What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2023-11-01 · 351 added, 589 removed, 585 unchanged (62% of the section changed)

16 unchanged sentences

Intangibles, net 5,880 6,006

Deferred income taxes 15,113 15,081

Investments in unconsolidated subsidiaries 13,753 12,371

5 unchanged sentences

Accounts payable to affiliates 691 904

Revolving credit agreements 17,000 10,000

Current maturities of long-term debt 4,498 3,953

8 unchanged sentences

Pension and other postretirement obligations 5,059 5,183

Deferred income taxes 4,206 6,122

Liability for uncertain tax positions 5,795 5,795

14 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2023 2022 2023 2022

THREE MONTHS ENDED

(In thousands, except per share data)

1 unchanged sentence

Cost of sales 46,271 46,784

Gross (loss) profit ( 2,174 ) 17,828 7,590 49,318

Gross profit 7,018 3,357

Earnings of unconsolidated operations 13,307 13,824

Contract termination settlement — — — 14,000

Operating expenses

1 unchanged sentence

Amortization of intangible assets 126 727

Loss (gain) on sale of assets

Gain on sale of assets

( 11 ) ( 236 )

Asset impairment charges — 3,939 — 3,939

15,568 15,367

Operating (loss) profit ( 6,267 ) 9,818 ( 2,703 ) 54,445

Operating profit 4,757 1,814

Other (income) expense

2 unchanged sentences

Closed mine obligations 455 409

Loss (gain) on equity securities 551 316 ( 498 ) 1,676

Income from equity method investee — ( 2,156 ) — ( 2,156 )

Other contract termination settlements — — — ( 16,882 )

Gain on equity securities ( 1,041 ) ( 628 )

Other, net ( 214 ) ( 1,725 )

( 816 ) ( 2,554 )

(Loss) income before income tax (benefit) provision ( 5,850 ) 11,480 1,775 71,497

Income tax (benefit) provision ( 2,018 ) 866 ( 2,605 ) 11,121

Net (loss) income $ ( 3,832 ) $ 10,614 $ 4,380 $ 60,376

Income before income tax provision (benefit) 5,573 4,368

Income tax provision (benefit) 1,003 ( 1,324 )

Net income $ 4,570 $ 5,692

Earnings per share:

Basic (loss) earnings per share $ ( 0.51 ) $ 1.45 $ 0.59 $ 8.27

Diluted (loss) earnings per share $ ( 0.51 ) $ 1.45 $ 0.58 $ 8.24

Basic earnings per share $ 0.61 $ 0.77

Diluted earnings per share $ 0.61 $ 0.76

Basic weighted average shares outstanding 7,452 7,428

4 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2023 2022 2023 2022

THREE MONTHS ENDED

(In thousands)

Net (loss) income $ ( 3,832 ) $ 10,614 $ 4,380 $ 60,376

Reclassification of pension and postretirement adjustments into earnings, net of $ 6 and $ 18 tax benefit in the three and nine months ended September 30, 2023, respectively, and net of $ 38 and $ 105 tax benefit in the three and nine months ended September 30, 2022, respectively.

20 118 59 354

Net income $ 4,570 $ 5,692

Reclassification of pension and postretirement adjustments into earnings, net of $ 23 and $ 6 tax benefit in the three months ended March 31, 2024 and March 31, 2023, respectively.

Total other comprehensive income 76 21

Comprehensive (loss) income $ ( 3,812 ) $ 10,732 $ 4,439 $ 60,730

Comprehensive income $ 4,646 $ 5,713

See notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED

THREE MONTHS ENDED

(In thousands)

Operating activities

Net cash provided by operating activities $ 63,020 $ 54,929

Net cash (used for) provided by operating activities $ ( 9,758 ) $ 6,254

Investing activities

7 unchanged sentences

Reductions of long-term debt ( 1,295 ) ( 1,456 )

Net reductions to revolving credit agreements — ( 4,000 )

Net additions to revolving credit agreements

Cash dividends paid ( 1,630 ) ( 1,557 )

Purchase of treasury shares ( 4,274 ) —

Net cash used for financing activities ( 8,046 ) ( 8,942 )

Net cash provided by (used for) financing activities 1,128 ( 901 )

Cash and cash equivalents

Total increase for the period 17,419 6,749

Total decrease for the period ( 23,265 ) ( 1,111 )

Balance at the beginning of the period 85,109 110,748

8 unchanged sentences

Stock-based compensation 161 — 403 — — 564

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

Net income — — — 5,692 — 5,692

4 unchanged sentences

Balance, March 31, 2023 $ 5,944 $ 1,566 $ 24,109 $ 409,059 $ ( 8,992 ) $ 431,686

Stock-based compensation

7 — 2,325 — — 2,332

— — — 37,180 — 37,180

Cash dividends on Class A and Class B common stock:

$ 0.2075 per share

— — — ( 1,521 ) — ( 1,521 )

Reclassification adjustment to net income, net of tax

— — — — 118 118

Balance, June 30, 2022 $ 5,769 $ 1,566 $ 19,634 $ 383,574 $ ( 7,940 ) $ 402,603

Stock-based compensation 7 — 3,601 — — 3,608

Net income — — — 10,614 — 10,614

Cash dividends on Class A and Class B common stock:

$ 0.2075 per share

— — — ( 1,522 ) — ( 1,522 )

Reclassification adjustment to net income, net of tax — — — — 118 118

Balance, September 30, 2022 $ 5,776 $ 1,566 $ 23,235 $ 392,666 $ ( 7,822 ) $ 415,421

Balance, January 1, 2024 $ 5,883 $ 1,566 $ 28,672 $ 355,873 $ ( 9,654 ) $ 382,340

Stock-based compensation 130 — 401 — — 531

Purchase of treasury shares ( 128 ) — — ( 4,146 ) — ( 4,274 )

Net income — — — 4,570 — 4,570

4 unchanged sentences

Balance, March 31, 2024 $ 5,885 $ 1,566 $ 29,073 $ 354,667 $ ( 9,578 ) $ 381,613

Stock-based compensation

10 — 797 — — 807

— — — 2,520 — 2,520

Cash dividends on Class A and Class B common stock:

$ 0.2175 per share

— — — ( 1,633 ) — ( 1,633 )

Reclassification adjustment to net income, net of tax

— — — — 18 18

Balance, June 30, 2023 $ 5,954 $ 1,566 $ 24,906 $ 409,946 $ ( 8,974 ) $ 433,398

Stock-based compensation 10 — 1,309 — — 1,319

Purchase of treasury shares ( 24 ) — ( 800 ) — — ( 824 )

Net loss — — — ( 3,832 ) — ( 3,832 )

Cash dividends on Class A and Class B common stock:

$ 0.2175 per share

— — — ( 1,636 ) — ( 1,636 )

Reclassification adjustment to net income, net of tax — — — — 20 20

Balance, September 30, 2023 $ 5,940 $ 1,566 $ 25,415 $ 404,478 $ ( 8,954 ) $ 428,445

See notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

MARCH 31, 2024

(In thousands, except as noted and per share amounts)

9 unchanged sentences

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

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

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

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

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

underground mining activities.

Intercompany accounts and transactions are eliminated in consolidation.

See Note 8 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.

The Coal Mining segment 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.

During the three and nine months ended September 30, 2023, the Coal Mining segment's operating coal mines were:

During the three months ended March 31, 2024, 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.

While MLMC’s coal supply contract contains a take or pay provision, the contract 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 coal supply 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.

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

This issue has resulted in a reduction in customer demand which will have a significant impact on the Company's 2024 results of operations.

Repairs to the boiler are expected to be completed during the second half of 2024.

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

2 unchanged sentences

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

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

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.

During the third quarter of 2023, Sabine and SWEPCO entered into an agreement under which Sabine will provide mine reclamation services through September 30, 2026.

On October 1, 2026, SWEPCO will take over and complete the remaining mine reclamation services by acquiring all of the capital stock of Sabine.

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

The North Dakota Department of Environmental Quality approved Falkirk’s customer's plan for an alternate disposal liner to store coal ash at the Coal Creek Station power plant.

In the first quarter of 2023, the United States Environmental Protection Agency proposed to deny the application.

If denied, a new liner or new waste management unit(s) may need to be installed which could result in the temporary suspension of operations at Coal Creek Station.

To minimize any impact to operations, Coal Creek Station is moving forward with plans to dry coal combustion residual materials produced by the plant, reducing the need to utilize the lined area in question.

See the Government Regulation Update on page 19 of this Quarterly Report on Form 10-Q for further information.

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

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

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

During 2022, Southern Company disclosed that it provided notice to CGLP to terminate the related operating and maintenance agreement.

On July 14, 2023, the Southern Company subsidiary agreed to continue operating the plant for CGLP until the associated power off-take agreement ends in 2032, subject to certain terms and conditions.

This restructuring had no material impact on the Company's financial statements.

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

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

At Coteau, Coyote Creek and Falkirk, the Company is paid a management fee per ton of coal or heating unit (MMBtu) delivered.

Each contract specifies the indices and mechanics by which fees change over time, generally in line with broad measures of U.S.

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

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

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.

1 unchanged sentence

See Note 6 for further discussion of Coyote Creek's guarantees.

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

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;

1 unchanged sentence

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 Unaudited Condensed Consolidated Statements of Operations and the Company’s investment is reported on the line Investments in unconsolidated subsidiaries in the Unaudited Condensed Consolidated Balance Sheets.

6 unchanged sentences

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

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

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

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

inflation rates.

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

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

During the first nine months of 2023, MLMC completed mining in the original mine area and moved to a new mine area, which has resulted in increased costs and a reduction in earnings.

MLMC does not anticipate opening additional mine areas through the remaining contract term.

NAMining Segment

4 unchanged sentences

materials handling and processing, product sales and distribution.

As of September 30, 2023, NAMining operates in Florida, Texas, Arkansas, Indiana, Virginia and Nebraska.

In addition, Sawtooth Mining, LLC ("Sawtooth") provides comprehensive mining services as the exclusive contract miner for the Thacker Pass lithium project in northern Nevada.

As of March 31, 2024, NAMining operates in Florida, Texas, Arkansas, Virginia and Nebraska.

In addition, Sawtooth Mining, LLC ("Sawtooth") has exclusive responsibility for mining and mine closure services for the Thacker Pass lithium project in northern Nevada, including mine design, construction, operation and maintenance.

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

6 unchanged sentences

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

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.

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 have no environmental liability.

Royalty interests leased to producers expire upon the expiration of the oil and gas lease and revert to the mineral owner.

17 unchanged sentences

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.

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.

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

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

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

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

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

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

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

The Company recognized a gain of $ 30.9 million within the accompanying Unaudited Condensed Consolidated Statements of Operations during the first nine months of 2022 as GRE paid $ 14.0 million in cash, as well as transferred ownership of an office building with an estimated fair value of $ 4.1 million, and conveyed membership units in Midwest AgEnergy Group, LLC (“MAG”), a North Dakota-based ethanol business, with an estimated fair value at the transfer date of $ 12.8 million.

Prior to receiving the membership units from GRE, the Company held a $ 5.0 million investment in MAG carried at cost, less impairment.

Subsequent to the receipt of the additional membership units, the Company began to account for the investment under the equity method of accounting.

During the third quarter of 2022, the Company recorded $ 2.2 million, which represented its share of MAG's earnings on the "Income from equity method investee" line within the accompanying Unaudited Condensed Consolidated Statements of Operations.

On December 1, 2022, the Company transferred its ownership interest in MAG to HLCP Ethanol Holdco, LLC (“HLCP”) and received a cash payment of $ 18.6 million during the fourth quarter of 2022.

The Company received a payment of $ 1.2 million

in the first quarter of 2023 in connection with a post-closing purchase price adjustment, which is included on the line "Other, net" within the accompanying Unaudited Condensed Consolidated Statements of Operations.

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

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

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

Additional payments to NACCO could range from $ 0 to approximately $ 12.9 million based on achievement of the two earn-outs as well as payment of amounts held in escrow to address potential indemnity claims during the 12-month period following the transaction date.

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

During the first quarter of 2023, the Company’s wholly-owned subsidiary, Caddo Creek Resources Company (“Caddo Creek”), acquired 100 % of the membership interests in the Marshall Mine located outside of Marshall, Texas from Advanced Emissions Solutions (“ADES”).

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

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 first quarter of 2023.

On December 1, 2022, the Company transferred its ownership interest in Midwest AgEnergy Group, LLC (“MAG”), a North Dakota-based ethanol business to HLCP Ethanol Holdco, LLC (“HLCP”).

The Company received a payment of $ 1.2 million in the first quarter of 2023 in connection with a post-closing purchase price adjustment, which is included on the line "Other, net" within the accompanying Unaudited Condensed Consolidated Statements of Operations.

Basis of Presentation:

4 unchanged sentences

GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at September 30, 2023, the results of its operations, comprehensive income, cash flows and changes in equity for the nine months ended September 30, 2023 and 2022 have been included.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at March 31, 2024, the results of its operations, comprehensive income, cash flows and changes in equity for the three months ended March 31, 2024 and 2023 have been included.

These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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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 has a contract with its respective customer that represents a contract under ASC 606.

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:

2 unchanged sentences

Fluctuations in revenue from period to period generally result from changes in customer demand.

At NAMining, the management service is primarily to oversee the operation of the equipment, and delivery of aggregates or other minerals is the performance obligation accounted for as a series.

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;

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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 third-party lessees the right to explore, develop, produce and sell minerals controlled by the Company.

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;

1 unchanged sentence

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 is the performance obligation.

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.

1 unchanged sentence

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 provisions of royalty contracts are customary in the industry.

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 .

3 unchanged sentences

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 agreements under which Mitigation Resources is reimbursed for all costs incurred in performing the required mitigation plus an agreed profit percentage or a fixed fee.

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.

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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 $ 23.1 million of equipment for this project during the first nine months of 2023.

Revenue recognized by Sawtooth in connection with its capital assets was immaterial in the three and nine months ended September 30, 2023.

Sawtooth recognized $ 1.5 million and $ 0.1 million in revenue for reimbursable costs during the three months ended March 31, 2024 and 2023, respectively.

In accordance with the Thacker Pass mining 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 $ 3.5 million 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 non-operator, 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 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.

1 unchanged sentence

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.

For the three months ended September 30, 2023 and

2022, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was immaterial.

For the nine months ended September 30, 2023, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was $ 1.4 million.

For the nine months ended September 30, 2022, royalty income of $ 2.1 million was recognized for a settlement related to the Company’s ownership interest in certain mineral rights.

For the three months ended March 31, 2024 and 2023, royalty income recognized in the reporting period related to performance obligations satisfied in prior reporting periods was immaterial.

Disaggregation of Revenue

3 unchanged sentences

See Note 8 to the Unaudited Condensed Consolidated Financial Statements for further discussion of segment reporting.

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2023 2022 2023 2022

The following table disaggregates revenue by major sources as of March 31:

THREE MONTHS ENDED

Timing of Revenue Recognition

3 unchanged sentences

Contract Balances

The opening and closing balances of the Company’s current and long-term accounts receivable, contract assets and contract liabilities are as follows:

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

Trade accounts receivable Contract asset

(long-term) Contract liability (current) Contract liability (long-term)

Balance, January 1, 2024 $ 37,429 $ 3,712 $ 878 $ 1,470

Balance, September 30, 2023 29,738 — 3,625 1,299 1,604

Balance, March 31, 2024 27,958 3,500 930 2,117

Increase (decrease) $ ( 9,471 ) $ ( 212 ) $ 52 $ 647

3 unchanged sentences

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 three months ended September 30, 2023 and 2022 included in the opening contract liability was $ 0.3 million and $ 0.2 million, respectively.

The amount of royalty revenue recognized in both of the nine months ended September 30, 2023 and 2022 included in the opening contract liability was $ 0.7 million.

The amount of royalty revenue recognized in both of the three months ended March 31, 2024 and 2023 included in the opening contract liability was $ 0.2 million.

This revenue consists of up-front lease bonus payments received under royalty contracts that are recognized over the primary term of the royalty contracts, which are generally three to five years .

The Company expects to recognize an additional $ 0.8 million in the remainder of 2023, $ 0.7 million in 2024, $ 1.3 million in 2025 and $ 0.1 million in both 2026 and 2027 related to the contract liability remaining at September 30, 2023.

The Company expects to recognize an additional $ 0.9 million in the remainder of 2024, $ 1.2 million in 2025, $ 0.1 million in 2026, less than $ 0.1 million in 2027 and $ 0.8 million in the years after 2027 related to the contract liability remaining at March 31, 2024.

The difference between the opening and closing balances of the Company’s contract balances results from the timing difference between the Company’s performance and the customer’s payment.

6 unchanged sentences

Total inventories $ 75,755 $ 77,000

During the three and nine months ended September 30, 2023, the Company recorded a $ 2.4 million and $ 6.6 million inventory impairment charge, respectively, in the line “Cost of sales” in the accompanying Unaudited Condensed Consolidated Statements of Operations as mining costs exceeded net realizable value at MLMC.

During the three months ended March 31, 2024 and 2023, the Company recorded a $ 2.5 million and a $ 2.4 million inventory impairment charge, respectively, in the line “Cost of sales” in the accompanying Unaudited Condensed Consolidated Statements of Operations as mining costs exceeded net realizable value at MLMC.

NOTE 4— Stockholders' Equity

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On November 7, 2023, the Company's Board of Directors approved a stock repurchase program ("2023 Stock Repurchase Program") providing for the purchase of up to $ 20.0 million of the Company’s outstanding Class A common stock through December 31, 2025.

During both the three and nine months ended September 30, 2023, the Company repurchased 24,762 shares of Class A Common Stock under the 2021 Stock Repurchase Program for an aggregate purchase price of $ 0.8 million.

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

During the three months ended March 31, 2024, the Company repurchased 127,687 shares of Class A Common Stock under the 2023 Stock Repurchase Program for an aggregate purchase price of $ 4.3 million.

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 2021 Stock Repurchase Program may be implemented under a Rule 10b5-1 trading plan, which would allow repurchases under pre-set terms at times when the Company might otherwise be restricted from doing so under applicable securities laws.

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.

NOTE 5— Fair Value Disclosure

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Description Date (Level 1) (Level 2) (Level 3)

September 30, 2023

March 31, 2024

Equity securities $ 18,284 $ 18,284 $ — $ —

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

Company recognized a loss of $ 0.4 million and a gain of $ 0.7 million during the three and nine months ended September 30, 2023, respectively, and a loss of $ 0.5 million and $ 2.7 million during the three and nine months ended September 30, 2022, respectively, related to the Mine Water Treatment Trust.

The fair value of the Mine Water Treatment Trust was $ 11.9 million and $ 11.2 million at March 31, 2024 and December 31, 2023, respectively, and is included in Other non-current assets in the accompanying Unaudited Consolidated Balance Sheets.

The Company recognized a gain of $ 0.7 million and $ 0.6 million during the three months ended March 31, 2024 and 2023, respectively, related to the Mine Water Treatment Trust.

Prior to 2023, the Company invested $ 2.0 million in equity securities of a public company with a diversified portfolio of royalty producing mineral interests.

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

The Company recognized a loss of $ 0.2 million during both, the three and nine months ended September 30, 2023, and a gain of $ 0.2 million and $ 1.0 million during the three and nine months ended September 30, 2022, respectively, related to the investment in these equity securities.

The change in fair value of equity securities is reported on the line Loss (gain) on equity securities in the Other (income) expense section of the Unaudited Condensed Consolidated Statements of Operations.

There were no transfers into or out of Levels 1, 2 or 3 during the nine months ended September 30, 2023 and 2022.

The fair value of this investment was $ 6.4 million and $ 6.0 million at March 31, 2024 and December 31, 2023, respectively, and is included in Other non-current assets in the accompanying Unaudited Consolidated Balance Sheets.

The Company recognized a gain of $ 0.4 million and $ 0.1 million during the three months ended March 31, 2024 and 2023, respectively, related to the investment in these equity securities.

The change in fair value of equity securities is reported on the line Gain on equity securities in the Other (income) expense section of the Unaudited Condensed Consolidated Statements of Operations.

There were no transfers into or out of Levels 1, 2 or 3 during the three months ended March 31, 2024 and 2023.

NOTE 6— Unconsolidated Subsidiaries

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See Note 1 for a discussion of these entities.

The Investment in the unconsolidated subsidiaries and related tax positions totaled $ 11.5 million and $ 14.9 million at September 30, 2023 and December 31, 2022, respectively.

The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $ 4.7 million and $ 7.1 million at September 30, 2023 and December 31, 2022, respectively.

Earnings of unconsolidated operations were $ 12.8 million and $ 37.7 million during the three and nine months ended September 30, 2023, respectively, and $ 14.6 million and $ 43.8 million during the three and nine months ended September 30, 2022, respectively.

NACoal is a party to certain guarantees related to Coyote Creek.

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 Investment in the unconsolidated subsidiaries and related tax positions totaled $ 13.8 million and $ 12.4 million at March 31, 2024 and December 31, 2023, respectively.

The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $ 4.8 million and $ 5.0 million at March 31, 2024 and December 31, 2023, respectively.

Earnings of unconsolidated operations were $ 13.3 million and $ 13.8 million during the three months ended March 31, 2024 and 2023, respectively.

NACCO Natural Resources Corporation ("NACCO Natural Resources"), a wholly-owned subsidiary of NACCO, 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”), NACCO Natural Resources 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.

In addition, in the event Coyote Creek’s LSA is terminated by Coyote Creek’s customers, NACCO Natural Resources 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 NACCO Natural Resources since the inception of these guarantees.

The Company believes that the likelihood NACCO Natural Resources would be required to perform under the guarantees is remote, and no amounts related to these guarantees have been recorded.

NOTE 7— Contingencies

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underground mining activities.

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

The following table presents revenues, operating (loss) profit, expenditures for property, plant and equipment and acquisition of mineral interests and depreciation, depletion and amortization expense:

THREE MONTHS ENDED NINE MONTHS ENDED

SEPTEMBER 30 SEPTEMBER 30

2023 2022 2023 2022

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

The following table presents Revenues, Cost of sales, Earnings of unconsolidated operations, Operating expenses, Operating profit (loss), Expenditures for property, plant and equipment and acquisition of mineral interests and Depreciation, depletion and amortization expense:

THREE MONTHS ENDED

Coal Mining $ 15,545 $ 20,653

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Total $ 53,289 $ 50,141

Operating (loss) profit

Cost of sales

Coal Mining $ 20,943 $ 25,878

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Total $ 46,271 $ 46,784

Earnings of unconsolidated operations

Coal Mining $ 12,007 $ 12,466

NAMining 1,365 1,358

Minerals Management ( 65 ) —

Total $ 13,307 $ 13,824

Operating expenses*

Coal Mining $ 7,026 $ 6,928

NAMining 1,822 1,920

Minerals Management 1,042 1,189

Unallocated Items 5,678 5,330

Total $ 15,568 $ 15,367

Operating profit (loss)

Coal Mining $ ( 417 ) $ 313

NAMining 2,355 830

Minerals Management 7,930 6,044

Unallocated Items ( 5,128 ) ( 5,353 )

Eliminations 17 ( 20 )

Total $ 4,757 $ 1,814

*Operating expenses consist of Selling, general and administrative expenses, Amortization of intangible assets and (Gain) loss on sale of assets.

THREE MONTHS ENDED

Expenditures for property, plant and equipment and acquisition of mineral interests

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Total $ 5,692 $ 7,019

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

- Management's Discussion and Analysis of Financial Condition and Results of Operations

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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 as part of the measurement of segment operating profit.

These items primarily include administrative costs related to public company reporting requirements at the parent company and the financial results of Mitigation Resources and Bellaire Corporation ("Bellaire").

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

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

underground mining activities.

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

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