NACCO Industries, Inc. (NC)
F4Q and Year End 2008 Earnings Call
March 13, 2009 11:00 am ET
Christina Kmetko - Manager of Finances
Alfred M. Rankin Jr. - Chairman of the Board, President and Chief Executive Officer
Kenneth C. Schilling - Vice President and Controller
Frank Magdlen - The Robins Group
Charlene Mills - The Boston Company
Mark Sigal - Canaccord Adams
Vanessa Miranda - Stanfield Capital Partners
Previous Statements by NC
» NACCO Industries Inc. Q3 2009 Earnings Call Transcript
» NACCO Industries Inc. Q3 2008 Earnings Call Transcript
» NACCO Industries Inc. Q2 2008 Earnings Call Transcript
Thank you. Good morning everyone and thank you for joining us today. This morning a press release was distributed outlining NACCO’s results for the fourth quarter and year-end December 31, 2008. If anyone has not received a copy of this earnings release or would like a copy of the 10-K please call me at 440-449-9669 and I will be happy to send you this information. You may also obtain copies of these items on our web site at nacco.com.
Our conference call today will be hosted by Al Rankin, Chairman, President, and Chief Executive Officer of NACCO Industries. Also in attendance representing NACCO is Ken Schilling, Vice President and Controller. Al will provide an overview of the quarter and full year and then open up the call to your questions.
Before we begin, I would like to remind participants that this conference call may contain certain forward-looking statements. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. Additional information regarding these risks and uncertainties was set forth in our earnings release and in our 10-K. In addition, certain amounts discussed during this call are considered non-GAAP numbers. The non-GAAP reconciliations of these amounts are included on our website and in our 2008 fourth quarter earnings release, which is also available on our website.
I'll now turn the call over to Al Rankin.
Thanks Christy and good morning to all of you. The Company’s revenues for the fourth quarter of 2008 were $949 million which was 13% lower than the $1.1 billion in the prior year period. The sales decline was primarily attributable to lower volume and all of NACCO’s subsidiaries primarily as a result of the deteriorating economy.
During the quarter the Company wrote off the goodwill on its books. Because the Company’s stock price at year-end was significantly below the Company’s book value of tangible assets and its book value of equity accounting rules effectively required that the company take a non-cash write off of goodwill and certain other intangible assets totaling $436 million or $431.6 million net of taxes of $4.1 million. The Company recorded those pre tax charges as follows: $351 million at NACCO Materials Handling Group; $80 million at Hamilton Beach and $4 million at Kitchen Collection. The goodwill and intangibles were incurred largely as a result of acquisitions in the late 1980s and early 1990s. Also in the fourth quarter, basically as a consequence of the goodwill write off, the Company recognized a non-cash charge of $15.3 million against accumulated deferred tax assets for the European operations of NMHG's Wholesale and Retail subsidiaries.
The Company believes that current stock market valuations, which were the basis for the impairment testing under the existing accounting rules are generally reflective of broader global macro economic and stock market conditions and I must say also the trading characteristics of our own stock, rather than reflection of the operating fundamentals and the programs being implemented at each of our subsidiaries. We expect that as market conditions improve the Company will find that these fundamentals and the programs in place at each of our subsidiaries is well positioned, each subsidiary to move positively toward the achievement of sound long-term financial returns.
From here on all of my remarks will address adjusted income which, as Christy indicated, excludes the goodwill impairment and the charge against deferred tax assets and the non-GAAP details and the reconciliation to GAAP of these earnings are all outlined in the supplemental data pages that are attached to the earnings release.
Consolidated fourth quarter 2008 adjusted net income was $18.7 million, or $2.26 a share and that compares with consolidated net income for fourth quarter of 2007 a $59.1 million or $6.27 per diluted share.
Economic conditions in the fourth quarter deteriorated and that deterioration significantly affected consolidated results. A few key perspectives on these numbers: at NACCO Materials Handling Group the adjusted loss was $1.6 million in the fourth quarter compared with net income of $23.8 million in 2007. The key drivers for the change were a decrease in market volume for units and parts, unfavorable foreign currency movements, and costs associated with reductions in force.
NACCO Materials Handling Group retail had an adjusted loss of $1.6 million in 2008, compared with a net loss of $1.1 million in 2007 and the key driver for the increased loss was an increase in income tax expense, underlying operating results were better due to reduced spending and reduced interest expense.
Rising product costs and a weak North American consumer market had an adverse effect on results at both Hamilton Beach and Kitchen Collection. Hamilton Beach’s adjusted income decreased to $6.6 million in 2008 from $12.8 million in 2007. The decrease in 2008 primarily resulted from increased product costs net of price increases, lower unit volumes, and reduced sales of higher margin products.