NACCO Industries, Inc.

Hello, everyone, and welcome to the NACO Q2 2022 Earnings Conference Call. My name is Seb, and I'll be the operator for your call today. There will be an opportunity to ask questions on the call, and you can do so by pressing star 1 on your telephone keypad or press star 2 to withdraw your question. If you need assistance at any time, please press star 0. I will now hand the floor over to Christina Kometko. Please go ahead.

Thank you. Good morning, everyone, and welcome to our 2022 second quarter earnings call. Thank you for joining us this morning. I'm Christina Kmetko, and I am responsible for investor relations at NACO Industries. Joining me today are J.C. Butler, President and Chief Executive Officer, and Elizabeth Loveman, Vice President and Controller. Yesterday, we published our second 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. In a moment, I will discuss our results for the quarter, but first let me turn the call over to J.C. Butler, our President and CEO, for some opening remarks. J.C.

Thank you, Chris Meek, and good morning, everyone. Second quarter 2022 was another very strong quarter for us. As I mentioned during our Q1 call, Rainbow Energy's purchase of the Coal Creek Station power plant in North Dakota from Great River Energy was finalized in early May. As a result, our second quarter coal mining segment earnings benefited from contract termination settlements received from our former customer, Great River Energy. We received $14 million in cash and recorded income of $16.9 million related to our receipt of an office building in Bismarck, North Dakota, and membership units in a private company that produces ethanol. We're excited to have this transaction completed and enthusiastic to have 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 plant and its potential for the future. 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. Turning back to the quarter, I'm pleased to report that our earnings improved significantly over the second quarter of 2021, even excluding the settlement with GRE, driven primarily by strong results in our minerals management segment. This improvement was partly offset by unfavorable changes in the fair value of certain exchange-traded equity securities we own, and an increase in unallocated employee-related expenses. The strong earnings at minerals management were mainly due to significantly higher natural gas and oil prices in 2022. This quarter's results also benefited from a $2.4 million gain on sale of land related to legacy operations. We completed a small acquisition in the first quarter, and the Catapult Mineral Partners team continues to look for attractive acquisitions of mineral and royalty interests that will allow us to continue to grow and diversify this business while also promoting development of our existing mineral interests. Our North American mining segment had an increase in revenues, but lower operating profit in the second quarter of 2022 as employee related costs rose over the prior year. And as I've said before, there's a lot of growth potential in this business and North American mining continues to review potential new projects. I'd also like to note that Lithium Americas continues to make progress on their Thacker Press project. In July of 2022, Lithium Americas provided an update that noted all key state-level permits have been issued and feasibility study results are expected in the second half of this year. These steps bring them closer to the startup of this project. We continue to work closely with them as they advance the Thacker Press project. The Mitigation Resources of North America team continues to work on existing mitigation projects and development of a number of interesting new projects. During the first half of 2022, Mitigation Resources purchased property to establish a new mitigation bank in Texas and finalized an agreement to provide mitigation services for the Lake Ralph Hall project, which is also in Texas. With these new projects, Mitigation Resources is involved in over 10 mitigation banks and permitting responsible mitigation projects and is making strong progress toward its goal to be a top 10 US provider of stream and wetland mitigation services. I'm very pleased with the way all of these businesses are advancing their strategies. With that, I will turn the call back over to Christy to cover our results for the quarter in more detail. Christy?