Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 NACCO Industries Incorporated Earnings Conference Call. My name is Caris, and I will be your coordinator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And I would now like to hand the call over to your host for today, Ms. 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 second quarter ended June 30, 2012. If anyone has not received a copy of this 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 the 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-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 2012 second quarter release which is available on our website. I will now turn the call over to Al Rankin. Al?

As you know NACCO announced consolidated net income of $21.8 million or $2.60 per diluted share, on revenues of $773 million for the second quarter of 2012, compared with consolidated net income of $19.2 million, or $2.28 per share on revenues of $811 million. Of particular importance during a quarter, we announced that on June 28th that Hyster-Yale Materials Handling would be spun-off from NACCO industries. We had a filing of registration statement with the SEC related to that proposal and Hyster-Yale as independent company will own and operate the company’s materials handling business in its entirety. Spin-off is expected to occur during the third quarter of 2012 and if you look at the implications of that looking backwards from the second quarter over the trailing 12 months Hyster-Yale had revenues of about $2.5 billion, net income of $81.8 million, earnings before interest, taxes, depreciation and amortization of $140.4 million, it had depth of $142.6 million, cash of $103 -- $143.1 million, so its net debt was actually cash positive $0.5 million. The remaining NACCO after the spin-off of Hyster-Yale, we’ll have revenues of $814 million, net income of $45.3 million, or had over the previous 12 months, net income of $45.3 million, EBITDA of $85.5 million, it had debt at the end of the period, at the end of the second quarter of $164.9 million, cash of $160.1 million, so it had net debt of $4.8 million. As you look forward and taking into account the additional expenses associated with becoming a public company, Hyster-Yale is expected to have ongoing annual incremental expenses something on the order of $3.5 million pre-tax. These expenses will commence on completion of the spin-off of Hyster-Yale when the normal and customary expenses associated with being a public company are expected to be incurred.…

[Operator Instructions] And you have a question from the line of Jason Miller [ph] with Ionic Capital [ph].

Can you explain why it's time to spinoff the materials handling business at this point of the cycle? And then an unrelated question on the Kitchen Collection side, how should we think about a return to profitability and that you -- could you monitor on the store-by-store basis or there is some examples you can show us where the older stores or selected stores are profitable. So that there's a way forward to profitability in that business?

Let me take the Kitchen Collection question first. We do monitor individual store profitability. We've been -- we are in a period where we've been making some significant changes to the presentation of our merchandise in both the Kitchen Collection stores and particularly in the Gourmet Chef stores. The Kitchen Collection store format is generally quite satisfactory in its profitability. And we expect it to improve particularly as we weed out some of the poorer performing stores and add additional stores that are -- we expect to be good sound performers. The Gourmet Chef format as I've indicated -- as a company has indicated pretty consistently in our quarterly earnings commentary has not been performing at a level that we consider anywhere near satisfactory. There are certain mall locations that we are moving out of because they are less profitable. The rents relative to sales volumes that we think are reasonable for those stores are too high. On the other hand, we are very hopeful that the revised format that we have put in place will bring those stores to greater profitability. I think the other factor that requires patience in the Kitchen Collection format is that a consumer who purchases it, both of those types of stores has been under a lot of financial stress. And our hope is that that financial stress will moderate over the next 2 to 3 years and that will mean that comparable store increases can be reasonably significant. The consumer for the Kitchen Collection stores has been hard hit on the other hand. Those stores have a fairly basic product offering. The Gourmet Chef Stores consumer is a little bit higher end, but still in the same general category but it's more discretionary in terms of the types of purchases than perhaps the…

Is there level of debt though you might be comfortable with without making acquisition that perhaps might enhance the returns to equity holders or could be paid out in the form of a dividend as well?

Well, certainly, we will be looking at those issues in the context of the separate companies as they go forward. We have not obviously since those companies haven’t been performed. The separate independent Board of Directors have not considered what the dividend policies will be. We have had, as you know, a share buyback program that was begun and carried out sort of until we got into this spin-off mode. And there is no reason that the Board won’t take a look at those kinds of programs in the future. I would much prefer to find thoughtful opportunities to deploy additional capital within the businesses at the kinds of returns that they get today. On the other hand, I think the best way to answer your question is to say that the debt levels in the net debt equation are, we believe quite appropriate for each of our businesses. And it’s worth noting that we have refinanced each business in the last relatively few months, all 4 and on very favorable terms, in terms of historical perspective. And so the debt position that we believe is appropriate for each business is really in place at this point. So the opportunity is to use the cash, again, a wise and thoughtful way and that’s the subject that we will be taking out with the directors of the 2 independent companies.

Sure. I would just say, given how senior float is currently buying back stock doesn’t really make the situation worse versus one-time dividend where we have uncertainty about what the tax rules are going to be but where there will be a 15% treatment, which would help return value to shareholders and allow us to continue to benefit from the future growth, just my perspective on that. I am sure you’ve considered.

Well, we certainly have considered it. And I just say that at something we have thought about a great deal. But we would expect that any share buyback if we continue to do that would enhance the value remaining in the hands of the shareholders who are still there after a share buyback. And that’s particularly the case when you look at the multiple depending on whatever multiple you want to take a look at. These -- this is not exactly an expensive situation relative to the kinds of returns on invested capital that I described earlier. So you have a company that is generating a high degree of free cash flow, a very high returns on all of its significant businesses, the only exception at the moment is Kitchen Collection. And we feel pretty good about to getting that to acceptable levels relatively shortly. And so, buying ourselves is not necessarily -- a strategy that we should set aside. And I am sure that the Board will take all of that in the consideration the 2 Boards as they considered but certainly it would be a very different -- I am just suggesting it would be a very different equation. If the multiples were much, much higher in the levels that they are at, I think the value equation changes. And as you know the shareholders of NACCO are very patient long-term shareholders. They have been in it for -- the major shareholders have been in it for a very long time and expect to continue to be.

[Operator Instructions]

Okay. It sounds as if there are no more questions at this time. I think Christie can answer some questions and I’ll just turn it over to her for concluding remarks.

Again, thank you for joining us today. We do appreciate your interest and if you do have any additional follow-up questions, please call me again my number is (440) 449-9669. Thank you so much.

And ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a wonderful day.