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NACCO Industries, Inc. Announces Fourth Quarter And Full Year 2009 Results

CLEVELAND, March 2 /PRNewswire-FirstCall/ -- NACCO Industries, Inc. (NYSE: NC) today announced consolidated net income of $42.5 million, or $5.12 per diluted share, for the fourth quarter of 2009 on revenues of $687.6 million compared with a consolidated net loss for the fourth quarter of 2008 of $428.2 million, or $51.69 per share, on revenues of $945.7 million.

Net income for the year ended December 31, 2009 was $31.1 million, or $3.75 per diluted share, on revenues of $2.3 billion, compared with a consolidated net loss of $437.6 million, or $52.84 per share, on revenues of $3.7 billion for the year ended December 31, 2008.  

NACCO's fourth quarter and full year 2008 results were negatively affected by a non-cash write-off of goodwill and certain other intangible assets totaling $435.7 million, or $431.6 million net of taxes of $4.1 million.  Also in 2008, the Company recognized a non-cash charge of $15.3 million against the accumulated deferred tax assets for the European operations of NMHG in the fourth quarter and a total charge of $29.8 million against the accumulated deferred tax assets for European and Australian operations and for certain U.S. state taxing jurisdictions at NMHG for the full year.  

Non-GAAP Financial Discussion

As a result of these charges, NACCO believes 2008 reported results were not reflective of the underlying operations of NACCO Industries, Inc. and its subsidiaries.  The charges were recorded as follows:

    
    
                          Actual 2008 Fourth Quarter
                          --------------------------
    
                                                Income
                                                (Loss)
                     Pre-   *After-  Operating  before   Net
                     tax      tax      Profit   Income  Income 
                   Charges  Charges    (Loss)   Taxes   (Loss)
                   -------- -------  --------  ------  -------
    NMHG            $351.1  $362.6   $(358.8) $(362.7) $(365.8)
    Hamilton Beach   $80.7   $80.7    $(68.8)  $(70.6)  $(74.1)
    Kitchen
     Collection       $3.9    $3.6      $3.4     $3.2     $0.2
    Consolidated
     NACCO          $435.7  $446.9   $(417.9) $(426.6) $(428.2)
    
    
                          Actual 2008 Full Year
                          ---------------------
                                                Income
                                                (Loss) 
                    Pre-   *After-  Operating   before 
                    tax      tax      Profit    Income   Net
                  Charges  Charges    (Loss)    Taxes   Loss
                  -------- -------- ---------   ------  ---- 
                                                       
    NMHG            $351.1   $377.1   $(344.0) $(360.3) $(376.0)
    Hamilton Beach   $80.7    $80.7    $(60.8)  $(70.6)  $(73.3)
    Kitchen
     Collection       $3.9     $3.6    $(12.2)  $(13.3)  $(10.0)
    Consolidated
     NACCO          $435.7   $461.4   $(389.5) $(421.0) $(437.6)
    
    * The after-tax charges exclude taxes of $3.8 million for NMHG and $0.3 
      million for Kitchen Collection on the intangible asset impairment.

To explain the underlying operations better, NACCO has adjusted the 2008 reported results to exclude these charges. Excluding the goodwill and intangible asset impairment charges as well as the charge against the deferred tax assets, fourth quarter 2008 consolidated adjusted net income was $18.7 million, or $2.26 per share.  Full year 2008 consolidated adjusted net income was $23.8 million, or $2.87 per share. "Adjusted operating profit/loss" and "adjusted net income/loss" in this news release refer to operating profit/loss and net income/loss results that exclude the goodwill and intangible asset impairment charges as well as the charges against the accumulated deferred tax assets.  For reconciliations from 2008 generally accepted accounting principles ("GAAP") results to the adjusted non-GAAP financial results, see pages 17 to 20.  The remaining discussion of 2008 fourth quarter and full year results in this release relates largely to adjusted operating profit/loss or adjusted net income/loss unless otherwise noted.  Management believes a discussion of adjusted operating profit/loss and adjusted net income/loss for 2008 is more reflective of NACCO's underlying business operations and assists investors and the subsidiaries' lenders in better understanding the results of operations of the Company.  

Net income for the 2009 fourth quarter and full year includes earnings from discontinued operations of $21.9 million and $22.6 million, after-tax, respectively as a result of the December 29, 2009 sale of certain assets of North American Coal's Red River Mining Company subsidiary.  Earnings from discontinued operations include a gain on the sale of $22.3 million, after-tax, and operating results for Red River. The attached financial statements and related 2008 financial information in this news release have been reclassified to reflect the Red River Mining Company operating results as discontinued operations.  On this basis, consolidated adjusted net income for the 2008 fourth quarter and full year includes earnings from discontinued operations of $0.5 million and $2.3 million, after-tax, respectively.  For the 2009 fourth quarter income from continuing operations was $20.6 million compared with adjusted income from continuing operations of $18.2 million in the fourth quarter of 2008.  For the 2009 full year, income from continuing operations was $8.5 million compared with adjusted income from continuing operations of $21.5 million in 2008.

Adjusted results and discontinued operations were recorded by subsidiary as follows and are compared with 2009 in the following tables:

    
    
                              2009 Fourth Quarter 
                              ------------------- 
    
                                                              Income
                         Operating    Net                      from
                           Profit   Income    Discontinued   Continuing
                           (Loss)   (Loss)     Operations    Operations
                         ---------  ------    ------------   -----------
    
    NMHG                    $3.5      $0.9              $-         $0.9
    Hamilton Beach          22.7      13.1               -         13.1
    Kitchen Collection      13.0       8.1               -          8.1
    North American Coal      3.7      23.9            21.9          2.0
    NACCO & Other and
     Eliminations           (5.5)     (3.5)              -         (3.5)
                            ----      ----             ---         ----
    Consolidated NACCO     $37.4     $42.5           $21.9        $20.6
    
    
                              2008 Fourth Quarter
                              -------------------
                                                              Adjusted
                        Adjusted    Adjusted                   Income
                        Operating     Net                       from
                          Profit     Income    Discontinued  Continuing
                          (Loss)     (Loss)     Operations   Operations
                        ---------   --------   ------------  ----------
    
    NMHG                   $(7.7)     $(3.2)             $-        $(3.2)
    Hamilton Beach          11.9        6.6               -          6.6
    Kitchen Collection       7.3        3.8               -          3.8
    North American Coal      7.8        4.9             0.5          4.4
    NACCO & Other and
     Eliminations           (1.5)       6.6               -          6.6
                            ----        ---             ---          ---
    Consolidated NACCO     $17.8      $18.7            $0.5        $18.2
    
    
    
    
                                  2009 Full Year 
                                  -------------- 
    
                                                                Income
                        Operating    Net                         from
                          Profit    Income       Discontinued Continuing
                          (Loss)    (Loss)        Operations  Operations
                        ---------   ------       ------------ -----------
    NMHG                  $(31.2)   $(43.1)             $-       $(43.1)
    Hamilton Beach          50.4      26.1               -         26.1
    Kitchen Collection       6.7       3.9               -          3.9
    North American Coal     42.6      53.2            22.6         30.6
    NACCO & Other and
     Eliminations           (9.4)     (9.0)              -         (9.0)
                            ----      ----             ---         ----
    Consolidated NACCO     $59.1     $31.1           $22.6         $8.5
    
     
                                  2008 Full Year
                                  -------------- 
                                                               Adjusted
                         Adjusted  Adjusted                     Income
                        Operating    Net                         from
                          Profit    Income       Discontinued Continuing
                          (Loss)    (Loss)        Operations  Operations
                        ---------   ------       ------------ -----------
    NMHG                    $7.1       $1.1              $-         $1.1
    Hamilton Beach          19.9        7.4               -          7.4
    Kitchen Collection      (8.3)      (6.4)              -         (6.4)
    North American Coal     29.8       22.1             2.3         19.8
    NACCO & Other and
     Eliminations           (2.3)      (0.4)              -         (0.4)
                            ----       ----             ---         ----
    Consolidated NACCO     $46.2      $23.8            $2.3        $21.5

NACCO and Subsidiaries Consolidated Fourth Quarter Highlights

Key perspectives on NACCO's fourth quarter results are as follows:  

  • NMHG's operating profit in the fourth quarter of 2009 was $3.5 million compared with an adjusted operating loss of $7.7 million in 2008.  Operating profit improved substantially, even after a $6.0 million reduction-in-force charge taken in 2008.  Benefits from cost containment actions, favorable foreign currency, lower material costs, favorable pricing and lower warranty costs more than offset the effects of an over 40 percent decline in sales from $661.5 million in 2008 to $395.7 million in 2009.  Net income in 2009 was $0.9 million compared with an adjusted loss of $3.2 million in 2008.
  • Hamilton Beach's net income was $13.1 million in the fourth quarter of 2009 compared with adjusted net income of $6.6 million in the fourth quarter of 2008.  The significant improvement was the result of lower product and freight costs and increased sales of innovative products partially offset by volume declines and higher selling, general and administrative expenses.
  • Kitchen Collection experienced a dramatic turnaround in the fourth quarter of 2009 compared with 2008.  Net income was $8.1 million in 2009 compared with adjusted net income of $3.8 million in 2008.  Results improved primarily due to improved gross margins at comparable stores and lower employee-related costs.
  • North American Coal's income from continuing operations of $2.0 million declined in the fourth quarter of 2009 compared with income from continuing operations of $4.4 million in 2008.  The decrease was primarily the result of a decline in earnings from the unconsolidated mines due to a decrease in contractual price escalators and an extended outage at a customer's power plant that resulted in fewer tons delivered, partially offset by an increase in tons delivered at the Mississippi Lignite Mining Company.
  • NACCO and Other, which includes the Parent Company operations and eliminations for consolidated taxes, generated a net loss of $3.5 million in 2009 compared with adjusted net income of $6.6 million in 2008.  The 2009 net loss includes increased employee-related expenses, a reduction in management fees charged to the subsidiaries and an impairment charge recognized in connection with the buy-out of a capital lease asset, offset by a small positive effective tax rate adjustment to the full year rate.  Adjusted net income in 2008 includes the reversal of previously accrued incentive compensation expense and a large positive effective tax rate adjustment to the full year rate.

In light of the difficult economic conditions, NACCO increased the capitalization of its subsidiaries by contributing $79.7 million to NMHG and $3.2 million to Kitchen Collection during the year ended December 31, 2009, of which fourth quarter contributions were $14.5 million to NMHG.

Consolidated Outlook for 2010

Economic and market conditions appear to have stabilized in the second half of 2009, with some isolated signs of limited recovery beginning to emerge.  The forklift truck capital goods market in which NMHG participates appears to have stabilized at the end of 2009 in all geographic areas, with only China and Brazil beginning to show improvement.  The consumer markets in which Hamilton Beach and Kitchen Collection participate appear to be recovering, although consumers continue to struggle with high unemployment rates and lower income levels.  Changes in products, product positioning and product costs continue to be implemented at NMHG, Hamilton Beach and Kitchen Collection to strengthen margin positions during 2010.  North American Coal's lignite coal operations continue to be strong and the company expects steady performance at these operations in 2010 with comparable deliveries to 2009.  However, North American Coal's limerock deliveries are expected to be significantly higher in 2010 compared with 2009 as new mining permits, previously set aside by a legal ruling, were issued in early 2010 for some of the company's customers.  

The Company continues to operate on the assumption that the economic environment will not improve significantly in the first half of 2010 in the lift truck market and is cautiously optimistic a moderate recovery in that market will begin in the second half of 2010.  Aggressive cost containment actions and other programs put in place in late 2008 and during 2009 moderated the effect of the economic downturn in 2009.  The employee-related benefit programs suspended during 2009 were partially phased back in during the fourth quarter of 2009 at NACCO's consumer products subsidiaries and are expected to be fully phased back in during 2010.  Similar benefits will be phased back in as financial results permit at NMHG and NACCO headquarters.  At NMHG, these ongoing cost containment actions are unlikely to overcome moderate losses in the first half of the year from the effect of continued reduced volumes, particularly in the first quarter.  However, with anticipated moderate recovery in the latter half of 2010, NMHG expects to be profitable in the second half, resulting in about break-even results for the full year based on the current lift truck market outlook.  At Hamilton Beach, the reinstatement of suspended benefits, the phasing back in of additional spending and reduced placements at certain retailers are expected to result in lower net income in 2010 compared with 2009.  While it is still too early to say consumer markets have fully rebounded, Kitchen Collection expects a moderate increase in full year net income for 2010 compared with 2009 as a result of improvements to merchandise mix and closure of underperforming stores. North American Coal expects full year 2010 income from continuing operations to increase moderately over 2009 income from continuing operations, after excluding the lease bonus payments of $7.1 million pre-tax received during the third quarter of 2009.

Overall, NACCO expects its subsidiaries to generate positive cash flow before financing activities in 2010, although at lower levels than in 2009.  NACCO continues to have flexibility in capitalizing its subsidiaries.  

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