9 unchanged sentences
Inventories 69,216 71,488
+Added: Assets held for sale 3,936 285
Federal income tax receivable 5,864 15,687
38 unchanged sentences
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
−Removed: THREE MONTHS ENDED SIX MONTHS ENDED
−Removed: JUNE 30 JUNE 30
+Added: THREE MONTHS ENDED NINE MONTHS ENDED
+Added: SEPTEMBER 30 SEPTEMBER 30
2023 2022 2023 2022
2 unchanged sentences
Cost of sales 48,720 43,965 150,447 128,867
−Removed: Gross profit 6,407 15,643 9,764 31,490
+Added: Gross (loss) profit ( 2,174 ) 17,828 7,590 49,318
Earnings of unconsolidated operations 12,754 14,588 37,662 43,802
5 unchanged sentences
87 2 ( 81 ) ( 2,451 )
+Added: Asset impairment charges — 3,939 — 3,939
16,847 22,598 47,955 52,675
−Removed: Operating profit 1,750 29,683 3,564 44,627
+Added: Operating (loss) profit ( 6,267 ) 9,818 ( 2,703 ) 54,445
Other (income) expense
2 unchanged sentences
Closed mine obligations 394 398 1,236 1,155
−Removed: (Gain) loss on equity securities ( 421 ) 1,878 ( 1,049 ) 1,360
+Added: Loss (gain) on equity securities 551 316 ( 498 ) 1,676
+Added: Income from equity method investee — ( 2,156 ) — ( 2,156 )
Other contract termination settlements — — — ( 16,882 )
1 unchanged sentence
( 417 ) ( 1,662 ) ( 4,478 ) ( 17,052 )
−Removed: Income before income tax provision (benefit) 3,257 45,073 7,625 60,017
−Removed: Income tax provision (benefit) 737 7,893 ( 587 ) 10,255
−Removed: Net income $ 2,520 $ 37,180 $ 8,212 $ 49,762
+Added: (Loss) income before income tax (benefit) provision ( 5,850 ) 11,480 1,775 71,497
+Added: Income tax (benefit) provision ( 2,018 ) 866 ( 2,605 ) 11,121
+Added: Net (loss) income $ ( 3,832 ) $ 10,614 $ 4,380 $ 60,376
Earnings per share:
−Removed: Basic earnings per share $ 0.34 $ 5.07 $ 1.10 $ 6.83
−Removed: Diluted earnings per share $ 0.34 $ 5.07 $ 1.09 $ 6.79
+Added: Basic (loss) earnings per share $ ( 0.51 ) $ 1.45 $ 0.59 $ 8.27
+Added: Diluted (loss) earnings per share $ ( 0.51 ) $ 1.45 $ 0.58 $ 8.24
Basic weighted average shares outstanding 7,517 7,337 7,480 7,302
4 unchanged sentences
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
−Removed: THREE MONTHS ENDED SIX MONTHS ENDED
−Removed: JUNE 30 JUNE 30
+Added: THREE MONTHS ENDED NINE MONTHS ENDED
+Added: SEPTEMBER 30 SEPTEMBER 30
2023 2022 2023 2022
(In thousands)
−Removed: Net income $ 2,520 $ 37,180 $ 8,212 $ 49,762
−Removed: Reclassification of pension and postretirement adjustments into earnings, net of $ 6 and $ 12 tax benefit in the three and six months ended June 30, 2023, respectively, and net of $ 32 and $ 67 tax benefit in the three and six months ended June 30, 2022, respectively.
+Added: Net (loss) income $ ( 3,832 ) $ 10,614 $ 4,380 $ 60,376
+Added: Reclassification of pension and postretirement adjustments into earnings, net of $ 6 and $ 18 tax benefit in the three and nine months ended September 30, 2023, respectively, and net of $ 38 and $ 105 tax benefit in the three and nine months ended September 30, 2022, respectively.
20 118 59 354
Total other comprehensive income 20 118 59 354
−Removed: Comprehensive income $ 2,538 $ 37,298 $ 8,251 $ 49,998
+Added: Comprehensive (loss) income $ ( 3,812 ) $ 10,732 $ 4,439 $ 60,730
See notes to Unaudited Condensed Consolidated Financial Statements.
2 unchanged sentences
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: SIX MONTHS ENDED
+Added: NINE MONTHS ENDED
(In thousands)
12 unchanged sentences
Cash dividends paid ( 4,826 ) ( 4,488 )
+Added: Purchase of treasury shares ( 824 ) —
Net cash used for financing activities ( 8,046 ) ( 8,942 )
27 unchanged sentences
Balance, June 30, 2022 $ 5,769 $ 1,566 $ 19,634 $ 383,574 $ ( 7,940 ) $ 402,603
+Added: Stock-based compensation 7 — 3,601 — — 3,608
+Added: Net income — — — 10,614 — 10,614
+Added: Cash dividends on Class A and Class B common stock:
+Added: $ 0.2075 per share
+Added: — — — ( 1,522 ) — ( 1,522 )
+Added: Reclassification adjustment to net income, net of tax — — — — 118 118
+Added: Balance, September 30, 2022 $ 5,776 $ 1,566 $ 23,235 $ 392,666 $ ( 7,822 ) $ 415,421
Balance, January 1, 2023 $ 5,783 $ 1,566 $ 23,706 $ 404,924 $ ( 9,013 ) $ 426,966
15 unchanged sentences
Balance, June 30, 2023 $ 5,954 $ 1,566 $ 24,906 $ 409,946 $ ( 8,974 ) $ 433,398
+Added: Stock-based compensation 10 — 1,309 — — 1,319
+Added: Purchase of treasury shares ( 24 ) — ( 800 ) — — ( 824 )
+Added: Net loss — — — ( 3,832 ) — ( 3,832 )
+Added: Cash dividends on Class A and Class B common stock:
+Added: $ 0.2175 per share
+Added: — — — ( 1,636 ) — ( 1,636 )
+Added: Reclassification adjustment to net income, net of tax — — — — 20 20
+Added: Balance, September 30, 2023 $ 5,940 $ 1,566 $ 25,415 $ 404,478 $ ( 8,954 ) $ 428,445
See notes to Unaudited Condensed Consolidated Financial Statements.
2 unchanged sentences
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: JUNE 30, 2023
+Added: SEPTEMBER 30, 2023
(In thousands, except as noted and per share amounts)
16 unchanged sentences
Each mine is fully integrated with its customer's operations.
−Removed: During the three and six months ended June 30, 2023, the Coal Mining segment's operating coal mines were:
+Added: During the three and nine months ended September 30, 2023, 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”) and Mississippi Lignite Mining Company (“MLMC”).
5 unchanged sentences
Funding for mine reclamation is the responsibility of SWEPCO, and Sabine receives compensation for providing mine reclamation services.
−Removed: The United States Environmental Protection Agency (the “EPA”) has a comprehensive regulatory program to manage the disposal of coal combustion residuals (“CCR”) from coal-fired power plants as non-hazardous material under the Resource Conservation and Recovery Act (“RCRA”).
−Removed: Individual states administer some or all of the RCRA provisions.
+Added: During the third quarter of 2023, Sabine and SWEPCO entered into an agreement under which Sabine will provide mine reclamation services through September 30, 2026.
+Added: On October 1, 2026, SWEPCO will take over and complete the remaining mine reclamation services by acquiring all of the capital stock of Sabine.
+Added: Falkirk is the sole supplier of lignite coal to the Coal Creek Station power plant.
The North Dakota Department of Environmental Quality approved Falkirk’s customer's plan for an alternate disposal liner to store coal ash at the Coal Creek Station power plant.
−Removed: In the first quarter of 2023, the EPA proposed to deny the application.
+Added: In the first quarter of 2023, the United States Environmental Protection Agency proposed to deny the application.
If denied, a new liner or new waste management unit(s) may need to be installed which could result in the temporary suspension of operations at Coal Creek Station.
−Removed: To minimize any impact to operations, Coal Creek Station is moving forward with plans to dry CCR materials produced by the plant, reducing the need to utilize the lined area in question.
−Removed: Falkirk is the sole supplier of lignite coal to Coal Creek Station.
−Removed: Any suspension of operations at Coal Creek Station would eliminate the need for lignite coal during the suspension period.
−Removed: Any such suspension of operations at Coal Creek Station or any of the power plants supplied by the Company's mines could have a material adverse effect on the Company’s business, financial condition and results of operations.
+Added: To minimize any impact to operations, Coal Creek Station is moving forward with plans to dry coal combustion residual materials produced by the plant, reducing the need to utilize the lined area in question.
See the Government Regulation Update on page 19 of this Quarterly Report on Form 10-Q for further information.
MLMC is the exclusive supplier of lignite to the Red Hills Power Plant in Ackerman, Mississippi.
−Removed: Choctaw Generation Limited Partnership ("CGLP") leases the Red Hills Power Plant from a Southern Company subsidiary pursuant to a leveraged lease arrangement.
+Added: Choctaw Generation Limited Partnership ("CGLP") leases the Red Hills Power Plant from a Southern Company subsidiary.
CGLP's ability to make required payments to the Southern Company subsidiary is dependent on the operational performance of the Red Hills Power Plant.
−Removed: During 2022, Southern Company disclosed that it provided notice to the lessee, CGLP, to terminate the related operating and maintenance agreement effective June 30, 2023.
−Removed: Subsequently, CGLP failed to make the semi-annual lease payment due in December 2022, and as a result, the Southern Company subsidiary was unable to make its corresponding payment to the debtholders.
−Removed: The parties to the lease have entered into a forbearance agreement which suspends the related contractual rights of the parties while they continue restructuring negotiations, which could result in rescission of the termination notice.
−Removed: The ultimate outcome of this matter cannot be determined at this time but could have a material impact on the Company's financial statements if the operating and maintenance agreement is terminated.
+Added: During 2022, Southern Company disclosed that it provided notice to CGLP to terminate the related operating and maintenance agreement.
+Added: On July 14, 2023, the Southern Company subsidiary agreed to continue operating the plant for CGLP until the associated power off-take agreement ends in 2032, subject to certain terms and conditions.
+Added: This restructuring had no material impact on the Company's financial statements.
At Coteau, Coyote Creek and Falkirk, 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.
−Removed: 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.
+Added: The customers are responsible for funding all mine operating costs, including final mine
+Added: 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 income and cash flow with minimal capital investment.
19 unchanged sentences
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.
+Added: During the first nine months of 2023, MLMC completed mining in the original mine area and moved to a new mine area, which has resulted in increased costs and a reduction in earnings.
+Added: MLMC does not anticipate opening additional mine areas through the remaining contract term.
NAMining Segment
4 unchanged sentences
materials handling and processing, product sales and distribution.
−Removed: As of June 30, 2023, NAMining operates in Florida, Texas, Arkansas, Indiana, Virginia and Nebraska.
−Removed: Sawtooth Mining, LLC ("Sawtooth") provides comprehensive mining services as the exclusive contract miner for the Thacker Pass lithium project in northern Nevada.
+Added: As of September 30, 2023, NAMining operates in Florida, Texas, Arkansas, Indiana, Virginia and Nebraska.
+Added: In addition, Sawtooth Mining, LLC ("Sawtooth") provides comprehensive mining services as the exclusive contract miner for the Thacker Pass lithium project in northern Nevada.
Certain of the entities within the NAMining segment are VIEs and are accounted for under the equity method as Unconsolidated Subsidiaries.
6 unchanged sentences
Typically, the resulting royalty interest is a cost-free percentage of production revenues for minerals extracted from the acreage.
−Removed: A holder of royalty interests is generally not responsible for capital expenditures or lease operating expenses, but royalty interests may be calculated
−Removed: net of post-production expenses, and typically has no environmental liability.
+Added: A holder of royalty interests is generally not responsible for capital expenditures or lease operating expenses, but royalty interests may be calculated net of post-production expenses, and typically has no environmental liability.
Royalty interests leased to producers expire upon the expiration of the oil and gas lease and revert to the mineral owner.
26 unchanged sentences
The initial production period is expected to run through May 1, 2032, but the CSA may be extended or terminated early under certain circumstances.
−Removed: The Company recognized a gain of $ 30.9 million within the accompanying Unaudited Condensed Consolidated Statements of Operations during the second quarter of 2022 as GRE paid $ 14.0 million in cash, as well as transferred ownership of an office building with an estimated fair value of $ 4.1 million, and conveyed membership units in Midwest AgEnergy Group, LLC (“MAG”), a North Dakota-based ethanol business, with an estimated fair value at the transfer date of $ 12.8 million.
+Added: The Company recognized a gain of $ 30.9 million within the accompanying Unaudited Condensed Consolidated Statements of Operations during the first nine months of 2022 as GRE paid $ 14.0 million in cash, as well as transferred ownership of an office building with an estimated fair value of $ 4.1 million, and conveyed membership units in Midwest AgEnergy Group, LLC (“MAG”), a North Dakota-based ethanol business, with an estimated fair value at the transfer date of $ 12.8 million.
Prior to receiving the membership units from GRE, the Company held a $ 5.0 million investment in MAG carried at cost, less impairment.
Subsequent to the receipt of the additional membership units, the Company began to account for the investment under the equity method of accounting.
−Removed: On December 1, 2022, the Company transferred its ownership interest in Midwest AgEnergy, LLC to HLCP Ethanol Holdco, LLC (“HLCP”) and received a cash payment of $ 18.6 million during the fourth quarter of 2022.
−Removed: The Company received a payment of $ 1.2 million in the first quarter of 2023 in connection with a post-closing purchase price adjustment, which is included on the line "Other, net" within the accompanying Unaudited Consolidated Statements of Operations.
+Added: During the third quarter of 2022, the Company recorded $ 2.2 million, which represented its share of MAG's earnings on the "Income from equity method investee" line within the accompanying Unaudited Condensed Consolidated Statements of Operations.
+Added: On December 1, 2022, the Company transferred its ownership interest in MAG to HLCP Ethanol Holdco, LLC (“HLCP”) and received a cash payment of $ 18.6 million during the fourth quarter of 2022.
+Added: The Company received a payment of $ 1.2 million
+Added: in the first quarter of 2023 in connection with a post-closing purchase price adjustment, which is included on the line "Other, net" within the accompanying Unaudited Condensed Consolidated Statements of Operations.
The HLCP acquisition agreement includes two contingent earn-out arrangements under which additional payments are possible.
12 unchanged sentences
GAAP for complete financial statements.
−Removed: 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 June 30, 2023, the results of its operations, comprehensive income, cash flows and changes in equity for the six months ended June 30, 2023 and 2022 have been included.
+Added: 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, 2023, the results of its operations, comprehensive income, cash flows and changes in equity for the nine months ended September 30, 2023 and 2022 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, 2022.
52 unchanged sentences
Sawtooth will recognize revenue over the estimated useful life of the asset on a straight-line basis as the performance obligation is satisfied over time.
−Removed: Sawtooth began acquiring equipment for this project during the first half of 2023.
−Removed: Revenue recognized by Sawtooth in connection with its capital assets was immaterial in the three and six months ended June 30, 2023.
+Added: Sawtooth acquired $ 23.1 million of equipment for this project during the first nine months of 2023.
+Added: Revenue recognized by Sawtooth in connection with its capital assets was immaterial in the three and nine months ended September 30, 2023.
Prior Period Performance Obligations
4 unchanged sentences
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.
−Removed: For the three and six months ended June 30, 2023, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was $ 1.4 million.
−Removed: For the three months ended June 30, 2022, royalty income recognized in the reporting period related to
−Removed: performance obligations satisfied in prior reporting periods was immaterial .
−Removed: For the six months ended June 30, 2022, royalty income of $ 2.1 million was recognized for a settlement related to the Company’s ownership interest in certain mineral rights.
+Added: For the three months ended September 30, 2023 and
+Added: 2022, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was immaterial.
+Added: For the nine months ended September 30, 2023, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was $ 1.4 million.
+Added: For the nine months ended September 30, 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
3 unchanged sentences
See Note 8 to the Unaudited Condensed Consolidated Financial Statements for further discussion of segment reporting.
−Removed: THREE MONTHS ENDED SIX MONTHS ENDED
−Removed: JUNE 30 JUNE 30
+Added: THREE MONTHS ENDED NINE MONTHS ENDED
+Added: SEPTEMBER 30 SEPTEMBER 30
2023 2022 2023 2022
9 unchanged sentences
Balance, January 1, 2023 $ 37,940 $ 409 $ 5,985 $ 833 $ 1,709
−Removed: Balance, June 30, 2023 46,047 — 3,559 1,122 1,626
+Added: Balance, September 30, 2023 29,738 — 3,625 1,299 1,604
Increase (decrease) $ ( 8,202 ) $ ( 409 ) $ ( 2,360 ) $ 466 $ ( 105 )
3 unchanged sentences
Therefore, at the time any such up-front payment is received, a contract liability is recorded which represents deferred revenue.
−Removed: The amount of royalty revenue recognized in the three months ended June 30, 2023 and 2022 included in the opening contract liability was $ 0.2 million and $ 0.3 million, respectively.
−Removed: The amount of royalty revenue recognized in the six months ended June 30, 2023 and 2022 included in the opening contract liability was $ 0.4 million and $ 0.5 million, respectively.
+Added: The amount of royalty revenue recognized in the three months ended September 30, 2023 and 2022 included in the opening contract liability was $ 0.3 million and $ 0.2 million, respectively.
+Added: The amount of royalty revenue recognized in both of the nine months ended September 30, 2023 and 2022 included in the opening contract liability was $ 0.7 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 three to five years .
−Removed: The Company expects to recognize an additional $ 0.8 million in the remainder of 2023, $ 1.5 million in 2024, $ 0.3 million in 2025 and $ 0.1 million in both 2026 and 2027 related to the contract liability remaining at June 30, 2023.
+Added: The Company expects to recognize an additional $ 0.8 million in the remainder of 2023, $ 0.7 million in 2024, $ 1.3 million in 2025 and $ 0.1 million in both 2026 and 2027 related to the contract liability remaining at September 30, 2023.
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.
6 unchanged sentences
Total inventories $ 69,216 $ 71,488
−Removed: During the three and six months ended June 30, 2023, the Company recorded a $ 1.8 million and $ 4.2 million inventory impairment charge, respectively, in the line “Cost of sales” in the accompanying Unaudited Consolidated Statements of Operations as mining costs exceeded net realizable value at MLMC.
+Added: During the three and nine months ended September 30, 2023, the Company recorded a $ 2.4 million and $ 6.6 million inventory impairment charge, respectively, in the line “Cost of sales” in the accompanying Unaudited Condensed Consolidated Statements of Operations as mining costs exceeded net realizable value at MLMC.
NOTE 4— Stockholders' Equity
1 unchanged sentence
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.
+Added: During both the three and nine months ended September 30, 2023, the Company repurchased 24,762 shares of Class A Common Stock under the 2021 Stock Repurchase Program for an aggregate purchase price of $ 0.8 million.
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.
1 unchanged sentence
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.
−Removed: The Company has no t repurchased any shares of common stock under the 2021 Stock Repurchase Program through June 30, 2023.
NOTE 5— Fair Value Disclosure
6 unchanged sentences
Description Date (Level 1) (Level 2) (Level 3)
−Removed: June 30, 2023
+Added: September 30, 2023
Equity securities $ 15,702 $ 15,702 $ — $ —
8 unchanged sentences
therefore, they are classified as Level 1 within the fair value hierarchy.
−Removed: The Company recognized a gain of $ 0.5 million and $ 1.0 million during the three and six months ended June 30, 2023, respectively,
−Removed: and a loss of $ 1.5 million and $ 2.1 million during the three and six months ended June 30, 2022, respectively, related to the Mine Water Treatment Trust.
+Added: Company recognized a loss of $ 0.4 million and a gain of $ 0.7 million during the three and nine months ended September 30, 2023, respectively, and a loss of $ 0.5 million and $ 2.7 million during the three and nine months ended September 30, 2022, respectively, related to the Mine Water Treatment Trust.
Prior to 2022, 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.
−Removed: The Company recognized a loss of $ 0.1 million and a de minimis gain during the three and six months ended June 30, 2023, respectively, and a loss of $ 0.4 million and a gain of $ 0.8 million during the three and six months ended June 30, 2022, respectively, related to the investment in these equity securities.
−Removed: The change in fair value of equity securities is reported on the line (Gain) loss on equity securities in the Other (income) expense section of the Unaudited Condensed Consolidated Statements of Operations.
−Removed: Nonrecurring Fair Value Measurements :
−Removed: The Company recorded the estimated fair value of an office building during the second quarter of 2022.
−Removed: In determining the $ 4.1 million fair value of the office building, the Company engaged an independent real estate appraiser to appraise the property utilizing observed sales transactions for similar assets as well as consideration of an income approach;
−Removed: therefore, it is classified as Level 2 within the fair value hierarchy.
−Removed: The office building is included in Property, plant and equipment, net in the accompanying Unaudited Condensed Consolidated Balance Sheets.
−Removed: There were no transfers into or out of Levels 1, 2 or 3 during the six months ended June 30, 2023 and 2022.
+Added: The Company recognized a loss of $ 0.2 million during both, the three and nine months ended September 30, 2023, and a gain of $ 0.2 million and $ 1.0 million during the three and nine months ended September 30, 2022, respectively, related to the investment in these equity securities.
+Added: The change in fair value of equity securities is reported on the line Loss (gain) on equity securities in the Other (income) expense section of the Unaudited Condensed Consolidated Statements of Operations.
+Added: There were no transfers into or out of Levels 1, 2 or 3 during the nine months ended September 30, 2023 and 2022.
NOTE 6— Unconsolidated Subsidiaries
5 unchanged sentences
See Note 1 for a discussion of these entities.
−Removed: The Investment in the unconsolidated subsidiaries and related tax positions totaled $ 11.1 million and $ 14.9 million at June 30, 2023 and December 31, 2022, respectively.
−Removed: The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $ 4.2 million and $ 7.1 million at June 30, 2023 and December 31, 2022, respectively.
−Removed: Earnings of unconsolidated operations were $ 11.1 million and $ 24.9 million during the three and six months ended June 30, 2023, respectively, and $ 14.6 million and $ 29.2 million during the three and six months ended June 30, 2022, respectively.
+Added: The Investment in the unconsolidated subsidiaries and related tax positions totaled $ 11.5 million and $ 14.9 million at September 30, 2023 and December 31, 2022, respectively.
+Added: The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $ 4.7 million and $ 7.1 million at September 30, 2023 and December 31, 2022, respectively.
+Added: Earnings of unconsolidated operations were $ 12.8 million and $ 37.7 million during the three and nine months ended September 30, 2023, respectively, and $ 14.6 million and $ 43.8 million during the three and nine months ended September 30, 2022, respectively.
NACoal is a party to certain guarantees related to Coyote Creek.
11 unchanged sentences
The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote.
−Removed: 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
−Removed: circumstances, an estimate of the possible loss.
+Added: 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.
These matters are subject to inherent uncertainties, and unfavorable rulings could occur.
5 unchanged sentences
The Company’s Chief Operating Decision Maker utilizes operating profit to evaluate segment performance and allocate resources.
−Removed: 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.
+Added: The Company has items not directly attributable to a reportable segment that are not included as part of the measurement of segment operating profit.
+Added: These items primarily include administrative costs related to public company reporting requirements at the parent company and the financial results of Mitigation Resources and Bellaire.
Mitigation Resources 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.
2 unchanged sentences
All financial statement line items below operating profit (other income including interest expense and interest income, the (benefit) provision for income taxes and net income) are presented and discussed within this Form 10-Q on a consolidated basis.
−Removed: The following table presents revenues, operating profit (loss), expenditures for property, plant and equipment and acquisition of mineral interests and depreciation, depletion and amortization expense:
−Removed: THREE MONTHS ENDED SIX MONTHS ENDED
−Removed: JUNE 30 JUNE 30
+Added: The following table presents revenues, operating (loss) profit, expenditures for property, plant and equipment and acquisition of mineral interests and depreciation, depletion and amortization expense:
+Added: THREE MONTHS ENDED NINE MONTHS ENDED
+Added: SEPTEMBER 30 SEPTEMBER 30
2023 2022 2023 2022
5 unchanged sentences
Total $ 46,546 $ 61,793 $ 158,037 $ 178,185
−Removed: Operating profit (loss)
+Added: Operating (loss) profit
Coal Mining $ ( 4,697 ) $ 6,089 $ ( 9,059 ) $ 34,616
4 unchanged sentences
Total $ ( 6,267 ) $ 9,818 $ ( 2,703 ) $ 54,445
−Removed: THREE MONTHS ENDED SIX MONTHS ENDED
−Removed: JUNE 30 JUNE 30
−Removed: 2023 2022 2023 2022
Expenditures for property, plant and equipment and acquisition of mineral interests
24 unchanged sentences
Mitigation Resources of North America ® ("Mitigation Resources") provides stream and wetland mitigation solutions.
−Removed: 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").
+Added: The Company has items not directly attributable to a reportable segment that are not included as part of the measurement of segment operating profit.
+Added: These items primarily include 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.
6 unchanged sentences
Each mine is fully integrated with its customer's operations.
−Removed: During the three and six months ended June 30, 2023, the Coal Mining segment's operating coal mines were:
+Added: During the three and nine months ended September 30, 2023, 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”) and Mississippi Lignite Mining Company (“MLMC”).
5 unchanged sentences
Funding for mine reclamation is the responsibility of SWEPCO, and Sabine receives compensation for providing mine reclamation services.
+Added: During the third quarter of 2023, Sabine and SWEPCO entered into an agreement under which Sabine will provide mine reclamation services through September 30, 2026.
+Added: On October 1, 2026, SWEPCO will take over and complete the remaining mine reclamation services by acquiring all of the capital stock of Sabine.
MLMC is the exclusive supplier of lignite to the Red Hills Power Plant in Ackerman, Mississippi.
−Removed: Choctaw Generation Limited Partnership ("CGLP") leases the Red Hills Power Plant from a Southern Company subsidiary pursuant to a leveraged lease arrangement.
+Added: Choctaw Generation Limited Partnership ("CGLP") leases the Red Hills Power Plant from a Southern Company subsidiary.
CGLP's ability to make required payments to the Southern Company subsidiary is dependent on the operational performance of the Red Hills Power Plant.
−Removed: During 2022, Southern Company disclosed that it provided notice to the lessee, CGLP, to terminate the related operating and maintenance agreement effective June 30, 2023.
−Removed: Subsequently, CGLP failed to make the semi-annual lease payment due in December 2022, and as a result, the Southern Company subsidiary was unable to make its corresponding payment to the debtholders.
−Removed: The parties to the lease have entered into a forbearance agreement which suspends the related contractual rights of the parties while they continue restructuring negotiations, which could result in rescission of the termination notice.
−Removed: The ultimate outcome of this matter cannot be determined at this time but could have a material impact on the Company's financial statements if the operating and maintenance agreement is terminated.
+Added: During 2022, Southern Company disclosed that it provided notice to CGLP to terminate the related operating and maintenance agreement.
+Added: On July 14, 2023, the Southern Company subsidiary agreed to continue operating the plant for CGLP until the associated power off-take agreement ends in 2032, subject to certain terms and conditions.
+Added: This restructuring had no material impact on the Company's financial statements.
At Coteau, Coyote Creek and Falkirk, the Company is paid a management fee per ton of coal or heating unit (MMBtu) delivered.
23 unchanged sentences
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.
+Added: During the first nine months of 2023, MLMC completed mining in the original mine area and moved to a new mine area, which has resulted in increased costs and a reduction in earnings.
+Added: MLMC does not anticipate opening additional mine areas through the remaining contract term.
NAMining Segment
4 unchanged sentences
materials handling and processing, product sales and distribution.
−Removed: As of June 30, 2023, NAMining operates in Florida, Texas, Arkansas, Indiana, Virginia and Nebraska.
−Removed: Sawtooth Mining, LLC ("Sawtooth") provides comprehensive mining services as the exclusive contract miner for the Thacker Pass lithium project in northern Nevada.
+Added: As of September 30, 2023, NAMining operates in Florida, Texas, Arkansas, Indiana, Virginia and Nebraska.
+Added: In addition, Sawtooth Mining, LLC ("Sawtooth") provides comprehensive mining services as the exclusive contract miner for the Thacker Pass lithium project in northern Nevada.
Certain of the entities within the NAMining segment are VIEs and are accounted for under the equity method as Unconsolidated Subsidiaries.
6 unchanged sentences
Typically, the resulting royalty interest is a cost-free percentage of production revenues for minerals extracted from the acreage.
−Removed: A holder of royalty interests is generally not responsible for capital expenditures or lease operating expenses, but royalty interests may be calculated net of post-production expenses, and typically has no environmental liability.
+Added: A holder of royalty interests is generally not responsible for capital expenditures or lease operating expenses, but royalty interests may be calculated
+Added: net of post-production expenses, and typically has no environmental liability.
Royalty interests leased to producers expire upon the expiration of the oil and gas lease and revert to the mineral owner.
33 unchanged sentences
Circuit Court's decision, and finding that the EPA exceeded its statutory authority when the EPA set emission requirements in the CPP based on generation shifting.
−Removed: On May 11, 2023, the EPA proposed a new rule imposing limits on GHG emissions from existing coal and new natural-gas electric generating units, which could compel such facilities to install additional pollution controls or shut down.
−Removed: The proposed rule includes guidelines for carbon dioxide ("CO2") emissions from existing EGUs with a proposed compliance date of January 1, 2030.
+Added: On May 11, 2023, the EPA proposed a new rule imposing limits on GHG emissions from existing coal and new natural-gas electric generating units, which could compel such facilities to install additional pollution controls or shut down ("CPP2").
+Added: The proposed CPP2 includes guidelines for carbon dioxide ("CO2") emissions from existing EGUs with a proposed compliance date of January 1, 2030.
For coal-fired steam EGUs that plan to operate past January 1, 2040, the EPA is proposing a best system of emissions reduction ("BSER") of carbon capture and sequestration/storage ("CCS") with 90 percent capture of CO2 at the stack.
For coal-fired steam EGUs that will permanently cease operations after December 31, 2031, but before January 1, 2040, the EPA is proposing a BSER of 40 percent natural gas co-firing on a heat input basis.
−Removed: Coal-fired steam EGUs that will permanently cease operations between December 31, 2031 and January 1, 2035, will be subject to an annual capacity factor limit, and for units that will permanently cease operations before January 1, 2032, the EPA is proposing a BSER of routine
−Removed: methods of operation and maintenance that maintain current emission rates.
+Added: Coal-fired steam EGUs that will
+Added: permanently cease operations between December 31, 2031 and January 1, 2035, will be subject to an annual capacity factor limit, and for units that will permanently cease operations before January 1, 2032, the EPA is proposing a BSER of routine methods of operation and maintenance that maintain current emission rates.
Each of the EGUs supplied by the Company would be subject to these proposed requirements.
−Removed: Additionally, the proposed rule contains other actions, including revised new source performance standards for GHG emissions from new and reconstructed fossil fuel-fired steam EGUs that undertake a large modification.
+Added: Additionally, the proposed CPP2 contains other actions, including revised new source performance standards for GHG emissions from new and reconstructed fossil fuel-fired steam EGUs that undertake a large modification.
These new rules may raise the cost of fossil fuel generated energy, making coal-fired power plants less competitive, and/or result in early closure which could have an adverse impact on demand for coal and ultimately result in the early closure of the mines servicing these plants, including closure of the Company's coal mines.
22 unchanged sentences
This affects states in the eastern half of the U.S.
+Added: CSAPR does not affect EGUs in North Dakota.
This rule imposes additional emission restrictions on coal-fired power plants to attain ozone and fine particulate NAAQS.
5 unchanged sentences
The EPA’s action to deny the SIPs was challenged in various courts, including the 5th Circuit Court of Appeals (the “Fifth Circuit”).
−Removed: The Fifth Circuit issued a stay of the SIP rejection in Texas, Louisiana, and Mississippi which prevents the Final FIP from going into effect pending the outcome of the litigation challenges to the Final FIP.
−Removed: As a result, the EPA is currently writing an interim FIP for states where a stay has been granted that will likely attempt to require these states to return to the previously approved NOx trading program and emission caps.
−Removed: Should the Final FIP be fully implemented, the rule could influence the closure of some coal-fired EGUs that have not installed selective catalytic reduction technologies, potentially including the EGU supplied by MLMC.
+Added: The Fifth Circuit issued a stay of the SIP rejection in Texas, Louisiana, and Mississippi which prevents the Final FIP from going into effect pending the outcome of the litigation challenges to the SIP rejection and Final FIP.
+Added: On June 5, 2023, the EPA published the Final FIP in the Federal Register.
+Added: The Final FIP decreases, over time, the ozone-season NOx allowances allocated to generators in the states not affected by the judicial stay beginning in 2024 by assuming that participants in this cap-and-trade program had or would optimize existing NOx controls and later install additional NOx controls.
+Added: The Company cannot
+Added: predict the outcome of the legal challenges to the:
+Added: (i) various state disapprovals;
+Added: (ii) the Final FIP promulgated on June 5, 2023;
+Added: and (iii) the interim final rule promulgated on July 31, 2023 that seeks to address the judicial orders.
+Added: On July 31, 2023, the EPA promulgated an interim final rule (“interim FIP”) that addresses the various judicial orders where the SIP rejection has been stayed.
+Added: The interim FIP requires these states to return to the previously approved NOx trading program and emission caps.
+Added: The interim FIP maintains the state emissions budgets, unit level allowance allocation provisions, and banked allowance holdings reflecting the status quo for the power plants in these states under the Group 2 trading program.
+Added: Should the Final FIP be fully implemented in states where a stay has been issued, the rule could influence the closure of some coal-fired EGUs that have not installed selective catalytic reduction technologies, potentially including the EGU supplied by MLMC.
Should the interim FIP be implemented, it could result in an increase in the cost to comply with emission limits as the pool of available NOx emission credits will be reduced.
3 unchanged sentences
In 2020, the EPA issued a final rule reversing a prior finding and determined that it is not “appropriate and necessary” under the CAA to regulate hazardous air pollutant emissions from coal-fired power plants.
−Removed: On February 9, 2022 the EPA proposed a rule to revoke the 2020 finding and to reaffirm the agency’s 2016 finding that it remained “appropriate and necessary” to regulate mercury-containing particulate matter.
+Added: On February 9, 2022 the EPA proposed a rule to revoke the EPA's 2020 finding and to reaffirm the agency’s 2016 finding that it remained “appropriate and necessary” to regulate mercury-containing particulate matter.
The EPA finalized the 2022 proposed rule on March 6, 2023, revoking the 2020 finding and concluding that it is appropriate and necessary to regulate mercury-containing particulate matter.
−Removed: In April 2023, the EPA proposed corresponding revisions to the MATS rule.
+Added: In April 2023, the EPA proposed corresponding revisions to MATS.
These revisions would remove the mercury emission limit for lignite-fired EGUs and require particulate emission reductions for all coal-fired EGUs.
4 unchanged sentences
Clean Water Act ("CWA")
−Removed: CWA affects coal mining operations by establishing in-stream water quality standards and treatment standards for waste water discharge, including from coal mines.
+Added: CWA affects coal mining operations by establishing in-stream water quality standards and treatment standards for wastewater discharge, including from coal mines.
These federal and state requirements could require more costly water treatment and could materially adversely affect the Company’s business, financial condition and results of operations.
3 unchanged sentences
EPA case in October 2022, which considered whether certain wetlands constitute WOTUS.
−Removed: In the meantime, in January 2023, the EPA published a new rule that redefines WOTUS that relies on the expansive significant nexus test.
+Added: Prior to the Supreme Court issuing a decision, in January 2023, the EPA published a new rule that redefines WOTUS that relied on an expansive significant nexus test.
The new definition expanded the scope of federal jurisdiction over land and water features which could cause some of the Company's operations to incur additional costs to mitigate streams and wetlands.
1 unchanged sentence
EPA ruling that defines WOTUS as “a relatively permanent body of water connected to traditional interstate navigable waters” with a “continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.” The Supreme Court decision rejected the “significant nexus” test relied upon by the EPA in its new 2023 WOTUS rule.
−Removed: As a result, the EPA and the Army Corps of Engineers are authoring a revised definition of WOTUS.
−Removed: This has made securing CWA permits more challenging due to uncertainty.
+Added: As a result, the EPA and the Army Corps of Engineers authored a revised definition of WOTUS, bypassed the rule proposal stage, and promulgated a final rule that removed references to “significant nexus”.
+Added: The new rule does not go into effect in states where a stay had been issued for the previous rule, including North Dakota, Texas, Louisiana, and Mississippi.
+Added: In these states, the legal challenge to the rule will resume.
+Added: In the meantime, securing CWA permits may be more challenging since the agencies in states where a stay has been issued have less guidance to rely on to determine whether certain features are considered WOTUS.
Bellaire is treating mine water drainage from coal refuse piles associated with former underground coal mines in Ohio and Pennsylvania.
9 unchanged sentences
and (b) October 17, 2028 for surface impoundments larger than 40 acres.
−Removed: These rules may raise the cost for CCR disposal at coal-fired power plants, making them less competitive, and/or result in early closure which could have an adverse impact on demand for coal and ultimately result in the early closure
−Removed: of the mines servicing these plants, including closure of the Company's mines.
+Added: These rules may raise the cost for CCR disposal at coal-fired power plants, making them less competitive, and/or result in early closure which could have an adverse impact on demand for coal and ultimately result in the early closure of the mines servicing these plants, including closure of the Company's mines.
Any such closure of the Company's mines could have a material adverse effect on the Company’s business, financial condition and results of operations.
23 unchanged sentences
On April 21, 2023, President Biden signed a new executive order focused on incorporating environmental justice considerations into federal decision-making.
−Removed: The executive order created a new White House Office of Environmental Justice, and directed all federal agencies to make environmental justice a central part of each agency’s mission by publishing an environmental justice strategic plan for the agency.
+Added: The executive order created a new White House Office of Environmental Justice, and directed all
+Added: federal agencies to make environmental justice a central part of each agency’s mission by publishing an environmental justice strategic plan for the agency.
Additionally, the order requires agencies conducting NEPA reviews to assess direct, indirect and cumulative impacts on environmental justice communities in their analyses, to consider best available science and information on disparate health impacts related to exposure to environmental hazards and provide opportunities for meaningful engagement with environmental justice communities during the environmental review process.
1 unchanged sentence
On June 3, 2023, President Biden signed the Fiscal Responsibility Act of 2023 into law, which included certain provisions collectively known as the Builder Act.
−Removed: These Builder Act includes amendments to NEPA codify past regulatory reforms including narrowing what qualifies as a “major federal action,” limiting the scope of NEPA review to “reasonably foreseeable environmental effects,” narrowing consideration of cumulative effects, directing agencies to only consider technically and economically feasible reasonable alternatives and providing page limits and timelines for environmental impact statements and environmental assessments.
+Added: The Builder Act includes amendments to NEPA which codify past regulatory reforms, including narrowing what qualifies as a “major federal action,” limiting the scope of NEPA review to “reasonably foreseeable environmental effects,” narrowing consideration of cumulative effects, directing agencies to only consider technically and economically feasible reasonable alternatives and providing page limits and timelines for environmental impact statements and environmental assessments.
It remains to be seen how the changes enacted by Congress will impact site level NEPA analysis.
3 unchanged sentences
CONSOLIDATED FINANCIAL SUMMARY
−Removed: The results of operations for NACCO were as follows for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: The results of operations for NACCO were as follows for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
5 unchanged sentences
Total revenue $ 46,546 $ 61,793 $ 158,037 $ 178,185
−Removed: Operating profit (loss):
+Added: Operating (loss) profit:
Coal Mining $ (4,697) $ 6,089 $ (9,059) $ 34,616
3 unchanged sentences
Eliminations (19) 103 (52) 365
−Removed: Total operating profit 1,750 29,683 3,564 44,627
+Added: Total operating (loss) profit
+Added: (6,267) 9,818 (2,703) 54,445
Interest expense 632 486 1,749 1,495
1 unchanged sentence
Closed mine obligations 394 398 1,236 1,155
−Removed: (Gain) loss on equity securities (421) 1,878 (1,049) 1,360
+Added: Loss (gain) on equity securities
+Added: 551 316 (498) 1,676
+Added: Income from equity method investee — (2,156) — (2,156)
Other contract termination settlements — — — (16,882)
1 unchanged sentence
Other income, net (417) (1,662) (4,478) (17,052)
−Removed: Income before income tax provision (benefit) 3,257 45,073 7,625 60,017
−Removed: Income tax provision (benefit) 737 7,893 (587) 10,255
−Removed: Net income $ 2,520 $ 37,180 $ 8,212 $ 49,762
+Added: (Loss) income before income tax (benefit) provision
+Added: (5,850) 11,480 1,775 71,497
+Added: Income tax (benefit) provision
+Added: (2,018) 866 (2,605) 11,121
+Added: Net (loss) income
+Added: $ (3,832) $ 10,614 $ 4,380 $ 60,376
Effective income tax rate 34.5 % 7.5 % (146.8) % 15.6 %
The components of the change in revenues and operating profit are discussed below in "Segment Results."
−Removed: Second Quarter of 2023 Compared with Second Quarter of 2022, and First Six Months of 2023 Compared with First Six Months of 2022
+Added: Third Quarter of 2023 Compared with Third Quarter of 2022, and First Nine Months of 2023 Compared with First Nine Months of 2022
Other (income) expense, net
−Removed: During the second quarter of 2022, GRE transferred ownership of an office building with an estimated fair value of $4.1 million
−Removed: and conveyed membership units in Midwest AgEnergy, LLC (“MAG”) with an estimated fair value of $12.8 million.
−Removed: The Company recognized a gain of $16.9 million on the "Other contract termination settlements" line within the accompanying Unaudited Condensed Consolidated Statements of Operations during the second quarter of 2022 as a result of the transactions with GRE.
+Added: Interest income increased in the third quarter of 2023 and the first nine months of 2023 compared with the respective 2022 periods primarily due to a higher average invested cash balance as well as an increase in interest rates.
+Added: Loss (gain) on equity securities represents changes in the market price of invested assets reported at fair value.
+Added: The change in the third quarter of 2023 and the first nine months of 2023 compared with the respective 2022 periods was due to fluctuations in the market prices of the exchange-traded equity securities.
+Added: See Note 5 to the Unaudited Condensed Consolidated Financial Statements for further discussion of equity securities.
+Added: During the first nine months of 2022, GRE transferred ownership of an office building with an estimated fair value of $4.1 million and conveyed membership units in Midwest AgEnergy, LLC (“MAG”) with an estimated fair value of $12.8 million.
+Added: The Company recognized a gain of $16.9 million on the "Other contract termination settlements" line within the accompanying
+Added: Unaudited Condensed Consolidated Statements of Operations during the first nine months of 2022 as a result of the transactions with GRE.
+Added: Prior to receiving the membership units from GRE, the Company held a $5.0 million investment in MAG.
+Added: Subsequent to the receipt of the additional membership units, the Company began to account for the investment under the equity method of accounting.
+Added: During the third quarter of 2022, the Company recorded $2.2 million, which represented its share of MAG's earnings on the "Income from equity method investee" line within the accompanying Unaudited Condensed Consolidated Statements of Operations.
On December 1, 2022, the Company transferred its ownership interest in MAG to HLCP Ethanol Holdco, LLC.
−Removed: The Company received a payment of $1.2 million in the first six months of 2023 in connection with a post-closing purchase price adjustment, which is included on the line "Other, net" within the accompanying Unaudited Consolidated Statements of Operations.
+Added: The Company received a payment of $1.2 million in the first nine months of 2023 in connection with a post-closing purchase price adjustment, which is included on the line "Other, net" within the accompanying Unaudited Condensed Consolidated Statements of Operations.
See Note 1 to the Unaudited Condensed Consolidated Financial Statements for further discussion of MAG.
−Removed: Interest income increased in the second quarter of 2023 and the first six months of 2023 compared with the respective 2022 periods primarily due to a higher average invested cash balance as well as an increase in interest rates.
−Removed: (Gain) loss on equity securities represents changes in the market price of invested assets reported at fair value.
−Removed: The change in the second quarter of 2023 and the first six months of 2023 compared with the respective 2022 periods was due to fluctuations in the market prices of the exchange-traded equity securities.
−Removed: See Note 5 to the Unaudited Condensed Consolidated Financial Statements for further discussion of equity securities.
The Company evaluates and updates its estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws.
−Removed: Consequently, based upon the mix and timing of actual earnings compared to projections of earnings between entities that benefit from percentage depletion and those that do not, the effective tax rate may vary quarterly.
+Added: Consequently, based upon the mix and timing of actual earnings compared to projections of earnings between entities that benefit from percentage depletion and those that do not, the effective tax rate may vary quarterly and may make quarterly comparisons not meaningful.
The benefit of percentage depletion is not directly related to the amount of consolidated pre-tax income recorded in a period.
2 unchanged sentences
LIQUIDITY AND CAPITAL RESOURCES OF NACCO
−Removed: The following tables detail NACCO's changes in cash flow for the six months ended June 30:
+Added: The following tables detail NACCO's changes in cash flow for the nine months ended September 30:
2023 2022 Change
6 unchanged sentences
Cash flow before financing activities $ 25,465 $ 15,691 $ 9,774
−Removed: The $17.2 million change in net cash provided by operating activities was primarily due to a $41.6 million decrease in net
−Removed: income partially offset by non-cash adjustments recognized during the first six months of 2022, including $16.9 million related to the termination and release of claims agreement between Falkirk and GRE.
−Removed: An unfavorable change in working capital also contributed to the reduction in net cash provided by operating activities.
+Added: The $8.1 million change in net cash provided by operating activities during the first nine months of 2023 was primarily due to a favorable change in working capital partially offset by a decrease in net income adjusted for non-cash items, primarily the $16.9 million related to the termination and release of claims agreement between Falkirk and GRE.
+Added: The favorable change in working capital was mainly the result of a reduction in the Federal income tax receivable during the first nine months of 2023 compared with an increase in the first nine months of 2022.
+Added: In addition, an increase in Accounts Payable during the first nine months of 2023 compared with a decrease in the first nine months of 2022 also contributed to the favorable change in working capital.
+Added: The increase in 2023 accounts payable is primarily due to $9.9 million related to equipment acquired for the Thacker Pass lithium project.
2023 2022 Change
2 unchanged sentences
Cash dividends paid (4,826) (4,488) (338)
+Added: Purchase of treasury shares (824) — (824)
Net cash used for financing activities $ (8,046) $ (8,942) $ 896
−Removed: The change in net cash used for financing activities was primarily due to fewer repayments during the first six months of 2023 compared with the first six months of 2022.
+Added: The change in net cash used for financing activities was primarily due to fewer debt repayments during the first nine months of 2023 compared with the first nine months of 2022, partially offset by the purchase of treasury shares during 2023.
Financing Activities
Financing arrangements are obtained and maintained at the NACCO Natural Resources level.
−Removed: NACCO Natural Resources is the Company's holding Company for NACoal, NAMining, Catapult and Mitigation Resources.
+Added: NACCO Natural Resources is the parent company for NACoal, NAMining, Catapult and Mitigation Resources.
NACCO Natural Resources has a secured revolving line of credit of up to $150.0 million (the “Facility”) that expires in November 2025.
−Removed: There were no borrowings outstanding under the Facility at June 30, 2023.
−Removed: At June 30, 2023, the excess availability under the Facility was $117.2 million, which reflects a reduction for outstanding letters of credit of $32.8 million.
+Added: There were no borrowings outstanding under the Facility at September 30, 2023.
+Added: At September 30, 2023, the excess availability under the Facility was $122.0 million, which reflects a reduction for outstanding letters of credit of $28.0 million.
NACCO has not guaranteed any borrowings of NACCO Natural Resources.
3 unchanged sentences
Borrowings bear interest at a floating rate plus a margin based on the level of debt to EBITDA ratio achieved.
−Removed: The applicable margins, effective June 30, 2023, for base rate and LIBOR loans were 1.23% and 2.23%, respectively.
+Added: The applicable margins, effective September 30, 2023, for base rate and LIBOR loans were 1.23% and 2.23%, respectively.
The Facility has a commitment fee which is based upon achieving various levels of debt to EBITDA ratios.
−Removed: The commitment fee was 0.34% on the unused commitment at June 30, 2023.
+Added: The commitment fee was 0.34% on the unused commitment at September 30, 2023.
The Facility contains restrictive covenants, which require, among other things, NACCO Natural Resources 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 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 Facility, of $15.0 million.
−Removed: At June 30, 2023, NACCO Natural Resources was in compliance with all financial covenants in the Facility.
+Added: At September 30, 2023, NACCO Natural Resources was in compliance with all financial covenants in the Facility.
The obligations under the Facility are guaranteed by certain of NACCO Natural Resource's direct and indirect, existing and future domestic subsidiaries, and is secured by certain assets of NACCO Natural Resources and the guarantors, subject to customary exceptions and limitations.
1 unchanged sentence
Expenditures for property, plant and equipment and mineral interests
−Removed: Expenditures for property, plant and equipment and mineral interests were $14.1 million during the first six months of 2023.
−Removed: Planned expenditures for the remainder of 2023 are expected to be approximately $26 million in the NAMining segment, $20 million in the Minerals Management segment, $7 million in the Coal Mining segment and less than $1.0 million in Unallocated Items.
−Removed: In the NAMining segment, 2023 capital expenditures are primarily related to the acquisition of equipment to be used at the
−Removed: Thacker Pass lithium project.
−Removed: Sawtooth is the contract miner for the Thacker Pass lithium project.
−Removed: Under the terms of the contract mining agreement, the customer will reimburse Sawtooth for these capital expenditures over a five-year period from the equipment acquisition date.
+Added: Expenditures for property, plant and equipment and mineral interests were $37.9 million during the first nine months of 2023, primarily for the acquisition of equipment to support the Thacker Pass lithium project.
+Added: Planned expenditures for the remainder of 2023 are expected to be approximately $5 million in the Coal Mining segment, $4 million in the NAMining segment, $37 million in the Minerals Management segment and less than $1 million in Unallocated Items.
+Added: In the Minerals Management segment, planned expenditures for the remainder of 2023 are primarily related to the acquisition of mineral and royalty interests in the oil-rich Permian basin.
+Added: Planned expenditures for 2024 are expected to be approximately $10 million in the Coal Mining segment, $8 million in the NAMining segment, $20 million in the Minerals Management segment and $1 million in Unallocated Items.
Expenditures are expected to be funded from internally generated funds and/or bank borrowings.
10 unchanged sentences
Debt to total capitalization 5% 4% 1%
−Removed: The increase in other net tangible assets at June 30, 2023 compared with December 31, 2022 was mainly the result of an
−Removed: increase in Trade accounts receivable due to higher sales at NAMining and Mitigation Resources as well as a decrease in Accrued payroll for payments made under the Company's incentive compensation plans during the first six months of 2023.
−Removed: These items were partially offset by a reduction in the Federal income tax receivable during the first six months of 2023.
+Added: The decrease in other net tangible assets at September 30, 2023 compared with December 31, 2022 was mainly the result of an increase in Accounts payable and a reduction in the Federal income tax receivable.
+Added: Accounts payable at September 30, 2023 includes $9.9 million related to equipment acquired for the Thacker Pass lithium project.
+Added: A decrease in Trade accounts receivable due to lower sales at the Coal Mining and Minerals Management segments during the third quarter of 2023 compared with the fourth quarter of 2022 also contributed to the decrease in other net tangible assets.
+Added: These items were partially offset by an increase in Property, plant and equipment during the first nine months of 2023.
Contractual Obligations, Contingent Liabilities and Commitments
4 unchanged sentences
FINANCIAL REVIEW
−Removed: Tons of coal delivered by the Coal Mining segment were as follows for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: Tons of coal delivered by the Coal Mining segment were as follows for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
2 unchanged sentences
Total tons delivered 5,733 7,960 18,144 21,458
−Removed: The results of operations for the Coal Mining segment were as follows for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: The results of operations for the Coal Mining segment were as follows for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
7 unchanged sentences
Amortization of intangible assets 642 867 2,296 2,772
−Removed: Loss (gain) on sale of assets 68 (1) (168) (1)
+Added: (Gain) loss on sale of assets — 2 (168) 1
Operating (loss) profit $ (4,697) $ 6,089 $ (9,059) $ 34,616
(a) See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of the Company's unconsolidated subsidiaries, including summarized financial information.
−Removed: Second Quarter of 2023 Compared with Second Quarter of 2022
−Removed: Revenues in the second quarter of 2023 were comparable to the second quarter of 2022.
−Removed: The following table identifies the components of change in operating (loss) profit for the second quarter of 2023 compared with the second quarter of 2022:
+Added: Third Quarter of 2023 Compared with Third Quarter of 2022
+Added: Revenues decreased 17.4% in the third quarter of 2023 compared with the third quarter of 2022 primarily due to a reduction in customer requirements at MLMC.
+Added: The following table identifies the components of change in operating (loss) profit for the third quarter of 2023 compared with the third quarter of 2022:
Operating (Loss) Profit
−Removed: 2022 $ 21,175
Increase (decrease) from:
−Removed: Contract termination settlement (14,000)
Gross profit, excluding inventory impairment charge (7,399)
−Removed: Earnings of unconsolidated operations (3,498)
Inventory impairment charge (2,421)
−Removed: Loss on sale of assets (69)
+Added: Earnings of unconsolidated operations (2,041)
Selling, general and administrative expenses 848
Amortization of intangibles 225
+Added: Loss on sale of assets 2
2023 $ (4,697)
−Removed: Operating (loss) profit decreased $25.9 million in the second quarter of 2023 compared with the second quarter of 2022.
−Removed: This decrease was primarily due to the non-recurrence of $14.0 million recognized in the second quarter of 2022 related to the contract termination settlement with GRE, a decrease in gross profit and a decrease in the earnings of unconsolidated operations, partially offset by lower selling, general and administrative expenses.
−Removed: The decrease in gross profit was primarily due to an increase in the cost per ton delivered at MLMC.
+Added: Operating (loss) profit decreased $10.8 million in the third quarter of 2023 compared with the third quarter of 2022 primarily due to decreases in gross profit and in the earnings of unconsolidated operations, partially offset by lower selling, general and administrative expenses.
+Added: The decrease in gross profit was primarily the result of an increase in the cost per ton delivered at MLMC.
The increase in cost per ton delivered at MLMC is due to costs associated with establishing operations in a new mine area and a reduction in the number of tons severed.
−Removed: The reduction in severed tons was due to adverse mining conditions caused by the amount of rain during the second quarter of 2023, as well as operational inefficiencies related to final mining activities at the existing mine area.
−Removed: Fewer tons severed caused a decrease in tons held in inventory since more tons were delivered than produced during the second quarter of 2023, which resulted in an increase in the cost per ton and a $1.8 million inventory impairment charge to write down coal inventory to its net realizable value.
−Removed: The decrease in the earnings of unconsolidated operations was primarily due to:
−Removed: • A reduction in earnings at Coteau due to reduced customer requirements and a change in price;
−Removed: • A reduction in the per ton management fee at Falkirk effective May 2022 through May 2024 to support the transition of the Coal Creek Station Power Plant to Rainbow Energy, as well as a reduction in customer requirements;
−Removed: • A reduction in earnings at Sabine, which ceased deliveries in the first quarter of 2023 and began final reclamation on April 1, 2023.
−Removed: These decreases in the earnings of unconsolidated operations were partly offset by improved results at Coyote Creek.
+Added: The reduction in severed tons was due to adverse mining conditions caused by the amount of rain during the third quarter of 2023, as well as operational inefficiencies related to final mining activities at the existing mine area.
+Added: Fewer tons severed caused a decrease in tons held in inventory since more tons were delivered than produced during the third quarter of 2023.
+Added: This resulted in an increase in the cost per ton and a $2.4 million inventory impairment charge to write down coal inventory to its net realizable value.
+Added: The decrease in the earnings of unconsolidated operations was primarily due to a reduction in customer requirements at Coteau.
The decrease in selling, general and administrative expenses was primarily due to lower employee-related costs.
−Removed: First Six Months of 2023 Compared with First Six Months of 2022
−Removed: Revenues in the first six months of 2023 were comparable to the first six months of 2022.
−Removed: The following table identifies the components of change in operating (loss) profit for the first six months of 2023 compared with the first six months of 2022:
+Added: First Nine Months of 2023 Compared with First Nine Months of 2022
+Added: Revenues decreased 6.4% in the first nine months of 2023 compared with the first nine months of 2022 primarily due to a reduction in customer requirements at MLMC.
+Added: The following table identifies the components of change in operating (loss) profit for the first nine months of 2023 compared with the first nine months of 2022:
Operating (Loss) Profit
1 unchanged sentence
Increase (decrease) from:
−Removed: Contract termination settlement (14,000)
Gross profit, excluding inventory impairment charges (19,406)
−Removed: Earnings of unconsolidated operations (4,358)
+Added: Contract termination settlement in 2022 (14,000)
Inventory impairment charges (6,641)
+Added: Earnings of unconsolidated operations (6,399)
Selling, general and administrative expenses 2,126
2 unchanged sentences
2023 $ (9,059)
−Removed: Operating (loss) profit decreased $32.9 million in the first six months of 2023 compared with the first six months of 2022 due to the non-recurrence of $14.0 million recognized in the second quarter of 2022 related to the contract termination settlement with GRE, a decrease in gross profit and a decline in the earnings of unconsolidated operations, partially offset by lower selling, general and administrative expenses.
+Added: Operating (loss) profit decreased $43.7 million in the first nine months of 2023 compared with the first nine months of 2022 due to a decrease in gross profit, the non-recurrence of $14.0 million recognized in the first nine months of 2022 related to the contract termination settlement with GRE and a decline in the earnings of unconsolidated operations.
+Added: These decreases were partially offset by lower selling, general and administrative expenses.
The decrease in gross profit was primarily due to an increase in the cost per ton delivered at MLMC.
The increase in cost per ton delivered at MLMC is due to costs associated with establishing operations in a new mine area and a reduction in the number of tons severed.
−Removed: The reduction in severed tons was due to adverse mining conditions caused by the amount of rain during the first six months of 2023, as well as operational inefficiencies related to final mining activities at the existing mine area.
−Removed: Fewer tons severed caused a decrease in tons held in inventory since more tons were delivered than produced during the first six months of 2023, which resulted in an increase in the cost per ton and $4.2 million of inventory impairment charges to write down coal inventory to its net realizable value.
−Removed: The decrease in the earnings of unconsolidated operations was primarily due to a reduction in the per ton management fee at Falkirk effective May 2022 through May 2024 to support the transition of the Coal Creek Station Power Plant to Rainbow Energy as well as a reduction in customer requirements.
−Removed: A reduction in earnings at Coteau due to reduced customer requirements also contributed to the decrease in the earnings of unconsolidated operations.
+Added: The reduction in severed tons was due to adverse mining conditions caused by the amount of rain during the first nine months of 2023, as well as operational inefficiencies related to final mining activities at the existing mine area.
+Added: Fewer tons severed caused a decrease in tons held in inventory since more tons were delivered than produced during the first nine months of 2023.
+Added: This resulted in an increase in the cost per ton and $6.6 million of inventory impairment charges to write down coal inventory to its net realizable value.
+Added: The decrease in the earnings of unconsolidated operations was primarily due to a reduction in the per ton management fee at Falkirk, effective May 2022 through May 2024, to support the transition of the Coal Creek Station Power Plant to Rainbow Energy.
+Added: A reduction in customer requirements at Coteau and Falkirk also contributed to the decrease in earnings.
These decreases were partly offset by improved results at Coyote Creek.
2 unchanged sentences
FINANCIAL REVIEW
−Removed: Tons delivered by the NAMining segment were as follows for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: Tons delivered by the NAMining segment were as follows for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
Total tons delivered 15,410 13,421 44,178 40,756
−Removed: The results of operations for the NAMining segment were as follows for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: The results of operations for the NAMining segment were as follows for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
9 unchanged sentences
Loss on sale of assets — — — 75
−Removed: Operating profit $ 2,214 $ 1,257 $ 3,044 $ 2,528
+Added: Operating profit (loss) $ 866 $ (210) $ 3,910 $ 2,318
(a) See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of the Company's unconsolidated subsidiaries, including summarized financial information.
−Removed: Second Quarter of 2023 Compared with Second Quarter of 2022
−Removed: Total revenues decreased 4.8% in the second quarter of 2023 compared with the second quarter of 2022 primarily due to a reduction in revenue from reclamation activities at Caddo Creek as a result of the Company's first-quarter 2023 acquisition of Marshall Mine, where Caddo Creek had been performing mine reclamation work.
−Removed: This decrease was partially offset by revenue from mining operations at an additional quarry added during the fourth quarter of 2022.
−Removed: The following table identifies the components of change in operating profit for the second quarter of 2023 compared with the second quarter of 2022:
−Removed: Operating Profit
+Added: Third Quarter of 2023 Compared with Third Quarter of 2022
+Added: Total revenues decreased 5.4% in the third quarter of 2023 compared with the third quarter of 2022 primarily due to a decrease in reimbursable costs, which have an offsetting amount in cost of sales and have no impact on operating profit, and a decrease in mine reclamation revenue at Caddo Creek.
+Added: These decreases were partially offset by an increase in customer requirements and tons delivered at the consolidated quarries.
+Added: The following table identifies the components of change in operating profit (loss) for the third quarter of 2023 compared with the third quarter of 2022:
+Added: Operating Profit (Loss)
Increase (decrease) from:
−Removed: Gross profit 601
+Added: Voluntary retirement program charge 769
Selling, general and administrative expenses 307
−Removed: Loss on sale of assets 80
Earnings of unconsolidated operations 207
−Removed: Operating profit increased $1.0 million in the second quarter of 2023 compared with the second quarter of 2022 primarily due to an increase in gross profit and a decrease in selling, general and administrative expenses.
−Removed: The increase in gross profit was due to higher earnings at the consolidated quarries as well as an increase in dragline part sales, partially offset by the absence of earnings associated with Caddo Creek reclamation activities.
+Added: Gross profit (207)
+Added: Operating profit increased $1.1 million in the third quarter of 2023 compared with the third quarter of 2022 primarily due to the absence of a voluntary retirement program charge and a decrease in selling, general and administrative expenses.
+Added: During the third quarter of 2022, the Company implemented a voluntary retirement program for employees who met certain age
+Added: and service requirements to reduce overall headcount.
+Added: As a result of this program, the third quarter 2022 operating loss includes
+Added: a charge of $0.8 million related to one-time termination benefits.
The decrease in selling, general and administrative expenses was mainly due to lower employee-related costs.
−Removed: First Six Months of 2023 Compared with First Six Months of 2022
−Removed: Total revenues decreased 4.2% in the first six months of 2023 compared with the first six months of 2022 primarily due to a reduction in revenue from reclamation activities at Caddo Creek as a result of the Company's first-quarter 2023 acquisition of Marshall Mine, where Caddo Creek had been performing mine reclamation work.
−Removed: The following table identifies the components of change in operating profit for the first six months of 2023 compared with the first six months of 2022:
+Added: First Nine Months of 2023 Compared with First Nine Months of 2022
+Added: Total revenues decreased 4.6% in the first nine months of 2023 compared with the first nine months of 2022 primarily due to a reduction in revenue from reclamation activities at Caddo Creek.
+Added: The Marshall Mine, where Caddo Creek had been performing mine reclamation work, was acquired by the Company in the first quarter of 2023.
+Added: A decrease in reimbursable costs, which have an offsetting amount in cost of sales and have no impact on operating profit, also contributed to the decrease in total revenues.
+Added: These decreases were partially offset by an increase in customer requirements and tons delivered at the consolidated quarries.
+Added: The following table identifies the components of change in operating profit for the first nine months of 2023 compared with the first nine months of 2022:
Operating Profit
Increase (decrease) from:
−Removed: Gross profit 239
+Added: Voluntary retirement program charge 769
Selling, general and administrative expenses 457
−Removed: Loss on sale of assets 75
Earnings of unconsolidated operations 259
−Removed: Operating profit increased $0.5 million in the first six months of 2023 compared with the first six months of 2022 primarily due to an increase in gross profit and a decrease in selling, general and administrative expenses.
−Removed: The increase in gross profit was due to higher earnings at the consolidated quarries as well as an increase in dragline part sales, partially offset by the absence of earnings associated with Caddo Creek reclamation activities.
+Added: Loss on sale of assets 75
+Added: Gross profit 32
+Added: Operating profit increased $1.6 million in the first nine months of 2023 compared with the first nine months of 2022 primarily due to the absence of a voluntary retirement program charge and a decrease in selling, general and administrative expenses.
+Added: During the third quarter of 2022, the Company implemented a voluntary retirement program for employees who met certain age
+Added: and service requirements to reduce overall headcount.
+Added: As a result of this program, the first nine months of 2022 operating profit includes a charge of $0.8 million related to one-time termination benefits.
The decrease in selling, general and administrative expenses was mainly due to lower employee-related costs.
+Added: In addition, the change in gross profit was due to higher earnings at the consolidated quarries as well as an increase in dragline part sales, largely offset by the absence of earnings associated with Caddo Creek reclamation activities.
MINERALS MANAGEMENT SEGMENT
FINANCIAL REVIEW
−Removed: The results of operations for the Minerals Management segment were as follows for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: The results of operations for the Minerals Management segment were as follows for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
3 unchanged sentences
Selling, general and administrative expenses 986 611 3,147 1,672
−Removed: Gain on sale of assets — (2,396) — (2,527)
+Added: Loss (gain) on sale of assets 87 — 87 (2,527)
+Added: Asset impairment charges — 3,939 — 3,939
Operating profit $ 3,610 $ 10,616 $ 16,943 $ 35,317
−Removed: During the second quarter of 2023 and the first six months of 2023, the oil and natural gas industry experienced a decline in commodity prices compared with the respective 2022 periods.
+Added: During the third quarter of 2023 and the first nine months of 2023, the oil and natural gas industry experienced a decline in commodity prices compared with the respective 2022 periods.
Oil and natural gas prices have been historically volatile and may continue to be volatile in the future.
−Removed: The table below demonstrates such volatility with the average price as reported by the United States Energy Information Administration for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: The table below demonstrates such volatility with the average price as reported by the United States Energy Information Administration for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
1 unchanged sentence
Henry Hub Average Natural Gas Price $ 2.59 $ 7.99 $ 2.47 $ 6.71
−Removed: Revenues and operating profit decreased significantly in the second quarter of 2023 and the first six months of 2023 compared with the respective 2022 periods, primarily due to substantially lower natural gas and oil prices and the recognition of less settlement income.
−Removed: The second quarter of 2023 and the first quarter of 2022 included $1.4 million and $2.1 million of settlement income, respectively.
+Added: Revenues and operating profit decreased significantly in the third quarter of 2023 and the first nine months of 2023 compared with the respective 2022 periods, primarily due to substantially lower natural gas and oil prices, as well as lower settlement
+Added: The first nine months of 2023 and the first nine months of 2022 included settlement income of $1.4 million and $2.1 million, respectively.
Settlement income relates to the Company’s ownership interest in certain mineral rights.
−Removed: In addition, operating profit in the second quarter of 2023 decreased due to a $2.4 million gain on the sale of land related to legacy operations during the second quarter of 2022.
+Added: In addition, operating profit in the first nine months of 2023 decreased due to a $2.4 million gain on the sale of land related to legacy operations recognized during the second quarter of 2022.
An increase in selling, general and administrative expenses, mainly due to higher employee-related costs, also contributed to the decrease in operating profit.
+Added: The Company regularly performs reviews of potential future development projects and identified certain legacy coal assets
+Added: where future development is unlikely.
+Added: The long-lived assets, which included land, prepaid royalties and capitalized leasehold
+Added: costs, were written off in the third quarter of 2022 and resulted in non-cash asset impairment charges of $3.9 million.
UNALLOCATED ITEMS AND ELIMINATIONS
FINANCIAL REVIEW
−Removed: Unallocated Items and Eliminations were as follows for the three and six months ended June 30:
−Removed: THREE MONTHS SIX MONTHS
+Added: Unallocated Items and Eliminations were as follows for the three and nine months ended September 30:
+Added: THREE MONTHS NINE MONTHS
2023 2022 2023 2022
Operating loss $ (6,046) $ (6,677) $ (14,497) $ (17,806)
−Removed: The operating loss in the second quarter of 2023 and the first six months of 2023 decreased compared with the respective 2022 periods due to higher earnings at Mitigation Resources and lower employee-related costs.
+Added: The operating loss in the third quarter of 2023 and the first nine months of 2023 decreased compared with the respective 2022 periods due to lower employee-related costs.
+Added: The first nine months of 2023 also included higher earnings at Mitigation Resources.
NACCO Industries, Inc.
Coal Mining Outlook
−Removed: Coal deliveries for second-half and full-year 2023 are expected to decrease from 2022 levels.
−Removed: The owner of the power plant served by the Company's Sabine Mine in Texas retired the Pirkey power plant, and as a result Sabine ceased deliveries March 31, 2023.
−Removed: This is the primary driver for the year-over-year declines in coal deliveries.
−Removed: Coal Mining operating profit and Segment Adjusted EBITDA are also expected to decrease significantly in both the 2023 second half and full year compared with the respective 2022 periods, including and excluding the contract termination payment received in 2022.
−Removed: The expected reduction in operating profit for the remainder of 2023 is primarily the result of reduced earnings at both the consolidated and unconsolidated Coal Mining operations.
−Removed: Results at the consolidated mining operations are projected to decrease significantly in the second half of 2023 from the comparable 2022 period.
−Removed: This expected decrease is mainly due to an expected substantial decline in earnings at MLMC from decreased customer demand and increased costs associated with establishing operations in a new mine area.
−Removed: The year-over-year decrease in second-half 2023 results is expected to be lower than the decrease experienced in the first half of 2023 because the anticipated inefficiencies of this project are expected to continue through the third quarter and then moderate beginning in the fourth quarter of 2023 and into 2024.
+Added: The Company expects fourth-quarter 2023 Coal Mining operating results and Segment Adjusted EBITDA to improve significantly compared with the 2023 third quarter but decline substantially from the 2022 fourth quarter.
+Added: The improvement in fourth-quarter 2023 over third-quarter 2023 results is primarily due to anticipated lower production costs from completion of the move to a new mine area at MLMC partially offset by anticipated higher Coal Mining operating expenses due to higher professional fees and outside services.
+Added: While production costs at MLMC are anticipated to decline significantly from recent levels, production costs are expected to remain above historical levels through 2024 when a pit extension in the new mine area is complete.
+Added: All production costs are capitalized into inventory at this mine.
+Added: Beginning in the 2023 fourth quarter, MLMC expects to increase the number of tons severed, which is anticipated to lead to an increase in coal inventory levels.
+Added: Higher inventory levels will allow costs to be spread over more tons, which is expected to result in a lower cost per ton sold and improved profitability beginning with the fourth quarter and going forward.
+Added: The fourth-quarter 2023 results at MLMC are expected to be below fourth-quarter 2022 despite the improvement in results over the previous 2023 quarters.
+Added: An anticipated increase in operating expenses is also expected to contribute to the lower fourth-quarter 2023 results.
MLMC does not anticipate opening additional mine areas through the remaining contract term.
−Removed: As a result, mine development capital expenditures are expected to moderate from 2024 through 2032.
While increased depreciation from capital expenditures related to the new mine area will affect future results, the Company anticipates MLMC should contribute favorably to Segment Adjusted EBITDA in future years.
−Removed: In 2023, capital expenditures are expected to be $11 million, with $7 million expended in the second half of 2023, primarily for mine development and equipment replacement.
−Removed: The anticipated reduction in earnings at the unconsolidated Coal Mining operations for the second half of 2023 from second half of 2022 is primarily due to the early retirement of the Pirkey power plant and commencement of final reclamation at the Sabine Mine, which began April 1, 2023.
−Removed: Sabine is receiving compensation for providing final mine reclamation services, but at a lower rate than during active mining.
−Removed: Funding for Sabine's mine reclamation is the responsibility of the customer.
−Removed: A decrease in earnings at Falkirk and Coteau is also expected to contribute to the lower earnings of unconsolidated operations.
+Added: Capital expenditures are expected to be approximately $5 million in the fourth quarter of 2023, $10 million for the 2023 full year, and $10 million in 2024.
+Added: Coal Mining Outlook - 2024
+Added: In 2024, the Company expects coal deliveries to increase moderately from 2023 levels.
+Added: Higher Coteau and Falkirk deliveries are expected to be partly offset by the unfavorable effect of the Pirkey Plant retirement and resulting March 31, 2023 cessation of coal deliveries from the Company's Sabine Mine.
+Added: Strong operating profit and significantly higher Segment Adjusted EBITDA are expected in 2024 compared with 2023.
+Added: increases are primarily the result of significant improvements in results at MLMC due to the anticipated reduction in cost per ton sold and an increase in earnings of unconsolidated operations.
+Added: Improvements are expected to be higher in the second half of 2024 as comparisons are made to much lower second-half 2023 results.
+Added: The anticipated higher earnings at the unconsolidated coal mining operations are expected to be driven primarily by increased customer requirements at Coteau and Falkirk, as well as a higher per ton management fee at Falkirk beginning in June 2024 when temporary price concessions end.
The Company's contract structure at each of its coal mining operations eliminates exposure to spot coal market price fluctuations.
However, fluctuations in natural gas prices, weather and the availability of renewable power generation, particularly wind, can contribute to changes in power plant dispatch and customer demand for coal.
−Removed: Changes to customer power plant dispatch would affect the Company’s outlook for the remainder of 2023, as well as over the longer term.
+Added: Changes to customer power plant dispatch would affect the Company’s outlook for the remainder of 2023 and 2024, as well as over the longer term.
NAMining Outlook
−Removed: NAMining expects operating profit and Segment Adjusted EBITDA to increase in both the 2023 second half and full year over the respective 2022 periods but decrease from the 2023 first half.
−Removed: The second-half increase over 2022 is primarily because the second half of 2022 included a $0.8 million charge related to a voluntary retirement program.
−Removed: A reduction in Caddo Creek earnings is expected to be offset by improvements at other NAMining operations.
−Removed: This anticipated improvement is due in part to profit improvement initiatives underway, as well as contributions from mining operations commencing at an additional quarry during the fourth quarter of 2022.
−Removed: In 2023, NAMining capital expenditures are expected to be $35 million, with $26 million expended in the second half of 2023, primarily for the acquisition of equipment to support the Thacker Pass lithium project.
+Added: NAMining expects fourth-quarter 2023 tons delivered to decrease modestly from 2022, while full-year 2023 tons delivered are expected to increase year-over-year as a result of the increased deliveries in the first nine months of 2023.
+Added: Operating profit and Segment Adjusted EBITDA are anticipated to increase significantly in both the 2023 fourth quarter and full year over the respective prior year periods.
+Added: These increases are primarily due to anticipated earnings improvement under existing contracts, including Sawtooth, partially offset by the completion of services at Caddo Creek.
+Added: In 2024, NAMining expects full-year operating profit and Segment Adjusted EBITDA to increase significantly over 2023 due to improved earnings under certain existing contracts, including Sawtooth, and an anticipated reduction in operating expenses.
+Added: Any new contracts should be accretive to NAMining's future results.
+Added: Sawtooth has an exclusive agreement to provide comprehensive mining services for the Thacker Pass lithium project in northern Nevada, owned by Lithium Nevada Corp., a subsidiary of Lithium Americas Corp.
+Added: Lithium Americas controls the lithium reserves at Thacker Pass.
+Added: In March 2023, Lithium Americas commenced construction at Thacker Pass.
+Added: With construction beginning, Sawtooth started acquiring mining equipment in the 2023 second quarter.
+Added: Sawtooth has acquired $23.1 million of equipment to-date.
+Added: While Lithium Americas will reimburse Sawtooth for these capital expenditures over a five-year period, Sawtooth will recognize the associated revenue over the estimated useful life of the asset.
+Added: In addition, during the construction period, Sawtooth will be reimbursed for all costs of construction and will recognize a contractually agreed construction fee.
+Added: The Company expects to continue to recognize moderate income prior to the expected commencement of Phase 1 lithium production in the second half of 2026.
+Added: NAMining expects full-year 2023 capital expenditures to be approximately $34 million, with approximately $4 million expended in the fourth quarter.
+Added: In 2024, capital expenditures are expected to be approximately $8 million, primarily for the acquisition of dragline parts and other equipment.
Minerals Management Outlook
1 unchanged sentence
Changing prices of natural gas and oil could have a significant impact on Minerals Management’s operating profit.
−Removed: Operating profit and Segment Adjusted EBITDA for the 2023 second half and full year are expected to decrease significantly compared with the respective 2022 periods.
+Added: In the 2023 fourth quarter and full year, operating profit and Segment Adjusted EBITDA are expected to continue to decrease significantly compared with the respective prior year periods.
These decreases are primarily driven by current market expectations for natural gas and oil prices.
−Removed: Based on current market expectations, operating profit in the second half is expected to decline moderately from the first half of 2023.
−Removed: The Company's forecast is based on current market assumptions for natural gas and oil market prices;
−Removed: however, commodity prices are inherently volatile.
−Removed: Growing economic uncertainty continues to drive commodity price volatility and any change in natural gas and oil prices from current expectations will result in adjustments to the Company's outlook.
+Added: In 2024, operating profit and Segment Adjusted EBITDA are expected to increase moderately compared with 2023 primarily driven by current market expectations for natural gas and oil prices and limited forecasted development of additional new wells by third-party lessees.
+Added: Lower operating expenses are also expected to contribute to the profit growth.
+Added: The Company's forecast is based on current market assumptions for natural gas and oil market prices, as well as currently owned reserves.
+Added: Commodity prices are inherently volatile.
+Added: Economic uncertainty continues to drive commodity price volatility and any change in natural gas and oil prices from current expectations will result in adjustments to the Company's outlook.
+Added: The Company is closely monitoring the Israel/Gaza conflict and its potential impact on OPEC countries and international oil and gas production and demand.
+Added: The actions of OPEC, inventory levels of natural gas and oil and the uncertainty associated with demand, as well as other factors, have the potential to impact future oil and gas prices.
+Added: Current merger and acquisition activity
+Added: within the oil and gas industry is also a focus as the Company works to understand its potential impact on development plans by third-party lessees.
As an owner of royalty and mineral interests, the Company’s access to information concerning activity and operations with respect to its interests is limited.
The Company's expectations are based on the best information currently available and could vary positively or negatively as a result of adjustments made by operators, additional leasing and development and/or changes to commodity prices.
−Removed: Development of additional wells on existing interests in excess of current expectations could be accretive to future results.
−Removed: In 2023, Minerals Management expects capital expenditures of approximately $21 million, which includes up to $20 million of additional investments during the second half of 2023 that align with the Company's strategy and objectives to establish a diversified portfolio of mineral and royalty interests.
+Added: Development of additional wells on existing interests in excess of current expectations, or acquisitions of additional interests, could be accretive to future results.
+Added: In 2023, Minerals Management expects capital expenditures of approximately $39 million, which includes the anticipated acquisition of approximately $37 million of mineral and royalty interests expected to close during the fourth quarter that will provide additional diversification into the oil-rich Permian basin.
+Added: The anticipated fourth quarter acquisition exceeds the previously announced capital expenditure projection as management believes it offers an attractive investment profile and aligns with the Company's strategy to establish a diversified portfolio of mineral and royalty interests.
+Added: In 2024, Minerals Management is targeting additional investments of up to $20 million.
Future investments are expected to be accretive, but each investment's contribution to near-term earnings is dependent on the details of that investment, including the size and type of interests acquired and the stage and timing of mineral development.
+Added: Mitigation Resources
+Added: Mitigation Resources continues to build on the substantial foundation it established over the past several years.
+Added: Mitigation Resources currently has nine mitigation banks and four permittee-responsible mitigation projects located in Tennessee, Mississippi, Alabama and Texas.
+Added: In addition, Mitigation Resources is providing ecological restoration services for abandoned surface mines, as well as pursuing additional environmental restoration projects.
+Added: It was named a designated provider of abandoned mine land restoration by the State of Texas.
+Added: Mitigation Resources plans to continue to expand its business during the remainder of 2023 and in 2024, and expects to achieve near break-even earnings in 2024 and sustainable profitability in future years.
Consolidated Outlook
−Removed: Overall, the Company expects consolidated results to continue to decrease in the third quarter before improving in the fourth quarter.
−Removed: The improvement in fourth quarter 2023 results will not offset the anticipated third quarter decline.
−Removed: Therefore, earnings in the second half of 2023 are expected to be lower than both the first half of 2023 and the second half of 2022, primarily driven by activity at the Minerals Management and Coal Mining segments.
−Removed: At Minerals Management, the decrease in the second half of 2023 is primarily driven by the expected continued reduction in commodity prices from 2022 price levels.
−Removed: At the Coal Mining segment, a higher cost per ton at MLMC is expected to reduce earnings in the second half of 2023, particularly the third quarter.
−Removed: In addition, a reduction in earnings from the unconsolidated mines is expected to contribute to the decrease.
−Removed: These reductions are expected to be partially offset by lower income tax expense.
−Removed: The Company expects a negative effective income tax rate between 5% and 10% for the 2023 full year.
−Removed: Management continues to view the long-term business outlook for NACCO positively, despite an expected significant decrease in full-year 2023 consolidated net income compared with 2022.
−Removed: In 2024 and beyond, the Coal Mining segment expects increased profitability compared with anticipated full-year 2023 results due in part to improvements at Falkirk and MLMC.
−Removed: At Falkirk, the temporary price concessions end in June 2024.
−Removed: At MLMC, the cost per ton delivered is expected to moderate once the move to the new mine area is complete in the second half of 2023.
−Removed: In addition, certain costs incurred at MLMC in 2023 will be passed through to the customer and included in revenues in 2024.
−Removed: Earnings from the Sawtooth lithium project are also expected to contribute to improved results in 2024 and 2025 and more significantly when production commences at Thacker Pass in 2026.
−Removed: Mitigation Resources of North America ® continues to build on the substantial foundation established over the past several years and currently has eight mitigation banks and four permittee-responsible mitigation projects located in Tennessee, Mississippi, Alabama and Texas.
−Removed: Mitigation Resources was named a designated provider of abandoned mine land restoration by the State of Texas.
−Removed: It plans to provide ecological restoration services for abandoned surface mines as well as pursue additional environmental restoration projects during the remainder of 2023.
−Removed: In 2023, the Company expects capital expenditures of approximately $68 million, which includes up to $20 million of investments at Minerals Management.
−Removed: As a result of the forecasted capital expenditures and anticipated substantial decrease in net income, cash flow before financing activities in 2023 is expected to be positive but decline significantly from 2022.
+Added: Overall, the Company expects that fourth-quarter 2023 improvements will produce operating profit and net income compared with consolidated third-quarter losses.
+Added: However, fourth-quarter and full-year 2023 consolidated operating results and Adjusted EBITDA are expected to be down significantly from the respective prior-year periods due to substantial decreases at the Coal Mining and Minerals Management segments.
+Added: These reductions are expected to be partially offset by favorable changes in income taxes leading to modest net income for the 2023 full year.
+Added: In 2024, the Company expects a significant increase in consolidated net income and EBITDA over 2023.
+Added: These improvements are primarily due to increased profitability at the Coal Mining segment from improved results at MLMC, Falkirk and Coteau.
+Added: Growth at NAMining and Mitigation Resources is also expected to contribute to the higher 2024 net income.
+Added: The Company expects an effective income tax rate between 10% and 13% in 2024.
+Added: Additional contracts for NAMining or Mitigation Resources or the acquisition of additional mineral interests at Minerals Management, including the $37 million investment expected to close in the 2023 fourth quarter, could be accretive to the current forecast.
+Added: Consolidated capital expenditures are expected to total approximately $84 million in 2023, which includes approximately $39 million at Minerals Management and $24 million related to the Thacker Pass lithium project.
+Added: As a result of the forecasted capital expenditures and anticipated substantial decrease in net income, cash flow before financing activities in 2023 is expected to be a moderate use of cash.
+Added: In 2024, the Company expects capital expenditures of approximately $39 million, including up to $20 million of investments at Minerals Management.
+Added: Cash flow before financing activities in 2024 is expected to be positive but not to the level generated in 2022.
Long-term Growth and Diversification
+Added: Management continues to view the long-term business outlook for NACCO positively.
The Company is pursuing growth and diversification by strategically leveraging its core mining and natural resources management skills to build a strong portfolio of affiliated businesses.
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The Minerals Management segment continues to pursue acquisitions of mineral and royalty interests in the United States.
−Removed: The Minerals Management segment expects to benefit from the continued development of its mineral properties without additional capital investment, as development costs are borne entirely by third-party exploration and development companies that lease the minerals.
−Removed: This business model can deliver higher average operating margins over the life of a reserve than traditional oil and gas companies that bear the cost of exploration, production and/or development.
Catapult, the Company’s business unit focused on managing and expanding the Company’s portfolio of oil and gas mineral and royalty interests, has developed a strong network to source and secure new acquisitions.
−Removed: The goal is to construct a high-quality diversified portfolio of oil and gas mineral and royalty interests in the United States that delivers near-term cash flow yields and long-term projected growth.
+Added: The goal is to construct a high-quality
+Added: diversified portfolio of oil and gas mineral and royalty interests in the United States that delivers near-term cash flow yields and long-term projected growth.
The Company believes this business will provide unlevered after-tax returns on invested capital in the mid-teens as this business model matures.
−Removed: The Company remains committed to expanding the NAMining business while improving profitability.
−Removed: NAMining intends to be a substantial contributor to operating profit over time.
−Removed: The pace of achieving that objective will depend on the execution and successful implementation of profit improvement initiatives in the aggregates operations, and the mix and scale of new projects.
−Removed: A number of initiatives are underway or in the planning stages that are expected to support the continuing improvement of financial results at these mining operations over time.
−Removed: Until profit improves at existing operations, NAMining has narrowed its business development efforts.
−Removed: Sawtooth has a mining services agreement to provide comprehensive mining services as the exclusive contract miner for the Thacker Pass lithium project in northern Nevada, owned by Lithium Nevada Corp., a subsidiary of Lithium Americas Corp.
−Removed: Lithium Americas controls the lithium reserves at Thacker Pass.
−Removed: On March 2, 2023, Lithium Americas announced that construction had commenced.
−Removed: Phase 1 production of lithium is projected to begin in the second half of 2026.
−Removed: Sawtooth began acquiring mining equipment for this project in the second quarter of 2023.
−Removed: Under the terms of the contract mining agreement, Lithium Americas will reimburse Sawtooth for these capital expenditures over a five-year period from the equipment acquisition date.
−Removed: Sawtooth will be reimbursed for all costs of mine construction plus a construction fee.
−Removed: The Company expects to continue to recognize moderate income prior to commencement of production in 2026.
+Added: This business model can deliver higher average operating margins over the life of a reserve than traditional oil and gas companies that bear the cost of exploration, production and/or development as these costs are borne entirely by third-party exploration and development companies that lease the minerals.
+Added: The Company remains committed to expanding the NAMining business while working to improve profitability.
+Added: NAMining intends to be a substantial contributor to operating profit over time, specifically in its Sawtooth subsidiary when production commences at Thacker Pass, which is projected to occur in 2026.
Once production commences, Sawtooth will receive a management fee per metric ton of lithium delivered.
At maturity, this contract is expected to deliver fee income similar to a mid-sized management fee coal mine.
−Removed: Mitigation Resources continues to expand its business, which creates and sells stream and wetland mitigation credits and provides services to those engaged in permittee-responsible mitigation as well as provides other environmental restoration services.
+Added: The pace of achieving substantially improved results at NAMining will depend on the execution and successful implementation of profit improvement initiatives in the aggregates operations, and the mix and scale of new projects.
+Added: A number of initiatives are already delivering improved financial results.
+Added: Mitigation Resources continues to expand its business, which creates and sells stream and wetland mitigation credits, provides services to those engaged in permittee-responsible mitigation and provides other environmental restoration services.
This business offers an opportunity for growth and diversification in an industry where the Company has substantial knowledge and expertise and a strong reputation.
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The Company continues to look for ways to create additional value by utilizing its core mining competencies which include reclamation and permitting.
−Removed: One such way the Company may be able to utilize these skills is through development of utility-scale solar projects on reclaimed mining properties.
+Added: The Company is working to utilize these skills through development of utility-scale solar projects on reclaimed mining properties.
Reclaimed mining properties offer large tracts of land that could be well-suited for solar and other energy-related projects.
−Removed: These projects could be developed by the Company itself or through joint
−Removed: ventures that include partners with expertise in energy development projects.
−Removed: In March 2023, the Company acquired 100% of the membership interests in the Marshall Mine, where Caddo Creek had been performing mine reclamation work.
−Removed: The Company is considering development of a utility-scale solar project at this location.
+Added: These projects could be developed by the Company itself or through joint ventures that include partners with expertise in energy development projects.
The Company is committed to maintaining a conservative capital structure as it continues to grow and diversify, while avoiding unnecessary risk.
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(1) changes to or termination of customer or other third-party contracts, or a customer or other third party default under a contract, (2) any customer's premature facility closure, (3) regulatory actions, including the United States Environmental Protection Agency's 2023 proposed rules relating to mercury and greenhouse gas emissions for coal-fired power plants, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (4) a significant reduction in purchases by the Company's customers, including as a result of changes in coal consumption patterns of U.S.
−Removed: electric power generators, or changes in the power industry that would affect demand for the Company's coal and other mineral reserves, (5) changes in the prices of hydrocarbons, particularly diesel fuel, natural gas, natural gas liquids and oil, (6) failure or delays by the Company's lessees in achieving expected production of natural gas and other hydrocarbons;
+Added: electric power generators, or changes in the power industry that would affect
+Added: demand for the Company's coal and other mineral reserves, (5) changes in the prices of hydrocarbons, particularly diesel fuel, natural gas, natural gas liquids and oil, (6) failure or delays by the Company's lessees in achieving expected production of natural gas and other hydrocarbons;
the availability and cost of transportation and processing services in the areas where the Company's oil and gas reserves are located;
4 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.