NACCO Industries Inc.
11/05/2025 | Press release | Distributed by Public on 11/05/2025 15:57
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
- Management's Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in thousands, except as noted and per share data)
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 business portfolio. We operate under three 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 leading provider of a broad range of specialized contract mining services for producers of industrial minerals. The Minerals and Royalties segment, which includes the Catapult Mineral Partners®(Catapult) business, acquires and promotes the development of mineral interests and related investments.
Mitigation Resources of North America®(Mitigation Resources) provides stream and wetland mitigation solutions as well as comprehensive reclamation and restoration construction services. ReGen Resources is pursuing opportunities to develop new power generation resources. See Note 1 to the Unaudited Condensed Consolidated Financial Statements within this Form 10-Q for further discussion of our operating segments.
We have items not directly attributable to a reportable segment, which are therefore excluded from the financial results of the operating segment. These items primarily include administrative costs related to public company reporting requirements, including management and board compensation, and the financial results of Bellaire Corporation (Bellaire), Mitigation Resources, ReGen Resources and other developing businesses. Bellaire manages its long-term liabilities related to former Eastern U.S. underground mining activities.
During 2025, we changed the names of our reportable segments to make it easier for our stakeholders to understand the business activities within each segment. The Utility Coal Mining, Contract Mining and Minerals and Royalties segments were formerly the Coal Mining, North American Mining and Minerals Management segments, respectively. There were no changes to the composition of each segment and therefore no changes to historical segment reporting.
All financial statement line items below operating profit (other income, including interest expense and interest income, the provision (benefit) for income taxes and net income) are presented and discussed within this Form 10-Q on a consolidated basis.
Government Regulation Update: There have been no material changes to the Government Regulation Update previously disclosed on pages 9 through 17 in our Annual Report on Form 10-K for the year ended December 31, 2024, except as follows:
The Environmental Protection Agency (EPA)
In July 2025, the EPA issued a final rule and companion proposal that will extend the compliance deadlines for coal combustion residual (CCR) management unit (CCRMU) requirements.
In June 2025, the EPA announced plans to repeal regulations on power plants (Clean Power Plan 2.0) and Mercury and Air Toxics Standards (MATS). Litigation over the previously adopted Clean Power Plan 2.0 and MATS rules continues to be held in abeyance while the EPA conducts new rulemaking to repeal the rules.
In May 2025, the EPA granted an administrative petition for reconsideration of the portion of the Clean Air Act's regional haze rule which disapproved North Dakota's state implementation plan. The EPA is required to submit status reports every 120 days and submitted its first status report on September 30, 2025. This case continues to be held in abeyance while the EPA reconsiders the rule.
In May 2025, the EPA proposed to approve North Dakota's CCR program application, which would allow the state, rather than the federal government, to manage coal ash disposal in surface impoundments and landfills.
Since March 2025, the Trump Administration announced that the EPA will undertake historic actions of deregulation, as discussed above, but also including:
•Reconsideration of regulations on the oil and gas industry;
•Reconsideration of mandatory Greenhouse Gas Reporting Program;
•Reconsideration of limitations, guidelines and standards for the Steam Electric Power Generating Industry to ensure low-cost electricity while protecting water resources;
•Reconsideration of wastewater regulations for oil and gas development to help unleash American energy;
•Reconsideration of the Risk Management Program rule;
•Rescinding the 2009 Carbon Dioxide Endangerment Finding and regulations and actions that rely on that Finding;
•Reconsideration of Particulate Matter National Ambient Air Quality Standards;
•Reconsideration of multiple National Emission Standards for Hazardous Air Pollutants for American energy and manufacturing sectors;
•Restructuring the Regional Haze Program;
•Overhauling the Social Cost of Carbon;
•Redirecting enforcement resources to the EPA's core mission;
•Ending the Good Neighbor Plan; and
•Working with states and tribes to resolve massive backlog with State Implementation Plans and Tribal Implementation Plans.
Federal Coal Leasing
In April 2025, President Trump signed four executive orders designed to boost the U.S. coal industry, outlining steps to protect coal-fired power plants and expedite leases for coal mining on U.S. land. We enter into leases of federally owned coal for a small portion of the coal mined at certain of our North Dakota mines. In October 2025, the Company's two federal coal lease applications were issued by the Department of Interior's Bureau of Land Management.
Other Regulations
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The OBBBA includes changes to U.S. tax law including provisions for bonus depreciation, current expensing of research expenditures and changes to the interest deductibility threshold. The changes resulting from the tax provisions in OBBBA did not have a material impact on our results of operations.
The OBBBA includes substantial changes to U.S. solar energy tax policy which could have a material impact on the solar projects being developed by ReGen Resources. Our investments in solar projects are dependent, in part, upon current state regulatory incentives and federal tax credits in order for the projects to be economically viable. To mitigate the impacts of evolving regulations, we are focused on safe-harboring certain projects by establishing the beginning of construction through physical work of a significant nature to retain federal investment tax credits. We have approximately $7.2 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.
The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any such policies, treaties or tariffs could be implemented, could restrict our access to suppliers and increase the cost of equipment and supplies imported into the U.S.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Refer to the discussion of our Critical Accounting Policies and Estimates as disclosed on pages 50 through 51 in our Annual Report on Form 10-K for the year ended December 31, 2024. Our Critical Accounting Policies and Estimates have not materially changed since December 31, 2024.
CONSOLIDATED FINANCIAL SUMMARY
Our results of operations were as follows for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Utility Coal Mining | $ | 19,654 | $ | 17,706 | $ | 67,519 | $ | 48,247 | |||||||||||||||
| Contract Mining | 45,611 | 32,326 | 107,860 | 84,729 | |||||||||||||||||||
| Minerals and Royalties | 9,313 | 8,849 | 27,483 | 24,843 | |||||||||||||||||||
| Unallocated Items | 2,958 | 3,745 | 9,581 | 11,573 | |||||||||||||||||||
| Eliminations | (922) | (970) | (2,023) | (2,102) | |||||||||||||||||||
| Total revenue | $ | 76,614 | $ | 61,656 | $ | 210,420 | $ | 167,290 | |||||||||||||||
|
Operating profit (loss):
|
|||||||||||||||||||||||
| Utility Coal Mining | $ | 4,987 | $ | 19,938 | $ | 10,000 | $ | 22,288 | |||||||||||||||
| Contract Mining | 1,929 | (474) | 4,909 | 4,966 | |||||||||||||||||||
| Minerals and Royalties | 7,968 | 6,188 | 21,080 | 21,709 | |||||||||||||||||||
| Unallocated Items | (8,071) | (5,912) | (21,564) | (17,120) | |||||||||||||||||||
| Eliminations | (36) | (41) | (17) | (21) | |||||||||||||||||||
|
Total operating profit
|
6,777 | 19,699 | 14,408 | 31,822 | |||||||||||||||||||
| Interest expense | 1,087 | 1,386 | 4,805 | 3,808 | |||||||||||||||||||
| Interest income | (708) | (1,084) | (2,343) | (3,249) | |||||||||||||||||||
| Closed mine obligations | 478 | 463 | 1,454 | 1,389 | |||||||||||||||||||
|
(Gain) loss on equity securities
|
(284) | (442) | 237 | (1,219) | |||||||||||||||||||
|
Gain on settlement of excess funding liability
|
- | - | (3,590) | - | |||||||||||||||||||
| Other, net | 247 | 244 | 767 | 160 | |||||||||||||||||||
|
Other expense, net
|
820 | 567 | 1,330 | 889 | |||||||||||||||||||
|
Income before income tax (benefit) provision
|
5,957 | 19,132 | 13,078 | 30,933 | |||||||||||||||||||
|
Income tax (benefit) provision
|
(7,297) | 3,497 | (8,336) | 4,756 | |||||||||||||||||||
| Net income | $ | 13,254 | $ | 15,635 | $ | 21,414 | $ | 26,177 | |||||||||||||||
| Effective income tax rate | (122.5) | % | 18.3 | % | (63.7) | % | 15.4 | % | |||||||||||||||
The components of the change in revenues and operating profit are discussed below in Segment Results.
Third Quarter of 2025 Compared with Third Quarter of 2024, and First Nine Months Ended September 30, 2025 Compared with First Nine Months Ended September 30, 2024
Other expense, net
Interest expense decreased in the third quarter of 2025 compared with the respective 2024 period due to an increase in capitalized interest as well as lower average interest rates. Interest expense increased in the first nine months of 2025 compared with the respective 2024 period due to higher average borrowings, partially offset by an increase in capitalized interest and lower average interest rates.
Interest income decreased in the third quarter of 2025 and the first nine months of 2025 compared with the respective 2024 periods due to lower earnings on reduced invested cash balances.
(Gain) loss on equity securities represents changes in the market price of invested assets reported at fair value. The change in the third quarter of 2025 and the first nine months of 2025 compared with the respective 2024 periods was due to fluctuations in the market prices of the exchange-traded equity securities. See Note 5 to theUnaudited Condensed Consolidated Financial Statements for further discussion of equity securities.
During the first nine months of 2025, $14.5 million of excess funds from the terminated Falkirk pension plan were directly transferred to the NACCO 401(k) plan. The NACCO 401(k) plan is a qualified replacement plan; therefore, these funds will be
utilized to offset future profit sharing contributions to 401(k) plan participants. During the first nine months of 2025, NACCO and Falkirk's former customer agreed to settle the corresponding liability for $10.9 million, resulting in a $3.6 million Gain on settlement of excess funding liability.
Income Taxes
We evaluate and update our estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Historically, our actual effective tax rates have differed from the statutory effective tax rate primarily due to the benefit received from percentage depletion. The effective rate benefit from percentage depletion varies based upon the mix and timing of actual earnings compared to projections of earnings between entities that benefit from percentage depletion and those that do not, and as such the effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. The benefit of percentage depletion is not directly related to the amount of consolidated pre-tax income recorded in a period. Accordingly, as a result of the reduction in 2025 income before income tax compared with 2024, the proportional effect of the benefit from percentage depletion on the effective income tax rate results in a negative forecasted effective tax rate for 2025. This contributed to the income tax benefit recorded for the three and nine months ended September 30, 2025. Each quarter, we update our estimate of the annual effective tax rate, and the cumulative impact of the change in the estimated annual tax rate is recorded, which can make quarterly comparisons not meaningful.
LIQUIDITY AND CAPITAL RESOURCES OF NACCO
Cash Flows
The following tables detail the changes in cash flow for the nine months ended September 30:
| 2025 | 2024 | Change | |||||||||||||||
| Operating activities: | |||||||||||||||||
|
Net cash provided by (used for) operating activities
|
$ | 39,502 | $ | (2,879) | $ | 42,381 | |||||||||||
| Investing activities: | |||||||||||||||||
| Expenditures for property, plant and equipment and acquisition of mineral interests | (34,342) | (30,697) | (3,645) | ||||||||||||||
| Other | 1,532 | (358) | 1,890 | ||||||||||||||
| Net cash used for investing activities | (32,810) | (31,055) | (1,755) | ||||||||||||||
| Cash flow before financing activities | $ | 6,692 | $ | (33,934) | $ | 40,626 | |||||||||||
The $42.4 million change in net cash provided by (used for) operating activities was primarily due to a favorable change in the adjustments to reconcile net income to net cash provided by operating activities. The Company's adjustments primarily include the business interruption insurance recoveries at MLMC in 2024, Gain on sale of assets, deferred income taxes, depreciation, depletion and amortization and stock-based compensation.
A change in operating assets and liabilities also contributed to the increase in net cash provided by (used for) operating activities. Accounts receivable decreased during the current-year period due to the timing of collections, whereas accounts receivable was comparable in the prior periods. Inventory levels at September 30, 2025 are relatively consistent with year-end balances, whereas inventories 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 was comparable in prior periods.
| 2025 | 2024 | Change | |||||||||||||||
| Financing activities: | |||||||||||||||||
| Net (reductions) additions to long-term debt and revolving credit agreements | $ | (20,721) | $ | 26,417 | $ | (47,138) | |||||||||||
| Cash dividends paid | (5,452) | (4,964) | (488) | ||||||||||||||
| Purchase of treasury shares | (695) | (9,576) | 8,881 | ||||||||||||||
| Net cash (used for) provided by financing activities | $ | (26,868) | $ | 11,877 | $ | (38,745) | |||||||||||
The change in net cash (used for) provided by financing activities was primarily due to reductions in debt borrowings during the first nine months of 2025 compared with additions during the first nine months of 2024, partially offset by a decrease in share repurchases during the first nine months of 2025.
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 $50.0 million at September 30, 2025. At September 30, 2025, the excess availability under the Facility was $99.3 million, which reflects a reduction for outstanding letters of credit of $50.7 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 September 30, 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 debt to EBITDA ratios. The commitment fee was 0.40% on the unused commitment at September 30, 2025. During the three and nine months ended September 30, 2025, the average borrowing under the Facility was $47.1 million and $57.5 million, respectively, and the weighted-average annual interest rate was 8.53% and 7.41%, respectively.
The Facility contains restrictive covenants, which require, among other things, NACCO Natural Resources to maintain a maximum net debt to EBITDA ratio of 2.75 to 1.00 and an interest coverage ratio of not less than 4.00 to 1.00. The Facility provides the ability to make loans, dividends and advances to NACCO, with some restrictions based on maintaining a maximum debt to EBITDA ratio of 1.50 to 1.00, or if greater than 1.50 to 1.00, a Fixed Charge Coverage Ratio of 1.10 to 1.00. At September 30, 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.
Expenditures for property, plant and equipment and mineral interests
Expenditures for property, plant and equipment were $34.3 million during the first nine months of 2025, primarily for a dragline and dragline related repairs in the Contract Mining segment.
Planned expenditures for the remainder of 2025 are expected to be approximately $44 million. This amount includes $7 million in the Utility Coal Mining segment, $19 million in the Contract Mining segment, $16 million in the Minerals and Royalties segment and $2 million in growth businesses included in Unallocated Items. Planned expenditures in 2026 are expected to be approximately $70 million.
Expenditures are expected to be funded from internally generated funds and/or bank borrowings.
Capital Structure
NACCO's consolidated capital structure is presented below:
|
SEPTEMBER 30 2025 |
DECEMBER 31 2024 |
Change | |||||||||||||||
| Cash and cash equivalents | $ | 52,657 | $ | 72,833 | $ | (20,176) | |||||||||||
| Other net tangible assets | 474,440 | 451,962 | 22,478 | ||||||||||||||
| Intangible assets, net | 4,901 | 5,475 | (574) | ||||||||||||||
| Net assets | 531,998 | 530,270 | 1,728 | ||||||||||||||
| Total debt | (80,162) | (99,514) | 19,352 | ||||||||||||||
| Bellaire closed mine obligations | (25,434) | (25,809) | 375 | ||||||||||||||
| Total equity | $ | 426,402 | $ | 404,947 | $ | 21,455 | |||||||||||
| Debt to total capitalization | 16% | 20% | (4)% | ||||||||||||||
The increase in other net tangible assets at September 30, 2025 compared with December 31, 2024 was mainly the result of increases in Property, plant and equipment and tax assets. These increases were partially offset by a decrease in Trade accounts receivable during the first nine months of 2025 primarily due to the timing of payments.
Contractual Obligations, Contingent Liabilities and Commitments
Since December 31, 2024, other than the changes identified above, there have been no significant changes in the total amount of NACCO's contractual obligations, contingent liabilities or commercial commitments, or the timing of cash flows in accordance with those obligations as reported on pages 56 and 57 in our Annual Report on Form 10-K for the year ended December 31, 2024. See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of certain guarantees related to Coyote Creek.
SEGMENT RESULTS
UTILITY COAL MINING SEGMENT
FINANCIAL REVIEW
Tons of coal delivered by the Utility Coal Mining segment were as follows for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Unconsolidated operations | 5,469 | 5,335 | 14,821 | 15,745 | |||||||||||||||||||
| Consolidated operations | 609 | 474 | 2,090 | 1,352 | |||||||||||||||||||
| Total tons delivered | 6,078 | 5,809 | 16,911 | 17,097 | |||||||||||||||||||
The results of operations for the Utility Coal Mining segment were as follows for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues | $ | 19,654 | $ | 17,706 | $ | 67,519 | $ | 48,247 | |||||||||||||||
| Cost of sales | 21,511 | 18,054 | 74,408 | 55,135 | |||||||||||||||||||
|
Gross loss
|
(1,857) | (348) | (6,889) | (6,888) | |||||||||||||||||||
|
Earnings of unconsolidated operations(a)
|
14,311 | 13,821 | 40,430 | 37,834 | |||||||||||||||||||
| Business interruption insurance recoveries | - | 13,612 | - | 13,612 | |||||||||||||||||||
| Selling, general and administrative expenses | 7,317 | 7,014 | 23,070 | 21,984 | |||||||||||||||||||
| Amortization of intangible assets | 167 | 131 | 574 | 373 | |||||||||||||||||||
|
(Gain) loss on sale of assets
|
(17) | 2 | (103) | (87) | |||||||||||||||||||
| Operating profit | $ | 4,987 | $ | 19,938 | $ | 10,000 | $ | 22,288 | |||||||||||||||
(a) See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of our unconsolidated subsidiaries.
Third Quarter of 2025 Compared with Third Quarter of 2024
Revenues increased 11.0% in the third quarter of 2025 compared with the third quarter of 2024 primarily due to an increase in customer requirements at MLMC. 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 the third quarter of 2025 compared with the third quarter of 2024:
| Operating Profit | |||||
| 2024 | $ | 19,938 | |||
| Increase (decrease) from: | |||||
|
Business interruption insurance recoveries in 2024
|
(13,612) | ||||
| Gross loss | (1,509) | ||||
| Selling, general and administrative expenses | (303) | ||||
| Amortization of intangibles | (36) | ||||
| Earnings of unconsolidated operations | 490 | ||||
| Net change on sale of assets | 19 | ||||
| 2025 | $ | 4,987 | |||
Operating profit decreased by $15.0 million in the third quarter of 2025 compared with the 2024 period. This decrease was primarily due to the absence of MLMC's business interruption insurance recoveries for the boiler issue at the Red Hills Power Plant, an increase in gross loss and higher selling, general and administrative expenses. These unfavorable changes were partially offset by an increase in earnings of unconsolidated operations.
Gross loss was unfavorable at MLMC during the third quarter of 2025 compared with the 2024 period, primarily due to a decrease in the contractual sales price per ton.
The increase in selling, general and administrative expenses was mainly the result of higher employee-related costs.
The increase in earnings of unconsolidated operations was primarily due to a higher per ton management fee at Coteau as well as an increase in customer demand and a higher per ton management fee at Falkirk.
First Nine Months of 2025 Compared with First Nine Months of 2024
Revenues increased 39.9% in the first nine months of 2025 compared with the first nine months of 2024 primarily due to an increase in customer requirements at MLMC. 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 the first nine months of 2025 compared with the first nine months of 2024:
| Operating Profit | |||||
| 2024 | $ | 22,288 | |||
| Increase (decrease) from: | |||||
|
Business interruption insurance recoveries in 2024
|
(13,612) | ||||
| Selling, general and administrative expenses | (1,086) | ||||
| Amortization of intangibles | (201) | ||||
| Gross loss | (1) | ||||
| Earnings of unconsolidated operations | 2,596 | ||||
| Net change on sale of assets | 16 | ||||
| 2025 | $ | 10,000 | |||
Operating profit decreased by $12.3 million in the first nine months of 2025 compared with the 2024 period. This decrease was primarily due to the absence of MLMC's business interruption insurance recoveries for the boiler issue at the Red Hills Power Plant and higher selling, general and administrative expenses. These unfavorable changes were partially offset by an increase in earnings of unconsolidated operations.
The increase in selling, general and administrative expenses was mainly the result of higher employee-related costs.
The increase in earnings of unconsolidated operations was primarily due to higher per ton management fees, mainly the result of temporary price concessions ending at Falkirk in June 2024, partially offset by lower customer demand at Coteau, Coyote and Falkirk.
CONTRACT MINING SEGMENT
FINANCIAL REVIEW
Tons delivered by the Contract Mining segment were as follows for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Total tons delivered | 14,385 | 12,005 | 41,185 | 43,178 | |||||||||||||||||||
The results of operations for the Contract Mining segment were as follows for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Total revenues | $ | 45,611 | $ | 32,326 | $ | 107,860 | $ | 84,729 | |||||||||||||||
| Reimbursable costs | 32,959 | 21,922 | 71,009 | 50,819 | |||||||||||||||||||
| Revenues excluding reimbursable costs | $ | 12,652 | $ | 10,404 | $ | 36,851 | $ | 33,910 | |||||||||||||||
| Total revenues | $ | 45,611 | $ | 32,326 | $ | 107,860 | $ | 84,729 | |||||||||||||||
| Cost of sales | 42,395 | 31,379 | 99,432 | 77,304 | |||||||||||||||||||
| Gross profit | 3,216 | 947 | 8,428 | 7,425 | |||||||||||||||||||
|
Earnings of unconsolidated operations(a)
|
1,074 | 1,122 | 3,275 | 3,935 | |||||||||||||||||||
| Selling, general and administrative expenses | 2,363 | 2,843 | 6,796 | 6,696 | |||||||||||||||||||
| Gain on sale of assets | (2) | (300) | (2) | (302) | |||||||||||||||||||
|
Operating profit (loss)
|
$ | 1,929 | $ | (474) | $ | 4,909 | $ | 4,966 | |||||||||||||||
(a) See Note 6 to the Unaudited Condensed Consolidated Financial Statements for a discussion of our unconsolidated subsidiaries.
Third Quarter of 2025 Compared with Third Quarter of 2024
Total revenues increased in the third quarter of 2025 compared with the third quarter of 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 21.6% in the third quarter of 2025 compared with the 2024 period, mainly the result of more tons delivered due to higher customer requirements and an increase in part sales. The increase in tons delivered is partially due to an increase in planned customer outages and significant rain events in Florida during the third quarter of 2024 that did not recur in the 2025 period.
The following table identifies the components of change in Operating profit (loss) for the third quarter of 2025 compared with the third quarter of 2024:
|
Operating Profit (Loss)
|
|||||
| 2024 | $ | (474) | |||
| Increase (decrease) from: | |||||
| Gross profit | 2,269 | ||||
| Selling, general and administrative expenses | 480 | ||||
|
Net change on sale of assets
|
(298) | ||||
| Earnings of unconsolidated operations | (48) | ||||
| 2025 | $ | 1,929 | |||
Operating profit (loss) improved by $2.4 million in the third quarter of 2025 compared with the 2024 period. The favorable change was primarily due to an increase in gross profit and a decrease in selling, general and administrative expenses. The improvement in gross profit was mainly the result of an increase in tons delivered and improved margins at the consolidated limestone quarries. The decrease in selling, general and administrative expenses was the result of the absence of a $0.9 million charge to establish an allowance against a customer receivable.
First Nine Months of 2025 Compared with First Nine Months of 2024
Total revenues increased in the first nine months of 2025 compared with the first nine months of 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 the first nine months of 2025 compared with the 2024 period primarily due to an increase in part sales.
The following table identifies the components of change in Operating profit for the first nine months of 2025 compared with the first nine months of 2024:
| Operating Profit | |||||
| 2024 | $ | 4,966 | |||
| Increase (decrease) from: | |||||
| Gross profit | 1,003 | ||||
| Earnings of unconsolidated operations | (660) | ||||
|
Net change on sale of assets
|
(300) | ||||
| Selling, general and administrative expenses | (100) | ||||
| 2025 | $ | 4,909 | |||
Operating profit in the first nine months of 2025 was comparable to the 2024 period. An increase in gross profit was largely offset by a decrease in earnings of unconsolidated operations. The improvement in gross profit was mainly the result of an increase in part sales, partially offset by a decrease in tons delivered and higher operating costs, including unexpected repairs and maintenance costs. The decrease in earnings of unconsolidated operations was primarily due to a reduction in tons delivered.
MINERALS AND ROYALTIES SEGMENT
FINANCIAL REVIEW
The following table sets forth our estimate of the number of gross and net productive wells:
| September 30, 2025 | September 30, 2024 | ||||||||||||||||||||||
| Gross | Net | Gross | Net | ||||||||||||||||||||
|
Oil and Natural Gas Wells
|
2,406 | 23.5 | 2,128 | 22.8 | |||||||||||||||||||
Gross wells are the total wells in which an interest is owned. Net wells are calculated based on our net royalty interest, factoring in both ownership percentage of gross wells and royalty rate.
Oil and natural gas prices have been historically volatile and may continue to be volatile in the future. The table below demonstrates such volatility and shows the average prices as reported by the United States Energy Information Administration for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| West Texas Intermediate Average Crude Oil Price | $ | 65.74 | $ | 76.24 | $ | 67.40 | $ | 78.50 | |||||||||||||||
| Henry Hub Average Natural Gas Price | $ | 3.03 | $ | 2.11 | $ | 3.45 | $ | 2.11 | |||||||||||||||
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.
The results of operations for the Minerals and Royalties segment were as follows for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Oil and natural gas revenues | $ | 7,516 | $ | 7,116 | $ | 22,614 | $ | 19,347 | |||||||||||||||
|
Other revenues
|
1,797 | 1,733 | 4,869 | 5,496 | |||||||||||||||||||
| Total Revenues | $ | 9,313 | $ | 8,849 | $ | 27,483 | $ | 24,843 | |||||||||||||||
| Total Revenues | $ | 9,313 | $ | 8,849 | $ | 27,483 | $ | 24,843 | |||||||||||||||
| Cost of sales | 1,121 | 1,286 | 4,351 | 4,151 | |||||||||||||||||||
| Gross profit | 8,192 | 7,563 | 23,132 | 20,692 | |||||||||||||||||||
|
Earnings from unconsolidated operations
|
1,111 | 213 | 1,916 | 286 | |||||||||||||||||||
| Selling, general and administrative expenses | 1,335 | 1,588 | 3,968 | 3,781 | |||||||||||||||||||
|
Gain on sale of assets
|
- | - | - | (4,512) | |||||||||||||||||||
| Operating profit | $ | 7,968 | $ | 6,188 | $ | 21,080 | $ | 21,709 | |||||||||||||||
Revenues increased 5.2% and 10.6% in the third quarter and the first nine months of 2025, respectively, compared with the 2024 periods, primarily due to an increase in natural gas revenue as a result of higher natural gas prices, partially offset by a decrease in oil revenue as a result of lower oil prices.
The following table identifies the components of change in Operating profit for the third quarter of 2025 compared with the third quarter of 2024:
| Operating Profit | |||||
| 2024 | $ | 6,188 | |||
| Increase (decrease) from: | |||||
| Earnings of unconsolidated operations | 898 | ||||
| Gross profit | 629 | ||||
| Selling, general and administrative expenses | 253 | ||||
| 2025 | $ | 7,968 | |||
Operating profit increased by $1.8 million in the third quarter of 2025 compared with the 2024 period, primarily due to improvements in earnings of unconsolidated operations and gross profit. The increase in earnings of unconsolidated operations was primarily related to an additional investment in Eiger Resources during the fourth quarter of 2024. The increase in gross profit was mainly due to higher natural gas prices.
The following table identifies the components of change in Operating profit for the first nine months of 2025 compared with the first nine months of 2024:
| Operating Profit | |||||
| 2024 | $ | 21,709 | |||
| Increase (decrease) from: | |||||
|
Gain on sale of assets
|
(4,512) | ||||
| Selling, general and administrative expenses | (187) | ||||
| Gross profit | 2,440 | ||||
| Earnings of unconsolidated operations | 1,630 | ||||
| 2025 | $ | 21,080 | |||
Operating profit decreased by $0.6 million in the first nine months of 2025 compared with the 2024 period, primarily due to the absence of a $4.5 million prior year gain on sale of land. This decrease was partially offset by improvements in gross profit and earnings of unconsolidated operations. The increase in gross profit was mainly due to higher natural gas prices. The increase in earnings of unconsolidated operations was primarily related to an additional investment in Eiger Resources during the fourth quarter of 2024.
UNALLOCATED ITEMS AND ELIMINATIONS
FINANCIAL REVIEW
Unallocated Items and Eliminations were as follows for the three and nine months ended September 30:
| THREE MONTHS | NINE MONTHS | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating loss | $ | (8,107) | $ | (5,953) | $ | (21,581) | $ | (17,141) | |||||||||||||||
The operating loss increased in the third quarter and first nine months of 2025 compared to the 2024 periods primarily due to 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 is a growing diversified natural resource company, strategically positioned to deliver consistent financial returns over the long term. Our businesses operate exclusively in the U.S. and provide critical inputs for electricity generation, construction and development, and the production of industrial minerals and products. Increasing demand for electricity, on-shoring and current federal policies are creating favorable macroeconomic trends within these industries. We continue to capitalize on these tailwinds, pursuing longer-term growth opportunities. Through disciplined capital allocation, operational expertise and an entrepreneurial yet cautious approach to growth, we have unique capabilities and clear competitive advantages that enable us to capture a wide range of attractive growth opportunities. Our platform is supported by multiple vectors for value creation, and we are steadfastly committed to delivering compounding returns and expanding investor value over the long term.
Our business model is purposely built for durability and resilience. Our foundation rests on a stable base of long-term coal-mining contracts, generating dependable recurring cash flows. As new long-term contracts are added each year in our other businesses, these multi-year agreements create a "layering" effect as their contributions compound. This, combined with income generated by our mineral and royalty assets, provide cash flow stability. We remain confident in our ability to deliver sound fourth-quarter 2025 operating results, with momentum building as we move into 2026.
We anticipate consolidated operating profit for the 2025 fourth-quarter to be comparable to the prior year quarter. Full-year operating profit will be lower than 2024 due in part to the 2025 second-quarter break-even results. In addition, we intend to terminate our defined benefit pension plan in the fourth quarter of 2025. Although the plan is currently over funded, a significant non-cash settlement charge is anticipated upon termination. The pension settlement charge and lower operating profit are expected to lead to a substantial year-over-year decrease in net income and EBITDA compared with the 2024 fourth quarter and full year. We expect meaningful year-over-year improvements in both operating profit and net income in 2026.
Our Utility Coal Mining segment, operated by North American Coal, constitutes the foundation of our business, anchored by our long-term mining contracts. We anticipate steady customer demand for the remainder of 2025 and in 2026 at the
unconsolidated mining operations. At MLMC, fourth-quarter 2025 results are expected to improve over 2024 due to operational efficiencies. However, this improvement is not expected to offset the effect of the reduction in the 2025 contractually determined per ton sales price, causing MLMC's and the Utility Coal Mining segment's 2025 full-year results to decline compared with 2024. Looking ahead, we expect improving profitability for this segment in 2026, driven by anticipated improvements at MLMC in both sales price and cost per ton delivered, particularly if the customer's power plant is able to operate more consistently.
The Contract Mining segment, operated by North American Mining, represents our mining growth platform. Our expanding pipeline of potential deals and continued engagement with customers position this segment as a key pillar for future growth. Through ongoing geographic and mineral expansion, we are building a growing portfolio of long-term contracts. As an example, North American Mining executed a multi-year contract in October 2025 to provide dragline services as part of a project to construct an embankment dam in Palm Beach County, Florida. This project should be accretive to earnings beginning in the second quarter of 2026.
Sawtooth, a North American Mining subsidiary, is the exclusive provider of comprehensive mining services at Thacker Pass, which is owned by a joint venture between Lithium Americas Corp. (TSX: LAC) (NYSE: LAC) and General Motors Holdings LLC. The U.S. Department of Energy also holds warrants to purchase five percent non-voting, non-transferable equity in this joint venture. 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 currently providing stable income during the construction phase and will contribute enhanced income and long-term cash flows once lithium production commences. Phase 1 lithium production is estimated to begin in late 2027.
While overall customer demand within the Contract Mining segment is expected to increase year-over-year, profitability improvements in the 2025 fourth quarter are expected to be driven by operational efficiencies partly offset by elevated operating expenses. Momentum from the strong full-year 2025 results and operational efficiencies is expected to accelerate in 2026. These factors, combined with earnings from the new contract signed in October 2025 are expected to lead to a significant increase in year-over-year results.
The Minerals and Royalties segment, led 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.
Minerals and Royalties' operating profit and Segment Adjusted EBITDA for the 2025 fourth quarter are expected to decrease compared with 2024 primarily driven by current market expectations for natural gas and oil prices, as well as development and production assumptions on currently owned reserves. While fourth-quarter 2025 results are projected to decline, full-year operating profit is expected to increase over 2024, excluding the $4.5 million gain on sale recognized in the 2024 second quarter. This increase is due in part to recent investments made by Catapult.
In July 2025, Catapult completed a $4.2 million acquisition of mineral interests within the Midland Basin. The acquisition includes a mix of producing wells, as well as additional upside opportunities through future development with existing operators in the area. This segment also has an investment in a company that holds non-operated working interests in oil and natural gas assets. While these investments are expected to contribute to 2026 profits, reductions in earnings from legacy assets are expected to mostly offset these improvements resulting in a modest operating profit increase compared with 2025.
Mitigation Resources provides stream and wetland mitigation solutions, as well as comprehensive reclamation and restoration construction services. Mitigation Resources has a strong reputation and clear competitive strengths, which are supporting continued expansion into new markets. This business, while currently variable in performance due to permit and project timing, is expected to achieve a key milestone in profitability in 2026 and move toward more consistent results over time as the business expands.
We continue to invest in our businesses to drive future growth. Based on the current project pipeline, we anticipate capital expenditures of approximately $44 million in the remainder of 2025, and up to $70 million in 2026, with the majority earmarked for future business development - the kind of prudent reinvestment that is expected to generate significant long-term value creation. As we begin to harvest returns from prior investments, we project a substantial improvement in full-year 2025 cash provided by operations. This improvement is expected to be offset by anticipated capital investments, resulting in a lower use of cash before financing compared with 2024. In 2026, we expect a use of cash before financing comparable to 2025.
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, that others 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.
FORWARD-LOOKING STATEMENTS
The statements contained in this Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) a significant reduction in demand by the Company'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.
NACCO Industries Inc. published this content on November 05, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 05, 2025 at 21:57 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]