Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1996 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
Incorporation or Organization) Identification No.)
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, 1997:
$281,774,337
Number of shares of Class A Common Stock outstanding at February 28, 1997:
6,511,054
Number of shares of Class B Common Stock outstanding at February 28, 1997:
1,692,326
DOCUMENTS INCORPORATED BY REFERENCE
(a) The Company's Proxy Statement for its 1997 annual meeting of
stockholders is incorporated herein by reference in Part III.
2
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 98%
of the outstanding capital stock of Hyster-Yale Materials Handling, Inc.
("Hyster-Yale"), which is the parent company of NACCO Materials Handling Group,
Inc. (For convenience of reference NACCO Materials Handling Group, Inc. and
Hyster-Yale hereinafter referred to as "NMHG"). NMHG markets two full lines of
forklift trucks and related service parts under the Hyster(R) and Yale(R) brand
names. NMHG accounted for 69% and 55% of NACCO's revenues and operating profits,
respectively, in 1996.
(b) HAMILTON BEACH-PROCTOR-SILEX. The Company's wholly owned
subsidiary, Hamilton Beach-Procter-Silex, Inc. ("Hamilton
Beach-Procter-Silex"),is one of the nation's leading manufacturers and marketers
of small electric kitchen appliances. Hamilton Beach-Procter-Silex accounted for
17% and 19% of NACCO's revenues and operating profits, respectively, in 1996.
(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 also
provides dragline mining services for a limerock quarry near Miami, Florida.
North American Coal accounted for 11% and 31% of NACCO's revenues and operating
profits, respectively, in 1996.
(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 2% of NACCO's revenues and operating
profits, respectively, in 1996.
Additional information relating to financial and operating data on a
segment basis (including NACCO and Other, which reduced operating profits by 7%
in 1996) is set forth in Management's Discussion and Analysis of Results of
Operations and Financial Condition, including Notes thereto, on pages 21 through
40 contained in Part II hereof and in Note 16 to the Consolidated Financial
Statements on pages F-22 through F-25 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.
SIGNIFICANT EVENTS
In April 1996, Hamilton Beach-Procter-Silex announced plans to build a
new facility in Mexico to increase manufacturing capacity for new and existing
products. Construction on the new facility located in the Satillo/Monterey area
began in May 1996 and the facility is scheduled to begin production during the
second quarter of 1997. The new facility is expected to allow Hamilton
Beach-Procter-Silex to compete more effectively with low-cost Chinese
manufacturers.
On July 31, 1996, NMHG completed the acquisition of ORMIC, S.p.a.
("Ormic"), an Italian manufacturer of warehouse equipment, with approximately
$36 million in sales. In combination with the 1995 acquisition of DECA, S.r.l.
("DECA"), another Italian warehouse equipment company, this provides NMHG with a
strong base of product to serve the large European warehouse equipment market.
On October 18, 1996, the Company's wholly owned subsidiary, Housewares
Holding Company, Inc. ("Houseware Holding"), purchased the 20 percent indirect
minority ownership interest in Hamilton Beach-Procter-Silex from Glen Dimplex,
an unlimited corporation incorporated in the Republic of Ireland, for $33.6
million. The Shareholders Agreement between the Company and Glen Dimplex
provided Glen Dimplex with certain rights to dispose of it's interest in
Hamilton Beach-Procter-Silex, including the right, at its sole option, to offer
its interest to Housewares Holding at a purchase price determined pursuant to
the Shareholders Agreement. As a result of this purchase, the Company now owns
100 percent of Hamilton Beach-Procter-Silex. This purchase was funded by
borrowings under the Hamilton Beach-Procter-Silex credit facility, which was
increased to $160 million to accommodate the purchase.
On November 15, 1996, the Company announced a 1.5 million share
repurchase program. The first portion of the repurchase program consisted of a
"Dutch auction" issuer tender offer to purchase up to 800,000 shares of Class A
common stock at a purchase price of not less than $43.50 and not greater than
$50.00 per share. On December 23, 1996, the Company repurchased 800,000 shares
at $50.00 per share, which represented approximately 11 percent of the
outstanding Class A common stock. As a second phase of the repurchase program,
the Company is further authorized to purchase an additional 700,000 shares of
Class A common stock pursuant to an open market purchase program during the next
two fiscal years. If fully implemented, the
2
3
shares purchased through the repurchase program would constitute approximately
21 percent of the outstanding Class A common stock prior to the initiation of
the repurchase program.
In December 1996, North American Coal was the successful bidder for two
long-term coal mining projects, the San Miguel Lignite Project in south Texas
and Phillips Coal Company's Lignite Project in Mississippi. North American Coal
will provide mining services to the San Miguel Electric Cooperative, under a
contract for 10 1/2 years, beginning in the third quarter of 1997. In addition,
North American Coal was chosen by Phillips Coal Company to be its 25% joint
venture partner to develop a new lignite mine. The joint venture agreement and
the 30 year lignite sales contract between the joint venture and the power
facility are currently being finalized. Commencement of the commercial operation
of the facility is scheduled for the year 2000.
Effective March 4, 1997, Frank B. O'Brien resigned as Senior Vice
President - Corporate Development and Chief Financial Officer of the Company.
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 55% and 43% of NACCO's assets
and liabilities, respectively, as of December 31, 1996, while its operations
accounted for 69% and 55% of NACCO's revenues and operating profits,
respectively, in 1996.
THE INDUSTRY
Forklift trucks are used in a wide variety of business applications
including manufacturing and warehousing. The materials handling industry,
especially in industrialized nations, is generally a mature industry, which has
historically been cyclical. Fluctuations in the rate of orders for forklift
trucks reflect the capital investment decisions of the customers, which in turn
depend upon the general level of economic activity in the various industries
served by such customers.
Since 1991, the worldwide market for forklift trucks has gradually
increased to approximately 450,000 units. During this time, however, individual
geographic markets have been subject to cyclicality. The North American market
for forklift trucks peaked in 1995 and began a cyclical downturn in 1996. The
European market reversed a declining trend in 1994, peaked in 1995 and
exhibited a slight decline in 1996. The Japanese market reversed a declining
trend in 1994 and has since exhibited modest growth. The market in Asia-Pacific
(outside of Japan) continued steady growth in 1996.
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 provides all design, manufacturing and administrative
functions. Products are marketed and sold through two separate dealer networks
which retain the Hyster and Yale identities. In Japan, NMHG 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 and
which are exported for sale by NMHG and its affiliates in the U.S., Europe and
Asia-Pacific.
NMHG continued to expand its presence in the European market through
the acquisition of Ormic, an Italian manufacturer of warehouse equipment. In
combination with the 1995 acquisition of DECA, another Italian warehouse
equipment company, NMHG can now provide a full line of Hyster and Yale warehouse
equipment for the European market.
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 84%, 85% and 82% of NMHG's net sales in 1996, 1995 and 1994,
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 and Yale forklift trucks now in
service provides a market for service parts. In addition to parts for its own
forklift trucks, NMHG has a program in North America (termed UNISOURCE(TM)) and
in Europe (termed MULTIQUIP(TM)) 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
Europe. Accordingly, NMHG dealers can offer their mixed fleet customers a "one
stop" supply source. Certain of these parts are manufactured by and
3
4
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 16%, 15% and 18% of NMHG net sales in 1996, 1995 and
1994, respectively. For further information on geographic regions see Note 16 to
the Consolidated Financial Statements on pages F-22 through F-25 contained in
Part IV hereof.
COMPETITION
The forklift truck industry is highly competitive. The worldwide
competitive structure of the industry is fragmented by product line and country;
however, the three largest manufacturers have a significantly greater market
position on a unit volume basis than the other manufacturers. The principal
methods of competition among forklift truck manufacturers are product
performance, price, service and distribution networks. The forklift truck
industry 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 the leading manufacturer of forklift trucks in the
world, based on number of lift trucks sold.
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.
Although NMHG's current market share in the Asia-Pacific and Japanese markets is
lower than in other geographic areas, these markets have been targeted for
additional market share growth. The Japanese market reversed a declining trend
in 1994 and has since exhibited modest growth. The market in Asia-Pacific
(outside of Japan) continued a steady growth in 1996.
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 1996 range from 4.48% to 56.81%
depending on manufacturer or importer. The antidumping duty rate applicable to
imports from S-N is 51.33%, and is likely to continue unchanged for the
foreseeable future, unless S-N 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 (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 revocation of the order. The legislation implementing the Uruguay round of
GATT negotiations passed in 1994 provides that the antidumping 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. NMHG cannot predict with any certainty if there has been
or will be any negative effects to it resulting from the Japanese sourcing of
their forklift products in the United States.
B. EUROPE
From 1986 through 1994, 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. These informal
restraints terminated in 1995. 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 has been or will be any negative effects to
NMHG resulting from the Japanese sourcing of their forklift products in Europe.
PRODUCT DESIGN AND DEVELOPMENT
NMHG spent $23.3 million, $24.2 million and $23.2 million on product
design and development activities in 1996, 1995 and 1994, 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-N. S-N spent
approximately $4.2 million, $3.8 million and $4.5 million on product design and
development in 1996, 1995 and 1994, respectively.
4
5
BACKLOG
As of December 31, 1996, NMHG's backlog of unfilled orders for forklift
trucks was approximately 11,700 units, or $219 million, of which substantially
all is expected to be filled during fiscal 1997. This compares to the backlog
as of December 31, 1995 of approximately 21,200 units, or $385 million. A
softening of demand for forklift trucks in 1996 caused backlog levels to
decline as dealers sought to reduce inventory. 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 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 portion 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. In addition, the company
has an internal sales force for each brand to sell directly to major customers.
In Japan, forklift truck products are distributed by S-N. In 1995, Yale
reached agreement with Jungheinrich Aktiengesellschaft ("Jungheinrich"), a
German manufacturer of forklift trucks, to terminate Jungheinrich's distribution
of Yale brand products in Germany and Austria at the end of 1996. By mid-1997,
NMHG will cease to provide to Jungheinrich certain ICE and electric-powered
products for sale in other major European countries under the Jungheinrich brand
name. Yale is establishing a new distribution network in Germany and has begun
appointing German dealers. The company's management does not believe that the
termination of its relationship with Jungheinrich will have a materially adverse
effect on NMHG.
FINANCING OF SALES
Hyster U.S. dealer and direct sales of Hyster products in the U.S. 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 20% stockholder of Yale Financial Services, Inc., a
subsidiary of General Electric Capital Corporation, which offers U.S. dealers of
Yale products 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, 1997, NMHG had approximately 6,350 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 expires in June 1997. A three-year
contract with the Portland tool room union expires in October 1997. 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 generally satisfactory and that it will be able to
renew the domestic union contracts in 1997 on acceptable terms.
GOVERNMENT REGULATION
NMHG'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's
products are also subject to various industry and governmental standards. NMHG's
management believes that the impact of expenditures to comply with such
requirements will not have a material adverse effect on NMHG.
5
6
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 55 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
150 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.
FOREIGN OPERATIONS
For a description of net sales and other financial information by
geographic region, see footnote 16 to the Company's Consolidated Financial
Statements on pages F-22 through F-25 contained in Part IV hereof.
B. HAMILTON BEACH-PROCTOR-SILEX
GENERAL
Hamilton Beach-Procter-Silex believes that it is the largest full-line
manufacturer and marketer of small electric kitchen appliances in North America
based on market share of key product categories. Hamilton Beach-Procter-Silex's
products are marketed primarily to retail merchants and wholesale distributors.
Hamilton Beach-Procter-Silex accounted for 16% and 11% of NACCO's assets and
liabilities, respectively, as of December 31, 1996, while its operations
accounted for 17% and 19% of NACCO's revenues and operating profits,
respectively, in 1996.
SALES AND MARKETING
Hamilton Beach-Procter-Silex manufactures and markets a wide range of
small electric kitchen appliances, including motor driven appliances such as
blenders, food processors, mixers and electric knives, and heat-generating
appliances such as toasters, irons, coffeemakers and toaster ovens. The company
markets its "better"/"best" categories under the Hamilton Beach(R) brand and
uses the Proctor-Silex(R) brand for the "good" and "better" categories. The
company markets its products primarily in North America, but also sells products
in South America, Latin America, Asia and Europe. Sales are generated
predominantly by a network of inside sales employees to mass merchandisers,
national department stores, catalog showrooms, warehouse membership clubs,
variety store chains, drug store chains and other retail outlets. Principal
customers include Wal-Mart, Kmart, Target, Canadian Tire, Caldor, Montgomery
Ward, Zellers and SAM's Club. Sales promotional activities are primarily focused
on cooperative advertising.
Because of the seasonal nature of the markets for small electric
appliances, Hamilton Beach-Procter-Silex's management believes that backlog is
not a meaningful indicator of performance and is not a significant indicator of
annual sales. Backlog of orders as of December 31, 1996 was approximately $8.4
million. This compares with the aggregate backlog as of December 31, 1995 of
approximately $4.6 million. This backlog represents customer orders; customer
orders may be canceled at any time prior to shipment.
Hamilton Beach-Procter-Silex's warranty program to the consumer
consists generally of a limited warranty lasting for two years for electric
appliances. Under its warranty program, the company may repair or replace, at
its option, those products found to contain manufacturing defects.
Revenues and operating profit for Hamilton Beach-Procter-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-Procter-Silex
incurs substantial short-term debt to finance inventories and accounts
receivable.
PRODUCT DESIGN AND DEVELOPMENT
Hamilton Beach-Procter-Silex spent $3.7 million in 1996, $3.3 million
in 1995 and $2.7 million in 1994 on product design and development activities.
SOURCES
The principal raw materials used to manufacture and distribute Hamilton
Beach-Procter-Silex's products are steel, aluminum, plastics and packaging
materials. The company's management believes that adequate quantities of raw
materials are available from various suppliers.
COMPETITION
The small electric kitchen appliance industry is highly competitive.
Based on publicly available information about the industry, Hamilton
Beach-Procter-Silex's management believes it is the largest full-line
manufacturer and marketer of small kitchen appliances in North America based on
key product categories.
As retailers generally purchase a limited selection of small electric
appliances, Hamilton Beach-Procter-Silex competes with other suppliers for
retail shelf space and focuses its primary marketing
6
7
efforts on retailers rather than consumers. In 1996, the company also initiated
consumer advertising for the Hamilton Beach brand. 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-Procter-Silex's management believes that it is
competitive in all of these areas.
GOVERNMENT REGULATION
Hamilton Beach-Procter-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-Procter-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-Procter-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, 1997, Hamilton Beach-Procter-Silex's work force
consisted of approximately 3,700 employees, none of which is currently
represented by unions except for approximately 20 hourly employees at the
Picton, Ontario facility. The Picton, Ontario employees are represented by an
employee association which performs a consultative role on employment matters.
On January 17, 1997, a collective bargaining agreement was executed for
the Saltillo manufacturing facility currently under construction. The company
expects to hire approximately 300 employees within the next six months who will
be subject to the terms of this agreement
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. North American Coal also provides dragline mining services for a limerock
quarry near Miami, Florida. At December 31, 1996, 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
where 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 8
to the Consolidated Financial Statements on pages F-15 and F-16 contained in
Part IV hereof. Project mining subsidiaries accounted for 22% and 30% of NACCO's
assets and liabilities, respectively, as of December 31, 1996, while their
operations accounted for 11% and 31% of NACCO's revenues and operating profits,
respectively, in 1996.
SALES, MARKETING AND OPERATIONS
The principal customers of North American Coal are electric utilities
and a synfuels plant. In 1996, sales to one customer, which supplies coal to
four facilities, accounted for 57% of North American Coal's revenues compared
with 46% and 45% in 1995 and 1994, respectively. The distribution of sales in
the last five years has been as follows:
DISTRIBUTION
------------
TOTAL
TONS SOLD ELECTRIC SYNFUELS
(MILLIONS) UTILITIES PLANT
---------- --------- -----
1996 27.6 77% 23%
1995 26.7 76% 24%
1994 27.2 76% 24%
1993 26.5 75% 25%
1992 24.5 74% 26%
7
8
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. North American Coal does not know of any
conditions of default that currently exist.
The location, mine type, reserve data, ore characteristics, customer,
sales tonnage and contract expiration date for the mines operated by North
American Coal in 1996 were as follows:
8
9
DEVELOPED LIGNITE MINING OPERATIONS
-----------------------------------
PROVEN AND PROBABLE RESERVES
(MILLIONS OF TONS)(1)
---------------------
Committed
under
Project Mining Subsidiares Mine Location Type of Mine Contract Uncommitted
-------------------------- ---- -------- ------------ -------- -----------
The Coteau Properties Company Freedom Mine(2) Beulah, ND Surface Lignite 526.4 ----
The Falkirk Mining Company Falkirk Mine (2) Underwood, ND Surface Lignite 566.9 ----
The Sabine Mining Company South Hallsville Hallsville, TX Surface Lignite (4) (4)
No. 1 Mine (2)
Other
-----
Red River Mining Company (5) Oxbow Mine Coushatta, LA Surface Lignite 8.7 (6) 15.9
---- ----
Total Developed 1,102.0 15.9
Undeveloped Mining Operations
-----------------------------
North Dakota ---- ---- ---- ---- 591.2
Texas ---- ---- ---- ---- 225.8
Eastern ---- ---- ---- 86.8 106.4
---- -----
Total Undeveloped 86.8 923.4
Total Developed/ 1,188.8 939.3
Undeveloped
Average Average Sulfur 1996 Sales
BTUs Content Per Unit Tonnage Contract
Project Mining Subsidiares Per Pound of Weight Customer(s) (Plant) (Millions) Expires
-------------------------- --------- --------- ------------------- ---------- -------
The Coteau Properties Company 6,767 0.8% Dakota Coal Company 6.3 2007(3)
(Great Plains Synfuels Plant)
Dakota Coal Company 5.2 2007(3)
(Antelope Valley Station)
Dakota Coal Company 3.2 2007(3)
(Leland Olds Station)
Dakota Coal Company 0.9 1997
(Stanton Station of
United Power
Association)
The Falkirk Mining Company 6,200 0.6% United Power Association/ 7.2 2020
Cooperative Power Association
(Coal Creek Station)
The Sabine Mining Company (4) (4) Southwestern Electric Power 4.0 2020
Company
(Henry W. Pirkey Power Plant)
Other
-----
Red River Mining Company (5) 6,722 0.7% Central Louisiana Electric 0.8 (7) 2010
Company/ Southwestern Electric
Power Company
(Dolet Hills Power Plant)
Undeveloped Mining Operations
-----------------------------
North Dakota 6,428 0.7% ---- ---- ----
Texas 6,208 0.9% ---- ---- ----
Eastern 12,070 3.3% ---- ---- ----
(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) Joint venture with Phillips Coal Company.
(6) These amounts represent the total (100%) of the joint venture reserves.
(7) These amounts represent the total (100%) of the 1996 joint venture tonnage.
9
10
Under terms of a lignite mining agreement entered into in 1985 with
Houston Lighting & Power Company ("HL&P") (as successor to Utility Fuels, Inc.),
a subsidiary of Houston Industries Incorporated, North American Coal was
retained to design, develop, construct and operate the proposed Trinity Mine in
the Malakoff-Cayuga reserves near Malakoff, Texas. The Trinity Mine was expected
to produce from 4.5 to 6.5 million tons of lignite annually. After several
delays, however, the proposed Malakoff Generating Station was canceled in July
1994. North American Coal and its wholly owned subsidiary, North American Coal
Royalty Company ("Royalty Company"), 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 HL&P was no longer obligated to pay minimum royalties
to Royalty Company. 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
2005.
Under the lignite mining agreement with HL&P, North American Coal had
been receiving annual management fees. HL&P accelerated payment of the final
management fee of $2.6 million, after-tax, into 1995. In December 1995, HL&P
also terminated the lignite mining agreement and North American Coal will no
longer receive such management fees. Termination of this obligation reduces
North American Coal's annual net income approximately $5.3 million, after-tax
compared with 1995 levels.
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 1997 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 $1.8 million for
certain closed mines and are included in the caption "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 or
"unbundle" their gas sales and gas transportation functions. Effectively, order
636 forced pipelines to abandon their traditional merchant function meaning that
the nation's natural gas pipeline companies, including the four which purchase
gas produced by the Great Plains Synfuels Plant ("the Synfuels Plant"), which is
supplied by 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. In 1994, the four pipeline companies that purchase gas from
the Synfuels Plant each reached a tentative settlement agreement with the
plant's operator, Dakota Gasification Company ("DGC"), and the U.S. Department
of Energy ("DOE") over the dispute regarding the pipeline companies' gas
purchase contracts. The FERC approved these settlement agreements by order of
December 18, 1996. No requests for a rehearing were filed meaning the order
became final and unappealable. The settlements resolve all pricing disputes for
past periods and establishes a new pricing formula for future gas sales.
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 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 North
American Coal believes that it is the eighth largest commercial coal producer in
the United States.
EMPLOYEES
As of February 28, 1997, North American Coal had approximately 910
employees.
10
11
D. KITCHEN COLLECTION
Kitchen Collection is a national specialty retailer of kitchenware,
small electric appliances and related accessories which operated 144 retail
stores as of February 28, 1997. 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(R) and
Proctor-Silex(R).
As the outlet channel of the retail industry is approaching maturity,
the management of Kitchen Collection continues to explore alternate areas of
growth and diversification. Kitchen Collection has tested several store formats
both within the outlet industry and the more traditional retail environments.
Many of these formats have failed to meet the company's rigorous financial
performance standards. Kitchen Collection continues to explore alternate
channels of distribution, including distribution through the Internet.
Kitchen Collection accounted for 1% of NACCO's assets and liabilities
as of December 31, 1996, while its operations accounted for 3% and 2% of NACCO's
revenues and operating profits, respectively, in 1996.
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
Danville, Illinois X Hyster forklift truck marketing
and sales operations for the
Americas
Flemington, X Yale forklift truck marketing
New Jersey and sales operations for the
Americas and certain NMHG
engineering operations
Greenville, North X Manufacture of forklift trucks
Carolina and other staff operations for the
Americas
Irvine, Scotland X Manufacture of forklift trucks
and other staff operations for
the Europe
Lenoir, North X Manufacture of component
Carolina parts for forklift trucks
Masate, Italy X Manufacture of forklift trucks
Modena, Italy X Manufacture of forklift trucks
Nijmegen, The X Manufacture of forklift
Netherlands trucks and component parts;
distribution of service parts
for forklift trucks
11
12
Portland, Oregon X Technical center for testing
of prototype equipment and
component parts
Portland, Oregon X NMHG corporate 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 and
staff operations for Asia-
Pacific
Wolverhampton, X Yale forklift truck
England marketing and sales operations
for Europe
B. HAMILTON BEACHPROCTOR-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
- -------- ----- ------ ---------------------------
Collierville, X Distribution center
Tennessee
El Paso, Texas X Distribution center
Glen Allen, Virginia X Corporate headquarters
Juarez, Chihuahua, X Assembly of heat driven products(two plants);
Mexico plastic molding facility (one plant)
Mt. Airy, North X Manufacture of heat driven products
Carolina
Picton, Ontario, X Distribution center
Canada
Southern Pines, X Manufacture of iron components;
North Carolina service center for customer returns;
catalog sales center; parts
distribution center
Toronto, Ontario, X Proctor-Silex, Canada sales
Canada and administration
headquarters
Washington, North X Distribution and warranty center;
Carolina manufacture of motor driven products;
plastic molding facility
Saltillo, Mexico X Manufacture of heat driven and motor
products and plastic molding facility
(operational second quarter of 1997)
12
13
Sales offices are also leased in several cities in the United States
and Canada.
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 2.1 billion tons, approximately 82% of which are lignite deposits
in North Dakota. Reserves are estimates of quantities of coal, made by North
American'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
ore characteristics for North American Coal's properties are set forth on the
table on page 9 under "Item 1. Business -- C. North American Coal -- Sales,
Marketing and Operations."
D. KITCHEN COLLECTION
Kitchen Collection currently leases its corporate headquarters
building, a warehouse/distribution facility and a retail store in Chillicothe,
Ohio. The company also leases warehouse/distribution facilities in Chillicothe,
Ohio and the remainder of its retail stores. A typical store is approximately
3,300 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.
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) of Regulation S-K.
There exists no arrangement or understanding between any executive
officer and any other person pursuant to which such executive officer was
elected. Each executive officer serves until his successor is elected and
qualified.
The table on the following pages sets forth the name, age, current
position and principal occupation and employment during the past five years of
the Company's executive officers.
13
14
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Alfred M. Rankin, Jr. 55 Chairman, President, and From prior to 1992 to May 1994,
Chief Executive Officer President and Chief
of NACCO (since May 1994) Executive Officer of NACCO.
Charles A. Bittenbender 47 Vice President, General Counsel
and Secretary of NACCO (since
prior to 1992)
Kenneth C. Schilling 37 Controller of NACCO From July 1995 to May 1996, Manager
(since June 1996) of Tax and Budgeting of NACCO. From
prior to 1992 to May 1995, Manager
of Tax of NACCO.
J.C. Butler, Jr. 36 Manager of Corporate From May 1995 to May 1996, Manager
Development and Treasurer of Corporate Development of NACCO.
of NACCO (since June 1996) From prior to 1992 to 1995,
Associate at McFarland Dewey & Co.
(investment banking).
Suzanne Schulze Taylor 34 Senior Attorney and Assistant From February 1994 to May 1996,
Secretary of NACCO (since May Senior Attorney of NACCO. From
1996) prior to 1992 to February 1994,
Associate at Jones, Day, Reavis &
Pogue (law firm).
14
15
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
A. NMHG
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Reginald R. Eklund 56 President and Chief Executive From August 1993 to September 1993,
Officer of NMHG (since Vice President of Hyster and Yale.
September 1992) From September 1992 to August 1993,
President and Chief Executive
Officer of Hyster-Yale. From prior
to 1992 to September 1992, President
and Chief Operating Officer of NMHG.
From prior to 1992 to August 1993,
President and Chief Executive
Officer of Yale.
William C. Maxwell 50 Vice President, Finance and From March 1993 to August 1996, Vice
Chief Financial Officer of NMHG President Finance - Europe of NMHG.
(since August 1996) From prior to 1992 to February 1993,
Director of Business Planning of NMHG.
Julie C. Hui 40 Controller of NMHG (since From 1992 to January 1995,
January 1995) Controller, Burr Brown Corporation
(manufacturer of micro electronics and
systems products).
Geoffrey D. Lewis 39 Vice President, General From prior to 1992 to September 1995,
Counsel and Secretary of Senior Vice President, General Counsel
NMHG (since September 1995) and Corporate Secretary for American
Health Properties, Inc. (health care
facilities).
Jeffrey C. Mattern 44 Treasurer of NMHG (since From August 1992, Treasurer of
August 1992) Hyster and Yale. From prior to 1992 to
July 1992, Assistant Treasurer for
Harnischfeger Industries, Inc.
(manufacturer of papermaking machinery,
mining and materials handling
equipment).
Frank G. Muller 55 Vice President, President - From February 1993 to December
Americas for NMHG (since May 1993, Vice President of Hyster and Yale.
1993) From May 1992 to May 1993, Vice
President, Manufacturing, Americas for
NMHG. From prior to 1992 to May 1992,
Vice President, Manufacturing, Yale.
Victoria L. Rickey 44 Vice President, Managing From 1993 to January 1995,
Director, NMHG Europe (since Senior Vice President
January 1995) International Business Group, J.I. Case
(manufacturer of agricultural and
construction equipment). From prior to
1992 to 1993, Vice President,
Agricultural Equipment of J.I. Case.
Graham D. Tribe 54 Vice President, Managing From prior to 1992 to May 1994,
Director, NMHG Asia-Pacific Managing Director, Hyster
(since May 1994) Australia Pty. Ltd.
15
16
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
B. HAMILTON BEACHPROCTOR-SILEX
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Richard E. Posey 50 President and Chief Executive Officer From January 1993 to June 1994,
of Hamilton Beach-Procter-Silex (since Executive Vice President, Consumer
September 1995) Products, North America, S.C.
Johnson & Sons, Inc. (manufacturer
of consumer products).From prior to
1992 to December 1992, Executive Vice
President, Regional Director, Consumer
Products, S.C. Johnson & Sons, Inc.
Charles B. Hoyt 49 Senior Vice President - Finance From prior to 1992, Vice President -
and Chief Financial Officer of Finance and Chief Financial Officer of
Hamilton Beach-Procter-Silex Hamilton Beach-Procter-Silex.
(since January 1997)
Clark S. Leslie 63 Senior Vice President - Operations From March 1996 to December 1996, Vice
of Hamilton Beach-Procter-Silex President - Operations of Hamilton Beach-
(since January 1997) Proctor-Silex. From December 1993 to March
1996, General Manager, Washington, N.C.
plant, Hamilton Beach-Procter-Silex.
From prior to 1992 to December 1993,
Senior Vice President of Operations,
Esselt Pendaflex Corp. (manufacturer
of office supplies).
Michael J. Morecroft 54 Senior Vice President, Engineering/ From prior to 1992, Vice President.
President, Product Development of Engineering/ Product Development of
Hamilton Beach-Procter-Silex (since Hamilton Beach-Procter-Silex.
January Hamilton 1997)
Judith B. McBee 49 Senior Vice President - From October 1994 to December 1996,
Marketing of Hamilton Beach- Executive Vice President - Marketing
Proctor-Silex (since January 1997) of Hamilton Beach-Procter-Silex. From
prior to 1992 to September 1994,
Executive Vice President -
Marketing/Sales of Hamilton
Beach/Proctor Silex.
Paul C. Smith 50 Senior Vice President - Sales From prior to 1992 to September
of Hamilton Beach-Procter-Silex 1994, Vice President and General
(since October 1994) Manager, Consumer Markets
Division, Fuji Photo Film U.S.A.
(manufacturer of photographic
film).
George P. Manson, Jr. 43 Vice President, General Counsel and From March 1995 to July 1996, Corporate
Secretary of Hamilton Beach-Procter- Counsel of American Home Products Corp.
Silex (since July 1996) (healthcare and consumer products
manufacturer). From February 1994 to
January 1995, Assistant General Counsel,
A.T. Massey Coal Company (mining company).
From prior to 1992 to December 1993,
Corporate Counsel of American Home
Products Corp.
James H. Taylor 39 Vice President and Treasurer of
Hamilton Beach-Procter-Silex
(since prior to 1992)
16
17
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
C. NORTH AMERICAN COAL
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Clifford R. Miercort 57 President and Chief Executive Officer
of North American Coal
(since prior to 1992)
Herschell A. Cashion 54 Senior Vice President - Business From prior to 1992 to August 1994,
Development of North American Coal Vice President - Business
(since August 1994) Development of North American
Coal.
Charles B. Friley 55 Vice President and Chief Financial From April 1992 to October 1994,
Officer of North American Coal Senior Vice President of Phillips
(since February 1995) Alaska Natural Gas Company. From
prior to 1992 to April 1992, Vice
President of Phillips 66 Natural
Gas Company.
Thomas A. Koza 50 Vice President - Law and
Administration of North
American Coal; Secretary of
North American Coal
(since prior to 1992)
K. Donald Grischow 49 Controller and Treasurer of North
American Coal (since prior to 1992)
17
18
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
D. KITCHEN COLLECTION
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Randall D. Lynch 49 President and Chief Executive Officer
of Kitchen Collection (since prior to 1992)
Randolph J. Gawelek 49 Executive Vice President and Secretary
of Kitchen Collection (since prior to
1992)
18
19
PART II
ITEM 5. MARKET FOR NACCO INDUSTRIES, INC. COMMON STOCK AND RELATED SECURITY
HOLDERS' MATTERS
NACCO Industries, Inc. Class A common stock is traded on the New York Stock
Exchange under the ticker symbol NC. Because of transfer restrictions, no
trading market has developed, or is expected to develop, for the Company's Class
B common stock. The Class B common stock is convertible into Class A common
stock on a one-for-one basis. The high and low market prices for the Class A
common stock and dividends per share for both classes of stock for each quarter
during the past two years are presented in the table below:
1996
--------------------------------------------
SALES PRICE
------------------- CASH
HIGH LOW DIVIDEND
------ ------ -----------
First quarter $59.88 - $51.50 18.00(CENT)
Second quarter $64.00 - $54.63 18.75(CENT)
Third quarter $56.00 - $47.75 18.75(CENT)
Fourth quarter $55.00 - $43.13 18.75(CENT)
1995
--------------------------------------------
Sales Price
------------------- Cash
High Low Dividend
------ ------ -----------
First quarter $56.75 - $46.88 17.0(CENT)
Second quarter $64.00 - $53.63 18.0(CENT)
Third quarter $63.50 - $56.00 18.0(CENT)
Fourth quarter $60.50 - $55.25 18.0(CENT)
At December 31, 1996, there were approximately 700 holders of record of Class A
common stock and 500 holders of record of Class B common stock.
On February 20, 1997, the Company issued 12,985 shares of Class A common stock
to certain employees of the Company pursuant to the NACCO Industries, Inc.
Executive Long-Term Incentive Compensation Plan (the "Plan") These shares are
fully vested but are subject to a ten year restriction on transfer. The Plan is
further described in footnote 1 to the table "Item 1. Election of Directors -
Long-Term Incentive Plans" in the 1997 Proxy Statement.
19
20
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
NACCO Industries, Inc. and Subsidiaries
Year Ended December 31
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ----------- ----------
(In millions, except per share and employee data)
Total revenues $ 2,273.2 $ 2,204.5 $ 1,864.9 $ 1,549.4 $ 1,483.8
Operating profit $ 131.2 $ 148.7 $ 129.6 $ 88.5 $ 100.8
Income before extraordinary items $ 50.6 $ 65.5 $ 45.3 $ 11.6 $ 22.9
Extraordinary items:
Extraordinary gain, net-of-tax 32.3
Extraordinary charges, net-of-tax (3.4) (3.2) (3.3) (110.0)
--------- ---------- ---------- ---------- ----------
Net income (loss) $ 50.6 $ 94.4 $ 42.1 $ 8.3 $ (87.1)
========= ========== ========== ========== ==========
Total assets $ 1,708.1 $ 1,833.8 $ 1,694.3 $ 1,642.5 $ 1,684.9
Long-term debt $ 333.3 $ 320.2 $ 286.7 $ 357.8 $ 459.9
Stockholders' equity $ 379.3 $ 370.1 $ 279.4 $ 235.6 $ 238.3
Per share of stock:
Income before extraordinary items $ 5.67 $ 7.31 $ 5.06 $ 1.30 $ 2.57
Extraordinary items:
Extraordinary gain, net-of-tax 3.61
Extraordinary charges, net-of-tax (.38) (.36) (.37) (12.37)
--------- ---------- ---------- ---------- ----------
Net income (loss) $ 5.67 $ 10.54 $ 4.70 $ 0.93 $ (9.80)
========= ========== ========== ========== ==========
Cash dividends $ .743 $ .710 $ .675 $ .655 $ .635
Market value at December 31 $ 53.50 $ 55.50 $ 48.38 $ 51.50 $ 51.75
Stockholders' equity $ 46.34 $ 41.28 $ 31.21 $ 26.35 $ 26.67
Average shares outstanding 8.920 8.963 8.948 8.938 8.891
Total employees 11,800 12,300 11,100 10,900 10,500
20
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Tabular Amounts in Millions, Except Per Share, Unit, Store
and Percentage Data)
FINANCIAL SUMMARY
Income before extraordinary items for 1996 was $50.6 million, or $5.67 per
share, compared with income before extraordinary items of $65.5 million, or
$7.31 per share, in 1995 and $45.3 million, or $5.06 per share, in 1994. In
1995, an extraordinary gain of $32.3 million, net-of-tax, or $3.61 per share,
was recognized as a result of an adjustment to the obligation to the United Mine
Workers of America Combined Benefit Fund. Extraordinary charges of $3.4 million
and $3.2 million net-of-tax, or $0.38 per share, and $0.36 per share,
respectively, were recognized in 1995 and 1994 to reflect debt retirement and
debt restructuring costs at NACCO Materials Handling Group, Inc. These
extraordinary items are discussed in more detail in Note 3 to the consolidated
financial statements on page F-11 and in this discussion and analysis on page 30
and page 37. Net income was $50.6 million, or $5.67 per share, in 1996, $94.4
million, or $10.54 per share, in 1995 and $42.1 million, or $4.70 per share, in
1994.
The following schedule identifies the components of the changes in consolidated
revenues, operating profit and net income for 1996 compared with 1995:
Operating Net
Revenues Profit Income
-------- ------ ------
1995 $ 2,204.5 $ 148.7 $ 94.4
Increase (decrease) in 1996 from:
NMHG 50.0 (10.9) (8.4)
HB-PS 12.5 (.7) .2
NACoal 1.1 (5.5) (2.8)
KCI 5.3 (.2) (.1)
NACCO & Other (.2) (.2) (.6)
Difference between effective and
statutory tax rates (5.1)
Minority interest 1.9
Extraordinary items (28.9)
--------- ------- --------
1996 $ 2,273.2 $ 131.2 $ 50.6
========== ======= ========
SEGMENT INFORMATION
NACCO Industries, Inc. ("NACCO," the parent company) has four operating
subsidiaries (collectively, the "Company"): The North American Coal Corporation
("NACoal"), NACCO Materials Handling Group, Inc. ("NMHG"), Hamilton
Beach-Proctor-Silex, Inc. ("HB-PS") and The Kitchen Collection, Inc. ("KCI").
These four subsidiaries function in distinct business environments, and the
results of operations and financial condition are best discussed at the
subsidiary level. Results by segment are summarized in Note 16 to the
consolidated financial statements on pages F-22 to F-25 of this annual report.
21
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION
NACoal mines and markets lignite for use primarily as fuel for power generation
by electric utilities. The lignite is surface-mined in North Dakota, Texas and
Louisiana. Total coal reserves approximate 2.1 billion tons, with 1.2 billion
tons committed to electric utility customers pursuant to long-term contracts.
In November 1995, NACoal began providing dragline mining services ("Florida
dragline operations") for a limerock quarry near Miami, Florida. The operating
results for the Florida dragline operations are included in other mining
operations.
FINANCIAL REVIEW
NACoal's three project mining subsidiaries (Coteau, Falkirk and Sabine) mine
lignite for utility customers pursuant to long-term contracts at a price based
on actual cost plus an agreed pretax profit per ton. Due to the cost-plus nature
of these contracts, revenues and operating profits are impacted by increases and
decreases in operating costs, as well as by tons sold. Net income of these
project mines, however, is not significantly affected by changes in such
operating costs, which include costs of operations, interest expense and certain
other items. Because of the nature of the contracts at these mines, operating
results are best analyzed in terms of income before taxes and net income.
Lignite tons sold by NACoal's operating mines were as follows for the year
ended December 31:
1996 1995 1994
-------- -------- -------
Coteau Properties 15.6 15.1 15.7
Falkirk Mining 7.2 7.1 7.3
Sabine Mining 4.0 3.7 3.4
Red River Mining .8 .8 .8
------- ------- -------
Total lignite 27.6 26.7 27.2
======= ======= =======
In its first full year of operations, the Florida dragline mined 7.4 million
cubic yards of limerock.
Revenues, income before taxes, provision for taxes and net income were as
follows for the year ended December 31:
1996 1995 1994
------- ------- --------
Revenues
Project mines $ 227.8 $ 221.0 $ 226.6
Other mining operations 17.8 14.7 13.9
------- ------- --------
245.6 235.7 240.5
Royalties and other 3.5 12.3 9.7
------- ------- --------
$ 249.1 $ 248.0 $ 250.2
======= ======= ========
Income before taxes
Project mines $ 25.7 $ 24.5 $ 23.6
Other mining operations 2.8 1.0 2.3
------- ------- --------
Total from operating mines 28.5 25.5 25.9
Escrow payments 4.2 2.1 1.2
Royalty and other income, net 2.5 11.9 9.3
Headquarters expense (6.1) (6.1) (6.0)
------- ------- --------
29.1 33.4 30.4
Provision for taxes 9.9 10.8 9.4
------- ------- --------
Net income $ 19.2 $ 22.6 $ 21.0
======= ======= ========
22
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION - Continued
FINANCIAL REVIEW - Continued
1996 COMPARED WITH 1995
The following schedule identifies the components of the changes in revenues,
income before taxes and net income for 1996 compared with 1995:
Income Net
Revenues Before Taxes Income
-------- ------------ ------
1995 $ 248.0 $ 33.4 $ 22.6
Increase (decrease) in 1996 from:
Project mines
Tonnage volume 9.0 .8 .6
Mix of tons sold (.2) (.2) (.1)
Agreed profit per ton 1.8 .6 .4
Pass-through costs (3.8) -- --
Other mining operations
Tonnage volume 2.9 3.5 2.3
Mix of tons sold .1 .1 .1
Average selling price .1 .1 .1
Operating costs -- (1.9) (1.3)
-------- ------- -------
Changes from operating mines 9.9 3.0 2.1
Escrow payments -- 2.1 1.3
Royalties and other income, net (.6) (1.2) (.9)
Management fees (8.2) (8.2) (5.3)
Difference between effective and
statutory tax rates -- -- (.6)
-------- ------- -------
1996 $ 249.1 $ 29.1 $ 19.2
======== ======= =======
The favorable impact from tonnage volume at the project mines was due to
increased volume at Coteau, Falkirk and Sabine as a result of increased customer
demand. Because actual results exceeded benchmarks established in the long-term
sales contracts, NACoal received profit incentive payments in the fourth quarter
of 1996. These payments contributed to the increase in agreed profit per ton. In
addition, the agreed profit per ton increased at Coteau due to an annual
escalation of profit per ton as provided for in the long-term contract.
The increase in tonnage volume and operating costs from other mining operations
resulted from the Florida dragline's full year of operations in 1996 versus two
months in 1995.
23
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION - Continued
The receipt in the second quarter of 1996 of the final escrow payment from the
sale of a previously owned eastern U.S. underground mining property resulted in
an increase in income before taxes. The decrease in royalties and other, net was
due to reduced activity at former coal properties. The decrease in management
fees results from the elimination of the management fee after the accelerated
receipt of the final management fee in 1995 under a contract mining agreement
between NACoal and a public utility company.
1995 COMPARED WITH 1994
The following schedule details the components of the changes in revenues, income
before taxes and net income for 1995 compared with 1994:
Income Net
Revenues Before Taxes Income
-------- ------------ ------
1994 $ 250.2 $ 30.4 $ 21.0
Increase (decrease) in 1995 from:
Project mines
Tonnage volume (2.3) (.4) (.3)
Mix of tons sold .3 .3 .2
Agreed profit per ton 1.0 1.0 .6
Pass-through costs (4.6) -- --
Other mining operations
Tonnage volume 1.8 .9 .6
Mix of tons sold 4.8 4.8 3.1
Average selling price (5.8) (5.8) (3.7)
Operating costs -- (1.7) (1.1)
Other income -- .5 .3
------- ----- ------
Changes from operating mines (4.8) (.4) (.3)
Escrow payments -- .9 .6
Royalties and other income, net 2.6 2.6 1.7
Headquarters expense -- (.1) (.1)
Difference between effective and
statutory tax rates -- -- (.3)
-------- ------ -------
1995 $ 248.0 $ 33.4 $ 22.6
======= ====== ==+====
The level of customer fuel requirements produced lower demand at Coteau and
Falkirk and higher demand at Sabine, resulting in a slight reduction in overall
volume at the project mines in 1995. The favorable agreed profit per ton
variance at the project mines was the result of the annual escalation in the
agreed profit per ton as provided for in the long-term contracts with each
mine's customer.
Increased sales of base tons at Red River, which yield a higher price as
specified in the supply contract, resulted in a favorable mix variance at the
other mining operations. In addition, Red River signed a new agreement with its
customer in 1995 that extends the contract term to 2010 in exchange for lower
per-ton sales prices. This resulted in the unfavorable price variance from other
mining operations.
24
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION- Continued
The increase in royalties and other income, net relates to the accelerated
receipt of annual management fees under a contract mining agreement between
NACoal and a public utility company. The utility company accelerated the final
annual management fee payment of $2.6 million, after-tax, from 1996 into 1995.
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
1996 1995 1994
------- ------- -------
Interest expense
Project mines $ (13.6) $ (14.0) $ (14.3)
Other mining operations (.2) (1.3) (1.3)
------- ------- -------
$ (13.8) $ (15.3) $ (15.6)
======= ======= =======
Other-net
Project mines $ (.1) $ 1.3 $ 1.2
Other mining operations 2.7 1.6 .7
------- ------- -------
$ 2.6 $ 2.9 $ 1.9
======= ======= =======
Effective tax rate 34.0% 32.4% 31.1%
The increase in other-net from other mining operations primarily relates to the
receipt of the final escrow payment from the 1988 sale of a previously owned
eastern underground mining property. The increase in the 1996 effective tax rate
is due to the receipt of a nonrecurring tax refund in 1995.
1997 OUTLOOK
In December 1996, NACoal was the successful bidder for two long-term coal mining
projects, the San Miguel Lignite Project in south Texas and Phillips Coal
Company's Lignite Project in Mississippi. NACoal will provide mining services to
San Miguel Electric Cooperative, Inc.'s lignite mine in Texas under a contract
for 10 1/2 years. NACoal expects to deliver approximately 1.8 million tons
during the second half of 1997 and approximately 3.0 million tons annually
through 2007. It is anticipated that NACoal's results of operations will begin
to be positively impacted during the second half of 1997. Also in December 1996,
NACoal was selected by Phillips Coal Company to be its 25% joint venture partner
to develop a new lignite mine in Mississippi. This mine will supply a
440-megawatt power generation facility to be constructed and operated by CRSS,
Inc. It is anticipated that the NACoal and Phillips Coal Company joint venture
will deliver approximately 3.0 million tons of lignite annually to CRSS's
facility. Mine development is in progress, and commercial operation of CRSS's
facility is scheduled for the year 2000. NACoal and Phillips Coal Company are in
the process of finalizing their joint venture agreement and also a lignite sales
contract between the joint venture and CRSS, which will run for 30 years. Costs
to develop the mine will be deferred until the commencement of commercial
operations.
NACoal's other lignite mines and the Florida dragline operations are expected to
produce about the same number of total tons in 1997 as in 1996, as customer
requirements appear level with the previous year. Sales contracts with customers
at Coteau, Falkirk, Sabine and Red River extend to 2037, 2020, 2020 and 2010,
respectively.
25
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
THE NORTH AMERICAN COAL CORPORATION - Continued
FINANCIAL REVIEW - Continued
NACoal is involved in ongoing initiatives to obtain additional mining contracts.
However, the successful achievement of these contracts is uncertain at this
time. Costs to pursue these contracts are not expected to be material in 1997.
See discussion under the heading "CAUTIONARY STATEMENTS."
LIQUIDITY AND CAPITAL RESOURCES
NACoal has in place a $50.0 million revolving credit facility. The expiration
date of this facility (which was extended to September 2001 during 1996) may be
extended, on an annual basis, for one additional year upon the mutual consent of
NACoal and the bank group. NACoal had $21.0 million of its revolving credit
facility available at December 31, 1996. The outstanding balance of $29.0
million was loaned to the parent company to finance the stock repurchase
program, as discussed in Note 13 to the consolidated financial statements on
page F-18 of this annual report.
The financing of the project mining subsidiaries, which is guaranteed by the
utility customers, consists of long-term equipment leases, notes payable and
non-interest-bearing advances from customers. The obligations of the project
mining subsidiaries do not impact the short- or long-term liquidity of the
company and are without recourse to NACCO or NACoal. These arrangements allow
the project mining subsidiaries to pay dividends in amounts equal to their
retained earnings.
Expenditures for property, plant and equipment by the project mining
subsidiaries and other mining operations were $19.5 million in 1996 and $22.5
million in 1995, and are anticipated to be approximately $31.4 million in 1997.
These expenditures primarily relate to the development, establishment and
improvement of the project mining subsidiaries' mines and are financed or
guaranteed by the utility customers. The increase in 1997 expenditures primarily
relates to costs incurred to build infrastructure, as two of the mines move into
new phases of mine development. In addition, capital investments of
approximately $26.0 million necessary to establish and develop the mine for the
San Miguel Lignite Project are expected to be financed with operating lease
agreements in 1997.
26
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.
NMHG, 98 percent-owned by NACCO, designs, manufactures and markets forklift
trucks and related service parts under the Hyster(R) and Yale(R) brand names.
In July 1996, NMHG acquired the warehouse equipment business of ORMIC S.p.a.,
located near Milan, Italy. ORMIC manufactures motorized hand trucks, order
pickers and turret trucks. This acquisition, along with the 1995 acquisition of
DECA S.r.l., another Italian warehouse equipment manufacturer, strengthened
NMHG's presence in the European warehouse and distribution market.
FINANCIAL REVIEW
The results of operations for NMHG were as follows for the year ended December
31:
1996 1995 1994
-------- -------- --------
Revenues
Americas $1,015.5 $1,002.7 $ 828.1
Europe, Africa and Middle East 451.8 422.3 289.7
Asia - Pacific 92.8 85.1 61.1
-------- -------- ---------
$1,560.1 $1,510.1 $1 ,178.9
======== ======== =========
Operating profit (loss)
Americas $ 43.7 $ 48.8 $ 44.3
Europe, Africa and Middle East 32.5 34.4 15.1
Asia - Pacific (3.7) .2 5.2
-------- -------- ---------
$ 72.5 $ 83.4 $ 64.6
======== ======== =========
Operating profit (loss) excluding
goodwill amortization
Americas $ 51.6 $ 56.5 $ 52.2
Europe, Africa and Middle East 35.9 37.2 17.9
Asia - Pacific (3.5) .5 5.3
-------- -------- ---------
$ 84.0 $ 94.2 $ 75.4
======== ======== =========
Net income (loss) before
extraordinary charges $ 26.4 $ 36.9 $ 18.7
Extraordinary charges, net-of-tax -- (3.4) (3.2)
-------- -------- ---------
Net income $ 26.4 $ 33.5 $ 15.5
======== ======== =========
27
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.--Continued
FINANCIAL REVIEW--Continued
1996 COMPARED WITH 1995
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1996 compared with 1995:
Operating Net
Revenues Profit Income
-------- -------- --------
1995 $1,510.1 $ 83.4 $ 33.5
Increase (decrease) in 1996 from:
Unit volume (14.4) (2.4) (1.6)
Sales mix 43.4 5.9 3.8
Average sales price (4.0) (4.0) (2.6)
Service parts 26.5 11.6 7.5
Foreign currency (1.5) 9.6 6.2
Manufacturing cost -- (19.7) (12.5)
Other operating expense -- (11.9) (7.7)
Other income and expense -- -- (1.5)
Difference between effective and
statutory tax rates -- -- (2.1)
Extraordinary charges -- -- 3.4
-------- -------- --------
1996 $1,560.1 $ 72.5 $ 26.4
======== ======== ========
During 1996, the market size of forklift trucks declined approximately 3 percent
on a worldwide basis. Nevertheless, NMHG obtained a slightly improved market
share in 1996 over 1995. Unit volume in the Americas declined 5 percent to
47,628 units due to the decline in market size and dealer inventory reductions.
This decline was partially offset by increased volume in Europe of 12 percent to
18,702 units and in Asia-Pacific of 7 percent to 3,059 units. Late 1995 and
mid-1996 acquisitions of European warehouse equipment businesses principally
contributed to the unit growth in Europe. Product sales mix favorably impacted
revenues due to increased sales of higher value product. Intensified pricing
pressures in the Americas due to decreased industry demand, slightly offset by
price increases implemented in Europe, caused the unfavorable pricing impact.
The improvement in service parts, concentrated in the Americas, resulted from
NMHG's increasing lift truck population.
Operating profit was positively affected by currency due to the strength of the
U.S. dollar against the Japanese yen, as costs of Japanese sourced goods
decreased. Manufacturing costs increased due to lower plant utilization and
labor inefficiencies resulting from the decline in market demand. In addition,
provisions to increase warranty and inventory reserves contributed to the
increase in manufacturing costs. Other operating expenses increased due to
higher marketing costs expended to generate sales volume and due to operating
expenses of recently acquired businesses.
28
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.--Continued
FINANCIAL REVIEW--Continued
1995 COMPARED WITH 1994
The following schedule identifies the components of the changes in revenues,
operating profit and net income for 1995 compared with 1994:
Operating Net
Revenues Profit Income
-------- ------ ------
1994 $1,178.9 $ 64.6 $ 15.5
Increase (decrease) in 1995 from:
Unit volume 235.0 43.0 28.0
Sales mix (7.1) (12.1) (7.9)
Average sales price 57.6 57.6 37.4
Service parts 16.0 7.4 4.8
Foreign currency 26.6 (7.7) (5.0)
DECA S.r.l. 3.1 .3 .2
Manufacturing cost -- (47.3) (29.1)
Other operating expense -- (22.4) (14.6)
Other income and expense -- -- .8
Difference between effective and
statutory tax rates -- -- 3.6
Extraordinary charges -- -- (.2)
-------- -------- --------
1995 $1,510.1 $ 83.4 $ 33.5
======== ======== ========
Unit volumes during 1995 increased 20 percent to 49,953 units in the Americas,
37 percent to 16,701 units in Europe and 54 percent to 2,859 units in
Asia-Pacific when compared with 1994. The increased volumes resulted from growth
in both market size and market share. The price increases announced in mid-1994
favorably impacted pricing during all of 1995, while the price increases
announced in the spring of 1995 reached their full impact in the fourth quarter.
These price increases were enacted to offset the raw material cost increases and
currency impacts discussed below. The unfavorable sales mix resulted from a
shift to certain lower-margin markets in Europe and lower-margin products in
both the Americas and Europe. The strong markets in both the Americas and
Europe, along with price increases in the Americas, resulted in improved results
from sales of service parts.
The favorable impact from currency on revenues was due to the strength of
European currencies relative to the dollar. This favorable impact was offset by
the strength of the yen relative to the dollar, resulting in an unfavorable
impact on operating profit, particularly in the first nine months of 1995. The
strong yen increased the cost of purchases sourced from Japan. During 1995, NMHG
acquired DECA S.r.l., a manufacturer of European warehouse equipment located in
Italy. DECA's contribution to 1995 operating results is shown separately in the
above table.
Increased raw materials prices and manufacturing inefficiencies caused by vendor
parts shortages, the training of new employees and capacity constraints resulted
in higher manufacturing costs in 1995. Increases in new product introduction and
marketing programs, administrative costs and service parts distribution costs
resulted in higher other operating expenses.
29
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NACCO INDUSTRIES, INC. AND SUBSIDIARIES--Continued
(Tabular Amounts in Millions, Except Per Share, Unit, Store and Percentage Data)
NACCO MATERIALS HANDLING GROUP, INC.--Continued
FINANCIAL REVIEW--Continued
OTHER INCOME, EXPENSE AND INCOME TAXES
Below is a detail of other income (expense) for the year ended December 31:
1996 1995 1994
------- ------- -------