Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the NACO Industries 2025 fourth quarter and full year earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, simply press star 1 on your telephone keypad. To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to Christina Kometko, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for today's 2025 fourth quarter and full year earnings call. I'm Christina Kometko, and I'm responsible for Investor Relations at NACO. I'm joined today by NACO's President and CEO, J.C. Butler, and Senior Vice President and Controller, Elizabeth Luvman. Yesterday evening, we announced our fourth quarter and four-year results and filed our 10-K with the SEC. Both documents are on our website for your reference. We'll refer today to several non-GAAP metrics to give you a clearer picture of how we think about our business. Reconciliations to GAAP can also be found on our website. Before beginning our discussion, let me remind you that today's remarks will include forward-looking statements. As always, actual outcomes may differ materially due to various risks and uncertainties, which are described in our earnings release, 10K, and other filings. We undertake no obligation to update these statements. With those quick notes out of the way, I'll turn the call over to JC for his opening remarks.

Thanks, Christy, and good morning, everyone. Before I begin, I'd like to take a moment to discuss an incident that happened at one of our Florida operations. The safety and well-being of our employees has always been a cornerstone of our company's values. Despite this focus, a tragic incident in December resulted in the loss of two employees. This loss deeply affected us and we extend our heartfelt condolences to the family, friends, and colleagues of these two individuals. This is a solemn reminder of the importance we place on protecting the well-being of our people every day. In the aftermath of this tragedy, we are actively reinforcing our safety expectations across the organization. Our employees are the nucleus of our success and their safety will always come before all else. I'll now discuss our operating performance. We delivered a strong close to 2025. Our fourth quarter operating profit rose 95% over last year at almost 12% sequentially. All three of our reportable segments reported improved year-over-year results, led by a significant increase in the utility coal mining segment. Overall, we continue to build upon the improving profitability and growth we experienced in the third quarter, highlighting the second half that overcame operational challenges experienced during the first half of the year. We disclosed over the past several quarters that we were terminating our pension plan during the fourth quarter, and I'm happy to report that we have now successfully settled all future pension obligations. As a result of completing this process, we recognized an after-tax termination charge of $6 million. This charge and an increase in tax expense, which Liz will explain in more detail, contributed to our reported fourth quarter net loss of $3.8 million. These transactional anomalies aside, I feel good about our underlying operating results, which contributed to the 59% year-over-year and 14% sequential increases in adjusted EBITDA. I believe these results represent a business delivering on its potential. Our utility coal mining segment, which features long-term mining contracts, remains the foundation of our business. I'm pleased to say that our utility coal mining segment reported a gross profit this quarter after a number of quarters of losses. For more than a year, I've discussed Mississippi Lignite's unfavorable contract mechanics that resulted in a lower per ton sales price that unfavorably affected results. The team at Mississippi Lignite Mining Company has worked diligently to mine efficiently and control costs. In this quarter, the mine produced and sold more tons, and as a result, benefited from higher production efficiency and a lower cost per ton sold. Production also outpaced deliveries in the period, leading to certain production costs to be capitalized into inventory. These factors drove the current quarter gross profit compared to the prior year loss when results were affected by a significant inventory write-down. I'd like to be able to say the results at Mississippi Lignite Mining Company are moving in the right direction now, especially with an anticipated increase in the contractually determined price per ton. However, the customer's power plant began a maintenance outage in mid-February, which is affecting first-quarter demand. The power plant is expected to resume operations in mid-March. We are expecting year-over-year improvements at Mississippi Lignite Mining Company in 2026, but any delay or further changes in demand or dispatch or any reduced power plant mechanical availability could alter our expectations. Our contract mining segment continues to benefit from ongoing progress on operational and strategic initiatives designed to enhance profitability. Improved margins, driven largely by contracts executed in recent years and other growth initiatives, led to an increase in this segment's year-over-year operating performance. This segment remains our growth platform for mining. Through continued geographic and mineral expansion, we're building a growing portfolio of long-term contracts that strengthen the foundation for sustained profitability. As I mentioned during our Q3 earnings call, we secured a multi-year drag line services contract as part of a U.S. Army Corps of Engineers dam construction project in Palm Beach County, Florida. This project is already starting to ramp up we're excited about this opportunity as it advances our growth into large-scale infrastructure projects this project also provides an opportunity to showcase the efficiency and environmental advantages of the new electric drive mtech drag lines we also anticipate commencing operations in a new limestone quarry in arizona in 2026. Turning to minerals and royalties, this segment grew year over year. Royalties from our legacy natural gas assets benefited from higher prices and production, more than offsetting the impact of lower oil prices and production. The Catapult team continues to actively pursue additional investment opportunities to support future growth in earnings. At Mitigation Resources, we expect increasing profitability over time from the sale of mitigation credits and as reclamation and restoration services expand. While performance is currently variable due to permit and project timing, mitigation resources is expected to generate a profit in the second half of 2026 and move toward more consistent results over time as the business expands. We continue to invest in our businesses to drive future growth. Again, in 2026, we anticipate making significant capital investments. The majority of these planned expenditures relate to business development opportunities, and we will only make those investments if the projects meet our strict investment criteria. Overall, I continue to believe we're well positioned for meaningful growth. We are entering 2026 with clear opportunities to build on our 2025 momentum as we execute our growth strategies and create long-term values for our shareholders. Our approach is rooted in long-term contracts and investments, which continue to deliver strong earnings and steady cash flow for compounding annuity-like returns. We executed on this strategy over the past decade, and momentum continues to build. I remain confident in our businesses and in our ability to deliver strong 2026 results and continued progress in the years to come. Before I turn the call over to Liz, I'd like to say thank you to all of our employees. Our team delivered strong 2025 fourth quarter and full year earnings, and their hard work and commitment will enable us to continue to deliver in the future. We have an incredibly strong team across the company, and I am proud of the work that they do. With that, I'll turn the call over to Liz to provide a more detailed view of our financial results and outlook. Liz.

Thank you, JC. I'll start with some high-level comments about our consolidated fourth-quarter financial results compared to 2024. In the 2025 fourth quarter, we generated consolidated growth profit of $12 million, an increase of 42% year-over-year, while our fourth-quarter revenues of $66.8 million increased 5%. We reported consolidated operating profit of $7.6 million, up from $3.9 million in 2024, driven by improvements at all three of our reportable segments. These favorable results were partly offset by higher unallocated expenses. Consolidated adjusted EBITDA increased 59% to $14.3 million versus $9 million for the same period last year. As JC discussed, we completed the termination of our pension plan, and as a result, recorded a $7.8 million non-cash pension settlement charge, or $6 million after-tax. This charge, combined with the fourth quarter true-up of tax expense to the full-year effective tax rate, resulted in a net loss for the quarter of $3.8 million, or $0.52 per share. This compared to net income of $7.6 million, dollars, or $1.02 per share in 2024. Moving to the individual segments. The utility coal mining segment reported operating profit of $7.2 million in 2025, a significant increase over the $2 million generated in the 2024 fourth quarter. Segment adjusted EBITDA increased to $9.7 million from $4.2 million in the prior year. These year-over-year improvements were driven by the stronger operating performance at Mississippi Lignite Mining Company that JC discussed. Lower general and administrative employee-related expenses also contributed to the higher segment operating profit. Looking ahead, we expect an increase in operating profit in 2026 compared with 2025. Improvements at Mississippi Lignite Mining Company as a result of an increase in the contractually determined per ton sales price are expected to be partly offset by lower earnings at the unconsolidated mining operations. The lower unconsolidated mining earnings are due to reduced income at the Sabine Mining Company associated with the wind down of reclamation services. In the contact mining segment, revenues, net of reimbursed costs grew 9% over the prior year, primarily driven by higher part sales, partly offset by increased volumes of lower price times. Operating profit of $900,000 and segment-adjusted EBITDA of $3.3 million were comparable to the prior year. Improved margins at the mining operations and an increase in part sales were offset by a $1.1 million loss contingency and lower employee-related expenses. The loss contingency is related to costs associated with the incident JC discussed previously. Looking forward, higher customer demand, earnest contributions from new contracts, and continued momentum from 2025 activities are expected to lead to a significant year-over-year increase in results in 2026. The minerals and royalty segment delivered year-over-year growth in revenues, operating profit, and segment-adjusted EBITDA due to increased royalty revenues driven by improved natural gas pricing and increased production volumes. These benefits were partly offset by lower royalty oil revenues resulting from reduced oil prices and volumes. Lower employee-related expenses and higher earnings from an equity investment also contributed to the year-over-year profit improvement. At the minerals and royalty segment, newer investments are expected to contribute favorably to 2026 results. However, commodity price forecasts as well as development and production assumptions are expected to result in an overall year-over-year decrease in operating profit and segment-adjusted EBITDA, particularly in the second half of the year. It is important to note that our forecast was developed prior to the recent developments in the Middle East. Any significant changes in commodity prices or production as a result of this conflict could change our expectations for 2026. Overall, we anticipate meaningful year-over-year improvements in consolidated operating profit, net income, and EBITDA in 2026. Turning to our liquidity, for the 2025 full year, we generated cash from operations of $50.9 million, compared to $22.3 million in 2024. At December 31st, we had outstanding debt of $100.9 million, up modestly from $99.5 million at December 31st, 2024. Our total liquidity was $124.2 million, which consisted of $49.7 million of cash and $74.5 million of availability under our revolving credit facility. As a result of the anticipated capital investments in 2026, we expect a use of cash before financing greater than in 2025. With that, I'll turn the call back to JC for closing remarks.

JC. Thanks, Liz. Thanks, Liz. to wrap up i remain confident in our trajectory and long-term opportunities our businesses provide critical inputs for many industries as the need for uninterrupted energy grows industry fundamentals for natural resources are expected to continue to strengthen reinforcing the critical need to keep existing reliable baseload resources online in 2026 the national coal council which is an advisory committee to the u.s secretary of energy was re-established This council is focused on advising the Department of Energy on reinforcing coal's strategic role in U.S. energy policy and providing actionable advice on sustaining coal plant operations and prioritizing coal to support grid reliability, which supports our country's economic competitiveness and national security. The reestablishment of this council and the underlying improving regulatory environment reinforced my confidence in our prospects for 2026, fix, as well as our overall business trajectory and longer-term growth opportunities. The building blocks for durable compounding growth at NACO are firmly in place. Our team is focused on execution, operational discipline, and delivering long-term returns for shareholders. We'll now turn the call over to any questions you may have.

As a reminder to questions, simply press star one on your telephone keypad. Again, that is our one to ask a question, and we'll pause for just a moment to compile the Q&A roster. Our first question is in the line of Doug Weiss with DSW Investments. Please go ahead.

Hey, good morning. Good morning.

I guess starting with the coal division, can you quantify how much the step down in Sabine work is we have not quantified that number okay but what i would say doug i think what i'd say is you know when the plant when the when the mine and the plant were operating and we're delivering coal that was the highest level of income that we received from sabine as we stepped down into reclamation uh that you know appropriately because you know we're scaling down the amount of work that that fee was reduced as we exit that, you know, that situation, that's when it goes away. So it's not – I just want you to know that it's not going from, like, full bore production level, which we had, you know, a couple years ago, to zero. It's stepping down from a lower level.

Right. And at the same time, you get, you know, your price index goes up this year, right?

Yeah, you're speaking at Red Hills at Mississippi Ignite Mining Company. Yes, we believe, you know, it's based on what happens to indices month to month, but we believe that we're going to see an increase in price during the course of the year. okay and does that flow in you know is that weighted towards one is there a seasonal element to that when that when that really starts to um benefit you it's a it's a formula that compares current prices for relevant indices to prior indices so you know it's tracking movements over a one- and five-year period. And so, you know, just as we look at what was happening in the prior periods and what our expectations are in the future periods, we're able to, you know, develop a forecast. There's not really a seasonal component to price. However, you know, there is generally a seasonal component to deliveries. In, you know, particularly in the south, power plants operate at their heaviest level in the winter when it's cold, in the summer when it's hot, and the shoulder seasons typically don't operate at the same high level.

So, seasonal was a bad choice of words. I really just meant when, you know, when in the year do you really start to see the benefit from that index reset?

Yeah. You know, it's really just going to depend on how the indices play out over time. I think we've mentioned before that, you know, petroleum is represented in the basket of indices. And, you know, who knows how that's going to play out with what's going on in the Middle East. Very difficult to forecast that at this time. Obviously, when we developed our forecast, we didn't know that this Middle East situation was going to develop.

I see. I mean, could that create kind of a windfall situation given the spike in oil prices?

I mean, look, I think we could play out lots of scenarios. I think you could say spikes in, you know, various things are going to drive the price up. But, you know, we can also see things happen in the market that cause some of those indices to drop as well. So I think it's really hard to forecast. I mean, every day you pick up the Wall Street Journal and you can read, even in just one newspaper, various views of how this might play out with respect to controlling prices and inflation and interest rates and all the other stuff.

Well, and I had understood from your previous comments that it wasn't actually the wholesale petroleum price. It was more of the diesel price at the pump. Is that true or did I misunderstand there?

So, the price is based on published indices. So, it's not like we drive by the local gas station and see what diesel is selling for. It's the nationally, federally published indices.

Okay. All right. Well, I got you. I guess moving on to contract mining, how large is the, you know, not, I know you probably don't want to quantify it, but just relative to a typical contract is the Army Corp of Engineers contract?

It's a significant contract. We're very excited about the opportunity. As, you know, we mentioned, it's an opportunity for us to apply our skills in a new market instead of, you know, mining aggregates that are going to be used either in a cement plant or, you know, sold as crushed aggregates or sand or gravel. You know, this is an opportunity to go use our skills for infrastructure projects. So it's a pretty sizable project for us. and we're excited about the new opportunity and the partnership.

And what's the timing of that in terms of when that starts and when it gets up to full production?

We are already ramping up production. I don't actually know when it gets to full production. Liz, do you know that?

I think it's going to depend a little bit on the timing of getting the additional drag line session, but it will ramp up throughout this year.

Yeah, it's going to ramp up throughout the year, and, you know, it'll be full steam ahead. One of the things that I find interesting about this project, and I think we all are encouraged or excited by this feature, is, you know, this is not a contract where we're delivering aggregates, we're mining aggregates for a customer that's responding to customer demand. This is a contract where we've been asked to go in and move X amount of material. And, you know, obviously, we have to work in coordination with our customer to do that. But this isn't a contract that's got any exposure to market forces. So, you know, I think it's a pretty predictable, nice contract for us.

Yeah, you think there's an opportunity to add more business like that?

Well, we don't know, but I think we hope so.

Yeah. Okay. And how about Phoenix? How substantial is that new business?

I mean, that also is a nice contract. It's a sizable drag line that we've moved out there. As you know, Phoenix is just exploding with growth. So, it seems like, you know, lots of potential there. Okay, interesting.

You gave your capital targets, your capital expense targets, I guess two questions on Well, I guess I'll start to just – I'll break them up. On the first one, is it reasonable to think that that capital will be allocated in a manner are similar to 2025 in terms of the divisional breakout?

You mean like the pie chart of CapEx?

Yeah, like how much is going to mining and how much is going to oil and gas?

Well, I mean, I guess I'd break that down by saying, you know, I mean, we're really clear that we budget $20 million of investment capital for our minerals business. And, you know, there's nothing saying that we have to spend that $20 million. It's just what we put in our budget. So we spend $20 million, and, you know, if we do, great. If we don't, that's okay, too. We're only going to spend it if we find the right project. So that's kind of a fixed number, generally. you know, the total that we published is a pretty big number. And we said that the, you know, the majority of what we're going to spend is with respect to growth. So I think it really determines how those opportunities play out. I think we do disclose a breakout in the 10K. Liz can probably here point us to that in a second. But ultimately, this is going to depend on what opportunities do we really find. If you're talking about our forecast, it's in the 10K. If you want to talk about where does it actually get spent, it really is dependent upon what projects we find and which ones, you know, meet our investment criteria. I think we've been really clear about how we think about deploying capital. And if we don't meet our investment criteria, then we just don't invest.

Right.

So, in terms of the – I was going to say, you can find the breakout in the 10K in our MD&A where we have a discussion of five actual and 2026 planned CapEx.

Okay. Okay, great. You know, in terms of the Army Corp of Engineer work and the Phoenix work, I mean, that capital has already been spent, right? So, this would be capital for new contracts. Is that right?

There is some additional capital for the Army Corps of Engineers project. That's going to end up being a three-drag line project. And so, we're still, you know, getting the, you know, the final drag lines commissioned in order to – constructed and commissioned in order to do that project.

Okay. Would you be able to say about how much is left on that project?

We haven't disclosed that. I mean, it's included – what we spend in 2026 is included in the $36 million we have for the contract mining segment.

Okay.

So, that number is in the 36th.

Yeah, okay. I guess in terms of allocating to the minerals segment, does Iger give you a good, you know, do you have an opportunity to continue to invest capital in that operation? Is that an attractive use of your capital, you know, as they expand?

Well, I mean, a couple pieces of that. We think it's a very attractive use of our capital. It's why we invested an additional amount in their operations. I think, and we're very enthusiastic about the investments that we've made with them. I think it's a great piece of our minerals and royalties platform. You know, the work that they're doing, I think, is for the most part funded. So, one, I don't know that there would be additional opportunities to invest. But I also think, you know, we want to pay attention to diversifying our investments. You know, the whole premise of Catapult is our mineral segment is we started with a highly concentrated investment in Appalachian natural gas assets, and the goal here is diversify into other basins and other minerals. Iger is a piece of that. Taking more Iger, I think, you know, is more concentration as opposed to more diversification, which is our primary goal. Now, I'm not going to rule out that we'd ever invest more in Iger, but I'd say generally we're more in line – we're more likely to end up, you know, investing in mineral and royalty interest like we have in the past.

Mm-hmm. If you hit that capital target, my guess is you're going to be somewhat cash negative for the year. Do you have a leverage level where you feel, you know, where you get uncomfortable or where you're willing to go up to?

Well, I don't ever want to get to a level where I start to feel uncomfortable. You know, we talk often about our desire to have a conservative financial structure. As we've discussed, you know, we've been through a period of investing in all these businesses, and we believe that we're in a, you know, we're entering a period of significant harvest in a, you know, investment harvest business model. So, you know, one, we don't know that we're going to spend the entire $89 million, and two, we're going to watch our level of harvest that's going on during the year, and we will certainly manage in an appropriate way so that we don't ever get to a point where we're having a call, and I'm like, eh, I'm a little uncomfortable with where we are in our leverage. I don't want to get there. Yeah.

I guess last question from you is just on mitigation resources. So is most of the revenue in the unallocated line, is that mostly mitigation resources?

Yes.

Okay. And how are you feeling about that business in terms of growth and, you know, I saw that you said it would be profitable at the end of the year. Is that something you expect to continue to go forward into next year?

Yeah, you know, yes, we expect it to, you know, reach profitability and grow from there. The mitigation banks, you know, there's two parts to that business. One is the mitigation banking business. Speaking of invest and then harvest, you know, We've identified properties in high-growth areas. In some instances, we'll acquire property with opportunity to improve the streams and or wetlands on that property. And, you know, you get permits approved with the Army Corps of Engineers, and then there's basically a 10-year process where we do work that would involve improving the streams and or wetlands and then monitoring, and you receive credits. We know up front how many credits we're going to get. And the mitigation banks that we've already got in place have a very large value of credits that are going to be released from them over time. So we've got a pretty good horizon on the, we call it credit inventory, that we will be able to sell in the future from just our existing credits. Now, you know, that's all subject to timing because, obviously, you've got to get through the Army Corps of Engineers upfront permitting process. Then you've got milestones that we need to hit with the work that we're doing. We're confident that we can be successful with that. But then you've also got, you know, what are customer projects? What's their timing look like? When do they get their Army Corps permits, and how does their development proceed? So we think all of this is moving in a positive direction and will continue to do so in the future. And all of that gets mixed in with shorter-term reclamation and restoration projects, you know, that we're finding really nice success in that part of the business. So you blend those two together, and we think this business is on a really nice trajectory that will really start taking hold later this year.

Okay, great. Well, next quarter, I'm glad to see things continue to go well overall. And so, thank you for your hard work and for taking my questions.

Great. Doug, we always appreciate your questions. Thank you for your interest.

And with no further questions in queue, I will now hand the call back over to JC for closing remarks.

This is Christy. With that, I'll conclude our Q&A session. Before we conclude, I'd like to provide a few reminders. A replay of our call will be available online later this morning. We'll also post a transcript on the Investor Relations website when it becomes available. If you have any questions, please reach out to me. My phone number is in the press release. I hope you enjoy the rest of your day, and I'll now turn the call back to Tina to conclude.

An audio recording of the event will be available via the ECHO Replay platform. The Echo Replay will expire on Thursday, the 12th, March 2026 at 11.59 p.m. This does conclude today's conference call. You may now disconnect.