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Item 1A. Risk Factors

2021-03-03 compared with 2020-03-04 · 209 added, 130 removed, 120 unchanged (74% of the section changed)

Risks related to the Coal Mining segment

Termination of or default under long-term mining contracts could materially reduce the Company's profitability.

Substantially all of the Coal Mining segment's profits are derived from long-term mining contracts.

Although the Company has long-term contracts, numerous political and regulatory authorities, along with well-funded environmental activist groups, are devoting substantial resources to anti-coal activities to minimize or eliminate the use of coal as a source of electricity generation.

Although the Company has long-term contracts, numerous regulatory authorities, along with well-funded political and environmental activist groups, are devoting substantial resources to anti-coal activities to minimize or eliminate the use of coal as a source of electricity generation.

As a result of such activities, the Coal Mining segment's customers could prematurely retire certain coal-fired generating units.

Any customers' premature plant closure could have a material adverse effect on the Company’s business, financial condition and results of operations.

During the first quarter of 2020, Great River Energy, Falkirk's customer, announced that it was evaluating the economics of the Coal Creek Station ("CCS") power plant.

The Company has a mining contract to supply coal to CCS that expires in 2045.

Any decision by Great River Energy to reduce operations or prematurely close CCS would have a material adverse effect on the Company’s results of operations.

The loss of, or significant reduction in, purchases by our largest coal customers could adversely affect our business, financial condition, results of operation and cash flows.

For the year ended December 31, 2019 , the Coal Mining segment derived approximately 60% of earnings of unconsolidated operations from two customers, Basin Electric Power Cooperative and Great River Energy.

Any customer's premature facility closure could have a material adverse effect on the Company’s business, financial condition and results of operations.

On May 7, 2020, Great River Energy ("GRE"), Falkirk Mine's customer, and the Company's second largest customer, announced its intent to retire the Coal Creek Station power plant in the second half of 2022 and modify the Spiritwood Station power plant to be fueled by natural gas.

On November 5, 2020, American Electric Power announced its affiliate, Southwestern Electric Power Company's (“SWEPCO”), intends to retire the Henry W.

Pirkey Plant (the “Pirkey Plant”) in 2023.

The Sabine Mining Company, (“Sabine”) operates the Sabine Mine in Texas and all production from Sabine is delivered to SWEPCO's Pirkey Plant.

Business — Business Developments" on page 2 in this Form 10-K for further discussion.

State implementation of the EPA’s Regional Haze Rule (“RHR”) could require Coyote Creek’s customers to incur significant new costs at the Coyote Station power plant, which could, dependent on determinations by state regulatory commissions on approval to recover such costs from the customers of Coyote Creek’s customer, negatively impact Coyote Creek’s customers’ net income, financial position and cash flows.

The Company understands that the North Dakota Department of Environmental Quality (“NDDEQ”) could require sources subject to RHR Round 2 reasonable progress determinations, including Coyote Station, to undertake emissions control measures.

If NDDEQ requires significant emissions controls at Coyote Station by December 31, 2028, it may not be economically feasible for Coyote Creek's customers to invest in such equipment and an early retirement of Coyote Station and the Coyote Creek mine could be necessary.

NDDEQ’s state implementation plan is due to be submitted to the EPA by July 2021.

Preliminary modeling favors minimal additional emissions control measures for all North Dakota sources.

The Company expects NDDEQ to further evaluate additional preliminary control scenarios for regional visibility modeling in the first quarter of 2021 and prepare a draft state implementation plan available for public comment the first half of 2021.

Under certain circumstances of default or termination of Coyote Creek’s Lignite Sales Agreement (“LSA”), the Company would be obligated for payment of a "make-whole" amount to Coyote Creek’s third-party lenders.

The “make-whole” amount is based on the excess, if any, of the discounted value of the remaining scheduled debt payments over the principal amount.

In addition, in the event Coyote Creek’s LSA is terminated on or after January 1, 2024 by Coyote Creek’s customers, the Company is obligated to purchase Coyote Creek’s dragline and rolling stock for the then net book value of those assets.

Any decision by Coyote Creek’s customers to reduce operations or prematurely close the Coyote Creek mine would have a material adverse effect on the Company’s results of operations, financial position and cash flows.

The loss of, or significant reduction in, purchases by our coal customers could adversely affect our business, financial condition, results of operation and cash flows.

For the year ended December 31, 2020, the Coal Mining segment derived approximately 60% of earnings of unconsolidated operations from two customers, Basin Electric Power Cooperative and GRE.

GRE announced its intent to close Coal Creek station in 2022.

There are inherent risks whenever a significant percentage of total earnings are concentrated with a limited number of customers.

Earnings from the Coal Mining segment's largest customers may fluctuate from time to time based on numerous factors, including market conditions and the realignment of customers' power generation portfolios that reduce the electric power generated from coal, which may be outside of the Company's control.

If any of the Coal Mining segment's largest customers experience declining demand due to market, economic or competitive conditions, it could have an adverse effect on the Company's profitability, cash flows and financial position.

In addition, if any customers were to significantly reduce their purchases of coal from us, the Company's business, financial condition, results of operations and cash flows could be adversely affected.

Earnings from the Coal Mining segment's customers may fluctuate from time to time based on numerous factors, including market conditions and the realignment of customers' power generation portfolios that reduce the electric power generated from coal, which may be outside of the Company's control.

If any of the Coal Mining segment's customers experience declining demand due to market, economic, regulatory or competitive conditions, it could have an adverse effect on the Company's profitability, cash flows and financial position.

In addition, if any customers were to significantly reduce or eliminate their purchases of coal from us or if the Company is unable to renew expiring long-term sales agreements with existing customers or enter into new supply agreements, the Company's business, financial condition, results of operations and cash flows could be adversely affected.

Business — Business Developments" on page 2 in this Form 10-K for further discussion.

Further, in large part as a result of increasing and frequently changing regulation and the realignment of customers' power generation portfolios that reduce the electric power generated from coal, electric power generators may be less willing to enter into long-term coal supply contracts.

Any shift away from long-term supply contracts could adversely affect the Company's profitability, cash flows and financial position.

Mississippi Lignite Mining Company ("MLMC") is subject to risks associated with its capital investment, operating and equipment costs, growing use of alternative generation that competes with coal fired generation, changes in customer demand and inflationary adjustments.

The profitability of MLMC is subject to the risk of loss of investment in this operation, increases in the cost of mining, changes in customer demand, growing competition from alternative generation that competes with coal-fired generation and the emergence of adverse mining conditions.

The profitability of MLMC is subject to the risk of loss of investment in this operation, increases in the cost of mining, changes in customer demand, growing competition from alternative power generation that competes with coal-fired generation and the emergence of adverse mining conditions.

At MLMC, the costs of mining operations are not reimbursed by MLMC's customer.

As such, increased costs at MLMC or decreased revenues could materially reduce the Company's profitability.

Any reduction in customer demand at MLMC would adversely affect the Company's operating results and could result in significant impairments.

In addition, MLMC sells lignite at contractually agreed upon prices which are subject to changes in the level of established indices over time.

Any reduction in customer demand at MLMC, including reductions related to reduced mechanical availability of the customer’s power plant, would adversely affect the Company's operating results and could result in significant impairments.

MLMC has approximately $135 million of long-lived assets, including property, plant and equipment and its coal supply agreement intangible asset, which are subject to periodic impairment analysis and review.

Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including assumptions about future power plant dispatch levels, changes in operating costs and other factors that impact anticipated revenue and customer demand, requires significant judgment.

Actual future operating results could differ significantly from these estimates, which may result in an impairment charge in a future period, which could have a substantial impact on the Company’s results of operations.

MLMC sells lignite at contractually agreed upon prices which are subject to changes in the level of established indices over time.

The price of diesel fuel is heavily-weighted among these indices.

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The decision of which power plants to dispatch is determined by TVA.

TVA has dispatched Red Hills Power Plant at a lower rate in the last two years than in prior years.

TVA has dispatched Red Hills Power Plant at a lower rate in 2019 and 2020 than in previous years.

Choctaw Generation Limited Partnership ("CGLP") leases the Red Hills Power Plant from a Southern Company subsidiary pursuant to a leveraged lease arrangement.

The ability of the lessee to make required payments to the Southern Company subsidiary is dependent on the operational performance of the Red Hills Power Plant.

CGLP's ability to make required payments to the Southern Company subsidiary is dependent on the operational performance of the Red Hills Power Plant.

Southern Company recently publicly disclosed that while all CGLP lease payments have been paid in full through December 31, 2020, operational and other risks have resulted in cash liquidity challenges at the Red Hills Power Plant, and based on current forecasts of energy prices in the years following the expiration of the PPA in 2032, concerns exist regarding the lessee's ability to make the remaining semi-annual lease payments through the end of the lease term in 2047.

Southern Company concluded that it is no longer probable that all of the payments will be received over the term of the lease and therefore recognized an impairment charge in the fourth quarter of 2019.

During the fourth quarter of 2019, Southern Company concluded that it was no longer probable that all of the payments would be received over the term of the lease and therefore recognized an impairment charge to reduce the value of the lease investment.

During the second quarter of 2020, Southern Company revised the estimated cash flows to be received under the leveraged lease which resulted in a full impairment of the lease investment.

If any future lease payment is not paid in full, the Southern Company subsidiary may be unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the Red Hills Power Plant.

Failure to make the required payment to the debtholders could represent an event of default that would give the debtholders the right to

foreclose on, and take ownership of, the Red Hills Power Plant from the Southern Company subsidiary.

Failure to make the required payment to the debtholders could represent an event of default that would give the debtholders the right to foreclose on, and take ownership of, the Red Hills Power Plant from the Southern Company subsidiary.

A foreclosure of the Red Hills Power Plant could have a material adverse effect on MLMC's financial condition, results of operations and cash flows.

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In periods of limited or no deliveries, MLMC may be required to reduce its inventory carrying value using the lower of cost or net realizable value approach, which could adversely affect MLMC’s results of operations.

Changes in customer demand for any reason, including, but not limited to, dispatch of power generated by other energy sources ahead of coal, fluctuations in demand due to unanticipated weather conditions, regulations or comparable policies which may promote planned and unplanned outages at the Red Hills Power Plant, economic conditions, including an economic slowdown and a corresponding decline in the use of electricity, governmental regulations and inflationary adjustments could have a material adverse effect on MLMC's financial condition, results of operations and cash flows.

Changes in customer demand for any reason, including, but not limited to, reduced mechanical availability of the customer’s power plant, dispatch of power generated by other energy sources ahead of coal, fluctuations in demand due to unanticipated weather conditions, regulations or comparable policies which may promote planned and unplanned outages at the Red Hills Power Plant, economic conditions, including an economic slowdown and a corresponding decline in the use of electricity, governmental regulations and inflationary adjustments could have a material adverse effect on MLMC's financial condition, results of operations and cash flows.

The Coal Mining segment's Unconsolidated Subsidiaries are subject to risks created by changes in customer demand and inflationary adjustments.

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Such mandates make alternative fuel sources more competitive with coal-fired electric power generation.

A decrease in coal consumption by the electric power generation industry and the Company’s customers could have a material adverse effect on the Company’s business, financial condition and results of operations.

Changes in federal and state mandates that would include an acceleration in the use of electricity derived from renewable energy sources could result in a decrease in coal consumption by the electric power generation industry and the Company’s customers.

Certain of the Coal Mining segment’s customers, including MLMC's customer, benefit or have benefited from a tax credit under Section 45 of the Internal Revenue Code.

The benefit results in a reduction to the cost of coal-fired electric power generation.

The elimination or expiration of the Section 45 tax credit would increase the cost of the coal-fired electric power generation from these facilities and could result in the power these facilities produce being less economical than other sources of power generation, which could reduce demand and result in a decrease in coal consumption.

Any of these risks could result in a decrease in coal consumption by the Company’s customers and could have a material adverse effect on the Company’s business, financial condition and results of operations.

Government regulations could impose costly requirements on the Company and its customers.

The coal mining industry and the electric generation industry are subject to extensive regulation by federal, state and local authorities on matters concerning the health and safety of employees, land use, permit and licensing requirements, air and water quality standards, plant and wildlife protection, reclamation and restoration of mining properties after mining, the discharge of GHGs and other materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability.

The coal mining industry and the electric generation industry are subject to extensive regulation by federal, state and local authorities on matters concerning the health and safety of employees, land use, stream and wetland protection, permit and licensing requirements, air and water quality standards, plant and wildlife protection, reclamation and restoration of mining properties after mining, the discharge of GHGs and other materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability.

Legislation mandating certain benefits for current and retired coal miners also affects the industry.

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The Company is required to prepare and present to federal, state or local authorities data pertaining to the impact the production and combustion of coal may have upon the environment.

The public, including non-governmental organizations, opposition groups and individuals, have

statutory rights to comment upon and submit objections to requested permits and approvals and to legally challenge certain permits subsequent to their issuance.

The public, including non-governmental organizations, opposition groups and individuals, have statutory rights to comment upon and submit objections to requested permits and approvals and to legally challenge certain permits subsequent to their issuance.

Compliance with these requirements is costly and time-consuming and may delay commencement or continuation of development or production.

New legislation and/or regulations and orders may materially adversely affect the Company's mining operations or its cost structure, or its customers.

New legislation and/or

regulations and orders may materially adversely affect the Company's mining operations or its cost structure, or its customers.

All of these factors could significantly reduce the Company's profitability.

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Such changes could have a material adverse effect on the Company’s business and could significantly reduce its profitability.

The Clean Air Act and the Affordable Clean Energy Rule could reduce the demand for coal.

The Clean Air Act ("CAA") and the Affordable Clean Energy ("ACE") Rule could reduce the demand for coal.

The process of burning coal can cause many compounds and impurities in the coal to be released into the air, including carbon dioxide, sulfur dioxide, nitrogen oxides, mercury, particulates and other matter.

6 unchanged sentences

Business — Government Regulation" on page 16 in this Form 10-K for further discussion.

The Company has experienced growth in its NAMining business in recent periods and it may not be able to sustain or manage future growth effectively.

The Company has expanded its overall NAMining business, operations and headcount in recent periods.

NAMining’s operating expenses may continue to increase as the Company scales the NAMining business, including in expanding business development capabilities outside of Florida and in providing general and administrative resources to support NAMining’s growth.

As NACCO continues to grow the NAMining business, the Company must effectively integrate, develop and motivate new employees, as well as existing employees who are promoted or moved into new roles, while maintaining the effectiveness of its business execution.

In part, NAMining’s success depends on its ability to integrate new customers in an efficient and effective manner.

The Company anticipates that it will continue to incur costs and capital expenditures associated with future growth prior to realizing the full measure of anticipated long-term benefits, and the return on these investments may be lower, may develop more slowly than expected or may never be realized.

If the Company is unable to manage this growth effectively, the Company may not be able to take advantage of market opportunities.

The Company may also fail to execute on its business plan or respond to competitive pressures, any of which could adversely affect the NAMining business, operating results and financial condition.

Property and casualty insurance is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future.

Property and casualty insurance coverage is expensive and from time to time may be difficult or impossible to obtain.

The Company's insurance policies are subject to annual review by its insurers and policies may not be renewed at all or on similar or favorable terms.

Because the Company is involved in the coal mining industry, insurance carriers may decide not to insure us in the future.

In addition, if the Company makes significant insurance claims, its ability to obtain future insurance coverage at commercially reasonable rates could be materially adversely affected.

An inability to obtain property and casualty insurance, significant increases in the cost of insurance the Company obtains, or losses in excess of its liability insurance coverage, could have a material adverse effect on the Company's operating results and financial condition.

The Company has no control over the timing of the development and operation of its natural gas, oil and coal reserves extracted by third parties.

The Company owns mineral interests and royalty interests in seven states in the continental United States.

The Company does not develop oil and gas reserves and is not a natural gas and oil producer.

The Company derives income from royalty-based leases under which lessees make payments to the Company based on their sale of natural gas and, to a lesser extent, oil and coal.

In recent years, a significant portion of the Minerals Management segment's income has been derived from lease signing bonus and production payments associated with assets in the Utica Shale in Ohio and future royalty-based income is dependent on the number of gas wells being developed and operated on the Company’s mineral acreage in Ohio.

Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 30 in this Form 10-K for further discussion.

The decision to pursue development and operation of oil and gas wells is made by third-party operators, not by the Company, and depends on a number of factors outside of the Company's control, including fluctuations in commodity prices (primarily natural gas), regulatory risk, the Company's lessees' willingness and ability to incur well-development and other operating costs, and changes in the availability and continuing development of infrastructure.

Lower commodity prices may reduce the amount of oil and natural gas that third-party operators can produce economically.

Natural gas wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production.

Decline rates can vary due to factors like well depth, well length, formation pressure, and facility design.

In addition to the natural production decline curve, royalty income can fluctuate in response to a number of factors outside of the Company's control, including the number of wells being operated by third parties, fluctuations in commodity prices (primarily natural gas), fluctuations in production rates associated with operator decisions, regulatory risks, the Company's lessees' willingness and ability to incur well-development and other operating costs, and changes in the availability and continuing development of infrastructure.

Any of these risks could materially reduce the Company’s expected royalty income and the Company’s profitability.

Mining operations are vulnerable to weather and other conditions that are beyond the Company's control.

Many conditions beyond the Company's control can decrease the delivery, and therefore the use, of coal to the Company's customers.

These conditions include weather, adverse mining conditions, unexpected maintenance problems and shortages of replacement parts, which could significantly reduce the Company's profitability.

The Coal Mining Segment's customer's operations require significant capital expenditures

Maintaining power plants requires significant capital expenditures.

The Coal Mining segment's customers' operations require significant capital expenditures.

Maintaining and installing environmental controls on power plants requires significant capital expenditures.

Any delay or reduction in making capital expenditures to maintain or upgrade coal-fired power plants by the Coal Segment's customers, principally electric utilities, could result in an increase in outage days and a corresponding decrease in coal consumption.

A decrease in coal consumption could have a material adverse effect on the Coal Mining segment's financial condition, results of operations and cash flows.

Long-lived and intangible assets could become impaired.

The Company reviews long-lived assets, including property, plant and equipment and amortizing intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable.

Factors which may cause an impairment of long-lived assets include significant changes in the manner of use of these assets, negative industry or market trends, significant underperformance relative to historical or projected future operating results, or a likely sale or disposal of the asset before the end of its estimated useful life.

The Company is subject to the high costs and risks involved in the development of new mining projects.

From time to time, the Company seeks to develop new mining projects, including the Thacker Pass project.

The costs and risks associated with such projects can be substantial.

New mining projects can take up to several years to complete, are complex and require significant capital expenditures.

These projects are subject to significant risks, including delays, extreme weather events, unexpected increases in the cost of required materials, and disputes with third party providers of materials, equipment or services, and a completed project may not yield the anticipated operational or financial benefit, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Mining operations are vulnerable to weather and other conditions that are beyond the Company's control.

Many conditions beyond the Company's control can decrease the delivery, and therefore the use, of coal to the Company's customers.

These conditions include weather, pandemics, adverse mining conditions, unexpected maintenance problems and shortages of replacement parts, which could significantly reduce the Company's profitability.

Estimates of the Company's recoverable coal reserves involve uncertainties, and inaccuracies in these estimates could result in lower than expected revenues, higher than expected costs, decreased profitability and asset impairments.

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The Company's estimates as to the quantity and quality of the coal in its reserves are updated annually to reflect production of coal from the reserves and new drilling, engineering or other data.

These estimates depend upon a variety of factors and assumptions, many of which involve uncertainties and factors

beyond the Company's control, such as geological and mining conditions that may not be fully identified by available exploration data or that may differ from experience in current operations.

These estimates depend upon a variety of factors and assumptions, many of which involve uncertainties and factors beyond the Company's control, such as geological and mining conditions that may not be fully identified by available exploration data or that may differ from experience in current operations.

For these reasons, estimates of the recoverable quantities and qualities attributable to any particular group of properties, classifications of reserves based on risk of recovery and estimates of net cash flows expected from particular reserves may vary substantially.

In addition, coal tonnage recovered from identified reserve areas or properties and revenues and expenditures with respect to the Company's reserves may vary materially from estimates.

Accordingly, the Company's estimates may vary from the actual reserves.

Accordingly, the Company's estimates may vary from

the actual reserves.

Any inaccuracy in the reserve estimates could result in lower than expected revenues, higher than expected costs, decreased profitability and asset impairments.

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The Company's inability to satisfy those requirements may cause the leasehold interest to terminate.

federal income tax deductions currently available with respect to coal mining and production may be eliminated.

From time to time, legislation is proposed that could result in the reduction or elimination of certain U.S.

federal income tax provisions currently available to companies engaged in the exploration, development, and production of coal reserves, including the percentage depletion allowance with respect to coal properties.

No legislation with that effect has been proposed, but the elimination of those provisions would have a material adverse effect on the Company’s business, financial condition and results of operations.

Certain of the Coal Segment’s customers benefit or have benefited from a tax credit under Section 45 of the Internal Revenue Code.

The benefit results in a reduction to the cost of coal-fired electric power generation.

The elimination or expiration of the Section 45 tax credit would increase the cost of the coal-fired electric power generation from these facilities and could result in the power being less economical than other sources of power generation, which could reduce demand and result in a decrease in coal consumption.

A decrease in coal consumption by the Company’s customers could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company’s business could suffer if NACCO’s information technology systems are disrupted, cease to operate effectively or if the Company experiences a security breach, a cyber incident or cyber attack.

The Company relies on information technology systems to operate its business and to record and process transactions;

respond to customer inquiries;

purchase supplies;

deliver inventory on a timely basis;

and maintain cost-efficient operations.

Despite the Company's efforts, the Company’s information technology systems may be vulnerable from time to time to damage or interruption from computer viruses, power outages, third-party intrusions and other technical malfunctions.

Through the Company’s business operations, the Company collects and stores confidential information from its customers and vendors and personal information and other confidential information from its employees.

Although the Company has taken steps designed to safeguard such information, there can be no assurance that such information will be protected against unauthorized access, use or disclosure.

Unauthorized parties may penetrate the Company’s or its vendors’ network security and, if successful, misappropriate such information.

Additionally, methods to obtain unauthorized access to confidential information change frequently and may be difficult to detect, which can impact the Company’s ability to respond appropriately.

The Company could be subject to liability for failure to comply with privacy and information security laws, for failing to protect personal information or for failing to respond appropriately.

Loss, unauthorized access to, or misuse of confidential or personal information could disrupt the Company’s operations, damage the Company’s reputation, and expose the Company to claims from customers, financial institutions, regulators, employees and other persons, any of which could have an adverse effect on the Company’s business, financial condition and results of operations.

Security breaches, cyber incidents or cyber attacks could include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial of service attacks and other attacks.

Like many other companies, the Company is the target of malicious cyber-attack attempts in the normal course of business.

Cybersecurity incidents involving businesses and other institutions are on the rise.

Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated.

Cyber threats and cyber-attackers can be sponsored by nation states or sophisticated criminal organizations or be the work of hackers.

As cyber threats evolve and become more difficult to detect and successfully defend against, one or more cyber-attacks might defeat the Company's or a third-party service provider's security measures in the future.

Employee error or other irregularities may also result in a failure of security measures and a breach of information systems.

Moreover, hardware, software or applications the Company may use have inherent defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a manner that could compromise information security.

A security breach and loss of information may not be discovered for a significant period of time after it occurs.

Any compromise of data security could result in a violation of applicable privacy and other laws or standards, the loss of valuable business data, or a disruption of the Company's business.

A security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could give rise to unwanted media attention, materially damage customer relationships and the Company's reputation, and result in fines, fees, or liabilities, which may not be covered by insurance policies.

The Company is continuously installing new and upgrading existing information technology systems.

The Company uses employee awareness training around phishing, malware, and other cyber risks.

The Company believes these incidents are likely to continue and is unable to predict the direct or indirect impact of future attacks or breaches to business operations.

The Company is dependent on key personnel and the loss of these key personnel could significantly reduce its profitability.

The Company is highly dependent on the skills, experience and services of its key personnel and the loss of key personnel could have a material adverse effect on its business, operating results and financial condition.

Employment and retention of qualified personnel is important to the successful conduct of the Company's business.

Therefore, the Company's success also depends upon its ability to recruit, hire, train and retain skilled and experienced management personnel.

The Company's inability to hire and retain personnel with the requisite skills could impair its ability to manage and operate its business effectively and could significantly reduce its profitability.

The amount and frequency of dividend payments made on NACCO's common stock could change.

The Board of Directors has the power to determine the amount and frequency of the payment of dividends.

Decisions regarding whether or not to pay dividends and the amount of any dividends are based on earnings, capital and future expense requirements, financial conditions, contractual limitations and other factors the Board of Directors may consider.

Accordingly, holders of NACCO's common stock should not rely on past payments of dividends in a particular amount as an indication of the amount of dividends that will be paid in the future.

The Company’s operations could be disrupted by natural or human causes beyond its control

The Company’s operations are subject to disruption from natural or human causes beyond its control, including physical risks from hurricanes, severe storms, floods and other forms of severe weather, accidents, fires, earthquakes, terrorist acts and epidemic or pandemic diseases such as the coronavirus, any of which could result in suspension of operations or harm to people or the environment.

While all of the Company’s operations are located in the United States, the Company participates in a global supply chain, and if a disease spreads sufficiently to cause a pandemic (or to cause the fear of a pandemic to rise) or governments regulate or restrict the flow of labor or products or impede the travel of Company personnel, the Company’s ability to conduct normal business operations could be impacted which could adversely affect the Company’s results of operations and liquidity.

Risks related to the NAMining segment

The Company has experienced growth in its NAMining business in recent periods and it may not be able to sustain growth or manage future growth effectively.

The Company has expanded its overall NAMining business, operations and headcount in recent periods.

NAMining’s operating expenses may continue to increase as the Company scales the NAMining business, including growth outside of Florida and providing general and administrative resources to support NAMining’s growth.

In part, NAMining’s success depends on its ability to integrate new customers in an efficient and effective manner.

If the Company is unable to manage this growth effectively, the Company may not be able to take advantage of market opportunities.

The Company may also fail to execute on its business plan or respond to competitive pressures, any of which could adversely affect the NAMining business, operating results and financial condition.

The Company is subject to the high costs and risks involved in the development of new mining projects.

From time to time, the Company seeks to develop new mining projects, including the Thacker Pass project.

The costs and risks associated with such projects can be substantial.

New mining projects can take up to several years to complete, are complex and require significant capital expenditures.

NAMining faces competition from aggregates producers that choose to self-perform mining operations and from other mining companies.

NAMining faces competition from existing and prospective customers that are capable of performing, or engaging other companies to perform the services NAMining provides.

NAMining cannot be certain that its existing customers will continue to outsource these services to NAMining in the future, which could adversely affect the NAMining business, operating results and financial condition.

Risks related to the Minerals Management segment

The Company has no control over the timing of the development and operation of its natural gas, oil and coal reserves extracted by third parties.

The Company owns mineral and royalty interests in the continental United States.

The Company does not develop oil and gas reserves and is not a natural gas and oil producer.

The Company derives income from royalty-based leases under which lessees make payments to the Company based on their sale of natural gas, oil and coal.

In recent years, a significant portion of the Minerals Management segment's income has been derived from lease signing bonus and production payments associated with

assets in the Utica Shale in Ohio.

During 2020, the Company acquired additional mineral interests in the Permian Basin in Texas.

Future royalty-based income is dependent on the number of oil and gas wells being developed and operated on the Company’s mineral acreage in Ohio and Texas.

The decision to pursue development and operation of oil and gas wells is made by third-party operators, not by the Company, and depends on a number of factors outside of the Company's control, including fluctuations in commodity prices (primarily natural gas), regulatory risk, the Company's lessees' willingness and ability to incur well-development and other operating costs, the rate of production of the reserves and changes in the availability and continuing development of infrastructure.

Lower commodity prices may reduce the amount of oil and natural gas that third-party operators can produce economically.

In the event that new federal or state restrictions relating to the hydraulic fracturing process are adopted in areas where the Company owns mineral and royalty interests, the Company’s lessees’ may incur additional costs or permitting requirements to comply with such federal requirements that may be significant and could result in added restrictions, delays or curtailments in the pursuit of exploration, development, or production activities.

In addition, if a lessee were to experience financial difficulty, the lessee might not be able to pay its royalty payments or continue operations.

A failure on the part of the lessee to make royalty payments gives the Company the right to terminate the lease, repossess the property and enforce payment obligations under the lease.

If the Company repossessed any of its properties, it would seek a replacement lessee.

However, the Company may not be able to find a replacement lessee and, if it did, the Company might not be able to enter into a new lease on favorable terms within a reasonable period of time.

In addition, if the Company is able to enter into a new lease with a new lessee, the replacement lessee may not achieve the same levels of production or sales prices as the lessee it replaced.

Any of these risks could materially reduce the Company’s expected royalty income and the Company’s profitability.

The Company’s producing mineral and royalty interests are located predominantly in the Utica Shale Basin in Ohio and the Permian Basin in Texas, making the Company vulnerable to risks associated with operating in limited geographic areas.

The majority of the Company's producing mineral and royalty interests are located predominantly in the Utica Shale Basin in Ohio and the Permian Basin in Texas.

As a result of this concentration, the Company may be disproportionately exposed to the impact of regional supply and demand factors, pricing differentials, delays or interruptions of production from wells in these areas caused by governmental regulation, processing or transportation capacity constraints, availability of equipment, facilities, personnel or services market limitations or interruption of the processing or transportation of crude oil, natural gas or natural gas liquids.

This concentration could result in a relatively greater impact on results of operations than on other companies that have a more diversified portfolio of mineral and royalty interests.

Such impacts could have a material adverse effect on the Company’s expected royalty income and the Company’s profitability.

Unless the Company replaces existing mineral and royalty interests with new mineral and royalty interests and third-party lessees develop those mineral and royalty interests, the Company’s reserves and royalty income will decline.

Producing oil and natural gas reservoirs are generally characterized by declining production rates that vary depending upon reservoir characteristics and other factors.

Unless the Company’s third-party lessees conduct successful ongoing well development activities or the Company continually acquires mineral and royalty interests, the Company’s mineral and royalty interests will decline as those reserves are produced.

The future cash flow and results of operations of the Minerals Management segment are highly dependent on third-party operators’ success in developing the Company’s current and future mineral and royalty interests.

The Company may not be able to acquire or find sufficient additional mineral and royalty interests to replace third-party operators' current and future production.

Further, the decline curve the Company uses to project future royalty income is subject to numerous assumptions and limitations.

Natural gas wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production.

Decline rates can vary due to factors like well depth, well length, formation pressure, and facility design.

Any of these risks could materially reduce the Company’s expected royalty income and the Company’s profitability.

Substantially all of the Minerals Management segment’s revenues are derived from royalty payments that are based on the price at which oil and natural gas produced from the acreage underlying the Company’s interests are sold.

Prices of oil and natural gas are volatile due to factors beyond the Company’s control.

A substantial or extended decline in commodity prices may adversely affect the Minerals Management segment’s financial condition or results of operations.

The Minerals Management segment’s revenues and operating results depend significantly upon the prevailing prices for oil and natural gas.

Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control;

market expectations about future prices of oil and natural gas;

the level of oil and natural gas exploration and production;

the cost of exploring for, developing, producing and delivering oil and natural gas;

the price and quantity of foreign imports and U.S.

exports of oil and

the level of U.S.

domestic production;

political and economic conditions in oil producing regions, including the Middle East, Africa, South America and Russia;

the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

trading in oil and natural gas derivative contracts;

the level of consumer product demand;

weather conditions and natural disasters;

technological advances affecting energy consumption, energy storage and energy supply;

domestic and foreign governmental regulations and taxes;

the continued threat of terrorism and the impact of military and other action, including U.S.

military operations in the Middle East and economic sanctions such as those imposed by the U.S.

on oil and gas exports from Iran;

the proximity, cost, availability and capacity of oil and natural gas pipelines and other transportation facilities;

the price and availability of alternative fuels;

and overall domestic and global economic conditions.

A substantial or extended decline in commodity prices may adversely affect the Minerals Management segment’s financial condition or results of operations.

Risks related to corporate structure

The Company’s stock repurchase program could affect the price of NACCO’s common stock and increase volatility and may not enhance long-term shareholder value.

The Company’s Board of Directors has authorized a stock repurchase program.

The timing and amount of any repurchases under the stock repurchase program are determined at the discretion of the Company's management based on a number of factors, including the availability of capital, other capital allocation alternatives, market conditions for the Company's Class A Common

Stock and other legal and contractual restrictions.

The stock repurchase program does not require the Company to acquire any specific number of shares and may be modified, suspended, extended or terminated by the Company without prior notice and may be executed through open market purchases, privately negotiated transactions or otherwise.

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Further, NACCO could be the subject of securities class action litigation due to any such stock price volatility, which could divert management’s attention and have a material adverse effect on the Company's operating results.

The amount and frequency of dividend payments made on NACCO's common stock could change.

The Board of Directors has the power to determine the amount and frequency of the payment of dividends.

Accordingly, holders of NACCO's common stock should not rely on past payments of dividends in a particular amount as an indication of the amount of dividends that will be paid in the future.

NACCO's certificate of incorporation and by-laws include provisions that may discourage a takeover attempt.

Provisions contained in the Company's certificate of incorporation and by-laws and Delaware law could make it more difficult for a third-party to acquire us, even if doing so might be beneficial to NACCO's stockholders.

Provisions of the Company's by-laws and certificate of incorporation impose various procedural and other requirements that could make it more difficult for stockholders to effect certain corporate actions.

Provisions contained in the Company's certificate of incorporation and by-laws and Delaware law could make it more difficult for a third-party to acquire the Company, even if doing so might be beneficial to NACCO's stockholders.

Provisions of the Company's by-laws and certificate of incorporation impose various procedural and other requirements that could make it more difficult for stockholders to affect certain corporate actions.

These provisions could limit the price that certain investors might be willing to pay in the future for shares of NACCO's common stock and may have the effect of delaying or preventing a change in control.

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If some investors find NACCO's common stock less attractive as a result, there may be a less active trading market for the Company's common stock and the stock price may be more volatile.

The Company may be subject to risk relating to increasing cash requirements of certain employee benefits plans, which may affect its financial position.

Although as of December 31, 2019 , the Company's consolidated defined benefit pension plans are frozen and no longer provide for the accrual of future benefits, the expenses recorded for, and cash contributions required to be made to its defined benefit pension plans are dependent on changes in market interest rates and the value of plan assets, which are dependent on actual investment returns.

Significant changes in U.S.

pension funding regulations, market interest rates, decreases in the value of plan assets or investment losses on plan assets may require the Company to increase the cash contributed to defined benefit pension plans which may affect its financial position.

The Company may become subject to claims under foreign laws and regulations, which may be expensive, time consuming and distracting.

The Company is subject to the laws and the court systems of multiple jurisdictions.

The Company may become subject to claims outside the U.S.

for violations or alleged violations of laws with respect to past or future foreign operations of NACCO.

In addition, these laws may be changed or new laws may be enacted in the future.

International litigation is often expensive, time consuming and distracting.

As a result, any of these risks could significantly reduce the Company's profitability and its ability to operate its businesses effectively.

Certain members of the Company's extended founding family own a substantial amount of its Class A and Class B common stock and, if they were to act in concert, could control the outcome of director elections and other stockholder votes on significant corporate actions.

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As of December 31, 2020, certain members of the Company's extended founding family held approximately 34 percent of the Company's outstanding Class A common stock and approximately 98 percent of the Company's outstanding Class B common stock.

On the basis of this common stock ownership, certain members of the Company's extended founding family could have exercised 82 percent of the Company's total voting power.

On the basis of this common stock ownership, certain members of the Company's extended founding family could have exercised approximately 82 percent of the Company's total voting power.

Although there is no voting agreement among such extended family members, in writing or otherwise, if they were to act in concert, they could control the outcome of director elections and other stockholder votes on significant corporate actions, such as certain amendments to the Company's certificate of incorporation and sales of the Company or substantially all of its assets.

Because certain members of the Company's extended founding family could prevent other stockholders from exercising significant influence over significant corporate actions, the Company may be a less attractive takeover target, which could adversely affect the market price of its common stock.

General Risk Factors

The Company’s effective income tax rate could be volatile and materially change as a result of changes in tax laws, mix of earnings and other factors.

The Company is subject to income taxes in the United States and the effective income tax rate is impacted by certain U.S.

federal income tax benefits currently available to coal mining and oil and gas exploration and development companies.

Future results of operations could be affected by changes in the Company’s effective income tax rate as a result of an increase in the statutory tax rate or the reduction or elimination of percentage depletion as well as changes in the mix of earnings between entities that benefit from percentage depletion and those that do not .

Current and future capital and credit market conditions could adversely affect the Company’s ability to obtain bank financing on reasonable terms.

The Company may be unable to obtain financing on reasonable terms.

Historically, the Company has addressed its liquidity needs (including funds required to pay dividends and fund working capital and planned capital expenditures) with operating cash flow and borrowings under credit facilities.

The Company’s wholly-owned subsidiary, NACoal, has an unsecured revolving line of credit of up to $150.0 million that expires in August 2022.

The Company’s ability to access the capital markets and the costs and terms of available financing depends on many factors, including perceived credit risks of companies with coal and/or oil and gas exposure.

The volatility in the energy industry combined with recent bankruptcies and additional perceived credit risks of companies with coal and/or oil and gas exposure has resulted in traditional bank lenders seeking to

reduce or eliminate their lending exposure to these companies.

An inability to obtain bank financing, or obtaining a refinancing with terms that are not as favorable as the existing terms of such indebtedness, could have a material adverse effect on the Company's operating results and financial condition.

Insurance coverage is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future.

A number of global insurance companies have taken action to limit coverage for companies in the coal mining industry, which could result in significant increases in costs of insurance or in the Company’s ability to maintain insurance coverage at current levels.

The Company holds a number of insurance policies, including director and officers’ liability and property and casualty insurance coverages.

Because the Company is involved in the coal mining industry, costs of insurance may increase substantially or insurance carriers may decide not to insure the Company in the future.

In addition, if the Company makes significant insurance claims, its ability to obtain future insurance coverage at commercially reasonable rates could be materially adversely affected.

An inability to obtain insurance coverage, significant increases in the premiums or deductibles of insurance the Company obtains, or losses in excess of its liability insurance coverage limits, which may go down in the future, could have a material adverse effect on the Company's operating results and financial condition.

Increasing scrutiny and changing expectations with respect to the Company’s environmental, social and governance practices may impose additional costs on the Company or expose the Company to new or additional risks.

Companies across all industries are facing increasing scrutiny from stakeholders related to their environmental, social and governance (“ESG”) practices.

Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices.

The Company could face pressures from investors, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce the Company’s carbon footprint and promote sustainability.

Investors may request the Company implement ESG procedures or standards as a condition to maintain their investment or to make further investments.

Lenders and insurers may also limit lending to and insuring of companies that do not meet certain ESG measures endorsed by them.

Additionally, the Company may face reputational challenges in the event its ESG practices are inconsistent with the third party views of acceptable ESG practices.

Companies which do not adapt to or comply with investor or stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.

Like many other companies, the Company is the target of malicious cyber attack attempts in the normal course of business.

Cybersecurity incidents involving businesses and other institutions are on the rise.

Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated.

Cyber threats and cyber attackers can be sponsored by nation states or sophisticated criminal organizations or be the work of independent hackers.

As cyber threats evolve and become more difficult to detect and successfully defend against, one or more cyber attacks might defeat the Company's or a third-party service provider's security measures in the future.

Employee error or other irregularities may also result in a failure of security measures and a breach of information systems.

A security breach and loss of information may not be discovered for a significant period of time after it occurs.

Any compromise of data security could result in a violation of applicable privacy and other laws or standards, the loss of valuable business data, or a disruption of the Company's business.

The Company relies on information technology systems to operate its business and to record and process transactions;

respond to customer inquiries;

purchase supplies;

deliver inventory on a timely basis;

and maintain cost-efficient operations.

Despite the Company's efforts, the Company’s information technology systems may be vulnerable, from time to time, to damage or interruption from computer viruses, power outages, third-party intrusions and other technical malfunctions.

Although the Company has taken steps designed to safeguard such information, there can be no assurance that such information will be protected against unauthorized access, use or disclosure.

Unauthorized parties may penetrate the Company’s or its vendors’ network security and, if successful, misappropriate such information.

Additionally, methods to obtain unauthorized access to confidential information change frequently and may be difficult to detect, which can impact the Company’s ability to respond appropriately.

The Company could be subject to liability for failure to comply with privacy and information security laws, for failing to protect personal information or for failing to respond appropriately.

Cybersecurity threats to, and incidents involving, vendors and other third-parties who support the Company's activities could impact us.

For example, although the Company has not experienced any material impacts from the SolarWinds Orion cybersecurity breach that was widely publicized in December 2020, similar future events could have a material impact to the Company.

The Company is continuously installing new and upgrading existing information technology systems.

The Company uses employee awareness training around phishing, malware, and other cyber risks.

The Company believes these incidents are likely to continue and is unable to predict the direct or indirect impact of future attacks or breaches to business operations.

The Company’s results of operations, financial condition, cash flows and stock price could be adversely affected by pandemics, epidemics or other public health emergencies, such as the global outbreak of COVID-19.

The COVID-19 pandemic resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions, business curtailments, school closures, and other measures.

Throughout the pandemic, the Company has continued to operate as an essential business because it supports critical infrastructure industries, as defined by the U.S.

Department of Homeland Security.

Although the Company has continued to operate facilities consistent with federal guidelines and state and local orders, the ongoing COVID-19 pandemic and the preventive or protective actions taken by governmental authorities may have a material adverse effect on the Company’s operations, work force, supply chain or customers, including business shutdowns or disruptions.

The extent to which COVID-19 may adversely impact the Company's businesses depends on future developments, which are highly uncertain and unpredictable, including the extent of new outbreaks, the extent to which additional actions to mitigate the COVID-19 pandemic may be needed, the nature of government public health guidelines and the public's adherence to those guidelines, and the timing for proven treatments and availability of vaccines for COVID-19.

Any resulting financial impact cannot reasonably be estimated at this time, but could have a material adverse effect on the Company’s financial condition, cash flows and results of operations.

Even after the COVID-19 pandemic has subsided, the Company may experience material adverse effects due to a decline in economic activity.

The Company’s operations could be disrupted by natural or human causes beyond its control.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors