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NACCO Industries(NC) - 2025 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents NACCO Industries, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, cash flows, and changes in equity, along with detailed notes explaining the nature of operations, revenue recognition, inventory, stockholders' equity, fair value measurements, unconsolidated subsidiaries, business segments, and contingencies Unaudited Condensed Consolidated Balance Sheets Unaudited Condensed Consolidated Balance Sheets (In thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | ASSETS | | | | Cash and cash equivalents | $49,402 | $72,833 | | Total current assets | 227,308 | 264,738 | | Property, plant and equipment, net | 256,762 | 259,457 | | Total assets | $631,312 | $631,687 | | LIABILITIES AND EQUITY | | | | Total current liabilities | 58,194 | 64,888 | | Total liabilities | 218,192 | 226,740 | | Total stockholders' equity | 413,120 | 404,947 | | Total liabilities and equity | $631,312 | $631,687 | Unaudited Condensed Consolidated Statements of Operations Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $68,235 | $52,345 | $133,806 | $105,634 | | Gross profit | 6,820 | 7,018 | 16,474 | 14,036 | | Operating (loss) profit | (51) | 7,366 | 7,631 | 12,123 | | Net income | $3,260 | $5,972 | $8,160 | $10,542 | | Basic earnings per share | $0.44 | $0.81 | $1.10 | $1.42 | | Diluted earnings per share | $0.44 | $0.81 | $1.10 | $1.42 | Unaudited Condensed Consolidated Statements of Comprehensive Income Unaudited Condensed Consolidated Statements of Comprehensive Income (In thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $3,260 | $5,972 | $8,160 | $10,542 | | Total other comprehensive income | 108 | 77 | 217 | 153 | | Comprehensive income | $3,368 | $6,049 | $8,377 | $10,695 | Unaudited Condensed Consolidated Statements of Cash Flows Unaudited Condensed Consolidated Statements of Cash Flows (In thousands, Six Months Ended June 30) | Activity | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Net cash used for operating activities | $(2,753) | $(5,698) | | Net cash used for investing activities | (11,035) | (23,275) | | Net cash (used for) provided by financing activities | (9,643) | 6,225 | | Total decrease for the period | (23,431) | (22,748) | | Balance at the beginning of the period | 72,833 | 85,109 | | Balance at the end of the period | $49,402 | $62,361 | Unaudited Condensed Consolidated Statements of Changes in Equity Unaudited Condensed Consolidated Statements of Changes in Equity (In thousands, except per share data) | Item | Balance, January 1, 2025 | Balance, June 30, 2025 | | :-------------------------------- | :----------------------- | :--------------------- | | Class A Common Stock | $5,730 | $5,888 | | Class B Common Stock | $1,566 | $1,564 | | Capital in Excess of Par Value | $34,340 | $38,223 | | Retained Earnings | $373,363 | $377,280 | | Accumulated Other Comprehensive Loss | $(10,052) | $(9,835) | | Total Stockholders' Equity | $404,947 | $413,120 | - Stock-based compensation contributed $1,547k in Q1 2025 and $2,514k in Q2 2025 to equity. Cash dividends paid were $1,691k in Q1 2025 and $1,879k in Q2 202514 Notes to Unaudited Condensed Consolidated Financial Statements NOTE 1—Nature of Operations and Basis of Presentation This note describes NACCO's business segments: Utility Coal Mining, Contract Mining, and Minerals and Royalties, along with other developing businesses, highlighting segment name changes in Q2 2025, operational models, accounting treatment for unconsolidated variable interest entities (VIEs), and key financial events like the Falkirk pension plan settlement and assets held for sale - Segment Name Changes (Q2 2025): Utility Coal Mining (formerly Coal Mining), Contract Mining (formerly North American Mining), and Minerals and Royalties (formerly Minerals Management). No changes to segment composition or historical reporting17 - Falkirk Pension Plan Settlement: $14,500 thousand of excess funds from the terminated Falkirk pension plan were transferred to the NACCO 401(k) plan in Q1 2025. A $10,900 thousand liability settlement with the former customer in Q2 2025 resulted in a $3,600 thousand gain on the Consolidated Statement of Operations31 Assets Held for Sale (In thousands) | Date | Amount | | :--- | :----- | | June 30, 2025 | $17,022 | | December 31, 2024 | $14,159 | NOTE 2—Revenue Recognition This note details NACCO's revenue recognition policies, outlining performance obligations for its various contracts, including coal delivery, contract mining services, and mineral rights leasing, explaining the treatment of variable consideration, such as sales-based royalties and index adjustments, and providing disaggregated revenue data by timing of transfer and contract balances Disaggregated Revenue by Timing of Recognition (In thousands) | Timing of Revenue Recognition | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Transferred at a point in time | $29,472 | $14,498 | $50,326 | $29,606 | | Transferred over time | 38,763 | 37,847 | 83,480 | 76,028 | | Total revenues | $68,235 | $52,345 | $133,806 | $105,634 | Contract Balances (In thousands) | Contract Balance | January 1, 2025 | June 30, 2025 | Change | | :----------------------- | :-------------- | :------------ | :----- | | Trade accounts receivable | $49,706 | $38,861 | $(10,845) | | Contract asset (current) | 313 | 388 | 75 | | Contract asset (long-term) | 3,500 | 3,500 | — | | Contract liability (current) | 484 | 1,450 | 966 | | Contract liability (long-term) | 5,119 | 8,435 | 3,316 | NOTE 3—Inventories This note provides a summary of the company's inventory composition, including coal, aggregates, and mining supplies, and reports the inventory impairment charges recognized during the three and six months ended June 30, 2025 and 2024 Inventories (In thousands) | Inventory Type | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :------------------ | | Coal and aggregates | $19,912 | $27,076 | | Mining supplies | 72,331 | 67,532 | | Total inventories | $92,243 | $94,608 | Inventory Impairment Charges (In thousands) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three months ended June 30 | $1,300 | $700 | | Six months ended June 30 | $4,300 | $3,100 | NOTE 4—Stockholders' Equity This note outlines the company's 2023 Stock Repurchase Program, approved for up to $20.0 million of Class A Common Stock through December 31, 2025, and details the number of shares repurchased and the aggregate purchase price for the three and six months ended June 30, 2025 and 2024 - 2023 Stock Repurchase Program: Approved for up to $20,000 thousand of Class A Common Stock through December 31, 202555 Class A Common Stock Repurchases under 2023 Program | Period | Shares Repurchased | Aggregate Purchase Price | | :------------------------- | :----------------- | :----------------------- | | Three months ended June 30, 2025 | 0 | $0 | | Six months ended June 30, 2025 | 22,198 | $0.7 million | | Three months ended June 30, 2024 | 108,371 | $3.3 million | | Six months ended June 30, 2024 | 236,058 | $7.6 million | NOTE 5—Fair Value Disclosure This note presents the company's recurring fair value measurements, specifically for equity securities held in a Mine Water Treatment Trust and an investment in a public company, both classified as Level 1 within the fair value hierarchy, and details the gains and losses recognized from these investments Fair Value Measurements of Equity Securities (In thousands, Level 1) | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $17,769 | | December 31, 2024 | $18,663 | - Mine Water Treatment Trust: Fair value was $12,500 thousand at June 30, 2025 (vs. $12,300 thousand at Dec 31, 2024). Recognized a gain of $800 thousand in Q2 2025 and $500 thousand in 6M 202557 - Investment in Public Company: Fair value was $5,300 thousand at June 30, 2025 (vs. $6,300 thousand at Dec 31, 2024). Recognized a loss of $400 thousand in Q2 2025 and $1,000 thousand in 6M 202558 NOTE 6—Unconsolidated Subsidiaries This note explains that NACCO's wholly-owned unconsolidated subsidiaries in the Utility Coal Mining and Contract Mining segments are Variable Interest Entities (VIEs) where NACCO is not the primary beneficiary, thus not consolidating their financial results, detailing the investment in these entities, NACCO's limited risk of loss, earnings generated, and specific guarantees related to Coyote Creek Investment in Unconsolidated Subsidiaries (In thousands) | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $16,100 | | December 31, 2024 | $14,100 | Earnings of Unconsolidated Subsidiaries (In thousands) | Period | 2025 | 2024 | | :------------------------- | :----- | :----- | | Three months ended June 30 | $12,900 | $13,500 | | Six months ended June 30 | $28,300 | $26,800 | - NACCO Natural Resources has guarantees related to Coyote Creek, including make-whole payments or asset purchases under certain default/termination scenarios, but the likelihood of performance is deemed remote63 NOTE 7—Business Segments This note outlines NACCO's three reportable segments: Utility Coal Mining, Contract Mining, and Minerals and Royalties, explaining how segment performance is evaluated by the Chief Operating Decision Maker (CODM) using Operating profit (loss), and provides detailed financial information for each segment, including revenues, cost of sales, earnings of unconsolidated operations, operating expenses, and operating profit Segment Revenues (In thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Utility Coal Mining | $28,626 | $14,996 | $47,865 | $30,541 | | Contract Mining | 30,723 | 27,920 | 62,249 | 52,403 | | Minerals and Royalties | 7,268 | 5,593 | 18,170 | 15,994 | | Unallocated Items | 2,223 | 4,566 | 6,623 | 7,828 | | Eliminations | (605) | (730) | (1,101) | (1,132) | | Total | $68,235 | $52,345 | $133,806 | $105,634 | Segment Operating (Loss) Profit (In thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Utility Coal Mining | $1,222 | $2,767 | $5,013 | $2,350 | | Contract Mining | 1,010 | 3,085 | 2,980 | 5,440 | | Minerals and Royalties | 5,205 | 7,591 | 13,112 | 15,521 | | Unallocated Items | (7,491) | (6,080) | (13,493) | (11,208) | | Eliminations | 3 | 3 | 19 | 20 | | Total | $(51) | $7,366 | $7,631 | $12,123 | Total Assets by Segment (In thousands) | Segment | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------------ | | Utility Coal Mining | $117,201 | $125,301 | | Contract Mining | 212,254 | 204,889 | | Minerals and Royalties | 96,247 | 99,905 | | Unallocated Items | 205,610 | 201,592 | | Total | $631,312 | $631,687 | NOTE 8—Contingencies This note addresses various legal and regulatory proceedings and claims against NACCO and its subsidiaries, stating that management believes it has meritorious defenses and accrues liabilities when they are probable and reasonably estimable, also noting the inherent uncertainties and potential adverse impacts of unfavorable rulings - Legal and Regulatory Proceedings: Incidental to ordinary course of business; management believes it has meritorious defenses and will vigorously defend the company69 - Accrual Policy: Costs are accrued when liability is probable and the amount can be reasonably estimated. If a range is estimable, the minimum amount is accrued69 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a comprehensive analysis of NACCO's financial condition and results of operations, covering recent government regulation updates, critical accounting policies, a consolidated financial summary, liquidity and capital resources, and detailed segment results, also including the company's outlook and a cautionary statement regarding forward-looking information Government Regulation Update This section provides updates on recent government regulations, including EPA actions on coal combustion residuals, power plant regulations, and regional haze rules, also covering federal coal leasing executive orders and the impact of the One Big Beautiful Bill Act (OBBBA) on tax law and solar energy projects - EPA Actions: Extended compliance deadlines for coal combustion residual (CCR) management units (July 2025); announced plans to repeal Clean Power Plan 2.0 and Mercury and Air Toxics Standards (MATS) (June 2025); proposed approval of North Dakota's CCR program application (May 2025)7576 - Federal Coal Leasing: President Trump signed four executive orders in April 2025 to boost the U.S. coal industry and expedite federal coal leases, with draft Environmental Assessments published for two lease applications in April and June 20257879 - One Big Beautiful Bill Act (OBBBA): Signed July 4, 2025, includes changes to U.S. tax law (bonus depreciation, research expensing, interest deductibility) and substantial changes to U.S. solar energy tax policy, which could materially impact ReGen Resources' solar projects8081 Critical Accounting Policies and Estimates This section states that there have been no material changes to the company's critical accounting policies and estimates since the Annual Report on Form 10-K for the year ended December 31, 2024 - No Material Changes: Critical Accounting Policies and Estimates have not materially changed since December 31, 202483 Consolidated Financial Summary This section provides a consolidated overview of NACCO's financial performance for the three and six months ended June 30, 2025, compared to 2024, highlighting changes in revenues, operating profit, net income, and the effective income tax rate, along with specific factors influencing other income/expense items, such as interest, equity securities, and the Falkirk pension plan settlement Consolidated Financial Performance (In thousands, except percentages) | Metric | Q2 2025 | Q2 2024 | Change ($k) | Change (%) | 6M 2025 | 6M 2024 | Change ($k) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | :------ | :------ | :---------- | :--------- | | Total Revenue | $68,235 | $52,345 | $15,890 | 30.4% | $133,806 | $105,634 | $28,172 | 26.7% | | Total Operating (loss) profit | $(51) | $7,366 | $(7,417) | (100.7%) | $7,631 | $12,123 | $(4,492) | (37.0%) | | Net income | $3,260 | $5,972 | $(2,712) | (45.4%) | $8,160 | $10,542 | $(2,382) | (22.6%) | | Effective income tax rate | (63.5%) | 4.1% | (67.6) pp | - | (14.6%) | 10.7% | (25.3) pp | - | - Gain on Settlement of Excess Funding Liability: A $3,600 thousand gain was recognized in Q2 2025 from the settlement of the Falkirk pension plan liability90 - Income Tax Benefit: The income tax benefit recorded for the three and six months ended June 30, 2025, was primarily due to the significant proportional effect of percentage depletion on relatively small income before tax91 Liquidity and Capital Resources of NACCO This section analyzes NACCO's cash flows from operating, investing, and financing activities, detailing changes in debt, share repurchases, and capital expenditures, also providing information on the secured revolving line of credit, including its terms, covenants, and current availability, concluding that the company has sufficient liquidity to meet its operational needs Cash Flow Summary (In thousands, Six Months Ended June 30) | Activity | 2025 | 2024 | Change | | :------------------------------------------ | :----------- | :----------- | :------- | | Net cash used for operating activities | $(2,753) | $(5,698) | $2,945 | | Net cash used for investing activities | (11,035) | (23,275) | $12,240 | | Net cash (used for) provided by financing activities | (9,643) | 6,225 | $(15,868) | | Total decrease for the period | $(23,431) | $(22,748) | $(683) | | Cash and cash equivalents, end of period | $49,402 | $62,361 | $(12,959) | - Financing Activities Change: Primarily due to net reductions in debt borrowings during the first six months of 2025 compared with net additions during the first six months of 2024, partially offset by a decrease in share repurchases93 - Secured Revolving Line of Credit: Commitments increased to $200,000 thousand, and maturity extended to September 2028. Borrowings outstanding were $65,000 thousand at June 30, 2025, with $90,500 thousand excess availability. The weighted-average annual interest rate was 7.05% for Q2 2025 and 7.00% for 6M 2025. NACCO Natural Resources was in compliance with all financial covenants949697 - Capital Expenditures: $12,000 thousand in the first six months of 2025, primarily for Contract Mining equipment. Planned expenditures for the remainder of 2025 are approximately $74,000 thousand, to be funded from internally generated funds and/or bank borrowings100 Capital Structure (In thousands, except percentages) | Item | June 30, 2025 | December 31, 2024 | Change | | :-------------------------- | :------------ | :------------------ | :----- | | Cash and cash equivalents | $49,402 | $72,833 | $(23,431) | | Total debt | $(95,506) | $(99,514) | $4,008 | | Total equity | $413,120 | $404,947 | $8,173 | | Debt to total capitalization | 19% | 20% | (1%) | Segment Results This section provides a detailed review of the financial performance for each of NACCO's operating segments: Utility Coal Mining, Contract Mining, and Minerals and Royalties, as well as Unallocated Items and Eliminations, highlighting key revenue and operating profit changes, along with the primary drivers for these fluctuations in the three and six months ended June 30, 2025, compared to the prior year UTILITY COAL MINING SEGMENT The Utility Coal Mining segment experienced a significant revenue increase in Q2 and 6M 2025 due to higher customer requirements at MLMC, following a boiler issue in 2024, however, operating profit decreased in Q2 due to an unfavorable gross loss and higher SG&A, while increasing for the six-month period due to improved earnings from unconsolidated operations and a reduced gross loss Utility Coal Mining Tons Delivered (In thousands) | Period | 2025 | 2024 | Change (%) | | :----- | :--- | :--- | :--------- | | Three months ended June 30 | 4,626 | 5,353 | (13.6%) | | Six months ended June 30 | 10,833 | 11,288 | (4.0%) | Utility Coal Mining Financial Performance (In thousands) | Metric | Q2 2025 | Q2 2024 | Change ($k) | Change (%) | 6M 2025 | 6M 2024 | Change ($k) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | :------ | :------ | :---------- | :--------- | | Revenues | $28,626 | $14,996 | $13,630 | 90.9% | $47,865 | $30,541 | $17,324 | 56.7% | | Operating profit | $1,222 | $2,767 | $(1,545) | (55.8%) | $5,013 | $2,350 | $2,663 | 113.3% | | Earnings of unconsolidated operations | $11,656 | $12,006 | $(350) | (2.9%) | $26,119 | $24,013 | $2,106 | 8.8% | - Q2 2025 Operating Profit Decrease: Primarily due to an increase in gross loss (contractual sales price per ton decreased at MLMC, tons sold exceeded tons mined), higher selling, general and administrative expenses, and a decrease in earnings of unconsolidated operations (lower customer demand at Coteau, Coyote, and Falkirk)106107109 - 6M 2025 Operating Profit Increase: Primarily due to an increase in earnings of unconsolidated operations (higher per ton management fees from temporary price concessions ending at Falkirk) and a decrease in gross loss at MLMC (reduction in cost per ton delivered due to increased tons sold), partially offset by higher selling, general and administrative expenses110111112113 CONTRACT MINING SEGMENT The Contract Mining segment saw an increase in total revenues for both Q2 and 6M 2025, mainly driven by higher reimbursable costs, however, operating profit decreased significantly due to lower gross profit (fewer tons delivered, higher operating costs, unexpected equipment repairs), increased selling, general and administrative expenses, and reduced earnings from unconsolidated operations Contract Mining Tons Delivered (In thousands) | Period | 2025 | 2024 | Change (%) | | :----- | :--- | :--- | :--------- | | Three months ended June 30 | 13,947 | 16,000 | (12.8%) | | Six months ended June 30 | 26,800 | 31,173 | (14.1%) | Contract Mining Financial Performance (In thousands) | Metric | Q2 2025 | Q2 2024 | Change ($k) | Change (%) | 6M 2025 | 6M 2024 | Change ($k) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | :------ | :------ | :---------- | :--------- | | Total revenues | $30,723 | $27,920 | $2,803 | 10.0% | $62,249 | $52,403 | $9,846 | 18.8% | | Revenues excluding reimbursable costs | $12,220 | $11,877 | $343 | 2.9% | $24,199 | $23,505 | $694 | 3.0% | | Operating profit | $1,010 | $3,085 | $(2,075) | (67.3%) | $2,980 | $5,440 | $(2,460) | (45.2%) | | Earnings of unconsolidated operations | $1,232 | $1,448 | $(216) | (14.9%) | $2,201 | $2,813 | $(612) | (21.8%) | - Operating Profit Decrease (Q2 and 6M YoY): Primarily due to a decrease in gross profit (fewer tons delivered, higher operating costs including unexpected equipment repairs and maintenance), an increase in selling, general and administrative expenses (higher employee-related costs), and a decrease in earnings of unconsolidated operations (reduction in tons delivered)117119 MINERALS AND ROYALTIES SEGMENT The Minerals and Royalties segment reported increased revenues in Q2 and 6M 2025, primarily driven by higher natural gas prices, despite decreased production volumes, however, operating profit decreased due to the absence of a significant prior-year gain on asset sales, partially offset by improvements in gross profit Productive Wells | Well Type | June 30, 2025 | June 30, 2024 | | :-------- | :------------ | :------------ | | Gross | 2,377 | 1,986 | | Net | 23.3 | 22.2 | Average Commodity Prices | Commodity | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | West Texas Intermediate Average Crude Oil Price | $81.71 | $68.23 | $79.64 | $64.63 | | Henry Hub Average Natural Gas Price | $2.08 | $3.67 | $2.11 | $3.19 | Minerals and Royalties Financial Performance (In thousands) | Metric | Q2 2025 | Q2 2024 | Change ($k) | Change (%) | 6M 2025 | 6M 2024 | Change ($k) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | :------ | :------ | :---------- | :--------- | | Total Revenues | $7,268 | $5,593 | $1,675 | 29.9% | $18,170 | $15,994 | $2,176 | 13.6% | | Operating profit | $5,205 | $7,591 | $(2,386) | (31.4%) | $13,112 | $15,521 | $(2,409) | (15.5%) | | Gain on sale of assets | $0 | $(4,512) | $4,512 | - | $0 | $(4,512) | $4,512 | - | - Operating Profit Decrease (Q2 and 6M YoY): Primarily due to the absence of a $4,500 thousand prior-year gain on the sale of land, partially offset by improvements in gross profit driven by higher natural gas prices124 UNALLOCATED ITEMS AND ELIMINATIONS The Unallocated Items and Eliminations section reported an increased operating loss for both the three and six months ended June 30, 2025, compared to the prior year periods, primarily attributed to higher employee-related costs and increased outside service costs, particularly for developing businesses Unallocated Items and Eliminations Operating Loss (In thousands) | Period | 2025 | 2024 | Change | | :------------------------- | :--------- | :--------- | :------- | | Three months ended June 30 | $(7,488) | $(6,077) | $(1,411) | | Six months ended June 30 | $(13,474) | $(11,188) | $(2,286) | - Operating Loss Increase: Primarily due to higher employee-related and outside service costs, with the increase in outside services mainly attributable to developing businesses125 NACCO Industries, Inc. Outlook NACCO anticipates a substantial increase in consolidated operating profit in the second half of 2025, though full-year results will be lower than 2024 due to prior-year business interruption insurance income and an expected pension settlement charge, projecting improving profitability for Utility Coal Mining in 2026, continued growth in Contract Mining with new long-term contracts and the Thacker Pass lithium project, and improved operating profit in Minerals and Royalties from portfolio expansion, with overall lower cash use in 2025 and increasing cash flow generation from 2026, driven by disciplined capital allocation and strategic growth investments - H2 2025 Outlook: Anticipates a substantial increase in consolidated operating profit compared to H1 2025, but full-year results will be lower than 2024 due to $13,600 thousand of business interruption insurance income recognized in Q3 2024128 - Pension Plan Termination: Intends to terminate its defined benefit pension plan in Q4 2025, expecting a significant non-cash settlement charge128 - Utility Coal Mining Segment Outlook: Customer demand expected to remain steady at unconsolidated operations. MLMC results expected to improve in H2 2025 over H1, but 2025 full-year segment results are anticipated to decline from 2024 due to a reduction in contractual per-ton sales price and prior-year insurance income. Improving profitability is expected in 2026129 - Contract Mining Segment Outlook: Positioned for growth with new long-term contracts (e.g., three new/amended contracts in 2024 projected to generate $20,000 thousand in after-tax net present value cash flows). Sawtooth (Thacker Pass lithium project) will contribute enhanced income and long-term cash flows starting late 2027. Near-term profitability improvements in H2 2025 and full year are expected from operational efficiencies and increased parts sales130131133 - Minerals and Royalties Segment Outlook: Completed a $4,200 thousand acquisition of mineral interests in the Midland Basin in July 2025. These investments are expected to contribute to improved H2 2025 operating profit and continued improvements into 2026135 - Capital Expenditures: Anticipates up to $86,000 thousand in 2025, with the majority earmarked for future business development. Projects a substantially lower use of cash for the 2025 full year compared with 2024, with a steady increase in annual cash flow generation beginning in 2026137 FORWARD-LOOKING STATEMENTS This section serves as a cautionary statement regarding forward-looking statements made in the Form 10-Q, outlining numerous factors that could cause actual results to differ materially from current expectations, including changes in customer demand, contract terms, hydrocarbon prices, regulatory actions, operational costs, and various external disruptions - Risk Factors: Factors that could cause actual results to differ materially include significant reduction in customer demand, weather conditions, power plant outages, changes to or termination of contracts, changes in hydrocarbon prices, changes in development plans by third-party lessees, premature facility closures, federal and state legislative and regulatory actions affecting fossil fuels, supply chain disruptions, changes in tax laws, impairment charges, changes in operational costs, equipment problems, changes in reclamation costs, costs for new business development, ability to evaluate investments, natural or human causes of disruption, and ability to attract/retain workforce139140 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, NACCO Industries, Inc. is not required to provide quantitative and qualitative disclosures about market risk - Exemption: As a smaller reporting company, NACCO is not required to provide quantitative and qualitative disclosures about market risk141 Item 4. Controls and Procedures This section confirms that management, including the principal executive and financial officers, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective, also stating that there have been no material changes in internal control over financial reporting during the second quarter of 2025 - Disclosure Controls and Procedures: Management concluded that disclosure controls and procedures were effective as of June 30, 2025142 - Internal Control Over Financial Reporting: No material changes in internal control over financial reporting occurred during the second quarter of 2025143 Part II. OTHER INFORMATION Item 1. Legal Proceedings This section states that there are no legal proceedings to report for the period - No Legal Proceedings: None to report146 Item 1A. Risk Factors This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No Material Changes: No material changes to risk factors since the Annual Report on Form 10-K for the year ended December 31, 2024147 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that no shares were repurchased under the 2023 Stock Repurchase Program during the second quarter of 2025, and $7.8 million remains authorized for future repurchases - No Repurchases in Q2 2025: No shares were purchased under the 2023 Stock Repurchase Program during April, May, or June 2025148 - Remaining Authorization: $7,846 thousand maximum dollar value of shares may yet be purchased under the 2023 Stock Repurchase Program148 Item 3. Defaults Upon Senior Securities This section states that there are no defaults upon senior securities to report for the period - No Defaults: None to report149 Item 4. Mine Safety Disclosures This section indicates that information concerning mine safety violations or other regulatory matters is included in Exhibit 95 filed with this Quarterly Report on Form 10-Q - Mine Safety Disclosures: Information concerning mine safety violations or other regulatory matters is included in Exhibit 95150 Item 5. Other Information This section reports that no directors or executive officers adopted or terminated a Rule 10b5-1 Trading Plan or a non-Rule 10b5-1 trading arrangement during the second quarter of 2025 - No 10b5-1 Plan Changes: No directors or executive officers adopted or terminated a Rule 10b5-1 Trading Plan or a non-Rule 10b5-1 trading arrangement during the second quarter of 2025151 Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including the Non-Employee Directors' Equity Compensation Plan, various certifications, the Mine Safety Disclosure Exhibit, and Inline XBRL documents - Exhibits List: Includes Non-Employee Directors' Equity Compensation Plan, Certifications (31(i)(1), 31(i)(2), 32), Mine Safety Disclosure Exhibit (95), and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)152 Signatures This section contains the official signature block for NACCO Industries, Inc.'s Quarterly Report on Form 10-Q, signed by Elizabeth I. Loveman, Senior Vice President and Controller, on August 6, 2025 - Signed By: Elizabeth I. Loveman, Senior Vice President and Controller (principal financial and accounting officer)155 - Date: August 6, 2025155