NACCO Industries Inc (NC) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter and year-end 2009 NACCO Industries earnings conference call. My name is Chanel and I will be your coordinator for today. (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 for today's call, Ms. Christina Kmetko.

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

Yesterday, a press release was distributed outlining NACCO's results for the fourth quarter and year ended December 31, 2009. If anyone has not received a copy of this earnings release or would like a copy of the 10-K, 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.

The 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 full year, 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 the earnings release and in the 10-K.

In addition, certain amounts discussed during this call are considered non-GAAP numbers. The non-GAAP reconciliations of these amounts are included in the 2009 fourth-quarter earnings release, which is available on the website.

I will now turn the call over to Al Rankin. Al.

Good morning to all of you. NACCO's earnings for the fourth quarter were $5.12 per share.

Understanding the structure of those earnings and in comparisons to earlier periods is unusually complicated this quarter. First, this year's fourth-quarter earnings included the sale of North American Coal's Red River Mine for $21.9 million after tax. This causes this mine to be treated as a discontinued operation in all comparative results.

Second, in the fourth quarter of 2008, very large charges were taken to write off a non-cash charge for goodwill and other intangible assets and certain deferred tax assets. All of this is outlined in the press release on pages one, two, and three.

Then, on page three, are tables showing comparative results excluding discontinued operations and the non-cash 2008 charges. Fourth-quarter results on this basis showed significant improvements at our key subsidiaries.

At NMHG, income increased from a loss of $3.2 million [in 2008] (company corrected after the call) to $900,000. Hamilton Beach had earnings of $13.1 million, compared to $6.6 million in the previous year. Kitchen Collection had earnings of $8.1 million, compared to $3.8 million in the previous year, and North American Coal had earnings of $2 million, compared to $4.4 million in the previous year.

Key perspectives on NACCO's fourth-quarter results are as follows. At NACCO Materials Handling Group, operating profit in the fourth quarter was $3.5 million, compared with an adjusted operating loss of $7.7 million in 2008. Clearly, operating profit improved substantially, even after a $6 million reduction-in-force charge taken in 2008 is adjusted for.

Benefits from cost-containment actions, favorable foreign currency, lower material costs, favorable pricing, and lower warranty costs more than offset the very significant effects of an over 40% decline in sales from $661.5 million in 2008 to $395.7 million in 2009. This, of course, reflects the very dramatic decline in global markets for forklift trucks.

Net income in 2009 was $900,000, as I had indicated, compared with the loss, despite these -- in the previous year, despite this very large decline in sales.

Hamilton Beach's net income was $13.1 million, compared to $6.6 million in the fourth quarter of 2008, and that significant improvement was the result of lower product and freight costs and increased sales of innovative products, partially offset by some volume declines and higher selling, general, and administrative expenses.

Kitchen Collection experienced a dramatic turnaround in the fourth quarter of 2009 compared with 2008. Net income was $8.1 million in 2009, compared with adjusted net income of $3.8 million in 2008. Results improved primarily due to improved gross margins at comparable stores and lower employee-related costs.

North American Coal's income from continuing operations of $2 million declined in the fourth quarter compared with income from continuing operations of $4.4 million in 2008. All operations operated at a very sound level, and the decrease simply was a result of a decline in earnings at the unconsolidated mines, due strictly to a decrease in contractual pricing escalators which in fact had increased in 2008 and decreased in 2009 in the fourth quarter. And also there was an extended plant outage at a customer's plant that resulted in fewer tons delivered, which was offset in large measure by an increase in tons delivered at the Mississippi Lignite Mining Company.

NACCO and other, which includes parent company operations and eliminations for consolidated taxes, generated a net loss of $3.5 million, compared with adjusted net income of $6.6 million in 2008. The 2009 net loss includes increased employee-related expenses, a reduction in management fees from -- charged to the subsidiaries, and an impairment recognized in connection with the buyout of the capital lease asset, offset by a small positive effective tax rate adjustment to the full year.

Adjusted net income in 2008 includes the reversal of previously-accrued incentive compensation and a large positive tax -- positive effective tax rate adjustment to the full year. Those were really both to benefit -- or both reflect the very sharply declining earnings of the Company over the course of 2008.

In light of the difficult economic conditions and to put our subsidiaries closer to their target capitalization rates, NACCO increased the capitalization of its subsidiaries by contributing about $80 million to NMHG and about $3 million to Kitchen Collection during the year ended December 31, and about $14 million was contributed to NMHG in the fourth quarter.

The earnings release contains a lot more details on the fourth quarter in each of our subsidiaries, and I won't go back over that in large measure. As I said, those are in the press release for further information.

At NMHG -- then I'll turn to each of the subsidiaries and talk a little bit about the full year and about their outlooks. At NMHG, full-year results were a large loss of 43 million -- $43.1 million on revenue of $1.5 billion, compared with adjusted net income of $1.1 million on revenues of $2.8 billion for the year ended December 31, 2008.

Lift truck shipments in 2009 decreased 52% to approximately 41,600 units from approximately 87,100 units in 2008. It's against this backdrop that it's important to note the breakeven performance of NACCO Materials Handling Group in the fourth quarter.

For the 2009 full year, NMHG's cash flow before financing activities was $121.7 million, which was comprised of net cash provided by operating activities of $115 million, plus net cash provided by investing activities of $6 million. For the 2008 full year, NACCO -- or NMHG had negative cash flow before financing activities of about $65 million.

Turning to NMHG's outlook, the global market levels for units and parts volumes do appear to have stabilized in the second half of 2009. However, NMHG is not anticipating a market upturn of any significance in the first half of 2010, with the exception of China and to some degree Brazil, and is cautiously optimistic a moderate recovery in other areas will begin in the second half of 2010.

As a result, the Company expects moderate increases in bookings, unit shipment levels, and parts sales in 2010, compared with 2009, with gradual increases occurring each quarter.

As you can imagine, during the course of the year NMHG took a large number of actions in late 2008 and during 2009 to respond to the depressed market conditions it faced. In 2009, NMHG announced it had essentially completed the closure of one of the Company's Italian facilities. The estimated benefits from that action are approximately $3 million annually.

This program supplements the estimated benefits from the Irvine, Scotland, restructuring program, which was completed in the first quarter of 2009, which is expected to be approximately $15 million annually.

In addition, estimated benefits at the current reduced workforce levels for the reduction-in-force programs implemented over the last two years are approximately $50 million on a current annualized basis with approximately 75% of the benefits related to manufacturing operations. Additional cost-containment actions that were taken in 2009 included a full range of actions -- capital expenditure restraints, additional planned plant downtime, restrictions on spending and travel, suspension of incentive compensation and profit sharing, wage freezes, and salary and benefit reductions.

As the market begins to improve and as financial conditions -- financial results permit, salary reductions and other suspended employee benefits will be gradually restored, although NMHG will continue to monitor its operations closely and will make additional adjustments if necessary.

Commodity costs appear to have stabilized, and the Company expects current levels to remain relatively constant through 2010. Overall, despite some recent commodity cost increases, material costs are expected to remain quite flat over the course of the year.

NMHG's new electric-rider lift truck program and warehouse truck and big truck development programs are progressing as planned. The new electric-rider lift truck program is bringing a full line of newly designed products to market. NMHG introduced two of those series in 2009, and they've both been well received.

The Company introduced an important two- to three-ton four-wheel electric truck series in Europe in early 2010, and expects to introduce five additional series of electric-rider trucks by the end of this year.

NMHG is also developing new base model internal-combustion engine truck aimed at the medium-duty segment of the market. The first lift trucks in the series are expected to be introduced in mid-2010 with a complete rollout by 2012.

All of these new products are expected to help improve revenues and enhance operating margins.

Overall, NMHG expects a net loss in the first half of 2010 with a more difficult first quarter. However, the net loss is expected to be well below the loss realized in the first half of 2009. Modest market improvements anticipated in the second half of 2010 are expected to generate breakeven results for the full year based on NMHG's current forecast of market conditions.

Cash flow before financing activities in 2010 is expected to be positive again, but significantly lower than 2009, since the working capital reductions achieved in 2009 will not be repeated in 2010.

At Hamilton Beach, again there is a more detailed outline of fourth-quarter results in the earnings release. For the full year ended December 31, Hamilton Beach reported net income of $26.1 million on revenues of $497 million, compared with adjusted net income of $7.4 million on revenues of $528 million in 2008. Operating profit was $50.4 million, compared with $19.9 million in the previous year. All in all, it was clearly a very good year for Hamilton Beach.

During 2009, Hamilton Beach also generated cash flow before financing activities of $33.4 million, which was combined of cash provided by operating activities of $35.5 million and cash used for investing activities of $2.1 million. During 2008, Hamilton Beach generated cash flow of $12.3 million, so this was a very significant improvement.

As you look forward, the small kitchen appliance market in which Hamilton Beach participates appears to be recovering. However, while consumer confidence and other key industries have improved compared with 2009, the pace and sustainability of the upturn is uncertain because consumers continue to struggle with financial concerns and high unemployment rates. Accordingly, Hamilton Beach expects revenues in 2010 to be comparable or slightly lower than in 2009.

Despite the challenging economic environment, Hamilton Beach continues to focus on strengthening its market position through product innovation, promotions, and branding programs, together with an appropriate level of advertising for the Company's highly successful BrewStation coffeemaker and Stay or Go Slow Cooker lines.

In 2010, Hamilton Beach expects to continue to introduce innovative products in several small appliance categories. In addition, the Company is expected to launch a line of Melita-branded beverage appliances under its new licensing agreement. These products, as well as other new product introductions in the pipeline for 2010, are expected to help ensure strong revenues in 2010.

Overall, full-year 2010 net income and cash flow before financing activities are expected at the current time to be lower than 2009. Margins are expected to be somewhat lower than 2009's strong levels and expenses are expected to be somewhat higher than in 2009, with the full phase-in of the employee-related benefit programs which were suspended at the beginning of 2009 partially phased in during the fourth quarter of 2009 and fully restored in 2010.

Hamilton Beach expects -- continues to monitor its commodity costs closely and will adjust its product prices and placements if it's necessary in light of any possible product-cost increases.

At Kitchen Collection for the full year, there was net income of $3.9 million on $214 million of revenue, compared to a net loss -- an adjusted net loss of $6.4 million on revenues of $202 million.

The -- for 2009's full year, Kitchen Collection generated cash flow before financing activities of $4.3 million, which was comprised of net cash provided by operating activities of $5.4 million less net cash used for investing activities of $1.1 million. In 2008, Kitchen Collection had a negative cash flow before financing activities of $12.4 million.

As we look to the future at Kitchen Collection, while consumer spending remains constrained by financial concerns and high unemployment rates, the outlet mall market appears to be improving. Kitchen Collection expects a modest increase in revenue in 2010 compared with 2009, due to the continued strength of both the Kitchen Collection and the Le Gourmet Chef stores. Favorable sales and margin trends that occurred in the reformatted Le Gourmet Chef stores in the second half of 2009 are expected to continue in 2010.

In addition, the Company plans to make further improvements to the merchandise mix in the Le Gourmet Chef stores. The opening of new store locations and the Company's aggressive efforts to close or renegotiate leases for underperforming stores whenever possible are also expected to help provide improved results in 2010.

Overall, Kitchen Collection anticipates a moderate increase in full-year net income for 2010 compared with 2009. And cash flow before financing activities is expected to be comparable to 2009.

Longer term, Kitchen Collection plans to focus on enhancing sales volumes through continued strengthening of its Kitchen Collection and Le Gourmet Chef store formats, which are both designed to respond to consumer preferences by strengthening its merchandise mix, store displays, and appearance, optimizing store-selling space and generating sales growth. Kitchen Collection also expects to achieve store growth in both the Kitchen Collection and Le Gourmet Chef outlet and traditional mall formats over the longer term, while it continues to maintain very disciplined cost control.

However, the closure of underperforming stores in 2009 will result in a near-term reduction in the number of Le Gourmet Chef stores.

At North American Coal for the full year ended December 31, North American Coal reported income from continuing operations of $30.6 million on revenues of $130 million, compared with income from continuing operations of $19.8 million on revenues of $115 million in 2008.

For the full-year 2009, North American Coal generated cash flow before financing activities of $76.5 million, which was comprised of net cash provided by operating activities of $42 million plus net cash provided by investing activities of $34.5 million, and includes proceeds of approximately $41 million from the sale of assets of the Red River Mining Company.

If you turn to North American Coal's outlook, the Company expects steady performance at its coal-mining operations in 2010, provided that customers achieve currently planned power plant operating levels. As a result, tons delivered at the coal mines in 2010 are expected to be comparable to 2009. And royalty income in 2010 is expected to be moderately lower than 2009.

Limerock deliveries, on the other hand, are expected to be significantly higher in 2010 than in 2009. In early 2010, the U.S. Army Corps of Engineers began issuing new permits for North American Coal's limerock customers in the Lake Belt region of Florida where an unfavorable legal ruling terminated the customer's previous mining permits. As a result, most of the Company's limerock operations are expected to be operating again by the end of the first quarter.

However, production will ramp up slowly and not all mining permits will be issued at once. In addition, although these mines are back in production, production levels are expected to continue at low rates in 2010 because of the depressed -- continued depressed levels of the southern Florida housing and construction markets. Delivery levels are not expected to return to 2008 levels until those markets recover.

The Company has a number of new projects that are expected to begin to generate modest income during 2010. These projects are in development phases and will not be fully operating for several years.

In the second quarter of 2009, North American Coal entered into a contract mining services agreement to mine approximately 300,000 to 400,000 tons of coal annually for a new customer, with initial deliveries expected to commence in 2010. In addition, in the third quarter of 2009, North American Coal entered into a contract mining services agreement to mine approximately 650,000 tons of coal annually for a customer that currently purchases coal from the Sabine Mining Company, with initial deliveries expected to commence in 2013. Finally, in the fourth quarter of 2009, North American Coal entered into a contract mining services agreement to mine approximately 2.7 million tons of coal annually for a new customer, with initial deliveries expected to commence in 2012.

North American Coal also has a number of new project opportunities for which it expects to incur additional expenses in 2010. The Company continues to seek permitting at its Otter Creek Reserve in North Dakota in preparation for the expected construction of a new mine. The permit is expected to be issued in mid-2010.

In addition, the Company continues to work on a project with Mississippi Power to provide lignite coal to a new coal-fired integrated gasification combined-cycle power plant expected to be built in Mississippi.

Overall, North American Coal expects full-year 2010 income from continuing operations to increase moderately over 2009 income from continuing operations, after excluding the lease bonus payments of $7.1 million pretax received during the third quarter of 2009. Cash flow before financing activities in 2010 is expected to be significantly positive, but also down significantly from 2009 after excluding the effect of the Red River Mining Company's sale and the lease bonus payments as a result of changes in working capital.

North American Coal's contract at the San Miguel Mine expires at the end of 2010. The Company intends to respond to San Miguel Electric's request for proposal to operate the mine beyond 2010.

Overall, we expect that in 2010 NACCO's continuing results will be driven by a big improvement at NACCO Materials Handling Group as that business moves from a large loss to roughly breakeven. And we expect continued strong performance at our other subsidiaries, with North American Coal and Kitchen Collection similar to 2009 and Hamilton Beach Brands down somewhat.

Cash flow before financing at the subsidiaries is expected to be positive, although clearly well down from the previous year due to the non-recurrence of the big reductions in working capital which occurred in 2009.

Most importantly, I think all of our businesses are in exceptional operating shape and very well positioned to take advantage of both an economic upturn, in the case of three of our businesses in the capital goods and consumer businesses, and in the case of North American Coal, new coal-mining opportunities.

Those are my update comments based on the earnings release, and now I'd like to turn to questions, if you have any.

(Operator Instructions).

While we're waiting for listeners who have questions, let me provide you with my contact information for any additional questions you might have after the conclusion of today's call. My number is 440-449-9669. Do we have any questions?

Schon Williams, BB&T Capital Markets.

Al, can you help me out and -- just to understand the pieces in terms of getting material handling back to breakeven. It sounds like orders are improving, but you're still kind of -- you're still looking for not robust growth next year at the topline. It also sounds like there may be some additional employee expenses coming online. I'm just trying to figure out how we get from a pretty significant loss to breakeven. What are the major pieces?

I think, if I were you, I wouldn't look at the full year at all. There are many anomalous things going on during the full year.

What I'd look at is the fourth quarter. We were breakeven in the fourth quarter, and basically volume will drive the results off the fourth-quarter base with somewhat seasonally lower volume in the first quarter, and then improvements gradually during the course of the year as it turns up. That's the best way to understand it.

Okay, so the gains that you guys made in Q4, those are sustainable gains, then?

Absolutely.

Okay. And then, I guess pulling back a little bit, do you have a sense of where market share might've fallen out this year? Granted, it was a tough year for forklift manufacturers, but do you have a sense of -- maybe with the new rollouts, has that helped market position at all?

You know, I think we're going to have to see how things develop during the course of 2010. I'm very optimistic that our new products will put us in a position to gain market share, especially in light of the moves we've been making to strengthen our distribution capabilities.

On the other hand, it's very difficult for me to say really what the effective base is in 2009 because we took very strong actions to wash out excess inventory at our dealers' ultimate level. And so, our factory shipments reflect the actions that we took, which are probably different from our competitors in a very substantial way, to reduce our inventories. So, we don't have the same clarity on ultimate retail market share that we do on factory market share.

In addition, during 2009 we were pretty careful to balance the prices at which we were willing to sell trucks with the margin that we could get for that. And our inventories, our own manufacturing inventories were generally under increasingly good shape as we went through the year. We believe that some of our competitors had inventory that they felt compelled to move into the marketplace in order to enhance their balance sheets and keep their factories operating at a low level.

So, we took different strategies in dealing with our own reductions of inventory than we believe our competitors did.

So, the result is 2009 is a very odd year and hard to really calibrate. What I do feel is that our historical levels of market share, if you look back in 2007, 2008, or 2006, that those are levels we feel very confident we can be at and we feel that we have an opportunity to be above those levels, but it's going to be hard to predict. And we're going to also have to watch again in 2010 what the trade-offs are between margin and share in certain kinds of customer transactions because some of our competitors have, as we do, a very significant excess capacity and it creates a difficult environment and one where, at least from our point of view, we're concentrating on ensuring that we have a good long-term business, and we're selling the value of our products and gaining share position in that way.

That's a complicated answer to your question, but it's a very complicated year.

I appreciate the insight. Moving on to Hamilton Beach, can you talk -- is there any way you can quantify exactly how much you guys are looking to bring back online in terms of people call -- I mean, could we get back to levels in terms of SG&A -- are we talking about getting back to 2007, 2008 levels, somewhere in between where you are now and those levels? I'm just trying to get an (multiple speakers) order of magnitude.

Schon, you know compensation is going to be one piece of it, and there's going to be some additional compensation costs, but we phased a lot of it back in in 2009.

There are some other things going on there as well. We have kind of -- now find ourselves operating at a quite a favorable product liability position in comparison to the past. That kind of result can generate a net benefit in 2009 which is not repeating in 2010 as you come back to a more normalized charge for product liability.

In addition, we were in a -- if you look at the end of 2008 when we were having very substantial cost increases in our products and we had to improve our prices, then in 2009 we had the prices established and we were benefited by, again, the shorter term by some favorable cost movements in our product costs, so we don't expect that our standard margins will be as robust in 2010 as they were in 2009.

But that's about as far as I'd like to go in describing the factors that are at work. But I wouldn't assume that this is all -- I think it would be a mistake to assume that this is all an SG&A issue related to compensation costs, because it isn't.

Then a little bit bigger picture on Hamilton Beach. There seems to be a lot of investor concern out there, specifically with your exposure to Wal-Mart. I know Wal-Mart's been moving to consolidate vendors. They've been very aggressive in terms of introducing product label into new product categories. What -- how would you address those concerns?

Wal-Mart -- first of all, and to some degree, we would hope to be a consolidator rather than a -- than have reductions, because we believe that we provide a lot of value-added services to Wal-Mart.

Secondly, you're right. It's always a competitive situation. The areas where we have our position are not as fully exposed to the private-label portion of the market. There is some private-label activity, but in fact we produce some of the products for the private-label activity and the kinds of price points where we are strongest.

And Wal-Mart's strongest use of private-label brands or licensed brands is really at their opening price-point and lower price-point products where we aren't a significant player with Wal-Mart anymore. We exited that business several years ago and -- because the margins just weren't there for us.

So, we feel we're reasonably positioned and that we simply have to continue to provide innovative products and value-added services. And if we do that, we feel reasonably comfortable that we can maintain our position with Wal-Mart.

Now, there are product promotional activities which come and go, and the level of those can change. We may have -- we had quite a strong position at the end of 2008. We had a less strong position in those areas at the end of 2009. And we don't really know yet just exactly how that will be positioned, whether it'll be more like 2008 or like 2009.

And so, that's kind of the best overview I can give you in that area. We are very conscious of it. We work very hard to ensure that we have the best possible people working with Wal-Mart. It's been a constructive but tough-minded relationship. But it's very professional.

One last question, then I'll get back in the queue. It looks like overhead expenses within coal, at least on the consolidated side, I guess were ahead of my expectations. I understand you guys are looking at additional expenses related to the development of some new mines in North Dakota there. Can you just talk about those overhead expenses in 2009 versus what you foresee in 2010 and 2011? Are we looking for kind of about even? Are we looking for a significant acceleration? Can you just give me a frame of reference here?

I would have to look at the numbers that you're talking about because our overhead structure has not changed in any significant way at North American Coal.

What changes are royalty income and royalty expense, if you are looking at things that are apart directly from how our mine activities are operating. And then, we have expenses that are associated with -- in a way, it's in our royalty operations, but we have expenses that are associated, for example, with the permitting of the new coal mine in North Dakota. Those expenses are dropped to the bottom line, but they are more associated with getting a permit approved, with additional -- it can be additional drilling activities. It could be additional mine planning, operations, a whole variety of things.

But there is nothing in the area of overhead expenses in the sense that I think of it that is changing in any significant way. Our manpower is pretty constant. Clearly we're bringing on a few people that are associated with the new mines, but those costs are being covered by the revenues that we receive, and that would be my explanation for you.

(Operator Instructions). Richard Davis, MetLife.

Could you please talk about your strategy regarding your revolver maturity at NMHG in December? I understand it's not drawn now, but, do you think you'll need to draw on it throughout the year and are you contemplating an amend-and-extend transaction any time in the near future?

We will, as a matter of ordinary course, be going back to extend that revolver. It is a secured revolver. It's an asset-backed facility. We certainly expect to replace it.

With regard to your question about how much of it will be drawn, it's a hard question to answer in a way because, first of all, we do use our revolvers within the month in a way that they're not always used at the end of the month, although that's not a huge factor. More important is the distribution of our cash on a global basis. We have more cash in some of our offshore areas, and -- so how we use that will depend.

But generally speaking during the course of 2010, at the current time we would not expect to draw on our revolver to any major degree.

Right, but you will use it intra-quarter, as you say?

A little bit. Not a lot. And it will depend on the areas we use. We have used it in Europe to some degree, but frankly, it -- at the cash levels that we have now and that we expect to have as we look out over this year, we don't expect much use of the revolver.

Okay. And then, generally speaking, though, you would prefer to maintain a revolver in place as we --

Yes.

Okay.

Well, you know, there are other reasons, too. I mean, we have -- we need to have facilities in place because we have other sort of collateral obligations and we have to ensure that we have the liquidity to provide for, and that's just as a part of our overall bank debt arrangements. Those can include backing for our foreign currency hedging transactions, you know, stuff like that.

Okay. And how about timing? Leaving it late could become an issue.

Yes, we are gathering our thoughts as you and I speak here.

Okay. And while I have you, if you could just talk a little bit about your CapEx at NMHG. I know historically it's run in the low 40s per year and I know the parent has footed some of the bill this year. Can you talk about how much you've -- NACCO funded CapEx at NMHG this year, and maybe your thoughts on CapEx (multiple speakers)

No, I'd just tell you to look to next year. We don't expect to do much of that as we look to next year at the current time.

We -- the capital expenditures will be up to some degree, but our plants are in very good shape. And, so, we don't have a lot of replacement that has to be done in our manufacturing facilities at the current time.

Secondly, our infrastructure in IT is also in quite good shape, and we have the ability to make further investments there pretty much when we think that the market is turned up and we can be more comfortable with that.

And then, finally, we've had CapEx that has gone into our regular retail maintenance of our fleets and our own retail operations. But we've sold most of those and, in fact, we see in connection with the sales of those some substantial further cash generation for the consolidated company in total and no significant capital expenditures.

So, I think that we have identified the kinds of excellent dealers that we'd like to have for the very few remaining retail operations that we own, which are in Asia and in the UK. And I would expect it to -- if things go the way we hope, that during the course of the earlier part of this year that those operations are going to be gone in addition. So, I see no CapEx requirement there.

But I think that kind of gives you a flavor for our feeling about 2010, and I guess I'd just add, and part of the reason that I'm careful in the way I comment, is that there is a distinction between what we might do and what we have to do. And in NACCO Materials Handling Group, at the have-to-do level, there really isn't a huge amount in there where we have some discretion as we look at the year ahead and how we think about that. That's a long answer to your question, but --

That's helpful. Thanks very much.

Tony Barbato, OppenheimerFunds, Inc..

Can you touch on cash balance at NMHG?

It's very substantial. At the end of the year, we had cash of -- as I think I indicated, we had cash of a hundred and -- we had cash generated of $121 million for the year, and I think the cash balance at the end of 2009 was about $163 million. And so, you can tell from that, it's pretty substantial.

Schon Williams.

Just a quick follow-up. It looks like tax rate almost got back to normal here. Any guidance on what we might be looking for in 2010?

Let me ask Ken to comment on tax rates. You know we -- as an introduction to that, I'd just comment that the tax rules cause us a lot of complexity in my mind, I guess is the right way to put it, between what we are required to use as a tax rate under GAAP accounting rules at the end of each quarter, in comparison to what that tax rate is at the end of the fourth quarter for the full year.

And there is a lot that goes on in our Company because we have certain areas where we don't have the normal tax benefits because of losses that have been generated. Those are overseas, in the main, and that's going to improve as the volumes come up, given the restructurings that we've done. So, that's sort of one type of problem.

And a second type of problem are the calculations that relate to the coal company where we have depletion, and the results vary because we have a mix of mines with where we have depletion and those where we don't. And that adds some confusion.

With that backdrop, let me ask Ken if he can comment on tax rates as we look at the year coming up.

I mean, I think it's fair to say that Kitchen Collection and Hamilton Beach are just normal tax rates. There's nothing really special going on in those. It's in the other two, right, Ken?

That is correct, Al. Schon, I think you've got to look at us in terms of the pieces because we have a vastly different tax story between NMHG on one side, North American on the other side, and then the two consumer businesses.

The two consumer businesses are pretty straightforward, federal plus some state. Hamilton Beach has a little international exposure, but not enough to really tilt the meter, so I think those are fairly easy to forecast. And, of course, there is a seasonality issue there that you have losses in the front end of the seasonal calendar for the housewares industry and then, of course, income in the back half of the year.

When you move onto North American Coal, you've got to focus on the percentage depletion fit to -- as it drives a lower effective tax rate. In short, you go from a 38% rate with state taxes, then if you're benefited by percentage depletion, that gets cut down by 40%, so that's kind of a rule of thumb for the percentage depletion activities. But even in North American Coal, there is a mix.

When you move on to NMHG, and in particular when you look at the 2009 information, you're going to see in our 10-K that we have our statutory effective rate drawdown, and there are a couple of large items there that you're going to want to normalize out. We did have a benefit for a capital loss that we booked and we did provide for taxes on future repatriations. Those are kind of large oddball issues that will not reoccur, but are primarily offsetting. So I think I would look to that.

And then, finally, in some jurisdictions where we have deferred tax assets, we're in a position where we cannot book additional benefits until we start earning income in those jurisdictions. So as we generated losses in those jurisdictions in 2009, we essentially provided no benefit. Only the jurisdictions that we had income and loss in for NMHG did we continue to provide taxes on, and that kind of goes in the mix as well.

But taxes are very complex. I think the best way to look at this is your beginning comment, we are beginning to get back to a normalized rate. But again, as we end up with recoveries in those jurisdictions that were no longer benefiting losses, we will again have some distortion in the future. That's just the way the accounting works.

(Operator Instructions). Richard Davis.

Just a quick question about raw materials. I thought I heard you say that, NMHG, you would kind of expect raw materials to be flattish in 2010. I'm just wondering if you could comment about that. I mean, some of the other industrial names like [follow] have called out steel especially as maybe exerting some pressure in the second half of this year. Do you have contracts in place or can you just talk a little bit about them?

Yes, we do see some modest increases in the second half of the year for the reasons that you mentioned.

But we do have some commitments in place, but I think, more importantly, the best way to understand why we'll be pretty flat is that, on balance, our regular -- what we call value improvement program, our cost-reduction activities will generate enough that we've identified to offset the effect of any increases that we see in the second half.

(Operator Instructions).

Okay. We thank you all. I think Christy would be happy to take follow-up questions, if you have any. Christy, do you have closing comments?

Just thank you for joining us today. And we do appreciate your interest. If you do have any additional questions, again you can reach me at 440-449-9669. Thanks and have a good day.

Thanks a lot, everybody.

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