What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-15 compared with 2022-03-02 · 55 added, 77 removed, 283 unchanged (32% of the section changed)

8 unchanged sentences

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

Any customer's premature facility closure, including as discussed in “Item 1.

Business — Business Developments" on page 2 or a result of GRE’s failure to complete the sale of Coal Creek Station and the adjacent high-voltage direct current transmission line to Rainbow Energy and its affiliates currently anticipated to close in the second quarter of 2022, could have a material adverse effect on the Company’s business, financial condition and results of operations.

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

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

The emissions modeling conducted for the combined western state agencies affected by the RHR was delayed and has subsequently delayed the NDDEQ state implementation plan process.

Therefore, the NDDEQ's state implementation plan, which was due to the EPA by July 2021, is anticipated to be submitted to EPA early in 2022.

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

The Company could be negatively impacted by the decisions of Coyote Creek's customers.

In September 2021, one of Coyote Creek's customers, Otter Tail Power Company, filed its 2022 Integrated Resource Plan in Minnesota and North Dakota which included its intent to start the process of withdrawal from its 35 percent ownership interest in Coyote Station power plant with an anticipated exit from the plant by December 31, 2028.

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

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

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

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

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

Business — Business Developments" on page 2 in this Form 10-K for discussion of Sabine's 2023 closure.

Business — Government Regulation" on page 8 in this Form 10-K for discussion of regulations that could materially adversely affect the Coal Mining segment, particularly the discussion of the implementation of the EPA’s Regional Haze Rule and its potential impact at Coyote Creek.

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

For the year ended December 31, 2021, the Coal Mining segment derived approximately 68% of earnings of unconsolidated operations from two customers, Basin Electric and GRE.

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

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

Future environmental regulation of GHG emissions, CCRs and/or new federal and state mandates for increased use of electricity derived from renewable energy sources could accelerate the use by utilities of fuels other than coal.

Such mandates, combined with other incentives to use renewable energy sources, such as tax credits, could accelerate the realignment of customers' power generation portfolios to reduce the electric power generated from coal.

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

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

Business — Business

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

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

MLMC is subject to risks associated with its capital investment, operating and equipment costs, growing use of alternative generation that competes with coal-fired generation, changes in customer demand and inflationary adjustments.

3 unchanged sentences

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

Similar to the Company's unconsolidated mines, all production costs at MLMC are capitalized into inventory and recognized in cost of sales as tons are delivered.

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

MLMC has approximately $125 million of long-lived assets, including property, plant and equipment and a coal supply agreement intangible asset, which are subject to periodic impairment analysis and review.

1 unchanged sentence

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.

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

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

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 TVA under a long-term PPA.

MLMC’s contract with its customer runs through 2032.

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

In 2019, TVA published its updated Integrated Resource Plan, which indicates plans to increase its reliance on solar power.

A decrease in the number of days TVA dispatches the Red Hills Power Plant would reduce MLMC's customer's demand for coal.

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

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

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

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

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

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

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

Southern Company publicly disclosed that all required lease payments have been paid in full through December 31, 2021

Similar to the Company's unconsolidated mines, all production costs at MLMC are capitalized into inventory and recognized in cost of sales as tons are delivered.

Diesel fuel is heavily weighted among the indices used to determine the coal sales price.

The diesel fuel-related component of the coal sales price is based on average price changes over time whereas the impact on actual costs from changes in diesel fuel prices is more immediate;

therefore, fluctuations in diesel fuel prices can result in significant fluctuations in earnings at MLMC.

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

3 unchanged sentences

inflation rates.

During the production stage, the

Unconsolidated Subsidiaries' customers pay the Company its agreed upon fee only for the coal delivered to them for consumption or use.

During the production stage, the Unconsolidated Subsidiaries' customers pay the Company its agreed upon fee only for the coal delivered to them for consumption or use.

As a result, reduced coal usage by customers for any reason, including, but not limited to, fluctuations in demand due to unanticipated weather conditions, scheduled and unscheduled outages at the Coal Mining segment's customers' facilities, unplanned equipment failures, economic conditions or governmental regulations or comparable policies which may promote dispatch of power generated by renewables, such as wind or solar, and the realignment of customers' power generation portfolios that reduce the electric power generated from coal could have a material adverse effect on the Company's results of operations.

35 unchanged sentences

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

The Clean Air Act ("CAA") could reduce the demand for coal.

The Clean Air Act could reduce the demand for coal.

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

14 unchanged sentences

The Company faces numerous uncertainties in estimating economically recoverable reserves and resources, and inaccuracies in estimates could result in lower than expected revenues, higher than expected costs and decreased profitability.

Information concerning the Company's mining operations in "Item 2 - Properties on page 31" has been prepared in accordance with the requirements of subpart 1300 of Regulation S-K, which first became applicable to us for the fiscal year ended December 31, 2021.

Information concerning the Company's mining operations in "Item 2 - Properties" on page 28 has been prepared in accordance with the requirements of subpart 1300 of Regulation S-K.

A mineral is economically recoverable when the price at which it can be sold exceeds the costs and expenses of mining, processing and selling the mineral.

Forecasts of NACCO's future performance are based on, among other things, estimates of mineral reserves and resources.

Mineral reserve and resource estimates of the remaining tons of coal in the Company's operational mines and other mining properties are based on many factors, including engineering, economic and geological data assembled and analyzed by internal staff and third parties, which includes various engineers and geologists, the area and volume covered by mining rights, assumptions regarding extraction rates and duration of mining operations, and the quality of in-place reserves and resources.

The reserve and resource estimates as to both quantity and quality are updated from time to time to reflect, among other matters, production of minerals from the Company's mining properties and new mining or other data received.

Mineral reserve and resource estimates of the remaining tons of coal at MLMC are based on many factors, including engineering, economic and geological data assembled and analyzed by internal staff, which includes various engineers and geologists, the area and volume covered by mining rights, assumptions regarding extraction rates and duration of mining operations, and the quality of in-place reserves and resources.

The reserve and resource estimates as to both quantity and quality are updated from time to time to reflect, among other matters, production of minerals, new mining or other data received.

There are numerous uncertainties inherent in estimating quantities and qualities of minerals and costs to mine recoverable reserves and resources, including many factors beyond the Company's control.

Estimates of mineral reserves and resources necessarily depend upon a number of variable factors and assumptions, any one of which may, if incorrect, result in an estimate that varies considerably from actual results.

While the Company believes that its mineral reserve and resource estimates are developed using well-established practices and with appropriate controls, mineral reserve and mineral resource estimation is an imprecise and subjective process.

Estimates of mineral reserves and resources depend upon a number of variable factors and assumptions, any one of which may, if incorrect, result in an estimate that varies considerably from actual results.

These factors and assumptions include:

8 unchanged sentences

• NACCO's ability to convert all or any part of mineral resources to economically extractable mineral reserves.

As a result, actual tonnage recovered from identified mining properties and estimated revenues, expenditures and cash flows with respect to reserves and resources may vary materially from estimates.

As a result, actual tonnage recovered, estimated revenues, expenditures and cash flows with respect to reserves and resources may vary materially from estimates.

Thus, these estimates may not accurately reflect the Company’s actual reserves and resources.

14 unchanged sentences

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

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

NAMining’s operating expenses may continue to increase as the Company scales the NAMining business, including growth outside of Florida.

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

14 unchanged sentences

A prolonged economic downturn or adverse change in regulatory conditions in the Florida mining or construction industry could result in a significant reduction in demand for NAMining’s services.

The occurrence of one or more natural disasters, severe weather events, terrorist attacks, or disruptive political events in Florida could adversely affect the NAMining business.

The occurr ence of one or more natural disasters, severe weather events, terrorist attacks, or disruptive political events in Florida could adversely affect the NAMining business.

Risks related to the Minerals Management segment

3 unchanged sentences

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

As discussed in “Item 1.

Business — Business Developments" on page 2, the Company acquired additional mineral and royalty interests during 2021 and 2020 and plans to continue to pursue acquisitions of additional mineral and royalty interests.

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

12 unchanged sentences

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

The future cash flow and results of operations of the Minerals Management segment are highly dependent on third-party operators’ success in developing the

Company’s current and future mineral and royalty interests.

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

These operators may not have access to the capital needed to develop the Company's mineral interests.

23 unchanged sentences

domestic and foreign governmental regulations and taxes;

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

the continued threat of terrorism and the impact of military and other action, including the ongoing conflict between Russia and Ukraine and associated oil and natural gas import bans as well as

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

5 unchanged sentences

Risks related to corporate structure

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

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

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

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

Repurchases under the stock repurchase program could affect the price of the Company's Class A common stock.

The existence of a stock repurchase program could cause the price of the Company's Class A common stock to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for the Company’s Class A common stock.

There can be no assurance that any stock repurchases will enhance shareholder value because the market price of the Company’s Class A common stock may decline below the levels at which the Company repurchased the shares.

Although the stock repurchase program is intended to enhance long-term shareholder value, there is no assurance that it will do so and short-term price fluctuations in the Class A common stock could reduce the program’s effectiveness.

Furthermore, the stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares of the Company's Class A common stock, and it may be suspended or discontinued at any time and any suspension or discontinuation could cause the market price of the Company's Class A common stock to decline.

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

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

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

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

The price of NACCO's securities may be volatile.

11 unchanged sentences

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

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

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

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

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

2 unchanged sentences

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

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

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

Repurchases under the stock repurchase program could affect the price of the Company's Class A common stock.

Furthermore, the stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares of the Company's

Class A common stock, and it may be suspended or discontinued at any time and any suspension or discontinuation could cause the market price of the Company's Class A common stock to decline.

NACCO is a smaller reporting company and cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make the Company's common stock less attractive to investors.

21 unchanged sentences

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

The Company’s wholly-owned subsidiary, NACoal, has a revolving line of credit of up to $150.0 million that expires in November 2025 (the "NACoal Facility").

The Company’s wholly-owned subsidiary, NACoal, has a revolving line of credit of up to $150.0 million that expires in November 2025.

The Company’s ability to access the capital markets and the costs and terms of available financing depends on many factors, including perceived credit risks of companies with coal and/or oil and gas exposure as a result of current market sentiment for fossil fuels.

1 unchanged sentence

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

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

An inability to obtain bank financing, or

refinance with terms that are as favorable as the existing terms of such indebtedness, could have a material adverse effect on the Company's operating results and financial condition.

Failure to obtain financial assurance to secure reclamation and other long-term obligations, including surety bonds and letters of credit on acceptable terms, could affect NACCO's ability to mine.

Federal and state laws require the Company to provide financial assurance or financial security to secure performance or payment of certain long-term obligations, such as mine closure or reclamation costs, federal and state workers’ compensation and black lung benefits costs, leases and other obligations.

Future federal and state laws and regulations may require higher amounts of financial security, including as a result of changes to certain factors used to calculate the bonding or security amounts.

14 unchanged sentences

Expectations relating to environmental, social and governance (“ESG”) matters have been rapidly evolving and increasing.

Government organizations are enhancing or advancing legal and regulatory requirements specific to ESG matters.

Government organizations, including the SEC, are enhancing or advancing legal, regulatory and disclosure requirements specific to ESG matters.

The heightened focus on ESG issues requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements.

6 unchanged sentences

The Company may be subject to litigation seeking to hold energy companies accountable for the effects of climate change.

Increasing attention to climate change risk has also resulted in a recent trend of governmental investigations and private litigation by local and state governmental agencies as well as private plaintiffs in an effort to hold energy companies accountable for the effects of climate change.

accountable for the effects of climate change.

Other public nuisance lawsuits have been brought in the past against power, coal, oil and gas companies alleging that their operations are contributing to climate change.

22 unchanged sentences

deliver inventory on a timely basis;

and maintain cost-efficient

and maintain cost-efficient operations.

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

6 unchanged sentences

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

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

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

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

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

The Company is continuously installing new and upgrading existing information

technology systems.

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

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

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

The COVID-19 pandemic resulted in governments around the world implementing stringent measures to help control the spread of the virus.

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

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

The Company’s results of operations, financial condition, cash flows and stock price could be adversely affected by pandemics, epidemics or other public health emergencies.

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

The extent to which pandemics may adversely impact the Company's businesses depends on future developments, which are highly uncertain and unpredictable, including the extent of new outbreaks, the nature of government public health guidelines and the public's adherence to those guidelines.

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

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

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

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

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

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

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

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors