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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
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(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
34-1505819
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(I.R.S. EMPLOYER IDENTIFICATION NO.)
5875 Landerbrook Drive
Mayfield Heights, Ohio
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
44124-4017
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(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
------