NACCO Industries (NC) 31 Oct 182018 Q3 Earnings call transcript

Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the NACCO Industries' Third Quarter 2018 Earnings Conference Call. All lines have been place on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. you your Kmetko Christina Instructions] may conference. begin [Operator

Industries. to third Kmetko, for brief quarter morning, at I everyone, outlook, call. overview call XXXX then, welcome and NACCO Relations results Investor Christina Good of earnings our providing and the our I I responsible will for your will up quarterly questions. I be am business a and and am open

American quarter both Coal; J.C. are President Chief NACCO Butler, release Vice and on are of and XX-Q. published North and and Elizabeth Joining Yesterday, me today available earnings our our President and Executive and of NACCO's XXXX Loveman, we Officer at our website filed XX-Q Copies Controller. our results third nacco.com.

to archived call, today's be able listen and webcast this will months. For to version our this for anyone an website later available on afternoon, is entire of XX who approximately not

to statements may We these to statements. that forward-looking I next actual begin, any participants, question-and-answer or following during this to made session. call, if updated conference materially prepared quarterly in may remind here the results our the we either update of not to number a statements call conference which that forward-looking remarks These expressed and differ our risks statements, would could obligation be As disclaim today, until all. at in those uncertainties cause forward-looking certain are like from contain subject

in uncertainties risks XX-Q. regarding information forth our release and these set our Additional in earnings was and

let Now the highlights that provide for me quarter. done, I the this formalities have

last in $XX.X increased quarter. XX.X% to years million revenues $XX.X Our from third million,

$XX.X $X in operations continuing XXXX. income to consolidated from tax from before million increased up Our million XX.X%

or million per from per third increased $X.XX to for or million share compared XXXX our consolidated the continuing with year. last operations $X.X Finally, $X.XX income quarter of share $X.X

we the Our was just provided income range year-to-date tax rate above XX.X% previously. effective

business. from American third North business. from the I by are what deliveries the majority that of coal all quarter of revenues these Coal, our million $XX.X increases North and the million XXXX to to yards the our our million from was XXXX. third in of At reasons division quarter consolidated As for million American American Company results Coal derived explaining Limestone Mining will yards tons at increased in tons driver the our consolidated happened explain of deliveries increase. $X.X last Increased increased tons at X.X operation in North Mining X.X also Mississippi our the year. coal the primary of revenue Lignite delivered

North prior operations contributed increase $XX quarter, million income of the in million quarter. attributable the unconsolidated in higher by partially also to in in an offset to was This also $X.X tons increase American royalty pre-tax to the income During Coal’s an increase the increased Mining the reduced Company’s as primarily expense income, employee-related the earnings results improvement due Lignite pretax from to the interest third costs. as year sold. well Mississippi Higher and third increase were in but

increase to in of that assets Looking sales expect the year not quarter, though our on the fourth forward to of are included XXXX, million quarter be expected even fourth of income fourth pretax compared substantially in we quarter $X.X the with repeated gains consolidated prior XXXX XXXX.

fourth quarter. Centennial. lower XXXX We by income pretax in Lignite Mining Centennial's quarter is but is partially be at These the improvements as anticipated volumes, an fourth Company's The prior improve our Mississippi prior we XXXX decrease higher the fourth improvement in because be year. improvements Lignite operations, fourth in pretax consolidated income and Mining third offset Mining pretax than are At Also, with primarily than expected in to loss. and consolidated quarter, over strong customer a XXXX of of expected significantly Company additional quarter is our fourth expected to customer Mississippi in expect Mississippi full year this is expected at and quarter Lignite increase a the in as be quarter increased modest result provided quarter to demand is as increase compared at to levels, income costs employee-related a expected XXXX. anticipated Company's improvement the lower expected year-over-year result royalty the improvements demand excluding year operations,

favorable increase quarter, million in mine an year-over-year, In to had but liability, excluding also requirements. an our Centennial million mainly these $X asset its pretax American to loss in reclamation We fourth $X.X items, consolidated partially Centennial's at increases charge. anticipate fourth customer due Mining anticipated Including quarter, a results North the in by unfavorable increase reduction operations the year impairment prior offset The the received them, is be Centennial's royalty unconsolidated pretax year prior the in the to was absence lease in expected is XXXX be the are fourth our that a expected of million quarter. to comparable to comparable income expected XXXX at result also decrease year. payment loss in fourth the quarter. $X.X operations fourth with quarter Earnings prior of compared bonus the

our expect we pretax continuing XXXX. from operations XXXX. with quarter comparable full royalty fourth to income A be combination when to year are in of consolidated overall increase factors to an compared item, this result XXXX expected income in these Excluding

in related million, as a and income We the full full are last quarter XXXX the year, benefits a to the and overall tax in U.S. tax effective tax fourth of reform. X.X% rate low for rate anticipating very $X.X tax XX% of included respectively, to income XX% compares range year $X.X effective result million This year. an with of

continuing the fourth and increase decrease year benefits, XXXX increase in an we absence with of of increase periods, expenditures. rate consolidated quarter XXXX in operations quarter expect in due income compared effective fourth income in lower the of tax ramp Cash a and To quarter from the compared financing tax substantially result fourth of year XXXX, primarily, the XXXX, the prior the full modestly the activities, expect year. capital consolidated year for reform full to with be up before flow prior but from we As to

high-level look let at XXXX. me provide Now we expect for what a

While by XXXX we look are like will planning primarily, our and higher providing year, year-end going have income our more we on of annual we XXXX currently operating anticipated annual remind I'd plan. with earnings, process a once are through and expected to color in generate next expectations, revenue we increase, consolidated income first operating provide is the at rate income that you, effective result range. detailed royalty finalized improved mining this to our operations. Pretax to our to is parties. lessee as leases the the based and royalty-based coal to the payments expected extent, at are extracted XX% make third our We gas XXXX year oil, which from be tax natural that in coal, XXXX XX% lesser full on results under sales primarily Similar of a to

factors our this we increase release. earnings in of and revenue wells had of about increase this In infrastructure. expecting not uncertainty to XXXX of based outlined outside which past, an in oil on royalty in not a are of development extract stream. our number of the and We a the of the of specifically, number we this or Whether occurs being revenue detail in control, company's operated gas detail the expected likelihood increase developed and stream because depends Ohio in in continuing have assets, the significant gas on this gotten the more

XXXX Company compared with flow is this and at with the In expected Lignite increase expenditures volumes customer million addition operations. Mining year and at to mining improvements an improvement before demand year. consolidated in anticipated Mississippi be we to in royalty, next Cash financing XXXX in are expect activities year. capital compared our coal also primarily These to expected increase approximately are $XX this also

repurchased stock ended with in Class in the debt. Lastly, quarter quarter, on we approximately regarding consolidated million XXXX, hand of we and million have purchase up approximately aggregate my That under million. price of cash and the consolidated cash during to of of an third This the hand $XXX.X repurchased aggregate with $XXX,XXX. in of of the open your of shares was million decrease of call tied The our Since now the XX,XXX on A cash balance debt for of purchase compares total at the an a Also reduction shares our $XX our for concludes February repurchase sheet, X,XXX program. for will $XX.X debt $XX.X we end beginning XXXX. program $XX.X common our questions. million stock prepared $XXX,XXX I price of remarks. third

first Your Lolley Nixon from Instructions] from Capital. of Mitchell question [Operator line the comes

open. is line Your

there. Hi,

Mitchell. Good morning,

Good morning.

or spin-related SG&A you'll are off costs into like down I was reasonable run $XX next looks to there and this on of year come looking and million about north cause a is Or could XXXX? that that some year slightly? wondering still SG&A maybe rate just It roll spend employee-related

the looking public sides it. an it's No, is and expenses, there, also of, service but is, – at kind There while a Hamilton little both LTM some Beach get there we in helping we collected – as bit some of transition mean is but fees noise from company. of additional numbers, running I independent there noise up is there were

wash, rate, probably may net that's it's an you it. run not negative basis. in think But to a be, about close So slightly a if off-base

operations is, any I've been if costs to broadly, other reasons? just there then I unconsolidated something mining in or about related a for that SG&A get included your legal think And SG&A the Okay. little about more wondering are accounting

that and starting direct mine no business the is including the staff, Everyone and on-site costs, At I got a that's of the it's of it's the included related filings SG&A to number. coal a a mine happens stuff. all cost of people, got to manager, mines at is a are all site any public public producing at that in at mines all related the got and at Anything corporate that's company costs. level, the got mine mines guess, sites, that their IT included there sort Well, in president, board it's top, HR there. we've that's in directors

centralized hub of the these all in arrangement as maintain, have all of, that sort also a mines We required for headquarters contracts. that's part we these

is So sites benefits master call overall the stuff hub, put to reimbursable programs an in all that site, from is we the mine over in care maintain customers. it The centralized maintain the I HR, of IT costs cost built and it's and folks health It's the place. that including the it. we included which, really, what

of returns, All coal headquarters number, nothing related tax those kinds that's expenses, really included are at as to producing IT, file mine we sites. tax, development. the that it's benefits, consolidated in but business things legal consolidated So those

including early million you're was year. which spending Okay, that there, are on commentary appreciate I things out you'll the of some threw are was you wondering figure And the be the XXXX? business? limestone unpack if next of, these about think spending these on thinking XXXX, expected some I – CapEx I the $XX that of kind related us, help of could you in growing to And

incur we for where places what's CapEx, it's the XXXX, other nickel, on number Well, every XXXX and that which our year. in is

inventory may dragline know land find or will They They have will we growing, to be those we've from as primary it's contracts the it's are helpful very on are some new in Mining, show sort a to need that's with have of, swapping – headquarters, now. because out production. themselves negotiating that related acquired at too or we and our put like can small short if things a is have right customers. American And mostly Anything quickly are in we we doing – and help customer get in at draglines a so, we really other new one in up periodic that if up them running. in systems dragline get computer in it that might mine. we we helps like that things have we spend We and the then us growth can bring it the equipment available, that process. contract help things And and disrepair, we've, pretty consolidated Our – which get that platform, up need done that for place time-to-time things is MLMC, there. we replacements, that capitalized acquisitions, end North

time-to-time money spend from So of we on those do sorts things.

of a cash then lastly, net you, consider much quarter. a to even share? only you continue a and And I've the on one to ever you've right. paying just All $X I got dividend, ask of generate than pretty if $X balance more every Would special mean, cash share you a got modest sheet like

what's I'd to Well, will just I to go with what any do the regularly what pretty during spin, little we we our NACCO that. at guess of over of the presentations we in we Hamilton don't that with about what recent might talk respect ago. board, our it's website. Beach speculate as a both And the we the roadshow our the about future, want around respect make back on level, talked year in did decisions I said to time we've with thing, investor as – to allocation, the capital a well same on

think That's priorities in with know, to The you to cash only in so mentioned mostly grow invest also resources business looking it's I and for we're as respect are buy. making to development, pretty opportunities that space there know, do where initiatives. to continued in I'm we're development for there if business We Our to America us there respect pretty to to really aggressively Mining. heavily fits in order anybody – in strategic model. is our to growing with we're really out were the with money continue to much don't spend well. growth company as respect business North do so. me place draglines expenditures I and that is we're going activities mining coal coal not saying, investing a for

to Our our in ventures, second invest complementary focused and leverage on strengths. to really, primarily was priority those skills

primary Our now environmental in area. is right the focus

the to we're tied but that diversify some future aren't directly about I in coal going that necessarily related opportunities activities that develops, to more think business into we talk mining. to as see

important we a debt, conservative quarter, pretty lot business. in fundamentally, we're it's to sheet, balance think of we since have see you a As a service down last the paid

I them, historical the worry that to financial in our troubles when we customers sure, in I that an us. to for they solid have the make Given thing that’s industry, experience, – to are to stability. from about and shape talk can go want new financial we represented we important know don't

and that both, to screw going to I maintain So do going them, way, tell and going we're to to be anything that up. are we conservatively leveraged not I'm that

using you a a is active. in having period very a a know, and I just, resources. our place currently allocation that's had we've of then I’d we've time pretty sheet and of what programs how number about – balance conservative as buyback about share a over mean, we've think very, that's say I we capital So important. And consistent dividend long paid have one and guess, got we

Thank appreciate it. much. you I very

Sure. Thanks for question. the

no questions. back [Operator turn I call further Instructions] to over are There the the presenters.

do much. very of ends you me any reach you your XXX-XXXX. appreciate That part (XXX) Thank call. We interest. And additional our at you have if can questions, the

until XXX-XXXX The enter available this or conference Eastern XXXXXXX dial This XX:XX in recording XXX-XXXX at ID be concludes This to (XXX) will recording listen. call Time. Standard at be will (XXX) X. and for available November Please call. conference today's

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