NACCO INDUSTRIES INC (NC)

Item 2. - 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 portfolio of businesses. We operate under three reportable 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, long-term contract mining services. The Minerals and Royalties segment, which includes the Catapult Mineral Partners® (Catapult) business, acquires and promotes the development of mineral and royalty interests and other related investments.

In addition to the reportable segments discussed above, we also operate other businesses that are not currently reported as separate segments. These businesses complement our existing operations and support our long-term growth strategic objectives. Mitigation Resources of North America® (Mitigation Resources) provides natural resource restoration and reclamation services that include stream and wetland mitigation solutions. ReGen Resources is pursuing the advancement and monetization of power generation projects. See Note 1 to the Unaudited Condensed Consolidated Financial Statements within this Form 10-Q for further discussion of our reportable segments.

We also have items not directly attributable to an operating segment. These items primarily include administrative costs related to public company reporting requirements, including management and board compensation, the financial results of developing businesses and Bellaire Corporation (Bellaire). Bellaire manages long-term liabilities related to former Eastern U.S. underground mining activities.

All financial statement line items below operating profit (other expense, including interest expense and interest income, the provision for income taxes and net income) are presented and discussed within this Form 10-Q on a consolidated basis.

Government Regulation and Environmental Matters: Refer to the discussion of Government Regulation and Environmental Matters as disclosed on pages 9 through 14 in our Annual Report on Form 10-K for the year ended December 31, 2025. The Government Regulation and Environmental Matters have not materially changed since December 31, 2025.

Critical Accounting Policies and Estimates: Refer to the discussion of our Critical Accounting Policies and Estimates as disclosed on pages 46 through 47 in our Annual Report on Form 10-K for the year ended December 31, 2025. Our Critical Accounting Policies and Estimates have not materially changed since December 31, 2025.

18

Table of Contents

CONSOLIDATED FINANCIAL SUMMARY

Our results of operations were as follows for the three and six months ended June 30:

The components of the change in revenues and operating (loss) profit are discussed below in Segment Results.

Second Quarter of 2026 Compared with Second Quarter of 2025, and First Six Months Ended June 30, 2026 Compared with First Six Months Ended June 30, 2025

Other expense (income), net

Interest expense decreased in the second quarter of 2026 and the first six months of 2026 compared with the respective 2025 periods due to an increase in capitalized interest and lower average interest rates, partially offset by higher average borrowings.

Interest income decreased in the second quarter of 2026 and the first six months of 2026 compared with the respective 2025 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 favorable change in the second quarter of 2026 and the first six months of 2026 compared with the respective 2025 periods is due to fluctuations in the market prices of the exchange-traded equity securities. See Note 5 to the Unaudited Condensed Consolidated Financial Statements for further discussion of equity securities.

During 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 second quarter of 2025, NACCO and Falkirk’s former

19

Table of Contents

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 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. When income tax expense is recorded, the benefit from percentage depletion decreases the effective income tax rate, while the effect is to increase the effective income tax rate when a benefit for income taxes is recorded. Each quarter, we update our estimate of the annual effective tax rate, and the cumulative impact of the change in the estimated annual effective tax rate is recorded, which can make quarterly comparisons not meaningful.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The following tables detail the changes in cash flow for the six months ended June 30:

The $23.4 million improvement in net cash provided by (used for) operating activities was primarily due to favorable changes in operating assets and liabilities during the first six months of 2026 compared with the prior-year period. The improvement in operating assets and liabilities was mainly attributable to decreases in Prepaid profit sharing and Prepaid insurance and lower cash requirements associated with vendor deposits.

The change in net cash provided by (used for) financing activities was primarily due to additions in debt borrowings during the first six months of 2026 compared with reductions during the first six months of 2025 and the absence of share repurchases during the first six months of 2026.

Financing Activities

NACCO Natural Resources has a $200.0 million secured revolving line of credit (Facility) that matures in September 2028. Borrowings outstanding under the Facility were $95.0 million at June 30, 2026. At June 30, 2026, the excess availability under the Facility was $69.1 million, which reflects a reduction for outstanding letters of credit of $35.9 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.

20

Table of Contents

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 June 30, 2026, for base rate and Term Secured Overnight Financing Rate loans were 1.75% and 2.75%, respectively. The Facility

[Excerpt truncated for page length; source filing is linked above.]

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NACCO INDUSTRIES, INC. AND SUBSIDIARIES

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

OVERVIEW

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 portfolio of businesses. We operate under three reportable 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, long-term contract mining services. The Minerals and Royalties segment, which includes the Catapult Mineral Partners® (Catapult) business, acquires and promotes the development of mineral and royalty interests and other related investments.

In addition to the reportable segments discussed above, we also operate other businesses that are not currently reported as separate segments. These businesses complement our existing operations and support our long-term growth strategic objectives. Mitigation Resources of North America® (Mitigation Resources) provides natural resource restoration and reclamation services that include stream and wetland mitigation solutions. ReGen Resources is pursuing opportunities to develop new power generation resources.

We also have items not directly attributable to an operating segment. These items primarily include administrative costs related to public company reporting requirements, including management and board compensation, the financial results of developing businesses and Bellaire Corporation (Bellaire). Bellaire manages long-term liabilities related to former Eastern U.S. underground mining activities.

All financial statement line items below operating profit (other expense, including interest expense and interest income, the benefit for income taxes and net income) are presented and discussed within this Form 10-K on a consolidated basis.

See Item 1. Business beginning on page 1 in this Form 10-K for further discussion of NACCO's subsidiaries. Additional information relating to financial and operating data on a segment basis (including unallocated items) is set forth in Note 15 to the Consolidated Financial Statements contained in this Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities (if any). On an ongoing basis, we evaluate our estimates based on historical experience, actuarial valuations and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.

Revenue recognition: Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. See Note 3 to the Consolidated Financial Statements in this Form 10-K for further discussion of our revenue recognition.

46

Table of Contents

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NACCO INDUSTRIES, INC. AND SUBSIDIARIES

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Long-lived assets: We periodically evaluate long-lived assets for impairment when changes in circumstances or the occurrence of certain events indicate the carrying amount of an asset or asset group may not be recoverable. Upon identification of indicators of impairment, we evaluate the carrying value of the asset by comparing the estimated future undiscounted cash flows generated from the use of the asset or asset group and its eventual disposition with the asset's net carrying value. If the carrying value of an asset is considered impaired, an impairment charge is recorded for the amount that the carrying value of the long-lived asset or asset group exceeds its fair value. Fair value is estimated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Income taxes: We file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as the benefit associated with percentage depletion (tax deductions for depletion that may exceed the tax basis in the mineral reserve) and expenses that are not deductible for tax purposes, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities using currently enacted tax rates. The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted laws and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in the calculated deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or changes in the structure or tax status.

Our tax assets, liabilities, and tax expense are supported by historical earnings and losses and our best estimates and assumptions of future earnings. We assess whether a valuation allowance should be established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses. When we determine, based on all available evidence, that it is more likely than not that deferred tax assets will not be realized, a valuation allowance is established.

Since significant judgment is required to assess the future tax consequences of events that have been recognized in our financial statements or tax returns, the ultimate resolution of these events could result in adjustments to our financial statements and such adjustments could be material. We believe the current assumptions, judgments and other considerations used to estimate the current year accrued and deferred tax positions are appropriate. If the actual outcome of future tax consequences differs from these estimates and assumptions, due to changes or future events, the resulting change to the provision for income taxes could have a material impact on our results of operations and financial position.

Since 2021, we have participated in a voluntary program with the IRS called Compliance Assurance Process (CAP). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most issues prior to the filing of the tax return.

See Note 13 to the Consolidated Financial Statements in this Form 10-K for further discussion of our income taxes.

47

Table of Contents

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NACCO INDUSTRIES, INC. AND SUBSIDIARIES

(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

CONSOLIDATED FINANCIAL SUMMARY

Our results of operations were as follows for the years ended December 31:

The components of the change in revenues and operating profit are discussed below in Segment Results.

Other expense, net

Interest expense increased modestly in 2025 compared with 2024 due to higher average borrowings, partially offset by an increase in capitalized interest and lower average interest rates.

Interest income decreased in 2025 compared with 2024 due to lower earnings on reduced cash balances.

Loss (gain) on equity securities represents changes in the market price of invested assets reported at fair value. The change during 2025 compared with 2024 was due to fluctuations in the market prices of the excha

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]