Good day and thank you for standing by. Welcome to NACCO Industries Fourth Quarter and full-year earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Christy Kmetko. Thank you. You may begin.

Good morning, everyone. And welcome to our 2021 fourth quarter and full-year earnings call. Thank you for joining us this morning. I am Christina Kmetko and I'm responsible for Investor Relations at NACCO Industries. Joining me today are J.C. Butler, President and Chief Executive Officer, and Elizabeth Loveman, Vice President and Controller. Yesterday we published our fourth quarter and full-year 2021 results and filed our 10-K. This information is available on our website. Today's call is also being webcast. The webcast will be on our website later this afternoon and available for approximately 12 months. Our remarks that follow, including answers to your questions could contain 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. These risks include among others, matters that we have described in our earnings release issued last night and in our 10-K and other filings with the SEC. We disclaim any obligation to update these forward-looking statements which may not be updated until our next quarterly earnings conference call, if at all. In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in our earnings release and on our website. In a moment I'll discuss our fourth-quarter and full-year results. But first, let me turn the call over to our President and CEO, J.C. Butler for some opening remarks. J.C.

Thank you, Christy. Good morning, everyone. As we look back on our fourth quarter and full-year 2021 results, I'm really pleased to report that our company delivered strong results generating much higher operating profit and net income than in 2020. The fourth quarter and frankly, every other quarter in 2021 was strong for us. Comparisons to the prior year fourth quarter are a little more complex given the $11.6 million of non operational charges, we recognized last year. But even excluding the impact of these charges, I'm pleased to report that our earnings improved significantly driven by our Minerals Management and Coal Mining segments. Our Minerals Management segment had another outstanding quarter helped by income for more recently acquired mineral and royalty interest, as well as legacy mineral and royalty interest. Higher natural gas and oil prices helped as well. Our team at Catapult Mineral Partners continues to look for opportunities to expand our portfolio of mineral and royalty interest through acquisitions, while also promoting development of our owned interest. On our Coal Mining segment, our fourth quarter 2021 operating profit improved significantly over the prior year quarter despite the termination of Bisti Fuels contract at the end of the third quarter. This increase in operating profit was primarily because of an increase in customer demand at Mississippi Lignite Mining Company. Although the Coal Mining industry faces increasing political and regulatory challenges, we believe the use of coal as a fuel source for electricity in the United States will continue for the foreseeable future. The significant increase in natural gas prices in 2021, benefited us on two sides. It contributed to an increase in dispatch and coal deliveries in our coal segment, as well as contributed to an increase in results at our Minerals Management segment. We continue to work…

Thanks J.C. I'll start with the consolidated quarter results and then provide additional detail at the segment level. On a consolidated basis, our fourth-quarter operating profit rose significantly, increasing to $10.8 million from an operating loss of $8 million in 2020. Consolidated net income also increased rising to $7.8 million or $1.07 per share from a net loss of $5.4 million or a loss of $0.77 per share last year. As J.C mentioned, included in these results are $11.6 million of charges taken in the prior year fourth quarter that did not reoccur in 2021. Our fourth quarter consolidated adjusted EBITDA increased to $17.8 million from $4.3 million last year. The increase in adjusted EBITDA was driven by improved results in our Coal Mining and Minerals Management segments. In our Coal Mining segment, operating profit excluding $4.6 million of prior year charges, increased significantly as a result of substantially higher earnings at the consolidated mining operations, primarily Mississippi Lignite Mining Company, and the decrease in operating expenses from lower employee-related costs. These improvements were partially offset by a decrease in earnings of unconsolidated operations. Segment adjusted EBITDA increased as a result of the improvement in operating profit, as well as an increase in depreciation, depletion, and amortization expense at Mississippi Lignite Mining Company. J.C already discussed the primary driver of North American Mining's fourth-quarter operating loss so let me focus on North American Mining's fourth-quarter 2021 segment adjusted EBITDA. Segment adjusted EBITDA was positive but lower than the prior year fourth quarter as the 2021 operating loss was partially offset by substantially higher depreciation expense resulting from the acquisition of additional equipment to support newer contracts. Finally, Minerals Management's operating profit and segment adjusted EBITDA for this quarter increased significantly over the prior year, even after excluding the $6.7 million…

[Operator Instructions]. Please stand by while we compile the Q&A roster. Your first question is from Andrew Kuhn with Focused Compounding.

Good morning, everyone great quarter and great year.

Good morning Andrew.

Morning.

So my first question relates to your outlook. Would a major move in natural gas prices say a doubling or being cut in half of the current natural gas price, mean that your 2022 outlook for the Coal segment be way off? Or do you think your Coal segment outlook is pretty reliable under a broad range of natural gas prices?

No, I mean, we saw in 2021 increased dispatch levels. Now, do we know exactly what led to the increased in dispatch levels in the Coal segment? There's lots of factors there. It can be outages, it can be of other power plants, it can be transmission congestion issues that focus dispatch. But we think -- we believe that a very significant driver in 2021 was natural gas prices. Particularly, I mean, if you think about when we started 2021, right? I mean, it's when everybody was still kind of locked down on the economy, not yet come roaring back. And so I think we as well as a lot of companies sort of had a conservative view of what play out during the course of the year. What we saw play out were pretty rapidly increasing natural gas prices during the course of the year and a continued sort of throughout the year. And we think that that supported a lot of dispatch decisions amongst a lot of our customers. You also see in our outlook, you're right, we talked about the fact that we had a assumption about natural gas prices that they were going to moderate and move back to sort of the average of the last half of 2021. Today's natural gas prices are far above that. I think that that's likely to support dispatch, but exactly how much that will affect this dispatches, it's always hard to predict that. But I think that the plan that we put together, that's reflected on our outlook, has a pretty conservative view of natural gas prices even before the events of the last week or so. I think what's going on with the situation in Russia and the Ukraine has sort of got everybody that's in the energy industry rethinking the way they're forecasting things like energy prices and reliability and dependability and all sorts of things are coming out of that. Was that helpful?

Yeah, no, that's actually that's very helpful. Thank you and then your initial investments in oil royalties at Catapult were made when oil prices were lower. So if oil prices stayed at today's level, do you think you'd still be able to find oil investments in 2022 that could hit your double-digit unlevered return target?

I don't we think we can. It's a market for buyers and sellers that doesn't necessarily fit into generalities. At any period in time, you might find that there are more buyers that are interested in undeveloped reserves, and other times you might find buyers are more interested in near-term cash flow assets. Same thing goes with sellers. I mean, people might be holding on to one. category of assets and selling another one. We also know that there is period of time when there's a lot of activity in very small transactions or there could be activity in a lot of huge transaction, hundreds and millions of dollars, things that make headlines in the newspaper. We sort of take a -- we're taking sort of an opportunistic view here. We're being rather selective about what we buy. We have not won every bid that we have put in which I think sort of confirms to me that we've got a pretty disciplined approach. We're not just chasing whatever we can acquire. We're thinking pretty carefully about it. And I think in the current environment, there are still opportunities that we're seeing at our actively bidding on that fit our profile and provide an attractive return opportunity for us. So I think there's still going to be good opportunities in 2022 to make acquisitions.

That's great to hear. And then you mentioned you'll recognize some income on the transfer of the North Dakota office building at the Midwest AgEnergy membership interests. Do you expect that income to be material to full-year 2022 earnings?

Well, so we'll recognize the income when it's transferred to us. I just want to be clear about that. It's not that we are going to get it and sell it and they're going to recognize it that way. I think we're going to wait -- we're going to get the -- assuming all this closes in May as it should, we will get title to the property and then decide what we do with it. Liz, over to you, comment on, is it material?

We'll look at the appraisal and it's an office building, it's real estate, we'll get an appraisal and I don't know that it's super material to us, but it's a --

It's a one-story office building sort of on the edge of Bismarck. It's not some major office tower in a major development district.

Yeah.

And just one other point, it is going to be recognized below operating profit. It will be included in our other income.

Got it. And then I have one more question and I'll drop back in the queue. But you said that capital expenditures in 2022 for mitigation, resources are going to be approximately 9 million. I was wondering if you could kind of explain what that represents, I guess I thought about this segment being more of like a capital light segment. So if you could expand on that, that would be great and I will jump back in the queue.

Well, it is generally a pretty capital light segment, but we are acquiring some equipment in that business. It's not a segment, in that business. So that we can perform some of the dirt work that's involved in the stream and wetland mitigation business, and we do from time-to-time acquire property. But generally, I think you can think of this is a pretty asset-light business. Liz, is that fair?

That's correct.

And again, if you would like to ask a question, [Operator Instructions]. Your next question is from Nachy Kanfer with Donovan Energy.

Hey everyone. Great quarter. Thanks for the remarks. Just a question on Coal Creek and the expected sale. My understanding is there remains an outstanding application to EPA for a different type of treatment under the CCR rule. And to my knowledge, EPA hasn't ruled on that. EPA hasn't ruled on any of them. Any insights or thoughts on if those risks there and how that might affect the closure of the sale or operating performance post-sale? Thanks.

So I am not aware of any challenges that that presents with respect to the transaction. I think the transaction is headed towards closing is expected. And I don't believe that it's -- that anybody has any expectations that this is a real problem for the long-term operation of this facility.

Okay, great. Thanks. And about Mississippi quickly, there was there was a question earlier about whether gas prices fundamentally are the major driver behind this past decisions, whether increased dispatcher, decrease dispatch, and my understanding of your response to that was basically gas prices are a major driver, possibly not the only driver. And for the Red Hills Plant, I'm wondering if there are any Plant specific or unique drivers there. Given just the big difference between 2020 and 2021 and then the difference you're forecasting between 2021 and 2022 as well.

I mean, look at the big drivers of results for us, right? With respect to coal sales, is coal dispatch. Coal dispatch is really made up of two things, one of those is to what extent is the plant dispatched onto the grid which is largely controlled by TVA, and the other piece of that's mechanical availability of the plant. Those two things work together to ultimately determine how that will play out. If you end up with tremendously high natural gas prices and TVA wanting to dispatch the plant but it's not mechanically available, it's the same as if TVA is not dispatching the plant and vice versa, right? You can have a plant that's very mechanically available, it's in great mechanical shape, doesn't have any issues, but if TVA is not dispatching the plant, it doesn't get dispatched. When those planets aligned and it's mechanically available and you get high dispatch levels, which can be driven by natural gas prices, you end up with the year like 2021. Is that helpful?

It is. Thank you.

Thank you.

If there are no further questions at this time, I will now turn it back over to Christy Kmetko for closing remarks.

Thank you. That will conclude our Q&A session. J.C, do you have any closing remarks?

I do not.

All right. We will close with a few reminders. A replay of our call will be available online later this morning. We'll also post a transcript on the Investor Relations website when it becomes available. If you have any questions, please reach out to me. You can reach me at the phone number on the earnings release. Hope you enjoy the rest of your day and now I will turn it back to our Operator to conclude the call.

This concludes today's conference call. This call will be available for replay beginning at 11:30 AM Eastern Time today through March 10th at midnight. The number to dial for the replay is 1800-585-8367 or 855-859-2056. [Operator Instructions]