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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K ANNUAL REPORT
[X] ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NO. 1-9172
NACCO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
34-1505819
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(I.R.S. EMPLOYER IDENTIFICATION NO.)
5875 Landerbrook Drive
Mayfield Heights, Ohio
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
44124-4017
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(ZIP CODE)
Registrant's telephone number, including area code: (440) 449-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ---------------------------------------------------- ----------------------------------------------------
Class A Common Stock, New York Stock Exchange
Par Value $1.00 Per Share
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Class B Common Stock, Par Value $1.00 Per Share
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirement for the past 90 days.
YES X NO _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Class A Common Stock and Class B Common Stock held by
non-affiliates as of February 28, 2002:
$286,073,304
Number of shares of Class A Common Stock outstanding at February 28, 2002:
6,560,427
Number of shares of Class B Common Stock outstanding at February 28, 2002:
1,635,218
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Company's Proxy Statement for its 2002 annual meeting
of stockholders are incorporated herein by reference in Part III.
PART I
ITEM 1. BUSINESS
GENERAL
NACCO Industries, Inc. ("NACCO" or the "Company") is a holding company
whose principal operating subsidiaries function in three distinct industries:
lignite mining, lift trucks and housewares.
(a) North American Coal. The Company's wholly owned subsidiary, The
North American Coal Corporation, and its affiliated coal companies
(collectively, "NACoal"), mine and market lignite primarily as fuel for power
providers. NACoal also provides dragline mining services for a limerock quarry
near Miami, Florida.
(b) NACCO Materials Handling Group. NACCO Materials Handling Group
consists of the Company's wholly owned subsidiary, NMHG Holding Co., and its
wholly owned subsidiaries (collectively, "NMHG"), including NACCO Materials
Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG
Retail"). NMHG, through NMHG Wholesale and NMHG Retail, designs, engineers,
manufactures, sells, services and leases a full line of lift trucks and service
parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG
Wholesale includes the manufacture and sale of lift trucks and related service
parts, primarily to independent and wholly owned Hyster and Yale retail
dealerships. NMHG Retail includes the sale, leasing and service of Hyster and
Yale lift trucks and related service parts by wholly owned retail dealerships
and rental companies.
(c) NACCO Housewares Group. NACCO Housewares Group ("Housewares")
consists of two of the Company's wholly owned subsidiaries: Hamilton
Beach-Proctor-Silex, Inc. ("HB-PS"), a leading manufacturer and marketer of
small electric motor and heat-driven appliances as well as commercial products
for restaurants, bars and hotels, and The Kitchen Collection, Inc. ("KCI"), a
national specialty retailer of brand-name kitchenware, small electrical
appliances and related accessories.
Additional information relating to financial and operating data on a segment
basis (including NACCO and Other) is set forth under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in Part II hereof and in Note 19 to the Consolidated Financial
Statements contained in Part IV hereof.
NACCO was incorporated as a Delaware corporation in 1986 in connection
with the formation of a holding company structure for a predecessor corporation
organized in 1913. As of February 28, 2002, the Company and its subsidiaries had
approximately 13,300 employees.
SIGNIFICANT EVENTS
On October 11, 2000, NACoal acquired certain assets from Phillips Coal
Company, including its 75% joint venture interest in Mississippi Lignite Mining
Company ("MLMC"), its 50% joint venture interest in Red River Mining Company and
the related lignite reserves under committed contracts at both of these mines.
As a result of the acquisition, NACoal now owns 100% of MLMC and Red River
Mining Company. In addition, NACoal acquired from Phillips Coal Company
approximately 560 million tons of undeveloped lignite reserves in Texas,
Mississippi and Tennessee. In the fourth quarter of 2001, MLMC commenced limited
deliveries of lignite to its customer. As of December 31, 2001, the customer's
power plant had not yet reached Commercial Operations Date ("COD"), as defined
in the lignite sales agreement. As a result, MLMC has been collecting monthly
contractual liquidated damages from its customer since January 2001. Subsequent
to December 31, 2001, MLMC was notified that the customer declared COD effective
March 1, 2002. MLMC does not expect to continue to receive contractual
liquidated damages payments related to the ongoing operations of the mine once
such COD has been confirmed.
On January 2, 2001, NMHG announced that it would close its manufacturing
and assembly operations in Danville, Illinois as part of a manufacturing plant
consolidation strategy that will enable NMHG to reduce its cost structure while
optimizing its global manufacturing capacity. The phase-out of the Danville
facility was substantially completed by December 31, 2001.
In 2001, NMHG implemented, and largely completed, a restructuring and
downsizing program in Europe. The restructuring is expected to be completed by
the end of 2002.
On December 31, 2001, NMHG Retail sold all of its company-owned Hyster
retail dealerships in Germany to ZEPPELIN GmbH and designated ZEPPELIN GmbH as
its Hyster dealer in parts of Germany, Austria, and several Central and Eastern
European countries.
In 2000, HB-PS introduced several air purification and humidification
products under the Hamilton Beach(R) brand, thus entering the home environment
segment of the small appliance industry for the first time. In 2001, HB-PS
launched TrueAir(TM), an odor elimination product. The national launch of this
product was supported by national television advertising in both the second and
fourth quarters of 2001.
In the second quarter of 2001, HB-PS expanded its 500,000 square foot
distribution center in Memphis, Tennessee, which has been operational since the
second quarter of 1999, by an additional 400,000 square feet. The expanded
Memphis distribution center is expected to allow HB-PS to enhance efficiencies
and customer service.
In 2001, HB-PS approved a plan to restructure its manufacturing
activities in Mexico. The restructuring plan includes outsourcing of certain of
the company's products and consolidating production in three of the company's
Mexican manufacturing plants into one of those plants.
In the fourth quarter of 2001, HB-PS initiated a restructuring and
downsizing plan at its headquarters as a cost-cutting measure in response to
reduced overall consumer demand caused by the 2001 U.S. economic slowdown.
BUSINESS SEGMENT INFORMATION
A. NORTH AMERICAN COAL
GENERAL
NACoal is engaged in the mining and marketing of lignite primarily as
fuel for power providers. Sales by NACoal are made primarily through wholly
owned project mining subsidiaries pursuant to long-term, cost plus a profit per
ton contracts. The utility customers have provided, arranged and/or guaranteed
the financing of the development and operation of the project mining
subsidiaries. There is no recourse to NACCO or NACoal for the financing of these
subsidiary mines. The balance of NACoal's sales are from non-project mining
subsidiaries for which NACoal has arranged and provided the necessary financing.
NACoal also provides dragline mining services for a limerock quarry near Miami,
Florida. At December 31, 2001, NACoal's operating mines consist of mines where
the reserves were acquired and developed by NACoal, except for the South
Hallsville No. 1 Mine and the San Miguel Lignite Mine where reserves are owned
by the customers of these mines. NACoal also earns royalty income from the lease
of various coal and gas properties. For further information as to the financing
of the project mining subsidiaries, see Note 12 to the Consolidated Financial
Statements contained in Part IV hereof.
SALES, MARKETING AND OPERATIONS
The principal customers of NACoal are electric utilities, an independent
power provider and a synfuels plant. Sales to Dakota Coal Company, which
supplies coal to four facilities, accounted for 40%, 47% and 47% of NACoal's
revenues in 2001, 2000 and 1999, respectively. The distribution of sales in the
last five years has been as follows:
DISTRIBUTION
------------
ELECTRIC
TOTAL UTILITIES/
TONS SOLD INDEPENDENT SYNFUELS
(MILLIONS) POWER PROVIDER PLANT
---------- -------------- --------
2001 31.4 80% 20%
2000 31.6 80% 20%
1999 31.3 80% 20%
1998 31.7 80% 20%
1997 29.9 80% 20%
The contracts under which the project mining subsidiaries were organized
provide that, under certain conditions of default, the customer(s) involved may
elect to acquire the assets (subject to the liabilities) or the capital stock of
the subsidiary, for an amount effectively equal to book value. NACoal does not
know of any conditions of default that currently exist. In one case, the
customer may elect to acquire the stock of the subsidiary after a specified
period of time without reference to default, in exchange for certain payments on
coal thereafter mined. In addition, NACoal does not know of any customer's
intent to acquire stock of a subsidiary or terminate a contract for convenience.
The location, mine type, reserve data, coal quality characteristics,
customer, sales tonnage and contract expiration date for the mines operated by
NACoal in 2001 were as follows:
2
DEVELOPED LIGNITE MINING OPERATIONS
-----------------------------------
PROVEN AND PROBABLE RESERVES (1)
--------------------------------
COMMITTED
UNDER
CONTRACT UNCOMMITTED AVERAGE
PROJECT MINING (MILLIONS OF (MILLIONS OF BTUS
SUBSIDIARIES MINE LOCATION TYPE OF MINE TONS) TONS) PER POUND
- --------------- ---- -------- ------------ ------------- -------------- ---------
The Coteau Properties Freedom Mine(2) Beulah, ND Surface Lignite 510.5 ---- 6,767
Company
The Falkirk Mining Falkirk Mine(2) Underwood, ND Surface Lignite 491.9 ---- 6,200
Company
The Sabine Mining Company South Hallsville Hallsville, TX Surface Lignite (4) (4) (4)
No. 1 Mine(2)
OTHER
- -----
San Miguel Lignite Mining San Miguel Jourdanton, TX Surface Lignite (5) (5) (5)
Operations Lignite
Mine
Red River Mining Company Oxbow Mine Coushatta, LA Surface Lignite 7.6 55.7 6,722
Mississippi Lignite Red Hills Mine Ackerman, MS Surface Lignite 166.5 126.7 5,200
Mining Company ----- -----
Total Developed 1,176.5 182.4
UNDEVELOPED MINING OPERATIONS
- -----------------------------
North Dakota ---- ---- ---- ---- 570.7 6,500
Texas ---- ---- ---- ---- 309.2 6,800
Eastern ---- ---- ---- 62.8 64.9 12,070
Mississippi ---- ---- ---- ---- 144.4 5,200
Tennessee ---- ---- ---- ---- 117.3 5,200
---- -----
Total 62.8 1,206.5
Undeveloped
Total Developed/ 1,239.3 1,388.9
Undeveloped
DEVELOPED LIGNITE MINING OPERATIONS
-----------------------------------
AVERAGE SULFUR 2001 SALES
PROJECT MINING CONTENT PER UNIT TONNAGE CONTRACT
SUBSIDIARIES OF WEIGHT CUSTOMER(S) (PLANT) (MILLIONS) EXPIRES
- --------------- -------- ------------------- ---------- -------
The Coteau Properties 0.8% Dakota Coal Company 6.2 2007(3)
Company
(Great Plains Synfuels
Plant)
Dakota Coal Company 5.3 2007(3)
(Antelope Valley Station)
Dakota Coal Company 3.1 2007(3)
(Leland Olds Station)
Dakota Coal Company 1.1 2002
(Stanton Station of United
Power Association)
The Falkirk Mining 0.6% United Power Association/ 7.7 2020
Company Cooperative Power
Association
(Coal Creek Station)
The Sabine Mining Company (4) Southwestern Electric 3.2 2020
Power Company
(Henry W. Pirkey Power
Plant)
OTHER
San Miguel Lignite Mining (5) San Miguel Electric 3.4 2007
Cooperative, Inc.
Operations (San Miguel Power Plant)
Red River Mining Company 0.7% CLECO Utility Group, Inc./ 0.9 2010
Southwestern Electric
Power Company
(Dolet Hills Power Plant)
Mississippi Lignite 0.6% Choctaw Generation Limited 0.5 2032
Mining Company Partnership
(Red Hills Power Plant)
UNDEVELOPED MINING OPERATI
- --------------------------
North Dakota 0.8% ---- ---- ----
Texas 1.0% ---- ---- ----
Eastern 3.3% ---- ---- ----
Mississippi 0.6% ---- ---- ----
Tennessee 0.7% ---- ---- ----
(1) The projected extraction loss is approximately ten percent (10%) of the
proven and probable reserves, except with respect to the reserves for
the Eastern Undeveloped Mining Operations, in which case the extraction
loss is approximately thirty percent (30%) of the proven and probable
reserves.
(2) The contracts for these mines require the customer to cover the cost of
the ongoing replacement and upkeep of the plant and equipment of the
mine.
(3) Although the term of the existing coal sales agreement terminates in
2007, the term may be extended for six (6) additional periods of five
years, or until 2037, at the option of The Coteau Properties Company.
(4) The reserves of the South Hallsville No. 1 Mine are owned and
controlled by the customer and, therefore, have not been listed in the
table.
(5) The reserves of the San Miguel Lignite Mine are owned and controlled by
the customer and, therefore, have not been listed in the table.
3
GOVERNMENT REGULATION
NACoal, like other coal producers, continues to be subject to Federal
and state health, safety and environmental regulations. The 2002 expenditures
which will be required for compliance with the provisions of governmental
regulations, including mined land reclamation and other air and water pollution
abatement requirements, are estimated at $3.2 million for certain closed mines
and are included in the caption "Other current liabilities" in NACCO's
Consolidated Financial Statements contained in Part IV hereof. The active
operations are required to make certain additional capital expenditures to
comply with such governmental regulations, which expenditures will be recovered
under the terms of the coal sales agreements with the utility customers.
NACoal's management believes that the Clean Air Act Amendments, which
became effective in 1990, have not had and will not have a material adverse
effect on its current operations, because substantially all of the power
generating facilities operated or supplied by NACoal's customers meet or exceed
the requirements of the Clean Air Act.
COMPETITION
The coal industry competes with other sources of energy, particularly
oil, gas, hydro-electric power and nuclear power. Among the factors that affect
competition are the price and availability of oil and natural gas, environmental
considerations, the time and expenditures required to develop new energy
sources, the cost of transportation, the cost of compliance with governmental
regulation of operations, the impact of Federal and state energy policies and
the current trend toward deregulation of energy markets. The ability of NACoal
to market and develop its reserves will depend upon the interaction of these
factors.
There is no official source of information on the subject, but NACoal
believes that it was the ninth largest coal producer in the United States in
2001 based on total coal tons sold.
EMPLOYEES
As of February 28, 2002, NACoal had approximately 1,100 employees.
B. NACCO MATERIALS HANDLING GROUP
1. NMHG WHOLESALE
GENERAL
NMHG Wholesale is a leading worldwide designer, manufacturer and
marketer of forklift trucks, which comprise the largest segment of the materials
handling equipment industry.
THE INDUSTRY
Forklift trucks are used in a wide variety of business applications,
including manufacturing, warehousing and retailing. The materials handling
industry, especially in industrialized nations, is generally a mature industry,
which has historically been cyclical. Fluctuations in the rate of orders for
forklift trucks reflect the capital investment decisions of the customers, which
in turn depend upon the general level of economic activity in the various
industries served by such customers.
From 1990 through 2000, the worldwide market for forklift trucks
gradually increased to approximately 600,000 units. Although individual
geographic markets have been subject to cyclicality over this time, all markets
worldwide fell during 2001 as a result of the declining global economy. In 2001,
the worldwide market decreased to a level of approximately 560,000 units. A
substantial portion of this decrease was a result of the decline in the North
American market from approximately 224,000 units in 2000 to approximately
161,000 units in 2001.
COMPANY OPERATIONS
NMHG Wholesale maintains product differentiation between Hyster and Yale
brands of forklift trucks and distributes its products through separate
worldwide dealer networks. Nevertheless, NMHG Wholesale has integrated
overlapping operations and takes advantage of economies of scale in design,
manufacturing and purchasing. NMHG Wholesale provides virtually all of its own
design, manufacturing and administrative functions. Products are marketed and
sold through two separate, primarily independent, dealer networks which retain
and promote the Hyster and Yale brand names. In Japan, NMHG Wholesale has a 50%
owned joint venture with Sumitomo Heavy Industries Ltd. which is generally known
as Sumitomo-NACCO Materials Handling Group ("S-N"). S-N performs certain design
activities and produces lift trucks and components which it markets in Japan
under the brand name "Sumitomo" and which are exported for sale by NMHG
Wholesale and its affiliates in the Americas, Europe and Asia-Pacific under the
Hyster and Yale brand names.
PRODUCT LINES
NMHG Wholesale designs and manufactures a wide range of forklift trucks
under both the Hyster and Yale brand names. The principal categories of forklift
trucks include electric rider, electric narrow-aisle and electric motorized hand
forklift trucks primarily for indoor use and internal combustion engine ("ICE")
forklift trucks for indoor or outdoor use. Forklift truck sales accounted for
approximately 81%, 81% and 82% of NMHG Wholesale's net sales in 2001, 2000 and
1999, respectively.
4
NMHG Wholesale also derives significant revenues from the sale of
service parts for its products. Profit margins on service parts are greater than
those on forklift trucks. The large population of Hyster and Yale forklift
trucks now in service provides a market for service parts. In addition to parts
for its own forklift trucks, NMHG Wholesale has a program in North America,
UNISOURCE(TM), and in Europe, MULTIQUIP(TM), designed to supply Hyster dealers
with replacement parts for most competing brands of forklift trucks. NMHG
Wholesale has a similar program, PREMIER(TM), for its Yale dealers in the
Americas and Europe. Accordingly, NMHG Wholesale dealers can offer their mixed
fleet customers a "one stop" supply source. Certain of these parts are
manufactured by and purchased from third party component makers. Service parts
accounted for approximately 19%, 19% and 18% of NMHG Wholesale's net sales in
2001, 2000 and 1999, respectively. For further information on geographic
regions, see Note 19 to the Consolidated Financial Statements contained in Part
IV hereof.
COMPETITION
Although there is no official source for information on the subject,
NMHG believes that in 2001 NMHG Wholesale was one of the leading manufacturers
of forklift trucks in the world, based on the number of lift trucks sold.
The forklift truck industry is highly competitive. The worldwide
competitive structure of the industry is fragmented by product line and country;
however, each of the three largest forklift truck manufacturers, including NMHG,
has a significantly greater market position on a unit volume basis than the
other manufacturers. Competition among forklift truck manufacturers is based
primarily on strength and quality of product line, product performance, product
quality and features, and cost of ownership over the life of the truck. The
forklift truck industry also competes with alternative methods of materials
handling, including conveyor systems, automated guided vehicle systems and
manual labor. Global competition is also affected by a number of other factors,
including currency fluctuations, variations in labor costs and effective tax
rates, and the costs related to compliance with applicable regulations,
including export restraints, antidumping provisions and environmental
regulations.
NMHG Wholesale's position is strongest in North America, where it
believes it is the leader in unit sales of electric rider and ICE forklift
trucks and has a significant share of unit sales of electric narrow-aisle and
electric motorized hand forklift trucks. Although the European market is
fragmented and competitive positions vary from country to country, NMHG
Wholesale believes that it has a significant share of unit sales of electric
rider and ICE forklift trucks in Western Europe.
TRADE RESTRICTIONS
UNITED STATES
Since June 1988, Japanese-built ICE forklift trucks imported into the
United States, with lifting capacities between 2,000 and 15,000 pounds,
including finished and unfinished forklift trucks, chassis, frames and frames
assembled with one or more component parts, have been subject to an antidumping
duty order. Antidumping duty rates in effect through 2001 range from 7.36% to
56.81% depending on manufacturer or importer. The antidumping duty rate
applicable to imports from S-N is 51.33%. NMHG Wholesale does not currently
import for sale in the United States any forklift trucks or components subject
to the antidumping duty order. This antidumping duty order will remain in effect
until the Japanese manufacturers and importers satisfy the U.S. Department of
Commerce (the "Commerce Department") that they have not individually sold
merchandise subject to the order in the United States below foreign market value
for at least three consecutive years, or unless the Commerce Department or the
U.S. International Trade Commission finds that changed circumstances exist
sufficient to warrant the retirement of the order. All of NMHG Wholesale's major
Japanese competitors have either built or acquired manufacturing or assembly
facilities in the United States. The legislation implementing the Uruguay round
of GATT negotiations passed in 1994 provided for the antidumping order to be
reviewed for possible retirement in 2000. NMHG Wholesale opposed retirement of
the order and the 2000 review did not result in retirement of the antidumping
duty. The antidumping order will again be reviewed for possible retirement in
2005.
EUROPE
There are no formal restraints on foreign forklift manufacturers in the
European Union. Several Japanese manufacturers have established manufacturing or
assembly facilities within the European Union.
PRODUCT DESIGN AND DEVELOPMENT
NMHG Wholesale spent $44.7 million, $43.9 million and $41.4 million on
product design and development activities in 2001, 2000 and 1999, respectively.
The Hyster and Yale products are differentiated for the specific needs of their
respective customer bases. NMHG Wholesale continues to pursue opportunities to
improve product costs by engineering new Hyster and Yale brand products with
component commonality.
In addition, certain product design and development activities with
respect to ICE forklift trucks and some components are performed in Japan by
S-N. S-N spent approximately $3.2 million, $4.0 million and $4.1 million on
product design and development in 2001, 2000 and 1999, respectively.
5
BACKLOG
As of December 31, 2001, NMHG Wholesale's backlog of unfilled orders for
forklift trucks was approximately 15,100 units, or $266 million, of which
substantially all is expected to be filled during fiscal 2002. This compares to
the backlog as of December 31, 2000 of approximately 21,800 units, or $373
million. Decreased product demand, primarily in the Americas, caused the
decrease in backlog levels. Backlog represents unit orders to NMHG Wholesale's
manufacturing plants from NMHG Retail, independent dealerships, retail customers
and contracts with the United States government. Although these orders are
believed to be firm, such orders may be subject to cancellation or modification.
SOURCES
NMHG Wholesale has adopted a strategy of obtaining its raw materials and
principal components on a global basis from competitively priced sources. NMHG
Wholesale is dependent on a limited number of suppliers for certain of its
critical components, including diesel and gasoline engines and cast-iron
counterweights used on certain forklift trucks. There would be a material
adverse effect on NMHG Wholesale if it were unable to obtain all or a
significant portion of such components, or if the cost of such components was to
increase significantly under circumstances which prevented NMHG Wholesale from
passing on such increases to its customers.
DISTRIBUTION
The Hyster and Yale brand products are distributed through separate
highly developed worldwide dealer networks which are primarily independently
owned. For further information, see the discussion under the heading "NMHG
Retail" below. In addition, NMHG Wholesale has an internal sales force for each
brand to sell directly to major customers. In Japan, forklift truck products are
distributed by S-N.
FINANCING OF SALES
NMHG Wholesale has a joint venture agreement and other agreements with
General Electric Capital Corporation ("GE Capital") under which GE Capital
furnishes leasing and financing services to selected Hyster dealers in the
United States and Canada in addition to the Yale dealers GE Capital was already
supporting under a prior agreement. NMHG Wholesale owns 20% of the joint venture
entity, NMHG Financial Services, Inc., and is entitled to certain fees and
remarketing profits. In addition, NMHG Wholesale entered into an International
Operating Agreement with GE Capital pursuant to which GE Capital provides
leasing and financing services to Hyster and Yale dealers throughout the major
countries of the world outside of the United States and Canada and makes
referral fee payments to NMHG Wholesale once certain financial thresholds are
reached. Each of these agreements expire in 2003.
EMPLOYEES
As of February 28, 2002, NMHG Wholesale had approximately 6,000
employees. Employees in the Danville, Illinois manufacturing and parts depot
operations (approximately 150 employees) are unionized, as are tool room
employees (approximately 18 employees) located in Portland, Oregon. A two-year
contract with the Portland tool room union expires in 2003. Employees at the
facilities in Berea, Kentucky; Sulligent, Alabama; and Greenville and Lenoir,
North Carolina are not represented by unions.
In Europe, shop employees in the Craigavon, Northern Ireland facility
are unionized. Employees in the Irvine, Scotland and Nijmegen, the Netherlands
facilities are not represented by unions. The employees in Nijmegen have
organized a works council, as required by Dutch law, which performs a
consultative role on employment matters. In Mexico, shop employees are
unionized.
NMHG Wholesale's management believes its current labor relations with
both union and non-union employees are generally satisfactory. However, there
can be no assurances that NMHG Wholesale will be able to successfully
renegotiate its union contracts without work stoppages or on acceptable terms.
GOVERNMENT REGULATION
NMHG Wholesale's manufacturing facilities, in common with others in the
industry, are subject to numerous laws and regulations designed to protect the
environment, particularly with respect to disposal of plant waste. NMHG
Wholesale's products are also subject to various industry and governmental
standards, particularly with respect to engine emission levels. NMHG Wholesale's
management believes that the impact of expenditures to comply with such
requirements will not have a material adverse effect on NMHG Wholesale.
PATENTS, TRADEMARKS AND LICENSES
NMHG Wholesale is not materially dependent upon patents or patent
protection. NMHG Wholesale is the owner of the Hyster trademark, which is
currently registered in approximately 55 countries. Yale is a registered
trademark of NMHG Wholesale used in connection with the manufacture and sale of
forklift trucks and related components, and is currently registered in
approximately 150 countries. NMHG Wholesale's management believes that its
business is not dependent upon any individual trademark registration or license,
but that the Hyster and Yale trademarks are material to its business.
6
FOREIGN OPERATIONS
For a description of revenues and other financial information by
geographic region, see Note 19 to the Consolidated Financial Statements
contained in Part IV hereof.
2. NMHG RETAIL
GENERAL
From time to time, NMHG, through NMHG Retail, acquires, on an interim
basis, certain independent Hyster, Yale and competitor dealers and rental
companies to strengthen or protect Hyster's or Yale's presence in select
territories.
NMHG Retail has one dealership in the United States, five dealerships
and rental companies in Europe and three dealerships and rental companies in
Asia-Pacific.
THE INDUSTRY
Forklift trucks are sold at the retail level worldwide by independent
dealers and by dealerships owned by the original equipment manufacturer (OEM).
Some OEMs distribute exclusively through independent dealers, some OEMs
distribute exclusively through owned dealerships and some OEMs (such as NMHG
Wholesale), distribute through a combination of independent and owned
dealerships. Forklifts are also leased on a short- and long-term basis at the
retail level by dealerships and independent rental companies.
COMPANY OPERATIONS
An NMHG Retail dealership is authorized to sell and rent either Hyster
or Yale brand materials handling equipment. These dealerships will typically
also sell allied lines of equipment from other manufacturers pursuant to dealer
agreements. Allied equipment includes such items as sweepers, aerial work
platforms, personnel carts, rough terrain forklifts and other equipment as well
as racking and shelving. The number and type of products available will vary
from dealership to dealership. A primary source of revenue for dealerships is
the sale of parts and service for equipment sold by the dealership. Service is
performed both in-shop and on-site. In addition to the outright sale of new and
used equipment, dealerships provide equipment for lease and for short- or
long-term rental.
NMHG Retail dealerships are granted a primary geographic territory by
NMHG Wholesale in which they operate. NMHG Retail operations are conducted at
branch facilities located in major cities within NMHG Retail's assigned area of
operations.
COMPETITION
The materials handling equipment sales and rental industry is highly
fragmented and competitive. NMHG Retail's competitors include OEM-owned dealers,
OEM direct sales efforts, independently owned competitive dealerships and
forklift rental outlets, independent parts operations, independent service shops
and, to a lesser extent, independent Hyster or Yale dealers. The forklift truck
industry also competes with alternative methods of materials handling, including
conveyor systems, automated guided vehicle systems and manual labor.
CUSTOMERS
NMHG Retail's customer base is highly diversified and ranges from
Fortune 100 companies to small businesses in virtually every type of
manufacturing and service industry. No single customer accounted for more than
10% of NMHG Retail's revenues during 2001. NMHG Retail's customer base varies
widely by branch and is determined by several factors, including the equipment
mix and marketing focus of the particular branch and the business composition of
the local economy.
FINANCING OF SALES
NMHG Retail dealerships have a preferred relationship with GE Capital.
In the United States, NMHG Retail dealerships may obtain wholesale and retail
financing for the sale and leasing of equipment through NMHG Financial Services,
a joint venture between NMHG Wholesale and GE Capital. This affords these
dealerships with a wide variety of financial products at competitive rates. See
also "Financing of Sales" under NMHG Wholesale above.
7
EMPLOYEES
As of February 28, 2002, NMHG Retail had approximately 1,500 employees.
GOVERNMENT REGULATION
NMHG Retail's operations, like others in similar operations, are subject
to numerous laws and regulations designed to protect the environment,
particularly with respect to the disposal of cleaning solvents and wastewater
and the use of and disposal of petroleum products from underground and
above-ground storage tanks. NMHG Retail's management believes that the impact of
any environmental remediation and compliance costs will not have a material
adverse effect on NMHG Retail.
FOREIGN OPERATIONS
For a description of revenues and other financial information by
geographic region, see Note 19 to the Consolidated Financial Statements
contained in Part IV hereof.
C. NACCO HOUSEWARES GROUP
GENERAL
NACCO Housewares Group consists of HB-PS and KCI. HB-PS believes that it
is one of the largest full-line manufacturers and marketers of small electric
kitchen appliances in North America based on market share of key product
categories. HB-PS' products are marketed primarily to retail merchants and
wholesale distributors. KCI is a national specialty retailer of kitchenware,
small electric appliances and related accessories that operated 168 retail
stores as of December 31, 2001. Stores are located primarily in factory outlet
complexes that feature merchandise of highly recognizable name-brand
manufacturers, including HB-PS.
SALES AND MARKETING
HB-PS manufactures and markets a wide range of small electric household
appliances, including motor-driven appliances such as blenders, mixers, can
openers and food processors, and heat-driven appliances such as coffeemakers,
irons, toasters, slow cookers, indoor grills and toaster ovens. In 2000, HB-PS
entered the home environment market with a line of humidifiers, air purifiers
and odor eliminators. HB-PS also makes commercial products for restaurants, bars
and hotels. HB-PS generally markets its "better" and "best" segments under the
Hamilton Beach brand and uses the Proctor-Silex(R) brand for the "good" and
"better" segments. In addition, HB-PS supplies Wal-Mart with GE-branded
kitchen electric and garment-care appliances under Wal-Mart's license
agreement with General Electric Company and, in 2001, launched a home odor
elimination product under the TrueAir brand name. HB-PS markets its products
primarily in North America, but also sells products in Latin America,
Asia-Pacific and Europe. Sales are generated predominantly by a network of
inside sales employees to mass merchandisers, national department stores,
variety store chains, drug store chains, specialty home retailers and other
retail outlets. Principal customers during 2001 included Wal-Mart, Kmart,
Target, Canadian Tire, Family Dollar, Ames, Sears, Bed, Bath & Beyond, Dollar
General, Home Depot and Zellers. Sales promotion activities are primarily
focused on cooperative advertising.
Because of the seasonal nature of the markets for small electric
appliances, HB-PS' management believes that backlog is not a meaningful
indicator of performance and is not a significant indicator of annual sales. As
of December 31, 2001, backlog for HB-PS was approximately $3.2 million. This
compares with the backlog as of December 31, 2000 of approximately $6.6 million.
This backlog represents customer orders, which may be canceled at any time prior
to shipment.
HB-PS' warranty program to the consumer consists generally of a limited
warranty lasting for varying periods of up to three years for electric
appliances. Under its warranty program, HB-PS may repair or replace, at its
option, those products found to contain manufacturing defects.
Revenues and operating profit for Housewares are traditionally greater
in the second half of the year as sales of small electric appliances to
retailers and consumers increase significantly with the fall holiday selling
season. Because of the seasonality of purchases of its products, HB-PS incurs
substantial short-term debt to finance inventories and accounts receivable in
anticipation of the fall holiday selling season.
PRODUCT DESIGN AND DEVELOPMENT
The Housewares Group spent $7.3 million in 2001, $8.0 million in 2000
and $6.6 million in 1999 on product design and development activities. All of
these expenditures were made by HB-PS.
SOURCES
The principal raw materials used to manufacture and distribute HB-PS'
products are steel, glass, plastic and packaging materials. HB-PS' management
believes that adequate quantities of raw materials are available from various
suppliers.
8
COMPETITION
The small electric household appliance industry is highly competitive.
Based on publicly available information about the industry, HB-PS' management
believes it is one of the largest full-line manufacturers and marketers of small
electric kitchen appliances in North America based on key product categories.
As retailers generally purchase a limited selection of small electric
appliances, HB-PS competes with other suppliers for retail shelf space and
focuses its primary marketing efforts on retailers rather than consumers. Since
1996, HB-PS has also conducted consumer advertising for the Hamilton Beach
brand. In 2001, this advertising focused on the Hamilton Beach and TrueAir
brands. HB-PS' management believes that the principal areas of competition with
respect to its products are quality, price, product design, product features,
merchandising, promotion and warranty. HB-PS' management believes that it is
competitive in all of these areas.
As the outlet channel of the retail industry is approaching maturity,
the management of KCI continues to explore alternate areas of growth and
diversification. For the past several years, KCI has been testing alternative
store formats both within the outlet industry and the more traditional retail
environments. Because not all of these formats have met KCI's rigorous financial
performance standards, KCI continues to explore alternate channels of
distribution, including distribution through the Internet.
GOVERNMENT REGULATION
HB-PS, in common with other manufacturers, is subject to numerous
Federal and state health, safety and environmental regulations. HB-PS'
management believes that the impact of expenditures to comply with such laws
will not have a material adverse effect on HB-PS. HB-PS' products are subject to
testing or regulation by Underwriters' Laboratories, the Canadian Standards
Association and various entities in foreign countries that review product
design.
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
HB-PS holds patents and trademarks registered in the United States and
foreign countries for various products. HB-PS' management believes that its
business is not dependent upon any individual patent, trademark, copyright or
license, but that the Hamilton Beach and Proctor-Silex trademarks are material
to its business.
EMPLOYEES
As of February 28, 2002, Housewares' work force consisted of
approximately 4,600 employees, most of which are not represented by unions. In
Canada, approximately 16 hourly employees at HB-PS' Picton, Ontario distribution
facility are unionized. These employees are represented by an employee
association which performs a consultative role on employment matters. On
February 6, 2002, a collective bargaining agreement, which expires on January
28, 2003, was executed for HB-PS' Saltillo, Mexico manufacturing facility. There
are approximately 1,640 employees subject to the terms of the Saltillo
agreement. The management of HB-PS and KCI believe their current labor relations
with both union and non-union employees are satisfactory. However, there can be
no assurances that HB-PS will be able to successfully renegotiate its union
contracts without work stoppages or on acceptable terms. A prolonged work
stoppage at a unionized facility could materially adversely affect Housewares'
business and results of operations.
ITEM 2. PROPERTIES
A. NACCO
NACCO currently leases its corporate headquarters building in Mayfield
Heights, Ohio.
B. NACOAL
NACoal's proven and probable coal reserves and deposits (owned in fee or
held under leases which generally remain in effect until exhaustion of the
reserves if mining is in progress) are estimated at approximately 2.6 billion
tons, all of which are lignite deposits, except for approximately 128 million
tons of bituminous coal. Reserves are estimates of quantities of coal, made by
NACoal's geological and engineering staff, that are considered mineable in the
future using existing operating methods. Developed reserves are those which have
been allocated to mines which are in operation; all other reserves are
classified as undeveloped. Information concerning mine type, reserve data and
coal quality characteristics for NACoal's properties are set forth on the table
on page 3 under "Item 1. Business -- A. North American Coal -- Sales, Marketing
and Operations."
9
C. NMHG
1. NMHG WHOLESALE
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
NMHG Wholesale.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- -------- ----- ------ ---------------------------
Berea, Kentucky X Manufacture and assembly of forklift trucks
Craigavon, Northern Ireland X Manufacture and assembly of forklift trucks
Danville, Illinois (1) X Manufacture and assembly of forklift trucks
Danville, Illinois X Distribution of service parts for both Hyster and Yale
forklift trucks
Fleet, England X Hyster and Yale forklift truck marketing and sales operations
for Europe, the Middle East and Africa
Greenville, North Carolina X NMHG Americas division headquarters; Hyster
and Yale marketing and sales operations for NMHG Americas;
design, manufacture and assembly of forklift trucks
Irvine, Scotland X NMHG European division headquarters; manufacture and assembly
of forklift trucks
Lenoir, North Carolina X Manufacture and assembly of component parts for forklift
trucks
Masate, Italy X Manufacture and assembly of forklift trucks
Modena, Italy X Manufacture and assembly of forklift trucks
Nijmegen, the Netherlands X Design, manufacture and assembly of forklift trucks and
component parts; distribution of service parts for forklift
trucks
Fairview, Oregon X Counterbalanced forklift truck development center for design
and testing of forklift trucks, prototype equipment and
component parts
Portland, Oregon X NMHG global headquarters
Portland, Oregon X Manufacture of production tooling and prototype units
Ramos Arizpe, Mexico X Manufacture of component parts for forklift trucks
Sao Paulo, Brazil X Assembly of forklift trucks; distribution of service parts
for forklift trucks
Shanghai, China X Assembly of forklift trucks by Shanghai Hyster Joint Venture
Sulligent, Alabama X Manufacture of component parts for forklift trucks
Sydney, Australia X Distribution of service parts for forklift trucks and staff
operations for NMHG Asia-Pacific division
- ------------------------
(1) As of December 31, 2001, NMHG had substantially eliminated all
manufacturing and assembly at this facility.
S-N's operations are supported by two facilities. S-N's headquarters
are located in Obu, Japan at an owned facility. The Obu facility also has
manufacturing and distribution capabilities. In Cavite, the Phillipines, S-N
owns a facility for the manufacture of component parts for Sumitomo-Yale
products.
10
2. NMHG RETAIL
NMHG Retail, through its subsidiaries, currently operates its 19 owned
dealerships from 62 locations. Of these 62 locations, 8 are in the United
States, 25 are in Europe and 29 are in Asia-Pacific as shown below:
United States:
Kentucky(1)
Ohio(5)
Pennsylvania(1)
West Virginia(1)
Europe:
France(17)
Germany(3)
Netherlands(1)
United Kingdom(4)
Asia-Pacific:
Australia(28)
Singapore(1)
Branch locations generally include facilities for displaying equipment,
storing rental equipment, servicing equipment, parts storage and sales and
administrative offices. NMHG Retail owns four of its branch locations and leases
58 of its locations. Certain of the leases were entered into (or assumed) in
connection with acquisitions and many of the lessors under these leases are
former owners of businesses that NMHG Retail acquired.
NMHG Retail geographic headquarters are shared with NMHG Wholesale in
Greenville, North Carolina; Fleet, England; and Sydney, Australia.
D. NACCO HOUSEWARES GROUP
The following table summarizes certain information with respect to the
principal manufacturing, distribution and office facilities owned or leased by
HB-PS.
LOCATION OWNED LEASED FUNCTION/PRINCIPAL PRODUCTS
- -------- ----- ------ ---------------------------
El Paso, Texas X Distribution center
Glen Allen, Virginia X Corporate headquarters
Juarez, Chihuahua, Mexico X Manufacturing and assembly of heat-driven products (two
plants); plastic molding facility (one plant)
Memphis, Tennessee X Distribution center
Picton, Ontario, Canada X Distribution center
Southern Pines, North Carolina X Assembly of commercial products;
service center for customer returns; catalog sales center;
parts distribution center
Toronto, Ontario, Canada X Proctor-Silex Canada sales and administration headquarters
Washington, North Carolina X Customer service center
Saltillo, Coahuila, Mexico X Manufacture and assembly of heat-driven and motor products;
plastic molding and metal stamping facility
Sales offices are also leased in several cities in the United States,
Canada and Mexico.
KCI currently leases its corporate headquarters building, a
warehouse/distribution facility and a retail store in Chillicothe, Ohio. KCI
leases the remainder of its retail stores. A typical store is approximately
3,000 square feet.
11
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any
material pending legal proceeding other than ordinary routine litigation
incidental to its respective business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders of the Company.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The information under this Item is furnished pursuant to Instruction 3
to Item 401(b) of Regulation S-K.
There exists no arrangement or understanding between any executive
officer and any other person pursuant to which such executive officer was
elected. Each executive officer serves until his successor is elected and
qualified.
The tables on the following pages set forth the name, age, current
position and principal occupation and employment during the past five years of
the Company's executive officers.
12
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Alfred M. Rankin, Jr. 60 Chairman, President and Chief Executive
Officer of NACCO (since prior to 1997)
Charles A. Bittenbender 52 Vice President, General Counsel and
Secretary of NACCO (since prior to 1997)
Kenneth C. Schilling 42 Vice President and Controller of NACCO From prior to 1997 to May 1997, Controller
(since May 1997) of NACCO.
J.C. Butler, Jr. 41 Vice President - Corporate Development From prior to 1997 to May 1997, Manager of
and Treasurer of NACCO (since May 1997) Corporate Development and Treasurer of
NACCO.
Lauren E. Miller 47 Vice President - Consulting Services of From prior to 1997 to May 1997, Director
NACCO (since May 1997) of Internal Consulting of NACCO.
Constantine E. Tsipis 43 Assistant General Counsel and Assistant From October 1997 to May 2000, Assistant
Secretary of NACCO (since May 2000) General Counsel of NACCO. From prior to
1997 to October 1997, Associate General
Counsel, STERIS Corporation (manufacturer
and distributor of medical and sterilizing
equipment).
13
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
A. NACOAL
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Clifford R. Miercort 62 President and Chief Executive Officer
of NACoal (since prior to 1997)
Charles B. Friley 60 Senior Vice President - Finance and From prior to 1997 to August 1999, Vice
Chief Financial Officer of NACoal President and Chief Financial Officer of
(since August 1999) NACoal.
Robert L. Benson 54 Vice President - Eastern and Southern Since March 1997, General Manager of
Operations of NACoal (since September Mississippi Lignite Mining Company (a
2001) subsidiary of NACoal). From March 1997 to
September 2001, Operations Manager, NACoal.
From prior to 1997 to February 1997,
President of The Coteau Properties Company
(a subsidiary of NACoal).
Thomas A. Koza 55 Vice President - Law and
Administration, and Secretary of NACoal
(since prior to 1997)
Clark A. Moseley 50 Vice President - Business Development From June 1997 to December 2001, Vice
and Engineering of NACoal (since President - Engineering of NACoal. From
January 2002) prior to 1997 to June 1997, Manager,
Engineering and Project Development,
NACoal.
K. Donald Grischow 54 Controller and Treasurer of NACoal
(since prior to 1997)
14
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
B. NMHG
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Reginald R. Eklund 61 President and Chief Executive Officer
of NMHG (since prior to 1997)
Michael P. Brogan 52 Senior Vice President, Product From May 1999 to June 2000, Vice
Development and Procurement of NMHG President, Warehouse Product Strategy of
(since June 2000) NMHG. From prior to 1997 to May 1999,
Managing Director of NACCO Materials
Handling S.R.L. (Italy) (a subsidiary of
NMHG Wholesale).
Richard H. Close 43 Vice President of NMHG; Managing From March 1999 to July 2001, Managing
Director, NMHG Europe, Africa and Director of Lex Industrial Machinery (a
Middle East (since August 2001) provider of industrial machinery
management solutions). From prior to 1997
to March 1999, Franchise Director of Lex
Retail Group (a provider of vehicle
management solutions).
Ron J. Leptich 58 Vice President, Engineering and Big From prior to 1997 to October 1997, Vice
Trucks of NMHG (since October 1997) President, Engineering and Big Trucks,
Worldwide of NMHG.
Geoffrey D. Lewis 44 Vice President, Corporate Development, From prior to 1997 to June 1999, Vice
General Counsel and Secretary of NMHG President, General Counsel and Secretary
(since June 1999) of NMHG.
Jeffrey C. Mattern 49 Treasurer of NMHG (since prior to 1997)
Frank G. Muller 60 Vice President of NMHG; President, NMHG
Americas (since prior to 1997)
Victoria L. Rickey 49 Vice President, Chief Strategy Officer From prior to 1997 to June 2001, Vice
of NMHG (since July 2001) President of NMHG; Managing Director, NMHG
Europe, Africa and Middle East.
Edward W. Ryan 63 Vice President, Marketing of NMHG
(since prior to 1997); President, NMHG
Asia-Pacific, China and Japan (since
prior to 1997)
Raymond C. Ulmer 38 Controller of NMHG (since December 2000) From April 1997 to December 2000, Director
of Financial Planning and Analysis, NMHG.
From prior to 1997 to April 1997, Plant
Controller - Greenville.
15
PRINCIPAL OFFICERS OF THE COMPANY'S SUBSIDIARIES
C. NACCO HOUSEWARES GROUP
1. HB-PS
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Michael J. Morecroft 59 President and Chief Executive Officer From January 1997 to January 2001, Senior
of HB-PS (since January 2001) Vice President - Engineering/Product
Development of HB-PS.
Keith B. Burns 45 Vice President - Engineering and New From April 1999 to March 2001, Vice
Product Development of HB-PS (since President, Purchasing of HB-PS. From
March 2001) November 1998 to April 1999, Director of
Product Engineering of HB-PS. From prior to
1997 to October 1998, Manager, Product
Engineering of HB-PS.
Kathleen L. Diller 50 Vice President, General Counsel and From May 1998 to August 2001, Assistant
Secretary of HB-PS (since August 2001) General Counsel and Assistant Secretary,
Cooper Tire & Rubber Company (developer,
manufacturer and marketer of primarily
rubber-based products for the
transportation industry). From prior to
1997 to April 1998, Senior Division
Counsel, Owens Corning (manufacturer of
building materials systems and composites
systems).
Charles B. Hoyt 54 Senior Vice President - Finance and
Chief Financial Officer of HB-PS (since
January 1997)
Judith B. McBee 54 Senior Vice President - Marketing of
HB-PS (since January 1997)
Paul C. Smith 55 Senior Vice President - Sales of HB-PS
(since prior to 1997)
James H. Taylor 44 Vice President and Treasurer of HB-PS
(since prior to 1997)
2. KCI
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
Randolph J. Gawelek 54 President and Chief Executive Officer From March 1999 to August 1999, President,
of KCI (since August 1999) Secretary and Treasurer of KCI. From
December 1998 to March 1999, Executive Vice
President, Secretary and Treasurer of KCI.
From prior to 1997 to December 1998,
Executive Vice President and Secretary of
KCI.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
NACCO Industries, Inc. Class A common stock is traded on the New York
Stock Exchange under the ticker symbol NC. Because of transfer restrictions, no
trading market has developed, or is expected to develop, for the Company's Class
B common stock. The Class B common stock is convertible into Class A common
stock on a one-for-one basis. The high and low market prices for the Class A
common stock and dividends per share for both classes of common stock for each
quarter during the past two years are presented in the table below:
2001
--------------------------------------------------------
SALES PRICE
-------------------------------------- CASH
HIGH LOW DIVIDEND
------------------- ----------------- ---------------
FIRST QUARTER $71.00 $42.50 22.50(CENT)
SECOND QUARTER $79.10 $60.59 23.50(CENT)
THIRD QUARTER $82.80 $44.25 23.50(CENT)
FOURTH QUARTER $65.00 $45.25 23.50(CENT)
2000
--------------------------------------------------------
Sales Price
-------------------------------------- Cash
High Low Dividend
------------------- ----------------- ---------------
First quarter $55.75 $39.50 21.50(cent)
Second quarter $51.25 $33.56 22.50(cent)
Third quarter $47.50 $34.25 22.50(cent)
Fourth quarter $44.50 $35.63 22.50(cent)
At December 31, 2001, there were approximately 500 Class A common
stockholders of record and 400 Class B common stockholders of record.
17
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31
-----------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(In millions, except per share and employee data)
Revenues $ 2,637.9 $ 2,871.3 $ 2,635.9 $ 2,569.3 $ 2,276.0
Operating profit $ 5.7 $ 117.9 $ 131.3 $ 198.1 $ 132.0
Income (loss) before extraordinary
gain and cumulative effect
of accounting changes $ (34.7) $ 37.8 $ 54.3 $ 102.3 $ 61.8
Extraordinary gain, net-of-tax --- 29.9 --- --- ---
Cumulative effect of accounting
changes, net-of-tax (1.3) --- (1.2) --- ---
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (36.0) $ 67.7 $ 53.1 $ 102.3 $ 61.8
=========== =========== =========== =========== ===========
Total assets $ 2,161.9 $ 2,193.9 $ 2,013.0 $ 1,898.3 $ 1,729.1
Long-term debt $ 248.1 $ 450.0 $ 326.3 $ 256.4 $ 230.2
Stockholders' equity $ 529.3 $ 606.4 $ 562.2 $ 518.3 $ 425.1
EBITDA* $ 78.1 $ 164.7 $ 182.6 $ 243.6 $ 170.7
Basic earnings per share:
Income (loss) before extraordinary
gain and cumulative effect
of accounting changes $ (4.24) $ 4.63 $ 6.67 $ 12.56 $ 7.56
Extraordinary gain, net-of-tax --- 3.66 --- --- ---
Cumulative effect of accounting
changes, net-of-tax (.16) --- (.15) --- ---
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (4.40) $ 8.29 $ 6.52 $ 12.56 $ 7.56
=========== =========== =========== =========== ===========
Diluted earnings per share:
Income (loss) before extraordinary
gain and cumulative effect
of accounting changes $ (4.24) $ 4.63 $ 6.66 $ 12.53 $ 7.55
Extraordinary gain, net-of-tax --- 3.66 --- --- ---
Cumulative effect of accounting
changes, net-of-tax (.16) --- (.15) --- ---
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (4.40) $ 8.29 $ 6.51 $ 12.53 $ 7.55
=========== =========== =========== =========== ===========
Per share data:
Cash dividends $ .930 $ .890 $ .850 $ .810 $ .773
Market value at December 31 $ 56.79 $ 43.69 $ 55.56 $ 92.00 $ 107.19
Stockholders' equity at December 31 $ 64.58 $ 74.21 $ 68.92 $ 63.83 $ 52.13
Average shares outstanding 8.190 8.167 8.150 8.147 8.171
Total employees 13,500 17,200 16,000 14,100 13,400
* EBITDA represents income before taxes, minority interest, extraordinary gain
and cumulative effect of accounting changes plus net interest and
depreciation, depletion and amortization. However, interest expense,
depreciation, depletion and amortization attributable to project mining
subsidiaries are not included.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
NACCO Industries, Inc. ("NACCO," the parent company) and its wholly
owned subsidiaries (collectively, the "Company") operate in three distinct
industries: lignite mining, lift trucks and housewares. Results of operations
and financial condition are discussed separately by segment, which corresponds
with the industry groupings, except that the Company segments its lift truck
operations into two components: wholesale manufacturing and retail distribution.
Results by segment are also summarized in Note 19 to the Consolidated Financial
Statements.
The North American Coal Corporation ("NACoal") mines and markets lignite
primarily as fuel for power providers. NMHG Holding Co., through its wholly
owned subsidiaries, NACCO Materials Handling Group, Inc. ("NMHG Wholesale") and
NMHG Distribution Co. ("NMHG Retail") (collectively "NMHG") designs, engineers,
manufactures, sells, services and leases a full line of lift trucks and service
parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG
Wholesale includes the manufacture and sale of lift trucks and related service
parts, primarily to independent and wholly owned Hyster and Yale retail
dealerships and rental companies. NMHG Retail includes the sale, leasing and
service of Hyster and Yale lift trucks and related service parts by wholly owned
retail dealerships and rental companies. NACCO Housewares Group ("Housewares")
consists of Hamilton BeachoProctor-Silex, Inc. ("HB-PS"), a leading manufacturer
and marketer of small electric motor and heat-driven appliances as well as
commercial products for restaurants, bars and hotels, and The Kitchen
Collection, Inc. ("KCI"), a national specialty retailer of brand-name
kitchenware, small electrical appliances and related accessories.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis, the
Company evaluates its estimates, including those related to product discounts
and returns, bad debts, inventories, income taxes, warranty obligations, product
liabilities, restructuring, closed-mine obligations, pensions and other
post-retirement benefits, and contingencies and litigation. The Company bases
its estimates on historical experience, actuarial valuations and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The Company believes the following critical accounting policies affect
its more significant judgments and estimates used in the preparation of its
consolidated financial statements.
PRODUCT LIABILITIES: The Company provides for the estimated cost of
personal and property damage relating to the Company's products. Reserves are
made for estimates of the costs for known claims and estimates of the costs of
incidents that have occurred but a claim has not yet been reported to the
Company. While the Company engages in extensive product quality reviews and
customer education programs, the Company's product liability provision is
affected by the number and magnitude of claims of alleged product-related damage
and the cost to defend those claims. In addition, the provision for product
liabilities is also affected by changes in assumptions for medical costs,
inflation rates, trends in damages awarded by juries and estimates of the number
of claims that have been incurred but not yet reported. Changes to the estimate
of any of these factors could result in a material change to the Company's
product liability provision causing a related increase or decrease in reported
net operating results in the period of change in the estimate.
CLOSED-MINE OBLIGATIONS: The Company's wholly owned subsidiary, Bellaire
Corporation ("Bellaire"), is a non-operating subsidiary with legacy liabilities
relating to closed mining operations, primarily former Eastern U.S. underground
mining operations. These legacy liabilities include obligations for Black Lung
and other retiree medical benefits, environmental clean-up and obligations to
the United Mine Workers of America Combined Benefit Fund arising as a result of
the Coal Industry Retiree Health Benefit Act of 1992. Provisions made by
Bellaire for these liabilities include estimates of the number of beneficiaries
assigned to Bellaire, health care trend rates, inflation rates, cost of ongoing
environmental clean-up, discount factors and legal costs to defend claims. In
addition, these liabilities can be influenced by judicial proceedings and
changes in regulations made by government agencies. The Company continually
monitors the regulatory climate which could influence these liabilities as well
as its assumptions used to develop accruals for these liabilities. Changes in
any of these factors could materially change the Company's estimates for these
closed-mine obligations causing a related increase or decrease in reported net
operating results in the period of change in the estimate.
REVENUE RECOGNITION: Revenues are generally recognized when customer
orders are completed and shipped. Reserves for discounts, returns and product
warranties are maintained for anticipated future claims. The accounting policies
used to develop these product discounts, returns and warranties include:
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
PRODUCT DISCOUNTS: The Company records estimated reductions to revenues
for customer programs and incentive offerings including special pricing
agreements, price competition, promotions and other volume-based
incentives. If market conditions were to decline or if competition was
to increase, the Company may take actions to increase customer
incentive offerings possibly resulting in an incremental reduction of
revenues at the time the incentive is offered.
PRODUCT RETURNS: Based on the Company's historical experience, a
portion of products sold are estimated to be returned due to reasons
such as buyer remorse, duplicate gifts received, product failure and
excess inventory stocked by the customer which, subject to certain
terms and conditions, the Company will agree to accept. The Company
records estimated reductions to revenues at the time of sale based on
this historical experience. If future trends were to change
significantly from those experienced in the past, incremental
reductions to revenues may result based on this new experience.
PRODUCT WARRANTIES: The Company provides for the estimated cost of
product warranties at the time revenues are recognized. While the
Company engages in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of its
component suppliers, the Company's warranty obligation is affected by
product failure rates, material usage and replacement component costs
incurred in correcting a product failure. Should actual product failure
rates, material usage or replacement component costs differ from the
Company's estimates, revisions to the estimated warranty liability
would be required.
ALLOWANCES FOR DOUBTFUL ACCOUNTS: The Company maintains allowances for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. These allowances are based on both recent
trends of certain customers estimated to be a greater credit risk as well as
general trends of the entire customer pool. If the financial condition of the
Company's customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.
INVENTORY RESERVES: The Company writes down its inventory for estimated
obsolescence or excess inventory equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be
required.
DEFERRED TAX VALUATION ALLOWANCES: The Company records a valuation
allowance to reduce its deferred tax assets to the amount that is more likely
than not to be realized. While the Company has considered future taxable income
and ongoing prudent and feasible tax planning strategies in assessing the need
for the valuation allowance, in the event the Company were to determine that it
would be able to realize its deferred tax assets in the future in excess of its
net recorded amount (including the valuation allowance), an adjustment to the
deferred tax asset would increase income in the period such determination was
made. Conversely, should the Company determine that it would not be able to
realize all or part of its net deferred tax asset in the future, an adjustment
to the deferred tax asset would be expensed in the period such determination was
made.
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
FINANCIAL SUMMARY
Selected consolidated operating results of the Company were as follows:
2001 2000 1999
-------------- ------------ -------------
CONSOLIDATED OPERATING RESULTS:
Income (loss) before extraordinary gain and cumulative effect
of accounting changes $ (34.7) $ 37.8 $ 54.3
Extraordinary gain, net-of-tax(1) --- 29.9 ---
Cumulative effect of accounting changes, net-of-tax(2)(3) (1.3) --- (1.2)
-------------- ------------ -------------
Net income (loss) $ (36.0) $ 67.7 $ 53.1
============== ============ =============
DILUTED EARNINGS PER SHARE:
Income (loss) before extraordinary gain and cumulative effect
of accounting changes $ (4.24) $ 4.63 $ 6.66
Extraordinary gain, net-of-tax(1) --- 3.66 ---
Cumulative effect of accounting changes, net-of-tax(2)(3) (.16) --- (.15)
-------------- ------------ -------------
Net income (loss) $ (4.40) $ 8.29 $ 6.51
============== ============ =============
(1) An extraordinary gain was recognized in 2000 as a result of a
reduction to Bellaire Corporation's closed mine obligations relating
to amounts owed to the United Mine Workers of America Combined Benefit
Fund arising as a result of the Coal Industry Retiree Health Benefit
Act of 1992. See also discussion in Note 4 to the Consolidated
Financial Statements.
(2) A cumulative effect of a change in accounting was recognized in 1999
for a change in the accounting for start-up costs at NACoal. Prior to
1999, certain start-up costs were deferred and amortized over the life
of the related mine. These previously deferred start-up costs were
written off as a cumulative effect of a change in accounting as
required by Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities." See also discussion in Note 2 to the
Consolidated Financial Statements.
(3) Cumulative effects of changes in accounting were recognized in 2001 as
a result of the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities" and for a change in calculating pension costs. See
discussion in Note 2 to the Consolidated Financial Statements.
The following schedule identifies the components of the changes in
consolidated revenues, operating profit and income (loss) before extraordinary
gain and cumulative effect of accounting changes for 2001 compared with 2000:
Income (loss)
before
extraordinary
gain and
cumulative
effect of
Operating accounting
Revenues Profit changes
--------------- --------------- ------------------
2000 $ 2,871.3 $ 117.9 $ 37.8
Increase (decrease) in 2001
NACoal 44.1 30.3 13.0
NMHG Wholesale (286.7) (84.6) (49.8)
NMHG Retail 27.0 (24.1) (19.6)
Housewares (17.8) (35.8) (21.0)
NACCO & Other --- 2.0 4.9
--------------- --------------- ------------------
2001 $ 2,637.9 $ 5.7 $ (34.7)
=============== =============== ==================
Following is a discussion of operating results by segment, including
those items that materially affect the year-to-year comparison within each of
the segment discussions.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
THE NORTH AMERICAN COAL CORPORATION
NACoal mines and markets lignite primarily as fuel for power providers.
The lignite is surface mined in North Dakota, Texas, Louisiana and Mississippi.
Total coal reserves approximate 2.6 billion tons, with 1.2 billion tons
committed to customers pursuant to long-term contracts. NACoal operates six
wholly owned lignite mines: The Coteau Properties Company ("Coteau"), The
Falkirk Mining Company ("Falkirk"), The Sabine Mining Company ("Sabine"), San
Miguel Lignite Mine ("San Miguel"), Red River Mining Company ("Red River") and
Mississippi Lignite Mining Company ("MLMC"). NACoal also provides dragline
mining services ("Florida dragline operations") for a limerock quarry near
Miami, Florida. The operating results of Coteau, Falkirk and Sabine are included
in "project mining subsidiaries." The operating results of all other operations
are included in "other mining operations."
FINANCIAL REVIEW
NACoal's subsidiaries, Coteau, Falkirk and Sabine, are termed "project
mining subsidiaries" because they mine lignite for utility customers pursuant to
long-term contracts at a price based on actual cost plus an agreed pre-tax
profit per ton. Due to the cost-plus nature of these contracts, revenues and
operating profits are affected by increases and decreases in operating costs, as
well as by tons sold. Net income of these project mines, however, is not
significantly affected by changes in such operating costs, which include costs
of operations, interest expense and certain other items. Because of the nature
of the contracts at these three mines, operating results for NACoal are best
analyzed in terms of lignite tons sold, income before taxes and net income.
During 2001, MLMC continued development of the mine area, but has been
able to deliver lignite to its customer throughout the year. MLMC delivered, for
testing purposes, a relatively small amount of lignite to its customer's power
plant in 2001. As of December 31, 2001, the customer's power plant, however, had
not yet reached Commercial Operations Date ("COD"), as defined in the lignite
sales agreement. As a result, MLMC has been receiving monthly liquidated damages
payments, as provided in the lignite sales agreement since January 2001.
Subsequent to December 31, 2001, the Company was notified that MLMC's customer
declared COD on March 1, 2002. MLMC does not expect to continue to receive
liquidated damages payments related to the ongoing operations of the mine upon
confirmation of COD. In addition, during the first few months after COD, the
plant may not be able to take the anticipated annual full production level of
3.5 million tons due to a scheduled power plant outage.
Lignite tons sold by NACoal's operating lignite mines were as follows
for the year ended December 31:
2001 2000 1999
-------------- -------------- --------------
Coteau 15.7 16.2 16.4
Falkirk 7.7 7.7 7.2
Sabine 3.2 3.5 3.6
San Miguel 3.4 3.4 3.4
Red River .9 .8 .7
MLMC .5 --- ---
-------------- -------------- --------------
Total lignite 31.4 31.6 31.3
============== ============== ==============
The Florida dragline operations mined 8.7 million, 7.9 million, and 8.4
million cubic yards of limerock for the years ended December 31, 2001, 2000 and
1999, respectively.
Total coal reserves declined to 2.6 billion at December 31, 2001 from
2.8 billion at December 31, 2000 primarily due to the expiration of
non-renewable coal leases in undeveloped areas and tons mined.
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
Revenues, income before taxes, income tax provision (benefit) and net
income were as follows for the year ended December 31:
2001 2000 1999
---------------- ------------ --------------
Revenues
Project mining subsidiaries $ 260.9 $ 250.5 $ 239.9
Other mining operations 47.6 36.8 35.1
---------------- ------------ --------------
308.5 287.3 275.0
Liquidated damages payments recorded by MLMC 20.5 --- ---
Arbitration award received by San Miguel 1.1 --- ---
Royalties and other 3.2 1.9 2.7
---------------- ------------ --------------
$ 333.3 $ 289.2 $ 277.7
================ ============ ==============
Income before taxes
Project mining subsidiaries $ 25.8 $ 25.5 $ 25.9
Other mining operations 23.9 (1.6) 2.7
---------------- ------------ --------------
Total income from operating mines 49.7 23.9 28.6
Royalty income and other income (expense), net (9.3) (4.0) 1.2
Other operating expenses (5.8) (7.4) (7.6)
---------------- ------------ --------------
Income before tax provision (benefit) 34.6 12.5 22.2
Income tax provision (benefit) 9.0 (.1) 4.5
---------------- ------------ --------------
Income before cumulative effect of accounting
change 25.6 12.6 17.7
Cumulative effect of accounting change --- --- (1.2)
---------------- ------------ --------------
Net income $ 25.6 $ 12.6 $ 16.5
================ ============ ==============
2001 COMPARED WITH 2000
Revenues for 2001 increased to $333.3 million, up 15.2 percent from
$289.2 million in 2000. Revenues increased in 2001 as compared with 2000
primarily due to (i) $20.5 million of contractual liquidated damages payments
recorded by MLMC due to a delay of the commercial operation of the customer's
power plant, (ii) increased revenues from project mines, (iii) initial lignite
sales at MLMC and (iv) a slight increase in tons sold at Red River. Net tonnage
volume decreased at the project mining subsidiaries due to a customer's plant
outage at Falkirk and reduced customer requirements at Coteau and Sabine.
Although tonnage volume decreased, revenues from the project mining subsidiaries
increased primarily as a result of an increase in pass through costs at Sabine.
Income before taxes increased to $34.6 million in 2001 from $12.5
million in 2000. This increase is primarily due to (i) the contractual
liquidated damages payments recorded by MLMC, (ii) initial lignite sales at
MLMC, and (iii) increased tonnage volume at Red River. These increases were
partially offset by higher interest expense. Net income in 2001 increased to
$25.6 million from $12.6 million in 2000 as a result of these factors, partially
offset by an increase in the 2001 effective tax rate as compared with 2000. See
effective tax rate discussion below.
2000 COMPARED WITH 1999
Revenues for 2000 increased as compared with 1999 primarily due to
increased pass-through costs at Coteau and Sabine and increased tonnage volume
at Falkirk and Red River. Income before taxes for 2000 declined as compared with
1999 primarily due to: (i) increased maintenance, administration and fuel costs
at San Miguel, which is not operated on a cost-plus basis, (ii) a write-off of
$2.4 million in 2000 of previously capitalized development costs incurred for a
power plant and mine development project in Turkey which NACoal no longer
intends to pursue, (iii) charges paid to NACCO for services provided by the
parent company, which began in 2000, and (iv) reduced royalty income. The
decline in net income in 2000 as compared with 1999 as a result of these factors
was partially offset by (i) a non-recurring cumulative effect of accounting
change expense recognized in 1999 for the write-off of previously capitalized
start-up costs and (ii) favorable tax adjustments in 2000 relating to the
resolution of tax issues provided for in prior years.
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
OTHER INCOME, EXPENSE AND INCOME TAXES
The components of other income (expense) and the effective tax rate are
as follows for the year ended December 31:
2001 2000 1999
--------------- -------------- --------------
Interest expense
Project mining subsidiaries $ (16.4) $ (16.9) $ (17.6)
Other mining operations (10.0) (.7) ---
--------------- -------------- --------------
$ (26.4) $ (17.6) $ (17.6)
=============== ============== ==============
Other-net
Project mining subsidiaries $ .2 $ .4 $ .1
Other mining operations (1.1) (.9) .3
--------------- -------------- --------------
$ (.9) $ (.5) $ .4
=============== ============== ==============
Effective tax rate 26.0% (.7)% 19.1%
Interest expense from other mining operations increased in 2001 as
compared with 2000 and 1999 primarily due to debt allocated to Red River and
MLMC as a result of the October 2000 acquisition of the remaining interests in
those mines. Interest expense on debt allocated to finance MLMC was being
capitalized prior to the second quarter of 2001 as part of the mine development
activities. Beginning in the second quarter of 2001 as a result of the effective
completion of the initial mine development phase at MLMC, interest expense on
debt allocated to finance MLMC is being expensed. Interest expense at the
project mines decreased in 2001 and 2000 as compared with 1999 primarily due to
a decrease in interest rates.
Other-net from other mining operations includes a charge from the parent
company of $1.1 million and $1.0 million, in 2001 and 2000, respectively, for
fees incurred by NACCO on NACoal's behalf. The effective tax rate increase in
2001 as compared with 2000 and 1999 is primarily due to a greater proportion of
income from operations not currently eligible to record a permanent tax benefit
from percentage depletion. The effective tax rate in 2000 reflects an income tax
benefit on pre-tax income primarily due to both the increased effect of
percentage depletion and a nonrecurring adjustment for the resolution of certain
tax issues provided for in prior years.
LIQUIDITY AND CAPITAL RESOURCES
NACoal's non-project mine financing needs are provided by a revolving
line of credit of up to $60.0 million and a remaining term loan of $100.0
million (the "NACoal Facility"). The NACoal Facility requires annual term loan
repayments of $15.0 million, with a final term loan repayment of $55.0 million
in October 2005. The revolving credit facility of $60.0 million is available
until the facility's expiration in October 2005. The NACoal Facility has
performance-based pricing, which sets interest rates based upon achieving
various levels of Debt to EBITDA ratios, as defined. The NACoal Facility
establishes financial targets which must be satisfied before NACoal can make
certain payments and dividends to NACCO or make significant investments. See
further discussion of the terms of the NACoal Facility in Note 9 to the
Consolidated Financial Statements. NACoal had $29.0 million of its $60.0 million
revolving credit facility available at December 31, 2001.
Following is a table which summarizes the contractual obligations of
NACoal, excluding the obligations of the project mining subsidiaries. The
financing of the project mining subsidiaries, which is either provided or
guaranteed by the utility customers, includes long-term equipment leases, notes
payable and advances from customers. The obligations of the project mining
subsidiaries do not affect the short-term or long-term liquidity of NACoal and
are without recourse to NACCO or NACoal. As such, these contractual obligations,
which are discussed in further detail in Note 12 to the Consolidated Financial
Statements, have been excluded from the table below.
PAYMENTS DUE BY PERIOD
NACOAL, EXCLUDING PROJECT MINES, ------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS TOTAL 2002 2003 2004 2005 2006 THEREAFTER
- -------------------------------------- ------- ------ ------- ------- ------- ------ ----------
NACoal Facility $ 131.0 $ 15.0 $ 15.0 $15.0 $ 86.0 $ --- $ ---
Capital lease obligations including
principal and interest 36.6 3.1 3.1 3.1 3.1 3.1 21.1
Off-balance-sheet operating leases 56.2 8.7 8.7 7.6 7.9 6.8 16.5
------- ------ ------ ----- ------ ----- ------
Total contractual cash obligations $ 223.8 $ 26.8 $ 26.8 $25.7 $ 97.0 $ 9.9 $ 37.6
======= ====== ====== ===== ====== ===== ======
24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
An event of default, as defined in the NACoal Facility agreement and in
NACoal's operating and capital lease agreements, could cause an acceleration of
the payment schedule. No such event of default has occurred or is anticipated to
occur.
NACoal believes that funds available under its revolving credit
agreement, operating cash flows and financing provided by the project mining
subsidiaries' customers are sufficient to finance all of its term loan principal
repayments and its operating needs and commitments arising during the
foreseeable future.
Following is a table which summarizes actual and planned capital
expenditures:
PLANNED ACTUAL ACTUAL
CAPITAL EXPENDITURES 2002 2001 2000
--------------------------------------------------------- --------------- --------------- ---------------
NACoal, excluding project mining subsidiaries $ 10.2 $ 18.9 $ 3.9
Project mining subsidiaries 36.5 18.3 15.3
--------------- --------------- ---------------
Total NACoal $ 46.7 $ 37.2 $ 19.2
=============== =============== ===============
Increased capital expenditures in 2001 as compared with 2000 primarily
relates to continued mine development at MLMC. Increased planned capital
expenditures in 2002 as compared with actual expenditures in 2001 and 2000 at
the project mining subsidiaries is primarily due to planned investments in
mining equipment. Planned expenditures for 2002 at NACoal include $7.2 million
for the continued development of MLMC.
NACoal's capital structure, excluding the project mining subsidiaries,
is presented below:
December 31
--------------------------------
2001 2000
---------------- --------------
Investment in project mining subsidiaries $ 4.9 $ 3.8
Other net tangible assets 127.6 95.2
Coal supply agreements, net 85.2 86.4
---------------- --------------
Net assets 217.7 185.4
Advances from NACCO (12.3) (8.4)
Other debt (156.5) (145.8)
---------------- --------------
Stockholder's equity $ 48.9 $ 31.2
================ ==============
Debt to total capitalization 78% 83%
The increase in net assets of $32.3 million is primarily due to an
increase in net property, plant and equipment related to continued development
at MLMC, including the capitalization of a lease covering several large pieces
of equipment at MLMC. The increase in stockholder's equity is due to $25.6
million of net income for 2001 partially offset by an increase in accumulated
other comprehensive loss relating to the adoption of SFAS No. 133 and dividends
paid to NACCO. See Note 2 to the Consolidated Financial Statements for a
discussion of the adoption of SFAS No. 133.
NACCO MATERIALS HANDLING GROUP
NMHG, through NMHG Wholesale and NMHG Retail, designs, engineers,
manufactures, sells, services and leases a full line of lift trucks and service
parts marketed worldwide under the Hyster(R) and Yale(R) brand names. NMHG
Retail includes the elimination of intercompany revenues and profits resulting
from sales by NMHG Wholesale to NMHG Retail.
25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
FINANCIAL REVIEW
The segment and geographic results of operations for NMHG were as
follows for the year ended December 31:
2001 2000 1999
-------- -------- --------
Revenues
Wholesale
Americas $1,031.1 $1,291.6 $1,149.5
Europe, Africa and Middle East 363.9 394.6 406.3
Asia-Pacific 68.3 63.8 63.1
-------- -------- --------
1,463.3 1,750.0 1,618.9
-------- -------- --------
Retail (net of eliminations)
Americas 30.9 33.1 32.1
Europe, Africa and Middle East 106.8 97.3 83.0
Asia-Pacific 71.4 51.7 27.4
-------- -------- --------
209.1 182.1 142.5
-------- -------- --------
NMHG Consolidated $1,672.4 $1,932.1 $1,761.4
======== ======== ========
Operating profit (loss)
Wholesale
Americas $ 16.8 $ 85.9 $ 70.4
Europe, Africa and Middle East (13.7) 2.3 7.4
Asia-Pacific (1.8) (2.3) (3.3)
-------- -------- --------
1.3 85.9 74.5
-------- -------- --------
Retail (net of eliminations)
Americas (2.4) (.9) (3.9)
Europe, Africa and Middle East (34.8) (15.3) (10.6)
Asia-Pacific (2.2) .9 (1.7)
-------- -------- --------
(39.4) (15.3) (16.2)
-------- -------- --------
NMHG Consolidated $ (38.1) $ 70.6 $ 58.3
======== ======== ========
Operating profit (loss) excluding
goodwill amortization
Wholesale
Americas $ 24.6 $ 93.8 $ 78.2
Europe, Africa and Middle East (10.4) 5.7 11.0
Asia-Pacific (1.5) (2.0) (3.1)
-------- -------- --------
12.7 97.5 86.1
-------- -------- --------
Retail (net of eliminations)
Americas (2.1) (.8) (3.6)
Europe, Africa and Middle East (34.4) (14.7) (10.3)
Asia-Pacific (1.4) 1.2 (1.7)
-------- -------- --------
(37.9) (14.3) (15.6)
-------- -------- --------
NMHG Consolidated $ (25.2) $ 83.2 $ 70.5
======== ======== ========
Interest expense
Wholesale $ (12.9) $ (13.4) $ (16.9)
Retail (net of eliminations) (10.2) (7.8) (2.1)
-------- -------- --------
$ (23.1) $ (21.2) $ (19.0)
======== ======== ========
Other-net
Wholesale $ (2.6) $ (12.0) $ 4.8
Retail (net of eliminations) .4 .2 (3.0)
-------- -------- --------
$ (2.2) $ (11.8) $ 1.8
======== ======== ========
Net income (loss)
Wholesale $ (14.1) $ 37.0 $ 39.0
Retail (net of eliminations) (35.3) (15.7) (15.3)
-------- -------- --------
$ (49.4) $ 21.3 $ 23.7
======== ======== ========
Effective tax rate
Wholesale 4.2% 40.7% 39.1%
Retail (including eliminations) 28.3% 31.4% 28.2%
NMHG Consolidated 22.9% 46.3% 44.8%
Interest expense increased in 2001, as compared with 2000 and 1999,
primarily due to an increase in the average borrowings outstanding.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
Other-net for NMHG Wholesale includes charges from NACCO, equity in
earnings of unconsolidated affiliates and discounts on the sale of accounts
receivable. Other-net for NMHG Wholesale includes $6.8 million ($4.4 million
after-tax) and $6.6 million ($4.3 million after-tax), in 2001 and 2000,
respectively, of charges from NACCO for services incurred on NMHG's behalf.
Equity in the earnings (loss) of unconsolidated affiliates, including
Sumitomo-NACCO Materials Handling Group ("S-N"), a 50 percent-owned joint
venture with Sumitomo Heavy Industries, Ltd. in Japan, were $2.6 million in
2001, ($0.2) million in 2000 and $2.3 million in 1999. Discounts on the sale of
receivables included in other-net were $4.7 million in 2001, $5.5 million in
2000 and $3.8 million in 1999. In 2001, other-net includes non-recurring
insurance proceeds of $8.0 million relating to flood damage in September 2000 at
S-N. In 1999, other-net for NMHG Wholesale included non-recurring income of $0.9
million for settlements from legal proceedings.
The effective tax rate in 2001 is not comparable to 2000 and 1999 due to
the effect of nondeductible goodwill amortization, an increase in the valuation
allowance provided for certain deferred tax assets and state income taxes.
NMHG WHOLESALE
2001 COMPARED WITH 2000
Revenues decreased 16.4 percent to $1,463.3 million in 2001 from
$1,750.0 million in 2000. A steep drop in the lift truck segment of the broader
capital goods market in North America resulted in an 18.7 percent reduction in
worldwide lift truck shipments at NMHG Wholesale. A total of 68,929 units were
shipped in 2001 compared with 84,825 units shipped 2000. The rate of monthly
retail orders in the U.S. and Canada declined approximately 50 percent from the
peak month in 2000 as compared with the lowest month in 2001. NMHG Wholesale's
revenues also declined due to lower parts sales resulting from reduced lift
truck utilization which is typical in this stage of a capital goods recession.
The decrease in revenues, which was primarily driven by unit volume, was
partially offset by a shift in mix to higher-priced lift trucks.
Operating profit decreased to $1.3 million for 2001 from $85.9 million
for 2000. The decrease in operating profit was largely due to reduced unit and
parts volume and resulting reductions in the absorption of manufacturing
overhead costs and related manufacturing inefficiencies. Additionally, operating
profit was adversely affected by $12.0 million of expenses incurred during 2001
related to the Danville plant closure announced in 2000 and a restructuring
charge of $4.5 million recognized in 2001 for cost reductions in Europe. These
2001 charges compare with a restructuring charge of $13.9 million recognized in
2000 for the Danville plant closure. See below for a further discussion of these
restructuring charges. The decline in operating profit was offset somewhat by
favorable foreign currency effects, lower incentive compensation costs and an
increase in the average sales price per unit.
NMHG Wholesale recorded a net loss for 2001 of $14.1 million as compared
with net income of $37.0 million for 2000. The decline in net operating results
is due to the factors affecting operating profit, the effect of nondeductible
goodwill amortization and an increase in the valuation allowance on the tax
provision and due to a $1.3 million after-tax charge for the cumulative effect
of accounting changes in 2001. See Note 2 to the Consolidated Financial
Statements for a discussion of these accounting changes. The decline in
operating results for 2001 as compared with 2000 was offset somewhat by
insurance proceeds resulting in income of $5.0 million after-tax recognized in
2001 relating to flood damage in September 2000 at a facility owned by S-N.
The worldwide backlog level decreased to 15,100 units at December 31,
2001 from 21,800 units at December 31, 2000 primarily due to decreased demand
for lift trucks in the Americas. The backlog level at December 31, 2001 has
increased slightly as compared to the level at September 30, 2001 of 14,400
units primarily due to an increase in lift truck demand in the Americas and
Asia-Pacific.
RESTRUCTURING PLANS
In 2001, management committed to the restructuring of certain operations
in Europe. As such, NMHG Wholesale recognized a restructuring charge of
approximately $4.5 million pre-tax for severance and other employee benefits to
be paid to approximately 285 manufacturing and administrative personnel in
Europe. As of December 31, 2001, $1.3 million has been paid to approximately 150
employees.
The Company estimates that additional pre-tax costs of $0.2 million will
be recognized during 2002 for the NMHG Wholesale European restructuring plan for
costs not eligible to be accrued as of December 31, 2001. Furthermore, as a
result of the reduced headcount in Europe, NMHG Wholesale estimates annual
pre-tax cost savings beginning in 2002 of $8.1 million. These estimates of
future costs and benefits are subject to change during the execution of the
restructuring plans.
In 2000, the Board of Directors approved management's plan to transfer
manufacturing activities from NMHG's Danville, Illinois, assembly plant to its
other global manufacturing plants. The adoption of this plan resulted in $11.7
million of costs accrued in 2000, relating to retirement costs, medical costs
and employee severance to be paid to approximately 425 manufacturing and office
personnel. In addition, an impairment charge of $2.2 million was recognized in
2000 as a result of the anticipated disposition of certain assets at an amount
below
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
net book value. During 2001, payments for severance and other benefits of
$1.7 million were made to approximately 350 employees. In addition, the accrual
for severance was reduced by $0.4 million. Approximately $12.0 million of
pre-tax costs associated with the Danville phase-out, which were not eligible
for accrual as of December 31, 2000, were expensed during 2001.
The Company estimates that additional pre-tax costs of $2.5 million will
be recognized during 2002 related primarily to idle facility costs for the
manufacturing plant in Danville. These additional estimated costs have not been
accrued as of December 31, 2001. Consistent with its communications in 2001, the
Company expects to complete implementation of the phase-out plan in 2002. Annual
pre-tax cost savings are estimated to be $10.1 million in 2002 and $12.5 million
thereafter, as a result of anticipated improved manufacturing efficiencies
depending on unit volume. These estimates could change during the phase-out
period. See also discussion in Note 3 to the Consolidated Financial Statements.
2000 COMPARED WITH 1999
Revenues increased to $1,750.0 million in 2000 from $1,618.9 million in
1999. Revenues increased as a result of unit and service parts volume growth,
primarily in the Americas, and a shift in mix to higher revenue units, partially
offset by adverse currency effects. Worldwide volume increased 11.5 percent to
84,825 units shipped during 2000 from 76,055 units shipped during 1999. Adverse
currency effects on revenues resulted primarily from (i) translating a weakened
British pound sterling into U.S. dollars and (ii) transactions denominated in a
weakened euro as compared with the British pound sterling, which causes revenues
that are invoiced in euros to decline when translated back to the British pound
sterling.
Operating profit of $99.8 million, which excludes the Danville
restructuring charge of $13.9 million discussed above, as a percentage of
revenues was 5.7 percent in 2000. This percentage in 2000 compares with
operating profit as a percentage of revenues in 1999 of 4.6 percent. Improved
operating profit in 2000 as compared with 1999 is primarily due to (i) volume
growth and related manufacturing efficiencies and (ii) a shift in the mix of
products sold to higher margin units, partially offset by adverse currency
effects in Europe. Including the restructuring charge, operating profit as a
percentage of revenues was 4.9 percent in 2000.
Excluding the restructuring charge, net income increased as a result of
the factors affecting operating profit. However, the increase was partially
offset by an increase in other income (expense), net, which includes a $4.3
million after-tax charge from NACCO for services provided by the parent company
and a decrease in equity in earnings of unconsolidated affiliates of $2.5
million, primarily due to losses for flood damages at a facility owned by S-N.
NMHG RETAIL
2001 COMPARED WITH 2000
Revenues increased 14.8 percent to $209.1 million for 2001 from $182.1
million for 2000 largely as a result of the effect of a full year of revenues in
2001 from dealerships acquired in Asia-Pacific in the fourth quarter of 2000.
This revenue growth was partially offset by lower parts and service revenues and
unfavorable pricing and product mix.
Operating loss in 2001 was $39.4 million compared with an operating loss
of $15.3 million in 2000. The increase in operating loss was primarily due to
several non-recurring special adjustments in 2001. The majority of these special
adjustments were recognized in Europe, which accounted for a significant portion
of NMHG Retail's 2001 operating loss. The 2001 operating loss includes a charge
of $10.4 million for a loss on the sale of certain wholly owned dealers and
related wind-down costs. See also Note 5 to the Consolidated Financial
Statements for a discussion of this transaction. The 2001 operating loss also
includes a $4.7 million restructuring charge for downsizing to match current
levels of demand at retail operations in Europe that NMHG Retail had acquired
over the last few years. In addition, the 2001 operating loss includes charges
of approximately $7.1 million to reduce asset values and increase reserves
reflective of the weakened capital goods markets, establish full accounting
consistency among retail operations on a global basis and to cause those dealers
previously reporting on a one-month lag to report on months consistent with the
rest of NMHG.
Net loss was $35.3 million for 2001 compared with $15.7 million for
2000, primarily due to the factors affecting operating loss combined with an
increase in interest expense allocated to NMHG Retail.
28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
RESTRUCTURING PLAN
In 2001, as previously discussed, management committed to the
restructuring of certain operations in Europe. As such, NMHG Retail recognized a
restructuring charge of approximately $4.7 million pre-tax, of which $0.4
million relates to lease termination costs and $4.3 million relates to severance
and other employee benefits to be paid to approximately 140 service technicians,
salesmen and administrative personnel at wholly owned dealers in Europe. As of
December 31, 2001, $0.4 million has been paid to approximately 40 employees.
The Company estimates that additional pre-tax costs of $0.3 million will
be recognized during 2002 for the NMHG Retail European restructuring plan for
costs not eligible to be accrued as of December 31, 2001. As a result of the
reduced headcount in Europe, NMHG Retail estimates annual pre-tax cost savings
beginning in 2002 of $3.3 million. This estimate could change during the
execution of the restructuring plan.
2000 COMPARED WITH 1999
Revenues increased $39.6 million, or 27.8 percent, due to acquisitions
of retail dealerships in Asia-Pacific and, to a lesser degree, Europe. Revenues
from volume growth at comparable dealerships also contributed slightly to the
increase in revenues but were entirely offset by adverse currency effects in
Europe and an increase in the elimination of intercompany shipments from NMHG
Wholesale to NMHG Retail. Operating results for 2000 in the Americas improved as
compared with the prior year primarily due to a decrease in administrative
support costs. Operating results for 2000 in Asia-Pacific improved as compared
with the prior year primarily due to favorable operating results contributed by
current year acquisitions. Increased net loss was driven by increased losses in
Europe, primarily due to increased pricing competition as a result of a weak
euro and due to continued integration, infrastructure, interest, amortization
and administrative costs necessary to build the Retail segment.
LIQUIDITY AND CAPITAL RESOURCES
NMHG Wholesale has a $350.0 million revolving credit facility (the
"Facility") that expires June 2002. The Facility has performance-based pricing
which sets interest rates based upon the achievement of certain financial
performance targets. The Facility permits NMHG Wholesale to advance funds to
NMHG Retail. Advances from NMHG Wholesale are the primary sources of financing
for NMHG Retail. At December 31, 2001, NMHG had available $85.0 million of its
$350.0 million revolving credit facility.
NMHG also has separate credit facilities totaling $76.3 million, of
which $34.3 million was available at December 31, 2001 and maintains additional
uncommitted lines of credit totaling $30.0 million, which was all available at
December 31, 2001.
Although NMHG's primary financing facility expires in June 2002, NMHG
anticipates that a new credit facility will be obtained in or before June 2002.
While there can be no assurances as to the specific terms of the refinancing,
including the nature of the covenants and restrictions, NMHG expects that
interest rates under the new facility will be higher based on its evaluation of
the generally higher interest rate spreads charged today versus interest rate
spreads in effect when NMHG Wholesale's Facility was structured in 1995. NMHG
Wholesale has assumed that the outstanding balance under the Facility at the
time of refinancing will be financed with a combination of short-term and
long-term financing. However, in accordance with accounting principles generally
accepted in the U.S., the outstanding balance under the Facility will be
classified as a current liability until the Facility is refinanced. The amount
outstanding that is classified as a current liability at December 31, 2001 is
$265.0 million.
With the expectation of the refinancing of the NMHG Facility prior to
its expiration in June 2002, NMHG believes that funds available under its credit
facilities and operating cash flows are sufficient to finance all of its
operating needs and commitments arising during the foreseeable future.
NMHG Wholesale's accounts receivable securitization program (the
"Program") to sell domestic accounts receivable was terminated on December 5,
2001. As a result, NMHG Wholesale is relying on the Facility to finance accounts
receivable that otherwise would have been sold under the Program prior to
December 5, 2001. Additional borrowings from the Facility of $33.4 million were
used to finance the outstanding balance of accounts receivable sold pursuant to
the Program on December 5, 2001. As a result of the termination of the Program,
an increase in interest expense arising from increased outstanding borrowings is
expected to be offset by a decrease in the cost of the Program, which is
classified in the Consolidated Statements of Operations and Other Comprehensive
Income (Loss) as other-net. NMHG Wholesale continues to sell certain of its
European accounts receivable under a separate program. The amount of receivables
sold at December 31, 2001 under this European program was $27.7 million.
29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
Following is a table which summarizes the contractual obligations of
NMHG:
PAYMENTS DUE BY PERIOD
----------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS TOTAL 2002 2003 2004 2005 2006 THEREAFTER
- ---------------------------------------- ------ ------ ------ ------ ------ ------ ----------
NMHG Facility(1)(2) $265.0 $265.0 $ --- $ --- $ --- $ --- $ ---
Other lines of credit(2) 36.2 36.2 --- --- --- --- ---
Term loans(2) 16.0 13.0 1.4 1.6 --- --- ---
Capital lease obligations including
principal and interest(2) 40.7 12.5 12.7 7.3 4.6 2.5 1.1
Off-balance-sheet operating
lease obligations(2) 141.6 40.4 32.1 26.0 19.0 13.3 10.8
Unconditional purchase obligations 4.3 .4 .8 .6 .9 .2 1.4
------ ------ ------ ------ ------ ------ ------
Total contractual cash obligations $503.8 $367.5 $ 47.0 $ 35.5 $ 24.5 $ 16.0 $ 13.3
====== ====== ====== ====== ====== ====== ======
(1) As noted above, the NMHG Facility expires in June 2002 and is anticipated to
be refinanced prior to its expiration.
(2) An event of default, as defined in the NMHG Facility agreement, in NMHG's
term loan agreements and in NMHG's operating and capital lease agreements,
could cause an acceleration of the payment schedule. No such event of
default has occurred or is anticipated to occur.
In addition, NMHG has the following commitments at December 31, 2001:
Total
---------------
Standby recourse or repurchase obligations $ 150.5
Guarantees 7.5
---------------
Total commercial commitments $ 158.0
===============
Guarantees and standby recourse or repurchase obligations primarily
represent guarantees of residual values or recourse obligations to repurchase
lift trucks subject to certain terms and conditions under financing agreements
made between NMHG's customers and financing companies in conjunction with the
customer's financing of lift trucks purchased from NMHG. For these transactions,
NMHG generally retains a security interest in the lift truck, such that NMHG
would take possession of the lift truck in the event that NMHG would become
liable under the terms of the guarantees or standby recourse or repurchase
obligations. Generally, these commitments are due upon demand in the event of
default by the customer. The amount of the standby recourse or repurchase
obligations increase and decrease over time as obligations under existing
arrangements expire and new obligations arise in the ordinary course of
business. Losses anticipated under the terms of the guarantees or standby
recourse or repurchase obligations are not significant and have been reserved
for in the Consolidated Financial Statements.
NMHG Wholesale anticipates spending approximately $30.4 million for
property, plant and equipment in 2002, compared with capital expenditures of
$46.6 million in 2001 and $43.3 million in 2000. NMHG Retail anticipates
spending approximately $3.3 million for property, plant and equipment in 2002,
compared with capital expenditures of $6.9 million in 2001 and $8.5 million in
2000. NMHG's planned expenditures in 2002 include investments in manufacturing
equipment, tooling for new products and retail lease and rental fleet. The
principal sources of financing for these capital expenditures are expected to be
internally generated funds and facility borrowings.
30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
NMHG Wholesale's capital structure is presented below:
December 31
-----------------------
2001 2000(1)
------- -------
NMHG WHOLESALE:
Total net tangible assets $ 375.2 $ 283.2
Advances to NMHG Retail 70.2 103.8
Advances to NACCO --- 3.0
Goodwill at cost 446.0 446.1
------- -------
Net assets before goodwill amortization 891.4 836.1
Accumulated goodwill amortization (141.4) (129.6)
Advances from NACCO (8.0) ---
Other debt (300.9) (254.6)
Minority interest (2.3) (3.1)
------- -------
Stockholder's equity $ 438.8 $ 448.8
======= =======
Debt to total capitalization 41% 36%
(1) Certain amounts presented for December 31, 2000 have been
reclassified to conform to the current period's presentation.
The increase in total net tangible assets of $92.0 million is primarily
due to a $79.0 million capital contribution to NMHG Retail in 2001, which
increased NMHG Wholesale's investment in NMHG Retail. In addition, the increase
is due to an increase in cash and cash equivalents of $37.2 million due to the
timing of customer receipts at year-end versus vendor and debt payments after
year-end.
Debt increased primarily to support increases in total net tangible
assets. Stockholder's equity decreased as a result of a $14.1 million net loss
combined with a minimum pension liability adjustment required in 2001 which
reduced equity, adverse currency movements recognized in the accumulated foreign
currency translation adjustment, dividends paid to NACCO and an increase in
accumulated other comprehensive loss relating to the adoption of SFAS No. 133,
partially offset by an increase in capital in excess of par value. See Note 2 to
the Consolidated Financial Statements for a discussion of the adoption of SFAS
No. 133.
NMHG Retail's capital structure is presented below:
December 31
------------------------
2001 2000(1)
------- -------
NMHG RETAIL:
Total net tangible assets $ 109.5 $ 133.0
Advances from NMHG Wholesale (70.2) (103.8)
Goodwill at cost 45.2 44.2
------- -------
Net assets before goodwill amortization 84.5 73.4
Accumulated goodwill amortization (5.6) (4.6)
Total debt (53.5) (50.3)
------- -------
Stockholder's equity $ 25.4 $ 18.5
======= =======
Debt to total capitalization 68% 73%
(1) Certain amounts presented for December 31, 2000 have been
reclassified to conform to the current period's presentation.
The decrease in total net tangible assets of $23.5 million is primarily
due to a decrease in accounts receivable of $18.1 million due to both a decrease
in the number of days' sales outstanding and a decrease in sales volume in
December 2001 as compared with December 2000. The decrease in total net tangible
assets is also attributable to an increase in accruals of $4.3 million relating
to the restructuring charge recorded in 2001.
31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
RELATED PARTY TRANSACTIONS
NMHG has a 20 percent ownership interest in NMHG Financial Services,
Inc. ("NFS"), a joint venture with GE Capital Corporation, formed primarily for
the purpose of providing financial services to independent and wholly owned
Hyster and Yale lift truck dealers in the United States. NMHG's ownership
percentage in NFS is accounted for using the equity method of accounting.
Generally, NMHG sells lift trucks directly to its customer and that
customer may enter into a financing transaction with NFS or another unrelated
party. However, for certain customer transactions, NMHG sells directly to NFS so
that the customer can obtain operating lease financing from NFS. Sales to NFS
related to these types of transactions for the years ended December 31, 2001,
2000 and 1999 were $137.5 million, $166.6 million and $8.5 million,
respectively. Amounts receivable from NFS at December 31, 2001 and 2000 were
immaterial. Also, from time to time, NMHG provides recourse or repurchase
obligations or guarantees the residual values of the lift trucks purchased by
customers and financed through NFS. See further discussion in Note 15 to the
Consolidated Financial Statements. At December 31, 2001, approximately $127.1
million of the Company's total guarantees, recourse or repurchase obligations
related to transactions with NFS. For these transactions, NMHG generally retains
a security interest in the lift truck, such that NMHG would take possession of
the lift truck in the event that NMHG would become liable under the terms of the
guarantees or standby recourse or repurchase obligations.
In addition to providing financing to NMHG's independent dealers, NFS
provides both lease and debt financing to NMHG. Operating lease obligations
relate to specific sale-leaseback-sublease transactions for certain NMHG
customers whereby NMHG sells lift trucks to NFS, NMHG leases these lift trucks
back under an operating lease agreement and NMHG subleases those lift trucks to
customers under an operating lease agreement. Debt financing includes long-term
notes payable to NFS primarily to finance certain of NMHG's long-term notes
receivable from Latin American customers which arise in the ordinary course of
business. In addition, NFS provides, on NMHG's behalf, installment billings to
the Latin American customers, account balance tracking and an inventory
management system to track the equipment covered by the notes. Total obligations
to NFS under the operating lease agreements and notes payable were $13.7 million
and $14.7 million at December 31, 2001 and 2000, respectively.
In addition, NMHG is reimbursed for certain services, primarily
administrative functions, provided to NFS. The amount of NMHG's expenses
reimbursed by NFS were $1.8 million, $1.5 million and $1.1 million in 2001, 2000
and 1999, respectively.
NMHG has a 50 percent ownership interest in S-N, a joint venture with
Sumitomo Heavy Industries, Inc., formed primarily for the manufacture and
distribution of Sumitomo-Yale branded lift trucks in Japan and the export of
Hyster and Yale branded lift trucks and related components and service parts
outside of Japan. NMHG's ownership in S-N is accounted for using the equity
method of accounting. NMHG purchases products from S-N under normal trade terms.
In 2001, 2000 and 1999, purchases from S-N were $63.7 million, $90.5 million and
$91.2 million, respectively. Amounts payable to S-N at December 31, 2001 and
2000 were $16.1 million and $23.6 million, respectively.
NACCO HOUSEWARES GROUP
The Housewares segment of the Company includes HB-PS, a leading
manufacturer and marketer of small electric motor and heat-driven appliances as
well as commercial products for restaurants, bars and hotels, and KCI, a
national specialty retailer of brand-name kitchenware, small electrical
appliances and related accessories. Because the housewares business is seasonal,
a majority of revenues and operating profit occurs in the second half of the
year when sales of small electric appliances to retailers and consumers increase
significantly for the fall holiday selling season.
FINANCIAL REVIEW
The results of operations for Housewares were as follows for the year
ended December 31:
2001 2000 1999
-------- ------- -------
Revenues $ 632.1 $ 649.9 $ 596.7
Operating profit (loss) $ (8.4) $ 27.4 $ 41.8
Operating profit (loss) excluding $ (5.4) $ 30.5 $ 44.8
goodwill amortization
Interest expense $ (7.7) $ (8.6) $ (6.7)
Other-net $ (.1) $ (2.6) $ (.4)
Net income (loss) $ (12.2) $ 8.8 $ 21.2
Effective tax rate 24.7% 45.7% 38.9%
32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
2001 COMPARED WITH 2000
Housewares' revenues decreased to $632.1 million in 2001, down 2.7
percent from $649.9 million in 2000. Revenues declined primarily due to reduced
unit volume and sale mix at HB-PS, primarily driven by the weak retail
environment in 2001 and reduced sales of opening-price-point products. Decreased
unit pricing primarily resulting from increased competition also caused revenues
to decline as compared with the prior year. The decline in Housewares' revenues
was partially offset by increased sales of General Electric-branded products to
Wal-Mart and the introduction of TrueAir(TM) home odor eliminators at
HB-PS, and increased revenues at KCI primarily driven by an increase in the
number of stores (168 at December 31, 2001 compared with 157 at December 31,
2000).
Housewares recorded an operating loss of $8.4 million in 2001 compared
with operating profit of $27.4 million in 2000. The decline in operating profit
resulted primarily from restructuring charges, described below, of $13.3 million
recognized in 2001 and a $4.0 million charge in 2001 for the write-off of
receivables from customers that filed voluntary petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code. Excluding these items,
operating results decreased as a result of (i) a decrease in the average sales
price, (ii) increased advertising costs incurred to support the TrueAir product
introduction, (iii) a shift in mix to lower-margin units and (iv) unfavorable
manufacturing overhead costs, partially offset by favorable material costs at
HB-PS and improved operating profit at KCI.
The decline in the effective tax rate is primarily due to the effect of
non-deductible goodwill amortization on the pre-tax loss.
Net loss was $12.2 million for 2001 as compared with net income of $8.8
million for 2000 primarily due to the factors affecting operating profit.
On January 22, 2002, one of HB-PS' largest customers, a major retail
chain, filed a voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code, which allows this customer to reorganize and seek
protection from its creditors. As a result, HB-PS recognized a charge of $3.7
million related to receivables due from this customer as of December 31, 2001.
HB-PS believes that the remaining receivable balance at December 31, 2001 due
from this customer is collectible, however, collection may take more than one
year. The customer has targeted emergence from Chapter 11 in 2003. In 2001 and
2000, sales to this customer were approximately $45.8 million and $60.1 million,
respectively, and represented 7.2 percent and 9.2 percent, respectively, of
Housewares revenues. HB-PS expects to continue to ship products to this
customer. However, HB-PS anticipates that revenues from this customer could
decline between 10 and 20 percent as compared with 2001, depending upon the
customer's decisions regarding the number of retail store closings and the level
of promotions of HB-PS' products.
RESTRUCTURING PLANS
In 2001, the Board of Directors approved management's plan to
restructure HB-PS' manufacturing activities in Mexico. This restructuring plan
includes outsourcing of certain of the company's products and consolidating
production of three of the company's Mexican manufacturing plants into one
plant. As a result of this plan, HB-PS recognized a charge of $12.5 million of
which $5.0 million relates to the impairment of fixed assets, $3.3 million
relates to equipment and building lease impairment and clean-up costs, $2.9
million relates to severance benefits to be paid to approximately 925
manufacturing personnel, $0.6 million relates to the impairment of inventory and
$0.7 million is for other related costs. The estimated cash outflows required
for this plan are expected to be almost entirely offset by cash inflows from the
anticipated sale of fixed assets and tax benefits associated with the plan. As
of December 31, 2001, no severance payments had been made. Future expenses,
which are not eligible for accrual at December 31, 2001, are estimated to be
$0.7 million pre-tax in 2002. Annual pre-tax cost savings are estimated to be
$10.3 million beginning in 2002.
In the fourth quarter of 2001, HB-PS recognized a charge of $0.8 million
relating to severance benefits to be paid to personnel in all functional areas
located at the company's headquarters. This restructuring plan was initiated
primarily as a cost-cutting measure in response to reduced overall consumer
demand caused by the 2001 U.S. economic slowdown. Headcount was reduced by 36,
or approximately 10 percent of the total corporate personnel. As of December 31,
2001, payments of $0.3 million have been made. Payments in respect to the
remainder of the charge, or $0.5 million, are expected to be made during the
first half of 2002. The full benefit from this restructuring is estimated to be
$2.7 million pre-tax beginning in 2002.
2000 COMPARED WITH 1999
Housewares' revenues improved in 2000 primarily due to unit volume
growth at HBPS. Unit volume at HB-PS increased 9.9 percent to 43.3 million units
sold in 2000 from 39.4 million units sold in 1999, primarily due to increased
demand for contact grills, slow cookers and irons, and from initial shipments of
GE-branded products to Wal-Mart, which began in August 2000. Revenues also
increased at KCI primarily due to an increase in the number of stores. KCI
operated 157 stores at December 31, 2000 compared with 150 stores at December
31, 1999.
33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
Housewares' gross profit declined to 18.4 percent of revenues in 2000
from 21.6 percent of revenues in 1999. This decline in gross profit is primarily
due to decreased sales prices and increased manufacturing costs. The decline in
the average sales price in 2000 as compared with 1999 was primarily due to
intense competition. Increased manufacturing costs were driven by (i) increased
materials costs, especially for petroleum-based resins and packaging materials,
(ii) increased transportation costs driven by rising fuel costs and (iii)
increased warehousing costs due to start-up inefficiencies at the new
consolidated distribution center in Memphis. Increased manufacturing costs were
partially offset by favorable Mexican peso exchange rates.
Housewares' operating profit declined to 4.2 percent of revenues in 2000
from 7.0 percent of revenues in 1999. Operating profit declined due to the 3.2
percentage point decline in gross profit discussed above and due to an increase
in administration costs at KCI, partially offset by a decline in direct
marketing costs at HB-PS.
Net income declined as a result of these factors combined with an
increase in other income (expense), net, which increased primarily due to a $1.6
million after-tax charge from NACCO.
LIQUIDITY AND CAPITAL RESOURCES
HB-PS' credit agreement provides for a revolving credit facility (the
"HB-PS Facility") that: (i) provides financing up to $160.0 million, (ii) is
secured by substantially all of HB-PS' assets, (iii) provides lower interest
rates if HB-PS achieves certain interest coverage ratios, (iv) allows for
interest rates quoted under a competitive bid option and (v) allows advances up
to $10.0 million from HB-PS to KCI.
In December 2001, the HB-PS Facility was amended to modify the covenant
requirements and redefine covenant calculations so that the recognition of the
restructuring charges in the fourth quarter of 2001 did not cause a violation of
covenants under the HB-PS Facility. In addition to the change in the covenant
requirements and calculations, the applicable margin added to the base rate of
interest increased and the facility fee on the available borrowings increased.
Prior to the amendment, for the year ended December 31, 2001, the HB-PS Facility
provided for an interest rate of LIBOR plus 0.4375 percent and a facility fee of
0.3125 percent. After the amendment, effective January 1, 2002, the HB-PS
Facility provides for an interest rate of LIBOR plus 2.25 percent and a facility
fee of 0.5 percent. Interest rates and facility fees, however, are subject to
change based on the level of EBITDA to interest expense ratio, as defined, HB-PS
achieves each quarter.
At December 31, 2001, HB-PS had $60.2 million available under this
facility, which expires in May 2003. In addition, HB-PS has separate uncommitted
facilities that permitted $30.0 million of additional borrowings, of which $25.0
million was available at December 31, 2001. Subsequent to December 31, 2001, one
of HB-PS' lenders reduced the availability under these uncommitted facilities by
$15.0 million in the normal course of business. Housewares believes that funds
available under its credit facilities and operating cash flows are sufficient to
finance all of its operating needs and commitments arising during the
foreseeable future.
Following is a table which summarizes the contractual obligations of
Housewares:
PAYMENTS DUE BY PERIOD
--------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS TOTAL 2002 2003 2004 2005 2006 THEREAFTER
- ----------------------------------------- ------ ------ ------ ------ ------ ------ ----------
HB-PS Facility and uncommitted
facilities balance outstanding $103.5 $ 5.0 $ 98.5 $ --- $ --- $ --- $ ---
Capital lease obligations including
principal and interest .7 .1 .1 .1 .1 .3 ---
Off-balance-sheet operating leases 68.7 15.6 12.5 10.6 7.7 6.2 16.1
Unconditional purchase obligations .7 .7 --- --- --- --- ---
------ ------ ------ ------ ------ ------ ------
Total contractual cash obligations $173.6 $ 21.4 $111.1 $ 10.7 $ 7.8 $ 6.5 $ 16.1
====== ====== ====== ====== ====== ====== ======
Note that, contractually, all amounts outstanding under the HB-PS
Facility are due in 2003 and have been reflected as such in the above table.
However, the Company has classified a portion of this facility, $18.5 million,
as a current obligation since that is the amount expected to be repaid in 2002.
An event of default, as defined in the HB-PS Facility agreement and in
Housewares' operating and capital lease agreements, could cause an acceleration
of the payment schedule. No such event of default has occurred or is anticipated
to occur.
Housewares anticipates spending approximately $17.1 million for
property, plant and equipment in 2002, compared with capital expenditures of
$13.4 million in 2001 and $22.0 million in 2000. Spending for capital
expenditures was down in 2001 as compared with actual spending in 2000 and
planned spending in 2002 primarily due to a delay in or elimination of certain
projects. Planned expenditures for 2002 include enhancements to information
systems, additional development of the GE-branded products and tooling for new
products and machinery and equipment, which are intended to reduce manufacturing
costs and increase manufacturing efficiency. These expenditures are expected to
be funded from internally generated funds and bank borrowings.
34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
Housewares' capital structure is presented below:
December 31
---------------------
2001 2000
------- -------
Total net tangible assets $ 168.7 $ 195.1
Goodwill at cost 123.5 123.5
------- -------
Net assets before goodwill amortization 292.2 318.6
Accumulated goodwill amortization (39.8) (36.7)
Advances from NACCO (3.0) ---
Other debt (103.8) (111.0)
------- -------
Stockholder's equity $ 145.6 $ 170.9
======= =======
Debt to total capitalization 42% 39%
Total net tangible assets decreased $26.4 million primarily due to a
$13.0 million decrease in assets/increase in liabilities resulting from the
restructuring programs, a $9.0 million decrease in accounts receivable, of which
$3.7 million is due to the write-off of customer receivables at year-end
December 31, 2001, and a $7.7 million decrease in inventory. Inventory has
decreased primarily due to anticipated decreases in consumer demand.
The decline in stockholder's equity at December 31, 2001 compared with
December 31, 2000 is due to the $12.2 million net loss, an increase in
accumulated other comprehensive loss relating to the adoption of SFAS No. 133
and dividends paid to NACCO. See Note 2 to the Consolidated Financial Statements
for a discussion of the adoption of SFAS No. 133.
NACCO AND OTHER
FINANCIAL REVIEW
NACCO and Other includes the parent company operations and Bellaire
Corporation ("Bellaire"), a non-operating subsidiary of NACCO. Although
Bellaire's operations are immaterial, it has significant long-term liabilities
related to closed mines, primarily from former Eastern U.S. underground coal
mining activities. On average, annual after-tax cash outflows related to
Bellaire's obligations are approximately $2.5 million.
The results of operations at NACCO and Other were as follows for the
year ended December 31:
2001 2000 1999
--------------- --------------- ---------------
Revenues $ .1 $ .1 $ .1
Operating loss $ (9.7) $ (11.7) $ (9.2)
Other income (expense), net $ 9.3 $ 4.4 $ (3.2)
Extraordinary gain, net-of-tax $ --- $ 29.9 $ ---
Net income (loss) $ --- $ 25.0 $ (8.3)
In 2000, NACCO & Other includes an extraordinary gain of $29.9 million,
net of $16.1 million in taxes, related to an estimated decrease in Bellaire's
obligation to UMWA. This obligation was initially recognized by Bellaire as an
extraordinary charge in 1992 to accrue for the estimated costs associated with
the Coal Act. See additional discussion in Note 4 to the Consolidated Financial
Statements. The decrease to the Company's estimate of the UMWA obligation in
2000 was made, in part, because of a U.S. District Court's ruling that was
upheld by the U.S. Court of Appeals for the Sixth Circuit in 2000 which
invalidated the Social Security Administration's ("SSA") assignment of certain
retired coal miners to Bellaire. This ruling reduced the Company's estimate of
the total beneficiaries assigned to Bellaire as part of the Coal Act. Subsequent
to December 31, 2001, the Company learned that the U.S. Supreme Court has
decided to review circuit court rulings whose decisions in this matter were in
conflict. The U.S Court of Appeals for the Sixth Circuit ruled that the SSA
assignments were invalid; while the U.S Court of Appeals for the Fourth Circuit
ruled that the SSA assignments were valid. If the U.S. Supreme Court decides
that the SSA assignments are valid, the Company would need to revise its
estimate of its obligation under the Coal Act which may result in an unfavorable
adjustment to the Consolidated Financial Statement, which could be material.
In addition, subsequent to December 31, 2001, the Company learned that
the U.S. Supreme Court ruled that the SSA's assignment of certain retired coal
miners to companies defined as "successors in interest to a signatory operator
no longer in business" was not permitted under the Coal Act. This decision is
expected to result in a favorable impact to the Company due to an anticipated
credit for payments made to UMWA for certain beneficiaries who were assigned to
Bellaire inappropriately and due to an anticipated reduction in Bellaire's
future obligation to UMWA as a result of a decrease in the number of
beneficiaries assigned to Bellaire. The Company has not yet determined the
favorable impact of this decision, which is expected to be recognized in 2002.
35
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
Also in 2000, Bellaire recognized a $5.6 million increase to its closed
mine reserves, with a corresponding decrease in other income (expense), net,
related primarily to Black Lung and other retiree medical benefits, and to
environmental obligations arising from former Eastern U.S. underground mining
operations. See additional discussion in Note 3 to the Consolidated Financial
Statements.
In 2000, the parent company began charging fees for services provided to
the operating subsidiaries. These fees, which totaled $10.5 million and $10.1
million for the year ended December 31, 2001 and 2000, respectively, are
included in other income (expense), net.
In 1999, other income (expense), net includes a charge of $2.9 million
for the write-off of costs related to a potential business acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Although NACCO's subsidiaries have entered into substantial borrowing
agreements, NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
The borrowing agreements at NACoal, NMHG and Housewares allow for the
payment to NACCO of dividends and advances under certain circumstances.
Dividends, advances and management fees from its subsidiaries are the primary
sources of cash for NACCO.
The Company believes that funds available under credit facilities,
anticipated funds generated from operations and the utility customers' funding
of the project mining subsidiaries are sufficient to finance all of its
scheduled principal repayments, operating needs and commitments arising during
the foreseeable future.
NACCO's consolidated capital structure is presented below:
December 31
-----------------------
2001 2000
-------- --------
Total net tangible assets $ 676.2 $ 688.1
Coal supply agreements, net 85.2 86.4
Goodwill at cost 614.7 613.8
-------- --------
Net assets before goodwill amortization 1,376.1 1,388.3
Accumulated goodwill amortization (186.8) (170.9)
Total debt, excluding current and long-term portion of
obligations of project mining subsidiaries (614.7) (561.7)
Closed mine obligations (Bellaire), including
UMWA, net-of-tax (41.9) (45.1)
Minority interest (3.4) (4.2)
-------- --------
Stockholders' equity $ 529.3 $ 606.4
======== ========
Debt to total capitalization 54% 48%
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." In August 2001, the FASB issued SFAS No. 143, "Accounting
for Asset Retirement Obligations," and, in October 2001, the FASB issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
SFAS No. 141 requires all business combinations completed after June 30,
2001, to be accounted for under the purchase method. This statement also
establishes, for all business combinations made after June 30, 2001, specific
criteria for the recognition of intangible assets separately from goodwill. SFAS
No. 141 also requires that the excess of the fair value of acquired assets over
cost (negative goodwill) be recognized immediately as an extraordinary gain,
rather than deferred and amortized. The Company will account for all future
business combinations under SFAS No. 141.
SFAS No. 142 addresses the accounting for goodwill and other intangible
assets after an acquisition. Goodwill and other intangibles that have indefinite
lives will no longer be amortized, but will be subject to annual impairment
tests. All other intangible assets will continue to be amortized over their
estimated useful lives, which is no longer limited to 40 years. The Company
adopted this statement effective January 1, 2002, as required. At that
36
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
time, amortization of existing goodwill ceased on the unamortized portion
associated with acquisitions and certain investments accounted for under the
equity method. This is expected to have a favorable annual impact of
approximately $15.8 million, net of tax, beginning in 2002. SFAS No. 142 also
requires a new methodology for the testing of impairment of goodwill and other
intangibles that have indefinite lives. During 2002, the Company will begin
testing goodwill for impairment under the new rules, applying a fair-value-based
test. The transition adjustment, if any, resulting from the adoption of the new
approach to impairment testing as required by SFAS No. 142 will be reported as a
cumulative effect of a change in accounting principle. At this time, the Company
has not yet determined what impact, if any, the change in the required approach
to impairment testing will have on either its financial position or results of
operations.
SFAS No. 143 provides accounting requirements for retirement obligations
associated with tangible long-lived assets, including: (i) the timing of
liability recognition; (ii) initial measurement of the liability; (iii)
allocation of asset retirement cost to expense; (iv) subsequent measurement of
the liability; and (v) financial statement disclosures. SFAS No. 143 requires
that an asset retirement cost should be capitalized as part of the cost of the
related long-lived asset and subsequently allocated to expense using a
systematic and rational method. This standard becomes effective for fiscal years
beginning after June 15, 2002. The Company will adopt the Statement effective
January 1, 2003. The transition adjustment, if any, resulting from the adoption
of SFAS No. 143 will be reported as a cumulative effect of a change in
accounting principle. At this time, the Company has not yet determined what
impact, if any, the adoption of this Statement will have on either its financial
position or results of operations.
SFAS No. 144 addresses the financial accounting and reporting for the
impairment or disposal of long-lived assets. This statement supercedes SFAS
No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business,
as previously defined in that Opinion. SFAS No. 144 provides a single accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale. Many of the provisions of SFAS No. 121 are retained,
however, SFAS No. 144 clarifies some of the implementation issues related to
SFAS No. 121. SFAS No. 144 also broadens the presentation of discontinued
operations to include more disposal transactions. This Statement is effective
for fiscal years beginning after December 15, 2001, with early adoption
encouraged. The Company adopted this Statement effective January 1, 2002, as
required. The adoption of this Statement did not result in an adjustment to the
Company's financial statements on January 1, 2002.
EFFECTS OF FOREIGN CURRENCY AND INFLATION
NMHG and HB-PS operate internationally and enter into transactions
denominated in foreign currencies. As a result, the Company is subject to the
variability that arises from exchange rate movements. The effects of foreign
currency on operating results at NMHG and HB-PS were discussed previously. The
Company's use of foreign currency derivative contracts is discussed under the
heading, "Quantitative and Qualitative Disclosures about Market Risk."
The Company believes that overall inflation has not materially affected
its results of operations in 2001 and 2000 and does not expect overall inflation
to be a significant factor in 2002.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations, like those of other companies
engaged in similar businesses, involve the use, disposal and cleanup of
substances regulated under environmental protection laws. The Company's NACoal
subsidiary is affected by the regulations of agencies under which it operates,
particularly the Federal Office of Surface Mining, the United States
Environmental Protection Agency and associated state regulatory authorities. In
addition, NACoal closely monitors proposed legislation concerning the Clean Air
Act Amendments of 1990, reauthorization of the Resource Conservation and
Recovery Act, the Clean Water Act, the Endangered Species Act and other
regulatory actions.
Compliance with these increasingly stringent standards could result in
higher expenditures for both capital improvements and operating costs. The
Company's policies stress environmental responsibility and compliance with these
regulations. Based on current information, management does not expect compliance
with these regulations to have a material adverse effect on the Company's
financial condition or results of operations.
37
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
EURO CONVERSION
On January 1, 1999, 11 of the 15 countries that are members of the
European Union introduced a new currency unit called the "euro," which has
replaced the national currencies of these 11 countries. The conversion rates
between the euro and the participating nations' currencies were fixed
irrevocably as of January 1, 1999, and participating national currencies will be
removed from circulation between January 1, 2002 and June 30, 2002 and replaced
by euro notes and coinage.
Under the regulations governing the transition to a single currency,
there was a "no compulsion, no prohibition" rule which stated that no one was
obligated to use the euro until the notes and coinage were introduced on January
1, 2002. In keeping with this rule, since January 1, 1999 the Company has been
able to (i) receive euro-denominated payments, (ii) invoice in euros and (iii)
perform appropriate conversion and rounding calculations. Full conversion of all
affected country operations to the euro has been completed and the cost to
achieve such conversion has not been material.
Excluding adverse affects caused by the weakening of the euro against
the Company's functional currencies, the introduction of the euro, to date, has
not had, and the Company does not anticipate that the continued use of the euro
will have, a material effect on the Company's foreign exchange and hedging
activities or the Company's use of derivative instruments, or a material adverse
effect on operating results or cash flows. However, the ultimate effect of the
euro on competition due to price transparency and foreign currency risk cannot
yet be fully determined and may have an adverse effect, possibly material, on
the Company's operations, financial position or cash flows. Conversely,
introduction of the euro may also have positive effects, such as lower foreign
currency risk and reduced prices of raw materials resulting from increased
competition among suppliers. The Company continues to monitor and assess the
potential risks imposed by the euro.
OUTLOOK
NACOAL
NACoal anticipates record lignite deliveries in 2002 since MLMC's
customer declared COD on March 1, 2002. Thereafter, lignite deliveries at MLMC
are expected to be approximately 3.5 million tons annually. MLMC does not expect
to receive contractual liquidated damages payments related to its ongoing
operations subsequent to the March 1, 2002 COD. As a result, MLMC then expects
to earn normal operating revenues which are expected to result in net enhanced
cash flow, but also additional operating costs and lower reported earnings.
NACoal expects Red River to sell fewer tons of lignite in 2002 due to a
reduction from the unusually high tonnage taken by its customer in 2001. Royalty
income is anticipated to be lower in 2002 due to decreased activity at NACoal's
Eastern underground properties. NACoal also expects to continue seeking
opportunities for developing its existing 2.6 billion tons of coal reserves.
NMHG WHOLESALE
NMHG Wholesale expects that the broad cost reduction actions taken in
2001, including the Danville plant closure, with a net positive impact of $12.0
million after tax in 2002 compared to 2001, as well as the elimination of the
inefficiencies involved in reducing production dramatically, will lead to an
improved cost position in 2002. NMHG Wholesale expects that its improved cost
position will offset the impact of current low levels of market demand and some
additional restructuring costs in the first quarter of 2002.
NMHG Wholesale's objective is to achieve at least break-even results in
2002 based on the assumption, which it believes is prudent, that lift truck
markets in the U.S. will not recover significantly in 2002. NMHG Wholesale,
however, is well prepared to respond quickly when markets do improve. Parts
sales are anticipated to improve modestly during 2002 due to the expected
increased utilization of lift trucks in the field. Market share is expected to
increase in Europe, largely as a result of a sale to ZEPPELIN GmbH in 2001 of
wholly owned Hyster dealerships in Germany as well as the strengthening of other
Hyster and Yale independent dealerships. NMHG Wholesale also plans several new
product introductions in 2002, including selected new warehouse, counterbalanced
and big trucks.
NMHG Wholesale also expects net income to be favorably impacted by
approximately $11.4 million in 2002 as a result of the adoption of SFAS No. 142.
Although the Company does not expect to recognize an impairment charge as a
result of the new impairment testing required by SFAS No. 142, the Company has
not yet completed its analysis of goodwill. An impairment charge, if required,
would reduce reported results in 2002.
NMHG RETAIL
NMHG Retail has largely completed the programs undertaken in 2001 to
restructure and realign its global operations, which were designed to put its
operations at close to break-even results in 2002 at current low market levels.
These restructuring actions included headcount reductions, consolidation of
operations, the sale of its Hyster
38
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
dealers in Germany, and adjusting asset values and reserves to reflect the
weakened capital goods markets. NMHG Retail expects to continue focusing its
efforts on improving the performance of its wholly owned dealerships.
NMHG Retail's operating results are expected to improve approximately
$1.4 million after-tax as a result of the adoption of SFAS No. 142. Although the
Company does not expect to recognize an impairment charge as a result of the new
impairment testing required by SFAS No. 142, the Company has not yet completed
its analysis of goodwill. An impairment charge, if required, would reduce
reported results in 2002.
HOUSEWARES
HB-PS expects that actions taken in 2001, including programs to gain a
higher margin mix of business, reduce operating costs, reduce and consolidate
Mexican manufacturing capacity, decrease manufacturing inefficiencies and
increase outsourcing to China, will result in operating margins in 2002 closer
to the company's objectives, even without an improved U.S. economy, and after
assuming some additional costs in the first quarter of 2002 related to
completing restructuring and inventory reduction programs.
The higher margin mix of business is expected to result from decreased
opening-price-point business and increased sales of home health products such as
TrueAir odor eliminators and sales of General Electric-branded products to
Wal-Mart. HB-PS also expects substantially enhanced cash flow from improved
inventory management.
KCI expects to open additional Kitchen Collection(R) and Gadgets &
More(R) stores, introduce new Hamilton Beach and Proctor-Silex-branded
non-electric products and continue to aggressively manage its costs.
Housewares expects that the adoption of SFAS No. 142 which eliminates
amortization of goodwill will contribute $3.0 million to net income in 2002.
Although the Company does not expect to recognize an impairment charge as a
result of the new impairment testing required by SFAS No. 142, the Company has
not yet completed its analysis of goodwill. An impairment charge, if required,
would reduce reported results in 2002.
The statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere throughout this
Annual Report that are not historical facts are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements are
made subject to certain risks and uncertainties which could cause actual results
to differ materially from those presented in these forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Such risks and uncertainties
with respect to each subsidiary's operations include without limitation:
NACOAL: (1) weather conditions and other events that would change the
level of customers' fuel requirements, (2) weather or equipment problems that
could affect lignite deliveries to customers, (3) changes in maintenance, fuel
or other similar costs, (4) costs to pursue international opportunities, (5)
further delays in achieving commercial operations at MLMC's customer's power
plant and (6) changes in the U.S. economy or in the power industry that would
affect demand for NACoal's Eastern U.S. underground reserves.
NMHG: (1) changes in demand for lift trucks and related service parts on
a worldwide basis, especially in the U.S. where the company derives a majority
of its sales, (2) changes in sales prices, (3) delays in delivery or changes in
costs of raw materials or sourced products and labor, (4) delays in
manufacturing and delivery schedules, (5) exchange rate fluctuations, changes in
foreign import tariffs and monetary policies and other changes in the regulatory
climate in the foreign countries in which NMHG operates and/or sells products,
(6) product liability or other litigation, warranty claims or returns of
products, (7) delays in or increased costs of the Danville, Illinois,
manufacturing plant phase-out and European restructuring programs, (8)
acquisitions and/or dispositions of dealerships by NMHG, (9) costs related to
the integration of acquisitions, (10) the impact of the continuing introduction
of the euro, including increased competition, foreign currency exchange
movements and/or changes in operating costs and (11) uncertainties regarding the
impact the September 11, 2001 terrorist activities and the subsequent climate of
war may have on the economy or the public's confidence in general.
39
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share, Unit, Store and
Percentage Data)
HOUSEWARES: (1) changes in the sales prices, product mix or levels of
consumer purchases of kitchenware and small electric appliances, (2) bankruptcy
of or loss of major retail customers or suppliers, (3) changes in costs of raw
materials or sourced products, (4) delays in delivery or the unavailability of
raw materials or key component parts, (5) exchange rate fluctuations, changes in
the foreign import tariffs and monetary policies and other changes in the
regulatory climate in the foreign countries in which HB-PS buys, operates and/or
sells products, (6) product liability, regulatory actions or other litigation,
warranty claims or returns of products, (7) increased competition, (8) customer
acceptance of, changes in costs of, or delays in the development of new
products, including the GE-branded products to be sold to Wal-Mart and new
home environment products, (9) weather conditions or other events that would
affect the number of customers visiting Kitchen Collection stores and (10)
uncertainties regarding the impact the September 11, 2001 terrorist activities
and the subsequent climate of war may have on the economy or the public's
confidence in general.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
The Company's subsidiaries, NACoal, NMHG and HB-PS, have entered into
certain financing arrangements that require interest payments based on floating
interest rates. As such, the Company's financial results are subject to changes
in the market rate of interest. To reduce the exposure to changes in the market
rate of interest, the Company has entered into interest rate swap agreements for
a significant portion of its floating rate financing arrangements. The Company
does not enter into interest rate swap agreements for trading purposes. Terms of
the interest rate swap agreements require the subsidiaries to receive a variable
interest rate and pay a fixed interest rate. See also Note 2 and Note 11 to the
Consolidated Financial Statements contained in Part IV hereof.
For purposes of specific risk analysis, the Company uses sensitivity
analysis to measure the potential loss in fair value of financial instruments
sensitive to changes in interest rates. Assuming a hypothetical 10 percent
decrease in the interest rates as of December 31, 2001 and 2000, the fair market
value of interest rate sensitive financial instruments, which primarily
represents interest rate swap agreements, would decline by $4.1 and $7.1
million, respectively, as compared with their fair market value at December 31,
2001 and 2000, respectively.
FOREIGN CURRENCY EXCHANGE RATE RISK
NMHG and HB-PS operate internationally and enter into transactions
denominated in foreign currencies. As such, their financial results are subject
to the variability that arises from exchange rate movements. NMHG and HB-PS use
forward foreign currency exchange contracts to partially reduce risks related to
transactions denominated in foreign currencies and not for trading purposes.
These contracts mature within one year and require the companies to buy or sell
Japanese yen, Australian dollars, Canadian dollars, Mexican pesos, British
pounds sterling or euros for the functional currency in which the applicable
subsidiary operates at rates agreed to at the inception of the contracts. See
also Note 2 and Note 11 to the Consolidated Financial Statements contained in
Part IV hereof.
For purposes of specific risk analysis, the Company uses sensitivity
analysis to measure the potential loss in fair value of financial instruments
sensitive to changes in foreign currency exchange rates. Assuming a hypothetical
10 percent strengthening of the U.S. dollar as compared with other foreign
currencies at December 31, 2001 and 2000, the fair market value of foreign
currency-sensitive financial instruments, which primarily represents forward
foreign currency exchange contracts, would decline by $3.7 million and $4.7
million, respectively, as compared with their fair market value at December 31,
2001 and 2000, respectively. It is important to note that the loss in fair
market value indicated in this sensitivity analysis would be somewhat offset by
changes in the fair market value of the underlying receivables, payables and net
investments in foreign subsidiaries.
COMMODITY PRICE RISK
The Company uses certain commodities, including steel, resins,
linerboard and diesel fuel, in the normal course of its mining and manufacturing
processes. As such, the cost of operations is subject to variability as the
market for these commodities change. The Company monitors this risk and, from
time to time, enters into derivative contracts to hedge this risk. The Company
does not currently have any such derivative contracts outstanding, nor does the
Company have any significant purchase obligations to obtain fixed quantities of
commodities in the future.
40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth in the Financial
Statements and Supplementary Data contained in Part IV hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company will be set forth
in the 2002 Proxy Statement under the heading "Business to be Transacted --
Election of Directors," which information is incorporated herein by reference.
The information set forth in the 2002 Proxy Statement under the subheadings "--
Report of the Audit Review Committee," "-- Report of the Compensation Committee
on Executive Compensation" and "-- Stock Price Performance Presentation" is not
incorporated herein by reference. Information with respect to compliance with
Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors,
executive officers, and holders of more than ten percent of the Company's equity
securities will be set forth in the 2002 Proxy Statement under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance," which information is
incorporated herein by reference. Information regarding the executive officers
of the Company is included in this Annual Report on Form 10-K as Item 4A of Part
I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be set forth in
the 2002 Proxy Statement under the heading "Business to be Transacted --
Election of Directors" under the subheadings "-- Compensation of Directors," "--
Compensation of Executive Officers," "-- Stock Option Grants," "-- Long-Term
Incentive Plans," "--Compensation Committee Interlocks and Insider
Participation" and "-- Pension Plans," which information is incorporated herein
by reference. The information set forth in the 2002 Proxy Statement under the
subheadings "-- Report of the Audit Review Committee," "-- Report of the
Compensation Committee on Executive Compensation" and "-- Stock Price
Performance Presentation" is not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial
owners and management will be set forth in the 2002 Proxy Statement under the
heading "Business to be Transacted -- Election of Directors -- Beneficial
Ownership of Class A Common and Class B Common," which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related
transactions will be set forth in the 2002 Proxy Statement under the heading
"Business to be Transacted -- Election of Directors -- Compensation Committee
Interlocks and Insider Participation," which information is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to Item 14(a)(1) and (2) is set forth
beginning at page F-1 of this Annual Report on Form 10-K.
(a) (3) Listing of Exhibits -- See the exhibit index beginning at page
X-1 of this Annual Report on Form 10-K.
(b) The Company did not file any current reports on Form 8-K during the
fourth quarter of 2001.
(c) The response to Item 14(c) is set forth beginning at page X-1 of
this Annual Report on Form 10-K.
(d) Financial Statement Schedules -- The response to Item 14(d) is set
forth beginning at page F-35 of this Annual Report on Form 10-K.
41
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NACCO Industries, Inc.
By: /s/ Kenneth C. Schilling
----------------------------------
Kenneth C. Schilling
Vice President and Controller
(principal financial
and accounting officer)
March 26, 2002
42
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Alfred M. Rankin, Jr. Chairman, President and March 26, 2002
- --------------------------- Chief Executive Officer (principal
Alfred M. Rankin, Jr. executive officer), Director
/s/ Kenneth C. Schilling Vice President and Controller March 26, 2002
- --------------------------- (principal financial and accounting
Kenneth C. Schilling officer)
* Owsley Brown II Director March 26, 2002
- ---------------------------
Owsley Brown II
* Robert M. Gates Director March 26, 2002
- ---------------------------
Robert M. Gates
* Leon J. Hendrix, Jr. Director March 26, 2002
- ---------------------------
Leon J. Hendrix, Jr.
* David H. Hoag Director March 26, 2002
- ---------------------------
David H. Hoag
* Dennis W. LaBarre Director March 26, 2002
- ---------------------------
Dennis W. LaBarre
* Richard de J. Osborne Director March 26, 2002
- ---------------------------
Richard de J. Osborne
* Ian M. Ross Director March 26, 2002
- ---------------------------
Ian M. Ross
* Britton T. Taplin Director March 26, 2002
- ---------------------------
Britton T. Taplin
* David F. Taplin Director March 26, 2002
- ---------------------------
David F. Taplin
* John F. Turben Director March 26, 2002
- ---------------------------
John F. Turben
*Kenneth C. Schilling, by signing his name hereto, does hereby sign this
Annual Report on Form 10-K on behalf of each of the above named and designated
directors of the Company pursuant to a Power of Attorney executed by such
persons and filed with the Securities and Exchange Commission.
/s/ Kenneth C. Schilling March 26, 2002
- ----------------------------------------------
Kenneth C. Schilling, Attorney-in-Fact
43
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2), AND ITEM 14(d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 2001
NACCO INDUSTRIES, INC.
MAYFIELD HEIGHTS, OHIO
F-1
FORM 10-K
ITEM 14(a)(1) AND (2)
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of NACCO Industries, Inc.
and Subsidiaries are incorporated by reference in Item 8:
Report of Independent Public Accountants--Year ended December 31, 2001,
2000 and 1999.
Consolidated Statements of Operations and Comprehensive Income (Loss)--Year
ended December 31, 2001, 2000 and 1999.
Consolidated Balance Sheets--December 31, 2001 and December 31, 2000.
Consolidated Statements of Cash Flows--Year ended December 31, 2001, 2000
and 1999.
Consolidated Statements of Stockholders' Equity--Year ended December 31,
2001, 2000 and 1999.
Notes to Consolidated Financial Statements.
NACCO Industries, Inc. Report of Management.
The following consolidated financial statement schedules of NACCO
Industries, Inc. and Subsidiaries are included in Item 14(d):
Schedule I -- Condensed Financial Information of the Parent
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of NACCO Industries, Inc.
We have audited the accompanying Consolidated Balance Sheets of NACCO
Industries, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the
related Consolidated Statements of Operations and Comprehensive Income (Loss),
Stockholders' Equity and Cash Flows for each of the three years in the period
ended December 31, 2001. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NACCO Industries,
Inc. and Subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
As explained in Note 2 to the Consolidated Financial Statements,
effective January 1, 2001, the Company changed its method of accounting for
derivative instruments and hedging activities and the Company changed its method
of accounting for certain pension liabilities. As explained in Note 2 to the
Consolidated Financial Statements, effective January 1, 1999, the Company
changed its method of accounting for start-up activities.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a)(1) and
(2) and Item 14(d) of Form 10-K are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Cleveland, Ohio,
February 12, 2002
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31
---------------------------------------
2001 2000 1999
--------- --------- ---------
(In millions, except per share data)
Net sales $ 2,613.1 $ 2,869.4 $ 2,633.2
Other revenues 24.8 1.9 2.7
--------- --------- ---------
REVENUES 2,637.9 2,871.3 2,635.9
Cost of sales 2,203.4 2,355.1 2,151.2
--------- --------- ---------
GROSS PROFIT 434.5 516.2 484.7
Selling, general and administrative expenses 381.0 367.0 337.0
Amortization of goodwill 15.9 15.7 15.2
Restructuring charges 21.5 15.6 1.2
Loss on sale of dealers 10.4 --- ---
--------- --------- ---------
OPERATING PROFIT 5.7 117.9 131.3
Other income (expense)
Interest expense (56.9) (47.1) (43.3)
Closed mine obligations (1.3) (5.6) ---
Insurance recovery 8.0 --- ---
Other-net (.9) (5.2) (1.4)
--------- --------- ---------
(51.1) (57.9) (44.7)
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST,
EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGES (45.4) 60.0 86.6
Income tax provision (benefit) (9.9) 22.3 31.7
--------- --------- ---------
INCOME (LOSS) BEFORE MINORITY INTEREST, EXTRAORDINARY GAIN
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES (35.5) 37.7 54.9
Minority interest income (expense) .8 .1 (.6)
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES (34.7) 37.8 54.3
Extraordinary gain, net of $16.1 tax expense --- 29.9 ---
--------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGES (34.7) 67.7 54.3
Cumulative effect of accounting changes, net of: $0.8 tax benefit
in 2001 and $0.6 tax benefit in 1999 (1.3) --- (1.2)
--------- --------- ---------
NET INCOME (LOSS) $ (36.0) $ 67.7 $ 53.1
========= ========= =========
Other comprehensive income (loss)
Foreign currency translation adjustment $ (9.4) $ (15.8) $ (11.9)
Cumulative effect of change in accounting for derivatives
and hedging, net of ($2.0) tax benefit (3.4) --- ---
Reclassification of hedging activities into earnings .9 --- ---
Current period cash flow hedging activity (9.3) --- ---
Minimum pension liability adjustment, net of: ($8.1)
tax benefit in 2001; ($1.0) tax benefit in 2000; $2.3
tax expense in 1999 (13.4) (1.4) 3.8
--------- --------- ---------
(34.6) (17.2) (8.1)
--------- --------- ---------
COMPREHENSIVE INCOME (LOSS) $ (70.6) $ 50.5 $ 45.0
========= ========= =========
BASIC EARNINGS PER SHARE:
Income (Loss) Before Extraordinary Gain and Cumulative
Effect of Accounting Changes $ (4.24) $ 4.63 $ 6.67
Extraordinary gain, net-of-tax --- 3.66 ---
Cumulative effect of accounting changes, net-of-tax (.16) --- (.15)
--------- --------- ---------
Net Income (Loss) $ (4.40) $ 8.29 $ 6.52
========= ========= =========
DILUTED EARNINGS PER SHARE
Income (Loss) Before Extraordinary Gain and Cumulative
Effect of Accounting Changes $ (4.24) $ 4.63 $ 6.66
Extraordinary gain, net-of-tax --- 3.66 ---
Cumulative effect of accounting changes, net-of-tax (.16) --- (.15)
--------- --------- ---------
Net Income (Loss) $ (4.40) $ 8.29 $ 6.51
========= ========= =========
See Notes to Consolidated Financial Statements.
F-4
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
December 31
---------------------
2001 2000
-------- --------
(In millions, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 71.9 $ 33.7
Accounts receivable, net of allowances of $15.6 in 2001 and
$16.8 in 2000 264.5 315.4
Inventories 360.6 411.8
Deferred income taxes 40.2 35.0
Prepaid expenses and other 32.8 19.8
-------- --------
770.0 815.7
PROPERTY, PLANT AND EQUIPMENT, NET 732.0 710.7
DEFERRED CHARGES
Goodwill, net 427.9 442.9
Coal supply agreements, net 85.2 86.4
Deferred costs and other 50.7 62.1
Deferred income taxes 26.1 12.8
-------- --------
589.9 604.2
OTHER ASSETS 70.0 63.3
-------- --------
TOTAL ASSETS $2,161.9 $2,193.9
======== ========
F-5
CONSOLIDATED BALANCE SHEETS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
December 31
----------------------
2001 2000
-------- --------
(In millions, except per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 235.3 $ 263.0
Revolving credit agreements 59.7 66.3
Revolving credit agreement expected to be refinanced within 12 months 265.0 ---
Current maturities of long-term debt 41.9 45.4
Current obligations of project mining subsidiaries 37.9 37.7
Accrued payroll 38.5 53.2
Accrued warranty obligations 34.5 37.0
Other current liabilities 161.5 147.6
-------- --------
874.3 650.2
LONG-TERM DEBT - not guaranteed by
the parent company 248.1 450.0
OBLIGATIONS OF PROJECT MINING SUBSIDIARIES -
not guaranteed by the parent company or its NACoal subsidiary 271.3 282.7
SELF-INSURANCE RESERVES AND OTHER 235.5 200.4
MINORITY INTEREST 3.4 4.2
STOCKHOLDERS' EQUITY
Common stock:
Class A, par value $1 per share, 6,559,925 shares
outstanding (2000 - 6,529,143 shares outstanding) 6.5 6.5
Class B, par value $1 per share, convertible
into Class A on a one-for-one basis,
1,635,720 shares outstanding
(2000 - 1,641,937 shares outstanding) 1.6 1.6
Capital in excess of par value 4.7 3.6
Retained earnings 571.3 614.9
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment (28.2) (18.8)
Reclassification of hedging activity into earnings .9 ---
Deferred loss on cash flow hedging (9.3) ---
Cumulative effect of change in accounting for derivatives and hedging (3.4) ---
Minimum pension liability adjustment (14.8) (1.4)
-------- --------
529.3 606.4
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,161.9 $2,193.9
======== ========
See Notes to Consolidated Financial Statements.
F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31
------------------------------
2001 2000 1999
------ ------ ------
(In millions)
OPERATING ACTIVITIES
Net income (loss) $(36.0) $ 67.7 $ 53.1
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 117.6 106.1 104.0
Deferred income taxes (5.0) (12.5) 3.3
Restructuring charges 21.5 15.6 1.2
Minority interest (income) expense (.8) (.1) .6
Extraordinary gain --- (29.9) ---
Cumulative effect of accounting changes 1.3 --- 1.2
Loss on sale of assets 10.5 1.4 .4
Other non-cash items .7 (1.3) (3.3)
Working capital changes, excluding the effect of business acquisitions:
Accounts receivable 42.7 (24.9) (11.3)
Inventories 41.4 (26.0) (23.0)
Other current assets (11.7) 1.2 (12.4)
Accounts payable and other liabilities (46.2) 35.7 15.3
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 136.0 133.0 129.1
------ ------ ------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (104.8) (93.3) (75.5)
Proceeds from the sale of property, plant and equipment 17.9 15.3 1.0
Acquisitions of businesses, net of cash acquired (3.9) (145.3) (62.4)
Investments in unconsolidated affiliates (.3) (10.3) (15.9)
Acquisition of minority interest --- --- (11.3)
Other-net (4.0) (.6) 2.7
------ ------ ------
NET CASH USED FOR INVESTING ACTIVITIES (95.1) (234.2) (161.4)
------ ------ ------
FINANCING ACTIVITIES
Additions to long-term debt and revolving credit agreements 68.9 186.0 90.2
Reductions of long-term debt and revolving credit agreements (43.8) (61.7) (9.1)
Additions to obligations of project mining subsidiaries 76.4 53.7 31.6
Reductions of obligations of project mining subsidiaries (95.0) (70.3) (58.8)
Deferred financing fees (1.0) (1.8) ---
Financing of other short-term obligations --- --- (17.2)
Cash dividends paid (7.6) (7.2) (7.0)
Capital grants .1 .4 2.6
Other-net .4 (.8) 3.0
------ ------ ------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (1.6) 98.3 35.3
------ ------ ------
Effect of exchange rate changes on cash (1.1) .4 (1.5)
------ ------ ------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year 38.2 (2.5) 1.5
Balance at the beginning of the year 33.7 36.2 34.7
------ ------ ------
BALANCE AT THE END OF THE YEAR $ 71.9 $ 33.7 $ 36.2
====== ====== ======
See Notes to Consolidated Financial Statements.
F-7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Year Ended December 31
-------------------------------
2001 2000 1999
------ ------ ------
(In millions, except per share data)
CLASS A COMMON STOCK $ 6.5 $ 6.5 $ 6.5
------ ------ ------
CLASS B COMMON STOCK 1.6 1.6 1.6
------ ------ ------
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance 3.6 2.7 .2
Shares issued under stock option and compensation plans 1.1 .9 2.5
------ ------ ------
4.7 3.6 2.7
------ ------ ------
RETAINED EARNINGS
Beginning balance 614.9 554.4 504.9
Net income (loss) (36.0) 67.7 53.1
Reconsolidation of Brazilian subsidiary --- --- 3.4
Cash dividends on Class A and Class B common stock:
2001 $.930 per share (7.6) --- ---
2000 $.890 per share --- (7.2) ---
1999 $.850 per share --- --- (7.0)
------ ------ ------
571.3 614.9 554.4
------ ------ ------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning balance (20.2) (3.0) 5.1
Foreign currency translation adjustment (9.4) (15.8) (11.9)
Cumulative effect of change in accounting for derivatives and
hedging (3.4) --- ---
Reclassification of hedging activity into earnings .9 --- ---
Current period cash flow hedge activity (9.3) --- ---
Minimum pension liability adjustment (13.4) (1.4) 3.8
------ ------ ------
(54.8) (20.2) (3.0)
------ ------ ------
TOTAL STOCKHOLDERS' EQUITY $529.3 $606.4 $562.2
====== ====== ======
See Notes to Consolidated Financial Statements.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
NOTE 1--PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS
The Consolidated Financial Statements include the accounts of NACCO Industries,
Inc. ("NACCO," the parent company) and its wholly owned subsidiaries (NACCO
Industries, Inc. and Subsidiaries -- the "Company"). Intercompany accounts and
transactions are eliminated. The Company's subsidiaries operate in three
principal industries: lignite mining, lift trucks and housewares. The Company
manages its subsidiaries by industry; however, the Company segments its lift
truck operations into two components: wholesale manufacturing and retail
distribution.
The North American Coal Corporation ("NACoal") mines and markets lignite
primarily as fuel for power generation by electric utilities. NMHG Holding Co.,
through its wholly owned subsidiaries, NACCO Materials Handling Group, Inc.
("NMHG Wholesale") and NMHG Distribution Co. ("NMHG Retail") (collectively
"NMHG"), designs, engineers, manufactures, sells, services and leases a full
line of lift trucks and service parts marketed worldwide under the Hyster(R) and
Yale(R) brand names. NMHG Wholesale includes the manufacture and sale of lift
trucks and related service parts, primarily to independent and wholly owned
Hyster and Yale retail dealerships. NMHG Retail includes the sale, leasing and
service of Hyster and Yale lift trucks and related service parts by wholly owned
retail dealerships and rental companies. The sale of service parts represents
approximately 19 percent, 19 percent and 17 percent of the total NMHG revenues
as reported for 2001, 2000 and 1999, respectively. NACCO Housewares Group
("Housewares") consists of Hamilton Beach-Proctor-Silex, Inc. ("HB-PS"), a
leading manufacturer and marketer of small electric motor and heat-driven
appliances as well as commercial products for restaurants, bars and hotels, and
The Kitchen Collection, Inc. ("KCI"), a national specialty retailer of
brand-name kitchenware, small electrical appliances and related accessories.
In 1989, NMHG acquired a majority interest in Hyster Brasil, Ltda., a Brazilian
manufacturer and marketer of Hyster forklift trucks and related service parts.
In 1990, NMHG deconsolidated this subsidiary because it did not have effective
control, given the uncertain economic and political environment in Brazil at
that time. In 1999, management reassessed its ability to influence the
performance of Hyster Brasil, Ltda. The stability of the economic environment in
Brazil, NMHG's ability to receive dividends from Hyster Brasil, Ltda. during the
few years prior to 1999 and NMHG's planned expansion of operations in Brazil at
that time were among the factors that led NMHG to determine that it had
significant influence over Hyster Brasil, Ltda. and that it was appropriate to
consolidate its operations. Undistributed earnings during the periods of
deconsolidation, when NMHG did not have effective control, were credited
directly to consolidated retained earnings in the amount of $3.4 million at
December 31, 1999. The consolidation of Hyster Brasil, Ltda. as of December 31,
1999 was not material to the Company's financial position or results of
operations. During 2001 and 2000, NMHG maintained consolidation of this
subsidiary, and the Company will periodically assess NMHG's ability to control
the operations of Hyster Brasil, Ltda.
NOTE 2--ACCOUNTING POLICIES
USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities (if any) at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash in banks and
highly liquid investments with original maturities of three months or less.
ACCOUNTS RECEIVABLE, NET OF ALLOWANCES: Allowances are maintained against
accounts receivable for doubtful accounts, product returns and product
discounts. Allowances for doubtful accounts are maintained for estimated losses
resulting from the inability of customers to make required payments. These
allowances are based on both recent trends of certain customers estimated to be
a greater credit risk as well as general trends of the entire customer pool.
Allowances for product returns due to reasons such as buyer remorse, duplicate
gifts received, product failure and excess inventory stocked by the customer
which, subject to certain terms and conditions, the Company will agree to accept
are estimated at the time of sale based on historical experience. Allowances for
product discounts are estimated at the time of sale for customer programs and
incentive offerings including special pricing agreements, price competition,
promotions and other volume-based incentives.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
determined under the last-in, first-out (LIFO) method for manufactured
inventories in the United States and for certain retail inventories. The
weighted average method is used for coal inventory. The first-in, first-out
(FIFO) method is used with respect to all other inventories. Reserves are
maintained for estimated obsolescence or excess inventory equal to the
difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions.
PROPERTY, PLANT AND EQUIPMENT, NET: Property, plant and equipment are recorded
at cost. Depreciation, depletion and amortization are provided in amounts
sufficient to amortize the cost of the assets, including assets recorded under
capital leases, over their estimated useful lives using the straight-line
method. Buildings are depreciated using a 40-year life or, at NACoal, over the
life of the mines, which range from 9 to 43 years. Estimated lives for machinery
and equipment range from 3 to 12 years and for land and building improvements
from 5 to 40 years. The units-of-production method is used to amortize certain
coal-related assets based on estimated recoverable tonnages. Repairs and
maintenance costs are generally expensed when incurred.
GOODWILL, NET: Goodwill represents the excess purchase price paid over the fair
value of the net assets acquired. The amortization of goodwill is provided on a
straight-line basis generally over a 40-year period. Accumulated amortization of
goodwill was $186.8 million and $170.9 million at December 31, 2001 and 2000,
respectively. Management regularly evaluates its accounting for goodwill,
considering such factors as historical and future profitability, and believes
that these assets are realizable and the amortization periods remain
appropriate.
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 addresses the accounting for goodwill and other
intangible assets. The Company adopted this statement on January 1, 2002 as
required. Beginning in 2002, goodwill will no longer be amortized in accordance
with this Statement. During 2002, the Company will begin testing goodwill for
impairment in accordance with SFAS No. 142.
SELF-INSURANCE RESERVES: The Company is generally self-insured for product
liability, environmental liability, medical and workers' compensation claims,
certain closed mine liabilities and obligations to the United Mine Workers of
America Combined Benefit Fund ("UMWA") arising as a result of the Coal Industry
Retiree Health Benefit Act of 1992 ("Coal Act"). For product liability,
catastrophic coverage is retained for potentially significant individual claims.
An estimated provision for claims reported and for claims incurred but not yet
reported under the self-insurance programs is recorded and revised periodically
based on industry trends, historical experience and management judgment. Changes
in assumptions for such matters as legal actions, inflation rates, medical costs
and actual experience could cause estimates to change in the near term.
REVENUE RECOGNITION: Revenues are generally recognized when customer orders are
completed and shipped. Reserves for discounts, returns and product warranties
are maintained for anticipated future claims.
ADVERTISING COSTS: Advertising costs are expensed as incurred and amounted to
$28.6 million, $24.3 million and $25.5 million in 2001, 2000 and 1999,
respectively.
PRODUCT DEVELOPMENT COSTS: Expenses associated with the development of new
products and changes to existing products are charged to expense as incurred.
These costs amounted to $52.0 million, $51.8 million and $48.0 million in 2001,
2000 and 1999, respectively.
FOREIGN CURRENCY: Assets and liabilities of foreign operations are translated
into U.S. dollars at the fiscal year-end exchange rate. The related translation
adjustments are recorded as a separate component of stockholders' equity, except
for the Company's Mexican operations. The U.S. dollar is considered the
functional currency for the Company's Mexican operations and, therefore, the
effect of translating assets and liabilities from the Mexican peso to the U.S
dollar is recorded in the Consolidated Statements of Operations and
Comprehensive Income (Loss). Revenues and expenses of all foreign operations are
translated using the monthly average exchange rates prevailing during the year.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS: Financial
instruments held by the Company include cash and cash equivalents, accounts
receivable, accounts payable, revolving credit agreements, long-term debt,
interest rate swap agreements and forward foreign currency exchange contracts.
The Company does not hold or issue financial instruments or derivative financial
instruments for trading purposes.
The Company uses forward foreign currency exchange contracts to partially reduce
risks related to transactions denominated in foreign currencies. These contracts
hedge primarily firm commitments and, to a lesser degree, forecasted
transactions relating to cash flows associated with sales and purchases
denominated in currencies other than the subsidiaries' functional currency.
Generally, gains and losses from changes in the market value of these contracts
are recognized in cost of sales and offset the foreign exchange gains and losses
on the underlying transactions.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
The Company uses interest rate swap agreements to partially reduce risks related
to floating rate financing agreements which are subject to changes in the market
rate of interest. Terms of the interest rate swap agreements require the Company
to receive a variable interest rate and pay a fixed interest rate. The Company's
interest rate swap agreements and its variable rate financings are predominately
based upon the three-month LIBOR (London Interbank Offered Rate). Amounts to be
paid or received under the interest rate swap agreements are accrued as interest
rates change and are recognized over the life of the swap agreement as an
adjustment to interest expense.
Interest rate swap agreements and forward foreign currency exchange contracts
held by the Company have been designated as hedges of forecasted cash flows. The
Company does not currently hold any nonderivative instruments designated as
hedges or any derivatives designated as fair value hedges as defined in SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."
NMHG Wholesale holds certain interest rate swap agreements that do not qualify
for hedge accounting treatment according to the guidance of SFAS No. 133. As
such, the change in the mark-to-market amount of these swaps will be recognized
in the statement of operations every quarter. Although these interest rate swap
agreements do not qualify for hedge accounting, the Company believes that these
interest rate swap agreements are reasonably effective at economically hedging
the Company's risk to changes in the variable rate of interest. The adjustment
to the Consolidated Statements of Operations and Comprehensive Income (Loss) for
those interest rate swap agreements that did not qualify for hedge treatment and
for the ineffective portion of certain interest rate swap agreements was
included in other-net and amounted to a loss of $1.4 million ($0.9 million
after-tax) for the year ended December 31, 2001.
For those interest rate swap agreements that qualify for hedge accounting
treatment, the mark-to-market effect has been included in the accumulated other
comprehensive income (loss) section ("OCL") of stockholders' equity. Based upon
market valuations at December 31, 2001, approximately $6.8 million of the net
deferred loss in OCL is expected to be reclassified into the statement of
operations over the next 12 months, as cash flow payments are made in accordance
with the interest rate swap agreements.
For the year ended December 31, 2001, there was no ineffectiveness of forward
foreign currency exchange contracts that would have resulted in recognition in
the statement of operations. Forward foreign currency exchange contracts are
used to hedge transactions expected to occur within the next 12 months. Based on
market valuations at December 31, 2001, the amount of net deferred gain included
in OCL at December 31, 2001 of $0.1 million is expected to be reclassified into
the statement of operations over the next 12 months, as those transactions
occur.
Cash flows from hedging activities are reported in the Consolidated Statements
of Cash Flows in the same classification as the hedged item, generally as a
component of cash flows from operations.
NEW ACCOUNTING STANDARDS: On January 1, 2001, the Company adopted SFAS No. 133,
as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." This Statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
companies to recognize all derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives are accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting.
As a result of the adoption of SFAS No. 133, the Company recognized a cumulative
effect of a change in accounting charge to the Consolidated Statement of
Operations and Comprehensive Income (Loss) for the year ended December 31, 2001
of $0.9 million, net of $0.5 million of tax benefit, relating primarily to
certain interest rate swap agreements held by NMHG Wholesale which did not
qualify for hedge accounting treatment at January 1, 2001. In addition,
effective January 1, 2001, the Company recognized a cumulative effect of a
change in accounting charge against OCL in the Consolidated Balance Sheet at
December 31, 2001 of $3.4 million, net of $2.0 million of tax benefit, relating
to net deferred losses on derivative instruments that qualify for hedge
accounting treatment under SFAS No. 133.
On January 1, 2001, the Company recognized a cumulative effect of a change in
accounting charge of $0.4 million, net of $0.3 million tax benefit, relating to
a change in the method of calculating pension costs for the defined benefit
pension plan in the United Kingdom. Prior to January 1, 2001, actuarially
determined net gains and losses of the United Kingdom plan were recognized in
full as a component of net pension cost in the year incurred. However,
actuarially determined net gains and losses of all other defined benefit pension
plans of the Company are amortized and included as a component of net pension
cost over the next four years. Both of these methods are permissible pursuant to
SFAS No. 87, "Employers' Accounting for Pensions." However, effective January 1,
2001, the Company changed the method of recognition of actuarially determined
net gains and losses of the United Kingdom plan to conform with the methodology
utilized by all other defined benefit plans of the Company. This change in
accounting was made to achieve consistency of application of this accounting
principle among all members of the consolidated group, which the Company
believes is the preferred application of accounting principles generally
accepted in the United States.
In September 2000, the Emerging Issues Task Force ("EITF") reached a consensus
on Issue Number 00-10, "Accounting for Shipping and Handling Fees and Costs"
("EITF 00-10"), which requires shipping and handling
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
amounts billed to a customer to be classified as revenue. In addition, the
EITF's preference is to classify shipping and handling costs as "cost of sales."
For certain shipping and handling fees, the Company netted the charge to the
customer with the cost incurred within its Consolidated Statements of Operations
and Comprehensive Income (Loss) on the line cost of sales. In the fourth quarter
of 2000, the Company changed its method of reporting to comply with EITF 00-10.
The Company restated its revenues and cost of sales for the first three quarters
of 2000 and the fiscal year ended December 31, 1999, resulting in an increase to
both revenues and cost of sales of approximately $36.4 million and $33.1
million, respectively. This restatement does not affect the reported amounts of
gross profit.
On December 3, 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 summarizes certain of the SEC staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company has reviewed its revenue recognition policies and procedures and
believes that it has complied with the requirements of SAB 101. No significant
changes to the Company's revenue recognition policies were necessary to comply
with SAB 101.
As of January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants' ("AICPA") Statement of Position ("SOP") 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use," and
SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-1 requires
capitalization on a prospective basis of certain development costs of software
to be used internally. The Company does not expect the change to this new
accounting standard to have a material impact on its financial position or
results of operations in the foreseeable future.
SOP 98-5 requires start-up and organization costs to be expensed as incurred and
also requires previously deferred start-up costs to be recognized as a
cumulative effect adjustment in the statement of income upon adoption. Prior to
January 1, 1999, the Company's NACoal subsidiary had deferred certain start-up
costs related to the development of lignite mining activities and amortized
these costs over the estimated useful lives of the related coal lands. Under the
new accounting standard, these costs--primarily training, travel and
administrative expenses--are no longer allowed to be deferred, but, rather, must
be expensed as incurred. Therefore, the Company has recognized the effect of
expensing these previously deferred start-up costs of $1.2 million, net-of-tax,
as a cumulative effect of accounting change in the accompanying Consolidated
Statement of Operations and Comprehensive Income (Loss) for the year ended
December 31, 1999.
ACCOUNTING STANDARDS NOT YET ADOPTED: In July 2001, the FASB issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," and, in October 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
SFAS No. 141 requires all business combinations completed after June 30, 2001,
to be accounted for under the purchase method. This standard also establishes,
for all business combinations made after June 30, 2001, specific criteria for
the recognition of intangible assets separately from goodwill. SFAS No. 141 also
requires that the excess of the fair value of acquired assets over cost
(negative goodwill) be recognized immediately as an extraordinary gain, rather
than deferred and amortized. The Company will account for all future business
combinations under SFAS No. 141.
SFAS No. 142 addresses the accounting for goodwill and other intangible assets
after an acquisition. Goodwill and other intangibles that have indefinite lives
will no longer be amortized, but will be subject to annual impairment tests. All
other intangible assets will continue to be amortized over their estimated
useful lives, which is no longer limited to 40 years. The Company adopted this
statement effective January 1, 2002, as required. Amortization of existing
goodwill ceased on the unamortized portion associated with acquisitions and
certain investments accounted for under the equity method. This is expected to
have a favorable annual impact of approximately $15.8 million, net of tax,
beginning in 2002. SFAS No. 142 also requires a new methodology for the testing
of impairment of goodwill and other intangibles that have indefinite lives.
During 2002, the Company will begin testing goodwill for impairment under the
new rules, applying a fair-value-based test. The transition adjustment, if any,
resulting from the adoption of the new approach to impairment testing as
required by SFAS No. 142 will be reported as a cumulative effect of a change in
accounting principle. At this time, the Company has not yet determined what
impact, if any, the change in the required approach to impairment testing will
have on either its financial position or results of operations.
SFAS No. 143 provides accounting requirements for retirement obligations
associated with tangible long-lived assets, including: (i) the timing of
liability recognition; (ii) initial measurement of the liability; (iii)
allocation of asset retirement cost to expense; (iv) subsequent measurement of
the liability; and (v) financial statement disclosures. SFAS No. 143 requires
that an asset retirement cost should be capitalized as part of the cost of the
related long-lived asset and subsequently allocated to expense using a
systematic and rational method. This standard becomes effective for fiscal years
beginning after June 15, 2002. The Company will adopt the Statement effective
January 1, 2003. The transition adjustment, if any, resulting from the adoption
of SFAS No. 143 will be reported as
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
a cumulative effect of a change in accounting principle. At this time, the
Company has not yet determined what impact, if any, the adoption of this
Statement will have on either its financial position or results of operations.
SFAS No. 144 addresses the financial accounting and reporting for the impairment
or disposal of long-lived assets. This statement supercedes SFAS No.121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business, as
previously defined in that Opinion. SFAS No. 144 provides a single accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale. Many of the provisions of SFAS No. 121 are retained,
however, SFAS No. 144 clarifies some of the implementation issues related to
SFAS No. 121. SFAS No. 144 also broadens the presentation of discontinued
operations to include more disposal transactions. This Statement is effective
for fiscal years beginning after December 15, 2001, with early adoption
encouraged. The Company adopted this Statement effective January 1, 2002, as
required. The adoption of this Statement did not result in an adjustment to the
Company's financial statements on January 1, 2002.
RECLASSIFICATIONS: Certain amounts in the prior periods' Consolidated Financial
Statements have been reclassified to conform to the current period's
presentation.
NOTE 3--SPECIAL CHARGES
RESTRUCTURING CHARGES
NMHG: During 2001, management committed to the restructuring of certain
operations in Europe for both the Wholesale and Retail segments of the business.
As such, NMHG Wholesale recognized a restructuring charge of approximately $4.5
million pre-tax, classified in the 2001 Consolidated Statement of Operations and
Comprehensive Income (Loss) on the line restructuring charges, for severance and
other employee benefits to be paid to approximately 285 manufacturing and
administrative personnel in Europe. NMHG Retail recognized a restructuring
charge of approximately $4.7 million pre-tax, classified in the 2001
Consolidated Statement of Operations and Comprehensive Income (Loss) on the line
restructuring charges, of which $0.4 million relates to lease termination costs
and $4.3 million relates to severance and other employee benefits to be paid to
approximately 140 service technicians, salesmen and administrative personnel at
wholly owned dealers in Europe. During 2001, total payments of $1.7 million have
been made to approximately 190 employees for both of these European plans.
During 2000, NMHG made the determination that the consolidation of the Americas'
truck assembly activities from three plants to two plants offers significant
opportunity to reduce structure costs while further optimizing the use of NMHG's
global manufacturing capacity. Accordingly, a decision was made to phase out
certain manufacturing activities in the Danville, Illinois, assembly plant. In
December 2000, the Board of Directors approved management's plan to transfer
manufacturing activities from NMHG's Danville plant to its other global
manufacturing plants. The adoption of this plan resulted in a charge to
operations of approximately $13.9 million recognized in the 2000 Consolidated
Statement of Operations and Comprehensive Income (Loss) on the line
restructuring charges. This charge is comprised of a $5.1 million curtailment
loss for retirement benefits under a defined benefit plan, $4.0 million for
employee severance to be paid to approximately 425 manufacturing and office
personnel, $2.2 million of asset impairment charges and $2.6 million for other
costs.
As noted above, in connection with the phase-out of activities at the Danville,
Illinois, assembly plant, NMHG recognized an impairment charge of $2.2 million
in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The impairment charge
relates to certain fixed assets and leasehold improvements that will either be
disposed of or sold at fair market value, which was estimated to be below the
net book value. Fair market value was estimated using current market values for
similar assets.
During 2001, payments of $1.7 million to approximately 350 employees have been
made. Approximately $12.0 million of pre-tax costs associated with the Danville
phase-out, which were not eligible for accrual as of December 31, 2000, were
expensed during 2001 and classified as cost of sales in the 2001 Consolidated
Statement of Operations and Comprehensive Income (Loss). In addition, the
accrual for restructuring was reduced by $0.4 million in 2002.
HOUSEWARES: In 2001, the Board of Directors approved management's plan to
restructure HB-PS' manufacturing activities in Mexico. Certain of the company's
products will be outsourced beginning in 2002 and production in three of the
company's Mexican manufacturing plants will be consolidated into one plant
during 2002 and 2003. As a result of this plan, HB-PS recognized a charge of
$12.5 million of which $5.0 million relates to the impairment of fixed assets,
$3.3 million relates to equipment and building lease impairment and clean-up
costs, $2.9 million relates to severance benefits to be paid to approximately
925 manufacturing personnel, $0.6 million relates to the impairment of inventory
and $0.7 million is for other related costs. In the 2001 Consolidated Statement
of Operations and Comprehensive Income (Loss), $11.9 million is classified on
the line restructuring charges and $0.6 million, which relates to the inventory
write-down, is included in cost of sales. As of December 31, 2001, no severance
payments were made.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
As noted above, in connection with the restructuring of the manufacturing
operations in Mexico, HB-PS recognized an impairment charge of $5.0 million in
accordance with SFAS No. 121. The impairment charge relates to certain fixed
assets that will either be disposed of or sold at fair market value, which is
estimated to be below the net book value, throughout 2002 as the outsourcing
program progresses. Fair market value was estimated using current market values
for similar assets.
Also in 2001, HB-PS recognized a charge of $0.8 million, classified on the line
restructuring charges in the 2001 Consolidated Statement of Operations and
Comprehensive Income (Loss), relating to severance benefits to be paid to
personnel located at the company's headquarters and affecting all functional
areas of the business. This restructuring plan was initiated primarily as a
cost-cutting measure in response to reduced overall consumer demand caused by
the 2001 economic slowdown. Headcount was reduced by 36, or approximately 10
percent of the total corporate personnel. As of December 31, 2001, payments of
$0.3 million have been made. Payments in respect to the remainder of the charge,
or $0.5 million, are expected to be made during the first half of 2002.
In 2000 and 1999, HB-PS recognized an accrual for employee severance and related
costs of $0.5 million for 40 manufacturing employees and $1.2 million for 130
manufacturing employees, respectively, in connection with transitioning
activities to HB-PS' Mexican facilities. During 2001, 2000, and 1999 payments of
$0.7 million to approximately 25 employees, $2.5 million to approximately 225
employees and $1.7 million to approximately 350 employees, respectively, have
been made. See also the table below for detail of the employee severance accrual
activity during this transition period. As of December 31, 2001, these
restructuring plans are complete.
In 2000, HB-PS recognized an impairment charge of $1.2 million in accordance
with SFAS No. 121 related to certain assets that will be disposed as a result of
the transitioning of activities from manufacturing facilities in the United
States to manufacturing facilities in Mexico.
The changes to the Company's restructuring accruals are as follows:
--------------------------------------------------------
ASSET LEASE CURTAILMENT
SEVERANCE IMPAIRMENT IMPAIRMENT LOSS OTHER TOTAL
--------------------------------------------------------
NMHG WHOLESALE
Balance at December 31, 1999 $ --- $ --- $ --- $ --- $ --- $ ---
Provision 4.0 2.2 --- 5.1 2.6 13.9
Payments --- --- --- --- --- ---
--------------------------------------------------------
Balance at December 31, 2000 4.0 2.2 --- 5.1 2.6 13.9
Provision (reversal), net 4.2 --- --- --- (.1) 4.1
Payments/assets disposed (2.9) (2.2) --- --- (.1) (5.2)
--------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 $ 5.3 $ --- $ --- $ 5.1 $ 2.4 $12.8
========================================================
NMHG RETAIL
Balance at December 31, 2000 $ --- $ --- $ --- $ --- $ --- $ ---
Provision 4.3 --- .4 --- --- 4.7
Payments (.4) --- --- --- --- (.4)
--------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 $ 3.9 $ --- $ .4 $ --- $ --- $ 4.3
========================================================
HOUSEWARES
Balance at December 31, 1998 $ 3.2 $ --- $ --- $ --- $ --- $ 3.2
Provision 1.2 --- --- --- --- 1.2
Payments (1.7) --- --- --- --- (1.7)
--------------------------------------------------------
Balance at December 31, 1999 2.7 --- --- --- --- 2.7
Provision .5 1.2 --- --- --- 1.7
Payments (2.5) --- --- --- --- (2.5)
--------------------------------------------------------
Balance at December 31, 2000 .7 1.2 --- --- --- 1.9
Provision 3.7 5.0 3.3 --- .7 12.7
Payments/assets disposed (1.0) (1.2) --- --- --- (2.2)
--------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 $ 3.4 $ 5.0 $ 3.3 $ --- $ .7 $12.4
========================================================
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
OTHER SPECIAL TRANSACTIONS
NACOAL: In 2000, NACoal recognized a charge of $2.4 million, included in
selling, general and administrative expenses in the accompanying Consolidated
Statements of Operations and Comprehensive Income (Loss), for the write-off of
previously capitalized development costs incurred for a power plant and mine
development project in Turkey. In 2000, NACoal determined that it would cease
development of this project.
NMHG: In 2001, NMHG recognized income of $8.0 million classified in other income
(expense) in the Consolidated Statements of Operations and Comprehensive Income
(Loss) resulting from the receipt of insurance proceeds relating to flood damage
in September 2000 at NMHG's Sumitomo-NACCO joint venture in Japan.
NACCO & OTHER: In addition to the extraordinary gain described in Note 4, in
2000, Bellaire Corporation ("Bellaire," a wholly owned non-operating subsidiary
of NACCO) recognized a charge of $5.6 million included in the accompanying
Consolidated Statements of Operations and Comprehensive Income (Loss) as closed
mine obligations, which is part of other income (expense), related primarily to
an increase in liabilities for Black Lung and other retiree medical benefits,
and to environmental obligations arising from former Eastern U.S. underground
mining operations. The Company periodically reviews its assumptions used to
estimate these reserves. Revisions made to the Company's estimate of
environmental clean-up costs, mortality tables used for Black Lung liabilities,
discount rates and changes in the expected health care trend rates resulted in
an increase to the estimated reserve for these obligations. See also Note 4 and
Note 14.
In 1999, NACCO recognized a charge of $2.9 million, included in other-net in the
accompanying Consolidated Statements of Operations and Comprehensive Income
(Loss), for the write-off of costs incurred to evaluate a potential business
acquisition.
NOTE 4--EXTRAORDINARY GAIN
The extraordinary gain of $29.9 million recognized in 2000, net of $16.1 million
in taxes, relates to a reduction in the accrual for obligations to UMWA. The
obligation to UMWA was initially recognized by Bellaire as an extraordinary
charge in 1992 to accrue for the estimated costs associated with the Coal Act,
which is discussed in more detail in Note 14. In 2000, the U.S. Court of Appeals
for the Sixth Circuit upheld an Opinion by the U.S. District Court in Columbus,
Ohio, which ruled that late assignments of beneficiaries made to Bellaire were
not allowed as a matter of law. As a result of this event and changes to certain
assumptions used to estimate this obligation, such as the number of
beneficiaries and health care trend rates, the aggregate estimated costs
associated with this obligation are expected to be lower than previously
anticipated. Management believes that the estimated future cost of this
obligation has been adequately accrued. See also Note 3 for a discussion of
changes to other closed mine reserves.
NOTE 5--ACQUISITIONS AND DISPOSITION
NACOAL: On October 11, 2000, NACoal acquired certain assets from Phillips Coal
Company, including its 75 percent joint venture interest in Mississippi Lignite
Mining Company ("MLMC"), its 50 percent joint venture interest in Red River
Mining Company ("Red River"), the related lignite reserves under committed
contracts at MLMC and Red River and 560 million tons of undeveloped lignite
reserves in Texas, Mississippi and Tennessee. The purchase price for the assets
acquired was $128.7 million and was financed with a new five-year, $175.0
million credit facility that includes a $60.0 million revolving line of credit
and a $115.0 million term loan. As a result of the acquisition, NACoal now owns
100 percent of both MLMC and Red River.
The acquisition was accounted for using the purchase method of accounting and,
accordingly, the results of operations for the fully consolidated businesses
acquired are included in the accompanying financial statements beginning on
October 11, 2000. The purchase price allocation, based on independent
third-party appraisals, has resulted in the allocation of $85.8 million to the
value of the existing long-term coal supply agreements with the customers ("coal
supply agreements"). These identifiable intangible assets are amortized over
units of production based on the estimated recoverable tonnages at each
respective mine. No goodwill was recognized as a result of this transaction.
NMHG: In 1998, NMHG announced and began implementation of a strategy to expand
into the retail forklift distribution business. As a result, either 100 percent
of the stock or substantially all of the assets of several forklift truck retail
dealerships were acquired in 2001, 2000 and 1999. The dealerships acquired were
either existing independent Hyster or Yale dealerships or were converted to
Hyster or Yale dealerships at the time of acquisition. The combined purchase
prices of retail dealerships acquired during 2001, 2000 and 1999 were
approximately $3.9 million, $16.6 million and $62.4 million, respectively. Funds
for the purchases were provided by either borrowings advanced to NMHG Retail by
NMHG Wholesale under existing NMHG Wholesale facilities or by internally
generated cash flows.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
These acquisitions were accounted for as purchases and, accordingly, the results
of operations of the acquired businesses are included in the accompanying
financial statements from their respective dates of acquisition. Goodwill has
been recognized for the amount of the excess of the purchase price paid over the
fair market value of the net assets acquired and is amortized on a straight-line
basis generally over 40 years. Goodwill recorded in 2001, 2000 and in 1999 as a
result of these acquisitions was $2.5 million, $8.9 million and $24.7 million,
respectively.
In 2001, NMHG sold certain of its wholly owned dealers. This transaction
resulted in initial proceeds of approximately $8.0 million and a preliminary
charge for the loss on the sale of assets and related wind-down costs of $10.4
million. The agreement to sell these dealers allows for a final determination of
the purchase price during the first half of 2002 whereby the preliminary
purchase price received for certain assets and liabilities may be adjusted. The
Company does not expect the proceeds or the loss on the sale to change
significantly as a result of the final determination of the purchase price.
Revenues for these dealers for each of the three years ended December 31, 2001,
2000 and 1999 were $45.1 million, $46.8 million and $47.4 million, respectively.
Net losses for these dealers for each of the three years ended December 31,
2001, 2000 and 1999 were $18.2 million, $5.5 million and $2.4 million,
respectively.
As a result of the acquisitions by NACoal and NMHG, certain liabilities were
assumed as follows:
2001 2000 1999
------------ ------------ -----------
Noncash Investing Activities:
Fair value of assets acquired $ 4.2 $ 179.8 $ 89.6
Cash paid for the net assets, net of cash acquired (3.9) (145.3) (62.4)
------------ ------------ -----------
Liabilities assumed $ .3 $ 34.5 $ 27.2
============ ============ ===========
On a pro forma basis, as if the businesses had been acquired on January 1, 2001,
2000 and 1999, respectively, revenues, net income (loss) and earnings per share
would not differ materially from the amounts reported in the accompanying
consolidated financial statements for 2001, 2000 and 1999.
ACQUISITION OF MINORITY INTEREST: In 1999, the Company acquired the remaining 2
percent minority interest in NMHG for book value of $11.3 million.
NOTE 6--ACCOUNTS RECEIVABLE SECURITIZATION
On December 5, 2001, NMHG Wholesale's domestic accounts receivable
securitization program (the "Program") was terminated. Prior to the termination
of the program, the transfer of receivables pursuant to the Program were
accounted for as a sale in accordance with SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
a Replacement of FASB Statement No. 125."
As a result of the termination of the Program, NMHG Wholesale will rely on its
revolving credit facility ("Facility") to finance accounts receivable that
otherwise would have been sold under the Program prior to December 5, 2001.
Additional borrowings from the Facility of $33.4 million were used to finance
the outstanding balance of accounts receivable sold pursuant to the Program on
December 5, 2001. As a result of the termination of the Program, an increase in
interest expense arising from increased outstanding borrowings is expected to be
offset by a decrease in the cost of the Program, which is classified in the
statement of operations as other-net.
NMHG Wholesale has agreements with financial institutions outside of the United
States which allow for the sale, without recourse, of undivided interests in
revolving pools of its foreign trade accounts receivable. The maximum allowable
amount of foreign trade receivables to be sold was $72.4 million and $59.6
million at December 31, 2001 and 2000, respectively.
NMHG Wholesale continues to service the receivables sold and maintains an
allowance for doubtful accounts based upon the expected collectibility of all
NMHG Wholesale accounts receivable, including the portion of receivables sold.
The servicing liability incurred in connection with these transactions is not
material.
Gross proceeds of $855.7 million, $858.2 million, and $655.0 million were
received during 2001, 2000 and 1999 respectively, and the balance of accounts
receivable sold at December 31, 2001 and 2000 was $27.7 million and $71.6
million, respectively. The discount and any other transaction gains and losses
are included in other-net in the Consolidated Statements of Operations and
Comprehensive Income (Loss) and totaled $4.7 million, $5.5 million and $3.8
million in 2001, 2000 and 1999, respectively.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
NOTE 7--INVENTORIES
Inventories are summarized as follows:
December 31
----------------------------------
2001 2000
---------------- ----------------
Manufactured inventories:
Finished goods and service parts -
NMHG $ 99.6 $ 103.1
Housewares 54.0 53.2
---------------- ----------------
153.6 156.3
Raw materials and work in process -
NMHG Wholesale 111.4 157.9
Housewares 10.5 17.8
---------------- ----------------
121.9 175.7
---------------- ----------------
Total manufactured inventories 275.5 332.0
Retail inventories:
NMHG Retail 35.8 36.8
Housewares 17.6 19.4
---------------- ----------------
Total retail inventories 53.4 56.2
---------------- ----------------
Total inventories at FIFO 328.9 388.2
Coal - NACoal 17.5 12.0
Mining supplies - NACoal 23.8 23.7
---------------- ----------------
Total inventories at weighted average 41.3 35.7
LIFO reserve:
NMHG (12.3) (14.8)
Housewares 2.7 2.7
---------------- ----------------
(9.6) (12.1)
---------------- ----------------
$ 360.6 $ 411.8
================ ================
The cost of certain manufactured and retail inventories has been determined
using the LIFO method. At December 31, 2001 and 2000, 60 and 66 percent of total
inventories, respectively, were determined using the LIFO method.
NOTE 8--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net includes the following:
December 31
----------------------------------
2001 2000
---------------- ---------------
Coal lands and real estate:
NACoal $ 30.9 $ 33.7
Project mining subsidiaries (Note 12) 83.6 80.8
NMHG 15.8 16.8
Housewares 1.8 1.9
NACCO and Other .1 .1
---------------- ---------------
132.2 133.3
---------------- ---------------
Plant and equipment:
NACoal 137.8 85.3
Project mining subsidiaries (Note 12) 500.8 491.1
NMHG Wholesale 413.2 386.4
NMHG Retail 109.1 95.7
Housewares 175.1 167.7
NACCO and Other 4.6 4.8
---------------- ---------------
1,340.6 1,231.0
---------------- ---------------
Property, plant and equipment, at cost 1,472.8 1,364.3
Less allowances for depreciation, depletion and amortization 740.8 653.6
---------------- ---------------
$ 732.0 $ 710.7
================ ===============
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
Total depreciation, depletion and amortization expense on property, plant and
equipment was $100.6 million, $90.3 million and $88.5 million during 2001, 2000
and 1999, respectively.
Proven and probable coal reserves approximated 2.6 billion and 2.8 billion tons
at December 31, 2001 and 2000, respectively.
NOTE 9--REVOLVING CREDIT AGREEMENTS
Financing arrangements are obtained and maintained at the subsidiary level.
NACCO has not guaranteed the long-term debt or any borrowings of its
subsidiaries.
The following table summarizes the Company's available and outstanding
borrowings under revolving credit agreements.
December 31
----------------------------------
2001 2000
---------------- ----------------
Available borrowings, net of limitations:
NACoal $ 60.0 $ 60.0
NMHG 450.5 389.6
Housewares 188.7 188.8
---------------- ----------------
$ 699.2 $ 638.4
================ ================
Current portion of borrowings outstanding:
NACoal $ --- $ 2.5
NMHG 301.2 33.1
Housewares 23.5 30.7
---------------- ----------------
$ 324.7 $ 66.3
================ ================
Unused availability*:
NACoal $ 29.0 $ 29.5
NMHG 149.3 147.5
Housewares 85.2 78.1
----------------- ----------------
$ 263.5 $ 255.1
================= ================
Weighted average stated interest rate:
NACoal 4.3% 9.0%
NMHG 2.8% 7.1%
Housewares 2.6% 7.0%
Weighted average effective interest rate (including interest rate swap
agreements):
NACoal 6.2% 8.9%
NMHG 5.8% 6.4%
Housewares 5.7% 6.8%
*Unused availability is determined using the available borrowings, net of
limitations, reduced by the current portion and long-term portion (see Note
10) of revolving credit agreements outstanding.
NACOAL: NACoal's non-project mine financing needs are provided by an unsecured
revolving line of credit of up to $60.0 million and an unsecured term loan with
a remaining balance of $100.0 million (the "NACoal Facility"). The NACoal
Facility requires annual term loan repayments of $15.0 million, with a final
term loan repayment of $55.0 million in October 2005. The revolving credit
facility of $60.0 million is available until the facility's expiration in
October 2005.
The NACoal Facility has performance-based pricing which sets interest rates
based upon achieving various levels of Debt to EBITDA ratios, as defined. The
NACoal Facility currently provides for, at NACoal's option, Euro-Dollar Loans
which bear interest at LIBOR plus a margin based on the level of Debt to EBITDA
ratio achieved and Base Rate Advances which bear interest at Base Rates (as
defined in the agreement). A facility fee, which is determined based on the
level of Debt to EBITDA ratio achieved, is also applied to the aggregate
revolving line of credit. At December 31, 2001, term loan borrowings outstanding
bore interest at LIBOR plus 2.25 percent and revolving credit borrowings
outstanding bore interest at LIBOR plus 1.85 percent. At December 31, 2001, the
revolving credit facility fee was 0.40 percent.
NMHG: NMHG Wholesale's credit agreement provides for an unsecured revolving
credit facility (the "Facility") that permits advances up to $350.0 million and
expires in June 2002. The Facility has performance-based pricing which sets
interest rates based upon the achievement of certain financial performance
targets. The Facility currently provides for, at NMHG Wholesale's option,
Euro-Dollar Loans which bear interest at LIBOR plus 0.20 percent and Money
Market Loans which bear interest at Auction Rates (as defined in the agreement)
and requires a 0.10 percent
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
fee on the available borrowings. The Facility permits NMHG Wholesale to advance
funds to NMHG Retail. Advances from NMHG Wholesale are the primary sources of
financing for NMHG Retail.
Because the Facility expires in June 2002, NMHG anticipates that a new credit
facility will be obtained in or before June 2002. While there can be no
assurances as to the specific terms of the refinancing, including the nature of
the covenants and restrictions, NMHG expects that interest rates under the new
facility will be higher based on its evaluation of the generally higher interest
rate spreads charged today versus interest rate spreads in effect when NMHG
Wholesale's Facility was structured in 1995. NMHG Wholesale expects that the
outstanding balance under the Facility at the time of refinancing will be
financed with a combination of short-term and long-term financing. However, in
accordance with accounting principles generally accepted in the U.S., the
outstanding balance under the Facility will be classified as a current liability
until the Facility is refinanced. The amount outstanding that is classified as a
current liability at December 31, 2001 is $265.0 million.
NMHG also has separate facilities totaling $76.3 million and $66.4 million at
December 31, 2001 and 2000, respectively. Outstanding letters of credit reduce
amounts available under these facilities. A portion of these facilities is
denominated in foreign currencies, primarily the British pound sterling and the
Australian dollar. At December 31, 2001 and 2000, unused availability, net of
limitations, under these facilities was $34.3 million and $26.5 million,
respectively. NMHG also maintains various uncommitted lines of credit, which
permitted funding up to $30.0 million at December 31, 2001 and 2000. Under these
facilities, unused availability was $30.0 million and $6.0 million at December
31, 2001 and 2000, respectively.
HOUSEWARES: HB-PS' credit agreement provides for a revolving credit facility
(the "HB-PS Facility") that permits advances up to $160.0 million and is secured
by substantially all of the assets of HB-PS. A portion of the outstanding
balance is classified as long-term debt because it is not expected to be repaid
during the subsequent fiscal year. The HB-PS Facility, which expires in May
2003, provides reduced interest rates if HB-PS achieves a certain interest
coverage ratio and allows interest rates quoted under a competitive bid option.
The HB-PS Facility allows advances of up to $10.0 million from HB-PS to KCI.
Advances from HB-PS are the primary sources of financing for KCI.
In December 2001, the HB-PS Facility was amended to modify the covenant
requirements and redefine covenant calculations so that the recognition of the
restructuring charge in the fourth quarter of 2001 did not cause a violation of
covenants under the HB-PS Facility. In addition to the change in the covenant
requirements and calculations, the applicable margin added to the base rate of
interest increased and the facility fee on the available borrowings increased.
Prior to the amendment, for the year ended December 31, 2001, the HB-PS Facility
provided for an interest rate of LIBOR plus 0.4375 percent and a facility fee of
0.3125 percent. After the amendment, effective January 1, 2002, the HB-PS
Facility provides for an interest rate of LIBOR plus 2.25 percent and a facility
fee of 0.50 percent. Interest rates and facility fees, however, are subject to
change based on the level of EBITDA to interest expense ratio, as defined, HB-PS
achieves each quarter.
HB-PS also has separate uncommitted facilities, which may provide funding up to
$30.0 million. Outstanding letters of credit reduce amounts available under
these facilities. At December 31, 2001 and 2000, availability, net of
limitations, under these facilities was $25.0 million and $29.7 million,
respectively.
NOTE 10--LONG-TERM DEBT
Subsidiary long-term debt is as follows:
December 31
----------------------------------
2001 2000
---------------- ----------------
NACOAL:
Long-term portion of revolving credit agreement $ 31.0 $ 28.0
Capital lease obligations and other term loans 125.5 115.3
---------------- ----------------
156.5 143.3
---------------- ----------------
NMHG:
Long-term portion of revolving credit agreements --- 209.0
Capital lease obligations and other term loans 53.2 62.8
---------------- ----------------
53.2 271.8
---------------- ----------------
HOUSEWARES:
Long-term portion of revolving credit agreement 80.0 80.0
Capital lease obligations .3 .3
---------------- ----------------
80.3 80.3
---------------- ----------------
Total long-term debt 290.0 495.4
Less current portion of capital leases and term loans (41.9) (45.4)
---------------- ----------------
$ 248.1 $ 450.0
================ ================
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
Annual maturities of revolving lines of credit and term loans are as follows:
$352.7 million in 2002, $96.5 million in 2003, $16.7 million in 2004 and $86.0
million in 2005. Interest paid on revolving credit agreements and long-term debt
was $46.0 million, $31.1 million and $26.4 million during 2001, 2000 and 1999,
respectively. Interest capitalized was $4.4 million, $3.8 million and $1.1
million in 2001, 2000 and 1999, respectively.
The credit agreements for NMHG Wholesale, HB-PS and NACoal contain certain
covenants and restrictions. These covenants require, among other things, some or
all of the following: maintenance of certain minimum amounts of net worth and
certain specified ratios of working capital, debt to capitalization, debt to
EBITDA, interest coverage and fixed charge coverage. These ratios are calculated
at the subsidiary level. Restrictions may also include limits on capital
expenditures, advances to affiliates and dividends. At December 31, 2001, the
subsidiaries were in compliance with the covenants in their credit agreements.
NOTE 11--FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable and
accounts payable approximate fair value due to the short-term maturities of
these instruments. The fair values of revolving credit agreements and long-term
debt were determined using current rates offered for similar obligations and
approximated carrying values at December 31, 2001 and 2000. Financial
instruments that potentially subject the Company to concentration of credit risk
consist principally of accounts receivable and derivatives. The large number of
customers comprising the Company's customer base and their dispersion across
many different industries and geographies mitigates concentration of credit risk
on accounts receivable. However, HB-PS maintains significant accounts receivable
balances with several large retail customers. At December 31, 2001 and 2000,
receivables from HB-PS' five largest customers represented 15.3 percent and 16.1
percent, respectively, of the Company's net accounts receivable. To further
reduce credit risk associated with accounts receivable, the Company performs
periodic credit evaluations of its customers, but does not generally require
advance payments or collateral. The Company enters into derivative contracts
with high-quality financial institutions and limits the amount of credit
exposure to any one institution.
DERIVATIVE FINANCIAL INSTRUMENTS
FOREIGN CURRENCY DERIVATIVES: NMHG and HB-PS held forward foreign currency
exchange contracts with total notional amounts of $101.6 million and $3.8
million, respectively, at December 31, 2001, primarily denominated in euros,
British pounds sterling, Japanese yen and Mexican pesos. NMHG and HB-PS held
forward foreign currency exchange contracts with total notional amounts of $92.2
million and $9.1 million, respectively, at December 31, 2000, primarily
denominated in British pounds sterling, euros, Japanese yen and Canadian
dollars. The amount of deferred gain at December 31, 2001 and 2000,
respectively, was not material. The fair market value of these contracts was
estimated based on quoted market prices and approximated a net payable of $0.7
million and $0.8 million at December 31, 2001 and 2000, respectively.
INTEREST RATE DERIVATIVES: The following table summarizes the notional amounts,
related rates (including applicable margins) and remaining terms on interest
rate swap agreements active at December 31:
Notional Amount Average Fixed Rate
------------------------- ---------------------------- Remaining Term at
2001 2000 2001 2000 December 31, 2001
------------ ------------ ---------------------------- -----------------------------------------------
NACoal $ 132.7 $ 147.9 8.1% 8.3% Various, extending to June 2008
NMHG $ 225.0 $ 215.0 5.8% 6.3% Various, extending to January 2005
Housewares $ 75.0 $ 80.0 6.3% 6.4% Various, extending to March 2005
At NACoal, $22.7 million and $27.9 million of interest rate swap agreements at
December 31, 2001 and 2000, respectively, hedge notes payable held by the
project mining subsidiaries (see Note 12). Maturities of these interest rate
swap agreements correspond with the maturities of the hedged obligation. The
related obligation is included in current and long-term obligations of project
mining subsidiaries in the Consolidated Balance Sheets. The net interest expense
paid or received is included in the cost of coal and passed through to the
utility customers. The remaining NACoal interest rate swap agreements hedge the
NACoal Facility as discussed in Note 9. Interest rate swap agreements held by
NMHG have terms that vary from one-year to seven-year periods from inception.
Terms of Housewares' interest rate swap agreements vary from one-year to
four-year periods from inception.
The fair market value of all interest rate swap agreements, which was based on
quotes obtained from independent brokers, was a net payable of $23.2 million and
$4.7 million at December 31, 2001 and 2000, respectively.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
NOTE 12--OBLIGATIONS OF PROJECT MINING SUBSIDIARIES
Three of NACoal's subsidiaries (the "project mining subsidiaries") operate
lignite mines under long-term contracts with various utility customers to sell
lignite at a price based on actual cost plus an agreed pre-tax profit per ton.
The utility customers have arranged and guaranteed the financing for the
development and operation of the project mining subsidiaries. The obligations of
these project mining subsidiaries included in the Company's Consolidated Balance
Sheets do not affect the short-term or long-term liquidity of the Company and
are without recourse to NACCO and its NACoal subsidiary.
Obligations of the project mining subsidiaries, less current maturities, consist
of the following:
December 31
----------------------------------
2001 2000
---------------- ----------------
Capitalized lease obligations $ 96.2 $ 104.8
Advances from customers 139.9 140.0
Notes payable with interest rates ranging
from 2.2% to 6.5% in 2001 and 5.6% to 8.7% in 2000 35.2 37.9
---------------- ----------------
$ 271.3 $ 282.7
================ ================
Advances from customers are used to develop, operate and provide for the ongoing
working capital needs of certain project mining subsidiaries. The customers have
established a repayment schedule for only a portion, or $100.1 million, of the
total advances. In addition, portions of the advances are non-interest-bearing.
The annual maturities of advances from customers and notes payable are as
follows: $18.3 million in 2002, $10.3 million in 2003, $8.0 million in 2004,
$7.9 million in 2005, $7.9 million in 2006 and $141.0 million thereafter.
Interest paid was $16.5 million, $17.1 million and $17.7 million during 2001,
2000 and 1999, respectively. The cost of coal, which is passed through to the
utility customers, includes interest expense.
The project mining subsidiaries lease certain mining equipment under
noncancellable capital and operating leases which expire at various dates
through 2007. Future minimum capital and operating lease payments at December
31, 2001, are:
Capital Operating
Leases Leases
---------------- ----------------
2002 $ 27.3 $ 4.6
2003 21.7 4.6
2004 20.2 4.5
2005 19.6 4.5
2006 14.3 2.4
Subsequent to 2006 50.6 --
---------------- ----------------
Total minimum lease payments 153.7 $ 20.6
================
Amounts representing interest (37.9)
----------------
Present value of net minimum lease payments 115.8
Current maturities (19.6)
----------------
Long-term capital lease obligation $ 96.2
================
Interest expense and amortization in excess of annual lease payments are
deferred and recognized in years when annual lease payments exceed interest
expense and amortization.
Project mining assets recorded under capital leases are included in property,
plant and equipment and consist of the following:
December 31
--------------------------------
2001 2000
--------------- ---------------
Plant and equipment $ 211.3 $ 210.9
Less accumulated amortization 133.8 126.8
--------------- ---------------
$ 77.5 $ 84.1
=============== ===============
During 2001, 2000 and 1999, the project mining subsidiaries incurred capital
lease obligations of $8.3 million, $11.6 million and $3.8 million, respectively,
in connection with lease agreements to acquire plant and equipment.
The above obligations are secured by substantially all of the owned assets of
the respective project mining subsidiary and the assignment of all rights under
its coal sales agreement.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
NOTE 13--LEASING ARRANGEMENTS
The Company leases certain office, manufacturing and warehouse facilities,
retail stores and machinery and equipment under noncancellable capital and
operating leases that expire at various dates through 2021. NMHG Retail also
leases certain forklift trucks that are held for sale or sublease to customers.
Many leases include renewal and/or purchase options.
Future minimum capital and operating lease payments, excluding project mining
subsidiaries, at December 31, 2001, are:
Capital Operating
Leases Leases
---------------- ---------------
2002 $ 15.6 $ 66.0
2003 15.9 53.8
2004 10.5 44.8
2005 7.7 35.2
2006 5.7 26.9
Subsequent to 2006 22.5 45.1
---------------- ---------------
Total minimum lease payments 77.9 $ 271.8
===============
Amounts representing interest (15.1)
----------------
Present value of net minimum lease payments 62.8
Current maturities (13.9)
----------------
Long-term capital lease obligation $ 48.9
================
Aggregate future minimum rentals to be received under noncancellable subleases
of forklift trucks as of December 31, 2001 are $29.8 million. Rental expense for
all operating leases, excluding project mining subsidiaries, consists of the
following:
2001 2000 1999
------------ ------------ ------------
Minimum rentals $ 57.5 $ 44.2 $ 32.6
Sublease income (15.7) (7.8) ---
------------ ------------ ------------
Rent expense, net $ 41.8 $ 36.4 $ 32.6
============ ============ ============
Assets recorded under capital leases are included in property, plant and
equipment and consist of the following (excluding assets of project mining
subsidiaries as indicated in Note 12):
December 31
--------------------------------
2001 2000
--------------- ---------------
Plant and equipment $ 94.1 $ 63.3
Less accumulated amortization 31.1 22.4
--------------- ---------------
$ 63.0 $ 40.9
=============== ===============
During 2001, 2000 and 1999, capital lease obligations, excluding project mining
subsidiaries, of $30.8 million, $22.3 million and $13.6 million, respectively,
were incurred in connection with lease agreements to acquire plant and
equipment.
NOTE 14--SELF-INSURANCE RESERVES AND OTHER
Self-insurance reserves and other consists of the following:
December 31
--------------------------------
2001 2000
--------------- ---------------
Undiscounted UMWA obligation $ 36.0 $ 38.0
Present value of other closed mine obligations 24.4 25.0
Other self-insurance reserves 175.1 137.4
--------------- ---------------
$ 235.5 $ 200.4
=============== ===============
The UMWA obligation and the other closed mine obligations relate to Bellaire's
former Eastern U.S. underground mining operations and the Indian Head Mine,
which ceased operations in 1992. The obligation to UMWA resulted from the Coal
Act, which requires Bellaire to incur additional costs for the medical expenses
of certain United Mine
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
Worker retirees. Annual cash payments of approximately $1.9 million, declining
steadily over time to approximately $0.1 million, are expected to be made
through 2050. The Company has recorded this obligation on an undiscounted basis.
The other closed mine obligations include reserves for land reclamation and site
treatment at certain closed eastern underground and western surface mines, as
well as reserves for retiree medical benefit costs, workers' compensation and
Black Lung benefit costs. Other self-insurance reserves include product
liability reserves, employee retirement obligations and other miscellaneous
long-term liabilities.
NOTE 15--CONTINGENCIES
Various legal and regulatory proceedings and claims have been or may be asserted
against NACCO and certain subsidiaries relating to the conduct of their
businesses, including product liability, environmental and other claims. These
proceedings are incidental to the ordinary course of business of the Company.
Management believes that it has meritorious defenses and will vigorously defend
itself in these actions. Any costs that management estimates will be paid as a
result of these claims are accrued when the liability is considered probable and
the amount can be reasonably estimated. Although the ultimate disposition of
these proceedings is not presently determinable, management believes, after
consultation with its legal counsel, that the likelihood is remote that material
costs will be incurred in excess of accruals already recognized.
Under various financing arrangements for certain customers, including
independently owned retail dealerships, NMHG provides guarantees of the residual
values of the lift trucks, or recourse or repurchase obligations such that NMHG
would be obligated in the event of default by the customer. Generally, NMHG
retains a security interest in the related assets financed such that, in the
event that NMHG would become obligated under the terms of the recourse or
repurchase obligations, NMHG would take title to the assets financed. Total
guarantees and amounts subject to recourse or repurchase obligations at December
31, 2001 and 2000 were $158.0 million and $172.8 million, respectively. The
security interest is generally expected to equal or exceed the amount of the
recourse or repurchase obligation. Losses anticipated under the terms of the
guarantees, recourse or repurchase obligations are not significant and have been
reserved for in the accompanying Consolidated Financial Statements.
NOTE 16--COMMON STOCK AND EARNINGS PER SHARE
The Class A common stock has one vote per share and the Class B common stock has
10 votes per share. The total number of authorized shares of Class A common
stock and Class B common stock at December 31, 2001 was 25,000,000 shares and
6,756,176 shares, respectively. Treasury shares of Class A common stock totaling
1,588,197 and 1,612,762 at December 31, 2001 and 2000, respectively, have been
deducted from shares issued.
STOCK OPTIONS: The 1975 and 1981 stock option plans, as amended, provide for the
granting to officers and other key employees of options to purchase Class A
common stock and Class B common stock of the Company at a price not less than
the market value of such stock at the date of grant. Options become exercisable
over a four-year period and expire 10 years from the date of the grant. During
the three-year period ending December 31, 2001, there were 80,701 shares of
Class A common stock and 80,100 shares of Class B common stock available for
grant. In 1999, options for 25,000 shares of Class A common stock were exercised
at an option price of $35.56. However, no options were granted during the
three-year period ending December 31, 2001 and no options remain outstanding at
the end of each of the three years ended December 31, 2001, 2000 and 1999. At
present, the Company does not intend to issue additional stock options.
EARNINGS PER SHARE: For purposes of calculating the basic and diluted earnings
per share, no adjustments have been made to the reported amounts of net income.
The share amounts used for the year ended December 31 are as follows:
2001 2000 1999
------------ ------------ ------------
Basic common shares (weighted average) 8.190 8.167 8.150
Dilutive stock options --- --- .004
------------ ------------ ------------
Diluted common shares 8.190 8.167 8.154
============ ============ ============
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
NOTE 17--INCOME TAXES
The components of income (loss) before income taxes and provision for income
taxes for the year ended December 31 are as follows:
2001 2000 1999
------------- ------------- ------------
INCOME (LOSS) BEFORE INCOME TAXES,
MINORITY INTEREST, EXTRAORDINARY GAIN AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES:
Domestic $ (11.9) $ 59.9 $ 91.5
Foreign (33.5) .1 (4.9)
------------- ------------- ------------
$ (45.4) $ 60.0 $ 86.6
============= ============= ============
INCOME TAX PROVISION (BENEFIT)
Current tax provision (benefit):
Federal $ (9.6) $ 27.3 $ 27.7
State (.3) 5.7 5.3
Foreign 4.9 4.5 2.7
------------- ------------- ------------
Total current (5.0) 37.5 35.7
------------- ------------- ------------
Deferred tax provision (benefit):
Federal 7.6 (6.9) (.3)
State (.8) (1.6) (.5)
Foreign (17.2) (3.6) (4.4)
------------- ------------- ------------
Total deferred (10.4) (12.1) (5.2)
------------- ------------- ------------
Increase (decrease) in valuation allowance 5.5 (3.1) 1.2
------------- ------------- ------------
$ (9.9) $ 22.3 $ 31.7
============= ============= ============
Substantially all of the Company's interest expense and goodwill amortization
has been allocated to domestic income (loss) before income taxes.
The Company made income tax payments of $23.5 million, $36.6 million and $44.2
million during 2001, 2000 and 1999, respectively. During the same period, income
tax refunds totaled $8.5 million, $2.5 million and $1.4 million, respectively.
A reconciliation of the federal statutory and effective income tax for the year
ended December 31 is as follows:
2001 2000 1999
------------- ------------- ------------
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY
INTEREST, EXTRAORDINARY GAIN AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES: $ (45.4) $ 60.0 $ 86.6
============= ============= ============
Statutory taxes at 35.0% $ (15.9) $ 21.0 $ 30.3
Valuation allowance 5.5 (3.1) 1.2
Amortization of goodwill 5.3 5.2 5.2
Foreign statutory rate differences .7 .8 (1.4)
Percentage depletion (3.8) (3.3) (3.6)
Earnings reported net of taxes (.9) (.2) (.6)
State income taxes (.6) 2.5 3.3
Export benefits (.5) (1.0) (1.3)
Other-net .3 .4 (1.4)
------------- ------------- ------------
Income tax provision (benefit) $ (9.9) $ 22.3 $ 31.7
============= ============= ============
Effective rate 21.8% 37.2% 36.6%
============= ============= ============
The Company does not provide for deferred taxes on certain unremitted foreign
earnings. Management has decided that the earnings of NMHG's foreign
subsidiaries have been and will be indefinitely reinvested in NMHG's foreign
operations and, therefore, a reserve for unremitted foreign earnings is not
required. As of December 31, 2001, the cumulative unremitted earnings of the
Company's foreign subsidiaries are $158.9 million. It is impracticable to
determine the amount of unrecognized deferred taxes with respect to these
earnings; however, foreign tax credits would be available to reduce U.S. income
taxes in the event of a distribution.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
A detailed summary of the total deferred tax assets and liabilities in the
Company's Consolidated Balance Sheets resulting from differences in the book and
tax basis of assets and liabilities follows:
December 31
-------------------------------------
2001 2000
----------------- -----------------
DEFERRED TAX ASSETS
Accrued expenses and reserves $ 92.4 $ 79.6
Accrued pension benefits 21.9 6.1
Other employee benefits 19.3 16.7
Net operating loss carryforwards 16.3 13.1
Reserve for UMWA 13.6 13.6
----------------- -----------------
Total deferred tax assets 163.5 129.1
Less: Valuation allowance (10.1) (4.6)
----------------- -----------------
153.4 124.5
----------------- -----------------
DEFERRED TAX LIABILITIES
Depreciation and depletion 43.9 45.8
Inventories 14.5 14.9
Other 28.7 16.9
----------------- -----------------
Total deferred tax liabilities 87.1 77.6
----------------- -----------------
Net deferred tax asset $ 66.3 $ 46.9
================= =================
The Company periodically reviews the need for a valuation allowance against
certain deferred tax assets and recognizes these assets to the extent that
realization is more likely than not. Based on a review of earnings history and
trends, forecasted earnings and expiration of carryforwards, the Company
believes that the valuation allowance provided is appropriate. In 2001, the
valuation allowance increased to $10.1 million from $4.6 million at December 31,
2000. At December 31, 2001, the Company had $5.9 million of net operating loss
carryforwards which expire, if unused, in years 2002 through 2021 and $10.4
million which are not subject to expiration.
The tax returns of the Company and certain of its subsidiaries are being
examined by various taxing authorities. The Company has not been informed of any
material assessment resulting from these examinations and will vigorously
contest any material assessment. Management believes that any potential
adjustment would not materially affect the Company's financial condition or
results of operations.
NOTE 18--RETIREMENT BENEFIT PLANS
DEFINED BENEFIT PLANS: The Company maintains various defined benefit pension
plans covering most of its employees. These plans provide benefits based on
years of service and average compensation during certain periods. The Company's
policy is to make contributions to fund these plans within the range allowed by
applicable regulations. Plan assets consist primarily of publicly traded stocks,
investment contracts and government and corporate bonds.
In 1996, pension benefits were frozen for employees covered under NMHG's and
HB-PS' United States plans, except for those NMHG employees participating in
collective bargaining agreements. As a result, in the United States only NACoal
employees and certain NMHG employees covered under collective bargaining
agreements will earn retirement benefits under defined benefit pension plans.
Other employees of the Company, including NMHG and HB-PS employees whose pension
benefits were frozen as of December 31, 1996, will receive retirement benefits
under defined contribution retirement plans.
As a result of management's decision to phase out certain manufacturing
activities in the NMHG Danville, Illinois, assembly plant, the Company
recognized a curtailment loss of $5.1 million in 2000. See also Note 3.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
Set forth below is a detail of the net periodic pension (income) expense and the
assumptions used in accounting for the United States and the United Kingdom
defined benefit plans for the years ended December 31.
2001 2000 1999
-------- -------- --------
UNITED STATES PLANS
Service cost $ 2.6 $ 3.0 $ 3.3
Interest cost 11.4 10.3 10.1
Expected return on plan assets (13.9) (12.6) (12.3)
Amortization of transition asset (.1) (.4) (.4)
Amortization of prior service cost .4 .4 .4
Recognized actuarial (gain) loss (1.9) (1.3) (.2)
Curtailment loss --- 5.1 ---
-------- -------- --------
Net periodic pension (income) expense $ (1.5) $ 4.5 $ .9
======== ======== ========
Assumptions:
Weighted average discount rates 7.50% 8.00% 7.75%
Rate of increase in compensation levels 3.75% 4.25% 4.25%
Expected long-term rate of return on assets 9.00% 9.00% 9.00%
UNITED KINGDOM PLAN
Service cost $ 2.0 $ 2.0 $ 2.4
Interest cost 3.2 3.0 3.1
Expected return on plan assets (5.2) (4.3) (3.7)
Amortization of transition asset (.1) (.1) (.1)
Amortization of prior service cost .1 .1 .1
Recognized actuarial (gain) loss (.5) (.4) .4
-------- -------- --------
Net periodic pension (income) expense $ (.5) $ .3 $ 2.2
======== ======== ========
Assumptions:
Weighted average discount rates 6.25% 6.75% 6.25%
Rate of increase in compensation levels 3.75% 4.25% 3.50%
Expected long-term rate of return on assets 9.00% 9.00% 7.50%
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
The following sets forth the changes in the benefit obligation and the plan
assets during the year and reconciles the funded status of the defined benefit
plans with the amounts recognized in the Consolidated Balance Sheets at December
31:
2001 2000
----------------------------- ---------------------------
UNITED UNITED United United
STATES PLANS KINGDOM PLAN States Plans Kingdom Plan
------------- -------------- ------------- ------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 143.8 $ 49.7 $ 134.6 $ 51.4
Service cost 2.6 2.0 3.0 2.0
Interest cost 11.4 3.2 10.3 3.0
Actuarial (gain) loss 1.5 5.6 1.8 (.6)
Benefits paid (8.5) (1.5) (7.5) (2.1)
Plan amendments --- --- 1.6 ---
Foreign currency exchange rate changes --- (1.4) --- (4.0)
------------- -------------- ------------- ------------
Benefit obligation at end of year $ 150.8 $ 57.6 $ 143.8 $ 49.7
------------- -------------- ------------- ------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 163.1 $ 65.2 $ 151.9 $ 59.5
Actual return on plan assets (23.1) (14.0) 17.4 10.4
Employer contributions .2 1.5 1.4 1.7
Employee contributions --- .5 --- .5
Benefits paid (8.6) (1.4) (7.5) (2.1)
Foreign currency exchange rate changes --- (1.9) (.1) (4.8)
------------- -------------- ------------- ------------
Fair value of plan assets at end of year $ 131.6 $ 49.9 $ 163.1 $ 65.2
------------- -------------- ------------- ------------
NET AMOUNT RECOGNIZED
Plan assets in excess of obligation $ (19.2) $ (7.7) $ 19.3 $ 15.5
Unrecognized prior service cost .6 .7 1.2 .8
Unrecognized actuarial (gain) loss (1.2) 19.1 (41.6) (5.2)
Unrecognized net transition asset (.1) (.2) (.1) (.3)
Contributions in fourth quarter --- .3 --- .3
------------- -------------- ------------- ------------
Net amount recognized $ (19.9) $ 12.2 $ (21.2) $ 11.1
============= ============== ============= ============
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE
SHEETS CONSIST OF:
Prepaid benefit cost $ 2.7 $ --- $ 5.7 $ 11.1
Accrued benefit liability (29.7) (5.6) (30.0) ---
Intangible asset .3 .7 .7 ---
Accumulated other comprehensive income 4.2 10.6 1.4 ---
Deferred tax asset 2.6 6.5 1.0 ---
------------- -------------- ------------- ------------
Net amount recognized $ (19.9) $ 12.2 $ (21.2) $ 11.1
============= ============== ============= ============
DEFINED CONTRIBUTION PLANS: NACCO and its subsidiaries have defined contribution
(401(k)) plans for substantially all U.S. employees and similar plans for
employees outside of the U.S. For NACCO and those subsidiaries, the applicable
company matches employee contributions based on plan provisions. In addition,
NACCO and certain other subsidiaries have defined contribution retirement plans
whereby the applicable company's contribution to participants is determined
annually based on a formula which includes the effect of actual compared to
targeted operating results and the age and compensation of the participants.
Total costs, including Company contributions, for these plans were $19.0
million, $20.7 million and $21.6 million in 2001, 2000 and 1999, respectively.
NOTE 19--BUSINESS SEGMENTS
Financial information for each of NACCO's reportable segments, as defined by
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is presented in the following table. See Note 1 for a discussion
of the Company's operating segments and product lines. NACCO's non-operating
segment, NACCO and Other, includes the accounts of the parent company and
Bellaire.
The accounting policies of the segments are the same as those described in Note
2 - Accounting Policies. NMHG Wholesale derives a portion of its revenues from
transactions with NMHG Retail. The amount of these revenues,
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
which are based on current market prices on similar third-party transactions,
are indicated in the following table on the line "NMHG Eliminations" in the
revenues section. No other intersegment sales transactions occur. Other
intersegment transactions are recognized based on similar third-party
transactions; that is, at current market prices.
On January 1, 2000, NACCO began charging fees to its operating subsidiaries for
services provided by the corporate headquarters. The 2001 and 2000 pre-tax fees
of $10.5 million and $10.1 million, respectively, included in the line
other-net, income (expense), was charged to the operating segments based on fees
incurred on their behalf, including services performed for each.
2001 2000 1999
-------- -------- --------
REVENUES FROM EXTERNAL CUSTOMERS
NMHG Wholesale $1,463.3 $1,750.0 $1,618.9
NMHG Retail 298.8 280.3 228.1
NMHG Eliminations (89.7) (98.2) (85.6)
-------- -------- --------
NMHG Consolidated 1,672.4 1,932.1 1,761.4
NACoal 333.3 289.2 277.7
Housewares 632.1 649.9 596.7
NACCO and Other .1 .1 .1
-------- -------- --------
$2,637.9 $2,871.3 $2,635.9
======== ======== ========
GROSS PROFIT
NMHG Wholesale $ 189.9 $ 292.9 $ 255.7
NMHG Retail 54.8 54.1 49.3
NMHG Eliminations 4.9 .5 (1.5)
-------- -------- --------
NMHG Consolidated 249.6 347.5 303.5
NACoal 75.1 49.0 52.7
Housewares 110.0 119.8 128.7
NACCO and Other (.2) (.1) (.2)
-------- -------- --------
$ 434.5 $ 516.2 $ 484.7
======== ======== ========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 173.1 $ 181.5 $ 169.6
NMHG Retail 84.7 69.8 63.9
NMHG Eliminations (2.2) (.9) (.5)
-------- -------- --------
NMHG Consolidated 255.6 250.4 233.0
NACoal 13.2 17.4 12.3
Housewares 102.7 87.6 82.7
NACCO and Other 9.5 11.6 9.0
-------- -------- --------
$ 381.0 $ 367.0 $ 337.0
======== ======== ========
AMORTIZATION OF GOODWILL
NMHG Wholesale $ 11.4 $ 11.6 $ 11.6
NMHG Retail 1.5 1.0 .6
-------- -------- --------
NMHG Consolidated 12.9 12.6 12.2
Housewares 3.0 3.1 3.0
-------- -------- --------
$ 15.9 $ 15.7 $ 15.2
======== ======== ========
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 1.3 $ 85.9 $ 74.5
NMHG Retail (46.5) (16.7) (15.2)
NMHG Eliminations 7.1 1.4 (1.0)
-------- -------- --------
NMHG Consolidated (38.1) 70.6 58.3
NACoal 61.9 31.6 40.4
Housewares (8.4) 27.4 41.8
NACCO and Other (9.7) (11.7) (9.2)
-------- -------- --------
$ 5.7 $ 117.9 $ 131.3
======== ======== ========
OPERATING PROFIT (LOSS) EXCLUDING GOODWILL AMORTIZATION
NMHG Wholesale $ 12.7 $ 97.5 $ 86.1
NMHG Retail (45.0) (15.7) (14.6)
NMHG Eliminations 7.1 1.4 (1.0)
-------- -------- --------
NMHG Consolidated (25.2) 83.2 70.5
NACoal 61.9 31.6 40.4
Housewares (5.4) 30.5 44.8
NACCO and Other (9.7) (11.7) (9.2)
-------- -------- --------
$ 21.6 $ 133.6 $ 146.5
======== ======== ========
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
2001 2000 1999
------- ------- -------
INTEREST EXPENSE
NMHG Wholesale $ (12.9) $ (13.4) $ (16.9)
NMHG Retail (5.0) (4.6) (3.0)
NMHG Eliminations (5.2) (3.2) .9
------- ------- -------
NMHG Consolidated (23.1) (21.2) (19.0)
NACoal (10.0) (.7) ---
Housewares (7.7) (8.6) (6.7)
NACCO and Other (.2) (.2) (.7)
Eliminations .5 .5 .7
------- ------- -------
(40.5) (30.2) (25.7)
Project mining subsidiaries (16.4) (16.9) (17.6)
------- ------- -------
$ (56.9) $ (47.1) $ (43.3)
======= ======= =======
INTEREST INCOME
NMHG Wholesale $ 3.4 $ 2.2 $ 8.2
NMHG Retail .2 .1 .2
NMHG Eliminations --- --- (3.6)
------- ------- -------
NMHG Consolidated 3.6 2.3 4.8
NACoal .4 .7 .7
Housewares --- --- .1
NACCO and Other .3 --- ---
Eliminations (.5) (.5) (.7)
------- ------- -------
$ 3.8 $ 2.5 $ 4.9
======= ======= =======
OTHER-NET, INCOME (EXPENSE) - (EXCLUDING INTEREST INCOME)
NMHG Wholesale $ (6.0) $ (14.2) $ (3.4)
NMHG Retail .2 .2 .3
NMHG Eliminations --- (.1) .1
------- ------- -------
NMHG Consolidated (5.8) (14.1) (3.0)
NACoal (1.3) (1.2) (.3)
Housewares (.1) (2.6) (.5)
NACCO and Other 9.2 4.6 (2.5)
------- ------- -------
$ 2.0 $ (13.3) $ (6.3)
======= ======= =======
INCOME TAX PROVISION (BENEFIT)
NMHG Wholesale $ (.6) $ 24.6 $ 24.4
NMHG Retail (14.6) (6.7) (4.9)
NMHG Eliminations .7 (.5) (1.1)
------- ------- -------
NMHG Consolidated (14.5) 17.4 18.4
NACoal 9.0 (.1) 4.5
Housewares (4.0) 7.4 13.5
NACCO and Other (.4) (2.4) (4.7)
------- ------- -------
$ (9.9) $ 22.3 $ 31.7
======= ======= =======
NET INCOME (LOSS)
NMHG Wholesale $ (14.1) $ 37.0 $ 39.0
NMHG Retail (36.5) (14.3) (12.8)
NMHG Eliminations 1.2 (1.4) (2.5)
------- ------- -------
NMHG Consolidated (49.4) 21.3 23.7
NACoal 25.6 12.6 16.5
Housewares (12.2) 8.8 21.2
NACCO and Other --- 25.0 (8.3)
------- ------- -------
$ (36.0) $ 67.7 $ 53.1
======= ======= =======
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
2001 2000 1999
------------ ------------- ------------
TOTAL ASSETS
NMHG Wholesale $ 1,164.9 $ 1,167.2 $ 1,040.5
NMHG Retail 215.6 232.8 185.0
NMHG Eliminations (175.4) (158.3) (46.9)
------------- ------------ -------------
NMHG Consolidated 1,205.1 1,241.7 1,178.6
NACoal 250.3 204.1 64.3
Housewares 347.5 366.4 372.8
NACCO and Other 60.4 41.8 47.6
------------- ------------ -------------
1,863.3 1,854.0 1,663.3
Project mining subsidiaries 383.1 389.9 392.0
------------- ------------ -------------
2,246.4 2,243.9 2,055.3
Consolidating eliminations (84.5) (50.0) (42.3)
------------- ------------ -------------
$ 2,161.9 $ 2,193.9 $ 2,013.0
============= ============ =============
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
NMHG Wholesale $ 47.0 $ 40.6 $ 39.9
NMHG Retail 13.4 14.0 14.2
------------- ------------ -------------
NMHG Consolidated 60.4 54.6 54.1
NACoal 5.1 3.2 3.1
Housewares 21.2 19.3 17.6
NACCO and Other .3 .3 .4
------------- ------------ -------------
87.0 77.4 75.2
Project mining subsidiaries 30.6 28.7 28.8
------------- ------------ -------------
$ 117.6 $ 106.1 $ 104.0
============= ============ =============
CAPITAL EXPENDITURES
NMHG Wholesale $ 46.6 $ 43.3 $ 44.7
NMHG Retail 6.9 8.5 1.5
------------- ------------ -------------
NMHG Consolidated 53.5 51.8 46.2
NACoal 18.9 3.9 2.7
Housewares 13.4 22.0 16.5
NACCO and Other .7 .3 .1
------------- ------------ -------------
86.5 78.0 65.5
Project mining subsidiaries 18.3 15.3 10.0
------------- ------------ -------------
$ 104.8 $ 93.3 $ 75.5
============= ============ =============
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
DATA BY GEOGRAPHIC AREA
No single country outside of the United States comprised 10 percent or more of
the Company's revenues from unaffiliated customers. The Other category below
includes Canada, Mexico, South America and Asia-Pacific. In addition, no single
customer comprised 10 percent or more of the Company's revenues from
unaffiliated customers.
Europe,
United Africa and
States Middle East Other Consolidated
---------------- ---------------- ---------------- ----------------
2001
---------------------------------------------
REVENUES FROM UNAFFILIATED
CUSTOMERS, BASED ON THE
CUSTOMERS' LOCATION $ 1,814.2 $ 474.1 $ 349.6 $ 2,637.9
================ ================ ================ ================
LONG-LIVED ASSETS $ 1,028.5 $ 184.8 $ 127.5 $ 1,340.8
================ ================ ================ ================
2000
---------------------------------------------
Revenues from unaffiliated
customers, based on the
customers' location $ 2,272.6 $ 373.9 $ 224.8 $ 2,871.3
================ ================ ================ ================
Long-lived assets $ 1,018.0 $ 199.1 $ 131.3 $ 1,348.4
================ ================ ================ ================
1999
---------------------------------------------
Revenues from unaffiliated
customers, based on the
customer's location $ 1,985.1 $ 491.5 $ 159.3 $ 2,635.9
================ ================ ================ ================
Long-lived assets $ 926.9 $ 189.8 $ 94.0 $ 1,210.7
================ ================ ================ ================
NOTE 20--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations for the year ended
December 31 is as follows:
2001
----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
REVENUES
NACoal $ 83.3 $ 83.1 $ 82.4 $ 84.5
NMHG Wholesale 442.9 392.0 314.4 314.0
NMHG Retail (including eliminations) 52.7 52.7 45.7 58.0
Housewares 138.3 140.1 155.0 198.7
NACCO and Other --- .1 --- ---
------- ------- ------- -------
717.2 668.0 597.5 655.2
------- ------- ------- -------
GROSS PROFIT 130.3 116.3 87.2 100.7
------- ------- ------- -------
OPERATING PROFIT (LOSS)
NACoal 16.9 14.8 16.1 14.1
NMHG Wholesale 25.8 7.8 (18.5) (13.8)
NMHG Retail (including eliminations) (3.4) (2.8) (15.9) (17.3)
Housewares (3.0) 1.2 3.2 (9.8)
NACCO and Other (3.2) (2.9) (2.4) (1.2)
------- ------- ------- -------
33.1 18.1 (17.5) (28.0)
------- ------- ------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 14.4 6.1 (27.5) (27.7)
Cumulative effect of accounting changes (1.3) --- --- ---
------- ------- ------- -------
NET INCOME (LOSS) $ 13.1 $ 6.1 $ (27.5) $ (27.7)
======= ======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE
Income (loss) before cumulative effect of
accounting changes $ 1.76 $ .74 $ (3.36) $ (3.38)
Cumulative effect of accounting changes (.16) --- --- ---
------- ------- ------- -------
Net income (loss) $ 1.60 $ .74 $ (3.36) $ (3.38)
======= ======= ======= =======
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
2000
----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
REVENUES
NACoal $ 71.5 $ 69.7 $ 73.4 $ 74.6
NMHG Wholesale 438.0 450.0 414.3 447.7
NMHG Retail (including eliminations) 44.5 48.6 49.2 39.8
Housewares 127.9 138.1 162.8 221.1
NACCO and Other --- --- .1 ---
------- ------- ------- -------
681.9 706.4 699.8 783.2
------- ------- ------- -------
GROSS PROFIT 120.2 126.7 124.4 144.9
------- ------- ------- -------
OPERATING PROFIT (LOSS)
NACoal 8.2 8.1 9.3 6.0
NMHG Wholesale 24.5 28.5 18.9 14.0
NMHG Retail (including eliminations) (3.0) (3.5) (2.4) (6.4)
Housewares (.5) 2.7 7.3 17.9
NACCO and Other (2.4) (2.6) (3.0) (3.7)
------- ------- ------- -------
26.8 33.2 30.1 27.8
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY GAIN 9.2 13.6 8.9 6.1
Extraordinary gain --- --- --- 29.9
------- ------- ------- -------
NET INCOME $ 9.2 $ 13.6 $ 8.9 $ 36.0
======= ======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE
Income before extraordinary gain $ 1.13 $ 1.67 $ 1.09 $ .75
Extraordinary gain --- --- --- 3.66
------- ------- ------- -------
Net income $ 1.13 $ 1.67 $ 1.09 $ 4.41
======= ======= ======= =======
NOTE 21--PARENT COMPANY CONDENSED BALANCE SHEETS
The condensed balance sheets of NACCO, the parent company, at December 31 are as
follows:
2001 2000
------- -------
ASSETS
Current assets $ 12.0 $ .1
Other assets .4 .4
Notes receivable from subsidiaries 23.3 8.4
Investment in subsidiaries
NMHG 382.0 463.0
Housewares 145.6 170.9
NACoal 48.9 31.2
Bellaire 2.6 2.2
------- -------
579.1 667.3
Property, plant and equipment, net .3 .4
Deferred income taxes .3 1.1
------- -------
Total Assets $ 615.4 $ 677.7
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 3.9 $ 9.3
Current intercompany accounts payable, net 31.3 3.8
Note payable to Bellaire 46.0 50.3
Notes payable to other subsidiaries --- 3.0
Deferred income taxes and other 4.9 4.9
Stockholders' equity 529.3 606.4
------- -------
Total Liabilities and Stockholders' Equity $ 615.4 $ 677.7
======= =======
The credit agreements at NACoal, NMHG and Housewares allow the transfer of
assets to NACCO under certain circumstances. The amount of NACCO's investment in
NACoal, NMHG and Housewares that was restricted at December 31, 2001 totals
approximately $541.9 million. Dividends, advances and management fees from its
subsidiaries are the primary sources of cash for NACCO.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
NOTE 22--RELATED PARTY TRANSACTIONS
NMHG has a 20 percent ownership interest in NMHG Financial Services, Inc.
("NFS"), a joint venture with GE Capital Corporation, formed primarily for the
purpose of providing financial services to independent and wholly owned Hyster
and Yale lift truck dealers and national account customers in the United States.
NMHG's ownership in NFS is accounted for using the equity method of accounting.
Generally, NMHG sells lift trucks directly to its customer and that customer may
enter into a financing transaction with NFS or another unrelated party. However,
for certain customer transactions, NMHG sells directly to NFS so that the
customer can obtain operating lease financing from NFS. Sales to NFS related to
these types of transactions for the years ended December 31, 2001, 2000 and 1999
were $137.5 million, $166.6 million and $8.5 million, respectively. Amounts
receivable from NFS at December 31, 2001 and 2000 were immaterial. Also, from
time to time, NMHG provides recourse or repurchase obligations or guarantees the
residual values of the lift trucks purchased by customers and financed through
NFS. See further discussion in Note 15. At December 31, 2001, approximately
$127.1 million of the Company's total guarantees, recourse or repurchase
obligations related to transactions with NFS. For these transactions, NMHG
generally retains a security interest in the lift truck, such that NMHG would
take possession of the lift truck in the event that NMHG would become liable
under the terms of the guarantees or standby recourse or repurchase obligations.
In addition to providing financing to NMHG's customers, NFS provides both lease
and debt financing to NMHG. Operating lease obligations relate to specific
sale-leaseback-sublease transactions for certain NMHG customers whereby NMHG
sells lift trucks to NFS, NMHG leases these lift trucks back under an operating
lease agreement and NMHG subleases those lift trucks to customers under an
operating lease agreement. Debt financing includes long-term notes payable to
NFS primarily to finance certain of NMHG's long-term notes receivable from Latin
American customers which arise in the ordinary course of business. In addition,
NFS provides, on NMHG's behalf, installment billings to the Latin American
customers, account balance tracking and an inventory management system to track
the equipment covered by the notes. Total obligations to NFS under the operating
lease agreements and notes payable were $13.7 million and $14.7 million at
December 31, 2001 and 2000, respectively.
In addition, NMHG is reimbursed for certain services, primarily administrative
functions, provided to NFS. The amount of NMHG's expenses reimbursed by NFS were
$1.8 million, $1.5 million and $1.1 million in 2001, 2000 and 1999,
respectively.
NMHG has a 50 percent ownership interest in Sumitomo NACCO Materials Handling
Group, Inc. ("SN"), a joint venture with Sumitomo Heavy Industries, Inc., formed
primarily for the manufacture and distribution of Sumitomo branded lift trucks
in Japan and the export of Hyster and Yale branded lift trucks and related
components and service parts outside of Japan. NMHG's ownership in SN is
accounted for using the equity method of accounting. NMHG purchases products
from SN under normal trade terms. In 2001, 2000 and 1999, purchases from SN were
$63.7 million, $90.5 million and $91.2 million, respectively. Amounts payable to
SN at December 31, 2001 and 2000 were $16.1million and $23.6 million,
respectively.
The Company expensed $2.2 million, $5.7 million and $4.8 million in the years
ended December 31, 2001, 2000 and 1999, respectively, for legal services
rendered by Jones, Day, Reavis & Pogue. A director of the Company is also a
partner at this firm.
F-33
NACCO INDUSTRIES, INC. REPORT OF MANAGEMENT
To the Stockholders of NACCO Industries, Inc.
The management of NACCO Industries, Inc. is responsible for the
preparation, content and integrity of the financial statements and related
information contained within this report. The accompanying financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States and include amounts that are based on informed judgments
and estimates.
The Company's code of conduct, communicated throughout the organization,
requires adherence to high ethical standards in the conduct of the Company's
business.
NACCO Industries, Inc. and each of its subsidiaries maintain a system of
internal controls designed to provide reasonable assurance as to the protection
of assets and the integrity of the financial statements. These systems are
augmented by the selection of qualified financial management personnel. In
addition, an internal audit function periodically assesses the internal
controls.
Arthur Anderson LLP, independent certified public accountants, audits NACCO
Industries, Inc. and its subsidiaries' financial statements. Its audits are
conducted in accordance with auditing standards generally accepted in the United
States and provide an objective and independent assessment that helps ensure
fair presentation of the Company's operating results and financial position. The
independent accountants have access to all financial records and related data of
the Company, as well as to the minutes of stockholders' and directors' meetings.
The Audit Review Committee of the Board of Directors, composed of
independent directors, meets regularly with the independent auditors and
internal auditors to review the scope of their audit reports and to discuss any
action to be taken. The independent auditors and the internal auditors have free
and direct access to the Audit Review Committee. The Audit Review Committee also
reviews the financial reporting process and accounting policies of NACCO
Industries, Inc. and each of its subsidiaries.
/s/ Alfred M. Rankin, Jr. /s/ Kenneth C. Schilling
------------------------------ -------------------------------
Alfred M. Rankin, Jr. Kenneth C. Schilling
Chairman, President and Vice President and Controller
Chief Executive Officer
F-34
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY CONDENSED BALANCE SHEETS
December 31
-----------------
2001 2000
------ ------
(In millions)
Current assets $ 12.0 $ .1
Other assets .4 .4
Notes receivable from subsidiaries 23.3 8.4
Investment in subsidiaries
NMHG 382.0 463.0
Housewares 145.6 170.9
NACoal 48.9 31.2
Bellaire 2.6 2.2
------ ------
579.1 667.3
Property, plant and equipment, net .3 .4
Deferred income taxes .3 1.1
------ ------
Total Assets $615.4 $677.7
====== ======
Current liabilities $ 3.9 $ 9.3
Current intercompany accounts payable, net 31.3 3.8
Note payable to Bellaire 46.0 50.3
Notes payable to other subsidiaries --- 3.0
Deferred income taxes and other 4.9 4.9
Stockholders' equity 529.3 606.4
------ ------
Total Liabilities and Stockholders' Equity $615.4 $677.7
====== ======
See Notes to Parent Company Financial Statements.
F-35
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF OPERATIONS
Year ended December 31
---------------------------
2001 2000 1999
------ ------ -------
(In millions)
Income (expense):
Intercompany interest expense $(2.1) $ (.2) $ (.7)
Other - net 10.5 10.1 (2.6)
------- ------ -------
8.4 9.9 (3.3)
Administrative and general expenses 9.4 11.6 8.9
------- ------ -------
Loss before income taxes (1.0) (1.7) (12.2)
Income tax benefit (.7) (.6) (4.6)
------- ------ -------
Net loss before extraordinary gain and
equity in earnings (loss) of subsidiaries (.3) (1.1) (7.6)
Extraordinary gain, net-of-tax --- 21.0 ---
------- ------ -------
Net income (loss) before equity in earnings (loss)
of subsidiaries (.3) 19.9 (7.6)
Equity in earnings (loss) of subsidiaries (35.7) 47.8 60.7
------- ------ -------
Net income (loss) $(36.0) $67.7 $ 53.1
======= ====== =======
See Notes to Parent Company Financial Statements.
F-36
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY STATEMENTS OF CASH FLOWS
Year Ended December 31
----------------------------
2001 2000 1999
------- ----------- -------
(In millions)
OPERATING ACTIVITIES
Net income (loss) $(36.0) $ 67.7 $ 53.1
Equity in (earnings) loss of subsidiaries 35.7 (47.8) (60.7)
------- ---------- -------
Parent company only net income (loss) (.3) 19.9 (7.6)
Extraordinary gain --- (21.0) ---
Deferred income taxes .8 .7 1.2
Income taxes net of intercompany tax payments (3.2) 1.0 (1.4)
Working capital changes (14.2) .3 (.3)
Changes in current intercompany amounts 27.5 4.2 2.6
Changes in reserve for future interest on UMWA obligation --- (1.6) (1.8)
Other non-cash items .2 (.3) .4
------- ---------- -------
Net cash provided by (used for) operating activities 10.8 3.2 (6.9)
INVESTING ACTIVITIES
Dividends and advances received from subsidiaries .1 1.6 13.9
Notes payable to Bellaire (4.2) .4 (2.4)
Expenditures for property, plant and equipment (.2) (.3) (.1)
Proceeds from the sale of property, plant and equipment --- 1.4 ---
------- ---------- -------
Net cash provided by (used for) investing activities (4.3) 3.1 11.4
FINANCING ACTIVITIES
Cash dividends paid (7.6) (7.2) (7.0)
Purchases of treasury stock --- --- ---
Treasury stock sales under stock option and
compensation plans - net 1.1 .9 2.5
------- ---------- -------
Net cash used for financing activities (6.5) (6.3) (4.5)
------- ---------- -------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the period --- --- ---
Balance at the beginning of the period --- --- ---
------- ---------- -------
Balance at the end of the period $ --- $ --- $ ---
======= ========== =======
See Notes to Parent Company Financial Statements.
F-37
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
The notes to Consolidated Financial Statements, incorporated in Item 14 of this
Form 10-K, are hereby incorporated by reference into these Notes to Parent
Company Financial Statements.
NOTE A - LONG-TERM OBLIGATIONS AND GUARANTEES
NACCO Industries, Inc. ("NACCO," the parent company) is a holding company which
owns four operating segments. It is NACCO's policy not to guarantee the debt of
such subsidiaries.
NOTE B - CASH DIVIDENDS AND ADVANCES TO NACCO
Dividends received from the subsidiaries were $18.0 million in 2001, $19.7
million in 2000, and $16.6 million in 1999.
NOTE C - UNRESTRICTED CASH
The amount of unrestricted cash available to NACCO, included in Investment in
subsidiaries was $25.3 million at December 31, 2001.
NOTE D - EXTRAORDINARY GAIN
A portion of the 2000 extraordinary gain relating to the reversal of the accrual
for the obligation to the United Mine Workers of America Combined Benefit Fund
arising as a result of the Coal Industry Retiree Health Benefit Act of 1992 as
discussed in Note 4 to the Consolidated Financial Statements was recorded on the
books of the parent company. The amount recorded by the parent company of $21.0
million, net of $11.3 million in taxes, combined with the amount recorded by
Bellaire Corporation of $8.9 million, net of $4.8 million in taxes, equals the
total extraordinary gain of $29.9 million, net of $16.1 million in taxes
recognized by the Company in 2000.
F-38
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
- ----------------------------------------------------------------------------------------------------------------------------
COL A. COL B. COL C. COL D. COL E.
- ----------------------------------------------------------------------------------------------------------------------------
Additions
------------------------------------- (D)
Description Balance at Charged to Charged to Deductions Balance at
Beginning of Costs and Other Accounts End of
Period Expenses --Describe --Describe Period
- ----------------------------------------------------------------------------------------------------------------------------
(In millions)
2001
RESERVES DEDUCTED FROM ASSET
ACCOUNTS:
ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 8.6 $ 4.1 $ .1 (C) $ 3.4 (A) $ 9.4
ALLOWANCE FOR DISCOUNTS,
ADJUSTMENTS AND RETURNS 8.2 15.8 --- 17.8 (B) 6.2
RESERVE FOR LOSSES ON INVENTORY 22.0 10.6 --- 5.4 (A) 27.2
VALUATION ALLOWANCE AGAINST
DEFERRED TAX ASSETS 4.6 5.5 --- --- 10.1
2000
Reserves deducted from asset
accounts:
Allowance for doubtful accounts $ 7.4 $ 1.7 $ .2 (C) $ .7 (A) $ 8.6
Allowance for discounts,
adjustments and returns 9.3 21.6 --- 22.7 (B) 8.2
Reserve for losses on inventory 22.9 3.9 .8 (C) 5.6 (A) 22.0
Valuation allowance against
deferred tax assets 7.9 (3.1) (.2) (C) --- 4.6
1999
Reserves deducted from asset
accounts:
Allowance for doubtful accounts $ 7.8 $ 2.2 $ .2 (C) $ 2.8 (A) $ 7.4
Allowance for discounts,
adjustments and returns 7.8 23.1 --- 21.6 (B) 9.3
Reserve for losses on inventory 21.5 8.6 (.4) (C) 6.8 (A) 22.9
Valuation allowance against
deferred tax assets 6.7 1.2 --- --- 7.9
(A) Write-offs, net of recoveries.
(B) Payments.
(C) Subsidiary's foreign currency translation adjustments and other.
(D) Balances which are not required to be presented and those which are
immaterial have been omitted.
F-39
EXHIBIT INDEX
(3) Articles of Incorporation and By-laws.
(i) Restated Certificate of Incorporation of the Company is
incorporated by reference to Exhibit 3(i) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172.
(ii) Restated By-laws of the Company are incorporated by reference to
Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Commission File Number 1-9172.
(4) Instruments defining the rights of security holders, including indentures.
(i) The Company by this filing agrees, upon request, to file with the
Securities and Exchange Commission the instruments defining the rights of
holders of Long-Term debt of the Company and its subsidiaries where the total
amount of securities authorized thereunder does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis.
(ii) The Mortgage and Security Agreement, dated April 8, 1976, between
The Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and
United Power Association (collectively as Mortgagee) is incorporated by
reference to Exhibit 4(ii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, Commission File Number 1-9172.
(iii) Amendment No. 1 to the Mortgage and Security Agreement, dated as
of December 15, 1993, between Falkirk Mining Company (as Mortgagor) and
Cooperative Power Association and United Power Association (collectively as
Mortgagee) is incorporated by reference to Exhibit 4(iii) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
Commission File Number 1-9172.
(iv) Stockholders' Agreement, dated as of March 15, 1990, among the
signatories thereto, the Company and Ameritrust Company National Association, as
depository, is incorporated herein by reference to Exhibit 2 to the Schedule 13D
filed on March 29, 1990 with respect to the Class B Common Stock, par value
$1.00 per share, of NACCO Industries, Inc.
(v) Amendment to Stockholders' Agreement, dated as of April 6, 1990,
among the signatories thereto, the Company and Ameritrust Company National
Association, as depository, is incorporated herein by reference to Exhibit 4 to
Amendment No. 1 to the Schedule 13D filed on April 11, 1990 with respect to the
Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(vi) Amendment to Stockholders' Agreement, dated as of April 6, 1990,
among the signatories thereto, the Company and Ameritrust Company National
Association, as depository, is incorporated herein by reference to Exhibit 5 to
Amendment No. 1 to the Schedule 13D filed on April 11, 1990 with respect to the
Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(vii) Amendment to Stockholders' Agreement, dated as of November 17,
1990, among the signatories thereto, the Company, and Ameritrust Company
National Association, as depository, is incorporated herein by reference to
Amendment No. 2 to the Schedule 13D filed on March 18, 1991 with respect to the
Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(viii) Amendment to Stockholders' Agreement, dated as of November 14,
1996, among the signatories thereto, the Company, the New Participating
Stockholders (as defined therein) and Key Bank, N.A. (successor to Ameritrust
Company National Association), as depository, is incorporated herein by
reference to Amendment No. 3 to the Schedule 13D filed on November 26, 1996,
with respect to the Class B Common Stock, par value $1.00 per share, of NACCO
Industries, Inc.
(ix) Amendment to Stockholders' Agreement, dated as of November 14,
1996, among the signatories thereto, the Company, the New Participating
Stockholders (as defined therein) and Key Bank, N.A. (successor to Ameritrust
Company National Association), as depository, is incorporated herein by
reference to Amendment No. 3 to the Schedule 13D filed on November 26, 1996,
with respect to the Class B Common Stock, par value $1.00 per share, of NACCO
Industries, Inc.
(x) Amendment to Stockholders' Agreement, dated as of April 9, 1998, by
and among KeyCorp Shareholder Services, Inc., the Company, the Participating
Stockholders (as defined therein) and the New Participating Stockholders (as
defined therein) is incorporated by reference to Amendment No. 6 to the Schedule
13D filed on March 25, 1999, with respect to the Class B Common Stock, par value
$1.00 per share, of NACCO Industries, Inc.
X-1
(xi) Amendment to Stockholders' Agreement, dated as of December 26,
1998, by and among KeyCorp Shareholder Services, Inc., the Company, the
Participating Stockholders (as defined therein) and the New Participating
Stockholders (as defined therein) is incorporated by reference to Amendment No.
6 to the Schedule 13D filed on March 25, 1999, with respect to the Class B
Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(xii) Amendment to Stockholders' Agreement, dated as of November 30,
1999, by and among First Chicago Trust Company of New York, the Company and the
Participating Stockholders (as defined therein) is incorporated by reference to
Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the
Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(xiii) Amendment to Stockholders' Agreement, dated as of November 30,
1999, by and among First Chicago Trust Company of New York, the Company and the
Participating Stockholders (as defined therein) is incorporated by reference to
Amendment No. 7 to the Schedule 13D filed on March 30, 2000, with respect to the
Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(xiv) Amendment to Stockholders' Agreement, dated as of March 30, 2000,
by and among First Chicago Trust Company of New York, the Company, the
Participating Stockholders (as defined therein) and the New Participating
Stockholders (as defined therein) is incorporated by reference to Amendment No.
7 to the Schedule 13D filed on March 30, 2000, with respect to the Class B
Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(xv) Amendment to Stockholders' Agreement, dated as of October 31,
2000, by and among First Chicago Trust Company of New York, the Company and the
Participating Stockholders (as defined therein) is incorporated by reference to
Amendment No. 8 to the Schedule 13D filed on February 14, 2001, with respect to
the Class B Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(xvi) Amendment to Stockholders' Agreement, dated as of October 31,
2000, by and among National City Bank (Cleveland), the Company, the
Participating Stockholders (as defined therein) and the New Participating
Stockholders (as defined therein) is incorporated by reference to Amendment No.
8 to the Schedule 13D filed on February 14, 2001, with respect to the Class B
Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(xvii) Amendment to Stockholders' Agreement, dated as of February 14,
2001, by and among National City Bank (Cleveland), the Company, the
Participating Stockholders (as defined therein) and the New Participating
Stockholders (as defined therein) is incorporated by reference to Amendment No.
8 to the Schedule 13D filed on February 14, 2001, with respect to the Class B
Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(xviii) Amendment to Stockholders' Agreement, dated as of February 14,
2002, by and among National City Bank (Cleveland), the Company, the
Participating Stockholders (as defined therein) and the New Participating
Stockholder (as defined therein) is incorporated by reference to Amendment No. 9
to the Schedule 13D filed on February 14, 2002, with respect to the Class B
Common Stock, par value $1.00 per share, of NACCO Industries, Inc.
(10) Material contracts.
*(i) The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and
restated as of July 17, 1986) is incorporated herein by reference to Exhibit
10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, Commission File Number 1-9172.
*(ii) Form of Incentive Stock Option Agreement for incentive stock
options granted before 1987 under The NACCO Industries, Inc. 1975 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(ii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(iii) Form of Incentive Stock Option Agreement for incentive stock
options granted after 1986 under The NACCO Industries, Inc. 1975 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(iii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(iv) Form of Non-Qualified Stock Option Agreement under The NACCO
Industries, Inc., 1975 Stock Option Plan (as amended and restated as of July 17,
1986) is incorporated herein by reference to Exhibit 10(iv) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1991,
Commission File Number 1-9172.
*(v) The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and
restated as of July 17, 1986) is incorporated herein by reference to Exhibit
10(v) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, Commission File Number 1-9172.
X-2
*(vi) Form of Non-Qualified Stock Option Agreement under The NACCO
Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17,
1986) is incorporated herein by reference to Exhibit 10(vi) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1991,
Commission File Number 1-9172.
*(vii) Form of Incentive Stock Option Agreement for incentive stock
options granted before 1987 under The NACCO Industries, Inc. 1981 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(vii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(viii) Form of Incentive Stock Option Agreement for incentive stock
options granted after 1986 under The NACCO Industries, Inc. 1981 Stock Option
Plan (as amended and restated as of July 17, 1986) is incorporated herein by
reference to Exhibit 10(viii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991, Commission File Number 1-9172.
*(ix) The Retirement Benefit Plan for Alfred M. Rankin, Jr., effective
as of January 1, 1994 is incorporated herein by reference to Exhibit 10 (ix) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, Commission File Number 1-9172.
*(x) Amendment No. 1, dated as of March 15, 1995, to the Retirement
Benefit Plan for Alfred M. Rankin, Jr. is incorporated herein by reference to
Exhibit 10 (x) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, Commission File Number 1-9172.
*(xi) Instrument of Adoption and Merger for NACCO Industries, Inc. for
the NACCO Materials Handling Group, Inc. Unfunded Benefit Plan (As Amended and
Restated Effective October 1, 1994) dated December 30, 1994, is incorporated
herein by reference to Exhibit 10(xxii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, Commission File Number 1-9172.
*(xii) Instrument of Withdrawal and Transfer of Liabilities from The
North American Coal Corporation Deferred Compensation Plan for Management
Employees, effective as of December 31, 1994, is incorporated herein by
reference to Exhibit 10(xxiii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, Commission File Number 1-9172.
*(xiii) NACCO Industries, Inc. Annual Incentive Compensation Plan,
effective as of January 1, 2001, is incorporated herein by reference to as
Exhibit 10(xx) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000, Commission File Number 1-9172.
*(xiv) NACCO Industries, Inc. Supplemental Annual Incentive
Compensation Plan, effective as of January 1, 2001, is attached hereto as
Exhibit 10(xiv).
*(xv) NACCO Industries, Inc. Executive Long-Term Incentive Compensation
Plan, effective as of January 1, 2001, is attached hereto as Exhibit 10(xv).
(xvi) Assumption Agreement, made as of December 20, 1991, between the
Company and Citicorp North America, Inc., as agent is incorporated herein by
reference to Exhibit 10(xciii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991, Commission File Number 1-9172.
(xvii) Intentionally left blank.
*(xviii) NACCO Industries, Inc. Non-Employee Directors' Equity
Compensation Plan, effective January 1, 1992, is incorporated by reference to
Exhibit 10(cxi) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Commission File Number 1-9172.
*(xix) Amendment No. 2, dated June 30, 1995, to the Retirement Benefit
Plan for Alfred M. Rankin, Jr. (as amended and restated effective January 1,
1994) is incorporated herein by reference to Exhibit 10 (clxxi) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, Commission
File Number 1-9172.
*(xx) NACCO Industries, Inc. 2002 Annual Incentive Compensation Plan,
effective as of January 1, 2002, is attached hereto as Exhibit 10(xx).
*(xxi) Amendment No. 3, dated as of September 13, 1999, to the
Retirement Benefit Plan for Alfred M. Rankin, Jr. (as amended and restated
effective January 1, 1994) is incorporated herein by reference to Exhibit
10(xxi) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, Commission File Number 1-9172.
X-3
*(xxii) Amendment No. 4, dated as of June 23, 2000, to the Retirement
Benefit Plan for Alfred M. Rankin, Jr. (as amended and restated effective
January 1, 1994) is incorporated herein by reference to Exhibit 10(xxii) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000, Commission File Number 1-9172.
*(xxiii) The NACCO Industries, Inc. Unfunded Benefit Plan (effective
September 1, 2000) is incorporated herein by reference to Exhibit 10(xxiii) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000, Commission File Number 1-9172.
*(xxiv) Amendment No. 1, dated as of September 25, 2001, to the NACCO
Industries, Inc. Unfunded Benefit Plan (effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(xxiv).
*(xxv) Amendment No. 2, dated as of December 21, 2001, to the NACCO
Industries, Inc. Unfunded Benefit Plan (effective September 1, 2000) is
incorporated herein by reference to Exhibit 10(xxv).
(xxvi) - (xxx) Intentionally left blank.
*(xxxi) The North American Coal Annual Incentive Plan, effective as of
January 1, 2001, is incorporated herein by reference to Exhibit 10(xlv) to the
Company's Annual Report on Form 10-K for the year ended December 31, 2000,
Commission File Number 1-9172.
*(xxxii) Instrument of Merger, Amendment and Transfer of Sponsorship of
Benefit Plans, effective as of August 31, 1994, is incorporated herein by
reference to Exhibit 10(xxviii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, Commission File Number 1-9172.
(xxxiii) Credit Agreement, dated as of September 27, 1991, among The
North American Coal Corporation, Citibank, N.A., Ameritrust Company National
Association and Morgan Guaranty Trust Company of New York, as agent is
incorporated herein by reference to Exhibit 10(xcii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File
Number 1-9172.
(xxxiv) Subordination Agreement, dated September 27, 1991, among The
North American Coal Corporation, the Company and Morgan Guaranty Trust Company
of New York, as agent, is incorporated herein by reference to Exhibit 10(xciv)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1991, Commission File Number 1-9172.
*(xxxv) The North American Coal Corporation Deferred Compensation Plan
for Management Employees (as amended and restated effective November 1, 2001) is
attached hereto as Exhibit 10(xxxv).
*(xxxvi) Amendment No. 1, dated as of December 21, 2001, to The North
American Coal Corporation Deferred Compensation Plan for Management Employees
(as amended and restated effective November 1, 2001) is attached hereto as
Exhibit 10(xxxvi).
(xxxvii) Purchase and Sale Agreement, dated October 11, 2000, by and
among Phillips Petroleum Company, Phillips Coal Company, The North American Coal
Corporation, Oxbow Property Company L.L.C. and Red Hills Property Company L.L.C.
is incorporated herein by reference to Exhibit 10(xxxvii) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000,
Commission File Number 1-9172.
(xxxviii) Amendment No. 1 to the Credit Agreement, dated as of July 28,
1993, among The North American Coal Corporation and the banks listed on the
signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is
incorporated herein by reference to Exhibit 10(cxxxxiii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, Commission File
Number 1-9172.
(xxxix) Amendment No. 2 to the Credit Agreement, dated as of September,
1995, among The North American Coal Corporation and the banks listed on the
signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is
incorporated herein by reference to Exhibit 10(xxxix) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File
Number 1-9172.
*(xl) The North American Coal Corporation Supplemental Retirement
Benefit Plan, as amended and restated effective September 1, 1994, is
incorporated by reference to Exhibit 10 (clxv) to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994, Commission File Number 1-
9172.
*(xli) The North American Coal Corporation Deferred Compensation Plan
for Management Employees (as amended and restated effective January 1, 1996), is
incorporated herein by reference to Exhibit 10(xli) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File
Number 1-9172.
X-4
*(xlii) Amendment No. 1, dated December 1, 1995, to The North American
Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated
effective September 1, 1994), effective as of December 31, 1994, is incorporated
herein by reference to Exhibit 10 (xlii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995, Commission File Number 1-9172.
(xliii) Amendment No. 3 to the Credit Agreement, dated as of September
16, 1996, among The North American Coal Corporation and the banks listed on the
signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is
incorporated herein by reference to Exhibit 10(xliii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File
Number 1-9172.
*(xliv) Amendment No. 1, dated as of June 23, 2000, to The North
American Coal Corporation Deferred Compensation Plan for Management Employees
(as amended and restated effective January 1, 1999) is incorporated herein by
reference to Exhibit 10(xliv) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, Commission File Number 1-9172.
*(xlv) The North American Coal 2002 Incentive Compensation Plan,
effective as of January 1, 2002, is attached hereto as Exhibit 10(xlv).
(xlvi) Waiver Agreement, dated November 15, 1996, by and among Morgan
Guaranty Trust Company, Citibank, N.A., Wells Fargo (Texas), N.A., Key Bank
National Association and The North American Coal Corporation is incorporated
herein by reference to Exhibit 10(xlvi) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996, Commission File Number 1-9172.
(xlvii) Amendment No. 4 to the Credit Agreement, dated as of July 29,
1997, among The North American Coal Corporation, the banks listed on the
signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is
incorporated herein by reference to Exhibit 10(xlvii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File
Number 1-9172.
(xlviii) Assignment and Assumption Agreement, dated as of August 22,
1997, among The North American Coal Corporation, the banks listed on the
signatory pages and Morgan Guaranty Trust Company of New York, as Agent, is
incorporated herein by reference to Exhibit 10(xlviii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File
Number 1-9172.
*(xlix) The North American Coal Corporation Deferred Compensation Plan
for Management Employees, dated December 29, 1998 (as amended and restated
effective January 1, 1999) is incorporated herein by reference to Exhibit
10(xlix) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, Commission File Number 1-9172.
*(l) Amendment No. 2, dated October 1, 1998, to The North American Coal
Corporation Supplemental Retirement Benefit Plan (as amended and restated
effective September 1, 1994), effective as of July 15, 1998, is incorporated
herein by reference to Exhibit 10(l) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, Commission File Number 1-9172.
*(li) Amendment No. 3, dated October 30, 1998, to The North American
Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated
effective September 1, 1994), effective as of July 15, 1998, is incorporated
herein by reference to Exhibit 10(li) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, Commission File Number 1-9172.
*(lii) Amendment No. 4, dated December 8, 1999, to The North American
Coal Corporation Supplemental Retirement Benefit Plan (as amended and restated
effective September 1, 1994), effective as of January 1, 2000, is incorporated
herein by reference to Exhibit 10(lii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172.
*(liii) The North American Coal Corporation Value Appreciation Plan For
Years 2000 to 2009, effective as of January 1, 2000, is incorporated herein by
reference to Exhibit 10(liii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, Commission File Number 1-9172.
(liv) Credit Agreement, dated as of October 11, 2000, by and among The
North American Coal Corporation, the Initial Lenders named therein, Salomon
Smith Barney Inc., as Lead Arranger and Book Manager, Keybank National
Association, as Syndication Agent, and Citibank N.A., as Agent, is incorporated
herein by reference to Exhibit 10(liv) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172.
(lv) Letter Amendment, dated as of November 20, 2001, to the Credit
Agreement, dated as of October 11, 2000, by and among The North American Coal
Corporation, the Lenders named therein, and Citibank N.A., as Agent, is attached
hereto as Exhibit 10(lv).
X-5
(lvi) Agreement and Plan of Merger, dated as of April 7, 1989, among
NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition I, Esco
Corporation, Hyster Company and Newesco, is incorporated herein by reference to
Exhibit 2.1 to Hyster-Yale Materials Handling, Inc.'s Registration Statement on
Form S-1 filed May 17, 1989 (Registration Statement Number 33-28812).
(lvii) Agreement and Plan of Merger, dated as of April 7, 1989, among
NACCO Industries, Inc., Yale Materials Handling Corporation, Acquisition II,
Hyster Company and Newesco, is incorporated herein by reference to Exhibit 2.2
to Hyster-Yale Materials Handling, Inc.'s Registration Statement on Form S-1
filed May 17, 1989 (Registration Statement Number 33-28812).
*(lviii) NACCO Materials Handling Group, Inc. Annual Incentive
Compensation Plan for 2001 is incorporated herein by reference to Exhibit
10(lxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, Commission File Number 1-9172.
*(lix) Hyster-Yale Materials Handling, Inc. Long-Term Incentive
Compensation Plan, dated as of January 1, 1990, is incorporated herein by
reference to Exhibit 10(lxxxix) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, Commission File Number 1-9172.
(lx) Intentionally left blank.
(lxi) Agreement and Plan of Merger, dated as of December 20, 1993,
between Hyster Company, an Oregon corporation, and Hyster Company, a Delaware
corporation, is incorporated herein by reference to Exhibit 10(lxxviii) to
Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31,
1993, Commission File Number 33-28812.
*(lxii) Agreement and Plan of Merger, dated as of December 20, 1993,
between Yale Materials Handling Corporation, a Delaware corporation, Hyster
Company, a Delaware corporation, and Hyster-Yale Materials Handling, Inc., a
Delaware corporation, is incorporated herein by reference to Exhibit 10(lxxix)
to Hyster-Yale Annual Report on Form 10-K for the fiscal year ended December 31,
1993, Commission File Number 33-28812.
*(lxiii) NACCO Materials Handling Group, Inc. Annual Incentive
Compensation Plan, effective as of January 1, 2002, is attached hereto as
Exhibit 10(lxiii).
*(lxiv) NACCO Materials Handling Group, Inc. Senior Executive Long-Term
Incentive Compensation Plan, effective as of January 1, 2000, is incorporated
herein by reference to Exhibit 10(lxiv) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172.
*(lxv) NACCO Materials Handling Group, Inc. Long-Term Incentive
Compensation Plan, effective as of January 1, 2000, is incorporated by reference
to Exhibit 10(lxv) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, Commission File Number 1-9172.
*(lxvi) Amendment No. 1, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Senior Executive Long-Term Incentive Compensation
Plan (effective as of January 1, 2000) is attached hereto as Exhibit 10(lxvi).
*(lxvii) Amendment No. 1, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Long-Term Incentive Compensation Plan (effective
as of January 1, 2000) is attached hereto as Exhibit 10(lxvii).
*(lxviii) Amendment No. 1, dated as of February 19, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated
effective September 1, 2000) is attached hereto as Exhibit 10(lxviii).
(lxix) Amendment, dated as of January 1, 1994, to the Third Amendment
and Restated Operating Agreement dated as of November 7, 1991, between NACCO
Materials Handling Group and AT&T Commercial Finance Corporation is incorporated
herein by reference to Exhibit 10(c) to the Hyster-Yale Quarterly Report on Form
10-Q for the quarter ended September 30, 1994, Commission File Number 33-28812.
*(lxx) The Yale Materials Handling Corporation Deferred Incentive
Compensation Plan (also known as The Yale Materials Handling Corporation
Short-Term Incentive Compensation Deferral Plan), dated March 1, 1984, is
incorporated herein by reference to Exhibit 10(lxxi) to the Hyster-Yale Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File
Number 33-28812.
(lxxi) Intentionally left blank.
(lxxii) Credit Agreement between NACCO Materials Handling Group, Inc.
and Morgan Guaranty Trust company of New York, as Agent, and the other banks
listed thereto, dated February 28, 1995, is incorporated by reference herein to
Exhibit 10(lxxxvii) of the Hyster-Yale Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, Commission File Number 33-28812.
X-6
*(lxxiii) NACCO Materials Handling Group, Inc. Unfunded Benefit Plan
(as amended and restated effective as of September 1, 2000) is incorporated
herein by reference to Exhibit 10(lxxiii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2000, Commission File Number 1-9172.
(lxxiv) Intentionally left blank.
(lxxv) Amended and Restated Credit Agreement, dated as of June 4, 1996,
among NACCO Materials Handling Group, Inc., the Banks party thereto, the
Co-Arrangers and Co-Agents listed on the signature page thereto and Morgan
Guaranty Trust Company of New York, as Agent, is incorporated by reference to
Exhibit 10(lxxv) to the Company's Quarterly Statement on Form 10-Q for the
quarter ended June 30, 1996, Commission File Number 1-9172.
(lxxvi) Amendment, dated as of December 16, 1996, to the Amended and
Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials
Handling Group, Inc., the Banks party thereto, the Co-Arrangers and Co-Agents
listed on the signature page thereto and Morgan Guaranty Trust Company of New
York, as Agent, is incorporated herein by reference to Exhibit 10(lxxxvi) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, Commission File Number 1-9172.
(lxxvii) Amendment No. 2, dated as of March 26, 1997, to the Amended
and Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials
Handling Group, Inc., the Banks party thereto, the Co-arrangers and Co-agents
listed on the signature page thereto and Morgan Guaranty Trust Company of New
York, as Agent, is incorporated herein by reference to Exhibit 10(lxxviii) to
the Company's Quarterly Statement on Form 10-Q for the quarter ended March 31,
1997, Commission File Number 1-9172.
(lxxviii) Amendment No. 3, dated as of May 19, 1997, to the Amended and
Restated Credit Agreement dated as of June 4, 1996 among NACCO Materials
Handling Group, Inc., the Banks party thereto, the Co-arrangers and Co-agents
listed on the signature page thereto and Morgan Guaranty Trust Company of New
York, as Agent, is incorporated herein by reference to Exhibit 10(lxxviii) to
the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30,
1997, Commission File Number 1-9172.
*(lxxix) Amendment No. 2, dated as of August 6, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated
effective September 1, 2000) is attached hereto as Exhibit 10(lxxix).
*(lxxx) Amendment No. 3, dated as of June 8, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated
effective September 1, 2000) is attached hereto as Exhibit 10(lxxx).
*(lxxxi) Amendment No. 4, dated as of November 1, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated
effective September 1, 2000) is attached hereto as Exhibit 10(lxxxi).
*(lxxxii) Amendment No. 5, dated as of December 21, 2001, to the NACCO
Materials Handling Group, Inc. Unfunded Benefit Plan (as amended and restated
effective September 1, 2000) is attached hereto as Exhibit 10(lxxxii).
*(lxxxiii) Amendment No. 4, dated as of October 8,1999, to the NACCO
Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is
incorporated herein by reference to Exhibit 10(lxxxiii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File
Number 1-9172.
*(lxxxiv) Amendment No. 5, dated as of December 20,1999, to the NACCO
Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is
incorporated herein by reference to Exhibit 10(lxxxiv) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, Commission File
Number 1-9172.
*(lxxxv) Amendment No. 6, dated as of March 9, 2000, to the NACCO
Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is
incorporated by reference to Exhibit 10(lxxxv) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, Commission File Number
1-9172.
*(lxxxvi) Amendment No. 7, dated as of June 23, 2000, to the NACCO
Materials Handling Group, Inc. Long-Term Incentive Compensation Plan is
incorporated by reference to Exhibit 10(lxxxvi) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000, Commission File Number
1-9172.
(lxxxvii) Agreement of Merger, dated as of January 20, 1988, among
NACCO Industries, Inc., Housewares Holding Company, WE-PS Merger, Inc. and
WearEver-ProctorSilex, Inc., is incorporated herein by reference to pages 8
through 97 of Exhibit 2 to the Company's Current Report on Form 8-K, dated
February 1, 1988, Commission File Number 1-9172.
X-7
(lxxxviii) Shareholders Agreement, dated January 20, 1988, among NACCO
Industries, Inc. and the shareholders named therein is incorporated herein by
reference to pages 98 through 108 of Exhibit 2 to the Company's Current Report
on Form 8-K, dated February 1, 1988, Commission File Number 1-9172.
(lxxxix) - (xci) Intentionally left blank.
(xcii) Pledge Agreement re: 66% Pledge of PSC Stock, dated as of
October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cx) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xciii) Pledge Agreement re: 66% Pledge of PSM Stock, dated as of
October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cxi) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xciv) Pledge Agreement re: 34% pledge of PSC Stock, dated as of
October 11, 1990, between Hamilton Beach/Proctor-Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cxii) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xcv) Pledge Agreement re: 33.2% Pledge of PSM Stock, dated as of
October 11, 1990, between Hamilton Beach/Proctor Silex and The Chase Manhattan
Bank (National Association) is incorporated herein by reference to Exhibit
10(cxiii) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 1-9172.
(xcvi) Pledge Agreement, dated as of October 11, 1990, between
Housewares Holding Company and The Chase Manhattan Bank (National Association)
is incorporated herein by reference to Exhibit 10(cxiv) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File
Number 1-9172.
(xcvii) Pledge Agreement, dated as of October 11, 1990, between HB-PS
Holding Company, Inc. and The Chase Manhattan Bank (National Association) is
incorporated herein by reference to Exhibit 10(cxv) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File
Number 1-9172.
(xcviii) Security Agreement, dated as of October 11, 1990, between
Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxvi) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission File Number 1-9172.
(xcix) Collateral Assignment of Patents and Trademarks and Security
Agreement, dated as of October 11, 1990, between Hamilton Beach/Proctor-Silex
and The Chase Manhattan Bank (National Association), as the United States agent,
is incorporated herein by reference to Exhibit 10(cxvii) to the Company s Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File
Number 1-9172.
(c) NACCO Supplemental Agreement, dated as of October 11, 1990, between
NACCO and The Chase Manhattan Bank (National Association), as the United States
agent, is incorporated herein by reference to Exhibit 10(cxviii) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 1-9172.
(ci) Housewares Supplemental Agreement, dated as of October 11, 1990,
between Housewares Holding Company and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxix) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission File Number 1-9172.
(cii) Holdings Supplemental Agreement, dated as of October 11, 1990,
between HB-PS Holding Company, Inc. and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxx) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31,1990, Commission File Number 1-9172.
(ciii) Override Agreement, dated as of October 11, 1990, among the
Company, Housewares Holding Company, Glen Dimplex, Precis [521] Ltd., Glen
Electric, Ltd. and The Chase Manhattan Bank (National Association), as the
United States agent, is incorporated herein by reference to Exhibit 10(cxxi) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 1-9172.
X-8
(civ) General Security Agreement, dated as of October 11, 1990, by
Proctor-Silex Canada to and in favor of The Chase Manhattan Bank of Canada, as
the Canadian agent, is incorporated herein by reference to Exhibit 10(cxxii) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission File Number 1-9172.
*(cv) The Hamilton Beach/Proctor-Silex, Inc. 2001 Annual Incentive
Compensation Plan is incorporated herein by reference to Exhibit 10(cxx) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000, Commission File Number 1-9172.
*(cvi) Hamilton Beach/Proctor-Silex, Inc. Long-Term Incentive
Compensation Plan, effective January 1, 1993, is incorporated by reference to
Exhibit 10(cxxiv) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, Commission File Number 1-9172.
(cvii) First Amendment to the Housewares Supplemental Agreement, dated
as of March 1, 1991, between Housewares Holding Company and The Chase Manhattan
Bank (National Association), as the United States agent, is incorporated herein
by reference to Exhibit 10(cxxv) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, Commission File Number 1-9172.
(cviii) First Amendment to the Holdings Supplemental Agreement, dated
as of March 1, 1991, between HB-PS Holding Company and The Chase Manhattan Bank
(National Association), as the United States agent, is incorporated herein by
reference to Exhibit 10(cxxvi) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990, Commission File Number 1-9172.
(cvix) Consent and Authorization with reference made to the Credit
Agreement dated October 11, 1990, as amended among Hamilton Beach/Proctor-Silex,
Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., the banks named on
the signatory pages and The Chase Manhattan Bank is incorporated herein by
reference to Exhibit (cxxxvii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, Commission File Number 1-9172.
(cx) Amended and Restated Credit Agreement, dated as of May 10, 1994
among Hamilton Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc.,
Proctor-Silex S.A. DE C.V., the banks named on the signatory pages and the Chase
Manhattan Bank is incorporated herein by reference to as Exhibit 10 (cxxxviii)
to the NACCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, Commission File Number 1-9172.
(cxi) Confirmation Agreement, dated May 10, 1994, among Hamilton
Beach/Proctor-Silex, Inc., Housewares Holding Company, Precis [521] Ltd., HB-PS
Holding Company, Glen Dimplex, Glen Electric, Ltd., the banks named on the
signatory pages, the Chase Manhattan Bank and the Chase Manhattan Bank of Canada
is incorporated herein by reference to Exhibit 10 (cxxix) to the NACCO
Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended on June 30,
1994, Commission File Number 1-9172.
(cxii) First Amendment to the NACCO Supplemental Agreement, dated as of
March 1, 1991, between the Company and The Chase Manhattan Bank (National
Association), as the United States agent, is incorporated herein by reference to
Exhibit 10(cxxi) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission File Number 1-9172.
(cxiii) Waiver Agreement, dated January 16, 1996, among Hamilton
Beach/Proctor-Silex, Inc., Proctor-Silex Canada, Inc., Proctor-Silex S.A. de
C.V. the banks named on the signatory pages and Chase Manhattan Bank is
incorporated herein by reference to Exhibit 10 (cxiii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File
Number 1-9172.
(cxiv) Amended and Restated Credit Agreement, dated as of April 18,
1995, among Hamilton Beach/Proctor-Silex, Inc., Proctor- Silex, Inc.,
Proctor-Silex S.A. de C.V., the banks named on the signatory pages and The Chase
Manhattan Bank is incorporated herein by reference to Exhibit 10(cxiv) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995, Commission File Number 1-9172.
(cxv) Amendment No. 1, dated as of March 29, 1996, to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc.
Proctor-Silex Canada, Inc., Proctor-Silex S.A de C.V., as Borrowers, the Banks
signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The
Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated by reference
herein to Exhibit 10 (xvii) on the Company's Quarterly Statement on Form 10-Q
for the quarter ended June 30, 1996, Commission File Number 1-9172.
(cxvi) Amendment No. 2, dated as of October 4, 1996, to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc.,
Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks
signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The
Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by
reference to Exhibit 10(cxviii) to the Company's Quarterly Statement for the
quarter ended September 30, 1996, Commission File Number 1-9172.
X-9
(cxvii) Amendment No. 3, dated as of April 14, 1997, to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc.,
Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Borrowers, the Banks
signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The
Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by
reference to Exhibit 10(cxviii) to the Company's Quarterly Statement for the
quarter ended June 30, 1997, Commission File Number 1-9172.
(cxviii) Pledge Agreement, dated as of November 30, 1995, between
Hamilton Beach/Proctor-Silex and The Chase Manhattan Bank (National
Association), is incorporated herein by reference to Exhibit 10(cxviii) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, Commission File Number 1-9172.
(cxix) Pledge Agreement re: 66% of PST Stock, dated as of November 30,
1995, between HB/PS El Paso, Inc. and The Chase Manhattan Bank (National
Association), is incorporated herein by reference to Exhibit 10(cxix) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, Commission File Number 1-9172.
*(cxx) The Hamilton Beach/Proctor-Silex, Inc. 2002 Annual Incentive
Compensation Plan, effective as of January 1, 2002, is attached hereto as
Exhibit 10(cxx).
(cxxi) Amendment No. 4, dated as of April 22, 1998, to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc.,
Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks
signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The
Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by
reference to Exhibit 10(cxxi) to the Company's Quarterly Statement for the
quarter ended March 31, 1998, Commission File Number 1-9172.
(cxxii) Amendment No. 5, dated as of June 10, 1998, to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc.,
Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks
signatory thereto and The Chase Manhattan Bank, N.A., as U.S. Agent, and The
Chase Manhattan Bank of Canada, as Canadian Agent, is incorporated herein by
reference to Exhibit 10(cxxii) to the Company's Quarterly Statement for the
quarter ended June 30, 1998, Commission File Number 1-9172.
(cxxiii) Amendment No. 6, dated as of December 8, 1998, to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc.,
Proctor-Silex Canada, Inc., Proctor-Silex S.A. de C.V., as Obligors, the Banks
signatory thereto and The Chase Manhattan Bank (successor by merger to The Chase
Manhattan Bank, N.A.)(the Existing U.S. Agent), KeyBank National Association
(the Successor U.S. Agent), The Chase Manhattan Bank of Canada(the Existing
Canadian Agent) and The Bank of Nova Scotia (the Successor Canadian Agent), is
incorporated herein by reference to Exhibit 10(cxxiii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, Commission File
Number 1-9172.
*(cxxiv) Amendment No. 1, dated December 12, 1999, to the Hamilton
Beach/Proctor-Silex, Inc. Long-Term Incentive Compensation Plan is incorporated
herein by reference to Exhibit 10(cxxiv) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, Commission File Number 1-9172.
*(cxxv) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan
(As Amended and Restated Effective November 1, 2000) is incorporated herein by
reference to Exhibit 10(cxxv) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, Commission File Number 1-9172.
(cxxvi) Amendment No. 7, dated as of December 19, 2001, to the Second
Amended and Restated Credit Agreement, dated as of October 11, 1990, amended and
restated as of April 18, 1995, among Hamilton Beach/Proctor-Silex, Inc.,
Proctor-Silex Canada, Inc. and Proctor-Silex S.A. de C.V., as Obligors, each of
the Banks signatory thereto and KeyBank National Association, as U.S. Agent, and
The Bank of Nova Scotia, the Canadian Agent, is attached hereto as Exhibit
10(cxxvi).
*(cxxvii) The Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan
(As Amended and Restated Effective October 1, 2001) is attached hereto as
Exhibit 10(cxxvii).
X-10
*(cxxviii) Amendment No. 1, dated as of December 21, 2001, to the
Hamilton Beach/Proctor-Silex, Inc. Unfunded Benefit Plan (As Amended and
Restated Effective October 1, 2001) is attached hereto as Exhibit 10(cxxviii).
(21) Subsidiaries. A list of the subsidiaries of the Company is attached
hereto as Exhibit 21.
(23) Consents of experts and counsel.
(i) The consent of Arthur Andersen LLP, independent accountant, is attached
hereto as Exhibit 23(i).
(24) Powers of Attorney.
(i) A copy of a power of attorney for Owsley Brown II is attached hereto as
Exhibit 24(i).
(ii) A copy of a power of attorney for Robert M. Gates is attached hereto
as Exhibit 24(ii).
(iii) A copy of a power of attorney for Leon J. Hendrix, Jr. is attached
hereto as Exhibit 24(iii).
(iv) A copy of a power of attorney for David H. Hoag is attached hereto as
Exhibit 24(iv).
(v) A copy of a power of attorney for Dennis W. LaBarre is attached hereto
as Exhibit 24(v).
(vi) A copy of a power of attorney for Richard de J. Osborne is attached
hereto as Exhibit 24(vi).
(vii) A copy of a power of attorney for Ian M. Ross is attached hereto as
Exhibit 24(vii).
(viii) A copy of a power of attorney for Britton T. Taplin is attached hereto
as Exhibit 24(viii).
(ix) A copy of a power of attorney for David F. Taplin is attached hereto
as Exhibit 24(ix).
(x) A copy of a power of attorney for John F. Turben is attached hereto as
Exhibit 24(x).
(99) Other exhibits not required to otherwise be filed.**
(i) Unaudited Consolidating Statement of Operations and Comprehensive
Income (Loss) of NACCO Industries, Inc. for the Year Ended December 31,
2001 is attached hereto as Exhibit 99(i).
(ii) Unaudited Consolidating Balance Sheet of NACCO Industries, Inc. as of
December 31, 2001 is attached hereto as Exhibit 99(ii).
(iii) Unaudited Consolidating Statement of Cash Flows of NACCO Industries,
Inc. for the Year Ended December 31, 2001 is attached hereto as Exhibit
99(iii).
(iv) Unaudited Consolidating Statement of Stockholders' Equity of NACCO
Industries, Inc. for the Year Ended December 31, 2001 is attached
hereto as Exhibit 99(iv).
(v) Letter to the Securities and Exchange Commission regarding Arthur
Andersen LLP's representations to NACCO Industries, Inc. pursuant to
Temporary Note 3T to Article 3 of Regulation S-X is attached hereto as
Exhibit 99(v).
*Management contract or compensation plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of this Annual Report on Form 10-K.
**Consolidating Financial Statements of NACCO Industries, Inc. are not
required disclosures and are included only for informational purposes. These
statements have not been audited by independent public accountants and are
presented only for purposes of additional analysis and not as a presentation of
the financial results or position of each component of the consolidated group,
and should be read accordingly.
X-11