Good day, ladies and gentlemen, and welcome to the second quarter 2008 NACCO Industries Earnings Call. My name is Aika and I'll be your operator for today. At this time, all participants are in a listen-only mode. We'll be facilitating a question-and-answer session towards the end of this conference. (Operator instructions) I would now like to turn the presentation over to your host for today's call, Ms. Christina Kmetko. You may proceed.

Thank you. Good morning everyone and thank you for joining us today. Yesterday, a press release was distributed outlining NACCO's results for the second quarter ended June 31, 2008. If anyone has not received a copy of this earnings release or would like a copy of the 10-Q, please call me at 440-449-9669 and I'll be happy to send you this information. You may also obtain copies of these items on our web site at www.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 Industries is Ken Schilling, Vice President and Controller. Al will provide an overview of the quarter 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-Q. In addition, certain amounts discussed during this call are considered non-GAAP numbers. The non-GAAP reconciliations of these amounts are included in our 2008 second quarter earnings release, which is available on our website. I'll now turn the call over to Al Rankin.

NACCO had a difficult second quarter and as you look forward a number of the forces that were at work in the second quarter are going to be at work in the remainder of the year. So, these are turbulent and difficult times at least as reflected on the businesses that we have. NACCO had consolidated net income for the second quarter of $2.4 million or $0.29 a share on revenues of $948 million compared with consolidated net income in 2007 of $9.9 million or $1.20 per share on revenues of $831 million. The decreased results reflected a decline in NACCO Materials Handling Group Wholesale to net income of $3.2 million versus $10.4 in the previous year. At Kitchen Collection the loss increased to $3.7 million from $2.8 million. The Coal company earnings were $6.4 million in comparison to $9.8 million in the previous year and at the NACCO and other level loss of $3.2 million compared to the previous year of $1.3 million. Hamilton Beach was about the same with a loss of, with essentially the same results, where NACCO Materials Handling Group retail was the only source of improvement with loss of $600,000 as opposed to $5.9 million loss in the previous year. 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 market in which NMHG participate. 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. And 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…

(Operator Instructions) Your first question comes from the line of Frank Magdlen from The Robins Group. You may proceed.

Good morning.

Good morning.

Al, when I look at the reasons for the lower gross margins or operating profit there is a number of issues out there. But what are the two biggest factors that are impacting gross margins or operating margins right now?

Well. Let me take them business-by-business. At NACCO Materials Handling Group Wholesales it's clearly currency and material cost expenses, currency or rates Euro versus the Dollars continued to deteriorate very significantly. And secondly material cost increases have been coming through at a very rapid rate. And in many cases suppliers have simply said regardless to past operating practice if you want for example steel this is the price sir you won't get it and so the conditions are very difficult there. And since we have historically had a large measure in fixed price backlog, it takes quite a while for new price increases that are put in place to respond to those cost increases to take effect or to have an impact on the P&L. At retail there are no particular forces at work other than just continuing to try to improve the businesses; the restructuring programs are largely complete. At Hamilton Beach and it's essentially an environment of weak customer sales but pretty good market position for us. I think that it's just a general slowness in the retail environment, which you undoubtedly see in other businesses. Consumers are reluctant to buy. They are putting off things. They are shifting from discretionary purchases to purchases of things that they have do. And so most importantly however, if you net it all out because we did have a slight of modest sales increase. Most important are the cost increase we are receiving from our Chinese suppliers. They are faced with the same very large cost increases for many of the same kinds of commodities that we have in NACCO Materials Handling Group. And generally speaking the suppliers in China are relatively thinly capitalized. They don't have the ability to absorb additional cost. They are pretty efficient. And so, they need…

If I could follow on, if commodity costs were frozen today, how long will it take or what type of price increases in generally you need to get to a fair gross margin or operating margin?

Well, I don’t think I can get into the amount of increases so much is there timing. I think the timing is the key. Our point of view is that, these costs increases that we’re dealing with our no different from the costs increases that all of our competitors are dealing with. So, no one can observe these costs increases and keep producing the products at the same prices if they are selling them out. So, the question is more one of timing than anything else. And from a timing point of view, the biggest issue, we face is, that we have a backlog of four to six months at NACCO Materials Handling Group. Some portion of that is frozen and in terms of prices and it’s very difficult to change, if a customer negotiated a price in a competitive bid for forklift truck and then the costs change in a way that you couldn't anticipate at the time that you entered into that bid. We've certainly been working to enhance the quality of the understanding the people, who are doing the pricing of deals of costs that, are going to be increasing and that have not yet increased but will increase in the four to six month window that I mentioned. So, that when people are pricing those trucks they can take into account the best estimate of what our procurement people believe is going to happen in a way of cost increases. However, if unanticipated cost increases continue to come up the way they have in the first eight months of this year its very difficult to be competitive in the marketplace with regard to costs that have not yet become apparent. Now, there maybe some evidence that commodity costs are not going to go up in the future at the rates that they have been going up in the past. On the other hand it is very difficult to determine the behavior of these markets in a situation, where supply of these commodities on a global basis is relatively inelastic and therefore doesn't respond very quickly to increases in demand and the increases in demand are coming not from America and Europe but from China and India. And so they are really driving continued scarcity and availability in creating an environment, where it's really difficult to predict the price increase behavior. But my hope would be that they are starting to moderate after these very large cost increases that have been coming out over the last few months. And indeed there are some commodities, where I think you have already seen them come down from their highs and there is a lot of volatility out there. But hopefully that gives you an answer to the question.

Thank you very much.

(Operator Instructions)

Okay. I think if there are no other questions, I just thank all of you for joining us and leave you with the assurance that in each of our businesses the management teams are very much focused on dealing with these forces. Some of which are amenable to being managed and others particularly weakness in markets, which are not. It's a difficult environment and we are watching it very, very carefully and trying to manage our way through at it as best we can. And I thank you all for joining us.

Thank you. We appreciate your interest. If you do have any additional questions, please feel free to call me at 440-449-9969. Have a good day.

Thank you for your participation in today's conference. To access the reply for this call you may dial 1-617-801-6888 or 1-888-286-8010 with the reply pass code 79478512. The replay will be available in approximately 1 hours' time. This concludes the presentation. You may now disconnect. And have a wonderful day.