NACCO Industries Inc (NC) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter two 2013 NACCO Industries earnings conference call. My name is Michelle and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to hand the call over to Christina Kmetko. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. Last night a press release was distributed outlining NACCO's results for the second quarter ended June 30, 2013. If you have not received a copy of this earnings release or would like a copy of the Q, you may obtain copies of these items on our website at 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 are Mark Barrus, NACCO's Vice President and Controller, and J.C. Butler, Senior Vice President, Finance, Treasurer, and Chief Administrative Officer. I 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 our 10-Q.

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

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

Good morning. NACCO had income of $5.1 million or $0.63 a share on revenues of $196 million in the second quarter of 2013; and that compared with income of $3.4 million, $0.42 a share, on revenues of $171 million in the second quarter a year ago. Consolidated EBITDA from continuing operations for the second quarter of 2013 and the trailing 12 months ended June 30 was $13.2 million and $86.3 million, respectively.

The Company's cash position was $85 million as of June 30 compared with $140 million as of December 31, 2012, and $160 million as of June 30 a year was. Debt as of June 30 of this year was $163.9 million compared with $177.7 million as of December 31, and $164 million as of June 30, 2012.

NACCO implemented a stock repurchase program in November 2011 that permits the purchase of up to $50 million of the Company's outstanding Class A common stock. As of June 30, NACCO has repurchased approximately 500,000 shares for an aggregate purchase price of $26.8 million, including $21.6 million of stock purchased during the 6 months ended June 30 of this year.

As a highlight, before I go into the details of the individual subsidiary companies, I would note that net income in the second quarter of this year includes a charge of $2.3 million at Hamilton Beach, or $1.5 million after-tax, related to an estimate for an environmental liability to Hamilton Beach's Picton, Ontario, facility.

Turning now to the discussion of the individual subsidiary results, I will begin with North American Coal. The Coal Company's net income for the second quarter was $9 million on revenues of $43.6 million, and that compared with net income of $7.1 million and revenues of $19.2 million in the year-ago quarter.

Revenues increased in the second quarter compared with the year-ago quarter primarily due to the Reed Minerals acquisition, which occurred on August 31, 2012. Reed Minerals contributed $20.5 million of revenue in the second quarter. Higher royalty and other income and an increase in deliveries at the limerock dragline mining operations also contributed to the improvement in second-quarter revenues. Fewer deliveries at the Mississippi Lignite Mining Company resulted -- as a result of an extended shutdown at the customer's power plant partially offset the increase in revenue.

Net income in the second quarter of 2013 increased compared with the second quarter a year ago. The improvement was primarily the result of higher royalty and other income, partially offset by the absence of a $2.3 million pretax gain on the sale of land recognized in the second quarter of 2012 and a net loss of $900,000 at Reed Minerals.

The results at Reed Minerals were below expectations due to lower sales resulting from lower demand for metallurgical coal and higher mining costs attributable to unexpected major equipment repairs and operational productivity which, while improving, has not yet reached expected levels.

Steam coal tons delivered in the last half of 2013 are expected to increase over the same period a year ago at the unconsolidated mining operations, provided customers achieve currently planned power plant operating levels for the remainder of the year.

Demery Resources Company's Five Forks Mine commenced delivering coal to its customer in 2012 and is expected to increase production this year, with full production levels expected to be reached in late 2015 or in 2016. Liberty Fuels also commenced production in 2013 and is expected to reach full production levels of 4.5 million tons of lignite coal annually for the Mississippi Power Company's new Kemper County Energy Facility in late 2014.

At the consolidated mining operations, deliveries of the Mississippi Lignite Mining Company are expected to be slightly lower in the second half of 2013 than in the latter half of 2012. Deliveries at the Mississippi Lignite Mining Company are expected to increase longer-term as a result of recently implemented and anticipated operational improvements at the customer's power plant.

Metallurgical coal sales for Reed Minerals in the second half of 2013 are expected to be slightly higher than the first half of 2013, but below the Company's initial expectations as a result of volume expectations for the metallurgical coal market. Overall operating results at Reed are expected to be comparable to the first half of 2013 as a result of these volume expectations and operating costs, which are not yet at levels expected in future years. Post-acquisition productivity improvements are being made to increase mining efficiencies, and substantial improvements are expected in 2014 once a new large dragline is in operation. Also, limerock deliveries for the second half of 2013 are expected to decrease compared with deliveries in the last half of 2012, as customer requirements are expected to decline moderately. Royalty and other income in the remainder of 2013 is also expected to be lower than the same period in 2012.

Unconsolidated mines currently in development are expected to continue to generate modest income in the remainder of 2013. Three mines in development are not expected to be in full production for several years.

In the first quarter of 2013, mining permits needed to commence mining operations in Texas were issued for the Caddo Creek Resources Company's project and the Camino Real Fuels project. Caddo Creek expects to begin making initial coal deliveries in 2014, and Camino Real Fuels expects initial deliveries in the latter half of 2014 and expects to mine approximately 3 million tons of coal annually when in full production. Coyote Creek Mining Company is developing the lignite mine in Mercer County, North Dakota, from which it expects to deliver 2.5 million tons of coal annually beginning in 2016.

North American Coal also has new project opportunities for which it expects to continue to incur additional expenses in 2013. In particular, the company expects to move forward to obtain a permit for its Otter Creek reserve in North Dakota in preparation for the anticipated construction of a new mine. Overall, North American Coal expects net income in the second half of 2013 to decline from the same period in 2012, primarily due to the absence of pretax gains from asset sales of approximately $4.5 million recognized during the last half of 2012.

Excluding the effect of asset sales, operating results are expected to be down slightly compared with 2012. Cash flow before financing activities for 2013 is expected to be higher than 2012, but not at the levels of 2011 due to anticipated increases in capital expenditures at Mississippi Lignite Mining Company and at the Reed Minerals operations. Capital expenditures associated with the Reed Minerals operations were designed as part of the Reed Minerals acquisition plan to improve mining efficiencies by reducing costs and increasing production capacity.

Over the longer term, North American Coal's goal is to increase earnings of unconsolidated mines by approximately 50% over the next five years through the development and ongoing maturation of its new mines and normal escalation of contractual compensation at its existing mines. At the consolidated mines, North American Coal has a goal of at least doubling the contribution from consolidated mining operations, as the Mississippi Lignite Mining Company benefits from recently implemented and anticipated operational improvements at its customer's power plant and as the company executes its long-term plan at the Reed Minerals operations.

You may notice that in the press release there is an additional supplemental schedule of financial information related to North American Coal, which outlines in additional detail, than we have previously done, earnings from unconsolidated mines, contribution from consolidated by mines, and the contribution from royalties and others, and our SG&A. And it leads to overall reconciliation with overall operating profit for the business.

North American Coal also expects to continue its efforts to develop new mining projects. The Company is actively pursuing domestic opportunities for new or expanded coal mining projects, which includes prospects for power generation, coal to liquids, coal to chemicals, coal gasification, coal drying, and other clean-coal technologies.

Also, the company views its acquisition of Reed Minerals as the first step in a metallurgical coal strategic initiative which includes coal exports. North American Coal also continues to pursue additional non-coal mining opportunities, principally in aggregates, and international value-added mining services projects, particularly in India.

Hamilton Beach reported net income of $2.0 million for the second quarter of 2013 and revenues of $115 million, compared with net income of $2.2 million for the second quarter a year ago and revenues of $111 million. Net income in 2013 includes a charge of $2.3 million, or $1.5 million after-tax, related to an estimate for an environmental liability at Hamilton Beach's Picton, Ontario, facility.

Revenues increased moderately in the second quarter compared with the second quarter a year ago, primarily due to an increase in sales of products with higher price points, mainly in the US consumer retail market. The improvement in revenue was principally or partially offset by lower unit sales volumes in the international and Canadian consumer markets.

Excluding the effect of the environmental charge, operating profit and net income increased in the second quarter compared with the year-ago quarter. This improvement in net income was mainly attributable to sales of higher-margin products and a favorable product liability adjustment of $900,000 pretax primarily as a result of a change in estimate. Higher selling, general, and administrative costs mainly due to higher employee-related costs, increase in advertising expenses, and additional costs incurred to execute Hamilton Beach's five strategic initiatives partially offset the improvement in operating profit and net income.

Looking forward, Hamilton Beach's target consumer, the middle market mass consumer, continues to struggle with financial and economic concerns. As a result, sales volume in the middle market portion of the US small kitchen appliance market in which Hamilton Beach participates are projected to grow only moderately in the second half of 2013 compared to a year ago. International and commercial product markets are expected to grow reasonably in the second half of 2013 compared to the same period in 2012.

Hamilton Beach continues to focus on strengthening its North American consumer market position through product innovation, promotions, increased placements and branding programs, together with appropriate levels of advertising for the company's highly successful and innovative product lines. Hamilton Beach expects The Scoop, the Two-Way Brewer, and the Durathon iron product line, all introduced in late 2011, as well as the FlexBrew, launched in late 2012, to continue to gain market position as broader distribution is obtained over time.

The Company is continuing to introduce innovative products in several small appliance categories. In the first quarter of 2013, Hamilton Beach launched the Hamilton Beach Breakfast Sandwich Maker, which provides an innovative and convenient way for consumers to cook breakfast sandwiches at home. These products, as well as other new product introductions in the pipeline for 2013, are expected to increase both revenues and operating profit.

As a result of these new products and the execution of the company's strategic initiatives, Hamilton Beach expects to increase volumes and revenues in the second half of the year compared to the same period a year ago. Overall, Hamilton Beach expects net income in the second half of 2013 to be comparable to or slightly up from the second half of a year ago, as anticipated increases in operating profit from increased revenues are forecasted to offset expected increases in operating expenses to support Hamilton Beach's strategic initiatives and promotional programs.

Product and transportation costs in the second half of 2013 are currently expected to be comparable with the same period in 2012. Hamilton Beach expects cash flow before financing activities for 2013 full year to be moderately lower than a year ago due to increased working capital.

Longer term, Hamilton Beach continues to work to take advantage of the potential to improve returns on sales through economies of scale derived from market growth and a focus on its five strategic initiatives. Those five are -- enhancing its placements in the North American consumer business; enhancing Internet sales; achieving further penetration in the global commercial market; expanding internationally; and entering the only-the-best segment of the appliance market. During the first half of 2013, Hamilton Beach continued to make strides in the execution of its strategic initiatives and expects to continue to do so over the remainder of this year.

Kitchen Collection reported a loss of $2.4 million on revenues of $38 million in the second quarter, compared with a loss of $3.2 million and revenues of $42 million in the year-ago quarter. Revenues declined in Kitchen Collection primarily as a result of the loss of sales from closing unprofitable Le Gourmet Chef and Kitchen Collection stores since June 30, 2012, and a decrease in comparable-store sales at both Kitchen Collection and Le Gourmet Chef stores.

The decline in comparable-store sales was predominantly due to a decrease in customer visits and store transactions, partially offset by improvements in the average sales transaction value. The decline in revenue was partially offset by sales at newly opened Kitchen Collection stores.

At June 30, Kitchen Collection operated 254 stores compared with 265 at a year ago; and Le Gourmet Chef operated 14 ((sic - see press release, "41") stores compared with 55 stores a year ago.

The decrease in Kitchen Collection's second-quarter net loss was primarily the result of a higher separate company effective tax rate in 2013, which generated a greater tax benefit on Kitchen Collection's loss from operations. The benefits from closing unprofitable stores and lower employee-related costs largely offset the effect of reduced sales and a shift in mix to lower-margin products at Kitchen Collection comparable stores.

Looking forward, Kitchen Collection believes the middle market consumer remains under pressure due to financial and economic concerns, and those concerns are expected to continue to dampen consumer sentiment and limit consumer spending levels by Kitchen Collection's target customer in 2013. Kitchen Collection expects to increase the number of Kitchen Collection stores in the second half of the year compared with the first half. However, the Company expects to continue to have fewer aggregate stores in 2012, as it expects to close six additional Le Gourmet Chef stores during the remainder of this year. As a result, Kitchen Collection expects revenues in the second half of the year to decrease compared with the second half of last year.

Overall, Kitchen Collection expects an increase in net income for the second half of 2013 compared with the second half of 2012, primarily in the fourth quarter. However, these improvements are not expected to completely offset the losses for the first half of the year. As a result, Kitchen Collection expects a moderate loss for the full year.

The net effect of the closing of a number of stores early this year and the anticipated opening of new stores during the second half of this year are expected to contribute to improved results over the remainder of the year compared with the second half of last year. Nevertheless, a shift in sales mix from higher-margin gadgets to lower-margin electrics is expected to continue to affect operating margins negatively.

Kitchen Collection expects to continue to make improvements in store formats and layouts, and promotional offers and merchandise mix at both the Kitchen Collection and Le Gourmet Chef stores to offset the shift in product mix. Kitchen Collection expects positive cash flow before financing in 2013 compared with the essentially breakeven cash flow before financing activities in 2012.

Longer term, Kitchen Collection expects -- plans to focus on comparable-store sales growth around a sound store portfolio. Kitchen Collection expects to accomplish its goals by enhancing sales volume and profitability through continued refinement of its formats and ongoing review of specific product offerings, merchandise mix, store displays, and appearance, while improving inventory efficiency and in-store inventory controls.

The Company will also continue to evaluate and, as lease contracts permit, close underperforming and loss-generating stores. Kitchen Collection expects to have closed most underperforming and loss-generating stores by the first quarter of 2014.

In the near-term, Kitchen Collection expects to concentrate its growth on increasing the number of Kitchen Collection stores, with store expansion to be focused on identifying the best positions in the best outlet malls for Kitchen Collection stores. Kitchen Collection also expects to explore growth opportunities in textiles, with limited testing occurring later in 2013, and in e-Commerce.

In closing, I would note that NACCO and Other, which includes the Parent Company operations, had a loss from continuing operations of $1 million for the second quarter compared with a loss of $1.7 million in the second quarter a year ago. In the second quarter, the Company recorded a $2.4 million interim tax provision in eliminations at the NACCO level compared with a $1 million interim tax provision in the second quarter a year ago, to adjust to the overall consolidated effective tax rate.

That concludes my comments on the second quarter earnings release for NACCO Industries, and I would be happy to answer any questions that you may have.

(Operator Instructions) Tara Reisberg, Moab Partners.

Good morning. Just want to start off by saying we appreciate the additional disclosure you guys have provided this quarter, especially in regard to North American Coal. It is very helpful for us. I guess we will start off with the consolidated mines.

In terms of the Mississippi Lignite power plant, is that extended shutdown over or will that continue to impact results through the rest of the year?

That shutdown is over.

Okay. So it shouldn't have an impact on the second-half tons?

Correct.

Okay. In terms of Reed, what did the unexpected major equipment repairs entail?

Well, you know, it is very difficult to evaluate in the context of an acquisition the amount of maintenance that is required and the kinds of things that we think are appropriate in terms of getting the equipment up to the levels that would generate the maximum productivity. So we have gone through an extensive process of ensuring that the equipment operates at the kind of levels that North American Coal has set its standards on; and we expect those to be largely behind us.

Was it one of the draglines that was down? It sounds like you guys are getting a new one in the beginning of next year.

It was not that the draglines were down. It really had much more to do with our rolling stock, equipment of various kinds. And I think that is all that I'd want to say at this point.

Okay. So far, Reed has underperformed your expectations, largely given to the metallurgical coal market. What are your expectations for that business at this point? How long might it take for the company to return to profitability?

Well, we continue to be hopeful that we will move into profitability relatively quickly. It was always part of our expectation that we would both expand our capacity -- and, as you noted, there is a new dragline that will be coming online -- and that we would have our own people beginning to develop additional sales opportunities with new customers. That process continues to move forward, and it is certainly our goal to have a profitable year in 2014.

Okay, how many tons did Reed deliver prior to your acquisition? And how much do you think it might be able to deliver with the addition of this new dragline?

I don't think we are going to get into the kind of detail in terms of the forecasting that we do.

Okay. Fair enough. Moving on to the unconsolidated mines, why were the tons delivered for the unconsolidated JVs down year-over-year?

Well, in all these unconsolidated mines, we do what our customers ask us to do. In other words, it is their requirements that determine what we do.

And to the extent that their requirements vary seasonally, they vary with outages, there are a whole variety of considerations. So I would just really leave it at that, in terms of how we look at the overall situation.

We take a long view and we tend to oscillate around the levels that our customers have when their power plants are operating at full levels. I think that is the best answer that I can really give you.

We kind of gave you some perspective on the second half as well, and to tie it all together I think it is much more realistic to look at these from a full-year point of view.

Okay, great. Do those customers have minimum delivery requirements in the contracts?

Well, they can't operate a power plant without -- to the extent that these are -- let me take a step back -- the bulk of these and the bulk of the tons are all related to power plants. The power plant is built on top of the coal mine. The power plant gets coal from nowhere else.

So if it is operating, if the power plant is operating, it takes our coal. It is not a market-based situation, and that is why, as you know, we had the extended outage in the consolidated mines, the Mississippi Lignite Mining Company, and so that reduced the tons that they take. Now there are protective provisions in our contracts which means that we are reimbursed for certain costs, even if the company doesn't take the tons of coal.

Our profits tend to be dependent on the number of tons that are taken; but the costs tend to be reimbursed by the customers under the contractual provisions that we have. So I think it is not like a free market situation where the company, if the volume is lower, is absorbing a very substantially higher fixed cost in most cases.

So especially in our unconsolidated mines it is much closer to a service agreement than a free market coal sales situation, where the number of tons is determined by the market, the price is determined by the market, and the costs are determined by the company. None of those factors are really at work in quite that -- in our contracts.

Okay, great. In terms of those contracts, do you expect the plus portion of your cost-plus contracts to stay flat over time, decrease over time, go up over time? How should we consider that?

Especially given that, if you use today's number on a per-ton basis, that would project greater than 50% growth there over the next several years.

We tend not to think in terms of per-ton numbers, the way we think about the business. But what I would say is that all of these contracts have escalators in them. If there are certain costs that we are responsible for, those have escalators that are designed to allow us to recapture those costs, and our profits escalate over time.

The escalating provisions vary. But there are various government-provided indexes that control the incremental profits that are incurred by the company.

Okay, great. In terms of pricing, we know you guys took the Coyote Station contract from Westmoreland. We are just wondering how aggressive you are being on pricing in trying to win more contracts, and if you see any potential to win further contracts from either Westmoreland or BNI.

Again, let me emphasize that in the case of Coyote, we are entering into a long-term contract with them. These contracts are all take-or-pay type contracts of one form or another. And different contracts have different provisions for how capital costs are handled and passed through and so on.

So the pricing that we use is not free market pricing, where you can run into the kind of issue that you are implying. What I would simply say to you is that the profits are relatively predictable if we can mine the way we think we can mine and if the customer's power plant takes the number of tons that they expect to take to operate at the levels that they have given us as the assumptions for their operating performance, and which we have determined to be reasonable.

Then we calculate returns and hurdle rates, and in terms of the investment and what we think our services are worth. And we price the contracts accordingly.

In all of these cases, it really is much more a function of the cost of mining the coal that we control and that the customer wants to tie up on a long-term basis. In the case of the contract you are referring to, the power plant really did not have reserves -- or any reserves that they had access to were extremely high cost. So it is a contract that we feel very comfortable with, and that will be good for them and good for us.

Al, it is J.C. I would just like to clarify that the reference was made that we took the contract away from another miner. The customers actually ran an open RFP process, solicited proposals from anybody that wanted to bid. We submitted a proposal and like others did -- I believe Westmoreland did, but I don't know for sure. And the customer selected us as the folks that they wanted to go forward with. So it was an open RFP process.

In other words, their contract really came to an end, and then the question was where they went from there.

(multiple speakers) to an end in May.

Excuse me, J.C.?

May of 2016 is when that contract comes to an end. So in anticipation of that is when the company -- when the customer ran the RFP.

So it is a very important point that in almost everything we do we have competitors, and the question is how their power plant is going to be serviced from coal reserves that are in the general area of the power plant.

Or else, as in the case of the Liberty Fuel project in Mississippi, the decision by Mississippi Power to locate that plant on top of our coal reserves, as opposed to any other coal reserves that they might have looked at, because they thought that we provided the best mining cost structure for them in terms of their power plant.

Understood. Okay. In regards to the entire market, I guess mainly in North Dakota, are there any other contracts, either yours or with competitors, that are going to be coming up for rebid soon, I guess, that might be included in an open RFP process?

All of the existing power plants have a long time to run. We have referred to the development of a new mine called Otter Creek and the permitting process. So we certainly are looking for new customers for Otter Creek and having discussions with a variety of people about that operation. But nothing that affects our existing plants -- mines. You have anything you want to add, J.C.?

No, I was just going to say our contracts are long-term contracts. And as far as other RFPs that are open or that we might or might not participate in, I don't think we want to comment on that.

Okay. You guys had mentioned the Liberty Mine. Is that ahead of schedule? I think we thought it was not supposed to commence deliveries until mid-2014; but it sounds like it is on track to reach full production in late 2014. Or is (multiple speakers) the ramp-up doesn't take that long?

Yes, so it is right now producing coal but not delivering coal. The production is just being put on a stockpile. Deliveries will start later in conjunction with the startup of the gasification power plant, and deliveries -- ultimate production is on schedule.

Okay, great. I think that covers North American Coal for us. Moving on to Kitchen Collection, you said that most of the underperforming and loss-generating stores should be closed in early 2014. Does that imply or is it reasonable to assume that Kitchen Collection may be profitable some time maybe mid-2014?

I would say that we would certainly be hopeful that Kitchen Collection in total would be profitable over the whole year. Essentially all of the profits are made in the fourth quarter of the year. So even in the best of times, Kitchen Collection would have lost money in the first three quarters of the year because of the highly seasonal aspect of that business.

But the premise that we would be in more normal conditions I think is correct in 2014, or after the first quarter of 2014. I think the unknown is consumer activity at a factory outlet malls, outlet malls. I think that has been a weak spot in the economy.

Certainly as employment improves, as unemployment declines, we would expect to see some improvement in traffic flows into outlet malls. And that is a very important factor from our point of view, just setting aside what we do to control our own result.

And Al, if I could add one more thing regarding store count. the question about -- do we expect to have all our unprofitable stores closed? The opening and closing of stores is a dynamic process. We are constantly evaluating the store portfolio.

We look at things like when leases come due, whether that store is profitable at the store level, and so on. So I think we could expect to see even going forward -- what we will expect to see is a continuing number of both stores opening and closing. And that is just year, in year out, that is part of the normal course of operations, that stores will open and close on an ongoing basis.

The special program or the intensity of focus on this will be completed as you suggested, by the end of the first quarter. But Mark's comment is correct with regard to the ongoing business.

Okay. Where the new stores that you been opening? They seem to be offsetting the profit loss from the underperforming stores. Just wondering where your target markets are.

They are nationwide. We have 300 stores. They are all over the United States, and there is no particular pattern to where they are opened and closed.

Okay.

I mean it is dependent on -- let me give you a bit more insight there. It is dependent on a couple of things.

One, where developers build new factory outlet malls. And we are viewed as a valued client of factory outlet malls.

And secondly, there are some existing outlet malls where we don't have positions, where if the right kind of space opens up, where we might be willing to look at it. We do a pretty comprehensive job of trying to evaluate malls in terms of their key characteristics and in terms of the areas they are put into and the attractiveness of the malls and, secondly, the attractiveness of our location in those malls. And those are two very important criteria for us.

But generally speaking, the industry is a nationwide industry. And we are following the outlet mall industry as it makes decisions on where to put these malls.

Understood. Okay, and lastly for us, just a general question. How do you think about the uses of cash in relation to further stock repurchases versus some of the expansion opportunities that you have outlined in the press release?

For NACCO, we certainly continue to have an open share buyback program, and we will be continuing to pursue that, with decisions made periodically based on the situation as we see it in terms of price and other characteristics. Then I would simply say that Hamilton Beach is not a capital-intensive business; that Kitchen Collection really isn't a capital-intensive business. And the strategic initiatives in those businesses may involve some operating expense, but not any significant capital requirements -- other than if we grow at Hamilton Beach in the way that we hope, that there will be additional working capital requirements. But it is not major commitments of capital and would be self-financing in large measure.

At North American Coal, you have heard in each case of the projects where capital is being expended. In particular, we're spending some capital on Reed and we always have replacement capital at our other big consolidated mine, Mississippi Lignite Mining Company. But again in the context of things over the longer-term, and assuming the completion of our post-acquisition implementation program at Reed, we don't expect that business to be particularly capital-intensive on the margin either.

So, I'd put the comments -- I would put the answer to your question in reference to those comments. And the strategic initiatives at the Coal Company, at least as we see them at this point, are not particularly capital-intensive either. Now, obviously, opportunities could come along that could vary from that; but at this time, that is not the focus.

Tara, I think you have access to these numbers; but there was $50 million authorized and we are $26.8 million into that program as of June 30.

Okay. Just a follow-up on that. Can you give us any kind of indication of maintenance CapEx level for North American Coal versus growth CapEx in terms of what is expected for 2013?

I really think the best thing to do is to focus on what we have put in the Q, what we have put in our press release. The huge bulk of the maintenance capital requirements is really in mines where the customer is paying for all of that capital, and so it doesn't even flow through our books.

There is -- we are in effect the operator of a much bigger coal mining business than the numbers we report publicly, but our customers are responsible for those. And you will find that those expenditures and, indeed, the operating P&Ls of those businesses are in fact on the books of the power companies in many cases.

Okay. Can you give us a sense of how much the new dragline at Reed might cost?

Mark, what have we said in the Q, which is the limit of what we would say?

Well, we forecast for 2013 $42.6 million total expenditures of coal; and we have not disclosed the '14 numbers yet. And the dragline is ongoing.

And how much have we spent in the first six months, Mark?

The first six months, we are about half -- we're little bit less than halfway there. I'm sorry, $13.7 million, so we have a ways to go yet out of the total of $50 million for the whole Company.

But I think that we have said that the capital expenditures would be much more intensive this year, as we address the issues, as we implement the acquisition program at Reed.

Right. Okay. Thank you very much. We really appreciate it.

Okay, thanks a lot. Bye-bye.

Thank you for your question. We have no further questions at this time, sir.

Okay. Thank you very much.

Thank you for joining us today. We appreciate your interest and if you do have any additional questions you can reach me at 440-229-5130.

Thank you for your participation in today's conference call. The replay for this call will be available shortly. To access, please dial either 617-801-6888 or 1-888-286-8010 and enter the access code 74793450.

Again, that concludes your presentation for today. You may now disconnect. Enjoy the rest of your day.