Hamilton Beach 2010 Annual Report Download - page 7

2011 in the range of approximately $2.5 million to
$3.0 million pre-tax for services rendered prior to
entering into the settlement agreement. The payment
was received in February 2011. As a result of the
settlement, no further litigation costs in relation to
this matter will be incurred.
In 2008 and 2009, NACCO made capital contribu-
tions to several of its subsidiaries to help them navigate
the economic downturn. In 2010, only small capital
contributions were made to NMHG. During 2010,
both NMHG and Kitchen Collection renegotiated
certain credit agreements on favorable terms. All
other financing arrangements at the other subsidiaries
remain in place with attractive terms.
Importantly, each of NACCO’s subsidiaries
generated strong positive cash flow before financing
activities in 2010 totaling $57.3 million on a consoli-
dated basis. While cash flow before financing activities
was substantial in 2010, it was significantly lower than
the $180.1 million generated in 2009 when working
capital requirements contracted during the downturn
and the Company benefited from asset sales. NACCO
will continue to focus on maximizing cash flow before
financing activities and expects continued strong cash
flow generation at all subsidiaries in 2011.
Improved market conditions are expected to
continue into 2011, but all subsidiaries are proceeding
cautiously until market prospects become clearer.
The global lift truck market is improving, but the pace
of recovery is still unclear and periodic supply chain
constraints are likely as suppliers work to increase
volume levels. While continued improvement in
consumer confidence is expected, selling to the mass-
market consumer is expected to remain challenging
until the job market recovers. In addition, rising com-
modity costs are expected to create margin pressures
at HBB and NMHG since recovering these cost
increases through price increases will be challenging.
Lignite deliveries are expected to remain relatively
stable, but the limerock market in southern Florida is
expected to continue to be depressed by weak local
housing and construction markets. The Company
expects improved earnings at the subsidiaries in light
of these anticipated market conditions, but at lower
levels than might otherwise be expected due to the
full restoration in 2011 of employee compensation
and benefits at NACCO and all of its subsidiaries, as
well as the non-recurrence in 2011 of favorable foreign
currency contracts that benefited NMHG in 2010.
Subsidiary Financial Objectives
Each of NACCO’s subsidiary companies has
specific long-term financial objectives (see sidebar
for specific goals). In 2010, NACoal achieved all of its
financial targets. HBB had sound operating profit but
fell somewhat short of its long-term operating profit
margin target in 2010. Kitchen Collection made solid
progress in each of its store formats but also fell
below its target. At both HBB and Kitchen Collection,
operating profits declined compared with 2009 as a
result of the full reinstatement of employee benefits
that were suspended in 2009 and restored in 2010.
Looking forward, HBB is expected to continue to have
sound results but will need additional sales volume
to achieve its target. Kitchen Collection®stores
operated close to target in 2010 and are expected to
achieve their operating profit margin goal in 2011,
but the Le Gourmet Chef®stores are not expected
to achieve their target objective until sales volumes
increase and additional underperforming stores have
been closed. Improving market conditions in the lift
truck market have helped NMHG return to more
normal operating levels and allowed the company
to make substantial progress toward its financial
objectives. Nevertheless, actual results at NMHG
remain well below the target level. Because reaching
appropriate capacity utilization will require increased
market share and because reaching target margins
on certain products is necessary, particularly in
the smaller internal combustion engine products,
it is difficult to provide a timetable for achieving
NMHG’s financial target–particularly in the context
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