What changed in this filing

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Item 1. Financial Statements

2024-07-31 compared with 2024-05-01 · 317 added, 181 removed, 755 unchanged (40% of the section changed)

8 unchanged sentences

Accounts receivable from affiliates 6,377 7,860

Cash held by 1031 exchange facilitator 6,721 —

Inventories 83,399 77,000

Assets held for sale 4,739 6,466

Federal income tax receivable 845 845

Prepaid insurance 7,192 1,790

38 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED

THREE MONTHS ENDED SIX MONTHS ENDED

JUNE 30 JUNE 30

2024 2023 2024 2023

(In thousands, except per share data)

6 unchanged sentences

Amortization of intangible assets 116 927 242 1,654

Gain on sale of assets

(Gain) loss on sale of assets

( 4,592 ) 68 ( 4,603 ) ( 168 )

1 unchanged sentence

Operating profit 7,366 1,750 12,123 3,564

Other (income) expense

Other expense (income)

Interest expense 1,311 572 2,422 1,117

1 unchanged sentence

Closed mine obligations 471 433 926 842

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

Loss (gain) on equity securities 264 ( 421 ) ( 777 ) ( 1,049 )

Other, net 130 ( 377 ) ( 84 ) ( 2,102 )

12 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED

THREE MONTHS ENDED SIX MONTHS ENDED

JUNE 30 JUNE 30

2024 2023 2024 2023

(In thousands)

Net income $ 5,972 $ 2,520 $ 10,542 $ 8,212

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.

Reclassification of pension and postretirement adjustments into earnings, net of $ 25 and $ 48 tax benefit in the three and six months ended June 30, 2024, respectively, and net of $ 6 and $ 12 tax benefit in the three and six months ended June 30, 2023, respectively.

Total other comprehensive income 77 18 153 39

4 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

SIX MONTHS ENDED

(In thousands)

15 unchanged sentences

Cash and cash equivalents

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

Total (decrease) increase for the period ( 22,748 ) 6,268

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

14 unchanged sentences

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

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

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

7 unchanged sentences

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

Stock-based compensation

11 — 1,378 — — 1,389

Purchase of treasury shares

( 108 ) — — ( 3,177 ) — ( 3,285 )

— — — 5,972 — 5,972

Cash dividends on Class A and Class B common stock:

$ 0.2275 per share

— — — ( 1,676 ) — ( 1,676 )

Reclassification adjustment to net income, net of tax

— — — — 77 77

Balance, June 30, 2024 $ 5,788 $ 1,566 $ 30,451 $ 355,786 $ ( 9,501 ) $ 384,090

See notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

JUNE 30, 2024

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

1 unchanged sentence

The accompanying Unaudited Condensed 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.

® (“NACCO”) and its wholly owned subsidiary, NACCO Natural Resources ® (collectively, the “Company”).

NACCO Natural Resources brings natural resources to life by delivering aggregates, minerals, reliable fuels and environmental solutions through its robust business portfolio.

The Company operates under three business segments:

3 unchanged sentences

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.

Mitigation Resources of North America ® ("Mitigation Resources") provides stream and wetland mitigation solutions as well as comprehensive reclamation and restoration construction services.

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

9 unchanged sentences

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

During the three months ended March 31, 2024, the Coal Mining segment's operating coal mines were:

During the three and six months ended June 30, 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”).

14 unchanged sentences

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.

On December 18, 2023, MLMC received 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.

This issue resulted in a reduction in customer demand which had a significant impact on the Company's results of operations during the first six months of 2024.

Based on current expectations, repairs to the boiler will be resolved and the plant will be fully operational by fourth quarter 2024.

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

20 unchanged sentences

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.

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

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

See Note 6 for further information on the Unconsolidated Subsidiaries.

9 unchanged sentences

materials handling and processing, product sales and distribution.

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

As of June 30, 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.

36 unchanged sentences

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 Company has cash proceeds from the sale of assets held by a qualified intermediary to facilitate tax-deferred exchange transactions under Section 1031 of the Internal Revenue Code.

In May 2024, the Company sold land and recognized a $ 4.5 million gain in the Minerals Management segment.

The Company structured this transaction in a manner that qualified as like-kind exchange pursuant to Section 1031 of the Internal Revenue Code.

The net proceeds are being held in escrow until replacement property is purchased.

A $ 0.3 million property related to this like-kind exchange was acquired in June 2024.

The Company had $ 6.7 million and $ 0.0 million of cash at June 30, 2024 and December 31, 2023, respectively, which is reported on the line Cash held by 1031 exchange facilitator in the Unaudited Condensed Consolidated Balance Sheets.

The Company is evaluating other acquisitions which, if executed, could utilize some or all of the remaining cash.

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 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.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at June 30, 2024, the results of its operations, comprehensive income, cash flows and changes in equity for the six months ended June 30, 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.

31 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 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.

agreed profit percentage or a fixed fee.

The mitigation services provided is the performance obligation and is accounted for as a series.

5 unchanged sentences

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.

The Company’s contracts with its customers in the Coal Mining and NAMining segments 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.

1 unchanged sentence

Index adjustments, if applicable, are effective prospectively.

In the Minerals Management segment, the Company has the right to receive revenues from the sale of oil and natural gas through sales of the third-party lessees in which the Company owns a mineral or royalty interest.

Revenue is recognized at the point control of the product is transferred from the operator to the purchaser.

Those purchasers remit payment to the operator and the operator, in turn, remits payment to the Company.

Receivables from third-party lessees for which the Company did not receive actual production information, either due to timing delays or due to the unavailability of data at the time when revenues are recognized, are estimated using expected sales volumes and estimated prices.

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.

The Company typically receives payment for oil and natural gas sales within 90 days of the month of delivery.

For the three months ended June 30, 2024, differences between the Company’s first quarter pricing estimates and the actual amounts received from operators in the second quarter resulted in a $ 2.3 million change in estimate.

For the six months ended June 30, 2024, change in estimates was immaterial .

For the three and six months ended June 30, 2023, change in estimates was immaterial .

Cost Reimbursement

5 unchanged sentences

Sawtooth will recognize revenue over the estimated useful life of the asset on a straight-line basis as the performance obligation is satisfied over time.

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.

Sawtooth recognized $ 2.2 million and $ 1.0 million in revenue for reimbursable costs during the three months ended June 30, 2024 and 2023, respectively.

Sawtooth recognized $ 3.6 million and $ 1.1 million in revenue for reimbursable costs during the six months ended June 30, 2024 and 2023, respectively.

In prior years, 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 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.

As discussed above, the Company records royalty income in the month production is delivered to the purchaser.

The expected sales volumes and prices for these properties are estimated and recorded in "Trade accounts receivable" in the accompanying Unaudited Condensed 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.

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.

For the three and six months ended June 30, 2024, royalty income recognized in the reporting period related to production satisfied in prior reporting periods was immaterial .

For the three and six months ended June 30, 2023, royalty income recognized in the reporting period related to production satisfied in prior reporting periods was $ 1.4 million.

Disaggregation of Revenue

3 unchanged sentences

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

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

THREE MONTHS ENDED

The following table disaggregates revenue by major sources as of June 30:

THREE MONTHS ENDED SIX MONTHS ENDED

JUNE 30 JUNE 30

2024 2023 2024 2023

Timing of Revenue Recognition

5 unchanged sentences

Contract balances

Trade accounts receivable Contract asset

Trade accounts receivable Contract asset (current) Contract asset

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

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

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

Balance, June 30, 2024 36,635 2,283 3,500 843 3,100

Increase (decrease) $ ( 794 ) $ 2,283 $ ( 212 ) $ ( 35 ) $ 1,630

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

The amount of royalty revenue recognized in both of the three months ended June 30, 2024 and 2023 included in the opening contract liability was $ 0.2 million.

The amount of royalty revenue recognized in both of the six months ended June 30, 2024 and 2023 included in the opening contract liability was $ 0.4 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 $ 0.9 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 Company expects to recognize an additional $ 0.8 million in the remainder of 2024, $ 1.1 million in 2025, $ 0.1 million in 2026 and 2027 and $ 1.9 million in the years after 2027 related to the contract liability remaining at June 30, 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.

3 unchanged sentences

2024 DECEMBER 31

Coal $ 19,576 $ 23,784

Coal and aggregates $ 24,637 $ 23,784

Mining supplies 58,762 53,216

Total inventories $ 83,399 $ 77,000

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.

During the three and six months ended June 30, 2024, the Company recorded a $ 0.7 million and $ 3.1 million inventory impairment charge, respectively.

During the three and six months ended June 30, 2023, the Company recorded a $ 1.8 million and $ 4.2 million inventory impairment charge, respectively.

The inventory impairment charges are in the line “Cost of sales” in the accompanying Unaudited Condensed Consolidated Statements of Operations as the cost-basis of coal inventory exceeded its net realizable value at MLMC.

NOTE 4— Stockholders' Equity

2 unchanged sentences

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.

During the three and six months ended June 30, 2024, the Company repurchased 108,371 and 236,058 shares, respectively, of Class A Common Stock under the 2023 Stock Repurchase Program for an aggregate purchase price of $ 3.3 million and $ 7.6 million, respectively.

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.

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

6 unchanged sentences

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

March 31, 2024

June 30, 2024

Equity securities $ 18,039 $ 18,039 $ — $ —

5 unchanged sentences

underground coal mining operations.

Prior to 2023, Bellaire contributed $ 5.0 million to establish a mine water treatment trust (the "Mine Water Treatment Trust") to assure the long-term treatment of post-mining discharge.

Prior to 2023, Bellaire contributed $ 5.0 million

to establish a mine water treatment trust (the "Mine Water Treatment Trust") to assure the long-term treatment of post-mining discharge.

Bellaire's Mine Water Treatment Trust invests in equity 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 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.

The fair value of the Mine Water Treatment Trust was $ 12.2 million and $ 11.2 million at June 30, 2024 and December 31, 2023, respectively, and is included in Other non-current assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

The Company recognized a gain of $ 0.3 million and $ 1.0 million during the three and six months ended June 30, 2024, respectively, and a gain of $ 0.5 million and $ 1.0 million during the three and six months ended June 30, 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.

1 unchanged sentence

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

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.

The fair value of this investment was $ 5.8 million and $ 6.0 million at June 30, 2024 and December 31, 2023, respectively, and is included in Other non-current assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

The Company recognized a loss of $ 0.5 million and $ 0.2 million during the three and six months ended June 30, 2024, respectively, and a loss of $ 0.1 million and a de minimis gain during the three and six months ended June 30, 2023, 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 six months ended June 30, 2024 and 2023.

NOTE 6— Unconsolidated Subsidiaries

5 unchanged sentences

See Note 1 for a discussion of these entities.

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.

The Investment in the unconsolidated subsidiaries and related tax positions totaled $ 15.4 million and $ 12.4 million at June 30, 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 $ 5.1 million and $ 5.0 million at June 30, 2024 and December 31, 2023, respectively.

Earnings of unconsolidated operations were $ 13.6 million and $ 26.9 million during the three and six months ended June 30, 2024, respectively, and $ 11.1 million and $ 24.9 million during the three and six months ended June 30, 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.

10 unchanged sentences

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.

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.

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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

THREE MONTHS ENDED SIX MONTHS ENDED

JUNE 30 JUNE 30

2024 2023 2024 2023

Coal Mining $ 14,996 $ 26,343 $ 30,541 $ 46,996

16 unchanged sentences

Total $ 13,592 $ 11,084 $ 26,899 $ 24,908

Operating expenses*

Operating expenses (income)*

Coal Mining $ 8,097 $ 7,711 $ 15,123 $ 14,639

10 unchanged sentences

Total $ 7,366 $ 1,750 $ 12,123 $ 3,564

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

THREE MONTHS ENDED

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

THREE MONTHS ENDED SIX MONTHS ENDED

JUNE 30 JUNE 30

2024 2023 2024 2023

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

17 unchanged sentences

Management's Discussion and Analysis of Financial Condition and Results of Operations include 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.

® (“NACCO”) and its wholly owned subsidiary, NACCO Natural Resources ® (collectively, the “Company”).

NACCO Natural Resources brings natural resources to life by delivering aggregates, minerals, reliable fuels and environmental solutions through its robust business portfolio.

The Company operates under three business segments:

3 unchanged sentences

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.

Mitigation Resources of North America ® ("Mitigation Resources") provides stream and wetland mitigation solutions as well as comprehensive reclamation and restoration construction services.

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

8 unchanged sentences

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

During the three months ended March 31, 2024, the Coal Mining segment's operating coal mines were:

During the three and six months ended June 30, 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”).

14 unchanged sentences

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.

On December 18, 2023, MLMC received 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.

This issue resulted in a reduction in customer demand which had a

significant impact on the Company's results of operations during the first six months of 2024.

Based on current expectations, repairs to the boiler will be resolved and the plant will be fully operational by fourth quarter 2024.

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

31 unchanged sentences

materials handling and processing, product sales and distribution.

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

As of June 30, 2024, NAMining operates in Florida, Texas, Arkansas, Virginia and Nebraska.

34 unchanged sentences

Government Regulation Update

On April 25, 2024, the Environmental Protection Agency (“EPA”) issued a pre-publication version of the final rules for Greenhouse Gas (“GHG”) emissions and Mercury Air Toxics Standards (“MATS”).

In May 2024, the Environmental Protection Agency (“EPA”) published the final rules for Greenhouse Gas (“GHG”) emissions and Mercury Air Toxics Standards (“MATS”) in the Federal Register.

The final MATS and GHG rules will require compliance as early as 2027 and 2032, respectively.

The Company is in the process of determining the implications of these rules.

Previous efforts by the EPA were met with extensive litigation and the Company anticipates a similar response to the new GHG and MATS rules.

Preliminary review of the GHG rules indicate that the compliance deadline for coal-fired plants planning to install carbon capture and sequestration/storage technology has been extended to January 1, 2032.

Previous efforts by the EPA were met with extensive litigation and there has been a similar response to the new GHG and MATS rules.

State coalitions have filed lawsuits challenging both of these rules.

Several other entities, including electric generators and industry groups, have joined the lawsuits.

Stay motions are pending in both lawsuits.

Review of the newly established emission guidelines for carbon dioxide emissions from existing coal-fired, steam generating electric generating units ("EGUs") indicate that the compliance deadline for coal-fired plants planning to install carbon capture and sequestration/storage technology has been extended to January 1, 2032 in order to operate beyond 2039.

If a coal-fired plant intends to close prior to 2032, no controls will be required and if a plant plans to close between 2032 and 2039, they must begin co-firing with natural gas by January 1, 2030.

Preliminary review of the final MATS rules indicate that the EPA significantly reduced the fine particulate matter emission standard for all existing coal-fired electric generating units and will require continuous monitoring equipment to demonstrate compliance.

Furthermore, the EPA elected to remove the lignite subcategory for mercury limits and will require lignite-fired electric generating units to meet the same standard as other types of coal.

The MATS rules finalize changes for the filterable particulate matter surrogate emission standard for non-mercury metal hazardous air pollutants for existing coal-fired EGUs, the filterable particulate matter emission standard compliance demonstration requirements, and the mercury emission standard for lignite-fired EGUs.

Review of the MATS rules indicate that the EPA significantly reduced the fine particulate matter emission standard for all existing coal-fired EGUs and will require continuous monitoring equipment to demonstrate compliance.

Furthermore, the EPA elected to remove the lignite subcategory for mercury limits and will require lignite-fired EGUs to meet the same standard as other types of coal.

Substantially all of the Coal Mining segment's profits are derived from long-term mining contracts.

1 unchanged sentence

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

The EPA promulgated a regional haze program designed to protect and to improve visibility at and around Class I Areas, which are generally National Parks, National Wilderness Areas and International Parks.

State implementation of the EPA’s Regional Haze Rule could require Coyote Creek’s customers to incur significant new costs at the Coyote Station power plant, which could result in the premature closure of the power plant and the Coyote Creek mine.

The North Dakota Department of Environmental Quality (“NDDEQ”) finalized its state implementation plan and submitted it to the EPA for approval in August 2022.

The NDDEQ determined that visibility progress was being made and did not require significant emissions controls at Coyote Station power plant.

Notwithstanding NDDEQ’s determination, the EPA may require additional costly emission controls and it may not be economically feasible for Coyote Creek's customers to invest in such equipment, which could result in early retirement of Coyote Station and the Coyote Creek mine.

In July 2024, the EPA issued a proposed partial denial of the state implementation plan.

The Company plans to submit comments to the EPA on the proposed partial denial.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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CONSOLIDATED FINANCIAL SUMMARY

The results of operations for NACCO were as follows for the three months ended March 31:

The results of operations for NACCO were as follows for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

Coal Mining $ 14,996 $ 26,343 $ 30,541 $ 46,996

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Total operating profit

7,366 1,750 12,123 3,564

Interest expense 1,311 572 2,422 1,117

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Closed mine obligations 471 433 926 842

Gain on equity securities

(1,041) (628)

Loss (gain) on equity securities 264 (421) (777) (1,049)

Other, net 130 (377) (84) (2,102)

Other income, net (816) (2,554)

Other expense (income), net 1,138 (1,507) 322 (4,061)

Income before income tax provision (benefit)

6,228 3,257 11,801 7,625

Income tax provision (benefit)

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The components of the change in revenues and operating profit are discussed below in "Segment Results."

First Quarter of 2024 Compared with First Quarter of 2023

Other (income) expense, net

Interest expense increased in the first quarter of 2024 compared with the respective 2023 period due to higher average borrowings as well as an increase in interest rates.

Gain on equity securities represents changes in the market price of invested assets reported at fair value.

The change in the first quarter of 2024 compared with the respective 2023 period was due to fluctuations in the market prices of the exchange-traded equity securities.

Second Quarter of 2024 Compared with Second Quarter of 2023, and First Six Months of 2024 Compared with First Six Months of 2023

Other expense (income), net

Interest expense increased in the second quarter of 2024 and the first six months of 2024 compared with the respective 2023 periods due to higher average borrowings as well as an increase in interest rates.

Interest income decreased in the second quarter of 2024 and the first six months of 2024 compared with the respective 2023 periods due to lower earnings on reduced cash balances.

Loss (gain) on equity securities represents changes in the market price of invested assets reported at fair value.

The change in the second quarter of 2024 and the first six months of 2024 compared with the respective 2023 periods was due to fluctuations in the market prices of the exchange-traded equity securities.

See Note 5 to the Unaudited Condensed Consolidated Financial Statements for further discussion of equity securities.

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Accordingly, in periods where income before tax is relatively small, the proportional effect of the benefit from percentage depletion on the effective tax rate may be significant.

In addition, as a result of the forecasted loss before income tax as of March 31, 2023, the effect of the benefit from percentage depletion resulted in a negative forecasted effective tax rate.

In addition, as a result of a forecasted full-year 2023 loss before income tax as of June 30, 2023, the effect of the benefit from percentage depletion resulted in a negative forecasted effective tax rate.

Each quarter, the Company updates its estimate of the annual effective tax rate and the cumulative impact of the change in the estimated annual tax rate is recorded, which can additionally make quarterly comparisons not meaningful.

LIQUIDITY AND CAPITAL RESOURCES OF NACCO

The following tables detail NACCO's changes in cash flow for the three months ended March 31:

The following tables detail NACCO's changes in cash flow for the six months ended June 30:

2024 2023 Change

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Cash flow before financing activities $ (28,973) $ 10,588 $ (39,561)

The $16.0 million change in net cash (used for) provided by operating activities was primarily due to an unfavorable change in working capital, which was mainly the result of increases in Other current assets and Accounts receivable from affiliates during the first quarter of 2024 compared with significant decreases in the first quarter of 2023.

The change in Other current assets was primarily due to changes in accrued royalties.

The $29.0 million change in net cash (used for) provided by operating activities was primarily due to a net unfavorable change in working capital, which was mainly the result of:

• An increase in Other current assets during the first six months of 2024 compared with a modest increase in the first six months of 2023.

The change in Other current assets was mainly due to an increase in vendor deposits.

• An increase in Inventory during the first six months of 2024 compared with a decrease in the first six months of 2023, primarily due to an increase in mining supplies.

• A reduction in the Federal income tax receivable during the first six months of 2023 that did not reoccur in the first six months of 2024.

These unfavorable changes were partially offset by a decrease in Trade accounts receivable and Accounts receivable from affiliates during the first six months of 2024 compared with increases in the first six months of 2023.

The 2023 increase in Trade accounts receivable was due to a delay in payments by a customer.

The change in Accounts receivable from affiliates is primarily attributable to the amount and timing of payments from unconsolidated subsidiaries.

In addition, the Company entered into an Accounts Receivable Financing Program with a third-party banking institution on March 14, 2024 for the sale of certain accounts receivables.

Accounts receivable sold under the Accounts Receivable Financing Program for the quarter ended March 31, 2024 were $6.1 million.

The net proceeds received were included in Net cash (used for) provided by operating activities in the Unaudited Consolidated Statement of Cash Flows.

Accounts receivable sold under the Accounts Receivable Financing Program for the three and six months ended June 30, 2024 were $11.0 million and $17.1 million, respectively.

The net proceeds received were included in Net cash (used for) provided by operating activities in the Unaudited Condensed Consolidated Statements of Cash Flows.

2024 2023 Change

Financing activities:

Net additions to long-term debt and revolving credit agreement

$ 7,032 $ 656 $ 6,376

Net additions (reductions) to long-term debt and revolving credit agreement $ 17,090 $ (1,130) $ 18,220

Cash dividends paid (3,306) (3,190) (116)

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$ 6,225 $ (4,320) $ 10,545

The change in net cash provided by (used for) financing activities was primarily due to an increase in debt borrowings during the first three months of 2024 compared with the first three months of 2023, partially offset by share repurchases during the first quarter of 2024.

The change in net cash provided by (used for) financing activities was primarily due to additions in debt borrowings during the first six months of 2024 compared with reductions during the first six months of 2023, partially offset by share repurchases during the first six months of 2024.

Cash held by 1031 exchange facilitator

The Company has cash proceeds from the sale of assets held by a qualified intermediary to facilitate tax-deferred exchange transactions under Section 1031 of the Internal Revenue Code.

In May 2024, the Company sold land for $7.0 million and recognized a $4.5 million gain in the Minerals Management segment.

The Company structured this transaction in a manner that qualified as like-kind exchange pursuant to Section 1031 of the Internal Revenue Code.

The net proceeds are being held in escrow until replacement property is purchased.

A $0.3 million property related to this like-kind exchange was acquired in June 2024.

The Company had $6.7 million and $0.0 million of restricted cash at June 30, 2024 and December 31, 2023, respectively, which is reported on the line Cash held by 1031 exchange facilitator in the Unaudited Condensed Consolidated Balance Sheets.

The Company is evaluating other acquisitions which, if executed, could utilize some or all of the remaining restricted cash.

Financing Activities

NACCO Natural Resources Corporation (“NACCO Natural Resources”), maintains 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 $17.0 million at

March 31, 2024.

At March 31, 2024, the excess availability under the Facility was $100.4 million, which reflects a reduction for outstanding letters of credit of $32.6 million.

Borrowings outstanding under the Facility were $27.5 million at June 30, 2024.

At June 30, 2024, the excess availability under the Facility was $89.4 million, which reflects a reduction for outstanding letters of credit of $33.1 million.

NACCO has not guaranteed any borrowings of NACCO Natural Resources.

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

The applicable margins, effective March 31, 2024, for base rate and SOFR loans were 1.23% and 2.23%, respectively.

The applicable margins, effective June 30, 2024, for base rate and SOFR 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 March 31, 2024.

The commitment fee was 0.34% on the unused commitment at June 30, 2024.

During the three and six

months ended June 30, 2024, the average borrowing under the Facility was $23.0 million and $18.2 million, respectively,

and the weighted-average annual interest rate was 9.73% during both periods.

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

The Facility provides the ability to make loans, dividends and advances to NACCO, with some restrictions based on maintaining a maximum debt to EBITDA ratio of 1.50 to 1.00, or if greater than 1.50 to 1.00, a Fixed Charge Coverage Ratio of 1.10 to 1.00, in conjunction with maintaining unused availability thresholds of borrowing capacity, as defined in the Facility, of $15.0 million.

At March 31, 2024, NACCO Natural Resources was in compliance with all financial covenants in the Facility.

The obligations under the Facility are guaranteed by certain of NACCO Natural Resource's direct and indirect, existing and future domestic subsidiaries, and is secured by certain assets of NACCO Natural Resources and the guarantors, subject to customary exceptions and limitations.

At June 30, 2024, NACCO Natural Resources was in compliance with all financial covenants in the Facility.

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

The Company believes funds available from cash on hand, the Facility and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments arising during the next twelve months and until the expiration of the Facility in November 2025.

Expenditures for property, plant and equipment and mineral interests

Expenditures for property, plant and equipment and mineral interests were $14.5 million during the first three months of 2024, primarily for the acquisition of land at Mitigation Resources and equipment at NAMining.

Expenditures for property, plant and equipment and mineral interests were $22.4 million during the first six months of 2024, primarily for the acquisition of land at Mitigation Resources and equipment at NAMining.

Planned expenditures for the remainder of 2024 are expected to be approximately $9 million in the Coal Mining segment, $12 million in the NAMining segment, $20 million in the Minerals Management segment and $3 million in Unallocated Items.

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Debt to total capitalization 14% 9% 5%

The increase in other net tangible assets at March 31, 2024 compared with December 31, 2023 was mainly the result of increases in Property, plant and equipment and Prepaid insurance during the first quarter of 2024.

The increase in other net tangible assets at June 30, 2024 compared with December 31, 2023 was mainly the result of increases in Property, plant and equipment, Other current assets and Prepaid insurance during the first six months of 2024.

The increase in other current assets is primarily due to $6.7 million of cash held by a qualified intermediary to facilitate tax-deferred exchange transactions under Section 1031 of the Internal Revenue Code and $5.7 million in vendor deposits.

Contractual Obligations, Contingent Liabilities and Commitments

Since December 31, 2023, there have been no significant changes in the total amount of NACCO's contractual obligations, contingent liabilities or commercial commitments, or the timing of cash flows in accordance with those obligations as reported on page 58 in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Since December 31, 2023, other than the changes identified above, there have been no significant changes in the total amount of NACCO's contractual obligations, contingent liabilities or commercial commitments, or the timing of cash flows in accordance with those obligations as reported on page 58 in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of certain guarantees related to Coyote Creek.

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FINANCIAL REVIEW

Tons of coal delivered by the Coal Mining segment were as follows for the three months ended March 31:

Tons of coal delivered by the Coal Mining segment were as follows for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

Unconsolidated operations 4,930 4,602 10,410 10,794

1 unchanged sentence

Total tons delivered 5,353 5,508 11,288 12,411

The results of operations for the Coal Mining segment were as follows for the three months ended March 31:

The results of operations for the Coal Mining segment were as follows for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

Revenues $ 14,996 $ 26,343 $ 30,541 $ 46,996

5 unchanged sentences

Amortization of intangible assets 116 927 242 1,654

Gain on sale of assets (10) (236)

Operating (loss) profit $ (417) $ 313

(Gain) loss on sale of assets (79) 68 (89) (168)

Operating profit (loss) $ 2,767 $ (4,675) $ 2,350 $ (4,362)

(a) See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of the Company's unconsolidated subsidiaries, including summarized financial information.

Revenues decreased 24.7% in the first quarter of 2024 compared with the first quarter of 2023 primarily due to a reduction in customer requirements at MLMC as a result of an ongoing issue that impacts one of two boilers at the Red Hills Power Plant.

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

The following table identifies the components of change in Operating (loss) profit for the first quarter of 2024 compared with the first quarter of 2023:

Operating (Loss) Profit

Second Quarter of 2024 Compared with Second Quarter of 2023

Revenues decreased 43.1% in the second quarter of 2024 compared with the second quarter of 2023 primarily due to a reduction in customer requirements at MLMC as a result of an ongoing issue that impacted one of two boilers at the Red Hills Power Plant.

The following table identifies the components of change in Operating profit (loss) for the second quarter of 2024 compared with the second quarter of 2023:

Operating Profit (Loss)

2023 $ (4,675)

Increase (decrease) from:

Selling, general and administrative expenses (473)

Gross loss 5,784

Earnings of unconsolidated operations 2,044

Amortization of intangibles 811

Gain on sale of assets 147

Selling, general and administrative expenses (1,344)

Operating profit (loss) changed favorably by $7.4 million in the second quarter of 2024 compared with the second quarter of 2023 primarily due to a decrease in gross loss and an increase in earnings of unconsolidated operations.

These favorable changes were partially offset by an increase in selling, general and administrative expenses primarily due to higher employee-related costs.

The reduction in revenues at MLMC was offset by lower cost of goods sold, resulting in a decrease in gross loss during the second quarter of 2024 compared with the second quarter of 2023.

The reduction in cost of goods sold was primarily attributable to increased operating efficiencies due to the completion of the move to a new mine area in 2023 and improved mining conditions in the second quarter of 2024 compared to the prior period.

Changes in the level of coal inventory and costs capitalized into inventory also contributed to the improvement as the decrease in demand resulted in an increase in the coal stockpile and an increase in costs capitalized into inventory during the second quarter of 2024.

Cost of sales in the second quarter of 2023 was higher as the coal stockpile was reduced during the move to a new mine area and prior period production costs were recognized into income.

In addition, gross loss in the second quarter of 2024 and 2023 included $0.7 million and $1.8 million of inventory impairment charges, respectively, to write down MLMC's coal inventory to its net realizable value.

The increase in earnings of unconsolidated operations was primarily due to an increase in customer demand at Falkirk as well as a higher per ton management fee beginning in June 2024 when temporary price concessions ended.

Improved results at Sabine also contributed to the increase in earnings of unconsolidated operations.

First Six Months of 2024 Compared with First Six Months of 2023

Revenues decreased 35.0% in the first six months of 2024 compared with the first six months of 2023 primarily due to a reduction in customer requirements at MLMC as a result of an ongoing issue that impacted one of two boilers at the Red Hills Power Plant.

The following table identifies the components of change in Operating profit (loss) for the first six months of 2024 compared with the first six months of 2023:

Operating Profit (Loss)

2023 $ (4,362)

Increase (decrease) from:

Gross loss 5,611

Earnings of unconsolidated operations 1,585

Amortization of intangibles 1,412

Operating (loss) profit decreased $0.7 million in the first quarter of 2024 compared with the first quarter of 2023 primarily due to an increase in selling, general and administrative expenses and a decrease in the earnings of unconsolidated operations.

The increase in selling, general and administrative expenses was primarily due to higher employee-related costs.

The decrease in the earnings of unconsolidated operations was primarily due to a reduction in customer requirements at Coteau.

The reduction in revenues at MLMC was offset by a reduction in cost of goods sold, resulting in a comparable gross loss in both the first quarter of 2024 and 2023.

Gross loss in the first quarter of 2024 and the first quarter of 2023 included a $2.5 million and $2.4 million inventory impairment charge, respectively, to write down MLMC's coal inventory to its net realizable value.

Selling, general and administrative expenses (1,817)

Gain on sale of assets (79)

Operating profit (loss) changed favorably by $6.7 million in the first six months of 2024 compared with the first six months of 2023 primarily due to a decrease in gross loss and an increase in earnings of unconsolidated operations.

These favorable changes were partially offset by an increase in selling, general and administrative expenses primarily due to higher employee-related costs.

The reduction in revenues at MLMC was offset by lower cost of goods sold, resulting in a decrease in gross loss during the first six months of 2024 compared with the first six months of 2023.

The reduction in cost of goods sold was primarily attributable to increased operating efficiencies due to the completion of the move to a new mine area in 2023 and improved mining conditions in the first six months of 2024 compared to the prior period.

Cost of sales in the first six months of 2023 was higher as the coal stockpile was reduced during the move to a new mine area and prior period production costs were recognized into income.

In addition, gross loss in the first six months of 2024 and 2023 included $3.1 million and $4.2 million of inventory impairment charges, respectively, to write down MLMC's coal inventory to its net realizable value.

Improved results at Sabine also contributed to the increase in earnings of unconsolidated operations.

NORTH AMERICAN MINING ("NAMining") SEGMENT

FINANCIAL REVIEW

Tons delivered by the NAMining segment were as follows for the three months ended March 31:

Tons delivered by the NAMining segment were as follows for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

Total tons delivered 16,000 13,939 31,173 28,768

The results of operations for the NAMining segment were as follows for the three months ended March 31:

The results of operations for the NAMining segment were as follows for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

Total revenues $ 27,920 $ 21,716 $ 52,403 $ 42,349

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Earnings of unconsolidated operations (a)

1,448 1,122 2,813 2,480

Selling, general and administrative expenses 2,030 1,740 3,853 3,660

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(a) See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of the Company's unconsolidated subsidiaries, including summarized financial information.

Total revenues increased 18.7% in the first quarter of 2024 compared with the first quarter of 2023 primarily due to an improvement at the consolidated quarries.

An increase in reimbursable costs at Sawtooth, which have an offsetting amount in cost of sales and have no impact on operating profit, also contributed to the improvement in total revenues.

The following table identifies the components of change in Operating profit for the first quarter of 2024 compared with the first quarter of 2023:

Second Quarter of 2024 Compared with Second Quarter of 2023

Total revenues increased 28.6% in the second quarter of 2024 compared with the second quarter of 2023, primarily due to an increase in reimbursable costs, which have an offsetting amount in cost of sales and have no impact on operating profit.

An increase in demand at the consolidated quarries also contributed to the improvement in total revenues.

The following table identifies the components of change in Operating profit for the second quarter of 2024 compared with the second quarter of 2023:

Operating Profit

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Gross profit 834

Earnings of unconsolidated operations 326

Gain on sale of assets 1

Selling, general and administrative expenses (290)

Operating profit increased $0.9 million in the second quarter of 2024 compared with the second quarter of 2023 primarily due to an increase in gross profit.

This improvement was mainly the result of favorable pricing and improved margins at the limestone quarries resulting from mutually beneficial contract amendments.

A new 15-year contract to mine phosphate at a quarry in central Florida also contributed to the increase in gross profit.

These improvements were partially offset by higher employee-related costs.

First Six Months of 2024 Compared with First Six Months of 2023

Total revenues increased 23.7% in the first six months of 2024 compared with the first six months of 2023 primarily due to an increase in demand at the consolidated quarries.

An increase in reimbursable costs, which have an offsetting amount in cost of sales and have no impact on operating profit, also contributed to the improvement in total revenues.

The following table identifies the components of change in Operating profit for the first six months of 2024 compared with the first six months of 2023:

Operating Profit

Increase (decrease) from:

Gross profit 2,254

Earnings of unconsolidated operations 333

Gain on sale of assets 2

Operating profit increased $1.5 million in the first quarter of 2024 compared with the first quarter of 2023 primarily due to an increase in gross profit.

This improvement was mainly the result of favorable pricing and delivery mix and improved margins at the limestone quarries resulting from mutually beneficial contract amendments.

Selling, general and administrative expenses (193)

Operating profit increased $2.4 million in the first six months of 2024 compared with the first six months of 2023 primarily due to an increase in gross profit.

This improvement was mainly the result of favorable pricing and improved margins at the limestone quarries resulting from mutually beneficial contract amendments.

A new phosphate contract also contributed to the increase in gross profit.

These improvements were partially offset by higher employee-related costs.

MINERALS MANAGEMENT SEGMENT

FINANCIAL REVIEW

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 oil and natural gas operations because detailed information is not generally available to owners of royalty and mineral interests.

Consequently, the exact number of wells producing from or drilling on the Company’s mineral interests at a given point in time is not determinable.

The following table sets forth the Company’s estimate of the number of gross and net productive wells:

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

Gross Net Gross Net

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Oil and natural gas prices have been historically volatile and may continue to be volatile in the future.

The table below demonstrates such volatility with the average price as reported by the United States Energy Information Administration for the three months ended March 31:

The table below demonstrates volatility with the average prices as reported by the United States Energy Information Administration for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

West Texas Intermediate Average Crude Oil Price $ 81.71 $ 73.76 $ 79.64 $ 74.92

Henry Hub Average Natural Gas Price $ 2.08 $ 2.16 $ 2.11 $ 2.41

The following table sets forth the estimated oil and natural gas production data related to the Company’s mineral and royalty interests as well as certain price and cost information for the three months ended March 31:

These indicated prices do not necessarily reflect the contract terms for the Company's sales.

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.

THREE MONTHS SIX MONTHS

Production data:

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(4) As an owner of mineral and royalty interests, the Company’s access to information concerning activity and operations of its royalty and mineral interests is limited.

As a result, the Company estimated February and March 2024 data with volumes projected from prior well production and pricing based on public pricing data adjusted for expense information.

The results of operations for the Minerals Management segment were as follows for the three months ended March 31:

As a result, the Company estimated May and June 2024 data with volumes projected from prior well production and pricing based on public pricing data adjusted for expense information.

The results of operations for the Minerals Management segment were as follows for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

Revenues $ 5,593 $ 9,171 $ 15,994 $ 17,456

1 unchanged sentence

Gross profit 4,092 8,261 13,129 15,494

Loss from unconsolidated operations (65) —

Earnings from unconsolidated operations 138 — 73 —

Selling, general and administrative expenses 1,151 972 2,193 2,161

Gain on sale of assets (4,512) — (4,512) —

Operating profit $ 7,591 $ 7,289 $ 15,521 $ 13,333

Revenues and operating profit increased in the first quarter of 2024 compared with the respective 2023 period, primarily due to an increase in production volumes.

Revenues and gross profit decreased in the second quarter of 2024 and the first six months of 2024 compared with the respective 2023 periods, primarily due to substantially lower natural gas and oil prices and changes in pricing estimates.

The second quarter of 2023 included $1.4 million of settlement income related to the Company’s ownership interest in certain mineral rights.

Operating profit increased in the second quarter of 2024 and the first six months of 2024, as the Company recognized a $4.5 million gain on the sale of land related to legacy operations.

UNALLOCATED ITEMS AND ELIMINATIONS

FINANCIAL REVIEW

Unallocated Items and Eliminations were as follows for the three months ended March 31:

Unallocated Items and Eliminations were as follows for the three and six months ended June 30:

THREE MONTHS SIX MONTHS

2024 2023 2024 2023

Operating loss $ (6,077) $ (3,078) $ (11,188) $ (8,451)

The operating loss in the first quarter of 2024 decreased compared with the respective 2023 period due to higher earnings at Mitigation Resources.

The operating loss in the second quarter and first six months of 2024 increased compared with the respective 2023 periods due to higher operating expenses at Mitigation Resources and higher employee-related costs.

NACCO Industries, Inc.

Coal Mining Outlook

In 2024, the Company expects overall coal deliveries to increase modestly from 2023 levels primarily due to anticipated higher deliveries at Coteau and Falkirk.

These improvements are expected to be partly offset by reduced deliveries at MLMC, due to an ongoing boiler issue, and the cessation of coal deliveries at the Company's Sabine Mine in April 2023.

Strong operating profit compared with a significant 2023 operating loss, which included a $60.8 million impairment charge, and substantially higher Segment Adjusted EBITDA are expected in 2024.

These anticipated increases are primarily due to an expected improvement in results at MLMC and higher earnings at Falkirk and Coteau in the second half of 2024.

MLMC expects to incur a loss in 2024, albeit significantly less than in 2023, mainly as a result of fewer tons delivered.

While total production costs at MLMC are anticipated to decrease substantially from 2023 levels, they are expected to remain above historical levels throughout 2024 until deliveries return to normal and a pit extension is completed later this year.

In addition, the effect of the impairment charge taken in 2023 will result in lower depreciation and amortization expense and contribute to the lower production costs.

An anticipated increase in 2024 earnings at the unconsolidated coal mining operations is driven primarily by an expectation for increased deliveries at Coteau and Falkirk, as well as a higher per ton management fee at Falkirk beginning in June 2024 when temporary price concessions end.

2024 capital expenditures are expected to total approximately $13 million.

Coal deliveries in the second half of 2024 are expected to increase over 2023 levels as higher deliveries at Coteau and Falkirk are partly offset by fewer deliveries at MLMC.

The decrease in MLMC deliveries is due to the previously mentioned boiler issue.

Coal Mining segment full-year 2024 deliveries are expected to be comparable to 2023.

Excluding the $60.8 million impairment charge taken in fourth-quarter 2023, Coal Mining operating profit and Segment Adjusted EBITDA are expected to increase significantly in both the 2024 second half and full year compared with the respective 2023 periods.

These anticipated increases are primarily due to an expected substantial improvement in results at MLMC and higher earnings at the unconsolidated coal mining operations.

The anticipated second-half 2024 increase in earnings at the unconsolidated coal mining operations compared with 2023 is driven primarily by an expectation for increased deliveries, as well as the cessation of temporary price concessions at Falkirk.

Second-half 2024 results are also expected to increase significantly over the first half primarily due to higher earnings at Falkirk and improved results at MLMC based on current expectations that the boiler issue will be resolved and the plant will be fully operational by the fourth quarter of 2024.

Capital expenditures in 2024 are expected to be approximately $13 million, with $9 million expended in the second half of 2024.

NAMining Outlook

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

Production is expected to commence in the second quarter of 2024 once commissioning of a dragline is complete.

The business also amended and extended existing limestone contracts in late 2023 that contain mutually advantageous contract terms and expanded the scope of work with another customer.

As a result of these new and modified contracts, as well as improvements at existing operations, NAMining expects substantial quarterly growth in operating profit and Segment Adjusted EBITDA in each remaining 2024 quarter, leading to significantly improved full-year results over 2023.

Sawtooth has exclusive responsibility for mining and mine closure services at Thacker Pass, including mine design,

construction, operation and maintenance.

NAMining expects operating profit and Segment Adjusted EBITDA to increase in both the 2024 second half and full year over

the respective 2023 periods but decrease from the 2024 first half.

The year-over-year improvements are primarily due to the late 2023 amendment of limestone contracts to more mutually advantageous contract terms, a scope of work expansion with another customer and the second-quarter 2024 commencement of a new 15-year contract to mine phosphate at a quarry in central Florida.

Earnings in the second half are expected to moderate from the first half of 2024 due to anticipated lower customer requirements.

Sawtooth is the exclusive provider of comprehensive mining services at Thacker Pass, including mine design, construction, operation, maintenance and reclamation.

Thacker Pass is owned by Lithium Americas Corp.

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In March 2023, Lithium Americas commenced construction at Thacker Pass.

With construction underway, Sawtooth acquired mining equipment totaling $23.3 million in 2023.

These capital expenditures will be reimbursed by Lithium Americas over a five-year period, and Sawtooth will recognize the associated revenue over the estimated useful life of the asset.

Sawtooth will be reimbursed for all costs of mining and mine closure and will recognize a contractually agreed upon production fee.

Sawtooth will be reimbursed for costs of mining, capital expenditures and mine closure and will recognize a contractually agreed upon production fee.

The Company expects to continue to recognize moderate income prior to the commencement of Phase 1 lithium production, estimated to begin in 2027/2028.

In 2024, capital expenditures are expected to be approximately $33 million.

These expenditures are primarily for the acquisition of draglines and dragline parts, as well as other equipment to support existing contracts and the new and modified contracts previously discussed.

Capital expenditures in 2024 are expected to be approximately $23 million, with $12 million expended in the second half of the year, primarily for the acquisition of draglines and dragline parts, as well as other equipment to support existing contracts.

Minerals Management Outlook

Operating profit and Segment Adjusted EBITDA for the 2024 second half and full year are expected to increase compared with the respective 2023 periods, excluding the fourth-quarter 2023 impairment charge of $5.1 million.

These improvements are primarily driven by current market expectations for natural gas and oil prices, as well as development and production assumptions on currently owned reserves.

Based on current market expectations, operating profit in the second half of 2024 is expected to increase moderately compared with the first half, excluding the $4.5 million gain on sale recognized in the second quarter.

The Minerals Management segment derives income primarily from royalty-based leases under which lessees make payments to the Company based on their sale of natural gas, oil, natural gas liquids and coal, extracted primarily by third parties.

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Changing prices of natural gas and oil could have a significant impact on Minerals Management’s operating profit.

In December 2023, Minerals Management completed a significant acquisition of mineral interests within the Midland Basin, the eastern sub-basin of the oil-rich Permian Basin, which included 43.4 thousand gross acres and 2.5 thousand net royalty acres.

This acquisition is expected to continue to be accretive to 2024 earnings and provide opportunities for longer-term growth.

In 2024, operating profit and Segment Adjusted EBITDA are expected to decrease moderately compared with the prior year, excluding the 2023 impairment charge of $5.1 million.

Lower operating expenses are expected to partially offset the anticipated profit decline.

The forecasted reduction in profitability is primarily driven by current market expectations for natural gas and oil market prices, as well as development and production assumptions on currently owned reserves.

Development of additional wells on existing interests in excess of current expectations, or acquisitions of additional interests, could be accretive to future results.

In 2024, Minerals Management is targeting additional investments of up to $20 million.

Minerals Management is targeting investments of up to $20 million in the second half of 2024.

Future investments are expected to be accretive, but each investment's contribution to near-term earnings is dependent on the details of that investment, including the size and type of interests acquired and the stage and timing of mineral development.

Mitigation Resources Outlook

Mitigation Resources continues to build on the substantial foundation it has established over the past several years.

Mitigation Resources currently has ten mitigation banks and four permittee-responsible mitigation projects located in Tennessee, Mississippi, Alabama, Texas, Florida and Pennsylvania.

In addition, Mitigation Resources is providing ecological restoration services for abandoned surface mines, as well as pursuing additional environmental restoration projects.

It was named a designated provider of abandoned mine land restoration by the State of Texas.

Mitigation Resources anticipates expanding its business in 2024, with a focus on generating a modest operating profit by 2025 and achieving sustainable profitability in future years.

Consolidated Outlook

Overall, the Company expects to generate net income in 2024 compared with the substantial 2023 consolidated net loss, which included a $65.9 million impairment charge.

Adjusted EBITDA is also expected to increase significantly over 2023.

These improvements are primarily due to anticipated increased profitability at the Coal Mining segment from improved results at MLMC, Falkirk and Coteau.

The effect of NAMining's growth and profit improvement initiatives are also expected to contribute to improved 2024 results.

Additional contracts for NAMining or Mitigation Resources, or the acquisition of additional mineral interests at Minerals Management could be accretive to the current forecast.

The Company is taking steps to terminate its defined benefit pension plan in 2024.

In connection with this action, NACCO is anticipating a non-cash settlement charge in the second half of the year, which is expected to partly offset the improved 2024 operating results.

Consolidated capital expenditures are expected to total approximately $76 million in 2024.

In 2024, cash flow before financing activities is expected to be a moderate use of cash.

Result for the second half of 2023 included a $65.9 million pre-tax impairment charge.

Comparisons in the remainder of this section exclude the effect of this charge.

Consolidated second-half operating profit is expected to increase compared with both the first half of 2024 and second half of 2023.

These improvements are primarily due to anticipated increases in profitability at the Coal Mining segment from improved results at MLMC, Falkirk and Coteau.

Contributions from NAMining's growth and profit improvement initiatives are also expected to contribute to improved second-half results.

The Company also expects consolidated net income in the 2024 second half and full year to increase compared with the respective 2023 periods.

This improvement is anticipated to be partly offset by an increase in net interest expense as a result of additional borrowings and lower cash levels and higher income tax expense.

The Company is taking steps to terminate its defined benefit pension plan, which will eliminate future volatility from changes in the pension obligation.

In connection with this action, obligations under this plan will be transferred to a third-party insurance provider.

The Company expects to utilize surplus assets to fund a qualified replacement plan, reducing future cash funding requirements.

Although the plan is currently over funded, NACCO is anticipating a non-cash settlement charge in the 2024 fourth quarter, which is expected to partly offset improvements in 2024 second-half operating profit.

As a result, the Company anticipates that consolidated net income and Adjusted EBITDA will decrease in the second half of 2024 compared with the first half of the year.

While the Company anticipates that third-quarter net income will improve significantly over the second quarter, fourth-quarter net income is expected to be substantially lower than both the third quarter and prior year fourth quarter primarily as a result of the anticipated non-cash pension settlement charge.

Consolidated capital expenditures are expected to total approximately $66 million in 2024, which includes approximately $11 million for Unallocated capital expenditures, primarily at Mitigation Resources.

In 2024, cash flow before financing activities is expected to be a use of cash.

Long-term Growth and Diversification

Management is focused on transforming NACCO into a broad-based natural resources company and is optimistic about the Company's long-term business outlook.

Management is transforming NACCO into a broad-based natural resources company and is optimistic about the Company's long-term business outlook.

NACCO's businesses provide critical inputs for electricity generation, construction and development, and the production of industrial minerals and chemicals.

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The Company believes its businesses have competitive advantages that provide value to customers and create long-term value for stockholders.

The Company is pursuing growth and diversification by strategically leveraging its core mining and natural resources management skills to build a strong portfolio of affiliated businesses.

The Company is pursuing growth and diversification by strategically leveraging its core mining and natural resources management skills to build a robust portfolio of affiliated businesses.

Opportunities for growth remain strong.

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This business model has the potential to deliver higher average operating margins over the life of a reserve than traditional oil and gas companies that bear the cost of exploration, production and/or development as these costs are borne entirely by third-party exploration and development companies that lease the minerals.

NAMining is focused on continuing to evaluate new business opportunities and drive profitable growth in line with refined strategic objectives.

After pausing on business development in early 2023, NAMining has better identified how to enhance operational excellence, where to focus and scale, and how to drive profitable growth.

NAMining continues to evaluate new business opportunities and drive profitable growth in line with refined strategic objectives.

New contracts and contract extensions are central to the business' organic growth strategy, and the Company expects NAMining to be a substantial contributor to operating profit over time.

Mitigation Resources continues to expand its business, which creates and sells stream and wetland mitigation credits, provides services to those engaged in permittee-responsible mitigation and provides other environmental restoration services.

Mitigation Resources, which provides stream and wetland mitigation solutions as well as comprehensive reclamation and restoration construction services, continues to build on the substantial foundation it has established over the past several years.

This business offers an opportunity for growth and diversification in an industry where the Company has substantial knowledge and expertise and a strong reputation.

It currently has ten mitigation banks and four permittee-responsible mitigation projects located in Tennessee, Mississippi, Alabama, Texas, Florida and Pennsylvania.

In addition, Mitigation Resources is providing ecological restoration services for abandoned surface mines, as well as pursuing additional environmental restoration projects.

It was named a designated provider of abandoned mine land restoration by the State of Texas.

The Company believes that Mitigation Resources can provide solid rates of return on capital employed as this business matures.

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The Company continues to look for ways to create additional value by utilizing its core mining competencies which include reclamation and permitting.

The Company is working to utilize these skills through development of utility-scale solar projects on reclaimed mining properties.

Reclaimed mining properties offer large tracts of land that could be well-suited for solar and other energy-related projects.

NACCO established ReGen Resources to utilize these skills to address the rapidly increasing demand for additional power generation sources in the United States through development of solar and other energy-related projects on reclaimed mining properties.

These projects could be developed by the Company itself or through joint ventures that include partners with expertise in energy development projects.

In 2023, NACCO formed ReGen Resources to pursue such projects, including the development of a solar farm on reclaimed land at MLMC.

Current opportunities under review include solar arrays, solar-gas hybrid projects and carbon capture on reclaimed mine land in Mississippi, Pennsylvania and Texas.

NACCO is committed to maintaining a conservative capital structure as it continues to grow and diversify, while avoiding unnecessary risk.

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The statements contained in this Form 10-Q that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those

These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

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Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation:

(1) changes to or termination of customer or other third-party contracts, or a customer or other third party default under a contract, (2) any customer's premature facility closure or extended project development delay, (3) regulatory actions, including the United States Environmental Protection Agency's 2023 proposed rules relating to mercury and greenhouse gas emissions for coal-fired power plants, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (4) a significant reduction in purchases by the Company's customers, including as a result of changes in coal consumption patterns of U.S.

(1) changes to or termination of customer or other third-party contracts, or a customer or other third party default under a contract, (2) any customer's premature facility closure or extended project development delay, (3) regulatory actions, including the United States EPA's rules finalized in 2024 relating to mercury and greenhouse gas emissions for coal-fired power plants, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (4) a significant reduction in purchases by the Company's customers, including as a result of changes in coal consumption patterns of U.S.

electric power generators, or changes in the power industry that would affect demand for the Company's coal and other mineral reserves, (5) changes in the prices of hydrocarbons, particularly diesel fuel, natural gas, natural gas liquids and oil as result of factors such as OPEC and/or government actions, geopolitical developments, economic conditions and regulatory changes, as well as supply and demand dynamics, (6) changes in development plans by third-party lessees of the Company's mineral interests, (7) failure or delays by the Company's lessees in achieving expected production of natural gas and other hydrocarbons;

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

What changed 10-Q

Item 1. Financial Statements