Hamilton Beach 2009 Annual Report Download - page 7

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we believe to be a key advantage of our
operating holding company organization
structure. In 2009, additional capital
contributions of $79.7 million and $3.2
million were made to NMHG and Kitchen
Collection, respectively.
Subsidiary Financial Objectives
Each of NACCO’s subsidiary
companies has specific long-term financial
objectives (see sidebar for specific goals).
In 2009, NACoal and HBB achieved their
targets. However, if HBB had not suspended
certain employee benefits, the company
would have been short of its operating
profit margin target. Looking forward,
HBB is expected to continue to do very well,
but it will need additional sales volume to
achieve its target. Kitchen Collection made
substantial progress toward its financial
objectives in 2009. Kitchen Collection
®
stores were at target, but the Le Gourmet
Chef
®
stores are not expected to achieve
the target objective until 2012 to 2013
as sales volume increases and certain
underperforming stores are closed. Due
to the unprecedented depressed market
conditions in the forklift truck market and
the continuing uncertainty regarding the
timing of an upturn in that market, it is
difficult to provide a timetable for achieving
NMHG’s target. However, NMHG’s
programs created substantial operating
leverage, establishing a strong position to
achieve its operating profit margin target
when the market does peak. Each of
NACCO’s subsidiaries is proceeding with
specific programs designed to achieve its
targets. As market conditions improve, the
Company expects that the subsidiaries’
operating fundamentals and the maturation
of the programs that have been put in place
will position each of them to achieve their
long-term financial goals.
• NACoal: Earn a minimum return on
capital employed of 13 percent and
attain positive Economic Value
Income from all existing consolidated
mining operations and any new
projects while maintaining or
increasing the profitability of all
existing unconsolidated mining
operations
• NMHG: Achieve a minimum
operating profit margin of 9 percent
at the peak of the market cycle
• HBB: Achieve a minimum operating
profit margin of 10 percent
• Kitchen Collection: Achieve a
minimum operating profit margin
of 5 percent
•All subsidiaries: Generate
substantial cash flow before
financing activities
Subsidiary
Financial Objectives:s
In late 2009, NACoal completed the sale of certain
assets of the Red River Mining Company for cash proceeds of
$41.4 million. Because of this sale, the financial information in
this Annual Report has been reclassified to reflect the Red River
Mining Company operating results as discontinued operations.
As a result, net income(1) for 2009 includes earnings from
discontinued operations of $22.6 million, comprised of the after-
tax gain on the sale of $22.3 million and Red River’s full-year
after-tax earnings of $0.3 million.
Overall, NACCO reported consolidated income from
continuing operations of $8.5 million in 2009, compared with
a consolidated loss from continuing operations of $439.9 million
in 2008. Results for 2008 were negatively affected by a non-cash
write-off of goodwill and certain other intangible assets at
NMHG, HBB and Kitchen Collection totaling $435.7 million,
or $431.6 million net of taxes of $4.1 million, and the recognition
of non-cash charges totaling $29.8 million against certain
accumulated deferred tax assets at NMHG. Including these
charges, in 2008 NMHG incurred a net loss of $376.0 million,
HBB reported a net loss of $73.3 million and Kitchen Collection
reported a net loss of $10.0 million.
Excluding these charges, consolidated adjusted net income
for the year ended December 31, 2008 was $23.8 million, or
$2.87 per share, which includes earnings from discontinued
operations of $2.3 million. “Adjusted net income or loss” in this
letter refers to net income or net loss results that exclude the
goodwill and intangible assets impairment charges as well as
the charges against the accumulated deferred tax assets. (For
reconciliations from 2008 GAAP results to the adjusted 2008
non-GAAP results, see page 16.) The remaining discussion of
2008 results in this letter relates only to adjusted net income or
adjusted net loss unless otherwise noted. Management believes
a discussion of adjusted net income or adjusted net loss is more
reflective of NACCO’s underlying business operations and assists
investors and the subsidiaries' lenders in better understanding the
results of operations of NACCO and its subsidiaries.
During 2009, NACoal reported income from continuing
operations of $30.6 million compared with income from
continuing operations of $19.8 million in 2008. NMHG had a net
loss of $43.1 million in 2009 compared with adjusted net income
of $1.1 million in 2008. HBB had 2009 net income of $26.1
million compared with 2008 adjusted net income of $7.4 million.
Finally, in 2009 Kitchen Collection reported net income of $3.9
million compared with an adjusted net loss of $6.4 million in
2008. Further discussion of these results is contained in each
subsidiary’s section of this letter.
(1) For purposes of this annual report, discussions about income/loss from continuing operations and net income/loss refer to income/loss from continuing
operations attributable to stockholders and net income/loss attributable to stockholders.
Discussion of Results