Good day ladies and gentlemen and welcome to the third quarter 2009, NACCO Industries Earnings Call. My name is [Evet] and I will be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions). I would now like to turn the call over to Miss Christina Kmetko. Please 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 third quarter ended September 30, 2009. If anyone has not received a copy of this earnings release or would like a copy of the 10-Q please give me a call and I would send you this information. You may also obtain copies of these items on our website 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 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 third quarter earnings release, which is available on our website. I'll now turn the call over to Al Rankin. Al?

Thanks Christy. The earnings release indicated that we had a consolidated net loss at NACCO Industries for the third quarter of 2009 of $3.9 million or $0.47 a share, on revenues of $532 million and that compares with a consolidated net loss for the third quarter of the previous year of $17.3 million or $2.09, on revenues of $917 million. Its important to note that in the third quarter last year, results were negatively affected by the recognition of a non-cash tax charge of $14.5 million, against the accumulated deferred tax assets at NACCO Materials Handling Group’s Australian operations and for certain U.S. taxing state tax jurisdictions. NACCO's consolidated revenues for the third quarter were lower than the prior year primarily as a result of significantly lower volume at NACCO Materials Handling Group, due to a major drop in the global forklift truck market demand. There is some highlights first on the third quarter. NACCO Materials Handlings Groups net loss was 22.4 million compared with a net loss of $20.1 million in 2008. In early October, NMHG announced a manufacturing restructuring program and additional reduction-in-force programs that resulted in a restructuring charge of $6.9 million both before and after tax. Hamilton Beach's net income increased to $6.9 million in 2009 from $1.3 million in 2008. Kitchen Collection's income increased to $300,000 in 2009 from a net loss of $3.3 million in 2008. And North American Coal's net income increased to $11.4 million in 2009 compared with $7 million in 2008. I’ll turn now to the individual business units to discuss their results. I had noted in beginning the discussion of the third quarter at NACCO Materials Handling Group that remaining retail operations after the sales of the Hyster Retail dealerships that the presentation has been changed and we eliminate the…

(Operator Instructions)

While we are waiting for listeners to have questions to press star one, let me provide you with my contact information for any additional questions you may have after the conclusion of today's call. That phone number is 440-449-9669. With that, are there any questions?

Yes, ma’am. Your first question comes from the line of [Lionel Joliwag].

Thank you. Just that the -- we start at NMHG I mean obviously you have done a very good job on the cash front and I saw in your guidance that you expect to generate more cash in Q4. I am just wondering I mean how much more do you left in working capital in Q4 and going into 2010?

Well I would say that in large measure we expect to be pretty much at the point of having completed our working capital program by the end of the first quarter. It could be some more minor adjustments. There is one portion of working capital, which relates to the retail operations that are being divested, its working capital. But it's not really part of the capital of the wholesale business but there is a process of winding down the amount of capital tied up in those businesses, which takes a while. So I would simply distinguish between wholesale working capital and the others. The other thing I would note with regard to your question is that and my answer to it is that when I say that the working capital will be wound down, what I really mean is that receivables and inventory will be largely wound down. I think it still remains to be seen a little bit when payables will level out, and we've seen some upturn in payables in the third quarter, and that might take until the first quarter here to have some stability. We've been working off inventory, and obviously the flipside of that is that we're not buying inventory, and therefore our payables are low. So, in that sense there's further opportunity on the payable side.

I know you were in compliance with the covenants of your credit facility at NMHG this quarter, but it remains pretty tight and it forces you to basically keep a lot of cash at NMHG. I'm just wondering have you considered refinancing your credit facility. It seems that the credit markets are yet to reopen and a lot of companies has been issuing secured notes, which would effectively take out all the covenants you may have. I mean is it something you've been looking at or you'll be looking at going into year end?

Well, what I would say is this, that we always look at the financing of the business, and certainly the state of the current credit markets is a factor. However, we have a lot of tools at our disposal for ensuring that we're in compliance with our covenants, and as a result we feel quite comfortable that we can live within our covenants, and given that we are inclined to keep in place a very attractive borrowing rate that we have in our existing borrowing agreements. I think perhaps the question might relate in the end of us, might relate more to whether we should in some way reduce our borrowings by using some of our cash to reduce those borrowings or whether we keep them outstanding as we anticipate an upturn and in that sense, we'd be looking at it but not so much in the sense of re-financing sooner than we'd be prudent, but we certainly are keeping in mind credit market conditions and what we think they might be at such time as our existing agreements mature. But as you well know any company and any business that refinances agreements that’s were made at the time that our financing agreements were entered into is paying a significantly higher interest rates and in fact the covenants tend to be more restrictive and not less restricted even if there is more collateral provided.

Your next question comes from the line of Frank Magdlen. Please proceed.

Looking at your various businesses and it's been difficult to gauge final demand and right-size the businesses, but where are you in that process of thinking. In another words, if business stays relatively flat at this lower level, have you completed enough downsizing or in the downsizing plan have you anticipated some upturn in the next six to nine months where we could see breakeven say in material handing maybe a little sooner.

Let me just go through the businesses. And we feel that the coal company is at levels that it [ought] to be add. The business is doing well. We think it will do well next year. We at Hamilton Beach, we have taken significant actions. We think that they remain at the proper level unless something dramatic happened on the downside, which we certainly don't expect although we watch very carefully. At Kitchen Collection, it has a done very effective job of streamlining their operations both in the Chillicothe headquarters and also in the store operations and we feel very comfortable there. NACCO Materials Handling Group, I think is using this as an opportunity to try to ensure that it has the most cost effective structure and work pretty well through that and expect that we will be by the end of the year. I don't see much opportunity for further reductions in people. I think what we really want is the full benefit of the actions that we have taken. Secondly, we got number of new products out in the market place, which we believe can help us enhance our share position in both the Americas and in Europe even in light of market that is not recovering in the way that it has been typically in past downturns. Then certainly as to breakeven we have, the objective of breaking even as quickly as possible very much in our sights, and as we go through our planning process, we are going to keep that very clearly in mind and have some perspective on that that's better than we have right at the moment, when we talk to you next. In the meantime, I think that you should feel that the actions have been taken are prudent and wise, both…

Thank you. Could you just give a little color into the new order rate, it's up a little bit sequentially, where is it coming from, is it particularly the new products or is it particularly any particular type of industry?

That’s a hard question to answer really because there are so many products, so many channels, so many market segments and I would prefer to really focus on the fact that, particularly in the Americas we seem to have hit a bottom and if anything, it’s getting a little bit better. In Europe it's not quite so clear, as to whether things are going to get better. September was a little better than the previous couple of months. But, while reading anything into one month's result is a more than I can interpret. So, I think the European economy has been weak, but it’s showing some signs of upturn in a general sense and when that flows back in forklift truck business, we’ll have to see. So and then there is always sort of the customer driven side of it. It certainly it hasn't helped us. They have companies like General Motors and Chrysler and Ford under the kind of pressure that they’re under as far as our US markets are concerned. So, there are many factors that work and we keep working with our dealers to and our national accounts efforts to exploit the opportunities wherever they are. But obviously, the automotive sector is very weak at this point and that's one that we don't see coming back. Probably some of the warehousing segments will start to strengthen sooner rather than later. But again, I am just reluctant to make any prognosis at this point because we haven't seen enough trends to really make it reasonable to make any kind of judgment about those things.

Your next question comes from the lines of [Shawn William]. Please proceed.

Al could you help me over see the margins within Material Handlings in wholesale this quarter? I mean you guys were stripping out the restructuring costs, you were largely breakeven in Q2, and any of that benefit didn't seem to carry over in Q3. I mean was there anything that artificially boosted margins in Q2, or anything that's providing a particular drag in Q3 that's kind of not normal?

Well, it's probably wise to keep in mind that third quarter is the summer holiday period. As you can well imagine, this is a year in which we certainly wanted to take our summer holidays, and because the people are off, and we have the fixed cost still hitting us. But I think there has certainly been some pressure on prices, and I think we're hopeful that, that pressure will begin to abate. Why has there been pressure? I don't think it's just because the markets are down, I mean everybody is competing for a smaller pie. I think it has much more to do with the fact that some of our competitors appear to have had enormous inventories at the time the market collapsed. We were not in that position nearly to the degree that our competitors were. Obviously, we had some inventories, we had to work through, and some pockets where there are longer supply chains. But some of our competitors have had huge amounts of inventory and they like us are trying to liquidate inventory and working capital under these conditions and to pay back the banks at a time, when that covenant constraints can be significant. So in my judgment that’s probably led to some pressure on prices I think our material costs have been declining, we gave you an indication of that. These are very unsettled periods. There is a lot going on and some of these numbers effects LIFO and accounting transactions and currency has had a significant impact as well. I think perhaps the thing to do is to wait and see how the fourth quarter starts to shape up. I think I said in my remarks that in the fourth quarter, we’re hoping to have a pretty moderate loss. So I think what you’re going to see is that things are going to stabilize, as some of the elements that affect the one or two quarters will dissipate. We hope to be in improved condition in the fourth quarter. Our unit volumes were down in the third quarter in comparison to second quarter as well. So that affects the absorption and addition to the factory downtime from vacations.

I mean did you mention and was there a LIFO charge in the quarter, was that material?

No, they’re just constant adjustments that we take in terms of what's capitalized and how variances are hitting and so on, and so forth. It just, there are a lot of moving parts is really all I meant to say.

Can we go back to the saving and can you help me just on what is truly incremental versus what's already kind of baked into the numbers. I mean obviously the Modena closure that will be incremental next year. I mean are there still incremental saving from Scotland that should be carrying through into Q4 and into 2010 are those numbers have we really realized the full savings that we are going to get from that and that's already baked into the Q3 numbers and there aren't real incremental savings beyond what you already seeing in Q3.

With regards to Irvine there are probably not a lot of further incremental savings. We think are pretty close to the running rate. Obviously if you look at 2010 as a year, it will improve because we had in the first quarter some substantial cost associated and no benefit particularly from the Irvine closure, so only in the last half of the year where you have had the fuller impact. I agree with you the program at Modena, the closure of that facility will be a benefit. We are completing some additional cost reduction actions including additional layoffs that are reflected in the charges that we took this quarter that will have an impact on a reported earnings point of view probably practically beginning in the first quarter Ken rather than this year. And from a cash point of view it will be little further on but from a reported earnings point of view that will have an impact. Those programs are underway. So there are some programs that are underway, but I think it's getting the full annualized benefit, which we're hoping to really see in a significant way in the fourth quarter, and then have that flow thorough over the course of 2010.

Right, but there shouldn't be any real incremental improvement from Q3 into Q4 just from Irvine I mean you'll get benefit next year just as those savings are annualized, but there's no kind of incremental dollar pickup in Q4 versus Q3?

No.

Then what are you expecting dollar wise for 2010 that's incremental to 2009?

From what?

From Irvine.

I don't know that I could give it to you dollar wise. I just gave you the annualized number, which I think we put in our release. It's approximately $16 million, 15.6 in 2010 and $18 million thereafter.

So you think you got half of that in 2009, so I mean, ballpark, I could say there's another $7 million to be gained in 2010?

I'd rather not get that specific. I think you can draw your own conclusions. I haven't got the numbers and I wouldn't like to be quite that specific, but during the general thinking process that I would say is a good way to think about it.

Can we just briefly talk about GE Credit, your finance arm for material handling? We haven't talked about that business much. Are you seeing any drag come from that business? Has GE changed the way in which they are conducting business within that unit that is negatively impacting you?

No I think its continuing to be to work in a very sound way. The most important GE program is really in the US and that’s a good program for both GE and for US. Outside of the US the programs are with GE are much more of a facility and if GE isn't competitive, their opportunities to get financing through other folks and I think but I would say in answer to the implicit question you have is that, well GE is certainly tightened up its approach and so have we. We have potential, we have request for credit extension from borrowers whose credit quality has deteriorated and so we have absolutely a joint interest with GE in making sure that we’re lending in an appropriate way to ensure that we have a sound joint venture business, which is what we have with GE at the Americas.

All right, I mean but I guess to get back to my point then I mean has there been a material drag from that business?

If you are losing money, no.

So if can just to help you little bit on the income statement, if you look at the line, the income from non-consolidated, non-controlling interest, you can see that our numbers dropped $300,000 between last years third quarter and this years third quarter, now that also includes some other businesses in it but that is not a material change.

Okay.

I mean that’s where that would be recorded.

Then Hamilton Beach looks like you, there was a statement in the press release, there was reduced distribution to certain retailers. I mean can you add a little color there I mean did you lose the distribution channel or partner there, is there and if so is there any chance we can replace that in the near term?

Well I think replacing it is replacing the volume as opposed to the channels is very important. May I just give you some examples some of our international businesses have been quite weak. We have the Hamilton Beach commercial business that sells a lot to restaurants, bars and it's even though it's at a lower end, it's a capital goods investment. Well what's happened to capital goods investment and restaurant business I mean it just collapsed, so that channel is very weak. In the US consumer business, there are relative changes in the position of Wal-Mart, Kmart, Target, a Kmart [series] that is Target. Some of the smaller players they have done less well than others. The high-end business has declined for certain products quite dramatically. So there are a lot of different factors coming to play. In addition, we have certain seasonal in and out placements and we have a lot of discipline as to what we really want to go for and what we don't. I think some of our competitors have had higher inventories and have been anxious to move some of that stuff. If you look at our results at Ham Beach, you can see pretty clearly that we like to be a profitable company, not just a company with a very large top line. And so we have a lot of discipline in that whole process. However, we're working very hard to ensure that we have the right products in the pipeline. The other thing I'd urge you to have a little bit of caution on is that well there can be some of these seasonal placements or number of points of distribution, within a particular customer that can change, that also retailers have their own pattern of when they order, and that can influence…

Then last questions and maybe this one is for Ken here, any guidance maybe on the tax rate going forward, up, down, ballpark, any help there?

I think I'd look at the tax [holes]. We have income or more specially losses in jurisdictions that we do not benefit. You need to exclude those items and then once you do that, you end up with a rate that’s some what more consistent.

Okay.

That's helpful, but that's the mechanism that works under those tax [holes].

Let me just point out and as an additional note to Ken's comment that as earnings come back in some of these areas and as volume improves from these very depressed levels that just as we are not getting a tax benefit now we are not going to have a tax cost in the future in those jurisdictions. So to the extent there is a silver lining in that, that's going to come back and benefit us as markets come back. Now the other comment I am making to add to Ken's is that you really need to look at tax rates individually by subsidiary and I think you can do that but the sale of the oil and gas leases fro example at North American Coal we're taxed at a higher rate than many of our coal mining operations are taxed at. Therefore their average tax rate has gone up and it's kind of peculiar item because the way the accounting works we got all the benefit of those payments in the third quarter in term of recording them as revenue and income. Then we charge an average tax rate so what you will see in the fourth quarter is that the tax rate in the coal company will go up and the reason it will go up is because of what happened in the third quarter not because of anything that happens in the fourth quarter. So, you've touched on an area which I find very complicated and hard to get a good fix on. So I think thinking it through unit by unit is probably the most helpful way, and I think Ken's comments had more to do with NACCO Materials Handling Group than any of the other businesses. I think Kitchen Collection pretty straightforward, Hamilton Beach, pretty straightforward, the coal company. I've given you the issue, and it depends a lot on where we get the benefit of depletion accounting and where we don't, and obviously we don't get it on an oil and gas mineral rights sale. Then NACCO Materials Handling Group we have these areas where we got to earn some income before we get the tax benefit.

(Operator Instructions).

It sounds to be as though the question have been completed, and we know that at the last conference call, somehow we didn't get the questions showing up, and ended things too soon. I hope we've covered all the questions at this session, and in any event, as Christy indicated to you before, she's available to follow-up on any further questions that may develop in your minds as you think more about this release. Okay. Thank you.

Thank you for joining us today.

A replay of this event will be available two hours after this event. To access the replay, please dial 888-286-8010 or 617-801-6888. The pass code for the replay is 64932809. The replay will be available for one week. Thank you for joining today's conference. This concludes the presentation. You may now disconnect. Have a great day.