Hamilton Beach 2008 Annual Report Download - page 8

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particularly good performance at the Red River Mining
Company compared with 2007 and the extension of The
Sabine Mining Company contract through 2035.
Nevertheless, 2008 was still challenging for NACoal as net
income was negatively affected by Mississippi Lignite Mining
Company’s customer’s planned extended power plant outage,
which reduced lignite coal tons delivered and also resulted in
increased costs of sales due to the capitalization of fixed costs
over lower production levels. NACoal’s limerock mining
operations in southern Florida also experienced significant
declines in deliveries as customer requirements were reduced
by the downturn in the housing and construction markets in
that region. Contractual price escalation at most of the mines
partially offset these declines.
Market Outlook for 2009
NACoal expects improved
performance at its lignite coal
mining operations in 2009
provided that customers
achieve currently planned
power plant operating levels.
Tons delivered at the lignite
coal mines are expected to
increase in 2009 compared
with 2008, especially at the
Mississippi Lignite Mining
Company as a result of
fewer planned outages and
improved operating efficiencies at the customer’s power plant.
In addition, recently reduced costs for certain commodities,
such as diesel fuel, are helping the company manage mine
operating costs.
Limerock customer 2009 deliveries will be down
significantly due to an unfavorable U.S. District Court
ruling for the Florida lake belt region that terminated our
customers’, and others’, existing mining permits at most
of the limerock dragline mining operations. As a result,
deliveries from the limerock dragline mining operations
are expected to be significantly lower in 2009. Customers
will be reducing stockpiled inventory levels until their
limerock mining operations return to production under
new permits that are expected to be issued toward the end
of 2009. However, demand for limerock remains severely
depressed due to the significant decline in the southern
Florida housing and construction markets.
Actions Being Taken to Move Forward in 2009
NACoal prides itself on its intense focus on safety,
efficiency and its continuous cost reduction programs.
Because these programs have been in place for many years,
operations are projected to be relatively stable at all of
NACoal’s lignite coal mines in 2009 given that no significant
power plant outages are planned at any of its customers.
However, contractual price escalation at all mines is not
expected to affect results as favorably in 2009 as it did in 2008
because of recent declines in commodity costs. High levels of
productivity are expected to continue at all of the mining
locations. At the Mississippi Lignite Mining Company, the
company expects to increase mine tonnage as a result of
improved operating efficiency at the customer’s power plant.
In early 2009, in light of
the U.S. District Court ruling
shutting down Florida lake belt
mining operations, NACoal’s
limerock dragline mining
operations took significant
action to reduce costs, including
layoffs for many employees.
These measures will remain in
place at all of the Florida lake
belt facilities during 2009
until limerock production is
resumed, which is expected to
be in late 2009. The company
also mitigated its financial
exposure to these limerock operations by transitioning
to new cost reimbursable management fee contracts with
almost all of its customers. Only one Florida limerock
operation, which is not in the lake belt area, will be in
production for all of 2009.
NACoal has a number of potential new projects and
opportunities under consideration or in progress, and expects
to incur additional expenses related to these opportunities in
2009. Permitting is taking place in the Otter Creek Reserve in
North Dakota in expectation of construction of a new mine.
Construction is continuing on coal dryers and a coal load-out
facility adjacent to the Falkirk Mine, which, when complete,
will improve market potential by extending practical
transportation distances for shipping lignite coal. In addition,
NACoal is working on a project with Mississippi Power to
provide lignite coal to a new plant in Mississippi and is
optimistic about concluding other new agreements in 2009.
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