What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-03 · 317 added, 472 removed, 578 unchanged (58% of the section changed)

6 unchanged sentences

Cash and cash equivalents $ 81,620 $ 86,005

Trade accounts receivable, net 19,127 18,894

Trade accounts receivable 27,226 25,667

Accounts receivable from affiliates 5,804 5,605

Inventories 55,967 54,085

Federal income tax receivable 8,959 17,615

Refundable federal income taxes 12,537 15,054

Prepaid insurance 11,283 2,016

10 unchanged sentences

Accounts payable to affiliates 909 741

Revolving credit agreements — 20,000

Current maturities of long-term debt 2,965 2,527

1 unchanged sentence

Accrued payroll 8,040 16,339

Deferred revenue 2,989 4,082

Other current liabilities 8,664 8,299

21 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2021 2020 2021 2020

THREE MONTHS ENDED

(In thousands, except per share data)

3 unchanged sentences

Earnings of unconsolidated operations 14,592 15,342

Contract termination settlement 10,333 — 10,333 —

Operating expenses

1 unchanged sentence

Amortization of intangible assets 847 982

(Gain) loss on sale of assets

Gain on sale of assets

( 136 ) ( 41 )

1 unchanged sentence

Operating profit 14,944 8,330

Other expense (income)

Other (income) expense

Interest expense 513 356

3 unchanged sentences

Other, net ( 230 ) ( 130 )

158 ( 481 ) ( 942 ) ( 99 )

Income before income tax provision 27,434 9,879 45,534 21,559

Income tax provision 2,597 1,857 5,231 1,321

Income before income tax provision (benefit) 14,944 8,664

Income tax provision (benefit) 2,362 ( 297 )

Net income $ 12,582 $ 8,961

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2021 2020 2021 2020

THREE MONTHS ENDED

(In thousands)

Net income $ 12,582 $ 8,961

Reclassification of pension and postretirement adjustments into earnings, net of $ 42 and $ 127 tax benefit in the three and nine months ended September 30, 2021, respectively, and net of $ 29 and $ 102 tax benefit in the three and nine months ended September 30, 2020, respectively.

143 99 429 355

Reclassification of pension and postretirement adjustments into earnings, net of $ 35 and $ 43 tax benefit in the three months ended March 31, 2022 and March 31, 2021, respectively.

Total other comprehensive income 118 143

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED

THREE MONTHS ENDED

(In thousands)

Operating activities

Net cash provided by operating activities $ 67,794 $ 2,760

Net cash used for operating activities $ ( 1,070 ) $ ( 910 )

Investing activities

1 unchanged sentence

Proceeds from the sale of property, plant and equipment 135 44

Purchase of equity securities — ( 2,000 )

Other ( 15 ) ( 15 )

3 unchanged sentences

Reductions of long-term debt ( 2,689 ) ( 357 )

Net reductions to revolving credit agreements ( 30,000 ) ( 7,000 )

Net additions (reductions) to revolving credit agreements 2,000 ( 2,000 )

Cash dividends paid ( 1,445 ) ( 1,374 )

Purchase of treasury shares — ( 1,002 )

Net cash used for financing activities ( 33,698 ) ( 6,905 )

Net cash provided by (used for) financing activities 1,214 ( 3,561 )

Cash and cash equivalents

10 unchanged sentences

Stock-based compensation 92 — 923 — — 1,015

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

Net income — — — 6,166 — 6,166

Cash dividends on Class A and Class B common stock:

$ 0.1900 per share

— — — ( 1,339 ) — ( 1,339 )

Reclassification adjustment to net income, net of tax — — — — 155 155

Balance, March 31, 2020 $ 5,453 $ 1,569 $ 8,318 $ 289,679 $ ( 11,182 ) $ 293,837

Stock-based compensation

10 — 624 — — 634

— — — 6,050 — 6,050

Cash dividends on Class A and Class B common stock:

$ 0.1925 per share

— — — ( 1,351 ) — ( 1,351 )

Reclassification adjustment to net income, net of tax

— — — — 101 101

Balance, June 30, 2020 $ 5,463 $ 1,569 $ 8,942 $ 294,378 $ ( 11,081 ) $ 299,271

Stock-based compensation 13 — 439 — — 452

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

4 unchanged sentences

Reclassification adjustment to net income, net of tax — — — — 143 143

Balance, September 30, 2020 $ 5,477 $ 1,568 $ 9,381 $ 301,045 $ ( 10,982 ) $ 306,489

Balance, March 31, 2021 $ 5,583 $ 1,567 $ 11,818 $ 301,857 $ ( 11,456 ) $ 309,369

Balance, January 1, 2022 $ 5,616 $ 1,567 $ 16,331 $ 336,778 $ ( 8,176 ) $ 352,116

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Balance, March 31, 2022 $ 5,762 $ 1,566 $ 17,309 $ 347,915 $ ( 8,058 ) $ 364,494

Stock-based compensation

12 — 1,110 — — 1,122

— — — 6,505 — 6,505

Cash dividends on Class A and Class B common stock:

$ 0.1975 per share

— — — ( 1,412 ) — ( 1,412 )

Reclassification adjustment to net income, net of tax

— — — — 143 143

Balance, June 30, 2021 $ 5,595 $ 1,567 $ 12,928 $ 306,950 $ ( 11,313 ) $ 315,727

Stock-based compensation 12 — 1,614 — — 1,626

Net income — — — 24,837 — 24,837

Cash dividends on Class A and Class B common stock:

$ 0.1975 per share

— — — ( 1,414 ) — ( 1,414 )

Reclassification adjustment to net income, net of tax — — — — 143 143

Balance, September 30, 2021 $ 5,607 $ 1,567 $ 14,542 $ 330,373 $ ( 11,170 ) $ 340,919

See notes to Unaudited Condensed Consolidated Financial Statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

MARCH 31, 2022

(In thousands, except as noted and per share amounts)

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

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 Coal Mining segment operates surface coal mines for power generation companies.

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

The Minerals Management segment acquires and promotes the development of mineral interests.

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.

Effective January 1, 2022, the Company changed the composition of its reportable segments.

As a result, the Company retrospectively changed its computation of segment operating profit to reclassify the results of Caddo Creek Resources Company, LLC (“Caddo Creek”) and Demery Resources Company, LLC ("Demery") from the Coal Mining segment into the NAMining segment as these operations provide mining solutions for producers of industrial minerals, rather than for power generation.

The Coal Mining segment now includes only mines that deliver coal for power generation.

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

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

See Note 8 to the Unaudited Condensed Consolidated Financial Statements for further discussion of segment reporting.

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Coal Mining Segment

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.

During the nine months ended September 30, 2021, the Company's operating coal mines were:

Bisti Fuels Company, LLC (“Bisti”), 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”).

Lignite coal is surface mined in North Dakota, Texas and Mississippi.

Each mine is fully integrated with its customer's operations and is the exclusive supplier of coal to its customers' facilities.

During the three months ended March 31, 2022, the Coal Mining segment's operating coal mines were:

The Coteau Properties Company (“Coteau”), Coyote Creek Mining Company, LLC (“Coyote Creek”), The Falkirk Mining Company (“Falkirk”), Mississippi Lignite Mining Company (“MLMC”) and The Sabine Mining Company (“Sabine”).

Each of these mines deliver their coal production to adjacent power plants or synfuels plants under long-term supply contracts.

MLMC’s coal supply contract contains a take or pay provision;

all other coal supply contracts are requirements contracts under which earnings can fluctuate.

Certain coal supply contracts can be terminated early, which would result in a reduction to future earnings.

During the three months ended March 31, 2021, the Coal Mining segment's operating coal mines also included Bisti Fuels Company, LLC (“Bisti”).

Effective September 30, 2021, the contract mining agreement between Bisti and its customer, Navajo Transitional Energy Company ("NTEC"), was terminated.

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, 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 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.

The closing is subject to the satisfaction of specified conditions.

As part of the term sheet between Basin Electric and Bakken, Basin Electric indicated that the Synfuels Plant will continue existing operations through 2026.

Basin Electric is also considering other options for the Synfuels Plant if the transaction with Bakken does not close.

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 2027.

Falkirk operates the Falkirk Mine in North Dakota.

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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.

On June 30, 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.

The closing of this sale is subject to the satisfaction of certain conditions and presently, the transaction is expected to close by the end of the first quarter of 2022.

The timing could be accelerated, and the transaction could close before the end of 2021 if conditions are satisfied earlier than anticipated.

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 Falkirk will be terminated.

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.

Bisti supplied the Four Corners Power Plant through its contract mining agreement with the Navajo Transitional Energy Company ("NTEC").

This contract mining agreement was terminated effective September 30, 2021.

As required under the agreement, NTEC paid the Company a termination fee of $ 10.3 million.

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

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

During 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.

On May 2, 2022, GRE completed the sale of the Coal Creek Station power plant and the adjacent high-voltage direct current transmission line to Rainbow Energy.

See Note 9 for further discussion of the transactions.

Sabine operates the Sabine Mine in Texas.

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

In November 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.

AEP intends to retire the Pirkey Plant in 2023.

Sabine expects deliveries to cease during the first quarter of 2023 at which time it expects to begin final reclamation.

Funding for mine reclamation is the responsibility of SWEPCO.

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.

In November 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.

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.

On August 16, 2021, Bakken Energy (“Bakken”) and Basin Electric signed a non-binding term sheet to purchase the assets of Dakota Gas.

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

As part of the agreement 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 not close.

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

At Coteau, Coyote Creek, Falkirk and Sabine, the Company is paid a management fee per ton of coal or heating unit (MMBtu) delivered.

Each contract specifies the indices and mechanics by which fees change over time, generally in line with broad measures of U.S.

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See Note 6 for further discussion of Coyote Creek's guarantees.

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

Coteau, Coyote Creek, Falkirk and Sabine each meet the definition of a variable interest entity ("VIE").

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

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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.

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

therefore, the Income tax provision (benefit) line on the Unaudited Condensed Consolidated Statements of Operations includes income taxes related to these entities.

See Note 6 for further information on the Unconsolidated Subsidiaries.

Falkirk meets the definition of a VIE.

The completion of the Rainbow Energy transaction results in a VIE 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 will remain a VIE and Rainbow Energy is the primary beneficiary;

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

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.

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.

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

The financial results of Caddo Creek are consolidated within NACCO's financial statements for the nine months ended September 30, 2021.

Prior to entering into reclamation, Caddo Creek met the definition of

therefore, the financial results of Caddo Creek are reported as Earnings of unconsolidated operations for the three and nine months ended September 30, 2020.

The reclamation at Caddo Creek is expected to be substantially complete by June 30, 2022.

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.

MLMC delivers coal to the Red Hills Power Plant in Ackerman, Mississippi.

The Red Hills Power Plant supplies electricity to the Tennessee Valley Authority ("TVA") under a long-term Power Purchase Agreement.

MLMC’s contract with its customer runs through 2032.

TVA’s power portfolio includes coal, nuclear, hydroelectric, natural gas and renewables.

The decision of

which power plants to dispatch is determined by TVA.

Reduction in dispatch of the Red Hills Power Plant will result in reduced earnings at MLMC.

NAMining Segment

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

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

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

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

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

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NAMining 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.

In the second quarter of 2021, NAMining entered into a one-year mining services contract with an existing customer for a sand and gravel quarry in Indiana.

In the third quarter of 2021, NAMining entered into contracts with a new customer to perform all mining operations at two sand and gravel quarries located in Texas and Arkansas.

The initial term of each contract is two years, and one of the contracts automatically extends an additional two years provided NAMining is not in default under that contract.

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

NAMining utilizes both fixed price and management fee contract structures.

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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.

In the second quarter of 2021, the Minerals Management segment, through its Catapult Mineral Partners (“Catapult”) business, acquired a combination of mineral and overriding royalty interests in the Eagle Ford Basin, which includes approximately 14.1 thousand gross acres and 1.7 thousand net royalty acres, for $ 4.7 million.

Under the terms of the transaction, Catapult will make payments for each additional well developed on the acquired assets at the end of 2021 and 2022 of up to a maximum of $ 0.6 million per year, or an additional $ 1.2 million of payments in total.

Catapult also completed a small acquisition of royalty interests in the Delaware Basin in the second quarter of 2021 for a purchase price of $ 0.3 million.

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 and coalbed methane and natural gas) and North Dakota (coal, oil and natural gas).

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

During the first quarter of 2022, the Minerals Management segment had capital expenditures of $ 0.8 million, primarily for mineral interests in the New Mexico portion of the Permian Basin.

The Minerals Management segment 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), 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.

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

The Minerals Management segment owns royalty interests, mineral interests, nonparticipating royalty interests, and overriding royalty interests.

The Company may own more than one type of mineral and royalty interest in the same tract of land.

For example, where the Company owns an overriding royalty interest in a lease on the same tract of land in which it owns a mineral interest, the overriding royalty interest in that tract will relate to the same gross acres as the mineral interest in that tract.

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

The Minerals Management segment does not have any investments under which it would be required to bear the cost of exploration, production or development.

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 oil and natural gas operations because detailed information is not generally available to owners of royalty and mineral interests.

Basis of Presentation:

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GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at September 30, 2021, the results of its operations, comprehensive income, cash flows and changes in equity for the nine months ended September 30, 2021 and 2020 have been included.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at March 31, 2022, the results of its operations, comprehensive income, cash flows and changes in equity for the three months ended March 31, 2022 and 2021 have been included.

These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

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NOTE 2— Revenue Recognition

Nature of Performance Obligations

At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service that is distinct.

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

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

At NAMining, the management service is primarily 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 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.

Included within NAMining, Caddo Creek has 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, 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 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).

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

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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 generally 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.

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

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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 "Accounts receivable" in the accompanying Unaudited Condensed Consolidated Balance Sheets.

The expected sales volumes and prices for these properties are estimated and recorded in "Trade accounts receivable" in the accompanying Unaudited Condensed 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 three and nine months ended September 30, 2021 and 2020, royalty income recognized in the reporting periods related to performance obligations satisfied in prior reporting periods was immaterial.

During the third quarter of 2021, the Company recognized $ 1.8 million of variable consideration that was previously constrained due to uncertainty of collectability.

For the three months ended March 31, 2022, royalty income of $ 2.1 million was recognized for a settlement related to the Company’s ownership interest in certain mineral rights.

Disaggregation of Revenue

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See Note 8 to the Unaudited Condensed Consolidated Financial Statements for further discussion of segment reporting.

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2021 2020 2021 2020

THREE MONTHS ENDED

Timing of Revenue Recognition

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Balance, January 1, 2022 $ 25,667 $ 5,985 $ 4,082 $ 1,453

Balance, September 30, 2021 19,127 5,790 824 3,683

Balance, March 31, 2022 27,226 5,985 2,989 1,329

Increase (decrease) $ 1,559 $ — $ ( 1,093 ) $ ( 124 )

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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 three months ended September 30, 2021 and 2020 that was included in the opening contract liability was $ 0.2 million.

The amount of revenue recognized in both of the nine months ended September 30, 2021 and 2020 that was included in the opening contract liability was $ 0.7 million.

The amount of revenue recognized in both of the three months ended March 31, 2022 and 2021 that was included in the opening contract liability was $ 0.2 million.

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

The Company expects to recognize an additional $ 0.2 million in the remainder of 2021, $ 3.8 million in 2022, $ 0.3 million in 2023, and $ 0.1 million in 2024 related to the contract liability remaining at September 30, 2021.

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

The Company expects to recognize an additional $ 3.0 million in the remainder of 2022, $ 1.2 million in 2023, $ 0.1 million in 2024, and de minimis amounts in 2025 and 2026 related to the contract liability remaining at March 31, 2022.

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

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

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Stock Repurchase Program:

During 2019, the Company's Board of Directors approved a stock purchase program ("2019 Stock Repurchase Program") providing for the purchase of up to $ 25 million of the Company's outstanding Class A Common Stock through December 31, 2021.

As a result 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 nine months ended September 30, 2020.

On November 10, 2021, the Company's Board of Directors approved a stock repurchase program ("2021 Stock Repurchase Program") providing for the purchase of up to $ 20.0 million of the Company’s outstanding Class A common stock through December 31, 2023.

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.

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All or part of the repurchases under the 2021 Stock Repurchase Program may be implemented under a Rule 10b5-1 trading plan, which would allow repurchases under pre-set terms at times when the Company might otherwise be restricted from doing so under applicable securities laws.

The Company has not repurchased any shares of common stock under the 2021 Stock Repurchase Program through March 31, 2022.

NOTE 5— Fair Value Disclosure

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Description Date (Level 1) (Level 2) (Level 3)

September 30, 2021

March 31, 2022

Equity securities $ 16,643 $ 16,643 $ — $ —

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underground coal mining operations.

Prior to 2019, Bellaire established a $ 5.0 million mine water treatment trust (the "Mine Water Treatment Trust") to provide a financial assurance mechanism to assure the long-term treatment of post-mining discharge.

Prior to 2021, Bellaire contributed $ 5.0 million to establish a mine water treatment trust (the "Mine Water Treatment Trust") to assure the long-term treatment of post-mining discharge.

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

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

The Company recognized a gain of less than $ 0.1 million and $ 1.0 million during the three and nine months ended September 30, 2021, respectively, and a gain of $ 0.5 million and $ 0.4 million in the three and nine months ended September 30, 2020, respectively, related to the Mine Water Treatment Trust.

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

The Company recognized a loss of $ 0.7 million and a gain of $ 0.3 million during the three months ended March 31, 2022 and 2021, respectively, related to the Mine Water Treatment Trust.

Prior to 2021, the Company invested $ 2.0 million in equity securities of a public company with a diversified portfolio of royalty producing mineral interests.

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

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

The Company recognized a gain of $ 0.4 million and $ 1.6 million during the three and nine months ended September 30, 2021, respectively, and a loss of $ 0.5 million and $ 0.1 million in the three and nine months ended September 30, 2020 related to the investment in these equity securities.

The Company recognized a gain of $ 1.2 million and $ 0.5 million during the three months ended March 31, 2022 and 2021, respectively, related to the investment in these equity securities.

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

There were no transfers into or out of Levels 1, 2 or 3 during the nine months ended September 30, 2021 and 2020.

There were no transfers into or out of Levels 1, 2 or 3 during the three months ended March 31, 2022 and 2021.

NOTE 6— Unconsolidated Subsidiaries

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See Note 1 for a discussion of these entities.

The Investment in the unconsolidated subsidiaries and related tax positions totaled $ 19.3 million and $ 29.0 million at September 30, 2021 and December 31, 2020, respectively.

The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $ 5.8 million and $ 6.5 million at September 30, 2021 and December 31, 2020,

respectively.

Earnings of unconsolidated operations were $ 17.7 million and $ 46.5 million during the three and nine months ended September 30, 2021, respectively, and $ 15.1 million and $ 44.9 million during the three and nine months ended September 30, 2020, respectively.

The Investment in the unconsolidated subsidiaries and related tax positions totaled $ 18.5 million and $ 19.1 million at March 31, 2022 and December 31, 2021, respectively.

The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $ 5.1 million and $ 7.6 million at March 31, 2022 and December 31, 2021, respectively.

Earnings of unconsolidated operations were $ 14.6 million and $ 15.3 million during the three months ended March 31, 2022 and 2021, respectively.

The contract mining agreement between Bisti and NTEC was terminated effective September 30, 2021.

As required under the agreement, NTEC paid the Company a termination fee of $ 10.3 million.

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

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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-Q on a consolidated basis.

As discussed in Note 1, the Company retrospectively changed its computation of segment operating profit to reclassify the results of Caddo Creek and Demery from the Coal Mining segment into the NAMining segment.

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

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

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2021 2020 2021 2020

THREE MONTHS ENDED

Coal Mining $ 20,962 $ 21,942

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Total $ 6,127 $ 5,585

NOTE 9—Subsequent Events

As a result of the completion of the sale of Coal Creek Station on May 2, 2022, the existing Coal Sales Agreement, the existing Mortgage and Security Agreement and the existing Option Agreement between GRE and Falkirk were terminated.

GRE paid NACoal $ 14.0 million in cash, as well as transferred ownership of an office building located in Bismarck, North Dakota, and conveyed membership units in Midwest AgEnergy to NACoal as agreed to under the termination and release of claims agreement between Falkirk and GRE.

NACCO previously invested $ 5.0 million in Midwest AgEnergy, which operates two ethanol facilities in North Dakota.

The new Coal Sales Agreement (“CSA”) between Falkirk and Rainbow Energy became effective upon the closing of the transaction.

Falkirk will continue to supply all coal requirements of Coal Creek 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.

- Management's Discussion and Analysis of Financial Condition and Results of Operations

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

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 has items not directly attributable to a reportable segment that are not included as part of the measurement of segment operating profit, which include primarily administrative costs related to public company reporting requirements at the parent company and the financial results of Mitigation Resources and Bellaire Corporation ("Bellaire").

The Coal Mining segment operates surface coal mines for power generation companies.

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

The Minerals Management segment, which includes the Catapult Mineral Partners ("Catapult") business, acquires and promotes the development of mineral interests.

Mitigation Resources of North America ® (“Mitigation Resources”) provides stream and wetland mitigation solutions.

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

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

underground mining activities.

Effective January 1, 2022, the Company changed the composition of its reportable segments.

The Coal Mining segment now includes only mines that deliver coal for power generation.

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

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

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-Q on a consolidated basis.