-----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, TevZ0pryiktA0LzIxZD4tb17oMAavj96wSAjyn2FviA9WFn+LSRRKl1oJh2IeEIR IMmIFl+CRHVR/Wb7CorrcA== 0000789933-95-000005.txt : 19950516 0000789933-95-000005.hdr.sgml : 19950516 ACCESSION NUMBER: 0000789933-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NACCO INDUSTRIES INC CENTRAL INDEX KEY: 0000789933 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL TRUCKS TRACTORS TRAILERS & STACKERS [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: 95538920 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, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 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, 1995: 7,245,435 Number of shares of Class B Common Stock outstanding at April 30, 1995: 1,719,330 1 NACCO INDUSTRIES, INC. TABLE OF CONTENTS Part I. FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 1995 and 1994 Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1995 and 1994 Notes to Unaudited Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition Part II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K Exhibit Index 2 PART I Item 1 - Financial Statements CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Unaudited) (Audited) MARCH 31 DECEMBER 31 1995 1994 (In thousands) ASSETS Current Assets Cash and cash equivalents $ 15,250 $ 19,541 Accounts receivable, net 218,129 236,215 Inventories 357,019 298,987 Prepaid expenses and other 29,750 31,893 620,148 586,636 Other Assets 41,313 41,341 Property, Plant and Equipment, Net 482,679 485,314 Deferred Charges Goodwill, net 468,835 471,574 Deferred costs and other 67,753 69,257 Deferred income taxes 39,348 40,200 575,936 581,031 Total Assets $1,720,076 $1,694,322 See notes to unaudited consolidated financial statements. 3 CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Unaudited) (Audited) MARCH 31 DECEMBER 31 1995 1994 (In thousands) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $237,517 $226,892 Revolving credit agreements 51,741 30,760 Current maturities of long-term obligations 22,158 63,509 Income taxes 14,042 20,356 Accrued payroll 22,626 28,018 Other current liabilities 102,873 111,903 450,957 481,438 Notes Payable - not guaranteed by the parent company 326,987 286,717 Obligations of Project Mining Subsidiaries - not guaranteed by the parent company or its North American Coal subsidiary 329,280 331,876 Obligation to United Mine Workers of America Combined Benefit Fund 154,097 154,959 Self-insurance Reserves and Other 122,763 119,399 Minority Interest 40,739 40,542 Stockholders' Equity Common stock: Class A, par value $1 per share, 7,245,121 shares outstanding (1994 - 7,228,739 shares outstanding) 7,245 7,229 Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,719,644 shares outstanding (1994 - 1,722,981 shares outstanding) 1,720 1,723 Capital in excess of par value 3,495 2,788 Retained income 272,225 262,226 Foreign currency translation adjustment and other 10,568 5,425 295,253 279,391 Total Liabilities and Stockholders' Equity $1,720,076 $1,694,322 See notes to unaudited consolidated financial statements. 4 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME NACCO INDUSTRIES, INC. AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31 1995 1994 (In thousands, except per share data) Net sales $499,966 $381,051 Other operating income 2,405 2,197 Total Revenues 502,371 383,248 Cost of sales 401,618 305,444 Gross Profit 100,753 77,804 Selling, administrative and general expenses 63,098 54,054 Amortization of goodwill 3,422 3,448 Operating Profit 34,233 20,302 Other income (expense) Interest income 393 338 Interest expense (14,023) (14,793) Other - net 288 (1,284) (13,342) (15,739) Income Before Income Taxes, Minority Interest and Extraordinary Charge 20,891 4,563 Provision for income taxes 7,878 2,001 Income Before Minority Interest and Extraordinary Charge 13,013 2,562 Minority interest (208) 208 Income Before Extraordinary Charge 12,805 2,770 Extraordinary charge, net-of-tax (1,280) Net Income $11,525 $2,770 Per Share: Income Before Extraordinary Charge $1.43 $.31 Extraordinary charge, net-of-tax (.14) Net Income $1.29 $.31 Dividends per share $.170 $.165 See notes to unaudited consolidated financial statements. 5 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS NACCO INDUSTRIES, INC. AND SUBSIDIARIES THREE MONTHS ENDED MARCH 31 1995 1994 (In thousands) Operating Activities Net income $11,525 $2,770 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary charge, net-of-tax 1,280 Depreciation, depletion and amortization 20,332 20,021 Deferred income taxes (574) 527 Other non-cash items 691 (1,128) Working Capital Changes: Accounts receivable 20,545 22,084 Inventories (55,762) (45,683) Other current assets 2,247 2,317 Accounts payable 12,525 10,389 Accrued income taxes (5,214) (10,946) Other liabilities (16,776) (9,289) Net cash used by operating activities (9,181) (8,938) Investing Activities Expenditures for property, plant and equipment (12,813) (11,328) Proceeds from the sale of assets 313 1,835 Net cash used by investing activities (12,500) (9,493) Financing Activities Additions to long-term obligations and revolving credit 162,789 28,645 Reductions of long-term obligations and revolving credit (143,496) (20,076) Additions to obligations of project mining subsidiaries 13,680 14,389 Reductions of obligations of project mining subsidiaries (15,778) (16,574) Additions (reductions) to advances from customers (959) (1,596) Cash dividends paid (1,524) (1,475) Capital grants 385 496 Other - net 570 2,337 Net cash provided by financing activities 15,667 6,146 Effect of exchange rate changes on cash 1,723 (312) Cash and Cash Equivalents Decrease for the period (4,291) (12,597) Balance at the beginning of the period 19,541 29,149 Balance at the end of the period $15,250 $16,552 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. ("HB/PS"), and The Kitchen Collection, Inc. ("KCI"). The accompanying unaudited consolidated financial statements include the accounts of NACCO and its majority owned subsidiaries (NACCO Industries, Inc. and Subsidiaries - the "Company"). Intercompany accounts have been eliminated. These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company as of March 31, 1995 and the results of its operations and cash flows for the three month periods ended March 31, 1995 and 1994 have been included. Operating results for the three month period ended March 31, 1995, are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. 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, 1994. Certain amounts in the prior periods' unaudited consolidated financial statements have been reclassified to conform to the current period's presentation. 7 Note B - Inventories Inventories are summarized as follows: March 31 December 31 1995 1994 Manufacturing inventories: Finished goods and service parts NACCO Materials Handling Group $ 97.5 $ 82.3 Hamilton Beach/Proctor-Silex 63.5 32.8 161.0 115.1 Raw materials and work in process NACCO Materials Handling Group 153.9 137.9 Hamilton Beach/Proctor-Silex 17.6 15.9 171.5 153.8 LIFO reserve NACCO Materials Handling Group (14.3) (11.4) Hamilton Beach/Proctor-Silex (.3) (.1) (14.6) (11.5) Total manufacturing inventories 317.9 257.4 North American Coal: Coal 7.4 8.4 Mining supplies 17.8 18.8 Retail inventories - Kitchen Collection 13.9 14.4 $357.0 $ 299.0 The cost of manufacturing inventories has been determined by the last-in, first-out (LIFO) method for 70 percent and 69 percent of such inventories as of March 31, 1995 and December 31, 1994, respectively. Note C - Revolving Credit Agreements and Notes Payable On February 28, 1995, NMHG entered into a new long-term credit agreement to replace its previous bank agreement and to refinance the majority of its existing long-term debt. The new agreement provides NMHG with an unsecured $350.0 million revolving credit facility to replace its previous senior credit facility. The new credit facility has a five-year maturity with extension options and performance-based pricing comparable to its previous senior credit facility which provides NMHG with reduced interest rates upon achievement of certain financial performance targets. With the new credit agreement in place, NMHG has the ability to call the remaining $78.5 million outstanding Hyster-Yale 12 3/8% subordinated debentures. These remaining debentures will be called in August, 1995 when the call price becomes 102.5, resulting in an extraordinary charge of $2.1 million which will be recorded at that time. Note D - Extraordinary Charge The 1995 extraordinary charge, of $1.3 million, net of $0.9 million in tax benefits, relates to the write off of deferred financing fees associated with NMHG's former revolving credit facility and senior term loan which was replaced by the new long-term credit agreement discussed in Note C above. 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 function in distinct business environments, and the results of operations and financial condition are best discussed at the subsidiary level as presented below. The results for "North American Coal" have been adjusted to exclude the previously combined results of Bellaire Corporation, a non-operating subsidiary of NACCO. THREE MONTHS ENDED MARCH 31 1995 1994 REVENUES NACCO Materials Handling Group $363.2 $245.3 Hamilton Beach/Proctor-Silex 67.0 68.6 North American Coal 60.5 59.2 Kitchen Collection 12.2 10.7 Bellaire .2 Eliminations (.5) (.8) $502.4 $383.2 AMORTIZATION OF GOODWILL NACCO Materials Handling Group $ 2.7 $ 2.7 Hamilton Beach/Proctor-Silex .7 .7 $ 3.4 $ 3.4 OPERATING PROFIT (LOSS) NACCO Materials Handling Group $ 23.7 $ 11.1 Hamilton Beach/Proctor-Silex 1.4 (.4) North American Coal 11.7 12.0 Kitchen Collection (.5) (.2) NACCO (2.0) (2.2) $ 34.3 $ 20.3 OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION NACCO Materials Handling Group $ 26.4 $ 13.8 Hamilton Beach/Proctor-Silex 2.1 .3 North American Coal 11.7 12.0 Kitchen Collection (.5) (.2) NACCO (2.0) (2.2) $ 37.7 $ 23.7 INTEREST INCOME NACCO Materials Handling Group $ .2 $ .1 North American Coal .6 .6 Bellaire .3 .3 NACCO .1 .2 Eliminations (.9) (.9) $ .3 $ .3 9 FINANCIAL SUMMARY - continued THREE MONTHS ENDED MARCH 31 1995 1994 INTEREST EXPENSE NACCO Materials Handling Group $ (7.5) $ (8.7) Hamilton Beach/Proctor-Silex (1.6) (1.4) North American Coal (.4) (.3) NACCO (.8) (.7) Eliminations .9 .9 (9.4) (10.2) Project mining subsidiaries (4.6) (4.6) $(14.0) $(14.8) OTHER-NET, INCOME (EXPENSE) NACCO Materials Handling Group $ .2 $ (.6) Hamilton Beach/Proctor-Silex (.1) (.4) North American Coal .2 (.6) Bellaire .1 NACCO .2 $ .3 $ (1.3) NET INCOME (LOSS) Before Extraordinary Charge NACCO Materials Handling Group $ 9.7 $ .9 Hamilton Beach/Proctor-Silex (.2) (1.2) North American Coal 5.3 4.8 Kitchen Collection (.3) (.1) Bellaire .1 .2 NACCO (1.6) (2.0) Minority interest (.2) .2 12.8 2.8 Extraordinary charge, net-of-tax (1.3) $ 11.5 $ 2.8 DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE NACCO Materials Handling Group $ 8.2 $ 8.1 Hamilton Beach/Proctor-Silex 4.0 3.9 North American Coal .4 .4 Kitchen Collection .2 .2 12.8 12.6 Project mining subsidiaries 7.4 7.4 $ 20.2 $ 20.0 CAPITAL EXPENDITURES NACCO Materials Handling Group $ 8.2 $ 6.3 Hamilton Beach/Proctor-Silex 2.0 2.3 North American Coal .1 .1 Kitchen Collection .4 .3 10.7 9.0 Project mining subsidiaries 2.0 2.3 $ 12.7 $ 11.3 10 FINANCIAL SUMMARY - continued MARCH 31 DECEMBER 31 1995 1994 TOTAL ASSETS NACCO Materials Handling Group $938.1 $ 906.2 Hamilton Beach/Proctor-Silex 290.4 289.6 North American Coal 65.2 49.0 Kitchen Collection 22.0 26.0 Bellaire 85.8 87.1 NACCO 30.8 26.6 1,432.3 1,384.5 Project mining subsidiaries 405.4 412.3 1,837.7 1,796.8 Consolidating eliminations (120.9) (102.5) $1,716.8 $1,694.3 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 2.2 billion tons with 1.4 billion tons committed to electric utility customers pursuant to long-term contracts. 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 income and expense 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. North American Coal's results for 1994 have been adjusted to include certain royalty and other payments previously classified with Bellaire, a non-operating subsidiary of NACCO, that are more appropriately classified with North American Coal. 11 NORTH AMERICAN COAL - continued FINANCIAL REVIEW - continued Tons sold by North American Coal's four operating mines were as follows for the three months ended March 31: 1995 1994 Coteau Properties 4.1 4.1 Falkirk Mining 1.9 1.8 Sabine Mining .9 .8 Red River Mining .1 .2 7.0 6.9 Revenues, income before taxes, provision for taxes and net income were as follows for the three months ended March 31: 1995 1994 Revenues Project mining subsidiaries $54.9 $ 53.0 Red River 3.3 4.2 58.2 57.2 Royalties and other 2.3 2.0 $60.5 $ 59.2 Income before taxes Project mining subsidiaries $ 6.4 $ 5.7 Red River .4 .7 Total from operating mines 6.8 6.4 Royalty and other income, net 2.5 2.0 Headquarters expense (1.7) (1.3) 7.6 7.1 Provision for taxes 2.3 2.3 Net income $ 5.3 $ 4.8 12 NORTH AMERICAN COAL - continued FINANCIAL REVIEW - continued First Quarter of 1995 Compared with First Quarter of 1994 The following schedule details the components of the changes in revenues, income before taxes and net income for the three months ended March 31: Income Before Net Revenues Taxes Income 1994 $59.2 $ 7.1 $4.8 Project mining subsidiaries Tonnage volume 1.5 .1 .1 Mix of tons sold .2 .2 .1 Agreed profit per ton .1 .1 .1 Red River Tonnage volume (.7) (.2) (.1) Mix of tons sold 1.4 1.4 .9 Average selling price (1.5) (1.5) (1.0) Operating costs (.2) (.1) Other income (expense) .3 .1 Variances from operating mines 1.0 .2 .1 Royalties and other income, net .3 .7 .5 Headquarters expense (.4) (.3) Differences between effective and statutory tax rates .2 1995 $60.5 $ 7.6 $5.3 The favorable mix variance at Red River is due to increased sales of base tons which yield a higher price as specified in the contract. North American Coal has an agreement in principle with its customer at Red River that would extend the contract term nine years in exchange for a lower sales prices per ton resulting in an unfavorable price variance. Royalty income favorably impacted operations due to the receipt of royalties relating to former eastern coal reserves. 13 NORTH AMERICAN COAL - continued FINANCIAL REVIEW - continued Other Income and Expense Items of other income (expense) for the three months ended March 31: 1995 1994 Interest income Project mining subsidiaries $ .3 $ .2 Other mining operations .3 .4 $ .6 $ .6 Interest expense Project mining subsidiaries $(4.6) $(4.6) Other mining operations (.4) (.3) $(5.0) $(4.9) Other-net Project mining subsidiaries $ .1 $ .1 Other mining operations .1 (.7) $ .2 $ (.6) Provision for Income Taxes North American Coal's effective tax rate for the three months ended March 31, 1995 and 1994 was 30.6 percent and 32.8 percent, respectively. 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 1997) can be extended one additional year, on an annual basis, upon the mutual consent of North American Coal and the bank group. North American Coal had $25.0 million of its revolving credit facility available at March 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. 14 NORTH AMERICAN COAL - continued LIQUIDITY AND CAPITAL RESOURCES - continued North American Coal's capital structure, excluding the project mining subsidiaries, is presented below: March 31 December 31 1995 1994 Total Tangible Assets $ 6.4 $ 9.5 Parent Company Advances 37.8 22.7 Total Assets $44.2 $32.2 Debt Related to Parent Advances $28.5 $16.7 Other Debt .3 0.4 Total Debt 28.8 17.1 Stockholder's Equity 15.4 15.1 Total Capitalization $44.2 $32.2 Debt to Total Capitalization 65% 53% 15 NACCO MATERIALS HANDLING GROUP NMHG, 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 three months ended March 31: 1995 1994 Revenues Americas $249.5 $174.1 Europe, Africa and Middle East 95.8 58.2 Asia-Pacific 17.9 13.0 $363.2 $245.3 Operating profit Americas $ 16.9 $ 9.5 Europe, Africa and Middle East 5.8 .7 Asia-Pacific 1.0 .9 $ 23.7 $ 11.1 Operating profit excluding goodwill amortization Americas $ 18.8 $ 11.4 Europe, Africa and Middle East 6.5 1.4 Asia-Pacific 1.1 1.0 $ 26.4 $ 13.8 Net income before extraordinary charge $ 9.7 $ .9 Extraordinary charge (1.3) Net income $ 8.4 $ .9 16 NACCO MATERIALS HANDLING GROUP - continued FINANCIAL REVIEW - continued First Quarter of 1995 Compared With First Quarter of 1994 The following schedule details the components of the changes in revenues, operating profit and net income for the first quarter of 1995 compared with 1994: Operating Net Revenues Profit Income 1994 $245.3 $11.1 $ .9 Increase (Decrease) in 1995 from: Unit volume 85.8 16.1 10.5 Sales mix 1.6 (2.0) (1.3) Average sales price 14.5 14.5 9.4 Service parts 6.5 3.3 2.1 Foreign currency 9.5 (1.7) (.8) Manufacturing cost (9.2) (5.9) Other operating expense (8.4) (5.5) Other income and expense 1.0 Differences between effective and statutory tax rates (.7) Extraordinary charge (1.3) 1995 $363.2 $23.7 $ 8.4 Unit volumes in the first quarter of 1995 increased 39 percent in the Americas, 58 percent in Europe and 51 percent in Asia-Pacific compared with the same period in 1994. Demand in the Americas remains high while improving market conditions in Europe and Asia-Pacific increased volumes in those regions. The price increases announced in mid-1994 caused the favorable price variance in the quarter. These price increases were effective on new orders after June 1, 1994 in the Americas and after April, 1994 and October, 1994 in Europe for Hyster and Yale, respectively. The improved economies in the Americas and Europe, and new dealers in Europe resulted in improved results from service parts business. Operating profit was adversely affected by the strength of the yen relative to the dollar which increased the cost of purchases sourced from Japan. The adverse impact of the yen was partially offset by the strength of the British pound sterling compared with the dollar which caused translated European results to be higher than in 1994. However, continuation of the recent additional strengthening of the yen could negatively affect future earnings. 17 NACCO MATERIALS HANDLING GROUP - continued FINANCIAL REVIEW - continued Manufacturing costs increased in the first quarter of 1995 compared with 1994 due to higher raw materials prices and manufacturing inefficiencies caused by vendor parts shortages, partially offset by higher factory throughput. The company anticipates resolving the vendor parts supply problem during 1995. Other operating expenses increased in 1995 due primarily to higher volume related customer service costs, higher compensation and benefits based on profit improvement and general inflation. NMHG's backlog of orders at March 31, 1995 was approximately 25,200 forklift truck units compared to the 24,600 forklift truck units at December 31, 1994. Backlog has increased slightly as increased orders have outpaced the record levels of production in 1995. Other Income and Expense Below is a detail of other income (expense) for the three months ended March 31: 1995 1994 Interest income $ .2 $ .1 Interest expense (7.5) (8.7) Other-net .2 (.6) $(7.1) $(9.2) The lower interest expense in 1995 is primarily due to the retirements in 1994 of subordinated debentures. The improvement in other-net in 1995 results primarily form the Sumitomo-Yale joint venture which had income of $0.4 million in 1995 compared with a loss of $0.6 million in 1994. Provision for Income Taxes NMHG's effective tax rate for the three months ended March 31, 1995 and 1994 was 41.4 percent and 53.5 percent, respectively. The higher level of pretax earnings in 1995 reduced the effect of nondeductible goodwill amortization, and thus lowered the effective tax rate compared with 1994. Extraordinary Charge The 1995 extraordinary charge of $1.3 million, net of $0.9 million in tax benefits, relates to the write off of deferred financing fees associated with NMHG's former revolving credit facility and senior term loan which was replaced by the new long- term credit agreement discussed in the following section. 18 NACCO MATERIALS HANDLING GROUP - continued LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $8.2 million during the first three months of 1995. The increased demand for lift trucks has required NMHG to invest in its productive capacity. NMHG is investing to break bottlenecks at all of its plants and has undertaken expansion of its Craigavon, Northern Ireland and Irvine, Scotland production facilities. It is estimated that NMHG's capital expenditures for the remainder of 1995 will be approximately $30.0 million. The principal sources of financing for these capital expenditures are internally generated funds, bank borrowings and government assistance grants. On February 28, 1995, the company entered into a new long-term credit agreement to replace its previous bank agreement and to refinance the majority of its existing long-term debt. The new agreement provides the company with an unsecured $350.0 million revolving credit facility to replace its previous senior credit facility. The new credit facility has a five-year maturity with extension options and performance-based pricing comparable to its previous senior credit facility which provides the company with reduced interest rates upon achievement of certain financial performance targets. With the new credit agreement in place, the company has the ability to call the remaining $78.5 million outstanding Hyster-Yale 12 3/8% subordinated debentures. These remaining debentures will be called in August, 1995 when the call price becomes 102.5, resulting in an extraordinary charge of $2.1 million which will be recorded at that time. The company believes it can meet all of its current and long- term commitments and operating needs from operating cash flows and funds available under revolving credit agreements. At March 31, 1995 NMHG had available $205.0 million of its $350.0 million revolving credit facility. NMHG's capital structure is presented below: MARCH 31 DECEMBER 31 1995 1994 Total Tangible Assets $214.0 $192.9 Goodwill at Cost 433.5 433.5 Total Assets Before Goodwill Amortization 647.5 626.4 Less: Accumulated Goodwill Amortization 63.1 60.4 Total Assets $584.4 $566.0 Total Debt $264.8 $260.1 Stockholders' Equity 319.6 305.9 Total Capitalization $584.4 $566.0 Debt to Total Capitalization 45% 46% 19 HAMILTON BEACH/PROCTOR-SILEX HB/PS, 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 HB/PS were as follows for the three months ended March 31: 1995 1994 Revenues $67.0 $68.6 Operating profit $ 1.4 $ (.4) Operating profit excluding goodwill amortization $ 2.1 $ .3 Net loss $ (.2) $(1.2) First Quarter of 1995 Compared With First Quarter of 1994 The following schedule details the components of the changes in revenues, operating profit and net loss for the first quarter of 1995 compared with 1994: Operating Net Revenues Profit Loss 1994 $68.6 $(.4) $(1.2) Increase (Decrease) in 1995 from: Unit volume Good (5.8) (.9) (.6) Better (.3) Best 3.8 1.5 1.0 (2.3) .6 .4 Average sales price .9 .9 .6 Foreign currency translation (.2) (.2) (.1) Manufacturing cost .5 .3 Differences between effective and statutory tax rates (.2) 1995 $67.0 $1.4 (.2) 20 HAMILTON BEACH/PROCTOR-SILEX - continued FINANCIAL REVIEW - continued The decrease in revenues from unit volume is due mainly to lower sales of domestic blenders, toaster ovens, food processors and toasters, and most all Canadian product lines. Increased unit sales of domestic irons, coffeemakers and can openers partially offset the decreases in other product lines. Improved pricing in most all domestic and Canadian product lines caused the favorable impact from average sales price. While unit volume decreased revenues in 1995, a shift to the better and best product categories and also to higher margin product lines resulted in an increase to operating profit from volume. Continued factory improvements resulted in increased efficiencies which contributed favorably to operating results. In addition, the decline in value of the Mexican peso also contributed favorably to operating results by reducing manufacturing costs. Increased costs of certain raw materials and higher warehousing and selling expenses tempered operating results. Other Income and Expense Below is a detail of other income (expense) for the three months ended March 31: 1995 1994 Interest expense $(1.6) $(1.4) Other-net (.1) (.4) $(1.7) $(1.8) Provision for Income Taxes HB/PS's effective tax rate for the three months ended March 31, 1995 and 1994 was 43.1 percent and 45.1 percent, respectively. LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $2.0 during the first three months of 1995 and are estimated to be $10.7 million for the remainder of 1995. 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. HB/PS's credit agreement provides for a revolving credit facility ("Facility") that permits advances up to $135.0 million. At March 31, 1995, HB/PS had $54.5 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. On April 28, 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 March 31, 1995, HB/PS also had $10.7 million available under separate facilities. 21 HAMILTON BEACH/PROCTOR-SILEX - continued LIQUIDITY AND CAPITAL RESOURCES - continued HB/PS's capital structure is presented below: MARCH 31 DECEMBER 31 1995 1994 Total Tangible Assets $120.9 $118.3 Goodwill at Cost 110.5 110.5 Total Assets Before Goodwill Amortization 231.4 228.8 Less: Accumulated Goodwill Amortization 16.5 15.8 Total Assets $214.9 $213.0 Total Debt $ 84.8 $ 82.6 Stockholders' Equity 130.1 130.4 Total Capitalization $214.9 $213.0 Debt to Total Capitalization 39% 39% KITCHEN COLLECTION KCI is a national specialty retailer of kitchenware, tableware, small electric appliances and related accessories. The specialty retail business is seasonal with the majority of its revenues and operating profit generated in the fourth quarter during the fall holiday selling season. FINANCIAL REVIEW First Quarter of 1995 Compared With First Quarter of 1994 The following schedule details the components of the changes in revenues, operating profit and net loss for the first quarter of 1995 compared with 1994: Operating Net Revenues Profit Loss 1994 $10.7 $(.2) $(.1) Increase (decrease) in 1995 from: Stores opened in 1995 .1 Stores opened in 1994 1.7 Comparable stores (.3) (.2) (.1) Other (.1) (.1) 1995 $12.2 $(.5) $(.3) 22 KITCHEN COLLECTION - continued FINANCIAL REVIEW - continued KCI, which opened one store in the first quarter of 1995, operated 120 stores at March 31, 1995 compared with 104 stores at the end of the first quarter of 1994. A full quarter of operation of stores opened in 1994 contributed favorably to revenues in 1995. The results at comparable stores were adversely affected by poor weather in the Western United States as well as overall lower customer traffic. Provision for Income Taxes Kitchen Collection's effective tax rate for the three months ended March 31, 1995 and 1994 was 40.8 percent and 40.7 percent, respectively. LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $0.4 million during the first three months of 1995. Estimated capital expenditures for the remainder of 1995 are $1.5 million. These expenditures are primarily for new store openings and improvements to existing facilities. The principal source of funds for these capital expenditures is internally generated funds. At March 31, 1995, KCI had available $0.5 million of its $2.5 million line of credit. In May, Kitchen Collection entered into negotiations for a $5.0 million revolving credit facility. The terms of the new facility have been approved by NACCO's Board of Directors and the banks. A formal agreement is expected to be executed by June 1, 1995 replacing the current line of credit. This new facility has performance based pricing which provides for reduced interest rates based on achievement of certain financial performance measures. Management expects their interest rates to be reduced by 0.33% when this agreement becomes effective. KCI's capital structure is presented below: MARCH 31 DECEMBER 31 1995 1994 Total Tangible Assets $13.0 $11.3 Goodwill at Cost 4.6 4.6 Total Assets Before Goodwill Amortization 17.6 15.9 Less: Accumulated Goodwill Amortization .8 0.8 Total Assets $16.8 $15.1 Total Debt $ 7.0 $ 5.0 Stockholder's Equity 9.8 10.1 Total Capitalization $16.8 $15.1 Debt to Total Capitalization 42% 33% 23 NACCO AND OTHER FINANCIAL REVIEW First Quarter of 1995 Compared with First Quarter of 1994 The following schedule details the components of the changes in parent company operating loss and net loss for the first quarter of 1995 compared with 1994: Operating Net Loss Loss 1994 $(2.2) $(2.0) Administrative and general expenses .2 .1 Interest income (.1) Interest expense (.1) Other-net (.1) Consolidating tax adjustments .6 1995 $(2.0) $(1.6) 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 HB/PS and KCI allow for the payment of dividends under certain circumstances. The revised credit agreement entered into on February 28, 1995, at NMHG will allow the transfer of up to $25.0 million to NACCO. 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 is supported by the amounts available under revolving credit facilities and the utility customers' funding of the project mining subsidiaries. BELLAIRE CORPORATION Bellaire Corporation ("Bellaire") is a non-operating subsidiary of NACCO. Bellaire's results primarily include mine closing activities related to the Indian Head Mine, which ceased mining operations in April 1992. Bellaire's results for 1994 have been adjusted to remove certain royalty and other payments that are more appropriately classified with North American Coal's results. Cash payments related to Bellaire's obligations, net of internally generated cash, are funded by NACCO and amounted to $1.1 million and $1.4 million during the first three months of 1995 and 1994, respectively. 24 NACCO AND OTHER - continued BELLAIRE CORPORATION - continued For the first three months of 1995 Bellaire had revenues of $33,000 and minimal operating profit compared with revenues of $0.2 million and minimal operating profit in 1994. Bellaire's net income in the first three months of 1995 and 1994 is $0.1 million and $0.2 million, respectively. The condensed balance sheets for Bellaire were as follows: MARCH 31 DECEMBER 31 1995 1994 Net current assets $ 13.9 $ 13.1 Property, plant and equipment, net .5 .5 Deferred taxes and other assets 64.4 64.1 Obligation to United Mine Workers of America Combined Benefit Fund (154.1) (155.0) Other liabilities (25.9) (24.0) Deficit $(101.2) $(101.3) 25 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 32 of this quarterly report on Form 10-Q (b) Current report on Form 8-K dated March 13, 1995, filed on March 16, 1995. This report on Form 8-K disclosed under Item 5 thereof the resignation of George C. Nebel from the position of President and Chief Executive Officer of Hamilton Beach/Proctor-Silex and the finalization by NMHG of a new $350.0 million five year revolving credit facility as set forth in the above referenced Form 8-K. 26 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 15, 1995 Frank B. O'Brien Frank B. O'Brien Senior Vice President - Corporate Development and Chief Financial Officer Date May 15, 1995 Steven M. Billick Steven M. Billick Vice President and Controller (Principal Accounting Officer) 27 Exhibit Index Exhibit Number* Description of Exhibit (11) Computation of Earnings Per Common Share (27) Financial Data Schedule *Numbered in accordance with Item 601 of Regulation S-K. 28 Exhibit 11 NACCO Industries, Inc. And Subsidiaries Form 10-Q Computation of Earnings per Share Three Months Ended March 31 1995 1994 (Amounts in thousands except per share data) Income (loss): Income before extraordinary charge $12,805 $2,770 Extraordinary charge, net-of-tax (1,280) Net income (loss) $11,525 $2,770 Per share amounts reported to stockholders - Note 1: Income before extraordinary charge $ 1.43 $ .31 Extraordinary charge, net-of-tax (.14) Net income (loss) $ 1.29 $ .31 Primary: Weighted average shares outstanding 8,958 8,942 Dilutive stock options - Note 2 9 15 Totals 8,967 8,957 Per share amounts Income before extraordinary charge $ 1.43 $ .31 Extraordinary charge, net-of-tax (.14) Net income (loss) $ 1.29 $ .31 Fully diluted - Note 3: Weighted average shares outstanding 8,958 Dilutive stock options - Note 2 11 Totals 8,969 Per share amounts Income before extraordinary charge $ 1.43 Extraordinary charge, net-of-tax (.14) Net income (loss) $ 1.29 29 EXHIBIT 11 - continued 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 period-end market price, if higher than the average market price, 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 did not exceed the average market price for the three month period in 1994. 30 EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS DEC-31-1994 MAR-31-1995 15,250 0 218,129 0 357,019 620,148 482,679 0 1,720,076 450,957 0 8,965 0 0 286,288 1,720,076 499,966 502,371 401,618 468,138 0 0 14,023 20,891 7,878 12,805 0 1,280 0 11,525 1.29 1.29
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