Hello, everyone, and welcome to the NACCO Q2 2022 Earnings Conference Call. My name is Seth, and I'll be the operator for your call today. [Operator Instructions] I will now hand the floor over to Christina Kmetko. Please go ahead.

Thank you. Good morning, everyone, and welcome to our 2022 second quarter earnings call. Thank you for joining us this morning. I'm Christina Kmetko, and I am 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 the second quarter 2022 results and filed our 10-Q. 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-Q 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 will discuss our results for the quarter. But first, let me turn the call over to J.C. Butler, our President and CEO, for some opening remarks. J.C.?

Thank you, Christy and good morning, everyone. Second quarter 2022 was another very strong quarter for us. As I mentioned during our Q1 call, Rainbow Energy's purchase and the Coal Creek Station power plant in North Dakota from Great River Energy was finalized in early May. As a result, our second quarter Coal Mining segment earnings benefited from contract termination settlements received from our former customer, Great River Energy. We received $14 million in cash and reported income -- recorded income of $16.9 million related to our receipt of an office building in Bismarck, North Dakota and membership units in a private company that produces ethanol. We're excited to have this transaction completed and enthusiastic to have Rainbow Energy as our new customer. As independent privately-held energy marketers, I think they have a real understanding of the value of the power plant and its potential for the future. At our Coal Mining segment, we continue to work diligently to support our existing customers so that they can continue to produce affordable and reliable energy. Although, the coal mining industry faces ongoing 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. We think there are more reasons to be optimistic about coal-fired power generation today than at any other time in the last several years. Turning back to the quarter. I'm pleased to report that our earnings improved significantly over the second quarter of 2021, even excluding the settlement with GRE, driven primarily by strong results in our Minerals Management segment. This improvement was partly offset by unfavorable changes in the fair value of certain exchange-traded equity securities we own and an increase in unallocated employee-related expenses. The strong earnings at Minerals Management were…

Thank you, J.C. I'll start with the consolidated quarter results and then provide additional detail at the segment level not already covered by J.C. On a consolidated basis, our second quarter operating profit rose significantly increasing to $29.7 million from $8.7 million in 2021. Consolidated net income also increased, rising to $37.2 million or $5.07 per share from $6.5 million or $0.91 per share last year. As J.C. mentioned, these increases were driven primarily by the contract termination settlements received from GRE. Our second quarter consolidated adjusted EBITDA, which excludes the contract termination settlements, increased to $21 million, up 37% from $15.3 million last year. The increase was driven primarily by improved results in our Minerals Management segment and the add-back of higher depreciation, depletion and amortization expense. Moving to a discussion of our segments. Excluding the contract termination settlement, operating profit at our Coal Mining segment decreased moderately due to higher employee-related costs and lower earnings at Mississippi Lignite Mining Company mainly because of the impact of inflation on the cost per ton delivered. An increase in earnings from our unconsolidated mining operations, principally from an increase in contractual price escalation and increased customer requirements at Coteau, partly offset these declines. J.C. already gave the primary drivers of the lower North American Mining operating profit, so let me focus on our second quarter 2022 segment adjusted EBITDA. Adjusted EBITDA was comparable to the prior year quarter as lower operating profit was fully offset by the add-back of higher depreciation expense resulting from the acquisition of additional equipment to support newer contracts. Finally, Minerals Management segment second quarter 2022 operating profit and segment adjusted EBITDA more than doubled from the prior year results. As J.C. said, the significant improvement was driven by higher natural gas and oil prices and the…

Thank you. [Operator Instructions] Our first question comes from Andrew Kuhn from Focused Compounding. Please go ahead.

Good morning, everyone. Great quarter.

Good morning, Andrew.

So should we think of the office building and the ethanol company membership units you received as being assets you're likely to hold for the long term? Or are these assets you would consider monetizing in some way if conditions were right?

It's a good question. So the office building in Bismarck is -- it's a very nice modern building. We're actually -- and it's got a number of tenants in it. We're actually -- now that we own it, we're evaluating the possibility of occupying part of that space ourselves. We currently rent space in an office building in North Dakota but really isn't great space for our needs, although it's perfectly fine. So we are evaluating the possibility of moving our office over to that space. But it's, let's say, a small amount of the space. The rest of it is rented. And after -- separate from that, we will continue to look at it as an asset that maybe it makes sense to own it, maybe it makes sense to sell it. It's real estate ownership for things like that. It's not part of our core business, and we'll just evaluate that as time goes on and see what makes the most sense, whether to be the landlord of the building we occupy or rent from somebody else. The membership interest in the ethanol plant, we actually have had an ownership stake in this ethanol business for a number of years because the ethanol plants are next to power plants where we supply the coal, and it had made sense for us to invest in that business while it was developing because it increased the production of coal on the margin. What happens with the future of that is hard to tell. We've owned it for a number of years, and we're happy to get additional membership interest in that, and I think we're still minority owners. We're not a majority owner in the business, and we'll just monitor what happens there as well.

Got it. Thanks. And then does the shift of planned equipment acquisition costs for Thacker Pass from 2022 to 2023 reflect a meaningful change in your expectations for the pace at which that project will proceed or do you expect Thacker Pass to move ahead at about the schedule you originally expected?

Well, the project itself -- and I think you can see all this by studying with the Americas' announcements on their website. I mean the project is behind where it was originally expected to be, but I think that's largely because the -- our customer has done a really thoughtful set of analyses around how they're going to develop the project and how we can work with them to do that, and I think it ultimately is leading to a larger project that's probably going to have a more meaningful impact on their business as well as ours in the future. The change in timing doesn't give me any concern at all. I think it continues to be a very attractive project. And certainly, over the last few years, the demand for lithium, particularly domestic lithium, has only increased. So I feel very good about that project.

Right. And then do you expect that any future value changes in the office building, the private membership units, the publicly-traded equity security and the Bellaire trust assets will all be recorded in the Corporate segment or are some of these items going to be grouped within an actual operating segment?

Liz, that sounds like a question for you.

So those are all below operating profit, so they're below our segment results that we report. They're a component of other income.

So just -- I guess the answer to that is no.

Correct. Yes, it's below segment. We report segment operating profit, and anything below that is reported on a consolidated basis.

Got it. All right. That's all I have for today, and keep up the great work, and I'll hop back in the queue.

Great. We appreciate your interest.

[Operator Instructions]

That appears to conclude our Q&A session. Let me ask J.C. Do you have any closing remarks?

I do not. Thanks, Christy.

Thanks, J.C. We'll just close with a few final 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 do have any questions, please reach out to me. You can call me at the phone number that is available on the release. I hope you enjoy the rest of your day, and now I'll turn back to Seth to conclude the call.

Thank you. This concludes today's conference call. As Christina said, a replay will be available, and the replay details are as follows. If you're calling from the U.S. please call 1 (929) 458-6194. If you're calling from Canada, please call 1 (226) 828-7578 and then to the access code 279176. Once again, if you're calling from the U.S. please call 1 (929) 458-6194. If you're calling from Canada, please use 1 (226) 828-7578 and then to the access code is 279176. Thank you. You may now disconnect your lines.