of our sales in those years.
For the three months ended March 31, 2002, we invested $9.6 million on product
design and development activities, which represented 2.6% of our sales for the
period.
51
FACILITIES
The following table presents the principal assembly, manufacturing,
distribution and office facilities that we own or lease:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
OWNED/ SQUARE
REGION FACILITY LOCATION LEASED FOOTAGE FUNCTION(S)
- ---------------------------------------------------------------------------------------------------
AMERICAS Berea, Kentucky Owned 558,000 Assembly of lift trucks, primarily electric
rider and 3.5 to 8.0 ton ICE lift trucks
Danville, Illinois Owned 234,000 Americas parts distribution center
Greenville, Owned 598,000 Divisional headquarters and marketing and
sales
North Carolina operations for Hyster and Yale in Americas;
Americas warehouse development center;
assembly of lift trucks, primarily narrow
aisle, motorized hand and 1.5 to 3.0 ton ICE
lift trucks
Lenoir, Owned 265,000 Manufacture and assembly of component parts
for
North Carolina lift trucks, primarily masts and cylinders
Portland, Oregon Owned 51,000 Counterbalanced development center for
design and testing of lift trucks, prototype
equipment and component parts
Portland, Oregon Leased 33,000 Manufacture of production tooling and
prototype units
Portland, Oregon Leased 15,000 Global headquarters
Ramos Arizpe, Mexico Owned 72,000 Manufacture of component parts for lift
trucks, primarily frames
Sao Paolo, Brazil Owned 87,000 Assembly of lift trucks and marketing
operations for Brazil
Sulligent, Alabama Owned 301,000 Manufacture of component parts for lift
trucks, primarily transmissions
- ---------------------------------------------------------------------------------------------------
EUROPE Craigavon, Northern Owned 388,000 Manufacture of lift trucks, primarily 2.0 to
Ireland 3.2 ton ICE lift trucks; cylinder and
transmission assembly for the world; mast
fabrication and assembly for Europe
Fleet, England Leased 25,000 Hyster and Yale marketing and sales
operations in Europe
Irvine, Scotland Owned 367,000 Divisional headquarters; assembly of lift
trucks, primarily electric rider and 3.5 to
8.0 ton ICE lift trucks; mast manufacturing
and assembly
Modena, Italy Leased 17,000 Assembly of lift trucks, primarily motorized
hand trucks
Masate, Italy Leased 32,000 Assembly of lift trucks, primarily narrow
aisle trucks; European warehouse development
center
Nijmegen, The Owned 361,000 Big trucks development center; manufacture
Netherlands and assembly of big trucks and component
parts; European parts distribution center
- ---------------------------------------------------------------------------------------------------
ASIA Shanghai, China Owned(1) 70,000 Assembly of lift trucks by Shanghai Hyster
joint venture, primarily 1.5 to 5.5 ton ICE
pneumatic lift trucks
Sydney, Australia Leased 15,000 Divisional headquarters and sales and
marketing for Asia-Pacific; distribution of
aftermarket parts
- ---------------------------------------------------------------------------------------------------
</Table>
(1) This facility is owned by Shanghai Hyster Forklift Ltd., our Chinese joint
venture company.
S-N's operations are supported by two facilities. S-N's headquarters are
located in Obu, Japan at an approximately 250,000 square foot facility owned by
S-N. The Obu facility also has assembly and distribution capabilities, primarily
for 1.5 to 5.5 ton ICE lift trucks. In Cavite, the Philippines, S-N owns an
approximately 100,000 square foot facility for the manufacture of frames for S-N
products.
52
Our nine owned dealers operate from 61 locations. Of these 61 locations,
eight are in the United States, 22 are in Europe and 31 are in Asia-Pacific, as
shown below:
<Table>
<Caption>
UNITED STATES EUROPE ASIA-PACIFIC
- ------------- ------ ------------
Kentucky(1) France(14) Australia(30)
Ohio(5) Germany(3) Singapore(1)
Pennsylvania(1) The Netherlands(1)
West Virginia(1) United Kingdom(4)
</Table>
Dealer locations generally include facilities for displaying equipment,
storing rental equipment, servicing equipment, aftermarket parts storage and
sales and administrative offices. We own four of our locations and lease 57 of
our locations. Some of the leases were entered into or assumed in connection
with acquisitions and many of the lessors under these leases are former owners
of businesses that we acquired.
EMPLOYEES
At April 30, 2002, our wholesale operations had approximately 5,700
employees and our owned dealers had approximately 1,400 employees. A majority of
the employees in the Danville, Illinois parts depot operations (approximately
135 employees) are unionized, as are tool room employees (approximately 15
employees) located in Portland, Oregon. Our contracts with the Danville and
Portland unions each expire in 2003. Employees at the facilities in Berea,
Kentucky; Sulligent, Alabama; and Greenville and Lenoir, North Carolina are not
represented by unions.
In Europe, some employees in the Craigavon, Northern Ireland facility are
unionized. Employees in the Irvine, Scotland and Nijmegen, The Netherlands
facilities are not represented by unions. The employees in Nijmegen have
organized a works council, as required by Dutch law, which performs a
consultative role on employment matters. In Mexico, shop employees are
unionized. All of the European employees are part of a European Works Council
which performs a consultative role on business and employment matters.
We believe our current labor relations with both union and non-union
employees are generally satisfactory. However, there can be no assurances that
we will be able to successfully renegotiate our union contracts without work
stoppages or on acceptable terms.
COMPETITION
Competition in the lift truck industry is based primarily on strength and
quality of dealers, brand loyalty, customer service, availability of products
and aftermarket parts, comprehensive product line offering, product performance,
product quality and features, and the cost of ownership over the life of the
lift truck.
The lift truck industry is made up of the following types of lift truck
manufacturers:
- Global full line manufacturers, who have positions in all major
geographic markets. Global full line manufacturers include us (with
Hyster and Yale brands); Linde AG (with Linde, OM Pimespo and Still
brands); and Toyota Industries Corporation (with BT, Raymond and Toyota
brands); and
- Product line specialists and regional manufacturers who focus on a narrow
product segment and customer type across all geographic regions and/or
whose competitive position is relatively concentrated geographically,
including Clark Material Handling Co., Crown Equipment Corporation,
Daewoo Heavy Industries Ltd., Kalmar Industries, Komatsu Ltd.,
Jungheinrich GmbH, Mitsubishi Caterpillar Fork Lift America, Inc. and
Taylor Machine Works, Inc.
We believe that NMHG, Linde and Toyota are the only manufacturers of a
comprehensive line of lift trucks with a global presence. While all of the
global full line manufacturers participate in each major geographic market, each
is a market-leader in a different geographic region. We believe we are the
leading manufacturer of lift trucks in the Americas, but that Linde has the
strongest market share in Europe and Toyota the strongest market share in
Asia-Pacific. In 2001, the three global full line manufacturers in the industry
produced 51% of the total number of lift trucks sold worldwide.
53
The lift truck industry also competes with alternative methods of materials
handling, including conveyor systems and automated guided vehicle systems.
Our aftermarket parts offerings compete with parts manufactured by other
lift truck manufacturers as well as companies that focus solely on the sale of
generic parts.
The lift truck distribution industry is highly fragmented and competitive.
Competitors of our owned dealers include OEM-owned dealers for competing brands,
OEM direct sales efforts, independently owned competitive dealerships and
forklift rental outlets, independent parts operations, independent service shops
and, to a lesser extent, independent Hyster or Yale dealers.
ENVIRONMENTAL MATTERS
Our manufacturing operations are subject to laws and regulations relating
to the protection of the environment, including those governing the management
and disposal of hazardous substances. Our policies stress compliance and we
believe we are currently in substantial compliance with existing environmental
laws. If we fail to comply with these laws or our environmental permits, then we
could incur substantial costs, including cleanup costs, fines and civil or
criminal sanctions. In addition, future changes to environmental laws could
require us to incur significant additional expense or restrict our operations.
Based on current information, management does not expect compliance with
environmental requirements to have a material adverse effect on our financial
condition or results of operations.
In addition, our products may be subject to laws and regulations relating
to the protection of the environment, including those governing vehicle exhaust.
Regulatory agencies in the United States and Europe have issued or proposed
various regulations and directives designed to reduce emissions from spark
ignited engines and diesel engines used in off-road vehicles, such as industrial
lift trucks. These regulations will require us and other lift truck
manufacturers to incur costs to modify designs and manufacturing processes, and
to perform additional testing and reporting. While there can be no assurance, we
believe that the impact of expenditures to comply with these requirements will
not have a material adverse effect on our business.
We are investigating or remediating historical contamination caused by our
operations or those of businesses we acquired at some of our current and former
sites. We have also been named as a potentially responsible party for cleanup
costs under the so-called Superfund law at several third-party sites where we
(or our predecessors) disposed of wastes in the past. Under Superfund and often
under similar state laws, the entire cost of cleanup can be imposed on any one
of the statutorily liable parties, without regard to fault. While we are not
currently aware that any material outstanding claims or obligations exist with
regard to these sites, the discovery of additional contamination at these or
other sites could result in significant cleanup costs.
In connection with any acquisition made by us, we could under some
circumstances be held financially liable for or suffer other adverse effects due
to environmental violations or contamination caused by a prior owner of the
business. In addition, under some of the agreements through which we have sold
businesses or assets, we have retained responsibility for certain contingent
environmental liabilities arising from pre-closing operations. These liabilities
may not arise, if at all, until years later.
GOVERNMENT AND TRADE REGULATIONS
Since June 1988, Japanese-built ICE lift trucks imported into the United
States, with lifting capacities between 2,000 and 15,000 pounds, including
finished and unfinished lift trucks, chassis, frames and frames assembled with
one or more component parts, have been subject to an anti-dumping duty order.
Anti-dumping duty rates in effect through 2001 range from 7.39% to 56.81%
depending on manufacturer or importer. The anti-dumping duty rate applicable to
imports from S-N is 51.33%. We do not currently import for sale in the United
States any lift trucks or components subject to the anti-dumping duty order.
This anti-dumping duty order will remain in effect until the Japanese
manufacturers and importers satisfy the U.S. Department of Commerce that they
have not individually sold merchandise subject to the order in the United States
below fair market value for at least three consecutive years, or unless the
Commerce Department or the
54
U.S. International Trade Commission finds that changed circumstances exist
sufficient to warrant the retirement of the order. All of our major Japanese
competitors have either built or acquired manufacturing or assembly facilities
over the past decade in the United States and any products manufactured at these
facilities are not subject to the anti-dumping duty order. The legislation
implementing the Uruguay round of GATT negotiations passed in 1994 provided for
the anti-dumping order to be reviewed for possible retirement in 2000. We
opposed retirement of the order and the 2000 review did not result in retirement
of the anti-dumping duty. The anti-dumping order will again be reviewed for
possible retirement in 2005.
There are no formal restraints on foreign lift truck manufacturers in the
European Union. Several Japanese manufacturers have established manufacturing or
assembly facilities within the European Union.
PATENTS, TRADEMARKS AND LICENSES
We are not materially dependent upon patents or patent protection. NMHG
Wholesale is the owner of the Hyster trademark, which is currently registered in
approximately 65 countries. The Yale trademark, which we use on a perpetual
royalty-free basis in connection with the manufacture and sale of lift trucks
and related components, is currently registered in approximately 90 countries.
We believe that the Hyster and Yale trademarks are material to our business.
LEGAL PROCEEDINGS
Various legal proceedings and claims have been or may be asserted against
us relating to the conduct of our business, including product liability,
environmental and other claims. These proceedings are incidental to the ordinary
course of our business.
We are insured against civil liabilities relating to personal injuries to
third parties and for loss of or damage to property and maintain coverage that
we believe is appropriate upon terms and conditions and for premiums that we
consider fair and reasonable. We believe that we have insurance providing
coverage for claims and in amounts that we believe appropriate. We cannot assure
you, however, that we will not incur losses beyond the limits or outside the
coverage of our insurance.
55
MANAGEMENT
Our executive officers, directors and other key employees, and their ages
and positions are as follows:
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
Reginald R. Eklund................... 61 President and Chief Executive Officer
Michael P. Brogan.................... 52 Senior Vice President, Product Development and
Procurement
Richard H. Close..................... 43 Vice President and Managing Director, Europe,
Middle East and Africa
Gregory J. Dawe...................... 53 Vice President, Manufacturing and Quality
Strategy
Ron J. Leptich....................... 58 Vice President, Engineering and Big Trucks
Geoffrey D. Lewis.................... 44 Vice President, Corporate Development, General
Counsel and Secretary
Jeffrey C. Mattern................... 49 Treasurer
Frank G. Muller...................... 60 Vice President and President, Americas
Victoria L. Rickey................... 49 Vice President and Chief Strategy Officer
Edward W. Ryan....................... 63 Vice President, Marketing and President,
Asia-Pacific, China and Japan
Raymond C. Ulmer..................... 38 Controller
Alfred M. Rankin, Jr. ............... 60 Director
Owsley Brown II...................... 59 Director
Eiichi Fujita........................ 58 Director
Robert M. Gates...................... 58 Director
Leon J. Hendrix, Jr. ................ 60 Director
David H. Hoag........................ 62 Director
Dennis W. LaBarre.................... 59 Director
Richard de J. Osborne................ 68 Director
Claiborne R. Rankin.................. 51 Director
Ian M. Ross.......................... 74 Director
Britton T. Taplin.................... 45 Director
David F. Taplin...................... 52 Director
Frank F. Taplin...................... 42 Director
John F. Turben....................... 66 Director
</Table>
Reginald R. Eklund has been our President and Chief Executive Officer since
prior to 1997.
Michael P. Brogan has been our Senior Vice President, Product Development
and Procurement since June 2000. Prior to this, he was our Vice President,
Warehouse Product Strategy from May 1999 to June 2000. He also served as
Managing Director of NACCO Materials Handling S.R.L. (Italy) from prior to 1997
to May 1999.
Richard H. Close has been our Vice President and Managing Director, Europe,
Middle East and Africa since August 2001. From February 1999 until August 2001,
he was a Managing Director for Lex Service plc, an automotive service and
distribution company. He was a Franchise Director for Lex Service from prior to
1997 to February 1999.
Gregory J. Dawe has been our Vice President, Manufacturing and Quality
Strategy since January 2002. Prior to this, he was our Vice President
Manufacturing, Americas, since prior to 1997.
56
Ron J. Leptich has been our Vice President, Engineering and Big Trucks
since October 1997. Prior to this, he served as Vice President, Engineering and
Big Trucks, Worldwide from prior to 1997 to October 1997.
Geoffrey D. Lewis has been our Vice President, Corporate Development,
General Counsel and Secretary since June 1999. Prior to this, he served as Vice
President, General Counsel and Secretary from prior to 1997 to June 1999.
Jeffrey C. Mattern has been our Treasurer since prior to 1997.
Frank G. Muller has been our Vice President and President, Americas since
prior to 1997.
Victoria L. Rickey has been our Vice President and Chief Strategy Officer
since August 2001. Prior to this, she was Vice President and Managing Director,
Europe, Middle East and Africa from prior to 1997 to August 2001.
Edward W. Ryan has been our Vice President, Marketing and President,
Asia-Pacific, China and Japan since prior to 1997.
Raymond C. Ulmer has been our Controller since December 2000. Prior to
December 2000, he served as Director of Financial Planning from April 1997 to
November 2000. He also served as Plant Controller-Greenville from prior to 1997
to April 1997.
Alfred M. Rankin, Jr. has been a director since prior to 1997. He has
served as the Chairman, President and Chief Executive Officer of NACCO
Industries, Inc., an operating holding company with principal operating
subsidiaries in the lift truck, housewares and lignite coal mining industries,
since prior to 1997. Prior to joining NACCO, Mr. Rankin was Vice Chairman and
Chief Operating Officer of Eaton Corporation, a diversified industrial
manufacturer. He is also a director of Goodrich Corporation, The Vanguard Group
and the National Association of Manufacturers.
Owsley Brown II has been a director since prior to 1997. Since prior to
1997 he has been the Chairman and Chief Executive Officer of Brown-Forman
Corporation, a diversified producer and marketer of consumer products. He is
also a director of Brown-Forman Corporation.
Eiichi Fujita has been a director since 2000. He has been a Senior
Executive Vice President of Sumitomo Heavy Industries, Ltd., a manufacturer of
heavy machinery, since April 2001. Prior to April 2001, he was a Director and
Executive Vice President of Sumitomo Heavy Industries from June 1999. From April
1999 to June 1999, Mr. Fujita was a Managing Director of Sumitomo Heavy
Industries and from 1997 to April 1999 he was a Director of Sumitomo Heavy
Industries.
Robert M. Gates has been a director since prior to 1997. He is an educator,
author and lecturer. From 1999 to 2001, Mr. Gates was the Dean, George Bush
School of Government and Public Service, Texas A&M University. Mr. Gates was a
Director of Central Intelligence for the United States, a former Assistant to
the President of the United States and a Deputy for National Security Affairs
for the National Security Council. He is also a director of TRW Inc. and Parker
Drilling Company and a trustee of Fidelity Funds.
Leon J. Hendrix, Jr. has been a director since prior to 1997. He is the
Chairman of Remington Arms Company, Inc., a manufacturer and marketer of
sporting arms and ammunition. Mr. Hendrix was a Principal of Clayton, Dubilier &
Rice, Inc., a private investment firm, from prior to 1997 to 2000. He is also a
director of Cambrex Corp., Keithley Investments, Inc., Remington Arms Company,
Inc. and Riverwood International Corp.
David H. Hoag has been a director since 2000. Now retired, he was the
Chairman from 1998 to 1999 and Chief Executive Officer, during 1998, of The LTV
Corporation, an integrated steel producer which filed for bankruptcy protection
in December 2000. He served as the Chairman, President and Chief Executive
Officer of The LTV Corporation from prior to 1997 to 1998. He is also the
Chairman of the Federal Reserve Bank of Cleveland and director of The Lubrizol
Corporation, The Chubb Corporation, PolyOne Corporation and Brush Engineered
Materials, Inc.
57
Dennis W. LaBarre has been a director since prior to 1997. He is a partner
in the law firm of Jones, Day, Reavis & Pogue.
Richard de J. Osborne has been a director since 1998. Now retired, he was
the Chairman and Chief Executive Officer of ASARCO, Incorporated, a leading
producer of non-ferrous metals, from prior to 1997 to 1999. He also served as
the President of ASARCO, Incorporated from prior to 1997 to 1998. He is also a
director of Goodrich Corporation, Birmingham Steel Corporation and
Schering-Plough Corporation.
Claiborne R. Rankin has been a director since prior to 1997. Since 1997 he
has been a partner of Sycamore Partners, LLC, a consulting and venture capital
company.
Ian M. Ross has been a director since prior to 1997. He serves as the
President Emeritus of AT&T Bell Laboratories, the research and development
subsidiary of AT&T.
Britton T. Taplin has been a director since prior to 1997. He is a
Principal of Western Skies Group, Inc., a developer of medical office and
healthcare-related facilities.
David F. Taplin has been a director since prior to 1997. Mr. Taplin is
self-employed in the field of tree farming.
Frank F. Taplin has been a director since 1997. Mr. Taplin is self-employed
in the field of real estate consulting.
John F. Turben has been a director since 1997. He serves as the Chairman
and Managing Partner of Kirtland Capital Corporation, a private investment
partnership. He is also a director of PVC Container Corporation, Unifrax
Corporation and Instron Corporation.
Alfred M. Rankin, Jr. and Claiborne R. Rankin are brothers. Britton T.
Taplin and Frank F. Taplin are brothers. The Rankin brothers, the Taplin
brothers and David F. Taplin are all first cousins.
DIRECTOR COMPENSATION
During 2001, each of our directors who was not an officer of NMHG, NACCO or
any other subsidiary of NACCO, and was also a director of NACCO, received a
retainer of $40,000 for the calendar year for service on our Board of Directors
and the NACCO board of directors. Each of our directors who were not officers of
NMHG, NACCO or any other subsidiary of NACCO, and not a director of NACCO,
received a retainer of $15,000 for the calendar year for service on our Board of
Directors. In addition, each director received $1,000 for attending each meeting
of the Board of Directors and each meeting of a committee thereof. Fees for
attendance at board meetings (of any of the related companies) could not exceed
$2,000 per day. The chairman of each committee of our Board of Directors
received $4,000 for the year for service as committee chairman.
Under NACCO's Non-Employee Directors' Equity Compensation Plan, each person
who served on our board and on NACCO's board who was not one of our officers or
an officer of NACCO or any other subsidiary of NACCO, received 50% of his annual
retainer ($20,000) in shares of Class A common stock of NACCO. These shares
cannot be assigned, pledged, hypothecated or otherwise transferred by the
director, voluntarily or involuntarily, other than (a) by will or the laws of
descent and distribution, (b) pursuant to a qualifying domestic relations order
or (c) to a trust for the benefit of the director, or his spouse, children or
grandchildren. The foregoing restrictions on transfer lapse upon the earliest to
occur of:
- the date which is ten years after the last day of the calendar quarter
for which such shares were earned;
- the date of the death or permanent disability of the director;
- five years (or earlier with the approval of the board of directors of
NACCO) from the date of the retirement of the director from the board of
directors of NACCO; and
- the date that a director is both retired from the board of directors of
NACCO and has reached 70 years of age.
58
In addition, each director who is also a director NACCO has the right under
the Non-Employee Directors' Plan to receive shares of Class A common stock of
NACCO in lieu of cash for up to 100% of the balance of his annual retainer,
meeting attendance fees and any committee chairman's fee. These voluntary shares
are not subject to the foregoing restrictions.
Each of our directors who are not also directors of NACCO receives 100% of
their annual retainer and meeting attendance fees in cash.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities to NMHG of the Chief Executive Officer and four other most highly
compensated executive officers of NMHG, the "Named Executive Officers."
<Table>
<Caption>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION PAYOUTS
-------------------- ------------ ALL OTHER
NAME AND FISCAL SALARY BONUS LTIP PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)
------------------ ------ -------- -------- ------------ ------------
Reginald R. Eklund................. 2001 $512,692(1) $ 57,733(2) -- $114,143(4)
President and Chief 2000 494,305(1) 296,373(2) $1,947,811(3) 153,493(4)
Executive Officer 1999 470,016(1) 152,553(2) 759,850(3) 137,314(4)
Frank G. Muller.................... 2001 $334,731(1) $ 29,100(2) -- $ 63,774(6)
Vice President and 2000 320,377(1) 152,350(2) $ 998,513(5) 84,297(6)
President, Americas 1999 302,991(1) 94,681(2) 177,150(5) 77,952(6)
Victoria L. Rickey................. 2001 $350,145(7) $ 18,554(2) -- $ 28,554(8)
Vice President and Chief Strategy
Officer
Edward W. Ryan..................... 2001 $286,476(1) $ 27,987(2) -- $ 38,896(9)
Vice President, Marketing and
President, Asia-Pacific, China
and Japan
Ronald D. Muller................... 2001 $242,890(1) $ 14,112(2) -- 30,474(10)
Former Vice President,
Manufacturing, Quality and IT
Strategy
</Table>
- ---------------
(1) Under current disclosure requirements of the SEC, certain of the amounts
listed are being reported as "Salary," although we consider them as payments
of cash in lieu of perquisites, which are at competitive levels as
determined by our Nominating, Organization and Compensation Committee. For
Mr. Eklund, the amounts listed for 2001, 2000 and 1999 include payments of
cash in lieu of perquisites of $53,292, $52,560, and $51,300, respectively.
For Mr. Frank G. Muller, the amounts listed in 2001, 2000 and 1999 include
payments of cash in lieu of perquisites of $29,100, $29,300 and $28,390,
respectively. For 2001, Mr. Ryan received cash in lieu of perquisites of
$19,104 and Mr. Ronald D. Muller received cash in lieu of perquisites of
$16,128.
(2) The amounts were paid in cash pursuant to the NACCO Materials Handling
Group, Inc. Annual Incentive Compensation Plan.
(3) For Mr. Eklund, the amount listed for 2000 represents the appreciation and
interest on the book value units awarded to Mr. Eklund in 1998, 1996, 1994
and 1993 under the NACCO Materials Handling Group, Inc. Long-Term Incentive
Compensation Plan (the "LTIP Plan"), which was terminated in 2000. A portion
of such amount was paid in cash and the remainder was deferred into the
NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (the "Unfunded
Benefit Plan"). The amount listed for 1999 represents the appreciation on
the book value units awarded to Mr. Eklund in 1990 under the LTIP Plan. A
portion of such amount was paid in cash and the remainder was deferred into
the Unfunded Benefit Plan.
59
(4) For Mr. Eklund, the amounts listed for 2001, 2000 and 1999 include $16,432,
$19,500 and $20,000, respectively, consisting of contributions by NACCO
Materials Handling Group, Inc. under the NMHG Profit Sharing Retirement
Plan; and $97,711, $133,993 and $117,314, respectively, consisting of
amounts credited and interest under the Unfunded Benefit Plan.
(5) For Mr. Frank G. Muller, the amount listed for 2000 represents the
appreciation and interest on the book value units awarded to Mr. Frank G.
Muller in 1998, 1994 and 1993 under the LTIP Plan, which was terminated in
2000. A portion of such amount was paid in cash and the remainder was
deferred into a separate account under the Unfunded Benefit Plan. The amount
listed for 1999 represents the appreciation on the book value appreciation
units awarded to Mr. Frank G. Muller in 1990 under the LTIP Plan and was
deferred into the Unfunded Benefit Plan.
(6) For Mr. Frank G. Muller, the amounts listed for 2001, 2000 and 1999 include
$16,432, $19,500 and $20,000, respectively, consisting of contributions by
NACCO Materials Handling Group, Inc. under the NMHG Profit Sharing
Retirement Plan; and $47,342, $64,797 and $57,952, respectively, consisting
of amounts credited and interest under the Unfunded Benefit Plan.
(7) For Ms. Rickey the amount listed for 2001 includes $56,073 as overseas
premium payments in lieu of perquisites.
(8) For Ms. Rickey, the amount listed for 2001 includes $6,490 for contributions
by NACCO Materials Handling Group, Inc. under the NMHG Profit Sharing
Retirement Plan and $22,055 consisting of amounts credited and interest
under the Unfunded Benefit Plan.
(9) For Mr. Ryan, the amount listed for 2001 includes $11,682 for contributions
by NACCO Materials Handling Group, Inc. under the NMHG Profit Sharing
Retirement Plan and $27,208 consisting of amounts credited and interest
under the Unfunded Benefit Plan.
(10) For Mr. Ronald D. Muller, the amount listed for 2001 includes $9,864 for
contributions by NACCO Materials Handling Group, Inc. under the NMHG Profit
Sharing Retirement Plan and $20,605 consisting of amounts credited and
interest under the Unfunded Benefit Plan.
LONG-TERM INCENTIVE PLANS
The following table sets forth information concerning awards to the Named
Executive Officers during fiscal year 2001, and estimated payouts in the future,
under our long-term incentive plans:
<Table>
<Caption>
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
SHARES, OR OTHER NON-STOCK PRICE-BASED PLANS
UNITS OR PERIOD UNTIL -------------------------------
OTHER RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAME ($ OR #) OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
---- ------------ ------------ --------- -------- --------
Reginald R. Eklund.................... $466,300 7 years $0 $821,854 (1)
Frank G. Muller....................... 189,150 7 years 0 333,377 (1)
Victoria L. Rickey.................... 141,735 7 years 0 249,808 (1)
Edward W. Ryan........................ 107,460 7 years 0 189,398 (1)
Ronald D. Muller...................... 70,560 6 years 0 124,362 (2)
</Table>
- ---------------
(1) Effective as of January 1, 2000, Messrs. Eklund, Frank G. Muller and Ryan
and Ms. Rickey became participants in the NMHG Senior Executive Long-Term
Incentive Compensation Plan (the "Executive Long-Term Plan"). Under the
Executive Long-Term Plan, participants including Messrs. Eklund, Frank G.
Muller and Ryan and Ms. Rickey are eligible for awards for performance
against a target which is based upon our adjusted return on equity over
two-year periods. Effective January 1, 2001, participants were granted
dollar-denominated target awards. Awards, if any, for the two-year
performance period will be made in 2003 based upon our adjusted return on
equity for the period from January 1, 2001 through December 31, 2002 against
a pre-established target. The total award for any period cannot exceed 150%
of the target award. Under the Executive Long-Term Plan, awards to
participants are made in the form of "book value units" which are subject to
a payment restriction of five years from the date of award. Such payment
restriction shall automatically lapse upon the participant's death,
permanent disability or
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retirement, or in the event of any other termination of employment with the
approval of our Nominating, Organization and Compensation Committee. Upon
the lapse of the payment restriction, the participant is entitled to receive
a payment in cash equal to (a) the book value of the units as of the end of
the calendar quarter coincident with or immediately preceding the date the
payment restriction lapses or (b) for participants who terminated employment
for reasons other than death, disability or retirement, the book value of
the units as of the end of the calendar quarter coincident with or
immediately preceding termination. At any time up to one year prior to the
fifth anniversary of the grant date of an award, a participant may elect to
defer the payout of the award under the plan for a period not to exceed ten
years from the grant date of the award and if the award is deferred for the
entire ten years the participant may thereafter elect to further defer
receipt of the award, in which case the deferred amount will be paid under
the Unfunded Benefit Plan. There is no minimum or maximum value for final
award payouts under the Executive Long-Term Plan.
(2) Effective as of January 1, 2000, Mr. Ronald D. Muller became a participant
in the NMHG Long-Term Incentive Compensation Plan, which became effective as
of January 1, 2000 (the "2000 Long-Term Plan"). Under the 2000 Long-Term
Plan, participants, including Mr. Muller, are eligible for awards for
performance against a target which is based upon our adjusted return on
equity over a one-year period. Effective January 1, 2001, participants were
granted dollar-denominated target awards. Awards, if any, for the one-year
performance period will be made in 2002 based upon our adjusted return on
equity for the period from January 1, 2001 through December 31, 2001 against
a pre-established target. The total award for any period cannot exceed 150%
of the target award. Under the 2000 Long-Term Plan, awards to participants
are made in the form of "book value units" which are subject to a payment
restriction of five years from the date of award. Such payment restriction
shall automatically lapse upon the participant's death, permanent disability
or retirement, or in the event of any other termination of employment with
the approval of our Nominating, Organization and Compensation Committee.
Upon the lapse of the payment restriction, the participant is entitled to
receive a payment in cash equal to (a) the book value of the units as of the
end of the calendar quarter coincident with or immediately preceding the
date the payment restriction lapses or (b) for participants who terminated
employment for reasons other than death, disability or retirement, the book
value of the units as of the end of the calendar quarter coincident with or
immediately preceding termination. At any time up to one year prior to the
fifth anniversary of the grant date of an award, a participant may elect to
defer the payout of the award under the plan for a period not to exceed ten
years from the grant date of the award and if the award is deferred for the
entire ten years the participant may thereafter elect to further defer
receipt of the award, in which case the deferred amount will be paid under
the Unfunded Benefit Plan. There is no minimum or maximum value for final
award payouts under the 2000 Long-Term Plan.
PENSION PLANS
Mr. Ronald D. Muller is covered by our defined benefit cash balance plans
and frozen standard pension benefit plans (both qualified and non-qualified).
The standard pension plans were frozen as of January 1, 1992, except for a
4% annual increase on the amount of such frozen benefit which continues until
termination of employment. The cash balance plans were frozen as of December 31,
1996. However, cash balance accounts continue to be credited with interest equal
to 1% above the one-year constant maturity yield rate, with a minimum of 5% and
a maximum of 12%, until benefit commencement. The entire pension benefit may be
paid in the form of a lump sum or in an annuity to provide monthly benefit
payments.
The estimated annual pension benefit for Mr. Muller under the cash balance
plans, based on compensation, service and interest credits through December 31,
2001, which would be payable on a straight life annuity basis at age 65, is
approximately $800 per month. Mr. Muller is also entitled to a benefit under a
frozen pension plan in the amount of approximately $1,400 per month, payable on
a straight life basis at age 65.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<Table>
<Caption>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
TITLE OF CLASS OWNERSHIP(1) OF CLASS
-------------- ----------------- --------
NACCO Industries, Inc.................... Common Stock 5,599 100%
5875 Landerbrook Drive
Mayfield Heights, Ohio 44124
</Table>
- ---------------
(1) We are a wholly owned subsidiary of NACCO Industries, Inc. NACCO has the
sole power to vote and dispose of all of our outstanding capital stock.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In 2000, our parent company, NACCO, began charging fees for services
provided by the corporate headquarters to its operating subsidiaries, including
us. These services include, among other things, strategic consulting, corporate
development services, accounting support, tax advisory services, legal advice
and internal audit functions. In each of 2000 and 2001, we paid NACCO $5.3
million for the provision of such services, which we believe represents their
fair market value.
Our parent company is a holding company with no independent source of
revenues. As a result, it relies on dividends and other distributions from its
operating subsidiaries, including us, to fund the costs of its operations. In
2000, NACCO began charging each of its operating subsidiaries a management fee
generally in proportion to the size of the subsidiary to fund these costs. In
each of 2000 and 2001, we paid NACCO $2.3 million in allocated management fees.
In 1999, 2000 and 2001, NACCO declared and paid a dividend on its common
stock of $0.85, $0.89 and $0.93, respectively, per share. In 2000 and 2001, we
declared and paid a dividend to NACCO of $10.0 million and $5.0 million,
respectively, to fund a portion of the common stock dividend paid by NACCO in
those years. We did not pay a dividend to NACCO in 1999 but we paid a dividend
of $15.0 million to NACCO in the first quarter of 2002.
From time to time we loan money to, or receive loans from NACCO. We had an
outstanding note payable to NACCO in the amount of $8.0 million at December 31,
2001, which we have repaid prior to the date of this prospectus. Our
intercompany loans with NACCO earn interest at an arm's-length rate and are due
upon demand. For 1999, 2000 and 2001, we received interest payments from NACCO
of $0.7 million, $0.4 million and $0.3 million, respectively. We had no notes
payable to NACCO during 1999, 2000 and almost all of 2001, and therefore did not
make any payments in respect of interest to NACCO during those years.
We are party to a tax sharing agreement with NACCO and its other domestic
subsidiaries. Under the terms of the tax sharing agreement, we calculate our own
tax liability quarterly on a stand-alone basis (our "separate return tax
liability"). If a payment is required, we make that payment directly to NACCO.
At the close of the consolidated group's tax year, NACCO determines the tax
liability of the consolidated group and either remits a payment to, or receives
a refund from, the Internal Revenue Service. In addition, we determine our
separate return tax liability as of the close of the consolidated group's tax
year. If our separate return tax liability is greater than the total amount of
quarterly payments made to NACCO, we must make an additional payment to NACCO.
If our separate return tax liability is less than the amount of quarterly
payments, we receive a refund from NACCO. We advanced $13.7 million and $0.8
million to NACCO in the second and third quarters of 2001, respectively, in
respect of tax liabilities we would have otherwise paid directly to the Internal
Revenue Service. We received $25.3 million from NACCO in the first quarter of
2002, and expect to receive $3.0 million in the second quarter of 2002 in
respect of tax refunds we would otherwise have been entitled to.
Dennis W. LaBarre, one of our directors and a member of our Nominating,
Organization and Compensation Committee, is a partner in the law firm of Jones,
Day, Reavis & Pogue. Such firm provided legal services on our behalf during 2001
on a variety of matters, and it is anticipated that such firm will provide such
services in 2002.
62
DESCRIPTION OF OTHER INDEBTEDNESS
NEW REVOLVING CREDIT FACILITY
On May 9, 2002, we refinanced our prior financing agreement, an unsecured
floating-rate revolving line of credit with availability of $350.0 million,
certain other lines of credit with availability of $4.6 million and a program to
sell accounts receivable in Europe, with the proceeds from the sale of the
outstanding notes and borrowings under a secured, floating-rate revolving credit
facility which expires in May 2005.
Availability under the new revolving credit facility is up to $175.0
million and is governed by a borrowing base based on advance rates against the
inventory and accounts receivable of the "borrowers," as defined below. At May
9, 2002, the borrowing capacity under this facility was $109.7 million and the
domestic floating rate of interest applicable to this facility was 6.75%,
including the applicable margin.
Prior to the maturity date, funds borrowed under the new revolving credit
facility may be borrowed, repaid and reborrowed without premium or penalty.
Borrowings are subject to the satisfaction of customary conditions, including
absence of a default and accuracy of representations and warranties.
BORROWERS
The borrowers under the new revolving credit facility are us, NACCO
Materials Handling Group, Inc., and NMHG Distribution Co., which are the
domestic borrowers under the domestic facility, and certain of our foreign
subsidiaries, which are the foreign borrowers under the foreign facility. We
refer to the domestic borrowers and foreign borrowers collectively as the
"borrowers."
GUARANTEES; SECURITY
The obligations of the domestic borrowers are joint and several and are
guaranteed by our domestic subsidiaries (other than the domestic borrowers) and
the obligations of the foreign borrowers are joint and several and are
guaranteed by the domestic borrowers, the domestic subsidiaries of the domestic
borrowers and certain subsidiaries of the foreign borrowers.
The lenders have a first priority perfected lien (or fixed or floating
charge, if applicable) upon substantially all assets of the domestic borrowers
and their domestic subsidiaries to secure the obligations under the domestic
facility and the guaranties of the foreign facility, and substantially all the
assets of the foreign borrowers and the foreign guarantors to secure the
obligations under the foreign facility, other than assets constituting real
estate, equipment, fixtures and improvements thereon, but including, and not
limited to, assets constituting accounts, deposit accounts, chattel paper,
instruments, investment property, inventory, general intangibles (including
intellectual property) and proceeds thereof. The lenders have a pledge of (i)
all the stock of the domestic borrowers' and guarantors' domestic subsidiaries
and 65% of the stock of the domestic borrowers' first tier foreign subsidiaries
to secure the obligations of the domestic borrowers and the domestic guarantors
and (ii) all of the stock of certain of the foreign borrowers' and foreign
guarantors' subsidiaries to secure the obligations of the foreign borrowers and
the foreign guarantors.
INTEREST; FEES
Borrowings under the new revolving credit facility bear interest at a
floating rate, which can be either a base rate or a LIBOR rate. With respect to
the domestic borrowings, base rate is defined as the highest of (x) Citibank,
N.A.'s base rate, (y) the federal funds effective rate, plus one-half of one
percent (0.50%) per annum, and (z) the base three-month certificate of deposit
rate plus one-half of one percent (0.50%) per annum, plus an applicable margin
in each case. LIBOR loans bear interest at LIBOR, as described in the new
revolving credit facility, plus an applicable margin. The initial applicable
margin for base rate loans and LIBOR loans under the new revolving credit
facility will be 2.00% and 3.00%, respectively. Thereafter, the applicable
margin will be subject to adjustment based on our leverage ratio. A per annum
letter of credit fee of 2.75% will initially be payable and thereafter will be
subject to adjustment based on our leverage ratio. A
63
fronting fee of 0.25% will be payable on each letter of credit issued. The
interest rate payable under the new revolving credit facility will increase by
2.00% per annum during the continuance of an event of default.
The borrowers will also be required to pay an unused commitment fee on the
difference between committed amounts and amounts actually borrowed under the new
revolving credit facility. The initial unused commitment fee will be 0.50% per
annum. Thereafter, the commitment fee will be subject to adjustment based on our
leverage ratio.
REPAYMENTS
The lenders have full cash dominion over the cash management system of the
borrowers and their subsidiaries. The borrowers and the guarantors are required
to use all available cash to repay amounts outstanding under the new revolving
credit facility. In addition, we are required to repay amounts outstanding under
the new revolving credit facility with net cash proceeds from asset sales and
equity and debt issuances.
Voluntary payments of principal amounts outstanding and voluntary
reductions of the unutilized portion of the new revolving credit facility are
permitted at any time, upon the giving of proper notice and subject to minimum
dollar amounts. However, if any prepayment is made with respect to a LIBOR loan
on a date other than the last day of the applicable interest period, we are
required to compensate the lenders for losses and expenses incurred as a result
of such prepayment. The lenders have control of the borrowers' bank accounts and
of the guarantors' bank accounts and will apply amounts deposited in
concentration accounts to repay amounts outstanding under the new revolving
credit facility.
COVENANTS
The new revolving credit facility requires us to meet certain financial
tests, including, but not limited to, maximum capital expenditures, maximum
leverage ratio, minimum fixed charge ratio and minimum liquidity. In addition,
the new revolving credit facility contains certain covenants binding on us and
our subsidiaries which, among other things, limit our ability to:
- incur additional debt, guarantees and liens;
- make investments, dividends and restricted payments;
- make acquisitions, merge or consolidate;
- change our line of business;
- enter into transactions with affiliates;
- make prepayments, repurchases and redemptions of certain other
indebtedness (including the Notes and the Exchange Notes);
- enter into operating leases or sale-leaseback transactions; and
- amend certain material agreements.
For certain of these covenants, the limitations are subject to exceptions,
materiality qualifiers and baskets.
EVENTS OF DEFAULT
The new revolving credit facility contains customary events of default,
including, but not limited to, payment defaults, breaches of representations and
warranties, covenant defaults, cross defaults to certain other agreements or
indebtedness, certain events of bankruptcy and insolvency, judgment defaults,
certain ERISA events, lack of enforceability of any of the related transaction
documents, invalidity of security interests supporting the revolving credit
facility and a change of control of NACCO Industries, Inc., us or the other
borrowers. Certain of the events of default are subject to cure periods.
64
EUROPEAN CREDIT FACILITY
We are currently engaged in discussions with a non-U.S. financial
institution to obtain a new European revolving credit facility which would
provide up to 30 million British pounds sterling (approximately $43 million) of
borrowing availability for certain of our European subsidiaries to be used for,
among other things, working capital requirements, permitted capital expenditures
and other lawful corporate purposes of those European subsidiaries. Our ability
to enter into this European credit facility is subject to the terms and
conditions of the new revolving credit facility and the notes and would replace
or refinance the foreign subfacilities under the new revolving credit facility.
The obligations under this European credit facility are expected to be secured
by substantially the same assets that will secure the obligations under the
foreign subfacilities of the new revolving credit facility and will contain
other customary limitations, covenants and restrictions.
OTHER INDEBTEDNESS
We also have separate facilities with availability, net of limitations, of
$63.5 million, of which $29.2 million was available at March 31, 2002 and
maintain additional uncommitted lines of credit, of which $30.0 million was
available at March 31, 2002.
At December 31, 2001 and March 31, 2002, our total obligations under
capital leases and other term loans were $53.2 million and $49.7 million,
respectively.
65
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On May 9, 2002, we sold $250.0 million in principal amount at maturity of
the outstanding notes in a private placement through initial purchasers to a
limited number of "qualified institutional buyers," as defined in the Securities
Act. In connection with the sale of the outstanding notes, we entered into a
registration rights agreement with the initial purchasers, dated as of May 9,
2002. Under that agreement, we must, among other things, file with the SEC a
registration statement under the Securities Act covering the exchange offer and
use our best efforts to cause that registration statement to become effective
under the Securities Act. Upon effectiveness of that registration statement, we
must offer each holder of the outstanding notes the opportunity to exchange its
securities for an equal principal amount at maturity of exchange notes. You are
a holder with respect to the exchange offer if you are a person in whose name
any outstanding notes are registered on our books or any other person who has
obtained a properly completed assignment of outstanding notes from the
registered holder.
We are making the exchange offer to comply with our obligations under the
registration rights agreement. A copy of the registration rights agreement has
been filed as an exhibit to the registration statement of which this prospectus
is a part.
In order to participate in the exchange offer, you must represent to us,
among other things, that:
- the exchange notes being acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of the person receiving
the exchange notes;
- you do not have any arrangement or understanding with any person to
participate in the distribution of the outstanding notes or the exchange
notes;
- you are not engaged in, and do not intend to engage in, a distribution of
the exchange notes; and
- you are not one of our "affiliates," as defined in Rule 405 of the
Securities Act, or if you are an affiliate, you will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of outstanding notes in any jurisdiction in which the
exchange offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of the particular jurisdiction.
RESALE OF THE EXCHANGE NOTES
Based on a previous interpretation by the staff of the SEC set forth in
no-action letters issued to third parties, including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), Mary Kay Cosmetics, Inc. (available June 5, 1991),
Warnaco, Inc. (available October 11, 1991), and K-III Communications Corp.
(available May 14, 1993), we believe that the exchange notes issued in the
exchange offer may be offered for resale, resold and otherwise transferred by
you, except if you are an affiliate of ours, without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that you are able to make the representations set forth in "-- Purpose and
Effect of the Exchange Offer."
If you tender in the exchange offer with the intention of participating in
a distribution of the exchange notes, you cannot rely on the interpretation by
the staff of the SEC as set forth in the Morgan Stanley & Co. Incorporated
no-action letter and other similar letters and you must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. In the event that our belief
regarding resale is inaccurate, those who transfer exchange notes in violation
of the prospectus delivery provisions of the Securities Act and without an
exemption from registration under the federal securities laws may incur
liability under these laws. We do not assume, or indemnify you against, this
liability.
66
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of exchange notes. See "Plan of Distribution." In order to
facilitate the disposition of exchange notes by broker-dealers participating in
the exchange offer, we have agreed, subject to specific conditions, to make this
prospectus, as it may be amended or supplemented from time to time, available
for delivery by those broker-dealers to satisfy their prospectus delivery
obligations under the Securities Act.
Any holder that is a broker-dealer participating in the exchange offer must
notify the exchange agent at the telephone number set forth in the enclosed
letter of transmittal and must comply with the procedures for brokers-dealers
participating in the exchange offer. Under the registration rights agreement, we
are not required to amend or supplement the prospectus for a period exceeding
180 days after the expiration date of the exchange offer, except in limited
circumstances where we suspend use of the registration statement. We may suspend
use of the registration statement if:
- the SEC requests amendments or supplements to the registration statement
or the prospectus forming a part thereof or for additional information;
- the SEC issues a stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose;
- we receive notice of the suspension of the qualification of the exchange
notes for sale in any jurisdiction or the initiation of any proceedings
for that purpose;
- any event occurs that requires us to make changes in the registration
statement or the prospectus forming a part thereof in order that the
registration statement or prospectus does not contain an untrue statement
of a material fact nor omit to state a material fact required to be
stated therein or necessary to make the statements therein (in case of
the prospectus, in light of the circumstances under which they were made)
not misleading; and
- we determine, in good faith, that it is advisable to suspend use of the
registration statement or the prospectus forming a part thereof for a
discrete period of time due to pending material corporate developments or
similar material events that have not yet been publicly disclosed and as
to which we reasonably believe public disclosure would be prejudicial to
us.
We have not entered into any arrangement or understanding with any person
to distribute the exchange notes to be received in the exchange offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all outstanding notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the day the exchange offer expires.
As of the date of this prospectus, $250.0 million in principal amount at
maturity of the notes are outstanding. This prospectus, together with the letter
of transmittal, is being sent to all registered holders of the outstanding notes
on this date. There will be no fixed record date for determining registered
holders of the outstanding notes entitled to participate in the exchange offer.
Holders, however, of the outstanding notes must tender their certificates
therefor or cause their outstanding notes to be tendered by book-entry transfer
prior to the expiration date of the exchange offer to participate.
The form and terms of the exchange notes will be the same as the form and
terms of the outstanding notes, except that the exchange notes will be
registered under the Securities Act and therefore will not bear legends
restricting their transfer. Following consummation of the exchange offer, all
rights under the registration rights agreement accorded to holders of
outstanding notes, including the right to receive additional incremental
interest on the outstanding notes, to the extent and in the circumstances
specified in the registration rights agreement, will terminate.
67
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement and applicable federal securities laws.
Outstanding notes that are not tendered for exchange under the exchange offer
will remain outstanding and will be entitled to the rights under the related
indenture. Any outstanding notes not tendered for exchange will not retain any
rights under the registration rights agreement and will remain subject to
transfer restrictions. See "-- Consequences of Failure to Exchange."
We will be deemed to have accepted validly tendered outstanding notes when,
as and if we will have given oral or written notice of its acceptance to the
exchange agent. The exchange agent will act as agent for the tendering holders
for the purposes of receiving the exchange notes from us. If any tendered
outstanding notes are not accepted for exchange because of an invalid tender,
the occurrence of other events set forth in this prospectus, or otherwise,
certificates for any unaccepted outstanding notes will be returned, or, in the
case of outstanding notes tendered by book-entry transfer, those unaccepted
outstanding notes will be credited to an account maintained with The Depository
Trust Company, without expense to the tendering holder of those outstanding
notes as promptly as practicable after the expiration date of the exchange
offer. See "-- Procedures for Tendering."
Those who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange pursuant
to the exchange offer. We will pay all charges and expenses, other than
applicable taxes described below, in connection with the exchange offer. See
"-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date is 5:00 p.m., New York City time on , 2002,
unless we, in our sole discretion, extend the exchange offer, in which case, the
expiration date will be the latest date and time to which the exchange offer is
extended. We may, in our sole discretion, extend the expiration date of, or
terminate, the exchange offer.
To extend the exchange offer, we must notify the exchange agent by oral or
written notice prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date and make a public announcement of
the extension.
We reserve the right:
- to delay accepting any outstanding notes, to extend the exchange offer or
to terminate the exchange offer if any of the conditions set forth below
under "-- Conditions" are not satisfied by giving oral or written notice
of the delay, extension, or termination to the exchange agent; or
- to amend the terms of the exchange offer in any manner consistent with
the registration rights agreement.
Any delay in acceptances, extension, termination, or amendment will be
followed as promptly as practicable by oral or written notice of the delay to
the registered holders of the outstanding notes. If we amend the exchange offer
in a manner that constitutes a material change, we will promptly disclose the
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the outstanding notes, and we will extend the exchange
offer for a period of five to ten business days, depending upon the significance
of the amendment and the manner of disclosure to the registered holders of the
outstanding notes, if the exchange offer would otherwise expire during the five
to ten business day period.
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, amendment, or termination of the exchange
offer, we will have no obligation to publish, advertise, or otherwise
communicate that public announcement, other than by making a timely release to
an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the exchange offer, we
will accept, promptly after the expiration date of the exchange offer, all
outstanding notes properly tendered and will issue the exchange notes promptly
after acceptance of the outstanding notes. See "-- Conditions" below. For
purposes of the
68
exchange offer, we will be deemed to have accepted properly tendered outstanding
notes for exchange when, as and if we will have given oral or written notice of
its acceptance to the exchange agent.
In all cases, issuance of the exchange notes for outstanding notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of certificates for those outstanding notes
or a timely confirmation of book-entry transfer of the outstanding notes into
the exchange agent's account at The Depository Trust Company, a properly
completed and duly executed letter of transmittal, and all other required
documents; provided, however, that we reserve the absolute right to waive any
defects or irregularities in the tender of outstanding notes or in the
satisfaction of conditions of the exchange offer by holders of the outstanding
notes. If any tendered outstanding notes are not accepted for any reason set
forth in the terms and conditions of the exchange offer, if the holder withdraws
such previously tendered outstanding notes, or if outstanding notes are
submitted for a greater principal amount of outstanding notes than the holder
desires to exchange, then the unaccepted, withdrawn or portion of non-exchanged
outstanding notes, as appropriate, will be returned as promptly as practicable
after the expiration or termination of the exchange offer, or, in the case of
outstanding notes tendered by book-entry transfer, those unaccepted, withdrawn
or portion of non-exchanged outstanding notes, as appropriate, will be credited
to an account maintained with The Depository Trust Company, without expense to
the tendering holder thereof.
CONDITIONS
Without regard to other terms of the exchange offer, we will not be
required to exchange any exchange notes for any outstanding notes and may
terminate the exchange offer before the acceptance of any outstanding notes for
exchange, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our reasonable judgment, might materially impair the ability of
we to proceed with the exchange offer;
- the staff of the SEC proposes, adopts or enacts any law, statute, rule or
regulation or issues any interpretation of any existing law, statute,
rule or regulation, which, in our reasonable judgment, might materially
impair our ability to proceed with the exchange offer; or
- any governmental approval or approval by holders of the outstanding notes
has not been obtained, which approval we, in our reasonable judgment,
deem necessary for the consummation of the exchange offer.
If we determine that any of these conditions are not satisfied, we may
- refuse to accept any outstanding notes and return all tendered
outstanding notes to the tendering holders, or, in the case of
outstanding notes tendered by book-entry transfer, credit those
outstanding notes to an account maintained with The Depository Trust
Company,
- extend the exchange offer and retain all outstanding notes tendered prior
to the expiration of the exchange offer, subject, however, to the rights
of holders who tendered the outstanding notes to withdraw their tendered
outstanding notes, or
- waive unsatisfied conditions with respect to the exchange offer and
accept all properly tendered outstanding notes that have not been
withdrawn. If the waiver constitutes a material change to the exchange
offer, we will promptly disclose the waiver by means of a prospectus
supplement that will be distributed to the registered holders of the
outstanding notes, and we will extend the exchange offer for a period of
five to ten business days, depending upon the significance of the waiver
and the manner of disclosure to the registered holders of the outstanding
notes, if the exchange offer would otherwise expire during this period.
PROCEDURES FOR TENDERING
To tender in the exchange offer, you must complete, sign and date an
original or facsimile letter of transmittal, have the signatures thereon
guaranteed if required by the letter of transmittal, and mail or
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otherwise deliver the letter of transmittal to the exchange agent prior to the
expiration date of the exchange offer. In addition, either:
- certificates for the outstanding notes must be received by the exchange
agent, along with the letter of transmittal, or
- a timely confirmation of transfer by book-entry of those outstanding
notes, if the book-entry procedure is available, into the exchange
agent's account at The Depository Trust Company, as set forth in the
procedure for book-entry transfer described below, which the exchange
agent must receive prior to the expiration date of the exchange offer, or
- you must comply with the guaranteed delivery procedures described below.
To be tendered effectively, the exchange agent must receive the letter of
transmittal and other required documents at the address set forth below under
"-- Exchange Agent" prior to the expiration of the exchange offer.
If you tender your outstanding notes and do not withdraw them prior to the
expiration date of the exchange offer, you will be deemed to have an agreement
with us in accordance with the terms and subject to the conditions set forth in
this prospectus and in the letter of transmittal.
The method of delivery of outstanding notes and the letter of transmittal
and all other required documents to the exchange agent is at your risk. Instead
of delivery by mail, it is recommended that you use an overnight or hand
delivery service, properly insured. In all cases, sufficient time should be
allowed to assure delivery to the exchange agent before the expiration date of
the exchange offer. No letter of transmittal or outstanding notes should be sent
to NMHG Holding Co. You may request your respective brokers, dealers, commercial
banks, trust companies or nominees to effect the above transactions for you.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender its outstanding notes should contact the registered holder promptly
and instruct that registered holder to tender the outstanding notes on the
beneficial owner's behalf. If the beneficial owner wishes to tender its
outstanding notes on the owner's own behalf, that owner must, prior to
completing and executing the letter of transmittal and delivering its
outstanding notes, either make appropriate arrangements to register ownership of
the outstanding notes in that owner's name or obtain a properly completed
assignment from the registered holder. The transfer of registered ownership of
outstanding notes may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution unless the
outstanding notes tendered pursuant thereto are tendered:
- by a registered holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the letter of
transmittal, or
- for the account of an eligible institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, each of the
following is deemed an eligible institution:
- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,
- commercial bank,
- trust company having an office or correspondent in the United States or
- eligible guarantor institution as provided by Rule 17Ad-15 of the
Exchange Act.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes, the outstanding notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as his, her or its name appears on the outstanding notes.
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If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any outstanding notes or bond power,
those persons should so indicate when signing, and unless we waive the
requirement, evidence satisfactory to us of their authority to so act must be
submitted with the letter of transmittal.
We will determine all questions as to the validity, form, eligibility,
including time of receipt, acceptance of tendered outstanding notes, and
withdrawal of tendered outstanding notes, in our sole discretion. All of these
determinations will be final and binding. We reserve the absolute right to
reject any and all outstanding notes not properly tendered or any outstanding
notes our acceptance of which would, in the opinion of counsel for us, be
unlawful. We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular outstanding notes. Our interpretation of
the terms and conditions of the exchange offer, including the instructions in
the letter of transmittal will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of outstanding
notes must be cured within the time we determine. Although we intend to notify
holders of outstanding notes of defects or irregularities with respect to
tenders of outstanding notes, neither we, nor the exchange agent, or any other
person will incur any liability for failure to give this notification. Tenders
of outstanding notes will not be deemed to have been made until defects or
irregularities have been cured or waived. Any outstanding notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the exchange
agent to the tendering holders of outstanding notes, unless otherwise provided
in the letter of transmittal, as soon as practicable following the expiration
date of the exchange offer.
In addition, we reserve the right, in our sole discretion, to purchase or
make offers for any outstanding notes that remain outstanding subsequent to the
expiration date of the exchange offer or, as set forth above under
"-- Conditions," to terminate the exchange offer and, to the extent permitted by
applicable law and the terms of our agreements relating to our outstanding
indebtedness, purchase outstanding notes in the open market, in privately
negotiated transactions or otherwise. The terms of any purchases or offers could
differ from the terms of the exchange offer.
If the holder of outstanding notes is a broker-dealer participating in the
exchange offer that will receive exchange notes for its own account in exchange
for outstanding notes that were acquired as a result of market-making activities
or other trading activities, that broker-dealer will be required to acknowledge
in the letter of transmittal that it will deliver a prospectus in connection
with any resale of the exchange notes and otherwise agree to comply with the
procedures described above under "-- Resale of the Exchange Notes"; however, by
so acknowledging and delivering a prospectus, that broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
In all cases, issuance of exchange notes pursuant to the exchange offer
will be made only after timely receipt by the exchange agent of certificates for
the outstanding notes or a timely confirmation of book-entry transfer of
outstanding notes into the exchange agent's account at The Depository Trust
Company, a properly completed and duly executed letter of transmittal, and all
other required documents. If any tendered outstanding notes are not accepted for
any reason set forth in the terms and conditions of the exchange offer or if
outstanding notes are submitted for a greater principal amount of outstanding
notes than the holder of outstanding notes desires to exchange, the unaccepted
or portion of non-exchanged outstanding notes will be returned as promptly as
practicable after the expiration or termination of the exchange offer, or, in
the case of outstanding notes tendered by book-entry transfer into the exchange
agent's account at The Depository Trust Company pursuant to the book-entry
transfer procedures described below, the unaccepted or portion of non-exchanged
outstanding notes will be credited to an account maintained with The Depository
Trust Company, without expense to the tendering holder of outstanding notes.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding notes at The Depository Trust Company for the purposes of the
exchange offer within two business days after the date of this prospectus, and
any financial institution that is a participant in The Depository Trust
Company's
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systems may make book-entry delivery of outstanding notes by causing The
Depository Trust Company to transfer the outstanding notes into the exchange
agent's account at The Depository Trust Company in accordance with The
Depository Trust Company's procedures for transfer. However, although delivery
of outstanding notes may be effected through book-entry transfer at The
Depository Trust Company, the letter of transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the exchange agent at the address set
forth below under "-- Exchange Agent" on or prior to the expiration date of the
exchange offer, unless the holder complies with the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their outstanding notes and (1) whose
outstanding notes are not immediately available or (2) who cannot deliver their
outstanding notes, the letter of transmittal, or any other required documents to
the exchange agent prior to the expiration date, may effect a tender if:
- The tender is made through an eligible institution;
- Prior to the expiration date of the exchange offer, the exchange agent
receives from such eligible institution a properly completed and duly
executed Notice of Guaranteed Delivery, by facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder, the
certificate number(s) of the outstanding notes and the principal amount
of outstanding notes tendered and stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date of the exchange offer, the letter
of transmittal, together with the certificate(s) representing the
outstanding notes in proper form for transfer or a confirmation of book-
entry transfer, as the case may be, and any other documents required by
the letter of transmittal will be deposited by the eligible institution
with the exchange agent; and
- The exchange agent receives the properly completed and executed letter of
transmittal, as well as the certificate(s) representing all tendered
outstanding notes in proper form for transfer and other documents
required by the letter of transmittal within three New York Stock
Exchange trading days after the expiration date of the exchange offer.
Upon request to the exchange agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided, tenders of outstanding notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the expiration date of
the exchange offer.
To withdraw a tender of outstanding notes in the exchange offer, a written
or facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date of the exchange offer. Any such notice of withdrawal must
- specify the name of the person having deposited the outstanding notes to
be withdrawn,
- identify the outstanding notes to be withdrawn,
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the outstanding notes were tendered or
be accompanied by documents of transfer sufficient to have the exchange
agent register the transfer of the outstanding notes in the name of the
person withdrawing the tender, and
- specify the name in which any outstanding notes are to be registered, if
different from that of the person who deposited the outstanding notes to
be withdrawn.
We will determine all questions as to the validity, form, and eligibility
of the notices, which determination will be final and binding on all parties.
Any outstanding notes so withdrawn will be deemed
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not to have been validly tendered for purposes of the exchange offer, and no
exchange notes will be issued with respect to those outstanding notes unless the
outstanding notes so withdrawn are validly re-tendered.
Any outstanding notes that have been tendered but that are not accepted for
payment will be returned to the holder of those outstanding notes, or in the
case of outstanding notes tendered by book-entry transfer, will be credited to
an account maintained with The Depository Trust Company, without cost to the
holder as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn outstanding notes may be
re-tendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the expiration date of the
exchange offer.
TERMINATION OF CERTAIN RIGHTS
All rights given to holders of outstanding notes under the registration
rights agreement will terminate upon the consummation of the exchange offer
except with respect to our duty:
- to keep the registration statement effective until the closing of the
exchange offer, and
- to provide copies of the latest version of this prospectus to any
broker-dealer that requests copies of this prospectus for use in
connection with any resale by that broker-dealer of exchange notes
received for its own account pursuant to the exchange offer in exchange
for outstanding notes acquired for its own account as a result of
market-making or other trading activities, subject to the conditions
described above under "-- Resale of the Exchange Notes."
EXCHANGE AGENT
U.S. Bank National Association has been appointed exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or the letter of transmittal, and requests for copies
of the Notice of Guaranteed Delivery with respect to the outstanding notes
should be addressed to the exchange agent as follows:
U.S. Bank National Association
U.S. Bank Trust Center
180 East Fifth Street, 2nd Floor
St. Paul, MN 55101
Attention: Corporate Trust Services
By Telephone (to confirm receipt of facsimile): (651) 244-8677
By Facsimile (for Eligible Institutions only): (651) 244-0711
FEES AND EXPENSES
We will pay the expenses of soliciting tenders in connection with the
exchange offer. The principal solicitation is being made by mail. Additional
solicitation, however, may be made by facsimile, telephone, or in person by
officers and regular employees of NMHG and its affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse the exchange
agent for its reasonable out-of-pocket expenses in connection with the exchange
offer.
We estimate that our cash expenses in connection with the exchange offer
will be approximately $160,000. These expenses include registration fees, fees
and expenses of the exchange agent, accounting and legal fees, and printing
costs, among others.
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We will pay all transfer taxes, if any, applicable to the exchange of the
outstanding notes for exchange notes. The tendering holder of outstanding notes,
however, will pay applicable taxes if certificates representing outstanding
notes not tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered, or
- if tendered, the certificates representing outstanding notes are
registered in the name of any person other than the person signing the
letter of transmittal, or
- if a transfer tax is imposed for any reason other than the exchange of
the outstanding notes in the exchange offer.
If satisfactory evidence of payment of the transfer taxes or exemption from
payment of transfer taxes is not submitted with the letter of transmittal, the
amount of the transfer taxes will be billed directly to the tendering holder and
the exchange notes need not be delivered until the transfer taxes are paid.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. Holders of the
outstanding notes are urged to consult their financial and tax advisors in
making their own decisions on what action to take.
Outstanding notes that are not exchanged for the exchange notes in the
exchange offer will not retain any rights under the registration rights
agreement and will remain restricted securities for purposes of the federal
securities laws. Accordingly, the outstanding notes may not be offered, sold,
pledged, or otherwise transferred except:
- to NMHG or any subsidiary thereof;
- to a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act purchasing for its own account or for the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A;
- pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder, if available;
- pursuant to an effective registration statement under the Securities Act,
and, in each case, in accordance with all other applicable securities
laws.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The exchange notes will be recorded at the same carrying
value as the outstanding notes, as reflected in our accounting records on the
date of the exchange. The expenses of the exchange offer will be amortized over
the remaining term of the exchange notes.
NO APPRAISAL OR DISSENTERS' RIGHTS
In connection with the exchange offer, you do not have any appraisal or
dissenters' rights under the General Corporation Law of the State of Delaware or
the indenture governing the notes. We intend to conduct the exchange offer in
accordance with the registration rights agreement, the applicable requirements
of the Exchange Act and the rules and regulations of the SEC related to exchange
offers.
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DESCRIPTION OF NOTES
NMHG Holding Co. issued the outstanding notes and will issue the exchange
notes under an Indenture (the "Indenture") between itself, each of the
Subsidiary Guarantors and U.S. Bank National Association, as trustee (the
"Trustee"). The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(the "Trust Indenture Act").
Certain terms used in this description are defined under the subheading
"-- Certain Definitions." In this description, the word "Company" refers only to
NMHG Holding Co. and not to any of its subsidiaries and all references to "the
Notes" include the outstanding notes and the exchange notes.
The following description is only a summary of the material provisions of
the Indenture. We urge you to read the Indenture because it, not this
description, defines your rights as holders of these Notes. You may request a
copy of the Indenture at our address set forth under the heading "Where You Can
Find More Information."
BRIEF DESCRIPTION OF THE NOTES
The Notes:
- are unsecured senior obligations of the Company;
- are senior in right of payment to any future Subordinated Obligations of
the Company;
- are guaranteed by each Subsidiary Guarantor; and
- are subject to registration with the SEC pursuant to the Registration
Rights Agreement.
PRINCIPAL, MATURITY AND INTEREST
The Company will issue the Notes initially with a maximum aggregate
principal amount of $250.0 million. The Company will issue the Notes in
denominations of $1,000 and any integral multiple of $1,000. The Notes will
mature on May 15, 2009. Subject to our compliance with the covenant described
under the subheading "-- Certain Covenants -- Limitation on Indebtedness," we
are entitled to, without the consent of the Holders, issue more Notes under the
Indenture on the same terms and conditions and with the same CUSIP numbers as
the Notes being offered hereby in an unlimited aggregate principal amount (the
"Additional Notes"). The Notes and the Additional Notes, if any, will be treated
as a single class for all purposes of the Indenture, including waivers,
amendments, redemptions and offers to purchase. Unless the context otherwise
requires, for all purposes of the Indenture and this "Description of Notes,"
references to the Notes include any Additional Notes actually issued.
Interest on these Notes will accrue at the rate of 10% per annum and will
be payable semiannually in arrears on May 15 and November 15, commencing on
November 15, 2002. We will make each interest payment to the Holders of record
of these Notes on the immediately preceding May 1 and November 1. We will pay
interest on overdue principal at 1% per annum in excess of the above rate and
will pay interest on overdue installments of interest at such higher rate to the
extent lawful.
Interest on these Notes will accrue from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Additional interest may accrue on the Notes in certain
circumstances under the Registration Rights Agreement.
OPTIONAL REDEMPTION
Except as set forth below, we will not be entitled to redeem the Notes at
our option prior to May 15, 2006.
On and after May 15, 2006, we will be entitled at our option to redeem all
or a portion of these Notes upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders of
record on
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the relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the 12-month period commencing on May 15 of
the years set forth below:
<Table>
<Caption>
PERIOD REDEMPTION PRICE
- ------ ----------------
2006........................................................ 105.00%
2007........................................................ 102.50
2008........................................................ 100.00
</Table>
In addition, before May 15, 2005, we are entitled at our option on one or
more occasions to redeem Notes (which includes Additional Notes, if any) in an
aggregate principal amount of not to exceed 35% of the aggregate principal
amount of the Notes (which includes Additional Notes, if any) originally issued
at a redemption price (expressed as a percentage of principal amount) of 110%,
plus accrued and unpaid interest to the redemption date, with the net cash
proceeds, to the extent actually received by the Company, from one or more
Public Equity Offerings; provided that
(1) at least 65% of such aggregate principal amount of Notes (which
includes Additional Notes, if any) remains outstanding immediately
after the occurrence of each such redemption (other than Notes
held, directly or indirectly, by the Company or its Affiliates);
and
(2) each such redemption occurs within 60 days after the date of the
related Public Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
If we are redeeming less than all the Notes at any time, the Trustee will
select Notes on a pro rata basis, by lot or by such other method as the Trustee
in its sole discretion shall deem to be fair and appropriate.
We will redeem Notes of $1,000 or less in whole and not in part. We will
cause notices of redemption to be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note will state the portion of the principal amount thereof to
be redeemed. We will issue a new Note in a principal amount equal to the
unredeemed portion of the original Note in the name of the holder upon
cancelation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES
We are not required to make any mandatory redemption or sinking fund
payments with respect to the Notes. However, under certain circumstances, we may
be required to offer to purchase Notes as described under the captions
"-- Change of Control" and "Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock." We may at any time and from time to time purchase Notes
in the open market or otherwise.
GUARANTIES
The Subsidiary Guarantors will jointly and severally guarantee, on a senior
unsecured basis, our obligations under these Notes. The obligations of each
Subsidiary Guarantor under its Subsidiary Guaranty will be limited as necessary
to prevent that Subsidiary Guaranty from constituting a fraudulent conveyance
under applicable law. See "Risk Factors -- Federal and state statutes allow
courts, under specific circumstances, to void guarantees and require noteholders
to return payments received from guarantors."
Each Subsidiary Guarantor that makes a payment under its Subsidiary
Guaranty will be entitled to a contribution from each other Subsidiary Guarantor
in an amount equal to such other Subsidiary Guarantor's pro rata portion of such
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of such payment determined in accordance with GAAP.
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If a Subsidiary Guaranty were rendered voidable, it could be subordinated
by a court to all other indebtedness (including guarantees and other contingent
liabilities) of the applicable Subsidiary Guarantor, and, depending on the
amount of such indebtedness, a Subsidiary Guarantor's liability on its
Subsidiary Guaranty could be reduced to zero. See "Risk Factors -- Although the
notes are referred to as 'senior notes,' they will be effectively subordinated
to any future secured indebtedness of NMHG and the subsidiary guarantors and all
obligations of the non-guarantor subsidiaries."
The Subsidiary Guaranty of a Subsidiary Guarantor will be released:
(1) upon the sale or other disposition (including by way of
consolidation or merger) of a Subsidiary Guarantor;
(2) upon the sale or disposition of all or substantially all the
assets of a Subsidiary Guarantor; or
(3) if the Company properly designates any Restricted Subsidiary that
is a Subsidiary Guarantor as an Unrestricted Subsidiary in
accordance with the applicable provisions of the Indenture;
in the case of paragraphs (1) or (2) other than to the Company or an Affiliate
of the Company and as permitted by the Indenture.
RANKING
SENIOR INDEBTEDNESS VERSUS NOTES
The Indebtedness evidenced by these Notes and the Subsidiary Guaranties
will be unsecured and will rank pari passu in right of payment to the Senior
Indebtedness of the Company and the Subsidiary Guarantors, as the case may be.
The Notes will be guaranteed by the Subsidiary Guarantors.
As of March 31, 2002, after giving pro forma effect to the offering of the
outstanding Notes and the application of the net proceeds therefrom, together
with borrowings under our new revolving credit facility and available cash, to
repay amounts outstanding under our existing credit facility and European
receivables discounting facility:
(1) the Company's Senior Indebtedness would have been approximately
$282.6 million, including $35.7 million of secured indebtedness;
and
(2) the Senior Indebtedness of the Subsidiary Guarantors would have
been approximately $297.9 million, including $51.0 million of
secured indebtedness. Virtually all of the Senior Indebtedness of
the Subsidiary Guarantors consists of their respective guaranties
of Senior Indebtedness of the Company under the Credit Facilities
and with respect to the Notes.
The Notes and the Subsidiary Guaranties are unsecured obligations of the
Company and the Subsidiary Guarantors. Secured debt and other secured
obligations of the Company and the Subsidiary Guarantors (including obligations
with respect to the Credit Facilities) will be effectively senior to the Notes
and the Subsidiary Guaranties to the extent of the value of the assets securing
such debt or other obligations.
LIABILITIES OF SUBSIDIARIES VERSUS NOTES
All of our operations are conducted through our subsidiaries. Claims of
creditors of such subsidiaries that are not Subsidiary Guarantors, including
trade creditors and creditors holding indebtedness or guarantees issued by such
subsidiaries, and claims of preferred stockholders of such subsidiaries
generally will have priority with respect to the assets and earnings of such
subsidiaries over the claims of our creditors, including holders of the Notes.
Accordingly, the Notes will be effectively subordinated to creditors (including
trade creditors) and preferred stockholders, if any, of our subsidiaries that
are not Subsidiary Guarantors.
At March 31, 2002, the total liabilities of our subsidiaries that are not
Subsidiary Guarantors were approximately $241.3 million, including trade
payables, but excluding intercompany accounts and investments. Although the
Indenture limits the incurrence of Indebtedness and issuance of Preferred Stock
of certain of our subsidiaries, such limitation is subject to a number of
significant qualifications. Moreover, the
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Indenture does not impose any limitation on the incurrence by such subsidiaries
of liabilities that are not considered Indebtedness under the Indenture. See
"-- Certain Covenants -- Limitation on Indebtedness."
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes will be issued in registered, global form in minimum
denominations of $1,000 and integral multiples of $1,000 in excess of $1,000.
The exchange notes initially will be represented by one or more notes in
registered, global form without interest coupons (collectively, the "Global
Notes"). The Global Notes will be deposited upon issuance with the Trustee as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Global Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Notes in certificated
form.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and DTC fails to
appoint a successor depositary or (b) has ceased to be a clearing
agency registered under the Exchange Act;
(2) the Company, at its option, notifies the trustee in writing that
it elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default with respect to the
Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend referred to in
"Transfer Restrictions," unless that legend is not required by applicable law.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them. We take no responsibility for these operations and
procedures and urge investors to contact the system or their participants
directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers (including the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in,
78
each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised us that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership of these interests will be effected
only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interests in the
Global Notes).
Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests therein indirectly through
organizations which are Participants. All interests in a Global Note may be
subject to the procedures and requirements of DTC. The laws of some states
require that certain Persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such Persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a Person having beneficial interests in
a Global Note to pledge such interests to Persons that do not participate in the
DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest and premium and
additional interest, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the Persons in whose names the Notes, including the Global
Notes, are registered as the owners of the Notes for the purpose of receiving
payments and for all other purposes. Consequently, neither the Company, the
Trustee nor any agent of the Company or the trustee has or will have any
responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the Notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which
79
such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the notes, DTC reserves the right to exchange
the Global Notes for legended Notes in certificated form, and to distribute such
Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among participants in DTC, they are under no
obligation to perform or to continue to perform such procedures, and may
discontinue such procedures at any time. Neither the Company nor the Trustee nor
any of their respective agents will have any responsibility for the performance
by DTC or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
SAME DAY SETTLEMENT AND PAYMENT
The Company will make payments in respect of the Notes represented by the
Global Notes (including principal, premium, if any, interest and additional
interest, if any) by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. The Company will make all payments
of principal, interest and premium and additional interest, if any, with respect
to Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the Holders of the Certificated Notes or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Notes represented by the Global Notes are expected to be eligible
to trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes will,
therefore, be required by DTC to be settled in immediately available funds. The
Company expects that secondary trading in any Certificated Notes will also be
settled in immediately available funds.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof on the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that for purposes of this
clause (1) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than
35% of the total voting power of the Voting Stock of Parent or the
Company; provided, however, that the Permitted Holders
beneficially own (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of Parent
or the Company, as the case may be, than such other person and do
not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the
Board of Directors of Parent or the Company, as the case may be
(such person shall be deemed to beneficially own any Voting Stock
of a Person (the "specified person") held by any other Person (the
"parent entity"), if such person is the beneficial owner (as
defined above in this clause (1)), directly or indirectly, of more
than 35% of the voting power of the Voting Stock of such parent
entity);
(2) individuals who on the Issue Date constituted the Board of
Directors of the Company or Parent (together with any new
directors whose election by such Board of Directors of the Company
or Parent, as the case may be, or whose nomination for election by
the stockholders of the Company or Parent, as the case may be, was
approved by a vote of a majority of the directors of the Company
or of Parent, as the case may be, then still in office who were
either directors on the Issue Date or whose election or nomination
for election was previously so approved)
80
cease for any reason to constitute a majority of the Board of
Directors of the Company or Parent then in office;
(3) the adoption of a plan relating to the liquidation or dissolution
of the Company or Parent; or
(4) the merger or consolidation of Parent or the Company with or into
another Person or the merger of another Person with or into Parent
or the Company, or the sale of all or substantially all the assets
of Parent or the Company (determined on a consolidated basis) to
another Person, other than a transaction following which (A) in
the case of a merger or consolidation transaction, holders of
securities that represented 100% of the Voting Stock of Parent or
the Company immediately prior to such transaction (or other
securities into which such securities are converted as part of
such merger or consolidation transaction) own directly or
indirectly at least a majority of the voting power of the Voting
Stock of the surviving Person in such merger or consolidation
transaction immediately after such transaction and in
substantially the same proportion as before the transaction and
(B) in the case of a sale of assets transaction, the transferee
Person becomes the obligor in respect of the Notes and a
Subsidiary of the transferor of such assets.
Within 30 days following any Change of Control, we will mail a notice to
each Holder with a copy to the Trustee (the "Change of Control Offer") stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require us to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof on the
date of purchase, plus accrued and unpaid interest, if any, or
premium, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest
due on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions, as determined by us, consistent with the
covenant described hereunder, that a Holder must follow in order
to have its Notes purchased.
We will not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by us and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
We will comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of Notes as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with the provisions of the covenant described hereunder, we will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached our obligations under the covenant described hereunder by virtue of its
compliance with such securities laws or regulations.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a sale or takeover of the Parent
and the Company and, thus, the removal of incumbent management. The Change of
Control purchase feature is a result of negotiations between the Company and the
Initial Purchasers. Neither the Company nor the Parent has the present intention
to engage in a transaction involving a Change of Control, although it is
possible that we or it could decide to do so in the future. Subject to the
limitations discussed below, we or the Parent could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to Incur additional Indebtedness are contained in
the covenants described under "-- Certain Covenants -- Limitation on
Indebtedness," "-- Limitation on Liens" and "-- Limitation on Sale/Leaseback
Transactions." Such
81
restrictions can only be waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding. Except for the limitations
contained in such covenants, however, the Indenture will not contain any
covenants or provisions that may afford holders of the Notes protection in the
event of a highly leveraged transaction.
The Credit Agreement will prohibit repurchases of Notes prior to the
termination of the Credit Agreement and payment in full of all obligations
thereunder. The occurrence of a Change of Control will constitute a default
under the Credit Agreement. In the event a Change of Control occurs at a time
when we are prohibited from purchasing Notes under the terms of the Credit
Agreement or other Senior Indebtedness of the Company, we may seek the consent
of our lenders to the purchase of Notes or may attempt to refinance the
borrowings that contain such prohibition. If we do not obtain such a consent or
refinance such borrowings, we will remain prohibited from purchasing Notes. In
such case, our failure to offer to purchase Notes would constitute a Default
under the Indenture, which would, in turn, constitute a default under the Credit
Agreement.
Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require the repurchase of such indebtedness upon a Change of Control. Moreover,
the exercise by the holders of their right to require us to repurchase the Notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on us. Finally,
our ability to pay cash to the holders of Notes following the occurrence of a
Change of Control may be limited by our then existing financial resources. There
can be no assurance that we will have sufficient funds available when necessary
to make any required repurchases.
The definition of "Change of Control" includes a disposition of all or
substantially all of the assets of the Company or Parent to certain Persons.
Although there is a limited body of case law interpreting "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, in certain circumstances there may be a degree of uncertainty as to
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of the Company or Parent. As a result, it may
be unclear as to whether a Change of Control has occurred and whether a Holder
of the Notes may require the Company to make an offer to repurchase the Notes as
described above.
The provisions under the Indenture relative to our obligation to make an
offer to repurchase the Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS
(a) The Company will not, and will not permit any Restricted Subsidiary to,
Incur, directly or indirectly, any Indebtedness; provided, however, that the
Company and the Subsidiary Guarantors will be entitled to Incur Indebtedness if,
on the date of such Incurrence and after giving effect thereto on a pro forma
basis no Default has occurred and is continuing and the Consolidated Coverage
Ratio exceeds 2.00 to 1 if such Indebtedness is Incurred prior to May 15, 2003
or 2.25 to 1 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries will be entitled to Incur any or all of the following
Indebtedness:
(1) Indebtedness Incurred by the Company and any Subsidiary Guarantor
pursuant to any Credit Facility; provided, however, that, after
giving effect to any such Incurrence, the aggregate principal
amount of Indebtedness Incurred pursuant to this clause (1) and
then outstanding does not exceed the greater of (i) $175.0 million
less the sum of all principal payments with respect to such
Indebtedness pursuant to paragraph (a)(3)(A) of the covenant
described under "-- Limitation on Sales of Assets and Subsidiary
Stock" and (ii) the sum of (x) 60% of the book value of the
inventory of the Company and its Restricted Subsidiaries and (y)
80% of the
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book value of the accounts receivables of the Company and its
Restricted Subsidiaries, in each case at the end of the most recent
fiscal quarter for which financial statements are publicly available;
(2) Indebtedness owed to and held by the Company or a Restricted
Subsidiary; provided, however, that (A) any subsequent issuance or
transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the obligor
thereon and (B) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all obligations with respect to
the Notes;
(3)the Notes and the Exchange Notes (other than any Additional Notes);
(4)Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2) or (3) of this covenant);
(5)Indebtedness of a Restricted Subsidiary Incurred and outstanding on
or prior to the date on which such Subsidiary was acquired by the
Company (other than Indebtedness Incurred in connection with, or to
provide all or any portion of the funds or credit support utilized
to consummate, the transaction or series of related transactions
pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company); provided, however, that on the date of
such acquisition and after giving pro forma effect thereto, the
Company would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to paragraph (a) of this covenant;
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) or
this clause (6); provided, however, that to the extent such
Refinancing Indebtedness directly or indirectly Refinances
Indebtedness of a Subsidiary Incurred pursuant to clause (5), such
Refinancing Indebtedness shall be Incurred only by such
Subsidiary;
(7) Hedging Obligations directly related to Indebtedness permitted to
be Incurred by the Company or the Subsidiary Guarantors pursuant
to the Indenture or directly related to the ordinary course of
business of the Company and its Restricted Subsidiaries;
(8) obligations in respect of performance, bid and surety bonds and
completion guarantees provided by the Company or any Restricted
Subsidiary in the ordinary course of business;
(9) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is
extinguished within five Business Days of its Incurrence;
(10) Indebtedness consisting of (i) the Subsidiary Guaranty of a
Subsidiary Guarantor, (ii) a Guarantee of a Restricted Subsidiary
that is not a Subsidiary Guarantor to the extent it Guarantees
Indebtedness permitted to be Incurred under the Indenture by any
other Restricted Subsidiary that is also not a Subsidiary
Guarantor and (iii) any Guarantee by a Subsidiary Guarantor of
Indebtedness Incurred pursuant to paragraph (a) or pursuant to
clause (1), (2), (3) or (4) or pursuant to clause (6) to the
extent the Refinancing Indebtedness Incurred thereunder directly
or indirectly Refinances Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clauses (3) or (4);
(11) Indebtedness of the Company or the Subsidiary Guarantors
represented by Capital Lease Obligations Incurred for the purpose
of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used
in a Related Business in an aggregate principal amount which,
when added together with the amount of Indebtedness Incurred
pursuant to this clause (11) and then outstanding, does not
exceed $5.0 million (including any Refinancing Indebtedness with
respect thereto);
83
(12) Lift Truck Financing Guarantees;
(13) Indebtedness Incurred by a Receivables Subsidiary in a Qualified
Receivables Transaction that is not recourse to the Company or
any of its Subsidiaries (except for Standard Securitization
Undertakings) in an amount which, when added together with the
aggregate amount of all Indebtedness Incurred pursuant to this
clause (13) and then outstanding, does not exceed the lesser of
(i) $175.0 million and (ii) the maximum principal amount of
Indebtedness that could be Incurred pursuant to clause (1) above
at such time after taking into account all Indebtedness
theretofore Incurred pursuant to clause (1) above and then
outstanding;
(14) Indebtedness of the Company or any Restricted Subsidiary
consisting of reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including,
without limitation, letters of credit in response to worker's
compensation claims or self-insurance or similar requirements;
(15) Indebtedness consisting of customary indemnification, adjustment
of purchase price or similar obligations, including insurance, of
the Company or any Restricted Subsidiary, in each case Incurred
in connection with the acquisition or disposition of any assets
by the Company or any Restricted Subsidiary;
(16) Indebtedness Incurred by any Foreign Subsidiary; provided,
however, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding
does not exceed the sum of (x) 60% of the book value of the
inventory of all Foreign Subsidiaries and their Restricted
Subsidiaries and (y) 80% of the book value of the accounts
receivables of all Foreign Subsidiaries and their Restricted
Subsidiaries, in each case at the end of the most recent fiscal
quarter for which financial statements are publicly available;
and
(17) Indebtedness of the Company or the Subsidiary Guarantors in an
aggregate principal amount which, when taken together with all
other Indebtedness of the Company or the Subsidiary Guarantors
outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (16) above or
paragraph (a)) does not exceed $40.0 million.
(c) Notwithstanding the foregoing, neither the Company nor any Subsidiary
Guarantor will incur any Indebtedness pursuant to the foregoing paragraph (b) if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations of the Company or any Subsidiary Guarantor unless such
Indebtedness shall be subordinated to the Notes or the applicable Subsidiary
Guaranty to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant, (1) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, the Company, in its sole discretion, will
classify such item of Indebtedness at the time of Incurrence and only be
required to include the amount and type of such Indebtedness in one of the above
clauses and (2) the Company will be entitled at the time of such Incurrence to
divide and classify an item of Indebtedness in more than one of the types of
Indebtedness described above.
(e) For purposes of determining compliance with any U.S. dollar restriction
on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated
in a different currency, the amount of such Indebtedness will be the U.S. Dollar
Equivalent determined on the date of the Incurrence of such Indebtedness;
provided, however, that if any such Indebtedness denominated in a different
currency is subject to a Currency Agreement with respect to U.S. dollars
covering all principal, premium, if any, and interest payable on such
Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be
as provided in such Currency Agreement. The principal amount of any Refinancing
Indebtedness Incurred in the same currency as the Indebtedness being Refinanced
will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to the
extent that (i) such U.S. Dollar Equivalent was determined based on a Currency
Agreement, in which case the Refinancing Indebtedness will be determined in
accordance with the preceding sentence, and (ii) the principal amount of the
Refinancing Indebtedness exceeds the principal amount of the
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Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such
excess, as appropriate, will be determined on the date such Refinancing
Indebtedness is Incurred.
LIMITATION ON RESTRICTED PAYMENTS
(a) The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not entitled to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described
under "-- Limitation on Indebtedness;" or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of
(without duplication):
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter during
which the Issue Date occurs to the end of the most recent
fiscal quarter prior to the date of such Restricted Payment for
which financial statements have been made publicly available
(or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit); plus
(B) 100% of the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company and other than
an issuance or sale to an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for
the benefit of their employees) and 100% of any cash capital
contribution received by the Company from its stockholders
subsequent to the Issue Date; plus
(C) the amount by which Indebtedness of the Company is reduced on
the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the
Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock)
of the Company (less the amount of any cash, or the fair value
of any other property, distributed by the Company upon such
conversion or exchange); plus
(D) an amount equal to the sum of (x) the net reduction in the
Investments (other than Permitted Investments) made by the
Company or any Restricted Subsidiary in any Person resulting
from repurchases, repayments or redemptions of such Investments
by such Person, proceeds realized on the sale of such
Investment and proceeds representing the return of capital
(excluding dividends and distributions), in each case received
by the Company or any Restricted Subsidiary and (y) to the
extent such Person is an Unrestricted Subsidiary, the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such
Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the case
of any such Person or Unrestricted Subsidiary, the amount of
Investments (excluding Permitted Investments) previously made
(and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person or Unrestricted
Subsidiary.
(b) The preceding provisions will not prohibit:
(1) any Restricted Payment made out of the Net Cash Proceeds of the
substantially concurrent sale of, or made by exchange for, Capital
Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock
85
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees) or a substantially
concurrent cash capital contribution received by the Company from its
stockholders; provided, however, that (A) such Restricted Payment
shall be excluded in the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale or such cash
capital contribution (to the extent so used for such Restricted
Payment) shall be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of
the Company or any Subsidiary Guarantor made by exchange for, or
out of the proceeds of the substantially concurrent sale of,
Indebtedness which is permitted to be Incurred pursuant to the
covenant described under "-- Limitation on Indebtedness;"
provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(3) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of
the Company or any Subsidiary Guarantor using any Net Available
Cash remaining after compliance with the requirements of the
covenant described under "-- Limitation on Sales of Assets and
Subsidiary Stock;"
(4) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that at the time
of payment of such dividend, no other Default shall have occurred
and be continuing (or result therefrom); provided further,
however, that such dividend shall be included in the calculation
of the amount of Restricted Payments;
(5) so long as no Default has occurred and is continuing, the
repurchase or other acquisition of shares of Capital Stock of the
Company or any of its Subsidiaries from employees, former
employees, directors or former directors of the Company or any of
its Subsidiaries (or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the
terms of the agreements (including employment agreements) or plans
(or amendments thereto) approved by the Board of Directors of the
Company under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such Capital
Stock; provided, however, that the aggregate amount of such
repurchases and other acquisitions shall not exceed $2.0 million
in any calendar year; provided further, however, that such
repurchases and other acquisitions shall be excluded in the
calculation of the amount of Restricted Payments;
(6) dividends or other distributions to Parent consistent with past
practices (i) to pay franchise taxes and other amounts allocable
to the Company required by Parent to maintain its corporate
existence, (ii) to pay for all operating and overhead expenses of
Parent allocable to the Company (including, without limitation,
salaries and other compensation of employees, directors' fees and
expenses, and travel and entertainment expenses) incurred by
Parent in the ordinary course of its business, (iii) to pay Parent
fees for services provided by Parent to the Company that would
otherwise have been performed by third parties (including
accounting, treasury, tax, legal, strategic consulting and
corporate development services) and (iv) to reimburse Parent for
the payment of amounts relating to services (including, without
limitation, legal, consulting, software, insurance and accounting
services) provided by third parties on the Company's or any
Restricted Subsidiary's behalf; provided, however, that such
dividends or other distributions shall be excluded in the
calculation of the amount of Restricted Payments, except for
dividends and other distributions described in clause (ii) above
which shall be included in the calculation of the amount of
Restricted Payments;
(7) so long as no Default has occurred and is continuing, payments to
Parent in an amount not in excess of $5.0 million per calendar
year; provided, however, that such payments shall be included in
the calculation of the amount of Restricted Payments;
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(8) so long as no Default has occurred and is continuing, any
Investments in joint ventures or similar Persons, including NMHG
Financial Services, Inc., Sumitomo-NACCO Materials Handling Co.,
Ltd., Shanghai Hyster Forklift Ltd., in Related Businesses;
provided, however, that the aggregate amount of all Investments
made pursuant to this clause (8) to the extent they shall not have
at the time been repaid, repurchased, redeemed, sold or returned,
does not exceed $5.0 million; provided further, however, that such
payments shall be included in the calculation of the amount of
Restricted Payments;
(9) payments or repayments of advances to Parent pursuant to the tax
sharing agreement among the Company, Parent and Parent's domestic
subsidiaries and consistent with past practices; provided,
however, that such payments shall be excluded in the calculation
of the amount of Restricted Payments; or
(10) so long as no Default has occurred and is continuing, Restricted
Payments in an amount which, when added together with all
Restricted Payments made pursuant to this clause (10) to the
extent they shall not have at the time been repaid, repurchased,
redeemed, sold or returned, does not exceed $10.0 million;
provided, however, that such payment shall be included in the
calculation of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:
(1) with respect to clause (a), (b) and (c),
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date or any encumbrance
or restriction pursuant to any term sheets for financings
attached to the Indenture;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or
prior to the date on which such Restricted Subsidiary was
acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on
such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to
an agreement referred to in clause (i) or (ii) of clause (1)
of this covenant or this clause (iii) or contained in any
amendment to an agreement referred to in clause (i) or (ii)
of clause (1) of this covenant or this clause (iii);
provided, however, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any
such refinancing agreement or amendment are no less favorable
to the Noteholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such
predecessor agreements;
(iv) applicable by reason of law, rule, regulation, order, grant or
governmental permit;
(v) any encumbrance or restriction with respect to contractual
requirements of a Receivables Subsidiary in connection with a
Qualified Receivables Transaction; provided, however, that such
restrictions apply only to such Receivables Subsidiary; and
87
(vi) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary pending the closing of
such sale or disposition; and
(2) with respect to clause (c) only,
(i) any such encumbrance or restriction consisting of customary
nonassignment provisions of any contract, license or lease with
any of our Restricted Subsidiaries to the extent such
provisions restrict the transfer of the property subject to
such contract, license or lease; and
(ii) restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property
subject to such security agreements or mortgages.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK
(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash
consideration), as determined in good faith by the senior
management of the Company or, in the case of an Asset Disposition
in excess of $5.0 million, by the Board of Directors of the
Company, of the shares and assets subject to such Asset
Disposition;
(2) at least 75% of the consideration thereof received by the Company
or such Restricted Subsidiary is in the form of cash or cash
equivalents; and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) pursuant to one or more of the
following:
(A) to the extent the Company elects (or is required by the terms
of any Indebtedness), to prepay, repay, redeem or purchase
Senior Indebtedness of the Company or a Subsidiary Guarantor or
Indebtedness (other than any Disqualified Stock) of a
Restricted Subsidiary (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within one
year from the later of the date of such Asset Disposition or
the receipt of such Net Available Cash;
(B) to the extent the Company or such Restricted Subsidiary elects,
to acquire Additional Assets within one year from the later of
the date of such Asset Disposition or the receipt of such Net
Available Cash; and
(C) to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an
offer to the holders of the Notes (and to holders of other
Senior Indebtedness of the Company designated by the Company)
to purchase Notes (and such other Senior Indebtedness of the
Company) pursuant to and subject to the conditions contained in
the Indenture;
provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary shall permanently retire such Indebtedness and shall cause
the related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries will not be required to apply any Net Available Cash
in accordance with this covenant except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this covenant exceeds $10.0 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash shall be invested in
Temporary Cash Investments or applied to temporarily reduce revolving credit
indebtedness.
88
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents:
(1) the assumption of Indebtedness of the Company or any Restricted
Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition; and
(2) securities received by the Company or any Restricted Subsidiary
from the transferee that are promptly converted by the Company or
such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Notes (and other Senior Indebtedness of the Company) pursuant to clause
(a)(3)(C) above, the Company will purchase Notes tendered pursuant to an offer
by the Company for the Notes (and such other Senior Indebtedness of the Company)
at a purchase price of 100% of their principal amount (or, in the event such
other Senior Indebtedness of the Company was issued with significant original
issue discount, 100% of the accreted value thereof) without premium, plus
accrued but unpaid interest (or, in respect of such other Senior Indebtedness of
the Company, such lesser price, if any, as may be provided for by the terms of
such Senior Indebtedness) in accordance with the procedures (including prorating
in the event of oversubscription) set forth in the Indenture. If the aggregate
purchase price of the securities tendered exceeds the Net Available Cash
allotted to their purchase, the Company will select the securities to be
purchased on a pro rata basis but in round denominations, which in the case of
the Notes will be denominations of $1,000 principal amount or multiples thereof.
The Company shall not be required to make such an offer to purchase Notes (and
other Senior Indebtedness of the Company) pursuant to this covenant if the Net
Available Cash available therefor is less than $10.0 million (which lesser
amount shall be carried forward for purposes of determining whether such an
offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this clause by virtue of its compliance with
such securities laws or regulations.
LIMITATION ON AFFILIATE TRANSACTIONS
(a) The Company will not, and will not permit any Restricted Subsidiary to,
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with, or for the benefit of, any Affiliate of the
Company (an "Affiliate Transaction") unless:
(1) the terms of the Affiliate Transaction are no less favorable to
the Company or such Restricted Subsidiary than those that could be
obtained at the time of the Affiliate Transaction in arm's-length
dealings with a Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of
$10.0 million, the terms of the Affiliate Transaction are set
forth in writing and a majority of the members of the Board of
Directors of the Company disinterested with respect to such
Affiliate Transaction have determined in good faith that the
criteria set forth in clause (1) are satisfied and have approved
the relevant Affiliate Transaction as evidenced by a resolution of
the Board of Directors of the Company; provided, that for purposes
of this paragraph only, in the event of any Affiliate Transaction
involving Parent, those members of the Board of Directors of the
Company who are not Permitted Holders, whether or not they are
also members of the Board of Directors of Parent, shall be deemed
disinterested; and
(3) if such Affiliate Transaction involves an amount in excess of (i)
$10.0 million in the case of any Affiliate Transaction between
Parent, on the one hand, and the Company or any Restricted
Subsidiary, on the other hand, or (ii) $20.0 million in the case
of any other Affiliate Transaction, the Board of Directors of the
Company shall also have received a written opinion
89
from an Independent Qualified Party to the effect that such Affiliate
Transaction is fair, from a financial standpoint, to the Company and
its Restricted Subsidiaries or not less favorable to the Company and
its Restricted Subsidiaries than could reasonably be expected to be
obtained at the time in an arm's-length transaction with a Person who
was not an Affiliate.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(1) any Investment (other than a Permitted Investment) or other
Restricted Payment, in each case permitted to be made pursuant to
the covenant described under "-- Limitation on Restricted
Payments;"
(2) any issuance of securities, or other payments, awards or grants in
cash, securities (including securities of Parent) or otherwise
pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of
Directors of the Company;
(3) loans or advances to employees in the ordinary course of business
in accordance with the past practices of the Company or its
Restricted Subsidiaries, but in any event not to exceed $6.0
million in the aggregate outstanding at any one time;
(4) reasonable fees and compensation paid to and indemnity provided on
behalf of officers, directors and employees of the Company or any
of its Restricted Subsidiaries in the ordinary course of business
or as required by law;
(5) any transaction with a Restricted Subsidiary or joint venture or
similar entity which would constitute an Affiliate Transaction
solely because the Company or a Restricted Subsidiary owns an
equity interest in or otherwise controls such Restricted
Subsidiary, joint venture or similar entity;
(6) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company;
(7) the purchase of or the payment of Indebtedness of or monies owed
by the Company or any of its Restricted Subsidiaries for goods or
materials purchased, or services received, in the ordinary course
of business;
(8) any Qualified Receivables Transaction, and the Incurrence of
obligations and acquisitions of Permitted Investments and other
rights or assets in connection with a Qualified Receivables
Transaction; and
(9) any agreement as in effect or entered into on the Issue Date and
described in the Offering Circular or any renewals or extensions
of any such agreement (so long as such renewals or extensions are
not less favorable to the Company or the Restricted Subsidiaries)
and the transactions evidenced thereby.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company
(1) will not, and will not permit any Restricted Subsidiary to, sell,
lease, transfer or otherwise dispose of any Capital Stock of any
Restricted Subsidiary to any Person (other than to the Company or
a Wholly Owned Subsidiary), and
(2) will not permit any Restricted Subsidiary to issue any of its
Capital Stock (other than, if necessary, shares of its Capital
Stock constituting directors' or other legally required qualifying
shares) to any Person (other than to the Company or a Wholly Owned
Subsidiary),
unless
(A) immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries
own any Capital Stock of such Restricted Subsidiary; or
90
(B) immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such
Person remaining after giving effect thereto is treated as a
new Investment by the Company and such Investment would not
have been prohibited by the covenant described under
"-- Limitation on Restricted Payments" if made on the date of
such issuance, sale or other disposition.
LIMITATION ON LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur or permit to exist any Lien (the "Initial Lien")
of any nature whatsoever on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired,
securing any Indebtedness, other than Permitted Liens, without effectively
providing that the Notes shall be secured equally and ratably with (or prior to)
the obligations so secured for so long as such obligations are so secured.
Any Lien created for the benefit of the Holders of the Notes pursuant to
the preceding sentence shall provide by its terms that such Lien shall be
automatically and unconditionally released and discharged upon the release and
discharge of the Initial Lien.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction with respect to any property unless:
(1) the Company or such Restricted Subsidiary would be entitled to (A)
Incur Indebtedness in an amount equal to the Attributable Debt
with respect to such Sale/Leaseback Transaction pursuant to the
covenant described under "-- Limitation on Indebtedness" and (B)
create a Lien on such property securing such Attributable Debt
without equally and ratably securing the Notes pursuant to the
covenant described under "-- Limitation on Liens;"
(2) the net proceeds received by the Company or any Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are
at least equal to the fair value (as determined by our senior
management or, in the case of a Sale/Leaseback Transaction in
excess of $5.0 million, by the Board of Directors of the Company)
of such property; and
(3) the Company applies the proceeds of such transaction in compliance
with the covenant described under "-- Limitation on Sale of Assets
and Subsidiary Stock."
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, directly or
indirectly, all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws
of the United States of America, any State thereof or the District
of Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental thereto, executed
and delivered to the Trustee, in form reasonably satisfactory to
the Trustee, all the obligations of the Company under the Notes
and the Indenture;
(2) immediately after giving pro forma effect to such transaction (and
treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such
transaction as having been Incurred by such Successor Company or
such Subsidiary at the time of such transaction), no Default shall
have occurred and be continuing;
91
(3) immediately after giving pro forma effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described
under "-- Limitation on Indebtedness;"
(4) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture
(if any) comply with the Indenture; and
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of such
transaction and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such transaction had not occurred;
provided, however, that clause (3) will not be applicable to (A) a Restricted
Subsidiary consolidating with, merging into or transferring all or part of its
properties and assets to the Company or (B) the Company merging with an
Affiliate of the Company solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction.
The Successor Company will be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and the predecessor Company, except in the case
of a lease, shall be released from the obligation to pay the principal of and
interest on the Notes.
The Company will not permit any Subsidiary Guarantor to consolidate with or
merge with or into, or convey, transfer or lease, in one transaction or a series
of transactions, all or substantially all of its assets to any Person unless:
(1) except in the case of a Subsidiary Guarantor that has been
disposed of in its entirety to another Person (other than to the
Company or an Affiliate of the Company), whether through a merger,
consolidation or sale of Capital Stock or assets, if in connection
therewith the Company provides an Officers' Certificate to the
Trustee to the effect that the Company will comply with its
obligations under the covenant described under "-- Limitation on
Sales of Assets and Subsidiary Stock" in respect of such
disposition, the resulting, surviving or transferee Person (if not
such Subsidiary Guarantor) shall be a Person organized and
existing under the laws of the jurisdiction under which such
Subsidiary Guarantor was organized or under the laws of the United
States of America, or any State thereof or the District of
Columbia, and such Person shall expressly assume, by a Guaranty
Agreement, in a form reasonably satisfactory to the Trustee, all
the obligations of such Subsidiary Guarantor, if any, under its
Subsidiary Guaranty;
(2) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness
which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been
issued by such Person at the time of such transaction), no Default
shall have occurred and be continuing; and
(3) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such Guaranty Agreement, if any, complies
with the Indenture.
Notwithstanding the foregoing, a Restricted Subsidiary may consolidate with
or merge with or into or convey, transfer or lease, in one transaction or a
series of transactions, all or substantially all of its assets to the Company or
another Restricted Subsidiary.
FUTURE GUARANTORS
The Company will cause each Restricted Subsidiary organized under the laws
of the United States, any state thereof or the District of Columbia that
Guarantees any Indebtedness of the Company or any other Restricted Subsidiary
to, at the same time, execute and deliver to the Trustee a Guaranty Agreement
pursuant
92
to which such Restricted Subsidiary will Guarantee payment of the Notes on the
same terms and conditions as those set forth in the Indenture.
SEC REPORTS
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will file
with the SEC and provide the Trustee and Noteholders with such annual reports
and such information, documents and other reports as are specified in Sections
13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filings of such information, documents
and reports under such Sections.
In addition, the Company shall furnish to the Holders of the Notes and to
prospective investors, upon the requests of such Holders, any information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so
long as the Notes are not freely transferable under the Securities Act.
DEFAULTS
Each of the following is an Event of Default:
(1) a default in the payment of interest on the Notes when due,
continued for 30 days;
(2) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required purchase,
upon declaration of acceleration or otherwise;
(3) the failure by the Company to comply with its obligations under
"-- Certain Covenants -- Merger and Consolidation" above;
(4) the failure by the Company to comply for 30 days after notice with
any of its obligations in the covenants described above under
"Change of Control" (other than a failure to purchase Notes) or
under "-- Certain Covenants" under "-- Limitation on
Indebtedness," "-- Limitation on Restricted Payments,"
"-- Limitation on Restrictions on Distributions from Restricted
Subsidiaries," "-- Limitation on Sales of Assets and Subsidiary
Stock" (other than a failure to purchase Notes), "-- Limitation on
Affiliate Transactions," "-- Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries," or "-- Limitation on
Liens," "-- Limitation on Sale/Leaseback Transactions," "-- Future
Guarantors," or "-- SEC Reports;"
(5) the failure by the Company or a Subsidiary Guarantor to comply for
60 days after notice with its other agreements contained in the
Indenture;
(6) Indebtedness of the Company, any Subsidiary Guarantor or any
Significant Subsidiary is not paid within any applicable grace
period after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10.0 million (the
"cross acceleration provision");
(7) certain events of bankruptcy, insolvency or reorganization of the
Company, a Subsidiary Guarantor or a Significant Subsidiary (the
"bankruptcy provisions");
(8) any judgment or decree for the payment of money, the portion of
which is not covered by insurance is in excess of $10.0 million is
entered against the Company, a Subsidiary Guarantor or a
Significant Subsidiary, remains outstanding for a period of 60
consecutive days following such judgment and is not discharged,
waived or stayed (the "judgment default provision"); or
(9) a Subsidiary Guaranty ceases to be in full force and effect (other
than in accordance with the terms of such Subsidiary Guaranty) or
a Subsidiary Guarantor denies or disaffirms its obligations under
its Subsidiary Guaranty.
93
However, a default under clauses (4) or (5) will not constitute an Event of
Default until the Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless:
(1) such holder has previously given the Trustee notice that an Event
of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity;
and
(5) holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such
request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding Notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
holder of a Note or that would involve the Trustee in personal liability.
If a Default occurs, is continuing and is known to the Trustee, the Trustee
must mail to each holder of the Notes notice of the Default within 90 days after
it occurs. Except in the case of a Default in the payment of principal of or
interest on any Note, the Trustee may withhold notice if and so long as a
committee of its trust officers determines that withholding notice is not
opposed to the interest of the holders of the Notes. In addition, we are
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. We are required to deliver to the
Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action we
are taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or noncompliance with any
provisions may also be waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding.
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However, without the consent of each holder of an outstanding Note affected
thereby, an amendment or waiver may not, among other things:
(1) reduce the amount of Notes whose holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Note;
(3) reduce the principal of or extend the Stated Maturity of any Note;
(4) reduce the amount payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described
under "-- Optional Redemption" above;
(5) make any Note payable in money other than that stated in the Note;
(6) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's Notes on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such holder's Notes;
(7) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions;
(8) make any change in the ranking or priority of any Note that would
adversely affect the Noteholders; or
(9) make any change in any Subsidiary Guaranty that would adversely
affect the Noteholders.
Notwithstanding the preceding, without the consent of any holder of the
Notes, the Company, the Subsidiary Guarantors and Trustee may amend the
Indenture:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of the Company or any Subsidiary Guarantor under the
Indenture;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the
Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code);
(4) to add guarantees with respect to the Notes, including any
Subsidiary Guaranties, or to secure the Notes;
(5) to add to the covenants of the Company or a Subsidiary Guarantor
for the benefit of the holders of the Notes or to surrender any
right or power conferred upon the Company or a Subsidiary
Guarantor;
(6) to make any change that does not adversely affect the rights of
any holder of the Notes; or
(7) to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are required
to mail to holders of the Notes a notice briefly describing such amendment.
However, the failure to give such notice to all holders of the Notes, or any
defect therein, will not impair or affect the validity of the amendment.
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TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
We may require payment of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection with certain transfers and exchanges.
DEFEASANCE
At any time, we may terminate all our and the Subsidiary Guarantors'
obligations under the Notes and the Indenture ("legal defeasance"), except for
certain obligations, including those respecting the defeasance trust and
obligations to register the transfer or exchange of the Notes, to replace
mutilated, destroyed, lost or stolen Notes and to maintain a registrar and
paying agent in respect of the Notes.
In addition, at any time we may terminate our obligations under "-- Change
of Control" and under the covenants described under "-- Certain Covenants"
(other than the covenant described under "-- Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries and the judgment default provision described
under "-- Defaults" above and the limitations contained in clause (3) of the
first paragraph under "-- Certain Covenants -- Merger and Consolidation" above
("covenant defeasance").
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the Notes may not be accelerated because of an Event of
Default with respect thereto. If we exercise our covenant defeasance option,
payment of the Notes may not be accelerated because of an Event of Default
specified in clause (4), (5), (6), (7) (with respect only to Significant
Subsidiaries), (8) or (9) under "-- Defaults" above or because of the failure of
the Company to comply with clause (3) of the first paragraph under "-- Certain
Covenants -- Merger and Consolidation" above. If we exercise our legal
defeasance option or our covenant defeasance option, each Subsidiary Guarantor
will be released from all of its obligations with respect to its Subsidiary
Guaranty.
In order to exercise either of our defeasance options, we must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations or a combination thereof for the payment of principal and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amounts and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
U.S. Bank National Association is to be the Trustee under the Indenture. We
have appointed the Trustee as Registrar and Paying Agent with regard to the
Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
either eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. If an Event of Default occurs (and is not cured), the Trustee will
be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder of Notes, unless such Holder
shall have offered to the
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Trustee security and indemnity satisfactory to it against any loss, liability or
expense and then only to the extent required by the terms of the Indenture.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder (including
Parent) of the Company or any Subsidiary Guarantor will have any liability for
any obligations of the Company or any Subsidiary Guarantor under the Notes, any
Subsidiary Guaranty or the Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver and release
may not be effective to waive liabilities under the U.S. Federal securities
laws, and it is the view of the SEC that such a waiver is against public policy.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means:
(1) any property, plant or equipment or other tangible assets used in
or useful in the operation of a Related Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary
as a result of the acquisition of such Capital Stock by the
Company or another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that
at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "-- Certain Covenants -- Limitation on
Restricted Payments," "-- Certain Covenants -- Limitation on Affiliate
Transactions" and "-- Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 5% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law
to be held by a Person other than the Company or a Restricted
Subsidiary);
(2) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary; or
97
(3) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such
Restricted Subsidiary
other than, in the case of clauses (1), (2) and (3) above,
(A) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary;
(B) for purposes of the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary
Stock" only, (x) a disposition that constitutes a Restricted
Payment permitted by the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments" or a Permitted
Investment and (y) a disposition of all or substantially all
the assets of the Company in accordance with the covenant
described under "-- Certain Covenants -- Merger and
Consolidation;"
(C) a disposition of assets with a fair market value of less than
$2.0 million;
(D) sales of accounts receivable and related assets of the type
specified in the definition of Qualified Receivables
Transaction to a Receivables Subsidiary for the fair market
value thereof;
(E) disposals of equipment in connection with reinvestment in or
the replacement of its equipment and disposals of worn-out or
obsolete equipment, in each case in the ordinary course of
business of the Company or its Restricted Subsidiaries;
(F) the grant in the ordinary course of business of the Company or
its Restricted Subsidiaries of any license of patents,
trademarks, registrations therefor or similar intellectual
property;
(G) any sale, transfer or other disposition of defaulted
receivables for collection; and
(H) any sale, transfer or other disposition of lift trucks and
related products in which the Company or its Restricted
Subsidiaries holds a security interest in connection with its
granting of a guarantee or recourse or repurchase obligation
under any Lift Truck Financing Guarantee; provided that the net
proceeds of any such sale, transfer or other disposition shall
be applied to repay the outstanding Indebtedness, if any,
associated with such guarantee or recourse or repurchase
obligation.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as of
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/ Leaseback Transaction (including any period for which such lease has been
extended); provided, however, that if such Sale/Leaseback Transaction results in
a Capital Lease Obligation, the amount of Indebtedness represented thereby with
be determined in accordance with the definition of "Capital Lease Obligation."
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal
payment of or redemption or similar payment with respect to such
Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.
"Board of Directors" means with respect to a Person, the Board of Directors
of such Person or any committee thereof duly authorized to act on behalf of such
Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance
98
with GAAP; and the Stated Maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (x) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which financial statements have been made
publicly available prior to the date of such determination to (y) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro
forma basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such period;
(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness
since the beginning of such period or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each
case other than Indebtedness Incurred under any revolving credit
facility unless such Indebtedness has been permanently repaid and
has not been replaced) on the date of the transaction giving rise
to the need to calculate the Consolidated Coverage Ratio, EBITDA
and Consolidated Interest Expense for such period shall be
calculated on a pro forma basis as if such discharge had occurred
on the first day of such period and as if the Company or such
Restricted Subsidiary has not earned the interest income actually
earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise
discharge such Indebtedness;
(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition,
EBITDA for such period shall be reduced by an amount equal to
EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or
increased by an amount equal to EBITDA (if negative), directly
attributable thereto for such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale);
(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any person which
becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with a
transaction requiring a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such
period; and
(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or
into the Company or any Restricted Subsidiary since the
99
beginning of such period) shall have made any Asset Disposition, any
Investment or acquisition of assets that would have required an
adjustment pursuant to clause (3) or (4) above if made by the Company
or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro
forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication:
(1) interest expense attributable to Capital Lease Obligations and the
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expenses;
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
(6) net payments pursuant to Interest Rate Agreements and, to the
extent entered into in connection with financing transactions,
currency hedging transactions;
(7) Preferred Stock dividends in respect of all Preferred Stock held
by Persons other than the Company or a Wholly Owned Subsidiary
(other than dividends payable solely in Capital Stock (other than
Disqualified Stock) of the issuer of such Preferred Stock);
(8) interest incurred in connection with Investments in discontinued
operations;
(9) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such
plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(1) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (3) below);
and
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(B) the Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net
Income but only to the extent the Company or a Restricted
Subsidiary funded such net loss with cash;
(2) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company,
except that:
(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary
during such period to the Company or another Restricted
Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to another
Restricted Subsidiary, to the limitation contained in this
clause); and
(B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining
such Consolidated Net Income but only to the extent the Company
or a Restricted Subsidiary funded such net loss with cash;
(4) any gain or loss realized upon the sale or other disposition of
any assets of the Company, its consolidated Subsidiaries or any
other Person (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon the
sale or other disposition of any Capital Stock of any Person;
(5) extraordinary gains or losses; and
(6) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants -- Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any repurchases, repayments or redemptions
of Investments, proceeds realized on the sale of Investments or return of
capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D)
thereof.
"Credit Agreement" means the Credit Agreement to be entered into as of the
Issue Date by and among the Company, certain of its Subsidiaries, the lenders
referred to therein, Citicorp North America, Inc., as Administrative Agent, and
Credit Suisse First Boston, as Syndication Agent, together with the related
documents thereto (including the term loans and revolving loans thereunder, any
guarantees and security documents), as such Credit Agreement and/or related
documents may be replaced, amended, extended, renewed, restated, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions and whether or not with the
same agent, trustee or lenders) from time to time, and any agreement (and
related document) governing Indebtedness incurred to Refinance, in whole or in
part, the borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Agreement or a successor Credit Agreement, whether
by the same or any other lender or group of lenders.
"Credit Facility" means one or more debt facilities (including the Credit
Agreement), with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing or letters of credit, in each
case, as amended, extended, renewed, replaced, restated, supplemented or
otherwise modified in whole or in part from time to time (including any increase
in principal amount).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
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"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable at the option of the holder) or upon the
happening of any event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the occurrence
of certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated Maturity of the
Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if:
(1) the "asset sale" or "change of control" provisions applicable to
such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Notes and described
under "-- Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock" and "-- Certain Covenants -- Change of Control";
and
(2) any such requirement only becomes operative after compliance with
such terms applicable to the Notes, including the purchase of any
Notes tendered pursuant thereto.
The amount of any Disqualified Stock that does not have a fixed redemption,
repayment or repurchase price will be calculated in accordance with the terms of
such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or
repurchased on any date on which the amount of such Disqualified Stock is to be
determined pursuant to the Indenture; provided, however, that if such
Disqualified Stock could not be required to be redeemed, repaid or repurchased
at the time of such determination, the redemption, repayment or repurchase price
will be the book value of such Disqualified Stock as reflected in the most
recent financial statements of such Person.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense, plus the following to the extent deducted in
calculating such Consolidated Net Income:
(1) all income tax expense of the Company and its consolidated
Restricted Subsidiaries;
(2) depreciation and amortization expense of the Company and its
consolidated Restricted Subsidiaries (excluding amortization
expense attributable to a prepaid operating activity item that was
paid in cash in a prior period);
(3) all non-recurring gains and losses of the Company and its
consolidated Restricted Subsidiaries; and
(4) all other non-cash charges of the Company and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash
expenditures in any future period);
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended or distributed to the Company or
another Restricted Subsidiary by such Restricted Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees,
102
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Subsidiary" means any Restricted Subsidiary that is not organized
and existing under the laws of the United States of America, any State thereof
or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting
Standards Board;
(3) such other statements by such other entity as approved by a
significant segment of the accounting profession; and
(4) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in
periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the
accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well,
to purchase assets, goods, securities or services, to take-or-pay
or to maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in
part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Guaranty Agreement" means a supplemental indenture, in a form satisfactory
to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the
Company's obligations with respect to the Notes on the terms provided for in the
Indenture.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Restricted Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. Solely for
purposes of determining compliance with "-- Certain Covenants -- Limitation on
Indebtedness," (1) amortization of debt discount or the accretion of principal
with respect to a non-interest bearing or other discount security and (2) the
payment of regularly scheduled interest in the form of additional Indebtedness
of the same instrument or the payment of regularly scheduled
103
dividends on Capital Stock in the form of additional Capital Stock of the same
class and with the same terms will not be deemed to be the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable, including, in each
case, any premium on such indebtedness to the extent such premium
has become due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/ Leaseback Transactions entered into by
such Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising
in the ordinary course of business);
(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters
of credit securing obligations (other than obligations described
in clauses (1) through (3) above) entered into in the ordinary
course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day
following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified
Stock of such Person or, with respect to any Preferred Stock of
any Subsidiary of such Person, the principal amount of such
Preferred Stock to be determined in accordance with the Indenture
(but excluding, in each case, any accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets and the amount of
the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
Notwithstanding the foregoing, in connection with the purchase by the Company or
any Restricted Subsidiary of any business or other assets, the term
"Indebtedness" will exclude indemnification or post-closing payment adjustments
to which the seller may become entitled to the extent such payment is determined
by a final closing balance sheet or such payment depends on the performance of
such business after the closing; provided, however, that, at the time of
closing, the amount of any such payment is not determinable and, to the extent
such payment thereafter becomes fixed and determined, the amount is paid within
60 days thereafter.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided,
however, that in the case of Indebtedness sold at a discount, the amount of such
Indebtedness at any time will be the accreted value thereof at such time.
"Independent Qualified Party" means an investment banking firm, accounting
firm or appraisal firm of national standing; provided, however, that such firm
is not an Affiliate of the Company.
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"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other similar financial agreement
or arrangement.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable or deposits on the balance sheet of the lender)
or other extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person. Except as otherwise provided
for herein, the amount of an Investment shall be its fair value at the time the
Investment is made and without giving effect to subsequent changes in value.
For purposes of the definition of "Unrestricted Subsidiary", the definition
of "Restricted Payment" and the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments":
(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed
to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (A) the
Company's "Investment" in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of
the net assets of such Subsidiary at the time of such
redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the
Company's senior management or, in the case of an Investment in
excess of $5.0 million, by the Board of Directors of the Company.
"Issue Date" means the date on which the Notes are originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Lift Truck Financing Guarantee" means guarantees or repurchase or recourse
obligations of the Company or a Restricted Subsidiary, Incurred in the ordinary
course of business consistent with past practice, of Indebtedness Incurred by a
dealer or customer of a dealer, for the purchase or lease of lift trucks
substantially all of which are manufactured or sold by the Company or a
Restricted Subsidiary, the proceeds of which Indebtedness is used by such dealer
or customer primarily to pay the purchase price of such lift trucks and any
related reasonable fees and expenses (including financing fees), provided,
however, that (1)(A) with respect to lift trucks located in the United States,
the Indebtedness so guaranteed is secured by a perfected first priority Lien on
such lift trucks in favor of the holder of such Indebtedness, the Company or a
Restricted Subsidiary and (B) with respect to lift trucks located outside of the
United States, the Indebtedness so guaranteed is secured by a lien or other
similar security interest in favor of the holder of such Indebtedness, the
Company or a Restricted Subsidiary to the extent commercially practicable in the
jurisdiction in which such lift trucks are located and (2) if the Company or
such Restricted Subsidiary is required to make payment with respect to such
guarantee, the Company or such Restricted Subsidiary will have the right to
either (a) the title to such lift trucks, (b) a valid assignment of a perfected
first priority Lien or other similar security interest in the lift trucks, or
(c) the net proceeds of any resale of such lift trucks.
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as
105
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of:
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses (including fees and expenses of counsel,
accountants and investment bankers) incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued
as a liability under GAAP, as a consequence of such Asset
Disposition;
(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind
with respect to such assets, or which must by its terms, or in
order to obtain a necessary consent to such Asset Disposition, or
by applicable law, be repaid out of the proceeds from such Asset
Disposition;
(3) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result
of such Asset Disposition;
(4) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such
Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition; and
(5) in the case of an Asset Disposition that involves the sale of an
owned dealer or dealers, payments required to be made to third
parties (other than as set forth in paragraph (3) above) in
respect of terminations of lease obligations, dealer exclusivity
arrangements or similar obligations necessary, in the good faith
judgment of the Company, to complete such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Controller or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Parent" means NACCO Industries, Inc. or its successors.
"Permitted Holders" means, collectively, the parties to the Stockholders'
Agreement, dated as of March 15, 1990, as amended from time to time, by and
among National City Bank, (Cleveland, Ohio), as depository, the Participating
Stockholders, as defined therein, and Parent; provided, however, that for
purposes of this definition only, the definition of Participating Stockholders
contained in the Stockholders' Agreement shall be such definition in effect on
the Issue Date.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted
Subsidiary is a Related Business;
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys
all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's
primary business is a Related Business;
106
(3) cash and Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted
Subsidiary deems reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary
course of business;
(6) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such
Restricted Subsidiary;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of
judgments;
(8) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as
permitted pursuant to the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock;"
(9) any Person where such Investment was acquired by the Company or
any of its Restricted Subsidiaries (a) in exchange for any other
Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the
issuer of such other Investment or accounts receivable or (b) as a
result of a foreclosure by the Company or any of its Restricted
Subsidiaries with respect to any secured Investment or other
transfer of title with respect to any secured Investment in
default;
(10) a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person, in each case in connection with a
Qualified Receivables Transaction, provided, however, that any
Investment in a Receivables Subsidiary is in the form of (a) a
Purchase Money Note; (b) any equity interest; (c) obligations of
the Receivables Subsidiary to pay the purchase price for assets
transferred to it; or (d) interests in accounts receivable
generated by the Company or a Restricted Subsidiary and
transferred to any Person in connection with a Qualified
Receivables Transaction or any such Person owning such accounts
receivable;
(11) Hedging Obligations;
(12) negotiable instruments held for deposit or collection in the
ordinary course of business;
(13) any Investment in existence on the Issue Date;
(14) Investments in independently held lift truck dealers (consisting
of not more than 50% of the total voting power of shares of
Voting Stock of any such dealer) which do not exceed, at any one
time, $5.0 million; and
(15) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value) which, when
taken together with all other Investments made pursuant to this
clause (15) that are at the time outstanding (measured on the
date such Investment was made and without giving effect to
subsequent changes in value), does not exceed $20.0 million.
"Permitted Liens" means, with respect to any Person:
(1) pledges or deposits by such Person under worker's compensation
laws, unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts (other
than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United
107
States government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or
import duties or for the payment of rent, in each case Incurred in the
ordinary course of business;
(2) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings or other Liens
arising out of judgments or awards against such Person with
respect to which such Person shall then be proceeding with an
appeal or other proceedings for review and Liens arising solely by
virtue of any statutory or common law provision relating to
banker's Liens, rights of set-off or similar rights and remedies
as to deposit accounts or other funds maintained with a creditor
depository institution; provided, however, that (A) such deposit
account is not a dedicated cash collateral account and is not
subject to restrictions against access by the Company in excess of
those set forth by regulations promulgated by the Federal Reserve
Board and (B) such deposit account is not intended by the Company
or any Restricted Subsidiary to provide collateral to the
depository institution;
(3) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith by
appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided, however,
that such letters of credit do not constitute Indebtedness;
(5) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way,
sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of
real property or Liens incidental to the conduct of the business
of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness and which do not in
the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the
business of such Person;
(6) Liens securing Indebtedness Incurred to finance the construction,
purchase or lease of, or repairs, improvements or additions to,
property, plant or equipment of such Person; provided, however,
that the Lien may not extend to any other property owned by such
Person or any of its Restricted Subsidiaries at the time the Lien
is Incurred (other than assets and property affixed or appurtenant
thereto), and the Indebtedness (other than any interest thereon)
secured by the Lien may not be Incurred more than 180 days after
the later of the acquisition, completion of construction, repair,
improvement, addition or commencement of full operation of the
property subject to the Lien;
(7) Liens to secure Indebtedness permitted under the provisions
described in clauses (b)(1) and (b)(16) under "-- Certain
Covenants -- Limitation on Indebtedness;" provided, however, that
with respect to Liens securing Indebtedness Incurred under clause
(b)(16), such Liens exclude Liens on real property, plant and
equipment;
(8) Liens existing on the Issue Date;
(9) Liens on property or shares of Capital Stock of another Person at
the time such other Person becomes a Subsidiary of such Person;
provided, however, that the Liens may not extend to any other
property owned by such Person or any of its Restricted
Subsidiaries (other than assets and property affixed or
appurtenant thereto);
(10) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by
means of a merger or consolidation with or into such Person or a
Subsidiary of such Person; provided, however, that the Liens may
not extend to any other property owned by such Person or any of
its Restricted Subsidiaries (other than assets and property
affixed or appurtenant thereto);
108
(11) Liens securing Indebtedness or other obligations of a Subsidiary
of such Person owing to such Person or a wholly owned Subsidiary
of such Person;
(12) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Indebtedness that is, and is permitted to
be under the Indenture, secured by a Lien on the same property
securing such Hedging Obligations;
(13) Liens arising from precautionary Uniform Commercial Code
financing statement filings relating to operating leases entered
into by the Company and its Subsidiaries in the ordinary course
or business;
(14) Liens on assets held by Company-owned dealers in connection with
Lift Truck Financing Guarantees and limited in each case to the
property subject to such Lift Truck Financing Guarantee; and
(15) Liens to secure any Refinancing (or successive Refinancings) as a
whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clause (6), (8), (9) or (10);
provided, however, that:
(A) such new Lien shall be limited to all or part of the same
property and assets that secured or, under the written
agreements pursuant to which the original Lien arose, could
secure the original Lien (plus improvements and accessions to,
such property or proceeds or distributions thereof); and
(B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (x) the
outstanding principal amount or, if greater, committed amount
of the Indebtedness described under clause (6), (8), (9) or
(10) at the time the original Lien became a Permitted Lien and
(y) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension,
renewal or replacement.
Notwithstanding the foregoing, "Permitted Liens" will not include any Lien
described in clauses (6), (9) or (10) above to the extent such Lien applies to
any Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to the covenant described under "-- Certain Covenants -- Limitation on
Sale of Assets and Subsidiary Stock." For purposes of this definition, the term
"Indebtedness" shall be deemed to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of Parent or the Company pursuant to an effective registration
statement under the Securities Act.
"Purchase Money Note" means a promissory note evidencing a line of credit,
which may be irrevocable, from, or evidencing other Indebtedness owed to, the
Company or any Restricted Subsidiary in connection with a Qualified Receivables
Transaction, which note shall be repaid from cash available to the maker of such
note, other than amounts required to be established as reserves pursuant to
agreements, amounts paid to investors in respect of interest, principal and
other amounts owing to such investors and amounts paid in connection with the
purchase of newly generated receivables.
109
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any Restricted
Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell,
convey or otherwise transfer to (1) a Receivables Subsidiary (in the case of a
transfer by the Company or any Restated Subsidiary), and (2) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any Restricted Subsidiary of the Company, and any
assets related thereto, including all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
that are customarily transferred, or in respect of which security interests are
customarily granted, in connection with asset securitization transactions
involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of the Company
that engages in no activities other than in connection with the financing of
accounts receivable and that is designated by the Board of Directors of the
Company (as provided below) as a Receivables Subsidiary and (1) has no
Indebtedness or other obligations (contingent or otherwise) that (a) are
guaranteed by the Company or any Restricted Subsidiary, other than contingent
liabilities pursuant to Standard Securitization Undertakings, (b) are recourse
to or obligate the Company or any Restricted Subsidiary of the Company in any
way other than pursuant to Standard Securitization Undertakings or (c) subjects
any property or asset of the Company or any Restricted Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings; (2) has no
contract, agreement, arrangement or undertaking (except in connection with a
Purchase Money Note or Qualified Receivables Transaction) with the Company or
its Restricted Subsidiaries other than on terms no less favorable to the Company
or such Restricted Subsidiaries than those that might be obtained at the time
from Persons that are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing accounts
receivable; and (3) neither the Company nor any Restricted Subsidiary has any
obligation to maintain or preserve the Receivables Subsidiary's financial
condition or cause the Receivables Subsidiary to achieve certain levels of
operating results.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an Officer's Certificate certifying, to the best of such
officer's knowledge and belief after consulting with counsel, that such
designation complied with the foregoing conditions.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;
(2) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater
than the Average Life of the Indebtedness being Refinanced; and
(3) such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate
accreted value) then outstanding or committed (plus fees and
expenses, including any premium and defeasance costs) under the
Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
110
"Registration Rights Agreement" means the Registration Rights Agreement
dated May 9, 2002, among the Company, the Subsidiary Guarantors, Credit Suisse
First Boston Corporation and Salomon Smith Barney Inc.
"Related Business" means any business in which the Company or its
Subsidiaries was engaged on the Issue Date and any business related, ancillary
or complementary to any business of the Company or its Subsidiaries in which the
Company or its Subsidiaries was engaged on the Issue Date or a reasonable
extension, development or expansion of the business in which the Company or its
Subsidiaries was engaged as of the Issue Date.
"Restricted Payment" with respect to any Person means:
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock
(including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the
direct or indirect holders of its Capital Stock (other than
dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or of
any Capital Stock of a Restricted Subsidiary held by any Affiliate
of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than
into Capital Stock of the Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations of such Person (other than the purchase,
repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within
one year of the date of such purchase, repurchase or other
acquisition); or
(4) the making of any Investment (other than a Permitted Investment)
in any Person.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter
acquired by the Company or a Restricted Subsidiary whereby the Company or a
Restricted Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person, other than Sale/Leaseback
Transactions involving lift trucks placed into the owned operations of the
Company or the Restricted Subsidiaries for use or lease.
"SEC" means the U.S. Securities and Exchange Commission.
"Senior Indebtedness" means with respect to any Person:
(1) Indebtedness of such Person, whether outstanding on the Issue Date
or thereafter Incurred; and
(2) accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for
reorganization relating to such Person whether or not post-filing
interest is allowed in such proceeding) in respect of (A)
indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is
responsible or liable
unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Notes or the
Subsidiary Guaranty of such Person, as the case may be; provided, however, that
Senior Indebtedness shall not include:
111
(1) any obligation of such Person to any Subsidiary;
(2) any liability for Federal, state, local or other taxes owed or
owing by such Person;
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof
or instruments evidencing such liabilities);
(4) any Indebtedness or Guarantee of such Person (and any accrued and
unpaid interest in respect thereof) which is subordinate or junior
in any respect to any other Indebtedness or Guarantee or other
obligation of such Person; or
(5) that portion of any Indebtedness which at the time of Incurrence
is Incurred in violation of the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Restricted
Subsidiary that are reasonably customary in securitization transactions
involving accounts receivables in connection with any servicing obligations
assumed by the Company or any Restricted Subsidiary in respect of such accounts
receivable.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means, with respect to a Person, any Indebtedness
of such Person (whether outstanding on the Issue Date or thereafter Incurred)
which is subordinate or junior in right of payment to the Notes or a Subsidiary
Guaranty of such Person, as the case may be, pursuant to a written agreement to
that effect.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
"Subsidiary Guarantor" means NMHG Distribution Co., Hyster-Yale Materials
Handling, Inc., NACCO Materials Handling Group, Inc., NMHG Oregon, Inc. and
Hyster Overseas Capital Corporation, LLC and each other Subsidiary of the
Company that executes the Indenture as a guarantor and each other Subsidiary of
the Company that thereafter guarantees the Notes pursuant to the terms of the
Indenture.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the
United States of America or any agency thereof;
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United
States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50.0
million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized
statistical rating organization
112
(as defined in Rule 436 under the Securities Act) or any money-market
fund sponsored by a registered broker dealer or mutual fund
distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above
entered into with a bank meeting the qualifications described in
clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than
an Affiliate of the Company) organized and in existence under the
laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group; and
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America,
or by any political subdivision or taxing authority thereof, and
rated at least "A" by Standard & Poor's Ratings Group or "A" by
Moody's Investors Service, Inc.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of
Directors of the Company in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary of the
Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments."
The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (A) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"-- Certain Covenants -- Limitation on Indebtedness" and (B) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
of the Company shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Board of Directors of the Company giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Dollar Equivalent" means with respect to any monetary amount in a
currency other than U.S. dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in The Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.
Except as described under "-- Certain Covenants -- Limitation on
Indebtedness," whenever it is necessary to determine whether the Company has
complied with any covenant in the Indenture or a Default has occurred and an
amount is expressed in a currency other than U.S. dollars, such amount will be
treated as the U.S. Dollar Equivalent determined as of the date such amount is
initially determined in such currency.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
113
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
114
FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a discussion of the U.S. federal income tax consequences
that are anticipated to be material to the ownership and disposition of the
exchange notes to non-U.S. holders (as defined below) of exchange notes. This
summary is based upon existing U.S. federal income tax law, which is subject to
change, possibly retroactively. This discussion is limited to exchange notes
held as capital assets within the meaning of Section 1221 of the U.S. Internal
Revenue Code of 1986 (the "Code"). This summary does not discuss all of the U.
S. federal income tax consequences that may be relevant to a particular non-U.S.
holder in light of such holder's specific circumstances or to holders subject to
special tax rules, such as certain financial institutions, insurance companies,
securities dealers, tax-exempt organizations, real estate investment trusts,
regulated investment companies, grantor trusts or persons holding exchange notes
in connection with a hedging, straddle, conversion or other integrated
transaction. This summary also does not address the tax consequences that may be
relevant to persons who have ceased to be United States citizens or who are no
longer subject to tax as resident aliens or that have a functional currency
other than the U.S. dollar, all of whom may be subject to tax rules that differ
significantly from those summarized below. Holders are urged to consult their
tax advisors with regard to the application of U.S. federal income tax laws to
their particular situations, as well as any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction.
As used herein, the term "non-U.S. holder" means a beneficial owner of an
exchange note that is for, U.S. federal income tax purposes:
- a nonresident alien individual;
- a foreign corporation;
- a foreign estate; or
- a foreign trust.
Foreign partnerships, including other foreign entities taxable as
partnerships for U.S. federal income tax purposes, are subject to special U.S.
income and withholding tax rules. The tax treatment of a partner in a foreign
partnership will generally depend on the status of the partner and the
activities of the foreign partnership. Prospective investors that are foreign
partnerships or partners in a foreign partnership are urged to consult their tax
advisors regarding the U.S. federal income tax consequences of the ownership and
disposition of the exchange notes.
PAYMENT OF INTEREST
Subject to the discussion below concerning backup withholding, payments of
interest on the exchange notes by us or our paying agent to any non-U.S. holder
should qualify as portfolio interest under the Code and should not be subject to
U.S. federal income or withholding tax, provided that:
- the interest is not effectively connected with the conduct by such holder
of a trade or business in the United States;
- the holder (1) does not own, actually or constructively, 10% or more of
the total combined voting power of all our classes of stock entitled to
vote, (2) is not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership, and (3) is not a bank
receiving interest from us under a loan agreement entered into in the
ordinary course of the bank's business; and
- the certification requirement, as described below, has been fulfilled
with respect to the beneficial owner.
The certification requirement referred to above will be fulfilled if the
beneficial owner of exchange notes certifies on Internal Revenue Service ("IRS")
Form W-8BEN (or successor form) under penalties of perjury that it is not a
United States person and provides its name and address and:
- such beneficial owner files such Form W-8BEN with the withholding agent;
- in the case of exchange notes held on behalf of the beneficial owners by
a securities clearing organization, bank or other financial institution
holding customers' securities in the ordinary course of
115
its trade or business, such financial institution files with the
withholding agent IRS Form W-8IMY (or successor form) certifying that it
has received certifications from the beneficial owners of exchange notes,
furnishes the withholding agent with copies thereof and otherwise
complies with applicable IRS requirements; or
- in the case of exchange notes held by a foreign partnership, such foreign
partnership (1) files with the withholding agent IRS Form W-8IMY
certifying that it has received certifications from its partners that are
non-U.S. holders, furnishes the withholding agent with the required
withholding statement, and otherwise complies with applicable IRS
requirements, or (2) enters into a withholding agreement with the IRS
under which it assumes certain U.S. withholding responsibilities and
otherwise complies with applicable IRS requirements.
Alternatively, these certification requirements will not apply if the
beneficial owner of the exchange note holds such exchange note directly through
a "qualified intermediary" (which is a non-U.S. office of a bank, securities
dealer or similar intermediary that has signed an agreement with the IRS
concerning withholding tax procedures), the qualified intermediary has
sufficient information in its files to indicate that the holder is a non-U.S.
holder and the intermediary complies with IRS requirements. Special intermediary
rules apply with respect to exchange notes held by a foreign partnership.
Prospective investors, including foreign partnerships and their partners and
holders who hold their exchange notes through a qualified intermediary, are
urged to consult their tax advisors regarding possible reporting and withholding
requirements.
Except to the extent that an applicable treaty otherwise provides, a
non-U.S. holder generally will be taxed with respect to interest in the same
manner as a holder that is a U.S. person if the interest is effectively
connected with a United States trade or business of the non-U.S. holder.
Effectively connected interest income received or accrued by a corporate
non-U.S. holder may also, under certain circumstances, be subject to an
additional "branch profits" tax at a 30% rate (or, if applicable, at a lower tax
rate specified by a treaty). Even though such effectively connected income is
subject to income tax, and may be subject to branch profits tax, it is not
subject to withholding tax if the non-U.S. holder delivers a properly executed
IRS Form W-8ECI (or successor form) to the withholding agent.
The gross amount of any payments of interest that do not qualify for the
exception from withholding described above and that are not effectively
connected with the conduct by such holder of a trade or business in the United
States will be subject to U.S. withholding tax at a rate of 30% unless a treaty
applies to reduce or eliminate withholding and the non-U.S. holder properly
certifies on IRS Form W-8BEN that it is entitled to such treaty benefits.
SALE, EXCHANGE, REDEMPTION, OR DISPOSITION OF NOTES
Subject to the discussion below concerning backup withholding, a non-U.S.
holder of an exchange note generally will not be subject to U.S. federal income
tax on gain realized on the sale, exchange, redemption or other disposition of
such exchange note, unless:
- such holder is an individual who is present in the United States for 183
days or more in the taxable year of disposition and certain other
conditions exist; or
- such gain is effectively connected with the conduct by such holder of a
trade or business in the United States; or
- the holder is subject to the special rules applicable to certain former
citizens and residents of the United States.
UNITED STATES FEDERAL ESTATE TAX
If interest on the exchange notes is exempt from withholding of U.S.
federal income tax under the portfolio interest exemption (without regard to the
certification requirement), the exchange notes will not be included in the
estate of a deceased non-U.S. holder for U.S. federal estate tax purposes.
116
BACKUP WITHHOLDING AND INFORMATION REPORTING
We must report annually to the IRS and to each non-U.S. holder any interest
paid to the non-U.S. holder. Copies of these information returns may also be
made available under the provisions of a specific treaty or other agreement with
the tax authorities of the country in which the non-U.S. holder resides.
Under current U.S. federal income tax law, backup withholding tax will not
apply to payments of interest by us or our paying agent on an exchange note if
the certifications are received or the qualified intermediary requirements are
met as described above under "-- Payment of interest" provided that we or such
paying agent, as the case may be, do not have actual knowledge or reason to know
that the payee is a U.S. person or that the conditions of any other exemption
are not in fact satisfied.
Payments on the sale, exchange or other disposition of an exchange note
made to or through a foreign office of a foreign broker generally will not be
subject to backup withholding or information reporting. However, if such broker
is for U.S. federal income tax purposes a U.S. person, a controlled foreign
corporation, a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year period or a
foreign partnership with certain connections to the United States, then
information reporting will generally be required unless the broker has in its
records documentary evidence that the beneficial owner is not a U.S. person and
certain other conditions are met or the beneficial owner otherwise establishes
an exemption. Backup withholding may apply to any payment that such broker is
required to report if the broker has actual knowledge or reason to know that the
payee is a U.S. person. Payments to or through the U.S. office of a broker will
be subject to backup withholding and information reporting unless the holder
certifies, under penalties of perjury, that it is not a U.S. person or otherwise
establishes an exemption. Treasury Regulations provide certain presumptions
under which a non-U.S. holder will be subject to backup withholding and
information reporting unless such holder certifies as to its non-U.S. status or
otherwise establishes an exemption.
Any amounts withheld from a payment to a non-U.S. holder under the backup
withholding rules will be allowed as a credit against such holder's U.S. federal
income tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the IRS.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
Because the exchange notes should not differ materially in kind or extent
from the outstanding notes, your exchange of outstanding notes for exchange
notes should not constitute a taxable disposition of the outstanding notes for
United States federal income tax purposes. As a result, you should not recognize
income, gain or loss on your exchange of outstanding notes for exchange notes,
your holding period for the exchange notes should generally include your holding
period for outstanding notes, your adjusted tax basis in the exchange notes
should generally be the same as your adjusted tax basis in your outstanding
notes and the United States federal income tax consequences associated with
owning the outstanding notes should continue to apply to the exchange notes.
117
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that, for a period of 180 days after the expiration date of the exchange offer,
we will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
, 2002, all dealers effecting transactions in the exchange notes may
be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date of the exchange offer,
we will promptly send additional copies of this prospectus and any amendment or
supplement to the prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer, including the expenses of one counsel for the initial purchasers
of the outstanding notes up to $5,000, other than commissions or concessions of
any brokers or dealers and will indemnify the initial purchasers of the
outstanding notes, including any broker-dealers, against certain liabilities,
including liabilities under the Securities Act.
118
LEGAL MATTERS
Jones, Day, Reavis & Pogue, Cleveland, Ohio, will pass upon the validity of
the exchange notes for us. Dennis W. LaBarre, a director of NMHG Holding Co. and
NACCO Industries, Inc., and a member of our Nominating, Organization and
Compensation Committee, is a partner in the law firm of Jones, Day, Reavis &
Pogue.
EXPERTS
The audited consolidated financial statements and schedule as of December
31, 2001 and 2000, and for each of the three years in the period ended December
31, 2001, included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the report of said firm and upon the authority of said
firm as experts in accounting and auditing.
Reference is made to the report, which includes an explanatory paragraph
with respect to the change in method of accounting for derivative instruments
and hedging activities, and the change in method of calculating pension costs
for a defined benefit pension plan in the United Kingdom, as discussed in Note 2
to the audited consolidated financial statements.
OTHER MATTERS
Our former independent public accountant, Arthur Andersen LLP, has informed
us that on March 14, 2002, an indictment was unsealed charging it with federal
obstruction of justice arising from the U.S. government's investigation of Enron
Corp. It is possible that events arising out of the indictment may adversely
affect the ability of Arthur Andersen LLP to satisfy any claims that may arise
out of Arthur Andersen LLP's audit of our financial statements. See "Risk
Factors -- Our public accountants have recently been indicted by the U.S.
federal government, which may adversely affect our ability to comply with our
registration obligations, whether contractual or statutory, and the ability of
Arthur Andersen LLP to satisfy any claims that may arise out of Arthur Andersen
LLP's audit of our financial statements."
Effective May 8, 2002, our Board of Directors, based on the recommendation
of its Audit Review Committee, dismissed Arthur Andersen LLP as independent
auditor for itself and its subsidiaries, and engaged the services of Ernst &
Young LLP as its new independent auditors for the fiscal year ending December
31, 2002. This determination followed the decision by NACCO's Board of Directors
to seek proposals from independent public accounting firms to audit the
consolidated financial statements of NACCO and its subsidiaries, including us.
We have continued to utilize Arthur Andersen LLP to perform services as our
predecessor independent auditor with respect to our financial statements prior
to May 8, 2002.
The audit reports of Arthur Andersen LLP on our consolidated financial
statements for the fiscal years ended December 31, 2001 and 2000 did not contain
any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended December 31, 2001 and 2000, and the
subsequent interim period through May 8, 2002, there were no disagreements
between us and Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused them to make reference to the subject matter of the disagreement in
connection with their reports.
None of the reportable events described under Item 304(a)(1)(v) of
Regulation S-K occurred within our fiscal years ended December 31, 2001 and 2000
or the subsequent interim period through May 8, 2002.
During the fiscal years ended December 31, 2001 and 2000, and the
subsequent interim period through May 8, 2002, neither we nor anyone on our
behalf consulted with Ernst & Young LLP regarding any of the matters or events
set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.
119
WHERE YOU CAN FIND MORE INFORMATION
Following completion of this offering, we will be required to file reports
and other information with the Securities and Exchange Commission. These reports
and other information will be available for reading and copying at the SEC
Public Reference Room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. The SEC maintains an Internet site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC.
We will provide without charge, upon written or oral request, a copy of any
or all of the documents which are incorporated by reference into this
prospectus. Requests should be directed to: NACCO Materials Handling Group,
Attention: Vice President Corporate Development, General Counsel and Secretary,
650 N.E. Holladay Street Suite 1600, Portland, Oregon 97232, telephone number:
(503) 721-6060.
120
INDEX TO FINANCIAL STATEMENTS
<Table>
<Caption>
PAGE
----
Audited Financial Statements:
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Operations and Comprehensive
Income (Loss) for the years ended December 31, 2001, 2000
and 1999.................................................. F-3
Consolidated Balance Sheets at December 31, 2001 and 2000... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.......................... F-6
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 2001, 2000 and 1999.............. F-7
Notes to Consolidated Financial Statements.................. F-8
Financial Statement Schedules:
Valuation and Qualifying Accounts for the years ended
December 31, 2001, 2000 and 1999.......................... F-38
Unaudited Financial Statements:
Condensed Consolidated Balance Sheets at March 31, 2002 and
December 31, 2001......................................... X-1
Unaudited Condensed Consolidated Statements of Operations
for the three months ended March 31, 2002 and 2001........ X-3
Unaudited Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2002 and 2001........ X-4
Unaudited Condensed Consolidated Statements of Stockholder's
Equity for the three months ended March 31, 2002 and
2001...................................................... X-5
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ X-6
</Table>
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
NMHG Holding Co. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of NMHG
Holding Co. (a Delaware corporation and a wholly owned subsidiary of NACCO
Industries, Inc., a Delaware corporation) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of operations and
comprehensive income (loss), stockholder's equity and cash flows for each of the
three years in the period ended December 31, 2001. These financial statements
and the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NMHG Holding Co. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
As explained in Note 2 to the financial statements, effective January 1,
2001, the Company changed its method of accounting for derivative instruments
and hedging activities, and its method of calculating pension costs for a
defined benefit pension plan in the United Kingdom.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Cleveland, Ohio,
January 25, 2002.
F-2
NMHG HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN MILLIONS)
<Table>
<Caption>
YEAR ENDED DECEMBER 31
------------------------------
2001 2000 1999
-------- -------- --------
Revenues.................................................... $1,672.4 $1,932.1 $1,761.4
Cost of sales............................................... 1,422.8 1,584.6 1,457.9
-------- -------- --------
Gross Profit................................................ 249.6 347.5 303.5
Selling, general and administrative expenses................ 262.4 257.8 233.0
Amortization of goodwill.................................... 12.9 12.6 12.2
Restructuring charges....................................... 8.8 13.9 --
Loss on sale of dealers..................................... 10.4 -- --
-------- -------- --------
Operating Profit (Loss)..................................... (44.9) 63.2 58.3
Other income (expense)
Interest expense.......................................... (23.1) (21.2) (19.0)
Insurance recovery........................................ 8.0 -- --
Other -- net.............................................. (3.4) (4.4) 1.8
-------- -------- --------
(18.5) (25.6) (17.2)
-------- -------- --------
Income (Loss) Before Income Taxes, Minority Interest, and
Cumulative Effect of Accounting Changes................... (63.4) 37.6 41.1
Income tax provision (benefit).............................. (14.5) 17.4 18.4
-------- -------- --------
Income (Loss) Before Minority Interest and Cumulative Effect
of Accounting Changes..................................... (48.9) 20.2 22.7
Minority interest income.................................... .8 1.1 1.0
-------- -------- --------
Income (Loss) Before Cumulative Effect of Accounting
Changes................................................... (48.1) 21.3 23.7
Cumulative effect of accounting changes, net of $0.8 tax
benefit in 2001........................................... (1.3) -- --
-------- -------- --------
Net Income (Loss)........................................... $ (49.4) $ 21.3 $ 23.7
======== ======== ========
Other comprehensive income (loss)
Foreign currency translation adjustment................... $ (9.2) $ (15.6) $ (12.6)
Minimum pension liability adjustment, net of: ($8.1) tax
benefit in 2001; ($1.0) tax benefit in 2000; $2.3 tax
expense in 1999........................................ (13.4) (1.4) 3.8
Current period cash flow hedging activity................. (3.3) -- --
Cumulative effect of change in accounting for derivatives
and hedging, net of ($0.4) tax benefit................. (.7) -- --
-------- -------- --------
(26.6) (17.0) (8.8)
-------- -------- --------
Comprehensive Income (Loss)................................. $ (76.0) $ 4.3 $ 14.9
======== ======== ========
</Table>
See Notes to Consolidated Financial Statements.
F-3
NMHG HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<Table>
<Caption>
DECEMBER 31
-------------------
2001 2000
-------- --------
ASSETS
Current Assets
Cash and cash equivalents................................. $ 59.6 $ 24.4
Accounts receivable, net of allowances of $8.0 in 2001 and
$7.7 in 2000........................................... 165.6 204.0
Tax advances, parent company.............................. 23.1 --
Notes receivable, parent company.......................... -- 3.0
Inventories............................................... 234.5 283.0
Deferred income taxes..................................... 32.9 30.5
Prepaid expenses and other................................ 12.2 7.4
-------- --------
527.9 552.3
Property, Plant and Equipment, Net.......................... 280.5 286.2
Deferred Charges
Goodwill, net............................................. 344.2 356.1
Deferred costs and other.................................. 1.9 12.3
Deferred income taxes..................................... 15.7 2.7
-------- --------
361.8 371.1
Other Assets................................................ 34.9 32.1
-------- --------
Total Assets........................................... $1,205.1 $1,241.7
======== ========
</Table>
See Notes to Consolidated Financial Statements.
F-4
NMHG HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<Table>
<Caption>
DECEMBER 31
-------------------
2001 2000
-------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable.......................................... $ 176.7 $ 209.8
Revolving credit agreements............................... 36.2 33.1
Revolving credit agreement expected to be refinanced
within 12 months....................................... 265.0 --
Current maturities of long-term debt...................... 25.5 30.3
Notes payable, parent company............................. 8.0 --
Accrued payroll........................................... 20.0 30.3
Accrued warranty obligations.............................. 34.3 36.8
Other current liabilities................................. 112.2 104.6
-------- --------
677.9 444.9
Long-term Debt.............................................. 27.7 241.5
Self-insurance Reserve...................................... 52.7 44.7
Other Long-term Liabilities................................. 62.5 44.5
Minority Interest........................................... 2.3 3.1
Stockholder's Equity
Common stock, par value $1 per share, 10,000 shares
authorized; 5,599 shares outstanding................... -- --
Capital in excess of par value............................ 198.2 198.2
Retained earnings......................................... 229.5 283.9
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment.............. (26.9) (17.7)
Minimum pension liability adjustment................. (14.8) (1.4)
Deferred loss on cash flow hedging................... (3.3) --
Cumulative effect of change in accounting for
derivatives and hedging............................. (.7) --
-------- --------
382.0 463.0
-------- --------
Total Liabilities and Stockholder's Equity............. $1,205.1 $1,241.7
======== ========
</Table>
See Notes to Consolidated Financial Statements.
F-5
NMHG HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<Table>
<Caption>
YEAR ENDED DECEMBER 31
-------------------------
2001 2000 1999
------ ------ -------
OPERATING ACTIVITIES
Net income (loss)......................................... $(49.4) $ 21.3 $ 23.7
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................ 60.4 54.6 54.1
Deferred income taxes................................ (8.5) (12.2) 2.3
Restructuring charges................................ 8.8 13.9 --
Minority interest income............................. (0.8) (1.1) (1.0)
Cumulative effect of accounting changes.............. 1.3 -- --
Loss on sale of assets............................... 10.5 0.7 --
Other non-cash items................................. 1.6 (5.8) .7
Working capital changes, excluding the effect of business
acquisitions:
Intercompany receivable/payable, affiliate........... (17.4) (1.5) (.9)
Accounts receivable.................................. 30.6 (36.3) 12.0
Inventories.......................................... 38.2 (19.0) (10.0)
Accounts payable and other liabilities............... (45.6) 47.1 8.2
Other current assets................................. 1.3 .9 (9.7)
------ ------ -------
Net cash provided by operating activities............ 31.0 62.6 79.4
------ ------ -------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment............ (53.5) (51.8) (46.2)
Proceeds from the sale of property, plant and equipment... 13.0 10.1 (.1)
Acquisitions of businesses, net of cash acquired.......... (3.9) (16.6) (62.4)
Investments in unconsolidated affiliates.................. (0.3) (1.4) 1.7
Acquisition of minority interest.......................... -- -- (11.3)
Other -- net.............................................. (2.5) -- 2.2
------ ------ -------
Net cash used for investing activities............... (47.2) (59.7) (116.1)
------ ------ -------
FINANCING ACTIVITIES
Additions to long-term debt and revolving credit
agreements.............................................. 68.9 38.6 61.7
Reductions of long-term debt and revolving credit
agreements.............................................. (22.0) (46.1) (26.3)
Cash dividends paid....................................... (5.0) (10.0) --
Capital grants............................................ .1 .4 2.6
Notes receivable/payable, parent company.................. 11.0 7.0 8.0
Deferred financing fees and other......................... (0.7) -- 1.4
------ ------ -------
Net cash provided by (used for) financing
activities........................................... 52.3 (10.1) 47.4
------ ------ -------
Effect of exchange rate changes on cash................... (0.9) .5 (1.8)
------ ------ -------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year.......................... 35.2 (6.7) 8.9
Balance at the beginning of the year...................... 24.4 31.1 22.2
------ ------ -------
Balance at the end of the year.......................... $ 59.6 $ 24.4 $ 31.1
====== ====== =======
</Table>
See Notes to Consolidated Financial Statements.
F-6
NMHG HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
<Table>
<Caption>
YEAR ENDED DECEMBER 31
------------------------
2001 2000 1999
------ ------ ------
Common Stock................................................ $ -- $ -- $ --
------ ------ ------
Capital in Excess of Par Value.............................. 198.2 198.2 198.2
------ ------ ------
Retained Earnings
Beginning balance......................................... 283.9 272.6 256.8
Net income (loss)......................................... (49.4) 21.3 23.7
Reconsolidation of Brazilian subsidiary................... -- -- 3.4
Repurchase of minority interest and other................. -- -- (11.3)
Cash dividends............................................ (5.0) (10.0) --
------ ------ ------
229.5 283.9 272.6
------ ------ ------
Accumulated Other Comprehensive Income (Loss)
Beginning balance......................................... (19.1) (2.1) 6.7
Foreign currency translation adjustment................... (9.2) (15.6) (12.6)
Minimum pension liability adjustment...................... (13.4) (1.4) 3.8
Current period cash flow hedge activity................... (3.3) -- --
Cumulative effect of change in accounting for derivatives
and hedging............................................ (.7) -- --
------ ------ ------
(45.7) (19.1) (2.1)
------ ------ ------
Total Stockholder's Equity............................. $382.0 $463.0 $468.7
====== ====== ======
</Table>
See Notes to Consolidated Financial Statements.
F-7
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN MILLIONS, EXCEPT PERCENTAGE DATA)
NOTE 1 -- PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS
The Consolidated Financial Statements include the accounts of NMHG Holding
Co. ("NMHG Holding," the parent company), a Delaware corporation, and its wholly
owned subsidiaries, NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and
NMHG Distribution Co. ("NMHG Retail") (collectively, "NMHG" or the "Company").
NMHG Holding is a wholly owned subsidiary of NACCO Industries, Inc. ("NACCO").
Effective April 1, 1999, NACCO reorganized the Company's legal structure to
align with its strategic plan to segregate its business segments into wholesale
manufacturing and retail distribution operations. In order to support this new
alignment, NACCO created NMHG Holding to serve as the parent company to NMHG
Wholesale and NMHG Retail by contributing its investment in Hyster-Yale
Materials Handling, Inc. ("H-Y") to NMHG Holding. Also during 1999, NACCO
acquired the remaining 2 percent minority interest in H-Y.
NMHG designs, engineers, manufactures, sells, services and leases a full
line of lift trucks and service parts marketed worldwide under the Hyster(R) and
Yale(R) brand names. NMHG Wholesale includes the manufacture and sale of lift
trucks and related service parts, primarily to independent and wholly owned
Hyster and Yale retail dealerships. NMHG Retail includes the sale, leasing and
service of Hyster and Yale lift trucks and related service parts by wholly owned
retail dealerships and rental companies. The sale of service parts represents
approximately 19 percent, 19 percent and 18 percent of the total NMHG revenues
as reported for 2001, 2000 and 1999, respectively.
The Consolidated Financial Statements include the accounts of NMHG's
majority-owned domestic and international manufacturing and retail subsidiaries.
Also included is Shanghai Hyster Forklift Ltd., a 55 percent owned joint venture
in China. All significant intercompany accounts and transactions among the
consolidated companies are eliminated in consolidation.
The Company applies the equity method of accounting for its 25 percent
ownership in QFS Holdings (Queensland) Pty Limited ("QFS"), a forklift parts
depot located in Australia, which was purchased in May 2000. Investments in
Sumitomo NACCO Materials Handling Company, Ltd. ("SN"), a 50 percent owned joint
venture, and NMHG Financial Services, Inc., a 20 percent owned joint venture,
are also accounted for by the equity method. SN operates manufacturing
facilities in Japan and the Philippines from which the Company purchases certain
components and internal combustion engine and electric forklift trucks. SN has a
30 percent ownership interest in Shanghai Hyster Forklift Ltd. The Company's
percentage share of the net income or loss from its equity investments is
reported as a component of other-net in the Other Income (Expense) portion of
the Consolidated Statements of Operations and Comprehensive Income (Loss).
In 1989, NMHG acquired a majority interest in Hyster Brasil, Ltda., a
Brazilian manufacturer and marketer of Hyster forklift trucks and related
service parts. In 1990, NMHG deconsolidated this subsidiary because it did not
have effective control, given the uncertain economic and political environment
in Brazil at that time. In 1999, management reassessed its ability to influence
the performance of Hyster Brasil, Ltda. The stability of the economic
environment in Brazil, NMHG's ability to receive dividends from Hyster Brasil,
Ltda. during the few years prior to 1999 and NMHG's planned expansion of
operations in Brazil at that time were among the factors that led NMHG to
determine that it had significant influence over Hyster Brasil, Ltda. and that
it was appropriate to consolidate its operations. Undistributed earnings during
the periods of deconsolidation, when NMHG did not have effective control, were
credited directly to consolidated retained earnings in the amount of $3.4
million at December 31, 1999. The consolidation of Hyster Brasil, Ltda. as of
December 31, 1999 was not material to the Company's financial position or
results of operations. During 2001 and 2000, NMHG maintained consolidation of
this subsidiary, and the Company will periodically assess its ability to control
the operations of Hyster Brasil, Ltda.
F-8
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities (if any) at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks and highly liquid
investments with original maturities of three months or less.
ACCOUNTS RECEIVABLE, NET OF ALLOWANCES
Allowances are maintained against accounts receivable for doubtful
accounts. Allowances for doubtful accounts are maintained for estimated losses
resulting from the inability of customers to make required payments. These
allowances are based on both recent trends of certain customers estimated to be
a greater credit risk as well as general trends of the entire customer pool.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
under the last-in, first-out (LIFO) method for manufactured inventories in the
United States and for certain retail inventories. The first-in, first-out (FIFO)
method is used with respect to all other inventories. Reserves are maintained
for estimated obsolescence or excess inventory equal to the difference between
the cost of inventory and the estimated market value based upon historical
inventory turnover activity.
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment are recorded at cost. Depreciation and
amortization are provided in amounts sufficient to amortize the cost of the
assets, including assets recorded under capital leases, over their estimated
useful lives using the straight-line method. Buildings are depreciated using a
40-year life, improvements to land and buildings are depreciated over 20 and 15
years, respectively, and equipment is depreciated over estimated useful lives
ranging from 3 to 12 years. Repairs and maintenance costs are generally expensed
when incurred.
GOODWILL, NET
Goodwill represents the excess purchase price paid over the fair value of
the net assets acquired. The amortization of goodwill is provided on a
straight-line basis generally over a 40-year period. Accumulated amortization of
goodwill was $147.0 million and $134.2 million at December 31, 2001 and 2000,
respectively. Management regularly evaluates its accounting for goodwill,
considering such factors as historical and future profitability, and believes
that these assets are realizable and the amortization periods remain
appropriate.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets." SFAS No. 142 addresses the accounting for goodwill and
other intangible assets. The Company adopted this statement on January 1, 2002
as required. Beginning in 2002, goodwill will no longer be amortized in
accordance with this Statement. During 2002, the Company will begin testing
goodwill for impairment in accordance with SFAS No. 142.
F-9
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SELF-INSURANCE RESERVES
The Company is generally self-insured for product liability, environmental
liability, and medical and workers' compensation claims. For product liability,
catastrophic coverage is retained for potentially significant individual claims.
An estimated provision for claims reported and for claims incurred but not yet
reported under the self-insurance programs is recorded and revised periodically
based on industry trends, historical experience and management judgment. Changes
in assumptions for such matters as legal actions, inflation rates, medical costs
and actual experience could cause estimates to change in the near term.
REVENUE RECOGNITION
Revenues are generally recognized when customer orders are completed and
shipped. For National Account customers, revenue is generally recognized upon
customer acceptance of the product. Reserves for sales discounts, returns and
product warranty repairs are established and maintained for anticipated future
claims.
ADVERTISING COSTS
Advertising costs are expensed as incurred and amounted to $7.6 million,
$10.8 million and $10.3 million in 2001, 2000 and 1999, respectively.
PRODUCT DEVELOPMENT COSTS
Expenses associated with the development of new products and changes to
existing products are charged to expense as incurred. These costs amounted to
$44.7 million, $43.9 million and $41.4 million in 2001, 2000 and 1999,
respectively.
FOREIGN CURRENCY
Assets and liabilities of foreign operations are translated into U.S.
dollars at the fiscal year-end exchange rate. The related translation
adjustments are recorded as a separate component of stockholder's equity, except
for the Company's Mexican operations. The U.S. dollar is considered the
functional currency for the Company's Mexican operations and, therefore, the
effect of translating assets and liabilities from the Mexican peso to the U.S.
dollar is recorded in the Consolidated Statements of Operations and
Comprehensive Income (Loss). Revenues and expenses of all foreign operations are
translated using the monthly average exchange rates prevailing during the year.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
Financial instruments held by the Company include cash and cash
equivalents, accounts receivable, accounts payable, revolving credit agreements,
long-term debt, interest rate swap agreements and forward foreign currency
exchange contracts. The Company does not hold or issue financial instruments or
derivative financial instruments for trading purposes.
The Company uses forward foreign currency exchange contracts to partially
reduce risks related to transactions denominated in foreign currencies. These
contracts hedge primarily firm commitments and, to a lesser degree, forecasted
transactions relating to cash flows associated with sales and purchases
denominated in currencies other than the subsidiaries' functional currency.
Generally, gains and losses from changes in the market value of these contracts
are recognized in cost of sales and offset the foreign exchange gains and losses
on the underlying transactions.
The Company uses interest rate swap agreements to partially reduce risks
related to floating rate financing agreements which are subject to changes in
the market rate of interest. Terms of the interest rate swap agreements require
the Company to receive a variable interest rate and pay a fixed interest rate.
The
F-10
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's interest rate swap agreements and its variable rate financings are
predominately based upon the three-month LIBOR (London Interbank Offered Rate).
Amounts to be paid or received under the interest rate swap agreements are
accrued as interest rates change and are recognized over the life of the swap
agreement as an adjustment to interest expense.
Interest rate swap agreements and forward foreign currency exchange
contracts held by the Company which qualify as hedges have been designated as
hedges of forecasted cash flows. The Company does not currently hold any
nonderivative instruments designated as hedges or any derivatives designated as
fair value hedges as defined in SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities."
NMHG Wholesale holds certain interest rate swap agreements that do not
qualify for hedge accounting treatment according to the guidance of SFAS No.
133. As such, the change in the mark-to-market amount of these swaps will be
recognized in the statement of operations every quarter. Although these interest
rate swap agreements do not qualify for hedge accounting, the Company believes
that these interest rate swap agreements are reasonably effective at
economically hedging the Company's risk to changes in the variable rate of
interest. The adjustment to the Consolidated Statements of Operations and
Comprehensive Income (Loss) for those interest rate swap agreements that did not
qualify for hedge treatment and for the ineffective portion of certain interest
rate swap agreements was included in other -- net and amounted to a loss of $1.4
million ($0.9 million after-tax) for the year ended December 31, 2001.
For those interest rate swap agreements that qualify for hedge accounting
treatment, the mark-to-market effect has been included in the accumulated other
comprehensive income (loss) section ("OCL") of stockholder's equity. Based upon
market valuations at December 31, 2001, approximately $2.0 million of the net
deferred loss in OCL is expected to be reclassified into the statement of
operations over the next 12 months, as cash flow payments are made in accordance
with the interest rate swap agreements.
For the year ended December 31, 2001, there was no ineffectiveness of
forward foreign currency exchange contracts that would have resulted in
recognition in the statement of operations. Forward foreign currency exchange
contracts are used to hedge transactions expected to occur within the next 12
months. Based on market valuations at December 31, 2001, the amount of net
deferred gain included in OCL at December 31, 2001, totaling less than $0.1
million, is expected to be reclassified into the statement of operations over
the next 12 months, as those transactions occur.
Cash flows from hedging activities are reported in the Consolidated
Statements of Cash Flows in the same classification as the hedged item,
generally as a component of cash flows from operations.
NEW ACCOUNTING STANDARDS
On January 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities." This Statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires companies to
recognize all derivatives on the balance sheet as assets and liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives are accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting.
As a result of the adoption of SFAS No. 133, the Company recognized a
cumulative effect of a change in accounting charge to the Consolidated Statement
of Operations and Comprehensive Income (Loss) for the year ended December 31,
2001 of $0.9 million, net of $0.5 million of tax benefit, relating primarily to
certain interest rate swap agreements held by NMHG Wholesale which did not
qualify for hedge accounting treatment at January 1, 2001. In addition,
effective January 1, 2001, the Company recognized a cumulative effect of a
change in accounting charge against OCL in the Consolidated Balance Sheet at
December 31, 2001 of $0.7 million, net of $0.4 million of tax benefit, relating
to net deferred losses on derivative instruments that qualify for hedge
accounting treatment under SFAS No. 133.
F-11
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On January 1, 2001, the Company recognized a cumulative effect of a change
in accounting charge of $0.4 million, net of $0.3 million tax benefit, relating
to a change in the method of calculating pension costs for the defined benefit
pension plan in the United Kingdom. Prior to January 1, 2001, actuarially
determined net gains and losses of the United Kingdom plan were recognized in
full as a component of net pension cost in the year incurred. However,
actuarially determined net gains and losses of all other defined benefit pension
plans of the Company are amortized and included as a component of net pension
cost over the next four years. Both of these methods are permissible pursuant to
SFAS No. 87, "Employers' Accounting for Pensions." However, effective January 1,
2001, the Company changed the method of recognition of actuarially determined
net gains and losses of the United Kingdom plan to conform with the methodology
utilized by all other defined benefit plans of the Company. This change in
accounting was made to achieve consistency of application of this accounting
principle among all members of the consolidated group, which the Company
believes is the preferred application of accounting principles generally
accepted in the United States.
In September 2000, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue Number 00-10, "Accounting for Shipping and Handling Fees and
Costs" ("EITF 00-10"), which requires shipping and handling amounts billed to a
customer to be classified as revenue. In addition, the EITF's preference is to
classify shipping and handling costs as "cost of sales."
For certain shipping and handling fees, the Company netted the charge to
the customer with the cost incurred within its Consolidated Statements of
Operations and Comprehensive Income (Loss) on the line cost of sales. In the
fourth quarter of 2000, the Company changed its method of reporting to comply
with EITF 00-10.
On December 3, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 -- Revenue Recognition in Financial Statements
("SAB 101"). SAB 101 summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company has reviewed its revenue recognition policies and
procedures and believes that it has complied with the requirements of SAB 101.
No significant changes to the Company's revenue recognition policies were
necessary to comply with SAB 101.
As of January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants' ("AICPA") Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," and SOP 98-5, "Reporting on the Costs of Start-Up Activities."
SOP 98-1 requires capitalization on a prospective basis of certain development
costs of software to be used internally. SOP 98-5 requires start-up and
organization costs to be expensed as incurred and also requires previously
deferred start-up costs to be recognized as a cumulative effect adjustment in
the statement of income upon adoption. The change to these new accounting
standards did not have a material impact on the Company's financial position or
results of operations.
ACCOUNTING STANDARDS NOT YET ADOPTED
In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." In August 2001, the FASB
issued SFAS No. 143, "Accounting for Asset Retirement Obligations," and, in
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."
SFAS No. 141 requires all business combinations completed after June 30,
2001, to be accounted for under the purchase method. This standard also
establishes, for all business combinations made after June 30, 2001, specific
criteria for the recognition of intangible assets separately from goodwill. SFAS
No. 141 also requires that the excess of the fair value of acquired assets over
cost (negative goodwill) be recognized
F-12
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
immediately as an extraordinary gain, rather than deferred and amortized. The
Company will account for all future business combinations under SFAS No. 141.
SFAS No. 142 addresses the accounting for goodwill and other intangible
assets after an acquisition. Goodwill and other intangibles that have indefinite
lives will no longer be amortized, but will be subject to annual impairment
tests. All other intangible assets will continue to be amortized over their
estimated useful lives, which is no longer limited to 40 years. The Company
adopted this statement effective January 1, 2002, as required. Amortization of
existing goodwill ceased on the unamortized portion associated with acquisitions
and certain investments accounted for under the equity method. This is expected
to have a favorable annual impact of approximately $12.8 million, net of tax,
beginning in 2002. SFAS No. 142 also requires a new methodology for the testing
of impairment of goodwill and other intangibles that have indefinite lives.
During 2002, the Company will begin testing goodwill for impairment under the
new rules, applying a fair-value-based test. The transition adjustment, if any,
resulting from the adoption of the new approach to impairment testing as
required by SFAS No. 142 will be reported as a cumulative effect of a change in
accounting principle. At this time, the Company has not yet determined what
impact, if any, the change in the required approach to impairment testing will
have on either its financial position or results of operations.
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 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. This standard becomes effective for fiscal years
beginning after June 15, 2002. The Company will adopt the Statement effective
January 1, 2003. The transition adjustment, if any, resulting from the adoption
of SFAS No. 143 will be reported as a cumulative effect of a change in
accounting principle. At this time, the Company does not expect that the
adoption of this Statement will have an impact on either its financial position
or results of operations.
SFAS No. 144 addresses the financial accounting and reporting for the
impairment or disposal of long-lived assets. This statement supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business,
as previously defined in that Opinion. SFAS No. 144 provides a single accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale. Many of the provisions of SFAS No. 121 are retained,
however, SFAS No. 144 clarifies some of the implementation issues related to
SFAS No. 121. SFAS No. 144 also broadens the presentation of discontinued
operations to include more disposal transactions. This Statement is effective
for fiscal years beginning after December 15, 2001, with early adoption
encouraged. The Company adopted this Statement effective January 1, 2002, as
required. The adoption of this Statement did not result in an adjustment to the
Company's financial statements on January 1, 2002.
NOTE 3 -- SPECIAL CHARGES
Restructuring Charges
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, classified in the 2001 Consolidated Statement of Operations and
Comprehensive Income (Loss) on the line restructuring charges, for severance and
other employee benefits to be paid to approximately 285 manufacturing and
administrative personnel in Europe. NMHG Retail recognized a restructuring
charge of approximately $4.7 million pre-tax, classified in the 2001
Consolidated
F-13
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statement of Operations and Comprehensive Income (Loss) on the line
restructuring charges, of which $0.4 million relates to lease termination costs
and $4.3 million relates to severance and other employee benefits to be paid to
approximately 140 service technicians, salesmen and administrative personnel at
wholly owned dealers in Europe. During 2001, total payments of $1.7 million have
been made to approximately 190 employees for both of these European plans.
During 2000, NMHG made the determination that the consolidation of the
Americas' truck assembly activities from three plants to two plants offers
significant opportunity to reduce structure costs while further optimizing the
use of NMHG's global manufacturing capacity. Accordingly, a decision was made to
phase out certain manufacturing activities in the Danville, Illinois, assembly
plant. In December 2000, the Board of Directors approved management's plan to
transfer manufacturing activities from NMHG's Danville plant to its other global
manufacturing plants. The adoption of this plan resulted in a charge to
operations of approximately $13.9 million recognized in the 2000 Consolidated
Statement of Operations and Comprehensive Income (Loss) on the line
restructuring charges. This charge is comprised of a $5.1 million curtailment
loss for retirement benefits under a defined benefit plan, $4.0 million for
employee severance to be paid to approximately 425 manufacturing and office
personnel, $2.2 million of asset impairment charges and $2.6 million for other
costs.
As noted above, in connection with the phase-out of activities at the
Danville, Illinois, assembly plant, NMHG recognized an impairment charge of $2.2
million in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The impairment
charge relates to certain fixed assets and leasehold improvements that will
either be disposed of or sold at fair market value, which was estimated to be
below the net book value. Fair market value was estimated using current market
values for similar assets.
During 2001, payments of $1.7 million to approximately 350 employees have
been made. Approximately $12.0 million of pre-tax costs associated with the
Danville phase-out, which were not eligible for accrual as of December 31, 2000,
were expensed during 2001 and classified as cost of sales in the 2001
Consolidated Statement of Operations and Comprehensive Income (Loss). In
addition, the accrual for restructuring was reduced by $0.4 million in 2002.
The changes to the Company's restructuring accruals are as follows:
<Table>
<Caption>
ASSET LEASE CURTAILMENT
SEVERANCE IMPAIRMENT IMPAIRMENT LOSS OTHER TOTAL
--------- ---------- ---------- ----------- ----- ------
NMHG WHOLESALE
Balance at December 31, 1999.......... $ -- $ -- $ -- $ -- $ -- $ --
Provision........................... 4.0 2.2 -- 5.1 2.6 13.9
Payments............................ -- -- -- -- -- --
----- ----- ----- ----- ----- ------
Balance at December 31, 2000.......... $ 4.0 $ 2.2 $ -- $ 5.1 $2.6 $ 13.9
Provision (reversal), net........... 4.2 -- -- -- (0.1) 4.1
Payments/assets disposed............ (2.9) (2.2) -- -- (0.1) (5.2)
----- ----- ----- ----- ----- ------
BALANCE AT DECEMBER 31, 2001.......... $ 5.3 $ -- $ -- $ 5.1 $2.4 $ 12.8
===== ===== ===== ===== ===== ======
NMHG RETAIL
Balance at December 31, 2000.......... $ -- $ -- $ -- $ -- $ -- $ --
Provision........................... 4.3 -- 0.4 -- -- 4.7
Payments............................ (0.4) -- -- -- -- (0.4)
----- ----- ----- ----- ----- ------
BALANCE AT DECEMBER 31, 2001.......... $ 3.9 $ -- $ 0.4 $ -- $ -- $ 4.3
===== ===== ===== ===== ===== ======
</Table>
F-14
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER SPECIAL TRANSACTIONS
In 2001, NMHG recognized income of $8.0 million classified in other income
(expense) in the Consolidated Statements of Operations and Comprehensive Income
(Loss) resulting from the receipt of insurance proceeds relating to flood damage
in September 2000 at NMHG's Sumitomo-NACCO joint venture in Japan.
NOTE 4 -- ACQUISITIONS AND DISPOSITION
In 1998, NMHG announced and began implementation of a strategy to expand
into the retail forklift distribution business. As a result, either 100 percent
of the stock or substantially all of the assets of several forklift truck retail
dealerships were acquired in 2001, 2000 and 1999. The dealerships acquired were
either existing independent Hyster or Yale dealerships or were converted to
Hyster or Yale dealerships at the time of acquisition. The combined purchase
prices of retail dealerships acquired during 2001, 2000 and 1999 were
approximately $3.9 million, $16.6 million and $62.4 million, respectively. Funds
for the purchases were provided by either borrowings advanced to NMHG Retail by
NMHG Wholesale under existing NMHG Wholesale facilities or by internally
generated cash flows.
These acquisitions were accounted for as purchases and, accordingly, the
results of operations of the acquired businesses are included in the
accompanying financial statements from their respective dates of acquisition.
Goodwill has been recognized for the amount of the excess of the purchase price
paid over the fair market value of the net assets acquired and is amortized on a
straight-line basis generally over 40 years. Goodwill recorded in 2001, 2000 and
in 1999 as a result of these acquisitions was $2.5 million, $8.9 million and
$24.7 million, respectively.
In 2001, NMHG Retail sold certain of its wholly owned dealers. This
transaction resulted in initial proceeds of approximately $8.0 million and a
preliminary charge for the loss on the sale of assets and related wind-down
costs of $10.4 million, of which approximately $2.1 million related to income
statement recognition of amounts previously reported in the cumulative
translation adjustment. The agreement to sell these dealers allows for a final
determination of the purchase price during the first quarter of 2002 whereby the
preliminary purchase price received for certain assets and liabilities may be
adjusted. The Company does not expect the proceeds or the loss on the sale to
change significantly as a result of the final determination of the purchase
price. Revenues for these dealers for the three years ended December 31, 2001,
2000 and 1999 were $45.1 million, $46.8 million and $47.4 million, respectively.
Net losses for these dealers for the three years ended December 31, 2001, 2000
and 1999 were $18.2 million, $5.5 million and $2.4 million, respectively.
As a result of the acquisitions by NMHG, certain liabilities were assumed
as follows:
<Table>
<Caption>
2001 2000 1999
----- ------ ------
NONCASH INVESTING ACTIVITIES:
Fair value of assets acquired............................. $ 4.2 $ 49.1 $ 89.6
Cash paid for the net assets, net of cash acquired........ (3.9) (16.6) (62.4)
----- ------ ------
Liabilities assumed.................................... $ 0.3 $ 32.5 $ 27.2
===== ====== ======
</Table>
On a pro forma basis, as if the businesses had been acquired on January 1,
2001, 2000 and 1999, respectively, revenues and net income (loss) would not
differ materially from the amounts reported in the accompanying consolidated
financial statements for 2001, 2000 and 1999.
ACQUISITION OF MINORITY INTEREST
In 1999, NACCO acquired the remaining 2 percent minority interest in H-Y
for its book value of $11.3 million.
F-15
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- ACCOUNTS RECEIVABLE SECURITIZATION
On December 5, 2001, NMHG Wholesale's domestic accounts receivable
securitization program (the "Program") was terminated. Prior to the termination
of the program, the transfer of receivables pursuant to the Program were
accounted for as a sale in accordance with SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities -- a Replacement of FASB Statement No. 125."
As a result of the termination of the Program, NMHG Wholesale will rely on
its revolving credit facility ("Facility") to finance accounts receivable that
otherwise would have been sold under the Program prior to December 5, 2001.
Additional borrowings from the Facility of $33.4 million were used to finance
the outstanding balance of accounts receivable sold pursuant to the Program on
December 5, 2001. As a result of the termination of the Program, an increase in
interest expense arising from increased outstanding borrowings is expected to be
offset by a decrease in the cost of the Program, which is classified in the
statement of operations as other -- net.
NMHG Wholesale has agreements with financial institutions outside of the
United States which allow for the sale, without recourse, of undivided interests
in revolving pools of its foreign trade accounts receivable. The maximum
allowable amount of foreign trade receivables to be sold was $72.4 million and
$59.6 million at December 31, 2001 and 2000, respectively.
NMHG Wholesale continues to service the receivables sold and maintains an
allowance for doubtful accounts based upon the expected collectibility of all
NMHG Wholesale accounts receivable, including the portion of receivables sold.
The servicing liability incurred in connection with these transactions is not
material.
Gross proceeds of $855.7 million, $858.2 million, and $655.0 million were
received during 2001, 2000 and 1999 respectively, and the balance of accounts
receivable sold at December 31, 2001 and 2000 was $27.7 million and $71.6
million, respectively. The discount and any other transaction gains and losses
are included in other -- net in the Consolidated Statements of Operations and
Comprehensive Income (Loss) and totaled $4.7 million, $5.5 million and $3.8
million in 2001, 2000 and 1999, respectively.
NOTE 6 -- INVENTORIES
Inventories are summarized as follows:
<Table>
<Caption>
DECEMBER 31
---------------
2001 2000
------ ------
Manufactured inventories:
Finished goods and service parts.......................... $ 99.6 $103.1
Raw materials and work in process......................... 111.4 157.9
------ ------
Total manufactured inventories......................... 211.0 261.0
Retail inventories.......................................... 35.8 36.8
------ ------
Total inventories at FIFO.............................. 246.8 297.8
LIFO reserve................................................ (12.3) (14.8)
------ ------
$234.5 $283.0
====== ======
</Table>
The cost of certain manufactured and retail inventories has been determined
using the LIFO method. At December 31, 2001 and 2000, 68 and 72 percent of total
inventories, respectively, were determined using the LIFO method.
F-16
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net includes the following:
<Table>
<Caption>
DECEMBER 31
---------------
2001 2000
------ ------
Land and land improvements.................................. $ 15.8 $ 16.8
Plant and equipment:
NMHG Wholesale............................................ 413.2 386.3
NMHG Retail............................................... 109.1 95.7
------ ------
522.3 482.0
------ ------
Property, plant and equipment, at cost...................... 538.1 498.8
Less allowances for depreciation and amortization........... 257.6 212.6
------ ------
$280.5 $286.2
====== ======
</Table>
Total depreciation and amortization expense on property, plant and
equipment was $47.0 million, $41.9 million and $41.8 million during 2001, 2000
and 1999, respectively.
NOTE 8 -- REVOLVING CREDIT AGREEMENTS
The following table summarizes the Company's available and outstanding
borrowings under revolving credit agreements.
<Table>
<Caption>
DECEMBER 31
---------------
2001 2000
------ ------
Available borrowings, net of limitations.................... $450.5 $389.6
Current portion of borrowings outstanding................... $301.2 $ 33.1
Unused availability*........................................ $149.3 $147.5
Weighted average stated interest rate....................... 2.8% 7.1%
Weighted average effective interest rate
(including interest rate swap agreements)................. 5.8% 6.4%
</Table>
- ---------------
* Unused availability is determined using the available borrowings, net of
limitations, reduced by the current portion and long-term portion (see Note 9)
of revolving credit agreements outstanding.
NMHG Wholesale's credit agreement provides for an unsecured revolving
credit facility (the "Facility") that permits advances up to $350.0 million and
expires in June 2002. The Facility has performance-based pricing which sets
interest rates based upon the achievement of certain financial performance
targets. The Facility currently provides for, at NMHG Wholesale's option,
Euro-Dollar Loans which bear interest at LIBOR plus 0.20 percent and Money
Market Loans which bear interest at Auction Rates (as defined in the agreement)
and requires a 0.10 percent fee on the available borrowings. The Facility
permits NMHG Wholesale to advance funds to NMHG Retail. Advances from NMHG
Wholesale are the primary sources of financing for NMHG Retail.
Because the Facility expires in June 2002, NMHG anticipates that a new
credit facility will be obtained in or before June 2002. While there can be no
assurances as to the specific terms of the refinancing, including the nature of
the covenants and restrictions, NMHG expects that interest rates under the new
facility will be higher based on its evaluation of the generally higher interest
rate spreads charged today versus interest rate spreads in effect when NMHG
Wholesale's Facility was structured in 1995. NMHG Wholesale
F-17
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expects that the outstanding balance under the Facility at the time of
refinancing will be financed with a combination of short-term and long-term
financing. However, in accordance with accounting principles generally accepted
in the U.S., the outstanding balance under the Facility will be classified as a
current liability until the Facility is refinanced. The amount outstanding that
is classified as a current liability at December 31, 2001 is $265.0 million.
NMHG also has separate facilities totaling $76.3 million and $66.4 million
at December 31, 2001 and 2000, respectively. Outstanding letters of credit
reduce amounts available under these facilities. A portion of these facilities
is denominated in foreign currencies, primarily the British pound sterling and
the Australian dollar. At December 31, 2001 and 2000, unused availability, net
of limitations, under these facilities was $34.3 million and $26.5 million,
respectively. NMHG also maintains various uncommitted lines of credit, which
permitted funding up to $30.0 million at December 31, 2001 and 2000. Under these
facilities, unused availability was $30.0 million and $6.0 million at December
31, 2001 and 2000, respectively.
NOTE 9 -- LONG-TERM DEBT
Long-term debt is as follows:
<Table>
<Caption>
DECEMBER 31
---------------
2001 2000
------ ------
Long-term portion of revolving credit agreements............ $ -- $209.0
Capital lease obligations and other term loans.............. 53.2 62.8
------ ------
Total long-term debt...................................... 53.2 271.8
Less: current portion of capital leases and term loans...... (25.5) (30.3)
------ ------
$ 27.7 $241.5
====== ======
</Table>
Annual maturities of revolving lines of credit and term loans are as
follows: $314.2 million in 2002, $1.4 million in 2003 and $1.6 million in 2004.
Interest paid on revolving credit agreements and long-term debt was $25.4
million, $19.8 million and $18.8 million during 2001, 2000 and 1999,
respectively. Interest capitalized was $0.8 million in 2001.
The Facility contains certain covenants and restrictions. These covenants
require, among other things, maintenance of minimum amounts of net worth, and
specified ratios of debt to capitalization and interest coverage. At December
31, 2001, the Company was in compliance with these covenants.
NOTE 10 -- FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable and
accounts payable approximate fair value due to the short-term maturities of
these instruments. The fair values of revolving credit agreements and long-term
debt were determined using current rates offered for similar obligations. The
fair value of outstanding borrowings against the Facility was approximately
$258.1 million at December 31, 2001 compared with a carrying value of $265.0
million, while the fair value of outstanding borrowings against the Facility
approximated carrying value at December 31, 2000. The fair value of other
revolving credit agreements, long-term debt and notes with NACCO approximated
carrying values at December 31, 2001 and 2000. Financial instruments that
potentially subject the Company to concentration of credit risk consist
principally of accounts receivable and derivatives. The large number of
customers comprising the Company's customer base and their dispersion across
many different industries and geographies mitigates concentration of credit risk
on accounts receivable. To further reduce credit risk associated with accounts
receivable, the Company performs periodic credit evaluations of its customers,
but does not generally require
F-18
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
advance payments or collateral. The Company enters into derivative contracts
with high-quality financial institutions and limits the amount of credit
exposure to any one institution.
DERIVATIVE FINANCIAL INSTRUMENTS
FOREIGN CURRENCY DERIVATIVES: NMHG held forward foreign currency exchange
contracts with a total notional amount of $101.6 million at December 31, 2001,
primarily denominated in euros, British pounds sterling, Japanese yen, Canadian
dollars, Australian dollars, and Mexican pesos. NMHG held forward foreign
currency exchange contracts with a total notional amount of $92.2 million at
December 31, 2000, primarily denominated in British pounds sterling, euros,
Japanese yen, Canadian dollars, and Australian dollars. The amount of deferred
gain at December 31, 2001 and 2000, respectively, was not material. The fair
market value of these contracts was estimated based on quoted market prices and
approximated a net payable of $0.8 million and $0.6 million at December 31, 2001
and 2000, respectively.
INTEREST RATE DERIVATIVES: The following table summarizes the notional amounts,
related rates (including applicable margins) and remaining terms on interest
rate swap agreements active at December 31:
<Table>
<Caption>
AVERAGE
NOTIONAL AMOUNT FIXED RATE
--------------- ----------- REMAINING TERM AT
2001 2000 2001 2000 DECEMBER 31, 2001
------ ------ ---- ---- -----------------
NMHG................... $225.0 $215.0 5.8% 6.3% Various, extending to January 2005
</Table>
Interest rate swap agreements held by NMHG have terms that vary from
one-year to seven-year periods from inception. The fair market value of all
interest rate swap agreements, which was based on quotes obtained from the
Company's counterparties, was a net payable of $10.7 million and $2.5 million at
December 31, 2001 and 2000, respectively.
NOTE 11 -- LEASING ARRANGEMENTS
The Company leases certain office, manufacturing and warehouse facilities,
retail stores and machinery and equipment under noncancellable capital and
operating leases that expire at various dates through 2012. NMHG Retail also
leases certain forklift trucks that are held for sale or sublease to customers.
Many leases include renewal and/or purchase options.
Future minimum capital and operating lease payments at December 31, 2001
are:
<Table>
<Caption>
CAPITAL OPERATING
LEASES LEASES
------- ---------
2002........................................................ $ 12.5 $ 40.4
2003........................................................ 12.7 32.1
2004........................................................ 7.3 26.0
2005........................................................ 4.6 19.0
2006........................................................ 2.5 13.3
Subsequent to 2006.......................................... 1.1 10.8
------ ------
Total minimum lease payments................................ 40.7 $141.6
======
Amounts representing interest............................... (3.5)
------
Present value of net minimum lease payments................. 37.2
Current maturities.......................................... (12.5)
------
Long-term capital lease obligation.......................... $ 24.7
======
</Table>
F-19
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate future minimum rentals to be received under noncancellable
subleases of forklift trucks as of December 31, 2001 are $29.8 million.
Rental expense for all operating leases consists of the following:
<Table>
<Caption>
2001 2000 1999
------ ----- -----
Minimum rentals............................................. $ 30.3 $20.2 $10.5
Sublease income............................................. (15.7) (7.8) --
------ ----- -----
Rent expense, net........................................... $ 14.6 $12.4 $10.5
====== ===== =====
</Table>
Assets recorded under capital leases are included in property, plant and
equipment and consist of the following:
<Table>
<Caption>
DECEMBER 31
-------------
2001 2000
----- -----
Plant and equipment......................................... $60.8 $55.4
Less accumulated amortization............................... 26.3 17.9
----- -----
$34.5 $37.5
===== =====
</Table>
During 2001, 2000 and 1999, capital lease obligations of $5.4 million,
$22.3 million and $13.6 million, respectively, were incurred in connection with
lease agreements to acquire plant and equipment.
NOTE 12 -- CONTINGENCIES
Various legal proceedings and claims have been or may be asserted against
the Company relating to the conduct of its business, including product
liability, environmental and other claims. These proceedings are incidental to
the ordinary course of business of the Company. Management believes that it has
meritorious defenses and will vigorously defend itself in these actions. Any
costs that management estimates will be paid as a result of these claims are
accrued when the liability is considered probable and the amount can be
reasonably estimated. Although the ultimate disposition of these proceedings is
not presently determinable, management believes, after consultation with its
legal counsel, that the likelihood is remote that material costs will be
incurred in excess of accruals already recognized.
Under various financing arrangements for certain customers, including
independently owned retail dealerships, NMHG provides guarantees of the residual
values of the lift trucks, or recourse or repurchase obligations such that NMHG
would be obligated in the event of default by the customer. 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. Total
guarantees and amounts subject to recourse or repurchase obligations at December
31, 2001 and 2000 were $158.0 million and $172.8 million, respectively. The
security interest is generally expected to equal or exceed the amount of the
recourse or repurchase obligation. Losses anticipated under the terms of the
guarantees, recourse or repurchase obligations are not significant and have been
reserved for in the accompanying Consolidated Financial Statements.
F-20
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- INCOME TAXES
The components of income (loss) before income taxes and provision for
income taxes for the year ended December 31 are as follows:
<Table>
<Caption>
2001 2000 1999
------ ----- -----
Income (loss) before income taxes, minority interest and
cumulative effect of accounting changes:
Domestic.................................................... $(19.3) $45.5 $50.9
Foreign..................................................... (44.1) (7.9) (9.8)
------ ----- -----
$(63.4) $37.6 $41.1
====== ===== =====
Income tax provision (benefit)
Current tax provision (benefit):
Federal................................................... $ (3.3) $22.1 $19.8
State..................................................... (0.5) 4.7 3.7
Foreign................................................... 0.7 1.6 --
------ ----- -----
Total current.......................................... (3.1) 28.4 23.5
------ ----- -----
Deferred tax provision (benefit):
Federal................................................... 0.8 (3.0) (1.3)
State..................................................... (0.3) (0.9) (0.7)
Foreign................................................... (17.4) (4.0) (4.3)
------ ----- -----
Total deferred......................................... (16.9) (7.9) (6.3)
------ ----- -----
Increase (decrease) in valuation allowance.................. 5.5 (3.1) 1.2
------ ----- -----
$(14.5) $17.4 $18.4
====== ===== =====
</Table>
Substantially all of the Company's interest expense and goodwill
amortization has been allocated to domestic income (loss) before income taxes.
The Company made income tax payments of $22.7 million, $34.6 million and
$36.7 million during 2001, 2000 and 1999, respectively. During the same period,
income tax refunds totaled $6.6 million, $6.9 million and $6.9 million,
respectively.
A reconciliation of the federal statutory and effective income tax for the
year ended December 31 is as follows:
<Table>
<Caption>
2001 2000 1999
------ ----- -----
Income (loss) before income taxes, minority interest and
cumulative effect of accounting changes:.................. $(63.4) $37.6 $41.1
====== ===== =====
Statutory taxes at 35.0%.................................... $(22.2) $13.2 $14.4
Valuation allowance....................................... 5.5 (2.3) 1.2
Amortization of goodwill.................................. 4.3 4.1 4.1
Foreign statutory rate differences........................ 0.2 -- (0.2)
Tax credits and capital grants............................ (0.4) (0.7) (1.1)
Earnings reported net of taxes............................ (0.9) 0.1 (0.2)
State income taxes........................................ (0.3) 2.3 2.1
Export benefits........................................... (0.5) (1.0) (1.3)
Other -- net.............................................. (0.2) 1.7 (0.6)
------ ----- -----
Income tax provision (benefit).............................. $(14.5) $17.4 $18.4
====== ===== =====
Effective rate.............................................. 22.9% 46.3% 44.8%
====== ===== =====
</Table>
F-21
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company does not provide for deferred taxes on certain unremitted
foreign earnings. Management has decided that the earnings of NMHG's foreign
subsidiaries have been and will be indefinitely reinvested in NMHG's foreign
operations and, therefore, a reserve for unremitted foreign earnings is not
required. As of December 31, 2001, the cumulative unremitted earnings of the
Company's foreign subsidiaries are $147.4 million. It is impracticable to
determine the amount of unrecognized deferred taxes with respect to these
earnings; however, foreign tax credits would be available to reduce U.S. income
taxes in the event of a distribution.
A detailed summary of the total deferred tax assets and liabilities in the
Company's Consolidated Balance Sheets resulting from differences in the book and
tax basis of assets and liabilities follows:
<Table>
<Caption>
DECEMBER 31
--------------
2001 2000
------ -----
Deferred tax assets
Accrued expenses and reserves............................. $ 51.5 $49.4
Accrued pension benefits.................................. 9.7 --
Other employee benefits................................... 23.7 22.3
Net operating loss carryforwards.......................... 16.1 12.5
Other..................................................... 5.8 3.6
------ -----
Total deferred tax assets.............................. 106.8 87.8
Less: Valuation allowance.............................. 10.1 4.6
------ -----
$ 96.7 $83.2
------ -----
Deferred tax liabilities
Depreciation and amortization............................. $ 24.1 $21.1
Inventories............................................... 9.4 10.1
Pension................................................... -- 5.6
Other..................................................... 14.6 15.3
------ -----
Total deferred tax liabilities......................... 48.1 52.1
------ -----
Net deferred tax asset............................... $ 48.6 $31.1
====== =====
</Table>
The Company periodically reviews the need for a valuation allowance against
certain deferred tax assets and recognizes these assets to the extent that
realization is more likely than not. Based on a review of earnings history and
trends, forecasted earnings and expiration of carryforwards, the Company
believes that the valuation allowance provided is appropriate. In 2001, the
valuation allowance increased to $10.1 million from $4.6 million at December 31,
2000. At December 31, 2001, the Company had $5.9 million of net operating loss
carryforwards which expire, if unused, in years 2002 through 2021 and $10.2
million which are not subject to expiration.
The tax returns of the Company and certain of its subsidiaries are being
examined by various taxing authorities. The Company has not been informed of any
material assessment resulting from these examinations and will vigorously
contest any material assessment. Management believes that any potential
adjustment would not materially affect the Company's financial condition or
results of operations.
NOTE 14 -- RETIREMENT AND OTHER POSTRETIREMENT BENEFIT PLANS
DEFINED BENEFIT PLANS
The Company participates in the combined defined benefit plan of NACCO for
certain employee groups. The Company also maintains a defined benefit plan for
those employees who are covered under collective bargaining agreements. The
Company's policy is to make contributions to fund these plans within the range
allowed by the applicable regulations. Plan assets consist primarily of publicly
traded stocks, investment contracts and government and corporate bonds.
F-22
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1996, pension benefits were frozen for employees covered under NMHG's
United States plans, except for those NMHG employees participating in collective
bargaining agreements. As a result, in the United States only certain NMHG
employees covered under collective bargaining agreements will earn retirement
benefits under defined benefit pension plans. Other employees of the Company,
including NMHG employees whose pension benefits were frozen as of December 31,
1996, will receive retirement benefits under defined contribution retirement
plans.
As a result of management's decision to phase out certain manufacturing
activities in the NMHG Danville, Illinois, assembly plant, the Company
recognized a curtailment loss of $5.1 million in 2000. See also Note 3.
Set forth below is a detail of the net periodic pension (income) expense
and the assumptions used in accounting for the United States and the United
Kingdom defined benefit plans for the years ended December 31.
<Table>
<Caption>
2001 2000 1999
------ ----- -----
UNITED STATES PLANS
Service cost.............................................. $ 0.1 $ 0.5 $ 0.6
Interest cost............................................. 4.2 3.5 3.6
Expected return on plan assets............................ (5.3) (4.8) (4.7)
Net amortization and deferral............................. 0.4 0.4 0.6
Curtailment loss.......................................... -- 5.1 --
------ ----- -----
Net periodic pension (income) expense.................. $ (0.6) $ 4.7 $ 0.1
====== ===== =====
Assumptions:
Weighted average discount rates........................ 7.50% 8.00% 7.75%
Rate of increase in compensation levels................ 3.75% 4.25% 4.25%
Expected long-term rate of return on assets............ 9.00% 9.00% 9.00%
UNITED KINGDOM PLAN
Service cost.............................................. $ 2.0 $ 2.0 $ 2.4
Interest cost............................................. 3.2 3.0 3.1
Expected return on plan assets............................ (5.2) (4.3) (3.7)
Amortization of transition asset.......................... (0.1) (0.1) (0.1)
Amortization of prior service cost........................ 0.1 0.1 0.1
Recognized actuarial (gain) loss.......................... (0.5) (0.4) 0.4
------ ----- -----
Net periodic pension (income) expense.................. $ (0.5) $ 0.3 $ 2.2
====== ===== =====
Assumptions:
Weighted average discount rates........................ 6.25% 6.75% 6.25%
Rate of increase in compensation levels................ 3.75% 4.25% 3.50%
Expected long-term rate of return on assets............ 9.00% 9.00% 7.50%
</Table>
F-23
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following sets forth the changes in the benefit obligation and the plan
assets during the year and reconciles the funded status of the defined benefit
plans with the amounts recognized in the Consolidated Balance Sheets at December
31:
<Table>
<Caption>
2001 2000
---------------- ----------------
UNITED UNITED UNITED UNITED
STATES KINGDOM STATES KINGDOM
PLANS PLAN PLANS PLAN
------ ------- ------ -------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.................. $54.7 $49.7 $46.7 $51.4
Service cost............................................. 0.1 2.0 0.5 2.0
Interest cost............................................ 4.2 3.2 3.5 3.0
Actuarial (gain) loss.................................... 1.9 5.5 5.2 (0.6)
Benefits paid............................................ (3.9) (1.4) (2.8) (2.1)
Plan amendments.......................................... -- -- 1.6 --
Foreign currency exchange rate changes................... -- (1.4) -- (4.0)
----- ----- ----- -----
Benefit obligation at end of year..................... $57.0 $57.6 $54.7 $49.7
===== ===== ===== =====
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year........... $60.9 $65.2 $56.5 $59.5
Actual return on plan assets............................. (8.0) (14.0) 6.0 10.4
Employer contributions................................... -- 1.5 1.2 1.7
Employee contributions................................... -- 0.5 -- 0.5
Benefits paid............................................ (3.9) (1.4) (2.8) (2.1)
Foreign currency exchange rate changes................... -- (1.9) -- (4.8)
----- ----- ----- -----
Fair value of plan assets at end of year.............. $49.0 $49.9 $60.9 $65.2
===== ===== ===== =====
NET AMOUNT RECOGNIZED
Plan assets in excess of obligation...................... $(8.0) $(7.7) $ 6.2 $15.5
Unrecognized prior service cost.......................... 0.3 0.7 0.8 0.8
Unrecognized actuarial (gain) loss....................... 11.0 19.1 (4.0) (5.2)
Unrecognized net transition asset........................ -- (0.2) -- (0.3)
Contributions in fourth quarter.......................... -- 0.3 -- 0.3
----- ----- ----- -----
Net amount recognized................................. $ 3.3 $12.2 $ 3.0 $11.1
===== ===== ===== =====
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
CONSIST OF:
Prepaid benefit cost..................................... $ 5.1 $ -- $ 4.0 $11.1
Accrued benefit liability................................ (8.9) (5.6) (4.1) --
Intangible asset......................................... 0.3 0.7 0.7 --
Accumulated other comprehensive income................... 4.2 10.6 1.4 --
Deferred tax asset....................................... 2.6 6.5 1.0 --
----- ----- ----- -----
Net amount recognized................................. $ 3.3 $12.2 $ 3.0 $11.1
===== ===== ===== =====
</Table>
POSTRETIREMENT HEALTH AND LIFE INSURANCE: The Company also maintains
health care and life insurance plans (other benefit plans) which provide
benefits to eligible retired employees. The Company funds these benefits on a
"pay as you go" basis, with the retirees paying a portion of the costs.
The assumed health care cost trend rate for measuring the postretirement
benefit cost was 10.00% in 2001 and 7.50% in 2000, gradually reducing to 5.0%
through years 2010 and after. If the assumed health care trend rate were
increased or decreased by one percentage point, the effect would be to increase
or decrease the Accumulated Postretirement Benefit Obligation by approximately
$0.2 million.
F-24
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Set forth below is a detail of the net periodic expense and the assumptions
used in accounting for the postretirement health and life insurance plans for
the years ended December 31.
<Table>
<Caption>
2001 2000 1999
----- ----- -----
Service cost.............................................. $ 0.1 $ 0.1 $ 0.2
Interest cost............................................. 0.8 0.6 0.6
Curtailment loss.......................................... 0.3 2.5 --
----- ----- -----
Net periodic expense................................... $ 1.2 $ 3.2 $ 0.8
===== ===== =====
Assumptions:
Weighted average discount rates........................ 7.50% 8.00% 7.75%
Rate of increase in compensation levels................ 3.75% 4.25% 4.25%
</Table>
The following sets forth the changes in the benefit obligation and
reconciles the funded status of the postretirement health and life insurance
plans with the amounts recognized in the Consolidated Balance Sheets at December
31:
<Table>
<Caption>
2001 2000
------ ------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year................... $ 11.0 $ 8.1
Service cost.............................................. 0.1 0.1
Interest cost............................................. 0.8 0.6
Actuarial (gain) loss..................................... 1.4 3.8
Benefits paid............................................. (2.8) (1.6)
------ ------
Benefit obligation at end of year...................... $ 10.5 $ 11.0
------ ------
NET AMOUNT RECOGNIZED
Benefit obligation in excess of plan assets............... $(10.5) $(11.0)
Unrecognized actuarial (gain) loss........................ 3.4 2.2
------ ------
Net amount recognized.................................. $ (7.1) $ (8.8)
====== ======
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEETS CONSIST OF:
Accrued benefit liability................................... $ (7.1) $ (8.8)
</Table>
DEFINED CONTRIBUTION PLANS
The Company has defined contribution (401(k)) plans for substantially all
U.S. employees and similar plans for employees outside of the U.S. NMHG matches
employee contributions based on plan provisions. In addition, NMHG has defined
contribution retirement plans whereby the applicable company's contribution to
participants is determined annually based on a formula which includes the effect
of actual compared to targeted operating results and the age and compensation of
the participants. Total costs, including Company contributions, for these plans
were $12.7 million, $14.2 million and $14.6 million in 2001, 2000 and 1999,
respectively.
F-25
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- BUSINESS SEGMENTS
Financial information for each of NMHG's reportable segments, as defined by
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is presented in the following table. See Note 1 for a discussion
of the Company's operating segments and product lines.
The accounting policies of the segments are the same as those described in
Note 2 -- Accounting Policies. 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.
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
REVENUES FROM EXTERNAL CUSTOMERS
NMHG Wholesale............................................ $1,463.3 $1,750.0 $1,618.9
NMHG Retail............................................... 298.8 280.3 228.1
NMHG Eliminations......................................... (89.7) (98.2) (85.6)
-------- -------- --------
$1,672.4 $1,932.1 $1,761.4
======== ======== ========
GROSS PROFIT
NMHG Wholesale............................................ $ 189.9 $ 292.9 $ 255.7
NMHG Retail............................................... 54.8 54.1 49.3
NMHG Eliminations......................................... 4.9 0.5 (1.5)
-------- -------- --------
$ 249.6 $ 347.5 $ 303.5
======== ======== ========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale............................................ $ 179.9 $ 188.9 $ 169.6
NMHG Retail............................................... 84.7 69.8 63.9
NMHG Eliminations......................................... (2.2) (0.9) (0.5)
-------- -------- --------
$ 262.4 $ 257.8 $ 233.0
======== ======== ========
AMORTIZATION OF GOODWILL
NMHG Wholesale............................................ $ 11.4 $ 11.6 $ 11.6
NMHG Retail............................................... 1.5 1.0 0.6
-------- -------- --------
$ 12.9 $ 12.6 $ 12.2
======== ======== ========
OPERATING PROFIT (LOSS)
NMHG Wholesale............................................ $ (5.5) $ 78.5 $ 74.5
NMHG Retail............................................... (46.5) (16.7) (15.2)
NMHG Eliminations......................................... 7.1 1.4 (1.0)
-------- -------- --------
$ (44.9) $ 63.2 $ 58.3
======== ======== ========
OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION
NMHG Wholesale............................................ $ 5.9 $ 90.1 $ 86.1
NMHG Retail............................................... (45.0) (15.7) (14.6)
NMHG Eliminations......................................... 7.1 1.4 (1.0)
-------- -------- --------
$ (32.0) $ 75.8 $ 70.5
======== ======== ========
</Table>
F-26
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
INTEREST EXPENSE
NMHG Wholesale............................................ $ (12.9) $ (13.4) $ (16.9)
NMHG Retail............................................... (5.0) (4.6) (3.0)
NMHG Eliminations......................................... (5.2) (3.2) .9
-------- -------- --------
$ (23.1) $ (21.2) $ (19.0)
======== ======== ========
INTEREST INCOME
NMHG Wholesale............................................ $ 3.4 $ 2.2 $ 8.2
NMHG Retail............................................... 0.2 0.1 0.2
NMHG Eliminations......................................... -- -- (3.6)
-------- -------- --------
$ 3.6 $ 2.3 $ 4.8
======== ======== ========
OTHER -- NET, INCOME (EXPENSE) -- (EXCLUDING INTEREST
INCOME)
NMHG Wholesale............................................ $ 0.8 $ (6.8) $ (3.4)
NMHG Retail............................................... 0.2 0.2 0.3
NMHG Eliminations......................................... -- (0.1) 0.1
-------- -------- --------
$ 1.0 $ (6.7) $ (3.0)
======== ======== ========
INCOME TAX PROVISION (BENEFIT)
NMHG Wholesale............................................ $ (0.6) $ 24.6 $ 24.4
NMHG Retail............................................... (14.6) (6.7) (4.9)
NMHG Eliminations......................................... 0.7 (0.5) (1.1)
-------- -------- --------
$ (14.5) $ 17.4 $ 18.4
======== ======== ========
NET INCOME (LOSS)
NMHG Wholesale............................................ $ (14.1) $ 37.0 $ 39.0
NMHG Retail............................................... (36.5) (14.3) (12.8)
NMHG Eliminations......................................... 1.2 (1.4) (2.5)
-------- -------- --------
$ (49.4) $ 21.3 $ 23.7
======== ======== ========
TOTAL ASSETS
NMHG Wholesale............................................ $1,164.9 $1,167.2 $1,040.5
NMHG Retail............................................... 215.6 232.8 185.0
NMHG Eliminations......................................... (175.4) (158.3) (46.9)
-------- -------- --------
$1,205.1 $1,241.7 $1,178.6
======== ======== ========
DEPRECIATION AND AMORTIZATION EXPENSE
NMHG Wholesale............................................ $ 47.0 $ 40.6 $ 39.9
NMHG Retail............................................... 13.4 14.0 14.2
-------- -------- --------
$ 60.4 $ 54.6 $ 54.1
======== ======== ========
CAPITAL EXPENDITURES
NMHG Wholesale............................................ $ 46.6 $ 43.3 $ 44.7
NMHG Retail............................................... 6.9 8.5 1.5
-------- -------- --------
$ 53.5 $ 51.8 $ 46.2
======== ======== ========
</Table>
F-27
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DATA BY GEOGRAPHIC AREA
No single country outside of the United States comprised 10 percent or more
of the Company's revenues from unaffiliated customers. The Other category below
includes Canada, Mexico, South America and Asia-Pacific. In addition, no single
customer comprised 10 percent or more of the Company's revenues from
unaffiliated customers.
<Table>
<Caption>
EUROPE,
UNITED AFRICA AND
STATES MIDDLE EAST OTHER CONSOLIDATED
-------- ----------- ------ ------------
2001
Revenues from unaffiliated customers, based on the
customers' location.............................. $ 934.5 $470.7 $267.2 $1,672.4
======== ====== ====== ========
Long-lived assets.................................. $ 367.9 $184.8 $ 90.1 $ 642.8
======== ====== ====== ========
2000
Revenues from unaffiliated customers, based on the
customers' location.............................. $1,268.9 $491.9 $171.3 $1,932.1
======== ====== ====== ========
Long-lived assets.................................. $ 381.8 $199.1 $ 89.1 $ 670.0
======== ====== ====== ========
1999
Revenues from unaffiliated customers, based on the
customer's location.............................. $1,181.7 $489.3 $ 90.4 $1,761.4
======== ====== ====== ========
Long-lived assets.................................. $ 413.3 $189.8 $ 58.6 $ 661.7
======== ====== ====== ========
</Table>
NOTE 16 -- RELATED PARTY TRANSACTIONS
NMHG has a 20 percent ownership interest in NMHG Financial Services, Inc.
("NFS"), a joint venture with GE Capital Corporation, formed primarily for the
purpose of providing financial services to independent and wholly owned 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 directly to its customer and that
customer may enter into a financing transaction with NFS or another unrelated
party. However, for certain customer transactions, NMHG sells directly to NFS so
that the customer can obtain operating lease financing from NFS. Sales to NFS
related to these types of transactions for the years ended December 31, 2001,
2000 and 1999 were $31.2 million, $17.5 million and $8.5 million, respectively.
Amounts receivable from NFS at December 31, 2001 and 2000 were immaterial. Also,
from time to time, NMHG provides recourse or repurchase obligations or
guarantees the residual values of the lift trucks purchased by customers and
financed through NFS. See further discussion in Note 12. At December 31, 2001,
approximately $127.1 million of the Company's total guarantees, recourse or
repurchase obligations related to transactions with NFS. For these transactions,
NMHG generally retains a security interest in the lift truck, such that NMHG
would take possession of the lift truck in the event that NMHG would become
liable under the terms of the guarantees or standby recourse or repurchase
obligations.
In addition to providing financing to NMHG's customers, NFS provides both
lease and debt financing to NMHG. Operating lease obligations relate to specific
sale-leaseback-sublease transactions for certain NMHG customers whereby NMHG
sells lift trucks to NFS, NMHG leases these lift trucks back under an operating
lease agreement and NMHG subleases those lift trucks to customers under an
operating lease agreement. Debt financing includes long-term notes payable to
NFS primarily to finance certain of NMHG's long-term notes receivable from Latin
American customers which arise in the ordinary course of business. In addition,
NFS
F-28
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
provides, on NMHG's behalf, installment billings to the Latin American
customers, account balance tracking and an inventory management system to track
the equipment covered by the notes. Total obligations to NFS under the operating
lease agreements and notes payable were $20.3 million and $14.7 million at
December 31, 2001 and 2000, respectively.
In addition, NMHG is reimbursed annually for certain services, primarily
administrative functions, provided to NFS. The amount of NMHG's expenses
reimbursable by NFS were $1.8 million, $1.5 million and $1.1 million for 2001,
2000 and 1999, respectively.
NMHG has a 50 percent ownership interest in Sumitomo NACCO Materials
Handling Group, Inc. ("SN"), a joint venture with Sumitomo Heavy Industries,
Inc., formed primarily for the manufacture and distribution of Sumitomo-Yale
branded lift trucks in Japan and the export of Hyster and Yale branded lift
trucks and related components and service parts outside of Japan. NMHG's
ownership in SN is accounted for using the equity method of accounting. NMHG
purchases products from SN under normal trade terms. In 2001, 2000 and 1999,
purchases from SN were $63.7 million, $90.5 million and $91.2 million,
respectively. Amounts payable to SN at December 31, 2001 and 2000 were $16.1
million and $23.6 million, respectively.
On January 1, 2000, NACCO began charging fees to its operating subsidiaries
for services provided by the corporate headquarters. NACCO charged fees of $7.7
million and $7.4 million in 2001 and 2000, respectively, which are included as a
component of selling, general and administrative expenses in the Consolidated
Statements of Operations and Comprehensive Income (Loss).
The Company expensed $0.8 million, $0.9 million, and $2.5 million in the
years ended December 31, 2001, 2000 and 1999, respectively, for legal services
rendered by a firm having a partner who is also a director of the Company.
F-29
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION
The following tables set forth the condensed consolidating statements of
operations and cash flows for each of the three years in the period ended
December 31, 2001 and the condensed consolidating balance sheets as of December
31, 2001 and December 31, 2000. The following information is included as a
result of the guarantee of the notes by each of NMHG's wholly owned U.S.
subsidiaries ("Guarantor Companies"). None of NMHG Holding's other subsidiaries
will guarantee any of these notes. Each of the guarantees is joint and several
and full and unconditional. "NMHG Holding" includes the consolidated financial
results of NMHG Holding only, with all of its wholly owned subsidiaries
accounted for under the equity method.
NMHG HOLDING CO.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (FOREIGN CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
Revenues..................... $ -- $ 1,100.2 $ 835.4 $(263.2) $ 1,672.4
Cost of sales.............. -- 968.3 722.6 (268.1) 1,422.8
Restructuring.............. -- (0.4) 9.2 -- 8.8
Loss on sale of dealers.... -- 0.6 11.4 (1.6) 10.4
All other operating
expenses................ -- 144.0 131.9 (0.6) 275.3
------ --------- ------- ------- ---------
Operating profit............. -- (12.3) (39.7) 7.1 (44.9)
Interest expenses.......... (0.9) (13.2) (3.8) (5.2) (23.1)
Other income............... -- 1.3 0.7 -- 2.0
------ --------- ------- ------- ---------
Income (loss) before income
taxes, minority interest,
equity in consolidated
subsidiaries and
unconsolidated affiliates
and cumulative effect of
accounting
changes.................... (0.9) (24.2) (42.8) 1.9 (66.0)
Income tax (expense)
benefit................. 2.6 3.6 9.0 (0.7) 14.5
Minority interest income... -- -- 0.8 -- 0.8
Equity in consolidated
subsidiaries and
unconsolidated
affiliates.............. (51.1) 2.6 -- 51.1 2.6
------ --------- ------- ------- ---------
Income (loss) before
cumulative effect of
accounting changes......... (49.4) (18.0) (33.0) 52.3 (48.1)
Cumulative effect of
accounting changes...... -- (0.9) (0.4) -- (1.3)
------ --------- ------- ------- ---------
Net income (loss)............ $(49.4) $ (18.9) $ (33.4) $ 52.3 $ (49.4)
====== ========= ======= ======= =========
</Table>
F-30
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMHG HOLDING CO.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (FOREIGN CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
Revenues..................... $ -- $1,374.2 $859.0 $(301.1) $1,932.1
Cost of sales.............. -- 1,162.7 723.5 (301.6) 1,584.6
Restructuring.............. -- 13.0 0.9 -- 13.9
All other operating
expenses................ -- 133.2 138.1 (0.9) 270.4
----- -------- ------ ------- --------
Operating profit............. -- 65.3 (3.5) 1.4 63.2
Interest expenses.......... (1.1) (12.9) (4.0) (3.2) (21.2)
Other expenses............. -- (2.9) (1.3) -- (4.2)
----- -------- ------ ------- --------
Income (loss) before income
taxes, minority interest
and equity in consolidated
subsidiaries and
unconsolidated
affiliates................. (1.1) 49.5 (8.8) (1.8) 37.8
Income tax (expense)
benefit................. 0.5 (17.2) (1.2) 0.5 (17.4)
Minority interest income... -- -- 1.1 -- 1.1
Equity in consolidated
subsidiaries and
unconsolidated
affiliates.............. 21.9 (0.3) 0.1 (21.9) (0.2)
----- -------- ------ ------- --------
Net income (loss)............ $21.3 $ 32.0 $ (8.8) $ (23.2) $ 21.3
===== ======== ====== ======= ========
</Table>
F-31
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMHG HOLDING CO.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (FOREIGN CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
Revenues..................... $ -- $1,249.2 $760.2 $(248.0) $1,761.4
Cost of sales.............. -- 1,064.9 639.5 (246.5) 1,457.9
All other operating
expenses................ -- 124.1 121.6 (0.5) 245.2
----- -------- ------ ------- --------
Operating profit............. -- 60.2 (0.9) (1.0) 58.3
Interest expenses.......... (0.6) (12.1) (4.2) (2.1) (19.0)
Other income (expenses).... 0.2 3.0 (1.9) -- 1.3
----- -------- ------ ------- --------
Income (loss) before income
taxes, minority interest
and equity in consolidated
subsidiaries and
unconsolidated
affiliates................. (0.4) 51.1 (7.0) (3.1) 40.6
Income tax (expense)
benefit................. 0.1 (21.5) 2.1 0.9 (18.4)
Minority interest income... -- -- 1.0 -- 1.0
Equity in consolidated
subsidiaries and
unconsolidated
affiliates.............. 24.0 0.6 (0.1) (24.0) 0.5
----- -------- ------ ------- --------
Net income (loss)............ $23.7 $ 30.2 $ (4.0) $ (26.2) $ 23.7
===== ======== ====== ======= ========
</Table>
F-32
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMHG HOLDING CO.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2001
<Table>
<Caption>
GUARANTOR NON-GUARANTOR
NMHG COMPANIES COMPANIES CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) (FOREIGN COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------------- ------------- ------------
Cash and cash
equivalents............ $ -- $ 21.9 $ 37.7 $ -- $ 59.6
Accounts and notes
receivable, net........ -- 211.9 225.8 (272.1) 165.6
Inventories.............. -- 136.9 97.8 (0.2) 234.5
Other current assets..... 2.6 55.4 10.2 -- 68.2
------ -------- ------ --------- --------
Total current
assets............ 2.6 426.1 371.5 (272.3) 527.9
Property, plant and
equipment, net......... -- 163.0 118.0 (0.5) 280.5
Goodwill, net............ -- 307.3 36.9 -- 344.2
Other assets............. 476.7 849.7 31.6 (1,305.5) 52.5
------ -------- ------ --------- --------
Total Assets........ $479.3 $1,746.1 $558.0 $(1,578.3) $1,205.1
====== ======== ====== ========= ========
Accounts payable......... $ 96.3 $ 154.4 $200.7 $ (274.7) $ 176.7
Other current
liabilities............ 0.9 126.8 73.3 (1.0) 200.0
Revolving credit
facilities............. -- 265.0 36.2 -- 301.2
------ -------- ------ --------- --------
Total current
liabilities....... 97.2 546.2 310.2 (275.7) 677.9
Long-term debt........... -- 3.2 24.5 -- 27.7
Other long-term
liabilities............ 0.1 95.0 28.1 (5.7) 117.5
Stockholder's equity..... 382.0 1,101.7 195.2 (1,296.9) 382.0
------ -------- ------ --------- --------
Total liabilities and
stockholder's
equity.............. $479.3 $1,746.1 $558.0 $(1,578.3) $1,205.1
====== ======== ====== ========= ========
</Table>
F-33
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMHG HOLDING CO.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000
<Table>
<Caption>
GUARANTOR NON-GUARANTOR
NMHG COMPANIES COMPANIES CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) (FOREIGN COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------------- ------------- ------------
Cash and cash
equivalents............ $ -- $ 2.8 $ 21.6 $ -- $ 24.4
Accounts and notes
receivable, net........ -- 212.1 232.5 (237.6) 207.0
Inventories.............. -- 173.1 111.2 (1.3) 283.0
Other current assets..... -- 28.8 8.6 0.5 37.9
------ -------- ------ --------- --------
Total current
assets............ -- 416.8 373.9 (238.4) 552.3
Property, plant and
equipment, net......... -- 163.0 121.5 1.7 286.2
Goodwill, net............ -- 318.2 37.9 -- 356.1
Other assets............. 480.2 866.9 34.4 (1,334.4) 47.1
------ -------- ------ --------- --------
Total Assets........ $480.2 $1,764.9 $567.7 $(1,571.1) $1,241.7
====== ======== ====== ========= ========
Accounts payable......... $ 15.8 $ 214.0 $189.5 $ (209.5) $ 209.8
Other current
liabilities............ 1.3 126.6 119.0 (11.8) 235.1
------ -------- ------ --------- --------
Total current
liabilities....... 17.1 340.6 308.5 (221.3) 444.9
Long-term debt........... -- 214.2 27.3 -- 241.5
Other long-term
liabilities............ 0.1 85.2 22.4 (15.4) 92.3
Stockholder's equity..... 463.0 1,124.9 209.5 (1,334.4) 463.0
------ -------- ------ --------- --------
Total liabilities
and stockholder's
equity............ $480.2 $1,764.9 $567.7 $(1,571.1) $1,241.7
====== ======== ====== ========= ========
</Table>
F-34
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMHG HOLDING CO.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
GUARANTOR NON-GUARANTOR
NMHG COMPANIES COMPANIES CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) (FOREIGN COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------------- ------------- ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES... $ 2.2 $ 18.7 $ 48.8 $(38.7) $ 31.0
INVESTING ACTIVITIES
Expenditures for
property, plant and
equipment........... -- (31.6) (24.3) 2.4 (53.5)
Proceeds from the sale
of property, plant
and equipment....... -- 6.0 7.0 -- 13.0
Other -- net........... -- 2.8 (9.5) -- (6.7)
------ ------ ------ ------ ------
Net cash used for
investing
activities........ -- (22.8) (26.8) 2.4 (47.2)
FINANCING ACTIVITIES
Additions to long-term
debt and revolving
credit agreements... -- 68.9 -- -- 68.9
Reductions of long-term
debt and revolving
credit agreements... -- (3.9) (18.1) -- (22.0)
Notes
receivable/payable,
parent company...... 80.5 (37.4) (32.1) -- 11.0
Other -- net........... (82.7) (4.4) 45.2 36.3 (5.6)
------ ------ ------ ------ ------
Net cash provided by
(used for)
financing
activities........ (2.2) 23.2 (5.0) 36.3 52.3
Effect of exchange rate
changes on cash..... -- -- (0.9) -- (0.9)
------ ------ ------ ------ ------
CASH AND CASH EQUIVALENTS
Increase for the
year................ -- 19.1 16.1 -- 35.2
Balance at the
beginning of the
year................ -- 2.8 21.6 -- 24.4
------ ------ ------ ------ ------
Balance at the end of
the year............ $ -- $ 21.9 $ 37.7 $ -- $ 59.6
====== ====== ====== ====== ======
</Table>
F-35
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMHG HOLDING CO.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (FOREIGN CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES....... $0.2 $ 31.9 $ (26.2) $ 56.7 $ 62.6
INVESTING ACTIVITIES
Expenditures for property,
plant and equipment..... -- (31.0) (21.6) 0.8 (51.8)
Proceeds from the sale of
property, plant and
equipment............... -- 3.1 7.1 (0.1) 10.1
Other -- net............... -- -- (18.3) 0.3 (18.0)
---- ------- ------- ------ -------
Net cash used for
investing
activities............ -- (27.9) (32.8) 1.0 (59.7)
FINANCING ACTIVITIES
Additions to long-term debt
and revolving credit
agreements.............. -- 32.4 6.2 -- 38.6
Reductions of long-term
debt and revolving
credit agreements....... -- (43.2) (2.9) -- (46.1)
Notes receivable/payable,
parent company.......... (0.2) (5.8) 13.0 -- 7.0
Other -- net............... -- 12.9 35.2 (57.7) (9.6)
---- ------- ------- ------ -------
Net cash provided by
(used for) financing
activities............ (0.2) (3.7) 51.5 (57.7) (10.1)
Effect of exchange rate
changes on cash......... -- -- 0.5 -- 0.5
---- ------- ------- ------ -------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the
year.................... -- 0.3 (7.0) -- (6.7)
Balance at the beginning of
the year................ -- 2.5 28.6 -- 31.1
---- ------- ------- ------ -------
Balance at the end of
the year.............. $ -- $ 2.8 $ 21.6 $ -- $ 24.4
==== ======= ======= ====== =======
</Table>
F-36
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NMHG HOLDING CO.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (FOREIGN CONSOLIDATING NMHG
HOLDING CO. (US COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES....... $(16.1) $ 17.4 $ 80.3 $(2.2) $ 79.4
INVESTING ACTIVITIES
Expenditures for property,
plant and equipment..... -- (41.2) (5.7) 0.7 (46.2)
Other -- net............... -- (32.6) (37.3) -- (69.9)
------ ------- ------ ----- -------
Net cash used for
investing
activities............ -- (73.8) (43.0) 0.7 (116.1)
FINANCING ACTIVITIES.........
Additions to long-term debt
and revolving credit
agreements.............. -- 49.8 5.9 6.0 61.7
Reductions of long-term
debt and revolving
credit agreements....... -- -- (26.3) -- (26.3)
Notes receivable/payable,
parent company.......... 16.1 (17.2) 10.5 (1.4) 8.0
Other -- net............... -- 25.4 (18.3) (3.1) 4.0
------ ------- ------ ----- -------
Net cash provided by
(used for) financing
activities............ 16.1 58.0 (28.2) 1.5 47.4
Effect of exchange rate
changes on cash......... -- -- (1.8) -- (1.8)
------ ------- ------ ----- -------
CASH AND CASH EQUIVALENTS
Increase for the year...... -- 1.6 7.3 -- 8.9
Balance at the beginning of
the year................ -- 0.9 21.3 -- 22.2
------ ------- ------ ----- -------
Balance at the end of
the year.............. $ -- $ 2.5 $ 28.6 $ -- $ 31.1
====== ======= ====== ===== =======
</Table>
F-37
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
NMHG HOLDING CO. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
COL A. COL B. COL C. COL D. COL E.
- ---------------------------------------- ------------ --------------------------- ----------- ----------
ADDITIONS
--------------------------- (C)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES -- DESCRIBE -- DESCRIBE PERIOD
- ---------------------------------------- ------------ ---------- -------------- ----------- ----------
(DOLLARS IN MILLIONS)
2001
Reserves deducted from asset accounts:
Allowance for doubtful accounts....... $ 7.7 $(0.4) $ 0.1(B) $(0.6)(A) $ 8.0
Reserve for losses on inventory....... 17.3 9.4 -- 4.2(A) 22.5
Valuation allowance against deferred
tax assets.......................... 4.6 5.5 -- -- 10.1
2000
Reserves deducted from asset accounts:
Allowance for doubtful accounts....... $ 6.4 $ 1.6 $ 0.2(B) $ 0.5(A) $ 7.7
Reserve for losses on inventory....... 18.5 2.4 0.8(B) 4.4(A) 17.3
Valuation allowance against deferred
tax assets.......................... 7.9 (3.1) (0.2)(B) -- 4.6
1999
Reserves deducted from asset accounts:
Allowance for doubtful accounts....... $ 5.8 $ 1.8 $ 0.2(B) $ 1.4(A) $ 6.4
Reserve for losses on inventory....... 19.1 6.2 (0.4)(B) 6.4(A) 18.5
Valuation allowance against deferred
tax assets.......................... 6.7 1.2 -- -- 7.9
</Table>
Note (A) -- Write-offs, net of recoveries.
Note (B) -- Subsidiary's foreign currency translation adjustments and other.
Note (C) -- Balances which are not required to be presented and those which are
immaterial have been omitted.
F-38
NMHG HOLDING CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
----------- ------------
(UNAUDITED) (AUDITED)
ASSETS
Current Assets
Cash and cash equivalents................................. $ 54.9 $ 59.6
Accounts receivable, net.................................. 194.2 165.6
Tax advances, NACCO Industries, Inc....................... 3.0 23.1
Inventories............................................... 220.2 234.5
Deferred income taxes..................................... 29.1 32.9
Prepaid expenses and other................................ 12.0 12.2
-------- --------
513.4 527.9
Property, Plant and Equipment, Net.......................... 274.3 280.5
Deferred Charges
Goodwill, net............................................. 342.8 344.2
Other intangibles, net.................................... 1.6 --
Deferred costs and other.................................. 1.7 1.9
Deferred income taxes..................................... 18.0 15.7
-------- --------
364.1 361.8
Other Assets................................................ 34.8 34.9
-------- --------
Total Assets........................................... $1,186.6 $1,205.1
======== ========
</Table>
See Notes to Unaudited Condensed Consolidated Financial Statements.
X-1
NMHG HOLDING CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
----------- ------------
(UNAUDITED) (AUDITED)
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable.......................................... $ 187.5 $ 176.7
Revolving credit agreements............................... 34.3 36.2
Revolving credit agreement refinanced on May 9, 2002...... 265.0 265.0
Current maturities of long-term debt...................... 23.7 25.5
Notes payable, NACCO Industries, Inc...................... -- 8.0
Accrued payroll........................................... 13.4 20.0
Accrued warranty obligations.............................. 33.8 34.3
Other current liabilities................................. 115.3 112.2
-------- --------
673.0 677.9
Long-term Debt.............................................. 26.0 27.7
Self-insurance Reserves..................................... 52.4 52.7
Other Long-term Liabilities................................. 61.0 62.5
Minority Interest........................................... 2.1 2.3
Stockholder's Equity
Common stock, par value $1 per share, 10,000 shares
authorized; 5,599 shares outstanding................... -- --
Capital in excess of par value............................ 198.2 198.2
Retained earnings......................................... 218.8 229.5
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment.............. (27.4) (26.9)
Reclassification of hedging activities into
earnings............................................ 1.2 --
Deferred loss on cash flow hedging................... (3.9) (3.3)
Minimum pension liability adjustment................. (14.8) (14.8)
Cumulative effect of change in accounting for
derivatives and hedging............................. -- (0.7)
-------- --------
372.1 382.0
-------- --------
Total Liabilities and Stockholder's Equity............. $1,186.6 $1,205.1
======== ========
</Table>
See Notes to Unaudited Condensed Consolidated Financial Statements.
X-2
NMHG HOLDING CO. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
------------------
2002 2001
------- -------
Revenues.................................................... $371.8 $495.6
Cost of sales............................................... 310.1 406.8
------ ------
Gross Profit................................................ 61.7 88.8
Selling, general and administrative expenses................ 55.1 64.9
Amortization of goodwill.................................... -- 3.2
------ ------
Operating Profit............................................ 6.6 20.7
Other expenses
Interest expense.......................................... (5.5) (5.2)
Other -- net.............................................. 2.1 1.7
------ ------
(3.4) (3.5)
------ ------
Income Before Income Taxes, Minority Interest and Cumulative
Effect of Accounting Changes.............................. 3.2 17.2
Provision (benefit) for income taxes........................ (0.9) 7.8
------ ------
Income Before Minority Interest and Cumulative Effect of
Accounting Changes........................................ 4.1 9.4
Minority interest income.................................... 0.2 0.2
------ ------
Income Before Cumulative Effect of Accounting Changes....... 4.3 9.6
Cumulative effect of accounting changes (net of $0.8 tax
benefit).................................................. -- (1.3)
------ ------
Net Income.................................................. $ 4.3 $ 8.3
====== ======
Comprehensive Income (Loss)................................. $ 5.1 $ (6.9)
====== ======
</Table>
See Notes to Unaudited Condensed Consolidated Financial Statements.
X-3
NMHG HOLDING CO. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<Table>
<Caption>
THREE MONTHS
ENDED MARCH 31,
---------------
2002 2001
------ ------
OPERATING ACTIVITIES
Net income................................................ $ 4.3 $ 8.3
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 10.6 14.7
Deferred income taxes................................ 3.2 (1.2)
Minority interest income............................. (0.2) (0.2)
Cumulative effect of accounting changes.............. -- 1.3
Other non-cash items................................. (0.8) (3.7)
Working capital changes
Affiliate receivables/payables....................... 20.4 10.2
Accounts receivable.................................. (28.3) 5.3
Inventories.......................................... 15.0 (9.6)
Other current assets................................. (4.0) (2.0)
Accounts payable and other liabilities............... 8.4 (10.4)
------ ------
Net cash provided by operating activities............ 28.6 12.7
INVESTING ACTIVITIES
Expenditures for property, plant and equipment............ (6.2) (9.7)
Proceeds from the sale of property, plant and equipment... 0.2 1.4
Investments in unconsolidated affiliates.................. -- (0.1)
Proceeds from unconsolidated affiliates................... 0.6 --
Other -- net.............................................. -- (2.3)
------ ------
Net cash used for investing activities............... (5.4) (10.7)
FINANCING ACTIVITIES
Additions to long-term debt and revolving credit
agreements............................................. 3.3 30.4
Reductions of long-term debt and revolving credit
agreements............................................. (8.2) (14.6)
Cash dividends paid....................................... (15.0) --
Notes receivable/payable, NACCO Industries, Inc........... (8.0) (7.2)
Deferred financing costs and other........................ -- (0.5)
------ ------
Net cash provided by (used for) financing
activities.......................................... (27.9) 8.1
Effect of exchange rate changes on cash................... -- (0.5)
------ ------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the period........................ (4.7) 9.6
Balance at the beginning of the period.................... 59.6 24.4
------ ------
Balance at the end of the period.......................... $ 54.9 $ 34.0
====== ======
</Table>
See Notes to Unaudited Condensed Consolidated Financial Statements.
X-4
NMHG HOLDING CO. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN MILLIONS)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
------------------
2002 2001
------- -------
Common Stock................................................ $ -- $ --
------ ------
Capital in Excess of Par Value.............................. 198.2 198.2
------ ------
Retained Earnings
Beginning balance......................................... 229.5 283.9
Net income................................................ 4.3 8.3
Cash dividends............................................ (15.0) --
------ ------
218.8 292.2
------ ------
Accumulated Other Comprehensive Income (Loss)
Beginning balance......................................... (45.7) (19.1)
Foreign currency translation adjustment................... (0.5) (12.3)
Cumulative effect of change in accounting for derivatives
and hedging............................................ 0.7 (0.7)
Reclassification from Cumulative effect of change in
accounting for derivatives and hedging to Deferred loss
on cash flow hedging................................... (0.7) --
Reclassification of hedging activity into earnings........ 1.2 --
Current period cash flow hedging activity................. 0.1 (2.2)
------ ------
(44.9) (34.3)
------ ------
Total Stockholder's Equity............................. $372.1 $456.1
====== ======
</Table>
X-5
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN MILLIONS)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of NMHG Holding Co. ("NMHG Holding," the parent company), a
Delaware corporation, and its wholly owned subsidiaries, NACCO Materials
Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG
Retail") (collectively, "NMHG" or the "Company"). NMHG Holding is a wholly owned
subsidiary of NACCO Industries, Inc. ("NACCO"). The Company's subsidiaries
operate in the lift truck industry. NMHG segments its lift truck operations into
two components: wholesale manufacturing and retail distribution. Intercompany
accounts and transactions have been eliminated.
NMHG designs, engineers, manufactures, sells, services and leases a full
line of lift trucks and service parts marketed worldwide under the Hyster(R) and
Yale(R) brand names. NMHG Wholesale includes the manufacture and sale of lift
trucks and related service parts, primarily to independent and wholly owned
Hyster and Yale retail dealerships. NMHG Retail includes the sale, service and
rental of Hyster and Yale lift trucks and related service parts by wholly owned
retail dealerships and rental companies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus for segment disclosures.
These unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the financial position
of the Company as of March 31, 2002 and the results of its operations, cash
flows and changes in stockholder's equity for the three month periods ended
March 31, 2002 and 2001 have been included.
Operating results for the three month period ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the remainder of
the year ended December 31, 2002. For further information, refer to the
consolidated financial statements and footnotes thereto for the fiscal year
ended December 31, 2001 on pages F-1 to F-37 of this prospectus.
NOTE 2 -- INVENTORIES
Inventories are summarized as follows:
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
----------- ------------
(UNAUDITED) (AUDITED)
Manufactured inventories:
Finished goods and service parts......................... $ 99.5 $ 99.6
Raw materials and work in process........................ 98.6 111.4
------ ------
Total manufactured inventories........................ 198.1 211.0
Retail inventories......................................... 33.0 35.8
------ ------
Total inventories at FIFO............................. 231.1 246.8
LIFO reserve............................................... (10.9) (12.3)
------ ------
$220.2 $234.5
====== ======
</Table>
X-6
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The cost of certain manufactured and retail inventories has been determined
using the LIFO method. At March 31, 2002 and December 31, 2001, 67 and 68
percent of total inventories, respectively, were determined using the LIFO
method.
NOTE 3 -- RESTRUCTURING CHARGES
The changes to the Company's restructuring accruals since December 31, 2001
are as follows:
<Table>
<Caption>
LEASE CURTAILMENT
SEVERANCE IMPAIRMENT LOSS OTHER TOTAL
--------- ---------- ----------- ----- -----
NMHG WHOLESALE
Balance at December 31, 2001................ $ 5.3 $ -- $5.1 $2.4 $12.8
Provision................................ -- -- -- -- --
Payments................................. (2.4) -- -- -- (2.4)
----- ----- ---- ---- -----
BALANCE AT MARCH 31, 2002................... $ 2.9 $ -- $5.1 $2.4 $10.4
===== ===== ==== ==== =====
NMHG RETAIL
Balance at December 31, 2001................ $ 3.9 $ 0.4 $ -- $ -- $ 4.3
Provision................................ -- -- -- -- --
Payments................................. (0.7) (0.1) -- -- (0.8)
----- ----- ---- ---- -----
BALANCE AT MARCH 31, 2002................... $ 3.2 $ 0.3 $ -- $ -- $ 3.5
===== ===== ==== ==== =====
</Table>
NMHG WHOLESALE: The reserve balance at NMHG Wholesale consists of two
restructuring programs: the 2001 closure of the Danville, Illinois facility and
the restructuring of European wholesale operations initiated in 2001. The
Danville program, which was approved and accrued in December 2000, was
essentially completed in 2001. In the first quarter of 2002, severance payments
of $1.8 million were made to approximately 200 employees which reduced the
ending severance reserve balance to $0.3 million. The curtailment loss and other
reserve balances also relate to the closure of the Danville facility and were
recognized primarily for pension and other post-employment benefits, which will
not be paid until employees reach retirement age. In the first quarter of 2002,
NMHG Wholesale recognized a charge of approximately $0.6 million, which had not
previously been accrued and is not included in the table above, related to the
costs of the idle Danville facility. Pre-tax benefits of approximately $3.2
million were recognized in the first quarter of 2002 related to this program.
Pre-tax benefits, net of idle facility costs, are estimated to be $7.6 million
for the remainder of 2002.
In 2001, 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. Of this amount, $3.2 million remained unpaid as of December 31, 2001.
Payments of $0.6 million were made in the first quarter of 2002 to approximately
25 employees. Pre-tax benefits of approximately $1.2 million were recognized in
the first quarter of 2002 related to this program. Pre-tax benefits for the
remainder of 2002 are estimated to be $6.8 million.
NMHG RETAIL: NMHG Retail recognized a restructuring charge of
approximately $4.7 million pre-tax, in 2001, of which $0.4 million relates to
lease termination costs and $4.3 million relates to severance and other employee
benefits to be paid to approximately 140 service technicians, salesmen and
administrative personnel at wholly owned dealers in Europe. During 2001,
severance payments of $0.4 million were made to approximately 40 employees. In
the first quarter of 2002, severance payments of $0.7 million were made to
approximately 10 employees. Pre-tax benefits of approximately $0.5 million were
recognized in the first quarter of 2002 related to this program. Pre-tax
benefits for the remainder of 2002 are estimated to be $2.3 million.
X-7
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- ACCOUNTING CHANGES
ACCOUNTING FOR GOODWILL
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." This
Statement establishes accounting and reporting standards for goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets."
Goodwill and other intangibles that have indefinite lives will no longer be
amortized, but will be subject to annual impairment tests. All other intangible
assets will continue to be amortized over their estimated useful lives, which
are no longer limited to 40 years. Effective January 1, 2002, the Company
discontinued amortization of its goodwill in accordance with this Statement. The
amortization periods of the Company's other intangible assets were not revised
as a result of the adoption of this Statement. Pro forma information, assuming
the adoption of this Statement in the prior year, is as follows:
<Table>
<Caption>
THREE MONTHS
ENDED MARCH 31
---------------
2002 2001
------ ------
Reported net income......................................... $ 4.3 $ 8.3
Add back: goodwill amortization............................. -- 3.2
----- -----
Adjusted net income......................................... $ 4.3 $11.5
===== =====
</Table>
The balance of other intangible assets, which are subject to amortization,
acquired in previous years is as follows at March 31, 2002:
<Table>
<Caption>
OTHER INTANGIBLES
---------------------------------
GROSS
CARRYING ACCUMULATED NET
AMOUNT AMORTIZATION BALANCE
-------- ------------ -------
BALANCE AT DECEMBER 31, 2001.......................... $ -- $ -- $ --
Transfer from goodwill.............................. 1.6 -- 1.6
----- ----- -----
BALANCE AT MARCH 31, 2002............................. $ 1.6 $ -- $ 1.6
===== ===== =====
</Table>
In the first quarter of 2002, $1.6 million that was previously
preliminarily classified as goodwill relating to an acquisition in 2001 was
reclassified to other intangibles.
Amortization expense in the first quarter of 2002 was less than $0.1
million. Expected amortization expense of other intangible assets for the next
five years is $0.2 million annually.
Following is the a summary of the changes in goodwill during the first
quarter of 2002:
<Table>
<Caption>
WHOLESALE RETAIL CONSOLIDATED
--------- ------ ------------
Balance at December 31, 2001.......................... $304.6 $39.6 $344.2
Reclassification to other intangibles............... -- (1.6) (1.6)
Foreign currency translation........................ -- 0.2 0.2
------ ----- ------
BALANCE AT MARCH 31, 2002............................. $304.6 $38.2 $342.8
====== ===== ======
</Table>
In addition, this Statement requires goodwill to be tested for impairment
at least annually at a level of reporting defined in the Statement as a
"reporting unit," using a two-step process. The first step requires comparison
of the reporting unit's fair market value to its carrying value. If the fair
market value of the reporting unit exceeds its carrying value, no further
analysis is necessary and goodwill is not impaired. If the carrying value of the
reporting unit exceeds its fair market value, then the second step, as defined
in the Statement, must be completed. The second step requires the Company to
determine the fair market value of
X-8
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
each existing asset and liability of the applicable reporting unit to enable the
Company to derive the "implied" fair market value of goodwill. If the implied
fair market value of goodwill is less than the carrying value of goodwill, then
an impairment loss must be recognized.
This Statement provides that companies have until the second quarter of
fiscal 2002 to complete the first step of the impairment testing and until the
end of the fiscal year to complete the second step of the impairment testing
during this initial adoption of SFAS No. 142. In accordance with this provision,
the Company has begun the process of testing its goodwill for impairment, but
has not yet completed the first step of the two-step testing process.
NOTE 5 -- SUBSEQUENT EVENTS
On May 9, 2002, NMHG refinanced its prior financing agreement, an unsecured
floating-rate revolving line of credit with availability of $350.0 million,
certain other lines of credit with availability of $4.6 million and a program to
sell accounts receivable in Europe with the proceeds from the sale of $250.0
million of 10% Senior Notes due 2009 and borrowings under a secured,
floating-rate revolving credit facility which expires in May 2005. Availability
under the new revolving credit facility is up to $175.0 million, based on a
formula using certain of NMHG's accounts receivable and inventory balances. At
May 9, 2002, the borrowing capacity under this facility was $109.7 million and
the domestic floating rate of interest applicable to this facility was 6.75%
including the applicable floating rate margin. NMHG will also pay a 0.5% per
annum fee on the unused commitment. Both the new revolving credit facility and
terms of the Senior Notes include restrictive covenants which, among other
things, limit dividends to NACCO. The new revolving credit facility also
requires NMHG to maintain certain ratios of Debt to EBITDA and EBITDA to
interest, as defined, and limits capital expenditures.
As a result of the refinancing of the prior financing arrangement, a
significant portion of NMHG's interest rate swap agreements will no longer
qualify for hedge accounting treatment in accordance with SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." As such, the
mark-to-market of these interest rate swap agreements will be recognized in the
statement of operations. Prior to the refinancing, the mark-to-market of these
interest rate swap agreements was recognized as a component of other
comprehensive income (loss) in stockholder's equity. The balance in other
comprehensive income (loss) for all of NMHG's interest rate swap agreements was
a loss of $2.4 million at March 31, 2002.
X-9
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION
The following tables set forth the condensed consolidating statements of
operations and cash flows for each of the three months ended March 31, 2002 and
2001 and the condensed consolidating balance sheet as of March 31, 2002. The
following information is included as a result of the guarantee of the new debt
by each of NMHG's wholly owned U.S. subsidiaries ("Guarantor Companies"). None
of the company's other subsidiaries will guarantee any of these notes. Each of
the guarantees is joint and several and full and unconditional. "NMHG Holding"
includes the consolidated financial results of the parent company only, with all
of its wholly owned subsidiaries accounted for under the equity method.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(IN MILLIONS)
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (US (FOREIGN CONSOLIDATING NMHG
HOLDING CO. COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
Revenues...................... $ -- $239.1 $181.3 $(48.6) $371.8
Cost of sales................. -- 208.2 151.1 (49.2) 310.1
All other operating
expenses.................... -- 30.7 24.6 (0.2) 55.1
----- ------ ------ ------ ------
Operating profit.............. -- 0.2 5.6 0.8 6.6
Interest expenses............. (1.8) (2.5) (0.1) (1.1) (5.5)
Other income (expenses)....... -- 1.4 (0.3) -- 1.1
----- ------ ------ ------ ------
Income (loss) before income
taxes, minority interest and
equity in unconsolidated
affiliates.................. (1.8) (0.9) 5.2 (0.3) 2.2
Income tax (expense)
benefit..................... 0.6 0.1 -- 0.2 0.9
Minority interest income...... -- -- 0.2 -- 0.2
Equity in unconsolidated
affiliates.................. 5.5 1.0 -- (5.5) 1.0
----- ------ ------ ------ ------
Net income.................... $ 4.3 $ 0.2 $ 5.4 $ (5.6) $ 4.3
===== ====== ====== ====== ======
</Table>
X-10
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(IN MILLIONS)
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (US (FOREIGN CONSOLIDATING NMHG
HOLDING CO. COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
Revenues...................... $ -- $349.1 $226.0 $(79.5) $495.6
Cost of sales................. -- 294.4 192.6 (80.2) 406.8
All other operating
expenses.................... -- 36.2 32.2 (0.3) 68.1
----- ------ ------ ------ ------
Operating profit.............. -- 18.5 1.2 1.0 20.7
Interest expenses............. (0.3) (3.2) (0.6) (1.1) (5.2)
Other income.................. -- -- 0.3 -- 0.3
----- ------ ------ ------ ------
Income (loss) before income
taxes, minority interest,
equity in unconsolidated
affiliates and cumulative
effect of accounting
changes..................... (0.3) 15.3 0.9 (0.1) 15.8
Income tax (expense)
benefit..................... 0.6 (8.4) -- -- (7.8)
Minority interest income...... -- -- 0.2 -- 0.2
Equity in unconsolidated
affiliates.................. 8.0 1.4 -- (8.0) 1.4
----- ------ ------ ------ ------
Income before cumulative
effect of accounting
changes..................... 8.3 8.3 1.1 (8.1) 9.6
Cumulative effect of
accounting changes.......... -- (0.9) (0.4) -- (1.3)
----- ------ ------ ------ ------
Net income.................... $ 8.3 $ 7.4 $ 0.7 $ (8.1) $ 8.3
===== ====== ====== ====== ======
</Table>
X-11
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 2002
(IN MILLIONS)
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (US (FOREIGN CONSOLIDATING NMHG
HOLDING CO. COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
Cash and cash equivalents.... $ -- $ 17.3 $ 37.6 $ -- $ 54.9
Accounts and notes
receivable, net............ 0.6 231.7 238.9 (274.0) 197.2
Inventories.................. -- 125.5 95.6 (0.9) 220.2
Other current assets......... 2.4 32.6 6.7 (0.6) 41.1
------ -------- ------ --------- --------
Total current assets.... 3.0 407.1 378.8 (275.5) 513.4
Property, plant and
equipment, net............. -- 157.9 116.9 (0.5) 274.3
Goodwill, net................ -- 307.3 35.5 -- 342.8
Other assets................. 467.9 834.3 28.9 (1,275.0) 56.1
------ -------- ------ --------- --------
Total assets............ $470.9 $1,706.6 $560.1 $(1,551.0) $1,186.6
====== ======== ====== ========= ========
Accounts and notes payable... $ 97.0 $ 150.6 $208.7 $ (268.8) $ 187.5
Other current liabilities.... 1.8 123.7 102.4 (7.4) 220.5
Revolving credit facility.... -- 265.0 -- -- 265.0
------ -------- ------ --------- --------
Total current
liabilities........... 98.8 539.3 311.1 (276.2) 673.0
Long-term debt............... -- 3.7 22.3 -- 26.0
Other long-term
liabilities................ -- 95.2 20.7 (0.4) 115.5
Stockholder's equity......... 372.1 1,068.4 206.0 (1,274.4) 372.1
------ -------- ------ --------- --------
Total liabilities and
stockholder's equity.... $470.9 $1,706.6 $560.1 $(1,551.0) $1,186.6
====== ======== ====== ========= ========
</Table>
X-12
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2001
(IN MILLIONS)
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (US (FOREIGN CONSOLIDATING NMHG
HOLDING CO. COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
Cash and cash equivalents.... $ -- $ 21.9 $ 37.7 $ -- $ 59.6
Accounts and notes
receivable, net............ -- 211.9 225.8 (272.1) 165.6
Inventories.................. -- 136.9 97.8 (0.2) 234.5
Other current assets......... 2.6 55.4 10.2 -- 68.2
------ -------- ------ --------- --------
Total current assets.... 2.6 426.1 371.5 (272.3) 527.9
Property, plant and
equipment, net............. -- 163.0 118.0 (0.5) 280.5
Goodwill, net................ -- 307.3 36.9 -- 344.2
Other assets................. 476.7 849.7 31.6 (1,305.5) 52.5
------ -------- ------ --------- --------
Total assets............ $479.3 $1,746.1 $558.0 $(1,578.3) $1,205.1
====== ======== ====== ========= ========
Accounts and notes payable... $ 96.3 $ 154.4 $200.7 $ (274.7) $ 176.7
Other current liabilities.... 0.9 126.8 73.3 (1.0) 200.0
Revolving credit
facilities................. -- 265.0 36.2 -- 301.2
------ -------- ------ --------- --------
Total current
liabilities........... 97.2 546.2 310.2 (275.7) 677.9
Long-term debt............... -- 3.2 24.5 -- 27.7
Other long-term
liabilities................ 0.1 95.0 28.1 (5.7) 117.5
Stockholder's equity......... 382.0 1,101.7 195.2 (1,296.9) 382.0
------ -------- ------ --------- --------
Total liabilities and
stockholder's equity.... $479.3 $1,746.1 $558.0 $(1,578.3) $1,205.1
====== ======== ====== ========= ========
</Table>
X-13
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(IN MILLIONS)
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (US (FOREIGN CONSOLIDATING NMHG
HOLDING CO. COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
(IN MILLIONS)
NET CASH PROVIDED BY (USED
FOR) OPERATING
ACTIVITIES................ $ (0.7) $ 17.8 $ 11.1 $ 0.4 $ 28.6
INVESTING ACTIVITIES
Expenditures for property,
plant and equipment.... -- (0.8) (5.4) -- (6.2)
Proceeds from the sale of
property, plant and
equipment.............. -- 0.3 (0.1) -- 0.2
Other -- net.............. 14.2 2.5 (2.2) (13.9) 0.6
-------- -------- -------- -------- --------
Net cash provided by
(used for) investing
activities........... 14.2 2.0 (7.7) (13.9) (5.4)
FINANCING ACTIVITIES
Additions to long-term
debt and revolving
credit agreements...... -- -- 3.3 -- 3.3
Reductions of long-term
debt and revolving
credit agreements...... -- (0.8) (7.4) -- (8.2)
Notes receivable/payable,
parent company......... 0.7 (3.6) (5.4) 0.3 (8.0)
Other -- net.............. (14.2) (20.0) 6.0 13.2 (15.0)
-------- -------- -------- -------- --------
Net cash used for
financing
activities........... (13.5) (24.4) (3.5) 13.5 (27.9)
Effect of exchange rate
changes on cash........ -- -- -- -- --
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS
Decrease for the year..... -- (4.6) (0.1) -- (4.7)
Balance at the beginning
of the year............ -- 21.9 37.7 -- 59.6
-------- -------- -------- -------- --------
Balance at the end of the
year................... $ -- $ 17.3 $ 37.6 $ -- $ 54.9
======== ======== ======== ======== ========
</Table>
X-14
NMHG HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(IN MILLIONS)
<Table>
<Caption>
NON-GUARANTOR
GUARANTOR COMPANIES
NMHG COMPANIES (US (FOREIGN CONSOLIDATING NMHG
HOLDING CO. COMPANIES) COMPANIES) ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------
NET CASH PROVIDED BY (USED
FOR) OPERATING
ACTIVITIES................ $ 0.4 $ (13.0) $ 24.3 $ 1.0 $ 12.7
INVESTING ACTIVITIES
Expenditures for property,
plant and equipment.... -- (7.7) (2.0) -- (9.7)
Proceeds from the sale of
property, plant and
equipment.............. -- 0.1 1.3 -- 1.4
Other -- net.............. -- 38.7 (14.9) (26.2) (2.4)
-------- -------- -------- -------- --------
Net cash provided by
(used for) investing
activities........... -- 31.1 (15.6) (26.2) (10.7)
FINANCING ACTIVITIES
Additions to long-term
debt and revolving
credit agreements...... -- 12.1 18.3 -- 30.4
Reductions of long-term
debt and revolving
credit agreements...... -- (14.6) -- -- (14.6)
Notes receivable/payable,
parent company......... (0.4) (10.8) 4.0 -- (7.2)
Other -- net.............. -- (0.3) (25.4) 25.2 (0.5)
-------- -------- -------- -------- --------
Net cash used for
financing
activities........... (0.4) (13.6) (3.1) 25.2 8.1
Effect of exchange rate
changes on cash........ -- -- (0.5) -- (0.5)
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS
Increase for the year..... -- 4.5 5.1 -- 9.6
Balance at the beginning
of the year............ -- 2.8 21.6 -- 24.4
-------- -------- -------- -------- --------
Balance at the end of the
year................... $ -- $ 7.3 $ 26.7 $ -- $ 34.0
======== ======== ======== ======== ========
</Table>
X-15
$250,000,000
NMHG HOLDING CO.
10% SENIOR NOTES DUE 2009
PROSPECTUS
--------------------------
, 2002
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law provides that a director of a corporation will not be
personally liable for monetary damages for breach of that individual's fiduciary
duties as a director except for liability for (1) a breach of the director's
duty of loyalty to the corporation or its stockholders, (2) any act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of the law, (3) unlawful payments of dividends or unlawful stock repurchases or
redemptions, or (4) any transaction from which the director derived an improper
personal benefit.
This limitation of liability does not apply to liabilities arising under
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or recission.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers, as well as other employees and
individuals, against attorneys' fees and other expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person was or is a party or is threatened to be made a
party by reason of such person being or having been a director, officer,
employee or agent of the corporation. The Delaware General Corporation Law
provides that Section 145 is not exclusive of other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following is a list of all exhibits filed as a part of
this registration statement on Form S-4, including those incorporated by
reference.
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
3.1(i) Certificate of Incorporation of NMHG Holding Co.
3.1(ii) By-laws of NMHG Holding Co.
4.1 Form of Common Stock Certificate of NMHG Holding Co.
4.2 Indenture, dated as of May 9, 2002, by and among NMHG
Holding Co., the Subsidiary Guarantors named therein and
U.S. Bank National Association, as Trustee (including the
form of 10% senior note due 2009)
4.3 Registration Rights Agreement, dated as of May 9, 2002, by
and among NMHG Holding Co., the Guarantors named therein and
Credit Suisse First Boston Corporation, Salomon Smith Barney
Inc., U.S. Bancorp Piper Jaffray Inc., McDonald Investments
Inc., NatCity Investments, Inc. and Wells Fargo Brokerage
Services, LLC
* 5.1 Opinion of Jones, Day, Reavis & Pogue
10.1 Credit Agreement, dated as of May 9, 2002, among NMHG
Holding Co., NACCO Materials Handling Group, Inc., NMHG
Distribution Co., NACCO Materials Handling Limited, NACCO
Materials Handling B.V., the financial institutions from
time to time a party thereto as Lenders, the financial
institutions from time to time a party thereto as Issuing
Bank, Citicorp North America, Inc., as administrative agent
for the Lenders and the Issuing Bank thereunder and Credit
Suisse First Boston as joint arrangers and joint bookrunners
and CSFB as syndication agent
10.2 Operating Agreement, dated July 31, 1979, among Eaton
Corporation and Sumitomo Heavy Industries, Ltd.
10.3 Equity joint venture contract, dated November 27, 1997,
between Shanghai Perfect Jinqiao United Development Company
Ltd., People's Republic of China, NACCO Materials Handling
Group, Inc., USA, and Sumitomo-Yale Company Ltd., Japan
10.4 Recourse and Indemnity Agreement, dated October 21, 1998,
between General Electric Capital Corp., NMHG Financial
Services, Inc. and NACCO Materials Handling Group, Inc.
</Table>
II-1
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.5 Restated and Amended Joint Venture and Shareholders
Agreement, dated April 15, 1998, between General Electric
Capital Corp. and NACCO Materials Handling Group, Inc.
10.6 Amendment No. 1 to the Restated and Amended Joint Venture
and Shareholders Agreement between General Electric Capital
Corporation and NACCO Materials Handling Group, Inc., dated
as of October 21, 1998
10.7 International Operating Agreement, dated April 15, 1998,
between NACCO Materials Handling Group, Inc. and General
Electric Capital Corp. (the "International Operating
Agreement")
10.8 Amendment No. 1 to the International Operating Agreement,
dated as of October 21, 1998
10.9 Amendment No. 2 to the International Operating Agreement,
dated as of December 1, 1999
10.10 Amendment No. 3 to the International Operating Agreement,
dated as of May 1, 2000
10.11 Letter agreement, dated November 22, 2000, between General
Electric Capital Corporation and NACCO Materials Handling
Group, Inc. amending the International Operating Agreement
10.12 A$ Facility Agreement, dated November 22, 2000, between GE
Capital Australia and National Fleet Network PTY Limited
10.13 Loan Agreement, dated as of June 28, 1996, between NACCO
Materials Handling Group, Inc. and NACCO Industries, Inc.
10.14 Business sale agreement, dated November 10, 2000, between
Brambles Australia Limited, ACN 094 802 141 Pty Limited and
NACCO Materials Handling Group, Inc.
10.15 NACCO Materials Handling Group, Inc. Annual Incentive
Compensation Plan, effective as of January 1, 2002, is
incorporated herein by reference to Exhibit 10(lxiii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.16 NACCO Materials Handling Group, Inc. Senior Executive
Long-Term Incentive Compensation Plan, effective as of
January 1, 2000, is incorporated herein by reference to
Exhibit 10(lxiv) to NACCO Industries, Inc.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 2000,
Commission File Number 1-9172
10.17 NACCO Materials Handling Group, Inc. Long-Term Incentive
Compensation Plan, effective as of January 1, 2000, is
incorporated by reference to Exhibit 10(lxv) to NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, Commission File Number 1-9172
10.18 Amendment No. 1, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Senior Executive Long-Term
Incentive Compensation Plan (effective as of January 1,
2000) is incorporated herein by reference to Exhibit
10(lxvi) to NACCO Industries, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 2001, Commission
File Number 1-9172
10.19 Amendment No. 1, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Long-Term Incentive
Compensation Plan (effective as of January 1, 2000) is
incorporated herein by reference to Exhibit 10(lxvii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.20 Amendment No. 1, dated as of February 19, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxviii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.21 NACCO Materials Handling Group, Inc. Unfunded Benefit Plan
(as amended and restated effective as of September 1, 2000)
is incorporated herein by reference to Exhibit 10(lxxiii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, Commission File Number
1-9172
10.22 Amendment No. 2, dated as of August 6, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxix) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
</Table>
II-2
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.23 Amendment No. 3, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxx) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.24 Amendment No. 4, dated as of November 1, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxxi) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.25 Amendment No. 5, dated as of December 21, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxxii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
12.1 Ratio of Earnings to Fixed Charges
16.1 Letter of Arthur Andersen LLP to the Securities and Exchange
Commission dated May 24, 2002
21.1 Subsidiaries of NMHG Holding Co.
23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1)
24.1 Powers of attorney
25.1 Statement of Eligibility under the Trust Indenture Act of
1939 on Form T-1
99.1 Letter of Transmittal
99.2 Notice of Guaranteed Delivery
99.3 Letter regarding exchange offer
99.4 Letter to participants
</Table>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules. Valuation and Qualifying Accounts for
the Years Ended December 31, 2001, 2000 and 1999
(c) Reports. None
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that paragraphs
(1)(i) and (1)(ii) do not apply if
II-3
the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the SEC by the registrant pursuant
to Sections 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
SEC such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, in the State of
Oregon, on May 28, 2002.
NMHG Holding Co.
By: /s/ GEOFFREY D. LEWIS
--------------------------------------
Geoffrey D. Lewis
Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* President, Chief Executive Officer and May 28, 2002
- ------------------------------------------------ Director (Principal Executive Officer)
Reginald R. Eklund
* Treasurer (Principal Financial May 28, 2002
- ------------------------------------------------ Officer)
Jeffrey C. Mattern
* Controller (Principal Accounting May 28, 2002
- ------------------------------------------------ Officer)
Raymond C. Ulmer
* Director May 28, 2002
- ------------------------------------------------
Alfred M. Rankin, Jr.
* Director May 28, 2002
- ------------------------------------------------
Owsley Brown II
* Director May 28, 2002
- ------------------------------------------------
Eiichi Fujita
* Director May 28, 2002
- ------------------------------------------------
Robert M. Gates
* Director May 28, 2002
- ------------------------------------------------
Leon J. Hendrix, Jr.
* Director May 28, 2002
- ------------------------------------------------
David H. Hoag
* Director May 28, 2002
- ------------------------------------------------
Dennis W. LaBarre
* Director May 28, 2002
- ------------------------------------------------
Richard de J. Osborne
* Director May 28, 2002
- ------------------------------------------------
Claiborne R. Rankin
</Table>
II-5
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* Director May 28, 2002
- ------------------------------------------------
Ian M. Ross
* Director May 28, 2002
- ------------------------------------------------
Britton T. Taplin
* Director May 28, 2002
- ------------------------------------------------
David F. Taplin
* Director May 28, 2002
- ------------------------------------------------
Frank F. Taplin
* Director May 28, 2002
- ------------------------------------------------
John F. Turben
</Table>
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 pursuant to a Power of Attorney executed on
behalf of the above-indicated officers and directors of the registrant and
filed herewith as exhibit 24.1 on behalf of the registrant.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis, Attorney-in-Fact
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, in the State of
Oregon, on May 28, 2002.
NMHG Distribution Co.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* President and Director May 28, 2002
- ------------------------------------------------ (Principal Executive Officer)
Edward W. Ryan
* Treasurer (Principal Financial Officer May 28, 2002
- ------------------------------------------------ and Principal Accounting Officer)
Jeffrey C. Mattern
* Chairman and Director May 28, 2002
- ------------------------------------------------
Reginald R. Eklund
* Director May 28, 2002
- ------------------------------------------------
Geoffrey D. Lewis
</Table>
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 pursuant to a Power of Attorney executed on
behalf of the above-indicated officers and directors of the registrant and
filed herewith as exhibit 24.1 on behalf of the registrant.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis,
Attorney-in-Fact
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, in the State of
Oregon, on May 28, 2002.
NMHG Oregon, Inc.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* President and Director May 28, 2002
- ------------------------------------------------ (Principal Executive Officer)
Reginald R. Eklund
* Treasurer May 28, 2002
- ------------------------------------------------ (Principal Financial Officer)
Jeffrey C. Mattern
* Controller May 28, 2002
- ------------------------------------------------ (Principal Accounting Officer)
Raymond C. Ulmer
* Director May 28, 2002
- ------------------------------------------------
Geoffrey D. Lewis
</Table>
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 pursuant to a Power of Attorney executed on
behalf of the above-indicated officers and directors of the registrant and
filed herewith as exhibit 24.1 on behalf of the registrant.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis,
Attorney-in-Fact
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, in the State of
Oregon, on May 28, 2002.
Hyster Overseas Capital Corporation,
LLC
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* President and Manager May 28, 2002
- ------------------------------------------------ (Principal Executive Officer)
Reginald R. Eklund
* Treasurer and Manager May 28, 2002
- ------------------------------------------------ (Principal Financial Officer and
Jeffrey C. Mattern Principal Accounting Officer)
* Manager May 28, 2002
- ------------------------------------------------
Geoffrey D. Lewis
</Table>
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 pursuant to a Power of Attorney executed on
behalf of the above-indicated officers and directors of the registrant and
filed herewith as exhibit 24.1 on behalf of the registrant.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis,
Attorney-in-Fact
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, in the State of
Oregon, on May 28, 2002.
Hyster-Yale Materials Handling, Inc.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis
Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* President, Chief Executive Officer and May 28, 2002
- ------------------------------------------------ Director (Principal Executive Officer)
Reginald R. Eklund
* Treasurer May 28, 2002
- ------------------------------------------------ (Principal Financial Officer)
Jeffrey C. Mattern
* Controller May 28, 2002
- ------------------------------------------------ (Principal Accounting Officer)
Raymond C. Ulmer
* Director May 28, 2002
- ------------------------------------------------
Alfred M. Rankin, Jr.
* Director May 28, 2002
- ------------------------------------------------
Owsley Brown II
* Director May 28, 2002
- ------------------------------------------------
Eiichi Fujita
* Director May 28, 2002
- ------------------------------------------------
Robert M. Gates
* Director May 28, 2002
- ------------------------------------------------
Leon J. Hendrix, Jr.
* Director May 28, 2002
- ------------------------------------------------
David H. Hoag
* Director May 28, 2002
- ------------------------------------------------
Dennis W. LaBarre
* Director May 28, 2002
- ------------------------------------------------
Richard de J. Osborne
* Director May 28, 2002
- ------------------------------------------------
Claiborne R. Rankin
</Table>
II-10
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* Director May 28, 2002
- ------------------------------------------------
Ian M. Ross
* Director May 28, 2002
- ------------------------------------------------
Britton T. Taplin
* Director May 28, 2002
- ------------------------------------------------
David F. Taplin
* Director May 28, 2002
- ------------------------------------------------
Frank F. Taplin
* Director May 28, 2002
- ------------------------------------------------
John F. Turben
</Table>
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 pursuant to a Power of Attorney executed on
behalf of the above-indicated officers and directors of the registrant and
filed herewith as exhibit 24.1 on behalf of the registrant.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis,
Attorney-in-Fact
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, in the State of
Oregon, on May 28, 2002.
NACCO Materials Handling Group, Inc.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis
Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* President, Chief Executive Officer and May 28, 2002
- ------------------------------------------------ Director (Principal Executive Officer)
Reginald R. Eklund
* Treasurer May 28, 2002
- ------------------------------------------------ (Principal Financial Officer)
Jeffrey C. Mattern
* Controller May 28, 2002
- ------------------------------------------------ (Principal Accounting Officer)
Raymond C. Ulmer
* Director May 28, 2002
- ------------------------------------------------
Alfred M. Rankin, Jr.
* Director May 28, 2002
- ------------------------------------------------
Owsley Brown II
* Director May 28, 2002
- ------------------------------------------------
Eiichi Fujita
* Director May 28, 2002
- ------------------------------------------------
Robert M. Gates
* Director May 28, 2002
- ------------------------------------------------
Leon J. Hendrix, Jr.
* Director May 28, 2002
- ------------------------------------------------
David H. Hoag
* Director May 28, 2002
- ------------------------------------------------
Dennis W. LaBarre
* Director May 28, 2002
- ------------------------------------------------
Richard de J. Osborne
* Director May 28, 2002
- ------------------------------------------------
Claiborne R. Rankin
</Table>
II-12
<Table>
<Caption>
NAME TITLE DATE
---- ----- ----
* Director May 28, 2002
- ------------------------------------------------
Ian M. Ross
* Director May 28, 2002
- ------------------------------------------------
Britton T. Taplin
* Director May 28, 2002
- ------------------------------------------------
David F. Taplin
* Director May 28, 2002
- ------------------------------------------------
Frank F. Taplin
* Director May 28, 2002
- ------------------------------------------------
John F. Turben
</Table>
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 pursuant to a Power of Attorney executed on
behalf of the above-indicated officers and directors of the registrant and
filed herewith as exhibit 24.1 on behalf of the registrant.
By: /s/ GEOFFREY D. LEWIS
------------------------------------
Geoffrey D. Lewis, Attorney-in-Fact
II-13
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
3.1(i) Certificate of Incorporation of NMHG Holding Co.
3.1(ii) By-laws of NMHG Holding Co. of NMHG Holding Co.
4.1 Form of Common Stock Certificate
4.2 Indenture, dated as of May 9, 2002, by and among NMHG
Holding Co., the Subsidiary Guarantors named therein and
U.S. Bank National Association, as Trustee (including the
form of 10% senior note due 2009)
4.3 Registration Rights Agreement, dated as of May 9, 2002, by
and among NMHG Holding Co., the Guarantors named therein and
Credit Suisse First Boston Corporation, Salomon Smith Barney
Inc., U.S. Bancorp Piper Jaffray Inc., McDonald Investments
Inc., NatCity Investments, Inc. and Wells Fargo Brokerage
Services, LLC
* 5.1 Opinion of Jones, Day, Reavis & Pogue
10.1 Credit Agreement, dated as of May 9, 2002, among NMHG
Holding Co., NACCO Materials Handling Group, Inc., NMHG
Distribution Co., NACCO Materials Handling Limited, NACCO
Materials Handling B.V., the financial institutions from
time to time a party thereto as Lenders, the financial
institutions from time to time a party thereto as Issuing
Bank, Citicorp North America, Inc., as administrative agent
for the Lenders and the Issuing Bank thereunder and Credit
Suisse First Boston as joint arrangers and joint bookrunners
and CSFB as syndication agent
10.2 Operating Agreement, dated July 31, 1979, among Eaton
Corporation and Sumitomo Heavy Industries, Ltd.
10.3 Equity joint venture contract, dated November 27, 1997,
between Shanghai Perfect Jinqiao United Development Company
Ltd., People's Republic of China, NACCO Materials Handling
Group, Inc., USA, and Sumitomo-Yale Company Ltd., Japan
10.4 Recourse and Indemnity Agreement, dated October 21, 1998,
between General Electric Capital Corp., NMHG Financial
Services, Inc. and NACCO Materials Handling Group, Inc.
10.5 Restated and Amended Joint Venture and Shareholders
Agreement, dated April 15, 1998, between General Electric
Capital Corp. and NACCO Materials Handling Group, Inc.
10.6 Amendment No. 1 to the Restated and Amended Joint Venture
and Shareholders Agreement between General Electric Capital
Corporation and NACCO Materials Handling Group, Inc., dated
as of October 21, 1998
10.7 International Operating Agreement, dated April 15, 1998,
between NACCO Materials Handling Group, Inc. and General
Electric Capital Corp. (the "International Operating
Agreement")
10.8 Amendment No. 1 to the International Operating Agreement,
dated as of October 21, 1998
10.9 Amendment No. 2 to the International Operating Agreement,
dated as of December 1, 1999
10.10 Amendment No. 3 to the International Operating Agreement,
dated as of May 1, 2000
10.11 Letter agreement, dated November 22, 2000, between General
Electric Capital Corporation and NACCO Materials Handling
Group, Inc. amending the International Operating Agreement
10.12 A$ Facility Agreement, dated November 22, 2000, between GE
Capital Australia and National Fleet Network PTY Limited
10.13 Loan Agreement, dated as of June 28, 1996, between NACCO
Materials Handling Group, Inc. and NACCO Industries, Inc.
10.14 Business sale agreement, dated November 10, 2000, between
Brambles Australia Limited, ACN 094 802 141 Pty Limited and
NACCO Materials Handling Group, Inc.
10.15 NACCO Materials Handling Group, Inc. Annual Incentive
Compensation Plan, effective as of January 1, 2002, is
incorporated herein by reference to Exhibit 10(lxiii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.16 NACCO Materials Handling Group, Inc. Senior Executive
Long-Term Incentive Compensation Plan, effective as of
January 1, 2000, is incorporated herein by reference to
Exhibit 10(lxiv) to NACCO Industries, Inc.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 2000,
Commission File Number 1-9172
</Table>
II-14
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.17 NACCO Materials Handling Group, Inc. Long-Term Incentive
Compensation Plan, effective as of January 1, 2000, is
incorporated by reference to Exhibit 10(lxv) to NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, Commission File Number 1-9172
10.18 Amendment No. 1, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Senior Executive Long-Term
Incentive Compensation Plan (effective as of January 1,
2000) is incorporated herein by reference to Exhibit
10(lxvi) to NACCO Industries, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 2001, Commission
File Number 1-9172
10.19 Amendment No. 1, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Long-Term Incentive
Compensation Plan (effective as of January 1, 2000) is
incorporated herein by reference to Exhibit 10(lxvii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.20 Amendment No. 1, dated as of February 19, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxviii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.21 NACCO Materials Handling Group, Inc. Unfunded Benefit Plan
(as amended and restated effective as of September 1, 2000)
is incorporated herein by reference to Exhibit 10(lxxiii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, Commission File Number
1-9172
10.22 Amendment No. 2, dated as of August 6, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxix) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.23 Amendment No. 3, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxx) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.24 Amendment No. 4, dated as of November 1, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxxi) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.25 Amendment No. 5, dated as of December 21, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as
amended and restated effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(lxxxii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
12.1 Ratio of Earnings to Fixed Charges
16.1 Letter of Arthur Andersen LLP to the Securities and Exchange
Commission dated May 24, 2002
21.1 Subsidiaries of NMHG Holding Co.
23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1)
24.1 Powers of attorney
25.1 Statement of Eligibility under the Trust Indenture Act of
1939 on Form T-1.
99.1 Letter of Transmittal
99.2 Notice of Guaranteed Delivery
99.3 Letter regarding exchange offer
99.4 Letter to participants
</Table>
- ---------------
* To be filed by amendment.
II-15