NACCO Industries Inc (NC) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2007 NACCO Industries Earnings Conference Call. My name is Francis and I will be your coordinator for today.

At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference.

(OPERATOR INSTRUCTIONS)

I would now like to turn the call over to Christina Kmetko, Manager of Finance. Please proceed.

Thank you. Good afternoon, everyone and thank you for joining us today.

Early this morning, a press release was distributed outlining NACCO's results for the third quarter ended September 30th, 2007. If anyone has not received a copy of this earnings release or would like a copy of the 10-Q, please call me at 440-449-9669 and I will be happy to send you this information. You may also obtain copies of these items on our Web site at www.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 Industries is Ken Schilling, 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 was 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 2007 third earnings release which is available on our Web site.

I will now turn the call over to Al Rankin.

Al?

Good afternoon. I will begin with an overview of the earnings release which was sent out this morning. As Christy indicated, this complements the 10-Q, which was also released this morning and which is available on the NACCO Web site.

As you have probably seen already, NACCO's third quarter net income was $21.1 million or $2.55 a share, compared with $18.8 million or $2.28 a share last year.

Our key highlights include a number of points -- at NACCO Materials Handling Group, Wholesale's net income was $5 million, compared with $13.3 million a year ago. In August 2007, NACCO Materials Handling Group announced a manufacturing restructuring program that resulted in a restructuring charge of $5 million, or $3.5 million net of taxes, and additional costs for the third quarter of $300,000 net of taxes.

NACCO Materials Handling Group Retail had net income of $1.8 million compared to a net loss of $2.8 million in the quarter a year ago. Net income in 2007 included a total gain of $3 million or $2.6 million net of tax from the sale of a European retail dealership in the third quarter.

Hamilton Beach reported net income of $6.3 million for the third quarter compared with net income of $5 million in 2006. Ham Beach's 2006 net income included a charge for environmental expense of $1.3 million net of tax last year. And net income for 2007 was negatively affected by the increased interest expense payable in or paid in 2007 due to increased borrowings related to the $110 million special cash dividend paid in May of this year.

Kitchen Collection's net loss of $900,000 increased $200,000 from the quarter a year ago as a result of two months of seasonal losses of $900,000, or $0.5 million net of taxes, from Kitchen Collection's acquisition of certain Le Gourmet Chef stores in late August of 2006.

North American Coal's net income increased to $7.8 million from $5.9 million, primarily as a result of a decrease in the 2007 effective tax rate.

And NACCO and Other's net income increased to $900,000 from a net loss of $1.9 million for the third quarter of 2006. Spin-off expenses related to Hamilton Beach were $400,000 pretax in 2007. They were offset by increased interest income and the absence of cost associated with the terminated Applica transaction of $1.3 million net of taxes.

Improved operations at all subsidiaries and the parent company, if you exclude the items that I have just been through, resulted in an after-tax improvement to the third quarter 2007 net income of approximately $1.6 million compared with the previous year's quarter.

Consolidated net income for the nine months ended September 30 was $37.6 million compared with $36.2 million for the first nine months of 2006.

Those are really the highlights of NACCO's overall third quarter results. And the outlook for the full-year 2007, I'll touch on now.

It's basically the same as we saw earlier this year, the combination of favorable market forces and the results of improvement programs are expected to lead to 2007 net income in the general range of 2006 results, excluding the 2006 extraordinary gain from the reduction in the Company's estimated closed mine obligations and charges associated with the restructuring program at NACCO Materials Handling Group Wholesale.

Improvements are expected to occur in the last quarter of the year as a result of specific programs at NACCO Materials Handling Group, the seasonal nature of the Housewares business and increasing benefits from the integration of Le Gourmet Chef into Kitchen Collection.

And then, assuming market conditions do not deteriorate significantly, we do think on a preliminary basis that results in 2008 are expected to improve over 2007 as more program benefits are achieved. That's a very broad and very preliminary perspective at this point on 2008.

Now I'd like to move to add a few supporting perspectives on each subsidiary. As usual more details are in the press release itself.

First, I will focus on NACCO Materials Handling Group Wholesale, the revenues did increase in the third quarter compared to the previous year as a result of a favorable mix in sales, favorable currency movements in Europe and Asia-Pacific, and the realignment of certain activities that are preformed in Asia-Pacific Wholesale and Retail to make them more in line with the way that we operate in the United States.

In addition, unit volume increased in Europe and Asia-Pacific, parts sales volume and pricing improved in Americas and Europe, and the effect of price increases implemented in late 2006 and early 2007 in Americas and Europe contributed to the improvement in revenue.

Worldwide shipments increased a bit to 21,247 from 20,758 in the previous year, and the backlog now stands at 30,500 in comparison with 25,700 a year ago September 30, and 30,000 units at June 30.

The decrease in net income compared with the prior year resulted from the recognition of the manufacturing restructuring charge, which I mentioned, an increase in selling and general, administrative expense and unfavorable foreign currency movements, which increased the cost of lift trucks and components sold in the U.S. market and sourced from countries with appreciated currencies.

Selling, general and administrative expenses increased primarily due to higher marketing program and employee-related expenses. The decrease in income resulting from these factors was partially offset by an improvement in gross profit resulting primarily as a result of price increases and an increase in the sales of higher-margin units in Europe and higher-margin parts in the Americas.

Turning to the outlook for Wholesale, Wholesale expects continued growth in the lift truck markets in the fourth quarter of 2007 in both Europe and Asia-Pacific and a moderate year-over-year decrease in the Americas market. However, growth in the South American market is expected to partially offset the decline in the North American market.

As a result, the Company expects modest growth in these markets for the remainder of 2007 and overall modest increases in unit bookings and shipment levels for the fourth quarter of 2007 compared with 2006.

For 2008, our hope really is for better insight over the next few months. But a very preliminary look suggests a continuing moderate year-over-year decline in North America and reasonable strength elsewhere.

The weakening of the U.S. dollar has adversely affected earnings, due mainly to NACCO Materials Handling Group manufacturing of certain lift trucks and sourcing of components from countries with appreciated currencies for sale in the U.S. market.

As you know, if you followed the Company during the first quarter of 2007, Wholesale outsourced its welding and painting operations at its manufacturing facility in the Netherlands to a lower-cost country. This action is expected to provide pretax benefits that will reach $1.5 million annually.

More importantly, during the third quarter of 2007, NACCO Materials Handling Group announced an additional manufacturing restructuring program which will phase out production of current product at its facility in Irvine, Scotland, change the product mix at its Craigavon, Northern Ireland, facility, and increase its production at its Berea, Kentucky, and Sulligent, Alabama, plants in the U.S. and at its Ramos Arizpe facility in Mexico.

These actions are expected to reduce purchases of high cost Euro and British pound sterling-denominated materials and components, reduce freight costs, lessen the Company's exposure to future foreign currency exchange rate fluctuations, reduce the manufacturing footprint of NMHG Wholesale's European manufacturing locations and provide additional opportunities to source components from lower-cost countries.

This manufacturing program net of future charges is anticipated to contribute to improved results in 2008 and 2009 and, at maturity, generate benefits which are expected to exceed $20 million in annual cost savings.

We do expect future additional charges related to this program of approximately $2.7 million in the fourth quarter, $10.2 million in 2008 and $800,000 in 2009, and those charges are in addition to the $5.4 million of charges already incurred in the third quarter. They, of course, are not net of the improvement benefits which will begin to occur in mid-year 2008.

Overall, Wholesale's full year results are expected to improve over 2006. The Company has been investing in long-term programs, particularly its significant new electric-rider truck, warehouse truck and big -- large truck product development and manufacturing programs, and are expected to continue to improve future results.

The Company continues to believe that the programs are in place or under consideration which will allow NACCO Materials Handling Group to achieve its 9% operating profit margin goal in the 2010-2011 time frame.

Turning to NACCO Materials Handling Group Retail -- as I indicated earlier, Retail's third quarter net income was primarily attributable to a total gain of $2.6 million net of taxes from the sale of a European retail dealership in the third quarter.

Excluding the results of the sale of the European dealership, Retail had an after-tax improvement in the third quarter of approximately $2 million compared with 2006, primarily as a result of improvements in service and rental margins in Asia-Pacific and higher new unit and used unit margins in Europe.

Retail's key change programs are expected to have an increasingly favorable effect in the fourth quarter of this year and are being put in place to meet the longer term objectives, strategic objectives, which include at least break-even results while building market position.

At Hamilton Beach third quarter net income increased $1.3 million compared with the year ago quarter, primarily as a result of an improvement in gross profit and lower selling, general and administrative expenses, partially offset by an increase in interest expense as a result of the borrowings to pay the special cash dividend of $110 million in the second quarter of 2007.

As you look to the Hamilton Beach outlook, current economic factors affecting U.S. consumers, such as high gasoline prices, depressed home sales and mortgage debt concerns, appear to be among factors unfavorably affecting sales at key retailers and creating a challenging environment at the retail level.

In spite of those challenges, Hamilton Beach has secured strong placements and promotional programs for the fourth quarter of 2007. The new products introduced in 2007 along with those products introduced in recent years are expected to continue to generate additional product placements at retailers resulting in increased revenues and operating profit in the fourth quarter of 2007 and in 2008.

Hamilton Beach has now completed its transition out of manufacturing and moved the production of all products to third-party manufacturers. This transition and other programs initiated by Hamilton Beach, as well as the anticipated increases in sales results from an improved mix of sales of higher-margin products, are expected to have a favorable impact on operating results over time.

And longer term, Hamilton Beach is focused on improving revenues and profitability continuously through production of innovative new products and on -- focus on cost reduction and margin enhancement programs in conjunction with pursuing strategic growth initiatives.

KCI's outlook - I'll just cover the outlook. Kitchen Collection is expecting an increase in revenues in the fourth quarter of 2007 as a result of opening the seasonal store locations during the holiday season, sales at new stores opened in the last year, and higher average sales transaction resulting from improvements in merchandising.

Kitchen Collection also expects operating results for the Le Gourmet Chef stores in the fourth quarter to improve as the Company continues to work to offer a better mix of store inventory and rebuild customer loyalty lost as a result of the bankruptcy before the acquisition of LGC by Kitchen Collection.

And the integration of Le Gourmet Chef is on schedule; it is expected to be completed by the end of this year with the exception of the distribution function which would be expected to be completed in late 2008.

As a result, Kitchen Collection expects the majority of the synergy benefits, excluding distribution synergies, from the integration of Le Gourmet Chef to be achieved by mid 2008.

At North American Coal, net income for 2007's third quarter increased compared with the previous year, primarily as a result of lower income tax rates from the increased benefit of percentage depletion tax treatment, partially offset by a decrease in limerock deliveries as a result of an unfavorable decision in the ongoing Florida litigation, which has reduced operations at some of the customers' quarries.

In July 2007, a federal district judge ruled and ordered that mining cease in selected previously permitted areas in South Florida mined by the Company for its customers. However, North American Coal's operations aren't expected to be materially affected by the ruling in 2007.

Further, North American Coal's customers continue to challenge this ruling and have appealed the unfavorable decision of the federal district court. Deliveries from the limerock dragline mining operations are expected to decrease moderately in the fourth quarter as customer projections for 2007 continue to reflect the decline in the housing market.

This decrease will be partially offset by customer requests to maximize inventory in advance of the decision related to the pending appeal.

Overall, North American Coal expects strong performance from its current operations over the next few years. And over the longer term, North American Coal expects to continue its efforts to develop new domestic coal projects and is encouraged that more new project opportunities may become available, including opportunities for coal-to-liquids, coal gasification and other clean coal technologies.

Accordingly, expenditures for the development of additional uncommitted coal reserves are likely to be higher in 2007 compared with 2006. And the Company also continues to pursue additional non-coal mining opportunities.

In closing, I have a few broad thoughts about the challenges and opportunities which lie ahead. First, Hamilton Beach, Kitchen Collection and North American Coal are all operating quite well. Some improvement programs are still under way, for example, the completion of the integration of LGC at Kitchen Collection.

But mainly the emphasis in all these business is on growth - through Le Gourmet Chef at Kitchen Collection, through innovative products at Hamilton Beach/Proctor-Silex -- now Hamilton Beach brands -- and through new deals at North American Coal.

Second, NACCO Materials Handling Group plans to reach its 9% operating profit target in the 2010 to 2011 period seem to be on track at this point. New products, especially in the electric counterbalance line are coming along in 2008 and 2009.

We have the restructuring program which I mentioned earlier. But the focus is still on even more cost reduction and on the performance and future positioning in our big truck product line and in our internal combustion engine line serving the Americas.

We think there are further profit improvement efforts as a result of these, and all of these are receiving major emphasis, especially with the currency mix continuing to deteriorate for NACCO Materials Handling Group in total. We're also hopeful that the Australia Retail business is now headed in the right direction.

Third, NACCO's businesses continue to expect to be solid free cash flow generators as we look to the future. So an overview then, I think we're on the same track that I've suggested we've been on in the last few quarters, which is basically one of enhanced underlying profitability that we achieved in 2006, and I expect again in 2007, and then a gradual move to a further new plateau over the period between the end of 2007 and 2010 and 2011.

I do, however, want to note, as I always do, that markets and competitive conditions are uncertain. U.S. market conditions, as I think any close observer of the U.S. economy knows at this point, are unclear. The risk may well be on the side of weaker than current forecast, but it's too early to say.

Fortunately, at each of our businesses, we will be addressing any future issues from a position of strength. Each of our companies is a real leader in its industry and each has, we believe, a very strong management team.

And with that, what I'd like to do now is to turn to any questions that you may have.

(OPERATOR INSTRUCTIONS)

Your first question comes from the line of Frank Magdlen with The Robins Group. Please proceed.

Good afternoon.

Good afternoon.

When I look at your longer term strategy, what is the capital expenditure program going to look in the future and what is the maintenance CapEx going forward?

Well, I would answer that in a general way as follows and I will do it business by business. At NACCO Materials Handling Group Wholesale, we don't expect major change in our level of our capital expenditures.

Really, the issue there is focused around the profitability programs and to the extent that we have additional capital expenditures associated with enhancing our Berea, Sulligent and Ramos Arizpe operations. They are offset by reduced capital expenditures for the plant in Scotland which will no longer need them.

At NACCO Materials Handling Group Retail, we don't expect significant capital expenditures. At Hamilton Beach, capital expenditures will continue at a very low level. Having withdrawn from manufacturing, those capital expenditures are associated mainly with new product tooling and certain instances and they are just not very major capital expenditures.

The -- At Kitchen Collection, capital expenditures will stay at a fairly modest level despite expansion of the Le Gourmet Chef format at both factory outlet malls and at enclosed malls over the next few years.

The one that is very difficult to call is the Coal Company. Our existing coal mines will not require particularly large capital investment. They will be pretty stable at a not very high level. The part that is hard to call is the part that is related to new deal opportunities in those businesses.

We do expect that we will have some, we hope, substantial expansion opportunities in the coal business. And in many of those, we may have to supply a significant portion of the capital.

It is worth noting, however, that those projects are all back. The way we do business by long-term contractual commitments, 20, 30, 40 years -- from the customers that they serve and to that extent -- capital expenditure is to have a self-financing aspect to them because they allow the individual company entities that are involved in creating new mining operations to borrow money on the back of the capital expenditures that are being put in place to carry out the contract commitments.

But, now that's the one area where you really can't call until you get a deal. And other than that, I can't -- that's about as far as I can go.

Well, could you give a minimum size or a maximum or a range of what a major project might entail?

Well, it depends so much on how they are structured. It's very difficult to do that.

The one thing I would say is that we don't enter into speculative contractual arrangements in terms of pricing structure. We are willing to take the risk that is associated with being an effective miner. We really don't take price risk in those.

And so, as I said, there is a self-financing element. They could be very substantial. We certainly hope so because it would be wonderful to be able to use the free cash flow of the Company for constructive high-returning investment opportunities.

But we can't really predict what those will involve. Some will be financed by customers, some would be financed by us. It really has to be dealt with on an individual mine-by-mine basis, as those deals come along.

What would it be -- because you characterize irrespective of who finances it, what would be the magnitude of the total capital needed whether you provide or whether the customer provides it?

An individual new coal mine today, if you add all the pieces together, would typically be quite an expensive proposition, many of them could exceed $100 million in capital investment depending on whether the draglines are new or used pieces of equipment and a number of things of that nature.

All right.

Frank, in terms of the information we have given in the release, we have incurred $42 million of CapEx to date and we got a forecast of $25 million for the rest of the year. I don't know if that's helpful to you.

That's helpful. I guess I am trying to figure out is what is your maintenance CapEx going forward. You have lot of moving pieces as you expand capacity in certain parts of the world and contract in others. But I guess, I have lost sight a little bit as to what the ongoing --

Well, I think our maintenance -- level of maintenance capital expenditures is going to be something below those numbers and I don't know that I have off hand a specific number, but if you think around the system, it's going to more like less than $50 million.

Okay.

Just from a depreciation perspective, we are running about $16 million of depreciation if you think about that in terms of replacement capital.

$16 million?

$16 million a quarter.

Okay.

$54 million.

$54 million.

And I think we are probably at this point, given the state of our facilities, they are all in good condition. Our mines are established and it's a number that's well below that.

All right. And then back to Materials Handling a little bit, you talk about the lead costs have increased and is that, I am not quite sure what lead costs mean other than I keep thinking of the commodity costs going up and your charge -- and there is a surcharge involved.

You mean lead?

Well, I am sorry. It's lead cost. I am sorry -- I am a really bad reader.

Yes, I think it's lead cost. Lead has gone through the roof and our position is that on those selected product lines that require the use of lead, whatever the cost is we are going to pass it on to the customer. And we just put it on a surcharge.

And if the price of lead goes down, we will reduce it immediately by the same amount. We are going to keep the Company whole and we just don't have any other way of dealing with those kinds of things that are involved in somewhat specialized parts of the product line.

Can you give me an idea of how much that's fluctuated in the last year or two?

Lead is up three or four times. I forgot what the number is, but it's a huge amount.

All right.

In light of the fact that a lot of the products we sell are electric products that use a lead acid battery, that's where a lot of the lead is as well as sometimes in counterweights.

Counterweights is a big issue though.

All right. Thank you, gentlemen.

Okay.

(OPERATOR INSTRUCTIONS)

Your next question is from the line of Amy Bloom with Stanfield.

Please proceed.

Hi, yes. On the Hamilton Beach subsidiary area, I was wondering if you could talk about the improvement in year-over-year sales. Was that from any particular product category or any particular customer?

You know, there are product categories that have gone up and product categories that have gone down. And -- in general, the most important single thing we have done is to continue to try to have innovative new products come out.

For example, our Toastation has been out for a while. That's been a very successful product. Our BrewStation family of products has been a real leader in that -- in the coffee-maker area. Other product line sometimes with smaller, lower unit prices, like can openers, have been much less robust, have declined a little to some degree. There's been a movement away from cans that have to be opened with a can opener. But generally speaking, it's more higher-priced products and fewer opening price point products that have moved the revenue structure up.

Now, we have had some other selected categories that have -- that have been doing well this last year, but it's fairly broad.

Thanks for the color.

How many new products were introduced in 2007 and how many do you plan to introduce in 2008?

I think those are not numbers that I have on the tip of my tongue. I think Christy can probably get some perspective on that and give you a sense of those numbers. But there is a great deal of innovation that goes on and the level of new product activity continues to be extremely high.

I have a recollection that we have 40 or 50 major programs going on at any one time with the, sort of, cadre of engineering people that we have. We have a collaborative arrangement that we use which involves a combination of deep knowledge of the U.S. market by the engineering group here at the headquarters of the business in Richmond, Virginia, which is very much in tune with the needs and requirements of American consumers.

But we complement that with some of our own engineering capabilities in China, in Shenzhen, at our own facility there -- people that are very much in touch and they work closely with our suppliers' engineering groups. So we are trying to leverage the whole system while keeping innovation coming through for our particular products. Maybe that gives you a little bit more of a feel for it.

Yes, thank you.

And has there been any change in the ordering patterns of your larger customers? We have heard a lot about some of the big customers keeping inventory levels tight.

Our big customers have kept inventory levels pretty tight for a very long period of time -- Wal-Mart, Kmart, Sears, Target, those kinds of customers.

Certainly, a while back, Wal-Mart explicitly reduced its inventories across the board for everyone. And we find as a general pattern that the sales -- that our sales to our customers or sales in the fall selling season are coming closer and closer to the actual sales and there is less and less accumulation of inventory in anticipation.

So the whole system is quite highly geared and pushed back toward the end of the year. So the months of October and November are -- at Hamilton Beach are just enormous months, and November and December for Kitchen Collection.

Thank you.

And then just one last question. Is there any update on the spin-off of Hamilton Beach, or is that still on hold?

The update is really the one that we gave awhile back when we made our formal press release, which is we canceled the spin-off of Hamilton Beach. Market conditions were extremely unsettled. We concluded it didn't make sense. And I think we said at that time that, while we might go back and revisit that sometime in the future, that we have no plans to do that at this time.

Okay, thank you.

Your next question comes from the line of [David Rosen] with SAC.

Please proceed.

Hi, I just wanted to understand the basis for your -- the flat (inaudible) you guys said net income is going to be flat '07 to '08 and what I am -- or is '06 to '07?

'07 compared to '06.

What we said is -- and I think we stick by the very specific language that we used, which was it's in the general range as opposed to just flat -- it's in the general range in '07 of '06 taking into account the elimination of the extraordinary income item that we had in '06. Obviously, it was literally an extraordinary item.

And, secondly, we also noted that and have through the year that it would exclude the charges associated with the restructuring decision at NACCO Materials Handling Group. But that's the general framework that we have used for '07 in comparison to '06.

Okay. This was (inaudible) that excluding one-time charge number, what is that, that you are basing -- what is the net income, that '06 number that you are using as a comparison on?

The '06 number that excluding the extraordinary charge was, I think, $93.4 million. There was an extraordinary item in '06 of $12.8 million. And we had total net income in '06 of $106.2 million. And what we excluded was that $12.8 million.

Got you.

And the restructuring charge that you also mentioned, Al, of about $3.5 million or thereabouts.

That's $3.5 million for fiscal '07?

For 2007, right.

Okay. Just thinking about the general vicinity, what do you think it would take you guys to get to above last year's numbers versus what would happen to get you modestly below last year's numbers?

You know, I really don't want to comment any more on forecasts. As a general rule, we really don't make forecasts of earnings. I do think that I would just make the obvious comment that both Hamilton Beach and Kitchen Collection are highly dependent on having a strong Christmas and Thanksgiving selling season. The stronger it is, the better they do; the weaker it is, the less well that they might want to do.

So North American Coal Corporation, not terribly dependent on that. At NACCO Materials Handling Group, it's really a question of completing the year with the strong fourth quarter which has -- got a lot of workdays in it. The third quarter is always a little bit muddled because it's the vacation quarter. And so we have -- but it's not - there's much more of the situation is in our hands than it is in the two consumer-based businesses.

And final question and this, again -- and I apologize; I know someone had just asked this question. But it relates to spin-off of Hamilton Beach. And I know you said at that time that it was because of market conditions.

I mean, I guess in the equity markets, the market has basically kind of normalized; I mean, stocks are not much off their highs. I'm trying to understand why the issue would be the market. I mean, is there something else that -- another reason why you have decided not to go through with this, because it seemed to make a lot of strategic sense to split up the business?

I think we meant just what we said, which was, it is unsettled market conditions. It's not just equities. It's debt. We are not sure how that's all going to play out. These are very tricky times in financial markets.

Then, there are a lot of issues associated with smaller company's evaluations -- being spun off, the kinds of pressures that come up in markets where hedge funds are playing a significant role in terms of market movements.

There's just a whole variety of issues that kind of came to a fore and are still unsettled in terms of the situation that may be playing out in front of us. And I think you see it pretty much everyday with disclosures not just about subprime mortgage issues, but also about specialized investment vehicles of the banks, the implications for the banks lending, and so on and so forth.

So I think all of that went into our thinking and we just stand on what we said and what was, I think Christina, not only in a press release, but an 8-K filing. And that's the way we would kind of stick with it.

Okay. Thank you very much.

Your next question comes from the line of Steve Thomas with Platts Coal Outlook.

Please proceed.

There's a mention made of a decline in coal sales due to an extended planned power plant outage. I was wondering what plant that was, the length of outage versus the planned outage and the affected tonnage?

We really don't go into the specifics usually. We have outages from time to time.

I think the best way to think about the Coal Company is to take a full year. And we think the prospects for the Coal Company for the full year are very sound. We feel comfortable with those.

We do try to indicate when there are special conditions that affect one quarter or another as a matter of explanation. But the outages are, on the one hand, often planned, but, on the other hand, never known in terms of duration until the power plant owners get in there to do the maintenance when they have an outage and see what the conditions are. Sometimes they would have more work to do and sometimes they have less work to do. We have -- but it is a sort of a random thing that we simply deal within that.

Keep in mind that too that most of our Coal operations effectively are paying a profit per ton, or that on the margin some of the fluctuations have -- while they have an impact, are not necessarily dramatic impact. Because they just reduce the number of tons that are sold in any one quarter, but the base for the year is still a very, very high number and so most of the profit comes on through. So there is not a lot of fixed cost to cover in most of our operations in that sense.

Thank you.

Your next question comes from the line of Jason Metcalf with Plutus.

Please proceed.

Yes, hi. I guess the stock is down about a third for the quarter. And I guess I haven't heard any discussion on the phone call -- I apologize if I missed it -- but I haven't any discussion about that decline and your thoughts on the decline and how you would get the stock back up.

And in my -- I guess kind of second point that I've heard, the middle market buyouts are getting done. They're still getting done at the same pace that they did in the previous two quarters of the year. So I guess I don't understand the thought behind the market turmoil subprime special purpose vehicles. I'm not sure they have anything to do with middle-market buyouts or shopping [fills] to buy out funds or strategic players.

So I guess what I'm saying is I don't understand -- I don't hear a sense of urgency about a dramatic decline in the share price.

Well, I guess there are a couple factors. First of all, we never -- if you're referring to Hamilton Beach, we never proposed to sell the company. And so there never were questions of buyouts or anything of that nature. We were spinning it off to the same shareholders who own it today.

So in that sense there was no transaction involved. This is a question of the ownership vehicle. Our objective at that time was simply to find a more flexible vehicle to accomplish the kinds of things that we had previously tried to accomplish, including the merger with Applica. So that's the broadest answer as far as that kind of -- that aspect of it is concerned.

With regard to the stock price, I really can't answer your question. We have had earnings that have been pretty much what we anticipated that they would be. We haven't really changed our view with regard to the Company and its prospects since early this year. So in that sense, nothing has happened.

The stock price, I suppose -- and perhaps you all are in better position than we are to say -- is made by the folks that are either buyers -- or the combination of buyers and sellers in the marketplace.

(inaudible)

And I think to the extend that the market turmoil brought pressure to bear on certain funds that own our Company and that felt they needed to liquidate shares regardless of the price in order to raise liquidity to provide more collateral for the banks or to meet liquidation needs in the particular funds, there could easily be a situation where there was substantial selling price pressure on the price of the stock.

The Company is very thinly traded. The market is one that can go up or down for the stock without over regard to the performance of the Company. We have a long-term view that is focused on performance of our individual businesses. And so we tend to put it in that perspective.

Hopefully, the market will recognize the performance of the businesses, but in the meantime we simply are continuing to carry out our efforts with the individual businesses.

But if the market is saying that the Company is worth more separated and that seems to be the indication -- because the market is back over where it was in July, but the stock is still down, which seems to me that it's de-coupled from market -- the market seems to be suggesting that the Company is worth more separated than together.

I don't hear anything to say, "Okay, well, if we're not going to separate, if we're not going to spin it out or we're not going to sell a piece of the business, how do we get back up to where we were before? How do we get back that share price performance?"

Kind of a corollary behind that is it's $1 billion market cap, or over $1 billion. Do you have any ideas about getting coverage from investment banks on this Company or getting more exposure for the Company?

It is a subject that we discuss from time to time. The economics of the business of coverage in today's world are not highly supportive of a thinly traded security, and the expense of coverage in terms of where the revenue is derived from is complex.

Certainly, if there are operations that are interested in being covered, we would be interested in trying to support that within the limits of the clear requirements for making information broadly public to all investors.

But it's not something that has -- I would say coverage condition or the coverage in general for small cap companies has deteriorated rather than improved. It's a problem.

And my hope is, in the broader question valuation that, as markets continue to settle down that people will look at our particular Company, get interested in it, and the price can go back up just as fast as it went down.

But it's probably going to be more a function of individual investors' interest in the Company, particularly institutions that do their own research and analysis.

There are no other questions in the queue at this time. I would like to turn the call over to Mr. Al Rankin for closing remarks.

I think if you do have further questions that Christy Kmetko would be happy to try to answer those for you.

We appreciate all of you being a part of the telephone conference that we've had, and we look forward to continuing to carry on the programs that we have been carrying on for the last few years that have been outlined in our Annual Report and our other various publications that we think are going to create real long term value for all of our shareholders. So those would be my closing thoughts.

Christy, is there anything you want to say?

Just want to say thank you for joining us today. And if you do have follow-up questions, please call me at 440-449-9669.

Thanks and have a great day.

Thank you for your participation in today's conference. This concludes the presentation.

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