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NACCO Industries, Inc. Announces Third Quarter 2019 Results

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CLEVELAND, Oct. 30, 2019 /PRNewswire/ --  

Quarter Highlights:

  • Consolidated revenues increased to $32.6 million, up 3.7% over Q3 2018
  • Consolidated operating profit decreased 17.9%, or $1.9 million, from Q3 2018 on higher operating expenses
  • Consolidated net income increased 11.6%, or $1.1 million, over Q3 2018 due primarily to payment received associated with a prior India venture
  • Diluted earnings per share increased to $1.47/share from $1.33/share in Q3 2018

NACCO Industries, Inc.® (NYSE:NC) today announced consolidated net income of $10.3 million, or $1.47 per diluted share, and consolidated revenues of $32.6 million for the third quarter of 2019, compared with consolidated net income of $9.2 million, or $1.33 per diluted share, and consolidated revenues of $31.4 million for the third quarter of 2018.  The increase in consolidated net income was primarily due to the receipt of $2.7 million pre-tax associated with a prior India venture and higher earnings at the Minerals Management segment, partly offset by a decrease in earnings in the Coal Mining and North American Mining segments.

For the nine months ended September 30, 2019, the Company reported consolidated net income of $33.3 million, or $4.76 per diluted share, and consolidated revenues of $114.1 million, compared with consolidated net income of $23.8 million, or $3.43 per diluted share, and consolidated revenues of $96.3 million for the first nine months of 2018. NACCO's effective income tax rate was 14.1% for the nine months ended September 30, 2019, compared with 12.7% for the nine months ended September 30, 2018.

NACCO ended the third quarter of 2019 with consolidated cash on hand of $115.1 million and debt of $7.7 million.  At December 31, 2018, NACCO had consolidated cash on hand of $85.3 million and debt of $11.0 million.

In February 2018, NACCO's Board of Directors authorized a stock buyback program to purchase up to $25 million of the Company's outstanding Class A common stock through December 31, 2019.  The Company has repurchased approximately 78,100 shares for an aggregate purchase price of $2.7 million since inception of this program, including less than $0.1 million of stock purchased during the three months ended September 30, 2019.

In the first quarter of 2019, the Company changed its segment reporting.  The 2018 financial information in this release has been recast to reflect the new segments.  In addition, recast quarterly segment information for the fourth quarter and full year 2018 has been included on page 11.

Detailed Discussion of Results

Coal Mining Results

Coal deliveries for the third quarter of 2019 and 2018 were as follows:


2019


2018

Tons of coal delivered

(in millions)

        Unconsolidated operations

8.7



9.8


        Consolidated operations

0.7



0.7


                        Total deliveries

9.4



10.5



Key financial results for the third quarter of 2019 and 2018 were as follows:








2019


2018


(in thousands)

Revenues

$

18,799



$

18,583


Earnings of unconsolidated operations     

$

16,211



$

17,004


Operating expenses(1)

$

11,286



$

9,683


Operating profit

$

7,341



$

9,814



(1) Operating expenses consist of Selling, general and administrative expenses, Amortization of intangible
assets and Gain on sale of assets.

Coal Mining operating profit decreased substantially in the third quarter of 2019 compared with the third quarter of 2018.  The decrease in operating profit was primarily due to higher operating expenses, mainly as a result of an increase in employee-related costs, and a decrease in earnings of unconsolidated operations.  The higher employee-related costs included an increase to the estimated non-cash equity component of incentive compensation of $0.7 million pre-tax mainly due to a more than 20% increase in the market price of the Company's stock during the third quarter.  The decrease in earnings of unconsolidated operations was mainly due to fewer coal tons delivered as a result of changes in customer demand, primarily related to the timing and duration of planned outages at certain customer facilities. Earnings from the consolidated operations were comparable.  Favorable results at Centennial Natural Resources were offset by reduced earnings at Mississippi Lignite Mining Company, primarily due to an increase in the cost per ton delivered.

Coal Mining Outlook - 2019

In the 2019 fourth quarter and full year, the Company expects coal deliveries to decrease compared with respective prior year periods. The expected reduction in coal deliveries is a result of changes in customer requirements, including the timing and duration of power plant outages, as well as comparisons to historically high delivery levels at certain of the unconsolidated operations in 2018.

Revenues in the fourth quarter of 2019 are expected to decrease primarily as a result of the absence of a favorable $3.0 million contractual settlement recognized at Mississippi Lignite Mining Company in the fourth quarter of 2018. Excluding the contractual settlement, revenues in the 2019 fourth quarter and full year are expected to decrease modestly compared with the comparable 2018 periods due to reduced customer requirements.

Excluding the $3.0 million contractual settlement, as well as $1.8 million of favorable adjustments recognized in the fourth quarter of 2018 related to a reduction in Centennial's mine reclamation liabilities, the 2019 fourth quarter Coal Mining operating profit is expected to increase modestly compared with the 2018 fourth quarter primarily as a result of a reduction in operating expenses and improved results at the consolidated mining operations.  These improvements are expected to be partially offset by reduced income at the unconsolidated Coal Mining operations as customer requirements are expected to be lower than the prior year.

Full-year 2019 operating profit is expected to decrease compared with full-year 2018, after excluding the favorable 2018 items noted above and an additional $1.0 million favorable mine reclamation liability adjustment recognized in the first quarter of 2018.  The decrease is primarily due to anticipated lower income at the unconsolidated Coal Mining operations as a result of reduced customer requirements, and higher operating expenses, partially offset by an anticipated improvement in results at the consolidated mining operations.

Capital expenditures are expected to be $7.4 million in the fourth quarter of 2019 and $13.9 million for the 2019 full year.

Coal Mining Outlook - 2020

In 2020, the Company expects coal deliveries to increase compared with 2019, primarily at the unconsolidated operations.  The expected increase in coal deliveries is a result of an expected increase in customer requirements, as the Company's customers are forecasting a reduction in planned power plant outage days in 2020.

Coal Mining operating profit in 2020 is expected to increase substantially compared with 2019, predominantly in the first half of the year.  This anticipated increase is primarily the result of an expected significant increase in income at the consolidated operations in the first half of 2020, and improved earnings at the unconsolidated Coal Mining operations throughout the year.

The increase at the consolidated operations is expected to be driven by improved results at Mississippi Lignite Mining Company, primarily due to an anticipated modest increase in customer demand and a reduction in the cost per ton of coal delivered in 2020 compared with 2019.  In general, cost per ton delivered is lowest when the power plant requires a consistently high level of coal deliveries, primarily because costs are spread over more tons.  Historically, periods of reduced or fluctuating deliveries, such as during planned or unplanned power plant outages or periods of fluctuating demand for electricity generated by the plant, have adversely affected Mississippi Lignite Mining Company's tons delivered, resulting in an increase in cost per ton delivered and reduced profitability.  If customer demand at Mississippi Lignite Mining Company decreases from expected levels, it could unfavorably affect North American Coal's 2020 earnings significantly.

Capital expenditures are expected to be approximately $30 million in 2020. Elevated levels of capital expenditures in 2019 through 2021 are primarily related to spending at Mississippi Lignite Mining Company as it develops a new mine area. These capital expenditures will result in an increase in depreciation that will unfavorably affect ongoing operating profit.

North American Mining Results

Limestone deliveries for the third quarter of 2019 and 2018 were as follows:


2019


2018


(in millions)

Tons of limestone delivered

10.2



11.4





Key financial results for the third quarter of 2019 and 2018 were as follows:







2019


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