Hamilton Beach 2008 Annual Report Download - page 7

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Above: A Le Tourneau front-end loader loads mined lignite coal into a Kress coal haul truck at The Coteau Properties Company’s Freedom Mine in
North Dakota.
On this basis, North American Coal reported net income
of $22.1 million in 2008 compared with $31.0 million in 2007.
NMHG Wholesale had adjusted income of $4.5 million in
2008 compared with net income of $48.2 million in 2007.
NMHG Retail had an adjusted loss of $3.4 million in 2008
compared with a net loss in 2007 of $8.9 million. Hamilton
Beach’s 2008 adjusted income of $7.4 million compared
with net income of $19.5 million in 2007. Finally, Kitchen
Collection’s results declined to an adjusted loss of $6.4 million
in 2008 from a net loss of $0.9 million in 2007. The background
for these results is discussed in each subsidiary company’s
section of this letter.
Today we face unprecedented global economic and
financial market conditions. The future is highly uncertain and,
at this time, accurately forecasting market demand, customer
and consumer purchasing behavior or NACCO performance
for 2009 or 2010 is very challenging. Therefore, we have
promptly and aggressively put
in place what we believe to be
the right plans to weather a
very difficult 2009. We are
making the decisions necessary
to address current economic
conditions at all of our
subsidiaries and to prepare for
the possibility that markets will
remain at current depressed
levels. Cost containment
actions at NACCO Industries
and our subsidiaries include
personnel reductions, the suspension of incentive compensation
and profit-sharing, benefit reductions, wage freezes, spending
and travel restrictions, and, in some cases, salary reductions.
Further, many targeted improvement programs, some put in
place over the last few years and some implemented more
recently, will be largely complete in 2009.
We have great confidence in the management teams at
each of our subsidiaries and in the many experienced and
capable people working closely together around the globe
to help our companies manage through the downturn. In
addition, several senior NACCO parent company personnel
have taken on more specific operational roles at NACCO
Materials Handling Group and North American Coal, in
addition to their parent company roles, to add expertise as
well as to reduce costs.
NACCO Industries is financially secure. The Company
currently has financing in place on favorable terms at each of
its subsidiaries. We are focusing on maximizing cash flow
before financing activities in 2009. In addition, NACCO
currently has substantial cash available, which provides the
Company flexibility with respect to capitalizing its subsidiaries,
an option we believe to be a key advantage of our operating
holding company organizational structure. In this regard,
during 2008, NACCO contributed $68.3 million to NMHG,
$29.0 million to Hamilton Beach and $25.3 million to
Kitchen Collection to increase capitalization at each of
these subsidiaries.
Subsidiary Financial Objectives
Each of NACCO’s subsidiary companies has specific
financial objectives (see sidebar on page 3 for specific goals).
Due to the extraordinary economic conditions, NACCO
Materials Handling Group,
Hamilton Beach Brands
and Kitchen Collection fell
significantly short of meeting
their objectives in 2008. Given
the uncertainty of market
projections for 2009 and
subsequent years, it is difficult
to provide a timetable for the
achievement of these objectives.
However, each of NACCO’s
subsidiaries is implementing
well-structured operational
programs over the short and long term with its specific
financial objectives in mind. As market conditions improve,
the Company expects that the operating fundamentals and
the programs in place at our subsidiaries will position them
to move positively toward achievement of their long-term
financial goals.
North American Coal
2008 Results
North American Coal (“NACoal”) has had relatively
stable performance over the years and continued to do so in
2008. Long-term contracts are in place at the company’s
lignite coal mines, demand remains strong from customers
who continue to require a constant supply of coal to generate
power and cash flow is steadier than in NACCO’s other
businesses. Positive developments at NACoal in 2008 included