-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sxy2v27/e+iyCs9HlPs61SC3jVh6vd0M20eIhm3Xxu99FpCIWMkIuVotzK2e6Gd/ Y10SRrLlNs1ZIqxIn0ET3A== 0000789933-97-000004.txt : 19970520 0000789933-97-000004.hdr.sgml : 19970520 ACCESSION NUMBER: 0000789933-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97606528 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 |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 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, 1997: 6,514,472 Number of shares of Class B Common Stock outstanding at April 30, 1997: 1,689,916 NACCO INDUSTRIES, INC. TABLE OF CONTENTS Part I. FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheets - March 31, 1997 (Unaudited) and December 31, 1996 Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 1997 and 1996 Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996 Notes to Unaudited Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K Exhibit Index PART I Item 1 - Financial Statements CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited) MARCH 31 DECEMBER 31 1997 1996 ----------- --------- ASSETS (In millions) Current Assets Cash and cash equivalents $ 33.3 $ 47.8 Accounts receivable, net 204.4 212.2 Inventories 305.7 309.6 Prepaid expenses and other 24.5 22.2 -------- -------- 567.9 591.8 Property, Plant and Equipment, Net 539.7 550.3 Deferred Charges Goodwill, net 456.4 461.0 Deferred costs and other 59.3 59.6 Deferred income taxes 7.7 7.9 -------- -------- 523.4 528.5 Other Assets 39.6 37.5 -------- -------- Total Assets $ 1,670.6 $ 1,708.1 ======== ========
See notes to unaudited consolidated financial statements. CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited) (Audited) MARCH 31 DECEMBER 31 1997 1996 -------- ----------- (In millions) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 183.9 $ 186.3 Revolving credit agreements 96.9 45.8 Current maturities of long-term debt 22.8 21.4 Income taxes 8.2 5.9 Accrued payroll 23.7 30.8 Other current liabilities 126.9 125.8 -------- -------- 462.4 416.0 Long-term Debt - not guaranteed by the parent company 263.8 333.3 Obligations of Project Mining Subsidiaries - not guaranteed by the parent company or its North American Coal subsidiary 333.1 341.5 Self-insurance Reserves and Other 222.5 223.9 Minority Interest 13.9 14.1 Stockholders' Equity Common stock: Class A, par value $1 per share, 6,513,462 shares outstanding (1996 - 6,492,059 shares outstanding) 6.5 6.5 Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,690,926 shares outstanding (1996 - 1,694,336 shares outstanding) 1.7 1.7 Capital in excess of par value .9 .1 Retained income 360.5 359.2 Foreign currency translation adjustment and other 5.3 11.8 -------- -------- 374.9 379.3 -------- -------- Total Liabilities and Stockholders' Equity $ 1,670.6 $ 1,708.1 ======== ========
See notes to unaudited consolidated financial statements. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31 ------------------------------------ 1997 1996 -------------- --------------- (Dollars in millions, except per share data; shares in thousands) Revenues $ 479.7 $ 559.5 Cost of sales 397.6 452.7 ------------- ----------- Gross Profit 82.1 106.8 Selling, administrative and general expenses 62.2 71.9 Amortization of goodwill 3.9 3.8 ------------- ------------ Operating Profit 16.0 31.1 Other income (expense) Interest expense (10.0) (11.7) Other - net (.8) .4 ------------- ------------- (10.8) (11.3) ------------- ------------- Income Before Income Taxes and Minority Interest 5.2 19.8 Provision for income taxes 2.3 6.7 ------------- ------------ Income Before Minority Interest 2.9 13.1 Minority interest (.1) (.2) ------------- ----------- Net Income $ 2.8 $ 12.9 ============= ============ Weighted average common shares outstanding 8,205 8,986 ============= ============ Net Income per share $ .35 $ 1.44 ============= ============ Dividends per share $ .1875 $ .1800 ============= ============
See notes to unaudited consolidated financial statements. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31 1997 1996 ------------ ----------- (In millions) Operating Activities Net income $ 2.8 $ 12.9 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 21.5 20.8 Deferred income taxes (1.7) (2.8) Other non-cash items (.4) (.4) Working Capital Changes: Accounts receivable 7.3 2.8 Inventories (.8) (25.0) Other current assets 2.3 (.5) Accounts payable (8.6) (3.3) Accrued income taxes 7.9 5.9 Other liabilities (7.3) 1.8 ----------- ----------- Net cash provided by operating activities 23.0 12.2 Investing Activities Expenditures for property, plant and equipment (8.7) (18.1) Proceeds from the sale of assets .8 .3 Investments in unconsolidated affiliates (2.5) (1.8) ----------- ----------- Net cash used for investing activities (10.4) (19.6) Financing Activities Additions to long-term debt and revolving credit agreements 18.8 40.9 Reductions of long-term debt and revolving credit agreements (33.5) (25.1) Additions to obligations of project mining subsidiaries 14.8 26.4 Reductions of obligations of project mining subsidiaries (24.1) (30.8) Cash dividends paid (1.5) (1.6) Capital grants .3 .4 Other - net (.2) --- ----------- ----------- Net cash (used for) provided by financing activities (25.4) 10.2 Effect of exchange rate changes on cash (1.7) (.8) ----------- ----------- Cash and Cash Equivalents Increase (decrease) for the period (14.5) 2.0 Balance at the beginning of the period 47.8 30.9 ----------- ----------- Balance at the end of the period $ 33.3 $ 32.9 =========== ===========
See notes to unaudited consolidated financial statements. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Dollars in Millions) Note A - Basis of Presentation NACCO Industries, Inc. ("NACCO") is a holding company with four operating subsidiaries: The North American Coal Corporation ("NACoal"), NACCO Materials Handling Group, Inc. ("NMHG"), Hamilton BeachProctor-Silex, Inc. ("HBPS"), 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, 1997 and the results of its operations and cash flows for the three month periods ended March 31, 1997 and 1996 have been included. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. 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, 1996. Certain 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 1997 1996 --------- ----------- Manufacturing inventories: Finished goods and service parts- NMHG $ 89.8 $ 113.6 HBPS 43.4 34.1 ------ ------ 133.2 147.7 ------ ------ Raw materials and work in process- NMHG 126.4 120.6 HBPS 15.5 14.0 ------ ------ 141.9 134.6 ------ ------ LIFO reserve- NMHG (13.4) (15.6) HBPS .1 .3 ------ ------ (13.3) (15.3) ------ ------ Total manufacturing inventories 261.8 267.0 Coal-NACoal 8.3 8.3 Mining supplies-NACoal 18.8 18.9 Retail inventories-Kitchen Collection 16.8 15.4 ------ ------ $ 305.7 $ 309.6 ====== ======
The cost of manufacturing inventories has been determined by the last-in, first-out (LIFO) method for 65 percent and 62 percent of such inventories as of March 31, 1997 and December 31, 1996, respectively. Note C - Long-term Commitments In the first quarter of 1997, NACoal entered into operating lease agreements to lease certain machinery and equipment to be used in operating a mine for San Miguel Electric Cooperative. Mine services to San Miguel Electric Cooperative are expected to begin during the third quarter of 1997. No lease expense has been incurred in the first quarter of 1997. The total lease commitment, beginning in July 1997 and extending to December 2007, is estimated to be $34.0 million and will be paid as follows: $1.6 million in 1997, $3.2 million each year in the period 1998 through 2001, $3.4 million in 2002 and $16.2 million payable over the remaining terms of the operating lease agreements. Note D - Accounting Standard Not Yet Adopted In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," establishing standards for computing and presenting earnings per share ("EPS"). SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement of all prior period EPS data presented. Earlier application is not permitted. The implementation of SFAS No. 128 is not expected to have a material effect on the reported EPS of the Company. Note E - Subsequent Event On April 25, 1997, NMHG entered into an agreement to sell all of its domestic accounts receivable, on a revolving basis, to Lift Truck Funding Company, LLC ("LTF"), a wholly owned subsidiary. LTF was formed prior to the execution of this agreement for the purpose of buying and selling accounts receivable and is designed to be bankruptcy remote. In accordance with this agreement, NMHG sold $77.5 million of accounts receivable to LTF. Also, on April 25, 1997, NMHG and LTF entered into an agreement with a financial institution whereby LTF can sell, on a revolving basis, an undivided percentage ownership interest in certain eligible accounts receivable, as defined, up to a maximum of $75.0 million. In accordance with this agreement, LTF sold an undivided interest in $33.0 million of accounts receivable to the financial institution, at a discount. Gains and losses on the sale of receivables are not expected to have a significant effect on the Company's 1997 financial results. This two-step transaction, which will be reflected in the Company's financial statements in the second quarter of 1997, will be accounted for as a sale of receivables. Accordingly, the Company's Consolidated Balance Sheet will reflect the reduction in accounts receivable for the portion of receivables transferred to the financial institution. The discount and any other transaction gains and losses will be included in other income (expense) in the Consolidated Statement of Income. NMHG will continue to service the receivables and will maintain an allowance for doubtful accounts based upon the expected collectibility of all consolidated accounts receivable, including receivables sold by LTF. The Company expects to use the proceeds from the revolving sale of receivables to retire long-term debt. As such, the Company's financial position as of March 31, 1997 reflects a reclassification of $50.0 million from long-term debt to current revolving credit agreements. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Per Share Data) FINANCIAL SUMMARY - ----------------- NACCO's four operating subsidiaries function in distinct business environments, and the financial condition and results of operations are best discussed at the subsidiary level as presented below.
THREE MONTHS ENDED MARCH 31 1997 1996 -------- ------- REVENUES NMHG $ 332.3 $ 420.8 HBPS 75.3 67.9 NACoal 58.4 59.1 KCI 14.6 12.9 NACCO and Other .1 .1 Eliminations (1.0) (1.3) ------ ------ $ 479.7 $ 559.5 ====== ====== AMORTIZATION OF GOODWILL NMHG $ 2.9 $ 2.9 HBPS 1.0 .9 ------ ------ $ 3.9 $ 3.8 ====== ====== OPERATING PROFIT (LOSS) NMHG $ 12.2 $ 26.0 HBPS (2.1) (1.0) NACoal 9.0 9.8 KCI (1.0) (1.2) NACCO and Other (2.1) (2.5) ------ ------ $ 16.0 $ 31.1 ====== ====== OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION NMHG $ 15.1 $ 28.9 HBPS (1.1) (.1) NACoal 9.0 9.8 KCI (1.0) (1.2) NACCO and Other (2.1) (2.5) ------ ------ $ 19.9 $ 34.9 ====== ====== INTEREST EXPENSE NMHG $ (4.7) $ (6.8) HBPS (1.5) (1.3) NACoal (.5) (.1) KCI (.1) (.1) NACCO and Other (.6) (.2) Eliminations .6 .2 ------ ------ (6.8) (8.3) Project mining subsidiaries (3.2) (3.4) ------ ------ $ (10.0) $ (11.7) ====== ======
FINANCIAL SUMMARY - continued
THREE MONTHS ENDED MARCH 31 ---------------------- 1997 1996 -------- -------- OTHER-NET, INCOME (EXPENSE) NMHG $ (.9) $ (.2) HBPS -- (.1) NACoal .6 .7 NACCO and Other .1 .3 Eliminations (.6) (.3) ------- ------- $ (.8) $ .4 ======= ======= NET INCOME (LOSS) NMHG $ 3.5 $ 12.2 HBPS (2.0) (.7) NACoal 3.9 4.8 KCI (.7) (.7) NACCO and Other (1.8) (2.5) Minority interest (.1) (.2) ------- ------- $ 2.8 $ 12.9 ======= ======= DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE NMHG $ 8.2 $ 8.2 HBPS 4.8 4.5 NACoal .6 .5 KCI .3 .2 ------- ------- 13.9 13.4 Project mining subsidiaries 7.6 7.4 ------- ------- $ 21.5 $ 20.8 ======= ======= CAPITAL EXPENDITURES NMHG $ 1.6 $ 13.3 HBPS 5.3 1.5 NACoal .7 .2 KCI .3 .9 ------- ------- 7.9 15.9 Project mining subsidiaries .8 2.2 ------- ------- $ 8.7 $ 18.1 ======= =======
MARCH 31 DECEMBER 31 1997 1996 ---------- ----------- TOTAL ASSETS NMHG $ 927.8 $ 950.9 HBPS 274.0 271.8 NACoal 67.9 66.5 KCI 24.7 27.6 NACCO and Other 50.5 56.7 --------- ---------- 1,344.9 1,373.5 Project mining subsidiaries 421.2 433.6 --------- ---------- 1,766.1 1,807.1 Consolidating eliminations (95.5) (99.0) --------- ---------- $ 1,670.6 $ 1,708.1 ========= ==========
NACCO MATERIALS HANDLING GROUP, INC. - ------------------------------------ NMHG, 98 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:
1997 1996 --------- -------- Revenues Americas $ 220.1 $ 272.2 Europe, Africa and Middle East 93.7 121.3 Asia-Pacific 18.5 27.3 -------- -------- $ 332.3 $ 420.8 ======== ======== Operating profit Americas $ 10.0 $ 15.6 Europe, Africa and Middle East 3.2 10.9 Asia-Pacific (1.0) (.5) -------- -------- $ 12.2 $ 26.0 ======== ======== Operating profit excluding goodwill amortization Americas $ 12.0 $ 17.7 Europe, Africa and Middle East 4.1 11.7 Asia-Pacific (1.0) (.5) -------- -------- $ 15.1 $ 28.9 ======== ======== Net income $ 3.5 $ 12.2 ======== ========
NACCO MATERIALS HANDLING GROUP, INC. - continued FINANCIAL REVIEW - continued First Quarter of 1997 Compared With First Quarter of 1996 The following schedule details the components of the changes in revenues, operating profit and net income for the first quarter of 1997 compared with 1996:
Operating Net Revenues Profit Income ---------- ----------- --------- 1996 $ 420.8 $ 26.0 $ 12.2 Increase (decrease) in 1997 from: Unit volume (96.3) (15.9) (10.4) Sales mix 8.9 5.0 3.3 Average sales price (1.1) (1.1) (.7) Service parts 2.9 1.4 .9 Foreign currency (2.9) .5 .4 Manufacturing cost (7.6) (5.0) Other operating expense 3.9 2.7 Other income and expense .8 Differences between effective and statutory tax rates (.7) -------- --------- ------- 1997 $ 332.3 $ 12.2 $ 3.5 ======== ========= =======
Declines in first quarter 1997 revenues and net income were primarily attributable to unit volume decreases, as compared to the first quarter of 1996. The comparisons for first quarter 1997 were affected by the cyclical nature of the lift truck industry. Demand for forklift trucks has historically been cyclical, driven by the economic conditions in the various geographic regions in which the industry's customers operate. After a slight increase during 1995, NMHG reached a peak unit sales volume in the first quarter of 1996. During the remainder of 1996, unit volume declined, reaching its lowest point in the first quarter of 1997 since the first quarter of 1995. In the Americas, volume declined 24.6 percent, or 3,283 units, as compared to 1996, primarily due to weaker retail demand. Volume declines of 25.6 percent in Europe, from 5,186 units in 1996 to 3,857 units in 1997, can be attributed to a decrease in market size. Decreasing demand and increasing competition contributed to the 36.2 percent volume decline in Asia-Pacific. Also contributing to the decrease in volume was a decline in backlog during the first quarter of 1996 from 21,200 units at December 31, 1995 to 17,300 units at March 31, 1996, as compared to an increase in backlog from 11,700 forklift truck units at December 31, 1996 to 16,500 units at March 31, 1997. Partially offsetting the decrease in revenues resulting from volume declines was a shift in the mix of sales in the first quarter of 1997 to higher margin products in the U.S. and to higher margin regions in Europe over the same period in 1996. Manufacturing costs increased over 1996 due to lower plant volumes that resulted in labor and overhead costs that were not capitalized as inventory. Other operating costs were lower reflecting reduced incentive compensation expense as well as cost containment programs in response to the lower volumes. NACCO MATERIALS HANDLING GROUP, INC.- continued FINANCIAL REVIEW - continued Other Income and Expense and Income Taxes Below is a detail of other income (expense) for the three months ended March 31:
1997 1996 ----------- ----------- Interest expense $ (4.7) $ (6.8) Other-net (.9) (.2) ----------- ----------- $ (5.6) $ (7.0) =========== =========== Effective tax rate 48.0% 35.7%
The decrease in interest expense reflects lower borrowing levels in the first quarter of 1997 as compared to the same period in 1996. The increase in the effective tax rate results from a non-recurring 1996 favorable income tax adjustment recognized due to the resolution of tax issues from prior years and the effect of nondeductible goodwill amortization on lower comparative levels of pre-tax income. LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $1.6 million during the first three months of 1997. It is estimated that NMHG's capital expenditures for the remainder of 1997 will be approximately $34.5 million. Planned expenditures relate to investments in manufacturing facilities, worldwide information systems and tooling for new products. The principal sources of financing for these capital expenditures are internally generated funds and bank borrowings. At March 31, 1997, NMHG had available $145.0 million of its $350.0 million revolving credit facility. The expiration date of the NMHG facility (which is currently June 2001) may be extended, on an annual basis, for one additional year upon the mutual consent of NMHG and the bank group. In addition, the NMHG facility has performance-based pricing which sets interest rates based upon achievement of certain financial performance targets. NMHG also has separate facilities totaling $38.3 million, of which $28.9 million was available at March 31, 1997. NMHG 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. NACCO MATERIALS HANDLING GROUP, INC.- continued LIQUIDITY AND CAPITAL RESOURCES - continued NMHG's capital structure is presented below:
MARCH 31 DECEMBER 31 1997 1996 ----------- ----------- Total Net Tangible Assets $ 240.8 $ 267.9 Goodwill at Cost 443.6 443.6 ----------- ----------- Total Assets Before Goodwill Amortization 684.4 711.5 Accumulated Goodwill Amortization (86.3) (82.8) Total Debt (231.6) (258.9) ----------- ----------- Stockholders' Equity $ 366.5 $ 369.8 =========== =========== Debt to Total Capitalization 39% 41%
The decrease in total net tangible assets is due to decreases in cash and cash equivalents and inventory, partially offset by an increase in accounts receivable. The decrease in cash results from debt paydowns, partially offset by positive cash flows from operations. Inventory declines reflect management's ability to reduce inventory levels at all divisions. Accounts receivable increased due to a slight increase in the aging of receivables and a decrease in the receivables sold by the Europe division, which is reflective of a decrease in first quarter 1997 volume as compared to fourth quarter 1996. HAMILTON BEACHPROCTOR-SILEX, INC. - --------------------------------- HBPS, wholly 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 HBPS were as follows for the three months ended March 31:
1997 1996 ------- ------- Revenues $ 75.3 $ 67.9 Operating loss $ (2.1) $ (1.0) Operating loss excluding goodwill amortization $ (1.1) $ (.1) Net loss $ (2.0) $ (.7)
First Quarter of 1997 Compared With First Quarter of 1996 The following schedule details the components of the changes in revenues, operating loss and net loss for the first quarter of 1997 compared with 1996:
Operating Net Revenues Loss Loss ----------- --------- --------- 1996 $ 67.9 $ (1.0) $ (.7) Increase (decrease) in 1997 from: Unit volume and sales mix 10.2 3.0 2.0 Average sales price (2.8) (2.8) (1.8) Manufacturing cost (.7) (.5) Other operating expense (.6) (.4) Other income and expense (.1) Differences between effective and statutory tax rates (.5) --------- --------- ------- 1997 $ 75.3 $ (2.1) $ (2.0) ========= ========= =======
Revenues grew primarily due to increased unit volumes of blenders, drinkmasters, steam/indoor grills and toasters. The positive earnings impact from increased volume was partially offset by a decline in the average sales price due to competition, especially at opening price points for irons, coffeemakers and toasters. Also contributing to the decline in net income was a non-recurring 1996 tax benefit and start-up costs in 1997 for a new manufacturing facility in Saltillo, Mexico. The Saltillo facility, which is part of HBPS's strategic cost reduction program, is expected to become fully operational later this year. HAMILTON BEACHPROCTOR-SILEX, INC. - continued FINANCIAL REVIEW - continued Other Income and Expense and Income Taxes Below is a detail of other income (expense) for the three months ended March 31:
1997 1996 ------- -------- Interest expense $ (1.5) $ (1.3) Other-net -- (.1) ------- ------- $ (1.5) $ (1.4) ======= ======= Effective tax rate 44.1% 69.6%
The effective tax rate benefit on first quarter net loss declined due to a non-recurring favorable income tax adjustment recognized in 1996 as a result of the resolution of tax issues from prior years. LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $5.3 million during the first three months of 1997 and are estimated to be $13.6 million for the remainder of 1997. The primary purpose of these expenditures is to increase manufacturing capacity and efficiency and to acquire tooling for new and existing products. These expenditures are funded primarily from internally generated funds and short-term borrowings. HBPS's credit agreement provides for a revolving credit facility that permits advances up to $160.0 million. At March 31, 1997, HBPS had $80.7 million available under this facility, which expires in May 2002. The HBPS facility provides lower interest rates if HBPS achieves a certain interest coverage ratio and allows for interest rates quoted under a competitive bid option. At March 31, 1997, HBPS also had $7.0 million available under separate facilities. HBPS's capital structure is presented below:
MARCH 31 DECEMBER 31 1997 1996 --------- -------- Total Net Tangible Assets $ 115.6 $ 111.1 Goodwill at Cost 118.9 118.9 -------- -------- Total Assets Before Goodwill Amortization 234.5 230.0 Accumulated Goodwill Amortization (23.5) (22.5) Total Debt (95.2) (89.7) -------- -------- Stockholder's Equity $ 115.8 $ 117.8 ======== ======== Debt to Total Capitalization 45% 43%
THE NORTH AMERICAN COAL CORPORATION - ----------------------------------- NACoal 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 1.2 billion tons committed to electric utility customers pursuant to long-term contracts. NACoal also provides dragline mining services ("Florida dragline operations") for a limerock quarry near Miami, Florida. The operating results for the Florida dragline operations are included in other mining operations. FINANCIAL REVIEW NACoal'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 tons sold. 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. Lignite tons sold by NACoal's four operating mines were as follows for the three months ended March 31:
1997 1996 ---- ---- Coteau Properties 3.9 4.2 Falkirk Mining 1.5 1.9 Sabine Mining 1.0 .9 Red River Mining .2 .1 --- --- Total Lignite 6.6 7.1 === ===
The Florida dragline mined 1.8 million cubic yards of limerock in the first quarter of 1997 versus 1.6 million cubic yards in the first quarter of 1996. Revenues, income before taxes, provision for taxes and net income were as follows for the three months ended March 31:
1997 1996 ---- ---- Revenues Project mines $ 52.8 $ 54.6 Other mining operations 4.6 3.6 ------- ------- 57.4 58.2 Royalties and other 1.0 .9 ------- ------- $ 58.4 $ 59.1 ======= ======= Income before taxes Project mines $ 5.7 $ 6.4 Other mining operations .7 .5 ------- ------- Total from operating mines 6.4 6.9 Royalty and other income, net .8 1.5 Headquarters expense (1.3) (1.4) ------- ------- 5.9 7.0 Provision for taxes 2.0 2.2 ------- ------- Net income $ 3.9 $ 4.8 ======= =======
THE NORTH AMERICAN COAL CORPORATION - continued FINANCIAL REVIEW - continued First Quarter of 1997 Compared with First Quarter of 1996 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 --------- --------- --------- 1996 $ 59.1 $ 7.0 $ 4.8 Increase (decrease) in 1997 from: Project mines Tonnage volume (4.5) (.6) (.4) Agreed profit per ton (.1) (.1) --- Pass-through costs 2.8 --- --- Other mining operations Tonnage volume 1.5 .5 .3 Average selling price (.5) (.5) (.3) Operating costs .2 .1 -------- ------- ------- Changes from operating mines (.8) (.5) (.3) Royalties and other income, net .1 (.7) (.5) Headquarters expense .1 --- Differences between effective and statutory tax rates (.1) -------- ------- ------- 1997 $ 58.4 $ 5.9 $ 3.9 ======== ======= =======
Adverse winter weather conditions affecting mining operations and a customer's power plant outage resulted in reduced tons delivered by Coteau and Falkirk. This decline in project mine tonnage volume was slightly offset by increased volume at Sabine. The results from other mining operations include increased tonnage volume, offset by a decrease in the average selling price at the Red River mine. The decline in income before taxes and net income from royalties and other income, net was due to the receipt of escrow payments in the first quarter of 1996 related to the sale of a previously owned eastern U.S. underground mine that did not recur in 1997. THE NORTH AMERICAN COAL CORPORATION - continued FINANCIAL REVIEW - continued Other Income and Expense and Income Taxes Items of other income (expense) for the three months ended March 31:
1997 1996 ---- ---- Interest expense Project mining subsidiaries $ (3.2) $ (3.4) Other mining operations (.5) (.1) ------ ------ $ (3.7) $ (3.5) ====== ====== Other-net Project mining subsidiaries $ .4 $ .2 Other mining operations .2 .5 ------ ------ $ .6 $ .7 ====== ====== Effective tax rate 34.6% 31.9%
The increase in the effective tax rate results from a lower level of net income which generates percentage depletion eligible to reduce NACoal's effective tax. LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $1.5 million during the first quarter of 1997 and are estimated to be $31.0 million for the remainder of 1997. These expenditures primarily relate to the development, establishment and improvement of the project mining subsidiaries' mines and are financed or guaranteed by the utility customers. NACoal has in place a $50.0 million revolving credit facility. The expiration date of this facility (which currently is September 2001) can be extended one additional year, on an annual basis, upon the mutual consent of NACoal and the bank group. NACoal had $18.0 million of its revolving credit facility available at March 31, 1997. A portion of the outstanding balance, $29.0 million, was loaned to the parent company in December 1996 to finance the repurchase of 800,000 shares of NACCO's Class A common stock. The financing of the project mining subsidiaries, which is guaranteed by the utility customers, includes long-term equipment leases, notes payable and non-interest-bearing advances from customers. The obligations of the project mining subsidiaries do not affect the short-term or long-term liquidity of NACoal and are without recourse to NACCO or NACoal. These arrangements allow the project mining subsidiaries to pay dividends in amounts equal to their retained earnings. THE NORTH AMERICAN COAL CORPORATION - continued LIQUIDITY AND CAPITAL RESOURCES - continued NACoal's capital structure, excluding the project mining subsidiaries, is presented below:
March 31 December 31 1997 1996 --------- ----------- Investment in Project Mining Subsidiaries $ 2.2 $ 3.3 Other Net Tangible Assets 4.7 (.8) ------- ------- Total Tangible Assets 6.9 2.5 Advances to Parent Company 42.8 41.9 Debt Related to Parent Advances (34.4) (29.0) Other Debt (.2) (.3) ------- ------- Total Debt (34.6) (29.3) ------- ------- Stockholder's Equity $ 15.1 $ 15.1 ======= ======= Debt to Total Capitalization 70% 66%
THE KITCHEN COLLECTION, INC. - ---------------------------- 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 1997 Compared With First Quarter of 1996 The following schedule details the components of the changes in revenues, operating loss and net loss for the first quarter of 1997 compared with 1996:
Operating Net Revenues Loss Loss ---------- ---------- -------- 1996 $ 12.9 $ (1.2) $ (.7) Increase (decrease) in 1997 from: Stores opened in 1996 .7 (.1) (.1) Comparable stores 1.0 .5 .3 Other (.2) (.2) --------- --------- ------- 1997 $ 14.6 $ (1.0) $ (.7) ========= ========= =======
KCI operated 144 stores at March 31, 1997 compared with 134 stores at the end of the first quarter of 1996. A full quarter's results from stores opened in 1996 contributed favorably to revenues in 1997. Comparable stores also contributed favorably to revenues primarily due to an increase in the average sales transaction, resulting from a management incentive program, increases in select retail pricing and improved sales from KCI's gadget category. Overall margins were moderately reduced due to clearance actions on discontinued product lines. The unfavorable other variance relates to higher payroll and lease costs. Provision for Income Taxes KCI's effective tax rate for the three months ended March 31, 1997 and 1996 was 42.0 percent and 41.5 percent, respectively. LIQUIDITY AND CAPITAL RESOURCES Expenditures for property, plant and equipment were $0.3 million during the first three months of 1997. Estimated capital expenditures for the remainder of 1997 are $0.4 million. The principal source of funds for these capital expenditures is short term borrowings. At March 31, 1997, KCI had available $4.5 million of its $5.0 million line of credit. This line of credit has performance-based pricing which provides for reduced interest rates based on the achievement of certain financial performance measures. THE KITCHEN COLLECTION, INC. - continued LIQUIDITY AND CAPITAL RESOURCES - continued KCI's capital structure is presented below:
MARCH 31 DECEMBER 31 1997 1996 -------- ----------- Total Net Tangible Assets $ 13.7 $ 14.6 Goodwill at Cost 4.6 4.6 ------- ------- Total Assets Before Goodwill Amortization 18.3 19.2 Accumulated Goodwill Amortization (1.0) (.9) Total Debt (5.2) (5.0) ------- ------- Stockholder's Equity $ 12.1 $ 13.3 ======= ======= Debt to Total Capitalization 30% 27%
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 NACCO and are anticipated to be $3.3 million for the remainder of 1997. The results of operations at NACCO and Other were as follows for the three months ended March 31:
1997 1996 ---------- ----------- Revenues $ .1 $ .1 Operating loss $ (2.1) $ (2.5) Other income (expense), net $ .1 $ .3 Net loss $ (1.8) $ (2.5)
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 HBPS and KCI allow for the payment of dividends to NACCO under certain circumstances. The credit agreement at NMHG allows the transfer of up to $25.0 million to NACCO; there have not yet been any such transfers. There are no restrictions on the transfer of assets from NACoal. Dividends and advances from NACoal, HBPS and KCI 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. INTEREST RATE PROTECTION NMHG, HBPS, NACoal and KCI have entered into interest rate swap agreements for portions of their floating rate debt. These interest rate swaps provide protection against significant increases in interest rates and have terms ranging from one to seven years. The Company evaluates its exposure to floating rate debt on an ongoing basis. EFFECTS OF FOREIGN CURRENCY NMHG and HBPS operate internationally and enter into transactions denominated in foreign currencies. As a result, the Company is subject to the transaction exposures that arise from exchange rate movements between the dates foreign currency transactions are recorded and the dates they are consummated. The effects of foreign currency on revenues, operating income and net income at NMHG are disclosed above. At HBPS, foreign currency effects had an immaterial impact on operating results between comparable periods of 1997 and 1996. NMHG and HBPS use forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. These contracts usually have maturities of one to twelve months and generally require the companies to buy or sell Japanese yen, Australian dollars, Canadian dollars or various European currencies for the U.S. dollar at rates agreed to at the inception of the contracts. Gains and losses from changes in the market value of these contracts are deferred and recognized as part of the transaction being hedged. FORWARD-LOOKING STATEMENTS The statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere throughout this Form 10-Q that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, such items as expansion and growth of the Company's business, future capital expenditures, availability of liquidity and cash generation. These forward-looking statements are made subject to certain risks and uncertainties which could cause results to differ materially from those presented in those forward-looking statements. Such risks and uncertainties with respect to each subsidiary's operations have been disclosed on page 39 of the Company's 1996 Annual Report on Form 10-K. 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 28 of this quarterly report on Form 10-Q (b) Current report on Form 8-K dated and filed on February 10, 1997. This report on Form 8-K disclosed under Item 5 thereof the resignation of Frank B. O'Brien from the position of Senior Vice President - Corporate Development and Chief Financial Officer effective March 5, 1997. Current report on Form 8-K dated February 11, 1997, filed on February 13, 1997. This report on Form 8-K disclosed under Item 5 thereof the resignation of Frank E. Taplin, Jr. from the position of director and the subsequent election of Frank E. Taplin, Jr. as director emeritus. This report also disclosed the election of David F. Taplin as director. 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, 1997 /s/Kenneth C. Schilling ------------ ----------------------- Kenneth C. Schilling Vice President and Controller (Principal Financial Officer and Principal Accounting Officer) 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. EX-11 2 Exhibit 11 NACCO Industries, Inc. And Subsidiaries Form 10-Q Computation of Earnings per Share
Three Months Ended March 31 ------------------------------------------- 1997 1996 -------------- ---------------- Dollars and shares in thousands, except per share data) Net income $ 2,848 $ 12,919 ============= ============= Per share amounts reported to stockholders - Note 1: $ .35 $ 1.44 ============= ============= Primary: Weighted average shares outstanding 8,196 8,975 Dilutive stock options - Note 2 9 11 ============= ============= Totals 8,205 8,986 ============= ============= Net income per share $ .35 $ 1.44 ============= ============= Fully diluted: Weighted average shares outstanding 8,196 8,975 Dilutive stock options - Note 2 8 12 ============= ============= Totals 8,204 8,987 ============= ============= Net income per share $ .35 $ 1.44 ============= =============
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. EX-27 3 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 0000789933 NACCO Industries 1,000,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 33 0 204 0 306 568 540 450 1,671 462 0 0 0 8 367 1,671 480 480 398 398 0 0 10 5 2 3 0 0 0 3 $0.35 0
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