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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.30pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.14pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.74pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
downturns+2
adverse+1
incidents+1
unplanned+1
outage+1
Positive rising
improve+1
Risk Factors (Item 1A)
7,215 words
Item 1A. RISK FACTORS
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 results. In February 2026, MLMC received notice from its customer that the Red Hills Power Plant experienced an , which is expected to lead to reduced demand and an anticipated operating for MLMC during 2026.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
terminated+2
critical+1
losses+1
absence+1
delay+1
Positive rising
opportunities+3
stable+3
benefit+1
improvements+1
strong+1
MD&A (Item 7)
6,927 words
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
OVERVIEW
Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations and are subject to various uncertainties and changes in circumstances. Important factors that could cause actual results to differ materially from those described in these forward-looking statements are set forth below under the heading Forward-Looking Statements.
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 Resources, 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 Coal ® , manages surface coal mines that are exclusive, long-term fuel providers for power generation companies. The Contract Mining segment, operated by North American Mining ® , is a provider of a broad range of specialized, long-term contract mining services. The Minerals and Royalties segment, which includes the Catapult Mineral Partners ® (Catapult) business, acquires and promotes the development of mineral and royalty interests and other related investments.
Any reduction in customer demand at MLMC, including fluctuations in demand due to planned and unplannedoutages 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.
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Termination of or default under long-term mining contracts could adversely affect our business, financial condition, results of operation 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, any 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 is subject to ongoing complex governmental regulations and legislation that could adversely impact our long-term mining contracts and our results of operations, liquidity, financial condition and cash flow.
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 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.
The potential impact 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.
In view of the significant uncertainty surrounding each of these factors, it is not possible for us to reasonably predict 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.
The loss of, or significant reduction in, purchases by NACCO's coal customers could adversely affect our business, financial condition, results of operation and cash flows.
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.
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 unplannedoutages 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.
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Changes in coal consumption patterns of U.S. electric power generators could adversely affect 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. Changes in the utility industry 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 could have a material adverse effect on our business, financial condition and results of operations.
We are subject to burdensome federal and state mining regulations and the assumptions underlying our reclamation and mine closure obligations could be materially inaccurate.
Federal and state statutes require us to restore mine property in accordance with specified standards and an approved reclamation plan, and require that we obtain and periodically renew permits for mining operations. Regulations require us to incur the cost of reclaiming current mine disturbance at operations where we hold the mining permit. Estimates of our total reclamation and mine closing liabilities are based upon permit requirements and our engineering expertise related to these requirements. While management regularly reviews the estimated reclamation liabilities and believes that appropriate accruals have been recorded for all expected reclamation and other costs associated with closed mines, the estimate can change significantly if actual costs vary from assumptions or if governmental regulations change significantly. Such changes could have a material adverse effect on our business and could significantly reduce our profitability.
The Utility Coal Mining segment's customers' operations require significant capital expenditures.
Maintaining 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.
We face numerous uncertainties in estimating economically recoverable reserves and resources, and inaccuracies in estimates could result in lower than expected revenues, higher than expected costs and decreased profitability.
Information concerning our mining operations in Item 2 - Properties on page 25 has been prepared in accordance with the requirements of subpart 1300 of Regulation S-K. A mineral is economically recoverable when the price at which it can be sold exceeds the costs and expenses of mining, processing and selling the mineral. Forecasts of NACCO's future performance are based on, among other things, estimates of mineral reserves and resources. Mineral reserve and resource estimates of the remaining tons of coal at MLMC are based on many factors, including engineering, economic and geological data assembled and analyzed by internal staff, which includes various engineers and geologists, the area and volume covered by mining rights, assumptions regarding extraction rates and duration of mining operations, and the quality of in-place reserves and resources. The reserve and resource estimates as to both quantity and quality are updated from time to time to reflect, among other matters, production of minerals, new mining or other data received.
There are numerous uncertainties inherent in estimating quantities and qualities of minerals and costs to mine recoverable reserves and resources, including many factors beyond our control. While we believe that our mineral reserve and resource estimates are developed using well-established practices and with appropriate controls, mineral reserve and mineral resource estimation is an imprecise and subjective process. Estimates of mineral reserves and resources depend upon a number of variable factors and assumptions, any one of which may, if incorrect, result in an estimate that varies considerably from actual results. These factors and assumptions include:
• Geologic and mining conditions, including our ability to access certain mineral deposits as a result of the nature of the geologic formations of coal deposits or other factors, which may not be fully identified by available exploration data and may differ from past experience;
• Demand for our minerals;
• Contractual arrangements, operating costs and capital expenditures;
• Development and reclamation costs;
• Mining technology and processing improvements;
• The effects of regulation by governmental agencies, including volatility in the political, legal and regulatory environments due to the U.S. presidential administration;
• The ability to obtain, maintain and renew all required permits;
• Employee health and safety; and
• Our ability to convert all or any part of mineral resources to economically extractable mineral reserves.
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As a result, actual tonnage recovered, estimated revenues, expenditures and cash flows with respect to reserves and resources may vary materially from estimates. Thus, these estimates may not accurately reflect our actual reserves and resources. Any material inaccuracy in estimates related to our reserves or resources could result in lower than expected revenues, higher than expected costs or decreased profitability and changes in future cash flow, which could materially and adversely affect our business, results of operations, financial position and cash flows. Additionally, reserve and resource estimates may be adversely affected in the future by interpretations of, or changes to, the SEC’s property disclosure requirements for mining companies.
A defect in title or the loss of a leasehold interest in certain property could limit our ability to mine coal reserves or result in significant unanticipated costs.
We conduct a significant part of our coal mining operations on leased properties. A title defect or the loss of a lease could adversely affect the ability to mine the associated coal reserves. We may not verify title to leased properties or associated coal reserves until we are committed to developing those properties or coal reserves. We may not commit to develop property or coal reserves until we have obtained necessary permits and completed exploration. As such, the title to property that we intend to lease or mine may contain defects prohibiting the ability to conduct mining operations. Similarly, leasehold interests may be subject to superior property rights of third parties. In order to conduct mining operations on properties where these defects exist, we may incur unanticipated costs. In addition, some leases require us to produce a minimum quantity of coal and/or pay minimum production royalties. Our inability to satisfy those requirements may cause the leasehold interest to terminate.
Risks related to the Contract Mining segment
We have experienced growth in our Contract Mining business in recent periods and we may not be able to sustain growth or manage future growth effectively.
We have expanded our overall Contract Mining business, operations and headcount in recent periods. The Contract Mining segment's operating expenses may increase as we continue to scale the Contract 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 we 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 Contract Mining business, operating results and financial condition.
Our Contract Mining business faces competition from customers that choose to self-perform mining operations and from other mining companies.
We face competition from existing and prospective customers that are capable of performing, or engaging other companies to perform the services we provide. We cannot be certain that our existing customers will continue to outsource these services to us in the future, which could adversely affect the Contract Mining business, operating results and financial condition.
We are subject to risks involved in the development of new mining projects.
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 Contract 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.
Contract 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, 2025, over 80% of the Contract Mining segment's quarries 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 our services. The occurr ence of one or more natural disasters, severe weather events, terrorist attacks, or disruptive political events in Florida could adversely affect the Contract Mining business.
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Risks related to the Minerals and Royalties segment
We have no control over the timing of the development and operation of our natural gas, oil and coal reserves extracted by third parties.
We own mineral and royalty interests in the continental United States. The Minerals and 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, 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 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 certain rights; and if 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.
Minerals are a depleting asset. Unless we replace existing mineral and royalty interests with new mineral and royalty interests and third-party lessees develop those mineral and royalty interests, our reserves and royalty income will decline.
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 and 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. Decline rates can vary due to factors like well depth, well length, formation pressure and facility design. Any of these risks could materially reduce our expected royalty income and profitability.
Substantially all of the Minerals and 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 and Royalties segment’s financial condition or results of operations.
The Minerals and 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; 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; and overall domestic and global economic conditions. A substantial or extended decline in commodity prices may adversely affect the Minerals and 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 and Royalties segment’s financial condition or results of operations.
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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 and Royalties segment’s financial condition or results of operations.
Risks related to long-term growth strategy
Our investments in mitigation solutions, comprehensive reclamation and restoration construction services as well as solar and other energy-related development projects are subject to substantial risks and uncertainties.
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 other energy-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, which would adversely affect our financial condition and results of 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.
Risks related to corporate structure
The amount and frequency of dividend payments made on NACCO's common stock could change.
The Board of Directors has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on earnings, capital and future expense requirements, financial conditions and other factors the Board of Directors may consider. Accordingly, holders of our common stock should not rely on past payments of dividends in a particular amount as an indication of the amount of dividends that will be paid in the future.
The price of NACCO's securities may be volatile.
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) military conflicts, inclusive of acts of terrorism; (v) supply chain disruptions, inclusive of tariff effects; (vi) announcements concerning NACCO, our customers or competitors; (vii) lack of trading liquidity as a result of low trading volumes could make it difficult for investors to sell shares; and (viii) the general state
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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.
NACCO's certificate of incorporation and by-laws include provisions that may discourage a takeover attempt.
Provisions contained in our certificate of incorporation and by-laws and Delaware law could make it more difficult for a third-party to acquire us, even if doing so might be beneficial to NACCO's stockholders. Provisions in our by-laws and certificate of incorporation impose various procedural and other requirements that could make it more difficult for stockholders to affect certain corporate actions. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock and may have the effect of delaying or preventing a change in control.
Our stock repurchase program could affect the price of NACCO’s common stock and increase volatility and may not enhance long-term shareholder value.
Our Board of Directors has authorized a stock repurchase program. The timing and amount of any repurchases under the stock repurchase program are determined at the discretion of our management based on a number of factors, including the availability of capital, other capital allocation alternatives, market conditions for our Class A common stock and other legal and contractual restrictions. The stock repurchase program does not require us to acquire any specific number of shares and may be modified, suspended, extended or terminated without prior notice and may be executed through open market purchases, privately negotiated transactions or otherwise.
Repurchases under the stock repurchase program could affect the price of our Class A common stock. The existence of a stock repurchase program could cause the price of our Class A common stock to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our Class A common stock. There can be no assurance that any stock repurchases will enhance shareholder value because the market price of our Class A common stock may decline below the levels at which we repurchased the shares. Although the stock repurchase program is intended to enhance long-term shareholder value, there is no assurance that it will do so and short-term price fluctuations in the Class A common stock could reduce the program’s effectiveness. Furthermore, the stock repurchase program does not obligate us to repurchase any dollar amount or number of shares of our Class A common stock, and it may be suspended or discontinued at any time and any suspension or discontinuation could cause the market price of our Class A common stock to decline.
NACCO is a smaller reporting company and cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
We are currently a smaller reporting company as defined in the Securities Exchange Act of 1934, and thus allowed to provide simplified executive compensation disclosures and other decreased disclosure in SEC filings. The reduced disclosures may make it more difficult to compare our performance with other public companies.
NACCO cannot predict whether investors will find our common stock less attractive because of these exemptions. If some investors find NACCO's common stock less attractive as a result, there may be a less active trading market for our common stock and the stock price may be more volatile.
Certain members of our extended founding family own a substantial amount of our Class A and Class B common stock and, if they were to act in concert, could control the outcome of director elections and other stockholder votes on significant corporate actions.
We have two classes of common stock: Class A common stock and Class B common stock. Holders of Class A common stock are entitled to cast one vote per share and, as of December 31, 2025, accounted for approximately 27 percent of our voting power. Holders of Class B common stock are entitled to cast ten votes per share and, as of December 31, 2025, accounted for our remaining voting power. As of December 31, 2025, certain members of our extended founding family held approximately 35 percent of our outstanding Class A common stock and approximately 99 percent of our outstanding Class B common stock. On the basis of this common stock ownership, certain members of our extended founding family could have exercised approximately 81 percent of our total voting power. Although there is no voting agreement among such extended family members, in writing or otherwise, if they were to act in concert, they could control the outcome of director elections and other stockholder votes on significant corporate actions, such as certain amendments to our certificate of incorporation and our sale or the sale of our assets. Because certain members of our extended founding family could prevent other stockholders from exercising significant influence over significant corporate actions, we may be a less attractive takeover target, which could adversely affect the market price of our common stock.
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General Risk Factors
Our effective income tax rate could be volatile and materially change as a result of changes in tax laws, mix of earnings and other factors.
We are subject to income taxes in the United States and the effective income tax rate is impacted by certain U.S. federal income tax benefits currently available to coal mining and oil and gas exploration and development companies. Future results of operations could be affected by changes in our effective income tax rate as a result of an increase in the statutory tax rate or the reduction or elimination of percentage depletion as well as changes in the mix of earnings between entities that benefit from percentage depletion and those that do not .
Current and future capital and credit market conditions could adversely affect our ability to obtain bank financing on reasonable terms.
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. 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.
Failure to obtain financial assurance to secure reclamation and other long-term obligations, including surety bonds and letters of credit on acceptable terms, could affect NACCO's ability to mine.
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. Any such 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.
We hold a number of insurance policies, including director and officers’ liability and property and casualty insurance coverages. If 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.
We may be subject to litigation seeking to hold energy companies accountable for the effects of climate change.
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 allegedamages 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.
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Our business could suffer if NACCO’s information technology systems are disrupted, cease to operate effectively or if we experience a security breach, a cyber incident or cyber attack.
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.
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.
A security breach and loss of information may not be discovered for a significant period of time after it occurs. Any compromise of data security could result in a violation of applicable privacy and other laws or standards, the loss of valuable business data, or a disruption of our business. A security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could give rise to unwanted media attention, materially damage customer relationships and our reputation, and result in fines, fees, or liabilities, which may not be covered by insurance policies.
We rely on information technology systems to operate our business and to record and process transactions; respond to customer inquiries; purchase supplies; provide services; deliver inventory on a timely basis; and maintain cost-efficient operations. Despite our efforts, our information technology systems may be vulnerable, from time to time, to damage or interruption from user error, computer viruses, power outages, third-party intrusions and other technical malfunctions.
Through our business operations, we collect and store confidential information from our customers and vendors and personal information and other confidential information from our employees. Although we have taken steps designed to safeguard such information, there can be no assurance that such information will be protected againstunauthorized access, use or disclosure. Unauthorized parties may penetrate our or our vendors’ network security and, if successful, misappropriate such information. Additionally, methods to obtain unauthorized access to confidential information change frequently and may be difficult to detect, which can impact our ability to respond appropriately.
We could be subject to liability for failure to comply with privacy and information security laws, for failing to protect personal information or for failing to respond appropriately. Loss, unauthorized access to, or misuse of confidential or personal information could disrupt our operations, damage our reputation, and expose us to claims from customers, financial institutions, regulators, employees and other persons, any of which could have an adverse effect on our business, financial condition and results of operations.
Security breaches, cyber incidents or cyber attacks could include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial of service attacks and other attacks. Cybersecurity threats to, and incidents involving, vendors and other third-parties who support our activities could impact the business. We are continuously installing new and upgrading existing information technology systems. We use employee awareness training around phishing, malware, and other cyber risks. We believe these incidents are likely to continue and are unable to predict the direct or indirect impact of future attacks or breaches to business operations.
Our operations could be disrupted by natural or human causes beyond our control.
Our operations are subject to disruption from natural or human causes beyond our control, including physical risks from hurricanes, severe storms, floods and other forms of severe weather, accidents, fires, earthquakes, terrorist acts and epidemic or pandemic diseases, any of which could result in suspension of operations or harm to people or the environment. While all of our operations are located in the United States, we participate in a global supply chain, and if governments regulate or restrict the flow of labor or products or impede the travel of our personnel, our ability to conduct normal business operations could be impacted which could adversely affect our results of operations and liquidity.
leading
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 an operating segment. These items primarily include administrative costs related to public company reporting requirements, including management and board compensation, the financial results of developing businesses and Bellaire Corporation (Bellaire). Bellaire manages long-term liabilities related to former Eastern U.S. underground mining activities.
All financial statement line items below operating profit (other expense, including interest expense and interest income, the benefit for income taxes and net income) are presented and discussed within this Form 10-K on a consolidated basis.
See Item 1. Business beginning on page 1 in this Form 10-K for further discussion of NACCO's subsidiaries. Additional information relating to financial and operating data on a segment basis (including unallocated items) is set forth in Note 15 to the Consolidated Financial Statements contained in this Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities (if any). On an ongoing basis, we evaluate our estimates based on historical experience, actuarial valuations and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.
Revenue recognition: Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. See Note 3 to the Consolidated Financial Statements in this Form 10-K for further discussion of our revenue recognition.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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 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.
Income taxes: We file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as the benefit associated with percentage depletion (tax deductions for depletion that may exceed the tax basis in the mineral reserve) and expenses that are not deductible for tax purposes, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities using currently enacted tax rates. The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted laws and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in the calculated deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or changes in the structure or tax status.
Our tax assets, liabilities, and tax expense are supported by historical earnings and losses and our best estimates and assumptions of future earnings. We assess whether a valuation allowance should be established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses. When we determine, based on all available evidence, that it is more likely than not that deferred tax assets will not be realized, a valuation allowance is established.
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.
See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of our income taxes.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
CONSOLIDATED FINANCIAL SUMMARY
Our results of operations were as follows for the years ended December 31:
Revenues:
Utility Coal Mining
Contract Mining
Minerals and Royalties
Unallocated Items
Eliminations
Total revenue
Operating profit (loss):
Utility Coal Mining
Contract Mining
Minerals and Royalties
Unallocated Items
Eliminations
Total operating profit
Interest expense
Interest income
Closed mine obligations
Loss (gain) on equity securities
Gain on settlement of excess funding liability
Pension settlement charge
Other, net
Other expense, net
Income before income tax benefit
Income tax benefit
Net income
Effective income tax rate
The components of the change in revenues and operating profit are discussed below in Segment Results.
Other expense, net
Interest expense increased modestly in 2025 compared with 2024 due to higher average borrowings, partially offset by an increase in capitalized interest and lower average interest rates.
Interest income decreased in 2025 compared with 2024 due to lower earnings on reduced cash balances.
Loss (gain) on equity securities represents changes in the market price of invested assets reported at fair value. The change during 2025 compared with 2024 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.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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.
Income Taxes
We recorded an income tax benefit of $4.4 million for the year ended December 31, 2025 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)%, for the year ended December 31, 2024. The years ended December 31, 2025 and 2024 included $1.9 million and $4.0 million of discrete tax benefits, primarily for deferred tax adjustments and the reversal of uncertain tax provisions, respectively. Excluding the respective $1.9 million and $4.0 million of discrete tax benefits, the effective income tax rate was (19.5)% and 11.5% in 2025 and 2024, respectively.
The change in the effective income tax rate for 2025 compared to 2024, excluding the impact of discrete items, is primarily due to an increase in losses at entities that do not benefit from percentage depletion. Losses 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.
See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of our income taxes.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following tables detail the change in cash flow for the years ended December 31:
Change
Operating activities:
Net income
Depreciation, depletion and amortization
Deferred income taxes
Stock-based compensation
Gain on sale of assets
Inventory impairment charges
Pension settlement charge
Other
Changes in operating assets and liabilities
Net cash provided by operating activities
Investing activities:
Expenditures for property, plant and equipment and acquisition of mineral interests
Proceeds from the sale of assets
Equity method investment
Return of equity method investment
Other
Net cash used for investing activities
Cash flow before financing activities
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.
Change
Financing activities:
Net additions to long-term debt and revolving credit agreements
Debt issuance costs
Cash dividends paid
Purchase of treasury shares
Net cash (used for) provided by financing activities
The change in net cash (used for) provided by financing activities was primarily due to relatively consistent debt borrowings during 2025 compared with additions during 2024. This change was partially offset by decreases in share repurchases and debt
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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.
Financing Activities
In September 2024, NACCO Natural Resources amended its 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 $75.0 million at December 31, 2025. At December 31, 2025, the excess availability under the Facility was $74.5 million, which reflects a reduction for outstanding letters of credit of $50.5 million.
NACCO has not guaranteed any borrowings of NACCO Natural Resources. The Facility allows for the payment to NACCO of dividends and advances under certain circumstances. Dividends (to the extent permitted by the Facility) and management fees are the primary sources of cash for NACCO and enable us to pay dividends to stockholders and repurchase shares.
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, 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, 2025. During the years ended December 31, 2025 and December 31, 2024, the average borrowing under the Facility was $57.3 million and $27.2 million, respectively, and the weighted-average annual interest rate was 7.21% and 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, 2025, NACCO Natural Resources was in compliance with all financial covenants in the Facility.
The obligations under the Facility are guaranteed by certain of NACCO Natural Resources' direct and indirect, existing and future domestic subsidiaries, and is secured by certain assets of NACCO Natural Resources and the guarantors, subject to customary exceptions and limitations.
We believe funds available from cash on hand, the Facility and operating cash flows will provide sufficient liquidity to meet our operating needs and commitments arising during the next twelve months and until the expiration of the Facility in September 2028.
See Note 8 and Note 10 to the Consolidated Financial Statements in this Form 10-K for further information on our other financing arrangements and leases, respectively.
Expenditures for property, plant and equipment and mineral interests
Following is a table which summarizes expenditures (in millions):
Planned
Actual
Actual
NACCO
Actual expenditures for 2025 were $8.0 million in the Utility Coal Mining Segment, $32.0 million in the Contract Mining segment, $7.7 million in the Minerals and Royalties segment and $5.6 million in growth business 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
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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.
Capital Structure
NACCO's consolidated capital structure is presented below:
December 31
Change
Cash and cash equivalents
Other net tangible assets
Intangible assets, net
Net assets
Total debt
Closed mine obligations
Total equity
Debt to total capitalization
The increase in other net tangible assets was mainly the result of increases in Property, plant and equipment, the Equity method investment in Eiger Resources and the establishment of the Prepaid profit sharing asset during 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.
Contractual Obligations, Contingent Liabilities and Commitments
NACCO has asset retirement obligations. See Note 7 to the Consolidated Financial Statements in this Form 10-K for further discussion of our asset retirement obligations.
NACCO has unrecognized tax benefits, including interest and penalties. See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of our income taxes.
We are a party to certain guarantees related to Coyote Creek. We believe that the likelihood of future performance under the guarantees is remote, and no amounts related to these guarantees have been recorded. See Note 16 to the Consolidated Financial Statements in this Form 10-K for further discussion of our guarantees.
We utilize letters of credit to support commitments made in the ordinary course of business. As of December 31, 2025 and 2024, outstanding letters of credit totaled $50.5 million and $30.9 million, respectively.
ENVIRONMENTAL MATTERS
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, CERCLA, 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.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
SEGMENT RESULTS
UTILITY COAL MINING SEGMENT
FINANCIAL REVIEW
See Item 2. Properties on page 25 in this Form 10-K for discussion of our mineral resources and mineral reserves.
Tons of coal delivered by the Utility Coal Mining segment were as follows for the years ended December 31:
Unconsolidated mines
Consolidated mines
Total tons delivered
The results of operations for the Utility Coal Mining segment were as follows for the years ended December 31:
Revenues
Cost of sales
Gross loss
Earnings of unconsolidated operations (a)
Business interruption insurance recoveries
Selling, general and administrative expenses
Amortization of intangible assets
Gain on sale of assets
Operating profit
(a) See Note 16 to the Consolidated Financial Statements in this Form 10-K for a discussion of our unconsolidated subsidiaries, including summarized financial information.
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
Increase (decrease) from:
Business interruption insurance recoveries in 2024
Selling, general and administrative expenses
Amortization of intangibles
Net change on sale of assets
Gross loss
Earnings of unconsolidated operations
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
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
FINANCIAL REVIEW
Aggregate tons delivered by the Contract Mining segment were as follows for the years ended December 31:
Total tons delivered
The results of operations for the Contract Mining segment were as follows for the years ended December 31:
Total revenues
Reimbursable costs
Revenues excluding reimbursable costs
Revenues
Cost of sales
Gross profit
Earnings of unconsolidated operations (a)
Selling, general and administrative expenses
Gain on sale of assets
Operating profit
(a) See Note 16 to the Consolidated Financial Statements in this Form 10-K for a discussion of our unconsolidated subsidiaries, including summarized financial information.
2025 Compared with 2024
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.
The following table identifies the components of change in Operating profit for 2025 compared with 2024.
Operating Profit
Increase (decrease) from:
Gross profit
Selling, general and administrative expenses
Net change on sale of assets
Earnings of unconsolidated operations
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
Operating profit was comparable during 2025 and 2024. An increase in gross profit was largely offset by an increase in selling, general and administrative expenses. The improvement in gross profit was mainly the result of an increase in part sales partially offset by a $1.1 million charge to establish a loss contingency in 2025. The increase in selling, general and administrative expenses during 2025 was primarily the result of higher employee-related costs, partially offset by the absence of a $0.9 million prior year charge to establish an allowance against a customer receivable.
MINERALS AND ROYALTIES SEGMENT
FINANCIAL REVIEW
Oil and natural gas prices have been historically volatile and may continue to be volatile in the future. The table below shows the average price as reported by the United States Energy Information Administration for the years ended December 31:
West Texas Intermediate Average Crude Oil Price
Henry Hub Average Natural Gas Price
These indicated prices do not necessarily reflect the contract terms for our sales.
As an owner of royalty and mineral interests, our access to information concerning activity and operations of our royalty and mineral interests is limited. We do not have information that would be available to a company with working interests in oil and natural gas operations because detailed information is not generally available to owners of royalty and mineral interests.
See Item 2. Properties on page 40 in this Form 10-K discussion of our proved reserves.
The results of operations for the Minerals and Royalties segment were as follows for the years ended December 31:
Oil and natural gas revenues
Other revenues
Total Revenues
Total Revenues
Cost of sales
Gross profit
Earnings of unconsolidated operations
Selling, general and administrative expenses
Gain on sale of assets
Operating profit
Revenues increased 8.8% in 2025 compared with 2024 primarily due to an increase in natural gas revenue as a result of higher natural gas prices and increased production, partially offset by a decrease in oil revenue as a result of lower oil prices and decreased production.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
The following table identifies the components of change in Operating profit for 2025 compared with 2024.
Operating Profit
Increase (decrease) from:
Gross profit
Earnings of unconsolidated operations
Selling, general and administrative expenses
Gain on sale of assets
Operating profit increased by $0.2 million in 2025 compared with 2024, primarily due to improvements in gross profit and earnings of unconsolidated operations. The increase in gross profit was mainly due to higher natural gas revenues. The increase in earnings of unconsolidated operations was primarily related to an additional investment in Eiger Resources during the fourth quarter of 2024. These increases were partially offset by the absence of a $4.5 million prior year gain on sale of land.
UNALLOCATED ITEMS AND ELIMINATIONS
FINANCIAL REVIEW
Unallocated Items and Eliminations were as follows for the years ended December 31:
Operating loss
2025 Compared with 2024
Operating loss increased during 2025 compared with 2024 primarily due to an increase in selling, general and administrative expenses. This increase was mainly the result of higher employee-related costs and increased costs related to our business development projects. Employee-related costs increased primarily due to elevated medical costs and higher share-based incentive compensation expense as a result of an increase in our share price during 2025.
NACCO Industries, Inc. Outlook
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 purposely 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-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. This provides cash flow stability. The momentum our operations experienced in 2025, particularly in the second half, is expected to continue into 2026, with meaningful year-over-year improvements in consolidated operating profit, net income and EBITDA.
At our Utility Coal Mining segment, operated by North American Coal, we expect an increase in operating profit compared with 2025. Improvements at MLMC as a result of an increase in the contractually determined per ton sales price are expected
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
to be partly offset by lower earnings at the unconsolidated mining operations due to reduced income associated with the wind down of reclamation services at Sabine.
While we expect modest year-over-year improvements at MLMC, the customer's power plant began a maintenance outage in mid-February 2026. The power plant is expected to resume operations in mid-March. Any delay or further changes in demand, dispatch and/or reduced mechanical availability at the power plant could decrease current expectations.
The Contract Mining segment, operated by North American Mining, serves as our primary mining growth platform. Through continued geographic and mineral expansion, we are building a growing portfolio of long-term contracts that strengthen the foundation for sustained profitability. In October 2025, we secured a multi-year dragline services contract as part of a U.S. Army Corps of Engineers construction project in Palm Beach County, Florida. We also anticipate commencing operations at a new limestone quarry in Arizona in 2026. We expect the segment to deliver a significant year-over-year increase in operating profit and Segment Adjusted EBITDA as a result of higher customer demand, earnings contributions from new contracts and continued momentum from 2025 activities.
Sawtooth, a North American Mining subsidiary, provides exclusive comprehensive mining services at Thacker Pass, which is owned by a joint venture led by Lithium Americas Corp. (TSX: LAC; NYSE: LAC). Sawtooth will supply all of the lithium-bearing ore requirements for our customer's Thacker Pass lithium processing facility, which is currently under construction. This project is providing stable income during construction and is expected to contribute increased income and long-term cash flows once lithium production commences, which is targeted for late 2027.
The Minerals and Royalties segment, managed by Catapult, has constructed a high-quality, diversified portfolio of oil and gas mineral and royalty interests in the United States. The Catapult team is expanding its portfolio by leveraging a data-driven approach to capital deployment that incorporates a longer-term view of production and development. We believe this provides a competitive advantage in the U.S. market.
In July 2025, Catapult completed a $4.2 million acquisition of mineral interests within the Permian Basin. The acquisition includes a mix of producing wells, as well as additional development opportunities with existing operators in the area. This segment also has an investment in a company that holds operated and non-operated working interests in oil and natural gas assets. While these investments are expected to contribute favorably to 2026, commodity price forecasts as well as development and production assumptions are expected to result in an overall year-over-year decrease in Minerals and Royalties' operating profit and Segment Adjusted EBITDA, particularly in the second half of the year. Our forecast was developed prior to recent events in the Middle East. Any changes in commodity prices or production as a result of this conflict could alter current expectations.
Mitigation Resources provides natural resource restoration and reclamation services that include stream and wetland mitigation solutions. Mitigation Resources is successfully leveraging its strong reputation and clear competitive strengths to expand into additional mitigation, restoration and reclamation markets. Mitigation Resources is expected to deliver increasing profitability over time from the sale of mitigation credits and as reclamation and restoration services expand. This business, while currently variable in performance due to permit and project timing, is expected to generate a profit in the second half of 2026 and move toward more consistent results over time as the business expands.
We continue to invest in our businesses to drive future growth. In 2026, we anticipate total capital expenditures of up to $89 million. The majority of these expenditures relate to business development opportunities and will only be made if the projects meet our growth investment criteria. These anticipated capital investments are expected to result in a use of cash before financing greater than in 2025.
Our businesses provide critical inputs for electricity generation, construction and development, and the production of industrial minerals and chemicals. As the need for uninterrupted energy grows, industry fundamentals for natural resources are expected to continue to strengthen, reinforcing the critical need to keep existing, reliable baseload resources online. In 2026, the National Coal Council, an advisory committee to the U.S. Secretary of Energy, was re-established. This council is focused on advising the Department of Energy on reinforcing coal’s strategic role in U.S. energy policy and providing actionable advice on sustaining coal plant operations and prioritizing coal to support grid reliability to support our country’s economic competitiveness and national security. The re-establishment of this council and the underlying improving regulatory
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)
environment reinforce our confidence in our prospects for 2026, our overall business trajectory and longer-term growth opportunities.
Our conservative approach to maintaining a strong capital structure and operating discipline minimizes risk, while the compounding effect of a growing portfolio of long-term contracts and deliberate growth investments create a robust foundation for cash flow growth. With a perspective that spans decades, we are methodically building a strong, stable business that is expected to deliver annuity-like returns. This long-term view allows us to leverage our core skills for strategic, measured expansion and pursue opportunities with longer-term horizons and higher returns. We pursue opportunities that other companies with shorter time horizons might overlook. Our commitment is to generate increasing cash flows and return value to stockholders, whether through reinvestment for growth or direct returns such as share repurchases and payment of dividends. We remain confident in our ability to drive growth, expand our capabilities and reward shareholders over the long run.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 2 to the Consolidated Financial Statements in this Form 10-K for a description of recently issued accounting standards including actual and expected dates of adoption and effects to our Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS
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, (4) 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, (5) changes in development plans by third-party lessees of the Company's mineral interests, (6) 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, (7) any customer's premature facility closure or extended project development delay, (8) federal and state legislative and regulatory actions affecting 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, (12) impairment charges, (13) changes in costs related to geological and geotechnical conditions, repairs and maintenance, new equipment and replacement parts, fuel or other similar items, (14) equipment 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 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 (19) the ability to attract, retain, and replace workforce and administrative employees.
