Company: NC
Filing Date: 2025-04-07
Form Type: ARS
Source: 0000789933-25-000013
Chunk: 79

Company: NACCO INDUSTRIES INC
Filing Date: 2025-04-07
Form: ARS
Chunk 79
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 revenue include all production, transportation and maintenance costs including, without limitation, the following types of costs: ◦ Labor, which include wages and all related payroll taxes, benefits and fringes, including welfare plans; group insurance, vacations and other comparable benefits of employees ◦ Materials and supplies, ◦ Tools, ◦ Machinery and equipment not capitalized or leased, ◦ Costs of acquiring interests in coal reserves and surface lands, ◦ Rental of machinery and equipment, ◦ Power costs, ◦ Reasonable and necessary services by third parties ◦ Insurance including worker’s compensation ◦ Certain taxes, and ◦ Cost of reclamation The contractually-determined coal sales price includes reimbursement of all costs incurred and the agreed-upon profit. The agreed-upon profit adjusts based on changes in the level of established indices (e.g., CPI-U and/or PPI indices). The cost-plus nature of the contracts provide assurance that all costs incurred, including contemporaneous and final reclamation, will be reimbursed by the respective customer and negates any risk of loss which allows the mines to remain cash flow positive through the end of the contract terms. The coal sales price as well as profitability at Coteau, Falkirk and Coyote Creek are not subject to any change based on market factors. Profitability at these mines is affected by two factors: demand for coal (because this impacts units of agreed profit that are charged) and changes in the indices that determine coal sales price (because this adjusts the agreed-upon per unit profit). Under any scenario, Coteau, Coyote Creek and Falkirk will be cash flow positive as a result of the terms of the mining agreements. Extraction of Coteau, Coyote Creek and Falkirk’s lignite tonnages is only economically viable as a result of the long-term mining agreements in place with each mine’s respective customer. The development of the Coteau, Coyote Creek and Falkirk mines was conducted in tandem with the development of the respective mine mouth power plants each serve. The power plants were designed to operate exclusively on the coal provided by the adjacent mines. No other market exists for the lignite at Coteau, Coyote Creek and Falkirk as the cost of transportation makes sales to any entity other than the current mine-mouth operator unprofitable. 35

Coteau, Coyote Creek and Falkirk meet the definition of a VIE. In each case, NACCO is not the primary beneficiary of the VIE as it does not exercise financial control; therefore