CLEVELAND, Aug. 7 /PRNewswire-FirstCall/ -- NACCO Industries, Inc. (NYSE: NC) today announced consolidated net income for the second quarter of 2008 of $2.4 million, or $0.29 per diluted share, on revenues of $948.1 million compared with consolidated net income for the second quarter of 2007 of $9.9 million, or $1.20 per diluted share, on revenues of $830.9 million.

NACCO and Subsidiaries Consolidated Second Quarter Highlights

The Company reported a decrease in consolidated net income for the 2008 second quarter compared with the prior year. Key perspectives on NACCO's second quarter results include:

-- NACCO Materials Handling Group ('NMHG') Wholesale's net income was $3.2 million in 2008 compared with net income of $10.4 million in 2007. Increased sales of higher-priced units and parts, as well as price increases, did not offset the effects of unfavorable foreign currency effects movements, increased material and delivery costs, higher warranty costs and increased selling, general and administrative expenses. Included in the 2008 second quarter net income are $0.8 million, or $0.5 million net of taxes of $0.3 million, of additional restructuring charges for the Irvine, Scotland manufacturing restructuring program, and additional costs related to the same program of $1.2 million, or $0.7 million net of taxes of $0.5 million.

-- NMHG Retail's net loss of $0.6 million in 2008 decreased compared with the net loss of $5.9 million in 2007. As a result of programs put in place in 2007, significant progress was made toward achieving at least break-even results while building market position.

-- Hamilton Beach's net loss was $0.5 million in 2008, compared with a net loss of $0.4 million in 2007.

-- Kitchen Collection's net loss was $3.7 million in 2008, compared with a net loss of $2.8 million in 2007. The increase in net loss was the result of lower margins at the Le Gourmet Chef(R) stores largely as a result of mark downs related to discontinued products.

-- North American Coal's net income decreased to $6.4 million in 2008 from $9.8 million in 2007 primarily as a result of the absence of an arbitration award of $3.7 million, or $2.3 million net of taxes of $1.4 million, received in the prior year quarter and lower royalty income.

-- NACCO and Other's net loss increased to $3.2 million in 2008 from $1.3 million in 2007. Higher income tax expense and lower interest income in 2008 were partially offset by the absence of Hamilton Beach spin-off related expenses in 2007.

Consolidated net income for the six months ended June 30, 2008 was $5.1 million, or $0.62 per diluted share, on revenues of $1.8 billion. This compared with consolidated net income of $16.5 million, or $2.00 per diluted share, on revenues of $1.6 billion for the first six months of 2007.

Consolidated Outlook for 2008

The economic environment continues to be very uncertain at this time for the consumer markets in which Hamilton Beach and Kitchen Collection participate and the capital goods markets in which NMHG participates. At NMHG, key improvement programs continue to be implemented to mitigate the unfavorable effects of the current environment. However, these programs will continue to incur significant costs during the remainder of 2008. Price increases implemented to offset increased material and transportation costs at NMHG are expected to improve margin recovery over time. However, these price increases are not expected to fully offset the effect of the significantly higher costs being incurred during 2008 due to the price increase lag created by NMHG's fixed price backlog. North American Coal and Hamilton Beach are likely to continue to have very difficult operating environments in 2008, which are expected to lead to significantly reduced results in those businesses compared with 2007. As a result, NACCO's third quarter is currently expected to be very weak with results currently expected to improve in the fourth quarter.

                        Detailed Discussion of Results

NMHG Wholesale - Second Quarter Results

NMHG Wholesale reported net income of $3.2 million on revenues of $742.4 million for the second quarter of 2008, compared with net income of $10.4 million on revenues of $608.8 million for the second quarter of 2007. Second-quarter 2008 net income includes additional restructuring charges associated with the Irvine restructuring program announced in August 2007 of $0.8 million, or $0.5 million net of taxes of $0.3 million, and additional costs for the second quarter of 2008 of $1.2 million, or $0.7 million net of taxes of $0.5 million, primarily for accelerated depreciation and manufacturing inefficiencies as a result of the Irvine restructuring.

Revenues increased 22 percent in the second quarter of 2008 compared with the second quarter of 2007 primarily as a result of a favorable shift in sales mix to higher-priced lift trucks in Europe, favorable foreign currency movements in Europe from the strength of the euro and British pound compared with the U.S. dollar and increased unit volume. In addition, higher parts sales volume, the effect of unit and parts price increases implemented during late 2007 in the Americas and Europe and the realignment of activities performed by the Asia-Pacific Wholesale and Retail groups during 2007 contributed to the revenue improvement in the second quarter of 2008. Shipments in the second quarter of 2008 increased to 23,370 units from shipments of 22,192 units in the second quarter of 2007. NMHG Wholesale's worldwide backlog was approximately 28,400 units at June 30, 2008 compared with approximately 30,000 units at June 30, 2007 and 29,100 units at March 31, 2008.

The significant decrease in net income in the second quarter of 2008 compared with the second quarter of 2007 was primarily attributable to a decrease in operating profit. The favorable effect of increased units and parts sales, a favorable shift in mix to higher-margin products and previous price increases were more than offset by the continued increase in commodity costs of steel and copper, higher fuel and freight costs, unfavorable foreign currency effects movements, higher warranty costs in the Americas and Europe, an increase in selling, general and administrative expenses and the affect of the additional Irvine restructuring charge and associated additional costs. Selling, general and administrative expenses increased mainly as a result of higher marketing expenses, increased bad debt expense, primarily in Europe, and incremental costs from the realignment of activities performed by the Asia-Pacific Wholesale and Retail groups. These increases were partially offset by lower product liability expense as a result of better than expected claims experience.

For the six months ended June 30, 2008, NMHG Wholesale reported net income of $11.1 million on revenues of $1.4 billion compared with net income of $19.4 million on revenues of $1.2 billion for the first six months of 2007.

NMHG Wholesale - Outlook

NMHG Wholesale expects very mixed growth prospects in lift truck markets in the remainder of 2008 compared with 2007 with significantly slower growth or even moderate declines in Europe, moderate growth in Asia-Pacific and a year-over-year decrease in the Americas market. Overall, the company expects comparable to modest increases in shipment levels for 2008 compared with 2007. However, if U.S. and European economic conditions deteriorate further, sales of units and higher-margin parts could decline in the second half of 2008, which would adversely affect revenues and profit margins.

Inflationary increases in material costs, specifically steel and copper, and fuel and freight costs are expected to continue to affect results unfavorably throughout 2008. Price increases implemented in 2007 and through July of 2008 are expected to offset these higher costs increasingly in the second half of 2008, particularly in the fourth quarter. The company will work to mitigate these higher costs through additional price increases when appropriate. However, any further material cost increases are unlikely to be recovered in 2008 because of the fixed prices for units in backlog.

Appreciation of currencies in countries where NMHG Wholesale manufactures lift trucks for sale in the U.S. market and where NMHG Wholesale buys components for its U.S. lift truck manufacturing operations has had a significant adverse affect on earnings as the U.S. dollar has weakened compared with other currencies, including in 2008 compared with 2007. To offset the effects of adverse currency movements, in 2007 NMHG Wholesale outsourced certain operations at its manufacturing facility in The Netherlands to a third party in a lower-cost country and announced an additional manufacturing restructuring program, which will phase out production of current products at its facility in Irvine, Scotland, change the product mix at its Craigavon, Northern Ireland facility and increase production at its Berea, Kentucky and Sulligent, Alabama plants in the United States and at its Ramos Arizpe facility in Mexico. These programs, projected to be completed in early 2009, are expected to reduce purchases of high cost euro- and British pound-denominated lift trucks, materials and components, reduce freight costs, lessen NMHG Wholesale's exposure to future currency exchange rate fluctuations, reduce the manufacturing footprint of NMHG Wholesale's European manufacturing locations, provide additional opportunities to source components from lower-cost countries and reduce working capital. The Irvine, Scotland and other related manufacturing restructuring programs are anticipated to improve net results starting in 2009, and, at maturity, generate benefits which are expected to exceed $20 million in annual cost savings. However, the company anticipates future additional charges related to this manufacturing restructuring program of approximately $4.2 million during the second half of 2008 and $1.3 million in 2009. These charges are in addition to the $12.2 million of pre-tax charges incurred during 2007 and the first half of 2008.

NMHG Wholesale's investment in long-term programs are expected to continue to improve future results, particularly its warehouse truck and big truck product development and manufacturing programs, and its significant new electric-rider lift truck program, which is expected to bring a full line of newly designed products to market over the course of 2009, including introducing a new 1 to 2 ton electric counterbalanced lift truck in early 2009.