Ladies and gentlemen, thank you for standing by and welcome to the NACCO Industries Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the call over to your speaker today, Christina Kmetko. Ma'am, please go ahead.

Thank you. Good morning everyone and welcome to our 2020 second quarter earnings call. I am Christina Kmetko and I'm responsible for Investor Relations at NACCO Industries. Thank you for joining us this morning. I hope you and your families are continuing to remain healthy and safe. I'll be providing a brief overview of our quarterly results and business outlook. And then I will open up the call for your questions. Joining me today are J.C. Butler, President and Chief Executive Officer of both NACCO and North American Coal, and Elizabeth Loveman, NACCO's Vice President and Controller. Yesterday, we published our second quarter 2020 results and filed our 10-Q. Copies of our earnings release and 10-Q are available on our website. For anyone who is not able to listen to today's entire call, an archived version of this webcast will be on our website later this afternoon and available for approximately 12 months. Our remarks that follow including answers to your questions 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-Q 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. Let me start by saying that we sincerely thank those who continue to work to keep us safe, particularly those in the healthcare community and first responders. We would also like to recognize our employees who are ensuring we can continue to deliver coal in line with the critical infrastructure industry to our customers. We truly appreciate everyone's commitment to supporting our customers while also working diligently to keep one another safe. The majority of our employees have been reporting to work since the pandemic began, implementing safeguards in accordance with regulatory requirements and guidance from health authorities to protect those at work and limit exposure to COVID-19. Other employees who are able to continue to work from home. Now let me discuss our 2020 second quarter, I will cover our consolidated results first, and then provide the highlights for each segment. On a consolidated basis, our second quarter consolidated net income decreased to $6.1 million or $0.86 per share from $8 million or $1.14 per share last year. The largest driver of the decrease was a significant reduction in the earnings of the Minerals Management segment, as the prior year benefited from a large number of new gas wells put into commission during 2018 and early 2019. This was expected because new wells have high initial production rates and follow a natural decline before settling into relatively stable long-term production. Earnings in the second quarter of 2020 were substantially lower than the second quarter of 2019. The reduced earnings in Minerals Management were partly offset by improved earnings in both the North American Mining and coal mining segments as well as lower unallocated employee-related expenses and a favorable change in taxes. Despite the reduction in tons delivered, North American Mining's operating profit improved significantly, primarily due to new operations since last year and favorable changes in net customer requirements. The coal mining segment's operating profit increased modestly over the prior year, driven by improved earnings at Mississippi Lignite Mining Company and lower operating expenses in the coal mining segment, partially offset by reduced earnings from consolidated operations. Effective July 1, the Contract Mining agreement between the Camino Real Fuels and its customer will be terminated as a result of the unexpected termination of the coal supply contract between an affiliate of Republic and its customer. This contract termination eliminated the need to recall from Camino Real Fuels Legal Pass Mine, so it will result in mine closure. Camino Real Fuels has no legal obligation to perform mine reclamation but is in negotiations with Republic to potentially perform mine reclamation activities under a new contractual arrangement. The Contract Mining agreement between Camino Real Fuels and the previous customer was expected to terminate in 2021. Now let me discuss income taxes. Similar to last quarter, we had a negative effective income tax rate, which resulted in a tax benefit on income in both the second quarter and first half of 2020, as a result of legislation in response to the COVID-19 pandemic. Compared with tax expense in the comparable prior year period, the legislation includes temporary changes regarding the utilization of tax basis net operating losses. For the full year we anticipate to see the effective tax rate to be negative, resulting in a benefit within the range of 7% to 10% excluding discrete items. A significant factor affecting the second quarter's results. Now I'll turn to our outlook. In the Coal Mining segment, we expect the second half and full year 2020 coal deliveries in operating profit to decrease from the respective prior-year period. Excluding a $2 million unfavorable adjustment to mine reclamation liabilities, Centennial Natural Resources expects that operating profit in the second half of 2020 will decrease substantially from the prior year, as a result of an anticipated decrease in earnings at the unconsolidated mining operations due to reduced customer requirements and an expected increase in operating expenses mainly due to higher professional fees. Excluding the unfavorable 2019 mine reclamation adjustments, operating profit for the 2020 full year is expected to decrease from the prior year due to a reduction in earnings at the unconsolidated mining operations and the expected increase in operating expenses. Operating expenses are expected to be moderately higher for the full year of 2020. North American Mining expects limestone deliveries in the second half and for the full year of 2020 to increase modestly from the prior year period. Operating profit in the second half of 2020 is expected to improve over the prior year but decrease significantly from the first half of 2020, mainly as a result of the timing of new limestone mining contracts and favorable changes in the mix of customer requirements. As a result of the significant increase in the first half of 2020 compared to the first half of 2019, full year 2020 operating profit is expected to increase significantly over 2019. As I noted previously, last year's results included significant fee income, particularly in the first half of the year generated by a large number of new gas wells commissioned during 2018 and early 2019. Given the expected lower natural gas prices and fewer expected new wells, the natural production climate decline occurred earlier in the life of a well. Full year 2020 royalty income is expected to decrease and be substantially lower than 2019 levels. While other income is expected to decline in the second half of 2020 compared with the second half of 2019, we believe the rate of decrease will be substantially lower than the decrease in the first half of this year because prior-year income significantly decreased between the first and second halves of 2019. The Management segment is actively engaged in reviewing opportunities to diversify its mineral interests, to complement what are the oil and gas interests in Ohio. On a consolidated basis, we expect a significant decline in full-year 2020 consolidated net income compared with 2019, primarily due to the substantial decrease in operating profit in Minerals Management as well as a reduction in operating profit at the coal mining segment. These items are expected to be partially offset by the recognition of 2020 tax benefits resulting from legislation and an improvement in earnings at the North American Mining segment. Before I open up the call for questions, let me quickly provide some cash flow information. We ended the second quarter with consolidated cash of $95.5 million and debt of $28.4 million, which is an improvement from consolidated cash of $93.7 million and debt of $34.6 million at the end of the first quarter. In addition, at the end of the 2020 second quarter, we had availability of $133 million under our $150 million revolving credit facility. We believe that a conservative capital structure and liquidity are important given our strategic initiatives to grow and diversify in response to changing trends in the energy market. Cash flow before financing activities in 2020 is expected to be a use of cash, due to the significant capital expenditures and payments made in the first half of the year related to deferred compensation and other payroll liabilities. That concludes my prepared remarks. I will now open up the call for your questions.

While we're waiting if anybody does have any follow-up questions, you are more than welcome to reach out to me. My name and my phone number are all on the earnings release. Brian, it appears we don't have any questions today. That is correct. We don't have any questions at this time.

Okay, I will turn the call over to JC Butler for some final comments.

Thanks, Christine. I will provide a response to one question that you shared with me that you received by email. It's a question we had before, so I will respond to it as well. The question was regarding the differences between our coal mining segment and our North American mining segment. In both of those businesses, we operate predominantly with management fee business arrangements, where the customers pay costs through operations and we receive a fee for every unit of delivery. The question was regarding why, even when our coal segment and our North American mining segment seem to deliver similar volumes, the profitability of the two segments is so different. The answer to that question is because the scope of services we provide is drastically different between the two. In a typical coal mining operation, we operate the entire mine — everything from acquiring and permitting the raw land through permitting, pre-strip, mining, reclamation, and all the activities involved in the operation at a large mine with hundreds of employees. In the North American mining segment, we focus primarily on operating draglines at customer quarries, which requires very few employees. So, it's the difference in fees per unit of delivery that results in the profitability differences between these two segments. Hopefully, that answers the question. Christy, I hand it back to you.

Okay, great. Well, thank you everyone for joining us today and again, if you do have any additional questions, please feel free to give me a call.