SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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.
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(Exact name of registrant as specified in its charter)
DELAWARE 31-1637659
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
650 N.E. Holladay Street; Suite 1600; Portland, OR 97232
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(Address of principal executive offices) (Zip code)
(503) 721-6000
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(Registrant's telephone number, including area code)
N/A
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(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, and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
----- -----
At September 26, 2002, 100 common shares were outstanding.
NMHG HOLDING CO.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 2002 (Unaudited) and December 31, 2001
Unaudited Condensed Consolidated Statements of Operations
for the Three Months and Six Months Ended June 30, 2002
and 2001
Unaudited Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2002 and 2001
Unaudited Condensed Consolidated Statements of Changes
in Stockholder's Equity for the Six Months Ended
June 30, 2002 and 2001
Notes to Unaudited Condensed Consolidated Financial
Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
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
CONDENSED CONSOLIDATED BALANCE SHEETS
NMHG HOLDING CO. AND SUBSIDIARIES
(Unaudited) (Audited)
JUNE 30, DECEMBER 31,
2002 2001
---------- ----------
(in millions, except share data)
ASSETS
Current Assets
Cash and cash equivalents $ 50.9 $ 59.6
Accounts receivable, net 206.3 165.6
Tax advances, NACCO Industries, Inc. 8.0 23.1
Inventories 224.0 234.5
Deferred income taxes 25.0 32.9
Prepaid expenses and other 16.2 12.2
---------- ----------
530.4 527.9
Property, Plant and Equipment, Net 274.8 280.5
Goodwill, Net 345.3 344.2
Deferred Income Taxes 20.9 15.7
Other Non-current Assets 45.2 36.8
---------- ----------
411.4 396.7
---------- ----------
Total Assets $ 1,216.6 $ 1,205.1
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 188.7 $ 176.7
Revolving credit agreements 60.0 36.2
Revolving credit agreement refinanced on May 9, 2002 --- 265.0
Current maturities of long-term debt 17.7 25.5
Notes payable, NACCO Industries, Inc. --- 8.0
Accrued payroll 14.2 20.0
Accrued warranty obligations 33.1 34.3
Other current liabilities 128.2 112.2
---------- ----------
441.9 677.9
Long-term Debt 272.9 27.7
Self-insurance Reserves 53.9 52.7
Other Long-term Liabilities 60.9 62.5
Minority Interest 1.8 2.3
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 217.6 229.5
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment (15.3) (26.9)
Reclassification of hedging activities into earnings 1.8 ---
Deferred loss on cash flow hedging (2.3) (3.3)
Minimum pension liability adjustment (14.8) (14.8)
Cumulative effect of change in accounting for derivatives and hedging --- (.7)
---------- ----------
385.2 382.0
---------- ----------
Total Liabilities and Stockholder's Equity $ 1,216.6 $ 1,205.1
========== ==========
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NMHG HOLDING CO. AND SUBSIDIARIES
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
(in millions)
Revenues $ 388.7 $ 444.7 $ 760.5 $ 940.3
Cost of sales 320.2 372.7 630.3 779.5
-------- -------- -------- --------
Gross Profit 68.5 72.0 130.2 160.8
Selling, general and administrative expenses 58.1 65.4 113.2 130.3
Amortization of goodwill --- 3.3 --- 6.5
-------- -------- -------- --------
Operating Profit 10.4 3.3 17.0 24.0
Other income (expenses)
Interest expense (8.6) (6.0) (14.1) (11.2)
Insurance recovery --- 5.2 --- 7.7
Gains (losses) on interest rate swap agreements (3.1) .4 (2.8) (.5)
Other - net (.9) (.5) .9 (.4)
-------- -------- -------- --------
(12.6) (.9) (16.0) (4.4)
-------- -------- -------- --------
Income (Loss) Before Income Taxes, Minority
Interest and Cumulative Effect of Accounting
Changes (2.2) 2.4 1.0 19.6
Income tax provision (benefit) (.7) 1.4 (1.6) 9.2
-------- -------- -------- --------
Income (Loss) Before Minority Interest and
Cumulative Effect of Accounting Changes (1.5) 1.0 2.6 10.4
Minority interest income .3 .2 .5 .4
-------- -------- -------- --------
Income (Loss) Before Cumulative Effect of
Accounting Changes (1.2) 1.2 3.1 10.8
Cumulative effect of accounting changes (net of $0.8
tax benefit) --- --- --- (1.3)
-------- -------- -------- --------
Net Income (Loss) $ (1.2) $ 1.2 $ 3.1 $ 9.5
======== ======== ======== ========
Comprehensive Income (Loss) $ 13.1 $ (3.5) $ 18.2 $ (10.4)
======== ======== ======== ========
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NMHG HOLDING CO. AND SUBSIDIARIES
SIX MONTHS ENDED
JUNE 30,
--------------------
2002 2001
-------- -------
(in millions)
Operating Activities
Net income $ 3.1 $ 9.5
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 20.7 29.1
Deferred income taxes 5.0 (1.9)
Minority interest income (.5) (.4)
Cumulative effect of accounting changes (net-of-tax) --- 1.3
Other non-cash items .3 (4.4)
Working capital changes
Affiliate receivables/payables 15.1 (1.9)
Accounts receivable (16.1) 21.8
Inventories 16.1 9.7
Other current assets (3.4) (1.7)
Accounts payable and other liabilities 1.4 (40.2)
-------- -------
Net cash provided by operating activities 41.7 20.9
Investing Activities
Expenditures for property, plant and equipment (9.1) (30.0)
Proceeds from the sale of property, plant and equipment .7 3.7
Investments in unconsolidated affiliates --- (.1)
Proceeds from unconsolidated affiliates .7 ---
Other - net --- (2.0)
-------- -------
Net cash used for investing activities (7.7) (28.4)
Financing Activities
Additions to long-term debt and revolving credit agreements 288.2 42.8
Reductions of long-term debt and revolving credit agreements (297.2) (28.2)
Cash dividends paid (15.0) (2.5)
Notes receivable/payable, NACCO Industries, Inc. (8.0) (1.2)
Deferred financing costs (13.0) (.6)
Other - net --- .1
-------- -------
Net cash provided by (used for) financing activities (45.0) 10.4
Effect of exchange rate changes on cash 2.3 (1.3)
-------- -------
Cash and Cash Equivalents
Increase (decrease) for the period (8.7) 1.6
Balance at the beginning of the period 59.6 24.4
-------- -------
Balance at the end of the period $ 50.9 $ 26.0
======== =======
See notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
NMHG HOLDING CO. AND SUBSIDIARIES
SIX MONTHS ENDED
JUNE 30,
---------------------
2002 2001
-------- --------
(in millions)
Common Stock $ --- $ ---
-------- --------
Capital in Excess of Par Value 198.2 198.2
-------- --------
Retained Earnings
Beginning balance 229.5 283.9
Net income 3.1 9.5
Cash dividends declared (15.0) (5.0)
-------- --------
217.6 288.4
-------- --------
Accumulated Other Comprehensive Income (Loss)
Beginning balance (45.7) (19.1)
Foreign currency translation adjustment 11.6 (17.1)
Cumulative effect of change in accounting for derivatives and
hedging 0.7 (0.7)
Reclassification from Cumulative effect of change in accounting for
derivatives and hedging to Deferred loss on cash flow hedging (0.7) ---
Reclassification of hedging activity into earnings 1.8 ---
Current period cash flow hedging activity 1.7 (2.1)
-------- --------
(30.6) (39.0)
-------- --------
Total Stockholder's Equity $ 385.2 $ 447.6
======== ========
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NMHG HOLDING CO. AND SUBSIDIARIES
JUNE 30, 2002
(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 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, 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 June 30, 2002 and the results of its operations and cash flows for
the three and six month periods ended June 30, 2002 and 2001 and changes in
stockholder's equity for the six month periods ended June 30, 2002 and 2001 have
been included.
Operating results for the three and six month periods ended June 30, 2002 are
not necessarily indicative of the results that may be expected for the remainder
of the year ending December 31, 2002. For further information, refer to the
consolidated financial statements and footnotes thereto for the fiscal year
ended December 31, 2001 included in the Company's Registration Statement on Form
S-4, as amended.
Note 2 - Inventories
Inventories are summarized as follows:
(UNAUDITED) (AUDITED)
JUNE 30, DECEMBER 31,
2002 2001
----------- -----------
Manufactured inventories:
Finished goods and service parts $ 92.6 $ 99.6
Raw materials and work in process 110.1 111.4
----------- -----------
Total manufactured inventories 202.7 211.0
Retail inventories 32.2 35.8
----------- -----------
Total inventories at FIFO 234.9 246.8
LIFO reserve (10.9) (12.3)
----------- -----------
$ 224.0 $ 234.5
=========== ===========
The cost of certain manufactured and retail inventories has been determined
using the LIFO method. At June 30, 2002 and December 31, 2001, 62 and 68 percent
of total inventories, respectively, 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, 2001 are
as follows:
Curtailment
Losses -
Pension and
Other Post-
Lease Employment
Severance Impairment Benefits Total
--------- ---------- -------- -----
NMHG Wholesale
Balance at December 31, 2001 $ 5.3 $ --- $ 7.5 $ 12.8
Foreign currency effect .2 --- --- .2
Payments (2.8) --- --- (2.8)
------ ----- ------ -------
Balance at June 30, 2002 $ 2.7 $ --- $ 7.5 $ 10.2
====== ====== ====== =======
NMHG Retail
Balance at December 31, 2001 $ 3.9 $ .4 $ --- $ 4.3
Payments (.9) (.1) --- (1.0)
------ ------ ------ -------
Balance at June 30, 2002 $ 3.0 $ .3 $ --- $ 3.3
====== ====== ====== =======
NMHG Wholesale: The reserve balance at NMHG Wholesale consists of two
restructuring programs: the 2001 closure of the Danville, Illinois facility and
the restructuring of the European wholesale operations initiated in 2001. The
Danville program, which was approved and accrued in December 2000, was
essentially completed in 2001. In the first half of 2002, severance payments of
$2.0 million were made to approximately 215 employees which reduced the ending
severance reserve balance related to the Danville closure to $0.1 million. The
reserve balance for curtailment losses relating to pension and other
post-employment benefits relates entirely to the closure of the Danville
facility and will not be paid until employees reach retirement age. In the first
half of 2002, NMHG Wholesale recognized a charge of approximately $1.4 million,
which had not previously been accrued and is not included in the table above,
related primarily to the costs of the idle Danville facility. Cost savings
primarily from reduced employee wages and benefits of approximately $3.1 million
pre-tax were recognized in the first half of 2002 related to this program. Cost
savings primarily from reduced employee wages and benefits, net of idle facility
costs, are estimated to be $5.8 million pre-tax for the remainder of 2002 and
$13.4 million annually thereafter, as a result of anticipated improved
manufacturing efficiencies and reduced fixed factory overhead. Although a
significant portion 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 2001, 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. Of this amount, $3.2 million remained unpaid as of December 31, 2001.
Payments of $0.8 million were made in the first half of 2002 to approximately 40
employees. The majority of the headcount reductions were made by the end of the
first half of 2002. Pursuant to local country requirements, the remaining
headcount reductions will be initiated in the second half of 2002, with the
initiation of severance payments thereafter. Cost savings primarily from reduced
employee wages and benefits of approximately $1.9 million pre-tax were
recognized in the first half of 2002 related to this program. Cost savings
primarily from reduced employee wages and benefits for the remainder of 2002 are
estimated to be $5.0 million pre-tax. 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.
NMHG Retail: NMHG Retail recognized a restructuring charge of approximately $4.7
million pre-tax, in 2001, 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, severance payments of
$0.4 million were made to approximately 40 employees. In the first half of 2002,
severance payments of $0.9 million were made to approximately 10 employees. A
majority of the headcount reductions were made by the end of the first half of
2002. The majority of the severance amount accrued is expected to be paid by
December 31,
2002. Cost savings primarily from reduced employee wages, employee benefits and
lease costs of approximately $1.3 million pre-tax were recognized in the first
half of 2002 related to this program. Cost savings primarily from reduced
employee wages, employee benefits and lease costs for the remainder of 2002 are
estimated to be $1.6 million pre-tax. 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.
Note 4 - Accounting for Goodwill
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." This
Statement establishes accounting and reporting standards for goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets."
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
are no longer limited to 40 years. Effective January 1, 2002, the Company
discontinued amortization of its goodwill in accordance with this Statement. The
amortization periods of the Company's other intangible assets were not revised
as a result of the adoption of this Statement. Adjusted net income (loss)
assuming the adoption of this Statement in the prior year, is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- -------------------------
2002 2001 2002 2001
--------- --------- -------- --------
Reported net income (loss) $ (1.2) $ 1.2 $ 3.1 $ 9.5
Add back: goodwill amortization --- 3.3 --- 6.5
--------- --------- -------- --------
Adjusted net income (loss) $ (1.2) $ 4.5 $ 3.1 $ 16.0
========= ========= ======== ========
In addition, this Statement requires goodwill to be tested for impairment at the
beginning of the fiscal year of adoption, January 1, 2002 for the Company, and,
thereafter, at least annually at a level of reporting defined in the Statement
as a "reporting unit," using a two-step process. The first step requires
comparison of the reporting unit's fair market value to its carrying value. If
the fair market value of the reporting unit exceeds its carrying value, no
further analysis is necessary and goodwill is not impaired. If the carrying
value of the reporting unit exceeds its fair market value, then the second step,
as defined in the Statement, must be completed. The second step, if necessary,
requires the determination of the fair market value of each existing asset and
liability of the applicable reporting unit to enable the derivation of the
"implied" fair market value of goodwill. If the implied fair market value of
goodwill is less than the carrying value of goodwill, then an impairment loss
must be recognized.
During the second quarter of 2002, the Company completed its impairment testing
of goodwill as described above. For each of the Company's reporting units, the
fair market value of the reporting unit exceeded the reporting unit's carrying
value; therefore, there is no goodwill impairment as of the testing date,
January 1, 2002.
The process to test goodwill for impairment included an allocation of goodwill
among the Company's reporting units. As a result of this allocation process,
goodwill that was previously reported in the Company's reportable segment, NMHG
Retail, was reallocated to NMHG Wholesale. This reallocation was primarily based
on an analysis of the synergy benefits that arose as a result of the
acquisitions of the retail dealerships. As a result, goodwill of approximately
$40.3 million that was previously reported in NMHG Retail is now reported in
NMHG Wholesale.
Following is a summary of the changes in goodwill during the first half of 2002:
Carrying Amount of Goodwill
---------------------------
NMHG NMHG NMHG
Wholesale Retail Consolidated
--------- ------ ------------
Balance at December 31, 2001 $ 304.6 $ 39.6 $ 344.2
Reclassification to other intangibles --- (1.8) (1.8)
Reallocation among segments 40.3 (40.3) ---
Foreign currency translation .4 2.5 2.9
--------- ------- ---------
Balance at June 30, 2002 $ 345.3 $ --- $ 345.3
========= ======= =========
During the first half of 2002, $1.8 million that was previously preliminarily
classified as goodwill relating to an acquisition of a retail dealership in 2001
was reclassified to other intangibles.
The balance of other intangible assets, which continue to be subject to
amortization and relate to assets acquired prior to January 1, 2002, is as
follows at June 30, 2002:
Other Intangibles
-----------------------------------------------
Gross Carrying Accumulated Net
Amount Amortization Balance
-------------- ------------ -------
Balance at June 30, 2002
Other intangibles $ 1.8 $ (.2) $ 1.6
======== ======== ========
Amortization of these intangibles began in the second quarter of 2002. Expected
annual amortization expense of other intangible assets for the next five years
is as follows: $0.3 million in 2002, $0.2 million in 2003, $0.2 million in 2004,
$0.2 million 2005 and $0.2 million in 2006.
Note 5 - Debt Financing
NMHG: On May 9, 2002, NMHG replaced its primary financing agreement, an
unsecured floating-rate revolving line of credit with availability of $350.0
million, certain other lines of credit with availability of $28.6 million and a
program to sell accounts receivable in Europe, with the proceeds from the
private placement of $250.0 million of 10% unsecured Senior Notes due 2009 and
borrowings under a secured, floating-rate revolving credit facility which
expires in May 2005. The proceeds from the Senior Notes were reduced by an
original issue discount of $3.1 million.
The $250.0 million of 10% Senior Notes 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 has filed a registration
statement on Form S-4 to exchange the Senior Notes for notes with substantially
identical terms registered with the SEC. 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.
Availability under the new revolving credit facility is up to $175.0 million and
is governed by a borrowing base based on advance rates against the inventory and
accounts receivable of the "borrowers." 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. The borrowers,
as defined in the new revolving credit facility, include NMHG Holding Co. and
certain domestic and foreign subsidiaries of NMHG Holding Co. Borrowings bear
interest at a floating rate, which can be either a base rate or LIBOR, as
defined, plus an applicable margin. The initial applicable margins, effective
through September 30, 2002, for base rate loans and LIBOR loans are 2.00% and
3.00%, respectively. The new revolving credit facility also requires a fee of
0.5% per annum on the unused commitment. Subsequent to September 30, 2002, the
margins and unused commitment fee will be subject to adjustment based on a
leverage ratio.
At June 30, 2002, the borrowing capacity under this facility, both domestic and
foreign, was $79.9 million, which has been reduced by the commitments or
availability under certain foreign credit facilities and an excess availability
requirement of $15.0 million, as described below. Borrowings outstanding under
this facility were $34.9 million at June 30, 2002. The domestic floating rate of
interest applicable to this facility on June 30, 2002 was 6.75%, including the
applicable floating rate margin. The new revolving credit facility includes a
subfacility for foreign borrowers which can be denominated in British pounds
sterling or euro. The foreign floating rate of interest applicable to this
subfacility on June 30, 2002 was 7.18%, including the applicable floating rate
margin. Included in the borrowing capacity is a $15.0 million overdraft facility
available to foreign borrowers. The initial applicable margin, effective through
September 30, 2002, for overdraft loans is 3.25% above the London base rate, as
defined. The new revolving credit facility is guaranteed by certain domestic and
foreign subsidiaries of NMHG Holding Co. and secured by substantially all of the
assets, other than property, plant and equipment, of the borrowers and
guarantors, both domestic and foreign, under the facility.
The terms of the new revolving credit facility provide that availability is
reduced by the commitments or availability under a foreign credit facility of
the borrowers and certain foreign working capital facilities. A foreign credit
facility commitment of approximately U.S. $18.1 million on June 30, 2002,
denominated in Australian dollars, reduced the amount of availability under the
new revolving credit facility. In addition, availability under the new revolving
credit facility was reduced by $5.5 million for a working capital facility
denominated in Chinese yuan. If the commitments or availability under these
facilities are increased, availability under the new revolving credit facility
will be reduced. The $79.9 million of capacity under the new revolving credit
facility at June 30, 2002 reflected the reduction of these foreign credit
facilities.
Both the new revolving credit facility and terms of the Senior Notes include
restrictive covenants which, among other things, limit dividends to NACCO. The
new revolving credit facility also requires NMHG to meet certain financial
tests, including, but not limited to, minimum excess availability, maximum
capital expenditures, maximum leverage ratio and minimum fixed charge coverage
ratio tests. The borrowers must maintain aggregate excess availability under the
new revolving credit facility of at least $15.0 million.
NMHG paid financing fees of approximately $13.0 million related to this
refinancing. These fees were deferred and will be amortized as interest expense
in the statement of operations over the respective terms of the new financing
facilities.
As a result of the refinancing of NMHG's floating-rate revolving credit
facility, NMHG's interest rate swap agreements no longer qualify for hedge
accounting treatment in accordance with SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended. As such, the mark-to-market of
these interest rate swap agreements will be recognized in the statement of
operations until the interest rate swap agreements are terminated or expire.
Prior to the refinancing, the mark-to-market of interest rate swap agreements
that qualified for hedge accounting treatment was recognized as a component of
other comprehensive income (loss) in stockholder's equity.
Prior to the cessation of hedge accounting resulting from the May 9, 2002
refinancing, the balance in other comprehensive income (loss) for all of NMHG's
interest rate swap agreements was a pre-tax loss of $4.2 million ($2.6 million
after-tax). This balance is being amortized into the statement of operations
over the remaining lives of the interest rate swap agreements in accordance with
the provisions in SFAS No. 133, as amended. The amount of amortization of
accumulated other comprehensive income included in the statement of operations
for each of the three and six months ended June 30, 2002 was a pre-tax expense
of $0.9 million. At June 30, 2002, NMHG held interest rate swap agreements with
a notional amount of $335.0 million and a fair market value of a payable of
$10.7 million. The mark-to-market of the interest rate swap agreements that was
included in the statement of operations during the second quarter of 2002 and
the first six months of 2002 was an expense of $2.2 million and $1.9 million,
respectively.
On June 27, 2002, NMHG terminated certain interest rate swap agreements, which
required cash settlement on July 1, 2002. The combined notional amount and fair
market value of the interest rate swap agreements terminated was $100.0 million
and a payable of $5.5 million on the date of termination. The amount of the
deferred loss remaining in accumulated other comprehensive income (loss)
relating to these interest rate swap agreements will continue to be amortized
over the original lives of the terminated interest rate swap agreements.
Note 6 - Asset Impairment
In the second quarter of 2002, NMHG Wholesale recognized an impairment loss of
approximately $0.8 million, included on the line selling, general and
administrative expenses in the accompanying statement of operations, on certain
property, primarily land, owned in South America due to an estimated decline in
value provided by broker quotes.
Note 7 - Condensed Consolidating Guarantor and Non-Guarantor Financial
Information
The following tables set forth the condensed consolidating statements of
operations and cash flows for each of the three and six month periods ended June
30, 2002 and 2001 and the condensed consolidating balance sheets as of June 30,
2002 and December 31, 2001. The following information is included as a result of
the guarantee of the Senior Notes (as discussed in Note 5) 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 OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Revenues $ --- $ 248.3 $ 181.0 $ (40.6) $ 388.7
Cost of sales --- 206.1 154.1 (40.0) 320.2
All other operating expenses --- 31.0 26.9 .2 58.1
--------- -------- --------- ------- ---------
Operating profit (loss) --- 11.2 --- (.8) 10.4
Interest expense (1.8) (5.7) (2.2) 1.1 (8.6)
Other income (expenses) --- (2.5) (1.7) --- (4.2)
--------- -------- --------- ------- ---------
Income (loss) before income
taxes, minority interest and
equity in unconsolidated
affiliates (1.8) 3.0 (3.9) .3 (2.4)
Income tax (expense) benefit .8 1.7 (1.6) (.2) .7
Minority interest income --- --- .3 --- .3
Equity in unconsolidated
affiliates (.2) .2 --- .2 .2
--------- -------- --------- ------- ---------
Net income (loss) $ (1.2) $ 4.9 $ (5.2) $ .3 $ (1.2)
========== ========= ========= ======= =========
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2001
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Revenues $ --- $ 283.1 $ 177.9 $ (16.3) $ 444.7
Cost of sales --- 244.3 144.6 (16.2) 372.7
All other operating expenses --- 35.9 32.5 .3 68.7
--------- --------- ---------- ---------- --------
Operating profit (loss) --- 2.9 .8 (.4) 3.3
Interest expense (.2) (3.7) (3.2) 1.1 (6.0)
Other income (expenses) --- 4.1 .5 --- 4.6
--------- --------- ---------- ---------- --------
Income (loss) before income
taxes, minority interest and
equity in unconsolidated
affiliates (.2) 3.3 (1.9) .7 1.9
Income tax (expense) benefit (.4) (1.6) .6 --- (1.4)
Minority interest income --- --- .2 --- .2
Equity in unconsolidated
affiliates 1.8 .5 --- (1.8) .5
--------- --------- ---------- ---------- --------
Net income (loss) $ 1.2 $ 2.2 $ (1.1) $ (1.1) $ 1.2
========= ========= ========== ========== ========
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Revenues $ --- $ 487.4 $ 362.3 $ (89.2) $ 760.5
Cost of sales --- 414.3 305.2 (89.2) 630.3
All other operating expenses --- 61.7 51.5 --- 113.2
--------- --------- --------- ---------- ---------
Operating profit --- 11.4 5.6 --- 17.0
Interest expense (3.6) (8.2) (2.3) --- (14.1)
Other income (expenses) --- (1.1) (2.0) --- (3.1)
--------- --------- --------- ---------- ---------
Income (loss) before income
taxes, minority interest and
equity in unconsolidated
affiliates (3.6) 2.1 1.3 --- (.2)
Income tax (expense) benefit 1.4 1.8 (1.6) --- 1.6
Minority interest income --- --- .5 --- .5
Equity in unconsolidated
affiliates 5.3 1.2 --- (5.3) 1.2
--------- --------- --------- ---------- ---------
Net income (loss) $ 3.1 $ 5.1 $ .2 $ (5.3) $ 3.1
========= ========= ========= ========== =========
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Revenues $ --- $ 632.2 $ 403.9 $ (95.8) $ 940.3
Cost of sales --- 538.7 337.2 (96.4) 779.5
All other operating expenses --- 72.1 64.7 --- 136.8
--------- --------- ---------- ---------- ---------
Operating profit --- 21.4 2.0 .6 24.0
Interest expense (.5) (6.9) (3.8) --- (11.2)
Other income (expenses) --- 4.1 .8 --- 4.9
--------- --------- ---------- ---------- ---------
Income (loss) before income
taxes, minority interest and
equity in unconsolidated
affiliates (.5) 18.6 (1.0) .6 17.7
Income tax (expense) benefit .2 (10.0) .6 --- (9.2)
Minority interest income --- --- .4 --- .4
Equity in unconsolidated
affiliates 9.8 1.9 --- (9.8) 1.9
--------- --------- ---------- ---------- ---------
Income (loss) before
cumulative effect of
accounting changes 9.5 10.5 --- (9.2) 10.8
Cumulative effect of
accounting changes --- (.9) (.4) --- (1.3)
--------- --------- ---------- ---------- ---------
Net income (loss) $ 9.5 $ 9.6 $ (.4) $ (9.2) $ 9.5
========= ========= ========== ========== =========
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2002
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Cash and cash equivalents $ --- $ 11.9 $ 39.0 $ --- $ 50.9
Accounts and notes receivable, net 274.6 111.9 172.6 (352.8) 206.3
Inventories --- 118.7 105.3 --- 224.0
Other current assets 3.8 34.9 12.6 (2.1) 49.2
-------- ----------- ---------- ---------- ----------
Total current assets 278.4 277.4 329.5 (354.9) 530.4
Property, plant and equipment, net --- 156.5 118.3 --- 274.8
Goodwill, net --- 307.3 38.0 --- 345.3
Other non-current assets 376.9 310.0 18.9 (639.7) 66.1
-------- ----------- ---------- ---------- ----------
Total Assets $ 655.3 $ 1,051.2 $ 504.7 $ (994.6) $ 1,216.6
======== =========== ========== ========== ==========
Accounts and intercompany notes payable $ --- $ 401.7 $ 133.3 $ (346.3) $ 188.7
Other current liabilities 23.0 116.6 119.8 (6.2) 253.2
-------- ----------- ---------- ---------- ----------
Total current liabilities 23.0 518.3 253.1 (352.5) 441.9
Long-term debt 247.0 3.0 22.9 --- 272.9
Other long-term liabilities .1 93.1 27.8 (4.4) 116.6
Stockholder's equity 385.2 436.8 200.9 (637.7) 385.2
-------- ----------- ---------- ---------- ----------
Total liabilities and stockholder's equity $ 655.3 $ 1,051.2 $ 504.7 $ (994.6) $ 1,216.6
======== =========== ========== ========== ==========
AUDITED CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2001
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Cash and cash equivalents $ --- $ 21.9 $ 37.7 $ --- $ 59.6
Accounts and notes receivable, net --- 211.9 225.8 (272.1) 165.6
Inventories --- 136.9 97.8 (.2) 234.5
Other current assets 2.6 55.4 10.2 --- 68.2
-------- ---------- ---------- ----------- ----------
Total current assets 2.6 426.1 371.5 (272.3) 527.9
Property, plant and equipment, net --- 163.0 118.0 (.5) 280.5
Goodwill, net --- 307.3 36.9 --- 344.2
Other non-current assets 476.7 360.3 31.6 (816.1) 52.5
-------- ---------- ---------- ----------- ----------
Total Assets $ 479.3 $ 1,256.7 $ 558.0 $ (1,088.9) $ 1,205.1
======== ========== ========== =========== ==========
Accounts and intercompany notes payable $ 96.3 $ 154.4 $ 200.7 $ (274.7) $ 176.7
Other current liabilities .9 391.8 109.5 (1.0) 501.2
-------- ---------- ---------- ----------- ----------
Total current liabilities 97.2 546.2 310.2 (275.7) 677.9
Long-term debt --- 3.2 24.5 --- 27.7
Other long-term liabilities .1 95.0 28.1 (5.7) 117.5
Stockholder's equity 382.0 612.3 195.2 (807.5) 382.0
-------- ---------- ---------- ----------- ----------
Total liabilities and stockholder's equity $ 479.3 $ 1,256.7 $ 558.0 $ (1,088.9) $ 1,205.1
======== ========== ========== =========== ==========
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Net cash provided by (used for) operating activities $ (3.4) $ 44.5 $ .4 $ .2 $ 41.7
Investing activities
Expenditures for property, plant and equipment --- (6.1) (2.5) (.5) (9.1)
Proceeds from the sale of property, plant and
equipment --- .4 .3 --- .7
Other-net 132.7 .7 --- (132.7) .7
-------- --------- ---------- -------- ---------
Net cash provided by (used for) investing activities 132.7 (5.0) (2.2) (133.2) (7.7)
Financing activities
Additions to long-term debt and revolving
credit agreements 266.2 4.5 17.5 --- 288.2
Reductions of long-term debt and revolving
credit agreements --- (277.1) (20.1) --- (297.2)
Notes receivable/payable, affiliates (367.6) 355.9 3.4 .3 (8.0)
Other-net (27.9) (132.8) --- 132.7 (28.0)
-------- --------- ---------- -------- ---------
Net cash provided by (used for) financing activities (129.3) (49.5) .8 133.0 (45.0)
Effect of exchange rate changes on cash --- --- 2.3 --- 2.3
-------- --------- ---------- -------- ---------
Cash and cash equivalents
Increase (decrease) for the period --- (10.0) 1.3 --- (8.7)
Balance at the beginning of the period --- 21.9 37.7 --- 59.6
-------- --------- ---------- -------- ---------
Balance at the end of the period $ --- $ 11.9 $ 39.0 $ --- $ 50.9
======== ========= ========== ======== =========
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(In millions)
NMHG Guarantor Non-Guarantor Consolidating NMHG
Holding Co. Companies Companies Eliminations Consolidated
----------- --------- --------- ------------ ------------
Net cash provided by (used for) operating activities $ (1.3) $ 12.7 $ 9.5 $ --- $ 20.9
Investing activities
Expenditures for property, plant and equipment --- (18.2) (13.5) 1.7 (30.0)
Proceeds from the sale of property, plant and
equipment --- 2.0 1.7 --- 3.7
Other-net 2.5 .4 (2.5) (2.5) (2.1)
-------- -------- ---------- --------- ---------
Net cash provided by (used for) investing activities 2.5 (15.8) (14.3) (.8) (28.4)
Financing activities
Additions to long-term debt and revolving credit
agreements --- 37.4 5.4 --- 42.8
Reductions of long-term debt and revolving credit
agreements --- (10.8) (17.4) --- (28.2)
Notes receivable/payable, affiliates 1.3 (18.8) 18.0 (1.7) (1.2)
Other-net (2.5) (2.7) (.3) 2.5 (3.0)
-------- -------- ---------- --------- ---------
Net cash provided by (used for) financing activities (1.2) 5.1 5.7 .8 10.4
Effect of exchange rate changes on cash --- --- (1.3) --- (1.3)
-------- -------- ---------- --------- ---------
Cash and cash equivalents
Increase (decrease) for the period --- 2.0 (.4) --- 1.6
Balance at the beginning of the period --- 2.8 21.6 --- 24.4
-------- -------- ---------- --------- ---------
Balance at the end of the period $ --- $ 4.8 $ 21.2 $ --- $ 26.0
======== ======== =========== ========= =========
Note 8 - Segment Information
Financial information for each of the Company's reportable segments, as defined
by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is presented in the following table.
NMHG Wholesale derives a portion of its revenues from transactions with NMHG
Retail. The amount of these revenues, which are based on current market prices
of similar third-party transactions, are indicated in the following table on the
line "NMHG Eliminations" in the revenues section.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ----------------
2002 2001 2002 2001
--------- --------- --------- ---------
REVENUES FROM EXTERNAL CUSTOMERS
NMHG Wholesale $ 347.2 $ 392.0 $ 674.9 $ 834.9
NMHG Retail 58.6 78.3 114.8 153.6
NMHG Eliminations (17.1) (25.6) (29.2) (48.2)
--------- --------- --------- ---------
NMHG Consolidated $ 388.7 $ 444.7 $ 760.5 $ 940.3
========= ========= ========= =========
GROSS PROFIT
NMHG Wholesale $ 57.6 $ 54.0 $ 106.4 $ 126.6
NMHG Retail 10.6 16.5 22.9 32.0
NMHG Eliminations .3 1.5 .9 2.2
--------- --------- --------- ---------
NMHG Consolidated $ 68.5 $ 72.0 $ 130.2 $ 160.8
========= ========= ========= =========
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
NMHG Wholesale $ 44.4 $ 45.0 $ 86.8 $ 90.6
NMHG Retail 14.0 20.6 27.0 40.2
NMHG Eliminations (.3) (.2) (.6) (.5)
--------- --------- --------- ---------
NMHG Consolidated $ 58.1 $ 65.4 $ 113.2 $ 130.3
========= ========= ========= =========
AMORTIZATION OF GOODWILL*
NMHG Wholesale $ --- $ 2.9 $ --- $ 5.8
NMHG Retail --- .4 --- .7
--------- --------- --------- ---------
NMHG Consolidated $ --- $ 3.3 $ --- $ 6.5
========= ========= ========= =========
OPERATING PROFIT (LOSS)
NMHG Wholesale $ 13.2 $ 6.1 $ 19.6 $ 30.2
NMHG Retail (3.4) (4.5) (4.1) (8.9)
NMHG Eliminations .6 1.7 1.5 2.7
--------- --------- --------- ---------
NMHG Consolidated $ 10.4 $ 3.3 $ 17.0 $ 24.0
========= ========= ========= =========
OPERATING PROFIT (LOSS) EXCLUDING
GOODWILL AMORTIZATION
NMHG Wholesale $ 13.2 $ 9.0 $ 19.6 $ 36.0
NMHG Retail (3.4) (4.1) (4.1) (8.2)
NMHG Eliminations .6 1.7 1.5 2.7
--------- --------- --------- ---------
NMHG Consolidated $ 10.4 $ 6.6 $ 17.0 $ 30.5
========= ========= ========= =========
* Amortization of goodwill is not recognized in 2002 as a result of the adoption
of SFAS No. 142 on January 1, 2002. See Note 4 for further discussion.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
2002 2001 2002 2001
------- ------- ------- -------
INTEREST EXPENSE
NMHG Wholesale $ (6.6) $ (3.4) $ (10.2) $ (6.0)
NMHG Retail (.9) (1.1) (1.7) (2.6)
NMHG Eliminations (1.1) (1.5) (2.2) (2.6)
------- ------- ------- -------
NMHG Consolidated $ (8.6) $ (6.0) $ (14.1) $ (11.2)
======= ======= ======= =======
INTEREST INCOME
NMHG Wholesale $ .6 $ .9 $ 1.2 $ 1.8
NMHG Retail --- .1 --- .1
------- ------- ------- -------
NMHG Consolidated $ .6 $ 1.0 $ 1.2 $ 1.9
======= ======= ======= =======
OTHER-NET, INCOME (EXPENSE),
EXCLUDING INTEREST INCOME
NMHG Wholesale $ (3.6) $ 4.1 $ (2.1) $ 4.9
NMHG Retail (1.0) --- (1.0) ---
------- ------- ------- -------
NMHG Consolidated $ (4.6) $ 4.1 $ (3.1) $ 4.9
======= ======= ======= =======
INCOME TAX PROVISION (BENEFIT)
NMHG Wholesale $ 1.4 $ 3.0 $ .9 $ 12.7
NMHG Retail (1.9) (1.7) (2.2) (3.6)
NMHG Eliminations (.2) .1 (.3) .1
------- ------- ------- -------
NMHG Consolidated $ (.7) $ 1.4 $ (1.6) $ 9.2
======= ======= ======= =======
NET INCOME (LOSS)
NMHG Wholesale $ 2.5 $ 4.9 $ 8.1 $ 17.3
NMHG Retail (3.4) (3.8) (4.6) (7.8)
NMHG Eliminations (.3) .1 (.4) ---
------- ------- ------- -------
NMHG Consolidated $ (1.2) $ 1.2 $ 3.1 $ 9.5
======= ======= ======= =======
DEPRECIATION, DEPLETION AND
AMORTIZATION EXPENSE
NMHG Wholesale $ 7.6 $ 11.2 $ 15.2 $ 22.2
NMHG Retail 2.5 3.2 5.5 6.9
------- ------- ------- -------
NMHG Consolidated $ 10.1 $ 14.4 $ 20.7 $ 29.1
======= ======= ======= =======
CAPITAL EXPENDITURES
NMHG Wholesale $ 2.4 $ 12.3 $ 7.8 $ 21.5
NMHG Retail .5 8.0 1.3 8.5
------- ------- ------- -------
NMHG Consolidated $ 2.9 $ 20.3 $ 9.1 $ 30.0
======= ======= ======= =======
JUNE 30 DECEMBER 31
2002 2001
----------- -----------
TOTAL ASSETS
NMHG Wholesale $ 1,113.7 $ 1,164.9
NMHG Retail 202.9 215.6
NMHG Holding/Eliminations (100.0) (175.4)
----------- -----------
NMHG Consolidated $ 1,216.6 $ 1,205.1
=========== ===========
NACCO charges fees to its operating subsidiaries for services provided by the
corporate headquarters. These services represent most of NACCO's operating
expenses. The amounts charged were $1.7 million and $3.5 million for the three
and six month periods ended June 30, 2002, respectively. This compares with $1.7
million and $3.4 million for the three and six month periods ended June 30,
2001, respectively.
Note 9 - Accounting Standards Not Yet Adopted
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 requires gains and losses on extinguishments of debt to be
reclassified as income or loss from continuing operations rather than as
extraordinary items as previously required by SFAS No. 4, "Reporting Gains and
Losses from Extinguishment of Debt." SFAS No. 145 also amends SFAS No. 13 to
require certain modifications to capital leases to be treated as sale-leaseback
transactions and modifies the accounting for subleases when the original lessee
remains a secondary obligor, or guarantor. SFAS No.145 also rescinded SFAS No.
44, which addressed the accounting for intangible assets of motor carriers and
made numerous technical corrections.
The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are
effective for fiscal years beginning after May 15, 2002, with restatement of
prior periods for any gain or loss on the extinguishment of debt that was
classified as an extraordinary item in prior periods, as necessary. The
remaining provisions of SFAS No. 145 are effective for transactions and
reporting subsequent to May 15, 2002. The adoption of SFAS No. 145 did not have
a material impact to the Company's financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities". SFAS No. 146 is effective for exit or disposal activities initiated
after December 31, 2002. SFAS No. 146 requires that liabilities for one-time
termination benefits that will be incurred over future service periods should be
measured at the fair value as of the termination date and recognized over the
future service period. This statement also requires that liabilities associated
with disposal activities should be recorded when incurred. These liabilities
should be adjusted for subsequent changes resulting from revisions to either the
timing or amount of estimated cash flows, discounted at the original
credit-adjusted risk-free rate. Interest on the liability would be accreted and
charged to expense as an operating item. The Company does not expect the
adoption of this statement to have a material impact to the Company's financial
position or results of operations.
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 26 through 28 in the Company's Registration
Statement on Form S-4, as amended. In addition to those policies and estimates
set forth in the Registration Statement, as a result of the adoption of SFAS No.
142, as discussed in Note 4 to the Unaudited Condensed Consolidated Financial
Statements in this Form 10-Q, the Company also considers the accounting for its
goodwill, which is a significant asset to the Company, to be a critical
accounting policy. Changes in management's judgments and estimates could
significantly affect the Company's analysis of the impairment of goodwill. To
test goodwill for impairment, the Company is required to estimate the fair
market value of each of its reporting units. Using management judgments, a model
was developed to estimate the fair market value of the reporting units. This
fair market value model incorporated the Company's estimates of future cash
flows, estimated allocations of certain assets and cash flows among reporting
units, estimates of future growth rates and management's judgment regarding the
applicable discount rates to use to discount those estimated cash flows. Changes
to these judgments and estimates could result in a significantly different
estimate of the fair market value of the reporting units which could result in
an impairment of goodwill.
================
FINANCIAL REVIEW
================
The segment and geographic results of operations for NMHG were as follows for
the three months and six months ended June 30:
THREE MONTHS SIX MONTHS
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenues
Wholesale
Americas $ 237.6 $ 280.1 $ 465.9 $ 607.6
Europe, Africa and Middle East 92.2 94.6 176.8 194.2
Asia-Pacific 17.4 17.3 32.2 33.1
-------- -------- -------- --------
347.2 392.0 674.9 834.9
-------- -------- -------- --------
Retail (net of eliminations)
Americas 6.4 9.0 14.0 17.4
Europe, Africa and Middle East 16.2 25.4 32.3 50.3
Asia-Pacific 18.9 18.3 39.3 37.7
-------- -------- -------- --------
41.5 52.7 85.6 105.4
-------- -------- -------- --------
NMHG Consolidated $ 388.7 $ 444.7 $ 760.5 $ 940.3
======== ======== ======== ========
Operating profit (loss)
Wholesale
Americas $ 11.6 $ 6.8 $ 20.8 $ 30.9
Europe, Africa and Middle East 1.8 (.4) (1.0) .3
Asia-Pacific (.2) (.3) (.2) (1.0)
-------- -------- -------- --------
13.2 6.1 19.6 30.2
-------- -------- -------- --------
Retail (net of eliminations)
Americas (.4) (.1) (.2) (1.0)
Europe, Africa and Middle East .7 (3.8) 1.0 (7.7)
Asia-Pacific (3.1) 1.1 (3.4) 2.5
-------- -------- -------- --------
(2.8) (2.8) (2.6) (6.2)
-------- -------- -------- --------
NMHG Consolidated $ 10.4 $ 3.3 $ 17.0 $ 24.0
======== ======== ======== ========
FINANCIAL REVIEW - continued
THREE MONTHS SIX MONTHS
-------------------- --------------------
2002 2001 2002 2001
------- ------- ------- -------
Operating profit (loss) excluding
goodwill amortization
Wholesale
Americas $ 11.6 $ 8.7 $ 20.8 $ 34.8
Europe, Africa and Middle East 1.8 .5 (1.0) 2.0
Asia-Pacific (.2) (.2) (.2) (.8)
------- ------- ------- -------
13.2 9.0 19.6 36.0
------- ------- ------- -------
Retail (net of eliminations)
Americas (.4) --- (.2) (.8)
Europe, Africa and Middle East .7 (3.7) 1.0 (7.5)
Asia-Pacific (3.1) 1.3 (3.4) 2.8
------- ------- ------- -------
(2.8) (2.4) (2.6) (5.5)
------- ------- ------- -------
NMHG Consolidated $ 10.4 $ 6.6 $ 17.0 $ 30.5
======= ======= ======= =======
Interest expense
Wholesale $ (6.6) $ (3.4) $ (10.2) $ (6.0)
Retail (net of eliminations) (2.0) (2.6) (3.9) (5.2)
------- ------- ------- -------
NMHG Consolidated $ (8.6) $ (6.0) $ (14.1) $ (11.2)
======= ======= ======= =======
Other-net
Wholesale $ (3.0) $ 5.0 $ (.9) $ 6.7
Retail (net of eliminations) (1.0) .1 (1.0) .1
------- ------- ------- -------
NMHG Consolidated $ (4.0) $ 5.1 $ (1.9) $ 6.8
======= ======= ======= =======
Net income (loss)
Wholesale $ 2.5 $ 4.9 $ 8.1 $ 17.3
Retail (net of eliminations) (3.7) (3.7) (5.0) (7.8)
------- ------- ------- -------
NMHG Consolidated $ (1.2) $ 1.2 $ 3.1 $ 9.5
======= ======= ======= =======
Effective tax rate
Wholesale 38.9% 39.0% 10.6% 41.1%
Retail (including eliminations) 36.2% 30.2% 33.3% 31.0%
NMHG Consolidated 31.8% 58.3% See (a) 46.9%
(a) The effective tax rate for the six months ended June 30, 2002 for NMHG
Consolidated is not meaningful.
The effective tax rate for the six months ended June 30, 2002 is a low 10.6
percent for NMHG Wholesale and is not meaningful for NMHG Consolidated due to a
$1.9 million tax benefit recognized in the first quarter of 2002 related to the
recognition of previously generated losses in China, combined with a relatively
low level of pre-tax income. These factors resulted in a net tax benefit for
NMHG Consolidated generated on pre-tax income.
Second Quarter of 2002 Compared with Second Quarter of 2001
NMHG Wholesale: Revenues decreased to $347.2 million in the second quarter of
2002, down 11.4 percent from $392.0 million in the second quarter of 2001. The
decline in revenues was largely due to decreased unit volume worldwide, as unit
shipments declined 12.3 percent to 16,135 units in the second quarter of 2002
from 18,402 units in the second quarter of 2001.
FINANCIAL REVIEW - continued
Operating profit increased to $13.2 million in the second quarter of 2002 from
$6.1 million in the second quarter of 2001. Operating profit improved despite a
decrease in unit volume primarily due to (i) lower manufacturing costs driven by
the completion of the Danville restructuring program in the fourth quarter of
2001 and global procurement and cost control programs, (ii) a favorable shift in
mix to higher-margin lift trucks and (iii) the elimination of goodwill
amortization of $2.9 million. See Note 3 and Note 4 to the Unaudited Condensed
Consolidated Financial Statements in this Form 10-Q for a discussion of the NMHG
Wholesale restructuring programs and the adoption of SFAS No. 142, respectively.
Net income decreased to $2.5 million in the second quarter of 2002 from $4.9
million in the second quarter of 2001. Although operating profit increased for
the second quarter of 2002 as compared with 2001, net income declined due to an
increase in interest expense and other-net expenses. Interest expense increased
in the second quarter of 2002 as compared with the second quarter of 2001 due to
an increase in the average borrowings outstanding, an increase in interest rates
and the amortization of deferred financing fees.
Both the increase in interest rates and the amortization of deferred financing
fees relate to the refinancing of NMHG's debt during the second quarter of 2002.
See Liquidity and Capital Resources. The increase in the average borrowings
outstanding is primarily due to the December 2001 termination of the asset
securitization program in the Americas effective December 2001, resulting in
certain accounts receivables in the United States being financed with debt. In
addition, the increase in the average borrowings outstanding is due to the May
9, 2002 termination of a program to sell accounts receivable in Europe effective
May 9, 2002, resulting in certain accounts receivable in Europe being financed
with debt.
In the second quarter of 2002, other-net includes a pre-tax expense of $3.1
million ($1.9 million after-tax) related to (i) the mark-to-market of interest
rate swap agreements that no longer qualify for hedge accounting due to the
refinancing of NMHG's debt and (ii) the recognition of previously deferred
losses on these interest rate swap agreements. See further discussion in Note 5
to the Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.
Also affecting the year over year comparability of net income is a pre-tax
insurance recovery of $5.2 million ($3.2 million after-tax) included in
other-net in the second quarter of 2001 relating to flood damage in September
2000 at NMHG's Sumitomo-NACCO joint venture in Japan.
The worldwide backlog level increased to 17,500 units at June 30, 2002 from
14,100 units at June 30, 2001 and 16,300 units at the end of the first quarter
of 2002 due to an increase in demand in the Americas and Europe.
NMHG Retail (net of eliminations): Revenues decreased to $41.5 million in the
second quarter of 2002 from $52.7 million in the second quarter of 2001. This
decrease is primarily due to the sale of retail dealerships in the fourth
quarter of 2001 (the "sold operations"), which were included in the results for
the second quarter of 2001, and decreased sales of new units worldwide. Revenues
generated in the second quarter of 2001 by the sold operations were $6.7
million, net of intercompany eliminations.
Operating loss was unchanged at $2.8 million for both the second quarter of 2002
and the second quarter of 2001. Benefits from (i) lower operating costs in
Europe resulting from restructuring programs implemented in 2001, (ii) the
elimination of losses incurred by the sold operations in the second quarter of
2001 and (iii) the elimination of goodwill amortization were offset by the
unfavorable effect of lower volumes and expenses for implementing cost reduction
programs in Asia-Pacific.
Unchanged operating loss and a decrease in the interest expense incurred by NMHG
Retail offset by unfavorable foreign currency movements included in other-net
expenses, resulted in an unchanged net loss of $3.7 million for both the second
quarter of 2002 and the second quarter of 2001.
FINANCIAL REVIEW - continued
First Six Months of 2002 Compared with First Six Months of 2001
NMHG Wholesale: Revenues decreased to $674.9 million in the first six months of
2002 from $834.9 million in the first six months of 2001. The decline in
revenues was primarily driven by decreased unit volume and, to a lesser degree,
decreased service parts sales in the Americas. The decrease was slightly offset
by a favorable shift in mix to higher-priced lift trucks.
Operating profit decreased to $19.6 million in the first half of 2002 from $30.2
million in the first half of 2001. The decrease in operating profit was
primarily driven by reduced unit and parts volume and the consequent negative
impact of lower shipments on manufacturing overhead absorption. The decline in
operating profit was partially offset by a shift in mix to higher-margin lift
trucks; the positive impact from improvement programs initiated in 2001,
including the completion of the Danville, Illinois, plant closure in the fourth
quarter of 2001 and the benefits of procurement, restructuring and cost control
programs; and the elimination of goodwill amortization as a result of the
adoption of SFAS No. 142.
Net income decreased to $8.1 million in the first six months of 2002 from $17.3
million in the first six months of 2001 as a result of the factors affecting
operating profit and additional interest and other-net expenses due to the
factors discussed for the second quarter operating results, above. Net income
for the first six months of 2001 also included a $1.3 million after-tax charge
for the cumulative effect of accounting changes for derivatives and pension
costs.
NMHG Retail (net of eliminations): Revenues decreased to $85.6 million for the
first six months of 2002 from $105.4 million for the first six months of 2001.
Revenues for the first six months of 2001 include $12.4 million of revenues
generated by the sold operations. Revenues also declined year over year due to
decreased volumes of new units. Operating loss in the first six months of 2002
was $2.6 million compared with an operating loss of $6.2 million in the first
six months of 2001. Operating results improved primarily due to (i) lower
operating costs in Europe resulting from restructuring programs implemented in
2001, (ii) the elimination of losses incurred by the sold operations in the
second half of 2001 and (iii) the elimination of goodwill amortization,
partially offset by the unfavorable effect of lower volumes and expenses for
implementing cost reduction programs in Asia-Pacific. Net loss was $5.0 million
for the six months ended June 30, 2002 compared with $7.8 million for the first
six months of 2001, primarily due to the factors affecting operating loss.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for property, plant and equipment were $7.8 million for NMHG
Wholesale and $1.3 million for NMHG Retail during the first half of 2002. These
capital expenditures include investments in machinery and equipment, tooling for
new products, information systems and lease and rental fleet. It is estimated
that NMHG's capital expenditures for the remainder of 2002 will be approximately
$9.0 million for NMHG Wholesale and $1.3 million for NMHG Retail. Planned
expenditures for the remainder of 2002 include tooling for new products,
investments in worldwide information systems and additions to retail lease and
rental fleet. The principal sources of financing for these capital expenditures
are internally generated funds and bank borrowings.
During the first half of 2002, NMHG Retail entered into operating lease
agreements, primarily for rental equipment, with future minimum lease payments
of approximately $5.6 million in 2002, $6.1 million in 2003, $4.9 million in
2004, $4.7 million in 2005, $3.0 million in 2006 and $1.9 million thereafter,
for a total increase in NMHG's operating lease obligations of $26.2 million
since December 31, 2001. In addition to these new operating lease agreements,
NMHG also refinanced certain of its debt financing (see discussion below). Since
December 31, 2001, there have been no other 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 Registration Statement on Form S-4, as amended, for the year ended
December 31, 2001.
FINANCIAL REVIEW - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
On May 9, 2002, NMHG replaced its primary financing agreement, an unsecured
floating-rate revolving line of credit with availability of $350.0 million,
certain other lines of credit with availability of $28.6 million and a program
to sell accounts receivable in Europe, with the proceeds from the private
placement of $250.0 million of 10% unsecured Senior Notes due 2009 and
borrowings under a secured, floating-rate revolving credit facility which
expires in May 2005. The proceeds from the Senior Notes were reduced by an
original issue discount of $3.1 million.
The $250.0 million of 10% Senior Notes 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 has filed a registration
statement on Form S-4 to exchange the Senior Notes for notes with substantially
identical terms registered with the SEC. 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.
Availability under the new revolving credit facility is up to $175.0 million and
is governed by a borrowing base based on advance rates against the inventory and
accounts receivable of the "borrowers." 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. The borrowers,
as defined in the new revolving credit facility, include NMHG Holding Co. and
certain domestic and foreign subsidiaries of NMHG Holding Co. Borrowings bear
interest at a floating rate, which can be either a base rate or LIBOR, as
defined, plus an applicable margin. The initial applicable margins, effective
through September 30, 2002, for base rate loans and LIBOR loans are 2.00% and
3.00%, respectively. The new revolving credit facility also requires a fee of
0.5% per annum on the unused commitment. Subsequent to September 30, 2002, the
margins and unused commitment fee will be subject to adjustment based on a
leverage ratio.
At June 30, 2002, the borrowing capacity under this facility, both domestic and
foreign, was $79.9 million, which has been reduced by the commitments or
availability under certain foreign credit facilities and an excess availability
requirement of $15.0 million, as described below. Borrowings outstanding under
this facility were $34.9 million at June 30, 2002. The domestic floating rate of
interest applicable to this facility on June 30, 2002 was 6.75%, including the
applicable floating rate margin. The new revolving credit facility includes a
subfacility for foreign borrowers which can be denominated in British pounds
sterling or euro. The foreign floating rate of interest applicable to this
subfacility on June 30, 2002 was 7.18%, including the applicable floating rate
margin. Included in the borrowing capacity is a $15.0 million overdraft facility
available to foreign borrowers. The initial applicable margin, effective through
September 30, 2002, for overdraft loans is 3.25% above the London base rate, as
defined. The new revolving credit facility is guaranteed by certain domestic and
foreign subsidiaries of NMHG Holding Co. and secured by substantially all of the
assets, other than property, plant and equipment, of the borrowers and
guarantors, both domestic and foreign, under the facility.
The terms of the new revolving credit facility provide that availability is
reduced by the commitments or availability under a foreign credit facility of
the borrowers and certain foreign working capital facilities. A foreign credit
facility commitment of approximately U.S. $18.1 million on June 30, 2002,
denominated in Australian dollars, reduced the amount of availability under the
new revolving credit facility. In addition, availability under the new revolving
credit facility was reduced by $5.5 million for a working capital facility
denominated in Chinese yuan. If the commitments or availability under these
facilities are increased, availability under the new revolving credit facility
will be reduced. The $79.9 million of capacity under the new revolving credit
facility at June 30, 2002 reflected the reduction of these foreign credit
facilities.
Both the new revolving credit facility and terms of the Senior Notes include
restrictive covenants which, among other things, limit dividends to NACCO. The
new revolving credit facility also requires NMHG to meet certain financial
tests, including, but not limited to, minimum excess availability, maximum
capital expenditures, maximum leverage ratio and minimum fixed charge coverage
ratio tests. The borrowers must maintain aggregate excess availability under the
new revolving credit facility of at least $15.0 million.
NMHG paid financing fees of approximately $13.0 million related to this
refinancing. These fees were deferred and will be amortized as interest expense
in the statement of operations over the respective terms of the new financing
facilities.
FINANCIAL REVIEW - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
As a result of the refinancing of NMHG's floating-rate revolving credit
facility, NMHG's interest rate swap agreements no longer qualify for hedge
accounting treatment in accordance with SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended. See further discussion in Note
5 to the Unaudited Condensed Consolidated Financial Statements included in this
Form 10-Q.
NMHG believes that funds available under the new 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 Wholesale's capital structure is presented below:
JUNE 30 DECEMBER 31
2002 2001
---------- -----------
NMHG Wholesale:
Total net tangible assets $ 282.8 $ 375.2
Advances to NMHG Retail 16.2 70.2
Goodwill at cost 488.1 446.0
---------- -----------
Net assets before goodwill amortization 787.1 891.4
Accumulated goodwill amortization (142.8) (141.4)
Advances from NACCO --- (8.0)
Advances from NMHG Holding (250.1) ---
Other debt (45.2) (300.9)
Minority interest (1.8) (2.3)
---------- -----------
Stockholder's equity $ 347.2 $ 438.8
========== ===========
Debt to total capitalization 46% 41%
The decrease in net tangible assets of $92.4 million is primarily due to a $79.0
million decrease in investments in NMHG Retail which was allocated to NMHG
Holding Co., the parent, and is not held by NMHG Wholesale. The remaining $13.4
million decrease in net tangible assets is due to decreases in cash and cash
equivalents, inventories, property, plant and equipment and net deferred tax
assets combined with increases in accounts payable and intercompany interest
payable, somewhat offset by an increase in accounts receivable. Accounts
receivable increased primarily due to the second quarter 2002 termination of an
agreement to sell European accounts receivable as part of NMHG's debt
refinancing.
As a result of NMHG's debt refinancing, certain of NMHG Wholesale's borrowings
that were previously from external sources are now financed from an intercompany
advance from NMHG Holding. As such, advances from NMHG Holding replaced the
majority of NMHG Wholesale's "other debt." Furthermore, NMHG Wholesale's
advances to NMHG Retail were reduced to the extent that NMHG Retail now obtains
financing from NMHG Holding instead of from NMHG Wholesale.
Net goodwill increased $40.7 million primarily due to a reallocation of goodwill
from NMHG Retail as part of the adoption of SFAS No. 142. See further discussion
in Note 4 to the Unaudited Condensed Consolidated Financial Statements in this
Form 10-Q.
Stockholder's equity decreased due to a dividend to NMHG Holding of $117.7
million and a dividend to NACCO of $15.0 million, partially offset by a $10.4
million favorable adjustment to the foreign currency cumulative translation
balance, net income for the first six months of 2002 of $8.1 million, a $3.5
million favorable adjustment to the deferred loss on derivatives and a $19.1
million reallocation of equity from NMHG Retail and NMHG Holding. This
adjustment to equity among segments does not affect NMHG's consolidated equity
position.
FINANCIAL REVIEW - continued
LIQUIDITY AND CAPITAL RESOURCES - continued
NMHG Retail's capital structure is presented below:
JUNE 30 DECEMBER 31
2002 2001
---------- ----------
NMHG Retail:
Total net tangible assets $ 84.7 $ 109.5
Advances from NMHG Wholesale (16.2) (70.2)
Goodwill and other intangibles at cost 1.8 45.2
---------- ----------
Net assets before goodwill amortization 70.3 84.5
Accumulated goodwill and other intangible amortization (.2) (5.6)
Advances from NMHG Holding (16.2) ---
Other debt (39.1) (53.5)
---------- ----------
Stockholder's equity $ 14.8 $ 25.4
========== ==========
Debt to total capitalization 79% 68%
The decrease in total net tangible assets of $24.8 million is primarily due to a
$19.8 million decrease in net intercompany and other receivables. The decrease
in net intercompany accounts receivable is primarily due to the settlement of
fiscal 2001 intercompany tax advances with NMHG Wholesale. Other receivables
decreased primarily due to proceeds received in the first quarter of 2002 for
the 2001 sold operations. A portion of these proceeds was used to pay down debt.
As noted above, certain advances from NMHG Wholesale were replaced with advances
from NMHG Holding. Overall, advances from affiliates decreased primarily due to
the transfer of net goodwill to NMHG Wholesale. See further discussion in Note 4
to the Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.
The decrease in stockholder's equity is due to the $5.0 million net loss and a
$6.7 million reallocation of equity to NMHG Wholesale and NMHG Holding,
partially offset by a $1.1 favorable adjustment to the foreign currency
cumulative translation balance. The reallocation of equity among segments does
not affect NMHG's consolidated equity position.
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 income and net income were not
material in the first half of 2002 as compared with the first half of 2001.
OUTLOOK
NMHG Wholesale
NMHG Wholesale expects that previously initiated cost reduction activities,
including restructuring programs, procurement initiatives, and other strategic
and cost reduction programs, have positioned the Company for improved results in
the second half of 2002, compared with the second half of 2001. Furthermore,
NMHG Wholesale does not expect to incur the inefficiencies of the second half of
2001, when production was dramatically reduced. NMHG Wholesale expects improved
operating results but also to incur, as a result of the refinancing of NMHG's
debt, increased interest expense, amortization of deferred financing fees and
the negative effect of interest rate swap agreements during the second half of
2002, compared with the second half of 2001.
NMHG Retail
NMHG Retail expects to continue its programs to improve the performance of its
wholly owned dealerships as part of its objective for reaching 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) acquisitions and/or
dispositions of dealerships by NMHG, (10) costs related to the integration of
acquisitions, (11) the impact of the 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.
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 of this quarterly report
on Form 10-Q.
(b) Reports on Form 8-K. None.
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 September 26, 2002 /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.
Date: September 26, 2002 /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.
Date: September 26, 2002 /s/ Michael K. Smith
----------------------------- ---------------------------------
Michael K. Smith
Vice President Finance &
Information Systems and Chief
Financial Officer
(Principal Financial Officer)
Exhibit Index
Exhibit
Number Description of Exhibit
3.1(i) Certificate of Incorporation of NMHG Holding Co., is
incorporated herein by reference from Exhibit 3.1(i) to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
3.1(ii) By-laws of NMHG Holding Co., is incorporated herein by
reference from Exhibit 3.1(ii) to the Registration Statement
on Form S-4 of NMHG Holding Co. (Registration No. 333-89248)
4.1 Form of Common Stock Certificate of NMHG Holding Co., is
incorporated herein by reference from Exhibit 4.1 to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
4.2 Indenture, dated as of May 9, 2002, by and among NMHG Holding
Co., the Subsidiary Guarantors named therein and U.S. Bank
National Association, as Trustee (including the form of 10%
senior note due 2009), is incorporated herein by reference
from Exhibit 4.2 to the Registration Statement on Form S-4 of
NMHG Holding Co. (Registration No. 333-89248)
4.3 Registration Rights Agreement, dated as of May 9, 2002, by and
among NMHG Holding Co., the Guarantors named therein and
Credit Suisse First Boston Corporation, Salomon Smith Barney
Inc., U.S. Bancorp Piper Jaffray Inc., McDonald Investments
Inc., NatCity Investments, Inc. and Wells Fargo Brokerage
Services, LLC, is incorporated herein by reference from
Exhibit 4.3 to the Registration Statement on Form S-4 of NMHG
Holding Co. (Registration No. 333-89248)
10.1 Credit Agreement, dated as of May 9, 2002, among NMHG Holding
Co., NACCO Materials Handling Group, Inc., NMHG Distribution
Co., NACCO Materials Handling Limited, NACCO Materials
Handling B.V., the financial institutions from time to time a
party thereto as Lenders, the financial institutions from time
to time a party thereto as Issuing Bank, Citicorp North
America, Inc., as administrative agent for the Lenders and the
Issuing Bank thereunder and Credit Suisse First Boston as
joint arrangers and joint bookrunners and CSFB as syndication
agent, is incorporated herein by reference from Exhibit 10.1
to the Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
10.2 Operating Agreement, dated July 31, 1979, among Eaton
Corporation and Sumitomo Heavy Industries, Ltd., is
incorporated herein by reference from Exhibit 10.2 to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
10.3 Equity joint venture contract, dated November 27, 1997,
between Shanghai Perfect Jinqiao United Development Company
Ltd., People's Republic of China, NACCO Materials Handling
Group, Inc., USA, and Sumitomo-Yale Company Ltd., Japan II-1,
is incorporated herein by reference from Exhibit 10.3 to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
10.4 Recourse and Indemnity Agreement, dated October 21, 1998,
between General Electric Capital Corp., NMHG Financial
Services, Inc. and NACCO Materials Handling Group, Inc., is
incorporated herein by reference from Exhibit 10.4 to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
10.5 Restated and Amended Joint Venture and Shareholders Agreement,
dated April 15, 1998, between General Electric Capital Corp.
and NACCO Materials Handling Group, Inc., is incorporated
herein by reference from Exhibit 10.5 to the Registration
Statement on Form S-4 of NMHG Holding Co. (Registration No.
333-89248)
10.6 Amendment No. 1 to the Restated and Amended Joint Venture and
Shareholders Agreement between General Electric Capital
Corporation and NACCO Materials Handling Group, Inc., dated as
of October 21, 1998, is incorporated herein by reference from
Exhibit 10.6 to the Registration Statement on Form S-4 of NMHG
Holding Co. (Registration No. 333-89248)
10.7 International Operating Agreement, dated April 15, 1998,
between NACCO Materials Handling Group, Inc. and General
Electric Capital Corp. (the "International Operating
Agreement"), is incorporated herein by reference from Exhibit
10.7 to the Registration Statement on Form S-4 of NMHG Holding
Co. (Registration No. 333-89248)
10.8 Amendment No. 1 to the International Operating Agreement,
dated as of October 21, 1998, is incorporated herein by
reference from Exhibit 10.8 to the Registration Statement on
Form S-4 of NMHG Holding Co. (Registration No. 333-89248)
10.9 Amendment No. 2 to the International Operating Agreement,
dated as of December 1, 1999, is incorporated herein by
reference from Exhibit 10.9 to the Registration Statement on
Form S-4 of NMHG Holding Co. (Registration No. 333-89248)
10.10 Amendment No. 3 to the International Operating Agreement,
dated as of May 1, 2000, is incorporated herein by reference
from Exhibit 10.10 to the Registration Statement on Form S-4
of NMHG Holding Co. (Registration No. 333-89248)
10.11 Letter agreement, dated November 22, 2000, between General
Electric Capital Corporation and NACCO Materials Handling
Group, Inc. amending the International Operating Agreement, is
incorporated herein by reference from Exhibit 10.11 to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
10.12 A$ Facility Agreement, dated November 22, 2000, between GE
Capital Australia and National Fleet Network PTY Limited, is
incorporated herein by reference from Exhibit 10.12 to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
10.13 Loan Agreement, dated as of June 28, 1996, between NACCO
Materials Handling Group, Inc. and NACCO Industries, Inc., is
incorporated herein by reference from Exhibit 10.13.1 to the
Registration Statement on Form S-4 of NMHG Holding Co.
(Registration No. 333-89248)
10.14 Business sale agreement, dated November 10, 2000, between
Brambles Australia Limited, ACN 094 802 141 Pty Limited and
NACCO Materials Handling Group, Inc., is incorporated herein
by reference from Exhibit 10.14 to the Registration Statement
on Form S-4 of NMHG Holding Co. (Registration No. 333-89248)
10.15 NACCO Materials Handling Group, Inc. Annual Incentive
Compensation Plan, effective as of January 1, 2002, is
incorporated herein by reference to Exhibit 10(lxiii) to NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, Commission File Number 1-9172
10.16 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 NACCO Industries, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 2000, Commission
File Number 1-9172
10.17 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 NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, Commission File Number 1-9172
10.18 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 incorporated herein by reference to Exhibit 10(lxvi) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.19 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
incorporated herein by reference to Exhibit 10(lxvii) to NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, Commission File Number 1-9172
10.20 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
incorporated herein by reference to Exhibit 10(lxviii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172
10.21 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
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, Commission File Number
1-9172
10.22 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
incorporated herein by reference to Exhibit 10(lxxix) to NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, Commission File Number 1-9172
10.23 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
incorporated herein by reference to Exhibit 10(lxxx) to NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, Commission File Number 1-9172
10.24 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
incorporated herein by reference to Exhibit 10(lxxxi) to NACCO
Industries, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, Commission File Number 1-9172
10.25 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
incorporated herein by reference to Exhibit 10(lxxxii) to
NACCO Industries, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, Commission File Number
1-9172