What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-02 compared with 2021-03-03 · 355 added, 284 removed, 1289 unchanged (33% of the section changed)

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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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 Third Amendment to Amended and Restated Stockholders' Agreement, dated as of February 11, 2022, 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 99.8 of the Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on February 11, 2022, Commission File Number 1-9172.

4.8 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.

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10.3* NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan (Amended and Restated March 1, 20 21 ) 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 19 , 20 21 , Commission File Number 1-9172.

10.4* 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.

10.5* NACCO Industries, Inc.

Non-Employee Directors' Equity Compensation Plan (Amended and Restated May 19 , 20 21 ) 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 19 , 20 21 , Commission File Number 1-9172.

10.6* Form of Award Agreement for the NACCO Industries, Inc.

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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.

10.13 Amendment to Consulting Agreement, dated as of December 21 , 202 1 , 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 22 , 202 1 , Commission File Number 1-9172.

10.14* NACCO Industries, Inc.

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10.17* The North American Coal Corporation Annual Incentive Compensation Plan (Amended and Restated Effective March 1, 2015) is incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed by the Company on May 18, 2015, Commission File Number 1-9172.

Exhibit Number Exhibit Description

10.18* Amendment No.

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10.20 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

10.21 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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1 to Lignite Sales Agreement, Settlement Agreement and Release by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, LLLP, dated as of November 16, 2018, is incorporated herein by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Commission File Number 1-9172.

10.29** Amendment No.

2 to Lignite Sales Agreement, Settlement Agreement and Release by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, LLLP, dated as of November 24, 2021.

10.30 Second Restatement of Coal Sales Agreement by and between The Falkirk Mining Company and Great River Energy, dated as of January 1, 2007, is incorporated herein by reference to Exhibit 10.18 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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3 to Second Restatement of Coal Sales Agreement, by and between The Falkirk Mining Company and Great River Energy, dated as of January 1, 2019, is incorporated herein by reference to Exhibit 10.37 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

10.34 Restatement of Option Agreement by and among The Falkirk Mining Company, Cooperative Power Association, United Power Association, and the State of North Dakota, dated as of January 1, 1997, is incorporated herein by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

10.35 Termination Agreement and Release, by and among The Falkirk Mining Company, Great River Energy and NoDak Energy Investments Corporation, dated June 30, 2021, is incorporated herein by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172.

10.36** Amendment No.

1 to Termination Agreement and Release, by and between The Falkirk Mining Company, NoDak Energy Investments Corporation and Great River Energy, dated as of December 28, 2021.

*** Coal Sales Agreement, by and between The Falkirk Mining Company and Rainbow Energy Center, LLC, dated June 30, 2021, is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172.

*** Guaranty by REMC Assets, LP, dated June 17, 2021, is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172.

*** Mortgage, Assignment of Leases, Rents and As-Extracted Collateral, Security Agreement, Financing Statement and Fixture Filing, by and between The Falkirk Mining Company and Rainbow Energy Center, LLC, dated June 30, 2021, is incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172.

10.40 Security Agreement, by and between The Falkirk Mining Company and Rainbow Energy Center, LLC, dated June 30, 2021, is incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172.

10.41 Option Agreement, by and between The Falkirk Mining Company, Rainbow Energy Center, LLC and the State of North Dakota, Doing Business as The Bank of North Dakota, dated June 30, 2021, is incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172.

10.42 Third Restatement of Lignite Mining Agreement by and between The Sabine Mining Company and Southwestern Electric Power Company, dated as of January 1, 2008, is incorporated herein by reference to Exhibit 10.21 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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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

10.44 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

10.50 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 PNC Capital Markets LLC as Joint Lead Arrangers and Joint Bookrunners, dated as of August 11, 2017 is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on August 15, 2017, Commission File Number 1-9172.

10.59 Amended and Restated Credit Agreement by and among The North American Coal Corporation and the Guarantors party thereto and the Lenders party thereto and KeyBank National Association as Syndication Agent, PNC Bank National Association as Administrative Agent and KeyBanc Capital Markets Inc.

and PNC Capital Markets LLC as Joint Lead Arrangers and Joint Bookrunners, dated as of November 12, 2021 is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on November 15, 2021, Commission File Number 1-9172.

10.60 Revolving Credit Commitment Increase Agreement, dated as of December 10, 2021 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 13, 2021.

Commission File Number 1-9172.

(21) Subsidiaries.

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

96.1** Technical Report Summary relating to The Coteau Properties Company, dated December 31, 2021.

96.2** Technical Report Summary relating to the Coyote Creek Mining Company, LLC., dated December 31, 2021.

96.3** Technical Report Summary relating to The Falkirk Mining Company, dated December 31, 2021.

96.4** Technical Report Summary relating to the Mississippi Lignite Mining Company, dated December 31, 2021.

96.5** Supplemental Figures Attachment

(99.1**) Reserve Report of Catapult Mineral Partners.

(99.2**) Supplemental Figures Attachment

101.INS Inline XBRL Instance Document

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** Filed herewith.

*** Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.

+ Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 and an Order from the Commission granting the Company's request for confidential treatment dated March 27, 2013.

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The following consolidated financial statements of NACCO Industries, Inc.

and Subsidiaries are incorporated by reference in Item 8:

and Subsidiaries and the reports of the Company's independent registered public accounting firm (PCAOB ID:

42 ) are incorporated by reference in Item 8:

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm — For each of the two years in the period ended December 31, 2021 .

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Report of Independent Registered Public Accounting Firm

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

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

Opinion on the Financial Statements

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(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

Falkirk and Great River Energy Contract Termination

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.

As discussed in Note 1 to the consolidated financial statements, during June 2021, Great River Energy (“GRE”) entered into an agreement to sell Coal Creek Station and the adjacent high-voltage direct current transmission line to Bismarck, North Dakota-based Rainbow Energy Center, LLC (“Rainbow Energy”) and its affiliates.

The closing of the transaction between GRE and Rainbow Energy is subject to the satisfaction of certain conditions.

Upon completion of the sale of Coal Creek Station, the existing Coal Sales Agreement, the existing Mortgage and Security Agreement and the existing Option Agreement between GRE and the Falkirk Mining Company (“Falkirk”), a wholly owned subsidiary of North American Coal Corporation (“NACoal”), will terminate.

If GRE’s efforts to sell the power plant are successful, a new Coal Sales Agreement (“CSA”) between Falkirk and Rainbow Energy will become effective and Falkirk will supply all coal requirements of Coal Creek Station concurrent with Rainbow Energy’s acquisition of the power plant.

The Company evaluated whether the GRE announcement in June 2021 was a variable interest entity (“VIE)” reconsideration event and concluded it was not.

Auditing the disclosure of the terms of the contract termination was especially complex in determining whether the GRE contract termination and the subsequent agreement between Falkirk and Rainbow Energy will result in a reconsideration event, a change in the conclusion that Falkirk meets the definition of a VIE and the determination of the primary beneficiary of the VIE.

Evaluating the Company’s judgments in determining whether an entity is a VIE and the primary beneficiary of the VIE requires a high degree of complex auditor judgment.

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.

We obtained an understanding, evaluated and tested the design and operating effectiveness of the controls surrounding the Company’s processes to assess the implications of significant transactions and events that could trigger a VIE reconsideration event.

To test the implications of the transaction, our audit procedures included, among other things, inspecting the termination agreement between Falkirk and GRE and new CSA between Falkirk and Rainbow Energy that are both effective upon regulatory approval of the sale of Coal Creek Station and evaluating the VIE assessment performed by the Company.

We evaluated the significant terms of the contracts and whether the June 2021 announcement by GRE or the contract termination and subsequent agreement between Falkirk and Rainbow Energy will result in a reconsideration event, a change in the conclusion that Falkirk meets the definition of a VIE and the determination of the primary beneficiary.

/s/ Ernst & Young LLP

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Report of Independent Registered Public Accounting Firm

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

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

Opinion on Internal Control Over Financial Reporting

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Earnings of unconsolidated operations 60,843 60,203

Contract termination settlement 10,333 —

Operating expenses

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Interest income ( 449 ) ( 1,200 )

Income from other unconsolidated affiliates ( 239 ) ( 1,300 )

Closed mine obligations 1,297 1,641

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( 1,440 ) ( 810 )

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

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

Income before income tax provision (benefit) 56,850 14,258

Income tax provision (benefit) 8,725 ( 535 )

Net income $ 48,125 $ 14,793

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Other comprehensive income

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

Current period pension and postretirement plan adjustment, net of $ 864 tax expense and $ 213 tax benefit in 2021 and 2020, respectively

2,851 ( 697 )

Reclassification of pension and postretirement adjustments into earnings, net of $ 170 and $ 129 tax benefit in 2021 and 2020, respectively

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Refundable federal income taxes 15,054 17,615

Prepaid expenses and other 10,872 6,528

Prepaid insurance 2,016 2,564

Other current assets 14,621 8,308

Total current assets 203,053 188,146

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Accrued payroll 16,339 14,430

Deferred compensation — 13,465

Deferred revenue 4,082 941

Other current liabilities 8,299 7,283

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Other current liabilities 6,004 ( 19,306 )

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

Net cash provided by (used for) operating activities 74,875 ( 2,486 )

Investing Activities

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Financing Activities

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

Net (reductions) additions to revolving credit agreement ( 26,000 ) 14,000

Additions to long-term debt 3,634 7,427

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Other ( 1,755 ) 332

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

Net cash (used for) provided by financing activities ( 33,173 ) 14,028

Cash and Cash Equivalents

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

Total decrease for the year ( 2,445 ) ( 34,442 )

Balance at the beginning of the year 88,450 122,892

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CONSOLIDATED STATEMENTS OF 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

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

(In thousands, except per share data)

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Stock-based compensation 124 — 2,954 — — 3,078

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

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

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

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

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

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Stock-based compensation 125 — 5,436 — — 5,561

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

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

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

® (“NACCO” or the "Company").

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

® (“NACCO”) and its wholly owned subsidiaries (collectively, the “Company”).

NACCO brings natural resources to life by delivering aggregates, minerals, reliable fuels and environmental solutions through its robust portfolio of NACCO Natural Resources businesses.

The Company 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.

The Coal Mining segment operates surface coal mines for power generation companies and an activated carbon producer.

The NAMining segment is a trusted mining partner for producers of aggregates, lithium and other minerals.

The Minerals Management segment promotes the development of mineral interests.

In addition, Mitigation Resources of North America ® ("Mitigation Resources") provides stream and wetland mitigation solutions.

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

Intercompany accounts and transactions are eliminated in consolidation.

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Coal Mining Segment

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.

The Coal Mining segment, operating as The North American Coal Corporation ® ("NACoal"), operates surface coal mines under long-term contracts with power generation companies and an activated carbon producer pursuant to a service-based business model.

Coal is surface mined in North Dakota, Texas, Mississippi, Louisiana and through September 30, 2021, on the Navajo Nation in New Mexico.

Each mine is fully integrated with its customer's operations.

As of December 31, 2021, the Company's operating coal mines were:

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 contract mining agreement between Bisti Fuels Company, LLC (“Bisti”) and its customer, Navajo Transitional Energy Company ("NTEC") was terminated effective September 30, 2021.

As required under the agreement, NTEC paid the Company a termination fee of $ 10.3 million reported on the line Contract termination settlement on the Consolidated Statements of Operations.

As of October 1, 2021, NTEC assumed control and responsibility for operation and all reclamation of the Navajo Mine.

The Coteau Properties Company (“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.

The Synfuels Plant is a coal gasification plant, owned by Dakota Gasification Company (“Dakota Gas’), a subsidiary of Basin Electric, that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale.

During 2020, Basin Electric informed 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.

During August 2021, Bakken Energy (“Bakken”) and Basin Electric signed a non-binding term sheet to transfer ownership of the assets of Dakota Gas to Bakken.

Bakken stated the closing date is expected to be April 1, 2023.

As part of the term sheet between Basin Electric and Bakken, Basin Electric indicated that the Synfuels Plant will continue existing operations through 2025.

The closing is subject to the satisfaction of specified conditions.

Basin Electric is also considering other options for the Synfuels Plant if the transaction with Bakken does

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.

Falkirk operates the Falkirk Mine in North Dakota.

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

Coal Creek Station and Spiritwood Station are owned by Great River Energy (“GRE”).

In May 2020, GRE announced its intent to sell or retire Coal Creek Station and modify Spiritwood Station to be fueled by natural gas.

During June 2021, GRE entered into an agreement to sell Coal Creek Station and the adjacent high-voltage direct current transmission line to Bismarck, North Dakota-based Rainbow Energy Center, LLC (“Rainbow Energy”) and its affiliates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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(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.

closing of this sale is subject to the satisfaction of certain conditions and presently, the transaction is expected to close during the second quarter of 2022.

Falkirk meets the definition of a variable interest entity (“VIE”).

The Company concluded that GRE’s May 2020 and June 2021 announcements were not reconsideration events;

however, the completion of the Rainbow Energy transaction will result in a reconsideration event.

As the terms of the contract between Falkirk and Rainbow Energy are substantially the same as the terms of the contract between Falkirk and GRE, Falkirk is expected to remain a VIE and Rainbow Energy will become the primary beneficiary;

therefore, NACCO will continue to account for Falkirk under the equity method.

Falkirk and GRE have entered into a termination and release of claims agreement.

Upon completion of the sale of Coal Creek Station, GRE will pay Falkirk $ 14.0 million in cash, as well as transfer ownership of an office building located in Bismarck, North Dakota, and convey membership units in Midwest AgEnergy to NACoal.

NACCO currently holds a $ 5.0 million investment in Midwest AgEnergy, which operates two ethanol facilities in North Dakota.

If GRE's efforts to sell the power plant are successful, a new Coal Sales Agreement (“CSA”) between Falkirk and Rainbow Energy will become effective and Falkirk will supply all coal requirements of Coal Creek Station concurrent with Rainbow Energy’s acquisition of the power plant.

Falkirk will no longer make any coal deliveries to GRE’s Spiritwood Station.

Falkirk will be paid a management fee and Rainbow Energy will be responsible for funding all mine operating costs and directly or indirectly providing all of the capital required to operate the mine.

The CSA specifies that Falkirk will perform final mine reclamation, which will be funded in its entirety by Rainbow Energy.

The initial production period is expected to run ten years from the effective date of the CSA, but the CSA may be extended or terminated early under certain circumstances.

If Rainbow Energy terminates the CSA and closes Coal Creek Station before 2027, Falkirk will be entitled to an additional payment from GRE under the terms of the termination and release of claims agreement.

The additional payment amount ranges from $ 8 million if the closure occurs before 2024 to $ 2 million if the closure occurs in 2026.

To support the transfer to new ownership, Falkirk has agreed to a reduction in the current per ton management fee from the effective date of the new CSA through May 31, 2024.

After May 31, 2024, the per ton management fee increases to a higher base in line with current fee levels, and thereafter adjusts annually according to an index which tracks broad measures of U.S.

If GRE’s efforts to sell the power plant are not successful and GRE elects to prematurely close Coal Creek Station, the early termination of the CSA would have a material adverse effect on the Company's business, financial condition and results of operations.

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.

During 2020, AEP announced its intent to retire the Pirkey Plant in 2023.

SWEPCO expects deliveries from Sabine to continue until the first quarter of 2023 at which time Sabine expects to begin final reclamation.

Funding for mine reclamation is the responsibility of SWEPCO.

During 2020, Caddo Creek Resources Company, LLC (“Caddo Creek”) ceased all mining and delivery of lignite and commenced mine reclamation.

Funding for mine reclamation is the responsibility of a subsidiary of Advanced Emissions Solutions (“AES”).

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

The reclamation at Caddo Creek is expected to be substantially complete during the first half of 2022.

During 2020, the contract mining agreement between Camino Real Fuels, LLC (“Camino Real”) and its customer, Dos Republicas Coal Partnership (“DRCP”), terminated and resulted in mine closure.

Funding for mine reclamation is the responsibility of DRCP.

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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The customers are responsible for funding all mine operating costs, including final mine reclamation, and directly or indirectly provide all of the capital required to build and operate the mine.

This contract structure eliminates exposure to spot coal market price fluctuations while providing steady income and cash flow with minimal capital investment.

This contract structure eliminates exposure to spot coal market price fluctuations while providing income and cash flow with minimal capital investment.

Other than at Coyote Creek, debt financing provided by or supported by the customers is without recourse to NACCO and NACoal.

See Note 17 for further discussion of Coyote Creek's guarantees.

All operating coal mines other than MLMC meet the definition of a variable interest entity (“VIE”).

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All operating coal mines other than MLMC meet the definition of a VIE.

In each case, NACCO is not the primary beneficiary of the VIE as it does not exercise financial control;

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Instead, these contracts are accounted for as equity method investments.

The income before income taxes associated with these VIE's is reported as Earnings of unconsolidated operations on the Consolidated Statements of Operations and the Company’s investment is reported on the line Investments in Unconsolidated Subsidiaries in the Consolidated Balance Sheets.

The income before income taxes associated with these VIEs is reported as Earnings of unconsolidated operations on the Consolidated Statements of Operations, and the Company’s investment is reported on the line Investments in Unconsolidated Subsidiaries in the Consolidated Balance Sheets.

The mines that meet the definition of a VIE are referred to collectively as the “Unconsolidated Subsidiaries.” For tax purposes, the Unconsolidated Subsidiaries are included within the NACCO consolidated U.S.

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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 Company performs contemporaneous reclamation activities at each mine in the normal course of operations.

Under all of the Unconsolidated Subsidiaries’ contracts, the customer has the obligation to fund final mine reclamation activities.

Under certain contracts, the Unconsolidated Subsidiary holds the mine permit and is therefore responsible for final mine reclamation activities.

To the extent the Unconsolidated Subsidiary performs such final reclamation, it is compensated for providing those services in addition to receiving reimbursement from customers for costs incurred.

At Caddo Creek, the terms of the contract to perform mine reclamation contain a fixed-price component and therefore, Caddo Creek no longer meets the VIE criteria.

As a result, Caddo Creek is consolidated within the Company's financial statements.

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.

Profitability at MLMC is affected by customer demand for coal and changes in the indices that determine sales price and actual costs incurred.

As diesel fuel is heavily weighted among the indices used to determine the coal sales price, fluctuations in diesel fuel prices can result in significant fluctuations in earnings at MLMC.

NAMining Segment

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materials handling and processing, product sales and distribution.

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

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

NAMining historically operated primarily at limestone quarries in Florida, but is focused on expanding outside of Florida, mining materials other than limestone and expanding the scope of mining operations provided to its customers.

NAMining utilizes both fixed price and management fee contract structures.

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See Note 17 for further discussion.

Minerals Management Segment

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 2021 and 2020, the Minerals Management segment acquired mineral interests, primarily in the Eagle Ford and Permian Basins 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.

See Note 20 for further discussion of Mineral Management's acquisitions.

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), Texas (Cotton Valley and Austin Chalk formation natural gas), Mississippi (coal), Pennsylvania (coal, coalbed methane and Marcellus shale natural gas), Alabama (coal, coalbed methane and natural gas) and North Dakota (coal, oil and natural gas).

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Minerals Management Segment

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.

NOTE 2— Significant Accounting Policies

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Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less.

Inventories are stated at the lower of cost or net realizable value.

Inventories are stated at the lower of cost and net realizable value.

The weighted average method is used for inventory valuation.

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Royalty Interests in Oil and Natural Gas Properties:

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

The Company follows the successful efforts method of accounting for its royalty and mineral interests.

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.

As an owner of mineral and royalty interests and not working interests, the Company is not required to make capital expenditures and did not make capital expenditures to convert proved undeveloped reserves from undeveloped to developed.

Acquisition costs of proved royalty and mineral interests are amortized using the units of production method over the life of the property, which is estimated using proved 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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properties and compares such future cash flows to the carrying amounts of the properties to determine if the carrying amounts are recoverable.

Proved 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 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.

See Note 20 for further discussion of the Company's royalty and mineral interests.

Long-Lived Assets:

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MLMC has approximately $ 136 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.

Identifying and assessing whether impairment indicators exist, or if events or changes in

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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.

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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.

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

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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 .

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, hypothecated 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, (iv) the date the director has both retired from the Board of Directors and has reached age 70 , or (v) at such other time as determined by the Board of Directors in its sole and absolute discretion.

Pursuant to this plan, the Company issued 45,223 and 42,744 shares related to the years ended December 31, 2021 and 2020, respectively.

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generally accepted accounting principles, which defines fair value 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.

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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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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.

During 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.

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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.

At NAMining, the management service to oversee the operation of the equipment and delivery of aggregates or other minerals 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.

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).

Fluctuations in revenue from period to period result from changes in customer demand and variances in reimbursable costs primarily due to increases and decreases in activity levels on individual contracts.

The Company enters into royalty contracts which grant the right to explore, develop, produce and sell minerals controlled by the Company.

Consistent with the conclusion that the 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 or fixed fee and the general and administrative fee (as applicable).

Fluctuations in revenue from period to period result from changes in customer demand primarily due to increases and decreases in activity levels on individual contracts and variances in reimbursable costs.

The Minerals Management segment enters into contracts which grant the right to explore, develop, produce and sell minerals controlled by the Company.

These arrangements result in the transfer of mineral rights for a period of time;

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The mineral rights revert back to the Company at the expiration of the contract.

Under these royalty contracts, granting exclusive right, title, and interest in and to minerals, if any, is the performance obligation.

Under these contracts, granting exclusive right, title, and interest in and to minerals, if any, is the performance obligation.

The performance obligation under these contracts represents a series of distinct goods or services whereby each day of access that is provided is distinct.

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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 .

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

The Company’s contracts with its customers contain different types of variable consideration including, but not limited to, management fees that adjust based on volumes or MMBtu delivered, however, the terms of these variable payments relate specifically to the Company's efforts to satisfy one or more, but not all of, the performance obligations (or to a 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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Index adjustments, if applicable, are effective prospectively.

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.

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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.

Cost Reimbursement

Certain contracts include reimbursement from customers of actual costs incurred for the purchase of supplies, equipment and services in accordance with contractual terms.

Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof is highly dependent on factors outside of the Company’s control.

Accordingly, reimbursable revenue is fully constrained and not recognized until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer.

The Company is considered a principal in such transactions and records the associated revenue at the gross amount billed to the customer with the related costs recorded as an expense within cost of sales.

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.

As a non-operator, the Company has limited visibility into 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 of the product 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 "Trade 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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During 2021, the Company recognized $ 1.8 million of variable consideration that was previously constrained due to uncertainty of collectability.

During 2020, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was immaterial.

Disaggregation of Revenue

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

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The following table disaggregates revenue by major sources for the years ended December 31:

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Contract balances

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

Trade accounts receivable Contract asset

(long-term) Contract liability (current) Contract liability (long-term)

Balance at January 1, 2021 $ 18,894 $ 4,984 $ 941 $ 3,626

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

The amount of revenue recognized in the years ended December 31, 2021 and December 31, 2020 that was included in the opening contract liability was $ 1.4 million and $ 0.9 million, respectively.

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 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 Company expects to recognize $ 4.1 million in 2022, $ 0.3 million in 2023, $ 0.1 million in 2024, and de minimis amounts in 2025 and 2026 related to the contract liability remaining at December 31, 2021.

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.

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Coal supply agreement $ 84,200 $ ( 48,870 ) $ 35,330

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.

Amortization expense for intangible assets was $ 3.6 million and $ 2.6 million in 2021 and 2020, respectively.

Expected annual amortization expense of the coal supply agreement for the next five years is $ 3.1 million in 2022 through 2026.

NOTE 7— Asset Retirement Obligations

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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 life of the mine.

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

Liabilities incurred during the period 9,809 — — 9,809

Liabilities settled during the period ( 184 ) — ( 869 ) ( 1,053 )

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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.

As part of the transfer of the mine permits, the Company also 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 Other long-term liabilities are primarily associated with amounts due to the third-party acquirer upon replacement of outstanding letters of credit.

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

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

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Prior to 2020, 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 Bellaire's Mine Water Treatment assets, which are recognized as a component of Other non-current assets on the Consolidated Balance Sheets, are $ 12.3 million and $ 11.1 million at December 31, 2021 and December 31, 2020, respectively, and are legally restricted for purposes of settling the Bellaire asset retirement obligation.

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Weighted average stated interest rate on total borrowings 3.7 % 2.3 %

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

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Interest paid on total debt was $ 1.6 million and $ 1.4 million during 2021 and 2020, respectively.

NACoal has an unsecured revolving line of credit of up to $ 150.0 million (the “NACoal Facility”) that expires in August 2022.

Deferred financing fees of $ 1.8 million were capitalized during 2021.

NACoal has a secured revolving line of credit of up to $ 150.0 million (the “NACoal Facility”) that was refinanced during 2021 and expires in November 2025.

Borrowings outstanding under the NACoal Facility were $ 4.0 million at December 31, 2021.

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The applicable margins, effective December 31, 2021, for base rate and LIBOR loans were 1.25 % and 2.25 %, respectively.

The NACoal Facility has a commitment fee which is based upon achieving various levels of debt to EBITDA ratios.

The NACoal Facility has a commitment fee which is based upon achieving various levels

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of debt to EBITDA ratios.

The commitment fee was 0.35 % on the unused commitment at December 31, 2021.

The weighted average interest rate applicable to the NACoal Facility at December 31, 2021 was 4.50 % including the floating rate margin.

The NACoal Facility contains restrictive covenants, which require, among other things, NACoal to maintain a maximum debt to EBITDA ratio of 3.00 to 1.00 and an interest coverage ratio of not less than 4.00 to 1.00.

The NACoal Facility contains restrictive covenants, which require, among other things, NACoal to maintain a maximum net debt to EBITDA ratio of 2.75 to 1.00 and an interest coverage ratio of not less than 4.00 to 1.00.

The NACoal Facility provides the ability to make loans, dividends and advances to NACCO, with some restrictions based on maintaining a maximum debt to EBITDA ratio of 1.50 to 1.00, or if greater than 1.50 to 1.00, a Fixed Charge Coverage Ratio of 1.10 to 1.00, in conjunction with maintaining unused availability thresholds of borrowing capacity, as defined in the NACoal Facility, of $ 15.0 million.

At December 31, 2021, NACoal was in compliance with all financial covenants in the NACoal Facility.

The obligations under the NACoal Facility are guaranteed by certain of NACoal's direct and indirect, existing and future

domestic subsidiaries, and is secured by certain assets of NACoal and the guarantors, subject to customary exceptions and

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, 2021 and 2020, the balance of the note was $ 2.6 million and $ 4.4 million and the interest rate was 0.18 % and 0.14 %, 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.

NACoal has six notes payable that are secured by eleven specified units of equipment, bear interest at a weighted average rate of 4.03 %, and expire at various dates through 2027.

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

At December 31, 2021 and 2020, the outstanding balances of the notes were $ 13.8 million and $ 10.6 million, respectively.

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NOTE 9— Fair Value Disclosure

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

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

1 unchanged sentence

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 Company recognized a gain of $ 1.7 million and $ 0.1 million in the years ended December 31, 2021 and 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.

9 unchanged sentences

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

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.

The fair value and the book value of revolving credit agreements and long-term debt, excluding finance leases, was $ 20.5 million and $ 20.4 million, respectively, at December 31, 2021 and $ 45.2 million and $ 45.0 million, respectively, at December 31, 2020.

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

5 unchanged sentences

NOTE 10— Leases

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.

The Company recognizes 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.

The majority of the Company's leases are operating leases.

1 unchanged sentence

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Leased assets and liabilities include the following:

18 unchanged sentences

Total lease expense $ 4,120 $ 3,134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Future minimum finance and operating lease payments were as follows at December 31, 2021:

9 unchanged sentences

Present value of net minimum lease payments $ 340 $ 11,196

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

As most of the Company's leases do not provide an implicit rate, the Company determines the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

21 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.

9 unchanged sentences

Treasury shares of Class A common stock totaling 2,600,661 and 2,726,017 at December 31, 2021 and 2020, respectively, have been deducted from shares outstanding.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Stock Repurchase Programs:

1 unchanged sentence

NACCO’s previous repurchase program ("2019 Stock Repurchase Program") would have expired on December 31, 2021 but was terminated and replaced by the 2021 Stock Repurchase Program.

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 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 2020.

The timing and amount of any repurchases under the 2021 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.

29 unchanged sentences

Total current 12,278 ( 8,052 )

Deferred income tax provision:

Deferred income tax (benefit) provision:

Federal ( 4,449 ) 7,847

21 unchanged sentences

Effective income tax rate 15.3 % ( 3.8 ) %

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 Company recorded an income tax expense of $ 8.7 million for the year ended December 31, 2021 on income before income tax of $ 56.9 million, or 15.3 %, compared to income tax benefit of $ 0.5 million on income before income tax of $ 14.3 million, or ( 3.8 %), for the year ended December 31, 2020.

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.

There were no material discrete items affecting income tax expense in 2021.

The effective income tax rate for 2021 reflects the impact of higher pre-tax income in 2021 compared with 2020, including the termination fee associated with the Bisti contract termination.

The effective income tax rate varies based upon the mix and timing of earnings between entities that benefit from percentage depletion and those that do not benefit from percentage depletion.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

(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

23 unchanged sentences

State net operating loss $ 17,516 $ 14,694 2022-2041

Federal research credit 2,648 — 2034-2040

Total $ 21,356 $ 14,478

December 31, 2020

5 unchanged sentences

Federal research credit 2,648 — 2034-2040

Federal foreign tax credit 463 463 2029

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

Total $ 21,356 $ 14,478

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.

3 unchanged sentences

Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings.

4 unchanged sentences

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, 2021 and 2020.

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.

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

Approximately $ 6.4 million and $ 6.3 million of the gross unrecognized tax benefits as of December 31, 2021 and 2020, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate.

7 unchanged sentences

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

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 recognized net expense of less than $ 0.1 million and net benefit of less than $ 0.1 million in interest and penalties related to uncertain tax positions during 2021 and 2020, respectively.

The total amount of interest and penalties accrued was $ 0.2 million and $ 0.1 million as of December 31, 2021 and 2020, respectively.

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

7 unchanged sentences

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

During the year ended December 31, 2019, the Company offered lump-sum settlements to certain Combined Plan participants.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8 unchanged sentences

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

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

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

Interest cost $ 1,002 $ 1,285

2 unchanged sentences

Amortization of prior service cost 59 58

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 )

Net periodic pension income $ ( 789 ) $ ( 495 )

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:

Current year actuarial (gain) loss $ ( 3,793 ) $ 667

Amortization of actuarial loss ( 718 ) ( 597 )

Amortization of prior service cost ( 59 ) ( 58 )

Settlements — ( 873 )

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

Total recognized in other comprehensive (income) loss $ ( 4,570 ) $ 12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 unchanged sentences

Interest cost 1,002 1,285

Actuarial loss 3,996 3,121

Actuarial (gain) loss ( 1,367 ) 3,996

Benefits paid ( 2,572 ) ( 2,535 )

Settlements — ( 2,612 )

Projected benefit obligation at end of year $ 41,663 $ 44,600

5 unchanged sentences

Benefits paid ( 2,572 ) ( 2,535 )

Settlements — ( 2,612 )

Fair value of plan assets at end of year $ 44,009 $ 41,099

5 unchanged sentences

$ 2,346 $ ( 3,501 )

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

Components of accumulated other comprehensive loss consist of:

Actuarial loss $ 9,510 $ 14,022

36 unchanged sentences

Total $ 44,009 $ 41,099

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Postretirement Health Care:

1 unchanged sentence

All health care plans of the Company have a cap on the Company's share of the costs.

The health care plans were amended effective January 1, 2019 to eliminate the open network structure.

The move to network provided benefits will result in cost savings for the Company.

The health care plans have network provided benefits which result in cost savings for the Company.

These plans have no assets.

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 2029 2027

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:

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

Service cost $ 13 $ 21

Interest cost 27 52

Amortization of actuarial (gain) loss ( 1 ) 8

Amortization of actuarial loss (gain) 19 ( 1 )

Amortization of prior service credit ( 54 ) ( 59 )

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 )

Net periodic benefit expense (income) $ 5 $ ( 18 )

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

Current year actuarial (gain) loss $ ( 48 ) $ 194

Amortization of actuarial (loss) gain ( 19 ) 1

Amortization of prior service credit 54 59

1 unchanged sentence

Transfers 126 46

Total recognized in other comprehensive income $ 331 $ 118

Total recognized in other comprehensive loss $ 113 $ 331

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8 unchanged sentences

Plan amendments — 49

Actuarial loss 145 46

Actuarial (gain) loss ( 48 ) 145

Benefits paid ( 169 ) ( 262 )

5 unchanged sentences

$ ( 1,877 ) $ ( 2,054 )

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

Components of accumulated other comprehensive loss consist of:

Actuarial loss $ 520 $ 466

1 unchanged sentence

Deferred taxes ( 195 ) ( 167 )

$ 132 $ ( 128 )

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

9 unchanged sentences

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

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.

Mitigation Resources generates and sells stream

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

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.

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.

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

The NoDak contract expired in the first quarter of 2020.

See Note 1 for additional discussion of the Company's reportable segments.

All current operations reside in the U.S.

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

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 accounting policies of the reportable segments are described in Note 2 and Note 20.

In 2021 and 2020, two customers 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:

3 unchanged sentences

NAMining customer 19 % 19 %

Minerals Management lessee less than 10 %

In addition, for the year ended December 31, 2021, the Coal Mining segment derived approximately 68 % 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

37 unchanged sentences

Accounts receivable from affiliates

Current intercompany accounts receivable, net — 1,255

Other current assets 17,578 20,648

6 unchanged sentences

Current intercompany accounts payable, net 637 2,337

Current portion of deferred compensation — 13,465

Note payable to Bellaire 16,750 16,750

19 unchanged sentences

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

(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.

Summarized financial information for the unconsolidated subsidiaries is as follows:

15 unchanged sentences

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

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.

Rankin continues to serve as the Chairman of the Board of Directors of NACCO and Mr.

Legal services rendered by Jones Day approximated $ 1.2 million and $ 1.0 million for the years ended December 31, 2021 and 2020.

continues to serve as the Chairman of the Board of Directors of NACCO and Mr.

Rankin supports the President and Chief Executive Officer of NACCO upon request under the terms of a consulting agreement.

11 unchanged sentences

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.

NOTE 20— Supplemental Oil and Gas Disclosures (Unaudited)

As an owner of royalty and mineral interests, the Company’s access to information concerning activity and operations of its royalty and mineral interests is limited.

The Company does not have information that would be available to a company with working interests in oil and natural gas operations because detailed information is not generally available to owners of royalty and mineral interests.

See Note 1, Note 2 and Note 15 for additional discussion of the Minerals Management segment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

During 2021 and 2020, the Minerals Management segment acquired additional mineral interests, primarily in the Eagle Ford and Permian Basins in Texas.

Total consideration for the 2021 and 2020 acquisitions of mineral and royalty interests was $ 5.3 million and $ 14.2 million, respectively.

The 2021 acquisitions include 20.6 thousand gross acres and 1.8 thousand net royalty acres.

The 2020 acquisitions include 65.5 thousand gross acres and 1.2 thousand net royalty acres.

Total oil and gas mineral and royalty interests include approximately 127.8 thousand gross acres and 59.9 thousand net royalty acres at December 31, 2021.

Aggregate capitalized costs related to oil and gas royalty and mineral interests with applicable accumulated depreciation, depletion and amortization at December 31 are as follows:

Proved developed $ 3,266

Proved undeveloped 16,246

accumulated depreciation, depletion and amortization 868

Net royalty interests in oil and natural gas properties $ 18,644

Total net proved reserves are defined as those natural gas and hydrocarbon liquid reserves to Company interests after deducting all royalties, overriding royalties, and reversionary interests owned by outside parties that become effective upon payout of specified monetary balances.

Decline curve analysis was used to estimate the remaining reserves of pressure depletion reservoirs with enough historical production data to establish decline trends.

Reservoirs under non-pressure depletion drive mechanisms and non-producing reserves were estimated by volumetric analysis, research of analogous reservoirs, or a combination of both.

Reserves have been estimated using deterministic and probabilistic methods.

All reserves estimates have been prepared using standard engineering practices generally accepted by the petroleum industry and conform to guidelines developed and adopted by the SEC.

The following table presents the Company's estimated net proved oil and natural gas reserves as of December 31, 2021 based on the reserve report prepared by Haas Engineering, the Company’s independent petroleum engineering firm.

All of the Company’s reserves are located in the United States.

Net reserves as of December 31, 2021

Oil (bbl) (1)

NGL (bbl) (1)

Residue gas (Mcf) (2)

Proved developed 167,430 282,230 16,617,360

Proved undeveloped 220 90 1,210

Total 167,650 282,320 16,618,570

One stock tank barrel, or 42 U.S.

gallons liquid volume.

One thousand cubic feet of natural gas at the contractual pressure and temperature bases.

Standardized Measure of Discounted Future Net Cash Flows

Future cash inflows represent expected revenues from production of period-end quantities of proved reserves based on the 12-month unweighted average of first-day-of-the-month commodity prices for the periods presented.

Future cash inflows are computed by applying applicable prices relating to proved reserves to the year-end quantities of those reserves.

Future production and costs are derived based on current costs assuming continuation of existing economic conditions.

Federal income tax expenses are deducted from future production revenues in the calculation of the standardized measure using the statutory tax rate.

The Company is subject to certain state based taxes;

however, these amounts are not material.

The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted as representing current value to the Company.

Material revisions to estimates of proved reserves may occur in the future;

development and production of the reserves may not occur in the periods assumed;

actual prices realized are expected to vary significantly from those used;

and actual costs may vary.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The following table provides the future net cash flows relating to proved oil and gas reserves based on the standardized measure of discounted cash flows as of December 31, 2021 :

Gross Amounts Statutory tax rate Net Amounts

Future cash inflows $ 71,400

Future production costs 14,664

Future net cash flows before income tax expense 56,736 21 % 44,821

10% discount to reflect timing of cash flows ( 19,897 ) 21 % ( 15,719 )

Standardized measure of discounted cash flows $ 36,839 21 % $ 29,102

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE PARENT

5 unchanged sentences

Accounts receivable from affiliates

Current intercompany accounts receivable, net — 1,255

Other current assets 17,578 20,648

6 unchanged sentences

Current intercompany accounts payable, net 637 2,337

Current portion of deferred compensation — 13,465

Note payable to Bellaire 16,750 16,750

14 unchanged sentences

Loss before income taxes ( 5,136 ) ( 5,833 )

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

Income tax (benefit) provision ( 463 ) 2,419

Net loss before equity in earnings of subsidiaries ( 4,673 ) ( 8,252 )

1 unchanged sentence

Net income 48,125 14,793

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

Current period pension and postretirement plan adjustment, net of $ 864 tax expense and $ 213 tax benefit in 2021 and 2020, respectively

2,851 ( 697 )

Reclassification of pension and postretirement adjustments into earnings, net of $ 170 and $ 129 tax benefit in 2021 and 2020, respectively

13 unchanged sentences

Net changes related to operating activities 8,018 ( 22,822 )

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

Net cash provided by (used for) operating activities 3,345 ( 31,074 )

Investing Activities

Expenditures for property, plant and equipment — —

Net cash used for investing activities — —

4 unchanged sentences

Cash dividends paid ( 5,617 ) ( 5,375 )

Other — ( 4 )

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

Net cash used for financing activities ( 5,617 ) ( 3,577 )

Cash and cash equivalents

Increase (decrease) for the period ( 34,651 ) 35,197

Decrease for the period ( 2,272 ) ( 34,651 )

Balance at the beginning of the period 85,365 120,016

8 unchanged sentences

NOTE A — ACCOUNTING POLICIES

NACCO Industries, Inc.

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

In the Parent Company Condensed Financial Statements, NACCO's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition.

21 unchanged sentences

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