Company: NC
Filing Date: 2025-04-07
Form Type: ARS
Source: 0000789933-25-000013
Chunk: 9

Company: NACCO INDUSTRIES INC
Filing Date: 2025-04-07
Form: ARS
Chunk 9
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 Directors’ thoughtful oversight and the continued support of NACCO’s shareholders. These long-standing relationships and a shared commitment to excellence form the bedrock of our company. J.C. Butler, Jr. President and Chief Executive Officer, NACCO Industries, Inc. and NACCO Natural Resources Corporation Above, we have been efficiently using draglines at the Falkirk Mine since 1978. At left, an employee services a dragline gear. As we enter 2025, we are energized by the opportunities ahead, strengthened by these enduring partnerships and our shared commitment to value creation. Thank you for being part of our journey. 8 NACCO INDUSTRIES

Our Coal Mining segment provides comprehensive mining services for electric generating utilities under long- term contracts, measured in decades, that eliminate any exposure to spot coal market price volatility. Each of the mines we operate supplies 100% of the fuel needed to run the adjacent power plants. In each case, we are contractually designated as the exclusive coal supplier, eliminating competitive risk. We believe our customers are stable and their power plants are essential providers of affordable and reliable base-load power. At Coteau, Coyote Creek and Falkirk, our income is generated by management fees paid to us by our customers per ton of coal delivered. Our customers pay all of our costs, including reclamation, and our management fee adjusts in line with broad economic indicators such as the consumer price index or the producer price index. Our income is based on the amount of coal delivered and our fee adjusts for periodic changes in these economic indicators. Because of this unique management-fee contract structure that limits our downside risk of lower income levels from reductions in customer demand and requires minimal capital investment by us, these entities are not consolidated within our financial statements. Rather, our service-fee income from these mining operations is reported as Earnings of Unconsolidated Operations in our income statement. At MLMC, our coal price is a fixed amount per ton, adjusted monthly, based on a contractually agreed formula that was designed to track coal production costs over time. We have invested capital in this mine, and we are responsible for all operating costs, additional capital requirements and final mine reclamation; therefore, MLMC is consolidated within our financial statements. Profitability at MLMC is affected by customer demand for coal, changes in the indices that determine sales price and actual costs incurred. MLMC supplies 100% of the fuel for the customer’s power plant, which supplies electricity to the Tennessee Valley Authority under a long