What changed in this filing

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Item 1A. Risk Factors

2024-03-06 compared with 2023-03-15 · 60 added, 61 removed, 277 unchanged (30% of the section changed)

9 unchanged sentences

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

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

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

The coal mining industry is subject to ongoing complex governmental regulations and legislation that could adversely impact the Company’s long-term mining contracts and the Company’s results of operations, liquidity, financial condition and cash flow.

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”).

Individual states administer some or all of the RCRA provisions.

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.

In the first quarter of 2023, the EPA 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.

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.

Falkirk is the sole supplier of lignite coal to Coal Creek Station.

Any suspension of operations at Coal Creek Station would eliminate the need for lignite coal during the suspension period.

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.

The EPA also has a comprehensive regulatory program to manage airborne emissions from coal-fired power plants.

During 2023, the EPA proposed updated rules related to mercury and greenhouse gas emissions from coal-fired power plants.

The first update was to the Mercury Air Toxics Standard, or MATS.

In this update, the EPA proposed to eliminate a mercury emission standard for lignite-fired power plants that currently permits higher mercury emissions by lignite plants than other coal plants.

In the event this rule is adopted as proposed, and not successfully legally challenged, it could result in the closure of many lignite-fired power plants, potentially including all of those supplied by the Company.

The second update was the EPA’s proposed new rule for greenhouse gas emissions from coal-fired power plants.

In this proposed new rule, the EPA requires that power plant owners that intend to operate the plants beyond 2031 utilize controls, including reduced levels of power generation, co-firing coal and natural gas and installing carbon capture and sequestration to reduce greenhouse gas emissions.

Each of these controls may impact the plant owners’ profitability and could result in the closure of coal-fired power plants, potentially including all of those supplied by the Company.

The closure of any of the power plants supplied by the Company could have a material adverse effect on the Company’s business, financial condition and results of operation.

The coal mining industry and the electric generation industry are subject to extensive regulation by federal, state and local authorities on matters concerning the health and safety of employees, land use, stream and wetland protection, permit and licensing requirements, air and water quality standards, plant and wildlife protection, reclamation and restoration of mining properties after mining, the discharge of GHGs and other materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability.

Legislation mandating certain benefits for current and retired coal miners also affects the industry.

Mining operations require numerous governmental and regulatory permits and approvals.

The Company is required to prepare and present to federal, state or local authorities data pertaining to the impact the production and combustion of coal may have upon the environment.

The public, including non-governmental organizations, opposition groups and individuals, have statutory rights to comment upon and submit objections to requested permits and approvals and to legally challenge certain permits subsequent to their issuance.

Compliance with these requirements is costly and time-consuming and may delay commencement or continuation of development or production.

New legislation and/or regulations and orders may materially adversely affect the Company's mining operations or its cost structure, or its customers.

All of these factors could significantly reduce the Company's profitability.

Business — Government Regulation" on page 8 in this Form 10-K for discussion of regulations that could materially adversely affect the Coal Mining segment.

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

9 unchanged sentences

As such, increased costs at MLMC or decreased revenues could materially reduce the Company's profitability.

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

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

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

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

Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including assumptions about future power plant dispatch levels, changes in operating costs and other factors that impact anticipated revenue and customer demand, requires significant judgment.

Actual future operating results could differ significantly from these estimates, which may result in an impairment charge in a future period, which could have a substantial impact on the Company’s results of operations.

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

3 unchanged sentences

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

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

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

The Coal Mining segment's Unconsolidated Subsidiaries are subject to risks created by changes in customer demand and inflationary adjustments.

3 unchanged sentences

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

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

power grid reliability issues, economic conditions or governmental regulations or comparable policies which may promote dispatch of power generated by renewable energy sources, such as wind or solar, and the realignment of customers' power generation portfolios that reduce the electric power generated from coal could have a material adverse effect on the Company's results of operations.

Because of the contractual price formulas for the management fees at these Unconsolidated Subsidiaries, the profitability of these operations is also subject to fluctuations in inflationary adjustments (or lack thereof) that can impact the agreed upon management fees.

11 unchanged sentences

Competition from natural gas-fired plants that are relatively more efficient, less expensive to construct and less difficult to permit than coal-fired plants has the most potential to continue to displace a significant amount of coal-fired electric power generation in the near term.

Federal and state mandates for increased use of electricity derived from renewable energy sources have also adversely affected demand for coal-fired electric power generation.

Federal and state mandates for increased use of electricity derived from renewable energy sources

have also adversely affected demand for coal-fired electric power generation.

Such mandates make alternative fuel sources more competitive with coal-fired electric power generation.

Changes in federal and state mandates that would include an acceleration in the use of electricity derived from renewable energy sources could result in a decrease in coal consumption by the electric power generation industry and the Company’s customers.

Certain of the Coal Mining segment’s customers, including MLMC's customer, benefit or have benefited from a tax credit under Section 45 of the Internal Revenue Code.

The benefit results in a reduction to the cost of coal-fired electric power generation.

The elimination or expiration of the Section 45 tax credit would increase the cost of the coal-fired electric power generation from these facilities and could result in the power these facilities produce being less economical than other sources of power generation, which could reduce demand and result in a decrease in coal consumption.

Any of these risks could result in a decrease in coal consumption by the Company’s customers and could have a material adverse effect on the Company’s business, financial condition and results of operations.

Government regulations could impose costly requirements on the Company and its customers.

Legislation mandating certain benefits for current and retired coal miners also affects the industry.

Mining operations require numerous governmental and regulatory permits and approvals.

The Company is required to prepare and present to federal, state or local authorities data pertaining to the impact the production and combustion of coal may have upon the environment.

Compliance with these requirements is costly and time-consuming and may delay commencement or continuation of development or production.

New legislation and/or regulations and orders may materially adversely affect the Company's mining operations or its cost structure, or its customers.

All of these factors could significantly reduce the Company's profitability.

Business — Government Regulation" on page 8 in this Form 10-K for further discussion.

The Company is subject to burdensome federal and state mining regulations and the assumptions underlying the Company's reclamation and mine closure obligations could be materially inaccurate.

4 unchanged sentences

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

The Clean Air Act could reduce the demand for coal.

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

The CAA and the corresponding state laws that extensively regulate the emissions of materials into the air affect coal mining operations both directly and indirectly.

Direct impacts on coal mining operations occur through CAA permitting requirements and/or emission control requirements relating to air contaminants, especially particulate matter.

Indirect impacts on coal mining operations occur through regulation of the air emissions of carbon dioxide, sulfur dioxide, nitrogen oxides, mercury, particulate matter and other compounds emitted by coal-fired power plants.

The EPA has discussed issuing or issued regulations that impose tighter emission restrictions on a number of these compounds, some of which are currently subject to litigation.

The general effect of tighter restrictions is to reduce demand for coal.

A reduction in coal’s share of the capacity for power generation could have a material adverse effect on the Company’s business, financial condition and results of operations.

Business — Government Regulation" on page 8 in this Form 10-K for further discussion.

The Coal Mining segment's customers' operations require significant capital expenditures.

41 unchanged sentences

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

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

NAMining’s operating expenses may continue to increase as the Company scales the NAMining business.

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

10 unchanged sentences

New mining projects can take up to several years to complete, are complex and require significant capital expenditures.

These projects are subject to significant risks, including delays, extreme weather events, unexpected increases in the cost of required materials, and disputes with third party providers of materials, equipment or services, and a completed project may not yield the anticipated operational or financial benefit, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

These projects are subject to significant risks, including delays or reductions in making capital expenditures by NAMining's customers, extreme weather events, unexpected increases in the cost of required materials, and disputes with third party providers of materials, equipment or services, and a completed project may not yield the anticipated operational or financial benefit, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

NAMining operations are currently geographically concentrated and therefore subject to regional economic risk, regulatory conditions, natural disasters, severe weather events or other circumstances affecting Florida.

6 unchanged sentences

The Company does not develop oil and gas reserves and is not a natural gas and oil producer.

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

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

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

3 unchanged sentences

In addition, if a lessee were to experience financial difficulty, the lessee might not be able to pay its royalty payments or continue operations.

A failure on the part of the lessee to make royalty payments gives the Company the right to terminate the lease, repossess the property and enforce payment obligations under the lease.

A failure on the part of the lessee to make royalty payments may give the Company the right to terminate the lease, repossess the property and enforce payment obligations under the lease.

If the Company repossessed any of its properties, it would seek a replacement lessee.

11 unchanged sentences

Natural gas wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production.

Decline rates can vary due to factors like well depth, well length, formation pressure, and facility design.

Decline rates can vary due to

factors like well depth, well length, formation pressure, and facility design.

Any of these risks could materially reduce the Company’s expected royalty income and the Company’s profitability.

18 unchanged sentences

domestic and foreign governmental regulations and taxes;

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

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

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

4 unchanged sentences

A substantial or extended decline in commodity prices may adversely affect the Minerals Management segment’s financial condition or results of operations.

The marketability of oil and natural gas production is dependent upon transportation, pipelines and refining facilities and continued operation of the U.S.

Any limitation in the availability of these items could interfere with our third-party lessee’s ability to market oil and natural gas production and may adversely affect the Minerals Management segment’s financial condition or results of operations.

The marketability of our third-party lessee’s production depends in part on the availability, proximity, and capacity of pipelines, tanker trucks, and other transportation methods, and processing and refining facilities owned by third parties as well as continued reliable operation of the U.S power grid.

Any significant disruption in the U.S.

power grid, gathering system or transportation, processing, or refining-facility capacity could reduce our third-party lessee’s ability to market oil production and may adversely affect the Minerals Management segment’s financial condition or results of operations.

Risks related to corporate structure

15 unchanged sentences

As a result of all of these factors, investors in the Company's common stock may not be able to resell their stock at or above the price they paid or at all.

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

Further, NACCO could

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

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

10 unchanged sentences

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

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

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

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

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

11 unchanged sentences

Although there is no voting agreement among such extended family members, in writing or otherwise, if they were to act in concert, they could control the outcome of director elections and other stockholder votes on significant corporate actions, such as certain amendments to the Company's certificate of incorporation and sales of the Company or substantially all of its assets.

Because certain members of the Company's extended founding family could prevent other stockholders from exercising significant influence over significant corporate actions, the Company may be a less attractive takeover target, which could adversely affect the market price of its common stock.

Because certain members of the Company's extended founding family could prevent

other stockholders from exercising significant influence over significant corporate actions, the Company may be a less attractive takeover target, which could adversely affect the market price of its common stock.

General Risk Factors

7 unchanged sentences

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

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

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

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

Certain financial institutions have taken actions to limit available financing to entities that produce or use fossil fuels.

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

An inability to obtain bank financing, or

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

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

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

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

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

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

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

Bond issuers may demand higher fees or additional collateral, including cash or letters of credit or other terms less favorable upon renewals.

As the Company is required by state and federal law to have bonds or other acceptable security in place before mining can commence or continue, the failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect NACCO's ability to mine.

As the Company is required by state and federal law to have bonds or other acceptable security in place before mining can commence or for certain projects to move forward, the failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect NACCO's ability to mine.

That failure could result from a variety of factors, including lack of availability, higher expense or unfavorable market terms, the exercise by third-party surety bond issuers of their right to refuse to renew the surety and restrictions on availability of collateral for current and future third-party surety bond issuers under the terms of the Company's financing arrangements.

In addition, as a result of increasing credit pressures on the coal industry, it is possible that surety bond providers could demand cash collateral as a condition to providing or maintaining surety bonds.

In addition, as a result of increasing credit pressures on the coal industry, it is possible that surety bond providers could demand other forms of collateral as a condition to providing or maintaining surety bonds.

Any such demands, could have a material adverse impact on the Company’s liquidity and financial position.

18 unchanged sentences

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

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

accountable for the effects of climate change.

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

32 unchanged sentences

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

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

The Company is continuously installing new and upgrading existing information

technology systems.

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

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

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

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

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

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

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

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

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

1 unchanged sentence

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

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors