MAYFIELD HEIGHTS, Ohio, Apr 24, 2002 /PRNewswire-FirstCall via COMTEX/ -- NACCO Industries, Inc. (NYSE: NC) today announced net income for the first quarter of 2002 of $6.3 million, compared to net income for the first and second quarters of 2001 of $13.1 million and $6.1 million, respectively, and net losses of $27.5 million and $27.7 million for the third and fourth quarters of 2001, respectively. First quarter earnings in 2002 were $0.77 per share, compared to $1.60 per share in the first quarter of 2001.
The adoption of new accounting rules eliminating goodwill amortization contributed approximately $4.0 million, or $0.49 per share, to net income in the first quarter of 2002. Comparable results for the first quarter of 2001 included a $1.3 million charge to income at NACCO Materials Handling Group (NMHG) for the cumulative effect of accounting changes. Revenues for the first quarter of 2002 were $576.5 million compared to $717.2 million for the same period in 2001.
Discussion of Results
North American Coal
North American Coal's net income for the first quarter of 2002 decreased to $6.4 million from an unusually high $9.2 million for the first quarter of 2001. Lower net income for the first quarter of 2002, compared to the first quarter of 2001, was primarily due to increased interest expense at the Red Hills Mine in Mississippi since interest costs were expensed in the first quarter of 2002 and capitalized as mine development in the first quarter of 2001; reduced contractual liquidated damages payments recorded by the Red Hills Mine; and significantly decreased lignite coal sales at the Red River Mine in Louisiana due to lower customer requirements in comparison to the unusually high requirements in the first quarter of 2001, partially offset by increased lignite coal sales by the Red Hills Mine. Net income in the first quarter of 2001 also benefited from an arbitration award received by the San Miguel Lignite Mine in Texas.
A total of 8.3 million tons of lignite coal were delivered during the first quarter of 2002, compared to 7.8 million tons of lignite coal delivered in the first quarter of 2001. North American Coal's Florida dragline operations delivered 2.4 million cubic yards of limerock in the first quarter of 2002, compared to 1.9 million yards of limerock in the first quarter of 2001.
North American Coal - Outlook
North American Coal anticipates that lignite deliveries in 2002 will exceed the 31.4 million tons sold in 2001 as a result of the Choctaw power plant's commencement of commercial operation in 2002. Lignite deliveries at the Red Hills Mine are expected to be approximately 2.8 million tons in 2002 and approximately 3.5 million tons annually thereafter. The Red Hills Mine anticipates earning normal operating revenues for the remainder of 2002, resulting in enhanced cash flow, but also lower earnings primarily due to additional operating expenses. North American Coal also expects the Red River Mine in Louisiana to sell fewer tons of lignite coal in 2002 due to a reduction from the unusually high tonnage taken by its customer in 2001. Second quarter tonnage from mines other than Red Hills is expected to be significantly lower than the first quarter due to normal scheduled customer power plant outages.
NACCO Housewares Group
NACCO Housewares Group, which includes NACCO's Hamilton Beach\Proctor-Silex and Kitchen Collection subsidiaries, reported a reduced net loss of $2.8 million for the first quarter of 2002, compared to a net loss of $3.1 million for the first quarter of 2001, despite a $16.7 million reduction in revenues in the first quarter of 2002. Revenues for the first quarter of 2002 were $121.6 million, compared to $138.3 million for the first quarter of 2001. NACCO Housewares Group's operating results are seasonally weak during the first quarter of the year.
Revenues decreased at NACCO Housewares Group in the first quarter of 2002, compared to the first quarter of 2001, primarily due to lower unit volumes at Hamilton Beach\Proctor-Silex as a result of the company's strategic decision to withdraw from selected low-margin, opening-price-point business. Also, sales to Kmart were lower and sales of Hamilton Beach\Proctor-Silex home health products decreased in the first quarter of 2002, compared to the first quarter of 2001 when the company introduced TrueAir(R) home odor eliminators with a national advertising campaign. These declines in revenues were partially offset by increased sales of General Electric-branded products to Wal-Mart.
The reduced net loss at NACCO Housewares Group during the first quarter of 2002, compared to the first quarter of 2001, was partially due to lower manufacturing costs at Hamilton Beach\Proctor-Silex's Mexico plants as a result of restructuring activities initiated in 2001 and lower overall operating costs in the first quarter of 2002. These improvements were partially offset by an unfavorable one-time charge of $2.8 million after-tax, which included unfavorable inventory revaluation, lower absorption of manufacturing costs as inventory was reduced, inefficiencies resulting from closing the Juarez, Mexico, facility, and severance costs, partially offset by a one-time favorable item. Decreased working capital in the first quarter of 2002, especially inventory, led to reduced borrowings of approximately $27.0 million from the year ago quarter at Hamilton Beach\Proctor-Silex.
Results at Kitchen Collection for the first quarter of 2002, compared to the first quarter of 2001, benefited from higher overall consumer spending in outlet malls and from decreased competition following the bankruptcy of a major competitor. Kitchen Collection recorded increases in comparable store average sales transaction value and the total number of sales transactions per store, compared to the first quarter in 2001. Also, the number of stores operated by Kitchen Collection increased to 167 stores at March 31, 2002 from 158 stores at March 31, 2001.
NACCO Housewares Group - Outlook
Hamilton Beach\Proctor-Silex expects consumer markets to improve over the next three quarters. The company also anticipates a shift in mix to higher margin products in 2002 due to the company's strategic decision to withdraw from selected low-margin, opening-price-point business. In the first quarter of 2002, Hamilton Beach\Proctor-Silex completed its program to reduce operating costs and substantially completed its program to reduce and consolidate its Mexican manufacturing capacity. Over the next three quarters, the company anticipates continuing to improve manufacturing efficiencies, reduce manufacturing overhead costs, increase outsourcing to China and introduce new products. Hamilton Beach\Proctor-Silex also expects that enhanced inventory management programs and tightly controlled capital spending will lead to significantly improved cash flow for 2002 in comparison to 2001.
Kitchen Collection expects revenues in 2002 to benefit from increased consumer spending at outlet malls and from the opening of additional Kitchen Collection(R) stores in outlet malls and Gadgets & More(R) stores in enclosed malls.
NMHG Wholesale
NMHG Wholesale returned to profitability in the first quarter of 2002, reporting net income of $5.6 million on relatively low shipment volumes of 14,971 units, compared to net income for the first quarter of 2001 of $12.4 million on strong shipment volumes of 21,624 units. NMHG Wholesale had net losses of $19.7 million and $11.7 million for the third and fourth quarters of 2001, respectively, on shipments of 14,452 units and 14,451 units, respectively. Items affecting comparability for the first quarter include a $1.9 million tax benefit and a $0.4 million after-tax charge for costs to idle the Danville, Illinois, facility recognized in the first quarter of 2002 and charges in the first quarter of 2001 of $2.9 million for goodwill amortization, $1.1 million after-tax for Danville closure costs, and $1.3 million for the cumulative affect of accounting changes. Revenues for the first quarter of 2002 were $327.7 million, compared to $442.9 million in the first quarter of 2001 and $314.4 million and $314.0 million in the third and fourth quarters of 2001, respectively.
Net income declined in the first quarter of 2002, compared to the first quarter of 2001, due primarily to lower unit shipments and reduced parts sales caused by weak market conditions, particularly in the United States, and the consequent negative impact of lower shipments on manufacturing overhead absorption. However, net income shifted from significant losses in the third and fourth quarters of 2001 to modest profitability in the first quarter of 2002 as a result of the positive impact from improvement programs initiated in 2001, including the completion of the Danville plant closure in the fourth quarter of 2001, the elimination of manufacturing inefficiencies involved in reducing production dramatically, the benefits of procurement and cost control programs, and the previously mentioned tax benefit and the change in accounting for goodwill amortization.
Market demand for lift trucks improved in the first quarter of 2002 compared to the last three quarters of 2001. NMHG Wholesale's worldwide backlog at the end of the first quarter of 2002 increased 8 percent to 16,300 units, compared to 15,100 units at the end of the fourth quarter of 2001. Backlog increased 16 percent, compared to 14,100 units at the end of the second quarter of 2001, and increased 13 percent, compared to 14,400 units at the end of the third quarter of 2001. Backlog at the end of the first quarter of 2001 was 17,800 units.
NMHG Wholesale - Outlook
NMHG Wholesale expects that cost reduction actions initiated in previous years, including the Danville plant closure and procurement initiatives, as well as other strategic and cost reduction programs, have positioned the company to respond effectively and profitably to the anticipated strengthening of the U.S. economy in 2002. Despite the economic downturn in 2001 and resulting prudent cost reduction activities, NMHG Wholesale is continuing its investment program for the development of new products and the enhancement of existing products. The company anticipates that increased utilization of lift trucks in the field will drive modestly improved parts sales in 2002. Also, net income in 2002 is expected to benefit by approximately $11.4 million as a result of the adoption of new accounting rules for the amortization of goodwill. Since NMHG Wholesale has upgraded the capabilities of its operating plants and information systems through capital spending in previous years, capital spending is expected to be significantly lower in 2002 than 2001, which, together with the effects of other programs implemented in previous years, is expected to result in enhanced free cash flow in 2002.
NMHG Retail
NMHG's Retail operations, which include the required elimination of intercompany transactions between NMHG Wholesale and company owned retail dealerships, incurred a net loss for the first quarter of 2002 of $1.3 million compared to a net loss of $4.1 million for the first quarter of 2001 and net losses of $12.9 million and $14.6 million for the third and fourth quarters of 2001, respectively. Revenues for the first quarter of 2002 were $44.1 million, compared to $52.7 million for the first quarter of 2001.
The lower net loss for the first quarter of 2002, compared to the first quarter of 2001, reflects reduced operating expenses and the completion of the restructuring of NMHG Retail's global operations in 2001. Reduced operating expenses were partially offset by lower sales from parts, maintenance and rental. NMHG Retail operations in the United States and Europe essentially broke even during the first quarter of 2002, while the Asia-Pacific operations had a moderate loss, which included a one-time $0.5 million after-tax non-cash charge.
NMHG Retail - Outlook
NMHG Retail expects to continue its progress in 2002 toward achieving its objective of at least break-even results as a result of its efforts to improve the performance of its wholly owned dealerships. Operating results are expected to benefit by approximately $1.4 million after-tax in 2002 as a result of the adoption of new accounting rules for goodwill amortization.
In conjunction with this news release, the management of NACCO Industries, Inc. will host a conference call on Thursday, April 25, at 11 a.m. eastern time. The call may be accessed online via NACCO Industries' Web site at http://www.nacco.com or at http://www.ccbn.com. Please allow 15 minutes to register, download and install any necessary audio software required to listen to the broadcast. The online archive of the broadcast will be available for 72 hours at the NACCO Web site.
The statements contained in the news release that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties which could cause actual results to differ materially from those presented in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Such risks and uncertainties with respect to each subsidiary's operations include, without limitation:
North American Coal: (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 and (5) changes in the U.S. economy or in the power industry that would affect demand for North American Coal's Eastern U.S. underground reserves.
NACCO Housewares Group: (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 Hamilton Beach/Proctor-Silex 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 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.
NACCO Materials Handling Group: (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, such as the phase-out of the Danville, Illinois, manufacturing plant, (8) the effectiveness of the cost reduction programs implemented globally, (9) acquisitions and/or dispositions of dealerships by NMHG, (10) costs related to the integration of acquisitions, (11) the impact of the continuing introduction of the euro, including increased competition, foreign currency exchange movements and/or changes in operating costs and (12) 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.
NACCO Industries, Inc. is an operating holding company with three principal businesses: lift trucks, housewares and lignite coal mining. NACCO Materials Handling Group designs, engineers, manufactures and sells a full line of lift trucks and replacement parts marketed worldwide under the Hyster(TM) and Yale(TM) brand names. NACCO Housewares Group consists of Hamilton Beach/Proctor-Silex, Inc., a leading manufacturer and marketer of small electric motor and heat-driven household appliances as well as commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc., a national specialty retailer of brand-name kitchenware, small electrical appliances and related accessories. The North American Coal Corporation mines and markets lignite coal primarily as fuel for power generators. For more information about NACCO Industries, visit the Company's Web site at http://www.nacco.com.
CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Three Months Ended
March 31
2002 2001
(In millions,
except per share data)
Total revenues $576.5 $717.2
Income before cumulative
effect of accounting changes* $6.3 $14.4
Cumulative effect of accounting
changes - (1.3)
Net income * $6.3 $13.1
Earnings before cumulative effect of
accounting changes per share* $0.77 $1.76
Cumulative effect of accounting
changes - (0.16)
Earnings per share * $0.77 $1.60
Cash dividends per share $0.235 $0.225
Average shares outstanding 8.196 8.182
(All amounts are subject to annual audit by independent public
accountants.)
* Prior years results reflect the amortization of goodwill of
$4.0 million or $0.49 per share.
CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
Three Months Ended
March 31
2002 2001
(In millions,
except per share data)
Revenues
NACCO Materials Handling Group
Wholesale $327.7 $442.9
NACCO Materials Handling Group
Retail (incl. elims.) 44.1 52.7
NACCO Materials Handling Group 371.8 495.6
NACCO Housewares Group 121.6 138.3
North American Coal 83.1 83.3
576.5 717.2
Amortization of goodwill
NACCO Materials Handling Group
Wholesale - 2.9
NACCO Materials Handling Group
Retail (incl. elims.) - 0.3
NACCO Materials Handling Group - 3.2
NACCO Housewares Group - 0.8
- 4.0
Operating profit (loss)
NACCO Materials Handling Group
Wholesale 7.0 25.8
NACCO Materials Handling Group
Retail (incl. elims.) 0.2 (3.4)
NACCO Materials Handling Group 7.2 22.4
NACCO Housewares Group (2.6) (3.0)
North American Coal 15.0 16.9
NACCO and Other (0.8) (3.2)
18.8 33.1
Other income (expense)
NACCO Materials Handling Group
Wholesale (2.1) (2.6)
NACCO Materials Handling Group
Retail (incl. elims.) (1.9) (2.6)
NACCO Materials Handling Group (4.0) (5.2)
NACCO Housewares Group (2.0) (2.4)
North American Coal (7.4) (4.6)
NACCO and Other 0.6 2.2
Income before income taxes, minority
interest and cumulative effect of accounting
changes 6.0 23.1
Provision (benefit) for income taxes (0.1) 8.9
Income before minority interest and
cumulative effect of accounting
changes 6.1 14.2
Minority interest 0.2 0.2
Income before cumulative effect of
accounting changes
NACCO Materials Handling Group
Wholesale 5.6 13.7
NACCO Materials Handling Group
Retail (incl. elims.) (1.3) (4.1)
NACCO Materials Handling Group 4.3 9.6
NACCO Housewares Group (2.8) (3.1)
North American Coal 6.4 9.2
NACCO and Other (1.6) (1.3)
6.3 14.4
Cumulative effect of accounting
changes - (1.3)
Net income $6.3 $13.1
(All amounts are subject to annual audit by independent
public accountants.)
