NACCO INDUSTRIES INC 10-K

Item 9A . CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures: An evaluation was carried out under the supervision and with the participation of the Company's management, including the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, these officers have concluded that the Company's disclosure controls and procedures are effective. Management's report on internal control over financial reporting: Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation under the framework, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2023. The Company's effectiveness of internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is included in Item 15 of this Form 10-K and incorporated herein by reference. Changes in internal control: There have been no changes in the Company's internal control over financial reporting, that occurred during the fourth quarter of 2023, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Item 9B . OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 67 Table of Contents PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information with respect to Directors of the Company will be set forth in the 2024 Proxy Statement under the subheadings “Part III — Proposals To Be Voted On At The 2024 Annual Meeting — Proposal 1 — Election of Directors,” which information is incorporated herein by reference. Information with respect to the audit review committee and the audit review committee financial expert will be set forth in the 2024 Proxy Statement under the subheading “Part I — Corporate Governance Information — Directors' Meetings and Committees,” which information is incorporated herein by reference. Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors, executive officers and holders of more than ten percent of the Company's equity securities will be set forth in the 2024 Proxy Statement under the subheading “Part IV — Other Important Information,” which information is incorporated herein by reference. The Company has adopted a code of business conduct and ethics applicable to all Company personnel, including the principal executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar functions. The code of business conduct and ethics, entitled the “Code of Corporate Conduct,” is posted on the Company's website at www.nacco.com under “Corporate Governance.” If the Company makes any amendments to or grants any waivers from the code of business conduct and ethics which are required to be disclosed pursuant to the Securities and Exchange Act of 1934, the Company will make such disclosure on the NACCO website. Item 11. EXECUTIVE COMPENSATION Information with respect to executive compensation will be set forth in the 2024 Proxy Statement under the headings “Part II — Executive Compensation Information” and “Part III — Proposals To Be Voted On At The 2024 Annual Meeting — Proposal 1 — Election of Directors,” which information is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information with respect to security ownership of certain beneficial owners and management will be set forth in the 2024 Proxy Statement under the subheading “Part IV — Other Important Information — Beneficial Ownership of Class A Common and Class B Common,” which information is incorporated herein by reference. Information with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance will be set forth in the 2024 Proxy Statement under the subheading “Part IV — Other Important Information — Equity Compensation Plan Information," which information is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information with respect to certain relationships and related transactions will be set forth in the 2024 Proxy Statement under the subheadings “Part I — Corporate Governance Information — Review and Approval of Related-Person Transactions,” which information is incorporated herein by reference. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information with respect to principal accountant fees and services will be set forth in the 2024 Proxy Statement under the heading “Part III — Proposals To Be Voted On At The 2024 Annual Meeting — Proposal 4 — Ratification of the Appointment of Company's Independent Registered Public Accounting Firm,” which information is incorporated herein by reference. 68 Table of Contents PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) and (2) The response to Item 15(a)(1) and (2) is set forth beginning at page F-1 of this Form 10-K. (b) Financial Statement Schedules — The response to Item 15(c) is set forth beginning at page F-43 of this Form 10-K. (c) Exhibits required by Item 601 of Regulation S-K Exhibit Number Exhibit Description (3) Articles of Incorporation and By-laws. 3.1(i) Restated Certificate of Incorporation of the Company is incorporated herein by reference to Exhibit 3(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172. 3.1(ii) Amended and Restated By-laws of the Company are incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed by the Company on December 18, 2014, Commission File Number 1-9172. (4) Instruments defining the rights of security holders, including indentures. 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 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. 4.3 Amendment to Amended and Restated Stockholders' Agreement, dated as of February 14, 2019, among NACCO Industries, Inc., the other signatories thereto and NACCO Industries, Inc., as depository, is incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Commission File Number 1-9172. 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. 4.5 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. 69 Table of Contents Exhibit Number Exhibit Description (10) Material contracts 10.1* NACCO Industries, Inc. Supplemental Executive Long-Term Incentive Bonus Plan (Amended and Restated March 1, 2012) is incorporated herein by reference to Appendix B to NACCO's Definitive Proxy Statement, filed by NACCO on March 16, 2012, Commission File Number 1-9172. 10.2* NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan (Amended and Restated March 1, 2021) 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 19, 2021, Commission File Number 1-9172. 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. Supplemental Executive Long-Term Incentive Bonus Plan is incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172. 10.8* Form of Cashless Exercise Award Agreement for the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Commission File Number 1-9172. 10.9* Form of Non-Cashless Exercise Award Agreement for the NACCO Industries, Inc. 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. 10.10 Consulting Agreement, dated as of September 29, 2017, between NACCO Industries, Inc. and Alfred M. Rankin, Jr., is incorporated by reference to Exhibit 10.5 of NACCO Industries, Inc.'s Current Report on Form 8-K, filed on October 5, 2017, Commission File Number 1-9172. 10.11 Amendment to Consulting Agreement, dated as of December 15, 2020, 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 15, 2020, Commission File Number 1-9172. 10.12 Amendment to Consulting Agreement, dated as of December 21, 2021, 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 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. Short-Term Incentive Compensation Plan (Effective as of March 1, 2019) 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 13, 2019, Commission File Number 1-9172. 10.15* The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed by the Company on December 19, 2007, Commission File Number 1-9172. 10.16* Amendment No. 1 to The North America Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, Commission File Number 1-9172. 10.17* The North American Coal Corporation Annual Incentive Compensation Plan (Amended and Restated Effective March 1, 2015) is incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed by the Company on May 18, 2015, Commission File Number 1-9172. 10.18* Amendment No. 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. 70 Table of Contents 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.+ 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.+ 10.22 Option and Put Agreement by and among The North American Coal Corporation, Dakota Coal Company and the State of North Dakota, dated as of January 1, 1990, is incorporated herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172. 10.23 First Amendment to the Option and Put Agreement by and among The North American Coal Corporation, Dakota Coal Company and the State of North Dakota, dated as of June 1, 1994, is incorporated herein by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172. 10.24 Lignite Sales Agreement by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of April 1, 1998, is incorporated herein by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+ 10.25 First Amendment to Lignite Sales Agreement by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of August 30, 2016, 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 1, 2016, Commission File Number 1-9172. 10.26 Pay Scale Agreement by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of September 29, 2005, is incorporated herein by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172. 10.27 Consent and Agreement by and among Mississippi Lignite Mining Company, Choctaw Generation Limited Partnership, SE Choctaw L.L.C. and Citibank, N.A., dated as of December 20, 2002, is incorporated herein by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172. 10.28 Amendment No. 1 to Lignite Sales Agreement, Settlement Agreement and Release by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, LLLP, dated as of November 16, 2018, is incorporated herein by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Commission File Number 1-9172. 10.29 Amendment No. 2 to Lignite Sales Agreement, Settlement Agreement and Release by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, LLLP, dated as of November 24, 2021, is incorporated herein by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, Commission File Number 1-9172. 10.3 Termination Agreement and Release, by and among The Falkirk Mining Company, Great River Energy and NoDak Energy Investments Corporation, dated June 30, 2021, is incorporated herein by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172. 10.31 Amendment No. 1 to Termination Agreement and Release, by and between The Falkirk Mining Company, NoDak Energy Investments Corporation and Great River Energy, dated as of December 28, 2021, is incorporated herein by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, Commission File Number 1-9172. 10.32 *** Coal Sales Agreement, by and between The Falkirk Mining Company and Rainbow Energy Center, LLC, dated June 30, 2021, is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed by the Company on August 4, 2021, Commission File Number 1-9172. 10.33 First Amendment to Coal Sales Agreement, by and between The Falkirk Mining Company and Rainbow Energy Center, LLC, dated March 8, 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 May 4, 2022, Commission File Number 1-9172. 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. 71 Table of Contents Exhibit Number Exhibit Description 10.35 *** 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. 10.36 *** 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. 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. 10.39 Lignite Sales Agreement between Coyote Creek Mining Company, L.L.C. and Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co. and Northwestern Corporation dated as of October 10, 2012 is incorporated herein by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K, filed by the Company on March 6, 2013, Commission File Number 1-9172.++ 10.40 First Amendment to Lignite Sales Agreement, dated as of January 30, 2014, between Coyote Creek Mining Company, L.L.C. and Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc. and NorthWestern Corporation is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 8-K, filed by the Company on January 30, 2014, Commission File Number 1-9172. 10.41 Second Amendment to Lignite Sales Agreement, dated as of March 16, 2015, between Coyote Creek Mining Company, L.L.C. and Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., and NorthWestern Corporation is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on May 5, 2015, Commission File Number 1-9172. 10.42* Amendment No. 3 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 10.1 to the Company's Quarterly Report on Form 10-Q, filed by the Company on October 30, 2013, Commission File Number 1-9172. 10.43* Amendment No. 4 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 10.54 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172. 10.44* Amendment No. 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. 10.45* Amendment No. 6 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 10.52 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, Commission File Number I-9172. 10.46 Agreement, dated as of March 16, 2015, among The North American Coal Corporation, Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc. and Northwestern Corporation is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed by the Company on May 5, 2015, Commission File Number 1-9172 . 10.47 The North American Coal Corporation Excess Retirement Plan (Amended and Restated Effective January 1, 2020) is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on December 18, 2019, Commission File Number 1-9172. 10.48 Amended and Restated Credit Agreement by and among The North American Coal Corporation and the Guarantors party thereto and the Lenders party thereto and KeyBank National Association as Syndication Agent, PNC Bank National Association as Administrative Agent and KeyBanc Capital Markets Inc. and PNC Capital Markets LLC as Joint Lead Arrangers and Joint Bookrunners, dated as of November 12, 2021 is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on November 15, 2021, Commission File Number 1-9172. 10.49 Revolving Credit Commitment Increase Agreement, dated as of December 10, 2021 is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on December 13, 2021. Commission File Number 1-9172. 10.50 ESG Amendment to Amended and Restated Credit Agreement, dated as of June 30, 2022, is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on July 7, 2022. Commission File Number 1-9172. 72 Table of Contents Exhibit Number Exhibit Description (21**) Subsidiaries. A list of the subsidiaries of the Company is attached hereto as Exhibit 21. (23) Consents of experts and counsel. 23.1** Consents of experts and counsel. 23.2** Consent of Qualified Person. 23.3** Consent of Qualified Person. 23.4** Consent of experts and counsel. (24) Powers of Attorney. 24.1** A copy of a power of attorney for John S. Dalrymple is attached hereto as Exhibit 24.1. 24.2** A copy of a power of attorney for John P. Jumper is attached hereto as Exhibit 24.2. 24.3** A copy of a power of attorney for Dennis W. 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. 24.6** A copy of a power of attorney for Alfred M. Rankin, Jr. is attached hereto as Exhibit 24. 6 . 24.7** A copy of a power of attorney for Matthew M. Rankin is attached hereto as Exhibit 24. 7 . 24.8** A copy of a power of attorney for Roger F. Rankin is attached hereto as Exhibit 24. 8 . 24.9** A copy of a power of attorney for Lori J. Robinson is attached hereto as Exhibit 24. 9 . 24.10** A copy of a power of attorney for Valerie Gentile Sachs is attached hereto as Exhibit 24. 10 . 24.11** A copy of a power of attorney for Robert S. Shapard is attached hereto as Exhibit 24.1 1 . 24.12** A copy of a power of attorney for Britton T. Taplin is attached hereto as Exhibit 24.1 2 . 73 Table of Contents Exhibit Number Exhibit Description (31) Rule 13a-14(a)/15d-14(a) Certifications. 31(i)(1) ** Certification of J.C. Butler, Jr. pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)(1). 31(i)(2) ** Certification of Elizabeth I. Loveman pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)(2). (32)**** Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by J.C. Butler, Jr. and Elizabeth I. Loveman. (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, 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. (99.2**) Supplemental Figures Attachment. 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item15(b) of this Annual Report on Form 10-K. ** Filed herewith. *** Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed. **** Furnished herewith. + Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 and an Order from the Commission granting the Company's request for confidential treatment dated March 27, 2013. Portions for which confidential treatment has been granted have been marked with three asterisks [***] and a footnote indicating "Confidential treatment requested". ++ Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 and an Order from the Commission granting the Company's request for confidential treatment dated April 2, 2013. Portions for which confidential treatment has been granted have been marked with three asterisks [***] and a footnote indicating "Confidential treatment requested". Item 16. Form 10-K Summary None. 74 Table of Contents SIGNATURES 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. NACCO Industries, Inc. By: /s/ Elizabeth I. Loveman Elizabeth I. Loveman Senior Vice President and Controller (principal financial and accounting officer) March 6, 2024 75 Table of Contents Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ J.C. Butler, Jr. President and Chief Executive Officer (principal executive officer) March 6, 2024 J.C. Butler, Jr. /s/ Elizabeth I. Loveman Senior Vice President and Controller (principal financial and accounting officer) March 6, 2024 Elizabeth I. Loveman *John S. Dalrymple Director March 6, 2024 John S. Dalrymple * John P. Jumper Director March 6, 2024 John P. Jumper * Dennis W. LaBarre Director March 6, 2024 Dennis W. LaBarre * W. Paul McDonald Director March 6, 2024 W. Paul McDonald * Michael S. Miller Director March 6, 2024 Michael S. Miller * Alfred M. Rankin, Jr. Director March 6, 2024 Alfred M. Rankin, Jr. * Matthew M. Rankin Director March 6, 2024 Matthew M. Rankin * Roger F. Rankin Director March 6, 2024 Roger F. Rankin *Lori J. Robinson Director March 6, 2024 Lori J. Robinson * Valerie Gentile Sachs Director March 6, 2024 Valerie Gentile Sachs *Robert S. Shapard Director March 6, 2024 Robert S. Shapard * Britton T. Taplin Director March 6, 2024 Britton T. Taplin * Elizabeth I. Loveman, by signing her name hereto, does hereby sign this Form 10-K on behalf of each of the above named and designated directors of the Company pursuant to a Power of Attorney executed by such persons and filed with the Securities and Exchange Commission. /s/ Elizabeth I. Loveman March 6, 2024 Elizabeth I. Loveman, Attorney-in-Fact 76 Table of Contents ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 15(a)(1) AND (2), AND ITEM 15(c) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 2023 NACCO INDUSTRIES, INC. CLEVELAND, OHIO F-1 Table of Contents FORM 10-K ITEM 15(a)(1) AND (2) NACCO INDUSTRIES, INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of NACCO Industries, Inc. and Subsidiaries and the reports of the Company's independent registered public accounting firm (PCAOB ID: 42 ) are incorporated by reference in Item 8: Report of Ernst & Young LLP, Independent Registered Public Accounting Firm — For each of the two years in the period ended December 31, 2023. F- 3 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting — As of December 31, 2023. F- 6 Consolidated Statements of Operations F- 7 Consolidated Statements of Comprehensive (Loss) Income F- 8 Consolidated Balance Sheets F- 9 Consolidated Statements of Cash Flows F- 10 Consolidated Statements of Equity F- 11 Notes to Consolidated Financial Statements F- 12 The following consolidated financial statement schedules of NACCO Industries, Inc. and Subsidiaries are included in Item 15(c): Schedule II — Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the SEC are not required under the related instructions or are inapplicable, and therefore have been omitted. F-2 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of NACCO Industries, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of NACCO Industries, Inc. 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. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 6, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 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. F-3 Table of Contents 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 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. F-4 Table of Contents 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 We have served as the Company’s auditor since 2002. Cleveland, Ohio March 6, 2024 F-5 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of NACCO Industries, Inc. Opinion on Internal Control Over Financial Reporting We have audited NACCO Industries, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, NACCO Industries, Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2023 consolidated financial statements of the Company and our report dated March 6, 2024 expressed an unqualified opinion thereon. 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Cleveland, Ohio March 6, 2024 F-6 Table of Contents NACCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31 2023 2022 (In thousands, except per share data) Revenues $ 214,794 $ 241,719 Cost of sales 200,203 173,877 Gross profit 14,591 67,842 Earnings of unconsolidated operations 49,994 57,250 Contract termination settlement — 14,000 Operating expenses Selling, general and administrative expenses 65,616 63,911 Amortization of intangible assets 2,998 3,719 Loss (gain) on sale of assets 221 ( 2,463 ) Long-lived asset impairment charge 65,887 3,939 134,722 69,106 Operating (loss) profit ( 70,137 ) 69,986 Other (income) expense Interest expense 2,460 2,034 Interest income ( 6,081 ) ( 1,449 ) Closed mine obligations 3,585 1,179 (Gain) loss on equity securities ( 1,958 ) 283 Other contract termination settlements — ( 16,882 ) Other, net ( 3,985 ) ( 2,902 ) ( 5,979 ) ( 17,737 ) (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 Diluted weighted average shares outstanding 7,478 7,373 See notes to the Consolidated Financial Statements. F-7 Table of Contents NACCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME Year Ended December 31 2023 2022 (In thousands) 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 ) Pension settlement, net of $ 417 tax benefit in 2023 1,398 — Reclassification of pension and postretirement adjustments into earnings, net of $ 24 and $ 140 tax benefit in 2023 and 2022, respectively 79 473 Total other comprehensive loss ( 641 ) ( 837 ) Comprehensive (loss) income $ ( 40,228 ) $ 73,321 See notes to the Consolidated Financial Statements. F-8 Table of Contents NACCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31 2023 2022 (In thousands, except share data) ASSETS Current assets Cash and cash equivalents $ 85,109 $ 110,748 Trade accounts receivable 37,429 37,940 Accounts receivable from affiliates 7,860 6,638 Inventories 77,000 71,488 Assets held for sale 6,466 285 Federal income tax receivable 845 15,687 Prepaid insurance 1,790 1,999 Other current assets 15,499 15,622 Total current assets 231,998 260,407 Property, plant and equipment, net 223,902 217,952 Intangibles, net 6,006 28,055 Deferred income taxes 15,081 — Investments in unconsolidated subsidiaries 12,371 14,927 Operating lease right-of-use assets 8,667 6,419 Other non-current assets 41,683 40,312 Total assets $ 539,708 $ 568,072 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 16,702 $ 11,952 Accounts payable to affiliates 904 1,362 Revolving credit agreements 10,000 — Current maturities of long-term debt 3,953 3,649 Asset retirement obligations 13,114 1,746 Accrued payroll 17,317 18,105 Deferred revenue 878 833 Other current liabilities 7,118 6,623 Total current liabilities 69,986 44,270 Long-term debt 22,003 16,019 Operating lease liabilities 8,782 7,528 Asset retirement obligations 39,499 44,256 Pension and other postretirement obligations 5,183 5,082 Deferred income taxes — 6,122 Liability for uncertain tax positions 5,795 9,329 Other long-term liabilities 6,120 8,500 Total liabilities 157,368 141,106 Stockholders’ equity Common stock: Class A, par value $ 1 per share, 5,882,845 shares outstanding (2022 - 5,782,944 shares outstanding) 5,883 5,783 Class B, par value $ 1 per share, convertible into Class A on a one -for-one basis, 1,565,819 shares outstanding (2022 - 1,566,129 shares outstanding) 1,566 1,566 Capital in excess of par value 28,672 23,706 Retained earnings 355,873 404,924 Accumulated other comprehensive loss ( 9,654 ) ( 9,013 ) Total stockholders’ equity 382,340 426,966 Total liabilities and equity $ 539,708 $ 568,072 See notes to the Consolidated Financial Statements. F-9 Table of Contents NACCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 2023 2022 (In thousands) Operating Activities Net (loss) income $ ( 39,587 ) $ 74,158 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 29,387 26,816 Amortization of deferred financing fees 505 446 Deferred income taxes ( 21,114 ) ( 8,471 ) Stock-based compensation 5,157 7,541 Loss (gain) on sale of assets 221 ( 2,463 ) Inventory impairment charge 7,514 — Other contract termination settlements — ( 15,552 ) Long-lived asset impairment charge 65,887 3,939 Other 968 ( 791 ) Working capital changes: Affiliates receivable/payable ( 55 ) — Accounts receivable 2,519 ( 13,224 ) Inventories ( 12,971 ) ( 6,834 ) Other current assets ( 1,849 ) 1,308 Accounts payable 3,148 252 Income taxes receivable/payable 14,996 ( 416 ) Other current liabilities ( 236 ) 1,026 Net cash provided by operating activities 54,490 67,735 Investing Activities Expenditures for property, plant and equipment ( 45,408 ) ( 42,523 ) Acquisition of mineral interests ( 36,714 ) ( 11,924 ) 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 Other ( 146 ) ( 170 ) Net cash used for investing activities ( 81,597 ) ( 33,152 ) Financing Activities Net additions (reductions) to revolving credit agreement 10,000 ( 4,000 ) Additions to long-term debt 5,232 3,091 Reductions to long-term debt ( 4,209 ) ( 2,919 ) Cash dividends paid ( 6,452 ) ( 6,012 ) Purchase of treasury shares ( 3,103 ) — Net cash provided by (used for) financing activities 1,468 ( 9,840 ) Cash and Cash Equivalents Total (decrease) increase for the year ( 25,639 ) 24,743 Balance at the beginning of the year 110,748 86,005 Balance at the end of the year $ 85,109 $ 110,748 See notes to the Consolidated Financial Statements. F-10 Table of Contents NACCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY Class A Common Stock Class B Common Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity (In thousands, except per share data) Balance, January 1, 2022 $ 5,616 $ 1,567 $ 16,331 $ 336,778 $ ( 8,176 ) $ 352,116 Stock-based compensation 166 — 7,375 — — 7,541 Conversion of Class B to Class A shares 1 ( 1 ) — — — — Net income — — — 74,158 — 74,158 Cash dividends on Class A and Class B common stock: $ 0.8200 per share — — — ( 6,012 ) — ( 6,012 ) Current period other comprehensive income, net of tax — — — — ( 1,310 ) ( 1,310 ) Reclassification adjustment to net income, net of tax — — — — 473 473 Balance, December 31, 2022 $ 5,783 $ 1,566 $ 23,706 $ 404,924 $ ( 9,013 ) $ 426,966 Stock-based compensation 191 — 4,966 — — 5,157 Purchase of treasury shares ( 91 ) — — ( 3,012 ) — ( 3,103 ) Net income — — — ( 39,587 ) — ( 39,587 ) Cash dividends on Class A and Class B common stock: $ 0.8600 per share — — — ( 6,452 ) — ( 6,452 ) 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 Balance, December 31, 2023 $ 5,883 $ 1,566 $ 28,672 $ 355,873 $ ( 9,654 ) $ 382,340 See notes to the Consolidated Financial Statements. F-11 Table of Contents 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 1— Principles of Consolidation and Nature of Operations The Consolidated Financial Statements include the accounts of NACCO Industries, Inc. ® (“NACCO”) and its wholly owned subsidiaries (collectively, the “Company”). NACCO brings natural resources to life by delivering aggregates, minerals, reliable fuels and environmental solutions through its robust portfolio of NACCO Natural Resources ® businesses. The Company operates under three business segments: Coal Mining, North American Mining ® ("NAMining") and Minerals Management. The Coal Mining segment operates surface coal mines for power generation companies. The NAMining segment is a trusted mining partner for producers of aggregates, activated carbon, lithium and other industrial minerals. The Minerals Management segment, which includes the Catapult Mineral Partners (“Catapult”) business, acquires and promotes the development of mineral interests. Mitigation Resources of North America ® (“Mitigation Resources”) provides stream and wetland mitigation solutions. The Company has items not directly attributable to a reportable segment that are not included 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. See Note 15 to the Consolidated Financial Statements for further discussion of segment reporting. The Company’s operating segments are further described below: Coal Mining Segment 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, 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 F-12 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) 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. 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. inflation. 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 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 investments. 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. 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. tax return; 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. Under all of the Unconsolidated Subsidiaries’ contracts, the customer has the obligation to fund final mine reclamation activities. Under certain contracts, the Unconsolidated Subsidiary holds the mine permit and is therefore responsible for final mine reclamation activities. To the extent the Unconsolidated Subsidiary performs such final reclamation, it is compensated for providing those services in addition to receiving reimbursement from customers for costs incurred. NAMining Segment The NAMining segment provides value-added contract mining and other services for producers of industrial minerals. The segment is a platform for the Company’s growth and diversification of mining activities outside of the thermal coal industry. NAMining provides contract mining services for independently owned mines and quarries, creating value for its customers by performing the mining aspects of its customers’ operations. This allows customers to focus on their areas of expertise: materials handling and processing, product sales and distribution. 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. F-13 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) Certain of the entities within the NAMining segment are VIEs and are accounted for under the equity method as Unconsolidated Subsidiaries. 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, non-participating royalty interests and overriding royalty interests. • Royalty Interest. Royalty interests generally result when the owner of a mineral interest leases the underlying minerals to an exploration and production company pursuant to an oil and gas lease. 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 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. • Mineral Interest. Mineral interests are perpetual rights of the owner to explore, develop, exploit, mine and/or produce any or all of the minerals lying below the surface of the property. The holder of a mineral interest has the right to lease the minerals to an exploration and production company. Upon the execution of an oil and gas lease, the lessee (the exploration and production company) becomes the working interest owner and the lessor (the mineral interest owner) has a royalty interest. • Non-Participating Royalty Interest (“NPRIs”). NPRI is an interest in oil and gas production which is created from the mineral estate. The NPRI is expense-free, bearing no operational costs of production. The term “non-participating” indicates that the interest owner does not share in the bonus, rentals from a lease, nor the right to participate in the execution of oil and gas leases. The NPRI owner does; however, typically receive royalty payments. • Overriding Royalty Interest (“ORRIs”). ORRIs are created by carving out the right to receive royalties from a working interest. Like royalty interests, ORRIs do not confer an obligation to make capital expenditures or pay for lease operating expenses and have limited environmental liability; however, ORRIs may be calculated net of post-production expenses, depending on how the ORRI is structured. ORRIs that are carved out of working interests are linked to the same underlying oil and gas lease that created the working interest, and therefore, such ORRIs are typically subject to expiration upon the expiration or termination of the oil and gas lease. The Company may own more than one type of mineral and royalty interest in the same tract of land. For example, where the Company owns an ORRI in a lease on the same tract of land in which it owns a mineral interest, the ORRI in that tract will relate to the same gross acres as the mineral interest in that tract. The Minerals Management segment will benefit from the continued development of its mineral properties without the need for investment of additional capital once mineral and royalty interests have been acquired. The Minerals Management segment does not 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. F-14 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) 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. 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. Other items: 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. inflation. 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. F-15 Table of Contents 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 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 Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and judgments. These estimates and judgments affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities (if any) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents: Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less. Property, Plant and Equipment, Net: Property, plant and equipment are initially recorded at cost. 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 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. The units-of-production method is used to amortize certain assets based on estimated recoverable tonnages. Repairs and maintenance costs are expensed when incurred, unless such costs extend the estimated useful life of the asset, in which case such costs are capitalized and depreciated. Asset retirement costs associated with asset retirement obligations are capitalized with the carrying amount of the related long-lived asset and depreciated over the asset's estimated useful life. Royalty Interests in Oil and Natural Gas Properties: The Company follows the successful efforts method of accounting for its royalty and mineral interests. Under this method, costs to acquire mineral and royalty interests in oil and natural gas properties are capitalized when incurred. Acquisitions of royalty interests of oil and natural gas properties are considered asset acquisitions and are recorded at cost. As an owner of mineral and royalty interests and not working interests, the Company is not required to make capital expenditures and did not make capital expenditures to convert proved undeveloped reserves from undeveloped to developed. Acquisition costs of proved royalty and mineral interests are amortized using the units of production method over the life of the property, which is estimated using proved reserves. For purposes of amortization, interests in oil and natural gas properties are grouped in a reasonable aggregation of properties with common geological structural features or stratigraphic condition. The Company reviews and evaluates its royalty interests in oil and natural gas properties for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Proved oil and gas properties are reviewed for impairment when events and circumstances indicate a potential decline in the fair value of such properties below the carrying value, such as a downward revision of the reserve estimates or lower commodity prices. When such events or changes in circumstances occur, the Company estimates the undiscounted future cash flows expected in connection with the properties and compares such future cash flows to the carrying amounts of the properties to determine if the carrying amounts are recoverable. If the carrying value of the properties is determined to not be recoverable based on the undiscounted cash flows, an impairment charge is recognized by comparing the carrying value to the estimated fair value of the properties. See Note 18 for further discussion of the Company's royalty and mineral interests. Long-Lived Assets: The Company periodically evaluates long-lived assets for impairment when changes in circumstances or the occurrence of certain events indicate the carrying amount of an asset or asset group may not be recoverable. Upon identification of indicators of impairment, the Company evaluates the carrying value of the asset by comparing the estimated future undiscounted cash flows generated from the use of the asset or asset group and its eventual disposition with the asset's net carrying value. If the carrying value of an asset is considered impaired, an impairment charge is recorded for the amount that the carrying value of the long-lived asset or asset group exceeds its fair value. 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. 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. A reduction in customer demand at MLMC, including reductions related to reduced mechanical availability of the customer’s power plant, could adversely affect F-16 Table of Contents 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 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: The Company is generally self-insured for medical claims, certain workers’ compensation claims and certain closed mine liabilities. An estimated provision for claims reported and for claims incurred but not yet reported under the self-insurance programs is recorded and revised periodically based on industry trends, historical experience and management judgment. In addition, industry trends are considered within management's judgment for valuing claims. Changes in assumptions for such matters as legal judgments and settlements, inflation rates, medical costs and actual experience could cause estimates to change in the near term. Revenue Recognition: See Note 3 to the Consolidated Financial Statements for discussion of revenue recognition. 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 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. In general, for shares awarded for years ended December 31, 2023 and December 31, 2022, the restriction period ends at the earliest of (i) three years after the participant's retirement date, (ii) three , five or ten years from the award date, or (iii) the participant's death or permanent disability. Pursuant to the plans, the Company issued 120,649 and 165,574 shares related to the years ended December 31, 2023 and 2022, respectively. After the issuance of these shares, there were 779,351 shares of Class A common stock available for issuance under these plans. Compensation expense related to these share awards was $ 4.1 million ($ 3.3 million net of tax) and $ 6.4 million ($ 5.0 million net of tax) for the years ended December 31, 2023 and 2022, respectively. Compensation expense represents fair value based on the market price of the shares of Class A common stock at the grant date. 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, 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. In general, the restriction period ends at the earliest of (i) ten years from the award date, (ii) the date of the director's death or permanent disability, (iii) five years (or earlier with the approval of the Board of Directors) after the director's date of retirement from the Board of Directors, (iv) the date the director has both retired from the Board of Directors and has reached age 70 , or (v) at such other time as determined by the Board of Directors in its sole and absolute discretion. Pursuant to this plan, the Company issued 35,965 and 30,034 shares related to the years ended December 31, 2023 and 2022, respectively. In addition to the mandatory retainer fee received in restricted stock, directors may elect to receive shares of Class A common stock in lieu of cash for up to 100 % of the balance of their annual retainer, committee retainer and any committee chairman's fees. These voluntary shares are not subject to any restrictions. Total shares issued under voluntary elections were 1,603 in 2023 and 480 in 2022. After the issuance of these shares, there were 98,479 shares of Class A common stock available for issuance under this plan. Compensation expense related to these awards was $ 1.3 million ($ 1.1 million net of tax) and $ 1.3 million ($ 1.0 million net of tax) for the years ended December 31, 2023 and 2022, respectively. Compensation expense represents fair value based on the market price of the shares of Class A common stock at the grant date. Financial Instruments: Financial instruments held by the Company include cash and cash equivalents, accounts receivable, equity securities, accounts payable, revolving credit agreements and long-term debt. Fair Value Measurements: The Company accounts for the fair value measurement of its financial assets and liabilities in accordance with U.S. generally accepted accounting principles, which defines fair value 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. 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. F-17 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) Described below are the three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3 - Unobservable inputs are used when little or no market data is available. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. See Note 9 for further discussion of fair value measurements. NOTE 3— Revenue Recognition Nature of Performance Obligations At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Each mine or mine area has a contract with its respective customer that represents a contract under ASC 606. For its consolidated entities, the Company’s performance obligations vary by contract and consist of the following: At MLMC, each MMBtu delivered during the production period is considered a separate performance obligation. Revenue is recognized at the point in time that control of each MMBtu of lignite transfers to the customer. Fluctuations in revenue from period to period generally result from changes in customer demand. At NAMining, the management service to oversee the operation of the equipment and delivery of aggregates or other minerals is the performance obligation accounted for as a series. Performance momentarily creates an asset that the customer simultaneously receives and consumes; therefore, control is transferred to the customer over time. Consistent with the conclusion that the customer simultaneously receives and consumes the benefits provided, an input-based measure of progress is appropriate. As each month of service is completed, revenue is recognized for the amount of actual costs incurred, plus the management fee or fixed fee and the general and administrative fee (as applicable). 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. 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. These arrangements result in the transfer of mineral rights for a period of time; however, no rights to the actual land are granted other than access for purposes of exploration, development, production and sales. The mineral rights revert back to the Company at the expiration of the contract. Under these contracts, granting exclusive right, title, and interest in and to minerals, if any, is the performance obligation. The performance obligation under these contracts represents a series of distinct goods or services whereby each day of access that is provided is distinct. The transaction price consists of a variable sales-based royalty and, in certain arrangements, a fixed component in the form of an up-front lease bonus payment. As the amount of consideration the Company will ultimately be entitled to is entirely susceptible to factors outside its control, the entire amount of variable consideration is constrained at contract inception. The Company believes that the pricing provisions of royalty contracts are customary in the industry. Up-front lease bonus payments represent the fixed portion of the transaction price and are recognized over the primary term of the contract, which is generally three to five years . Mitigation Resources generates and sells stream and wetland mitigation credits (known as mitigation banking) and provides services to those engaged in permittee-responsible stream and wetland mitigation. Each mitigation credit sale is considered a separate performance obligation. Revenue is recognized at the point in time that control of each mitigation credit transfers to the customer. Fluctuations in revenue from period to period generally result from changes in customer demand. Under the permittee-responsible stream and wetland mitigation model, the contracts are generally structured as a management fee agreement under which Mitigation Resources is reimbursed for all costs incurred in performing the required mitigation plus an agreed profit percentage or a fixed fee. The mitigation services provided is the performance obligation and is accounted for as a series. Performance momentarily creates an asset that the customer simultaneously receives and consumes; therefore, control is F-18 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) 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. Fluctuations in revenue from period to period result from changes in customer demand primarily due to increases and decreases in activity levels of individual contracts and variances in reimbursable costs. Significant Judgments The Company’s contracts with its customers contain different types of variable consideration including, but not limited to, management fees that adjust based on volumes or MMBtu delivered, however, the terms of these variable payments relate specifically to the Company's efforts to satisfy one or more, but not all of, the performance obligations (or to a specific outcome from satisfying the performance obligations) in the contract. Therefore, the Company allocates each variable payment (and subsequent changes to that payment) entirely to the specific performance obligation to which it relates. Management fees, as well as general and administrative fees, are also adjusted based on changes in specified indices (e.g., CPI) to compensate for general inflation changes. Index adjustments, if applicable, are effective prospectively. Cost Reimbursement Certain contracts include reimbursement from customers of actual costs incurred for the purchase of supplies, equipment and services in accordance with contractual terms. Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof is highly dependent on factors outside of the Company’s control. Accordingly, reimbursable revenue is fully constrained and not recognized until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. The Company is 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 The Company records royalty income in the month production is delivered to the purchaser. As a mineral owner, the Company has limited visibility into when new wells start producing and production statements may not be received for 30 to 90 days or more after the date production is delivered. As a result, the Company is required to estimate the amount of production delivered to the purchaser of the product and the price that will be received for the sale of the product. The expected sales volumes and prices for these properties are estimated and recorded in "Trade accounts receivable" in the accompanying Consolidated Balance Sheets. The difference between the Company’s estimates and the actual amounts received is recorded in the month that payment is received from the third-party lessee. 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. Disaggregation of Revenue In accordance with ASC 606-10-50, the Company disaggregates revenue from contracts with customers into major goods and service lines and timing of transfer of goods and services. The Company determined that disaggregating revenue into these categories achieves the disclosure objective of depicting how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Company’s business consists of the Coal Mining, NAMining and Minerals Management segments as well as Unallocated Items. See Note 15 to the Consolidated Financial Statements for further discussion of segment reporting. F-19 Table of Contents 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 table disaggregates revenue by major sources for the years ended December 31: Major Goods/Service Lines 2023 2022 Coal Mining $ 85,415 $ 95,204 NAMining 90,532 85,664 Minerals Management 32,985 60,242 Unallocated Items 8,459 2,952 Eliminations ( 2,597 ) ( 2,343 ) Total revenues $ 214,794 $ 241,719 Timing of Revenue Recognition Goods transferred at a point in time $ 83,273 $ 92,842 Services transferred over time 131,521 148,877 Total revenues $ 214,794 $ 241,719 Contract Balances The opening and closing balances of the Company’s current and long-term contract assets and liabilities and receivables are as follows: Contract balances Trade accounts receivable Contract asset (current) Contract asset (long-term) Contract liability (current) Contract liability (long-term) Balance at January 1, 2023 $ 37,940 $ 409 $ 5,985 $ 833 $ 1,709 Balance at December 31, 2023 37,429 — 3,712 878 1,470 Increase (decrease) $ ( 511 ) $ ( 409 ) $ ( 2,273 ) $ 45 $ ( 239 ) As described above, the Company enters into royalty contracts that grant exclusive right, title, and interest in and to minerals. The transaction price consists of a variable sales-based royalty and, in certain arrangements, a fixed component in the form of an up-front lease bonus payment. The timing of the payment of the fixed portion of the transaction price is upfront, however, the performance obligation is satisfied over the primary term of the contract, which is generally three to five years . Therefore, at the time any such up-front payment is received, a contract liability is recorded which represents deferred revenue. The amount of royalty revenue recognized in the years ended December 31, 2023 and December 31, 2022 that was included in the opening contract liability was $ 0.8 million and $ 1.0 million, respectively. 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 $ 0.9 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. The Company has no contract assets recognized from the costs to obtain or fulfill a contract with a customer. F-20 Table of Contents 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 4— Inventories Inventories are summarized as follows: December 31 2023 2022 Coal $ 23,784 $ 27,927 Mining supplies 53,216 43,561 Total inventories $ 77,000 $ 71,488 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 Property, plant and equipment, net includes the following: December 31 2023 2022 Coal lands and real estate $ 58,353 $ 60,277 Mineral interests 68,150 31,436 Plant and equipment 325,655 290,511 Property, plant and equipment, at cost 452,158 382,224 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 The Company has a coal supply agreement intangible asset which is subject to amortization based on units of production over the term of the lignite sales agreement which expires in 2032. The gross and net balances are set forth in the following table: Gross Carrying Amount Accumulated Amortization and Impairment Net Balance Balance at December 31, 2023 Coal supply agreement $ 84,200 $ ( 78,194 ) $ 6,006 Balance at December 31, 2022 Coal supply agreement $ 84,200 $ ( 56,145 ) $ 28,055 Amortization expense for intangible assets was $ 3.0 million and $ 3.7 million in 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 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 F-21 Table of Contents 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. Upon initial recognition of a liability, a corresponding amount is capitalized as part of the carrying value of the related long-lived asset and is depreciated either by the straight-line method or the units-of-production method. The liability is accreted each period until the liability is settled, at which time the liability is removed. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. 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 regulations 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. The accretion of the liability is being recognized over the estimated life of each individual asset retirement obligation and is recorded in the line Cost of sales in the accompanying Consolidated Statements of Operations. The associated asset is recorded in Property, Plant and Equipment, net in the accompanying Consolidated Balance Sheets. The depreciation of the asset is recorded in the line Cost of sales in the accompanying Consolidated Statements of Operations. A reconciliation of the Company's beginning and ending aggregate carrying amount of the asset retirement obligations are as follows: Coal Mining Unallocated Items NACCO Consolidated Balance at January 1, 2022 $ 26,898 $ 17,053 $ 43,951 Liabilities settled during the period ( 223 ) ( 956 ) ( 1,179 ) Accretion expense 2,190 1,332 3,522 Revision of estimated cash flows ( 405 ) 113 ( 292 ) 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 ) Accretion expense 2,170 1,358 3,528 Revision of estimated cash flows 1,346 1,717 3,063 Balance at December 31, 2023 $ 33,044 $ 19,569 $ 52,613 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. The fair value of Bellaire's Mine Water Treatment assets, which are recognized as a component of Other non-current assets on the Consolidated Balance Sheets, are $ 11.2 million and $ 9.9 million at December 31, 2023 and December 31, 2022, respectively, and are legally restricted for purposes of settling the Bellaire asset retirement obligation. See Note 9 for further discussion of the Mine Water Treatment Trust. F-22 Table of Contents 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 8— Current and Long-Term Financing Financing arrangements are obtained and maintained at the subsidiary level. NACCO has not guaranteed any borrowings of its subsidiaries. The following table summarizes the Company's available and outstanding borrowings: December 31 2023 2022 Total outstanding borrowings: Revolving credit agreement $ 10,000 $ — Other debt 25,956 19,668 Total debt outstanding $ 35,956 $ 19,668 Current portion of borrowings outstanding $ 13,953 $ 3,649 Long-term portion of borrowings outstanding 22,003 16,019 $ 35,956 $ 19,668 Total available borrowings, net of limitations, under revolving credit agreement $ 115,120 $ 116,285 Unused revolving credit agreement $ 105,120 $ 116,285 Weighted average stated interest rate on total borrowings 6.6 % 3.9 % Annual maturities of total debt, excluding leases, are as follows: 2024 13,925 2025 3,149 2026 7,591 2027 1,987 2028 1,720 Thereafter 7,472 $ 35,844 Interest paid on total debt was $ 2.4 million and $ 2.0 million during 2023 and 2022, respectively. 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, 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, 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 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. F-23 Table of Contents 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 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. 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. At December 31, 2023 and 2022, the outstanding balances of the notes were $ 18.8 million and $ 13.2 million, respectively. NOTE 9— Fair Value Disclosure Recurring Fair Value Measurements : The following table presents the Company's assets accounted for at fair value on a recurring basis: Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Description December 31, 2023 (Level 1) (Level 2) (Level 3) Assets: Equity securities $ 17,208 $ 17,208 $ — $ — $ 17,208 $ 17,208 $ — $ — Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs Description December 31, 2022 (Level 1) (Level 2) (Level 3) Assets: Equity securities $ 15,534 $ 15,534 $ — $ — $ 15,534 $ 15,534 $ — $ — Bellaire's Mine Water Treatment Trust invests in available for sale securities that are reported at fair value based upon quoted market prices in active markets for identical assets; therefore, they are classified as Level 1 within the fair value hierarchy. The 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. Prior to 2022, the Company invested $ 2.0 million in equity securities of a public company with a diversified portfolio of royalty producing mineral interests. The investment is reported at fair value based upon quoted market prices in active markets for identical assets; therefore, it is classified as Level 1 within the fair value hierarchy. The Company recognized a gain of $ 0.4 million and $ 1.9 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 F-24 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) 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 that potential impairment existed as of December 31, 2023 and, as a result, reviewed MLMC's long-lived assets 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 the asset group. 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 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: The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements and long-term debt, excluding finance leases, were determined using current rates offered for similar obligations taking into account subsidiary credit risk, which is Level 2 as defined in the fair value hierarchy. The fair value and the book value of revolving credit agreements and long-term debt, excluding finance leases, was $ 35.3 million and $ 35.8 million, respectively, at December 31, 2023 and $ 18.1 million and $ 18.9 million, respectively, at December 31, 2022. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable. Under its mining contracts, the Company recognizes revenue and a related receivable as coal or other aggregates are delivered or predevelopment services are provided. These mining contracts provide for monthly settlements. The Company's significant credit concentration is uncollateralized; however, historically minimal credit losses have been incurred. To further reduce credit risk associated with accounts receivable, the Company performs periodic credit evaluations of its customers, but does not generally require advance payments or collateral. NOTE 10— Leases The Company recognizes right-of-use assets (“ROU assets”) and lease liabilities for operating leases of real estate, mining and other equipment that expire at various dates through 2033. The majority of the Company's leases are operating leases. NACCO does not recognize leases with a term of 12 months or less on the balance sheet. Instead, the Company recognizes the related lease expense on a straight-line basis over the lease term. The Company accounts for lease and non-lease components as a single lease component. 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. F-25 Table of Contents 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: Description Location 2023 2022 Assets Operating Operating lease right-of-use assets $ 8,667 $ 6,419 Finance Property, plant and equipment, net (a) 107 843 Liabilities Current Operating Other current liabilities $ 1,485 $ 1,039 Finance Current maturities of long-term debt 28 776 Non-current Operating Operating lease liabilities $ 8,782 $ 7,528 Finance Long-term debt 84 19 (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: Description Location 2023 2022 Lease expense Operating lease cost Selling, general and administrative expenses $ 1,712 $ 1,881 Finance lease cost: Amortization of leased assets Cost of sales 61 128 Interest on lease liabilities Interest expense 7 13 Variable lease expense Selling, general and administrative expenses 572 534 Short-term lease expense Selling, general and administrative expenses 3,214 3,434 Total lease expense $ 5,566 $ 5,990 Future minimum finance and operating lease payments were as follows at December 31, 2023: Finance Leases Operating Leases Total 2024 $ 36 $ 2,238 $ 2,274 2025 33 2,014 2,047 2026 33 2,003 2,036 2027 21 1,593 1,614 2028 9 1,607 1,616 Subsequent to 2028 — 3,935 3,935 Total minimum lease payments 132 13,390 $ 13,522 Amounts representing interest 20 3,123 Present value of net minimum lease payments $ 112 $ 10,267 F-26 Table of Contents 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. The Company considers its credit rating and the current economic environment in determining this collateralized rate. The assumptions used in accounting for ASC 842 for the years ended December 31 are as follows: 2023 2022 Weighted average remaining lease term (years) Operating 6.81 7.66 Finance 3.97 1.41 Weighted average discount rate Operating 8.13 % 7.13 % Finance 8.69 % 3.11 % The following table details cash paid for amounts included in the measurement of lease liabilities for the years ended December 31: 2023 2022 Operating cash flows from operating leases $ 1,823 $ 2,097 Operating cash flows from finance leases 7 13 Financing cash flows from finance leases 786 183 NOTE 11— Contingencies Various legal and regulatory proceedings and claims have been or may be asserted against NACCO and certain subsidiaries relating to the conduct of their businesses. These proceedings and claims are incidental to the ordinary course of business of the Company. Management believes that it has meritorious defenses and will vigorously defend the Company in these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss. These matters are subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the Company’s financial position, results of operations and cash flows of the period in which the ruling occurs, or in future periods. NOTE 12— Stockholders' Equity and Earnings Per Share NACCO Industries, Inc. Class A common stock is traded on the New York Stock Exchange under the ticker symbol “NC.” Because of transfer restrictions on Class B common stock, no trading market has developed, or is expected to develop, for the Company's Class B common stock. The Class B common stock is convertible into Class A common stock on a one-for-one basis at any time at the request of the holder. The Company's Class A common stock and Class B common stock have the same cash dividend rights per share. As the liquidation and dividend rights are identical, any distribution of earnings would be allocated to Class A and Class B stockholders on a proportionate basis, and accordingly the net income per share for each class of common stock is identical. The Class A common stock has one vote per share and the Class B common stock has ten votes per share. The total number of authorized shares of Class A common stock and Class B common stock at December 31, 2023 was 25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A common stock totaling 2,335,178 and 2,434,769 at December 31, 2023 and 2022, respectively, have been deducted from shares outstanding. Stock Repurchase Program: 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 F-27 Table of Contents 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. The 2023 Stock Repurchase Program does not require the Company to acquire any specific number of shares and may be modified, suspended, extended or terminated by the Company without prior notice and may be executed through open market purchases, privately negotiated transactions or otherwise. 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. Stock Compensation: See Note 2 for a discussion of the Company's restricted stock awards. Earnings per Share: The weighted average number of shares of Class A common stock and Class B common stock outstanding used to calculate basic and diluted earnings per share were as follows: 2023 2022 Basic weighted average shares outstanding 7,478 7,312 Dilutive effect of restricted stock awards N/A 61 Diluted weighted average shares outstanding 7,478 7,373 Basic (loss) earnings per share $ ( 5.29 ) $ 10.14 Diluted (loss) earnings per share $ ( 5.29 ) $ 10.06 F-28 Table of Contents 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 13— Income Taxes The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. 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 (Loss) income before income tax (benefit) provision and the Income tax (benefit) provision for the years ended December 31 are as follows: 2023 2022 (Loss) income before income tax (benefit) provision Domestic $ ( 64,077 ) $ 87,975 Foreign ( 81 ) ( 252 ) $ ( 64,158 ) $ 87,723 Income tax (benefit) provision Current income tax (benefit) provision: Federal $ ( 3,405 ) $ 20,761 State 290 1,328 Foreign ( 342 ) ( 53 ) Total current ( 3,457 ) 22,036 Deferred income tax (benefit) provision: Federal ( 16,467 ) ( 8,887 ) State ( 4,647 ) 416 Total deferred ( 21,114 ) ( 8,471 ) $ ( 24,571 ) $ 13,565 The Company made income tax payments of $ 1.4 million and $ 23.4 million during 2023 and 2022, respectively. During the same periods, income tax refunds totaled $ 14.9 million and $ 0.1 million, respectively. F-29 Table of Contents 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 provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before the provision for income taxes. A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows: 2023 2022 (Loss) income before income tax (benefit) provision $ ( 64,158 ) $ 87,723 Statutory taxes at 21.0% $ ( 13,473 ) $ 18,422 State and local income taxes ( 4,392 ) 1,629 Non-deductible expenses 1,071 745 Percentage depletion ( 3,455 ) ( 4,866 ) R&D and other federal credits ( 109 ) ( 300 ) Settlements and uncertain tax positions ( 3,512 ) ( 787 ) Other, net ( 701 ) ( 1,278 ) Income tax (benefit) provision $ ( 24,571 ) $ 13,565 Effective income tax rate 38.3 % 15.5 % 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 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. F-30 Table of Contents 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 detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes is as follows: December 31 2023 2022 Deferred tax assets Lease liabilities $ 22,265 $ 21,880 Tax carryforwards 14,816 12,398 Inventories 4,880 5,571 Accrued liabilities 9,226 8,176 Employee benefits 3,319 3,086 Land valuation adjustment 6,378 6,261 Partnership investment - development costs 12,565 — Other 9,680 6,850 Total deferred tax assets 83,129 64,222 Less: Valuation allowance 11,783 11,809 71,346 52,413 Deferred tax liabilities Lease right-of-use assets 22,611 21,880 Depreciation and depletion 23,607 19,665 Partnership investment - development costs — 6,069 Accrued pension benefits 10,047 10,921 Total deferred tax liabilities 56,265 58,535 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: December 31, 2023 Net deferred tax asset Valuation allowance Carryforwards expire during: State net operating loss $ 16,526 $ 14,757 2024 - 2043 December 31, 2022 Net deferred tax asset Valuation allowance Carryforwards expire during: State net operating loss $ 15,347 $ 14,422 2023-2042 The Company has a valuation allowance for certain state and foreign deferred tax assets. Based upon the review of historical earnings and the relevant expiration of carryforwards, including utilization limitations in the various state taxing jurisdictions, the Company believes the valuation allowances are appropriate and does not expect to release valuation allowances within the next twelve months that would have a significant effect on the Company's financial position or results of operations. Since 2021, the Company has participated in a voluntary program with the IRS called Compliance Assurance Process (“CAP”). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most issues prior to the filing of the tax return. In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The tax returns of the Company and certain of its subsidiaries are under routine examination by various taxing authorities. The Company has not been informed of any material assessment for which an accrual has not been previously provided and the Company would F-31 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) vigorously contest any material assessment. Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations. The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2023 and 2022. Approximately $ 2.8 million and $ 5.5 million of the gross unrecognized tax benefits as of December 31, 2023 and 2022, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to (1) the deferred tax asset which would be available if the position were not sustained upon audit and (2) the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein. 2023 2022 Balance at January 1 $ 9,626 $ 10,554 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 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. The Company expects the amount of unrecognized tax benefits will change within the next 12 months; however, the change in unrecognized tax benefits, which is reasonably possible within the next 12 months, is not expected to have a significant effect on the Company's financial position, results of operations or cash flows. NOTE 14— Retirement Benefit Plans Defined Benefit Plans: The Company maintains defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. 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: 2023 2022 Weighted average discount rates for pension benefit obligation 5.02 % - 5.04 % 5.36 % - 5.40 % Weighted average discount rates for net periodic benefit cost 5.36 % - 5.40 % 2.53 % - 2.77 % Expected long-term rate of return on assets for net periodic benefit cost 7.00 % 7.00 % F-32 Table of Contents 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: 2023 2022 Interest cost $ 1,639 $ 1,105 Expected return on plan assets ( 2,751 ) ( 2,707 ) Amortization of actuarial loss 51 543 Amortization of prior service cost 58 58 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: 2023 2022 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 F-33 Table of Contents 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 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: 2023 2022 Change in benefit obligation Projected benefit obligation at beginning of year $ 31,722 $ 41,663 Interest cost 1,639 1,105 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 Accumulated benefit obligation at end of year $ 28,357 $ 31,722 Change in plan assets Fair value of plan assets at beginning of year $ 34,485 $ 44,009 Actual return on plan assets 2,452 ( 7,405 ) Employer contributions 456 531 Benefits paid ( 2,614 ) ( 2,650 ) Settlements ( 4,651 ) — Fair value of plan assets at end of year $ 30,128 $ 34,485 Funded status at end of year $ 1,771 $ 2,763 Amounts recognized in the balance sheets consist of: Non-current assets $ 6,068 $ 6,991 Current liabilities ( 510 ) ( 491 ) Non-current liabilities ( 3,787 ) ( 3,737 ) $ 1,771 $ 2,763 Components of accumulated other comprehensive loss consist of: Actuarial loss $ 11,379 $ 10,682 Prior service cost 586 645 Deferred taxes ( 2,724 ) ( 2,490 ) $ 9,241 $ 8,837 The Company recognizes as a component of benefit (income) cost, as of the measurement date, any unrecognized actuarial net gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor." Amounts outside the corridor are amortized over the average expected remaining service of active participants expected to benefit under the retiree medical plans or over the average expected remaining lifetime of inactive participants for the pension plans. The (gain) loss amounts recognized in AOCI are not expected to be fully recognized until the plan is terminated or as settlements occur, which would trigger accelerated recognition. Prior service costs resulting from plan changes are also in AOCI. 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. F-34 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) Future pension benefit payments expected to be paid from assets of the pension plans are: 2024 $ 2,739 2025 2,636 2026 2,588 2027 2,533 2028 2,473 2029 - 2033 11,129 $ 24,098 The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes. Expected returns for pension plans are based on a calculated market-related value for pension plan assets. Under this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns are recognized in the market-related value of assets ratably over three years. The pension plans maintain investment policies that, among other things, establish a portfolio asset allocation methodology with percentage allocation bands for individual asset classes. The investment policies provide that investments are reallocated between asset classes as balances exceed or fall below the appropriate allocation bands. The following is the actual allocation percentage and target allocation percentage for the pension plan assets at December 31: 2023 Actual Allocation 2022 Actual Allocation Target Allocation Range 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 % U.S. equity securities — % 44.9 % 0.0 % - 0.0 % Non-U.S. 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. The fair value of each major category of the Company's pension plan assets are valued using quoted market prices in active markets for identical assets, or Level 1 in the fair value hierarchy. Following are the values as of December 31: Level 1 2023 2022 Fixed income securities $ 29,866 $ 11,753 Cash equivalents 81 — Money market funds 181 178 U.S. equity securities — 15,499 Non-U.S. equity securities — 7,055 Total $ 30,128 $ 34,485 F-35 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) Postretirement Health Care: The Company also maintains health care plans which provide benefits to grandfathered eligible retired employees. All health care plans of the Company have a cap on the Company's share of the costs. The health care plans have network provided benefits which result in cost savings for the Company. These plans have no assets. Under the Company's current policy, plan benefits are funded at the time they are due to participants. The assumptions used in accounting for the postretirement health care plans are set forth below for the years ended December 31: 2023 2022 Weighted average discount rates for benefit obligation 4.98 % 5.29 % Weighted average discount rates for net periodic benefit cost 5.29 % 2.12 % Health care cost trend rate assumed for next year 6.25 % - 6.50 % 6.25 % 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 2029 Set forth below is detail of the net periodic benefit expense for the postretirement health care plans for the years ended December 31: 2023 2022 Service cost $ 7 $ 12 Interest cost 77 38 Amortization of actuarial loss 44 64 Amortization of prior service credit ( 50 ) ( 52 ) Net periodic benefit expense $ 78 $ 62 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: 2023 2022 Current year actuarial loss (gain) $ 173 $ ( 44 ) Amortization of actuarial loss ( 44 ) ( 64 ) Amortization of prior service credit 50 52 Total recognized in other comprehensive loss (income) $ 179 $ ( 56 ) F-36 Table of Contents 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 sets forth the changes in benefit obligations during the year and the funded status of the postretirement health care at December 31: 2023 2022 Change in benefit obligation Benefit obligation at beginning of year $ 1,551 $ 1,877 Service cost 7 12 Interest cost 77 38 Actuarial loss (gain) 173 ( 44 ) Benefits paid ( 229 ) ( 332 ) Benefit obligation at end of year $ 1,579 $ 1,551 Funded status at end of year $ ( 1,579 ) $ ( 1,551 ) Amounts recognized in the balance sheets consist of: Current liabilities $ ( 183 ) $ ( 206 ) Noncurrent liabilities ( 1,396 ) ( 1,345 ) $ ( 1,579 ) $ ( 1,551 ) Components of accumulated other comprehensive loss consist of: Actuarial loss $ 542 $ 412 Prior service credit ( 6 ) ( 56 ) Deferred taxes ( 123 ) ( 180 ) $ 413 $ 176 Future postretirement health care benefit payments expected to be paid are: 2024 188 2025 182 2026 191 2027 194 2028 185 2029 - 2033 660 $ 1,600 Defined Contribution Plans: NACCO and its subsidiaries maintain a defined contribution (401(k)) plan for substantially all employees and provide employer matching contributions based on plan provisions. The plan also provides for a minimum employer contribution. Total costs, including Company contributions, for these plans were $ 3.6 million and $ 3.3 million in 2023 and 2022, respectively. NOTE 15— Business Segments The Company’s operating segments are: (i) Coal Mining, (ii) NAMining and (iii) Minerals Management. The Company determines its reportable segments by first identifying its operating segments, and then by assessing whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. The Company’s Chief Operating Decision Maker utilizes operating profit to evaluate segment performance and allocate resources. 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. F-37 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) See Note 1 for additional discussion of the Company's reportable segments. All current operations reside in the U.S. The accounting policies of the reportable segments are described in Note 2 and Note 18. In 2023 and 2022, two customers individually accounted for more than 10% of consolidated revenue. The following represents the revenue attributable to each of these entities as a percentage of consolidated revenue for those years: Percentage of Consolidated Revenue Segment 2023 2022 Coal Mining customer 40 % 39 % NAMining customer 22 % 17 % The following tables present revenue, operating profit, depreciation expense and capital expenditures for the years ended December 31: 2023 2022 Revenues Coal Mining $ 85,415 $ 95,204 NAMining 90,532 85,664 Minerals Management 32,985 60,242 Unallocated Items 8,459 2,952 Eliminations ( 2,597 ) ( 2,343 ) Total $ 214,794 $ 241,719 Operating (loss) profit Coal Mining $ ( 71,342 ) $ 38,309 NAMining 3,348 2,202 Minerals Management 19,418 52,214 Unallocated Items ( 21,461 ) ( 23,233 ) Eliminations ( 100 ) 494 Total $ ( 70,137 ) $ 69,986 Expenditures for property, plant and equipment and acquisition of mineral interests Coal Mining $ 6,609 $ 14,853 NAMining 36,073 13,203 Minerals Management 38,881 13,388 Unallocated Items 559 13,003 Total $ 82,122 $ 54,447 Depreciation, depletion and amortization Coal Mining $ 17,569 $ 17,074 NAMining 8,172 6,457 Minerals Management 3,067 3,026 Unallocated Items 579 259 Total $ 29,387 $ 26,816 Asset information by segment is not discretely maintained for internal reporting or used in evaluating performance. F-38 Table of Contents 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 Each of the Company's wholly owned Unconsolidated Subsidiaries, within the Coal Mining and NAMining segments, meet the definition of a VIE. The Unconsolidated Subsidiaries are capitalized primarily with debt financing provided by or supported by their respective customers, and generally without recourse to NACCO and NACoal. Although NACoal owns 100% of the equity and manages the daily operations of the Unconsolidated Subsidiaries, the Company has determined that the equity capital provided by NACoal 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 the 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 positions or results of operations. See Note 1 for a discussion of these entities. 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. The Company's risk of loss relating to these entities is limited to its invested capital, which was $ 5.0 million and $ 7.1 million at December 31, 2023 and 2022, respectively. NACoal is a party to certain guarantees related to Coyote Creek. Under certain circumstances of default or termination of Coyote Creek’s Lignite Sales Agreement (“LSA”), NACoal would be obligated for payment of a "make-whole" amount to Coyote Creek’s third-party lenders. The “make-whole” amount is based on the excess, if any, of the discounted value of the remaining scheduled debt payments over the principal amount. In addition, in the event Coyote Creek’s LSA is terminated on or after January 1, 2024 by Coyote Creek’s customers, NACoal is obligated to purchase Coyote Creek’s dragline and rolling stock for the then net book value of those assets. To date, no payments have been required from NACoal since the inception of these guarantees. The Company believes that the likelihood NACoal would be required to perform under the guarantees is remote, and no amounts related to these guarantees have been recorded. Summarized financial information for the unconsolidated subsidiaries is as follows: 2023 2022 Statement of Operations Revenue $ 610,734 $ 664,824 Gross profit $ 63,646 $ 47,748 Income before income taxes $ 49,994 $ 57,250 Net income $ 43,714 $ 48,467 Balance Sheet Current assets $ 124,387 $ 214,098 Non-current assets $ 814,226 $ 805,833 Current liabilities $ 161,606 $ 116,701 Non-current liabilities $ 772,003 $ 896,134 Revenue includes all mine operating costs that are reimbursed by the customers of the Unconsolidated Subsidiaries as well as the compensation per ton of coal, heating unit (MMBtu) or ton of limestone delivered. Reimbursed costs have offsetting expenses and have no impact on income before income taxes. Income before income taxes represents the Earnings of the unconsolidated operations. 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 One of the Company's directors is a retired Jones Day partner. Legal services rendered by Jones Day approximated $ 0.8 million and $ 1.0 million for the years ended December 31, 2023 and 2022. F-39 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) Alfred M. Rankin, Jr. 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 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. Mr. 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. NOTE 18— Supplemental Oil and Gas Disclosures (Unaudited) 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. As an owner of royalty and mineral interests, the Company’s access to information concerning activity and operations of its royalty and mineral interests is limited. The Company does not have information that would be available to a company with working interests in oil and natural gas operations because detailed information is not generally available to owners of royalty and mineral interests. 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: 2023 2022 Proved developed $ 16,179 $ 7,302 Proved undeveloped 51,971 24,134 Proved reserves 68,150 31,436 Less: accumulated depreciation, depletion and amortization 3,309 1,936 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. Decline curve analysis was used to estimate the remaining reserves of pressure depletion reservoirs with enough historical production data to establish decline trends. Reservoirs under non-pressure depletion drive mechanisms and non-producing reserves were estimated by volumetric analysis, research of analogous reservoirs, or a combination of both. Reserves have been estimated using deterministic and probabilistic methods. All reserves estimates have been prepared using standard engineering practices generally accepted by the petroleum industry and conform to guidelines developed and adopted by the SEC. The following table presents the Company's estimated net proved oil and natural gas reserves as of December 31 based on the reserve report prepared by Haas Engineering, the Company’s independent petroleum engineering firm. All of the Company’s reserves are located in the United States. Net reserves as of December 31, 2023 Oil (bbl) (1) NGL (bbl) (1) Residue gas (Mcf) (2) Proved developed 656,370 380,650 23,596,110 Proved undeveloped 9,020 3,720 26,420 Total 665,390 384,370 23,622,530 F-40 Table of Contents 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 Oil (bbl) (1) NGL (bbl) (1) Residue gas (Mcf) (2) Proved developed 305,710 408,280 25,907,890 Proved undeveloped 32,570 11,030 1,784,670 Total 338,280 419,310 27,692,560 (1) Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume. (2) Mcf. One thousand cubic feet of natural gas at the contractual pressure and temperature bases. Estimated Proved Reserves The following table summarizes changes in proved reserves during the year ended December 31, 2023: Estimated Proved Reserves Oil (bbl) (1) NGL (bbl) (1) Residue gas (Mcf) (2) December 31, 2022 338,280 419,310 27,692,560 Purchases 259,178 43,934 609,184 Extensions and discoveries 170,330 77,527 2,340,715 Revisions of previous estimates (3) 37,483 ( 73,375 ) 1,027,779 Production ( 98,553 ) ( 56,768 ) ( 7,601,521 ) Other ( 41,328 ) ( 26,258 ) ( 446,187 ) December 31, 2023 665,390 384,370 23,622,530 Estimated Proved Undeveloped Reserves ("PUDs") The following table summarizes changes in PUDs during the year ended December 31, 2023: Estimated Proved Undeveloped Reserves Oil (bbl) (1) NGL (bbl) (1) Residue gas (Mcf) (2) December 31, 2022 32,570 11,030 1,784,670 Purchases 2,300 950 8,237 Extensions and discoveries 5,786 2,021 14,814 Conversions ( 29,757 ) ( 9,172 ) ( 1,770,232 ) Revisions of previous estimates (3) ( 1,879 ) ( 1,109 ) ( 11,069 ) December 31, 2023 9,020 3,720 26,420 (1) Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume. (2) Mcf. 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. As an owner of mineral and royalty interests, the Company generally does not have evidence of approval of operators’ development plans. As a result, proved undeveloped reserve estimates are limited to those relatively few locations for which drilling permits have been publicly filed. As of December 31, 2023, PUD reserves consists of 45 wells in various stages of drilling or completions. As of December 31, 2023, less than 1 % of the Company's total proved reserves were classified as PUDs. F-41 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES (Tabular Amounts in Thousands, Except Per Share, Percentage Data and Oil and Gas Disclosures) Standardized Measure of Discounted Future Net Cash Flows Future cash inflows represent expected revenues from production of period-end quantities of proved reserves based on the 12-month unweighted average of first-day-of-the-month commodity prices for the periods presented. Future cash inflows are computed by applying applicable prices relating to proved reserves to the year-end quantities of those reserves. Future production and costs are derived based on current costs assuming continuation of existing economic conditions. Federal income tax expenses are deducted from future production revenues in the calculation of the standardized measure using the statutory tax rate. The Company is subject to certain state-based taxes; however, these amounts are not material. The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted as representing current value to the Company. Material revisions to estimates of proved reserves may occur in the future; development and production of the reserves may not occur in the periods assumed; actual prices realized are expected to vary significantly from those used; and actual costs may vary. The following table provides the future net cash flows relating to proved oil and gas reserves based on the standardized measure of discounted cash flows as of December 31, 2023 : Gross Amounts Statutory tax rate Net Amounts Future cash inflows (3) $ 122,286 Future production costs 27,487 Future net cash flows before income tax expense 94,799 21 % 74,891 10% discount to reflect timing of cash flows ( 33,521 ) 21 % ( 26,481 ) Standardized measure of discounted cash flows $ 61,278 21 % $ 48,410 The following table provides the future net cash flows relating to proved oil and gas reserves based on the standardized measure of discounted cash flows as of December 31, 2022 : Gross Amounts Statutory tax rate Net Amounts Future cash inflows (3) $ 218,982 Future production costs 39,841 Future net cash flows before income tax expense 179,141 21 % 141,521 10% discount to reflect timing of cash flows ( 62,615 ) 21 % ( 49,465 ) Standardized measure of discounted cash flows $ 116,526 21 % $ 92,056 The following summarizes the principal sources of change in the standardized measure of discounted future net cash flows during 2023: Gross amounts 2023 2022 January 1 $ 116,526 $ 36,839 Purchases 11,312 6,236 Extensions and discoveries 11,419 54,795 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. F-42 Table of Contents SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS NACCO INDUSTRIES, INC. AND SUBSIDIARIES YEAR ENDED DECEMBER 31, 2023 AND 2022 Additions Description Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts — Describe Deductions — Describe Balance at End of Period (A) (In thousands) 2023 Reserves deducted from asset accounts: Deferred tax valuation allowances $ 11,809 $ ( 26 ) $ — $ — $ 11,783 2022 Reserves deducted from asset accounts: Deferred tax valuation allowances $ 11,695 $ 114 $ — $ — $ 11,809 (A) Balances which are not required to be presented and those which are immaterial have been omitted. F-43