NACCO Industries, Inc.

Hello and welcome to the NACO Industries Q4 2022 Earnings Conference Call. My name is Lauren and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing Start Rated by 1 on your telephone keypad. I will now hand you over to your host, Christina Connetco, to begin. Christina, please go ahead.

Thank you. Good morning, everyone, and welcome to our 2022 fourth quarter and full year earnings call. Thank you for joining us this morning. I am Christina Kometko, and I am 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 2022 fourth quarter and four-year results and filed our 10-K. 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 10 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 our President and CEO, J.C. Butler for some opening remarks. J.C.?

Thank you, Christy, and good morning, everyone. I'm very pleased to report that our company once again delivered strong results, generating much higher operating profit, net income, and adjusted EBITDA in the 2022 fourth quarter and full year than in the 2021 fourth quarter and full year. Christy will go into more detail about our fourth quarter earnings and provide an overview or outlook in a minute. But first, let me provide some highlights for the year. Our strong full-year operating results were led by our minerals management segment, which more than doubled its operating profit at a just city bid from 2021. These improvements were driven by substantially higher natural gas and oil prices, as well as production buy-in from more recently acquired mineral interest and increased production from legacy mineral interests. Our team at Catapult Mineral Partners continues to look for opportunities to expand our portfolio of mineral and royalty interest through acquisitions, while also promoting development of our existing interests. The team acquired approximately $12 million of additional mineral and royalty interests in 2022 and is targeting additional investments of up to $20 million in 2023. Our 2023 forecast for the minerals management segment assumes oil and gas prices, market prices moderate to levels in line with 2021 averages. However, as we witnessed in 2022, Commodity prices are inherently volatile, and changes in natural gas and oil prices could result in adjustments to our current forecast. On the upside, the development of additional wells on existing reserves beyond our forecast for future acquisitions could be accretive to our future results. At our coal mining segment, a big highlight of 2022 was Rainbow Energy's purchase of Coal Creek Station from Great River Energy. We are very enthusiastic about our new relationship with Rainbow. With this transaction, our Farpoke mine gained a new customer, and we recognized $30.9 million of pre-tax contract termination settlement income. This settlement included a cash payment of $14 million, the transfer of ownership of an office building, and the conveyance of membership units in Midwest Ag Energy Group. Midwest Ag Energy was acquired by a third party in December, and we received a cash payment of $18.6 million for our ownership position. While the transfer of Coal Crease Station was very positive for our coal mining segment, a decision made by another customer is not so encouraging. The owner of the power plant served by our Sabine Mine in East Texas plans to retire the plant. If that happens, we'll stop delivering coal as of April 1st, just a few short weeks away, and final mine reclamation will commence. Sabine will receive compensation for providing final mine reclamation services, but that annual income will be less than our income during active mining. Despite the planned closure of Sabine's power plant and the ongoing political and regulatory challenges the coal mining industry faces, we continue to believe the use of coal as a fuel source for reliable electricity in the United States will continue for the foreseeable future. Shifting to our North American mining segment, Our full year operating profit did not meet our expectations. We're working on initiatives designed to support the return to profitability. During 2022, we conducted a thorough review of each North American mining quarry operation to identify areas that are not meeting expectations. We are implementing changes that should drive future improvements to financial results. Until profit improves, North American mining has narrowed its business development efforts. On a positive note, Lithium Americas continues to make progress on the Thacker Pass project. Our Sawtooth mining subsidiary is the exclusive contract miner for this major U.S. lithium project, and Sawtooth is part of our North American mining segment. In January, General Motors announced that they will invest $650 million in the Thacker Pass project. It's our understanding that this agreement with GM is a major milestone in moving Thacker Pass towards production. And in fact, on March 2nd, Lithium America has announced that construction has started. Phase 1 production is projected to begin in the second half of 2026. We plan to begin acquiring equipment for this project in 2023. While this project isn't expected to result in significant income generation until production commences, this is an important step forward in what is expected to be a key project for domestic lithium production. The Mitigation Resources of North America team continues to advance work on existing mitigation projects and build on a substantial foundation as established over the past several years. Mitigation Resources established two new stream mitigation banks near Dallas and Nashville in 2022 and was recently named a designated provider of abandoned mineless land restoration by the state of Texas. Mitigation Resources is making strong progress towards its goal of becoming a top 10 provider of stream and wetland mitigation services in the southeastern United States. Overall, I'm very pleased with the way all of these businesses are advancing their strategies, including efforts to protect our coal mining business. Before I turn the call back to Christy, I'd like to recognize that our strong 22 results were made possible by our great team of employees. Their hard work and tremendous passion for our business continues to propel us forward, and I'm very grateful to be working with such a fantastic team. With that, I'll turn the call back over to Christy to cover our results for the quarter in more detail. Christy?