NACCO Industries Inc (NC) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter and year end NACCO Industries earnings conference call. My name is Noellia, and I will be your coordinator today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host, Ms. Christina Kmetko, Manager of Finances. Please proceed.

Thank you. Good morning, everyone, and thank you for joining us today. This morning a press release was distributed outlining NACCO's results for fourth quarter and year end December 31, 2008. If anyone has not received a copy of this earnings release or would like a copy of the 10K 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 website at NACCO.com. Our conference will be hosted by Al Rankin, Chairman, President and Chief Executive Officer of NACCO Industries, also in attendance representing NACCO is Ken Schilling, Vice President and Controller. Al will provide an overview of the quarter and full year and then open up the call to your questions.

Before we begin, I would like to remind participants 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 10K. In addition, certain amounts discussed during this call are considered non-GAAP numbers. The non-GAAP reconciliations of these amounts are included on our website and in our 2008 fourth quarter earnings release which is also available on our website. I will now turn the call over to Al Rankin. Al?

Thanks, Christy, and good morning to all of you. The Company's revenues for the fourth quarter 2008 were $949 million, which was 13% lower than the $1.1 billion in the prior year period. The sales decline was primarily attributable to lower volume and all of NACCO's subsidiaries primarily as a result of the deteriorating economy.

During the quarter, the Company wrote off the goodwill on its books. Because the Company's stock price at year end was significantly below the Company's book value of tangible assets and its book value of equity, accounting rules effectively required that the Company take a noncash write-off of goodwill and certain other intangible assets totaling $436 million or $431.6 million net of taxes of $4.1 million.

The Company recorded those pretax charges as follows. $351 million at NACCO Materials Handling Group, $80 million at Hamilton Beach and $4 million at Kitchen Collection. The goodwill and intangibles were incurred largely as a result of acquisitions in the late 1980s and early 1990s. Also in the fourth quarter, basically as a consequence of the goodwill write-off, the Company recognized a noncash charge of $15.3 million against the accumulated deferred tax assets for the European operations of NMHG's wholesale and retail subsidiaries. The Company believes that current stock market valuations, which were the basis for the impairment testing under the existing accounting rules are generally reflective of broader global macro economic and stock market conditions, and I must say also the trading characteristics of our own stock, rather than a reflection of the operating fundamentals and the programs being implemented at each of our subsidiaries. And we expect that as market conditions improve, the Company will find that these fundamentals and programs in place at each of our subsidiaries will position each subsidiary to move positively toward the achievement of sound long-term financial returns.

From here on, all my remarks will address adjusted income, which, as Christy indicated, excludes the goodwill impairment and a charge against deferred tax assets, and the non-GAAP details and the reconciliation to GAAP of these earnings are all outlined in the supplemental data pages that are attached to the earnings release. Consolidated fourth quarter 2008 adjusted net income was $18.7 million or $2.26 a share. And that compares with consolidated net income for the fourth quarter of 2007 of $51.9 million, or $6.27 per diluted share. Economic conditions in the fourth quarter deteriorated and that significant deterioration affected consolidated results. A few key perspectives on these numbers: At NACCO Materials Handling Group the adjusted loss was $1.6 million in the fourth quarter compared with net income of $23.8 million in 2007. The key drivers for the change were a decrease in market volume for units and parts, unfavorable foreign currency movements, and costs associated with reductions in force.

Retail. NACCO Material Handling Group Retail had an adjusted loss of $1.6 million in 2008 compared with a net loss of $1.1 million in 2007, and the key driver for the increased loss was an increase in income tax expense underlying, operating results were better due to reduced spending and reduced interest expense.

Rising product costs and a weak North American consumer market had an adverse effect on results at both Hamilton Beach and Kitchen Collection. Hamilton Beach's adjusted income decreased to $6.6 million in 2008 from $12.8 million in 2007, and the decrease in 2008 primarily resulted from increased product costs net of price increases, lower unit volumes, and reduced sales of higher margin products. Kitchen Collection's adjusted income was $3.8 million, and that decreased compared with net income of $5.9 million in the previous year, and that was a result of decreases at both Kitchen Collection and Le Gourmet Chef comparable stores due to fewer store transactions and lower average sales transactions. And North American Coal's net income decreased to $4.9 million compared with $6.6 million primarily due to fewer tons sold at the Mississippi Lignite Mining Company.

For the full year our revenues were $3.7 billion compared to $3.6 billion in the year before, and consolidated adjusted income was $23.8 million or $2.87 compared with $90.4 million or $10.93 for the year ended in the end of 2007.

All of our subsidiaries had lower results for the year ended December 2008. North American Coal was the one bright spot reporting net income of $22.1 million. Overall adjusted income was negatively affected by increased material costs not recovered by price increases, adverse foreign currency movements and related volumes as the global recession unfolded. Also as the year went on, in light of the current economic conditions, NACCO increased the capitalization of three of its subsidiaries by contributing $68 million to NMHG, $29 million to Hamilton Beach, $25 million to Kitchen Collection, to put their balance sheets on a firmer footing.

As we look to 2009, economic and market conditions, of course, deteriorated dramatically toward the end of 2008 with a deep global recession likely to continue through 2009. The depth and the duration of this downturn from my perspective is extremely uncertain. The consumer markets in which Hamilton Beach and Kitchen Collection participate have declined as consumers reduce purchases.

The forklift truck capital goods market in which NACCO Materials Handling Group participates has moved into a significant global downturn that has resulted in a decline in bookings in the Americas, Europe, and Asia Pacific. Price increases, changes in product positioning and product cost reductions were implemented in 2008 and early 2009 to offset higher material and transportation costs and adverse currency movements at both NACCO Materials Handling Group and Hamilton Beach, in order to achieve more acceptable margin positions. While North American Coal's lignite coal operations continue to be strong, the Company expects limerock production and limerock deliveries to be significantly lower in 2009 due to a continued drop in demand in the housing and construction markets in southern Florida, and an unfavorable legal ruling that terminated customers' existing mining permits at most of the limerock mining operations.

Limerock customers are expected to reduce inventory levels until they return to production under new permits that are expected to be issued toward the end of 2009. The Company is really operating on the assumption that the economic environment will not improve in 2009. And accordingly, we moved very aggressively to put plans in place to help meet the challenges of 2009. We have taken cost containment actions which include, spending and travel restrictions, personnel reductions, suspension of incentive compensation and profit sharing, benefit reductions, wage freezes, and salary reductions have been taken at our consumer and capital goods subsidiaries and here at our NACCO headquarters. At the NACCO Materials Handling Group, these cost containment actions are unlikely to overcome the effect of reduced volumes in the early part of the year, particularly in the first quarter. NMHG's 2009 net income is expected to be somewhere around breakeven, assuming, and that's an important assumption, that market conditions don't deteriorate further than we currently expect. Retail's objective is to breakeven.

While the consumer businesses anticipate weak markets in 2009, both Hamilton Beach and Kitchen Collection expect results in 2009 to improve increasingly over the course of the year, especially at Kitchen Collection where the new Le Gourmet Chef store format is in place, and no further large product clearance program is needed, and the coal company expects 2009 income to be comparable to the previous year.

Overall, the Company expects its subsidiaries to generate substantial cash flow before financing activities, and the Company has substantial cash available which provides flexibility with respect to capitalizing its subsidiaries.

As we turn now to touch on some highlights at each of the subsidiary companies, first at NACCO Materials Handling Group. Wholesale income was $1.6 million compared with net income of $23.8 million in the fourth quarter of '07. The revenues decreased from $760 million to $647 million, as a result of a decrease in both units and parts volumes in all geographic areas due to the downturn in each of these markets.

Shipments in the fourth quarter declined to 20,830 units from 25,946 units in the fourth quarter 2007, and the backlog, importantly, ran down considerably during the fourth quarter, with a backlog of 14,900 units at December 31st, compared with 30,500 at the end of 2007 and 26,000 at the end of the third quarter.

The significant decrease in results compared with 2007 in the fourth quarter was primarily due to a decline in gross profit unfavorable foreign currency movements of $15 million pretax, mainly due to adverse currency revaluations, and a $6 million pretax charge for reductions in force at all NMHG locations because of the downturn in forklift truck markets. Gross profit declined as a result of the reduced volumes and lower sales of higher margin units and parts, and an increase in manufacturing costs as less fixed cost was absorbed due to lower production volumes. These unfavorable items were partially offset by the effects of LIFO liquidation and lower year -- lower prior year inventory costs of $6.7 million, reduced warranty costs, and benefits of $21.5 million pretax from price increases that have been implemented in prior periods. Those price increases were, however, partially offset by material cost increases of $17.1 million, primarily from increased steel costs.

As you look to 2009, NMHG Wholesale expects significant declines in all lift truck markets around the world in 2009, and very little recovery until 2010. That will affect both unit bookings and shipment levels and parts sales. The company, NACCO Materials Handling Group, has taken a number of steps to respond to the market outlook. They include: capital expenditure constraints, planned plant down time, reductions in force, restrictions on spending and travel, suspension of the incentive compensation programs and profit sharing, wage freezes, salary and benefit reductions. The benefits from price increases that are implemented are -- previously implemented are expected to be fully realized in 2009, and NMHG is actively monitoring commodity costs and other supply chain drivers to ensure that we have timely implementation of reductions in procurement costs, because material costs specifically steel, fuel, and freight costs have moderated in the fourth quarter of 2008 and 2009. And our goal is to improve our near term margins while we still maintain market position.

Unfavorable foreign currency movements continue to affect 2008 results quite significantly, and as we have reported in previous calls, we have implemented a manufacturing restructuring program which will be completed very shortly early this year, most of it at the end of this month, to lessen NMHG's exposure to future currency exchange rate fluctuations, and also to reduce our manufacturing footprint in our European manufacturing operations, and provide additional opportunities to source components from lower cost countries and reduce working capital. We expect benefits from this which are very significant and at their conclusion, about $17 million in annual cost savings. We've got a regular compliment of new truck product development programs underway. Of particular importance is the new electric rider program which is progressing as planned.

The new electric rider program is expected to bring a full line of newly designed product to market including the introduction of two series in the second quarter of this year. Overall, NMHG wholesale expects earnings in the first half of 2009 to be well below the first half of 2008, with an especially difficult first quarter. And modest market improvements are expected in the second half of 2009, largely as inventory decumulation at dealers ends, and along with the benefits of new product introductions and the restructurings and reductions in force are expected to lead to something close to breakeven results, but that assumes, as I said earlier, that market conditions don't deteriorate further. We do expect significantly improved cash flow before financing activities in 2009, as a result of cost containment actions, plant restructurings, and particularly, importantly, a reduction in working capital.

Turning to Hamilton Beach, income was $6.6 million for the fourth quarter on revenues of $186 million compared with $12.8 million of net income for the fourth quarter of 2007 on $200 million. During the fourth quarter, Hamilton Beach changed its method of valuing inventories from LIFO to FIFO, and all of the prior year financial information that's contained in the supporting exhibits has been revised to reflect those changes. Revenues decreased due to a significant drop in consumer spending stemming from the weak economy and adverse foreign currency movements that were caused by weakening Canadian dollar and Mexican peso also contributed to the decrease. The adjusted net income was down significantly. The most significant factors that contributed to the decrease were increased product and freight costs of $7.6 million, net of price increases of $1.8 million, lower unit volumes and reduced sales of certain higher margin products.

During the quarter, there was also adjustment of certain inventories to market value, an increase in the Company's -- and an increase in the Company's environmental liability due to the bankruptcy of a co-responsible party, and the absence of favorable product liability adjustments which were recognized in the previous year, but you put that all together, and it netted out with significant reduction in net income. Partially offsetting those factors that were reducing income were lower employee-related costs, some favorable foreign currency movements and lower interest costs.

As you look forward, the global recession and other financial concerns are among the factors that create a really challenging retail environment, as consumer confidence continues to decline. As a result, consumer spending is expected to be significantly reduced in 2007, particularly in the first half, with Hamilton Beach revenues expected to be lower in 2009 than in 2008.

On the other hand, Hamilton Beach is focused on high value adding product, which in a difficult market are more likely to hold up well than more discretionary products. As a result of these lower volumes, Hamilton Beach took actions which are very similar to those I just described at NACCO Materials Handling Group with regard to personnel reductions and so on. In addition to those, Hamilton Beach is working actively to improve its pricing, its product positioning and reduce its product costs in light of the softening commodity costs for resins, copper, steel, and aluminum, as well as reduced transportation costs and to get its margin structure to more acceptable levels that are comparable to earlier years before the spike in product costs occurred early in 2008. Hamilton Beach is monitoring those commodity costs closely and negotiating with suppliers and retailers on those costs, prices, and product placement programs. Overall net income and cash flow before financing activities are currently expected to improve compared with 2008 as a result of Hamilton Beach's cost containment actions and efforts to improve margins through reduced costs, improved prices, and new product introductions and placements. Again, the caveat that if markets deteriorate further, revenues and earnings could be adversely affected.

Kitchen Collection reported adjusted income of $3.8 million on $78 million of revenue in the fourth quarter compared with $5.9 million on revenues of $85 million in 2007. The decrease was driven by a decrease in both Kitchen Collection and Le Gourmet Chef comparable store sales as a result of fewer store transactions and a lower average sales value. Those declines were the result of reduced traffic at outlet malls and an increase in shopping for lower priced items due to the current recessionary environment. Uncertainty in the US economy and financial markets and a reduction in consumer confidence, the same factors affecting Hamilton Beach, affect Kitchen Collection and they're expected to continue to affect consumer traffic to outlet and traditional malls and negatively affect retail spending decisions in 2009, which again, makes forecasts very uncertain.

Nevertheless, Kitchen Collection expects a modest increase in revenues in 2009 as a result of improved holiday selling late in 2009 in comparison to 2008 and expected improved sales volumes and margins at the Le Gourmet Chef stores as a result of the completion of the new product enhancement and store merchandising programs. Those programs coupled with the completion of the large product clearance program in the Le Gourmet Chef stores that significantly reduce margins in 2008 are expected to improve results in 2009. Again, Kitchen Collection has put in place capital expenditures, restraints, administrative cost control measures, including those I described for Hamilton Beach. Kitchen Collection expects a difficult first quarter with increasing improvements in quarterly results for the remainder of the year, and that will produce an improvement in full year results as I indicated. Cash flow before financing activities is expected to be slightly negative, but significantly improved compared with 2008.

North American Coal's net income for the fourth quarter was $4.9 million compared with $6.6 million in the previous year. The decreases were primarily due to fewer tons delivered at Mississippi Lignite Mining Company as a result of its customers' planned power outage and fewer limerock deliveries at the limerock operations which I described earlier. Those unfavorable items were partially offset by an increase at the unconsolidated mines due to contractual price escalation and higher royalty income. North American Coal's lignite mining operations are not significantly affected by the economic downturn because of North American Coal's long-term contract structure and the continuing high demand for electricity from the power plants that it serves. The Company does expect improved performance at its mining operations in 2009 provided the customers achieve currently planned power plant operating levels. Tons delivered at the lignite coal mines are expected to increase in 2009 compared with 2008, especially at the lignite -- Mississippi Lignite Mining Company as a result of fewer planned outage days and improved operating efficiencies at the customer's power plant. However, contractual price escalation at all mines is not expected to affect results as favorably in 2009 as it did in 2008 because of the recent declines in commodity costs.

As I have already indicated, limerock customer projections for 2009 deliveries continue to reflect the significant decline in the southern Florida housing and construction markets, and the Company really won't be mining until the new permits are issued toward the end of the year. The Company has a number of potential new products and opportunities that are under consideration and will be incurring additional expenses related to those in 2009. Permitting is taking place in the Company's Otter Creek reserves in North Dakota in expectation of a construction of a new mine, and North American Coal is also working on a project with Mississippi Power to provide lignite coal to a new plant in Mississippi. Overall, North American Coal expects solid operating performance in 2009, comparable to 2008, and cash flow before financing is expected to be positive but down somewhat from 2008. That really completes my remarks and now I will turn to questions if any of you have them.

(Operator Instructions) All questions must be submitted at this time in order for it to be received. Questions will be taken in the order received. (Operator Instructions) Your first question comes from the line of Frank Magdlen with The Robins Group.

Good morning.

Good morning.

On the Hamilton Beach side, what's happening to your costs right now, particularly in light of maybe declining deflationary trends for raw material, and what are the new products -- can you give us new product examples?

Let me address the issue of product costs first, because it's a very important issue. We have challenged all of our suppliers to get their costs back to the levels that we saw toward the end of 2007, and we have seen increasingly positive responses from suppliers as their own supply chains are having lower costs. And to the extent that the lower costs have not fully come through, at this point, we have been working with our customers to change product offerings to increase prices and generally to put ourselves back in a margin position that's much closer to our traditional margin position than it was after the big spike in costs occurred. So I think the answer to your question is, it's a very aggressive program to get costs back down to levels that they previously were at. We have a very -- as far as new products are concerned, I think if you want some more detailed list that Christy can provide those in a separate call, but we have a very broad new product introduction program. It covers our commercial products, where we have an increasingly broad set of products.

It covers our US consumer product lines, and includes really new product in essentially every product category. So on average, and I would have to check a little bit, but my recollection is that we renew about a third of our products every year. So it's a very broad program. To the extent your question was focused on breakthrough products, I think these would, in the main be more classified as updating and enhancing the performance of products we have, ensuring that the quality is as high as it can possibly be. We give a lot of attention to quality. We have a very significant quality oversight organization in China that works closely with our suppliers, and is actively involved in bringing forward a strong new set of products.

Okay, Al. On the cost side, could you quantify a little bit, '08 costs were what percentage higher than '07, and half-way, three-quarters of the way back to the '07 levels?

Really I don't think I would put it in terms of costs, but margin aspirations, and I think that we're hopeful that our margins will return to levels that are closer to -- that is, our gross profit margins that are at levels that are closer to 2007. That's the way I would put it.

All right. In the lift truck market, do you have a feel for where dealer inventories are today versus what they were maybe six months ago?

It's a very geographically dependent answer that I have to give. We think that in certain areas of the world, Eastern Europe, Latin America, South America, that dealer inventories were fairly substantial the pipelines are much longer in these areas, and so the factory booking levels have fallen off very rapidly in those -- all factory bookings have fallen off very rapidly but even more rapidly in those areas. Generally speaking, the last two months, December and January, I don't have the numbers yet for February, showed global declines slightly over 50% in terms of market volumes compared to the previous year.

I would guess that by the end of February, the largest portion of that will have worked its way through and we'll be dealing much more with underlying retail bookings, order levels, but again, that will be somewhat dependent on the inventory situation in some countries, but that's the general flavor that I would give you, which is that the biggest stress of that runoff will, for us, will occur in the first quarter, or in first quarter bookings, and then we should return to levels that are closer to retail consumption levels.

All right. In your backlog number, will most of that be shipped in the first quarter.

I have to think about it carefully, but in the main 12 weeks of backlog, would mean that most would be shipped in the first quarter, but some will go into the second quarter. I can't really give you the numbers on that. But certainly some of those are planned to be produced in the second quarter.

All right. And do you have your market share numbers for '08?

Well, we've never commented publicly on our market share, not in recent times, in any event, but we feel it depends on the product category. We've had some customers that have been good customers of ours that have been more stressed than some of our competitors, for example, in the automotive area. We've been gaining share in certain products, particularly over the last couple of years, particularly in class two. That is, the narrow aisle types of warehousing products. But overall, we're probably a little bit lower, but it's more related to the industry segments in my view than -- and how we're positioned in certain markets, but it's a relatively stable situation, and we expect to have about our normal level of share as we look forward in the course of 2009.

All right. And I guess one last question. Company-wide, can you give a feel for what your headcount is down to or what percentage it's down?

I really couldn't give you company-wide figures. We don't tend to look at it from that point of view. Just go through the businesses and say that the coal company is stable. They operate efficiently, and their demand characteristics haven't changed much. The bulk of employees in Kitchen Collection are out in our retail stores, and we have restricted hourly hiring to try to tie it better to the sales levels in the stores. There have been some constraints on headcount at the headquarters of that business, but freezes in salaries and elimination of certain benefits and incentive compensation. And in Hamilton Beach, there have been reductions in force in the United States and -- that are not insignificant. The biggest ones, however, really have occurred, as you would expect, in the forklift truck business, where we've had very significant reductions in the numbers of people, and I'm not sure I have the numbers handy.

Christy can check on them, but my recollection is they're in the order of 20% reduction in headcount in the business, but that's really not the full story, either, because we have taken weeks out of the schedule, and employees have, in effect, taken weeks off at our manufacturing operations, and that's been complimented on the salary side by headcount reductions, but also by salary reductions in that particular business and here at NACCO headquarters. And so that everyone is sharing in the difficulties of what is the sharpest downturn the industry has seen, and certainly in my memory, and going back into the '70s and before, from a percentage point of view, including in the US market, which is our strongest market.

All right, thank you very much.

Yes.

Your next question comes from the line of Charlene Mills with The Boston Company.

Hello. Thank you for taking my call. With regard to Hamilton Beach what was the impact of the shift from LIFO to FIFO.

Ken, do you have that?

Yes. In our footnote two, we describe the impact to the prior years, but the impact after tax to 2008 was $2 million, $2.1 million, to be exact.

Thank you. And --

I think, just to complete that, that it's important to recognize that the environmental charge and the inventory write-down to get our inventories at absolutely clean level more than exceeded the change from LIFO to FIFO. So if you are trying to think about it in terms of the future, you probably have to take all those things into account, not just the one.

Okay, thank you. Then regarding some of the other comments on your 10K about the covenants, if things don't get better in the second half, as you expect them to at NHGH -- excuse me, at NMHG, are you concerned at all about the 3.25 times leverage covenant or the 1.5 times fixed charge covenant, and could you confirm that those are correct for me?

I believe that those are correct, and I guess what I would say is, I'm always concerned about covenants. We have operating plans and have no expectation that we'll have difficulty meeting those covenants. It takes a lot of hard work and cost reduction of the type that we've been implementing, and a variety of other actions. We're watching all of that very carefully. I can certainly describe for you a scenario where the market volumes go down so much more than we're currently anticipating that you would have a problem, but at this point, we are not forecasting one.

Thank you. All set.

Your next question comes from the line of Mark Segal with Canaccord Adams.

Hi, good morning. Thanks for taking my questions. With regard to the NACCO materials business, in light of some of your prior comments, can you talk a bit about how the domestic business is fairing, versus international, and perhaps what geographies you might expect to lead recovery when it happens?

Well, the pain is very broad based, and I suppose the worst hit are some of those developing country environments or the less developed countries. The forklift truck business virtually, which was quite large in Russia, virtually came to a halt in December and January. That's probably the worst. Markets are down in China, not as much. Markets are down in Japan, but the Europe market turned down a little bit later than the US market, and is now the decline is very pronounced now. So I think these declines have affected all areas of the world. Our most significant markets by quite a significant margin are Europe and North America. And I think that if the stimulus is effective, and if the actions that are designed to shore up the banking system work effectively, we could see the US market turn up, perhaps earlier than some of the others. And that would be good for us, and I suppose if I were speculating, that's probably the way I would speculate.

But as I think I said in my remarks at one point, these are uncharted waters, and we really don't have clear -- the kind of insight that we would normally have on how our end markets and demand for our products would -- should work. And so it's very difficult to give you a good answer on that, particularly with regard to timing. Perhaps the most important thing in our forklift truck business is the overall perspective that we are very fortunate that we took aggressive actions over two years ago to begin the process of changing our manufacturing footprint in Europe and Americas, so that we didn't have as much exposure to currency fluctuations. That has reduced our capacity, and the project, as I indicated, that whole program, basically is complete at the end of this quarter, and it would be very expensive to undertake that program in the middle of a downturn, but that's behind us.

In addition, we have, with the new electric truck line, we will have, in large measure, all of our product lines with very solid up to date products. We'll be adding some products in the internal combustion engine area that we hope will be particularly suited to a lower, more competitive market level that you see in a recession of this nature. It will be coming in towards the end of this year, but we've got the big product development programs largely in hand. We've restructured our supply chain activities a couple of years ago, major centralization supported by a new system which has allowed us to be very aggressive about going after cost reductions as material costs come down. We've taken over the last couple of years very significant actions to enhance our sourcing from low cost countries, whether they are in Eastern Europe or in China in particular.

So we had a number of things that really came together and were maturing just in time for this downturn. So in that sense, we feel fortunate that those programs are operating at the level that we had hoped they would and having the kind of impact because it helps to moderate the problems of the dramatic decline that we're dealing with.

Okay. That's very helpful. And then can you just give us a sense of the mix of business between internal combustion engine and electric units? And does the mix shift significantly, in light of the expected new product introductions in the next couple of quarters?

Well, if you look at total units, we have a lot of electric trucks, because we have motorized hand trucks, narrow aisle trucks, and the counter balance trucks. All of them are electric powered. But I think the more important aspect to your question is traditionally the internal combustion engine trucks have been more cyclical than the electric trucks. We expect that to be the case, especially in certain countries in this downturn as well. However, this is a broader downturn, and we think that that shift will be less pronounced in the United States because the warehousing infrastructure that was associated with the tremendous increase in imports, particularly from China, really has been put in place over the last 10 or 15 years, and now with the decline in imports, and the downturn that comes from the downturn in the economy, the supportiveness of the electric truck line, in a downturn, is just not there. So that business is cyclical as well. We can -- Christy can probably get you some more specific figures on the mix, but I think we will see a mix away from electric -- away from internal combustion engine toward electric, but not as much as would have been the case in past years.

All right, great. Thanks so much.

Your next question comes from the line of Vanessa Miranda with Stanfield Capital Partners.

Hi, yes, I don't know if you said this in the call, but I was just wondering if you could tell us the amount of equity that was contributed to Hamilton Beach in the fourth quarter and for the year, and what your outlook is for 2009.

I did mention it. It's in the press release, and over the course of the year we contributed $68 million to NACCO materials handling group. We would expect to make additional contributions during the course of this year. It will depend on the circumstances. And we want to make sure that our businesses are adequately capitalized and in the best position to move forward, but I would add that we expect NACCO Materials Handling Group to be a large cash generator over the course of 2009 as well, and that [simply] is a consequence of the reduced volumes that it expects to sell due to market levels which are so much lower than normal. So the working capital component will come down very significantly.

Okay. And also, you put out a press release regarding the consulting agreement for Kitchen Collection. Any plans or thoughts about combining the two businesses?

No, but I think it goes without saying that one of the reasons that we want to associate them more closely is that we think that there are elements that can work together in those businesses. I'll just give you a couple of examples. Both businesses bring in very substantial amounts of product from China. Both have negotiated freight rates. We have certain areas where we can provide administrative support that can be helpful. The Kitchen Collection business, very importantly, sells -- has a licensing agreement with Hamilton Beach and uses the Hamilton Beach and Proctor Silex names on certain of its product, and that has to be overseen from the point of view of product quality and consistency with the requirements of the license, and so -- but I think the fundamental answer to your question is that it's more of an oversight issue. Not a combining, because one business is really a retail business, and the other business sells products to retailers, and so there's not an overlap of any significance at that level.

Okay, thanks, that's it for me.

And I'm showing that at this moment you don't have any further questions.

Okay. I thank all of you for joining us. And I think what we most need and what everybody most needs is stabilization and an upturn in the economy, but I'd leave you with the thought, the overview thought that our approach to this is not to assume an upturn. When we see it, we will respond. In the meantime, we are taking every action that we can to strengthen our businesses and manage them in a highly disciplined way in light of the extraordinary economic and financial market conditions that we're dealing with. So I thank you all for participating, and that's it for today.

Thank you. If you do have any additional questions, you can reach me at 440-449-9669. Have a good day.

Thank you for your participation in today's conference. To access the replay for this call, you may dial 1-617-614-4949, or 1-888-233-1854 internationally, with the replay passcode 52105229. The replay will be available approximately one hour's time. This concludes the presentation. You may now disconnect. Have a great day.