NC 10-K & 10-Q changes, risk factors and insider trading
Nacco Industries Inc. · NYSE · Bituminous Coal & Lignite Surface Mining · CIK 789933 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “MLMC is subject to risks associated with our capital investment, operating and equipment costs, changes in customer demand and inflationary adjustments.”
New heading “Operating results may vary significantly from period to period and are inherently unpredictable.”
New heading “Insurance coverage is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future.”
Removed heading “MLMC is subject to risks associated with our capital investment, operating and equipment costs, growing use of alternative generation that competes with coal-fired generation, changes in customer demand and inflationary adjustments.”
Removed heading “Insurance coverage is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future. A number of global insurance companies have taken steps to limit coverage for companies in the fossil fuel industry, including coal mining, which could result in significant increases in costs of insurance or in our ability to maintain insurance coverage at current levels.”
Removed heading “Increasing emphasis and changing expectations with respect to environmental, social and governance matters may impose additional costs on us or expose us to new or additional risks.”
Largest changes
“MLMC is subject to risks associated with our capital investment, operating and equipment costs, growing use of alternative generation that competes with coal-fired generation, changes in customer demand and inflationary adjustments.”see in full comparison
“MLMC is subject to risks associated with our capital investment, operating and equipment costs, changes in customer demand and inflationary adjustments.”see in full comparison
Like many other companies, we are the target of malicious cyber attack attempts in the normal course of business. Cybersecurity incidents involving businesses and other institutions are on the rise. Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated. Cyber threats and cyber attackers can be sponsored by nation states or sophisticated criminal organizations or be the work of independent hackers. The rapid evolution and increased availability of artificial intelligence (AI) may intensify cybersecurity risks by making cyber-attacks more sophisticated and cybersecurity incidents more difficult to detect, contain and mitigate. As threat actors adopt and deploy AI tools, the speed and sophistication of cyber threats and privacy risks may increase across our environment and those of our customers and vendors.see in full comparison
“Insurance coverage is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future. A number of global insurance companies have taken steps to limit coverage for companies in the fossil fuel industry, including coal mining, which could result in significant increases in costs of insurance or in our ability to maintain insurance coverage at current levels.”see in full comparison
“Expectations relating to environmental, social and governance (ESG) matters have been rapidly evolving. Government organizations are enhancing or advancing legal, regulatory and disclosure requirements specific to ESG matters. The heightened focus on ESG issues requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements. Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices. …”see in full comparison
“Increasing emphasis and changing expectations with respect to environmental, social and governance matters may impose additional costs on us or expose us to new or additional risks.”see in full comparison
Full comparison: every changed paragraph (57)
We operate in a rapidly changing environment that involves a number of risks. The following discussion highlights some of these risks and others are discussed elsewhere in this report. These and other risks could materially and adversely affect our business, financial condition, operating results or cash flows. The following risk factors are not an exhaustive list of the risks associated with our business. New factors may emerge or changes to these risks could occur that could materially affect our business. See Item 1. Business — Government Regulation and Environmental Matters on page 9 in this Form 10-K for discussion of regulations that could materially adversely affect our businesses.
Risks related to the Utility Coal Mining segment
MLMC is subject to risks associated with our capital investment, operating and equipment costs, changes in customer demand and inflationary adjustments.
Profitability at MLMC is affected by customer demand for coal, changes in the contractually determined sales price and actual costs incurred. The MLMC contract is the only coal supply contract in which we are responsible for all operating costs, capital requirements and final mine reclamation. As such, increased costs or decreased revenues could materially reduce our profitability. As a significant portion of MLMC’s costs are fixed, reduction in dispatch and/or reduced mechanical availability of the Red Hills Power Plant can and historically has materially reduced operating results at MLMC. Conversely, periods of higher dispatch can improve results. In February 2026, MLMC received notice from its customer that the Red Hills Power Plant experienced an unplanned outage, which is expected to lead to reduced demand and an anticipated operating loss for MLMC during 2026.
Any reduction in customer demand at MLMC, including fluctuations in demand due to planned and unplanned outages at the customer's Red Hills Power Plant, unanticipated weather conditions, economic conditions, governmental regulations and inflationary adjustments could have a material adverse effect on MLMC's financial condition, results of operations and cash flows.
Substantially all of the Utility Coal Mining segment's profits are derived from long-term mining contracts. Although we have long-term contracts, numerous regulatory authorities, along with well-funded political and environmental activist groups, are devoting substantial resources to anti-coal activities to minimize or eliminate the use of coal as a source of electricity generation. Anyany customer's premature facility closure or contract default could have a material adverse effect on our business, financial condition and results of operations.
The coal mining industry and the electric generation industry are subject to extensive regulation by federal, state and local authorities on matters concerning the health and safety of employees, land use, stream and wetland protection, permit and licensing requirements, air and water quality standards, plant and wildlife protection, reclamation and restoration of mining properties after mining, the discharge of GHGs and other materials into the environment, surface subsidence from underground miningenvironment and the effects that mining has on groundwater quality and availability. Legislation mandating certain benefits for current and retired coal miners also affects the industry. Mining operations require numerous governmental and regulatory permits and approvals. We are required to prepare and present to federal, state or local authorities data pertaining to the impact the production and combustion of coal may have upon the environment. The public, including non-governmental organizations, opposition groups and individuals, have statutory rights to comment upon and submit objections to requested permits and approvals and to legally challenge certain permits subsequent to their issuance. Compliance with these requirements is costly and time-consuming and may delay commencement or continuation of development or production. New legislation and/or regulations and orders may materially adversely affect our mining operations, cost structure or customers. All of these factors could significantly reduce our profitability.
Congress has considered climate change legislation aimed at reducing GHG emissions, particularly from coal combustion by power plants. Enactment of laws and passage of regulations regarding GHG emissions at the federal or state level, or other actions to limit carbon dioxide emissions, such as opposition by environmental groups of coal-fired power plants, could result in electric generators switching from coal to other fuel sources or premature facility closures.
Congress continues to consider a variety of proposals to reduce GHG emissions from the combustion of coal and other fuels. These proposals include emission taxes, emission reductions, including carbon tax and cap-and-trade programs, and mandates or incentives to generate electricity by using renewable energy sources, such as wind or solar power. Some states have established programs to reduce GHG emissions. Further, certain governmental agencies provide grants or other financial incentives to entities developing or selling alternative energy sources with lower levels of GHG emissions, which may lead to more competition from those entities.
The potential impact on us of future laws, regulations or other policies or circumstances will depend upon the degree to which any such laws, regulations or other policies or circumstances require electricity generators to diminish their reliance on coal as a fuel source. Complicating these matters further, over the last several decades, U.S. Administrations have increasingly relied on regulations and executive orders to implement environmental policies and objectives in the absence of Congressional agreement regarding new legislation. This condition, which creates instability and unpredictability of environmental regulations, seems likely to persist and could increase due to apparent polarization between the two main political parties. As a result, we and/or our customers, often must comply with and otherwise adapt to environmental regulations without assurance of their continued effect. We and/or our customers often do not have the ability to anticipate, or prepare in advance for, changes in regulatory approaches that may be implemented following a change in Administration. The SCOTUS’s recent decision in Loper Bright Enterprises v. Raimondo overturned the SCOTUS’s longstanding deferral to the applicable agency’s interpretation of ambiguous federal laws. We are unable to predict whether, or to what extent, this decision will alter the outcome of judicial reviews of current or future regulations. We do not know whether risks related to current and future regulations affecting us will be significantly mitigated by the decision in Loper Bright.
In view of the significant uncertainty surrounding each of these factors, it is not possible for us to reasonably predict reasonably the impact that any such laws, regulations or other policies may have on our business, financial condition and results of operations. However, such impacts could have a material adverse effect on our business, financial condition and results of operations.
See Item 1. Business — Government Regulation on page 9 in this Form 10-K for discussion of regulations that could materially adversely affect the Coal Mining segment.
Earnings from the Utility Coal Mining segment's customers may fluctuate from time to time based on numerous factors, including market conditions and the realignment of customers' power generation portfolios that reduce the electric power generated from coal, which may be outside of our control. If any of the Utility Coal Mining segment's customers experience declining demand due to market, economic, regulatory or competitive conditions, it could have an adverse effect on our profitability, cash flows and financial position. In addition, if any customers were to significantly reduce or eliminate their purchases of coal from us or if we are unable to renew expiring long-term sales agreements with existing customers or enter into new supply agreements, our business, financial condition, results of operations and cash flows could be adversely affected. See Item 1. Business — Business Developments on page 2 in this Form 10-K for further discussion.
MLMC is subject to risks associated with our capital investment, operating and equipment costs, growing use of alternative generation that competes with coal-fired generation, changes in customer demand and inflationary adjustments.
The profitability of MLMC is subject to the risk of loss of investment in this operation, increases in the cost of mining, changes in customer demand, adverse mining conditions and growing competition from alternative power generation that competes with coal-fired generation. At MLMC, the costs of mining operations are not reimbursed by MLMC's customer. As such, increased costs or decreased revenues could materially reduce our profitability.
Profitability at MLMC is affected by customer demand for coal and changes in the indices that determine sales price and actual costs incurred. MLMC sells lignite at contractually agreed upon prices which are subject to changes in the level of established indices over time. All production costs at MLMC are capitalized into inventory and recognized in cost of sales as tons are delivered. In periods of limited or no deliveries, MLMC may be required to reduce inventory carrying value using the lower of cost and net realizable value approach, which could adversely affect MLMC’s results of operations.
Diesel fuel is heavily weighted among the indices used to determine the coal sales price. The diesel fuel-related component of the coal sales price is based on average price changes over time whereas the impact on actual costs from changes in diesel fuel prices is more immediate; therefore, fluctuations in diesel fuel prices can result in significant fluctuations in earnings at MLMC.
Any reduction in customer demand at MLMC, including, but not limited to, reduced availability of the customer’s power plant, dispatch of power generated by other energy sources, fluctuations in demand due to unanticipated weather conditions, planned and unplanned outages at the customer's Red Hills Power Plant, economic conditions, governmental regulations and inflationary adjustments could have a material adverse effect on MLMC's financial condition, results of operations and cash flows.
The Utility Coal Mining segment's Unconsolidated Subsidiaries are subject to risks created by changes in customer demand and inflationary adjustments.
The contracts with the Unconsolidated Subsidiaries' customers are primarily based on a management fee approach, whereby compensation includes reimbursement of all operating costs, plus a fee based on the amount of coal delivered. The fees earned adjust over time in line with various indices which reflect general U.S. inflation rates. During the production stage, the Unconsolidated Subsidiaries' customers pay us our agreed upon fee only for the coal delivered to them for consumption or use. As a result, reduced coal usage by customers for any reason, including, but not limited to, reduced availability of the customer’s power plant, dispatch of power generated by other energy sources, fluctuations in demand due to unanticipated weather conditions, planned and unplanned outages at the Utility Coal Mining segment's customers' facilities, economic conditions and governmental regulations could have a material adverse effect on our results of operations. Because of the contractual price formulas for the management fees at these Unconsolidated Subsidiaries, the profitability of these operations is also subject to fluctuations in inflationary adjustments (or lack thereof) that can impact the agreed upon management fees. These factors could materially reduce our profitability.
The amount of coal consumed by the electric power generation industry is affected by general economic conditions; overall demand for electricity; availability of transmission; competition from alternative fuel sources for power generation, such as natural gas, nuclear, hydroelectric, wind and solar power, and the location, availability, quality and price of those alternative fuel sources; and environmental and other governmental regulations,regulations. includingChanges thosein impactingthe coal-firedutility powerindustry plants;that affect NACCO's customers could also adversely affect us. Any of these risks could result in a decrease in coal consumption by our customers and energycould conservationhave effortsa material adverse effect on our business, financial condition and relatedresults governmentalof policies.operations.
Changes in the utility industry that affect NACCO's customers could also adversely affect us. The increased availability of renewable energy sources has contributed to a reduction in demand for coal-fired electric power generation. Competition from natural gas-fired plants that are relatively more efficient, less expensive to construct and less difficult to permit than coal-fired plants have the most potential to continue to displace a significant amount of coal-fired electric power generation. Federal and state mandates for increased use of electricity derived from renewable energy sources have also adversely affected demand for coal-fired electric power generation. Such mandates make alternative fuel sources more competitive with coal-fired electric power generation.
Any of these risks could result in a decrease in coal consumption by our customers and could have a material adverse effect on our business, financial condition and results of operations.
The Utility Coal Mining segment's customers' operations require significant capital expenditures.
Maintaining and installing environmental controls on power plants requires significant capital expenditures. Any delay or reduction in making capital expenditures to maintain or upgrade coal-fired power plants by the Utility Coal Mining segment's customers, principally electric utilities, could result in an increase in outage days and a corresponding decrease in coal consumption. The Red Hills Power Plant operated at below full baseload capacity and experienced periods of reduced mechanical availability during 2024 and 2025. A decrease in coal consumption could have a material adverse effect on the Utility Coal Mining segment's financial condition, results of operations and cash flows.
Risks related to the NAMiningContract Mining segment
We have experienced growth in our NAMiningContract Mining business in recent periods and we may not be able to sustain growth or manage future growth effectively.
We have expanded our overall NAMiningContract Mining business, operations and headcount in recent periods. NAMining’sThe Contract Mining segment's operating expenses may continue to increase as we continue to scale the NAMiningContract Mining business. We must effectively integrate, develop and motivate employees, while integrating new equipment and customers in an efficient and effective manner. We anticipate that itwe will continue to incur costs and capital expenditures associated with future growth prior to realizing the full measure of anticipated long-term benefits, and the return on these investments may be lower, may develop more slowly than expected or may never be realized. If we are unable to manage this growth and the associated expenses effectively, we may not be able to take advantage of market opportunities or remain competitive. We may also fail to execute on our business plan or respond to competitive pressures, any of which could adversely affect the NAMiningContract Mining business, operating results and financial condition.
NAMiningOur Contract Mining business faces competition from aggregates producerscustomers that choose to self-perform mining operations and from other mining companies.
NAMiningWe facesface competition from existing and prospective customers that are capable of performing, or engaging other companies to perform the services NAMiningwe provides.provide. NAMiningWe cannot be certain that our existing customers will continue to outsource these services to NAMiningus in the future, which could adversely affect the NAMiningContract Mining business, operating results and financial condition.
From time to time, we seek to develop new mining projects, including the Thacker Pass project. The risks associated with such projects can be substantial. New mining projects can take up to several years to complete, are complex and require significant capital expenditures. These projects are subject to significant risks, including delays or reductions in making capital expenditures by NAMining'sContract Mining's customers, timely regulatory approvals, extreme weather events, unexpected increases in the cost of required materials, and disputes with third party providers of materials, equipment or services, and a completed project may not yield the anticipated operational or financial benefit, any of which could have a material adverse effect on our business, financial condition and results of operations.
NAMiningContract Mining operations are currently geographically concentrated and therefore subject to regional economic risk, regulatory conditions, natural disasters, severe weather events or other circumstances affecting Florida.
As of December 31, 2024,2025, over 75%80% of the Contract Mining segment's quarries NAMining operates are located in Florida. A prolonged economic downturn or adverse change in regulatory conditions in the Florida mining or construction industry could result in a significant reduction in demand for NAMining’sour services. The occurrence of one or more natural disasters, severe weather events, terrorist attacks, or disruptive political events in Florida could adversely affect the NAMiningContract Mining business.
Risks related to the Minerals Managementand Royalties segment
We own mineral and royalty interests in the continental United States. The Minerals Managementand Royalties segment does not currently have any material investments under which it would be required to bear the cost of exploration, production or development. We primarily derive income from royalty-based leases under which lessees make payments to us based on their sale of natural gas, oil and coal. Future royalty-based income is dependent on the number of oil and gas wells being developed and operated on our mineral acreage. The decision to pursue development and operation of oil and gas wells is made by third-party operators, not by us, and depends on a number of factors outside of our control, including fluctuations in commodity prices (primarily natural gas),prices, regulatory risk, our lessees' willingness and ability to incur well-development and other operating costs, the rate of production of the reserves and changes in the availability and continuing development of infrastructure. Lower commodity prices and/or increased costs may reduce the amount of oil and natural gas that third-party operators can produce economically. In the event that new federal or state restrictions related to the hydraulic fracturing process are adopted in areas where we own mineral and royalty interests, our lessees may incur additional costs or permitting requirements to comply with such requirements that may be significant and could result in added restrictions, delays or curtailments in the pursuit of exploration, development, or production activities. In addition, if a lessee were to experience financial difficulty, the lessee might not be able to pay our royalty payments or continue operations. A failure on the part of the lessee to make royalty payments may give us thecertain right to terminate the lease, repossess the propertyrights; and enforceif payment obligations under the lease. If we repossessed any of our properties,possible, we would seek a replacement lessee. However, we may not be able to find a replacement lessee or might not be able to enter into a new lease on favorable terms within a reasonable period of time. In addition, if we are able to enter into a new lease with a new lessee, the replacement lessee may not achieve the same levels of production or sales prices as the lessee it replaced. Any of these risks could materially reduce our expected royalty income and profitability.
Producing oil and natural gas reservoirs are generally characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Unless our third-party lessees conduct successful ongoing well development activities or we continually acquire mineral and royalty interests, production and income related to our mineral and royalty interests will decline as those reserves are depleted. The future cash flow and results of operations of the Minerals Managementand Royalties segment are highly dependent on third-party operators’ success in developing our current and future mineral and royalty interests. These operators may not have access to the capital needed to develop our mineral interests. We may not be able to acquire or find sufficient additional mineral and royalty interests to replace third-party operators' current and future production. Further, the decline curve we use to project future royalty income is subject to numerous assumptions and limitations. Natural gas wells have high initial production rates and follow a natural decline before settling into relatively stable, long-term production. Decline rates can vary due to factors like well depth, well length, formation pressure,pressure and facility design. Any of these risks could materially reduce our expected royalty income and profitability.
Substantially all of the Minerals Managementand Royalties segment’s revenues are derived from royalty payments that are based on the price at which oil and natural gas produced from the acreage underlying our interests are sold. Prices of oil and natural gas are volatile due to factors beyond our control. A substantial or extended decline in commodity prices may adversely affect the Minerals Managementand Royalties segment’s financial condition or results of operations.
The Minerals Managementand Royalties segment’s revenues and operating results depend significantly upon the prevailing prices for oil and natural gas. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in: supply and demand, including if energy supply exceeds demand; market uncertainty and a variety of additional factors that are beyond our control; market expectations about future prices of oil and natural gas; the level of global oil and natural gas exploration and production; the cost of exploring for, developing, producing and delivering oil and natural gas; the price and quantity of foreign imports and U.S. exports of oil and natural gas; the level of U.S. domestic production; political and economic conditions in oil producing regions; the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls; trading in oil and natural gas derivative contracts; the level of consumer product demand; weather conditions and natural disasters; technological advances affecting energy consumption, energy storage and energy supply; domestic and foreign governmental regulations and taxes; the continued threat of terrorism and the impact of military and other action, including ongoing conflicts in foreign nations and associated oil and natural gas import bans as well as economic sanctions such as those imposed by the U.S. on oil and gas exports from Iran; the proximity, cost, availability and capacity of oil and natural gas pipelines and other transportation facilities; the price and availability of alternative fuels; volatility in the political, legal and regulatory environments due to the U.S. presidential election; and overall domestic and global economic conditions. A substantial or extended decline in commodity prices may adversely affect the Minerals Managementand Royalties segment’s financial condition or results of operations.
The marketability of oil and natural gas production is dependent upon transportation, pipelines and refining facilities and continued operation of the U.S. power grid. Any limitation in the availability of these items could interfere with our third-party lessee’s ability to market oil and natural gas production and may adversely affect the Minerals Managementand Royalties segment’s financial condition or results of operations.
The marketability of our third-party lessee’s production depends in part on the availability, proximity, and capacity of pipelines, tanker trucks, and other transportation methods, and processing and refining facilities owned by third parties as well as continued reliable operation of the U.S power grid. Any significant disruption in the U.S. power grid, gathering system or transportation, processing, or refining-facility capacity could reduce our third-party lessee’s ability to market oil production and may adversely affect the Minerals Managementand Royalties segment’s financial condition or results of operations.
There are risks associated with NACCO's ability to execute on our longer term growth strategy, including our investment in mitigation solutions, comprehensive reclamation and restoration construction services as well as cleanother energyenergy-related projects through our Mitigation Resources of North America and ReGen Resources businesses, and our ability to develop and manage such projects profitably. These include political and regulatory developments that may make it more costly, or impossible, to pursue these business opportunities, logistical risks and potential delays related to construction, permitting and regulatory approvals; operational risk that the projects will not perform according to expectations; weather conditions or other factors beyond our control. General concerns about the fundamental soundness of the economy may cause customers to defer projects, even if they have available financing. Prolonged uncertainties in the capital markets, or the returns of constrained capital market conditions, could have adverse effects on our customers. All of the aforementioned risks could reduce the viability of project development.development, Wewhich havewould andadversely will continue to incur costs in connection with these projects and the results of operations and/or return on investment could be negative or lower than anticipated and we may need to write-down the value of capitalized assets associated with these projects. Furthermore,affect our abilityfinancial to forecast results may be hindered or inaccurate and the projects may not perform as predicted. Even if these projects are profitable in the long term, they may not be profitable in the short term,condition and results of operations are unlikely to be even quarter over quarter.operations.
The OBBBA includes substantial changes to U.S. solar energy tax policy which could have a material impact on the projects being developed by ReGen Resources. Current projects in development include solar arrays, solar-gas hybrid projects, thermal generation and carbon capture primarily on reclaimed mining properties in Louisiana, Mississippi, Ohio, Pennsylvania and Texas. ReGen develops energy infrastructure projects directly as well as through joint ventures. Our investments in solar projects are dependent, in part, on federal tax incentives to preserve economic value. We believe all current solar projects have been safe harbored in order to preserve tax credit eligibility. We have approximately $8.4 million of capitalized assets associated with our solar projects. We have incurred, and will continue to incur, costs in connection with these projects and the results of operations and/or return on investment could be lower than anticipated. These projects face the risk that the current state regulatory programs and tax laws may expire or be adversely modified and could have a material adverse effect on our operating results and financial condition.
Operating results may vary significantly from period to period and are inherently unpredictable.
Demand for our mitigation credits and mitigation services has been, and will likely continue to be, cyclical in nature and vulnerable to downturns in the general economy, as well as downturns in government infrastructure spending. We base our planned operating expenses in part on our expectations of future revenue, and a significant portion of our expenses are fixed in the short-term. We have and will continue to incur costs in connection with these projects and the results of operations and/or return on investment could be negative or lower than anticipated and we may need to write-down the value of capitalized assets associated with these projects. Furthermore, our ability to forecast results may be hindered or inaccurate and the projects may not perform as predicted. Even if these projects are profitable in the long term, they may not be profitable in the short term, and results of operations will not be even quarter over quarter, and this could have a material adverse effect on our operating results and financial condition.
In addition, our investments in solar and other energy projects are dependent, in part, upon current state regulatory incentives and federal tax credits in order for the projects to be economically viable. These projects face the risk that the current state regulatory programs and tax laws may expire or be adversely modified and could have a material adverse effect on our operating results and financial condition.
The price of our common stock may fluctuate due to a variety of market and industry factors that may materially reduce the market price of NACCO's common stock regardless of operating performance, including, among others: (i) actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in the industry; (ii) industry cycles and trends; (iii) changes in government regulation; (iv) potential or actual military conflictsconflicts, orinclusive of acts of terrorism; (v) supply chain disruptions, inclusive of tariff effects; (vi) announcements concerning NACCO, our customers or competitors; (vivii) lack of trading liquidity as a result of low trading volumes could make it difficult for investors to sell shares; and (viiviii) the general state of the securities market. In addition, the stock market in general has experienced significant volatility that often has been unrelated to the operating performance of companies whose shares are traded. These market fluctuations could adversely affect the trading price of our common stock, regardless of NACCO's actual operating performance. As a result of all of these factors, investors in our common stock may not be able to resell their stock at or above the price they paid or at all. Further, we could be the subject of securities class action litigation due to any such stock price volatility, which could divert management’s attention and have a material adverse effect on our operating results.
Current and future capital and credit market conditions could adversely affect our ability to obtain bank financing on reasonable terms. Certain financial institutions have acted to limit available financing for companies in the fossil fuel industry, including coal mining, which could result in increases in costs of borrowing or in our ability to maintain financing at current levels.
We may be unable to obtain financing on reasonable terms. Historically, we have addressed our liquidity needs (including funds required to pay dividends and fund working capital and planned capital expenditures) with operating cash flow and borrowings under credit facilities. Our wholly-owned subsidiary has a revolving line of credit of up to $200.0 million that expires in September 2028. Our ability to access the capital markets and the costs and terms of available financing depends on many factors, including perceived credit risks of companies with coal and/or oil and gas exposure as a result of current market sentiment for fossil fuels. Certain financial institutions have taken actions to limit available financing to entities that produce or use fossil fuels. The volatility in the energy industry and additional perceived credit risks of companies with coal and/or oil and gas exposure has resulted in traditional bank lenders seeking to reduce or eliminate their lending exposure to these companies.factors. An inability to obtain bank financing, or refinance with terms that are as favorable as the existing terms of such indebtedness, could have a material adverse effect on our operating results and financial condition.
Federal and state laws require us to provide financial assurance or financial security to secure performance or payment of certain long-term obligations, such as mine closure or reclamation costs, federal and state workers’ compensation and black lung benefit costs, leases, transmission interconnection construction costs, power purchase agreement delivery obligations and other obligations. Future federal and state laws and regulations, regional transmission organizations and power purchase agreement customers may require higher amounts of financial security, including as a result of changes to certain factors used to calculate the bonding or security amounts. Bond issuers may demand higher fees or additional collateral, including cash or letters of credit or other terms less favorable upon renewals. As we are required by state and federal law to have bonds or other acceptable security in place before mining can commence or for certain projects to move forward, the failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect NACCO's ability to mine. That failure could result from a variety of factors, including lack of availability, higher expense or unfavorable market terms, the exercise by third-party surety bond issuers of their right to refuse to renew the surety and restrictions on availability of collateral for current and future third-party surety bond issuers under the terms of our financing arrangements. In addition, as a result of increasing credit pressures on the coal industry, it is possible that surety bond providers could demand other forms of collateral as a condition to providing or maintaining surety bonds. Any such demands,factors, could have a material adverse impact on our liquidity and financial position. If we are unable to meet collateral requirements and cannot otherwise obtain or retain required surety bonds, it may be unable to satisfy legal requirements necessary to conduct mining operations. Difficulty in acquiring surety bonds, or additional collateral requirements, would increase our costs and likely require greater use of alternative sources of funding for this purpose, which would reduce our liquidity.
Insurance coverage is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future.
Insurance coverage is increasingly expensive, contains more stringent terms and may be difficult to obtain in the future. A number of global insurance companies have taken steps to limit coverage for companies in the fossil fuel industry, including coal mining, which could result in significant increases in costs of insurance or in our ability to maintain insurance coverage at current levels.
We hold a number of insurance policies, including director and officers’ liability and property and casualty insurance coverages. Because we are involved in coal mining, costs of insurance may increase substantially or insurance carriers may limit or decide not to insure us in the future. In addition, ifIf we make significant insurance claims under our insurance policies, such claims may have a material adverse effect on our ability to obtain future insurance coverage at commercially reasonable rates. Limited, or an inability to obtain, insurance coverage, significant increases in the premiums or deductibles of insurance, or losses in excess of our liability insurance coverage limits, could have a material adverse effect on our operating results and financial condition.
Increasing emphasis and changing expectations with respect to environmental, social and governance matters may impose additional costs on us or expose us to new or additional risks.
Expectations relating to environmental, social and governance (ESG) matters have been rapidly evolving. Government organizations are enhancing or advancing legal, regulatory and disclosure requirements specific to ESG matters. The heightened focus on ESG issues requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements. Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices. We could face pressures from investors, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. Investors may request that we implement ESG procedures or standards as a condition to maintain their investment or to make further investments. Lenders and insurers may also limit lending to and insuring of companies that do not meet certain ESG measures endorsed by them. Additionally, we may face reputational challenges in the event our ESG practices are inconsistent with the third-party views of acceptable ESG practices. Further, there is an increasing number of state-level anti-ESG initiatives in the United States that may conflict with other regulatory requirements or various stakeholders’ expectations. Companies which do not adapt to or comply with regulatory, investor or stakeholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.
Increasing attention to climate change risk has also resulted in a recent trend of governmental investigations and private litigation by local and state governmental agencies as well as private plaintiffs in an effort to hold energy companies accountable for the alleged effects of climate change. Other public nuisance lawsuits have been brought in the past against power, coal, oil and gas companies alleging that their operations are contributing to climate change. We could incur substantial legal costs associated with defending such lawsuits in the future. Government entities in certain states have brought similar claims seeking to hold a wide variety of companies that produce fossil fuels liable for the alleged impacts of emissions attributable to those fuels or for other grounds related to climate change, such as improper disclosure of climate change risks. Those lawsuits allege damages as a result of climate change and the plaintiffs are seeking unspecified damages and abatement under various tort theories. We have not been made a party to these suits, but it is possible that we could be included in similar future lawsuits initiated by state and local governments as well as private claimants.
Like many other companies, we are the target of malicious cyber attack attempts in the normal course of business. Cybersecurity incidents involving businesses and other institutions are on the rise. Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated. Cyber threats and cyber attackers can be sponsored by nation states or sophisticated criminal organizations or be the work of independent hackers. The rapid evolution and increased availability of artificial intelligence (AI) may intensify cybersecurity risks by making cyber-attacks more sophisticated and cybersecurity incidents more difficult to detect, contain and mitigate. As threat actors adopt and deploy AI tools, the speed and sophistication of cyber threats and privacy risks may increase across our environment and those of our customers and vendors.
As cyber threats evolve and become more difficult to detect and successfully defend against, one or more cyber attacks might defeat our, or a third-party service provider's, security measures in the future. Employee error or other irregularities may also result in a failure of security measures and a breach of information systems. Moreover, hardware, software or applications we may use have inherent defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a manner that could compromise information security.
Management's Discussion & Analysis (MD&A)
New heading “2025 Compared with 2024”
New heading “CONTRACT MINING SEGMENT”
New heading “MINERALS AND ROYALTIES SEGMENT”
Removed heading “Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”
Removed heading “1031 exchange transactions”
Removed heading “NORTH AMERICAN MINING (NAMining) SEGMENT”
Removed heading “2024 Compared with 2023”
Removed heading “MINERALS MANAGEMENT SEGMENT”
Largest changes
The statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere throughout this Annual Report on Form 10-K 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 presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) a significant reduction in demand by the Company's customers, (2) weather conditions, extended power plant outages, liquidity events or other events that would change the level of customers' coal or aggregates requirements, (3) changes to or termination of customer or other third-party contracts, or a customer or other third party default under a contract, (see in full comparison2) 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 a result of factors such as OPEC and/or government actions, geopolitical developments, economic conditions and regulatory changes, vehicle electrification, as well as supply and demand dynamics, (65) changes in development plans by third-party lessees of the Company's mineral interests, (76) failure or delays by the Company's lessees in achieving expected production of natural gas and other hydrocarbons; the availability and cost of transportation and processing services in the areas where the Company's oil and gas reserves are located;federal and state legislative and regulatory initiatives relating to hydraulic fracturing and U.S. export of natural gas;and the ability of lessees to obtain capital or financing needed for well-development operations and leasing and development of oil and gas reserves on federal lands, (7) any customer's premature facility closure or extended project development delay, (8)failurefederaltoandobtainstateadequatelegislativeinsuranceandcoveragesregulatoryatactionsreasonableaffectingrates,fossil fuels, (9) supply chain disruptions, including price increases and shortages of parts and materials, inclusive of tariff effects, (10) failure to obtain adequate insurance coverages at reasonable rates, (11) changes in tax laws or regulatory requirements, including the elimination of, or reduction in, the percentage depletion tax deduction, changes in mining or power plant emission regulations and health, safety or environmental legislation, (1112) impairment charges, (1213) changes in costs related to geological and geotechnical conditions, repairs and maintenance, new equipment and replacement parts, fuel or other similar items, (13) weather conditions, extended power plant outages, liquidity events or other events that would change the level of customers' coal or aggregates requirements, (14)weather orequipment problems that could affect deliveries to customers, (15) changes in the costs to reclaim mining areas, (16) costs to pursue and develop new mining, mitigation, oil and gas andsolarpower generation development opportunities and other value-added service opportunities, (17) delays or reductions in coal or aggregates deliveries, (18) the ability to successfully evaluate investments and achieve intended financial results in new business and growth initiatives, (1918) disruptions from natural or human causes, including severe weather, accidents, fires, earthquakes and terrorist acts, any of which could result in suspension of operations or harm to people or the environment, and (2019) the ability to attract, retain, and replace workforce and administrative employees.
“Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”see in full comparison
“During 2023, MLMC received notice from its customer related to a boiler issue at the Red Hills Power Plant that began on December 15, 2023. We assessed for impairment and recorded a non-cash, long-lived asset impairment charge of $65.9 million in 2023. The $65.9 million relates exclusively to MLMC; however, $60.8 million and $5.1 million were recorded on the Coal Mining segment and the Minerals Management segment, respectively, as certain MLMC land assets were recorded within the Minerals Management segment. …”see in full comparison
“Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including assumptions about future power plant dispatch levels, changes in future sales price, operating costs and other factors that impact anticipated revenue and customer demand, requires significant judgment. We determined that indicators of impairment existed at MLMC during the fourth quarter of 2023 and, as a result, MLMC's long-lived assets were reviewed for impairment. …”see in full comparison
“During 2025, $14.5 million of excess funds from the terminated Falkirk Defined Benefit Plan were directly transferred to the NACCO 401(k) plan. The NACCO 401(k) plan is a qualified replacement plan; therefore, these funds will be utilized to offset future profit sharing contributions to eligible 401(k) plan participants. During 2025, NACCO and Falkirk’s former customer agreed to settle the corresponding liability for $10.9 million, resulting in a $3.6 million Gain on settlement of excess funding liability. …”see in full comparison
Full comparison: every changed paragraph (121)
Management's Discussion and Analysis of Financial Condition and Results of Operations include NACCO Industries, Inc.® (NACCO) and its wholly owned subsidiary, NACCO Natural Resources Corporation® (NACCO Natural ResourcesResources, and with NACCO collectively, the Company, we, our or us). NACCO Natural Resources brings natural resources to life by delivering aggregates, minerals, reliable fuels and environmental solutions through our robust portfolio of businesses. We operate under three reportable business segments: Utility Coal Mining, Contract Mining and Minerals and Royalties. The Utility Coal Mining segment, operated by North American MiningCoal®, (NAMining) and Minerals Management. The Coal Mining segment operatesmanages surface coal mines that are exclusive, long-term fuel providers for power generation companies. The NAMiningContract segmentMining segment, operated by North American Mining®, is a trustedleading provider of a broad range of specialized, long-term contract mining partner for producers of aggregates, activated carbon, lithium and other industrial minerals.services. The Minerals Managementand Royalties segment, which includes the Catapult Mineral Partners® (Catapult) business, acquires and promotes the development of mineral interests.and Mitigationroyalty Resources of North America® (Mitigation Resources) provides streaminterests and wetlandother mitigationrelated solutions as well as comprehensive reclamation and restoration construction services. In addition, ReGen Resources is pursuing opportunities to develop new power generation resources.investments.
In addition to the reportable segments discussed above, we also operate other businesses that are not currently reported as separate segments. These businesses complement our existing operations and support our long-term growth strategic objectives. Mitigation Resources of North America® (Mitigation Resources) provides natural resource restoration and reclamation services that include stream and wetland mitigation solutions. ReGen Resources is pursuing opportunities to develop new power generation resources.
We also have items not directly attributable to a reportable segment that are not included in the reported financial results of thean operating segment. These items primarily include administrative costs related to public company reporting requirements, including management and board compensation, and the financial results of developing businesses and Bellaire Corporation (Bellaire), Mitigation Resources, ReGen Resources and other developing businesses.. Bellaire manages our long-term liabilities related to former Eastern U.S. underground mining activities.
All financial statement line items below operating profit (loss) (other income,expense, including interest expense and interest income, the provision (benefit) for income taxes and net income (loss)) are presented and discussed within this Form 10-K on a consolidated basis.
Long-lived assets: We periodically evaluate long-lived assets for impairment when changes in circumstances or the occurrence of certain events indicate the carrying amount of an asset or asset group may not be recoverable. Upon identification of indicators of impairment, we evaluate the carrying value of the asset by comparing the estimated future
ItemLong-lived 7.assets: MANAGEMENT'SWe DISCUSSIONperiodically ANDevaluate ANALYSISlong-lived OFassets FINANCIALfor CONDITIONimpairment ANDwhen RESULTSchanges OFin OPERATIONScircumstances or the occurrence of certain events indicate the carrying amount of an asset or asset group may not be recoverable. Upon identification of indicators of impairment, we evaluate the carrying value of the asset by comparing the estimated future undiscounted cash flows generated from the use of the asset or asset group and its eventual disposition with the asset's net carrying value. If the carrying value of an asset is considered impaired, an impairment charge is recorded for the amount that the carrying value of the long-lived asset or asset group exceeds its fair value. Fair value is estimated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including assumptions about future power plant dispatch levels, changes in future sales price, operating costs and other factors that impact anticipated revenue and customer demand, requires significant judgment. We determined that indicators of impairment existed at MLMC during the fourth quarter of 2023 and, as a result, MLMC's long-lived assets were reviewed for impairment. We assessed the recoverability of the MLMC asset group and determined that the assets were not fully recoverable when compared to the remaining future undiscounted cash flows from these assets. As a result, we estimated the fair value of the asset group which resulted in a non-cash, long-lived asset impairment charge of $65.9 million in 2023.
See Note 9 to the Consolidated Financial Statements in this Form 10-K for further discussion of our impairment analysis.
Since significant judgment is required to assess the future tax consequences of events that have been recognized in our financial statements or tax returns, the ultimate resolution of these events could result in adjustments to our financial statements and such adjustments could be material. We believe the current assumptions, judgments and other considerations used to estimate the current year accrued and deferred tax positions are appropriate. If the actual outcome of future tax consequences differs from these estimates and assumptions, due to changes or future events, the resulting change to the provision for income taxes could have a material impact on our results of operations and financial position. Since 2021, we have participated in a voluntary program with the IRS called Compliance Assurance Process (CAP). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most issues prior to the filing of the tax return.
Since 2021, we have participated in a voluntary program with the IRS called Compliance Assurance Process (CAP). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most issues prior to the filing of the tax return.
Other expense (income),expense, net
Interest expense increased modestly in 20242025 compared with 20232024 due to higher average borrowingsborrowings, aspartially welloffset asby an increase in capitalized interest and lower average interest rates.
GainLoss (gain) on equity securities represents changes in the market price of invested assets reported at fair value. The change during 20242025 compared with 20232024 was due to fluctuations in the market prices of the exchange-traded equity securities. See Note 9 to the Consolidated Financial Statements in this Form 10-K for further discussion of our invested assets reported at fair value.
Closed mine obligations decreased in 2025 compared with 2024 due to a change in the estimate of future water treatment costs at Bellaire. See Note 7 to the Consolidated Financial Statements in this Form 10-K for further discussion of our asset retirement obligations.
During 2023, our Board of Directors approved the termination of the Combined Defined Benefit Plan and participants were offered lump-sum distributions as part of the termination process. As a result of the lump-sum distributions, we recognized a non-cash, pension settlement charge of $1.8 million in 2023 on the line Other, net within the accompanying Consolidated Statements of Operations. See Note 14 to the Consolidated Financial Statements in this Form 10-K for further information on the Combined Defined Benefit Plan.
During 2025, we terminated the NACCO Combined Defined Benefit Plan (Combined Plan) and settled all future obligations by transferring the remaining benefit obligations to a third-party insurance company. Although the plan was over funded, we recognized a $7.8 million non-cash Pension settlement charge. See Note 1 and Note 14 to the Consolidated Financial Statements in this Form 10-K for further information on the Combined Plan.
During 2025, $14.5 million of excess funds from the terminated Falkirk Defined Benefit Plan were directly transferred to the NACCO 401(k) plan. The NACCO 401(k) plan is a qualified replacement plan; therefore, these funds will be utilized to offset future profit sharing contributions to eligible 401(k) plan participants. During 2025, NACCO and Falkirk’s former customer agreed to settle the corresponding liability for $10.9 million, resulting in a $3.6 million Gain on settlement of excess funding liability. See Note 1 to the Consolidated Financial Statements in this Form 10-K for further information on the excess funds.
On December 1, 2022, we transferred our ownership interest in Midwest AgEnergy Group, LLC (MAG) to HLCP Ethanol Holdco, LLC. We received cash payments totaling $3.6 million during 2023 in connection with MAG and recognized the gain on the line Other, net within the accompanying Consolidated Statements of Operations.
We recorded an income tax benefit of $0.1$4.4 million for the year ended December 31, 20242025 on income before income tax of $13.1 million, or (33.7)%, compared to an income tax benefit of $0.1 million on income before income tax of $33.6 million, or 0.3%, compared to an income tax benefit of $24.6 million on loss before income tax of $64.2 million, or 38.3%,(0.3)%, for the year ended December 31, 2023.2024. The years ended December 31, 20242025 and 2023 both2024 included $1.9 million and $4.0 million of discrete tax benefits, primarily fromfor deferred tax adjustments and the reversal of uncertain tax provisions.provisions, respectively. Excluding the respective $1.9 million and $4.0 million of discrete tax benefits in each year,benefits, the effective income tax rate inwas 2024(19.5)% and 202311.5% wasin 11.5%2025 and 32.0%,2024, respectively.
The change in the effective income tax rate for 20242025 compared to 2023,2024, excluding the impact of the long-lived asset impairment charge and discrete items, is primarily due to an increase in earningslosses at entities that do not qualifybenefit forfrom percentage depletion. TheLosses generated by these entities generate tax deductions at the statutory rate. This shift in the mix of pre-tax income resulted in a benefit tax rate in 2025. In addition, the benefit from percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where income or loss before income tax is relatively small, the proportional effect of the benefit from percentage depletion on the effective tax rate may be significant. When income tax expense is recorded, the benefit from percentage depletion decreases the effective income tax rate, while the effect is to increase the effective income tax rate when a benefit for income taxes is recorded.
The $28.6 million favorable change in net cash provided by operating activities during 2025 compared with 2024 was primarily due to changes in operating assets and liabilities. Inventory levels at December 31, 2025 and December 31,2024 were relatively consistent, whereas inventories increased during 2024. Accounts receivable decreased during 2025 due to the timing of collections, whereas accounts receivable increased during 2024. These favorable items were partially offset by an unfavorable change in accrued expenses, mainly attributable to a decrease in accrued payroll during the 2025 period, whereas accrued payroll increased during 2024.
The $32.2 million unfavorable change in net cash provided by operating activities during 2024 compared with 2023 was primarily due to an unfavorable change in cash provided by working capital, partially offset by an increase in cash provided by net income adjusted for non-cash items. The unfavorable change in working capital was mainly the result of:
•A significant reduction in the Federal income tax receivable during 2023 that did not reoccur in 2024.
•The changes in Inventory during the period as coal inventory increased during 2024 compared with a decrease in 2023. In addition, there was a larger increase in mining supplies inventory during 2024.
•An increase in Trade accounts receivable during 2024 compared with a decrease during 2023, primarily due to changes in the level and timing of collections as well as the payment terms provided to various customers.
Our non-cash items primarily include Long-lived asset impairment charge, Inventory impairment charges, Depreciation, depletion and amortization, Deferred income taxes, Stock-based compensation and (Gain) loss on sale of assets.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The change in net cash (used for) provided by financing activities was primarily due to higherrelatively additions inconsistent debt borrowings during 20242025 compared with 2023,additions during 2024. This change was partially offset by increaseddecreases in share repurchases and debt issuance costs during 2024. See Note 12 to the Consolidated Financial Statements in this Form 10-K for a discussion of our stock repurchase programs.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS issuance costs during 2025. See Note 12 to the Consolidated Financial Statements in this Form 10-K for a discussion of our stock repurchase programs.
1031 exchange transactions
During 2024, we had 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, we sold land for $7.0 million and recognized a $4.5 million gain in the Minerals Management segment. We structured this transaction in a manner that qualified as a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code and used all of the net proceeds from the sale during the year ended December 31, 2024.
In September 2024, NACCO Natural Resources amended theits secured revolving line of credit (Facility) to increase the revolving credit commitments to $200.0 million and extend the maturity to September 2028. Borrowings outstanding under the Facility were $70.0$75.0 million at December 31, 2024.2025. At December 31, 2024,2025, the excess availability under the Facility was $99.1$74.5 million, which reflects a reduction for outstanding letters of credit of $30.9$50.5 million.
The Facility has performance-based pricing, which sets interest rates based upon NACCO Natural Resources achieving various levels of debt to EBITDA ratios, as defined in the Facility. Borrowings bear interest at a floating rate plus a margin based on the level of debt to EBITDA ratio achieved. The applicable margins, effective December 31, 2024,2025, for base rate and Term Secured Overnight Financing Rate loans were 1.50% and 2.50%, respectively. The Facility has a commitment fee which is based upon achieving various levels of net debt to EBITDA ratios. The commitment fee was 0.40% on the unused commitment at December 31, 2024.2025. During the years ended December 31, 20242025 and December 31, 2023,2024, the average borrowing under the Facility was $27.2$57.3 million and $6.2$27.2 million, respectively, and the weighted-average annual interest rate was 8.83%7.21% and 6.06%,8.83%, respectively.
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 net 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. At December 31, 2024,2025, NACCO Natural Resources was in compliance with all financial covenants in the Facility.
Following is a table which summarizes actual and planned expenditures (in millions):
PlannedActual expenditures for 2025 arewere expected to be approximately $13$8.0 million in the Utility Coal Mining segment,Segment, $17$32.0 million in the NAMiningContract Mining segment, $20$7.7 million in the Minerals Managementand Royalties segment and $8$5.6 million in growth businessesbusiness included in Unallocated Items. Capital expenditures were primarily for a dragline and dragline related improvements in the Contract Mining segment.
Capital expenditures for 2026 are expected to be up to $6 million in the Utility Coal Mining segment, $36 million in the Contract Mining segment, $20 million in the Minerals and Royalties segment and $27 million in growth businesses included in
Unallocated Items. The majority of these expenditures relate to business development opportunities and will only be made if the projects meet our growth investment criteria. Expenditures are expected to be funded from internally generated funds and/or bank borrowings.
The increase in other net tangible assets was mainly the result of increases in Property, plant and equipment, Otherthe non-currentEquity assetsmethod and Inventory during 2024. The increaseinvestment in OtherEiger non-current asset was primarily due to our investment of $15.7 million in Eiger, which holds non-operated working interests in oil and natural gas assets in the KansasResources and the Oklahoma portionestablishment of the HugotonPrepaid basin.profit Thesharing increaseasset induring Inventory was mainly due to higher mining supplies and coal inventory.2025.
During 2025, we invested an additional $15.0 million in Eiger Resources, which holds operated and non-operated working interests in oil and natural gas assets in the Kansas and the Oklahoma portion of the Hugoton basin. This resulted in an increase in Equity method investment in Eiger Resources. See Note 1 to the Consolidated Financial Statements in this Form 10-K for further information on Eiger Resources.
The excess funds from the terminated Combined Plan as well as the excess funds from the Falkirk Defined Benefit Plan will be utilized by the NACCO 401(k) plan, which is a qualified replacement plan. These funds will be used for future profit sharing contributions to eligible 401(k) plan participants, which resulted in an increase in Prepaid profit sharing. See Note 1 to the Consolidated Financial Statements in this Form 10-K for further information on the excess funds.
Pension and postretirement funding can vary significantly each year due to plan amendments, changes in the market value of plan assets, legislation and our decisions to contribute above the minimum regulatory funding requirements. We do not expect to contribute to our pension plan in 2025 and any settlements will be paid out of pension plan assets. NACCO maintains one supplemental retirement plan that pays monthly benefits to participants directly out of corporate funds. NACCO also expects to make payments related to our other postretirement plans. See Note 14 to the Consolidated Financial Statements in this Form 10-K for further information on future benefit payments.
We are affected by the regulations of numerous agencies, particularly the Federal Office of Surface Mining, the U.S. Environmental Protection Agency, the U.S. Army Corps of Engineers and associated state regulatory authorities. In addition, we closely monitor proposed legislation and regulation concerning SMCRA, CAA, ACE, CWA, RCRA, CERCLACERCLA, OBBBA and other regulatory actions. See Item 1 and Item 1A. in Part I of this Form 10-K for further discussion of these matters.
Compliance with these increasingly stringent regulations could result in higher expenditures for both capital improvements and operating costs. The election of Donald Trump, paired with Republican control of Congress, is likely to have a significant and favorable impact on the regulatory environment, particularly for fossil fuels. President Trump issued an Executive Order on January 20, 2025, "Unleashing American Energy," directing all federal executive agency heads to review all agency actions implicating energy reliability and affordability or potentially burdening the development of domestic energy resources. It is not yet clear how existing regulations affecting existing fossil fuel assets will be reconsidered or repealed. Our policies stress environmental responsibility and compliance with these regulations. See Item 1 and Item 1A. in Part I of this Form 10-K for further discussion of these matters.
UTILITY COAL MINING SEGMENT
Tons of coal delivered by the Utility Coal Mining segment were as follows for the years ended December 31:
The results of operations for the Utility Coal Mining segment were as follows for the years ended December 31:
2025 Compared with 2024
Revenues increased 28.5% in 2025 compared with 2024 primarily due to an increase in customer requirements at MLMC partially offset by a reduction in the contractually determined per ton sales price. A boiler issue at the customer's Red Hills Power Plant reduced customer requirements in 2024.
The following table identifies the components of change in Operating profit for 2025 compared with 2024:
Operating profit decreased by $7.2 million in 2025 compared with 2024 primarily due to the absence of MLMC's business interruption insurance recoveries for the boiler issue at the Red Hills Power Plant. This unfavorable change was partially offset by a decrease in gross loss and an increase in earnings of unconsolidated operations. Gross loss was favorable during 2025 compared with the 2024 period, primarily due to an increase in customer requirements and a reduction in cost per ton delivered. The increase in earnings of unconsolidated operations was primarily due to a higher per ton management fee at Falkirk as temporary price concessions ended in the second quarter of 2024.
CONTRACT MINING SEGMENT
Aggregate tons delivered by the Contract Mining segment were as follows for the years ended December 31:
The results of operations for the Contract Mining segment were as follows for the years ended December 31:
Total revenues increased in 2025 compared with 2024, primarily due to an increase in reimbursable costs, which have an offsetting amount in cost of sales and have no impact on gross profit. Revenues excluding reimbursable costs increased 8.7% in 2025 compared with 2024, mainly due to an increase in part sales.
Revenues decreased 19.7% in 2024 compared with 2023 due to a reduction in customer requirements at MLMC as a result of a boiler issue at the customer's Red Hills Power Plant.
The following table identifies the components of change in Operating profit (loss) for 20242025 compared with 2023:2024.
Operating profit (loss) changed favorably by $95.7 million in 2024 compared with 2023. The change in Operating profit (loss) was primarily due to:
•The absence of a long-lived asset impairment charge;
•Business interruption insurance recoveries for the boiler issue at the Red Hills Power Plant;
What changed in the latest 10-Q
Risk Factors
New heading “MLMC is subject to risks associated with our capital investment, operating and equipment costs, changes in customer demand and inflationary adjustments.”
New heading “Our investments in mitigation solutions, comprehensive reclamation and restoration construction services and solar-related development projects are subject to substantial risks and uncertainties.”
Largest changes
“MLMC is subject to risks associated with our capital investment, operating and equipment costs, changes in customer demand and inflationary adjustments.”see in full comparison
“Our investments in mitigation solutions, comprehensive reclamation and restoration construction services and solar-related development projects are subject to substantial risks and uncertainties.”see in full comparison
“In July 2026, MLMC's customer notified MLMC that payment of coal invoices would be delayed due to operational issues at the Red Hills Power Plant that reduced the customer's cash receipts and liquidity. As of June 30, 2026, MLMC had $12.5 million in Trade accounts receivable outstanding, of which $7.2 million was past due. The customer was unable to provide an estimate regarding when it expects to become current on its payment obligations. …”see in full comparison
“Changes to U.S. energy policy including modifications to tax incentives and other regulatory programs, may adversely affect the economics of solar development projects being pursued by ReGen Resources. As of June 30, 2026, we have approximately $4.2 million of capitalized assets associated with solar development projects. …”see in full comparison
“Profitability at MLMC is affected by customer demand for coal, changes in the contractually determined sales price and actual costs incurred. The MLMC contract is the only coal supply contract in which we are responsible for all operating costs, capital requirements and final mine reclamation. As such, increased costs or decreased revenues could materially reduce our profitability. …”see in full comparison
“During the first half of 2026, unplanned outages and maintenance issues at the Red Hills Power Plant reduced plant availability and generation. Continued operational disruptions may result in sustained reductions in coal deliveries, reduced revenues, impairment charges, operating losses and lower operating cash flows during 2026. In response to reduced customer demand, MLMC has curtailed certain mining activities and increased its focus on reclamation activities. …”see in full comparison
Full comparison: every changed paragraph (10)
During the quarter ended MarchJune 31,30, 2026, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.2025, except as follows:
MLMC is subject to risks associated with our capital investment, operating and equipment costs, changes in customer demand and inflationary adjustments.
Profitability at MLMC is affected by customer demand for coal, changes in the contractually determined sales price and actual costs incurred. The MLMC contract is the only coal supply contract in which we are responsible for all operating costs, capital requirements and final mine reclamation. As such, increased costs or decreased revenues could materially reduce our profitability. As a significant portion of MLMC’s costs are fixed, reduction in dispatch, reduced mechanical availability or other operational issues at the Red Hills Power Plant could adversely affect coal demand, customer liquidity and the collectability of amounts due under the contract and materially reduce operating results at MLMC.
During the first half of 2026, unplanned outages and maintenance issues at the Red Hills Power Plant reduced plant availability and generation. Continued operational disruptions may result in sustained reductions in coal deliveries, reduced revenues, impairment charges, operating losses and lower operating cash flows during 2026. In response to reduced customer demand, MLMC has curtailed certain mining activities and increased its focus on reclamation activities. While reclamation work may reduce MLMC's asset retirement obligation, such activities require the expenditure of cash and may not offset the adverse effects of reduced customer demand, lower revenues and decreased operating cash flows.
In July 2026, MLMC's customer notified MLMC that payment of coal invoices would be delayed due to operational issues at the Red Hills Power Plant that reduced the customer's cash receipts and liquidity. As of June 30, 2026, MLMC had $12.5 million in Trade accounts receivable outstanding, of which $7.2 million was past due. The customer was unable to provide an estimate regarding when it expects to become current on its payment obligations. Although the customer has indicated that payment is expected following restoration of plant operations, there can be no assurance regarding the timing of payment or the customer's future ability to satisfy its obligations when due. If plant outages, reduced generation levels or related liquidity constraints continue, additional customer receivables could accumulate and payment delays could extend beyond currently outstanding amounts, which could increase MLMC's working capital requirements, adversely affect liquidity and cash flows and increase exposure to customer credit risk.
Our investments in mitigation solutions, comprehensive reclamation and restoration construction services and solar-related development projects are subject to substantial risks and uncertainties.
There are risks associated with NACCO's ability to execute on our long-term growth strategy, including our investments in mitigation solutions, comprehensive reclamation and restoration construction services at Mitigation Resources and solar-related development projects at ReGen Resources, as well as our ability to develop and manage such projects profitably.
Changes to U.S. energy policy including modifications to tax incentives and other regulatory programs, may adversely affect the economics of solar development projects being pursued by ReGen Resources. As of June 30, 2026, we have approximately $4.2 million of capitalized assets associated with solar development projects. Although the Company recognized impairment charges related to certain solar-related development projects during the second quarter of 2026, future changes in project economics, development timelines, financing availability, tax-credit qualification, buyer demand or transaction terms could adversely affect the recoverability or returns associated with remaining project assets and investments. We may incur additional development costs in connection with current projects. If project assumptions are not realized or expected returns are lower than anticipated, we could incur additional expenses or impairment charges, which could adversely affect our operating results, financial condition and cash flows.
Mitigation solutions, comprehensive reclamation and restoration construction services and solar-related development projects require significant upfront investments before project viability is fully established. If project economics deteriorate, development projects schedules are delayed, financing is unavailable, anticipated tax incentives are reduced or unavailable, interconnection arrangements become less favorable or buyers cannot be identified on acceptable terms, the Company may be unable to recover all or a portion of these investments. The assumptions used in evaluating project economics and asset recoverability involve significant judgment, including assumptions related to project timing, tax-credit qualification, financing availability, customer and buyer demand, equipment commitments and expected project returns.
Future changes in project economics, transaction terms, buyer interest, financing availability, tax-credit qualification, project cost estimates or development timelines could result in reduced expected returns, additional expense or impairment charges in future periods. We have incurred, and expect to continue to incur, costs in connection with these projects and the results of operations and/or return on investment could be lower than anticipated. In addition, state regulatory programs and tax laws may expire or be adversely modified in a manner that affects project economics, which could have a material adverse effect on our operating results, financial condition and cash flows.
Management's Discussion & Analysis (MD&A)
New heading “Second Quarter of 2026 Compared with Second Quarter of 2025, and First Six Months Ended June 30, 2026 Compared with First Six Months Ended June 30, 2025”
Removed heading “First Quarter of 2026 Compared with First Quarter of 2025”
Largest changes
“Second Quarter of 2026 Compared with Second Quarter of 2025, and First Six Months Ended June 30, 2026 Compared with First Six Months Ended June 30, 2025”see in full comparison
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 presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) a significant reduction in demand by the Company'ssee in full comparisoncustomers,customers from extended power plant outages, weather conditions or other events that would change the level of customers' coal or aggregates requirements, (2) customer liquidity constraints that could increase exposure to customer credit risk, (3) changes in the prices of hydrocarbons, particularly diesel fuel, natural gas, natural gas liquids and oil as a result of factors such as OPEC and/or government actions, geopolitical developments, economic conditions and regulatory changes, as well as supply and demand dynamics, (3) weather conditions, extended power plant outages, liquidity events or other events that would change the level of customers' coal or aggregates requirements, (4) changes to or termination of customer or other third-party contracts, or a customer or other third party default under a contract, (5) costs to pursue and develop new mining, mitigation, oil and gas and power generation development opportunities and other value-added service opportunities, (6) the ability to successfully evaluate investments and achieve intended financial results in new business and growth initiatives, (7) changes in development plans by third-party lessees of the Company's mineral interests, (68) failure or delays by the Company's lessees in achieving expected production of natural gas and other hydrocarbons; the availability and cost of transportation and processing services in the areas where the Company's oil and gas reserves are located; and the ability of lessees to obtain capital or financing needed for well-development operations and leasing and development of oil and gas reserves on federal lands, (79) any customer's premature facility closure or extended project development delay, (810) federal and state legislative and regulatory actions affecting fossil fuels, (911) supply chain disruptions, including price increases and shortages of parts and materials, inclusive of tariff effects, (10) failure to obtain adequate insurance coverages at reasonable rates, (1112) changes in tax laws or regulatory requirements, including the elimination of, or reduction in, the percentage depletion tax deduction, changes in mining or power plant emission regulations and health, safety or environmental legislation, (1213) impairment charges, (1314) changes in costs related to geological and geotechnical conditions, repairs and maintenance, new equipment and replacement parts, fuel or other similar items, (1415) equipment problems that could affect deliveries to customers, (1516) changes in the costs to reclaim mining areas, (16) costs to pursue and develop new mining, mitigation, oil and gas and power generation development opportunities and other value-added service opportunities, (17) the ability to successfully evaluate investments and achieve intended financial results in new business and growth initiatives, (18) disruptions from natural or human causes, including severe weather, accidents, fires, earthquakes and terrorist acts, any of which could result in suspension of operations or harm to people or the environment, and (1918) the ability to attract, retain, and replaceworkforce and administrative employees.workforce.
“At our Utility Coal Mining segment, operated by North American Coal, full-year customer demand is expected to be comparable and operating profit is expected to increase year over year due to a shift in focus to reclamation activities in the first half of 2026. During the second half of 2026, customer demand is expected to decline modestly compared with the prior-year period, provided MLMC's customer's power plant operates as currently planned. …”see in full comparison
“We also expect second-half consolidated operating profit and net income to decline from first-half 2026 and prior-year levels. Expectations for lower second-half operating profit are primarily driven by potential additional solar project curtailment costs and expected inventory write-downs at MLMC. Given the effect of the realized and anticipated 2026 charges, we expect full-year operating profit and net income will be significantly lower than in 2025. Comparisons to prior-year net income also reflect a $6.0 million after-tax pension settlement charge recognized in the second half of 2025.”see in full comparison
“In July 2026, MLMC's customer notified MLMC that payment of coal invoices would be delayed due to operational issues at the Red Hills Power Plant that reduced the customer's cash receipts and liquidity. As of June 30, 2026, MLMC had $12.5 million in Trade accounts receivable outstanding, of which $7.2 million was past due. Management is actively monitoring collectability and the potential impact on MLMC's liquidity and working capital requirements. See Item 1A Risk Factors on page 30 within this Form 10-Q for further discussion of MLMC.”see in full comparison
Full comparison: every changed paragraph (70)
In addition to the reportable segments discussed above, we also operate other businesses that are not currently reported as separate segments. These businesses complement our existing operations and support our long-term growth strategic objectives. Mitigation Resources of North America® (Mitigation Resources) provides natural resource restoration and reclamation services that include stream and wetland mitigation solutions. ReGen Resources is pursuing opportunitiesthe toadvancement developand newmonetization of power generation resources.projects. See Note 1 to the Unaudited Condensed Consolidated Financial Statements within this Form 10-Q for further discussion of our reportable segments.
Our results of operations were as follows for the three and six months ended MarchJune 3130:
The components of the change in revenues and operating (loss) profit are discussed below in Segment Results.
Second Quarter of 2026 Compared with Second Quarter of 2025, and First Six Months Ended June 30, 2026 Compared with First Six Months Ended June 30, 2025
First Quarter of 2026 Compared with First Quarter of 2025
Other expense,expense (income), net
Interest expense decreased in the second quarter of 2026 and the first six months of 2026 compared with the respective 2025 periods due to an increase in capitalized interest and lower average interest rates, partially offset by higher average borrowings.
Interest income decreased in the second quarter of 2026 and the first quartersix months of 2026 compared with the respective 2025 periodperiods due to lower earnings on reduced invested cash balances.
(Gain) loss on equity securities represents changes in the market price of invested assets reported at fair value. The favorable change in the second quarter of 2026 and the first quartersix months of 2026 compared with the respective 2025 periodperiods is 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.
During 2025, $14.5 million of excess funds from the terminated Falkirk pension plan were directly transferred to the NACCO 401(k) plan. The NACCO 401(k) plan is a qualified replacement plan; therefore, these funds will be utilized to offset future profit sharing contributions to 401(k) plan participants. During the second quarter of 2025, NACCO and Falkirk’s former customer agreed to settle the corresponding liability for $10.9 million, resulting in a $3.6 million Gain on settlement of excess funding liability.
We evaluate and update our estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Historically, our actual effective tax rates have differed from the statutory effective tax rate primarily due to the benefit received from percentage depletion. The effective rate benefit from percentage depletion varies based upon the mix and timing of actual earnings compared to projections of earnings between entities that benefit from percentage depletion and those that do not, and as such the effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. The benefit of percentage depletion is not directly related to the amount of consolidated pre-tax income recorded in a period. When income tax expense is recorded, the benefit from percentage depletion decreases the effective income tax rate, while the effect is to increase the effective income tax rate when a benefit for income taxes is recorded. Each quarter, we update our estimate of the annual effective tax rate, and the cumulative impact of the change in the estimated annual effective tax rate is recorded, which can make quarterly comparisons not meaningful.
The following tables detail the changes in cash flow for the threesix months ended MarchJune 3130:
The $7.4 million favorable change in net cash provided by operating activities was primarily due to changes in operating assets and liabilities. This improvement was mainly attributable to an increase in Accounts payable during the first quarter of 2026, primarily due to purchases related to ReGen Resources' solar projects, whereas Accounts payable decreased during the first quarter of 2025 due to the timing of expenditures in the Coal Mining and Contract Mining segments. In addition, a decrease in Accounts receivable, mainly attributable to lower revenues at MLMC, contributed to the improvement but was partially offset by cash payments associated with reclamation work at MLMC during the first quarter of 2026.
The change$23.4 million improvement in net cash provided by (used for) financingoperating activities was primarily due to additionsfavorable changes in debtoperating borrowingsassets and liabilities during the first threesix months of 2026 compared with reductions during the firstprior-year threeperiod. monthsThe of 2025 as well as a decreaseimprovement in shareoperating repurchasesassets duringand theliabilities firstwas threemainly monthsattributable ofto 2026.decreases in Prepaid profit sharing and Prepaid insurance and lower cash requirements associated with vendor deposits.
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 2026 compared with reductions during the first six months of 2025 and the absence of share repurchases during the first six months of 2026.
NACCO Natural Resources has a $200.0 million secured revolving line of credit (Facility) that matures in September 2028. Borrowings outstanding under the Facility were $100.0$95.0 million at MarchJune 31,30, 2026. At MarchJune 31,30, 2026, the excess availability under the Facility was $49.5$69.1 million, which reflects a reduction for outstanding letters of credit of $50.5$35.9 million.
The Facility has performance-based pricing, which sets interest rates based upon NACCO Natural Resources achieving various levels of debt to EBITDA ratios, as defined in the Facility. Borrowings bear interest at a floating rate plus a margin based on the level of debt to EBITDA ratio achieved. The applicable margins, effective MarchJune 31,30, 2026, for base rate and Term Secured Overnight Financing Rate loans were 1.75% and 2.75%, respectively. The Facility has a commitment fee which is based upon achieving various levels of debt to EBITDA ratios. The commitment fee was 0.45% on the unused commitment at MarchJune 31,30, 2026. During the three and six months ended MarchJune 31,30, 2026, the average borrowing under the Facility was $84.7$102.8 million and $93.8 million, respectively, and the weighted-average annual interest rate was 6.52%.6.42% and 6.36%, respectively.
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. At MarchJune 31,30, 2026, NACCO Natural Resources was in compliance with all financial covenants in the Facility.
Actual expenditures were $33.4$41.9 million during the first threesix months of 2026, primarily for land in Tennessee at Mitigation Resources and a draglinedraglines in the Contract Mining segment.
Other items
In July 2026, MLMC's customer notified MLMC that payment of coal invoices would be delayed due to operational issues at the Red Hills Power Plant that reduced the customer's cash receipts and liquidity. As of June 30, 2026, MLMC had $12.5 million in Trade accounts receivable outstanding, of which $7.2 million was past due. Management is actively monitoring collectability and the potential impact on MLMC's liquidity and working capital requirements. See Item 1A Risk Factors on page 30 within this Form 10-Q for further discussion of MLMC.
The change in other net tangible assets at MarchJune 31,30, 2026 compared with December 31, 2025 was mainly the result of an increaseincreases in Property, plant and equipment and a decrease in Accrued payroll for incentive compensation payments madeinventory during the first quartersix months of 2026. TheseProperty, increasesplant wereand partiallyequipment offset by a decrease in Trade accounts receivableincreased primarily due to lowerinvestments revenuein atContract MLMCMining duringand Mitigation Resources supporting the firstCompany’s quartergrowth of 2026 compared with the fourth quarter of 2025.initiatives.
Inventory increased mainly as the result of higher coal and mining supplies inventory, including growth associated with the Contract Mining segment's expansion.
Tons of coal delivered by the Utility Coal Mining segment were as follows for the three and six months ended MarchJune 3130:
The results of operations for the Utility Coal Mining segment were as follows for the three and six months ended MarchJune 3130:
During the first2026 quarter of 2026,periods, MLMC's customer's power plant experienced aunplanned outages and maintenance outage.issues which resulted in lower customer requirements. As a result, revenues decreased 13.2%25.0% and 20.3% in the firstsecond quarter of 2026 and the first six months of 2026, respectively, compared with the first quarter of 2025 due to lower customer requirements.periods. This decrease was partially offset by an increase in the contractually determined per ton sales price at MLMC.price.
The following table identifies the components of change in Operating profit for the firstsecond quarter of 2026 compared with the firstsecond quarter of 2025:
The following table identifies the components of change in Operating profit for the first six months of 2026 compared with the first six months of 2025:
Operating profit increased by $5.1 million and $8.7 million in the second quarter of 2026 and the first six months of 2026, respectively, compared with the 2025 periods. These improvements were primarily due to favorable changes in gross profit (loss), earnings of unconsolidated operations and selling, general and administrative expenses.
OperatingThe improvements in gross profit increased(loss) by $3.6 million in the first quarter of 2026 compared with the first quarter of 2025,were primarily due to a reduction in cost per ton delivered and an increase in the contractually determined sales price at MLMC. Lower customer demand duringresulting from outages and maintenance issues at the Red Hills Power Plant outage resulted in a shift of certain costs from inventory and cost of sales to reduce MLMC’s asset retirement obligation, which favorably impacted quarterly2026 results. In addition, the second quarter of 2025 and the first quartersix months of 2025 included a $3.0$1.3 million and a $4.3 million inventory impairment chargecharge, respectively, to write down MLMC's coal inventory to its net realizable value.
The increase in operating profit was partially offset by a decrease in earnings of unconsolidated operations was primarily due to higher customer demand at Coteau and Coyote Creek, partially offset by a lower management fee at Sabine during the first2026 quarter of 2026.periods.
The decrease in selling, general and administrative expenses during the 2026 periods was mainly attributable to lower contributions expense, as the 2025 periods included costs associated with a multi-year charitable pledge.
Tons delivered by the Contract Mining segment were as follows for the three and six months ended MarchJune 3130:
The results of operations for the Contract Mining segment were as follows for the three and six months ended MarchJune 3130:
Revenues excluding reimbursable costs increased 31.7%34.5% and 33.1% in the firstsecond quarter and the first six months of 20262026, respectively, compared with the 2025 periodperiods, primarily due to the commencement and ramp up of a new dragline mining serviceservices contract during 2026 as well as higher customer requirements at the consolidated limestone quarries. Reimbursable costs have an offsetting amount in cost of sales and have no impact on gross profit.
The following table identifies the components of change in Operating profit for the firstsecond quarter of 2026 compared with the firstsecond quarter of 2025:
The following table identifies the components of change in Operating profit for the first six months of 2026 compared with the first six months of 2025:
Operating profit increased $2.8 million and $4.8 million in the second quarter and the first six months of 2026, respectively, compared with the 2025 periods. These improvements were primarily due to increases in gross profit and earnings of unconsolidated operations. The favorable change in gross profit was mainly the result of contributions from a new dragline mining services contract and improved margins at limestone quarries. The increase in earnings of unconsolidated operations was primarily due to higher customer requirements as a result of an additional dragline operating at a new quarry pursuant to an existing contract. The improvements in operating profit were partially offset by increases in selling, general and administrative expenses mainly due to higher employee-related costs.
Operating profit improved by $2.0 million in the first quarter of 2026 compared with the first quarter of 2025, primarily due to increases in gross profit and earnings of unconsolidated operations. These improvements were mainly the result of an increase in tons delivered, improved margins at limestone quarries and contributions from a new dragline mining service contract, partially offset by lower profit on part sales.
The improved margins were partially due to $0.9 million in lower depreciation expense.expense in the 2026 periods. Effective January 1, 2026, the Company’s Contract Mining segment changed its depreciation method for certain assets (primarily draglines and other large mining equipment) from the straight-line method to the units-of-production method. See Note 1 to the Unaudited Condensed Consolidated Financial Statements for further discussion of this change.
Oil and natural gas prices have been historically volatile and may continue to be volatile in the future. The table below shows the average prices as reported by the United States Energy Information Administration for the three and six months ended MarchJune 3130:
These indicated prices do not necessarily reflect the contract terms for our sales.mineral and royalty interests.
The results of operations for the Minerals and Royalties segment were as follows for the three and six months ended MarchJune 3130:
Revenues decreasedincreased 12.4%46.1% and 11.0% in the firstsecond quarter and the first six months of 20262026, respectively, compared with the first2025 quarter of 2025periods, primarily due to lowerhigher naturaloil and gas revenuerevenues as awell resultas ofincreased decreasedcoal production.revenues. The higher revenues were mainly attributable to increased commodity prices.
Receivables from third-party lessees for which we 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 our estimates and the actual amounts received is recorded in the period that payment is received from the third-party lessee. Revenue in the second quarter of 2026 included a $1.6 million favorable adjustment primarily related to first quarter 2026 pricing estimates. Revenue in the six months ended June 30, 2025 included a $1.5 million favorable adjustment.
The following table identifies the components of change in Operating profit for the firstsecond quarter of 2026 compared with the firstsecond quarter of 2025:
The following table identifies the components of change in Operating profit for the first six months of 2026 compared with the first six months of 2025:
Operating profit increased by $1.5 million and $1.4 million in the second quarter and the first six months of 2026, respectively, compared with the 2025 periods, primarily due to higher gross profit mainly attributable to favorable commodity prices. These improvements were partially offset by losses from unconsolidated operations related to an investment in Eiger Resources. The unfavorable change in Eiger's results was primarily attributable to commodity hedge positions rather than underlying production. Due to the timing and availability of financial information, earnings or losses from this investment are recorded on a one quarter lag. In addition, selling, general and administrative expenses increased primarily due to higher employee-related costs.
Operating profit decreased by $0.2 million in the first quarter of 2026 compared with the first quarter of 2025 primarily due to an increase in selling, general and administrative expenses and lower gross profit. The increase in selling, general and administrative expenses was primarily due to higher employee-related costs. The decrease in gross profit was mainly due to lower production, partially offset by a decrease in depletion expense.
These decreases were partially offset by an improvement in earnings of unconsolidated operations related to an additional investment in Eiger Resources during the fourth quarter of 2024. Due to the timing and availability of financial information, earnings or losses from this investment are recorded on a one quarter lag.
Unallocated Items and Eliminations were as follows for the three and six months ended MarchJune 3130:
The operating lossRevenues increased in the second quarter and the first quartersix months of 2026 compared to the first2025 quarter of 2025periods, primarily due to higher operatingrestoration expensesand reclamation service revenue at Mitigation Resources and a $0.5 million long-lived asset impairment charge for an office building in North Dakota that is held for sale.Resources.
The operating loss increased in the second quarter and the first six months of 2026 compared to the 2025 periods, primarily due to $12.0 million of impairment charges related to certain solar development projects within ReGen Resources. See Note 5 to the Unaudited Condensed Consolidated Financial Statements and Item 1A Risk Factors on page 30 within this Form 10-Q for further discussion of the impairment charges and ReGen Resources, respectively.
NACCO Industries is a growing diversified natural resources company with a unique business model strategically positioned to deliver stable and growing financial returns over the long term. Our business model is purposelypurposefully built for durability and resilience with an expanding portfolio of long-term contracts, relationships and investments that leverage our proven operational expertise, disciplined capital allocation and an entrepreneurial yet patient approach. We have methodically built unique capabilities and clear competitive advantages that allow us to pursue a wide range of growth opportunities, often completely integrated into customers’ operations in partnership-based relationships. We have multiple vectors for value creation, and we are steadfastly committed to delivering compounding returns and expanding investor value over the long term.
Our foundation rests on a stable base of long-term coal-miningcoal mining contracts and legacy mineral and royalty assets, which generate dependable recurring cash flows. As new long-term contracts and investments are added across the Company, these new multi-year agreements create a “layering effect" as their contributions compound.compound Theover momentum our operations experienced in the second half of 2025 and the first quarter of 2026 is expected to continue throughout the remainder of 2026, resulting in meaningful year‑over‑year improvements in consolidated operating profit, net income and Adjusted EBITDA. Excluding the effect of a $6 million after-tax pension settlement charge in 2025, year‑over‑year growth is expected to moderate in the second half of 2026 as anticipated results are compared against stronger prior-year operational performance.time.
While these long-term agreements and investments are intended to strengthen our earnings base over time, we continually evaluate whether individual projects or initiatives remain aligned with our strategic and financial objectives. As part of this process, changing market conditions, regulatory developments and project-specific challenges led us to reassess certain solar investments during the 2026 second quarter. In early July, we began pursuing a range of alternatives, including potential asset sales, contract amendments and other strategic actions, to monetize these investments and reduce our exposure. Depending on the outcome of these activities, additional curtailment costs could be incurred.
Strong first-half 2026 operating performance across our reportable segments is expected to drive year‑over‑year improvements in full-year 2026 Consolidated Adjusted EBITDA, which excludes the solar impairment charges and a $7.8 million pre-tax pension settlement charge recorded in 2025. While we expect Consolidated Adjusted EBITDA to remain strong in the second half of 2026, growth is expected to moderate relative to both the first half of 2026 and prior-year periods.
We also expect second-half consolidated operating profit and net income to decline from first-half 2026 and prior-year levels. Expectations for lower second-half operating profit are primarily driven by potential additional solar project curtailment costs and expected inventory write-downs at MLMC. Given the effect of the realized and anticipated 2026 charges, we expect full-year operating profit and net income will be significantly lower than in 2025. Comparisons to prior-year net income also reflect a $6.0 million after-tax pension settlement charge recognized in the second half of 2025.
At our Utility Coal Mining segment, operated by North American Coal, full-year customer demand is expected to be comparable and operating profit is expected to increase year over year due to a shift in focus to reclamation activities in the first half of 2026. During the second half of 2026, customer demand is expected to decline modestly compared with the prior-year period, provided MLMC's customer's power plant operates as currently planned. Operating results at MLMC are expected to decline from the first half of 2026, particularly in the third quarter, due to lower customer demand, higher diesel fuel costs and an anticipated inventory impairment charge. A higher contractually determined per ton sales price is anticipated to mitigate the lower demand. Earnings at the unconsolidated mining operations are also expected to decline primarily due to reclamation services at Sabine concluding as of September 30, 2026.
Looking ahead to 2027, overall customer demand for coal is expected to remain consistent with 2026, while profitability is expected to improve. This increase is driven by anticipated improvements at MLMC if the customer's power plant is able to operate more consistently, as well as continued stable earnings at our unconsolidated operations. Anticipated improved results at the remaining unconsolidated mining locations should mostly offset the absence of reclamation income at Sabine.
NC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-01 | Burns Patrick Joseph (2026) |
Grant/award | 310 | — | — |
| 2026-10-01 | Sachs Valerie Gentile |
Grant/award | 663 | — | — |
| 2026-10-01 | Rankin Victoire G |
Grant/award | 663 | — | — |
| 2026-10-01 | Rankin Alfred M Et Al |
Grant/award | 663 | — | — |
| 2026-10-01 | Mcdonald William Paul |
Grant/award | 663 | — | — |
| 2026-10-01 | Shapard Robert S |
Grant/award | 663 | — | — |
| 2026-10-01 | Miller Michael Sidney |
Grant/award | 663 | — | — |
| 2026-10-01 | Labarre Dennis W |
Grant/award | 663 | — | — |
| 2026-10-01 | Dalrymple John S Iii |
Grant/award | 663 | — | — |
| 2026-10-01 | Jumper John P |
Grant/award | 1,125 | — | — |
| 2026-10-01 | Taplin Britton T |
Grant/award | 663 | — | — |
| 2026-10-01 | Rankin Elizabeth B |
Grant/award | 663 | — | — |
| 2026-10-01 | Rankin Matthew M |
Grant/award | 663 | — | — |
| 2026-07-01 | Taplin Britton T |
Grant/award | 569 | — | — |
| 2026-07-01 | Rankin Elizabeth B |
Grant/award | 569 | — | — |
| 2026-07-01 | Rankin Matthew M |
Grant/award | 569 | — | — |
| 2026-07-01 | Rankin Victoire G |
Grant/award | 760 | — | — |
| 2026-07-01 | Rankin Alfred M Et Al |
Grant/award | 760 | — | — |
| 2026-07-01 | Shapard Robert S |
Grant/award | 569 | — | — |
| 2026-07-01 | Sachs Valerie Gentile |
Grant/award | 569 | — | — |
| 2026-07-01 | Mcdonald William Paul |
Grant/award | 569 | — | — |
| 2026-07-01 | Labarre Dennis W |
Grant/award | 569 | — | — |
| 2026-07-01 | Miller Michael Sidney |
Grant/award | 569 | — | — |
| 2026-07-01 | Jumper John P |
Grant/award | 773 | — | — |
| 2026-07-01 | Dalrymple John S Iii |
Grant/award | 569 | — | — |
Well-known investors holding NC (13F)
None of the 59 investors we track reported a position in their latest 13F.