Good day, ladies and gentlemen, and welcome to the Q1 2013 NACCO Industries Earnings Conference Call. My name is Alex, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I would like to hand the call over to Christina Kmetko. Go ahead please.

Thank you. Good morning, everyone, and thank you for joining us today. Yesterday, a press release was distributed outlining NACCO’s results for the first quarter ended March 31, 2013. If you have not received a copy of the release who would like a copy of the Q, you may 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. Also in attendance, representing NACCO are Mark Barrus, NACCO’s Vice President and Controller; and J.C. Butler, Senior Vice President - Finance, Treasurer and Chief Administrative Officer. 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 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 first quarter earnings release which is available on our website. I will now turn the call over to Al Rankin. Al?

Good morning. NACCO Industries reported income from continuing operations of $4.4 million, $0.53 a share on revenues of $196 million for the first quarter and that compared with income from continuing operations of $4.7 million, $0.57 a share on revenues of $173 million in the year ago quarter. Consolidated EBITDA from continuing operations for the trailing 12 months ended March 31, was just under $83 million. The company’s cash position was about $97 million at the end of the quarter and that compared with $140 million at the end of December. Debt was a $173 million compared with $178 million at the end of the year and $114 million a year ago. In overview, North American Coal and Hamilton Beach had improved net income and the highly seasonal Kitchen Collection business had an increased net loss in the first quarter. Turning to the individual businesses North American Coal’s net income for this first quarter was $9.6 million, revenues were $51 million, that compared with $9.2 million and revenues of $24 million in the first quarter a year ago. The first quarter financial results include $16.7 million of revenues and a loss of $1.2 million from the Reed Minerals operations, which were acquired at the end of August last year. Our revenues increased in the first quarter primarily due to the Reed Minerals acquisition, but there was also an increase in tons delivered at the Mississippi Lignite Mining Company as a result of fewer outage days at the customer’s power plant compared with a year ago. An increase in deliveries at the Limerock Dragline Mining operations and higher royalty income also contributed to the improvement in the first quarter revenues. Net income in the first quarter increased slightly compared with the first quarter a year ago. The favorable effect of higher…

(Operator Instructions) Our first question comes from Tara Reisbig from Moab Partners. Tara Reisbig – Moab Partners: Hi, guys. This is Tara Reisbig from Moab. We’ve been invested for a while and our efforts to talk to the company in the past sort of have been unsuccessful in getting a number of our specific questions answered. So I was hoping either on this call or perhaps after, in private you might be willing to go through similar questions, is that okay?

We’ll try to answer your questions if you want to give us any questions, yes. Tara Reisbig – Moab Partners: Okay. Great. Let’s start with North American Coal, first off with Reed Minerals, just wanted to kind of review the – your rational for acquiring that especially the time when that Coal wasn’t exactly bearing so well in the market. And how you came up with the valuation for the price that you paid?

Well, we think the Reed Coal acquisition was an excellent acquisition, and we think that the timing, well, it’s never absolutely perfect, but was really pretty good because the boom conditions had already passed, so some of the prices that were being paid were not the prices that we paid. It’s structured with contingencies, so that there’s a base price and then a contingent payout depending on certain aspects of the performance of the business, so we had a lot of protection in the way that the contract was designed. Secondly, it’s a very much a long-term opportunity from our advantage point. We really don’t look at it from an absolute short-term point of view, we prefer that things be better in the short-term than not better. But on the other hand, we are moving aggressively to make operating improvements in the Reed Mining operations additional mechanization capital expenditures that we think can significantly improve its operations and them much more on the basis of the other coal operations that we have in North American Coal in the United States. And secondly, we are working hard as I indicated in my comments to develop an international metallurgical coal strategy and sales, those efforts are underway. The volumes at the moment are weaker than we had anticipated in one particular customer. And – but the prices are pretty much where we anticipated that they would be. We’ve been fairly close in projecting the prices and terms of our expectations. So I think my answer to your question is that, we’re really in the midst of getting prepared for significant benefit from the Reed operations down the track over the next few years and that’s really the way we look at this opportunity from our advantage point. Tara Reisbig – Moab Partners: Okay. I guess, following on to that, long-term what sort of potential do you really see from that business, like why get into that coal at all? As I understand that you are – the other consolidated mines are obliviously all correct.

We see an opportunity to make money in this business and we think that these particular mines are well positioned for access to international markets in terms of the specific location that we’re in Alabama and access to transportation that would get us into international markets, and so we’re quite optimistic about the opportunities. And I would just say that North American Coal has a history over the years of developing new initiatives, different parts of the country, different types of customers, and this is simply a continuation, I don’t know continuous change that we’ve had in our coal business. And I think overall, we’ve been pleased with the results that we’ve gotten form the coal business and we certainly hope the same will be true with Reed operation. We have no reason to think that it won’t. Tara Reisbig – Moab Partners: Okay. Great. Could you give us any sense of how much of the revenue at Reed is markets steam coal versus met coal?

I think we will have to get back to you on those, I don’t know, I’m not sure we will reveal those numbers in our Q, but we -- and let me just say this, that it isn’t quite as simple as this much metallurgical coal and this much steam coal. The metallurgical coal seams and the steam coal seams are intermingled in individual operations to some degree. And so as you mine through the seams, you will mine some that will go to customers for steam coal and some that for metallurgical coal. And so, it’s a balance and obviously, it is our objective over time to develop reserves that are more intensively metallurgical coal reserves and to increase our volumes of metallurgical coal. I think that’s the best answer I can give you at this point.

Okay. That’s great, thank you. Then let’s move on to the unconsolidated mines and the new projects that you have coming on line. I guess just in general, how should we view the potential there? I mean, is it sort of average earnings per projected tons delivered? Is all the additional unconsolidated tonnage pure EBITDA for you considering that it comes in the unconsolidated earnings line? We’re just trying to understand what the potential is. I think there’s a lot of potential in the next few years, but we would like to make sure we are evaluating it correctly.

Well, we do think there’s a lot of potential there. And we effectively and these are – every single one of these mines is a long-term contract mine. They are not exposed to market prices in the sense that, let’s say, the Reed operation could be exposed to market prices. Tara Reisbig – Moab Partners: Right.

And in that context, we get a return for the services that we provide in mining the coal for providing the coal in most instances, which is mined, and then we get a return for the capital that we put in and in some of these mines we put in a fair amount of capital and others, we don’t. And so it depends on how the contract is structured individually as to just exactly what the returns are. But the way we tend to look at them all is that we want a good return on the capital that invest in the mine and we want a service return on the mining services that we provide for these, and in combination that can improve the returns on capital in those situations where we’re providing -- both using our capital and providing mining services. So it’s not a free market type return, it’s much more along the lines of a return per ton or equivalent of coal delivered to customers. That’s about the best way I can describe it to you is that these are structured, so that if the volumes are there, if the customer takes the coal, we make a reasonable profit along the way. That’s generally the way these are structured, and in that sense, there’s some difference from the way that Mississippi Lignite Mining works. We’re – we – if we can find other sources of volume, we can get some incremental impact, but still the core volumes are controlled by the prices that we set contractually that are over very long periods of time and they are adjusted for factors like inflation and so on and so forth.

Well, I would add to that from accounting standpoint, those operations are in development dewdrop to EBITDA just as the other consolidated lines?

We are in the development period. Tara Reisbig – Moab Partners: Okay. Right. So…

And in production. Tara Reisbig – Moab Partners: Okay. Great. So just to look at it numerically, if you would take your 2012 results, you had 25 million tons delivered from the unconsolidated mines and you’re earning from the unconsolidated mines were $45 million roughly, is it fair to take that $45 million of earnings and divide it by the 25 million tons delivered and come up with a sort of an earnings per ton and then apply that to the future tons that you expect to deliver from these new projects? Is that a fair way to look at it?

Yeah, there are – these mines are so individually dependent that it’s very difficult for me to answer the question that way. You certainly do get an amount per ton by doing that division, but it’s not necessarily true in each of mines. For example, we would get a larger amount per ton for mines that we are putting a significant amount of capital in than for mines that we’re putting less capital in. Tara Reisbig – Moab Partners: Right. Then in terms of the new projects that – there are five new projects, is that correct? Which ones are you putting significant capital into and which ones is the capital being funded by the plant?

Well, in some of these, there is a sharing of capitals. It depends to some degree, but certainly J.C., we would be putting substantial capital into several of those mines new mines, Mississippi lignite Mining. J.C. Butler - NACCO Industries.

That’s an existing mine.

I mean the mines in other Mississippi operation.

Yeah, we’re investing substantial capital obviously in Reed, which we just acquired, that is a consolidated operation. The other one where we are investing capital is the Coyote Creek Mining operation. Tara Reisbig – Moab Partners: Okay.

And how about the structure of Liberty Fuels?

That’s all financed by the customer.

The Liberty Fuels is financed by the customer and the others are with the exception then of which one?

Coyote Creek.

Coyote Creek, where would be our capital. Tara Reisbig – Moab Partners: Okay, great. That’s very helpful.

No. Tara Reisbig – Moab Partners: Speaking of liberty, are there any updates on the regulatory approval for the Ratcliffe plant? I know that’s sort of been pending.

Just only what’s available in the public racket. Tara Reisbig – Moab Partners: Okay. And…

There is nothing new to report, but everything is on track as I indicated in my comments to begin production and I forgot what I said, mid-2014, I think. Tara Reisbig – Moab Partners: Right. In terms of the ramp-up of the production, is it kind of a linear ramp up tons or is it more like a hockey stick where it starts off slowly and then kind of exponentially increases as you get efficiencies of production? How does that work exactly? How should we think about that?

Why don’t you go ahead JC.

Each customer has its own demand curve as these restarted up because ultimately these mines are serving a single customer and it’s really depended on the plants and the actual execution of the start up of the customer’s operations. So there is no typical curve for any of these.

I think the only think I’d add to that is that those that are designed to produce power and mines that are backing the power plant, have a defined period of time in which they move to production of the power and that is in a really extended period of time after first delivery. So it could be over a one year to two year period. On the other hand, there are some coal mines where we’re not selling to power plants where the coal is going for other uses. And in those cases it’s more dependent on the customers demand and therefore it ramps up in accordance with the customer’s demand and that’s a different situation where you have embedded power plant that you want to operate at full capacity, that’s helpful too. Tara Reisbig – Moab Partners: Okay. That is helpful, very helpful. Okay. I think – and then just lastly on North American Coal, once you sort of get these new projects online -- obviously, I’m thinking much more longer term, but is there any just thought about strategic initiatives in terms of breaking up the appliance business and the North American Coal business or we just have a hard time seeing how they really fit together.

Well, they fit together in the sense that they have good returns on capital. And from our point of view, they are well run businesses and so that’s a primary consideration. And the answer to your question is, no, there are no plans to do anything different from what we are doing at this time. Tara Reisbig – Moab Partners: Okay. And actually, one more on the coal side, what kind of risks are there to the long-term contracts? If a plant decides to switch to natural gas, would they pay you a termination fee? What are the – how easy is it for them to get out of that contract, because some of your contracts have lives of 25, 30 years and...

Well, Tara, I will ask J.C. to give you some specifics here, but the general answer is that, it’s pretty difficult for our customers to move away from us as a supplier given how the contracts are structured and the basic economics of our particular power plants, J.C.

Yeah, I mean, I’d also add that coal fired power plants can’t switch to natural gas any easier than you could switch a car from gasoline to diesel, it’s too fundamentally different ways of generating electricity. So a power plant switching really isn’t part of the equation. From a contractual standpoint I mean I guess what I tell you is that, as you go through the variable interest entity analysis that says that our contracts will be – these operation will be deconsolidated marketing issues. Certainly the cost to us in a termination event are considered. If there was any significant risk on our part for any significant cost on our part it would certainly affect that analysis and swing it more towards having those operations consolidated on our financials. The specifics as to how each contract works with respect to termination are subject to risk contracts.

But generally speaking, I think our assessment is that the risk profile is low that these are very efficient power plants they have a cost structure that generally speaking allows them to be dispatched early on the in terms of desirability from point of view of the grid and that if the bigger risk if there is one would be some sort of draconian rules that relate to carbon dioxide as opposed to lower fuel prices. And I mean, frankly the sort of deconstruction of the U.S. infrastructure that would be involved in that for our particular coal mines and power plants would be enormous. And so we don’t feel that those risks are particularly significant as we see it. Now what I would add and really perhaps this is simply the more important point is that the market is very likely for the time being with the technology that’s in existence to be constrained for new power plants being build on top of reserves that we currently have that are coal fired. So what we want to look for our opportunities for coal-to-liquids kinds of technologies, we think those are evolving we’re going to be pursuing those. We think that in all of the Kemper County Liberty Fuels project is very environmentally sound, it has carbon capture capabilities. On the other hand they are lot of hurdles for new coal fired power plants as you look to the future at the moment and given the technology. So what we want to be doing is looking with the completion of our new coal mines. And I would suspect we’re in a mighty small minority of companies that are building new coal mines at least of the magnitude that we are in the country. And those we think will all turn…

I mentioned the Breakfast Sandwich Maker I think that’s an example. We’ve gotten good pick up on that. The other products that I mentioned are also really picking up and enhancing our position. We have very strong position in the Internet, it’s growing quite rapidly. We’ve been working with not only the traditional customers like Wal-Mart, Target and so on but also with Amazon and we are well positioned with the customers in the internet area, but we are also trying to do work to enhance customer understanding of our products. Our products tend to be well rated by consumers and folks that are in the business so rating and one of the interesting facets of the internet business is that customers tend to look more thoughtfully add the information about the products, their quality, how they have been received by consumers, then those that are to buy and some of the more traditional brick and mortar operation. So that is another example. Our commercial business, we got a number of initiatives underway with the change. We’ve really been moving in the last few years out of the more traditional bar oriented blender type of business. We’ve expanded the product line considerably, but the chain business tends to require less standardized and more tailored products, and so we’ve been working with a number of the major change not only in the United States but internationally. So that’s I think another example. And then in the only the best market I would simply say that we are working on very specific initiatives in that area and trying to move that forward. So, the entire organization is really galvanized around those five strategic initiatives and we view them as kind of a three to five year program. Those are not going to reach the longer term objectives we have for them in extremely short period of time. Things were going to have to – we are working hard on developing putting capabilities in place and it really complements a strong core business that we already have. So that’s the best way I think I can answer that question. Tara Reisbig – Moab Partners: Okay. In that three to five year timeframe, do you think Hamilton Beach can get back to being kind of a $50 million EBITDA company? Is that level of profitability achievable?

I am really not going to comment on the growth in terms of EBITDA and others. Our aspirations I’d just say that our aspirations for the longer term are very significant. Tara Reisbig – Moab Partners: Okay. And then lastly on Hamilton Beach, is Wal-Mart still your largest customer?

Wal-Mart is I believe our largest customer, yes. Tara Reisbig – Moab Partners: Okay. After Wal-Mart, could you give us any sense of what percent of revenue the second largest customer would be.

You’d have to look at the queue and whatever is in, the queue is what we are prepared to say and to be honest I don’t have those numbers at my finger tips. Tara Reisbig – Moab Partners: Understood?

Tara, this is Christie Kmetko. Tara Reisbig – Moab Partners: Hi.

There is information in the 10-K that talks about I believe the percentage of our five largest customers. I have to find it, but I can call you back with that information. Tara Reisbig – Moab Partners: Okay, that would be great. Thank you. And then lastly on kitchen collection, how far long in the renovation strategy are you and is there any point at which you would consider giving up sort of on the strategy it doesn’t seems to be improving?

Well, I think the way to look at kitchen collection is, there is a solid core business and I think that we still have some further way to go in terms of eliminating stores that are not as profitable, as we would like them to be but that is really in large measure, reaching a conclusion, I think that’s behind us. So as we look forward, I think a number of things can happen, one is eventually I think the consumers, the middle market consumer will become healthier than the middle consumer is today, we can’t estimate how fast that’s going to happen, lots going to be dependent on the improvement of the economy and fuller employment than we have today. But it has been a long cycle and that has affected that business, it’s affected the Hamilton Beach business as well. But I think we have been able to counter it, in the Hamilton Beach business by deploying our assets and efforts around in a variety of different businesses, countries and so on. But so I think the consumer is going to get more healthy. We’re looking at some additional formats as we indicated, as I indicated textiles are one and enhanced performance in the Internet business is another. And I think we’ll be looking very carefully at our positioning and outlet malls as opposed to more traditional malls. And I think the formats are pretty much in place, they need to mature a little bit. And we need to have consumers get more healthy and be patient in that regard. And then we’ll continue to expand particularly in outlet malls, where we think the characteristics are soundest in terms of the sound cord that I mentioned earlier. And there is some signs that developers are starting to, they get more interested in additional outlet malls and improved environment. So what I guess I would say we’re cautiously optimistic at this point. Tara Reisbig – Moab Partners: Okay. So do you – would it be fair to say that you feel that you have hit the inflection point in terms of the transition or the renovation strategy and you should see recovery from this point on, or could we still expect declines in this business – further declines in this business?

Well I think you have to distinguish between the comparisons to the previous year, which is one set of comparisons and the base that we’re at, at the moment. And if you’re talking about the base we’re at, at the moment then it is at the end of the first quarter. I think you are going to see at that stage more or less in place with some puts and takes, but you still got – you’re still going to see some reported declines based on the activity that occurred in the second and third quarters of last year, as you are comparing the year-to-year numbers. Tara Reisbig – Moab Partners: Understood. Okay. That rest of my questions. I really appreciate you taking the time to answer them.

Happy to do it. Tara Reisbig – Moab Partners: And that’s it for me. So thank you very much.

Thank you.

We have no further questions in the queue at this time, now I’d like to hand back to management for closing remarks.

Okay. Thank you all very much. Christy?

Thank you for joining us. If you do have any further questions, you may reach me at 440-229-5130. Thanks for joining us.

Thank you for joining today’s conference. This concludes the presentation. Please be aware a replay of this call maybe available by dialing 617-801-6888 and using the pass code 84397307. You may now disconnect. Good day.