-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GeaZmi68eeUNWQyw3sp3X3rmYg+zE8Ebig1RKpYU/pIBYTOq7PVVmAoTRGCK+AvP tRrLFdVjEqozWfBe5xkELA== 0000789933-94-000001.txt : 19940520 0000789933-94-000001.hdr.sgml : 19940520 ACCESSION NUMBER: 0000789933-94-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NACCO INDUSTRIES INC CENTRAL INDEX KEY: 0000789933 STANDARD INDUSTRIAL CLASSIFICATION: 3537 IRS NUMBER: 341505819 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09172 FILM NUMBER: 94528276 BUSINESS ADDRESS: STREET 1: 5875 LANDERBROOK DR CITY: MAYFIELD HTS STATE: OH ZIP: 44124-4017 BUSINESS PHONE: 2164499600 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1994 .................................... OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-9172 ............ NACCO Industries, Inc. ...................................................... (Exact name of registrant as specified in its charter) DELAWARE 34-1505819 ....................................................................... (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5875 LANDERBROOK DRIVE, MAYFIELD HEIGHTS, OHIO 44124 ........................................................................ (Address of principal executive offices) Zip code Registrant's telephone number, including area code (216) 449-9600 ................. ...................................... Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the last 90 days. YES X NO ..... ..... Number of shares of Class A Common Stock outstanding at April 30, 1994: 7,186,087 ......... Number of shares of Class B Common Stock outstanding at April 30, 1994: 1,761,388 ......... NACCO INDUSTRIES, INC. TABLE OF CONTENTS PAGE NO. Part I. FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheets - March 31, 1994 3-4 and December 31, 1993 Unaudited Consolidated Statements of Income - 5 for the Three Months Ended March 31, 1994 and 1993 Unaudited Consolidated Statements of Cash Flows- 6 for the Three Months Ended March 31, 1994 and 1993 Notes to Unaudited Consolidated Financial 7-8 Statement Item 2 - Management's Discussion and Analysis of Results 9-19 of Operations and Financial Condition Part II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 20 Exhibit Index 22 - 2 - PART I Item 1 - Financial Statements CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Unaudited) (Audited) MARCH 31 DECEMBER 31 1994 1993 (In thousands) ASSETS Current Assets Cash and cash equivalents $ 16,552 $ 29,149 Accounts receivable, net 180,557 200,112 Inventories 284,927 238,168 Prepaid expenses and other 35,674 37,373 517,710 504,802 Other Assets 44,115 45,438 Property, Plant and Equipment, Net 491,401 496,213 Deferred Charges Goodwill, net 481,841 487,963 Deferred costs and other 65,008 64,663 Deferred income taxes 37,491 43,414 584,340 596,040 Total Assets $1,637,566 $1,642,493 See notes to unaudited consolidated financial statements. - 3 - CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Unaudited) (Audited) MARCH 31 DECEMBER 31 1994 1993 (In thousands) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 162,791 $ 148,397 Revolving credit agreements 47,784 35,178 Current maturities of long-term obligations 64,686 55,016 Income taxes 14,950 27,198 Other current liabilities 116,230 131,666 406,441 397,455 Notes Payable - not guaranteed by the parent company 344,209 357,788 Obligations of Project Mining Subsidiaries - not guaranteed by the parent company or its North American Coal subsidiary 336,410 338,504 Obligation to United Mine Workers of America Combined Benefit Fund 158,043 163,217 Self-insurance Reserves and Other 114,434 108,648 Minority Interests 40,467 41,255 Stockholders' Equity Common stock: Class A, par value $1 per share, 7,183,362 shares outstanding (1993--7,177,075 shares outstanding) 7,183 7,177 Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,762,813 shares outstanding (1993--1,763,503 shares outstanding) 1,763 1,764 Capital in excess of par value 2,582 2,548 Retained income 227,506 226,212 Foreign currency translation adjustment and other (1,472) (2,075) 237,562 235,626 Total Liabilities and Stockholders' Equity $1,637,566 $1,642,493 See notes to unaudited consolidated financial statements. - 4 - UNAUDITED CONSOLIDATED STATEMENTS OF INCOME NACCO INDUSTRIES, INC. AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31 1994 1993 (In thousands, except per share data) Net sales $381,051 $341,895 Other operating revenues 2,197 1,926 Total Revenues 383,248 343,821 Cost of sales 305,444 275,969 Gross Profit 77,804 67,852 Selling, administrative and general expenses 54,054 48,503 Amortization of goodwill 3,448 3,455 Operating Profit 20,302 15,894 Other income (expense) Interest income 338 439 Interest expense (14,793) (16,366) Other - net (1,284) (777) (15,739) (16,704) Income (Loss) Before Income Taxes and Minority Interest 4,563 (810) Income tax provision (benefit) 2,001 (336) Net Income (Loss) Before Minority Interest 2,562 (474) Minority interest 208 468 Net Income (Loss) $ 2,770 $ (6) Net Income (Loss) per share $ .31 $ .00 Dividends per share $ .165 $ .160 See notes to unaudited consolidated financial statements. - 5 - UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS NACCO INDUSTRIES, INC. AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31 1994 1993 (In thousands) Operating Activities Net income (loss) $ 2,770 $ (6) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 20,021 19,149 Deferred income taxes 527 1,984 Other non-cash items (1,128) 1,217 Working Capital Changes Accounts receivable 22,084 10,629 Inventories (45,683) (11,449) Other current assets 2,317 (1,063) Accounts payable 10,389 (8,476) Accrued income taxes (10,946) (9,595) Other liabilities (9,289) (12,085) Net cash used by operating activities (8,938) (9,695) Investing Activities Expenditures for property, plant and equipment (11,328) (13,253) Proceeds from the sale of assets 1,835 338 Net cash used by investing activities (9,493) (12,915) Financing Activities Additions to long-term obligations and revolving credit 43,034 60,576 Reductions of long-term obligations and revolving credit (36,650) (56,328) (Reductions of) additions to advances from customers (1,596) 3,713 Cash dividends paid (1,475) (1,430) Other - net 2,833 4,132 Net cash provided by financing activities 6,146 10,663 Effect of exchange rate changes on cash (312) 33 Cash and Cash Equivalents Decrease for the period (12,597) (11,914) Balance at the beginning of the period 29,149 33,847 Balance at the end of the period $16,552 $21,933 See notes to unaudited consolidated financial statements. - 6 - NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Dollars in Millions, Except Per Share Data) Note A - Basis of Presentation NACCO Industries, Inc. ("NACCO") is a holding company with four operating subsidiaries: The North American Coal Corporation ("North American Coal"), NACCO Materials Handling Group, Inc. ("NMHG"), Hamilton Beach/Proctor-Silex, Inc. ("Hamilton Beach/Proctor-Silex"), and The Kitchen Collection, Inc. ("Kitchen Collection"). The accompanying unaudited consolidated financial statements include the accounts of NACCO and its majority owned subsidiaries (NACCO Industries, Inc. and Subsidiaries - the "Company"). Intercompany accounts have been eliminated. These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company as of March 31, 1994, and the results of its operations and cash flows for the three month periods ended March 31, 1994 and 1993 have been included. Operating results for the three month period ended March 31, 1994 are not necessarily indicative of the results that may be expected for the year ended December 31, 1994. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993. The operating profit (loss) for the three month period ended March 31, 1993 has been restated to reflect the reclassification in the third quarter of 1993 of amortization of intangibles as an operating expense. Certain other amounts in the prior periods' unaudited consolidated financial statements have been reclassified to conform to the current period's presentation. Note B - Inventories Inventories are summarized as follows: March 31 December 31 1994 1993 Manufacturing inventories: Finished goods and service parts $140.2 $117.6 Raw materials and work in process 120.6 95.6 LIFO reserve (11.1) (10.2) Total manufacturing inventories 249.7 203.0 Coal and mining supplies 23.7 23.8 Retail inventories 11.6 11.4 $285.0 $238.2 The cost of manufacturing inventories has been determined by the last-in, first-out (LIFO) method for 70% and 69% of such inventories as of March 31, 1994 and December 31, 1993, respectively. - 7 - Note C Subsequent Event On May 10, 1994 the Company's Hamilton Beach/Proctor-Silex and Kitchen Collection subsidiaries modified their respective credit arrangements. These revisions provide improved pricing and liquidity and adjust the covenants and restrictions. At Hamilton Beach/Proctor-Silex the revised credit arrangement provides for a $135.0 million revolving credit facility. The expiration date of this facility (which currently is May 1997) can be extended one additional year, on an annual basis, upon the mutual consent of Hamilton Beach/Proctor-Silex and the bank group, beginning in 1995. This agreement, secured by all assets of Hamilton Beach/Proctor-Silex, allows borrowings to be made at either LIBOR or lender's prime rate plus a margin. The borrowing rates are subject to reductions based upon achievement of predetermined interest coverage ratios. At the end of the first quarter the stated interest rate was LIBOR plus 1.75%. As of May 10, 1994 the stated interest rate is LIBOR plus 1.00%. In addition, this modification allows Hamilton Beach/Proctor-Silex to pay dividends, under certain conditions, to its stockholders. The revised credit arrangement at Kitchen Collection allows for an increase to the outstanding balance on its term loan to $5.0 million. At March 31, 1994 the outstanding balance was $1.9 million. In addition, the scheduled repayments, which currently are in annual installments through 1997, are now in two equal installments due January 1, 1999 and January 1, 2000. This modification also reduces Kitchen Collection's stated interest rate to LIBOR plus 0.75% from LIBOR plus 1.50% and allows for increased levels of dividends to its stockholder. - 8 - Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition (Tabular Dollars in Millions, Except Per Share Data) FINANCIAL SUMMARY NACCO's four operating subsidiaries operate in distinct business environments, and the results of operations and financial condition are best discussed at the subsidiary level. Information relating to the Company's operations is presented below. The results for "North American Coal" have been adjusted to exclude the previously combined results of Bellaire Corporation, a non-operating subsidiary of NACCO. THREE MONTHS ENDED MARCH 31 1994 1993 REVENUES NMHG $245.3 $214.7 Hamilton Beach/Proctor-Silex 68.6 65.8 North American Coal 58.9 53.8 Kitchen Collection 10.7 9.1 Bellaire .5 1.2 Eliminations (.8) (.8) $383.2 $343.8 AMORTIZATION OF GOODWILL NMHG $ 2.7 $ 2.7 Hamilton Beach/Proctor-Silex .7 .8 $ 3.4 $ 3.5 OPERATING PROFIT (LOSS) NMHG $ 11.1 $ 9.6 Hamilton Beach/Proctor-Silex (.4) (2.7) North American Coal 11.6 11.0 Kitchen Collection (.2) (.1) Bellaire .4 .2 NACCO (2.2) (2.1) $ 20.3 $ 15.9 INTEREST INCOME NMHG $ .1 $ .1 North American Coal .6 .5 Bellaire .3 .3 NACCO .2 .7 Eliminations (.9) (1.2) $ .3 $ .4 INTEREST EXPENSE NMHG $ (8.7) $(10.5) Hamilton Beach/Proctor-Silex (1.4) (1.6) North American Coal (.3) (.2) NACCO (.7) (.9) Eliminations .9 1.3 (10.2) (11.9) Project mining subsidiaries (4.6) (4.4) $(14.8) $(16.3) - 9 - FINANCIAL SUMMARY (Continued) THREE MONTHS ENDED MARCH 31 1994 1993 OTHER-NET, INCOME (EXPENSE) NMHG $ (.6) $ (.6) Hamilton Beach/Proctor-Silex (.4) North American Coal (.6) (.3) Bellaire .1 NACCO .2 .1 $ (1.3) $ (.8) NET INCOME (LOSS) NMHG $ .9 $ (.8) Hamilton Beach/Proctor-Silex (1.2) (2.2) North American Coal 4.5 4.5 Kitchen Collection (.1) (.1) Bellaire .5 .4 NACCO (2.0) (2.3) Minority interest .2 .5 $ 2.8 $ 0.0 DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE NMHG $ 8.1 $ 8.0 Hamilton Beach/Proctor-Silex 3.9 4.0 North American Coal .4 .4 Kitchen Collection .2 .2 NACCO .3 12.6 12.9 Project mining subsidiaries 7.4 6.2 $20.0 $19.1 CAPITAL EXPENDITURES NMHG $ 6.3 $ 4.5 Hamilton Beach/Proctor-Silex 2.3 4.0 North American Coal .1 .1 Kitchen Collection .3 .3 9.0 8.9 Project mining subsidiaries 2.3 4.4 $11.3 $13.3 MARCH 31 DECEMBER 31 1994 1993 TOTAL ASSETS NMHG $ 844.7 $ 833.0 Hamilton Beach/Proctor-Silex 295.1 300.3 North American Coal 72.7 63.7 Kitchen Collection 19.1 23.3 Bellaire 95.2 97.0 NACCO 20.6 22.8 1,347.4 1,340.1 Project mining subsidiaries 411.3 416.7 1,758.7 1,756.8 Consolidating eliminations (121.1) (114.3) $1,637.6 $1,642.5 - 10 - NORTH AMERICAN COAL North American Coal mines and markets lignite for use primarily as fuel for power generation by electric utilities and general industry. The lignite is surface mined in North Dakota, Texas and Louisiana. Total coal reserves approximate 2.2 billion tons with 1.4 billion tons committed to electric utility customers pursuant to long- term contracts. FINANCIAL REVIEW First Quarter of 1994 Compared With First Quarter of 1993 The following schedule details the components of the changes in revenues, operating profit and net income for the first quarter of 1994 compared with 1993: Operating Net Revenues Profit Income 1993 $53.8 $11.0 $4.5 Volume (tons) 5.0 .9 .6 Mix of tons sold (1.1) (1.1) (.8) Agreed profit per ton (.1) (.1) (.1) Average selling price (.2) (.2) (.1) Royalties received (.1) (.1) Pass-through costs 1.6 .1 Operating costs 1.1 .7 Other income (expense) (.3) 1994 $58.9 $11.6 $4.5 The favorable impact from volume reflects increased sales tons at three of the four operating mines. During the first quarter of 1994 North American Coal sold 6.9 million tons of lignite compared with 6.6 million tons in 1993. While sales tons were higher the mix of tons sold was unfavorable because Red River sold its additional tons at lower prices in 1994. Increases in pass-through costs at the project mines, which are included in the cost of coal to the utility customer, increased revenues $1.6 million. These pass-through costs include costs of operations, interest expense and certain other income and expense items. Increases and decreases in pass-through costs have no significant impact on net income. The favorable operating profit impact from operating costs relate primarily to reduced costs at the Red River mine. Other Income and Expense Items of other income (expense) for North American Coal were as follows for the three months ended March 31: 1994 1993 Interest income $ .6 $ .5 Interest expense $(4.9) $(4.6) Other-net $ (.6) $ (.3) - 11 - Provision for Income Taxes Income before income taxes, provision for income taxes and the effective tax rate for North American Coal were as follows for the three months ended March 31: 1994 1993 Income before income taxes $6.7 $6.6 Provision for income taxes $2.2 $2.1 Effective tax rate 32.6% 31.7% 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 1996) can be extended one additional year, on an annual basis, upon the mutual consent of North American Coal and the bank group, beginning in 1994. North American Coal had $32.0 million of its revolving credit facility available at March 31, 1994. The financing of the project mining subsidiaries, which is guaranteed by the utility customers, consists of long-term equipment leases, notes payable and non-interest-bearing advances from customers. The obligations of the project mining subsidiaries do not impact the short- or long-term liquidity of the Company and are without recourse to NACCO or North American Coal. These arrangements do not prevent the project mining subsidiaries from paying dividends in amounts up to their retained earnings. Supplemental operating data for North American Coal is presented below: THREE MONTHS ENDED MARCH 31 1994 1993 Income before tax from operating mines $ 6.4 $ 6.1 Royalty and other income, net $ 1.6 $ 1.7 Headquarters expense $(1.3) $(1.2) Net income $ 4.5 $ 4.5 Supplemental financial data for North American Coal, excluding the project mining subsidiaries, is presented below: MARCH 31 DECEMBER 31 1994 1993 Total assets net of current liabilities (excluding debt) $69.1 $59.0 Debt $21.7 $17.0 Stockholder's equity $35.3 $33.7 Debt to total capitalization 38% 33% - 12 - NACCO MATERIALS HANDLING GROUP NMHG, 97% owned by NACCO, designs, manufactures and markets forklift trucks and related service parts under the Hyster and Yale brand names. FINANCIAL REVIEW The results of operations for NMHG were as follows for the three months ended March 31: 1994 1993 Revenues Americas $174.1 $155.5 Europe, Africa and Middle East 58.2 49.1 Australia and Far East 13.0 10.1 $245.3 $214.7 Operating profit Americas $ 9.7 $ 9.7 Europe, Africa and Middle East .7 (1.4) Australia and Far East 1.1 .5 Corporate and Eliminations (.4) .8 $11.1 $ 9.6 Operating profit excluding goodwill amortization Americas $11.7 $11.7 Europe, Africa and Middle East 1.4 (.7) Australia and Far East 1.1 .5 Corporate and Eliminations (.4) .8 $13.8 $12.3 First Quarter of 1994 Compared With First Quarter of 1993 The following schedule details the components of the changes in revenues, operating profit and net income (loss) for the first quarter of 1994 compared with 1993: Net Operating Income Revenues Profit (Loss) 1993 $214.7 $ 9.6 $(.8) Increase (Decrease) in 1994 from: Unit volume 24.6 4.5 3.0 Sales mix 2.0 1.1 .7 Average sales price 1.5 1.5 1.0 Service parts 4.0 1.4 .9 Manufacturing cost 1.1 .7 Other operating expense (4.1) (2.7) Foreign currency translation (1.5) (4.0) (3.0) Other income and expense .9 Differences between effective and statutory tax rates .5 Change in statutory tax rate (.3) 1994 $245.3 $11.1 $ .9 - 13 - Increased unit volume in 1994 reflects the continued economic improvement in North America and improvements in global market share. Most European markets continue to be in recession. While price discounting continues to be prevalent in the forklift industry, pricing has been favorable in 1994 compared with 1993. Sales mix changes to higher margin products have positively affected results of operations in 1994. The service parts business continues to improve in North America and Europe due to the improving economy in North America and the addition of new dealers in Europe. Manufacturing costs have decreased in 1994 due to higher production volumes which have led to increased overhead absorption. New product introductions in 1993 increased manufacturing costs in Europe during 1993 which did not recur in 1994. Other operating expenses increased in 1994 due to additional marketing programs and new dealer promotion costs. Operating profit was adversely affected by a stronger Japanese Yen which increased the cost of purchases sourced from Japan. NMHG's backlog of orders at March 31, 1994 was approximately 18,500 units compared to the 12,000 units at December 31, 1993. Backlog has increased due to a significant increase in orders from dealers both in North America and Europe. Other Income and Expense Items of other income (expense) for NMHG were as follows for the three months ended March 31: 1994 1993 Interest income $ .1 $ .1 Interest expense $(8.7) $(10.5) Other-net $ (.6) $ (.6) The reduction in interest expense in 1994 is due to lower levels of debt in 1994 after the 1993 debt restructuring. Provision for Income Taxes Income (loss) before income taxes, provision (benefit) for income taxes and the effective tax rate for NMHG were as follows for the three months ended March 31: 1994 1993 Income (loss) before income taxes $ 1.9 $(1.4) Provision (benefit) for income taxes $ 1.0 $ (.6) Effective tax rate 53.5% 45.5% The higher tax rate in 1994 compared with 1993 is primarily due to tax benefits received in 1993 on the sale of property which are not repeated in 1994. In addition, the tax rate in 1994 reflects increased domestic and foreign statutory tax rates. LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $6.3 million during the first three months of 1994. The majority of these expenditures were for manufacturing expansion and tooling related to the future production of new products. It is estimated that NMHG's capital expenditures for the remainder of 1994 will be approximately $18.7 million. The principal sources of financing for these capital expenditures are internally generated funds, bank borrowings and assistance grants from local development boards. - 14 - NMHG's management believes it can adequately meet all of its current and long-term commitments and operating needs. This is a result of its cash flow from operations and additional funds available under revolving credit agreements. NMHG had available $89.3 million of its $100.0 million revolving credit facility at March 31, 1994. Supplemental financial data for NMHG is presented below: MARCH 31 DECEMBER 31 1994 1993 Total assets net of current liabilities (excluding debt) $651.0 $644.0 Goodwill, net $381.2 $383.9 Debt $332.2 $326.6 Stockholders' equity $259.0 $257.1 Debt to total capitalization 56% 56% HAMILTON BEACH/PROCTOR-SILEX Hamilton Beach/Proctor-Silex, 80% 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 three months ended March 31: 1994 1993 Revenues $68.6 $65.8 Operating loss $ (.4) $(2.7) Operating profit (loss) excluding goodwill amortization $ .3 $(1.9) Net loss $(1.2) $(2.2) First Quarter of 1994 Compared With First Quarter of 1993 The following schedule details the components of the changes in revenues, operating loss and net loss for the first quarter of 1994 compared with 1993: Operating Net Revenues Loss Loss 1993 $65.8 $(2.7) $(2.2) Increase (Decrease) in 1994 from: Unit volume 3.3 .8 .5 Sales mix (.3) (.1) Average sales price .2 .2 .1 Foreign currency translation (.4) (.4) (.3) Manufacturing cost 2.2 1.4 Other operating expense (.4) (.3) Other income and expense (.1) Differences between effective and statutory tax rates (.3) 1994 $68.6 $ (.4) $(1.2) - 15 - The favorable impact from volume is due primarily to increased sales of blenders, toasters, coffeemakers and food processors somewhat offset by reduced iron sales. The increased volumes in blenders, food processors and toasters were primarily in lower priced models resulting in an unfavorable sales mix. The drop in the value of the Canadian dollar to the U.S. dollar in the first quarter of 1994 compared with the first quarter of 1993 negatively influenced operating results in 1994. The favorable impact from manufacturing costs related primarily to lower material costs and increased manufacturing efficiencies and throughput. Other Income and Expense Items of other income (expense) for Hamilton Beach/Proctor- Silex were as follows for the three months ended March 31: 1994 1993 Interest expense $(1.4) $(1.6) Other-net $(.4) ---- Other-net in 1994 consisted primarily of a loss from the sale of certain equipment and tooling during the quarter. The reduced interest expense in 1994 is the result of lower average interest rates offset somewhat by higher average borrowings. Provision for Income Taxes Loss before income taxes, benefit for income taxes and the effective tax rate for Hamilton Beach/Proctor-Silex were as follows for the three months ended March 31: 1994 1993 Loss before income taxes $(2.2) $(4.3) Benefit for income taxes $(1.0) $(2.1) Effective tax rate 45.1% 47.7% LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $2.3 million during the first three months of 1994 and are estimated to be $11.7 million for the remainder of 1994. The primary purpose of these expenditures is to increase manufacturing efficiency and to acquire tooling for new and existing products. These expenditures are funded primarily from internally generated funds and short-term borrowings. Hamilton Beach/Proctor-Silex has a revolving credit facility of up to $95.0 million, the availability of which is based on percentages of eligible accounts receivable and inventory. As of March 31, 1994, $12.1 million of the revolving credit facility was available. On May 10, 1994 Hamilton Beach/Proctor-Silex modified its credit arrangement to provide for a $135.0 million revolving credit facility. The expiration date of this facility (which currently is May 1997) can be extended one additional year, on an annual basis, upon the mutual consent of Hamilton Beach/Proctor-Silex and the bank group, beginning in 1995. This agreement, secured by all assets of Hamilton Beach/Proctor-Silex, allows borrowings to be made at either LIBOR or lender's prime rate plus a margin. The borrowing rates are subject to reductions based upon achievement of predetermined interest coverage ratios. At the end of the first quarter the stated interest rate was LIBOR plus 1.75%. As of May 10, 1994 the stated interest rate is LIBOR plus 1.00%. In addition, this modification allows Hamilton Beach/Proctor-Silex to pay dividends, under certain conditions, to its stockholders. - 16 - Supplemental financial data for Hamilton Beach/Proctor-Silex is presented below: MARCH 31 DECEMBER 31 1994 1993 Total assets net of current liabilities (excluding debt) $232.4 $237.9 Goodwill, net $ 96.7 $100.1 Debt $ 85.4 $ 86.5 Stockholders' equity $134.3 $138.6 Debt to total capitalization 39% 39% 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 being generated in the fourth quarter during the fall holiday selling season. FINANCIAL REVIEW First Quarter of 1994 Compared With First Quarter of 1993 The following schedule details the components of the changes in revenues, operating loss and net loss for the first quarter of 1994 compared with 1993: Operating Net Revenues Loss Loss 1993 $ 9.1 $(.1) $(.1) Increase (decrease) in 1994 from: Stores opened in 1993 1.7 .1 .1 Comparable stores (.1) (.1) (.1) Other (.1) 1994 $10.7 $(.2) $(.1) Provision for Income Taxes Loss before income taxes, benefit for income taxes and the effective tax rate for Kitchen Collection were as follows for the three months ended March 31: 1994 1993 Loss before income taxes $(.2) $(.1) Benefit for income taxes $(.1) ---- Effective tax rate 40.7% 40.0% LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $0.3 million during the first three months of 1994. Estimated capital expenditures for the remainder of 1994 are $1.1 million. These expenditures are primarily for new - 17 - store openings and improvements to existing facilities. The principal source of funds for these capital expenditures is internally generated funds. At March 31, 1994, Kitchen Collection had available all of its $2.5 million line of credit. This credit line is renewable annually in May and has currently been extended through May, 1995. On May 10, 1994 Kitchen Collection modified its credit arrangement to allow for an increase in the outstanding balance on its term loan to $5.0 million. At March 31, 1994 the outstanding balance was $1.9 million. In addition, the scheduled repayments, which currently are in annual installments through 1997, are now in two equal installments due January 1, 1999 and January 1, 2000. This modification also reduces Kitchen Collection's stated interest rate to LIBOR plus 0.75% from LIBOR plus 1.50% and allows for increased levels of dividends to its stockholder. Supplemental financial data for Kitchen Collection is presented below: MARCH 31 DECEMBER 31 1994 1993 Total assets net of current liabilities (excluding debt) $14.5 $15.0 Goodwill, net $ 3.9 $ 4.0 Debt $ 1.9 $ 2.4 Stockholder's equity $12.5 $12.6 Debt to total capitalization 13% 16% NACCO AND OTHER FINANCIAL REVIEW First Quarter of 1994 Compared with First Quarter of 1993 The following schedule details the components of the changes in operating loss and net loss for the first quarter of 1994 compared with 1993: Operating Net Loss Loss 1993 $(2.1) $(2.3) Administrative general expenses Payroll related (.2) (.1) Outside services .1 Interest income (.2) Interest expense .1 Other-net .1 Differences between effective and statutory tax rates .4 1994 $(2.2) $(2.0) The reduction in interest income relates to NMHG's Hyster- Yale 12 3/8% subordinated debentures. In the first quarter of 1993, NACCO owned $23.7 million, face value, of these debentures and received interest income on them. These debentures were contributed to NMHG during the third quarter of 1993. In the first quarter of 1994 NACCO owned $7.9 million, face value, of these debentures and as a result NACCO has earned less interest income during the first quarter of 1994 compared with 1993. The variance in differences between effective and statutory tax rates reflects a reduction in 1994 in the consolidating income tax adjustment recognized at the reporting entity level. - 18 - 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. As previously noted in this Management's Discussion and Analysis, the debt arrangements at Hamilton Beach/Proctor-Silex and Kitchen Collection were modified on May 10, 1994. These modifications permit the payment of dividends by Hamilton Beach/Proctor-Silex to NACCO under certain circumstances and increases the level of dividends that can be paid by Kitchen Collection. North American Coal continues to be allowed to pay dividends to 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, the substantial prepayment of scheduled debt payments and the utility customers' funding of the project mining subsidiaries. BELLAIRE CORPORATION Bellaire Corporation ("Bellaire") is a non-operating subsidiary of NACCO. Bellaire's operating results primarily include royalty payments received on certain coal reserves and mine closing activities related to the Indian Head Mine, which ceased mining operations in April 1992. During the first quarter of 1994 Bellaire had revenues and operating profit of $0.5 million and $0.4 million, respectively, compared with revenues of $1.2 million and operating profit of $0.2 million in 1993. Bellaire's net income in the first quarter of 1994 and 1993 is $0.5 million and $0.4 million, respectively. Because Bellaire's operating results during the first quarter of 1994 and 1993 are not significant they will not be discussed in detail. The condensed balance sheets for Bellaire were as follows: MARCH 31 DECEMBER 31 1994 1993 Net current assets $ 18.0 $ 18.2 Property, plant and equipment, net .5 .5 Deferred taxes and other assets 66.1 67.0 Obligation to United Mine Workers of America Combined Benefit Fund (158.0) (163.2) Other liabilities (24.9) (21.2) Deficit $(98.3) $(98.7) - 19 - Part II Item 1 - Legal Proceedings None Item 2 - Change in Securities None Item 3 - Defaults Upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits. See Exhibit Index on page 22 of this quarterly report on Form 10-Q. - 20 - Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NACCO Industries, Inc. (Registrant) Date May 13, 1994 Frank B. O'Brien Frank B. O'Brien Senior Vice President -Corporate Development and Chief Financial Officer Date May 13, 1994 Steven M. Billick Steven M. Billick Vice President and Controller (Principal Accounting Officer) - 21 - Exhibit Index Exhibit Page Number* Description of Exhibit Number (11) Computation of Earnings Per Common Share 23 *Numbered in accordance with Item 601 of Regulation S-K. - 22 - Exhibit 11 NACCO Industries, Inc. And Subsidiaries Form 10-Q Computation of Earnings per Share THREE MONTHS MARCH 31 1994 1993 (In thousands, except per share data) Net income (loss): $2,770 $ (6) Per share amounts reported to stockholders Note 1: $ .31 $ 0.0 Primary: Weighted average shares outstanding 8,942 8,936 Dilutive stock options Note 2 15 16 Totals 8,957 8,952 Per share amounts $ .31 $ 0.0 Fully diluted Note 3: Weighted average shares outstanding 8,936 Dilutive stock options Note 2 18 Totals 8,954 Per share amounts $ 0.0 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 quarter-end market price, if higher than the average market price for the period, is used. Note 3 Fully diluted per share earnings for the three months ended March 31, 1994 are not disclosed because the quarter-end market price was lower than the average market price for the quarter. - 23 - -----END PRIVACY-ENHANCED MESSAGE-----