What changed in this filing

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Item 9A. Controls and Procedures

2024-03-06 compared with 2023-03-15 · 404 added, 330 removed, 1268 unchanged (37% of the section changed)

37 unchanged sentences

4.1 The Company by this filing agrees, upon request, to file with the Securities and Exchange Commission the instruments defining the rights of holders of long-term debt of the Company and its subsidiaries where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis.

4.2 The Mortgage and Security Agreement, dated April 8, 1976, between The Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively, as Mortgagee) is incorporated herein by reference to Exhibit 4(ii) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172.

4.3 Amendment No.

1 to the Mortgage and Security Agreement, dated as of December 15, 1993, between Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively, as Mortgagee) is incorporated herein by reference to Exhibit 4(iii) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172.

4.2 Amended and Restated Stockholders' Agreement, dated as of September 29, 2017, among NACCO Industries, Inc., the other signatories thereto and NACCO Industries, Inc., as depository, is incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K, filed by the Company on October 5, 2017, Commission File Number 1-9172.

1 unchanged sentence

4.4 Second Amendment to Amended and Restated Stockholders' Agreement, dated as of February 12, 2021, by and among the Depository, NACCO Industries, Inc., the new Participating Stockholders identified on the signature pages thereto and the Participating Stockholders under the Amended and Restated Stockholders' Agreement, dated as of September 29, 2017, as amended, is incorporated by reference to Exhibit 99.60 of the Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on February 12, 2021, Commission File Number 1-9172.

4.7 Third Amendment to Amended and Restated Stockholders' Agreement, dated as of February 11, 2022, by and among the Depository, NACCO Industries, Inc., the new Participating Stockholders identified on the signature pages thereto and the Participating Stockholders under the Amended and Restated Stockholders' Agreement, dated as of September 29, 2017, as amended, is incorporated by reference to Exhibit 99.

62 of the Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on February 11, 2022, Commission File Number 1-9172.

4.5 Third Amendment to Amended and Restated Stockholders' Agreement, dated as of February 11, 2022, by and among the Depository, NACCO Industries, Inc., the new Participating Stockholders identified on the signature pages thereto and the Participating Stockholders under the Amended and Restated Stockholders' Agreement, dated as of September 29, 2017, as amended, is incorporated by reference to Exhibit 99.62 of the Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on February 11, 2022, Commission File Number 1-9172.

4.6 Fourth Amendment to Amended and Restated Stockholders' Agreement, dated as of February 10, 2023, by and among the Depository, NACCO Industries, Inc., the new Participating Stockholders identified on the signature pages thereto and the Participating Stockholders under the Amended and Restated Stockholders' Agreement, dated as of September 29, 2017, as amended, is incorporated by reference to Exhibit 99.67 of the Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on February 10, 2023, Commission File Number 1-9172.

4.7 Fifth Amendment to Amended and Restated Stockholders' Agreement, dated as of February 9, 2024, by and among the Depository, NACCO Industries, Inc., the new Participating Stockholders identified on the signature pages thereto and the Participating Stockholders under the Amended and Restated Stockholders' Agreement, dated as of September 29, 2017, as amended, is incorporated by reference to Exhibit 99.69 of the Company's General statement of acquisition of beneficial ownership on Form SC 13D, filed on February 12, 2024, Commission File Number 1-9172.

4.8 Description of Securities is incorporated herein by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Commission File Number 1-9172.

6 unchanged sentences

10.3* NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan (Amended and Restated March 1, 2023) is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on May 16, 2023, Commission File Number 1-9172.

10.4* Amendment No.

1 to NACCO Industries, Inc.

Executive Long-Term Incentive Compensation Plan (Amended and Restated March 1, 2023), dated as of February 20, 2024, is incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed by the Company on February 22, 2024, Commission File Number 1-9172.

10.5* NACCO Industries, Inc.

Non-Employee Directors' Equity Compensation Plan (Amended and Restated May 19, 2021) is incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed by the Company on May 19, 2021, Commission File Number 1-9172.

10.6* Amendment No.

1 to N ACCO Industries, Inc.

Non-Employee Directors' Equity Compensation Plan (Amended and Restated May 19, 2021) , dated as of February 20, 2024, is incorporated herein by reference to Exhibit 10.

1 to the Company's Current Report on Form 8-K, filed by the Company on February 22, 2024 , Commission File Number 1-9172.

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

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Executive Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Commission File Number 1-9172.

10.7 Separation Agreement, dated as of September 29, 2017, between NACCO Industries, Inc.

and Hamilton Beach Brands Holding Company, is incorporated by reference to Exhibit 10.1 of Hamilton Beach Brands Holding Company's Current Report on Form 8-K, filed on October 4, 2017, Commission File Number 1-9172.

10.8 Tax Allocation Agreement, dated as of September 29, 2017, between NACCO Industries, Inc.

and Hamilton Beach Brands Holding Company, is incorporated by reference to Exhibit 10.3 of Hamilton Beach Brands Holding Company's Current Report on Form 8-K, filed on October 4, 2017, Commission File Number 1-9172.

10.10 Consulting Agreement, dated as of September 29, 2017, between NACCO Industries, Inc.

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Rankin, Jr., is incorporated by reference to Exhibit 10.1 of NACCO Industries, Inc.'s Current Report on Form 8-K, filed on December 22, 2021, Commission File Number 1-9172.

10.13 Amendment to Consulting Agreement, dated as of December 19 , 202 3 , between NACCO Industries, Inc.

and Alfred M.

Rankin, Jr., is incorporated by reference to Exhibit 10.1 of NACCO Industries, Inc.'s Current Report on Form 8-K, filed on December 19 , 202 3 , Commission File Number 1-9172.

10.14* NACCO Industries, Inc.

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2 to The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, Commission File Number 1-9172.

Exhibit Number Exhibit Description

10.19 Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of January 1, 1990, is incorporated herein by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+

10.20 First Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of June 1, 1994, is incorporated herein by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+

Exhibit Number Exhibit Description

10.21 Second Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of January 1, 1997, is incorporated herein by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+

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10.34 Second Amendment to Coal Sales Agreement, by and between the Falkirk Mining Company and Rainbow Energy Center, LLC, dated August 5, 2022, is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed by the Company on November 2, 2022, Commission File Number 1-9172.

Exhibit Number Exhibit Description

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

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

Exhibit Number Exhibit Description

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

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

10.37 Third Restatement of Lignite Mining Agreement by and between The Sabine Mining Company and Southwestern Electric Power Company, dated as of January 1, 2008, is incorporated herein by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+

10.38 Amendment No.

1 to Third Restatement of Lignite Mining Agreement by and between The Sabine Mining Company and Southwestern Electric Power Company, dated as of October 18, 2013 is incorporated herein by reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.

10.39 Option Agreement by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of January 15, 1981, is incorporated herein by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

10.40 Addendum to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of January 15, 1981 is incorporated herein by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

10.41 Amendment to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of December 2, 1996, is incorporated herein by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

10.42 Second Amendment to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Regions Bank, dated as of January 1, 2008, is incorporated herein by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

10.43 Agreement by and among The North American Coal Corporation, Southwestern Electric Power Company, Texas Commerce Bank-Longview, Nortex Mining Company and The Sabine Mining Company, dated as of June 30, 1988, is incorporated herein by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.

10.39 Lignite Sales Agreement between Coyote Creek Mining Company, L.L.C.

12 unchanged sentences

5 to The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, Commission File Number I-9172.

Exhibit Number Exhibit Description

10.45* Amendment No.

9 unchanged sentences

Commission File Number 1-9172.

Exhibit Number Exhibit Description

(21**) Subsidiaries.

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LaBarre is attached hereto as Exhibit 24.3.

24.4** A copy of a power of attorney for W.

Paul McDonald is attached hereto as Exhibit 24.4.

24.5** A copy of a power of attorney for Michael S.

Miller is attached hereto as Exhibit 24.5.

24.5** A copy of a power of attorney for Richard de J.

Osborne is attached hereto as Exhibit 24.5.

24.6** A copy of a power of attorney for Alfred M.

6 unchanged sentences

Robinson is attached hereto as Exhibit 24.

24.10** A copy of a power of attorney for Valerie Gentile Sachs is attached hereto as Exhibit 24.

24.11** A copy of a power of attorney for Robert S.

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Taplin is attached hereto as Exhibit 24.1 2 .

Exhibit Number Exhibit Description

(31) Rule 13a-14(a)/15d-14(a) Certifications.

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

96.1** Technical Report Summary relating to the Mississippi Lignite Mining Company , effective date as of December 31, 2022.

96.1 Technical Report Summary relating to the Mississippi Lignite Mining Company, effective date as of December 31, 2022, is incorporated herein by reference to Exhibit 96.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, Commission File Number I-9172.

(97.1)** NACCO Industries, Inc.

Dodd-Frank Clawback Policy

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

15 unchanged sentences

Portions for which confidential treatment has been granted have been marked with three asterisks [***] and a footnote indicating "Confidential treatment requested".

Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

1 unchanged sentence

/s/ Elizabeth I.

Vice President and Controller

Senior Vice President and Controller

(principal financial and accounting officer)

3 unchanged sentences

/s/ Elizabeth I.

Loveman Vice President and Controller (principal financial and accounting officer) March 15, 2023

Loveman Senior Vice President and Controller

(principal financial and accounting officer) March 6, 2024

Dalrymple Director March 6, 2024

1 unchanged sentence

LaBarre Director March 6, 2024

Paul McDonald

Director March 6, 2024

Paul McDonald

Miller Director March 6, 2024

* Richard de J.

Osborne Director March 15, 2023

Richard de J.

Director March 6, 2024

2 unchanged sentences

Robinson Director March 6, 2024

* Valerie Gentile Sachs Director March 6, 2024

Valerie Gentile Sachs

Shapard Director March 6, 2024

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Balance Sheets

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We have audited the accompanying consolidated balance sheets of NACCO Industries, Inc.

and Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for the years then ended, and the related notes and the financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

and Subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows for each of the two years in the period ended December 31,2023, and the related notes and financial statement schedule listed in the Index at Item 15(b) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

11 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit review committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Falkirk VIE Reconsideration Event

Description of the Matter

As discussed in Note 1 to the consolidated financial statements, on May 2, 2022, Great River Energy (“GRE”) completed the sale of Coal Creek Station and the adjacent high-voltage direct current transmission line to Rainbow Energy Center, LLC (“Rainbow Energy”) and its affiliates.

While Falkirk meets the definition of a VIE, the completion of the Rainbow Energy transaction resulted in a VIE reconsideration event.

As the terms of the CSA between Falkirk and Rainbow Energy are substantially the same as the terms of the coal supply contract between Falkirk and GRE, Falkirk remains a VIE and Rainbow Energy is the primary beneficiary;

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

Auditing the disclosure of the terms of the transaction was especially complex in determining whether the completion of the Rainbow Energy transaction resulted in a VIE reconsideration event, a change in the conclusion that Falkirk meets the definition of a VIE and the determination of the primary beneficiary of the VIE.

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit review committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Unconsolidated subsidiaries – accounting for variable interest entities

Description of the Matter As discussed in Note 1 and 16 to the consolidated financial statements, certain of the operating coal mines and entities within the NAMining segment, collectively referred to as the “Unconsolidated Subsidiaries,” are variable interest entities (VIEs) and are accounted for under the equity method.

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

Although NACCO owns 100% of the equity and manages the daily operations of the Unconsolidated Subsidiaries, the Company has determined that the equity capital provided by NACCO is not sufficient to adequately finance the ongoing activities or absorb any expected losses without additional support from the customers.

The customers have a controlling financial interest and have the power to direct activities that most significantly affect the economic performance of the entities.

As a result, the Company is not the primary beneficiary and therefore does not consolidate these entities’ financial position or results of operations.

The Company regularly evaluates if there are reconsideration events which could change the Company's conclusion as to whether these entities meet the definition of a VIE and the determination of the primary beneficiary.

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

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

The Company also monitors for reconsideration events relating to the Unconsolidated Subsidiaries, which necessitates on-going critical judgments over whether any such events have arisen that require a re-evaluation of prior accounting judgments.

How We Addressed the Matter in Our Audit

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

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

We evaluated the significant terms of the contract and whether the agreement between Falkirk and Rainbow Energy resulted in a reconsideration event, a change in the conclusion that Falkirk meets the definition of a VIE and the determination of the primary beneficiary.

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

For those entities where the Company has determined it is not the primary beneficiary, we evaluated the Company’s accounting for and disclosure of the Unconsolidated Subsidiaries under the equity method in accordance with the generally accepted accounting principles.

To test the identification of reconsideration events, we obtained and inspected amendments to the agreements with customers, if any, and evaluated evidence from other parts of the audit to determine if a reconsideration event arose that necessitated a re-evaluation of previous accounting judgments.

These procedures included, among others, reading board minutes, inquiring of management about transactions or events that could require a reconsideration of previous consolidation conclusions and obtaining direct confirmation of the total annual support provided in accordance with the contractual arrangements from the customers.

MLMC Long-Lived Asset Impairment

Description of the Matter As discussed in Notes 2 and 9 of the consolidated financial statements, the Company evaluates if there are indicators of impairment for long-lived assets in accordance with ASC 360, Property, Plant, and Equipment .

The Company’s first step is to determine whether indicators of impairment exist in its long-lived assets at the lowest level at which individual cash flows can be identified.

If indicators of impairment are identified, the Company evaluates if the projected undiscounted cash flows to be generated by those assets are less than their carrying amounts.

When this is the case, the Company compares the estimated fair value to the carrying value of the asset group.

If fair value is less than carrying value, an impairment loss is recorded for the difference.

The Company determined that indicators of impairment existed at MLMC during the fourth quarter of 2023 and, as a result, MLMC's long-lived assets were reviewed for impairment.

The Company assessed the recoverability of the MLMC asset group and determined that the assets were not fully recoverable.

The Company estimated the fair value of the asset group.

The impairment charge was allocated to the long-lived assets of the asset group on a pro rata basis using the relative carrying amount of those assets.

For the year ended December 31, 2023, the Company recorded a long-lived asset impairment of $65.9 million.

Auditing the Company’s MLMC long-lived asset impairment was complex and involved a high degree of subjectivity due to the significant estimation required by management to determine the fair value of the long-lived asset group.

The Company measured the fair value of the asset group using observable and unobservable inputs.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process over the determination of the fair values of the MLMC asset group and measurement of the impairment charge.

These controls include, among others, management’s review of the selection of the valuation model, the determination and review of the fair value estimates, and management’s testing of the completeness and accuracy of the underlying data utilized to estimate the fair value of the asset group.

Our audit procedures included, among others, procedures to evaluate the selection of the valuation methodology used by management to determine the fair value of the asset group and to corroborate the fair value measurement of the long-lived assets using our specialists.

Further, we evaluated the Company’s disclosures related to the impairment of long-lived assets.

/s/ Ernst & Young LLP

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Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s report on internal control over financial reporting in Item 9A.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Amortization of intangible assets 2,998 3,719

Gain on sale of assets ( 2,463 ) ( 60 )

Asset impairment charges 3,939 —

Loss (gain) on sale of assets 221 ( 2,463 )

Long-lived asset impairment charge 65,887 3,939

134,722 69,106

Operating profit 69,986 55,410

Operating (loss) profit ( 70,137 ) 69,986

Other (income) expense

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Closed mine obligations 3,585 1,179

Loss (gain) on equity securities 283 ( 3,423 )

Income from equity method investee ( 2,194 ) —

(Gain) loss on equity securities ( 1,958 ) 283

Other contract termination settlements — ( 16,882 )

1 unchanged sentence

( 5,979 ) ( 17,737 )

Income before income tax provision 87,723 56,850

Income tax provision 13,565 8,725

Net income $ 74,158 $ 48,125

Earnings per share:

Basic earnings per share $ 10.14 $ 6.73

Diluted earnings per share $ 10.06 $ 6.69

(Loss) income before income tax (benefit) provision ( 64,158 ) 87,723

Income tax (benefit) provision ( 24,571 ) 13,565

Net (loss) income $ ( 39,587 ) $ 74,158

(Loss) earnings per share:

Basic (loss) earnings per share $ ( 5.29 ) $ 10.14

Diluted (loss) earnings per share $ ( 5.29 ) $ 10.06

Basic weighted average shares outstanding 7,478 7,312

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Year Ended December 31

(In thousands)

Net income $ 74,158 $ 48,125

Other comprehensive income

Current period pension and postretirement plan adjustment, net of $ 363 tax benefit and $ 864 tax expense in 2022 and 2021, respectively

Net (loss) income $ ( 39,587 ) $ 74,158

Other comprehensive (loss) income

Current period pension and postretirement plan adjustment, net of $ 615 and $ 363 tax

benefit in 2023 and 2022, respectively

( 2,118 ) ( 1,310 )

Reclassification of pension and postretirement adjustments into earnings, net of $ 140 and $ 170 tax benefit in 2022 and 2021, respectively

Total other comprehensive (loss) income ( 837 ) 3,423

Comprehensive income $ 73,321 $ 51,548

Pension settlement, net of $ 417 tax benefit in 2023

Reclassification of pension and postretirement adjustments into earnings, net of $ 24

and $ 140 tax benefit in 2023 and 2022, respectively

Total other comprehensive loss ( 641 ) ( 837 )

Comprehensive (loss) income $ ( 40,228 ) $ 73,321

See notes to the Consolidated Financial Statements.

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Inventories 77,000 71,488

Assets held for sale 6,466 285

Federal income tax receivable 845 15,687

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Intangibles, net 6,006 28,055

Investment in unconsolidated subsidiaries 14,927 19,090

Deferred income taxes 15,081 —

Investments in unconsolidated subsidiaries 12,371 14,927

Operating lease right-of-use assets 8,667 6,419

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Accounts payable to affiliates

Revolving credit agreements 10,000 —

Current maturities of long-term debt 3,953 3,649

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Operating Activities

Net income $ 74,158 $ 48,125

Net (loss) income $ ( 39,587 ) $ 74,158

Adjustments to reconcile net income to net cash provided by operating activities:

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Stock-based compensation 5,157 7,541

Gain on sale of assets ( 2,463 ) ( 60 )

Loss (gain) on sale of assets 221 ( 2,463 )

Inventory impairment charge 7,514 —

Other contract termination settlements — ( 15,552 )

Asset impairment charges 3,939 —

Long-lived asset impairment charge 65,887 3,939

Other 968 ( 791 )

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Proceeds from the sale of assets 561 2,837

Equity method investment ( 3,464 ) —

Proceeds from the sale of private company equity units 3,574 18,628

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Financing Activities

Net reductions to revolving credit agreement ( 4,000 ) ( 26,000 )

Net additions (reductions) to revolving credit agreement 10,000 ( 4,000 )

Additions to long-term debt 5,232 3,091

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Cash dividends paid ( 6,452 ) ( 6,012 )

Other — ( 1,755 )

Net cash used for financing activities ( 9,840 ) ( 33,173 )

Purchase of treasury shares ( 3,103 ) —

Net cash provided by (used for) financing activities 1,468 ( 9,840 )

Cash and Cash Equivalents

Total increase (decrease) for the year 24,743 ( 2,445 )

Total (decrease) increase for the year ( 25,639 ) 24,743

Balance at the beginning of the year 110,748 86,005

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Stock-based compensation 191 — 4,966 — — 5,157

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

Purchase of treasury shares ( 91 ) — — ( 3,012 ) — ( 3,103 )

Net income — — — ( 39,587 ) — ( 39,587 )

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Current period other comprehensive income, net of tax — — — — ( 2,118 ) ( 2,118 )

Pension settlement, net of tax — — — — 1,398 1,398

Reclassification adjustment to net income, net of tax — — — — 79 79

15 unchanged sentences

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

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

The Company has items not directly attributable to a reportable segment that are not included in the reported financial results of the operating segment.

These items primarily include administrative costs related to public company reporting requirements, including management and board compensation, and the financial results of Bellaire Corporation ("Bellaire"), Mitigation Resources and other developing businesses.

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

underground mining activities.

Intercompany accounts and transactions are eliminated in consolidation.

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Coal Mining Segment

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

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

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

Coal is surface mined in North Dakota and Mississippi.

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

As of December 31, 2022, the Company's operating coal mines were:

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

MLMC is the exclusive supplier of lignite to the Red Hills Power Plant in Ackerman, Mississippi.

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

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

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

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

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

On October 27, 2022, Southern Company disclosed in its Form 10-Q that it provided notice to the lessee, CGLP, to terminate the related operating and maintenance agreement effective June 30, 2023.

CGLP failed to make the semi-annual lease payment due December 15, 2022.

As a result, the Southern Company subsidiary was unable to make its corresponding payment to the debtholders.

The parties to the lease agreement are currently negotiating a potential restructuring, which could result in rescission of the termination notice.

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.

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.

On May 2, 2022, Great River Energy (“GRE”) completed the sale of Coal Creek Station and the adjacent high-voltage direct current transmission line to Rainbow Energy Center, LLC (“Rainbow Energy”) and its affiliates.

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

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

Falkirk continues to supply all coal requirements of Coal Creek Station and is paid a management fee per ton of coal delivered.

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

After May 31, 2024, the per ton management fee increases to a higher base in line with 2021 fee levels, and thereafter adjusts annually according to an index which tracks broad measures of U.S.

Rainbow Energy is responsible for funding all mine operating costs, including

As of December 31, 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").

Each of these mines supply lignite coal for power generation and delivers its coal production to an adjacent power plant or synfuels plant under a long-term supply contract.

MLMC’s coal supply contract contains a take or pay provision but contains a force majeure provision that allows for the temporary suspension of the take or pay provision during the duration of certain specified events beyond the control of either party;

all other coal supply contracts are requirements contracts.

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

The MLMC contract is the only operating coal contract in which the Company is responsible for all operating costs, capital requirements and final mine reclamation;

therefore, MLMC is consolidated within NACCO’s financial statements.

MLMC sells coal to its customer's Red Hills Power Plant at a contractually agreed-upon price which adjusts monthly, primarily based on changes in the level of established indices which reflect general U.S.

inflation rates.

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

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

The Red Hills Power Plant supplies electricity to the Tennessee Valley Authority (“TVA”) under a long-term power purchase agreement.

MLMC’s contract with its customer runs through April 1, 2032.

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

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

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

During 2023, MLMC completed mining in its original mine area and began mining in a new mine area.

The move to the new mine area resulted in increased costs during 2023.

MLMC does not anticipate opening additional mine areas through the remaining contract term unless doing so would result in improved economic returns.

On December 18, 2023, MLMC received a force majeure event notice from its customer related to an issue that began on December 15, 2023 and impacted one of two boilers at the Red Hills Power Plant.

The notice did not provide a timeline for resolution of the issue.

As of March 6, 2024, the impacted boiler is still not operational.

The prolonged mechanical issue is expected to result in a reduction in customer demand and will have a significant impact on the Company's results of operations during 2024.

The Company determined the anticipated reduction in customer demand caused by this issue was an indicator of

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mine reclamation, and directly or indirectly providing all of the capital required to operate the mine.

The initial production period is expected to run through May 1, 2032, but the CSA may be extended or terminated early under certain circumstances.

The Company recognized a gain of $ 30.9 million within the accompanying Condensed Consolidated Statements of Operations during the second quarter of 2022 as GRE paid NACoal $ 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 of $ 12.8 million, as agreed to under the termination and release of claims agreement between Falkirk and GRE.

Prior to receiving the membership units from GRE, the Company held a $ 5.0 million investment in the same privately-held company 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.

During the third quarter, 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 Consolidated Statements of Operations.

On December 1, 2022, HLCP Ethanol Holdco, LLC (“HLCP”) completed its acquisition of MAG.

Upon closing of the transaction, NACCO transferred its ownership interest in MAG to HLCP and received a cash payment of $ 18.6 million and recognized a $ 1.3 million loss during the fourth quarter of 2022 on the line "Other, net" within the accompanying Consolidated Statements of Operations.

The HLCP acquisition agreement includes two contingent earn-out arrangements under which additional payments are possible.

The first earn-out is based on the achievement of EBITDA targets through December 31, 2024.

The second earn-out is based on the development of a carbon dioxide pipeline that will support a carbon dioxide sequestration project over a four-year period commencing on the transaction closing date.

Additional payments to NACCO could range from $ 0 to approximately $ 13.6 million based on achievement of the two earn-outs as well as payment of amounts held in escrow.

Any future payments associated with the earn-outs or amounts held in escrow will be recognized when realized, consistent with the accounting for gain contingencies.

Sabine operates the Sabine Mine in Texas.

All production from Sabine is delivered to Southwestern Electric Power Company's (“SWEPCO”) Henry W.

potential impairment.

The Company reviewed MLMC's long-lived assets for impairment as of December 31, 2023 and determined the carrying amount of its long-lived assets were not recoverable.

As a result, the Company recorded a non-cash, long-lived asset impairment charge of $ 65.9 million in 2023.

See Note 9 to the Consolidated Financial Statements in this Form 10-K for further information on the impairment analysis.

The Sabine Mining Company (“Sabine”) operates the Sabine Mine in Texas.

All production from Sabine was delivered to

Southwestern Electric Power Company's (“SWEPCO”) Henry W.

Pirkey Plant (the “Pirkey Plant”).

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

AEP intends to retire the Pirkey Plant during March 2023.

Sabine expects deliveries to cease in March 2023 and final reclamation to begin on April 1, 2023.

Funding for mine reclamation is the responsibility of SWEPCO, and Sabine will receive compensation for providing mine reclamation services.

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

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

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

At all operating coal mines other than MLMC, 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.

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.

SWEPCO is an American

Electric Power (“AEP”) company.

As a result of the early retirement of the Pirkey Plant, Sabine ceased deliveries and final reclamation began on April 1, 2023.

Funding for mine reclamation is the responsibility of SWEPCO, and Sabine receives compensation for providing mine reclamation services.

Sabine will provide mine reclamation services through September 30, 2026.

On October 1, 2026, SWEPCO will acquire all of the capital stock of Sabine and complete the remaining mine reclamation.

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.

The customers are responsible for funding all mine operating costs, including final mine

reclamation, and directly or indirectly providing 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.

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

See Note 16 for further discussion of Coyote Creek's guarantees.

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

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

therefore, NACCO does not consolidate the results of these operations within its financial statements.

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

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

See Note 16 to the Consolidated Financial Statements in this Form 10-K for further discussion of Coyote Creek's guarantees.

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

In each case, NACCO

is not the primary beneficiary of the VIE as it does not exercise financial control;

therefore, NACCO does not consolidate the

results of these operations within its financial statements.

Instead, these contracts are accounted for as equity method

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

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

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

See Note 16 for further information on the Unconsolidated Subsidiaries.

While Falkirk meets the definition of a VIE, the completion of the Rainbow Energy transaction resulted in a VIE

reconsideration event.

As the terms of the CSA between Falkirk and Rainbow Energy are substantially the same as the terms

of the coal supply contract between Falkirk and GRE, Falkirk remains a VIE and Rainbow Energy is the primary beneficiary;

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

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

See Note 16 to the Consolidated Financial Statements in this Form 10-K for further information on the Unconsolidated Subsidiaries.

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

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

The MLMC contract is the only operating coal contract in which the Company is responsible for all operating costs, capital requirements and final mine reclamation;

therefore, MLMC is consolidated within NACCO’s financial statements.

MLMC sells coal to its customer at a contractually agreed-upon price which adjusts monthly, primarily based on changes in the level of established indices which reflect general U.S.

inflation rates.

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

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

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

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

MLMC’s contract with its customer runs through 2032.

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

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

NAMining Segment

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materials handling and processing, product sales and distribution.

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

As of December 31, 2022, NAMining operates mines in Florida, Texas, Arkansas, Indiana, Virginia and Nebraska and will serve as exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

As of December 31, 2023, NAMining operates in Florida, Texas, Arkansas, Virginia and Nebraska.

In addition, Sawtooth Mining, LLC ("Sawtooth") provides mining design, consulting and will be the exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

During December 2023, NAMining executed a 15-year contract to mine phosphate at a quarry in central Florida.

Production is expected to commence in the first half of 2024 once relocation and commissioning of a dragline is complete.

NAMining also amended and extended existing limestone contracts with two customers and expanded the scope of work with another customer.

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Certain of the entities within the NAMining segment are VIEs and are accounted for under the equity method as Unconsolidated Subsidiaries.

See Note 16 for further discussion.

See Note 16 to the Consolidated Financial Statements in this Form 10-K for further information on the Unconsolidated Subsidiaries.

Minerals Management Segment

The Minerals Management segment derives income primarily by leasing its royalty and mineral interests to third-party exploration and production companies, and, to a lesser extent, other mining companies, granting them the rights to explore, develop, mine, produce, market and sell gas, oil, and coal in exchange for royalty payments based on the lessees' sales of those minerals.

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

The Minerals Management segment owns royalty interests, mineral interests, non-participating royalty interests and overriding royalty interests.

• Royalty Interest.

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Typically, the resulting royalty interest is a cost-free percentage of production revenues for minerals extracted from the acreage.

A holder of royalty interests is generally not responsible for capital expenditures or lease operating expenses, but royalty interests may be calculated

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net of post-production expenses, and typically has no environmental liability.

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.

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

During 2023, Minerals Management completed an acquisition of $ 36.7 million of mineral and royalty interests in the Texas portion of the Permian Basin.

During 2022, Minerals Management acquired $ 11.4 million of mineral and royalty interests in the Texas portion of the Permian Basin and the Wyoming portion of the Powder River Basin as well as a small acquisition of mineral interests in the New Mexico portion of the Permian Basin.

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Total consideration for the 2023 and 2022 acquisitions of mineral and royalty interests was $ 36.7 million and $ 11.9 million, respectively.

The 2023 acquisition includes 43.4 thousand gross acres and 2.5 thousand net royalty acres.

The 2022 acquisitions included 13.6 thousand gross acres and 880 net royalty acres.

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

Total mineral and royalty interests included approximately 141.4 thousand gross acres and 60.8 thousand net royalty acres at December 31, 2022.

Total mineral and royalty interests include approximately 184.7 thousand gross acres and 63.3 thousand net royalty acres at December 31, 2023.

Net royalty acres are calculated based on the Company’s ownership and royalty rate, normalized to a standard 1/8 th royalty lease, and assumes a 1/4 th royalty rate for unleased acres.

See Note 18 for further discussion of Minerals Management.

The Company's acquisition criteria for building a blended portfolio of mineral and royalty interests includes (i) new wells anticipated to come online within one to two years of investment, (ii) areas with forecasted future development within five years after acquisition and (iii) existing producing wells further along the decline curve that will generate stable cash flow.

In addition, acquisitions should extend the geographic footprint to diversify across multiple basins with a preliminary focus on the more oil-rich Permian basin and a secondary focus on other diversifying basins to increase regional exposure.

While the current focus is on the acquisition of mineral and royalty interests, the Company would also consider investments in ORRIs, NPRIs or non-operating working interests under certain circumstances.

The current acquisition strategy does not contemplate any near-term working interest investments in which the Company would act as the operator.

The Company also manages legacy royalty and mineral interests located in Ohio (Utica and Marcellus shale natural gas), Louisiana (Haynesville shale and Cotton Valley formation natural gas), Texas (Cotton Valley and Austin Chalk formation natural gas), Mississippi (coal), Pennsylvania (coal, coalbed methane and Marcellus shale natural gas), Alabama (coal, coalbed methane and natural gas) and North Dakota (coal, oil and natural gas).

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

During 2023, the Board of Directors of the Company approved the termination of the Combined Defined Benefit Plan for NACCO and its subsidiaries (the “Combined Plan”) and Combined Plan participants were offered lump-sum distributions as part of the termination process.

As a result of the lump-sum distributions, the Company recognized a non-cash, pension settlement charge of $ 1.8 million on the line " Other, net " within the accompanying Consolidated Statements of Operations.

The $ 1.8 million charge represents a pro rata portion of the unrecognized net loss recorded in Accumulated other comprehensive loss.

See Note 14 to the Consolidated Financial Statements in this Form 10-K for further information on the Combined Plan.

On May 2, 2022, Great River Energy ("GRE") completed the sale of Coal Creek Station and the adjacent high-voltage direct current transmission line to Rainbow Energy Center, LLC (“Rainbow Energy”) and its affiliates.

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

Falkirk continues to supply all coal requirements of Coal Creek Station and is paid a management fee per ton of coal delivered.

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

After May 31, 2024, the per ton management fee increases to a higher base in line with 2021 fee levels, and thereafter adjusts annually according to an index which tracks broad measures of U.S.

Rainbow Energy is responsible for funding all mine operating costs, including mine reclamation, and directly or indirectly providing all of the capital required to operate the mine.

The initial production period is expected to run through May 1, 2032, but the CSA may be extended or terminated early under certain circumstances.

The Company recognized a gain of $ 30.9 million within the accompanying Consolidated Statements of Operations during 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 of $ 12.8 million, as agreed to under the termination and release of claims agreement between Falkirk and GRE.

The office building is included in assets held for sale at December 31, 2023.

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.

During 2022, the Company recorded $ 2.2 million, which represented its share of MAG's earnings on the "Other, net" line within the accompanying Consolidated Statements of Operations.

On December 1, 2022, HLCP Ethanol Holdco, LLC (“HLCP”) completed its acquisition of MAG.

Upon closing of the transaction, NACCO transferred its ownership interest in MAG to HLCP and received a cash payment of $ 18.6 million and recognized a $ 1.3 million loss in 2022 on the line "Other, net" within the accompanying Consolidated Statements of Operations.

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The Company received additional payments totaling $ 3.6 million during 2023 in connection with a post-closing purchase price adjustment and the release of amounts held in escrow recorded on the "Other, net" line within the accompanying Consolidated Statements of Operations.

NOTE 2— Significant Accounting Policies

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Depreciation, depletion and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under finance leases, over their estimated useful lives using the straight-line method or the units-of-production method.

Buildings and

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building improvements are depreciated over the life of the mine, which is generally 30 years.

Buildings and building improvements are depreciated over the life of the mine, which is generally 30 years.

Estimated lives for machinery and equipment range from three to 15 years.

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Fair value is estimated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

See Note 9 for further discussion of the Company's nonrecurring fair value measurements.

At MLMC, the costs of mining operations are not reimbursed by MLMC's customer.

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.

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

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

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.

A reduction in customer demand at MLMC, including reductions related to reduced mechanical availability of the customer’s power plant, could adversely affect

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the Company's operating results.

The costs of mining operations are not reimbursed by MLMC's customer.

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

The Company determined that indicators of impairment existed at MLMC during the fourth quarter of 2023 and, as a result, MLMC's long-lived assets were reviewed for impairment.

The Company assessed the recoverability of the MLMC asset group and determined that the assets were not fully recoverable when compared to the remaining future undiscounted cash flows from these assets.

As a result, the Company estimated the fair value of the asset group which resulted in a non-cash, long-lived asset impairment charge of $ 65.9 million in 2023.

See Note 9 for further discussion of the Company's impairment analysis.

Self-insurance Liabilities:

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Stock Compensation:

The Company maintains long-term incentive programs that allow for the grant of shares of Class A common stock, subject to restrictions, as a means of retaining and rewarding selected employees for long-term performance and

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to increase ownership in the Company.

Shares awarded under the plans are fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged or otherwise transferred during the restriction period.

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The Company also has a stock compensation plan for non-employee directors of the Company under which a portion of the annual retainer for each non-employee director is paid in restricted shares of Class A common stock.

For the year ended December 31, 2022, $ 110,000 ($ 150,000 for the Chairman) of the non-employee director's annual retainer of $ 175,000 ($ 250,000 for the Chairman) was paid in restricted shares of Class A common stock.

For the year ended December 31, 2021, $ 105,000 ($ 150,000 for the Chairman) of the non-employee director's annual retainer of $ 167,000 ($ 250,000 for the Chairman) was paid in restricted shares of Class A common stock.

For the year ended December 31, 2023 and 2022, $ 110,000 ($ 150,000 for the Chairman) of the non-employee director's annual retainer of $ 175,000 ($ 250,000 for the Chairman) was paid in restricted shares of Class A common stock.

Shares awarded under the plan are fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged, hypothecated or otherwise transferred during the restriction period.

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A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

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Described below are the three levels of inputs that may be used to measure fair value:

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See Note 9 for further discussion of fair value measurements.

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NOTE 3— Revenue Recognition

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

Included within NAMining, Caddo Creek has a fixed-price contract to perform mine reclamation.

The management service to perform mine reclamation is the performance obligation accounted for as a series.

Performance momentarily creates an asset that the customer simultaneously receives and consumes;

therefore, control is transferred to the customer over time.

Revenue from this contract is recognized over time utilizing the cost-to-cost method to measure the extent of progress toward completion of the performance obligation.

The Company believes the cost-to-cost method is the most appropriate method to measure progress and that the rate at which costs are incurred to fulfill the contract best depicts the transfer of control to the customer.

The extent of progress towards completion is measured based on the ratio of costs incurred to date compared to total estimated costs at completion, and revenue is recorded proportionally based on an estimated profit margin.

Revenue from part sales is recognized upon transfer of control of the parts to the customer.

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

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Performance momentarily creates an asset that the customer simultaneously receives and consumes;

therefore, control is transferred to the customer as work is completed.

Consistent with the conclusion that the customer simultaneously receives and

therefore, control is

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consumes the benefits provided, an input-based measure of progress is appropriate.

transferred to the customer as work is completed.

Consistent with the conclusion that the customer simultaneously receives and consumes the benefits provided, an input-based measure of progress is appropriate.

As each month of service is completed, revenue is recognized for the amount of actual costs incurred, plus the management fee or fixed fee.

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Index adjustments, if applicable, are effective prospectively.

Recognition of revenue and recognition of profit related to the Caddo Creek contract requires the use of assumptions and estimates related to the total contract value, the total cost at completion, and the measurement of progress towards completion of the performance obligation.

Due to the nature of the contract, developing the estimated total contract value and total cost at completion requires the use of significant judgment.

The total contract value includes variable consideration.

The Company includes variable consideration in the transaction price at the most likely amount to be earned, based upon the Company’s assessment of expected performance.

The Company records these amounts only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Cost Reimbursement

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

At the Thacker Pass lithium project, in addition to management fee income, the customer will reimburse Sawtooth for up to $ 50 million of capital expenditures.

The amount is variable until the equipment is acquired.

At the time the equipment is acquired, the variability is resolved as the compensation is fixed.

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.

Sawtooth acquired $ 23.3 million of equipment for this project during 2023.

In addition, Sawtooth recognized $ 4.9 million in revenue for reimbursable costs during the year ended December 31, 2023.

In accordance with the Thacker Pass agreement, the customer received a $ 3.5 million advance from Sawtooth, which is included in the long-term contract asset.

The customer will pay a $ 4.7 million success fee to Sawtooth upon achieving commercial mining milestones or repay the advance if such commercial mining milestones are not met.

Prior Period Performance Obligations

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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.

During 2023, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was $ 1.4 million.

During 2022, royalty income of $ 2.1 million was recognized for a settlement related to the Company's ownership interest in certain mineral rights.

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

Disaggregation of Revenue

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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 .

The Company expects to recognize $ 0.8 million in 2023, $ 1.5 million in 2024, $ 0.2 million in 2025, and de minimis amounts in 2026 and 2027 related to the contract liability remaining at December 31, 2022.

The Company expects to recognize $ 0.9 million in 2024, $ 1.3 million in 2025, $ 0.1 million in 2026, and less than $ 0.1 million in 2027 related to the contract liability remaining at December 31, 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.

10 unchanged sentences

The weighted average method is used for inventory valuation.

During 2023, the Company recorded a $ 7.5 million inventory impairment charge in the line “Cost of sales” in the accompanying Consolidated Statements of Operations as mining costs exceeded net realizable value at MLMC.

NOTE 5— Property, Plant and Equipment, Net

4 unchanged sentences

Property, plant and equipment, at cost 452,158 382,224

Less allowances for depreciation, depletion and amortization 164,272 142,466

Less allowances for depreciation, depletion, amortization and impairment

228,256 164,272

$ 223,902 $ 217,952

Total depreciation, depletion and amortization expense on property, plant and equipment was $ 26.4 million and $ 23.1 million during 2023 and 2022, respectively.

During the fourth quarter of 2023, the Company recorded a non-cash, long-lived asset impairment charge of $ 65.9 million.

See Note 9 for further discussion of the impairment charge.

NOTE 6— Intangible Assets

3 unchanged sentences

Amount Accumulated

Amortization Net

Amortization and Impairment Net

Balance at December 31, 2023

3 unchanged sentences

Amortization expense for intangible assets was $ 3.0 million and $ 3.7 million in 2023 and 2022, respectively.

Expected annual amortization expense of the coal supply agreement is $ 3.2 million in 2023, $ 3.1 million in 2024 and $ 3.0 million in 2025 through 2027.

During the fourth quarter of 2023,the Company recorded a non-cash, long-lived asset impairment charge of $ 65.9 million.

See Note 9 for further discussion of the impairment charge.

NOTE 7— Asset Retirement Obligations

The Company’s obligations associated with the retirement of long-lived assets are recognized at fair value at the time the legal

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

obligations are incurred.

3 unchanged sentences

If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The Company's asset retirement obligations are principally for costs to close its surface mines and reclaim the land it has disturbed as a result of its normal mining activities as well as for costs to dismantle certain mining equipment at the end of the life of the mine.

Management’s estimate involves a high degree of subjectivity.

In particular, the obligation’s fair value is determined using a discounted cash flow technique and is based upon mining permit requirements and various assumptions including credit adjusted risk-free-rates, estimates of disturbed acreage, life of the mine, estimated reclamation costs, the application of various environmental laws and regulation and assumptions regarding equipment productivity.

The Company reviews its asset retirement obligations at each mine site at least annually and makes necessary adjustments for permit changes and for revisions of estimates of the timing and extent of reclamation activities and cost estimates.

9 unchanged sentences

Balance at December 31, 2022 $ 28,460 $ 17,542 $ 46,002

Liabilities incurred during the period 1,920 — 1,920

Liabilities settled during the period ( 852 ) ( 1,048 ) ( 1,900 )

2 unchanged sentences

Balance at December 31, 2023 $ 33,044 $ 19,569 $ 52,613

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

underground coal mining operations.

These legacy liabilities include obligations for water treatment and other environmental remediation that arose as part of the normal course of closing these underground mining operations.

During 2023, the Company’s wholly-owned subsidiary, Caddo Creek Resources Company (“Caddo Creek”), acquired 100 % of the membership interests in the Marshall Mine.

Prior to the acquisition, Caddo Creek was performing mine reclamation under a fixed price contract with a customer.

The Company received $ 2.2 million of cash, assumed the asset retirement obligation estimated to be approximately $ 1.9 million and recognized a gain of approximately $ 0.3 million in the line "Other, net” in the accompanying Consolidated Statements of Operations.

The asset retirement obligation’s fair value was determined using a discounted cash flow technique and is based upon permit requirements and various estimates and assumptions that would be used by market participants, including estimates of disturbed acreage, reclamation costs and assumptions regarding equipment productivity.

Bellaire's legacy liabilities include obligations for water treatment and other environmental remediation that arose as part of the normal course of closing these underground mining operations.

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

Bellaire’s asset retirement obligation is included in the table above in the Unallocated Items column.

Prior to 2022, Bellaire established a $ 5.0 million Mine Water Treatment Trust to provide a financial assurance mechanism in order to assure the long-term treatment of post-mining discharges.

9 unchanged sentences

The following table summarizes the Company's available and outstanding borrowings:

Total outstanding borrowings of NACoal:

Total outstanding borrowings:

Revolving credit agreement $ 10,000 $ —

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Interest paid on total debt was $ 2.4 million and $ 2.0 million during 2023 and 2022, respectively.

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

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

There were no borrowings outstanding under the NACoal Facility at December 31, 2022.

At December 31, 2022, the excess availability under the NACoal Facility was $ 116.3 million, which reflects a reduction for outstanding letters of credit of $ 33.7 million.

The NACoal Facility has performance-based pricing, which sets interest rates based upon NACoal achieving various levels of debt to EBITDA ratios, as defined in the NACoal Facility.

The Company has a secured revolving line of credit of up to $ 150.0 million (the “Facility”) that expires in November 2025.

Borrowings outstanding under the Facility were $ 10.0 million at December 31, 2023.

At December 31, 2023, the excess availability under the Facility was $ 105.1 million, which reflects a reduction for outstanding letters of credit of $ 34.9 million.

The Facility has performance-based pricing, which sets interest rates based upon achieving various levels of debt to EBITDA ratios, as defined in the Facility.

Borrowings bear interest at a floating rate plus a margin based on the level of debt to EBITDA ratio achieved.

The applicable margins, effective December 31, 2022, for base rate and LIBOR loans were 1.23 % and 2.23 %, respectively.

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

The applicable margins, effective December 31, 2023, for base rate and Secured Overnight Financing Rate 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.

The commitment fee was 0.34 % on the unused commitment at December 31, 2023.

During the year ended December 31, 2022, the average borrowing under the NACoal Facility was $ 2.0 million.

During the year ended December 31, 2023, the average borrowing under the Facility was $ 6.2 million.

The weighted-average annual interest rate, including the floating rate margin, was 6.06 % and 2.54 % at December 31, 2023 and December 31, 2022, respectively.

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

The NACoal Facility provides the ability to make loans, dividends and advances to NACCO, with some restrictions based on maintaining a maximum debt to EBITDA ratio of 1.50 to 1.00, or if greater than 1.50 to 1.00, a Fixed Charge Coverage Ratio of 1.10 to 1.00, in conjunction

The Facility contains restrictive covenants, which require, among other things, maintaining 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 subsidiaries 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.

At December 31, 2023, the Company was in compliance with all financial covenants in the Facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

with maintaining unused availability thresholds of borrowing capacity, as defined in the NACoal Facility, of $ 15.0 million.

At December 31, 2022, NACoal was in compliance with all financial covenants in the NACoal Facility.

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

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

NACoal has a demand note payable to Coteau, one of the unconsolidated subsidiaries, which bears interest based on the applicable quarterly federal short-term interest rate as announced from time to time by the Internal Revenue Service.

The obligations under the Facility are guaranteed by certain direct and indirect, existing and future domestic subsidiaries, and is secured by certain assets and the guarantors, subject to customary exceptions and limitations.

The Company has a demand note payable to Coteau, one of the unconsolidated subsidiaries, which bears interest based on the applicable quarterly federal short-term interest rate as announced from time to time by the IRS.

At December 31, 2023 and 2022, the balance of the note was $ 7.0 million and $ 5.7 million and the interest rate was 5.12 % and 3.36 %, respectively.

NACoal has seven notes payable that are secured by twelve specified units of equipment, bear interest at a weighted average rate of 4.11 %, and expire at various dates through 2027.

The Company has eleven notes payable that are secured by sixteen specified units of equipment, bear interest at a weighted average rate of 5.42 %, and expire at various dates through 2029.

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

19 unchanged sentences

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

The Mine Water Treatment Trust realized a loss of $ 2.2 million and a gain of $ 1.7 million in the years ended December 31, 2022 and 2021, respectively.

The Mine Water Treatment Trust realized a gain of $ 1.6 million and a loss of $ 2.2 million in the years ended December 31, 2023 and 2022, respectively.

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

2 unchanged sentences

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

The Company recognized a gain of $ 1.9 million and $ 1.7 million in the years ended December 31, 2022 and 2021, related to the investment in these equity securities.

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 Consolidated Statements of Operations.

The Company recognized a gain of $ 0.4 million and $ 1.9 million in the years ended December 31, 2023 and 2022, respectively, related to the investment in these equity securities.

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 Consolidated Statements of Operations.

There were no transfers into or out of Levels 1, 2 or 3 during the year ended December 31, 2023.

Nonrecurring Fair Value Measurements:

On December 18, 2023, MLMC received a force majeure event notice from its customer related to an issue that began on December 15, 2023 and impacted one of the two boilers at the Red Hills Power Plant.

The notice did not provide a timeline for resolution of the issue.

As of March 6, 2024, the impacted boiler is still not

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

Nonrecurring Fair Value Measurements:

The Company recorded the estimated fair value of an office building during the second quarter of 2022.

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;

therefore, it is classified as Level 2 within the fair value hierarchy.

The office building is included in Property, plant and equipment, net in the accompanying Consolidated Balance Sheets.

The Company regularly performs reviews of potential future development projects and identified certain legacy assets where future development is unlikely.

The prolonged mechanical issue is expected to result in a reduction in customer demand and will have a significant impact on the Company's results of operations during 2024.

The Company determined the anticipated reduction in customer demand caused by this issue was an indicator that potential impairment existed as of December 31, 2023 and, as a result, reviewed MLMC's long-lived assets for impairment.

As a result, the Company estimated the fair value of the asset group which resulted in a non-cash, long-lived asset impairment charge of $ 65.9 million.

The asset impairment charge was recorded as Long-lived asset impairment charge in the Consolidated Statement of Operations for the year ended December 31, 2023.

The $ 65.9 million relates exclusively to MLMC;

however, $ 60.8 million and $ 5.1 million were recorded on the Coal Mining segment and the Minerals Management segment, respectively, as certain MLMC land assets were recorded within the Minerals Management segment.

The impairment charge was allocated to the long-lived assets of the asset group on a pro rata basis using the relative carrying amount of those assets in relation to their fair value.

The analysis for the land and real estate and other property, plant and equipment was calculated using market data for similar assets, which are classified as Level 2 inputs.

The analysis of certain other long-term assets was calculated using unobservable inputs with little or no market data, which are classified as Level 3 inputs.

The Company regularly performs reviews of potential future development projects and in 2022 identified certain legacy assets where future development is unlikely.

As a result, the Company estimated the fair value of the assets using unobservable inputs, which are classified as Level 3 inputs.

The long-lived assets, which included land, prepaid royalties and capitalized leasehold costs, were written off to zero in the third quarter of 2022 and resulted in non-cash asset impairment charges of $ 3.9 million in the Minerals Management segment.

The impairment charges are reported on the line Asset impairment charges in the Consolidated Statements of Operations.

The long-lived assets, which included land, prepaid royalties and capitalized leasehold costs, were written off to zero during 2022 and resulted in non-cash asset impairment charges of $ 3.9 million in the Minerals Management segment.

The impairment charge is reported on the line Long-lived asset impairment charge in the Consolidated Statements of Operations.

Other Fair Value Measurement Disclosures:

15 unchanged sentences

The Company's lease agreements do not contain lease payments that depend on an index or a rate, as such, minimum lease payments do not include variable lease payments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Leased assets and liabilities include the following at December 31:

6 unchanged sentences

Finance Long-term debt 84 19

(a) Finance leased assets are recorded net of accumulated amortization of $ 0.2 million and $ 0.3 million as of December 31, 2022 and December 31, 2021, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

(a) Finance leased assets are recorded net of accumulated amortization of less than $ 0.1 million and $ 0.2 million as of December 31, 2023 and December 31, 2022, respectively.

The components of lease expense for the years ended December 31 are as follows:

19 unchanged sentences

Present value of net minimum lease payments $ 112 $ 10,267

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

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

11 unchanged sentences

Financing cash flows from finance leases 786 183

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

NOTE 11— Contingencies

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Stock Repurchase Program:

On November 10, 2021, the Company's Board of Directors approved a stock purchase 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.

On November 7, 2023, the Company's Board of Directors approved a stock purchase program ("2023 Stock Repurchase Program") providing for the purchase of up to $ 20.0 million of the Company’s outstanding Class A

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

common stock through December 31, 2025.

NACCO's previous repurchase program ("2021 Stock Repurchase Program") would have expired on December 31, 2023 but was terminated and replaced by the 2023 Stock Repurchase Program.

During 2023, the Company repurchased 47,095 shares of Class A Common Stock under the 2021 Stock Repurchase Program for an aggregate purchase price of $ 1.6 million and 43,872 shares of Class A Common Stock under the 2023 Stock Repurchase Program for an aggregate purchase price of $ 1.5 million.

There were no stock repurchases in 2022.

The timing and amount of any repurchases under the 2023 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 2023 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.

There were no stock repurchases in 2022 or 2021 under the 2021 Stock Repurchase Program.

Stock Compensation:

3 unchanged sentences

Basic weighted average shares outstanding 7,478 7,312

Dilutive effect of restricted stock awards 61 44

Dilutive effect of restricted stock awards N/A 61

Diluted weighted average shares outstanding 7,478 7,373

Basic earnings per share $ 10.14 $ 6.73

Diluted earnings per share $ 10.06 $ 6.69

Basic (loss) earnings per share $ ( 5.29 ) $ 10.14

Diluted (loss) earnings per share $ ( 5.29 ) $ 10.06

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 unchanged sentences

Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

The components of Income before income tax provision and the Income tax provision for the years ended December 31 are as follows:

Income before income tax provision

The components of (Loss) income before income tax (benefit) provision and the Income tax (benefit) provision for the years ended December 31 are as follows:

(Loss) income before income tax (benefit) provision

Domestic $ ( 64,077 ) $ 87,975

1 unchanged sentence

$ ( 64,158 ) $ 87,723

Income tax provision

Current income tax provision (benefit):

Income tax (benefit) provision

Current income tax (benefit) provision:

Federal $ ( 3,405 ) $ 20,761

15 unchanged sentences

A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:

Income before income tax provision $ 87,723 $ 56,850

(Loss) income before income tax (benefit) provision $ ( 64,158 ) $ 87,723

Statutory taxes at 21.0% $ ( 13,473 ) $ 18,422

5 unchanged sentences

Other, net ( 701 ) ( 1,278 )

Income tax provision $ 13,565 $ 8,725

Income tax (benefit) provision $ ( 24,571 ) $ 13,565

Effective income tax rate 38.3 % 15.5 %

The Company recorded income tax expense of $ 13.6 million for the year ended December 31, 2022 on income before income tax of $ 87.7 million, or 15.5 %, compared to income tax expense of $ 8.7 million on income before income tax of $ 56.9 million, or 15.3 %, for the year ended December 31, 2021.

The Company recorded an income tax benefit of $ 24.6 million for the year ended December 31, 2023 on loss before income tax of $ 64.2 million, or 38.3 %, compared to income tax expense of $ 13.6 million on income before income tax of $ 87.7 million, or 15.5 %, for the year ended December 31, 2022.

The year ended December 31, 2023 included $ 4.0 million of discrete tax benefits, primarily from the reversal of uncertain tax provisions and the impact of U.S.

federal provision to return adjustments.

Excluding the $ 4.0 million of discrete tax benefit, the effective income tax rate in 2023 was 32.0 %.

The income tax provision for the year ended December 31, 2022 includes $ 1.5 million of discrete tax benefits, primarily from the reversal of uncertain tax positions as a result of the conclusion of the IRS examination of the Company’s 2013, 2014, 2015 and 2016 federal income tax returns.

Excluding the $ 1.5 million of discrete tax benefits, the effective income tax rate in 2022 was 17.1 %.

The year ended December 31, 2021 included $ 1.0 million of discrete tax expense.

Excluding the $ 1.0 million of discrete tax expense, the effective income tax rate in 2021 was 13.5 %.

The increase in the effective income tax rate for 2022 compared to 2021, excluding the impact of discrete items, is primarily due to an increase in earnings at entities that do not qualify for percentage depletion.

The change in the effective income tax rate for 2023 compared to 2022, excluding the impact of the long-lived asset impairment charge and discrete items, is primarily due to a decrease in earnings at entities that qualify for percentage depletion.

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

11 unchanged sentences

Land valuation adjustment 6,378 6,261

Partnership investment - development costs 12,565 —

Other 9,680 6,850

8 unchanged sentences

Total deferred tax liabilities 56,265 58,535

Net deferred liability $ ( 6,122 ) $ ( 14,714 )

Net deferred asset (liability) $ 15,081 $ ( 6,122 )

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:

29 unchanged sentences

Balance at January 1 $ 9,626 $ 10,554

Additions based on tax positions related to prior years — 95

Decreases based on settlements with tax authorities — ( 928 )

Decreases based on lapse of applicable statute of limitations ( 3,478 ) —

Balance at December 31 $ 6,148 $ 9,626

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

The Company recognized net expense of less than $ 0.1 million in interest and penalties related to uncertain tax positions during both 2022 and 2021.

The Company recognized net benefit of less than $ 0.1 million and net expense of less than $ 0.1 million in interest and penalties related to uncertain tax positions during 2023 and 2022, respectively.

The total amount of interest and penalties accrued was $ 0.2 million and $ 0.3 million as of December 31, 2023 and 2022, respectively.

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The Company maintains defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods.

Prior to 2021, the Company amended the Combined Defined Benefit Plan for NACCO Industries, Inc.

and its subsidiaries (the “Combined Plan”) to freeze pension benefits for all employees.

Prior to 2022, the Company amended Combined Plan to freeze pension benefits for all employees.

The Company also amended the Supplemental Retirement Benefit Plan (the “SERP”) to freeze all pension benefits.

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

During 2023, the Board of Directors of the Company approved the termination of the Combined Plan and participants were offered lump-sum distributions as part of the termination process.

As a result of the lump-sum distributions, the Company recognized a non-cash, pension settlement charge of $ 1.8 million on the "Other, net" line within the accompanying Consolidated Statements of Operations.

The $ 1.8 million charge represents a pro rata portion of the unrecognized net loss recorded in Accumulated other comprehensive loss.

The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:

4 unchanged sentences

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

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

Interest cost $ 1,639 $ 1,105

2 unchanged sentences

Amortization of prior service cost 58 58

Net periodic pension income $ ( 1,001 ) $ ( 789 )

Settlements 1,815 —

Net periodic pension expense (income) $ 812 $ ( 1,001 )

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

Current year actuarial (gain) loss $ 2,560 $ 1,717

Amortization of actuarial loss ( 51 ) ( 543 )

Amortization of prior service cost ( 58 ) ( 58 )

Settlements ( 1,815 ) —

Total recognized in other comprehensive loss $ 636 $ 1,116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

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

Current year actuarial (gain) loss $ 1,717 $ ( 3,793 )

Amortization of actuarial loss ( 543 ) ( 718 )

Amortization of prior service cost ( 58 ) ( 59 )

Total recognized in other comprehensive loss (income) $ 1,116 $ ( 4,570 )

The following table sets forth the changes in the benefit obligation and the plan assets during the year and the funded status of the defined benefit plans at December 31:

2 unchanged sentences

Interest cost 1,639 1,105

Actuarial gain ( 8,396 ) ( 1,367 )

Actuarial loss (gain) 2,261 ( 8,396 )

Benefits paid ( 2,614 ) ( 2,650 )

Settlements ( 4,651 ) —

Projected benefit obligation at end of year $ 28,357 $ 31,722

5 unchanged sentences

Benefits paid ( 2,614 ) ( 2,650 )

Settlements ( 4,651 ) —

Fair value of plan assets at end of year $ 30,128 $ 34,485

14 unchanged sentences

The Company's policy is to make contributions to fund its pension plans within the range allowed by applicable regulations.

The Company maintains one supplemental defined benefit plan that pays monthly benefits to participants directly out of corporate funds.

All other pension benefit payments are made from assets of the pension plans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

The Company maintains one supplemental defined benefit plan that pays monthly benefits to participants directly out of corporate funds.

All other pension benefit payments are made from assets of the pension plans.

Future pension benefit payments expected to be paid from assets of the pension plans are:

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The following is the actual allocation percentage and target allocation percentage for the pension plan assets at December 31:

Allocation 2021

Allocation 2022 Actual

Allocation Target Allocation

equity securities 44.9 % 48.7 % 36.0 % - 54.0 %

equity securities 20.5 % 19.7 % 16.0 % - 24.0 %

Fixed income securities 99.1 % 34.1 % 90.0 % - 100.0 %

Cash equivalents 0.3 % — % — % - 5.0 %

Money market funds 0.6 % 0.5 % 0.0 % - 10.0 %

equity securities — % 44.9 % 0.0 % - 0.0 %

equity securities — % 20.5 % 0.0 % - 0.0 %

The 2023 asset allocation reflects the move into fixed income securities to mitigate volatility prior to the termination of the Combined Plan.

The defined benefit pension plans do not have any direct ownership of NACCO common stock.

1 unchanged sentence

Following are the values as of December 31:

equity securities $ 15,499 $ 21,434

equity securities 7,055 8,678

Fixed income securities $ 29,866 $ 11,753

Cash equivalents 81 —

Money market funds 181 178

equity securities — 15,499

equity securities — 7,055

Total $ 30,128 $ 34,485

14 unchanged sentences

Rate to which the cost trend rate is assumed to decline (ultimate trend rate) 4.75 %

4.50 % - 4.75 %

Year that the rate reaches the ultimate trend rate 2029 - 2033

5 unchanged sentences

Net periodic benefit expense $ 78 $ 62

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

Current year actuarial gain $ ( 44 ) $ ( 48 )

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

Current year actuarial loss (gain) $ 173 $ ( 44 )

Amortization of actuarial loss ( 44 ) ( 64 )

Amortization of prior service credit 50 52

Transfers — 126

Total recognized in other comprehensive (income) loss $ ( 56 ) $ 113

Total recognized in other comprehensive loss (income) $ 179 $ ( 56 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7 unchanged sentences

Interest cost 77 38

Actuarial gain ( 44 ) ( 48 )

Actuarial loss (gain) 173 ( 44 )

Benefits paid ( 229 ) ( 332 )

20 unchanged sentences

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

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

All financial statement line items below operating profit (other income including interest expense and interest income, the provision for income taxes and net income) are presented and discussed within this Form 10-K on a consolidated basis.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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

stream and wetland mitigation.

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

underground mining activities.

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

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

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

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

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

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

7 unchanged sentences

NAMining customer 22 % 17 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The following tables present revenue, operating profit, depreciation expense and capital expenditures for the years ended December 31:

5 unchanged sentences

Total $ 214,794 $ 241,719

Operating profit (loss)

Operating (loss) profit

Coal Mining $ ( 71,342 ) $ 38,309

17 unchanged sentences

Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

NOTE 16— Unconsolidated Subsidiaries

5 unchanged sentences

See Note 1 for a discussion of these entities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

The Investment in the unconsolidated subsidiaries and related tax positions totaled $ 12.4 million and $ 14.9 million at December 31, 2023 and 2022, respectively.

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Income before income taxes represents the Earnings of the unconsolidated operations.

NACoal received dividends of $ 49.0 million and $ 51.7 million from the Unconsolidated Subsidiaries in 2022 and 2021, respectively.

The Company received dividends of $ 45.8 million and $ 49.0 million from the Unconsolidated Subsidiaries in 2023 and 2022, respectively.

NOTE 17— Related Party Transactions

1 unchanged sentence

Legal services rendered by Jones Day approximated $ 0.8 million and $ 1.0 million for the years ended December 31, 2023 and 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

serves as the Chairman of the Board of Directors of NACCO and supports the President and Chief Executive Officer of NACCO upon request under the terms of a consulting agreement.

Fees for consulting services rendered by Mr.

Rankin approximated $ 0.3 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively.

Rankin approximated $ 0.3 million for both of the years ended December 31, 2023 and 2022.

Hyster-Yale Materials Handling, Inc.

("Hyster-Yale") is a former subsidiary of the Company that was spun-off to stockholders in 2012.

Rankin is Chairman, President and Chief Executive Officer of Hyster-Yale Materials Handling and Chairman, Hyster-Yale Group.

In the ordinary course of business, NACoal leases or buys Hyster-Yale lift trucks.

Rankin is Executive Chairman of Hyster-Yale.

In the ordinary course of business, the Company leases or buys Hyster-Yale lift trucks.

The terms may not be comparable to terms that would be obtained in a transaction between unaffiliated parties.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

NOTE 18— Supplemental Oil and Gas Disclosures (Unaudited)

3 unchanged sentences

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

Capitalized Oil and Natural Gas Costs

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

4 unchanged sentences

Net royalty interests in oil and natural gas properties $ 64,841 $ 29,500

Oil and Natural Gas Reserves

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

12 unchanged sentences

Total 665,390 384,370 23,622,530

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Net reserves as of December 31, 2022

8 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NACCO INDUSTRIES, INC.

AND SUBSIDIARIES

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

Estimated Proved Reserves

12 unchanged sentences

December 31, 2023 665,390 384,370 23,622,530

One stock tank barrel, or 42 U.S.

gallons liquid volume.

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

(3) Revisions of previous estimates include technical revisions due to changes in commodity prices, historical and projected performance and other factors.

Estimated Proved Undeveloped Reserves ("PUDs")

7 unchanged sentences

Extensions and discoveries 5,786 2,021 14,814

( 29,757 ) ( 9,172 ) ( 1,770,232 )

Revisions of previous estimates (3)

8 unchanged sentences

As of December 31, 2023, PUD reserves consists of 45 wells in various stages of drilling or completions.

As of December 31, 2022, approximately 6 % of the Company's total proved reserves were classified as PUDs.

As of December 31, 2023, less than 1 % of the Company's total proved reserves were classified as PUDs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

30 unchanged sentences

Gross amounts

December 31, 2021 $ 36,839

January 1 $ 116,526 $ 36,839

Purchases 11,312 6,236

1 unchanged sentence

Revisions of previous estimates (3)(4)

( 61,206 ) 18,695

Conversions ( 16,773 ) ( 39 )

December 31 $ 61,278 $ 116,526

(3) Requirements for oil and gas reserve estimation and disclosure require that reserve estimates and future cash flows be based on the average market prices for sales of oil and gas on the first calendar day of each month during the year.

The benchmark price for WTI crude oil sold at Cushing, OK during 2023 and 2022 was $ 78.22 and $ 93.67 per bbl, respectively.

The benchmark price for natural gas delivered at Henry Hub during 2023 and 2022 was $ 2.64 and $ 6.36 per MMBTU, respectively.

Actual future prices and costs are likely to be substantially different from historical prices and costs utilized in the computation of reported amounts.

Any analysis or evaluation of the reported amounts should give specific recognition to the computational methods utilized and the limitations inherent therein.

(4) Revisions of previous estimates include technical revisions due to changes in commodity prices, historical and projected performance and other factors.

15 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures