Good day ladies and gentlemen and welcome to the Second Quarter 2010 NACCO Industries Earnings Conference Call. My name is Brandy and I will be your operator for today. At this time all attendees are in listen-only mode. (Operator Instructions). And I will turn the call over to your host for today, Ms. Christina Kmetko. Please proceed, ma'am.

Thank you. Good morning everyone and thank you for joining us today. Yesterday, a press release was distributed outlining NACCO's 2010 second quarter results. 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 will be happy to send you this information. You may also obtain copies of these items on the NACCO website at nacco.com. The 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 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 the earnings release and in the 10-Q. I'll now turn the call over to Mr. Al Rankin.

Good morning to all of you. As I think you all are probably aware of NACCO announced its earnings last evening. Net income was $15.9 million or $1.91 per share in the second quarter on revenues of about $599 million that compares with net income of 1.6 million or $0.19 a share on revenues of about 540 million in the year ago second quarter. At NACCO materials Handling Group net income was $7.3 million, revenues 413 million compared with a net loss in the second quarter of $3.1 million and revenues of 362 million. Operating profit improved substantially to 9.8 million from a loss of 1.7 million in the year ago quarter. Revenue increase 14% compared with the 2009 quarter primarily as a result of an increase in units and parts volume in the America and in our EMEA, Europe, Middle-East and Africa markets. Shipments in the second quarter increased to 13,800 units from 11,100 in the first quarter and 9900 units in the year ago second quarter. The backlog was approximately 21,700 units at June compared with 16,900 a quarter ago March 31 and 13,200 at the end of last year and 12.,300 at the end of the year ago second quarter of June 30. The second quarter net income increased significantly compared with 2009 primarily as a result of a substantial increase in operating and a change in effective income tax rates. Operating profit increased 11.5 million, primarily due to improved gross profit attributable to higher sales volumes and margins of both units and parts and lower manufacturing variances which resulted from higher production levels in 2010. The improvement in operating profit was partially offset by an increase in employee related expenses which resulted from the partial restoration of compensation and benefits which were reduced in 2009 and…

(Operator Instructions). And the first question comes from Schon Williams at BB&T Capital Markets. Please proceed. Schon Williams - BB&T Capital Markets: Hi, good morning. It's Schon Williams.

Good morning. Schon Williams - BB&T Capital Markets: Let's start with the star that showed this quarter's material handling. Order activity has been very robust in the first half of the year. I just wanted to kind of circle back on the issue of shipments. Certainly the backlog has been building fairly dramatically the last two quarters and it sounds like you're kind of expecting normal seasonal slowdown in terms of shipments in Q3 and I'd expect that to kind of ramp back up in Q4 but do you expect that you can clear some of this backlog in Q4 or are you going to carry a lot of that into 2011. I'm just wondering how long can you keep customer orders in that backlog maybe before there is some risk that they get cancelled.

Well we would hope to manage the backlog in a way that there wouldn't be any cancellations. However there are a clear limitations to our ability to ramp up the shipment schedule from a supplier point of view. In addition we want to be very careful that we don't get out ahead of the market. But the bookings performance has been very encouraging and as you say, it's seasonal in a sense in the summer but it's seasonal in the sense that we have factory vacations and those will proceed on a normal basis. So, shipments will ramp up at a much lower rate than the bookings at this point. And then as we go into 2011 I certainly think we will look forward and my hope would be that we will have a supply chain level of support that can sustain throughout 2011 higher levels of shipments than 2010. Schon Williams - BB&T Capital Markets: Are there specific components that are critically short at this point or is it kind of across the Board.

It's just spotty and the suppliers are all ramping up too and I think these are the normal issues -- at this point we haven't seen any problem areas that are of significant concern. It's just a question of working closely with suppliers to ensure that they are ramping at the same speed that we are. The last thing we want to do is end up with a lot of inventory that we can't shipment. Schon Williams - BB&T Capital Markets: Certainly, Al can you talk a little bit about pricing, it sounds like you have got some new rounds of pricing I guess coming in Q3. How much are you looking for there?

Well we have put some modest price increases out and we will really gear those around cost increases and in the main that will be the driver and we see the same thing going on with our competitors. Some of them are experiencing the same forces of course that we are and reacting in a similar way. But they are going to be moderate and reflective of tight conditions. They are going to be reflective of input cost increases. Schon Williams - BB&T Capital Markets: Is there any concern that there was some customer pre-buy ahead of that price increase? Have you seen that historically?

We see some booking activity but we have been a little surprised at how little that seems to have affected the bookings since the time that price increase was announced but you are right there is usually is that kind of behavior we haven't seen at this point but again I just want to say that on the one hand I am very encouraged by the bookings increases and in the other hand we are going to make sure they are real and that they are going to continue over a period of time. I think I noted in my comments that there is some element of rebuilding of inventories and depleted inventory situations around the world and we want to make sure that and we have had some new dealers that have come onboard in certain areas and we just want to make sure that the underlying levels of demand continue to support our factory schedules. We don't want them to get out ahead and as you will know future economic conditions are not crystal clear. We are still in the camp of thinking that there is going to be slow and steady improvement in the economy not a snap back but we're going to watch it very carefully. Schon Williams - BB&T Capital Markets: Okay, and then as a follow-up, can you talk a little bit about some of your market expansion opportunities. It sounds like you got -- captured a dealer in the UK and with a new agreement in Russia that was recently signed. Can you talk about where you see the most opportunity right now and how that plays into the market share expansion?

Well, we're always on the lookout for opportunities to strengthen our existing dealer base and I believe that we have been able to do that in Russia. I believe we've been able to do that in our Yale UK operations where we had a much more limited position through the Yale distribution which we owned and which has now been brought by that dealer as a part of the overall program in the UK. There are other areas where we see those opportunities. We see other situations where dealers have depleted excess stocks and are now ordering in line with the market. All of those things are helping. We were very aggressive last year and in the end of 2008 and helping our dealers to deplete their stocks and in running off our own, as opposed to trying to moderate the downturn and now that's coming around to help us on the other side of the equation and we've got a healthy distribution system. But we'll continue to look for opportunities to strengthen it. So the distribution dealers are one aspect of it. We are very reliant, very confident about our dealer network. The other is individual market areas and certainly, as I indicated in areas where we participate and indeed participate significantly, such as Brazil and in developing markets such as Brazil, Eastern Europe, Russia. Those markets have come back relatively quickly compared to the European, the Western European and North American markets and the only major developing country where we're really quite a modest player is China and on the other hand the margins in that business are very, very thin. So from a profit point of view that's not a major consideration. So think we have both certain markets and strengthened distribution, something we've been working very…

There is a lot to do with promotional activity and when we get it in comparison to previous years and we are very hopeful that the promotional activity in the third and fourth quarter have been quite encouraging for Hamilton Beach. There are signs that consumer behavior is uncertain. In the last month or so there are some indications that traffic and factory outlet malls has been down a little bit. I think our views are not based at this point on a really strong upturn in consumer buying. We are taking a pretty moderate point of view but an awful lot of depends on how our retailers do particularly in the mass marketing people and how their relative positions are in terms of comparisons to other. So there is a lot of issues in terms of the mix of the customer base. There is some in terms of the mix of products but these happen every year and we are feeling reasonably good unless this consumer gets more stressed in that second half, in Hamilton Beach. I think the biggest driver for improvement in Kitchen Collection is the enhanced formats really in both businesses but particularly in Gourmet Chef. I think what is less clear is just how quickly we will get the full benefit of that. It takes a while for consumers to get in a regular pattern on coming back to our stores and making kinds of repeat purchases that we would hope to overtime but we feel we are very well positioned over the next couple of years there. Schon Williams - BB&T Capital Markets: Okay and then it looks like Hamilton Beach is moving a distribution center in the quarter. Do you expect – are there going to be any significant cost associated with that move?

No I think that, I am not sure where that comes from, we are not moving any distribution centers at all. What we are… Schon Williams - BB&T Capital Markets: Not, not in the quarter. The lease in Memphis...

That really is a very marginal move. There's no material expense moved. It's just moving from one building to a nearby building and we have better rental rates. But it's not a significant matter. Schon Williams - BB&T Capital Markets: Okay, and then let me just move on to coal. Can you just talk about the, your expecting some modest increases from some of the new mines coming online. Are we -- over the next four quarters, kind of Q3 through Q2 of next year, Q2 of this year through Q2 of next year, are we talking about maybe tens of thousands of tones coming online, maybe a 200,000 tones coming online, very modest numbers really kind of over the next 12 months. Is that what we should expect?

It's pretty modest though '10 and '11 and you're not going to see much till '12, '13. Schon Williams - BB&T Capital Markets: Okay, okay. And then last question here, we discussed this last time but it looks like the litigation cost ballooned significantly in Q2 versus Q1. I understand that this is kind of a moving target but at $4.5 million a quarter, that's very material to earnings. Do you have a sense of whether that going to be the run rate for the next couple of quarters, 4.5 million a quarter or just was there a tremendous amount of activity this quarter that just happened to hit because of timing.

Well, we're in a very active stage of the litigation process right now. Many depositions are being taken in preparation for depositions and preparation of legal case. Certainly that process is going to continue at a high level for a while. Then we'll have to see where things go as we get further down the track but there will be some ebbs and flows. We're certainly at a higher level now but litigation is a very expense process and very time consuming, very people intensive, not just of lawyer's time but also of management's time. But the case is moving forward and there will be substantial expenses through the remainder of this year and I can't really say just exactly what the level would be but certainly the second quarter was a very active period. Schon Williams - BB&T Capital Markets: Okay, that's all I have for now. Thank you for your time.

Okay, are there other questions?

(Operator Instructions).

Okay, if there are no more questions, thank you all for listening to our earnings call. Cristi?

Thank you for joining us. We do appreciate your interest and if you do have any additional questions, you can call me. Again the phone number is 440-449-9669. Thanks and have a great day.

Bye-bye.

Thank you for joining today's conference. That concludes the presentation. To access the replay of the call please dial 1-888-286-8010 and passcode is 28666167. Again, its 28666167. Have a great day.