Hamilton Beach 2012 Annual Report Download - page 11

9
the third quarter, The North American
Coal Corporation (“NACoal”) under-
went a transformation of its own by
re-entering the bituminous coal business
through the acquisition of companies
which comprise the operations of Reed
Minerals, an Alabama producer of steam
and metallurgical coal. With this acqui-
sition, NACoal is positioned to expand
in the domestic and international met-
allurgical coal business, in addition to
the growth expected in its domestic
lignite mining operations.
Coal deliveries at NACoal’s lignite
mines increased in 2012 as more elec-
trical demand at customers’ power
plants translated into higher customer
requirements during the first half of
the year. However, an extended power
plant outage in the latter half of the
year tempered those improvements.
Limerock customers increased require-
ments as a result of significant demand
related primarily to one large project in
the Florida construction market. The
consumer market continued to be soft
as the mass-market consumer, which is
Hamilton Beach Brands’ (“HBB”) and
Kitchen Collection’s primary customer,
remained under pressure in 2012.
Additionally, customer visits to stores
in both indoor and outlet malls dropped
in 2012, especially during the fourth-
quarter holiday-selling season. In
this highly challenging environment,
revenues and profits improved at HBB
as a result of increased placements and
promotions at its largest customers.
Kitchen Collection continues to make
adjustments to attract customers but
was not able to overcome the unfavor-
able effect of the decline in customer
visits to its stores.
Given 2012 market conditions, the
acquisition of Reed Minerals and gains
on sales of assets at NACoal, revenues
increased and strong operating results
were achieved at HBB and NACoal but
operating results were disappointing
at Kitchen Collection. Consolidated
revenues for NACCO grew to $873.4
million in 2012 from $790.4 million in
2011, with the increase primarily
driven by increased deliveries at NACoal
and higher sales volumes of higher-
priced products at HBB. Income from
continuing operations decreased to $42.2
million, or $5.02 per diluted share, in
2012 from $79.5 million, or $9.46 per
diluted share, in 2011. However, income
from continuing operations for 2011
included the receipt of $60.0 million, or
$39.0 million after taxes of $21.0 million,
related to the Applica litigation settle-
ment in 2011. This settlement was
partially offset by litigation costs of $2.8
million, or $1.8 million after taxes of $1.0
million, also incurred in 2011. Excluding
the settlement and the corresponding
litigation costs, adjusted income from
continuing operations(1) was $42.3
million, or $5.03 per diluted share for
the year ended December 31, 2011.
In 2012, strong returns on capital
employed(2) (“ROTCE”) on a net debt
Stockholders
(1) “Consolidated adjusted income from continuing operations” in this letter refers to income from continuing operations that exclude the Applica settlement and related litigation
costs. (For reconciliations from GAAP results to the adjusted non-GAAP results, see page 24.) Management believes a discussion of adjusted income from continuing operations
is more reflective of NACCO’s underlying business operations and assists investors in better understanding the results of operations of NACCO and its subsidiaries.
(2) See page 24 for the calculation of return on capital employed.