NACCO INDUSTRIES INC

During the quarter ended September 30, 2026, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, except as follows:

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, reduced mechanical availability or other operational issues at the Red Hills Power Plant could adversely affect coal demand, customer liquidity and the collectability of amounts due under the contract and materially reduce operating results at MLMC.

During 2026, unplanned outages and maintenance issues at the Red Hills Power Plant reduced plant availability and generation. Continued operational disruptions may result in sustained reductions in coal deliveries, reduced revenues, impairment charges, operating losses and lower operating cash flows during the remainder of 2026 and future periods. In response to reduced customer demand, MLMC has curtailed certain mining activities and increased its focus on reclamation activities. While reclamation work may reduce MLMC's asset retirement obligation, such activities require the expenditure of cash and may not offset the adverse effects of reduced customer demand, lower revenues and decreased operating cash flows.

In July 2026, MLMC's customer notified MLMC that payment of coal invoices would be delayed due to operational issues at the Red Hills Power Plant that reduced the customer's cash receipts and liquidity. The customer has made payments on outstanding invoices; however, certain payments continue to be delayed. As of September 30, 2026, MLMC had $25.5 million in Trade accounts receivable outstanding, of which $8.8 million was past due. There can be no assurance regarding the timing of payment or the customer's future ability to satisfy its obligations when due. If plant outages, reduced generation levels or related liquidity constraints continue, additional customer receivables could accumulate and payment delays could extend beyond the current outstanding amounts, which could increase MLMC's working capital requirements, adversely affect liquidity and cash flows and increase exposure to customer credit risk.

Termination of or default under long-term mining contracts could adversely affect our business, financial condition, results of operations 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.

Coteau operates the Freedom Mine in North Dakota. All coal production from the Freedom Mine is delivered to Basin Electric Power Cooperative (Basin Electric) under a lignite sales agreement through 2032, with a Coteau option to extend through 2037. Basin Electric utilizes the coal at the Great Plains Synfuels Plant (the Synfuels Plant), Antelope Valley Station and Leland Olds Station. The Synfuels Plant is a coal gasification plant, owned by Dakota Gasification Company, a subsidiary of Basin Electric, that manufactures synthetic natural gas and produces fertilizers, solvents, phenol, carbon dioxide, and other chemical products for sale.

In September 2026, Basin Electric announced that a financial forecast for Dakota Gasification Company indicated that the facility may not continue operating through 2047, the end of its previously estimated useful life, and that Basin Electric expects to record a material impairment charge related to the facility. Basin Electric has not announced a closure date for the Synfuels Plant. However, any future reduction in coal requirements, early retirement of the facility or other material adverse changes affecting operations at the Synfuels Plant could reduce coal deliveries from the Freedom Mine and adversely affect the Company's future earnings and cash flows.

Our investments in mitigation solutions, comprehensive reclamation and restoration construction services and solar-related development projects are subject to substantial risks and uncertainties.

There are risks associated with NACCO's ability to execute on our long-term growth strategy, including our investments in mitigation solutions, comprehensive reclamation and restoration construction services at Mitigation Resources and solar-related development projects, as well as our ability to develop and manage such projects profitably.

Changes to U.S. energy policy including modifications to tax incentives and other regulatory programs, may adversely affect the economics of solar development projects. As of September 30, 2026, we have approximately $4.0 million of capitalized assets associated with solar development projects. Although the Company recognized solar curtailment costs associated with obligations under a power purchase agreement and solar impairment charges related to these development projects during the first nine months of 2026, future changes in project economics, development timelines, financing availability, tax-credit qualification, buyer demand or transaction terms could adversely affect the recoverability or returns associated with remaining project assets and investments. We may incur additional development costs in connection with current projects. If project assumptions are not realized or expected returns are lower than anticipated, we could incur additional expenses or impairment charges, which could adversely affect our operating results, financial condition and cash flows.

Mitigation solutions, comprehensive reclamation and restoration construction services and solar-related development projects require significant upfront investments before project viability is fully established. If project economics deteriorate, development project schedules are delayed, financing is unavailable, anticipated tax incentives are reduced or unavailable, interconnection arrangements become less favorable or buyers cannot be identified on acceptable terms, the Company may be unable to recover all or a portion of these investments. The assumptions used in evaluating project economics and asset recoverability involve significant judgment, including assumptions related to project timing, tax-credit qualification, financing availability, customer and buyer demand, equipment commitments and expected project returns.

Future changes in project economics, transaction terms, buyer interest, financing availability, tax-credit qualification, project cost estimates or development timelines could result in reduced expected returns, additional expense or impairment charges in future periods. We have incurred, and expect to continue to incur, costs in connection with these projects and the results of operations and/or return on investment could be lower than anticipated. In addition, state regulatory programs and tax laws may expire or be adversely modified in a manner that affects project economics, which could have a material adverse effect on our operating results, financial condition and cash flows.