What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-03 compared with 2020-03-04 · 545 added, 339 removed, 1028 unchanged (46% of the section changed)

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Information with respect to the audit review committee and the audit review committee financial expert will be set forth in the 2021 Proxy Statement under the subheading “Part I — Corporate Governance Information — Directors' Meetings and Committees,” which information is incorporated herein by reference.

Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors, executive officers and holders of more than ten percent of the Company's equity securities will be set forth in the 2020 Proxy Statement under the subheading “Part IV — Other Important Information — Section 16(a) Beneficial Ownership Reporting Compliance,” which information is incorporated herein by reference.

Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors, executive officers and holders of more than ten percent of the Company's equity securities will be set forth in the 2021 Proxy Statement under the subheading “Part IV — Other Important Information — Delinquent Section 16(a) Reports,” which information is incorporated herein by reference.

The Company has adopted a code of business conduct and ethics applicable to all Company personnel, including the principal executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar functions.

The code of business conduct and ethics, entitled the “Code of Corporate Conduct,” is posted on the Company's website at www.nacco.com under “Corporate Governance.” If the Company makes any amendments to or grants any waivers from the code of business conduct and ethics which are required to be be disclosed pursuant to the Securities and Exchange Act of 1934, the Company will make such disclosure on the NACCO website.

The code of business conduct and ethics, entitled the “Code of Corporate Conduct,” is posted on the Company's website at www.nacco.com under “Corporate Governance.” If the Company makes any amendments to or grants any waivers from the code of business conduct and ethics which are required to be disclosed pursuant to the Securities and Exchange Act of 1934, the Company will make such disclosure on the NACCO website.

EXECUTIVE COMPENSATION

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Exhibit Number

Exhibit Description

Exhibit Number Exhibit Description

(3) Articles of Incorporation and By-laws.

Restated Certificate of Incorporation of the Company is incorporated herein by reference to Exhibit 3(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172.

Amended and Restated By-laws of the Company are incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed by the Company on December 18, 2014, Commission File Number 1-9172.

3.1(i) Restated Certificate of Incorporation of the Company is incorporated herein by reference to Exhibit 3(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172.

3.1(ii) Amended and Restated By-laws of the Company are incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed by the Company on December 18, 2014, Commission File Number 1-9172.

(4) Instruments defining the rights of security holders, including indentures.

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4.5 Amendment to Amended and Restated Stockholders' Agreement, dated as of February 14, 2019, among NACCO Industries, Inc., the other signatories thereto and NACCO Industries, Inc., as depository, is incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Commission File Number 1-9172.

Description of Securities

Exhibit Number

Exhibit Description

4.6 Second Amendment to Amended and Restated Stockholders' Agreement, dated as of February 12, 2021, by and among the Depository, NACCO Industries, Inc., the new Participating Stockholders identified on the signature pages thereto and the Participating Stockholders under the Amended and Restated Stockholders' Agreement, dated as of September 29, 2017, as amended, is incorporated by reference to Exhibit 60 of the Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on February 12, 2021 , Commission File Number 1-9172.

4.7 Description of Securities is incorporated herein by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Commission File Number 1-9172.

Exhibit Number Exhibit Description

(10) Material contracts

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10.2* NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan (Amended and Restated March 1, 2017) is incorporated herein by reference to Appendix A to NACCO's Definitive Proxy Statement, filed by the Company on March 27, 2017, Commission File Number 1-9172.

NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan (Amended and Restated March 1, 2019) is incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed by the Company on May 8, 2019, Commission File Number 1-9172.

10.3* NACCO Industries, Inc.

Non-Employee Directors' Equity Compensation Plan (Amended and Restated May 9, 2017) is incorporated herein by reference to Appendix B to NACCO's Definitive Proxy Statement, filed by the Company on March 27, 2017, Commission File Number 1-9172.

NACCO Industries, Inc.

Non-Employee Directors' Equity Compensation Plan (Amended and Restated May 8, 2019) is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on May 8, 2019, Commission File Number 1-9172.

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10.5* Form of Cashless Exercise Award Agreement for the NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed by the Company on August 1, 2017, Commission File Number 1-9172.

Form of Non-Cashless Exercise Award Agreement for the NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, filed by the Company on August 1, 2017, Commission File Number 1-9172.

Form of Cashless Exercise Award Agreement for the NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan.**

Executive Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Commission File Number 1-9172.

10.6* Form of Non-Cashless Exercise Award Agreement for the NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan.**

Executive Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Commission File Number 1-9172.

10.7 Separation Agreement, dated as of September 29, 2017, between NACCO Industries, Inc.

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Rankin, Jr., is incorporated by reference to Exhibit 10.5 of NACCO Industries, Inc.'s Current Report on Form 8-K, filed on October 5, 2017, Commission File Number 1-9172.

10.10 Amendment to Consulting Agreement, dated as of December 15, 2020, between NACCO Industries, Inc.

and Alfred M.

Rankin, Jr., is incorporated by reference to Exhibit 10.1 of NACCO Industries, Inc.'s Current Report on Form 8-K, filed on December 15, 2020, Commission File Number 1-9172.

10.11 Transfer Restriction Agreement, dated as of September 29, 2017, by and among the Issuer, NACCO and the signatories thereto, is incorporated by reference to Exhibit 2 of Hamilton Beach Brands Holding Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on October 6, 2017, Commission File Number 1-9172.

Transition Services Agreement, dated as of September 29, 2017, between NACCO Industries, Inc.

and Hamilton Beach Brands Holding Company, is incorporated by reference to Exhibit 10.2 of Hamilton Beach Brands Holding Company's Current Report on Form 8-K, filed on October 4, 2017, Commission File Number 1-9172.

Amendment No.

1 to the Transition Services Agreement, dated as of September 29, 2018, is incorporated herein by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Commission File Number 1-9172.

Amendment No.

2 to the Transition Services Agreement, dated as of December 18, 2018, is incorporated herein by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Commission File Number 1-9172.

Exhibit Number

Exhibit Description

10.12* NACCO Industries, Inc.

Short-Term Incentive Compensation Plan (Effective as of March 1, 2019) is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on February 13, 2019, Commission File Number 1-9172.

The Retirement Benefit Plan for Alfred M.

(Amended and Restated Effective as of January 1, 2014) is incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 8-K, filed by the Company on February 14, 2014, Commission File Number 1-9172.

NACCO Industries, Inc.

Unfunded Benefit Plan (Amended and Restated Effective as of January 1, 2014) is incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 8-K, filed by the Company on February 14, 2014, Commission File Number 1-9172.

10.13* The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed by the Company on December 19, 2007, Commission File Number 1-9172.

The North American Coal Corporation Long-Term Incentive Compensation Plan (Effective as of January 1, 2016) is is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on May 11, 2016, Commission File Number 1-9172.

10.14* Amendment No.

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10.18 First Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of June 1, 1994, is incorporated herein by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+

Exhibit Number Exhibit Description

10.19 Second Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of January 1, 1997, is incorporated herein by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+

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and Citibank, N.A., dated as of December 20, 2002, is incorporated herein by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

Exhibit Number

Exhibit Description

10.26 Amendment No.

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1 to Third Restatement of Lignite Mining Agreement by and between The Sabine Mining Company and Southwestern Electric Power Company, dated as of October 18, 2013 is incorporated herein by reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.

Exhibit Number Exhibit Description

10.34 Option Agreement by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of January 15, 1981, is incorporated herein by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

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and Northwestern Corporation dated as of October 10, 2012 is incorporated herein by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K, filed by the Company on March 6, 2013, Commission File Number 1-9172.++

Exhibit Number

Exhibit Description

10.40 First Amendment to Lignite Sales Agreement, dated as of January 30, 2014, between Coyote Creek Mining Company, L.L.C.

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and Northwestern Corporation is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed by the Company on May 5, 2015, Commission File Number 1-9172 .

The North American Coal Corporation Excess Retirement Plan (Amended and Restated Effective January 1, 2016) is incorporated herein by reference to Exhibit 10.60 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, Commission File Number 1-9172.

10.47 The North American Coal Corporation Excess Retirement Plan (Amended and Restated Effective January 1, 2020) is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on December 18, 2019, Commission File Number 1-9172.

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LaBarre is attached hereto as Exhibit 24.3.

A copy of a power of attorney for Timothy K.

Light is attached hereto as Exhibit 24.4.

24.4 A copy of a power of attorney for Michael S.

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Robinson is attached hereto as Exhibit 24.

24.10 A copy of a power of attorney for Robert S.

Shapard is attached hereto as Exhibit 24.10.

24.11 A copy of a power of attorney for Britton T.

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(31) Rule 13a-14(a)/15d-14(a) Certifications.

Certification of J.C.

31(i)(1) Certification of J.C.

pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)(1).

Certification of Elizabeth I.

31(i)(2) Certification of Elizabeth I.

Loveman pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)(2).

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(95) Mine Safety Disclosure Exhibit is attached hereto as Exhibit 95.

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item15(b) of this Annual Report on Form 10-K.

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

President and Chief Executive Officer (principal executive officer)

March 4, 2020

President and Chief Executive Officer (principal executive officer) March 3, 2021

/s/ Elizabeth I.

Vice President and Controller (principal financial and accounting officer)

March 4, 2020

Loveman Vice President and Controller (principal financial and accounting officer) March 3, 2021

Dalrymple Director March 3, 2021

Jumper Director March 3, 2021

LaBarre Director March 3, 2021

Miller Director March 3, 2021

* Richard de J.

March 4, 2020

Osborne Director March 3, 2021

Richard de J.

March 4, 2020

Director March 3, 2021

Rankin Director March 3, 2021

Robinson Director March 3, 2021

Shapard Director March 3, 2021

Taplin Director March 3, 2021

* Elizabeth I.

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/s/ Elizabeth I.

March 4, 2020

Loveman March 3, 2021

Loveman, Attorney-in-Fact

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of NACCO Industries, Inc.

To the Stockholders and Board of Directors of NACCO Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of NACCO Industries, Inc.

and Subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the two years in the period ended December 31, 2019, and the related notes and the financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S.

and Subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for the years then ended, and the related notes and the financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit review committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Asset Retirement Obligations Liability

Description of the Matter

At December 31, 2020, the Company’s aggregate asset retirement obligations were approximately $41.7 million.

As discussed in Note 7 to consolidated financial statements, the Company’s obligations associated with the retirement of long-lived assets are recognized at fair value at the time the legal obligations are incurred.

Upon initial recognition of a liability, a corresponding amount is capitalized as part of the carrying value of the related long-lived asset.

The Company reviewed its asset retirement obligations at each mine site and made necessary adjustments for permit changes and for revisions of estimates of the timing and extent of reclamation activities and cost estimates.

Management’s estimate involves a high degree of subjectivity and auditing the significant assumptions utilized by management in estimating the fair value of the liability requires judgement.

In particular, the obligation’s fair value is determined using a discounted cash flow technique and is based upon mining permit requirements and various assumptions including credit adjusted risk-free-rates, estimates of disturbed acreage, life of the mine, estimated reclamation costs, the application of various environmental laws and regulations and assumptions regarding equipment productivity.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated and tested the design and operating effectiveness of the controls surrounding the Company’s processes to determine the fair value of the asset retirement obligations.

This included controls related to estimating the future cash expenditures to reclaim each mine site and other key assumptions underlying the calculation of the obligation.

To test the asset retirement obligation, our audit procedures included, among other things, evaluating the methodology used, the significant assumptions referenced above, and the underlying data used by the Company.

We evaluated the credit-adjusted risk-free rate applied to calculate the net present value of the obligation as compared to observable market data.

We involved our mine reclamation specialists to assist in testing the significant assumptions.

Specifically, we evaluated the estimates of the life of mines the Company used in calculating its significant reclamation obligations based on the known mineral reserves and expected production, and consideration of the estimate of disturbed acreage through inspection of permits, approved site restoration plans and restoration area schematics.

We assessed the identification of reclamation activities by the Company’s mine engineers by comparison to environmental laws and regulations and the likely cost of the reclamation activities as determined by the Company’s mine engineers compared with historical amounts, published pricing data and other publicly available information.

We recalculated the reclamation obligations using management’s model.

/s/ Ernst & Young LLP

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of NACCO Industries, Inc.

To the Stockholders and Board of Directors of NACCO Industries, Inc.

Opinion on Internal Control Over Financial Reporting

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(In thousands, except per share data)

Revenues $ 128,432 $ 140,990

Cost of sales 111,463 109,862

Gross profit 16,969 31,128

Earnings of unconsolidated operations 60,203 63,883

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Gain on sale of assets ( 269 ) ( 206 )

Asset impairment charges 8,359 —

63,724 56,191

Operating profit 13,448 38,820

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Closed mine obligations 1,641 1,537

(Gain) loss on equity securities

Income before income tax provision

Income tax provision

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

Other, net ( 1,140 ) ( 527 )

( 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

Earnings per share:

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(In thousands)

Net income $ 14,793 $ 39,632

Other comprehensive income

Current period pension and postretirement plan adjustment, net of $226 expense and $14 tax benefit in 2019 and 2018, respectively

Current period pension and postretirement plan adjustment, net of $ 213 tax benefit and $ 226 tax expense in 2020 and 2019, respectively

Pension settlement, net of $ 202 tax benefit in 2019

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Cash and cash equivalents $ 88,450 $ 122,892

Trade accounts receivable, net of allowances of $0 and $1,523 in 2019 and 2018, respectively

Trade accounts receivable 18,894 15,444

Accounts receivable from affiliates

Assets held for sale

Inventories 47,551 40,465

Refundable federal income taxes 17,615 8,928

Prepaid expenses and other 10,872 6,528

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Investment in unconsolidated subsidiaries 28,978 24,611

Deferred costs

Operating lease right-of-use assets 10,324 11,398

Other non-current assets 40,984 32,133

Total assets $ 476,179 $ 444,773

LIABILITIES AND EQUITY

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Deferred income taxes 17,550 12,338

Deferred compensation

Liability for uncertain tax positions 9,413 1,912

Other long-term liabilities 12,060 6,188

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Operating Activities

Net income $ 14,793 $ 39,632

Adjustments to reconcile net income to net cash provided by operating activities:

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Gain on sale of assets ( 269 ) ( 206 )

Inventory impairment charge 1,973 —

Other asset impairment charges 8,359 —

Other ( 3,786 ) ( 7,405 )

Working capital changes:

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Accounts receivable 42 8,221

Inventories ( 9,361 ) ( 9,256 )

Other current assets ( 2,582 ) 1,432

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Other current liabilities ( 19,306 ) ( 5,898 )

Net cash provided by operating activities

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

Investing Activities

Expenditures for property, plant and equipment ( 30,187 ) ( 24,664 )

Acquisition of mineral interests ( 14,181 ) —

Proceeds from the sale of assets 571 4,572

Purchase of equity securities ( 2,000 ) —

Other ( 187 ) ( 170 )

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

Financing Activities

Net additions (reductions) to revolving credit agreement

Net additions to revolving credit agreement 14,000 12,000

Additions to long-term debt 7,427 2,000

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Purchase of treasury shares ( 1,002 ) ( 3,010 )

Net cash provided by (used for) financing activities

Other 332 ( 3 )

Net cash provided by financing activities 14,028 5,113

Cash and Cash Equivalents

Total increase (decrease) for the year

Total (decrease) increase for the year ( 34,442 ) 37,635

Balance at the beginning of the year 122,892 85,257

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CONSOLIDATED STATEMENTS OF EQUITY

Accumulated Other Comprehensive Income (Loss)

Class A Common Stock

Class B Common Stock

Capital in Excess of Par Value

Retained Earnings

Deferred Gain (Loss) on Available for Sale Securities

Pension and Postretirement Plan Adjustment

Total Stockholders' Equity

Class A Common Stock Class B Common Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

(In thousands, except per share data)

Balance, January 1, 2019 $ 5,352 $ 1,569 $ 7,042 $ 250,352 $ ( 13,611 ) $ 250,704

ASC 606 adoption (see Note 3)

ASU 2016-01 adoption (see Note 9)

ASU 2018-02 adoption

Stock-based compensation 117 — 4,807 — — 4,924

Purchase of treasury shares ( 72 ) — ( 2,938 ) — — ( 3,010 )

Conversion of Class B to Class A shares

Net income — — — 39,632 — 39,632

Cash dividends on Class A and Class B common stock:

$ 0.7350 per share

— — — ( 5,132 ) — ( 5,132 )

Current period other comprehensive income, net of tax — — — — 758 758

Pension settlement, net of tax — — — — 671 671

Reclassification adjustment to net income, net of tax — — — — 845 845

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Purchase of treasury shares ( 32 ) — ( 970 ) — — ( 1,002 )

Conversion of Class B to Class A shares 1 ( 1 ) — — — —

Net income — — — 14,793 — 14,793

Cash dividends on Class A and Class B common stock:

$ 0.7675 per share

— — — ( 5,375 ) — ( 5,375 )

Current period other comprehensive income, net of tax — — — — ( 697 ) ( 697 )

Pension settlement, net of tax

Reclassification adjustment to net income, net of tax — — — — 435 435

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The Consolidated Financial Statements include the accounts of NACCO Industries, Inc.

® (the parent company or “NACCO”) and its wholly owned subsidiaries (“NACCO Industries, Inc.

and Subsidiaries” or the “Company”).

Intercompany accounts and transactions are eliminated in consolidation.

NACCO is the public holding company for The North American Coal Corporation ® ("NACoal").

In the first quarter of 2019, the Company changed its segment reporting to three operating segments:

® (“NACCO” or the "Company").

NACCO, through a portfolio of mining and natural resources businesses, operates under three business segments:

Coal Mining, North American Mining ("NAMining") and Minerals Management.

The Coal Mining segment operates surface coal mines under long-term contracts with power generation companies and an activated carbon producer pursuant to a service-based business model.

The NAMining segment provides value-added contract mining and other services for producers of aggregates, lithium and other minerals.

The Minerals Management segment acquires and promotes the development of oil, gas and coal mineral interests, generating income primarily from royalty-based lease payments from third parties.

In addition, the Company has a business providing stream and wetland mitigation solutions.

The Company also has unallocated items not directly attributable to a reportable segment.

Prior to January 1, 2019, NACoal was the Company’s operating segment.

NACCO and Other, which included parent company operations and Bellaire Corporation (“Bellaire”), was the Company’s non-operating segment.

Historical financial information for 2018 has been recast to conform to the current presentation.

Intercompany accounts and transactions are eliminated in consolidation.

See Note 15 to the Consolidated Financial Statements for further discussion of segment reporting.

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Coal Mining Segment

The operating coal mines are:

Bisti Fuels LLC (“Bisti”), Caddo Creek Resources Company, LLC (“Caddo Creek”), Camino Real Fuels, LLC (“Camino Real”), The Coteau Properties Company (“Coteau”), Coyote Creek Mining Company, LLC (“Coyote Creek”), Demery Resources Company, LLC (“Demery”), The Falkirk Mining Company (“Falkirk”), Mississippi Lignite Mining Company (“MLMC”) and The Sabine Mining Company (“Sabine”).

Liberty Fuels Company, LLC (“Liberty”) ceased all mining and delivery of lignite in 2017.

The terms of the contract specified that Mississippi Power was responsible for all mine closure costs and Liberty receives compensation for providing mine reclamation services.

As of December 31, 2019, the mine areas have been reclaimed and final mine reclamation activities, primarily monitoring, will continue until final bond release.

During 2020, the Company's operating coal mines were:

Bisti Fuels Company, LLC (“Bisti”), Caddo Creek Resources Company, LLC (“Caddo Creek”), Camino Real Fuels, LLC (“Camino Real”), The Coteau Properties Company (“Coteau”), Coyote Creek Mining Company, LLC (“Coyote Creek”), Demery Resources Company, LLC (“Demery”), The Falkirk Mining Company (“Falkirk”), Mississippi Lignite Mining Company (“MLMC”) and The Sabine Mining Company (“Sabine”).

The Company operates these mines as the North American Coal Corporation ® ("NACoal").

Sabine operates the Sabine Mine in Texas.

All production from Sabine is delivered to Southwestern Electric Power Company's (“SWEPCO”) Henry W.

Pirkey Plant (the “Pirkey Plant”).

SWEPCO is an American Electric Power (“AEP”) company.

On November 5, 2020, AEP announced it intends to retire the Pirkey Plant in 2023 in order to comply with the U.S.

Environmental Protection Agency’s Coal Combustion Residuals rule.

The Sabine Mine delivered 1.9 million and 2.6 million tons to the Pirkey Plant in 2020 and 2019, respectively.

During 2020, SWEPCO reduced its expected future annual delivery requirements to be between 1.4 million and 1.7 million tons.

The Sabine Mine contributed $ 3.9 million and $ 4.6 million to Earnings from Unconsolidated Operations during 2020 and 2019, respectively.

Coteau operates the Freedom Mine in North Dakota.

All coal production from the Freedom Mine is delivered to Basin Electric Power Cooperative (“Basin Electric”).

Basin Electric utilizes the coal at the Great Plains Synfuels Plant (the “Synfuels Plant”), Antelope Valley Station and Leland Olds Station.

The Synfuels Plant is a coal gasification plant that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale.

On November 5, 2020, Basin Electric informed its employees and Coteau that it is considering changes that may result in modifications to its Synfuels Plant that could potentially reduce or eliminate coal requirements at the Synfuels Plant beginning in 2026.

Basin Electric indicated that if it decides to proceed with any changes that could reduce or eliminate the use of coal, the feedstock change is not expected to occur before 2026.

As a result, coal deliveries to the Synfuels Plant are expected to continue until at least 2026.

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 AES.

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.

The Marshall Mine delivered 0.1 million and 0.2 million tons during 2020 and 2019, respectively.

The contract mining agreement between Camino Real and its customer, Dos Republicas Coal Partnership (“DRCP”), terminated effective July 1, 2020 as a result of the unexpected termination by Comisión Federal de Electricidad (“CFE”) of its coal supply contract with an affiliate of DRCP.

The termination of the contract between CFE and DRCP eliminated DRCP’s need for coal from Camino Real's Eagle Pass Mine, and resulted in mine closure.

Mine reclamation is the responsibility of DRCP.

Camino Real has no legal obligation to perform mine reclamation.

The Eagle Pass Mine delivered 0.3 million and 1.6 million tons during 2020 and 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

On May 7, 2020, Great River Energy ("GRE"), Falkirk's 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.

As noted in the announcement, GRE is willing to consider opportunities to sell Coal Creek Station.

Falkirk Mine is the sole supplier of lignite coal to Coal Creek Station pursuant to a long-term contract under which Falkirk also supplies approximately 0.3 million tons of lignite coal per year to Spiritwood Station.

Falkirk delivered a total of 7.2 million and 7.4 million tons of lignite coal and contributed $ 16.1 million and $ 15.9 million to Earnings from Unconsolidated Operations during 2020 and 2019, respectively.

At all operating coal mines other than MLMC, the Company is paid a management fee per ton of coal or heating unit (MMBtu) delivered.

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therefore, the income tax expense line on the Consolidated Statements of Operations includes income taxes related to these entities.

All of the Unconsolidated Subsidiaries are accounted for under the equity method.

See Note 17 for further discussion.

See Note 17 for further information on the Unconsolidated Subsidiaries.

Camino Real and Caddo Creek previously met the definition of a VIE of which the Company was not the primary beneficiary and therefore NACCO did not consolidate the results of operations within its financial statements.

As a result of the events described above, Camino Real and Caddo Creek are no longer VIEs.

Camino Real’s and Caddo Creek's financial positions were consolidated within NACCO’s financial statements during the second quarter of 2020 and the fourth quarter of 2020, respectively.

During 2020, the consolidation of these entities did not materially change the Company’s Consolidated Statements of Operations and Consolidated Balance Sheet.

The MLMC contract is the only operating coal contract in which the Company is responsible for all operating costs, capital requirements and final mine reclamation;

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inflation rates.

Centennial Natural Resources (“Centennial”), located in Alabama, ceased coal production at the end of 2015.

Since 2015, the Company has sold or transferred certain Centennial equipment and mineral reserves.

The Company continues to evaluate strategies for the remaining mineral reserves and a dragline, which have no remaining book value.

Cash expenditures related to mine reclamation at Centennial will continue until mine reclamation is complete, or ownership of, or responsibility for, the

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remaining mines is transferred.

Centennial is a consolidated entity within the Coal Mining segment as the Company is responsible for carrying costs and final mine reclamation.

NAMining Segment

The NAMining segment provides value-added contract mining and other services for producers of aggregates, lithium and other minerals.

The segment is a primary platform for the Company’s growth and diversification outside of the coal industry.

The segment is a primary platform for the Company’s growth and diversification of mining activities outside of the coal industry.

NAMining provides contract mining services for independently owned mines and quarries, creating value for its customers by performing the mining aspects of its customers’ operations.

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NAMining operates primarily at limestone quarries in Florida, but is focused on expanding outside of Florida and into mining materials other than limestone.

During 2019, the Company entered into a mining agreement to serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

NAMining utilizes both fixed price and cost plus a management fee contract structures.

Certain of the entities within NAMining segment are VIEs and are accounted for under the equity method as Unconsolidated Subsidiaries.

In addition, NAMining will serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

NAMining utilizes both fixed price and management fee contract structures.

Certain of the entities within the NAMining segment are VIEs and are accounted for under the equity method as Unconsolidated Subsidiaries.

See Note 17 for further discussion.

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Minerals Management Segment

The Minerals Management segment promotes the development of the Company’s oil, gas and coal reserves, generating income primarily from royalty-based lease payments from third parties.

The Company’s gas, oil and undeveloped coal reserves are located in Ohio (Utica and Marcellus shale natural gas), Louisiana (Haynesville shale and Cotton Valley formation natural gas), Mississippi (coal), Pennsylvania (coal, coalbed methane and Marcellus shale natural gas), Alabama (coal and coalbed methane and natural gas) and North Dakota (coal).

The majority of the Company’s existing reserves were acquired as part of its historical coal mining operations.

The Minerals Management segment derives income primarily by entering into contracts with third-party operators, granting them the rights to explore, produce and sell natural resources in exchange for royalty payments based on the lessees' sales of natural gas and, to a lesser extent, oil and coal.

The Minerals Management segment derives income primarily by leasing its royalty and mineral interests to third-party exploration and production companies, and, to a lesser extent, other mining companies, granting them the rights to explore, develop, mine, produce, market and sell gas, oil, and coal in exchange for royalty payments based on the lessees' sales of those minerals.

During 2020, the Minerals Management segment acquired mineral interests in the Permian Basin in Texas and intends to make future acquisitions of mineral and royalty interests that meet the Company’s acquisition criteria as part of its growth strategy.

The Company’s legacy royalty and mineral interests are located in Ohio (Utica and Marcellus shale natural gas), Louisiana (Haynesville shale and Cotton Valley formation natural gas), Mississippi (coal), Pennsylvania (coal, coalbed methane and Marcellus shale natural gas), Alabama (coal and coalbed methane and natural gas) and North Dakota (coal).

The majority of the Company’s legacy reserves were acquired as part of its historical coal mining operations.

Specialized employees in the Minerals Management segment also provide surface and mineral acquisition and lease maintenance services related to Company operations.

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Asset retirement costs associated with asset retirement obligations are capitalized with the carrying amount of the related long-lived asset and depreciated over the asset's estimated useful life.

Long-Lived Assets:

The Company periodically evaluates long-lived assets for impairment when changes in circumstances or the occurrence of certain events indicate the carrying amount of an asset or asset group may not be recoverable.

Upon identification of indicators of impairment, the Company evaluates the carrying value of the asset by comparing the estimated future undiscounted cash flows generated from the use of the asset and its eventual disposition with the asset's net carrying value.

If the carrying value of an asset is considered impaired, an impairment charge is recorded for the amount that the

Royalty Interests in Oil and Natural Gas Properties:

The Company follows the successful efforts method of accounting for oil and natural gas operations.

Under this method, costs to acquire mineral and royalty interests in oil and natural gas properties are capitalized when incurred.

Acquisitions of royalty interests of oil and natural gas properties are considered asset acquisitions and are recorded at cost.

During the year ended December 31, 2020, the Company closed on multiple acquisitions of mineral and royalty interests for total consideration of $ 14.2 million, of which $ 12.0 million closed in December 2020, $ 2.0 million closed in November 2020 and $ 0.2 million closed in August 2020.

These acquisitions are all located in the Permian Basin in Texas.

The Company did not acquire any mineral interests in 2019.

Acquisition costs of proven royalty interests are amortized using the units of production method over the life of the property, which is estimated using proven reserves.

For purposes of amortization, interests in oil and natural gas properties are grouped in a reasonable aggregation of properties with common geological structural features or stratigraphic condition.

The Company did not recognize any amortization expense related to the Company’s royalty interests in oil and natural gas properties for the year ended December 31, 2020.

The Company reviews and evaluates its royalty interests in oil and natural gas properties for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

Proven oil and gas properties are reviewed for impairment when events and circumstances indicate a potential decline in the fair value of such properties below the carrying value, such as a downward revision of the reserve estimates or lower commodity prices.

When such events or changes in circumstances occur, the Company estimates the undiscounted future cash flows expected in connection with the

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carrying value of the long-lived asset exceeds its fair value.

properties and compares such future cash flows to the carrying amounts of the properties to determine if the carrying amounts are recoverable.

If the carrying value of the properties is determined to not be recoverable based on the undiscounted cash flows, an impairment charge is recognized by comparing the carrying value to the estimated fair value of the properties.

Long-Lived Assets:

Upon identification of indicators of impairment, the Company evaluates the carrying value of the asset by comparing the estimated future undiscounted cash flows generated from the use of the asset or asset group and its eventual disposition with the asset's net carrying value.

If the carrying value of an asset is considered impaired, an impairment charge is recorded for the amount that the carrying value of the long-lived asset or asset group exceeds its fair value.

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.

See Note 9 for further discussion of the Company's nonrecurring fair value measurements.

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 analyses 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 future sales price, 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.

Coal Supply Agreement:

The coal supply agreement represents a long-term supply agreement with MLMC's customer and was recorded based on the fair value at the date of acquisition.

The coal supply agreement is amortized based on units of production over the term of the agreement, which is estimated to be 30 years .

The coal supply agreement is amortized based on units of production over the term of the agreement, which expires in 2032.

The Company reviews identified intangible assets for impairment when changes in circumstances or the occurrence of certain events indicate potential impairment.

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For the year ended December 31, 2020, $ 100,000 ($ 150,000 for the Chairman) of the non-employee director's annual retainer of $ 162,000 ($ 250,000 for the Chairman) was paid in restricted shares of Class A common stock.

For the year ended December 31, 2018 , $90,000 of the non-employee director's annual retainer of $150,000 was paid in restricted shares of Class A common stock.

For the year ended December 31, 2019, $ 95,000 ($ 150,000 for the Chairman) of the non-employee director's annual retainer of $ 155,000 ($ 250,000 for the Chairman) was paid in restricted shares of Class A common stock.

Shares awarded under the plan are fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged or otherwise transferred during the restriction period.

In general, the restriction period ends at the earliest of (i) ten years from the award date, (ii) the date of the director's death or permanent disability, (iii) five years (or earlier with the approval of the Board of Directors) after the director's date of retirement from the Board of Directors, or (iv) the date the director has both retired from the Board of Directors and has reached age 70 .

In general, the restriction period ends at the earliest of (i) ten years from the award date, (ii) the

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date of the director's death or permanent disability, (iii) five years (or earlier with the approval of the Board of Directors) after the director's date of retirement from the Board of Directors, or (iv) the date the director has both retired from the Board of Directors and has reached age 70 .

Pursuant to this plan, the Company issued 42,744 and 22,258 shares related to the years ended December 31, 2020 and 2019, respectively.

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Financial Instruments:

Financial instruments held by the Company include cash and cash equivalents, accounts receivable, accounts payable, revolving credit agreements and long-term debt.

Financial instruments held by the Company include cash and cash equivalents, accounts receivable, equity securities, accounts payable, revolving credit agreements and long-term debt.

Fair Value Measurements:

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A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

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Described below are the three levels of inputs that may be used to measure fair value:

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See Note 9 for further discussion of fair value measurements.

Recently Issued Accounting Standards

Accounting Standards Adopted in 2019:

NACCO adopted Accounting Standard Update ("ASU") 2016-02, Leases (Topic 842), which is codified in Accounting Standards Codification 842, Leases (“ASC 842”), on January 1, 2019, using the modified retrospective transition method (the "guidance").

See Note 10 for further information on the Company's leases.

NOTE 3— Revenue Recognition

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Fluctuations in revenue from period to period generally result from changes in customer demand.

On September 30, 2020, Caddo Creek entered into a fixed-price contract to perform mine reclamation.

The management service to perform mine reclamation is the performance obligation accounted for as a series.

Performance momentarily creates an asset that the customer simultaneously receives and consumes;

therefore, control is transferred to the customer over time.

Revenue from this contract is recognized over time utilizing the cost-to-cost method to measure the extent of progress toward completion of the performance obligation.

The Company believes the cost-to-cost method is the most appropriate method to measure progress and that the rate at which costs are incurred to fulfill the contract best depicts the transfer of control to the customer.

The extent of progress towards completion is measured based on the ratio of costs incurred to date compared to total estimated costs at completion, and revenue is recorded proportionally based on an estimated profit margin.

At NAMining entities, the management service to oversee the operation of the equipment and delivery of limestone is the performance obligation accounted for as a series.

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therefore, control is transferred to the customer over time.

Consistent with the conclusion that the customer simultaneously receives and consumes the benefits provided, an input-based measure of progress is appropriate.

Consistent with the conclusion that the

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customer simultaneously receives and consumes the benefits provided, an input-based measure of progress is appropriate.

As each month of service is completed, revenue is recognized for the amount of actual costs incurred, plus the management fee and the general and administrative fee (as applicable).

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As the amount of consideration the Company will ultimately be entitled to is entirely susceptible to factors outside its control, the entire amount of variable consideration is constrained at contract inception.

The fixed portion of the transaction price is recognized over the primary term of the contract, which is generally five years .

The Company believes that the pricing provisions of royalty contracts are customary in the industry.

Up-front lease bonus payments represent the fixed portion of the transaction price and are recognized over the primary term of the contract, which is generally five years .

Significant Judgments

The Company’s contracts with its customers contain different types of variable consideration including, but not limited to, management fees that adjust based on coal volumes or MMBtu delivered or limestone tons, however, the terms of these variable payments relate specifically to our efforts to satisfy one or more, but not all of, the performance obligations (or to a

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specific outcome from satisfying the performance obligations), in the contract.

Therefore, the Company allocates each variable payment (and subsequent changes to that payment) entirely to the specific performance obligation to which it relates.

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Certain contracts include reimbursement of actual costs incurred.

Recognition of revenue and recognition of profit related to the Caddo Creek contract requires the use of assumptions and estimates related to the total contract value, the total cost at completion, and the measurement of progress towards completion of the performance obligation.

Due to the nature of the contract, developing the estimated total contract value and total cost at completion requires the use of significant judgment.

The total contract value includes variable consideration.

The Company includes variable consideration in the transaction price at the most likely amount to be earned, based upon the Company’s assessment of expected performance.

The Company records these amounts only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Prior Period Performance Obligations

The Company records royalty income in the month production is delivered to the purchaser.

As a non-operator, the Company has limited visibility into the timing of when new wells start producing and production statements may not be received for 30 to 90 days or more after the date production is delivered.

As a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product.

The expected sales volumes and prices for these properties are estimated and recorded in "Accounts receivable" in the accompanying Consolidated Balance Sheets.

The difference between the Company’s estimates and the actual amounts received is recorded in the month that payment is received from the third party lessee.

For the years ended December 31, 2020 and 2019, royalty income recognized in the reporting periods related to performance obligations satisfied in prior reporting periods was immaterial.

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Disaggregation of Revenue

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Major Goods/Service Lines 2020 2019

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 revenues $ 128,432 $ 140,990

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Contract balances

Trade accounts receivable, net

Contract liability (current)

Contract liability (long-term)

Balance, January 1, 2019

Balance, December 31, 2019

Trade accounts receivable, net Long-term asset Contract liability (current) Contract liability (long-term)

Balance at January 1, 2020 $ 15,444 $ 1,977 $ 944 $ 2,153

Balance at December 31, 2020 18,894 4,984 941 3,626

Increase (decrease) $ 3,450 $ 3,007 $ ( 3 ) $ 1,473

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The difference between the opening and closing balance of this contract liability, which is shown above, primarily results from the difference between new lease bonus payments received and amortization of up-front lease bonus payments received in previous periods.

The amount of revenue recognized in the years ended December 31, 2019 and December 31, 2018 that was included in the opening contract liability was $0.9 million and $1.2 million , respectively.

The amount of revenue recognized in both of the years ended December 31, 2020 and December 31, 2019 that was included in the opening contract liability was $ 0.9 million.

This revenue consists of up-front lease bonus payments received under royalty contracts that are recognized over the primary term of the royalty contracts, which are generally five years .

The Company expects to recognize $0.9 million in both 2020 and 2021, $0.7 million in 2022, $0.3 million

The Company expects to recognize $ 0.9 million in 2021, $ 3.1 million in 2022, $ 0.3 million in 2023, and $ 0.1 million in 2024 related to the contract liability remaining at December 31, 2020.

The difference between the opening and closing balances of the Company’s contract balances results from the timing difference between the Company’s performance and the customer’s payment.

The Company has no contract assets recognized from the costs to obtain or fulfill a contract with a customer.

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in 2023, and $0.1 million in 2024 related to the contract liability remaining at December 31, 2019 .

The difference between the opening and closing balances of the Company’s accounts receivable and contract liabilities results from the timing difference between the Company’s performance and the customer’s payment.

Contracts with payments in arrears are recognized as receivables.

The Company has no contract assets recognized from the costs to obtain or fulfill a contract with a customer.

NOTE 4— Inventories

Inventories are summarized as follows:

Coal $ 17,695 $ 15,700

Mining supplies 29,856 24,765

Total inventories $ 47,551 $ 40,465

During 2020, the Company recorded a $ 2.0 million inventory impairment charge in the line “Cost of sales” in the accompanying Consolidated Statements of Operations as mining costs exceeded net realizable value at MLMC.

NOTE 5— Property, Plant and Equipment, Net

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Coal lands and real estate $ 50,887 $ 54,647

Mineral interests 14,181 —

Plant and equipment 231,190 190,868

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Less allowances for depreciation, depletion and amortization 123,841 107,454

$ 172,417 $ 138,061

Total depreciation, depletion and amortization expense on property, plant and equipment was $ 15.5 million and $ 13.6 million during 2020 and 2019, respectively.

NOTE 6— Intangible Assets

Intangible assets other than goodwill, which are subject to amortization, consist of the following:

The Company has a coal supply agreement intangible asset which is subject to amortization based on units of production over the term of the lignite sales agreement which expires in 2032.

The gross and net balances are set forth in the following table:

Gross Carrying

Amount Accumulated

Amortization Net

Balance at December 31, 2020

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Coal supply agreement $ 84,200 $ ( 46,298 ) $ 37,902

Amortization expense for intangible assets was $2.6 million and $3.0 million in 2019 and 2018 , respectively.

Expected annual amortization expense of NACCO's coal supply agreement for the next five years is as follows:

$3.0 million in 2020 and $3.1 million in 2021 , 2022 , 2023 and 2024 , respectively.

The coal supply agreement is amortized based on units of production over the term of the agreement, which is estimated to be 30 years.

Amortization expense for intangible assets was $ 2.6 million in both 2020 and 2019.

Expected annual amortization expense of the coal supply agreement for the next five years is as follows:

$ 3.1 million in 2021 and 2022, $ 3.2 million in 2023, $ 3.1 million in 2024 and $ 3.2 million in 2025, respectively.

NOTE 7— Asset Retirement Obligations

The Company's asset retirement obligations are principally for costs to close its surface mines and reclaim the land it has disturbed as a result of its normal mining activities as well as for costs to dismantle certain mining equipment at the end of the

The Company’s obligations associated with the retirement of long-lived assets are recognized at fair value at the time the legal

obligations are incurred.

Upon initial recognition of a liability, a corresponding amount is capitalized as part of the carrying

value of the related long-lived asset and is depreciated either by the straight-line method or the units-of-production method.

liability is accreted each period until the liability is settled, at which time the liability is removed.

If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.

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life of the mine.

The Company determined the amounts of these obligations based on cost estimates, adjusted for inflation, projected to the estimated closure dates, and then discounted using a credit-adjusted risk-free interest rate.

Management’s estimate involves a high degree of subjectivity.

The Company reviews its asset retirement obligations at each mine site at least annually and makes necessary adjustments for permit changes and for revisions of estimates of the timing and extent of reclamation activities and cost estimates.

The accretion of the liability is being recognized over the estimated life of each individual asset retirement obligation and is recorded in the line “Cost of sales” in the accompanying Consolidated Statements of Operations.

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The depreciation of the asset is recorded in the line “Cost of sales” in the accompanying Consolidated Statements of Operations.

Bellaire is a non-operating subsidiary of the Company with legacy liabilities relating to closed mining operations, primarily former Eastern U.S.

underground coal mining operations.

These legacy liabilities include obligations for water treatment and other environmental remediation that arose as part of the normal course of closing these underground mining operations.

The Company determined the amounts of these obligations based on cost estimates, adjusted for inflation, and then discounted the amounts using a credit-adjusted risk-free interest rate.

The accretion of the liability is recognized over the estimated life of the asset retirement obligation and is recorded in the line “Closed mine obligations” in the accompanying Consolidated Statements of Operations.

Since Bellaire's properties are no longer active operations, no associated asset has been capitalized.

A reconciliation of the Company's beginning and ending aggregate carrying amount of the asset retirement obligations are as follows:

Unallocated Items

Coal Mining NAMining Unallocated Items NACCO

Balance at January 1, 2019 $ 20,396 $ 485 $ 16,822 $ 37,703

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Accretion expense 1,793 — 1,022 2,815

Revision of estimated cash flows at MLMC

Revision of estimated cash flows at Centennial

Revision of estimated cash flows 400 ( 604 ) ( 838 ) ( 1,042 )

Balance at December 31, 2020 $ 25,040 $ — $ 16,692 $ 41,732

Asset retirement obligations are incurred at the time development of a new mine or mine area commences.

During 2020, MLMC began development of a new mine area and as such, recorded an additional $ 9.8 million asset retirement obligation and a corresponding $ 9.8 million asset was capitalized as a component of Property, plant and equipment, net.

The asset retirement obligation’s fair value was determined using a discounted cash flow technique and is based upon permit requirements and various estimates and assumptions that would be used by market participants, including estimates of disturbed acreage, reclamation costs and assumptions regarding equipment productivity.

Centennial Natural Resources (“Centennial”) ceased coal production at the end of 2015.

During 2020, the Company transferred the mine permits for certain Centennial mines to an unrelated third party.

As a result of these transfers, the Company was relieved of the associated mine reclamation obligations and recorded a $5.4 million reduction to Centennial's asset retirement obligation, included in "Liabilities settled during the current period" in the table above.

As part of these transactions, the Company transferred a $3.4 million escrow account and paid $2.4 million of cash, resulting in a net loss on the transactions of $0.4 million recognized within cost of sales in the Consolidated Statement of Operations and reflected on the line “Revision of estimated cash flows at Centennial” in the table above.

The reduction to the asset retirement obligation related to these transfers was offset by a $2.0 million increase to the asset retirement obligation related to updated costs estimates for the remaining Centennial asset retirement obligations recognized within cost of sales in the Consolidated Statement of Operations and reflected on the line “Revision of estimated cash flows at Centennial” in the table above.

Due to updated cost estimates and changes in timing of the asset retirement obligation for MLMC, the Company recognized a $3.1 million increase to the asset retirement obligation in 2019 within cost of sales in the Consolidated Statement of Operations and reflected on the line “Revision of estimated cash flows at MLMC” in the table above.

Prior to 2018, Bellaire established a $5.0 million Mine Water Treatment Trust to provide a financial assurance mechanism in order to assure the long-term treatment of post-mining discharges.

The fair value of the Mine Water Treatment assets, which are recognized as a component of "Other Non-Current Assets" on the Consolidated Balance Sheets, are $10.1 million at December 31, 2019 and are legally restricted for purposes of settling the Bellaire asset retirement obligation.

See Note 9 for further discussion of the Mine Water Treatment Trust.

As a result of the transfer of the mine permits, the Company was relieved of the associated mine reclamation obligations and therefore recorded a $ 4.8 million reduction to Centennial's asset retirement obligation, included in "Liabilities settled during the period" in the table above.

As part of the transfer of the mine permits, the Company paid $ 3.8 million of cash, recorded $ 1.4 million in Other assets for amounts owed to Centennial from the third-party acquirer, and recognized $ 2.4 million in Other long-term liabilities in the Consolidated Balance Sheets.

The liabilities are associated with amounts due to the third-party acquirer upon transfer or replacement of the surety bonds and the fair value of the obligation to stand ready to perform in the event there is a claim under the surety bonds.

As of December 31, 2020, the Company has $ 5.8 million of surety bonds outstanding related to the mines associated with the transferred mine permits.

The third party that acquired the mine permits is required as part of the transaction to transfer or replace the outstanding surety bonds as soon as it is able.

If there is a claim under these surety bonds prior to the transfer or replacement of such bonds, the Company would be responsible to the surety company for any amounts it pays with respect to such claim, up to the amount of the outstanding surety bonds.

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During 2019, the Company transferred the mine permits for certain Centennial mines to an unrelated third party.

As a result of these transfers, the Company was relieved of the associated mine reclamation obligations and recorded a $ 5.4 million reduction to Centennial's asset retirement obligation, included in "Liabilities settled during the current period" in the table above.

As part of these transactions, the Company transferred a $ 3.4 million escrow account and paid $ 2.4 million of cash, resulting in a net loss on the transactions of $ 0.4 million recognized within cost of sales in the Consolidated Statement of Operations and reflected on the line “Revision of estimated cash flows” in the table above.

The reduction to the asset retirement obligation related to these transfers was offset by a $ 2.0 million increase to the asset retirement obligation related to updated costs estimates for the remaining Centennial asset retirement obligations recognized within cost of sales in the Consolidated Statement of Operations and reflected on the line “Revision of estimated cash flows” in the table above.

Due to updated cost estimates and changes in timing of the asset retirement obligation for MLMC, the Company recognized a $ 3.1 million increase to the asset retirement obligation in 2019 within cost of sales in the Consolidated Statement of Operations and reflected on the line “Revision of estimated cash flows” in the table above.

Bellaire Corporation (“Bellaire”) is a non-operating subsidiary of the Company with legacy liabilities relating to closed mining operations, primarily former Eastern U.S.

underground coal mining operations.

These legacy liabilities include obligations for water treatment and other environmental remediation that arose as part of the normal course of closing these underground mining operations.

Since Bellaire's properties are no longer active operations, no associated asset has been capitalized.

The fair value of Bellaire's Mine Water Treatment assets, which are recognized as a component of Other non-current assets on the Consolidated Balance Sheets, are $ 11.1 million and $ 10.1 million at December 31, 2020 and December 31, 2019, respectively, and are legally restricted for purposes of settling the Bellaire asset retirement obligation.

See Note 9 for further discussion of the Mine Water Treatment Trust.

NOTE 8— Current and Long-Term Financing

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Revolving credit agreement $ 30,000 $ 16,000

Other debt 16,465 8,943

Total debt outstanding $ 46,465 $ 24,943

Current portion of borrowings outstanding

$ 22,112 $ 7,795

Long-term portion of borrowings outstanding 24,353 17,148

$ 46,465 $ 24,943

Total available borrowings, net of limitations, under revolving credit agreement $ 146,951 $ 148,644

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Weighted average stated interest rate on total borrowings 2.3 % 5.1 %

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Annual maturities of total debt, excluding leases, are as follows:

Thereafter 10,041

Interest paid on total debt was $ 1.4 million and $ 0.9 million during 2020 and 2019, respectively.

11 unchanged sentences

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

NACoal has a demand note payable to Coteau, one of the unconsolidated subsidiaries, which bears interest based on the applicable quarterly federal short-term interest rate as announced from time to time by the Internal Revenue Service.

At December 31, 2020 and 2019, the balance of the note was $ 4.4 million and $ 2.0 million and the interest rate was 0.14 % and 1.68 %, respectively.

NACoal has two notes payable that are secured by four specified units of equipment and bears interest at a weighted average rate of 4.20 %.

One note has a ten year term and includes a principal payment of $ 4.4 million at the end of the term on December 15, 2026.

The other has a seven year term and expires on April 1, 2027.

At December 31, 2020 and 2019, the outstanding balances of the notes were $ 10.6 million and $ 6.3 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

At December 31, 2019, the balance of the note was $2.0 million and the interest rate was 1.68% .

NACoal has a ten year note payable that is secured by two specified units of equipment and bears interest at a fixed 5.29% rate.

This note includes a principal payment of $4.4 million at the end of the term on December 15, 2026 .

At December 31, 2019 and 2018 , the outstanding balances of the note were $6.3 million and $6.6 million , respectively.

NOTE 9— Fair Value Disclosure

Recurring Fair Value Measurements :

The following table presents the Company's assets and liabilities accounted for at fair value on a recurring basis:

The following table presents the Company's assets accounted for at fair value on a recurring basis:

Fair Value Measurements at Reporting Date Using

Quoted Prices in

Active Markets for

Significant Other

Identical Assets

Observable Inputs

December 31, 2019

Quoted Prices in Significant

Active Markets for Significant Other Unobservable

Identical Assets Observable Inputs Inputs

Description December 31, 2020 (Level 1) (Level 2) (Level 3)

Equity securities $ 13,164 $ 13,164 $ — $ —

$ 13,164 $ 13,164 $ — $ —

Fair Value Measurements at Reporting Date Using

Quoted Prices in

Active Markets for

Significant Other

Identical Assets

Observable Inputs

December 31, 2018

Quoted Prices in Significant

Active Markets for Significant Other Unobservable

Identical Assets Observable Inputs Inputs

Description December 31, 2019 (Level 1) (Level 2) (Level 3)

Equity securities $ 10,120 $ 10,120 $ — $ —

$ 10,120 $ 10,120 $ — $ —

Bellaire's Mine Water Treatment Trust invests in available for sale securities that are reported at fair value based upon quoted market prices in active markets for identical assets;

therefore, they are classified as Level 1 within the fair value hierarchy.

On January 1, 2018, the Mine Water Treatment Trust's unrealized gain of $2.7 million was reclassified within the Consolidated Balance Sheet upon adoption of ASU No.

The Mine Water Treatment Trust realized a (gain)/loss of $(1.5) million and $0.3 million in the years ended December 31, 2019 and 2018, respectively, in the "Other (income) expense " section of the Consolidated Statements of Operations.

The Mine Water Treatment Trust realized a gain of $ 1.2 million and $ 1.5 million in the years ended December 31, 2020 and 2019, respectively.

See Note 7 for further discussion of Bellaire's Mine Water Treatment Trust.

During 2020, the Company invested $ 2.0 million in equity securities of a public company with a diversified portfolio of royalty producing mineral interests.

The investment is reported at fair value based upon quoted market prices in active markets for identical assets;

therefore, it is classified as Level 1 within the fair value hierarchy.

The Company recognized a gain of $ 0.1 million during the year ended December 31, 2020, related to the investment in these equity securities.

The gains related to equity securities are reported on the line Gain on equity securities in the "Other (income) expense" section of the Consolidated Statements of Operations.

There were no transfers into or out of Levels 1, 2 or 3 during the year ended December 31, 2020.

Nonrecurring Fair Value Measurements:

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 estimated the fair value of the assets using unobservable inputs, which are classified as Level 3 inputs.

The long-lived assets were written down to their estimated fair value, which resulted in a non-cash asset impairment charge of $ 7.3 million in the Minerals Management segment and $ 1.1 million in the Coal Mining segment for certain capitalized leasehold costs, prepaid royalties and other assets during 2020.

The fair value of these long-lived assets was determined to be zero as such assets were deemed to have no future economic benefit based on the Company's analysis using market participant assumptions, and therefore no expected future cash flows.

The impairment charges are reported on the line Asset impairment charges in the Consolidated Statements of Operations.

Other Fair Value Measurement Disclosures:

1 unchanged sentence

The fair values of revolving credit agreements and long-term debt, excluding finance leases, were determined using current rates offered for similar obligations taking into account subsidiary credit risk, which is Level 2 as defined in the fair value hierarchy.

The fair value and the book value of revolving credit agreements and long-term debt, excluding finance leases, was $24.3 million and $24.3 million , respectively, at December 31, 2019 and $10.4 million and $10.6 million , respectively, at December 31, 2018 .

The fair value and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

the book value of revolving credit agreements and long-term debt, excluding finance leases, was $ 45.2 million and $ 45.0 million, respectively, at December 31, 2020 and $ 24.3 million and $ 24.3 million, respectively, at December 31, 2019.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable.

4 unchanged sentences

To further reduce credit risk associated with accounts receivable, the Company performs periodic credit evaluations of its customers, but does not generally require advance payments or collateral.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

NOTE 10— Leases

NACCO adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019 using the modified retrospective transition method.

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

The most significant effect to the Consolidated Balance Sheet relates to the recognition of new right-of-use assets (“ROU assets”) and lease liabilities for operating leases of real estate, mining and other equipment that expire at various dates through 2031.

1 unchanged sentence

See the table below for further information on the Consolidated Balance Sheet.

Many leases include renewal and/or fair value or bargain purchase options, which are not recognized on the Consolidated Balance Sheet.

The Company's lease agreements do not contain lease payments that depend on an index or a rate, as such, minimum lease payments do not include variable lease payments.

There was no cumulative effect adjustment to the opening balance of retained earnings.

The adoption of this guidance did not have a material effect on the Company’s results of operations, cash flows, liquidity or debt-covenant compliance.

NACCO did not apply the standard to the comparative periods presented in the year of adoption.

The Company elected many of the available practical expedients permitted under the guidance, which among other items, allow the Company to carry forward its historical lease classification, not reassess leases for the definition of a lease under the new standard and not separate lease components from nonlease components for all classes of underlying assets.

The Company also elected the practical expedient to carry forward the historical accounting treatment for existing land easement agreements.

Upon the adoption of ASC 842, NACCO did not record a ROU asset and related lease liability for leases with an initial term of 12 months or less.

Leased assets and liabilities include the following:

Operating lease right-of-use assets

Property, plant and equipment, net (a)

Other current liabilities

Current maturities of long-term debt

Operating lease liabilities

Long-term debt

(a) Finance leased assets are recorded net of accumulated amortization of $1.9 million as of December 31, 2019 .

Description Location DECEMBER 31

2020 DECEMBER 31

Operating Operating lease right-of-use assets $ 10,324 $ 11,398

Finance Property, plant and equipment, net (a)

Operating Other current liabilities $ 1,457 $ 1,318

Finance Current maturities of long-term debt 1,188 558

Operating Operating lease liabilities $ 11,196 $ 12,448

Finance Long-term debt 280 85

(a) Finance leased assets are recorded net of accumulated amortization of $ 0.2 million and $ 1.9 million as of December 31, 2020 and December 31, 2019, respectively.

The components of lease expense for the years ended December 31 are as follows:

Description Location 2020 2019

Lease expense

Operating lease cost Selling, general and administrative expenses $ 2,103 $ 2,251

Finance lease cost:

Amortization of leased assets Cost of sales 164 570

Interest on lease liabilities Interest expense

Variable lease expense Selling, general and administrative expenses 588 555

Short-term lease expense Selling, general and administrative expenses 260 298

Total lease expense $ 3,134 $ 3,692

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

The components of lease expense were as follows for the year ended December 31, 2019 :

Lease expense

Operating lease cost

Selling, general and administrative expenses

Finance lease cost:

Amortization of leased assets

Cost of sales

Interest on lease liabilities

Interest expense

Variable lease expense

Selling, general and administrative expenses

Short-term lease expense

Selling, general and administrative expenses

Total lease expense

Rental expense for all operating leases was $3.7 million in 2018 .

Depreciation of plant and equipment under capital leases was included in depreciation expense in the year ended December 31, 2018 .

Future minimum finance and operating lease payments were as follows at December 31, 2020:

Leases Operating

2021 $ 1,229 $ 2,260 $ 3,489

2022 124 2,181 2,305

2023 102 1,705 1,807

2024 63 1,661 1,724

2025 7 1,469 1,476

Subsequent to 2025 — 7,952 7,952

4 unchanged sentences

The Company considers its credit rating and the current economic environment in determining this collateralized rate.

The assumptions used in accounting for ASC 842 were as follows for the year ended December 31, 2019 :

The assumptions used in accounting for ASC 842 for the years ended December 31 are as follows:

Lease term and discount rate 2020 2019

Weighted average remaining lease term (years)

Operating 8.92 9.63

Finance 1.38 0.75

Weighted average discount rate

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The following table details cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2019 :

Operating 7.00 % 6.99 %

Finance 4.11 % 5.95 %

The following table details cash paid for amounts included in the measurement of lease liabilities for the years ended December 31:

Cash paid for amounts included in the measurement of lease liabilities 2020 2019

10 unchanged sentences

For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

These matters are subject to inherent uncertainties, and unfavorable rulings could occur.

12 unchanged sentences

NACCO’s previous repurchase program ("2018 Stock Repurchase Program") would have expired on December 31, 2019 but was terminated and replaced by the 2019 Stock Repurchase Program.

During 2019, the Company repurchased 28,094 and 44,476 shares of Class A Common Stock under the 2019 Stock Repurchase Program and 2018 Stock Repurchase Program, respectively, for an aggregate purchase price of $3.0 million .

During 2018, The Company repurchased 39,047 shares of Class A Common Stock under the 2018 Stock Repurchase Program for an aggregate purchase price of $1.3 million .

of the uncertainty surrounding the COVID-19 pandemic, the Company suspended repurchasing shares under the 2019 Stock

Repurchase Program in March 2020.

Prior to the decision to cease share repurchases, the Company repurchased 32,286 shares

of Class A common stock under the 2019 Stock Repurchase Program for an aggregate purchase price of $ 1.0 million during

The Company repurchased 28,094 and 44,476 shares of Class A common stock under the 2019 Stock Repurchase Program and 2018 Stock Repurchase Program, respectively, for an aggregate purchase price of $ 3.0 million during 2019.

The timing and amount of any repurchases under the 2019 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 2019 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.

All or part of the repurchases under the 2019 Stock Repurchase Program may be

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

implemented under a Rule 10b5-1 trading plan, which would allow repurchases under pre-set terms at times when the Company might otherwise be restricted from doing so under applicable securities laws.

All or part of the repurchases under the 2019 Stock Repurchase Program may be implemented under a Rule 10b5-1 trading plan, which would allow repurchases under pre-set terms at times when the Company might otherwise be restricted from doing so under applicable securities laws.

Stock Compensation:

7 unchanged sentences

Diluted earnings per share $ 2.10 $ 5.66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

NOTE 13— Income Taxes

The Company provides for income taxes and the related accounts under the asset and liability method.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse.

Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

The components of income (loss) before income tax provision (benefit) and the income tax provision (benefit) for the years ended December 31 are as follows:

Income (loss) before income tax provision (benefit)

Domestic $ 13,990 $ 40,742

Foreign 268 2,657

$ 14,258 $ 43,399

Income tax provision (benefit)

Current income tax provision (benefit):

Federal $ ( 7,859 ) $ ( 6,473 )

State ( 408 ) 939

Foreign 215 603

Total current ( 8,052 ) ( 4,931 )

Deferred income tax provision:

Federal 7,847 8,125

State ( 330 ) 573

Total deferred 7,517 8,698

$ ( 535 ) $ 3,767

The Company made income tax payments of $ 0.4 million and $ 1.0 million during 2020 and 2019, respectively.

4 unchanged sentences

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

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before the provision for income taxes.

A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:

5 unchanged sentences

R&D and other federal credits ( 367 ) ( 255 )

Settlements and uncertain tax positions 6,286 ( 2,377 )

Coronavirus Aid, Relief, and Economic Security ("CARES") Act - carryback rate differential

Other, net ( 763 ) ( 129 )

Income tax provision $ ( 535 ) $ 3,767

Effective income tax rate ( 3.8 ) % 8.7 %

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

Income tax expense for the year ended December 31, 2018 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.

A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax bases of assets and liabilities follows:

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 to the rate differential related to carrying back losses under the provisions of the 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

Deferred tax assets

1 unchanged sentence

Tax carryforwards 17,756 16,305

Inventories 3,742 1,704

Accrued liabilities 10,160 10,020

Employee benefits 2,747 4,853

Land valuation adjustment 5,536 4,304

Other 5,401 4,701

Total deferred tax assets 73,142 72,762

Valuation allowance 11,549 12,296

61,593 60,466

Deferred tax liabilities

5 unchanged sentences

Net deferred liability $ ( 17,550 ) $ ( 12,338 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:

1 unchanged sentence

Net deferred tax

Carryforwards

asset Valuation

allowance Carryforwards

expire during:

1 unchanged sentence

Federal research credit 2,648 — 2034-2040

Federal foreign tax credit

Alternative minimum tax credit

Total $ 21,356 $ 14,478

December 31, 2019

Net deferred tax

Carryforwards

asset Valuation

allowance Carryforwards

expire during:

net operating loss

State net operating loss $ 16,531 $ 13,668 2020-2039

Federal research credit 1,455 — 2034-2038

Alternative minimum tax credit

(1) This credit is refundable in 2021, if not fully utilized prior to 2021.

Federal foreign tax credit 463 463 2029

Alternative minimum tax ("AMT") credit 1,596 — (1)

Total $ 20,045 $ 14,131

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

(1) The Tax Cuts and Jobs Act provided that AMT credits can be utilized to offset income taxes owed in tax years 2018 through 2020 with any remaining AMT credit refundable in 2021.

The CARES Act revised this to allow AMT credits to be refundable in 2018 and 2019.

The Company has reclassified its AMT credits to the current receivable as of December 31, 2020.

The Company has a valuation allowance for certain state and foreign deferred tax assets.

6 unchanged sentences

federal tax returns is ongoing.

The Company does not have any material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by law.

The Company has extended the statute of limitations to allow the U.S.

taxing authorities to complete their examination.

The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2020 and 2019.

Approximately $2.3 million and $1.1 million of these gross amounts as of December 31, 2019 and 2018 , respectively, relate to permanent items that, if recognized, would impact the effective income tax rate.

This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S.

The increase in the gross unrecognized tax benefits in 2020 is primarily due to tax positions related to worthlessness losses for which the timing of deductibility is uncertain.

Approximately $ 6.3 million and $ 2.3 million of the gross unrecognized tax benefits as of December 31, 2020 and 2019, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate.

This amount differs from the gross unrecognized tax benefits presented in the table below due to (1) the deferred tax asset which would be available if the position were not sustained upon audit and (2) the decrease in U.S.

federal income taxes which would occur upon the recognition of the state tax benefits included herein.

1 unchanged sentence

Additions based on tax positions related to prior years 2,774 1,172

Decreases based on settlements with tax authorities ( 803 ) —

Additions based on tax positions related to the current year 5,628 408

1 unchanged sentence

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision.

The Company recognized net expense of less than $0.1 million in interest and penalties related to uncertain tax positions during

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

2019 and 2018 , respectively.

The total amount of interest and penalties accrued was $0.1 million and $0.1 million as of December 31, 2019 and 2018 , respectively.

The Company recognized net benefit of less than $ 0.1 million and net expense of less than $ 0.1 million in interest and penalties related to uncertain tax positions during 2020 and 2019, respectively.

The total amount of interest and penalties accrued was $ 0.1 million as of December 31, 2020 and 2019, respectively.

The Company expects the amount of unrecognized tax benefits will change within the next 12 months;

6 unchanged sentences

The Company also amended the Supplemental Retirement Benefit Plan (the “SERP”) to freeze all pension benefits.

Certain executive officers also maintain accounts under various deferred compensation plans that were frozen prior to 2018 .

All eligible employees of the Company, including employees whose pension benefits are frozen, receive retirement benefits under defined contribution retirement plans.

1 unchanged sentence

These lump sum payments resulted in a pension settlement charge of $ 0.9 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:

1 unchanged sentence

2.98 % - 3.20 %

4.10% - 4.20%

Weighted average discount rates for net periodic benefit cost 2.98 % - 3.20 %

4.10 % - 4.20 %

3.40% - 3.55%

Expected long-term rate of return on assets for net periodic benefit cost 7.00 % 7.50 %

Set forth below is a detail of the net periodic pension expense (income) for the defined benefit plans for the years ended December 31 :

Set forth below is a detail of the net periodic pension (income) expense for the defined benefit plans for the years ended December 31:

Interest cost $ 1,285 $ 1,710

2 unchanged sentences

Amortization of prior service cost 58 58

Net periodic pension expense (income)

Set forth below is detail of other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss for the years ended December 31 :

Settlements — 873

Net periodic pension (income) expense $ ( 495 ) $ 285

Set forth below is detail of other changes in plan assets and benefit obligations recognized in other comprehensive loss (income) for the years ended December 31:

Current year actuarial loss (gain) $ 667 $ ( 1,030 )

1 unchanged sentence

Amortization of prior service cost ( 58 ) ( 58 )

Settlements — ( 873 )

Total recognized in other comprehensive loss (income) $ 12 $ ( 2,383 )

7 unchanged sentences

Interest cost 1,285 1,710

Actuarial loss (gain)

Actuarial loss 3,996 3,121

Benefits paid ( 2,535 ) ( 2,391 )

Settlements — ( 2,612 )

Projected benefit obligation at end of year $ 44,600 $ 41,854

2 unchanged sentences

Fair value of plan assets at beginning of year $ 37,364 $ 34,954

Actual return (loss) on plan assets

Actual return on plan assets 5,763 6,930

Employer contributions 507 483

Benefits paid ( 2,535 ) ( 2,391 )

Settlements — ( 2,612 )

Fair value of plan assets at end of year $ 41,099 $ 37,364

4 unchanged sentences

Non-current liabilities ( 7,022 ) ( 6,963 )

$ ( 3,501 ) $ ( 4,490 )

Components of accumulated other comprehensive loss (income) consist of:

2 unchanged sentences

Deferred taxes ( 3,316 ) ( 3,305 )

The Company recognizes as a component of benefit cost (income), as of the measurement date, any unrecognized actuarial net gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor." Amounts outside the corridor are amortized over the average expected remaining service of active participants expected to benefit under the retiree medical plans or over the average expected remaining lifetime of inactive participants for the pension plans.

$ 11,467 $ 11,465

The Company recognizes as a component of benefit (income) cost, as of the measurement date, any unrecognized actuarial net gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor." Amounts outside the corridor are amortized over the average expected remaining service of active participants expected to benefit under the retiree medical plans or over the average expected remaining lifetime of inactive participants for the pension plans.

The (gain) loss amounts recognized in AOCI are not expected to be fully recognized until the plan is terminated or as settlements occur, which would trigger accelerated recognition.

8 unchanged sentences

Future pension benefit payments expected to be paid from assets of the pension plans are:

2026 - 2030 12,866

The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations.

6 unchanged sentences

The following is the actual allocation percentage and target allocation percentage for the pension plan assets at December 31:

Target Allocation

Allocation 2019

Allocation Target Allocation

equity securities 45.4 % 45.1 % 36.0 % - 54.0 %

36.0% - 54.0%

equity securities 20.3 % 20.0 % 16.0 % - 24.0 %

16.0% - 24.0%

Fixed income securities 33.9 % 34.4 % 30.0 % - 40.0 %

30.0% - 40.0%

Money market 0.4 % 0.5 % 0.0 % - 10.0 %

The defined benefit pension plans do not have any direct ownership of NACCO common stock.

4 unchanged sentences

Fixed income securities 13,948 12,854

Money market 176 166

Total $ 41,099 $ 37,364

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Postretirement Health Care:

5 unchanged sentences

Under the Company's current policy, plan benefits are funded at the time they are due to participants.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The assumptions used in accounting for the postretirement health care plans are set forth below for the years ended December 31:

4 unchanged sentences

Year that the rate reaches the ultimate trend rate 2027 2025

Set forth below is a detail of the net periodic benefit expense for the postretirement health care plans for the years ended December 31 :

Set forth below is a detail of the net periodic benefit (income) expense for the postretirement health care plans for the years ended December 31:

Service cost $ 21 $ 24

Interest cost 52 77

Amortization of actuarial loss

Amortization of actuarial (gain) loss ( 1 ) 8

Amortization of prior service credit ( 59 ) ( 80 )

Net periodic benefit expense

Set forth below is a detail of other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended December 31 :

Current year actuarial loss (gain)

Amortization of actuarial loss

Current year prior service credit

Amortization of curtailment ( 31 ) —

Net periodic benefit (income) expense $ ( 18 ) $ 29

Set forth below is a detail of other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31:

Current year actuarial loss $ 194 $ 46

Amortization of actuarial gain (loss) 1 ( 8 )

Amortization of prior service credit 59 80

Total recognized in other comprehensive income (loss)

Amortization of curtailment 31 —

Transfers 46 —

Total recognized in other comprehensive income $ 331 $ 118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5 unchanged sentences

Benefit obligation at beginning of year $ 2,049 $ 2,113

Service cost 21 24

Interest cost 52 77

Plan amendments 49 —

Actuarial loss (gain)

Actuarial loss 145 46

Benefits paid ( 262 ) ( 211 )

4 unchanged sentences

Noncurrent liabilities ( 1,816 ) ( 1,845 )

$ ( 2,054 ) $ ( 2,049 )

Components of accumulated other comprehensive loss (income) consist of:

2 unchanged sentences

Deferred taxes ( 167 ) ( 96 )

$ 132 $ ( 128 )

Future postretirement health care benefit payments expected to be paid are:

2026 - 2030 688

Defined Contribution Plans:

3 unchanged sentences

NOTE 15— Business Segments

In the first quarter of 2019, the Company changed its reportable segments to reflect changes in the business, including growth at NAMining and Minerals Management.

As of January 1, 2019, the Company’s operating segments are:

The Company’s operating segments are:

(i) Coal Mining, (ii) NAMining and (iii) Minerals Management.

While the Company continues to pursue opportunities to add new coal mining operations to the Coal Mining segment, the NAMining segment will serve as the platform for pursuing non-coal mining projects and the Minerals Management segment will work to capitalize on the Company’s oil, gas and coal reserves.

The Company determines its reportable segments by first identifying its operating segments, and then by assessing whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component.

The Company’s Chief Operating Decision Maker utilizes operating profit to evaluate segment performance and allocate resources.

Operating profit for each segment includes an allocation of shared costs based on a reasonable measure of utilization.

The Company has items not directly attributable to a reportable segment which are not included as part of the measurement of segment operating profit, which are primarily administrative costs related to public company reporting requirements at the parent company and the financial results of Mitigation Resources of North America ® (“MRNA”) and Bellaire.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company also has costs not directly attributable to a reportable segment which are not included as part of the measurement of segment operating profit, primarily administrative costs related to public company reporting requirements, the financial results of the Company’s mitigation banking business, Mitigation Resources of North America ® (“MRNA”), and Bellaire.

MRNA generates and sells stream and wetland mitigation credits (known as mitigation banking) and provides services to those engaged in permittee-responsible stream and wetland mitigation.

generates and sells stream and wetland mitigation credits (known as mitigation banking) and provides services to those engaged in permittee-responsible stream and wetland mitigation.

Bellaire manages the Company’s long-term liabilities related to former Eastern U.S.

underground mining activities.

Transactions between segments are accounted for as third-party arrangements for purposes of presenting segment results of operations and are eliminated in consolidation.

As of January 1, 2020, the Company retrospectively changed its computation of segment operating profit to reclassify certain

expenses, primarily related to executive and board compensation.

These expenses are now included in unallocated items.

change in segment reporting reflected a decision to evaluate the financial performance of the Company’s segments excluding

executive and board compensation.

All prior period segment information has been reclassified to conform to the new

presentation.

This segment reporting change has no impact on consolidated operating results.

All financial statement line items below operating profit (other income including interest expense and interest income, the provision for income taxes and net income) are presented and discussed within this Form 10-K on a consolidated basis.

Included within other income on the line Income from other unconsolidated affiliates within the Consolidated Statements of Operations is the financial results of NoDak Energy Services, LLC ("NoDak").

NoDak operates and maintains a coal drying system at a customer’s power plant.

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

The NoDak contract expired in the first quarter of 2020.

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The accounting policies of the reportable segments are described in Note 2.

In 2019, two customers and an oil and gas lessee individually accounted for more than 10% of consolidated revenue.

In 2020, two customers individually accounted for more than 10% of consolidated revenue.

In 2019, two customers and an oil and gas lessee individually accounted for more than 10% of consolidated revenue.

The following represents the revenue attributable to each of these entities as a percentage of consolidated revenue for those years:

Percentage of Consolidated Revenue

Choctaw Generation Limited Partnership, LLLP

Ascent Resources

Minerals Management

In addition, for the year ended December 31, 2019 , the Coal Mining segment derived approximately 60% of the Earnings of Unconsolidated Operations from two customers, Basin Electric Power Cooperative and Great River Energy.

Segment 2020 2019

Coal Mining customer 55 % 48 %

NAMining customer 19 % 21 %

Minerals Management lessee less than 10 %

In addition, for the year ended December 31, 2020, the Coal Mining segment derived approximately 60 % of the Earnings of Unconsolidated Operations from two customers, Basin Electric and GRE.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The following tables present revenue, operating profit, depreciation expense and capital expenditures 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 $ 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 )

Expenditures for property, plant and equipment

Eliminations ( 97 ) 256

Total $ 13,448 $ 38,820

Expenditures for property, plant and equipment and acquisition of mineral interests

Coal Mining $ 14,825 $ 15,092

NAMining 13,862 8,824

Minerals Management 15,474 517

Unallocated Items 207 231

Total $ 44,368 $ 24,664

Depreciation, depletion and amortization

Coal Mining $ 14,213 $ 12,409

NAMining 2,470 2,223

Minerals Management 1,308 1,362

Unallocated Items 123 246

Total $ 18,114 $ 16,240

Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.

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Other non-current assets 5,890 4,570

Total Assets $ 323,976 $ 326,309

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities $ 3,242 $ 5,257

Current intercompany accounts payable, net 2,337 —

Current portion of deferred compensation — 13,465

Note payable to Bellaire 16,750 16,950

Deferred compensation

Other non-current liabilities 1,023 1,245

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NOTE 17— Unconsolidated Subsidiaries

Each of the Company's wholly owned Unconsolidated Subsidiaries meet the definition of a VIE.

Each of the Company's wholly owned Unconsolidated Subsidiaries, within the Coal Mining and NAMining segments, meet the definition of a VIE.

The Unconsolidated Subsidiaries are capitalized primarily with debt financing provided by or supported by their respective customers, and generally without recourse to NACCO and NACoal.

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See Note 1 for a discussion of these entities.

The income taxes resulting from the operations of the Unconsolidated Subsidiaries are solely the responsibility of the Company.

The pre-tax income from the unconsolidated subsidiaries, excluding NoDak, is reported on the line Earnings of unconsolidated operations in the Consolidated Statements of Operations, with related income taxes included in the provision for income taxes.

The Company has included the pre-tax earnings of the Unconsolidated Subsidiaries, excluding NoDak, above operating profit as they are an integral component of the Company's business and operating results.

The pre-tax income from NoDak is reported on the line Income from other unconsolidated affiliates in the Other (income) expense section of the Consolidated Statements of Operations, with the related income taxes included in the provision for income taxes.

The investment in the unconsolidated subsidiaries and related tax positions totaled $ 29.0 million and $ 24.6 million at December 31, 2020 and 2019, respectively.

The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $5.0 million and $4.4 million at December 31, 2019 and 2018 , respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The Company's risk of loss relating to these entities is limited to its invested capital, which was $ 6.5 million and $ 5.0 million at December 31, 2020 and 2019, respectively.

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

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

To date, no payments have been required from NACoal since the inception of these guarantees.

To date, no payments have been required from NACoal since the inception of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

these guarantees.

The Company believes that the likelihood NACoal would be required to perform under the guarantees is remote, and no amounts related to these guarantees have been recorded.

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Statement of Operations

Revenue $ 768,660 $ 734,515

Gross profit $ 69,021 $ 72,433

Income before income taxes $ 60,398 $ 65,183

Net income $ 50,933 $ 54,067

Balance Sheet

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One of the Company's directors is a retired Jones Day partner.

Legal services rendered by Jones Day approximated $1.0 million and $2.1 million for the years ended December 31, 2019 and 2018 , respectively.

Legal services rendered by Jones Day approximated $ 1.0 million for both of the years ended December 31, 2020 and 2019.

retired as the President and Chief Executive Officer of NACCO effective during 2017.

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Fees for consulting services rendered by Mr.

Rankin approximated $0.5 million and $0.5 million for the years ended December 31, 2019 and 2018 , respectively.

Rankin approximated $ 0.5 million for both of the years ended December 31, 2020 and 2019.

Hyster-Yale Materials Handling, Inc.

("Hyster-Yale") is a former subsidiary of the Company that was spun-off to stockholders in 2012.

Rankin is Chairman, President and Chief Executive Officer of Hyster-Yale Materials Handling and Chairman, Hyster-Yale Group.

In the ordinary course of business, NACoal leases or buys Hyster-Yale lift trucks.

The terms may not be comparable to terms that would be obtained in a transaction between unaffiliated parties.

NOTE 19— Other Events and Transactions

Voluntary Separation Program:

During the fourth quarter of 2020, the Company adopted a voluntary separation program ("2020 VSP") for eligible employees who met certain age and service requirements in an effort to reduce overall headcount at the Company’s headquarters.

The irrevocable acceptance period for associates electing to participate in the 2020 VSP ended during December 2020.

In the fourth quarter of 2020, the Company recorded pre-tax charges for the 2020 VSP of $ 1.8 million included in Selling, general and administrative expense in the accompanying Consolidated Statements of Operations.

As of December 31, 2020, $ 1.6 million was unpaid and recorded in Accrued payroll in the Consolidated Balance Sheet.

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE PARENT

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Other non-current assets 5,890 4,570

Total Assets $ 323,976 $ 326,309

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities $ 3,242 $ 5,257

Current intercompany accounts payable, net 2,337 —

Current portion of deferred compensation — 13,465

Note payable to Bellaire 16,750 16,950

Deferred compensation

Other non-current liabilities 1,023 1,245

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Intercompany interest expense $ 1,178 $ 1,190

Other, net ( 1,003 ) ( 1,796 )

Administrative and general expenses 5,658 6,403

Loss before income taxes ( 5,833 ) ( 5,797 )

Income tax benefit

Income tax provision (benefit) 2,419 ( 3,819 )

Net loss before equity in earnings of subsidiaries ( 8,252 ) ( 1,978 )

Equity in earnings of subsidiaries 23,045 41,610

Current period pension and postretirement plan adjustment, net of $226 expense and $14 tax benefit in 2019 and 2018, respectively

Net income 14,793 39,632

Current period pension and postretirement plan adjustment, net of $ 213 tax benefit and $ 226 tax expense in 2020 and 2019, respectively

Pension settlement, net of $ 202 tax benefit in 2019

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Operating Activities

Net income $ 14,793 $ 39,632

Equity in earnings of subsidiaries 23,045 41,610

1 unchanged sentence

Net changes related to operating activities ( 22,822 ) 3,671

Net cash provided by (used for) operating activities

Net cash (used for) provided by operating activities ( 31,074 ) 1,693

Investing Activities

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

Net cash provided by financing activities

Other — ( 4 )

Net cash (used for) provided by financing activities ( 3,577 ) 33,504

Cash and cash equivalents

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YEAR ENDED DECEMBER 31, 2020 AND 2019

Balance at Beginning of Period

Description Balance at Beginning of Period Charged to

Expenses Charged to

Other Accounts

— Describe Deductions

— Describe Balance at

(In thousands)

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Deferred tax valuation allowances $ 14,219 $ ( 1,923 ) $ — $ — $ 12,296

Balances which are not required to be presented and those which are immaterial have been omitted.

(A) Balances which are not required to be presented and those which are immaterial have been omitted.

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 9A. Controls and Procedures