NACCO Industries, Inc. · NYSE:NC
NACCO Industries — Investor Presentation (March 2017)
55 slides from NACCO Industries's investor presentation, Mar 27, 2017
Slide 1: 2016 Investor Presentation
Exhibit 99 2016 Investor Presentation
Slide 2: Safe Harbor Statement & Disclosure
Safe Harbor Statement & Disclosure This presentationincludesforward-looking commentssubject to importantrisks and uncertainties. It may also containfinancialmeasuresthat are not in conformancewith accountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(GAAP). Referto NACCO’sreportsfiledon Fo
Slide 3: NACCO Industries Overview
NACCO Industries Overview y/} NACCO Industries, Inc. SEAL
Slide 4: NACCO Industries at a Glance
NACCO Industries at a Glance NACCO Industries, Inc. (NYSE: NC) 2016 full year highlights: Operating holding company with subsidiaries in the Revenue $–856.4 million mining, small appliances and specialty retail Net income$29.6 – million industries Adjusted Income$46.8 – million(1)(2) Headquartered i
Slide 5: NACCO Industries Overview
NACCO Industries Overview Headquartered in Dallas, Texas Headquartered in Richmond, Virginia Headquartered in Chillicothe, Ohio 2016 full year highlights: 2016 full year highlights: 2016 full year highlights: Revenue – $111.1million Revenue – $605.2million Revenue – $144.4million Netincome–$8.2milli
Slide 6: NACCO Industries Overview (continued)
NACCO Industries Overview (continued) NACCO has significant strengths in its principal businesses: – Strong collective earnings and cash flow generation capability – Cash flow sustainability and low earnings volatility – Significant management expertise in operating each business across a range of e
Slide 7: NACCO's Priorities for Use of Cash
NACCO’s Priorities for Use of Cash Investments in Core Subsidiary Businesses Ensure subsidiaries are appropriately leveraged Investments in Individual Subsidiary Strategic Initiatives Support strategic initiatives to accelerate growth or enhance margins Pursue complementary growth opportunities that
Slide 8: Experienced Management Team
Experienced Management Team Alfred M. Rankin Jr. Chairman, President and CEO of Chairman, President andNACCO Industries since 1994 Chief Executive Officer ofFormer Vice Chairman, Chief NACCO Operating Officer and Director of Eaton Corporation J.C. Butler, Jr. President and Chief John Neumann VP, Gen
Slide 9: The History of NACCO Industries, Inc. and Subsidiaries
The History of NACCO Industries, Inc. and Subsidiaries 1913 Cleveland & Western Coal Company is founded 1925 Name changed to The North American Coal Corporation (NACoal) 1956 NACoalstock begins publicly trading over-the-counter 1961 NACoalis listed on NYSE 1985 NACoalbuys controlling interest in Yal
Slide 10: North American Coal Overview
North American Coal Overview 10
Slide 11: North American Coal ("NACoal") Overview
North American Coal (“NACoal”) Overview Mines coal primarily for use in power generation and provides value-added services for natural resource companies Mines located in North Dakota, Texas, Mississippi, Louisiana and within the Navajo Nation in New Mexico One of the largest producers of lignite co
Slide 12: NACoal's Excellent Safety Record
NACoal’s Excellent Safety Record 2016 National Mining Association (“NMA”) 2016 NMA Top 20 Coal Producers Ranked by Top 7 Coal Producers Ranked by Incident Incident Rate Rate 7.15 5.87 5.87 5.47 5.18 4.64 4.31 4.42 4.42 4.3 4.31 3.8 3.64 2.17 2.17 1.46 1.29 1.46 1.18 1.18 0.87 0.62 0.62 0.72 0.25 0.2
Slide 13: Environmental Responsibility
Environmental Responsibility North American Coal has received 80 federal and state awards for successful and innovative reclamation projects over the last 30 years 13
Slide 14: NACoal Operations
NACoa®Operations CORPORATION Locations of Sossaiies
Slide 15: Unconsolidated Mines
Unconsolidated Mines These mines produce strong cash flow with minimal capital requirements NACoal’sunconsolidated mines operate under long-term cost-plus contracts with their customers • Customer pays 100% of cost of operating the mine • Customerprovides,orprovidessupportfor,allofthecapitalrequired
Slide 16: Unconsolidated Mines (continued)
Unconsolidated Mines (continued) • Long-term contractsexpiring2018– 2055 • Pre-tax profits generated from these mines shown separately in the Company’s income statement as “earnings from unconsolidated mines” • Mine-Mouth operations – Allofthemines’production goestocustomerpowerplantsorcoal processi
Slide 17: Consolidated Mine Mississippi Lignite Mining Company
Consolidated Mine Mississippi – Lignite Mining Company Mississippi Lignite Mining Company’s Red Hills Mine supplies coal under a long-term contract that extends through 2032 o Delivered 3.0 million tons in 2016 o Coal produced is sold for use in its customer’s power plant, adjacent to mine o Contrac
Slide 18: Value-Added Mining Services and Other Income Sources
Value-Added Mining Services and Other Income Sources NACoalprovides value-added mining services for natural resource companies Maintains and operates draglines for extraction ofatlimerock independently owned limerockquarries – Customers pay all operating costs plus an agreed profit per cubic yard ex
Slide 19: NACoal Outlook
NACoalOutlook Unconsolidated Operations • January 1, 2017 Bistibecame - the contract miner at the Navajo Mine within the Navajo Nation in New Mexico Target production of ~5-6 million tons annually • Tons delivered and income before tax expected to increase at unconsolidated operations as newer mines
Slide 20: NACoal Key Strategy Overview
NACoalKey Strategy Overview Strategic initiatives for growth Using a disciplined approach, and using NACoal’s core cost-plus business model, pursue: Additional opportunities to serve as a contract miner in new or existing coal mining operations Opportunities in non-coal mining operations, such as ag
Slide 21: NACoal Operational Highlights
NACoalOperational Highlights Tons of Coal Sold (millions of tons) 35.0 30.2 30.6 32.5 28.4 29.9 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2012 2013 2014 2015 2016 CubicYardsofLimerock Delivered (millions of cubic yards) 30.0 26.1 25.0 22.1 21.0 20.9 18.8 20.0 15.0 10.0 5.0 0.0 2012 2013 2014 2015 2016 21
Slide 22: Annual Coal Production from Current Operations
Annual Coal Production from Current Operations 2016 1994 - 35 30 25 20 15 Other Coyote Creek 10 Camino Red Hills Sabine 5 Falkirk Coteau 0 1994 1995 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: the annual coal production of legacy operatio
Slide 23: NACoal Financial Highlights
NACoalFinancial Highlights Net Income (Loss) CashFlowBeforeFinancing (3) ($ in millions) ($ in millions) $94.4 $40 $32.8 $31.9 $85 $20 $5.6 $8.2 $31.0 $45 $0 $5 ($20) ($6.1) -$35 ($40) ($26.7) $(51.0) -$75 ($50.2) ($60) (1) (1) 2012 2013 (1) 2014(1) 2015 2016(1) 2012 2013 2014(1) 2015 2016 Adjusted
Slide 24: Hamilton Beach Brands Overview
Hamilton Beach Brands Overview * ** ® * WolfGourmet is a registeredtrademarkoftheSub-ZeroGroup,Inc. ** CHI® isa registeredtrademark ofFaroukSystems, Inc. 24
Slide 25: Hamilton Beach Brands ("HBB") Overview
Hamilton Beach Brands (“HBB”) Overview Strong heritage brands with leading market shares Strong relationships with leading retailers and customers across diverse channels Focused emphasis on the quality of products Successful track record of product line expansion and new product innovation…we call
Slide 26: HBB Business Highlights
HBB Business Highlights Leading designer, marketer and distributor of: – Small electric household and specialty housewares appliances – Commercial products for restaurants, bars and hotels HBB has a leading retail market share position in North America – Hamilton Beach ® brand ranked #1 small kitche
Slide 27: HBB Business Highlights (continued)
HBB Business Highlights (continued) Broad product assortment distributed through mass merchants, national department stores, ecommerce, wholesale distributors and other retail outlets HBBisinvestingshareholder resources thatwillgeneratea strong return for years to come • Focused on the long term…thi
Slide 28: Broad Product Offering
Broad Product Offering Comprehensive offering of high-quality consumer housewares Coffeemakers Kettles Toasters Irons SlowCookers Hand Mixers Can Openers Blenders Toaster Ovens Meat Grinders Bag Sealers 28
Slide 29: HBB Global Footprint
HBB Global Footprint Markham, Ontario, Canada g Sales & Marketin Picton, Ontario, Canada Distribution Center Minneapolis, MN Sales Richmond, VA Shanghai, China Headquarters Geel, Belgium Sales , Engineering, Sales & Marketing Distribution Center Distribution Center Engineering Olive Branch, MS Distr
Slide 30: Core Business Deliverables
Core Business Deliverables Achieve organizational excellence Ensure best-in-class sourcing and logistics – Attractandretainpassionate talenttodeliverGoodThinking® – Continually reduce supply chain costs and optimize supply core competency chain to ensure a sustainable competitive advantage Pursue ma
Slide 31: HBB Strategic Initiatives
HBB Strategic Initiatives The following strategic initiatives have been put in place to achieve HBB’s financial objectives: Enhance placements in the North American Expand internationally in the emerging Asia and consumer business Latin America markets and continue to expand in – Provide consumer-dr
Slide 32: HBB International Opportunity
HBB International Opportunity Goal is to shift international sales mix from approximately 20% to 35%-4 Continue to expand established positions in Mexico, Planned Sales Mix Evolution Canada, Central America and South America International 20% Actively target fast growing China, Brazil and other mark
Slide 33: Recent Product Launches Support Market Share Gains
Recent Product Launches Support Market Share Gains Premium garment care products designed and branded to appeal to consumers CHI® Garment interested in a contemporary design and brand Includesa fulllineofirons,allwitha titaniuminfusedceramicsoleplateandhigh Care Line steam rates Includes the Easy St
Slide 34: Recent Product Launches Support Market Share Gains (continued)
Recent Product Launches Support Market Share Gains (continued) Engineered to reduce noise throughout the base and jar Hamilton Beach ® Quiet shield adds additional noise reduction Quiet Blenders Great for making smoothies or drinks without the noise levels that traditional blenders create Hamilton B
Slide 35: HBB Financial Highlights
HBB Financial Highlights Revenue Net Income ($ in millions) ($ in millions) $640 $621.0 $30 $26.6 $605.2 $25.1 $23.1 $25 $21.2 $600 $19.7 $547.8 $559.7 $20 $560 $521.6 $15 $520 $10 $480 $5 $440 $0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Operating Profit Operating Profit Margin ($ in millio
Slide 36: HBB Financial Highlights (continued)
HBB Financial Highlights (continued) Net Working Capital (1) Cash Flow Before Financing (1) ($ in millions) ($ in millions) Net Working Capital % Revenue $53.9 $150 30% $60 $110.2 $116.8 $38.5 $96.9 $93.5 $95.1 $40 $100 20% $24.2 $20 $9.2 $50 10% $0 $0 0% 2012 2013 2014 2015 2016 -$20 ($10.9) 2012 2
Slide 37: Kitchen Collection Overview
Kitchen Collection Overview 37
Slide 38: Kitchen Collection ("KC") Overview
Kitchen Collection (“KC”) Overview A leading specialty retailer of kitchen and related products in outlet malls throughout the U.S. Highly analytical merchandising skills and disciplined operating controls ® StrongcoreKitchenCollection storeportfolioin outlet malls 223 stores throughout the U.S. at
Slide 39: Kitchen Collection Locations
Kitchen Collection Locations 39
Slide 40: KC Key Strategy Overview
KC Key Strategy Overview Meet the challenge of a difficult environment and evolve aggressively in a constructive manner, focusing on the outlet mall segment Focus on comparable store sales growth through: o Enhancing customers’ store experience through improved customer interactions to generate grea
Slide 41: KC Operational Highlights
KC Operational Highlights Store Count 350 312 304 300 248 250 229 223 200 150 100 50 0 2012 2013 2014 2015 2016 Sales Per Store ($ in thousands) $1,000 $720.2 $679.4 $750 $644.7 $659.4 $647.5 $500 $250 $0 2012 2013 2014 2015 2016 41
Slide 42: KC Financial Highlights
KC Financial Highlights Revenue Operating Profit (Loss) ($ in millions) ($ in millions) $300 $9 $224.7 $196.0 $3 $0.2 $0.4 $200 $168.5 $151.0 $144.4 ($3) $100 ($9) ($4.5) ($7.1) ($15) ($10.9) $0 2012(1) 2013(1) 2014(1) 2015 2016 2012 2013 2014 2015 2016 Cash Flow Before Financing (2) Net Income (Los
Slide 43: NACCO Industries Financial Update
NACCO Industries Financial Update 43
Slide 44: 2016 Highlights and Outlook
2016 Highlights and Outlook 2016 Results ($ in thousands) 2016Full Year NACoalperformed as expected in 2016. While revenues decreased due As to the cessation of coal production at Centennial, net income improved Reported % Revenue $856,438 100.0% HBB’s net income increased substantially in 2016 desp
Slide 45: Why Invest in NACCO?
Why Invest in NACCO? NACCO represents a strong, multi-industry company with leading, well-positioned businesses in mining, small applian and specialty retail North American Coal has a unique coal business model: – Providesminingservicesprimarily underlong-term coalcontracts whicheliminate NACoal’s e
Slide 46: Appendix
Appendix 46
Slide 47: Risk Factors
Risk Factors The risks and uncertainties with respect to each subsidiary’s operations as referenced on page 2 of this document include, without limitation: North American Coal: (1) changes in tax laws or regulatory requirements, including changes in mining or power plant emission regulations and hea
Slide 48: Non-GAAP Disclosure
Non-GAAP Disclosure This presentation contains non-GAAP financial measures. Included in this presentation are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP").
Slide 49: Non-GAAP Reconciliations
Non-GAAP Reconciliations AdjustedEBITDAreconciliation – bysegment ($ in thousands) 2016 Full Year North American Hamilton Kitchen NACCO & Coal Beach Brands Collection Other Consolidated Calculation of Adjusted EBITDA Net income (loss) $8,244 $26,557 $(355) $(4,839) $29,607 Centennial asset impairmen
Slide 50: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) Cash Flow Before Financing For the Year Ended December 31, ($ in thousands) Consolidated 2012 2013 2014 2015 2016 Net cash provided by operating activities $74,335 $53,065 $19,799 $108,002 $93,935 Net cash used for investing activities (63,768) (60,734) (74,934)
Slide 51: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) NetWorkingCapital– HamiltonBeachBrands ($ in thousands) December 31, 2012 2013 2014 2015 2016 Accounts receivable, net $94,899 $100,714 $108,908 $100,918 $102,131 Inventories, net 84,814 90,713 104,746 97,511 95,008 Less: Accounts payable (82,800) (97,912) (103,3
Slide 52: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) ReturnonCapitalEmployed– 2012& 2013 North American Hamilton ($ in thousands) Coal Beach Brands 2012 2012 Average Equity (12/31/2011 and each of 2012’s quarter ends) $96,132 $35,941 Plus: 2012 Average Debt (12/31/2011 and each of 2012’s quarter ends) 109,019 45,50
Slide 53: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) North Hamilton ReturnonCapitalEmployed– 2014and2015 American Coal Beach Brands ($ in thousands) 2014 2014 Average Equity (12/31/2013 and each of 2014’s quarter ends) $139,791 $53,453 Plus: 2014 Average Debt (12/31/2013 and each of 2014’s quarter ends) 179,841 32,
Slide 54: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) ReturnonCapitalEmployed– 2016 ($ in thousands) North Hamilton American Beach Coal Brands 2016 2016 Average Equity (12/31/2015 and each of 2016’s quarter ends) $110,554 $51,954 Plus: 2016 Average Debt (12/31/2015 and each of 2016’s quarter ends) 108,020 40,167 Les
Slide 55: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) NACCO Consolidated Reconciliation “As Reported” to Adjusted ($ in thousands) Year Ended December 31, 2016 Reconciliation of Adjusted Income Net Income, as reported $29,607 Adjustments to eliminate Centennial 17,159 Adjusted Income $46,766 NACoal Reconciliation “A
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