-----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, FFQ7kY4Ieb1+ZXPmuyR2a37LemDzwRUAgVHhnYrtmz9CU4EB7dPXT+pgc0HE3cmC uejscqX36PgOuACwwFB+6g== 0000950152-00-002561.txt : 20000331 0000950152-00-002561.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950152-00-002561 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 34 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 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-K SEC ACT: SEC FILE NUMBER: 001-09172 FILM NUMBER: 588110 BUSINESS ADDRESS: STREET 1: 5875 LANDERBROOK DR CITY: MAYFIELD HTS STATE: OH ZIP: 44124-4017 BUSINESS PHONE: 2164499600 10-K 1 NACCO INDUSTRIES, INC. FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NO. 1-9172 NACCO INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE ---------------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 5875 Landerbrook Drive, Mayfield Heights, Ohio ---------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 34-1505819 ---------------------------------------------------- (I.R.S. EMPLOYER IDENTIFICATION NO.) 44124-4017 ---------------------------------------------------- (ZIP CODE) Registrant's telephone number, including area code: (440) 449-9600 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ----------------------------------------------------- ----------------------------------------------------- Class A Common Stock, New York Stock Exchange Par Value $1.00 Per Share
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Class B Common Stock, Par Value $1.00 Per Share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirement for the past 90 days. YES X NO _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of Class A Common Stock and Class B Common Stock held by non-affiliates as of February 29, 2000: $214,860,770 Number of shares of Class A Common Stock outstanding at February 29, 2000: 6,519,212 Number of shares of Class B Common Stock outstanding at February 29, 2000: 1,647,279 DOCUMENTS INCORPORATED BY REFERENCE (a) Portions of the Company's 1999 Annual Report are incorporated herein by reference in Part I and Part II; and (b) Portions of the Company's Proxy Statement for its 2000 annual meeting of stockholders are incorporated herein by reference in Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS GENERAL NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company that owns four principal operating subsidiaries that function in three principal industries: lignite mining, lift trucks and housewares. (a) North American Coal. The Company's wholly owned subsidiary, The North American Coal Corporation, and its affiliated coal companies (collectively, "NACoal"), mine and market lignite for use primarily as fuel for power generation by electric utilities. NACoal also provides dragline mining services for a limerock quarry near Miami, Florida. NACoal accounted for 10% and 31% of NACCO's revenues and operating profits, respectively, in 1999. (b) NACCO Materials Handling Group. NACCO Materials Handling Group consists of the Company's wholly owned subsidiary, NMHG Holding Co., and its wholly owned subsidiaries (collectively, "NMHG"), including NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG Retail"). NMHG Wholesale primarily designs, engineers, manufactures and sells a full line of lift trucks and replacement parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG Retail primarily sells, rents and services Hyster and Yale lift trucks and replacement parts through a network of wholly owned retail dealerships. NMHG Wholesale accounted for 61% and 56% of NACCO's revenues and operating profits, respectively, in 1999. NMHG Retail, including the elimination of intercompany transactions, accounted for 6% and (12%) of NACCO's revenues and operating profits, respectively, in 1999. (c) NACCO Housewares Group. NACCO Housewares Group ("Housewares") consists of two of the Company's wholly owned subsidiaries: Hamilton Beach-Proctor-Silex, Inc. ("HB-PS"), one of the nation's leading manufacturers and marketers of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. Housewares accounted for 23% and 32% of NACCO's revenues and operating profits, respectively, in 1999. Additional information relating to financial and operating data on a segment basis (including NACCO and Other, which reduced operating profits by 7% in 1999) is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1999 Annual Report (the "1999 Annual Report") and in Note Eighteen to the Consolidated Financial Statements in the 1999 Annual Report, which portions of the 1999 Annual Report are incorporated herein by reference. NACCO was incorporated as a Delaware corporation in 1986 in connection with the formation of a holding company structure for a predecessor corporation organized in 1913. SIGNIFICANT EVENTS In September 1997, Phillips Coal Company and NACoal formed a joint venture (75% owned by Phillips Coal and 25% owned by NACoal) to develop a new lignite mine in Mississippi (the "Red Hills Mine"). The 30 year lignite sales contract between the joint venture and the electric power facility was entered into on April 1, 1998. Commercial operation of the electric power facility is expected to begin in the fourth quarter of 2000. On December 31, 1997, the Chinese government gave approval for the formation of Shanghai Hyster Forklift Truck, Ltd., a joint venture (the "Shanghai Hyster Joint Venture") among NMHG Wholesale (55% share), Sumitomo-NACCO Materials Handling Group (30% share) and Shanghai Perfect Jinqiao United Development Co. (15% share). The Shanghai Hyster Joint Venture acquired land in the Pudong area of Shanghai and commenced construction of a manufacturing facility in the second quarter of 1998. Production commenced in the third quarter of 1999. The facility manufactures Hyster large and medium capacity lift trucks primarily for sale in the Chinese domestic market. The Shanghai Hyster Joint Venture also distributes forklift trucks it manufactures. In 1998, NMHG, through NMHG Retail, embarked on a strategy of acquiring or investing in certain independently owned Hyster and Yale and competitor retail dealerships. As of December 31, 1999, NMHG Retail had acquired and consolidated two dealerships in the United States, 11 dealerships in Europe and nine dealerships in Asia-Pacific. In December 1998, HB-PS entered into an agreement to lease a 500,000 square foot distribution center in Memphis, Tennessee. The new distribution center has allowed HB-PS to consolidate its distribution network and is expected to enhance efficiencies and customer service. The new distribution center became operational during the second quarter of 1999. In 1999, HB-PS entered into a private label arrangement with Wal*Mart which is scheduled to continue for at least three years. Wal*Mart had previously licensed certain trademarks from General Electric Company for use with small kitchen and other appliances for exclusive sale in Wal*Mart stores. Wal*Mart has selected several manufacturers to supply these GE-branded products. HB-PS has been named the lead supplier for this program. In addition to supplying a number of products, HB-PS is responsible for the creation of the GE product line's "design language" and for providing other services. 1 3 BUSINESS SEGMENT INFORMATION A. NORTH AMERICAN COAL GENERAL NACoal is engaged in the mining and marketing of lignite for use primarily as fuel for power generation by electric utilities. Sales by NACoal are made primarily through wholly owned project mining subsidiaries pursuant to long-term, cost plus a profit per ton contracts. The utility customers have arranged and guaranteed the financing of the development and operation of the project mining subsidiaries. There is no recourse to NACCO or NACoal for the financing of these subsidiary mines. NACoal also provides dragline mining services for a limerock quarry near Miami, Florida. At December 31, 1999, NACoal's operating mines consist of mines where the reserves were acquired and developed by NACoal, except for the South Hallsville No. 1 Mine and the San Miguel Lignite Mine where reserves are owned by the customers of these mines. NACoal also earns royalty income from the lease of various coal and gas properties. For further information as to the financing of the project mining subsidiaries, see Note Nine to the Consolidated Financial Statements at page 50 of the 1999 Annual Report. Project mining subsidiaries accounted for 19% and 26% of NACCO's assets and liabilities, respectively, as of December 31, 1999, while their operations accounted for 9% and 33% of NACCO's revenues and operating profits, respectively, in 1999. SALES, MARKETING AND OPERATIONS The principal customers of NACoal are electric utilities and a synfuels plant. In 1999, sales to one customer, which supplies coal to four facilities, accounted for 47% of NACoal's revenues compared with 45% and 46% in 1998 and 1997, respectively. The distribution of sales in the last five years has been as follows: DISTRIBUTION ------------ TOTAL TONS SOLD ELECTRIC SYNFUELS (MILLIONS) UTILITIES PLANT ---------- --------- ----- 1999 31.3 80% 20% 1998 31.7 80% 20% 1997 29.9 80% 20% 1996 27.6 77% 23% 1995 26.7 76% 24% The contracts under which the project mining subsidiaries were organized provide that, under certain conditions of default, the customer(s) involved may elect to acquire the assets (subject to the liabilities) or the capital stock of the subsidiary, for an amount effectively equal to book value. In one case, the customer may elect to acquire the stock of the subsidiary after a specified period of time without reference to default, in exchange for certain payments on coal thereafter mined. In addition, the customer for NACoal's contract mining operation may elect to terminate the contract for convenience at any time on or after July 1, 2000. NACoal does not know of any conditions of default that currently exist. The location, mine type, reserve data, coal quality characteristics, customer, sales tonnage and contract expiration date for the mines operated by NACoal in 1999 were as follows: 2 4
DEVELOPED LIGNITE MINING OPERATIONS PROVEN AND PROBABLE RESERVES(1) COMMITTED UNDER AVERAGE SULFUR CONTRACT UNCOMMITTED AVERAGE CONTENT PER PROJECT MINING (MILLIONS (MILLIONS BTUS UNIT SUBSIDIARIES MINE LOCATION TYPE OF MINE OF TONS) OF TONS) PER POUND OF WEIGHT - --------------- ---- -------- ------------ ---------- ---------- --------- ------------- The Coteau Properties Freedom Mine(2) Beulah, ND Surface Lignite 509.4 ---- 6,767 0.8% Company The Falkirk Mining Falkirk Mine(2) Underwood, ND Surface Lignite 481.4 ---- 6,200 0.6% Company The Sabine Mining South Hallsville Hallsville, TX Surface Lignite (4) (4) (4) (4) Company No. 1 Mine(2) OTHER ----- San Miguel Lignite San Miguel Jourdanton, TX Surface Lignite (5) (5) (5) (5) Mining Operations Lignite Mine Red River Mining Oxbow Mine Coushatta, LA Surface Lignite 9.0(7) 11.9(7) 6,722 0.7% Company(6) --- ---- Total Developed 999.8 11.9 UNDEVELOPED MINING OPERATIONS ---------- North Dakota ---- ---- ---- ---- 566.5 6,428 0.7% Texas ---- ---- ---- ---- 169.3 6,208 0.9% Eastern ---- ---- ---- 76.9 54.0 12,070 3.3% Mississippi ---- ---- ---- 41.5(9) 24.7(9) 5,300 0.6% ---- ---- Total 118.4 814.5 Undeveloped Total Developed/ 1,118.2 826.4 Undeveloped DEVELOPED LIGNITE MINING OPERATIONS PROVEN AND PROBABLE RESERVES(1) 1999 SALES PROJECT MINING TONNAGE CONTRACT SUBSIDIARIES CUSTOMER(S) (PLANT) (MILLIONS) EXPIRES - -------------- ------------------- ---------- ------- The Coteau Properties Dakota Coal Company 6.3 2007(3) Company (Great Plains Synfuels Plant) Dakota Coal Company 5.5 2007(3) (Antelope Valley Station) Dakota Coal Company 3.6 2007(3) (Leland Olds Station) Dakota Coal Company 1.0 2002 (Stanton Station of United Power Association) The Falkirk Mining United Power 7.2 2020 Company Association/ Cooperative Power Association (Coal Creek Station) The Sabine Mining Company Southwestern Electric 3.6 2020 Power Company (Henry W. Pirkey Power Plant) OTHER - ----- San Miguel Lignite Mining San Miguel Electric 3.4 2007 Operations Cooperative, Inc. (San Miguel Power Plant) Red River Mining Central Louisiana 0.7(8) 2010 Company(6) Electric Company/ Southwestern Electric Power Company (Dolet Hills Power Plant) UNDEVELOPED MINING OPERATIONS - ---------- North Dakota ---- ---- ---- Texas ---- ---- ---- Eastern ---- ---- ---- Mississippi ---- ---- ---- (1) The projected extraction loss is approximately ten percent (10%) of the proven and probable reserves, except with respect to the reserves for the Eastern Undeveloped Mining Operations, in which case the extraction loss is approximately thirty percent (30%) of the proven and probable reserves. (2) The contracts for these mines require the customer to cover the cost of the ongoing replacement and upkeep of the plant and equipment of the mine. (3) Although the term of the existing coal sales agreement terminates in 2007, the term may be extended for six (6) additional periods of five years, or until 2037, at the option of The Coteau Properties Company. (4) The reserves of the South Hallsville No. 1 Mine are owned and controlled by the customer and, therefore, have not been listed in the table. (5) The reserves of the San Miguel Lignite Mine are owned and controlled by the customer and, therefore, have not been listed in the table. (6) Joint venture with Phillips Coal Company. (7) These amounts represent the total (100%) of the joint venture reserves. (8) This amount represents the total (100%) of the 1999 joint venture tonnage. (9) These amounts represent 25% of the reserves owned and controlled by Mississippi Lignite Mining Company, a joint venture with Phillips Coal Company, related to the Red Hills Mine. The company's investment in Mississippi Lignite Mining Company is accounted for under the equity method.
3 5 GOVERNMENT REGULATION NACoal, like other coal producers, continues to be subject to Federal and state health, safety and environmental regulations. The 2000 expenditures which will be required for compliance with the provisions of governmental regulations, including mined land reclamation and other air and water pollution abatement requirements, are estimated at $6.7 million for certain closed mines and are included in the caption "Self-Insurance Reserves and Other" in NACCO's Consolidated Financial Statements in the 1999 Annual Report. The active operations are required to make certain additional capital expenditures to comply with such governmental regulations, which expenditures will be recovered under the terms of the coal sales agreements with the utility customers. NACoal's management believes that the Clean Air Act Amendments, which became effective in 1990, have not had and will not have a material adverse effect on its current operations, because substantially all of the power generating facilities operated or supplied by NACoal's customers meet or exceed the requirements of the Clean Air Act. COMPETITION The coal industry competes with other sources of energy, particularly oil, gas, hydro-electric power and nuclear power. Among the factors that affect competition are the price and availability of oil and natural gas, environmental considerations, the time and expenditures required to develop new energy sources, the cost of transportation, the cost of compliance with governmental regulation of operations, the impact of Federal and state energy policies and the current trend toward deregulation of energy markets. The ability of NACoal to market and develop its reserves will depend upon the interaction of these factors. There is no official source of information on the subject, but NACoal believes that it is the eighth largest coal producer in the United States. EMPLOYEES As of February 29, 2000, NACoal had approximately 1,050 employees. B. NACCO MATERIALS HANDLING GROUP GENERAL During 1999, NACCO purchased from Sumitomo Heavy Industries, Inc. for book value of $11.3 million the remaining two percent indirect interest in NACCO Materials Handling Group, Inc. that it previously did not own. In addition, the legal structure of the forklift business was reorganized to create NMHG Holding Co., which now indirectly owns 100 percent of NMHG Wholesale and directly owns 100 percent of NMHG Retail. The new legal structure was formed primarily to distinguish the wholesale operations from the retail operations of NMHG. 1. NMHG WHOLESALE GENERAL NMHG Wholesale is one of the leading worldwide designers, manufacturers and marketers of forklift trucks, which comprise the largest segment of the materials handling equipment industry. NMHG Wholesale accounted for 51% and 40% of NACCO's assets and liabilities, respectively, as of December 31, 1999, while its operations accounted for 61% and 56% of NACCO's revenues and operating profits, respectively, in 1999. THE INDUSTRY Forklift trucks are used in a wide variety of business applications, including manufacturing and warehousing. The materials handling industry, especially in industrialized nations, is generally a mature industry, which has historically been cyclical. Fluctuations in the rate of orders for forklift trucks reflect the capital investment decisions of the customers, which in turn depend upon the general level of economic activity in the various industries served by such customers. Since 1991, the worldwide market for forklift trucks has gradually increased to approximately 530,000 units. During this time, however, individual geographic markets have been subject to cyclicality. The North American market for forklift trucks peaked in 1995, began a cyclical downturn in 1996 and then recovered to a new high in 1999. The European market reversed a declining trend in 1994 and grew steadily to a new high in 1998, which was almost matched in 1999. The Japanese market reversed a growth trend in 1998 and worsened in 1999 as a result of the widely publicized financial problems in Japan in 1998. The market in Asia-Pacific (outside of Japan) continued modest growth in 1996 and the first half of 1997. However, the late-1997 Asian financial crisis, which continued through 1998, has negatively affected lift truck demand in that part of the world. This downturn in demand continued in 1999. 4 6 COMPANY OPERATIONS NMHG Wholesale maintains product differentiation between Hyster and Yale brands of forklift trucks and distributes its products through separate worldwide dealer networks. Nevertheless, NMHG Wholesale has integrated overlapping operations and takes advantage of economies of scale in design, manufacturing and purchasing. NMHG Wholesale provides virtually all of its own design, manufacturing and administrative functions. Products are marketed and sold through two separate primarily independent dealer networks which retain and promote the Hyster and Yale identities. In Japan, NMHG Wholesale has a 50% owned joint venture with Sumitomo Heavy Industries Ltd. which is generally known as Sumitomo-NACCO Materials Handling Group ("S-N"). S-N performs certain design activities and produces lift trucks and components which it markets in Japan under the name "Sumitomo Yale" and which are exported for sale by NMHG Wholesale and its affiliates in the U.S., Europe and Asia-Pacific. PRODUCT LINES NMHG Wholesale designs and manufactures a wide range of forklift trucks under both the Hyster and Yale brand names. The principal categories of forklift trucks include electric rider, electric narrow-aisle and electric motorized hand forklift trucks primarily for indoor use and internal combustion engine ("ICE") forklift trucks for indoor or outdoor use. Forklift truck sales accounted for approximately 83%, 83% and 82% of NMHG Wholesale's net sales in 1999, 1998 and 1997, respectively. NMHG Wholesale also derives significant revenues from the sale of service parts for its products. Profit margins on service parts are greater than those on forklift trucks. The large population of Hyster and Yale forklift trucks now in service provides a market for service parts. In addition to parts for its own forklift trucks, NMHG Wholesale has a program in North America, UNISOURCE(TM), and in Europe, MULTIQUIP(TM), designed to supply Hyster dealers with replacement parts for most competing brands of forklift trucks. NMHG Wholesale has a similar program, PREMIER(TM), for its Yale dealers in the Americas and Europe. Accordingly, NMHG Wholesale dealers can offer their mixed fleet customers a "one stop" supply source. Certain of these parts are manufactured by and purchased from third party component makers. Service parts accounted for approximately 17%, 17% and 18% of NMHG's net sales in 1999, 1998 and 1997, respectively. For further information on geographic regions, see Note Eighteen to the Consolidated Financial Statements in the 1999 Annual Report. COMPETITION Although there is no official source for information on the subject, NACCO believes that in 1999 NMHG Wholesale was one of the leading manufacturers of forklift trucks in the world, based on the number of lift trucks sold. The forklift truck industry is highly competitive. The worldwide competitive structure of the industry is fragmented by product line and country; however, each of the three largest forklift truck manufacturers have a significantly greater market position on a unit volume basis than the other manufacturers. The principal methods of competition among forklift truck manufacturers are product performance, price, service and distribution networks. The forklift truck industry also competes with alternative methods of materials handling, including conveyor systems, automated guided vehicle systems and manual labor. Global competition is also affected by a number of other factors, including currency fluctuations, variations in labor costs and effective tax rates, and the costs related to compliance with applicable regulations, including export restraints, antidumping provisions and environmental regulations. NMHG Wholesale's position is strongest in North America, where it believes it is the leader in unit sales of electric rider and ICE forklift trucks and has a significant share of unit sales of electric narrow-aisle and electric motorized hand forklift trucks. Although the European market is fragmented and competitive positions vary from country to country, NMHG Wholesale believes that it has a significant share of unit sales of electric rider and ICE forklift trucks in Western Europe. TRADE RESTRICTIONS UNITED STATES Since June 1988, Japanese-built ICE forklift trucks imported into the United States, with lifting capacities between 2,000 and 15,000 pounds, including finished and unfinished forklift trucks, chassis, frames and frames assembled with one or more component parts, have been subject to an antidumping duty order. Antidumping duty rates in effect through 1999 range from 7.39% to 56.81% depending on manufacturer or importer. The antidumping duty rate applicable to imports from S-N is 51.33%. NMHG Wholesale does not currently import for sale in the United States any forklift trucks or components subject to the antidumping duty order. This antidumping duty order will remain in effect until the Japanese manufacturers and importers satisfy the U.S. Department of Commerce (the "Commerce Department") that they have not individually sold merchandise subject to the order in the United States below foreign market value for at least three consecutive years, or unless the Commerce Department or the U.S. International Trade Commission finds that changed circumstances exist sufficient to warrant the retirement of the order. The legislation implementing the Uruguay round of GATT negotiations passed in 1994 provides that the antidumping order was to be reviewed for possible retirement in 2000. All of NMHG Wholesale's major Japanese competitors have either built or acquired manufacturing or assembly facilities in the United States. NMHG Wholesale cannot predict with any certainty if there have been or will be any negative effects to it resulting from Japanese manufacturers sourcing their forklift products from the United States. NMHG Wholesale prevailed in 5 7 opposing retirement of the antidumping duty in 2000. The antidumping order will again be reviewed for possible retirement in 2005. EUROPE There are no formal restraints on foreign forklift manufacturers in the European Union. Several Japanese manufacturers have established manufacturing or assembly facilities within the European Union. PRODUCT DESIGN AND DEVELOPMENT NMHG Wholesale spent $41.4 million, $38.6 million and $23.5 million on product design and development activities in 1999, 1998 and 1997, respectively. The Hyster and Yale products are differentiated for the specific needs of their respective customer bases. NMHG Wholesale continues to pursue opportunities to improve product costs by engineering new Hyster and Yale brand products with component commonality. Certain product design and development activities with respect to ICE forklift trucks and some components are performed in Japan by S-N. S-N spent approximately $4.1 million, $4.3 million and $4.1 million on product design and development in 1999, 1998 and 1997, respectively. BACKLOG As of December 31, 1999, NMHG Wholesale's backlog of unfilled orders for forklift trucks was approximately 21,500 units, or $362 million, of which substantially all is expected to be filled during fiscal 2000. This compares to the backlog as of December 31, 1998 of approximately 19,500 units, or $350 million. Decreased production and a slight increase in the rate of incoming orders for forklift trucks in 1999 caused this slight increase in backlog levels. Backlog represents unit orders to NMHG Wholesale's manufacturing plants from independent dealerships, retail customers and contracts with the United States government. Although these orders are believed to be firm, such orders may be subject to cancellation or modification. SOURCES NMHG Wholesale has adopted a strategy of obtaining its raw materials and principal components on a global basis from competitively priced sources. NMHG Wholesale is dependent on a limited number of suppliers for certain of its critical components, including diesel and gasoline engines and cast-iron counterweights used on certain forklift trucks. There would be a material adverse effect on NMHG Wholesale if it were unable to obtain all or a significant portion of such components, or if the cost of such components was to increase significantly under circumstances which prevented NMHG Wholesale from passing on such increases to its customers. DISTRIBUTION The Hyster and Yale brand products are distributed through separate highly developed worldwide dealer networks which are primarily independently owned. For further information, see the discussion under the heading "NMHG Retail" below. In addition, NMHG Wholesale has an internal sales force for each brand to sell directly to major customers. In Japan, forklift truck products are distributed by S-N. FINANCING OF SALES In 1998, NMHG Wholesale amended its existing joint venture agreement with General Electric Capital Corporation ("GE Capital") to provide that GE Capital would furnish leasing and financing services to selected Hyster dealers in North America in addition to the Yale dealers GE Capital was already supporting under the agreement. NMHG Wholesale owns 20% of the joint venture entity, NMHG Financial Services, Inc., and is entitled to certain fees and remarketing profits. In addition, NMHG Wholesale entered into an International Operating Agreement with GE Capital pursuant to which GE Capital provides leasing and financing services to Hyster and Yale dealers throughout the major countries of the world and makes referral fee payments to NMHG Wholesale once certain financial thresholds are reached. The agreements expire in 2003. United States Hyster dealer sales and direct sales of Hyster products in the United States are supported by leasing and financing services provided by Hyster Credit Company pursuant to an operating agreement that expires in December 2000. EMPLOYEES As of February 29, 2000, NMHG Wholesale had approximately 7,000 employees. Employees in the Danville, Illinois manufacturing and parts depot operations (approximately 773 employees) are unionized, as are tool room employees (approximately 22 employees) located in Portland, Oregon. A three-year contract for the Danville union employees expires in June 2000. A one-year contract with the Portland tool room union expires in October 2000. Employees at the facilities in Berea, Kentucky; Sulligent, Alabama; and Greenville and Lenoir, North Carolina are not represented by unions. In Europe, shop employees in the Craigavon, Northern Ireland facility are unionized. Employees in the Irvine, Scotland and Nijmegen, the Netherlands facilities are not represented by unions. The employees in Nijmegen 6 8 have organized a works council, as required by Dutch law, which performs a consultative role on employment matters. In Mexico, shop employees are unionized. NMHG Wholesale's management believes its current labor relations with both union and non-union employees are generally satisfactory and that it will be able to renew the Danville and Portland union contracts in 2000 on acceptable terms. However, there can be no assurances that NMHG Wholesale will be able to successfully renegotiate these union contracts without work stoppages or on acceptable terms. A prolonged work stoppage at either of these facilities could materially adversely affect NMHG Wholesale's business and results of operations. GOVERNMENT REGULATION NMHG Wholesale's manufacturing facilities, in common with others in the industry, are subject to numerous laws and regulations designed to protect the environment, particularly with respect to disposal of plant waste. NMHG Wholesale's products are also subject to various industry and governmental standards. NMHG Wholesale's management believes that the impact of expenditures to comply with such requirements will not have a material adverse effect on NMHG Wholesale. PATENTS, TRADEMARKS AND LICENSES NMHG Wholesale is not materially dependent upon patents or patent protection. NMHG Wholesale is the owner of the Hyster trademark, which is currently registered in approximately 55 countries. The Yale trademark, which is used on a perpetual royalty-free basis by NMHG Wholesale in connection with the manufacture and sale of forklift trucks and related components, is currently registered in approximately 150 countries. NMHG Wholesale's management believes that its business is not dependent upon any individual trademark registration or license, but that the Hyster and Yale trademarks are material to its business. FOREIGN OPERATIONS For a description of net sales and other financial information by geographic region, see Note Eighteen to the Consolidated Financial Statements in the 1999 Annual Report. 2. NMHG RETAIL GENERAL In 1998, NMHG, through NMHG Retail, embarked on a strategy of acquiring or investing in certain independently owned Hyster and Yale and competitor retail dealerships. NMHG Retail believes its expansion into retail distribution will be beneficial in the long term because of the potential revenue that occurs at the retail level from new and used unit sales, part sales, rental income and the maintenance and repair business. NMHG Retail believes that ownership of retail dealers will ensure strategic alignment of its manufacturing with its distribution and will streamline its distribution channel. NMHG Retail's ownership and operation of retail dealers will allow it to financially strengthen this portion of its distribution organization. NMHG has experience (prior to 1992) in operating company owned Hyster and Yale dealers and believes it has the experience, personnel and resources to be successful in the retail distribution end of the materials handling business. NMHG Retail intends to further expand its retail operations over the next several years through acquisitions, principally outside the United States, and growth of its existing dealerships. For further information, see the 1999 Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." As of December 31, 1999, NMHG Retail has acquired and consolidated two dealerships in the United States, 11 dealerships in Europe and nine dealerships in Asia-Pacific. NMHG Retail, including the elimination of intercompany transactions, accounted for 7% and 9% of NACCO's assets and liabilities, respectively, as of December 31, 1999, while its operations accounted for 6% and (12%) of NACCO's revenues and operating profits, respectively, in 1999. THE INDUSTRY Forklift trucks are sold at the retail level worldwide by independent dealers and by dealerships owned by the original equipment manufacturer (OEM). Some OEMs distribute exclusively through independent dealers, some OEMs distribute exclusively through owned dealerships and some OEMs (such as NMHG Wholesale), distribute through a combination of independent and owned dealerships. NMHG believes there is a growing trend by OEMs in the forklift industry to acquire their dealerships. COMPANY OPERATIONS An NMHG Retail dealership is authorized to sell either Hyster or Yale brand materials handling equipment. These dealerships will typically also sell allied lines of equipment from other manufacturers pursuant to dealer agreements. Allied equipment includes such items as sweepers, aerial work platforms, personnel carts, rough terrain forklifts and other equipment as well as racking and shelving. The number and type of products available will vary from dealership to dealership. A primary source of revenue for dealerships is the sale of parts and service for equipment sold by the dealership. Service is performed both in-shop and on-site. In addition to the outright sale of new and used equipment, dealerships provide equipment for lease and for long or short-term rental. 7 9 NMHG Retail dealerships are granted a primary geographic territory by NMHG Wholesale in which they operate. NMHG Retail operations are conducted at branch facilities located in major cities within NMHG Retail's assigned area of operations. COMPETITION The materials handling equipment sales and rental industry is highly fragmented and competitive. NMHG Retail's competitors primarily include: its own independent Hyster and Yale dealers, OEM owned dealers for competing brands, OEM direct sales efforts, independently owned equipment rental companies, independent parts operations and independent service shops. The forklift truck industry also competes with alternative methods of materials handling, including conveyor systems, automated guided vehicle systems and manual labor. CUSTOMERS NMHG Retail's customer base is highly diversified and ranges from Fortune 100 companies to small businesses in virtually every type of manufacturing and service industry. No single customer accounted for more than 10% of its revenues during 1999. NMHG Retail's customer base varies widely by branch and is determined by several factors, including the equipment mix and marketing focus of the particular branch and the business composition of the local economy. FINANCING OF SALES NMHG Retail dealerships may obtain wholesale and retail financing for the sale and leasing of equipment through NMHG Financial Services, a joint venture between NMHG Wholesale and GE Capital. This affords these dealerships with a wide variety of financial products at competitive rates. See also "Financing of Sales" under NMHG Wholesale above. EMPLOYEES As of February 29, 2000, NMHG Retail had approximately 1,670 employees. GOVERNMENT REGULATION NMHG Retail's operations, like others in similar operations, are subject to numerous laws and regulations designed to protect the environment, particularly with respect to the disposal of cleaning solvents and wastewater and the use of and disposal of petroleum products from underground and above-ground storage tanks. NMHG Retail is currently assessing the nature of any environmental problems and remediation requirements at its recently acquired dealerships. Based on currently known facts, NMHG Retail's management believes that any environmental remediation and compliance costs will not have a material adverse effect on NMHG Retail. However, the assessment is in a preliminary stage and no assurance can be given that environmental remediation and compliance costs resulting from NMHG Retail's final assessment will not have material adverse effect on NMHG Retail. FOREIGN OPERATIONS For a description of net sales and other financial information by geographic region, see Note Eighteen to the Consolidated Financial Statements in the 1999 Annual Report. C. NACCO HOUSEWARES GROUP GENERAL In 1998, NACCO began reporting the results of HB-PS and KCI on a combined basis as the NACCO Housewares Group. HB-PS believes that it is the largest full-line manufacturer and marketer of small electric kitchen appliances in North America based on market share of key product categories. HB-PS' products are marketed primarily to retail merchants and wholesale distributors. KCI is a national specialty retailer of kitchenware, small electric appliances and related accessories that operated 150 retail stores as of December 31, 1999. Stores are located primarily in factory outlet complexes that feature merchandise of highly recognizable name-brand manufacturers, including HB-PS. Housewares accounted for 19% and 14% of NACCO's assets and liabilities, respectively, as of December 31, 1999, while its operations accounted for 23% and 32% of NACCO's revenues and operating profits, respectively, in 1999. SALES AND MARKETING HB-PS manufactures and markets a wide range of small electric household appliances, including motor-driven appliances such as blenders, food processors, mixers and electric knives, and heat-generating appliances such as toasters, irons, coffeemakers, indoor grills and toaster ovens. HB-PS also makes commercial products for restaurants, bars and hotels. HB-PS generally markets its "better" and "best" segments under the Hamilton Beach(R) brand and uses the Proctor-Silex(R) brand for the "good" and "better" segments. HB-PS generally markets its products primarily in North America, but also sells products in Latin America, Asia-Pacific and Europe. Sales are generated predominantly by a network of inside sales employees to mass merchandisers, national department stores, variety store chains, drug store chains, catalog showrooms and other retail outlets. Principal customers include Wal*Mart, 8 10 Kmart, Target, Canadian Tire, Zellers, SAM'S Club, Dollar General, Sears and Ames. Sales promotional activities are primarily focused on cooperative advertising. Because of the seasonal nature of the markets for small electric appliances, HB-PS' management believes that backlog is not a meaningful indicator of performance and is not a significant indicator of annual sales. Backlog of orders as of December 31, 1999 was approximately $5.2 million. This compares with the backlog as of December 31, 1998 of approximately $5.5 million. This backlog represents customer orders, which may be canceled at any time prior to shipment. HB-PS' warranty program to the consumer consists generally of a limited warranty lasting for two years for electric appliances. Under its warranty program, HB-PS may repair or replace, at its option, those products found to contain manufacturing defects. Revenues and operating profit for Housewares are traditionally greater in the second half of the year as sales of small electric appliances to retailers and consumers increase significantly with the fall holiday selling season. Because of the seasonality of purchases of its products, HB-PS incurs substantial short-term debt to finance inventories and accounts receivable during this period. PRODUCT DESIGN AND DEVELOPMENT The Housewares Group spent $6.6 million in 1999, $5.5 million in 1998 and $4.4 million in 1997 on product design and development activities. All of these expenditures were made by HB-PS. SOURCES The principal raw materials used to manufacture and distribute HB-PS' products are steel, aluminum, plastic and packaging materials. HB-PS' management believes that adequate quantities of raw materials are available from various suppliers. COMPETITION The small electric household appliance industry is highly competitive. Based on publicly available information about the industry, HB-PS' management believes it is the largest full-line manufacturer and marketer of small electric kitchen appliances in North America based on key product categories. As retailers generally purchase a limited selection of small electric appliances, HB-PS competes with other suppliers for retail shelf space and focuses its primary marketing efforts on retailers rather than consumers. In 1996, HB-PS also initiated consumer advertising for the Hamilton Beach(R) brand. HB-PS' management believes that the principal areas of competition with respect to its products are quality, price, product design, product features, merchandising, promotion and warranty. HB-PS' management believes that it is competitive in all of these areas. As the outlet channel of the retail industry is approaching maturity, the management of KCI continues to explore alternate areas of growth and diversification. For the past several years, KCI has been testing alternative store formats both within the outlet industry and the more traditional retail environments. Not all of these formats have met KCI's rigorous financial performance standards. KCI continues to explore alternate channels of distribution, including distribution through the Internet. GOVERNMENT REGULATION HB-PS, in common with other manufacturers, is subject to numerous Federal and state health, safety and environmental regulations. HB-PS' management believes that the impact of expenditures to comply with such laws will not have a material adverse effect on HB-PS. HB-PS' products are subject to testing or regulation by Underwriters' Laboratories, the Canadian Standards Association and various entities in foreign countries that review product design. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES HB-PS holds patents and trademarks registered in the United States and foreign countries for various products. HB-PS' management believes that its business is not dependent upon any individual patent, trademark, copyright or license, but that the Hamilton Beach and Proctor-Silex trademarks are material to its business. EMPLOYEES As of February 29, 2000, Housewares' work force consisted of approximately 5,400 employees, most of which are not represented by unions. In Canada, approximately 20 hourly employees at HB-PS' Picton, Ontario distribution facility are unionized. These employees are represented by an employee association which performs a consultative role on employment matters. On February 1, 1999, a collective bargaining agreement, which expires on January 31, 2001, was executed for HB-PS' Saltillo manufacturing facility. There are approximately 1,613 employees subject to the terms of this agreement. The management of HB-PS and KCI believe their current labor relations with both union and non-union employees are satisfactory. 9 11 ITEM 2. PROPERTIES A. NACCO NACCO currently leases its corporate headquarters building in Mayfield Heights, Ohio. B. NACOAL NACoal's proven and probable coal reserves and deposits (owned in fee or held under leases which generally remain in effect until exhaustion of the reserves if mining is in progress) are estimated at approximately 1.9 billion tons, approximately 80% of which are lignite deposits in North Dakota. Reserves are estimates of quantities of coal, made by NACoal's geological and engineering staff, that are considered mineable in the future using existing operating methods. Developed reserves are those which have been allocated to mines which are in operation; all other reserves are classified as undeveloped. Information concerning mine type, reserve data and coal quality characteristics for NACoal's properties are set forth on the table on page 3 under "Item 1. Business -- A. NACoal -- Sales, Marketing and Operations." 10 12 C. NMHG 1. NMHG WHOLESALE The following table summarizes certain information with respect to the principal manufacturing, distribution and office facilities owned or leased by NMHG Wholesale.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS - -------- ----- ------ --------------------------- Berea, Kentucky X Manufacture of forklift trucks Craigavon, Northern Ireland X Manufacture of forklift trucks Danville, Illinois X Manufacture of forklift trucks, components and service parts Danville, Illinois X Distribution of service parts for both Hyster and Yale forklift trucks Fleet, England X Hyster and Yale forklift truck marketing and sales operations for Europe, the Middle East and Africa Greenville, North Carolina X NMHG Americas division headquarters; Hyster and Yale marketing and sales operations for NMHG Americas; design and manufacture of forklift trucks Irvine, Scotland X NMHG European division headquarters; manufacture of forklift trucks Lenoir, North Carolina X Manufacture of component parts for forklift trucks Masate, Italy X Manufacture of forklift trucks Modena, Italy X Manufacture of forklift trucks Nijmegen, the Netherlands X Design and manufacture of forklift trucks and component parts; distribution of service parts for forklift trucks Obu, Japan X S-N headquarters; manufacture of forklift trucks and component parts; distribution of service parts for forklift trucks Portland, Oregon X Counterbalanced forklift truck development center for design and testing of forklift trucks, prototype equipment and component parts Portland, Oregon X NMHG global headquarters Portland, Oregon X Manufacture of production tooling and prototype units Ramos Arizpe, Mexico X Manufacturing facility for component parts of forklift trucks (near Saltillo) Sao Paulo, Brazil X Assembly of forklift trucks; distribution of service parts for forklift trucks Shanghai, China X Manufacturing facility for forklift trucks by Shanghai Hyster Joint Venture Sulligent, Alabama X Manufacture of component parts for forklift trucks Sydney, Australia X Distribution of service parts for forklift trucks and staff operations for NMHG Asia-Pacific division
11 13 2. NMHG RETAIL NMHG Retail's owned dealerships currently operate 53 branch locations. Of these locations, 10 are in the United States, 27 are in Europe and 16 are in Asia-Pacific as shown below: United States: Kentucky (2) Ohio (6) Pennsylvania (1) West Virginia (1) Europe: France (7) Germany (11) Netherlands (1) United Kingdom (8) Asia-Pacific: Australia (15) Singapore (1) Branch locations generally include facilities for displaying equipment, servicing equipment, parts storage and sales and administrative offices. NMHG Retail owns two of its branch locations and leases 51 of its locations. Certain of the leases were entered into (or assumed) in connection with acquisitions and many of the lessors under these leases are former owners of businesses that NMHG Retail acquired. NMHG Retail geographic headquarters are shared with NMHG Wholesale in Greenville, North Carolina; Fleet, England; and Sydney, Australia. D. NACCO HOUSEWARES GROUP The following table summarizes certain information with respect to the principal manufacturing, distribution and office facilities owned or leased by HB-PS.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS - -------- ----- ------ --------------------------- El Paso, Texas X Distribution center Glen Allen, Virginia X Corporate headquarters Juarez, Chihuahua, Mexico X Assembly of heat-driven products (two plants); plastic molding facility (one plant) Memphis, Tennessee X Distribution center Mt. Airy, North Carolina X Manufacture of heat-driven products Picton, Ontario, Canada X Distribution center Southern Pines, North Carolina X Manufacture of commercial products; service center for customer returns; catalog sales center; parts distribution center Toronto, Ontario, Canada X Proctor-Silex Canada sales and administration headquarters Washington, North Carolina X Customer service center Saltillo, Mexico X Manufacture of heat-driven and motor products and plastic molding facility
Sales offices are also leased in several cities in the United States and Canada. KCI currently leases its corporate headquarters building, a warehouse/distribution facility and a retail store in Chillicothe, Ohio. KCI leases the remainder of its retail stores. A typical store is approximately 3,000 square feet. ITEM 3. LEGAL PROCEEDINGS Neither the Company nor any of its subsidiaries is a party to any material pending legal proceeding other than ordinary routine litigation incidental to its respective business. 12 14 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders of the Company. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The information under this Item is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K. There exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was elected. Each executive officer serves until his successor is elected and qualified. The table on the following pages sets forth the name, age, current position and principal occupation and employment during the past five years of the Company's executive officers. 13 15 EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Alfred M. Rankin, Jr. 58 Chairman, President and Chief Executive Officer of NACCO (since prior to 1995) Charles A. Bittenbender 50 Vice President, General Counsel and Secretary of NACCO (since prior to 1995) Kenneth C. Schilling 40 Vice President and Controller of NACCO From June 1996 to May 1997, Controller of (since May 1997) NACCO. From July 1995 to May 1996, Manager of Tax and Budgeting of NACCO. From prior to 1995 to June 1995, Manager of Tax of NACCO. J.C. Butler, Jr. 39 Vice President - Corporate Development From June 1996 to May 1997, Manager of and Treasurer of NACCO (since May 1997) Corporate Development and Treasurer of NACCO. From May 1995 to May 1996, Manager of Corporate Development of NACCO. From prior to 1995 to 1995, Associate at McFarland Dewey & Co. (investment banking). Lauren E. Miller 45 Vice President - Consulting Services of From January 1996 to May 1997, Director of NACCO (since May 1997) Internal Consulting of NACCO. From prior to 1995 to December 1995, Manager of Strategy Development of NACCO.
14 16 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES A. NACOAL
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Clifford R. Miercort 60 President and Chief Executive Officer of NACoal (since prior to 1995) Herschell A. Cashion 57 Senior Vice President - Business Development of NACoal (since prior to 1995) Charles B. Friley 58 Senior Vice President - Finance and From February 1995 to August 1999, Vice Chief Financial Officer of NACoal President and Chief Financial Officer of (since August 1999) NACoal Thomas A. Koza 53 Vice President - Law and Administration of NACoal; Secretary of NACoal (since prior to 1995) Clark A. Moseley 48 Vice President - Engineering of NACoal From prior to 1995 to June 1997, Manager, (since June 1997) Engineering and Project Development, NACoal. K. Donald Grischow 52 Controller and Treasurer of NACoal (since prior to 1995)
15 17 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES B. NMHG
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Reginald R. Eklund 59 President and Chief Executive Officer of NMHG (since prior to 1995) Julie C. Hui 43 Controller of NMHG (since January 1995) From prior to 1995 to January 1995, Controller, Burr Brown Corporation (manufacturer of micro electronics and systems products). Ron J. Leptich 56 Vice President, Engineering and Big From June 1996 to October 1997, Vice Trucks of NMHG (since October 1997) President, Engineering and Big Trucks, Worldwide of NMHG. From prior to 1995 to June 1996, Vice President, Engineering, Worldwide of NMHG. Geoffrey D. Lewis 42 Vice President, Corporate Development, From September 1995 to June 1999, Vice General Counsel and Secretary of NMHG President, General Counsel and Secretary (since June 1999) of NMHG. From prior to 1995 to September 1995, Senior Vice President, General Counsel and Corporate Secretary of American Health Properties, Inc. (health care facilities). Jeffrey C. Mattern 47 Treasurer of NMHG (since prior to 1995) William C. Maxwell 53 Vice President, Finance and Chief From prior to 1995 to August 1996, Vice Financial Officer of NMHG (since August President Finance - Europe of NMHG. 1996) Frank G. Muller 58 Vice President of NMHG; President, NMHG Americas (since prior to 1995) Ronald D. Muller 53 Vice President, Operations Strategy & From August 1996 to August 1998, Vice Counterbalanced Products of NMHG (since President, Manufacturing and Information August 1998) Services, Worldwide of NMHG. From February 1995 to August 1996, Vice President,Manufacturing and Component Strategy, Worldwide of NMHG. From prior to 1995 to February 1995, Vice President, Manufacturing, Worldwide of NMHG. Victoria L. Rickey 47 Vice President of NMHG; Managing From prior to 1995 to January 1995, Senior Director, NMHG Europe, Africa and Vice President International Business Middle East (since January 1995) Group, J.I. Case (manufacturer of agricultural and construction equipment). Edward W. Ryan 61 Vice President, Marketing of NMHG From February 1995 to November 1996, Vice (since February 1995); President, NMHG President, Counterbalanced Trucks, Asia-Pacific, China and Japan (since Worldwide of NMHG. From prior to 1995 to November 1996) February 1995, Vice President, Yale Materials Handling Corporation. From prior to 1995 to February 1995, Vice President, Yale Marketing.
16 18 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES C. NACCO HOUSEWARES GROUP 1. HB-PS
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Richard E. Posey 53 President and Chief Executive Officer of HB-PS (since September 1995) Charles B. Hoyt 52 Senior Vice President - Finance and From prior to 1995 to January 1997, Vice Chief Financial Officer of HB-PS (since President - Finance and Chief Financial January 1997) Officer of HB-PS. Clark S. Leslie 66 Senior Vice President - Operations of From March 1996 to December 1996, Vice HB-PS (since January 1997) President - Operations of HB-PS. From prior to 1995 to March 1996, General Manager, Washington, N.C. plant, HB-PS. Michael J. Morecroft 57 Senior Vice President - From prior to 1995 to December 1996, Vice Engineering/Product Development of President, Engineering/Product Development HB-PS (since January 1997) of HB-PS. Judith B. McBee 52 Senior Vice President - Marketing of From prior to 1995 to December 1996, HB-PS (since January 1997) Executive Vice President - Marketing of HB-PS. Paul C. Smith 53 Senior Vice President - Sales of HB-PS From prior to 1995 to January 1996, Senior (since January 1996) Vice President - Sales of HB-PS. George P. Manson, Jr. 46 Vice President, General Counsel and From March 1995 to July 1996, Corporate Secretary of HB-PS (since July 1996) Counsel of American Home Products Corp. (health care and consumer products manufacturer). From prior to 1995 to January 1995, Assistant General Counsel, A.T. Massey Coal Company (mining company). James H. Taylor 42 Vice President and Treasurer of HB-PS (since prior to 1995)
2. KCI
NAME AGE CURRENT POSITION OTHER POSITIONS Randolph J. Gawelek 52 President and Chief Executive Officer From March 1999 to August 1999, President, of KCI (since August 1999). Secretary and Treasurer of KCI. From December 1998 to March 1999, Executive Vice President, Secretary and Treasurer of KCI. From prior to 1995 to December 1998, Executive Vice President and Secretary of KCI.
17 19 PART II ITEM 5. MARKET FOR NACCO INDUSTRIES, INC. COMMON STOCK AND RELATED SECURITY HOLDERS' MATTERS The information required by this Item 5 is set forth on page 39 of the 1999 Annual Report under the heading "Market For NACCO Industries, Inc. Common Stock and Related Security Holders' Matters," which information is incorporated herein by reference. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The information required by this Item 6 with respect to selected financial data is set forth on page 1 of the 1999 Annual Report under the heading "Selected Financial and Operating Data," which information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item 7 is set forth at pages 24 through 38 of the 1999 Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item 7A is set forth at page 39 of the 1999 Annual Report under the heading "Quantitative and Qualitative Disclosures About Market Risk," which information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is set forth at pages 40 through 63 of the 1999 Annual Report, which information is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors of the Company will be set forth in the 2000 Proxy Statement under the headings "Business to be Transacted -- 1. Election of Directors," and "Section 16(a) Beneficial Ownership Reporting Compliance," which information is incorporated herein by reference. Information regarding the executive officers of the Company is included as Item 4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION Information with respect to executive compensation will be set forth in the 2000 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors" under the subheadings "-- Compensation of Directors," "-- Compensation of Executive Officers," "-- Stock Option Grants," "-- Stock Option Exercises and Fiscal Year-End Values," "-- Long-Term Incentive Plans," "-- Compensation Committee Interlocks and Insider Participation" and "-- Pension Plans," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to security ownership of certain beneficial owners and management will be set forth in the 2000 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors -- Beneficial Ownership of Class A Common and Class B Common," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to certain relationships and related transactions will be set forth in the 2000 Proxy Statement under the heading "Business to be Transacted -- 1. Election of Directors -- Compensation Committee Interlocks and Insider Participation," which information is incorporated herein by reference. 18 20 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) and (2) The response to Item 14(a)(1) and (2) is set forth beginning at page F-1 of this Annual Report on Form 10-K. (a) (3) Listing of Exhibits -- See the exhibit index beginning at page X-1 of this Annual Report on Form 10-K. (b) The Company did not file any current reports on Form 8-K during the fourth quarter of 1999. (c) The response to Item 14(c) is set forth beginning at page X-1 of this Annual Report on Form 10-K. (d) Financial Statement Schedules -- The response to Item 14(d) is set forth beginning at page F-3 of this Annual Report on Form 10-K. 19 21 SIGNATURES Pursuant to the requirements of Section 13 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. By: /s/ Kenneth C. Schilling ------------------------------------ Kenneth C. Schilling Vice President and Controller (principal financial and accounting officer) March 30, 2000 20 22 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Alfred M. Rankin, Jr. Chairman, President and March 30, 2000 - ------------------------------------ Chief Executive Officer (principal Alfred M. Rankin, Jr. executive officer), Director /s/ Kenneth C. Schilling Vice President and Controller March 30, 2000 - ------------------------------------ (principal financial and accounting Kenneth C. Schilling officer) * Owsley Brown II Director March 30, 2000 - ------------------------------------ Owsley Brown II * Robert M. Gates Director March 30, 2000 - ------------------------------------ Robert M. Gates * Leon J. Hendrix, Jr. Director March 30, 2000 - ------------------------------------ Leon J. Hendrix, Jr. * David H. Hoag Director March 30, 2000 - ------------------------------------ David H. Hoag * Dennis W. LaBarre Director March 30, 2000 - ------------------------------------ Dennis W. LaBarre * Richard de J. Osborne Director March 30, 2000 - ------------------------------------ Richard de J. Osborne * Ian M. Ross Director March 30, 2000 - ------------------------------------ Ian M. Ross * John C. Sawhill Director March 30, 2000 - ------------------------------------ John C. Sawhill * Britton T. Taplin Director March 30, 2000 - ------------------------------------ Britton T. Taplin * David F. Taplin Director March 30, 2000 - ------------------------------------ David F. Taplin * John F. Turben Director March 30, 2000 - ------------------------------------ John F. Turben
*Kenneth C. Schilling, by signing his name hereto, does hereby sign this Annual Report on Form 10-K on behalf of each of the above named and designated directors of the Company pursuant to a Power of Attorney executed by such persons and filed with the Securities and Exchange Commission. /s/ Kenneth C. Schilling March 30, 2000 - --------------------------------------- Kenneth C. Schilling, Attorney-in-Fact 21 23 ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14(a)(1) AND (2), AND ITEM 14(d) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1999 NACCO INDUSTRIES, INC. MAYFIELD HEIGHTS, OHIO F-1 24 FORM 10-K ITEM 14(a)(1) AND (2) NACCO INDUSTRIES, INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of NACCO Industries, Inc. and Subsidiaries are incorporated by reference in Item 8 beginning at page 40 of the 1999 Annual Report: Consolidated Statements of Income and Comprehensive Income--Year ended December 31, 1999, 1998 and 1997. Consolidated Balance Sheets--December 31, 1999 and December 31, 1998. Consolidated Statements of Cash Flows--Year ended December 31, 1999, 1998 and 1997. Consolidated Statements of Stockholders' Equity--Year ended December 31, 1999, 1998 and 1997. Notes to Consolidated Financial Statements. NACCO Industries, Inc. Report of Management. Report of Independent Public Accountants--Year ended December 31, 1999, 1998 and 1997. The following consolidated financial statement schedules of NACCO Industries, Inc. and Subsidiaries are included in Item 14(d): Schedule I -- Condensed Financial Information of the Parent Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. F-2 25 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of NACCO Industries, Inc.: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in NACCO Industries, Inc.'s annual report to stockholders, incorporated by reference in this Form 10-K, and have issued our report thereon dated February 8, 2000. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP Cleveland, Ohio February 8, 2000 F-3 26
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY CONDENSED BALANCE SHEETS Year ended December 31 ------------------------------ 1999 1998 -------- -------- (In millions) Current assets $ 0.2 $ 0.6 Current intercompany accounts receivable, net 0.4 5.5 Other assets 0.4 0.2 Investment in subsidiaries NMHG 468.7 451.0 Housewares 163.9 150.1 NACoal 23.2 15.1 Bellaire 0.5 0.7 -------- -------- 656.3 616.9 Property, plant and equipment, net 1.2 1.6 Deferred income taxes 20.6 21.8 -------- -------- Total Assets $ 679.1 $ 646.6 ======== ======== Current liabilities $ 8.5 $ 10.0 Reserve for future interest on UMWA obligation 55.3 57.1 Note payable to Bellaire 36.0 38.4 Notes payable to other subsidiaries 12.7 18.0 Deferred income taxes and other 4.4 4.8 Stockholders' equity 562.2 518.3 -------- -------- Total Liabilities and Stockholders' Equity $ 679.1 $ 646.6 ======== ========
See Notes to Parent Company Financial Statements. F-4 27
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF INCOME Year ended December 31 -------------------------------------------------- 1999 1998 1997 ------- -------- ------- (In millions) Income (expense): Intercompany interest expense $ (0.7) $ (1.0) $ (2.3) Other - net (2.6) 0.9 1.9 ------- -------- ------- (3.3) (0.1) (0.4) Administrative and general expenses 8.9 10.5 8.4 ------- -------- ------- Loss before income taxes (12.2) (10.6) (8.8) Income tax benefit (4.6) (4.2) (3.4) ------- -------- ------- Net loss before equity in earnings of subsidiaries (7.6) (6.4) (5.4) Equity in earnings of subsidiaries 60.7 108.7 67.2 ------- -------- ------- Net income $ 53.1 $ 102.3 $ 61.8 ======= ======== =======
See Notes to Parent Company Financial Statements. F-5 28
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF CASH FLOWS Year ended December 31 --------------------------- 1999 1998 1997 ------- ------- ------- OPERATING ACTIVITIES Net income $ 53.1 $ 102.3 $ 61.8 Equity in earnings of subsidiaries (60.7) (108.7) (67.2) ------- ------- ------- Parent company only net loss (7.6) (6.4) (5.4) Deferred income taxes 1.2 (0.6) (1.3) Income taxes net of intercompany tax payments (1.4) (6.8) 6.0 Working capital changes (0.3) 3.4 (1.3) Changes in current intercompany amounts 2.6 7.9 (1.8) Changes in reserve for future interest on UMWA obligation (1.8) (2.1) (2.3) Items of income or expense not requiring cash outlays 0.4 0.4 0.4 ------- ------- ------- Net cash used for operating activities (6.9) (4.2) (5.7) INVESTING ACTIVITIES Dividends and advances received from subsidiaries 13.9 15.4 14.8 Notes payable to Bellaire (2.4) (0.8) (1.3) Expenditures for equipment (0.1) (0.1) (0.1) ------- ------- ------- Net cash provided by investing activities 11.4 14.5 13.4 FINANCING ACTIVITIES Cash dividends (7.0) (6.6) (6.3) Purchases of treasury stock - (4.7) (2.8) Treasury stock sales under stock option and Directors' compensation plans - net 2.5 1.0 1.0 Other - net - - 0.1 ------- ------- ------- Net cash used for financing activities (4.5) (10.3) (8.0) ------- ------- ------- CASH AND CASH EQUIVALENTS Increase (decrease) for the period - - (0.3) Balance at the beginning of the period - - 0.3 ------- ------- ------- Balance at the end of the period $ - $ - $ - ======= ========= =======
See Notes to Parent Company Financial Statements. F-6 29 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 The Notes to Consolidated Financial Statements, incorporated by reference elsewhere in this Form 10-K, are hereby incorporated by reference into these Notes to Parent Company Financial Statements. NOTE A - LONG-TERM OBLIGATIONS AND GUARANTEES NACCO Industries, Inc. ("NACCO" the parent company) is a holding company which owns four operating subsidiaries. It is NACCO's policy not to guarantee the debt of such subsidiaries. NOTE B - CASH DIVIDENDS AND ADVANCES TO NACCO Dividends received from the subsidiaries were $16.6 million in 1999, $22.6 million in 1998, and $37.7 million in 1997. NOTE C - UNRESTRICTED CASH The amount of unrestricted cash available to NACCO, included in Investment in subsidiaries was $36.2 million at December 31, 1999. F-7 30
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - ------------------------------------------------------------------------------------------------------------------------------------ COL A. COL B. COL C. COL D. COL E. - ------------------------------------------------------------------------------------------------------------------------------------ Additions (D) ------------------------- Balance at Charged to Charged to Balance at Beginning of Costs and Other Accounts Deductions End of Description Period Expenses --Describe --Describe Period - ------------------------------------------------------------------------------------------------------------------------------------ (In millions) 1999 Reserves deducted from asset accounts: Allowance for doubtful accounts $ 7.8 $ 2.2 $ 0.2(C) $ 2.8 (A) $ 7.4 Allowance for discounts, adjustments and returns 7.8 23.1 - 21.6 (B) 9.3 Reserve for losses on inventory 21.5 8.6 (0.4)(C) 6.8 (A) 22.9 Valuation allowance against deferred tax assets 6.7 1.2 - - 7.9 1998 Reserves deducted from asset accounts: Allowance for doubtful accounts 6.3 2.5 0.1 (C) 1.1 (A) 7.8 Allowance for discounts, adjustments and returns 7.8 17.4 - 17.4 (B) 7.8 Reserve for losses on inventory 15.8 7.2 0.5 (C) 2.0 (A) 21.5 Valuation allowance against deferred tax assets 5.9 0.8 - - 6.7 1997 Reserves deducted from asset accounts: Allowance for doubtful accounts 5.0 2.0 (0.1)(C) 0.6 (A) 6.3 Allowance for discounts, adjustments and returns 7.5 16.7 - 16.4 (B) 7.8 Reserve for losses on inventory 16.1 9.8 (3.3)(C) 6.8 (A) 15.8 Valuation allowance against deferred tax assets - 5.9 - - 5.9 Note (A) - Write-offs, net of recoveries. Note (B) - Payments. Note (C) - Subsidiary's foreign currency translation adjustments and other. Note (D) - Balances which are not required to be presented and those which are immaterial have been omitted.
F-8 31 EXHIBIT INDEX (3) Articles of Incorporation and By-laws. (i) Restated Certificate of Incorporation of the Company is incorporated by reference to Exhibit 3(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (ii) Restated By-laws of the Company are incorporated by reference to Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (4) Instruments defining the rights of security holders, including indentures. (i) The Company by this filing agrees, upon request, to file with the Securities and Exchange Commission the instruments defining the rights of holders of Long-Term debt of the Company and its subsidiaries where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. (ii) The Mortgage and Security Agreement, dated April 8, 1976, between The Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively as Mortgagee) is incorporated by reference to Exhibit 4(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. (iii) Amendment No. 1 to the Mortgage and Security Agreement, dated as of December 15, 1993, between Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively as Mortgagee) is incorporated by reference to Exhibit 4(iii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. (iv) Stockholders' Agreement, dated as of March 15, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Exhibit 2 to the Schedule 13D filed on March 29, 1990 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (v) Amendment to Stockholders' Agreement, dated as of April 6, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Exhibit 4 to Amendment No. 1 to the Schedule 13D filed on April 11, 1990 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (vi) Amendment to Stockholders' Agreement, dated as of April 6, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Exhibit 5 to Amendment No. 1 to the Schedule 13D filed on April 11, 1990 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (vii) Amendment to Stockholders' Agreement, dated as of November 17, 1990, among the signatories thereto, the Company and Ameritrust Company National Association, as depository, is incorporated herein by reference to Amendment No. 2 to the Schedule 13D filed on March 18, 1991 with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (viii) Amendment to Stockholders' Agreement, dated November 14, 1996, adding CTR Family Associates, L.P. as a Participating Stockholder, among the signatories thereto, the Company, and Key Bank, N.A. (successor to Ameritrust Company National Association), as depository, is incorporated herein by reference to Amendment No. 3 to the Schedule 13D filed on November 26, 1996, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (ix) Amendment to Stockholders' Agreement, dated as of November 14, 1996, adding Rankin Mangement, Inc. as a Participating Stockholder, among the signatories thereto, the Company, and Key Bank, N.A. (successor to Ameritrust Company National Association), as depository, is incorporated herein by reference to Amendment No. 3 to the Schedule 13D filed on November 26, 1996, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (x) Amendment to Stockholders' Agreement, dated as of April 9, 1998, by and among KeyCorp Shareholder Services, Inc., the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 6 to the Schedule 13D filed on March 25, 1999, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xi) Amendment to Stockholders' Agreement, dated as of December 26, 1998, by and among KeyCorp Shareholder Services, Inc., the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 6 to the Schedule 13D filed on March 25, 1999, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. X-1 32 (xii) Amendment to Stockholders' Agreement, dated as of November 30, 1999, by and among First Chicago Trust Company of New York, the Company and the Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xiii) Amendment to Stockholders' Agreement, dated as of November 30, 1999, by and among First Chicago Trust Company of New York, the Company and the Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xiv) Amendment to Stockholders' Agreement, dated as of March 30, 2000, by and among First Chicago Trust Company of New York, the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (10) Material contracts. *(i) The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(ii) Form of Incentive Stock Option Agreement for incentive stock options granted before 1987 under The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(iii) Form of Incentive Stock Option Agreement for incentive stock options granted after 1986 under The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(iii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(iv) Form of Non-Qualified Stock Option Agreement under The NACCO Industries, Inc., 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(iv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(v) The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(vi) Form of Non-Qualified Stock Option Agreement under The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(vi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(vii) Form of Incentive Stock Option Agreement for incentive stock options granted before 1987 under The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(vii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(viii) Form of Incentive Stock Option Agreement for incentive stock options granted after 1986 under The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(viii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(ix) The Retirement Benefit Plan for Alfred M. Rankin, Jr., effective as of January 1, 1994 is incorporated herein by reference to Exhibit 10 (ix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. *(x) Amendment No. 1, dated as of March 15, 1995, to the Retirement Benefit Plan for Alfred M. Rankin, Jr. is incorporated herein by reference to Exhibit 10 (x) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. *(xi) Instrument of Adoption and Merger for NACCO Industries, Inc. for the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective October 1, 1994) dated December 30, 1994, is incorporated herein by reference to Exhibit 10(xxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. X-2 33 *(xii) Instrument of Withdrawal and Transfer of Liabilities from The North American Coal Corporation Deferred Compensation Plan for Management Employees, effective as of December 31, 1994, is incorporated herein by reference to Exhibit 10(xxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. *(xiii) NACCO Industries, Inc. Annual Incentive Compensation Plan, effective as of January 1, 1999, is incorporated herein by reference to as Exhibit 10(xx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(xiv) NACCO Industries, Inc. Supplemental Annual Incentive Compensation Plan, effective as of January 1, 1996, is incorporated herein by reference to Exhibit 10(xiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. *(xv) NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan, amended and restated as of January 1, 1996, is attached incorporated herein by reference to Exhibit 10(xv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172. (xvi) Assumption Agreement, made as of December 20, 1991, between the Company and Citicorp North America, Inc., as agent is incorporated herein by reference to Exhibit 10(xciii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. (xvii) Intentionally left blank. *(xviii) NACCO Industries, Inc. Non-Employee Directors' Equity Compensation Plan, effective January 1, 1992, is incorporated by reference to Exhibit 10(cxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. *(xix) Amendment No. 2, dated June 30, 1995, to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (as amended and restated effective January 1, 1994) is incorporated herein by reference to Exhibit 10 (clxxi) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, Commission File Number 1-9172. *(xx) NACCO Industries, Inc. Annual Incentive Compensation Plan, effective as of January 1, 2000, is attached hereto as Exhibit 10(xx). *(xxi) Amendment No. 3, dated as of September 13, 1999, to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (as amended and restated effective January 1, 1994) is attached hereto as Exhibit 10(xxi). (xxii) - (xxx) Intentionally left blank. *(xxxi) The North American Coal Annual Incentive Plan, effective as of January 1, 1999, is incorporated herein by reference to Exhibit 10(xlv) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, Commission File Number 1-9172. *(xxxii) Instrument of Merger, Amendment and Transfer of Sponsorship of Benefit Plans, effective as of August 31, 1994, is incorporated herein by reference to Exhibit 10(xxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. (xxxiii) Credit Agreement, dated as of September 27, 1991, among The North American Coal Corporation, Citibank, N.A., Ameritrust Company National Association and Morgan Guaranty Trust Company of New York, as agent is incorporated herein by reference to Exhibit 10(xcii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. (xxxiv) Subordination Agreement, dated September 27, 1991, among The North American Coal Corporation, the Company and Morgan Guaranty Trust Company of New York, as agent, is incorporated herein by reference to Exhibit 10(xciv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(xxxv) The North American Coal Corporation Value Appreciation Plan, as amended on March 11, 1992, is incorporated herein by reference to Exhibit 10(xcviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172. *(xxxvi) Amendment No. 1 to The North American Coal Corporation Value Appreciation Plan, dated as of December 14, 1994, is incorporated herein by reference to Exhibit 10(xcix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172. (xxxvii) Intentionally left blank. (xxxviii) Amendment No. 1 to the Credit Agreement, dated as of July 28, 1993, among The North American Coal Corporation and the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(cxxxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 1-9172. X-3 34 (xxxix) Amendment No. 2 to the Credit Agreement, dated as of September, 1995, among The North American Coal Corporation and the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10 (xxxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. *(xl) The North American Coal Corporation Supplemental Retirement Benefit Plan, as amended and restated effective September 1, 1994, is incorporated by reference to Exhibit 10 (clxv) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, Commission File Number 1- 9172. *(xli) The North American Coal Corporation Deferred Compensation Plan for Management Employees (as amended and restated effective January 1, 1996), is incorporated herein by reference to Exhibit 10(xli) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. *(xlii) Amendment No. 1, dated December 1, 1995, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of December 31, 1994, is incorporated herein by reference to Exhibit 10 (xlii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. (xliii) Amendment No. 3 to the Credit Agreement, dated as of September 16, 1996, among The North American Coal Corporation and the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(xliii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172. *(xliv) Intentionally left blank. *(xlv) The North American Coal Annual Incentive Plan, effective as of January 1, 2000, is attached hereto as Exhibit 10(xlv). (xlvi) Waiver Agreement, dated November 15, 1996, by and among Morgan Guaranty Trust Company, Citibank, N.A., Wells Fargo (Texas), N.A., Key Bank National Association and The North American Coal Corporation is incorporated herein by reference to Exhibit 10(xlvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172. (xlvii) Amendment No. 4 to the Credit Agreement, dated as of July 29, 1997, among The North American Coal Corporation, the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(xlvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. (xlviii) Assignment and Assumption Agreement, dated as of August 22, 1997, among The North American Coal Corporation, the banks listed on the signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(xlviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. *(xlix) The North American Coal Corporation Deferred Compensation Plan for Management Employees, dated December 29, 1998 (as amended and restated effective January 1, 1999) is incorporated herein by reference to Exhibit 10(xlix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(l) Amendment No. 2, dated October 1, 1998, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of July 15, 1998, is incorporated herein by reference to Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(li) Amendment No. 3, dated October 30, 1998, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of July 15, 1998, is incorporated herein by reference to Exhibit 10(li) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(lii) Amendment No. 4, dated December 8, 1999, to The North American Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated effective September 1, 1994), effective as of January 1, 2000, is attached hereto as Exhibit 10(lii). (liii) Intentionally left blank. *(liv) Amendment No. 1 to the Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan, effective as of January 1, 1994, is incorporated herein by reference to Exhibit 10(lxxxviii) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 33-28812. X-4 35 (lv) Agreement and Plan of Merger, dated as of April 7, 1989, among NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition I, Esco Corporation, Hyster Company and Newesco, is incorporated herein by reference to Exhibit 2.1 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 filed May 17, 1989 (Registration Statement Number 33-28812). (lvi) Agreement and Plan of Merger, dated as of April 7, 1989, among NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition II, Hyster Company and Newesco, is incorporated herein by reference to Exhibit 2.2 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1 filed May 17, 1989 (Registration Statement Number 33-28812). (lvii) Intentionally left blank. *(lviii) NACCO Materials Handling Group, Inc. Annual Incentive Compensation Plan for 1999 is incorporated herein by reference to Exhibit 10(lxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(lix) Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan, dated as of January 1, 1990, is incorporated herein by reference to Exhibit 10(lxxxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (lx) Intentionally left blank. (lxi) Agreement and Plan of Merger, dated as of December 20, 1993, between Hyster Company, an Oregon corporation, and Hyster Company, a Delaware corporation, is incorporated herein by reference to Exhibit 10(lxxviii) to Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(lxii) Agreement and Plan of Merger, dated as of December 20, 1993, between Yale Materials Handling Corporation, a Delaware corporation, Hyster Company, a Delaware corporation, and Hyster-Yale Materials Handling, Inc., a Delaware corporation, is incorporated herein by reference to Exhibit 10(lxxix) to Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(lxiii) NACCO Materials Handling Group, Inc. Annual Incentive Plan, effective as of January 1, 2000, is attached hereto as Exhibit 10(lxiii). (lxiv) - (lxvi) Intentionally left blank. *(lxvii) Amendment No. 2, effective as of December 31, 1993, to the Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10 (lxxxxiii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 33-28812. *(lxviii) Amendment No. 3, effective as of January 1, 1994, to the Hyster-Yale Materials Handling, Inc. Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10 (lxxxxv) to the Hyster-Yale Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, Commission File Number 33-28812. (lxix) Amendment, dated as of January 1, 1994, to the Third Amendment and Restated Operating Agreement dated as of November 7, 1991, between NACCO Materials Handling Group and AT&T Commercial Finance Corporation is incorporated herein by reference to Exhibit 10(c) to the Hyster-Yale Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, Commission File Number 33-28812. *(lxx) The Yale Materials Handling Corporation Deferred Incentive Compensation Plan (also known as The Yale Materials Handling Corporation Short-Term Incentive Compensation Deferral Plan), dated March 1, 1984, is incorporated herein by reference to Exhibit 10(lxxi) to the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 33-28812. (lxxi) Intentionally left blank. (lxxii) Credit Agreement between NACCO Materials Handling Group, Inc. and Morgan Guaranty Trust company of New York, as Agent, and the other banks listed thereto, dated February 28, 1995, is incorporated by reference herein to Exhibit 10(lxxxvii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 33-28812. (lxxiii) Intentionally left blank. *(lxxiv) The NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective as of January 1, 1999) is incorporated herein by reference to Exhibit 10(lxxiv) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. X-5 36 (lxxv) Amended and Restated Credit Agreement, dated as of June 4, 1996, among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-Arrangers and Co-Agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as Agent, is incorporated by reference to Exhibit 10(lxxv) to the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30, 1996, Commission File Number 1-9172. (lxxvi) Amendment, dated as of December 16, 1996, to the Amended and Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-Arrangers and Co-Agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(lxxxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172. (lxxvii) Amendment No. 2, dated as of March 26, 1997, to the Amended and Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-arrangers and Co-agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(lxxviii) to the Company's Quarterly Statement on Form 10-Q for the quarter ended March 31, 1997, Commission File Number 1-9172. (lxxviii) Amendment No. 3, dated as of May 19, 1997, to the Amended and Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials Handling Group, Inc., the Banks party thereto, the Co-arrangers and Co-agents listed on the signature page thereto and Morgan Guaranty Trust Company of New York, as Agent, is incorporated herein by reference to Exhibit 10(lxxviii) to the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30, 1997, Commission File Number 1-9172. *(lxxix) Amendment No. 1, dated as of June 5, 1999, to the The NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective as of January 1, 1999) is attached hereto as Exhibit 10(lxxix). *(lxxx) Amendment No. 2, dated as of October 8, 1999, to the The NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective as of January 1, 1999) is attached hereto as Exhibit 10(lxxx). *(lxxxi) Amendment No. 3, dated as of August 27, 1999, to the The NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective as of January 1, 1999) is attached hereto as Exhibit 10(lxxxi). *(lxxxii) Amendment No. 4, dated as of September 24, 1999, to the The NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective as of January 1, 1999) is attached hereto as Exhibit 10(lxxxii). *(lxxxiii) Amendment No. 4, dated as of October 8,1999, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is attached hereto as Exhibit (lxxxiii). *(lxxxiv) Amendment No. 5, dated as of December 20,1999, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is attached hereto as Exhibit (lxxxiv). (lxxxv) Intentionally left blank. (lxxxvi) Agreement of Merger, dated as of January 20, 1988, among NACCO Industries, Inc., Housewares Holding Company, WE-PS Merger, Inc. and WearEver-ProctorSilex, Inc., is incorporated herein by reference to pages 8 through 97 of Exhibit 2 to the Company's Current Report on Form 8-K, dated February 1, 1988, Commission File Number 1-9172. (lxxxvii) Shareholders Agreement, dated January 20, 1988, among NACCO Industries, Inc. and the shareholders named therein is incorporated herein by reference to pages 98 through 108 of Exhibit 2 to the Company's Current Report on Form 8-K, dated February 1, 1988, Commission File Number 1-9172. (lxxxviii) Intentionally left blank. *(lxxxix) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective January 1, 1999) is incorporated herein by reference to Exhibit 10(lxxxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(xc) Amendment No. 1, dated as of December 22, 1999, to the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective January 1, 1999) is attached hereto as Exhibit 10(xc). (xci) Intentionally left blank. (xcii) Pledge Agreement re: 66% Pledge of PSC Stock, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to X-6 37 Exhibit 10(cx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xciii) Pledge Agreement re: 66% Pledge of PSM Stock, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(cxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xciv) Pledge Agreement re: 34% pledge of PSC Stock, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(cxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcv) Pledge Agreement re: 33.2% Pledge of PSM Stock, dated as of October 11, 1990, between Hamilton Beach/Proctor Silex and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(cxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcvi) Pledge Agreement, dated as of October 11, 1990, between Housewares Holding Company and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(cxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcvii) Pledge Agreement, dated as of October 11, 1990, between HB-PS Holding Company, Inc. and The Chase Manhattan Bank (National Association) is incorporated herein by reference to Exhibit 10(cxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcviii) Security Agreement, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (xcix) Collateral Assignment of Patents and Trademarks and Security Agreement, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxvii) to the Company s Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (c) NACCO Supplemental Agreement, dated as of October 11, 1990, between NACCO and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxviii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (ci) Housewares Supplemental Agreement, dated as of October 11, 1990, between Housewares Holding Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxix) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (cii) Holdings Supplemental Agreement, dated as of October 11, 1990, between HB-PS Holding Company, Inc. and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,1990, Commission File Number 1-9172. (ciii) Override Agreement, dated as of October 11, 1990, among the Company, Housewares Holding Company, Glen Dimplex, Precis [521] Ltd., Glen Electric, Ltd. and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (civ) General Security Agreement, dated as of October 11, 1990, by Proctor-Silex Canada to and in favor of The Chase Manhattan Bank of Canada, as the Canadian agent, is incorporated herein by reference to Exhibit 10(cxxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. *(cv) The Hamilton Beach/Proctor-Silex, Inc. 1999 Annual Incentive Compensation Plan is incorporated herein by reference to Exhibit 10(cxx) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172. *(cvi) Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan, effective January 1, 1993, is incorporated by reference to Exhibit 10(cxxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. X-7 38 (cvii) First Amendment to the Housewares Supplemental Agreement, dated as of March 1, 1991, between Housewares Holding Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (cviii) First Amendment to the Holdings Supplemental Agreement, dated as of March 1, 1991, between HB-PS Holding Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (cvix) Consent and Authorization with reference made to the Credit Agreement dated October 11, 1990, as amended among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., the banks named on the signatory pages and The Chase Manhattan Bank is incorporated herein by reference to Exhibit (cxxxvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File Number 1-9172. (cx) Amended and Restated Credit Agreement, dated as of May 10, 1994 among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. DE C.V., the banks named on the signatory pages and the Chase Manhattan Bank is incorporated herein by reference to as Exhibit 10 (cxxxviii) to the NACCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, Commission File Number 1-9172. (cxi) Confirmation Agreement, dated May 10, 1994, among Hamilton Beach/Proctor-Silex, Inc., Housewares Holding Company, Precis [521] Ltd., HB-PS Holding Company, Glen Dimplex, Glen Electric, Ltd., the banks named on the signatory pages, the Chase Manhattan Bank and the Chase Manhattan Bank of Canada is incorporated herein by reference to Exhibit 10 (cxxix) to the NACCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended on June 30, 1994, Commission File Number 1-9172. (cxii) First Amendment to the NACCO Supplemental Agreement, dated as of March 1, 1991, between the Company and The Chase Manhattan Bank (National Association), as the United States agent, is incorporated herein by reference to Exhibit 10(cxxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 1-9172. (cxiii) Waiver Agreement, dated January 16, 1996, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V. the banks named on the signatory pages and Chase Manhattan Bank is incorporated herein by reference to Exhibit 10 (cxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. (cxiv) Amended and Restated Credit Agreement, dated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor- Silex, Inc., Proctor-Silex S.A. de C.V., the banks named on the signatory pages and The Chase Manhattan Bank is incorporated herein by reference to Exhibit 10(cxiv) to the Company's Annual Report on From 10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172. (cxv) Amendment No. 1, dated as of March 29, 1996, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc. Proctor-Silex Canada, Inc., Proctor-Silex S.A de C.V., as Borrowers, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated by reference herein to Exhibit 10 (xvii) on the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30, 1996, Commission File Number 1-9172. (cxvi) Amendment No. 2, dated as of October 4, 1996, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxviii) to the Company's Quarterly Statement for the quarter ended September 30, 1996, Commission File Number 1-9172. (cxvii) Amendment No. 3, dated as of April 14, 1997, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxviii) to the Company's Quarterly Statement for the quarter ended June 30, 1997, Commission File Number 1-9172. (cxviii) Pledge Agreement, dated as of November 30, 1995, between Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National Association), is incorporated herein by reference to Exhibit 10(cxviii) to the Company's Annual Report on From 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. X-8 39 (cxix) Pledge Agreement re: 66% of PST Stock, dated as of November 30, 1995, between HB/PS El Paso, Inc. and The Chase Manhattan Bank (National Association), is incorporated herein by reference to Exhibit 10(cxix) to the Company's Annual Report on From 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. *(cxx) The Hamilton Beach/Proctor-Silex, Inc. 2000 Annual Incentive Plan is attached hereto as Exhibit 10 (cxx). (cxxi) Amendment No. 4, dated as of April 22, 1998, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxxi) to the Company's Quarterly Statement for the quarter ended March 31, 1998, Commission File Number 1-9172. (cxxii) Amendment No. 5, dated as of June 10, 1998, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by reference to Exhibit 10(cxxii) to the Company's Quarterly Statement for the quarter ended June 30, 1998, Commission File Number 1-9172. (cxxiii) Amendment No. 6, dated as of December 8, 1998, to the Second Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks signatory thereto and The Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.)(the Existing U.S. Agent), KeyBank National Association (the Successor U.S. Agent), The Chase Manhattan Bank of Canada(the Existing Canadian Agent) and The Bank of Nova Scotia (the Successor Canadian Agent), is incorporated herein by reference to Exhibit 10(cxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172 *(cxxiv) Amendment No. 1, dated December 12, 1999, to the Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan is attached hereto as Exhibit 10(cxxiv). (13) Portions of the Company's 1999 Annual Report to security holders that are incorporated by reference into this Form 10-K are attached hereto as Exhibit 13. (21) Subsidiaries. A list of the subsidiaries of the Company is attached hereto as Exhibit 21. (23) Consents of experts and counsel. (i) The consent of Arthur Andersen LLP, independent accountant, is attached hereto as Exhibit 23(i). (24) Powers of Attorney. (i) A copy of a power of attorney for Owsley Brown II is attached hereto as Exhibit 24(i). (ii) A copy of a power of attorney for Robert M. Gates is attached hereto as Exhibit 24(ii). (iii) A copy of a power of attorney for Leon J. Hendrix, Jr. is attached hereto as Exhibit 24(iii). (iv) A copy of a power of attorney for David H. Hoag is attached hereto as Exhibit 24 (iv). (v) A copy of a power of attorney for Dennis W. LaBarre is attached hereto as Exhibit 24(v). (vi) A copy of a power of attorney for Richard de J. Osborne is attached hereto as Exhibit 24(vi). (vii) A copy of a power of attorney for Ian M. Ross is attached hereto as Exhibit 24 (vii). (viii) A copy of a power of attorney for John C. Sawhill is attached hereto as Exhibit 24(viii). (ix) A copy of a power of attorney for Britton T. Taplin is attached hereto as Exhibit 24 (ix). (x) A copy of a power of attorney for David F. Taplin is attached hereto as Exhibit 24 (x). (xi) A copy of a power of attorney for John F. Turben is attached hereto as Exhibit 24(xi). (27) Financial Data Schedules -- filed electronically for SEC information purposes only. X-9 40 (99) Other exhibits not required to otherwise be filed.** (i) Unaudited Consolidating Statement of Income and Comprehensive Income of NACCO Industries, Inc. for the Year Ended December 31, 1999 is attached hereto as Exhibit 99(i). (ii) Unaudited Consolidating Balance Sheet of NACCO Industries, Inc. as of December 31, 1999 is attached hereto as Exhibit 99(ii). (iii) Unaudited Consolidating Statement of Cash Flows of NACCO Industries, Inc. for the Year Ended December 31, 1999 is attached hereto as Exhibit 99(iii). (iv) Unaudited Consolidating Statement of Stockholders' Equity for the Year Ended December 31, 1999 is attached hereto as Exhibit 99 (iv). *Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this Annual Report on Form 10-K. **Consolidating Financial Statements of NACCO Industries, Inc. are not required disclosures and are included only for informational purposes. These statements have not been audited by independent public accountants and are presented only for purposes of additional analysis and not as a presentation of the financial results or position of each component of the consolidated group, and should be read accordingly. X-10 EX-10.XX 2 EXHIBIT 10(XX) 1 Exhibit 10(xx) ================================================================================ NACCO INDUSTRIES, INC. 2000 ANNUAL INCENTIVE COMPENSATION PLAN ================================================================================ 1. PURPOSE OF THE PLAN The purpose of the NACCO Industries, Inc. 2000 Annual Incentive Compensation Plan (the "Plan") is to further the profits and growth of NACCO Industries, Inc. (the "Company") by enabling the Company to attract and retain key employees of the Company by offering annual incentive compensation to those key employees who will be in a position to help the Company to meet its financial and business objectives. 2. DEFINITIONS (a) "Award" means cash paid to a Participant under the Plan for the Award Term in an amount determined in accordance with Section 4. (b) "Award Term" means the period from January 1, 2000 through December 31, 2000. (c) "Base Amount" means for any Participant a dollar amount, which shall be equal to the salary midpoint for the Salary Points assigned to the Participant by the Committee for the Award Term multiplied by 60% of the short-term incentive compensation target percent for those Salary Points. Attached hereto as EXHIBIT A is a schedule listing the Base Amount for each Participant for the Award Term. (d) "Committee" means the Nominating, Organization and Compensation Committee of the Company's Board of Directors or any other committee appointed by the Company's Board of Directors to administer this Plan in accordance with Section 3, so long as any such committee consists of not less than two directors of the Company and so long as each member of the Committee is not an employee of the Company or any of its subsidiaries. (e) "Participant" means any salaried employee of the Company who in the judgment of the Committee occupies a key position in which his efforts may significantly contribute to the profits or growth of the Company; provided, however, that the Committee may select any employee who is expected to contribute, or who has contributed, significantly to the Company's profitability to participate in the Plan and receive an Award hereunder; and further provided, however, that following the end of the Award Term the Committee may make one or more discretionary Awards to employees of the Company who are not Participants. Directors of the Company who are also employees of the Company are eligible 2 to participate in the Plan. Employees of the Company's subsidiaries shall not be eligible to participate in the Plan. The Committee shall have the power to add Participants at any later date in the Award Term if individuals subsequently become eligible to participate in the Plan. Each Participant shall be notified that he is eligible to receive an Award for such term and the amount of his Base Amount. If a Participant receives a change in Salary Points, salary midpoint and/or short-term incentive compensation target percent, such change and any resulting change in his Base Amount will be reflected on an amended EXHIBIT A. Unless otherwise determined by the Committee, a Participant must be both employed by the Company and a Participant on December 31 of the Award Term, and the amount of any Award to a Participant who was not also employed by the Company and a Participant on the first day of the Award Term shall be not more than the pro-rated amount based upon the number of days actually employed by the Company in the Award Term. Attached hereto as EXHIBIT A is a schedule listing the Participants for the Award Term. (f) "Salary Points" means the salary points assigned to a Participant by the Committee pursuant to the Hay salary point system, or any successor salary point system adopted by the Committee. 3. ADMINISTRATION This Plan shall be administered by the Committee. The Committee shall have complete authority to interpret all provisions of this Plan consistent with law, to prescribe the form of any instrument evidencing any Award granted or paid under this Plan, to adopt, amend and rescind general and special rules and regulations for its administration, and to make all other determinations necessary or advisable for the administration of this Plan. A majority of the Committee shall constitute a quorum, and the action of members of the Committee present at any meeting at which a quorum is present or acts unanimously approved in writing, shall be the act of the Committee. All acts and decisions of the Committee with respect to any questions arising in connection with the administration and interpretation of this Plan, including the severability of any or all of the provisions hereof, shall be conclusive, final and binding upon the Company and all present and former Participants, all other employees of the Company, and their respective descendants, successors and assigns. No member of the Committee shall be liable for any such act or decision made in good faith. 4. AWARDS The Committee may, from time to time and upon such conditions as it may determine, authorize Awards for Participants, which Awards shall be not inconsistent with, and shall be subject to all of the requirements of, the following provisions: 2 3 (a) PERFORMANCE TARGETS. The Committee shall determine performance target descriptions, weightings and targets for the Award Term, which shall be attached hereto as EXHIBIT B. The Committee shall have the power to add, delete and amend target descriptions, weightings and targets during the Award Term, which shall be reflected on an amended EXHIBIT B. No performance targets used in this Plan shall be used in the Company's Supplemental Annual Incentive Compensation Plan in the same year. (b) AWARDS. Following the end of the Award Term, the Committee shall compare the actual performance against the performance targets for each of the performance target descriptions. Based thereupon, the Committee shall determine the total payout percentage under the Plan (the "Payout Percentage"). The Committee shall then determine the Award for each Participant, which shall be equal to the Participant's Base Amount, multiplied by the Payout Percentage, and further adjusted by such other factors, including an individual performance factor for each Participant, as the Committee shall determine are appropriate; provided, however, that no Award may be made to any Participant which exceeds 150% of his Base Amount. Promptly following the approval of the final Awards, the Company shall pay the amount of such Awards to the Participants in cash, subject to all withholdings and deductions pursuant to Section 5; provided, however, that no Award shall be payable to a Participant except as determined by the Committee. 5. WITHHOLDING TAXES Any Award paid to a Participant under this Plan, shall be subject to standard federal, state and local income tax, social security and other standard withholdings and deductions. 6. AMENDMENT AND TERMINATION The Committee may alter or amend this Plan from time to time or terminate it in its entirety; provided, however, that no such action shall, without the consent of a Participant, affect the rights in an outstanding Award of such Participant. 7. GENERAL PROVISIONS (a) NO RIGHT OF EMPLOYMENT. Neither the adoption or operation of this Plan, nor any document describing or referring to this Plan, or any part thereof, shall confer upon any employee any right to continue in the employ of the Company, or shall in any way affect the right and power of the Company to 3 4 terminate the employment of any employee at any time with or without assigning a reason therefor to the same extent as the Company might have done if this Plan had not been adopted. (b) GOVERNING LAW. The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of Delaware. (c) MISCELLANEOUS. Headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such headings, numbering and paragraphing shall not in any case be deemed in any way material or relevant to the construction of this Plan or any provisions thereof. The use of the masculine gender shall also include within its meaning the feminine. The use of the singular shall also include within its meaning the plural, and vice versa. 8. EFFECTIVE DATE This Plan shall become effective as of January 1, 2000. 4 EX-10.XXI 3 EXHIBIT 10(XXI) 1 Exhibit 10(xxi) AMENDMENT NO. 3 TO THE RETIREMENT BENEFIT PLAN FOR ALFRED M. RANKIN, JR. (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994) NACCO Industries, Inc. hereby adopts this Amendment No. 3 to the Retirement Benefit Plan for Alfred M. Rankin, Jr. (As Amended and Restated Effective January 1, 1994), to be effective October 1, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 The second sentence of Section 6.4(a) of the Plan is hereby amended in its entirety to read as follows: "The Committee shall have discretion to interpret the provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in or in resolving inconsistencies or ambiguities in the language of the Plan, to make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Participants and Beneficiaries and other persons, to decide disputes arising under the Plan and to make any determinations (including factual determinations) with respect to benefits payable hereunder." SECTION 2 Section 7.1 of the Plan is hereby amended in its entirety to read as follows: "SECTION 7.1 AMENDMENT. Subject to Section 7.3, the NACCO Industries, Inc. Benefits Committee (the "Benefits Committee") does hereby reserve the right to amend, at any time, any or all of the provisions of the Plan, without the consent of the Participant, Beneficiary or any other person. Any such amendment shall be expressed in an instrument executed by an officer of the Employer on the order of the Benefits Committee and shall become effective as of the date designated in such instrument or, if no such date is specified, on the date of its execution." 2 EXECUTED this 13TH day of SEPTEMBER, 1999. NACCO INDUSTRIES, INC. By: /S/ CHARLES A. BITTENBENDER ------------------------------ Title: Vice President, General Counsel and Secretary EX-10.XLV 4 EXHIBIT 10(XLV) 1 Exhibit 10(xlv) 2000 INCENTIVE COMPENSATION PLAN SUMMARY The Incentive Compensation Plan (Plan) offers a highly attractive incentive compensation opportunity to senior managers when all performance objectives under their control or influence are achieved. This is accomplished through a structure containing the following elements: - Each participant is assigned an individual incentive target, stated as a percentage of their salary midpoint, that establishes the incentive compensation amount they will receive when performance objectives are met. - The individual target amount is allocated among the following performance components: - North American Coal (NAC) corporate performance. - Bellaire Corporation cash flow. - Business unit results. - Individual achievement. - Percentage weightings are assigned to each component, based on the participant's accountabilities and their impact on each component. - One or more performance objectives will be established at the beginning of the year for each performance component. - A performance range, which defines the acceptable level of results, from threshold to maximum, is created for each performance objective. - A payout range is defined, which provides for incentive payments of up to 150 percent of the incentive target, except to the extent the Committee elects to increase the actual pool by up to 10 percent, as described below. - A performance/payout schedule combines the two ranges into a matrix that defines the level of incentive compensation payment that will result from each level of performance. - After audited financials are available, awards will be calculated based on actual results against the established objectives. 2 - A final individual performance adjustment may be made, within a range of +10 percent of the calculated award, based on a judgment of the participant's overall performance. This Incentive Compensation Plan will allow management and the Board to establish, in advance, the performance expectations and related incentive compensation potential that NAC's executives can expect for the year. At year-end, the Plan focuses judgment of the management team's performance on predetermined objectives that should produce fairness in the determination of rewards. PLAN STRUCTURE INDIVIDUAL INCENTIVE TARGETS ---------------------------- The primary focus of the proposed Plan is the individual incentive compensation target. Each participant is assigned a target, stated as a percentage of the mid-point of base salary, which will be paid when all relevant performance objectives are achieved. The Plan provides for payments above or below the target to reflect acceptable variances from performance objectives. PERFORMANCE GOALS ----------------- Four sets of goals are proposed: INTENTIONALLY LEFT BLANK INCENTIVE AWARD RANGE --------------------- Actual performance results attained probably will not match the established performance goals exactly. Therefore, the Plan is designed to provide incentive compensation payouts of up to 150 percent of the target award if actual results fall within a predetermined range of acceptable performance. The award range is defined as follows:
% OF AWARD LEVEL TARGET DESCRIPTION ------------------------ ---------------- ---------------------------------------------- Maximum 150% Highest level of incentive paid. Target 100% Competitive incentive opportunity for achieving all important goals. Threshold 50% Incentive paid when results meet minimum acceptable standards. Below threshold 0% Performance does not merit incentive payment.
3 COMPONENT WEIGHTINGS -------------------- Participants' potential incentive awards will be allocated between performance components based on their individual impact on results. The allocations allow for awards to be earned based on the achievement of the performance objectives over which each executive has the most control. Weightings will be stated as a percentage and total 100 percent for each participant. The weightings will be established each year to reflect current organizational accountabilities and the relative importance of the various performance components. Our recommended weightings are as follows: INTENTIONALLY LEFT BLANK When there is more than one goal for a performance component, further percentage weightings may be assigned, within the overall weightings, to reflect the relative priority of each goal. For example, if the individual component has a 40 percent weighting and there are five individual goals, each individual goal might be assigned a priority weighting of 20 percent. PERFORMANCE RANGE ----------------- A range of performance acceptable for incentive compensation payment will be established for each performance objective. For quantitative goals, the range may be set as a percentage of the objective. For goals that cannot be quantified, the range will be defined in narrative form. The following general definitions will apply. The percentage ranges indicated are only guidelines; specific percentage ranges or narrative descriptions should be determined for each goal based on the definitions.
PERFORMANCE PERFORMANCE PERCENTAGE LEVEL GUIDELINE DEFINITION ------------------------ ------------------- ---------------------------------------------- Threshold 75% Minimum acceptable results justifying payment of incentives. Objective 100% Results meet high performance demands justifying fully competitive rewards. Maximum 125% Highest foreseeable level of performance.
4 Combining the performance and payout ranges yields a performance/ payout schedule as in the following example:
PERFORMANCE DEFINITION RESULTS AWARD LEVELS PAYOUT -------------------- ---------------------------- ----------- ------------------- ----------- Threshold Minimum 75% Threshold 50% Objective On plan 100% Target 100% Maximum Exceeding expectations 125% Maximum 150%
This schedule is applied separately to the results of each established performance element to determine the incentive amount earned in accordance with assigned weightings. Performance that falls between the defined levels would result in proportionally adjusted payouts, which may be calculated mathematically or determined judgmentally. CORPORATE PERFORMANCE THRESHOLD ------------------------------- No incentive compensation awards will be earned under the Plan in any year unless the threshold level of the corporate performance component is achieved. Once the corporate performance threshold is attained, each performance objective is separate and distinct. This means that partial awards can be earned for the attainment of one performance objective even if another is not sufficient to generate a payout. INDIVIDUAL ADJUSTMENT FACTOR ---------------------------- Each individual award, as calculated above, may be adjusted upward or downward by as much as 10 percent of the total award, based on management's' perceptions of each individual's overall performance. PARTIAL AWARDS -------------- Executives who are hired or promoted during the year to positions eligible for participation in the Plan may be included in the Plan on a prorata basis. COMMITTEE DISCRETION -------------------- It is the intent of the Plan that the total incentive compensation, as determined above, will be the final total corporate incentive compensation to be paid. However, the Committee, in its sole discretion, may increase or decrease, by up to 10 percent, the total incentive compensation or may approve an incentive compensation payment where normally there would be no payment, due to corporate performance which is below the criteria established for the year. 2000 PERFORMANCE TARGETS See Plan Summary. EX-10.LII 5 EXHIBIT 10(LII) 1 Exihibit 10(iii) AMENDMENT NO. 4 TO THE NORTH AMERICAN COAL CORPORATION SUPPLEMENTAL RETIREMENT BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 1994) ----------------------------------------------------- The North American Coal Corporation hereby adopts this Amendment No. 4 to The North American Coal Corporation Supplemental Retirement Benefit Plan (As Amended and Restated Effective September 1, 1994) (the "Plan"), effective January 1, 2000. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- Section 3.1(1) of the Plan is hereby amended in its entirety to read as follows: "(1) IN GENERAL. Each Participant or Beneficiary of a deceased Participant (a) whose benefits under the Pension Plan payable on or after the Effective Date are reduced due to the Code Limitations, or (b) who is a Participant in the North American Coal Corporation Deferred Compensation Plan for Management Employees who defers Compensation thereunder on or after the Effective Date, shall be entitled to a Supplemental Retirement Benefit, which shall be determined as hereinafter provided." SECTION 2 --------- Section 3.3(2) of the Plan is hereby amended by replacing "$5,000" with "$10,000" each time it appears therein. SECTION 3 --------- Section 5.4 of the Plan is hereby amended by replacing the phrase "the Committee" with the phrase "the NACCO Industries, Inc. Benefits Committee" (the "Benefits Committee") wherever such phrase shall appear therein. SECTION 4 --------- Section 6.1 of the Plan is hereby amended by replacing the phrase "the Committee" with the phrase "the Benefits Committee" wherever such phrase shall appear therein. SECTION 5 --------- Section 6.2 of the Plan is hereby amended by replacing the phrase "the Committee" with the phrase the Nominating, Organization and Compensation Committee of the -1- 2 Board of Directors of the Company ("the Compensation Committee") wherever such phrase shall appear therein. EXECUTED this 8TH day of DECEMBER, 1999. THE NORTH AMERICAN COAL CORPORATION By: /S/THOMAS A. KOZA Title: Vice President-Law and Administration and Secretary -2- EX-10.LXIII 6 EXHIBIT 10(LXIII) 1 Exhibit 10(1xiii) ANNUAL INCENTIVE COMPENSATION PLAN ---------------------------------- 2000 GENERAL - ------- NACCO Materials Handling Group, Inc., (the "Company") has established an Annual Incentive Compensation Plan ("Plan") as part of a competitive compensation program for the officers and key management employees of the Company and its Subsidiaries. PLAN OBJECTIVE - -------------- The Company desires to attract and retain talented employees to enable the Company to meet its financial and business objectives. The objective of the Plan is to provide an opportunity to earn annual incentive compensation to those employees whose performance has a significant impact on the Company's short-term and long-term profitability. ADMINISTRATION AND PARTICIPATION - -------------------------------- The Plan is administered by the Nominating, Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee: a. May amend, modify or discontinue the Plan. b. Will approve participation in the Plan. Generally, participants will include all employees in NACCO Materials Handling Group salary grades 22 and above. However, the Committee may select any employee who has contributed significantly to the Company's profitability to participate in the Plan and receive an annual incentive compensation award. Subject to paragraphs g and h, below, no employee of NACCO Materials Handling Group shall be eligible to be a participant in the Plan, and no participant in 2 the Plan shall be eligible to receive an award, unless such individual is employed for at least 90 calendar days during the year. c. Will determine the annual performance criteria which generate the incentive compensation pool. d. Will determine the total amount of both the target and actual annual incentive compensation pool. e. Will approve individual incentive compensation awards to officers and employees in NACCO Materials Handling Group above salary grade 29. f. May delegate to the Chief Executive Officer of the Company the approval of incentive compensation awards to NACCO Materials Handling Group employees in salary grade 29 and below. g. May consider at the end of each year the award of a discretionary bonus amount to non-participants as an addition to the regular incentive compensation pool on a special one-time basis to motivate individuals not eligible to participate in the Plan. h. May approve a pro-rate incentive compensation award for participants in the Plan whose employment is terminated (1) due to death, disability, retirement or facility closure, such award to be determined pursuant to the provisions of subparagraphs (e) and (f) above, or (2) under other circumstances at the recommendation of the Chief Executive Officer of the Company. DETERMINATION OF CORPORATE INCENTIVE COMPENSATION POOL - ------------------------------------------------------ Each participant in the Plan will have an individual target incentive compensation percentage which is determined by the participant's salary grade. This percentage is multiplied by the mid-point of the participant's salary grade to determine his individual 3 target incentive compensation award. The total of the target incentive compensation awards of all participants equals the target corporate incentive compensation pool ("Target Pool"). The Target Pool is approved each year by the Committee. The actual corporate incentive compensation pool ("Actual Pool") is determined at the end of each year based on the Company's actual performance against specific criteria established in the beginning of the year by the Committee. The Target Pool is adjusted upwards or downwards by corporate performance adjustment factors to determine the Actual Pool. In no event will the Actual Pool exceed 150% of the Target Pool, except to the extent that the Committee elects to increase the Actual Pool by up to 110%, as described below. The Target and Actual Pools may consist of the sum of two or more subpools, provided the subpools have individual objectives. It is the intent of the Plan that the Actual Pool, as determined above, will be the final total corporate incentive compensation pool. However, the Committee, in its sole discretion, may increase or decrease by up to 10% the Actual Pool or may approve an incentive compensation pool where there would normally be no pool due to Company performance which is below the criteria established for the year. The Actual and Target Pools exclude the Marketing Incentive Plan for regional parts, service, sales and national account managers. However, total compensation or employees covered by the Marketing Incentive Plan will be based on competitive levels. DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS - --------------------------------------------------------- Salary grades and the corresponding target incentive percentages for each participant in the Plan will be established at the beginning of each year and approved by the Committee. Individual target incentive compensation will 4 then be adjusted by the appropriate pool or subpool factor. Such adjusted individual incentive compensation will then be further modified based on the team performance to which an individual belongs compared to the team goals for the year, and may be further modified based on a Participant's performance as compared to their individual goals for the year. The total of all individual incentive compensation awards must not exceed the Actual Pool for the Year. On the following page are examples of actual pool and individual award calculations. a. Example calculation for determination actual pool: INTENTIONALLY OMITTED EX-10.LXXIX 7 EXHIBIT 10(LXXIX) 1 Exhibit 10(lxxix) AMENDMENT NO. 1 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999) NACCO Materials Handling Group, Inc. adopts this Amendment No. 1 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective January 1, 1999) (the "Plan"), effective as of June 5, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Section 2.7 of the Plan is hereby amended in its entirety to read as follows: "SECTION 2.7. Compensation shall have the same meaning as under the Profit Sharing Plan, except that (a) Compensation shall be deemed to include (i) the amount of compensation deferred by the Participant under this Plan, excluding, however, LTIP Deferral Benefits and (ii) amounts in excess of the limitation imposed by Code Section 401(a)(17) and (b) Compensation shall be deemed to exclude cash compensation which is paid for special perquisites, such as country club dues and company plane allowances. Notwithstanding the foregoing, cash allowances in lieu of general perquisites that are paid to substantially all Participants shall be included in the definition of Compensation hereunder." SECTION 2 Section 5.4(a) of the Plan is hereby amended in its entirety to read as follows: "(a) The NACCO Industries, Inc. Benefits Committee (the "Committee") may change (but not suspend) the earnings rate credited on Accounts under the Plan at any time upon at least 30 days advance notice to Participants." SECTION 3 Section 10.6(a) of the Plan is hereby amended by deleting the phrase "the Committee" and replacing it with the phrase "the Company" each time it appears therein. NACCO MATERIALS HANDLING GROUP, INC. By:/s/ Charles A. Bittenbender ------------------------------ Date: June 5, 1999 Title: Assistant Secretary ------------------ EX-10.LXXX 8 EXHIBIT 10(LXXX) 1 Exhibit 10(lxxx) AMENDMENT NO. 2 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999) NACCO Materials Handling Group, Inc. adopts this Amendment No. 2 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective January 1, 1999) (the "Plan"), effective September 1, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Section 2.8 of the Plan is hereby amended in its entirety to read as follows: "SECTION 2.8. EMPLOYER shall mean the Company, NACCO Industries, Inc., NACCO Materials Handling Group, Ltd., NACCO Materials Handling, B.V. and NACCO Materials Handling, S.r.l. SECTION 2 Section 2.14(d) of the Plan is hereby amended in its entirety to read as follows: "(d) For purposes of Section 3.6 of the Plan, the term 'Participant' means an Employee (i) who is a participant in the LTIP Plan, (ii) who, both at the time the deferral election is required and at the time the deferral becomes effective, is (a) a U.S. citizen, (b) a nonresident alien who is covered on a U.S. payroll or (c) a citizen or resident of the United Kingdom (referred to herein as the 'UK Participants') and (ii) whose total annual Compensation from the Controlled Group for the Plan Year in which a deferral election is required was at least $100,000." SECTION 3 Sections 3.6(a) and 3.6(a)(i) of the Plan are hereby amended in their entirety to read as follows: "(a) AMOUNT. Each Participant (as defined in Section 2.14(d)) may, with the consent of the Company, by completing an approved deferral election form, direct his Employer: (i) to reduce an Award (as that term is defined in the LTIP Plan) payable under the LTIP Plan by a specified dollar amount or percentage and thereby extinguish his entitlement under the LTIP Plan to so much of an Award as is covered by the election form; and". SECTION 4 Section 4.1(e) of the Plan is hereby amended in its entirety to read as follows: 2 2 "(e) Credits to an LTIP Deferral Sub-Account for the LTIP Deferral Benefits described in Section 3.6, which shall be credited to the Sub-Account as soon as practicable following the time the Award would otherwise be payable to the Participant under the LTIP Plan." SECTION 5 Section 6.1(a) of the Plan is hereby amended (a) by adding the phrase "Subject to the provisions of the following sentence, " to the beginning thereof, and (b) adding the following new sentence to the end thereof to read as follows: "Notwithstanding the foregoing, a UK Participant shall always be 100% vested in the amounts credited to his LTIP Deferral Sub-Account but this does not give rise to any right or entitlement (whether legal, equitable or otherwise) to payment or distribution otherwise than in accordance with Article VII or Article VIII of the Plan." SECTION 6 Section 9.2 of the Plan is hereby amended by adding the following provisions to the end thereof, to read as follows: "The amount standing to the credit of any UK Participant's Sub-Account is purely notional and affects only the calculation of benefits payable to or in respect of him. It does not give the UK Participant any right or entitlement (whether legal, equitable or otherwise) to any particular assets held for the purposes of the Plan or otherwise." NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Michael L. Smith ----------------------------- Date: 10/8/99 Title: VP Finance --------------- EX-10.LXXXI 9 EXHIBIT 10(LXXXI) 1 Exhibit 10(lxxxi) AMENDMENT NO. 3 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999) NACCO Materials Handling Group, Inc. adopts this Amendment No. 3 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective January 1, 1999) (the "Plan"), effective as of the close of business on August 31, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Section 1.2 of the Plan is hereby amended in its entirety to read as follows: "SECTION 1.2. PURPOSE OF THE PLAN. The purpose of this Plan is (a) to allow certain employees to defer the receipt of certain long-term incentive compensation award payments, (b) to provide for certain Employees the benefits they would have received under the Qualified Plans but for (i) the dollar limitation on Compensation taken into account under the Qualified Plans as a result of Section 401(a)(17) of the Code, (ii) the limitations imposed under Section 415 of the Code, and (iii) the limitations under Sections 402(g), 401(k)(3) and 401(m) of the Code, and (c) to provide for the continued deferral of certain frozen benefits." SECTION 2 Section 2.1 of the Plan is hereby amended in its entirety to read as follows: "SECTION 2.1. ACCOUNT shall mean the record maintained by the Employer in accordance with Section 4.1 as the sum of the Participant's Excess Profit Sharing Sub-Account, Excess 401(k) Sub-Account, Excess Matching Sub-Account, Excess Deferral Sub-Account, LTIP Deferral Sub-Account and Yale Short-Term Deferral Sub-Account." SECTION 3 Section 2.9 of the Plan is hereby amended to add the words "Yale Short-Term Deferral Benefit" following the words "LTIP Deferral Benefit" therein. SECTION 4 Section 2.14 of the Plan is hereby amended by renumbering Subsection 2.14(e) as Subsection 2.14(f) and by adding a new Subsection 2.14(e) thereto to read as follows: 2 "(e) For purposes of Section 3.7 of the Plan, the term "Participant" means any person who was entitled to receive benefits under the Yale Short-Term Plan on August 31, 1999." SECTION 5 A new Section 2.24 is hereby added to the Plan to read as follows: "SECTION 2.24. YALE SHORT-TERM PLAN shall mean the Yale Materials Handling Corporation Short-Term Incentive Compensation Deferral Plan, a plan that was frozen prior to 1992. The Yale Short-Term Plan was merged into the Plan effective August 31, 1999." SECTION 6 The heading which states "SECTION 3.5. LTIP DEFERRAL BENEFITS." is hereby deleted and replaced with the reading "SECTION 3.6. LTIP DEFERRAL BENEFITS". SECTION 7 A new Section 3.7 is hereby added to the Plan, immediately following Section 3.6, to read as follows: "SECTION 3.7 YALE SHORT-TERM DEFERRAL BENEFITS. Prior to 1992, certain Employees of a corporate predecessor to the Company were permitted to elect to defer specified amounts of their short-term incentive compensation under the Yale Short-Term Plan. Effective August 31, 1999, the Yale Short-Term Plan was merged into the Plan and amounts credited under the Yale Short-Term Plan were credited to the "Yale Short-Term Deferral Sub-Account" hereunder. SECTION 8 Section 4.1 of the Plan is hereby amended by renumbering Subsection 4.1(f) as 4.1(g) and 4.1(g) as 4.1(h) and by adding a new Subsection 4.2(f) thereto to read as follows: "(f) Credits to Yale Short-Term Deferral Sub-Account for the Yale Short- Term Deferral Benefits described in Section 3.7." SECTION 9 Section 5.2 of the Plan is hereby amended in its entirety to read as follows: "5.2 EARNINGS ON ADDITIONAL SUB-ACCOUNTS AND THE YALE SHORT-TERM DEFERRAL SUB-ACCOUNT. Subject to Section 5.4, at the end of each calendar month during the Plan Year, the Additional Excess Deferral Sub-Account, Additional Excess -2- 3 401(k) Sub-Account, Additional Excess Matching Sub-Account and Yale Short-Term Deferral Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant's average Sub-Account balance during such month by the blended rate earned during such month by the Fixed Income Fund. The earnings calculation for the month in which the Participant receives a distribution from his Sub-Account shall be based on the blended rate earned during the preceding month by the Fixed Income Fund." SECTION 10 Section 5.2 of the Plan is hereby amended by adding the words "and Yale Short-Term Deferral Sub-Account" after the words "Additional Excess Matching Sub-Account" wherever such words shall appear therein. SECTION 11 Section 6.1(a) of the Plan is hereby amended in its entirety to read as follows: " (a) EXCESS DEFERRAL SUB-ACCOUNT, EXCESS 401(K) SUB-ACCOUNT, EXCESS MATCHING SUB-ACCOUNT, LTIP DEFERRAL SUB-ACCOUNT AND YALE SHORT-TERM SUB-ACCOUNT. Subject to the provisions of the following sentence, a Participant shall always be 100% vested in the amounts credited to his Excess Deferral Sub-Account, his Excess 401(k) Sub-Account, his Excess Matching Sub-Account, his LTIP Sub-Account and his Yale Short-Term Sub-Account hereunder. SECTION 12 Section 7.1 of the Plan is hereby amended by renumbering Section 7.1(c) as Section 7.1(d) and Section 7.1(d) as Section 7.1(e) and by adding a new Section 7.1(c) to read as follows: "(c) YALE SHORT-TERM DEFERRAL SUB-ACCOUNT. The Yale Short-Term Deferral Sub-Account shall be commence to be paid to the Participant (i) in the form of five annual installments with each installment being based on the value of the Yale Short-Term Deferral Sub-Account on the Valuation Date on which such installment is to be paid and being a fraction of such value in which the numerator is one and the denominator is the total number of remaining installments to be paid, and (ii) commencing in the January following the date on which the Participant ceases to be an Employee of the Controlled Group." SECTION 13 Section 8.1(c) of the Plan is hereby amended to read as follows: "the Beneficiary of a Participant for his Excess Deferral Benefits, his LTIP Deferral Benefits and his Yale Short-Term Deferral Benefits shall be his surviving spouse or, if none, his estate." -3- 4 SECTION 14 Section 8.3 of the Plan is hereby amended by adding the words "and Yale Short-Term Deferral Benefit" after the words "LTIP Deferral Benefit" wherever such words appear therein. EXECUTED this 27TH day of AUGUST, 1999. NACCO MATERIALS HANDLING GROUP, INC. Date: 8/27/99 By: /s/ Michael L. Smith ----------------------- ------------------------- Title:VP Finance-Americas -4- EX-10.LXXXII 10 EXHIBIT 10(LXXXII) 1 Exhibit 10 (lxxxii) AMENDMENT NO. 4 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999) NACCO Materials Handling Group, Inc. adopts this Amendment No. 4 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective January 1, 1999) (the "Plan"), effective on the dates indicated herein. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Effective January 1, 2000, Section 1.2(a) of the Plan is hereby amended in its entirety to read as follows: "(a) to allow certain employees to defer the receipt of Compensation or the receipt of certain long-term incentive compensation award payments." SECTION 2 Effective as of January 1, 1999, Sections 2.14(b) and 2.14(c) of the Plan are hereby amended in their entirety to read as follows: "(b) For purposes of Section 3.2 of the Plan, the term 'Participant' means an Employee who is a Participant in the profit sharing portion of the Profit Sharing Plan (i) whose profit sharing benefit for a Plan Year is limited by the application of section 401(a)(17) or 415 of the Code and (ii) whose total annual compensation from the Controlled Group for such Plan Year was at least $100,000. (c) For purposes of Section 3.4 and 3.5 of the Plan, the term 'Participant' means a 401(k) Employee (i) who is unable to make all of the Before-Tax Contributions that he has elected to make to the Profit Sharing Plan, or is unable to receive the maximum amount of Matching Employer Contributions under the Profit Sharing Plan because of the limitations of Section 402(g), 401(a)(17), 401(k)(3) or 401(m) of the Code and (ii) whose total annual compensation from the Controlled Group for the Plan Year in which a deferral election is required is at least $100,000." SECTION 3 Effective January 1, 2000, Section 2.14 of the Plan is hereby amended by relettering Subsections (c) through (e) thereof as Subsections (d) through (f) thereof and adding the following new Subsection (c) thereof to read as follows: 2 2 "(c) For purposes of Section 3.3 of the Plan, the term 'Participant' means (i) any Employee of the Company who made Excess Deferrals under the Plan prior to January 1, 1996 and (ii) any Employee of the Company whose total annual Compensation from the Controlled Group for the Plan Year in which a deferral election is required was at least $100,000, who is listed on Exhibit A hereto and who is eligible to make Excess Deferrals on or after January 1, 2000." SECTION 4 Effective January 1, 2000, Section 3.3 of the Plan is hereby amended in its entirety to read as follows: "SECTION 3.3. BASIC AND ADDITIONAL EXCESS DEFERRAL BENEFITS. (a) PRE-1996 EXCESS DEFERRAL BENEFITS. Prior to January 1, 1996, certain Employees of the Company were permitted to elect to defer specified amounts of salary and bonus of up to 7% of compensation (the "Basic Excess Deferrals") which are credited to the Basic Excess Deferral Sub-Account hereunder and in excess of 7% of compensation (the "Additional Excess Deferrals") which are credited to the Additional Excess Deferral Sub-Account hereunder. At the time the Basic and Additional Excess Deferrals were elected, the Participant irrevocably designated the date of commencement of the payment of such Excess Deferrals by choosing one of the following dates: (i) the date on which he ceases to be an Employee of the Controlled Group, (ii) the date on which he attains an age specified in the election form, or (iii) the earlier or later of such dates. (b) POST-1999 EXCESS DEFERRAL BENEFITS. Each Participant described in Section 2.14(c)(ii) may, prior to the first day of any Plan Year, by completing an approved deferral election form, direct the Company to reduce his Compensation for such Plan Year and, subject to Subsection (d) below, subsequent Plan Years, by an amount equal to between 1% and 17% of his Compensation for the Plan Year (in 1% increments). The first 7% of Compensation deferred by a Participant will be classified as the Basic Excess Deferrals which are credited to the Basic Excess Deferrals Sub-Account and Compensation deferred in excess of 7% of Compensation will be classified as the Additional Excess Deferrals and will be credited to the Additional Excess Deferral Sub-Account. (c) DEFERRAL PERIOD FOR POST-1999 EXCESS DEFERRAL BENEFITS. The deferral election form shall also contain the Participant's irrevocable election regarding the time of the commencement of payment of the Participant's entire Basic and Additional Excess Deferral Sub-Accounts. The Participant may elect to commence payment of such Sub-Accounts on (i) the date on which he ceases to be an Employee of the Controlled Group, (ii) the date on which he attains an age specified in the form, or (iii) the earlier or later of such dates. 3 3 (d) EFFECT AND DURATION OF DEFERRAL ELECTION FOR POST-1999 EXCESS DEFERRAL BENEFITS. Any direction by a Participant to defer Compensation under Subsection (b) above shall be effective with respect to Compensation otherwise payable to the Participant during the Plan Year for which the deferral election form is effective, and the Participant shall not be eligible to receive such Compensation. Instead, such amounts shall be credited to the Participant's Basic or Additional Excess Deferral Sub-Account (as applicable). Any directions made in accordance with Subsection (b) shall be irrevocable and shall remain in effect for subsequent Plan Years unless changed or terminated by the Participant for Plan Years commencing after such change or termination on the appropriate form provided by the Plan Administrator, prior to the first day of any subsequent Plan Year. (e) AUTOMATIC TERMINATION OF DEFERRAL ELECTION FOR POST-1999 EXCESS DEFERRAL BENEFITS. A Participant's direction to defer Compensation under Subsection (b) shall automatically terminate on the earlier of the date on which (i) the Participant ceases employment with the Employers, (ii) the Participant's Employer is deemed Insolvent, (iii) the Participant ceases to satisfy the requirements of Section 2.14(c)(ii), or (iv) the Plan is terminated. In addition, the Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by the Plan Administrator, reduced and/or cease the deferral of Compensation under Subsection (b) by one or more Participants, to the extent deemed necessary or desirable in order to satisfy the requirements of any applicable law (including, without limitation, federal securities laws)." SECTION 5 Effective January 1, 2000, Sections 3.6(a) and 3.6(d)(i) are hereby amended by deleting the phrase "Section 2.14(d)" and replacing it with the phrase "Section 2.14(e)" each time it appears therein. SECTION 6 Effective January 1, 2000, Section 4.1(b) of the Plan is hereby amended in its entirety to read as follows: "(b) Credits to a Basic or Additional Excess Deferral Sub-Account for the Basic and Additional Excess Deferrals described in Section 3.3, which shall be credited to the Sub-Account as soon as practicable after the time the Compensation would otherwise have been paid to the Participant." SECTION 7 Effective October 1, 1999, Section 6.1(b) of the Plan is hereby amended in its entirety to read as follows: 4 4 "(b) EXCESS PENSION BENEFIT AND EXCESS PROFIT SHARING BENEFITS. The Excess Pension Benefit and Excess Profit Sharing Benefits of all Participants who are employed on or after October 1, 1999 shall be immediately 100% vested and nonforfeitable." SECTION 8 Effective January 1, 2000, a new Exhibit A is hereby added to the end of the Plan, to read as follows: "Exhibit A ---------- Employees Eligible to Make Post-1999 Excess Deferrals Colin Wilson" NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender --------------------------------- Date: September 24, 1999 Title: Assistant Secretary ----------------------- EX-10.LXXXIII 11 EXHIBIT 10(LXXXIII) 1 Exhibit 10(lxxxiii) AMENDMENT NO. 4 TO THE NACCO MATERIALS HANDLING GROUP, INC. LONG-TERM INCENTIVE COMPENSATION PLAN ------------------------------------- NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 4 to the NACCO Materials Handling, Inc. Long-Term Incentive Compensation Plan (the "Plan"), effective as of August 1, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 --------- Section 5.1(c) of the Plan is hereby amended by adding the following provisions to the end thereof, to read as follows: "Notwithstanding any provision of this Plan to the contrary, prior to the vesting of an Award under this Section 5.2, to the extent determined by the Company in its sole and absolute discretion and subject to the terms and conditions of the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (the "Unfunded Plan"), a grantee shall be permitted to make an irrevocable election to defer receipt of all or part of an Award under and into the Unfunded Plan. Any such election shall thereby extinguish his entitlement under this Plan to so much of an Award as is covered by such deferral election." EXECUTED this 8TH day of OCT., 1999. NACCO MATERIALS HANDLING GROUP, INC. By:/s/ Michael L. Smith ----------------------- Title:VP Finance EX-10.LXXXIV 12 EXHIBIT 10(LXXXIV) 1 Exhibit 10(1xxxiv) AMENDMENT NO. 5 TO THE NACCO MATERIALS HANDLING GROUP, INC. LONG-TERM INCENTIVE COMPENSATION PLAN NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 5 to the NACCO Materials Handling, Inc. Long-Term Incentive Compensation Plan (the "Plan"), effective as of December 31, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 The first two sentences of Section 5.2(f) of the Plan is hereby deleted in their entirety and replaced with the following sentences: "At any time following the fifth anniversary of the date of any Award which has not yet vested under this Plan, a grantee may annually request in writing that the Committee permit the grantee to exercise and receive payment of up to 20% of the number of Book Value Appreciation Units originally granted in such Award if such funds are required due to an 'Unforeseeable Emergency;' provided, however, that such grantee will not receive an Award of any replacement Units with respect to the Units exercised for a period of two years from the grantee's payment effective date; and further provided, however, that replacement Units, if any, awarded under this Plan shall equal no more than the same number of Units which were exercised. Payments of amounts because of an Unforeseeable Emergency shall be made at the sole discretion of the Committee and shall be permitted only to the extent reasonably necessary to satisfy the emergency need. For this purpose, an Unforeseeable Emergency shall mean an event which results (or will result) in severe financial hardship to the grantee as a consequence of an unexpected illness or accident or loss of the grantee's property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the grantee. A grantee may make any number of requests pursuant to this Section 5.2(f) so long as (y) no more than one request shall be granted in each calendar year and (z) the total amount paid over the life of the Award pursuant to this Section 5.2(f) does not exceed the amount represented by 40% of the Units originally granted in such Award." SECTION 2 Section 8 of the Plan is hereby amended by deleting the phrase "The Committee" therefrom and replacing it with the phrase "The Committee (or the NACCO Industries, Inc. Benefits Committee, as applicable)." EXECUTED this 20th day of Dec., 1999. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender -------------------------------- Title: Assistant Secretary EX-10.XC 13 EXHIBIT 10(XC) 1 Exhibit 10(xc) AMENDMENT NO. 1 TO THE HAMILTON BEACH/PROCTOR-SILEX, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999) Hamilton Beach/Proctor-Silex, Inc. adopts this Amendment No. 1 to the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective January 1, 1999) (the "Plan"), effective on December 31, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Section 5.1 of the Plan is hereby amended in its entirety to read as follows: "SECTION 5.1. Vesting. All Participants who are employed on or after December 31, 1999 shall be immediately 100% vested in their Excess Pension Benefit, Excess Profit Sharing Benefit and the amounts credited to their Excess 401(k) Sub-Account and Excess Matching Sub-Account hereunder." HAMILTON BEACH/PROCTOR-SILEX, INC. By: /s/ A.G. Mason Dirickson ------------------------------------ Date:12/22/99 Title:Vice President-Human Resources -------- EX-10.CXX 14 EXHIBIT 10(CXX) 1 Exhibit 10(cxx) HAMILTON BEACH/PROCTOR-SILEX, INC. PROCTOR-SILEX CANADA, INC. ANNUAL INCENTIVE COMPENSATION PLAN - 2000 GENERAL - ------- Hamilton Beach/Proctor-Silex, Inc. (the "Company") has established an Annual Incentive Compensation Plan (the "Plan") as part of a competitive compensation program for the Officers and key management employees of the Company and its Subsidiaries. Proctor-Silex Canada, Inc. is a subsidiary of the Company. PLAN OBJECTIVE - -------------- The Company desires to attract and retain talented employees to enable the Company to meet its financial and business objectives. The objective of the Plan is to provide an opportunity to earn annual incentive compensation to those employees whose performance has a significant impact on the Company's short-term and long-term profitability. ADMINISTRATION AND PARTICIPATION - -------------------------------- The Plan is administered by the Nominating, Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee: a. May amend, modify, or discontinue the Plan. b. Will approve participation in the Plan. Generally, participants will include all employee in Hay Salary Job Grades 14 and above. Employees who voluntarily terminate their employment prior to year-end are not entitled to an award, and employees joining the Company after August of any year will not be entitled to an award. However, the Committee may select any employee who has contributed significantly to the Company's profitability to participate in the Plan and receive an annual incentive compensation award. c. Will determine the annual performance criteria which generates the incentive compensation pool. d. Will determine the total amount of both the target and actual annual incentive compensation pool. e. Will approve individual incentive compensation awards to Officers and employees above Hay Salary Job Grade 17. f. May delegate to the Chief Executive Officer of the Company the power to approve incentive compensation awards to employees in and below Hay Salary Job Grade 17. g. May consider at the end of each year the award of a discretionary bonus amount to non-participants as an addition to the regular incentive compensation pool on a special one-time basis to motivate individuals not eligible to participate in the Plan. h. May approve a pro rata incentive compensation award for participants in the Plan whose employment is terminated (1) due to death, disability, retirement or facility closure, such award to be determined pursuant to the provisions of subparagraphs e. and f. above or (2) under other circumstances at the recommendation of the Chief Executive Officer of the Company. 2 DETERMINATION OF CORPORATE INCENTIVE COMPENSATION POOL - ------------------------------------------------------ Each participant in the Plan will have an individual target incentive compensation percentage which is determined by the participant's Salary Job Grade. This percentage is multiplied by the midpoint of the participant's Salary Job Grade to determine his individual target incentive compensation award. The total of the target incentive compensation awards of all participants equals the target corporate incentive compensation pool (the "Target Pool"). The Target Pool is approved each year by the Committee. The actual corporate incentive compensation pool (the "Actual Pool") is determined at the end of each year based on the Company's actual performance against specific criteria established in the beginning of the year by the Committee. The Target Pool is adjusted upwards or downwards by corporate performance adjustment factor to determine the Actual Pool. In no event will the Actual Pool exceed 150% of the Target Pool, except to the extent that the Committee elects to increase the Actual Pool by up to 10%, as described below. It is the intent of the Plan that the Actual Pool, as determined above, will be the final total corporate incentive compensation pool. However, the Committee, in its sole discretion, may increase or decrease by up to 10% the Actual Pool or may approve an incentive compensation pool where there would normally be no pool due to Company performance which is below the criteria established for the year. The Actual and Target Pools exclude commission personnel as salespersons, regional general manager and manufacturing representatives. DETERMINATION OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS - --------------------------------------------------------- Salary Job Grades and the corresponding target incentive percentage for each participant in the Plan will be established at the beginning of each year and approved by the Committee. Individual target incentive compensation will then be adjusted by the appropriate pool factor. Such adjusted individual incentive compensation will then be further modified based on a participant's performance as compared to his individual goals for the year. The total of all individual incentive compensation awards must not exceed the Actual Pool for the year. PERFORMANCE TARGETS - See Plan Summary. - ------------------- EX-10.CXXIV 15 EXHIBIT 10(CXXIV) 1 Exhibit 10(cxxiv) AMENDMENT NO. 1 TO THE HAMILTON BEACH/PROCTOR-SILEX, INC. LONG-TERM INCENTIVE COMPENSATION PLAN Hamilton Beach/Proctor-Silex, Inc. hereby adopts this Amendment No. 1 to the Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan (the "Plan"), effective as of December 31, 1999. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 The first two sentences of Section 5.2(f) of the Plan is hereby deleted in their entirety and replaced with the following sentences: "At any time following the fifth anniversary of the date of any Award which has not yet vested under this Plan, a grantee may annually request in writing that the Committee permit the grantee to exercise and receive payment of up to 20% of the number of Book Value Appreciation Units originally granted in such Award if such funds are required due to an 'Unforeseeable Emergency;' provided, however, that such grantee will not receive an Award of any replacement Units with respect to the Units exercised for a period of two years from the grantee's payment effective date; and further provided, however, that replacement Units, if any, awarded under this Plan shall equal no more than the same number of Units which were exercised. Payments of amounts because of an Unforeseeable Emergency shall be made at the sole discretion of the Committee and shall be permitted only to the extent reasonably necessary to satisfy the emergency need. For this purpose, an Unforeseeable Emergency shall mean an event which results (or will result) in severe financial hardship to the grantee as a consequence of an unexpected illness or accident or loss of the grantee's property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the grantee. A grantee may make any number of requests pursuant to this Section 5.2(f) so long as (y) no more than one request shall be granted in each calendar year and (z) the total amount paid over the life of the Award pursuant to this Section 5.2(f) does not exceed the amount represented by 40% of the Units originally granted in such Award." SECTION 2 Section 8 of the Plan is hereby amended by deleting the phrase "The Committee" therefrom and replacing it with the phrase "The Committee (or the NACCO Industries, Inc. Benefits Committee, as applicable)." EXECUTED this 20th day of Dec., 1999. HAMILTON BEACH/PROCTOR-SILEX, INC. By:/s/ Charles A. Bittenbender ----------------------------- Title: Assistant Secretary EX-13 16 EXHIBIT 13 1 Exhibit 13 [LOGO]SELECTED FINANCIAL AND OPERATING DATA NACCO Industries,Inc. and Subsidiaries
Year Ended December 31 --------------------------------------------------------------------- 1999 1998 1997 1996 1995 --------------------------------------------------------------------- (In millions,except per share and employee data) Total revenues ........................... $ 2,602.8 $ 2,536.2 $ 2,246.9 $ 2,273.2 $ 2,204.5 Operating profit ......................... $ 131.3 $ 198.1 $ 132.0 $ 131.2 $ 148.7 Income before extraordinary items and cumulative effect of accounting change $ 54.3 $ 102.3 $ 61.8 $ 50.6 $ 65.5 Extraordinary items: Extraordinary gain,net-of-tax ......... - - - - 32.3 Extraordinary charges,net-of-tax ...... - - - - (3.4) Cumulative effect of accounting change, net-of-tax ............................ (1.2) - - - - ----------- ----------- ----------- ----------- ----------- Net income ............................... $ 53.1 $ 102.3 $ 61.8 $ 50.6 $ 94.4 =========== =========== =========== =========== =========== Total assets ............................. $ 2,013.0 $ 1,898.3 $ 1,729.1 $ 1,708.1 $ 1,833.8 Long-term debt ........................... $ 326.3 $ 256.4 $ 230.2 $ 333.3 $ 320.2 Stockholders' equity ..................... $ 562.2 $ 518.3 $ 425.1 $ 379.3 $ 370.1 Basic earnings per share: Income before extraordinary items and cumulative effect of accounting change $ 6.67 $ 12.56 $ 7.56 $ 5.67 $ 7.31 Extraordinary items: Extraordinary gain,net-of-tax ....... - - - - 3.61 Extraordinary charges,net-of-tax .... - - - - (0.38) Cumulative effect of accounting change, net-of-tax .......................... (0.15) - - - - ----------- ----------- ----------- ----------- ----------- Net income ............................ $ 6.52 $ 12.56 $ 7.56 $ 5.67 $ 10.54 =========== =========== =========== =========== =========== Diluted earnings per share: Income before extraordinary items and cumulative effect of accounting change $ 6.66 $ 12.53 $ 7.55 $ 5.67 $ 7.30 Extraordinary items: Extraordinary gain,net-of-tax ....... - - - - 3.60 Extraordinary charges,net-of-tax .... - - - - (0.38) Cumulative effect of accounting change, net-of-tax .......................... (0.15) - - - - ----------- ----------- ----------- ----------- ----------- Net income ............................ $ 6.51 $ 12.53 $ 7.55 $ 5.67 $ 10.52 =========== =========== =========== =========== =========== Per share data: Cash dividends ........................ $ 0.850 $ 0.810 $ 0.773 $ 0.743 $ 0.710 Market value at December 31 ........... $ 55.56 $ 92.00 $ 107.19 $ 53.50 $ 55.50 Stockholders' equity .................. $ 68.92 $ 63.83 $ 52.13 $ 46.34 $ 41.28 Average shares outstanding ............... 8.150 8.147 8.171 8.920 8.963 Total employees .......................... 14,400 14,100 13,400 11,800 12,300
[BAR GRAPH] TOTAL REVENUES (in billions) $2.2 $2.3 $2.2 $2.5 $2.6 1995 1996 1997 1998 1999 [BAR GRAPH] DILUTED EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $7.30 $5.67 $7.55 $12.53 $6.66 1995 1996 1997 1998 1999 1 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) FINANCIAL SECTION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Summary .......................................................... 24 The North American Coal Corporation ........................................ 25 NACCO Materials Handling Group ............................................. 28 NACCO Housewares Group ..................................................... 33 NACCO and Other ............................................................ 36 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income and Comprehensive Income .................................................. 40 Consolidated Balance Sheets ................................................ 41 Consolidated Statements of Cash Flows ...................................... 42 Consolidated Statements of Stockholders' Equity .................................................. 43 Notes to Consolidated Financial Statements ................................. 44
FINANCIAL SUMMARY NACCO Industries, Inc. ("NACCO," the parent company) has four operating subsidiaries (collectively, the"Company") that function in three principal industries: lignite mining, lift trucks and housewares. The North American Coal Corporation ("NACoal") mines and markets lignite primarily as fuel for power generation by electric utilities. NMHG Holding Co. and its majority owned subsidiaries (collectively, "NMHG") consists of NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG Retail"). NMHG Wholesale primarily designs, engineers, manufactures and sells a full line of lift trucks and replacement parts marketed worldwide under the Hyster(R)and Yale(R)brand names. NMHG Retail primarily sells and services Hyster and Yale lift trucks and replacement parts through a network of wholly owned Hyster or Yale retail dealerships. NACCO Housewares Group ("Housewares") consists of Hamilton Beach*Proctor-Silex, Inc. ("HB*PS"), a leading manufacturer and marketer of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. In 1999, the Company recognized the cumulative effect of a required change in accounting for start-up costs of $1.2 million, net-of-tax. Consolidated income before the cumulative effect of this accounting change was $54.3 million, or $6.66 diluted earnings per share. This compares with income before the cumulative effect of accounting change, which was equal to net income of $102.3 million, or $12.53 diluted earnings per share, in 1998; and $61.8 million, or $7.55 diluted earnings per share, in 1997. In 1999, consolidated net income was $53.1 million, or $6.51 diluted earnings per share. The following schedule identifies the components of the changes in consolidated revenues, operating profit and net income for 1999 compared with 1998: Operating Net Revenues Profit Income -------- ------ ------ 1998 ................................. $2,536.2 $ 198.1 $ 102.3 Increase (decrease) in 1999 from: NACoal .............................. (7.7) (1.6) (2.6) NMHG Wholesale ...................... (95.9) (59.9) (38.2) NMHG Retail ......................... 111.2 (14.0) (13.2) Housewares .......................... 59.1 7.2 6.0 NACCO & Other ....................... (.1) 1.5 - Cumulative effect of accounting change ............................. - - (1.2) -------- -------- -------- 1999 ................................. $2,602.8 $ 131.3 $ 53.1 ======== ======== ======== NACCO's subsidiaries function in three distinct industries and, therefore, results of operations and financial condition are discussed separately for the industry groups, as defined above: NACoal, NMHG and Housewares. Results by segment are also summarized in Note Eighteen to the Consolidated Financial Statements. 24 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) 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 1.9 billion tons, with 1.1 billion tons committed to electric utility customers pursuant to long-term contracts. NACoal operates five lignite mines, including three project mining subsidiaries ("Coteau,""Falkirk"and "Sabine"), a NACoal division ("San Miguel") and a joint venture ("Red River"). NACoal also provides dragline mining services ("Florida dragline operations") for a limerock quarry near Miami, Florida. The operating results for the Florida dragline operations, San Miguel and Red River are included in Other mining operations. During 1997, the Mississippi Lignite Mining Company was formed as a joint venture between NACoal and Phillips Coal Company. This joint venture, in which NACoal has a 25 percent interest, was formed to develop and mine lignite at the Red Hills lignite mine near Ackerman, Mississippi. Development of the mine site began in 1998 and continued through 1999. Initial production is expected to begin during the fourth quarter of 2000. NACoal accounts for its minority ownership in the Mississippi Lignite Mining Company using the equity method of accounting. FINANCIAL REVIEW NACoal's three project mining subsidiaries (Coteau, Falkirk and Sabine), which represent a significant portion of NACoal's operations, mine lignite for utility customers pursuant to long-term contracts at prices based on actual cost plus an agreed pre-tax profit per ton. Due to the cost-plus nature of these contracts, revenues and operating profits are affected 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 three mines, operating results are best analyzed in terms of lignite tons sold, income before taxes and net income. Lignite tons sold by NACoal's five operating lignite mines were as follows for the year ended December31: 1999 1998 1997 ---- ---- ---- Coteau Properties ..................... 16.4 16.4 15.9 Falkirk Mining ........................ 7.2 7.0 6.9 Sabine Mining ......................... 3.6 3.8 4.1 San Miguel ............................ 3.4 3.5 2.0 Red River Mining ...................... .7 1.0 1.0 ------ ------ ------ Total lignite ..................... 31.3 31.7 29.9 ====== ====== ====== The Florida dragline operations mined 8.4 million, 8.3 million and 7.6 million cubic yards of limerock for the years ended December 31, 1999, 1998 and 1997, respectively. Revenues, income before taxes, provision for taxes and net income were as follows for the year ended December 31: 1999 1998 1997 -------- -------- -------- Revenues Project mines ................ $ 239.9 $ 240.0 $ 227.4 Other mining operations ................. 35.1 39.1 29.7 ------- ------- ------- 275.0 279.1 257.1 Royalties and other ...................... 2.7 6.3 5.8 ------- ------- ------- $ 277.7 $ 285.4 $ 262.9 ======= ======= ======= Income before taxes Project mines ................ $ 25.9 $ 25.2 $ 24.7 Other mining operations ................. 2.7 5.5 5.2 ------- ------- ------- Total income from operatingmines ................. 28.6 30.7 29.9 Royalty and other income, net .................... 1.2 4.8 3.2 Other operating expenses ....................... (7.6) (8.1) (6.0) ------- ------- ------- 22.2 27.4 27.1 Provision for taxes ............. 4.5 7.1 8.1 ------- ------- ------- Income before cumulative effect of accounting change .............. 17.7 20.3 19.0 Cumulative effect of accounting change .............. (1.2) -- -- ------- ------- ------- Net income .................... $ 16.5 $ 20.3 $ 19.0 ======= ======= ======= 25 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) 1999 COMPARED WITH 1998 The following schedule identifies the components of the changes in revenues, income before taxes and net income for 1999 compared with 1998: Income Before Net Revenues Taxes Income -------- ----- ------ 1998 ................................... $285.4 $ 27.4 $ 20.3 Increase (decrease) in 1999 from: Project mines Tonnage volume ....................... (1.4) (.3) (.2) Pass-through costs ................... .3 -- -- Agreed profit per ton ................ 1.0 1.0 .7 Other mining operations Tonnage volume ....................... (4.6) (4.6) (3.0) Averagesellingprice .................. .6 .6 .4 Operating costs ...................... -- .2 .1 Other ................................ -- 1.0 .7 ------ ------ ------ Changes from operating mines ...................... (4.1) (2.1) (1.3) Royalties and other income, net .......................... (3.6) (3.6) (2.4) Other operating expenses ............................. -- .5 .3 Cumulative effect of accounting change .................... -- -- (1.2) Difference between effective and statutory tax rates ............................ -- -- .8 ------ ------ ------ 1999 .................................... $277.7 $ 22.2 $ 16.5 ====== ====== ====== Revenues for 1999 decreased as compared with 1998 primarily due to decreased tons sold and reduced royalties. Tons sold declined at Red River due to the customer's planned power plant outage during the second quarter of 1999 and a decline in customer demand, which is expected to continue in 2000. Other slight changes in tons sold at all other mines resulted from fluctuations in customer demand. Income before taxes for1999 declined as compared with 1998 due to: (i) reduced royalty income,(ii)decreasedtonssoldatRedRiver,whichis not operated on a cost-plus basis, and (iii) increased costs at the San Miguel mine resulting from higher than expected maintenance costs. The decline in income before taxes was partially offset by reduced operating costs at Red River and increased profit per ton at each of the project mines and Red River. Net income declined primarily due to the factors affecting income before taxes and a one-time cumulative effect charge recognized in the first quarter of1999 as a result of a change in accounting for start-up costs. Royalty income continued to decline in 1999 due to decreased demand for coal from NACoal's Eastern underground reserves. Near-term profits generated by the San Miguel mine are expected to be lower than 1999 profits because of increased maintenance and other administrative expenses. 1998 COMPARED WITH 1997 The following schedule identifies the components of the changes in revenues, income before taxes and net income for 1998 compared with 1997: Income Before Net Revenues Taxes Income -------- ----- ------ 1997 ................................. $262.9 $ 27.1 $ 19.0 Increase (decrease) in 1998 from: Project mines Tonnage volume ..................... .8 .2 .1 Pass-through costs ................. 11.9 -- -- Agreed profit per ton .............. (.1) .3 .2 Other mining operations Tonnage volume ..................... 8.4 8.6 5.6 Averageselling price ............... 1.0 .9 .6 Operating costs .................... -- (9.4) (6.1) Other .............................. -- .2 .1 ------ ------ ------ Changes from operating mines .................... 22.0 .8 .5 Royalties and other income, net ........................ .5 1.6 1.0 Other operating expenses ........................... -- (2.1) (1.3) Difference between effective and statutory tax rates .......................... -- -- 1.1 ------ ------ ------ 1998 ................................. $285.4 $ 27.4 $ 20.3 ====== ====== ====== At the project mines, operating results for 1998 improved as compared with 1997 due to increased tons sold, primarily at Coteau, partially offset by decreased tons sold at Sabine due to a customer's planned power plant outage. Results from other mining operations improved due to a full year of production at the San Miguel lignite mining operation, which began operations in July 1997. Increased income from royalties was offset completely by the increased costs of pursuing new international mining opportunities. 26 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) OTHER INCOME, EXPENSE AND INCOME TAXES: The components of other income (expense) and the effective tax rate are as follows for the year ended December 31: 1999 1998 1997 ------- ------- ------- Interest expense Project mines .................. $ (17.6) $ (13.0) $ (12.7) Other mining operations .................... -- (.6) (2.1) ------- ------- ------- $ (17.6) $ (13.6) $ (14.8) ======= ======= ======= Other-net Project mines .................. $ .1 $ .7 $ (.4) Other mining operations .................... .3 .5 (1.6) ------- ------- ------- $ .4 $ 1.2 $ (2.0) ======= ======= ======= Effective tax rate .............. 19.1% 25.9% 29.9% Interest expense at the project mines increased in 1999 as compared with 1998 and 1997 primarily due to additional interest charged on advances from customers. In 1997, other-net from other mining operations includes a non-recurring write-off of certain non-productive assets. The effective tax rate continued to decline in 1999 and 1998 due to increasing amounts of percentage depletion eligible to reduce NACoal's effective tax rate. LIQUIDITY AND CAPITAL RESOURCES NACoal has in place a $50.0 million revolving credit facility. The expiration date of this facility, which is September 2002, may be extended annually, for one-year periods, upon the mutual consent of NACoal and the bank group. NACoal had $34.8 million of its revolving credit facility available at December 31, 1999. The financing of the project mining subsidiaries, which is either provided or guaranteed by the utility customers, includes long-term equipment leases, notes payable and 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 to NACoal in amounts equal to their retained earnings. NACoal believes that funds available under its revolving credit agreement, operating cash flows and financing provided by the project mining subsidiaries' customers are sufficient to finance all of its operating needs and commitments arising during the foreseeable future. NACoal anticipates spending approximately $30.9 million for property, plant and equipment in 2000, of which $30.5 million relates to the development, establishment and improvement of the project mining subsidiaries' mines and is financed or guaranteed by the utility customers. Planned expenditures primarily include costs to build infrastructure and to replace aging assets. The 2000 planned expenditures compare with capital expenditures of $12.7 million incurred in 1999 and $19.6 million incurred in 1998. Increased planned expenditures for 2000 as compared to actual expenditures in 1999 are primarily due to increased capital projects at Coteau and projects at Sabine that were delayed in 1999. Also during 1999 and 1998, NACoal invested $17.6 million and $10.5 million, respectively, in the Mississippi Lignite Mining Company, its joint venture with Phillips Coal Company, to develop the Red Hills lignite mine in Mississippi. During 2000, NACoal anticipates investing an additional $7.6 million in this joint venture. NACoal's capital structure, excluding the project mining subsidiaries, is presented below: December 31 ----------- 1999 1998 ---- ---- Investment in project mining subsidiaries ....................... $ 3.7 $ 3.6 Other net tangible assets .................................... 32.0 14.2 ------- ------- Net tangible assets ...................... 35.7 17.8 Advances to (from) parent company ............................ 2.7 (2.5) Debt related to parent advances .................................. (2.7) -- Other debt ................................. (12.5) (.2) ------- ------- Total debt ............................... (15.2) (.2) ------- ------- Stockholder's equity ....................... $ 23.2 $ 15.1 ======= ======= Debt to total capitalization ............... 40% 1% The increase in Other net tangible assets is primarily due to a $17.6 million increase in the investment in the Mississippi Lignite Mining Company. Borrowings increased to finance investments in the Mississippi Lignite Mining Company and loans to NACCO. 27 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) NACCO MATERIALS HANDLING GROUP NMHG, through NMHG Wholesale and NMHG Retail, designs, manufactures, sells and services forklift trucks and replacement parts marketed worldwide under the Hyster(R) and Yale(R) brand names. During 1999, the legal structure of the forklift business was reorganized to create NMHG Holding Co., a wholly owned subsidiary of NACCO, which indirectly owns 100 percent of NMHG Wholesale and directly owns 100 percent of NMHG Retail. Previously, NACCO indirectly owned 98 percent of NMHG Wholesale. However, in 1999, the Company purchased from Sumitomo Heavy Industries the remaining 2 percent indirect minority interest in NMHG Wholesale for its book value of $11.3 million. The Consolidated Balance Sheet at December 31, 1999 included in this Annual Report reflects the corresponding decrease in NACCO's minority interest liability as a result of this transaction. As a result of this transaction and the legal reorganization, NMHG Wholesaleis now indirectly wholly owned by NMHG Holding Co. The new legal structure was formed primarily to distinguish the wholesale operations from the retail operations of NMHG. During 1998, NMHG, through NMHG Retail, began a strategy of acquiring retail dealerships on a permanent basis to strengthen Hyster's and Yale's positions in the lift truck business. Previously, NMHG Wholesale had purchased dealerships on a temporary basis, primarily for the purpose of strengthening the financial position of that dealership. See also Note Twenty-One to the Consolidated Financial Statements for a discussion of retail acquisitions. As of December 31, 1999, NMHG had acquired and consolidated two lift truck dealerships in the United States, 11 dealerships in Europe and nine dealershipsin Asia-Pacific. These acquisitions increased revenues by $111.2 and $31.3 million in 1999 and 1998, respectively, and reduced net income by $13.2 and $2.1 million in 1999 and 1998, respectively. The impact of retail acquisitions includes the effect of the elimination of intercompany transactions. NMHG intends to expand further its retail operations over the next several years through acquisitions, principally outside the United States,and growth of its existing dealerships. See also Note Eighteen to the Consolidated Financial Statements for additional financial information related to the retail and wholesale segments of NMHG. The results of operations for NMHG Retail, net of intercompany eliminations, were as follows for the year ended December 31: 1999 1998 1997 -------- -------- -------- Revenues ............................ $ 142.5 $ 31.3 $ -- Operating loss ...................... $ (16.2) $ (2.2) $ -- Operating loss excluding goodwill amortization ....................... $ (15.6) $ (2.1) $ -- -------- -------- -------- Net loss ............................ $ (15.3) $ (2.1) $ -- ======== ======== ======== FINANCIAL REVIEW The results of operations for NMHG, including both the wholesale and retail operations, were as follows for the year ended December31: 1999 1998 1997 -------- -------- -------- Revenues Americas .................... $1,155.4 $1,177.1 $1,015.4 Europe, Africa and Middle East ............ 482.7 478.6 398.9 Asia-Pacific ................ 90.2 57.3 73.7 -------- -------- -------- $1,728.3 $1,713.0 $1,488.0 ======== ======== ======== Operating profit (loss) Americas .................... $ 66.5 $ 103.7 $ 52.3 Europe, Africa and Middle East ............ (3.2) 32.4 22.6 Asia-Pacific ................ (5.0) (3.9) (4.4) -------- -------- -------- $ 58.3 $ 132.2 $ 70.5 ======== ======== ======== Operating profit (loss) excluding goodwill amortization Americas .................... $ 74.6 $ 111.5 $ 60.2 Europe, Africa and Middle East ............ .7 36.0 26.2 Asia-Pacific ................ (4.8) (3.6) (4.2) -------- -------- -------- $ 70.5 $ 143.9 $ 82.2 ======== ======== ======== Net income .................. $ 23.7 $ 75.1 $ 38.7 ======== ======== ======== 1999 NMHG Revenues By Geographic Region [PIE GRAPH] Americas - 67% Europe, Africa, & Middle East -28% Asia-Pacific - 5% 28 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) [BAR GRAPH]
NMHG Revenues WHOLESALES ................. $1,510.1 $1,560.1 $1,488.0 $ 1,681.7 $ 1,585.8 RETAIL ..................... -- -- -- $ 31.3 $ 142.5 1995 1996 1997 1998 1999
1999 COMPARED WITH 1998 The following schedule identifies the components of the changes in NMHG's revenues, operating profit and net income for 1999 compared with 1998. The effect of NMHG Retail, including the elimination of intercompany profit, is reflected below on the line "Retail operations, net of intercompany." All other line items reflect changes from the operations of NMHG Wholesale. Operating Revenues Profit Income -------- ------ ------ 1998 ................................ $1,713.0 $ 132.2 $ 75.1 Increase (decrease) in 1999 from: Unit volume ........................ (29.0) (5.1) (3.3) Sales mix .......................... (20.9) (12.4) (8.1) Average sales price ................ (33.2) (33.2) (21.6) Service parts ...................... (1.0) (3.2) (2.1) Foreign currency ................... (11.8) (25.0) (16.3) Retail operations, net of intercompany ................... 111.2 (14.0) (13.2) Manufacturing cost ................. -- 4.9 3.2 Other operating expense ........................... -- 14.1 9.2 Other income and expense ........................... -- -- (1.0) Difference between effective and statutory tax rates ............... -- -- 1.8 -------- -------- -------- 1999 ................................. $1,728.3 $ 58.3 $ 23.7 ======== ======== ======== At NMHG, revenues increased as a result of retail sales made by recently acquired dealerships, almost completely offset by a decrease in revenue from wholesaleoperations. Operating income and net income declined primarily due to a reduction in the average sales price, adverse currency effects and an unfavorable sales mix at NMHG Wholesale and increased losses from NMHG Retail. NMHG WHOLESALE: Revenues declined primarily due to reduced pricing, decreased volume and an unfavorable product mix. The average sales price declined, predominately in the Americas. Pricing deteriorated close to 3 percent in the Americas due to aggressive competition. In addition, European pricing was adverselyaffected by unfavorable movements in the British pound sterling against the Euro. NMHG Wholesale's worldwide volume decreased 2 percent to 76,055 units shipped during 1999 from 77,636 units shipped during 1998. Volumes improved in the fourth quarter of 1999 as compared with the fourth quarter of 1998 primarily due to increased production in theAmericas. This increase allowed theshipmentof approximately1,300 units delayed from the third quarter as a result of September's Hurricane Floyd. However, the fourth quarterimprovement was not enough to offset declining volumes experienced during the first nine months of 1999. For the year, unit volume decreased in both the Americas and Europe due to a decline in Hyster demand. Volumes in Asia-Pacific improved 10 percent in 1999 as comparedwith 1998. An unfavorable product mix negatively affected both revenues and operating profit due to increased sales of both lower-priced and lower-margin units. Operating profit declined primarily due to a reduction in the average sales price, adverse currency movements and an unfavorable sales mix. Adverse currency movements resulted from both (i) a strengthening of the Japanese yen against the U.S. dollar and the British pound sterling, resulting in increased costs of Japanese-sourced products, and (ii) adverse movements of the British pound sterling against European currencies, resulting in decreased margins on products manufactured in the United Kingdom and sold to other European countries. The decline in operating profit was somewhat offset by a reduction in manufacturing costs and other operating expenses. Manufacturing costs declined primarily due to favorable materials pricing. Other operating expenses declined primarily due to reduced variable compensation expense. Net income declined primarily as a result of these factors and a reduction in income from legal settlements of $2.4 million after-tax. The backlog level increased to 21,500 units at December 31, 1999 from 20,000 units at September 30, 1999 and 19,500 units at December 31, 1998. The increase primarily arose from continued strong bookings in the Americas during the fourth quarter of 1999. NMHG Retail: Comparisons between years are not meaningful due to acquisitions of retail dealerships throughout 1999 and 1998, with the exception of two retail dealerships acquired toward the end of 1997. In 1997, these dealerships were considered "temporarily held" and, 29 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) thus, were accounted for using the equity method of accounting. They were consolidated in 1998 when the Company made the strategic decision to acquire retail dealerships on a permanent basis. Revenues at these two comparable dealerships increased $4.8 million in 1999, while operating loss and net loss increased $3.1 million and $2.5 million, respectively. Increased revenues were primarily due to volume growth. Increased operatingloss and net loss was primarily due to reduced gross margins resulting primarily from price competition. Excluding the effect of comparable retail dealerships, revenues increased due to a full year of operating results from retail dealerships acquired in 1998 and the acquisition of 11 retail dealerships during 1999. Operating and net loss increased due to (i) operating losses at these newly acquired dealerships as a result of integration and start-up costs, (ii) increased interest and goodwill amortization expenses, and (iii) intercompany eliminations to defer profits on sales from NMHG Wholesale to NMHG Retail. 1998 COMPARED WITH 1997 The following schedule identifies the components of the changes in NMHG's revenues, operating profit and net income for 1998 compared with 1997. The effect of NMHG Retail, including the elimination of intercompany profit, is reflected below on the line "Retail operations, net of intercompany." All other line items reflect changes from the operations of NMHG Wholesale. Operating Net Revenues Profit Income -------- ------ ------ 1997 ................................... $1,488.0 $ 70.5 $ 38.7 Increase (decrease) in 1998 from: Unit volume ........................... 195.7 32.2 20.9 Sales mix ............................. (4.2) 17.7 11.5 Average sales price ................... (4.9) (4.9) (3.2) Service parts ......................... 23.7 1.7 1.1 Foreign currency ...................... (16.6) (9.0) (5.9) Retail operations, net of intercompany ...................... 31.3 (2.2) (2.1) Manufacturing cost .................... -- 29.7 19.4 Other operating expense .............................. -- (3.5) (2.3) Other income and expense .............................. -- -- 5.1 Difference between effective and statutory tax rates .................. -- -- (8.1) -------- -------- -------- 1998 ................................... $1,713.0 $ 132.2 $ 75.1 ======== ======== ======== Revenues increased as a result of increased wholesale volume of units and service parts and the addition of retail sales made by recently acquired retail dealerships, partially offset by adverse currency movements and, to a lesser degree, by an adverse sales mix and reduced pricing from wholesale operations. Operating profit and net income improved primarily due to improvements from NMHG Wholesale, partially offset by losses from newly acquired retail dealerships. NMHG WHOLESALE: Worldwide wholesale volume increased 16 percent to 77,636 units shipped during 1998 from 66,833 units shipped during 1997. Increased demand in the Americas and Europe, fueled by the strong economies in those regions, contributed to this volume growth. Unit shipments in Asia-Pacific, however, declined as a result of the continued weak economies in that region. Revenues were negatively affected by a reduction in higher-priced units shipped in Europe and Asia-Pacific. Pricing declined moderately, especially during the fourth quarter of 1998, in response to increased competition. Operating profit improved due to increased unit volume, decreased manufacturing costs and improved sales mix, partially offset by adverse currency movements and increased operating costs. Manufacturing costs decreased significantly in 1998 due to reduced materials pricing, savings from ongoing process re-engineering programs ("VIP") and higher factory throughput resulting in increased overhead absorption. Although sales mix adversely affected revenues, operating profit improved as a result of a shift in the mix to higher margin units shipped in the Americas and a shift to higher margin European markets. Foreign currency fluctuations negatively affected operating profit due to the strengthening of the British pound sterling against other European currencies, which caused price and margin pressure on pound sterling- based lift trucks. The decrease to operating profit caused by the stronger pound sterling was partially offset by the reduced cost of Japanese yen-based materials as a result of the weakening of the yen against the U.S. dollar and the pound sterling. Other operating expenses increased during 1998 due to increased incentive compensation and costs to support sales volume growth, partially offset by employee attrition resulting from NMHG's restructuring program. See Note Three to the Consolidated Financial Statements for a discussion of the NMHG restructuring program, which began in 1997 and was substantially completed in 1998. 30 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) Although service parts contributed significantly to revenues, the contribution to operating profit was negligible due to margin erosion in Europe from increased competition and a shift to lower margin geographic markets. Net income improved as a result of the factors affecting operating profit and from income from legal settlements, partially offset by non-recurring favorable tax adjustments recognized in 1997. See also the discussion of other income, expense and income taxes to follow. As a result of increased production and a slight reduction in the rate of incoming orders, the backlog declined to 19,500 at December 31, 1998, compared with 22,100 units at December 31, 1997. NMHG RETAIL: Comparisons between years are not meaningful due to acquisitions of retail dealerships during 1998. In 1998, NMHG began a strategy of acquiring Hyster and Yale retail dealerships on a permanent basis to strengthen its position in the lift truck business. Previously, NMHG had purchased dealerships on a temporary basis, primarily for the purpose of strengthening the financial position of that dealership. This newly adopted strategy resulted in the acquisition and consolidation of several lift truck dealerships in 1998. Although these acquisitions were not material to the financial position or operating results of NMHG, they did result in a net increase in revenues of $31.4 million and a reduction in net income of $2.1 million, which also reflects the elimination of intercompany transactions. Losses from retail dealerships during 1998 are primarily due to integration and start-up costs. OTHER INCOME, EXPENSE AND INCOME TAXES: The components of other income (expense) and the effective tax rate for NMHG are as follows for the year ended December 31: 1999 1998 1997 ------- ------- ------- Interest expense ................. $ (19.0) $ (14.0) $ (14.5) Other-net ........................ 1.8 2.2 (3.7) ------- ------- ------- $ (17.2) $ (11.8) $ (18.2) ======= ======= ======= Effective tax rate ............... 44.8% 38.4% 26.0% Interest expense increased in 1999, as compared with 1998 and 1997, primarily due to increased debt levels in 1999, which were necessary to finance acquisitions of retail dealerships and an intercompany loan to NACCO. In 1999 and 1998, other-net includes non-recurring income of $0.9 million and $4.6 million, respectively, for settlements from legal proceedings. Other-net in 1999 also includes various improvements over 1998 and 1997 results, suchas increased income from unconsolidated affiliates, reduction in the loss on the sale of assets, improved results from currency hedging and other miscellaneous refunds. Equity in the earnings of unconsolidated affiliates, including Sumitomo-NACCO Materials Handling Group ("S-N"), a 50 percent-owned joint venture, were $2.3 million in 1999, $1.5 million in 1998 and a loss of $0.3 million in 1997. Discounts on the sale of receivables included in other-net were $3.8 millionin 1999, $3.2 million in 1998 and $4.3 million in 1997. The effective tax rate in 1997 includes certain one- time adjustments. In 1997, an adjustment to reverse the reserve for taxes on unremitted foreign earnings and the recognition of a valuation allowance against certain deferred tax assets resulted in an 18 percent reduction in the effective tax rate. The 1999 and 1998 effective tax rates reflect the absence of a provision for certain deferredtaxes on unremitted foreign earnings in accordance with the Company's policy established in 1997. In addition, the effective tax rate in 1998 was reduced by a shift in income to jurisdictions with lower tax rates and the effectof a fixed amount of nondeductible goodwill amortizationon an increased level of pre-tax income. Conversely, in 1999, the effective tax rate increased due tothe effect of a fixed amount of nondeductible goodwill amortization on a decreased level of pre-tax income. 31 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) LIQUIDITY AND CAPITAL RESOURCES NMHG Wholesale has a $350.0 million revolving credit facility (the "Facility") that expires in June 2002, but may be extended annually, for one-year periods, with the consent of the bank group. In addition, the Facility has performance-based pricing which sets interest rates based upon the achievement of certain financial performance targets. The Facility permits NMHG Wholesale to advance funds to NMHG Retail. Advances from NMHG Whole-sale are the primary sources of financing for NMHG Retail. At December 31, 1999, NMHG Wholesale had available $123.5 million of its $350.0 million revolving credit facility. NMHG also has separate credit facilities totaling $48.7 million, of which $25.4 million was available at December 31, 1999, and maintains additional uncommitted lines of credit totaling $40.0 million, of which $20.3 million was available at December 31, 1999. In addition, NMHG Wholesale has entered into various agreements to sell certain accounts receivable on a revolving basis. See also Note Four to the Consolidated Financial Statements for further discussion. NMHG believes that funds available under its credit facilities and operating cash flows are sufficient to finance all of its operating needs and commitments arising during the foreseeable future. NMHG anticipates spending approximately $68.5 million for property, plant and equipment in 2000, compared with capital expenditures of $46.2 million in 1999 and $63.9 million in 1998. Planned expenditures in 2000 include investments in worldwide information systems, manufacturing facilities, existing retail operations and tooling for new products. Capital expenditures in 1999 and 1998 included new plants constructed in Mexico and China, additions to existing buildings and investments in machinery and equipment. In 2000, NMHG also anticipates continuing investments in business acquisitions in amounts which may exceed the 1999 acquisition investment of $62.4 million. The principal sources of financing for these capital expenditures and acquisitions are expected to be internally generated funds and facility borrowings. [BAR GRAPH] NMHG'S CAPITAL EXPENDITURES HAVE OUTPACED DEPRECIATION EXPENSE CAPITAL EXPENDITURES.......... $ 39.4 $ 42.3 $ 25.3 $ 63.9 $ 46.2 DEPRECIATION EXPENSE.......... $ 21.0 $ 22.0 $ 23.0 $ 26.0 $ 41.7 1995 1996 1997 1998 1999 NMHG's capital structure is presented below: December 31 ----------- 1999 1998 ------- ------- Total net tangible assets ............. $ 374.0 $ 300.0 Advances to parent company .............................. 10.0 18.0 Goodwill at cost ...................... 478.7 454.0 ------- ------- Net assets before goodwill amortization ............. 862.7 772.0 Accumulated goodwill amortization ......................... (119.2) (105.9) Total debt ............................ (270.7) (200.2) Minority interest ..................... (4.1) (3.9) ------- ------- Stockholders' equity .................. $ 468.7 $ 462.0 ======= ======= Debt to total capitalization .......... 36% 30% The increase in net tangible assets of $74.0 million is primarily due to acquisitions of retail dealerships, which increased net tangible assets by approximately $42.4 million. The remaining $31.6 million increase in net tangible assets is primarily due to a reduction in accounts payable and other current liabilities of $41.3 million, an increase in inventory of $4.7 million and an increase in other current assets of $10.4 million, partially offset by a decrease in accounts receivable of $25.4 million. Decreased accounts payable and other current liabilities are primarily due to decreased accruals for current taxes payable, payroll and incentive compensation. Inventory increased due to a build up of inventory to fill increased incoming orders. Other current assets increased due to an increase in prepaid expenses, primarily prepaid tax expense. Accounts receivable declined due to a decrease in revenues during the fourth quarter of 1999 as compared with the fourth quarter of 1998. Goodwill and debt have increased primarily due to acquisitions of retail dealerships during 1999. 32 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) NACCO HOUSEWARES GROUP The Housewares segment of the Company includes HB*PS, a leading manufacturer and marketer of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and KCI, a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. Because 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 to retailers and consumers increase significantly for the fall holiday selling season. FINANCIAL REVIEW The results of operations for Housewares were as follows for the year ended December 31: 1999 1998 1997 ------- ------- ------- Revenues ......................... $ 596.7 $ 537.6 $ 495.8 Operating profit ................. $ 41.8 $ 34.6 $ 26.1 Operating profit excluding goodwill amortization .................. $ 44.8 $ 37.6 $ 30.2 Net income ....................... $ 21.2 $ 15.2 $ 10.5 [BAR GRAPH] HOUSEWARES OPERATING PROFIT BEFORE GOODWILL AMORTIZATION $31.2 $31.3 $30.2 $37.6 $44.8 1995 1996 1997 1998 1999 [BAR GRAPH] HB-PS UNIT VOLUME (in millions) 29.4 29.6 33.4 36.6 39.4 1995 1996 1997 1998 1999 1999 COMPARED WITH 1998 The following schedule identifies the components of the changes in revenues, operating profit and net income for 1999 compared with 1998: Operating Net Revenues Profit Income -------- ------ ------ 1998 ............................... $537.6 $ 34.6 $ 15.2 Increase (decrease) in 1999 from: Unit volume and sales mix ........................ 60.7 20.0 13.0 Average sales price ............... (7.1) (7.1) (4.6) Retail sales ...................... 5.5 .8 .6 Manufacturing cost ................ -- (2.1) (1.4) Other operating expense .......................... -- (4.4) (2.9) Other income and expense .......................... -- -- .3 Difference between effective and statutory tax rates .............. -- -- 1.0 ------ ------ ------ 1999 ................................ $596.7 $ 41.8 $ 21.2 ====== ====== ====== Housewares' revenues improved in 1999 as compared with 1998 primarily due to unit volume growth at HB*PS. Unit volume at HB*PS increased 7.7 percent to 39.4 million units sold in 1999 from 36.6 million units sold in 1998 primarily due to increased demand for indoor grills, blenders, slow cookers and irons. Operating profit and net income increased during 1999 due to unit volume growth and a more profitable sales mix, partially offset by a decrease in the average sales price as a result of increased competition and an increase in manufacturing and other operating costs. Housewares' gross profit improved slightly in 1999 to 21.6 percent of revenues, up from 21.5 percent of revenues in 1998. Although the standard production cost of manufacturing declined during 1999 compared with 1998 as a result of increased production in lower-cost Mexican facilities, unfavorable manufacturing variances significantly reduced the benefits of utilizing these facilities in Mexico. Increased manufacturing variances were due to (i) continued start-up inefficiencies at 33 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) HB*PS' Mexican facilities, (ii) the introduction of new product lines in Mexico and (iii) wind-down expenses at HB*PS' North Carolina plants. Manufacturing costs also increased due to increased transportation costs and additional start-up expenses associated with the new consolidated distribution center in Memphis. Increased manufacturing costs were partially offset by a decrease in employee severance of $2.0 million year-over-year and favorable Canadian exchange rates. Housewares' operating profit improved in 1999 to 7.0 percent of revenues up from 6.4 percent of revenues in 1998. Other operating expenses, especially marketing, advertising and engineering expenses, increased to support sales growth. However, administrative costs, as a percent of revenues, decreased, especially at KCI. Retail sales at KCI increased as a result of both increases in the size of an average sales transaction and the number of customer transactions. Increased revenues at KCI contributed to increased operating profit and net income. KCI operated 150 stores at December 31, 1999, compared with 146 stores at December 31, 1998. HB-PS SALES MIX IMPROVED IN 1999 WITH INCREASED SALES OF PRODUCTS IN THE "BETTER" AND "BEST" CATEGORIES [PIE GRAPH] [PIE GRAPH] Good - 46% Good - 52% Better - 29% Better - 28% Best - 25% Best - 20% 1999 1998 1998 COMPARED WITH 1997 The following schedule identifies the components of the changes in revenues, operating profit and net income for 1998 compared with 1997: Operating Net Revenues Profit Income -------- ------ ------ 1997 ................................. $495.8 $ 26.1 $ 10.5 Increase (decrease) in 1998 from: Unit volume and sales mix ......................... 42.9 14.6 9.5 Average sales price ................ (3.7) (3.7) (2.4) Retail sales ....................... 2.6 .5 .2 Manufacturing cost ................. -- .5 .3 Other operating expense ........................... -- (3.4) (2.2) Other income and expense ........................... -- -- (.2) Difference between effective and statutory tax rates ............... -- -- (.5) ------ ------ ------ 1998 .................................. $537.6 $ 34.6 $ 15.2 ====== ====== ====== Housewares' revenues improved in 1998 compared with 1997 primarily due to unit volume growth at HB*PS. Unit volume at HB*PS increased 9.6 percent to 36.6 million units sold in 1998 from 33.4 million units sold in 1997, primarily due to increased demand for indoor grills, blenders, toasters and irons. Operating profit and net income improved due to unit volume growth, improved sales mix to higher-margin products and decreased manufacturing costs, partially offset by continued price decreases due to competition and by increased operating costs. The strengthening of the U.S. dollar against the Canadian dollar resulted in a decrease to operating profit of approximately $2.5 million, primarily due to translating Canadian dollar revenues to a stronger U.S. dollar. This decrease to operating profit was partially mitigated by price increases introduced in the Canadian market that increased revenue and operating profit by approximately $0.3 million. Manufacturing costs declined due to increased production at more cost-efficient Mexican plants and reduced materials costs. These reduced manufacturing expenses were partially offset by cost increases related to transferring activities to manufacturing facilities in Mexico, including a $3.2 million pre-tax restructuring 34 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) charge recognized in 1998. Operating costs increased to support sales growth. In addition, operating costs in 1998 include increased legal fees, advertising costs and provisions for potential bad debts. Revenues and net income from KCI improved slightly due to the addition of three new stores during 1998. OTHER INCOME, EXPENSE AND INCOME TAXES: The components of other income (expense) and the effective tax rate are as follows for the year ended December 31: 1999 1998 1997 ------- ------- ------- Interest expense ................. $ (6.7) $ (7.0) $ (7.3) Other-net ........................ (.4) (.7) (.2) ------- ------- ------- $ (7.1) $ (7.7) $ (7.5) ======= ======= ======= Effective tax rate ............... 38.9% 43.2% 43.7% The decrease in interest expense for 1999 as compared with 1998 and 1997 is due to lower average borrowings outstanding. The decrease in the effective tax rate for 1999 as compared with 1998 and 1997 is primarily due to (i) the utilization of foreign tax credits resulting from the repatriation of foreign earnings previously taxed at a rate in excess of the U.S. statutory tax rate and (ii) the effect of a constant level of nondeductible goodwill amortization on a higher comparable level of pre-tax income. LIQUIDITY AND CAPITAL RESOURCES HB*PS' credit agreement provides for a revolving credit facility that: (i) provides financing up to $160.0 million, (ii) is secured by substantially all of HB*PS' assets, (iii) provides lower interest rates if HB*PS achieves certain interest coverage ratios, (iv) allows for interest rates quoted under a competitive bid option and (v) allows advances up to $10.0 million from HB*PS to KCI. At December 31, 1999, HB*PS had $67.8 million available under this facility, which expires in May 2003. In addition, HB*PS has separate uncommitted facilities that permitted $10.1 million of additional borrowings at December 31, 1999. KCI's cash requirements are financed through advances from HB*PS. Housewares believes that funds available under its credit facilities and operating cash flows are sufficient to finance all of its operating needs and commitments arising during the foreseeable future. Housewares anticipates spending approximately $33.0 million for property, plant and equipment in 2000, compared with capital expenditures of $16.5 million in 1999 and $16.8 million in 1998. In 1999, HB*PS entered into an agreement to develop products that will be sold to Wal*Mart under the GE brand name. Planned expenditures for 2000 include approximately $9.5 million of capital expenditures related to the development of the GE brand products. Remaining planned expenditures for 2000, some of which were planned but delayed in 1999, include tooling for new products and machinery and equipment, which will be used primarily to reduce manufacturing costs and increase efficiency. These expenditures are expected to be funded primarily from internally generated funds and bank borrowings. [Bar Graph] HOUSEWARES' CAPITAL EXPENDITURES VS. DEPRECIATION EXPENSE $ 11.1 $ 16.2 $ 18.3 $ 16.8 $ 16.5 $ 13.1 $ 14.3 $ 15.4 $ 13.7 $ 14.5 1995 1996 1997 1998 1999 Housewares' capital structure is presented below: December 31 ------------------- 1999 1998 ------- ------- Total net tangible assets ............... $ 183.4 $ 153.3 Goodwill at cost ........................ 123.5 123.5 ------- ------- Net assets before goodwill amortization ............... 306.9 276.8 Accumulated goodwill amortization ........................... (33.6) (30.6) Total debt .............................. (109.4) (96.0) ------- ------- Stockholder's equity .................... $ 163.9 $ 150.2 ======= ======= Debt to total capitalization ............ 40% 39% Total net tangible assets increased $30.1 million primarily due to a $28.2 million increase in accounts receivable related to volume growth. Debt has increased to support this increase in working capital. 35 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) NACCO AND OTHER FINANCIAL REVIEW NACCO and Other includes the parent company operations and Bellaire Corporation ("Bellaire"), a non-operating subsidiary of NACCO. Although Bellaire's operations are immaterial, it has significant long-term liabilities related to closed mines, 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 historically have not been material. The results of operations at NACCO and Other were as follows for the year ended December 31: 1999 1998 1997 ------- ------- ------- Revenues .......................... $ .1 $ .2 $ .2 Operating loss .................... $ (9.2) $ (10.7) $ (8.5) Other income (expense), net ................... $ (3.2) $ (.2) $ (.4) Net loss .......................... $ (8.3) $ (8.3) $ (6.4) NACCO and Other's operating loss declined in 1999 as compared with 1998 primarily due to a decrease in incentive compensation expenses. Other expenses increased in 1999 as compared with 1998 due to the write- off of costs mainly for advisors related to the potential acquisition of the forklift business of Nissan Motor Co., Ltd. ("Nissan"). As announced on January 24,2000, NACCO was not able to reach an agreement with Nissan for the purchase of Nissan's forklift operations. LIQUIDITY AND CAPITAL RESOURCES Although NACCO's subsidiaries have entered into substantial borrowing agreements, NACCO has not guaranteed the long-term debt or any borrowings of its subsidiaries. The borrowing agreements at NMHG and Housewares allow for the payment to NACCO of dividends and advances under certain circumstances. There are no restrictions on the transfer of assets from NACoal. Dividends, advances and management fees from its subsidiaries are the primary sources of cash for NACCO. The Company believes that funds available under credit facilities, anticipated funds generated from operations and the utility customers' funding of the project mining subsidiaries are sufficient to finance all of its operating needs and commitments arising during the foreseeable future. NACCO's consolidated capital structure is presented below: December 31 ----------- 1999 1998 -------- -------- Total net tangible assets .......................... $ 593.5 $ 473.2 Goodwill at cost ................................... 602.2 577.5 -------- -------- Net assets before goodwill amortization ........................... 1,195.7 1,050.7 Accumulated goodwill amortization ...................................... (152.8) (136.5) Total debt, excluding current and long-term portion of obligations of project mining subsidiaries ...................................... (395.3) (296.4) Closed mine obligations (Bellaire), including UMWA, net-of-tax ........................ (73.9) (76.6) Minority interest .................................. (11.5) (22.9) -------- -------- Stockholders' equity ............................... $ 562.2 $ 518.3 ======== ======== Debt to total capitalization ....................... 41% 35% RECENTLY ISSUED ACCOUNTING STANDARDS The Company has not yet adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." A discussion of this new standard is included in Note Two to the Consolidated Financial Statements. EFFECTS OF FOREIGN CURRENCY AND INFLATION NMHG and HB*PS operate internationally and enter into transactions denominated in foreign currencies. As a result, the Company is subject to the variability that arises from exchange rate movements. The effects of foreign currency on operating results at NMHG and HB*PS were discussed previously. The Company's use of foreign currency derivative contracts is discussed under the heading, "Quantitative and Qualitative Disclosures about Market Risk." The Company believes that inflation has not materially affected its results of operations in 1999 and 1998 and does not expect inflation to be a significant factor in 2000. 36 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) ENVIRONMENTAL MATTERS The Company's manufacturing operations, like those of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. The Company's NACoal subsidiary is affected by the regulations of agencies under which it operates, particularly the Federal Office of Surface Mining, the United States Environmental Protection Agency and associated state regulatory authorities. In addition, NACoal closely monitors proposed legislation concerning the Clean Air Act Amendments of 1990, reauthorization of the Resource Conservation and Recovery Act, the Clean Water Act, the Endangered Species Act and other regulatory actions. Compliance with these increasingly stringent standards could result in higher expenditures for both capital improvements and operating costs. The Company's policies stress environmental responsibility and compliance with these regulations. Based on current information, management does not expect compliance with these regulations to have a material adverse effect on the Company's financial condition or results of operations. YEAR 2000 The Company completed all phases of its year 2000 ("Y2K") compliance plan prior to December 31, 1999. The Company did not experience any significant malfunctions or errors in its operating or business systems when the date changed from 1999 to 2000. Based on operations since January 1, 2000, the Company does not expect any significant effect to its ongoing business as a result of the Y2K issue. However, it is possible that the full impact of the date change, which was of concern due to computer programs that use two digits instead of four digits to define years, has not been fully recognized. For example, it is possible that Y2K or similar issues such as leap year-related problems may occur with billing payroll or financial closing at month, quarter or year-end. The Company believes that any such problems are likely to be minor and correctable. In addition, the Company could still be negatively affected if Y2K or similar issues adversely affect its customers or suppliers. The Company currently is not aware of any significant Y2K or similar problems that have arisen for its customers and suppliers. Total costs incurred to date to address the Y2K issue have been approximately $8.5 million. The Company does not expect to incur any material additional costs related to this issue. EURO CONVERSION On January 1, 1999, 11 of the 15 countries that are members of the European Union introduced a new currency unit called the "Euro," which will ultimately replace the national currencies of these 11 countries. The conversion rates between the Euro and the participating nations' currencies were fixed irrevocably as of January 1, 1999, and participating national currencies will be removed from circulation between January 1, 2002 and June 30, 2002 and replaced by Euro notes and coinage. During the "transition period" from January 1, 1999 through December 31, 2001, public and private entities as well as individuals may pay for goods and services using either checks, drafts or wire transfers denominated in Euro or the participating country's national currency. Under the regulations governing the transition to a single currency, there is a "no compulsion, no prohibition" rule which states that no one is obligated to use the Euro until the notes and coinage have been introduced on January 1, 2002. In keeping with this rule, as of January 1, 1999 the Company is now also able to (i) receive Euro-denominated payments, (ii) invoice in Euros and (iii) perform appropriate conversion and rounding calculations. Full conversion of all affected country operations to the Euro is expected to be completed by the time national currencies are removed from circulation. The cost of software and business process conversion required to achieve such abilities is not expected to be material. Excluding adverse affects caused by the weakening of the Euro against the Company's functional currencies, the introduction of the Euro, to date, has not had--and the Company does not anticipate that the continued use of the Euro will have--a material affect on the Company's foreign exchange and hedging activities or the Company's use of derivative instruments, or a material adverse effect on operating results or cash flows. However, the ultimate effect of the Euro on competition due to price transparency and foreign currency risk cannot yet be determined and may have an adverse effect, possibly material, on the Company's operations, financial position or cash flows. Conversely, introduction of the Euro may also have positive effects, such as lower foreign currency risk and reduced prices of raw materials resulting from increased competition among suppliers. The Company continues to monitor and assess the potential risks imposed by the Euro. 37 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) OUTLOOK NACOAL: NACoal's customers have forecasted that their overall lignite requirements in 2000 will be slightly above 1999 levels. However, NACoal expects decreased royalty income in 2000, compared with 1999, due to reduced third-party mining activity at its Eastern underground coal reserves. NACoal expects to continue incurring expenses in 2000 for the development of international mining opportunities and for the new Red Hills Mine in Mississippi, in which it owns a 25 percent interest. The Red Hills Mine is expected to begin production in the fourth quarter of 2000. NMHG: NMHG expects the global lift truck industry to remain strong in 2000 at a shipment level in excess of 500,000 units. NMHG expects industry shipments in the Americas market to recede from very strong 1999 levels, while industry shipments in the European and Asia-Pacific lift truck markets are expected to grow moderately. NMHG anticipates continued benefits from cost reduction programs, including Value Improvement, Demand Flow Technology and increased efficiency at its new Mexican manufacturing facility. NMHG also expects to continue expanding its retail distribution network in 2000, principally outside the United States, and to have a primary focus on improving the profitability of its existing wholly owned dealerships. However, NMHG may continue to incur losses related to existing and newly acquired dealerships and the elimination of intercompany profits. HOUSEWARES: HB*PS expects to realize cost reductions from its new manufacturing facilities in Mexico and completion of the wind down of its North Carolina facilities, as well as increased efficiency at its new distribution center in Memphis. HB*PS anticipates incurring some start-up costs in 2000 to develop products that will be sold to Wal*Mart under the General Electric brand name. Continued price competition is also expected. HB*PS expects to introduce additional Hamilton Beach((R))and Proctor-Silex((R)) brand product lines. KCI expects to focus on increasing store profitability, growing its Internet business and testing new store formats. The statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere throughout this Annual Report 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. These forward-looking statements are made subject to certain risks and uncertainties which could cause actual results to differ materially from those presented in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Such risks and uncertainties with respect to each subsidiary's operations includes without limitation: NACOAL: (1) weather conditions and other events that would change the level of customers' fuel requirements, (2) weather or equipment problems that could affect lignite deliveries to customers, (3) costs to pursue international opportunities and (4) delays in the start-up of the Mississippi Lignite Mining Company. NMHG: (1) changes in demand for lift trucks and related service parts on a worldwide basis, (2) changes in sales prices, (3) delays in delivery or increased costs of raw materials or sourced products and labor, (4) delays in manufacturing and delivery schedules, (5) exchange rate fluctuations, changes in foreign import tariffs and monetary policies and other changes in the regulatory climate in the foreign countries in which NMHG operates and/or sells products, (6) product liability or other litigation, warranty claims or other returns of products, (7) ability to acquire dealerships acceptable to NMHG, (8) costs related to the integration of acquisitions and (9) increased competition, foreign currency risk and/or operating costs resulting from the introduction of the Euro. HOUSEWARES: (1) delays or increased costs in the repositioning of operations in Mexico and/or in the completion of restructuring programs, (2) bankruptcy of or loss of major retail customers, (3) changes in the sales price, product mix or levels of consumer purchases of kitchenware and small electric appliances, (4) exchange rate fluctuations, changes in the foreign import tariffs and monetary policies and other changes in the regulatory climate in the foreign countries in which Housewares buys, operates and/or sells products, (5) product liability or other litigation, warranty claims or other returns of products, (6) increased competition, (7) increased costs or delays in the development of the GE brand products to be sold to Wal*Mart and (8) weather conditions that would affect the number of customers visiting KCI stores. 38 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share, Unit and Percentage Data) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK The Company's subsidiaries, NMHG, HB*PS and NACoal, have entered into certain financing arrangements that require interest payments based on floating interest rates. As such, the Company's financial results are subject to changes in the market rate of interest. To reduce the exposure to changes in the market rate of interest, the Company has entered into interest rate swap agreements for a portion of its floating rate financing arrangements. The Company does not enter into interest rate swap agreements for trading purposes. Terms of the interest rate swap agreements require the subsidiaries to receive a variable interest rate and pay a fixed interest rate. See also Note Two and Note Twelve to the Consolidated Financial Statements. For purposes of specific risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in interest rates. Assuming a hypothetical 10 percent decrease in the interest rates as of December 31, 1999 and 1998, the fair market value of interest rate sensitive financial instruments, which primarily represents interest rate swap agreements, would decline by $2.3 million and $1.9 million, respectively, as compared with their fair market value at December 31, 1999 and 1998, respectively. FOREIGN CURRENCY RISK NMHG and HB*PS operate internationally and enter into transactions denominated in foreign currencies. As such, their financial results are subject to the variability that arises from exchange rate movements. NMHG and HB*PS use forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies and not for trading purposes. These contracts mature within one year and require the companies to buy or sell Japanese yen, Australian dollars, Canadian dollars or various European currencies for the functional currency in which the applicable subsidiary operates at rates agreed to at the inception of the contracts. See also Note Two and Note Twelve to the Consolidated Financial Statements. For purposes of specific risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in foreign currency exchange rates. Assuming a hypothetical 10 percent strengthening of the U.S. dollar as compared with other foreign currencies at December 31, 1999 and 1998, the fair market value of foreign currency-sensitive financial instruments, which primarily represents forward foreign currency exchange contracts, would decline by $1.4 million and $3.8 million, respectively, as compared with their fair market value at December 31, 1999 and 1998, respectively. It is important to note that the loss in fair market value indicated in this sensitivity analysis would be somewhat offset by changes in the fair market value of the underlying receivables, payables and net investments in foreign subsidiaries. MARKET FOR NACCO INDUSTRIES, INC. COMMON STOCK AND RELATED SECURITY HOLDERS' MATTERS NACCO Industries, Inc. Class A common stock is traded on the New York Stock Exchange under the ticker symbol NC. Because of transfer restrictions, no trading market has developed, or is expected to develop, for the Company's Class B common stock. The Class B common stock is convertible into Class A common stock on a one-for-one basis. The high and low market prices for the Class A common stock and dividends per share for both classes of common stock for each quarter during the past two years are presented in the table below: 1999 -------------------------------- Sales Price ----------- Cash High Low Dividend ---- --- -------- FIRST QUARTER ................ $ 97.00 $ 70.50 20.50(cent) SECOND QUARTER ............... $ 93.50 $ 66.88 21.50(cent) THIRD QUARTER ................ $ 89.00 $ 65.75 21.50(cent) FOURTH QUARTER ............... $ 73.63 $ 44.50 21.50(cent) 1998 -------------------------------- Sales Price ----------- Cash High Low Dividend ---- --- -------- First quarter ................ $137.81 $ 93.13 19.50(cent) Second quarter ............... $177.00 $121.00 20.50(cent) Third quarter ................ $157.50 $ 95.19 20.50(cent) Fourth quarter ............... $112.81 $ 76.25 20.50(cent) At December 31, 1999, there were approximately 500 Class A common stockholders of record and 300 Class B common stockholders of record. 39 18 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME NACCO Industries, Inc. and Subsidiaries
Year Ended December 31 ----------------------------------- 1999 1998 1997 --------- --------- --------- (In millions, except per share data) Revenues ................................................................... $ 2,602.8 $ 2,536.2 $ 2,246.9 Cost of sales .............................................................. 2,118.1 2,020.7 1,825.9 --------- --------- --------- GROSS PROFIT ............................................................... 484.7 515.5 421.0 Selling, general and administrative expenses ............................... 337.0 301.1 265.2 Amortization of goodwill ................................................... 15.2 14.7 15.8 Restructuring charges ...................................................... 1.2 1.6 8.0 --------- --------- --------- OPERATING PROFIT ........................................................... 131.3 198.1 132.0 Other income (expense) Interest expense ....................................................... (43.3) (34.6) (36.6) Other-net .............................................................. (1.4) 2.5 (6.3) --------- --------- --------- (44.7) (32.1) (42.9) --------- --------- --------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ................................. 86.6 166.0 89.1 Provision for income taxes ................................................. 31.7 60.7 26.4 --------- --------- --------- INCOME BEFORE MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ................................. 54.9 105.3 62.7 Minority interest .......................................................... (.6) (3.0) (.9) --------- --------- --------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ....................... 54.3 102.3 61.8 Cumulative Effect of accounting change (net of $0.6 tax benefit) .......... (1.2) -- -- --------- --------- --------- NET INCOME ................................................................. $ 53.1 $ 102.3 $ 61.8 ========= ========= ========= Other comprehensive income Foreign currency translation adjustment ................................ $ (11.9) $ 3.6 $ (8.5) Minimum pension liability adjustment, net of $2.3 tax in 1999; ($1.4) tax in 1998; $0.4 tax in 1997 .............................. 3.8 (2.4) .6 --------- --------- --------- (8.1) 1.2 (7.9) --------- --------- --------- COMPREHENSIVE INCOME ....................................................... $ 45.0 $ 103.5 $ 53.9 ========= ========= ========= BASIC EARNINGS PER SHARE Income Before Cumulative Effect of Accounting Change ....................... $ 6.67 $ 12.56 $ 7.56 Cumulative effect of accounting change, net-of-tax ......................... (.15) -- -- --------- --------- --------- Net Income ................................................................. $ 6.52 $ 12.56 $ 7.56 ========= ========= ========= DILUTED EARNINGS PER SHARE Income Before Cumulative Effect of Accounting Change ....................... $ 6.66 $ 12.53 $ 7.55 Cumulative effect of accounting change, net-of-tax ......................... (.15) -- -- --------- --------- --------- Net Income ................................................................. $ 6.51 $ 12.53 $ 7.55 ========= ========= =========
See Notes to Consolidated Financial Statements. 40 19 CONSOLIDATED BALANCE SHEETS NACCO Industries, Inc. and Subsidiaries
December 31 ----------- 1999 1998 -------- -------- (In millions) ASSETS CURRENT ASSETS Cash and cash equivalents ............................................................... $ 36.2 $ 34.7 Accounts receivable, net of allowance of $16.7 in 1999 and $15.6 in 1998 ............... 292.2 275.1 Inventories ............................................................................. 390.3 356.2 Prepaid expenses and other .............................................................. 53.5 37.2 -------- -------- 772.2 703.2 PROPERTY, PLANT AND EQUIPMENT, NET .......................................................... 625.4 593.4 DEFERRED CHARGES Goodwill, net ........................................................................... 449.4 441.0 Deferred costs and other ................................................................ 66.7 70.3 Deferred income taxes ................................................................... 29.2 31.9 -------- -------- 545.3 543.2 OTHER ASSETS ................................................................................ 70.1 58.5 -------- -------- TOTAL ASSETS ........................................................................ $2,013.0 $1,898.3 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ........................................................................ 254.4 $ 252.9 Revolving credit agreements ............................................................. 56.6 31.2 Current maturities of long-term debt .................................................... 32.5 28.4 Accrued income taxes .................................................................... 4.4 10.9 Accrued payroll ......................................................................... 47.0 44.7 Accrued warranty obligations ............................................................ 36.0 36.3 Other current liabilities ............................................................... 152.2 144.2 -------- -------- 583.1 548.6 LONG-TERM DEBT - not guaranteed by the parent company ....................................... 326.3 256.4 OBLIGATIONS OF PROJECT MINING SUBSIDIARIES - not guaranteed by the parent company or its NACoal subsidiary ........................... 289.2 313.2 SELF-INSURANCE RESERVES AND OTHER ........................................................... 240.7 38.9 MINORITY INTEREST ........................................................................... 11.5 22.9 STOCKHOLDERS' EQUITY Common stock: Class A, par value $1 per share, 8,156,878 shares outstanding (1998 - 6,468,620 shares outstanding) .......................................... 6.5 6.5 Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,647,428 shares outstanding (1998 - 1,651,615 shares outstanding) ............. 1.6 1.6 Capital in excess of par value .......................................................... 2.7 .2 Retained earnings ....................................................................... 554.4 504.9 Accumulated other comprehensive income: Foreign currency translation adjustment ............................................. (3.0) 8.9 Minimum pension liability adjustment ................................................ -- (3.8) -------- -------- 562.2 518.3 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................... $2,013.0 $1,898.3 ======== ========
See Notes to Consolidated Financial Statements. 41 20 CONSOLIDATED STATEMENTS OF CASH FLOWS NACCO Industries, Inc. and Subsidiaries
Year Ended December 31 ----------------------------- 1999 1998 1997 ------- ------- ------- (In millions) OPERATING ACTIVITIES Net income ................................................................. $ 53.1 $ 102.3 $ 61.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization ............................... 104.0 89.0 88.6 Deferred income taxes .................................................. 3.3 (13.2) (24.3) Minority interest expense .............................................. .6 3.0 .9 Cumulative effect of accounting change ................................. 1.2 -- -- Other non-cash items ................................................... (2.9) 5.6 (.1) Working capital changes, excluding the effect of business acquisitions: Accounts receivable .................................................... (11.3) (11.5) (35.1) Inventories ............................................................ (23.0) (32.7) (1.3) Other current assets ................................................... (12.4) .3 (3.1) Accounts payable and other liabilities ................................. 16.5 1.5 122.6 ------- ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES .......................... 129.1 144.3 210.0 ------- ------- ------- INVESTING ACTIVITIES Expenditures for property, plant and equipment ............................. (75.5) (100.3) (68.4) Proceeds from the sale of property, plant and equipment .................... 1.0 4.8 3.4 Acquisitions of businesses, net of cash acquired ........................... (62.4) (16.6) (12.2) Investments in unconsolidated affiliates ................................... (15.9) (10.5) (1.8) Acquisition of minority interest ........................................... (11.3) -- -- Other-net .................................................................. 2.7 .8 1.0 ------- ------- ------- NET CASH USED FOR INVESTING ACTIVITIES ............................. (161.4) (121.8) (78.0) ------- ------- ------- FINANCING ACTIVITIES Additions to long-term debt and revolving credit agreements ............................................ 81.1 12.1 -- Reductions of long-term debt and revolving credit agreements ............................................ -- -- (123.9) Additions to obligations of project mining subsidiaries .................................................... 31.6 59.8 58.1 Reductions of obligations of project mining subsidiaries .................................................... (58.8) (74.5) (79.1) Financing of other short-term obligations .................................. (17.2) (3.9) (.5) Stock repurchases .......................................................... -- (4.7) (2.8) Cash dividends paid ........................................................ (7.0) (6.6) (6.3) Capital grants ............................................................. 2.6 1.2 .7 Other-net .................................................................. 3.0 4.5 -- ------- ------- ------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES ............... 35.3 (12.1) (153.8) ------- ------- ------- Effect of exchange rate changes on cash.................................... (1.5) .2 (1.9) ------- ------- ------- CASH AND CASH EQUIVALENTS Increase (decrease) for the year ........................................... 1.5 10.6 (23.7) Balance at the beginning of the year ....................................... 34.7 24.1 47.8 ------- ------- ------- BALANCE AT THE END OF THE YEAR ............................................. $ 36.2 $ 34.7 $ 24.1 ======= ======= =======
See Notes to Consolidated Financial Statements. 42 21 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY NACCO Industries, Inc. and Subsidiaries
Year Ended December 31 ---------------------- 1999 1998 1997 ------- ------- ------- (In millions, except per share data) CLASS A COMMON STOCK Beginning balance ........................................ $ 6.5 $ 6.5 $ 6.5 Purchase of treasury shares .............................. -- (.1) (.1) Other .................................................... -- .1 .1 ------- ------- ------- 6.5 6.5 6.5 ------- ------- ------- CLASS B COMMON STOCK ......................................... 1.6 1.6 1.7 ------- ------- ------- CAPITAL IN EXCESS OF PAR VALUE Beginning balance ........................................ .2 .1 .1 Shares issued under stock option and compensation plans ........................ 2.5 1.0 1.0 Purchase of treasury shares .............................. -- (.9) (1.0) ------- ------- ------- 2.7 .2 .1 ------- ------- ------- RETAINED EARNINGS Beginning balance ........................................ 504.9 412.9 359.2 Net income ............................................... 53.1 102.3 61.8 Reconsolidation of Brazilian subsidiary (Note Twenty-Two) 3.4 -- -- Purchase of treasury shares .............................. -- (3.7) (1.8) Cash dividends on Class A and Class B common stock: 1999 $.850 per share ............................. (7.0) -- -- 1998 $.810 per share ............................. -- (6.6) -- 1997 $.773 per share ............................. -- -- (6.3) ------- ------- ------- 554.4 504.9 412.9 ------- ------- ------- ACCUMULATED OTHER COMPREHENSIVE INCOME Beginning balance ........................................ 5.1 3.9 11.8 Foreign currency translation adjustment .................. (11.9) 3.6 (8.5) Minimum pension liability adjustment ..................... 3.8 (2.4) .6 ------- ------- ------- (3.0) 5.1 3.9 ------- ------- ------- TOTAL STOCKHOLDERS' EQUITY ........................... $ 562.2 $ 518.3 $ 425.1 ======= ======= =======
See Notes to Consolidated Financial Statements. 43 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE ONE PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS The Consolidated Financial Statements include the accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its majority owned subsidiaries (NACCO Industries, Inc. and Subsidiaries - the "Company"). Intercompany accounts and transactions are eliminated. The Company has four operating subsidiaries that function in three principal industries: lift trucks, housewares and lignite mining. NMHG Holding Co., through its wholly owned subsidiaries, NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG Retail") (collectively "NMHG") designs, engineers, manufactures, sells and services a full line of lift trucks and replacement parts marketed worldwide under the Hyster(R) and Yale(R) brand names. The sale of replacement parts represents approximately 17 percent, 17 percent and 18 percent of the total NMHG revenues as reported for 1999, 1998 and 1997, respectively. NACCO Housewares Group ("Housewares") consists of Hamilton Beach*Proctor-Silex, Inc. ("HB*PS"), a leading manufacturer and marketer of small electric motor and heat-driven appliances as well as commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. The North American Coal Corporation ("NACoal") mines and markets lignite primarily as fuel for power generation by electric utilities. NOTE TWO ACCOUNTING POLICIES USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities (if any) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less. INVENTORIES: Inventories are stated at the lower of cost or market. Cost is determined under the last-in, first-out (LIFO) method for manufacturing inventories in the United States and for certain retail inventories. The first-in, first-out (FIFO) method is used with respect to all other inventories. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at cost. Depreciation, depletion and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under capital leases, over their estimated useful lives using the straight-line method. Buildings are depreciated using a 40-year life or, at NACoal, over the life of the mines which range from 9 to 43 years. Estimated lives for machinery and equipment range from 3 to 12 years and for land and building improvements from 5 to 40 years. The units-of-production method is used to amortize certain coal-related assets based on estimated recoverable tonnages. GOODWILL: Goodwill represents the excess purchase price paid over the fair value of the net assets acquired. The amortization of goodwill is provided on a straight-line basis over a 40-year period. Accumulated amortization of goodwill was $152.8 million and $136.5 million at December 31, 1999 and 1998, respectively. Management regularly evaluates its accounting for goodwill, considering such factors as historical and future profitability, and believes that the asset is realizable and the amortization period remains appropriate. SELF-INSURANCE RESERVES: The Company is generally self-insured for product liability, environmental liability, medical and workers' compensation claims, certain closed mine liabilities and obligations to the United Mine Workers of America Combined Benefit Fund ("UMWA") arising as a result of the Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"). For product liability, catastrophic coverage is retained for potentially significant individual claims. An estimated provision for claims reported and for claims incurred but not yet reported under the self-insurance programs is recorded and revised annually based on industry trends, historical experience and management judgment. Changes in assumptions for such matters as legal actions, medical costs and actual experience could cause estimates to change in the near term. REVENUE RECOGNITION: Revenues are recognized when customer orders are completed and shipped. Reserves for discounts, returns and product warranties are maintained for anticipated future claims. 44 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) ADVERTISING COSTS: Advertising costs are expensed as incurred and amounted to $45.3 million, $41.5 million and $36.8 million in 1999, 1998 and 1997, respectively. PRODUCT DEVELOPMENT COSTS: Expenses associated with the development of new products and changes to existing products are charged to expense as incurred. These costs amounted to $48.0 million, $44.1 million and $27.9 million in 1999, 1998 and 1997, respectively. FOREIGN CURRENCY: Assets and liabilities of foreign operations are translated into U.S. dollars at the fiscal year-end exchange rate. The related translation adjustments are recorded as a separate component of stockholders' equity. Revenues and expenses are translated using the monthly average exchange rates prevailing during the year. FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: Financial instruments held by the Company include cash and cash equivalents, accounts receivable, accounts payable, revolving credit agreements, long-term debt, interest rate swap agreements and forward foreign currency exchange contracts. The Company does not hold or issue financial instruments or derivative financial instruments for trading purposes. The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. These contracts hedge primarily firm commitments and, to a lesser degree, forecasted transactions relating to cash flows associated with sales and purchases denominated in currencies other than the subsidiaries' functional currency. Generally, gains and losses from changes in the market value of these contracts are recognized in cost of sales and offset the foreign exchange gains and losses on the underlying transactions. The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements which are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company's interest rate swap agreements and its variable rate financings are predominately based upon the three-month LIBOR (London Interbank Offered Rate). Amounts to be paid or received under the interest rate swap agreements are accrued as interest rates change and are recognized over the life of the swap agreement as an adjustment to interest expense. The related amounts payable to, or receivable from, the counterparties are included in other current liabilities. Changes in the market value of the interest rate swap agreements are not recognized in net income. However, in the event that the underlying debt is extinguished, changes in the market value of interest rate swap agreements that could not be designated as hedges of other assets, liabilities or anticipated transactions would be recognized in net income over the remaining life of the contract or upon termination of the contract. NEW ACCOUNTING STANDARDS: As of January 1, 1999, the Company adopted the American Institute of Certified Public Accountants' ("AICPA") Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," and SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-1 requires capitalization on a prospective basis of certain development costs of software to be used internally. The Company does not expect the change to this new accounting standard to have a material impact on its financial position or results of operations in the foreseeable future. SOP 98-5 requires start-up and organization costs to be expensed as incurred and also requires previously deferred start-up costs to be recognized as a cumulative effect adjustment in the statement of income upon adoption. Prior to January 1, 1999, the Company's NACoal subsidiary had deferred certain start-up costs related to the development of lignite mining activities and amortized these costs over the estimated useful lives of the related coal lands. Under the new accounting standard, these costs - primarily training, travel and administrative expenses - are no longer allowed to be deferred, but, rather, must be expensed as incurred. Therefore, the Company has recognized the effect of expensing these previously deferred start-up costs of $1.2 million, net-of- tax, as a cumulative effect of accounting change in the accompanying Statement of Income and Comprehensive Income for the year ended December 31, 1999. On December 3, 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain of the SEC staff's views in applying generally accepted accounting principals to revenue recognition in financial statements. The Company has reviewed its revenue recognition policies and procedures and believes that, as of December 31, 1999, it has complied with the requirements of SAB 101. No significant changes to the Company's revenue recognition policies were necessary to comply with SAB 101. 45 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) ACCOUNTING STANDARDS NOT YET ADOPTED: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires companies to recognize all derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. In June 1999, the FASB delayed the effective date of this Statement for one year to fiscal years beginning after June 15, 2000. The FASB cited the reason for this delay was to address concerns about a company's ability to modify its information systems and educate its managers in time to apply this Statement. The Company will adopt this Statement on January 1, 2001 and is in the process of determining the effect that adoption will have on its financial statements. RECLASSIFICATIONS: Certain amounts in the prior periods' Consolidated Statements of Cash Flows have been reclassified to conform to the current period's presentation. NOTE THREE SPECIAL CHARGES RESTRUCTURING CHARGE: In 1998, HB*PS recorded a pre-tax charge of $3.2 million to recognize severance payments to be made to approximately 450 manufacturing employees in connection with transitioning activities to HB*PS' Mexican facilities. During 1999, an additional $1.2 million pre-tax charge was made for severance payments to be made to an additional 130 manufacturing employees in connection with transitioning additional manufacturing activities to HB*PS' Mexican facilities. Payments of $1.7 million have been made to approximately 350 employees during 1999. These payments reduced the reserve for restructuring to $2.7 million as of December 31, 1999. The timing of payments has extended longer than originally anticipated due to unforeseen delays in the movement of production to Mexico. The Company anticipates that payments relating to these severance programs will be finalized by the end of 2000. In 1997, NMHG recognized a restructuring charge of $8.0 million, primarily related to employee severance and lease termination costs incurred in conjunction with the consolidation of certain engineering, marketing and administrative functions within the NMHG organization. In 1998, NMHG substantially completed its restructuring plan, which resulted in the construction of two new engineering and marketing facilities on Company-owned property, the addition of one new leased administrative building and the closure of one owned and four leased facilities. In addition, the plan resulted in the termination of approximately 220 engineering, marketing and administrative employees, which resulted in a net reduction of approximately 120 employee positions after considering staffing requirements at remaining facilities. The 1997 charge to earnings of $8.0 million represented severance payments made in 1997 of $1.1 million to approximately 50 employees and the recognition of a $6.9 million accrual for additional severance payments and lease termination costs. In 1998, $2.2 million of the severance accrual was reversed due to the higher-than-anticipated number of employees willing to relocate. Final payments related to this restructuring plan were made in early 1999. The changes to HB*PS' restructuring accrual as provided in 1999 and 1998 and to NMHG's restructuring accrual as announced in 1997 are as follows: HB*PS NMHG --------- -------------------- Employee Employee Severance Severance Other Total --------- --------- ----- ----- Balance at December 31, 1997 ... $-- $5.9 $1.0 $6.9 Provision (reversal) 3.2 (2.2) .6 1.6 Payments ........... -- (3.3) (4.9) ---- ---- ---- ---- December 31, 1998 ... $3.2 $ .4 $-- $3.6 Provision .......... 1.2 -- -- 1.2 Payments ........... (1.7) (.4) -- (2.1) ---- ---- ---- ---- BALANCE AT DECEMBER 31, 1999 ... $2.7 $ -- $ -- $2.7 ==== ==== ==== ==== SPECIAL CHARGES: In addition to the restructuring charge and in connection with the restructuring plan, NMHG recognized a charge of $8.3 million in 1997 related to commitments to provide relocation benefits to certain employees. In 1998, NMHG incurred an additional $4.5 million related to increases in temporary labor, moving and training costs associated with the restructuring program. These costs are classified as selling, general and administrative expenses in the accompanying Consolidated Statements of Income and Comprehensive Income. 46 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) In 1999, the Company recognized a charge of $2.9 million, included in other-net in the accompanying Consolidated Statements of Income and Comprehensive Income, for the write-off of costs incurred to evaluate the potential acquisition of the forklift business of Nissan. NACCO was not able to reach an agreement with Nissan for the purchase of Nissan's forklift business. NOTE FOUR ACCOUNTS RECEIVABLE SECURITIZATION NMHG Wholesale has 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 of NMHG Wholesale. 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. NMHG Wholesale and LTF also have 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 $50.0 million. The one-year-term agreements expire in August 2000. The Company intends to extend these agreements or replace them with a similar arrangement. This two-step transaction is accounted for as a sale of receivables. Accordingly, the Company's Consolidated Balance Sheets reflect the portion of receivables transferred to the financial institution as a reduction of accounts receivable, net. In addition to this domestic program, NMHG Wholesale also has agreements with financial institutions outside of the United States which allow for the sale, without recourse, of undivided interests in revolving pools of its foreign trade accounts receivable. The maximum allowable amount of foreign trade receivables to be sold was $70.9 million and $72.8 million at December 31, 1999 and 1998, respectively. NMHG Wholesale continues to service the receivables sold and maintains an allowance for doubtful accounts based upon the expected collectibility of all NMHG Wholesale accounts receivable, including the portion of receivables sold. The servicing liability incurred in connection with these transactions is not material. Gross proceeds of $655.0 million, $763.7 million and $543.5 million were received during 1999, 1998 and 1997, respectively, and the balance of accounts receivable sold at December 31, 1999 and 1998 was $63.6 million and $67.2 million, respectively. The discount and any other transaction gains and losses are included in other-net in the Consolidated Statements of Income and Comprehensive Income. The net effect of the sale of receivables during 1999, 1998 and 1997 was not material to the operating results of the Company. NOTE FIVE INVENTORIES Inventories are summarized as follows: December 31 ----------- 1999 1998 ------- ------- Manufactured inventories: Finished goods and service parts- NMHG .................................. $ 103.5 $ 106.2 Housewares ............................ 46.4 41.5 ------- ------- 149.9 147.7 Raw materials and work in process - NMHG Wholesale ........................ 150.1 136.6 Housewares ............................ 19.5 17.5 ------- ------- 169.6 154.1 ------- ------- Total manufactured inventories .......................... 319.5 301.8 Retail inventories - NMHG Retail ........................... 30.0 19.1 Housewares ............................ 18.9 17.2 ------- ------- Total retail inventories .............. 48.9 36.3 Coal - NACoal ............................ 9.6 9.5 Mining supplies - NACoal ................. 22.4 19.4 ------- ------- Total inventories at FIFO ............. 400.4 367.0 LIFO reserve - NMHG .................................. (13.2) (12.6) Housewares ............................ 3.1 1.8 ------- ------- (10.1) (10.8) ------- ------- $ 390.3 $ 356.2 ======= ======= The cost of certain manufactured and retail inventories has been determined using the LIFO method. At December 31, 1999 and 1998, 66 percent and 58 percent, respectively, of total inventories were determined using the LIFO method. 47 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE SIX PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment includes the following: December 31 ----------- 1999 1998 -------- -------- Coal lands and real estate: NMHG ...................................... $ 15.7 $ 10.0 Housewares ................................ 1.9 2.5 NACoal .................................... 15.9 15.4 Project mining subsidiaries (Note Nine) ............................. 81.0 81.7 NACCO and Other ........................... .1 .1 -------- -------- 114.6 109.7 -------- -------- Plant and equipment: NMHG ...................................... 446.2 381.2 Housewares ................................ 169.2 157.8 NACoal .................................... 31.7 30.3 Project mining subsidiaries (Note Nine) ............................. 472.5 456.4 NACCO and Other ........................... 4.6 4.6 -------- -------- 1,124.2 1,030.3 -------- -------- Property, plant and equipment, at cost .......................... 1,238.8 1,140.0 Less allowances for depreciation, depletion and amortization ................................ 613.4 546.6 -------- -------- $ 625.4 $ 593.4 ======== ======== Total depreciation, depletion and amortization expense on property, plant and equipment was $88.5 million, $74.0 million and $70.9 million during 1999, 1998 and 1997, respectively. Proven and probable coal reserves approximated 1.9 billion and 2.0 billion tons at December 31, 1999 and 1998, respectively. NOTE SEVEN REVOLVING CREDIT AGREEMENTS Financing arrangements are obtained and maintained at the subsidiary level. NACCO has not guaranteed the long-term debt or any borrowings of its subsidiaries. The following table summarizes the Company's available and outstanding borrowings. December 31 ----------- 1999 1998 ------- ------- Available borrowings, net of limitations: NMHG ........................................ $ 396.2 $ 411.4 Housewares .................................. 187.0 186.6 NACoal ...................................... 50.0 47.5 ------- ------- $ 633.2 $ 645.5 ======= ======= Current portion of borrowings outstanding: NMHG ........................................ $ 12.3 $ 5.5 Housewares .................................. 29.1 25.5 NACoal ...................................... 15.2 .2 ------- ------- $ 56.6 $ 31.2 ======= ======= Unused availability:(*) NMHG ........................................ $ 169.2 $ 231.3 Housewares .................................. 77.9 91.1 NACoal ...................................... 34.8 47.3 ------- ------- $ 281.9 $ 369.7 ======= ======= Weighted average stated interest rate: NMHG ........................................ 6.4% 5.7% Housewares .................................. 6.3% 5.7% NACoal ...................................... 6.9% 6.5% Weighted average effective interest rate (including interest swap agreements): NMHG ........................................ 6.8% 6.8% Housewares .................................. 6.3% 6.1% NACoal ...................................... 6.9% 6.5% * Unused availability is determined using the available borrowings, net of limitations, reduced by the current portion and long-term portion (see Note Eight) of revolving credit agreements outstanding. 48 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NMHG: NMHG Wholesale's credit agreement provides for an unsecured revolving credit facility (the "Facility") that permits advances up to $350.0 million. However, the portion of domestic receivables sold reduces this availability. (See Note Four for a discussion of the sale of domestic accounts receivable.) The June 2002 expiration date of the Facility may be extended annually for one additional year with the consent of the bank group. NMHG Wholesale does not anticipate repayment of the outstanding balance in the subsequent fiscal year. As such, the outstanding balance of this credit facility has been classified as long-term debt. In addition, the Facility has performance-based pricing which sets interest rates based upon the achievement of certain financial performance targets. The Facility currently provides for, at NMHG Wholesale's option, Euro-Dollar Loans which bear interest at LIBOR plus 0.2 percent and Money Market Loans which bear interest at Auction Rates (as defined in the agreement) and requires a 0.1 percent fee on the available borrowings. The Facility permits NMHG Wholesale to advance funds to NMHG Retail. Advances from NMHG Wholesale are the primary sources of financing for NMHG Retail. NMHG also has separate facilities totaling $48.7 million and $50.1 million at December 31, 1999 and 1998, respectively. Outstanding letters of credit reduce amounts available under these facilities. At December 31, 1999 and 1998, unused availability, net of limitations, under these facilities was $25.4 million and $38.6 million, respectively. NMHG also maintains various uncommitted lines of credit, which permitted funding up to $40.0 million and $55.0 million at December 31, 1999 and 1998. Under these facilities, unused availability was $20.3 million and $35.4 million at December 31, 1999 and 1998, respectively. HOUSEWARES: HB*PS' credit agreement provides for a revolving credit facility ("HB*PS Facility") that permits advances up to $160.0 million and is secured by substantially all of the assets of HB*PS. A portion of the outstanding balance is classified as long-term debt because it is not expected to be repaid during the subsequent fiscal year. The HB*PS Facility, which expires in May 2003, provides reduced interest rates if HB*PS achieves a certain interest coverage ratio and allows interest rates quoted under a competitive bid option. The HB*PS Facility currently provides for interest at LIBOR plus 0.3 percent and requires a 0.2 percent facility fee on the available borrowings. In 1998, the HB*PS Facility was amended to allow advances of up to $10.0 million from HB*PS to KCI. As a result of this amendment, KCI's cash requirements are financed through advances from HB*PS. HB*PS also has separate uncommitted facilities, which may provide funding up to $30.0 million. Outstanding letters of credit reduce amounts available under these facilities. At December 31, 1999 and 1998, availability, net of limitations, under these facilities was $10.1 million and $27.5 million, respectively. NACOAL: NACoal has in place a revolving credit facility ("NACoal Facility") that permits advances up to $50.0 million and requires a 0.2 percent commitment and facility fee. The September 2002 expiration date of the NACoal Facility may be extended annually for one additional year with the consent of the bank group. Borrowings bear interest at LIBOR plus 0.4 percent and availability is limited by the amount of borrowings from NACCO, if any. NOTE EIGHT LONG-TERM DEBT Subsidiary long-term debt, less current maturities, is as follows: December 31 ----------- 1999 1998 ------- ------- NMHG: Long-term portion of revolving credit agreements .................. $ 214.7 $ 174.6 Capital lease obligations and other .................................... 31.3 11.4 ------- ------- 246.0 186.0 HOUSEWARES: Long-term portion of revolving credit agreement ................... 80.0 70.0 Capital lease obligations and other .................................... .3 .4 ------- ------- 80.3 70.4 ------- ------- $ 326.3 $ 256.4 ======= ======= As noted above, the NMHG Wholesale credit agreement expires in 2002, if renewal options are not exercised, and the Housewares facility expires in 2003. Interest paid on revolving credit agreements and long-term debt was $26.4 million, $21.5 million and $24.9 million during 1999, 1998 and 1997, respectively. 49 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) The credit agreements for NMHG Wholesale, HB*PS and NACoal contain certain covenants and restrictions. These covenants require, among other things, some or all of the following: maintenance of certain minimum amounts of net worth and certain specified ratios of working capital, debt to capitalization, interest coverage and fixed charge coverage. These ratios are calculated at the subsidiary level. Restrictions may also include limits on capital expenditures and dividends. At December 31, 1999, the subsidiaries were in compliance with the covenants in their credit agreements. NOTE NINE OBLIGATIONS OF PROJECT MINING SUBSIDIARIES Three of NACoal's subsidiaries (the "project mining subsidiaries") operate lignite mines under long-term contracts with various utility customers to sell lignite at a price based on actual cost plus an agreed pre-tax profit per ton. The utility customers have arranged and guaranteed the financing for the development and operation of these subsidiary mines. The obligations of these project mining subsidiaries included in the Company's Consolidated Balance Sheets do not affect the short- or long-term liquidity of the Company and are without recourse to NACCO and its NACoal subsidiary. Obligations of project mining subsidiaries, less current maturities, consist of the following: December 31 ----------- 1999 1998 --------- --------- Capitalized lease obligations ................ $ 109.8 $ 120.2 Advances from customers ...................... 145.1 158.5 Promissory notes with interest rates ranging from 5.3% to 8.7% in 1999 and 5.5% to 8.7% in 1998 ............................... 34.3 34.5 --------- --------- $ 289.2 $ 313.2 ========= ========= Advances from customers are used to develop, operate and provide for the ongoing working capital needs of certain project mining subsidiaries. The customers have established a repayment schedule for only a portion, or $97.4 million, of the total advances. In addition, portions of the advances are non-interest- bearing. The annual maturities of advances from customers and promissory notes are as follows: $19.3 million in 2000, $15.5 million in 2001, $15.0 million in 2002, $10.2 million in 2003, $7.9 million in 2004 and $73.3 million thereafter. The current portion of advances from customers is included in other current liabilities in the accompanying Consolidated Balance Sheets. Interest paid was $17.7 million, $13.0 million and $12.8 million during 1999, 1998 and 1997, respectively. The cost of coal, which is passed through to the utility customers, includes interest expense. The project mining subsidiaries' capital lease obligations for mining equipment have the following future minimum lease payments at December 31, 1999: 2000 ...................................... $ 22.8 2001 ...................................... 22.4 2002 ...................................... 20.7 2003 ...................................... 18.8 2004 ...................................... 17.2 Subsequent to 2004 ........................ 72.6 ------ Total minimum lease payments ............... 174.5 Amounts representing interest .............. (50.8) ------ Present value of net minimum lease payments ............................ 123.7 Current maturities ......................... (13.9) ------ $109.8 ====== Interest expense and amortization in excess of annual lease payments are deferred and recognized in years when annual lease payments exceed interest expense and amortization. Project mining assets recorded under capital leases are included in property, plant and equipment and consist of the following: December 31 ----------- 1999 1998 ------- ------- Plant and equipment ........................ $ 201.2 $ 202.1 Less accumulated amortization .............................. 114.9 106.4 ------- ------- $ 86.3 $ 95.7 ======= ======= During 1999, 1998 and 1997, the project mining subsidiaries incurred capital lease obligations of $3.8 million, $4.9 million and $6.4 million, respectively, in connection with lease agreements to acquire plant and equipment. The above obligations are secured by substantially all of the owned assets of the respective project mining subsidiary and the assignment of all rights under its coal sales agreement. 50 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE TEN LEASE COMMITMENTS The Company leases certain office, manufacturing and warehouse facilities, retail stores and machinery and equipment under noncancelable operating leases which expire at various dates through 2009. Future minimum operating lease payments, excluding project mining subsidiaries, at December 31, 1999, are: $37.0 million in 2000, $32.2 million in 2001, $27.3 million in 2002, $22.9 million in 2003, $18.0 million in 2004 and $32.7 million thereafter. Rental expense for all operating leases, excluding project mining subsidiaries, amounted to $32.6 million, $29.4 million and $25.6 million during 1999, 1998 and 1997, respectively. NOTE ELEVEN SELF-INSURANCE RESERVES AND OTHER Self-insurance Reserves and Other consists of the following: December 31 ----------- 1999 1998 ------- ------- Undiscounted UMWA obligation ........................... $ 83.4 $ 86.1 Present value of other closed mine obligations .......................... 16.4 17.3 Other self-insurance reserves .............. 140.9 135.5 ------- ------- $ 240.7 $ 238.9 ======= ======= The UMWA obligation and the other closed mine obligations relate to Bellaire Corporation's ("Bellaire,"a wholly owned non-operating subsidiary of NACCO) former eastern U.S. underground mining operations and the Indian Head Mine, which ceased operations in 1992. The obligation to UMWA resulted from the Coal Act, which requires Bellaire to incur additional costs for the medical expenses of certain United Mine Worker retirees. Annual cash payments of up to $3.0 million after tax are expected relating to this obligation and could continue for as long as 40 to 50 years. The Company has recorded this obligation on an undiscounted basis. The other closed mine obligations include reserves for land reclamation and site treatment at certain closed eastern underground and western surface mines, as well as reserves for workers' compensation and black lung benefit costs. Other self-insurance reserves include product liability reserves, employee retirement obligations and other miscellaneous reserves. NOTE TWELVE FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements and long-term debt were determined using current rates offered for similar obligations and approximated carrying values at December 31, 1999 and 1998. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable and derivatives. Concentration of credit risk on accounts receivable is mitigated by the large number of customers comprising the Company's customer base and their dispersion across many different industries and geographies. To further reduce credit risk associated with accounts receivable, the Company performs periodic credit evaluations of its customers, but does not generally require advance payments or collateral. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one institution. DERIVATIVE FINANCIAL INSTRUMENTS FOREIGN CURRENCY DERIVATIVES: NMHG and HB*PS held forward foreign currency exchange contracts in the amounts of $91.1 million and $11.1 million, respectively, at December 31, 1999, primarily denominated in Euros, British pounds sterling, Japanese yen and Canadian dollars. At December 31, 1998, NMHG and HB*PS held forward foreign currency exchange contracts in the amounts of $72.4 million and $1.9 million, respectively, primarily denominated in Japanese yen, French francs, Spanish pesetas and Canadian dollars. The amount of deferred loss at December 31, 1999 and 1998 was not material. The fair market value of these contracts was estimated based on quoted market sources and approximated a net receivable of $0.3 million and $4.7 million at December 31, 1999 and 1998, respectively. 51 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) INTEREST RATE DERIVATIVES: The following table summarizes the notional amounts, related rates (including applicable margins) and remaining terms on interest rate swap agreements active at December 31: Notional Average Amount Fixed Rate Remaining -------------- ------------ Term at 1999 1998 1999 1998 Dec. 31, 1999 ---- ---- ---- ---- ------------- NMHG. . . . . . $ 190.0 $160.0 6.9% 7.1% Various, extending to January 2004 Housewares. . $ 62.5 $ 80.0 6.5% 6.2% Various, extending to February 2002 NACoal. . . . . $ 33.0 $ 38.1 6.2% 6.2% Various, extending to June 2008 Interest rate swap agreements held by NMHG have terms that vary from one-year to seven-year periods from inception. In addition to the interest rate swap agreements reflected in the table, at December 31, 1999, NMHG holds certain contracts that begin in January 2000 and extend to January 2003. These contracts increase the notional amount outstanding to $215.0 million in 2000. Terms of Housewares' interest rate swap agreements vary from one-year to three-year periods. In addition to the interest rate swap agreements reflected in the table, at December 31, 1999, Housewares holds certain contracts that begin in March 2000 and extend to March 2003. These contracts increase the notional amount outstanding to $80.0 million in 2000. At NACoal, the interest rate swap agreements hedge promissory notes held by the project mining subsidiaries (see Note Nine). Maturities of the NACoal interest rate swap agreements correspond with the maturities of the hedged obligation. The related obligation is included in obligations of project mining subsidiaries in the Consolidated Balance Sheets. The net interest expense paid or received is included in the cost of coal and passed through to the utility customers. The fair market value of all interest rate swap agreements, which was obtained from broker quotes, was a net receivable of $1.3 million at December 31, 1999 and a net payable of $7.5 million at December 31, 1998. NOTE THIRTEEN CONTINGENCIES Various legal proceedings and claims have been or may be asserted against NACCO and certain subsidiaries relating to the conduct of their businesses, including product liability and environmental claims. These proceedings are incidental to the ordinary course of business of the Company. Management believes that it has meritorious defenses and will vigorously defend itself in these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated. Although the ultimate disposition of these proceedings is not presently determinable, management believes, after consultation with its legal counsel, that the likelihood is remote that material costs will be incurred in excess of accruals already recognized. NMHG is subject to recourse or repurchase obligations under various financing arrangements for certain independently owned retail dealerships. Also, certain dealer loans are guaranteed by NMHG. When NMHG is the guarantor of the principal amount financed, a security interest is usually maintained in certain assets of parties for whom NMHG is guaranteeing debt. Total amounts subject to recourse or repurchase obligations at December 31, 1999 and 1998 were $157.3 million and $196.0 million, respectively. Losses anticipated under the terms of the recourse or repurchase obligations are not significant and have been reserved for in the accompanying Consolidated Financial Statements. 52 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE FOURTEEN COMMON STOCK The Class A common stock has one vote per share and the Class B common stock has 10 votes per share. The total number of authorized shares of Class A common stock and Class B common stock at December 31, 1999 was 25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A common stock totaling 1,626,964 and 1,663,607 at December 31, 1999 and 1998, respectively, have been deducted from shares issued. STOCK OPTIONS: The 1975 and 1981 stock option plans, as amended, provide for the granting to officers and other key employees of options to purchase Class A common stock and Class B common stock of the Company at a price not less than the market value of such stock at the date of grant. Options become exercisable over a four-year period and expire 10 years from the date of the grant. As of December 31, 1999 all options that were granted under stock option plans have been exercised or cancelled. No options remain outstanding. At December 31, 1999, 1998 and 1997, there were 80,701 shares of Class A common stock and 80,100 shares of Class B common stock available for grant. However, no options were granted during 1999, 1998 and 1997. In addition, the Company does not presently intend to issue additional stock options. In 1999, options for 25,000 shares of Class A common stock were exercised at an option price of $35.56. In 1998 and 1997, options for 1,800 and 4,000 shares, respectively, of Class A common stocks were exercised at an option price of $32.00. At December 31, 1997, there were options outstanding relating to 1,800 shares of Class A common stock with an option price of $32.00 that were granted on January 12, 1989. At December 31, 1999 and 1998, there were no options outstanding relating to this grant date. Also, at December 31, 1998 and 1997, there were options outstanding related to 25,000 shares of Class A common stock at an option price of $35.56 granted on March 1, 1989. At December 31, 1999, there were no options outstanding relating to this grant date. The Company applies AICPA Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for stock options. Because there have been no options granted subsequent to 1995, no additional pro forma disclosures are required as provided in SFAS No. 123, "Accounting for Stock-Based Compensation." NOTE FIFTEEN EARNINGS PER SHARE For purposes of calculating the basic and diluted earnings per share, no adjustments have been made to the reported amounts of net income. The share amounts used for the year ended December 31 are as follows:
1999 1998 1997 -------- -------- -------- Basic common shares (weighted average) ............... 8.150 8.147 8.171 Dilutive stock options ............. .004 .019 .014 -------- -------- -------- Diluted common shares ............................ 8.154 8.166 8.185 ======== ======== ========
NOTE SIXTEEN INCOME TAXES The components of income before income taxes and provision for income taxes for the year ended December 31 are as follows: 1999 1998 1997 ------- ------- ------- INCOME (LOSS) BEFORE INCOME TAXES Domestic .......................... $ 91.5 $ 137.9 $ 74.6 Foreign ........................... (4.9) 28.1 14.5 ------- ------- ------- $ 86.6 $ 166.0 $ 89.1 ======= ======= ======= PROVISION FOR INCOME TAXES Current tax expense: Federal .......................... $ 27.7 $ 53.1 $ 38.5 State ............................ 5.3 9.7 7.4 Foreign .......................... 2.7 9.2 3.9 ------- ------- ------- Total current ................... 35.7 72.0 49.8 ------- ------- ------- Deferred tax benefit: Federal .......................... (.3) (10.0) (24.3) State ............................ (.5) (1.3) (2.6) Foreign .......................... (4.4) (.8) (2.4) ------- ------- ------- Total deferred .................. (5.2) (12.1) (29.3) ------- ------- ------- Increase in valuation allowance ......................... 1.2 .8 5.9 ------- ------- ------- $ 31.7 $ 60.7 $ 26.4 ======= ======= ======= Domestic income before income taxes has been reduced by substantially all interest expense and the amortization of goodwill. 53 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) The Company made income tax payments of $44.2 million, $74.6 million and $46.4 million during 1999, 1998 and 1997, respectively. During the same period, income tax refunds totaled $1.4 million, $0.8 million and $2.1 million, respectively. A reconciliation of the federal statutory and effective income tax for the year ended December 31 follows: 1999 1998 1997 ------- ------- ------- Income before taxes ................. $ 86.6 $ 166.0 $ 89.1 ======= ======= ======= Statutory taxes at 35.0% .......................... $ 30.3 $ 58.1 $ 31.2 Amortization of goodwill .......................... 5.2 4.9 4.9 State income taxes ................. 3.3 5.7 3.4 Valuation allowance ................ 1.2 .8 5.9 Unremitted foreign earnings .......................... -- -- (15.3) Percentage depletion ......................... (3.6) (3.7) (1.6) Foreign statutory rate differences .................. (1.4) (1.6) (2.2) Export benefits .................... (1.3) (1.4) (.8) Earnings reported net of taxes ...................... (.6) (1.2) (.4) Other-net .......................... (1.4) (.9) 1.3 ------- ------- ------- Provision for income taxes .............................. $ 31.7 $ 60.7 $ 26.4 ======= ======= ======= Effective rate ...................... 36.6% 36.6% 29.6% ======= ======= ======= The Company does not provide for deferred taxes on certain unremitted foreign earnings. In 1997, management determined, and continues to conclude, that the earnings of NMHG's foreign subsidiaries have been and will be indefinitely reinvested in the Company's foreign operations and, therefore, a reserve for unremitted foreign earnings is no longer required. As a result, an income tax benefit of $15.3 million was recognized in 1997 relating to the reversal of previously provided deferred taxes on NMHG's unremitted foreign earnings. As of December 31, 1999, the unremitted earnings of the Company's foreign subsidiaries are $165.5 million. It is impracticable to determine the amount of unrecognized deferred taxes with respect to these earnings; however, foreign tax credits would be available to reduce U.S. income taxes in the event of a distribution. A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows: December 31 ----------- 1999 1998 ------- ------- DEFERRED TAX ASSETS Accrued expenses and reserves ............................................ $ 68.4 $ 66.9 Reserve for UMWA ..................................... 30.5 31.7 Employee benefits .................................... 23.6 25.1 Net operating loss carryforwards ....................................... 9.1 7.0 ------- ------- Total deferred tax assets .......................... 131.6 130.7 Less: Valuation allowance .......................... (7.9) (6.7) ------- ------- 123.7 124.0 ------- ------- DEFERRED TAX LIABILITIES Depreciation and depletion ........................... 48.8 46.3 Inventories .......................................... 14.8 16.3 Other ................................................ 12.7 12.3 ------- ------- Total deferred tax liabilities ..................... 76.3 74.9 ------- ------- Net deferred tax asset ........................... $ 47.4 $ 49.1 ======= ======= The Company periodically reviews the need for a valuation allowance against certain deferred tax assets and recognizes these assets to the extent that realization is more likely than not. Based on a review of earnings history and trends, forecasted earnings and expiration of carryforwards, the Company provided a valuation allowance of $5.9 million in 1997, primarily against foreign net operating loss carryforwards for which utilization is uncertain. In 1999 and 1998, this valuation allowance was increased to $7.9 million and $6.7 million, respectively. At December 31, 1999, the Company had $1.6 million of net operating loss carryforwards that expire, if unused, in years 2000 through 2004 and $7.5 million that are not subject to expiration. The tax returns of the Company and certain of its subsidiaries are being examined by various taxing authorities. The Company has not been informed of any material assessment resulting from these examinations and will vigorously contest any material assessment. Management believes that any potential adjustment would not materially affect the Company's financial condition or results of operations. 54 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE SEVENTEEN RETIREMENT BENEFIT PLANS DEFINED BENEFIT PLANS: The Company maintains various defined benefit pension plans covering most of its employees. These plans provide benefits based on years of service and average compensation during certain periods. The Company's policy is to make contributions to fund these plans within the range allowed by the applicable regulations. Plan assets consist primarily of publicly traded stocks, investment contracts and government and corporate bonds. As of December 31, 1996, pension benefits were frozen for employees covered under NMHG's and HB*PS' United States plans, except for those NMHG employees participating in collective bargaining agreements. As a result, in the United States only NACoal employees and certain NMHG employees covered under collective bargaining agreements will earn retirement benefits under defined benefit pension plans. Other employees of the Company, including NMHG and HB*PS employees whose pension benefits were frozen as of December 31, 1996, will receive retirement benefits under defined contribution retirement plans. Set forth below is a detail of the net periodic pension expense and the assumptions used in accounting for the United States and the United Kingdom defined benefit plans for the years ended December 31. Assumptions used in accounting for the United Kingdom plans changed significantly in 1998 as compared with 1997 primarily due to changes in the economic climate in the United Kingdom.
1999 1998 1997 -------- -------- -------- UNITED STATES PLANS Service cost ................................ $ 3.3 $ 5.5 $ 3.5 Interest cost ............................... 10.1 9.7 9.3 Expected return on plan assets .............. (12.3) (10.7) (9.1) Amortization of transition asset ............ (.4) (.4) (.4) Amortization of prior service cost .......... .4 .4 .3 Recognized actuarial gain ................... (.2) (.2) -- -------- -------- -------- Net periodic pension expense .............. $ .9 $ 4.3 $ 3.6 ======== ======== ======== ASSUMPTIONS: Weighted average discount rates ........... 7.75% 7.00% 7.50% Rate of increase in compensation levels ... 4.25% 4.00% 4.50% Expected long-term rate of return on assets 9.00% 9.00% 9.00% UNITED KINGDOM PLAN Service cost ................................ $ 2.4 $ 2.2 $ 2.1 Interest cost ............................... 3.1 2.8 2.7 Expected return on plan assets .............. (3.7) (4.5) (3.8) Amortization of transition asset ............ (.1) (.1) (.1) Amortization of prior service cost .......... .1 .1 .1 Recognized actuarial (gain) loss ............ .4 (1.1) (.8) -------- -------- -------- Net periodic pension (income) expense ..... $ 2.2 $ (.6) $ .2 ======== ======== ======== ASSUMPTIONS: Weighted average discount rates ........... 6.25% 5.75% 8.00% Rate of increase in compensation levels ... 3.50% 3.50% 5.00% Expected long-term rate of return on assets 7.50% 7.50% 9.00%
55 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) The following sets forth the changes in the benefit obligation and the plan assets during the year and reconciles the funded status of the defined benefit plans with the amounts recognized in the Consolidated Balance Sheets at December 31:
1999 1998 ------------------ ---------------- UNITED UNITED United United STATES KINGDOM States Kingdom PLANS PLAN Plans Plan ----- ---- ----- ---- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year ....................... $148.0 $ 56.7 $127.3 $ 35.3 Service cost .................................................. 3.3 2.4 5.5 2.2 Interest cost ................................................. 10.1 3.1 9.7 2.8 Actuarial (gain) loss ......................................... (18.3) (7.9) 12.0 17.6 Benefits paid ................................................. (8.5) (1.0) (8.0) (1.4) Plan amendments ............................................... -- -- 1.5 -- Foreign currency exchange rate changes ........................ -- (1.9) -- .2 ------ ------ ------ ------ Benefit obligation at end of year ............................ $134.6 $ 51.4 $148.0 $ 56.7 ------ ------ ------ ------ CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year ................ $135.7 $ 50.5 $138.4 $ 49.5 Actual return on plan assets .................................. 23.3 9.0 4.7 (.1) Employer contributions ........................................ 1.4 2.7 .7 1.5 Employee contributions ........................................ -- -- -- .8 Benefits paid ................................................. (8.5) (1.0) (8.0) (1.4) Foreign currency exchange rate changes ........................ -- (1.7) (.1) .2 ------ ------ ------ ------ Fair value of plan assets at end of year ..................... $151.9 $ 59.5 $135.7 $ 50.5 ------ ------ ------ ------ NET AMOUNT RECOGNIZED Plan assets in excess of (less than) obligation ............... $ 17.3 $ 8.1 $(12.3) $ (6.2) Unrecognized prior service cost ............................... 3.0 .9 3.4 1.1 Unrecognized actuarial (gain) loss ............................ (38.0) 1.6 (9.1) 16.0 Unrecognized net transition asset ............................. (.5) (.3) (1.0) (.5) Contributions in fourth quarter ............................... -- .4 .3 .4 ------ ------ ------ ------ Net amount recognized ........................................ $(18.2) $ 10.7 $(18.7) $ 10.8 ====== ====== ====== ====== AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSIST OF: Prepaid benefit cost ........................................... $ 7.6 $ 10.7 $ -- $ 10.8 Accrued benefit liability ...................................... (25.8) -- (28.0) -- Intangible asset ............................................... -- -- 2.9 -- Accumulated other comprehensive income ......................... -- -- 6.4 -- ------ ------ ------ ------ Net amount recognized ........................................ $(18.2) $ 10.7 $(18.7) $ 10.8 ====== ====== ====== ======
DEFINED CONTRIBUTION PLANS: NACCO and its subsidiaries have defined contribution (401(k)) plans for substantially all employees. For NACCO and those subsidiaries, the applicable company matches employee contributions based on plan provisions. In addition, NACCO and certain other subsidiaries have defined contribution retirement plans whereby the applicable company's contribution to participants is determined annually based on a formula which includes the effect of actual compared to targeted operating results and the age and compensation of the participants. Total costs, including Company contributions, for these plans were $13.7 million, $20.7 million and $16.3 million in 1999, 1998 and 1997, respectively. 56 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE EIGHTEEN BUSINESS SEGMENTS Financial information for each of NACCO's reportable segments, as defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," is presented in the following table. Because of the Company's continued acquisitions of Hyster and Yale retail dealerships during 1998 and 1999, the operating results of the retail segment of NMHG has met the materiality thresholds for disclosure, as provided in SFAS No. 131. Therefore, separate financial information has been provided for NMHG Wholesale and NMHG Retail. NMHG Wholesale includes the manufacture and sale of lift trucks and related service parts, primarily to independent and wholly owned Hyster and Yale retail dealerships. NMHG Retail includes the sale and service of Hyster and Yale lift trucks and related service parts by wholly owned retail dealerships. Segment data for 1998 has been restated to reflect the addition of the NMHG Retail segment. In 1997, the activity of retail dealerships was accounted for using the equity method. Operating results in 1997 were insignificant and have been included in other-net, income (expense). See Note One for a discussion of the Company's other operating segments and product lines. NACCO's non-operating segment, NACCO and Other, includes the accounts of the parent company and Bellaire. The accounting policies of the segments are the same as those described in Note Two - Accounting Policies. NMHG Wholesale derives a portion of its revenues from transactions with NMHG Retail. The amount of these revenues, which are derived based on similar third party transactions, are indicated in the following table on the line "NMHG Eliminations" in the revenue section. No other intersegment sales transactions occur. Other intersegment transactions are recognized based on similar third party transactions; that is, at current market prices.
1999 1998 1997 -------- -------- -------- REVENUES FROM EXTERNAL CUSTOMERS NMHG Wholesale ................................ $1,585.8 $1,681.7 $1,488.0 NMHG Retail ................................... 228.1 59.6 -- NMHG Eliminations ............................. (85.6) (28.3) -- -------- -------- -------- NMHG Consolidated ............................. 1,728.3 1,713.0 1,488.0 Housewares .................................... 596.7 537.6 495.8 NACoal ........................................ 277.7 285.4 262.9 NACCO and Other ............................... .1 .2 .2 -------- -------- -------- $2,602.8 $2,536.2 $2,246.9 ======== ======== ======== GROSS PROFIT NMHG Wholesale ................................ $ 255.7 $ 330.9 $ 264.1 NMHG Retail ................................... 49.3 15.2 -- NMHG Eliminations ............................. (1.5) (.4) -- -------- -------- -------- NMHG Consolidated ............................. 303.5 345.7 264.1 Housewares .................................... 128.7 115.6 102.8 NACoal ........................................ 52.7 54.4 54.2 NACCO and Other ............................... (.2) (.2) (.1) -------- -------- -------- $ 484.7 $ 515.5 $ 421.0 ======== ======== ======== SELLING, GENERAL AND ADMINISTRATIVE EXPENSES NMHG Wholesale ................................ $ 169.6 $ 186.5 $ 173.9 NMHG Retail ................................... 63.9 16.9 -- NMHG Eliminations ............................. (.5) -- -- -------- -------- -------- NMHG Consolidated ............................. 233.0 203.4 173.9 Housewares .................................... 82.7 74.8 72.6 NACoal ........................................ 12.3 12.4 10.3 NACCO and Other ............................... 9.0 10.5 8.4 -------- -------- -------- $ 337.0 $ 301.1 $ 265.2 ======== ======== ======== AMORTIZATION OF GOODWILL NMHG Wholesale ................................ $ 11.6 $ 11.6 $ 11.7 NMHG Retail ................................... .6 .1 -- -------- -------- -------- NMHG Consolidated ............................. 12.2 11.7 11.7 Housewares .................................... 3.0 3.0 4.1 -------- -------- -------- $ 15.2 $ 14.7 $ 15.8 ======== ======== ========
57 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data)
1999 1998 1997 -------- -------- -------- OPERATING PROFIT (LOSS) NMHG Wholesale ................................ $ 74.5 $ 134.4 $ 70.5 NMHG Retail ................................... (15.2) (1.8) -- NMHG Eliminations ............................. (1.0) (.4) -- -------- -------- -------- NMHG Consolidated ............................. 58.3 132.2 70.5 Housewares .................................... 41.8 34.6 26.1 NACoal ........................................ 40.4 42.0 43.9 NACCO and Other ............................... (9.2) (10.7) (8.5) -------- -------- -------- $ 131.3 $ 198.1 $ 132.0 ======== ======== ======== OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION NMHG Wholesale ................................ $ 86.1 $ 146.0 $ 82.2 NMHG Retail ................................... (14.6) (1.7) -- NMHG Eliminations ............................. (1.0) (.4) -- -------- -------- -------- NMHG Consolidated ............................. 70.5 143.9 82.2 Housewares .................................... 44.8 37.6 30.2 NACoal ........................................ 40.4 42.0 43.9 NACCO and Other ............................... (9.2) (10.7) (8.5) -------- -------- -------- $ 146.5 $ 212.8 $ 147.8 ======== ======== ======== INTEREST EXPENSE NMHG Wholesale ................................ $ (16.9) $ (14.0) $ (14.5) NMHG Retail ................................... (3.0) (1.2) -- NMHG Eliminations ............................. .9 1.2 -- -------- -------- -------- NMHG Consolidated ............................. (19.0) (14.0) (14.5) Housewares .................................... (6.7) (7.0) (7.3) NACoal ........................................ -- (.6) (2.1) NACCO and Other ............................... (.7) (1.0) (2.3) Eliminations .................................. .7 1.0 2.3 -------- -------- -------- (25.7) (21.6) (23.9) Project mining subsidiaries ................... (17.6) (13.0) (12.7) -------- -------- -------- $ (43.3) $ (34.6) $ (36.6) ======== ======== ======== INTEREST INCOME NMHG Wholesale ................................ $ 8.2 $ 3.4 $ 2.2 NMHG Retail ................................... .2 -- -- NMHG Eliminations ............................. (3.6) (1.2) -- -------- -------- -------- NMHG Consolidated ............................. 4.8 2.2 2.2 Housewares .................................... .1 -- .1 NACoal ........................................ .7 1.2 3.1 Eliminations .................................. (.7) (1.1) (2.3) -------- -------- -------- $ 4.9 $ 2.3 $ 3.1 ======== ======== ======== OTHER-NET, INCOME (EXPENSE) - (EXCLUDING INTEREST INCOME) NMHG Wholesale ................................ $ (3.4) $ -- $ (4.3) NMHG Retail ................................... .3 -- (1.6) NMHG Eliminations ............................. .1 -- -- -------- -------- -------- NMHG Consolidated ............................. (3.0) -- (5.9) Housewares .................................... (.5) (.7) (.3) NACoal ........................................ (.3) -- (5.1) NACCO and Other ............................... (2.5) .9 1.9 -------- -------- -------- $ (6.3) $ .2 $ (9.4) ======== ======== ========
58 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data)
1999 1998 1997 -------- -------- -------- PROVISION FOR INCOME TAXES NMHG Wholesale ................................ $ 24.4 $ 47.6 $ 13.6 NMHG Retail ................................... (4.9) (1.2) -- NMHG Eliminations ............................. (1.1) (.1) -- -------- -------- -------- NMHG Consolidated ............................. 18.4 46.3 13.6 Housewares .................................... 13.5 11.6 8.1 NACoal ........................................ 4.5 7.1 8.1 NACCO and Other ............................... (4.7) (4.3) (3.4) -------- -------- -------- $ 31.7 $ 60.7 $ 26.4 ======== ======== ======== NET INCOME (LOSS) NMHG Wholesale ................................ $ 39.0 $ 77.2 $ 38.7 NMHG Retail ................................... (12.8) (1.9) -- NMHG Eliminations ............................. (2.5) (.2) -- -------- -------- -------- NMHG Consolidated ............................. 23.7 75.1 38.7 Housewares .................................... 21.2 15.2 10.5 NACoal ........................................ 16.5 20.3 19.0 NACCO and Other ............................... (8.3) (8.3) (6.4) -------- -------- -------- $ 53.1 $ 102.3 $ 61.8 ======== ======== ======== TOTAL ASSETS NMHG Wholesale ................................ $1,040.5 $1,064.3 $ 942.4 NMHG Retail ................................... 185.0 87.8 -- NMHG Eliminations ............................. (46.9) (51.7) -- -------- -------- -------- NMHG Consolidated ............................. 1,178.6 1,100.4 942.4 Housewares .................................... 372.8 334.0 315.7 NACoal ........................................ 64.3 43.1 51.5 NACCO and Other ............................... 47.6 53.6 59.4 -------- -------- -------- 1,663.3 1,531.1 1,369.0 Project mining subsidiaries ................... 392.0 418.6 423.4 -------- -------- -------- 2,055.3 1,949.7 1,792.4 Consolidating eliminations .................... (42.3) (51.4) (63.3) -------- -------- -------- $2,013.0 $1,898.3 $1,729.1 ======== ======== ======== DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE NMHG Wholesale ................................ $ 39.9 $ 36.1 $ 35.0 NMHG Retail ................................... 14.2 1.8 -- -------- -------- -------- NMHG Consolidated ............................. 54.1 37.9 35.0 Housewares .................................... 17.6 16.7 21.0 NACoal ........................................ 3.1 3.3 2.4 NACCO and Other ............................... .4 .4 .4 -------- -------- -------- 75.2 58.3 58.8 Project mining subsidiaries ................... 28.8 30.7 29.8 -------- -------- -------- $ 104.0 $ 89.0 $ 88.6 ======== ======== ======== CAPITAL EXPENDITURES NMHG Wholesale ................................ $ 44.7 $ 57.9 $ 25.3 NMHG Retail ................................... 1.5 6.0 -- -------- -------- -------- NMHG Consolidated ............................. 46.2 63.9 25.3 Housewares .................................... 16.5 16.8 18.3 NACoal ........................................ 2.7 3.8 9.1 NACCO and Other ............................... .1 -- -- -------- -------- -------- 65.5 84.5 52.7 Project mining subsidiaries ................... 10.0 15.8 15.7 -------- -------- -------- $ 75.5 $ 100.3 $ 68.4 ======== ======== ========
59 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) DATA BY GEOGRAPHIC AREA No single country outside of the United States comprised 10 percent or more of the Company's revenues from unaffiliated customers. The Other category below includes Canada, Mexico, South America and Asia-Pacific. In addition, no single customer comprised 10 percent or more of the Company's revenues from unaffiliated customers.
Europe, United Africa and States Middle East Other Consolidated ------ ----------- ----- ------------ 1999 - ------------------------------------- REVENUES FROM UNAFFILIATED CUSTOMERS, BASED ON THE CUSTOMER'S LOCATION ... $1,958.9 $ 484.9 $ 159.0 $2,602.8 ======== ======== ======== ======== LONG-LIVED ASSETS ................... $ 926.9 $ 189.8 $ 94.0 $1,210.7 ======== ======== ======== ======== 1998 - ------------------------------------- Revenues from unaffiliated customers, based on the customer's location ... $1,938.4 $ 478.8 $ 119.0 $2,536.2 ======== ======== ======== ======== Long-lived assets ................... $ 917.5 $ 192.8 $ 52.8 $1,163.1 ======== ======== ======== ======== 1997 - ------------------------------------- Revenues from unaffiliated customers, based on the customer's location ... $1,709.1 $ 402.2 $ 135.6 $2,246.9 ======== ======== ======== ======== Long-lived assets ................... $ 896.5 $ 168.9 $ 39.9 $1,105.3 ======== ======== ======== ========
NOTE NINETEEN QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) A summary of the unaudited quarterly results of operations for the year ended December 31 is as follows:
1999 --------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NMHG ............................................. $ 438.5 $ 452.6 $ 391.1 $ 446.1 Housewares ....................................... 111.4 127.0 150.6 207.7 NACoal ........................................... 63.6 65.0 72.6 76.5 NACCO and Other .................................. -- .1 -- -- ------- ------- ------- ------- 613.5 644.7 614.3 730.3 ------- ------- ------- ------- GROSS PROFIT ....................................... 115.7 124.1 112.5 132.4 ------- ------- ------- ------- OPERATING PROFIT(LOSS) NMHG ............................................. 24.8 22.8 5.7 5.0 Housewares ....................................... -- 8.3 9.9 23.6 NACoal ........................................... 9.2 8.6 11.4 11.2 NACCO and Other .................................. (2.6) (2.5) (2.4) (1.7) ------- ------- ------- ------- 31.4 37.2 24.6 38.1 ------- ------- ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 12.9 16.3 7.0 18.1 Cumulative effect of accounting change ............. (1.2) -- -- -- ------- ------- ------- ------- NET INCOME ......................................... $ 11.7 $ 16.3 $ 7.0 $ 18.1 ======= ======= ======= ======= BASIC AND DILUTED EARNINGS PER SHARE Income before cumulative effect of accounting change $ 1.59 $ 2.00 $ 0.86 $ 2.22 Cumulative effect of accounting change ............. (.15) -- -- -- ------- ------- ------- ------- Net income ......................................... $ 1.44 $ 2.00 $ 0.86 $ 2.22 ======= ======= ======= =======
60 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data)
1998 ---------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NMHG ............................................. $ 431.9 $ 437.2 $ 374.6 $ 469.3 Housewares ....................................... 99.0 112.9 136.8 188.9 NACoal ........................................... 68.4 64.0 72.3 80.7 NACCO and Other .................................. -- .1 -- .1 ------- ------- ------- ------- 599.3 614.2 583.7 739.0 ------- ------- ------- ------- GROSS PROFIT ....................................... 119.0 120.2 118.2 158.1 ------- ------- ------- ------- OPERATING PROFIT(LOSS) NMHG ............................................. 41.3 38.7 23.6 28.6 Housewares ....................................... (.7) 2.4 11.6 21.3 NACoal ........................................... 10.9 8.6 10.7 11.8 NACCO and Other .................................. (2.4) (2.7) (2.6) (3.0) ------- ------- ------- ------- 49.1 47.0 43.3 58.7 ------- ------- ------- ------- NET INCOME ......................................... $ 24.1 $ 26.3 $ 20.4 $ 31.5 ======= ======= ======= ======= BASIC EARNINGS PER SHARE ........................... $ 2.95 $ 3.22 $ 2.50 $ 3.88 ======= ======= ======= ======= DILUTED EARNINGS PER SHARE ......................... $ 2.95 $ 3.21 $ 2.50 $ 3.87 ======= ======= ======= =======
NOTE TWENTY PARENT COMPANY CONDENSED BALANCE SHEETS The condensed balance sheets of NACCO, the parent company, at December 31 are as follows: 1999 1998 ------- ------- ASSETS Current assets ................................ $ .2 $ .6 Current intercompany accounts receivable, net . .4 5.5 Other assets .................................. .4 .2 Investment in subsidiaries NMHG ....................................... 468.7 451.0 Housewares ................................. 163.9 150.1 NACoal ..................................... 23.2 15.1 Bellaire ................................... .5 .7 ------- ------- 656.3 616.9 Property, plant and equipment, net ............ 1.2 1.6 Deferred income taxes ......................... 20.6 21.8 ------- ------- Total Assets ............................. $ 679.1 $ 646.6 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities ........................... $ 8.5 $ 10.0 Reserve for future interest on UMWA obligation 55.3 57.1 Note payable to Bellaire ...................... 36.0 38.4 Notes payable to other subsidiaries ........... 12.7 18.0 Deferred income taxes and other ............... 4.4 4.8 Stockholders' equity .......................... 562.2 518.3 ------- ------- Total Liabilities and Stockholders' Equity $ 679.1 $ 646.6 ======= ======= The credit agreements at NMHG and HB*PS allow the transfer of assets to NACCO under certain circumstances. The amount of NACCO's investment in NMHG and HB*PS that was restricted at December 31, 1999 totals approximately $489.7 million. There are no restrictions on the transfer of assets from NACoal. Dividends and advances from subsidiaries are the primary sources of cash for NACCO. 61 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO Industries, Inc. and Subsidiaries (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE TWENTY-ONE ACQUISITIONS ACQUISITIONS OF RETAIL DEALERSHIPS: In 1998, NMHG announced and began implementation of a strategy to expand into the retail forklift distribution business. As a result, 100 percent of either the stock or substantially all of the assets of several independent Hyster and Yale retail dealerships were acquired in 1999 and 1998. In addition, two retail dealerships were acquired in 1997. The combined preliminary purchase prices of retail dealerships acquired during 1999 were approximately $62.4 million. The combined purchase prices of retail dealerships acquired during 1998 and 1997 were $16.6 million and $12.2 million, respectively. Funds for the purchases were provided by either borrowings advanced to NMHG Retail by NMHG Wholesale under existing NMHG Wholesale facilities or by internally generated cash flows. These acquisitions were accounted for as purchases and, accordingly, the results of operations of the acquired businesses are included in the accompanying financial statements from their respective dates of acquisition. On a pro forma basis, as if the businesses had been acquired at the beginning of fiscal 1999 and 1998, respectively, revenue, net income and earnings per share would not differ materially from the amounts reported in the accompanying consolidated financial statements for 1999 and 1998. Goodwill has been recognized for the amount of the excess of the purchase price paid over the fair market value of the net assets acquired and is amortized on a straight-line basis over 40 years. Preliminary goodwill recognized in 1999 as a result of these acquisitions was $24.7 million. Goodwill recognized in 1998 and 1997 was $6.2 million and $4.1 million, respectively. As a result of these acquisitions, certain liabilities were assumed as follows: 1999 1998 1997 ------- ------- ------- Noncash Investing Activities Fair value of assets acquired .......... $ 89.6 $ 63.7 $ 16.7 Cash paid for the net assets ........ (62.4) (16.6) (12.2) ------- ------- ------- Liabilities assumed ........... $ 27.2 $ 47.1 $ 4.5 ======= ======= ======= ACQUISITION OF MINORITY INTEREST: In 1999, the Company acquired the remaining 2 percent minority interest in NMHG for book value of $11.3 million. NOTE TWENTY-TWO RECONSOLIDATION OF BRAZILIAN SUBSIDIARY In 1989, NMHG acquired a majority interest in Hyster Brasil, Ltda. (previously known as Companhia Hyster), a Brazilian manufacturer and marketer of Hyster forklift trucks and related service parts. In 1990, NMHG deconsolidated this subsidiary because it did not have effective control, given the uncertain economic and political environment in Brazil at that time. Subsequently, income from Hyster Brasil, Ltda. was recognized only when cash dividends were received. The continued stability of the economic environment in Brazil, the ability to receive dividends during the last few years and the Company's planned expansion of operations in Brazil has led management to reassess its ability to influence the performance of Hyster Brasil, Ltda. As of December 31, 1999, NMHG has determined that it now has significant influence over Hyster Brasil, Ltda. and therefore it is appropriate to consolidate its operations. Undistributed earnings during the periods of deconsolidation, when NMHG did not have effective control, have been credited directly to consolidated retained earnings in the amount of $3.4 million at December 31, 1999. The consolidation of Hyster Brasil, Ltda. as of December 31, 1999 was not material to the Company's financial position or results of operations. It is the Company's intention to continue to consolidate this subsidiary, but the Company will periodically assess its ability to control the operations of Hyster Brasil, Ltda. 62 41 NACCO INDUSTRIES, INC. REPORT OF MANAGEMENT To the Stockholders of NACCO Industries, Inc.: The management of NACCO Industries, Inc. is responsible for the preparation, content and integrity of the financial statements and related information contained within this report. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and include amounts that are based on informed judgments and estimates. The Company's code of conduct, communicated throughout the organization, requires adherence to high ethical standards in the conduct of the Company's business. NACCO Industries, Inc. and each of its subsidiaries maintain a system of internal controls designed to provide reasonable assurance as to the protection of assets and the integrity of the financial statements. These systems are augmented by the selection of qualified financial management personnel. In addition, an internal audit function periodically assesses the internal controls. Arthur Andersen LLP, independent certified public accountants, audits NACCO Industries, Inc. and its subsidiaries' financial statements. Its audits are conducted in accordance with generally accepted auditing standards and provide an objective and independent assessment that helps ensure fair presentation of the Company's operating results and financial position. The independent accountants have access to all financial records and related data of the Company, as well as to the minutes of stockholders' and directors' meetings. The Audit Committee of the Board of Directors, composed of independent directors, meets regularly with the independent auditors and internal auditors to review the scope of their audit reports and to discuss any action to be taken. The independent auditors and the internal auditors have free and direct access to the Audit Committee. The Audit Committee also reviews the financial reporting process and accounting policies of NACCO Industries, Inc. and each of its subsidiaries. /s/ Alfred M. Rankin, Jr. Alfred M. Rankin, Jr. Chairman, President and Chief Executive Officer /s/ Kenneth C. Schilling Kenneth C. Schilling Vice President and Controller REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of NACCO Industries, Inc.: We have audited the accompanying Consolidated Balance Sheets of NACCO Industries, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the related Consolidated Statements of Income and Comprehensive Income, Stockholders' Equity and Cash Flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NACCO Industries, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. As explained in Note Two to the Consolidated Financial Statements, effective January 1, 1999, the Company adopted the American Institute of Certified Public Accountants Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" and changed its method of accounting for start-up activities. /s/ Arthur Andersen LLP Arthur Andersen LLP Cleveland, Ohio, February 8, 2000. 63 EX-21 17 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF NACCO INDUSTRIES, INC. As of the date of the Annual Report on Form 10-K to which this is an Exhibit, the subsidiaries of NACCO Industries, Inc. were as follows: NAME - ---- INCORPORATION ------------- Bellaire Corporation Ohio The Coteau Properties Company Ohio The Falkirk Mining Company Ohio Hamilton Beach/Proctor-Silex, Inc. Delaware Hamilton Beach/Proctor-Silex de Mexico, S.A. de C.V. Mexico Housewares Holding Company Delaware HB-PS Holding Company, Inc. Delaware Hyster-Yale Materials Handling, Inc. Delaware (1) The Kitchen Collection, Inc. Delaware NACCO Materials Handling Group, Inc. Delaware NACCO Materials Handling Group, Ltd. England NACCO Materials Handling Group, Pty., Ltd. Australia NACCO Materials Handling, B.V. Netherlands NACCO Materials Handling, S.r.l. Italy NACCO Materials Handling Limited England NMH Holding, B.V. Netherlands NMHG Deutschland GmbH Germany NMHG Distribution B.V. Netherlands NMHG Distribution Co. Delaware NMHG Distribution Pty Limited Australia NMHG Mauritius Mauritius NMHG Holding Co. Delaware NMHG Mexico S.A. de C.V. Mexico The North American Coal Corporation Delaware North American Coal Royalty Company Delaware Powhatan Corporation Delaware Proctor-Silex Canada, Inc. Ontario (Canada) Proctor-Silex, S.A. de C.V. Mexico The Sabine Mining Company Nevada The Company has omitted the names of its subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a "significant subsidiary" within the meaning of Rule 1-02 contained in Regulation S-X. EX-23.I 18 EXHIBIT 23(I) 1 Arthur Andersen LLP Exhibit 23(i) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statement (No. 33-3422) on Form S-4 and Registration Statement (No. 33-52660) on Form S-8. /s/Arthur Andersen LLP Cleveland, Ohio, March 29, 2000 EX-24.I 19 EXHIBIT 24(I) 1 Exhibit 24(i) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Owsley Brown II --------------------------------------------------- Owsley Brown II Date: March 15, 2000 EX-24.II 20 EXHIBIT 24(II) 1 Exhibit 24(ii) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Robert M. Gates --------------------------------------------------- Robert M. Gates Date: March 8, 2000 EX-24.III 21 EXHIBIT 24(III) 1 Exhibit 24(iii) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Leon J. Hendrix, Jr. --------------------------------------------------- Leon J. Hendrix, Jr. Date: March 8, 2000 EX-24.IV 22 EXHIBIT 24(IV) 1 Exhibit 24(iv) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ David H. Hoag --------------------------------------------------- David H. Hoag Date: March 8, 2000 EX-24.V 23 EXHIBIT 24(V) 1 Exhibit 24(v) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Dennis W. LaBarre --------------------------------------------------- Dennis W. LaBarre Date: March 8, 2000 EX-24.VI 24 EXHIBIT 24(VI) 1 Exhibit 24(vi) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Richard de J. Osborne --------------------------------------------------- Richard de J. Osborne Date: March 8, 2000 EX-24.VII 25 EXHIBIT 24(VII) 1 Exhibit 24(vii) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Ian M. Ross --------------------------------------------------- Ian M. Ross Date: March 8, 2000 EX-24.VIII 26 EXHIBIT 24(VIII) 1 Exhibit 24(viii) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ John C. Sawhill --------------------------------------- John C. Sawhill Date: March 8, 2000 EX-24.IX 27 EXHIBIT 24(IX) 1 Exhibit 24(ix) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Britton T. Taplin ----------------------------------- Britton T. Taplin Date: March 8, 2000 EX-24.X 28 EXHIBIT 24(X) 1 Exhibit 24(x) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ David F. Taplin ----------------------------------- David F. Taplin Date: March 8, 2000 EX-24.XI 29 EXHIBIT 24(XI) 1 Exhibit 24(xi) POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of NACCO Industries, Inc. hereby constitutes and appoints Charles A. Bittenbender, Kenneth C. Schilling and Constantine E. Tsipis, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as Director of NACCO Industries, Inc., a Delaware corporation, an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1999, and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. /s/ John F. Turben ---------------------------------------- John F. Turben Date: March 8, 2000 EX-27 30 EXHIBIT 27
5 1,000,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 36 0 292 17 390 772 625 613 2,013 583 0 0 0 8 554 2,013 2,603 2,603 2,118 2,472 0 0 43 87 32 55 0 0 1 53 6.52 6.51
EX-99.I 31 EXHIBIT 99(I) 1
Exhibit 99(i) NACCO Industries, Inc. Unaudited Consolidating Statement of Income and Comprehensive Income Year Ended December 31, 1999 (In millions) NMHG ---------------------------------------------------- Wholesale Retail Elims Consolidated ----------- --------- --------- ------------ Net sales $ 1,585.8 $ 228.1 $ (85.6) 1,728.3 Other operating revenues - - - - ----------- --------- --------- -------- Total revenues 1,585.8 228.1 (85.6) 1,728.3 Cost of sales 1,330.1 178.8 (84.1) 1,424.8 ----------- --------- --------- -------- Gross profit 255.7 49.3 (1.5) 303.5 Selling, general, and administrative expenses 169.6 63.9 (0.5) 233.0 Restructuring charges - - - - Amortization of goodwill 11.6 0.6 - 12.2 ----------- --------- --------- --------- Operating profit(loss) 74.5 (15.2) (1.0) 58.3 Other income (expense) Interest income 8.2 0.2 (3.6) 4.8 Interest expense (16.9) (3.0) 0.9 (19.0) Other-net (3.4) 0.3 0.1 (3.0) ----------- --------- --------- --------- (12.1) (2.5) (2.6) (17.2) ----------- --------- --------- --------- Income before income taxes, minority interest and cumulative effect of accounting change 62.4 (17.7) (3.6) 41.1 Provision for income taxes 24.4 (4.9) (1.1) 18.4 ----------- --------- --------- --------- Income before minority interest and cumulative effect of accounting change 38.0 (12.8) (2.5) 22.7 Minority interest 1.0 - - 1.0 ----------- --------- --------- --------- Income before cumulative effect of accounting change 39.0 (12.8) (2.5) 23.7 Cumulative effect of accounting change - - - - ----------- --------- --------- --------- Net income(loss) $ 39.0 $ (12.8) $ (2.5) $ 23.7 =========== ========= ========= ========= Change in comprehensive income (7.1) (2.0) - (9.1) ----------- --------- --------- --------- Comprehensive income $ 31.9 $ (14.8) $ (2.5) $ 14.6 =========== ========= ========= ========= NACoal ----------------------------------------- Project NACoal Mines excl Proj Subsidiaries Mines Consolidated Housewares ----------- --------- ------------ ---------- Net sales $ 239.9 $ 35.1 $ 275.0 $ 596.7 Other operating revenues - 2.7 2.7 - ----------- --------- --------- --------- Total revenues 239.9 37.8 277.7 596.7 Cost of sales 193.7 31.3 225.0 468.0 ----------- --------- --------- --------- Gross profit 46.2 6.5 52.7 128.7 Selling, general, and administrative expenses 2.8 9.5 12.3 82.7 Restructuring charges - - - 1.2 Amortization of goodwill - - - 3.0 ----------- --------- --------- --------- Operating profit(loss) 43.4 (3.0) 40.4 41.8 Other income (expense) - Interest income 0.3 0.4 0.7 0.1 Interest expense (17.6) - (17.6) (6.7) Other-net (0.2) (0.1) (0.3) (0.5) ----------- --------- --------- --------- (17.5) 0.3 (17.2) (7.1) ----------- --------- --------- --------- Income before income taxes, minority interest and cumulative effect of accounting change 25.9 (2.7) 23.2 34.7 Provision for income taxes 5.7 (1.2) 4.5 13.5 ----------- --------- --------- --------- Income before minority interest and cumulative effect of accounting change 20.2 (1.5) 18.7 21.2 Minority interest - (1.0) (1.0) - ----------- --------- --------- --------- Income before cumulative effect of accounting change 20.2 (2.5) 17.7 21.2 Cumulative effect of accounting change (0.1) (1.1) (1.2) - ----------- --------- --------- --------- Net income(loss) $ 20.1 $ (3.6) $ 16.5 $ 21.2 =========== ========= ========= ========= Change in comprehensive income - - - 0.7 ----------- --------- --------- --------- Comprehensive income $ 20.1 $ (3.6) $ 16.5 $ 21.9 =========== ========= ========= ========= NACCO & NACCO Other Elims Consolidated ----------- --------- ------------- Net sales $ - $ - $ 2,600.0 Other operating revenues 0.1 - 2.8 ----------- --------- --------- Total revenues 0.1 - 2,602.8 Cost of sales 0.3 - 2,118.1 ----------- --------- --------- Gross profit (0.2) - 484.7 Selling, general, and administrative expenses 9.0 - 337.0 Restructuring charges - - 1.2 Amortization of goodwill - - 15.2 ----------- --------- --------- Operating profit(loss) (9.2) - 131.3 Other income (expense) Interest income - (0.7) 4.9 Interest expense (0.7) 0.7 (43.3) Other-net (2.5) - (6.3) ----------- --------- --------- (3.2) - (44.7) ----------- --------- --------- Income before income taxes, minority interest and cumulative effect of accounting change (12.4) - 86.6 Provision for income taxes (4.7) - 31.7 ----------- --------- --------- Income before minority interest and cumulative effect of accounting change (7.7) - 54.9 Minority interest (0.6) - (0.6) ----------- --------- --------- Income before cumulative effect of accounting change (8.3) - 54.3 Cumulative effect of accounting change - - (1.2) ----------- --------- --------- Net income(loss) $ (8.3) $ - $ 53.1 =========== ========= ========= Change in comprehensive income 0.3 - (8.1) ----------- --------- ---------- Comprehensive income $ (8.0) $ - $ 45.0 =========== ========= ==========
EX-99.II 32 EXHIBIT 99(II) 1
Exhibit 99(ii) NACCO Industries, Inc. Unaudited Consolidating Balance Sheet December 31, 1999 (In millions) NACoal --------------------------------------------------- Project NACoal Mining excl Proj NMHG Subsidiaries Mines Consolidated --------------- ---------------- ------------- ---------------- Current Assets Cash and cash equivalents $ 31.1 $ 2.2 $ - $ 2.2 Accounts receivable, net 168.7 15.7 1.3 17.0 Intercompany accounts receivable - - 3.6 3.6 Intercompany note receivable 10.0 2.7 - 2.7 Inventories 270.4 29.9 2.1 32.0 Prepaid expenses and other 32.7 10.1 (7.8) 2.3 --------------- ---------------- ------------- ---------------- 512.9 60.6 (0.8) 59.8 Property, Plant and Equipment, net 268.9 270.1 24.3 294.4 Deferred Charges Goodwill, net 359.5 - - - Deferred costs and other 17.5 39.5 9.5 49.0 Deferred income taxes 4.0 - - - --------------- ---------------- ------------- ---------------- 381.0 39.5 9.5 49.0 Other Assets 15.8 21.8 31.3 53.1 --------------- ---------------- ------------- ---------------- Total Assets $1,178.6 $ 392.0 $ 64.3 $ 456.3 =============== ================ ============= ================ Current Liabilities Accounts payable $ 195.3 $ 10.7 $ 6.7 $ 17.4 Intercompany accounts payable (3.8) 0.9 - 0.9 Revolving credit agreements 12.3 - 15.2 15.2 Current maturities of long-term debt 12.4 20.1 - 20.1 Accrued income taxes - - 0.8 0.8 Accrued payroll 22.8 - 7.1 7.1 Accrued warranty obligations 35.8 - - - Intercompany notes payable - - - - Intercompany interest payable - - - - Other current liabilities 91.8 25.4 (3.4) 22.0 --------------- ---------------- ------------- ---------------- 366.6 57.1 26.4 83.5 Long-term Debt 246.0 - - - Obligations of Project Mining Subsidiaries - 289.2 - 289.2 Self-insurance Reserves and Other 93.2 42.0 11.0 53.0 Minority Interest 4.1 - 7.4 7.4 Stockholders' Equity 468.7 3.7 19.5 23.2 --------------- ---------------- ------------- ---------------- Total Liabilities and Stockholders' Equity $1,178.6 $ 392.0 $ 64.3 $ 456.3 =============== ================ ============= ================ NACCO & Consolidated Housewares Other Elims NACCO --------------- ---------------- ------------- ---------------- Current Assets Cash and cash equivalents $ 2.9 $ - $ - $ 36.2 Accounts receivable, net 106.5 3.7 (3.7) 292.2 Intercompany accounts receivable 0.1 6.1 (9.8) - Intercompany note receivable - 36.0 (48.7) - Inventories 87.9 - - 390.3 Prepaid expenses and other 18.3 (35.8) 36.0 53.5 ---------------- ------------- ------------- ------------- 215.7 10.0 (26.2) 772.2 Property, Plant and Equipment, net 60.8 1.3 - 625.4 Deferred Charges Goodwill, net 89.9 - - 449.4 Deferred costs and other 0.2 - - 66.7 Deferred income taxes 6.1 35.2 (16.1) 29.2 ---------------- ------------- ------------- ------------- 96.2 35.2 (16.1) 545.3 Other Assets 0.1 1.1 - 70.1 ---------------- ------------- ------------- ------------- Total Assets $ 372.8 $ 47.6 $ (42.3) $ 2,013.0 ================ ============= ============= ============= Current Liabilities Accounts payable $ 43.3 $ 2.1 $ (3.7) $ 254.4 Intercompany accounts payable 4.3 8.4 (9.8) - Revolving credit agreements 29.1 - - 56.6 Current maturities of long-term debt - - - 32.5 Accrued income taxes 1.4 2.2 - 4.4 Accrued payroll 13.8 3.3 - 47.0 Accrued warranty obligations 0.2 - - 36.0 Intercompany notes payable - 12.7 (12.7) - Intercompany interest payable - - - - Other current liabilities 30.1 8.3 - 152.2 ---------------- ------------- ------------- ------------- 122.2 37.0 (26.2) 583.1 Long-term Debt 80.3 - - 326.3 Obligations of Project Mining Subsidiaries - - - 289.2 Self-insurance Reserves and Other 6.4 104.2 (16.1) 240.7 Minority Interest - - - 11.5 Stockholders' Equity 163.9 (93.6) - 562.2 ---------------- ------------- ------------- ------------- Total Liabilities and Stockholders' Equity $ 372.8 $ 47.6 $ (42.3) $ 2,013.0 ================ ============= ============= =============
EX-99.III 33 EXHIBIT 99(III) 1
Exhibit 99(iii) NACCO Industries, Inc. Unaudited Consolidating Statement of Cash Flows For the Year Ended December 31, 1999 (In millions) NACCO NACCO NMHG NACoal Housewares and Other Consolidated ----------- ----------- ----------- ---------- ----------- Operating Activities Net income $ 23.7 $ 16.5 $ 21.2 $ (8.3) $ 53.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 54.1 31.9 17.6 0.4 104.0 Deferred income taxes 2.3 (0.9) (0.2) 2.1 3.3 Minority interest expense (1.0) 1.0 - 0.6 0.6 Cumulative effect of accounting change - 1.2 - - 1.2 Other non-cash items 0.7 2.5 (1.0) (5.1) (2.9) Working capital changes, excluding the effect of business acquisitions: Intercompany receivable/payable (0.9) (1.3) (0.3) 2.5 - Accounts receivable 12.0 4.5 (28.1) 0.3 (11.3) Inventories (10.0) (3.1) (9.9) - (23.0) Other current assets (9.7) (0.3) (2.7) 0.3 (12.4) Accounts payable and other liabilities 8.2 (2.4) 12.7 (2.0) 16.5 ----------- ----------- ----------- ---------- ----------- Net cash provided by (used for) operating activities 79.4 49.6 9.3 (9.2) 129.1 ----------- ----------- ----------- ---------- ----------- Investing Activities Expenditures for property, plant and equipment (46.2) (12.7) (16.5) (0.1) (75.5) Proceeds from the sale of property, plant, and equipment (0.1) 1.1 - - 1.0 Acquisitions of businesses, net of cash acquired (62.4) - - - (62.4) Investments in unconsolidated affiliates 1.7 (17.6) - - (15.9) Acquisition of minority interest (11.3) - - - (11.3) Intercompany loans 8.0 (5.2) - (2.8) - Other - net 2.2 0.5 - - 2.7 ----------- ----------- ----------- ---------- ----------- Net cash used for investing activities (108.1) (33.9) (16.5) (2.9) (161.4) ----------- ----------- ----------- ---------- ----------- Financing Activities Additions to long-term debt and revolving credit agreements 52.6 15.0 13.5 - 81.1 Additions to obligations of project mining subsidiaries - 31.6 - - 31.6 Reductions of obligations of project mining subsidiaries - (58.8) - - (58.8) Financing of other short-term obligations (17.2) - - - (17.2) Cash dividends paid - (8.4) (8.1) 9.5 (7.0) Capital grants 2.6 - - - 2.6 Other-net 1.4 (1.0) - 2.6 3.0 ----------- ----------- ----------- ---------- ----------- Net cash provided by (used for) financing activities 39.4 (21.6) 5.4 12.1 35.3 ----------- ----------- ----------- ---------- ----------- Effect of exchange rate changes on cash (1.8) - 0.3 - (1.5) ----------- ----------- ----------- ---------- ----------- Cash and Cash Equivalents Increase (decrease) for the year 8.9 (5.9) (1.5) - 1.5 Balance at the beginning of the year 22.2 8.1 4.4 - 34.7 ----------- ----------- ----------- ---------- ----------- Balance at the end of the year $ 31.1 $ 2.2 $ 2.9 $ - $ 36.2 =========== =========== =========== ========== ===========
EX-99.IV 34 EXHIOBIT 99(IV) 1
Exhibit 99(iv) NACCO Industries, Inc. Unaudited Consolidating Statement of Stockholders' Equity Year Ended December 31, 1999 (In millions) NACCO NMHG NACoal Housewares NACCO & Other Elims Consolidated ----------- ---------- ---------- ------------- ----------- ------------ Class A Common Stock $ - $ - $ - $ 6.5 $ - $ 6.5 ----------- ---------- ---------- ----------- ----------- ---------- Class B Common Stock - - - 1.6 - 1.6 ----------- ---------- ---------- ----------- ----------- ---------- Capital In Excess of Par Value Beginning balance 198.2 15.1 160.6 0.2 (373.9) 0.2 Shares issued under stock option and compensation plans - - - 2.5 - 2.5 ------------ ---------- ----------- ----------- ----------- ----------- 198.2 15.1 160.6 2.7 (373.9) 2.7 Retained Earnings Beginning balance 256.8 - (7.8) 504.9 (249.0) 504.9 Net income (loss) 23.7 16.5 21.2 (8.3) - 53.1 Reconsolidation of Brazilian subsidiary 3.4 - - - - 3.4 Repurchase of minority interest (11.3) - - - 11.3 - Cash dividends - (8.4) (8.1) (7.0) 16.5 (7.0) ----------- --------- ---------- ---------- ---------- ---------- 272.6 8.1 5.3 489.6 (221.2) 554.4 Accumulated Other Comprehensive Income Beginning balance 7.0 - (2.7) - 0.8 5.1 Foreign currency translation adjustment and other (9.1) - 0.7 - 0.3 (8.1) ------------ ---------- ----------- ----------- ----------- ----------- (2.1) - (2.0) - 1.1 (3.0) ------------ ---------- ----------- ----------- ----------- ----------- Total Stockholders' Equity $ 468.7 $ 23.2 $ 163.9 $ 500.4 $ (594.0) $ 562.2 ============ ========== =========== =========== =========== ===========
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