Hamilton Beach 2007 Annual Report Download - page 45

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add value to its own and others’ operations and contribute to
the company’s profitability over time.
Contract mining of lignite coal. NACoal, the nation’s
largest miner of lignite coal, is widely regarded as an efficient
and effective mining partner and, as a result, periodically is
presented with opportunities to act as a contract miner for
reserves owned by others. NACoal is hopeful that at least one
of several projects currently under evaluation will come to
fruition in 2008 and contribute to profit growth in the future.
Contract mining of aggregates. The company is
optimistic opportunities for providing high value-added
services for aggregates, such as
limerock dragline mining services,
will continue to emerge. Discussions
are ongoing with NACoal’s existing
limerock customers, as well as other
limerock producers, about providing
additional mining services.
Outlook for 2008 and Beyond
Overall, NACoal anticipates
results for 2008 to be well below
those of 2007, as fewer lignite coal
deliveries primarily due to increased customer power plant
outages, lower limerock deliveries and lower royalty income,
resulting from the completion of third parties mining certain
reserves during 2007, are all expected to affect NACoal’s 2008
performance. The company also expects higher costs due to
lower production levels at MLMC as a result of expected
continued lower delivery levels, as well as higher repair and
maintenance expenses at Red River Mining Company. In
addition, NACoal benefited in 2007 from an arbitration award
that will not recur in 2008. NACoal expects improved
performance from its current operations over the next few
years. In addition, NACoal is encouraged that more new
project opportunities may become available and will continue
its efforts to develop new coal projects. The company is
pursuing a number of potential opportunities that would add
significantly to the company’s long-term profitability.
Accordingly, the company incurred expenditures for the
acquisition and development of additional uncommitted coal
reserves in 2007 and expects similar expenditures in 2008.
Key programs at NACoal are anticipated to help the
company reach or exceed each of its objectives. ROTCE was
19.9 percent in 2007, exceeding NACoal’s goal of 13 percent,
and prospects for ROTCE to continue to exceed that goal are
good for 2008 and 2009. (See reconciliations of non-GAAP
ROTCE on page 43.) EVI at the company’s consolidated
mining operations, including MLMC, is expected to improve
with increased coal deliveries over the next few years. The
company’s unconsolidated mining operations are
consistently performing well. Cash
flow before financing activities at
existing operations, excluding
proceeds from the dragline sales in
2006, was higher in 2007 than in
2006. While cash flow before
financing activities is expected to
decline in 2008 due to expected
mining volume reductions,
prospects are strong for the
following years.
North American Coal marked
50 years of lignite production in 2007. Much has changed
over this half-century and the company has demonstrated its
ability to adapt successfully and responsibly to change. We
believe our history, our skills and our people make us well
suited to continue to lead the industry over the next 50 years.
I want to thank all NACoal employees for their hard
work and dedication in making 2007 another successful year.
I look forward to our continued success in 2008.
Along with the traditional
mining business, new
technologies, partners and
business opportunities offer
significant promise for
future growth at NACoal.
Robert L. Benson
President and Chief Executive Officer
The North American Coal Corporation