-----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, LQVqbXFFWkDv1CdVxgMfERpSAdCQYxupzGn3YBqO2hscu9l24Ec5rZL5Dv+EAlF1 4B4G2Wzkc7txRQzA95huKg== 0000950152-02-002365.txt : 20020415 0000950152-02-002365.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950152-02-002365 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 39 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020326 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: 1934 Act SEC FILE NUMBER: 001-09172 FILM NUMBER: 02586557 BUSINESS ADDRESS: STREET 1: 5875 LANDERBROOK DR CITY: MAYFIELD HEIGHTS STATE: OH ZIP: 44124-4017 BUSINESS PHONE: 4404499668 MAIL ADDRESS: STREET 1: 5875 LANDERBRROK DR CITY: MAYFIELD HEIGHTS STATE: OH ZIP: 44124 10-K 1 l93112ae10-k.txt NACCO INDUSTRIES, INC. FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 2001 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) 34-1505819 ---------------------------------------------------- (I.R.S. EMPLOYER IDENTIFICATION NO.) 5875 Landerbrook Drive Mayfield Heights, Ohio ---------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 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 28, 2002: $286,073,304 Number of shares of Class A Common Stock outstanding at February 28, 2002: 6,560,427 Number of shares of Class B Common Stock outstanding at February 28, 2002: 1,635,218 DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the Company's Proxy Statement for its 2002 annual meeting of stockholders are incorporated herein by reference in Part III. PART I ITEM 1. BUSINESS GENERAL NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company whose principal operating subsidiaries function in three distinct 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 primarily as fuel for power providers. NACoal also provides dragline mining services for a limerock quarry near Miami, Florida. (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, through NMHG Wholesale and NMHG Retail, designs, engineers, manufactures, sells, services and leases a full line of lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. 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, leasing and service of Hyster and Yale lift trucks and related service parts by wholly owned retail dealerships and rental companies. (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"), 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. Additional information relating to financial and operating data on a segment basis (including NACCO and Other) is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Part II hereof and in Note 19 to the Consolidated Financial Statements contained in Part IV hereof. NACCO was incorporated as a Delaware corporation in 1986 in connection with the formation of a holding company structure for a predecessor corporation organized in 1913. As of February 28, 2002, the Company and its subsidiaries had approximately 13,300 employees. SIGNIFICANT EVENTS On October 11, 2000, NACoal acquired certain assets from Phillips Coal Company, including its 75% joint venture interest in Mississippi Lignite Mining Company ("MLMC"), its 50% joint venture interest in Red River Mining Company and the related lignite reserves under committed contracts at both of these mines. As a result of the acquisition, NACoal now owns 100% of MLMC and Red River Mining Company. In addition, NACoal acquired from Phillips Coal Company approximately 560 million tons of undeveloped lignite reserves in Texas, Mississippi and Tennessee. In the fourth quarter of 2001, MLMC commenced limited deliveries of lignite to its customer. As of December 31, 2001, the customer's power plant had not yet reached Commercial Operations Date ("COD"), as defined in the lignite sales agreement. As a result, MLMC has been collecting monthly contractual liquidated damages from its customer since January 2001. Subsequent to December 31, 2001, MLMC was notified that the customer declared COD effective March 1, 2002. MLMC does not expect to continue to receive contractual liquidated damages payments related to the ongoing operations of the mine once such COD has been confirmed. On January 2, 2001, NMHG announced that it would close its manufacturing and assembly operations in Danville, Illinois as part of a manufacturing plant consolidation strategy that will enable NMHG to reduce its cost structure while optimizing its global manufacturing capacity. The phase-out of the Danville facility was substantially completed by December 31, 2001. In 2001, NMHG implemented, and largely completed, a restructuring and downsizing program in Europe. The restructuring is expected to be completed by the end of 2002. On December 31, 2001, NMHG Retail sold all of its company-owned Hyster retail dealerships in Germany to ZEPPELIN GmbH and designated ZEPPELIN GmbH as its Hyster dealer in parts of Germany, Austria, and several Central and Eastern European countries. In 2000, HB-PS introduced several air purification and humidification products under the Hamilton Beach(R) brand, thus entering the home environment segment of the small appliance industry for the first time. In 2001, HB-PS launched TrueAir(TM), an odor elimination product. The national launch of this product was supported by national television advertising in both the second and fourth quarters of 2001. In the second quarter of 2001, HB-PS expanded its 500,000 square foot distribution center in Memphis, Tennessee, which has been operational since the second quarter of 1999, by an additional 400,000 square feet. The expanded Memphis distribution center is expected to allow HB-PS to enhance efficiencies and customer service. In 2001, HB-PS approved a plan to restructure its manufacturing activities in Mexico. The restructuring plan includes outsourcing of certain of the company's products and consolidating production in three of the company's Mexican manufacturing plants into one of those plants. In the fourth quarter of 2001, HB-PS initiated a restructuring and downsizing plan at its headquarters as a cost-cutting measure in response to reduced overall consumer demand caused by the 2001 U.S. economic slowdown. BUSINESS SEGMENT INFORMATION A. NORTH AMERICAN COAL GENERAL NACoal is engaged in the mining and marketing of lignite primarily as fuel for power providers. 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 provided, arranged and/or 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. The balance of NACoal's sales are from non-project mining subsidiaries for which NACoal has arranged and provided the necessary financing. NACoal also provides dragline mining services for a limerock quarry near Miami, Florida. At December 31, 2001, 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 12 to the Consolidated Financial Statements contained in Part IV hereof. SALES, MARKETING AND OPERATIONS The principal customers of NACoal are electric utilities, an independent power provider and a synfuels plant. Sales to Dakota Coal Company, which supplies coal to four facilities, accounted for 40%, 47% and 47% of NACoal's revenues in 2001, 2000 and 1999, respectively. The distribution of sales in the last five years has been as follows:
DISTRIBUTION ------------ ELECTRIC TOTAL UTILITIES/ TONS SOLD INDEPENDENT SYNFUELS (MILLIONS) POWER PROVIDER PLANT ---------- -------------- -------- 2001 31.4 80% 20% 2000 31.6 80% 20% 1999 31.3 80% 20% 1998 31.7 80% 20% 1997 29.9 80% 20%
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. NACoal does not know of any conditions of default that currently exist. 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, NACoal does not know of any customer's intent to acquire stock of a subsidiary or terminate a contract for convenience. The location, mine type, reserve data, coal quality characteristics, customer, sales tonnage and contract expiration date for the mines operated by NACoal in 2001 were as follows: 2
DEVELOPED LIGNITE MINING OPERATIONS ----------------------------------- PROVEN AND PROBABLE RESERVES (1) -------------------------------- COMMITTED UNDER CONTRACT UNCOMMITTED AVERAGE PROJECT MINING (MILLIONS OF (MILLIONS OF BTUS SUBSIDIARIES MINE LOCATION TYPE OF MINE TONS) TONS) PER POUND - --------------- ---- -------- ------------ ------------- -------------- --------- The Coteau Properties Freedom Mine(2) Beulah, ND Surface Lignite 510.5 ---- 6,767 Company The Falkirk Mining Falkirk Mine(2) Underwood, ND Surface Lignite 491.9 ---- 6,200 Company The Sabine Mining Company South Hallsville Hallsville, TX Surface Lignite (4) (4) (4) No. 1 Mine(2) OTHER - ----- San Miguel Lignite Mining San Miguel Jourdanton, TX Surface Lignite (5) (5) (5) Operations Lignite Mine Red River Mining Company Oxbow Mine Coushatta, LA Surface Lignite 7.6 55.7 6,722 Mississippi Lignite Red Hills Mine Ackerman, MS Surface Lignite 166.5 126.7 5,200 Mining Company ----- ----- Total Developed 1,176.5 182.4 UNDEVELOPED MINING OPERATIONS - ----------------------------- North Dakota ---- ---- ---- ---- 570.7 6,500 Texas ---- ---- ---- ---- 309.2 6,800 Eastern ---- ---- ---- 62.8 64.9 12,070 Mississippi ---- ---- ---- ---- 144.4 5,200 Tennessee ---- ---- ---- ---- 117.3 5,200 ---- ----- Total 62.8 1,206.5 Undeveloped Total Developed/ 1,239.3 1,388.9 Undeveloped DEVELOPED LIGNITE MINING OPERATIONS ----------------------------------- AVERAGE SULFUR 2001 SALES PROJECT MINING CONTENT PER UNIT TONNAGE CONTRACT SUBSIDIARIES OF WEIGHT CUSTOMER(S) (PLANT) (MILLIONS) EXPIRES - --------------- -------- ------------------- ---------- ------- The Coteau Properties 0.8% Dakota Coal Company 6.2 2007(3) Company (Great Plains Synfuels Plant) Dakota Coal Company 5.3 2007(3) (Antelope Valley Station) Dakota Coal Company 3.1 2007(3) (Leland Olds Station) Dakota Coal Company 1.1 2002 (Stanton Station of United Power Association) The Falkirk Mining 0.6% United Power Association/ 7.7 2020 Company Cooperative Power Association (Coal Creek Station) The Sabine Mining Company (4) Southwestern Electric 3.2 2020 Power Company (Henry W. Pirkey Power Plant) OTHER San Miguel Lignite Mining (5) San Miguel Electric 3.4 2007 Cooperative, Inc. Operations (San Miguel Power Plant) Red River Mining Company 0.7% CLECO Utility Group, Inc./ 0.9 2010 Southwestern Electric Power Company (Dolet Hills Power Plant) Mississippi Lignite 0.6% Choctaw Generation Limited 0.5 2032 Mining Company Partnership (Red Hills Power Plant) UNDEVELOPED MINING OPERATI - -------------------------- North Dakota 0.8% ---- ---- ---- Texas 1.0% ---- ---- ---- Eastern 3.3% ---- ---- ---- Mississippi 0.6% ---- ---- ---- Tennessee 0.7% ---- ---- ----
(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. 3 GOVERNMENT REGULATION NACoal, like other coal producers, continues to be subject to Federal and state health, safety and environmental regulations. The 2002 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 $3.2 million for certain closed mines and are included in the caption "Other current liabilities" in NACCO's Consolidated Financial Statements contained in Part IV hereof. 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 was the ninth largest coal producer in the United States in 2001 based on total coal tons sold. EMPLOYEES As of February 28, 2002, NACoal had approximately 1,100 employees. B. NACCO MATERIALS HANDLING GROUP 1. NMHG WHOLESALE GENERAL NMHG Wholesale is a leading worldwide designer, manufacturer and marketer of forklift trucks, which comprise the largest segment of the materials handling equipment industry. THE INDUSTRY Forklift trucks are used in a wide variety of business applications, including manufacturing, warehousing and retailing. 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. From 1990 through 2000, the worldwide market for forklift trucks gradually increased to approximately 600,000 units. Although individual geographic markets have been subject to cyclicality over this time, all markets worldwide fell during 2001 as a result of the declining global economy. In 2001, the worldwide market decreased to a level of approximately 560,000 units. A substantial portion of this decrease was a result of the decline in the North American market from approximately 224,000 units in 2000 to approximately 161,000 units in 2001. 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 brand names. 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 brand name "Sumitomo" and which are exported for sale by NMHG Wholesale and its affiliates in the Americas, Europe and Asia-Pacific under the Hyster and Yale brand names. 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 81%, 81% and 82% of NMHG Wholesale's net sales in 2001, 2000 and 1999, respectively. 4 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 19%, 19% and 18% of NMHG Wholesale's net sales in 2001, 2000 and 1999, respectively. For further information on geographic regions, see Note 19 to the Consolidated Financial Statements contained in Part IV hereof. COMPETITION Although there is no official source for information on the subject, NMHG believes that in 2001 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, including NMHG, has a significantly greater market position on a unit volume basis than the other manufacturers. Competition among forklift truck manufacturers is based primarily on strength and quality of product line, product performance, product quality and features, and cost of ownership over the life of the truck. 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 2001 range from 7.36% 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. All of NMHG Wholesale's major Japanese competitors have either built or acquired manufacturing or assembly facilities in the United States. The legislation implementing the Uruguay round of GATT negotiations passed in 1994 provided for the antidumping order to be reviewed for possible retirement in 2000. NMHG Wholesale opposed retirement of the order and the 2000 review did not result in retirement of the antidumping duty. 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 $44.7 million, $43.9 million and $41.4 million on product design and development activities in 2001, 2000 and 1999, 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. In addition, certain product design and development activities with respect to ICE forklift trucks and some components are performed in Japan by S-N. S-N spent approximately $3.2 million, $4.0 million and $4.1 million on product design and development in 2001, 2000 and 1999, respectively. 5 BACKLOG As of December 31, 2001, NMHG Wholesale's backlog of unfilled orders for forklift trucks was approximately 15,100 units, or $266 million, of which substantially all is expected to be filled during fiscal 2002. This compares to the backlog as of December 31, 2000 of approximately 21,800 units, or $373 million. Decreased product demand, primarily in the Americas, caused the decrease in backlog levels. Backlog represents unit orders to NMHG Wholesale's manufacturing plants from NMHG Retail, 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 NMHG Wholesale has a joint venture agreement and other agreements with General Electric Capital Corporation ("GE Capital") under which GE Capital furnishes leasing and financing services to selected Hyster dealers in the United States and Canada in addition to the Yale dealers GE Capital was already supporting under a prior 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 outside of the United States and Canada and makes referral fee payments to NMHG Wholesale once certain financial thresholds are reached. Each of these agreements expire in 2003. EMPLOYEES As of February 28, 2002, NMHG Wholesale had approximately 6,000 employees. Employees in the Danville, Illinois manufacturing and parts depot operations (approximately 150 employees) are unionized, as are tool room employees (approximately 18 employees) located in Portland, Oregon. A two-year contract with the Portland tool room union expires in 2003. 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 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. However, there can be no assurances that NMHG Wholesale will be able to successfully renegotiate its union contracts without work stoppages or on acceptable terms. 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, particularly with respect to engine emission levels. 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. Yale is a registered trademark of NMHG Wholesale used in connection with the manufacture and sale of forklift trucks and related components, and 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. 6 FOREIGN OPERATIONS For a description of revenues and other financial information by geographic region, see Note 19 to the Consolidated Financial Statements contained in Part IV hereof. 2. NMHG RETAIL GENERAL From time to time, NMHG, through NMHG Retail, acquires, on an interim basis, certain independent Hyster, Yale and competitor dealers and rental companies to strengthen or protect Hyster's or Yale's presence in select territories. NMHG Retail has one dealership in the United States, five dealerships and rental companies in Europe and three dealerships and rental companies in Asia-Pacific. 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. Forklifts are also leased on a short- and long-term basis at the retail level by dealerships and independent rental companies. COMPANY OPERATIONS An NMHG Retail dealership is authorized to sell and rent 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 short- or long-term rental. 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 include OEM-owned dealers, OEM direct sales efforts, independently owned competitive dealerships and forklift rental outlets, independent parts operations, independent service shops and, to a lesser extent, independent Hyster or Yale dealers. 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 NMHG Retail's revenues during 2001. 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 have a preferred relationship with GE Capital. In the United States, 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. 7 EMPLOYEES As of February 28, 2002, NMHG Retail had approximately 1,500 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's management believes that the impact of any environmental remediation and compliance costs will not have a material adverse effect on NMHG Retail. FOREIGN OPERATIONS For a description of revenues and other financial information by geographic region, see Note 19 to the Consolidated Financial Statements contained in Part IV hereof. C. NACCO HOUSEWARES GROUP GENERAL NACCO Housewares Group consists of HB-PS and KCI. HB-PS believes that it is one of the largest full-line manufacturers and marketers 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 168 retail stores as of December 31, 2001. Stores are located primarily in factory outlet complexes that feature merchandise of highly recognizable name-brand manufacturers, including HB-PS. SALES AND MARKETING HB-PS manufactures and markets a wide range of small electric household appliances, including motor-driven appliances such as blenders, mixers, can openers and food processors, and heat-driven appliances such as coffeemakers, irons, toasters, slow cookers, indoor grills and toaster ovens. In 2000, HB-PS entered the home environment market with a line of humidifiers, air purifiers and odor eliminators. HB-PS also makes commercial products for restaurants, bars and hotels. HB-PS generally markets its "better" and "best" segments under the Hamilton Beach brand and uses the Proctor-Silex(R) brand for the "good" and "better" segments. In addition, HB-PS supplies Wal-Mart with GE-branded kitchen electric and garment-care appliances under Wal-Mart's license agreement with General Electric Company and, in 2001, launched a home odor elimination product under the TrueAir brand name. HB-PS 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, specialty home retailers and other retail outlets. Principal customers during 2001 included Wal-Mart, Kmart, Target, Canadian Tire, Family Dollar, Ames, Sears, Bed, Bath & Beyond, Dollar General, Home Depot and Zellers. Sales promotion 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. As of December 31, 2001, backlog for HB-PS was approximately $3.2 million. This compares with the backlog as of December 31, 2000 of approximately $6.6 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 varying periods of up to three 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 in anticipation of the fall holiday selling season. PRODUCT DESIGN AND DEVELOPMENT The Housewares Group spent $7.3 million in 2001, $8.0 million in 2000 and $6.6 million in 1999 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, glass, plastic and packaging materials. HB-PS' management believes that adequate quantities of raw materials are available from various suppliers. 8 COMPETITION The small electric household appliance industry is highly competitive. Based on publicly available information about the industry, HB-PS' management believes it is one of the largest full-line manufacturers and marketers 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. Since 1996, HB-PS has also conducted consumer advertising for the Hamilton Beach brand. In 2001, this advertising focused on the Hamilton Beach and TrueAir brands. 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. Because 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 28, 2002, Housewares' work force consisted of approximately 4,600 employees, most of which are not represented by unions. In Canada, approximately 16 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 6, 2002, a collective bargaining agreement, which expires on January 28, 2003, was executed for HB-PS' Saltillo, Mexico manufacturing facility. There are approximately 1,640 employees subject to the terms of the Saltillo agreement. The management of HB-PS and KCI believe their current labor relations with both union and non-union employees are satisfactory. However, there can be no assurances that HB-PS will be able to successfully renegotiate its union contracts without work stoppages or on acceptable terms. A prolonged work stoppage at a unionized facility could materially adversely affect Housewares' business and results of operations. 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 2.6 billion tons, all of which are lignite deposits, except for approximately 128 million tons of bituminous coal. 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. North American Coal -- Sales, Marketing and Operations." 9 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 and assembly of forklift trucks Craigavon, Northern Ireland X Manufacture and assembly of forklift trucks Danville, Illinois (1) X Manufacture and assembly of forklift trucks 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, manufacture and assembly of forklift trucks Irvine, Scotland X NMHG European division headquarters; manufacture and assembly of forklift trucks Lenoir, North Carolina X Manufacture and assembly of component parts for forklift trucks Masate, Italy X Manufacture and assembly of forklift trucks Modena, Italy X Manufacture and assembly of forklift trucks Nijmegen, the Netherlands X Design, manufacture and assembly of forklift trucks and component parts; distribution of service parts for forklift trucks Fairview, 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 Manufacture of component parts for forklift trucks Sao Paulo, Brazil X Assembly of forklift trucks; distribution of service parts for forklift trucks Shanghai, China X Assembly of 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
- ------------------------ (1) As of December 31, 2001, NMHG had substantially eliminated all manufacturing and assembly at this facility. S-N's operations are supported by two facilities. S-N's headquarters are located in Obu, Japan at an owned facility. The Obu facility also has manufacturing and distribution capabilities. In Cavite, the Phillipines, S-N owns a facility for the manufacture of component parts for Sumitomo-Yale products. 10 2. NMHG RETAIL NMHG Retail, through its subsidiaries, currently operates its 19 owned dealerships from 62 locations. Of these 62 locations, 8 are in the United States, 25 are in Europe and 29 are in Asia-Pacific as shown below: United States: Kentucky(1) Ohio(5) Pennsylvania(1) West Virginia(1) Europe: France(17) Germany(3) Netherlands(1) United Kingdom(4) Asia-Pacific: Australia(28) Singapore(1) Branch locations generally include facilities for displaying equipment, storing rental equipment, servicing equipment, parts storage and sales and administrative offices. NMHG Retail owns four of its branch locations and leases 58 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 Manufacturing and assembly of heat-driven products (two plants); plastic molding facility (one plant) Memphis, Tennessee X Distribution center Picton, Ontario, Canada X Distribution center Southern Pines, North Carolina X Assembly 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, Coahuila, Mexico X Manufacture and assembly of heat-driven and motor products; plastic molding and metal stamping facility
Sales offices are also leased in several cities in the United States, Canada and Mexico. 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. 11 ITEM 3. LEGAL PROCEEDINGS Neither the Company nor any of its subsidiaries is a party to any material pending legal proceeding other than ordinary routine litigation incidental to its respective business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders of the Company. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The information under this Item is furnished pursuant to Instruction 3 to 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 tables on the following pages set forth the name, age, current position and principal occupation and employment during the past five years of the Company's executive officers. 12 EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Alfred M. Rankin, Jr. 60 Chairman, President and Chief Executive Officer of NACCO (since prior to 1997) Charles A. Bittenbender 52 Vice President, General Counsel and Secretary of NACCO (since prior to 1997) Kenneth C. Schilling 42 Vice President and Controller of NACCO From prior to 1997 to May 1997, Controller (since May 1997) of NACCO. J.C. Butler, Jr. 41 Vice President - Corporate Development From prior to 1997 to May 1997, Manager of and Treasurer of NACCO (since May 1997) Corporate Development and Treasurer of NACCO. Lauren E. Miller 47 Vice President - Consulting Services of From prior to 1997 to May 1997, Director NACCO (since May 1997) of Internal Consulting of NACCO. Constantine E. Tsipis 43 Assistant General Counsel and Assistant From October 1997 to May 2000, Assistant Secretary of NACCO (since May 2000) General Counsel of NACCO. From prior to 1997 to October 1997, Associate General Counsel, STERIS Corporation (manufacturer and distributor of medical and sterilizing equipment).
13 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES A. NACOAL
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Clifford R. Miercort 62 President and Chief Executive Officer of NACoal (since prior to 1997) Charles B. Friley 60 Senior Vice President - Finance and From prior to 1997 to August 1999, Vice Chief Financial Officer of NACoal President and Chief Financial Officer of (since August 1999) NACoal. Robert L. Benson 54 Vice President - Eastern and Southern Since March 1997, General Manager of Operations of NACoal (since September Mississippi Lignite Mining Company (a 2001) subsidiary of NACoal). From March 1997 to September 2001, Operations Manager, NACoal. From prior to 1997 to February 1997, President of The Coteau Properties Company (a subsidiary of NACoal). Thomas A. Koza 55 Vice President - Law and Administration, and Secretary of NACoal (since prior to 1997) Clark A. Moseley 50 Vice President - Business Development From June 1997 to December 2001, Vice and Engineering of NACoal (since President - Engineering of NACoal. From January 2002) prior to 1997 to June 1997, Manager, Engineering and Project Development, NACoal. K. Donald Grischow 54 Controller and Treasurer of NACoal (since prior to 1997)
14 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES B. NMHG
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Reginald R. Eklund 61 President and Chief Executive Officer of NMHG (since prior to 1997) Michael P. Brogan 52 Senior Vice President, Product From May 1999 to June 2000, Vice Development and Procurement of NMHG President, Warehouse Product Strategy of (since June 2000) NMHG. From prior to 1997 to May 1999, Managing Director of NACCO Materials Handling S.R.L. (Italy) (a subsidiary of NMHG Wholesale). Richard H. Close 43 Vice President of NMHG; Managing From March 1999 to July 2001, Managing Director, NMHG Europe, Africa and Director of Lex Industrial Machinery (a Middle East (since August 2001) provider of industrial machinery management solutions). From prior to 1997 to March 1999, Franchise Director of Lex Retail Group (a provider of vehicle management solutions). Ron J. Leptich 58 Vice President, Engineering and Big From prior to 1997 to October 1997, Vice Trucks of NMHG (since October 1997) President, Engineering and Big Trucks, Worldwide of NMHG. Geoffrey D. Lewis 44 Vice President, Corporate Development, From prior to 1997 to June 1999, Vice General Counsel and Secretary of NMHG President, General Counsel and Secretary (since June 1999) of NMHG. Jeffrey C. Mattern 49 Treasurer of NMHG (since prior to 1997) Frank G. Muller 60 Vice President of NMHG; President, NMHG Americas (since prior to 1997) Victoria L. Rickey 49 Vice President, Chief Strategy Officer From prior to 1997 to June 2001, Vice of NMHG (since July 2001) President of NMHG; Managing Director, NMHG Europe, Africa and Middle East. Edward W. Ryan 63 Vice President, Marketing of NMHG (since prior to 1997); President, NMHG Asia-Pacific, China and Japan (since prior to 1997) Raymond C. Ulmer 38 Controller of NMHG (since December 2000) From April 1997 to December 2000, Director of Financial Planning and Analysis, NMHG. From prior to 1997 to April 1997, Plant Controller - Greenville.
15 PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES C. NACCO HOUSEWARES GROUP 1. HB-PS
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Michael J. Morecroft 59 President and Chief Executive Officer From January 1997 to January 2001, Senior of HB-PS (since January 2001) Vice President - Engineering/Product Development of HB-PS. Keith B. Burns 45 Vice President - Engineering and New From April 1999 to March 2001, Vice Product Development of HB-PS (since President, Purchasing of HB-PS. From March 2001) November 1998 to April 1999, Director of Product Engineering of HB-PS. From prior to 1997 to October 1998, Manager, Product Engineering of HB-PS. Kathleen L. Diller 50 Vice President, General Counsel and From May 1998 to August 2001, Assistant Secretary of HB-PS (since August 2001) General Counsel and Assistant Secretary, Cooper Tire & Rubber Company (developer, manufacturer and marketer of primarily rubber-based products for the transportation industry). From prior to 1997 to April 1998, Senior Division Counsel, Owens Corning (manufacturer of building materials systems and composites systems). Charles B. Hoyt 54 Senior Vice President - Finance and Chief Financial Officer of HB-PS (since January 1997) Judith B. McBee 54 Senior Vice President - Marketing of HB-PS (since January 1997) Paul C. Smith 55 Senior Vice President - Sales of HB-PS (since prior to 1997) James H. Taylor 44 Vice President and Treasurer of HB-PS (since prior to 1997)
2. KCI
NAME AGE CURRENT POSITION OTHER POSITIONS - ---- --- ---------------- --------------- Randolph J. Gawelek 54 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 1997 to December 1998, Executive Vice President and Secretary of KCI.
16 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' 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:
2001 -------------------------------------------------------- SALES PRICE -------------------------------------- CASH HIGH LOW DIVIDEND ------------------- ----------------- --------------- FIRST QUARTER $71.00 $42.50 22.50(CENT) SECOND QUARTER $79.10 $60.59 23.50(CENT) THIRD QUARTER $82.80 $44.25 23.50(CENT) FOURTH QUARTER $65.00 $45.25 23.50(CENT) 2000 -------------------------------------------------------- Sales Price -------------------------------------- Cash High Low Dividend ------------------- ----------------- --------------- First quarter $55.75 $39.50 21.50(cent) Second quarter $51.25 $33.56 22.50(cent) Third quarter $47.50 $34.25 22.50(cent) Fourth quarter $44.50 $35.63 22.50(cent)
At December 31, 2001, there were approximately 500 Class A common stockholders of record and 400 Class B common stockholders of record. 17 ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31 ----------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ----------- ----------- ----------- ----------- ----------- (In millions, except per share and employee data) Revenues $ 2,637.9 $ 2,871.3 $ 2,635.9 $ 2,569.3 $ 2,276.0 Operating profit $ 5.7 $ 117.9 $ 131.3 $ 198.1 $ 132.0 Income (loss) before extraordinary gain and cumulative effect of accounting changes $ (34.7) $ 37.8 $ 54.3 $ 102.3 $ 61.8 Extraordinary gain, net-of-tax --- 29.9 --- --- --- Cumulative effect of accounting changes, net-of-tax (1.3) --- (1.2) --- --- ----------- ----------- ----------- ----------- ----------- Net income (loss) $ (36.0) $ 67.7 $ 53.1 $ 102.3 $ 61.8 =========== =========== =========== =========== =========== Total assets $ 2,161.9 $ 2,193.9 $ 2,013.0 $ 1,898.3 $ 1,729.1 Long-term debt $ 248.1 $ 450.0 $ 326.3 $ 256.4 $ 230.2 Stockholders' equity $ 529.3 $ 606.4 $ 562.2 $ 518.3 $ 425.1 EBITDA* $ 78.1 $ 164.7 $ 182.6 $ 243.6 $ 170.7 Basic earnings per share: Income (loss) before extraordinary gain and cumulative effect of accounting changes $ (4.24) $ 4.63 $ 6.67 $ 12.56 $ 7.56 Extraordinary gain, net-of-tax --- 3.66 --- --- --- Cumulative effect of accounting changes, net-of-tax (.16) --- (.15) --- --- ----------- ----------- ----------- ----------- ----------- Net income (loss) $ (4.40) $ 8.29 $ 6.52 $ 12.56 $ 7.56 =========== =========== =========== =========== =========== Diluted earnings per share: Income (loss) before extraordinary gain and cumulative effect of accounting changes $ (4.24) $ 4.63 $ 6.66 $ 12.53 $ 7.55 Extraordinary gain, net-of-tax --- 3.66 --- --- --- Cumulative effect of accounting changes, net-of-tax (.16) --- (.15) --- --- ----------- ----------- ----------- ----------- ----------- Net income (loss) $ (4.40) $ 8.29 $ 6.51 $ 12.53 $ 7.55 =========== =========== =========== =========== =========== Per share data: Cash dividends $ .930 $ .890 $ .850 $ .810 $ .773 Market value at December 31 $ 56.79 $ 43.69 $ 55.56 $ 92.00 $ 107.19 Stockholders' equity at December 31 $ 64.58 $ 74.21 $ 68.92 $ 63.83 $ 52.13 Average shares outstanding 8.190 8.167 8.150 8.147 8.171 Total employees 13,500 17,200 16,000 14,100 13,400
* EBITDA represents income before taxes, minority interest, extraordinary gain and cumulative effect of accounting changes plus net interest and depreciation, depletion and amortization. However, interest expense, depreciation, depletion and amortization attributable to project mining subsidiaries are not included. 18 ITEM 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, Store and Percentage Data) NACCO Industries, Inc. ("NACCO," the parent company) and its wholly owned subsidiaries (collectively, the "Company") operate in three distinct industries: lignite mining, lift trucks and housewares. Results of operations and financial condition are discussed separately by segment, which corresponds with the industry groupings, except that the Company segments its lift truck operations into two components: wholesale manufacturing and retail distribution. Results by segment are also summarized in Note 19 to the Consolidated Financial Statements. The North American Coal Corporation ("NACoal") mines and markets lignite primarily as fuel for power providers. 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, services and leases a full line of lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. 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 and rental companies. NMHG Retail includes the sale, leasing and service of Hyster and Yale lift trucks and related service parts by wholly owned retail dealerships and rental companies. NACCO Housewares Group ("Housewares") consists of Hamilton BeachoProctor-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. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to product discounts and returns, bad debts, inventories, income taxes, warranty obligations, product liabilities, restructuring, closed-mine obligations, pensions and other post-retirement benefits, and contingencies and litigation. The Company bases its estimates on historical experience, actuarial valuations and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. PRODUCT LIABILITIES: The Company provides for the estimated cost of personal and property damage relating to the Company's products. Reserves are made for estimates of the costs for known claims and estimates of the costs of incidents that have occurred but a claim has not yet been reported to the Company. While the Company engages in extensive product quality reviews and customer education programs, the Company's product liability provision is affected by the number and magnitude of claims of alleged product-related damage and the cost to defend those claims. In addition, the provision for product liabilities is also affected by changes in assumptions for medical costs, inflation rates, trends in damages awarded by juries and estimates of the number of claims that have been incurred but not yet reported. Changes to the estimate of any of these factors could result in a material change to the Company's product liability provision causing a related increase or decrease in reported net operating results in the period of change in the estimate. CLOSED-MINE OBLIGATIONS: The Company's wholly owned subsidiary, Bellaire Corporation ("Bellaire"), is a non-operating subsidiary with legacy liabilities relating to closed mining operations, primarily former Eastern U.S. underground mining operations. These legacy liabilities include obligations for Black Lung and other retiree medical benefits, environmental clean-up and obligations to the United Mine Workers of America Combined Benefit Fund arising as a result of the Coal Industry Retiree Health Benefit Act of 1992. Provisions made by Bellaire for these liabilities include estimates of the number of beneficiaries assigned to Bellaire, health care trend rates, inflation rates, cost of ongoing environmental clean-up, discount factors and legal costs to defend claims. In addition, these liabilities can be influenced by judicial proceedings and changes in regulations made by government agencies. The Company continually monitors the regulatory climate which could influence these liabilities as well as its assumptions used to develop accruals for these liabilities. Changes in any of these factors could materially change the Company's estimates for these closed-mine obligations causing a related increase or decrease in reported net operating results in the period of change in the estimate. REVENUE RECOGNITION: Revenues are generally recognized when customer orders are completed and shipped. Reserves for discounts, returns and product warranties are maintained for anticipated future claims. The accounting policies used to develop these product discounts, returns and warranties include: 19 ITEM 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, Store and Percentage Data) PRODUCT DISCOUNTS: The Company records estimated reductions to revenues for customer programs and incentive offerings including special pricing agreements, price competition, promotions and other volume-based incentives. If market conditions were to decline or if competition was to increase, the Company may take actions to increase customer incentive offerings possibly resulting in an incremental reduction of revenues at the time the incentive is offered. PRODUCT RETURNS: Based on the Company's historical experience, a portion of products sold are estimated to be returned due to reasons such as buyer remorse, duplicate gifts received, product failure and excess inventory stocked by the customer which, subject to certain terms and conditions, the Company will agree to accept. The Company records estimated reductions to revenues at the time of sale based on this historical experience. If future trends were to change significantly from those experienced in the past, incremental reductions to revenues may result based on this new experience. PRODUCT WARRANTIES: The Company provides for the estimated cost of product warranties at the time revenues are recognized. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company's warranty obligation is affected by product failure rates, material usage and replacement component costs incurred in correcting a product failure. Should actual product failure rates, material usage or replacement component costs differ from the Company's estimates, revisions to the estimated warranty liability would be required. ALLOWANCES FOR DOUBTFUL ACCOUNTS: The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. INVENTORY RESERVES: The Company writes down its inventory for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. DEFERRED TAX VALUATION ALLOWANCES: The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount (including the valuation allowance), an adjustment to the deferred tax asset would increase income in the period such determination was made. Conversely, should the Company determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be expensed in the period such determination was made. 20 ITEM 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, Store and Percentage Data) FINANCIAL SUMMARY Selected consolidated operating results of the Company were as follows:
2001 2000 1999 -------------- ------------ ------------- CONSOLIDATED OPERATING RESULTS: Income (loss) before extraordinary gain and cumulative effect of accounting changes $ (34.7) $ 37.8 $ 54.3 Extraordinary gain, net-of-tax(1) --- 29.9 --- Cumulative effect of accounting changes, net-of-tax(2)(3) (1.3) --- (1.2) -------------- ------------ ------------- Net income (loss) $ (36.0) $ 67.7 $ 53.1 ============== ============ ============= DILUTED EARNINGS PER SHARE: Income (loss) before extraordinary gain and cumulative effect of accounting changes $ (4.24) $ 4.63 $ 6.66 Extraordinary gain, net-of-tax(1) --- 3.66 --- Cumulative effect of accounting changes, net-of-tax(2)(3) (.16) --- (.15) -------------- ------------ ------------- Net income (loss) $ (4.40) $ 8.29 $ 6.51 ============== ============ =============
(1) An extraordinary gain was recognized in 2000 as a result of a reduction to Bellaire Corporation's closed mine obligations relating to amounts owed to the United Mine Workers of America Combined Benefit Fund arising as a result of the Coal Industry Retiree Health Benefit Act of 1992. See also discussion in Note 4 to the Consolidated Financial Statements. (2) A cumulative effect of a change in accounting was recognized in 1999 for a change in the accounting for start-up costs at NACoal. Prior to 1999, certain start-up costs were deferred and amortized over the life of the related mine. These previously deferred start-up costs were written off as a cumulative effect of a change in accounting as required by Statement of Position 98-5, "Reporting on the Costs of Start-up Activities." See also discussion in Note 2 to the Consolidated Financial Statements. (3) Cumulative effects of changes in accounting were recognized in 2001 as a result of the adoption of Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" and for a change in calculating pension costs. See discussion in Note 2 to the Consolidated Financial Statements. The following schedule identifies the components of the changes in consolidated revenues, operating profit and income (loss) before extraordinary gain and cumulative effect of accounting changes for 2001 compared with 2000:
Income (loss) before extraordinary gain and cumulative effect of Operating accounting Revenues Profit changes --------------- --------------- ------------------ 2000 $ 2,871.3 $ 117.9 $ 37.8 Increase (decrease) in 2001 NACoal 44.1 30.3 13.0 NMHG Wholesale (286.7) (84.6) (49.8) NMHG Retail 27.0 (24.1) (19.6) Housewares (17.8) (35.8) (21.0) NACCO & Other --- 2.0 4.9 --------------- --------------- ------------------ 2001 $ 2,637.9 $ 5.7 $ (34.7) =============== =============== ==================
Following is a discussion of operating results by segment, including those items that materially affect the year-to-year comparison within each of the segment discussions. 21 ITEM 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, Store and Percentage Data) THE NORTH AMERICAN COAL CORPORATION NACoal mines and markets lignite primarily as fuel for power providers. The lignite is surface mined in North Dakota, Texas, Louisiana and Mississippi. Total coal reserves approximate 2.6 billion tons, with 1.2 billion tons committed to customers pursuant to long-term contracts. NACoal operates six wholly owned lignite mines: The Coteau Properties Company ("Coteau"), The Falkirk Mining Company ("Falkirk"), The Sabine Mining Company ("Sabine"), San Miguel Lignite Mine ("San Miguel"), Red River Mining Company ("Red River") and Mississippi Lignite Mining Company ("MLMC"). NACoal also provides dragline mining services ("Florida dragline operations") for a limerock quarry near Miami, Florida. The operating results of Coteau, Falkirk and Sabine are included in "project mining subsidiaries." The operating results of all other operations are included in "other mining operations." FINANCIAL REVIEW NACoal's subsidiaries, Coteau, Falkirk and Sabine, are termed "project mining subsidiaries" because they mine lignite for utility customers pursuant to long-term contracts at a price 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 for NACoal are best analyzed in terms of lignite tons sold, income before taxes and net income. During 2001, MLMC continued development of the mine area, but has been able to deliver lignite to its customer throughout the year. MLMC delivered, for testing purposes, a relatively small amount of lignite to its customer's power plant in 2001. As of December 31, 2001, the customer's power plant, however, had not yet reached Commercial Operations Date ("COD"), as defined in the lignite sales agreement. As a result, MLMC has been receiving monthly liquidated damages payments, as provided in the lignite sales agreement since January 2001. Subsequent to December 31, 2001, the Company was notified that MLMC's customer declared COD on March 1, 2002. MLMC does not expect to continue to receive liquidated damages payments related to the ongoing operations of the mine upon confirmation of COD. In addition, during the first few months after COD, the plant may not be able to take the anticipated annual full production level of 3.5 million tons due to a scheduled power plant outage. Lignite tons sold by NACoal's operating lignite mines were as follows for the year ended December 31:
2001 2000 1999 -------------- -------------- -------------- Coteau 15.7 16.2 16.4 Falkirk 7.7 7.7 7.2 Sabine 3.2 3.5 3.6 San Miguel 3.4 3.4 3.4 Red River .9 .8 .7 MLMC .5 --- --- -------------- -------------- -------------- Total lignite 31.4 31.6 31.3 ============== ============== ==============
The Florida dragline operations mined 8.7 million, 7.9 million, and 8.4 million cubic yards of limerock for the years ended December 31, 2001, 2000 and 1999, respectively. Total coal reserves declined to 2.6 billion at December 31, 2001 from 2.8 billion at December 31, 2000 primarily due to the expiration of non-renewable coal leases in undeveloped areas and tons mined. 22 ITEM 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, Store and Percentage Data) Revenues, income before taxes, income tax provision (benefit) and net income were as follows for the year ended December 31:
2001 2000 1999 ---------------- ------------ -------------- Revenues Project mining subsidiaries $ 260.9 $ 250.5 $ 239.9 Other mining operations 47.6 36.8 35.1 ---------------- ------------ -------------- 308.5 287.3 275.0 Liquidated damages payments recorded by MLMC 20.5 --- --- Arbitration award received by San Miguel 1.1 --- --- Royalties and other 3.2 1.9 2.7 ---------------- ------------ -------------- $ 333.3 $ 289.2 $ 277.7 ================ ============ ============== Income before taxes Project mining subsidiaries $ 25.8 $ 25.5 $ 25.9 Other mining operations 23.9 (1.6) 2.7 ---------------- ------------ -------------- Total income from operating mines 49.7 23.9 28.6 Royalty income and other income (expense), net (9.3) (4.0) 1.2 Other operating expenses (5.8) (7.4) (7.6) ---------------- ------------ -------------- Income before tax provision (benefit) 34.6 12.5 22.2 Income tax provision (benefit) 9.0 (.1) 4.5 ---------------- ------------ -------------- Income before cumulative effect of accounting change 25.6 12.6 17.7 Cumulative effect of accounting change --- --- (1.2) ---------------- ------------ -------------- Net income $ 25.6 $ 12.6 $ 16.5 ================ ============ ==============
2001 COMPARED WITH 2000 Revenues for 2001 increased to $333.3 million, up 15.2 percent from $289.2 million in 2000. Revenues increased in 2001 as compared with 2000 primarily due to (i) $20.5 million of contractual liquidated damages payments recorded by MLMC due to a delay of the commercial operation of the customer's power plant, (ii) increased revenues from project mines, (iii) initial lignite sales at MLMC and (iv) a slight increase in tons sold at Red River. Net tonnage volume decreased at the project mining subsidiaries due to a customer's plant outage at Falkirk and reduced customer requirements at Coteau and Sabine. Although tonnage volume decreased, revenues from the project mining subsidiaries increased primarily as a result of an increase in pass through costs at Sabine. Income before taxes increased to $34.6 million in 2001 from $12.5 million in 2000. This increase is primarily due to (i) the contractual liquidated damages payments recorded by MLMC, (ii) initial lignite sales at MLMC, and (iii) increased tonnage volume at Red River. These increases were partially offset by higher interest expense. Net income in 2001 increased to $25.6 million from $12.6 million in 2000 as a result of these factors, partially offset by an increase in the 2001 effective tax rate as compared with 2000. See effective tax rate discussion below. 2000 COMPARED WITH 1999 Revenues for 2000 increased as compared with 1999 primarily due to increased pass-through costs at Coteau and Sabine and increased tonnage volume at Falkirk and Red River. Income before taxes for 2000 declined as compared with 1999 primarily due to: (i) increased maintenance, administration and fuel costs at San Miguel, which is not operated on a cost-plus basis, (ii) a write-off of $2.4 million in 2000 of previously capitalized development costs incurred for a power plant and mine development project in Turkey which NACoal no longer intends to pursue, (iii) charges paid to NACCO for services provided by the parent company, which began in 2000, and (iv) reduced royalty income. The decline in net income in 2000 as compared with 1999 as a result of these factors was partially offset by (i) a non-recurring cumulative effect of accounting change expense recognized in 1999 for the write-off of previously capitalized start-up costs and (ii) favorable tax adjustments in 2000 relating to the resolution of tax issues provided for in prior years. 23 ITEM 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, Store 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:
2001 2000 1999 --------------- -------------- -------------- Interest expense Project mining subsidiaries $ (16.4) $ (16.9) $ (17.6) Other mining operations (10.0) (.7) --- --------------- -------------- -------------- $ (26.4) $ (17.6) $ (17.6) =============== ============== ============== Other-net Project mining subsidiaries $ .2 $ .4 $ .1 Other mining operations (1.1) (.9) .3 --------------- -------------- -------------- $ (.9) $ (.5) $ .4 =============== ============== ============== Effective tax rate 26.0% (.7)% 19.1%
Interest expense from other mining operations increased in 2001 as compared with 2000 and 1999 primarily due to debt allocated to Red River and MLMC as a result of the October 2000 acquisition of the remaining interests in those mines. Interest expense on debt allocated to finance MLMC was being capitalized prior to the second quarter of 2001 as part of the mine development activities. Beginning in the second quarter of 2001 as a result of the effective completion of the initial mine development phase at MLMC, interest expense on debt allocated to finance MLMC is being expensed. Interest expense at the project mines decreased in 2001 and 2000 as compared with 1999 primarily due to a decrease in interest rates. Other-net from other mining operations includes a charge from the parent company of $1.1 million and $1.0 million, in 2001 and 2000, respectively, for fees incurred by NACCO on NACoal's behalf. The effective tax rate increase in 2001 as compared with 2000 and 1999 is primarily due to a greater proportion of income from operations not currently eligible to record a permanent tax benefit from percentage depletion. The effective tax rate in 2000 reflects an income tax benefit on pre-tax income primarily due to both the increased effect of percentage depletion and a nonrecurring adjustment for the resolution of certain tax issues provided for in prior years. LIQUIDITY AND CAPITAL RESOURCES NACoal's non-project mine financing needs are provided by a revolving line of credit of up to $60.0 million and a remaining term loan of $100.0 million (the "NACoal Facility"). The NACoal Facility requires annual term loan repayments of $15.0 million, with a final term loan repayment of $55.0 million in October 2005. The revolving credit facility of $60.0 million is available until the facility's expiration in October 2005. The NACoal Facility has performance-based pricing, which sets interest rates based upon achieving various levels of Debt to EBITDA ratios, as defined. The NACoal Facility establishes financial targets which must be satisfied before NACoal can make certain payments and dividends to NACCO or make significant investments. See further discussion of the terms of the NACoal Facility in Note 9 to the Consolidated Financial Statements. NACoal had $29.0 million of its $60.0 million revolving credit facility available at December 31, 2001. Following is a table which summarizes the contractual obligations of NACoal, excluding the obligations of the project mining subsidiaries. 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. As such, these contractual obligations, which are discussed in further detail in Note 12 to the Consolidated Financial Statements, have been excluded from the table below.
PAYMENTS DUE BY PERIOD NACOAL, EXCLUDING PROJECT MINES, ------------------------------------------------------------------------ CONTRACTUAL OBLIGATIONS TOTAL 2002 2003 2004 2005 2006 THEREAFTER - -------------------------------------- ------- ------ ------- ------- ------- ------ ---------- NACoal Facility $ 131.0 $ 15.0 $ 15.0 $15.0 $ 86.0 $ --- $ --- Capital lease obligations including principal and interest 36.6 3.1 3.1 3.1 3.1 3.1 21.1 Off-balance-sheet operating leases 56.2 8.7 8.7 7.6 7.9 6.8 16.5 ------- ------ ------ ----- ------ ----- ------ Total contractual cash obligations $ 223.8 $ 26.8 $ 26.8 $25.7 $ 97.0 $ 9.9 $ 37.6 ======= ====== ====== ===== ====== ===== ======
24 ITEM 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, Store and Percentage Data) An event of default, as defined in the NACoal Facility agreement and in NACoal's operating and capital lease agreements, could cause an acceleration of the payment schedule. No such event of default has occurred or is anticipated to occur. 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 term loan principal repayments and its operating needs and commitments arising during the foreseeable future. Following is a table which summarizes actual and planned capital expenditures:
PLANNED ACTUAL ACTUAL CAPITAL EXPENDITURES 2002 2001 2000 --------------------------------------------------------- --------------- --------------- --------------- NACoal, excluding project mining subsidiaries $ 10.2 $ 18.9 $ 3.9 Project mining subsidiaries 36.5 18.3 15.3 --------------- --------------- --------------- Total NACoal $ 46.7 $ 37.2 $ 19.2 =============== =============== ===============
Increased capital expenditures in 2001 as compared with 2000 primarily relates to continued mine development at MLMC. Increased planned capital expenditures in 2002 as compared with actual expenditures in 2001 and 2000 at the project mining subsidiaries is primarily due to planned investments in mining equipment. Planned expenditures for 2002 at NACoal include $7.2 million for the continued development of MLMC. NACoal's capital structure, excluding the project mining subsidiaries, is presented below:
December 31 -------------------------------- 2001 2000 ---------------- -------------- Investment in project mining subsidiaries $ 4.9 $ 3.8 Other net tangible assets 127.6 95.2 Coal supply agreements, net 85.2 86.4 ---------------- -------------- Net assets 217.7 185.4 Advances from NACCO (12.3) (8.4) Other debt (156.5) (145.8) ---------------- -------------- Stockholder's equity $ 48.9 $ 31.2 ================ ============== Debt to total capitalization 78% 83%
The increase in net assets of $32.3 million is primarily due to an increase in net property, plant and equipment related to continued development at MLMC, including the capitalization of a lease covering several large pieces of equipment at MLMC. The increase in stockholder's equity is due to $25.6 million of net income for 2001 partially offset by an increase in accumulated other comprehensive loss relating to the adoption of SFAS No. 133 and dividends paid to NACCO. See Note 2 to the Consolidated Financial Statements for a discussion of the adoption of SFAS No. 133. NACCO MATERIALS HANDLING GROUP NMHG, through NMHG Wholesale and NMHG Retail, designs, engineers, manufactures, sells, services and leases a full line of lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG Retail includes the elimination of intercompany revenues and profits resulting from sales by NMHG Wholesale to NMHG Retail. 25 ITEM 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, Store and Percentage Data) FINANCIAL REVIEW The segment and geographic results of operations for NMHG were as follows for the year ended December 31:
2001 2000 1999 -------- -------- -------- Revenues Wholesale Americas $1,031.1 $1,291.6 $1,149.5 Europe, Africa and Middle East 363.9 394.6 406.3 Asia-Pacific 68.3 63.8 63.1 -------- -------- -------- 1,463.3 1,750.0 1,618.9 -------- -------- -------- Retail (net of eliminations) Americas 30.9 33.1 32.1 Europe, Africa and Middle East 106.8 97.3 83.0 Asia-Pacific 71.4 51.7 27.4 -------- -------- -------- 209.1 182.1 142.5 -------- -------- -------- NMHG Consolidated $1,672.4 $1,932.1 $1,761.4 ======== ======== ======== Operating profit (loss) Wholesale Americas $ 16.8 $ 85.9 $ 70.4 Europe, Africa and Middle East (13.7) 2.3 7.4 Asia-Pacific (1.8) (2.3) (3.3) -------- -------- -------- 1.3 85.9 74.5 -------- -------- -------- Retail (net of eliminations) Americas (2.4) (.9) (3.9) Europe, Africa and Middle East (34.8) (15.3) (10.6) Asia-Pacific (2.2) .9 (1.7) -------- -------- -------- (39.4) (15.3) (16.2) -------- -------- -------- NMHG Consolidated $ (38.1) $ 70.6 $ 58.3 ======== ======== ======== Operating profit (loss) excluding goodwill amortization Wholesale Americas $ 24.6 $ 93.8 $ 78.2 Europe, Africa and Middle East (10.4) 5.7 11.0 Asia-Pacific (1.5) (2.0) (3.1) -------- -------- -------- 12.7 97.5 86.1 -------- -------- -------- Retail (net of eliminations) Americas (2.1) (.8) (3.6) Europe, Africa and Middle East (34.4) (14.7) (10.3) Asia-Pacific (1.4) 1.2 (1.7) -------- -------- -------- (37.9) (14.3) (15.6) -------- -------- -------- NMHG Consolidated $ (25.2) $ 83.2 $ 70.5 ======== ======== ======== Interest expense Wholesale $ (12.9) $ (13.4) $ (16.9) Retail (net of eliminations) (10.2) (7.8) (2.1) -------- -------- -------- $ (23.1) $ (21.2) $ (19.0) ======== ======== ======== Other-net Wholesale $ (2.6) $ (12.0) $ 4.8 Retail (net of eliminations) .4 .2 (3.0) -------- -------- -------- $ (2.2) $ (11.8) $ 1.8 ======== ======== ======== Net income (loss) Wholesale $ (14.1) $ 37.0 $ 39.0 Retail (net of eliminations) (35.3) (15.7) (15.3) -------- -------- -------- $ (49.4) $ 21.3 $ 23.7 ======== ======== ======== Effective tax rate Wholesale 4.2% 40.7% 39.1% Retail (including eliminations) 28.3% 31.4% 28.2% NMHG Consolidated 22.9% 46.3% 44.8%
Interest expense increased in 2001, as compared with 2000 and 1999, primarily due to an increase in the average borrowings outstanding. 26 ITEM 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, Store and Percentage Data) Other-net for NMHG Wholesale includes charges from NACCO, equity in earnings of unconsolidated affiliates and discounts on the sale of accounts receivable. Other-net for NMHG Wholesale includes $6.8 million ($4.4 million after-tax) and $6.6 million ($4.3 million after-tax), in 2001 and 2000, respectively, of charges from NACCO for services incurred on NMHG's behalf. Equity in the earnings (loss) of unconsolidated affiliates, including Sumitomo-NACCO Materials Handling Group ("S-N"), a 50 percent-owned joint venture with Sumitomo Heavy Industries, Ltd. in Japan, were $2.6 million in 2001, ($0.2) million in 2000 and $2.3 million in 1999. Discounts on the sale of receivables included in other-net were $4.7 million in 2001, $5.5 million in 2000 and $3.8 million in 1999. In 2001, other-net includes non-recurring insurance proceeds of $8.0 million relating to flood damage in September 2000 at S-N. In 1999, other-net for NMHG Wholesale included non-recurring income of $0.9 million for settlements from legal proceedings. The effective tax rate in 2001 is not comparable to 2000 and 1999 due to the effect of nondeductible goodwill amortization, an increase in the valuation allowance provided for certain deferred tax assets and state income taxes. NMHG WHOLESALE 2001 COMPARED WITH 2000 Revenues decreased 16.4 percent to $1,463.3 million in 2001 from $1,750.0 million in 2000. A steep drop in the lift truck segment of the broader capital goods market in North America resulted in an 18.7 percent reduction in worldwide lift truck shipments at NMHG Wholesale. A total of 68,929 units were shipped in 2001 compared with 84,825 units shipped 2000. The rate of monthly retail orders in the U.S. and Canada declined approximately 50 percent from the peak month in 2000 as compared with the lowest month in 2001. NMHG Wholesale's revenues also declined due to lower parts sales resulting from reduced lift truck utilization which is typical in this stage of a capital goods recession. The decrease in revenues, which was primarily driven by unit volume, was partially offset by a shift in mix to higher-priced lift trucks. Operating profit decreased to $1.3 million for 2001 from $85.9 million for 2000. The decrease in operating profit was largely due to reduced unit and parts volume and resulting reductions in the absorption of manufacturing overhead costs and related manufacturing inefficiencies. Additionally, operating profit was adversely affected by $12.0 million of expenses incurred during 2001 related to the Danville plant closure announced in 2000 and a restructuring charge of $4.5 million recognized in 2001 for cost reductions in Europe. These 2001 charges compare with a restructuring charge of $13.9 million recognized in 2000 for the Danville plant closure. See below for a further discussion of these restructuring charges. The decline in operating profit was offset somewhat by favorable foreign currency effects, lower incentive compensation costs and an increase in the average sales price per unit. NMHG Wholesale recorded a net loss for 2001 of $14.1 million as compared with net income of $37.0 million for 2000. The decline in net operating results is due to the factors affecting operating profit, the effect of nondeductible goodwill amortization and an increase in the valuation allowance on the tax provision and due to a $1.3 million after-tax charge for the cumulative effect of accounting changes in 2001. See Note 2 to the Consolidated Financial Statements for a discussion of these accounting changes. The decline in operating results for 2001 as compared with 2000 was offset somewhat by insurance proceeds resulting in income of $5.0 million after-tax recognized in 2001 relating to flood damage in September 2000 at a facility owned by S-N. The worldwide backlog level decreased to 15,100 units at December 31, 2001 from 21,800 units at December 31, 2000 primarily due to decreased demand for lift trucks in the Americas. The backlog level at December 31, 2001 has increased slightly as compared to the level at September 30, 2001 of 14,400 units primarily due to an increase in lift truck demand in the Americas and Asia-Pacific. RESTRUCTURING PLANS In 2001, management committed to the restructuring of certain operations in Europe. As such, NMHG Wholesale recognized a restructuring charge of approximately $4.5 million pre-tax for severance and other employee benefits to be paid to approximately 285 manufacturing and administrative personnel in Europe. As of December 31, 2001, $1.3 million has been paid to approximately 150 employees. The Company estimates that additional pre-tax costs of $0.2 million will be recognized during 2002 for the NMHG Wholesale European restructuring plan for costs not eligible to be accrued as of December 31, 2001. Furthermore, as a result of the reduced headcount in Europe, NMHG Wholesale estimates annual pre-tax cost savings beginning in 2002 of $8.1 million. These estimates of future costs and benefits are subject to change during the execution of the restructuring plans. In 2000, the Board of Directors approved management's plan to transfer manufacturing activities from NMHG's Danville, Illinois, assembly plant to its other global manufacturing plants. The adoption of this plan resulted in $11.7 million of costs accrued in 2000, relating to retirement costs, medical costs and employee severance to be paid to approximately 425 manufacturing and office personnel. In addition, an impairment charge of $2.2 million was recognized in 2000 as a result of the anticipated disposition of certain assets at an amount below 27 ITEM 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, Store and Percentage Data) net book value. During 2001, payments for severance and other benefits of $1.7 million were made to approximately 350 employees. In addition, the accrual for severance was reduced by $0.4 million. Approximately $12.0 million of pre-tax costs associated with the Danville phase-out, which were not eligible for accrual as of December 31, 2000, were expensed during 2001. The Company estimates that additional pre-tax costs of $2.5 million will be recognized during 2002 related primarily to idle facility costs for the manufacturing plant in Danville. These additional estimated costs have not been accrued as of December 31, 2001. Consistent with its communications in 2001, the Company expects to complete implementation of the phase-out plan in 2002. Annual pre-tax cost savings are estimated to be $10.1 million in 2002 and $12.5 million thereafter, as a result of anticipated improved manufacturing efficiencies depending on unit volume. These estimates could change during the phase-out period. See also discussion in Note 3 to the Consolidated Financial Statements. 2000 COMPARED WITH 1999 Revenues increased to $1,750.0 million in 2000 from $1,618.9 million in 1999. Revenues increased as a result of unit and service parts volume growth, primarily in the Americas, and a shift in mix to higher revenue units, partially offset by adverse currency effects. Worldwide volume increased 11.5 percent to 84,825 units shipped during 2000 from 76,055 units shipped during 1999. Adverse currency effects on revenues resulted primarily from (i) translating a weakened British pound sterling into U.S. dollars and (ii) transactions denominated in a weakened euro as compared with the British pound sterling, which causes revenues that are invoiced in euros to decline when translated back to the British pound sterling. Operating profit of $99.8 million, which excludes the Danville restructuring charge of $13.9 million discussed above, as a percentage of revenues was 5.7 percent in 2000. This percentage in 2000 compares with operating profit as a percentage of revenues in 1999 of 4.6 percent. Improved operating profit in 2000 as compared with 1999 is primarily due to (i) volume growth and related manufacturing efficiencies and (ii) a shift in the mix of products sold to higher margin units, partially offset by adverse currency effects in Europe. Including the restructuring charge, operating profit as a percentage of revenues was 4.9 percent in 2000. Excluding the restructuring charge, net income increased as a result of the factors affecting operating profit. However, the increase was partially offset by an increase in other income (expense), net, which includes a $4.3 million after-tax charge from NACCO for services provided by the parent company and a decrease in equity in earnings of unconsolidated affiliates of $2.5 million, primarily due to losses for flood damages at a facility owned by S-N. NMHG RETAIL 2001 COMPARED WITH 2000 Revenues increased 14.8 percent to $209.1 million for 2001 from $182.1 million for 2000 largely as a result of the effect of a full year of revenues in 2001 from dealerships acquired in Asia-Pacific in the fourth quarter of 2000. This revenue growth was partially offset by lower parts and service revenues and unfavorable pricing and product mix. Operating loss in 2001 was $39.4 million compared with an operating loss of $15.3 million in 2000. The increase in operating loss was primarily due to several non-recurring special adjustments in 2001. The majority of these special adjustments were recognized in Europe, which accounted for a significant portion of NMHG Retail's 2001 operating loss. The 2001 operating loss includes a charge of $10.4 million for a loss on the sale of certain wholly owned dealers and related wind-down costs. See also Note 5 to the Consolidated Financial Statements for a discussion of this transaction. The 2001 operating loss also includes a $4.7 million restructuring charge for downsizing to match current levels of demand at retail operations in Europe that NMHG Retail had acquired over the last few years. In addition, the 2001 operating loss includes charges of approximately $7.1 million to reduce asset values and increase reserves reflective of the weakened capital goods markets, establish full accounting consistency among retail operations on a global basis and to cause those dealers previously reporting on a one-month lag to report on months consistent with the rest of NMHG. Net loss was $35.3 million for 2001 compared with $15.7 million for 2000, primarily due to the factors affecting operating loss combined with an increase in interest expense allocated to NMHG Retail. 28 ITEM 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, Store and Percentage Data) RESTRUCTURING PLAN In 2001, as previously discussed, management committed to the restructuring of certain operations in Europe. As such, NMHG Retail recognized a restructuring charge of approximately $4.7 million pre-tax, of which $0.4 million relates to lease termination costs and $4.3 million relates to severance and other employee benefits to be paid to approximately 140 service technicians, salesmen and administrative personnel at wholly owned dealers in Europe. As of December 31, 2001, $0.4 million has been paid to approximately 40 employees. The Company estimates that additional pre-tax costs of $0.3 million will be recognized during 2002 for the NMHG Retail European restructuring plan for costs not eligible to be accrued as of December 31, 2001. As a result of the reduced headcount in Europe, NMHG Retail estimates annual pre-tax cost savings beginning in 2002 of $3.3 million. This estimate could change during the execution of the restructuring plan. 2000 COMPARED WITH 1999 Revenues increased $39.6 million, or 27.8 percent, due to acquisitions of retail dealerships in Asia-Pacific and, to a lesser degree, Europe. Revenues from volume growth at comparable dealerships also contributed slightly to the increase in revenues but were entirely offset by adverse currency effects in Europe and an increase in the elimination of intercompany shipments from NMHG Wholesale to NMHG Retail. Operating results for 2000 in the Americas improved as compared with the prior year primarily due to a decrease in administrative support costs. Operating results for 2000 in Asia-Pacific improved as compared with the prior year primarily due to favorable operating results contributed by current year acquisitions. Increased net loss was driven by increased losses in Europe, primarily due to increased pricing competition as a result of a weak euro and due to continued integration, infrastructure, interest, amortization and administrative costs necessary to build the Retail segment. LIQUIDITY AND CAPITAL RESOURCES NMHG Wholesale has a $350.0 million revolving credit facility (the "Facility") that expires June 2002. 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 Wholesale are the primary sources of financing for NMHG Retail. At December 31, 2001, NMHG had available $85.0 million of its $350.0 million revolving credit facility. NMHG also has separate credit facilities totaling $76.3 million, of which $34.3 million was available at December 31, 2001 and maintains additional uncommitted lines of credit totaling $30.0 million, which was all available at December 31, 2001. Although NMHG's primary financing facility expires in June 2002, NMHG anticipates that a new credit facility will be obtained in or before June 2002. While there can be no assurances as to the specific terms of the refinancing, including the nature of the covenants and restrictions, NMHG expects that interest rates under the new facility will be higher based on its evaluation of the generally higher interest rate spreads charged today versus interest rate spreads in effect when NMHG Wholesale's Facility was structured in 1995. NMHG Wholesale has assumed that the outstanding balance under the Facility at the time of refinancing will be financed with a combination of short-term and long-term financing. However, in accordance with accounting principles generally accepted in the U.S., the outstanding balance under the Facility will be classified as a current liability until the Facility is refinanced. The amount outstanding that is classified as a current liability at December 31, 2001 is $265.0 million. With the expectation of the refinancing of the NMHG Facility prior to its expiration in June 2002, 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 Wholesale's accounts receivable securitization program (the "Program") to sell domestic accounts receivable was terminated on December 5, 2001. As a result, NMHG Wholesale is relying on the Facility to finance accounts receivable that otherwise would have been sold under the Program prior to December 5, 2001. Additional borrowings from the Facility of $33.4 million were used to finance the outstanding balance of accounts receivable sold pursuant to the Program on December 5, 2001. As a result of the termination of the Program, an increase in interest expense arising from increased outstanding borrowings is expected to be offset by a decrease in the cost of the Program, which is classified in the Consolidated Statements of Operations and Other Comprehensive Income (Loss) as other-net. NMHG Wholesale continues to sell certain of its European accounts receivable under a separate program. The amount of receivables sold at December 31, 2001 under this European program was $27.7 million. 29 ITEM 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, Store and Percentage Data) Following is a table which summarizes the contractual obligations of NMHG:
PAYMENTS DUE BY PERIOD ---------------------------------------------------------------------- CONTRACTUAL OBLIGATIONS TOTAL 2002 2003 2004 2005 2006 THEREAFTER - ---------------------------------------- ------ ------ ------ ------ ------ ------ ---------- NMHG Facility(1)(2) $265.0 $265.0 $ --- $ --- $ --- $ --- $ --- Other lines of credit(2) 36.2 36.2 --- --- --- --- --- Term loans(2) 16.0 13.0 1.4 1.6 --- --- --- Capital lease obligations including principal and interest(2) 40.7 12.5 12.7 7.3 4.6 2.5 1.1 Off-balance-sheet operating lease obligations(2) 141.6 40.4 32.1 26.0 19.0 13.3 10.8 Unconditional purchase obligations 4.3 .4 .8 .6 .9 .2 1.4 ------ ------ ------ ------ ------ ------ ------ Total contractual cash obligations $503.8 $367.5 $ 47.0 $ 35.5 $ 24.5 $ 16.0 $ 13.3 ====== ====== ====== ====== ====== ====== ======
(1) As noted above, the NMHG Facility expires in June 2002 and is anticipated to be refinanced prior to its expiration. (2) An event of default, as defined in the NMHG Facility agreement, in NMHG's term loan agreements and in NMHG's operating and capital lease agreements, could cause an acceleration of the payment schedule. No such event of default has occurred or is anticipated to occur. In addition, NMHG has the following commitments at December 31, 2001:
Total --------------- Standby recourse or repurchase obligations $ 150.5 Guarantees 7.5 --------------- Total commercial commitments $ 158.0 ===============
Guarantees and standby recourse or repurchase obligations primarily represent guarantees of residual values or recourse obligations to repurchase lift trucks subject to certain terms and conditions under financing agreements made between NMHG's customers and financing companies in conjunction with the customer's financing of lift trucks purchased from NMHG. For these transactions, NMHG generally retains a security interest in the lift truck, such that NMHG would take possession of the lift truck in the event that NMHG would become liable under the terms of the guarantees or standby recourse or repurchase obligations. Generally, these commitments are due upon demand in the event of default by the customer. The amount of the standby recourse or repurchase obligations increase and decrease over time as obligations under existing arrangements expire and new obligations arise in the ordinary course of business. Losses anticipated under the terms of the guarantees or standby recourse or repurchase obligations are not significant and have been reserved for in the Consolidated Financial Statements. NMHG Wholesale anticipates spending approximately $30.4 million for property, plant and equipment in 2002, compared with capital expenditures of $46.6 million in 2001 and $43.3 million in 2000. NMHG Retail anticipates spending approximately $3.3 million for property, plant and equipment in 2002, compared with capital expenditures of $6.9 million in 2001 and $8.5 million in 2000. NMHG's planned expenditures in 2002 include investments in manufacturing equipment, tooling for new products and retail lease and rental fleet. The principal sources of financing for these capital expenditures are expected to be internally generated funds and facility borrowings. 30 ITEM 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, Store and Percentage Data) NMHG Wholesale's capital structure is presented below:
December 31 ----------------------- 2001 2000(1) ------- ------- NMHG WHOLESALE: Total net tangible assets $ 375.2 $ 283.2 Advances to NMHG Retail 70.2 103.8 Advances to NACCO --- 3.0 Goodwill at cost 446.0 446.1 ------- ------- Net assets before goodwill amortization 891.4 836.1 Accumulated goodwill amortization (141.4) (129.6) Advances from NACCO (8.0) --- Other debt (300.9) (254.6) Minority interest (2.3) (3.1) ------- ------- Stockholder's equity $ 438.8 $ 448.8 ======= ======= Debt to total capitalization 41% 36%
(1) Certain amounts presented for December 31, 2000 have been reclassified to conform to the current period's presentation. The increase in total net tangible assets of $92.0 million is primarily due to a $79.0 million capital contribution to NMHG Retail in 2001, which increased NMHG Wholesale's investment in NMHG Retail. In addition, the increase is due to an increase in cash and cash equivalents of $37.2 million due to the timing of customer receipts at year-end versus vendor and debt payments after year-end. Debt increased primarily to support increases in total net tangible assets. Stockholder's equity decreased as a result of a $14.1 million net loss combined with a minimum pension liability adjustment required in 2001 which reduced equity, adverse currency movements recognized in the accumulated foreign currency translation adjustment, dividends paid to NACCO and an increase in accumulated other comprehensive loss relating to the adoption of SFAS No. 133, partially offset by an increase in capital in excess of par value. See Note 2 to the Consolidated Financial Statements for a discussion of the adoption of SFAS No. 133. NMHG Retail's capital structure is presented below:
December 31 ------------------------ 2001 2000(1) ------- ------- NMHG RETAIL: Total net tangible assets $ 109.5 $ 133.0 Advances from NMHG Wholesale (70.2) (103.8) Goodwill at cost 45.2 44.2 ------- ------- Net assets before goodwill amortization 84.5 73.4 Accumulated goodwill amortization (5.6) (4.6) Total debt (53.5) (50.3) ------- ------- Stockholder's equity $ 25.4 $ 18.5 ======= ======= Debt to total capitalization 68% 73%
(1) Certain amounts presented for December 31, 2000 have been reclassified to conform to the current period's presentation. The decrease in total net tangible assets of $23.5 million is primarily due to a decrease in accounts receivable of $18.1 million due to both a decrease in the number of days' sales outstanding and a decrease in sales volume in December 2001 as compared with December 2000. The decrease in total net tangible assets is also attributable to an increase in accruals of $4.3 million relating to the restructuring charge recorded in 2001. 31 ITEM 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, Store and Percentage Data) RELATED PARTY TRANSACTIONS NMHG has a 20 percent ownership interest in NMHG Financial Services, Inc. ("NFS"), a joint venture with GE Capital Corporation, formed primarily for the purpose of providing financial services to independent and wholly owned Hyster and Yale lift truck dealers in the United States. NMHG's ownership percentage in NFS is accounted for using the equity method of accounting. Generally, NMHG sells lift trucks directly to its customer and that customer may enter into a financing transaction with NFS or another unrelated party. However, for certain customer transactions, NMHG sells directly to NFS so that the customer can obtain operating lease financing from NFS. Sales to NFS related to these types of transactions for the years ended December 31, 2001, 2000 and 1999 were $137.5 million, $166.6 million and $8.5 million, respectively. Amounts receivable from NFS at December 31, 2001 and 2000 were immaterial. Also, from time to time, NMHG provides recourse or repurchase obligations or guarantees the residual values of the lift trucks purchased by customers and financed through NFS. See further discussion in Note 15 to the Consolidated Financial Statements. At December 31, 2001, approximately $127.1 million of the Company's total guarantees, recourse or repurchase obligations related to transactions with NFS. For these transactions, NMHG generally retains a security interest in the lift truck, such that NMHG would take possession of the lift truck in the event that NMHG would become liable under the terms of the guarantees or standby recourse or repurchase obligations. In addition to providing financing to NMHG's independent dealers, NFS provides both lease and debt financing to NMHG. Operating lease obligations relate to specific sale-leaseback-sublease transactions for certain NMHG customers whereby NMHG sells lift trucks to NFS, NMHG leases these lift trucks back under an operating lease agreement and NMHG subleases those lift trucks to customers under an operating lease agreement. Debt financing includes long-term notes payable to NFS primarily to finance certain of NMHG's long-term notes receivable from Latin American customers which arise in the ordinary course of business. In addition, NFS provides, on NMHG's behalf, installment billings to the Latin American customers, account balance tracking and an inventory management system to track the equipment covered by the notes. Total obligations to NFS under the operating lease agreements and notes payable were $13.7 million and $14.7 million at December 31, 2001 and 2000, respectively. In addition, NMHG is reimbursed for certain services, primarily administrative functions, provided to NFS. The amount of NMHG's expenses reimbursed by NFS were $1.8 million, $1.5 million and $1.1 million in 2001, 2000 and 1999, respectively. NMHG has a 50 percent ownership interest in S-N, a joint venture with Sumitomo Heavy Industries, Inc., formed primarily for the manufacture and distribution of Sumitomo-Yale branded lift trucks in Japan and the export of Hyster and Yale branded lift trucks and related components and service parts outside of Japan. NMHG's ownership in S-N is accounted for using the equity method of accounting. NMHG purchases products from S-N under normal trade terms. In 2001, 2000 and 1999, purchases from S-N were $63.7 million, $90.5 million and $91.2 million, respectively. Amounts payable to S-N at December 31, 2001 and 2000 were $16.1 million and $23.6 million, respectively. 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:
2001 2000 1999 -------- ------- ------- Revenues $ 632.1 $ 649.9 $ 596.7 Operating profit (loss) $ (8.4) $ 27.4 $ 41.8 Operating profit (loss) excluding $ (5.4) $ 30.5 $ 44.8 goodwill amortization Interest expense $ (7.7) $ (8.6) $ (6.7) Other-net $ (.1) $ (2.6) $ (.4) Net income (loss) $ (12.2) $ 8.8 $ 21.2 Effective tax rate 24.7% 45.7% 38.9%
32 ITEM 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, Store and Percentage Data) 2001 COMPARED WITH 2000 Housewares' revenues decreased to $632.1 million in 2001, down 2.7 percent from $649.9 million in 2000. Revenues declined primarily due to reduced unit volume and sale mix at HB-PS, primarily driven by the weak retail environment in 2001 and reduced sales of opening-price-point products. Decreased unit pricing primarily resulting from increased competition also caused revenues to decline as compared with the prior year. The decline in Housewares' revenues was partially offset by increased sales of General Electric-branded products to Wal-Mart and the introduction of TrueAir(TM) home odor eliminators at HB-PS, and increased revenues at KCI primarily driven by an increase in the number of stores (168 at December 31, 2001 compared with 157 at December 31, 2000). Housewares recorded an operating loss of $8.4 million in 2001 compared with operating profit of $27.4 million in 2000. The decline in operating profit resulted primarily from restructuring charges, described below, of $13.3 million recognized in 2001 and a $4.0 million charge in 2001 for the write-off of receivables from customers that filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. Excluding these items, operating results decreased as a result of (i) a decrease in the average sales price, (ii) increased advertising costs incurred to support the TrueAir product introduction, (iii) a shift in mix to lower-margin units and (iv) unfavorable manufacturing overhead costs, partially offset by favorable material costs at HB-PS and improved operating profit at KCI. The decline in the effective tax rate is primarily due to the effect of non-deductible goodwill amortization on the pre-tax loss. Net loss was $12.2 million for 2001 as compared with net income of $8.8 million for 2000 primarily due to the factors affecting operating profit. On January 22, 2002, one of HB-PS' largest customers, a major retail chain, filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code, which allows this customer to reorganize and seek protection from its creditors. As a result, HB-PS recognized a charge of $3.7 million related to receivables due from this customer as of December 31, 2001. HB-PS believes that the remaining receivable balance at December 31, 2001 due from this customer is collectible, however, collection may take more than one year. The customer has targeted emergence from Chapter 11 in 2003. In 2001 and 2000, sales to this customer were approximately $45.8 million and $60.1 million, respectively, and represented 7.2 percent and 9.2 percent, respectively, of Housewares revenues. HB-PS expects to continue to ship products to this customer. However, HB-PS anticipates that revenues from this customer could decline between 10 and 20 percent as compared with 2001, depending upon the customer's decisions regarding the number of retail store closings and the level of promotions of HB-PS' products. RESTRUCTURING PLANS In 2001, the Board of Directors approved management's plan to restructure HB-PS' manufacturing activities in Mexico. This restructuring plan includes outsourcing of certain of the company's products and consolidating production of three of the company's Mexican manufacturing plants into one plant. As a result of this plan, HB-PS recognized a charge of $12.5 million of which $5.0 million relates to the impairment of fixed assets, $3.3 million relates to equipment and building lease impairment and clean-up costs, $2.9 million relates to severance benefits to be paid to approximately 925 manufacturing personnel, $0.6 million relates to the impairment of inventory and $0.7 million is for other related costs. The estimated cash outflows required for this plan are expected to be almost entirely offset by cash inflows from the anticipated sale of fixed assets and tax benefits associated with the plan. As of December 31, 2001, no severance payments had been made. Future expenses, which are not eligible for accrual at December 31, 2001, are estimated to be $0.7 million pre-tax in 2002. Annual pre-tax cost savings are estimated to be $10.3 million beginning in 2002. In the fourth quarter of 2001, HB-PS recognized a charge of $0.8 million relating to severance benefits to be paid to personnel in all functional areas located at the company's headquarters. This restructuring plan was initiated primarily as a cost-cutting measure in response to reduced overall consumer demand caused by the 2001 U.S. economic slowdown. Headcount was reduced by 36, or approximately 10 percent of the total corporate personnel. As of December 31, 2001, payments of $0.3 million have been made. Payments in respect to the remainder of the charge, or $0.5 million, are expected to be made during the first half of 2002. The full benefit from this restructuring is estimated to be $2.7 million pre-tax beginning in 2002. 2000 COMPARED WITH 1999 Housewares' revenues improved in 2000 primarily due to unit volume growth at HBPS. Unit volume at HB-PS increased 9.9 percent to 43.3 million units sold in 2000 from 39.4 million units sold in 1999, primarily due to increased demand for contact grills, slow cookers and irons, and from initial shipments of GE-branded products to Wal-Mart, which began in August 2000. Revenues also increased at KCI primarily due to an increase in the number of stores. KCI operated 157 stores at December 31, 2000 compared with 150 stores at December 31, 1999. 33 ITEM 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, Store and Percentage Data) Housewares' gross profit declined to 18.4 percent of revenues in 2000 from 21.6 percent of revenues in 1999. This decline in gross profit is primarily due to decreased sales prices and increased manufacturing costs. The decline in the average sales price in 2000 as compared with 1999 was primarily due to intense competition. Increased manufacturing costs were driven by (i) increased materials costs, especially for petroleum-based resins and packaging materials, (ii) increased transportation costs driven by rising fuel costs and (iii) increased warehousing costs due to start-up inefficiencies at the new consolidated distribution center in Memphis. Increased manufacturing costs were partially offset by favorable Mexican peso exchange rates. Housewares' operating profit declined to 4.2 percent of revenues in 2000 from 7.0 percent of revenues in 1999. Operating profit declined due to the 3.2 percentage point decline in gross profit discussed above and due to an increase in administration costs at KCI, partially offset by a decline in direct marketing costs at HB-PS. Net income declined as a result of these factors combined with an increase in other income (expense), net, which increased primarily due to a $1.6 million after-tax charge from NACCO. LIQUIDITY AND CAPITAL RESOURCES HB-PS' credit agreement provides for a revolving credit facility (the "HB-PS 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. In December 2001, the HB-PS Facility was amended to modify the covenant requirements and redefine covenant calculations so that the recognition of the restructuring charges in the fourth quarter of 2001 did not cause a violation of covenants under the HB-PS Facility. In addition to the change in the covenant requirements and calculations, the applicable margin added to the base rate of interest increased and the facility fee on the available borrowings increased. Prior to the amendment, for the year ended December 31, 2001, the HB-PS Facility provided for an interest rate of LIBOR plus 0.4375 percent and a facility fee of 0.3125 percent. After the amendment, effective January 1, 2002, the HB-PS Facility provides for an interest rate of LIBOR plus 2.25 percent and a facility fee of 0.5 percent. Interest rates and facility fees, however, are subject to change based on the level of EBITDA to interest expense ratio, as defined, HB-PS achieves each quarter. At December 31, 2001, HB-PS had $60.2 million available under this facility, which expires in May 2003. In addition, HB-PS has separate uncommitted facilities that permitted $30.0 million of additional borrowings, of which $25.0 million was available at December 31, 2001. Subsequent to December 31, 2001, one of HB-PS' lenders reduced the availability under these uncommitted facilities by $15.0 million in the normal course of business. 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. Following is a table which summarizes the contractual obligations of Housewares:
PAYMENTS DUE BY PERIOD -------------------------------------------------------------------- CONTRACTUAL OBLIGATIONS TOTAL 2002 2003 2004 2005 2006 THEREAFTER - ----------------------------------------- ------ ------ ------ ------ ------ ------ ---------- HB-PS Facility and uncommitted facilities balance outstanding $103.5 $ 5.0 $ 98.5 $ --- $ --- $ --- $ --- Capital lease obligations including principal and interest .7 .1 .1 .1 .1 .3 --- Off-balance-sheet operating leases 68.7 15.6 12.5 10.6 7.7 6.2 16.1 Unconditional purchase obligations .7 .7 --- --- --- --- --- ------ ------ ------ ------ ------ ------ ------ Total contractual cash obligations $173.6 $ 21.4 $111.1 $ 10.7 $ 7.8 $ 6.5 $ 16.1 ====== ====== ====== ====== ====== ====== ======
Note that, contractually, all amounts outstanding under the HB-PS Facility are due in 2003 and have been reflected as such in the above table. However, the Company has classified a portion of this facility, $18.5 million, as a current obligation since that is the amount expected to be repaid in 2002. An event of default, as defined in the HB-PS Facility agreement and in Housewares' operating and capital lease agreements, could cause an acceleration of the payment schedule. No such event of default has occurred or is anticipated to occur. Housewares anticipates spending approximately $17.1 million for property, plant and equipment in 2002, compared with capital expenditures of $13.4 million in 2001 and $22.0 million in 2000. Spending for capital expenditures was down in 2001 as compared with actual spending in 2000 and planned spending in 2002 primarily due to a delay in or elimination of certain projects. Planned expenditures for 2002 include enhancements to information systems, additional development of the GE-branded products and tooling for new products and machinery and equipment, which are intended to reduce manufacturing costs and increase manufacturing efficiency. These expenditures are expected to be funded from internally generated funds and bank borrowings. 34 ITEM 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, Store and Percentage Data) Housewares' capital structure is presented below:
December 31 --------------------- 2001 2000 ------- ------- Total net tangible assets $ 168.7 $ 195.1 Goodwill at cost 123.5 123.5 ------- ------- Net assets before goodwill amortization 292.2 318.6 Accumulated goodwill amortization (39.8) (36.7) Advances from NACCO (3.0) --- Other debt (103.8) (111.0) ------- ------- Stockholder's equity $ 145.6 $ 170.9 ======= ======= Debt to total capitalization 42% 39%
Total net tangible assets decreased $26.4 million primarily due to a $13.0 million decrease in assets/increase in liabilities resulting from the restructuring programs, a $9.0 million decrease in accounts receivable, of which $3.7 million is due to the write-off of customer receivables at year-end December 31, 2001, and a $7.7 million decrease in inventory. Inventory has decreased primarily due to anticipated decreases in consumer demand. The decline in stockholder's equity at December 31, 2001 compared with December 31, 2000 is due to the $12.2 million net loss, an increase in accumulated other comprehensive loss relating to the adoption of SFAS No. 133 and dividends paid to NACCO. See Note 2 to the Consolidated Financial Statements for a discussion of the adoption of SFAS No. 133. 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. On average, annual after-tax cash outflows related to Bellaire's obligations are approximately $2.5 million. The results of operations at NACCO and Other were as follows for the year ended December 31:
2001 2000 1999 --------------- --------------- --------------- Revenues $ .1 $ .1 $ .1 Operating loss $ (9.7) $ (11.7) $ (9.2) Other income (expense), net $ 9.3 $ 4.4 $ (3.2) Extraordinary gain, net-of-tax $ --- $ 29.9 $ --- Net income (loss) $ --- $ 25.0 $ (8.3)
In 2000, NACCO & Other includes an extraordinary gain of $29.9 million, net of $16.1 million in taxes, related to an estimated decrease in Bellaire's obligation to UMWA. This obligation was initially recognized by Bellaire as an extraordinary charge in 1992 to accrue for the estimated costs associated with the Coal Act. See additional discussion in Note 4 to the Consolidated Financial Statements. The decrease to the Company's estimate of the UMWA obligation in 2000 was made, in part, because of a U.S. District Court's ruling that was upheld by the U.S. Court of Appeals for the Sixth Circuit in 2000 which invalidated the Social Security Administration's ("SSA") assignment of certain retired coal miners to Bellaire. This ruling reduced the Company's estimate of the total beneficiaries assigned to Bellaire as part of the Coal Act. Subsequent to December 31, 2001, the Company learned that the U.S. Supreme Court has decided to review circuit court rulings whose decisions in this matter were in conflict. The U.S Court of Appeals for the Sixth Circuit ruled that the SSA assignments were invalid; while the U.S Court of Appeals for the Fourth Circuit ruled that the SSA assignments were valid. If the U.S. Supreme Court decides that the SSA assignments are valid, the Company would need to revise its estimate of its obligation under the Coal Act which may result in an unfavorable adjustment to the Consolidated Financial Statement, which could be material. In addition, subsequent to December 31, 2001, the Company learned that the U.S. Supreme Court ruled that the SSA's assignment of certain retired coal miners to companies defined as "successors in interest to a signatory operator no longer in business" was not permitted under the Coal Act. This decision is expected to result in a favorable impact to the Company due to an anticipated credit for payments made to UMWA for certain beneficiaries who were assigned to Bellaire inappropriately and due to an anticipated reduction in Bellaire's future obligation to UMWA as a result of a decrease in the number of beneficiaries assigned to Bellaire. The Company has not yet determined the favorable impact of this decision, which is expected to be recognized in 2002. 35 ITEM 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, Store and Percentage Data) Also in 2000, Bellaire recognized a $5.6 million increase to its closed mine reserves, with a corresponding decrease in other income (expense), net, related primarily to Black Lung and other retiree medical benefits, and to environmental obligations arising from former Eastern U.S. underground mining operations. See additional discussion in Note 3 to the Consolidated Financial Statements. In 2000, the parent company began charging fees for services provided to the operating subsidiaries. These fees, which totaled $10.5 million and $10.1 million for the year ended December 31, 2001 and 2000, respectively, are included in other income (expense), net. In 1999, other income (expense), net includes a charge of $2.9 million for the write-off of costs related to a potential business acquisition. 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 NACoal, NMHG and Housewares allow for the payment to NACCO of dividends and advances under certain circumstances. 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 scheduled principal repayments, operating needs and commitments arising during the foreseeable future. NACCO's consolidated capital structure is presented below:
December 31 ----------------------- 2001 2000 -------- -------- Total net tangible assets $ 676.2 $ 688.1 Coal supply agreements, net 85.2 86.4 Goodwill at cost 614.7 613.8 -------- -------- Net assets before goodwill amortization 1,376.1 1,388.3 Accumulated goodwill amortization (186.8) (170.9) Total debt, excluding current and long-term portion of obligations of project mining subsidiaries (614.7) (561.7) Closed mine obligations (Bellaire), including UMWA, net-of-tax (41.9) (45.1) Minority interest (3.4) (4.2) -------- -------- Stockholders' equity $ 529.3 $ 606.4 ======== ======== Debt to total capitalization 54% 48%
RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," and, in October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 141 requires all business combinations completed after June 30, 2001, to be accounted for under the purchase method. This statement also establishes, for all business combinations made after June 30, 2001, specific criteria for the recognition of intangible assets separately from goodwill. SFAS No. 141 also requires that the excess of the fair value of acquired assets over cost (negative goodwill) be recognized immediately as an extraordinary gain, rather than deferred and amortized. The Company will account for all future business combinations under SFAS No. 141. SFAS No. 142 addresses the accounting for goodwill and other intangible assets after an acquisition. Goodwill and other intangibles that have indefinite lives will no longer be amortized, but will be subject to annual impairment tests. All other intangible assets will continue to be amortized over their estimated useful lives, which is no longer limited to 40 years. The Company adopted this statement effective January 1, 2002, as required. At that 36 ITEM 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, Store and Percentage Data) time, amortization of existing goodwill ceased on the unamortized portion associated with acquisitions and certain investments accounted for under the equity method. This is expected to have a favorable annual impact of approximately $15.8 million, net of tax, beginning in 2002. SFAS No. 142 also requires a new methodology for the testing of impairment of goodwill and other intangibles that have indefinite lives. During 2002, the Company will begin testing goodwill for impairment under the new rules, applying a fair-value-based test. The transition adjustment, if any, resulting from the adoption of the new approach to impairment testing as required by SFAS No. 142 will be reported as a cumulative effect of a change in accounting principle. At this time, the Company has not yet determined what impact, if any, the change in the required approach to impairment testing will have on either its financial position or results of operations. SFAS No. 143 provides accounting requirements for retirement obligations associated with tangible long-lived assets, including: (i) the timing of liability recognition; (ii) initial measurement of the liability; (iii) allocation of asset retirement cost to expense; (iv) subsequent measurement of the liability; and (v) financial statement disclosures. SFAS No. 143 requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. This standard becomes effective for fiscal years beginning after June 15, 2002. The Company will adopt the Statement effective January 1, 2003. The transition adjustment, if any, resulting from the adoption of SFAS No. 143 will be reported as a cumulative effect of a change in accounting principle. At this time, the Company has not yet determined what impact, if any, the adoption of this Statement will have on either its financial position or results of operations. SFAS No. 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supercedes SFAS No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business, as previously defined in that Opinion. SFAS No. 144 provides a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. Many of the provisions of SFAS No. 121 are retained, however, SFAS No. 144 clarifies some of the implementation issues related to SFAS No. 121. SFAS No. 144 also broadens the presentation of discontinued operations to include more disposal transactions. This Statement is effective for fiscal years beginning after December 15, 2001, with early adoption encouraged. The Company adopted this Statement effective January 1, 2002, as required. The adoption of this Statement did not result in an adjustment to the Company's financial statements on January 1, 2002. 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 overall inflation has not materially affected its results of operations in 2001 and 2000 and does not expect overall inflation to be a significant factor in 2002. 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. 37 ITEM 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, Store and Percentage Data) 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 has replaced 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. Under the regulations governing the transition to a single currency, there was a "no compulsion, no prohibition" rule which stated that no one was obligated to use the euro until the notes and coinage were introduced on January 1, 2002. In keeping with this rule, since January 1, 1999 the Company has been 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 has been completed and the cost to achieve such conversion has not been 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 effect 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 fully 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. OUTLOOK NACOAL NACoal anticipates record lignite deliveries in 2002 since MLMC's customer declared COD on March 1, 2002. Thereafter, lignite deliveries at MLMC are expected to be approximately 3.5 million tons annually. MLMC does not expect to receive contractual liquidated damages payments related to its ongoing operations subsequent to the March 1, 2002 COD. As a result, MLMC then expects to earn normal operating revenues which are expected to result in net enhanced cash flow, but also additional operating costs and lower reported earnings. NACoal expects Red River to sell fewer tons of lignite in 2002 due to a reduction from the unusually high tonnage taken by its customer in 2001. Royalty income is anticipated to be lower in 2002 due to decreased activity at NACoal's Eastern underground properties. NACoal also expects to continue seeking opportunities for developing its existing 2.6 billion tons of coal reserves. NMHG WHOLESALE NMHG Wholesale expects that the broad cost reduction actions taken in 2001, including the Danville plant closure, with a net positive impact of $12.0 million after tax in 2002 compared to 2001, as well as the elimination of the inefficiencies involved in reducing production dramatically, will lead to an improved cost position in 2002. NMHG Wholesale expects that its improved cost position will offset the impact of current low levels of market demand and some additional restructuring costs in the first quarter of 2002. NMHG Wholesale's objective is to achieve at least break-even results in 2002 based on the assumption, which it believes is prudent, that lift truck markets in the U.S. will not recover significantly in 2002. NMHG Wholesale, however, is well prepared to respond quickly when markets do improve. Parts sales are anticipated to improve modestly during 2002 due to the expected increased utilization of lift trucks in the field. Market share is expected to increase in Europe, largely as a result of a sale to ZEPPELIN GmbH in 2001 of wholly owned Hyster dealerships in Germany as well as the strengthening of other Hyster and Yale independent dealerships. NMHG Wholesale also plans several new product introductions in 2002, including selected new warehouse, counterbalanced and big trucks. NMHG Wholesale also expects net income to be favorably impacted by approximately $11.4 million in 2002 as a result of the adoption of SFAS No. 142. Although the Company does not expect to recognize an impairment charge as a result of the new impairment testing required by SFAS No. 142, the Company has not yet completed its analysis of goodwill. An impairment charge, if required, would reduce reported results in 2002. NMHG RETAIL NMHG Retail has largely completed the programs undertaken in 2001 to restructure and realign its global operations, which were designed to put its operations at close to break-even results in 2002 at current low market levels. These restructuring actions included headcount reductions, consolidation of operations, the sale of its Hyster 38 ITEM 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, Store and Percentage Data) dealers in Germany, and adjusting asset values and reserves to reflect the weakened capital goods markets. NMHG Retail expects to continue focusing its efforts on improving the performance of its wholly owned dealerships. NMHG Retail's operating results are expected to improve approximately $1.4 million after-tax as a result of the adoption of SFAS No. 142. Although the Company does not expect to recognize an impairment charge as a result of the new impairment testing required by SFAS No. 142, the Company has not yet completed its analysis of goodwill. An impairment charge, if required, would reduce reported results in 2002. HOUSEWARES HB-PS expects that actions taken in 2001, including programs to gain a higher margin mix of business, reduce operating costs, reduce and consolidate Mexican manufacturing capacity, decrease manufacturing inefficiencies and increase outsourcing to China, will result in operating margins in 2002 closer to the company's objectives, even without an improved U.S. economy, and after assuming some additional costs in the first quarter of 2002 related to completing restructuring and inventory reduction programs. The higher margin mix of business is expected to result from decreased opening-price-point business and increased sales of home health products such as TrueAir odor eliminators and sales of General Electric-branded products to Wal-Mart. HB-PS also expects substantially enhanced cash flow from improved inventory management. KCI expects to open additional Kitchen Collection(R) and Gadgets & More(R) stores, introduce new Hamilton Beach and Proctor-Silex-branded non-electric products and continue to aggressively manage its costs. Housewares expects that the adoption of SFAS No. 142 which eliminates amortization of goodwill will contribute $3.0 million to net income in 2002. Although the Company does not expect to recognize an impairment charge as a result of the new impairment testing required by SFAS No. 142, the Company has not yet completed its analysis of goodwill. An impairment charge, if required, would reduce reported results in 2002. 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 include 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) changes in maintenance, fuel or other similar costs, (4) costs to pursue international opportunities, (5) further delays in achieving commercial operations at MLMC's customer's power plant and (6) changes in the U.S. economy or in the power industry that would affect demand for NACoal's Eastern U.S. underground reserves. NMHG: (1) changes in demand for lift trucks and related service parts on a worldwide basis, especially in the U.S. where the company derives a majority of its sales, (2) changes in sales prices, (3) delays in delivery or changes in 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 returns of products, (7) delays in or increased costs of the Danville, Illinois, manufacturing plant phase-out and European restructuring programs, (8) acquisitions and/or dispositions of dealerships by NMHG, (9) costs related to the integration of acquisitions, (10) the impact of the continuing introduction of the euro, including increased competition, foreign currency exchange movements and/or changes in operating costs and (11) uncertainties regarding the impact the September 11, 2001 terrorist activities and the subsequent climate of war may have on the economy or the public's confidence in general. 39 ITEM 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, Store and Percentage Data) HOUSEWARES: (1) changes in the sales prices, product mix or levels of consumer purchases of kitchenware and small electric appliances, (2) bankruptcy of or loss of major retail customers or suppliers, (3) changes in costs of raw materials or sourced products, (4) delays in delivery or the unavailability of raw materials or key component parts, (5) 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 HB-PS buys, operates and/or sells products, (6) product liability, regulatory actions or other litigation, warranty claims or returns of products, (7) increased competition, (8) customer acceptance of, changes in costs of, or delays in the development of new products, including the GE-branded products to be sold to Wal-Mart and new home environment products, (9) weather conditions or other events that would affect the number of customers visiting Kitchen Collection stores and (10) uncertainties regarding the impact the September 11, 2001 terrorist activities and the subsequent climate of war may have on the economy or the public's confidence in general. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK The Company's subsidiaries, NACoal, NMHG and HB-PS, 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 significant 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 2 and Note 11 to the Consolidated Financial Statements contained in Part IV hereof. 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, 2001 and 2000, the fair market value of interest rate sensitive financial instruments, which primarily represents interest rate swap agreements, would decline by $4.1 and $7.1 million, respectively, as compared with their fair market value at December 31, 2001 and 2000, respectively. FOREIGN CURRENCY EXCHANGE RATE 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, Mexican pesos, British pounds sterling or euros for the functional currency in which the applicable subsidiary operates at rates agreed to at the inception of the contracts. See also Note 2 and Note 11 to the Consolidated Financial Statements contained in Part IV hereof. 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, 2001 and 2000, the fair market value of foreign currency-sensitive financial instruments, which primarily represents forward foreign currency exchange contracts, would decline by $3.7 million and $4.7 million, respectively, as compared with their fair market value at December 31, 2001 and 2000, 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. COMMODITY PRICE RISK The Company uses certain commodities, including steel, resins, linerboard and diesel fuel, in the normal course of its mining and manufacturing processes. As such, the cost of operations is subject to variability as the market for these commodities change. The Company monitors this risk and, from time to time, enters into derivative contracts to hedge this risk. The Company does not currently have any such derivative contracts outstanding, nor does the Company have any significant purchase obligations to obtain fixed quantities of commodities in the future. 40 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is set forth in the Financial Statements and Supplementary Data contained in Part IV hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 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 2002 Proxy Statement under the heading "Business to be Transacted -- Election of Directors," which information is incorporated herein by reference. The information set forth in the 2002 Proxy Statement under the subheadings "-- Report of the Audit Review Committee," "-- Report of the Compensation Committee on Executive Compensation" and "-- Stock Price Performance Presentation" is not incorporated herein by reference. Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors, executive officers, and holders of more than ten percent of the Company's equity securities will be set forth in the 2002 Proxy Statement under the heading "Section 16(a) Beneficial Ownership Reporting Compliance," which information is incorporated herein by reference. Information regarding the executive officers of the Company is included in this Annual Report on Form 10-K 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 2002 Proxy Statement under the heading "Business to be Transacted -- Election of Directors" under the subheadings "-- Compensation of Directors," "-- Compensation of Executive Officers," "-- Stock Option Grants," "-- Long-Term Incentive Plans," "--Compensation Committee Interlocks and Insider Participation" and "-- Pension Plans," which information is incorporated herein by reference. The information set forth in the 2002 Proxy Statement under the subheadings "-- Report of the Audit Review Committee," "-- Report of the Compensation Committee on Executive Compensation" and "-- Stock Price Performance Presentation" is not 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 2002 Proxy Statement under the heading "Business to be Transacted -- 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 2002 Proxy Statement under the heading "Business to be Transacted -- Election of Directors -- Compensation Committee Interlocks and Insider Participation," which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) and (2) The response to Item 14(a)(1) and (2) is set forth beginning at page F-1 of this Annual Report on Form 10-K. (a) (3) Listing of Exhibits -- See the exhibit index beginning at page X-1 of this Annual Report on Form 10-K. (b) The Company did not file any current reports on Form 8-K during the fourth quarter of 2001. (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-35 of this Annual Report on Form 10-K. 41 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 26, 2002 42 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 26, 2002 - --------------------------- Chief Executive Officer (principal Alfred M. Rankin, Jr. executive officer), Director /s/ Kenneth C. Schilling Vice President and Controller March 26, 2002 - --------------------------- (principal financial and accounting Kenneth C. Schilling officer) * Owsley Brown II Director March 26, 2002 - --------------------------- Owsley Brown II * Robert M. Gates Director March 26, 2002 - --------------------------- Robert M. Gates * Leon J. Hendrix, Jr. Director March 26, 2002 - --------------------------- Leon J. Hendrix, Jr. * David H. Hoag Director March 26, 2002 - --------------------------- David H. Hoag * Dennis W. LaBarre Director March 26, 2002 - --------------------------- Dennis W. LaBarre * Richard de J. Osborne Director March 26, 2002 - --------------------------- Richard de J. Osborne * Ian M. Ross Director March 26, 2002 - --------------------------- Ian M. Ross * Britton T. Taplin Director March 26, 2002 - --------------------------- Britton T. Taplin * David F. Taplin Director March 26, 2002 - --------------------------- David F. Taplin * John F. Turben Director March 26, 2002 - --------------------------- 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 26, 2002 - ---------------------------------------------- Kenneth C. Schilling, Attorney-in-Fact 43 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, 2001 NACCO INDUSTRIES, INC. MAYFIELD HEIGHTS, OHIO F-1 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: Report of Independent Public Accountants--Year ended December 31, 2001, 2000 and 1999. Consolidated Statements of Operations and Comprehensive Income (Loss)--Year ended December 31, 2001, 2000 and 1999. Consolidated Balance Sheets--December 31, 2001 and December 31, 2000. Consolidated Statements of Cash Flows--Year ended December 31, 2001, 2000 and 1999. Consolidated Statements of Stockholders' Equity--Year ended December 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements. NACCO Industries, Inc. Report of Management. The following consolidated financial statement schedules of NACCO Industries, Inc. and Subsidiaries are included in Item 14(d): Schedule I -- Condensed Financial Information of the Parent Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. F-2 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, 2001 and 2000, and the related Consolidated Statements of Operations and Comprehensive Income (Loss), Stockholders' Equity and Cash Flows for each of the three years in the period ended December 31, 2001. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with 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, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. As explained in Note 2 to the Consolidated Financial Statements, effective January 1, 2001, the Company changed its method of accounting for derivative instruments and hedging activities and the Company changed its method of accounting for certain pension liabilities. As explained in Note 2 to the Consolidated Financial Statements, effective January 1, 1999, the Company changed its method of accounting for start-up activities. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in Item 14(a)(1) and (2) and Item 14(d) of Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Cleveland, Ohio, February 12, 2002 F-3 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31 --------------------------------------- 2001 2000 1999 --------- --------- --------- (In millions, except per share data) Net sales $ 2,613.1 $ 2,869.4 $ 2,633.2 Other revenues 24.8 1.9 2.7 --------- --------- --------- REVENUES 2,637.9 2,871.3 2,635.9 Cost of sales 2,203.4 2,355.1 2,151.2 --------- --------- --------- GROSS PROFIT 434.5 516.2 484.7 Selling, general and administrative expenses 381.0 367.0 337.0 Amortization of goodwill 15.9 15.7 15.2 Restructuring charges 21.5 15.6 1.2 Loss on sale of dealers 10.4 --- --- --------- --------- --------- OPERATING PROFIT 5.7 117.9 131.3 Other income (expense) Interest expense (56.9) (47.1) (43.3) Closed mine obligations (1.3) (5.6) --- Insurance recovery 8.0 --- --- Other-net (.9) (5.2) (1.4) --------- --------- --------- (51.1) (57.9) (44.7) --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST, EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES (45.4) 60.0 86.6 Income tax provision (benefit) (9.9) 22.3 31.7 --------- --------- --------- INCOME (LOSS) BEFORE MINORITY INTEREST, EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES (35.5) 37.7 54.9 Minority interest income (expense) .8 .1 (.6) --------- --------- --------- INCOME (LOSS) BEFORE EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES (34.7) 37.8 54.3 Extraordinary gain, net of $16.1 tax expense --- 29.9 --- --------- --------- --------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES (34.7) 67.7 54.3 Cumulative effect of accounting changes, net of: $0.8 tax benefit in 2001 and $0.6 tax benefit in 1999 (1.3) --- (1.2) --------- --------- --------- NET INCOME (LOSS) $ (36.0) $ 67.7 $ 53.1 ========= ========= ========= Other comprehensive income (loss) Foreign currency translation adjustment $ (9.4) $ (15.8) $ (11.9) Cumulative effect of change in accounting for derivatives and hedging, net of ($2.0) tax benefit (3.4) --- --- Reclassification of hedging activities into earnings .9 --- --- Current period cash flow hedging activity (9.3) --- --- Minimum pension liability adjustment, net of: ($8.1) tax benefit in 2001; ($1.0) tax benefit in 2000; $2.3 tax expense in 1999 (13.4) (1.4) 3.8 --------- --------- --------- (34.6) (17.2) (8.1) --------- --------- --------- COMPREHENSIVE INCOME (LOSS) $ (70.6) $ 50.5 $ 45.0 ========= ========= ========= BASIC EARNINGS PER SHARE: Income (Loss) Before Extraordinary Gain and Cumulative Effect of Accounting Changes $ (4.24) $ 4.63 $ 6.67 Extraordinary gain, net-of-tax --- 3.66 --- Cumulative effect of accounting changes, net-of-tax (.16) --- (.15) --------- --------- --------- Net Income (Loss) $ (4.40) $ 8.29 $ 6.52 ========= ========= ========= DILUTED EARNINGS PER SHARE Income (Loss) Before Extraordinary Gain and Cumulative Effect of Accounting Changes $ (4.24) $ 4.63 $ 6.66 Extraordinary gain, net-of-tax --- 3.66 --- Cumulative effect of accounting changes, net-of-tax (.16) --- (.15) --------- --------- --------- Net Income (Loss) $ (4.40) $ 8.29 $ 6.51 ========= ========= =========
See Notes to Consolidated Financial Statements. F-4 CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
December 31 --------------------- 2001 2000 -------- -------- (In millions, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents $ 71.9 $ 33.7 Accounts receivable, net of allowances of $15.6 in 2001 and $16.8 in 2000 264.5 315.4 Inventories 360.6 411.8 Deferred income taxes 40.2 35.0 Prepaid expenses and other 32.8 19.8 -------- -------- 770.0 815.7 PROPERTY, PLANT AND EQUIPMENT, NET 732.0 710.7 DEFERRED CHARGES Goodwill, net 427.9 442.9 Coal supply agreements, net 85.2 86.4 Deferred costs and other 50.7 62.1 Deferred income taxes 26.1 12.8 -------- -------- 589.9 604.2 OTHER ASSETS 70.0 63.3 -------- -------- TOTAL ASSETS $2,161.9 $2,193.9 ======== ========
F-5 CONSOLIDATED BALANCE SHEETS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
December 31 ---------------------- 2001 2000 -------- -------- (In millions, except per share data) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 235.3 $ 263.0 Revolving credit agreements 59.7 66.3 Revolving credit agreement expected to be refinanced within 12 months 265.0 --- Current maturities of long-term debt 41.9 45.4 Current obligations of project mining subsidiaries 37.9 37.7 Accrued payroll 38.5 53.2 Accrued warranty obligations 34.5 37.0 Other current liabilities 161.5 147.6 -------- -------- 874.3 650.2 LONG-TERM DEBT - not guaranteed by the parent company 248.1 450.0 OBLIGATIONS OF PROJECT MINING SUBSIDIARIES - not guaranteed by the parent company or its NACoal subsidiary 271.3 282.7 SELF-INSURANCE RESERVES AND OTHER 235.5 200.4 MINORITY INTEREST 3.4 4.2 STOCKHOLDERS' EQUITY Common stock: Class A, par value $1 per share, 6,559,925 shares outstanding (2000 - 6,529,143 shares outstanding) 6.5 6.5 Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,635,720 shares outstanding (2000 - 1,641,937 shares outstanding) 1.6 1.6 Capital in excess of par value 4.7 3.6 Retained earnings 571.3 614.9 Accumulated other comprehensive income (loss): Foreign currency translation adjustment (28.2) (18.8) Reclassification of hedging activity into earnings .9 --- Deferred loss on cash flow hedging (9.3) --- Cumulative effect of change in accounting for derivatives and hedging (3.4) --- Minimum pension liability adjustment (14.8) (1.4) -------- -------- 529.3 606.4 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,161.9 $2,193.9 ======== ========
See Notes to Consolidated Financial Statements. F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31 ------------------------------ 2001 2000 1999 ------ ------ ------ (In millions) OPERATING ACTIVITIES Net income (loss) $(36.0) $ 67.7 $ 53.1 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 117.6 106.1 104.0 Deferred income taxes (5.0) (12.5) 3.3 Restructuring charges 21.5 15.6 1.2 Minority interest (income) expense (.8) (.1) .6 Extraordinary gain --- (29.9) --- Cumulative effect of accounting changes 1.3 --- 1.2 Loss on sale of assets 10.5 1.4 .4 Other non-cash items .7 (1.3) (3.3) Working capital changes, excluding the effect of business acquisitions: Accounts receivable 42.7 (24.9) (11.3) Inventories 41.4 (26.0) (23.0) Other current assets (11.7) 1.2 (12.4) Accounts payable and other liabilities (46.2) 35.7 15.3 ------ ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 136.0 133.0 129.1 ------ ------ ------ INVESTING ACTIVITIES Expenditures for property, plant and equipment (104.8) (93.3) (75.5) Proceeds from the sale of property, plant and equipment 17.9 15.3 1.0 Acquisitions of businesses, net of cash acquired (3.9) (145.3) (62.4) Investments in unconsolidated affiliates (.3) (10.3) (15.9) Acquisition of minority interest --- --- (11.3) Other-net (4.0) (.6) 2.7 ------ ------ ------ NET CASH USED FOR INVESTING ACTIVITIES (95.1) (234.2) (161.4) ------ ------ ------ FINANCING ACTIVITIES Additions to long-term debt and revolving credit agreements 68.9 186.0 90.2 Reductions of long-term debt and revolving credit agreements (43.8) (61.7) (9.1) Additions to obligations of project mining subsidiaries 76.4 53.7 31.6 Reductions of obligations of project mining subsidiaries (95.0) (70.3) (58.8) Deferred financing fees (1.0) (1.8) --- Financing of other short-term obligations --- --- (17.2) Cash dividends paid (7.6) (7.2) (7.0) Capital grants .1 .4 2.6 Other-net .4 (.8) 3.0 ------ ------ ------ NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (1.6) 98.3 35.3 ------ ------ ------ Effect of exchange rate changes on cash (1.1) .4 (1.5) ------ ------ ------ CASH AND CASH EQUIVALENTS Increase (decrease) for the year 38.2 (2.5) 1.5 Balance at the beginning of the year 33.7 36.2 34.7 ------ ------ ------ BALANCE AT THE END OF THE YEAR $ 71.9 $ 33.7 $ 36.2 ====== ====== ======
See Notes to Consolidated Financial Statements. F-7 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31 ------------------------------- 2001 2000 1999 ------ ------ ------ (In millions, except per share data) CLASS A COMMON STOCK $ 6.5 $ 6.5 $ 6.5 ------ ------ ------ CLASS B COMMON STOCK 1.6 1.6 1.6 ------ ------ ------ CAPITAL IN EXCESS OF PAR VALUE Beginning balance 3.6 2.7 .2 Shares issued under stock option and compensation plans 1.1 .9 2.5 ------ ------ ------ 4.7 3.6 2.7 ------ ------ ------ RETAINED EARNINGS Beginning balance 614.9 554.4 504.9 Net income (loss) (36.0) 67.7 53.1 Reconsolidation of Brazilian subsidiary --- --- 3.4 Cash dividends on Class A and Class B common stock: 2001 $.930 per share (7.6) --- --- 2000 $.890 per share --- (7.2) --- 1999 $.850 per share --- --- (7.0) ------ ------ ------ 571.3 614.9 554.4 ------ ------ ------ ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Beginning balance (20.2) (3.0) 5.1 Foreign currency translation adjustment (9.4) (15.8) (11.9) Cumulative effect of change in accounting for derivatives and hedging (3.4) --- --- Reclassification of hedging activity into earnings .9 --- --- Current period cash flow hedge activity (9.3) --- --- Minimum pension liability adjustment (13.4) (1.4) 3.8 ------ ------ ------ (54.8) (20.2) (3.0) ------ ------ ------ TOTAL STOCKHOLDERS' EQUITY $529.3 $606.4 $562.2 ====== ====== ======
See Notes to Consolidated Financial Statements. F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 1--PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS The Consolidated Financial Statements include the accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its wholly owned subsidiaries (NACCO Industries, Inc. and Subsidiaries -- the "Company"). Intercompany accounts and transactions are eliminated. The Company's subsidiaries operate in three principal industries: lignite mining, lift trucks and housewares. The Company manages its subsidiaries by industry; however, the Company segments its lift truck operations into two components: wholesale manufacturing and retail distribution. The North American Coal Corporation ("NACoal") mines and markets lignite primarily as fuel for power generation by electric utilities. 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, services and leases a full line of lift trucks and service parts marketed worldwide under the Hyster(R) and Yale(R) brand names. 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, leasing and service of Hyster and Yale lift trucks and related service parts by wholly owned retail dealerships and rental companies. The sale of service parts represents approximately 19 percent, 19 percent and 17 percent of the total NMHG revenues as reported for 2001, 2000 and 1999, 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. In 1989, NMHG acquired a majority interest in Hyster Brasil, Ltda., 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. In 1999, management reassessed its ability to influence the performance of Hyster Brasil, Ltda. The stability of the economic environment in Brazil, NMHG's ability to receive dividends from Hyster Brasil, Ltda. during the few years prior to 1999 and NMHG's planned expansion of operations in Brazil at that time were among the factors that led NMHG to determine that it had significant influence over Hyster Brasil, Ltda. and that it was appropriate to consolidate its operations. Undistributed earnings during the periods of deconsolidation, when NMHG did not have effective control, were 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. During 2001 and 2000, NMHG maintained consolidation of this subsidiary, and the Company will periodically assess NMHG's ability to control the operations of Hyster Brasil, Ltda. NOTE 2--ACCOUNTING POLICIES USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. ACCOUNTS RECEIVABLE, NET OF ALLOWANCES: Allowances are maintained against accounts receivable for doubtful accounts, product returns and product discounts. Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. Allowances for product returns due to reasons such as buyer remorse, duplicate gifts received, product failure and excess inventory stocked by the customer which, subject to certain terms and conditions, the Company will agree to accept are estimated at the time of sale based on historical experience. Allowances for product discounts are estimated at the time of sale for customer programs and incentive offerings including special pricing agreements, price competition, promotions and other volume-based incentives. F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) INVENTORIES: Inventories are stated at the lower of cost or market. Cost is determined under the last-in, first-out (LIFO) method for manufactured inventories in the United States and for certain retail inventories. The weighted average method is used for coal inventory. The first-in, first-out (FIFO) method is used with respect to all other inventories. Reserves are maintained for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. PROPERTY, PLANT AND EQUIPMENT, NET: 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. Repairs and maintenance costs are generally expensed when incurred. GOODWILL, NET: 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 generally over a 40-year period. Accumulated amortization of goodwill was $186.8 million and $170.9 million at December 31, 2001 and 2000, respectively. Management regularly evaluates its accounting for goodwill, considering such factors as historical and future profitability, and believes that these assets are realizable and the amortization periods remain appropriate. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses the accounting for goodwill and other intangible assets. The Company adopted this statement on January 1, 2002 as required. Beginning in 2002, goodwill will no longer be amortized in accordance with this Statement. During 2002, the Company will begin testing goodwill for impairment in accordance with SFAS No. 142. 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 periodically based on industry trends, historical experience and management judgment. Changes in assumptions for such matters as legal actions, inflation rates, medical costs and actual experience could cause estimates to change in the near term. REVENUE RECOGNITION: Revenues are generally recognized when customer orders are completed and shipped. Reserves for discounts, returns and product warranties are maintained for anticipated future claims. ADVERTISING COSTS: Advertising costs are expensed as incurred and amounted to $28.6 million, $24.3 million and $25.5 million in 2001, 2000 and 1999, 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 $52.0 million, $51.8 million and $48.0 million in 2001, 2000 and 1999, 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, except for the Company's Mexican operations. The U.S. dollar is considered the functional currency for the Company's Mexican operations and, therefore, the effect of translating assets and liabilities from the Mexican peso to the U.S dollar is recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss). Revenues and expenses of all foreign operations 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. F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) 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. Interest rate swap agreements and forward foreign currency exchange contracts held by the Company have been designated as hedges of forecasted cash flows. The Company does not currently hold any nonderivative instruments designated as hedges or any derivatives designated as fair value hedges as defined in SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." NMHG Wholesale holds certain interest rate swap agreements that do not qualify for hedge accounting treatment according to the guidance of SFAS No. 133. As such, the change in the mark-to-market amount of these swaps will be recognized in the statement of operations every quarter. Although these interest rate swap agreements do not qualify for hedge accounting, the Company believes that these interest rate swap agreements are reasonably effective at economically hedging the Company's risk to changes in the variable rate of interest. The adjustment to the Consolidated Statements of Operations and Comprehensive Income (Loss) for those interest rate swap agreements that did not qualify for hedge treatment and for the ineffective portion of certain interest rate swap agreements was included in other-net and amounted to a loss of $1.4 million ($0.9 million after-tax) for the year ended December 31, 2001. For those interest rate swap agreements that qualify for hedge accounting treatment, the mark-to-market effect has been included in the accumulated other comprehensive income (loss) section ("OCL") of stockholders' equity. Based upon market valuations at December 31, 2001, approximately $6.8 million of the net deferred loss in OCL is expected to be reclassified into the statement of operations over the next 12 months, as cash flow payments are made in accordance with the interest rate swap agreements. For the year ended December 31, 2001, there was no ineffectiveness of forward foreign currency exchange contracts that would have resulted in recognition in the statement of operations. Forward foreign currency exchange contracts are used to hedge transactions expected to occur within the next 12 months. Based on market valuations at December 31, 2001, the amount of net deferred gain included in OCL at December 31, 2001 of $0.1 million is expected to be reclassified into the statement of operations over the next 12 months, as those transactions occur. Cash flows from hedging activities are reported in the Consolidated Statements of Cash Flows in the same classification as the hedged item, generally as a component of cash flows from operations. NEW ACCOUNTING STANDARDS: On January 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain 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 are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. As a result of the adoption of SFAS No. 133, the Company recognized a cumulative effect of a change in accounting charge to the Consolidated Statement of Operations and Comprehensive Income (Loss) for the year ended December 31, 2001 of $0.9 million, net of $0.5 million of tax benefit, relating primarily to certain interest rate swap agreements held by NMHG Wholesale which did not qualify for hedge accounting treatment at January 1, 2001. In addition, effective January 1, 2001, the Company recognized a cumulative effect of a change in accounting charge against OCL in the Consolidated Balance Sheet at December 31, 2001 of $3.4 million, net of $2.0 million of tax benefit, relating to net deferred losses on derivative instruments that qualify for hedge accounting treatment under SFAS No. 133. On January 1, 2001, the Company recognized a cumulative effect of a change in accounting charge of $0.4 million, net of $0.3 million tax benefit, relating to a change in the method of calculating pension costs for the defined benefit pension plan in the United Kingdom. Prior to January 1, 2001, actuarially determined net gains and losses of the United Kingdom plan were recognized in full as a component of net pension cost in the year incurred. However, actuarially determined net gains and losses of all other defined benefit pension plans of the Company are amortized and included as a component of net pension cost over the next four years. Both of these methods are permissible pursuant to SFAS No. 87, "Employers' Accounting for Pensions." However, effective January 1, 2001, the Company changed the method of recognition of actuarially determined net gains and losses of the United Kingdom plan to conform with the methodology utilized by all other defined benefit plans of the Company. This change in accounting was made to achieve consistency of application of this accounting principle among all members of the consolidated group, which the Company believes is the preferred application of accounting principles generally accepted in the United States. In September 2000, the Emerging Issues Task Force ("EITF") reached a consensus on Issue Number 00-10, "Accounting for Shipping and Handling Fees and Costs" ("EITF 00-10"), which requires shipping and handling F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) amounts billed to a customer to be classified as revenue. In addition, the EITF's preference is to classify shipping and handling costs as "cost of sales." For certain shipping and handling fees, the Company netted the charge to the customer with the cost incurred within its Consolidated Statements of Operations and Comprehensive Income (Loss) on the line cost of sales. In the fourth quarter of 2000, the Company changed its method of reporting to comply with EITF 00-10. The Company restated its revenues and cost of sales for the first three quarters of 2000 and the fiscal year ended December 31, 1999, resulting in an increase to both revenues and cost of sales of approximately $36.4 million and $33.1 million, respectively. This restatement does not affect the reported amounts of gross profit. 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 principles to revenue recognition in financial statements. The Company has reviewed its revenue recognition policies and procedures and believes that 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. 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 Consolidated Statement of Operations and Comprehensive Income (Loss) for the year ended December 31, 1999. ACCOUNTING STANDARDS NOT YET ADOPTED: In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," and, in October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 141 requires all business combinations completed after June 30, 2001, to be accounted for under the purchase method. This standard also establishes, for all business combinations made after June 30, 2001, specific criteria for the recognition of intangible assets separately from goodwill. SFAS No. 141 also requires that the excess of the fair value of acquired assets over cost (negative goodwill) be recognized immediately as an extraordinary gain, rather than deferred and amortized. The Company will account for all future business combinations under SFAS No. 141. SFAS No. 142 addresses the accounting for goodwill and other intangible assets after an acquisition. Goodwill and other intangibles that have indefinite lives will no longer be amortized, but will be subject to annual impairment tests. All other intangible assets will continue to be amortized over their estimated useful lives, which is no longer limited to 40 years. The Company adopted this statement effective January 1, 2002, as required. Amortization of existing goodwill ceased on the unamortized portion associated with acquisitions and certain investments accounted for under the equity method. This is expected to have a favorable annual impact of approximately $15.8 million, net of tax, beginning in 2002. SFAS No. 142 also requires a new methodology for the testing of impairment of goodwill and other intangibles that have indefinite lives. During 2002, the Company will begin testing goodwill for impairment under the new rules, applying a fair-value-based test. The transition adjustment, if any, resulting from the adoption of the new approach to impairment testing as required by SFAS No. 142 will be reported as a cumulative effect of a change in accounting principle. At this time, the Company has not yet determined what impact, if any, the change in the required approach to impairment testing will have on either its financial position or results of operations. SFAS No. 143 provides accounting requirements for retirement obligations associated with tangible long-lived assets, including: (i) the timing of liability recognition; (ii) initial measurement of the liability; (iii) allocation of asset retirement cost to expense; (iv) subsequent measurement of the liability; and (v) financial statement disclosures. SFAS No. 143 requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. This standard becomes effective for fiscal years beginning after June 15, 2002. The Company will adopt the Statement effective January 1, 2003. The transition adjustment, if any, resulting from the adoption of SFAS No. 143 will be reported as F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) a cumulative effect of a change in accounting principle. At this time, the Company has not yet determined what impact, if any, the adoption of this Statement will have on either its financial position or results of operations. SFAS No. 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supercedes SFAS No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business, as previously defined in that Opinion. SFAS No. 144 provides a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. Many of the provisions of SFAS No. 121 are retained, however, SFAS No. 144 clarifies some of the implementation issues related to SFAS No. 121. SFAS No. 144 also broadens the presentation of discontinued operations to include more disposal transactions. This Statement is effective for fiscal years beginning after December 15, 2001, with early adoption encouraged. The Company adopted this Statement effective January 1, 2002, as required. The adoption of this Statement did not result in an adjustment to the Company's financial statements on January 1, 2002. RECLASSIFICATIONS: Certain amounts in the prior periods' Consolidated Financial Statements have been reclassified to conform to the current period's presentation. NOTE 3--SPECIAL CHARGES RESTRUCTURING CHARGES NMHG: During 2001, management committed to the restructuring of certain operations in Europe for both the Wholesale and Retail segments of the business. As such, NMHG Wholesale recognized a restructuring charge of approximately $4.5 million pre-tax, classified in the 2001 Consolidated Statement of Operations and Comprehensive Income (Loss) on the line restructuring charges, for severance and other employee benefits to be paid to approximately 285 manufacturing and administrative personnel in Europe. NMHG Retail recognized a restructuring charge of approximately $4.7 million pre-tax, classified in the 2001 Consolidated Statement of Operations and Comprehensive Income (Loss) on the line restructuring charges, of which $0.4 million relates to lease termination costs and $4.3 million relates to severance and other employee benefits to be paid to approximately 140 service technicians, salesmen and administrative personnel at wholly owned dealers in Europe. During 2001, total payments of $1.7 million have been made to approximately 190 employees for both of these European plans. During 2000, NMHG made the determination that the consolidation of the Americas' truck assembly activities from three plants to two plants offers significant opportunity to reduce structure costs while further optimizing the use of NMHG's global manufacturing capacity. Accordingly, a decision was made to phase out certain manufacturing activities in the Danville, Illinois, assembly plant. In December 2000, the Board of Directors approved management's plan to transfer manufacturing activities from NMHG's Danville plant to its other global manufacturing plants. The adoption of this plan resulted in a charge to operations of approximately $13.9 million recognized in the 2000 Consolidated Statement of Operations and Comprehensive Income (Loss) on the line restructuring charges. This charge is comprised of a $5.1 million curtailment loss for retirement benefits under a defined benefit plan, $4.0 million for employee severance to be paid to approximately 425 manufacturing and office personnel, $2.2 million of asset impairment charges and $2.6 million for other costs. As noted above, in connection with the phase-out of activities at the Danville, Illinois, assembly plant, NMHG recognized an impairment charge of $2.2 million in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The impairment charge relates to certain fixed assets and leasehold improvements that will either be disposed of or sold at fair market value, which was estimated to be below the net book value. Fair market value was estimated using current market values for similar assets. During 2001, payments of $1.7 million to approximately 350 employees have been made. Approximately $12.0 million of pre-tax costs associated with the Danville phase-out, which were not eligible for accrual as of December 31, 2000, were expensed during 2001 and classified as cost of sales in the 2001 Consolidated Statement of Operations and Comprehensive Income (Loss). In addition, the accrual for restructuring was reduced by $0.4 million in 2002. HOUSEWARES: In 2001, the Board of Directors approved management's plan to restructure HB-PS' manufacturing activities in Mexico. Certain of the company's products will be outsourced beginning in 2002 and production in three of the company's Mexican manufacturing plants will be consolidated into one plant during 2002 and 2003. As a result of this plan, HB-PS recognized a charge of $12.5 million of which $5.0 million relates to the impairment of fixed assets, $3.3 million relates to equipment and building lease impairment and clean-up costs, $2.9 million relates to severance benefits to be paid to approximately 925 manufacturing personnel, $0.6 million relates to the impairment of inventory and $0.7 million is for other related costs. In the 2001 Consolidated Statement of Operations and Comprehensive Income (Loss), $11.9 million is classified on the line restructuring charges and $0.6 million, which relates to the inventory write-down, is included in cost of sales. As of December 31, 2001, no severance payments were made. F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) As noted above, in connection with the restructuring of the manufacturing operations in Mexico, HB-PS recognized an impairment charge of $5.0 million in accordance with SFAS No. 121. The impairment charge relates to certain fixed assets that will either be disposed of or sold at fair market value, which is estimated to be below the net book value, throughout 2002 as the outsourcing program progresses. Fair market value was estimated using current market values for similar assets. Also in 2001, HB-PS recognized a charge of $0.8 million, classified on the line restructuring charges in the 2001 Consolidated Statement of Operations and Comprehensive Income (Loss), relating to severance benefits to be paid to personnel located at the company's headquarters and affecting all functional areas of the business. This restructuring plan was initiated primarily as a cost-cutting measure in response to reduced overall consumer demand caused by the 2001 economic slowdown. Headcount was reduced by 36, or approximately 10 percent of the total corporate personnel. As of December 31, 2001, payments of $0.3 million have been made. Payments in respect to the remainder of the charge, or $0.5 million, are expected to be made during the first half of 2002. In 2000 and 1999, HB-PS recognized an accrual for employee severance and related costs of $0.5 million for 40 manufacturing employees and $1.2 million for 130 manufacturing employees, respectively, in connection with transitioning activities to HB-PS' Mexican facilities. During 2001, 2000, and 1999 payments of $0.7 million to approximately 25 employees, $2.5 million to approximately 225 employees and $1.7 million to approximately 350 employees, respectively, have been made. See also the table below for detail of the employee severance accrual activity during this transition period. As of December 31, 2001, these restructuring plans are complete. In 2000, HB-PS recognized an impairment charge of $1.2 million in accordance with SFAS No. 121 related to certain assets that will be disposed as a result of the transitioning of activities from manufacturing facilities in the United States to manufacturing facilities in Mexico. The changes to the Company's restructuring accruals are as follows:
-------------------------------------------------------- ASSET LEASE CURTAILMENT SEVERANCE IMPAIRMENT IMPAIRMENT LOSS OTHER TOTAL -------------------------------------------------------- NMHG WHOLESALE Balance at December 31, 1999 $ --- $ --- $ --- $ --- $ --- $ --- Provision 4.0 2.2 --- 5.1 2.6 13.9 Payments --- --- --- --- --- --- -------------------------------------------------------- Balance at December 31, 2000 4.0 2.2 --- 5.1 2.6 13.9 Provision (reversal), net 4.2 --- --- --- (.1) 4.1 Payments/assets disposed (2.9) (2.2) --- --- (.1) (5.2) -------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $ 5.3 $ --- $ --- $ 5.1 $ 2.4 $12.8 ======================================================== NMHG RETAIL Balance at December 31, 2000 $ --- $ --- $ --- $ --- $ --- $ --- Provision 4.3 --- .4 --- --- 4.7 Payments (.4) --- --- --- --- (.4) -------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $ 3.9 $ --- $ .4 $ --- $ --- $ 4.3 ======================================================== HOUSEWARES Balance at December 31, 1998 $ 3.2 $ --- $ --- $ --- $ --- $ 3.2 Provision 1.2 --- --- --- --- 1.2 Payments (1.7) --- --- --- --- (1.7) -------------------------------------------------------- Balance at December 31, 1999 2.7 --- --- --- --- 2.7 Provision .5 1.2 --- --- --- 1.7 Payments (2.5) --- --- --- --- (2.5) -------------------------------------------------------- Balance at December 31, 2000 .7 1.2 --- --- --- 1.9 Provision 3.7 5.0 3.3 --- .7 12.7 Payments/assets disposed (1.0) (1.2) --- --- --- (2.2) -------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $ 3.4 $ 5.0 $ 3.3 $ --- $ .7 $12.4 ========================================================
F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) OTHER SPECIAL TRANSACTIONS NACOAL: In 2000, NACoal recognized a charge of $2.4 million, included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss), for the write-off of previously capitalized development costs incurred for a power plant and mine development project in Turkey. In 2000, NACoal determined that it would cease development of this project. NMHG: In 2001, NMHG recognized income of $8.0 million classified in other income (expense) in the Consolidated Statements of Operations and Comprehensive Income (Loss) resulting from the receipt of insurance proceeds relating to flood damage in September 2000 at NMHG's Sumitomo-NACCO joint venture in Japan. NACCO & OTHER: In addition to the extraordinary gain described in Note 4, in 2000, Bellaire Corporation ("Bellaire," a wholly owned non-operating subsidiary of NACCO) recognized a charge of $5.6 million included in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) as closed mine obligations, which is part of other income (expense), related primarily to an increase in liabilities for Black Lung and other retiree medical benefits, and to environmental obligations arising from former Eastern U.S. underground mining operations. The Company periodically reviews its assumptions used to estimate these reserves. Revisions made to the Company's estimate of environmental clean-up costs, mortality tables used for Black Lung liabilities, discount rates and changes in the expected health care trend rates resulted in an increase to the estimated reserve for these obligations. See also Note 4 and Note 14. In 1999, NACCO recognized a charge of $2.9 million, included in other-net in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss), for the write-off of costs incurred to evaluate a potential business acquisition. NOTE 4--EXTRAORDINARY GAIN The extraordinary gain of $29.9 million recognized in 2000, net of $16.1 million in taxes, relates to a reduction in the accrual for obligations to UMWA. The obligation to UMWA was initially recognized by Bellaire as an extraordinary charge in 1992 to accrue for the estimated costs associated with the Coal Act, which is discussed in more detail in Note 14. In 2000, the U.S. Court of Appeals for the Sixth Circuit upheld an Opinion by the U.S. District Court in Columbus, Ohio, which ruled that late assignments of beneficiaries made to Bellaire were not allowed as a matter of law. As a result of this event and changes to certain assumptions used to estimate this obligation, such as the number of beneficiaries and health care trend rates, the aggregate estimated costs associated with this obligation are expected to be lower than previously anticipated. Management believes that the estimated future cost of this obligation has been adequately accrued. See also Note 3 for a discussion of changes to other closed mine reserves. NOTE 5--ACQUISITIONS AND DISPOSITION NACOAL: On October 11, 2000, NACoal acquired certain assets from Phillips Coal Company, including its 75 percent joint venture interest in Mississippi Lignite Mining Company ("MLMC"), its 50 percent joint venture interest in Red River Mining Company ("Red River"), the related lignite reserves under committed contracts at MLMC and Red River and 560 million tons of undeveloped lignite reserves in Texas, Mississippi and Tennessee. The purchase price for the assets acquired was $128.7 million and was financed with a new five-year, $175.0 million credit facility that includes a $60.0 million revolving line of credit and a $115.0 million term loan. As a result of the acquisition, NACoal now owns 100 percent of both MLMC and Red River. The acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations for the fully consolidated businesses acquired are included in the accompanying financial statements beginning on October 11, 2000. The purchase price allocation, based on independent third-party appraisals, has resulted in the allocation of $85.8 million to the value of the existing long-term coal supply agreements with the customers ("coal supply agreements"). These identifiable intangible assets are amortized over units of production based on the estimated recoverable tonnages at each respective mine. No goodwill was recognized as a result of this transaction. NMHG: In 1998, NMHG announced and began implementation of a strategy to expand into the retail forklift distribution business. As a result, either 100 percent of the stock or substantially all of the assets of several forklift truck retail dealerships were acquired in 2001, 2000 and 1999. The dealerships acquired were either existing independent Hyster or Yale dealerships or were converted to Hyster or Yale dealerships at the time of acquisition. The combined purchase prices of retail dealerships acquired during 2001, 2000 and 1999 were approximately $3.9 million, $16.6 million and $62.4 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. F-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) 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. 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 generally over 40 years. Goodwill recorded in 2001, 2000 and in 1999 as a result of these acquisitions was $2.5 million, $8.9 million and $24.7 million, respectively. In 2001, NMHG sold certain of its wholly owned dealers. This transaction resulted in initial proceeds of approximately $8.0 million and a preliminary charge for the loss on the sale of assets and related wind-down costs of $10.4 million. The agreement to sell these dealers allows for a final determination of the purchase price during the first half of 2002 whereby the preliminary purchase price received for certain assets and liabilities may be adjusted. The Company does not expect the proceeds or the loss on the sale to change significantly as a result of the final determination of the purchase price. Revenues for these dealers for each of the three years ended December 31, 2001, 2000 and 1999 were $45.1 million, $46.8 million and $47.4 million, respectively. Net losses for these dealers for each of the three years ended December 31, 2001, 2000 and 1999 were $18.2 million, $5.5 million and $2.4 million, respectively. As a result of the acquisitions by NACoal and NMHG, certain liabilities were assumed as follows:
2001 2000 1999 ------------ ------------ ----------- Noncash Investing Activities: Fair value of assets acquired $ 4.2 $ 179.8 $ 89.6 Cash paid for the net assets, net of cash acquired (3.9) (145.3) (62.4) ------------ ------------ ----------- Liabilities assumed $ .3 $ 34.5 $ 27.2 ============ ============ ===========
On a pro forma basis, as if the businesses had been acquired on January 1, 2001, 2000 and 1999, respectively, revenues, net income (loss) and earnings per share would not differ materially from the amounts reported in the accompanying consolidated financial statements for 2001, 2000 and 1999. 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 6--ACCOUNTS RECEIVABLE SECURITIZATION On December 5, 2001, NMHG Wholesale's domestic accounts receivable securitization program (the "Program") was terminated. Prior to the termination of the program, the transfer of receivables pursuant to the Program were accounted for as a sale in accordance with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement of FASB Statement No. 125." As a result of the termination of the Program, NMHG Wholesale will rely on its revolving credit facility ("Facility") to finance accounts receivable that otherwise would have been sold under the Program prior to December 5, 2001. Additional borrowings from the Facility of $33.4 million were used to finance the outstanding balance of accounts receivable sold pursuant to the Program on December 5, 2001. As a result of the termination of the Program, an increase in interest expense arising from increased outstanding borrowings is expected to be offset by a decrease in the cost of the Program, which is classified in the statement of operations as other-net. NMHG Wholesale 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 $72.4 million and $59.6 million at December 31, 2001 and 2000, 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 $855.7 million, $858.2 million, and $655.0 million were received during 2001, 2000 and 1999 respectively, and the balance of accounts receivable sold at December 31, 2001 and 2000 was $27.7 million and $71.6 million, respectively. The discount and any other transaction gains and losses are included in other-net in the Consolidated Statements of Operations and Comprehensive Income (Loss) and totaled $4.7 million, $5.5 million and $3.8 million in 2001, 2000 and 1999, respectively. F-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 7--INVENTORIES Inventories are summarized as follows:
December 31 ---------------------------------- 2001 2000 ---------------- ---------------- Manufactured inventories: Finished goods and service parts - NMHG $ 99.6 $ 103.1 Housewares 54.0 53.2 ---------------- ---------------- 153.6 156.3 Raw materials and work in process - NMHG Wholesale 111.4 157.9 Housewares 10.5 17.8 ---------------- ---------------- 121.9 175.7 ---------------- ---------------- Total manufactured inventories 275.5 332.0 Retail inventories: NMHG Retail 35.8 36.8 Housewares 17.6 19.4 ---------------- ---------------- Total retail inventories 53.4 56.2 ---------------- ---------------- Total inventories at FIFO 328.9 388.2 Coal - NACoal 17.5 12.0 Mining supplies - NACoal 23.8 23.7 ---------------- ---------------- Total inventories at weighted average 41.3 35.7 LIFO reserve: NMHG (12.3) (14.8) Housewares 2.7 2.7 ---------------- ---------------- (9.6) (12.1) ---------------- ---------------- $ 360.6 $ 411.8 ================ ================
The cost of certain manufactured and retail inventories has been determined using the LIFO method. At December 31, 2001 and 2000, 60 and 66 percent of total inventories, respectively, were determined using the LIFO method. NOTE 8--PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net includes the following:
December 31 ---------------------------------- 2001 2000 ---------------- --------------- Coal lands and real estate: NACoal $ 30.9 $ 33.7 Project mining subsidiaries (Note 12) 83.6 80.8 NMHG 15.8 16.8 Housewares 1.8 1.9 NACCO and Other .1 .1 ---------------- --------------- 132.2 133.3 ---------------- --------------- Plant and equipment: NACoal 137.8 85.3 Project mining subsidiaries (Note 12) 500.8 491.1 NMHG Wholesale 413.2 386.4 NMHG Retail 109.1 95.7 Housewares 175.1 167.7 NACCO and Other 4.6 4.8 ---------------- --------------- 1,340.6 1,231.0 ---------------- --------------- Property, plant and equipment, at cost 1,472.8 1,364.3 Less allowances for depreciation, depletion and amortization 740.8 653.6 ---------------- --------------- $ 732.0 $ 710.7 ================ ===============
F-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) Total depreciation, depletion and amortization expense on property, plant and equipment was $100.6 million, $90.3 million and $88.5 million during 2001, 2000 and 1999, respectively. Proven and probable coal reserves approximated 2.6 billion and 2.8 billion tons at December 31, 2001 and 2000, respectively. NOTE 9--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 under revolving credit agreements.
December 31 ---------------------------------- 2001 2000 ---------------- ---------------- Available borrowings, net of limitations: NACoal $ 60.0 $ 60.0 NMHG 450.5 389.6 Housewares 188.7 188.8 ---------------- ---------------- $ 699.2 $ 638.4 ================ ================ Current portion of borrowings outstanding: NACoal $ --- $ 2.5 NMHG 301.2 33.1 Housewares 23.5 30.7 ---------------- ---------------- $ 324.7 $ 66.3 ================ ================ Unused availability*: NACoal $ 29.0 $ 29.5 NMHG 149.3 147.5 Housewares 85.2 78.1 ----------------- ---------------- $ 263.5 $ 255.1 ================= ================ Weighted average stated interest rate: NACoal 4.3% 9.0% NMHG 2.8% 7.1% Housewares 2.6% 7.0% Weighted average effective interest rate (including interest rate swap agreements): NACoal 6.2% 8.9% NMHG 5.8% 6.4% Housewares 5.7% 6.8%
*Unused availability is determined using the available borrowings, net of limitations, reduced by the current portion and long-term portion (see Note 10) of revolving credit agreements outstanding. NACOAL: NACoal's non-project mine financing needs are provided by an unsecured revolving line of credit of up to $60.0 million and an unsecured term loan with a remaining balance of $100.0 million (the "NACoal Facility"). The NACoal Facility requires annual term loan repayments of $15.0 million, with a final term loan repayment of $55.0 million in October 2005. The revolving credit facility of $60.0 million is available until the facility's expiration in October 2005. The NACoal Facility has performance-based pricing which sets interest rates based upon achieving various levels of Debt to EBITDA ratios, as defined. The NACoal Facility currently provides for, at NACoal's option, Euro-Dollar Loans which bear interest at LIBOR plus a margin based on the level of Debt to EBITDA ratio achieved and Base Rate Advances which bear interest at Base Rates (as defined in the agreement). A facility fee, which is determined based on the level of Debt to EBITDA ratio achieved, is also applied to the aggregate revolving line of credit. At December 31, 2001, term loan borrowings outstanding bore interest at LIBOR plus 2.25 percent and revolving credit borrowings outstanding bore interest at LIBOR plus 1.85 percent. At December 31, 2001, the revolving credit facility fee was 0.40 percent. NMHG: NMHG Wholesale's credit agreement provides for an unsecured revolving credit facility (the "Facility") that permits advances up to $350.0 million and expires in June 2002. 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 0.20 percent and Money Market Loans which bear interest at Auction Rates (as defined in the agreement) and requires a 0.10 percent F-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) 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. Because the Facility expires in June 2002, NMHG anticipates that a new credit facility will be obtained in or before June 2002. While there can be no assurances as to the specific terms of the refinancing, including the nature of the covenants and restrictions, NMHG expects that interest rates under the new facility will be higher based on its evaluation of the generally higher interest rate spreads charged today versus interest rate spreads in effect when NMHG Wholesale's Facility was structured in 1995. NMHG Wholesale expects that the outstanding balance under the Facility at the time of refinancing will be financed with a combination of short-term and long-term financing. However, in accordance with accounting principles generally accepted in the U.S., the outstanding balance under the Facility will be classified as a current liability until the Facility is refinanced. The amount outstanding that is classified as a current liability at December 31, 2001 is $265.0 million. NMHG also has separate facilities totaling $76.3 million and $66.4 million at December 31, 2001 and 2000, respectively. Outstanding letters of credit reduce amounts available under these facilities. A portion of these facilities is denominated in foreign currencies, primarily the British pound sterling and the Australian dollar. At December 31, 2001 and 2000, unused availability, net of limitations, under these facilities was $34.3 million and $26.5 million, respectively. NMHG also maintains various uncommitted lines of credit, which permitted funding up to $30.0 million at December 31, 2001 and 2000. Under these facilities, unused availability was $30.0 million and $6.0 million at December 31, 2001 and 2000, respectively. HOUSEWARES: HB-PS' credit agreement provides for a revolving credit facility (the "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 allows advances of up to $10.0 million from HB-PS to KCI. Advances from HB-PS are the primary sources of financing for KCI. In December 2001, the HB-PS Facility was amended to modify the covenant requirements and redefine covenant calculations so that the recognition of the restructuring charge in the fourth quarter of 2001 did not cause a violation of covenants under the HB-PS Facility. In addition to the change in the covenant requirements and calculations, the applicable margin added to the base rate of interest increased and the facility fee on the available borrowings increased. Prior to the amendment, for the year ended December 31, 2001, the HB-PS Facility provided for an interest rate of LIBOR plus 0.4375 percent and a facility fee of 0.3125 percent. After the amendment, effective January 1, 2002, the HB-PS Facility provides for an interest rate of LIBOR plus 2.25 percent and a facility fee of 0.50 percent. Interest rates and facility fees, however, are subject to change based on the level of EBITDA to interest expense ratio, as defined, HB-PS achieves each quarter. 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, 2001 and 2000, availability, net of limitations, under these facilities was $25.0 million and $29.7 million, respectively. NOTE 10--LONG-TERM DEBT Subsidiary long-term debt is as follows:
December 31 ---------------------------------- 2001 2000 ---------------- ---------------- NACOAL: Long-term portion of revolving credit agreement $ 31.0 $ 28.0 Capital lease obligations and other term loans 125.5 115.3 ---------------- ---------------- 156.5 143.3 ---------------- ---------------- NMHG: Long-term portion of revolving credit agreements --- 209.0 Capital lease obligations and other term loans 53.2 62.8 ---------------- ---------------- 53.2 271.8 ---------------- ---------------- HOUSEWARES: Long-term portion of revolving credit agreement 80.0 80.0 Capital lease obligations .3 .3 ---------------- ---------------- 80.3 80.3 ---------------- ---------------- Total long-term debt 290.0 495.4 Less current portion of capital leases and term loans (41.9) (45.4) ---------------- ---------------- $ 248.1 $ 450.0 ================ ================
F-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) Annual maturities of revolving lines of credit and term loans are as follows: $352.7 million in 2002, $96.5 million in 2003, $16.7 million in 2004 and $86.0 million in 2005. Interest paid on revolving credit agreements and long-term debt was $46.0 million, $31.1 million and $26.4 million during 2001, 2000 and 1999, respectively. Interest capitalized was $4.4 million, $3.8 million and $1.1 million in 2001, 2000 and 1999, respectively. 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, debt to EBITDA, interest coverage and fixed charge coverage. These ratios are calculated at the subsidiary level. Restrictions may also include limits on capital expenditures, advances to affiliates and dividends. At December 31, 2001, the subsidiaries were in compliance with the covenants in their credit agreements. NOTE 11--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, 2001 and 2000. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable and derivatives. The large number of customers comprising the Company's customer base and their dispersion across many different industries and geographies mitigates concentration of credit risk on accounts receivable. However, HB-PS maintains significant accounts receivable balances with several large retail customers. At December 31, 2001 and 2000, receivables from HB-PS' five largest customers represented 15.3 percent and 16.1 percent, respectively, of the Company's net accounts receivable. 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 with total notional amounts of $101.6 million and $3.8 million, respectively, at December 31, 2001, primarily denominated in euros, British pounds sterling, Japanese yen and Mexican pesos. NMHG and HB-PS held forward foreign currency exchange contracts with total notional amounts of $92.2 million and $9.1 million, respectively, at December 31, 2000, primarily denominated in British pounds sterling, euros, Japanese yen and Canadian dollars. The amount of deferred gain at December 31, 2001 and 2000, respectively, was not material. The fair market value of these contracts was estimated based on quoted market prices and approximated a net payable of $0.7 million and $0.8 million at December 31, 2001 and 2000, respectively. 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 Amount Average Fixed Rate ------------------------- ---------------------------- Remaining Term at 2001 2000 2001 2000 December 31, 2001 ------------ ------------ ---------------------------- ----------------------------------------------- NACoal $ 132.7 $ 147.9 8.1% 8.3% Various, extending to June 2008 NMHG $ 225.0 $ 215.0 5.8% 6.3% Various, extending to January 2005 Housewares $ 75.0 $ 80.0 6.3% 6.4% Various, extending to March 2005
At NACoal, $22.7 million and $27.9 million of interest rate swap agreements at December 31, 2001 and 2000, respectively, hedge notes payable held by the project mining subsidiaries (see Note 12). Maturities of these interest rate swap agreements correspond with the maturities of the hedged obligation. The related obligation is included in current and long-term 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 remaining NACoal interest rate swap agreements hedge the NACoal Facility as discussed in Note 9. Interest rate swap agreements held by NMHG have terms that vary from one-year to seven-year periods from inception. Terms of Housewares' interest rate swap agreements vary from one-year to four-year periods from inception. The fair market value of all interest rate swap agreements, which was based on quotes obtained from independent brokers, was a net payable of $23.2 million and $4.7 million at December 31, 2001 and 2000, respectively. F-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 12--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 the project mining subsidiaries. The obligations of these project mining subsidiaries included in the Company's Consolidated Balance Sheets do not affect the short-term or long-term liquidity of the Company and are without recourse to NACCO and its NACoal subsidiary. Obligations of the project mining subsidiaries, less current maturities, consist of the following:
December 31 ---------------------------------- 2001 2000 ---------------- ---------------- Capitalized lease obligations $ 96.2 $ 104.8 Advances from customers 139.9 140.0 Notes payable with interest rates ranging from 2.2% to 6.5% in 2001 and 5.6% to 8.7% in 2000 35.2 37.9 ---------------- ---------------- $ 271.3 $ 282.7 ================ ================
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 $100.1 million, of the total advances. In addition, portions of the advances are non-interest-bearing. The annual maturities of advances from customers and notes payable are as follows: $18.3 million in 2002, $10.3 million in 2003, $8.0 million in 2004, $7.9 million in 2005, $7.9 million in 2006 and $141.0 million thereafter. Interest paid was $16.5 million, $17.1 million and $17.7 million during 2001, 2000 and 1999, respectively. The cost of coal, which is passed through to the utility customers, includes interest expense. The project mining subsidiaries lease certain mining equipment under noncancellable capital and operating leases which expire at various dates through 2007. Future minimum capital and operating lease payments at December 31, 2001, are:
Capital Operating Leases Leases ---------------- ---------------- 2002 $ 27.3 $ 4.6 2003 21.7 4.6 2004 20.2 4.5 2005 19.6 4.5 2006 14.3 2.4 Subsequent to 2006 50.6 -- ---------------- ---------------- Total minimum lease payments 153.7 $ 20.6 ================ Amounts representing interest (37.9) ---------------- Present value of net minimum lease payments 115.8 Current maturities (19.6) ---------------- Long-term capital lease obligation $ 96.2 ================
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 -------------------------------- 2001 2000 --------------- --------------- Plant and equipment $ 211.3 $ 210.9 Less accumulated amortization 133.8 126.8 --------------- --------------- $ 77.5 $ 84.1 =============== ===============
During 2001, 2000 and 1999, the project mining subsidiaries incurred capital lease obligations of $8.3 million, $11.6 million and $3.8 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. F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 13--LEASING ARRANGEMENTS The Company leases certain office, manufacturing and warehouse facilities, retail stores and machinery and equipment under noncancellable capital and operating leases that expire at various dates through 2021. NMHG Retail also leases certain forklift trucks that are held for sale or sublease to customers. Many leases include renewal and/or purchase options. Future minimum capital and operating lease payments, excluding project mining subsidiaries, at December 31, 2001, are:
Capital Operating Leases Leases ---------------- --------------- 2002 $ 15.6 $ 66.0 2003 15.9 53.8 2004 10.5 44.8 2005 7.7 35.2 2006 5.7 26.9 Subsequent to 2006 22.5 45.1 ---------------- --------------- Total minimum lease payments 77.9 $ 271.8 =============== Amounts representing interest (15.1) ---------------- Present value of net minimum lease payments 62.8 Current maturities (13.9) ---------------- Long-term capital lease obligation $ 48.9 ================
Aggregate future minimum rentals to be received under noncancellable subleases of forklift trucks as of December 31, 2001 are $29.8 million. Rental expense for all operating leases, excluding project mining subsidiaries, consists of the following:
2001 2000 1999 ------------ ------------ ------------ Minimum rentals $ 57.5 $ 44.2 $ 32.6 Sublease income (15.7) (7.8) --- ------------ ------------ ------------ Rent expense, net $ 41.8 $ 36.4 $ 32.6 ============ ============ ============
Assets recorded under capital leases are included in property, plant and equipment and consist of the following (excluding assets of project mining subsidiaries as indicated in Note 12):
December 31 -------------------------------- 2001 2000 --------------- --------------- Plant and equipment $ 94.1 $ 63.3 Less accumulated amortization 31.1 22.4 --------------- --------------- $ 63.0 $ 40.9 =============== ===============
During 2001, 2000 and 1999, capital lease obligations, excluding project mining subsidiaries, of $30.8 million, $22.3 million and $13.6 million, respectively, were incurred in connection with lease agreements to acquire plant and equipment. NOTE 14--SELF-INSURANCE RESERVES AND OTHER Self-insurance reserves and other consists of the following:
December 31 -------------------------------- 2001 2000 --------------- --------------- Undiscounted UMWA obligation $ 36.0 $ 38.0 Present value of other closed mine obligations 24.4 25.0 Other self-insurance reserves 175.1 137.4 --------------- --------------- $ 235.5 $ 200.4 =============== ===============
The UMWA obligation and the other closed mine obligations relate to Bellaire's 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 F-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) Worker retirees. Annual cash payments of approximately $1.9 million, declining steadily over time to approximately $0.1 million, are expected to be made through 2050. 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 retiree medical benefit costs, workers' compensation and Black Lung benefit costs. Other self-insurance reserves include product liability reserves, employee retirement obligations and other miscellaneous long-term liabilities. NOTE 15--CONTINGENCIES Various legal and regulatory proceedings and claims have been or may be asserted against NACCO and certain subsidiaries relating to the conduct of their businesses, including product liability, environmental and other 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. Under various financing arrangements for certain customers, including independently owned retail dealerships, NMHG provides guarantees of the residual values of the lift trucks, or recourse or repurchase obligations such that NMHG would be obligated in the event of default by the customer. Generally, NMHG retains a security interest in the related assets financed such that, in the event that NMHG would become obligated under the terms of the recourse or repurchase obligations, NMHG would take title to the assets financed. Total guarantees and amounts subject to recourse or repurchase obligations at December 31, 2001 and 2000 were $158.0 million and $172.8 million, respectively. The security interest is generally expected to equal or exceed the amount of the recourse or repurchase obligation. Losses anticipated under the terms of the guarantees, recourse or repurchase obligations are not significant and have been reserved for in the accompanying Consolidated Financial Statements. NOTE 16--COMMON STOCK AND EARNINGS PER SHARE 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, 2001 was 25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A common stock totaling 1,588,197 and 1,612,762 at December 31, 2001 and 2000, 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. During the three-year period ending December 31, 2001, there were 80,701 shares of Class A common stock and 80,100 shares of Class B common stock available for grant. In 1999, options for 25,000 shares of Class A common stock were exercised at an option price of $35.56. However, no options were granted during the three-year period ending December 31, 2001 and no options remain outstanding at the end of each of the three years ended December 31, 2001, 2000 and 1999. At present, the Company does not intend to issue additional stock options. 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:
2001 2000 1999 ------------ ------------ ------------ Basic common shares (weighted average) 8.190 8.167 8.150 Dilutive stock options --- --- .004 ------------ ------------ ------------ Diluted common shares 8.190 8.167 8.154 ============ ============ ============
F-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 17--INCOME TAXES The components of income (loss) before income taxes and provision for income taxes for the year ended December 31 are as follows:
2001 2000 1999 ------------- ------------- ------------ INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST, EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES: Domestic $ (11.9) $ 59.9 $ 91.5 Foreign (33.5) .1 (4.9) ------------- ------------- ------------ $ (45.4) $ 60.0 $ 86.6 ============= ============= ============ INCOME TAX PROVISION (BENEFIT) Current tax provision (benefit): Federal $ (9.6) $ 27.3 $ 27.7 State (.3) 5.7 5.3 Foreign 4.9 4.5 2.7 ------------- ------------- ------------ Total current (5.0) 37.5 35.7 ------------- ------------- ------------ Deferred tax provision (benefit): Federal 7.6 (6.9) (.3) State (.8) (1.6) (.5) Foreign (17.2) (3.6) (4.4) ------------- ------------- ------------ Total deferred (10.4) (12.1) (5.2) ------------- ------------- ------------ Increase (decrease) in valuation allowance 5.5 (3.1) 1.2 ------------- ------------- ------------ $ (9.9) $ 22.3 $ 31.7 ============= ============= ============
Substantially all of the Company's interest expense and goodwill amortization has been allocated to domestic income (loss) before income taxes. The Company made income tax payments of $23.5 million, $36.6 million and $44.2 million during 2001, 2000 and 1999, respectively. During the same period, income tax refunds totaled $8.5 million, $2.5 million and $1.4 million, respectively. A reconciliation of the federal statutory and effective income tax for the year ended December 31 is as follows:
2001 2000 1999 ------------- ------------- ------------ INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST, EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES: $ (45.4) $ 60.0 $ 86.6 ============= ============= ============ Statutory taxes at 35.0% $ (15.9) $ 21.0 $ 30.3 Valuation allowance 5.5 (3.1) 1.2 Amortization of goodwill 5.3 5.2 5.2 Foreign statutory rate differences .7 .8 (1.4) Percentage depletion (3.8) (3.3) (3.6) Earnings reported net of taxes (.9) (.2) (.6) State income taxes (.6) 2.5 3.3 Export benefits (.5) (1.0) (1.3) Other-net .3 .4 (1.4) ------------- ------------- ------------ Income tax provision (benefit) $ (9.9) $ 22.3 $ 31.7 ============= ============= ============ Effective rate 21.8% 37.2% 36.6% ============= ============= ============
The Company does not provide for deferred taxes on certain unremitted foreign earnings. Management has decided that the earnings of NMHG's foreign subsidiaries have been and will be indefinitely reinvested in NMHG's foreign operations and, therefore, a reserve for unremitted foreign earnings is not required. As of December 31, 2001, the cumulative unremitted earnings of the Company's foreign subsidiaries are $158.9 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. F-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) 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 ------------------------------------- 2001 2000 ----------------- ----------------- DEFERRED TAX ASSETS Accrued expenses and reserves $ 92.4 $ 79.6 Accrued pension benefits 21.9 6.1 Other employee benefits 19.3 16.7 Net operating loss carryforwards 16.3 13.1 Reserve for UMWA 13.6 13.6 ----------------- ----------------- Total deferred tax assets 163.5 129.1 Less: Valuation allowance (10.1) (4.6) ----------------- ----------------- 153.4 124.5 ----------------- ----------------- DEFERRED TAX LIABILITIES Depreciation and depletion 43.9 45.8 Inventories 14.5 14.9 Other 28.7 16.9 ----------------- ----------------- Total deferred tax liabilities 87.1 77.6 ----------------- ----------------- Net deferred tax asset $ 66.3 $ 46.9 ================= =================
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 believes that the valuation allowance provided is appropriate. In 2001, the valuation allowance increased to $10.1 million from $4.6 million at December 31, 2000. At December 31, 2001, the Company had $5.9 million of net operating loss carryforwards which expire, if unused, in years 2002 through 2021 and $10.4 million which 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. NOTE 18--RETIREMENT BENEFIT PLANS DEFINED BENEFIT PLANS: The Company maintains various defined benefit pension plans covering most of its employees. These plans provide benefits based on years of service and average compensation during certain periods. The Company's policy is to make contributions to fund these plans within the range allowed by applicable regulations. Plan assets consist primarily of publicly traded stocks, investment contracts and government and corporate bonds. In 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. As a result of management's decision to phase out certain manufacturing activities in the NMHG Danville, Illinois, assembly plant, the Company recognized a curtailment loss of $5.1 million in 2000. See also Note 3. F-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) Set forth below is a detail of the net periodic pension (income) expense and the assumptions used in accounting for the United States and the United Kingdom defined benefit plans for the years ended December 31.
2001 2000 1999 -------- -------- -------- UNITED STATES PLANS Service cost $ 2.6 $ 3.0 $ 3.3 Interest cost 11.4 10.3 10.1 Expected return on plan assets (13.9) (12.6) (12.3) Amortization of transition asset (.1) (.4) (.4) Amortization of prior service cost .4 .4 .4 Recognized actuarial (gain) loss (1.9) (1.3) (.2) Curtailment loss --- 5.1 --- -------- -------- -------- Net periodic pension (income) expense $ (1.5) $ 4.5 $ .9 ======== ======== ======== Assumptions: Weighted average discount rates 7.50% 8.00% 7.75% Rate of increase in compensation levels 3.75% 4.25% 4.25% Expected long-term rate of return on assets 9.00% 9.00% 9.00% UNITED KINGDOM PLAN Service cost $ 2.0 $ 2.0 $ 2.4 Interest cost 3.2 3.0 3.1 Expected return on plan assets (5.2) (4.3) (3.7) Amortization of transition asset (.1) (.1) (.1) Amortization of prior service cost .1 .1 .1 Recognized actuarial (gain) loss (.5) (.4) .4 -------- -------- -------- Net periodic pension (income) expense $ (.5) $ .3 $ 2.2 ======== ======== ======== Assumptions: Weighted average discount rates 6.25% 6.75% 6.25% Rate of increase in compensation levels 3.75% 4.25% 3.50% Expected long-term rate of return on assets 9.00% 9.00% 7.50%
F-26 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:
2001 2000 ----------------------------- --------------------------- UNITED UNITED United United STATES PLANS KINGDOM PLAN States Plans Kingdom Plan ------------- -------------- ------------- ------------ CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 143.8 $ 49.7 $ 134.6 $ 51.4 Service cost 2.6 2.0 3.0 2.0 Interest cost 11.4 3.2 10.3 3.0 Actuarial (gain) loss 1.5 5.6 1.8 (.6) Benefits paid (8.5) (1.5) (7.5) (2.1) Plan amendments --- --- 1.6 --- Foreign currency exchange rate changes --- (1.4) --- (4.0) ------------- -------------- ------------- ------------ Benefit obligation at end of year $ 150.8 $ 57.6 $ 143.8 $ 49.7 ------------- -------------- ------------- ------------ CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year $ 163.1 $ 65.2 $ 151.9 $ 59.5 Actual return on plan assets (23.1) (14.0) 17.4 10.4 Employer contributions .2 1.5 1.4 1.7 Employee contributions --- .5 --- .5 Benefits paid (8.6) (1.4) (7.5) (2.1) Foreign currency exchange rate changes --- (1.9) (.1) (4.8) ------------- -------------- ------------- ------------ Fair value of plan assets at end of year $ 131.6 $ 49.9 $ 163.1 $ 65.2 ------------- -------------- ------------- ------------ NET AMOUNT RECOGNIZED Plan assets in excess of obligation $ (19.2) $ (7.7) $ 19.3 $ 15.5 Unrecognized prior service cost .6 .7 1.2 .8 Unrecognized actuarial (gain) loss (1.2) 19.1 (41.6) (5.2) Unrecognized net transition asset (.1) (.2) (.1) (.3) Contributions in fourth quarter --- .3 --- .3 ------------- -------------- ------------- ------------ Net amount recognized $ (19.9) $ 12.2 $ (21.2) $ 11.1 ============= ============== ============= ============ AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSIST OF: Prepaid benefit cost $ 2.7 $ --- $ 5.7 $ 11.1 Accrued benefit liability (29.7) (5.6) (30.0) --- Intangible asset .3 .7 .7 --- Accumulated other comprehensive income 4.2 10.6 1.4 --- Deferred tax asset 2.6 6.5 1.0 --- ------------- -------------- ------------- ------------ Net amount recognized $ (19.9) $ 12.2 $ (21.2) $ 11.1 ============= ============== ============= ============
DEFINED CONTRIBUTION PLANS: NACCO and its subsidiaries have defined contribution (401(k)) plans for substantially all U.S. employees and similar plans for employees outside of the U.S. 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 $19.0 million, $20.7 million and $21.6 million in 2001, 2000 and 1999, respectively. NOTE 19--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. See Note 1 for a discussion of the Company's 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 2 - Accounting Policies. NMHG Wholesale derives a portion of its revenues from transactions with NMHG Retail. The amount of these revenues, F-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) which are based on current market prices on similar third-party transactions, are indicated in the following table on the line "NMHG Eliminations" in the revenues section. No other intersegment sales transactions occur. Other intersegment transactions are recognized based on similar third-party transactions; that is, at current market prices. On January 1, 2000, NACCO began charging fees to its operating subsidiaries for services provided by the corporate headquarters. The 2001 and 2000 pre-tax fees of $10.5 million and $10.1 million, respectively, included in the line other-net, income (expense), was charged to the operating segments based on fees incurred on their behalf, including services performed for each.
2001 2000 1999 -------- -------- -------- REVENUES FROM EXTERNAL CUSTOMERS NMHG Wholesale $1,463.3 $1,750.0 $1,618.9 NMHG Retail 298.8 280.3 228.1 NMHG Eliminations (89.7) (98.2) (85.6) -------- -------- -------- NMHG Consolidated 1,672.4 1,932.1 1,761.4 NACoal 333.3 289.2 277.7 Housewares 632.1 649.9 596.7 NACCO and Other .1 .1 .1 -------- -------- -------- $2,637.9 $2,871.3 $2,635.9 ======== ======== ======== GROSS PROFIT NMHG Wholesale $ 189.9 $ 292.9 $ 255.7 NMHG Retail 54.8 54.1 49.3 NMHG Eliminations 4.9 .5 (1.5) -------- -------- -------- NMHG Consolidated 249.6 347.5 303.5 NACoal 75.1 49.0 52.7 Housewares 110.0 119.8 128.7 NACCO and Other (.2) (.1) (.2) -------- -------- -------- $ 434.5 $ 516.2 $ 484.7 ======== ======== ======== SELLING, GENERAL AND ADMINISTRATIVE EXPENSES NMHG Wholesale $ 173.1 $ 181.5 $ 169.6 NMHG Retail 84.7 69.8 63.9 NMHG Eliminations (2.2) (.9) (.5) -------- -------- -------- NMHG Consolidated 255.6 250.4 233.0 NACoal 13.2 17.4 12.3 Housewares 102.7 87.6 82.7 NACCO and Other 9.5 11.6 9.0 -------- -------- -------- $ 381.0 $ 367.0 $ 337.0 ======== ======== ======== AMORTIZATION OF GOODWILL NMHG Wholesale $ 11.4 $ 11.6 $ 11.6 NMHG Retail 1.5 1.0 .6 -------- -------- -------- NMHG Consolidated 12.9 12.6 12.2 Housewares 3.0 3.1 3.0 -------- -------- -------- $ 15.9 $ 15.7 $ 15.2 ======== ======== ======== OPERATING PROFIT (LOSS) NMHG Wholesale $ 1.3 $ 85.9 $ 74.5 NMHG Retail (46.5) (16.7) (15.2) NMHG Eliminations 7.1 1.4 (1.0) -------- -------- -------- NMHG Consolidated (38.1) 70.6 58.3 NACoal 61.9 31.6 40.4 Housewares (8.4) 27.4 41.8 NACCO and Other (9.7) (11.7) (9.2) -------- -------- -------- $ 5.7 $ 117.9 $ 131.3 ======== ======== ======== OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION NMHG Wholesale $ 12.7 $ 97.5 $ 86.1 NMHG Retail (45.0) (15.7) (14.6) NMHG Eliminations 7.1 1.4 (1.0) -------- -------- -------- NMHG Consolidated (25.2) 83.2 70.5 NACoal 61.9 31.6 40.4 Housewares (5.4) 30.5 44.8 NACCO and Other (9.7) (11.7) (9.2) -------- -------- -------- $ 21.6 $ 133.6 $ 146.5 ======== ======== ========
F-28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data)
2001 2000 1999 ------- ------- ------- INTEREST EXPENSE NMHG Wholesale $ (12.9) $ (13.4) $ (16.9) NMHG Retail (5.0) (4.6) (3.0) NMHG Eliminations (5.2) (3.2) .9 ------- ------- ------- NMHG Consolidated (23.1) (21.2) (19.0) NACoal (10.0) (.7) --- Housewares (7.7) (8.6) (6.7) NACCO and Other (.2) (.2) (.7) Eliminations .5 .5 .7 ------- ------- ------- (40.5) (30.2) (25.7) Project mining subsidiaries (16.4) (16.9) (17.6) ------- ------- ------- $ (56.9) $ (47.1) $ (43.3) ======= ======= ======= INTEREST INCOME NMHG Wholesale $ 3.4 $ 2.2 $ 8.2 NMHG Retail .2 .1 .2 NMHG Eliminations --- --- (3.6) ------- ------- ------- NMHG Consolidated 3.6 2.3 4.8 NACoal .4 .7 .7 Housewares --- --- .1 NACCO and Other .3 --- --- Eliminations (.5) (.5) (.7) ------- ------- ------- $ 3.8 $ 2.5 $ 4.9 ======= ======= ======= OTHER-NET, INCOME (EXPENSE) - (EXCLUDING INTEREST INCOME) NMHG Wholesale $ (6.0) $ (14.2) $ (3.4) NMHG Retail .2 .2 .3 NMHG Eliminations --- (.1) .1 ------- ------- ------- NMHG Consolidated (5.8) (14.1) (3.0) NACoal (1.3) (1.2) (.3) Housewares (.1) (2.6) (.5) NACCO and Other 9.2 4.6 (2.5) ------- ------- ------- $ 2.0 $ (13.3) $ (6.3) ======= ======= ======= INCOME TAX PROVISION (BENEFIT) NMHG Wholesale $ (.6) $ 24.6 $ 24.4 NMHG Retail (14.6) (6.7) (4.9) NMHG Eliminations .7 (.5) (1.1) ------- ------- ------- NMHG Consolidated (14.5) 17.4 18.4 NACoal 9.0 (.1) 4.5 Housewares (4.0) 7.4 13.5 NACCO and Other (.4) (2.4) (4.7) ------- ------- ------- $ (9.9) $ 22.3 $ 31.7 ======= ======= ======= NET INCOME (LOSS) NMHG Wholesale $ (14.1) $ 37.0 $ 39.0 NMHG Retail (36.5) (14.3) (12.8) NMHG Eliminations 1.2 (1.4) (2.5) ------- ------- ------- NMHG Consolidated (49.4) 21.3 23.7 NACoal 25.6 12.6 16.5 Housewares (12.2) 8.8 21.2 NACCO and Other --- 25.0 (8.3) ------- ------- ------- $ (36.0) $ 67.7 $ 53.1 ======= ======= =======
F-29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data)
2001 2000 1999 ------------ ------------- ------------ TOTAL ASSETS NMHG Wholesale $ 1,164.9 $ 1,167.2 $ 1,040.5 NMHG Retail 215.6 232.8 185.0 NMHG Eliminations (175.4) (158.3) (46.9) ------------- ------------ ------------- NMHG Consolidated 1,205.1 1,241.7 1,178.6 NACoal 250.3 204.1 64.3 Housewares 347.5 366.4 372.8 NACCO and Other 60.4 41.8 47.6 ------------- ------------ ------------- 1,863.3 1,854.0 1,663.3 Project mining subsidiaries 383.1 389.9 392.0 ------------- ------------ ------------- 2,246.4 2,243.9 2,055.3 Consolidating eliminations (84.5) (50.0) (42.3) ------------- ------------ ------------- $ 2,161.9 $ 2,193.9 $ 2,013.0 ============= ============ ============= DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE NMHG Wholesale $ 47.0 $ 40.6 $ 39.9 NMHG Retail 13.4 14.0 14.2 ------------- ------------ ------------- NMHG Consolidated 60.4 54.6 54.1 NACoal 5.1 3.2 3.1 Housewares 21.2 19.3 17.6 NACCO and Other .3 .3 .4 ------------- ------------ ------------- 87.0 77.4 75.2 Project mining subsidiaries 30.6 28.7 28.8 ------------- ------------ ------------- $ 117.6 $ 106.1 $ 104.0 ============= ============ ============= CAPITAL EXPENDITURES NMHG Wholesale $ 46.6 $ 43.3 $ 44.7 NMHG Retail 6.9 8.5 1.5 ------------- ------------ ------------- NMHG Consolidated 53.5 51.8 46.2 NACoal 18.9 3.9 2.7 Housewares 13.4 22.0 16.5 NACCO and Other .7 .3 .1 ------------- ------------ ------------- 86.5 78.0 65.5 Project mining subsidiaries 18.3 15.3 10.0 ------------- ------------ ------------- $ 104.8 $ 93.3 $ 75.5 ============= ============ =============
F-30 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 ---------------- ---------------- ---------------- ---------------- 2001 --------------------------------------------- REVENUES FROM UNAFFILIATED CUSTOMERS, BASED ON THE CUSTOMERS' LOCATION $ 1,814.2 $ 474.1 $ 349.6 $ 2,637.9 ================ ================ ================ ================ LONG-LIVED ASSETS $ 1,028.5 $ 184.8 $ 127.5 $ 1,340.8 ================ ================ ================ ================ 2000 --------------------------------------------- Revenues from unaffiliated customers, based on the customers' location $ 2,272.6 $ 373.9 $ 224.8 $ 2,871.3 ================ ================ ================ ================ Long-lived assets $ 1,018.0 $ 199.1 $ 131.3 $ 1,348.4 ================ ================ ================ ================ 1999 --------------------------------------------- Revenues from unaffiliated customers, based on the customer's location $ 1,985.1 $ 491.5 $ 159.3 $ 2,635.9 ================ ================ ================ ================ Long-lived assets $ 926.9 $ 189.8 $ 94.0 $ 1,210.7 ================ ================ ================ ================
NOTE 20--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) A summary of the unaudited quarterly results of operations for the year ended December 31 is as follows:
2001 ---------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NACoal $ 83.3 $ 83.1 $ 82.4 $ 84.5 NMHG Wholesale 442.9 392.0 314.4 314.0 NMHG Retail (including eliminations) 52.7 52.7 45.7 58.0 Housewares 138.3 140.1 155.0 198.7 NACCO and Other --- .1 --- --- ------- ------- ------- ------- 717.2 668.0 597.5 655.2 ------- ------- ------- ------- GROSS PROFIT 130.3 116.3 87.2 100.7 ------- ------- ------- ------- OPERATING PROFIT (LOSS) NACoal 16.9 14.8 16.1 14.1 NMHG Wholesale 25.8 7.8 (18.5) (13.8) NMHG Retail (including eliminations) (3.4) (2.8) (15.9) (17.3) Housewares (3.0) 1.2 3.2 (9.8) NACCO and Other (3.2) (2.9) (2.4) (1.2) ------- ------- ------- ------- 33.1 18.1 (17.5) (28.0) ------- ------- ------- ------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 14.4 6.1 (27.5) (27.7) Cumulative effect of accounting changes (1.3) --- --- --- ------- ------- ------- ------- NET INCOME (LOSS) $ 13.1 $ 6.1 $ (27.5) $ (27.7) ======= ======= ======= ======= BASIC AND DILUTED EARNINGS PER SHARE Income (loss) before cumulative effect of accounting changes $ 1.76 $ .74 $ (3.36) $ (3.38) Cumulative effect of accounting changes (.16) --- --- --- ------- ------- ------- ------- Net income (loss) $ 1.60 $ .74 $ (3.36) $ (3.38) ======= ======= ======= =======
F-31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data)
2000 ---------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- REVENUES NACoal $ 71.5 $ 69.7 $ 73.4 $ 74.6 NMHG Wholesale 438.0 450.0 414.3 447.7 NMHG Retail (including eliminations) 44.5 48.6 49.2 39.8 Housewares 127.9 138.1 162.8 221.1 NACCO and Other --- --- .1 --- ------- ------- ------- ------- 681.9 706.4 699.8 783.2 ------- ------- ------- ------- GROSS PROFIT 120.2 126.7 124.4 144.9 ------- ------- ------- ------- OPERATING PROFIT (LOSS) NACoal 8.2 8.1 9.3 6.0 NMHG Wholesale 24.5 28.5 18.9 14.0 NMHG Retail (including eliminations) (3.0) (3.5) (2.4) (6.4) Housewares (.5) 2.7 7.3 17.9 NACCO and Other (2.4) (2.6) (3.0) (3.7) ------- ------- ------- ------- 26.8 33.2 30.1 27.8 ------- ------- ------- ------- INCOME BEFORE EXTRAORDINARY GAIN 9.2 13.6 8.9 6.1 Extraordinary gain --- --- --- 29.9 ------- ------- ------- ------- NET INCOME $ 9.2 $ 13.6 $ 8.9 $ 36.0 ======= ======= ======= ======= BASIC AND DILUTED EARNINGS PER SHARE Income before extraordinary gain $ 1.13 $ 1.67 $ 1.09 $ .75 Extraordinary gain --- --- --- 3.66 ------- ------- ------- ------- Net income $ 1.13 $ 1.67 $ 1.09 $ 4.41 ======= ======= ======= =======
NOTE 21--PARENT COMPANY CONDENSED BALANCE SHEETS The condensed balance sheets of NACCO, the parent company, at December 31 are as follows:
2001 2000 ------- ------- ASSETS Current assets $ 12.0 $ .1 Other assets .4 .4 Notes receivable from subsidiaries 23.3 8.4 Investment in subsidiaries NMHG 382.0 463.0 Housewares 145.6 170.9 NACoal 48.9 31.2 Bellaire 2.6 2.2 ------- ------- 579.1 667.3 Property, plant and equipment, net .3 .4 Deferred income taxes .3 1.1 ------- ------- Total Assets $ 615.4 $ 677.7 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 3.9 $ 9.3 Current intercompany accounts payable, net 31.3 3.8 Note payable to Bellaire 46.0 50.3 Notes payable to other subsidiaries --- 3.0 Deferred income taxes and other 4.9 4.9 Stockholders' equity 529.3 606.4 ------- ------- Total Liabilities and Stockholders' Equity $ 615.4 $ 677.7 ======= =======
The credit agreements at NACoal, NMHG and Housewares allow the transfer of assets to NACCO under certain circumstances. The amount of NACCO's investment in NACoal, NMHG and Housewares that was restricted at December 31, 2001 totals approximately $541.9 million. Dividends, advances and management fees from its subsidiaries are the primary sources of cash for NACCO. F-32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Millions, Except Per Share and Percentage Data) NOTE 22--RELATED PARTY TRANSACTIONS NMHG has a 20 percent ownership interest in NMHG Financial Services, Inc. ("NFS"), a joint venture with GE Capital Corporation, formed primarily for the purpose of providing financial services to independent and wholly owned Hyster and Yale lift truck dealers and national account customers in the United States. NMHG's ownership in NFS is accounted for using the equity method of accounting. Generally, NMHG sells lift trucks directly to its customer and that customer may enter into a financing transaction with NFS or another unrelated party. However, for certain customer transactions, NMHG sells directly to NFS so that the customer can obtain operating lease financing from NFS. Sales to NFS related to these types of transactions for the years ended December 31, 2001, 2000 and 1999 were $137.5 million, $166.6 million and $8.5 million, respectively. Amounts receivable from NFS at December 31, 2001 and 2000 were immaterial. Also, from time to time, NMHG provides recourse or repurchase obligations or guarantees the residual values of the lift trucks purchased by customers and financed through NFS. See further discussion in Note 15. At December 31, 2001, approximately $127.1 million of the Company's total guarantees, recourse or repurchase obligations related to transactions with NFS. For these transactions, NMHG generally retains a security interest in the lift truck, such that NMHG would take possession of the lift truck in the event that NMHG would become liable under the terms of the guarantees or standby recourse or repurchase obligations. In addition to providing financing to NMHG's customers, NFS provides both lease and debt financing to NMHG. Operating lease obligations relate to specific sale-leaseback-sublease transactions for certain NMHG customers whereby NMHG sells lift trucks to NFS, NMHG leases these lift trucks back under an operating lease agreement and NMHG subleases those lift trucks to customers under an operating lease agreement. Debt financing includes long-term notes payable to NFS primarily to finance certain of NMHG's long-term notes receivable from Latin American customers which arise in the ordinary course of business. In addition, NFS provides, on NMHG's behalf, installment billings to the Latin American customers, account balance tracking and an inventory management system to track the equipment covered by the notes. Total obligations to NFS under the operating lease agreements and notes payable were $13.7 million and $14.7 million at December 31, 2001 and 2000, respectively. In addition, NMHG is reimbursed for certain services, primarily administrative functions, provided to NFS. The amount of NMHG's expenses reimbursed by NFS were $1.8 million, $1.5 million and $1.1 million in 2001, 2000 and 1999, respectively. NMHG has a 50 percent ownership interest in Sumitomo NACCO Materials Handling Group, Inc. ("SN"), a joint venture with Sumitomo Heavy Industries, Inc., formed primarily for the manufacture and distribution of Sumitomo branded lift trucks in Japan and the export of Hyster and Yale branded lift trucks and related components and service parts outside of Japan. NMHG's ownership in SN is accounted for using the equity method of accounting. NMHG purchases products from SN under normal trade terms. In 2001, 2000 and 1999, purchases from SN were $63.7 million, $90.5 million and $91.2 million, respectively. Amounts payable to SN at December 31, 2001 and 2000 were $16.1million and $23.6 million, respectively. The Company expensed $2.2 million, $5.7 million and $4.8 million in the years ended December 31, 2001, 2000 and 1999, respectively, for legal services rendered by Jones, Day, Reavis & Pogue. A director of the Company is also a partner at this firm. F-33 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 accounting principles generally accepted in the United States 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 Anderson LLP, independent certified public accountants, audits NACCO Industries, Inc. and its subsidiaries' financial statements. Its audits are conducted in accordance with auditing standards generally accepted in the United States 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 Review 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 Review Committee. The Audit Review Committee also reviews the financial reporting process and accounting policies of NACCO Industries, Inc. and each of its subsidiaries. /s/ Alfred M. Rankin, Jr. /s/ Kenneth C. Schilling ------------------------------ ------------------------------- Alfred M. Rankin, Jr. Kenneth C. Schilling Chairman, President and Vice President and Controller Chief Executive Officer F-34 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY CONDENSED BALANCE SHEETS
December 31 ----------------- 2001 2000 ------ ------ (In millions) Current assets $ 12.0 $ .1 Other assets .4 .4 Notes receivable from subsidiaries 23.3 8.4 Investment in subsidiaries NMHG 382.0 463.0 Housewares 145.6 170.9 NACoal 48.9 31.2 Bellaire 2.6 2.2 ------ ------ 579.1 667.3 Property, plant and equipment, net .3 .4 Deferred income taxes .3 1.1 ------ ------ Total Assets $615.4 $677.7 ====== ====== Current liabilities $ 3.9 $ 9.3 Current intercompany accounts payable, net 31.3 3.8 Note payable to Bellaire 46.0 50.3 Notes payable to other subsidiaries --- 3.0 Deferred income taxes and other 4.9 4.9 Stockholders' equity 529.3 606.4 ------ ------ Total Liabilities and Stockholders' Equity $615.4 $677.7 ====== ======
See Notes to Parent Company Financial Statements. F-35 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF OPERATIONS
Year ended December 31 --------------------------- 2001 2000 1999 ------ ------ ------- (In millions) Income (expense): Intercompany interest expense $(2.1) $ (.2) $ (.7) Other - net 10.5 10.1 (2.6) ------- ------ ------- 8.4 9.9 (3.3) Administrative and general expenses 9.4 11.6 8.9 ------- ------ ------- Loss before income taxes (1.0) (1.7) (12.2) Income tax benefit (.7) (.6) (4.6) ------- ------ ------- Net loss before extraordinary gain and equity in earnings (loss) of subsidiaries (.3) (1.1) (7.6) Extraordinary gain, net-of-tax --- 21.0 --- ------- ------ ------- Net income (loss) before equity in earnings (loss) of subsidiaries (.3) 19.9 (7.6) Equity in earnings (loss) of subsidiaries (35.7) 47.8 60.7 ------- ------ ------- Net income (loss) $(36.0) $67.7 $ 53.1 ======= ====== =======
See Notes to Parent Company Financial Statements. F-36 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT NACCO INDUSTRIES, INC. AND SUBSIDIARIES PARENT COMPANY STATEMENTS OF CASH FLOWS
Year Ended December 31 ---------------------------- 2001 2000 1999 ------- ----------- ------- (In millions) OPERATING ACTIVITIES Net income (loss) $(36.0) $ 67.7 $ 53.1 Equity in (earnings) loss of subsidiaries 35.7 (47.8) (60.7) ------- ---------- ------- Parent company only net income (loss) (.3) 19.9 (7.6) Extraordinary gain --- (21.0) --- Deferred income taxes .8 .7 1.2 Income taxes net of intercompany tax payments (3.2) 1.0 (1.4) Working capital changes (14.2) .3 (.3) Changes in current intercompany amounts 27.5 4.2 2.6 Changes in reserve for future interest on UMWA obligation --- (1.6) (1.8) Other non-cash items .2 (.3) .4 ------- ---------- ------- Net cash provided by (used for) operating activities 10.8 3.2 (6.9) INVESTING ACTIVITIES Dividends and advances received from subsidiaries .1 1.6 13.9 Notes payable to Bellaire (4.2) .4 (2.4) Expenditures for property, plant and equipment (.2) (.3) (.1) Proceeds from the sale of property, plant and equipment --- 1.4 --- ------- ---------- ------- Net cash provided by (used for) investing activities (4.3) 3.1 11.4 FINANCING ACTIVITIES Cash dividends paid (7.6) (7.2) (7.0) Purchases of treasury stock --- --- --- Treasury stock sales under stock option and compensation plans - net 1.1 .9 2.5 ------- ---------- ------- Net cash used for financing activities (6.5) (6.3) (4.5) ------- ---------- ------- CASH AND CASH EQUIVALENTS Increase (decrease) for the period --- --- --- Balance at the beginning of the period --- --- --- ------- ---------- ------- Balance at the end of the period $ --- $ --- $ --- ======= ========== =======
See Notes to Parent Company Financial Statements. F-37 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, 2001, 2000 AND 1999 The notes to Consolidated Financial Statements, incorporated in Item 14 of 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 segments. 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 $18.0 million in 2001, $19.7 million in 2000, and $16.6 million in 1999. NOTE C - UNRESTRICTED CASH The amount of unrestricted cash available to NACCO, included in Investment in subsidiaries was $25.3 million at December 31, 2001. NOTE D - EXTRAORDINARY GAIN A portion of the 2000 extraordinary gain relating to the reversal of the accrual for the obligation to the United Mine Workers of America Combined Benefit Fund arising as a result of the Coal Industry Retiree Health Benefit Act of 1992 as discussed in Note 4 to the Consolidated Financial Statements was recorded on the books of the parent company. The amount recorded by the parent company of $21.0 million, net of $11.3 million in taxes, combined with the amount recorded by Bellaire Corporation of $8.9 million, net of $4.8 million in taxes, equals the total extraordinary gain of $29.9 million, net of $16.1 million in taxes recognized by the Company in 2000. F-38 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
- ---------------------------------------------------------------------------------------------------------------------------- COL A. COL B. COL C. COL D. COL E. - ---------------------------------------------------------------------------------------------------------------------------- Additions ------------------------------------- (D) Description Balance at Charged to Charged to Deductions Balance at Beginning of Costs and Other Accounts End of Period Expenses --Describe --Describe Period - ---------------------------------------------------------------------------------------------------------------------------- (In millions) 2001 RESERVES DEDUCTED FROM ASSET ACCOUNTS: ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 8.6 $ 4.1 $ .1 (C) $ 3.4 (A) $ 9.4 ALLOWANCE FOR DISCOUNTS, ADJUSTMENTS AND RETURNS 8.2 15.8 --- 17.8 (B) 6.2 RESERVE FOR LOSSES ON INVENTORY 22.0 10.6 --- 5.4 (A) 27.2 VALUATION ALLOWANCE AGAINST DEFERRED TAX ASSETS 4.6 5.5 --- --- 10.1 2000 Reserves deducted from asset accounts: Allowance for doubtful accounts $ 7.4 $ 1.7 $ .2 (C) $ .7 (A) $ 8.6 Allowance for discounts, adjustments and returns 9.3 21.6 --- 22.7 (B) 8.2 Reserve for losses on inventory 22.9 3.9 .8 (C) 5.6 (A) 22.0 Valuation allowance against deferred tax assets 7.9 (3.1) (.2) (C) --- 4.6 1999 Reserves deducted from asset accounts: Allowance for doubtful accounts $ 7.8 $ 2.2 $ .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 (.4) (C) 6.8 (A) 22.9 Valuation allowance against deferred tax assets 6.7 1.2 --- --- 7.9
(A) Write-offs, net of recoveries. (B) Payments. (C) Subsidiary's foreign currency translation adjustments and other. (D) Balances which are not required to be presented and those which are immaterial have been omitted. F-39 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 as of November 14, 1996, among the signatories thereto, the Company, the New Participating Stockholders (as defined therein) 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, among the signatories thereto, the Company, the New Participating Stockholders (as defined therein) 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. X-1 (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. (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. (xv) Amendment to Stockholders' Agreement, dated as of October 31, 2000, 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. 8 to the Schedule 13D filed on February 14, 2001, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xvi) Amendment to Stockholders' Agreement, dated as of October 31, 2000, by and among National City Bank (Cleveland), the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 8 to the Schedule 13D filed on February 14, 2001, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xvii) Amendment to Stockholders' Agreement, dated as of February 14, 2001, by and among National City Bank (Cleveland), the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholders (as defined therein) is incorporated by reference to Amendment No. 8 to the Schedule 13D filed on February 14, 2001, with respect to the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc. (xviii) Amendment to Stockholders' Agreement, dated as of February 14, 2002, by and among National City Bank (Cleveland), the Company, the Participating Stockholders (as defined therein) and the New Participating Stockholder (as defined therein) is incorporated by reference to Amendment No. 9 to the Schedule 13D filed on February 14, 2002, 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. X-2 *(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. *(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, 2001, 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, 2000, Commission File Number 1-9172. *(xiv) NACCO Industries, Inc. Supplemental Annual Incentive Compensation Plan, effective as of January 1, 2001, is attached hereto as Exhibit 10(xiv). *(xv) NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan, effective as of January 1, 2001, is attached hereto as Exhibit 10(xv). (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. 2002 Annual Incentive Compensation Plan, effective as of January 1, 2002, 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 incorporated herein by reference to Exhibit 10(xxi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. X-3 *(xxii) Amendment No. 4, dated as of June 23, 2000, 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(xxii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. *(xxiii) The NACCO Industries, Inc. Unfunded Benefit Plan (effective September 1, 2000) 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, 2000, Commission File Number 1-9172. *(xxiv) Amendment No. 1, dated as of September 25, 2001, to the NACCO Industries, Inc. Unfunded Benefit Plan (effective September 1, 2000) is incorporated herein by reference to Exhibit 10(xxiv). *(xxv) Amendment No. 2, dated as of December 21, 2001, to the NACCO Industries, Inc. Unfunded Benefit Plan (effective September 1, 2000) is incorporated herein by reference to Exhibit 10(xxv). (xxvi) - (xxx) Intentionally left blank. *(xxxi) The North American Coal Annual Incentive Plan, effective as of January 1, 2001, 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, 2000, 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 Deferred Compensation Plan for Management Employees (as amended and restated effective November 1, 2001) is attached hereto as Exhibit 10(xxxv). *(xxxvi) Amendment No. 1, dated as of December 21, 2001, to The North American Coal Corporation Deferred Compensation Plan for Management Employees (as amended and restated effective November 1, 2001) is attached hereto as Exhibit 10(xxxvi). (xxxvii) Purchase and Sale Agreement, dated October 11, 2000, by and among Phillips Petroleum Company, Phillips Coal Company, The North American Coal Corporation, Oxbow Property Company L.L.C. and Red Hills Property Company L.L.C. is incorporated herein by reference to Exhibit 10(xxxvii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. (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. (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. X-4 *(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) Amendment No. 1, dated as of June 23, 2000, to The North American Coal Corporation Deferred Compensation Plan for Management Employees (as amended and restated effective January 1, 1999) is incorporated herein by reference to Exhibit 10(xliv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. *(xlv) The North American Coal 2002 Incentive Compensation Plan, effective as of January 1, 2002, 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 incorporated herein by reference to Exhibit 10(lii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(liii) The North American Coal Corporation Value Appreciation Plan For Years 2000 to 2009, effective as of January 1, 2000, is incorporated herein by reference to Exhibit 10(liii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. (liv) Credit Agreement, dated as of October 11, 2000, by and among The North American Coal Corporation, the Initial Lenders named therein, Salomon Smith Barney Inc., as Lead Arranger and Book Manager, Keybank National Association, as Syndication Agent, and Citibank N.A., as Agent, is incorporated herein by reference to Exhibit 10(liv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. (lv) Letter Amendment, dated as of November 20, 2001, to the Credit Agreement, dated as of October 11, 2000, by and among The North American Coal Corporation, the Lenders named therein, and Citibank N.A., as Agent, is attached hereto as Exhibit 10(lv). X-5 (lvi) 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). (lvii) 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). *(lviii) NACCO Materials Handling Group, Inc. Annual Incentive Compensation Plan for 2001 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, 2000, 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 Compensation Plan, effective as of January 1, 2002, is attached hereto as Exhibit 10(lxiii). *(lxiv) NACCO Materials Handling Group, Inc. Senior Executive Long-Term Incentive Compensation Plan, effective as of January 1, 2000, is incorporated herein by reference to Exhibit 10(lxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. *(lxv) NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan, effective as of January 1, 2000, is incorporated by reference to Exhibit 10(lxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. *(lxvi) Amendment No. 1, dated as of June 8, 2001, to the NACCO Materials Handling Group, Inc. Senior Executive Long-Term Incentive Compensation Plan (effective as of January 1, 2000) is attached hereto as Exhibit 10(lxvi). *(lxvii) Amendment No. 1, dated as of June 8, 2001, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan (effective as of January 1, 2000) is attached hereto as Exhibit 10(lxvii). *(lxviii) Amendment No. 1, dated as of February 19, 2001, to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective September 1, 2000) is attached hereto as Exhibit 10(lxviii). (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. X-6 *(lxxiii) NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective as of September 1, 2000) is incorporated herein by reference to Exhibit 10(lxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. (lxxiv) Intentionally left blank. (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. 2, dated as of August 6, 2001, to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective September 1, 2000) is attached hereto as Exhibit 10(lxxix). *(lxxx) Amendment No. 3, dated as of June 8, 2001, to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective September 1, 2000) is attached hereto as Exhibit 10(lxxx). *(lxxxi) Amendment No. 4, dated as of November 1, 2001, to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective September 1, 2000) is attached hereto as Exhibit 10(lxxxi). *(lxxxii) Amendment No. 5, dated as of December 21, 2001, to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated effective September 1, 2000) 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 incorporated herein by reference to Exhibit 10(lxxxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(lxxxiv) Amendment No. 5, dated as of December 20,1999, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10(lxxxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(lxxxv) Amendment No. 6, dated as of March 9, 2000, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is incorporated by reference to Exhibit 10(lxxxv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. *(lxxxvi) Amendment No. 7, dated as of June 23, 2000, to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is incorporated by reference to Exhibit 10(lxxxvi) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172. (lxxxvii) 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. X-7 (lxxxviii) 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. (lxxxix) - (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 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. X-8 (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. 2001 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, 2000, 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. (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 Form 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. X-9 (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 Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. (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 Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172. *(cxx) The Hamilton Beach/Proctor-Silex, Inc. 2002 Annual Incentive Compensation Plan, effective as of January 1, 2002, 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 incorporated herein by reference to Exhibit 10(cxxiv) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172. *(cxxv) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective November 1, 2000) 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, 2000, Commission File Number 1-9172. (cxxvi) Amendment No. 7, dated as of December 19, 2001, 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. and Proctor-Silex S.A. de C.V., as Obligors, each of the Banks signatory thereto and KeyBank National Association, as U.S. Agent, and The Bank of Nova Scotia, the Canadian Agent, is attached hereto as Exhibit 10(cxxvi). *(cxxvii) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective October 1, 2001) is attached hereto as Exhibit 10(cxxvii). X-10 *(cxxviii) Amendment No. 1, dated as of December 21, 2001, to the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective October 1, 2001) is attached hereto as Exhibit 10(cxxviii). (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 Britton T. Taplin is attached hereto as Exhibit 24(viii). (ix) A copy of a power of attorney for David F. Taplin is attached hereto as Exhibit 24(ix). (x) A copy of a power of attorney for John F. Turben is attached hereto as Exhibit 24(x). (99) Other exhibits not required to otherwise be filed.** (i) Unaudited Consolidating Statement of Operations and Comprehensive Income (Loss) of NACCO Industries, Inc. for the Year Ended December 31, 2001 is attached hereto as Exhibit 99(i). (ii) Unaudited Consolidating Balance Sheet of NACCO Industries, Inc. as of December 31, 2001 is attached hereto as Exhibit 99(ii). (iii) Unaudited Consolidating Statement of Cash Flows of NACCO Industries, Inc. for the Year Ended December 31, 2001 is attached hereto as Exhibit 99(iii). (iv) Unaudited Consolidating Statement of Stockholders' Equity of NACCO Industries, Inc. for the Year Ended December 31, 2001 is attached hereto as Exhibit 99(iv). (v) Letter to the Securities and Exchange Commission regarding Arthur Andersen LLP's representations to NACCO Industries, Inc. pursuant to Temporary Note 3T to Article 3 of Regulation S-X is attached hereto as Exhibit 99(v). *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-11 EX-10.(XIV) 3 l93112aex10-xiv.txt EX-10(XIV) NACCO SUPPLEMENT ANNUAL INCENTIVE PLAN EXHIBIT 10(xiv) NACCO INDUSTRIES, INC. SUPPLEMENTAL ANNUAL INCENTIVE COMPENSATION PLAN 1. PURPOSE OF THE PLAN The purpose of the NACCO Industries, Inc. Supplemental 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 this Plan for any year in an amount determined in a manner not inconsistent with the terms hereof. (b) "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. (c) "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. Employees of the Company's subsidiaries shall not be eligible to participate in this Plan. (d) "Section 162(m)" means Section 162(m) of the Internal Revenue Code of 1986, as amended, or any successor provision. (e) "Target Award" means a dollar amount equal to the amount of cash to be paid to a Participant under the Plan assuming that all performance targets are met. The Target Award, together with the target amounts for the Participant under the Company's other incentive compensation plans, shall be in an amount which is competitive with similar target awards at other similarly situated companies. 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 Target Award or Award 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; provided, however, that no such action may be taken by the Committee which would cause any amounts to be paid to a Participant who is, or is determined by the Committee to be likely to become, a "covered employee" to be includable as "applicable employee remuneration" of such Participant, as such terms are defined in Section 162(m). 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. ELIGIBILITY Each Participant, including directors of the Company who are also salaried employees of the Company, shall be eligible to participate in this Plan and receive Awards in accordance with Section 5. 5. AWARDS The Committee may, from time to time and upon such conditions as it may determine, authorize the payment of Awards to Participants, which shall be not inconsistent with, and shall be subject to all of the requirements of, the following provisions: (a) Not later than the ninetieth day of each calendar year, the Committee shall approve (i) a Target Award to be granted to each Participant and (ii) one or more performance targets and formulas for determining the amount of each Award. Performance targets shall be based upon the return on total capital employed, return on equity, return on tangible assets employed, economic value income, net income, market share, sales development or support costs of the Company and/or its subsidiaries; provided, however, that performance targets which are used in the Plan will not be used in the Company's Annual Incentive Compensation Plan in the same year. (b) Not later than the ninetieth day of the following calendar year, the Committee shall approve: (i) a preliminary calculation of the amount of each Award based upon the application of the formulas and actual performance to the Target Awards previously determined in accordance with Section 5(a); and (ii) a final calculation of the amount of each Award to be paid to each Participant for the prior year, which amount shall be not greater than the amount determined in accordance with Section 5(b)(i). The Committee shall have the power to decrease, but not to increase, the amount of any Award below the amount determined in accordance with Section 5(b)(i); provided, however, that no Award, including any Award equal to the Target Award, shall be payable under the Plan to any Participant except as determined by the Committee. (c) Promptly following the determination of Awards for the Participants pursuant to Section 5(b)(ii), the Company shall pay the amount of such Awards to the Participants in cash, subject to all withholdings and deductions pursuant to Section 6. (d) No Award may be paid for any year to a Participant in excess of $800,000. 6. 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. 7. 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; and further provided, however, that no amendment may be made which would cause any amount paid to a Participant who is, or is determined by the Committee to be likely to become, a "covered employee" to be includable as "applicable employee remuneration" of such Participant, as such terms are defined in Section 162(m). 8. 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 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. 9. APPROVAL BY STOCKHOLDERS The Plan shall be submitted for approval by the stockholders of the Company. If such approval has not been obtained by June 1, 2001, this Plan shall be nullified and all grants of Target Awards shall be rescinded. 10. EFFECTIVE DATE Subject to its approval by the stockholders of the Company, this Plan shall become effective as of January 1, 2001. EX-10.(XV) 4 l93112aex10-xv.txt EX-10(XV) NACCO EXECUTIVE LONG TERM INCENTIVE PLAN EXHIBIT 10(xv) NACCO INDUSTRIES, INC. EXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLAN 1. PURPOSE OF THE PLAN The purpose of this Executive Long-Term Incentive Compensation Plan (the "Plan") is to further the long-term profits and growth of NACCO Industries, Inc. (the "Company") by enabling the Company to attract and retain key executive employees of the Company by offering long-term incentive compensation to those key executive employees who will be in a position to make significant contributions to such profits and growth. This incentive is in addition to annual compensation and is intended to encourage enhancement of the Company's stockholder value. 2. DEFINITIONS (a) "Average Award Share Price" means the average of the closing price per share of Class A Common Stock on the New York Stock Exchange on the Friday (or if Friday is not a trading day, the last trading day before such Friday) for each week of the relevant period. (b) "Award" means an award paid to a Participant under this Plan for any period of one or more years in an amount determined pursuant to a formula which is established by the Committee not later than the 90th calendar day of the performance period on which the Award is based. The Committee shall allocate the amount of an Award between the cash component, to be paid in cash, and the equity component, to be paid in Award Shares. (c) "Award Shares" means shares of Class A Common Stock which are issued pursuant to, and with such restrictions as are imposed by, the terms of this Plan. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing. (d) "Class A Common Stock" means the Company's Class A Common Stock, par value $1.00 per share. (e) "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 (i) is not an employee of the Company or any of its subsidiaries and (ii) is a "disinterested person" within the meaning of Rule 16b-3. (f) "Participant" means any salaried employee of the Company who in the judgment of the Committee occupies a key executive position in which his efforts may significantly contribute to the profits or growth of the Company. Employees of the Company's subsidiaries shall not be eligible to participate in this Plan. (g) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (or any successor rule to the same effect), as in effect from time to time. (h) "Section 162(m)" means Section 162(m) of the Internal Revenue Code of 1986, as amended, or any successor provision. (i) "Target Award" means a dollar amount equal to the award to be paid to a Participant under the Plan assuming that the performance targets are met. 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 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; provided, however, that no such action may be taken by the Committee which would cause any Awards to be made to a Participant who is, or is determined by the Committee to be likely to become, a "covered employee" to be includable as "applicable employee remuneration" of such Participant, as such terms are defined in Section 162(m). 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. ELIGIBILITY Each Participant, including directors of the Company who are also salaried employees of the Company, shall be eligible to participate in this Plan and receive Awards in accordance with Section 5. 5. AWARDS The Committee may, from time to time and upon such conditions as it may determine, authorize the payment of Awards to Participants, which shall be not inconsistent with, and shall be subject to all of the requirements of, the following provisions: (a) Not later than the ninetieth day of each calendar year, the Committee shall approve (i) a Target Award to be granted to each Participant and (ii) a formula for determining the amount of each Award, which formula is based upon the Company's average return on equity or return on total capital employed for years covered by the performance period. Each grant shall specify the allocation between the cash portion of the Award and the equity portion of the Award. (b) Not later than the ninetieth day of the following calendar year, the Committee shall approve: (i) a preliminary calculation of the amount of each Award based upon the application of the formula and actual performance to the Target Awards previously determined in accordance with Section 5(a); and (ii) a final calculation of the amount of each Award to be paid to each Participant for the prior year, which amount shall be not greater than the amount determined in accordance with Section 5(b)(i). The Committee shall have the power to decrease, but not to increase, the amount of any Award below the amount determined in accordance with Section 5(b)(i), provided, however, no Award, including any Award equal to the Target Award, shall be payable under the Plan to any Participant except as determined by the Committee. (c) Each Award shall be paid partly in cash and partly in Award Shares. The number of Award Shares to be issued to a Participant shall be based upon the number of shares of Class A Common Stock which can be purchased with the equity portion of the Award at the Average Award Share Price. Awards shall be paid subject to all withholdings and deductions pursuant to Section 6. Notwithstanding any other provision of the Plan, the maximum amount paid to a Participant in a single year as a result of Awards under this Plan shall not exceed $2,250,000. (d) Award Shares shall entitle such Participant to voting, dividend and other ownership rights. Each Award shall provide that the transferability of the Award Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Committee at the date of payment for a period of ten years, or such other shorter or longer period as may be determined by the Committee from time to time. (e) Each payment of Award Shares shall be evidenced by an agreement executed on behalf of the Company by an executive officer and delivered to and accepted by such Participant; each such agreement shall contain such terms and provisions, consistent with this Plan, as the Committee may approve, including, without limitation, prohibitions and restrictions regarding the transferability of Award Shares (other than a transfer (i) by will or the laws of descent and distribution, (ii) pursuant to a domestic relations order meeting the definition of a qualified domestic relations order under Section 206(d)(3)(B) of the Employee Retirement Income Security Act of 1974, as amended, or (iii) to a trust for the benefit of a Participant or his spouse, children or grandchildren, provided that Award Shares transferred to such a trust shall continue to be Award Shares subject to this Plan). (f) Multiple Awards may be granted to a Participant; provided, however, that no two Awards to a Participant may have identical performance periods. 6. WITHHOLDING TAXES To the extent that the Company is required to withhold federal, state or local taxes in connection with any Award paid to a Participant under this Plan, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such Award that the Participant make arrangements satisfactory to the Company for the payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such Award. The Company and a Participant may also make similar arrangements with respect to the payment of any other taxes derived from or related to the Award with respect to which withholding is not required. 7. AMENDMENT, TERMINATION AND ADJUSTMENTS 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 or any Award Shares of such Participant; and further provided, however, that, without further approval by the stockholders of the Company, no such action shall (i) increase the maximum number of Award Shares to be issued under this Plan specified in Section 8 (except that adjustments and additions expressly authorized by this Section 7 shall not be limited by this clause (i)), (ii) cause Rule 16b-3 to become inapplicable to this Plan or (iii) cause any amount of an Award to a Participant who is, or is determined by the Committee to be likely to become, a "covered employee" to be includable as "applicable employee remuneration" of such Participant, as such terms are defined in Section 162(m). The Committee may make or provide for such adjustment in the total number of Award Shares to be issued under this Plan specified in Section 8 as the Committee in its sole discretion, exercised in good faith, may determine is equitably required to reflect (a) any stock dividend, stock split, combination of shares, recapitalization or any other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. All Target Awards and Awards granted prior to any termination of this Plan shall continue to be subject to the terms of this Plan. In the case of termination of employment by reason of death, permanent disability or retirement pursuant to the terms of the qualified pension plan applicable to the Participant, or in the case of other special circumstances, of a Participant who holds Award Shares as to which the prohibition or restriction on transfer has not lapsed, or in case of a termination of the Plan pursuant to this Section 7, the Committee may, in its sole discretion, accelerate the time at which such prohibition or restriction on transfer will lapse. 8. AWARD SHARES SUBJECT TO PLAN Subject to adjustment as provided in this Plan, the total number of shares of Class A Common Stock which may be issued as Award Shares under this Plan shall be 300,000. 9. APPROVAL BY STOCKHOLDERS The Plan shall be submitted for approval by the stockholders of the Company. If such approval has not been obtained by June 1, 2001, all grants of Target Awards made on or after January 1, 2001, shall be rescinded. 10. 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 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. 11. EFFECTIVE DATE Subject to its approval by the stockholders of the Company, this Plan shall become effective as of January 1, 2001. EX-10.(XX) 5 l93112aex10-xx.txt EX-10(XX) NACCO ANNUAL INCENTIVE COMPENSATION PLAN EXHIBIT 10(xx) NACCO INDUSTRIES, INC. 2002 ANNUAL INCENTIVE COMPENSATION PLAN 1. Purpose of the Plan The purpose of the NACCO Industries, Inc. 2002 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, 2002 through December 31, 2002. (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 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: (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 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, 2002. EX-10.(XXIV) 6 l93112aex10-xxiv.txt EX-10(XXIV) AMENDMENT ONE - NACCO UNFUNDED PLAN EXHIBIT 10(xxiv) AMENDMENT NO. 1 TO THE NACCO INDUSTRIES, INC. UNFUNDED BENEFIT PLAN (EFFECTIVE SEPTEMBER 1, 2000) NACCO Industries, Inc. hereby adopts this Amendment No. 1 to the NACCO Industries, Inc. Unfunded Benefit Plan (Effective September 1, 2000) (the "Plan") effective January 1, 2002. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 Section 2.10 of the Plan is hereby amended (a) by deleting the number "$100,000" and replacing it with the number "$115,000" each time it appears therein and (b) by adding the following new sentence to the end thereof: "In addition, notwithstanding the change of eligibility requirements which became effective on January 1, 2002, any Employee of the Company who (i) was eligible to participate in the Plan on December 31, 2001 and (ii) actually had amounts allocated to an Account under the Plan as of such date, shall remain as an eligible Participant in the Plan on and after January 1, 2002; provided that his total compensation is at least equal to the compensation limit specified in Section 414(q) relating to Highly Compensated Employees." EXECUTED this 25th day of September, 2001. NACCO INDUSTRIES, INC. By: /s/ Charles A. Bittenbender --------------------------------- Title: Vice President, General Counsel and Secretary EX-10.(XXV) 7 l93112aex10-xxv.txt EX-10(XXV) AMENDMENT TWO - NACCO UNFUNDED PLAN EXHIBIT 10(xxv) AMENDMENT NO. 2 TO THE NACCO INDUSTRIES, INC. UNFUNDED BENEFIT PLAN (EFFECTIVE SEPTEMBER 1, 2000) NACCO Industries, Inc. hereby adopts this Amendment No. 2 to the NACCO Industries, Inc. Unfunded Benefit Plan (Effective September 1, 2000) (the "Plan") effective January 1, 2002. 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 sentence of Section 3.2(a) of the Plan is hereby amended to read as follows: "Each 401(k) Employee who is a Participant, 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 subsequent Plan Years, by an amount equal to the difference between (i) a specified percentage, in 1% increments, with a maximum of 25%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Profit Sharing Plan for such Plan Year by reason of the application of the limitations under Sections 402(g), 401(a)(17), and 401(k)(3) of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits")." EXECUTED this 21st day of December, 2001. NACCO INDUSTRIES, INC. By: /s/ Charles A. Bittenbender ---------------------------------- Title: Vice President, General Counsel and Secretary EX-10.(XXXV) 8 l93112aex10-xxxv.txt EX-10(XXXV) NACCO DEFERRED COMPENSATION PLAN EXHIBIT 10(xxxv) THE NORTH AMERICAN COAL CORPORATION DEFERRED COMPENSATION PLAN FOR MANAGEMENT EMPLOYEES The North American Coal Corporation (the "Company") does hereby adopt this amendment and restatement of The North American Coal Corporation Deferred Compensation Plan for Management Employees, effective November 1, 2001. ARTICLE I PREFACE Section 1.1. Effective Date. The effective date of this restatement of the Plan is October 1, 2001. Section 1.2. Purpose of the Plan. The purpose of this Plan is to (a) allow certain Employees to defer the receipt of certain long-term incentive compensation award payments and (b) provide for certain Employees the benefits they would have received under the Savings Plan but for the limitations imposed under Sections 402(g), 401(a)(17), 401(k)(3), 401(m) and 415 of the Code. Section 1.3. Governing Law. This Plan shall be regulated, construed and administered under the laws of the State of Ohio, except when preempted by federal law. Section 1.4. Gender and Number. For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context. Section 1.5. Status of Plan. This document is classified as a single "plan" for purposes of recordkeeping, the Code and the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). For purposes of the federal securities laws, however, this document shall be classified as two separate "plans." One plan shall consist of the Accounts of those persons who satisfy the requirements of an "accredited investor" or a "sophisticated purchaser" under Rule 506 of the Securities Act of 1933 and the other plan shall consist of the Accounts of all other Plan Participants. ARTICLE II DEFINITIONS Except as otherwise provided in this Plan, terms defined in the Savings Plan as they may be amended from time to time shall have the same meanings when used herein, unless a different meaning is clearly required by the context of this Plan. In addition, the following words and phrases shall have the following respective meanings for purposes of this Plan. Section 2.1. Account shall mean the record maintained in accordance with Section 3.5 by the Employer as the sum of the Participant's Excess 401(k) Sub-Account, Excess Matching Sub-Account and VAP Deferral Sub-Account and Excess Profit Sharing Sub-Account. Section 2.2. Adjusted ROE. (a) For purposes of this Section, the following terms shall have the following meanings: (i) "Net Income (before extraordinary items)" is defined as consolidated net income, as defined by general accepted accounting principles ("GAAP"), for NACCO Industries, Inc. and its subsidiaries for the subject year before extraordinary items, but including any extraordinary items related to refinancings (net of tax); (ii) "Amortization of Goodwill" is defined as the consolidated amortization expense related to the intangible asset goodwill for NACCO Industries, Inc. and its subsidiaries for the subject year; (iii) "Weighted Average Stockholders' Equity" is calculated by adding the consolidated stockholders' equity for NACCO Industries, Inc., as defined by GAAP, at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen; (iv) "Weighted Average Accumulated Amortization of Goodwill" is calculated by adding consolidated accumulated amortization of goodwill, as defined by GAAP, at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen; and (v) "Weighted Average UMWA Adjustment" is calculated by adding the balance in the Obligation to United Mine Workers of America Combined Benefit Fund, net of tax, for NACCO Industries, Inc. at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen. (b) "Adjusted ROE" shall mean the average return on equity of NACCO Industries, Inc. calculated for the applicable time period, based on A divided by B, where: A = Net Income (before extraordinary items) + Amortization of Goodwill; and B = Weighted Average (Stockholders' Equity + Accumulated Amortization of Goodwill + UMWA Adjustment). (c) Adjusted ROE shall be determined at least annually by NACCO Industries, Inc. Section 2.3. Beneficiary shall mean the person or persons designated by the Participant as his Beneficiary under this Plan, in accordance with the provisions of Article VII hereof. 2 Section 2.4. Company shall mean The North American Coal Corporation or any entity that succeeds The North American Coal Corporation by merger reorganization or otherwise. Section 2.5. Compensation shall have the same meaning as under the Savings Plan, except that Compensation shall be deemed to include (a) the amount of compensation deferred by the Participant under this Plan, excluding VAP Deferral Benefits and (b) amounts in excess of the limitation imposed by Code Section 401(a)(17). Section 2.6. Employer shall mean the Company and any other Controlled Group Member that adopts this Plan pursuant to Section 8.7. Section 2.7. Excess Retirement Benefit or Benefit shall mean a VAP Deferral Benefit, an Excess Profit Sharing Benefit, a Basic or Additional Excess 401(k) Benefit or a Basic or Additional Excess Matching Benefit (as described in Article III) which is payable to or with respect to a Participant under this Plan. Section 2.8. Fixed Income Fund shall mean the Stable Asset Fund under the Savings Plan or any equivalent fixed income fund thereunder which is designated by the NACCO Industries, Inc. Retirement Funds Investment Committee as the successor to the Stable Asset Fund. Section 2.9. Insolvent. For purposes of this Plan, an Employer shall be considered Insolvent at such time as it (a) is unable to pay its debts as they mature, or (b) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code. Section 2.10. Participant. (a) For purposes of Sections 3.1 and 3.2 of the Plan, the term "Participant" means an Employee of an Employer (other than a San Miguel Employee or a Florida Dragline Employee) who is a Participant in the Savings Plan who (i) is unable to make all of the Before-Tax Contributions that he has elected to make to the Savings Plan, or is unable to receive the maximum amount of Matching Contributions under the Savings Plan because of the limitations of Section 402(g), 401(a)(17), 401(k)(3), 401(m) or 415 of the Code and (ii) is in salary grade 14 or above. (b) For purposes of Section 3.3 of the Plan, the term "Participant" means an Employee of an Employer who (i) is a participant in the VAP Plan and (ii) is in salary grade 14 or above. (c) For purposes of Section 3.4 of the Plan, the term "Participant" means an Employee of an Employer (i) who is a Profit Sharing Employee under the Savings Plan, (ii) whose Profit Sharing Contribution under the Savings Plan is limited by the application of Section 401(a)(17) or 415 of the Code or is reduced due to his deferral of Compensation under this Plan, and (iii) who is in salary grade 14 or above. 3 (d) Notwithstanding the foregoing, effective January 1, 2002, in order to become a Plan Participant, an Employee must receive total compensation from the Controlled Group for the year in which a deferral election or Excess Profit Sharing Benefit is required, of at least $115,000; provided, however, that any Employee who (i) was eligible to participate in the Plan on December 31, 2001 and (ii) actually had amounts allocated to an Account under the Plan as of such date, shall remain as an eligible Participant on and after January 1, 2002. Section 2.11. Plan shall mean The North American Coal Corporation Deferred Compensation Plan for Management Employees, as herein set forth or as duly amended. Section 2.12. Plan Administrator shall mean the Company (or its delegate). Section 2.13. Plan Year shall mean the calendar year. Section 2.14. Savings Plan shall mean The North American Coal Corporation Retirement Savings Plan (or any successor plan). Section 2.15. Unforeseeable Emergency shall mean an event which results (or will result) in severe financial hardship to the Participant as a consequence of an unexpected illness or accident or loss of the Participant's property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the Participant. Section 2.16. Valuation Date shall mean the last business day of each Plan Year and any other date chosen by the Plan Administrator. Section 2.17. VAP Plan shall mean The North American Coal Corporation Value Appreciation Plan (Effective as of January 1, 1990), as amended. ARTICLE III EXCESS RETIREMENT BENEFITS Section 3.1. Basic and Additional Excess 401(k) Benefits. (a) Amount of Excess 401(k) Benefits. Each Participant may, prior to the first day of any Plan Year or within 30 days of becoming a Participant hereunder, by completing a "Deferral Election Form" direct his Employer to reduce his Compensation for such Plan Year and, subject to Subsection (e) below, subsequent Plan Years, by an amount equal to the difference between (i) a certain percentage, in 1% increments, with a maximum of 15%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Savings Plan by reason of the application of the limitations under Sections 402(g), 401(a)(17), 401(k)(3) and 415 of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits"). (b) Classification of Excess 401(k) Benefits. The Excess 401(k) Benefits for a particular Plan Year shall be calculated monthly and shall be further divided into the "Basic Excess 401(k) Benefits" and the "Additional Excess 401(k) Benefits" as follows: (i) The Basic Excess 401(k) Benefits shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the lesser 4 of the percentage of Compensation elected to be deferred in the Deferral Election Form for such Plan Year or 7% and the denominator of which is the percentage of Compensation elected to be deferred; and (ii) The Additional Excess 401(k) Benefits (if any) shall be determined by multiplying such Excess 401(k) Benefit by a fraction, the numerator of which is the difference between (1)the percentage of Compensation elected to be deferred in the Deferral Election Form for such Plan Year and (2) 7%, and the denominator of which is the percentage of Compensation elected to be deferred. The Basic Excess 401(k) Benefits shall be credited to the Basic Excess 401(k) Sub-Account under this Plan and the Additional Excess 401(k) Benefits shall be credited to the Additional Excess 401(k) Sub-Account hereunder. The Basic and Additional Excess 401(k) Sub-Accounts shall be referred to collectively as the "Excess 401(k) Sub-Account." (c) Deferral Period. The Deferral Election Form made as of the Effective Date (or, if later, the Deferral Election Form made when the Participant first becomes a Participant)shall also contain such Participant's irrevocable election regarding the time of the commencement of payment of the balance in Excess 401(k) Sub-Account on the Effective Date (if any) and all future amounts credited to his Excess 401(k) Sub-Account. In the Deferral Election Form, a Participant may elect to commence payment of his Excess 401(k) Sub-Account 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 Deferral Election Form, or (iii) the earlier or later of such dates. (d) Effect and Duration of Deferral Election. Any direction by a Participant to make deferrals of Excess 401(k) Benefits hereunder shall be effective with respect to Compensation otherwise payable to the Participant during the Plan Year for which the Deferral Election is effective, and the Participant shall not be eligible to receive such Excess 401(k) Benefits. Instead, such amounts shall be credited to the Participant's Basic or Additional Excess 401(k) Sub-Account (as applicable). Any direction made in accordance with Subsection (a) above 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/Suspension of Deferral Election. (i) A Participant's direction to make deferrals of Excess 401(k) Benefits shall automatically terminate on the earlier of the date on which (1) the Participant ceases employment with the Employers, (2) the Participant's Employer is deemed Insolvent, (3) the Participant is no longer eligible to make deferrals of Excess 401(k) Benefits hereunder or (4) the Plan is terminated. (ii) Any Participant whose eligibility to make Before-Tax Contributions to the Savings Plan has been suspended for any reason (including the taking of a hardship withdrawal thereunder) shall not be eligible to defer Excess 401(k) Benefits under this Plan for the period of his suspension from the Savings Plan. 5 (iii) The Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by it, reduce and/or cease the deferral of Excess 401(k) Benefits being made 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 3.2. Excess Matching Benefits. (a) Amount. A Participant shall have credited to his Basic or Additional Excess Matching Sub-Account (as applicable) an amount equal to the Matching Contributions attributable to the Basic or Additional Excess 401(k) Benefits that he is prevented from receiving under the Savings Plan because of the limitations imposed under Code Sections 402(g), 401(a)(17), 401(k)(3), 401(m) and 415 of the Code (collectively, the "Excess Matching Benefits"). (b) Time of Payment. The Excess Matching Benefits shall be paid (or commence to be paid) at the same time as the Excess 401(k) Benefits (as specified in the Deferral Election Form). Section 3.3. VAP Deferral Benefits. (a) Amount. Each Participant (as defined in Section 2.10(b)) 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 VAP Plan) payable under the VAP Plan by a specified dollar amount or percentage; and (ii) to credit the amount of the reduction (the "VAP Deferral Benefits") to the VAP Deferral Sub-Account hereunder. Such election must be made no later than one-year prior to the date such Award would otherwise be payable to the Participant under the VAP Plan or at such other time as approved by the Company, in its sole and absolute discretion. (b) Deferral Period. The deferral election made by a Participant under Subsection (a) above shall also contain such Participant's irrevocable election regarding the time of the commencement of payment of the VAP Deferral Benefits. The Participant may elect to commence payment of his VAP Deferral Benefits 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 deferral form, or (iii) the earlier or later of such dates. (c) Effect of Deferral Election. Any direction by a Participant to defer receipt of all or part of an Award under the VAP Plan and to receive VAP Deferral Benefits in lieu thereof shall be irrevocable with respect to such Award. (d) Automatic Termination of Deferral Election. (i) A Participant's direction to defer an Award under the VAP Plan shall automatically terminate on the earlier of the date on which (1) the Participant ceases employment with the Controlled Group, (2) the Participant ceases to satisfy the 6 requirements of Section 2.10(b), (3) the Participant's Employer is deemed Insolvent or (4) the Plan is terminated. (ii) The Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by the Plan Administrator, reduce and/or cease the deferral of VAP Deferral Benefits being made 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 3.4. Excess Profit Sharing Benefits. Each Employer shall credit to a Sub-Account (the "Excess Profit Sharing Sub-Account") established for each Participant (as defined in Section 2.10(c)) who is an Employee of such Employer, an amount equal to the excess, if any, of (i) the amount of the Employer's Profit Sharing Contribution which would have been made to the Savings Plan on behalf of the Participant for a Plan Year if (i) such Plan did not contain the limitations imposed under Sections 401(a)(17) and 415 of the Code and (2) the term "Compensation" (as defined in Section 2.5 hereof) were used for purposes of determining the amount of Profit Sharing Contributions under the Savings Plan, over (ii) the amount of the Employer's Profit Sharing Contribution which is actually made to the Savings Plan on behalf of the Participant for such Plan Year (the "Excess Profit Sharing Benefits.") Section 3.5. Participants' Accounts. Each Employer shall establish and maintain on its books for each Participant who is an Employee of such Employer an Account which shall contain the following entries: (a) Credits to a Basic or Additional Excess 401(k) Sub-Account (as applicable) for the Excess 401(k) Benefits described in Section 3.1, which shall be credited to the Sub-Account when a Participant is prevented from making a Before-Tax Contribution under the Savings Plan; (b) Credits to a Basic or Additional Excess Matching Sub-Account (as applicable) for the Excess Matching Benefits described in Section 3.2, which shall be credited to the Sub-Account when a Participant is prevented from receiving Matching Contributions under the Savings Plan; (c) Credits to a VAP Deferral Sub-Account for the VAP Deferral Benefits described in Section 3.3, which shall be credited to the Sub-Account at the time the Award would otherwise be payable to the Participant under the VAP Plan; (d) Credits to an Excess Profit Sharing Sub-Account for the Excess Profit Sharing Benefits described in Section 3.4, which shall be credited to the Sub-Account at the time the Profit Sharing Contributions are otherwise credited to Participants' accounts under the Savings Plan; (e) Credits to all Sub-Accounts for the earnings described in Article IV, which shall continue until such Sub-Accounts have been distributed to the Participant or his Beneficiary; and (f) Debits for any distributions made from the Sub-Accounts. 7 Section 3.6. Effect on other Benefits. Benefits payable to or with respect to a Participant under the Savings Plan or any other Employer-sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under this Plan. Section 3.7. Statements. Participants shall be provided with statements of their Account balances as soon as practicable following each Valuation Date. ARTICLE IV EARNINGS Section 4.1. Earnings on Basic 401(k), Basic Matching and Excess Profit Sharing Sub-Accounts. (a) Subject to Subsection (b) and Section 4.4, at the end of each calendar month during a Plan Year, the Basic Excess 401(k) Sub-Account and the Basic Excess Matching Sub-Account and the Excess Profit Sharing 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. Notwithstanding the foregoing, in the event that the Adjusted ROE determined for such Plan Year exceeds the rate credited to the Participant's Sub-Accounts under the preceding sentence, such Sub-Accounts shall retroactively be credited with the difference between (i) the amount determined under the preceding sentence, and (ii) the amount determined by multiplying the Participant's average Sub-Account balance during each month of such Plan Year by the Adjusted ROE determined for such Plan Year, compounded monthly. (b) The Adjusted ROE calculation described in Subsection (a) shall be made during the month in which the Participant terminates employment and shall be based on the year-to-date Adjusted ROE for the month ending prior to the date the Participant terminated employment, as calculated by NACCO Industries, Inc. For any subsequent month following such termination, the Adjusted ROE calculation shall not apply. The Fixed Income Fund calculation described in Subsection(a)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 4.2. Earnings on Additional 401(k) and Additional Matching Sub-Accounts. Subject to Section 4.4, at the end of each calendar month during a Plan Year, the Additional Excess 401(k) Sub-Account and Additional Excess Matching 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 4.3. Earnings on VAP Deferral Sub-Accounts. Subject to Section 4.4, at the end of each calendar month during a Plan Year, the VAP 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 "10-Year U.S. Treasury Yield" plus 2.0%. For purposes hereof, the 10-Year U.S. Treasury Yield shall be the 10 year yield on U.S. Treasury 8 issues as listed in the Bond Market Data Bank for the last day of the preceding calendar quarter as printed in the Wall Street Journal. In the event that a yield is not listed for a maturity exactly 10 years from the calendar quarter end, the next preceding chronological treasury bond issue yield shall be used. Section 4.4. Changes in/Limitations on Earnings Assumptions. (a) The Board of Directors of the Company, the Nominating, Organization and Compensation Committee of the Board of Directors of the Company or the NACCO Industries, Inc. Benefits Committee may change (but not suspend) the earnings rate credited on Accounts hereunder at any time upon at least 30 days notice to Participants. (b) Notwithstanding any provision of the Plan to the contrary, in no event will earnings on Accounts for a Plan Year be credited at a rate which exceeds 14%. ARTICLE V VESTING A Participant shall always be 100% vested in amounts credited to his Account hereunder. ARTICLE VI DISTRIBUTION OF BENEFITS TO PARTICIPANTS Section 6.1. Time and Manner of Payment. (a) Time of Payment. Excess 401(k) and Matching Benefits and VAP Deferral Benefits shall be paid (or commence to be paid) to the Participant no later than the 30th day after the date specified in the election form applicable to such Benefits. Excess Profit Sharing Benefits shall automatically be paid to the Participant at the same time that the Profit Sharing Contributions under the Savings Plan commence to be paid to the Participant. (b) Form of Payment. Each Sub-Account (other than the Excess Profit Sharing Sub-Account) shall each be distributed to the Participant in the form of ten annual installments with each installment being based on the value of the applicable 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. Notwithstanding the foregoing, the Participant may elect to receive the amount credited to his VAP Deferral Sub-Account and/or the sum of the amounts credited to his Excess 401(k) and Matching Sub-Accounts in the form of a single lump sum payment or in annual installments for a period of less than 10 years by filing a notice in writing, signed by the Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. Any such election of the form of benefit may be changed at any time and from time to time, without the consent of any other person, by filing a later election in writing that is signed by the Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. The Excess Profit Sharing Account shall automatically be paid in the form of a single lump sum payment. 9 (c) Unforeseeable Emergency Distributions. Notwithstanding the foregoing, the Company may at any time, upon written request of the Participant, cause to be paid to such Participant an amount equal to all or any part of the Participant's Account if the Company determines, in its absolute discretion based on such reasonable evidence that it shall require, that such a payment or payments is necessary for the purpose of alleviating the consequences of an Unforeseeable Emergency occurring with respect to the Participant. Payments of amounts because of an Unforeseeable Emergency shall be permitted only to the extent reasonably necessary to satisfy the emergency need. (d) Small Accounts. Notwithstanding any provision of the Plan or a Participant's Deferral Election Form to the contrary, in the event that the Account of a Participant does not exceed $10,000 at the time of the Participant's termination of employment with the Controlled Group, such Account shall automatically be paid to him in a single lump sum payment as soon as practicable following his termination of employment. (e) Withdrawals Subject to a 10% Penalty. (i) The provisions of this Subsection shall apply notwithstanding any other provision of the Plan to the contrary. (ii) A Participant who is an Employee may, at any time (and from time to time) elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Additional Excess 401(k) Sub-Account; (B) the Additional Excess Matching Sub-Account; and (C) the VAP Deferral Sub-Account. (iii) In addition to the amounts described in (ii) above, Participants who have ceased to be Employees of the Controlled Group may also elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Basic Excess 401(k) Sub-Account; and (B) the Basic Excess Matching Sub-Account. (iv) Withdrawals under this Subsection shall be equal to the entire amount credited to any such Sub-Account, less 10%. Such 10% reduction shall be treated as a forfeiture hereunder and shall immediately be subtracted from the applicable Sub-Account, never to be restored. (f) Payment Restriction. Notwithstanding any provision of the Plan to the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that any amount payable, when added to any other compensation received or to be received by the Participant in the same calendar year, would not be deductible by the Employer by reason of Section 162(m) of 10 the Code. The amount to be deferred will equal the amount that otherwise would not be deductible by the Employer by reason of Section 162(m) of the Code, but in no event greater than the total amount otherwise payable hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Employer by reason of Section 162(m) of the Code. The Nominating, Organization and Compensation Committee of the Board of Directors, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of the participant. Section 6.2. Liability for Payment/Expenses. The Employer by which the Participant was last employed prior to his payment commencement date under the Plan shall pay all Excess Retirement Benefits hereunder to or on behalf of such Participant, but such Employer's liability shall be limited to its proportionate share of such amount, as hereinafter provided. If the Excess Retirement Benefits payable to or on behalf of a Participant are based on the Participant's employment with more than one Employer, the liability for such Benefits shall be shared by all such Employers (by reimbursement to the Employer making such payment) as may be agreed to among them in good faith (taking into consideration the Participant's service and Compensation paid by each such Employer) and as will permit the deduction (for purposes of federal income tax) by each such Employer of its portion of the payments made and to be made hereunder. Expenses of administering the Plan shall be paid by the Employers, as directed by the Company. ARTICLE VII BENEFICIARIES Section 7.1. Beneficiary Designations. A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable to the Plan Administrator) signed by the Participant and filed with and received by the Plan Administrator prior to the Participant's death. In the absence of such a designation and at any other time when there is no existing Beneficiary designated hereunder, the Beneficiary of a Participant for his Excess Retirement Benefits shall be the estate of the last to die of the Participant and his Beneficiaries. If two or more persons designated as a Participant's Beneficiary are in existence with respect to a single Excess Retirement Benefit, the amount of any payment to the Beneficiary under this Plan shall be divided equally among such persons unless the Participant's designation specifically provides for a different allocation. Any change in Beneficiary shall be made by giving written notice thereof to the Plan Administrator and any change shall be effective only if received by the Plan Administrator prior to the death of the Participant. Section 7.2. Distributions to Beneficiaries. (a) Amount of Benefits. The Excess Retirement Benefit payable to a Participant's Beneficiary under this Plan shall be equal to such Participant's Account balance on the date of the distribution of the Account to the Beneficiary. (b) Time of Payment. The Excess Retirement Benefits payable to a Beneficiary under this Plan shall be paid as soon as practicable following the death of the Participant. 11 (c) Form of Payment. All Excess Retirement Benefits payable to a Beneficiary hereunder shall be paid in the form of a lump sum payment. ARTICLE VIII MISCELLANEOUS Section 8.1. Liability of Employers. Nothing in this Plan shall constitute the creation of a trust or other fiduciary relationship between an Employer and any Participant, Beneficiary or any other person. Section 8.2. Limitation on Rights of Participants and Beneficiaries - No Lien. The Plan is designed to be an unfunded, nonqualified plan. Nothing contained herein shall be deemed to create a trust or lien in favor of any Participant or Beneficiary on any assets of an Employer. The Employers shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Employers for use in connection with the Plan. No Participant or Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of an Employer prior to the time that such assets are paid to the Participant or Beneficiary as provided herein. Each Participant and Beneficiary shall have the status of a general unsecured creditor of his Employer. Section 8.3. No Guarantee of Employment. Nothing in this Plan shall be construed as guaranteeing future employment to Participants. A Participant continues to be an Employee of the Employers solely at the will of the Employers subject to discharge at any time, with or without cause. Section 8.4. Payment to Guardian. If a benefit payable hereunder is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Plan Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Employers from all liability with respect to such benefit. Section 8.5. Assignment. (a) Subject to Subsection (b), no right or interest under this Plan of any Participant or Beneficiary shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of the Participant or Beneficiary. (b) Notwithstanding the foregoing, the Plan Administrator shall honor a judgment, order or decree from a state domestic relations court which requires the payment of all or a part of a Participant's or Beneficiary's vested interest under this Plan to an "alternate payee" as defined in Code Section 414(p). Section 8.6. Severability. If any provision of this Plan or the application thereof to any circumstance(s) or person(s) is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby. 12 Section 8.7. Adoption by Other Employers. Any member of the Controlled Group that is an Employer under the Savings Plan or the VAP Plan may adopt this Plan with the consent of the NACCO Industries, Inc. Benefits Committee by executing an instrument evidencing its adoption of this Plan on the order of its Board of Directors (or the applicable committee of such Board of Directors) (or its delegate) and filing a copy thereof with the Company. Such adoption may be subject to such terms and conditions as the NACCO Industries, Inc. Benefits Committee requires or approves. ARTICLE IX ADMINISTRATION OF PLAN Section 9.1. Administration. (a) In general. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have the discretion to interpret where necessary all provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or 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, or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a person is a Participant, and (ii) to determine if a person is entitled to Excess Retirement Benefits hereunder and, if so, the amount and duration of such Benefits. The Plan Administrator's determination of the rights of any person hereunder shall be final and binding on all persons, subject only to the provisions of Sections 9.3 and 9.4 hereof. (b) Delegation of Duties. The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Excess Retirement Benefits, to a named administrator or administrators. Pursuant to this delegation power, the Company has appointed the Administrative Committee under the Savings Plan (as it exists from time to time) as the Plan Administrator of this Plan. Section 9.2. Regulations. The Plan Administrator shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. The rules, regulations and interpretations made by the Plan Administrator shall, subject to the provisions of Sections 9.3 and 9.4 hereof, be final and binding on all persons. Section 9.3. Claims Procedures. The Plan Administrator shall determine the rights of any person to any Excess Retirement Benefits hereunder. Any person who believes that he has not received the Excess Retirement Benefits to which he is entitled under the Plan may file a claim in writing with the Plan Administrator. The Plan Administrator shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90 day period), either allow or deny the claim in writing. If a claimant does not receive written notice of 13 the Plan Administrator's decision on his claim within the above-mentioned period, the claim shall be deemed to have been denied in full. A denial of a claim by the Plan Administrator, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include: (a) the specific reasons for the denial; (b) specific reference to pertinent Plan provisions on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claim review procedure. A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Plan Administrator a written request for a review of such claim. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his claim. If such an appeal is so filed within such 60 day period, the Company (or its delegate) shall conduct a full and fair review of such claim. During such review, the claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. For this purpose, the Company (or its delegate) shall have the same power to interpret the Plan and make findings of fact thereunder as is given to the Plan Administrator under Section 9.1 above. The Company shall mail or deliver to the claimant a written decision on the matter based on the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the claimant prior to the commencement of such extension). Such decision shall be written in a manner calculated to be understood by the claimant, shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and shall, to the extent permitted by law, be final and binding on all interested persons. If the decision on review is not furnished to the claimant within the above-mentioned time period, the claim shall be deemed to have been denied on review. Section 9.4. Revocability of Plan Administrator/ Employer Action. Any action taken by the Plan Administrator or an Employer with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the Employer as to payments not yet made to such person, and acceptance of any Excess Retirement Benefits under the Plan constitutes acceptance of and agreement to the Plan Administrator's or the Employer's making any appropriate adjustments in future payments to such person (or to recover from such person) any excess payment or underpayment previously made to him. 14 Section 9.5. Amendment. The NACCO Industries, Inc. Benefits Committee may at any time (without the consent of an Employer) authorize the amendment of any or all of the provisions of this Plan, except that (a) no such amendment may adversely affect any Participant's Excess Retirement Benefit as of the date of such amendment and (b) no such amendment may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any amendment shall be in the form of a written instrument executed by an officer of the Company on the order of such Committee. Subject to the foregoing provisions of this Section, such amendment shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Section 9.6. Termination. (a) The Board of Directors of the Company or the Nominating, Organization and Compensation Committee of the Board of Directors of the Company, in its sole discretion, may terminate this Plan at any time and for any reason whatsoever, except that, subject to Subsection (b) hereof, (i) no such termination may adversely affect any Participant's Excess Retirement Benefit as of the date of such termination, and (ii) no such termination may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any such termination shall be expressed in the form of a written instrument executed by an officer of the Company on the order of the Board (or Committee, as applicable). Subject to the foregoing provisions of this Subsection, such termination shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Written notice of any termination shall be given to the Participants as soon as practicable after the instrument is executed. (b) Notwithstanding anything in the Plan to the contrary, in the event of a termination of the Plan, the Company, in its sole and absolute discretion, shall have the right to change the time and form of distribution of Participants' Excess Retirement Benefits, including requiring that all amounts credited to Participant's Accounts hereunder be immediately distributed in the form of a lump sum payment. (c) Any Employer (other than the Company) that adopts the Plan may elect to withdraw from the Plan and such withdrawal shall constitute a termination of the Plan as to such Employer; provided, however, that such terminating Employer shall continue to be an Employer for the purposes hereof as to Participants or Beneficiaries to whom it owes obligations hereunder. Such withdrawal and termination shall be expressed in an instrument executed by the terminating Employer on authority of its Board of Directors (or the applicable Committee thereof) and filed with the Company, 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. Notwithstanding any other provision of the Plan, if an Employer (other than the Company) ceases to be a member of the Controlled Group, the Plan shall automatically terminate with respect to such Employer and 15 all amounts credited to the Accounts of Employees of such Employer shall be immediately payable in the form of a lump sum payment. Executed this 24th day of October, 2001. THE NORTH AMERICAN COAL CORPORATION By: /s/ Thomas A. Koza ---------------------------------- Title: Vice President-Law and Administration and Secretary 16 EX-10.(XXXVI) 9 l93112aex10-xxxvi.txt EX-10(XXXVI) AMD. 1 - NACCO DEFERRED COMP PLAN EXHIBIT 10(xxxvi) AMENDMENT NO. 1 TO THE NORTH AMERICAN COAL CORPORATION DEFERRED COMPENSATION PLAN FOR MANAGEMENT EMPLOYEES (AS AMENDED AND RESTATED EFFECTIVE AS OF NOVEMBER 1, 2001) The North American Coal Corporation hereby adopts this Amendment No. 1 to The North American Coal Corporation Deferred Compensation Plan for Management Employees (As Amended and Restated Effective November 1, 2001) (the "Plan"), to be effective as of January 1, 2002. Words used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Section 3.1(a) of the Plan is hereby amended in its entirety to read as follows: "(a) Amount of Excess 401(k) Benefits. Each Participant may, prior to the first day of any Plan Year or within 30 days of becoming a Participant hereunder, by completing a "Deferral Election Form" direct his Employer to reduce his Compensation for such Plan Year and, subject to Subsection (e) below, subsequent Plan Years, by an amount equal to the difference between (i) a certain percentage, in 1% increments, with a maximum of 25%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Savings Plan by reason of the application of the limitations under Sections 402(g), 401(a)(17), 401(k)(3) and 415 of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits")." EXECUTED this 21st day of December, 2001. THE NORTH AMERICAN COAL CORPORATION By: /s/ Charles A. Bittenbender --------------------------------------- Title: Assistant Secretary EX-10.(XLV) 10 l93112aex10-xlv.txt EX-10(XLV) NACCO ANNUAL INCENTIVE PLAN EXHIBIT 10(xlv) THE NORTH AMERICAN COAL CORPORATION 2002 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: o 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. o 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. o Percentage weightings are assigned to each component, based on the participant's accountabilities and their impact on each component. o One or more performance objectives will be established at the beginning of the year for each performance component. o A performance range, which defines the acceptable level of results, from threshold to maximum, is created for each performance objective. o 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. o 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. o After audited financials are available, awards will be calculated based on actual results against the established objectives. o 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 25% Incentive paid when results meet minimum acceptable standards. Below threshold 0% Performance does not merit incentive payment.
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.
PERFORMANCE/PAYOUT SCHEDULE 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. 2002 PERFORMANCE TARGETS See Plan Summary. EX-10.(LV) 11 l93112aex10-lv.txt EX-10(LV) LETTER AMENDMENT EXHIBIT 10(lv) LETTER AMENDMENT Dated as of November 20, 2001 To the banks, financial institutions and other institutional lenders (collectively, the "Lenders") parties to the Credit Agreement referred to below and to Citibank, N.A., as agent (the "Agent") for the Lenders Ladies and Gentlemen: We refer to the Credit Agreement dated as of October 11, 2000 (the "Credit Agreement") among the undersigned and you. Capitalized terms not otherwise defined in this Letter Amendment have the same meanings as specified in the Credit Agreement. It is hereby agreed by you and us, effective as of the date of this Letter Amendment, as follows: 1. Clause (A) of the proviso following the table in the definition of "Applicable Margin" is hereby amended in full to read "(A) through the fiscal quarter end that is at least 180 days after receipt by the Borrower of the "Commercial Operating Date" (as defined in the Power Purchase and Operating Agreement between Tennessee Valley Authority and Choctaw Generation, Inc. dated February 20, 1997), the Applicable Margin shall be at Level 5". 2. Clause (A) of the proviso following the table in the definition of "Applicable Percentage" is hereby amended in full to read "(A) through the fiscal quarter end that it at least 180 days after receipt by the Borrower of the "Commercial Operating Date" (as defined in the Power Purchase and Operating Agreement between Tennessee Valley Authority and Choctaw Generation, Inc. dated February 20, 1997), the Applicable Margin shall be at Level 5". 3. Section 5.03(b) of the Credit Agreement is hereby amended in full to read as follows: (b) Fixed Charge Coverage Ratio. Maintain a ratio of Consolidated EBITDA of the Borrower and its Non-Project Mining Subsidiaries to the sum of interest payable on, and amortization of debt discount in respect of, all Consolidated Recourse Debt during such period, by the Borrower and its Non-Project Mining Subsidiaries for each period of four fiscal quarters of not less than 3.00:1 from January 1, 2001 until December 31, 2001, 3.25:1 from January 1, 2002 until March 31, 2002, 3.50:1 from April 1, 2002 until September 30, 2002, 3.75 from October 1, 2002 until March 31, 2003 and not less than 4.00:1 thereafter. This Letter Amendment shall become effective as of the date first above written when, and only when, the Agent shall have received counterparts of this Letter Amendment executed by the undersigned and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Agent that such Lender has executed this Letter Amendment. This Letter Amendment is subject to the provisions of Section 8.01 of the Credit Agreement. On and after the effectiveness of this Letter Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Letter Amendment. The Credit Agreement and the Notes, as specifically amended by this Letter Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Letter Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. If you agree to the terms and provisions hereof, please evidence such agreement by executing and returning at least two counterparts of this Letter Amendment to Susan L. Hobart, Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022. This Letter Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Letter Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Letter Amendment. This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, THE NORTH AMERICAN COAL CORPORATION By: /s/ C.B. Friley ------------------------------------ Title: Senior Vice President and CFO Agreed as of the date first above written: CITIBANK, N.A., as Agent and as Lender By: /s/ David Harris ---------------------------------- Title: Vice president BANK ONE, NA By: /s/ Mary Lu D. Cramer ---------------------------------- Title: Director KEYBANK NATIONAL ASSOCIATION By: /s/ Marianne T. Meil ---------------------------------- Title: Vice President PNC BANK, NATIONAL ASSOCIATION By: /s/ Brett Schweikle ---------------------------------- Title: Assistant Vice President EX-10.(LXIII) 12 l93112aex10-lxiii.txt EX-10(LXIII) NMHG ANNUAL INCENTIVE PLAN EXHIBIT 10(lxiii) NACCO MATERIALS HANDLING GROUP, INC. ANNUAL INCENTIVE COMPENSATION PLAN 2002 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 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 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 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. Below are examples of actual pool and individual award calculations. a. Example calculation for determination actual pool: INTENTIONALLY OMITTED b. Example calculation for determination of individual incentive compensation award: John Doe: INTENTIONALLY OMITTED EX-10.(LXVI) 13 l93112aex10-lxvi.txt EX-10(LXVI) AMD.1 - NMHG SR EXEC. INCENTIVE PLAN EXHIBIT 10(lxvi) AMENDMENT NO. 1 TO THE NACCO MATERIALS HANDLING GROUP, INC. SENIOR LONG-TERM INCENTIVE COMPENSATION PLAN (EFFECTIVE AS OF JANUARY 1, 2000) NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 1 to the NACCO Materials Handling Group, Inc. Senior Long-Term Incentive Compensation Plan (Effective as of January 1, 2000) (the "Plan") effective as of July 1, 2001. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 Section 9(c) of the Plan is hereby amended (i) by deleting the phrase "Liability for Payment/Expenses" therefrom and replacing it with the phrase "Expenses" therein and (ii) by deleting the first sentence thereof. Section 2 Section 9(d) of the Plan is hereby amended (1) by identifying the current provisions as clause "(i)" thereof and (2) by adding the following new clause (ii) to the end thereof, to read as follows: "(ii) Except as provided in Article 11 hereof, neither the Company nor any Subsidiary shall be required to make any payment hereunder to any Participant or Beneficiary if the Company or Subsidiary is "Insolvent" at the time such payment is due to be made. For purposes of the Plan, the Company or Subsidiary shall be considered Insolvent at such time as it (1) is unable to pay its debts as they mature or (2) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code (or similar foreign law)." Section 3 A new Article 11 is hereby added to the Plan, immediately following Article 10, to read as follows: "11. Liability of Employers, Transfers and Guarantees. (a) In general. The provisions of this Article shall apply notwithstanding any other provision of the Plan to the contrary. (b) Liability for Payment/Transfers of Employment. (i) Subject to the provisions of clauses (i) and (ii) hereof, the Company and each Subsidiary (the "Employers") shall each be liable for the payment of the Awards which are payable hereunder to or on behalf of the Participants who are its employees. (ii) Notwithstanding the foregoing, if the Awards hereunder which are payable to or on behalf of a Participant are based on the Participant's employment with more than one Employer, the following provisions shall apply: (1) Each Award shall be granted by the Employer for whom the Participant was performing services during the Award Year. In the event that a Participant performed services for more than one Employer during the Award Year, the Award shall be divided so that the Participant shall receive a pro-rata number of Book Value Units from each Employer, based on the Participant's service with, and compensation from, each such Employer (as determined by the Committee in its sole and absolute discretion). (2) Each Employer shall be liable for the payment of the Awards it granted to its employees and, to the extent permitted by applicable law, shall receive an income tax deduction for the amount of those payments. 2 (c) Notwithstanding the foregoing, in the event that NMHG Oregon, Inc. is unable or refuses to satisfy its obligations hereunder with respect to the payment of Awards to or on behalf of its employees, the Company (unless it is Insolvent) shall guarantee and be responsible for the payment thereof." EXECUTED this 8th day of June, 2001. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender ------------------------------------- Title: Assistant Secretary EX-10.(LXVII) 14 l93112aex10-lxvii.txt EX-10(LXVII) AMD.1 - NMHG LONG TERM INCENTIVE PLAN EXHIBIT 10(lxvii) AMENDMENT NO. 1 TO THE NACCO MATERIALS HANDLING GROUP, INC. LONG-TERM INCENTIVE COMPENSATION PLAN (EFFECTIVE AS OF JANUARY 1, 2000) NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 1 to the NACCO Materials Handling Group, Inc. Long-Term Incentive Compensation Plan (Effective as of January 1, 2000) (the "Plan") effective as of July 1, 2001. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 Section 9(c) of the Plan is hereby amended (i) by deleting the phrase "Liability for Payment/Expenses" therefrom and replacing it with the phrase "Expenses" therein and (ii) by deleting the first sentence thereof. Section 2 Section 9(d) of the Plan is hereby amended (1) by identifying the current provisions as clause "(i)" thereof and (2) by adding the following new clause (ii) to the end thereof, to read as follows: "(ii) Except as provided in Article 11 hereof, neither the Company nor any Subsidiary shall be required to make any payment hereunder to any Participant or Beneficiary if the Company or Subsidiary is "Insolvent" at the time such payment is due to be made. For purposes of the Plan, the Company or Subsidiary shall be considered Insolvent at such time as it (1) is unable to pay its debts as they mature or (2) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code (or similar foreign law)." Section 3 A new Article 11 is hereby added to the Plan, immediately following Article 10, to read as follows: "11. Liability of Employers, Transfers and Guarantees. (a) In general. The provisions of this Article shall apply notwithstanding any other provision of the Plan to the contrary. (b) Liability for Payment/Transfers of Employment. (i) Subject to the provisions of clauses (i) and (ii) hereof, the Company and each Subsidiary (the "Employers") shall each be liable for the payment of the Awards which are payable hereunder to or on behalf of the Participants who are its employees. (ii) Notwithstanding the foregoing, if the Awards hereunder which are payable to or on behalf of a Participant are based on the Participant's employment with more than one Employer, the following provisions shall apply: (1) Each Award shall be granted by the Employer for whom the Participant was performing services during the Award Year. In the event that a Participant performed services for more than one Employer during the Award Year, the Award shall be divided so that the Participant shall receive a pro-rata number of Book Value Units from each Employer, based on the Participant's service with, and compensation from, each such Employer (as determined by the Committee in its sole and absolute discretion). (2) Each Employer shall be liable for the payment of the Awards it granted to its employees and, to the extent permitted by applicable law, shall receive an income tax deduction for the amount of those payments. 2 (c) Notwithstanding the foregoing, in the event that NMHG Oregon, Inc. is unable or refuses to satisfy its obligations hereunder with respect to the payment of Awards to or on behalf of its employees, the Company (unless it is Insolvent) shall guarantee and be responsible for the payment thereof." EXECUTED this 8th day of June, 2001. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender ------------------------------------- Title: Assistant Secretary EX-10.(LXVIII) 15 l93112aex10-lxviii.txt EX-10(LXVIII) AMD. 1 - NMHG UNFUNDED PLAN EXHIBIT 10(lxviii) AMENDMENT NO. 1 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 2000) 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 September 1, 2000) (the "Plan"), effective as of October 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 Sections 2.12(a), 2.12(b), 2.12(c) and 2.12(d) of the Plan are hereby amended in their entirety to read as follows: "(a) For purposes of Section 3.1 of the Plan, the term "Participant" means an Employee of the Company 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 base salary or annual base rate of pay for such Plan Year was at least $115,000. (b) For purposes of Section 3.2 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 base salary or annual base rate of pay for the Plan Year in which a deferral election is required is at least $115,000, who is listed on Exhibit A hereto and who is eligible to make Excess Deferrals on or after January 1, 2000. (c) For purposes of Sections 3.3 and 3.4 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 Contributions under the Profit Sharing Plan due to the limitations of Section 402(g), 401(a)(17), 401(k)(3) or 401(m) of the Code and (ii) whose base salary or annual base rate of pay for the Plan Year in which a deferral election is required is at least $115,000. (d) For purposes of Section 3.5 of the Plan, the term "Participant" means an Employee of the Company (i) who is a participant in the LTIP Plan, (ii) who, both at the time the deferral election is required and the time the deferral becomes effective, is either a U.S. citizen, a nonresident alien who is covered on a U.S. payroll or a citizen or resident of the United Kingdom (referred to herein as "UK Participants"), Brazil, Italy or Mexico and (iii) whose base salary or annual base rate of pay for the Plan Year in which a deferral election is required was at least $115,000 (U.S.). In addition, the Employee must either be an active Employee at the time the deferral becomes effective or must have "Retired" as such term is defined in the LTIP Plan." SECTION 2 Section 2.12(f) of the Plan is hereby amended by adding the following new sentence to the end thereof: "Notwithstanding the change in eligibility requirements which became effective as of October 1, 2000, any Employee of the Company who (i) was eligible to participate in the Plan as of September 30, 2000 and (ii) actually had amounts allocated to an Account under the Plan as of such date, shall remain as an eligible Participant in the Plan on and after October 1, 2000; provided that his total compensation is at least equal to the compensation limit specified in Code Section 414(q) relating to Highly Compensated Employees." NACCO MATERIALS HANDLING GROUP, INC. Date: 2/19/01 By: /s/ James M. Phillips ------------ -------------------------------- Title: Vice President-Human Resources 2 EX-10.(LXXIX) 16 l93112aex10-lxxix.txt EX-10(LXXIX) AMD. 2 - NMHG UNFUNDED PLAN EXHIBIT 10(lxxix) AMENDMENT NO. 2 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 2000) NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 2 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective September 1, 2000) (the "Plan") effective as of July 1, 2001. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 The heading of Section 3.7 of the Plan is hereby amended in its entirety to read as follows: "SECTION 3.7. Rules Relating to Deferral Elections/Excess Profit Sharing Payments." Section 2 Section 3.7(a)(1) of the Plan is hereby amended in its entirety to read as follows: "(i) Selecting a Payment Date. The initial deferral elections made by a Participant under Sections 3.2, 3.3 and 3.5 above shall also contain such Participant's irrevocable election regarding the time of the commencement of payment of the Participant's entire Excess Deferral Sub-Account, Excess 401(k) Sub-Account and LTIP Deferral Sub-Account hereunder. In addition, no later than thirty (30) days after the initial Excess Profit Sharing Contribution is contributed to a Participant's Excess Profit Sharing Sub-Account hereunder, the Participant shall make an irrevocable election regarding the time of the commencement of payment of his entire Excess Profit Sharing Sub-Account. (ii) Available Payment Dates. The Participant may elect to commence payment of the Excess Deferral Sub-Account, the Excess 401(k) Sub-Account and the LTIP Deferral Sub-Account, with separate elections being made for each such Sub-Account as soon as practicable following (A) the date on which he ceases to be an Employee of the Controlled Group, (B) the date on which he attains an age specified in the deferral/payment election form or (C) the earlier or later of such dates. The Participant may elect to commence payment of the Excess Profit Sharing Sub-Account (a) as soon as practicable after his termination of employment , or (b) at the same time as he had elected for payment of his Excess 401(k) Sub-Account. Notwithstanding the foregoing, (X) payment of the Participant's Excess Matching Sub-Account shall be made at the same time as the payment of the Participant's Excess 401(k) Sub-Account, (Y) payment of Excess Profit Sharing Benefits shall not occur until the date on which all amounts allocable to the Participant's Excess Profit Sharing Sub-Account for the year of termination of employment have been credited to such Sub-Account, and (Z) a Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess Deferral, Excess 401(k), Excess Matching, Excess Profit Sharing and LTIP Deferral Sub-Accounts as soon as practicable following the date on which the Participant ceases to be an Employee of the Controlled Group. (iii) Special One-Time Election. Notwithstanding the foregoing, Participants who are actively employed on July 1, 2001 shall be given, for the first and only time, a one-time irrevocable election to determine the payment date of their Excess Profit Sharing Benefits by filing a written election with the Plan Administrator during a 45-day period specified by the Company. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess Profit Sharing Benefits as soon as practicable following the later of (A) the date on which he ceases to be an Employee of the Controlled Group or (B) date on which all amounts allocable to the Participant's Excess Profit Sharing Sub-Account for the year of termination of employment have been credited to such Sub-Account." Section 3 Section 7.1(a) of the Plan is hereby amended in its entirety to read as follows: "(a) Excess Profit Sharing Benefits. The Excess Profit Sharing Benefits payable to a Participant shall be paid (or commence to be paid) to the Participant at the time specified in the election form applicable to the Excess Profit Sharing Sub-Account (as provided in Section 3.7). If a Participant has elected (or is deemed to have elected) to receive his Excess Profit Sharing Benefits upon termination of employment, such Benefits shall automatically be paid in the form of a lump sum payment. If a Participant has elected to receive his Excess Profit Sharing Benefits at the same time as his Excess 401(k) Benefits, his Excess Profit Sharing Benefits shall automatically be paid in the same form as he had elected for his Excess 401(k) Benefits." Section 4 Section 7.1(b)(iv) of the Plan is hereby amended by adding the following sentence to the end thereof to read as follows: "Notwithstanding the foregoing, the Excess Matching Sub-Account shall automatically be paid in the same form as the Excess 401(k) Sub-Account." EXECUTED this 6th day of August, 2001. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ James M. Phillips --------------------------------- Title: Vice President-Human Resources EX-10.(LXXX) 17 l93112aex10-lxxx.txt EX-10(LXXX) AMD. 3 - NMHG UNFUNDED PLAN EXHIBIT 10(1xxx) AMENDMENT NO. 3 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 2000) NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 3 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective September 1, 2000) (the "Plan") effective as of July 1, 2001. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 Section 2.6 of the Plan is hereby amended by adding the following words at the end thereof: "and NMHG Oregon, Inc." Section 2 Sections 2.12 and 3.2(b) of the Plan are hereby amended by deleting the phrase "the Company" and replacing it with the phrase "an Employer" each time it appears therein. Section 3 Section 3.2(b) of the Plan is hereby amended by deleting the phrase "Section 2.14(c)(ii)" and replacing it with the phrase "Section 2.12(b)(ii)" therein. Section 4 Sections 7.2 and 10.7 of the Plan are hereby deleted in their entirety from the Plan. Section 5 Section 9.2(b) of the Plan is hereby amended by adding the following new clause to the beginning thereof: "Except as provided in Article XI hereof,." Section 6 A new Article XI is hereby added to the Plan, immediately following Article X, to read as follows: "ARTICLE XI ADOPTION BY OTHER EMPLOYERS, TRANSFERS AND GUARANTEES SECTION 11.1. In general. The provisions of this Article shall apply notwithstanding any other provision of the Plan to the contrary. SECTION 11.2. Adoption of Plan by other Employers/Withdrawal. (a) Any Controlled Group Member may adopt the Plan with the written consent of the Company (on the authorization of the NACCO Industries, Inc. Benefits Committee). Any such adopting employer must (i) execute an instrument evidencing such adoption and (ii) file a copy of such Instrument with the Plan Administrator. Such adoption may be subject to such terms and conditions as the Company requires or approves. By this adoption of the Plan, Employers other than the Company shall be deemed to authorize the Company to take any actions within the authority of the Company under the terms of the Plan. (b) Notwithstanding the foregoing, in the case of any Employer that adopts the Plan and thereafter (i) ceases to exist, (ii) ceases to be a Controlled Group Member or (iii) withdraws or is eliminated from the Plan, it shall not thereafter be considered an Employer hereunder. (c) Any Employer (other than the Company) which adopts this Plan may elect separately to withdraw from the Plan and such withdrawal shall constitute a termination of the Plan as to it; provided, however, that (i) such terminating Employer shall continue to be an Employer for the purposes hereof as to Participants or Beneficiaries to whom it owes obligations hereunder, and (ii) such termination shall be subject to the limitations and other conditions described in Section 10.6, treating the Employer as if it were the Company. SECTION 11.3. Expenses. The expenses of administering the Plan shall be paid by the Employers, as directed by the Company. SECTION 11.4. Liability for Payment/Transfers of Employment. (a) Subject to the provisions of Subsections (b) and (c) hereof, each Employer shall be liable for the payment of the Excess Retirement Benefits which are payable hereunder to or on behalf of its Employees. (b) Notwithstanding the foregoing, if an Excess Retirement Benefit payable to or on behalf of a Participant is based on the Participant's employment with more than one Employer the following provisions shall apply: (i) Upon a transfer of employment, new Sub-Accounts shall be established for the transferred Participant. Excess Retirement Benefits which accrue following the transfer (along with earnings thereon) shall be credited to the new Sub-Accounts. Earning shall also continue to be credited to the Participant's Sub-Accounts which were established by the prior Employer. (ii) Upon distribution, each Employer shall be liable for the payment of the amounts credited to its respective Sub-Accounts and each Employer shall (to the extent permitted by applicable law) receive an income tax deduction for the amount of those payments. (c) Notwithstanding the foregoing, in the event that NMHG Oregon, Inc. is unable or refuses to satisfy its obligations hereunder with respect to the payment of Excess Retirement Benefits to its Employees, the Company (unless it is Insolvent) shall guarantee and be responsible for the payment thereof." EXECUTED this 8th day of June, 2001. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender ---------------------------------- Title: Assistant Secretary 2 EX-10.(LXXXI) 18 l93112aex10-lxxxi.txt EX-10(LXXXI) AMD. 4 - NMHG UNFUNDED PLAN EXHIBIT 10(lxxxi) AMENDMENT NO. 4 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 2000) NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 4 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective September 1, 2000) (the "Plan") effective as of October 1, 2001. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 Section 7.1(f)(iii) of the Plan is hereby amended in its entirety to read as follows: "(iii) Participants who have who ceased to be Employees of the Controlled Group and who have not received a distribution of all of their Sub-Accounts hereunder, may also elect in writing to receive a withdrawal from one or more of the following Sub-Accounts (in addition to withdrawing amounts from the Sub-Accounts specified in Subsection (f)(ii) above): (A) the Basic Excess Deferral Sub-Account; (B) the Basic Excess 401(k) Sub-Account; (C) the Basic Excess Matching Sub-Account; and (D) the Excess Profit Sharing Sub-Account." EXECUTED this 1st day of November, 2001. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ James M. Phillips --------------------------------- Title: Vice President - Human Resources EX-10.(LXXXII) 19 l93112aex10-lxxxii.txt EX-10(LXXXII) AMD. 5 - NMHG UNFUNDED PLAN EXHIBIT 10(lxxxii) AMENDMENT NO. 5 TO THE NACCO MATERIALS HANDLING GROUP, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 2000) NACCO Materials Handling Group, Inc. hereby adopts this Amendment No. 5 to the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and Restated Effective September 1, 2000) (the "Plan") effective as of January 1, 2002. Words and phrases used herein with initial capital letters which are defined in the Plan are used herein as so defined. Section 1 Section 3.3(a) of the Plan is hereby amended in its entirety to read as follows: "(a) Amount of Excess 401(k) Benefits. Each 401(k) Employee who is a Participant, may, prior to the first day of any Plan Year, by completing an approved deferral election form, direct his Employer to reduce his Compensation for such Plan Year by an amount equal to the difference between (i) a specified percentage, in 1% increments, with a maximum of 25%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Profit Sharing Plan for such Plan Year by reason of the application of the limitations under Sections 402(g), 401(a)(17), and 401(k)(3) of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits")." EXECUTED this 21st day of December, 2001. NACCO MATERIALS HANDLING GROUP, INC. By: /s/ Charles A. Bittenbender -------------------------------- Title: Assistant Secretary EX-10.(CXX) 20 l93112aex10-cxx.txt EX-10(CXX) HB/PS ANNUAL INCENTIVE PLAN EXHIBIT 10(cxx) HAMILTON BEACH/PROCTOR-SILEX ANNUAL INCENTIVE COMPENSATION PLAN - 2002 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. This Plan is also referred to as the Short Term Incentive Compensation Plan. 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 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 (31) of any year will not be entitled to an award. Existing employees who were hired prior to September 1 and who are subsequently promoted into Grade 14 or above are allowed to enter after August. 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, provided those participants were actively at work for 90 days in the year of termination, whose employment is terminated (1) due to death, disability, retirement or facility closure or partial 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. i. Pursuant to item h., retirement is defined as participants who are 55 years of age or older with five years or more of service at the time of termination. Disability is defined as an approved application for disability benefits under the Company's long term disability plan, or under the applicable government program. Facility closure or partial closure is defined as any layoff which requires WARN Act notice in the United States. In Mexico, facility closure or partial closure is defined as any layoff of 50 or more employees. 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 Hay Salary Job Grade. This percentage is multiplied by the midpoint of the participant's Hay Salary Job Grade to determine his/her 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 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 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 such as salespersons, regional general managers, and manufacturers representatives. DETERMINATION OR INDIVIDUAL INCENTIVE COMPENSATION AWARDS Hay 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. 2002 PERFORMANCE TARGETS The performance targets for the Hamilton Beach/Proctor-Silex Annual Incentive Compensation Plan are as follows: INTENTIONALLY OMITTED EX-10.(CXXVI) 21 l93112aex10-cxxvi.txt EX-10(CXXVI) AMD. 7 - CREDIT AGREEMENT EXHIBIT 10(cxxvi) AMENDMENT NO. 7 AMENDMENT NO. 7 dated as of December 19, 2001 to the SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 11, 1990 and amended and restated as of April 18, 1995 among Hamilton Beach/Proctor-Silex, Inc. (the "Company"), Proctor-Silex Canada Inc. ("PSC") and Proctor-Silex S.A. de C.V. ("PSM", and together with the Company and PSC, the "Obligors"); each of the Banks signatory thereto; and KeyBank National Association, as U.S. Agent (in such capacity, the "U.S. Agent") and The Bank of Nova Scotia, as Canadian Agent (in such capacity, the "Canadian Agent", and together with the U.S. Agent, the "Agents"). The Obligors, the Banks and the Agents are parties to the Second Amended and Restated Credit Agreement referred to above, as amended and modified by (i) Amendment No. 1 dated as of March 29, 1996, (ii) Amendment No. 2 dated as of October 4, 1996, (iii) Amendment No. 3 dated as of April 14, 1997, (iv) Amendment No. 4 dated as of April 22, 1998, (v) Amendment No. 5 dated as of June 10, 1998, and (vi) Amendment No. 6 dated as of December 8, 1998 (as so amended and modified and in effect on the date hereof, the "Credit Agreement"). The Obligors, the Banks and the Agents wish to amend the Credit Agreement in certain respects and, accordingly, the parties hereto agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 7, terms defined in the Credit Agreement are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 below, but effective as of the date hereof, the Credit Agreement shall be amended as follows: 2.01 Definitions. Section 1.01 of the Credit Agreement shall be amended by adding (to the extent not already included in said Section 1.01) or amending (to the extent already included in said Section 1.01) the following definitions to read in their entirety as follows: "Applicable Margin" shall mean, with respect to each type of Loan, letter of credit fees and facility fees, for the fiscal quarter commencing immediately following the delivery of a Compliance Certificate pursuant to the last sentence of Section 9.01 hereof, the percentage per annum set forth in the schedule immediately below opposite the EBITDA to Interest Expense Ratio as at the last day of the Computation Period of the Company covered by such Compliance Certificate. I. Loans Applicable Margin
EBITDA to Canadian Canadian Interest Base Rate Floating Eurodollar Discount Expense Ratio Loans Rate Loans Loans Rate Loans ------------- --------- ---------- ---------- ---------- Level I Period Level II Period Level III Period Intentionally Omitted Level IV Period Level V Period Level VI Period Level VII Period
II. Fees Applicable Margin
EBITDA to Interest Letter of Expense Ratio Credit Fees Facility Fees ------------- ----------- ------------- Level I Period Level II Period Level III Period Level IV Period Intentionally Omitted Level V Period Level VI Period Level VII Period
provided that, if the Company shall fail to deliver the financial statements and the accompanying Compliance Certificate within the time periods specified in Section 9.01 hereof, the Applicable Margin shall be at the numerical Level one higher than the current Level (or, if the current Level is the Level VII Period, the Applicable Margin shall remain at the Level VII margin) for the fiscal quarter commencing immediately following the date by which such Compliance Certificate should have been so delivered. Notwithstanding anything in the foregoing to the contrary, for the fiscal quarters of the Company ending on March 31, 2002 and June 30, 2002, the Level for purposes of determining the Applicable Margin shall be not less than the Level IV Period. 2 "Cash Charges" shall mean, with respect to any period, cash charges for such period relating to Non-Cash Charges included in the computation of "Cash Flow" or "EBITDA," as the case may be, for any previous period. "Cash Flow" shall mean, for any period, the sum of the following for any Person and its Subsidiaries (if any) determined on a consolidated basis in accordance with GAAP: (i) income before taxes for such period minus (ii) equity earnings of unconsolidated Subsidiaries and Affiliates for such period (or plus equity losses of unconsolidated Subsidiaries and Affiliates for such period, as the case may be) plus (iii) Net Non-Cash Charges for such period plus (iv) Interest Expense for such period plus (v) depreciation and amortization for such period. "EBITDA" shall mean, for any period, the sum of the following for any Person and its Subsidiaries (if any) determined on a consolidated basis in accordance with GAAP: (a) the sum of (i) net income for such period, plus (ii) the aggregate amounts deducted in determining such net income in respect of (A) income taxes for such period, (B) Interest Expense for such period, (C) depreciation and amortization for such period, (D) Special Charges for such period, (E) Net Non-Cash Charges for such period, plus (iii) any contribution of capital made in accordance with clause (e) of Section 10 hereof, minus (b) any cash benefit received by the Company in any quarter of fiscal year 2002 arising as a result of actions or charges taken by the Company in the fourth quarter of fiscal year 2001 and included in the computation of Special Charges. Notwithstanding anything in the foregoing to the contrary, contributions of capital made in accordance with clause (e) of Section 10 hereof shall be included in EBITDA only for purposes of determining compliance with Section 9.07 hereof and for no other purpose in this Agreement, including, without limitation, for purposes of determining the Applicable Margin. "EBITDA to Interest Expense Ratio " shall mean, at any time, for the Company and its Subsidiaries, the ratio of (i) EBITDA for the current Computation Period to (ii) Interest Expense for the current Computation Period. "Interest Expense" shall mean, for any period, for the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP, the sum of (i) all interest accrued during such period on Indebtedness of the Company and its Subsidiaries (whether or not paid during such period) plus (ii) the net amounts payable by the Company and its Subsidiaries (or minus the net amounts receivable by the Company and its Subsidiaries) under Interest Rate Protection Agreements (whether or not actually paid or received in such period); provided that "Interest Expenses" shall exclude to the extent otherwise included (a) accrued facility fees payable under Section 2.04(a) hereof and accrued letter of credit fees payable under Section 2.01(II)(a)(4) hereof, in each case for the period of determination, (b) all interest accrued during such period on Loans made hereunder to the extent the proceeds of such Loans are used to fund Kitchen Advances permitted under Section 9.17(h) hereof, and (c) the fees and expenses of the U.S. Agent and the Company paid during such period in connection with Amendment No. 7 to the Credit Agreement. "Level" shall mean any of the Level I Period, Level II Period, Level III Period, Level IV Period, Level V Period, Level VI Period or Level VII Period, as the case may be. 3 "Level I Period" shall mean any period during which the EBITDA to Interest Expense Ratio is greater than or equal to 4.0 to 1. "Level II Period" shall mean any period during which the EBITDA to Interest Expense Ratio is less than 4.0 to 1 but greater than or equal to 3.5 to 1. "Level III Period" shall mean any period during which the EBITDA to Interest Expense Ratio is less than 3.5 to 1 but greater than or equal to 3.25 to 1. "Level IV Period" shall mean any period during which the EBITDA to Interest Expense Ratio is less than 3.25 to 1 but greater than or equal to 3.0 to 1. "Level V Period" shall mean any period during which the EBITDA to Interest Expense Ratio is less than 3.0 to 1 but greater than or equal to 2.75 to 1. "Level VI Period" shall mean any period during which the EBITDA to Interest Expense Ratio is less than 2.75 to 1 but greater than or equal to 2.50 to 1. "Level VII Period" shall mean any period during which the EBITDA to Interest Expense Ratio is less than 2.50 to 1. "Net Non-Cash Charges" shall mean, with respect to any period, the amount (expressed as either a positive or negative number) obtained by subtracting Cash Charges for such period from Non-Cash Charges for such period. "Non-Cash Charges" shall mean, with respect to any period, non-cash charges in connection with transactions involving charges to income of $1,000,000 or more in any individual transaction for such period. "Special Charges" shall mean the nonrecurring charges and losses identified on Schedule XII hereto to be taken by the Company in accordance with GAAP in connection with the Company's restructuring and other corporate actions taken during the fiscal quarters of the Company ending December 31, 2001 and March 31, 2002, provided, however, that the aggregate amount of all such charges shall not exceed [ Intentionally Omitted]. 2.02 EBITDA to Interest Expense Ratio . Section 9.07 of the Credit Agreement shall be amended in its entirety as follows: 9.07 EBITDA to Interest Expense Ratio . The Company shall not permit the EBITDA to Interest Expense Ratio to be less than (a) for the fiscal quarter of the Company ending December 31, 2001, 2.75 to 1.00, (b) for the fiscal quarter of the Company ending March 31, 2002, 2.25 to 1.00, (c) for the fiscal quarter of the Company ending June 30, 2002, 2.25 to 1.00, (d) for the fiscal quarter of the Company ending September 30, 2002, 2.75 to 1.00, (e) for the fiscal quarter of the Company ending December 31, 2002, 4.00 to 1.00, and (f) for the fiscal quarter of the Company ending March 31, 2003 and each fiscal quarter of the Company thereafter, [intentionally omitted]. 4 2.03 Restricted Payments. The following sentence is hereby added to clause (b) of Section 9.12 of the Credit Agreement: "Notwithstanding the foregoing, (1) during the fourth quarter of the fiscal year of the Company ending December 31, 2002, the Company may pay Management Fees to NACCO for services actually rendered during such fiscal year in an aggregate amount not to exceed U.S.$2,400,000 provided that (I) such Management Fees shall not be paid until the Compliance Certificate for the third quarter of such fiscal year has been delivered, (II) the EBITDA to Interest Expense Ratio for the third quarter of such fiscal year is not less than 2.75 to 1.00, and (III) such Management Fees shall be included in the aggregate amount of all Restricted Payments that are authorized to be made during such fiscal year, and (2) the aggregate amount of Restricted Payments of the type described in clause (a) of the definition of "Restricted Payments" that may be made in any fiscal year of the Company in accordance with this clause (b) shall not exceed fifty percent (50%) of the amount that would otherwise be permitted by this clause (b) but for this sub-clause (2)." 2.04 Transactions with Affiliates. The following clause (x) is hereby added to Section 9.15 of the Credit Agreement: "and (x) the Company may pay Management Fees permitted by the last sentence of Section 9.12(b) hereof." 2.04 Events of Default. Clause (e) of Section 10 of the Credit Agreement shall be amended in its entirety as follows: (e) Any Obligor shall default in the performance of any of their respective obligations under Sections 9.01(h) or 9.07, 9.08, 9.09, 9.12, 9.13 or 9.14 (other than with respect to non-consensual Liens of the generic type described in Sections 9.14(b), (c), (d), (e), (f) and (g) hereof (the "Non-Consensual Liens")), 9.15 through 9.18 (inclusive), 9.21, 9.24 or 9.27 hereof and, with respect only to a default by the Company of its obligations under Sections 9.07, 9.08 or 9.09, neither NACCO nor any other Majority Interest Party shall have made a contribution of equity capital to the Company within 30 days after the Compliance Certificate for the Computation Period of the Company with respect to which default has occurred should have been delivered in accordance with Section 9.01 hereof in an amount sufficient to cure such default (which capital contribution shall not be returned to NACCO or such Majority Interest Party until the Revolving Credit Termination Date and shall not be included in the calculation of any financial covenant for any purpose hereunder other than for purposes of determining compliance with Sections 9.07, 9.08 or 9.09 and specifically shall be excluded from the determination of the EBITDA to Interest Expense Ratio for purposes of determining the Applicable Margin); or any Obligor shall default in the performance of any of their respective obligations under Section 9.14 (with respect to Non-Consensual Liens) hereof and such default in performance shall continue unremedied for a period of 10 days after the occurrence thereof or any Obligor shall default in the performance of any of its other covenants or agreements in this Agreement and such default shall continue unremedied for a period of 30 days after the occurrence thereof; or 5 2.05 Schedule XII. There is hereby added to the Credit Agreement the schedule identified as Schedule XII "Special Charges" attached to this Amendment No. 7. Section 3. Representations and Warranties. The Company represents and warrants to the Banks that on and as of the date hereof: (a) (i) the execution and delivery by the Obligors of this Amendment No. 7, and the performance by the Obligors of their obligations under the Credit Agreement, as amended hereby, have been duly authorized by all necessary corporate action of the Obligors, and will not violate any provision of law, or any Obligor's charter or by-laws, or result in a breach of or constitute a default or require a consent under any indenture or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any Obligor or any of its Property may be bound or affected, and (ii) each of this Amendment No. 7 and the Credit Agreement, as amended hereby, constitutes the legal, valid and binding obligation of the Obligors, in each case enforceable against the Obligors in accordance with its terms; (b) no Default or Event of Default has occurred and is continuing, and the representations and warranties set forth in Section 8 of the Credit Agreement are true and complete on the date hereof (or if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). It shall be an Event of Default for all purposes under the Credit Agreement, as amended hereby, if any representation or warranty made by the Company in this Amendment No. 7 shall prove to have been false or misleading as of the time made or furnished in any material respect. Section 4. Conditions Precedent. The amendments to the Credit Agreement set forth in said Section 2 shall become effective as of the date hereof, subject to the next succeeding sentence, upon the receipt by the Agents of this Amendment No. 7, duly executed and delivered by the Obligors, the Majority Banks and the Agents and payment by the Obligors to each of the Banks signing this Amendment No. 7 a fee equal to .20% of its Revolving Credit Commitment. Notwithstanding anything in the foregoing to the contrary, but subject to the conditions precedent set forth above, the amendment to the defined term "Applicable Margin" set forth in Section 2.01 hereof shall not be effective until the close of business on December 31, 2001. Section 5. Miscellaneous. The Obligors shall pay all of the fees and expenses of the U.S. Agent, including its reasonable legal fees and expenses, in connection with this Amendment No. 7. Except as amended by this Amendment No. 7, the Credit Agreement shall remain unchanged and in full force and effect. Reference in the Credit Agreement to "this Agreement" or words of similar import shall be deemed to be references to the Credit Agreement as amended hereby. This Amendment No. 7 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 7 by signing any such counterpart. This Amendment No. 7 shall be governed by, and construed in accordance with, the law of the State of New York. This Amendment No. 7 shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 7 to be duly executed and delivered as of the day and year first above written. OBLIGORS HAMILTON BEACH/PROCTOR-SILEX, INC. By: /s/ James H. Taylor --------------------------------- Title: Vice President and Treasurer PROCTOR-SILEX CANADA INC. By: /s/ James H. Taylor --------------------------------- Title: Treasurer PROCTOR-SILEX S.A. de C.V. By: /s/ James H. Taylor --------------------------------- Title: Vice President and Treasurer BANKS KEYBANK NATIONAL ASSOCIATION, Individually and as U.S. Agent By: /s/ Thomas J. Purcell -------------------------------- Title: Senior Vice President THE BANK OF NOVA SCOTIA, Individually and as Canadian Agent By: /s/ Nadine Bell -------------------------------- Title: Assistant Agent 7 BANK ONE, N.A. (formerly First Chicago NBD) By: /s/ Glenn A. Currin --------------------------------- Title: Director ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA - INSTITUTO MOBILARE ITALIANO SPA By: /s/ Carlo Persico --------------------------------- Title: General Manager and /s/ Glen Binder --------------------------------- Title: Vice President CREDIT AGRICOLE INDOSUEZ By: --------------------------------- Title: and --------------------------------- Title: SUNTRUST BANK (formerly Crestar Bank) By: /s/ Mark A. Flatin --------------------------------- Title: Director WACHOVIA BANK, N.A. By: /s/ David J.C. Silander --------------------------------- Title: Vice President 8 EX-10.(CXXVII) 22 l93112aex10-cxxvii.txt EX-10(CXXVII) HB/PS UNFUNDED PLAN EXHIBIT 10(cxxvii) HAMILTON BEACH/PROCTOR-SILEX, INC. UNFUNDED BENEFIT PLAN Hamilton Beach/Proctor-Silex, Inc. (the "Company") does hereby amend and completely restate the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan to read as follows, effective as of October 1, 2001. ARTICLE I PREFACE SECTION 1.1 Effective Date. The original effective date of this Plan was March 10, 1993. The effective date of this amendment and restatement is October 1, 2001. SECTION 1.2 Purpose of the Plan. The purpose of this Plan is to (a) allow certain Employees to defer the receipt of certain long-term incentive compensation award payments, (b) provide for certain Employees the benefits they would have received under the Cash Balance Plan but for (i) the dollar limitation on Compensation taken into account as a result of Section 401(a)(17) of the Code, and (ii) the limitations imposed under Section 415 of the Code, and/or (c) provide for certain Employees the benefits they would have received under the Savings Plan but for the limitations imposed under Section 402(g), 401(m), 401(a)(17), 401(k)(3) or 415 of the Code. SECTION 1.3 Governing Law. This Plan shall be regulated, construed and administered under the laws of the State of Ohio, except when preempted by federal law. SECTION 1.4 Gender and Number. For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context. ARTICLE II DEFINITIONS Except as otherwise provided in this Plan, terms defined in the Qualified Plans as they may be amended from time to time shall have the same meanings when used herein, unless a different meaning is clearly required by the context of this Plan. In addition, the following words and phrases shall have the following respective meanings for purposes of this Plan. SECTION 2.1 Account shall mean the record maintained by the Company in accordance with Section 3.6 as the sum of the Participant's Excess Profit Sharing Sub-Account, Basic Excess 401(k) Sub-Account, Basic Excess Matching Sub-Account, Additional Excess 401(k) Sub-Account, Additional Excess Matching Sub-Account and LTIP Deferral Sub-Account. SECTION 2.2 Adjusted ROE. (a) For purposes of this Section, the following terms shall have the following meanings: (i) "Net Income (before extraordinary items)" is defined as consolidated net income, as defined by general accepted accounting principals ("GAAP"), for the Company for the subject year before extraordinary items, but including any extraordinary items related to refinancings (net of tax); (ii) "Amortization of Goodwill" is defined as the consolidated amortization expense related to the intangible asset goodwill for the Company for the subject year; (iii) "Weighted Average Stockholders' Equity" is calculated by adding the consolidated stockholders' equity for the Company, as defined by GAAP, at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen; (iv) "Weighted Average Accumulated Amortization of Goodwill" is calculated by adding consolidated accumulated amortization of goodwill, as defined by GAAP, at the beginning of the subject year and the end of each month of the subject year and dividing by thirteen. (b) "Adjusted ROE" shall mean the average return on equity of the Company calculated for the applicable time period, based on A divided by B, where: A = Net Income (before extraordinary items) + Amortization of Goodwill; and B = Weighted Average (Shareholders' Equity + Accumulated Amortization of Goodwill) Adjusted ROE shall be determined at least annually by the Company. SECTION 2.3 Beneficiary shall mean the person or persons designated by the Participant as his Beneficiary under this Plan, in accordance with the provisions of Article VII hereof. SECTION 2.4 Cash Balance Employee shall mean a participant in the Cash Balance Plan. SECTION 2.5 Cash Balance Plan shall mean Part II of the Combined Defined Benefit Plan for NACCO Industries, Inc. and Its Subsidiaries (commonly known as the "Hamilton Beach/Proctor-Silex, Inc. Profit Sharing Retirement Plan") (or any successor thereto), as the same may be amended from time to time. Benefits under the Cash Balance Plan were permanently frozen effective for Plan Years beginning on or after January 1, 1997. SECTION 2.6 Company shall mean Hamilton Beach/ Proctor-Silex, Inc. 2 SECTION 2.7 Compensation. For purposes of Sections 3.2 and 3.3 of the Plan, the term "Compensation" shall have the same meaning as under the Savings Plan, except that Compensation shall be deemed to include (a) the amount of compensation deferred by the Participant under this Plan and (b) amounts in excess of the limitation imposed by Code Section 401(a)(17). SECTION 2.8 Excess Retirement Benefit or Benefit shall mean an LTIP Deferral Benefit, an Excess Pension Benefit, an Excess Profit Sharing Benefit, a Basic or Additional Excess 401(k) Benefit or a Basic or Additional Excess Matching Benefit (as described in Article III) which is payable to or with respect to a Participant under this Plan. SECTION 2.9 Fixed Income Fund shall mean the Stable Asset Fund under the Savings Plan or any equivalent fixed income fund thereunder which is designated by the NACCO Industries, Inc. Retirement Funds Investment Committee as the successor to the Stable Asset Fund. SECTION 2.10 401(k) Employee shall mean a participant in the Savings Plan who is eligible for Before-Tax and Matching Employer Contributions thereunder. SECTION 2.11 Insolvent. For purposes of this Plan, the Company shall be considered Insolvent at such time as it (a) is unable to pay its debts as they mature, or (b) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code. SECTION 2.12 LTIP Plan shall mean the Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan, or any successor thereto. SECTION 2.13 Participant. (a) For purposes of Section 3.1 of the Plan, the term "Participant" shall mean a Cash Balance Employee whose benefit under the Cash Balance Plan is limited by the application of Section 401(a)(17) or 415 of the Code. (b) For purposes of Section 3.2 of the Plan, the term "Participant" shall mean a Profit Sharing Employee (i) whose Post-1996 Profit Sharing Contributions for a Plan Year are limited by the application of Section 401(a)(17) or 415 of the Code and (ii) who is classified in job grades 17 or above and, effective January 1, 2002, whose total compensation from the Controlled Group for the year of such Contribution is at least $115,000. (c) For purposes of Sections 3.3 and 3.4 of the Plan, the term "Participant" shall mean a 401(k) Employee (i) who is unable to make all of the Before-Tax Contributions that he has elected to make to the Savings Plan, or who is unable to receive the maximum amount of Post-1994 Matching Employer Contributions under the Savings Plan, because of the limitations imposed under Section 402(g), 401(a)(17), 401(k)(3) or 401(m) of the Code and (ii) who is classified in job grades 17 or above and, effective January 1, 2002, whose total compensation from the Controlled Group for the year in which the deferral election is required is at least $115,000. 3 (d) For purposes of Section 3.5 of the Plan, the term "Participant" shall mean an Employee of the Company who is a participant in the LTIP Plan and who is classified in job grades 17 and above and, effective January 1, 2002, whose total compensation from the Controlled Group for the year in which the deferral election is required is at least $115,000. In addition, the Employee must be an active Employee (i.e., have not terminated employment or retired) at the time the LTIP Deferral Benefit is deferred hereunder. (e) The term "Participant" shall also include any other person who, as of September 30, 2001, was entitled to receive a Benefit under the Plan. (f) Notwithstanding the change in eligibility requirements which became effective January 1, 2002, any Employee of the Company who (i) was eligible to participate in the Plan on December 31, 2001, and (ii) actually had amounts allocated to an Account under the Plan as of such date, shall remain as an eligible Participant in the Plan on and after January 1, 2002. SECTION 2.14 Plan shall mean the Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan as herein set forth or as duly amended. SECTION 2.15 Plan Administrator shall mean the Company. SECTION 2.16 Plan Year shall mean the calendar year. SECTION 2.17 Profit Sharing Employee shall mean a participant in the Savings Plan who is eligible for Post-1996 Profit Sharing Contributions. SECTION 2.18 Qualified Plan shall mean (a) for Cash Balance Employees, the Cash Balance Plan, (b) for Profit Sharing Employees, the profit-sharing portion of the Savings Plan and (c) for 401(k) Employees, the Before-Tax Contributions and Matching Employer Contributions portion of the Savings Plan. References throughout this Plan to a "Qualified Plan" shall be deemed to refer to the underlying Qualified Plan to which a particular Benefit relates. SECTION 2.19 Savings Plan shall mean the Hamilton Beach/Proctor-Silex, Inc. Employees' Retirement Savings Plan (401(k)), as the same may be amended from time to time, or any successor thereto. SECTION 2.20 Unforeseeable Emergency shall mean an event which results (or will result) in severe financial hardship to the Participant as a consequence of an unexpected illness or accident or loss of the Participant's property due to casualty or other similar extraordinary or unforeseen circumstances out of the control of the Participant. SECTION 2.21 Valuation Date shall mean the last business day of each Plan Year and any other date chosen by the Plan Administrator. 4 ARTICLE III EXCESS RETIREMENT BENEFITS SECTION 3.1 Excess Pension Benefits. The Excess Pension Benefit payable to a Participant who is a Cash Balance Employee shall be a monthly benefit equal to the excess, if any, of (a) the amount of the monthly benefit that would be payable to such Participant under the Cash Balance Plan (in the form actually paid) if such Plan did not contain the limitations imposed under Sections 401(a)(17) and 415 of the Code and, effective as of January 1, 1995, the definition of Compensation under such Plan included any amounts deferred under Section 3.3 of this Plan, over (b) the amount of the monthly benefit that is actually payable to the Participant under the Cash Balance Plan. SECTION 3.2 Excess Profit Sharing Benefits. At the time described in Section 3.6(a), the Company shall credit to a Sub-Account (the "Excess Profit Sharing Sub-Account") established for each Participant who is a Profit Sharing Employee, an amount equal to the excess, if any, of (a) the amount of the Company's Post-1996 Profit Sharing Contribution which would have been made to the profit sharing portion of the Savings Plan on behalf of the Participant if (i) such Plan did not contain the limitations imposed under Sections 401(a)(17) and 415 of the Code and (ii) the term "Compensation" (as defined in Section 2.7 hereof) were used for purposes of determining the amount of profit sharing contributions under the Savings Plan, over (b) the amount of the Company's Post-1996 Profit Sharing Contribution which is actually made to the Savings Plan on behalf of the Participant for such Plan Year (the "Excess Profit Sharing Benefits"). SECTION 3.3 Basic and Additional Excess 401(k) Benefits. (a) Amount of Excess 401(k) Benefits. Each 401(k) Employee who is a Participant, 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 by the difference between (i) a specified percentage, in 1% increments, with a maximum of 17%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax Contributions actually permitted to be contributed for him to the Savings Plan for such Plan Year by reason of the application of the limitations imposed under Sections 402(g), 401(a)(17), or 401(k)(3) of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits"). (b) Classification of Excess 401(k) Benefits. The Excess 401(k) Benefits for a particular Plan Year shall be calculated monthly and shall be further divided into the "Basic Excess 401(k) Benefits" and the "Additional Excess 401(k) Benefits" as follows: (i) The Basic Excess 401(k) Benefits shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the lesser of the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year or 7% and the denominator of which is the percentage of Compensation elected to be deferred; and (ii) The Additional Excess 401(k) Benefits (if any) shall be determined by multiplying such Excess 401(k) Benefit by a fraction, the numerator of which is the 5 difference between (1) the percentage of Compensation elected to be deferred in the 401(k) Deferral Election Form for such Plan Year and (2) 7%, and the denominator of which is the percentage of Compensation elected to be deferred. The Basic Excess 401(k) Benefits shall be credited to the Basic Excess 401(k) Sub-Account under this Plan and the Additional Excess 401(k) Benefits shall be credited to the Additional Excess 401(k) Sub-Account hereunder. The Basic and Additional Excess 401(k) Sub-Accounts shall be referred to collectively as the "Excess 401(k) Sub-Account." (c) Rules Relating to Excess 401(k) Deferral Elections. (i) Deferral Period/Payment Date. The initial deferral election made by a Participant shall also contain the Participant's election regarding the time of the commencement of payment of the Participant's entire Excess 401(k) Sub-Account hereunder. The Participant may elect to commence payment of his Excess 401(k) Sub-Account as soon as practicable following (1) the date on which he ceases to be an Employee of a Controlled Group Member, (2) January 1st of the year following the date on which he ceases to be an Employee of a Controlled Group Member, (3) the date on which he attains a specified age, or (4) the earlier or later of such dates. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his Excess 401(k) Sub-Account as soon as practicable following the date on which he ceases to be an Employee of a Controlled Group Member. (ii) Change of Payment Date. Notwithstanding the foregoing, a Participant who is an Employee may elect to change the payment date selected (or deemed selected) for his Excess 401(k) Sub-Account to one of the other dates permitted under (i) above; provided, however that (1) the form electing such change is filed with the Plan Administrator at least two (2) years prior to the original payment date and while the Participant is an Employee, (2) the new payment date is at least two (2) years after the date the form is filed and (3) the Participant remains employed throughout such two (2) year period. Any election to change the payment date which does not meet all of the foregoing requirements shall not be valid and, in such case, payment shall be made in accordance with the Participant's last effective payment date election. (iii) Special Election. Due to administrative errors on the part of the Company, all payment date elections which were made by Participants who are actively employed by the Company on November 1, 2000 were deemed null and void as of such date. Such Participants were given new payment date election forms which had to be completed during a 45-day election period specified by the Company. Such elections superceded all prior elections. Any such Participant who did not timely and properly file such an election form is deemed to have elected to receive all amounts credited to his Excess 401(k) Sub-Account (whether before or after the Effective Date of this restatement of the Plan) as soon as practicable following the date on which he ceases to be an Employee of the Controlled Group; provided, however, that such a Participant may elect to change such deemed payment date in accordance with the requirements of (ii) above. 6 (d) Effect and Duration of Deferral Election. Any direction by a Participant to make deferrals of Excess 401(k) Benefits hereunder shall be effective with respect to Compensation otherwise payable to the Participant during the Plan Year for which the 401(k) Deferral Election Form is in effect, and the Participant shall not be eligible to receive such Excess 401(k) Benefits. Instead, such amounts shall be credited to the Participant's Basic and Additional Excess 401(k) Sub-Accounts (as applicable) as provided in Section 3.6(b). Any directions made in accordance with Subsection (a) above 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 such subsequent Plan Year. (e) Automatic Termination/Suspension of Deferral Election. (i) A Participant's direction to make deferrals of Excess 401(k) Benefits shall automatically terminate on the earlier of the date on which (1) the Participant ceases employment with the Company, (2) the Company is deemed Insolvent, (3) the Participant is no longer eligible to make deferrals of Excess 401(k) Benefits hereunder, or (4) the Plan is terminated. (ii) Any Participant whose eligibility to make Before-Tax Contributions to the Savings Plan has been suspended because he has taken a hardship withdrawal from the Savings Plan shall not be eligible to make deferrals of Excess 401(k) Benefits under this Plan for the period of his suspension from the Savings Plan. (iii) The Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by the Plan Administrator, reduce and/or cease the deferral of Excess 401(k) Benefits being made 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 3.4 Excess Matching Benefits. (a) Amount. A 401(k) Employee shall have credited to his Basic or Additional Excess Matching Sub-Account (as applicable) an amount equal to the Post-1994 Matching Employer Contributions attributable to the Basic or Additional Excess 401(k) Benefits that he is prevented from receiving under the Savings Plan because of the limitations imposed under Code Sections 402(g), 401(a)(17), 401(k)(3) and 401(m) (collectively, the "Excess Matching Benefits"). (b) Time of Payment. The Excess Matching Benefits shall be paid (or commence to be paid) at the same time as Participant's Excess 401(k) Benefits. SECTION 3.5 LTIP Deferral Benefits. (a) Amount. Each Participant (as defined in Section 2.13(d)) may, with the consent of the Company, by completing an approved election form, direct the Company to (i) reduce an Award (as that term is defined in the LTIP Plan) payable under the LTIP Plan by a 7 specified dollar amount or percentage and (ii) to credit the amount of the reduction (the "LTIP Deferral Benefit") to the LTIP Deferral Sub-Account hereunder. (b) Deferral Election. A Participant may elect to make a separate deferral election with respect to each Award under the LTIP Plan. Except as specifically permitted by the Company, each such election must be made no later than one year prior to the date such Award would otherwise be payable to the Participant under the LTIP Plan. (c) Deferral Period/Payment Date. The initial deferral election made by a Participant shall also contain the Participant's election regarding the time of the commencement of payment of the Participant's entire LTIP Deferral Sub-Account hereunder. The Participant may elect to commence payment of his LTIP Deferral Sub-Account as soon as practicable following (1) the date on which he ceases to be an Employee of a Controlled Group Member, (2) January 1st of the year following the date on which he ceases to be an Employee of a Controlled Group Member, (3) the date on which he attains a specified age, or (4) the earlier or later of such dates. A Participant who does not timely and properly file such an election form shall be deemed to have elected to receive his LTIP Deferral Sub-Account as soon as practicable following the date on which he ceases to be an Employee of a Controlled Group Member. (d) Change of Payment Date. Notwithstanding the foregoing, a Participant who is an Employee may elect to change the payment date selected (or deemed selected) for his LTIP Deferral Sub-Account to one of the other dates permitted under (i) above; provided, however that (1) the form electing such change is filed with the Plan Administrator at least two (2) years prior to the original payment date and while the Participant is an Employee, (2) the new payment date is at least two (2) years after the date the form is filed and (3) the Participant remains employed throughout such two (2) year period. Any election to change the payment date which does not meet all of the foregoing requirements shall not be valid and, in such case, payment shall be made in accordance with the Participant's last effective payment date election. (e) Effect and Duration of LTIP Deferral Election. Any direction by a Participant to defer receipt of all or part of an Award under the LTIP Plan and to receive LTIP Deferral Benefits in lieu of such Award shall be irrevocable with respect to such Award. (f) Automatic Termination/Suspension of LTIP Deferral Election. (i) A Participant's direction to make deferrals of LTIP Deferral Benefits shall automatically terminate on the earlier of the date on which (1) the Participant ceases employment with the Company, (2) the Company is deemed Insolvent, (3) the Participant ceases to satisfy the requirements of Section 2.13(d) or (4) the Plan is terminated. (ii) The Plan Administrator may, in its sole and absolute discretion, pursuant to nondiscriminatory rules adopted by the Plan Administrator, reduce and/or cease the deferral of LTIP Deferral Benefits being made 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 3.6 Participant's Account. The Company shall establish and maintain on its books an Account for each Participant which shall contain the following entries: 8 (a) Credits to an Excess Profit Sharing Sub-Account for the Excess Profit Sharing Benefits described in Section 3.2, which shall be credited to the Sub-Account at the time the Profit Sharing Contributions are otherwise credited to Participants' Accounts under the Savings Plan; (b) Credits to a Basic or Additional Excess 401(k) Sub-Account (as applicable) for the Basic and Additional Excess 401(k) Benefits described in Section 3.3, which shall be credited to the Sub-Account when a 401(k) Employee is prevented from making a Before-Tax Contribution under the Savings Plan; (c) Credits to a Basic or Additional Excess Matching Sub-Account (as applicable) for the Basic or Additional Excess Matching Benefits described in Section 3.4, which shall be credited to the Sub-Account when a 401(k) Employee is prevented from receiving Post-1994 Matching Employer Contributions under the Savings Plan; (d) Credits to an LTIP Deferral Sub-Account for the LTIP Deferral Benefits described in Section 3.5, which shall be credited to the Sub-Account at the time the Award would otherwise be payable to the Participant under the LTIP Plan; (e) Credits to all such Sub-Accounts for the earnings described in Article IV, which shall continue until the Sub-Accounts have been distributed to the Participant or his Beneficiary; and (f) Debits for any distributions made from such Sub-Accounts and any amounts forfeited under Section 6.1(d). To the extent determined necessary by the Company, the Company may also establish a "notional account" in the name of each Cash Balance Employee to reflect the Excess Pension benefits payable to such Employees. SECTION 3.7 Effect on other Benefits. Benefits payable to or with respect to a Participant under the Qualified Plans or any other Company-sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under this Plan. ARTICLE IV EARNINGS SECTION 4.1 Earnings on Basic 401(k) and Matching Sub-Accounts and Profit Sharing Sub-Accounts. (a) Subject to Subsection (b) and Section 4.4, at the end of each calendar month during a Plan Year, the Excess Profit Sharing Sub-Account, Basic Excess 401(k) Sub-Account and Basic Excess Matching 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. Notwithstanding the foregoing, in the event that the Adjusted ROE determined for such Plan Year exceeds the rate credited to the Sub-Accounts under the preceding sentence, such Sub-Accounts shall retroactively be credited with the difference between (1) the amount determined 9 under the preceding sentence, and (2) the amount determined by multiplying the Participant's average Sub-Account balance during each month of such Plan Year by the Adjusted ROE determined for such Plan Year, compounded monthly. (b) The Adjusted ROE calculation described in Subsection (a) shall be made during the month in which the Participant terminates employment and shall be based on the year-to-date Adjusted ROE for the month ending prior to the date the Participant terminated employment, as calculated by the Company. For any subsequent month, such Adjusted ROE calculation shall not apply. The Fixed Income Fund calculation described above 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 4.2 Earnings on Additional 401(k) and Matching Sub-Accounts. Subject to Section 4.3, at the end of each calendar month during a Plan Year, the Additional Excess 401(k) Sub-Account and Additional Excess Matching 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 earning 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 4.3 Earnings on LTIP Deferral Sub-Accounts. Subject to Section 4.4, at the end of each calendar month during a Plan Year, the LTIP 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 "10-Year U.S. Treasury Yield" plus 2.0%. For purposes hereof, the 10-Year U.S. Treasury Yield shall be the 10 year yield on US Treasury issues as listed in the Bond Market Data Bank for the last day of the preceding calendar quarter as printed in the Wall Street Journal. In the event that a yield is not listed for a maturity exactly 10 years from the calendar quarter end, the next preceding chronological treasury bond issue yield shall be used. SECTION 4.4 Changes in Limitations on Earnings Assumptions. (a) The NACCO Industries, Inc. Benefits Committee (the "Committee") may change (but not suspend) the earnings rate credited to Accounts hereunder at any time upon at least 30 days advance notice to Participants. (b) Notwithstanding any provision of the Plan to the contrary, in no event will earnings on Accounts for a Plan Year be credited at a rate which exceeds 14%. ARTICLE V VESTING SECTION 5.1 Vesting. A Participant shall always be 100% vested in all amounts credited to his Account hereunder and in his Excess Pension Benefits. 10 ARTICLE VI DISTRIBUTION OF BENEFITS TO PARTICIPANTS SECTION 6.1 Time and Manner of Payment. (a) Excess Pension Benefits. (i) Timing. A Participant who is a Cash Balance Employee is required to elect the time and manner of payment of his benefits under the Cash Balance Plan before he will be eligible to receive payment of his Excess Pension Benefit hereunder. The Excess Pension Benefit payable to a Participant shall be paid at the same time or times and in the same manner as the benefits payable to the Participant under the Cash Balance Plan. (ii) Form. Notwithstanding the foregoing, in the event that the monthly payments of the Excess Pension Benefits payable to a Participant hereunder following the Participant's termination of the employment with the Controlled Group amount to less than Fifty Dollars ($50) per month, such Excess Pension Benefits shall be paid in the form of a single lump sum payment. Such lump sum amount shall be equal to the Actuarial Equivalent present value of such Excess Pension Benefits. (b) Excess Profit Sharing Benefits. The Excess Profit Sharing Benefit payable to a Participant shall be paid in the form of a single lump sum payment at the time the corresponding Post-1996 Profit Sharing Contributions payable to the Participant under the Savings Plan commence to be paid. (c) Excess 401(k) and Matching Benefits/LTIP Deferral Benefits. (i) Timing. A Participant's Excess 401(k) Sub-Account, Excess Matching Sub-Account and LTIP Deferral Sub-Account shall be paid (or commence to be paid) to the Participant as soon as practicable after the date specified in the Participant's last valid election form (as provided in Section 3.3(c) or 3.5(c), as applicable). (ii) Normal Form of Payment. The Excess 401(k) Sub-Account , Excess Matching Sub-Account and LTIP Deferral Sub-Account shall each be distributed in the form of ten annual installments with each installment being based on the value of the applicable Sub-Account on the Valuation Date immediately preceding the date 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. (iii) Optional Forms of Payment. Notwithstanding the foregoing, the Participant may elect to receive the amounts credited to his Excess 401(k) Sub-Account and/or his Excess Matching Sub-Account and/or his LTIP Deferral Sub-Account in the form of a single lump sum payment or in annual installments for a period of less than 10 years by filing a notice in writing, signed by the Participant and filed with the Plan Administrator while the Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. Any such election of the form of payment may be changed at any time and from time to time, without the consent 11 of any other person, by filing a later election in writing that is signed by a Participant and filed with the Plan Administrator while such Participant is alive and at least one year prior to the time he had elected to commence receiving payment of such Sub-Account. (iv) Unforeseeable Emergency Distributions. Notwithstanding the foregoing, the Company may at any time, upon written request of the Participant cause to be paid to such Participant an amount equal to all or any part of the Participant's Excess 401(k) Sub-Account and/or Excess Matching Sub-Account and/or LTIP Deferral Sub-Account if the Company determines, in its absolute discretion based on such reasonable evidence that it shall require, that such a payment or payments is necessary for the purpose of alleviating the consequences of an Unforeseeable Emergency occurring with respect to the Participant. Payments of amounts because of an Unforeseeable Emergency shall be permitted only to the extent reasonably necessary to satisfy the emergency need. (d) Withdrawals Subject to a 10% Penalty. (i) The provisions of this Subsection shall apply notwithstanding any other provision of the Plan to the contrary. (ii) A Participant who is an Employee may, at any time (and from time to time) elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Additional Excess 401(k) Sub-Account; (B) the Additional Excess Matching Sub-Account; and (C) the LTIP Deferral Sub-Account. (iii) In addition to the amounts described in (ii) above, Participants who have ceased to be Employees of the Controlled Group may also elect in writing to receive a withdrawal from one or more of the following Sub-Accounts: (A) the Basic Excess 401(k) Sub-Account; (B) the Basic Excess Matching Sub-Account; and (C) the Excess Profit Sharing Sub-Account. (iv) Withdrawals under this Subsection shall be equal to the entire amount credited to any such Sub-Account, less 10%. Such 10% reduction shall be treated as a forfeiture hereunder and shall immediately be subtracted from the applicable Sub-Account, never to be restored. (e) Payment Restriction. Notwithstanding any provision of the Plan to the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that any amount payable, when added to any other compensation received or to be received by the Participant in the same calendar year, would not be deductible by the Company 12 by reason of Section 162(m) of the Code. The amount to be deferred will equal the amount that otherwise would not be deductible by the Company by reason of Section 162(m) of the Code, but in no event greater than the total amount otherwise payable hereunder. The deferred amount shall become payable on December 31 of the first succeeding calendar year in which such amount, when added to all other compensation received or to be received by the Participant in such calendar year, would not be non-deductible by the Company by reason of Section 162(m) of the Code. The Nominating, Organization and Compensation Committee of the Board of Directors, in its sole and absolute discretion, shall have the authority to waive this payment restriction (in whole or in part) upon the written request of the Participant. SECTION 6.2 Small Sub-Accounts. Notwithstanding the foregoing, in the event that the Participant's Account does not exceed $10,000 at the time of such Participant's termination of employment with the Controlled Group, such Account shall automatically be paid to him in a single lump sum payment as soon as practicable following his termination of employment. SECTION 6.3 Liability for Payment/Expenses. The Company shall be liable for the payment of the Excess Retirement Benefits which are payable hereunder to the Participants. Expenses of administering the Plan shall be paid by the Company. ARTICLE VII BENEFICIARIES SECTION 7.1 Beneficiary Designations. A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable to the Plan Administrator) signed by the Participant and filed with the Plan Administrator prior to the Participant's death. Separate Beneficiary designations may be made for each Benefit under the Plan. In the absence of such a designation and at any other time when there is no existing Beneficiary designated hereunder, (a) the Beneficiary of a Participant for his Excess Pension Benefits shall be his beneficiary under the Cash Balance Plan and (b) the Beneficiary of a Participant for his Account shall be his Beneficiary under the Savings Plan. A person designated by a Participant as his Beneficiary who or which ceases to exist shall not be entitled to any part of any payment thereafter to be made to the Participant's Beneficiary unless the Participant's designation specifically provided to the contrary. If two or more persons designated as a Participant's Beneficiary are in existence with respect to a single Excess Retirement Benefit the amount of any payment to the Beneficiary under this Plan shall be divided equally among such persons unless the Participant's designation specifically provides for a different allocation. SECTION 7.2 Change in Beneficiary. (a) Anything herein or in the Qualified Plans to the contrary notwithstanding, a Participant may, at any time and from time to time, change a Beneficiary designation hereunder without the consent of any existing Beneficiary or any other person. A change in Beneficiary hereunder may be made regardless of whether such a change is also made under the applicable underlying Qualified Plan. In other words, the Beneficiary hereunder need not be the same as under the applicable underlying Qualified Plan. 13 (b) Any change in Beneficiary shall be made by giving written notice thereof to the Plan Administrator and any change shall be effective only if received by the Plan Administrator prior to the death of the Participant. SECTION 7.3 Distributions to Beneficiaries. (a) Amount of Benefits. (i) Amount of Excess Pension Benefit. The Excess Pension Benefit payable to a Beneficiary under this Plan shall be a monthly benefit equal to the excess, if any, of (A) the amount of the monthly benefit that would be payable to the Beneficiary last effectively designated by the Participant under the Cash Balance Plan (in the form actually paid) if such Plan did not contain the limitations imposed under Sections 401(a)(17) or 415 of the Code and the definition of Compensation under such Plan included any amounts deferred under this Plan over (B) the amount of the monthly benefit that is actually paid to such Beneficiary under such Plan. (ii) Amount of Excess Profit Sharing Benefit. The Excess Profit Sharing Benefit payable to a Participant's Beneficiary under this Plan shall be equal to such Participant's Excess Profit Sharing Sub-Account balance on the date of the distribution. (iii) Amount of Excess 401(k) and Excess Matching Benefits. The Excess 401(k) and Excess Matching Benefits payable to a Participant's Beneficiary under this Plan shall be equal to such Participant's Excess 401(k) and Excess Matching Sub-Account balances on the date of distribution. (iv) Amount of LTIP Deferral Benefit. The LTIP Deferral Benefits payable to a Participant's Beneficiary under this Plan shall be equal to such Participant's LTIP Deferral Sub-Account balance on the date of distribution. (b) Time and Manner of Payment. (i) Excess Pension Benefit. The Excess Pension Benefit payable to a Beneficiary under this Plan shall be paid at the same time or times and in the same manner as the benefits payable to the Beneficiary last effectively designated by the Participant under the Cash Balance Plan; provided however, that the provisions of Subsection 6.1(a)(ii) shall apply to such Benefit, treating the Beneficiary hereunder as if he were the Participant. (ii) Excess Profit Sharing Benefit/Excess 401(k) Benefit and Excess Matching Benefit/LTIP Deferral Benefit. The Excess Profit Sharing Benefit, Excess 401(k) Benefit and Excess Matching Benefit and LTIP Deferral Benefit payable to a Beneficiary under this Plan shall be paid as soon as practicable following the death of the Participant in the form of a lump sum payment. (c) Effect of Different Beneficiaries under this Plan and the Cash Balance Plan. In the event the Beneficiary designated hereunder for the Excess Pension Benefit is different than the Beneficiary under the Cash Balance Plan, (i) if the Beneficiary hereunder dies 14 after the Participant but while the Beneficiary under the Cash Balance Plan is still living, any remaining payments hereunder shall be payable, as they come due, to the estate of the Beneficiary hereunder and (ii) if the Beneficiary hereunder predeceases the Beneficiary under the Cash Balance Plan and the Participant, the Beneficiary hereunder shall revert to the Beneficiary last effectively designated under the Cash Balance Plan unless and until the Participant again makes a change of Beneficiary pursuant to Section 7.2. ARTICLE VIII MISCELLANEOUS SECTION 8.1 Liability of Company. Nothing in this Plan shall constitute the creation of a trust or other fiduciary relationship between the Company and any Participant, Beneficiary or any other person. SECTION 8.2 Limitation on Rights of Participants and Beneficiaries - No Lien. The Plan is designed to be an unfunded, nonqualified plan. Nothing contained herein shall be deemed to create a trust or lien in favor of any Participant or Beneficiary on any assets of the Company. The Company shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Company for use in connection with the Plan. No Participant or Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Company prior to the time that such assets are paid to the Participant or Beneficiary as provided herein. Each Participant and Beneficiary shall have the status of a general unsecured creditor of the Company. SECTION 8.3 No Guarantee of Employment. Nothing in this Plan shall be construed as guaranteeing future employment to Participants. A Participant continues to be an Employee of the Company solely at the will of the Company subject to discharge at any time, with or without cause. SECTION 8.4 Payment to Guardian. If a Benefit payable hereunder is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Plan Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such Benefit. SECTION 8.5 Assignment. No right or interest under this Plan of any Participant or Beneficiary shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of the Participant or Beneficiary. Notwithstanding the foregoing, the Plan Administrator shall honor a judgment, order or decree from a state domestic relations court which requires the payment of part or all or a Participant's or Beneficiary's vested interest under this Plan to an "alternate payee" as defined in Code Section 414(p). SECTION 8.6 Severability. If any provision of this Plan or the application thereof to any circumstance(s) or person(s) is held to be invalid by a court of competent 15 jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby. ARTICLE IX ADMINISTRATION OF PLAN SECTION 9.1 Administration. (a) In general. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have discretion to interpret where necessary all provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or 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, or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a particular Employee is a Participant, and (ii) to determine if a person is entitled to Excess Retirement Benefits hereunder and, if so, the amount and duration of such Benefits. The Plan Administrator's determination of the rights of any person hereunder shall be final and binding on all persons, subject only to the provisions of Sections 9.3 and 9.4 hereof. (b) Delegation of Duties. The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Excess Retirement Benefits, to a named administrator or administrators. SECTION 9.2 Regulations. The Plan Administrator shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. The rules, regulations and interpretations made by the Plan Administrator shall, subject only to the provisions of Sections 9.3 and 9.4 hereof, be final and binding on all persons. SECTION 9.3 Claims Procedures. The Plan Administrator shall determine the rights of any person to any Excess Retirement Benefits hereunder. Any person who believes that he has not received the Excess Retirement Benefits to which he is entitled under the Plan may file a claim in writing with the Plan Administrator. The Plan Administrator shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90 day period), either allow or deny the claim in writing. If a claimant does not receive written notice of the Plan Administrator's decision on his claim within the above-mentioned period, the claim shall be deemed to have been denied in full. A written denial of a claim by the Plan Administrator, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include: (a) the specific reasons for the denial; 16 (b) specific reference to pertinent Plan provisions on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claim review procedure. A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Plan Administrator a written request for a review of such claim. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his claim. If such an appeal is so filed within such 60 day period, the Company (or its delegate) shall conduct a full and fair review of such claim. During such review, the claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. For this purpose, the Company (or its delegate) shall have the same power to interpret the Plan and make findings of fact thereunder as is given to the Plan Administrator under Section 9.1(a) above. The Company shall mail or deliver to the claimant a written decision on the matter based on the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the claimant prior to the commencement of such extension). Such decision shall be written in a manner calculated to be understood by the claimant, shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and shall, to the extent permitted by law, be final and binding on all interested persons. If the decision on review is not furnished to the claimant within the above-mentioned time period, the claim shall be deemed to have been denied on review. SECTION 9.4 Revocability of Plan Administrator/ Company Action. Any action taken by the Plan Administrator or the Company with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the Company as to payments not yet made to such person, and acceptance of any Excess Retirement Benefits under the Plan constitutes acceptance of and agreement to the Plan Administrator's or the Company's making any appropriate adjustments in future payments to such person (or to recover from such person) any excess payment or underpayment previously made to him. SECTION 9.5 Amendment. The Committee may at any time amend any or all of the provisions of this Plan, except that (a) no such amendment may adversely affect the amount of any Participant's Excess Retirement Benefit as of the date of such amendment and (b) no such amendment may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any amendment shall be in the form of a written instrument executed by an officer of the Company on the order of the Committee. Subject to the 17 foregoing provisions of this Section, such amendment shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. SECTION 9.6 Termination. (a) The Company, in its sole discretion, may terminate this Plan at any time and for any reason whatsoever, except that, subject to Subsection (b) hereof, (i) no such termination may adversely affect the amount of any Participant's Excess Retirement Benefit as of the date of such termination and (ii) no such termination may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any such termination shall be expressed in the form of a written instrument executed by an officer of the Company on the order of the Nominating, Organization and Compensation Committee of the Board of Directors of the Company. Subject to the foregoing provisions of this Section, such termination shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Written notice of any termination shall be given to the Participants as soon as practicable after the instrument is executed. (b) Notwithstanding anything in the Plan to the contrary, in the event of a termination of the Plan (or any portion thereof), the Company, in its sole and absolute discretion, shall have the right to change the time and form of distribution of Participants' Excess Retirement Benefits. Executed this 20th day of October, 2001. HAMILTON BEACH/PROCTOR-SILEX, INC. By: /s/ Michael J. Morecroft ------------------------------ Title: President and CEO 18 EX-10.(CXXVIII) 23 l93112aex10-cxxviii.txt EX-10(CXXVIII) AMD. 1 - HB/PS UNFUNDED PLAN EXHIBIT 10(cxxviii) AMENDMENT NO. 1 TO THE HAMILTON BEACH/PROCTOR-SILEX, INC. UNFUNDED BENEFIT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF OCTOBER 1, 2001) Hamilton Beach/Proctor-Silex, Inc. hereby adopts this Amendment No. 1 to The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and Restated Effective October 1, 2001) (the "Plan"), to be effective as of January 1, 2002. Words used herein with initial capital letters which are defined in the Plan are used herein as so defined. SECTION 1 Section 3.3(a) of the Plan is hereby amended in its entirety to read as follows: "(a) Amount of Excess 401(k) Benefits. Each 401(k) Employee who is a Participant, 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 by the difference between (i) a specified percentage, in 1% increments, with a maximum of 25%, of his Compensation for the Plan Year, and (ii) the maximum before-Tax Contributions actually permitted to be contributed for him to the Savings Plan for such Plan Year by reason of the application of the limitations imposed under Sections 402(g), 401(a)(17), or 401(k)(3) of the Code (which amounts shall be referred to as the "Excess 401(k) Benefits")." EXECUTED this 21st day of December, 2001. HAMILTON BEACH/PROCTOR-SILEX, INC. By: /s/ Charles A. Bittenbender --------------------------- Title: Assistant Secretary EX-21 24 l93112aex21.txt EX-21 SUBSIDIARIES 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 The Kitchen Collection, Inc. Delaware Mississippi Lignite Mining Company Texas 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 Distribution B.V. Netherlands NMHG Distribution Co. Delaware NMHG Distribution Pty. Limited Australia NMHG Holding Co. Delaware NMHG Mexico S.A. de C.V. Mexico The North American Coal Corporation Delaware North American Coal Royalty Company Delaware Oxbow Property Company L.L.C. Louisiana Powhatan Corporation Delaware Proctor-Silex Canada, Inc. Ontario (Canada) Proctor-Silex, S.A. de C.V. Mexico Red Hills Property Company L.L.C. Mississippi Red River Mining Company Texas 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) 25 l93112aex23-i.txt EX-3(I) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23(i) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 12, 2002 included 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 22, 2002 EX-24.(I) 26 l93112aex24-i.txt EX-24(I) POWER OF ATTORNEY - OWSLEY BROWN III 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, 2001, 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: February 13, 2002 ----------------- EX-24.(II) 27 l93112aex24-ii.txt EX-24(II) POWER OF ATTORNEY - ROBERT M. GATES 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, 2001, 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: February 12, 2002 ----------------- EX-24.(III) 28 l93112aex24-iii.txt EX-24(III) POWER OF ATTORNEY - LEON J. HENDRIX, JR 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, 2001, 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: February 13, 2002 ----------------- EX-24.(IV) 29 l93112aex24-iv.txt EX-24(IV) POWER OF ATTORNEY - DAVID H. HOAG 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, 2001, 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: February 12, 2002 ----------------- EX-24.(V) 30 l93112aex24-v.txt EX-24(V) POWER OF ATTORNEY - DENNIS W. LABARRE 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, 2001, 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: February 12, 2002 ----------------- EX-24.(VI) 31 l93112aex24-vi.txt EX-24(VI) POWER OF ATTORNEY-RICHARD DE J. OSBORNE 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, 2001, 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: February 13, 2002 ----------------- EX-24.(VII) 32 l93112aex24-vii.txt EX-24(VII) POWER OF ATTORNEY - IAN M. ROSS 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, 2001, 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: February 12, 2002 ----------------- EX-24.(VIII) 33 l93112aex24-viii.txt EX-24(VIII) POWER OF ATTORNEY - BRITTON T. TAPLIN 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, 2001, 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: February 13, 2002 ----------------- EX-24.(IX) 34 l93112aex24-ix.txt EX-24(IX) POWER OF ATTORNEY - DAVID F. TAPLIN 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, 2001, 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: February 13, 2002 ----------------- EX-24.(X) 35 l93112aex24-x.txt EX-24(X) POWER OF ATTORNEY - JOHN F. TURBIN 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, 2001, 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: February 12, 2002 ----------------- EX-99.(I) 36 l93112aex99-i.txt EX-99(I) UNAUDITED STATEMENT OF OPERATIONS EXHIBIT 99(i) NACCO Industries, Inc. Unaudited Consolidating Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2001 (In millions)
NMHG ------------------------------------------------- Wholesale Retail Elims Consolidated Housewares --------- -------- -------- ------------ ---------- Net sales $1,463.3 $ 298.8 $ (89.7) $1,672.4 $ 632.1 Other revenues -- -- -- -- -- -------- -------- -------- -------- -------- Revenues 1,463.3 298.8 (89.7) 1,672.4 632.1 Cost of sales 1,273.4 244.0 (94.6) 1,422.8 522.1 -------- -------- -------- -------- -------- Gross profit 189.9 54.8 4.9 249.6 110.0 Selling, general and administrative expenses 173.1 84.7 (2.2) 255.6 102.7 Restructuring charges 4.1 4.7 -- 8.8 12.7 Loss on sale of dealers -- 10.4 -- 10.4 -- Amortization of goodwill 11.4 1.5 -- 12.9 3.0 -------- -------- -------- -------- -------- Operating profit (loss) 1.3 (46.5) 7.1 (38.1) (8.4) Other income (expense) Interest expense (12.9) (5.0) (5.2) (23.1) (7.7) Closed mine obligations -- -- -- -- -- Insurance recovery 8.0 -- -- 8.0 -- Other-net (10.6) 0.4 -- (10.2) (0.1) -------- -------- -------- -------- -------- (15.5) (4.6) (5.2) (25.3) (7.8) -------- -------- -------- -------- -------- Income (loss) before income taxes, minority interest and cumulative effect of accounting changes (14.2) (51.1) 1.9 (63.4) (16.2) Income tax provision (benefit) (0.6) (14.6) 0.7 (14.5) (4.0) -------- -------- -------- -------- -------- Income (loss) before minority interest and cumulative effect of accounting changes (13.6) (36.5) 1.2 (48.9) (12.2) Minority interest income (expense) 0.8 -- -- 0.8 -- -------- -------- -------- -------- -------- Income (loss) before cumulative effect of accounting changes (12.8) (36.5) 1.2 (48.1) (12.2) Cumulative effect of accounting changes (1.3) -- -- (1.3) -- -------- -------- -------- -------- -------- Net income (loss) $ (14.1) $ (36.5) $ 1.2 $ (49.4) $ (12.2) ======== ======== ======== ======== ======== Change in comprehensive income (loss) (27.6) 1.0 -- (26.6) (3.1) -------- -------- -------- -------- -------- Comprehensive income (loss) $ (41.7) $ (35.5) $ 1.2 $ (76.0) $ (15.3) ======== ======== ======== ======== ======== NACoal ------------------------------------ Project NACoal Mining excl Proj NACCO & NACCO NACCO Subsidiaries Mines Consolidated Other Elims Consolidated ------------ --------- ------------ -------- -------- ------------ Net sales $ 260.9 $ 47.6 $ 308.5 $ 0.1 $ -- $2,613.1 Other revenues -- 24.8 24.8 -- -- 24.8 -------- -------- -------- -------- -------- -------- Revenues 260.9 72.4 333.3 0.1 -- 2,637.9 Cost of sales 215.2 43.0 258.2 0.3 -- 2,203.4 -------- -------- -------- -------- -------- -------- Gross profit 45.7 29.4 75.1 (0.2) -- 434.5 Selling, general and administrative expenses 3.7 9.5 13.2 9.5 -- 381.0 Restructuring charges -- -- -- -- -- 21.5 Loss on sale of dealers -- -- -- -- -- 10.4 Amortization of goodwill -- -- -- -- -- 15.9 -------- -------- -------- -------- -------- -------- Operating profit (loss) 42.0 19.9 61.9 (9.7) -- 5.7 Other income (expense) Interest expense (16.4) (10.0) (26.4) (0.2) 0.5 (56.9) Closed mine obligations -- -- -- (1.3) -- (1.3) Insurance recovery -- -- -- -- -- 8.0 Other-net 0.2 (1.1) (0.9) 10.8 (0.5) (0.9) -------- -------- -------- -------- -------- -------- (16.2) (11.1) (27.3) 9.3 -- (51.1) -------- -------- -------- -------- -------- -------- Income (loss) before income taxes, minority interest and cumulative effect of accounting changes 25.8 8.8 34.6 (0.4) -- (45.4) Income tax provision (benefit) 5.8 3.2 9.0 (0.4) -- (9.9) -------- -------- -------- -------- -------- -------- Income (loss) before minority interest and cumulative effect of accounting changes 20.0 5.6 25.6 -- -- (35.5) Minority interest income (expense) -- -- -- -- -- 0.8 -------- -------- -------- -------- -------- -------- Income (loss) before cumulative effect of accounting changes 20.0 5.6 25.6 -- -- (34.7) Cumulative effect of accounting changes -- -- -- -- -- (1.3) -------- -------- -------- -------- -------- -------- Net income (loss) $ 20.0 $ 5.6 $ 25.6 $ -- $ -- $ (36.0) ======== ======== ======== ======== ======== ======== Change in comprehensive income (loss) 2.2 (7.1) (4.9) -- -- (34.6) -------- -------- -------- -------- -------- -------- Comprehensive income (loss) $ 22.2 $ (1.5) $ 20.7 $ -- $ -- $ (70.6) ======== ======== ======== ======== ======== ========
EX-99.(II) 37 l93112aex99-ii.txt EX-99(II) UNAUDITED BALANCE SHEET EXHIBIT 99(ii) NACCO Industries, Inc. Unaudited Consolidating Balance Sheet December 31, 2001 (In millions)
NACoal ------------------------------------- Project NACoal Mining excl Proj NMHG Housewares Subsidiaries Mines Consolidated ---------- ---------- ------------ ---------- ------------ Current Assets Cash and cash equivalents $ 59.6 $ 8.0 $ 2.6 $ 1.7 $ 4.3 Accounts receivable, net 165.7 74.9 15.9 7.9 23.8 Intercompany accounts receivable 23.0 2.8 4.9 3.6 8.5 Intercompany notes receivable -- -- 10.6 (10.6) -- Inventories 234.5 84.8 31.0 10.3 41.3 Deferred income taxes 32.9 6.3 0.9 0.1 1.0 Prepaid expenses and other 12.2 7.3 0.8 0.6 1.4 ---------- ---------- ---------- ---------- ---------- 527.9 184.1 66.7 13.6 80.3 Property, Plant and Equipment, net 280.5 55.1 257.9 136.0 393.9 Deferred Charges Goodwill, net 344.2 83.7 -- -- -- Coal supply agreements, net -- -- -- 85.2 85.2 Deferred costs and other 1.9 3.1 35.9 9.7 45.6 Deferred income taxes 15.7 15.2 -- -- -- ---------- ---------- ---------- ---------- ---------- 361.8 102.0 35.9 94.9 130.8 Other Assets 34.9 6.3 22.6 5.8 28.4 ---------- ---------- ---------- ---------- ---------- Total Assets $ 1,205.1 $ 347.5 $ 383.1 $ 250.3 $ 633.4 ========== ========== ========== ========== ========== Current Liabilities Accounts payable $ 176.6 $ 39.0 $ 14.6 $ 4.7 $ 19.3 Intercompany accounts payable 0.1 1.5 0.6 1.1 1.7 Revolving credit agreements 36.2 23.5 -- -- -- Revolving credit agreement expected to be refinanced 265.0 -- -- -- -- Current maturities of long-term debt 25.5 -- -- 16.4 16.4 Current obligations of project mining subsidiaries -- -- 37.9 -- 37.9 Accrued payroll 20.0 9.2 4.2 2.1 6.3 Accrued warranty obligations 34.3 0.2 -- -- -- Intercompany notes payable 8.0 3.0 -- 12.3 12.3 Other current liabilities 112.2 33.0 5.1 7.0 12.1 ---------- ---------- ---------- ---------- ---------- 677.9 109.4 62.4 43.6 106.0 Long-term Debt 27.7 80.3 -- 140.1 140.1 Obligations of Project Mining Subsidiaries -- -- 271.3 -- 271.3 Self-insurance Reserves and Other 115.2 12.2 44.5 21.5 66.0 Minority Interest 2.3 -- -- 1.1 1.1 Stockholders' Equity 382.0 145.6 4.9 44.0 48.9 ---------- ---------- ---------- ---------- ---------- Total Liabilities and Stockholders' Equity $ 1,205.1 $ 347.5 $ 383.1 $ 250.3 $ 633.4 ========== ========== ========== ========== ========== NACCO & NACCO NACCO Other Elims Consolidated ---------- ---------- ------------ Current Assets Cash and cash equivalents $ -- $ -- $ 71.9 Accounts receivable, net 0.1 -- 264.5 Intercompany accounts receivable 3.8 (38.1) -- Intercompany notes receivable 69.3 (69.3) -- Inventories -- -- 360.6 Deferred income taxes -- -- 40.2 Prepaid expenses and other 12.0 (0.1) 32.8 ---------- ---------- ---------- 85.2 (107.5) 770.0 Property, Plant and Equipment, net 2.5 -- 732.0 Deferred Charges Goodwill, net -- -- 427.9 Coal supply agreements, net -- -- 85.2 Deferred costs and other -- 0.1 50.7 Deferred income taxes 18.4 (23.2) 26.1 ---------- ---------- ---------- 18.4 (23.1) 589.9 Other Assets 590.1 (589.7) 70.0 ---------- ---------- ---------- Total Assets $ 696.2 $ (720.3) $ 2,161.9 ========== ========== ========== Current Liabilities Accounts payable $ 0.6 $ (0.2) $ 235.3 Intercompany accounts payable 34.5 (37.8) -- Revolving credit agreements -- -- 59.7 Revolving credit agreement expected to be refinanced -- -- 265.0 Current maturities of long-term debt -- -- 41.9 Current obligations of project mining subsidiaries -- -- 37.9 Accrued payroll 3.0 -- 38.5 Accrued warranty obligations -- -- 34.5 Intercompany notes payable 46.0 (69.3) -- Other current liabilities 4.3 (0.1) 161.5 ---------- ---------- ---------- 88.4 (107.4) 874.3 Long-term Debt -- -- 248.1 Obligations of Project Mining Subsidiaries -- -- 271.3 Self-insurance Reserves and Other 65.2 (23.1) 235.5 Minority Interest -- -- 3.4 Stockholders' Equity 542.6 (589.8) 529.3 ---------- ---------- ---------- Total Liabilities and Stockholders' Equity $ 696.2 $ (720.3) $ 2,161.9 ========== ========== ==========
EX-99.(III) 38 l93112aex99-iii.txt EX-99(III) UNAUDITED STATEMENT OF CASH FLOWS EXHIBIT 99(iii) NACCO Industries, Inc. Unaudited Consolidating Statement of Cash Flows For the Year Ended December 31, 2001 (In millions)
NACCO NACCO NMHG Housewares NACoal & Other Consolidated ------- ---------- ------ ------- ------------ Operating Activities Net income (loss) $(49.4) $(12.2) $ 25.6 $ -- $(36.0) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 60.4 21.2 35.7 0.3 117.6 Deferred income taxes (8.5) (6.5) 7.9 2.1 (5.0) Minority interest (income) expense (0.8) -- -- -- (0.8) Cumulative effect of accounting changes 1.3 -- -- -- 1.3 Restructuring charges 8.8 12.7 -- -- 21.5 Loss on sale of assets 10.5 -- -- -- 10.5 Other non-cash items 1.6 (3.6) 4.1 (1.4) 0.7 Working capital changes, excluding the effect of business acquisitions: Intercompany receivable/payable (17.4) (6.8) 1.0 23.2 -- Accounts receivable 30.6 15.1 (2.9) (0.1) 42.7 Inventories 38.2 8.3 (5.1) -- 41.4 Other current assets 1.3 (0.9) (0.2) (11.9) (11.7) Accounts payable and other liabilities (45.6) 1.2 3.4 (5.2) (46.2) ------ ------ ------ ------ ------ Net cash provided by operating activities 31.0 28.5 69.5 7.0 136.0 ------ ------ ------ ------ ------ Investing Activities Expenditures for property, plant and equipment (53.5) (13.4) (37.2) (0.7) (104.8) Proceeds from the sale of property, plant, and equipment 13.0 -- 4.9 -- 17.9 Acquisitions of businesses, net of cash acquired (3.9) -- -- -- (3.9) Investments in unconsolidated affiliates (0.3) -- -- -- (0.3) Intercompany loans 11.0 3.0 3.8 (17.8) -- Other - net (2.5) -- (1.5) -- (4.0) ------ ------ ------ ------ ------ Net cash used for investing activities (36.2) (10.4) (30.0) (18.5) (95.1) ------ ------ ------ ------ ------ Financing Activities Additions to long-term debt and revolving credit agreements 68.9 -- -- -- 68.9 Reductions to long-term debt and revolving credit agreements (22.0) (7.2) (14.6) -- (43.8) Additions to obligations of project mining subsidiaries -- -- 76.4 -- 76.4 Reductions of obligations of project mining subsidiaries -- -- (95.0) -- (95.0) Deferred financing fees (0.7) (0.3) -- -- (1.0) Cash dividends paid (5.0) (10.0) (3.0) 10.4 (7.6) Capital grants 0.1 -- -- -- 0.1 Other - net -- -- (0.7) 1.1 0.4 ------ ------ ------ ------ ------ Net cash provided by (used for) financing activities 41.3 (17.5) (36.9) 11.5 (1.6) ------ ------ ------ ------ ------ Effect of exchange rate changes on cash (0.9) (0.2) -- -- (1.1) ------ ------ ------ ------ ------ Cash and Cash Equivalents Increase for the year 35.2 0.4 2.6 -- 38.2 Balance at the beginning of the year 24.4 7.6 1.7 -- 33.7 ------ ------ ------ ------ ------ Balance at the end of the year $ 59.6 $ 8.0 $ 4.3 $ -- $ 71.9 ====== ====== ====== ====== ======
EX-99.(IV) 39 l93112aex99-iv.txt EX-99(IV) UNAUDITED STATEMT. OF STOCKHOLDER EQUITY EXHIBIT 99(iv) NACCO Industries, Inc. Unaudited Consolidating Statement of Stockholders' Equity For the Year Ended December 31, 2001 (In millions)
NACCO & NACCO NACCO NMHG Housewares NACoal 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 198.2 160.6 15.1 3.6 (373.9) 3.6 Shares issued under stock option and compensation plans -- -- -- 1.1 -- 1.1 ------ ------ ------ ------ ------- ------ 198.2 160.6 15.1 4.7 (373.9) 4.7 Retained Earnings Beginning balance 283.9 12.4 16.1 507.4 (204.9) 614.9 Net income (loss) (49.4) (12.2) 25.6 -- -- (36.0) Cash dividends (5.0) (10.0) (3.0) (7.6) 18.0 (7.6) ------ ------ ------ ------ ------- ------ 229.5 (9.8) 38.7 499.8 (186.9) 571.3 Accumulated Other Comprehensive Income (Loss) Beginning balance (19.1) (2.1) -- -- 1.0 (20.2) Foreign currency translation adjustment (9.2) (0.2) -- -- -- (9.4) Cumulative effect of change in accounting for derivatives and hedging (0.7) (0.9) (1.8) -- -- (3.4) Minimum pension liability adjustment (13.4) -- -- -- -- (13.4) Reclassification of hedging activity into earnings -- 0.9 -- -- -- 0.9 Current period cash flow hedging activity (3.3) (2.9) (3.1) -- -- (9.3) ------ ------ ------ ------ ------- ------ (45.7) (5.2) (4.9) -- 1.0 (54.8) ------ ------ ------ ------ ------- ------ Total Stockholders' Equity $382.0 $145.6 $ 48.9 $512.6 $(559.8) $529.3 ====== ====== ====== ====== ======= ======
EX-99.(V) 40 l93112aex99-v.txt EX-99(V) LETTER TO SEC EXHIBIT 99(v) NACCO INDUSTRIES, INC. March 26, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Ladies and Gentlemen: Arthur Andersen LLP ("Arthur Andersen"), the independent public accountant for NACCO Industries, Inc. during 2001, has represented to us by letter dated March 22, 2002 that its audit of the consolidated financial statements of NACCO Industries, Inc. and subsidiaries as of December 31, 2001 and for the year then ended was subject to Arthur Andersen's quality control system for the U.S. accounting and auditing practice so as to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Arthur Andersen personnel working on the audit, availability of national office consultation, and availability of personnel at foreign affiliates of Arthur Andersen to conduct the relevant portions of the audit. Very truly yours, /s/ Kenneth C. Schilling Kenneth C. Schilling Vice President and Controller -----END PRIVACY-ENHANCED MESSAGE-----