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Item 7. Management’s Discussion and Analysis

2021-03-03 compared with 2020-03-04 · 229 added, 154 removed, 241 unchanged (61% of the section changed)

24 unchanged sentences

Fair value is estimated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company regularly performs reviews of potential future development projects and identified certain undeveloped properties where market conditions related to any future development deteriorated during 2020.

As a result, the Company recognized charges of $7.3 million in the Minerals Management segment and $1.1 million in the Coal Mining segment to write-off certain capitalized leasehold costs, prepaid royalties and other assets during 2020.

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, 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.

Income taxes:

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Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted laws and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities.

Changes in the calculated deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or chan ges in the structure or tax status.

Changes in the

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

calculated deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or chan ges in the structure or tax status.

The Company's tax assets, liabilities, and tax expense are supported by historical earnings and losses and the Company's best estimates and assumptions of future earnings.

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The Company believes the current assumptions, judgments and other considerations used to estimate the current year accrued and deferred tax positions are appropriate.

If the actual outcome of future tax consequences differs from these estimates and assumptions, due to changes or future events, the

If the actual outcome of future tax consequences differs from these estimates and assumptions, due to changes or future events, the resulting change to the provision for income taxes could have a material impact on the Company's results of operations and financial position.

See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's income taxes.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2 unchanged sentences

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

resulting change to the provision for income taxes could have a material impact on the Company's results of operations and financial position.

See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's income taxes.

CONSOLIDATED FINANCIAL SUMMARY

The results of operations for NACCO were as follows for the years ended December 31:

Coal Mining $ 72,088 $ 68,701

NAMining 42,392 42,823

Minerals Management 14,721 30,119

Unallocated Items 2,133 790

Eliminations (2,902) (1,443)

Total revenue $ 128,432 $ 140,990

Operating profit (loss):

Coal Mining $ 25,436 $ 34,120

NAMining 1,872 (564)

Minerals Management 3,493 25,721

Unallocated Items (17,256) (20,713)

Eliminations (97) 256

Total operating profit $ 13,448 $ 38,820

3 unchanged sentences

Closed mine obligations 1,641 1,537

(Gain) loss on equity securities

Other (income) expense, net

Income before income tax provision

Income tax provision

Gain on equity securities (1,226) (1,545)

Other, net (1,140) (527)

Other income, net (810) (4,579)

Income before income tax (benefit) provision 14,258 43,399

Income tax (benefit) provision (535) 3,767

Net income $ 14,793 $ 39,632

Effective income tax rate (3.8) % 8.7 %

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During 2014, NACC India's customer defaulted on its contractual payment obligations and as a result of this default, NACC India terminated its contract with the customer and began pursuing contractual remedies.

During the third quarter of 2019, the Company received payment of $2.7 million from NACC India's customer, of which $1.4 million related to past invoices and has been reported on the line Other, net, and $1.3 million represented interest income and has been reported on the line Interest income.

During 2019, the Company received payment of $2.7 million from NACC India's customer, of which $1.4 million related to past invoices and has been reported on the line Other, net, and $1.3 million represented interest income and has been reported on the line Interest income.

During 2020, the Company received an additional payment of $1.0 million from NACC India's customer which has been reported on the line, Other, net.

Both of these lines are in the Other (income) expense section of the Consolidated Statements of Operations.

The Company does not expect to receive any additional payments from NACC India’s customer.

Interest expense increased $0.5 million due to higher average borrowings during 2020 compared with 2019.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Interest expense decreased $1.1 million due to lower average borrowings under NACoal's revolving credit facility during 2019 compared with 2018.

Interest income increased $2.8 million due to the interest income related to the NACC India customer payment and increased income earned on invested cash during 2019 compared with 2018.

(Gain) loss on equity securities had improved returns on invested assets of Bellaire's Mine Water Treatment Trust during 2019 compared with 2018.

Interest income decreased $2.4 million primarily due to the interest income related to the NACC India customer payment the Company received in 2019 and lower interest rates on invested cash during 2020 compared with 2019.

Income from other unconsolidated affiliates represents the financial results of NoDak.

NoDak operated and maintained a coal drying system at a customer’s power plant.

The NoDak contract expired on January 31, 2020, resulting in a decrease of $1.1 million in Income from other unconsolidated affiliates during 2020 compared with 2019.

Gain on equity securities represents changes in the market price of invested assets reported at fair value.

See Note 9 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Mine Water Treatment Trust .

Other, net, increased $0.5 million due to the $1.4 million payment from NACC India's customer for past invoices, partially offset by $0.9 million in settlement expense for the Combined Defined Benefit Plan.

Other, net, increased $0.6 million primarily due to the absence of $0.9 million in settlement expense for the Combined Defined Benefit Plan recognized during 2019.

See Note 14 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's pension and postretirement expense.

The Company’s effective income tax rate was 8.7% for the year ended December 31, 2019.

The 2019 effective income tax rate included a net discrete tax benefit of $2.5 million primarily resulting from changes in prior year estimates and the effective settlement of certain discrete tax items from on-going examinations.

The Company’s effective income tax rate was 17.5% for the year ended December 31, 2018.

The 2018 effective income tax rate included $1.2 million of discrete tax expense primarily related to an additional valuation allowance provided against deferred tax assets in India as the Company had previously determined that such deferred tax assets do not meet the more likely than not standard for realization.

Excluding discrete items, the effective income tax rate would have been approximately 14.5% and 14.7% for the years ended December 31, 2019 and 2018, respectively.

The Company recorded an income tax benefit of $0.5 million for the year ended December 31, 2020 on income before income tax of $14.3 million, or (3.8%), compared to income tax expense of $3.8 million on income before income tax of $43.4 million, or 8.7%, for the year ended December 31, 2019.

The year ended December 31, 2020 includes $7.3 million of discrete tax charges primarily related to settlement of tax examinations, reserves for uncertain tax positions and return to provision adjustments partially offset by a benefit of $4.7 million, primarily due the rate differential related to carrying back losses under the provisions of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

The CARES Act allows net operating tax losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company generated a net tax operating loss in 2020 primarily due to the realization of certain deferred tax assets.

Discrete tax items in the year ended December 31, 2019 were a benefit of $2.5 million primarily resulting from changes in prior year estimates and the effective settlement of certain discrete tax items from on-going examinations.

The Company’s effective income tax rate, excluding the CARES Act and discrete items, was (22.0%) and 14.5% for the years ended December 31, 2020 and 2019, respectively.

The effective income tax rate differs from the U.S.

federal statutory rate primarily due to the benefit from percentage depletion.

The benefit of percentage depletion is not directly related to the amount of pre-tax income recorded in a period.

Accordingly, as a result of the $29.1 million reduction in income before income tax in 2020 compared to 2019, the proportional effect of the benefit from percentage depletion on the effective income tax rate in 2020 resulted in a significantly lower effective tax rate in 2020 compared to 2019.

See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's income taxes.

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The following tables detail the change in cash flow for the years ended December 31:

2020 2019 Change

Operating activities:

Net income $ 14,793 $ 39,632 $ (24,839)

Depreciation, depletion and amortization 18,114 16,240 1,874

2 unchanged sentences

Gain on sale of assets (269) (206) (63)

Inventory impairment charge 1,973 — 1,973

Other asset impairment charge 8,359 — 8,359

Other (3,452) (7,071) 3,619

Working capital changes (52,599) (9,433) (43,166)

Net cash provided by operating activities

Net cash (used by) provided by operating activities (2,486) 52,784 (55,270)

Investing activities:

Expenditures for property, plant and equipment

Expenditures for property, plant and equipment and acquisition of mineral interests (44,368) (24,664) (19,704)

Proceeds from the sale of assets 571 4,572 (4,001)

Other (2,187) (170) (2,017)

Net cash used for investing activities (45,984) (20,262) (25,722)

Cash flow before financing activities $ (48,470) $ 32,522 $ (80,992)

The $1.8 million decrease in net cash provided by operating activities was primarily the result of unfavorable working capital changes, partially offset by the increase in net income.

Working capital changed unfavorably during 2019 primarily due to an increase in inventory at MLMC as a result of a decrease in customer requirements.

A decrease in accounts receivable from affiliates during 2018, specifically attributable to payments from Hamilton Beach Brands Holding Company and Bisti Fuels Company, LLC, that did not reoccur in 2019, also contributed to the unfavorable change in working capital.

The increase in net cash used for investing activities was primarily attributable to an increase in expenditures for property, plant and equipment at MLMC and NAMining's operations in 2019 compared with 2018 , partially offset by an increase in proceeds from the sale of assets in 2019.

The $55.3 million decrease in net cash provided by operating activities was primarily the result of unfavorable working capital changes and the decrease in net income, partially offset by impairment charges.

Working capital changes primarily included:

• Increased payments made under deferred compensation and long-term incentive compensation plans during 2020 compared with 2019.

• An increase in Accounts receivables during 2020 compared to a decrease during 2019.

The large decrease in 2019 was primarily due to the timing of customer requirements at MLMC.

• A decrease in Accounts payable during 2020 compared to an increase during 2019 due to a change in timing.

The increase in net cash used for investing activities was primarily attributable to $14.2 million in acquisitions of mineral and royalty interests at the Minerals Management segment during 2020 compared with none during 2019.

2020 2019 Change

Financing activities:

Net additions (reductions) to long-term debt and revolving credit agreements

Net additions to long-term debt and revolving credit agreements 20,073 $ 13,258 $ 6,815

Cash dividends paid (5,375) (5,132) (243)

Net cash provided by (used for financing) activities

The change in net cash provided by (used for) financing activities was primarily due to increased borrowings during 2019 compared to repayments of borrowings during 2018 .

Other (670) (3,013) 2,343

Net cash provided by financing activities $ 14,028 $ 5,113 $ 8,915

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

The change in net cash provided by financing activities was primarily due to increased borrowings during 2020 compared with 2019.

Financing Activities

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At December 31, 2020, NACoal was in compliance with all financial covenants in the NACoal Facility.

Capital Expenditures

Following is a table which summarizes actual and planned capital expenditures (in millions):

Planned expenditures for 2020 are expected to be approximately $33 million, primarily consisting of $24 million in the Coal Mining segment and $9 million in the NAMining segment.

Capital expenditures are expected to be funded from internally generated funds and/or bank borrowings.

NACoal’s variable interest payments are calculated based upon NACoal’s anticipated payment schedule and the December 31, 2020 base rate and applicable margins, as defined in the NACoal Facility.

A 1/8% increase in the base rate would increase NACoal’s estimated total annual interest payments on the NACoal Facility by less than $0.1 million.

Expenditures for property, plant and equipment and mineral interests

Following is a table which summarizes actual and planned expenditures (in millions):

Planned Actual Actual

2021 2020 2019

NACCO $ 46.6 $ 44.4 $ 24.7

Planned expenditures for 2021 are expected to be approximately $46 million, primarily consisting of $27 million in the Coal Mining segment, $10 million in the Minerals Management segment and $9 million in the NAMining segment.

In the Coal Mining segment, elevated levels of expected capital expenditures through 2021 are primarily related to spending at MLMC as it develops a new mine area.

In the NAMining segment, capital expenditures in 2020 are primarily for the acquisition, relocation and refurbishment of draglines.

In the Minerals Management segment, expected expenditures in 2021 are primarily for the acquisition of mineral interests.

In the NAMining segment, expected capital expenditures in 2021 are primarily for the acquisition, relocation and refurbishment of draglines.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Expenditures are expected to be funded from internally generated funds and/or bank borrowings.

Capital Structure

NACCO's consolidated capital structure is presented below:

2020 2019 Change

Cash and cash equivalents $ 88,450 $ 122,892 $ (34,442)

Other net tangible assets

244,907 174,465 70,442

Intangible assets, net 35,330 37,902 (2,572)

Net assets 368,687 335,259 33,428

Total debt (46,465) (24,943) (21,522)

Closed mine obligations (21,598) (20,924) (674)

Total equity $ 300,624 $ 289,392 $ 11,232

Debt to total capitalization 13 % 8 % 5 %

The increase in net assets was primarily due to the increase in cash and cash equivalents.

The increase in other net tangible assets also contributed to the change in net assets, mainly due to an increase in property, plant and equipment.

The increase in other net tangible assets was primarily due to increases in Property, plant and equipment as well as payments made for deferred compensation and accrued incentive compensation during 2020.

Contractual Obligations, Contingent Liabilities and Commitments

Following is a table which summarizes the contractual obligations of the Company as of December 31, 2019 :

Payments Due by Period

Contractual Obligations

NACoal Facility

Interest payments on NACoal Facility

Other interest

Deferred compensation

Finance lease obligations

Operating leases

Purchase and other obligations

Total contractual cash obligations

An event of default, as defined in the NACoal Facility and the Company’s lease agreements, could cause an acceleration of the payment schedule.

No such event of default has occurred or is anticipated to occur.

NACoal’s variable interest payments are calculated based upon NACoal’s anticipated payment schedule and the December 31, 2019 base rate and applicable margins, as defined in the NACoal Facility.

A 1/8% increase in the base rate would increase NACoal’s estimated total annual interest payments on the NACoal Facility by $0.2 million .

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which is codified in ASC 842, Leases (“ASC 842”) and supersedes current lease guidance in ASC 840.

ASC 842 required a lessee to recognize a right-of-use asset and a corresponding lease liability for substantially all leases beginning January 1, 2019 for NACCO.

NACCO adopted ASU 2016-02, “Leases (Topic 842)," on January 1, 2019.

ASC 842 required a lessee to recognize a right-of-use asset and a corresponding lease liability for substantially all leases.

See Note 10 to the Consolidated Financial Statements in this Form 10-K for further information on the Company's leases.

The purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and incentive compensation.

Pension and postretirement funding can vary significantly each year due to plan amendments, changes in the market value of plan assets, legislation and the Company’s decisions to contribute above the minimum regulatory funding requirements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

result, pension and postretirement funding has not been included in the table above.

The Company does not expect to contribute to its pension plan in 2021.

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Benefit payments beyond that time cannot currently be estimated.

Not included in the table above, the Company has a long-term liability of approximately $2.5 million for unrecognized tax benefits, including interest and penalties, as of December 31, 2019 .

At this time, the Company is unable to make a reasonable estimate of the timing of payments due to, among other factors, the uncertainty of the timing and outcome of its tax audits.

NACCO has asset retirement obligations that are not included in the table above due to the uncertainty of the timing of payments to settle this liability.

NACCO has asset retirement obligations.

See Note 7 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's asset retirement obligations.

NACoal is a party to certain guarantees related to Coyote Creek that are not included in the table above as the Company believes that the likelihood of NACoal’s future performance under the guarantees is remote, and no amounts related to these guarantees have been recorded.

NACCO has unrecognized tax benefits, including interest and penalties.

See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's income taxes.

NACoal is a party to certain guarantees related to Coyote Creek.

The Company believes that the likelihood of NACoal’s future performance under the guarantees is remote, and no amounts related to these guarantees have been recorded.

See Note 17 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's guarantees.

Off Balance Sheet Arrangements

The Company has not entered into any off balance sheet financing arrangements.

ENVIRONMENTAL MATTERS

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The Company’s policies stress environmental responsibility and compliance with these regulations.

Based on current information, management does not expect compliance with these regulations to have a material adverse effect on the Company’s financial condition or results of operations.

See Item 1 in Part I of this Form 10-K for further discussion of these matters.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

on current information, management does not expect compliance with these regulations to have a material adverse effect on the Company’s financial condition or results of operations.

See Item 1 in Part I of this Form 10-K for further discussion of these matters.

SEGMENT RESULTS

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Total coal reserves 1.9 2.0

(1) Amount includes 0.1 million of coal reserves owned or controlled by customers.

(1) Amount includes 0.1 billion of coal reserves owned or controlled by customers as of both December 31, 2020 and December 31, 2019.

The Company conducts activities to extract these customer-owned and controlled reserves.

The results of operations for the Coal Mining segment were as follows for the years ended December 31:

Revenues $ 72,088 $ 68,701

Cost of sales 70,452 65,430

Gross profit 1,636 3,271

Earnings of unconsolidated operations (a)

56,584 60,678

Selling, general and administrative expenses 30,216 27,394

4 unchanged sentences

2020 Compared with 2019

The following table identifies the components of change in revenues for 2019 compared with 2018 :

Increase (decrease) from:

Consolidated operations

MLMC contractual settlements in 2018

Revenues increased 4.9% in 2020 compared with 2019 primarily due to an increase in price per ton attributable to reimbursable costs at MLMC.

The sales price at MLMC is index-based and includes adjustments for coal quality and reimbursable costs.

Also contributing to the increase is reclamation revenue from Caddo Creek.

On September 30, 2020, Caddo Creek's customer, a division of Cabot Corporation, entered into a long-term supply agreement with a subsidiary of Advanced Emissions Solutions (“AES”) as well as an agreement for the sale of the Marshall Mine, operated by Caddo Creek, to a subsidiary of

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2 unchanged sentences

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Revenues decreased 15.8% in 2019 compared with 2018 primarily due to a decrease in MLMC's tons delivered.

MLMC delivers coal to the Red Hills Power Plant, which supplies electricity to TVA under a long-term Power Purchase Agreement.

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

The Red Hills power plant saw a decrease in the number of days TVA dispatched the plant in 2019 compared with 2018.

As a result of this reduction in customer demand, tons delivered decreased in 2019 compared with 2018.

MLMC's contractual settlements in 2018 related to resolution of its customer’s tonnage-related payment obligations and coal pricing adjustments.

AES announced its intent to close the Marshall Mine.

Caddo Creek entered into a contract with a subsidiary of AES to perform the required mine reclamation.

As a result of these changes, Caddo Creek financial results are now consolidated within the Coal Mining segment.

The following table identifies the components of change in operating profit for 2020 compared with 2019:

Operating Profit

2019 $ 34,120

Increase (decrease) from:

Revisions to Centennial's asset retirement obligation

Earnings of unconsolidated operations (4,094)

Selling, general and administrative expenses

MLMC contractual settlements in 2018

MLMC 's inventory impairment charge (1,973)

Gross profit, excluding revisions to Centennial's asset retirement obligation and MLMC's inventory impairment charge (1,741)

Voluntary separation program ("VSP") charge (1,475)

Selling, general and administrative expenses, excluding VSP charge (1,347)

Net gain on sale of assets (175)

Revisions to Centennial's asset retirement obligation 2,079

Amortization of intangibles 42

Gross profit, excluding asset retirement obligation revisions

2020 $ 25,436

Operating profit decreased $8.7 million in 2020 compared with 2019.

The decrease was primarily the result of revisions to Centennial's asset retirement obligation, a decrease in earnings of unconsolidated operations and an increase in selling, general and administrative expenses, mainly due to higher employee-related and insurance costs.

The change in Centennial's asset retirement obligation is attributable to the absence of a $2.8 million favorable revision that occurred during 2018 and a $2.5 million unfavorable revision during 2019.

The change in operating profit was primarily due to:

• A decrease in earnings of unconsolidated operations, mainly due to a reduction in tons delivered as a result of decreases in customer demand and the termination of the Camino Real contract mining agreement during 2020.

• A $2.0 million inventory impairment charge at MLMC as mining costs exceeded net realizable value.

• A reduction in gross profit due to wind-down and employee-related expenses at Camino Real.

• During the fourth quarter of 2020, the Company implemented a voluntary separation program for employees who met certain age and service requirements to reduce overall headcount.

As a result of this program, the Coal Mining segment recorded a charge of $1.5 million related to one-time termination benefits.

• An increase in selling, general and administrative expenses due to a $1.1 million asset impairment charge, higher professional fees, outside service fees and insurance costs, partially offset by lower employee-related expenses.

• The favorable net change in Centennial's asset retirement obligation is attributable to the absence of a $2.5 million unfavorable revision that occurred during 2019, partially offset by a $0.4 million unfavorable revision that occurred during 2020.

See Note 7 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's asset retirement obligations.

The decrease in earnings of unconsolidated operations was primarily due to fewer coal tons delivered as a result of changes in customer demand, mainly related to the timing and duration of outages at certain customer facilities, partially offset by an increase in coal tons delivered at Bisti.

Coal deliveries at Bisti were reduced during the prior year while the power plant's owners were installing additional environmental controls.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

NORTH AMERICAN MINING ("NAMining") SEGMENT

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Total tons delivered 45.9 44.7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

The results of operations for the NAMining segment were as follows for the years ended December 31:

Revenues $ 42,392 $ 42,823

Cost of sales 39,266 41,698

Gross profit 3,126 1,125

Earnings of unconsolidated operations (a)

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2020 Compared with 2019

Despite the decrease in tons delivered at the consolidated operations, revenues increased 15.9% in 2019 compared with 2018 , primarily due to increased deliveries under fixed-price contract mining agreements.

Revenues decreased 1.0% in 2020 compared with 2019, primarily due to lower reimbursed costs, which have an offsetting amount in cost of goods sold and have no impact on operating profit.

The decrease was partially offset by favorable changes in the mix of customer requirements and work related to the Thacker Pass lithium project.

The following table identifies the components of change in operating profit (loss) for 2020 compared with 2019.

1 unchanged sentence

Increase (decrease) from:

Selling, general and administrative expenses

Net gain on sale of assets

Gross profit 2,001

Earnings of unconsolidated operations 414

NAMining reported an operating loss of $0.7 million in 2019 compared with operating profit of $1.9 million in 2018 .

The change is primarily due to a decrease in gross profit, mainly due to higher labor, equipment repairs and supplies expenses.

An increase in selling, general and administrative expenses, which includes higher employee-related and business development costs, also contributed to the change in operating profit (loss).

These decreases were partially offset by an improvement in earnings of unconsolidated operations, which benefited from increased customer requirements and increased deliveries under fixed-price contract mining agreements.

Net gain on sale of assets 238

Selling, general and administrative expenses (217)

NAMining reported operating profit of $1.9 million in 2020 compared with an operating loss of $0.6 million in 2019.

The change is primarily due to an increase in gross profit and in earnings of unconsolidated operations.

Both variances are due to changes in the mix of customer requirements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The results of operations for the Minerals Management segment were as follows for the years ended December 31:

Revenues $ 14,721 $ 30,119

Cost of sales 2,342 3,465

Gross profit 12,379 26,654

Selling, general and administrative expenses 8,886 933

Gain on sale of assets

Operating profit $ 3,493 $ 25,721

2020 Compared with 2019

Revenues and Operating Profit

Revenues and operating profit increased in 2019 compared with 2018 , primarily due to an increase in the number of wells operated by third parties to extract natural gas from the Company's mineral reserves in Ohio.

The number of producing wells increased as operators increased activity on Minerals Management's reserves and additional pipeline, gas compression, and other transportation infrastructure came online in southeast Ohio.

Revenues and operating profit decreased in 2020 compared with 2019 as 2019 included significant royalty income generated by a large number of new gas wells put into commission in Ohio during 2018 and early 2019.

These wells are operated by third parties to extract natural gas from the Company's Ohio Utica shale mineral reserves.

Since new wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production, royalty income in 2020 decreased substantially from 2019 levels.

Lower commodity prices in 2020 compared with 2019 also contributed to the reduction in revenues and operating profit.

The increase in selling, general and administrative expenses is due to a $7.3 million asset impairment charge during 2020.

As a result, the Company wrote-off certain capitalized leasehold costs and prepaid royalties related to legacy coal interests in 2020.

UNALLOCATED ITEMS AND ELIMINATIONS

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2020 Compared with 2019

The $1.4 million decrease in operating loss in 2019 compared with 2018 was primarily due to lower professional fees as 2018 included fees incurred for arbitration with a former customer.

The $3.1 million decrease in operating loss during 2020 compared with 2019 was primarily due to lower employee-related expenses.

During the fourth quarter of 2020, the Company implemented a voluntary separation program for employees who met certain age and service requirements to reduce overall headcount.

As a result of this program, the 2020 operating loss includes a charge of $0.3 million related to one-time termination benefits.

NACCO Industries, Inc.

Coal Mining Outlook - 2021

In 2020, the Company expects coal deliveries to increase modestly compared with 2019.

The anticipated increase in coal deliveries is a result of an expected increase in customer demand, as the Company's customers are generally forecasting a reduction in power plant outage days and an increase in the number of days dispatched in 2020.

Coal Mining operating profit is expected to increase in 2020 over 2019.

This anticipated increase is primarily the result of an expected increase in gross profit at MLMC, primarily in the first half of the year, and the absence of the $2.0 million unfavorable adjustment to mine reclamation liabilities at Centennial in the fourth quarter of 2019.

A modest improvement in earnings at the unconsolidated Coal Mining operations is also expected to contribute to the increase in operating profit, but these improvements are expected to be partly offset by an increase in operating expenses primarily from anticipated higher professional fees and IT expenses.

The increase in gross profit at MLMC is expected to be driven by higher customer demand due to an anticipated increase in the number of days the customer's power plant is expected to be dispatched in 2020.

If customer demand at MLMC decreases

In 2021, the Company expects coal deliveries to be comparable to 2020 based on current expectations of customer requirements.

Coal Mining operating profit in 2021 is expected to decrease significantly from 2020.

This decrease is primarily attributable to substantially lower earnings expected at MLMC and reduced earnings at the unconsolidated Coal Mining operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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from expected levels, it could unfavorably affect the Company's 2020 earnings, as reduced customer demand affected earnings in 2019.

earnings are expected to be lower as a result of an anticipated increase in the cost per ton of coal delivered in 2021 compared with 2020, due in part to an increase in depreciation expense associated with development of a new mine area.

The anticipated reduction in earnings at the unconsolidated Coal Mining operations is expected to be mainly driven by a reduction in fee-based earnings at the Liberty Mine, as the scope of final mine reclamation activities is reduced.

Lower operating profit is expected to be partially offset by a decrease in operating expenses primarily due to lower employee-related costs resulting from the 2020 voluntary separation program partially offset by higher insurance expense.

Changes in customer power plant dispatch, including changes related to natural gas price fluctuations and the continued increase in renewable generation, particularly wind, could reduce customer demand below anticipated levels, which could further unfavorably affect the Company’s 2021 outlook.

In May 2020, 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.

GRE is willing to consider opportunities to sell Coal Creek Station, and NACCO is actively engaged in the exploration of options that could, if successful, allow for transfer of ownership of the power plant to one or more third parties, which would preserve jobs at both Coal Creek Station and the Falkirk Mine.

Falkirk Mine is the sole supplier of lignite coal to Coal Creek Station pursuant to a long-term contract.

The terms of the contract between the Company and GRE specify that GRE is responsible for all costs related to mine closure, including but not limited to, final mine reclamation costs, post-retirement medical benefits and pension costs with respect to Falkirk employees.

This closure is not expected to affect 2021 results.

The owner of the power plant served by the Company's Sabine Mine in Texas intends to retire the power plant in 2023.

The Sabine Mine contributed approximately $3.9 million to Earnings from Unconsolidated Operations in 2020.

The terms of the contract between the Company and the customer specify that the customer is responsible for all costs related to mine closure, including but not limited to, final mine reclamation costs, post-retirement medical benefits and pension costs with respect to Sabine employees.

The closure of the power plants that are served by the Falkirk and Sabine Mines would have a material adverse effect on the future Earnings of unconsolidated operations of the Coal Mining segment and on the long-term earnings and cash flows of NACCO.

Capital expenditures are expected to be approximately $27 million in 2021.

The Company expects high levels of capital expenditures in 2020 and 2021 primarily related to anticipated spending at MLMC as it develops a new mine area.

These capital expenditures will result in an increase in depreciation that will unfavorably affect operating profit in future periods.

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

The Company has a management fee mining contract to supply coal to this plant that expires in 2045.

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

The mining contract specifies that Great River Energy is responsible for all mine closure costs.

The elevated levels of capital expenditures in the Coal Mining segment from 2019 through 2021 relate to the development of a new mine area at MLMC.

These increased capital expenditures will result in higher depreciation that will unfavorably affect operating profit in future periods.

Capital expenditures for MLMC are expected to return to lower levels beginning in 2022 and continue through 2032, the end of the current contract term.

NAMining Outlook

In 2020, NAMining expects limestone deliveries to increase and full year operating results to improve significantly over 2019.

Operating profit is expected to benefit from earnings associated with new limestone mining contracts.

The improvement in operating profit is expected to be partly offset by an increase in operating expenses due to higher employee-related costs associated with new mining operations.

Capital expenditures are expected to be $9 million in 2020, primarily for the acquisition, relocation and refurbishment of draglines.

In 2019, NAMining, through a new subsidiary, Sawtooth Mining, LLC, entered into a mining agreement to serve as the exclusive contract miner for the Thacker Pass lithium project, owned by Lithium Nevada, Corp., in northern Nevada.

Sawtooth Mining will provide comprehensive mining services, with responsibility for all aspects of the lithium mine, similar to our typical scope of work in the Coal Mining segment.

The mining agreement provides that Lithium Nevada will reimburse Sawtooth for its operating and mine reclamation costs, and pay Sawtooth Mining a management fee per metric ton of lithium delivered during the 20-year contract term.

Lithium Nevada is in the process of securing permits and currently expects to commence construction in 2021 and production of lithium products in 2023.

In 2021, NAMining expects full year operating profit to increase moderately over 2020 with its existing customer contracts.

NAMining is pursuing a number of growth initiatives that if successful would be accretive to future earnings.

Capital expenditures are expected to be approximately $9 million for the 2021 full year primarily for the acquisition, relocation and refurbishment of draglines.

In 2019, NAMining's subsidiary, Sawtooth Mining, LLC, entered into a mining agreement to serve as the exclusive contract miner for the Thacker Pass lithium project in northern Nevada, owned by Lithium Nevada Corp., a subsidiary of Lithium Americas Corp.

In January 2021, Thacker Pass received a Record of Decision from the U.S.

Bureau of Land Management for the Thacker Pass project following the completion of the National Environmental Policy Act Process.

This decision represents an important milestone in the development and the permitting of the Thacker Pass project.

More permitting decisions are expected later in 2021 with production expected to begin in the second half of 2022.

Minerals Management Outlook

The Minerals Management segment 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, natural gas liquids and coal, extracted primarily by third parties.

The Company experienced a significant increase in royalty income in 2019 compared with 2018, primarily due to a significant increase in the number of gas wells operated by third parties to extract natural gas from the Company's Ohio Utica shale mineral reserves.

Because new wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production, royalty income in 2020 is expected to decrease and be substantially lower than 2019 levels.

This decrease is expected to occur primarily in the first half of the year, particularly in the first quarter, as comparisons are made to historically high revenue levels in the first half of 2019 associated with increased production levels in the early stages of production from new wells.

The reduction in royalty income is based on natural gas price expectations, fewer expected new wells and the natural production decline that occurs early in the life of a well.

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 favorably or unfavorably 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.

Excluding the impact of the $6.7 million write-off taken in 2020, operating profit in the Minerals Management

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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segment is expected to be down substantially in 2021 from 2020.

This decrease is primarily related to a reduction in royalty income from existing Ohio mineral and royalty assets as a result of expected lower natural gas prices, fewer expected new wells in Ohio, lower commodity prices and the natural production decline that occurs early in the life of a well.

Another sustained decline in natural gas prices could unfavorably affect the Company’s outlook.

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

In addition, royalty income can fluctuate favorably or unfavorably 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.

In 2020, the Minerals Management segment acquired mineral and royalty interests for approximately 65.5 thousand gross acres and 1.2 thousand net royalty acres in the Permian Basin in Texas for a total purchase price of approximately $14.2 million.

The acquired interests align with the Company’s strategy of selectively acquiring mineral and royalty interests with a balance of near-term cash flow yields and long-term growth potential, in oil-rich basins offering diversification from the Company’s legacy mineral interests in predominately natural gas-rich basins.

Including the 2020 acquisitions, total mineral and royalty interests include approximately 109.2 thousand gross acres and 58.1 thousand net royalty acres.

Minerals Management is targeting additional investments in mineral and royalty interests of approximately $10 million in 2021.

These investments are expected to be accretive to earnings, but each investment's contribution to earnings is dependent on the characteristics of each investment, including the size and type of interests acquired and the stage and timing of mineral development.

Consolidated 2021 Outlook

Overall, in 2020, NACCO expects a modest decrease in operating profit compared with 2019 mainly due to the substantial decrease in Minerals Management's results and an increase in consolidated operating expenses, partly offset by expected improvements in earnings at both the Coal Mining and NAMining segments.

While the Company expects consolidated net income in 2021 to decrease significantly from 2020, management still continues to view the long-term business outlook positively because of a strong pipeline of potential new projects.

The COVID-19 pandemic slowed certain business development initiatives in 2020, but the outlook for growth in the NAMining and Minerals Management segments and in the Company's Mitigation Resources of North America ® business remains strong.

Excluding the favorable impact of potential business development activities, the Company expects substantially lower pre-tax earnings as a result of lower operating profit, an anticipated increase in interest expense and a reduction in interest income.

These lower pre-tax results are expected to be partially offset by an increase in the benefit from income taxes primarily due to the benefit from percentage depletion at certain of the Company's mining operations.

Pre-tax income and net income are expected to be higher in the second half of 2021 than in the first half of 2021, primarily due to current expectations on the timing of customer requirements in the Coal Mining segment.

In light of ongoing regulatory, economic and public opinion challenges facing the coal-fired power generation industry, the Company commenced a voluntary separation program for certain corporate employees in the 2020 fourth quarter.

The program was substantially completed by December 31, 2020.

Estimated net benefits from this voluntary separation program are expected to be between $1.5 and $2.5 million annually beginning in 2021.

As a result of this program and natural attrition, the number of headquarters employees was reduced by approximately 25%.

The Company’s cash flow before financing activities varies with changes in customer demand, particularly in the Coal Mining segment, as well as changes in earnings of the Minerals Management segment, working capital changes, capital expenditures, investments in royalty and mineral interests and changes in income taxes, as well as other factors.

Cash flow before financing activities in 2020 included a significant use of cash related to changes in working capital, capital expenditures and the acquisition of mineral royalty interests.

The Company anticipates positive cash flow before financing activities in 2021 but at a level still below the cash generated in 2019.

Consolidated capital expenditures are expected to be approximately $46 million in 2021.

Significant uncertainties remain regarding the COVID-19 pandemic.

The extent to which COVID-19 impacts the Company going forward will depend on numerous factors, including but not limited to the extent of new outbreaks, the extent to which additional stay-at-home orders may be imposed, the nature of the government public health guidelines and the public's adherence to those guidelines, the success of businesses reopening fully, the timing for proven treatments and the availability of vaccines for COVID-19.

While the Company's existing mining operations to date have not been materially affected by the

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Consolidated net income in 2020 is expected to decrease compared with 2019, predominantly in the first half of the year, mainly as a result of the anticipated reduction in Minerals Management operating profit, as well as the absence of $2.7 million pre-tax received in 2019 associated with a prior India venture and the absence of a $2.5 million tax benefit recognized in the fourth quarter of 2019.

The 2020 full-year effective income tax rate is expected to be between 10% and 12%, based on the anticipated mix of earnings and excluding discrete items.

In 2020, cash flow before financing activities is expected to decrease significantly from 2019 levels due to a significant increase in capital expenditures and payment of deferred compensation and other payroll liabilities.

Consolidated capital expenditures are expected to be approximately $33 million in 2020 compared with $24.7 million in 2019.

One of the Company’s core strategies is to pursue activities which can strengthen the resiliency of its existing coal mining operations.

The Company works to drive down coal production costs and maximize efficiencies and operating capacity at mine locations to help customers with management fee contracts be more competitive.

This benefits both customers and the Company's Coal Mining segment, as fuel cost is the major driver for power plant dispatch.

Increased power plant dispatch drives increased demand for coal by the Coal Mining segment's customers, just as lower dispatch reduces demand.

The Company continues to evaluate opportunities to expand its core coal mining business, however opportunities are likely to be very limited.

Low natural gas prices and growth in renewable energy sources, such as wind and solar, could continue to unfavorably affect the amount of electricity dispatched from coal-fired power plants.

The political and regulatory environment is not generally receptive to development of new coal-fired power generation projects which would create opportunities to build and operate new coal mines.

However, the Company does continue to seek out and pursue opportunities where it can apply its management fee business model to replace legacy operators of existing surface coal mining operations in the United States.

Outright acquisitions of existing coal mines or mining companies with exposure to fluctuating coal commodity markets, or structures that would create significant leverage, are outside the Company’s area of focus.

The Company is focused on building a strong portfolio of affiliated businesses for diversified growth.

It continues to expand the scope of its business development activities related to growing NAMining beyond aggregates, by providing additional mining services where the Company’s core mining skills can add value to customers of a broad range of minerals and materials, including by providing comprehensive mining services, and expanding the range of contract mining services.

The Company is also considering the acquisition of additional mineral interests or similar investments in the energy industry as part of the growth of Minerals Management, with an initial focus on smaller, diversifying acquisitions with near-term cash flow yields.

The Company has recently formed Mitigation Resources of North America ® to create and sell stream and wetland mitigation credits and provide services to those engaged in permittee-responsible mitigation.

This new business has achieved several early successes and is positioned for additional growth.

The Company is leveraging its core mining skills to develop a strong and diverse portfolio of service-based businesses operating in the mining and natural resources industries.

The Company is also committed to maintaining a conservative capital structure while it grows and diversifies without unnecessary risk.

Ultimately, diversified strategic growth is the key to increasing free cash flow available to continue to re-invest in and expand the businesses.

pandemic, future developments, which are highly uncertain and unpredictable, could significantly and rapidly cause a deterioration in the Company’s results, supply chain channels and customer demand.

Growth and Diversification

The Company is pursuing growth and diversification by strategically leveraging its core mining and natural resources management skills to build a strong portfolio of affiliated businesses.

NAMining is pursuing growth and diversification by expanding the scope of its business development activities to include potential customers who require a broad range of minerals and materials and by leveraging the Company’s core mining skills to expand the range of contract mining services it provides.

In addition, NAMining is pursuing opportunities to provide comprehensive mining services to operate entire mines when appropriate, as is the case at the new lithium project in Nevada.

The Minerals Management segment continues its efforts to grow and diversify by pursuing acquisitions of additional mineral and royalty interests in the United States, in what the Company believes is a buyer-friendly market.

Once mineral and royalty interests have been acquired, the Minerals Management segment will benefit from the continued development of its mineral properties without additional capital investment.

This business model can deliver higher average operating margins over the life of a reserve than traditional oil and gas companies that bear the cost of exploration, production and/or development.

MRNA continues to expand its business, which creates and sells stream and wetland mitigation credits and provides services to those engaged in permittee-responsible mitigation.

This business offers opportunity for growth and diversification in an industry where the Company has substantial knowledge and expertise and a strong reputation.

The MRNA business has achieved several successes and is positioned for additional growth.

The Company also continues to pursue activities which can strengthen the resiliency of its existing coal mining operations.

The Company remains focused on managing coal production costs and maximizing efficiencies and operating capacity at mine locations to help customers with management fee contracts be more competitive.

These activities benefit both customers and the Company's Coal Mining segment, as fuel cost is a significant driver for power plant dispatch.

Increased power plant dispatch results in increased demand for coal by the Coal Mining segment's customers.

The Company continues to look for opportunities to expand its coal mining business where it can apply its management fee business model to assume operation of existing surface coal mining operations in the United States.

However, opportunities are very limited in the current environment.

Low natural gas prices and growth in renewable energy sources, such as wind and solar, are likely to continue to unfavorably affect the amount of electricity dispatched from coal-fired power plants.

In addition, the political and regulatory environment is not receptive to development of new coal-fired power generation projects which would create opportunities to build and operate new coal mines.

The Company is committed to maintaining a conservative capital structure while it grows and diversifies without unnecessary risk, which will allow for strategic growth and increased free cash flow to re-invest in and expand the businesses.

The Company also continues to maintain the highest levels of customer service and operational excellence, with an unwavering focus on safety and environmental stewardship.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2 to the Consolidated Financial Statements in this Form 10-K for a description of recently issued accounting standards, including actual and expected dates of adoption and effects to the Company's Consolidated Financial Statements.

See Note 2 to the Consolidated Financial Statements in this Form 10-K for a description of recently issued accounting standards, if any, including actual and expected dates of adoption and effects to the Company's Consolidated Financial Statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation:

(1) changes to or termination of a long-term mining contract, or a customer default under a contract, including any decision by Great River Energy to reduce operations or prematurely close the Coal Creek Station power plant, (2) changes in coal consumption patterns of U.S.

electric power generators or the power industry that would affect demand for the Company's mineral reserves, (3) changes in tax laws or regulatory requirements, including changes in mining or power plant emission regulations and health, safety or environmental legislation, (4) changes in costs related to geological and geotechnical conditions, repairs and maintenance, new equipment and replacement parts, fuel or other similar items, (5) regulatory actions, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (6) weather conditions, extended power plant outages, liquidity events or other events that would change the level of customers' coal or aggregates requirements, (7) weather or equipment problems that could affect deliveries to customers, (8) failure or delays by the Company's lessees in achieving expected production of natural gas and other hydrocarbons;

(1) changes to or termination of a long-term mining contract, or a customer default under a contract, (2) the impact of the COVID-19 pandemic, (3) a significant reduction in purchases by the Company's customers, including changes in coal consumption patterns of U.S.

electric power generators, or changes in the power industry that would affect demand for the Company's coal and other mineral reserves, (4) changes in tax laws or regulatory requirements, including changes in mining or power plant emission regulations and health, safety or environmental legislation, (5) the ability of the Company to access credit in the current economic environment, or obtain financing at reasonable rates, or at all, as a result of current market sentiment for fossil fuels, (6) failure to obtain adequate insurance coverages at reasonable rates, (7) changes in costs related to geological and geotechnical conditions, repairs and maintenance, new equipment and replacement parts, fuel or other similar items, (8) regulatory actions, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (9) weather conditions, extended power plant outages, liquidity events or other events that would change the level of customers' coal or aggregates requirements, (10) weather or equipment problems that could affect deliveries to customers, (11) failure or delays by the Company's lessees in achieving expected production of natural gas and other hydrocarbons;

the availability and cost of transportation and processing services in the areas where the Company's oil and gas reserves are located;

federal and state legislative and regulatory initiatives relating to hydraulic fracturing;

and the ability of lessees to obtain capital or financing needed for well development operations, (9) changes in the costs to reclaim mining areas, (10) costs to pursue and develop new mining and value-added service opportunities, (11) delays or reductions in coal or aggregates deliveries, (12) changes in the prices of hydrocarbons, particularly diesel fuel, natural gas and oil, (13) increased competition, including consolidation within the coal and aggregates industries, and (14) disruption from natural or human causes, including 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.

and the ability of lessees to obtain capital or financing needed for well development operations and leasing and development of oil and gas reserves on federal lands, (12) changes in the costs to reclaim mining areas, (13) costs to pursue and develop new mining and value-added service opportunities, (14) delays or reductions in coal or aggregates deliveries, (15) changes in the prices of hydrocarbons, particularly diesel fuel, natural gas and oil, (16) the ability to successfully evaluate investments and achieve intended financial results in new business and growth initiatives, (17) the effects of receiving low sustainability scores which could result in the exclusion of the Company's securities from consideration by certain investment funds, and (18) disruptions from natural or human causes, including severe weather, accidents, fires, earthquakes and terrorist acts, any of which could result in suspension of operations or harm to people or the environment.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 7. Management’s Discussion and Analysis