Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the NACCO Industries' Third Quarter 2018 Earnings Conference Call. All lines have been place on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Christina Kmetko you may begin your conference.

Good morning, everyone, and welcome to our 2018 third quarter earnings call. I am Christina Kmetko, and I am responsible for Investor Relations at NACCO Industries. I will be providing a brief overview of our quarterly results and business outlook, and then, I will open up the call for your questions. Joining me today are J.C. Butler, President and Chief Executive Officer of both NACCO and North American Coal; and Elizabeth Loveman, NACCO's Vice President and Controller. Yesterday, we published our third quarter 2018 results and filed our 10-Q. Copies of our earnings release and 10-Q are available on our website at nacco.com. For anyone who is not able to listen to today's entire call, an archived version of this webcast will be on our website later this afternoon, and available for approximately 12 months. As 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, in either our prepared remarks or during the following question-and-answer session. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly conference call, if at all. Additional information regarding these risks and uncertainties was set forth in our earnings release and in our 10-Q. Now that I have the formalities done, let me provide the highlights for this quarter. Our revenues increased 43.3% to $31.4 million, from $21.9 million in last years third quarter. Our consolidated income from continuing operations before tax increased 78.9% to $10.7 million up from $6 million in 2017. Finally, our consolidated income from continuing operations increased to $9.2 million or $1.33 per share for the…

[Operator Instructions] Your first question comes from the line of Mitchell Lolley from Nixon Capital. Your line is open.

Hi, there.

Good morning, Mitchell.

Good morning.

It looks like you'll spend just north of about $40 million on SG&A this year and I was wondering is that a reasonable run rate looking into 2019? Or are there still some maybe spin-related or employee-related costs that could roll off next year and cause SG&A to come down slightly?

No, it's – I mean there is – looking at the LTM numbers, there is a little bit of noise in there, but there is, kind of, both sides of it. There is some noise from additional expenses, but we also collected some transition service fees while we were helping Hamilton Beach get up and running as an independent public company. So that's probably close to a wash, may be, slightly negative in a net basis. But it's not an off-base run rate, if you think about it.

Okay. And then if I just think about SG&A a little more broadly, something I've been wondering about is, are there any costs related to the unconsolidated mining operations that get included in your SG&A for legal accounting or other reasons?

Well, there is no direct cost related to any of the mines that are in the SG&A number. Anything that's related to producing coal at the mines that happens at a mine site is included there. Everyone in the mine sites, it's got a mine president, it's got a business manager, it's got HR staff, IT people, all that's on-site at the mines and that's all included in their costs. At a corporate level, I guess, starting at the top, we've got public company costs, including board of directors and public filings and all that sort of stuff. We also maintain, sort of, a centralized headquarters hub that's required for all these mines as part of the arrangement that we have in all these contracts. So we maintain an IT hub, we maintain centralized HR, it benefits over site, is what I call it. It's really, the folks that put the overall master programs in place. The cost of which, including health care and all that stuff is built to the mine sites and it's included in the reimbursable costs from the customers. So it's really those headquarters kinds of expenses, IT, benefits, tax, as we file consolidated tax returns, consolidated legal business development. All those things are included in that number, but nothing that's related to producing coal at the mine sites.

Okay, I appreciate the early commentary on 2019, including the CapEx figure that I think you threw out there, which was about $19 million of expected spending next year. And I was wondering if you could help us, kind of, unpack some of the things that you're thinking you'll be spending on in 2019? And are these – are some of these related to growing the limestone business?

Well, the places where we incur CapEx, it's on our nickel, which is what's in that number for 2018, 2019 and every other year. Our things that we spend at MLMC, that are related to periodic equipment replacements, land acquisitions, things that we need for that one consolidated mine. Anything that we might need at headquarters, if we end up swapping out computer systems that get capitalized or things like that will show up in there. And then the other place is growing, mostly North American Mining, which is our primary growth platform, right now. We from time-to-time have done things like – we've acquired some draglines that we've, sort of, put in inventory because we know it's – those are very helpful to have as we are negotiating contracts with new customers. They will find themselves short on production. They may be have a dragline that's too small or it's in disrepair, and we can – if we have a dragline available, we can bring it in pretty quickly and help them get up and running. And in doing so, it really helps us get a new contract and help the customer in the process. So from time-to-time we do spend money on those sorts of things.

All right. And then lastly, I've got to ask you, I mean, you've got more than $9 a share of net cash on the balance sheet and you pretty much continue to just generate cash every quarter. Would you ever consider paying a special dividend, even if only a modest one of like $1 a share?

Well, we talk about what we will do pretty regularly with our board, I don't want to speculate on what decisions we might make in the future, with respect to any of that. I guess I'd just go back to what we talked about with respect to capital allocation, both during the roadshow that we did at the NACCO level, around the time of the Hamilton Beach spin, a little over a year ago. And as well as what's – it's the same thing, we've said in our recent investor presentations on our website. Our priorities for cash are really to invest in strategic growth initiatives. We do think there is continued opportunities for us to grow in the coal space and we're going to continue to spend money and resources in order to do so. That's mostly with respect to business development, it's not so much with respect to me saying, I'm looking for a coal mining company to buy. I don't know, if anybody out there really fits our business model. The only place where we're – as you know, we're growing pretty aggressively is in North America Mining. I mentioned that expenditures that we're making with respect to draglines were also investing pretty heavily in business development activities there as well. Our second priority was to invest in complementary ventures, really, primarily focused on those to leverage our skills and strengths. Our primary focus right now is in the environmental area. I think we're going to talk more about that in the future as that business develops, but we see some opportunities to diversify into related activities that aren't necessarily directly tied to coal mining. As you see in the last quarter, we paid down a lot of debt, we think it's important to have a pretty conservative balance sheet, since fundamentally, we're a service business. Given the historical troubles in the industry, I want to make sure, when we go talk to new customers that we can represented to them, that we are in solid financial shape and they don't – have to worry about our financial stability. I know from experience, that’s an important thing for us. So I both, tell them, that we are going to be conservatively leveraged and we're going to maintain that way, and I'm not going to do anything to screw that up. So having a conservative balance sheet is important. And then as you know, we've paid a pretty consistent dividend over a very, very long period of time and we've got a – we've had a number of share buyback programs in place and we currently have one that's active. I mean, that's just, I guess, what I’d say about capital allocation and how we think about using our resources.

Thank you very much. I appreciate it.

Sure. Thanks for the question.

[Operator Instructions] There are no further questions. I turn the call back over to the presenters.

Thank you very much. We appreciate your interest. And if you do have any additional questions, you can reach me at (440) 229-5130. That ends our part of the call.