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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



FORM 10-Q

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 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)

(440) 449-9600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES X NO ____

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES X NO ____


Number of shares of Class A Common Stock outstanding at July 31, 2003
6,581,499

Number of shares of Class B Common Stock outstanding at July 31, 2003
1,623,110






NACCO INDUSTRIES, INC.



TABLE OF CONTENTS

Part I. FINANCIAL INFORMATION

Item 1 Financial Statements Page Number
------ -------------------- -----------

Unaudited Condensed Consolidated Balance Sheets - 3
June 30, 2003 and December 31, 2002

Unaudited Condensed Consolidated Statements of Income for 4
the Three Months and Six Months Ended June 30, 2003 and
2002

Unaudited Condensed Consolidated Statements of Cash Flows 5
for the Six Months Ended June 30, 2003 and 2002

Unaudited Condensed Consolidated Statements of Changes 6
in Stockholders' Equity for the Six Months Ended
June 30, 2003 and 2002

Notes to Unaudited Condensed Consolidated Financial 7-17
Statements

Item 2 Management's Discussion and Analysis of Financial 18-35
------ ------------------------------------------------
Condition and Results of Operations
-----------------------------------

Item 3 Quantitative and Qualitative Disclosures About Market Risk 35
------ ---------------------------------------------------------

Item 4 Controls and Procedures 35
------ -----------------------

Part II. OTHER INFORMATION

Item 1 Legal Proceedings 36
------ -----------------

Item 2 Changes in Securities and Use of Proceeds 36
------ -----------------------------------------

Item 3 Defaults Upon Senior Securities 36
------ ------------------------------

Item 4 Submission of Matters to a Vote of Security Holders 36
------ ---------------------------------------------------

Item 5 Other Information
------ ----------------- 36

Item 6 Exhibits and Reports on Form 8-K 36
------ --------------------------------

Signature 37

Exhibit Index 38






2





PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES



JUNE 30 DECEMBER 31
2003 2002
---------- ----------
(In millions, except share data)

ASSETS
Current Assets
Cash and cash equivalents $ 43.6 $ 64.1
Accounts receivable, net 289.4 278.8
Inventories 396.1 357.0
Deferred income taxes 30.6 29.0
Prepaid expenses and other 51.2 54.1
---------- ----------
Total Current Assets 810.9 783.0
Property, Plant and Equipment, Net 670.7 658.0
Goodwill 431.2 427.4
Coal Supply Agreements and Other Intangibles, Net 83.3 85.0
Other Non-current Assets 184.8 170.5
---------- ----------
Total Assets $ 2,180.9 $ 2,123.9
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 266.8 $ 257.2
Revolving credit agreements 32.0 33.2
Current maturities of long-term debt 37.3 35.0
Current obligations of project mining subsidiaries 34.5 35.0
Other current liabilities 229.4 235.8
---------- ----------
Total Current Liabilities 600.0 596.2
Long-term Debt - not guaranteed by the parent company 411.5 406.5
Obligations of Project Mining Subsidiaries - not guaranteed by
the parent company or its North American Coal subsidiary 268.1 275.1
Self-insurance Liabilities and Other 315.0 285.6
Minority Interest .7 1.1
Stockholders' Equity
Common stock:
Class A, par value $1 per share, 6,581,399 shares outstanding
(2002 - 6,576,936 shares outstanding) 6.6 6.6
Class B, par value $1 per share, convertible into Class A
on a one-for-one basis, 1,623,210 shares outstanding
(2002 - 1,623,651 shares outstanding) 1.6 1.6
Capital in excess of par value 5.1 4.9
Retained earnings 615.3 605.7
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment 5.6 (11.6)
Deferred loss on cash flow hedging (14.1) (13.3)
Minimum pension liability adjustment (34.5) (34.5)
---------- ----------
585.6 559.4
---------- ----------
Total Liabilities and Stockholders' Equity $ 2,180.9 $ 2,123.9
========== ==========


See notes to unaudited condensed consolidated financial statements.



3



UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NACCO INDUSTRIES, INC. AND SUBSIDIARIES



THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------- -----------------------------
2003 2002 2003 2002
---------- ---------- ------------ ------------
(In millions, except per share data)


Net sales $ 633.0 $ 607.3 $ 1,250.4 $ 1,179.0
Other revenues 4.5 2.3 7.0 7.1
---------- ---------- ------------ ------------
Revenues 637.5 609.6 1,257.4 1,186.1

Cost of sales 520.6 495.8 1,027.7 971.9
---------- ---------- ------------ ------------

Gross Profit 116.9 113.8 229.7 214.2

Selling, general and administrative expenses 87.3 88.2 179.5 169.8
---------- ---------- ------------ ------------

Operating Profit 29.6 25.6 50.2 44.4

Other income (expense)
Interest expense (16.8) (17.2) (33.6) (31.7)
Loss on interest rate swap agreements (.3) (3.1) (.7) (2.8)
Income from unconsolidated affiliates 1.0 .1 1.7 1.1
Other - net --- (1.7) (.3) (1.3)
---------- ---------- ------------ ------------
(16.1) (21.9) (32.9) (34.7)
---------- ---------- ------------ ------------
Income Before Income Taxes, Minority Interest
and Cumulative Effect of Accounting
Change 13.5 3.7 17.3 9.7

Provision for income taxes 4.1 1.2 5.3 1.1
---------- ---------- ------------ ------------

Income Before Minority Interest and Cumulative
Effect of Accounting Change 9.4 2.5 12.0 8.6

Minority interest income .2 .3 .5 .5
---------- ---------- ------------ ------------

Income Before Cumulative Effect of Accounting
Change 9.6 2.8 12.5 9.1

Cumulative effect of accounting change (net of $0.7
tax expense) --- --- --- ---
---------- ---------- ------------ ------------

Net Income $ 9.6 $ 2.8 $ 13.7 $ 9.1
========== ========== ============ ============

Comprehensive Income $ 23.8 $ 10.3 $ 30.1 $ 22.2
========== ========== ============ ============

Earnings per Share:
Income Before Cumulative Effect of Accounting
Change $ 1.17 $ .34 $ 1.52 $ 1.11
Cumulative effect of accounting change (net-of-tax) --- --- .15 ---
---------- ---------- ------------ ------------
Net Income $ 1.17 $ .34 $ 1.67 $ 1.11
========== ========== ============ ============

Dividends per share $ .255 $ .245 $ .500 $ .480
========== ========== ============ ============

Weighted average shares outstanding 8.204 8.197 8.203 8.196
========== ========== ============ ============



See notes to unaudited condensed consolidated financial statements.



4




UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES




SIX MONTHS ENDED
JUNE 30
----------------
2003 2002
------- --------
(In millions)

Operating Activities
Net income $ 13.7 $ 9.1
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 45.8 46.7
Deferred income taxes 5.0 11.0
Minority interest (.5) (.5)
Cumulative effect of accounting change (net-of-tax) (1.2) ---
Other non-cash items 3.1 3.8
Working capital changes
Accounts receivable (5.5) (15.7)
Inventories (28.2) (6.6)
Other current assets (17.6) (.2)
Accounts payable and other liabilities (2.3) 23.2
------- --------
Net cash provided by operating activities 12.3 70.8

Investing Activities
Expenditures for property, plant and equipment (40.1) (20.6)
Proceeds from the sale of assets 14.4 2.9
Proceeds from unconsolidated affiliates --- .7
Other - net (.3) (1.1)
------- --------
Net cash used for investing activities (26.0) (18.1)

Financing Activities
Additions to long-term debt and revolving credit agreements 42.2 299.3
Reductions of long-term debt and revolving credit agreements (36.8) (338.1)
Additions to obligations of project mining subsidiaries .7 35.4
Reductions of obligations of project mining subsidiaries (9.0) (42.2)
Cash dividends paid (4.1) (3.9)
Financing fees paid (.2) (14.0)
Other - net --- (.2)
------- --------
Net cash used for financing activities (7.2) (63.7)

Effect of exchange rate changes on cash .4 2.5
------- --------

Cash and Cash Equivalents
Decrease for the period (20.5) (8.5)
Balance at the beginning of the period 64.1 71.9
------- --------

Balance at the end of the period $ 43.6 $ 63.4
======= ========


See notes to unaudited condensed consolidated financial statements.



5




UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NACCO INDUSTRIES, INC. AND SUBSIDIARIES



SIX MONTHS ENDED JUNE 30
------------------------
2003 2002
-------- --------
(In millions, except per
share data)

Class A Common Stock
Beginning balance $ 6.6 $ 6.5
Shares issued under stock compensation plans --- .1
-------- --------
6.6 6.6
-------- --------

Class B Common Stock 1.6 1.6
-------- --------

Capital in Excess of Par Value
Beginning balance 4.9 4.7
Shares issued under stock compensation plans .2 .1
-------- --------
5.1 4.8
-------- --------

Retained Earnings
Beginning balance 605.7 571.3
Net income 13.7 9.1
Cash dividends on Class A and Class B common stock:
2003 $0.500 per share (4.1) ---
2002 $0.480 per share --- (3.9)
-------- --------
615.3 576.5
-------- --------

Accumulated Other Comprehensive Income (Loss)
Beginning balance (59.4) (54.8)
Foreign currency translation adjustment 17.2 11.8
Reclassification of hedging activity into earnings 2.9 4.7
Current period cash flow hedging activity (3.7) (3.4)
-------- --------
(43.0) (41.7)
-------- --------
Total Stockholders' Equity $ 585.6 $ 547.8
======== ========



See notes to unaudited condensed consolidated financial statements.



6




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
JUNE 30, 2003
(Tabular Amounts in Millions)

Note 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include
the accounts of NACCO Industries, Inc. ("NACCO," the parent company) and its
wholly owned subsidiaries ("NACCO Industries, Inc. and Subsidiaries," or the
"Company"). Intercompany accounts and transactions have been eliminated. The
Company's subsidiaries operate in three principal industries: lift trucks,
housewares and lignite mining. The Company manages its subsidiaries primarily by
industry; however, the Company manages its lift truck operations as two
reportable segments: wholesale manufacturing and retail distribution.

NMHG Holding Co., through its wholly owned subsidiaries, NACCO Materials
Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG
Retail") (collectively "NMHG") designs, engineers, manufactures, sells, services
and leases a comprehensive line of lift trucks and aftermarket parts and service
marketed globally under the Hyster(R) and Yale(R) brand names. NMHG Wholesale
includes the manufacture and sale of lift trucks and related service parts,
primarily to independent and wholly owned Hyster and Yale retail dealerships.
NMHG Retail includes the sale, leasing and service of Hyster and Yale lift
trucks and related service parts by wholly owned retail dealerships and rental
companies. NACCO Housewares Group ("Housewares") consists of Hamilton
Beach/Proctor-Silex, Inc. ("HB/PS"), a leading manufacturer, marketer and
distributor of small electric motor and heat-driven appliances as well as
commercial products for restaurants, bars and hotels, and The Kitchen
Collection, Inc. ("KCI"), a national specialty retailer of brand-name
kitchenware, small electrical appliances and related accessories. The North
American Coal Corporation ("NACoal") mines and markets lignite primarily as fuel
for power providers.

These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial position of the
Company as of June 30, 2003 and the results of its operations for the three and
six month periods ended June 30, 2003 and 2002 and the results of its cash flows
and changes in stockholders equity for the six month periods ended June 30, 2003
and 2002 have been included.

The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information or
notes required by accounting principles generally accepted in the United States
for complete financial statements.

Operating results for the three and six month periods ended June 30, 2003 are
not necessarily indicative of the results that may be expected for the remainder
of the year ending December 31, 2003. Because the housewares business is
seasonal, a majority of revenues and operating profit occurs in the second half
of the calendar year when sales of small electric appliances to retailers and
consumers increase significantly for the fall holiday selling season. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002.

Certain amounts in the prior period's Unaudited Condensed Consolidated Statement
of Cash Flows have been reclassified to conform to the current period's
presentation.



7

<


Note 2 - Inventories

Inventories are summarized as follows:




JUNE 30 DECEMBER 31
2003 2002
-------- --------

Manufactured inventories:
Finished goods and service parts -
NMHG Wholesale $ 112.1 $ 99.9
Housewares 75.4 66.8
-------- --------
187.5 166.7
Raw materials and work in process -
NMHG Wholesale 121.2 110.3
Housewares 6.8 6.5
-------- --------
128.0 116.8
-------- --------

Total manufactured inventories 315.5 283.5

Retail inventories:
NMHG Retail 30.2 23.4
Housewares 20.9 21.4
-------- --------
Total retail inventories 51.1 44.8

Total inventories at FIFO 366.6 328.3

Coal - NACoal 15.5 14.5
Mining supplies - NACoal 22.9 22.3
-------- --------
Total inventories at weighted average 38.4 36.8

LIFO reserve -
NMHG (13.6) (11.6)
Housewares 4.7 3.5
-------- --------
(8.9) (8.1)
-------- --------
$ 396.1 $ 357.0
======== ========



The cost of certain manufactured and retail inventories, including service
parts, has been determined using the LIFO method. At June 30, 2003 and December
31, 2002, 59% of total inventories were determined using the LIFO method. An
actual valuation of inventory under the LIFO method can be made only at the end
of the year based on the inventory levels and costs at that time. Accordingly,
interim LIFO calculations must necessarily be based on management's estimates of
expected year-end inventory levels and costs. Because these estimates are
subject to change and may be different than the actual inventory levels and
costs at year-end, interim results are subject to the final year-end LIFO
inventory valuation.

Housewares' LIFO inventory value exceeds its FIFO value primarily due to price
deflation experienced by HB/PS.



8





Note 3 - Restructuring Charges

The changes to the Company's restructuring accruals since December 31, 2002 are
as follows:



Asset Lease
Severance Impairment Impairment Other Total
--------- ---------- ---------- ----- -----

NMHG Wholesale
Balance at December 31, 2002 $ 9.3 $ 3.8 $ --- $ .9 $ 14.0(a)
Foreign currency effect .2 --- --- --- .2
Reversal (.3) --- --- --- (.3)
Payments (1.6) --- --- --- (1.6)
-------------------------------------------------
Balance at June 30, 2003 $ 7.6 $ 3.8 $ --- $ .9 $ 12.3
=================================================

NMHG Retail
Balance at December 31, 2002 $ 1.5 $ --- $ .1 $ --- $ 1.6
Reversal (.4) --- --- --- (.4)
Payments (.3) --- (.1) --- (.4)
-------------------------------------------------
Balance at June 30, 2003 $ .8 $ --- $ --- $ --- $ .8
=================================================

Housewares
Balance at December 31, 2002 $ --- $ --- $ 1.2 $ .4 $ 1.6
Payments --- --- (.5) (.1) (.6)
-------------------------------------------------
Balance at June 30, 2003 $ --- $ --- $ .7 $ .3 $ 1.0
=================================================


(a) The December 31, 2002 balance indicated in the table above does not include
$7.6 million in curtailment losses relating to pension and other post-retirement
benefits which will not be paid until employees reach retirement age. These
amounts were accrued in the fiscal year ended December 31, 2000 as part of the
restructuring of the Danville, Illinois assembly plant. Final severance payments
for the Danville restructuring plan were made in 2002.

NMHG 2002 Restructuring Program

As announced in December 2002, NMHG Wholesale is phasing out its Lenoir, North
Carolina, lift truck component facility and restructuring other manufacturing
and administrative operations, primarily its Irvine, Scotland, lift truck
assembly and component facility. During the fourth quarter of 2002, NMHG
Wholesale recognized a restructuring charge of approximately $12.5 million
pre-tax. Of this amount, $3.8 million relates to a non-cash asset impairment
charge for building, machinery and tooling, which was determined based on the
then current market values for similar assets and broker quotes as compared to
the net book value of these assets; and $8.7 million relates to severance and
other employee benefits to be paid to approximately 615 manufacturing and
administrative employees. Payments began during the second quarter of 2003. As
of June 30, 2003, payments of $0.7 million were made to approximately 100
employees. Payments are expected to continue through 2005. In addition, $0.3
million of the amount accrued at December 31, 2002 was reversed in the first
half of 2003. Approximately $2.5 million of pre-tax costs which were not
eligible for accrual in December 2002 and are not shown in the table above,
primarily related to manufacturing inefficiencies, were expensed in the first
half of 2003. Of the $2.5 million additional costs incurred during 2003, $2.3
million is classified as cost of sales and $0.2 million is classified as
selling, general, and administrative expenses in the Unaudited Condensed
Consolidated Statement of Income for the six months ended June 30, 2003.

NMHG 2001 Restructuring Programs

During 2001, management committed to the restructuring of certain operations in
Europe for both the Wholesale and Retail segments of the business. As such, NMHG
Wholesale recognized a restructuring charge of approximately $4.5 million
pre-tax for severance and other employee benefits to be paid to approximately
285 direct and indirect factory labor and administrative personnel in Europe. As
of December 31, 2002, payments of $3.4 million to approximately 245 employees
had been made and $0.2 million of the amount originally accrued was reversed in
2002. Although the majority of the headcount reductions were made by the end of
2002, payments of $0.9 million to 16 employees were made during the first six
months of 2003.


9



NMHG Retail recognized a restructuring charge of approximately $4.7 million
pre-tax in 2001, of which $0.4 million related to lease termination costs and
$4.3 million related to severance and other employee benefits to be paid to
approximately 140 service technicians, salesmen and administrative personnel at
wholly owned dealers in Europe. As of December 31, 2002, severance payments of
$2.8 million had been made to approximately 110 employees. Although the majority
of the headcount reductions were made by the end of 2002, during the first half
of 2003, severance payments of $0.3 million were made to six employees. In
addition, $0.4 million of the amount accrued at December 31, 2002 was reversed
in the first six months of 2003.

Housewares: In 2001, the Board of Directors approved management's plan to
restructure HB/PS' manufacturing activities in Mexico by outsourcing certain of
the company's products and consolidating production from three of the company's
Mexican manufacturing plants in the Juarez area into one plant. This
restructuring was substantially completed during 2002. However, lease payments
on idle facilities are expected to continue through 2003.

Note 4 - Accounting Changes

Accounting for Asset Retirement Obligations

On January 1, 2003, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations." SFAS
No. 143 provides accounting requirements for retirement obligations associated
with tangible long-lived assets, including: (i) the timing of liability
recognition; (ii) initial measurement of the liability; (iii) allocation of
asset retirement cost to expense; (iv) subsequent measurement of the liability;
and (v) financial statement disclosures. SFAS No. 143 requires that an asset's
retirement cost should be capitalized as part of the cost of the related
long-lived asset and subsequently allocated to expense using a systematic and
rational method.

A cumulative effect of a change in accounting principle ("CECAP") adjustment of
$1.2 million, net of a tax expense of $0.7 million, to increase net income has
been recognized in the accompanying Unaudited Condensed Consolidated Statement
of Income for the six months ended June 30, 2003, as a result of the adoption of
SFAS No. 143 on January 1, 2003. This adjustment consists of a CECAP adjustment
to decrease net income by $1.3 million, net of a tax benefit of $0.7 million,
recorded by NACoal and a CECAP adjustment to increase net income by $2.5
million, net of $1.4 million tax expense, recorded by Bellaire Corporation
("Bellaire"). Bellaire's results are included in the non-operating segment
"NACCO & Other."

Bellaire is a non-operating subsidiary of the Company with legacy liabilities
relating to closed mining operations, primarily former Eastern U.S. underground
mining operations. These legacy liabilities include obligations for water
treatment and other environmental remediation which arose as part of the normal
course of closing these underground mining operations. Prior to the adoption of
SFAS No. 143, an accrual for these legacy liabilities was estimated and
discounted using an applicable risk-free rate of return. As of January 1, 2003,
these obligations have been remeasured to their estimated fair market value and
discounted using a credit-adjusted risk-free rate, as required per SFAS No. 143.
This change in the measurement of these liabilities as required per SFAS No. 143
resulted in a CECAP adjustment to increase net income, primarily as a result of
the change in the discount rate used to measure these liabilities. As a result,
future accretion expense is expected to increase as compared with the Company's
previous methodology for measuring this obligation. Since Bellaire's properties
are no longer active operations, no associated asset was capitalized as a result
of the adoption of SFAS No. 143.

NACoal's asset retirement obligations are for costs to close its surface mines
and reclaim the land it has disturbed as a result of its normal mining
activities. As a result of the adoption of SFAS No. 143, NACoal has estimated
these costs and recognized that liability and associated assets in accordance
with the Statement. The associated assets established in connection with the
implementation of SFAS No. 143 are recorded in property, plant and equipment in
the accompanying Unaudited Condensed Consolidated Balance Sheet at June 30,
2003. Prior to the adoption of SFAS No. 143, NACoal's accounting policy was to
accrue for mine-closing costs over the five-year period prior to the closing of
the mine. Since none of NACoal's mines were forecasted to be closed within the
next five years, NACoal did not have an accrual recognized for asset retirement
obligations prior to the adoption of this Statement.

For NACoal and Bellaire, there are no assets legally restricted for purposes of
settling the asset retirement obligations. The asset retirement obligations for
the project mining subsidiaries will be funded by the


10



respective project mining subsidiaries' customer. NACoal's non-project mining
operations and Bellaire's asset retirement obligation will be funded out of
general corporate funds. A reconciliation of the beginning and ending aggregate
carrying amount of the asset retirement obligation is as follows:




NACoal NACoal
Project Non-Project NACoal NACCO
Mines Mines Consolidated Bellaire Consolidated
-------- ----------- ------------ ------------ -------------

Balance at December 31, 2002 $ --- $ --- $ --- $ 15.9 $ 15.9
Increase (decrease) to liabilities
recorded as a result of the
adoption of SFAS No. 143 40.8 3.5 44.3 (3.9) 40.4
Liabilities settled during the
period --- --- --- (.2) (.2)
Accretion expense 1.4 .2 1.6 .5 2.1
------- -------- --------- -------- -------
Balance at June 30, 2003 $ 42.2 $ 3.7 $ 45.9 $ 12.3 $ 58.2
======= ======== ========= ======== =======



Assuming the adoption of SFAS No. 143 in the prior year, the December 31, 2002
liabilities recorded on the balance sheet for the project mines, non-project
mines and Bellaire would have been $40.8 million, $3.5 million and $12.0
million, respectively. The effect of adopting SFAS No. 143 was to decrease
income before the cumulative effect of accounting change and net income by $0.1
million in both the three and six months ended June 30, 2003, respectively. The
effect on earnings per share was a decrease of $0.01 and $0.02 in the three and
six months ended June 30, 2003, respectively.

Additional pro forma information, assuming the adoption of this Statement in the
prior year, is as follows:




THREE SIX
MONTHS MONTHS
ENDED ENDED
JUNE 30, 2002 JUNE 30, 2002
------------- -------------
(in millions)

Reported net income $ 2.8 $ 9.1
Deduct additional expense assuming the adoption
of SFAS No. 143 on 12/31/01 .1 .1
-------- --------
Adjusted net income $ 2.7 $ 9.0
======== ========

(in dollars)
Reported earnings per share $ .34 $ 1.11
Deduct additional expense per share assuming
the adoption of SFAS No. 143 on 12/31/01 .01 .01
-------- --------
Adjusted earnings per share $ .33 $ 1.10
======== ========



Accounting for Guarantees

In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." FIN No. 45 requires guarantors to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee for those guarantees initiated or modified after December
31, 2002. However, certain guarantees, including product warranties and
guarantees between parties under common control (i.e., parent and subsidiary),
are not required to be recognized at fair value at inception. FIN No. 45 also
requires additional disclosures of guarantees, including product warranties and
guarantees between parties under common control, beginning with interim or
annual periods ending after December 15, 2002. Guarantees initiated prior to
December 31, 2002 are not recognized as a liability measured at fair value per
this Interpretation, but are subject to the disclosure requirements. The Company
has made the required disclosures in these financial statements. Also, the
Company has recognized guarantees included within the scope of this
Interpretation and initiated after December 31, 2002 as liabilities measured at
fair value. The adoption of the fair value provisions of this Interpretation did
not have a material impact on the Company's financial position or results of
operations for the three or six months ended June 30, 2003.


11



Under various financing arrangements for certain customers, including
independently owned retail dealerships, NMHG provides guarantees of the residual
values of lift trucks, or recourse or repurchase obligations such that NMHG
would be obligated in the event of default by the customer. Terms of the
third-party financing arrangements for which NMHG is providing a guarantee
generally range from one to five years. Total guarantees and amounts subject to
recourse or repurchase obligations at June 30, 2003 and December 31, 2002 were
$168.2 million and $153.6 million, respectively. Losses anticipated under the
terms of the guarantees, recourse or repurchase obligations, which are not
significant, have been reserved for in the accompanying Unaudited Condensed
Consolidated Financial Statements. Generally, NMHG retains a security interest
in the related assets financed such that, in the event that NMHG would become
obligated under the terms of the recourse or repurchase obligations, NMHG would
take title to the assets financed. The fair value of collateral held at June 30,
2003 was approximately $180.7 million, based on Company estimates.

NMHG has a 20% ownership interest in NMHG Financial Services, Inc. ("NFS"), a
joint venture with GE Capital Corporation ("GECC"), formed primarily for the
purpose of providing financial services to Hyster and Yale lift truck dealers
and national account customers in the United States. NMHG's ownership in NFS is
accounted for using the equity method of accounting. Generally, NMHG sells lift
trucks through its independent dealer network or directly to customers. These
dealers and customers may enter into a financing transaction with NFS or another
unrelated third-party. NFS provides debt financing to dealers and lease
financing to both dealers and customers. On occasion, the credit quality of the
customer or concentration issues within GECC necessitate providing standby
recourse or repurchase obligations or a guarantee of the residual value of the
lift trucks purchased by customers and financed through NFS. At June 30, 2003,
$122.2 million of the $168.2 million of guarantees discussed above related to
transactions with NFS. In addition, in connection with the formation of the
current joint venture agreement that expires in April 2004, NMHG also provides a
guarantee to GECC for 20% of NFS' debt with GECC, such that NMHG would become
liable under the terms of NFS' debt agreements with GECC in the case of default
by NFS. At June 30, 2003, the amount of NFS' debt guaranteed by NMHG was $101.2
million. NFS has not defaulted under the terms of this debt financing in the
past and NMHG does not expect NFS to default in the foreseeable future.

NMHG provides a standard warranty on its lift trucks, generally for six to
twelve months or 1,000 to 2,000 hours. In addition, NMHG sells extended warranty
agreements which provide additional warranty up to three to five years or up to
3,600 to 10,000 hours. The specific terms and conditions of those warranties
vary depending upon the product sold and the country in which NMHG does
business. Revenue received for the sale of extended warranty contracts is
deferred and recognized in the same manner as the costs are incurred to perform
under the warranty contracts, in accordance with FASB Technical Bulletin 90-1,
"Accounting for Separately Priced Extended Warranty and Product Maintenance
Contracts." HB/PS provides a standard warranty to consumers for all of its
products. The specific terms and conditions of those warranties vary depending
upon the product brand. In general, if a product is returned under warranty, a
refund is provided to the consumer by HB/PS' customer, the retailer. Generally,
the retailer returns those products to HB/PS for a credit. The Company estimates
the costs that may be incurred under its warranty programs, both standard and
extended, and records a liability for such costs at the time product revenue is
recognized. Factors that affect the Company's warranty liability include the
number of units sold, historical and anticipated rates of warranty claims and
the cost per claim. The Company periodically assesses the adequacy of its
recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company's current and long-term warranty obligations, including
deferred revenue on extended warranty contracts, during the six months ended
June 30, 2003 are as follows:

Balance at December 31, 2002 $ 43.9
Warranties issued 18.1
Settlements made (17.6)
Changes in estimates (2.2)
Foreign currency effect .2
----------
Balance at June 30, 2003 $ 42.4
==========

The Company's periodic review of the estimates used to calculate its warranty
obligations resulted in an adjustment of $2.2 million recognized in the six
months ended June 30, 2003 to reduce the estimated required accrual at June 30,
2003. This adjustment is not necessarily indicative of future trends or
adjustments that may be required to adjust the warranty accrual during the
remainder of 2003.


12



Note 5 - Accounting Standards Not Yet Adopted

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities." FIN No. 46 clarifies the application of Accounting Research Bulletin
("ARB") No. 51, "Consolidated Financial Statements" for certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 requires that variable interest entities, as defined,
should be consolidated by the primary beneficiary, which is defined as the
entity that is expected to absorb the majority of the expected losses, receive a
majority of the expected gains, or both.

The Company will adopt this Interpretation for the reporting period beginning on
July 1, 2003, as required. The Company has determined that three of NACoal's
wholly owned subsidiaries, the "project mining subsidiaries" meet the definition
of a variable interest entity pursuant to FIN No. 46. Although NACoal owns 100%
of the equity interest of the project mining subsidiaries, the Company has
concluded that NACoal is not the primary beneficiary and thus, must
deconsolidate these entities. The project mining subsidiaries operate lignite
mines under long-term contracts with various utility customers to sell lignite
at a price based on actual cost plus an agreed pre-tax profit per ton. The
utility customers have arranged and guaranteed the financing for the development
and operation of the project mining subsidiaries. The obligations of these
project mining subsidiaries are currently included in the Company's consolidated
balance sheets, but do not affect the short-term or long-term liquidity of the
Company and are without recourse to NACCO and NACoal. These entities are
capitalized primarily with debt financing; the equity investment in these
entities at June 30, 2003 was $5.0 million, which supports total assets of
$418.7 million at June 30, 2003. NACoal owns 100% of the stock and manages the
daily operations of these entities.

As a result of the deconsolidation of these entities, the financial statement
presentation of the Company will change significantly. As of July 1, 2003, the
Company will account for its 100% ownership investment in these entities using
the equity method of accounting. This change in accounting, however, will not
affect the reported net earnings of the Company.

The Company's risk of loss relating to these entities is limited to its invested
capital, which was $5.0 million at June 30, 2003. Selected financial information
for the project mining subsidiaries is as follows:


AS OF AND AS OF AND
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, 2003 DECEMBER 31, 2002
------------------- ------------------
Revenues $ 130.5 $ 263.1
Net income $ 13.0 $ 24.7
Total assets $ 418.7 $ 381.2
Stockholder's equity $ 5.0 $ 4.9


In addition, NMHG does have an interest in a variable interest entity, NFS. The
Company, however, has concluded that NMHG is not the primary beneficiary and the
Company does not consider NMHG's variable interest to be significant. NMHG will
continue to use the equity method to account for its 20% interest in NFS. The
Company continues to review two other entities with which NMHG is affiliated to
determine if they meet the definition of a variable interest entity. The Company
expects to have its analysis complete and adopt FIN No. 46 during the third
quarter of 2003.

On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends and
clarifies accounting for derivatives and hedging based on decisions made: (a)
previously as part of the Derivative Implementation Group process, (b) in
connection with other FASB projects and (c) regarding other issues raised,
including the characteristics of a derivative that contains a financing
component. This Statement is effective for contracts entered into or modified
after June 30, 2003 and should be applied prospectively, with the exception of
certain transactions. The Company has not yet determined what impact, if any,
the adoption of this Statement will have on its results of operations or
financial position.

On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
provides guidance on how an entity classifies and measures certain financial
instruments with characteristics of both liabilities and equity. This Statement
is


13


effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. This Statement requires the recognition of a
cumulative effect of a change in accounting transition adjustment for financial
instruments existing at adoption date. The Company has not yet determined what
impact, if any, the adoption of this Statement will have on its results of
operations or financial position.

Note 6 - Current and Long-term Financing

In April 2003, NACoal refinanced $15.8 million of equipment previously financed
under operating leases with collateralized debt. The equipment consisted of
mining equipment, such as trucks, bulldozers, graders and a backhoe. These April
2003 purchases were financed with three collateralized notes payable that
expire, in accordance with their respective terms, in either 2007 or 2008 and
require monthly principal and interest payments at a weighted-average fixed
interest rate of 5.46%.

Note 7 - Contingent Obligation

As a result of the Coal Industry Retiree Health Benefit Act of 1992, the
Company's non-operating subsidiary, Bellaire Corporation ("Bellaire"), is
obligated to the United Mine Workers of America Combined Benefit Fund (the
"Fund") for the medical expenses of certain United Mine Worker retirees. As a
result, the Company established an estimate of this obligation in 1992 and has
continued to revise this estimate as new facts arise. See additional discussion
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2002, on pages F-10, F-17, F-28 and F-29. Revisions to this liability are
recognized in the statement of operations as an extraordinary item pursuant to
the requirement of EITF 92-13, "Accounting for Estimated Payments in Connection
with the Coal Industry Retiree Health Benefit Act of 1992." On July 15, 2003,
the Fund filed suit against 214 companies, including Bellaire, seeking an
increase in premiums paid to the Fund. If the Fund prevails, the Company's
estimate of this accrual could increase within an estimated range of $0 to $6.2
million pre-tax. Since the outcome of this proceeding is uncertain, the Company
has not revised its accrual.



14




Note 8 - Segment Information

Financial information for each of the Company's reportable segments, as defined
by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is presented in the following table.

NMHG Wholesale derives a portion of its revenues from transactions with NMHG
Retail. The amount of these revenues, which are based on current market prices
on similar third-party transactions, are indicated in the following table on the
line "NMHG Eliminations" in the revenues section. No other intersegment sales
transactions occur.




THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- -------------------------
2003 2002 2003 2002
-------- ---------- ---------- ----------

REVENUES FROM EXTERNAL CUSTOMERS
NMHG Wholesale $ 389.2 $ 347.2 $ 771.8 $ 674.9
NMHG Retail 57.5 58.6 111.4 114.8
NMHG Eliminations (18.3) (17.1) (35.8) (29.2)
-------- ---------- ---------- ----------
NMHG Consolidated 428.4 388.7 847.4 760.5
Housewares 118.3 134.5 234.3 256.1
NACoal 90.7 86.3 175.6 169.4
NACCO and Other .1 .1 .1 .1
-------- ---------- ---------- ----------
$ 637.5 $ 609.6 $ 1,257.4 $ 1,186.1
======== ========== ========== ==========
GROSS PROFIT
NMHG Wholesale $ 64.3 $ 57.6 $ 128.4 $ 106.4
NMHG Retail 11.5 10.6 21.8 22.9
NMHG Eliminations (.3) .3 .1 .9
-------- ---------- ---------- ----------
NMHG Consolidated 75.5 68.5 150.3 130.2
Housewares 26.9 29.5 48.4 49.8
NACoal 14.4 15.7 31.0 34.2
NACCO and Other .1 .1 --- ---
-------- ---------- ---------- ----------
$ 116.9 $ 113.8 $ 229.7 $ 214.2
======== ========== ========== ==========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 48.8 $ 43.8 $ 99.2 $ 85.6
NMHG Retail 11.2 14.0 22.9 27.0
NMHG Eliminations (.1) (.3) (.1) (.6)
-------- ---------- ---------- ----------
NMHG Consolidated 59.9 57.5 122.0 112.0
Housewares 22.5 26.3 47.8 49.2
NACoal 4.8 3.3 9.6 6.8
NACCO and Other .1 1.1 .1 1.8
-------- ---------- ---------- ----------
$ 87.3 $ 88.2 $ 179.5 $ 169.8
======== ========== ========== ==========





15







THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
2003 2002 2003 2002
------- ------- ------- -------

OPERATING PROFIT (LOSS)
NMHG Wholesale $ 15.5 $ 13.8 $ 29.2 $ 20.8
NMHG Retail .3 (3.4) (1.1) (4.1)
NMHG Eliminations (.2) .6 .2 1.5
------- ------- ------- -------
NMHG Consolidated 15.6 11.0 28.3 18.2
Housewares 4.4 3.2 .6 .6
NACoal 9.6 12.4 21.4 27.4
NACCO and Other --- (1.0) (.1) (1.8)
------- ------- ------- -------
$ 29.6 $ 25.6 $ 50.2 $ 44.4
======= ======= ======= =======
INTEREST EXPENSE
NMHG Wholesale $ (7.3) $ (6.6) $ (14.5) $ (10.2)
NMHG Retail (.9) (.9) (1.8) (1.7)
NMHG Eliminations (.5) (1.1) (1.0) (2.2)
------- ------- ------- -------
NMHG Consolidated (8.7) (8.6) (17.3) (14.1)
Housewares (1.7) (1.9) (3.3) (3.8)
NACoal (2.4) (2.7) (4.7) (5.9)
NACCO and Other --- --- (.3) ---
Eliminations .1 .1 .2 .2
------- ------- ------- -------
(12.7) (13.1) (25.4) (23.6)
Project mining subsidiaries (4.1) (4.1) (8.2) (8.1)
------- ------- ------- -------
$ (16.8) $ (17.2) $ (33.6) $ (31.7)
======= ======= ======= =======
INTEREST INCOME
NMHG Wholesale $ .7 $ .6 $ 1.2 $ 1.2
NMHG Retail --- --- .1 ---
------- ------- ------- -------
NMHG Consolidated .7 .6 1.3 1.2
NACoal .1 .1 .3 .1
NACCO and Other .1 .1 .2 .2
Eliminations (.1) (.1) (.2) (.2)
------- ------- ------- -------
$ .8 $ .7 $ 1.6 $ 1.3
======= ======= ======= =======
OTHER-NET, INCOME (EXPENSE)
NMHG Wholesale $ .3 $ (4.2) $ --- $ (3.3)
NMHG Retail .4 (1.0) .6 (1.0)
------- ------- ------- -------
NMHG Consolidated .7 (5.2) .6 (4.3)
Housewares (.1) (.7) (.4) (.8)
NACoal --- (.1) (.1) (.3)
NACCO and Other (.7) .6 (1.0) 1.1
------- ------- ------- -------
$ (.1) $ (5.4) $ (.9) $ (4.3)
======= ======= ======= =======
INCOME TAX PROVISION (BENEFIT)
NMHG Wholesale $ 3.1 $ 1.4 $ 5.4 $ .9
NMHG Retail --- (1.9) (.7) (2.2)
NMHG Eliminations (.3) (.2) (.3) (.3)
------- ------- ------- -------
NMHG Consolidated 2.8 (.7) 4.4 (1.6)
Housewares 1.1 .2 (1.2) (1.6)
NACoal --- 1.4 .9 2.6
NACCO and Other .2 .3 1.2 1.7
------- ------- ------- -------
$ 4.1 $ 1.2 $ 5.3 $ 1.1
======= ======= ======= =======




16







THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------- -------------------
2003 2002 2003 2002
------- ------- ------- -------

NET INCOME (LOSS)
NMHG Wholesale $ 6.3 $ 2.5 $ 11.0 $ 8.1
NMHG Retail (.2) (3.4) (1.5) (4.6)
NMHG Eliminations (.4) (.3) (.5) (.4)
------- ------- ------- -------
NMHG Consolidated 5.7 (1.2) 9.0 3.1
Housewares 1.5 .4 (1.9) (2.4)
NACoal 3.2 4.2 6.5 10.6
NACCO and Other (.8) (.6) .1 (2.2)
------- ------- ------- -------
$ 9.6 $ 2.8 $ 13.7 $ 9.1
======= ======= ======= =======
DEPRECIATION, DEPLETION AND
AMORTIZATION EXPENSE
NMHG Wholesale $ 6.6 $ 7.6 $ 13.2 $ 15.2
NMHG Retail 2.4 2.5 4.3 5.5
------- ------- ------- -------
NMHG Consolidated 9.0 10.1 17.5 20.7
Housewares 3.2 2.9 6.4 7.1
NACoal 2.9 2.0 5.4 4.1
NACCO and Other --- --- .1 ---
------- ------- ------- -------
15.1 15.0 29.4 31.9
Project mining subsidiaries 8.2 7.1 16.4 14.8
------- ------- ------- -------
$ 23.3 $ 22.1 $ 45.8 $ 46.7
======= ======= ======= =======
CAPITAL EXPENDITURES
NMHG Wholesale $ 5.6 $ 2.4 $ 8.4 $ 7.8
NMHG Retail 1.7 .5 2.4 1.3
------- ------- ------- -------
NMHG Consolidated 7.3 2.9 10.8 9.1
Housewares 1.9 1.5 3.3 2.5
NACoal 19.0 1.9 20.7 3.1
NACCO and Other --- .3 --- .7
------- ------- ------- -------
28.2 6.6 34.8 15.4
Project mining subsidiaries 2.4 3.6 5.3 5.2
------- ------- ------- -------
$ 30.6 $ 10.2 $ 40.1 $ 20.6
======= ======= ======= =======







JUNE 30 DECEMBER 31
2003 2002
---------- ----------

TOTAL ASSETS
NMHG Wholesale $ 1,117.7 $ 1,070.7
NMHG Retail 172.0 187.7
NMHG Parent/Eliminations (81.2) (54.9)
---------- ----------
NMHG Consolidated 1,208.5 1,203.5
Housewares 328.1 331.5
NACoal 240.4 224.2
NACCO and Other 81.4 75.5
---------- ----------
1,858.4 1,834.7
Project mining subsidiaries 418.7 381.2
---------- ----------
2,277.1 2,215.9
Consolidating Eliminations (96.2) (92.0)
---------- ----------
$ 2,180.9 $ 2,123.9
========== ==========





17





Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Tabular Amounts in Millions)

==========================================
Critical Accounting Policies and Estimates
==========================================


Please refer to the discussion of the Company's Critical Accounting Policies and
Estimates as disclosed on pages 21 and 22 in the Company's Form 10-K for the
fiscal year ended December 31, 2002.

=================
FINANCIAL SUMMARY
=================

The parent company charges fees to its operating subsidiaries for services
provided by the corporate headquarters. These services represent most of the
parent company's operating expenses. The classification in the income statement
by the segments, however, has changed to reflect all of the fees in selling,
general and administrative expenses, as directed by the parent company for
purposes of internal analysis. Following is a table for comparison of parent
company fees year over year:




THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------- -----------------
2003 2002 2003 2002
------ ------ ------ ------

NACCO fees included in selling, general and
administrative expenses
NMHG Wholesale $ 2.1 $ 1.1 $ 4.1 $ 2.3
Housewares .8 .5 1.6 1.0
NACoal .3 .2 .6 .3
------ ------ ------ ------
$ 3.2 $ 1.8 $ 6.3 $ 3.6
====== ====== ====== ======
NACCO fees included in other-net, income
(expense)
NMHG Wholesale $ --- $ .6 $ --- $ 1.2
Housewares --- .2 --- .4
NACoal --- .1 --- .2
------ ------ ------ ------
$ --- $ .9 $ --- $ 1.8
====== ====== ====== ======
Total NACCO fees charged to segments
NMHG Wholesale $ 2.1 $ 1.7 $ 4.1 $ 3.5
Housewares .8 .7 1.6 1.4
NACoal .3 .3 .6 .5
------ ------ ------ ------
$ 3.2 $ 2.7 $ 6.3 $ 5.4
====== ====== ====== ======





18





================
NMHG HOLDING CO.
================

NMHG designs, engineers, manufactures, sells, services and leases a
comprehensive line of lift trucks and service parts marketed worldwide under the
Hyster(R) and Yale(R) brand names.

FINANCIAL REVIEW

The segment and geographic results of operations for NMHG were as follows for
the three months and six months ended June 30:




THREE MONTHS SIX MONTHS
--------------------- ---------------------
2003 2002 2003 2002
-------- -------- -------- --------

Revenues
Wholesale
Americas $ 251.7 $ 237.6 $ 507.9 $ 465.9
Europe, Africa and Middle East 111.5 92.2 214.2 176.8
Asia-Pacific 26.0 17.4 49.7 32.2
-------- -------- -------- --------
389.2 347.2 771.8 674.9
-------- -------- -------- --------
Retail (net of eliminations)
Americas .5 6.4 1.2 14.0
Europe, Africa and Middle East 19.9 16.2 37.4 32.3
Asia-Pacific 18.8 18.9 37.0 39.3
-------- -------- -------- --------
39.2 41.5 75.6 85.6
-------- -------- -------- --------
NMHG Consolidated $ 428.4 $ 388.7 $ 847.4 $ 760.5
======== ======== ======== ========
Operating profit (loss)
Wholesale
Americas $ 13.0 $ 12.2 $ 26.2 $ 22.0
Europe, Africa and Middle East 1.6 1.8 2.1 (1.0)
Asia-Pacific .9 (.2) .9 (.2)
-------- -------- -------- --------
15.5 13.8 29.2 20.8
-------- -------- -------- --------
Retail (net of eliminations)
Americas (.1) (.4) .1 (.2)
Europe, Africa and Middle East (.8) .7 (2.3) 1.0
Asia-Pacific 1.0 (3.1) 1.3 (3.4)
-------- -------- -------- --------
.1 (2.8) (.9) (2.6)
-------- -------- -------- --------
NMHG Consolidated $ 15.6 $ 11.0 $ 28.3 $ 18.2
======== ======== ======== ========
Interest expense
Wholesale $ (7.3) $ (6.6) $ (14.5) $ (10.2)
Retail (net of eliminations) (1.4) (2.0) (2.8) (3.9)
-------- -------- -------- --------
NMHG Consolidated $ (8.7) $ (8.6) $ (17.3) $ (14.1)
======== ======== ======== ========
Other-net
Wholesale $ 1.0 $ (3.6) $ 1.2 $ (2.1)
Retail (net of eliminations) .4 (1.0) .7 (1.0)
-------- -------- -------- --------
NMHG Consolidated $ 1.4 $ (4.6) $ 1.9 $ (3.1)
======== ======== ======== ========

Net income (loss)
Wholesale $ 6.3 $ 2.5 $ 11.0 $ 8.1
Retail (net of eliminations) (.6) (3.7) (2.0) (5.0)
-------- -------- -------- --------
NMHG Consolidated $ 5.7 $ (1.2) $ 9.0 $ 3.1
======== ======== ======== ========



19



NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued




THREE MONTHS SIX MONTHS
--------------- -----------------
2003 2002 2003 2002
---- ---- ---- ----

Effective tax rate
Wholesale 33.7% 38.9% 34.0% 10.6%
Retail (net of eliminations) 33.3% 36.2% 33.3% 33.3%
NMHG Consolidated 33.7% 31.8% 34.1% (a)




(a) The effective tax rate for the six months ended June 30, 2002 for NMHG
Consolidated is not meaningful. See below.

The effective tax rate for the six months ended June 30, 2002 is 10.6% for NMHG
Wholesale and is not meaningful for NMHG Consolidated due to a $1.9 million tax
benefit recognized in the first quarter of 2002 related to the recognition of
previously generated losses in China, combined with a relatively low level of
pre-tax income. These factors resulted in a net tax benefit generated on pre-tax
income for NMHG Consolidated.

Second Quarter of 2003 Compared with Second Quarter of 2002

NMHG Wholesale: Revenues increased to $389.2 million in the second quarter of
2003, up 12.1% from $347.2 million in the second quarter of 2002. The increase
in revenues was largely due to increased unit volume worldwide, a shift in mix
to higher-priced lift trucks and favorable foreign currency movements. Lift
truck shipments increased 5.1% to 16,961 units in the second quarter of 2003
from 16,135 units in the second quarter of 2002.

Operating profit increased to $15.5 million in the second quarter of 2003 from
$13.8 million in the second quarter of 2002. Operating profit improved primarily
due to (i) a favorable shift in mix to higher-margin lift trucks, (ii) a $1.6
million favorable adjustment related to favorable product liability experience
and (iii) a $1.1 million gain on the sale of idle property recorded in the
second quarter of 2003. In addition, operating profit in 2002 included an
impairment loss of approximately $0.8 million, included in selling, general and
administrative expenses in the accompanying statement of income, on certain
property, consisting primarily of land, owned in South America due to an
estimated decline in value based on broker quotes. These increases in operating
profit were partially offset by (i) unfavorable foreign currency effects largely
as a result of the weakening U.S. dollar against the euro, (ii) increased
product development expenses and (iii) additional expenses, which were not
eligible for accrual in 2002, related to the previously announced phase-out of
the Lenoir, North Carolina lift truck component facility. See additional
discussion of the NMHG Wholesale restructuring programs under the heading "NMHG
Restructuring Plans" in this Form 10-Q.

The increase in operating profit was also partially offset by a change in
classification of management fees charged to NMHG Wholesale by NACCO. In the
first quarter of 2003, the parent company began classifying all management fees
charged to NMHG Wholesale and the other segments as selling, general and
administrative expenses for purposes of internal analysis. In comparison, in the
three and six months ended June 30, 2002, a portion of the fees, $0.6 million
and $1.2 million, respectively, for NMHG Wholesale, were recorded as a component
of other income (expense).

Net income increased to $6.3 million in the second quarter of 2003 from $2.5
million in the second quarter of 2002 primarily as a result of the factors
affecting operating profit plus increased income from unconsolidated affiliates
and certain favorable foreign currency transactions. Also affecting the
comparability of net income is a decrease in the loss on interest rate swap
agreements: the second quarter of 2002 net income includes a pre-tax expense of
$3.1 million related to (i) the mark-to-market of interest rate swap agreements
that no longer qualified for hedge accounting due to the refinancing of NMHG's
debt and (ii) the recognition of previously deferred losses on these interest
rate swap agreements.



20




NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued


The worldwide backlog level increased to 19,400 units at June 30, 2003 from
17,500 units at June 30, 2002 and 17,300 units at the end of the first quarter
of 2003 primarily due to an increase in demand.

NMHG Retail (net of eliminations): Revenues decreased to $39.2 million in the
second quarter of 2003 from $41.5 million in the second quarter of 2002. This
decrease is primarily due to the January 3, 2003 sale of NMHG Retail's only
wholly owned U.S. dealer. NMHG Retail-Americas revenues were $0.5 million in the
second quarter of 2003 compared with $6.4 million in the second quarter of 2002.
This decrease in Americas revenues was partially offset by an increase in
revenues due to favorable foreign currency effects. NMHG Retail generated an
operating profit of $0.1 million in the second quarter of 2003 compared with an
operating loss of $2.8 million in the second quarter of 2002, which was
primarily the result of stronger operating results in Asia-Pacific. NMHG
Retail's net loss improved to $0.6 million from a net loss of $3.7 million in
the second quarter of 2002 due to the factors affecting operating profit and a
decrease in interest expense allocated to NMHG Retail and favorable foreign
currency movements included in other-net expenses.

First Six Months of 2003 Compared with First Six Months of 2002

NMHG Wholesale: Revenues increased to $771.8 million in the first six months of
2003 from $674.9 million in the first six months of 2002. The increase in
revenues was primarily the result of increased unit volume, favorable foreign
currency movements and, to a lesser degree, a favorable shift in mix to
higher-priced lift trucks. Unit shipments increased 10.6% to 34,413 units in the
first six months of 2003 as compared with 31,106 in the first six months of
2002.

Operating profit increased to $29.2 million in the first half of 2003 from $20.8
million in the first half of 2002. The increase in operating profit was
primarily the result of a favorable shift in mix to higher-margin lift trucks
and increased volume, partially offset by increased product development and
marketing expenses and unfavorable foreign currency effects largely as a result
of the weakening U.S. dollar against the euro. Also affecting the year over year
comparability is the change in classification of the management fee charged to
NMHG Wholesale from NACCO. See discussion of this change in classification in
the second quarter operating results, above.

Net income increased to $11.0 million in the first six months of 2003 from $8.1
million in the first six months of 2002 as a result of the factors affecting
operating profit and additional income from unconsolidated affiliates and a
decrease in the loss on interest rate swap agreements. These factors were
partially offset by an increase in interest expense, including the amortization
of deferred financing fees.

NMHG Retail (net of eliminations): Revenues decreased to $75.6 million in the
first six months of 2003 from $85.6 million in the first six months of 2002.
This decrease is primarily due to the January 3, 2003 sale of NMHG Retail's only
wholly owned U.S. dealer, partially offset by an increase in units sold in
Europe. NMHG Retail-Americas revenues were $1.2 million in the first six months
of 2003 compared with $14.0 million in the first six months of 2002. NMHG Retail
generated an operating loss of $0.9 million in the first six months of 2003
compared with an operating loss of $2.6 million in the first six months of 2002,
primarily as a result of stronger operating results in Asia-Pacific. NMHG
Retail's net loss improved to $2.0 million in the six months ended June 30, 2003
from a net loss of $5.0 million in the first six months of 2002 due to the
factors affecting operating profit and a decrease in interest expense allocated
to NMHG Retail and favorable foreign currency movements included in other-net
expenses.



21




NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued

NMHG Restructuring Plans

NMHG 2002 Restructuring Program

As announced in December 2002, NMHG Wholesale is phasing out its Lenoir, North
Carolina, lift truck component facility and restructuring other manufacturing
and administrative operations, primarily its Irvine, Scotland, lift truck
assembly and component facility. During the fourth quarter of 2002, NMHG
Wholesale recognized a restructuring charge of approximately $12.5 million
pre-tax. Of this amount, $3.8 million relates to a non-cash asset impairment
charge for building, machinery and tooling, which was determined based on the
then current market values for similar assets and broker quotes as compared to
the net book value of these assets; and $8.7 million relates to severance and
other employee benefits to be paid to approximately 615 manufacturing and
administrative employees. Payments began during the second quarter of 2003. As
of June 30, 2003, payments of $0.7 million were made to approximately 100
employees. Payments are expected to continue through 2005. In addition, $0.3
million of the amount accrued at December 31, 2002 was reversed in the first
half of 2003.

Approximately $2.5 million of pre-tax costs primarily related to manufacturing
inefficiencies, which were not eligible for accrual in December 2002, were
expensed in the first six months of 2003. Of the additional costs incurred
during 2003, $2.3 million is classified as cost of sales and the remaining $0.2
million is classified as selling, general and administrative expenses in the
Unaudited Condensed Consolidated Statement of Income for the six months ended
June 30, 2003. Additional costs for severance and manufacturing inefficiencies
are expected to be approximately $8.1 million for the remainder of 2003, $8.5
million in 2004 and $5.7 million in 2005. Initial net benefits from this
restructuring program are expected to be realized in 2004 with a full twelve
months of estimated annual pre-tax benefits of approximately $14.3 million
expected beginning in 2005. Although a majority of the projected savings is the
result of a reduction in fixed factory costs, the overall benefit estimates
could vary depending on unit volumes and the resulting impact on manufacturing
efficiencies. In addition, outlays for capital expenditures, primarily for new
tooling and equipment, of approximately $4.3 million are expected for the
remainder of 2003.

This restructuring program will allow the Company to re-focus its product line
manufacturing activities, including the manufacture of new product lines in
Europe. As a result, the Company expects to receive government grants during
2003 through 2005 totaling approximately $6.5 million over that three-year
period. Of this total amount, $1.1 million is expected to be received in 2003.


22



NMHG HOLDING CO. - continued

FINANCIAL REVIEW - continued

NMHG 2001 Restructuring Programs

During 2001, management committed to the restructuring of certain operations in
Europe for both the Wholesale and Retail segments of the business. As such, NMHG
Wholesale recognized a restructuring charge of approximately $4.5 million
pre-tax for severance and other employee benefits to be paid to approximately
285 direct and indirect factory labor and administrative personnel in Europe. As
of December 31, 2002, payments of $3.4 million to approximately 245 employees
had been made and $0.2 million of the amount originally accrued was reversed in
2002. Payments of $0.9 million to 16 employees were made during the first six
months of 2003. The majority of the headcount reductions were made by the end of
2002. As a result of the reduced headcount in Europe, NMHG Wholesale realized
pre-tax cost savings primarily from reduced employee wages and benefits of $4.6
million for the first six months of 2003 and estimates pre-tax savings of $4.6
million for the remainder of 2003. Annual pre-tax cost saving of $9.2 million
are expected to continue subsequent to 2003 as a result of this program.
Although a majority of the projected savings is the result of a reduction in
fixed factory costs, the overall benefit estimates could vary depending on unit
volumes and the resulting impact on manufacturing efficiencies or due to changes
in foreign currency rates.

NMHG Retail recognized a restructuring charge of approximately $4.7 million
pre-tax in 2001, of which $0.4 million related to lease termination costs and
$4.3 million related to severance and other employee benefits to be paid to
approximately 140 service technicians, salesmen and administrative personnel at
wholly owned dealers in Europe. As of December 31, 2002, severance payments, net
of currency effects, of $2.8 million had been made to approximately 110
employees. During the first six months of 2003, severance payments of $0.3
million were made to six employees. In addition, $0.4 million of the amount
accrued at December 31, 2002 was reversed in the first six months of 2003. The
majority of the headcount reductions were made by the end of 2002. Cost savings
primarily from reduced employee wages, employee benefits and lease costs of
approximately $1.6 million pre-tax were realized in the first six months of 2003
and are expected to be approximately $1.6 million for the remainder of 2003
related to this program. Annual pre-tax cost saving of $3.1 million are expected
to continue subsequent to 2003 as a result of this program. Estimated benefits
could be reduced by additional severance payments, if any, made to employees
above the statutory or contractually required amount that was accrued in 2001 or
due to changes in foreign currency rates.

LIQUIDITY AND CAPITAL RESOURCES

Expenditures for property, plant and equipment were $8.4 million for NMHG
Wholesale and $2.4 million for NMHG Retail during the first six months of 2003.
These capital expenditures include tooling for new products, machinery,
equipment and lease and rental fleet. It is estimated that NMHG's capital
expenditures for the remainder of 2003 will be approximately $20.8 million for
NMHG Wholesale and $0.8 million for NMHG Retail. Planned expenditures for the
remainder of 2003 include tooling for new products, capital expenditures arising
as a result of the manufacturing restructuring programs, replacement of
machinery and equipment and additions to retail lease and rental fleet. The
principal sources of financing for these capital expenditures will be internally
generated funds and bank borrowings.

Since December 31, 2002, there have been no significant changes in the total
amount of NMHG's contractual obligations or commercial commitments, or the
timing of cash flows in accordance with those obligations, as reported in the
Company's 10-K for the year ended December 31, 2002.

During 2002, NMHG issued $250.0 million of 10% unsecured Senior Notes that
mature on May 15, 2009. The Senior Notes are senior unsecured obligations of
NMHG Holding Co. and are guaranteed by substantially all of NMHG's domestic
subsidiaries. NMHG Holding Co. has the option to redeem all or a portion of the
Senior Notes on or after May 15, 2006 at the redemption prices set forth in the
Indenture governing the Senior Notes. The proceeds from the Senior Notes were
reduced by an original issue discount of $3.1 million.



23




NMHG HOLDING CO. - continued

LIQUIDITY AND CAPITAL RESOURCES - continued

Additionally, NMHG has a secured, floating-rate revolving credit facility which
expires in May 2005. Availability under the revolving credit facility is up to
$175.0 million and is governed by a borrowing base derived from advance rates
against the inventory and accounts receivable of the borrowers, as defined in
the revolving credit facility. Adjustments to reserves booked against these
assets, including inventory reserves, will change the eligible borrowing base
and thereby impact the liquidity provided by the facility. At June 30, 2003, the
borrowing base under the revolving credit facility was $105.3 million, which
reflects reductions for the commitments or availability under certain foreign
credit facilities and for an excess availability requirement of $15.0 million.
Borrowings outstanding under this facility were $2.0 million at June 30, 2003.
Therefore, at June 30, 2003, the excess availability under the revolving credit
facility was $103.3 million. The floating rate of interest applicable to this
facility on June 30, 2003 was 5.875%, including the applicable floating rate
margin.

In addition to the amount outstanding under the Senior Notes and the revolving
credit facility, NMHG had borrowings of approximately $33.0 million outstanding
at June 30, 2003 under various foreign working capital facilities and other
domestic term loans.

NMHG believes that funds available under the revolving credit facility, other
available lines of credit and operating cash flows are sufficient to finance all
of its operating needs and commitments arising during the foreseeable future.

NMHG's capital structure is presented below:




JUNE 30 DECEMBER 31
2003 2002
-------- --------

Total net tangible assets $ 361.2 $ 362.8
Goodwill and other intangibles at cost 494.7 487.7
-------- --------
Net assets before amortization of intangibles 855.9 850.5
Accumulated goodwill and other intangibles amortization (145.6) (142.3)
Total debt (307.0) (324.8)
Minority interest (.7) (1.1)
-------- --------

Stockholder's equity $ 402.6 $ 382.3
======== ========
Debt to total capitalization 43% 46%



The decrease in total net tangible assets of $1.6 million is in part due to a
$26.2 million decrease in cash, an $8.6 million decrease in net assets as a
result of the sale of NMHG Retail's wholly owned U.S. dealership on January 3,
2003, an $11.9 million increase in trade and intercompany accounts payable and a
$9.1 million increase in other current liabilities. These decreases were
partially offset by increases of $24.1 million in trade and intercompany
accounts receivable and a $27.9 million increase in inventory. Stockholder's
equity at June 30, 2003 increased $20.3 million as a result of net income of
$9.0 million and a favorable foreign currency translation adjustment of $16.4
million partially offset by a dividend to NACCO of $5.0 million and an
unfavorable adjustment to the deferred loss on hedges of $0.1 million.


24



======================
NACCO HOUSEWARES GROUP
======================

Because the Housewares business is seasonal, a majority of revenues and
operating profit occurs in the second half of the year when sales of small
electric appliances to retailers and consumers increase significantly for the
fall holiday selling season.

FINANCIAL REVIEW

The results of operations for Housewares were as follows for the three and six
months ended June 30:



THREE MONTHS SIX MONTHS
---------------------- -----------------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenues $ 118.3 $ 134.5 $ 234.3 $ 256.1
Operating profit $ 4.4 $ 3.2 $ .6 $ .6
Interest expense $ (1.7) $ (1.9) $ (3.3) $ (3.8)
Other-net $ (.1) $ (.7) $ (.4) $ (.8)
Net income (loss) $ 1.5 $ .4 $ (1.9) $ (2.4)

Effective tax rate 42.3% 33.3% 38.7% 40.0%


Second Quarter of 2003 Compared with Second Quarter of 2002

Housewares' revenues decreased to $118.3 million in the second quarter of 2003
from $134.5 million in the second quarter of 2002 primarily due to reduced
consumer spending as a result of the weak retail environment in the U.S. and
Canada. HB/PS was also affected by certain retail customers' inventory reduction
programs as a result of the weak economy. The decline in revenues at HB/PS was
partially offset by a shift in mix to higher price-point products and increased
volume of home health products. In addition, revenues at KCI declined as a
result of reduced customer visits due to the weak economy, partially offset by
an increase in the number of stores from 170 at June 30, 2002 to 178 at June 30,
2003. Although the total store transactions declined at KCI, the average sales
transaction increased slightly.

Operating profit in the seasonally weak second quarter increased to $4.4 million
in the second quarter of 2003 compared with $3.2 million in the second quarter
of 2002, primarily as a result of a $3.6 million charge in the second quarter of
2002 related to the partial write-down of pre-bankruptcy receivables from Kmart.
Excluding this charge, operating profit decreased $2.4 million in the second
quarter of 2003 as compared with the second quarter of 2002. This decrease
resulted from declines in the average sales price, reduced unit volumes and
resulting reductions in the absorption of manufacturing overhead costs. These
declines were partially offset by lower manufacturing costs.

Net income of $1.5 million for the second quarter of 2003 improved as compared
with net income of $0.4 million for the second quarter of 2002 primarily due to
the factors affecting operating profit.


25



NACCO HOUSEWARES GROUP - continued

FINANCIAL REVIEW - continued

First Six Months of 2003 Compared with First Six Months of 2002

Housewares' revenues decreased to $234.3 million in the first six months of
2003, down 8.5% from $256.1 million in the first six months of 2002. The decline
in revenues resulted from the same factors affecting the second quarter
discussed above.

Operating profit of $0.6 million for the period ended June 30, 2003 was
unchanged from the operating profit for the period ended June 30, 2002.
Operating results for the six months ended June 30, 2003 improved $2.3 million
as a result of the year-over-year change in net charges to write-off Kmart
pre-petition bankruptcy receivables. However, this benefit was completely offset
by the effects of reduced unit volume.

Net loss of $1.9 million for the first six months of 2003 decreased as compared
with a net loss of $2.4 million for the first six months of 2002 primarily due
to the factors affecting operating profit and a $0.5 million decrease in
interest expense primarily due to decreased debt levels.

LIQUIDITY AND CAPITAL RESOURCES

Housewares' expenditures for property, plant and equipment were $3.3 million
during the first six months of 2003 and are estimated to be $7.0 million for the
remainder of 2003. These planned capital expenditures are primarily for tooling
and equipment designed for new products, as well as tooling and equipment
intended to reduce manufacturing costs and increase efficiency. These
expenditures will be funded primarily from internally generated funds and bank
borrowings.

HB/PS' credit agreement provides for a revolving credit facility with
availability of up to $140.0 million, which is governed by a borrowing base
derived from advance rates against the inventory, accounts receivable and
certain trademarks of HB/PS. A portion of the availability can be denominated in
Canadian dollars to provide funding to HB/PS' Canadian subsidiary. The borrowing
base is reduced by specific reserves for inventory, accounts receivable,
obligations outstanding under letters of credit and interest rate derivatives,
among others, and an excess availability requirement of $10.0 million.
Adjustments to reserves booked against inventory and accounts receivable will
change the eligible borrowing base and thereby impact the liquidity provided by
the facility.

Borrowings bear interest at a floating rate, which can be either a base rate or
LIBOR, as defined, plus an applicable margin. The applicable margins, effective
June 30, 2003, for base rate loans and LIBOR loans were 0.50% and 1.75%,
respectively. This is a decline from the applicable margins effective as of
December 31, 2002, which were 1.50% and 2.75%, respectively. The revolving
credit facility also requires the payment of a fee on the unused commitment. The
unused commitment fee has declined from 0.50% per annum at December 31, 2002 to
0.375% per annum at June 30, 2003. The margins and unused commitment fee are
subject to quarterly adjustment based on a leverage ratio. The revolving credit
facility is secured by substantially all of HB/PS' assets. The facility expires
in December 2005.

At June 30, 2003, the borrowing base under the revolving credit facility was
$81.4 million, which reflects reductions for reserves and the excess
availability requirement of $10.0 million. Borrowings outstanding under this
facility were $60.1 million at June 30, 2003. Therefore, at June 30, 2003, the
excess availability under the revolving credit facility was $21.3 million. The
floating rate of interest applicable to this facility on June 30, 2003 was
3.34%, including the applicable floating rate margin.



26




NACCO HOUSEWARES GROUP - continued

LIQUIDITY AND CAPITAL RESOURCES - continued

KCI's credit agreement provides for a secured, floating-rate revolving line of
credit (the "KCI Facility") with availability up to $15.0 million, based on a
formula using KCI's eligible inventory, as defined. At June 30, 2003, the
borrowing base as defined in the agreement was $10.2 million. Borrowings
outstanding at June 30, 2003 were $8.3 million at an effective interest rate of
LIBOR plus 1.35%, or 2.38%.

Since December 31, 2002, there have been no significant changes in the total
amount of Housewares' contractual obligations or commercial commitments, or the
timing of cash flows in accordance with those obligations, as reported in the
Company's 10-K for the year ended December 31, 2002.

Housewares believes that funds available under its credit facilities and
operating cash flows are sufficient to finance all of its operating needs and
commitments arising during the foreseeable future.

Housewares' capital structure is presented below:




JUNE 30 DECEMBER 31
2003 2002
-------- --------


Total net tangible assets $ 134.7 $ 127.6
Goodwill and other intangibles at cost 124.1 124.1
-------- --------
Net assets before goodwill amortization 258.8 251.7
Accumulated goodwill and other intangibles amortization (40.0) (39.9)
Total debt (68.7) (57.9)
-------- --------

Stockholder's equity $ 150.1 $ 153.9
======== ========

Debt to total capitalization 31% 27%




Total net tangible assets increased $7.1 million primarily due to a $9.6 million
increase in inventory, an $8.7 decrease in other current liabilities and a $4.8
million decrease in trade and intercompany accounts payable, partially offset by
a $12.4 million decrease in accounts receivable and a $3.6 million decrease in
property, plant, and equipment. Inventory increased primarily due to the
seasonality of the Housewares business. Other current liabilities declined
primarily due to the payment of payroll and incentive compensation in the first
quarter of 2003 relating to amounts accrued at December 31, 2002. Accounts
receivable declined primarily as a result of lower sales in the second quarter
of 2003 as compared with sales in the seasonally higher fourth quarter of 2002.



27



===================================
THE NORTH AMERICAN COAL CORPORATION
===================================


NACoal mines and markets lignite for use primarily as fuel for power providers.
The lignite is surface mined in North Dakota, Texas, Louisiana and Mississippi.
Total coal reserves approximate 2.5 billion tons, with 1.3 billion tons
committed to customers pursuant to long-term contracts. NACoal operates six
wholly owned lignite mines: The Coteau Properties Company ("Coteau"), The
Falkirk Mining Company ("Falkirk"), The Sabine Mining Company ("Sabine"), San
Miguel Lignite Mine ("San Miguel"), Red River Mining Company ("Red River") and
Mississippi Lignite Mining Company ("MLMC"). NACoal also provides dragline
mining services ("Florida dragline operations") for a limerock quarry near
Miami, Florida. The operating results of Coteau, Falkirk and Sabine are included
in "project mining subsidiaries." The operating results of all other operations
are included in "other mining operations."

NACoal's subsidiaries, Coteau, Falkirk and Sabine, are termed "project mining
subsidiaries" because they mine lignite for utility customers pursuant to
long-term contracts at a price based on actual cost plus an agreed pre-tax
profit per ton. Due to the cost-plus nature of these contracts, revenues and
operating profits are affected by increases and decreases in operating costs, as
well as by tons sold. Net income of the project mining subsidiaries, 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 and because the operating results of the
project mining subsidiaries represent a substantial portion of NACoal's revenues
and profits, operating results are best analyzed in terms of lignite tons sold,
income before taxes and net income.

FINANCIAL REVIEW

Lignite tons sold by NACoal's operating lignite mines were as follows for the
three and six months ended June 30:




THREE MONTHS SIX MONTHS
------------------------ ------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------


Coteau 3.4 3.4 7.7 7.5
Falkirk 1.9 1.5 3.9 3.4
Sabine 1.1 .9 2.1 2.0
San Miguel .8 .8 1.5 1.6
MLMC .8 .9 1.8 1.2
Red River .1 .2 .3 .3
----------- ----------- ----------- -----------
Total lignite 8.1 7.7 17.3 16.0
=========== =========== =========== ===========




The Florida dragline operations delivered 2.4 million and 5.2 million cubic
yards of limerock in the three and six months ended June 30, 2003, respectively.
This compares with 2.8 million and 5.2 million cubic yards of limerock in the
three and six months ended June 30, 2002, respectively.



28




THE NORTH AMERICAN COAL CORPORATION - continued

FINANCIAL REVIEW - continued

Revenues, income before taxes, provision for taxes and net income were as
follows for the three and six months ended June 30:




THREE MONTHS SIX MONTHS
-------------------- ---------------------
2003 2002 2003 2002
------- -------- -------- --------

Revenues
Project mining subsidiaries $ 68.7 $ 63.8 $ 130.5 $ 128.2
Other mining operations 21.4 21.8 44.0 36.2
------- -------- -------- --------
90.1 85.6 174.5 164.4
Liquidated damage payments recorded by MLMC --- --- --- 3.3
Royalties and other .6 .7 1.1 1.7
------- -------- -------- --------
$ 90.7 $ 86.3 $ 175.6 $ 169.4
======= ======== ======== ========
Income before taxes
Project mining subsidiaries $ 6.9 $ 6.1 $ 14.4 $ 13.5
Other mining operations .9 2.5 2.9 6.8
------- -------- -------- --------
Total from operating mines 7.8 8.6 17.3 20.3
Royalties and other expenses, net (2.1) (1.1) (3.7) (3.6)
Other operating expenses (2.5) (1.9) (4.8) (3.5)
------- -------- -------- --------
Income before tax provision 3.2 5.6 8.8 13.2
Provision for taxes --- 1.4 1.0 2.6
------- -------- -------- --------
Income before cumulative effect of accounting change 3.2 4.2 7.8 10.6
Cumulative effect of accounting change, net-of tax --- --- (1.3) ---
------- -------- -------- --------
Net income $ 3.2 $ 4.2 $ 6.5 $ 10.6
======= ======== ======== ========

Effective tax rate(a) (b) 25.0% 10.3% 19.7%




(a) The effective tax rate for NACoal is lower than the statutory federal tax
rate of 35% primarily due to the benefit received from percentage depletion.

(b) The effective tax rate for the three months ended June 30, 2003 for NACoal
is not meaningful.

Second Quarter of 2003 Compared with Second Quarter of 2002

Revenues in the second quarter of 2003 increased to $90.7 million, up 5.1% from
$86.3 million in the second quarter of 2002. Increased revenues in the second
quarter of 2003 as compared with the second quarter of 2002 is primarily due to
an increase in tons sold at Falkirk and Sabine, partially offset by a slight
decrease in tonnage volume at Mississippi, decreased cubic yards delivered at
the Florida dragline operations and a decrease in pass-through costs billed to
the project mining subsidiaries' customers.

Income before taxes decreased to $3.2 million in the second quarter of 2003 from
$5.6 million in the second quarter of 2002. This decrease is primarily due to
(i) a $1.4 million gain recorded in the second quarter of 2002 for the sale of
undeveloped Eastern coal reserves that were not aligned with NACoal's
development strategies, (ii) lower volumes at MLMC due to reduced customer
requirements and (iii) increased operating costs at MLMC and San Miguel. These
decreases were partially offset by the favorable effect of increased volume at
Falkirk and due to decreased interest expense as a result of lower debt levels.
Net income in the second quarter of 2003 decreased to $3.2 million from $4.2
million in the second quarter of 2002 as a result of these factors and a lower
effective tax rate.

The decrease in the effective tax rate for the three and six months ended June
30, 2003 as compared with the three and six months ended June 30, 2002, is
primarily due to a greater proportion of income from operations eligible to
record a benefit from percentage depletion when compared to losses at operations
not eligible for percentage depletion. In addition, the second quarter of 2003
includes a favorable tax adjustment related to the revision of the full year
estimated effective tax rate.



29




THE NORTH AMERICAN COAL CORPORATION - continued

FINANCIAL REVIEW - continued

First Six Months of 2003 Compared with First Six Months of 2002

Revenues in the first six months of 2003 increased to $175.6 million, up 3.7%
from $169.4 million in the first six months of 2002. Increased revenues in the
first six months of 2003 as compared with the first six months of 2002 is
primarily due to a full six months of commercial operations of the customer's
power plant in 2003 at MLMC and an increase in tons sold by the project mines,
partially offset by (i) a decrease in pass-through costs billed to the project
mining subsidiaries' customers, (ii) a decrease in liquidated damages payments
which were received by MLMC in the first half of 2002 due to the delay of
commercial operations of the customer's power plant and (iii) a decrease in
royalty income.

Income before taxes decreased to $8.8 million in the first six months of 2003
from $13.2 million in the first six months of 2002. This decrease is primarily
due to (i) unfavorable operating results at MLMC as a result of increased
operating costs from the significant increase in production and delivery of
lignite to the customer during the first six months of 2003 as compared with
operating costs incurred when receiving liquidated damages payments during the
first six months of 2002, (ii) increased maintenance costs at San Miguel and
(iii) a $1.4 million gain on the sale of undeveloped Eastern coal reserves
recognized in the first six months of 2002. Net income in the second half of
2003 decreased to $6.5 million from $10.6 million in the second half of 2002 as
a result of these factors and due to a $1.3 million after-tax charge for the
cumulative effect of a change in accounting related to the adoption of SFAS No.
143. See Note 4 to the Unaudited Condensed Consolidated Financial Statements for
a discussion related to the adoption of SFAS No. 143.

LIQUIDITY AND CAPITAL RESOURCES

Expenditures for property, plant and equipment were $26.0 million during the
first six months of 2003. In April 2003, $15.8 million of equipment previously
financed under operating leases was refinanced with collateralized debt. The
equipment consisted of mining equipment, such as trucks, bulldozers, graders and
a backhoe. These April 2003 purchases were financed with three collateralized
notes payable that expire, in accordance with their respective terms, in either
2007 or 2008 and require monthly principal and interest payments at a
weighted-average fixed interest rate of 5.46%. NACoal estimates that its capital
expenditures for the remainder of 2003 will be $20.1 million, of which $15.5
million relates to the development, establishment and improvement of the project
mining subsidiaries' mines and will be financed or guaranteed by the utility
customers.

In addition to the new collateralized debt discussed above, NACoal's
non-project-mine financing needs are provided by a revolving line of credit of
up to $60.0 million and a term loan with a principal balance of $85.0 million at
June 30, 2003 (the "NACoal Facility"). The NACoal Facility requires annual term
loan repayments of $15.0 million, with a final term loan repayment of $55.0
million in October 2005. The revolving line of credit of up to $60.0 million is
available until the facility's expiration in October 2005. The NACoal Facility
has performance-based pricing which sets interest rates based upon achieving
various levels of Debt to EBITDA ratios, as defined therein. The margins and
commitment fee are subject to quarterly adjustment based on the level of debt to
EBITDA. At June 30, 2003, the stated interest rate, including the applicable
margin, for the revolving line of credit and for the term loan was LIBOR plus
1.45% and LIBOR plus 1.75%, respectively. The applicable margins at June 30,
2003 have declined from those in effect at December 31, 2002 of 1.85% and 2.25%,
respectively. The revolving credit facility fee has also declined from 0.40% at
December 31, 2002 to 0.30% at June 30, 2003. At June 30, 2003, NACoal had
borrowings outstanding under its revolving line of credit of $5.0 million,
leaving $55.0 million available.



30





THE NORTH AMERICAN COAL CORPORATION - continued

LIQUIDITY AND CAPITAL RESOURCES - continued

Since December 31, 2002, there have been no significant changes in the total
amount of NACoal's contractual obligations or commercial commitments, or the
timing of cash flows in accordance with those obligations as reported in the
Company's 10-K for the year ended December 31, 2002.

The financing of the project mining subsidiaries, which is either provided or
guaranteed by the utility customers, includes long-term equipment leases, notes
payable and non-interest-bearing advances from customers. The obligations of the
project mining subsidiaries do not affect the short-term or long-term liquidity
of NACoal and are without recourse to NACCO or NACoal. These arrangements allow
the project mining subsidiaries to pay dividends to NACoal in amounts based on
their earnings.

NACoal believes that funds available under its revolving line of credit,
operating cash flows and financing provided by the project mining subsidiaries'
customers are sufficient to finance all of its term loan principal repayments
and its operating needs and commitments arising during the foreseeable future.

NACoal's capital structure, excluding the project mining subsidiaries, is
presented below:




JUNE 30 DECEMBER 31
2003 2002
-------- --------


Investment in project mining subsidiaries $ 5.0 $ 4.9
Other net tangible assets 109.7 93.2
Coal supply agreements, net 81.3 82.8
-------- --------
Net assets 196.0 180.9

Advances from NACCO (24.4) (25.7)
Other debt (105.1) (92.0)
-------- --------
Total debt (129.5) (117.7)
-------- --------
Stockholder's equity $ 66.5 $ 63.2
======== ========

Debt to total capitalization 66% 65 %




The increase in other net tangible assets and debt is primarily due to the April
2003 $15.8 million refinancing of several equipment operating leases at MLMC
with collateralized debt. As a result of the refinancing, these pieces of
equipment are now included in property, plant and equipment on the balance
sheet. Total contractual obligations of NACoal and the timing of payments did
not change significantly as a result of this refinancing. The change in
stockholder's equity is the result of net income of $6.5 million and a $0.8
million increase in accumulated other comprehensive income related to hedging
activity, partially offset by $4.0 million in dividends paid to NACCO.



31





===============
NACCO AND OTHER
===============

FINANCIAL REVIEW

NACCO and Other includes the parent company operations and Bellaire Corporation
("Bellaire"), a non-operating subsidiary of NACCO. While Bellaire's results are
immaterial, it has significant long-term liabilities related to closed mines,
primarily from former Eastern U.S. underground coal-mining activities. See
additional discussion in Note 7 to the Unaudited Condensed Consolidated
Financial Statements. Cash payments related to Bellaire's obligations, net of
internally generated cash, are funded by NACCO and historically have not been
material.

The results of operations at NACCO and Other were as follows for the three and
six months ended June 30:


THREE MONTHS SIX MONTHS
---------------- -----------------
2003 2002 2003 2002
----- ------ ------ ------

Revenues $ .1 $ .1 $ .1 $ .1
Operating loss $ --- $ (1.0) $ (.1) $ (1.8)
Other income (loss), net $ (.6) $ .7 $ (1.1) $ 1.3
Net income (loss) $ (.8) $ (.6) $ .1 $ (2.2)

The change in operating loss and other income (loss) is primarily due to a
change in the classification of certain of NACCO's fees charged to the operating
segments. In 2002, $0.9 million and $1.8 million for the three and six months
ended June 30, 2002, respectively, of income from fees charged to the operating
segments was included in other income (loss). In 2003, all fees charged to the
operating segments are included in operating loss. In addition, total fees
charged to the operating segments increased by $0.5 million and $0.9 million in
the three and six months ended June 30, 2003 as compared with the same periods
of 2002.

The increase in net income (loss) for the six months ended June 30, 2003 as
compared with the six months ended June 30, 2002 is primarily due a $2.5 million
after-tax cumulative effect benefit recorded by Bellaire for the adoption of
SFAS No. 143 in the first quarter of 2003. See Note 4 to the Unaudited Condensed
Consolidated Financial Statements for a discussion of the adoption of SFAS No.
143.

LIQUIDITY AND CAPITAL RESOURCES

Although NACCO's subsidiaries have entered into substantial borrowing
agreements, NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries. The borrowing agreements at NMHG, Housewares and NACoal allow for
the payment to NACCO of dividends and advances under certain circumstances.
Dividends, advances and management fees from its subsidiaries are the primary
sources of cash for NACCO.

The Company believes that funds available under credit facilities, anticipated
funds to be generated from operations and the utility customers' funding of the
project mining subsidiaries are sufficient to finance all of its scheduled
principal repayments, operating needs and commitments arising during the
foreseeable future.



32




NACCO AND OTHER - continued

FINANCIAL REVIEW - continued

NACCO's consolidated capital structure is presented below:




JUNE 30 DECEMBER 31
2003 2002
---------- ----------

Total net tangible assets $ 596.9 $ 570.8
Coal supply agreements and other intangibles, net 83.3 85.0
Goodwill at cost 615.5 609.0
---------- ----------
Net assets before goodwill amortization 1,295.7 1,264.8
Accumulated goodwill amortization (184.3) (181.6)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (480.8) (474.7)
Closed mine obligations (Bellaire), including the
United Mine Worker retirees' medical fund, net-of-tax (44.3) (48.0)
Minority interest (.7) (1.1)
---------- ----------

Stockholders' equity $ 585.6 $ 559.4
========== ==========

Debt to total capitalization 45% 46%



EFFECTS OF FOREIGN CURRENCY

NMHG and Housewares operate internationally and enter into transactions
denominated in foreign currencies. As such, the Company's financial results are
subject to the variability that arises from exchange rate movements. The effects
of foreign currency fluctuations on revenues, operating profit (loss) and net
income (loss) at NMHG and Housewares have either been discussed above or were
not material in the three and six months ended June 30, 2003 as compared with
the three and six months ended June 30, 2002. See also Item 3, "Quantitative and
Qualitative Disclosures About Market Risk."

OUTLOOK

NMHG Wholesale

NMHG Wholesale expects overall lift truck shipments to increase moderately in
the second half of 2003 compared with the second half of 2002. While global
market prospects continue to be more uncertain than usual, lift truck markets in
the Americas are anticipated to improve in the second half of 2003 while markets
in Europe and Asia-Pacific are expected to remain relatively flat.

NMHG Wholesale expects that results in the second half of 2003 will be affected
by ongoing costs for a product development program that is expected to mature in
2004-2006 and additional costs related to the Lenoir, North Carolina, and
Irvine, Scotland, manufacturing restructuring program announced in December
2002.

NMHG Retail

NMHG Retail expects to continue its programs to improve the performance of its
wholly owned dealerships in 2003 as part of its objective to achieve and sustain
at least break-even results.



33




OUTLOOK - continued

Housewares

Housewares is cautiously optimistic that the current weak retail environment
will improve in the second half of 2003.

HB/PS continues to implement programs, begun in earlier years, which are
designed to reduce operating costs and enhance manufacturing and distribution
efficiencies. Also, HB/PS believes that new product offerings, such as the
Hamilton Beach(R) BrewStation(TM) coffeemaker, the Hamilton Beach(R)
WaffleStix(TM) waffle baker and an expanded line of TrueAir(TM) home health
products, will enhance revenues over the remainder of 2003.

KCI expects to continue programs designed to enhance its operating results,
including improving its merchandise mix, closing non-performing stores and
prudently opening new stores, expanding the offerings of Hamilton Beach(R) and
Proctor-Silex(R)-branded products and aggressively managing its costs.

NACoal

NACoal anticipates increased lignite coal deliveries in 2003, compared with
2002, primarily due to an expected increase in lignite coal production at MLMC.
However, certain favorable items which improved financial results in 2002,
including liquidated damages payments and related settlements, are not expected
to be repeated in 2003. Further, maintenance requirements and the adoption of
SFAS No. 143 will continue to increase costs in 2003 compared to 2002.

In the first quarter of 2003, NACoal reached an agreement on a new limerock
mining contract which has minimum deliveries of 3.0 million cubic yards
annually. This operation is expected to begin late in 2003. NACoal expects to
continue its efforts to develop other new domestic mining projects.

The statements contained in this Form 10-Q that are not historical facts are
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are made subject to certain risks and uncertainties
which could cause actual results to differ materially from those presented in
these forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Such risks and uncertainties
with respect to each subsidiary's operations include, without limitation:

NMHG: (1) changes in demand for lift trucks and related aftermarket parts and
service on a worldwide basis, especially in the U.S. where the Company derives a
majority of its sales, (2) changes in sales prices, (3) delays in delivery or
changes in costs of raw materials or sourced products and labor, (4) delays in
manufacturing and delivery schedules, (5) exchange rate fluctuations, changes in
foreign import tariffs and monetary policies and other changes in the regulatory
climate in the foreign countries in which NMHG operates and/or sells products,
(6) product liability or other litigation, warranty claims or returns of
products, (7) delays in or increased costs of restructuring programs, (8) the
effectiveness of the cost reduction programs implemented globally, including the
successful implementation of procurement initiatives, (9) customer acceptance
of, changes in costs of, or delays in the development of new products, (10)
acquisitions and/or dispositions of dealerships by NMHG, and (11) the uncertain
impact on the economy or the public's confidence in general from terrorist
activities and the impact of the situation in Iraq.



34





Housewares: (1) changes in the sales prices, product mix or levels of consumer
purchases of kitchenware and small electric appliances, (2) bankruptcy of or
loss of major retail customers or suppliers, (3) changes in costs of raw
materials or sourced products, (4) delays in delivery or the unavailability of
raw materials or key component parts, (5) exchange rate fluctuations, changes in
the foreign import tariffs and monetary policies and other changes in the
regulatory climate in the foreign countries in which HB/PS buys, operates and/or
sells products, (6) product liability, regulatory actions or other litigation,
warranty claims or returns of products, (7) increased competition, (8) customer
acceptance of, changes in costs of, or delays in the development of new
products, (9) weather conditions or other events that would affect the number of
customers visiting KCI stores and (10) the uncertain impact on the economy or
the public's confidence in general from terrorist activities and the impact of
the situation in Iraq.

NACoal: (1) weather conditions and other events that would change the level of
customers' fuel requirements, (2) weather or equipment problems that could
affect lignite deliveries to customers, (3) changes in maintenance, fuel or
other similar costs, (4) costs to pursue and develop new mining opportunities
and (5) changes in the U.S. economy, in U.S. regulatory requirements or in the
power industry that would affect demand for NACoal's reserves.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See pages 47, F-11, F-25 and F-26 of the Company's Form 10-K for the fiscal year
ended December 31, 2002, for a discussion of its derivative hedging policies and
use of financial instruments. There have been no material changes in the
Company's market risk exposures since December 31, 2002.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures: The Company maintains a set of
disclosure controls and procedures designed to ensure that information required
to be disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. An evaluation was carried out under the supervision and with the
participation of the Company's management, including the Principal Executive
Officer and the Principal Financial Officer, of the effectiveness of the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation, these officers have concluded that the
Company's disclosure controls and procedures are effective.

Changes in internal controls: Subsequent to the date of their evaluation, there
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weaknesses.



35




Part II

OTHER INFORMATION

Item 1. Legal Proceedings - None
-----------------

Item 2. Changes in Securities and Use of Proceeds - None
-----------------------------------------

Item 3. Defaults Upon Senior Securities - None
-------------------------------

Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The following matters were submitted to a vote of security
holders at the Annual Meeting of Stockholders held May 14, 2003,
with the results indicated:

Outstanding Shares Entitled to Vote Number of Votes
------------------------------------ -----------------
Class A Common 6,578,328
Class B Common 16,234,100
-----------------
22,812,428
=================

Item A. Election of twelve directors for the ensuing year.
------




Votes Votes
Director Nominee For Withheld Total
-------------------------- ----------------- --------------- -----------------


Owsley Brown II 21,743,815 54,349 21,798,164
Robert M. Gates 21,724,540 73,624 21,798,164
Leon J. Hendrix, Jr. 21,716,940 81,224 21,798,164
David H. Hoag 21,717,040 81,124 21,798,164
Dennis W. LaBarre 21,715,006 83,158 21,798,164
Richard de J. Osborne 20,824,281 973,883 21,798,164
Alfred M. Rankin, Jr. 21,716,820 81,344 21,798,164
Ian M. Ross 21,741,125 57,039 21,798,164
Michael E. Shannon 21,723,046 75,118 21,798,164
Britton T. Taplin 21,712,986 85,178 21,798,164
David F. Taplin 21,742,101 56,063 21,798,164
John F. Turben 21,743,995 54,169 21,798,164






Item B. Confirming the appointment of Ernst & Young LLP as
------
independent auditors of the Company for the current fiscal year.


For Against Abstain Total
---------------------- -------------------- -------------------- ---------------
21,745,019 49,228 3,917 21,798,164




Item 5. Other Information
- ------ -----------------
None

Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits. See Exhibit Index on page 38 of this quarterly
report on Form 10-Q.
(b) Reports on Form 8-K.
Current Report on Form 8-K filed with the Commission on
April 23, 2003 (Item 9)
Current Report on Form 8-K filed with the Commission on
May 8, 2003 (Item 5)



36




Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


NACCO Industries, Inc.
----------------------------------
(Registrant)



Date August 13, 2003 /s/ Kenneth C. Schilling
------------------------------ ----------------------------------
Kenneth C. Schilling
Vice President and Controller
(Authorized Officer and Principal
Financial and Accounting Officer)



37





Exhibit Index
- -------------

Exhibit
Number* Description of Exhibits
- ------- -----------------------

31.1 Certification of Alfred M. Rankin pursuant to
Rule 13a-14(a)/15d-14(a) of the Exchange Act

31.2 Certification of Kenneth C. Schilling pursuant to
Rule 13a-14(a)/15d-14(a) of the Exchange Act

32 Certifications pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, signed and dated by Alfred M. Rankin and
Kenneth C. Schilling



*Numbered in accordance with Item 601 of Regulation S-K.


38