NACCO Industries, Inc.

Good day and thank you for standing by. Welcome to NACO Industry Q1 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. And if you require any further assistance, please press star 0. Thank you. I would now like to hand the conference over to your speaker today, Christina Kometko. The floor is yours.

Thank you. Good morning, everyone, and welcome to our 2022 first quarter earnings call. Thank you for joining us this morning. I am Christina Kometko, and I'm responsible for investor relations at NACO Industries. Joining me today are J.C. Butler, President and Chief Executive Officer, and Elizabeth Lubman, Vice President and Controller. Yesterday, we published our first quarter 2022 results and followed our 10-Q. This information is available on our website. Today's call is also being webcast. The webcast will be on our website later this afternoon and available for approximately 12 months. Our remarks that follow, including answers to your questions, could contain 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. These risks include, among others, matters that we have described in our earnings release issued last night and in our 10Q and other filings with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in our earnings release and on our website. Before I turn the call over to JC for his opening remarks, I want to mention a change we made in our segment reporting. Effective at the beginning of this year, we changed the composition of our reportable segments to reclassify the results of Caddo Creek and Demery resources from our coal mining segment into the North American mining segment. The coal mining segment now includes only mines that deliver coal for power generation. This segment reporting change has no impact on our consolidated operating results, but all prior period segment information mentioned in the following discussion follows the new reporting structure. We have also included the reclassified segment financial information for all four quarters and full year 2021 at the end of our earnings release. In a moment, I will discuss our results for the quarter, but first let me turn the call over to our President and CEO, J.C. Butler, for some opening remarks. J.C.

Thank you, Christine. Good morning, everyone. I'm very glad to be on the call this morning since we have a lot of good news to report. I mentioned in our year-end call that I was optimistic about our long-term outlook because I have a lot of confidence in our strategies to protect the core and grow and diversify. I'm very excited to start with some great news associated with our Protect the Core strategy. This past Monday, May 2nd, Rainbow Energy finalized the purchase of the Coal Creek Station power plant in North Dakota and the adjacent high-voltage direct current transmission line. As a result of this sale, The existing agreements between Great River Energy and Falkirk terminated, and the new coal sales agreement between Falkirk and Rainbow Energy became effective. Falkirk will continue supplying all coal requirements of Coal Creek Station. GRE paid us $14 million, transferred ownership of its office building in Bismarck, North Dakota, and conveyed membership units in Midwest Ag Energy to NACO. This is a great outcome, and we are enthusiastic about this new relationship with Rainbow Energy as our new customer. As independent privately held energy marketers, I think they have a real understanding of the value of the power plants and its potential in the future. In addition to this exciting news, I'm pleased to report strong 22 first quarter earnings driven primarily by improved results in our minerals management segment. Minerals management had another outstanding quarter, mainly due to significantly higher natural gas and oil prices, as well as $2.1 million of settlement income recognized this quarter. Our team at Catapult Mineral Partners continues to look for opportunities to expand our portfolio of mineral and royalty interests through acquisitions, while also promoting development of our existing mineral interests. In the first quarter of 2022, we completed a small acquisition of mineral interests in the New Mexico portion of the Permian Basin. The Catapult team continues to look for attractive acquisitions of mineral and royalty interests to continue to grow and diversify this business. Our North American mining segment also contributed to the improvement in earnings, although this was offset by lower earnings in the coal mining segment and an increase in unallocated business development and employee-related expenses. First quarter earnings in our North American mining segment increased versus the prior as higher reclamation income at Caddo Creek was partly offset by a reduction in earnings on our active operations as a result of higher employee-related costs. As I've said before, there's a lot of growth potential in this business, and North American Mining continues to have a substantial pipeline of potential new projects in the works. During the first quarter of 2022, North American Mining agreed to commission a second drag line at an existing quarry in Florida to secure a contract extension through 2027. This drag line will supplement an existing drag line at this operation, resulting in an expected increase in deliveries and income over the next five years. At our coal mining segment, we continue to work diligently to support our existing customers so that they can continue to produce affordable and reliable energy. Although the coal mining industry faces ongoing political and regulatory challenges, We believe the use of coal as a fuel source for electricity in the United States will continue for the foreseeable future. We think there are more reasons to be optimistic about coal-fired power generation today than at any other time in the last several years. The Mitigation Resources of North America team continues to advance development of existing mitigation projects, and they are evaluating a number of interesting new projects as well. Early in 2022, Mitigation Resources finalized an agreement to provide mitigation services for the Lake Ralph Hall project in northern Texas. We've established a joint venture related to this project with a partner that has expertise in restoration and mitigation solutions. This will be a great project for us, and it is great to have a project that expands mitigation resources into Texas. With that, I'll turn the call back over to Christy to cover our results for the quarter in more detail.