NACCO Industries Inc (NC) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2013 NACCO Industries earnings conference call. My name is Mark, and I will be your operator for today. At this time, all participants are in a listen-only mode. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Christina Kmetko. Please proceed.

Thank you. Good morning, everyone, and thank you for joining us today. Yesterday a press release was distributed outlining NACCO's results for the third quarter ended September 30, 2013. If anyone has not received a copy of this release or would like a copy of the 10-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, NACCO's Senior Vice President, Finance, Treasurer and Chief Administrative Officer.

Now 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 in our 10-Q.

In addition, certain amounts discussed during this call are considered non-GAAP numbers. The non-GAAP reconciliations of these amounts are included in our 2013 third-quarter earnings release, which is available on our website.

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

Good morning. NACCO Industries announced income from continuing operations of $12.3 million or $1.54 per share and revenues of $228 million for the third quarter of 2013. That compared with income from continuing operations of $10.4 million or $1.23 per share and revenues of $210 million in the third quarter a year ago.

The Company's cash position was $79.4 million as of September 30. That compared with $139.9 million at the end of 2012 and $155 million at September 30, 2012. Debt at the end of September was $175 million compared with $178 million at the end of last year and $207 million as of September 30, 2012.

As of September 30, 2013, NACCO has repurchased approximately 570,400 shares for an aggregate purchase price of $32.6 million, including $27.4 million of stock purchased during the 9 months ended September 30 as part of the stock repurchase program the Company announced in November of 2011, which permits the repurchase of up to $50 million of the Company's outstanding Class A common stock.

I'll turn now to a discussion of the results of the individual operations. North American Coal had net income for the third quarter of $7.8 million and revenues of $52.9 million, and that compared with net income of $8.1 million and revenues of $38 million for the third quarter of 2012. Revenues increased compared with the year ago, primarily due to the Reed Minerals acquisition which occurred on August 31 of 2012. Reed Minerals contributed $18.6 million to revenues during the third quarter compared with $7.7 million for the one month ended September 30, 2012. An increase in reimbursable costs at the limerock dragline mining operations, higher deliveries at the Mississippi Lignite Mining Company due to increased customer requirements and higher royalty income also contributed to the improvement in third-quarter revenues. Net income in the third quarter decreased compared with the year earlier. The decline was primarily the result of the absence of a $3.3 million pretax gain on the sale of a dragline recognized in the third quarter of 2012, a net loss of $3 million at Reed Minerals in the third quarter of 2013, and higher income tax expense resulting from a shift in mix of taxable income toward entities with higher estimated effective income tax rates. Lower selling, general and administrative expenses, improved results in the Mississippi Lignite Mining Company, and higher royalty income partially offset the decline in net income. The loss at Reed Minerals was the result of lower-than-expected sales, partially due to lower demand for higher quality metallurgical coal, higher mining costs and an increase in royalty expense. The higher mining costs are attributable to the unexpected thinning of a coal seam in an isolated area, substantial one-time costs associated with the development of a new mining area, and current mining restrictions, which have significantly increased hauling distances and reduced overburden removal and equipment productivity.

Selling, general and administrative expenses decreased significantly in the third quarter of 2013 compared with 2012 as a result of lower professional fees and employee-related costs, primarily related to the Reed acquisition in 2012, as well as a $1.6 million pretax pension curtailment gain recognized in the third quarter of 2013.

North American Coal expects improved operating performance at its coal mining operations in the fourth quarter of 2013 and in 2014. Steam coal tons delivered in the fourth quarter of 2013 and in 2014 are expected to increase over the prior year periods at the unconsolidated mining operations, provided customers achieve currently planned power plant operating levels for the remainder of 2013 and in 2014.

Demery Resources Company's Five Forks Mine commenced delivering coal to its customer in 2012 and is expected to maintain similar levels of quarterly production in the fourth quarter of 2013 and in 2014 with full production levels expected to be reached in late 2015 or early 2016.

Liberty Fuels also commenced production of lignite coal in 2013 for Mississippi Power Company's new Kemper County Energy Facility. Production levels are expected to increase gradually from 1 million to 2 million tons in 2014 to full production of approximately 4.7 million tons of lignite annually in 2019. The Kemper County project has announced a startup delay for the power plant. North American Coal is currently evaluating the impact of this delay on its forecasted 2014 results, but based on the most recent information, the delay is not expected to have a material effect.

At the consolidated mining operations, deliveries at the Mississippi Lignite Mining Company are expected to be higher in the fourth quarter of 2013 compared with the fourth quarter of 2012, but slightly lower in 2014 compared to the prior year period as a result of a planned outage at the customer's power plant. Deliveries at the Mississippi Lignite Mining Company are expected to increase over the long-term as a result of recently implemented and anticipated operational improvements at the customer's power plant.

Coal tons sold by Reed Minerals in the fourth quarter of 2013 are expected to be comparable to the fourth quarter of 2012, increase slightly over the third quarter of 2013 and increase in 2014 compared with 2013. Overall, Reed Minerals' fourth-quarter 2013 operating results are expected to improve slightly compared with the third-quarter of 2013 as a result of the expected increase in tons sold, provided the mining restrictions can be appropriately resolved, but still result in an operating loss since operating costs are expected to be comparable to the third-quarter costs. Post-acquisition productivity improvements, which increase mining efficiencies, are expected in 2014, and along with the resolution of the mining restrictions are expected to move 2014 results toward breakeven compared with the expected 2013 loss.

Also, limerock deliveries in the fourth quarter of 2013 and in 2014 are expected to be lower than the comparable periods a year ago as customer requirements are expected to decline. Royalty and other income is expected to be lower in the remainder of 2013 compared with the fourth quarter of 2012 and significantly lower in 2014 compared with 2013.

Unconsolidated mines currently in develop are expected to continue to generate modest income in the remainder of 2013 and in 2014. Three mines in development are not expected to be at full production for several years. In the first quarter of 2013, mining permits needed to commence mining operations were issued for the Caddo Creek Resources Company and the Camino Real Fuels projects in Texas. Caddo Creek expects to begin making initial coal deliveries in 2015, and Camino Real expects initial coal deliveries in the latter half of 2015 and expects to mine approximately 3 million tons of coal annually when at full production. The Coyote Creek mining company is developing a lignite mine in Mercer County, North Dakota from which it expects to deliver approximately 2.5 million tons of coal beginning in May of 2016.

North American Coal also has new project opportunities for which it expects to continue to incur additional expenses in the fourth quarter of 2013 and in 2014. In particular, the Company continues 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 2013 fourth-quarter net income to be comparable to 2012 fourth-quarter net income. Lower operating expenses and favorable operating results at the Mississippi Lignite Mining Company are expected to offset the absence of pretax gains from asset sales of approximately $1.4 million recognized during the fourth quarter of 2012 and an anticipated fourth-quarter operating loss at Reed Minerals. Net income in 2014 is expected to decline moderately compared with 2013 as improvements at Reed Minerals are expected to be more than offset by a decline in royalty income and fewer deliveries at the Mississippi Lignite Mining Company. Cash flow before financing activities for 2013 is expected to improve over 2012, but remain negative due to anticipated increases in capital expenditures at the Mississippi Lignite Mining Company and at the Reed Minerals operations. Capital expenditures associated with the Reed Minerals operations are part of the Reed Minerals acquisition plan to improve mining efficiencies by reducing costs and increasing production capacity. Cash flow before financing activities in 2014 is expected to be significantly higher than in 2013.

Over the longer term, North American Coal's goal is to increase earnings of its unconsolidated mines by approximately 50% over the next five years through the development and maturation of its new mines and normal escalation of contractual compensation at its existing mines. Also, North American Coal has a goal of at least doubling the earnings contribution from its consolidated mining operations due to benefits from recently implemented and anticipated operational improvements at the Mississippi Lignite Mining Company's customer's power plant and from the Company's execution of its long-term plan at the Reed Minerals operation. The Company used its acquisition of Reed Minerals as the first step in a metallurgical coal strategic initiative, which includes significantly increased volume. North American Coal also expects to continue its efforts to develop new mining projects, and the Company is actively pursuing domestic opportunities for new or expanded coal mining projects.

Turning to Hamilton Beach, the Company reported net income of $7.4 million and revenues of $134 million for the third quarter of 2013 compared with net income of $5.2 million and revenues of $125 million for the quarter a year ago. Revenues increased in the third quarter, primarily due to an increase in sales volumes of products with higher price points and new products, mainly in the US consumer and Canadian retail markets and in the commercial market. The improvement in revenue is partially offset by lower sales volumes in its international consumer markets.

Operating profit and net income increased in the third quarter, primarily as a result of an increase in sales of higher-margin products and a $1.6 million pretax reduction in environmental remediation expense, partially offset by lower prices on comparable products sold. The reduction in the environmental remediation expense is the result of a third-party's commitment to share in anticipated remediation costs of former manufacturing locations. The higher selling, general and administrative expenses, namely due to higher employee-related costs and additional costs incurred to execute Hamilton Beach's five strategic initiatives, also 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 volumes 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 remainder of this year and in 2014. Nevertheless, Hamilton Beach expects sales volumes to grow more favorably than the market due to increased promotions and placements in the fourth quarter of 2013 in comparison to the fourth quarter of 2012 and improved placements and sales volumes in 2014 compared with 2013. Hamilton Beach's international and commercial product markets are anticipated to grow in the remainder of 2013 and in 2014 compared with comparable prior periods.

Hamilton Beach continues to focus on strengthening the 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, introduced in late 2011, and the FlexBrew launched in late 2012, to continue to gain market position as broader distribution is attained over time. The Company is continuing to introduce innovative products in several small appliance categories. In the first quarter of this year, Hamilton Beach launched the Hamilton Beach Breakfast Sandwich Maker, which continues to gain market attention. These products, as well as other new product introductions in the pipeline for the fourth quarter of this year and for 2014 and expected key placements and promotions for the holiday selling season, are expected to affect both revenues and operating profit positively.

As a result of these new products and execution of the Company's strategic initiatives both domestically and internationally, Hamilton Beach expects an increase in revenues in the fourth-quarter 2013, providing consumer spending is at expected fourth-quarter levels, and in 2014 compared with the respective prior-year periods.

Overall, Hamilton Beach expects fourth-quarter net income to be comparable to the fourth quarter of a year ago as anticipated increases in operating profit from higher revenues are expected to be offset by planned increases in operating expenses to support Hamilton Beach's strategic initiatives and its promotional programs. Full-year 2014 net income is expected to improve slightly over 2013 as a result of increased sales volumes attributed to the continued implementation and execution of Hamilton Beach's strategic initiatives, offset by the cost to implement these initiatives and by the related promotional costs.

Product and transportation costs, as well as currency translation costs, are currently expected to be modestly higher in the fourth quarter of 2013 than in the fourth quarter of 2012. Hamilton Beach expects 2013 cash flow before financing activities to be slightly lower than 2012, and cash flow before financing activities in 2014 is expected to be moderately lower than 2013.

Longer-term, Hamilton Beach will work to take advantage of the potential to improve return on sales through economies of scale derived from market growth and a focus on its five strategic volume growth initiatives. One, enhancing its placements in the North American consumer business through consumer-driven innovative products and strong sales and marketing support; second, enhancing Internet sales by providing best-in-class retailer-supported increased consumer content and engagement; three, achieving further penetration of the global commercial market through a commitment to an enhanced global product line for change and distributors serving global food and service and hospitality markets; and fourth, expanding internationally in the emerging Asian and Latin American markets by increasing product offerings designed specifically for the needs of these markets and by expanding its distribution channels and sales and marketing capabilities; and five, entering only the best market with a strong brand and product line. During the first nine months 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 2013 and in 2014.

Turning to Kitchen Collection, the Company reported a net loss of $2.8 million and revenues of $42.6 million for the third quarter compared with the loss of $1.2 million and revenues of $48.2 million a year ago. A decline in revenues was primarily the result of the loss of sales from the closure of unprofitable Le Gourmet Chef and Kitchen Collection stores over the last year and a decrease in comparable store sales growth at both Kitchen Collection and Le Gourmet Chef. 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 September 30, Kitchen Collection operated 258 stores compared with 264 stores a year ago. Le Gourmet Chef operated 36 stores at September 30 compared with 55 stores a year ago.

The increase in Kitchen Collection's third-quarter 2013 net loss was primarily the result of lower operating margins at both Kitchen Collection and Le Gourmet Chef comparable stores, mainly caused by lower sales and a shift in mix toward lower margin product categories, seasonal losses at newly opened stores and the lower quarterly effective income tax rate in 2013 compared with 2012, which resulted in a lower tax benefit from the operating loss.

Looking forward, the outlet mall retail market remains very challenging, especially in the housewares segment, and is expected to remain so for the remainder of this year and for 2014. Kitchen Collection believes the middle market consumer continues to have financial and economic concerns, and those concerns are expected to limit consumer spending levels of Kitchen Collection's target customer in the fourth quarter of this year and in 2014. While Kitchen Collection expects to add 20 Kitchen Collection stores during the fourth quarter of 2013, the Company expects to end the year with a lower number of stores than a year ago and expects to maintain a lower number of stores throughout much of 2014 compared with 2013 as a result of closing a number of stores during the first quarter of next year.

As a result, Kitchen Collection expects revenues for the fourth quarter of 2013 and for 2014 to decrease compared with the prior-year periods. Overall, Kitchen Collection expects a modest increase in 2013 fourth-quarter net income compared with a year ago, primarily from enhanced margins resulting from further refinements of promotional offers and merchandise mix in both store formats and from closure of stores with store operating losses. However, these improvements will depend on improved mall traffic compared with earlier in 2013 and are still not expected to offset fully the losses from the first 9 months of the year. As a result, Kitchen Collection expects a loss for the 2013 full-year. The net effect of closing a number of stores early in 2014 and the anticipated opening of new stores during the second half of 2014 is expected to contribute to improved results of around breakeven in 2014.

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 is focused on driving consumer interest back toward higher-margin products and 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 improve product mix.

Cash flow before financing in 2013 is expected to be lower than 2012, but improve in 2014 compared with 2013. Longer-term, Kitchen Collection plans to focus on comparable-store sales growth around a sound store portfolio. Kitchen Collection expects to accomplish this 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 store inventory controls.

The Company will also continue to evaluate and, as lease contracts permit, close or restructure leases for underperforming and loss-generating stores over the next few years.

In the near term, Kitchen Collection expects to concentrate its growth on increasing the number of Kitchen Collection stores with new stores expected to be located in sound positions in strong outlet malls.

Now that completes my -- our summary of the third-quarter results for NACCO Industries, and I'd be happy to turn now to any questions that you may have.

(Operator Instructions). Tara Reisbig, Moab Partners.

I guess we'll start with North American Coal. I want to dig into Reed a little bit more. What's going on in terms of mining restrictions that are increasing your hauling distances?

Let me ask J.C. to address that if I could.

Sure, Al. So the mining restrictions are really a combination of opening a new mining area and some geographic restrictions related to some streams and how the exact permit is laid out. It's probably easiest to think of it like a bottleneck. We've got a lot of material because of the new mining area that we're trying to move through while we're mining in a similar area, and it's created a bottleneck that's causing some productivity inefficiencies and, you know, haulage complications. It's a temporary problem.

Okay so there is no like environmental or EPA issues here?

No, no, no. Not at all. This is really just a logistical bottleneck. Partly that we did know that this was going to be there. It is -- I will say that because of when you really get down to the timing, we had hoped that it wouldn't be as tough as it's been, but it's been a pretty tough bottleneck.

Got it. Just in general with Reed, I guess if you could sort of lay out how many stages are there from the time that you acquired the company to the time that you expect to be profitable, how many stages are there and where in the range of stages are you today?

Well, I don't know that you can really think about it in terms of stages as much as it's a series of activities. Some are related to looking at additional customers. Some are related -- which we are actively doing. Some are related to productivity and operational improvements which are underway. This is a mine. This is something that takes a fair amount of time to move. Even moving pieces of equipment from one area to another takes a while because you have to disassemble equipment and move it.

All of those things are sort of on track. We think those are moving along as we expected, you know, and we're moving in a positive direction. I think as we said in our outlook, I think we're going to see a good amount of improvement as we move into next year. But it's a continuum. It's not like there's a factory here where you flip a switch on a new mine, and suddenly it is operating in a different way.

Right. Okay. And can you just give us kind of an updated view or perspective on the met coal market, I guess, domestically and internationally?

The met coal that we produce is sold currently into the domestic market. We're finding that price is pretty consistent with what we had expected. We are seeing some instances -- I mean we mentioned a thinning of a seam. There's some instances where we just didn't have as many tons as we thought we would have at a limited point in time on some met coal. We also see that demand is down generally.

So, you know, the price is kind of where we thought it would be. Demand is not where we thought it would be.

From an international standpoint, we're really just playing on the edges of that right now, exploring customer opportunities. There -- I mean it's in the press pretty widely, right? There is a fair amount of softness in the international markets. That's the market we're trying to sell into, albeit we have a very small number of tons compared to the overall. So we're really playing in kind of a niche space there.

Right. And how do you view demand in 2014? Do you see it picking up at all or kind of staying flat?

From a domestic standpoint, I'd say it's flat to slightly up. From an international standpoint, I don't know that we have any changed view. It continues to be sort of the same market we've all been looking at the last six months or so.

Okay. In terms of the royalty income, you said in 2014 you expect it to be down significantly. Can you just give a little more color on that?

The royalties that we get are really controlled by other folks. It's other people that are either mining coal that we own or doing other work. We really don't control their mine plans. We don't control how these guys operate. In some instances, we've had some of these folks tell us that they are going to be mining in areas that their mine plans are going to move into areas that do not include our coal for part of next year, all of next year. In other instances, we just haven't heard from other folks, and we're not going to count those chickens before they hatch, right? It's foolish for us to speculate on continued royalties from somebody if we don't know where they're going to be operating.

Fair enough. The SG&A seems like it's come down pretty significantly. I mean is $5 million a quarter a good run rate or --? How should we think about the costs that you've been able to take out of the business?

I'd be inclined to think a little bit less about -- a little bit less about certainly taking costs out than I would about the ebb and flow of certain kinds of expenses that we incur. For example, we had expenses a year ago for the acquisition of Reed, professional expenses of various kinds. Those obviously dropped out.

Secondly, we had incentive compensation programs that had substantial payoff last year based on the results. So the way we -- based on the formulas that we used for incentive compensation, those don't always repeat. And so I think it's less what I would call a cost-reduction than a fairly level base of costs that fluctuates depending on certain specific impacts such as I just described.

Okay. So, I guess, going forward it seems -- I'm just trying to determine what a normalized SG&A is for North American Coal. Obviously last year was sort of skewed with the Reed acquisition. This year it seems like you're up to about $19 million year-to-date versus $25 million last year. You know, you've just started sort of breaking out more of the expenses on a line item basis, which is great. But can you maybe give us a sense of what you did last fourth quarter for SG&A?

I don't have that number, but what I would say is that generally speaking the SG&A was high in 2012, it was lower in 2013, and we would expect it to go up to more normal levels in 2014.

Okay. I want to get into some of the unconsolidated mines now. It looks as though for both Caddo Creek and Camino Real, you had some delays in terms of when you plan to commence the initial deliveries. I believe Caddo Creek was supposed to as of last quarter start delivering in 2014, and Camino Real is expected in the back half of 2014. Both of those seem to be pushed into 2015 now. I am just curious sort of if there is a reason for that.

You know, both of those contracts are unconsolidated, as you noted. All of that is really dictated by the customers. Those are the standard contracts where they really determine the pace of development of their own facilities and the pace of development of the mine so they are all lined up together. And that's the source of the delays.

Okay. Both of those are currently permitted in things of that nature. It's just really developing the mines there. How long will the Mississippi Lignite Mining power plant be out in 2014? The planned outage?

That's a customer matter that we don't disclose if they don't disclose, and that -- I would also add that those tend to change over time as they get their contractors and equipment scheduled. So we don't this far out in advance speculate on that.

Okay. Going back to the unconsolidated mines quickly, it looks as though the gross margin appears to be declining slightly. The first nine months of 2013, it's around 12.9% versus 13.6% in 2012. Is there any reason? Are you getting any pushback on the plus side of those contracts?

No. I think it's probably (multiple speakers)

It's probably the mix of tons sold, probably the biggest influence on all of that. But they are all according to contract.

Al, I agree. It's a mix of tons between the various operations. I think it's also mix of indices that are used to escalate the various payment provisions in each of those as well.

And then lastly on coal, what is the $5 million in escrow for future investment for?

So that's an investment that's actually being held in escrow because it hasn't closed yet. But it's an investment that we have made into a customer's facility that they are going to be building that will take some additional tons.

That's a current customer?

Yes.

Okay.

And I would only add that it's a small minority position. It's not anything where we have any sway in that.

And then my last question is about Kitchen Collection. Why do you guys continue to build out new stores when same-store sales are declining? I know you mentioned that the new stores will be in strong robust markets, but why not just close the ones that are underperforming and, you know, run the good ones going forward? Why continue to invest in new stores when the outlook for the outlet malls is pretty grim?

Well, you're right. It is a difficult outlet mall environment right now. But I would just put the emphasis on the points you noted, which is that we have very stringent controls on the malls that we're putting stores up on. And I would add in addition that some of those stores have contractual provisions that permit us to go in during the high selling season in the fourth quarter and then close them shortly thereafter. So we are being extremely careful about new store openings for all the reasons that you just mentioned.

So you're not just necessarily signing long-term leases with these outlet malls. You're really just going into the holiday season and getting back in.

Well, we're going in in many cases for the holiday season and then into situations where both the nature of the mall and the position of the store within the mall and the rent structure that we are able to negotiate mean that we're confident that we have a high degree of confidence that we can make an acceptable profit.

So, I think it's important to understand that the entire mall industry or all the stores that we have are not necessarily having declines. It's more pronounced in some types of malls than in other types of malls, and we're concentrating on focusing in those areas where we think the prospects are good. But we are being extremely careful and, as you can tell, we are prepared to have a smaller sales base and a sound core -- I think is the terminology we use -- as we look forward. And our hope certainly is that, eventually, the conditions in outlet malls are going to improve. But we're not counting on it in terms of our deployment of new stores.

Lastly, on the capital return program in terms of buying back shares, I looks like you guys have roughly $15 million to $20 million left on your authorization. Do you have any plans to increase that once you've expired it? Do you plan on using that through the end of this year? Do you view your stock is cheap where it's trading today? Any color on (multiple speakers)?

What I would say is we have been buying, as you noted, over the course of the year and in the third quarter. We will continue to have additional purchases in due course up to the maximum that's been approved by the Board, and then, of course, the Board will consider share buyback programs and other uses of capital on a regular basis at all of its board meetings, and that's really the only comments that I could make at this time.

All right. And then lastly, how is management compensated? Are you guys incentivized with stock price growth in EBITDA? What really drives your compensation?

We have goals that are set for each business, and those goals collectively make up the incentive compensation for those of us at the parent company level. We pay a certain amount that is based on whether we do better or worse against those goals. A portion of that amount is paid in cash, and the remainder is paid in shares, which the participant at the corporate level is expected to hold for 10 years, and at the individual subsidiary levels, compensation is simply based on the individual objectives within that business and then either paid out in cash or put into effectively a long-term program. But those are not based on the corporate share program.

So, for example, in the coal business, a big driver is signing new contracts that benefit the Company for the long-term, as well as accomplishing the financial objectives that were set out at the time of acquisition of those coal mines. Hamilton Beach, it is based on volume growth and also on, let's see, the operating profit levels that are achieved and the same with the Kitchen Collection.

Okay. Great. That's very helpful. That's it for me. Thank you guys very much for the additional disclosure.

Okay. Thank you. Are there other questions?

There are no further questions in queue.

Okay. I think then that that completes our quarterly update for the third quarter for NACCO Industries. Christy?

I guess just thank you for joining us today. We do appreciate your interest, and if you have any further questions, please give me a call. You can reach me at 440-229-5130. Thank you.

If you would like to listen to the replay from today's call, the dial-in number is 888-286-8010 with a passcode of 86685576. Thank you very much.

Okay. Thank you all very much. Bye-bye.

Thank you very much. This concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.