Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K ANNUAL REPORT
Pursuant to Section 13 of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993 Commission File No. 1-9172
NACCO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1505819
- --------------------------------------- -------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5875 Landerbrook Drive
Mayfield Heights, Ohio 44124-4017
- --------------------------------------- -------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (216) 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 checkmark 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, 1994:
$335,171,382
Number of shares of Class A Common Stock outstanding at February 28, 1994:
7,178,085
Number of shares of Class B Common Stock outstanding at February 28, 1994:
1,762,493
DOCUMENTS INCORPORATED BY REFERENCE
(a) The Company's Proxy Statement for its 1994 annual meeting of
stockholders, incorporated herein by reference in Part III.
2
PART I
ITEM 1. BUSINESS
GENERAL
NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company
which owns four principal operating subsidiaries:
(a) NACCO MATERIALS HANDLING GROUP. The Company owns approximately
97% of the outstanding capital stock of Hyster-Yale Materials Handling, Inc.
("Hyster-Yale"), which was the parent company of Hyster Company ("Hyster") and
Yale Materials Handling Corporation ("Yale"). On January 1, 1994 Yale was
merged into Hyster and Hyster changed its name to NACCO Materials Handling
Group, Inc. (For convenience of reference NACCO Materials Handling Group, Inc.
and Hyster-Yale hereinafter referred to as "NMHG"). This action was the final
step in NMHG's strategy to combine the company's administrative, design,
engineering and manufacturing capabilities into a unified group. NMHG will
continue to market two full lines of forklift trucks and related service parts
under the Hyster(R) and Yale(R) brand names. NMHG accounted for 59% and 42% of
NACCO's revenues and operating profits, respectively, in 1993.
(b) HAMILTON BEACH/PROCTOR-SILEX. The Company owns 80% of Hamilton
Beach/Proctor-Silex, Inc. ("Hamilton Beach/ Proctor-Silex"), one of the
nation's leading manufacturers and marketers of small electric appliances.
Hamilton Beach/ Proctor-Silex accounted for 23% and 13% of NACCO's revenues and
operating profits, respectively, in 1993.
(c) NORTH AMERICAN COAL. The Company's wholly owned subsidiary, The
North American Coal Corporation, and its affiliated coal companies
(collectively, "North American Coal"), mine and market lignite for use
primarily as fuel for power generation by electric utilities. North American
Coal accounted for 15% and 47% of NACCO's revenues and operating profits,
respectively, in 1993.
(d) KITCHEN COLLECTION. The Company's wholly owned subsidiary, The
Kitchen Collection, Inc. ("Kitchen Collection"), is a national specialty
retailer of kitchenware, small electric appliances and related accessories.
Kitchen Collection accounted for 3% and 5% of NACCO's revenues and operating
profits, respectively, in 1993.
Additional information relating to financial and operating data on a
segment basis (including NACCO, which reduced operating profits by 7% in 1993)
is set forth in Management's Discussion and Analysis of Results of Operations
and Financial Condition on pages 27 through 50 contained in Part II hereof and
in Note P to the Consolidated Financial Statements on pages F-25 through F-28
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.
3
SIGNIFICANT EVENTS
In August 1993, NACCO and NMHG's two minority stockholders made a
proportional capital contribution of $53.8 million in the form of (a)
previously purchased 12-3/8% NMHG subordinated debentures with a face value of
$23.7 million and a purchase value by NACCO of $25.5 million, and (b) a cash
contribution of $28.3 million.
The cash contribution enabled NMHG to call approximately $26.5 million
face value of subordinated debentures at a price of 107.5. This, and the
capital contribution by NACCO of previously purchased subordinated debentures,
allowed NMHG to retire approximately $50.2 million face value of these
debentures.
As part of this transaction, NMHG amended its existing senior bank
credit agreement. This amendment permits equity infusions to be used for cash
purchases of debentures and, after August 1994, permits use of internally
generated funds to retire up to $75.0 million of additional subordinated
debentures if certain debt to capitalization ratios are achieved. In addition,
the amendment modifies the bank loan repayment schedules and provides for
favorable performance-based interest rate incentives.
BUSINESS SEGMENT INFORMATION
A. NACCO MATERIALS HANDLING GROUP
NMHG is one of the leading worldwide designers, manufacturers and
marketers of forklift trucks which comprise the largest segment of the
materials handling equipment industry. NMHG accounted for 50% and 41% of
NACCO's assets and liabilities, respectively, as of December 31, 1993, while
its operations accounted for 59% and 42% of NACCO's revenues and operating
profits, respectively, in 1993.
THE INDUSTRY
Forklift trucks are used in both manufacturing and warehousing
environments. The materials handling industry, especially in industrialized
nations, is generally a mature industry. In the most recent business cycle the
North American market for forklift trucks reached its lowest level in 1991 and
increased in both 1992 and 1993 over prior year levels. The European and
Japanese markets generally have been in decline since 1990.
The forklift truck industry historically has 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.
-2-
4
COMPANY OPERATIONS
NMHG maintains product differentiation between Hyster(R) and Yale(R)
brands of forklift trucks and distributes its products through separate
worldwide dealer networks. Nevertheless, opportunities have been identified
and addressed to improve the company's results by integrating overlapping
operations and taking advantage of economies of scale in design, manufacturing
and purchasing. NMHG completed a series of plant and parts depot
consolidations with the closure of its Wednesfield, England manufacturing plant
in early 1992. NMHG now provides all design, manufacturing and administrative
functions. Products are marketed and sold through two separate groups which
retain the Hyster and Yale identities. In Japan, NMHG has a 50% owned joint
venture with Sumitomo Heavy Industries Ltd. named Sumitomo-Yale Company Limited
("S-Y"). S-Y performs certain design activities and produces lift trucks and
components which it markets in Japan and which are exported for sale by NMHG
and its affiliates in the U.S. and Europe.
PRODUCT LINES
NMHG manufactures a wide range of forklift trucks under both the
Hyster(R) and Yale(R) 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 80%, 79%, and 77% of NMHG's net sales in 1993, 1992
and 1991, respectively.
NMHG 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(R) and Yale(R) forklift trucks
now in service provides a market for service parts. In addition to parts for
its own forklift trucks, NMHG has a program (termed UNISOURCE(TM) in North
America and MULTIQUIP(TM) in Europe) designed to supply Hyster dealers with
replacement parts for most competing brands of forklift trucks. NMHG has a
similar program (termed PREMIER(TM)) for its Yale dealers in the Americas and
the United Kingdom. Accordingly, NMHG 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, NMHG also manufactures some
of these parts through reverse-engineering of its competitors' parts. Service
parts accounted for approximately 20%, 21%, and 23% of NMHG net sales in 1993,
1992 and 1991, respectively.
COMPETITION
The forklift truck industry is highly competitive. The worldwide
competitive structure of the industry is fragmented by product line and
country. The principal methods of competition among forklift truck
manufacturers are product performance, price, service and distribution
networks. The forklift truck industry
-3-
5
competes with alternative methods of materials handling, including conveyor
systems, automated guided vehicle systems and hand 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.
Although there is no official source for information on the subject,
NACCO believes that NMHG is one of the top three manufacturers of forklift
trucks in the world.
NMHG'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 believes that it has a
significant share of unit sales of electric rider and ICE forklift trucks in
Western Europe. In Japan, although its share is currently small, NMHG has a
distribution system through S-Y.
TRADE RESTRICTIONS
A. United States
Since June 1988, Japanese-built ICE forklift trucks imported into the
U.S., 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 1993 range from 4.48% to
56.81% depending on manufacturer or importer. The antidumping duty rate
applicable to imports from S-Y is 51.33%, and is likely to continue unchanged
for the foreseeable future, unless S-Y and NMHG decide to participate in
proceedings to have it reduced. NMHG 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
("Commerce") 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 Commerce or the U.S. International Trade
Commission finds that changed circumstances exist sufficient to warrant the
order's revocation. If the U.S. Congress approves legislation implementing the
Uruguay round of GATT negotiations, the anti-dumping order will be reviewed for
possible revocation in 2000. All of NMHG's major Japanese competitors have
either built or acquired manufacturing or assembly facilities in the United
States. The company cannot predict with any certainty if there will be any
negative effects to the company resulting from the Japanese sourcing of their
forklift products in the United States.
-4-
6
B. Europe
From 1986 through 1993, Japanese forklift truck manufacturers were
subject to informal export restraints on Japanese-manufactured electric rider,
electric narrow-aisle and ICE forklift trucks shipped to Europe. Discussions
are continuing between European Community and Japanese government officials;
however, these informal restraints are expected to continue in 1994. Several
Japanese manufacturers have announced either that they have established, or
intend to establish, manufacturing or assembly facilities within the European
Community. The company also cannot predict with any certainty if there will be
any negative effects to NMHG resulting from the Japanese sourcing of their
forklift products in Europe.
C. Australia
In 1987 an Australian producer of forklift trucks filed an antidumping
action against imports from Japan. Voluntary price undertakings were
negotiated with all major Japanese producers including S-Y. The S-Y
undertaking expired in 1991. The Australian producer has filed a legal
challenge to the validity of the price undertakings. Meanwhile, in 1991 this
same producer filed an antidumping action against imports from the United
Kingdom. In this action Hyster Europe was found to be dumping and duties have
been imposed on imports from the company's Craigavon, Northern Ireland and
Irvine, Scotland factories. Hyster Australia challenged this finding and in
the interim sourced its product elsewhere. In the summer of 1993 both of these
antidumping actions were terminated.
PRODUCT DESIGN AND DEVELOPMENT
NMHG spent $20.7 million, $21.9 million, and $19.2 million on product
design and development activities in 1993, 1992 and 1991, respectively. The
Hyster(R) and Yale(R) products are differentiated for the specific needs of
their respective customer bases. NMHG continues to pursue opportunities to
improve product costs by engineering new Hyster(R) and Yale(R) brand products
with component commonality.
Certain product design and development activities with respect to ICE
forklift trucks and some components are performed in Japan by S-Y. S-Y spent
approximately $4.0 million, $3.7 million, and $3.8 million on product design
and development in 1993, 1992 and 1991, respectively.
BACKLOG
As of December 31, 1993, NMHG's backlog of unfilled orders for
forklift trucks was approximately 12,100 units, or $206 million. This compares
to the backlog as of December 31, 1992 of approximately 12,100 units, or $203
million. Backlog represents unit orders to NMHG's manufacturing plants from
independent dealerships, retail customers and contracts with the U.S.
Government. Although these orders are believed to be firm, such
-5-
7
orders may be subject to cancellation or modification.
SOURCES
NMHG has adopted a strategy of obtaining its raw materials and
principal components on a global basis from competitively priced sources. NMHG
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 if it were unable to obtain all or a significant part of such components,
or if the cost of such components was to increase significantly under
circumstances which prevented NMHG from passing on such increases to its
customers.
DISTRIBUTION
The Hyster(R) and Yale(R) brand products are distributed through
separate highly developed worldwide dealer networks. The company believes that
both dealer networks contribute significantly to its competitive position in
the industry and intends to keep the separate networks intact and to continue
to market products separately under the Hyster(R) and Yale(R) brand names.
Each also sells directly to certain major accounts.
In Japan, forklift truck products are distributed by S-Y. In 1991,
Yale reached a ten-year agreement with Jungheinrich Aktiengesellschaft AG
("Jungheinrich"), a German manufacturer of forklift trucks, to continue
distribution of Yale brand products in Germany and Austria and to provide to
Jungheinrich certain ICE and electric-powered products for sale in other major
European countries under the Jungheinrich brand name.
FINANCING OF SALES
Hyster U.S. dealer and direct sales are supported by leasing and
financing services provided by Hyster Credit Company, a division of AT&T
Commercial Finance Corporation, pursuant to an operating agreement which
expires in 2000.
NMHG is a minority stockholder of Yale Financial Services, Inc., a
subsidiary of General Electric Capital Corporation, which offers Yale U.S.
dealers wholesale and retail financing and leasing services for its forklift
trucks. Such retail financing and leasing services are also available to Yale
national account customers.
EMPLOYEES
As of February 28, 1994, NMHG had approximately 5,000 employees.
Employees in the Danville, Illinois manufacturing and parts depot operations
are unionized, as are tool room employees located in Portland, Oregon. A
three-year contract for the Danville union employees was signed in 1991, which
will expire in June, 1994. A new one-year contract was signed in 1993 with the
-6-
8
Portland tool room union which will expire in October 1994. 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.
NMHG's management believes its current labor relations with both union
and non-union employees are good.
GOVERNMENT REGULATION
NMHG's manufacturing facilities, in common with others in industry,
are subject to numerous laws and regulations designed to protect the
environment, particularly with respect to disposal of plant waste. NMHG's
products are also subject to various industry and governmental standards.
NMHG's management believes that such requirements have not had a material
adverse effect on its operations.
PATENTS, TRADEMARKS AND LICENSES
NMHG is not materially dependent upon patents or patent protection.
NMHG is the owner of the Hyster(R) trademark, which is currently registered in
approximately 51 countries. The Yale(R) trademark, which is used on a
perpetual royalty-free basis by NMHG in connection with the manufacture and
sale of forklift trucks and related components, is currently registered in
approximately 100 countries. NMHG's management believes that its business is
not dependent upon any individual trademark registration or license, but that
the Hyster(R) and Yale(R) trademarks are material to its business.
B. HAMILTON BEACH/PROCTOR-SILEX
GENERAL
The Company believes that Hamilton Beach/Proctor-Silex is one of the
largest broad line manufacturers and marketers of small electric appliances in
North America. Hamilton Beach/Proctor-Silex's products are marketed primarily
to retail merchants and wholesale distributors. Hamilton Beach/Proctor-Silex
accounted for 18% and 13% of NACCO's assets and liabilities, respectively, as
of December 31, 1993, while its operations accounted for 23% and 13% of NACCO's
revenues and operating profits, respectively, in 1993.
-7-
9
SALES AND MARKETING
Hamilton Beach/Proctor-Silex manufactures and markets a wide range of
small electric appliances, including motor driven appliances such as blenders,
food processors, mixers and electric knives which are primarily marketed under
the Hamilton Beach(R) name, and heat generating appliances such as toasters,
irons, coffeemakers and toaster ovens which are primarily marketed under the
Proctor-Silex(R) name. The company markets its products primarily in North
America. Sales are generated by a network of sales employees and outside sales
representatives to mass merchandisers, catalog showrooms, warehouse membership
clubs, variety store chains, department stores and other retail outlets. Sales
are also made through independent dealers and distributors. Principal
customers include Wal-Mart, Target, K-Mart, Service Merchandise, Sears,
Canadian Tire, and Montgomery Ward. The company also manufactures and sells
certain private label brand products to third parties for resale. Sales
promotional activities are primarily focused on cooperative advertising.
Because of the nature of the markets for small electric appliances,
Hamilton Beach/Proctor-Silex's management believes that backlog is not a
meaningful indicator of performance nor is it a significant indicator of annual
sales. Backlog of orders as of December 31, 1993 was approximately $13.1
million. This compares with the aggregate backlog as of December 31, 1992 of
approximately $7.0 million. This backlog represents customer orders; customer
orders may be cancelled at any time prior to shipment.
Hamilton Beach/Proctor-Silex's warranty program to the consumer
consists generally of a limited warranty lasting one or two years, depending on
the product, for domestic electric appliances, and two years for all Canadian
electric appliances. Under these warranty programs, the company may repair or
replace, at its option, those products found to contain manufacturing defects.
Revenues and operating profit for Hamilton Beach/ Proctor-Silex are
traditionally greater in the second half of the year as sales of small electric
appliances increase significantly with the fall holiday selling season.
Because of the seasonality of purchases of its products, Hamilton
Beach/Proctor-Silex incurs substantial short-term debt to finance inventories
and accounts receivable.
PRODUCT DESIGN AND DEVELOPMENT
Hamilton Beach/Proctor-Silex spent $2.7 million, $2.5 million, and
$2.3 million on product design and development activities in 1993, 1992 and
1991, respectively.
The principal raw materials used to manufacture and distribute
Hamilton Beach/Proctor-Silex's products are steel, aluminum, plastics and
packaging materials. The company's management believes that adequate quantities
of raw materials are
-8-
10
available from various suppliers.
COMPETITION
The small electric appliance industry is highly competitive. Based on
publicly available information about the industry, Hamilton
Beach/Proctor-Silex's management believes it is one of the largest producers of
such appliances in North America.
As retailers generally purchase a limited selection of small electric
appliances, Hamilton Beach/Proctor-Silex competes with other suppliers for
retail shelf space and focuses its marketing efforts on retailers rather than
consumers. The company's management believes that the principal areas of
competition with respect to its products are quality, price, product design,
product features, merchandising, promotion, and warranty. Hamilton
Beach/Proctor-Silex's management believes that it is competitive in all of
these areas.
GOVERNMENT REGULATION
Hamilton Beach/Proctor-Silex, in common with other manufacturers, is
subject to numerous Federal and state health, safety and environmental
regulations. The company's management believes that the impact of expenditures
to comply with such laws will not have a material adverse effect on Hamilton
Beach/Proctor-Silex. The company's products are subject to testing or
regulation by Underwriters' Laboratories, the Canadian Standards Association,
and various entities in foreign countries which review product design.
PATENTS, TRADEMARKS, COPYRIGHTS, AND LICENSES
Hamilton Beach/Proctor-Silex holds patents and trademarks registered
in the United States and foreign countries for various products. The company's
management believes that its business is not dependent upon any individual
patent, trademark, copyright or license, but that the Hamilton Beach(R) and
Proctor-Silex(R) trademarks are material to its business.
EMPLOYEES
As of February 28, 1994, Hamilton Beach/Proctor-Silex's work force
consisted of approximately 4,400 employees, none of which are represented by
unions except for approximately 30 hourly employees at the Picton, Ontario
facility. The Picton, Ontario employees are represented by an employee
association which performs a consultative role.
-9-
11
C. NORTH AMERICAN COAL
GENERAL
North American Coal is engaged in the mining and marketing of lignite
for use primarily as fuel for power generation by electric utilities.
Substantially all of the sales by North American Coal are made through wholly
owned project mining subsidiaries pursuant to long-term, cost plus a profit per
ton contracts. The utility customers have arranged and guaranteed the
financing of the development and operation of the project mining subsidiaries.
There is no recourse to NACCO or North American Coal for the financing of these
subsidiary mines. At December 31, 1993 North American Coal's operating mines
consisted of mines where the reserves were acquired and developed by North
American Coal, except for the South Hallsville No. 1 Mine whose reserves are
owned by the customer. North American Coal 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 H to the Consolidated
Financial Statements on pages F- 16 through F-17 contained in Part IV hereof.
Project mining subsidiaries accounted for 25% and 30% of NACCO's assets and
liabilities, respectively, as of December 31, 1993, while their operations
accounted for 14% and 45% of the Company's revenues and operating profits,
respectively, in 1993.
SALES AND MARKETS
The principal customers of North American Coal are electric utilities
and a synfuels plant. In 1993, sales to one customer, which supplies coal to
four facilities, accounted for 46% of North American Coal's revenues compared
with 44% in 1992 and 1991. The distribution of sales in the last five years
has been as follows:
DISTRIBUTION
-----------------------
Total
Tons Sold Electric Synfuels
(Millions) Utilities Plant
---------- --------- --------
1993 26.5 75% 25%
1992 24.5 74% 26%
1991 21.7 73% 27%
1990 20.8 71% 29%
1989 21.5 72% 28%
The contracts under which the project mining subsidiaries were
organized provide that under certain conditions of default the customer(s)
involved may elect to acquire the assets (subject to the liabilities) or the
capital stock of the subsidiary, for an amount effectively equal to book value.
In one case, the customer may elect to acquire the stock of the subsidiary
after a specified period of time without reference to default, in exchange for
certain payments on coal thereafter mined.
-10-
12
The location, customer, sales tonnage and contract expiration date for
the mines operated by North American Coal in 1993 were as follows:
1993 Sales
Mine and Customer Tonnage Contract
Mining Operation Location (Plant) (Millions) Expires
- ---------------- -------- -------- ---------- --------
Project Mining
Subsidiaries
--------------
The Coteau Freedom (1) Dakota Coal 6.5 2007
Properties Mine; Company
Company Beulah, (Great Plains
North Synfuels
Dakota Project)
(surface)
Dakota Coal 5.5 2007
Company
(Antelope
Valley
Station)
Dakota Coal 2.0 2007
Company
(Leland Olds
Station)
Dakota Coal .9 1997
Company
(Stanton Station
of United Power
Association)
The Falkirk Falkirk (1) United Power 7.6 2013
Mining Mine; Association/
Company Under- Cooperative
wood, Power
North Association
Dakota (Coal Creek
(surface) Station)
The Sabine South (1) Southwestern 3.5 2007
Mining Hallsville, Electric
Company No. 1 Power Company
Mine; (Henry W. Pirkey
Halls- Power Plant)
ville,
Texas
(surface)
Other
-----
Red River Oxbow Mine; Central .5 (2) 2001
Mining Coushatta, Louisiana
Company Louisiana Electric
(Joint Venture (surface) Company (Dolet
with Phillips Hills Power Plant)
Coal Company)
- - SEE FOLLOWING PAGE FOR EXPLANATION OF NOTE REFERENCES.
-11-
13
Notes to preceding table:
__________________________
(1) 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.
(2) The amount represents the total (100%) of the 1993 joint
venture tonnage.
Under terms of a lignite mining agreement entered into in 1985 with
Utility Fuels, Inc. ("UFI"), a subsidiary of Houston Industries Incorporated,
North American Coal has been retained to design, develop, construct and operate
the proposed Trinity Mine in the Malakoff-Cayuga reserves near Malakoff, Texas.
The Trinity Mine is expected to produce from 4.5 to 6.5 million tons of lignite
annually. The two generating units have been delayed and are now expected to
be completed in 2005 and 2007. North American Coal and a subsidiary have
received certain management fees, minimum royalties and other payments in
connection with the future development of the Trinity Mine project. In
December 1992 the lignite lease and sublease agreement under which the minimum
royalties were received was amended. The parties agreed that, in light of the
delayed development of this mining project, effective January 1, 1993 UFI is no
longer obligated to pay minimum royalties to North American Coal. Termination
of this obligation reduces North American Coal's annual net income
approximately $2.4 million, after tax. Under the original agreement, these
minimum royalty payments would have terminated at the end of the year 2005.
GOVERNMENT REGULATION
North American Coal, in common with other coal producers, continues to
be subject to Federal and state health, safety and environmental regulations.
The 1994 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 $1.1 million for
certain closed mines and are included in Self-Insurance Reserves and Other in
NACCO's Consolidated Financial Statements in this Annual Report on Form 10-K.
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.
North American Coal's management believes that the Clean Air Act
Amendments, which became effective in 1990, will not have a material adverse
effect on its current operations, because substantially all of the power
generating facilities operated or supplied by North American Coal's customers
meet or exceed the requirements of the Clean Air Act.
The Federal Energy Regulatory Commission (FERC) issued Order 636,
effective in May 1992, which requires gas pipeline companies to separate their
gas sales and gas transportation functions. As a result of this Order, the
nation's natural gas pipeline companies, including the four which purchase gas
produced by the Great Plains Synfuels Plant (Synfuels Plant), which is supplied
by
-12-
14
the company's Coteau mining subsidiary, have much less need for gas supply
under contract and are actively seeking to restructure or terminate many supply
contracts. To date, however, the four pipelines' contracts with the Synfuels
Plant are unaffected and the FERC has permitted the four pipelines to recover
their costs associated with continuing to perform under the contracts. The
affected customers of the four pipelines have been unsuccessful to date in
court challenges to the arrangements although several challenges are presently
pending on rehearing. Based on regulatory and judicial consideration to date,
it does not appear the continued operation of the Great Plains Synfuels Plant
and Coteau's supply of coal to the Plant will be adversely affected. Coteau
sold approximately 6.5 million tons of lignite to the Synfuels Plant in 1993.
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, the
time and expenditures required to develop new energy sources, the cost of
transportation, the cost of compliance with governmental regulation of
operations, and the impact of federal energy policies. The ability of North
American Coal 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 company
management believes that North American Coal is the eighth largest commercial
coal producer in the United States.
EMPLOYEES
As of February 28, 1994, North American Coal had approximately 850
employees.
D. KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of kitchenware,
small electric appliances and related accessories which operated 104 retail
stores as of February 28, 1994. Stores are located primarily in factory outlet
complexes that feature merchandise of highly recognizable name-brand
manufacturers. Kitchen Collection's product mix includes a broad line of
appliances from leading manufacturers, including Hamilton Beach/ Proctor-Silex
appliances.
Kitchen Collection accounted for 1% of NACCO's assets and its
liabilities as of December 31, 1993, while its operations accounted for 3% and
5% of NACCO's revenues and operating profits, respectively, in 1993.
-13-
15
ITEM 2. PROPERTIES
A. NMHG
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
NMHG.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
Basingstoke, England X Hyster forklift truck marketing and sales operations for Europe, the
Middle East and Africa
Berea, Kentucky X Manufacture of forklift trucks
Craigavon, Northern X Manufacture of forklift trucks
Ireland
Danville, Illinois X Manufacture of forklift trucks, components and service parts
Danville, Illinois X Distribution of service parts
for both Hyster and Yale forklift trucks; Hyster forklift truck
marketing and sales operations for North America
Flemington, X Yale forklift truck marketing
New Jersey and sales operations for North
America and certain NMHG engineering operations
Greenville, North X Manufacture of forklift trucks;
Carolina NMHG manufacturing and other staff operations for North America
Irvine, Scotland X Manufacture of forklift trucks
Lenoir, North X Manufacture of component
Carolina parts for forklift trucks
Nijmegen, The X Manufacture of forklift
Netherlands trucks and component parts; distribution of service parts for
forklift trucks
-14-
16
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
Portland, Oregon X Technical center for testing of
prototype equipment and component parts
Portland, Oregon X NMHG corporate and product development headquarters
Portland, Oregon X Manufacture of production tooling and
prototype units
Sao Paulo, Brazil X Manufacture of forklift trucks; distribution of service parts for
forklift trucks
Sulligent, Alabama X Manufacture of component parts for forklift trucks
Sydney, Australia X Assembly of forklift trucks; distribution of service parts for
forklift trucks
Wolverhampton, X Yale forklift truck marketing
England and sales operations for Europe
NMHG intends to sell its Flemington, New Jersey facility and intends
to either lease back a portion of the office space in this facility or to rent
suitable office space in the same area. NMHG also intends to sell one of its
facilities located in Danville, Illinois which is currently vacant. There is
no certainty that any such transactions will occur.
Each of NMHG's principal U.S. facilities is encumbered as security
for the obligations under NMHG's bank financing. The facilities in Berea,
Kentucky and Sulligent, Alabama are leased pursuant to industrial development
bond financings which permit NMHG to acquire the properties for nominal amounts
upon redemption or repayment of the bonds.
B. HAMILTON BEACH/PROCTOR-SILEX
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
Hamilton Beach/Proctor-Silex.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
Clinton, North X Warehouse
Carolina
Collierville, X Distribution center
Tennessee
-15-
17
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
El Paso, Texas X Distribution center
Glen Allen, Virginia X Corporate headquarters
Juarez, Chihuahua, X Two assembly plants;
Mexico manufacture of coffeemakers,
irons and popcorn pumpers
Miami, Florida X Distribution center
Mt. Airy, North X Manufacture of toasters and
Carolina toaster ovens
Mt. Airy, North X Distribution center
Carolina
Picton, Ontario, X Distribution center
Canada
Southern Pines, X Manufacture of iron components
North Carolina
Toronto, Ontario, X Proctor-Silex, Canada sales
Canada and administration
headquarters
Washington, North X Distribution and warranty
Carolina repair center; manufacture and
assembly of blenders, mixers,
food processors, motors and
commercial products; plastics
molding facility
Sales offices are also leased in several cities in the United States
and Canada.
In February 1991, Hamilton Beach/Proctor-Silex announced that it was
integrating certain facilities, including the Clinton, North Carolina facility,
with other manufacturing facilities. The integration of the Clinton facility
into the Washington facility was completed in 1993.
C. NORTH AMERICAN COAL
North American Coal'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 2.2 billion tons, approximately 82% of which are lignite deposits
in North Dakota.
-16-
18
Reserves are estimates of quantities of coal, made by the company'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. The table which follows gives detailed information as to North
American Coal's in-place reserves as of December 31, 1993 for the mines listed
under Item 1 "North American Coal" on page 11. The reserves of the South
Hallsville No. 1 Mine, which is listed on page 11, are owned and controlled by
the customer and, therefore, have not been listed in the following table.
Additional information concerning North American Coal is set forth in Item 1
"North American Coal".
RESERVES (MILLIONS OF TONS)
Average
Sulfur
Committed Average Content
Under BTUs Per Unit
Contract Uncommitted per lb. of Weight
-------- ----------- ------- ---------
Developed
- ---------
Freedom Mine,
North Dakota 542.5 6,767 0.8%
Falkirk Mine, 679.1 6,200 0.6%
North Dakota
Oxbow Mine,
Louisiana (1) 3.0 7.0 6,722 0.7%
------- ------
Total Developed 1,224.6 7.0
Undeveloped
- -----------
North Dakota 571.2 6,428 0.7%
Texas 125.8 125.2 6,208 0.9%
Eastern 73.3 72.2 12,070 3.3%
------- -----
Total Undeveloped 199.1 768.6
------- -----
1,423.7 775.6
======= =====
(1) These amounts represent the total (100%) of the joint venture reserves.
D. KITCHEN COLLECTION
Kitchen Collection owns the building housing its corporate
headquarters, a warehouse/distribution facility and a retail store in
Chillicothe, Ohio. It leases a warehouse/distribution facility in Chillicothe,
Ohio and the remainder of its retail stores. A typical store is approximately
3,200 square feet.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any
material pending legal proceeding other than ordinary routine litigation
incidental to its respective business.
-17-
19
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 Items 401(b) and 401(c) of Regulation S-K.
The table on the following pages sets forth the name, age, current
position and principal occupation and employment during the past five years of
the Company's executive officers.
-18-
20
OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS
Ward Smith 63 Chairman of the Board of NACCO (since From prior to 1989 to May 1991,
prior to 1989) Chairman and Chief
Executive Officer of NACCO.
Alfred M. Rankin, Jr. 52 President and Chief Executive Officer From April 1989 to May 1991,
of NACCO (since May 1991) President and Chief Operating
Officer of NACCO. From prior
to 1989 to February 1989,
Vice Chairman and Chief
Operating Officer of Eaton
Corporation (manufacturer of highly
engineered products serving
automotive, industrial and
commercial markets).
Frank B. O'Brien 47 Senior Vice President - Corporate From January 1, 1993 to December
Development and Chief Financial Officer of 31, 1993, Senior Vice President -
NACCO (since January 1994) Corporate Development of NACCO.
From prior to 1989 to December 31,
1992, Vice President - Corporate
Development of NACCO.
Steven M. Billick 37 Vice President and Controller From prior to 1989 to July 1991,
of NACCO (since July 1991) Partner, Deloitte & Touche
(accounting firm).
Charles A. Bittenbender 44 Vice President, General Counsel and From prior to 1989 to June 1990,
Secretary of NACCO (since July 1990) Deputy General Counsel, G.D. Searle
& Co. (research-based manufacturer
and marketer of pharmaceutical
products).
R. Robertson Hilton 43 Vice President and Treasurer of From January 1991 to October 1992,
NACCO (since October 1992) Senior Vice President and Head,
International Marketing Department,
The First National Bank of Chicago
(money center bank). From
September 1989 to December 1990,
Vice President and Head,
International Marketing Department.
From prior to 1989 to August 1989,
Vice President and Head, Cleveland
Regional Office.
-19-
21
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
A. NMHG
NAME AGE CURRENT POSITION OTHER POSITIONS
Reginald R. Eklund 53 President and Chief Executive From August 1993 to September 1993,
Officer of NMHG (since Vice President of Hyster and
September 1992) Yale. From September 1992 to
August 1993, President and Chief
Executive Officer of Hyster.
From June 1989 to September 1992,
President and Chief Operating
Officer of NMHG. From prior to
1989 to August 1993, President
and Chief Executive Officer of
Yale.
Bergen I. Bull 54 Vice President, General Counsel From November 1990 to December
and Secretary of NMHG 1993, Vice President and Assistant
(since October 1989) Secretary of Yale. From prior to
1989 to December 1993, Vice
President, Corporate
Administration, General
Counsel and Secretary of Hyster.
G. Michael Decker 52 Vice President, Finance and Chief From February 1993 to December
Financial Officer of NMHG 1993, Vice President, Finance
(since February 1993) and Chief Financial Officer of both
Hyster and Yale. From 1991 to
1993, Vice President, Finance,
Secretary and Chief Financial
Officer for Doehler Jarvis Ltd.
Partnership (casting
manufacturer). From 1989 to 1990,
Senior Vice President Finance
Treasurer and Chief Financial
Officer, and prior to 1989, Vice
President, Finance, Treasurer
and Chief Financial Officer of
The Manitowoc Company, Inc.
(manufacturer serving
heavy construction, food service
and shipbuilding industries).
-20-
22
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
A. NMHG - Continued
NAME AGE CURRENT POSITION OTHER POSITIONS
Roger A. Jensen 54 Controller of NMHG (since From prior to 1989, Controller of
March 1990) Hyster.
Jeffrey C. Mattern 41 Treasurer of NMHG (since From August 1992, Treasurer of both
August 1992) Hyster and Yale. From prior to
1989 to July 1992, Assistant
Treasurer for Harnischfeger
Industries, Inc. (manufacturer
papermaking machinery, mining
and materials handling equipment).
Frank G. Muller 52 Vice President, President Americas From February 1993 to December
for NMHG (since May 1993) 1993 Vice President of Hyster and
Yale. From May 1992 to May 1993,
Vice President, Manufacturing,
Americas for NMHG. From prior to
1989 to May 1992, Vice President,
Manufacturing, Yale.
David M. Pollock 48 Vice President, Managing Director, From May 1992 to December 1993,
NMHG Europe (since May 1992) Vice President of Yale. From
October 1989 to May 1992, Vice
President, Managing Director,
Hyster Europe. From prior to 1989,
Vice President and Managing
Director, Hyster Europe Limited for
Hyster.
-21-
23
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
B. Hamilton Beach/Proctor-Silex
Name Age Current Position Other Positions
George C. Nebel 55 President and Chief Executive From January 1991 to December 1991,
Officer of Hamilton Beach/Proctor- President and Chief Operating
Silex (since January 1992) Officer of Hamilton Beach/Proctor-
Silex. From prior to 1989 to
December 1990, President and Chief
Executive Officer of Roadmaster
Corporation (manufacturer of
bicycles, fitness equipment and
junior riding products).
Judith B. McBee 46 Executive Vice President - From January 1990 to October 1990,
Marketing/Sales of Hamilton Executive Vice President -
Beach/Proctor-Silex (since Marketing/Sales of Proctor-Silex.
October 1990) From prior to 1989 to January
1990, Executive Vice President -
Marketing of Proctor-Silex
Charles B. Hoyt 46 Vice President - Finance and From August 1990 to October 1990,
Chief Financial Officer of Vice President and Chief
Hamilton Beach/Proctor-Silex Financial Officer of Proctor-
(since October 1990) Silex. From prior to 1989 to
August 1990, Vice President -
Finance and Treasurer of Yale.
Ronald C. Eksten 50 Vice President, General Counsel From prior to 1989 to December
and Secretary of Hamilton Beach/ 1991, Associate General Counsel,
Proctor-Silex (since December 1991) Continental Can Company, Inc. (an
international manufacturer of
packaging products).
Michael J. Morecroft 51 Vice President, Engineering/Product From January 1989 to October 1990,
Development of Hamilton Beach/ Vice President, Engineering of
Proctor-Silex (since October 1990) Hamilton Beach Inc.
Jack J. Pountney 65 Vice President - President, Proctor-Silex From prior to 1989, President,
Canada (since June 1993) Proctor-Silex Canada
Ronald A. Rosati 41 Vice President - Commercial Products From April 1990 to June 1991, Sales
(since July 1991) Operations Manager, Kraft
Foodservice (distributor to
foodservice industry). From
prior to 1989 to March 1990,
owner/operator Rocky
Rococo Pizza (two restaurants in
Gainesville, Florida).
James H. Taylor 36 Vice President and Treasurer of From September 1989 to October
Hamilton Beach/Proctor-Silex 1990, Vice President and
(since October 1990) Treasurer of Proctor-Silex. From
prior to 1989 to September 1989,
Corporate Treasurer of
Proctor-Silex.
-22-
24
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
C. NORTH AMERICAN COAL
NAME AGE CURRENT POSITION OTHER POSITIONS
Clifford R. Miercort 54 President of North American Coal
(since prior to 1989) and Chief
Executive Officer of North American
Coal (since April 1989)
H. Dean Jacot 51 Executive Vice President and From prior to 1989 to October 1989,
Chief Operating Officer of Vice President of North American
North American Coal (since Coal.
October 1989)
Herschell A. Cashion 51 Vice President - Business
Development of North American
Coal (since prior to 1989)
Thomas A. Koza 47 Vice President - Law and From prior to 1989 to July 1990,
Administration of North Vice President, General Counsel
American Coal (since October and Secretary of NACCO. From prior
1989); Secretary of North to 1989 to October 1989, Vice
American Coal (since prior to 1989) President and General Counsel of
North American Coal.
K. Donald Grischow 46 Controller of North American From prior to 1989 to April 1989,
Coal (since prior to 1989); and Assistant Treasurer of North
Treasurer of North American Coal American Coal.
(since April 1989)
-23-
25
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
D. KITCHEN COLLECTION
NAME AGE CURRENT POSITION OTHER POSITIONS
Randall D. Lynch 47 President and Chief Executive Officer of Kitchen From prior to 1989 to June 1991,
Collection (since June 1991) President of Kitchen Collection.
Randolph J. Gawelek 46 Executive Vice President and Secretary of Kitchen
Collection (since prior to 1989)
-24-
26
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
NACCO Industries, Inc. Class A common stock is traded on the New York
Stock Exchange. The ticker symbol is 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 stock for the
past two years are presented in the table below:
1993
-------------------------------------
SALES PRICE CASH
-------------------
HIGH LOW DIVIDEND
------ ------- --------
First quarter $55.00 - $44.00 16.0c.
Second quarter $58.25 - $50.00 16.5c.
Third quarter $52.13 - $43.63 16.5c.
Fourth quarter $52.00 - $42.00 16.5c.
1992
------------------------------------
Sales Price Cash
--------------------
High Low Dividend
------- ------- --------
First quarter $55.50 - $46.63 15.5c.
Second quarter $60.00 - $41.50 16.0c.
Third quarter $47.50 - $37.13 16.0c.
Fourth quarter $52.25 - $34.25 16.0c.
At December 31, 1993, there were approximately 900 Class A common
stockholders of record and 600 Class B common stockholders of record.
-25-
27
ITEM 6. SELECTED FINANCIAL DATA
NACCO Industries, Inc. and Subsidiaries
Year Ended December 31
--------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
-------------- ------------- ------------- ------------- --------------
(In thousands, except per share, percentage and employee data)
Total revenues $ 1,549,371 $ 1,483,779 $ 1,369,195 $ 1,384,993 $ 1,187,570
Operating profit $ 93,384 $ 101,280 $ 94,532 $ 106,484 $ 125,363
Income before extraordinary charge $ $11,593 $ 22,868 $ 20,038 $ 28,189 $ 55,820
Extraordinary charge, net-of-tax (3,292) (110,000)
------------- ------------ --------------- ---------------- ---------------
Net income (loss) $ 8,301 $ (87,132) $ 20,038 $ 28,189 $ 55,820
Total assets $ 1,642,493 $ 1,684,889 $ 1,629,663 $ 1,767,098 $ 1,724,767
Notes payable $ 357,788 $ 459,906 $ 442,279 $ 533,692 $ 605,874
Stockholders' equity $ 235,626 $ 238,316 $ 350,188 $ 353,293 $ 303,986
Total employees 10,879 10,497 9,858 11,111 10,725
Per share of stock:
Income before extraordinary
charge $ 1.30 $ 2.57 $ 2.26 $ 3.18 $ 6.29
Extraordinary charge, net-of-tax (0.37) (12.37)
-------------- ------------- --------------- --------------- ---------------
Net income (loss) $ 0.93 $ (9.80) $ 2.26 $ 3.18 $ 6.29
Cash dividends $ .655 $ .635 $ .615 $ .595 $ .575
Market value $ 51.50 $ 51.75 $ 47.50 $ 30.25 $ 55.50
Stockholders' equity $ 26.35 $ 26.67 $ 39.43 $ 39.79 $ 34.25
Return on stockholders' equity 5%* 7%* 6% 8% 21%
Average shares outstanding 8,938 8,891 8,878 8,877 8,874
* Based on net income before extraordinary charge.
-26-
28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL SUMMARY
Income before extraordinary charge for 1993 was $11.6 million, or
$1.30 per share, compared with income before extraordinary charge of $22.9
million, or $2.57 per share, in 1992. Net income for 1991 was $20.0 million,
or $2.26 per share. An extraordinary charge of $3.3 million, or $0.37 per
share, was recognized in 1993 resulting in net income of $8.3 million, or $0.93
per share. This extraordinary charge relates to the retirement of NACCO
Materials Handling Group's Hyster-Yale 12 3/8% subordinated debentures and is
discussed in more detail in Note B to the consolidated financial statements on
page F-11 and in this discussion and analysis on page 32.
In 1992 an extraordinary charge of $110.0 million, or $12.37 per
share, was recognized as a result of the Coal Industry Retiree Health Benefit
Act of 1992. The 1992 extraordinary charge is discussed in more detail in Note
B to the consolidated financial statements on page F-11 and in this discussion
and analysis on page 49.
ACCOUNTING CHANGE
The Company has adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109), effective January 1, 1993,
and has elected to retroactively apply its provisions to January 1, 1989, as
permitted by this Standard. Accordingly, retained earnings and net goodwill
have been adjusted as of January 1, 1991, to reflect the cumulative impact of
applying this Standard, and the consolidated financial statements and
subsidiary financial data for the years ending December 31, 1992 and 1991, have
been restated for the effects of SFAS 109. The adoption of this Standard is
discussed in more detail in Notes A and M to the consolidated financial
statements on pages F-10 and F-20.
SEGMENT INFORMATION
NACCO Industries, Inc. ("NACCO," the parent company) has four
operating subsidiaries, The North American Coal Corporation ("North American
Coal"), NACCO Materials Handling Group, Inc. ("NACCO Materials Handling
Group"), Hamilton Beach/Proctor-Silex, Inc. ("Hamilton Beach/Proctor-Silex"),
and The Kitchen Collection, Inc. ("Kitchen Collection"). These four
subsidiaries operate in distinct business environments, and the results of
operations and financial condition are best discussed at the subsidiary level.
Results by segment as reported in the financial statements are summarized in
Note P to the consolidated financial statements on page F-25.
-27-
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NACCO MATERIALS HANDLING GROUP
NACCO Materials Handling Group, 97% owned by NACCO, designs,
manufactures and markets forklift trucks and related service parts under the
Hyster and Yale brand names.
FINANCIAL REVIEW
The results of operations for NACCO Materials Handling Group were as
follows for the year ended December 31:
1993 1992 1991
------ ------ ------
(In millions)
Revenues
North America $645.4 $579.0 $499.2
Europe 220.5 251.5 264.1
Asia 42.3 35.4 27.3
------ ------ ------
$908.2 $865.9 $790.6
====== ====== ======
Operating profit
North America $ 40.3 $ 15.5 $ 2.2
Europe (2.4) 28.7 38.7
Asia 1.7 .8 .5
Eliminations (.7) .1
------ ------ ------
$ 39.6 $ 44.3 $ 41.5
====== ====== ======
Net income (loss) before
extraordinary charge $ (5.1) $ 1.3 $ 1.1
Extraordinary charge (3.3)
------ ------ ------
Net income (loss) $ (8.4) $ 1.3 $ 1.1
====== ====== ======
-28-
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NACCO MATERIALS HANDLING GROUP--Continued
FINANCIAL REVIEW--Continued
1993 COMPARED WITH 1992
The following schedule details the components of the changes in
revenues, operating profit and net income (loss) for 1993 compared with 1992:
Net
Operating Income
Revenues Profit (Loss)
-------- ---------- ---------
(In millions)
1992 $865.9 $44.3 $1.3
Increase (Decrease) in 1993 from:
Unit volume 49.8 7.1 4.7
Sales mix 15.1 1.2 .8
Average sales price 8.2 8.2 5.4
Service parts 6.4 6.6 4.4
Manufacturing cost (10.8) (7.1)
Other operating expense (.7) (.5)
Foreign currency translation (37.2) (16.3) (10.8)
Other income and expense (1.0)
Differences between effective and
statutory tax rates (1.8)
Change in statutory tax rate (.5)
Extraordinary item (3.3)
------ ------ --------
1993 $908.2 $39.6 $( 8.4)
====== ===== =======
Improved economic conditions in North America, partially offset by
continued weakness in most of Europe and Japan, resulted in increased unit
volume in 1993. While continued price discounting prevented significant price
improvements in 1993 in the forklift industry, pricing in North America and
Europe has been favorable when compared with 1992. Although sales mix changes
to higher-priced products in both North America and Europe during 1993 had a
favorable impact on revenues, the impact on operating profit was not
proportionate because mix shifted to lower-margin products. NACCO Materials
Handling Group also realized improved global market share in 1993.
Service parts business continued to recover in North America, which
included higher volumes and sales of higher-margin service parts resulting in a
favorable impact on revenues and operating profit. Higher revenues from the
North American service parts business were partially offset by weak European
markets. Favorable service parts mix, however, reduced the impact of lower
European volume on operating profit from the service parts business.
-29-
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NACCO MATERIALS HANDLING GROUP--Continued
FINANCIAL REVIEW--Continued
1993 COMPARED WITH 1992--Continued
Manufacturing costs were higher in 1993 compared with 1992 primarily
as a result of start-up costs associated with new product introductions and
unfavorable fixed manufacturing cost variances due to the level of production
volume in Europe. A weaker British pound sterling in 1993 compared with 1992
resulted in lower translated sales and profits in Europe. In addition, a
stronger Japanese yen in 1993 adversely affected operating profit because it
increased the cost of products and parts sourced from Japan.
1992 COMPARED WITH 1991
The following schedule details the components of the changes in
revenues, operating profit and net income for 1992 compared with 1991:
Operating Net
Revenues Profit Income
-------- ------------ ------
(In millions)
1991 $790.6 $41.5 $1.1
Increase (Decrease) in 1992 from:
Unit volume 86.4 20.0 13.2
Sales mix (29.8) (14.3) (9.4)
Average sales price (3.7) (3.7) (2.4)
Service parts 11.5 5.3 3.5
Manufacturing cost 5.2 3.4
Reduction in restructuring reserve 1.5 1.0
Other operating expense (12.1) (8.0)
Foreign currency translation 10.9 .9 .6
Other income and expense 3.6
Differences between effective and
statutory tax rates (5.3)
------ -------- -----
1992 $865.9 $44.3 $1.3
====== ===== ====
Increased unit volume in 1992 was the result of economic improvement
in North America partially offset by softening markets in Europe and the Far
East. In addition, NACCO Materials Handling Group increased market share in
North America and Europe in 1992. Price discounting, which continued to be
prevalent in the forklift industry, and mix changes to lower margin-products,
primarily in Europe, reduced revenues and operating profits. The improvement
in results of operations from service parts was primarily due to increased
parts volume. Manufacturing costs decreased due to reductions in overhead from
continued savings realized from the consolidation of operations and higher
overall volume. Operating expenses increased as marketing programs for
existing and new products and new product development programs were implemented
in 1992.
-30-
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NACCO MATERIALS HANDLING GROUP--Continued
FINANCIAL REVIEW---Continued
OTHER INCOME AND EXPENSE
Below is a detail of other income and expense for the year ended
December 31:
1993 1992 1991
------ ------ ------
(In millions)
Other income (expense)
Interest income $ .8 $ 1.5 $ 4.8
Interest expense (40.4) (44.2) (49.5)
Other-net (1.7) 2.9 ( .5)
------ ------ ------
$(41.3) $(39.8) $(45.2)
------ ------ ------
------ ------ ------
Interest Income
The decrease in interest income in 1993 compared with 1992 is due
primarily to lower levels of excess cash available for investment. The
substantial reduction in interest income in 1992 compared with 1991 is the
result of lower levels of excess cash available for investment, primarily in
Europe, and lower interest rates.
Interest Expense
The debt restructuring and equity infusion in 1993 reduced outstanding
debt and lowered overall effective interest rates resulting in reduced interest
expense in 1993 (see the "Extraordinary Charge" discussion which follows). The
reduction in interest expense in 1992 compared with 1991 is due to lower levels
of debt and lower interest rates.
Other-Net
Other-net for 1993 is expense of $1.7 million compared with income of
$2.9 million in 1992 and expense of $0.5 million in 1991. Other-net consists
primarily of equity in the earnings of the Sumitomo-Yale 50% owned joint
venture (S-Y) and gains and losses on the sale of assets. The increase in the
value of the Japanese yen compared with other global currencies and depressed
European and Japanese markets resulted in significant losses of approximately
$3.9 million at S-Y in 1993. During the second quarter of 1993 NACCO Materials
Handling Group sold its former manufacturing site in Wednesfield, England for
$3.3 million resulting in a net pretax gain of $2.1 million. During 1992 NACCO
Materials Handling Group experienced foreign currency exchange gains due to the
decrease in the value of the British pound sterling compared with other
currencies. During 1993 these exchange gains were not repeated. In 1993 NACCO
Materials Handling Group hedged this exposure. Other-net was also favorably
affected in 1992 by reduced losses from retail branch operations classified as
net assets held for sale.
-31-
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NACCO MATERIALS HANDLING GROUP--Continued
FINANCIAL REVIEW--Continued
PROVISION FOR INCOME TAXES
Below is a detail of income (loss) before income taxes, provisions
(benefit) for income taxes and the effective tax rate for the year ended
December 31:
1993 1992 1991
---- ---- ----
(In millions, except percentage data)
Income (loss) before income taxes and
extraordinary charge $(1.7) $4.5 $(3.7)
Provision (benefit) for income taxes $ 3.4 $3.2 $(4.8)
Effective tax rate Not meaningful 70.7% (128.5)%
Expenses not deductible for tax purposes, which primarily include
amortization of goodwill associated with the acquisition of Hyster Company,
were approximately level in 1993, 1992 and 1991. These non-deductible expenses
increased the effective tax rate above statutory levels and resulted in a tax
provision in 1993 despite a loss before income taxes. In addition, NACCO
Materials Handling Group began providing for U.S. taxes in 1993 on foreign
earnings taxed at overall lower rates in anticipation of future repatriations.
Due to higher levels of pretax income in 1992, the non-deductible expenses had
a smaller impact on the effective tax rate in 1992. In addition, the tax
benefit reported in 1991 includes a favorable adjustment related to estimated
income tax liabilities for prior years of $2.6 million. No such adjustment was
required in 1992 or 1993.
EXTRAORDINARY CHARGE
The extraordinary charge in 1993 of $3.3 million, net of $2.0 million
in tax benefits, was recognized in the second quarter of 1993. This charge
represents the loss from the write-off of premiums and unamortized debt
issuance costs associated with the retirement of approximately $50.2 million
face value of NACCO Materials Handling Group's Hyster-Yale 12-3/8% subordinated
debentures. NACCO Materials Handling Group retired the debentures as a result
of a contribution by NACCO of previously purchased subordinated debentures
with a face value of $23.7 million, and an equity infusion of $28.3 million
($26.7 million from NACCO) which enabled NACCO Materials Handling Group to call
approximately $26.5 million face value of subordinated debentures at a price of
107.5. Refer to Note G, "Revolving Credit Agreements and Notes Payable," for
additional information.
BACKLOG
NACCO Materials Handling Group's backlog of orders at December 31,
1993, was approximately 12,100 forklift truck units, compared with 12,100 and
10,100 units at December 31, 1992 and 1991, respectively. While retail
customer order demand grew in North America during 1993, dealers have remained
cautious in placing future factory orders, and factory-to-dealer delivery
lead-times have been reduced resulting in level backlog between years. During
1992 backlog increased significantly in North America, while Europe and the
Far East continued to experience reduced levels of backlog. The market
declines experienced in North America and in most European countries during
1991 resulted in lower 1991 backlog.
-32-
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NACCO MATERIALS HANDLING GROUP--Continued
1994 OUTLOOK
Historically, the forklift truck industry has been cyclical. Economic
conditions in the various markets in which the industry's customers operate
affect demand. Current external economic forecasts and recent factory order
information indicate continued economic improvement in North America. However,
Europe and Japan continue to be plagued by recessionary pressures. While no
near-term economic recovery is forecast for these regions, improvements in the
North American economy and favorable worldwide interest rates should lead to a
global recovery.
NACCO Materials Handling Group will continue to introduce new products
in 1994. Improved profitability is dependent on continual efforts to reduce
costs.
LIQUIDITY AND CAPITAL RESOURCES
The previously discussed retirement of subordinated debentures, the
majority of which were retired during the third quarter of 1993, has been
reflected as a reduction in notes payable on the consolidated balance sheet as
of December 31, 1993. In connection with the retirement of these subordinated
debentures, NACCO Materials Handling Group amended its existing senior bank
credit agreement. This amendment permits equity infusions to be used for cash
purchases of subordinated debentures. In addition, after August 1994, the
amendment permits NACCO Materials Handling Group to use internally generated
funds to retire up to $75.0 million of additional subordinated debentures if
certain debt-to-capitalization ratios are achieved. The amendment also
modifies the bank loan repayment schedules and provides NACCO Materials
Handling Group with more favorable performance-based interest rate incentives.
The amendment to the bank loan repayment schedule reduced the required payments
in 1994 and 1995 by $35.0 million and $16.0 million, respectively. In
addition, the original 1996 installment has been increased by $0.7 million, and
the amended schedule requires a $50.3 million payment in 1997.
NACCO Materials Handling Group had available all of its $100.0 million
revolving credit facility at December 31, 1993.
Expenditures for property, plant and equipment were $20.2 million in
1993 and $24.3 million in 1992, and are anticipated to be approximately $25.0
million in 1994. The majority of these expenditures are for improvements in
manufacturing efficiencies and tooling related to the production of various new
products. Capital for these expenditures has been and is expected to be
provided primarily by internally generated funds and capital grants from local
governments.
-33-
35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NACCO MATERIALS HANDLING GROUP--Continued
LIQUIDITY AND CAPITAL RESOURCES--Continued
During 1993 NACCO Materials Handling Group repatriated $18.3 million
of unremitted earnings from certain foreign subsidiaries, which were used in
operations. Taxes associated with these earnings were previously provided for
financial reporting purposes. Future repatriations of foreign earnings may be
affected by changes in currency exchange rates and foreign and U.S. tax rates.
NACCO Materials Handling Group completed the sales of all of its
retail operations during 1992. Sales proceeds in 1992 of approximately $21.3
million, which resulted in net cash received of approximately $18.0 million
after the payment of taxes and expenses, were used to reduce bank debt.
-34-
36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
HAMILTON BEACH/PROCTOR-SILEX
Hamilton Beach/Proctor-Silex, 80% owned by NACCO, is a leading
manufacturer of small electric appliances. The housewares business is
seasonal. A majority of revenues and operating profit occurs in the second
half of the year when sales of small electric appliances increase significantly
for the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for Hamilton Beach/Proctor-Silex were as
follows for the year ended December 31:
1993 1992 1991
------ ------ -----
(In millions)
Revenues $356.3 $358.6 $351.9
Operating profit $ 11.8 $ 19.3 $ 20.3
Net income (loss) $ (1.0) $ 5.4 $ 2.5
1993 COMPARED WITH 1992
The following schedule details the components of the changes in
revenues, operating profit and net income (loss) for 1993 compared with 1992:
Net
Operating Income
Revenues Profit (Loss)
-------- ------------ --------
(In millions)
1992 $358.6 $19.3 $5.4
Increase (Decrease) in 1993 from:
Unit volume 14.3 3.8 2.4
Sales mix (10.2) (2.6) (1.7)
Average sales price (3.5) (3.5) (2.3)
Manufacturing cost (1.1) (.7)
Other operating expense (1.2) (.8)
Foreign currency translation (2.9) (2.9) (1.9)
Other income and expense (2.1)
Differences between effective and
statutory tax rates .5
Change in statutory tax rate .2
------ ----- -----
1993 $356.3 $11.8 $(1.0)
====== ===== =====
-35-
37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
HAMILTON BEACH/PROCTOR-SILEX--Continued
FINANCIAL REVIEW--Continued
1993 COMPARED WITH 1992--Continued
The higher volume is primarily the result of increased unit sales of
coffeemakers, blenders, steam grills, food processors, toaster ovens and
commercial roasters. A significant decrease in unit sales of juice extractors
has offset the increases in other product lines. The adverse sales mix is the
result of the reduced juice extractor sales, which yielded improved margins in
1992, and a shift away from sales of full-size irons. In addition, the
increased volume in blenders, food processors, toaster ovens and coffeemakers
was primarily in opening price-point models. Foreign currency translation
negatively influenced operating results in 1993 due to the drop in the value of
the Canadian dollar to the U.S. dollar. The increase in other operating
expense in 1993 is primarily the result of higher marketing and selling costs.
1992 COMPARED WITH 1991
The following schedule details the components of the changes in
revenues, operating profit and net income for 1992 compared with 1991:
Operating Net
Revenues Profit Income
-------- ------------ ------
(In millions)
1991 $351.9 $20.3 $2.5
Increase (Decrease) in 1992 from:
Unit volume 18.7 5.2 3.5
Sales mix (8.1) (2.2) (1.5)
Average sales price (3.9) (3.9) (2.6)
Manufacturing cost (1.3) (.8)
Other operating expense 1.2 .8
Other income and expense 3.5
------ ----- ----
1992 $358.6 $19.3 $5.4
====== ===== ====
Improved unit volume performance resulted primarily from a significant
increase for 1992 in sales of juice extractors and increased sales of toasters
and certain other products. The unit volume improvement was tempered somewhat
by decreased sales of blenders and close-out products as compared with 1991.
Increased sales of opening price-point models, primarily in the coffeemaker,
toaster oven, iron and toaster product lines, and continued price competition
in the housewares industry have reduced average selling prices. Reductions in
other operating expenses resulted primarily from additional efficiencies gained
from the merger of Hamilton Beach and Proctor-Silex which reduced selling and
administrative expenses.
-36-
38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
HAMILTON BEACH/PROCTOR-SILEX--Continued
FINANCIAL REVIEW--Continued
OTHER INCOME AND EXPENSE
Below is a detail of other income and expense for the year ended
December 31:
1993 1992 1991
------ ------ ------
(In millions)
Other income (expense)
Interest expense $ (7.7) $ (8.6) $(12.8)
Other-net (4.1) (1.1)
------ ------- ------
$(11.8) $ (8.6) $(13.9)
====== ======= ======
Interest Expense
The reduction in interest expense in 1993 compared with 1992 is due to
lower levels of borrowings. The reduction in interest expense in 1992 compared
with 1991 is due to lower interest rates and improved levels of working
capital. Hamilton Beach/Proctor-Silex received the maximum reductions
available to its interest rates during 1993 when certain ratios were achieved.
Other-Net
The increase in other-net in 1993 results primarily from the
settlement of certain litigation during the year.
PROVISION FOR INCOME TAXES
Below is a detail of income before income taxes, provisions for income
taxes and the effective tax rate for the year ended December 31:
1993 1992 1991
--------- --------- -------
(In millions, except percentage data)
Income before income taxes -- $10.7 $6.4
Provision for income taxes $1.0 $ 5.3 $3.9
Effective tax rate Not meaningful 50.0% 60.2%
Expenses not deductible for tax purposes, which include amortization
of goodwill and other purchase price adjustments associated with the Hamilton
Beach and Proctor-Silex acquisitions, were approximately level in 1993, 1992
and 1991. These non- deductible expenses resulted in a tax provision in 1993
despite breakeven pretax earnings. Due to higher levels of pretax income in
1992 these non-deductible expenses had a smaller impact on the effective tax
rate in 1992 compared with 1991.
-37-
39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
HAMILTON BEACH/PROCTOR-SILEX--Continued
FINANCIAL REVIEW--Continued
1994 OUTLOOK
Hamilton Beach/Proctor-Silex expects 1994 total industry unit
shipments to be slightly lower than 1993 levels for most core products. During
1994, Hamilton Beach/Proctor-Silex expects to introduce a number of new and
redesigned products to better meet consumer demand and to improve its product
placements. Improved profitability is dependent on continual efforts to
reduce costs.
LIQUIDITY AND CAPITAL RESOURCES
The Hamilton Beach/Proctor-Silex credit agreement requires that a
portion of annual excess cash flow that is generated, as defined in the
agreement, be used to prepay the term note. Accordingly, Hamilton Beach/
Proctor-Silex prepaid $4.7 million of its 1997 installment in February 1993,
$5.0 million of the 1997 installment in September 1992 and $4.7 million of the
1997 installment and $2.0 million of the 1993 installment in March 1992. As a
result of effective working capital management, the revolving credit facility
was reduced to $95.0 million in the second quarter of 1993, the availability of
which is determined based on percentages of eligible accounts receivable and
inventory. As of December 31, 1993, $26.1 million of the revolving credit
facility was available.
Expenditures for property, plant and equipment were $12.2 million in
1993 and $10.8 million in 1992, and are anticipated to be approximately $14.0
million in 1994. The primary focus of these expenditures is to increase
manufacturing efficiency and to acquire tooling for new and existing products.
Capital for these expenditures has been and is expected to be provided
primarily by internally generated funds and short-term borrowings.
-38-
40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
NORTH AMERICAN COAL
North American Coal mines and markets lignite for use primarily as
fuel for power generation by electric utilities and general industry. The
lignite is surface mined in North Dakota, Texas and Louisiana. Total coal
reserves approximate 2.2 billion tons, with 1.4 billion tons committed to
electric utility customers pursuant to long-term contracts.
FINANCIAL REVIEW
Substantially all of North American Coal's operations are conducted by
project mining subsidiaries. These subsidiaries ship coal to utility customers
pursuant to long-term contracts, which expire between 2001 and 2013. These
long-term contracts provide for the sale of lignite based on actual cost plus a
profit per ton. The profit component is adjusted for the effects of inflation
as measured by government-published indices. Due to the cost-plus nature of
these contracts, revenues and operating profits are impacted by increases and
decreases in operating costs as well as sales tons. Net income, however, is
not significantly affected by changes in operating costs at these contract
mines.
The results for "Other mining operations" have been adjusted to
exclude the previously combined results of Bellaire Corporation, a
non-operating subsidiary of NACCO. Bellaire's results are reviewed on pages 48