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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2003
--------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to ________
Commission file number 333-89248
---------
NMHG Holding Co.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1637659
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
650 N.E. Holladay Street; Suite 1600; Portland, OR 97232
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(503) 721-6000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
NMHG HOLDING CO. IS A WHOLLY OWNED SUBSIDIARY OF NACCO INDUSTRIES, INC. AND
MEETS THE CONDITIONS IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q. WE ARE
FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT UNDER GENERAL INSTRUCTION H(2).
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ______
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES _____ NO X
At April 30, 2003, 100 common shares were outstanding.
NMHG HOLDING CO.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Unaudited Condensed Consolidated Balance Sheets -
March 31, 2003 and December 31, 2002
Unaudited Condensed Consolidated Statements of Income
for the Three Months Ended March 31, 2003 and 2002
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2003 and 2002
Unaudited Condensed Consolidated Statements of Changes
in Stockholder's Equity for the Three Months Ended
March 31, 2003 and 2002
Notes to Unaudited Condensed Consolidated Financial
Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 4 Controls and Procedures
Part II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signature
Certifications
Exhibit Index
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
NMHG HOLDING CO. AND SUBSIDIARIES
MARCH 31 DECEMBER 31
2003 2002
-------- --------
(in millions, except share data)
ASSETS
Current Assets
Cash and cash equivalents $ 48.1 $ 54.9
Accounts receivable, net 203.7 193.1
Tax advances, NACCO Industries, Inc. 13.5 16.4
Inventories 233.6 222.0
Deferred income taxes 22.6 21.6
Prepaid expenses and other 19.4 29.9
-------- --------
Total Current Assets 540.9 537.9
Property, Plant and Equipment, Net 236.3 242.1
Goodwill 344.8 343.7
Other Non-current Assets 75.4 79.8
-------- --------
Total Assets $1,197.4 $1,203.5
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 204.4 $ 186.9
Revolving credit agreements 14.0 31.3
Current maturities of long-term debt 18.8 20.0
Accrued payroll 15.7 23.3
Accrued warranty obligations 26.5 23.1
Other current liabilities 120.3 114.2
-------- --------
Total Current Liabilities 399.7 398.8
Long-term Debt 273.5 273.5
Other Non-current Liabilities 141.2 147.8
Minority Interest .8 1.1
Stockholder's Equity
Common stock, par value $1 per share, 100 shares authorized;
100 shares outstanding --- ---
Capital in excess of par value 198.2 198.2
Retained earnings 225.1 226.8
Accumulated other comprehensive loss:
Foreign currency translation adjustment (8.0) (10.3)
Minimum pension liability adjustment (31.9) (31.9)
Deferred loss on cash flow hedging (1.2) (0.5)
-------- --------
382.2 382.3
-------- --------
Total Liabilities and Stockholder's Equity $1,197.4 $1,203.5
======== ========
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NMHG HOLDING CO. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
--------------------
2003 2002
------ ------
(in millions)
Revenues $419.0 $371.8
Cost of sales 344.2 310.1
------ ------
Gross Profit 74.8 61.7
Selling, general and administrative expenses 62.1 55.1
------ ------
Operating Profit 12.7 6.6
Other income (expense)
Interest expense (8.6) (5.5)
Gain (loss) on interest rate swap agreements (.4) .3
Income from unconsolidated affiliates .7 1.0
Other - net .2 .8
------ ------
(8.1) (3.4)
------ ------
Income Before Income Taxes and Minority Interest 4.6 3.2
Income tax provision (benefit) 1.6 (.9)
------ ------
Income Before Minority Interest 3.0 4.1
Minority interest income .3 .2
------ ------
Net Income $ 3.3 $ 4.3
====== ======
Comprehensive Income $ 4.9 $ 5.1
====== ======
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NMHG HOLDING CO. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
----------------------
2003 2002
----- -----
(in millions)
Operating Activities
Net income $ 3.3 $ 4.3
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 8.5 10.6
Deferred income taxes 1.4 3.2
Minority interest (.3) (.2)
Other non-cash items (1.8) (.8)
Working capital changes
Intercompany receivable/payable, affiliate 2.8 20.4
Accounts receivable (14.3) (28.3)
Inventories (9.1) 15.0
Other current assets (6.8) (4.0)
Accounts payable and other liabilities 25.5 8.4
----- -----
Net cash provided by operating activities 9.2 28.6
Investing Activities
Expenditures for property, plant and equipment (3.5) (6.2)
Proceeds from the sale of assets 8.1 .2
Proceeds from unconsolidated affiliates --- .6
----- -----
Net cash provided by (used for) investing activities 4.6 (5.4)
Financing Activities
Additions to long-term debt and revolving credit agreements 8.6 3.3
Reductions of long-term debt and revolving credit agreements (27.1) (8.2)
Cash dividends paid (1.2) (15.0)
Notes receivable/payable, NACCO Industries, Inc. --- (8.0)
Financing fees paid (.1) ---
----- -----
Net cash used for financing activities (19.8) (27.9)
Effect of exchange rate changes on cash (.8) ---
----- -----
Cash and Cash Equivalents
Decrease for the period (6.8) (4.7)
Balance at the beginning of the period 54.9 59.6
----- -----
Balance at the end of the period $48.1 $54.9
===== =====
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
NMHG HOLDING CO. AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31
------------------
2003 2002
------ ------
(in millions)
Common Stock $ --- $ ---
------ ------
Capital in Excess of Par Value 198.2 198.2
------ ------
Retained Earnings
Beginning balance 226.8 229.5
Net income 3.3 4.3
Cash dividends declared (5.0) (15.0)
------ ------
225.1 218.8
------ ------
Accumulated Other Comprehensive Income (Loss)
Beginning balance (42.7) (45.7)
Foreign currency translation adjustment 2.3 (.5)
Reclassification of hedging activity into earnings (.1) 1.2
Current period cash flow hedging activity (.6) .1
------ ------
(41.1) (44.9)
------ ------
Total Stockholder's Equity $382.2 $372.1
====== ======
See notes to unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NMHG HOLDING CO. AND SUBSIDIARIES
MARCH 31, 2003
(Tabular Amounts in Millions)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include
the accounts of NMHG Holding Co. ("NMHG Holding," the parent company), a
Delaware corporation, and its wholly owned subsidiaries, NACCO Materials
Handling Group, Inc. ("NMHG Wholesale") and NMHG Distribution Co. ("NMHG
Retail") (collectively, "NMHG" or the "Company"). NMHG Holding is a wholly owned
subsidiary of NACCO Industries, Inc. ("NACCO"). The Company's subsidiaries
operate in the lift truck industry. NMHG segments its lift truck operations into
two components: wholesale manufacturing and retail distribution. Intercompany
accounts and transactions have been eliminated.
NMHG designs, engineers, manufactures, sells, services and leases a
comprehensive line of lift trucks and aftermarket parts and service marketed
globally under the Hyster(R) and Yale(R) brand names. NMHG Wholesale includes
the manufacture and sale of lift trucks and related service parts, primarily to
independent and wholly owned Hyster and Yale retail dealerships. NMHG Retail
includes the sale, service and rental of Hyster and Yale lift trucks and related
service parts by wholly owned retail dealerships and rental companies.
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial position of the
Company as of March 31, 2003 and the results of its operations, cash flows and
changes in stockholder's equity for the three month periods ended March 31, 2003
and 2002 have been included.
The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information or
notes required by accounting principles generally accepted in the United States
for complete financial statements.
Operating results for the three month period ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the remainder of
the year ending December 31, 2003. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002.
Note 2 - Inventories
Inventories are summarized as follows:
MARCH 31 DECEMBER 31
2003 2002
------ ------
Manufactured inventories:
Finished goods and service parts $109.0 $ 99.9
Raw materials and work in process 110.7 110.3
------ ------
Total manufactured inventories 219.7 210.2
Retail inventories 26.8 23.4
------ ------
Total inventories at FIFO 246.5 233.6
LIFO reserve (12.9) (11.6)
------ ------
$233.6 $222.0
====== ======
The cost of certain manufactured and retail inventories, including service
parts, has been determined using the LIFO method. At March 31, 2003 and December
31, 2002, 64% of total inventories were determined using the LIFO method. An
actual valuation of inventory under the LIFO method can be made only at the end
of the year based on the inventory levels and costs at that time. Accordingly,
interim LIFO calculations must necessarily be based on management's estimates of
expected year-end inventory levels and costs. Because these estimates are
subject to change and may be different than the actual inventory levels and
costs at year-end, interim results are subject to the final year-end LIFO
inventory valuation.
Note 3 - Restructuring Charges
The changes to the Company's restructuring accruals since December 31, 2002 are
as follows:
Asset Lease
Severance Impairment Impairment Other Total
--------- ---------- ---------- ----- -----
NMHG Wholesale
Balance at December 31, 2002 $ 9.3 $ 3.8 $ --- $ .9 $ 14.0(a)
Foreign currency effect (.1) --- --- --- (.1)
Payments
(.8) --- --- --- (.8)
---------------------------------------------------------------
Balance at March 31, 2003 $ 8.4 $ 3.8 $ --- $ .9 $ 13.1
===============================================================
NMHG Retail
Balance at December 31, 2002 $ 1.5 $ --- $ .1 $ --- $ 1.6
Reversal (.1) --- --- --- (.1)
Payments
(.2) --- (.1) --- (.3)
---------------------------------------------------------------
Balance at March 31, 2003 $ 1.2 $ --- $ --- $ --- $ 1.2
===============================================================
(a) The December 31, 2002 balance indicated in the table above does not include
$7.6 million in curtailment losses relating to pension and other post-retirement
benefits which will not be paid until employees reach retirement age. These
amounts were accrued in the fiscal year ended December 31, 2000 as part of the
restructuring of the Danville, Illinois assembly plant. Final severance payments
for the Danville restructuring plan were made in 2002.
NMHG 2002 Restructuring Program
As announced in December 2002, NMHG Wholesale is phasing out its Lenoir, North
Carolina, lift truck component facility and restructuring other manufacturing
and administrative operations, primarily its Irvine, Scotland, lift truck
assembly and component facility. During the fourth quarter of 2002, NMHG
Wholesale recognized a restructuring charge of approximately $12.5 million
pre-tax. Of this amount, $3.8 million relates to a non-cash asset impairment
charge for building, machinery and tooling, which was determined based on the
then current market values for similar assets and broker quotes as compared to
the net book value of these assets; and $8.7 million relates to severance and
other employee benefits to be paid to approximately 615 manufacturing and
administrative employees. No payments have been made as of March 31, 2003.
Payments are expected to begin in 2003 and continue through 2005. Approximately
$0.8 million of pre-tax costs which were not eligible for accrual and are not
shown in the table above, primarily related to manufacturing inefficiencies,
were expensed in the first quarter of 2003 and are classified as cost of sales
in the Unaudited Condensed Consolidated Statement of Income for the three months
ended March 31, 2003.
NMHG 2001 Restructuring Programs
During 2001, management committed to the restructuring of certain operations in
Europe for both the Wholesale and Retail segments of the business. As such, NMHG
Wholesale recognized a restructuring charge of approximately $4.5 million
pre-tax for severance and other employee benefits to be paid to approximately
285 direct and indirect factory labor and administrative personnel in Europe. As
of December 31, 2002, payments of $3.4 million to approximately 245 employees
had been made and $0.2 million of the amount originally accrued was reversed in
2002. Payments of $0.8 million to 13 employees were made during the first
quarter of 2003. The majority of the headcount reductions were made by the end
of 2002.
NMHG Retail recognized a restructuring charge of approximately $4.7 million
pre-tax in 2001, of which $0.4 million related to lease termination costs and
$4.3 million related to severance and other employee benefits to be paid to
approximately 140 service technicians, salesmen and administrative personnel at
wholly owned dealers in Europe. As of December 31, 2002, severance payments of
$2.8 million had been made to approximately 110 employees. During the first
quarter of 2003, severance payments of $0.2 million were made to three
employees. In addition, $0.1 million of the amount accrued at December 31, 2002
was reversed in the first quarter of 2003. The majority of the headcount
reductions were made by the end of 2002.
Note 4 - Accounting for Guarantees
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." FIN No. 45 requires guarantors to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee for those guarantees initiated or modified after December
31, 2002. However, certain guarantees, including product warranties and
guarantees between parties under common control (i.e., parent and subsidiary),
are not required to be recognized at fair value at inception. FIN No. 45 also
requires additional disclosures of guarantees, including product warranties and
guarantees between parties under common control, beginning with interim or
annual periods ending after December 15, 2002. Guarantees initiated prior to
December 31, 2002 are not recognized as a liability measured at fair value per
this Interpretation, but are subject to the disclosure requirements. The Company
has made the required disclosures in these financial statements. Also, the
Company has recognized guarantees included within the scope of this
Interpretation and initiated after December 31, 2002 as liabilities measured at
fair value. The adoption of the fair value provisions of this Interpretation did
not have a material impact on the Company's financial position or results of
operations for the three months ended March 31, 2003.
Under various financing arrangements for certain customers, including
independently owned retail dealerships, NMHG provides guarantees of the residual
values of lift trucks, or recourse or repurchase obligations such that NMHG
would be obligated in the event of default by the customer. Terms of the
third-party financing arrangements for which NMHG is providing a guarantee
generally range from one to five years. Total guarantees and amounts subject to
recourse or repurchase obligations at March 31, 2003 and December 31, 2002 were
$163.2 million and $153.6 million, respectively. Losses anticipated under the
terms of the guarantees, recourse or repurchase obligations, which are not
significant, have been reserved for in the accompanying Unaudited Condensed
Consolidated Financial Statements. Generally, NMHG retains a security interest
in the related assets financed such that, in the event that NMHG would become
obligated under the terms of the recourse or repurchase obligations, NMHG would
take title to the assets financed. The fair value of collateral held at March
31, 2003 was approximately $177.5 million, based on Company estimates.
NMHG provides a standard warranty on its forklift trucks, generally for six to
twelve months or 1,000 to 2,000 hours. In addition, NMHG sells extended warranty
agreements which provide additional warranty up to three to five years or up to
3,600 to 10,000 hours. The specific terms and conditions of those warranties
vary depending upon the product sold and the country in which NMHG does
business. Revenue received for the sale of extended warranty contracts is
deferred and recognized in the same manner as the costs are incurred to perform
under the warranty contracts, in accordance with FASB Technical Bulletin 90-1,
"Accounting for Separately Priced Extended Warranty and Product Maintenance
Contracts." The Company estimates the costs that may be incurred under its
warranty programs, both standard and extended, and records a liability for such
costs at the time product revenue is recognized. Factors that affect the
Company's warranty liability include the number of units sold, historical and
anticipated rates of warranty claims and the cost per claim. The Company
periodically assesses the adequacy of its recorded warranty liabilities and
adjusts the amounts as necessary.
Changes in the Company's current and long-term warranty obligations, including
deferred revenue on extended warranty contracts, during the three months ended
March 31, 2003 are as follows:
Balance at December 31, 2002 $ 41.9
Warranties issued 8.6
Settlements made (8.1)
Changes in estimates (2.2)
----------
Balance at March 31, 2003 $ 40.2
==========
The Company's periodic review of the estimates used to calculate its warranty
obligations resulted in an adjustment of $2.2 million recognized in the first
quarter of 2003 to reduce the estimated required accrual at March 31, 2003. This
adjustment is not necessarily indicative of future trends or adjustments that
may be required to adjust the warranty accrual during the remainder of 2003.
Note 5 - Unaudited Condensed Consolidating Guarantor and Non-Guarantor Financial
Information
The following tables set forth the unaudited condensed consolidating statements
of income and cash flows for the three months ended March 31, 2003 and 2002 and
the unaudited condensed consolidating balance sheets as of March 31, 2003 and
December 31, 2002. The following information is included as a result of the
guarantee of the Parent Company's Senior Notes by each of NMHG's wholly owned
U.S. subsidiaries ("Guarantor Companies"). None of the Company's other
subsidiaries has guaranteed the Senior Notes. Each of the guarantees is joint
and several and full and unconditional. "NMHG Holding" includes the consolidated
financial results of the parent company only, with all of its wholly owned
subsidiaries accounted for under the equity method.
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Companies Companies Eliminations Consolidated
------- --------- --------- ------------ ------------
Revenues $ --- $ 262.9 $ 214.1 $ (58.0) $ 419.0
Cost of sales --- 221.8 180.3 (57.9) 344.2
Selling, general and
administrative expenses --- 32.6 29.5 --- 62.1
------- --------- ---------- ---------- ---------
Operating profit (loss) --- 8.5 4.3 (.1) 12.7
Interest expense --- (7.0) (1.6) --- (8.6)
Other income (expense) --- (.3) .1 --- (.2)
------- --------- ---------- ---------- ---------
Income (loss) before
income taxes, minority
interest and equity in
unconsolidated affiliates --- 1.2 2.8 (.1) 3.9
Income tax expense --- .9 .7 --- 1.6
Minority interest income --- --- .3 --- .3
Equity in income (loss) of
unconsolidated affiliates 3.3 3.1 --- (5.7) .7
------ --------- ---------- ---------- ---------
Net income (loss) $ 3.3 $ 3.4 $ 2.4 $ (5.8) $ 3.3
====== ========= ========== ========== =========
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Companies Companies Eliminations Consolidated
------- --------- --------- ------------ ------------
Revenues $ --- $239.1 $181.3 $(48.6) $371.8
Cost of sales --- 208.2 151.1 (49.2) 310.1
Selling, general and
administrative expenses --- 30.7 24.6 (.2) 55.1
------ ------ ------ ------ ------
Operating profit --- .2 5.6 .8 6.6
Interest expense (1.8) (2.5) (.1) (1.1) (5.5)
Other income (expense) --- 1.4 (.3) --- 1.1
------ ------ ------ ------ ------
Income (loss) before income
taxes, minority interest and
equity in unconsolidated
affiliates (1.8) (.9) 5.2 (.3) 2.2
Income tax benefit (.6) (.1) --- (.2) (.9)
Minority interest income --- --- .2 --- .2
Equity in income (loss) of
unconsolidated affiliates 5.5 6.4 --- (10.9) 1.0
------ ------ ------ ------ ------
Net income (loss) $ 4.3 $ 5.6 $ 5.4 $(11.0) $ 4.3
====== ======= ====== ====== ======
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
AT MARCH 31, 2003
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Companies Companies Eliminations Consolidated
------- --------- --------- ------------ ------------
Cash and cash equivalents $ --- $ 16.3 $ 31.8 $ --- $ 48.1
Accounts and notes receivable, net 16.0 102.5 175.7 (90.5) 203.7
Inventories --- 125.6 108.0 --- 233.6
Other current assets 2.8 38.5 17.5 (3.3) 55.5
-------- -------- -------- -------- --------
Total current assets 18.8 282.9 333.0 (93.8) 540.9
Property, plant and equipment, net --- 131.4 104.9 --- 236.3
Goodwill --- 307.2 37.6 --- 344.8
Other non-current assets 623.9 262.6 28.4 (839.5) 75.4
-------- -------- -------- -------- --------
Total assets $ 642.7 $ 984.1 $ 503.9 $ (933.3) $1,197.4
======== ======== ======== ======== ========
Accounts and intercompany notes
payable $ 3.8 $ 134.1 $ 143.3 $ (76.8) $ 204.4
Other current liabilities 9.5 115.0 77.9 (21.1) 181.3
Revolving credit agreements --- --- 14.0 --- 14.0
-------- -------- -------- -------- --------
Total current liabilities 13.3 249.1 235.2 (97.9) 399.7
Long-term debt 247.2 260.3 39.3 (273.3) 273.5
Other long-term liabilities --- 113.2 44.4 (15.6) 142.0
Stockholder's equity 382.2 361.5 185.0 (546.5) 382.2
-------- -------- -------- -------- --------
Total liabilities and stockholder's equity $ 642.7 $ 984.1 $ 503.9 $ (933.3) $1,197.4
======== ======== ======== ======== ========
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
AT DECEMBER 31, 2002
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Companies Companies Eliminations Consolidated
------- --------- --------- ------------ ------------
Cash and cash equivalents $ --- $ 5.3 $ $ --- $ 54.9
Accounts and notes receivable, net 259.7 120.3 161.7 (348.6) 193.1
Inventories --- 121.5 100.5 --- 222.0
Other current assets 3.7 55.2 9.3 (0.3) 67.9
-------- -------- -------- -------- --------
Total current assets 263.4 302.3 321.1 (348.9) 537.9
Property, plant and equipment, net --- 133.3 108.8 --- 242.1
Goodwill --- 307.3 36.4 --- 343.7
Other non-current assets 374.8 238.4 27.1 (560.5) 79.8
-------- -------- -------- -------- --------
Total assets $ 638.2 $ 981.3 $ 493.4 $ (909.4) $1,203.5
======== ======== ======== ======== ========
Accounts and intercompany notes
payable $ --- $ 375.2 $ 152.5 $ (340.8) $ 186.9
Other current liabilities 3.6 114.4 75.1 (12.5) 180.6
Revolving credit agreements 5.2 --- 26.1 --- 31.3
-------- -------- -------- -------- --------
Total current liabilities 8.8 489.6 253.7 (353.3) 398.8
Long-term debt 247.1 11.5 14.9 --- 273.5
Other long-term liabilities --- 118.7 44.2 (14.0) 148.9
Stockholder's equity 382.3 361.5 180.6 (542.1) 382.3
-------- -------- -------- -------- --------
Total liabilities and stockholder's
equity $ 638.2 $ 981.3 $ 493.4 $ (909.4) $1,203.5
======== ======== ======== ======== ========
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Companies Companies Eliminations Consolidated
------- --------- --------- ------------ ------------
Net cash provided by (used for) operating
activities $ 1.9 $ 13.1 $ (4.6) $ (1.2) $ 9.2
Investing activities
Expenditures for property, plant and equipment --- (2.0) (1.5) --- (3.5)
Proceeds from the sale of assets --- 7.3 .8 --- 8.1
------ ------- ------- ------ -------
Net cash provided by (used for) investing
activities --- 5.3 (.7) --- 4.6
Financing activities
Additions to long-term debt and revolving
credit agreements --- 1.1 7.5 --- 8.6
Reductions of long-term debt and revolving
credit agreements (5.2) (.9) (21.0) --- (27.1)
Notes receivable/payable, affiliates 4.6 (6.4) 1.8 --- ---
Other-net (1.3) (1.2) --- 1.2 (1.3)
------ ------- ------- ------ -------
Net cash provided by (used for) financing
activities (1.9) (7.4) (11.7) 1.2 (19.8)
Effect of exchange rate changes on cash --- --- (.8) --- (.8)
------ ------- ------- ------ -------
Cash and cash equivalents
Increase (decrease) for the period --- 11.0 (17.8) --- (6.8)
Balance at the beginning of the period --- 5.3 49.6 --- 54.9
------ ------- ------- ------ -------
Balance at the end of the period $ --- $ 16.3 $ 31.8 $ --- $ 48.1
======= ======= ======= ====== =======
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Companies Companies Eliminations Consolidated
--------- ---------- ------------ ----------- ------------
Net cash provided by (used for) operating
activities $ (.7) $ 17.8 $ 11.1 $ .4 $ 28.6
Investing activities
Expenditures for property, plant and equipment --- (.8) (5.4) --- (6.2)
Proceeds from the sale of assets --- .3 (.1) --- .2
Other-net 14.2 2.5 (2.2) (13.9) .6
------- -------- --------- -------- --------
Net cash provided by (used for) investing
activities 14.2 2.0 (7.7) (13.9) (5.4)
Financing activities
Additions to long-term debt and revolving
credit agreements --- --- 3.3 --- 3.3
Reductions of long-term debt and revolving
credit agreements --- (.8) (7.4) --- (8.2)
Notes receivable/payable, affiliates .7 (3.6) (5.4) .3 (8.0)
Other-net (14.2) (20.0) 6.0 13.2 (15.0)
------- -------- --------- -------- --------
Net cash provided by (used for) financing
activities (13.5) (24.4) (3.5) 13.5 (27.9)
Effect of exchange rate changes on cash --- --- --- --- ---
------- -------- --------- -------- --------
Cash and cash equivalents
Decrease for the period --- (4.6) (.1) --- (4.7)
Balance at the beginning of the period --- 21.9 37.7 --- 59.6
------- --------- --------- -------- --------
Balance at the end of the period $ --- $ 17.3 $ 37.6 $ --- $ 54.9
======= ========= ========= ======== ========
Note 6 - Segment Information
Financial information for each of the Company's reportable segments, as defined
by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is presented in the following table.
NMHG Wholesale derives a portion of its revenues from transactions with NMHG
Retail. The amount of these revenues, which are based on current market prices
of similar third-party transactions, are indicated in the following table on the
line "NMHG Eliminations" in the revenues section.
THREE MONTHS ENDED
MARCH 31
---------------------------
2003 2002
-------- ---------
REVENUES FROM EXTERNAL CUSTOMERS
NMHG Wholesale $ 382.6 $ 327.7
NMHG Retail 53.9 56.2
NMHG Eliminations (17.5) (12.1)
-------- --------
NMHG Consolidated $ 419.0 $ 371.8
======== ========
GROSS PROFIT
NMHG Wholesale $ 64.1 $ 48.8
NMHG Retail 10.3 12.3
NMHG Eliminations .4 .6
-------- --------
NMHG Consolidated $ 74.8 $ 61.7
======== ========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 50.4 $ 42.4
NMHG Retail 11.7 13.0
NMHG Eliminations --- (.3)
-------- --------
NMHG Consolidated $ 62.1 $ 55.1
======== ========
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 13.7 $ 6.4
NMHG Retail (1.4) (.7)
NMHG Eliminations .4 .9
-------- --------
NMHG Consolidated $ 12.7 $ 6.6
======== ========
INTEREST EXPENSE
NMHG Wholesale $ (7.2) $ (3.6)
NMHG Retail (.9) (.8)
NMHG Eliminations (.5) (1.1)
-------- --------
NMHG Consolidated $ (8.6) $ (5.5)
======== ========
INTEREST INCOME
NMHG Wholesale $ .5 $ .6
NMHG Retail .1 ---
-------- --------
NMHG Consolidated $ .6 $ .6
======== ========
THREE MONTHS ENDED
MARCH 31
----------------------------
2003 2002
----------- ----------
OTHER-NET, INCOME (EXPENSE), EXCLUDING INTEREST INCOME
NMHG Wholesale $ (.3) $ 1.5
NMHG Retail .2 ---
----------- ----------
NMHG Consolidated $ (.1) $ 1.5
=========== ==========
INCOME TAX PROVISION (BENEFIT)
NMHG Wholesale $ 2.3 $ (.5)
NMHG Retail (.7) (.3)
NMHG Eliminations --- (.1)
----------- ----------
NMHG Consolidated $ 1.6 $ (.9)
=========== ==========
NET INCOME (LOSS)
NMHG Wholesale $ 4.7 $ 5.6
NMHG Retail (1.3) (1.2)
NMHG Eliminations (.1) (.1)
----------- ----------
NMHG Consolidated $ 3.3 $ 4.3
=========== ==========
DEPRECIATION AND AMORTIZATION
EXPENSE
NMHG Wholesale $ 6.6 $ 7.6
NMHG Retail 1.9 3.0
----------- ----------
NMHG Consolidated $ 8.5 $ 10.6
=========== ==========
CAPITAL EXPENDITURES
NMHG Wholesale $ 2.8 $ 5.4
NMHG Retail .7 .8
----------- ----------
NMHG Consolidated $ 3.5 $ 6.2
=========== ==========
MARCH 31 DECEMBER 31
2003 2002
----------- ----------
TOTAL ASSETS
NMHG Wholesale $ 1,105.9 $ 1,070.7
NMHG Retail 158.8 187.7
NMHG Eliminations (67.3) (54.9)
----------- ----------
NMHG Consolidated $ 1,197.4 $ 1,203.5
=========== ==========
NACCO charges fees to its operating subsidiaries, including NMHG. The amounts
charged to NMHG were $2.0 million and $1.8 million for the three months ended
March 31, 2003 and 2002, respectively.
Note 7 - Accounting Standards Not Yet Adopted
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities." FIN No. 46 clarifies the application of Accounting Research Bulletin
("ARB") No. 51, "Consolidated Financial Statements" for certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 requires that variable interest entities, as defined,
should be consolidated by the primary beneficiary, which is defined as the
entity that is expected to absorb the majority of the expected losses, receive a
majority of the expected gains, or both. The Company is currently evaluating its
affiliated entities, however, at this time, the Company does not believe that it
is reasonably possible that any entity it is affiliated with but does not
currently consolidate will meet the definition of a variable interest entity.
On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends and
clarifies accounting for derivatives and hedging based on decisions made: (a)
previously as part of the Derivative Implementation Group process, (b) in
connection with other FASB projects and (c) regarding other issues raised,
including the characteristics of a derivative that contains a financing
component. This Statement is effective for contracts entered into or modified
after June 30, 2003 and should be applied prospectively, with the exception of
certain transactions. The Company has not yet determined what impact, if any,
the adoption of this Statement will have on its results of operations or
financial position.
Note 8 - Equity Investments
NMHG has a 20% 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.
NMHG has a 50% ownership interest in Sumitomo NACCO Materials Handling Company,
Ltd. ("SN"), a limited liability company which was 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 purchases products from SN under normal
trade terms.
Summarized financial information for these equity investments is as follows:
THREE MONTHS ENDED
MARCH 31
-------------------
2003 2002
---- ----
Revenues $ 56.4 $ 40.0
Gross Profit $ 20.1 $ 12.5
Net Income $ 3.4 $ 1.5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Tabular Amounts in Millions)
==========================================
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
==========================================
Please refer to the discussion of the Company's Critical Accounting Policies and
Estimates as disclosed on pages 10 and 11 in the Company's Form 10-K for the
fiscal year ended December 31, 2002.
================
FINANCIAL REVIEW
================
The segment and geographic results of operations for NMHG were as follows for
the three months ended March 31:
2003 2002
------ ------
Revenues
Wholesale
Americas $256.2 $228.3
Europe, Africa and Middle East 102.7 84.6
Asia-Pacific 23.7 14.8
------ ------
382.6 327.7
------ ------
Retail (net of eliminations)
Americas .7 7.6
Europe, Africa and Middle East 17.5 16.1
Asia-Pacific 18.2 20.4
------ ------
36.4 44.1
------ ------
NMHG Consolidated $419.0 $371.8
====== ======
Operating profit (loss)
Wholesale
Americas $ 13.2 $ 9.2
Europe, Africa and Middle East .5 (2.8)
Asia-Pacific --- ---
------ ------
13.7 6.4
------ ------
Retail (net of eliminations)
Americas .2 .2
Europe, Africa and Middle East (1.5) .3
Asia-Pacific .3 (.3)
------ ------
(1.0) .2
------ ------
NMHG Consolidated $ 12.7 $ 6.6
====== ======
Interest expense
Wholesale $ (7.2) $ (3.6)
Retail (net of eliminations) (1.4) (1.9)
------ ------
NMHG Consolidated $ (8.6) $ (5.5)
====== ======
Other income, net
Wholesale $ .2 $ 2.1
Retail (net of eliminations) .3 ---
------ ------
NMHG Consolidated $ .5 $ 2.1
====== ======
Net income (loss)
Wholesale $ 4.7 $ 5.6
Retail (net of eliminations) (1.4) (1.3)
------ ------
NMHG Consolidated $ 3.3 $ 4.3
====== ======
FINANCIAL REVIEW - continued
2003 2002
---- ----
Effective tax rate
Wholesale 34.3% (a)
Retail (net of eliminations) 33.3% 23.5%
NMHG Consolidated 34.8% (a)
(a) The effective tax rate for the first quarter of 2002 for NMHG Wholesale and
NMHG Consolidated is not meaningful due to a $1.9 million tax benefit recognized
in the first quarter of 2002 related to the recognition of previously generated
losses in China, combined with a relatively low level of pre-tax income. These
factors resulted in a net tax benefit generated on pre-tax income.
First Quarter of 2003 Compared with First Quarter of 2002
NMHG Wholesale
Revenues increased to $382.6 million in the first quarter of 2003, up 16.8% from
$327.7 million in the first quarter of 2002. Increased unit volume in the
Americas and, to a lesser degree, favorable currency movements in Europe
contributed to revenue growth. Worldwide unit volumes increased 16.6% to 17,452
units shipped in the first quarter compared with 14,971 units shipped in the
first quarter of 2002. Increased revenues from these factors were partially
offset by a higher proportion of lower-priced lift trucks sold in the first
quarter of 2003 compared with the first quarter of 2002.
Operating profit increased to $13.7 million in the first quarter of 2003 from
$6.4 million in the first quarter of 2002. Operating profit improved primarily
due to increased unit and parts volume and a favorable shift in mix to
higher-margin products sold. The increase in operating profit was partially
offset by increased product development expenses of $2.6 million and additional
expenses related to the previously announced phase-out of the Lenoir, North
Carolina lift truck component facility. See additional discussion of the NMHG
Wholesale restructuring programs under the heading "NMHG Restructuring Plans" in
this Form 10-Q.
Net income decreased to $4.7 million in the first quarter of 2003 from $5.6
million in the first quarter of 2002. Although operating profit increased in the
first quarter of 2003 as compared with the first quarter of 2002, net income
declined primarily due to (i) increased interest expense, including the
amortization of deferred financing fees, resulting from the refinancing of
NMHG's debt in the second quarter of 2002, (ii) an increase in the effective tax
rate due to a non-recurring $1.9 million tax benefit recorded in 2002 related to
the recognition of previously generated losses in China and (iii) the negative
effect of the amortization of accumulated other comprehensive income related to
terminated interest rate swap agreements. The interest rate swap agreements were
terminated in 2002 as a result of the May 2002 refinancing of NMHG's floating
rate revolving credit facility.
NMHG Wholesale's worldwide backlog level at the end of the first quarter of 2003
increased 6.1% to 17,300 units, compared with 16,300 units at the end of first
quarter of 2002. However, the backlog level at March 31, 2003 decreased 8.0%,
compared with 18,800 units at the end of the fourth quarter of 2002. NMHG
Wholesale's bookings in the first quarter of 2003 were affected, like many
capital goods manufacturers, by pre-war purchasing conservatism by customers.
FINANCIAL REVIEW - continued
NMHG Retail (net of eliminations)
Revenues decreased to $36.4 million in the first quarter of 2003 from $44.1
million in the first quarter of 2002. This decrease is primarily due to the
January 3, 2003 sale of NMHG Retail's only wholly owned U.S. dealer. NMHG
Retail-Americas revenues were $7.6 million in the first quarter of 2002 compared
with $0.7 million in the first quarter of 2003. Revenues in Europe increased
primarily due to favorable currency movements, while revenues in Asia-Pacific
decreased primarily due to lower service and parts sales. NMHG Retail generated
an operating loss of $1.0 million in the first quarter of 2003 compared with an
operating profit of $0.2 million in the first quarter of 2002. The decrease in
operating results is primarily due to $1.1 million of additional wind-down costs
related to dealers which have been sold. Net loss in the first quarter of 2003
was $1.4 million compared with a net loss of $1.3 million in the first quarter
of 2002. The 2003 net loss is comparable to 2002 results due to the factors
affecting operating profit (loss), partially offset by (i) a decrease in
interest expense allocated to NMHG Retail, (ii) favorable foreign currency
movements included in other-net expenses and (iii) an increase in the effective
tax rate benefit applied to the pre-tax loss in the first quarter of 2003 as
compared with the first quarter of 2002.
NMHG Restructuring Plans
NMHG 2002 Restructuring Program
As announced in December 2002, NMHG Wholesale is phasing out its Lenoir, North
Carolina, lift truck component facility and restructuring other manufacturing
and administrative operations, primarily its Irvine, Scotland, lift truck
assembly and component facility. During the fourth quarter of 2002, NMHG
Wholesale recognized a restructuring charge of approximately $12.5 million
pre-tax. Of this amount, $3.8 million relates to a non-cash asset impairment
charge for building, machinery and tooling, which was determined based on the
then current market values for similar assets and broker quotes as compared to
the net book value of these assets; and $8.7 million relates to severance and
other employee benefits to be paid to approximately 615 manufacturing and
administrative employees. No payments have been made as of March 31, 2003.
Payments are expected to begin in 2003 and continue through 2005.
Approximately $0.8 million of pre-tax costs primarily related to manufacturing
inefficiencies were expensed in the first quarter of 2003 and are classified as
cost of sales in the Unaudited Condensed Consolidated Statement of Income for
the three months ended March 31, 2003. Additional costs for severance and
manufacturing inefficiencies to be expensed as incurred are expected to be
approximately $10.0 million for the remainder of 2003, $8.1 million in 2004 and
$5.7 million in 2005. Initial net benefits from this restructuring program are
expected to be realized in 2004 with a full twelve months of estimated annual
pre-tax benefits of approximately $14.8 million expected beginning in 2006.
Although a majority of the projected savings is the result of a reduction in
fixed factory costs, the overall benefit estimates could vary depending on unit
volumes and the resulting impact on manufacturing efficiencies. In addition,
outlays for capital expenditures, primarily for new tooling and equipment, of
approximately $6.8 million are expected for the remainder of 2003.
This restructuring program will allow the Company to re-focus its product line
manufacturing activities, including the manufacture of new product lines in
Europe. As a result, the Company expects to receive government grants during
2003 through 2005 totaling approximately $6.5 million over that three-year
period. Of this total amount, $0.3 million is expected to be received in 2003.
FINANCIAL REVIEW - continued
NMHG 2001 Restructuring Programs
During 2001, management committed to the restructuring of certain operations in
Europe for both the Wholesale and Retail segments of the business. As such, NMHG
Wholesale recognized a restructuring charge of approximately $4.5 million
pre-tax for severance and other employee benefits to be paid to approximately
285 direct and indirect factory labor and administrative personnel in Europe. As
of December 31, 2002, payments of $3.4 million to approximately 245 employees
had been made and $0.2 million of the amount originally accrued was reversed in
2002. Payments of $0.8 million to 13 employees were made during the first
quarter of 2003. The majority of the headcount reductions were made by the end
of 2002. As a result of the reduced headcount in Europe, NMHG Wholesale realized
pre-tax cost savings primarily from reduced employee wages and benefits of $2.3
million for the first three months of 2003 and estimates pre-tax savings of $6.9
million for the remainder of 2003. Annual pre-tax cost saving of $9.2 million
are expected to continue subsequent to 2003 as a result of this program.
Although a majority of the projected savings is the result of a reduction in
fixed factory costs, the overall benefit estimates could vary depending on unit
volumes and the resulting impact on manufacturing efficiencies or due to changes
in foreign currency rates.
NMHG Retail recognized a restructuring charge of approximately $4.7 million
pre-tax in 2001, of which $0.4 million related to lease termination costs and
$4.3 million related to severance and other employee benefits to be paid to
approximately 140 service technicians, salesmen and administrative personnel at
wholly owned dealers in Europe. As of December 31, 2002, severance payments, net
of currency effects, of $2.8 million had been made to approximately 110
employees. During the first quarter of 2003, severance payments of $0.2 million
were made to three employees. In addition, $0.1 million of the amount accrued at
December 31, 2002 was reversed in the first quarter of 2003. The majority of the
headcount reductions were made by the end of 2002. Cost savings primarily from
reduced employee wages, employee benefits and lease costs of approximately $0.7
million pre-tax were realized in the first three months of 2003 and are expected
to be approximately $2.4 million for the remainder of 2003 related to this
program. Annual pre-tax cost saving of $3.1 million are expected to continue
subsequent to 2003 as a result of this program. Estimated benefits could be
reduced by additional severance payments, if any, made to employees above the
statutory or contractually required amount that was accrued in 2001 or due to
changes in foreign currency rates.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $2.8 million for NMHG
Wholesale and $0.7 million for NMHG Retail during the first three months of
2003. These capital expenditures include tooling for new products, machinery,
equipment and lease and rental fleet. It is estimated that NMHG's capital
expenditures for the remainder of 2003 will be approximately $31.0 million for
NMHG Wholesale and $0.8 million for NMHG Retail. Planned expenditures for the
remainder of 2003 include tooling for new products, capital expenditures arising
as a result of the manufacturing restructuring programs, replacement of
machinery and equipment and additions to retail lease and rental fleet. The
principal sources of financing for these capital expenditures will be internally
generated funds and bank borrowings.
Since December 31, 2002, there have been no significant changes in the total
amount of NMHG's contractual obligations or commercial commitments, or the
timing of cash flows in accordance with those obligations, as reported in the
Company's 10-K for the year ended December 31, 2002.
During 2002, NMHG issued $250.0 million of 10% unsecured Senior Notes that
mature on May 15, 2009. The Senior Notes are senior unsecured obligations of
NMHG Holding Co. and are guaranteed by substantially all of NMHG's domestic
subsidiaries. NMHG Holding Co. has the option to redeem all or a portion of the
Senior Notes on or after May 15, 2006 at the redemption prices set forth in the
Indenture governing the Senior Notes. The proceeds from the Senior Notes were
reduced by an original issue discount of $3.1 million.
LIQUIDITY AND CAPITAL RESOURCES - continued
Additionally, NMHG has a secured, floating-rate revolving credit facility which
expires in May 2005. Availability under the revolving credit facility is up to
$175.0 million and is governed by a borrowing base derived from advance rates
against the inventory and accounts receivable of the borrowers, as defined in
the revolving credit facility. Adjustments to reserves booked against these
assets, including inventory reserves, will change the eligible borrowing base
and thereby impact the liquidity provided by the facility. At March 31, 2003,
the borrowing base under the revolving credit facility was $93.0 million, which
reflects reductions for the commitments or availability under certain foreign
credit facilities and for an excess availability requirement of $15.0 million.
There were no borrowings outstanding under this facility at March 31, 2003.
Therefore, at March 31, 2003, the excess availability under the revolving credit
facility was $93.0 million. The floating rate of interest applicable to this
facility on March 31, 2003 was 6.25%, including the applicable floating rate
margin.
In addition to the amount outstanding under the Senior Notes, NMHG had
borrowings of approximately $32.2 million outstanding at March 31, 2003 under
various foreign working capital facilities and other domestic term loans.
NMHG believes that funds available under the revolving credit facility, other
available lines of credit and operating cash flows are sufficient to finance all
of its operating needs and commitments arising during the foreseeable future.
NMHG's capital structure is presented below:
MARCH 31 DECEMBER 31
2003 2002
-------- --------
Total net tangible assets $ 342.7 $ 362.8
Goodwill and other intangibles at cost 491.4 487.7
-------- --------
Net assets before amortization of intangibles 834.1 850.5
Accumulated goodwill and other intangibles amortization (144.8) (142.3)
Total debt (306.3) (324.8)
Minority interest (.8) (1.1)
-------- --------
Stockholder's equity $ 382.2 $ 382.3
======== ========
Debt to total capitalization 44% 46%
The decrease in total net tangible assets of $20.1 million is in part due to an
$8.6 million decrease in net assets as a result of the sale of NMHG Retail's
wholly owned U.S. dealership on January 3, 2003. The remaining $11.5 million
decrease in net tangible assets is primarily due to a $17.5 million increase in
trade and intercompany accounts payable and a $5.8 million decrease in property,
plant, and equipment, partially offset by an $11.6 million increase in
inventories. Total debt decreased consistent with the decrease in total net
tangible assets and from the use of $7.3 million of proceeds received in the
first quarter of 2003 from the January 3, 2003 sale of NMHG Retail's wholly
owned U.S. dealership. Stockholder's equity at March 31, 2003 decreased $0.1
million as a result of a dividend to NACCO of $5.0 million and an unfavorable
adjustment to the deferred loss on hedges of $0.7 million, partially offset by
net income of $3.3 million and a favorable foreign currency translation
adjustment of $2.3 million for the first three months of 2003.
LIQUIDITY AND CAPITAL RESOURCES - continued
EFFECTS OF FOREIGN CURRENCY
NMHG operates internationally and enters into transactions denominated in
foreign currencies. As such, the Company's financial results are subject to the
variability that arises from exchange rate movements. The effects of foreign
currency fluctuations on revenues, operating profit and net income are addressed
in the discussion of operating results, above.
OUTLOOK
NMHG Wholesale
NMHG Wholesale expects overall lift truck shipments to increase modestly in 2003
compared with 2002. While market prospects are currently more uncertain than
usual, lift truck markets in the Americas are anticipated to improve in the
second half of 2003 while markets in Europe and Asia-Pacific are expected to
remain relatively flat.
NMHG Wholesale expects that results in 2003 will be affected by ongoing costs
for a product development program that is expected to mature in 2004-2006 and
additional costs related to the Lenoir, North Carolina, and Irvine, Scotland,
manufacturing restructuring program announced in December 2002.
NMHG Retail
NMHG Retail expects to continue its programs to improve the performance of its
wholly owned dealerships in 2003 as part of its objective to achieve and sustain
at least break-even results.
The statements contained in this Form 10-Q that are not historical facts are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are made subject to certain risks and uncertainties
which could cause actual results to differ materially from those presented in
these forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Such risks and uncertainties
with respect to the Company's operations include, without limitation:
(1) changes in demand for lift trucks and related aftermarket parts and service
on a worldwide basis, especially in the U.S. where the Company derives a
majority of its sales, (2) changes in sales prices, (3) delays in delivery or
changes in costs of raw materials or sourced products and labor, (4) delays in
manufacturing and delivery schedules, (5) exchange rate fluctuations, changes in
foreign import tariffs and monetary policies and other changes in the regulatory
climate in the foreign countries in which NMHG operates and/or sells products,
(6) product liability or other litigation, warranty claims or returns of
products, (7) delays in or increased costs of restructuring programs, (8) the
effectiveness of the cost reduction programs implemented globally, including the
successful implementation of procurement initiatives, (9) customer acceptance
of, changes in costs of, or delays in the development of new products, (10)
acquisitions and/or dispositions of dealerships by NMHG, and (11) the uncertain
impact on the economy or the public's confidence in general from terrorist
activities and the impact of the war in Iraq.
Item 4. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES: The Company maintains a set of
disclosure controls and procedures designed to ensure that information required
to be disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. Within the 90-day period prior to the filing of this report, an
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Principal Executive Officer and the
Principal Financial Officer, of the effectiveness of the Company's disclosure
controls and procedures. Based on that evaluation, these officers have concluded
that the Company's disclosure controls and procedures are effective.
CHANGES IN INTERNAL CONTROLS: Subsequent to the date of their evaluation, there
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weaknesses.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index on page 30 of this quarterly report
on Form 10-Q.
(b) Reports on Form 8-K.
Current Report on Form 8-K filed with the Commission
on March 27, 2003 (Item 9)
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NMHG Holding Co.
------------------------------------
(Registrant)
Date May 15, 2003 /s/ Michael K. Smith
------------------------------ -------------------------------------
Michael K. Smith
Vice President Finance & Information Systems
and Chief Financial Officer
(Authorized Officer and Principal
Financial and Accounting Officer)
Certifications
I, Reginald R. Eklund, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NMHG Holding Co.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003 /s/ Reginald R. Eklund
-------------------- ----------------------
Reginald R. Eklund
President, Chief Executive Officer
and Director
(Principal Executive Officer)
I, Michael K. Smith, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NMHG Holding Co.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003 /s/ Michael K. Smith
-------------------- --------------------
Michael K. Smith
Vice President Finance & Information
Systems and Chief
Financial Officer
(Principal Financial Officer)
Exhibit Index
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Exhibit
Number* Description of Exhibits
- ------- -----------------------
99 Certifications under Section 906 of the Sarbanes-Oxley Act of 2002
*Numbered in accordance with Item 601 of Regulation S-K.