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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K ANNUAL REPORT
PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NO. 1-9172
NACCO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
5875 Landerbrook Drive,
Mayfield Heights, Ohio
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
34-1505819
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(I.R.S. EMPLOYER IDENTIFICATION NO.)
44124-4017
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(ZIP CODE)
Registrant's telephone number, including area code: (216) 449-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Class A Common Stock, New York Stock Exchange
Par Value $1.00 Per Share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class B Common Stock, Par Value $1.00 Per Share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirement for
the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Class A Common Stock and Class B Common Stock held by
non- affiliates as of February 29, 1996:
$337,680,093
Number of shares of Class A Common Stock outstanding at February 29, 1996:
7,273,956
Number of shares of Class B Common Stock outstanding at February 29, 1996:
1,708,993
DOCUMENTS INCORPORATED BY REFERENCE
(a) The Company's Proxy Statement for its 1996 annual meeting of
stockholders, incorporated herein by reference in Part III.
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ITEM 1. BUSINESS
GENERAL
NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company
which owns four principal operating subsidiaries:
(a) Nacco Materials Handling Group. The Company owns approximately 97% of
the outstanding capital stock of Hyster-Yale Materials Handling, Inc.
("Hyster-Yale"), which is the parent company of NACCO Materials Handling Group,
Inc. (For convenience of reference NACCO Materials Handling Group, Inc. and
Hyster-Yale hereinafter referred to as "NMHG"). NMHG markets two full lines of
forklift trucks and related service parts under the Hyster and Yale brand names.
NMHG accounted for 69% and 57% of NACCO's revenues and operating profits,
respectively, in 1995.
(b) Hamilton Beach/Proctor-Silex. The Company owns 80% of Hamilton
Beach/Proctor-Silex, Inc. ("Hamilton Beach/Proctor-Silex"), one of the nation's
leading manufacturers and marketers of small electric appliances. Hamilton
Beach/Proctor-Silex accounted for 17% of NACCO's revenues and operating profits
in 1995.
(c) North American Coal. The Company's wholly owned subsidiary, The North
American Coal Corporation, and its affiliated coal companies (collectively,
"North American Coal"), mine and market lignite for use primarily as fuel for
power generation by electric utilities. North American Coal also provides
dragline mining services for a limerock quarry near Miami, Florida. North
American Coal accounted for 11% and 30% of NACCO's revenues and operating
profits, respectively, in 1995.
(d) Kitchen Collection. The Company's wholly owned subsidiary, The Kitchen
Collection, Inc. ("Kitchen Collection"), is a national specialty retailer of
kitchenware, small electric appliances and related accessories. Kitchen
Collection accounted for 3% and 2% of NACCO's revenues and operating profits,
respectively, in 1995.
Additional information relating to financial and operating data on a
segment basis (including NACCO and Other, which reduced operating profits by 6%
in 1995) is set forth in Management's Discussion and Analysis of Results of
Operations and Financial Condition on pages 21 through 36 contained in Part II
hereof and in Note 19 to the Consolidated Financial Statements on pages F-22
through F-24 contained in Part IV hereof.
NACCO was incorporated as a Delaware corporation in 1986 in connection with
the formation of a holding company structure for a predecessor corporation
organized in 1913.
SIGNIFICANT EVENTS
In August 1995, NMHG retired the remaining $78.5 million outstanding
Hyster-Yale 12 3/8% subordinated debentures, using bank borrowings and
internally generated funds. This retirement resulted in a charge in the third
quarter of $2.1 million, representing the write-off of premiums and unamortized
debt issuance costs. In addition, a $1.3 million charge was recognized in the
first quarter of 1995 when NMHG's former revolving credit facility and senior
term loan were replaced by a new long-term credit agreement.
In the fourth quarter, Bellaire Corporation, a non-operating subsidiary of
NACCO, reported an extraordinary gain of $32.3 million, net of $19.8 million in
taxes, relating to a downward revision in the obligation to the United Mine
Workers of America Combined Benefit fund ("UMWA"). This obligation was
recognized by Bellaire as an extraordinary charge in 1992 to accrue for the
estimated costs associated with the Coal Industry Retiree Health Benefit Act of
1992 ("Coal Act"). It is the company's policy to periodically review the
estimates and assumptions upon which various liability reserves are based. As a
result of a review of the assumptions relating to the number of company and
industry covered beneficiaries ultimately assigned to Bellaire, and the trend of
health care costs, the aggregate estimated costs associated with the Coal Act
are expected to be lower than originally anticipated. Management believes that
the revised liability of $69.3 million, net of deferred taxes, more accurately
represents the future cost of this obligation.
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Effective February 28, 1995, George C. Nebel resigned as President and
Chief Executive Officer of Hamilton Beach/Proctor-Silex. On September 11, 1995,
Richard E. Posey joined Hamilton Beach/Proctor-Silex as President and Chief
Executive Officer. In the interim, Hamilton Beach/Proctor-Silex was managed by
Alfred M. Rankin, Jr., Chairman, President and Chief Executive Officer of the
Company, as nonexecutive chairman of the Hamilton Beach/Proctor-Silex Board of
Directors, with daily operations being overseen by an executive committee
comprised of key Hamilton Beach/Proctor-Silex executives from various
disciplines.
BUSINESS SEGMENT INFORMATION
A. NACCO MATERIALS HANDLING GROUP
NMHG is one of the leading worldwide designers, manufacturers and marketers
of forklift trucks which comprise the largest segment of the materials handling
equipment industry. NMHG accounted for 57% and 48% of NACCO's assets and
liabilities, respectively, as of December 31, 1995, while its operations
accounted for 69% and 57% of NACCO's revenues and operating profits,
respectively, in 1995.
THE INDUSTRY
Forklift trucks are used in a wide variety of business applications
including manufacturing and warehousing. The materials handling industry,
especially in industrialized nations, is generally a mature industry, which has
historically been cyclical. Fluctuations in the rate of orders for forklift
trucks reflect the capital investment decisions of the customers, which in turn
depend upon the general level of economic activity in the various industries
served by such customers.
Since 1990, the worldwide market for forklift trucks has remained
relatively stable at approximately 400,000 units per year. During this time,
however, individual geographic markets have been subject to cyclicality. During
the most recent business cycle, the North American market for forklift trucks
reached its lowest level in 1991 and management believes has recently peaked and
now leveled off. The European and Japanese markets reversed a declining trend in
1994 and continued a strong upward movement in 1995, particularly in Europe. The
market in Asia-Pacific (outside of Japan), an increasingly important market for
NMHG, continued steady growth to a record level in 1995.
COMPANY OPERATIONS
NMHG maintains product differentiation between Hyster and Yale brands of
forklift trucks and distributes its products through separate worldwide dealer
networks. Nevertheless, certain overlapping operations have been integrated to
take advantage of economies of scale in design, manufacturing and purchasing.
NMHG provides all design, manufacturing and administrative functions. Products
are marketed and sold through two separate dealer networks which retain the
Hyster and Yale identities. In Japan, NMHG has a 50% owned joint venture with
Sumitomo Heavy Industries Ltd. which is generally known as Sumitomo-NACCO
Company Limited ("S-N"). S-N performs certain design activities and produces
lift trucks and components which it markets in Japan and which are exported for
sale by NMHG and its affiliates in the U.S., Europe and Asia-Pacific.
In 1995, NMHG acquired DECA S.r.1., a manufacturer of European warehouse
equipment located in Italy. This acquisition gives the company a presence in the
substantial European warehouse equipment market. The company intends to leverage
DECA's stong product line through its extensive independent dealer network in
Europe.
PRODUCT LINES
NMHG manufactures a wide range of forklift trucks under both the Hyster and
Yale brand names. The principal categories of forklift trucks include electric
rider, electric narrow-aisle and electric motorized hand forklift trucks
primarily for indoor use, and internal combustion engine ("ICE") forklift trucks
for indoor or outdoor use. Forklift truck sales accounted for approximately 85%,
82%, and 80% of NMHG's net sales in 1995, 1994, and 1993, respectively.
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NMHG also derives significant revenues from the sale of service parts for
its products. Profit margins on service parts are greater than those on forklift
trucks. The large population of Hyster and Yale forklift trucks now in service
provides a market for service parts. In addition to parts for its own forklift
trucks, NMHG has a program (termed UNISOURCE) in North America and (termed
MULTIQUIP) in Europe designed to supply Hyster dealers with replacement parts
for most competing brands of forklift trucks. NMHG has a similar program (termed
PREMIER) for its Yale dealers in the Americas and Europe. Accordingly, NMHG
dealers can offer their mixed fleet customers a "one stop" supply source.
Certain of these parts are manufactured by and purchased from third party
component makers. NMHG also manufactures some of these parts through
reverse-engineering of its competitors' parts. Service parts accounted for
approximately 15%, 18%, and 20% of NMHG net sales in 1995, 1994, and 1993,
respectively.
COMPETITION
The forklift truck industry is highly competitive. The worldwide
competitive structure of the industry is fragmented by product line and country;
however, the three largest manufacturers have a significantly greater market
position on a unit volume basis than the other manufacturers. The principal
methods of competition among forklift truck manufacturers are product
performance, price, service and distribution networks. The forklift truck
industry competes with alternative methods of materials handling, including
conveyor systems, automated guided vehicle systems and hand labor. Global
competition is also affected by a number of other factors, including currency
fluctuations, variations in labor costs and effective tax rates, and the costs
related to compliance with applicable regulations, including export restraints,
antidumping provisions and environmental regulations.
Although there is no official source for information on the subject, NACCO
believes that NMHG is the top manufacturer of forklift trucks in the world based
on number of lift trucks sold.
NMHG's position is strongest in North America, where it believes it is the
leader in unit sales of electric rider and ICE forklift trucks and has a
significant share of unit sales of electric narrow-aisle and electric motorized
hand forklift trucks. Although the European market is fragmented and competitive
positions vary from country to country, NMHG believes that it has a significant
share of unit sales of electric rider and ICE forklift trucks in Western Europe.
Although NMHG's current market share in the Asia-Pacific and Japanese markets is
lower than in other geographic areas they have been targeted for additional
market share growth. Since 1990, Asia-Pacific market share has shown moderate
growth while Japanese market share has remained stable.
TRADE RESTRICTIONS
A. UNITED STATES
Since June 1988, Japanese-built ICE forklift trucks imported into the U.S.,
with lifting capacities between 2,000 and 15,000 pounds, including finished and
unfinished forklift trucks, chassis, frames, and frames assembled with one or
more component parts, have been subject to an antidumping duty order.
Antidumping duty rates in effect through 1995 range from 4.48% to 56.81%
depending on manufacturer or importer. The antidumping duty rate applicable to
imports from S-N is 51.33%, and is likely to continue unchanged for the
foreseeable future, unless S-N and NMHG decide to participate in proceedings to
have it reduced. NMHG does not currently import for sale in the United States
any forklift trucks or components subject to the antidumping duty order. This
antidumping duty order will remain in effect until the Japanese manufacturers
and importers satisfy the U.S. Department of Commerce ("Commerce") that they
have not individually sold merchandise subject to the order in the United States
below foreign market value for at least three consecutive years, or unless
Commerce or the U.S. International Trade Commission finds that changed
circumstances exist sufficient to warrant the revocation of the order. The
legislation implementing the Uruguay round of GATT negotiations passed in 1994
provides that the anti-dumping order will be reviewed for possible revocation in
2000. All of NMHG's major Japanese competitors have either built or acquired
manufacturing or assembly facilities in the United States. The company cannot
predict with any certainty if
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there has been or will be any negative effects to the company resulting from the
Japanese sourcing of their forklift products in the United States.
B. EUROPE
From 1986 through 1994, Japanese forklift truck manufacturers were subject
to informal export restraints on Japanese-manufactured electric rider, electric
narrow-aisle and ICE forklift trucks shipped to Europe. These informal
restraints terminated in 1995. Several Japanese manufacturers have announced
either that they have established, or intend to establish, manufacturing or
assembly facilities within the European Community. The company also cannot
predict with any certainty if there has been or will be any negative effects to
NMHG resulting from the Japanese sourcing of their forklift products in Europe.
PRODUCT DESIGN AND DEVELOPMENT
NMHG spent $24.2 million, $23.2 million, and $20.7 million on product
design and development activities in 1995, 1994, and 1993, respectively. The
Hyster(R) and Yale(R) products are differentiated for the specific needs of
their respective customer bases. NMHG continues to pursue opportunities to
improve product costs by engineering new Hyster(R) and Yale(R) brand products
with component commonality.
Certain product design and development activities with respect to ICE
forklift trucks and some components are performed in Japan by S-N. S-N spent
approximately $3.8 million, $4.5 million, and $4.0 million on product design and
development in 1995, 1994, and 1993, respectively.
BACKLOG
As of December 31, 1995, NMHG's backlog of unfilled orders for forklift
trucks was approximately 21,200 units, or $385 million. This compares to the
backlog as of December 31, 1994 of approximately 24,600 units, or $433 million.
The continuation of strong orders and vendor part shortages in 1995 caused
backlog levels to remain high. The company's management believes that NMHG
backlog levels are consistent with the overall industry. Backlog represents unit
orders to NMHG's manufacturing plants from independent dealerships, retail
customers and contracts with the U.S. Government. Although these orders are
believed to be firm, such orders may be subject to cancellation or modification.
SOURCES
NMHG has adopted a strategy of obtaining its raw materials and principal
components on a global basis from competitively priced sources. NMHG is
dependent on a limited number of suppliers for certain of its critical
components, including diesel and gasoline engines and cast-iron counterweights
used on certain forklift trucks. There would be a material adverse effect on
NMHG if it were unable to obtain all or a significant part of such components,
or if the cost of such components was to increase significantly under
circumstances which prevented NMHG from passing on such increases to its
customers. In 1995, NMHG suffered vendor part shortages which caused backlog
levels to remain high.
DISTRIBUTION
The Hyster(R) and Yale(R) brand products are distributed through separate
highly developed worldwide dealer networks. Each also sells directly to certain
major customers. In addition, the company has an internal sales forces for each
brand to sell directly to major customers.
In Japan, forklift truck products are distributed by S-N. In 1995, Yale
reached agreement with Jungheinrich Aktiengesellschaft ("Jungheinrich"), a
German manufacturer of forklift trucks, to terminate Jungheinrich's distribution
of Yale brand products in Germany and Austria at the end of 1996. By mid-1997,
NMHG will cease to provide to Jungheinrich certain ICE and electric-powered
products for sale in other major European countries under the Jungheinrich brand
name. Yale will establish a new distribution network in Germany and will begin
appointing German dealers in October 1996. The company's management does not
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believe that the termination of its relationship with Jungheinrich will have a
materially adverse effect on the company.
FINANCING OF SALES
Hyster U.S. dealer and direct sales are supported by leasing and financing
services provided by Hyster Credit Company, a division of AT&T Commercial
Finance Corporation, pursuant to an operating agreement which expires in 2000.
NMHG is a minority stockholder of Yale Financial Services, Inc., a
subsidiary of General Electric Capital Corporation, which offers Yale U.S.
dealers wholesale and retail financing and leasing services for its forklift
trucks. Such retail financing and leasing services are also available to Yale
national account customers.
EMPLOYEES
As of February 29, 1996, NMHG had approximately 6,900 employees. Employees
in the Danville, Illinois manufacturing and parts depot operations are
unionized, as are tool room employees located in Portland, Oregon. A new
three-year contract for the Danville union employees was signed in 1994, which
will expire in June, 1997. A new three-year contract was signed in 1994 with the
Portland tool room union which will expire in October 1997. Employees at the
facilities in Berea, Kentucky; Sulligent, Alabama; and Greenville and Lenoir,
North Carolina are not represented by unions.
In Europe, shop employees in the Craigavon, Northern Ireland facility are
unionized. Employees in the Irvine, Scotland and Nijmegen, 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.
NMHG's management believes its current labor relations with both union and
non-union employees are generally satisfactory.
GOVERNMENT REGULATION
NMHG's manufacturing facilities, in common with others in industry, are
subject to numerous laws and regulations designed to protect the environment,
particularly with respect to disposal of plant waste. NMHG's products are also
subject to various industry and governmental standards. NMHG's management
believes that the impact of expenditures to comply with such requirements will
not have a material adverse effect on NMHG.
PATENTS, TRADEMARKS AND LICENSES
NMHG is not materially dependent upon patents or patent protection. NMHG is
the owner of the Hyster(R) trademark, which is currently registered in
approximately 51 countries. The Yale(R) trademark, which is used on a perpetual
royalty-free basis by NMHG in connection with the manufacture and sale of
forklift trucks and related components, is currently registered in approximately
100 countries. NMHG's management believes that its business is not dependent
upon any individual trademark registration or license, but that the Hyster(R)
and Yale(R) trademarks are material to its business.
B. HAMILTON BEACH/PROCTOR-SILEX
GENERAL
The company believes that Hamilton Beach/Proctor-Silex is one of the
largest broad line manufacturers and marketers of small electric appliances in
North America. Hamilton Beach/Proctor-Silex's products are marketed primarily to
retail merchants and wholesale distributors. Hamilton Beach/Proctor-Silex
accounted for 16% and 12% of NACCO's assets and liabilities, respectively, as of
December 31, 1995, while its operations accounted for 17% of NACCO's revenues
and operating profits, in 1995.
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SALES AND MARKETING
Hamilton Beach/Proctor-Silex manufactures and markets a wide range of small
electric appliances, including motor driven appliances such as blenders, food
processors, mixers and electric knives which are primarily marketed under the
Hamilton Beach(R) brand name, and heat generating appliances such as toasters,
irons, coffeemakers and toaster ovens which are primarily marketed under the
Proctor-Silex(R) brand name. The company markets its products primarily in North
America, but also sells in South America, Latin America and Europe. Sales are
generated predominately by a network of inside sales employees to mass
merchandisers, catalog showrooms, warehouse membership clubs, variety store
chains, department stores and other retail outlets. Principal customers include
Wal-Mart, Target, K-Mart, Caldor, SAM'S Club, Montgomery Ward, Service
Merchandise, Canadian Tire and Zellers. Sales promotional activities are
primarily focused on cooperative advertising.
Because of the seasonal nature of the markets for small electric
appliances, Hamilton Beach/Proctor-Silex's management believes that backlog is
not a meaningful indicator of performance nor is it a significant indicator of
annual sales. Backlog of orders as of December 31, 1995 was approximately $4.6
million. This compares with the aggregate backlog as of December 31, 1994 of
approximately $8.2 million. This backlog represents customer orders; customer
orders may be cancelled at any time prior to shipment.
Hamilton Beach/Proctor-Silex's warranty program to the consumer consists
generally of a limited warranty lasting for two years for electric appliances.
Under its warranty program, the company may repair or replace, at its option,
those products found to contain manufacturing defects.
Revenues and operating profit for Hamilton Beach/Proctor-Silex are
traditionally greater in the second half of the year as sales of small electric
appliances increase significantly with the fall holiday selling season. Because
of the seasonality of purchases of its products, Hamilton Beach/Proctor-Silex
incurs substantial short-term debt in the first half of the year to finance
inventories and accounts receivable.
PRODUCT DESIGN AND DEVELOPMENT
Hamilton Beach/Proctor-Silex spent $3.3 million in 1995, $2.7 million in
1994 and $2.7 million in 1993 on product design and development activities.
SOURCES
The principal raw materials used to manufacture and distribute Hamilton
Beach/Proctor-Silex's products are steel, aluminum, plastics and packaging
materials. The company's management believes that adequate quantities of raw
materials are available from various suppliers.
On November 28, 1994, the parent company of one of Hamilton
Beach/Proctor-Silex's principal suppliers of molded plastic, Southern Tech
Plastics Products, Inc., entered into Chapter 11 bankruptcy proceedings. On
November 27, 1995, a wholly owned subsidiary of Hamilton Beach/Proctor- Silex
purchased the stock of the operating subsidiary of Southern Tech Plastics
Products, Inc. and now operates the molded plastic facility. This purchase did
not have a material effect on Hamilton Beach/Proctor-Silex.
COMPETITION
The small electric appliance industry is highly competitive. Based on
publicly available information about the industry, Hamilton
Beach/Proctor-Silex's management believes it is one of the largest producers of
such appliances in North America.
As retailers generally purchase a limited selection of small electric
appliances, Hamilton Beach/Proctor-Silex competes with other suppliers for
retail shelf space and focuses its marketing efforts on retailers rather than
consumers. The company's management believes that the principal areas of
competition with respect to its products are quality, price, product design,
product features, merchandising, promotion and warranty. Hamilton
Beach/Proctor-Silex's management believes that it is competitive in all of these
areas.
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GOVERNMENT REGULATION
Hamilton Beach/Proctor-Silex, in common with other manufacturers, is
subject to numerous Federal and state health, safety and environmental
regulations. The company's management believes that the impact of expenditures
to comply with such laws will not have a material adverse effect on Hamilton
Beach/Proctor-Silex. The company's products are subject to testing or regulation
by Underwriters' Laboratories, the Canadian Standards Association, and various
entities in foreign countries which review product design.
PATENTS, TRADEMARKS, COPYRIGHTS, AND LICENSES
Hamilton Beach/Proctor-Silex holds patents and trademarks registered in the
United States and foreign countries for various products. The company's
management believes that its business is not dependent upon any individual
patent, trademark, copyright or license, but that the Hamilton Beach(R) and
Proctor-Silex(R) trademarks are material to its business.
EMPLOYEES
As of February 29, 1996, Hamilton Beach/Proctor-Silex's work force
consisted of approximately 3,700 employees, none of which are represented by
unions except for approximately 20 hourly employees at the Picton, Ontario
facility. The Picton, Ontario employees are represented by an employee
association which performs a consultative role on employment matters.
C. NORTH AMERICAN COAL
GENERAL
North American Coal is engaged in the mining and marketing of lignite for
use primarily as fuel for power generation by electric utilities. Substantially
all of the sales by North American Coal are made through wholly owned project
mining subsidiaries pursuant to long-term, cost plus a profit per ton contracts.
The utility customers have arranged and guaranteed the financing of the
development and operation of these project mining subsidiaries. There is no
recourse to NACCO or North American Coal for the financing of these subsidiary
mines. North American Coal also provides dragline mining services for a limerock
quarry near Miami, Florida. At December 31, 1995 North American Coal's operating
lignite mines consisted of mines where the reserves were acquired and developed
by North American Coal, except for the South Hallsville No. 1 Mine where
reserves are owned by the customer. North American Coal also earns royalty
income from the lease of various coal and gas properties. For further
information as to the financing of the project mining subsidiaries, see Note 10
to the Consolidated Financial Statements on pages F-15 and F-16 contained in
Part IV hereof. Project mining subsidiaries accounted for 24% and 29% of NACCO's
assets and liabilities, respectively, as of December 31, 1995, while their
operations accounted for 10% and 25% of the Company's revenues and operating
profits, respectively, in 1995.
SALES AND MARKETS
The principal customers of North American Coal are electric utilities and a
synfuels plant. In 1995, sales to one customer, which supplies coal to four
facilities, accounted for 46% of North American Coal's revenues compared with
45% and 46% in 1994 and 1993, respectively. The distribution of sales in the
last five years has been as follows:
DISTRIBUTION
TOTAL ----------------------
TONS SOLD ELECTRIC SYNFUELS
(MILLIONS) UTILITIES PLANT
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1995 26.7 76% 24%
1994 27.2 76% 24%
1993 26.5 75% 25%
1992 24.5 74% 26%
1991 21.7 73% 27%
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The contracts under which the project mining subsidiaries were organized
provide that, under certain conditions of default, the customer(s) involved may
elect to acquire the assets (subject to the liabilities) or the capital stock of
the subsidiary, for an amount effectively equal to book value. In one case, the
customer may elect to acquire the stock of the subsidiary after a specified
period of time without reference to default, in exchange for certain payments on
coal thereafter mined. North American Coal does not know of any conditions of
default that currently exist.
The location, customer, sales tonnage and contract expiration date for the
mines operated by North American Coal in 1995 were as follows:
1995 SALES
MINE AND CUSTOMER TONNAGE CONTRACT
MINING OPERATION LOCATION (PLANT) (MILLIONS) EXPIRES
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Project Mining Subsidiaries
The Coteau Properties Company Freedom Mine(1) Dakota Coal Company 6.4 2007(2)
Beulah, North (Great Plains Synfuels Plant)
Dakota (surface) Dakota Coal Company 5.2 2007(2)
(Antelope Valley Station)
Dakota Coal Company 2.6 2007(2)
(Leland Olds Station)
Dakota Coal Company 0.9 1997
(Stanton Station of United
Power Association)
The Falkirk Mining Company Falkirk Mine(1) United Power Association/ 7.1 2020
Underwood, North Cooperative Power Association
Dakota (surface) (Coal Creek Station)
The Sabine Mining Company South Hallsville, Southwestern Electric Power 3.7 2020
No. 1 Mine;(1) Company
Hallsville, Texas, (Henry W. Pirkey Power Plant)
(surface)
Other
Red River Mining Company Oxbow Mine; Central Louisiana Electric 0.8(3) 2010
(Joint Venture with Phillips Coushatta, Company/Southwestern Electric
Coal Company) Louisiana (surface) Power Company
(Dolet Hills Power Plant)
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(1) The contracts for these mines require the customer to cover the cost of the
ongoing replacement and upkeep of the plant and equipment of the mine.
(2) Although the term of the existing coal sales agreement terminates in 2007,
the term may be extended for six (6) additional periods of five years, or
until 2037, at the option of The Coteau Properties Company.
(3) The amount represents the total (100%) of the 1995 joint venture tonnage.
Under terms of a lignite mining agreement entered into in 1985 with Houston
Lighting & Power Company ("HL&P") (as successor to Utility Fuels, Inc.), a
subsidiary of Houston Industries Incorporated, North American Coal was retained
to design, develop, construct and operate the proposed Trinity Mine in the
Malakoff-Cayuga reserves near Malakoff, Texas. The Trinity Mine was expected to
produce from 4.5 to 6.5 million tons of lignite annually. After several delays,
however, the proposed Malakoff Generating Station was cancelled in July 1994.
North American Coal and its wholly owned subsidiary, North American Coal Royalty
Company ("Royalty Company"), have received certain management fees, minimum
royalties and other payments in connection with the future development of the
Trinity Mine project. In December 1992 the Lignite Lease and Sublease Agreement
under which the minimum royalties were received was amended. The
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parties agreed that, in light of the delayed development of this mining project,
effective January 1, 1993 HL&P was no longer obligated to pay minimum royalties
to Royalty Company. Termination of this obligation reduced North American Coal's
annual net income approximately $2.4 million, after tax beginning in 1993. Under
the original agreement, these minimum royalty payments would have terminated at
the end of 2005.
Under the lignite mining agreement with HL&P, North American Coal had been
receiving annual management fees. HL&P accelerated payment of the final 1996
management fee of $2.6 million, after-tax, into 1995. In December 1995, HL&P
also terminated the lignite mining agreement and North American Coal will no
longer receive such management fees. Termination of this obligation will reduce
North American Coal's annual net income approximately $5.2 million, after-tax
compared with 1995 levels.
GOVERNMENT REGULATION
North American Coal, in common with other coal producers, continues to be
subject to Federal and state health, safety and environmental regulations. The
1996 expenditures which will be required for compliance with the provisions of
governmental regulations, including mined land reclamation and other air and
water pollution abatement requirements, are estimated at $1.1 million for
certain closed mines and are included in Self-Insurance Reserves and Other in
NACCO's Consolidated Financial Statements in this Annual Report on Form 10-K.
The active operations are required to make certain additional capital
expenditures to comply with such governmental regulations, which expenditures
will be recovered under the terms of the coal sales agreements with the utility
customers.
North American Coal's management believes that the Clean Air Act
Amendments, which became effective in 1990, will not have a material adverse
effect on its current operations, because substantially all of the power
generating facilities operated or supplied by North American Coal's customers
meet or exceed the requirements of the Clean Air Act.
The Federal Energy Regulatory Commission ("FERC") issued Order 636,
effective in May 1992, which requires gas pipeline companies to separate their
gas sales and gas transportation functions. As a result of this Order, the
nation's natural gas pipeline companies, including the four which purchase gas
produced by the Great Plains Synfuels Plant ("the Synfuels Plant"), which is
supplied by the company's Coteau mining subsidiary, have much less need for gas
supply under contract and are actively seeking to restructure or terminate many
supply contracts. In 1994 the four (4) pipeline companies that purchase gas from
the Synfuels Plant reached a tentative settlement agreement with the plant's
operator, Dakota Gasification Company ("DGC"), and the U.S. Department of Energy
("DOE") over the dispute regarding the pipeline companies' gas purchase
contracts. This settlement agreement resolves all pricing disputes for past
periods and establishes a new pricing formula for future gas sales. FERC
approval of the settlement agreement is required, and in 1994 each of the four
pipeline companies petitioned FERC for approval. DOE and DGC joined the pipeline
companies in asking FERC to approve the pipeline companies' settlement
agreement. In October 1994, FERC consolidated the pipeline companies' petitions
with an earlier complaint by a ratepayer group that claimed the prices charged
by one of the four pipeline companies violates FERC Opinion 119, which
authorized the purchase and pricing pass-through of gas from the Synfuels Plant.
In January 1995, FERC approved DGC's settlement with one of the four pipeline
companies. On December 29, 1995, FERC Administrative Law Judge ("ALJ") Michael
Levant issued a decision that the other three pipeline companies had acted
imprudently in entering into the settlement agreement. This decision also
established a new pricing formula that substantially reduces the price payable
by the three pipeline companies to DGC under FERC Opinion No. 119 for gas and
substantially reduces the quantity of gas that the pipelines are required to
purchase from DGC under Opinion No. 119. Furthermore, ALJ Levant's decision
requires the pipeline companies to refund to their ratepayers amounts collected
under the settlement agreement in excess of amounts allowed under his decision,
an amount estimated by DGC to be approximately $275 million. DGC subsequently
announced that the gas prices allowed under ALJ Levant's decision are less than
DGC's cost of producing gas and that the decision, if approved by FERC, could
result in closing the Synfuels Plant. On January 29, 1996, DGC, DOE and the
pipeline companies filed exceptions to ALJ Levant's decision with FERC. The
ratepayers group's response was filed February 20, 1996. FERC has committed to
taking final action in this docket by December 31, 1996.
9
11
COMPETITION
The coal industry competes with other sources of energy, particularly oil,
gas, hydro-electric power and nuclear power. Among the factors that affect
competition are the price and availability of oil and natural gas, environmental
considerations, the time and expenditures required to develop new energy
sources, the cost of transportation, the cost of compliance with governmental
regulation of operations, the impact of federal and state energy policies and
the current trend toward deregulation of energy markets. The ability of North
American Coal to market and develop its reserves will depend upon the
interaction of these factors. Within the coal industry, North American Coal also
competes with other large coal producers for the acquisition and development of
coal reserves and for contract mining engagements to develop and mine reserves
owned by noncoal producers.
There is no official source of information on the subject, but company
management believes that North American Coal is the eighth largest commercial
coal producer in the United States.
EMPLOYEES
As of February 29, 1996, North American Coal had approximately 950
employees.
D. KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of kitchenware, small
electric appliances and related accessories which operated 134 retail stores as
of February 29, 1996. Stores are located primarily in factory outlet complexes
that feature merchandise of highly recognizable name-brand manufacturers.
Kitchen Collection's product mix includes a broad line of appliances from
leading manufacturers, including Hamilton Beach(R) and Proctor-Silex(R)
appliances.
Kitchen Collection introduced a new store format in 1994, named
Hearthstone(TM). These stores carry a distinctive mix of merchandise for the
entire home, with particular emphasis on gift items and home decor. The product
mix and store design at Hearthstone are distinctively different from the
traditional Kitchen Collection(R) store. This market differentiation will
allow the two store formats to coexist within the same market.
Kitchen Collection accounted for 1% of NACCO's assets and liabilities as of
December 31, 1995, while its operations accounted for 3% and 2% of NACCO's
revenues and operating profits, respectively, in 1995.
ITEM 2. PROPERTIES
A. NMHG
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
NMHG.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- ---------------------------- ------ ------- -------------------------------------------
Basingstoke, England........ X Hyster forklift truck marketing and sales
operations for Europe, the Middle East and
Africa
Berea, Kentucky............. X Manufacture of forklift trucks
Craigavon, Northern X Manufacture of forklift trucks
Ireland...................
Danville, Illinois.......... X Manufacture of forklift trucks, components
and service parts
Danville, Illinois.......... X Distribution of service parts for both
Hyster and Yale forklift trucks
Danville, Illinois.......... X Hyster forklift truck marketing and sales
operations for the Americas
10
12
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- ---------------------------- ------ ------- -------------------------------------------
Flemington, New Jersey...... X Yale forklift truck marketing and sales
operations for the Americas and certain
NMHG engineering operations
Greenville, North X Manufacture of forklift trucks; NMHG
Carolina.................. manufacturing and other staff operations
for the Americas
Irvine, Scotland............ X Manufacture of forklift trucks and other
staff operations for Europe
Lenoir, North Carolina...... X Manufacture of component parts for forklift
trucks
Modena, Italy............... X Manufacture of forklift trucks
Nijmegen, The Netherlands... X Manufacture of forklift trucks and
component parts; distribution of service
parts for forklift trucks
Portland, Oregon............ X Technical center for testing of prototype
equipment and component parts
Portland, Oregon............ X NMHG corporate headquarters
Portland, Oregon............ X Manufacture of production tooling and
prototype units
Sao Paulo, Brazil........... X Manufacture of forklift trucks;
distribution of service parts for forklift
trucks
Sulligent, Alabama.......... X Manufacture of component parts for forklift
trucks
Sydney, Australia........... X Assembly of forklift trucks; distribution
of service parts for forklift trucks and
staff operations for Asia-Pacific
Wolverhampton, England...... X Yale forklift truck marketing and sales
operations for Europe
B. HAMILTON BEACH/PROCTOR-SILEX
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
Hamilton Beach/Proctor-Silex.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- --------------------------------- ------ ------- ---------------------------------------
Collierville, Tennessee.......... X Distribution center
El Paso, Texas................... X Distribution center
Glen Allen, Virginia............. X Corporate headquarters
Juarez, Chihuahua, Mexico........ X Assembly of heat driven products (two
plants); plastic molding facility
Miami, Florida................... X Distribution center
Mt. Airy, North Carolina......... X Manufacture of heat driven products
Mt. Airy, North Carolina......... X Distribution center
Picton, Ontario, Canada.......... X Distribution center
11
13
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- --------------------------------- ------ ------- ---------------------------------------
Southern Pines, North Carolina... X Manufacture of iron components; service
center for customer returns; catalog
sales center; parts distribution center
Toronto, Ontario, Canada......... X Proctor-Silex, Canada sales and
administration headquarters
Washington, North Carolina....... X Distribution and warranty center;
manufacture of motor driven products;
plastic molding facility
Sales offices are also leased in several cities in the United States and
Canada.
C. NORTH AMERICAN COAL
North American Coal's proven and probable coal reserves and deposits (owned
in fee or held under leases which generally remain in effect until exhaustion of
the reserves if mining is in progress) are estimated at approximately 2.1
billion tons, approximately 83% of which are lignite deposits in North Dakota.
Reserves are estimates of quantities of coal, made by the company's
geological and engineering staff, that are considered mineable in the future
using existing operating methods. Developed reserves are those which have been
allocated to mines which are in operation; all other reserves are classified as
undeveloped. The table which follows gives detailed information as to North
American Coal's in-place reserves as of December 31, 1995 for the mines listed
under Item 1 "North American Coal" on page 7. The reserves of the South
Hallsville No. 1 Mine, which are listed on page 8, are owned and controlled by
the customer and, therefore, have not been listed in the following table.
Additional information concerning North American Coal is set forth in Item 1
"North American Coal".
PROVEN AND PROBABLE
RESERVES (MILLIONS OF AVERAGE
TONS) SULFUR
----------------------- CONTENT
COMMITTED AVERAGE PER UNIT
UNDER BTUS OF
CONTRACT UNCOMMITTED PER LB. WEIGHT
--------- ----------- ------- --------
Developed
Freedom Mine, North Dakota.................... 536.3 -- 6,767 0.8%
Falkirk Mine, North Dakota.................... 671.5 -- 6,200 0.6%
Oxbow Mine, Louisiana(1)...................... 9.9 13.0 6,722 0.7%
--------- -----------
Total Developed............................... 1,217.7 13.0
Undeveloped
North Dakota.................................. -- 571.2 6,428 0.7%
Texas......................................... -- 205.4 6,208 0.9%
Eastern....................................... 62.5 80.1 12,070 3.3%
--------- -----------
Total Undeveloped............................. 62.5 856.7
--------- -----------
1,280.2 869.7
========== ============
- ---------------
(1) These amounts represent the total (100%) of the joint venture reserves.
D. KITCHEN COLLECTION
Kitchen Collection currently owns the building housing its corporate
headquarters, a warehouse/distribution facility and a retail store in
Chillicothe, Ohio. It has entered into an Agreement for the Sale, Purchase and
Leaseback of Real Estate and Lease regarding these facilities whereby these
facilities will be sold and leased-back after certain agreed upon improvements
have been made. The company's manage-
12
14
ment expects this transaction to close in April, although there can be no
assurance that this transaction will be consummated. The company leases
warehouse/distribution facilities in Chillicothe, Ohio and the remainder of its
retail stores. A typical store is approximately 3,300 square feet.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any material
pending legal proceeding other than ordinary routine litigation incidental to
its respective business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders of the Company.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The information under this Item is furnished pursuant to Instruction 3 to
Items 401(b) and 401(c) of Regulation S-K.
The table on the following pages sets forth the name, age, current position
and principal occupation and employment during the past five years of the
Company's executive officers.
13
15
OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
Alfred M. Rankin, Jr. 54 Chairman, President, and Chief Executive Officer
of NACCO (since May 1994)
Frank B. O'Brien 49 Senior Vice President -- Corporate Development and
Chief Financial Officer of NACCO (since January
1994)
Steven M. Billick 39 Vice President and Controller of NACCO (since July
1991)
Charles A. Bittenbender 46 Vice President, General Counsel and Secretary of
NACCO (since prior to 1991)
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
Alfred M. Rankin, Jr. From May 1991 to May 1994, President and Chief
Executive Officer of NACCO. From prior to 1991 to
May 1991, President and Chief Operating Officer of
NACCO.
Frank B. O'Brien From January 1993 to December 1993 Senior Vice
President -- Corporate Development of NACCO. From
prior to 1991 to December 1992, Vice President --
Corporate Development of NACCO.
Steven M. Billick From prior to 1991 to July 1991, Partner, Deloitte
& Touche (accounting firm).
Charles A. Bittenbender
14
16
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
A. NMHG
NAME AGE CURRENT POSITION
- ------------------------ --- ---------------------------------------------------------
Reginald R. Eklund 55 President and Chief Executive Officer of NMHG
(since September 1992)
G. Michael Decker 54 Vice President, Finance and Chief Financial Officer of
NMHG (since February 1993)
Julie C. Hui 39 Controller of NMHG (since January 1995)
Geoffrey D. Lewis 38 Vice President, General Counsel and Secretary of NMHG
(since September 1995)
Jeffrey C. Mattern 43 Treasurer of NMHG (since August 1992)
Frank G. Muller 54 Vice President, President Americas for NMHG
(since May 1993)
Victoria L. Rickey 43 Vice President, Managing Director, NMHG Europe
(since January 1995)
Graham D. Tribe 53 Vice President, Managing Director, NMHG Asia-Pacific
(since May 1994)
NAME OTHER POSITIONS
- ------------------------ ---------------------------------------------------------
Reginald R. Eklund From August 1993 to September 1993 Vice President of
Hyster and Yale. From September 1992 to August 1993,
President and Chief Executive Officer of Hyster-Yale.
From prior to 1991 to September 1992, President and Chief
Operating Officer of NMHG. From prior to 1991 to August
1993, President and Chief Executive Officer of Yale.
G. Michael Decker From February 1993 to December 1993, Vice President,
Finance and Chief Financial Officer of Hyster and Yale.
From 1991 to February 1993, Vice President, Finance,
Secretary and Chief Financial Officer for Doehler Jarvis
Ltd. Partnership (casting manufacturer). From prior to 1991
to 1991, Senior Vice President--Finance, Treasurer and Chief
Financial Officer for The Manitowoc Company, Inc.
(manufacturer serving heavy construction, food service and
shipbuilding industries).
Julie C. Hui From 1992 to January 1995, Controller, Burr Brown
Corporation (manufacturer of micro electronics and
systems products). In 1991, Director of Accounting and
Tax of Burr Brown.
Geoffrey D. Lewis From August 1991 to September 1995 Senior Vice President,
General Counsel and Corporate Secretary for American
Health Properties, Inc. (health care facilities). From
prior to 1991 to August 1991 attorney for Jones, Day,
Reavis & Pogue (law firm).
Jeffrey C. Mattern From August 1992, Treasurer of Hyster and Yale. From
prior to 1991 to July 1992, Assistant Treasurer for
Harnischfeger Industries, Inc. (manufacturer of
papermaking machinery, mining and materials handling
equipment).
Frank G. Muller From February 1993 to December 1993, Vice President of
Hyster and Yale. From May 1992 to May 1993, Vice
President, Manufacturing, Americas for NMHG. From prior
to 1991 to May 1992, Vice President, Manufacturing, Yale.
Victoria L. Rickey From 1993 to January 1995, Senior Vice President
International Business Group, J.I. Case (manufacturer of
agricultural and construction equipment). From prior to
1991 to 1993, Vice President, Agricultural Equipment of
J.I. Case.
Graham D. Tribe From prior to 1991 to May 1994, Managing Director, Hyster
Australia Pty. Ltd.
15
17
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES -- CONTINUED
B. HAMILTON BEACH/PROCTOR-SILEX
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
Richard E. Posey 48 President and Chief Executive Officer of Hamilton
Beach/Proctor-Silex (since September 1995)
Judith B. McBee 48 Executive Vice President -- Marketing of Hamilton
Beach/Proctor-Silex (since October 1994)
Paul C. Smith 49 Senior Vice President -- Sales and International
of Hamilton Beach/Proctor-Silex (since January
1996)
Clark S. Leslie 62 Vice President -- Operations of Hamilton
Beach/Proctor-Silex (since March 1996)
Charles B. Hoyt 48 Vice President -- Finance and Chief Financial
Officer of Hamilton Beach/Proctor-Silex (since
prior to 1991)
Ronald C. Eksten 52 Vice President, General Counsel and Secretary of
Hamilton Beach/Proctor-Silex (since December 1991)
Michael J. Morecroft 53 Vice President, Engineering/Product Development of
Hamilton Beach/ Proctor-Silex (since prior to
1991)
James H. Taylor 38 Vice President and Treasurer of Hamilton
Beach/Proctor-Silex (since prior to 1991)
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
Richard E. Posey From January 1993 to June 1994, Executive Vice
President, Consumer Products, North America, S.C.
Johnson & Sons, Inc. From prior to 1991 to
December 1992, Executive Vice President, Regional
Director, Consumer Products, S.C. Johnson & Sons,
Inc. (manufacturer of consumer products).
Judith B. McBee From prior to 1991 to September 1994, Executive
Vice President -- Marketing/Sales of Hamilton
Beach/Proctor-Silex.
Paul C. Smith From September 1994 to January 1996, Senior Vice
From prior to 1991 to September 1994, Vice
President and General Manager, Consumer Markets
Division, Fuji Photo Film U.S.A. (manufacturer of
photographic film).
Clark S. Leslie From December 1993 to March 1996, General Manager,
Washington N.C. plant, Hamilton
Beach/Proctor-Silex. From prior to 1991 to
December 1993, Senior Vice President of
Operations, Esselt Pendaflex Corp. (manufacturer
of office supplies).
Charles B. Hoyt
Ronald C. Eksten From prior to 1991 to December 1991, Associate
General Counsel, Continental Can Company, Inc. (an
international manufacturer of packaging products).
Michael J. Morecroft
James H. Taylor
16
18
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES -- CONTINUED
C. NORTH AMERICAN COAL
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
Clifford R. Miercort 56 President and Chief Executive Officer of North
American Coal (since prior to 1991)
H. Dean Jacot 53 Executive Vice President and Chief Operating
Officer of North American Coal (since prior to
1991)
Herschell A. Cashion 53 Senior Vice President -- Business Development of
North American Coal (since August 1994)
Charles B. Friley 54 Vice President and Chief Financial Officer of
North American Coal (since February 1995)
Thomas A. Koza 49 Vice President -- Law and Administration of North
American Coal; Secretary of North American Coal
(since prior to 1991)
K. Donald Grischow 48 Controller and Treasurer of North American Coal
(since prior to 1991)
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
Clifford R. Miercort
H. Dean Jacot
Herschell A. Cashion From prior to 1991 to August 1994, Vice President
-- Business Development of North American Coal.
Charles B. Friley From April 1992 to October 1994, Senior Vice
President of Phillips Alaska Natural Gas Company.
From prior to 1991 to April 1992, Vice President
of Phillips 66 Natural Gas Company.
Thomas A. Koza
K. Donald Grischow
17
19
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES -- CONTINUED
D. KITCHEN COLLECTION
NAME AGE CURRENT POSITION
- ------------------------ --- --------------------------------------------------
Randall D. Lynch 48 President and Chief Executive Officer of Kitchen
Collection (since June 1991)
Randolph J. Gawelek 48 Executive Vice President and Secretary of Kitchen
Collection (since prior to 1991)
NAME OTHER POSITIONS
- ------------------------ --------------------------------------------------
Randall D. Lynch From prior to 1991 to June 1991, President of
Kitchen Collection.
Randolph J. Gawelek
18
20
PART II
ITEM 5. MARKET FOR NACCO INDUSTRIES, INC. COMMON STOCK AND RELATED SECURITY
HOLDERS' MATTERS
NACCO Industries, Inc. Class A common stock is traded on the New York Stock
Exchange under the ticker symbol NC. Because of transfer restrictions, no
trading market has developed, or is expected to develop, for the Company's Class
B common stock. The Class B common stock is convertible into Class A common
stock on a one-for-one basis. The high and low market prices for the Class A
common stock and dividends per share for both classes of stock for the past two
years are presented in the table below:
1995
------------------------------
SALES PRICE
------------------- CASH
HIGH LOW DIVIDEND
------ ------ --------
First quarter........................................ $56.75 -- $46.88 17.0C.
Second quarter....................................... $64.00 -- $53.63 18.0C.
Third quarter........................................ $63.50 -- $56.00 18.0C.
Fourth quarter....................................... $60.50 -- $55.25 18.0C.
1994
------------------------------
SALES PRICE
------------------- CASH
HIGH LOW DIVIDEND
------ ------ --------
First quarter........................................ $58.13 -- $48.38 16.5c.
Second quarter....................................... $60.75 -- $45.75 17.0c.
Third quarter........................................ $63.00 -- $52.88 17.0c.
Fourth quarter....................................... $64.00 -- $46.63 17.0c.
At December 31, 1995, there were approximately 800 Class A common
stockholders of record and 500 Class B common stockholders of record.
19
21
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AND EMPLOYEE DATA)
Total revenues................................. $2,204.5 $1,864.9 $1,549.4 $1,483.8 $1,369.2
Operating profit............................... $ 151.1 $ 130.8 $ 89.0 $ 101.3 $ 94.5
Income before extraordinary items.............. $ 65.5 $ 45.3 $ 11.6 $ 22.9 $ 20.0
Extraordinary items:
Extraordinary gain, net-of-tax............... 32.3
Extraordinary charges, net-of-tax............ (3.4) (3.2) (3.3) (110.0)
-------- -------- -------- -------- --------
Net income (loss).............................. $ 94.4 $ 42.1 $ 8.3 $ (87.1) $ 20.0
======= ======= ======= ======= =======
Total assets................................... $1,833.8 $1,694.3 $1,642.5 $1,684.9 $1,629.7
Notes payable.................................. $ 320.2 $ 286.7 $ 357.8 $ 459.9 $ 442.3
Stockholders' equity........................... $ 370.1 $ 279.4 $ 235.6 $ 238.3 $ 350.2
Per share of stock:
Income before extraordinary items............ $ 7.31 $ 5.06 $ 1.30 $ 2.57 $ 2.26
Extraordinary items:
Extraordinary gain, net-of-tax............ 3.61
Extraordinary charges, net-of-tax......... (.38) (.36) (.37) (12.37)
-------- -------- -------- -------- --------
Net income (loss)............................ $ 10.54 $ 4.70 $ .93 $ (9.80) $ 2.26
======= ======= ======= ======= =======
Cash dividends............................... $ .710 $ .675 $ .655 $ .635 $ .615
Market value at December 31.................. $ 55.50 $ 48.38 $ 51.50 $ 51.75 $ 47.50
Stockholders' equity......................... $ 41.28 $ 31.21 $ 26.35 $ 26.67 $ 39.43
Average shares outstanding..................... 8.963 8.948 8.938 8.891 8.878
Total employees................................ 12,300 11,100 10,900 10,500 9,900
20
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
FINANCIAL SUMMARY
Income before extraordinary items for 1995 was $65.5 million, or $7.31 per
share, compared with income before extraordinary items of $45.3 million, or
$5.06 per share, in 1994 and $11.6 million, or $1.30 per share, in 1993. In
1995, an extraordinary gain of $32.3 million, net-of-tax, or $3.61 per share was
recognized as a result of an adjustment to the obligation to the United Mine
Workers of America Combined Benefit Fund. Extraordinary charges of $3.4 million,
$3.2 million and $3.3 million, net-of-tax, or $0.38 per share, $0.36 per share
and $0.37 per share, respectively, were recognized in 1995, 1994 and 1993. The
extraordinary charges relate to the new credit agreement at NMHG and the
retirements of NACCO Materials Handling Group's Hyster-Yale 12 3/8% subordinated
debentures. These extraordinary items are discussed in more detail in Note 3 to
the consolidated financial statements on page F-10 and in this discussion and
analysis on pages 29 and 35. Net income was $94.4 million, or $10.54 per share,
in 1995, $42.1 million, or $4.70 per share, in 1994 and $8.3 million, or $0.93
per share, in 1993.
The following schedule details the components of the changes in
consolidated revenues, operating profit and net income for 1995 compared with
1994:
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
1994..................................................... $1,864.9 $ 130.8 $42.1
Increase (decrease) in 1995 from:
NMHG................................................ 331.2 20.0 14.6
HB/PS............................................... 5.0 (.3) (.3 )
NACoal.............................................. (2.2 ) 1.5 1.9
KCI................................................. 5.7 (2.1) (1.5 )
NACCO & Other....................................... (.1 ) 1.2 1.7
Difference between effective and statutory tax
rates............................................. 4.6
Minority interest................................... (.9 )
Extraordinary items................................. 32.2
-------- --------- ------
1995..................................................... $2,204.5 $ 151.1 $94.4
======== ========= =======
SEGMENT INFORMATION
NACCO Industries, Inc. ("NACCO," the parent company) has four operating
subsidiaries: The North American Coal Corporation ("North American Coal" or
"NACoal"), NACCO Materials Handling Group, Inc. ("NACCO Materials Handling
Group" or "NMHG"), Hamilton Beach/Proctor-Silex, Inc. ("Hamilton
Beach/Proctor-Silex" or "HB/PS") and The Kitchen Collection, Inc. ("Kitchen
Collection" or "KCI"). These four subsidiaries function in distinct business
environments, and the results of operations and financial condition are best
discussed at the subsidiary level. Results by segment as reported in the
financial statements are summarized in Note 19 to the consolidated financial
statements on page F-22 of this annual report.
NORTH AMERICAN COAL
North American Coal mines and markets lignite for use primarily as fuel for
power generation by electric utilities. The lignite is surface-mined in North
Dakota, Texas and Louisiana. Total coal reserves approximate 2.1 billion tons,
with 1.3 billion tons committed to electric utility customers pursuant to
long-term contracts.
In November 1995, North American Coal began providing dragline mining
services ("non-coal mining operations") for a limerock quarry near Miami,
Florida. The operating results for the non-coal mining operations are included
in other mining operations.
21
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
FINANCIAL REVIEW
North American Coal's three project mining subsidiaries (Coteau, Falkirk
and Sabine) mine lignite for utility customers pursuant to long-term contracts
at a price based on actual cost plus an agreed pretax profit per ton. Due to the
cost-plus nature of these contracts, revenues and operating profits are impacted
by increases and decreases in operating costs, as well as by sales tons. Net
income of these project mines, however, is not significantly affected by changes
in such operating costs, which include costs of operations, interest expense and
certain other items. Because of the nature of the contracts at these mines,
operating results are best analyzed in terms of income before taxes and net
income.
Tons sold by North American Coal's four operating lignite mines remains
steady and were as follows for the year ended December 31:
1995 1994 1993
---- ---- ----
Coteau Properties......................................... 15.1 15.7 14.9
Falkirk Mining............................................ 7.1 7.3 7.6
Sabine Mining............................................. 3.7 3.4 3.5
Red River Mining.......................................... .8 .8 .5
---- ---- ----
26.7 27.2 26.5
==== ==== ====
Revenues, income before taxes, provision for taxes and net income were as
follows for the year ended December 31:
1995 1994 1993
------ ------ ------
Revenues
Project mines.................................... $221.0 $226.6 $216.4
Other mining operations.......................... 14.7 13.9 10.0
------ ------ ------
235.7 240.5 226.4
Royalties and other................................... 12.3 9.7 6.9
------ ------ ------
$248.0 $250.2 $233.3
====== ====== ======
Income before taxes
Project mines.................................... $ 24.5 $ 23.6 $ 24.2
Other mining operations.......................... 1.0 2.3 1.1
------ ------ ------
Total from operating mines............................ 25.5 25.9 25.3
Royalty and other income, net......................... 14.0 10.5 7.7
Headquarters expense.................................. (6.1) (6.0) (5.2)
------ ------ ------
33.4 30.4 27.8
Provision for taxes................................... 10.8 9.4 10.4
------ ------ ------
Net income....................................... $ 22.6 $ 21.0 $ 17.4
====== ====== ======
Low-cost production has led to customer demand in excess of the original
19.4 million tons of volume specified in the original contracts. Actual
production as a percentage of this original contract volume has been: 1991 --
113 percent; 1992 -- 124 percent; 1993 -- 135 percent; 1994 -- 140 percent; 1995
- -- 138 percent.
22
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
income before taxes and net income for 1995 compared with 1994:
INCOME NET
REVENUES BEFORE TAXES INCOME
-------- ------------ ------
1994.................................................. $250.2 $ 30.4 $21.0
Increase (decrease) in 1995 from:
Project mines
Tonnage volume.............................. (2.3) (.4) (.3 )
Mix of tons sold............................ .3 .3 .2
Agreed profit per ton....................... 1.0 1.0 .6
Pass-through costs.......................... (4.6) -- --
Other mining operations
Tonnage volume.............................. 1.8 .9 .6
Mix of tons sold............................ 4.8 4.8 3.1
Average selling price....................... (5.8) (5.8) (3.7 )
Operating costs............................. -- (1.7) (1.1 )
Other income (expense)...................... -- .5 .3
-------- ------ ------
Changes from operating mines........................ (4.8) (.4) (.3 )
Royalties and other income, net..................... 2.6 3.5 2.3
Headquarters expense................................ -- (.1) (.1 )
Difference between effective and statutory tax
rates............................................ -- -- (.3 )
-------- ------ ------
1995.................................................. $248.0 $ 33.4 $22.6
======== =========== =======
The level of customer fuel requirements produced lower demand at Coteau and
Falkirk and higher demand at Sabine, resulting in a slight reduction overall in
volume at the project mines in 1995. The favorable agreed profit per ton
variance at the project mines was the result of the annual escalation in the
agreed profit per ton as provided for in the long-term contracts with each
mine's customer.
At the other mining operations, the favorable impact from tonnage volume
was primarily caused by increased demand at Red River due to the higher fuel
requirements of its customer. Increased sales of base tons at Red River, which
yield a higher price as specified in the supply contract, resulted in a
favorable mix variance at the other mining operations. In addition, Red River
signed a new agreement with its customer in 1995 that extends the contract term
to 2010 in exchange for lower per-ton sales prices, which resulted in the
unfavorable price variance at the other mining operations.
The increase in royalty and other income relates to the accelerated receipt
of annual management fees under a contract mining agreement between North
American Coal and a public utility company. The utility company accelerated the
final annual management fee payment of $2.6 million, after-tax, from 1996 into
1995.
23
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
income before taxes and net income for 1994 compared with 1993:
INCOME NET
REVENUES BEFORE TAXES INCOME
-------- ------------ ------
1993.................................................. $233.3 $ 27.8 $17.4
Increase (decrease) in 1994 from:
Project mines
Tonnage volume.............................. 1.1 .1 --
Mix of tons sold............................ (.5) (.5) (.3 )
Agreed profit per ton....................... (.5) (.5) (.4 )
Pass-through costs.......................... 9.9 -- --
Other mining operations
Tonnage volume.............................. 6.6 1.6 1.0
Mix of tons sold............................ (1.6) (1.6) (1.0 )
Average selling price....................... (1.1) (1.1) (.7 )
Operating costs............................. -- 3.4 2.2
Other income (expense)...................... -- (1.2) (.8 )
-------- ------ ------
Changes from operating mines........................ 13.9 .2 --
Royalties and other income, net..................... 3.0 3.2 2.1
Headquarters expense................................ -- (.8) (.5 )
Difference between effective and statutory tax
rates............................................ -- -- 2.0
-------- ------ ------
1994.................................................. $250.2 $ 30.4 $21.0
======== =========== =======
Higher customer fuel requirements at Coteau, although slightly offset by
reduced volume at Falkirk, resulted in increased tonnage volume at the project
mines in 1994 compared with 1993. At the other mining operations, tonnage volume
increased due to higher customer fuel requirements at Red River. In addition,
tons sold at Red River in excess of amounts specified in the contract yield a
lower price, resulting in an unfavorable sales mix in 1994 at the other mining
operations.
The increased tonnage at Red River resulted in volume efficiencies that
favorably impacted operating costs. The increase in royalties and other income
in 1994 is from royalties received relating to former coal properties from which
royalties were not received in 1993.
24
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
1995 1994 1993
------ ------ ------
Interest income
Project mines....................................... $ 1.1 $ .8 $ .5
Other mining operations............................. 1.3 2.2 1.6
------ ------ ------
$ 2.4 $ 3.0 $ 2.1
====== ====== ======
Interest expense
Project mines....................................... $(14.0) $(14.3) $(14.1)
Other mining operations............................. (1.3) (1.3) (.8)
------ ------ ------
$(15.3) $(15.6) $(14.9)
====== ====== ======
Other-net
Project mines....................................... $ .2 $ .4 $ .2
Other mining operations............................. .3 (1.5) (.2)
------ ------ ------
$ .5 $ (1.1) $ --
====== ====== ======
Effective tax rate.................................... 32.4% 31.1% 37.9%
In the third quarter of 1993, North American Coal recognized additional tax
expense to reflect the impact on its deferred tax balances of the one percent
increase in the federal statutory tax rate. This adjustment increased North
American Coal's effective tax rate in 1993 relative to 1995 and 1994.
1996 OUTLOOK
North American Coal's lignite mines are expected to produce about the same
number of total tons in 1996 as in 1995, as customer requirements appear level
with the previous year. The non-coal mining operations are expected to mine
approximately 9.0 million tons of limerock, although the impact on net income
will not be material. In 1995, Falkirk, Red River and Sabine entered into
contract extensions with their customers until 2020, 2010 and 2020,
respectively. In 1994, Coteau extended its contract with its customer for up to
an additional 30 years, through 2037. North American Coal received these
extensions in exchange for reduced levels of profit.
North American Coal has been receiving annual management fees under the
previously discussed contract mining agreement it has with a public utility
company. The utility company terminated the contract mining agreement in 1995,
and North American Coal will no longer receive such management fees. In
addition, North American Coal anticipates a reduction in 1996 of approximately
$1.3 million in royalties received relating to former coal properties. This
reduction is expected to be temporary.
LIQUIDITY AND CAPITAL RESOURCES
North American Coal has in place a $50.0 million revolving credit facility.
The expiration date of this facility (which currently is September 2000) may be
extended, on an annual basis, for one additional year upon the mutual consent of
North American Coal and the bank group. North American Coal had all of its $50.0
million revolving credit facility available at December 31, 1995.
The financing of the project mining subsidiaries, which is guaranteed by
the utility customers, comprises long-term equipment leases, notes payable and
non-interest-bearing advances from customers. The obligations of the project
mining subsidiaries do not impact the short- or long-term liquidity of the
company and are without recourse to NACCO or North American Coal. These
arrangements allow the project mining subsidiaries to pay dividends in amounts
equal to their retained earnings.
25
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Expenditures for property, plant and equipment by the project mining
subsidiaries were $19.0 million in 1995 and $11.7 million in 1994, and are
anticipated to be approximately $16.6 million in 1996. These expenditures relate
to the development and improvement of the project mining subsidiaries' mines and
are financed or guaranteed by the utility customers.
NACCO MATERIALS HANDLING GROUP
NACCO Materials Handling Group, 97 percent-owned by NACCO, designs,
manufactures and markets forklift trucks and related service parts under the
Hyster(R) and Yale(R) brand names.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the year ended
December 31:
1995 1994 1993
-------- -------- ------
Revenues
Americas.............................................. $1,002.7 $ 828.1 $645.4
Europe, Africa and Middle East........................ 422.3 289.7 220.5
Asia-Pacific.......................................... 85.1 61.1 42.3
-------- -------- ------
$1,510.1 $1,178.9 $908.2
======= ======= ======
Operating profit
Americas.............................................. $ 51.1 $ 45.5 $ 40.3
Europe, Africa and Middle East........................ 34.4 15.1 (2.4)
Asia-Pacific.......................................... .3 5.2 1.7
-------- -------- ------
$ 85.8 $ 65.8 $ 39.6
======= ======= ======
Operating profit excluding goodwill amortization
Americas.............................................. $ 58.9 $ 53.4 $ 48.2
Europe, Africa and Middle East........................ 37.2 17.9 .4
Asia-Pacific.......................................... .5 5.3 1.8
-------- -------- ------
$ 96.6 $ 76.6 $ 50.4
======= ======= ======
Net income (loss) before extraordinary charges............. $ 36.9 $ 18.7 $ (5.1)
Extraordinary charges, net-of-tax..................... (3.4) (3.2) (3.3)
-------- -------- ------
Net income (loss)..................................... $ 33.5 $ 15.5 $ (8.4)
======= ======= ======
26
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
1994.................................................... $1,178.9 $ 65.8 $15.5
Increase (decrease) in 1995 from:
Unit volume........................................ 235.0 43.0 28.0
Sales mix.......................................... (7.1) (12.1) (7.9)
Average sales price................................ 57.6 57.6 37.4
Service parts...................................... 16.0 7.4 4.8
Foreign currency................................... 26.6 (7.7) (5.0)
DECA S.r.1......................................... 3.1 .3 .2
Manufacturing cost................................. -- (46.1) (29.1)
Other operating expense............................ -- (22.4) (14.6)
Other income and expense........................... -- -- .8
Difference between effective and statutory tax
rates............................................ -- -- 3.6
Extraordinary charges.............................. -- -- (.2)
-------- --------- -------
1995.................................................... $1,510.1 $ 85.8 $33.5
======== ========= =======
Unit volumes during 1995 increased 20 percent to 49,953 units in the
Americas, 37 percent to 16,701 units in Europe and 54 percent to 2,859 units in
Asia-Pacific when compared with 1994. The increased volumes resulted from growth
in both market size and market share. The price increases announced in mid-1994
favorably impacted pricing during all of 1995, while the price increases
announced in the spring of 1995 reached their full impact in the fourth quarter.
These price increases were enacted to offset the raw material cost increases and
currency impacts discussed below. The unfavorable sales mix resulted from a
shift to certain lower margin markets in Europe and lower margin products in
both the Americas and Europe. The strong markets in both the Americas and
Europe, along with price increases in the Americas, resulted in improved results
from sales of service parts.
The favorable impact from currency on revenues was due to the strength of
European currencies relative to the dollar. This favorable impact was offset by
the strength of the yen relative to the dollar, resulting in an unfavorable
impact on operating profit, particularly in the first nine months of 1995. The
strong yen increased the cost of purchases sourced from Japan. During 1995, NMHG
acquired DECA S.r.1., a manufacturer of European warehouse equipment located in
Italy. DECA's contribution to 1995 operating results is shown separately in the
above table.
Increased raw materials prices and manufacturing inefficiencies caused by
vendor parts shortages, the training of new employees and capacity constraints
resulted in higher manufacturing costs in 1995. Increases in new product
introduction and marketing programs, administrative costs and service parts
distribution costs resulted in higher other operating expenses.
27
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
operating profit and net income (loss) for 1994 compared with 1993:
NET
OPERATING INCOME
REVENUES PROFIT (LOSS)
-------- --------- ------
1993.................................................... $ 908.2 $ 39.6 $(8.4 )
Increase (decrease) in 1994 from:
Unit volume........................................ 211.7 40.8 26.5
Sales mix.......................................... 8.1 (.8) (.5 )
Average sales price................................ 14.7 14.7 9.6
Service parts...................................... 27.2 11.1 7.2
Foreign currency................................... 9.0 (4.2) (2.7 )
Manufacturing cost................................. -- 3.5 2.3
Other operating expense............................ -- (38.9) (25.2 )
Other income and expense........................... -- -- 7.1
Difference between effective and statutory tax
rates............................................ -- -- (.5 )
Extraordinary charge............................... -- -- .1
-------- --------- ------
1994.................................................... $1,178.9 $ 65.8 $15.5
======== ========= =======
Record market size in North America and higher market shares in both the
Americas and Europe resulted in record lift truck unit volume of approximately
56,000 units at NMHG in 1994. Unit shipments were up approximately 25 percent
and 30 percent in the Americas and in Europe, respectively. NMHG initiated
modest price increases during the middle of 1994 which were accepted in the
marketplace, favorably affecting operating results. The strong economy in North
America and new marketing programs and new dealers in Europe improved the
worldwide service parts business. During 1994, a weaker U.S. dollar caused
translated revenues to be higher compared with 1993, while operating profit was
adversely affected by the strong Japanese yen, which increased the cost of
purchases sourced from Japan.
The improvement in manufacturing cost is due to the favorable effect of
increased manufacturing throughput partially offset by plant ramp-ups and vendor
parts shortages which caused labor inefficiencies. Other operating expense
increased in 1994 compared with 1993 due to higher costs associated with
strategic marketing and product development programs, increased incentive-based
payroll costs and additional warranty expenditures related to new products and
increased volumes.
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
1995 1994 1993
------ ------ ------
Interest income....................................... $ .9 $ .8 $ .8
Interest expense...................................... (30.6) (33.7) (40.4)
Other-net............................................. 2.2 2.9 (1.7)
------ ------ ------
$(27.5) $(30.0) $(41.3)
====== ====== ======
Effective tax rate.................................... 36.8% 47.7% NM
The debt restructurings carried out in 1993 through 1995 and equity
infusions of 1994 and 1993 reduced the level of high cost debt, resulting in
lower overall effective interest rates that reduced interest expense in 1995
compared with 1994 and 1993.
Other-net consists primarily of equity in the earnings of the
Sumitomo-NACCO ("S-N"), a 50 percent-owned joint venture, gains and losses on
the sale of assets and grant income. In 1995, other-net included income of $2.2
million from S-N, compared with income of $0.5 million in 1994 and a loss of
$3.9 million in 1993. The improved results at S-N in 1995 and 1994 were due to
increasing sales volumes to NMHG and continuing manufacturing cost reductions.
In 1994, other-net also included $3.2 million of employment grant income related
to additional hiring at the Craigavon, Northern Ireland, facility. The
significant loss at S-N in
28
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1993 was caused by the upward pressures on S-N's costs due to a much stronger
yen, as well as the depressed European and Japanese markets. During the second
quarter of 1993, NMHG sold its former manufacturing site in Wednesfield,
England, for $3.3 million, resulting in a net pretax gain of $2.1 million.
For 1993, the effective tax rate was not meaningful because expenses not
deductible for tax purposes, primarily amortization of goodwill, resulted in a
tax provision in 1993 despite a loss before income taxes. The higher levels of
pretax income in 1995 and 1994 reduced the effect of these non-deductible
expenses and resulted in lower effective tax rates that were nearer to the
statutory tax rate. Also in 1995, NMHG reached agreement with various tax
authorities resulting in non-recurring tax benefits which lowered the effective
tax rate.
EXTRAORDINARY CHARGES
The extraordinary charges recognized in 1995, 1994 and 1993 primarily
relate to the early retirement of the Hyster-Yale 12 3/8% debentures. The 1995
extraordinary charge includes a $1.3 million charge, net-of-tax, recognized in
the first quarter, when NMHG's former revolving credit facility and senior term
loan were replaced by the new long-term credit agreement. In the third quarter
of 1995 a charge of $2.1 million, net-of-tax, was recognized. This charge, as
well as the 1994 and 1993 charges, represent call premiums and the write-off of
the remaining unamortized debt issuance costs associated with the retirement of
$78.5 million, $70.0 million and $50.0 million face-value, respectively, of the
12 3/8% debentures. These retirements were achieved using bank borrowings,
internally generated funds of NMHG and equity infusions from existing
stockholders.
BACKLOG
NMHG's backlog of orders at December 31, 1995, was approximately 21,200
forklift truck units, compared with 24,600 units and 12,100 units at December
31, 1994 and 1993, respectively. The continuation of strong orders and vendor
parts shortages in 1995 caused backlog levels to remain high. Management
believes that the NMHG backlog levels are consistent with the overall industry.
1996 OUTLOOK
The forklift truck industry has historically been cyclical, with industry
demand fluctuating with the economic conditions in the various geographic
markets in which the industry's customers operate. Based on external economic
forecasts and recent factory order levels, management expects demand in North
America to level-off in 1996 from its 1995 peak. In Europe, the strong growth
experienced in certain markets during 1995 may slow somewhat in 1996, but
overall the European market should expand. Many of the markets in Asia-Pacific
should continue to grow in 1996. The Japanese market is expected to grow
modestly in 1996. Overall, with the forecasted market levels and its backlog,
NMHG anticipates increased shipments in 1996 compared with 1995.
In 1996, NMHG will continue to strive for increased market share,
particularly in Asia-Pacific and the European warehouse equipment markets. The
significant investments in manufacturing capacity that were made in 1995 and
those planned for 1996 should help alleviate the manufacturing inefficiencies
experienced in 1995 by reducing delivery lead times and improving efficiency. In
addition, NMHG will continue to introduce new products in 1996, and by mid-year
approximately 80 percent of its product will have been redesigned since the
merger of Hyster and Yale in 1989.
LIQUIDITY AND CAPITAL RESOURCES
NMHG had available $75.0 million of its $350.0 million revolving credit
facility ("Facility") at December 31, 1995. The company entered into this
Facility on February 28, 1995, to replace its existing bank agreement and to
refinance the majority of its existing long-term debt. This Facility has a five
year maturity with extension options and performance-based pricing which
provides the company with reduced interest rates
29
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
upon achievement of certain financial performance targets. This Facility allowed
the company to redeem the remaining $78.5 million outstanding Hyster-Yale
12 3/8% debentures. NMHG has separate facilities totalling $30.5 million, of
which $26.5 million was available at December 31, 1995. The company believes it
can meet its current and long-term commitments and operating needs from
operating cash flow and funds available under credit agreements.
Expenditures for property, plant and equipment were $39.4 million in 1995
and $25.9 million in 1994, and are anticipated to be approximately $50.0 million
in 1996. These expenditures relate to investments in productive capacity because
of the increased unit volumes, as well as to new product development. NMHG is
investing to improve production volumes at all of its plants and has undertaken
expansion of its Craigavon, Northern Ireland, and Irvine, Scotland, production
facilities. Capital for these expenditures has been and is expected to be
provided primarily by internally generated funds and, to a lesser degree,
government assistance grants.
NMHG'S capital expenditures in 1995, 1994 and 1993 of $39.4 million, $25.9
million and $20.2 million, respectively, are outpacing depreciation expense of
$20.2 million in 1995, $19.9 million in 1994 and $18.8 million in 1993.
Increased working capital requirements in 1995 impeded NMHG's progress
toward its target capital structure of 35 percent debt-to-total capitalization.
At December 31, 1995, NMHG's debt-to-total capitalization was 49 percent
compared with 46 percent and 56 percent at December 31, 1994 and 1993,
respectively.
HAMILTON BEACH/PROCTOR-SILEX
Hamilton Beach/Proctor-Silex, 80 percent-owned by NACCO, is a leading
manufacturer of small electric appliances. The housewares business is seasonal.
A majority of revenues and operating profit occurs in the second half of the
year, when sales of small electric appliances increase significantly for the
fall holiday selling season.
FINANCIAL REVIEW
The results of operations for Hamilton Beach/Proctor-Silex were as follows
for the year ended December 31:
1995 1994 1993
------ ------ ------
Revenues.............................................. $381.4 $377.5 $356.3
Operating profit...................................... $ 25.0 $ 25.3 $ 11.8
Operating profit excluding goodwill amortization...... $ 27.8 $ 28.1 $ 14.7
Net income (loss)..................................... $ 11.8 $ 10.2 $ (1.0)
30
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
1994.............................................. $377.5 $25.3 $10.2
Increase (decrease) in 1995 from:
Unit volume and sales mix.................... 6.4 5.1 3.3
Average sales price.......................... (2.5) (2.5) (1.6 )
Manufacturing cost........................... -- (.2) (.1 )
Other operating expense...................... -- (2.7) (1.8 )
Other income and expense..................... -- -- (.1 )
Difference between effective and statutory
tax rates.................................. -- -- 1.9
-------- --------- ------
1995.............................................. $381.4 $25.0 $11.8
======== ========= =======
During 1995, the size of the domestic small electric appliance market
declined approximately 4 percent. Nevertheless, HB/PS increased its market share
from 27.8 percent in 1994 to 29.9 percent in 1995. Increased sales of can
openers, irons, roaster ovens and coffeemakers, slightly offset by reduced sales
of toasters, toaster ovens and blenders, resulted in overall higher volume. In
1995, approximately 46 percent of HB/PS's total sales volume was in the "better"
and "best" product categories, compared with 43 percent in 1994. This favorable
shift in sales mix resulted in improved margins on the incremental volumes in
1995. Reduced pricing on domestic products in the "better" and "best" categories
was the primary cause of the unfavorable price variance. Increased selling and
marketing costs as well as administrative costs caused the unfavorable impact
from other operating expenses.
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
operating profit and net income (loss) for 1994 compared with 1993:
NET
OPERATING INCOME
REVENUES PROFIT (LOSS)
-------- --------- ------
1993.............................................. $356.3 $11.8 $(1.0 )
Increase (decrease) in 1994 from:
Unit volume and sales mix....................... 19.0 4.7 3.1
Average sales price............................. 4.2 4.2 2.8
Foreign currency translation.................... (2.0) (2.0) (1.3 )
Manufacturing cost.............................. -- 8.5 5.6
Other operating expense......................... -- (1.9) (1.3 )
Other income and expense........................ -- -- 2.7
Difference between effective and statutory tax
rates........................................ -- -- (.4 )
-------- --------- ------
1994.............................................. $377.5 $25.3 $10.2
======== ========= =======
During 1994, Hamilton Beach/Proctor-Silex experienced increased volumes in
blenders, mixers, coffeemakers and food processors sold domestically and in most
products sold in Canada. The increased volumes in these product lines were
tempered somewhat by decreased steam grill and toaster sales domestically and
lower toaster oven sales both domestically and in Canada. Contributing to a
positive sales mix were increased sales of high-end toasters, irons and toaster
ovens offset by a shift to lower-priced blender models. Hamilton
31
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Beach/Proctor-Silex's improvements in pricing occurred in both the domestic and
Canadian markets across most core heat and motor-driven product lines.
The successful completion of its manufacturing consolidation programs,
level loading of its factories and reduced transportation costs favorably
affected operating results at Hamilton Beach/Proctor-Silex by reducing
manufacturing costs. Level loading maintains consistent production and staffing
levels throughout the year, contributing favorably to manufacturing efficiencies
by maintaining a more highly trained and experienced work force. Other operating
expenses were unfavorable in 1994 compared with 1993, primarily due to higher
selling and incentive compensation costs.
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
1995 1994 1993
----- ----- ------
Interest expense........................................ $(7.2) $(7.5) $ (7.7)
Other-net............................................... (.8) (.3) (4.1)
----- ----- ------
$(8.0) $(7.8) $(11.8)
===== ===== ======
Effective tax rate...................................... 31.0% 41.7% NM
Interest expense decreased in 1995 compared with 1994 due to lower average
borrowings partially offset by higher average interest rates. The reduced
interest expense in 1994 compared with 1993 is due to lower average interest
rates partially offset by higher average borrowings.
The decrease in other-net in 1994 compared with 1993 resulted primarily
from the settlement of certain litigation during 1993.
The reduction in HB/PS's tax rate in 1995 compared with 1994 is primarily
due to the utilization of foreign tax credits resulting from the repatriation of
foreign earnings previously taxed at a rate in excess of the U.S. statutory tax
rate. In 1993, the impact of expenses which are not deductible for tax purposes
resulted in a tax provision despite break-even earnings. These non-deductible
expenses, which include amortization of goodwill, are approximately level each
year and had a smaller impact on the effective tax rate in 1995 and 1994
relative to 1993 due to the higher level of pretax earnings in 1995 and 1994
compared with 1993.
1996 OUTLOOK
HB/PS expects total industry shipments in 1996 to approximate 1995 levels.
The company will continue to focus on market share through new product
introductions and increased placements in 1996. In addition, management expects
improved margins through cost reductions and a further favorable shift in sales
mix to the "better" and "best" product categories. The benefit received in 1995
from foreign tax credit utilization related to the repatriation of foreign
earnings was a one-time benefit that is not expected to recur.
LIQUIDITY AND CAPITAL RESOURCES
Hamilton Beach/Proctor-Silex's credit agreement provides for a revolving
credit facility ("Facility") that permits advances up to $135.0 million. At
December 31, 1995, Hamilton Beach/Proctor-Silex had $52.9 million available
under this Facility. The expiration date of this Facility (which currently is
May 1998) may be extended annually for one additional year upon the mutual
consent of HB/PS and the bank group. In April 1995, the Facility was amended to
provide a lower interest rate if HB/PS achieves a certain interest coverage
ratio and to allow for interest rates quoted under a competitive bid option. At
December 31, 1995, HB/PS also had $25.0 million available under separate
facilities.
32
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Expenditures for property, plant and equipment were $9.7 million in 1995
and $13.4 million in 1994, and are anticipated to be approximately $20.9 million
in 1996. The primary focus of these expenditures is to continue to improve
manufacturing efficiency and to acquire tooling for new and existing products.
Capital for these expenditures has been and is expected to be provided primarily
by internally generated funds and short-term borrowings.
HB/PS's sales mix improved in 1995 with increased sales of products in the
"better" and "best" categories. HB/PS's sales mix between "good," "better" and
"best" were as follows for the year ended December 31:
1995 1994
---- ----
Good................. 54% 57%
Better............... 21% 20%
Best................. 25% 23%
HB/PS's ratio of debt-to-total capitalization remains near its 35 percent
target and was 37 percent, 39 percent and 38 percent at December 31, 1995, 1994
and 1993, respectively.
KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of kitchenware,
tableware, small electric appliances and related accessories. The specialty
retail business is seasonal, with the majority of its revenues and operating
profit generated in the fourth quarter during the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for Kitchen Collection were as follows for the
year ended December 31:
1995 1994 1993
----- ----- -----
Number of stores......................................... 134 119 104
Revenues................................................. $69.6 $63.9 $53.7
Operating profit......................................... $ 3.3 $ 5.4 $ 4.8
Net income............................................... $ 1.6 $ 3.1 $ 2.7
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
1994........................................... $ 63.9 $ 5.4 $ 3.1
Increase (decrease) in 1995 from:
Stores opened in 1995..................... 4.6 .2 .1
Stores opened in 1994..................... 2.9 (.2) (.1 )
Comparable stores......................... (1.8) (.9) (.5 )
Other..................................... -- (1.2) (1.0 )
-------- --------- ------
1995........................................... $ 69.6 $ 3.3 $ 1.6
======== ========= =======
Kitchen Collection had a net increase in new stores of 15, or approximately
13 percent, in 1995. The increased number of stores, along with a full year's
operation of the 15 stores opened in 1994, resulted in
33
35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
increased revenues in 1995 compared with 1994. A difficult retailing environment
in 1995 caused a decrease in customer traffic, resulting in reduced sales at
comparable stores. In addition, margins were negatively impacted by this
environment, along with an overall shift to lower margin products. The
unfavorable variance in other was caused primarily by increased payroll related
costs and store rent escalations.
1994 COMPARED WITH 1993
The following schedule details the components of the changes in revenues,
operating profit and net income for 1994 compared with 1993:
OPERATING NET
REVENUES PROFIT INCOME
-------- --------- ------
1993........................................... $ 53.7 $ 4.8 $2.7
Increase (decrease) in 1994 from:
Stores opened in 1994..................... 5.5 .6 .4
Stores opened in 1993..................... 4.4 .4 .3
Comparable stores......................... .3 (.2) (.1)
Other..................................... -- (.2) (.2)
-------- --------- ------
1994........................................... $ 63.9 $ 5.4 $3.1
======== ========= =======
The opening of 37 new stores in 1994 and 1993 contributed favorably to
results in 1994. While gross profit showed a slight improvement in 1994 compared
with 1993, operating profit as a percent of sales declined slightly, due
primarily to store rent escalations and increased costs for renovations at
comparable stores.
OTHER INCOME, EXPENSE AND INCOME TAXES
Interest expense was $0.5 million, $0.3 million and $0.1 million in 1995,
1994 and 1993, respectively. Kitchen Collection's effective tax rate was 41.9
percent, 40.0 percent and 40.6 percent in 1995, 1994 and 1993, respectively.
LIQUIDITY AND CAPITAL RESOURCES
In May 1995, Kitchen Collection entered into a new $5.0 million revolving
credit facility which replaced the previous $2.5 million line of credit. This
new facility has performance-based pricing which provides for reduced interest
rates based on achievement of certain financial performance measures. At
December 31, 1995, KCI had available all of its $5.0 million facility.
Expenditures for property, plant and equipment were $1.4 million in 1995
and $1.0 million in 1994, and are anticipated to be approximately $1.0 million
in 1996. These expenditures are primarily for new store openings and
improvements to existing facilities, and are funded by internally generated
funds and short-term borrowings.
KCI'S capital structure is below its target of 35 percent debt-to-total
capitalization and was 30 percent, 33 percent and 16 percent at December 31,
1995, 1994 and 1993, respectively.
NACCO AND OTHER
FINANCIAL REVIEW
NACCO and Other includes the parent company operations and Bellaire
Corporation ("Bellaire"), a non-operating subsidiary of NACCO. While Bellaire's
operations are minor, it has significant long-term liabilities related to closed
mine activities, primarily from former eastern U.S. underground coal-mining
activities. Cash payments related to Bellaire's obligations, net of internally
generated cash, are funded by
34
36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
NACCO and amounted to $3.4 million during 1995 and $4.7 million during 1994, and
are anticipated to be $3.0 million in 1996.
The results of operations at NACCO and Other were as follows for the year
ended December 31:
1995 1994 1993
----- ------ -----
Revenues................................................ $ .5 $ .6 $ 3.0
Operating loss.......................................... $(8.8) $(10.0) $(8.0)
Other income (expense), net............................. $ .9 $ (.5) $ 1.7
Loss before extraordinary items......................... $(4.1) $ (5.3) $(2.8)
Extraordinary gain, net-of-tax........................ 32.3 -- --
----- ------ -----
Net income (loss)..................................... $28.2 $ (5.3) $(2.8)
===== ====== =====
The increased operating loss in 1994 relates primarily to increased
payroll-related expenses at the parent company in 1994 due to higher
incentive-based compensation, profit sharing and medical expenses.
During the third quarter of 1993, a non-recurring tax benefit of $2.3
million was recognized to reflect the impact of the 1 percent increase in the
statutory tax rate on NACCO and Other's deferred tax asset. This tax benefit
decreased the net loss in 1993 relative to 1994 and 1995.
EXTRAORDINARY GAIN
The extraordinary gain of $32.3 million, net of $19.8 million in taxes,
relates to a downward revision in the obligation to the United Mine Workers of
America Combined Benefit Fund ("UMWA"). This obligation was recognized by
Bellaire as an extraordinary charge in 1992 to accrue for the estimated costs
associated with the Coal Industry Retiree Health Benefit Act of 1992 ("Coal
Act"). It is the Company's policy to periodically review the estimates and
assumptions upon which various liability reserves are based. As a result of a
review of the assumptions relating to the number of Company and industry covered
beneficiaries ultimately assigned to Bellaire, and the trend of health care
costs, the aggregate estimated costs associated with the Coal Act are expected
to be lower than originally anticipated. Management believes that the revised
liability of $69.3 million, net of $33.3 million of deferred taxes, more
accurately represents the future cost of this obligation.
INTEREST RATE PROTECTION
NMHG, Hamilton Beach-Proctor-Silex, North American Coal and Kitchen
Collection have entered into interest rate swap agreements and/or purchased
interest rate caps for portions of their floating rate debt. These interest rate
swaps and caps provide protection against significant increases in interest
rates, and have terms ranging from three months to seven years. The Company
evaluates its exposure to floating rate debt on an ongoing basis. The notional
amounts, fixed rates paid and remaining duration of these swaps and caps for
each subsidiary are included in Note 13 to the consolidated financial statements
on page F-17 of this annual report.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations, like those of other companies
engaged in similar businesses, involve the use, disposal and cleanup of
substances regulated under environmental protection laws. The Company's North
American Coal subsidiary is affected by the regulations of agencies under which
it operates, particularly the federal Office of Surface Mining, the United
States Environmental Protection Agency and associated state regulatory
authorities. In addition, North American Coal is attentive to any changes which
may arise due to proposed legislation concerning the Clean Air Act Amendments of
1990, reauthorization of the Resource Conservation and Recovery Act, the Clean
Water Act, the Endangered Species Act and other regulatory actions.
35
37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
Compliance with these increasingly stringent standards results in higher
expenditures for both capital improvements and operating costs. The Company's
policies stress environmental responsibility and compliance with these
regulations. Based on current information, management does not expect compliance
with these regulations to have a material adverse effect on its financial
condition or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Although the subsidiaries have entered into substantial debt agreements,
NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
The debt agreements at Hamilton Beach-Proctor/Silex and Kitchen Collection
allow for the payment of dividends under certain circumstances. The revised
credit agreement entered into on February 28, 1995, by NMHG allows the transfer
of up to $25.0 million to NACCO; there have not yet been any such transfers.
There are no restrictions for North American Coal, and its dividends and
advances are the primary source of cash for NACCO.
The Company believes it can adequately meet all of its current and
long-term commitments and operating needs. This outlook stems from amounts
available under revolving credit facilities and the utility customers' funding
of the project mining subsidiaries.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has not yet adopted either SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" or
SFAS No. 123 "Accounting for Stock Based Compensation." A discussion of these
two standards, which are not expected to materially impact the Company's
financial condition, is included in Notes 7 and 15 to the consolidated financial
statements on pages F-12 and F-18, respectively, of this annual report.
EFFECTS OF INFLATION
The Company believes that inflation has not materially affected its results
of operations in 1995 and does not expect inflation to be a significant item in
1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth at pages F-1 through
F-33 of the Financial Statements and Supplementary Data contained in Part IV
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is set forth in the
1996 Proxy Statement under the heading "Business to be Transacted -- 1. Election
of Directors," which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included as Item
4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.
36
38
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth in the 1996
Proxy Statement under the headings "Business to be Transacted -- 1. Election of
Directors -- Compensation of Directors," and "Compensation of Executive
Officers," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management is set forth in the 1996 Proxy Statement under the heading
"Business to be Transacted -- 1. Election of Directors -- Beneficial Ownership
of Class A Common and Class B Common," which information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
is set forth in the 1996 Proxy Statement under the heading "Business to be
Transacted -- 1. Election of Directors -- Compensation Committee Interlocks and
Insider Participation and Certain Relationships and Related Transactions" which
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to Item 14(a)(1) and (2) is set forth
beginning at page F-1 of this Annual Report on Form 10-K.
(a) (3) Listing of Exhibits -- See the exhibit index beginning at page X-1
of this Annual Report on Form 10-K.
(b) The Company has not filed any current reports on Form 8-K during the
fourth quarter of 1995.
(c) The response to Item 14(c) is set forth beginning at page X-1 of this
Annual Report on Form 10-K.
(d) Financial Statement Schedules -- The response to Item 14(d) is set
forth beginning at page F-29 of this Annual Report on Form 10-K.
37
39
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
NACCO Industries, Inc.
By: /s/ FRANK B. O'BRIEN
Frank B. O'Brien
Senior Vice President --
Corporate
Development and Chief
Financial Officer (Principal
Financial Officer)
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
* ALFRED M. RANKIN, JR. Chairman, President and March 28, 1996
Alfred M. Rankin, Jr. Chief Executive Officer
(Principal Executive
Officer), Director
/s/ FRANK B. O'BRIEN Senior Vice President -- March 28, 1996
Frank B. O'Brien Corporate Development
and Chief Financial
Officer (Principal
Financial Officer)
/s/ STEVEN M. BILLICK Vice President and March 28, 1996
Steven M. Billick Controller (Principal
Accounting Officer)
* OWSLEY BROWN II Director March 28, 1996
Owsley Brown II
* JOHN J. DWYER Director March 28, 1996
John J. Dwyer
* ROBERT M. GATES Director March 28, 1996
Robert M. Gates
* LEON J. HENDRIX, JR. Director March 28, 1996
Leon J. Hendrix, Jr.
* DENNIS W. LABARRE Director March 28, 1996
Dennis W. LaBarre
* IAN M. ROSS Director March 28, 1996
Ian M. Ross
* JOHN C. SAWHILL Director March 28, 1996
John C. Sawhill
* BRITTON T. TAPLIN Director March 28, 1996
Britton T. Taplin
* FRANK E. TAPLIN, JR. Director March 28, 1996
Frank E. Taplin, Jr.
*Frank B. O'Brien, by signing his name hereto, does hereby sign this Annual
Report on Form 10-K on behalf of each of the above named and designated officers
and directors of the Company pursuant to a Power of Attorney executed by such
persons and filed with the Securities and Exchange Commission.
FRANK B. O'BRIEN March 28, 1996
Frank B. O'Brien, Attorney-in-Fact
38
40
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(A)(1) AND (2), AND ITEM 14(D)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1995
NACCO INDUSTRIES, INC.
MAYFIELD HEIGHTS, OHIO
F-1
41
FORM 10-K
ITEM 14(A)(1) AND (2)
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of NACCO Industries, Inc.
and Subsidiaries are included in Item 8:
Report of Independent Public Accountants--Year ended December 31,
1995, 1994 and 1993.
Consolidated statements of income--Year ended December 31, 1995, 1994
and 1993.
Consolidated balance sheets--December 31, 1995 and December 31, 1994.
Consolidated statements of cash flows--Year ended December 31, 1995,
1994 and 1993.
Consolidated statements of stockholders' equity--Year ended December
31, 1995, 1994 and 1993.
Notes to consolidated financial statements.
NACCO Industries, Inc. Report of Management.
The following consolidated financial statement schedules of NACCO
Industries, Inc. and Subsidiaries are included in Item 14(d):
Schedule I Condensed Financial Information of the Parent
Schedule II Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
F-2
42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of NACCO Industries, Inc.:
We have audited the accompanying consolidated balance sheets of NACCO
Industries, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements and the schedules referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 NACCO Industries, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a)(1) and
(2) and Item 14(d) of Form 10-K are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state 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
February 22, 1996
F-3
43
CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.............................................. $2,190,375 $1,853,479 $1,538,805
Other operating income................................. 14,142 11,408 10,566
---------- ---------- ----------
TOTAL REVENUES............................... 2,204,517 1,864,887 1,549,371
Cost of sales.......................................... 1,778,779 1,491,771 1,248,439
---------- ---------- ----------
GROSS PROFIT................................. 425,738 373,116 300,932
Selling, administrative and general expenses........... 260,902 228,619 198,149
Amortization of goodwill............................... 13,774 13,725 13,787
---------- ---------- ----------
OPERATING PROFIT............................. 151,062 130,772 88,996
Other income (expense)
Interest income................................... 1,850 1,615 1,880
Interest expense.................................. (51,879) (56,076) (61,542)
Other -- net...................................... 2,485 2,185 (4,670)
---------- ---------- ----------
(47,544) (52,276) (64,332)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEMS.................... 103,518 78,496 24,664
Provision for income taxes............................. 34,681 30,730 13,511
---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEMS........................ 68,837 47,766 11,153
Minority interest...................................... (3,331) (2,494) 440
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS............ 65,506 45,272 11,593
Extraordinary items:
Extraordinary gain, net-of-tax.................... 32,333
Extraordinary charges, net-of-tax................. (3,399) (3,218) (3,292)
---------- ---------- ----------
NET INCOME................................... $ 94,440 $ 42,054 $ 8,301
========= ========= =========
PER SHARE:
Income Before Extraordinary Items...................... $ 7.31 $ 5.06 $ 1.30
Extraordinary items:
Extraordinary gain, net-of-tax.................... 3.61
Extraordinary charges, net-of-tax................. (.38) (.36) (.37)
---------- ---------- ----------
Net Income............................................. $ 10.54 $ 4.70 $ .93
========= ========= =========
See notes to consolidated financial statements.
F-4
44
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
DECEMBER 31
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................... $ 30,924 $ 19,541
Accounts receivable, net....................................... 284,235 236,215
Inventories.................................................... 388,819 298,987
Prepaid expenses and other..................................... 18,027 31,893
---------- ----------
722,005 586,636
OTHER ASSETS........................................................ 38,289 41,341
PROPERTY, PLANT AND EQUIPMENT, NET.................................. 534,477 485,314
DEFERRED CHARGES
Goodwill, net.................................................. 465,051 471,574
Deferred costs and other....................................... 56,725 69,257
Deferred income taxes.......................................... 17,290 40,200
---------- ----------
539,066 581,031
---------- ----------
TOTAL ASSETS.............................................. $1,833,837 $1,694,322
========= =========
F-5
45
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
DECEMBER 31
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................... $ 250,662 $ 226,892
Revolving credit agreements.................................... 95,736 30,760
Current maturities of long-term obligations.................... 19,864 63,509
Income taxes................................................... 4,672 18,662
Accrued payroll................................................ 29,827 28,018
Other current liabilities...................................... 122,961 113,597
---------- ----------
523,722 481,438
NOTES PAYABLE -- not guaranteed by the parent company............... 320,200 286,717
OBLIGATIONS OF PROJECT MINING SUBSIDIARIES --
not guaranteed by the parent company or
its North American Coal subsidiary............................. 346,472 331,876
SELF-INSURANCE RESERVES AND OTHER................................... 229,302 274,358
MINORITY INTEREST................................................... 44,014 40,542
STOCKHOLDERS' EQUITY
Common stock:
Class A, par value $1 per share, 7,256,971 shares outstanding
(1994 -- 7,228,739 shares outstanding).................... 7,257 7,229
Class B, par value $1 per share, convertible into Class A
on a one-for-one basis, 1,709,453 shares outstanding
(1994 -- 1,722,981 shares outstanding).................... 1,709 1,723
Capital in excess of par value................................. 3,591 2,788
Retained income................................................ 350,301 262,226
Foreign currency translation adjustment and other.............. 7,269 5,425
---------- ----------
370,127 279,391
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................ $1,833,837 $1,694,322
========= =========
See notes to consolidated financial statements.
F-6
46
CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31
------------------------------------
1995 1994 1993
--------- --------- --------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income............................................. $ 94,440 $ 42,054 $ 8,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary gain, net-of-tax.................... (32,333)
Extraordinary charges, net-of-tax................. 2,161 1,022 2,007
Depreciation, depletion and amortization.......... 79,252 80,154 78,063
Deferred income taxes............................. 1,464 3,985 5,176
Other non-cash items.............................. 2,074 (6,165) (7,944)
Working capital changes:
Accounts receivable............................... (38,563) (31,180) (22,926)
Inventories....................................... (85,618) (54,791) 8,505
Other current assets.............................. 2,455 (5,353) (2,213)
Accounts payable and other liabilities............ 6,799 68,054 3,341
--------- --------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 32,131 97,780 72,310
INVESTING ACTIVITIES
Expenditures for property, plant and equipment......... (73,131) (52,564) (57,661)
Proceeds from the sale of other assets................. 1,345 11,144 27,600
Notes receivable....................................... 665 1,412 4,664
Acquisition of businesses.............................. (7,288)
--------- --------- --------
NET CASH USED BY INVESTING ACTIVITIES.......... (78,409) (40,008) (25,397)
FINANCING ACTIVITIES
Additions to long-term obligations and revolving
credit.............................................. 328,178 122,055 31,373
Reductions of long-term obligations and revolving
credit.............................................. (276,579) (192,679) (84,533)
Additions to obligations of project mining
subsidiaries........................................ 92,946 56,394 51,517
Reductions of obligations of project mining
subsidiaries........................................ (102,070) (67,658) (67,291)
Financing of other short-term obligations.............. 10,805 11,884 16,172
Cash dividends paid.................................... (6,365) (6,040) (5,854)
Capital grants......................................... 4,017 1,622 3,741
Other -- net........................................... 5,609 3,596 4,746
--------- --------- --------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES................................... 56,541 (70,826) (50,129)
Effect of exchange rate changes on cash................ 1,120 3,446 (1,482)
--------- --------- --------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year....................... 11,383 (9,608) (4,698)
Balance at the beginning of the year................... 19,541 29,149 33,847
--------- --------- --------
BALANCE AT THE END OF THE YEAR......................... $ 30,924 $ 19,541 $ 29,149
========= ========= ========
See notes to consolidated financial statements.
F-7
47
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
CLASS A COMMON STOCK
Beginning balance.......................................... $ 7,229 $ 7,177 $ 7,113
Conversion of Class B shares to Class A shares............. 14 43 60
Sale of treasury shares under stock option and compensation
plans................................................... 14 11 4
Purchase of treasury shares................................ (2)
-------- -------- --------
7,257 7,229 7,177
-------- -------- --------
CLASS B COMMON STOCK
Beginning balance.......................................... 1,723 1,764 1,823
Conversion of Class B shares to Class A shares............. (14) (43) (60)
Sale of shares under stock option plans.................... 2 1
-------- -------- --------
1,709 1,723 1,764
-------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance.......................................... 2,788 2,548 2,342
Sale of shares under stock option and compensation plans... 803 348 206
Purchase of treasury shares................................ (108)
-------- -------- --------
3,591 2,788 2,548
-------- -------- --------
RETAINED INCOME
Beginning balance.......................................... 262,226 226,212 223,765
Net income................................................. 94,440 42,054 8,301
Cash dividends on Class A and Class B common stock:
1995 $.710 per share.................................... (6,365)
1994 $.675 per share.................................... (6,040)
1993 $.655 per share.................................... (5,854)
-------- -------- --------
350,301 262,226 226,212
-------- -------- --------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT AND OTHER
Beginning balance.......................................... 5,425 (2,075) 3,273
Foreign currency translation adjustment and other.......... 1,844 7,500 (5,348)
-------- -------- --------
7,269 5,425 (2,075)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY......................... $370,127 $279,391 $235,626
======== ======== ========
See notes to consolidated financial statements.
F-8
48
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLARS IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGE DATA)
NOTE 1 -- NATURE OF OPERATIONS
The Company has four operating subsidiaries which function in distinct
business environments, including forklift truck manufacturing and service parts
distribution, small electric appliance manufacturing, mining and retail.
NMHG designs, manufactures and markets forklift trucks and related service
parts under the Hyster(R) and Yale(R) brand names. NMHG's manufacturing plants
are located primarily in the United States and Europe. In addition, NMHG has
manufacturing facilities in Japan through its S-N joint venture. While NMHG's
market position is strongest in North America, it also has a significant
presence in Europe and a growing position in Asia-Pacific.
HB/PS designs, manufactures and markets small electric appliances covering
approximately 80 percent of the small kitchen electric appliance market. The
company manufactures the majority of its products at its plants located in North
America and also sources some of its products from the Far East. HB/PS primarily
sells its products to retailers and distributors in North America.
NACoal mines and markets lignite for use primarily as fuel in power
generation by electric utilities. The company operates four surface lignite
mines, two in North Dakota and one each in Texas and Louisiana. Each of these
lignite mines operates under long-term contracts to sell lignite at a price
based on actual costs plus an agreed pretax profit per ton. In addition, NACoal
provides dragline mining services at a limerock quarry in Florida.
KCI is a national specialty retailer of kitchenware and small electric
appliances with stores located primarily in factory outlet malls. KCI operates
stores under the Kitchen Collection(R) and Hearthstone(TM) names and sells
brand-name kitchenware, tableware, small electric appliances and related
accessories.
NOTE 2 -- ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its
majority owned subsidiaries (NACCO Industries, Inc. and Subsidiaries -- the
"Company"). Intercompany accounts and transactions are eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and 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.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
determined under the last-in, first-out (LIFO) method for manufacturing
inventories in the United States and under the first-in, first-out (FIFO) method
with respect to all other inventories.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded
at cost. Depreciation, depletion 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. The units-of-production method is used to amortize certain coal-related
assets based on estimated recoverable tonnages.
F-9
49
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
GOODWILL: Goodwill represents the excess purchase price paid over the fair
value of the net assets acquired. The amortization of goodwill is determined on
a straight-line basis over a 40-year period. Management regularly evaluates its
accounting for goodwill considering such factors as historical and future
profitability and believes that the asset is realizable and the amortization
period remains appropriate.
DEFERRED FINANCING COSTS: Amortization of the costs related to
manufacturing assets is calculated utilizing the interest method over the term
of the related indebtedness. The costs incurred related to the coal assets are
amortized utilizing the units-of-production method. Amortization of these costs
is included in interest expense on the Company's consolidated statements of
income.
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 $27.5 million, $25.9 million and $23.4 million in 1995,
1994 and 1993, respectively.
COMMON STOCK: The Class A common stock has one vote per share and the Class
B common stock has 10 votes per share. The total number of authorized shares of
Class A common stock and Class B common stock at December 31, 1995, was
25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A
stock totalling 817,418 and 832,122 at December 31, 1995 and 1994, respectively,
have been deducted from shares outstanding.
FOREIGN CURRENCY: The financial statements of the Company's foreign
operations are translated into U.S. dollars at year-end exchange rates for
assets and liabilities, and at weighted average exchange rates during the year
for revenues and expenses. The effect of changes in foreign exchange rates
applied to these foreign financial statements is included as a separate
component of stockholders' equity.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: The fair values
of financial instruments have been determined through information obtained from
quoted market sources and management estimates. The Company does not hold or
issue financial instruments or derivative financial instruments for trading
purposes.
The Company enters into forward foreign exchange contracts with terms of
one-to-twelve months. These contracts hedge certain foreign currency denominated
receivables and payables and foreign currency commitments. Gains and losses on
these contracts are deferred and recognized as part of the cost of the
underlying transaction being hedged.
The Company also enters into interest rate swap agreements with terms
ranging from three months to seven years. The difference between the floating
interest rate and fixed interest rate which is to be paid or received is
recognized in interest expense as the floating interest rate changes over the
life of the agreement.
EARNINGS PER SHARE: The calculation of net income per share is based on the
weighted average number of shares outstanding during each period.
RECLASSIFICATIONS: Certain amounts in the prior periods' consolidated
financial statements have been reclassified to conform to the current period's
presentation.
NOTE 3 -- EXTRAORDINARY ITEMS
EXTRAORDINARY GAIN
The extraordinary gain of $32.3 million (recognized in 1995), net of $19.8
million in taxes, relates to a downward revision in the obligation to the United
Mine Workers of America Combined Benefit Fund ("UMWA"). This obligation was
recognized by Bellaire as an extraordinary charge in 1992 to accrue for the
estimated costs associated with the Coal Industry Retiree Health Benefit Act of
1992 ("Coal Act"), which is discussed in more detail in Note 11 on page F-16. It
is the Company's policy to periodically review the
F-10
50
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
estimates and assumptions upon which various liability reserves are based. As a
result of a review of the assumptions relating to the number of Company and
industry covered beneficiaries ultimately assigned to Bellaire, and the trend of
health care costs, the aggregate estimated costs associated with the Coal Act
are expected to be lower than originally anticipated. Management believes that
the revised liability of $69.3 million, net of deferred taxes, more accurately
represents the future cost of this obligation.
EXTRAORDINARY CHARGES
The extraordinary charges recognized in 1995, 1994 and 1993 relate to the
write-off of premiums and unamortized financing fees. The 1995 extraordinary
charge includes a $1.3 million charge recognized in the first quarter, when
NMHG's former revolving credit facility and senior term loan was replaced by the
new long-term credit agreement. In the third quarter of 1995 a charge of $2.1
million was recognized. This charge, as well as the 1994 and 1993 charges,
represents the write-off of premiums and unamortized debt issuance costs
associated with the retirement of $78.5 million, $70.0 million and $50.0 million
face-value Hyster-Yale 12 3/8% debentures, respectively. These retirements were
achieved using bank borrowings, internally generated funds of NMHG and equity
infusions from existing stockholders.
NOTE 4 -- ACCOUNTS RECEIVABLE
Allowances for doubtful accounts, returns, discounts and adjustments of
$11.3 million and $10.6 million at December 31, 1995 and 1994, respectively,
were deducted from accounts receivable.
NOTE 5 -- INVENTORIES
Inventories are summarized as follows:
DECEMBER 31
-----------------
1995 1994
------ ------
Manufacturing inventories:
Finished goods and service parts --
NACCO Materials Handling Group.............................. $117.4 $ 82.3
Hamilton Beach/Proctor-Silex................................ 43.3 32.8
------ ------
160.7 115.1
------ ------
Raw materials and work in process --
NACCO Materials Handling Group.............................. 182.0 137.9
Hamilton Beach/Proctor-Silex................................ 15.7 15.9
------ ------
197.7 153.8
------ ------
LIFO reserve --
NACCO Materials Handling Group.............................. (13.3) (11.4)
Hamilton Beach/Proctor-Silex................................ (.3) (.1)
------ ------
(13.6) (11.5)
------ ------
Total manufacturing inventories................................ 344.8 257.4
North American Coal:
Coal........................................................... 10.6 8.4
Mining supplies................................................ 19.1 18.8
Retail inventories -- Kitchen Collection......................... 14.3 14.4
------ ------
$388.8 $299.0
====== ======
F-11
51
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The cost of manufacturing inventories has been determined by the LIFO
method for 66 percent and 69 percent of such inventories at December 31, 1995
and 1994, respectively.
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes the following:
DECEMBER 31
-----------------
1995 1994
------ ------
Coal lands and real estate:
NACCO Materials Handling Group................................... $ 6.4 $ 6.0
Hamilton Beach/Proctor-Silex..................................... .8 .8
North American Coal.............................................. 15.3 14.8
Project mining subsidiaries (Note 10)............................ 77.1 54.0
Kitchen Collection............................................... .1 .1
NACCO and Other.................................................. .3 .9
------ ------
100.0 76.6
------ ------
Plant and equipment:
NACCO Materials Handling Group................................... 250.6 208.4
Hamilton Beach/Proctor-Silex..................................... 111.7 105.5
North American Coal.............................................. 18.2 15.2
Project mining subsidiaries (Note 10)............................ 428.2 409.3
Kitchen Collection............................................... 7.3 6.0
NACCO and Other.................................................. 4.1 4.1
------ ------
820.1 748.5
------ ------
Property, plant and equipment at cost.............................. 920.1 825.1
Less allowances for depreciation, depletion and amortization..... 385.7 339.8
------ ------
$534.4 $485.3
====== ======
Total depreciation, depletion and amortization expense on property, plant
and equipment was $63.9 million, $63.2 million and $60.1 million during 1995,
1994 and 1993, respectively.
Proven and probable coal reserves approximated 2.1 billion tons at December
31, 1995, and 2.2 billion tons at December 31, 1994.
NOTE 7 -- ACCOUNTING FOR LONG-LIVED ASSETS
In March 1995, Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" was issued. The Company will be required to adopt this new
method of accounting in the first quarter of 1996. This new standard requires,
among other things, that assets covered by this standard be written down to
their fair values (as defined) when certain conditions exist. The adoption of
this standard will not materially impact the Company's financial condition or
its results of operations.
NOTE 8 -- DEFERRED CHARGES
Accumulated amortization of goodwill, patents and trademarks was $94.7
million and $80.5 million at December 31, 1995 and 1994, respectively. Total
amortization expense of these items was $14.1 million during 1995 and 1994 and
$14.3 million during 1993.
F-12
52
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Total amortization expense of deferred financing costs was $1.2 million,
$3.0 million and $3.7 million during 1995, 1994 and 1993, respectively.
NOTE 9 -- REVOLVING CREDIT AGREEMENTS AND NOTES PAYABLE
NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
REVOLVING CREDIT AGREEMENTS
NACCO MATERIALS HANDLING GROUP
NMHG's credit agreement provides for an unsecured revolving credit facility
("Facility") that permits advances up to $350.0 million. The following
summarizes this Facility:
Amount of revolver.......................................................... $350.0
Amount available at December 31, 1995....................................... $ 75.0
Interest rate at December 31, 1995.......................................... 6.7%
Average interest rate during 1995........................................... 6.3%
Facility fee at December 31, 1995........................................... 0.3%
At December 31, 1995, NMHG had $275.0 million outstanding under this
Facility, $245.9 million of which is classified as long-term because it is not
expected to be repaid during 1996. The company entered into this Facility on
February 28, 1995, to replace its existing bank agreement and to refinance the
majority of its existing long-term debt. The expiration date of this Facility
(which currently is February 2000) may be extended annually for one additional
year upon the mutual consent of NMHG and the bank group. In addition, this
Facility has performance-based pricing which provides the company with reduced
interest rates upon achievement of certain financial performance targets. NMHG
also has separate facilities totalling $30.5 million, of which $26.5 million was
available at December 31, 1995.
HAMILTON BEACH/PROCTOR-SILEX
HB/PS's credit agreement provides for a revolving credit facility
("Facility") that permits advances up to $135.0 million and is secured by
substantially all assets of HB/PS. The following summarizes this Facility:
Amount of revolver.......................................................... $135.0
Amount available at December 31, 1995....................................... $ 52.9
Interest rate at December 31, 1995.......................................... 6.2%
Average interest rate during 1995........................................... 6.6%
Facility fee at December 31, 1995........................................... 0.2%
At December 31, 1995, HB/PS had $82.1 million outstanding under this
Facility, $65.0 million of which is classified as long-term because it is not
expected to be repaid during 1996. The expiration date of this Facility (which
currently is May 1998) may be extended annually for one additional year upon the
mutual consent of HB/PS and the bank group. In April 1995 this facility was
amended to provide a lower interest rate if HB/PS achieves a certain interest
coverage ratio, and to allow for interest rates quoted under a competitive bid
option. At December 31, 1995, HB/PS also had $25.0 million available under
separate facilities.
F-13
53
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NORTH AMERICAN COAL
NACoal has in place a revolving credit facility summarized as follows:
Amount of revolver.......................................................... $ 50.0
Amount available at December 31, 1995....................................... $ 50.0
Average interest rate during 1995........................................... 5.9%
Total commitment and facility fee at December 31, 1995...................... 0.2%
The expiration date of this facility (which currently is September 2000)
may be extended annually for one additional year upon the mutual consent of
NACoal and the bank group.
NOTES PAYABLE
Subsidiary notes payable, less current maturities, consist of the
following:
DECEMBER 31
-----------------
1995 1994
------ ------
NACCO MATERIALS HANDLING GROUP
Long-term portion of revolving credit facility........................... $245.9 $ 33.0
Term note................................................................ 95.3
12.375% senior subordinated debentures................................... 78.5
Other.................................................................... 4.1 4.6
------ ------
Total NMHG............................................................ 250.0 211.4
HAMILTON BEACH/PROCTOR-SILEX
Long-term portion of revolving credit facility........................... 65.0 70.0
KITCHEN COLLECTION
Term note with an interest rate of 7.8% at year-end
(average interest rate of 7.7% during 1995) payable 1999 to 2000...... 5.0 5.0
NORTH AMERICAN COAL........................................................ .2 .3
------ ------
$320.2 $286.7
====== ======
The maturities of the subsidiary notes payable for the next five years,
including current maturities, are as follows:
1996............................................................... $2.0
1997............................................................... .5
1998............................................................... .3
1999............................................................... 2.6
2000............................................................... 2.5
Thereafter......................................................... .2
----
$8.1
====
Interest paid was $42.6 million, $44.0 million and $48.4 million during
1995, 1994 and 1993, respectively.
The credit agreements for NMHG, HB/PS, NACoal and KCI contain certain
covenants and restrictions. Covenants require, among other things, maintenance
of certain minimum amounts of net worth and certain specified ratios of working
capital, debt to equity, interest coverage and fixed charge coverage. These
ratios are calculated at the subsidiary level. Restrictions include limits on
capital expenditures and dividends. At December 31, 1995, the subsidiaries were
in compliance with all of the covenants in their debt agreements.
F-14
54
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10 -- OBLIGATIONS OF PROJECT MINING SUBSIDIARIES
NACoal's project mining subsidiaries have entered into long-term contracts
with various utility customers to provide lignite at a sales price based on cost
plus a profit per ton. The utility customers have arranged and guaranteed the
financing for the development and operation of these subsidiary mines. The
obligations of these project mining subsidiaries included in the Company's
consolidated balance sheets do not affect the short- or long-term liquidity of
the Company and are without recourse to NACCO or its NACoal subsidiary.
Obligations of project mining subsidiaries, less current maturities,
consist of the following at December 31:
1995 1994
------ ------
Capitalized lease obligations...................................... $146.4 $140.1
Non-interest-bearing advances from customers....................... 176.4 136.0
Promissory notes with interest rates ranging from 5.0% to 8.7%
during 1995...................................................... 23.7 55.7
------ ------
$346.5 $331.8
====== ======
The annual maturities of the promissory notes are: 1996 -- $5.1 million;
1997 -- $6.1 million; 1998 -- $3.1 million; 1999 -- $3.2 million; 2000 -- $3.2
million; thereafter -- $8.1 million. Advances from customers are used to
develop, operate and provide for the ongoing working capital needs of certain
project mining subsidiaries.
Interest paid was $14.3 million, $17.7 million and $17.5 million during
1995, 1994 and 1993, respectively. Interest expense is included as part of the
cost of coal, which is passed through to the utility customers.
The project mining subsidiaries'capital lease obligations for mining
equipment have the following future minimum lease payments at December 31, 1995:
1996....................................................................... $ 23.1
1997....................................................................... 22.2
1998....................................................................... 21.5
1999....................................................................... 21.1
2000....................................................................... 20.2
Subsequent to 2000......................................................... 139.7
------
Total minimum lease payments............................................... 247.8
Amounts representing interest.............................................. (90.2)
------
Present value of net minimum lease payments................................ 157.6
Current maturities......................................................... (11.2)
------
$146.4
======
Interest expense and amortization in excess of annual lease payments are
deferred and recognized in years when annual lease payments exceed interest
expense and amortization.
Project mining assets recorded under capital leases are included with
property, plant and equipment and consist of the following at December 31:
1995 1994
------ ------
Plant and equipment.............................................. $201.0 $188.1
Less accumulated amortization.................................... 78.3 71.6
------ ------
$122.7 $116.5
====== ======
F-15
55
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
During 1995, 1994 and 1993, the project mining subsidiaries incurred
capital lease obligations of $18.0 million, $5.2 million and $22.4 million,
respectively, in connection with lease agreements to acquire plant and
equipment.
The above obligations are secured by substantially all owned assets of the
respective project mining subsidiary and the assignment of all rights under its
coal sales agreement.
NOTE 11 -- SELF-INSURANCE RESERVES AND OTHER
Self-insurance reserves and other consisted of the following at December
31:
1995 1994
------ ------
Present value of closed mine obligations........................... $ 53.8 $ 70.8
Reserve for future interest on obligation to UMWA.................. 64.2 103.9
------ ------
118.0 174.7
Other self-insurance reserves...................................... 111.3 99.7
------ ------
$229.3 $274.4
====== ======
The closed mine obligations relate to Bellaire's (a wholly-owned
non-operating subsidiary of NACCO) former eastern underground mining operations
and the Indian Head Mine, which ceased operations in 1992. Included in these
obligations is the obligation to the United Mine Workers of America Combined
Benefit Fund ("UMWA") which resulted from the Coal Industry Retiree Health
Benefit Act of 1992 ("Coal Act"). The Coal Act requires Bellaire to incur
additional costs for retiree medical expenses of certain United Mine Worker
retirees. Annual cash payments of up to $3.0 million after tax are expected
relating to this obligation and could continue for as long as 40 to 50 years.
The Company has recorded this obligation on an undiscounted basis. The reserve
for future interest represents the portion of this reserve comprising interest
costs. In addition, the closed mine obligations include reserves for land
reclamation and site treatment at certain closed eastern underground and western
surface mines, as well as reserves for workers compensation and black lung
benefit costs.
The other self-insurance reserves primarily include product liability
reserves, employee postretirement benefit obligations and other miscellaneous
reserves.
NOTE 12 -- LEASE COMMITMENTS
Future minimum operating lease payments, excluding project mining
subsidiaries, at December 31, 1995, are as follows:
1996........................................................................ $17.5
1997........................................................................ 15.4
1998........................................................................ 13.9
1999........................................................................ 11.3
2000........................................................................ 9.3
Thereafter.................................................................. 18.2
-----
$85.6
=====
Rental expense for all operating leases, excluding project mining
subsidiaries, amounted to $20.7 million, $16.9 million and $15.3 million during
1995, 1994 and 1993, respectively.
F-16
56
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13 -- FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS
A financial instrument is cash or a contract that imposes an obligation to
deliver, or conveys a right to receive, cash or another financial instrument.
The fair value of financial instruments approximated carrying values at December
31, 1995.
INTEREST RATE DERIVATIVES
The Company's operating subsidiaries enter into interest rate swap and/or
cap agreements ("swaps" and "caps"). The use of swaps and caps allows these
subsidiaries to enter into long-term credit agreements that have
performance-based, floating rates of interest and then exchange them for fixed
rates, as opposed to entering into higher cost fixed-rate credit arrangements.
These agreements are with major commercial banks; therefore, the risk of credit
loss from non-performance by the banks is minimal. The following table
summarizes the notional amounts, related rates (including applicable margins)
and remaining terms on interest rate swap agreements outstanding at December 31,
1995:
NOTIONAL FIXED RATE
AMOUNT PAID REMAINING TERM
-------- ---------- ----------------------
NACCO Materials Handling Group......... $210.0 6.1% One Month to Six Years
Hamilton Beach/Proctor-Silex........... $ 60.0 6.2% One to Three Years
North American Coal.................... $ 10.0 6.6% Seven Months
Kitchen Collection..................... $ 5.0 7.8% Four Years
FOREIGN CURRENCY DERIVATIVES
NMHG and HB/PS enter into forward foreign exchange contracts for purposes
of hedging their exposure to foreign currency exchange rate fluctuations. These
contracts are with major financial institutions; therefore, the risk of credit
loss from non-performance by these institutions is minimal. These contracts
hedge primarily firm commitments and, to a lesser degree, forecasted commitments
relating to cash flows associated with sales and purchases denominated in
foreign currencies. NMHG and HB/PS had foreign exchange contracts outstanding in
the amount of $293.2 million and $3.8 million, respectively, at December 31,
1995. The deferred loss on these contracts at December 31, 1995 was not
material.
NOTE 14 -- CONTINGENCIES
Various legal proceedings and claims have been or may be asserted against
NACCO and certain subsidiaries relating to the conduct of its business,
including product liability and environmental claims. These proceedings are
incidental to their ordinary course of business. 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 that, after consultation with
its General Counsel, the likelihood that material costs will be incurred in
excess of accruals already recognized is remote.
NMHG is subject to recourse or repurchase obligations under various
financing arrangements for certain independently owned retail dealerships at
December 31, 1995. Also, certain dealer loans are guaranteed by NMHG. When NMHG
is the guarantor of the principal amount financed, a security interest is
usually maintained in certain assets of parties for whom NMHG is guaranteeing
debt. Total amounts subject to recourse or repurchase obligation at December 31,
1995, were $100.8 million. Losses anticipated under the terms of the recourse or
repurchase obligations are not significant and have been reserved for in the
financial statements.
F-17
57
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 15 -- STOCK OPTIONS
The 1975 and 1981 stock option plans as amended provide for the granting to
officers and other key employees options to purchase Class A and Class B common
stock of the Company at a price not less than the market value of such stock at
the date of grant. Options become exercisable over a four-year period and expire
10 years from the date of the grant. At December 31, 1995, all stock options
outstanding were exercisable. There were options for 80,701 Class A shares at
December 31, 1995 and 1994, respectively, and 80,100 Class B shares at December
31, 1995 and 1994, respectively, available for grant under these plans. The
Company does not, however, intend to issue any additional stock options. At
December 31, 1995, there were options relating to Class A shares for 5,800
shares with an option price of $32.00 that were granted on January 12, 1989, and
25,000 shares at an option price of $35.56 granted on March 1, 1989.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" was issued. This new standard
requires, among other things, additional footnote disclosures relating to stock
options granted on or after January 1, 1995. Because the Company does not intend
to grant any additional stock options, this standard will not impact the
Company's disclosures.
NOTE 16 -- OTHER - NET
Items included in other-net income (expense) for the year ended December 31
are as follows:
1995 1994 1993
----- ---- -----
Equity in earnings (losses) of unconsolidated subsidiaries... $ 3.2 $1.0 $(3.9)
Litigation settlement........................................ -- -- (3.5)
Gain (loss) on sale of assets................................ (.4) (.1) 2.3
Currency transaction gains (losses).......................... (1.5) (.8) .1
Miscellaneous................................................ 1.2 2.1 .3
----- ---- -----
$ 2.5 $2.2 $(4.7)
===== ==== =====
F-18
58
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 17 -- INCOME TAXES
The components of income before income taxes and provision for income taxes
for the year ended December 31 are as follows:
1995 1994 1993
------ ----- -----
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS
Domestic................................................. $ 79.3 $57.1 $18.3
Foreign.................................................. 24.2 21.4 6.4
------ ----- -----
$103.5 $78.5 $24.7
====== ===== =====
PROVISION FOR INCOME TAXES
Current tax expense:
Federal............................................... $ 28.4 $24.3 $ 8.4
State................................................. 4.9 3.0 2.7
Foreign............................................... 4.2 7.8 4.4
------ ----- -----
Total current....................................... 37.5 35.1 15.5
------ ----- -----
Deferred tax expense (benefit):
Federal............................................... (3.3) (1.1) 3.6
State................................................. (.8) (.1) (1.2)
Foreign............................................... 1.3 (3.2) (4.4)
------ ----- -----
Total deferred...................................... (2.8) (4.4) (2.0)
------ ----- -----
$ 34.7 $30.7 $13.5
====== ===== =====
Domestic income before income taxes has been reduced by all of the
amortization of goodwill and deferred financing costs, and substantially all
interest expense.
The Company made income tax payments of $48.9 million, $29.0 million and
$16.3 million during 1995, 1994 and 1993, respectively. During the same period,
income tax refunds totaled $3.7 million, $1.2 million and $5.1 million,
respectively.
At December 31, 1995, the Company had cumulative undistributed earnings at
its foreign subsidiaries of $102.1 million. It is the Company's intention to
reinvest $38.5 million of these undistributed earnings of its foreign
subsidiaries and thereby indefinitely postpone their remittance. There has been
no provision made for taxes, nor is it practicable to estimate the amount of
taxes on the undistributed earnings which are reinvested indefinitely. The
remaining undistributed earnings of $63.6 million can be remitted without a
material charge to earnings.
Upon remittance of earnings, certain foreign countries impose withholding
taxes that are then available, subject to certain limitations, for use as
credits against the Company's U.S. tax liability. The amount of withholding tax
that would be payable upon remittance of the entire amount of undistributed
earnings would approximate $5.6 million.
F-19
59
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
A reconciliation of federal statutory and effective income tax for the year
ended December 31 follows:
1995 1994 1993
------ ----- -----
Income before taxes........................................ $103.5 $78.5 $24.7
====== ===== =====
Statutory taxes at 35%..................................... $ 36.2 $27.5 $ 8.6
Amortization of excess purchase price.................... 5.1 5.1 4.8
State income taxes....................................... 2.7 1.8 1.0
Tax audit settlements.................................... (3.1) -- --
Foreign tax items........................................ (2.3) .4 .1
Percentage depletion..................................... (1.8) (1.6) (1.6)
Earnings reported net of taxes........................... (1.2) (.4) 1.1
Export benefits.......................................... (1.1) (1.0) (.8)
Other-net................................................ .2 (1.1) .3
------ ----- -----
Provision for income taxes................................. $ 34.7 $30.7 $13.5
====== ===== =====
Effective rate............................................. 33.5% 39.1% 54.7%
====== ===== =====
A detailed summary of the current and noncurrent deferred tax assets and
(liabilities) in the Company's consolidated balance sheets at December 31
resulting from differences in the book and tax basis of assets and liabilities
follows:
1995 1994
------ ------
CURRENT
Inventories................................................... $(16.2) $(19.0)
Accrued expenses and reserves................................. 15.0 15.8
Employee benefits............................................. 2.0 1.8
Net operating loss carryforwards.............................. 2.8 2.6
Other......................................................... (2.3) (1.1)
------ ------
Total current net deferred tax asset..................... 1.3 0.1
------ ------
NON-CURRENT
Accrued expenses and reserves................................. 23.6 24.0
Employee benefits............................................. 16.3 13.3
Net operating loss carryforwards.............................. 2.6 3.3
Reserve for UMWA.............................................. 35.9 56.2
Depreciation & depletion...................................... (45.3) (45.7)
Unrepatriated earnings........................................ (11.7) (8.9)
Other......................................................... (11.8) (9.9)
------ ------
Total non-current net deferred tax asset................. 9.6 32.3
------ ------
Total net deferred tax asset............................. $ 10.9 $ 32.4
====== ======
In 1995 the Company reached agreements with various tax authorities
resulting in non-recurring tax benefits of $3.1 million. Additionally, the
Company recognized a non-recurring tax benefit of $2.5 million from the
remittance of earnings of foreign subsidiaries subject to rates of tax in excess
of the statutory rate.
The Company and certain of its subsidiaries are currently under examination
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 future earnings.
F-20
60
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 18 -- RETIREMENT BENEFIT PLANS
DEFINED BENEFIT PLANS
The Company maintains various defined benefit pension plans covering most
of its employees. These plans provide benefits based on years of service and
average compensation during certain periods. The Company's policy is to make
contributions to fund these plans within the range allowed by the applicable
regulations. Contributions to the various plans were $5.6 million in 1995, $6.9
million in 1994 and $5.2 million in 1993. Plan assets consist primarily of
publicly traded stocks, investment contracts and government and corporate bonds.
Set forth below is a detail of consolidated worldwide net periodic pension
expense and the assumptions used in accounting for the United States defined
benefit plans for the year ended December 31. The United Kingdom plans used
assumptions that are consistent with, but not identical to, those used by the
United States plans.
1995 1994 1993
--------- --------- ---------
Service cost................................... $ 7.9 $ 6.6 $ 6.3
Interest cost on projected benefit
obligation................................... 10.4 9.4 9.0
Actual loss (gain) on plan assets.............. (21.2) 1.1 (8.2)
Curtailment gain............................... -- -- (.4)
Net amortization and deferral of actuarial
(gains) losses............................... 11.7 (9.5) .1
--------- --------- ---------
Net periodic pension expense................... $ 8.8 $ 7.6 $ 6.8
========= ========= =========
Assumptions:
Weighted average discount rates.............. 7.5% 8.5% 7.5%
Rate of increase in compensation levels...... 4.5-5.0% 5.0-5.5% 4.0-6.0%
Expected long-term rate of return on
assets.................................... 9.0% 9.0% 9.0%
The following sets forth the funded status of the defined benefit plans and
amounts recognized in the consolidated balance sheets at December 31:
PARTIALLY FULLY
FUNDED PLANS FUNDED PLANS
----------------- ---------------
1995 1994 1995 1994
------ ------ ----- -----
Actuarial present value of benefit obligation:
Vested accumulated benefit obligation............. $ 90.0 $ 66.9 $26.3 $23.0
Non-vested accumulated benefit obligation......... 5.8 4.6 1.7 .2
------ ------ ----- -----
Total accumulated benefit obligation.............. 95.8 71.5 28.0 23.2
Value of future salary projections................ 25.5 19.9 1.0 2.4
------ ------ ----- -----
Total projected benefit obligation................ 121.3 91.4 29.0 25.6
Fair value of plan assets......................... 91.7 71.8 33.3 29.4
------ ------ ----- -----
Plan assets in excess of (less than) projected
benefit obligation............................. (29.6) (19.6) 4.3 3.8
Amounts available to (reduce) increase future
pension expense:
Unamortized balance of the initial transition
amount.................................... (2.0) (2.5) .1 (.6)
Unamortized cumulative actuarial loss
(gain).................................... 4.1 (2.0) -- 1.6
Unamortized prior service cost............... 3.4 3.8 1.3 1.3
Adjustment for minimum pension liability.......... (8.8) (7.8) -- --
------ ------ ----- -----
Pension asset (liability) recognized in
consolidated balance sheet..................... $(32.9) $(28.1) $ 5.7 $ 6.1
====== ====== ===== =====
F-21
61
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DEFINED CONTRIBUTION PLANS
NACCO and its subsidiaries have defined contribution plans for
substantially all employees. For NACCO and certain subsidiaries, employee
contributions are matched by the Company based on plan provisions. In addition,
NACCO and certain other subsidiaries have profit sharing plans whereby the
subsidiary's contribution is determined annually based on its operating results.
Total contributions to these plans were $7.3 million in 1995, $5.9 million in
1994 and $5.5 million in 1993.
NOTE 19 -- BUSINESS SEGMENTS
NACCO's four operating subsidiaries function in distinct business
environments. Sales between subsidiaries, which are minimal, are eliminated in
consolidation. NACCO and Other includes the accounts of the parent company and
Bellaire. Information relating to the Company's operations at the subsidiary
level is presented below.
1995 1994 1993
-------- -------- --------
REVENUES
NACCO Materials Handling Group............................. $1,510.1 $1,178.9 $ 908.2
Hamilton Beach/Proctor-Silex............................... 381.4 377.5 356.3
North American Coal........................................ 248.0 250.2 233.3
Kitchen Collection......................................... 69.6 63.9 53.7
NACCO and Other............................................ .5 .6 3.0
Eliminations............................................... (5.1) (6.2) (5.1)
-------- -------- --------
$2,204.5 $1,864.9 $1,549.4
======= ======= =======
AMORTIZATION OF GOODWILL
NACCO Materials Handling Group............................. $ 10.8 $ 10.8 $ 10.8
Hamilton Beach/Proctor-Silex............................... 2.8 2.8 2.9
Kitchen Collection......................................... .1 .1 .1
-------- -------- --------
$ 13.7 $ 13.7 $ 13.8
======= ======= =======
OPERATING PROFIT
NACCO Materials Handling Group............................. $ 85.8 $ 65.8 $ 39.6
Hamilton Beach/Proctor-Silex............................... 25.0 25.3 11.8
North American Coal........................................ 45.8 44.3 40.8
Kitchen Collection......................................... 3.3 5.4 4.8
NACCO and Other............................................ (8.8) (10.0) (8.0)
-------- -------- --------
$ 151.1 $ 130.8 $ 89.0
======= ======= =======
OPERATING PROFIT EXCLUDING GOODWILL AMORTIZATION
NACCO Materials Handling Group............................. $ 96.6 $ 76.6 $ 50.4
Hamilton Beach/Proctor-Silex............................... 27.8 28.1 14.7
North American Coal........................................ 45.8 44.3 40.8
Kitchen Collection......................................... 3.4 5.5 4.9
NACCO and Other............................................ (8.8) (10.0) (8.0)
-------- -------- --------
$ 164.8 $ 144.5 $ 102.8
======= ======= =======
INTEREST INCOME
NACCO Materials Handling Group............................. $ .9 $ .8 $ .8
North American Coal........................................ 2.4 3.0 2.1
NACCO and Other............................................ 1.9 1.1 1.9
Eliminations............................................... (3.3) (3.3) (2.9)
-------- -------- --------
$ 1.9 $ 1.6 $ 1.9
======= ======= =======
F-22
62
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1995 1994 1993
-------- -------- --------
INTEREST EXPENSE
NACCO Materials Handling Group............................. $ (30.6) $ (33.7) $ (40.4)
Hamilton Beach/Proctor-Silex............................... (7.2) (7.5) (7.7)
North American Coal........................................ (1.3) (1.3) (.8)
Kitchen Collection......................................... (.5) (.3) (.1)
NACCO and Other............................................ (1.6) (2.3) (1.3)
Eliminations............................................... 3.3 3.3 2.9
-------- -------- --------
(37.9) (41.8) (47.4)
Project mining subsidiaries................................ (14.0) (14.3) (14.1)
-------- -------- --------
$ (51.9) $ (56.1) $ (61.5)
======= ======= =======
OTHER -- NET, INCOME (EXPENSE)
NACCO Materials Handling Group............................. $ 2.2 $ 2.9 $ (1.7)
Hamilton Beach/Proctor-Silex............................... (.8) (.3) (4.1)
North American Coal........................................ .5 (1.1) --
NACCO and Other............................................ .6 .7 1.1
-------- -------- --------
$ 2.5 $ 2.2 $ (4.7)
======= ======= =======
NET INCOME (LOSS)
Before Extraordinary Items
NACCO Materials Handling Group.......................... $ 36.9 $ 18.7 $ (5.1)
Hamilton Beach/Proctor-Silex............................ 11.8 10.2 (1.0)
North American Coal..................................... 22.6 21.0 17.4
Kitchen Collection...................................... 1.6 3.1 2.7
NACCO and Other......................................... (4.1) (5.3) (2.8)
Minority interest....................................... (3.3) (2.4) .4
-------- -------- --------
65.5 45.3 11.6
Extraordinary gain, net-of-tax.......................... 32.3 -- --
Extraordinary charges, net-of-tax....................... (3.4) (3.2) (3.3)
-------- -------- --------
$ 94.4 $ 42.1 $ 8.3
======= ======= =======
TOTAL ASSETS
NACCO Materials Handling Group............................. $1,052.2 $ 906.2 $ 833.0
Hamilton Beach/Proctor-Silex............................... 288.0 289.6 300.3
North American Coal........................................ 40.7 49.0 44.8
Kitchen Collection......................................... 25.1 26.0 23.3
NACCO and Other............................................ 62.7 92.6 88.3
-------- -------- --------
1,468.7 1,363.4 1,289.7
Project mining subsidiaries................................ 433.3 412.3 416.7
-------- -------- --------
1,902.0 1,775.7 1,706.4
Consolidating eliminations................................. (68.2) (81.4) (63.9)
-------- -------- --------
$1,833.8 $1,694.3 $1,642.5
======= ======= =======
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NACCO Materials Handling Group............................. $ 31.8 $ 32.2 $ 31.7
Hamilton Beach/Proctor-Silex............................... 15.8 15.5 15.3
North American Coal........................................ 1.7 1.6 1.5
Kitchen Collection......................................... 1.0 .9 .8
NACCO and Other............................................ .2 .1 .3
-------- -------- --------
50.5 50.3 49.6
Project mining subsidiaries................................ 28.8 29.9 28.5
-------- -------- --------
$ 79.3 $ 80.2 $ 78.1
======= ======= =======
F-23
63
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1995 1994 1993
-------- -------- --------
CAPITAL EXPENDITURES
NACCO Materials Handling Group............................. $ 39.4 $ 25.9 $ 20.2
Hamilton Beach/Proctor-Silex............................... 9.7 13.4 12.2
North American Coal........................................ 3.5 .4 1.0
Kitchen Collection......................................... 1.4 1.0 1.1
NACCO and Other............................................ .1 .2 .2
-------- -------- --------
54.1 40.9 34.7
Project mining subsidiaries................................ 19.0 11.7 23.0
-------- -------- --------
$ 73.1 $ 52.6 $ 57.7
======= ======= =======
DATA BY GEOGRAPHIC AREA
EUROPE,
AFRICA AND ASIA-
AMERICAS MIDDLE EAST PACIFIC ELIMINATIONS CONSOLIDATED
-------- ----------- -------- ------------ ------------
1995
Sales to unaffiliated
customers...................... $1,691.8 $ 426.9 $ 85.8 $ -- $2,204.5
Transfer between geographic
areas.......................... 63.7 156.1 -- (219.8) --
-------- ----------- -------- ------------ ------------
Total revenues................... $1,755.5 $ 583.0 $ 85.8 $ (219.8) $2,204.5
======= ========= ======= ========= =========
Operating profit................. $ 116.0 $ 34.8 $ .3 $ -- $ 151.1
======= ========= ======= ========= =========
Total assets..................... $1,430.9 $ 374.4 $ 48.3 $ (19.8) $1,833.8
======= ========= ======= ========= =========
1994
Sales to unaffiliated
customers...................... $1,509.4 $ 294.4 $ 61.1 $ -- $1,864.9
Transfer between geographic
areas.......................... 49.2 130.6 -- (179.8) --
-------- ----------- -------- ------------ ------------
Total revenues................... $1,558.6 $ 425.0 $ 61.1 $ (179.8) $1,864.9
======= ========= ======= ========= =========
Operating profit................. $ 110.2 $ 15.4 $ 5.2 $ -- $ 130.8
======= ========= ======= ========= =========
Total assets..................... $1,371.1 $ 309.6 $ 24.0 $ (10.4) $1,694.3
======= ========= ======= ========= =========
1993
Sales to unaffiliated
customers...................... $1,284.8 $ 222.2 $ 42.4 $ -- $1,549.4
Transfer between geographic
areas.......................... 31.5 81.2 -- (112.7) --
-------- ----------- -------- ------------ ------------
Total revenues................... $1,316.3 $ 303.4 $ 42.4 $ (112.7) $1,549.4
======= ========= ======= ========= =========
Operating profit................. $ 89.7 $ (2.4) $ 1.7 $ -- $ 89.0
======= ========= ======= ========= =========
Total assets..................... $1,381.5 $ 274.8 $ 19.6 $ (33.4) $1,642.5
======= ========= ======= ========= =========
NACCO parent company expense reduced Americas operating profit by $8.7
million, $9.9 million and $7.9 million in 1995, 1994 and 1993, respectively. The
Asia-Pacific category above does not include the operating results or assets of
NMHG's 50-percent-owned Japanese joint venture, Sumitomo-NACCO, which is
accounted for using the equity method.
F-24
64
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations for the year
ended December 31 is as follows:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
1995
TOTAL REVENUES
NACCO Materials Handling Group............. $ 363.2 $ 370.2 $ 349.2 $ 427.5
Hamilton Beach/Proctor-Silex............... 67.0 79.7 110.3 124.4
North American Coal........................ 60.5 55.3 62.5 69.7
Kitchen Collection......................... 12.2 13.5 18.1 25.8
NACCO and Other............................ -- .3 -- .2
Eliminations............................... (.5) (1.4) (1.8) (1.4)
------- ------- ------- -------
502.4 517.6 538.3 646.2
------- ------- ------- -------
GROSS PROFIT.................................. 100.8 99.7 101.3 123.9
------- ------- ------- -------
OPERATING PROFIT
NACCO Materials Handling Group............. 23.7 21.9 15.3 24.9
Hamilton Beach/Proctor-Silex............... 1.4 3.6 9.5 10.5
North American Coal........................ 11.7 9.2 10.8 14.1
Kitchen Collection......................... (.5) (.4) .9 3.3
NACCO and Other............................ (2.0) (2.1) (2.1) (2.6)
------- ------- ------- -------
34.3 32.2 34.4 50.2
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEMS............. 12.8 14.7 13.7 24.3
Extraordinary gain, net-of-tax............. -- -- -- 32.3
Extraordinary charges, net-of-tax.......... (1.3) -- (2.1) --
------- ------- ------- -------
NET INCOME.................................... $ 11.5 $ 14.7 $ 11.6 $ 56.6
====== ====== ====== ======
PER SHARE AMOUNTS:
INCOME BEFORE EXTRAORDINARY ITEMS............. $ 1.43 $ 1.64 $ 1.53 $ 2.71
Extraordinary gain, net-of-tax............. -- -- -- 3.61
Extraordinary charges, net-of-tax.......... (.14) -- (.24) --
------- ------- ------- -------
NET INCOME.................................... $ 1.29 $ 1.64 $ 1.29 $ 6.32
====== ====== ====== ======
F-25
65
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
1994
TOTAL REVENUES
NACCO Materials Handling Group............. $ 245.3 $ 290.4 $ 289.7 $ 353.5
Hamilton Beach/Proctor-Silex............... 68.6 76.1 106.9 125.9
North American Coal........................ 59.3 58.8 68.3 63.8
Kitchen Collection......................... 10.7 12.4 17.2 23.6
NACCO and Other............................ .1 .2 .2 .1
Eliminations............................... (.8) (1.0) (2.0) (2.4)
------- ------- ------- -------
383.2 436.9 480.3 564.5
------- ------- ------- -------
GROSS PROFIT.................................. 77.8 88.7 96.1 110.5
------- ------- ------- -------
OPERATING PROFIT
NACCO Materials Handling Group............. 11.1 19.8 14.5 20.4
Hamilton Beach/Proctor-Silex............... (.4) 3.5 9.6 12.6
North American Coal........................ 12.0 9.5 11.0 11.8
Kitchen Collection......................... (.2) .2 1.6 3.8
NACCO and Other............................ (2.2) (2.3) (2.5) (3.0)
------- ------- ------- -------
20.3 30.7 34.2 45.6
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY CHARGE............ 2.8 9.2 11.0 22.3
Extraordinary charge, net-of-tax........... -- (3.2) -- --
------- ------- ------- -------
NET INCOME.................................... $ 2.8 $ 6.0 $ 11.0 $ 22.3
====== ====== ====== ======
PER SHARE AMOUNTS:
INCOME BEFORE EXTRAORDINARY CHARGE............ $ .31 $ 1.03 $ 1.23 $ 2.49
Extraordinary charge, net-of-tax........... -- (.36) -- --
------- ------- ------- -------
NET INCOME.................................... $ .31 $ .67 $ 1.23 $ 2.49
====== ====== ====== ======
NOTE 21 -- PARENT COMPANY CONDENSED BALANCE SHEETS
The condensed balance sheets of NACCO, the parent company, at December 31
are as follows:
1995 1994
------ ------
ASSETS
Current assets................................................... $ .1 $ .2
Current intercompany accounts receivable, net.................... 11.0 12.8
Other assets..................................................... 1.6 1.8
Investment in subsidiaries
NACCO Materials Handling Group................................ 330.3 300.7
Hamilton Beach/Proctor-Silex.................................. 114.2 104.7
North American Coal........................................... 15.1 15.1
Kitchen Collection............................................ 11.8 10.1
Bellaire...................................................... .9 (101.3)
------ ------
472.3 329.3
Property, plant and equipment, net............................... 1.1 1.2
Deferred income taxes............................................ 22.2 1.7
------ ------
Total Assets.................................................. $508.3 $347.0
====== ======
F-26
66
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1995 1994
------ ------
LIABILITIES AND EQUITY
Current liabilities.............................................. $ 9.9 $ 18.9
Reserve for future interest on UMWA obligation................... 64.2 --
Note payable to Bellaire......................................... 43.3 19.2
Notes payable to other subsidiaries.............................. 16.9 25.9
Deferred income and other........................................ 3.9 3.6
Stockholders' equity............................................. 370.1 279.4
------ ------
Total Liabilities and Stockholders' Equity.................... $508.3 $347.0
====== ======
The credit agreements at NMHG, HB/PS and KCI allow the transfer of assets
to NACCO under certain circumstances. The amount of NACCO's investment in NMHG,
HB/PS and KCI that was restricted at December 31, 1995, totals approximately
$418.2 million. There are no restrictions on the transfer of assets from North
American Coal, and its dividends and advances are the primary source of cash for
NACCO.
F-27
67
NACCO INDUSTRIES, INC. REPORT OF MANAGEMENT
TO THE STOCKHOLDERS OF NACCO INDUSTRIES, INC.:
The management of NACCO Industries, Inc. is responsible for the
preparation, content and integrity of the financial statements and related
information contained within this report. The accompanying financial statements
have been prepared in accordance with generally accepted accounting principles
and include amounts that are based on informed judgments and estimates.
The Company's code of conduct, communicated throughout the organization,
requires adherence to high ethical standards in the conduct of the Company's
business.
NACCO Industries, Inc. and each of its subsidiaries maintains a system of
internal controls designed to provide reasonable assurance as to the protection
of assets and the integrity of the financial statements. These systems are
augmented by the selection of qualified financial management personnel. In
addition, an internal audit function periodically assesses the internal
controls.
Arthur Andersen LLP, independent certified public accountants, audits NACCO
Industries, Inc. and its subsidiaries' financial statements. Its audits are
conducted in accordance with generally accepted auditing standards and provide
an objective and independent assessment that helps ensure fair presentation of
the Company's operating results and financial position. The independent
accountants have access to all financial records and related data of the
Company, as well as to the minutes of stockholders' and directors' meetings.
The Audit Committee of the Board of Directors, composed of independent
directors, meets regularly with the independent auditors and internal auditors
to review the scope of their audit reports and to discuss any action to be
taken. The independent auditors and the internal auditors have free and direct
access to the Audit Committee. The Audit Committee also reviews the financial
reporting process and accounting policies of NACCO Industries Inc. and each of
its subsidiaries.
Alfred M. Rankin, Jr. Frank B. O'Brien Steven M. Billick
- ------------------------------ ------------------------------ ------------------------------
Alfred M. Rankin, Jr. Frank B. O'Brien Steven M. Billick
Chairman, President Senior Vice President -- Vice President and Controller
and Chief Executive Officer Corporate Development
and Chief Financial Officer
F-28
68
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY CONDENSED BALANCE SHEETS
DECEMBER 31
----------------------
1995 1994
-------- ---------
(IN THOUSANDS)
Current assets........................................................ $ 99 $ 279
Net amounts receivable from subsidiaries.............................. 11,035 12,755
Other assets.......................................................... 1,595 1,753
Investment in subsidiaries
NMHG................................................................ 330,274 300,672
HB/PS............................................................... 114,239 104,694
NACoal.............................................................. 15,125 15,125
KCI................................................................. 11,768 10,141
Bellaire............................................................ 900 (101,329)
-------- ---------
472,306 329,303
Property, plant and equipment, net.................................... 1,062 1,198
Deferred income taxes................................................. 22,241 1,699
-------- ---------
Total Assets................................................ $508,338 $ 346,987
======== =========
Current liabilities................................................... $ 9,946 $ 18,942
Reserve for future interest on UWMA obligation........................ 64,248 --
Note payable to Bellaire.............................................. 43,259 19,227
Notes payable to other subsidiaries................................... 16,889 25,834
Deferred income and other............................................. 3,869 3,593
Stockholders' equity.................................................. 370,127 279,391
-------- ---------
Total Liabilities and Stockholders' Equity.................. $508,338 $ 346,987
======== =========
See notes to parent company financial statements.
F-29
69
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
Income (expense):
Intercompany interest income................................ $ 198 $ 1,068 $ 1,841
Intercompany interest expense............................... (2,670) (3,510) (2,101)
Other -- net................................................ 2,090 464 829
------- ------- -------
(382) (1,978) 569
Administrative and general expenses........................... 8,713 9,903 7,831
------- ------- -------
Loss before income taxes.................................... (9,095) (11,881) (7,262)
Income tax benefit............................................ (4,502) (5,825) (1,748)
------- ------- -------
Net loss before equity in earnings of subsidiaries and
extraordinary items......................................... (4,593) (6,056) (5,514)
Equity in earnings of subsidiaries before extraordinary
items....................................................... 70,099 51,328 17,107
Extraordinary gain, net-of-tax................................ 32,333 -- --
Extraordinary charge, net-of-tax.............................. (3,399) (3,218) (3,292)
------- ------- -------
Net income.......................................... $94,440 $42,054 $ 8,301
======= ======= =======
See notes to parent company financial statements.
F-30
70
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
Operating activities
Net income............................................... $ 94,440 $ 42,054 $ 8,301
Equity in earnings of subsidiaries....................... (70,099) (51,328) (17,107)
Extraordinary gain, net-of-tax........................... (32,333) -- --
Extraordinary charge, net-of-tax......................... 3,399 3,218 3,292
-------- -------- --------
Parent company only net loss............................. (4,593) (6,056) (5,514)
Deferred income taxes.................................... (23,603) (4,866) 6,908
Income taxes net of intercompany tax payments............ (7,120) (3,442) (3,954)
Working capital changes.................................. 1,145 983 775
Changes in current intercompany amounts.................. 2,268 69 49
Change in reserve for future interest on UMWA
obligation............................................ 64,486 -- --
Items of income or expense not requiring cash outlays.... 491 (577) 299
-------- -------- --------
Net cash provided (used) by operating
activities..................................... 33,074 (13,889) (1,437)
-------- -------- --------
Investing Activities
Capital contributions to subsidiaries
NMHG.................................................. -- (24,273) (52,235)
Bellaire.............................................. (69,326) -- --
Dividends and advances received from subsidiaries........ 10,270 40,009 45,883
Note payable to Bellaire................................. 27,410 -- --
Purchases of Hyster-Yale 12 3/8% debentures.............. -- -- (11,832)
Reduction of investment in Hyster-Yale 12 3/8%
debentures............................................ 4,394 3,946 25,529
Expenditures for equipment............................... (79) (85) (147)
-------- -------- --------
Net cash provided (used) by operating
activities..................................... (27,331) 19,597 7,198
-------- -------- --------
Financing Activities
Cash dividends........................................... (6,365) (6,040) (5,854)
Treasury stock sales under stock option and directors'
compensation plans -- net............................. 817 251 212
Other -- net............................................. (194) 38 (75)
-------- -------- --------
Net cash used by financing activities............ (5,742) (5,751) (5,717)
-------- -------- --------
Cash and cash equivalents
Increase (decrease) for the period....................... 1 (43) 44
Balance at the beginning of the period................... 4 47 3
-------- -------- --------
Balance at the end of the period................. $ 5 $ 4 $ 47
======== ======== ========
See notes to parent company financial statements.
F-31
71
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
The notes to consolidated financial statements, included elsewhere in this
Form 10-K, are hereby incorporated by reference into these notes to parent
company financial statements.
NOTE A -- LONG-TERM OBLIGATIONS AND GUARANTEES
NACCO Industries, Inc. ("NACCO" the parent company) is a holding company
which owns four operating subsidiaries. It is NACCO's policy not to guarantee
the debt of such subsidiaries.
NOTE B -- CASH DIVIDENDS AND ADVANCES TO NACCO
Dividends received from the subsidiaries were $22.6, $62.7, and $23.3
million in 1995, 1994, and 1993, respectively.
NOTE C -- CAPITAL CONTRIBUTIONS TO SUBSIDIARIES
The 1995 capital contribution to Bellaire of $69.3 million includes a note
payable of $27.4 million and the assumption of a reserve for future interest on
UMWA obligation, net of deferred taxes, of $41.9 million.
The 1993 capital contribution to NMHG of $52.2 million includes the $26.7
million of cash contributed by NACCO to NMHG in 1993. In addition, NACCO
contributed previously purchased Hyster-Yale 12 3/8% debentures with a cost to
NACCO of $25.5 million (face value of $23.7 million) to NMHG in 1993.
NOTE D -- UNRESTRICTED CASH
The amount of unrestricted cash available to NACCO, included in Investment
in subsidiaries, was $30.1 million at December 31, 1995.
F-32
72
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
- --------------------------------------------------------------------------------
COL A. COL B. COL C. COL D. COL E.
- ----------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------- (D)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES --DESCRIBE --DESCRIBE PERIOD
- ----------------------------------------------------------------------------------------------------
(IN THOUSANDS)
1995
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts................. $4,472 $ 1,583 $148(C) $ 1,764(A) $4,439
Allowance for discounts,
adjustments and
returns.................. $6,168 $ 17,328 $ 16,618(B) $6,878
1994
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts................. $5,731 $ 1,240 $ 39(C) $ 2,538(A) $4,472
Allowance for discounts,
adjustments and
returns.................. $5,397 $ 17,878 $ 17,107(B) $6,168
1993
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts................. $5,302 $ 1,056 $ 595(A)
$ 32(C) $5,731
Allowance for discounts,
adjustments and
returns.................. $7,097 $ 16,596 $ 18,296(B) $5,397
Note A -- Accounts receivable balances written off, net of recoveries.
Note B -- Payments.
Note C -- Subsidiary's foreign currency translation adjustments and other.
Note D -- Balances which are not required to be presented and those which are
immaterial have been omitted.
F-33
73
EXHIBIT 11
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
INCOME:
Income before extraordinary items........................... $65,506 $45,272 $11,593
Extraordinary gain, net-of-tax.............................. 32,333 -- --
Extraordinary charges, net-of-tax........................... (3,399) (3,218) (3,292)
------- ------- -------
Net income.................................................. $94,440 $42,054 $ 8,301
======= ======= =======
PER SHARE AMOUNTS REPORTED TO STOCKHOLDERS -- Note 1
Income before extraordinary items........................... $ 7.31 $ 5.06 $ 1.30
Extraordinary gain, net-of-tax.............................. 3.61 -- --
Extraordinary charges, net-of-tax........................... (.38) (.36) (.37)
------- ------- -------
Net income.................................................. $ 10.54 $ 4.70 $ .93
======= ======= =======
PRIMARY:
Weighted average shares outstanding......................... 8,963 8,948 8,938
Dilutive stock options -- Note 2............................ 12 12 15
------- ------- -------
Totals................................................... 8,975 8,960 8,953
======= ======= =======
Per share amounts
Income before extraordinary items........................ $ 7.30 $ 5.05 $ 1.30
Extraordinary gain, net-of-tax........................... 3.60 -- --
Extraordinary charges, net-of-tax........................ (.38) (.35) (.37)
------- ------- -------
Net income............................................... $ 10.52 $ 4.70 $ .93
======= ======= =======
FULLY DILUTED:
Weighted average shares outstanding......................... 8,963 8,948 8,938
Dilutive stock options -- Note 2............................ 12 9 17
------- ------- -------
Totals................................................... 8,975 8,957 8,955
======= ======= =======
Per share amounts
Income before extraordinary items........................ $ 7.30 $ 5.05 $ 1.30
Extraordinary gain, net-of-tax........................... 3.60 -- --
Extraordinary charges, net-of-tax........................ (.38) (.35) (.37)
------- ------- -------
Net income............................................... $ 10.52 $ 4.70 $ .93
======= ======= =======
NOTE 1 -- Per share earnings have been computed and reported to the stockholders
pursuant to APB Opinion No. 15, which provides that "any reduction of
less than 3% in the aggregate need not be considered as dilution in
the computation and presentation of earnings per share data."
NOTE 2 -- Dilutive stock options are calculated based on the treasury stock
method. For primary per share earnings the average market price is
used. For fully diluted per share earnings the year-end market price,
if higher than the average market price, is used.