Good day, ladies and gentlemen. And welcome to the First Quarter 2014 NACCO Industries Earnings Conference Call. My name is Lisa, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference 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 first quarter of March 31st, 2014. Copies of our earnings release and 10-Q are available 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 J.C. Butler, Senior Vice President, Finance, Treasurer and Chief Administrative Officer and Elizabeth Loveman, NACCO’s 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 were 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 first quarter earnings release, which is also available on our website. I will now turn the call over to Al Rankin. Al?

Good morning everyone. NACCO Industries had a net loss of $1.5 million, or $0.19 a share and revenues of $177 million in the first quarter of 2014, and that compared with net income of $4.4 million or $0.53 a share and revenues of $196 million in the first quarter of 2013. The Company’s cash position was $17.1 million as of March 31 and that compared with $95.4 million as of December 31, and $96.9 million as of March 31, 2013. Debt at the end of the first quarter was $223 million that compared with $184 million at December 31 and $174 million a year ago. NACCO’s repurchased approximately 107,100 shares for an aggregate purchase price of $5.9 million, including $5 million of stock purchased during the three months ended March 31, 2014 as part of the stock repurchase program that the Company announced in November of last year. That program permits the repurchase of up to $60 million of the company’s outstanding Class A common stock under a previous stock purchase program which ran from November 2011 to November 2013. The Company purchased approximately 624,000 shares of Class A common stock for an aggregate purchase price of $35.6 million. Turning to individual subsidiary companies, North American Coal’s net income and revenues for the first quarter of 2014 decreased to $5.7 million and $39.9 million, respectively compared with net income of $9.6 million and revenues of $51.1 million for the first quarter a year ago. First quarter for 2014 income before income tax provision was $6.1 million, compared with $11.4 million in the first quarter a year ago. Revenues decreased in the first quarter compared with the previous year, primarily due to fewer tons of the outage sold at the consolidated mining operations as a result of a plan that’s longer…

[Operator Instructions] Your first question comes from the line of Michael Hexen [ph].

Hi good morning this is Mike Hexen from [indiscernible]. I have three questions this morning. First up I was looking through your segment outlooks and commentary and trying to compare to what you would set on the fourth quarter call in March and from what I can tell it is very, very similar if not virtually identical. And I wanted to find out if there have been any changes in your outlook over the last two months or not?

Not really for the first for the full year we, we in the coal company, the outages are still the same ones that were planned as we were coming into the year. And the royalty situation hasn’t changed materially one way or the other from what we were anticipating. The Hamilton Beach, I think we see pretty much the same scenario that we saw, one of continuing to outpace the market in terms of the growth and revenues. And we had a very good year and 2013. And so given the expenses we have for the strategic initiatives, we expect to have another a good year, the outlook’s pretty much the same, we saw before. And the Kitchen Collection, I’d say the same thing, we see the solid core coming together as you saw, that we did what we indicated we’re going to do and closed a very substantial number of stores in the first quarter. And we have taken some very substantial and significant cost reduction moves as well. So we don’t see a big change either of improvement in the outlook in terms of enhanced buying by the middle market consumer in the case of our two consumer businesses or changes in coal deliveries of significance at this point.

Okay, great just wanted to confirm that. The second question was on the CapEx related to your consolidated coal operations. And it looked like it was going to be pretty significant in 2014 according to your guidance. How much of that spending already occurred in the first quarter. And then if you can sort of look forward to how you see that unfolding throughout, how you see that unfolding throughout the rest of 2014?

[indiscernible].

Yes, during the first quarter we have signed approximately $32 million consolidated CapEx. And we have an additional approximately $36 million in the forecast for the remainder of 2014.

Coal, that was 2901 expected for the second, third and fourth quarters.

$31 million in the first.

Right so the capital requirements in the two consumer businesses are very, very modest. And it’s really driven by the coal business and the completion in particular of the Reed program in terms of getting in place the capabilities we need to get the cost structure that we want.

Roughly half was spent in the first quarter, for the other half is that going to be concentrated in the second quarter or is it going to be fairly even lease spread out over the last three quarters?

Well, I mean I think that speculating on specific quarters would be not really wise because this is stuff that’s planned, but we’re not necessarily committed to making the purchases in any one quarter so, it’s going to play out over the rest of the year the exact quarters when it gets spent we’re not clear.

Okay and my third question was you put out a presentation a couple of weeks ago. And one of the slides showed a revenue target for Hamilton Beach of $750 million, it didn’t talk about the timeframe for that. Can you talk about what the timeframe is for that target? And whether that is expected to all be organic growth or not?

We do not put in growth that comes from anything other than organic objectives. And I would say that the $750 million is very much a longer term goal we think that if the five strategic initiatives we have underway are as successful as they hope, we hope there’ll be over the next five years or so that we can move up in that direction, well that’s a very ambitious target. I guess what I would say is that the reason we keep it very much in line. And keep putting in place plans that we think can help drive us there is that it is an economy and scale driven business. And we think that, that will, that kind of volume will put us in a position to have operating profit levels that are above the kinds of positions that we can get with the volume that we have today. So in other words it isn’t improvements in profitability will come mainly from leverage of additional volume on a cost reduction. I think that there are several elements, several different markets, there’s the U.S. consumer market. There are the international consumer markets where we’re putting in significant efforts to open up new business in Brazil, China and India. We, and then we have our commercial business which we think also has very significant opportunities, not in U.S. but around the world over the next few years. So I think those targets the five plus year time frame are ones that we really want to shoot for, but they are ambitious targets.

Got it. Okay, thank you very much.

Okay. Thank you.

[Operator Instructions] Question from the line of [Brian Leonard]. Please proceed.

Hi good morning everyone.

Good morning.

I just had a handful of questions on the royalties and in coal in this quarter good run rate to you going forward, I mean do you have a –

I didn’t hear the question. Can you repeat it?

Is the royalties that you received in the first quarter a good run rate to use for the remainder of the year?

A lot of those royalties are not within our control. And I think what is really significant is that the royalties would be very significantly less in total for year and in the first quarter than they were a year ago when we got very significant royalties.

So the visibility is really quarter-to-quarter and not really two quarters out three quarters out?

Pretty tough to –

Its quarter-to-quarter, it’s month-to-month. None of it is in our control; it’s entirely determined by what third party do with respect to their own coal production or their own production of gas or oil.

Was that a post month thing that you receive or is it a pre month thing meaning they just tell you what they did, and the numbers what it is, or they give you kind of heads up prior to that?

Well I think it’s a combination, it depends on the situation.

But I think in the main they tell us all these are based on what they did.

Okay got it. And sticking with coal on the planned outage for the fourth quarter is that planned outage in the same kind of realm that was already in the first quarter, were they various, are they expected to be similar?

There’s no significant outages, but the same power plant, but because these are really a bigger control of our customer who operates the power plant. We had a policy, don’t comment on the exact timing or what they’re going to do on these power plants.

But it is a significant outage at Mississippi Lignite Mining Company, is a very significant outage and its and I, I say that because its, it’s going to put in place the set of capabilities that we have hoped that we would have in power plan for quite some time in terms of improved potential operating characteristic. So, it maybe, it’s not going to be a short outage, on the other hand it is major, some of it does involve some major changes to our plant operation, which we think are going to be very beneficial for everybody concerned.

And I guess I’d just add, we’re very pleased to see our customer investing substantial amounts in the power plant.

As – there’s a new owner for that power plant now. And I think we’ve been saying in our release that we were optimistic that this was going to lead to a different operating environment. And there’s a lot of potential in that operation that we think has been realized. So it’s little longer this year, but it opens up a lot of opportunity as we look forward.

Okay. And then lastly – spend in coal I have a few more questions after this. You mentioned in the release the outage was a little bit longer than planned. Are you kind of, are we passed that outage now – current outage?

The outages ended, the power plants running again.

Okay and then lastly in North American coal on the Reed material sign. You had bought that a little over about a year ago about, how has that progressed to your expectations because it seems like you guys are slightly surprised or slightly disappointed in more cost, more runs or more, there’s more that. I mean how has that progressed to how you thought it would be when you originally purchased.

I’m going to answer that question in kind of a thoughtful way because there are two sides to the coin. I think it is fair to say that the price expectations that we hoped for which were, we thought were pretty pessimistic when we made the acquisition. We have deteriorated from what we saw or from what we anticipated. Secondly I think we have found that there were more operating improvements that needed to be made. And we anticipated in a couple of various. On the other hand it has been a sufficiently stressful period in the industry. And in Alabama in particular, we have had some opportunities to carry out our longer term platform plans in ways that has been highly advantageous in terms of price and well better than anything we could have anticipated when we started the Reed undertaking. And so I think the best answer to your question is that after we get through this – in the end I think our cost position is going to be better than we anticipated originally. And we’re not going to be very good at forecasting prices so but we can drive our cost down and we can bring in additional reserves and other capabilities that we had not anticipated. And so our longer term prospects in total – we think are good in the business even with the lower prices. And then of course if you look outer way and the prices go up, there’s there would be an enormous amount of leverage there. So I think we’re just working through the issues and getting the cost down and taking advantage of the current difficult market conditions to consolidate our position. I think that’s the best I can answer.

So do you anticipate working when all the said and done – heading to the second half is probably maybe a better run rate than what you’re doing in the first half in Reed but do you anticipate operating kind of a breakeven just like profit level going forward until the pricing environment improves?

Well I think we said was that the second half of the year we expect it to be approaching breakeven. And in the press release and I – there would be some elements of our cost structure program that will not be implemented by the second half. So there is more to come on the cost side but we think we will have a pretty well stabilized things and then we’ll begin to build from there in terms of more volume and that would probably be in a short term more important than more price.

Okay moving to Hamilton Beach I was somewhat surprised by the decline in revenue. In your commentary you didn’t really mention whether as much do you think weather had a decent impact on to sales –?

We know it had an impact in Kitchen Collection. The number of days of store outages was way higher than it was in the previous year. I don’t know whether did we put that number in anything so but it was very significant. As far as Hamilton Beach is concerned I think the whole industry was a little slower there could have been some weather. There could have been – of a tired retail environment after the Christmas season. But it hasn’t really changed our outlook for the year. Now having said that we’ll watch, we’re watching very carefully to make sure that things are coming back. There’s always some inventory rebalancing that occurs at our customers in the first quarter but. And so I would say that’s probably part of the reason but we have, we aren’t seeing at this point any change in our sort of outlook for the full year.

And you don’t really comment on short-term trends. It would be interesting to know how April shaped up? The sale is vastly different than what happened in the first quarter. I don’t know if it’s too narrow of a data point?

We really don’t comment on that but it’s in addition things fluctuate in a month and just you can get very significant fluctuations based on whether some of our large customers decided that their orders were not and they can fall one month or the other.

Okay and then within Hamilton Beach I know international is a main priority of expanding international. How has that shaped up the international sales pick up in the first quarter as a percentage of overall sales?

Well we have two substantial positions all ready, in Canada and Mexico. And those businesses are continuing to do reasonably well but I think you’re really referring to the new initiatives, which are Brazil and China and India. And I think the answer to your question is that we’re pretty much on track, but the volume at the moment is a small number. And so I wouldn’t concentrate on it, but I think we are off the ground in China, in an acceptable way that Brazil is now has started and that seems to be going in the direction that we had hoped. And India really is in early days.

Okay. And then moving to Kitchen Collection, how did the new stores perform in say a geography that wasn’t affected by weather per se, compared to some kind of legacy stores, and the newer stores perform better. I know there’s a comment in the release that said there was somewhat of a pullback there, but is there any way the – kind of your footprint?

Not in that way I don’t think. I think the generically stronger the mall and the better our position in the mall, the better our stores do. And so we’re pulling out of malls where we don’t think we can make an adequate profit. And I think what I’d say is that footsteps have continued to decline; I think we said that in the first quarter. And we’re watching that very carefully. There are a lot of things going on in the outlet mall environment that are changing the – to some degree the kinds of tenants that are in those malls. The internet has changed the pricing landscape for both major traditional retailers and niche retailers, like Kitchen Collection. And the target consumer for outlet malls it has not shared in the recovery in a way that has made, caused those sales to rebound as we might have hoped. Household formation as you probably have been reading has not been nearly asked levels, young people are living in with their families and their parents. And of course, the whole, that affects the entire house ware’s industry not just the segments that we participate in, particularly the kitchen oriented segments. So I think that the outlet mall environment is one where we’re just aggressively moving into the very best store or malls, where we think we can make money. And we’re not going to gamble on business coming back as usual.

So based on that comment, my concern is that you are moving into an area where there has been clearly a shift in spending habits of those types of customers. And given the track record of the performance of –

We’re opening almost no stores, so don’t, this is strictly pruning. And we’re going at that and in an orderly way. Go out with the number of stores with cost structure in the stores and with the cost structure in Kitchen Collection’s headquarters. So I think we’ve opened very few new stores, so I don’t I’d over interpret that part of the comment.

Okay, but at what point do we sit there and say that this isn’t going to play out as planned and the subtraction is greater than the addition meaning. You’ve been losing less money assuming you don’t get a break even status, which we’ve been hoping for a year plus now –?

We clearly intend to get to breakeven status and we believe we can do that. And indeed we think we can do better than that, but whether we will transpire to aspirations that we might have had four or five years ago, or certainly back in 2007, I think your point is well taken. So I think we can make it smaller, profitable business, there’s not a lot of capital tied up in the business to all mainly working capital would just be very prudent how we do that.

Okay. And then lastly and then I’ll hop off is the dividend. What are your views of the dividend you employed there, is there a consistent dividend sense before the separation. And now the dividends been pretty stagnant at $0.25 a quarter. What are your views on that?

Well we really don’t discuss prospects for dividends on a earnings call but we do of course discuss dividend with our Board quarterly. And I think historically we have a look at May as a time when we would consider increases in the dividend. So we’ll be having discussions with our Board to see what seems to be appropriate.

Fantastic. Thank you very much for your time.

Okay. Thanks.

There are no additional questions at this time.

Okay. Thank you very much everybody.

Thank you for joining us today. We do appreciate your interest. And if you do have additional questions, you can reach me at 440-229-5130. Thanks. And have a great day.

Ladies and gentlemen, that concludes today’s conference. To access the replay for this event please dial TOLL 1-617-801-6888. Toll Free 1888-286-8010. And the access code of 165-698-45. Ladies and gentlemen thank you for your participation. You may now disconnect. Have a great day.