UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
 
 
þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the fiscal year ended December 31, 2015
or
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-9172
NACCO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
 
34-1505819
(I.R.S. Employer Identification No.)
 
 
 
5875 Landerbrook Drive, Suite 220, Cleveland, Ohio
(Address of principal executive offices)
 
44124-4069
(Zip Code)
Registrant's telephone number, including area code: (440) 229-5151

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Class A Common Stock, Par Value $1.00 Per Share
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, Par Value $1.00 Per Share
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
     YES  ¨      NO   þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
     YES  ¨      NO   þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
      YES   þ      NO  £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
      YES   þ      NO  £
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ¨
Accelerated filer   þ  
Non-accelerated filer  ¨
(Do not check if a smaller reporting company)
Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
     YES  ¨      NO   þ
Aggregate market value of Class A Common Stock and Class B Common Stock held by non-affiliates as of June 30, 2015 (the last business day of the registrant's most recently completed second fiscal quarter): $266,826,629
Number of shares of Class A Common Stock outstanding at February 26, 2016 : 5,303,607
Number of shares of Class B Common Stock outstanding at February 26, 2016 : 1,571,552
DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement for its 2016 annual meeting of stockholders are incorporated herein by reference in Part III of this Form 10-K.

 
 
 
 
 



NACCO INDUSTRIES, INC.
TABLE OF CONTENTS
 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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PART I
Item 1. BUSINESS
General
NACCO Industries, Inc. (“NACCO” or the “Company”) is a holding company with the following principal businesses: mining, small appliances and specialty retail.
(a) North American Coal. The Company’s wholly owned subsidiary, The North American Coal Corporation and its affiliated companies (collectively, “NACoal”), mine coal primarily for use in power generation and provide selected value-added mining services for other natural resources companies.
(b) Hamilton Beach Brands. The Company’s wholly owned subsidiary, Hamilton Beach Brands, Inc. (“HBB”), is a leading designer, marketer and distributor of small electric household and specialty housewares appliances, as well as commercial products for restaurants, bars and hotels .
(c) Kitchen Collection. The Company’s wholly owned subsidiary, The Kitchen Collection, LLC (“KC”), is a national specialty retailer of kitchenware in outlet and traditional malls throughout the United States. 
Additional information relating to financial and operating data on a segment basis (including NACCO and Other) and by geographic region is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II of this Form 10-K and in Note 17 to the Consolidated Financial Statements contained in this Form 10-K.
NACCO was incorporated as a Delaware corporation in 1986 in connection with the formation of a holding company structure for a predecessor corporation organized in 1913. As of December 31, 2015 , the Company and its subsidiaries had approximately 3,600 employees, including approximately 1,550 employees at the Company’s unconsolidated mines.
The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports available, free of charge, through its website, www.nacco.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
Significant Events

During the fourth quarter of 2015, Bisti Fuels Company, LLC ("Bisti"), a wholly owned subsidiary of NACoal, entered into a 15-year, cost-plus contract mining agreement with Navajo Transitional Energy Company, LLC ("NTEC"). Under the agreement, Bisti will act as NTEC's contract miner at NTEC's Navajo Mine, a surface coal mine located within the Navajo Nation near Fruitland, San Juan County, New Mexico. Production is expected to be between 5.0 million to 6.0 million tons of coal per year. Pursuant to a separate agreement, NTEC will sell and deliver that coal to the third-party owners of the nearby Four Corners Generating Station. Similar to most of NACoal's other agreements, the agreement between Bisti and NTEC is a cost-plus arrangement, under which NTEC will reimburse Bisti for all operating costs of the mine and pay NACoal an agreed fee per Btu of heating value delivered. The agreement consists of a transition period and a production period. During the transition period, which commenced on January 1, 2016, Bisti will transition into the contract miner role. The production period is scheduled to commence when NTEC completes a pending commercial transaction with the existing contract miner, which is expected to occur during the second half of 2016. 

On July 31, 2015, NACoal's management and Board of Directors approved cessation of coal production at its Centennial Natural Resources, LLC ("Centennial") mines in Alabama. NACoal ceased coal production at Centennial during the fourth quarter of 2015. The decision was made as a result of worsening conditions in the Alabama and global coal markets and the adverse effect regulatory changes have had on Centennial’s business.

During the fourth quarter of 2014, NACoal determined that indicators of impairment existed at Centennial and, as a result, reviewed Centennial's long-lived assets for impairment. NACoal recorded a non-cash, asset impairment charge of $105.1 million in 2014 for Centennial's long-lived asset group.

During 2014, NACoal recognized a gain of $3.5 million from the sale of assets to Mississippi Power Company and an unrelated gain of $2.2 million from the sale of land.

In 2013, NACoal concluded during its annual assessment for impairment of goodwill that the goodwill within the Centennial reporting unit was fully impaired and, as a result, recorded a $4.0 million non-cash, goodwill impairment charge during the fourth quarter.
On December 16, 2014, HBB acquired Weston Products, LLC, which HBB refers to as Weston Brands, in exchange for cash consideration of $25.4 million , of which $25.0 million was paid at closing in 2014. As a result of the 2014 Weston Brands

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acquisition, HBB now markets a range of game and garden food processing equipment including, but not limited to, meat grinders, bag sealers, dehydrators and meat slicers under the Weston ® brand as well as several private label brands. The results of Weston Brands operations have been included in the Company's Consolidated Financial Statements since December 16, 2014.

During 2015, HBB entered the "only-the-best" product market and began selling Wolf Gourmet ® and Jamba ® branded products under licensing agreements with Sub-Zero Group, Inc. and Jamba Juice Company, respectively.

During 2013, the Company amended the Combined Defined Benefit Plan for NACCO Industries, Inc. and its subsidiaries (the “Combined Plan”) to freeze pension benefits for all employees, including those for certain unconsolidated mines' employees and cost of living adjustments for other employees, effective as of the close of business on December 31, 2013. As a result of this amendment, the Company remeasured the Combined Plan and recorded a $1.7 million pre-tax curtailment gain during the third quarter of 2013.

In November 2013, NACCO announced a $60 million stock repurchase program. During 2015, the Company completed the stock repurchase program with total repurchases of approximately 1,122,900 shares of Class A common stock. Under a previous stock repurchase program, which was in place from November 2011 to November 2013, the Company repurchased an additional 624,000 shares of Class A common stock for an aggregate purchase price of $35.6 million.


A. North American Coal
General
NACoal mines coal primarily for use in power generation and provides selected value-added mining services for other natural resources companies. Coal is surface mined from NACoal's developed mines in North Dakota, Texas, Mississippi and Louisiana. When Bisti commences mining coal for NTEC, it will be surface mined on the Navajo Nation in New Mexico. Total coal reserves approximate 2.0 billion tons (including the unconsolidated mining operations) with approximately 1.1 billion tons committed to customers pursuant to long-term contracts. NACoal has two consolidated mining operations: Mississippi Lignite Mining Company (“MLMC”) and Centennial. Centennial ceased coal production in the fourth quarter of 2015. NACoal also provides dragline mining services for independently owned limerock quarries in Florida. NACoal has the following wholly owned unconsolidated subsidiaries: The Coteau Properties Company (“Coteau”), The Falkirk Mining Company (“Falkirk”), The Sabine Mining Company (“Sabine”), Demery Resources Company, LLC (“Demery”), Caddo Creek Resources Company, LLC (“Caddo Creek”), Coyote Creek Mining Company, LLC (“Coyote Creek”), Camino Real Fuels, LLC (“Camino Real”), Liberty Fuels Company, LLC (“Liberty”), Bisti and NoDak Energy Services, LLC ("NoDak").

The unconsolidated subsidiaries, with the exception of NoDak, were formed to develop, construct and/or operate surface coal mines under long-term contracts and are capitalized primarily with debt financing provided by or supported by their respective customers, and without recourse to NACCO and NACoal. The contracts with the customers of the unconsolidated subsidiaries provide for reimbursement to the company at a price based on actual costs plus an agreed pre-tax profit per ton of coal sold or actual costs plus a management fee. The fees earned at each mine adjust over time in line with various indices which reflect general inflation rates. 

Coteau, Falkirk, Sabine, Liberty and Coyote supply or will supply lignite coal for power generation. Demery and Caddo Creek supply lignite coal for the production of activated carbon. Camino Real supplies sub- bituminous coal for power generation. Bisti will supply sub-bituminous coal for power generation. NoDak operates and maintains a coal processing facility.

Coteau, Falkirk and Sabine were developed between 1974 and 1984. Demery commenced delivering coal in 2012 and anticipates achieving full production levels in 2017. Caddo Creek commenced delivering coal in late 2014. Camino Real commenced delivering coal in October 2015, and expects to mine approximately 2.5 million to 2.7 million tons of coal annually when at full production.

Liberty commenced production in 2013 but did not deliver any coal for power generation in 2015. Production levels at Liberty are expected to increase gradually beginning in 2016 and build to full production of approximately 4.6 million tons of coal annually beginning in 2023, although the timing of future deliveries will be affected by when the Kemper County Energy Facility is commissioned.

Coyote Creek is developing a mine in Mercer County, North Dakota, from which it expects to deliver approximately 2.5 million tons of coal annually beginning in mid-2016.

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Bisti anticipates that it will replace an existing contract miner at an existing mine during the second half of 2016, after which it will make annual coal deliveries of between 5.0 million to 6.0 million tons.

At December 31, 2015 , NACoal's operating mines consisted both of mines where the reserves were acquired (whether in fee or through leases) and developed by NACoal, as well as mines where reserves are owned or leased by the customers of the mines and developed by NACoal. It is currently contemplated that the reported reserves will be mined within the terms of the majority of the leases for each of the mines. In the future, if any of the leases are projected to expire before mining operations can commence, it is currently expected that each such lease would be amended to extend the term or new leases would be negotiated. NACoal expects coal mined pursuant to these leases will be available to meet production requirements.

The majority of NACoal's revenue is generated from its consolidated mining operations and dragline mining services. MLMC's customer, Choctaw Generation Limited Partnership until February 28, 2013 and KMRC RH, LLC subsequent to February 28, 2013, accounted for approximately 57% , 39% and 42% of NACoal's revenues for the years ended December 31, 2015 , 2014 and 2013 , respectively. Centennial's largest customer, Alabama Coal Cooperative, accounted for approximately 16% of NACoal's revenues for the year ended December 31, 2015 and approximately 27% of NACoal's revenues for both 2014 and 2013 . Centennial ceased coal production in 2015.

North American Coal Corporation India Private Limited (“NACC India”) was formed to provide technical business advisory services to the third-party owner of a coal mine in India.  During 2014, NACC India's customer defaulted on its contractual payment obligations and, as a result of this default, NACC India terminated its contract with the customer and is pursuing contractual remedies.
Sales, Marketing and Operations
The principal coal customers of NACoal are electric utilities, an independent power provider and a synfuels plant. During 2015, Centennial sold coal to coke processing plants, cement plants and coal brokers in Alabama. The distribution of coal sales, including sales from the unconsolidated mines, in the last five years has been as follows:
 
Distribution
 
Synfuels Plant
 
Other
2015
20
%
 
80
%
2014
20
%
 
80
%
2013
19
%
 
81
%
2012
21
%
 
79
%
2011
22
%
 
78
%
The total coal severed by mine (in millions of tons) for the three years ended December 31 and the weighted average prices per ton delivered for the three years ended December 31 are as follows:
 
2015
 
2014
 
2013
Unconsolidated Mines
 
 
 
 
 
Freedom — The Coteau Properties Company
14.3

 
14.4

 
13.8

Falkirk — The Falkirk Mining Company
8.0

 
8.0

 
7.7

South Hallsville No. 1  The Sabine Mining Company
3.6

 
4.4

 
3.9

Other
1.2

 
1.0

 
0.3

Consolidated Mines
 
 
 
 
 
Red Hills — Mississippi Lignite Mining Company
3.0

 
2.9

 
3.3

Centennial Natural Resources
0.4

 
0.9

 
0.9

Total tons severed
30.5

 
31.6

 
29.9

Price per ton delivered
$
23.63

 
$
23.75

 
$
24.32


The contracts under which certain of the unconsolidated mines operate provide that, under certain conditions, including default, the customer(s) involved may elect or be obligated to acquire the assets (subject to the liabilities) or the capital stock of the

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NACoal mining subsidiary for an amount effectively equal to book value. NACoal does not know of any conditions of default that currently exist.
The location, mine type, reserve data, coal quality characteristics, sales tonnage and contract expiration date for the mines operated by NACoal were as follows:

COAL MINING OPERATIONS ON AN “AS RECEIVED” BASIS
 
 
 
 
2015
 
2014
 
 
 
 
 
 
 
Proven and Probable Reserves (a)(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Committed
Under
Contract
 
Uncommitted
 
Total
 
Tons
Delivered
(Millions)
 
Owned
Reserves
(%)
 
Leased
Reserves
(%)
 
Total
Committed
and
Uncommitted
(Millions of
Tons)
 
Tons
Delivered
(Millions)
 
Contract
Expires
Mine/Reserve
 
Type of Mine
 
(Millions of Tons)
 
 
 
 
 
 
Unconsolidated Mines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freedom Mine (c)
 
Surface Lignite
 
480.7

 

 
480.7

 
14.4

 
3
%
 
97
%
 
495.7

 
14.3

 
2022
(d)
Falkirk Mine (c)
 
Surface Lignite
 
390.4

 

 
390.4

 
8.0

 
1
%
 
99
%
 
399.1

 
7.8

 
2045
 
South Hallsville No. 1 Mine (c)
 
Surface Lignite
 
(e)

 
(e)

 
(e)

 
3.7

 
(e)

 
(e)

 
(e)

 
4.5

 
2035
 
Five Forks Mine (c)
 
Surface Lignite
 
(e)

 
(e)

 
(e)

 
0.2

 
(e)

 
(e)

 
(e)

 
0.1

 
2030
 
Marshall Mine (c)
 
Surface Lignite
 
(e)

 
(e)

 
(e)

 
0.2

 
(e)

 
(e)

 
(e)

 
(f)

 
2044
 
Eagle Pass Mine (c)
 
Surface
Sub-bituminous
 
(e)

 
(e)

 
(e)

 
0.5

 
(e)

 
(e)

 
(e)

 
(g)

 
2018
 
Liberty Mine (c)
 
Surface Lignite
 
(e)

 
(e)

 
(e)

 
(h)

 
(e)

 
(e)

 
(e)

 
(h)

 
2055
(i)
Coyote Creek Mine (c)
 
Surface Lignite
 
79.0

 

 
79.0

 
(j)

 
0
%
 
100
%
 
78.9

 
(j)

 
2040
 
Navajo Mine (c)
 
Surface
Sub-bituminous
 
(e)

 
(e)

 
(e)

 
(k)

 
(e)

 
(e)

 
(e)

 
(k)

 
2031
 
Consolidated Mines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Centennial Natural Resources
 
Surface Bituminous
 

 
60.3

 
60.3

 
0.4

 
28
%
 
72
%
 
64.6

 
0.9

 
(l)
 
Red Hills Mine
 
Surface Lignite
 
116.7

 
115.9

 
232.6

 
3.2

 
33
%
 
67
%
 
236.5

 
2.6

 
2032
 
Total Developed
 
 
 
1,066.8

 
176.2

 
1,243.0

 
30.6

 
 
 
 
 
1,274.8

 
30.2

 
 
 
Undeveloped Mines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North Dakota
 
 
 

 
283.2

 
283.2

 

 
0
%
 
100
%
 
287.3

 

 
 
 
Texas
 
 
 

 
225.6

 
225.6

 

 
54
%
 
46
%
 
225.6

 

 
 
 
Eastern (m)
 
 
 

 
28.7

 
28.7

 

 
100
%
 
0
%
 
28.7

 

 
 
 
Mississippi
 
 
 

 
187.8

 
187.8

 

 
0
%
 
100
%
 
187.8

 

 
 
 
Total Undeveloped
 
 
 

 
725.3

 
725.3

 

 
 
 
 
 
729.4

 

 
 
 
Total Developed/Undeveloped
 
 
 
1,066.8

 
901.5

 
1,968.3

 
 
 
 
 
 
 
2,004.2

 
 
 
 
 


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Average Coal Quality (As received)
Mine/Reserve
 
Type of Mine
 
Coal Formation or
Coal Seam(s)
 
Average Seam
Thickness (feet)
 
Average
Depth (feet)
 
BTUs/lb
 
Sulfur (%)
 
Ash (%)
 
Moisture (%)
Unconsolidated Mines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freedom Mine (c)
 
Surface Lignite
 
Beulah-Zap Seam
 
18

 
130

 
6,700

 
0.90
%
 
9
%
 
36
%
Falkirk Mine (c)
 
Surface Lignite
 
Hagel A&B, Tavis
Creek Seams
 
8

 
90

 
6,200

 
0.62
%
 
11
%
 
38
%
South Hallsville No. 1 Mine (c)
 
Surface Lignite
 
(e)
 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

Five Forks Mine (c)
 
Surface Lignite
 
(e)
 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

Marshall Mine (c)
 
Surface Lignite
 
(e)
 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

Eagle Pass Mine (c)
 
Surface
Sub-bituminous
 
(e)
 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

Liberty Mine (c)
 
Surface Lignite
 
(e)
 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

Coyote Creek Mine (c)
 
Surface Lignite
 
Beulah-Zap Seam
 
10

 
95

 
6,900

 
0.98
%
 
8
%
 
36
%
Navajo Mine (c)
 
Surface
Sub-bituminous
 
(e)
 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

 
(e)

Consolidated Mines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Centennial Natural Resources
 
Surface Bituminous
 
Black Creek, C1, C2, C3, New Castle, Mary Lee, Jefferson, American, Nickel Plate, Pratt Seams
 
1.75

 
178

 
13,226

 
2.00
%
 
10
%
 
4
%
Red Hills Mine
 
Surface Lignite
 
C, D, E, F, G, H Seams
 
3.6

 
150

 
5,200

 
0.60
%
 
14
%
 
43
%
Undeveloped Mines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North Dakota
 

 
Fort Union Formation
 
13

 
130

 
6,500

 
0.8
%
 
8
%
 
38
%
Texas
 

 
Wilcox Formation
 
5

 
120

 
6,800

 
1.0
%
 
16
%
 
30
%
Eastern (l)
 

 
Freeport & Kittanning Seams
 
4

 
400

 
12,070

 
3.3
%
 
12
%
 
3
%
Mississippi
 

 
Wilcox Formation
 
5

 
130

 
5,200

 
0.6
%
 
13
%
 
44
%


(a)
Committed and uncommitted tons represent in-place estimates. The projected extraction loss is approximately 10% of the proven and probable reserves, except with respect to the Eastern Undeveloped Mines, in which case the projected extraction loss is approximately 30% of the proven and probable reserves.
(b)
NACoal’s reserve estimates are generally based on the entire drill hole database for each reserve, which was used to develop a geologic computer model using a 200 foot grid and inverse distance to the second power as an interpolator for all of NACoal's reserves, except for the reserves of Centennial where a 50 foot grid was used. As such, all reserves are considered proven (measured) within NACoal’s reserve estimate. None of NACoal’s coal reserves have been reviewed by independent experts.
(c)
The contracts for these mines require the customer to cover the cost of the ongoing replacement and upkeep of the plant and equipment of the mine.
(d)
Although the term of the existing coal sales agreement terminates in 2022, the term may be extended for three additional periods of five years, or until 2037, at the option of Coteau.
(e)
The reserves are owned and controlled by the customer and, therefore, have not been listed in the table.
(f)
The contract for development of this mine was executed during 2009, and less than 0.1 million tons were sold in 2014.
(g)
The contract for development of this mine was executed during 2009, and no sales occurred during 2014 .
(h)
The contract for development of this mine was executed during 2010, and no sales occurred during 2015 or 2014 .
(i)
The term of this contract is 40 years, commencing on the date of commercial deliveries, which is anticipated to occur during 2016.
(j)
The contract for development of this mine was executed during 2012, and no sales occurred during 2015 or 2014 .
(k)
The contract for operation of this mine was executed during 2015, and no sales occurred during 2015.
(l)
The majority of the coal produced was sold to a single customer under contract through the third quarter of 2015.
(m)
The proven and probable reserves included in the table do not include coal that is leased to others. NACoal had 100.5 million tons and 105.2 million tons in 2015 and 2014 , respectively, of Eastern Undeveloped Mines with leased coal committed under contract.

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Unconsolidated Mines
Freedom Mine — The Coteau Properties Company
The Freedom Mine, operated by Coteau, is located approximately 90 miles northwest of Bismarck, North Dakota. The main entrance to the Freedom Mine is accessed by means of a paved road and is located on County Road 15. Coteau holds 275 leases granting the right to mine approximately 34,510 acres of coal interests and the right to utilize approximately 22,563 acres of surface interests. In addition, Coteau owns in fee 32,356 acres of surface interests and 4,265 acres of coal interests. Substantially all of the leases held by Coteau were acquired in the early 1970s and have been replaced with new leases or have lease terms for a period sufficient to meet Coteau’s contractual production requirements.
The Freedom Mine generally produces between 13 million and 15 million tons of lignite coal annually. The mine started delivering coal in 1983. All production from the mine is sold to Dakota Coal Company, a wholly owned subsidiary of Basin Electric Power Cooperative. Dakota Coal Company then sells the coal to Great Plains Synfuels Plant, Antelope Valley Station and Leland Olds Station, all of which are affiliates of Basin Electric Power Cooperative.
The reserves are located in Mercer County, North Dakota, starting approximately two miles north of Beulah, North Dakota. The center of the basin is located near the city of Williston, North Dakota, approximately 100 miles northwest of the Freedom Mine. The economically mineable coal in the reserve occurs in the Sentinel Butte Formation, and is overlain by the Coleharbor Formation. The Coleharbor Formation unconformably overlies the Sentinel Butte Formation. It includes all of the unconsolidated sediments resulting from deposition during glacial and interglacial periods. Lithologic types include gravel, sand, silt, clay and till. The modified glacial channels are in-filled with gravels, sands, silts and clays overlain by till. The coarser gravel and sand beds are generally limited to near the bottom of the channel fill. The general stratigraphic sequence in the upland portions of the reserve area consists of till, silty sands and clayey silts.
Falkirk Mine — The Falkirk Mining Company
The Falkirk Mine, operated by Falkirk, is located approximately 50 miles north of Bismarck, North Dakota on a paved access road off U.S. Highway 83. Falkirk holds 290 leases granting the right to mine approximately 45,999 acres of coal interests and the right to utilize approximately 24,607 acres of surface interests. In addition, Falkirk owns in fee 40,339 acres of surface interests and 1,270 acres of coal interests. Substantially all of the leases held by Falkirk were acquired in the early 1970s with initial terms that have been further extended by the continuation of mining operations.
The Falkirk Mine generally produces between 7 million and 9 million tons of lignite coal annually primarily for the Coal Creek Station, an electric power generating station owned by Great River Energy. Commencing in the second half of 2014, Falkirk began delivering coal to Spiritwood Station, another electric power generating station owned by Great River Energy. Annual deliveries to Spiritwood Station are expected to average approximately 500,000 tons. The mine started delivering coal in 1978.
The reserves are located in McLean County, North Dakota, from approximately nine miles northwest of the town of Washburn, North Dakota to four miles north of the town of Underwood, North Dakota. Structurally, the area is located on an intercratonic basin containing a thick sequence of sedimentary rocks. The economically mineable coals in the reserve occur in the Sentinel Butte Formation and the Bullion Creek Formation and are unconformably overlain by the Coleharbor Formation. The Sentinel Butte Formation conformably overlies the Bullion Creek Formation. The general stratigraphic sequence in the upland portions of the reserve area (Sentinel Butte Formation) consists of till, silty sands and clayey silts, main hagel lignite bed, silty clay, lower lignite of the hagel lignite interval and silty clays. Beneath the Tavis Creek, there is a repeating sequence of silty to sand clays with generally thin lignite beds.
South Hallsville No. 1 Mine — The Sabine Mining Company
The South Hallsville No. 1 Mine, operated by Sabine, is located approximately 150 miles east of Dallas, Texas on FM 968. The entrance to the mine is by means of a paved road. Sabine has no title, claim, lease or option to acquire any of the reserves at the South Hallsville No. 1 Mine. Southwestern Electric Power Company controls all of the reserves within the South Hallsville No. 1 Mine.
The South Hallsville No. 1 Mine has two active pits generally producing between 3 million and 5 million tons of lignite coal annually based upon Southwestern Electric Power Company’s demand for its Henry W. Pirkey Plant. The mine started delivering coal in 1985.
Five Forks Mine — Demery Resources Company, LLC
The Five Forks Mine, operated by Demery, is located approximately three miles north of Creston, Louisiana on State Highway 153. Access to the Five Forks Mine is by means of a gravel road. Demery commenced delivering coal to its customer in 2012 and is expected to reach full production levels in 2017. Demery has no title, claim, lease or option to acquire any of the reserves at the Five Forks Mine. Demery's customer, Five Forks Mining, LLC, controls all of the reserves within the Five Forks Mine.

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Marshall Mine — Caddo Creek Resources Company, LLC
The Marshall Mine, operated by Caddo Creek, commenced production in late 2014 and is located approximately ten miles south of Marshall, Texas on FM-1186. Access to the Marshall Mine is by means of a paved road. Caddo Creek has no title, claim, lease or option to acquire any of the reserves at the Marshall Mine. Marshall Mine, LLC controls all of the reserves within the Marshall Mine.
Eagle Pass Mine — Camino Real Fuels, LLC

The Eagle Pass Mine, operated by Camino Real, commenced production in October 2015 and is located approximately six miles north of Eagle Pass, Texas on State Highway 1588. Access to the Eagle Pass Mine is by means of a paved road. Camino Real has no title, claim, lease or option to acquire any of the reserves at the Eagle Pass Mine. Dos Republicas Coal Partnership controls all of the reserves within the Eagle Pass Mine.
Liberty Mine — Liberty Fuels Company, LLC

The Liberty Mine, operated by Liberty, is located approximately 20 miles north of Meridian, Mississippi off State Highway 493. Liberty commenced production in 2013 and is expected to increase production levels gradually with expected full production levels reached in 2023. Liberty has no title, claim, lease or option to acquire any of the reserves at the Liberty Mine. Mississippi Power Company controls all of the reserves within the Liberty Mine.
Coyote Creek Mine - Coyote Creek Mining Company, LLC

The Coyote Creek Mine,operated by Coyote Creek, is in the development stage and is located approximately 70 miles northwest of Bismarck, North Dakota. The main entrance to the Coyote Creek Mine is accessed by means of a four-mile graveled road extending west off of State Highway 49. Coyote Creek holds a sublease to 85 leases granting the right to mine approximately 7,809 acres of coal interests and the right to utilize approximately 15,168 acres of surface interests. In addition, Coyote Creek Mine owns in fee 160 acres of surface interests and has four easements to conduct coal mining operations on approximately 352 acres. Substantially all of these leases were acquired during the years 2010 through 2012 and have lease terms for a period sufficient to meet Coyote Creek's contractual production requirements.

In mid-2016, the Coyote Creek Mine is expected to begin coal deliveries to the Coyote Station owned by Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Company and Northwestern Corporation.

The reserves are located in Mercer County, North Dakota, starting approximately six miles southwest of Beulah, North Dakota. The center of the basin is located near the city of Williston, North Dakota, approximately 110 miles northwest of the Coyote Creek Mine. The economically mineable coal in the reserve occurs in the Sentinel Butte Formation, and is overlain by the Coleharbor Formation. The Coleharbor Formation unconformably overlies the Sentinel Butte Formation. It includes all of the unconsolidated sediments resulting from deposition during glacial and interglacial periods. Lithologic types include gravel, sand silt, clay and till. The modified glacial channels are in-filled with gravels, sands, silts and clays overlain by till. The coarser gravel and sand beds are generally limited to near the bottom of the channel fill. The general stratigraphic sequence in the upland portions of the reserve area consists of till, silty sands and clayey silts.
Navajo Mine - Bisti Fuels Company, LLC

The Navajo Mine, to be operated by Bisti, is located approximately 25 miles southwest of Farmington, New Mexico, off Indian Service Road 3005, and is on the Navajo Nation. Access to the Navajo Mine is by means of a paved road. Bisti has no title, claim, lease or option to acquire any of the reserves at Navajo Mine. The Navajo Nation controls all of the reserves within the Navajo Mine.
Consolidated Mines
Centennial Natural Resources
Centennial's mines are located about 12 miles east and southeast of the city of Jasper in Walker County, Alabama, about 20 miles southeast of the city of Jasper in Jefferson County, Alabama, and about 15 miles northwest of the City of Jasper in Winston County, Alabama. The main entrances to the Walker County, Alabama mines are accessed by means of a half-mile graveled road extending south off Sipsey Road and a half-mile graveled road extending west off Cordova Gorgas Road. The main entrance to the Jefferson County, Alabama mine is accessed by means of a three-mile paved section of Porter Road extending south off Snowville - Brent

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Road. The main entrance to the Winston County, Alabama mine is accessed by means of a quarter-mile gravel road extending west off County Road 21. The reserves within the Centennial mines are controlled by Centennial.
Centennial and its affiliate, North American Coal Royalty Company, own in fee approximately 5,339 acres of coal interests and approximately 2,397 acres of surface interests. Centennial holds leases granting the right to mine approximately 12,142 acres of coal interests and the right to utilize approximately 20,046 acres of surface interests. The majority of the leases held by Centennial were originally acquired between 2000 and 2010 with terms that can be extended by the continuation of mining.
Structurally, the reserves for the Centennial mines are located within the Warrior Coal Basin. The strata that underlies and outcrops in this region is of the Pottsville Formation of the Pennsylvanian Age. The Warrior Basin is the southernmost of a series of Pennsylvanian basins of the Appalachian Plateau. The Pottsville Formation in this area consists of thin to thick bedded sandstones, siltstones, shales, clays and coal seams. This sequence of clastic sediments is representative of a deltaic depositional environment. Structurally, the Warrior Basin is formed by a large gentle syncline that extends from north-central Mississippi in the west to north-central Alabama in the east. The syncline is tilted southwestward with a regional dip of 30 to 200 feet per mile. Toward the interior of the Warrior Basin, the regional southwest dip of Pottsville strata is modified by a series of three synclines and two anticlines. Of these, the major structural areas are the Warrior and Coalburg synclines, and the Sequatchie anticline. The fold axes are parallel to the Appalachian system in a northeast-southwest direction and plunge to the southwest with the regional dip.
Red Hills Mine — Mississippi Lignite Mining Company
The Red Hills Mine, operated by MLMC, is located approximately 120 miles northeast of Jackson, Mississippi. The entrance to the mine is by means of a paved road located approximately one mile west of Highway 9. MLMC owns in fee approximately 4,590 acres of surface interest and 2,198 acres of coal interests. MLMC holds leases granting the right to mine approximately 7,731 acres of coal interests and the right to utilize approximately 6,507 acres of surface interests. MLMC holds subleases under which it has the right to mine approximately 308 acres of coal interests. The majority of the leases held by MLMC were originally acquired during the mid-1970s to the early 1980s with terms extending 50 years, many of which can be further extended by the continuation of mining operations.
The Red Hills Mine generally produces approximately 3 million to 4 million tons of lignite coal annually for use at the Red Hills Power Plant. The mine started delivering coal in 2000.
The lignite deposits of the Gulf Coast are found primarily in a narrow band of strata that outcrops/subcrops along the margin of the Mississippi Embayment. The potentially exploitable tertiary lignites in Mississippi are found in the Wilcox Group. The outcropping Wilcox is composed predominately of non-marine sediments deposited on a broad flat plain.
Florida Dragline Operations — The North American Coal Corporation
NACoal’s Florida Dragline Operations operate draglines to mine limerock at the following quarries in Florida pursuant to mining services agreements with the quarry owners:
Quarry Name
Location
Quarry Owner
Year NACoal Started Dragline Operations
White Rock Quarry — North
Miami
WRQ
1995
White Rock Quarry — South
Miami
WRQ
2005
Krome Quarry
Miami
Cemex
2003
Alico Quarry
Ft. Myers
Cemex
2004
FEC Quarry
Miami
Cemex
2005
SCL Quarry
Miami
Cemex
2006

Vecellio & Grogan, Inc., d/b/a White Rock Quarries (“WRQ”) and Cemex S.A.B. de C.V. (“Cemex”) control all of the limerock reserves within their respective quarries. WRQ and Cemex perform drilling programs occasionally for the purpose of redefining the bottom of the limerock bed.
Access to the White Rock Quarry is by means of a paved road from 122nd Avenue and access to the Krome Quarry is by means of a paved road from Krome Avenue. Access to the FEC Quarry is by means of a paved road from NW 118th Avenue and access to the Alico Quarry is by means of a paved road from Alico Road. Access to the SCL Quarry is by means of a paved road from NW 137th Avenue. Florida Dragline Operations have no title, claim, lease or option to acquire any of the reserves at the White Rock Quarry (North and South), the FEC Quarry, the Krome Quarry, the SCL Quarry or the Alico Quarry.

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North American Coal Royalty Company
No operating mines currently exist on the undeveloped reserves in North Dakota, Texas and Mississippi. North American Coal Royalty Company receives certain royalty payments from third parties for production or advance royalty payments for oil and gas, as well as for coal reserves located in Alabama, Ohio, Pennsylvania, North Dakota, Louisiana, Texas and Mississippi.
General Information about the Mines
Leases . The leases held by Coteau, Falkirk, Coyote Creek and MLMC have a variety of continuation provisions, but generally permit the leases to be continued beyond their fixed terms. Under the terms of the leases held by these subsidiaries, each respective subsidiary expects that coal mined pursuant to its leases will be available to meet its production requirements. Centennial holds the mining rights to the reserves within its mines through fee ownership, and leases and licenses from the coal and surface owners.
Previous Operators . There were no previous operators of the Freedom Mine, Falkirk Mine, South Hallsville No. 1 Mine, Five Forks Mine, Marshall Mine, Eagle Pass Mine, Liberty Mine, Coyote Creek Mine or Red Hills Mine. Bisti will become an operator of NTEC's Navajo Mine, which is currently operated by a third party.
Exploration and Development . NACoal has one mine, Coyote Creek Mine, currently in development. The Centennial mines have ceased production as of December 31, 2015. With the exception of Coyote Creek and Centennial, all other mines are well past the exploration stage. Additional pit development is under way at each mine. Drilling programs are routinely conducted for the purpose of refining guidance related to ongoing operations. For example, at the Red Hills Mine, the lignite coal reserve has been defined by a drilling program that is designed to provide 500-foot spaced drill holes for areas anticipated to be mined within six years of the current pit. Drilling beyond the six-year horizon ranges from 1,000 to 2,000-foot centers. Drilling is conducted every other year to stay current with the advance of mining operations. Geological evaluation is in process at all locations.
Facilities and Equipment . The facilities and equipment for each of the mines are maintained to allow for safe and efficient operation. The equipment is well maintained, in good physical condition and is either updated or replaced periodically with newer models or upgrades available to keep up with modern technology. As equipment wears out, the mines evaluate what
replacement option will be the most cost-efficient, including the evaluation of both new and used equipment, and proceed with that replacement. The majority of electrical power for the draglines, shovels, coal crushers, coal conveyors and facilities generally is provided by the power generation customer for the applicable mine. Electrical power for the Sabine facilities is provided by Upshur Rural Electric Co-op. Electrical power for the Sabine draglines is provided by the Pirkey Power Plant. The remainder of the equipment generally is powered by diesel or gasoline.


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The total cost of the property, plant and equipment, net of applicable accumulated amortization, depreciation and impairment as of December 31, 2015 is set forth in the chart below:
Mine
 
Total Historical Cost of Mine
Property, Plant and Equipment
(excluding Coal Land, Real Estate
and Construction in Progress), Net of
Applicable Accumulated
Amortization, Depreciation and Impairment
 
 
( in millions)
Unconsolidated Mining Operations
 
 
Freedom Mine — The Coteau Properties Company
 
$
202.5

Falkirk Mine — The Falkirk Mining Company
 
$
98.6

South Hallsville No. 1 Mine — The Sabine Mining Company
 
$
174.7

Five Forks Mine — Demery Resources Company, LLC
 
$

Marshall Mine — Caddo Creek Resources Company, LLC
 
$

Eagle Pass Mine — Camino Real Fuels, LLC
 
$

Liberty Mine — Liberty Fuels Company, LLC
 
$
19.0

Coyote Creek Mine — Coyote Creek Mining Company, LLC
 
$
164.8

Consolidated Mining Operations
 
 
Red Hills Mine — Mississippi Lignite Mining Company
 
$
45.7

Centennial (a)
 
$
12.9

Florida Dragline Operations — The North American Coal Corporation
 
$
2.7

(a) Does not include $17.5 million of Centennial's mine machinery and equipment that is included in "Assets held for sale" on the Consolidated Balance Sheet at December 31, 2015. See Note 3 to the Consolidated Financial Statements for further discussion of assets held for sale.
Predominantly all of Demery, Caddo Creek, Camino Real and Liberty's machinery and equipment is owned by NACoal’s customers. A substantial portion of MLMC’s machinery, trucks and equipment is rented under operating leases and one of Centennial's draglines is under a capital lease. All other draglines were purchased used and have been or are expected to be updated with the latest technology.
Government Regulation
NACoal’s coal mining operations and dragline mining services are subject to various federal, state and local laws and regulations on matters such as employee health and safety, and certain environmental laws relating to, among others, the reclamation and restoration of properties after mining operations, air pollution, water pollution, the disposal of wastes and effects on groundwater. In addition, the electric power generation industry is subject to extensive regulation regarding the environmental impact of its power generation activities that could affect demand for coal from NACoal’s coal mining operations.
Numerous governmental permits and approvals are required for coal mining operations. NACoal or one of its subsidiaries holds or will hold the necessary permits at all of NACoal’s coal mining operations except Demery, Caddo Creek, Bisti and Camino Real, where NACoal’s customers hold the permits, and Centennial, where a coal reserve owner and a contract miner hold certain permits. The Company believes, based upon present information provided to it by these third-party mine permit holders, that these third parties have all permits necessary for NACoal to operate Centennial, Caddo Creek, Demery, Bisti and Camino Real; however, the Company cannot be certain that these third parties will be able to maintain all such permits in the future.
At the coal mining operations where NACoal holds the permits, NACoal is required to prepare and present to federal, state or local governmental authorities data pertaining to the effect or impact that any proposed exploration for or production of coal may have upon the environment and public and employee health and safety.
The limerock quarries where NACoal provides dragline mining services are owned and operated by NACoal’s customers.
Some laws, as discussed below, place many requirements on NACoal’s coal mining operations and the limerock quarries where NACoal provides dragline mining services. Federal and state regulations require regular monitoring of NACoal’s operations to ensure compliance.

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Mine Health and Safety Laws
The Federal Mine Safety and Health Act of 1977 imposes safety and health standards on all coal mining operations. Regulations are comprehensive and affect numerous aspects of mining operations, including training of mine personnel, mining procedures, blasting, the equipment used in mining operations and other matters. The Federal Mine Safety and Health Administration enforces compliance with these federal laws and regulations.
Environmental Laws
NACoal’s coal mining operations are subject to various federal environmental laws, as amended, including:
the Surface Mining Control and Reclamation Act of 1977 (“SMCRA”);
the Clean Air Act, including amendments to that act in 1990 (“CAA”);
the Clean Water Act of 1972 (the “Clean Water Act”);
the Resource Conservation and Recovery Act; and
the Comprehensive Environmental Response, Compensation and Liability Act.
In addition to these federal environmental laws, various states have enacted environmental laws that provide for higher levels of environmental compliance than similar federal laws. These state environmental laws require reporting, permitting and/or approval of many aspects of coal mining operations. Both federal and state inspectors regularly visit mines to enforce compliance. NACoal has ongoing training, compliance and permitting programs to ensure compliance with such environmental laws.
Surface Mining Control and Reclamation Act
SMCRA establishes mining, environmental protection and reclamation standards for all aspects of surface coal mining operations. Where state regulatory agencies have adopted federal mining programs under SMCRA, the state becomes the primary regulatory authority. All of the states where NACoal has active coal mining operations have achieved primary control of enforcement through federal authorization under SMCRA.
Coal mine operators must obtain SMCRA permits and permit renewals for coal mining operations from the applicable regulatory agency. These SMCRA permit provisions include requirements for coal prospecting, mine plan development, topsoil removal, storage and replacement, selective handling of overburden materials, mine pit backfilling and grading, protection of the hydrologic balance, surface drainage control, mine drainage and mine discharge control and treatment, and revegetation.
Although NACoal’s permits have stated expiration dates, SMCRA provides for a right of successive renewal. The cost of obtaining surface mining permits can vary widely depending on the quantity and type of information that must be provided to obtain the permits; however, the cost of obtaining a permit is usually between $1,000,000 and $5,000,000, and the cost of obtaining a permit renewal is usually between $15,000 and $100,000.
The Abandoned Mine Land Fund, which is part of SMCRA, imposes a fee on certain coal mining operations. The proceeds are used principally to reclaim mine lands closed prior to 1977. In addition, the Abandoned Mine Land Fund also makes transfers annually to the United Mine Workers of America Combined Benefit Fund (the “Fund”), which provides health care benefits to retired coal miners who are beneficiaries of the Fund. The fee is currently $0.08 per ton on lignite coal produced and $0.28 per ton on other surface-mined coal.
SMCRA establishes operational, reclamation and closure standards for surface coal mines. The Company accrues for the costs of current mine disturbance and final mine closure, including the cost of treating mine water discharges, where necessary. These obligations are unfunded with the exception of the final mine closure costs for the Coyote Creek Mine, which will be funded throughout the production stage.
SMCRA stipulates compliance with many other major environmental programs, including the CAA and Clean Water Act. The U.S. Army Corps of Engineers regulates activities affecting navigable waters, and the U.S. Bureau of Alcohol, Tobacco and Firearms regulates the use of explosives for blasting. In addition, the U.S. Environmental Protection Agency (the “EPA”), the U.S. Army Corps of Engineers and the Office of Surface Mining Reclamation and Enforcement ("OSM") are engaged in a series of rulemakings and other administrative actions under the Clean Water Act and other statutes that are directed at reducing the impact of coal mining operations on water bodies. Currently, these initiatives are primarily with respect to mining operations in the Appalachian region, especially on mountaintops.
The Company does not believe there is any significant risk to NACoal’s ability to maintain its existing mining permits or its ability to acquire future mining permits for its mines.

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Clean Air Act and Clean Power Plan ("CPP")

The process of burning coal can cause many compounds and impurities in the coal to be released into the air, including sulfur dioxide, nitrogen oxides, mercury, particulates and other matter. The CAA and the corresponding state laws that extensively regulate the emissions of materials into the air affect coal mining operations both directly and indirectly. Direct impacts on coal mining operations occur through CAA permitting requirements and/or emission control requirements relating to air contaminants, especially particulate matter. Indirect impacts on coal mining operations occur through regulation of the air emissions of sulfur dioxide, nitrogen oxides, mercury, particulate matter and other compounds emitted by coal-fired power plants. The EPA has promulgated or proposed regulations that impose tighter emission restrictions in a number of areas, some of which are currently subject to litigation. The general effect of tighter restrictions could be to reduce demand for coal. Any reduction in coal’s share of the capacity for power generation could have a material adverse effect on the Company’s business, financial condition and results of operations.

States are required to submit to the EPA revisions to their state implementation plans ("SIPs") that demonstrate the manner in which the states will attain national ambient air quality standards ("NAAQS") every time a NAAQS is issued or revised by the EPA. The EPA has adopted NAAQS for several pollutants, which continue to be reviewed periodically for revisions. When the EPA adopts new, more stringent NAAQS for a pollutant, some states have to change their existing SIPs. If a state fails to revise its SIP and obtain EPA approval, the EPA may adopt regulations to effect the revision. Coal mining operations and coal-fired power plants that emit particulate matter or other specified material are, therefore, affected by changes in the SIPs. Through this process over the last few years, the EPA has reduced the NAAQS for particulate matter, ozone, and nitrogen oxides. NACoal’s coal mining operations and power generation customers may be directly affected when the revisions to the SIPs are made and incorporate new NAAQS for sulfur dioxide, nitrogen oxides, ozone and particulate matter. In response to a court remand of earlier rules to control the regional dispersion of sulfur dioxide and nitrogen oxides from coal-fired power plants and their impacts of downwind NAAQS areas, in mid-2011, the EPA finalized the Cross-State Air Pollution Rule ("CSAPR") to address interstate transport of pollutants. This affects states in the eastern half of the U.S. and Texas. This rule imposes additional emission restrictions on coal-fired power plants to attain ozone and fine particulate NAAQS. On August 21, 2012, the U.S. Court of Appeals struck down the CSAPR rule, effectively eliminating the new additional emission restrictions. The EPA subsequently appealed to the U.S. Supreme Court, which overturned the lower court ruling on April 29, 2014. EPA began implementation of the rule January 1, 2015, when Phase I emission reductions in sulfur dioxide and nitrogen dioxide became effective. Phase II reductions become effective on January 1, 2017. On November 16, 2015, the EPA proposed an update to the CSAPR. In this update, the EPA proposes more stringent Phase II reductions in nitrogen oxide emissions. Some questions regarding the rule remain unresolved and additional litigation is pending.

The CAA Acid Rain Control Provisions were promulgated as part of the CAA Amendments of 1990 in Title IV of the CAA (“Acid Rain Program”). The Acid Rain Program required reductions of sulfur dioxide emissions from coal-fired power plants. The Acid Rain Program is now a mature program, and the Company believes that any market impacts of the required controls have likely been factored into the coal market.

The EPA promulgated a regional haze program designed to protect and to improve visibility at and around Class I Areas, which are generally National Parks, National Wilderness Areas and International Parks. This program may restrict the construction of new coal-fired power plants, the operation of which may impair visibility at and around the Class I Areas. Additionally, the program requires certain existing coal-fired power plants to install additional control measures designed to limit haze-causing emissions, such as sulfur dioxide, nitrogen oxide and particulate matter. States were required to submit Regional Haze SIPs to the EPA by December 2007; however, many states did not meet that deadline.

Under the CAA, new and modified sources of air pollution must meet certain new source standards (the “New Source Review Program”). In the late 1990s, the EPA filed lawsuits against owners of many coal-fired power plants in the eastern U.S. alleging that the owners performed non-routine maintenance, causing increased emissions that should have triggered the application of these new source standards. Some of these lawsuits have been settled with the owners agreeing to install additional emission control devices in their coal-fired power plants. The remaining litigation and the uncertainty around the New Source Review Program rules could adversely impact demand for coal. Regardless of the outcome of litigation on either rule, stricter controls on emissions of sulfur dioxide, nitrogen oxide and mercury are likely. Any such controls may have an adverse impact on the demand for coal, which may have a material adverse effect on the Company’s business, financial condition or results of operations.

Under the CAA, the EPA also adopts national emission standards for hazardous air pollutants. In December 2011, the EPA adopted a final rule called the Mercury and Air Toxics Standard (“MATS”), which applies to new and existing coal-fired and oil-fired units. This rule requires mercury emission reductions in fine particulates, which are being regulated as a surrogate for certain metals. In Michigan vs. Environmental Protection Agency, the U.S. Circuit Court of Appeals for the District of

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Columbia affirmed MATS, and that ruling was appealed. On June 29, 2015, the U.S. Supreme Court remanded the rule back to the Circuit Court, directing it to address deficiencies in the EPA’s MATS cost-benefit analysis. The Circuit Court directed the EPA to re-evaluate costs and benefits associated with the rule. On December 1, 2015, the EPA published a supplemental finding that consideration of costs does not alter the agency's original conclusion to regulate mercury and other air toxics through this rule. The EPA is expected to publish a final finding in the spring of 2016.

NACoal’s power generation customers must incur substantial costs to control emissions to meet all of the CAA requirements, including the requirements under MATS and the EPA's regional haze program. These costs could raise the price of coal-generated electricity, making coal-fired power less competitive with other sources of electricity, thereby reducing demand for coal. In addition, NACoal's power generation customers may choose to close coal-fired generation units or to postpone or cancel plans to add new capacity, in light of these costs and the limited time available for compliance with the requirements and the prospects of the imposition of additional future requirements on emissions from coal-fired units. If NACoal's customers cannot offset the cost to control certain regulated pollutant emissions by lowering the costs of delivery of its coal on an energy equivalent basis or if NACoal's customers elect to close coal-fired units, the Company’s business, financial condition and results of operations could be materially adversely affected.

Global climate change continues to attract considerable public and scientific attention and a considerable amount of legislative and regulatory attention in the United States. The U.S. Congress has considered climate change legislation that would reduce greenhouse gas (“GHG”) emissions, particularly from coal combustion by power plants. Enactment of laws and passage of regulations regarding GHG emissions by the U.S. or some of its states, or other actions to limit carbon dioxide emissions, such as opposition by environmental groups to expansion or modification of coal-fired power plants, could result in electric generators switching from coal to other fuel sources.

The U.S. Congress continues to consider a variety of proposals to reduce GHG emissions from the combustion of coal and other fuels. These proposals include emission taxes, emission reductions, including “cap-and-trade” programs, and mandates or incentives to generate electricity by using renewable resources, such as wind or solar power. Some states have established programs to reduce GHG emissions. Further, governmental agencies have been providing grants or other financial incentives to entities developing or selling alternative energy sources with lower levels of GHG emissions, which may lead to more competition from those entities.

The EPA has begun to establish a GHG regulation program under the CAA by issuing a finding that the emission of six GHGs, including carbon dioxide and methane, may reasonably be anticipated to endanger public health and welfare. On June 26, 2012, the U.S. Court of Appeals - DC Circuit upheld this finding. Based on this finding, in 2012 the EPA published a New Source Performance Standard for greenhouse gases, emitted from future new power plants. This was withdrawn and subsequently reissued in January 2014. On June 2, 2014, the EPA proposed new regulations limiting carbon dioxide emissions from existing power plants. On June 18, 2014, the EPA also issued a proposed carbon dioxide emission regulation for reconstructed and modified power plants, which addresses carbon dioxide emissions limits for power plants subsequent to modification. On August 3, 2015, President Obama and the EPA announced the CPP, which includes final emission guidelines for states to follow in developing plans to reduce GHG emissions from existing fossil fuel-fired electric generating units ("EGUs") as well as limits on GHG emission rates for new, modified and reconstructed EGUs. Under the CPP, nationwide carbon dioxide emissions would be reduced by 32% from 2005 levels by 2030 with emissions reductions scheduled to be phased in between 2 022 and 2030. On February 9, 2016, the U.S. Supreme Court granted a stay of the CPP pending resolution of litigation challenging the CPP. The CPP, though stayed, would require states to frame initial SIPs by September 6, 2016. The EPA has indicated it will grant states two additional years to submit final SIPs, if justified (to be submitted by September 6, 2018). Enactment of laws and passage of regulations regarding GHG emissions by the U.S. or some of its states or other actions to limit carbon dioxide emissions, such as opposition by environmental groups to expansion or modification of coal-fired power plants, could result in electric generators reducing generation or closing coal-fired power plants and/or switching from coal to other fuel sources and could have a materially adverse effect on NACoal’s business, financial condition and results of operations.

The U.S. has not implemented the 1992 Framework Convention on Global Climate Change (“Kyoto Protocol”), which became effective for many countries on February 16, 2005. The Kyoto Protocol was intended to limit or reduce emissions of GHGs. The U.S. has not ratified the emission targets of the Kyoto Protocol or any other GHG agreement. Because the first Protocol commitment period ended in 2012, an amendment to extend the Kyoto Protocol was adopted in Doha, Qatar on December 8, 2012. The U.S. is not a signatory to the amendment. Even though the U.S. has not accepted these international GHG limiting treaties or enacted domestic legislation to control GHGs, numerous lawsuits and regulatory actions have been undertaken by states and environmental groups to try to force controls on the emission of carbon dioxide; or to prevent the construction of new coal-fired power plants. On November 11, 2014, President Obama and Chinese President Xi Jinping jointly announced each nation's intentions to limit GHG emissions. These were non-binding statements of intent. As a successor to the Kyoto Protocol, on December 12, 2015, international negotiators finalized the Paris Agreement under the United Nations Framework

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Convention on Climate Change (“Paris Agreement”). Unlike the Kyoto Protocol, the Paris Agreement has no binding GHG reduction mandates on signatories. Participating countries only submit a description of their intended GHG reductions, and provide periodic progress updates, with no penalties for not meeting their self-imposed targets. The Paris Agreement also includes language stating that developed countries will provide financial assistance to help developing countries meet their GHG targets and adapt to climate change, but there are no mandated contributions. Because this agreement has no legally binding GHG reduction requirements, the President believes this does not constitute a treaty requiring Senate ratification. He is expected to sign this as a sole executive agreement. Although not legally binding, the President may use the Paris Agreement as support for continued regulatory actions limiting GHG’s. The implementation of the Paris Agreement, or other international agreements, the regulations promulgated to date by the EPA with respect to GHG emissions or the adoption of new legislation or regulations to control GHG emissions, could have a materially adverse effect on the Company’s business, financial condition and results of operations.

Signific ant public opposition has also been raised with respect to the proposed construction of certain new coal-fueled EGUs due to the potential for increased air emissions. Such opposition, as well as any corporate or investor policies against coal-fired EGUs, could also reduce the demand for NACoal’s coal. Further, policies limiting available financing for the development of new coal-fueled EGUs could adversely impact the global demand for coal in the future. The potential impact on NACoal of future laws, regulations or other policies or circumstances will depend upon the degree to which any such laws, regulations or other policies or circumstances force electricity generators to diminish their reliance on coal as a fuel source. In view of the significant uncertainty surrounding each of these factors, it is not possible for us to predict reasonably the impact that any such laws, regulations or other policies may have on NACoal’s business, financial condition and results of operations. However, such impacts could have a material adverse effect on NACoal’s business, financial condition and results of operations.

The Company believes NACoal has obtained all necessary permits under the CAA at all of its coal mining operations where it is responsible for permitting and is in compliance with such permits.
Clean Water Act

The Clean Water Act affects coal mining operations by establishing in-stream water quality standards and treatment standards for waste water discharge. Permits requiring regular monitoring, reporting and performance standards govern the discharge of pollutants into water.

Federal and state regulations establish standards that prohibit the diminution of water quality. Waters discharged from coal mines are required to meet these standards. These federal and state requirements could require more costly water treatment and could materially adversely affect the Company’s business, financial condition and results of operations.

The Company believes NACoal has obtained all permits required under the Clean Water Act and corresponding state laws and is in compliance with such permits. In many instances, mining operations require securing Clean Water Act authorization or a permit from the U.S. Army Corps of Engineers for operations in waters of the United States.

Bellaire Corporation, a wholly owned non-operating subsidiary of the Company (“Bellaire”), is treating mine water drainage from coal refuse piles associated with two former underground coal mines in Ohio and one former underground coal mine in Pennsylvania, and is treating mine water from a former underground coal mine in Pennsylvania. Bellaire anticipates that it will need to continue these activities indefinitely and has accrued a liability of $17.4 million as of December 31, 2015 related to these treatment operations.

In connection with Bellaire's normal permit renewal with the Pennsylvania Department of Environmental Protection ("DEP"), Bellaire was notified during 2004 that in order to obtain renewal of the permit Bellaire would be required to establish a mine water treatment trust (the "Trust"). On October 1, 2010, Bellaire executed a Post-Mining Treatment Trust Consent Order and Agreement with the DEP which established the Trust to provide a financial assurance mechanism in order to assure the long-term treatment of post-mining discharges. Bellaire funded the Trust with $5.0 million. See Note 7 and Note 10 for further information on the Trust.
Resource Conservation and Recovery Act
The Resource Conservation and Recovery Act ("RCRA") affects coal mining operations by establishing requirements for the treatment, storage and disposal of wastes, including hazardous wastes. Coal mine wastes, such as overburden and coal cleaning wastes, currently are exempted from hazardous waste management. In December 2014, the EPA finalized a rule specifying management standards for coal combustion residuals or coal ash ("CCRs") as a non-hazardous waste. These standards may

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raise the cost for CCR disposal at coal-fired power plants, making them less competitive, and may have an adverse impact on demand for coal.
The EPA rule exempts CCRs disposed of at mine sites and reserves any regulation thereof to the OSM. Currently, the OSM is developing rules to address the use of CCRs on coal mine sites. The outcome of these rulemakings, and any subsequent actions by EPA and OSM, could impact those NACoal operations that beneficially use CCRs. If NACoal were unable to beneficially use CCRs, its revenues for disposing of CCRs from its customers may decrease and its costs may increase due to the purchase of alternative materials for beneficial uses.
Comprehensive Environmental Response, Compensation and Liability Act
The Comprehensive Environmental Response, Compensation and Liability Act and similar state laws create liabilities for the investigation and remediation of releases of hazardous substances into the environment and for damages to natural resources. The Company must also comply with reporting requirements under the Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act.
From time to time, the Company has been the subject of administrative proceedings, litigation and investigations relating to environmental matters.
The extent of the liability and the cost of complying with environmental laws cannot be predicted with certainty due to many factors, including the lack of specific information available with respect to many sites, the potential for new or changed laws and regulations, the development of new remediation technologies and the uncertainty regarding the timing of work with respect to particular sites. As a result, the Company may incur material liabilities or costs related to environmental matters in the future, and such environmental liabilities or costs could materially and adversely affect the Company’s results of operations and financial condition. In addition, there can be no assurance that changes in laws or regulations would not affect the manner in which NACoal is required to conduct its operations.
Competition
The coal industry competes with other sources of energy, particularly oil, gas, hydro-electric power and nuclear power. In addition, it competes with subsidized green energy projects, such as biofuels, wind and solar projects. Among the factors that affect competition are the price and availability of oil and natural gas, environmental and related political considerations, the time and expenditures required to develop new energy sources, the cost of transportation, the cost of compliance with governmental regulations and the impact of federal and state energy policies. The ability of NACoal to market and develop its reserves will depend upon the interaction of these factors.
Based on industry information, NACoal believes it was one of the ten largest coal producers in the U.S. in 2015 based on total coal tons produced.
Employees
As of December 31, 2015 , NACoal had approximately 1,900 employees, including approximately 1,550 employees at the unconsolidated mines. None of NACoal’s employees are unionized as of December 31, 2015. NACoal believes its current labor relations with employees are satisfactory.

B. Hamilton Beach Brands
General
HBB is a leading designer, marketer and distributor of small electric household and specialty housewares appliances, as well as commercial products for restaurants, bars and hotels . HBB’s products are marketed primarily to retail merchants and wholesale distributors.
Sales and Marketing
HBB designs, markets and distributes a wide range of small electric household and specialty housewares appliances, including, but not limited to, blenders, can openers, coffeemakers, food processors, indoor electric grills, irons, mixers, slow cookers, toasters and toaster ovens. In addition, HBB designs, markets and distributes commercial products for restaurants, bars and hotels. HBB generally markets its “better” and “best” products under the Hamilton Beach ® brand and uses the Proctor Silex ® brand for the “good” and opening price point products. HBB entered the "only-the-best" market with licensing agreements to sell Jamba ® branded blenders and juicing products and a line of counter top appliances and kitchen tools under the Wolf Gourmet ® brand. As a result of the 2014 Weston Brands acquisition, HBB now markets a range of game and garden food processing equipment including, but not limited to, meat grinders, bag sealers, dehydrators and meat slicers under the Weston ®

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brand as well as several private label brands. HBB supplies additional private label products on a limited basis throughout North America.
HBB markets its retail products primarily in North America, but also sells products in South America, Asia and other selected markets. HBB commercial products are sold worldwide. Retail sales in North America are generated predominantly by a network of inside sales employees to mass merchandisers, e-commerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers, distributors and other retail outlets. Wal-Mart accounted for approximately 32% , 33% and 31% of HBB’s revenues in 2015 , 2014 and 2013 , respectively. HBB’s five largest customers accounted for approximately 52% , 56% and 55% of HBB’s revenues for the years ended December 31, 2015 , 2014 and 2013 , respectively. The loss of or significant reduction in sales to any key customer could result in significant decreases in HBB’s revenue and profitability and its ability to sustain or grow its business.
Sales promotion activities are primarily focused on cooperative advertising. In addition, HBB promotes certain of its innovative products through the use of television, internet and print advertising. HBB also licenses certain of its trademarks to various licensees primarily for use with microwaves, compact refrigerators, cookware, kitchen tools and gadgets and full-size household vacuums.
Because of the seasonal nature of the markets for small electric appliances, HBB’s management believes backlog is not a meaningful indicator of performance and is not a significant indicator of annual sales. Backlog represents customer orders, which may be cancelled at any time prior to shipment. Backlog for HBB was approximately $16.0 million and $17.5 million at December 31, 2015 and 2014 , respectively.
HBB’s warranty program to the consumer consists generally of a limited warranty lasting for varying periods of up to ten years for electric appliances, with the majority of products having a warranty of one year. Under its warranty program, HBB may repair or replace, at its option, those products returned under warranty.
The market for small electric household and specialty housewares appliances is highly seasonal in nature. Revenues and operating profit for HBB are traditionally greater in the second half of the year as sales of small electric appliances to retailers and consumers increase significantly with the fall holiday-selling season. Because of the seasonality of purchases of its products, HBB generally uses a substantial amount of cash or short-term debt to finance inventories and accounts receivable in anticipation of the fall holiday-selling season.
Patents, Trademarks, Copyrights and Licenses
HBB holds patents and trademarks registered in the U.S. and foreign countries for various products. HBB believes its business is not dependent upon any individual patent, copyright or license, but that the Hamilton Beach ® and Proctor Silex ® trademarks are material to its business.
Product Design and Development
HBB spent $9.6 million , $9.6 million and $8.1 million in 2015 , 2014 and 2013 , respectively, on product design and development activities.
Key Suppliers and Raw Material
HBB’s products are supplied to its specifications by third-party suppliers located primarily in China. HBB does not maintain long-term purchase contracts with suppliers and operates mainly on a purchase order basis. HBB generally negotiates purchase orders with its foreign suppliers in U.S. dollars. A weakening of the U.S. dollar against local currencies could result in certain non-U.S. manufacturers increasing the U.S. dollar prices for future product purchases.
During 2015 , HBB purchased 99% of its finished products from suppliers in China. HBB purchases its inventory from approximately 40 suppliers, two of which represented more than 10% of purchases during the year ended December 31, 2015 . HBB believes the loss of any one supplier would not have a long-term material adverse effect on its business because there are adequate supplier choices available that can meet HBB’s production and quality requirements. However, the loss of a supplier could, in the short term, adversely affect HBB’s business until alternative supply arrangements are secured.
The principal raw materials used by HBB’s third-party suppliers to manufacture its products are plastic, glass, steel, copper, aluminum and packaging materials. HBB believes adequate quantities of raw materials are available from various suppliers.

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Competition
The small electric household appliance industry does not have onerous entry barriers. As a result, HBB competes with many small manufacturers and distributors of housewares products. Based on publicly available information about the industry, HBB believes it is one of the largest full-line distributors and marketers of small electric household and specialty housewares appliances in North America based on key product categories.
Besides North America, HBB also competes to a lesser degree in Europe through its commercial product lines, and in South America and China. The competition in these geographic markets is more fragmented than in North America, and HBB is not yet a significant participant in these markets.
As retailers generally purchase a limited selection of small electric appliances, HBB competes with other suppliers for retail shelf space. HBB conducts consumer advertising for the Hamilton Beach ® brand and the Weston ® brand. HBB believes the principal areas of competition with respect to its products are product design and innovation, quality, price, product features, supply chain excellence, merchandising, promotion and warranty.
Government Regulation
HBB is subject to numerous federal and state health, safety and environmental regulations. HBB’s management believes the impact of expenditures to comply with such laws will not have a material adverse effect on HBB.
As a marketer and distributor of consumer products, HBB is subject to the Consumer Products Safety Act and the Federal Hazardous Substances Act, which empower the U.S. Consumer Product Safety Commission (“CPSC”) to seek to exclude products that are found to be unsafe or hazardous from the market. Under certain circumstances, the CPSC could require HBB to repair, replace or refund the purchase price of one or more of HBB’s products, or HBB may voluntarily do so.
Throughout the world, electrical appliances are subject to various mandatory and voluntary standards, including requirements in some jurisdictions that products be listed by Underwriters’ Laboratories, Inc. (“UL”) or other similar recognized laboratories. HBB also uses Intertek Testing Services for certification and testing of compliance with UL standards, as well as other nation- and industry-specific standards. HBB endeavors to have its products designed to meet the certification requirements of, and to be certified in, each of the jurisdictions in which they are sold.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Section 1502 (the "Dodd-Frank Act") requires public companies to disclose whether certain minerals, commonly known as "conflict minerals," are necessary to the functionality or production of a product manufactured by those companies and if those minerals originated in the Democratic Republic of the Congo ("DRC") or an adjoining country. The ongoing implementation of these disclosure requirements by HBB could adversely affect the sourcing, availability, and pricing of minerals used in the manufacture of certain components used in HBB's products. In addition, the supply-chain due diligence investigation required by the conflict minerals rules requires expenditures of resources and management attention, regardless of the results of the investigation.
Employees
As of December 31, 2015 , HBB’s work force, including Weston Brands, consisted of approximately 600 employees, none of whom are represented by unions except 16 hourly employees at HBB’s Picton, Ontario distribution facility. These employees are represented by an employee association which performs a consultative role on employment matters. None of HBB’s U.S. employees are unionized. HBB believes its current labor relations with both union and non-union employees are satisfactory.
C. Kitchen Collection
General
KC is a national specialty retailer of kitchenware operating under the Kitchen Collection ® store name in outlet and traditional malls throughout the United States. 
Sales and Marketing
KC operated 229 retail stores as of December 31, 2015 under the Kitchen Collection ® store name in outlet and traditional malls throughout the United States. The stores sell kitchenware from highly recognizable name-brands, including Hamilton Beach ® and Proctor Silex ® .

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Seasonality
Revenues and operating profit for KC are traditionally greater in the second half of the year as sales to consumers increase significantly with the fall holiday-selling season. Because of the seasonality of purchases of its products, KC incurs substantial short-term debt to finance inventories in anticipation of the fall holiday-selling season.
Product Design and Development
KC, a retailer, has limited expenditures for product design and development activities.
Product Sourcing and Distribution
KC purchases all inventory centrally, which allows KC to take advantage of volume purchase discounts and monitor controls over inventory and product mix. KC purchases its inventory from approximately 260 suppliers, one of which represented approximately 29% of purchases during the year ended December 31, 2015 . No other supplier represents more than 10% of purchases. KC believes that the loss of any one supplier would not have a long-term material adverse effect on its business because there are adequate supplier choices available that can meet KC’s requirements. However, the loss of a supplier could, in the short term, adversely affect KC’s business until alternative supply arrangements are secured.
KC currently maintains its inventory for distribution to its stores at a distribution center located near its corporate headquarters in Chillicothe, Ohio.

KC plans to focus on comparable store sales growth within its smaller core store portfolio. KC expects to accomplish this by increasing closure rates through continued refinement of its format, ongoing review of specific product offerings, merchandise mix, store displays and appearance and enhancing customers' store experience through improved customer interactions. Increasing sales of higher-margin products will also continue to be a key focus, as well as continuing to evaluate and, as lease contracts permit, terminate or restructure leases for underperforming and loss-generating stores.
Competition
KC competes against a diverse group of retailers, including specialty stores, department stores, discount stores and internet and catalog retailers. The retail environment continues to be extremely competitive. Widespread Chinese sourcing of products allows many retailers to offer value-priced kitchen products.
KC believes there is growth potential in kitchenware retailing, but only through offering unique, high-quality products at prices affordable to most consumers. While a number of very low-end and very high-end kitchenware retailers participate in the marketplace, KC believes there is still an opportunity for stores offering mid-priced, high-quality kitchenware.
Patents, Trademarks, Copyrights and Licenses
KC holds a trademark registered in the U.S. for the Kitchen Collection ® store name and believes that the trademark is material to its business.
Employees
As of December 31, 2015 , KC’s work force consisted of approximately 1,100 employees. None of KC’s employees are unionized. KC believes its current labor relations with employees are satisfactory.
Item 1A. RISK FACTORS
North American Coal
Termination of or default under long-term mining contracts could materially reduce the Company's profitability.
Substantially all of NACoal's profits are derived from long-term mining contracts. The contracts for certain of NACoal's unconsolidated mines permit or obligate the customer under some conditions to acquire the assets or stock of the NACoal subsidiary for an amount roughly equal to book value. If any of NACoal's long-term mining contracts were terminated or if any of its customers were to default under the contracts, profitability could be materially reduced to the extent that NACoal is unable to find alternative customers at the same level of profitability.
NACoal's unconsolidated mines are subject to risks created by changes in customer demand, inflationary adjustments and tax rates.
The contracts with the unconsolidated mines’ customers provide for reimbursement to the Company at a price based on actual costs plus an agreed pre-tax profit per ton of coal sold or actual costs plus a management fee during the production stage.

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During the development stage, the contracts with the unconsolidated mines' customers (other than the Coyote Creek and Bisti customers) provide for reimbursement of actual costs incurred plus a monthly management fee. Coyote Creek's customer does not reimburse developments costs until the production stage, when certain deferred development costs are reimbursed over a 52-month period. Bisti's customer does not reimburse transition period costs until the production stage, when all transition costs are reimbursed over a 24-month period. During the production stage, the unconsolidated mines' customers pay the Company its per-ton profit or management fee only for the coal delivered to them for consumption or use . As a result, reduced coal usage by customers for any reason, including, but not limited to, fluctuations in demand due to unanticipated weather conditions, scheduled and unscheduled power plant outages, economic conditions or governmental regulations or comparable policies which may promote dispatch of power generated by renewables such as wind or solar ahead of coal, could have a material adverse effect on the Company's results of operations. Because of the contractual price formulas for the sale of coal and mining services by these unconsolidated mines, the profitability of these operations is also subject to fluctuations in inflationary adjustments (or lack thereof) that can impact the per ton profit or management fee paid for the coal and taxes applicable to NACoal's income on that coal. In addition, any changes in tax laws that eliminate benefits for percentage depletion would have a material adverse effect on the Company. These factors could materially reduce NACoal's profitability.
NACoal’s consolidated mining operations are subject to risks created by its capital investment in the mines, the costs of mining the coal and equipment costs, growing use of alternative generation that competes with coal fired generation, in addition to risks created by changes in customer demand, inflationary adjustments and tax rates.
The consolidated mining operations are comprised of MLMC, Centennial, dragline mining services, royalties from mineral leases to other mining and oil and gas companies, and other activities. The profitability of these consolidated mining operations is subject to the risk of loss of investment in these operations, changes in demand from customers, as well as increases in the cost of mining the coal and growing competition from alternative generation that competes with coal fired generation. At MLMC, the costs of mining operations are not reimbursed by customers. As such, increased costs at MLMC could materially reduce NACoal's profitability. In addition, MLMC sells lignite at contractually agreed upon coal prices which are subject to changes in the level of established indices over time. The price of diesel fuel is heavily-weighted among these indices. As such, a substantial decline in diesel prices could materially reduce NACoal's profitability, as the decline in revenue will only be partially offset by the effect of lower diesel prices on production costs.
NACoal's operations are subject to changes in customer demand for any reason, including, but not limited to, fluctuations in demand due to unanticipated weather conditions, the emergence of unidentified adverse mining conditions, availability of alternative fuels such as natural gas at reduced prices making coal-fueled generation less competitive with natural gas-fueled generation, regulations or comparable policies which may promote dispatch of power generated by renewables such as wind or solar ahead of coal, planned and unplanned power plant outages, economic conditions, including economic conditions that adversely affect the demand for coal and steel, governmental regulations, inflationary adjustments and tax risks. In addition, any changes in tax laws that eliminate benefits for percentage depletion or eliminate the expensing of exploration and development costs could have a material adverse effect on NACoal's profitability.
Mining operations are vulnerable to weather and other conditions that are beyond NACoal's control.
Many conditions beyond NACoal's control can decrease the delivery, and therefore the use, of coal to NACoal's customers. These conditions include weather, adverse mining conditions, availability of alternative fuels such as natural gas at reduced prices making coal-fueled generation less competitive with natural gas-fueled generation, unexpected maintenance problems and shortages of replacement parts, which could significantly reduce the Company's profitability.
Government regulations could impose costly requirements on NACoal.
The coal mining industry is subject to extensive regulation by federal, state and local authorities on matters concerning the health and safety of employees, land use, permit and licensing requirements, air and water quality standards, plant and wildlife protection, reclamation and restoration of mining properties after mining, the discharge of GHGs and other materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. Legislation mandating certain benefits for current and retired coal miners also affects the industry. Mining operations require numerous governmental permits and approvals. NACoal is required to prepare and present to federal, state or local authorities data pertaining to the impact the production of coal may have upon the environment. The public, including non-governmental organizations, opposition groups and individuals, have statutory rights to comment upon and submit objections to requested permits and approvals. Compliance with these requirements may be costly and time-consuming and may delay commencement or continuation of development or production. New legislation and/or regulations and orders may materially adversely affect NACoal's mining operations or its cost structure. All of these factors could significantly reduce the Company's profitability. See “Item 1. Business — A. North American Coal — Government Regulation" on page 11 in this Form 10-K for further discussion.

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NACoal is subject to burdensome federal and state mining regulations.
Federal and state statutes require NACoal to restore mine property in accordance with specified standards and an approved reclamation plan, and require that NACoal obtain and periodically renew permits for mining operations. Regulations require NACoal to incur the cost of reclaiming current mine disturbance. Although the Company believes that appropriate accruals have been recorded for all expected reclamation and other costs associated with closed mines, future profitability would be adversely affected if accruals for these costs are later determined to be insufficient or if changed conditions, including adverse judicial proceedings or revised assumptions, require a change in these reserves.
The Clean Air Act and Clean Power Plan could reduce the demand for coal.

The process of burning coal can cause many compounds and impurities in the coal to be released into the air, including carbon dioxide, sulfur dioxide, nitrogen oxides, mercury, particulates and other matter. The CAA, CPP and the corresponding state laws that extensively regulate the emissions of materials into the air affect coal mining operations both directly and indirectly. Direct impacts on coal mining operations occur through CAA permitting requirements and/or CPP emission control requirements relating to air contaminants, especially particulate matter. Indirect impacts on coal mining operations occur through regulation of the air emissions of carbon dioxide, sulfur dioxide, nitrogen oxides, mercury, particulate matter and other compounds emitted by coal-fired power plants. The EPA has promulgated or proposed regulations that impose tighter emission restrictions on a number of these compounds, some of which are currently subject to litigation. The general effect of tighter restrictions could be to reduce demand for coal. A reduction in coal’s share of the capacity for power generation could have a material adverse effect on the Company’s business, financial condition and results of operations. See “Item 1. Business — A. North American Coal — Government Regulation" on page 11 in this Form 10-K for further discussion.
NACoal is subject to the high costs and risks involved in the development of new coal and dragline mining projects.
From time to time, NACoal seeks to develop new coal and dragline mining projects. The costs and risks associated with such projects can be substantial. In addition, any changes in tax laws that eliminate the expensing of exploration and development costs will increase the after-tax cost of building a mine and make the cost of coal less competitive with other power-generation fuels.
Estimates of NACoal's recoverable coal reserves involve uncertainties, and inaccuracies in these estimates could result in lower than expected revenues, higher than expected costs, decreased profitability and asset impairments.
NACoal estimates recoverable coal reserves based on engineering and geological data assembled and analyzed by internal and, less frequently, external engineers and geologists. NACoal's estimates as to the quantity and quality of the coal in its reserves are updated annually to reflect production of coal from the reserves and new drilling, engineering or other data. These estimates depend upon a variety of factors and assumptions, many of which involve uncertainties and factors beyond NACoal's control, such as geological and mining conditions that may not be fully identified by available exploration data or that may differ from experience in current operations.
For these reasons, estimates of the recoverable quantities and qualities attributable to any particular group of properties, classifications of reserves based on risk of recovery and estimates of net cash flows expected from particular reserves may vary substantially. In addition, coal tonnage recovered from identified reserve areas or properties and revenues and expenditures with respect to NACoal's reserves may vary materially from estimates. Accordingly, NACoal's estimates may vary from the actual reserves. Any inaccuracy in the reserve estimates could result in lower than expected revenues, higher than expected costs, decreased profitability and asset impairments.
Hamilton Beach Brands
HBB's business is sensitive to the strength of the North American retail markets and weakness in these markets could adversely affect its business.
The strength of the retail economy in the United States, and to a lesser degree in Canada and Mexico, has a significant impact on HBB's performance. Weakness in consumer confidence and poor financial performance by mass merchandisers,
e-commerce retailers, warehouse clubs, department stores or any of HBB's other customers could result in reduced revenues and profitability. A general slowdown in the retail sector could result in additional pricing and marketing support pressures on HBB.

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The market for HBB's products is highly seasonal and dependent on consumer spending, which could result in significant variations in the Company's revenues and profitability.
Sales of HBB's products are related to consumer spending. A downturn in the general economy or a shift in consumer spending away from small electric household and specialty housewares appliances could adversely affect its business. In addition, the market for small electric household and specialty housewares appliances is highly seasonal in nature. HBB generally recognizes a substantial portion of its sales in the last half of the year as sales of small electric appliances to retailers and consumers increase significantly with the fall holiday-selling season. Accordingly, quarter-to-quarter comparisons of past operating results of HBB are meaningful only when comparing equivalent time periods, if at all. Any economic downturn, decrease in consumer spending or shift in consumer spending away from small electric household and specialty housewares appliances may significantly reduce revenues and profitability.
HBB is dependent on key customers and the loss of, or significant decline in business from, one or more of its key customers could materially reduce its revenues and profitability and its ability to sustain or grow its business.
HBB relies on several key customers, which is discussed under “Item 1. Business — B. Hamilton Beach Brands — Sales and Marketing" on page 16 in this Form 10-K. Although HBB has long-established relationships with many customers, it does not have any long-term supply contracts with these customers, and purchases are generally made using individual purchase orders. A loss of any key customer could result in significant decreases in HBB's revenues and profitability and an inability to sustain or grow its business.
HBB must receive a continuous flow of new orders from its large, high-volume retail customers; however, it may be unable to continually meet the needs of those customers. In addition, failure to obtain anticipated orders or delays or cancellations of orders or significant pressure to reduce prices from key customers could impair its ability to sustain or grow its business.
As a result of dependence on its key customers, HBB could experience a material adverse effect on its revenues and profitability if any of the following were to occur:
the insolvency or bankruptcy of any key customer;
a declining market in which customers materially reduce orders or demand lower prices; or
a strike or work stoppage at a key customer facility, which could affect both its suppliers and customers.
If HBB were to lose, or experience a significant decline in business from, any major retail customer or if any major retail customers were to go bankrupt, HBB might be unable to find alternate distribution outlets.
HBB depends on third-party suppliers for the manufacturing of all of its products, which subjects the Company to risks, including unanticipated increases in expenses, decreases in revenues and disruptions in the supply chain.
HBB is dependent on third-party suppliers for the manufacturing of all of its products. HBB's ability to select reliable suppliers who provide timely deliveries of quality products will impact its success in meeting customer demand. Any inability of HBB's suppliers to timely deliver products that meet HBB's specifications or any unanticipated changes in suppliers could be disruptive and costly to the Company. Any significant failure by HBB to obtain quality products on a timely basis at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on the Company's revenues and profitability.
Because HBB's suppliers are primarily based in China, international operations subject the Company to additional risks including, among others:
currency fluctuations;
labor unrest;
potential political, economic and social instability;
lack of developed infrastructure;
restrictions on transfers of funds;
import and export duties and quotas;
changes in domestic and international customs and tariffs;

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uncertainties involving the costs to transport products;
long distance shipping routes dependent upon a small group of shipping and rail carriers;
unexpected changes in regulatory environments;
regulatory issues involved in dealing with foreign suppliers and in exporting and importing products;
protection of intellectual property;
difficulty in complying with a variety of foreign laws;
difficulty in obtaining distribution and support; and
potentially adverse tax consequences.
The foregoing factors could have a material adverse effect on HBB's ability to maintain or increase the supply of products, which may result in material increases in expenses and decreases in revenues and profitability.
HBB is subject to foreign currency exchange risk
A portion of HBB's revenues is derived from international operations, and HBB anticipates that a portion of sales will continue to come from outside the U.S. in the future. HBB's international revenues may be adversely affected by fluctuations in foreign currency exchange rates. A discussion of the financial impact of exchange rate fluctuations is contained in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations". Any hedging activities HBB engages in may only offset a portion of the adverse financial impact resulting from unfavorable changes in foreign currency exchange rates. HBB cannot predict with any certainty changes in foreign currency exchange rates or the degree to which HBB can mitigate these risks.
Increases in costs of products may materially reduce the Company's profitability.
Factors that are largely beyond the Company's control, such as movements in commodity prices for the raw materials needed by suppliers of HBB's products, may affect the cost of products, and HBB may not be able to pass those costs on to its customers. As an example, HBB's products require a substantial amount of plastic. Because the primary resource used in plastic is petroleum, the cost and availability of plastic varies to a great extent with the price of petroleum. When the prices of petroleum, as well as steel, aluminum and copper, increase significantly, they may materially reduce the Company's profitability.
The increasing concentration of HBB's small electric household and specialty housewares appliance sales among a few retailers and the trend toward private label brands could materially reduce revenues and profitability.
With the growing trend towards the concentration of HBB's small electric household and specialty housewares appliance sales among a few retailers, HBB is increasingly dependent upon fewer customers whose bargaining strength is growing as a result of this concentration. HBB sells a substantial quantity of products to mass merchandisers, e-commerce retailers, national department stores, variety store chains, drug store chains, specialty home retailers and other retail outlets. These retailers generally purchase a limited selection of small electric household and specialty housewares appliances. As a result, HBB competes for retail shelf space with its competitors. In addition, certain of HBB's larger customers use their own private label brands on household appliances that compete directly with some of HBB's products. As the retailers in the small electric household appliance industry become more concentrated, competition for sales to these retailers may increase, which could materially reduce the Company's revenues and profitability.
The small electric household, specialty housewares appliances and commercial appliance industry is consolidating, which could reduce HBB's ability to successfully secure product placements at key customers and limit its ability to sustain a cost competitive position in the industry.
Over the past several years, the small electric household, specialty housewares appliances and commercial appliance industry has undergone substantial consolidation, and further consolidation is likely. As a result of this consolidation, the small electric household, specialty housewares appliances and commercial appliance industry primarily consists of a limited number of large distributors. HBB’s ability to gain or maintain share of sales in the small electric household, specialty housewares appliances and commercial appliance industry or maintain or enhance HBB’s relationships with key customers may be limited as a result of actions by competitors, including as a result of increased consolidation in the small electric household, specialty housewares appliances and commercial appliance industry.

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If HBB is unable to continue to enhance existing products, as well as develop and market new products, that respond to customer needs and preferences and achieve market acceptance, the Company may experience a decrease in demand for its products, which could materially reduce revenues and profitability, which have historically benefited from sales of new products.
One of HBB’s strategic initiatives is to enhance placements through consumer-driven innovative products to generate revenue growth. HBB may not be able to compete as effectively with competitors, and ultimately satisfy the needs and preferences of customers, unless HBB can continue to enhance existing products and develop new innovative products for the markets in which HBB competes. Product development requires significant financial, technological, and other resources. Product improvements and new product introductions also require significant research, planning, design, development, engineering, and testing at the technological and product process levels and HBB may not be able to timely develop and introduce product improvements or new products. Competitors' new products may beat HBB’s products to market, be higher quality or more reliable, be more effective with more features, obtain better market acceptance, or render HBB’s products obsolete. Any new products that HBB develops may not receive market acceptance or otherwise generate any meaningful revenues or profits for the Company relative to our expectations based on, among other things, commitments to fund advertising, marketing, promotional programs and development.
HBB's inability to compete effectively with competitors in its industry, including large established companies with greater resources, could result in lost market share and decreased revenues.
The small electric household, specialty housewares appliances and commercial appliance industry does not have substantial entry barriers. As a result, HBB competes with many small manufacturers and distributors of housewares products. Additional competitors may also enter this market and cause competition to intensify. For example, some of HBB's customers have expressed interest in sourcing, or expanding the extent of sourcing, small electric household and commercial appliances directly from manufacturers in Asia. The Company believes competition is based upon several factors, including product design and innovation, quality, price, product features, merchandising, promotion and warranty. If HBB fails to compete effectively with these manufacturers and distributors, it could lose market share and experience a decrease in revenues, which would adversely affect the Company's results of operations.
HBB also competes with established companies, a number of which have substantially greater facilities, personnel, financial and other resources. In addition, HBB competes with retail customers, who use their own private label brands, and importers and foreign manufacturers of unbranded products. Some competitors may be willing to reduce prices and accept lower profit margins to compete. As a result of this competition, HBB could lose market share and revenues.
Government regulations could impose costly requirements on HBB.
The SEC adopted conflict mineral rules under Section 1502 of Dodd-Frank on August 22, 2012. The rules require disclosure of the use of certain minerals, known as "conflict minerals," which are mined from the DRC and adjoining countries. HBB expects that it will incur additional costs and expenses, which may be significant, in order to comply with these rules, including (i) due diligence to verify the sources of such conflict minerals; and (ii) any changes that HBB may make to its products, processes, or sources of supply as a result of such diligence and verification activities. Since HBB's supply chain is complex, ultimately it may not be able to designate all products as "DRC conflict free" which may adversely affect its reputation with certain customers. In such event, HBB may also face difficulties in satisfying customers who require products purchased from HBB to be "DRC conflict free". If HBB is not able to meet such requirements, customers may choose not to purchase HBB products, which could adversely affect sales and the value of portions of HBB's inventory. Further, there may be only a limited number of suppliers offering products containing only DRC conflict free parts, components and subassemblies and, as a result, HBB cannot be sure that it will be able to satisfy its purchase requirements from such suppliers in sufficient quantities or at competitive prices. Any one or a combination of these various factors could harm HBB's business, and materially and adversely affect HBB's results of operations.
Kitchen Collection
The market for KC's products is highly seasonal and dependent on consumer spending, which could result in significant variations in the Company's revenues and profitability.
Sales of products sold at KC stores are subject to a number of factors related to consumer spending, including general economic conditions affecting disposable consumer income such as unemployment rates, business conditions, interest rates, levels of consumer confidence, energy prices, mortgage rates, the level of consumer debt and taxation. In addition, KC generally recognizes a substantial portion of its revenues and operating profit in the last half of the year as sales to consumers increase significantly with the fall holiday-selling season. Accordingly, any economic downturn, decrease in consumer

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spending or a shift in consumer spending away from KC's products could significantly reduce, or cause significant variations in, KC's revenues and profitability.
KC faces an extremely competitive specialty retail market, and such competition could result in a reduction of KC's prices and loss of market share.
The retail market is highly competitive. KC competes against a diverse group of retailers, including specialty stores, department stores, discount stores and internet and catalog retailers. Widespread sourcing of products allows many retailers to offer value-priced kitchen products. Many of KC's competitors are larger and have significantly greater financial, marketing and other resources. This competition could result in the reduction of KC product prices and a loss of market share, revenues and profitability.
KC may not be able to forecast customer preferences accurately in its merchandise selections.
KC's success depends in part on its ability to anticipate the tastes of its customers and to provide merchandise that appeals to their preferences. KC's strategy requires merchandising staff to introduce products that meet current customer preferences and that are affordable and distinctive in quality and design. KC's failure to anticipate, identify or react appropriately to changes in consumer trends could cause excess inventories and higher mark-downs or a shortage of products and could harm KC's business and operating results.
KC depends on third-party suppliers for all of its products, which subjects KC to risks, including unanticipated increases in expenses, decreases in revenues and disruptions in the supply chain.
KC is dependent on third-party suppliers for all of its products. KC's inability to select reliable suppliers who provide timely deliveries of quality products could reduce its success in meeting customer demand. Any inability of KC's suppliers to timely deliver products or any unanticipated changes in suppliers could be disruptive and costly to KC. The loss of a supplier could, in the short term, adversely affect KC’s business until alternative supply arrangements are secured. In addition, KC may not be able to acquire desired merchandise in sufficient quantities on acceptable terms in the future. KC's business could also be adversely affected by delays in product shipments due to freight difficulties, strikes or other difficulties at its principal transport providers. Any significant failure by KC to obtain products on a timely basis at an affordable cost or any significant delays or interruptions of supply could have a material adverse effect on KC's profitability.
NACCO
The Company may be subject to risk relating to increasing cash requirements of certain employee benefits plans, which may affect its financial position.
Although the Company's defined benefit pension plans are frozen and no longer provide for the accrual of future benefits, the expenses recorded for, and cash contributions required to be made to its defined benefit pension plans are dependent on changes in market interest rates and the value of plan assets, which are dependent on actual investment returns. Significant changes in market interest rates, decreases in the value of plan assets or investment losses on plan assets may require the Company to increase the cash contributed to defined benefit pension plans which may affect its financial position.
The Company may become subject to claims under foreign laws and regulations, which may be expensive, time consuming and distracting.
Because the Company has employees, property and business operations outside of the United States, the Company is subject to the laws and the court systems of many jurisdictions. The Company may become subject to claims outside the U.S. for violations or alleged violations of laws with respect to the current or future foreign operations of NACoal and HBB. In addition, these laws may be changed or new laws may be enacted in the future. International litigation is often expensive, time consuming and distracting. As a result, any of these risks could significantly reduce the Company's profitability and its ability to operate its businesses effectively.
The Company is dependent on key personnel and the loss of these key personnel could significantly reduce its profitability.
The Company is highly dependent on the skills, experience and services of its key personnel and the loss of key personnel could have a material adverse effect on its business, operating results and financial condition. Employment and retention of qualified personnel is important to the successful conduct of the Company's business. Therefore, the Company's success also depends upon its ability to recruit, hire, train and retain additional skilled and experienced management personnel. The Company's inability to hire and retain personnel with the requisite skills could impair its ability to manage and operate its business effectively and could significantly reduce its profitability.

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The amount and frequency of dividend payments made on NACCO's common stock could change.
The Board of Directors has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on earnings, capital and future expense requirements, financial conditions, contractual limitations and other factors the Board of Directors may consider. Accordingly, holders of NACCO's common stock should not rely on past payments of dividends in a particular amount as an indication of the amount of dividends that will be paid in the future.
The Company’s business could suffer if NACCO’s information technology systems are disrupted,cease to operate effectively or if the Company experiences a security breach.
The Company relies heavily on information technology systems to operate websites; record and process transactions; respond to customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; and maintain cost-efficient operations. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of computer hardware and software systems and maintain cyber security. Despite the Company's cyber security efforts, the Company’s information technology systems may be vulnerable from time to time to damage or interruption from computer viruses, power outages, third-party intrusions and other technical malfunctions. If the Company’s systems are damaged, or fail to function properly, NACCO may have to make monetary investments to repair or replace the systems and could endure delays in operations.
In addition, the Company regularly evaluates information technology systems and requirements and from time to time implements modifications and/or upgrades to the information technology systems that support its businesses. Modifications include replacing existing systems with successor systems, making changes to existing systems and acquiring new systems with new functionality. There are inherent risks associated with replacing and modifying these systems, including inaccurate system information, system disruptions and user acceptance and understanding. The Company believes it is taking appropriate action to mitigate the risks through disciplined adherence to program management, testing systems and user involvement, improving the resiliency of systems, as well as securing appropriate commercial contracts with third-party vendors but there can be no assurance that the Company's actions will be successful or sufficient.
Any material disruption or slowdown of the Company’s systems, including a disruption or slowdown caused by a security breach or the Company’s failure to successfully upgrade its systems, could cause information, including data related to customer orders, to be lost or delayed. Such a loss or delay could reduce demand and cause the Company’s sales and/or profitability to decline.
Through the Company’s sales and marketing activities and its business operations, the Company collects and stores confidential information and certain personal information from its customers, vendors and employees. For example, the Company handles, collects and stores personal information in connection with its customers purchasing products or services, or otherwise communicating or interacting with the Company. The Company also accepts payments using a variety of methods, including debit and credit cards, gift cards, electronic transfer of funds and others. Although the Company has taken steps designed to safeguard such information, there can be no assurance that such information will be protected against unauthorized access, use or disclosure. Unauthorized parties may penetrate the Company’s or its vendors’ network security and, if successful, misappropriate such information. Additionally, methods to obtain unauthorized access to confidential information change frequently and may be difficult to detect, which can impact the Company’s ability to respond appropriately. The Company could be subject to liability for failure to comply with privacy and information security laws, for failing to protect personal information or for failing to respond appropriately. Loss, unauthorized access to, or misuse of confidential or personal information could disrupt the Company’s operations, damage the Company’s reputation, and expose the Company to claims from customers, financial institutions, regulators, payment card associations, employees and other persons, any of which could have an adverse effect on the Company’s business, financial condition and results of operations.
Certain members of the Company's extended founding family own a substantial amount of its Class A and Class B common stock and, if they were to act in concert, could control the outcome of director elections and other stockholder votes on significant corporate actions.
The Company has two classes of common stock: Class A common stock and Class B common stock. Holders of Class A common stock are entitled to cast one vote per share and, as of December 31, 2015, accounted for approximately 25 percent of the voting power of the Company. Holders of Class B common stock are entitled to cast ten votes per share and, as of December 31, 2015, accounted for the remaining voting power of the Company. As of December 31, 2015, certain members of the Company's extended founding family held approximately 35 percent of the Company's outstanding Class A common stock and approximately 98 percent of the Company's outstanding Class B common stock. On the basis of this common stock ownership, certain members of the Company's extended founding family could have exercised 82 percent of the Company's total voting power. Although there is no voting agreement among such extended family members, in writing or otherwise, if they were to act in concert, they could control the outcome of director elections and other stockholder votes on significant corporate actions, such as certain amendments to the Company's certificate of incorporation and sales of the Company or

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substantially all of its assets. Because certain members of the Company's extended founding family could prevent other stockholders from exercising significant influence over significant corporate actions, the Company may be a less attractive takeover target, which could adversely affect the market price of its common stock.

Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
A. NACCO
NACCO leases office space in Mayfield Heights, Ohio, a suburb of Cleveland, Ohio, which serves as its corporate headquarters.

B. NACoal

NACoal leases its corporate headquarters office space in Plano, Texas. NACoal’s proven and probable coal reserves and deposits (owned in fee or held under leases, which generally remain in effect until exhaustion of the reserves if mining is in progress) are estimated at approximately 2.0 billion tons (including the unconsolidated mining operations), all of which are lignite coal deposits, except for approximately 89.0 million tons of bituminous coal. Reserves are estimates of quantities of coal, made by NACoal’s geological and engineering staff, which are considered mineable in the future using existing operating methods. Developed reserves are those which have been allocated to mines which are in operation; all other reserves are classified as undeveloped. Information concerning mine type, reserve data and coal quality characteristics for NACoal’s properties are set forth on the table on pages 4 and 5 under “Item 1. Business — A. North American Coal — Sales, Marketing and Operations.”
C. Hamilton Beach Brands
The following table presents the principal distribution and office facilities owned or leased by HBB:
 
 
Owned/
 
 
Facility Location
 
Leased
 
Function(s)
Glen Allen, Virginia
 
Leased
 
Corporate headquarters
Geel, Belgium
 
(1)
 
Distribution center
Shenzhen, People's Republic of China
 
(1)
 
Distribution center
Mexico City, Mexico
 
Leased
 
Mexico sales and administrative headquarters
Tlalnepantla de Baz, Mexico
 
(1)
 
Distribution center
Olive Branch, Mississippi
 
Leased
 
Distribution center
Picton, Ontario, Canada
 
Leased
 
Distribution center
Southern Pines, North Carolina
 
Owned
 
Service center for customer returns; catalog distribution center; parts distribution center
Shenzhen, People's Republic of China
 
Leased
 
Administrative office
Markham, Ontario, Canada
 
Leased
 
Canada sales and administration headquarters
City of Sao Paulo, Sao Paulo, Brazil
 
Leased
 
Brazil sales and administrative headquarters
Jundiai, Sao Paulo, Brazil
 
(1)
 
Distribution center
Shanghai, People's Republic of China
 
Leased
 
Sales office
Shanghai, People's Republic of China
 
(1)
 
Distribution center
Independence, Ohio
 
Leased
 
Weston Brands sales office

(1)
This facility is not owned or leased by HBB. This facility is managed by a third-party distribution provider.
Sales offices are also leased in several cities in the United States, Canada, China and Mexico.

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D. The Kitchen Collection

KC leases its corporate headquarters building and the KC warehouse/distribution facility in Chillicothe, Ohio. KC leases its retail stores. A typical Kitchen Collection ® store is approximately 3,000 square feet. At December 31, 2015 , there were 229 Kitchen Collection ® stores.

Item 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any material legal proceeding other than ordinary routine litigation incidental to its respective business.

Item 4. MINE SAFETY DISCLOSURES
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 filed with this Form
10-K.


Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The information under this Item is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
There exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was elected. Each executive officer serves until his or her successor is elected and qualified.
The following tables set forth the name, age, current position and principal occupation and employment during the past five years of the Company’s executive officers. Certain executive officers of the Company listed below are also executive officers for certain of NACCO's subsidiaries.

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EXECUTIVE OFFICERS OF THE COMPANY
Name
 
Age
 
Current Position
 
Other Positions
 
 
 
 
 
 
 
Alfred M. Rankin, Jr.
 
74

 
Chairman, President and Chief Executive Officer of NACCO (from prior to 2011), Chairman of HBB (from prior to 2011), Chairman of KC (from prior to 2011), Chairman of NACoal (from prior to 2011)
 
Chairman, President and Chief Executive Officer of Hyster-Yale Materials Handling, Inc. (from September 2012). Chairman of Hyster-Yale Group ("Hyster-Yale"), formerly NACCO Materials Handling Group, Inc. ("NMHG")(from prior to 2011).
 
 
 
 
 
 
 
J.C. Butler, Jr.
 
55

 
Senior Vice President - Finance, Treasurer and Chief Administrative Officer of NACCO (from September 2012), President and Chief Executive Officer of NACoal (from July 2015), Assistant Secretary of HBB and KC (from November 2012)
 
From July 2014 to July 2015, Senior Vice President - Project Development, Administration and Mississippi Operations of NACoal. From prior to 2011 to June 2014, Senior Vice President - Project Development and Administration of NACoal. From prior to 2011 to September 2012, Vice President - Corporate Development and Treasurer of NACCO. From September 2011 to September 2012, Treasurer of NMHG.
 
 
 
 
 
 
 
Elizabeth I. Loveman
 
46

 
Vice President and Controller (from March 2014) and Principal Financial Officer (from June 2014)
 
From December 2012 to March 2014, Director of Financial Reporting of NACCO. From prior to 2011 to November 2012, Manager of Financial Reporting of OM Group, Inc.
 
 
 
 
 
 
 
John D. Neumann
 
40

 
Vice President, General Counsel and Secretary of NACCO (from September 2012), Vice President, General Counsel and Secretary of NACoal (from January 2011), Assistant Secretary of HBB and KC (from November 2012)
 
 
 
 
 
 
 
 
 
Miles B. Haberer
 
49

 
Associate General Counsel of NACCO (from October 2012), Associate General Counsel, Assistant Secretary of NACoal (from October 2012) and President of North American Coal Royalty Company (an NACoal subsidiary) (from September 2015)    
                                                        

 
From October 2013 to September 2015, Director-Land of NACoal. From October 2012 to September 2015, Assistant Secretary of NACCO. From prior to 2011 to October 2012, Partner, Hunton & Williams (law firm). 

 
 
 
 
 
 
 
Mary D. Maloney
 
54

 
Associate General Counsel, Assistant Secretary and Senior Director - Benefits & Human Resources of NACCO (from January 1, 2014), Associate General Counsel, Assistant Secretary and Senior Director - Benefits and Compensation of NACoal (from January 1, 2014)

 
From September 2012 to December 2013, Associate General Counsel and Assistant Secretary of Hyster-Yale and NMHG. From May 2012 to September 2012, Assistant General Counsel and Assistant Secretary of Hyster-Yale. From prior to 2011 to September 2012, Assistant General Counsel and Assistant Secretary of NACCO. From August 2011 to September 2012, Assistant Secretary of NMHG.
 
 
 
 
 
 
 
Jesse L. Adkins
 
33

 
Associate Counsel (from September 2012) and Assistant Secretary of NACCO (from November 2013), Associate Counsel (from August 2012) and Assistant Secretary (from May 2013) of NACoal                                
                          

 
From January 2011 to August 2012, Law Clerk, NACoal.

 
 
 
 
 
 
 
Thomas A. Maxwell
 
38

 
Director of Financial Planning and Analysis and Assistant Treasurer (from September 2015)

 
From January 2014 to September 2015, Senior Manager, Finance and Assistant Treasurer. From 2011 to January 2014, Manager of Financial Planning and Analysis.

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PRINCIPAL OFFICERS OF THE COMPANY’S SUBSIDIARIES
A. NACOAL
Name
 
Age
 
Current Position
 
Other Positions
 
 
 
 
 
 
 
Carroll L. Dewing
 
59

 
Vice President - North Dakota, Texas and Florida Operations, Human Resources and External Affairs of NACoal (from July 2014) and President, The Coteau Properties Company (an NACoal subsidiary) (from September 2011)
 
From October 2013 to July 2014, President, The Coteau Properties Company (an NACoal subsidiary) and Director - Northern Operations of NACoal. From September 2011 to October 2013, President, The Coteau Properties Company. From prior to 2011 to September 2011, President, The Falkirk Mining Company (an NACoal subsidiary).

 
 
 
 
 
 
 
Michael J. Gregory
 
68

 
Vice President - Marketing and Special Projects of NACoal (from October 2013)
 
From prior to 2011 to September 2013, Vice President - International Operations and Special Projects of NACoal.
 
 
 
 
 
 
 
K. Donald Grischow
 
68

 
Treasurer, Director - Compensation and Benefits and Global Risk Management of NACoal (from January 2013)
 
From prior to 2011 to December 2012, Treasurer of NACoal
 
 
 
 
 
 
 
John R. Pokorny
 
60

 
Controller of NACoal (from prior to 2011)
 
 
 
 
 
 
 
 
 
J. Patrick Sullivan, Jr.


 
57

 
Vice President and Chief Financial Officer of NACoal (from May 2013)
 
From prior to 2011 to May 2013, Controller, Luminant Generation, Mining, Construction and Development of Energy-Future Holdings Corporation.
 
 
 
 
 
 
 
Harry B. Tipton, III
 
58

 
Vice President - Engineering, and Alabama, Louisiana and Mississippi Operations of NACoal (from July 2015)

 
From July 2014 to June 2015, Vice President - Engineering, and Alabama and Louisiana Operations of NACoal. From October 2013 to June 2014, Vice President - Engineering, and Alabama, Louisiana and Mississippi Operations of NACoal. From prior to 2011 to October 2013, Vice President - Engineering, and Louisiana and Mississippi Operations of NACoal.

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PRINCIPAL OFFICERS OF THE COMPANY’S SUBSIDIARIES
B. HBB
Name
 
Age
 
Current Position
 
Other Positions
 
 
 
 
 
 
 
Gregory H. Trepp
 
54

 
President and Chief Executive Officer of HBB (from prior to 2011), Chief Executive Officer of KC (from prior to 2011)
 
From November 2013 to December 2014, Interim President of KC.
 
 
 
 
 
 
 
Keith B. Burns
 
59

 
Vice President, Engineering and Information Technology of HBB (from prior to 2011)
 
 
 
 
 
 
 
 
 
D. Scott Butler
 
64

 
Corporate Controller (from prior to 2011)
 
 
 
 
 
 
 
 
 
Richard E. Moss
 
52

 
Senior Director, Finance &Treasurer of HBB (from January 2011)
 
 
 
 
 
 
 
 
 
Gregory E. Salyers
 
55

 
Senior Vice President, Global Operations of HBB (from prior to 2011)
 
 
 
 
 
 
 
 
 
Dana B. Sykes
 
54

 
Vice President, General Counsel and Secretary of HBB (from September 2015)

 
From July 2014 to September 2015, Associate General Counsel, Assistant Secretary and Senior Director, Human Resources of HBB. From February 2012 to July 2014, Assistant General Counsel and Director, Human Resources of HBB. From prior to 2011 to February 2012, Assistant General Counsel of HBB.
 
 
 
 
 
 
 
James H. Taylor
 
58

 
Vice President and Chief Financial Officer of HBB (from January 2011)
 
 
 
 
 
 
 
 
 
R. Scott Tidey
 
51

 
Senior Vice President, North America Sales and Marketing of HBB (from prior to 2011)
 
 
C. KC
Name
 
Age
 
Current Position
 
Other Positions
Robert O. Strenski
 
59
 
President of KC (from January 2015)
 
From February 2014 to December 2014, Vice President, General Merchandise Manager of KC. From June 2013 to January 2014, General Merchandise Manager of KC. From prior to 2011 to January 2013, Vice President, Divisional Merchandise Manager, Consumables, Biglots Stores, Inc.



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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
NACCO's Class A common stock is traded on the New York Stock Exchange under the ticker symbol “NC.” Because of transfer restrictions, no trading market has developed, or is expected to develop, for the Company's Class B common stock. The Class B common stock is convertible into Class A common stock on a one-for-one basis.
The high and low sales prices for the Class A common stock and dividends per share for both classes of common stock for each quarter during the past two years are presented in the tables below:
 
2015
 
Sales Price
 
 
 
High
 
Low
 
Cash Dividend
Fourth quarter
$
50.85

 
$
40.04

 
$
0.2625

Third quarter
$
61.70

 
$
47.26

 
$
0.2625

Second quarter
$
62.96

 
$
48.04

 
$
0.2625

First quarter
$
60.99

 
$
48.42

 
$
0.2575

 
2014
 
Sales Price
 
 
 
High
 
Low
 
Cash Dividend
Fourth quarter  
$
63.88

 
$
47.42

 
$
0.2575

Third quarter
$
55.90

 
$
46.59

 
$
0.2575

Second quarter
$
56.86

 
$
46.50

 
$
0.2575

First quarter
$
62.84

 
$
49.44

 
$
0.2500

At December 31, 2015 , there were 742 Class A common stockholders of record and 164 Class B common stockholders of record. See Note 19 to Consolidated Financial Statements contained elsewhere in this Form 10-K for a discussion of the amount of NACCO's investment in subsidiaries that was restricted at December 31, 2015 .
Sales of Unregistered Company Stock
Pursuant to the Non-Employee Directors’ Equity Compensation Plan, the Company issued an aggregate of 10,584 shares of its Class A common stock on January 1, 2015, April 1, 2015, July 1, 2015 and October 1, 2015 for payment of a portion of the directors’ annual retainer fee. In addition, pursuant to the terms of the plan, directors may elect to receive shares of Class A common stock in lieu of cash for up to 100% of the balance of their annual retainer, meeting attendance fees and any committee chairman's fees. An aggregate of 2,349 shares of Class A common stock was issued under voluntary elections on January 1, 2015, April 1, 2015, July 1, 2015 and October 1, 2015.
Pursuant to the Non-Employee Directors’ Equity Compensation Plan, the Company issued an aggregate of 10,318 shares of its Class A common stock on January 1, 2014, April 1, 2014, July 1, 2014 and October 1, 2014 for payment of a portion of the directors’ annual retainer fee. An aggregate of 1,091 shares of Class A common stock was issued under voluntary elections on January 1, 2014, April 1, 2014, July 1, 2014 and October 1, 2014.
Pursuant to the Non-Employee Directors’ Equity Compensation Plan, the Company issued an aggregate of 9,712 shares of its Class A common stock on January 1, 2013, April 1, 2013, July 1, 2013 and October 1, 2013 for payment of a portion of the directors’ annual retainer fee.An aggregate of 1,333 shares of Class A common stock was issued under voluntary elections on January 1, 2013, April 1, 2013, July 1, 2013 and October 1, 2013.
The issuances of these unregistered shares qualify as exempt transactions pursuant to Section 4(a)(2) of the Securities Act of 1933.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Issuer Purchases of Equity Securities
Period
(a)
Total Number of Shares Purchased
 
(b)
Average Price Paid per Share
 
(c)
Total Number of Shares Purchased as Part of the Publicly Announced Program
 
(d)
Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Program  (1)
Month #1
(October 1 to 31, 2015)
15,944

 
$
47.75

 
15,944

 
$

Month #2
(November 1 to 30, 2015)

 
$

 

 
$

Month #3
(December 1 to 31, 2015)

 
$

 

 
$

     Total
15,944

 
$
47.75

 
15,944

 
$


(1)
In November 2013, NACCO announced a $60 million stock repurchase program. As of October 6, 2015, the Company completed the stock repurchase program with total repurchases of approximately 1,122,900 shares of Class A common stock.




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Item 6. SELECTED FINANCIAL DATA
 
Year Ended December 31
 
2015
 
2014 (1)
 
2013
 
2012 (2)
 
2011 (3)
 
(In thousands, except per share data)
Operating Statement Data:
 
 
 
 
 
 
 
 
 
Revenues
$
915,860

 
$
896,782

 
$
932,666

 
$
873,364

 
$
790,455

 
 
 
 
 
 
 
 
 
 
Operating profit (loss)
$
31,827

 
$
(66,309
)
 
$
61,336

 
$
67,642

 
$
64,074

 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
21,984

 
$
(38,118
)
 
$
44,450

 
$
42,163

 
$
79,470

Discontinued operations, net of tax (2)

 

 

 
66,535

 
82,601

Net income (loss)
$
21,984

 
$
(38,118
)
 
$
44,450

 
$
108,698

 
$
162,071

 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
3.14

 
$
(5.02
)
 
$
5.48

 
$
5.04

 
$
9.49

Discontinued operations (2)

 

 

 
7.93

 
9.85

Basic earnings (loss) per share
$
3.14

 
$
(5.02
)
 
$
5.48

 
$
12.97

 
$
19.34

 
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
3.13

 
$
(5.02
)
 
$
5.47

 
$
5.02

 
$
9.46

Discontinued operations (2)

 

 

 
7.90

 
9.82

Diluted earnings (loss) per share
$
3.13

 
$
(5.02
)
 
$
5.47

 
$
12.92

 
$
19.28


(1)
During the fourth quarter of 2014, NACoal determined that indicators of impairment existed at its Centennial mining operations and as a result reviewed the Centennial long-lived assets for impairment. NACoal recorded a non-cash, asset impairment charge of $105.1 million for Centennial's long-lived asset group. See Note 10 to the Consolidated Financial Statements for further discussion of the Company's long-lived asset impairment.
(2)
During 2012, NACCO spun-off Hyster-Yale Materials Handling, Inc. ("Hyster-Yale") , a former subsidiary. The results of operations of Hyster-Yale are reflected as discontinued operations in the table above.
(3)
In 2006, the Company initiated litigation in the Delaware Chancery Court against Applica Incorporated ("Applica") and individuals and entities affiliated with Applica's shareholder, Harbinger Capital Partners Master Fund, Ltd. The litigation alleged a number of contract and tort claims against the defendants related to the Company's failed transaction with Applica, which had been previously announced. On February 14, 2011, the parties to this litigation entered into a settlement agreement. The settlement agreement provided for, among other things, the payment of
$60 million to the Company and dismissal of the lawsuit with prejudice. The payment was received in February 2011. Litigation costs related to this matter were $2.8 million in 2011.

 


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Year Ended December 31
 
2015
 
2014
 
2013
 
2012 (1)
 
2011
 
(In thousands, except per share and employee data)
Balance Sheet Data at December 31:
 
 
 
 
 
 
 
 
 
Total assets  (1)
$
655,408

 
$
770,520

 
$
809,956

 
$
776,306

 
$
1,808,834

Long-term debt  (1)
$
160,113

 
$
191,431

 
$
152,431

 
$
135,448

 
$
74,471

Stockholders' equity
$
201,138

 
$
211,474

 
$
297,780

 
$
281,331

 
$
576,210

 
 
 
 
 
 
 
 
 
 
Cash Flow Data:
 
 
 
 
 
 
 
 
 
Provided by operating activities (2)
$
108,002

 
$
19,799

 
$
53,065

 
$
143,014

 
$
155,179

Used for investing activities (2)
$
(8,291
)
 
$
(74,934
)
 
$
(60,734
)
 
$
(74,237
)
 
$
(32,701
)
Provided by (used for) financing activities (2)
$
(108,301
)
 
$
20,979

 
$
(36,776
)
 
$
(123,433
)
 
$
(41,871
)
 
 
 
 
 
 
 
 
 
 
Other Data:
 
 
 
 
 
 
 
 
 
Per share data:
 
 
 
 
 
 
 
 
 
Cash dividends (3)
$
1.0450

 
$
1.0225

 
$
1.0000

 
$
5.3775

 
$
2.1200

Market value at December 31
$
42.20

 
$
59.36

 
$
62.19

 
$
60.69

 
$
89.22

Stockholders' equity at December 31
$
29.42

 
$
29.23

 
$
37.83

 
$
33.68

 
$
68.81

 
 
 
 
 
 
 
 
 
 
Actual shares outstanding at December 31
6.837

 
7.236

 
7.872

 
8.353

 
8.374

Basic weighted average shares outstanding
7.001

 
7.590

 
8.105

 
8.384

 
8.383

Diluted weighted average shares outstanding
7.022

 
7.590

 
8.124

 
8.414

 
8.408

Total employees at December 31 (4)
3,600

 
4,000

 
4,100

 
4,300

 
4,000


(1)
During 2012, the Company spun-off Hyster-Yale, a former subsidiary.
(2)
Includes both continuing operations and discontinued operations for 2012 and 2011.
(3)
2012 cash dividends include a one-time special cash dividend of $3.50 per share. The 25 cent dividend paid in the fourth quarter of 2012 was the first regular quarterly dividend following the spin-off of Hyster-Yale.
(4)
Includes employees of Weston Brands in 2014, Centennial from 2012 to 2014 and the unconsolidated mines for all years presented. Excludes employees of Hyster-Yale for all years presented.


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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
NACCO Industries, Inc. (the parent company or “NACCO”) and its wholly owned subsidiaries (collectively, the “Company”) operate in the following principal industries: mining, small appliances and specialty retail. Results of operations and financial condition are discussed separately by subsidiary, which corresponds with the industry groupings.
The North American Coal Corporation and its affiliated coal companies (collectively, “NACoal”) mine coal primarily for use in power generation and provide selected value-added mining services for other natural resources companies. Hamilton Beach Brands, Inc. (“HBB”) is a leading designer, marketer and distributor of small electric household and specialty housewares appliances, as well as commercial products for restaurants, bars and hotels. The Kitchen Collection, LLC (“KC”), is a national specialty retailer of kitchenware in outlet and traditional malls throughout the U.S. 
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company 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, the Company evaluates its 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.
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Revenue recognition: Revenues are generally recognized when title transfers and risk of loss passes to the customer. Under its mining contracts, the Company recognizes revenue as the coal or limerock is delivered or services are performed. Revenues at HBB are recognized when customer orders are completed and shipped. Revenues at KC are recognized at the point of sale when payment is made and customers take possession of the merchandise in stores. Reserves for discounts and returns are maintained for anticipated future claims at HBB and KC. The accounting policies used to develop these product discounts and returns include:
Product discounts: The Company records estimated reductions to revenues for customer programs and incentive offerings, including special pricing agreements, price competition, promotions and other volume-based incentives. At HBB, net sales represent gross sales less cooperative advertising, other volume-based incentives, estimated returns and allowances for defective products. At KC, retail markdowns are incorporated into KC's retail method of accounting for cost of sales. If market conditions were to decline or if competition were to increase, the Company may take actions to increase customer incentive offerings, possibly resulting in an incremental reduction of revenues at the time the incentive is offered. If the Company's estimates of customer programs and incentives were one percent higher than the levels offered during 2015 , the reserves for product discounts would increase and revenues would be reduced by $0.1 million . The Company's past results of operations have not been materially affected by a change in the estimate of product discounts and although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change its estimates in the future.
Product returns: Products generally are not sold with the right of return. However, based on the Company's historical experience, a portion of products sold are estimated to be returned due to reasons such as buyer remorse, duplicate gifts received, product failure and excess inventory stocked by the customer which, subject to certain terms and conditions, the Company will agree to accept. The Company records estimated reductions to revenues at the time of sale based on this historical experience and the limited right of return provided to certain customers. If future trends were to change significantly from those experienced in the past, incremental reductions to revenues may result based on this new experience. If the Company's estimate of average return rates for each type of product sold were to increase by one percent over historical levels, the reserves for product returns would increase and revenues would be reduced by $0.2 million . The Company's past results of operations have not been materially affected by a change in the estimate of product returns and although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change its estimates in the future.

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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)

Retirement benefit plans: The Company maintains various defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. During 2013, the Company amended the Combined Plan to freeze pension benefits for all employees, including those for certain unconsolidated mines' employees and cost of living adjustments for other employees, effective as of the close of business on December 31, 2013. All other eligible employees of the Company, including employees whose pension benefits are frozen, receive retirement benefits under defined contribution retirement plans. The Company's policy is to periodically make contributions to fund the defined benefit pension plans within the range allowed by applicable regulations. The defined benefit pension plan assets consist primarily of publicly traded stocks and government and corporate bonds. There is no guarantee the actual return on the plans’ assets will equal the expected long-term rate of return on plan assets or that the plans will not incur investment losses.
The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes.
Expected returns for pension plans are based on a calculated market-related value for U.S. pension plan assets. Under this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns are recognized in the market-related value of assets ratably over three years. Expected returns for pension plans are based on fair market value for non-U.S. pension plan assets.
The Company also maintains health care plans which provide benefits to eligible retired employees. All health care plans of the Company have a cap on the Company's share of the costs. These plans have no assets. Under the Company's current policy, plan benefits are funded at the time they are due to participants.
The basis for the selection of the discount rate for each plan is determined by matching the timing of the payment of the expected obligations under the defined benefit plans and health care plans against the corresponding yield of high-quality corporate bonds of equivalent maturities.
Changes to the estimate of any of these factors could result in a material change to the Company's pension obligation causing a related increase or decrease in reported net operating results in the period of change in the estimate. Because the 2015 assumptions are used to calculate 2016 pension expense amounts, a one percentage-point change in the expected long-term rate of return on plan assets would result in a change in pension expense for 2016 of approximately $0.6 million for the plans. A one percentage-point change in the discount rate would result in a change in pension expense for 2016 by approximately $0.1 million . A one percentage-point increase in the discount rate would have lowered the plans’ projected benefit obligation as of the end of 2015 by approximately $6.2 million ; while a one percentage-point decrease in the discount rate would have raised the plans’ projected benefit obligation as of the end of 2015 by approximately $7.4 million .

See Note 16 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's retirement benefit plans.
Self-insurance liabilities: The Company is generally self-insured for product liability, environmental liability, medical claims, certain workers’ compensation claims and certain closed mine liabilities. For product liability, catastrophic insurance coverage is retained for potentially significant individual claims. An estimated provision for claims reported and for claims incurred but not yet reported under the self-insurance programs is recorded and revised periodically based on industry trends, historical experience and management judgment. In addition, industry trends are considered within management's judgment for valuing claims. Changes in assumptions for such matters as legal judgments and settlements, inflation rates, medical costs and actual experience could cause estimates to change in the near term. Changes in any of these factors could materially change the Company's estimates for these self-insurance obligations causing a related increase or decrease in reported net operating results in the period of change in the estimate.
Accounting for Asset Retirement Obligations: The Company's asset retirement obligations are principally for costs to dismantle certain mining equipment at the end of the life of the mine as well as for costs to close its surface mines and reclaim the land it has disturbed as a result of its normal mining activities. Under certain federal and state regulations, the Company is required to reclaim land disturbed as a result of mining. The Company determined the amounts of these obligations based on

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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)

estimates adjusted for inflation, projected to the estimated closure dates, and then discounted using a credit-adjusted risk-free interest rate. Changes in any of these estimates could materially change the Company's estimates for these asset retirement obligations causing a related increase or decrease in reported net operating results in the period of change in the estimate. The accretion of the liability is being recognized over the estimated life of each individual asset retirement obligation. The Company has capitalized an asset’s retirement cost as part of the cost of the related long-lived asset. These capitalized amounts are subsequently amortized to expense using a systematic and rational method.
Bellaire Corporation (“Bellaire”) is a non-operating subsidiary of the Company with legacy liabilities relating to closed mining operations, primarily former Eastern U.S. underground coal mining operations. These legacy liabilities include obligations for water treatment and other environmental remediation that arose as part of the normal course of closing these underground mining operations. The Company determined the amounts of these obligations based on estimates adjusted for inflation and then discounted using a credit-adjusted risk-free interest rate. The accretion of the liability is recognized over the estimated life of the asset retirement obligation. Since Bellaire's properties are no longer active operations, no associated asset has been capitalized. Changes in any of these estimates could materially change the Company's estimates for these asset retirement obligations causing a related increase or decrease in reported net operating income in the period of change in the estimate.
See Note 7 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's asset retirement obligations.
Inventory reserves: The Company writes down its inventory to the lower of cost or market, which includes an estimate for obsolescence or excess inventory based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Upon a subsequent sale or disposal of the impaired inventory, the corresponding reserve for impaired value is relieved to ensure that the cost basis of the inventory reflects any write-downs. An impairment in value of one percent of net inventories would result in additional expense of approximately $1.7 million .
Allowances for doubtful accounts: The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of its customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. An impairment in value of one percent of net accounts receivable would require an increase in the allowance for doubtful accounts and would result in additional expense of approximately $1.1 million .
Long-Lived Assets: The Company periodically evaluates long-lived assets for impairment when changes in circumstances or the occurrence of certain events indicate the carrying amount of an asset may not be recoverable. Upon identification of indicators of impairment, the Company evaluates the carrying value of the asset by comparing the estimated future undiscounted cash flows generated from the use of the asset 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 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.
The Company determined that indicators of potential impairment were present during the fourth quarter of 2014 with respect to its Centennial mining operations asset group. As a result, the Company assessed the recoverability of Centennial assets and determined that the assets were not fully recoverable when compared to the remaining future undiscounted cash flows from these assets. The Company estimated the fair value of the asset group and the long-lived assets were written down to their estimated fair value which resulted in a non-cash asset impairment charge of $105.1 million . The asset impairment charge was recorded as Centennial long-lived asset impairment charge in the Consolidated Statement of Operations for the year ended December 31, 2014 and relates exclusively to the NACoal segment. The fair value of the asset group was calculated using the combination of a market and income approach.
The fair value estimate for the coal land and real estate and other property, plant and equipment was calculated using market data for similar assets, which are classified as Level 2 inputs. The fair value of the coal supply agreement and non-compete intangible assets were estimated to be zero given current market conditions. Key inputs in this model are based on significant unobservable inputs and include the forecast of tons sold and coal pricing and are classified as Level 3 inputs.
In 2014 and 2013, KC considered its operating loss to be an indicator of impairment.  For KC’s asset impairment analysis, the primary input is projected future cash flows utilizing assumptions consistent with those the Company uses in its internal

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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)

planning, which are classified as Level 3 inputs. As a result of the fiscal year-end review of long-lived store-related assets, the Company recorded impairment charges of $0.9 million and $1.1 million in 2014 and 2013, respectively, included in depreciation expense within Selling, general and administrative expenses in the Consolidated Statements of Operations. Long-lived assets at the stores consist mainly of leasehold improvements and furniture and fixtures. The fair value for leasehold improvements was determined to be zero as such assets were deemed to have no future use or economic benefit based on the Company's analysis using market participant assumptions, and therefore no expected future cash flows. The fair value for store fixtures is based on the market exit price based on historical experience. The impairment charges in 2014 were largely the result of decreased expected future operating results. If operating results do not improve, KC may be required to record additional long-lived asset impairment charges.
See Note 10 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's long-lived asset impairments.
Income taxes: 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 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. 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 Company's tax assets, liabilities, and tax expense are supported by historical earnings and losses and the Company's best estimates and assumptions of future earnings. When the Company determines, 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 the Company's financial statements or tax returns, the ultimate resolution of these events could result in adjustments to the Company's financial statements and such adjustments could be material. The Company believes 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 the Company's results of operations and financial position.
Valuation of acquisitions: The allocation of the purchase price to the tangible assets and liabilities and identifiable intangible assets acquired requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed. These estimates can include, but are not limited to, the cash flows that the acquisition is expected to generate in the future and the appropriate weighted-average cost of capital. These estimates are inherently uncertain and unpredictable, and if different estimates were used, the purchase price for the acquisition may have been allocated to the acquired assets and liabilities assumed differently from the current allocation. Although the Company believes the assumptions, judgments and estimates used are reasonable and appropriate, different assumptions, judgments and estimates could materially affect the value ascribed to an acquired asset and the Company's results of operations and financial position if impairment charges were required to be recorded. See Note 22 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's acquisitions.

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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
Selected consolidated results of the Company and components of change by subsidiary were as follows:
 
Revenues
 
Operating profit (loss)
 
Net income (loss)
2013 Consolidated results
$
932,666

 
$
61,336

 
$
44,450

Increase (decrease) in 2014
 
 
 
 
 
NACoal (1)
(20,949
)
 
(126,491
)
 
(82,903
)
HBB
11,893

 
(5,188
)
 
(1,949
)
KC (net of eliminations)
(26,828
)
 
3,257

 
1,910

NACCO and Other

 
777

 
374

2014 Consolidated results
$
896,782

 
$
(66,309
)
 
$
(38,118
)
Increase (decrease) in 2015
 
 
 
 
 
NACoal
(24,704
)
 
89,551

 
56,596

HBB
61,294

 
(971
)
 
(3,395
)
KC (net of eliminations)
(17,512
)
 
8,348

 
4,903

NACCO and Other

 
1,208

 
1,998

2015 Consolidated results
$
915,860

 
$
31,827

 
$
21,984

 
2015
 
2014  (1)
 
2013
Consolidated results:
 
 
 
 
 
Basic earnings (loss) per share:
$
3.14

 
$
(5.02
)
 
$
5.48

Diluted earnings (loss) per share:
$
3.13

 
$
(5.02
)
 
$
5.47


(1)
During the fourth quarter of 2014, the Company recorded a non-cash asset impairment charge of $105.1 million . The asset impairment charge was recorded as Centennial long-lived asset impairment charge in the Consolidated Statement of Operations for the year ended December 31, 2014 and relates exclusively to the NACoal segment.






















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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 INCOME TAXES

The Company’s income tax provision includes U.S. federal, state and local, and foreign income taxes. In determining the effective income tax rate, the Company analyzes various factors, including the Company’s annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the Company’s ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates, certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than included in the effective income tax rate.
A reconciliation of the Company's consolidated federal statutory and effective income tax is as follows for the years ended December 31:
 
2015
 
2014
 
2013
Income (loss) before income tax provision (benefit)
$
24,799

 
$
(76,573
)
 
$
55,720

Statutory taxes (benefit) at 35.0%
$
8,679

 
$
(26,801
)
 
$
19,502

Discrete items:
 
 
 
 
 
Valuation allowances
3,557

 
5,742

 

NACoal reserves (settlements)
551

 
(1,360
)
 

HBB reserves (settlements)
414

 
(1,533
)
 

NACCO and other settlements

 

 
116

Tax law changes
18

 

 
(503
)
Provision to return adjustments
(535
)
 
(867
)
 
(330
)
Other, net
24

 
(414
)
 
(721
)
 
4,029

 
1,568

 
(1,438
)
Permanent items:
 
 
 
 
 
Percentage depletion
(8,199
)
 
(7,091
)
 
(8,008
)
State income taxes
(1,334
)
 
(6,361
)
 
1,106

Federal credits
(1,196
)
 
(529
)
 
(941
)
Non-deductible expenses
787

 
632

 
1,081

Domestic production deduction

 
(522
)
 
(603
)
Foreign tax rate differential
754

 
225

 
(27
)
Other, net
(705
)
 
424

 
598

 
(9,893
)
 
(13,222
)
 
(6,794
)
Income tax provision (benefit)
$
2,815

 
$
(38,455
)
 
$
11,270

Effective income tax rate
11.4
%
 
50.2
%
 
20.2
%

During 2015, NACoal recorded valuation allowances of $3.0 million, primarily in North Dakota and Alabama, and HBB recorded valuation allowances of $0.6 million in certain foreign jurisdictions, against certain net deferred tax assets as realization of these assets was determined to no longer meet the “more likely than not” standard. The establishment of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the Company from using its loss carryforwards or other deferred tax assets in future periods. The tax net operating losses which comprise the North Dakota and Alabama deferred tax assets provide for a carryforward period of up to 20 years and 15 years, respectively. Partially offsetting the valuation allowance, NACoal recognized a $1.3 million tax benefit in 2015 due to the reinstatement of the Federal Research and Development Tax Credit.

During 2014, NACoal recorded a valuation allowance of $5.7 million against its Alabama state deferred tax assets as realization was determined to no longer meet the “more likely than not” standard. Partially offsetting the valuation allowance, NACoal recognized a $1.4 million discrete tax benefit resulting from the conclusion of the 2011 and 2012 U.S. federal tax return examinations and a $0.5 million favorable return to provision adjustment in 2014. In addition to the items impacting

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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)

NACoal’s effective income tax rate, HBB's effective income tax rate was affected by the reversal of a $1.4 million uncertain tax position as a result of the effective settlement of certain state tax issues resulting in a discrete tax benefit.

See Note 15 to the Consolidated Financial Statements in this Form 10-K for further discussion of the Company's income taxes.

THE NORTH AMERICAN COAL CORPORATION

NACoal mines coal primarily for use in power generation and provides selected value-added mining services for other natural resources companies. Coal is surface mined from NACoal's developed mines in North Dakota, Texas, Mississippi and Louisiana. When Bisti commences mining coal for NTEC, it will be surface mined on the Navajo Nation in New Mexico. Total coal reserves approximate 2.0 billion tons with approximately 1.1 billion tons committed to customers pursuant to long-term contracts.

NACoal has two consolidated mining operations: Mississippi Lignite Mining Company (“MLMC”) and Centennial Natural Resources ("Centennial"). Centennial ceased coal production in the fourth quarter of 2015. NACoal also provides dragline mining services for independently owned limerock quarries in Florida. NACoal has the following wholly owned unconsolidated subsidiaries that each meet the definition of a variable interest entity and are accounted for using the equity method:

The Coteau Properties Company (“Coteau”)
The Falkirk Mining Company (“Falkirk”)
The Sabine Mining Company (“Sabine”)
Demery Resources Company, LLC (“Demery”)
Caddo Creek Resources Company, LLC (“Caddo Creek”)
Coyote Creek Mining Company, LLC (“Coyote Creek”)
Camino Real Fuels, LLC (“Camino Real”)
Liberty Fuels Company, LLC (“Liberty”)
Bisti Fuels Company, LLC ("Bisti")
NoDak Energy Services, LLC ("NoDak")

See “Item 1. Business — A. North American Coal — General" on page 2 in this Form 10-K for further discussion of each of the consolidated mining operations and unconsolidated subsidiaries.

FINANCIAL REVIEW
Tons of coal sold by NACoal’s operating mines were as follows for the years ended December 31 (in millions):
 
2015
 
2014
 
2013
Coteau
14.4

 
14.3

 
13.8

Falkirk
8.0

 
7.8

 
7.7

Sabine
3.7

 
4.5

 
4.3

Other
0.9

 
0.1

 
0.1

Unconsolidated mines
27.0

 
26.7

 
25.9

MLMC
3.2

 
2.6

 
3.2

Centennial
0.4

 
0.9

 
0.8

Consolidated mines
3.6

 
3.5

 
4.0

Total tons sold
30.6

 
30.2

 
29.9

The limerock dragline mining operations mined 20.9 million , 21.0 million and 22.1 million cubic yards of limerock for the years ended December 31, 2015 , 2014 and 2013 , respectively.

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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)

Total coal reserves were as follows at December 31 :
 
2015
 
2014
 
2013
 
(in billions of tons)
Unconsolidated mines
1.0

 
1.0

 
1.0

Consolidated mines
1.0

 
1.0

 
1.2

Total coal reserves
2.0

 
2.0

 
2.2

Operating Results
The results of operations for NACoal were as follows for the years ended December 31 :
 
2015
 
2014
 
2013
Revenue - consolidated mines
$
140,161

 
$
161,964

 
$
172,532

Royalty and other
7,837

 
10,738

 
21,119

Revenues
147,998

 
172,702

 
193,651

Cost of sales - consolidated mines
155,936

 
174,135

 
166,881

Cost of sales - royalty and other
2,878

 
1,706

 
1,540

Total cost of sales
158,814

 
175,841

 
168,421

Gross profit (loss)
(10,816
)
 
(3,139
)
 
25,230

Earnings of unconsolidated mines (a)
48,432

 
48,396

 
46,429

Selling, general and administrative expenses
36,261

 
32,905

 
27,118

Centennial long-lived asset impairment charge

 
105,119

 

Centennial goodwill impairment charge

 

 
3,973

Amortization of intangibles
2,606

 
3,242

 
3,668

(Gain) loss on sale of assets
(1,772
)
 
(6,979
)
 
(561
)
Operating profit (loss)
521

 
(89,030
)
 
37,461

Interest expense
4,961

 
6,034

 
3,105

Other, net, including interest income and income from other unconsolidated affiliates
(2,099
)
 
(779
)
 
(1,032
)
Income (loss) from continuing operations before income tax provision (benefit)
(2,341
)
 
(94,285
)
 
35,388

Income tax provision (benefit)
(7,960
)
 
(43,308
)
 
3,462

Net income (loss)
$
5,619

 
$
(50,977
)
 
$
31,926

 
 
 
 
 
 
Effective income tax rate  (b) (c)
n/m

 
n/m

 
9.8
%
(a) See Note 20 for a discussion of the Company's unconsolidated subsidiaries, including summarized financial information.
(b) The NACoal effective income tax rate is affected by the benefit of percentage depletion.
(c) The effective income tax rate is not meaningful in 2015 and 2014 as the income tax benefit amounts are not directly correlated to the pre-tax income in 2015 and 2014 due to the impact of discrete tax items. See further information regarding the income taxes in the Consolidated Income Taxes discussion above and in Note 15 to the Consolidated Financial Statements.

43

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)

2015 Compared with 2014
The following table identifies the components of change in revenues for 2015 compared with 2014 :
 
Revenues
2014
$
172,702

Increase (decrease) from:
 
Centennial mining operations
(38,352
)
Royalty and other income
(2,901
)
Other consolidated mining operations
16,549

2015
$
147,998


Revenues decreased 14.3% in 2015 compared with 2014 as a result of a decrease in revenues at Centennial, primarily due to the cessation of coal production, partially offset by an increase in tons sold at MLMC because there were fewer outage days at the customer's power plant.  

The following table identifies the components of change in operating profit (loss) for 2015 compared with 2014 .
 
Operating Profit (Loss)
2014
$
(89,030
)
Increase (decrease) from:
 
Centennial long-lived asset impairment charge in 2014
105,119

Centennial asset retirement obligation charge in 2015
(7,526
)
Centennial mining operations
(4,347
)
Centennial earn-out change in estimate in 2014
(1,614
)
Gain on sale of assets
(5,208
)
Royalty and other income
(2,810
)
Other selling, general and administrative expenses
(2,057
)
Other consolidated mining operations
6,747

Reimbursement of damage to customer-owned equipment in 2014
1,211

Earnings of unconsolidated mines
36

2015
$
521


NACoal reported operating profit of $0.5 million in 2015 compared with an operating loss of $89.0 million in 2014 . The 2014 operating loss was primarily due to the $105.1 million non-cash, long-lived asset impairment charge associated with Centennial. See Note 10 to the Consolidated Financial Statements for further discussion of the Centennial long-lived asset impairment charge. Operating profit in 2015 includes a $7.5 million charge to increase Centennial’s asset retirement obligation. The Company ceased mining operations at Centennial during the fourth quarter of 2015. 

In addition to the changes related to Centennial, operating profit decreased in 2015 from 2014 primarily due to a reduction in gains on sales of assets, higher selling, general and administrative expenses due to an increase in employee-related costs and higher professional fees and reduced royalty and other income.  These items were partially offset by improved operating results at the other consolidated mining operations primarily as a result of the increase in tons sold at MLMC.

NACoal recognized net income of $5.6 million in 2015 compared with a net loss of $51.0 million in 2014 . The change in net income (loss) was primarily due to the factors affecting operating profit (loss) and the absence of a $1.1 million after-tax charge recognized in 2014 to establish an allowance against the receivable from NACC India's customer. In addition, net income in 2015 includes the recognition of valuation allowances of $3.0 million against certain net deferred tax assets, primarily in North Dakota and Alabama, partially offset by a $1.3 million tax benefit due to the reinstatement of the Federal

44

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)

Research and Development Tax Credit. The 2014 net loss includes the recognition of a valuation allowance of $5.7 million taken against the Alabama deferred tax assets, partially offset by a $1.4 million discrete tax benefit resulting from the conclusion of the 2011 and 2012 U.S. federal tax return examinations and a $0.5 million favorable return to provision adjustment in 2014.

2014 Compared with 2013
The following table identifies the components of change in revenues for 2014 compared with 2013 :
 
Revenues
2013
$
193,651

Increase (decrease) from:
 
Royalty and other income
(10,537
)
Other consolidated mining operations
(10,412
)
2014
$
172,702


Revenues decreased 10.8% in 2014 compared with 2013 primarily as a result of a reduction in both royalty and other income and the consolidated mining operations. The decrease in revenues at the consolidated mining operations was primarily the result of fewer tons sold at MLMC due to an increase in the number of planned and unplanned outage days at the customer's power plant in 2014 compared with 2013, slightly offset by increased reimbursable costs at the limerock dragline mining operations and an increase in revenues at Centennial. The slight increase in revenues at Centennial was due to an increase in tons sold and was almost completely offset by lower selling prices in 2014 compared with 2013 resulting from unfavorable metallurgical coal market conditions.
The following table identifies the components of change in operating profit for 2014 compared with 2013 .
 
Operating Profit
2013
$
37,461

Increase (decrease) from:
 
Centennial long-lived asset impairment charge
(105,119
)
Consolidated mining operations
(16,040
)
Royalty and other income
(11,823
)
Other selling, general and administrative expenses
(4,684
)
Pension curtailment in 2013
(1,587
)
Reimbursement of damage to customer-owned equipment
(1,211
)
Gain on sale of assets
6,418

Centennial goodwill impairment charge
3,974

Earnings of unconsolidated mines
1,967

Earn-out change in estimate
1,614

2014
$
(89,030
)

NACoal reported an operating loss of $89.0 million in 2014 compared with operating profit of $37.5 million in 2013 primarily as a result of the $105.1 million non-cash, long-lived asset impairment charge associated with Centennial. See Note 10 to the Consolidated Financial Statements for further discussion of the Centennial long-lived asset impairment charge.

In addition to the long-lived asset impairment charge, operating results at the consolidated mines decreased in 2014 compared with 2013 primarily due to increased mining costs at Centennial. While productivity improved and Centennial worked to reduce operating costs during the second half of 2014, productivity improvements at Centennial were implemented later in 2014 than anticipated, primarily related to a delay in the startup of a new dragline. As a result of the delay, Centennial experienced production shortfalls, which caused a decrease in inventory levels. Centennial's results were also unfavorably

45

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)

affected by an increase in depreciation expense on equipment acquired during 2013 and in 2014 to improve efficiencies and productivity as well as higher repair and maintenance expense. Operating results at the consolidated mining operations were also negatively impacted by a reduction in tons sold at MLMC due to substantial increase in planned and unplanned outage days at the customer's power plant during 2014 and unfavorable costs at the limerock dragline mining operations.

Also impacting the change in operating profit (loss) is a significant reduction in royalty and other income, an increase in Selling, general and administrative expenses, the absence in 2014 compared to 2013 of a $1.6 million pre-tax pension curtailment gain and a $1.2 million charge in 2014 to reimburse a customer for damage to certain customer-owned equipment at the limerock dragline mining operations. The increase in Selling, general and administrative expenses was primarily due to the higher employee-related costs, higher professional fees and higher management fees. These items were partially offset by gains on the sale of assets and land, the absence of a goodwill impairment charge in 2014, an increase in earnings of unconsolidated mines and a change in estimate for the earn-out liability associated with Centennial. The increase in earnings of unconsolidated mines mainly resulted from an increase in tons sold as well as an increase in contractual compensation levels. See Note 10 to the Consolidated Financial Statements for a discussion of the 2013 goodwill impairment charge and for a discussion of the earn-out liability.

NACoal recognized a net loss of $51.0 million in 2014 compared with net income of $31.9 million in 2013 primarily due to the factors affecting operating profit (loss), increased interest expense as a result of higher debt outstanding during 2014 and a $1.1 million after-tax charge to establish an allowance against the receivable from NACC India's customer. The 2014 net loss includes the recognition of a valuation allowance of $5.7 million taken against the Alabama deferred tax assets, partially offset by a $1.4 million discrete tax benefit resulting from the conclusion of the 2011 and 2012 U.S. federal tax return examinations and a $0.5 million favorable return to provision adjustment in 2014.

LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following tables detail the change in cash flow for the years ended December 31 :
 
2015
 
2014
 
Change
Operating activities:
 
 
 
 
 
Net income (loss)
$
5,619

 
$
(50,977
)
 
$
56,596

Depreciation, depletion and amortization
17,067

 
22,003

 
(4,936
)
Deferred income taxes
(4,831
)
 
(37,322
)
 
32,491

(Gain) loss on sale of assets
(1,772
)
 
(6,979
)
 
5,207

Centennial long-lived asset impairment charge

 
105,119

 
(105,119
)
Other
1,087

 
7,941

 
(6,854
)
Working capital changes
78,755

 
(45,867
)
 
124,622

Net cash provided by (used for) operating activities
95,925

 
(6,082
)
 
102,007

 
 
 
 
 
 
Investing activities:
 
 
 
 
 
Expenditures for property, plant and equipment
(4,116
)
 
(51,228
)
 
47,112

Proceeds from the sale of assets
3,418

 
7,733

 
(4,315
)
Other
(814
)
 
(648
)
 
(166
)
Net cash used for investing activities
(1,512
)
 
(44,143
)
 
42,631

 
 
 
 
 
 
Cash flow before financing activities
$
94,413

 
$
(50,225
)
 
$
144,638


The $102.0 million increase in net cash provided by (used for) operating activities was primarily the result of favorable working capital changes in 2015 compared with 2014. The change in working capital was mainly attributable to a significant

46


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)

decrease in accounts receivable from affiliates as well as a decrease in intercompany taxes and inventory. Accounts receivable from affiliates decreased as NACoal received payment from Coyote Creek, an unconsolidated mine, in the first quarter of 2015. See Note 20 for further discussion on NACoal's payment from Coyote Creek.
 
The decrease in net cash cash used for investing activities was primarily attributable to a reduction in expenditures for property, plant and equipment in 2015 compared with 2014. In 2014, capital expenditures were mainly for the refurbishment of a dragline and the purchase of equipment at Centennial.
 
2015
 
2014
 
Change
Financing activities:
 
 
 
 
 
Net additions to long-term debt and revolving credit agreements
$
(82,829
)
 
$
30,601

 
$
(113,430
)
Capital contribution from NACCO

 
19,800

 
(19,800
)
Other
931

 

 
931

Net cash provided by (used for) financing activities
$
(81,898
)
 
$
50,401

 
$
(132,299
)

The change in net cash provided by financing activities was primarily due to repayments made on NACoal's revolver as a result of the payment received from Coyote Creek during the first quarter of 2015, as opposed to increased borrowings and a capital contribution from NACCO in 2014 to fund operations and expenditures for property, plant and equipment.

Financing Activities
NACoal has an unsecured revolving line of credit of up to $225.0 million (the “NACoal Facility”) that expires in November 2018. Borrowings outstanding under the NACoal Facility were $100.0 million at December 31, 2015 . At December 31, 2015 , the excess availability under the NACoal Facility was $123.8 million , which reflects a reduction for outstanding letters of credit of $1.2 million .

The NACoal Facility has performance-based pricing, which sets interest rates based upon NACoal achieving various levels of debt to EBITDA ratios, as defined in the NACoal 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 December 31, 2015 , for base rate and LIBOR loans were 1.00% and 2.00% , respectively. The NACoal Facility has a commitment fee which is based upon achieving various levels of debt to EBITDA ratios. The commitment fee was 0.35% on the unused commitment at December 31, 2015 . The floating rate of interest applicable to the NACoal Facility at December 31, 2015 was 3.39% including the floating rate margin and the effect of an interest rate swap agreement.

To reduce the exposure to changes in the market rate of interest, NACoal has entered into an interest rate swap agreement for a portion of the NACoal Facility. Terms of the interest rate swap agreement require NACoal to receive a variable interest rate and pay a fixed interest rate. NACoal has interest rate swaps with notional values totaling $100.0 million at December 31, 2015 at an average fixed interest rate of 1.4% . See Note 2 and Note 9 to the Consolidated Financial Statements in this Form 10-K for further discussion of NACoal's interest rate swap agreement.

The NACoal Facility contains restrictive covenants, which require, among other things, NACoal to maintain a maximum debt to EBITDA ratio of 3.50 to 1.00 and an interest coverage ratio of not less than 4.00 to 1.00 . The NACoal 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 3.00 to 1.00 in conjunction with maintaining unused availability thresholds of borrowing capacity, as defined in the NACoal Facility, of $15.0 million . At December 31, 2015 , NACoal was in compliance with all covenants in the NACoal Facility.

NACoal has a demand note payable to Coteau which bears interest based on the applicable quarterly federal short-term interest rate as announced from time to time by the Internal Revenue Service. At December 31, 2015 , the balance of the note was $1.4 million and the interest rate was 0.55% .


47


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)

NACoal believes funds available from cash on hand at the Company, the NACoal Facility and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments arising during the next twelve months and until the expiration of the NACoal Facility in November 2018.
Contractual Obligations, Contingent Liabilities and Commitments
Following is a table which summarizes the contractual obligations of NACoal as of December 31, 2015 :
 
Payments Due by Period
Contractual Obligations
Total
 
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
NACoal Facility
$
100,000

 
$

 
$

 
$
100,000

 
$

 
$

 
$

Variable interest payments on NACoal Facility
9,379

 
3,262

 
3,262

 
2,855

 

 

 

Other debt
1,446

 

 

 

 

 

 
1,446

Other interest
91

 
26

 
26

 
26

 
13

 

 

Capital lease obligations, including principal and interest
11,003

 
1,732

 
1,732

 
2,022

 
1,521

 
1,105

 
2,891

Operating leases
19,329

 
6,960

 
3,978

 
2,895

 
1,712

 
1,550

 
2,234

Purchase and other obligations
39,874

 
39,874

 

 

 

 

 

Total contractual cash obligations
$
181,122

 
$
51,854

 
$
8,998

 
$
107,798

 
$
3,246

 
$
2,655

 
$
6,571

Not included in the table above, NACoal has a long-term liability of approximately $3.7 million for unrecognized tax benefits, including interest and penalties, as of December 31, 2015 . At this time, the Company is unable to make a reasonable estimate of the timing of payments due to, among other factors, the uncertainty of the timing and outcome of its tax audits.
An event of default, as defined in the NACoal Facility and NACoal’s lease agreements, could cause an acceleration of the payment schedule. No such event of default has occurred or is anticipated to occur.
NACoal’s variable interest payments are calculated based upon NACoal’s anticipated payment schedule and the December 31, 2015 base rate and applicable margins, as defined in the NACoal Facility. A 1/8% increase in the base rate would increase NACoal’s estimated total annual interest payments on the NACoal Facility by approximately $0.8 million .
The purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and incentive compensation.
Pension and postretirement funding can vary significantly each year due to plan amendments, changes in the market value of plan assets, legislation and the Company’s decisions to contribute above the minimum regulatory funding requirements. As a result, pension and postretirement funding has not been included in the table above. NACoal does not expect to contribute to its pension plan in 2016 . NACoal maintains one supplemental retirement plan that pays monthly benefits to participants directly out of corporate funds and expects to pay benefits of approximately $1.0 million in 2016 and approximately $0.5 million per year from 2017 through 2025. Benefit payments beyond that time cannot currently be estimated. All other pension benefit payments are made from assets of the pension plan. NACoal also expects to make payments related to its other postretirement plans of approximately $0.3 million per year from 2016 through 2025. Benefit payments beyond that time cannot currently be estimated.
NACoal has a long-term liability for asset retirement obligations of $23.6 million that is not included in the table above due to the uncertainty of the timing of payments to settle this liability.

NACoal is a party to certain guarantees related to Coyote Creek that are not included in the table above as the Company believes that the likelihood of NACoal’s future performance under the guarantees is remote, and no amounts related to these guarantees have been recorded. See Note 20 to the Consolidated Financial Statements for further discussion of the Company's guarantees.

48


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)

Off Balance Sheet Arrangements
NACoal has not entered into any off balance sheet financing arrangements, other than operating leases, which are disclosed in the contractual obligations table above.
Capital Expenditures
Following is a table which summarizes actual and planned capital expenditures (in millions):
 
Planned
 
Actual
 
Actual
 
2016
 
2015
 
2014
NACoal
$
15.7

 
$
4.1

 
$
51.2

Planned expenditures for 2016 include mine machinery, equipment and land. These expenditures are expected to be funded from internally generated funds and bank borrowings.
Capital Structure
NACoal’s capital structure is presented below:
 
December 31
 
 
 
2015
 
2014
 
Change
Cash and cash equivalents
$
12,718

 
$
203

 
$
12,515

Other net tangible assets
159,099

 
246,519

 
(87,420
)
Intangible assets, net
48,181

 
50,779

 
(2,598
)
Net assets
219,998

 
297,501

 
(77,503
)
Total debt
(111,617
)
 
(194,445
)
 
82,828

Total equity
$
108,381

 
$
103,056

 
$
5,325

Debt to total capitalization
51
%
 
65
%
 
(14
)%
The decrease in other net tangible assets and total debt during 2015 was primarily due to the collection of accounts receivable from affiliates. Accounts receivable from affiliates decreased as NACoal received payment from Coyote Creek in the first quarter of 2015. NACoal used the payment from Coyote Creek primarily to pay down the NACoal facility. See Note 20 for further discussion on NACoal's payment from Coyote Creek. Other net tangible assets also decreased due to lower inventory and the change in intercompany taxes.
Total equity increased primarily as a result of the $5.6 million net income in 2015 partially offset by a $0.3 million increase in accumulated other comprehensive loss in 2015.
OUTLOOK

NACoal - Discussion of Centennial Natural Resources

Centennial ceased mining operations as of December 31, 2015 but wind-down and reclamation activities are ongoing. In 2016, Centennial expects to incur a moderate but substantially lower loss than in 2015, excluding the effect of any potential future asset sales, as it manages mine reclamation obligations and disposes of certain assets. Assets associated with Centennial are $45.5 million at December 31, 2015. Centennial assets are comprised of $1.6 million of trade accounts receivable, $3.6 million of inventory, $17.5 million of assets held for sale, $6.2 million of coal land and reserves, $12.9 million of other property, plant and equipment and $3.7 million of other assets, primarily cash held in escrow related to reclamation. Of the $12.9 million of other property, plant and equipment at December 31, 2015, $11.1 million is expected to be transferred to MLMC during 2016.

Centennial will continue to evaluate strategies to maximize cash flow, including through the sale of mineral reserves, equipment and parts inventory. The company is also evaluating a range of strategies for its Alabama mineral reserves,

49


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)

including holding reserves with substantial unmined coal tons for sale or contract mining when conditions in Alabama and global coal markets improve. As Centennial continues to execute its wind-down and asset disposal programs, changes in circumstances or the occurrence of certain events may indicate the carrying amount of Centennial’s remaining assets may not be recoverable, resulting in potential future impairment charges. Cash expenditures related to mine reclamation will continue until reclamation is complete or ownership of the mines is transferred.

NACoal - Outlook, Excluding Centennial

NACoal expects an increase in tons sold in 2016 compared with 2015 at its core coal mining operations. Despite this increase in tons, and excluding Centennial results, NACoal expects a substantial decrease in income before income taxes in 2016 compared with 2015 Adjusted income before income taxes, primarily because of an expected decrease in income at MLMC. MLMC sells lignite at contractually agreed upon coal prices which are subject to changes in the level of established indices over time. The price of diesel fuel is heavily-weighted among these indices. As a result, the recent substantial decline in diesel prices is expected to reduce earnings at MLMC in 2016. This decline is anticipated to be only partially offset by a moderate increase in tons sold and the beneficial effect of lower diesel prices on production costs. Royalty and other income is also expected to decrease significantly in 2016. In addition, deliveries and operating results at the limerock mining operations in 2016 are expected to be modestly lower than 2015 due to reduced customer requirements. These decreases are expected to be partially offset by additional income from the unconsolidated mining operations as newer mines begin or increase production in 2016.

Production levels are expected to increase at Camino Real, which commenced delivering coal in October 2015, and expects to mine approximately 2.5 million to 2.7 million tons of coal annually when at full production. Liberty commenced production in 2013 but did not deliver any coal for power generation in 2015. Production levels at Liberty are expected to increase gradually beginning in 2016 and build to full production of approximately 4.6 million tons of coal annually beginning in 2023, although the timing of future deliveries will be affected by when the Kemper County Energy Facility is commissioned. Coyote Creek in North Dakota expects to deliver approximately 2.5 million tons of coal annually beginning in mid-2016.

In December 2015, NACoal's wholly-owned subsidiary, Bisti entered into a 15-year, cost-plus contract mining agreement with NTEC, whereby Bisti will be NTEC’s contract miner at NTEC’s Navajo Mine on the Navajo Nation near Fruitland, New Mexico. Production is expected to be approximately 5.0 to 6.0 million tons of coal per year. The agreement consists of a transition period and a production period. During the transition period, which commenced on January 1, 2016, Bisti will transition into the contract miner role. The production period is scheduled to commence when NTEC completes a pending commercial transaction with the existing contract miner, which is expected to occur during the second half of 2016. While Bisti will recognize income during the transition period, it will not receive cash payments until the production period begins.

Over the longer-term, NACoal’s goal continues to be to increase earnings of its unconsolidated mines by approximately 50% from the 2012 level of $45.2 million through the development and maturation of its newer mines and normal escalation of contractual compensation at its existing mines. Income related to a full year of deliveries at the Camino Real mine, the commencement of deliveries at the Liberty and Coyote Creek mines and income at Bisti will contribute to this goal in 2016 and beyond. However, generally low U.S. inflation rates, as reflected in typical market indices, such as the Consumer Price Index and the Producer Price Index, will determine the extent to which contractual compensation at the unconsolidated mines will change year by year. Achievement of the goal to increase earnings of the unconsolidated mines by 50% is currently expected to occur in 2017 or 2018, but timing will depend on future inflation rates and customer demand.

Cash flow before financing activities is expected to decrease substantially in 2016 compared with 2015 primarily as a result of the 2015 repayment of a large receivable from Coyote Creek and higher capital expenditures in 2016. Capital expenditures are expected to be approximately $16.0 million in 2016 compared with $4.1 million in 2015.

NACoal expects to continue its efforts to develop new mining projects and is pursuing opportunities for new or expanded coal mining projects, although opportunities are likely to be very limited. In addition, NACoal continues to pursue additional non-coal mining opportunities, principally in aggregates.



50


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)

HAMILTON BEACH BRANDS, INC.
HBB’s business is seasonal and a majority of revenues and operating profit typically occurs in the second half of the year when sales of small electric appliances to retailers and consumers increase significantly for the fall holiday-selling season.
FINANCIAL REVIEW
Operating Results
The results of operations for HBB were as follows for the years ended December 31 :
 
2015
 
2014
 
2013
Revenues
$
620,977

 
$
559,683

 
$
547,790

Operating profit
$
34,801

 
$
35,772

 
$
40,960

Interest expense
$
1,831

 
$
1,137

 
$
1,279

Other expense
$
1,470

 
$
1,132

 
$
461

Net income
$
19,749

 
$
23,144

 
$
25,093

Effective income tax rate
37.3
%
 
30.9
%
 
36.0
%
2015 Compared with 2014
The following table identifies the components of change in revenues for 2015 compared with 2014 :
 
Revenues
2014
$
559,683

Increase (decrease) from:
 
Unit volume and product mix
53,535

Weston Brands
24,537

Foreign currency
(15,301
)
Average sales price
(1,477
)
2015
$
620,977

Revenues for 2015 increased 11.0% , or 6.6% excluding the sales from the December 16, 2014 Weston Brands acquisition, compared with 2014 . Revenues increased primarily due to increased sales volumes primarily in the U.S. consumer retail market and a full year of sales from Weston Brands, partially offset by unfavorable foreign currency movements as both the Canadian dollar and Mexican peso weakened against the U.S. dollar.
The following table identifies the components of change in operating profit for 2015 compared with 2014 :
 
Operating Profit
2014
$
35,772

Increase (decrease) from:
 
Foreign currency
(3,799
)
Selling, general and administrative expenses
(700
)
Weston Brands
2,105

Gross profit
1,423

2015
$
34,801


HBB's operating profit decreased in 2015 compared with 2014 primarily as a result of unfavorable foreign currency movements and an increase in Selling, general and administrative expenses partially offset by operating profit contributed by Weston Brands and an increase in gross profit. Foreign currency movements were unfavorable as both the Mexican peso and

51


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)

Canadian dollar weakened against the U.S. dollar. Selling, general and administrative expenses increased as a result of higher professional and outside service fees and higher employee-related expenses partially offset by a reduction in environmental expenses in 2015 compared with 2014. HBB recorded $1.5 million and $3.3 million in 2015 and 2014, respectively, for environmental investigation and remediation at HBB's Picton, Ontario facility. The 2014 increase in environmental expense was partially offset by an $0.8 million reduction to HBB's environmental liability as a result of a third party's commitment to share in anticipated remediation costs at HBB's Southern Pines and Mt. Airy locations. Weston Brands' operating profit includes certain integration costs, including relocation and employee severance expenses, as well as $1.4 million in amortization expense on acquired intangibles relating to the Weston acquisition. The increase in gross profit primarily resulted from increased sales volumes partially offset by a shift in mix to products with lower margins.

Net income decreased to $19.7 million in 2015 compared with $23.1 million in 2014 primarily due to the absence of a $1.4 million discrete tax benefit recognized in 2014 and the factors affecting the change in operating profit.
2014 Compared with 2013
The following table identifies the components of change in revenues for 2014 compared with 2013 :
 
Revenues
2013
$
547,790

Increase (decrease) from:
 
Unit volume and product mix
18,736

Foreign currency
(4,681
)
Average sales price
(2,162
)
2014
$
559,683

Revenues increased 2.2% in 2014 compared with 2013 primarily due to an increase in sales of new products with higher price points, mainly in the commercial market and U.S. consumer market. The increase in revenues was partially offset by unfavorable foreign currency movements as both the Canadian dollar and Mexican peso weakened against the U.S. dollar and by lower average selling prices on comparable products sold.
Revenue for 2014 includes $1.1 million of revenue from Weston Brands from the December 16, 2014 acquisition date through December 31, 2014.
The following table identifies the components of change in operating profit for 2014 compared with 2013 :
 
Operating Profit
2013
$
40,960

Increase (decrease) from:
 
Other selling, general and administrative expenses
(5,510
)
Foreign currency
(2,038
)
Environmental expense - Picton
(934
)
Environmental expense - Southern Pines and Mt. Airy
(808
)
Gross profit
4,102

2014
$
35,772


HBB's operating profit decreased in 2014 compared with 2013 primarily as a result of an increase in Selling, general and administrative expenses, unfavorable foreign currency movements and unfavorable changes in environmental expenses partially offset by an increase in gross profit.

Selling, general and administrative expenses increased as a result of higher professional and outside service fees, higher employee-related expenses and advertising expenses incurred to execute HBB's five strategic initiatives. Environmental expenses increased during 2014 as HBB recorded an additional $3.3 million charge for environmental investigation and

52


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)

remediation activities at HBB's Picton, Ontario facility as a result of an environmental study performed in 2014. During 2013, HBB recorded a $2.3 million charge to establish the liability for environmental investigation and remediation activities at the Picton, Ontario facility. Also during 2014 and 2013, HBB recorded an $0.8 million and $1.6 million reduction, respectively, in Selling, general and administrative expenses as a result of a third party's commitment to share in anticipated remediation costs at HBB's Southern Pines and Mt. Airy locations.

The increase in gross profit primarily resulted from more sales of products with higher price points and higher margins, partially offset by lower prices on comparable products sold and the absence of a favorable product liability adjustment recognized during 2013 as a result of a change in estimate.

The operating loss from Weston Brands from the December 16, 2014 acquisition date through December 31, 2014 is $0.2 million and is included in operating profit above.

Net income decreased to $23.1 million in 2014 compared with $25.1 million in 2013 primarily due to the factors affecting operating profit partially offset by the reversal of a $1.4 million uncertain tax position resulting in a discrete tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following tables detail the change in cash flow for the years ended December 31 :
 
2015
 
2014
 
Change
Operating activities:
 
 
 
 
 
Net income
$
19,749

 
$
23,144

 
$
(3,395
)
Depreciation and amortization
4,750

 
2,693

 
2,057

Other
(2,361
)
 
1,148

 
(3,509
)
Working capital changes
(8,197
)
 
(8,404
)
 
207

Net cash provided by operating activities
13,941

 
18,581

 
(4,640
)
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
Expenditures for property, plant and equipment
(4,365
)
 
(4,516
)
 
151

Acquisition of business
(413
)
 
(25,000
)
 
24,587

Other
3

 

 
3

Net cash used for investing activities
(4,775
)
 
(29,516
)
 
24,741

 
 
 
 
 
 
Cash flow before financing activities
$
9,166

 
$
(10,935
)
 
$
20,101

Net cash provided by operating activities decreased $4.6 million in 2015 compared with 2014 primarily due to the change in other operating activities, which was largely attributable to the changes in environmental liabilities and deferred taxes.
The change in net cash used for investing activities was primarily due to the acquisition of Weston Brands in 2014.
 
2015
 
2014
 
Change
Financing activities:
 
 
 
 
 
Net additions (reductions) to revolving credit agreements
$
4,912

 
$
35,006

 
$
(30,094
)
Cash dividends paid to NACCO
(15,000
)
 
(22,300
)
 
7,300

Other

 
(241
)
 
241

Net cash provided by (used for) financing activities
$
(10,088
)
 
$
12,465

 
$
(22,553
)


53


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)

The change in net cash provided by (used for) financing activities was primarily the result of a decrease in borrowings under the HBB Facility in 2015 compared with an increase in borrowings in 2014 to fund the acquisition of Weston Brands, partially offset by a decrease in cash dividends paid to NACCO in 2015.
Financing Activities
HBB has a $115.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires in July 2019. The obligations under the HBB Facility are secured by substantially all of HBB's assets. The approximate book value of HBB's assets held as collateral under the HBB Facility was $253.9 million as of December 31, 2015 . At December 31, 2015 , the borrowing base under the HBB Facility was $111.6 million and borrowings outstanding under the HBB Facility were $57.5 million . At December 31, 2015 , the excess availability under the HBB Facility was $54.1 million .

The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible accounts receivable, inventory and trademarks of the borrowers, as defined in the HBB Facility. Adjustments to reserves booked against these assets, including inventory reserves, will change the eligible borrowing base and thereby impact the liquidity provided by the HBB Facility. A portion of the availability is denominated in Canadian dollars to provide funding to HBB's Canadian subsidiary. Borrowings bear interest at a floating rate, which can be a base rate, LIBOR or bankers' acceptance rate, as defined in the HBB Facility, plus an applicable margin. The applicable margins, effective December 31, 2015 , for base rate loans and LIBOR loans denominated in U.S. dollars were 0.00% and 1.50% , respectively. The applicable margins, effective December 31, 2015 , for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.00% and 1.50% , respectively. The HBB Facility also requires a fee of 0.25% per annum on the unused commitment. The margins and unused commitment fee under the HBB Facility are subject to quarterly adjustment based on average excess availability. The floating rate of interest applicable to the HBB Facility at December 31, 2015 was 2.72% , including the floating rate margin and the effect of the interest rate swap agreement.

To reduce the exposure to changes in the market rate of interest, HBB has entered into interest rate swap agreements for a portion of the HBB Facility. Terms of the interest rate swap agreements require HBB to receive a variable interest rate and pay a fixed interest rate. HBB has interest rate swaps with notional values totaling $20.0 million at December 31, 2015 at an average fixed interest rate of 1.4% . See Note 2 and Note 9 to the Consolidated Financial Statements in this Form10-K for further discussion of HBB's interest rate swap agreements.

The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to NACCO, subject to achieving availability thresholds. Dividends are discretionary to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains excess availability of not less than $25.0 million . The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. At December 31, 2015 , HBB was in compliance with all covenants in the HBB Facility.

HBB believes funds available from cash on hand at the Company, the HBB Facility and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments arising during the next twelve months and until the expiration of the HBB Facility in July 2019.

54


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)

Contractual Obligations, Contingent Liabilities and Commitments
Following is a table which summarizes the contractual obligations of HBB as of December 31, 2015 :
 
Payments Due by Period
Contractual Obligations
Total
 
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
HBB Facility
$
57,514

 
$
7,514

 
$

 
$

 
$
50,000

 
$

 
$

Variable interest payments on HBB Facility
7,560

 
1,989

 
2,085

 
2,219

 
1,267

 

 

Other debt
852

 
852

 

 

 

 

 

Purchase and other obligations
166,074

 
156,494

 
3,257

 
3,196

 
3,127

 

 

Operating leases
43,845

 
4,588

 
5,260

 
5,060

 
5,070

 
5,136

 
18,731

Total contractual cash obligations
$
275,845

 
$
171,437

 
$
10,602

 
$
10,475

 
$
59,464

 
$
5,136

 
$
18,731

Not included in the table above, HBB has a long-term liability of approximately $0.8 million for unrecognized tax benefits, including interest and penalties, as of December 31, 2015 . At this time, the Company is unable to make a reasonable estimate of the timing of payments due to, among other factors, the uncertainty of the timing and outcome of its audits.
An event of default, as defined in the HBB Facility and in HBB’s operating agreements, could cause an acceleration of the payment schedule. No such event of default has occurred or is anticipated to occur.
HBB’s variable interest payments are calculated based upon HBB's anticipated payment schedule and the December 31, 2015 base rate and applicable margins, as defined in the HBB Facility. A 1/8% increase in the base rate would increase HBB’s estimated total annual interest payments on the HBB Facility by approximately $1.0 million .
The purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and incentive compensation.
Pension funding can vary significantly each year due to plan amendments, changes in the market value of plan assets, legislation and the Company’s decisions to contribute above the minimum regulatory funding requirements. As a result, pension funding has not been included in the table above. HBB does not expect to contribute to its U.S. pension plans in 2016 and expects to contribute less than $0.1 million to its non-U.S. pension plans in 2016 . Pension benefit payments are made from assets of the pension plans.
Off Balance Sheet Arrangements
HBB has not entered into any off balance sheet financing arrangements, other than operating leases, which are disclosed in the contractual obligations table above.
Capital Expenditures
Following is a table which summarizes actual and planned capital expenditures (in millions):
 
Planned
 
Actual
 
Actual
 
2016
 
2015
 
2014
HBB
$
8.2

 
$
4.4

 
$
4.5

Planned expenditures for 2016 are primarily for improvements to HBB’s information technology infrastructure and tooling for new products. These expenditures are expected to be funded from internally generated funds and bank borrowings.

55


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)

Capital Structure
HBB’s capital structure is presented below:
 
December 31
 
 
 
2015
 
2014
 
Change
Cash and cash equivalents
$
474

 
$
1,442

 
$
(968
)
Other net tangible assets
94,353

 
85,329

 
9,024

Goodwill and intangible assets, net
14,915

 
16,295

 
(1,380
)
Net assets
109,742

 
103,066

 
6,676

Total debt
(58,365
)
 
(53,453
)
 
(4,912
)
Total equity
$
51,377

 
$
49,613

 
$
1,764

Debt to total capitalization
53
%
 
52
%
 
1
%

Net assets increased $6.7 million from December 31, 2014 primarily due to a decrease in accounts payable partially offset by a decrease in accounts receivable and inventory. The decrease in accounts payable and inventory was primarily due to a shift in the timing of inventory purchases and payments, and the decrease in accounts receivable was primarily due to a shift in the timing of sales and collections in 2015 compared with 2014.

Total debt increased $4.9 million due to the timing of working capital payments.

Total equity increased $1.8 million due to HBB's 2015 net income of $19.7 million partially offset by $15.0 million of dividends paid to NACCO during 2015 and a $3.0 million increase in accumulated other comprehensive loss, mainly due to changes in foreign currency translation adjustment.

OUTLOOK

Consumer habits are changing. Consumer traffic to retail locations has been declining as consumers buy more over the Internet, or utilize the Internet for comparison shopping, which has resulted in reduced visits to physical store locations. This trend, as well as financial pressures experienced by the middle-market consumer, have created continued uncertainty about the overall growth prospects for the U.S. retail market for small appliances, including growth prospects for both in-store and internet sales. As a result, volumes in 2016 in the market in which HBB's core brands participate are projected to be comparable with 2015. The Canadian retail market is also expected to be difficult since the Canadian economy continues to struggle. However, the hunting, gardening and food enthusiast markets, where Weston participates, as well as the international and commercial markets in which HBB participates, are expected to grow moderately.

In spite of current market conditions, HBB expects consolidated sales volumes in 2016 to increase moderately compared with 2015 due to enhanced distribution and increased placement of higher-margin products in its core small kitchen appliance business. HBB's international and commercial product sales volumes are expected to increase in 2016 compared with 2015 as a result of the company's strategic initiatives. While the company believes there are a number of placement opportunities that can be secured going forward for the Weston-branded business, Weston's lower-margin, private-label business is expected to experience reduced distribution in 2016 as compared with 2015 as a result of fewer placements at a large customer account.

HBB continues to focus on strengthening its North American consumer market position through product innovation, promotions, increased placements and branding programs, together with appropriate levels of advertising for the company's highly successful and innovative product lines and its line of Weston products. HBB will continue to introduce new innovative products, as well as upgrades to certain existing products across a wide range of brands, price points and categories in both the retail and commercial marketplace, leveraging its strong brand portfolio, which now includes Proctor Silex ® , Hamilton Beach ® , Weston ® , Wolf Gourmet ® and Jamba ® . HBB's new Jamba ® -branded and Wolf Gourmet ® -branded products, both of which entered the market in the first half of 2015, are expected to gain market position in 2016. Specifically, HBB secured its lead distribution partners for the Wolf Gourmet ® -branded products in 2015 and expects to add additional distribution channels in 2016 both domestically and in its Canadian and Mexican markets. The company also expects to

56


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)

increase its Jamba distribution channels in 2016. Volumes for these products are expected to build gradually in 2016. HBB expects its global, growing commercial business to benefit from broadening the distribution of several newer products, including the Fury TM and Eclipse TM high-performance blenders and a new line of food blenders. Finally, HBB continues to pursue other opportunities to create additional product lines and new brands that can be distributed in high-end or specialty stores and on the Internet, including the introduction of the Hamilton Beach ® Professional premium line of counter-top kitchen appliances. This product line, which is inspired by products used in commercial kitchens but customized for use in home kitchens, is expected to be available starting in mid-2016. These products, as well as other new product introductions in the pipeline for 2016, are expected to enhance both revenues and operating profit. As a result of these new products and execution of the company's strategic initiatives, both domestically and internationally, HBB expects a moderate increase in revenues in 2016 compared with 2015, provided consumer spending is at expected levels.
 
Overall, HBB's full-year 2016 net income is expected to increase compared with 2015. The anticipated increase in sales volumes and revenues, resulting from increased distribution and continued implementation and execution of HBB's strategic initiatives, is expected to be partially offset by unfavorable currency relationships based on currency rates in effect at the end of 2015. HBB continues to monitor both currency effects and commodity costs closely and intends to continue to adjust product prices and product placements, as market conditions permit.

Cash flow before financing activities in 2016 is expected to be substantially higher than in 2015. Capital expenditures are expected to be $8.2 million in 2016.

Longer term, HBB will work to improve return on sales through economies of scale derived from market growth and its five strategic volume growth initiatives: (1) enhancing its placements in the North American consumer business through consumer-driven innovative products and strong sales and marketing support, (2) enhancing internet sales by providing best-in-class retailer support and increased consumer content and engagement, (3) participating in the "only-the-best" market with a strong brand and broad product line, including investing in new products to be sold under the Jamba ® , Wolf Gourmet ® and Weston brand names, (4) expanding internationally in the emerging Asian and Latin American markets by increasing product offerings and expanding its distribution channels and sales and marketing capabilities, and (5) achieving global commercial market leadership through a commitment to an enhanced global product line for chains and distributors serving the global food service and hospitality markets.


THE KITCHEN COLLECTION, LLC
KC’s business is seasonal and a majority of revenues and operating profit typically occurs in the second half of the year when sales of small electric appliances to consumers increase significantly for the fall holiday-selling season.
FINANCIAL REVIEW
Operating Results
The results of operations for KC were as follows for the years ended December 31 :
 
2015
 
2014
 
2013
Revenues
$
150,988

 
$
168,545

 
$
196,033

Operating profit (loss)
$
165

 
$
(7,075
)
 
$
(10,903
)
Interest expense
$
131

 
$
367

 
$
390

Other expense
$
86

 
$
65

 
$
70

Net loss
$
(420
)
 
$
(4,603
)
 
$
(6,884
)
Effective income tax rate
n/m

 
38.7
%
 
39.4
%

57


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)

2015 Compared with 2014
The following table identifies the components of change in revenues for 2015 compared with 2014 :
 
Revenues
2014
$
168,545

Increase (decrease) from:
 
Le Gourmet Chef ("LGC") closed stores
(11,365
)
KC closed stores
(10,050
)
KC comparable stores
(2,055
)
Other
(459
)
KC new stores
6,372

2015
$
150,988

Revenues decreased 10.4% in 2015 compared with 2014 . The decrease was primarily the result of the loss of sales from closing unprofitable LGC and KC stores during 2015 and 2014 and a decline in comparable store sales at KC. The decrease in KC comparable store sales resulted from fewer customer visits, a reduction in store transactions and a decrease in the average sales transaction value for 2015 compared with 2014 . These decreases were partially offset by sales at newly opened KC stores.
At December 31, 2015 , KC operated 229 stores compared with 248 stores at December 31, 2014 .
The following table identifies the components of change in operating profit (loss) for 2015 compared with 2014 :
 
Operating profit (loss)
2014
$
(7,075
)
Increase (decrease) from:
 
KC comparable stores
2,189

Selling, general and administrative expenses and other
1,434

LGC closed stores
1,141

Lease termination penalties
1,121

KC closed stores
898

Asset impairment charges
877

KC new stores
455

Affordable Care Act ("ACA") penalty
(875
)
2015
$
165

KC reported operating profit of $0.2 million in 2015 compared with an operating loss of $7.1 million in 2014 , primarily as a result of improvements in KC comparable store operating margins, lower Selling, general and administrative expenses, closing unprofitable LGC and KC stores and a reduction in lease termination penalties in 2015 compared with 2014 . Comparable store operating margins improved due to fewer promotional sales and mark-downs, a shift in mix to higher-margin products and a reduction in store expenses. Selling general and administrative expenses decreased mainly from a reduction in employee-related expenses and depreciation.
KC reported a net loss of $0.4 million in 2015 compared with a net loss of $4.6 million in 2014 primarily due to the factors affecting the change in operating loss partially offset by an increase in the effective income tax rate in 2015 due to the non-deductible ACA penalty.

58


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)

2014 Compared with 2013
The following table identifies the components of change in revenues for 2014 compared with 2013 :
 
Revenues
2013
$
196,033

Increase (decrease) from:
 
Closed stores
(30,467
)
KC comparable stores
(5,491
)
LGC comparable stores
(2,450
)
KC new stores
10,639

Other
281

2014
$
168,545

Revenues decreased 14.0% in 2014 compared with 2013 primarily as a result of closing unprofitable KC and LGC stores and a decline in comparable store sales at both KC and LGC. The decrease in comparable store sales resulted from fewer customer visits, a reduction in store transactions and a decrease in the average sales transaction value at both store formats for 2014 compared with 2013 . These decreases were partially offset by sales at newly opened KC stores.
At December 31, 2014 , KC operated 237 stores compared with 272 stores at December 31, 2013 . LGC operated 11 stores at December 31, 2014 compared with 32 stores at December 31, 2013 . The Kitchen Collection ® store count does not include 5 stores at December 31, 2013 that were only open for the holiday-selling season. The company did not utilize the seasonal store format in 2014 .
The following table identifies the components of change in operating loss for 2014 compared with 2013 :
 
Operating loss
2013
$
(10,903
)
Increase (decrease) from:
 
Selling, general and administrative expenses and other
2,790

KC comparable stores
1,458

Closed stores
1,144

KC new stores
225

Lease termination penalties
(1,200
)
LGC comparable stores
(589
)
2014
$
(7,075
)
KC recognized a decreased operating loss in 2014 compared with 2013 primarily as a result of lower Selling, general and administrative expenses, mainly from a reduction in employee-related expenses and professional fees. The decrease in operating loss was also a result of a shift in sales mix to higher margin products at KC comparable stores and from closing unprofitable KC and LGC stores during the last 12 months. These improvements were partially offset by lease termination penalties as well as losses at comparable LGC stores.
KC reported a net loss of $4.6 million in 2014 compared with a net loss of $6.9 million in 2013 primarily due to the factors affecting the change in operating loss.

59


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)


LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following tables detail the change in cash flow for the years ended December 31 :
 
2015
 
2014
 
Change
Operating activities:
 
 
 
 
 
Net loss
$
(420
)
 
$
(4,603
)
 
$
4,183

Depreciation
1,558

 
3,048

 
(1,490
)
Other
771

 
(943
)
 
1,714

Working capital changes
10,639

 
9,595

 
1,044

Net cash provided by operating activities
12,548

 
7,097

 
5,451

 
 
 
 
 
 
Investing activities:
 
 
 
 
 
Expenditures for property, plant and equipment
(1,806
)
 
(1,193
)
 
(613
)
Other
38

 
401

 
(363
)
Net cash used for investing activities
(1,768
)
 
(792
)
 
(976
)
 
 
 
 
 
 
Cash flow before financing activities
$
10,780

 
$
6,305

 
$
4,475

Net cash provided by operating activities increased $5.5 million during 2015 compared with 2014 primarily due to the decreased net loss in 2015 compared with 2014 .
 
2015
 
2014
 
Change
Financing activities:
 
 
 
 
 
Net additions (reductions) of revolving credit agreements
$

 
$
(1,460
)
 
$
1,460

Financing fees paid

 
(92
)
 
92

Net cash provided by (used for) financing activities
$

 
$
(1,552
)
 
$
1,552

The $1.6 million change in net cash provided by (used for) financing activities during 2015 compared with 2014 was primarily due to the repayment during 2014 of amounts outstanding at December 31, 2013 under the KC revolving credit agreement. KC had no borrowings outstanding under the KC revolving credit agreement as of December 31, 2015 and December 31, 2014 .
Financing Activities
KC has a $25.0 million secured revolving line of credit that expires in September 2019 (the “KC Facility”). The obligations under the KC Facility are secured by substantially all assets of KC. The approximate book value of KC's assets held as collateral under the KC Facility was $53.4 million as of December 31, 2015 . At December 31, 2015 , the borrowing base and excess availability under the KC Facility were $18.3 million . KC had no borrowings outstanding under the KC Facility.

The maximum availability under the KC Facility is derived from a borrowing base formula using KC's eligible inventory and eligible credit card accounts receivable, as defined in the KC Facility. Borrowings bear interest at a floating rate plus a margin based on the excess availability under the agreement, as defined in the KC Facility, which can be either a base rate plus a margin of 1.00% or LIBOR plus a margin of 2.00% as of December 31, 2015 . The KC Facility also requires a fee of 0.32% per annum on the unused commitment.

The KC Facility allows for the payment of dividends to NACCO, subject to certain restrictions based on availability and meeting a fixed charge coverage ratio as described in the KC Facility. Dividends are limited to (i) $6.0 million in any twelve -month period, so long as KC has excess availability, as defined in the KC Facility, of at least $7.5 million after giving effect to

60


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)

such payment and maintaining a minimum fixed charge coverage ratio of 1.1 to 1.0, as defined in the KC Facility; (ii) $2.0 million in any twelve -month period, so long as KC has excess availability, as defined in the KC Facility, of at least $7.5 million after giving effect to such payment and (iii) in such amounts as determined by KC, so long as KC has excess availability under the KC Facility of $15.0 million after giving effect to such payment. At December 31, 2015 , KC was in compliance with all financial covenants in the KC Facility.

KC believes funds available from cash on hand at the Company, the KC Facility and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments arising during the next twelve months and until the KC Facility expires in September 2019.

Contractual Obligations, Contingent Liabilities and Commitments
Following is a table which summarizes the contractual obligations of KC as of December 31, 2015 :
 
Payments Due by Period
Contractual Obligations
Total
 
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
Purchase and other obligations
$
23,020

 
$
23,020

 
$

 
$

 
$

 
$

 
$

Operating leases
76,431

 
19,844

 
15,996

 
12,366

 
8,827

 
6,471

 
12,927

Total contractual cash obligations
$
99,451

 
$
42,864

 
$
15,996

 
$
12,366

 
$
8,827

 
$
6,471

 
$
12,927

An event of default, as defined in KC’s operating lease agreements, could cause an acceleration of the payment schedule. No such event of default has occurred or is anticipated to occur.
The purchase and other obligations are primarily for accounts payable, open purchase orders, accrued payroll and incentive compensation.
Off Balance Sheet Arrangements
KC has not entered into any off balance sheet financing arrangements, other than operating leases, which are disclosed in the contractual obligations table above.
Capital Expenditures
Following is a table which summarizes actual and planned capital expenditures (in millions):
 
Planned
 
Actual
 
Actual
 
2016
 
2015
 
2014
KC
$
2.4

 
$
1.8

 
$
1.2

Planned expenditures in 2016 for property, plant and equipment are primarily for improvements to KC’s information technology infrastructure, store remodels and new store fixtures. These expenditures are expected to be funded from internally generated funds and bank borrowings.

61


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)

Capital Structure
KC’s capital structure is presented below.
 
December 31
 
 
 
2015
 
2014
 
Change
Cash and cash equivalents
$
16,314

 
$
5,534

 
$
10,780

Other net tangible assets
15,436

 
26,636

 
(11,200
)
Net assets
31,750

 
32,170

 
(420
)
Total debt

 

 

Total equity
$
31,750

 
$
32,170

 
$
(420
)
Debt to total capitalization
(a)

 
(a)

 
(a)

(a) Debt to total capitalization is not meaningful.

Other net tangible assets decreased $11.2 million from December 31, 2014 primarily due to a significant reduction in inventory and the change in intercompany taxes from a receivable to a payable position, partially offset by a decrease in accounts payable. The decreases in inventory and accounts payable are primarily from a reduction in the number of stores and a decrease in average inventory per store at December 31, 2015 compared with December 31, 2014 .

OUTLOOK

The overall retail outlet and traditional mall market experienced lower consumer traffic in 2015 as a result of changing consumer habits. Consumer traffic to retail locations has been declining as consumers buy more over the Internet, or utilize the Internet for comparison shopping, which has resulted in reduced visits to physical store locations. These trends are expected to continue in 2016. Financial pressures on middle-market consumers interested in housewares and small appliances have also adversely affected sales trends in these categories over the last few years. All of these factors are expected to continue to limit KC's target consumers' spending on housewares and small appliances at its mall locations. Given this market environment, KC realigned its business by closing nearly 100 underperforming stores during 2014 and 2015, while only opening 24 stores, leaving a smaller number of core Kitchen Collection ® outlet stores which are expected to perform with acceptable profitability.

As a result of ongoing market weakness, KC anticipates 2016 revenues and results to be comparable with 2015. KC believes its remaining stores are well-positioned to allow the company to perform at close to break-even in the current challenging environment and to take advantage of any future market rebound. Cash flow before financing activities is expected to be positive in 2016 but substantially lower than 2015.

Longer term, KC plans to focus on comparable store sales growth within its smaller core store portfolio. KC expects to accomplish this by increasing closure rates through continued refinement of its format, ongoing review of specific product offerings, merchandise mix, store displays and appearance and enhancing customers' store experience through improved customer interactions. Increasing sales of higher-margin products will also continue to be a key focus, as well as continuing to evaluate and, as lease contracts permit, terminate or restructure leases for underperforming and loss-generating stores.



62


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)

NACCO AND OTHER
NACCO and Other includes the parent company operations and Bellaire Corporation ("Bellaire"), a non-operating subsidiary of NACCO. Although Bellaire’s operations are immaterial, it has long-term liabilities related to closed mines, primarily from former Eastern U.S. underground coal mining activities.
FINANCIAL REVIEW
Operating Results
The results of operations at NACCO and Other were as follows for the years ended December 31 :
 
2015
 
2014
 
2013
Revenues
$

 
$

 
$

Operating loss
$
(4,248
)
 
$
(5,456
)
 
$
(6,233
)
Other expense, including closed mine obligations
$
649

 
$
2,284

 
$
1,547

Net loss
$
(3,346
)
 
$
(5,344
)
 
$
(5,718
)

2015 Compared with 2014

NACCO and Other recognized a decreased operating loss in 2015 compared with 2014 . The decrease in the operating loss was primarily due to higher management fees charged to the subsidiaries and lower employee-related expenses in 2015. In 2014, employee-related expenses included the unfavorable impact of a prior period accounting error. As a result of the error, the Company recorded a $1.1 million charge included in Selling, general and administrative expenses in NACCO and Other in 2014. See Note 18 to the Consolidated Financial Statements in this Form 10-K for further discussion of this error.

NACCO and Other recognized a decrease in Other expense primarily due to revisions of estimated cash flows for the Bellaire asset retirement obligation.

NACCO and Other recognized a net loss of $3.3 million in 2015 compared with a net loss of $5.3 million in 2014 primarily due to the factors affecting the operating loss and other (income) expense.

2014 Compared with 2013

NACCO and Other recognized a decreased operating loss in 2014 compared with 2013 . The decrease in the operating loss was primarily due higher management fees charged to the subsidiaries partially offset by higher employee-related expenses. The increase in employee-related expenses was the result of a prior period accounting error detected in 2014. As a result of the error, the Company recorded a $1.1 million charge included in Selling, general and administrative expenses in NACCO and Other related to an increase in the estimated liability for certain frozen deferred compensation plans.

NACCO and Other recognized an increase in Other expense primarily due to revisions of estimated cash flows for the Bellaire asset retirement obligation.

NACCO and Other recognized a net loss of $5.3 million in 2014 compared with a net loss of $5.7 million in 2013 primarily due to the factors affecting the operating loss and other (income) expense.

Stock Repurchase Programs

See, "Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" and Note 14 to the Consolidated Financial Statements in this Form 10-K for a discussion of the Company's stock repurchase programs.


63


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)

Management Fees

The management fees charged to operating subsidiaries represent an allocation of corporate overhead of the parent company. Management fees are allocated among all subsidiaries based upon the relative size and complexity of each subsidiary. The Company believes the allocation method is consistently applied and reasonable.
Following are the parent company management fees included in each subsidiary’s Selling, general and administrative expenses for the years ended December 31 :
 
2015
 
2014
 
2013
NACoal
$
5,328

 
$
4,521

 
$
3,136

HBB
$
3,654

 
$
3,714

 
$
3,424

KC
$
270

 
$
260

 
$
250

LIQUIDITY AND CAPITAL RESOURCES
Although NACCO’s subsidiaries have entered into borrowing agreements, NACCO has not guaranteed any borrowings of its subsidiaries. The borrowing agreements at NACoal, HBB and KC allow for the payment to NACCO of dividends and advances under certain circumstances. Dividends (to the extent permitted by its subsidiaries’ borrowing agreements), advances and management fees from its subsidiaries are the primary sources of cash for NACCO.
The Company believes funds available from cash on hand, its subsidiaries’ credit facilities and anticipated funds generated from its subsidiaries operations are sufficient to finance all of its subsidiaries scheduled principal repayments, operating needs and commitments arising during the next twelve months and until the expiration of its subsidiaries’ credit facilities.
Contractual Obligations, Contingent Liabilities and Commitments
Following is a table which summarizes the contractual obligations of NACCO and Other as of December 31, 2015 :
Contractual Obligations
Total
 
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
Operating leases
$
2,491

 
$
279

 
$
279

 
$
279

 
$
279

 
$
279

 
$
1,096

Income taxes payable
1,935

 
1,935

 

 

 

 

 

Purchase and other obligations
6,682

 
6,682

 

 

 

 

 

Total contractual cash obligations
$
11,108

 
$
8,896

 
$
279

 
$
279

 
$
279

 
$
279

 
$
1,096

Pension and postretirement funding can vary significantly each year due to plan amendments, changes in the market value of plan assets, legislation and the Company’s funding decisions to contribute any excess above the minimum legislative funding requirements. As a result, pension and postretirement funding has not been included in the table above. NACCO does not expect to contribute to its pension plan during 2016 . NACCO and Other maintains one supplemental retirement plan that pays monthly benefits to participants directly out of corporate funds. Annual benefit payments are expected to be less than $0.1 million per year over the next ten years. Benefit payments beyond that time cannot currently be estimated. All other pension benefit payments are made from assets of the pension plan.
The purchase and other obligations are primarily for accounts payable, open purchase orders, accrued payroll and incentive compensation.
NACCO and Other has a long-term liability for asset retirement obligations of $16.1 million that is not included in the table above due to the uncertainty of the timing of payments to settle these liabilities.

64


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)

Off Balance Sheet Arrangements
NACCO has not entered into any off balance sheet financing arrangements, other than operating leases, which are disclosed in the contractual obligations table above.
Capital Structure
NACCO’s consolidated capital structure is presented below:
 
December 31
 
 
 
2015
 
2014
 
Change
Cash and cash equivalents
$
52,499

 
$
61,135

 
$
(8,636
)
Other net tangible assets
278,786

 
355,071

 
(76,285
)
Goodwill and intangible assets, net
63,096

 
67,074

 
(3,978
)
Net assets
394,381

 
483,280

 
(88,899
)
Total debt
(169,982
)
 
(247,898
)
 
77,916

Closed mine obligations
(23,261
)
 
(23,907
)
 
646

Total equity
$
201,138

 
$
211,475

 
$
(10,337
)
Debt to total capitalization - continuing operations
46
%
 
54
%
 
(8
)%



65


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)

RECENTLY ISSUED ACCOUNTING STANDARDS

Accounting Standards Adopted in 2015: In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes." This update requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified statement of financial position.  ASU 2015-17 is effective for annual and interim reporting periods beginning after December 15, 2016.  This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  Early application is permitted as of the beginning of the interim or annual reporting period.  The Company retrospectively adopted this guidance during the fourth quarter of 2015. Accordingly, the Company reclassified current deferred taxes to non-current on the December 31, 2014 Balance Sheet, which increased non-current deferred income taxes by $18.6 million . See Note 15 to the Consolidated Financial Statements for further discussion of deferred taxes.

Accounting Standards Not Yet Adopted: In May 2014, the FASB codified in ASC 606, "Revenue Recognition - Revenue from Contracts with Customers," which supersedes most current revenue recognition guidance, including industry-specific guidance, and requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers and provide additional disclosures. As amended, the effective date for public entities is annual reporting periods beginning after December 15, 2017 and interim periods therein. As such, the Company will be required to adopt the standard in the first quarter of fiscal year 2018. Early adoption is not permitted before the first quarter of fiscal year 2017. ASC 606 may be adopted either using a full retrospective approach, in which the standard is applied to all of the periods presented, or a modified retrospective approach. The Company is currently evaluating which transition method to use and how ASC 606 will affect the Company's financial position, results of operations, cash flows and related disclosures.  

In August 2014, the FASB issued ASU No. 2014-15, "Preparation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern," to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures.  Specifically, the amendments (1) provide a definition of the term “substantial doubt,” (2) require an evaluation every reporting period, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that financial statements are issued.  ASU 2014-15 is effective for fiscal years ending after December 15, 2016, and for annual periods and interim periods thereafter.  Early application is permitted. The Company does not expect the adoption of this guidance to have an effect on the Company's financial position, results of operations, cash flows or related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early application is permitted. In August 2015, the FASB issued ASU 2015-15, "Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update)."  ASU 2015-15 amends Subtopic 835-30 to include that the SEC would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of debt issuance costs over the term of the line-of-credit arrangement, whether or not there are any outstanding borrowings on the line-of-credit arrangement. This guidance is effective for fiscal years (and interim reporting periods within fiscal years) beginning after December 15, 2015. The Company does not expect the adoption of this guidance to have a material effect on the Company's financial position, results of operations, cash flows or related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, "Inventory - Simplifying the Measurement of Inventory," which requires that inventory be measured at lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The Company does not expect the adoption of this guidance to have a material effect on the Company's financial position, results of operations, cash flows and related disclosures.  

66


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)

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which modifies how entities measure equity investments and present changes in the fair value of financial liabilities; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; changes presentation and disclosure requirements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Company is evaluating the impact that this new guidance will have on the Company’s financial position, results of operations, cash flows and related disclosures.  
EFFECTS OF FOREIGN CURRENCY
HBB operates internationally and enters into transactions denominated in foreign currencies. As a result, the Company is subject to the variability that arises from exchange rate movements. The effects of foreign currency on operating results at HBB is discussed above. The Company’s use of foreign currency derivative contracts is discussed in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of this Form 10-K.
ENVIRONMENTAL MATTERS
The Company’s previous manufacturing operations, like those of other companies engaged in similar businesses, involved the use, disposal and cleanup of substances regulated under environmental protection laws. The Company’s NACoal and Bellaire subsidiaries are affected by the regulations of numerous agencies, particularly the Federal Office of Surface Mining, the U.S. Environmental Protection Agency, the U.S. Army Corps of Engineers and associated state regulatory authorities. In addition, NACoal and Bellaire closely monitor proposed legislation and regulation concerning SMCRA, CAA, CPP, reauthorization of the Resource Conservation and Recovery Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Endangered Species Act and other regulatory actions.
Compliance with these increasingly stringent standards could result in higher expenditures for both capital improvements and operating costs. The Company’s policies stress environmental responsibility and compliance with these regulations. Based on current information, management does not expect compliance with these regulations to have a material adverse effect on the Company’s financial condition or results of operations. See Item 1 in Part I of this Form 10-K for further discussion of these matters.
FORWARD-LOOKING STATEMENTS
The statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere throughout this Annual Report on Form 10-K 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. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Such risks and uncertainties with respect to each subsidiary's operations include, without limitation:

NACoal: (1) changes in tax laws or regulatory requirements, including changes in mining or power plant emission regulations and health, safety or environmental legislation, (2) changes in costs related to geological conditions, repairs and maintenance, new equipment and replacement parts, fuel or other similar items, (3) regulatory actions, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (4) weather conditions, extended power plant outages or other events that would change the level of customers' coal or limerock requirements, (5) weather or equipment problems that could affect deliveries to customers, (6) changes in the power industry that would affect demand for NACoal's reserves, (7) changes in the costs to reclaim NACoal mining areas, (8) costs to pursue and develop new mining opportunities, (9) changes or termination of a long-term mining contract, or a customer default under a contract, (10) the timing and pricing of transactions to dispose of assets at the Centennial operations, and (11) increased competition, including consolidation within the industry.


67


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)

HBB: (1) changes in the sales prices, product mix or levels of consumer purchases of small electric and specialty housewares appliances, (2) changes in consumer retail and credit markets, (3) bankruptcy of or loss of major retail customers or suppliers, (4) changes in costs, including transportation costs, of sourced products, (5) delays in delivery of sourced products, (6) changes in or unavailability of quality or cost effective suppliers, (7) exchange rate fluctuations, changes in the foreign import tariffs and monetary policies and other changes in the regulatory climate in the foreign countries in which HBB buys, operates and/or sells products, (8) product liability, regulatory actions or other litigation, warranty claims or returns of products, (9) customer acceptance of, changes in costs of, or delays in the development of new products, (10) increased competition, including consolidation within the industry and (11) changes mandated by federal, state and other regulation, including health, safety or environmental legislation.

KC: (1) changes in gasoline prices, weather conditions, the level of consumer confidence and disposable income as a result of economic conditions, unemployment rates or other events or conditions that may adversely affect the number of customers visiting Kitchen Collection ® stores, (2) changes in the sales prices, product mix or levels of consumer purchases of kitchenware, small electric appliances and gourmet foods, (3) changes in costs, including transportation costs, of inventory, (4) delays in delivery or the unavailability of inventory, (5) customer acceptance of new products, (6) the anticipated impact of the opening of new stores, the ability to renegotiate existing leases and effectively and efficiently close under-performing stores and (7) increased competition.


68




Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
The Company's subsidiaries, NACoal, HBB and KC, have entered into certain financing arrangements that require interest payments based on floating interest rates. As such, the Company's financial results are subject to changes in the market rate of interest. There is an inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements. To reduce the exposure to changes in the market rate of interest, NACoal and HBB have entered into interest rate swap agreements for a portion of its floating rate financing arrangements. The Company does not enter into interest rate swap agreements for trading purposes. Terms of the interest rate swap agreements require the subsidiaries to receive a variable interest rate and pay a fixed interest rate. See Note 2 and Note 9 to the Consolidated Financial Statements in this Form10-K.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in interest rates. The Company assumes that a loss in fair value is an increase to its liabilities. The fair value of the Company's interest rate swap agreements was a payable of $0.7 million at December 31, 2015 . A hypothetical 10% decrease in interest rates would cause a decrease of $0.5 million in the fair value of interest rate swap agreements and the resulting fair value would be a payable of $1.2 million .
FOREIGN CURRENCY EXCHANGE RATE RISK
HBB operates internationally and enters into transactions denominated in foreign currencies, principally the Canadian dollar, the Mexican peso and, to a lesser extent, the Chinese yuan and Brazilian real. As such, HBB's financial results are subject to the variability that arises from exchange rate movements. The fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of revenues, expenses, assets and liabilities. The potential impact of currency fluctuation increases as international expansion increases.
HBB uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies and not for trading purposes. These contracts generally mature within twelve months and require HBB to buy or sell the functional currency in which the applicable subsidiary operates and buy or sell U.S. dollars at rates agreed to at the inception of the contracts. See Note 2 and Note 9 to the Consolidated Financial Statements in this Form 10-K.
For purposes of risk analysis, the Company uses sensitivity analysis to measure the potential loss in fair value of financial instruments sensitive to changes in foreign currency exchange rates. The Company assumes that a loss in fair value is either a decrease to its assets or an increase to its liabilities. The fair value of the Company's foreign currency exchange contracts was a net receivable of $0.4 million at December 31, 2015 . Assuming a hypothetical 10% weakening of the U.S. dollar compared with the Canadian dollar at December 31, 2015 , the fair value of foreign currency-sensitive financial instruments, which represents forward foreign currency exchange contracts, would be decreased by $1.2 million compared with its fair value at December 31, 2015 . It is important to note that the change in fair value indicated in this sensitivity analysis would be somewhat offset by changes in the fair value of the underlying receivables and payables.
COMMODITY PRICE RISK
The Company uses certain commodities, including steel and diesel fuel, in the normal course of its mining processes. As such, the cost of operations is subject to variability as the market for these commodities changes. The Company monitors this risk and utilizes forward purchase contracts to manage a portion of NACoal's exposure related to diesel fuel volatility. There have been no material changes in the Company's commodity price risk during 2015.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is set forth in the Financial Statements and Supplementary Data contained in Part IV of this Form 10-K and is hereby incorporated herein by reference to such information.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disagreements with accountants on accounting and financial disclosure for the three-year period ended December 31, 2015 .


69




Item 9A . CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures: An evaluation was carried out under the supervision and with the participation of the Company's management, including the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, these officers have concluded that the Company's disclosure controls and procedures are effective.
Management's report on internal control over financial reporting: Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework in Internal Control — Integrated Framework (2013 framework), management concluded that the Company's internal control over financial reporting was effective as of December 31, 2015 . The Company's effectiveness of internal control over financial reporting as of December 31, 2015 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is included in Item 15 of this Form 10-K and incorporated herein by reference.
Changes in internal control: There have been no changes in the Company's internal control over financial reporting, that occurred during the fourth quarter of 2015 , that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B . OTHER INFORMATION
None.

70




PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to Directors of the Company will be set forth in the 2016 Proxy Statement under the subheadings “Proposals To Be Voted On At The 2016 Annual Meeting — Proposal 1 — Election of Directors — Director Nominee Information,” which information is incorporated herein by reference.
Information with respect to the audit review committee and the audit review committee financial expert will be set forth in the 2016 Proxy Statement under the subheading “Corporate Governance Information — Directors' Meetings and Committees,” which information is incorporated herein by reference.
Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's Directors, executive officers and holders of more than ten percent of the Company's equity securities will be set forth in the 2016 Proxy Statement under the subheading “Other Important Information — Section 16(a) Beneficial Ownership Reporting Compliance,” which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included in this Form 10-K as Item 4A of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.
The Company has adopted a code of business conduct and ethics applicable to all Company personnel, including the principal executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar functions. The code of business conduct and ethics, entitled the “Code of Corporate Conduct,” is posted on the Company's website at www.nacco.com under “Corporate Governance.”
Item 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be set forth in the 2016 Proxy Statement under the headings “Executive Compensation Information” and “Proposals To Be Voted On At The 2016 Annual Meeting — Proposal 1 — Election of Directors — Director Compensation,” which information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to security ownership of certain beneficial owners and management will be set forth in the 2016 Proxy Statement under the subheading “Other Important Information — Beneficial Ownership of Class A Common and Class B Common,” which information is incorporated herein by reference.
Information with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance will be set forth in the 2016 Proxy Statement under the subheading “Other Important Information — Equity Compensation Plan Information," which information is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions will be set forth in the 2016 Proxy Statement under the subheadings “Corporate Governance Information — Review and Approval of Related Person Transactions,” which information is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to principal accountant fees and services will be set forth in the 2016 Proxy Statement under the heading “Proposals To Be Voted On At The 2016 Annual Meeting — Proposal 3 — Ratification of the Appointment of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for 2016 ,” which information is incorporated herein by reference.


71

Table of Contents



PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) and (2) The response to Item 15(a)(1) and (2) is set forth beginning at page F-1 of this Form 10-K.
(a) (3) Listing of Exhibits — See the exhibit index beginning at page X-1 of this Form 10-K.
(b) The response to Item 15(b) is set forth beginning at page X-1 of this Form 10-K.
(c) Financial Statement Schedules — The response to Item 15(c) is set forth beginning at page F-48 of this Form 10-K.


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Table of Contents



SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
NACCO Industries, Inc.
 
 
 
By:  
/s/ Elizabeth I. Loveman
 
 
 
Elizabeth I. Loveman
 
 
 
Vice President and Controller
(principal financial and accounting officer)
 
 
 
 
 

March 2, 2016


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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Alfred M. Rankin, Jr.
 
Chairman, President and Chief Executive Officer (principal executive officer), Director
March 2, 2016
Alfred M. Rankin, Jr.
 
 
 
 
 
 
 
/s/ Elizabeth I. Loveman
 
Vice President and Controller (principal financial and accounting officer)
March 2, 2016
Elizabeth I. Loveman
 
 
 
 
 
 
* Scott S. Cowen
 
Director
March 2, 2016
Scott S. Cowen
 
 
 
 
 
 
 
* John P. Jumper
 
Director 
March 2, 2016
John P. Jumper
 
 
 
 
 
 
 
* Dennis W. LaBarre
 
Director 
March 2, 2016
Dennis W. LaBarre
 
 
 
 
 
 
 
* Richard de J. Osborne
 
Director 
March 2, 2016
Richard de J. Osborne
 
 
 
 
 
 
 
* James A. Ratner
 
Director 
March 2, 2016
James A. Ratner
 
 
 
 
 
 
 
* Britton T. Taplin
 
Director 
March 2, 2016
Britton T. Taplin
 
 
 
 
 
 
 
* David F. Taplin
 
Director 
March 2, 2016
David F. Taplin
 
 
 
 
 
 
 
* David B. H. Williams
 
Director 
March 2, 2016
David B. H. Williams
 
 
 

 
* Elizabeth I. Loveman, by signing her name hereto, does hereby sign this Form 10-K on behalf of each of the above named and designated directors of the Company pursuant to a Power of Attorney executed by such persons and filed with the Securities and Exchange Commission.

/s/ Elizabeth I. Loveman
 
March 2, 2016
Elizabeth I. Loveman, Attorney-in-Fact 
 
 


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ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 15(a)(1) AND (2), AND ITEM 15(c)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 2015
NACCO INDUSTRIES, INC.
CLEVELAND, OHIO


F-1

Table of Contents



FORM 10-K
ITEM 15(a)(1) AND (2)
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of NACCO Industries, Inc. and Subsidiaries are incorporated by reference in Item 8:
The following consolidated financial statement schedules of NACCO Industries, Inc. and Subsidiaries are included in Item 15(c):
 
 
All other schedules for which provision is made in the applicable accounting regulation of the SEC are not required under the related instructions or are inapplicable, and therefore have been omitted.


F-2

Table of Contents



Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of NACCO Industries, Inc.

We have audited the accompanying consolidated balance sheets of NACCO Industries, Inc and Subsidiaries (collectively “the Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NACCO Industries, Inc. and Subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), NACCO Industries, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 2, 2016 expressed an unqualified opinion thereon.
 
 
 
/s/ Ernst & Young LLP
Cleveland, Ohio
 
 
 
March 2, 2016
 
 
 


F-3

Table of Contents



Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of NACCO Industries, Inc.

We have audited NACCO Industries, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). NACCO Industries, Inc. and Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s report on internal control over financial reporting in Item 9A. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, NACCO Industries, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NACCO Industries, Inc. and Subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2015 and our report dated our report dated March 2, 2016 expressed an unqualified opinion thereon.
 
 
 
/s/ Ernst & Young LLP
Cleveland, Ohio
 
 
 
March 2, 2016
 
 
 


F-4

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NACCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Year Ended December 31
 
2015
 
2014
 
2013
 
(In thousands, except per share data)
Revenues
$
915,860

 
$
896,782

 
$
932,666

Cost of sales
736,364

 
711,710

 
711,375

Gross profit
179,496

 
185,072

 
221,291

Earnings of unconsolidated mines
48,432

 
48,396

 
46,429

Operating expenses
 
 
 
 
 
Selling, general and administrative expenses
193,925

 
198,697

 
199,331

Centennial long-lived asset impairment charge

 
105,119

 

Centennial goodwill impairment charge

 

 
3,973

Amortization of intangible assets
3,987

 
3,300

 
3,668

(Gain) loss on sale of assets
(1,811
)
 
(7,339
)
 
(588
)
 
196,101

 
299,777

 
206,384

Operating profit (loss)
31,827

 
(66,309
)
 
61,336

Other expense (income)
 
 
 
 
 
Interest expense
6,924

 
7,566

 
4,775

Income from other unconsolidated affiliates
(2,040
)
 
(161
)
 
(1,432
)
Closed mine obligations
919

 
2,582

 
1,817

Other, net, including interest income
1,225

 
277

 
456

 
7,028

 
10,264

 
5,616

Income (loss) before income tax provision (benefit)
24,799

 
(76,573
)
 
55,720

Income tax provision (benefit)
2,815

 
(38,455
)
 
11,270

Net income (loss)
$
21,984

 
$
(38,118
)
 
$
44,450

 
 
 
 
 
 
Basic earnings (loss) per share
$
3.14

 
$
(5.02
)
 
$
5.48

 
 
 
 
 
 
Diluted earnings (loss) per share
$
3.13

 
$
(5.02
)
 
$
5.47

 
 
 
 
 
 
Basic weighted average shares outstanding
7,001

 
7,590

 
8,105

Diluted weighted average shares outstanding
7,022

 
7,590

 
8,124

 
 
 
 
 
 
See notes to consolidated financial statements.

F-5

Table of Contents



NACCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Year Ended December 31
 
2015
 
2014
 
2013
 
(In thousands)
Net income (loss)
$
21,984

 
$
(38,118
)
 
$
44,450

Other comprehensive income (loss)
 
 
 
 
 
Foreign currency translation adjustment
(2,756
)
 
(1,896
)
 
(229
)
Deferred gain on available for sale securities, net of tax
17

 
442

 
729

Current period cash flow hedging activity, net of $357 tax benefit in 2015, $838 tax benefit in 2014 and $477 tax expense in 2013
(577
)
 
(1,518
)
 
810

Reclassification of hedging activities into earnings, net of $191 tax benefit in 2015, $489 tax benefit in 2014 and $95 tax benefit in 2013
409

 
898

 
152

Current period pension and postretirement plan adjustment, net of $1,222 tax benefit in 2015, $3,292 tax benefit in 2014 and $5,531 tax expense in 2013
(1,204
)
 
(6,483
)
 
8,022

Curtailment gain into earnings, net of $718 tax expense in 2013

 

 
(983
)
Reclassification of pension and postretirement adjustments into earnings, net of $420 tax benefit in 2015, $313 tax benefit in 2014 and $740 tax benefit in 2013
856

 
627

 
1,101

Total other comprehensive income (loss)
$
(3,255
)
 
$
(7,930
)
 
$
9,602

Comprehensive income (loss)
$
18,729

 
$
(46,048
)
 
$
54,052

See notes to consolidated financial statements.


F-6

Table of Contents



NACCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
December 31
 
2015
 
2014
 
(In thousands, except share data)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
52,499

 
$
61,135

Accounts receivable, net of allowances of $19,801 in 2015 and $17,327 in 2014
111,020

 
123,466

Accounts receivable from affiliates
3,085

 
57,421

Inventories, net
165,016

 
190,382

Assets held for sale
17,497

 
1,319

Prepaid expenses and other
12,317

 
13,424

Total current assets
361,434

 
447,147

Property, plant and equipment, net
132,539

 
159,644

Goodwill
6,253

 
6,253

Other intangibles, net
56,843

 
60,821

Deferred income taxes
42,013

 
34,372

Other non-current assets
56,326

 
62,283

Total assets
$
655,408

 
$
770,520

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
100,300

 
$
133,668

Revolving credit agreements of subsidiaries — not guaranteed by the parent company
8,365

 
55,000

Current maturities of long-term debt of subsidiaries — not guaranteed by the parent company
1,504

 
1,467

Accrued income taxes
1,935

 
4,015

Accrued payroll
40,854

 
23,567

Accrued cooperative advertising
10,676

 
9,899

Other current liabilities
28,112

 
27,065

Total current liabilities
191,746

 
254,681

Long-term debt of subsidiaries — not guaranteed by the parent company
160,113

 
191,431

Asset retirement obligations
39,780

 
37,399

Pension and other postretirement obligations
10,046

 
10,616

Other long-term liabilities
52,585

 
64,919

Total liabilities
454,270

 
559,046

Stockholders’ equity

 
 
Common stock:
 
 
 
Class A, par value $1 per share, 5,265,446 shares outstanding (2014 - 5,662,214 shares outstanding)
5,265

 
5,662

Class B, par value $1 per share, convertible into Class A on a one-for-one basis, 1,571,727 shares outstanding (2014 - 1,573,292 shares outstanding)
1,572

 
1,573

Capital in excess of par value

 

Retained earnings
217,745

 
224,428

Accumulated other comprehensive loss
(23,444
)
 
(20,189
)
Total stockholders’ equity
201,138

 
211,474

Total liabilities and equity
$
655,408

 
$
770,520

See notes to consolidated financial statements.

F-7

Table of Contents



NACCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Year Ended December 31
 
2015
 
2014
 
2013
 
(In thousands)
Operating Activities
 
 
 
 
 
Net income (loss)
$
21,984

 
$
(38,118
)
 
$
44,450

 
 
 
 
 
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
Depreciation, depletion and amortization
23,680

 
28,070

 
24,572

Amortization of deferred financing fees
1,089

 
229

 
614

Deferred income taxes
(6,942
)
 
(41,347
)
 
(7,646
)
Centennial long-lived asset impairment charge

 
105,119

 

Centennial goodwill impairment charge

 

 
3,973

(Gain) loss on sale of assets
(1,811
)
 
(7,339
)
 
(588
)
Other
1,754

 
14,667

 
(14,572
)
Working capital changes, excluding the effect of business acquisitions:
 
 
 
 
 
Accounts receivable
66,486

 
(22,506
)
 
(2,779
)
Inventories
24,149

 
(879
)
 
(14,871
)
Other current assets
4,530

 
201

 
(802
)
Accounts payable
(28,867
)
 
(2,963
)
 
4,851

Other current liabilities
1,950

 
(15,335
)
 
15,863

Net cash provided by operating activities
108,002

 
19,799

 
53,065

 
 
 
 
 
 
Investing Activities
 
 
 
 
 
Expenditures for property, plant and equipment
(10,615
)
 
(57,500
)
 
(57,449
)
Acquisition of business
(413
)
 
(25,000
)
 

Proceeds from the sale of assets
3,471

 
8,134

 
2,504

Cash payment for cost method investment

 

 
(5,000
)
Other
(734
)
 
(568
)
 
(789
)
Net cash used for investing activities
(8,291
)
 
(74,934
)
 
(60,734
)
 
 
 
 
 
 
Financing Activities
 
 
 
 
 
Reductions of long-term debt
(6,282
)
 
(9,399
)
 
(15,803
)
Net additions (reductions) to revolving credit agreements
(71,635
)
 
73,546

 
19,654

Cash dividends paid
(7,296
)
 
(7,755
)
 
(8,104
)
Purchase of treasury shares
(24,010
)
 
(35,075
)
 
(31,306
)
Financing fees paid

 
(333
)
 
(1,209
)
Other
922

 
(5
)
 
(8
)
Net cash provided by (used for) financing activities
(108,301
)
 
20,979

 
(36,776
)
 
 
 
 
 
 
Effect of exchange rate changes on cash
(46
)
 
(99
)
 
(20
)
Cash and Cash Equivalents
 
 
 
 
 
Decrease for the year
(8,636
)
 
(34,255
)
 
(44,465
)
Balance at the beginning of the year
61,135

 
95,390

 
139,855

Balance at the end of the year
$
52,499

 
$
61,135

 
$
95,390

See notes to consolidated financial statements.

F-8

Table of Contents



NACCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
 
 
 
 
 
 
Accumulated Other Comprehensive Income (Loss)
 
 
 
Class A Common Stock
Class B Common Stock
Capital in Excess of Par Value
Retained Earnings
Foreign Currency Translation Adjustment
Deferred Gain (Loss) on Available for Sale Securities
Deferred Gain (Loss) on Cash Flow Hedging
Pension and Postretirement Plan Adjustment
Total Stockholders' Equity
 
(In thousands, except per share data)
Balance, January 1, 2013
$
6,771

$
1,582

$
24,612

$
270,227

 
$
(574
)
 
$
292

 
$
(286
)
 
$
(21,293
)
 
$
281,331

Stock-based compensation
83


1,724


 

 

 

 

 
1,807

Purchase of treasury shares
(565
)

(26,336
)
(4,405
)
 

 

 

 

 
(31,306
)
Conversion of Class B to Class A shares
1

(1
)


 

 

 

 

 

Net income



44,450

 

 

 

 

 
44,450

Cash dividends on Class A and Class B common stock: $1.000 per share



(8,104
)
 

 

 

 

 
(8,104
)
Current period other comprehensive income (loss)




 
(229
)
 
729

 
810

 
8,022

 
9,332

Current period curtailment gain




 

 

 

 
(983
)
 
(983
)
Reclassification adjustment to net income




 

 

 
152

 
1,101

 
1,253

Balance, December 31, 2013
$
6,290

$
1,581

$

$
302,168


$
(803
)

$
1,021


$
676


$
(13,153
)
 
$
297,780

Stock-based compensation
28


2,544


 

 

 

 

 
2,572

Purchase of treasury shares
(664
)

(2,544
)
(31,867
)
 

 

 

 

 
(35,075
)
Conversion of Class B to Class A shares
8

(8
)


 

 

 

 

 

Net income (loss)



(38,118
)
 

 

 

 

 
(38,118
)
Cash dividends on Class A and Class B common stock: $1.0225 per share



(7,755
)
 

 

 

 

 
(7,755
)
Current period other comprehensive income (loss)




 
(1,896
)
 
442

 
(1,518
)
 
(6,483
)
 
(9,455
)
Reclassification adjustment to net income




 

 
 
 
898

 
627

 
1,525

Balance, December 31, 2014
$
5,662

$
1,573

$

$
224,428


$
(2,699
)

$
1,463

 
$
56


$
(19,009
)

$
211,474

Stock-based compensation
45


2,196


 

 

 

 

 
2,241

Purchase of treasury shares
(443
)

(2,196
)
(21,371
)
 

 

 

 

 
(24,010
)
Conversion of Class B to Class A shares
1

(1
)


 

 

 

 

 

Net income



21,984

 

 

 

 

 
21,984

Cash dividends on Class A and Class B common stock: $1.0450 per share



(7,296
)
 

 

 

 

 
(7,296
)
Current period other comprehensive income (loss)




 
(2,756
)
 
17

 
(577
)
 
(1,204
)
 
(4,520
)
Reclassification adjustment to net income (loss)




 

 

 
409

 
856

 
1,265

Balance, December 31, 2015
$
5,265

$
1,572

$

$
217,745


$
(5,455
)

$
1,480

 
$
(112
)

$
(19,357
)

$
201,138

See notes to consolidated financial statements.

F-9

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)


NOTE 1— Principles of Consolidation and Nature of Operations

The Consolidated Financial Statements include the accounts of NACCO Industries, Inc. (the parent company or “NACCO”) and its wholly owned subsidiaries (“NACCO Industries, Inc. and Subsidiaries” or the “Company”). Intercompany accounts and transactions are eliminated in consolidation. The Company's subsidiaries operate in the following principal industries: mining, small appliances and specialty retail. The Company manages its subsidiaries primarily by industry.

The North American Coal Corporation and its affiliated companies (collectively, “NACoal”) mine coal primarily for use in power generation and provide selected value-added mining services for other natural resources companies. Hamilton Beach Brands, Inc. (“HBB”) is a leading designer, marketer and distributor of small electric household and specialty housewares appliances as well as commercial products for restaurants, bars and hotels. The Kitchen Collection, LLC (“KC”) is a national specialty retailer of kitchenware operating under the Kitchen Collection ® store name in outlet and traditional malls throughout the United States.

NACoal has two consolidated mining operations: Mississippi Lignite Mining Company (“MLMC”) and Centennial Natural Resources ("Centennial"). Centennial ceased coal production in the fourth quarter of 2015. NACoal also provides dragline mining services for independently owned limerock quarries in Florida. NACoal has the following wholly owned unconsolidated subsidiaries that each meet the definition of a variable interest entity and are accounted for using the equity method:

The Coteau Properties Company (“Coteau”)
The Falkirk Mining Company (“Falkirk”)
The Sabine Mining Company (“Sabine”)
Demery Resources Company, LLC (“Demery”)
Caddo Creek Resources Company, LLC (“Caddo Creek”)
Coyote Creek Mining Company, LLC (“Coyote Creek”)
Camino Real Fuels, LLC (“Camino Real”)
Liberty Fuels Company, LLC (“Liberty”)
Bisti Fuels Company, LLC ("Bisti")
NoDak Energy Services, LLC ("NoDak")

The unconsolidated subsidiaries, with the exception of NoDak (collectively the "Unconsolidated Mines"), were formed to develop, construct and/or operate surface coal mines under long-term contracts and are capitalized primarily with debt financing provided by or supported by their respective customers, and without recourse to NACCO and NACoal. The contracts with the customers of the unconsolidated subsidiaries provide for reimbursement to the company at a price based on actual costs plus an agreed pre-tax profit per ton of coal sold or actual costs plus a management fee. The fees earned at each mine adjust over time in line with various indices which reflect general inflation rates. Although NACoal owns 100% of the equity and manages the daily operations of these entities, the Company has determined that the equity capital provided by NACoal is not sufficient to adequately finance the ongoing activities or absorb any expected losses without additional support from the customers. The customers have a controlling financial interest and have the power to direct the activities that most significantly affect the economic performance of the entities. As a result, NACoal is not the primary beneficiary and therefore does not consolidate these entities' financial position or results of operations. The income taxes resulting from operations of the Unconsolidated Mines are solely the responsibility of the Company. The pre-tax income from the Unconsolidated Mines, excluding NoDak, is reported on the line “Earnings of unconsolidated mines” in the Consolidated Statements of Operations, with related taxes included in the provision for income taxes. The Company has included the pre-tax earnings of the Unconsolidated Mines, excluding NoDak, above operating profit as they are an integral component of the Company's business and operating results. The pre-tax income from NoDak is reported on the line "Income from other unconsolidated affiliates" in the "Other (income) expense" section of the Consolidated Statements of Operations, with the related income taxes included in the provision for income taxes. The unconsolidated subsidiaries are accounted for under the equity method. See Note 20 for further discussion.

Coteau, Falkirk, Sabine, Liberty and Coyote supply or will supply lignite coal for power generation. Demery and Caddo Creek supply lignite coal for the production of activated carbon. Camino Real supplies sub- bituminous coal for power generation. Bisti will supply sub-bituminous coal for power generation. NoDak operates and maintains a coal processing facility.


F-10

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Coteau, Falkirk and Sabine were developed between 1974 and 1984. Demery commenced delivering coal in 2012 and anticipates achieving full production levels in 2017. Caddo Creek commenced delivering coal in late 2014. Camino Real commenced delivering coal in October 2015, and expects to mine approximately 2.5 million to 2.7 million tons of coal annually when at full production.

Liberty commenced production in 2013 but did not deliver any coal for power generation in 2015. Production levels at Liberty are expected to increase gradually beginning in 2016 and build to full production of approximately 4.6 million tons of coal annually beginning in 2023, although the timing of future deliveries will be affected by when the Kemper County Energy Facility is commissioned.

Coyote Creek is developing a mine in Mercer County, North Dakota, from which it expects to deliver approximately 2.5 million tons of coal annually beginning in mid-2016.

Bisti anticipates that it will replace an existing contract miner at an existing mine during the second half of 2016, after which it will make annual coal deliveries of between 5.0 million to 6.0 million tons.

North American Coal Corporation India Private Limited ("NACC India") was formed to provide technical business advisory services to the third-party owner of a coal mine in India.  During 2014, NACC India's customer defaulted on its contractual payment obligations and as a result of this default, NACC India terminated its contract with the customer and is pursuing contractual remedies. As a result of this default, NACoal recognized a $1.1 million after-tax charge to establish an allowance against the receivable from NACC India's customer during 2014. Prior to contract termination, NACC India met the definition of a variable interest entity of which NACoal was not the primary beneficiary and was accounted for using the equity method with net income or loss reported on the line "(Income) loss from other unconsolidated affiliates" in the "Other expense (income)" section of the Consolidated Statements of Operations. Subsequent to contract termination, NACC India is no longer a variable interest entity and its financial position and results of operations are consolidated by NACoal as of the contract termination date in 2014. 

NOTE 2— Significant Accounting Policies

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and judgments. These estimates and judgments affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities (if any) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less.
Accounts Receivable, Net of Allowances: Allowances for doubtful accounts are maintained against accounts receivable for estimated losses resulting from the inability of customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. Accounts are written off against the allowance when it becomes evident collection will not occur.
Inventories: Inventories are stated at the lower of cost or market. The weighted average method is used for coal inventory. KC retail inventories are stated at the lower of cost or market using the retail inventory method. The first-in, first-out (“FIFO”) method is used with respect to all other inventories. Reserves are maintained for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. Upon a subsequent sale or disposal of the impaired inventory, the corresponding reserve for impaired value is relieved to ensure that the cost basis of the inventory reflects any write-downs.
Property, Plant and Equipment, Net: Property, plant and equipment are initially recorded at cost. Depreciation, depletion and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under capital leases, over their estimated useful lives using the straight-line method. Buildings and building improvements are depreciated using a 40 year life or, at NACoal, over the life of the mine, which is 30 years. Estimated lives for machinery and equipment range from three to 15 years . Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the lease. The units-of-production method is used to amortize certain tooling for sourced products and certain coal-related assets based on estimated recoverable tonnages. Repairs and maintenance costs are generally expensed when incurred. Asset

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

retirement costs associated with asset retirement obligations are capitalized with the carrying amount of the related long-lived asset and depreciated over the asset's estimated useful life.
Long-Lived Assets: The Company periodically evaluates long-lived assets for impairment when changes in circumstances or the occurrence of certain events indicate the carrying amount of an asset may not be recoverable. Upon identification of indicators of impairment, the Company evaluates the carrying value of the asset by comparing the estimated future undiscounted cash flows generated from the use of the asset 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 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.
Coal Supply Agreement: The coal supply agreement represents a long-term supply agreement with NACoal's customer and was recorded based on the fair value at the date of acquisition. The coal supply agreement is amortized based on units of production over the term of the agreement, which is estimated to be 30 years . The Company reviews identified intangible assets for impairment when changes in circumstances or the occurrence of certain events indicate potential impairment.
Self-insurance Liabilities: The Company is generally self-insured for product liability, environmental liability, medical claims, certain workers’ compensation claims and certain closed mine liabilities. For product liability, catastrophic insurance coverage is retained for potentially significant individual claims. An estimated provision for claims reported and for claims incurred but not yet reported under the self-insurance programs is recorded and revised periodically based on industry trends, historical experience and management judgment. In addition, industry trends are considered within management's judgment for valuing claims. Changes in assumptions for such matters as legal judgments and settlements, inflation rates, medical costs and actual experience could cause estimates to change in the near term.
Revenue Recognition: Revenues are generally recognized when title transfers and risk of loss passes to the customer. Under its mining contracts, the Company recognizes revenue as the coal or limerock is delivered or services are performed. Revenues at HBB are recognized when customer orders are completed and shipped. Revenues at KC are recognized at the point of sale when payment is made and customers take possession of the merchandise in stores.
The Company's products generally are not sold with the right of return. Based on the Company's historical experience, a portion of KC and HBB products sold are estimated to be returned due to reasons such as buyer remorse, duplicate gifts received, product failure and excess inventory stocked by the customer, which, subject to certain terms and conditions, the Company will agree to accept. The Company records estimated reductions to revenues at the time of the sale based upon this historical experience and the limited right of return provided to the Company's customers.
The Company also records estimated reductions to revenues for customer programs and incentive offerings, including special pricing agreements, price competition, promotions and other volume-based incentives. At HBB, net sales represent gross sales less cooperative advertising, other volume-based incentives, estimated returns and allowances for defective products. Additionally, the Company provides for the estimated cost of product warranties at the time revenues are recognized. At KC, retail markdowns are incorporated into KC's retail method of accounting for cost of sales.
Advertising Costs: Advertising costs, except for direct response advertising, are expensed as incurred. Total advertising expense was $21.8 million , $20.4 million and $20.1 million in 2015 , 2014 and 2013 , respectively. Included in these advertising costs are amounts related to cooperative advertising programs at HBB that are recorded as a reduction of sales in the Consolidated Statements of Operations as related revenues are recognized. Direct response advertising, which consists primarily of costs to produce television commercials for HBB products, is capitalized and amortized over the expected period of future benefits. No assets related to direct response advertising were capitalized at December 31, 2015 or 2014 .
Product Development Costs: Expenses associated with the development of new products and changes to existing products are charged to expense as incurred. These costs amounted to $9.6 million , $9.6 million and $8.1 million in 2015 , 2014 and 2013 , respectively.
Shipping and Handling Costs: Shipping and handling costs billed to customers are recognized as revenue and shipping and handling costs incurred by the Company are included in cost of sales.
Taxes Collected from Customers and Remitted to Governmental Authorities: The Company collects various taxes and fees as an agent in connection with the sale of products and remits these amounts to the respective taxing authorities. These taxes and fees have been presented on a net basis in the Consolidated Statements of Operations and are recorded as a liability until remitted to the respective taxing authority.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Stock Compensation: The Company maintains long-term incentive programs at all of its subsidiaries. The parent company has stock compensation plans that allow the grant of shares of Class A common stock, subject to restrictions, as a means of retaining and rewarding selected employees for long-term performance and to increase ownership in the Company. Shares awarded under the plans are fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged or otherwise transferred during the restriction period. In general, the restriction period ends at the earliest of (i)  five years after the participant's retirement date, (ii)  ten years from the award date, or (iii) the participant's death or permanent disability. Pursuant to the plans, the Company issued 37,986 and 32,591 shares related to the years ended December 31, 2015 and 2014 , respectively. After the issuance of these shares, there were 163,182 shares of Class A common stock available for issuance under these plans. Compensation expense related to these share awards was $1.7 million ( $1.1 million net of tax), $1.8 million ( $1.2 million net of tax) and $0.9 million ( $0.6 million net of tax) for the years ended December 31, 2015 , 2014 and 2013 , respectively. Compensation expense represents fair value based on the market price of the shares of Class A common stock at the grant date.
The Company also has a stock compensation plan for non-employee directors of the Company under which a portion of the non-employee director's annual retainer is paid in restricted shares of Class A common stock. For the year ended December 31, 2015, $75,000 of the non-employee director's annual retainer of $131,000 was paid in restricted shares of Class A common stock. For the years December 31, 2014 and December 31, 2013 , $69,000 of the non-employee director's annual retainer of $125,000 was paid in restricted shares of Class A common stock. Shares awarded under the plan are fully vested and entitle the stockholder to all rights of common stock ownership except that shares may not be assigned, pledged or otherwise transferred during the restriction period. In general, the restriction period ends at the earliest of (i)  ten years from the award date, (ii) the date of the director's death or permanent disability, (iii)  five years (or earlier with the approval of the Board of Directors) after the director's date of retirement from the Board of Directors, or (iv) the date the director has both retired from the Board of Directors and has reached age 70 . Pursuant to this plan, the Company issued 11,496 , 10,446 and 9,472 shares related to the years ended December 31, 2015 , 2014 and 2013 , respectively. In addition to the mandatory retainer fee received in restricted stock, directors may elect to receive shares of Class A common stock in lieu of cash for up to 100% of the balance of their annual retainer, meeting attendance fees, committee retainer and any committee chairman's fees. These voluntary shares are not subject to any restrictions. Total shares issued under voluntary elections were 2,553 in 2015 , 1,335 in 2014 , and 1,300 in 2013 . After the issuance of these shares, there were 47,212 shares of Class A common stock available for issuance under this plan. Compensation expense related to these awards was $0.7 million ( $0.5 million net of tax), $0.6 million ( $0.4 million net of tax) and $0.6 million ( $0.4 million net of tax) for the years ended December 31, 2015 , 2014 and 2013 , respectively. Compensation expense represents fair value based on the market price of the shares of Class A common stock at the grant date.
Foreign Currency: Assets and liabilities of foreign operations are translated into U.S. dollars at the fiscal year-end exchange rate. The related translation adjustments are recorded as a separate component of stockholders’ equity. Revenues and expenses of all foreign operations are translated using average monthly exchange rates prevailing during the year.
Financial Instruments and Derivative Financial Instruments: Financial instruments held by the Company include cash and cash equivalents, accounts receivable, accounts payable, revolving credit agreements, long-term debt, interest rate swap agreements and forward foreign currency exchange contracts. The Company does not hold or issue financial instruments or derivative financial instruments for trading purposes.
The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. The Company offsets fair value amounts related to foreign currency exchange contracts executed with the same counterparty. These contracts hedge firm commitments and forecasted transactions relating to cash flows associated with sales and purchases denominated in currencies other than the subsidiaries’ functional currencies. Changes in the fair value of forward foreign currency exchange contracts that are effective as hedges are recorded in Accumulated other comprehensive income (loss) (“AOCI”). Deferred gains or losses are reclassified from AOCI to the Consolidated Statement of Operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in cost of sales. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and generally recognized in cost of sales.
The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company's interest rate swap agreements and its variable rate financings are predominately based upon LIBOR (London Interbank Offered Rate). Changes in the fair value of interest rate swap agreements that are effective as hedges are recorded in AOCI. Deferred gains or losses are reclassified from AOCI to the Consolidated Statement of Operations in the same period as the gains or losses from the underlying transactions are recorded

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

and are generally recognized in interest expense. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and included on the line “Other” in the “Other income (expense)” section of the Consolidated Statements of Operations.
Interest rate swap agreements and forward foreign currency exchange contracts held by the Company have been designated as hedges of forecasted cash flows. The Company does not currently hold any nonderivative instruments designated as hedges or any derivatives designated as fair value hedges.
The Company periodically enters into foreign currency exchange contracts that do not meet the criteria for hedge accounting. These derivatives are used to reduce the Company's exposure to foreign currency risk related to forecasted purchase or sales transactions or forecasted intercompany cash payments or settlements. Gains and losses on these derivatives are included on the line “Other” in the “Other income (expense)” section of the Consolidated Statements of Operations.
Cash flows from hedging activities are reported in the Consolidated Statements of Cash Flows in the same classification as the hedged item, generally as a component of cash flows from operations.
See Note 9 for further discussion of derivative financial instruments.
Fair Value Measurements: The Company accounts for the fair value measurement of its financial assets and liabilities in accordance with U.S. generally accepted accounting principles, which defines fair value 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.
A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
Described below are the three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3 - Unobservable inputs are used when little or no market data is available.
The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.
See Note 10 for further discussion of fair value measurements.

Recently Issued Accounting Standards

Accounting Standards Adopted in 2015: In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes." This update requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified statement of financial position.  ASU 2015-17 is effective for annual and interim reporting periods beginning after December 15, 2016.  This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  Early application is permitted as of the beginning of the interim or annual reporting period.  The Company retrospectively adopted this guidance during the fourth quarter of 2015. Accordingly, the Company reclassified current deferred taxes to non-current on the December 31, 2014 Balance Sheet, which increased non-current deferred income taxes by $18.6 million . See Note 15 for further discussion of deferred taxes.

Accounting Standards Not Yet Adopted: In May 2014, the FASB codified in ASC 606, "Revenue Recognition - Revenue from Contracts with Customers," which supersedes most current revenue recognition guidance, including industry-specific guidance, and requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers and provide additional disclosures. As amended, the effective date for public entities is annual reporting periods beginning after December 15, 2017 and interim periods therein. As such, the Company will be required to adopt the standard in the first quarter of fiscal year 2018. Early adoption is not permitted before the first quarter of fiscal year 2017. ASC 606 may be adopted either using a full retrospective approach, in which the standard is applied to all of the periods presented, or a modified retrospective approach. The Company is currently evaluating which transition method to use and how ASC 606 will affect the Company's financial position, results of operations, cash flows and related disclosures.  


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

In August 2014, the FASB issued ASU No. 2014-15, "Preparation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern," to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures.  Specifically, the amendments (1) provide a definition of the term “substantial doubt,” (2) require an evaluation every reporting period, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that financial statements are issued.  ASU 2014-15 is effective for fiscal years ending after December 15, 2016, and for annual periods and interim periods thereafter.  Early application is permitted. The Company does not expect the adoption of this guidance to have an effect on the Company's financial position, results of operations, cash flows or related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs," which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early application is permitted. In August 2015, the FASB issued ASU 2015-15, "Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update)."  ASU 2015-15 amends Subtopic 835-30 to include that the SEC would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of debt issuance costs over the term of the line-of-credit arrangement, whether or not there are any outstanding borrowings on the line-of-credit arrangement. This guidance is effective for fiscal years (and interim reporting periods within fiscal years) beginning after December 15, 2015. The Company does not expect the adoption of this guidance to have a material effect on the Company's financial position, results of operations, cash flows or related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, "Inventory - Simplifying the Measurement of Inventory," which requires that inventory be measured at lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The Company does not expect the adoption of this guidance to have a material effect on the Company's financial position, results of operations, cash flows and related disclosures.  

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which modifies how entities measure equity investments and present changes in the fair value of financial liabilities; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; changes presentation and disclosure requirements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Company is evaluating the impact that this new guidance will have on the Company’s financial position, results of operations, cash flows and related disclosures.  

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)," which requires an entity to recognize assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating how ASU 2016-02 will affect the Company's financial position, results of operations, cash flows and related disclosures.  

NOTE 3— Other Transactions

NACoal : On July 31, 2015, NACoal's management and Board of Directors approved cessation of coal production at its Centennial mines in Alabama. NACoal ceased coal production at Centennial during the fourth quarter of 2015. The decision was made as a result of worsening conditions in the Alabama and global coal markets and the adverse effect regulatory changes had on Centennial’s business. As a result of this decision, revisions were made to Centennial's asset retirement obligations due to revised estimated cash flows and the timing of those cash flows, resulting in a $7.5 million charge during the third quarter of

F-15

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

2015. Also as a result of this decision, the Company recognized a $0.6 million charge for severance and other employee benefit costs in 2015. Both of these charges are included in Cost of sales. See Note 7 for further discussion of the Company's asset retirement obligations.

As of December 31, 2015, the Company began actively marketing $17.5 million of Centennial's mine machinery and equipment. The Company classified these assets as held for sale during the fourth quarter of 2015 when management approved and committed to a formal plan of sale.

During the fourth quarter of 2014, NACoal's long-lived asset evaluation resulted in the Company recording a non-cash, asset impairment charge of $105.1 million on the line "Centennial long-lived asset impairment charge" in the Consolidated Statements of Operations. See Note 10 for further discussion of the Company's long-lived asset impairment.

During 2014, NACoal recognized a gain of $3.5 million from the sale of assets to Mississippi Power Company. These assets were previously classified as held for sale. Also during 2014, NACoal recognized an unrelated gain of $2.2 million from the sale of land.

During 2013, NACoal recorded a cash outflow for investing activities for $5.0 million for a cost method investment, which is included in "Other non-current assets" on the Consolidated Balance Sheet at December 31, 2015 and 2014.

HBB: During 2014, HBB completed the acquisition of Weston Products, LLC, which HBB refers to as Weston Brands, in exchange for cash consideration of $25.4 million , of which $25.0 million was paid at closing and $0.4 million was paid in 2015. The results of Weston Brands operations have been included in the Company's Consolidated Financial Statements since December 16, 2014. See Note 22 for further discussion of the Weston acquisition.

NOTE 4— Inventories

Inventories are summarized as follows:
 
December 31
 
2015
 
2014
Coal - NACoal
$
16,652

 
$
29,576

Mining supplies - NACoal
21,755

 
19,774

Total inventories at weighted average cost
38,407

 
49,350

Sourced inventories - HBB
97,511

 
104,746

Retail inventories - KC
29,098

 
36,286

Total inventories at FIFO
126,609

 
141,032

 
$
165,016

 
$
190,382



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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

NOTE 5— Property, Plant and Equipment, Net

Property, plant and equipment, net includes the following:
 
December 31
 
2015
 
2014
Coal lands and real estate:
 
 
 
NACoal
$
54,928

 
$
54,228

HBB
226

 
226

NACCO and Other
469

 
469

 
55,623

 
54,923

Plant and equipment:
 
 
 
NACoal
126,939

 
146,994

HBB
49,002

 
49,579

KC
26,119

 
26,152

NACCO and Other
4,978

 
4,655

 
207,038

 
227,380

Property, plant and equipment, at cost
262,661

 
282,303

Less allowances for depreciation, depletion and amortization
130,122

 
122,659

 
$
132,539

 
$
159,644

Total depreciation, depletion and amortization expense on property, plant and equipment was $19.7 million , $24.8 million and $20.9 million during 2015 , 2014 , and 2013 , respectively.

Proven and probable coal reserves, excluding the Unconsolidated Mines, approximated 1.0 billion tons (unaudited) at December 31, 2015 and 1.0 billion tons (unaudited) at December 31, 2014 . These tons are reported on an "as received by the customer basis" and are the equivalent of “demonstrated reserves” under the coal resource classification system of the U.S. Geological Survey. Generally, these reserves would be commercially mineable at year-end prices and cost levels, using current technology and mining practices.

NOTE 6— Intangible Assets
During 2014 , HBB acquired Weston Brands for a purchase price of $25.4 million . Of the purchase price, $10.1 million was allocated to identifiable intangible assets, including customer relationships of $5.8 million , trademarks of $3.1 million and other intangibles of $1.2 million . Goodwill is $6.3 million . See Note 22 for further discussion of the Weston Brands acquisition.

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Intangible assets other than goodwill, which are subject to amortization, consist of the following:
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net
Balance
Balance at December 31, 2015
 
 
 
 
 
NACoal:
 
 
 
 
 
Coal supply agreements
$
84,200

 
$
(36,020
)
 
$
48,180

 
 
 
 
 
 
HBB:
 
 
 
 
 
Customer relationships
$
5,760

 
$
(1,000
)
 
$
4,760

Trademarks
3,100

 
(208
)
 
2,892

Other intangibles
1,240

 
(229
)
 
1,011

 
$
10,100

 
$
(1,437
)
 
$
8,663

 
 
 
 
 
 
Balance at December 31, 2014
 
 
 
 
 
NACoal:
 
 
 
 
 
Coal supply agreements
$
84,200

 
$
(33,421
)
 
$
50,779

 
 
 
 
 
 
HBB:
 
 
 
 
 
Customer relationships
$
5,760

 
$
(40
)
 
$
5,720

Trademarks
3,100

 
(8
)
 
3,092

Other intangibles
1,240

 
(10
)
 
1,230

 
$
10,100

 
$
(58
)
 
$
10,042

Amortization expense for intangible assets was $4.0 million , $3.3 million and $3.7 million in 2015 , 2014 and 2013 , respectively.
Expected annual amortization expense of NACoal's coal supply agreement for the next five years is as follows: $2.6 million in 2016 , $2.8 million in 2017 , 2018 , 2019 and 2020 , respectively. The coal supply agreement is amortized based on units of production over the term of the agreement, which is estimated to be 30  years.
Expected annual amortization expense of HBB's intangible assets for the next five years is $1.4 million in 2016, 2017, 2018, 2019 and $1.2 million in 2020. The weighted average amortization period for HBB's intangible assets is approximately 9 years .

NOTE 7— Asset Retirement Obligations

NACoal's asset retirement obligations are principally for costs to dismantle certain mining equipment at the end of the life of the mine as well as for costs to close its surface mines and reclaim the land it has disturbed as a result of its normal mining activities. The Company determined the amounts of these obligations based on estimates adjusted for inflation, projected to the estimated closure dates, and then discounted using a credit-adjusted risk-free interest rate. The accretion of the liability is being recognized over the estimated life of each individual asset retirement obligation and is recorded in the line “Cost of sales” in the accompanying Consolidated Statements of Operations. The associated asset is recorded in “Property, Plant and Equipment, net” in the accompanying Consolidated Balance Sheets.

On July 31, 2015, NACoal's management and Board of Directors approved cessation of coal production at its Centennial mines in Alabama. NACoal ceased coal production at Centennial during the fourth quarter of 2015. The decision was made as a result of worsening conditions in the Alabama and global coal markets and the adverse effect regulatory changes had on Centennial’s business. As a result of this decision, revisions were made to Centennial's asset retirement obligations due to revised estimated cash flows and the timing of those cash flows, resulting in a $7.5 million charge during the third quarter of 2015.

Bellaire Corporation (“Bellaire”) is a non-operating subsidiary of the Company with legacy liabilities relating to closed mining operations, primarily former Eastern U.S. underground coal mining operations. These legacy liabilities include obligations for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

water treatment and other environmental remediation that arose as part of the normal course of closing these underground mining operations. The Company determined the amounts of these obligations based on estimates adjusted for inflation and then discounted the amounts using a credit-adjusted risk-free interest rate. The accretion of the liability is recognized over the estimated life of the asset retirement obligation and is recorded in the line “Closed mine obligations” in the accompanying Consolidated Statements of Operations. Since Bellaire's properties are no longer active operations, no associated asset has been capitalized.

In connection with Bellaire's normal permit renewal with the Pennsylvania Department of Environmental Protection ("DEP"), Bellaire was notified during 2004 that in order to obtain renewal of the permit Bellaire would be required to establish a mine water treatment trust (the "Mine Water Treatment Trust"). On October 1, 2010, Bellaire executed a Post-Mining Treatment Trust Consent Order and Agreement with the DEP which established the Mine Water Treatment Trust to provide a financial assurance mechanism in order to assure the long-term treatment of post-mining discharges. Bellaire funded the Mine Water Treatment Trust with $5.0 million . The fair value of the Mine Water Treatment assets are $7.2 million at December 31, 2015 and are legally restricted for purposes of settling the Bellaire asset retirement obligation. See Note 10 for further fair value disclosure.
A reconciliation of the Company's beginning and ending aggregate carrying amount of the asset retirement obligations are as follows:
 
NACCO
Consolidated
Balance at January 1, 2014
$
32,415

Liabilities acquired during the period
7,297

Liabilities settled during the period
(1,509
)
Accretion expense
1,562

Revision of estimated cash flows
2,054

Balance at December 31, 2014
$
41,819

Liabilities settled during the period
(7,835
)
Accretion expense
2,361

Revision of estimated cash flows
7,247

Balance at December 31, 2015
$
43,592

Asset retirement obligations totaled $43.6 million at December 31, 2015 , of which, $3.8 million is included on the line "Other current liabilities" and $39.8 million on the line "Asset retirement obligations" in the Consolidated Balance Sheets.


F-19

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

NOTE 8— Current and Long-Term Financing

Financing arrangements are obtained and maintained at the subsidiary level. NACCO has not guaranteed any borrowings of its subsidiaries.
The following table summarizes the Company's available and outstanding borrowings:
 
December 31
 
2015
 
2014
Total outstanding borrowings:
 
 
 
Revolving credit agreements:
 
 
 
NACoal
$
100,000

 
$
180,000

HBB
57,513

 
52,845

KC

 

 
$
157,513

 
$
232,845

 
 
 
 
Capital lease obligations and other term loans — NACoal
$
11,617

 
$
14,445

Other debt — HBB
852

 
608

Total debt outstanding
$
169,982

 
$
247,898

 
 
 
 
Current portion of borrowings outstanding:
 
 
 
NACoal
$
1,504

 
$
56,467

HBB
8,365

 

KC

 

 
$
9,869

 
$
56,467

Long-term portion of borrowings outstanding:
 
 
 
NACoal
$
110,113

 
$
137,978

HBB
50,000

 
53,453

 
$
160,113

 
$
191,431

Total available borrowings, net of limitations, under revolving credit agreements:
 
 
 
NACoal
$
223,795

 
$
223,995

HBB
111,590

 
112,105

KC
18,299

 
22,596

 
$
353,684

 
$
358,696

Unused revolving credit agreements:
 
 
 
NACoal
$
123,795

 
$
43,995

HBB
54,077

 
59,260

KC
18,299

 
22,596

 
$
196,171

 
$
125,851

Weighted average stated interest rate on total borrowings:
 
 
 
NACoal
2.4
%
 
2.5
%
HBB
2.3
%
 
2.0
%
KC
N/A

 
N/A

 
 
 
 
Weighted average effective interest rate on total borrowings (including interest rate swap agreements):
 
 
 
NACoal
3.3
%
 
3.1
%
HBB
2.7
%
 
2.5
%
KC
N/A

 
N/A


F-20

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Annual maturities of total debt, excluding capital leases, are as follows:
2016
$

2017

2018
100,000

2019
59,811

2020

Thereafter

 
$
159,811

Including swap settlements, interest paid on total debt was $6.5 million , $7.4 million and $5.3 million during 2015 , 2014 and 2013 , respectively. Interest capitalized was less than $0.1 million in 2015 and $0.3 million in 2014 .
NACoal: NACoal has an unsecured revolving line of credit of up to $225.0 million (the “NACoal Facility”) that expires in November 2018. Borrowings outstanding under the NACoal Facility were $100.0 million at December 31, 2015 . At December 31, 2015 , the excess availability under the NACoal Facility was $123.8 million , which reflects a reduction for outstanding letters of credit of $1.2 million .

The NACoal Facility has performance-based pricing, which sets interest rates based upon NACoal achieving various levels of debt to EBITDA ratios, as defined in the NACoal 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 December 31, 2015 , for base rate and LIBOR loans were 1.00% and 2.00% , respectively. The NACoal Facility has a commitment fee which is based upon achieving various levels of debt to EBITDA ratios. The commitment fee was 0.35% on the unused commitment at December 31, 2015 . The weighted average interest rate applicable to the NACoal Facility at December 31, 2015 was 3.39% including the floating rate margin and the effect of the interest rate swap agreements.

The NACoal Facility contains restrictive covenants, which require, among other things, NACoal to maintain a maximum debt to EBITDA ratio of 3.50 to 1.00 and an interest coverage ratio of not less than 4.00 to 1.00. The NACoal 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 3.00 to 1.00 in conjunction with maintaining unused availability thresholds of borrowing capacity, as defined in the NACoal Facility, of $15.0 million . At December 31, 2015 , NACoal was in compliance with all financial covenants in the NACoal Facility.

NACoal has a demand note payable to Coteau, one of the unconsolidated subsidiaries, which bears interest based on the applicable quarterly federal short-term interest rate as announced from time to time by the Internal Revenue Service. At December 31, 2015 , the balance of the note was $1.4 million and the interest rate was 0.55% .

NACoal incurred fees and expenses of $1.2 million in the year ended December 31, 2013 related to the NACoal Facility. These fees were deferred and are being amortized as interest expense in the Consolidated Statements of Operations over the term of the NACoal Facility. No similar fees were incurred in 2015 and 2014.
HBB: HBB has a $115.0 million senior secured floating-rate revolving credit facility (the “HBB Facility”) that expires in July 2019. The obligations under the HBB Facility are secured by substantially all of HBB's assets. The approximate book value of HBB's assets held as collateral under the HBB Facility was $253.9 million as of December 31, 2015 . At December 31, 2015 , the borrowing base under the HBB Facility was $111.6 million and borrowings outstanding were $57.5 million . At December 31, 2015 , the excess availability under the HBB Facility was $54.1 million .

The maximum availability under the HBB Facility is governed by a borrowing base derived from advance rates against eligible accounts receivable, inventory and trademarks of the borrowers, as defined in the HBB Facility. Adjustments to reserves booked against these assets, including inventory reserves, will change the eligible borrowing base and thereby impact the liquidity provided by the HBB Facility. A portion of the availability is denominated in Canadian dollars to provide funding to HBB's Canadian subsidiary. Borrowings bear interest at a floating rate, which can be a base rate or LIBOR, as defined in the HBB Facility, plus an applicable margin. The applicable margins, effective December 31, 2015 , for base rate loans and LIBOR loans denominated in U.S. dollars were 0.00% and 1.50% , respectively. The applicable margins, effective December 31, 2015 ,

F-21

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

for base rate loans and bankers' acceptance loans denominated in Canadian dollars were 0.00% and 1.50% , respectively. The HBB Facility also requires a fee of 0.25% per annum on the unused commitment. The margins under the HBB Facility are subject to quarterly adjustment based on average excess availability. The weighted average interest rate applicable to the HBB Facility at December 31, 2015 was 2.72% including the floating rate margin and the effect of the interest rate swap agreement.

The HBB Facility includes restrictive covenants, which, among other things, limit the payment of dividends to NACCO, subject to achieving availability thresholds. Dividends are discretionary to the extent that for the thirty days prior to the dividend payment date, and after giving effect to the dividend payment, HBB maintains Excess Availability of not less than $25.0 million . The HBB Facility also requires HBB to achieve a minimum fixed charge coverage ratio in certain circumstances, as defined in the HBB Facility. At December 31, 2015 , HBB was in compliance with all financial covenants in the HBB Facility.

HBB incurred fees and expenses of $0.2 million for the year ended December 31, 2014 related to the HBB Facility. These fees were deferred and are being amortized as interest expense in the Consolidated Statements of Operations over the term of the HBB Facility. No similar fees were incurred in 2015 and 2013.
KC: KC has a $25.0 million secured revolving line of credit that expires in September 2019 (the “KC Facility”). The obligations under the KC Facility are secured by substantially all assets of KC. The approximate book value of KC's assets held as collateral under the KC Facility was $53.4 million as of December 31, 2015 . At December 31, 2015 , the borrowing base and excess availability under the KC Facility were $18.3 million . KC had no borrowings outstanding under the KC Facility as of December 31, 2015 .

The maximum availability under the KC Facility is derived from a borrowing base formula using KC's eligible inventory and eligible credit card accounts receivable, as defined in the KC Facility. Borrowings bear interest at a floating rate plus a margin based on the excess availability under the agreement, as defined in the KC Facility, which can be either a base rate plus a margin of 1.00% or LIBOR plus a margin of 2.00% as of December 31, 2015 . The KC Facility also requires a fee of 0.32% per annum on the unused commitment.

The KC Facility allows for the payment of dividends to NACCO, subject to certain restrictions based on availability and meeting a fixed charge coverage ratio as described in the KC Facility. Dividends are limited to (i) $6.0 million in any twelve -month period, so long as KC has excess availability, as defined in the KC Facility, of at least $7.5 million after giving effect to such payment and maintaining a minimum fixed charge coverage ratio of 1.1 to 1.0, as defined in the KC Facility; (ii) $2.0 million in any twelve -month period, so long as KC has excess availability, as defined in the KC Facility, of at least $7.5 million after giving effect to such payment and (iii) in such amounts as determined by KC, so long as KC has excess availability under the KC Facility of $15.0 million after giving effect to such payment. At December 31, 2015 , KC was in compliance with all financial covenants in the KC Facility.

KC incurred fees and expenses of $0.1 million in the year ended December 31, 2014 related to the KC Facility. These fees were deferred and are being amortized as interest expense in the Consolidated Statements of Operations over the term of the KC Facility. No similar fees were incurred in 2015 and 2013.

NOTE 9— Derivative Financial Instruments

The Company measures its derivatives at fair value on a recurring basis using significant observable inputs, which is Level 2 as defined in the fair value hierarchy. The Company uses a present value technique that incorporates the LIBOR swap curve, foreign currency spot rates and foreign currency forward rates to value its derivatives, including its interest rate swap agreements and foreign currency exchange contracts, and also incorporates the effect of its subsidiary and counterparty credit risk into the valuation.
Foreign Currency Derivatives : HBB held forward foreign currency exchange contracts with total notional amounts of $7.3 million and $7.2 million at December 31, 2015 and December 31, 2014 , respectively, denominated primarily in Canadian dollars and Mexican pesos. The fair value of these contracts approximated a net receivable of $0.4 million and $0.3 million at December 31, 2015 and 2014 , respectively.
Forward foreign currency exchange contracts that qualify for hedge accounting are used to hedge transactions expected to occur within the next twelve months. The mark-to-market effect of forward foreign currency exchange contracts that are

F-22

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

considered effective as hedges has been included in AOCI. Based on market valuations at December 31, 2015 , $0.3 million of the amount included in AOCI is expected to be reclassified as income into the Consolidated Statement of Operations over the next twelve months, as the hedged transactions occur.
Interest Rate Derivatives : HBB has interest rate swaps that hedge interest payments on its one-month LIBOR borrowings. The following table summarizes the notional amounts, related rates and remaining terms of interest rate swap agreements active at December 31 in millions:
 
Notional Amount
 
Average Fixed Rate
 
Remaining Term at
 
2015
 
2014
 
2015
 
2014
 
December 31, 2015
HBB
$
20.0

 
$
20.0

 
1.4
%
 
1.4
%
 
extending to January 2020
The fair value of HBB's interest rate swap agreements was a net receivable of less than $0.1 million and $0.2 million at December 31, 2015 and 2014 , respectively. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in AOCI. Based on market valuations at December 31, 2015 , less than $0.1 million of the amount included in AOCI is expected to be reclassified as loss into the Consolidated Statement of Operations over the next twelve months, as cash flow payments are made in accordance with the interest rate swap agreements. The interest rate swap agreements held by HBB on December 31, 2015 are expected to continue to be effective as hedges.
NACoal has interest rate swaps that hedge interest payments on its one-month LIBOR borrowings. The following table summarizes the notional amounts, related rates and remaining terms of the interest rate swap agreement active at December 31 in millions:
 
Notional Amount
 
Average Fixed Rate
 
Remaining Term at
 
2015
 
2014
 
2015
 
2014
 
December 31, 2015
NACoal
$
100.0

 
$
100.0

 
1.4
%
 
1.4
%
 
extending to May 2018
The fair value of NACoal's interest rate swap agreement was a net payable of $0.7 million at December 31, 2015 . The mark-to-market effect of the interest rate swap agreement that is considered effective as a hedge has been included in AOCI. Based on market valuations at December 31, 2015 , $0.8 million of the amount included in AOCI is expected to be reclassified as income into the Consolidated Statement of Operations over the next twelve months, as cash flow payments are made in accordance with the interest rate swap agreement. The interest rate swap agreement held by NACoal on December 31, 2015 is expected to continue to be effective as a hedge.



F-23

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

The following table summarizes the fair value of derivative instruments at December 31 as recorded in the Consolidated Balance Sheets:
 
Asset Derivatives
 
Liability Derivatives
 
Balance sheet location
 
2015
 
2014
 
Balance sheet location
 
2015
 
2014
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
 
 
 
 
 
 
 
 
 
 
Current
Prepaid expenses and other
 
$
1

 
$
39

 
Other current liabilities
 
$
289

 
$
121

Long-term
Other non-current assets
 
2

 
142

 
Other long-term liabilities
 
409

 
291

Foreign currency exchange contracts
 
 
 
 
 
 
 
 
 
 
 
Current
Prepaid expenses and other
 
386

 
292

 
Other current liabilities
 

 

Long-term
Other non-current assets
 

 

 
Other long-term liabilities
 

 

Total derivatives
 
 
$
389

 
$
473

 
 
 
$
698

 
$
412

 
 
 
 
 
 
 
 
 
 
 
 
The following table summarizes the pre-tax impact of derivative instruments for each year ended December 31 as recorded in the Consolidated Statements of Operations:
Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain or (Loss)
Recognized in AOCI on
Derivative (Effective Portion)
 
Location of Gain or
(Loss) Reclassified
from AOCI into
Income (Effective
Portion)
 
Amount of Gain or (Loss)
Reclassified from AOCI
into Income (Effective Portion)
 
Location of Gain or
(Loss) Recognized
in Income on
Derivative
(Ineffective
Portion and Amount
Excluded from
Effectiveness
Testing)
 
Amount of Gain or (Loss) Recognized
in Income on Derivative
 (Ineffective Portion and Amount Excluded from
Effectiveness Testing)
 
 
2015
 
2014
 
2013
 
 
 
2015
 
2014
 
2013
 
 
 
2015
 
2014
 
2013
Interest rate swap agreements
 
$
(1,922
)
 
$
(2,664
)
 
$
933

 
Interest expense
 
$
(1,460
)
 
$
(1,495
)
 
$
(460
)
 
N/A
 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
988

 
308

 
354

 
Cost of sales
 
860

 
108

 
213

 
N/A
 

 

 

Total
 
$
(934
)
 
$
(2,356
)
 
$
1,287

 
 
 
$
(600
)
 
$
(1,387
)
 
$
(247
)
 
 
 
$

 
$

 
$

 
 
 
 
Amount of Gain or (Loss)
Recognized in Income on Derivative
Derivatives Not Designated as Hedging Instruments
 
Location of Gain or (Loss) Recognized in Income on Derivative
 
2015
 
2014
 
2013
Foreign currency exchange contracts
 
Cost of sales or Other
 
$

 
$
25

 
$
(14
)
Total
 
 
 
$

 
$
25

 
$
(14
)


F-24

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

NOTE 10— Fair Value Disclosure

Recurring Fair Value Measurements : The following table presents the Company's assets and liabilities accounted for at fair value on a recurring basis:

 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
 
Quoted Prices in
 
 
 
Significant
 
 
 
 
Active Markets for
 
Significant Other
 
Unobservable
 
 
 
 
Identical Assets
 
Observable Inputs
 
Inputs
Description
 
December 31, 2015
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets:
 
 
 
 
 
 
 
 
Available for sale securities
 
$
7,247

 
$
7,247

 
$

 
$

Interest rate swap agreements
 
3

 

 
3

 

Foreign currency exchange contracts
 
386

 

 
386

 

 
 
$
7,636

 
$
7,247

 
$
389

 
$

Liabilities:
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
698

 
$

 
$
698

 
$

 
 
$
698

 
$

 
$
698

 
$


 
 
 
 
Fair Value Measurements at Reporting Date Using
 
 
 
 
Quoted Prices in
 
 
 
Significant
 
 
 
 
Active Markets for
 
Significant Other
 
Unobservable
 
 
 
 
Identical Assets
 
Observable Inputs
 
Inputs
Description
 
December 31, 2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets:
 
 
 
 
 
 
 
 
Available for sale securities
 
$
7,220

 
$
7,220

 
$

 
$

Interest rate swap agreements
 
181

 

 
181

 

Foreign currency exchange contracts
 
292

 

 
292

 

 
 
$
7,693

 
$
7,220

 
$
473

 
$

Liabilities:
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
$
412

 
$

 
$
412

 
$

 
 
$
412

 
$

 
$
412

 
$


Bellaire's Mine Water Treatment Trust invests in available for sale securities that are reported at fair value based upon quoted market prices in active markets for identical assets; therefore, they are classified as Level 1 within the fair value hierarchy. See Note 7 for further discussion of Bellaire's Mine Water Treatment Trust.

The Company uses significant other observable inputs to value derivative instruments used to hedge foreign currency and interest rate risk; therefore, they are classified within Level 2 of the valuation hierarchy. The fair value for these contracts is determined based on exchange rates and interest rates, respectively. See Note 9 for further discussion of the Company's derivative financial instruments.

There were no transfers into or out of Levels 1, 2 or 3 during the year ended December 31, 2015 .

NACoal's 2012 acquisition of Centennial included contingent consideration. The contingent consideration is structured as an earn-out payment to the sellers of Centennial. The earn-out is calculated as a percentage by which the monthly average coal selling price exceeds an established threshold multiplied by the number of tons sold during the month. The earn-out period covers the first 15.0 million tons of coal sold from the Centennial coal reserves. There is no monetary cap on the amount payable under this contingent payment arrangement. During 2014 , the estimate of the contingent consideration liability

F-25

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

decreased to zero and the reversal of the $1.6 million was recorded as a reduction of Selling, general and administrative expenses in the Consolidated Statements of Operations. At December 31, 2015 and December 31, 2014, the estimated fair value of the earn-out liability, which is classified as Level 3 within the fair value hierarchy, is zero .

Nonrecurring Fair Value Measurements : The Company determined that indicators of potential impairment were present during the fourth quarter of 2014 with respect to its Centennial mining operations asset group. The Company assessed the recoverability of Centennial's assets and determined that the assets were not fully recoverable when compared to the remaining future undiscounted cash flows from these assets. As a result, the Company estimated the fair value of the asset group and the long-lived assets were written down to their estimated fair value which resulted in a non-cash asset impairment charge of $105.1 million . The asset impairment charge was recorded as "Centennial long-lived asset impairment charge" in the Consolidated Statement of Operations for the year ended December 31, 2014 and relates exclusively to the NACoal segment. The fair value of the asset group was calculated using the combination of a market and income approach and reduced the carrying value of coal land and real estate to $7.2 million , other property, plant and equipment to $37.1 million and intangible assets to zero as of December 31, 2014.
The fair value estimate for the coal land and real estate and other property, plant and equipment was calculated using market data for similar assets, which are classified as Level 2 inputs. The fair value of the coal supply agreement and non-compete intangible assets were estimated to be zero given current market conditions. Key inputs in this model are based on significant unobservable inputs and include the forecast of tons sold and coal pricing and are classified as Level 3 inputs.
The Company assessed the goodwill of the Centennial reporting unit as of October 1, 2013. In performing the test of goodwill, the Company utilized the two-step approach. The first step requires a comparison of the carrying value of the reporting unit to the estimated fair value of the reporting unit. If the carrying value of the reporting unit exceeds its estimated fair value, the Company performs the second step of the goodwill impairment test to calculate the implied fair value of the reporting unit's goodwill and compares that to its carrying value to measure the amount of the impairment, if any.
In step one, the Company used a combination of an income approach and a market approach to estimate the fair value of the Centennial reporting unit. The income approach utilized a discounted cash flow valuation technique ("DCF model") which incorporates the Company's historical results and projected, future estimates of after-tax cash flows attributable to the reporting units future growth rates, terminal value amounts and the weighted average cost of capital. The market approach utilized the guideline public company method and the guideline merged and acquired company method to determine the fair value of the reporting unit. The valuation result from the market approach was dependent upon the selection of the comparable guideline companies and transactions and the revenue multiple applied to the Centennial reporting unit's historical and projected financial information. Significant management judgment was applied in determining the weight, 25% and 75% , assigned to the outcome of the market approach and the income approach, respectively, which resulted in one single estimate of fair value of the reporting unit. The Company determined that the carrying value of the Centennial reporting unit exceeded its estimated fair value.
In performing step 2 of the goodwill impairment test, the Company estimated the implied fair value of the Centennial reporting unit's goodwill and concluded goodwill was fully impaired resulting in a non-cash charge of $4.0 million recognized during the year ended December 31, 2013. This charge had no impact on the Company's cash flows or compliance with debt covenants. The primary factors contributing to the goodwill impairment charge were changes to the mine plan in 2014 and assumptions regarding future metallurgical coal price trends and mining costs and the associated impact on future cash flows from these changes.
The fair value measurement of the reporting unit under the step-one analysis and the step-two analysis in their entirety are classified as Level 3 inputs. The estimates and assumptions underlying the fair value calculations used in the Company's annual impairment tests are uncertain by their nature and can vary significantly from actual results. Factors that management must estimate include, but are not limited to, industry and market conditions, sales volume and pricing, mining costs, capital expenditures, working capital changes, cost of capital, debt-equity mix and tax rates. The estimates and assumptions that most significantly affect the fair value calculation are metallurgical coal prices and sales volume and the associated cash flow assumptions, weighted average cost of capital, and revenue multiples from the selected comparable companies. The estimates and assumptions used in the estimate of fair value are consistent with those the Company uses in its internal planning.
In 2014 and 2013, KC considered its operating loss to be an indicator of impairment. For KC’s asset impairment analysis, the primary input is projected future store level cash flows utilizing assumptions consistent with those the Company uses in its internal planning, which are classified as Level 3 inputs. As a result of the year-end review of long-lived store-related assets, the Company recorded impairment charges of $0.9 million and $1.1 million in 2014 and 2013, respectively, included in depreciation expense within "Selling, general and administrative expenses" in the Consolidated Statements of Operations.

F-26

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Long-lived assets at the stores consist mainly of leasehold improvements and furniture and fixtures. The fair value for leasehold improvements was determined to be zero as such assets were deemed to have no future use or economic benefit based on the Company's analysis using market participant assumptions, and therefore no expected future cash flows. The fair value for store fixtures is based on the market exit price based on historical experience. The impairment charges in 2014 were largely the result of decreased expected future operating results.

Other Fair Value Measurement Disclosures: The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements and long-term debt, excluding capital leases, were determined using current rates offered for similar obligations taking into account subsidiary credit risk, which is Level 2 as defined in the fair value hierarchy. At December 31, 2015 and December 31, 2014 , both the fair value and the book value of revolving credit agreements and long-term debt, excluding capital leases, was $159.8 million and $236.3 million , respectively.
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable and derivatives. HBB maintains significant accounts receivable balances with several large retail customers. At December 31, 2015 and 2014 , receivables from HBB's five largest customers represented 56.8% and 53.3% , respectively, of the Company's consolidated, net accounts receivable. In addition, under its mining contracts, NACoal recognizes revenue and a related receivable as coal or limerock is delivered or predevelopment services are provided. These mining contracts provide for monthly settlements. HBB and NACoal's significant credit concentration is uncollateralized; however, historically minimal credit losses have been incurred. To further reduce credit risk associated with accounts receivable, the Company performs periodic credit evaluations of its customers, but does not generally require advance payments or collateral. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one institution. See Note 9 for further discussion of the Company's derivative financial instruments.

NOTE 11— Leasing Arrangements

The Company leases certain office and warehouse facilities, retail stores and machinery and equipment under noncancellable capital and operating leases that expire at various dates through 2031. Many leases include renewal and/or fair value purchase options.
Future minimum capital and operating lease payments at December 31, 2015 are:
 
Capital
Leases
 
Operating
Leases
2016
$
1,732

 
$
31,671

2017
1,732

 
25,513

2018
2,022

 
20,600

2019
1,521

 
15,888

2020
1,105

 
13,436

Subsequent to 2020
2,890

 
34,988

Total minimum lease payments
11,002

 
$
142,096

Amounts representing interest
832

 
 
Present value of net minimum lease payments
10,170

 
 
Current maturities
1,504

 
 
Long-term capital lease obligation
$
8,666

 
 
Rental expense for all operating leases was $35.8 million , $39.8 million and $45.0 million in 2015 , 2014 and 2013 , respectively. The Company also recognized $0.8 million , $0.7 million and $0.6 million in 2015 , 2014 and 2013 , respectively, for rental income on subleases of equipment and buildings under operating leases in which it was the lessee.

KC accrued $1.2 million in early lease termination penalties within "Selling, general, and administrative expenses" for the year ended December 2014. These penalties arose as a result of early exit provisions in certain operating lease contracts permitting KC to exit these sites in the first half of 2015 rather than upon lease expiration in outlying years.


F-27

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Assets recorded under capital leases are included in property, plant and equipment and consist of the following:
 
December 31
 
2015
 
2014
Plant and equipment
$
4,807

 
$
4,807

Less accumulated depreciation
2,529

 
1,927

 
$
2,278

 
$
2,880

Depreciation of plant and equipment under capital leases is included in depreciation expense in each of the years ended December 31, 2015 , 2014 and 2013 .
Capital lease obligations of $2.2 million were incurred in connection with lease agreements to acquire plant and equipment during 2013 . No capital lease obligations were incurred in 2015 and 2014.

NOTE 12— Contingencies

Various legal and regulatory proceedings and claims have been or may be asserted against NACCO and certain subsidiaries relating to the conduct of their businesses, including product liability, patent infringement, asbestos related claims, environmental and other claims. These proceedings and claims are incidental to the ordinary course of business of the Company. Management believes that it has meritorious defenses and will vigorously defend the Company in these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated.  If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss. 

These matters are subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of an adverse impact on the Company’s financial position, results of operations and cash flows of the period in which the ruling occurs, or in future periods.

Litigation

The Company is subject to several actions that allege the Company abandoned certain mineral interests pursuant to the Ohio Dormant Mineral Act ("ODMA") by failing to engage in a title transaction or other savings event within a statutory 20 -year period. The Company maintains that it preserved its mineral interests by engaging in title transactions or other savings events within the statutory period.  The U.S. District Court for the Southern District of Ohio is expected to issue decisions on certain matters related to the ODMA in 2016.  It is reasonably possible the Company could be required to repay an oil and gas lessee up to $4.1 million of royalties the Company has received since 2011 if it is determined by the Court the Company did not preserve its mineral interests under the ODMA.

Environmental matters

HBB is investigating or remediating historical environmental contamination at some current and former sites operated by HBB or by businesses it acquired. Based on the current stage of the investigation or remediation at each known site, HBB estimates the total investigation and remediation costs and the period of assessment and remediation activity required for each site. The estimate of future investigation and remediation costs is primarily based on variables associated with site clean-up, including, but not limited to, physical characteristics of the site, the nature and extent of the contamination and applicable regulatory programs and remediation standards. No assessment can fully characterize all subsurface conditions at a site. There is no assurance that additional assessment and remediation efforts will not result in adjustments to estimated remediation costs or the time frame for remediation at these sites.


F-28

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

HBB's estimates of investigation and remediation costs may change if it discovers contamination at additional sites or additional contamination at known sites, if the effectiveness of its current remediation efforts change, if applicable federal or state regulations change or if HBB's estimate of the time required to remediate the sites changes. HBB's revised estimates may differ materially from original estimates.

At December 31, 2015 and December 31, 2014 , HBB had accrued undiscounted obligations of $9.1 million and $9.7 million , respectively, for environmental investigation and remediation activities at these sites. In addition, HBB estimates that it is reasonably possible that it may incur additional expenses in the range of zero to $5.3 million related to the environmental investigation and remediation at these sites.

During 2015 and 2014, HBB recorded $1.5 million and $3.3 million in charges, respectively, in "Selling, general and administrative expenses" in the Consolidated Statement of Operations for environmental investigation and remediation at HBB's Picton, Ontario facility as a result of environmental studies.

NOTE 13— Product Warranties

HBB provides a standard warranty to consumers for all of its products. The specific terms and conditions of those warranties vary depending upon the product brand. In general, if a product is returned under warranty, a refund is provided to the consumer by HBB's customer, the retailer. Generally, the retailer returns those products to HBB for a credit. The Company estimates the costs which may be incurred under its standard warranty programs and records a liability for such costs at the time product revenue is recognized.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Factors that affect the Company's warranty liability include the number of units sold, historical and anticipated rates of warranty claims and the cost per claim.
Changes in the Company's current and long-term warranty obligations are as follows:
 
2015
 
2014
Balance at January 1
$
5,856

 
$
5,343

Warranties issued
9,608

 
8,640

Settlements made
(9,357
)
 
(8,127
)
Balance at December 31
$
6,107

 
$
5,856


NOTE 14— Stockholders' Equity and Earnings Per Share

NACCO Industries, Inc. Class A common stock is traded on the New York Stock Exchange under the ticker symbol “NC.” Because of transfer restrictions on Class B common stock, no trading market has developed, or is expected to develop, for the Company's Class B common stock. The Class B common stock is convertible into Class A common stock on a one-for-one basis at any time at the request of the holder. The Company's Class A common stock and Class B common stock have the same cash dividend rights per share. As the liquidation and dividend rights are identical, any distribution of earnings would be allocated to Class A and Class B stockholders on a proportionate basis, and accordingly the net income per share for each class of common stock is identical. The Class A common stock has one vote per share and the Class B common stock has ten votes per share. The total number of authorized shares of Class A common stock and Class B common stock at December 31, 2015 was 25,000,000 shares and 6,756,176 shares, respectively. Treasury shares of Class A common stock totaling 2,950,796 and 2,548,336 at December 31, 2015 and 2014 , respectively, have been deducted from shares outstanding.

Stock Repurchase Programs: On November 12, 2013, the Company's Board of Directors approved a stock repurchase program (the "2013 Stock Repurchase Program") providing for the purchase of up to $60 million of the Company's outstanding Class A Common Stock through December 31, 2015. As of October 6, 2015, the Company completed the 2013 Stock Repurchase Program under which the Company purchased a total of 1,122,866 shares of Class A Common Stock for an aggregate purchase price of $60.0 million . During 2015, the average purchase price per share and number of shares repurchased under 2013 Program were $54.22 per share and 442,853 shares, respectively. Under a previous stock repurchase program,

F-29

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

which was in place from November 2011 to November 2013, the Company repurchased an additional 624,000 shares of Class A common stock for an aggregate purchase price of $35.6 million .
Stock Options : The 1975 and 1981 stock option plans, as amended, provide for the granting to officers and other key employees of options to purchase Class A common stock and Class B common stock of the Company at a price not less than the market value of such stock at the date of grant. Options become exercisable over a four -year period and expire ten years from the date of the grant. During the three-year period ending December 31, 2015 , there were 80,701 shares of Class A common stock and 80,100 shares of Class B common stock available for grant. However, no options were granted during the three-year period ended December 31, 2015 and no options remain outstanding at the end of any of the years ended December 31, 2015 or 2014 . At present, the Company does not intend to issue additional stock options.
Stock Compensation: See Note 2 for a discussion of the Company's restricted stock awards.

Amounts Reclassified out of Accumulated Other Comprehensive Income: The following table summarizes the amounts reclassified out of AOCI and recognized in the Consolidated Statement of Operations:

 
 
Amount reclassified from AOCI
 
Details about AOCI components
 
2015
 
2014
 
2013
Location of loss (gain) reclassified from AOCI into income
 
 
(In thousands)
 
Loss (gain) on cash flow hedging
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
(860
)
 
$
(108
)
 
$
(213
)
Cost of sales
Interest rate contracts
 
1,460

 
1,495

 
460

Interest expense
 
 
600

 
1,387

 
247

Total before income tax expense
Tax effect
 
(191
)
 
(489
)
 
(95
)
Income tax expense (benefit)
 
 
$
409

 
$
898

 
$
152

Net of tax
 
 
 
 
 
 
 
 
Pension and postretirement plan
 
 
 
 
 
 
 
Actuarial loss
 
$
1,333

 
$
1,015

 
$
1,995

(a)  
Prior-service credit
 
(57
)
 
(75
)
 
(154
)
(a)  
 
 
1,276

 
940

 
1,841

Total before income tax expense
Tax effect
 
(420
)
 
(313
)
 
(740
)
Income tax expense (benefit)
 
 
$
856

 
$
627

 
$
1,101

Net of tax
 
 
 
 
 
 
 
 
Total reclassifications for the period
 
$
1,265

 
$
1,525

 
$
1,253

Net of tax

(a) These AOCI components are included in the computation of pension expense. See Note 16 for a discussion of the Company's pension expense.

F-30

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Earnings per Share: The weighted average number of shares of Class A common stock and Class B common stock outstanding used to calculate basic and diluted earnings per share were as follows:
 
2015
 
2014
 
2013
Basic weighted average shares outstanding
7,001

 
7,590

 
8,105

Dilutive effect of restricted stock awards
21

 
N/A

 
19

Diluted weighted average shares outstanding
7,022

 
7,590

 
8,124

 
 
 
 
 
 
Basic earnings (loss) per share
$
3.14

 
$
(5.02
)
 
$
5.48

 
 
 
 
 
 
Diluted earnings (loss) per share
$
3.13

 
$
(5.02
)
 
$
5.47


NOTE 15— Income Taxes

The components of income (loss) from continuing operations before income tax provision (benefit) and the income tax provision (benefit) for the years ended December 31 are as follows:
 
2015
 
2014
 
2013
Income (loss) before income tax provision (benefit)
 
 
 
 
 
Domestic
$
26,383

 
$
(74,402
)
 
$
54,630

Foreign
(1,584
)
 
(2,171
)
 
1,090

 
$
24,799

 
$
(76,573
)
 
$
55,720

Income tax provision (benefit)
 
 
 
 
 
Current income tax provision (benefit):
 
 
 
 
 
Federal
$
6,427

 
$
2,778

 
$
15,392

State
2,185

 
(472
)
 
1,965

Foreign
1,145

 
586

 
1,559

Total current
9,757

 
2,892

 
18,916

Deferred income tax provision (benefit):
 
 
 
 
 
Federal
(7,472
)
 
(38,829
)
 
(5,490
)
State
925

 
(1,817
)
 
(1,141
)
Foreign
(395
)
 
(701
)
 
(1,015
)
Total deferred
(6,942
)
 
(41,347
)
 
(7,646
)
 
$
2,815

 
$
(38,455
)
 
$
11,270

The Company made income tax payments of $10.9 million , $10.2 million and $10.8 million during 2015 , 2014 and 2013 , respectively. During the same periods, income tax refunds totaled $0.2 million , $0.9 million and $1.2 million , respectively.
A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:
 
2015
 
2014
 
2013
Income (loss) before income tax provision (benefit)
$
24,799

 
$
(76,573
)
 
$
55,720

Statutory taxes (benefit) at 35.0%
$
8,679

 
$
(26,801
)
 
$
19,502

State and local income taxes
(439
)
 
(7,112
)
 
136

Valuation allowance
3,525

 
5,742

 
(12
)
Non-deductible expenses
787

 
632

 
1,081

Percentage depletion
(8,406
)
 
(8,572
)
 
(8,057
)
R&D and other federal credits
(1,854
)
 
(1,397
)
 
(1,173
)
Other, net
(332
)
 
322

 
520

     Tax settlements
855

 
(1,269
)
 
(727
)
Income tax provision
$
2,815

 
$
(38,455
)
 
$
11,270

Effective income tax rate
11.4
%
 
50.2
%
 
20.2
%
As of December 31, 2015 , the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $8.6 million . The Company has provided a cumulative deferred tax liability in the amount of $0.3 million with respect to the cumulative unremitted earnings of the Company as of December 31, 2015 which are expected to be repatriated. The Company has continued to conclude all remaining foreign earnings in excess of this amount will be indefinitely reinvested in its foreign operations and, therefore, the recording of deferred tax liabilities for such unremitted earnings is not required. It is impracticable to determine the amount of unrecognized deferred taxes with respect to these permanently reinvested earnings; however, foreign tax credits would be available to reduce, in part, U.S. income taxes in the event of a distribution.
A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows:
 
December 31
 
2015
 
2014
Deferred tax assets
 
 
 
Tax carryforwards
$
12,812

 
$
8,531

Inventories
4,680

 
7,027

Accrued expenses and reserves
30,640

 
28,842

Other employee benefits
14,253

 
13,264

Partnership investment - development costs
21,766

 
14,536

Other
16,170

 
14,885

Total deferred tax assets
100,321

 
87,085

Less: Valuation allowance
11,723

 
8,521

 
88,598

 
78,564

Deferred tax liabilities
 
 
 
Depreciation and depletion
42,679

 
43,111

Accrued pension benefits
3,610

 
858

Unremitted foreign earnings
296

 
223

Total deferred tax liabilities
46,585

 
44,192

Net deferred asset
$
42,013

 
$
34,372



F-31

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:
 
December 31, 2015
 
Net deferred tax
asset
 
Valuation
allowance
 
Carryforwards
expire during:
Non-U.S. net operating loss
$
915

 
$
915

 
2021 - Indefinite
State losses
11,098

 
7,605

 
2016 - 2034
Research credit
2,807

 

 
2028 - 2029
Alternative minimum tax credit
1,871

 

 
Indefinite
Total
$
16,691

 
$
8,520

 
 
 
December 31, 2014
 
Net deferred tax
asset
 
Valuation
allowance
 
Carryforwards
expire during:
Non-U.S. net operating loss
$
772

 
$
772

 
2020 - Indefinite
State losses
9,791

 
5,687

 
2015 - 2033
Alternative minimum tax credit
1,396

 

 
Indefinite
Total
$
11,959

 
$
6,459

 
 
The Company evaluates its deferred tax assets to determine if a valuation allowance is required.  A valuation allowance is required where realization is determined to no longer meet the “more likely than not” standard.  The establishment of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the Company from using its loss carryforwards or other deferred tax assets in future periods.
Based upon the review of historical earnings and the relevant expiration of carryforwards, including utilization limitations in the various state taxing jurisdictions, the Company believes the valuation allowances are appropriate and does not expect to release valuation allowances within the next twelve months that would have a significant effect on the Company's financial position or results of operations.
The tax returns of the Company and certain of its subsidiaries are under routine examination by various taxing authorities. The Company has not been informed of any material assessment for which an accrual has not been previously provided and the Company would vigorously contest any material assessment. Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations.
The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2015 and 2014 . Approximately $3.9 million and $3.0 million of these gross amounts as of December 31, 2015 and 2014 , respectively, relate to permanent items that, if recognized, would impact the effective income tax rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.
 
2015
 
2014
 
2013
Balance at January 1
$
3,466

 
$
7,848

 
$
2,691

Additions based on tax positions related to prior years
1,230

 
453

 
5,615

Additions based on tax positions related to the current year
531

 
921

 
78

Reductions due to settlements with taxing authorities
(256
)
 
(4,701
)
 
(191
)
Reductions due to lapse of the applicable statute of limitations
(101
)
 
(1,055
)
 
(345
)
Balance at December 31
$
4,870

 
$
3,466

 
$
7,848

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recognized net (benefit)/expense of $0.2 million , $(0.9) million and $0.4 million in interest and penalties related to

F-32

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

uncertain tax positions during 2015 , 2014 and 2013, respectively. The total amount of interest and penalties accrued was $0.7 million and $0.5 million as of December 31, 2015 and 2014 , respectively.
The Company expects the amount of unrecognized tax benefits will change within the next 12 months; however, the change in unrecognized tax benefits, which is reasonably possible within the next 12 months, is not expected to have a significant effect on the Company's financial position, results of operations or cash flows.
In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The examination of the 2011 and 2012 U.S. federal tax returns concluded in the second quarter of 2014. The Company does not have any additional material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by law.

NOTE 16— Retirement Benefit Plans
Defined Benefit Plans: The Company maintains various defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. During 2013, the Company amended the Combined Defined Benefit Plan for NACCO Industries, Inc. and its subsidiaries (the “Combined Plan”) to freeze pension benefits for all employees, including those for certain Unconsolidated Mines' employees and cost of living adjustments ("COLA's") for other employees, effective as of the close of business on December 31, 2013. As a result of this amendment, the Company remeasured the Combined Plan and recorded a $1.7 million pre-tax curtailment gain during 2013.
The Company also amended the Supplemental Retirement Benefit Plan (the “SERP”) to freeze all remaining pension benefits. In years prior to 2013, benefits other than COLA’s were frozen for all SERP participants. Effective as of the close of business on December 31, 2013, all COLA benefits under the SERP were eliminated for all plan participants.
Certain executive officers also maintain accounts under various deferred compensation plans that were frozen effective December 31, 2007. All other eligible employees of the Company, including employees whose pension benefits are frozen, receive retirement benefits under defined contribution retirement plans.
The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31 :
 
2015
 
2014
 
2013
U.S. Plans
 
 
 
 
 
Weighted average discount rates for pension benefit obligation
3.70% - 4.20%

 
3.45% - 3.95%

 
4.00% - 4.75%

Weighted average discount rates for net periodic benefit cost
3.45% - 3.95%

 
4.00% - 4.75%

 
3.50% - 4.70%

Expected long-term rate of return on assets for net periodic benefit cost
7.75
%
 
7.75
%
 
7.75
%
Non-U.S. Plan
 
 
 
 
 
Weighted average discount rates for pension benefit obligation
4.00
%
 
3.75
%
 
4.50
%
Weighted average discount rates for net periodic benefit cost
3.75
%
 
4.50
%
 
4.00
%
Rate of increase in compensation levels
3.50
%
 
3.50
%
 
3.50
%
Expected long-term rate of return on assets for net periodic benefit cost
5.75
%
 
6.00
%
 
6.00
%


F-33

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Set forth below is a detail of the net periodic pension expense (income) for the defined benefit plans for the years ended December 31 :
 
2015
 
2014
 
2013
U.S. Plans
 
 
 
 
 
Interest cost
$
2,627

 
$
2,754

 
$
2,766

Expected return on plan assets
(4,892
)
 
(4,689
)
 
(4,513
)
Amortization of actuarial loss
1,059

 
837

 
1,822

Amortization of prior service cost (credit)
50

 
32

 
(47
)
Curtailment gain

 

 
(1,701
)
Net periodic pension expense (income)
$
(1,156
)
 
$
(1,066
)
 
$
(1,673
)
 
 
 
 
 
 
Non-U.S. Plan
 
 
 
 
 
Interest cost
$
152

 
$
196

 
$
197

Expected return on plan assets
(272
)
 
(296
)
 
(282
)
Amortization of actuarial loss
146

 
112

 
121

Settlements
37

 

 

Net periodic pension expense
$
63

 
$
12

 
$
36

Set forth below is detail of other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended December 31 :
 
2015
 
2014
 
2013
U.S. Plans
 
 
 
 
 
Current year actuarial (gain) loss
$
2,181

 
$
8,896

 
$
(11,503
)
Amortization of actuarial loss
(1,059
)
 
(837
)
 
(1,822
)
Current year prior service cost (credit)
147

 
360

 
(1,331
)
Amortization of prior service (cost) credit
(50
)
 
(32
)
 
47

Curtailment gain

 

 
1,701

Total recognized in other comprehensive (income) loss
$
1,219

 
$
8,387

 
$
(12,908
)
Non-U.S. Plan
 
 
 
 
 
Current year actuarial (gain) loss
$
(128
)
 
$
(94
)
 
$
(735
)
Amortization of actuarial loss
(146
)
 
(112
)
 
(121
)
Settlements
(37
)
 

 

Total recognized in other comprehensive (income)
$
(311
)
 
$
(206
)
 
$
(856
)

F-34

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

The following table sets forth the changes in the benefit obligation and the plan assets during the year and the funded status of the defined benefit plans at December 31 :
 
2015
 
2014
 
U.S.
Plans
 
Non-U.S.
Plan
 
U.S. Plans
 
Non-U.S.
Plan
Change in benefit obligation
 
 
 
 
 
 
 
Projected benefit obligation at beginning of year
$
72,839

 
$
4,549

 
$
65,099

 
$
4,603

Interest cost
2,627

 
152

 
2,754

 
196

Actuarial (gain) loss
(2,884
)
 
(146
)
 
8,736

 
301

Benefits paid
(4,393
)
 
(146
)
 
(4,262
)
 
(151
)
Plan amendments

 

 

 

Foreign currency exchange rate changes

 
(712
)
 

 
(400
)
Settlements

 
(178
)
 

 

Intercompany transfers
301

 

 
512

 

Projected benefit obligation at end of year
$
68,490

 
$
3,519

 
$
72,839

 
$
4,549

Accumulated benefit obligation at end of year
$
68,490

 
$
3,519

 
$
72,839

 
$
4,549

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
68,675

 
$
5,286

 
$
67,170

 
$
5,186

Actual return on plan assets
110

 
256

 
5,972

 
690

Employer contributions
424

 
17

 
496

 
20

Benefits paid
(4,393
)
 
(146
)
 
(4,262
)
 
(151
)
Foreign currency exchange rate changes

 
(852
)
 

 
(459
)
Settlements

 
(178
)
 

 

Intercompany transfers
77

 

 
(701
)
 

Fair value of plan assets at end of year
$
64,893

 
$
4,383

 
$
68,675

 
$
5,286

Funded status at end of year
$
(3,597
)
 
$
864

 
$
(4,164
)
 
$
737

Amounts recognized in the balance sheets consist of:
 
 
 
 
 
 
 
Noncurrent assets
$
4,261

 
$
864

 
$
4,304

 
$
737

Current liabilities
(1,016
)
 

 
(1,110
)
 

Non-current liabilities
(6,842
)
 

 
(7,358
)
 

 
$
(3,597
)
 
$
864

 
$
(4,164
)
 
$
737

Components of accumulated other comprehensive loss (income) consist of:
 
 
 
 
 
 
 
Actuarial loss
$
28,041

 
$
737

 
$
26,925

 
$
1,110

Prior service cost
1,054

 

 
955

 

Deferred taxes
(11,324
)
 
(250
)
 
(10,683
)
 
(426
)
     Currency differences

 
(102
)
 

 
(43
)
 
$
17,771

 
$
385

 
$
17,197

 
$
641

In 2014, the Company adopted the Society of Actuaries' ("SOA") RP-2014 mortality tables to determine the Company's 2014 liability for its U.S. pension plans. This table contributed $5.0 million to the increase in the actuarial loss recognized during 2014 and the increase in the projected benefit obligation. During 2015, the Company adopted the SOA tables updated to reflect the SOA's latest projection scale, more specifically the RP-2014 blend with the MP-2015 mortality improvement scale which contributed $1.3 million to the decrease in the projected benefit obligation in 2015.
The actuarial loss and prior service cost included in accumulated other comprehensive income (loss) expected to be recognized in net periodic benefit cost in 2016 are $0.9 million ( $0.6 million net of tax) and less than $0.1 million , respectively.

F-35

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

The Company recognizes as a component of benefit cost (income), as of the measurement date, any unrecognized actuarial net gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor." Amounts outside the corridor are amortized over the average expected remaining service of active participants expected to benefit under the retiree medical plans or over the average expected remaining lifetime of inactive participants for the pension plans. The (gain) loss amounts recognized in AOCI are not expected to be fully recognized until the plan is terminated or as settlements occur, which would trigger accelerated recognition. Prior service costs resulting from plan changes are also in AOCI.
The Company's policy is to make contributions to fund its pension plans within the range allowed by applicable regulations. The Company expects to contribute less than $0.1 million to its non-U.S. pension plans in 2016 .
The Company maintains one supplemental defined benefit plan that pays monthly benefits to participants directly out of corporate funds. All other pension benefit payments are made from assets of the pension plans.
Future pension benefit payments expected to be paid from assets of the pension plans are:
 
U.S. Plans
 
Non-U.S. Plan
2016
$
5,197

 
$
130

2017
4,480

 
142

2018
4,547

 
140

2019
4,521

 
148

2020
4,923

 
160

2021 - 2025
23,032

 
1,118

 
$
46,700

 
$
1,838

The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes.
Expected returns for U.S. pension plans are based on a calculated market-related value for U.S. pension plan assets. Under this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns are recognized in the market-related value of assets ratably over three years. Expected returns for Non-U.S. pension plans are based on fair market value for Non-U.S. pension plan assets.
The pension plans maintain investment policies that, among other things, establish a portfolio asset allocation methodology with percentage allocation bands for individual asset classes. The investment policies provide that investments are reallocated between asset classes as balances exceed or fall below the appropriate allocation bands.
The following is the actual allocation percentage and target allocation percentage for the U.S. pension plan assets at December 31:
 
2015
Actual
Allocation
 
2014
Actual
Allocation
 
Target Allocation
Range
U.S. equity securities
52.1
%
 
55.3
%
 
41.0% - 62.0%
Non-U.S. equity securities
12.3
%
 
11.3
%
 
10.0% - 16.0%
Fixed income securities
35.1
%
 
32.9
%
 
30.0% - 40.0%
Money market
0.5
%
 
0.5
%
 
0.0% - 10.0%

F-36

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

The following is the actual allocation percentage and target allocation percentage for the Non-U.S. pension plan assets at December 31:
 
2015
Actual
Allocation
 
2014
Actual
Allocation
 
Target Allocation
Range
Canadian equity securities
28.9
%
 
30.2
%
 
25.0% - 35.0%
Non-Canadian equity securities
30.6
%
 
30.1
%
 
25.0% - 35.0%
Fixed income securities
40.5
%
 
39.7
%
 
30.0% - 50.0%
Cash and cash equivalents
%
 
%
 
0.0% - 5.0%
The defined benefit pension plans do not have any direct ownership of NACCO common stock.
The fair value of each major category of the Company's U.S. pension plan assets are valued using quoted market prices in active markets for identical assets, or Level 1 in the fair value hierarchy. The fair value of each major category of the Company's Non-U.S. pension plan assets are valued using observable inputs, either directly or indirectly, other than quoted market prices in active markets for identical assets, or Level 2 in the fair value hierarchy. Following are the values as of December 31 :
 
Level 1
 
Level 2
 
2015
 
2014
 
2015
 
2014
U.S. equity securities
$
33,799

 
$
37,969

 
$
670

 
$
864

Non-U.S. equity securities
8,003

 
7,764

 
1,939

 
2,326

Fixed income securities
22,787

 
22,617

 
1,774

 
2,096

Money market
304

 
325

 

 

Total
$
64,893

 
$
68,675

 
$
4,383

 
$
5,286

Postretirement Health Care: The Company also maintains health care plans which provide benefits to grandfathered eligible retired employees in the U.S. All health care plans of the Company have a cap on the Company's share of the costs. These plans have no assets. Under the Company's current policy, plan benefits are funded at the time they are due to participants.
The assumptions used in accounting for the postretirement health care plans are set forth below for the years ended December 31 :
 
2015
 
2014
 
2013
Weighted average discount rates for benefit obligation
3.40
%
 
3.25
%
 
3.85
%
Weighted average discount rates for net periodic benefit cost
3.25
%
 
3.85
%
 
3.05
%
Health care cost trend rate assumed for next year
7.3
%
 
7.0
%
 
7.0
%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)
5.0
%
 
5.0
%
 
5.0
%
Year that the rate reaches the ultimate trend rate
2025

 
2022

 
2022

Assumed health care cost trend rates can have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects at December 31, 2015 :
 
1-Percentage-Point
Increase
 
1-Percentage-Point
Decrease
Effect on total of service and interest cost
$
16

 
$
(14
)
Effect on postretirement benefit obligation
$
256

 
$
(235
)

F-37

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Set forth below is a detail of the net periodic benefit expense for the postretirement health care plans for the years ended December 31 :
 
2015
 
2014
 
2013
Service cost
$
70

 
$
70

 
$
77

Interest cost
113

 
118

 
98

Amortization of actuarial loss
91

 
66

 
52

Amortization of prior service credit
(107
)
 
(107
)
 
(107
)
Net periodic benefit expense
$
167

 
$
147

 
$
120

Set forth below is a detail of other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended December 31 :
 
2015
 
2014
 
2013
Current year actuarial loss
$
226

 
$
613

 
$
16

Amortization of actuarial loss
(91
)
 
(66
)
 
(52
)
Amortization of prior service credit
107

 
107

 
107

Total recognized in other comprehensive income
$
242

 
$
654

 
$
71

The following sets forth the changes in benefit obligations during the year and the funded status of the postretirement health care at December 31 :
 
2015
 
2014
Change in benefit obligation
 
 
 
Benefit obligation at beginning of year
$
3,534

 
$
3,109

Service cost
70

 
70

Interest cost
113

 
118

Actuarial loss
226

 
613

Benefits paid
(477
)
 
(376
)
Benefit obligation at end of year
$
3,466

 
$
3,534

Funded status at end of year
$
(3,466
)
 
$
(3,534
)
Amounts recognized in the balance sheets consist of:
 
 
 
Current liabilities
$
(262
)
 
$
(276
)
Noncurrent liabilities
(3,204
)
 
(3,258
)
 
$
(3,466
)
 
$
(3,534
)
Components of accumulated other comprehensive loss (income) consist of:
 
 
 
Actuarial loss
$
1,140

 
$
1,005

Prior service credit
(202
)
 
(309
)
Deferred taxes
263

 
475

 
$
1,201

 
$
1,171

The actuarial loss and prior service credit included in accumulated other comprehensive income (loss) expected to be recognized in net periodic benefit cost in 2016 is $0.1 million (less than $0.1 million net of tax) and $0.1 million (less than $0.1 million net of tax), respectively.

F-38

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Future postretirement health care benefit payments expected to be paid are:
2016
$
262

2017
273

2018
293

2019
313

2020
325

2021 - 2025
1,564

 
$
3,030

Defined Contribution Plans: NACCO and its subsidiaries maintain defined contribution (401(k)) plans for substantially all U.S. employees and similar plans for employees outside of the United States. All companies provide employer matching (or safe harbor) contributions based on plan provisions. The defined contribution retirement plans also provide for an additional minimum employer contribution. Certain plans also permit additional contributions whereby the applicable company's contribution to participants is determined annually based on a formula that includes the effect of actual compared with targeted operating results and the age and/or compensation of the participants. Total costs, including Company contributions, for these plans were $6.5 million , $7.6 million and $8.0 million in 2015 , 2014 and 2013 , respectively.

NOTE 17— Business Segments

NACCO is a holding company with the following reportable segments: NACoal, HBB and KC. See Note 1 for a discussion of the Company's industries and product lines. NACCO's non-operating segment, NACCO and Other, includes the accounts of the parent company and Bellaire.
Financial information for each of NACCO's reportable segments is presented in the following table. The accounting policies of the reportable segments are described in Note 2 . The line “Eliminations” in the revenues section eliminates revenues from HBB sales to KC. The amounts of these revenues are based on current market prices of similar third-party transactions. No other sales transactions occur among reportable segments.
The majority of NACoal's revenues is generated from its consolidated mining operations and dragline mining services. MLMC's customer, Choctaw Generation Limited Partnership until February 28, 2013 and KMRC RH, LLC subsequent to February 28, 2013, accounted for approximately 57% , 39% and 42% of NACoal's revenues for the years ended December 31, 2015 , 2014 and 2013 , respectively. Centennial's largest customer, Alabama Coal Cooperative, accounted for approximately 16% , 27% and 27% of NACoal's revenues for the years ended December 31, 2015 , 2014 and 2013 , respectively. Wal-Mart accounted for approximately 32% , 33% and 31% of HBB’s revenues in 2015 , 2014 and 2013 , respectively. HBB’s five largest customers accounted for approximately 52% , 56% and 55% of HBB’s revenues for the years ended December 31, 2015 , 2014 and 2013 , respectively. The loss of or significant reduction in sales to any key customer could result in significant decreases in NACoal's and HBB’s revenue and profitability and an inability to sustain or grow its business.
The management fees charged to operating subsidiaries represent an allocation of corporate overhead of the parent company. Management fees are allocated among all subsidiaries based upon the relative size and complexity of each subsidiary. The Company believes the allocation method is consistently applied and reasonable. Management fees included in the Selling, general and administrative expenses of the subsidiaries were $9.3 million , $8.5 million and $6.8 million for 2015 , 2014 and 2013 , respectively.

F-39

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

 
2015
 
2014
 
2013
Revenues from external customers
 
 
 
 
 
NACoal
$
147,998

 
$
172,702

 
$
193,651

HBB
620,977

 
559,683

 
547,790

KC
150,988

 
168,545

 
196,033

Eliminations
(4,103
)
 
(4,148
)
 
(4,808
)
Total
$
915,860

 
$
896,782

 
$
932,666

Gross profit (loss)
 
 
 
 
 
NACoal
$
(10,816
)
 
$
(3,139
)
 
$
25,230

HBB
123,139

 
117,570

 
115,506

KC
67,000

 
71,621

 
80,972

NACCO and Other
(416
)
 
(461
)
 
(469
)
Eliminations
589

 
(519
)
 
52

Total
$
179,496

 
$
185,072

 
$
221,291

Selling, general and administrative expenses, including Amortization of intangible assets
 
 
 
 
 
NACoal
$
38,867

 
$
36,147

 
$
30,786

HBB
88,336

 
81,798

 
74,570

KC
66,864

 
79,056

 
91,878

NACCO and Other
3,845

 
4,996

 
5,765

Total
$
197,912

 
$
201,997

 
$
202,999


F-40

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

 
2015
 
2014
 
2013
Operating profit (loss)
 
 
 
 
 
NACoal
$
521

 
$
(89,030
)
 
$
37,461

HBB
34,801

 
35,772

 
40,960

KC
165

 
(7,075
)
 
(10,903
)
NACCO and Other
(4,248
)
 
(5,456
)
 
(6,233
)
Eliminations
588

 
(520
)
 
51

Total
$
31,827

 
$
(66,309
)
 
$
61,336

Interest expense
 
 
 
 
 
NACoal
$
4,961

 
$
6,034

 
$
3,105

HBB
1,831

 
1,137

 
1,279

KC
131

 
367

 
390

NACCO and Other
1

 
28

 
1

Total
$
6,924

 
$
7,566

 
$
4,775

Interest income
 
 
 
 
 
NACoal
$
(416
)
 
$
(823
)
 
$
(19
)
HBB
(56
)
 
(4
)
 
(1
)
KC

 

 

NACCO and Other
(2
)
 
(4
)
 
(205
)
Total
$
(474
)
 
$
(831
)
 
$
(225
)
Other (income) expense, including asset retirement obligations
 
 
 
 
 
NACoal
$
(1,683
)
 
$
44

 
$
(1,013
)
HBB
1,526

 
1,136

 
462

KC
86

 
65

 
70

NACCO and Other
649

 
2,284

 
1,547

Total
$
578

 
$
3,529

 
$
1,066

Income tax provision (benefit)
 

 
 

 
 

NACoal
$
(7,960
)
 
$
(43,308
)
 
$
3,462

HBB
11,751

 
10,359

 
14,127

KC
368

 
(2,904
)
 
(4,479
)
NACCO and Other
(1,550
)
 
(2,420
)
 
(1,858
)
Eliminations
206

 
(182
)
 
18

Total
$
2,815

 
$
(38,455
)
 
$
11,270

Net Income (loss)
 

 
 

 
 

NACoal
$
5,619

 
$
(50,977
)
 
$
31,926

HBB
19,749

 
23,144

 
25,093

KC
(420
)
 
(4,603
)
 
(6,884
)
NACCO and Other
(3,346
)
 
(5,344
)
 
(5,718
)
Eliminations
382

 
(338
)
 
33

Total
$
21,984

 
$
(38,118
)
 
$
44,450


F-41

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

 
2015
 
2014
 
2013
Total assets
 
 
 
 
 
NACoal
$
303,138

 
$
389,964

 
$
419,786

HBB
253,874

 
270,265

 
228,891

KC
56,177

 
56,260

 
70,014

NACCO and Other
64,069

 
96,918

 
131,085

Eliminations
(21,850
)
 
(42,887
)
 
(39,820
)
Total
$
655,408

 
$
770,520

 
$
809,956

Depreciation, depletion and amortization
 
 
 
 
 
NACoal
$
17,067

 
$
22,003

 
$
16,601

HBB
4,750

 
2,693

 
3,475

KC
1,558

 
3,048

 
4,162

NACCO and Other
305

 
326

 
334

Total
$
23,680

 
$
28,070

 
$
24,572

Capital expenditures, excluding acquisitions of business
 
 
 
 
 
NACoal
$
4,116

 
$
51,228

 
$
52,748

HBB
4,365

 
4,516

 
2,313

KC
1,806

 
1,193

 
2,150

NACCO and Other
328

 
563

 
238

Total
$
10,615

 
$
57,500

 
$
57,449

Data By Geographic Region
No single country outside of the U.S. comprised 10% or more of the Company's revenues from unaffiliated customers.
 
United
States
 
Other
 
Consolidated
2015
 
 
 
 
 
Revenues from unaffiliated customers, based on the customers’ location
$
795,071

 
$
120,789

 
$
915,860

Long-lived assets
$
151,618

 
$
5,564

 
$
157,182

2014
 
 
 
 
 
Revenues from unaffiliated customers, based on the customers’ location
$
779,890

 
$
116,892

 
$
896,782

Long-lived assets
$
182,116

 
$
5,780

 
$
187,896

2013
 
 
 
 
 
Revenues from unaffiliated customers, based on the customers’ location
$
813,609

 
$
119,057

 
$
932,666

Long-lived assets
$
246,902

 
$
5,486

 
$
252,388



F-42

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

NOTE 18— Quarterly Results of Operations (Unaudited)

A summary of the unaudited results of operations for the year ended December 31 is as follows:
 
2015
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Revenues
 
 
 
 
 
 
 
NACoal
$
41,319

 
$
37,942

 
$
42,704

 
$
26,033

HBB
123,293

 
129,498

 
163,291

 
204,895

KC
29,967

 
29,782

 
34,708

 
56,531

Eliminations
(845
)
 
(722
)
 
(1,596
)
 
(940
)
 
$
193,734

 
$
196,500

 
$
239,107

 
$
286,519

Gross profit
$
38,189

 
$
35,381

 
$
42,215

 
$
63,711

Earnings of unconsolidated mines
$
12,553

 
$
12,076

 
$
12,234

 
$
11,569

Operating profit (loss)
 
 
 
 
 
 
 
NACoal
$
5,207

 
$
2,382

 
$
(4,010
)
 
$
(3,058
)
HBB
2,188

 
2,880

 
11,643

 
18,090

KC
(3,045
)
 
(2,972
)
 
(843
)
 
7,025

NACCO and Other
(1,289
)
 
(836
)
 
(1,142
)
 
(981
)
Eliminations
180

 
(166
)
 
112

 
462

 
$
3,241

 
$
1,288

 
$
5,760

 
$
21,538

 
 
 
 
 
 
 
 
NACoal
$
4,547

 
$
4,199

 
$
(5,345
)
 
$
2,218

HBB
618

 
1,618

 
6,378

 
11,135

KC
(1,893
)
 
(1,847
)
 
(550
)
 
3,870

NACCO and Other
(1,239
)
 
(697
)
 
(774
)
 
(636
)
Eliminations
(1,006
)
 
(3,548
)
 
3,432

 
1,504

Net income (loss)
$
1,027

 
$
(275
)
 
$
3,141

 
$
18,091

 
 
 
 
 
 
 
 
Basic earnings (loss) per share
$
0.14

 
$
(0.04
)
 
$
0.45

 
$
2.65

 
 
 
 
 
 
 
 
Diluted earnings (loss) per share
$
0.14

 
$
(0.04
)
 
$
0.45

 
$
2.63


During the third quarter of 2015, NACoal recorded a $7.5 million charge related to Centennial's asset retirement obligations. See Note 3 for further information.
The significant increase in gross profit of HBB and KC in the fourth quarter of 2015 compared with the prior quarters of 2015 is primarily due to the seasonal nature of of their businesses.








F-43

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

 
2014
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Revenues
 
 
 
 
 
 
 
NACoal
$
39,872

 
$
49,780

 
$
49,840

 
$
33,210

HBB
101,325

 
118,385

 
135,155

 
204,818

KC
36,876

 
32,804

 
37,551

 
61,314

Eliminations
(660
)
 
(599
)
 
(832
)
 
(2,057
)
 
$
177,413

 
$
200,370

 
$
221,714

 
$
297,285

Gross profit
$
36,171

 
$
36,523

 
$
46,543

 
$
65,835

Earnings of unconsolidated mines
$
12,438

 
$
11,567

 
$
12,064

 
$
12,327

Operating profit (loss)
 
 
 
 
 
 
 
NACoal
$
6,653

 
$
183

 
$
4,362

 
$
(100,228
)
HBB
937

 
2,251

 
9,531

 
23,053

KC
(6,514
)
 
(4,255
)
 
(1,429
)
 
5,123

NACCO and Other
(1,352
)
 
(2,004
)
 
(1,073
)
 
(1,027
)
Eliminations
(309
)
 
(66
)
 
(68
)
 
(77
)
 
$
(585
)
 
$
(3,891
)
 
$
11,323

 
$
(73,156
)
 
 
 
 
 
 
 
 
NACoal
$
5,705

 
$
(75
)
 
$
3,185

 
$
(59,792
)
HBB
350

 
1,359

 
6,008

 
15,427

KC
(4,033
)
 
(2,657
)
 
(966
)
 
3,053

NACCO and Other
(1,197
)
 
(1,673
)
 
(906
)
 
(1,568
)
Eliminations
(2,349
)
 
(578
)
 
378

 
2,211

Net income
$
(1,524
)
 
$
(3,624
)
 
$
7,699

 
$
(40,669
)
 
 
 
 
 
 
 
 
Basic earnings per share
$
(0.19
)
 
$
(0.47
)
 
$
1.02

 
$
(5.57
)
 
 
 
 
 
 
 
 
Diluted earnings per share
$
(0.19
)
 
$
(0.47
)
 
$
1.02

 
$
(5.57
)

During the fourth quarter of 2014, NACoal's long-lived asset evaluation resulted in the Company recording a non-cash, asset impairment charge of $105.1 million on the line "Centennial long-lived asset impairment charge" in the Consolidated Statements of Operations. See Note 10 for further discussion of the Company's long-lived asset impairment.
The significant increase in gross profit of HBB and KC in the fourth quarter of 2014 compared with the prior quarters of 2014 is primarily due to the seasonal nature of of their businesses.

During the second quarter of 2014, the Company recorded a $1.1 million charge included in Selling, general and administrative expenses in NACCO and Other to correct a prior period accounting error related to an increase in the estimated liability for certain frozen deferred compensation plans.


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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

NOTE 19— Parent Company Condensed Balance Sheets

The condensed balance sheets of NACCO, the parent company, at December 31 are as follows:
 
2015
 
2014
ASSETS
 
 
 
Cash and cash equivalents
$
22,506

 
$
53,415

Current intercompany accounts receivable, net
2,555

 

Other current assets
1,241

 
1,570

Investment in subsidiaries
 
 
 
HBB
51,377

 
49,613

KC
31,750

 
32,170

NACoal
108,381

 
103,056

Other
13,516

 
13,143

 
205,024

 
197,982

Property, plant and equipment, net
1,276

 
1,253

Other non-current assets
8,534

 
8,078

Total Assets
$
241,136

 
$
262,298

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
$
6,323

 
$
7,636

Current intercompany accounts payable, net

 
9,756

Note payable to Bellaire
18,700

 
18,700

Other non-current liabilities
14,975

 
14,732

Stockholders’ equity
201,138

 
211,474

Total Liabilities and Stockholders’ Equity
$
241,136

 
$
262,298

The credit agreements at NACoal, HBB and KC allow the transfer of assets to NACCO under certain circumstances. The amount of NACCO's investment in NACoal, HBB, KC and NACCO and Other that was restricted at December 31, 2015 totaled approximately $182.1 million . The amount of unrestricted cash available to NACCO included in “Investment in subsidiaries” was $12.0 million at December 31, 2015 . Dividends, advances and management fees from its subsidiaries are the primary sources of cash for NACCO.

NOTE 20— Unconsolidated Subsidiaries

NACoal's wholly owned unconsolidated subsidiaries each meet the definition of a variable interest entity. See Note 1 for a discussion of these entities. The income taxes resulting from the operations of the Unconsolidated Mines are solely the responsibility of the Company. The pre-tax income from the Unconsolidated Mines, excluding NoDak, is reported on the line “Earnings of unconsolidated mines” in the Consolidated Statements of Operations, with related income taxes included in the provision for income taxes. The Company has included the pre-tax earnings of the Unconsolidated Mines, excluding NoDak, above operating profit as they are an integral component of the Company's business and operating results. The pre-tax income from NoDak is reported on the line "Income from other unconsolidated affiliates" in the "Other (income) expense" section of the Consolidated Statements of Operations, with the related income taxes included in the provision for income taxes.

The investment in the Unconsolidated Mines and related tax positions totaled $24.6 million and $28.2 million at December 31, 2015 and 2014 , respectively, and is included on the line “Other Non-current Assets” in the Consolidated Balance Sheets. The Company's maximum risk of loss relating to these entities is limited to its invested capital, which was $4.0 million at both December 31, 2015 and December 31, 2014 , and $5.4 million at December 31, 2013 .

Included in "Accounts receivable from affiliates" on the Consolidated Balance Sheet is $53.2 million as of December 31, 2014 due to NACoal from Coyote Creek . Coyote Creek repaid NACoal the amount outstanding during 2015 as a result of Coyote

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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)

Creek’s completion of third-party financing. 

NACoal is a party to certain guarantees related to Coyote Creek. Under certain circumstances of default or termination of Coyote Creek’s Lignite Sales Agreement (“LSA”), NACoal would be obligated for payment of a "make-whole" amount to Coyote Creek’s third party lenders. The “make-whole” amount is based on the excess, if any, of the discounted value of the remaining scheduled debt payments over the principal amount. In addition, in the event Coyote Creek’s LSA is terminated on or after January 1, 2024 by Coyote Creek’s customers, NACoal is obligated to purchase Coyote Creek’s dragline and rolling stock for the then net book value of those assets. To date, no payments have been required from NACoal since the inception of these guarantees. The Company believes that the likelihood of NACoal’s future performance under the guarantees is remote, and no amounts related to these guarantees have been recorded.
Summarized financial information for the unconsolidated subsidiaries is as follows:
 
2015
 
2014
 
2013
Statement of Operations
 
 
 
 
 
Revenues
$
608,349

 
$
579,031

 
$
577,436

Gross profit
$
71,727

 
$
74,244

 
$
74,870

Income before income taxes
$
49,641

 
$
48,592

 
$
47,953

Net income
$
39,181

 
$
37,067

 
$
37,468

Balance Sheet
 
 
 
 
 
Current assets
$
160,498

 
$
143,105

 
 
Non-current assets
$
913,402

 
$
781,475

 
 
Current liabilities
$
129,126

 
$
177,659

 
 
Non-current liabilities
$
940,782

 
$
742,938

 
 
NACoal received dividends of $39.1 million and $38.3 million from the unconsolidated subsidiaries in 2015 and 2014 , respectively.

NOTE 21— Related Party Transactions
Legal services rendered by Jones Day approximated $1.6 million , $1.9 million and $1.1 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. A director of the Company was also Of Counsel with this law firm during 2014 and 2013 .
The Company's Chairman, President and Chief Executive Officer also serves as Chairman, President and Chief Executive Officer of Hyster-Yale Materials Handling, Inc. ("Hyster-Yale"). Hyster-Yale is a former subsidiary of the Company that was spun-off to stockholders in 2012. In the ordinary course of business, the Company's subsidiaries lease or buy Hyster-Yale lift trucks. The terms may not be comparable to terms that would be obtained in a transaction between unaffiliated parties.

NOTE 22— Acquisitions

Weston Brands: On December 16, 2014, HBB completed the asset acquisition of Weston Products, LLC, which HBB refers to as Weston Brands, in exchange for cash consideration of $25.4 million , of which $25.0 million was paid at closing and $0.4 million was paid in 2015. During 2015 and 2014, the Company incurred $0.2 million and $0.4 million , respectively, in acquisition costs related to Weston Brands, which is included in "Selling, general and administrative expenses" in the Consolidated Statement of Operations.

The results of Weston Brands included in the Company's Consolidated Statement of Operations from the acquisition date through December 31, 2014 are as follows:
Revenues
$
1,102

Operating loss
$
(193
)

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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
(Tabular Amounts in Thousands, Except Per Share and Percentage Data)



The following table summarizes the fair values of the assets acquired and liabilities assumed of Weston Brands as of the acquisition date:
Accounts receivable
$
6,100

Inventory
5,113

Other current assets
624

Property, plant and equipment
590

Intangible assets
10,100

Total assets acquired
22,527

Current liabilities
3,367

Total liabilities assumed
3,367

Net assets acquired
19,160

Purchase price
25,413

Goodwill
$
6,253


The goodwill arising from the acquisition is deductible for tax purposes. See Note 6 for further discussion of the intangible assets acquired.



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SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY CONDENSED BALANCE SHEETS

 
December 31
 
2015
 
2014
 
(In thousands)
ASSETS
 
 
 
Cash and cash equivalents
$
22,506

 
$
53,415

Current intercompany accounts receivable, net
2,555

 

Other current assets
1,241

 
1,570

Investment in subsidiaries
 
 
 
HBB
51,377

 
49,613

KC
31,750

 
32,170

NACoal
108,381

 
103,056

Other
13,516

 
13,143

 
205,024

 
197,982

Property, plant and equipment, net
1,276

 
1,253

Other non-current assets
8,534

 
8,078

Total Assets
$
241,136

 
$
262,298

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
$
6,323

 
$
7,636

Current intercompany accounts payable, net

 
9,756

Note payable to Bellaire
18,700

 
18,700

Other non-current liabilities
14,975

 
14,732

Stockholders’ equity
201,138

 
211,474

Total Liabilities and Stockholders’ Equity
$
241,136

 
$
262,298

See Notes to Parent Company Condensed Financial Statements.



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Table of Contents



SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

 
Year Ended December 31
 
2015
 
2014
 
2013
 
(In thousands)
(Income) expense:
 
 
 
 
 
Intercompany interest expense
$
1,309

 
$
1,305

 
$
1,431

Other, net
(270
)
 
(276
)
 
(471
)
 
1,039

 
1,029

 
960

Administrative and general expenses
3,704

 
4,862

 
5,670

Loss before income taxes
(4,743
)
 
(5,891
)
 
(6,630
)
Income tax benefit
(1,496
)
 
(1,764
)
 
(1,527
)
Net loss before equity in earnings of subsidiaries
(3,247
)
 
(4,127
)
 
(5,103
)
Equity in earnings of subsidiaries
25,231

 
(33,991
)
 
49,553

Net income (loss)
21,984

 
(38,118
)
 
44,450

Foreign currency translation adjustment
(2,756
)
 
(1,896
)
 
(229
)
Deferred gain on available for sale securities, net of tax
17

 
442

 
729

Current period cash flow hedging activity, net of $357 tax benefit in 2015, $838 tax benefit in 2014 and $477 tax expense in 2013
(577
)
 
(1,518
)
 
810

Reclassification of hedging activities into earnings, net of $191 tax benefit in 2015, $489 tax benefit in 2014 and $95 tax benefit in 2013
409

 
898

 
152

Current period pension and postretirement plan adjustment, net of $1,222 tax benefit in 2015, $3,292 tax benefit in 2014 and $5,531 tax expense in 2013
(1,204
)
 
(6,483
)
 
8,022

Curtailment gain into earnings, net of $718 tax expense in 2013

 

 
(983
)
Reclassification of pension and postretirement adjustments into earnings, net of $420 tax benefit in 2015, $313 tax benefit in 2014 and $740 tax benefit in 2013
856

 
627

 
1,101

Total other comprehensive income (loss)
(3,255
)
 
(7,930
)
 
9,602

Comprehensive Income (loss)
$
18,729

 
$
(46,048
)
 
$
54,052

See Notes to Parent Company Condensed Financial Statements.


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SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
PARENT COMPANY CONDENSED STATEMENTS OF CASH FLOWS

 
Year Ended December 31
 
2015
 
2014
 
2013
 
(In thousands)
Operating Activities
 
 
 
 
 
Net income (loss)
$
21,984

 
$
(38,118
)
 
$
44,450

Equity in earnings of subsidiaries
25,231

 
(33,991
)
 
49,553

Parent company only net loss
(3,247
)
 
(4,127
)
 
(5,103
)
Net changes related to operating activities
(11,015
)
 
5,710

 
(1,858
)
Net cash provided by (used for) operating activities
(14,262
)
 
1,583

 
(6,961
)
Investing Activities
 
 
 
 
 
Expenditures for property, plant and equipment
(328
)
 
(103
)
 
(238
)
Net cash used for investing activities
(328
)
 
(103
)
 
(238
)
Financing Activities
 
 
 
 
 
Cash dividends received from subsidiaries
15,000

 
22,300

 
20,000

Notes payable to Bellaire

 
(1,750
)
 

Capital contributions to subsidiaries

 
(19,800
)
 

Purchase of treasury shares
(24,010
)
 
(35,075
)
 
(31,306
)
Cash dividends paid
(7,296
)
 
(7,755
)
 
(8,104
)
Other
(13
)
 
(20
)
 
(15
)
Net cash used for financing activities
(16,319
)
 
(42,100
)
 
(19,425
)
Cash and cash equivalents
 
 
 
 
 
Decrease for the period
(30,909
)
 
(40,620
)
 
(26,624
)
Balance at the beginning of the period
53,415

 
94,035

 
120,659

Balance at the end of the period
$
22,506

 
$
53,415

 
$
94,035

See Notes to Parent Company Condensed Financial Statements.

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SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE PARENT
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015 , 2014 AND 2013
The notes to Consolidated Financial Statements, incorporated in Item 15 of this Form 10-K, are hereby incorporated by reference into these Notes to Parent Company Condensed Financial Statements.
NOTE A — ACCOUNTING POLICIES
NACCO Industries, Inc. (the parent company or “NACCO”) is a holding company with subsidiaries that operate in three principal industries. In the Parent Company Condensed Financial Statements, NACCO's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. NACCO's share of net income of unconsolidated subsidiaries is included in net income using the equity method. Parent Company financial statements should be read in conjunction with the Company's consolidated financial statements.
NOTE B — LONG-TERM OBLIGATIONS AND GUARANTEES
It is NACCO's policy not to guarantee the debt of its subsidiaries.
NOTE C — UNRESTRICTED CASH
The amount of unrestricted cash available to NACCO, included in “Investment in subsidiaries,” was $12.0 million at December 31, 2015 and was in addition to the $22.5 million  of cash included in the Parent Company Condensed Balance Sheet at December 31, 2015 .





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SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
NACCO INDUSTRIES, INC. AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 2015 , 2014 AND 2013
 
 
 
 
Additions
 
 
 
 
 
 
Description
 
Balance at Beginning of Period
 
Charged to
Costs and
Expenses
 
Charged to
Other Accounts
— Describe
 
Deductions
— Describe
 
Balance at
End of
Period (C)
(In thousands)
2015
 
 
 
 
 
 
 
 
 
 
 
 
Reserves deducted from asset accounts:
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
2,731

 
$
18

 
$

 
$
345

 
(A) 
 
$
2,404

Allowance for discounts, adjustments and returns
 
$
15,048

 
$
25,150

 
$
1,587

 
$
24,388

 
(B) 
 
$
17,397

2014
 
 
 
 
 
 
 
 
 
 
 
 
Reserves deducted from asset accounts:
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
846

 
$
2,035

 
$

 
$
150

 
(A) 
 
$
2,731

Allowance for discounts, adjustments and returns
 
$
12,859

 
$
23,629

 
$

 
$
21,440

 
(B) 
 
$
15,048

2013
 
 
 
 
 
 
 
 
 
 
 
 
Reserves deducted from asset accounts:
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
955

 
$
(5
)
 
$

 
$
104

 
(A) 
 
$
846

Allowance for discounts, adjustments and returns
 
$
15,194

 
$
20,476

 
$
60

 
$
22,871

 
(B) 
 
$
12,859


(A)
Write-offs, net of recoveries.
(B)
Payments and customer deductions for product returns, discounts and allowances.
(C)
Balances which are not required to be presented and those which are immaterial have been omitted.

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EXHIBIT INDEX
(3) Articles of Incorporation and By-laws.
3.1(i) 
 
Restated Certificate of Incorporation of the Company is incorporated herein by reference to Exhibit 3(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172.
3.1(ii) 
 
Amended and Restated By-laws of the Company are incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed by the Company on December 18, 2014, Commission File Number 1-9172.
(4) Instruments defining the rights of security holders, including indentures.
4.1
 
The Company by this filing agrees, upon request, to file with the Securities and Exchange Commission the instruments defining the rights of holders of long-term debt of the Company and its subsidiaries where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
4.2
 
The Mortgage and Security Agreement, dated April 8, 1976, between The Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively, as Mortgagee) is incorporated herein by reference to Exhibit 4(ii) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 1-9172.
4.3
 
Amendment No. 1 to the Mortgage and Security Agreement, dated as of December 15, 1993, between Falkirk Mining Company (as Mortgagor) and Cooperative Power Association and United Power Association (collectively, as Mortgagee) is incorporated herein by reference to Exhibit 4(iii) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 1-9172.
4.4
 
Amended and Restated Stockholders' Agreement, dated as of September 28, 2012, as amended on February 16, 2016, among the signatories thereto, NACCO Industries, Inc., as depository, and NACCO Industries, Inc.**

(10) Material Contracts.
10.1* 
 
The NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(i) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172.
10.2* 
 
Form of Incentive Stock Option Agreement for incentive stock options granted after 1986 under the NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(iii) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172.
10.3* 
 
Form of Non-Qualified Stock Option Agreement under the NACCO Industries, Inc. 1975 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(iv) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172.
10.4* 
 
The NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(v) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172.
10.5* 
 
Form of Non-Qualified Stock Option Agreement under the NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(vi) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172.
10.6* 
 
Form of Incentive Stock Option Agreement for incentive stock options granted after 1986 under the NACCO Industries, Inc. 1981 Stock Option Plan (as amended and restated as of July 17, 1986) is incorporated herein by reference to Exhibit 10(viii) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission File Number 1-9172.
10.7* 
 
NACCO Industries, Inc. Supplemental Executive Long-Term Incentive Bonus Plan (Amended and Restated March 1, 2012) is incorporated herein by reference to Appendix B to NACCO's Definitive Proxy Statement, filed by NACCO on March 16, 2012, Commission File Number 1-9172.
10.8* 
 
NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan (Amended and Restated March 1, 2012) is incorporated herein by reference to Appendix A to NACCO's Definitive Proxy Statement, filed by the Company on March 16, 2012, Commission File Number 1-9172.
10.9* 
 
NACCO Industries, Inc. Non-Employee Directors' Equity Compensation Plan (Amended and Restated May 11, 2011) is incorporated herein by reference to Appendix A to NACCO's Definitive Proxy Statement, filed by the Company on March 18, 2011, Commission File Number 1-9172.

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10.10*
 
NACCO Industries, Inc. Executive Excess Retirement Plan (Effective as of September 28, 2012) is incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.
10.11*
 
Amendment No. 1 to the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2012) is incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.
10.12*
 
Form of Award Agreement for the NACCO Industries, Inc. Supplemental Executive Long-Term Incentive Bonus Plan (Amended and Restated Effective March 1, 2012) is incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.
10.13*
 
Form of Cashless Exercise Award Agreement for the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2012) is incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.

10.14*
 
Form of Non-Cashless Exercise Award Agreement for the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2012) is incorporated herein by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.
10.15
 
Separation Agreement, dated as of September 28, 2012, by and between NACCO Industries, Inc. and Hyster-Yale Materials Handling, Inc is incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.16
 
Tax Allocation Agreement, dated as of September 28, 2012, by and between NACCO Industries, Inc. and Hyster-Yale Materials Handling, Inc. is incorporated herein by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.17*
 
NACCO Industries, Inc. Annual Incentive Compensation Plan (Effective as of September 28, 2012) is incorporated herin by reference to Appendix A to NACCO's Definitive Proxy Statement, filed by the Company on March 22, 2013, Commission File Number 1-9172.
10.18*
 
The Retirement Benefit Plan for Alfred M. Rankin, Jr. (Amended and Restated Effective as of January 1, 2014) is incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 8-K, filed by the Company on February 14, 2014, Commission File Number 1-9172.
10.19*
 
NACCO Industries, Inc. Unfunded Benefit Plan (Amended and Restated Effective as of January 1, 2014) is incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 8-K, filed by the Company on February 14, 2014, Commission File Number 1-9172.
10.20* 
 
The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed by the Company on December 19, 2007, Commission File Number 1-9172.
10.21*
 
The North American Coal Corporation Value Appreciation Plan For Years 2006 to 2015 (Amended and Restated Effective January 1, 2008) is incorporated herein by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K, filed by the Company on December 19, 2007, Commission File Number 1-9172.
10.22*
 
Amendment No. 1 to The North American Coal Corporation Value Appreciation Plan for Years 2006 to 2015 (Amended and Restated Effective January 1, 2008) is incorporated herein by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, Commission File Number 1-9172.
10.23*
 
Amendment No. 2 to The North American Coal Corporation Value Appreciation Plan for Years 2006 to 2015 (Amended and Restated Effective January 1, 2008) is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on November 4, 2009, Commission File Number 1-9172.
10.24*
 
Amendment No. 1 to The North America Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, Commission File Number 1-9172.
10.25*
 
The North American Coal Corporation Annual Incentive Compensation Plan (Amended and Restated Effective March 1, 2015) is incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed by the Company on May 18, 2015, Commission File Number 1-9172.
10.26*
 
Amendment No. 3 to The North American Coal Corporation Value Appreciation Plan for Years 2006 to 2015 (Amended and Restated Effective January 1, 2008) is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on May 5, 2010, Commission File Number 1-9172.
10.27*
 
Amendment No. 4 to The North American Coal Corporation Value Appreciation Plan for Years 2006 to 2015 is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on November 12, 2010, Commission File Number 1-9172.

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Table of Contents



10.28*
 
Amendment No. 2 to The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, Commission File Number 1-9172.
10.29
 
Share and Membership Interest Purchase Agreement by and among TRU Energy Services, LLC, as Buyer, the sellers party thereto, and the trustees and beneficiaries party thereto dated as of August 31, 2012 is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on September 5, 2012, Commission File Number 1-9172.
10.30
 
Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of January 1, 1990, is incorporated herein by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+
10.31
 
First Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of June 1, 1994, is incorporated herein by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+
10.32
 
Second Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of January 1, 1997, is incorporated herein by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+
10.33
 
Option and Put Agreement by and among The North American Coal Corporation, Dakota Coal Company and the State of North Dakota, dated as of January 1, 1990, is incorporated herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.34
 
First Amendment to the Option and Put Agreement by and among The North American Coal Corporation, Dakota Coal Company and the State of North Dakota, dated as of June 1, 1994, is incorporated herein by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.35
 
Lignite Sales Agreement by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of April 1, 1998, is incorporated herein by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+
10.36
 
Pay Scale Agreement by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of September 29, 2005, is incorporated herein by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.37
 
Consent and Agreement by and among Mississippi Lignite Mining Company, Choctaw Generation Limited Partnership, SE Choctaw L.L.C. and Citibank, N.A., dated as of December 20, 2002, is incorporated herein by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.38
 
Second Restatement of Coal Sales Agreement by and between The Falkirk Mining Company and Great River Energy, dated as of January 1, 2007, is incorporated herein by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+
10.39
 
Amendment No. 1 to Second Restatement of Coal Sales Agreement, by and between The Falkirk Mining Company and Great River Energy, dated as of January 21, 2011, is incorporated herein by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.40
 
Amendment No. 2 to Second Restatement of Coal Sales Agreement, by and between The Falkirk Mining Company and Great River Energy, dated as of March 1, 2014, is incorporated herein by reference to Exhibit 10.52 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, Commission File Number 1-9172.
10.41
 
Restatement of Option Agreement by and among The Falkirk Mining Company, Cooperative Power Association, United Power Association, and the State of North Dakota, dated as of January 1, 1997, is incorporated herein by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.42
 
Third Restatement of Lignite Mining Agreement by and between The Sabine Mining Company and Southwestern Electric Power Company, dated as of January 1, 2008, is incorporated herein by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.+
10.43
 
Amendment No. 1 to Third Restatement of Lignite Mining Agreement by and between The Sabine Mining Company and Southwestern Electric Power Company, dated as of October 18, 2013 is incorporated herein by reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.

X-3

Table of Contents



10.44
 
Option Agreement by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of January 15, 1981, is incorporated herein by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.45
 
Addendum to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of January 15, 1981 is incorporated herein by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.46
 
Amendment to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of December 2, 1996, is incorporated herein by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.47
 
Second Amendment to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Regions Bank, dated as of January 1, 2008, is incorporated herein by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.48
 
Agreement by and among The North American Coal Corporation, Southwestern Electric Power Company, Texas Commerce Bank-Longview, Nortex Mining Company and The Sabine Mining Company, dated as of June 30, 1988, is incorporated herein by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.49
 
Lignite Sales Agreement between Coyote Creek Mining Company, L.L.C. and Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co. and Northwestern Corporation dated as of October 10, 2012 is incorporated herein by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K, filed by the Company on March 6, 2013, Commission File Number 1-9172.++
10.50
 
First Amendment to Lignite Sales Agreement, dated as of January 30, 2014, between Coyote Creek Mining Company, L.L.C. and Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc. and NorthWestern Corporation is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 8-K, filed by the Company on January 30, 2014, Commission File Number 1-9172.
10.51
 
Second Amendment to Lignite Sales Agreement, dated as of March 16, 2015, between Coyote Creek Mining Company, L.L.C. and Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., and NorthWestern Corporation is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on May 5, 2015, Commission File Number 1-9172.
10.52
 
Lignite Sales Agreement between Mississippi Lignite Mining Company and KMRC RH, LLC, dated as of February 28, 2013 is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on May 1, 2013, Commission File Number 1-9172.+++
10.53
 
Letter Agreement, dated January 1, 2015, between Mississippi Lignite Mining Company and KMRC RH, LLC. is incorporated herein by reference to Exhibit 10.51 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.
10.54
 
Modification and Omnibus Agreement between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of February 28, 2013 is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on May 1, 2013, Commission File Number 1-9172.
10.55*
 
Amendment No. 3 to The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed by the Company on October 1, 2013, Commission File Number 1-9172.
10.56*
 
Amendment No. 4 to The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) is incorporated herein by reference to Exhibit 10.54 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.
10.57*
 
Amendment No. 5 to The North American Coal Corporation Supplemental Retirement Benefit Plan (Amended and Restated as of January 1, 2008) **
10.58
 
Amended and Restated Credit Agreement by and among The North American Coal Corporation and the Lenders party thereto and PNC Capital Markets LLC, as Lead Arranger and Bookrunner, PNC Bank, National Association, as Administrative Agent, and KeyBank National Association and Regions Bank, as Co-Syndication Agents, dated as of November 22, 2013 is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on November 27, 2013, Commission File Number 1-9172.
10.59*
 
The North American Coal Corporation Excess Retirement Plan (Amended and Restated Effective January 1, 2014) is incorporated herein by reference to Exhibit 10.65 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, Commission File Number 1-9172.

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10.60
 
The North American Coal Corporation Excess Retirement Plan (Amended and Restated Effective January 1,
2016)**
10.61
 
Agreement, dated as of March 16, 2015, among The North American Coal Corporation, Otter Tail Power Company, Northern Municipal Power Agency, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc. and Northwestern Corporation is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed by the Company on May 5, 2015, Commission File Number 1-9172.
10.62*
 
The North American Coal Corporation Deferred Compensation Plan for Management Employees (Amended and Restated Effective January 1, 2014) is incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 8-K, filed by the Company on February 14, 2014, Commission File Number 1-9172.
10.63*
 
Consulting Agreement by and between The North American Coal Corporation and Robert L. Benson (effective July 1, 2015) is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on May 18, 2015, Commission File Number 1-9172.
10.64
 
Credit Agreement, dated as of April 29, 2010, among The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Retail Finance, LLC and the other lenders thereto is incorporated herein by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.65
 
First Amendment to Credit Agreement, dated as of August 7, 2012, among The Kitchen Collection, LLC, as successor to The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Bank, National Association, as successor to Wells Fargo Retail Finance, LLC, and the other lenders thereto is incorporated herein by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q/A, filed by the Company on March 20, 2013, Commission File Number 1-9172.
10.66
 
Second Amendment to Credit Agreement, dated as of September 19, 2014, among The Kitchen Collection, LLC, as successor to The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Bank, National Association, as successor to Wells Fargo Retail Finance, LLC, is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on September 19, 2014, Commission File Number 1-9172.
10.67
 
Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, Wells Fargo Capital Finance, LLC, as Sole Lead Arranger and Sole Lead Bookrunner, the Lenders that are Parties thereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower) and Hamilton Beach Brands Canada, Inc., (as Canadian Borrower) as Borrowers, dated as of May 31, 2012 is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on June 6, 2012, Commission File Number 1-9172.
10.68
 
Amended and Restated Guaranty and Security Agreement, dated as of May 31, 2012, among Hamilton Beach Brands, Inc. and Hamilton Beach, Inc., as Grantors, and Wells Fargo Bank, National Association, as Administrative Agent is incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed by the Company on June 6, 2012, Commission File Number 1-9172.
10.69
 
Amended and Restated Canadian Guarantee and Security Agreement, dated as of May 31, 2012, among Hamilton Beach Brands Canada, Inc., as Grantor, and Wells Fargo Bank, National Association, as Administrative Agent is incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, filed by the Company on June 6, 2012, Commission File Number 1-9172.
10.70
 
Amendment No.1 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower) and Hamilton Beach Brands Canada, Inc., (as Canadian Borrower) as Borrowers, dated as of July 29, 2014, incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on July 30, 2014, Commission File Number 1-9172.
10.71
 
Amendment No.2 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as US Borrower) and Hamilton Beach Brands Canada, Inc., (as Canadian Borrower) as Borrowers, dated as of November 20, 2014 is incorporated herein by reference to Exhibit 10.66 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.
10.72
 
Amendment No. 3 to Amended and Restated Credit Agreement by and among Wells Fargo Bank, National Association, as Administrative Agent, the Lenders that are Parties Hereto as the Lenders, Hamilton Beach Brands, Inc. (as Parent) and Weston Brands, LLC (as Weston) (collectively referred to as US Borrowers) and Hamilton Beach Brands Canada, Inc. (as Canadian Borrower) dated December 23, 2015**

10.73*
 
The Hamilton Beach Brands, Inc. 2013 Annual Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on March 27, 2013, Commission File Number 1-9172.
10.74*
 
Hamilton Beach Brands, Inc. Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2015) is incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed by the Company on May 18, 2015, Commission File Number 1-9172.

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10.75*
 
The Hamilton Beach Brands, Inc. Annual Incentive Compensation Plan (Effective January 1, 2014) is incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on May 9, 2014, Commission File Number 1-9172.
10.76*
 
The Hamilton Beach Brands, Inc. Excess Retirement Plan (As Amended and Restated Effective January 1, 2015) is incorporated herein by reference to Exhibit 10.71 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Commission File Number 1-9172.
10.77*
 
Amendment No.1 to The Hamilton Beach Brands, Inc. Excess Retirement Plan (As Amended and Restated Effective January 1, 2015)**

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Table of Contents



(21) Subsidiaries. A list of the subsidiaries of the Company is attached hereto as Exhibit 21.
(23) Consents of experts and counsel.
23.1
 
Consents of experts and counsel.
(24) Powers of Attorney.
24.1
 
A copy of a power of attorney for Scott S. Cowen is attached hereto as Exhibit 24.1.
24.2
 
A copy of a power of attorney for John P. Jumper is attached hereto as Exhibit 24.2.
24.3
 
A copy of a power of attorney for Dennis W. LaBarre is attached hereto as Exhibit 24.3.
24.4
 
A copy of a power of attorney for Richard de J. Osborne is attached hereto as Exhibit 24.4.
24.5
 
A copy of a power of attorney for James A. Ratner is attached hereto as Exhibit 24.5.
24.6
 
A copy of a power of attorney for Britton T. Taplin is attached hereto as Exhibit 24.6.
24.7
 
A copy of a power of attorney for David F. Taplin is attached hereto as Exhibit 24.7.
24.8
 
A copy of a power of attorney for David B.H. Williams is attached hereto as Exhibit 24.8.
(31) Rule 13a-14(a)/15d-14(a) Certifications.
31(i)(1) 
 
Certification of Alfred M. Rankin, Jr. pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)(1).
31(i)(2) 
 
Certification of Elizabeth I. Loveman pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act is attached hereto as Exhibit 31(i)(2).
(32)
 
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by Alfred M. Rankin, Jr. and Elizabeth I. Loveman.
(95)
 
Mine Safety Disclosure Exhibit is attached hereto as Exhibit 95.
(99)
 
Other exhibits not otherwise required to be filed. Audited Combined Financial Statements for the Unconsolidated Mines of the North American Coal Corporation, dated December 31, 2015, 2014 and 2013 with Report of Independent Registered Public Accounting Firm is attached hereto as Exhibit 99.**
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
*
 
Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item15(b) of this Annual Report on Form 10-K.
 
 
 
**
 
Filed herewith.
 
 
 
+
 
Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 and an Order from the Commission granting the Company's request for confidential treatment dated March 27, 2013. Portions for which confidential treatment has been granted have been marked with three asterisks [***] and a footnote indicating "Confidential treatment requested".
 
 
 
++
 
Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 and an Order from the Commission granting the Company's request for confidential treatment dated April 2, 2013. Portions for which confidential treatment has been granted have been marked with three asterisks [***] and a footnote indicating "Confidential treatment requested".
 
 
 
+++
 
Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 and an Order from the Commission granting the Company's request for confidential treatment dated June 17, 2013. Portions for which confidential treatment has been granted have been marked with three asterisks [***] and a footnote indicating "Confidential treatment requested".

X-7


Exhibit 4.4

AMENDMENT TO AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
This AMENDMENT TO STOCKHOLDERS’ AGREEMENT, dated as of February 16, 2016 (this “Amendment”), by and among the Depository, NACCO Industries, Inc., a Delaware corporation (the “Corporation”), the new Participating Stockholder(s) identified on the signature pages hereto (a “New Participating Stockholder”) and the Participating Stockholders under the Amended and Restated Stockholders’ Agreement, dated as of September 28, 2012 (the “Stockholders’ Agreement”), by and among the Depository, the Corporation and the Participating Stockholders. Capitalized terms defined in the Stockholders’ Agreement are used herein as so defined.
This Amendment sets forth the terms and conditions on which each New Participating Stockholder will join in and become a party to the Stockholders’ Agreement.
Pursuant to Section 8 of the Stockholders’ Agreement, prior to the acquisition of Class B Common Stock by a Permitted Transferee, the Stockholders’ Agreement may be amended to add a Permitted Transferee as a Participating Stockholder by a writing signed by the Signatories, the Corporation and such Permitted Transferee.
In consideration of the mutual promises hereinafter set forth and other good and valuable consideration had and received, the parties hereto agree as follows:
1.     Representations and Warranties . Each New Participating Stockholder represents and warrants to the other Participating Stockholders and the Corporation as follows:
(a)    The New Participating Stockholder is the beneficial owner of, or simultaneously with the execution hereof will acquire and be deemed to be the beneficial owner of, the shares of Class B Common Stock identified below such New Participating Stockholder’s name on the signature pages hereto (except as otherwise described thereon), and except as otherwise described thereon such New Participating Stockholder does not own of record or beneficially or have any interest in any other shares of Class B Common Stock or any options to purchase or rights to subscribe or otherwise acquire any other shares of Class B Common Stock other than pursuant to the Stockholders’ Agreement;
(b)    The New Participating Stockholder has the right, power and authority to execute and deliver this Amendment and to perform such New Participating Stockholder’s obligations hereunder and under the Stockholders’ Agreement; if this Amendment is being executed by a trustee on behalf of a trust, such trustee has full right, power and authority to enter into this Amendment on behalf of the trust and to bind the trust and its beneficiaries to the terms hereof; if this Amendment is being executed on behalf of a Participating Stockholder Organization, the person executing this Amendment is a duly authorized representative of such Participating Stockholder Organization with full right, power and authority to execute and deliver this Amendment on behalf of such Participating Stockholder Organization and to bind such Participating Stockholder Organization to the terms hereof; the execution, delivery and performance of this Amendment by such New Participating Stockholder will not constitute a violation of, conflict with or result in a default under (i) any contract, understanding or arrangement to which such New Participating Stockholder is a party or by which such New Participating Stockholder is bound or require the consent of any other person or any party pursuant thereto; (ii) any organizational, charter or other governance documents (including, without limitation, any partnership agreement, certificate of incorporation, or bylaws) of the New Participating Stockholder, (iii) any judgment, decree or order applicable to such New Participating Stockholder; or (iv) any law, rule or regulation of any governmental body;
(c)    This Amendment and the Stockholders’ Agreement constitute legal, valid and binding agreements on the part of such New Participating Stockholder; the shares of Class B Common Stock owned beneficially by such New Participating Stockholder are fully paid and nonassessable; and
(d)    The shares of Class B Common Stock owned beneficially by the New Participating Stockholder are now held by the New Participating Stockholder, free and clear of all adverse claims, liens, encumbrances and security





interests (except as created by the Stockholders’ Agreement and any Amendments thereto, including this Amendment, and the Restated Certificate).
2.     Address for Notices . The address for all notices to each New Participating Stockholder provided pursuant to the Stockholders’ Agreement shall be the address set forth below such New Participating Stockholder’s name on the signature pages hereto, or to such other address as such New Participating Stockholder may specify to the Depository.
3.     Agreement to be Bound by Stockholders’ Agreement . Each New Participating Stockholder agrees to be bound by all of the terms and provisions of the Stockholders’ Agreement applicable to Participating Stockholders.
4.     Beneficiaries . Each New Participating Stockholder acknowledges that the Corporation and each Participating Stockholder is a beneficiary of this Amendment.
5.     Amendment of Stockholders’ Agreement . The Stockholders’ Agreement is hereby amended to add the New Participating Stockholder as a Participating Stockholder.
6.     Signature of Amendment by Trusts, Minors and Incompetents .
(a)    In order for a trust exclusively for the benefit of a Family Member or Members (as defined in Section 1.11 of the Stockholders’ Agreement) to be considered a Participating Stockholder:
(i)    the trustee and all adult beneficiaries of such trusts having a current trust interest (as well as all Charitable Organization beneficiaries having a current trust interest) shall have previously signed the Stockholders’ Agreement or shall sign this Amendment as a Participating Stockholder;
(ii)    the trustee and a parent or legal guardian, for trusts with minor beneficiaries having a current trust interest, shall sign this Amendment on behalf of any such minor beneficiaries; or
(iii)    the trustee and legal guardian, if any, for trusts with incompetent beneficiaries having a current trust interest, shall sign this Amendment on behalf of any such incompetent beneficiaries.
(b)    If, at any time, any trust shall have an adult beneficiary (and such beneficiary is not incompetent) having a current trust interest or an ascertainable Charitable Organization beneficiary having a current trust interest and if such beneficiary has not previously signed the Stockholders’ Agreement, then if such beneficiary shall fail or be unable to sign this Amendment for a period of 30 calendar days following notification to such beneficiary of the terms of this Amendment and the Stockholders’ Agreement by the Depository and following signature of this Amendment by the trustee, the trust shall thereupon cease to be a Participating Stockholder and Section 3.2 of the Stockholders’ Agreement shall then apply as if the shares of Class B Common Stock held by the trust were then to be converted. The donor of a trust that is revocable by the donor alone, during the lifetime of such donor, shall be considered the only beneficiary thereof so long as such trust is so revocable.
(c)    In the case of Class B Common Stock held by a custodian under the Uniform Transfers to Minors Act (or the practical equivalent thereof) for the benefit of a minor Family Member, the custodian shall sign this Amendment on behalf of such minor if such minor is to be considered a Participating Stockholder.
(d)    In the case of Class B Common Stock held in the name of a minor Family Member, a parent or legal guardian of such minor shall sign this Amendment on behalf of such minor if such minor is to be considered a Participating Stockholder.
(e)    In the case of Class B Common Stock held in the name of an incompetent Family Member, the legal guardian of such incompetent shall sign this Amendment on behalf of such incompetent if such incompetent is to be considered a Participating Stockholder.





(f)    When a minor described in Section 6(c) or (d) reaches the age of majority, or an incompetent described in Section 6(e) is no longer impaired by such disability and has reached the age of majority, such Family Member shall execute and deliver an Amendment which has been executed and delivered by the Participating Stockholders (or their attorney-in-fact), the Corporation and the Depository. If such Family Member shall fail or be unable to sign such Amendment for a period of 30 calendar days following notification to such Family Member of the terms of the Stockholders’ Agreement by the Depository, such Family Member shall thereupon cease to be a Participating Stockholder and Section 3.2 of the Stockholders’ Agreement shall then apply as if the shares of Class B Common Stock were then to be converted.
7.     Power of Attorney . The undersigned New Participating Stockholder hereby constitutes and appoints Alfred M. Rankin, Jr., Dennis W. LaBarre, John D. Neumann, Jesse L. Adkins and Kimberly J. Pustulka, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and resubstitution, for the undersigned and in the name, place and stead of the undersigned, in any and all capacities to:
(a)    execute any and all statements under Section 13 or Section 16 of the Securities Exchange Act of 1934 of beneficial ownership of shares of Class B Common Stock subject to the Stockholders’ Agreement as amended by this Amendment, including all statements on Schedule 13D and all amendments thereto, all joint filing agreements pursuant to Rule 13d-1(k) under such Exchange Act in connection with such statements, all initial statements of beneficial ownership on Form 3 and any and all other documents to be filed with the Securities and Exchange Commission, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, and
(b)    execute and deliver any and all Amendments whereby a Family Member, Charitable Organization or Participating Stockholder Organization becomes a Participating Stockholder or any other amendment to the Stockholders’ Agreement in accordance with Section 8 of the Stockholders’ Agreement, other than those amendments that (i) extend the term of the Stockholders’ Agreement or (ii) amend Section 2, 3, 4 or 8 of the Stockholders’ Agreement, thereby granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and to perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them, or their substitutes or resubstitutes, may lawfully do or cause to be done by virtue of this Section 7. The grant of this power of attorney shall not be affected by any disability of such undersigned New Participating Stockholder. If applicable law requires additional or substituted language or formalities (including witnesses or acknowledgments) in order to validate the power of attorney intended to be granted by this Section 7, each New Participating Stockholder agrees to execute and deliver such additional instruments and to take such further acts as may be necessary to validate such power of attorney.
8.     Counterparts . This Amendment may be executed in multiple counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument, without production of the others.






IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

The Trust created under the Agreement, dated January 5, 1977, between PNC Bank, as Co-Trustee, Alfred M. Rankin, Jr., as Co-Trustee, for the benefit of Clara L.T. Rankin;
By: Alfred M. Rankin, Jr. as Trustee
(a new Participating Stockholder)


Name:     /s/ Alfred M. Rankin, Jr., Trustee             
Alfred M. Rankin, Jr., Trustee

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

The Trust created under the Agreement, dated January 1, 1977, between PNC Bank, as Co-Trustee, Alfred M. Rankin, Jr., as Co-Trustee, and Clara L.T. Rankin, for the benefit of Clara L.T. Rankin;
By: Alfred M. Rankin, Jr. as Trustee
(a new Participating Stockholder)


Name:     /s/ Alfred M. Rankin, Jr., Trustee             
Alfred M. Rankin, Jr., Trustee

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

Thomas E. Taplin Exempt Family Trust u/a dated January 21, 1966 and as amended, Beatrice Taplin, Trustee
By: Beatrice B. Taplin, as Trustee
(a new Participating Stockholder)


Name:     /s/ Beatrice B. Taplin, Trustee             
Beatrice B. Taplin, Trustee

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

Thomas E. Taplin Exempt Family Trust u/a dated January 21, 1966 amended, per IRC 1015(A) Dual Basis Sub-Account, Beatrice Taplin, Trustee

By: Beatrice B. Taplin, as Trustee
(a new Participating Stockholder)


Name:     /s/ Beatrice B. Taplin, Trustee             
Beatrice B. Taplin, Trustee

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

Alfred M. Rankin Jr.-Roth IRA-Brokerage Account #*****

By: Alfred M. Rankin, Jr.
(a new Participating Stockholder)


Name:     /s/ Alfred M. Rankin, Jr.                 
Alfred M. Rankin, Jr.

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

John C. Butler, Jr.-Roth IRA-Brokerage Account #*****

By: John C. Butler, Jr.
(a new Participating Stockholder)


Name:     /s/ John C. Butler, Jr.                 
John C. Butler, Jr.

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

DiAhn Taplin
(a new Participating Stockholder)


Name:     /s/ DiAhn Taplin                     
DiAhn Taplin

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Helen R. Butler
(a new Participating Stockholder)


Name:     /s/ Alfred M. Rankin, Jr., Trustee             
Alfred M. Rankin, Jr., Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Clara R. Williams
(a new Participating Stockholder)


Name:     /s/ Alfred M. Rankin, Jr., Trustee             
Alfred M. Rankin, Jr., Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for James T. Rankin
(a new Participating Stockholder)


Name:     /s/ Thomas T. Rankin, Trustee             
Thomas T. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Matthew M. Rankin
(a new Participating Stockholder)


Name:     /s/ Thomas T. Rankin, Trustee             
Thomas T. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Thomas P. Rankin
(a new Participating Stockholder)


Name:     /s/ Thomas T. Rankin, Trustee             
Thomas T. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Chloe R. Seelbach
(a new Participating Stockholder)


Name:     /s/ Claiborne R. Rankin, Trustee             
Claiborne R. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Claiborne R. Rankin, Jr.
(a new Participating Stockholder)


Name:     /s/ Claiborne R. Rankin, Trustee             
Claiborne R. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Julia R. Kuipers
(a new Participating Stockholder)


Name:     /s/ Claiborne R. Rankin, Trustee             
Claiborne R. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Anne F. Rankin
(a new Participating Stockholder)


Name:     /s/ Roger F. Rankin, Trustee             
Roger F. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

BTR 2012 GST for Elisabeth M. Rankin
(a new Participating Stockholder)


Name:     /s/ Roger F. Rankin, Trustee             
Roger F. Rankin, Trustee

Address:     5875 Landerbrook Drive, Suite 300         

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock

.36293486% interest in Rankin Associates I
(share equivalent 5,143 Class B Shares)







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

The Anne F. Rankin Trust dated August 15, 2012

By: A. Farnham Rankin, as beneficiary
(a new Participating Stockholder)


Name:     /s/ Anne F. Rankin                 
Anne F. Rankin

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock







IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

Trust created by the Agreement, dated August 20, 2009 between James T. Rankin, as Trustee, and James T. Rankin, creating a trust for the benefit of James T. Rankin
By: James T. Rankin, as Trustee
(a new Participating Stockholder)


Name:     /s/ James T. Rankin, Trustee             
James T. Rankin, Trustee

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

Thomas P.K. Rankin, Trustee of the trust created by agreement, dated February 2, 2011, as supplemented, amended and restated, between Thomas P.K. Rankin, as trustee, and Thomas P.K. Rankin, creating a trust for the benefit of Thomas P.K. Rankin
By: Thomas P.K. Rankin as Trustee
(a new Participating Stockholder)


Name:     /s/ Thomas P.K. Rankin, Trustee             
Thomas P.K. Rankin, Trustee

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

Claiborne R. Rankin Trust for children of Julia R. Kuipers dated December 27, 2013 under Custody Agreement dated December 27, 2013 fbo Evelyn R. Kuipers

By: Julia R. Kuipers, Trustee
(a new Participating Stockholder)


Name:     /s/ Julia R. Kuipers                 
Julia R. Kuipers

Address:     5875 Landerbrook Drive                 

Mayfield Heights, Ohio 44124             









Number of Shares of
Class B Common Stock








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

NACCO INDUSTRIES, INC.

By:     /s/ Alfred M. Rankin, Jr.                 
Alfred M. Rankin, Jr.,
Chairman, President, and Chief Executive Officer








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

NACCO INDUSTRIES, INC., as Depository

By:     /s/ Alfred M. Rankin, Jr.                 
Alfred M. Rankin, Jr.,
Chairman, President, and Chief Executive Officer








IN WITNESS WHEREOF, each New Participating Stockholder, the Participating Stockholders, the Corporation and the Depository have executed this Amendment or caused this Amendment to be executed in their respective names, all as of the date and year first above written.

THE PARTICIPATING STOCKHOLDERS
Listed in Exhibit A attached hereto and
incorporated herein by this reference

By:     /s/ Alfred M. Rankin, Jr.                 
Alfred M. Rankin, Jr., Attorney-in-fact



















Exhibit A

PARTICIPATING STOCKHOLDERS

1.    Clara L. T. Rankin
2.    Alfred M. Rankin, Jr.
3.    Victoire G. Rankin
4.    Helen Rankin Butler (f/k/a Helen P. Rankin)
5.    Clara T. Rankin Williams (f/k/a Clara T. Rankin)
6.    Thomas T. Rankin
7.    Matthew M. Rankin
8.    James T. Rankin
9.    Claiborne R. Rankin
10.    Chloe O. Rankin
11.    Chloe R. Seelbach (f/k/a Chloe E. Rankin)
12.    Claiborne R. Rankin, Jr.
13.    Roger F. Rankin
14.    Bruce T. Rankin
15.    Martha S. Kelly
16.    Susan Sichel
17.    Jennifer T. Jerome
18.    Caroline T. Ruschell
19.    David F. Taplin
20.    Beatrice B. Taplin
21.    Thomas E. Taplin, Jr.
22.    Theodore D. Taplin
23.    Britton T. Taplin
24.    Frank F. Taplin
25.    Rankin Management, Inc.
26.    Rankin Associates I, L.P. (f/k/a CTR Family Associates, L.P.)
27.
The Trust created under the Agreement, dated December 28, 1976, between National City Bank, as trustee, and Clara L.T. Rankin, for the benefit of grandchildren
28.
The Trust created under the Agreement, dated July 20, 2000, as supplemented, amended and restated, between Alfred M. Rankin, Jr., as trustee, and Clara T. Rankin, for the benefit of Clara T. Rankin





29.
The Trust created under the Agreement, dated September 28, 2000, as supplemented, amended and restated, between Alfred M. Rankin, Jr., as trustee, and Alfred M. Rankin, Jr., for the benefit of Alfred M. Rankin, Jr.
30.
The Trust created under the Agreement, dated September 28, 2000, as supplemented, amended and restated, between Victoire G. Rankin, as trustee, and Victoire G. Rankin, for the benefit of Victoire G. Rankin
31.
The Trust created under the Agreement, dated December 29, 1967, as supplemented, amended and restated, between Thomas T. Rankin, as trustee, and Thomas T. Rankin, creating a trust for the benefit of Thomas T. Rankin
32.
The Trust created under the Agreement, dated June 22, 1971, as supplemented, amended and restated, between Claiborne R. Rankin, as trustee, and Claiborne R. Rankin, creating a trust for the benefit of Claiborne R. Rankin
33.
The Trust created under the Agreement, dated September 11, 1973, as supplemented, amended and restated, between Roger F. Rankin, as trustee, and Roger F. Rankin, creating a trust for the benefit of Roger F. Rankin
34.
The Trust created under the Agreement, dated September 28, 2000, between Alfred M. Rankin, Jr., as trustee, and Bruce T. Rankin, for the benefit of Bruce T. Rankin
35.
The Trust created under the Agreement, dated August 26, 1974, between National City Bank, as trustee, and Thomas E. Taplin, Jr., for the benefit of Thomas E. Taplin, Jr.
36.
The Trust created under the Agreement, dated October 15, 1975, between National City Bank, as trustee, and Theodore D. Taplin, for the benefit of Theodore D. Taplin
37.
The Trust created under the Agreement, dated December 30, 1977, as supplemented, amended and restated, between National City Bank, as trustee, and Britton T. Taplin for the benefit of Britton T. Taplin
38.
The Trust created under the Agreement, dated December 29, 1989, as supplemented, amended and restated, between Alfred M. Rankin, Jr., as trustee, and Clara T. (Rankin) Williams for the benefit of Clara T. (Rankin) Williams
39.
The Trust created under the Agreement, dated December 29, 1989, as supplemented, amended and restated, between Alfred M. Rankin, Jr., as trustee, and Helen P. (Rankin) Butler for the benefit of Helen P. (Rankin) Butler
40.
Corbin Rankin
41.
Alison A. Rankin
42.
National City Bank as agent under the Agreement, dated July 16, 1969, with Margaret E. Taplin
43.
Alison A. Rankin, as trustee fbo A. Farnham Rankin under Irrevocable Trust No. 1, dated December 18, 1997, with Roger Rankin, Grantor
44.
Alison A. Rankin, as trustee fbo Elisabeth M. Rankin under Irrevocable Trust No. 1, dated December 18, 1997, with Roger Rankin, Grantor
45.
Rankin Associates II, L.P.
46.
John C. Butler, Jr.
47.
Clara Rankin Butler (by John C. Butler, Jr. as custodian)
48.
The Trust created under the Agreement, dated July 24, 1998, as amended, between Frank F. Taplin, as trustee, and Frank F. Taplin, for the benefit of Frank F. Taplin
49.
David B. H. Williams
50.
Griffin B. Butler (by John C. Butler, Jr. as Custodian)





51.
Claiborne R. Rankin as Trustee of the Claiborne R. Rankin, Jr. Revocable Trust dated August 25, 2000
52.
Alison A. Rankin as Trustee under Irrevocable Trust No. 2, dated September 11, 2000, for the benefit of A. Farnham Rankin
53.
Alison A. Rankin as Trustee under Irrevocable Trust No. 2, dated September 11, 2000, for the benefit of Elisabeth M. Rankin
54.
Alison A. Rankin as Trustee of the Alison A. Rankin Revocable Trust, dated September 11, 2000
55.
The Trust created under the Agreement, dated December 20, 1993, between Thomas T. Rankin, as co-trustee, Matthew M. Rankin, as co-trustee, and Matthew M. Rankin, for the benefit of Matthew M. Rankin
56.
Scott Seelbach
57.
Margo Jamison Victoire Williams (by Clara Rankin Williams as Custodian)
58.
Trust created under the Agreement, dated June 1, 1995, between Chloe O. Rankin, as Trustee, and Chloe O. Rankin, for the benefit of Chloe O. Rankin
59.
Trust created by the Agreement, dated June 17, 1999, between John C. Butler, Jr., as trustee, and John C. Butler, Jr., creating a trust for the benefit of John C. Butler, Jr.
60.
Clara Rankin Butler 2002 Trust, dated November 5, 2002
61.
Griffin Bedwell Butler 2002 Trust, dated November 5, 2002
62.
Elizabeth B. Rankin
63.
Margo Jamison Victoire Williams 2004 Trust created by the Agreement, dated December 10, 2004, between David B.H. Williams, as trustee, and Clara Rankin Williams, creating a trust for the benefit of Margo Jamison Victoire Williams
64.
Helen Charles Williams 2004 Trust created by the Agreement, dated December 10, 2004, between David B.H. Williams, as trustee, and Clara Rankin Williams, creating a trust for the benefit of Helen Charles Williams
65.
Helen Charles Williams (by David B.H. Williams as Custodian)
66.
Julia L. Rankin Kuipers
67.
Trust created by the Agreement, dated December 21, 2004, between Claiborne R. Rankin, as trustee, and Julia L. Rankin, creating a trust for the benefit of Julia L. Rankin
68.
Thomas Parker Rankin
69.
Taplin Elizabeth Seelbach (by Scott Seelbach as Custodian)
70.
Trust created by the Agreement, dated December 21, 2004, between Chloe R. Seelbach, as trustee, and Claiborne R. Rankin, creating a trust for the benefit of Taplin Elizabeth Seelbach
71.
Rankin Associates IV, L.P.
72.
Marital Trust created by the Agreement, dated January 21, 1966, as supplemented, amended and restated, between National City Bank and Beatrice Taplin, as Trustees, and Thomas E. Taplin, for the benefit of Beatrice B. Taplin
73.
Trust created by the Agreement, dated May 10, 2007, between Mathew M. Rankin, as Grantor, and Mathew M. Rankin and James T. Rankin, as co-trustees, for the benefit of Mary Marshall Rankin
74.
Trust created by Agreement, dated May 10, 2007, between Mathew M. Rankin, as trustee, and James T. Rankin, creating a trust for the benefit of William Alexander Rankin





75.
Trust created by the Agreement dated December 21, 2004, between Chloe R. Seelbach, as trustee, and Claiborne R. Rankin, creating a trust for the benefit of Isabelle Scott Seelbach
76.
Lynne Turman Rankin
77.
Jacob A. Kuipers
78.
Alfred M. Rankin, Jr.'s 2011 Grantor Retained Annuity Trust
79.
Alfred M. Rankin, Jr. 2012 Retained Annuity Trust
80.
2012 Chloe O. Rankin Trust
81.
2012 Corbin K. Rankin Trust
82.
2012 Alison A. Rankin Trust
83.
2012 Helen R. Butler Trust
84.
2012 Clara R. Williams Trust
85.
The David B.H. Williams Trust, David B.H. Trustee u/a/d October 14, 2009
86.
Mary Marshall Rankin (by Matthew M. Rankin, as Custodian)
87.
William Alexander Rankin (by Matthew M. Rankin, as Custodian)
88.
Margaret Pollard Rankin (by James T. Rankin, as Custodian)
89.
Trust created by the Agreement, dated April 10, 2009, between Chloe R. Seelbach, as trustee, creating a trust for the benefit of Chloe R. Seelbach
90.
Trust created by the Agreement, dated December 21, 2004, between Chloe R. Seelbach, as trustee, and Claiborne R. Rankin, creating a trust for the benefit of Thomas Wilson Seelbach
91.
Isabelle Seelbach (by Chloe R. Seelbach, as Custodian)
92.
Elisabeth M. Rankin (by Alison A. Rankin, as Custodian)
93.
A. Farnham Rankin
94.
Taplin Annuity Trust #1 of Beatrice B. Taplin dated June 18, 2011
95.
The Beatrice B. Taplin Trust/Custody dtd December 12, 2001, Beatrice B. Taplin, as Trustee, for the benefit of Beatrice B. Taplin
96.
Cory Freyer
97.
Ngaio T. Lowry Trust, dated February 26, 1998, Caroline T. Ruschell, Trustee
98.
Caroline T. Ruschell Trust Agreement dated December 8, 2005, Caroline T. Ruschell as Trustee
99.
Jennifer Dickerman
100.
The Trust created under the Agreement dated January 5, 1977 between PNC Bank as Co-Trustee, Alfred M. Rankin, Jr., as Co-Trustee, for the benefit of Clara L.T. Rankin
101.
The Trust created under the Agreement, dated January 1, 1977, between PNC Bank, as Co-Trustee, Alfred M. Rankin, Jr., as Co-Trustee, and Clara L. T. Rankin, for the benefit of Clara L. T. Rankin
102.
Thomas E. Taplin Exempt Family Trust u/a dated January 21, 1966 and as amended, Beatrice Taplin, Trustee





103.
Thomas E. Taplin Exempt Family Trust u/a dated January 21, 1966 amended, per IRC 1015(A) Dual Basis Sub-Account, Beatrice Taplin, Trustee
104.
Alfred M. Rankin Jr.-Roth IRA- Brokerage Account #*****
105.
John C. Butler, Jr.-Roth IRA- Brokerage Account #*****
106.
DiAhn Taplin
107.
BTR 2012 Trust for Helen R. Butler
108.
BTR 2012 Trust for Clara R. Williams
109.
BTR 2012 Trust for James T. Rankin
110.
BTR 2012 Trust for Matthew M. Rankin
111.
BTR 2012 Trust for Thomas P. Rankin
112.
BTR 2012 Trust for Chloe R. Seelbach
113.
BTR 2012 Trust for Claiborne R. Rankin, Jr.
114.
BTR 2012 Trust for Julia R. Kuipers
115.
BTR 2012 Trust for Anne F. Rankin
116.
BTR 2012 Trust for Elisabeth M. Rankin
117.
The Anne F. Rankin Trust dated August 15, 2012
118.
Trust created by the Agreement, dated August 20, 2009 between James T. Rankin, as Trustee, and James T. Rankin, creating a trust for the benefit of James T. Rankin
119.
Thomas P.K. Rankin, Trustee of the trust created by agreement, dated February 2, 2011, as supplemented, amended and restated, between Thomas P.K. Rankin, as trustee, and Thomas P.K. Rankin, creating a trust for the benefit of Thomas P.K. Rankin
120.
Claiborne R. Rankin Trust for children of Julia R. Kuipers dated December 27, 2013 under Custody Agreement dated December 27, 2013 fbo Evelyn R. Kuipers






Exhibit 10.57



AMENDMENT NO. 5
TO THE NORTH AMERICAN COAL CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
( As Amended and Restated as of January 1, 2008 )

The North American Coal Corporation hereby adopts this Amendment No. 5 to The North American Coal Corporation Supplemental Retirement Benefit Plan (As Amended and Restated as of January 1, 2008) (the "Plan"), to be effective immediately following the close of business on December 29, 2015. Words used herein with initial capital letters which are defined in the Plan are used herein as so defined.

Section 1

Section 3.5 is hereby amended by adding the following new Subsection (5) to the end thereof, to read as follows:

“(4) Notwithstanding the foregoing, or any other provision of the Plan to the contrary, The North American Coal Corporation shall be solely responsible for the payment of the Supplemental Retirement Benefits payable to the Participants who were employed by, or allocated to, The Falkirk Mining Company on December 29, 2015 (or, if earlier on the date of their Termination of Employment with the Controlled Group).”


Section 2

Exhibit A to the Plan is hereby amended in its entirety to read as shown in the attachment to this Amendment. [Exhibit Intentionally Omitted]


EXECUTED this 9 th day of December, 2015.


THE NORTH AMERICAN COAL CORPORATION


By: /s/ J.C. Butler, Jr.
Title: President & Chief Executive Officer


                     1



Exhibit 10.60


























THE NORTH AMERICAN COAL CORPORATION
EXCESS RETIREMENT PLAN
(AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2016)







THE NORTH AMERICAN COAL CORPORATION
EXCESS RETIREMENT PLAN
The North American Coal Corporation (the “Company”) does hereby adopt this amended and restated Excess Retirement Plan, effective January 1, 2016.

ARTICLE I.
INTRODUCTION

Section 1.01     Effective Date . The Plan was originally effective January 1, 2008. The effective date of this amendment and restatement is January 1, 2016.

Section 1.02     Purpose of the Plan . The purpose of this Plan is to provide for certain Employees the benefits they would have received under the Savings Plan but for (a) the limitations imposed under Code Sections 402(g), 401(a)(17), 401(k)(3), 401(m) and 415, (b) the deferral of Compensation under this Plan or (c) the limitations that apply to the benefits payable to certain Highly Compensation Employees.

Section 1.03     Governing Law . This Plan shall be regulated, construed and administered under the laws of the State of Texas, except when preempted by federal law.

Section 1.04     Gender and Number . For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context.

Section 1.05     Status of Plan . This document is classified as a single “plan” for purposes of recordkeeping, the Code and the requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

Section 1.06     Application of Code Section 409A.

(a)
The Excess 401(k) Sub-Accounts under the Plan are subject to the requirements of Code Section 409A. The Excess Matching Sub-Account and the Excess Profit Sharing Sub-Account are intended to be exempt from the requirements of Code Section 409A.

(b)
It is intended that the compensation arrangements under the Plan be in full compliance with the requirements of, or the exceptions to, Code Section 409A. The Plan shall be interpreted and administered in a manner to give effect to such intent. Notwithstanding the foregoing, the Employers do not guarantee to Participants or Beneficiaries any particular tax result with respect to any amounts deferred or any payments provided hereunder, including tax treatment under Code Section 409A.


                                 1




ARTICLE II.
DEFINITIONS

Except as otherwise provided in this Plan, terms defined in the Savings Plan as they may be amended from time to time shall have the same meanings when used herein, unless a different meaning is clearly required by the context of this Plan. In addition, the following words and phrases shall have the following respective meanings for purposes of this Plan.
Section 2.01     Account shall mean the record maintained in accordance with Section 3.05 by the Employer as the sum of the Participant’s Excess Retirement Benefits hereunder. The Participant’s Account shall be further divided into the Sub-Accounts described in Article III.

Section 2.02     Beneficiary shall mean the person or persons designated by the Participant as his Beneficiary under this Plan, in accordance with the provisions of Article VII hereof.

Section 2.03     Benefits Committee shall mean the NACCO Industries, Inc. Benefits Committee.

Section 2.04     Bonus shall mean any bonus under the Company’s Annual Incentive Compensation Plan or the NACCO Industries, Inc. Annual Incentive Compensation Plan that would be taken into account as Compensation under the Savings Plan, which is earned with respect to services performed by a Participant during a Plan Year (whether or not such Bonus is actually paid to the Participant during such Plan Year). An election to defer a Bonus under this Plan must be made before the period in which the services are performed which gives rise to such Bonus.

Section 2.05     Company shall mean The North American Coal Corporation or any entity that succeeds The North American Coal Corporation by merger, reorganization or otherwise.

Section 2.06     Compensation shall have the same meaning as under the Savings Plan, except that Compensation shall be deemed to include (a) the amount of compensation deferred by the Participant under this Plan and (b) amounts in excess of the limitation imposed by Code Section 401(a)(17). Notwithstanding the foregoing, the timing and crediting of Bonuses hereunder shall be as specified in Section 3.01.

Section 2.07     Compensation Committee shall mean the Compensation Committee of the Board of Directors of the Company.

Section 2.08     Employer shall mean the Company and any other Controlled Group Member that adopts the Savings Plan.

Section 2.09     Excess Retirement Benefit or Benefit shall mean an Excess Profit Sharing Benefit, an Excess 401(k) Benefit or an Excess Matching Benefit (all as described in Article III) that is payable to or with respect to a Participant under this Plan.

Section 2.10     Fixed Income Fund shall mean the Vanguard Retirement Savings Trust III investment fund under the Savings Plan or any equivalent fixed income fund thereunder which is designated by the NACCO Industries, Inc. Retirement Funds Investment Committee as the successor thereto.

Section 2.11     Key Employee . A Participant shall be classified as a Key Employee if he meets the following requirements :

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The Participant, with respect to the Participant’s relationship with the Company and the Controlled Group Members, met the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (without regard to Section 416(i)(5)) and the Treasury Regulations issued thereunder at any time during the 12-month period ending on the most recent Identification Date (defined below) and his Termination of Employment occurs during the 12-month period beginning on the most recent Effective Date (defined below). When applying the provisions of Code Section 416(i)(1)(A)(i), (ii) or (iii) for this purpose: (i) the definition of “compensation” (A) shall be as defined in Treasury Regulation Section 1.415(c)-2(d)(4) (i.e., the wages and other compensation for which the Employer is required to furnish the Employee with a Form W-2 under Code Sections 6041, 6051 and 6052, plus amounts deferred at the election of the Employee under Code Sections 125, 132(f)(4) or 401(k)) and (B) shall apply the rule of Treasury Regulation Section 1.415-2(g)(5)(ii) which excludes compensation of non-resident alien employees and (ii) the number of officers described in Code Section 416(i)(1)(A)(i) shall be 60 instead of 50.

The Identification Date for Key Employees is each December 31 st and the Effective Date is the following April 1 st . As such, any Employee who is classified as a Key Employee as of December 31 st of a particular Plan Year shall maintain such classification for the 12-month period commencing on the following April 1 st .

Notwithstanding the foregoing, a Participant shall not be classified as a Key Employee unless the stock of NACCO (or a related entity) is publicly traded on an established securities market or otherwise on the date of the Participant’s Termination of Employment.

Section 2.12     NACCO shall mean NACCO Industries, Inc.

Section 2.13     Participant .

(a)
For purposes of Sections 3.01 and 3.02 of the Plan, the term “Participant” means an Employee of an Employer who is a Participant in the Savings Plan (i) who is unable to make all of the Before-Tax and/or Roth Contributions that he has elected to make to the Savings Plan, or is unable to receive the maximum amount of Matching Contributions under the Savings Plan because of the limitations of Code Section 402(g), 401(a)(17), 401(k)(3), 401(m) or 415 or as a result of his deferral of Compensation under this Plan; (ii) who is in Hay Salary Grade 25/NA Coal Salary Grade 13 or above (Hay Salary Grade 24 or above for employees of NACCO Industries, Inc.); and (iii) whose total compensation from the Controlled Group for the year in which a deferral election is required is at least $140,000.

(b)
For purposes of Section 3.03 of the Plan, the term “Participant” means an Employee of an Employer whose Profit Sharing Contribution under the Savings Plan (A) is limited by the application of Code Section 401(a)(17) or 415, (B) is reduced due to his deferral of Compensation under this Plan or (C) is limited by the terms of the Savings Plan that apply to Highly Compensated Employees (if any).

(c)
The term “Participant” shall also include any other person who has an Account balance hereunder.

Section 2.14     Plan shall mean The North American Coal Corporation Excess Retirement Plan, as herein set forth or as duly amended.

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Section 2.15     Plan Administrator shall mean the Administrative Committee appointed under the Savings Plan.

Section 2.16     Plan Year shall mean the calendar year.

Section 2.17     Savings Plan shall mean The North American Coal Corporation Retirement Savings Plan (or any successor plan).

Section 2.18     Termination of Employment shall mean, with respect to any Participant’s relationship with the Company and the Controlled Group Members, a separation from service as defined under Code Section 409A (and the regulations and other guidance issued thereunder).

Section 2.19     Valuation Date shall mean the last business day of each calendar quarter and any other date chosen by the Plan Administrator.

ARTICLE III.
EXCESS RETIREMENT BENEFITS - CALCULATION OF AMOUNT

Section 3.01     Basic and Additional Excess 401(k) Benefits .

(a)
Amount of Excess 401(k) Benefits . Each Participant may, on or prior to each December  31 st , by completing an approved deferral election form, direct his Employer to reduce his Compensation for the next Plan Year by an amount equal to the difference between (i) a specified percentage, in 1% increments, with a maximum of 25%, of his Compensation for the Plan Year, and (ii) the maximum Before-Tax and/or Roth Contributions actually permitted to be contributed for him to the Savings Plan for such Plan Year by reason of the application of the limitations under Code Sections 402(g), 401(a)(17), 401(k)(3) and 415. All amounts deferred under this Section shall be referred to herein collectively as the “Excess 401(k) Benefits.” Notwithstanding the foregoing, a Participant’s direction to reduce a Bonus earned during a particular Plan Year shall be made no later than December 31 st of the Plan Year preceding the Plan Year in which the Bonus commences to be earned

(b)
Classification of Excess 401(k) Benefits . The Excess 401(k) Benefits for a particular Plan Year shall be calculated per pay period and shall be further divided into the “Basic Excess 401(k) Benefits” and the “Additional Excess 401(k) Benefits” as follows:

(i)
The Basic Excess 401(k) Benefits shall be determined by multiplying each Excess 401(k) Benefit by a fraction, the numerator of which is the lesser of the percentage of Compensation elected to be deferred in the deferral election form for such Plan Year or 5% and the denominator of which is the percentage of Compensation elected to be deferred; and

(ii)
The Additional Excess 401(k) Benefits (if any) shall be determined by multiplying such Excess 401(k) Benefit by a fraction, the numerator of which is the excess (if any) of (1) the percentage of Compensation elected to be deferred in the deferral election form for such Plan Year over (2) 5%, and the denominator of which is the percentage of Compensation elected to be deferred.


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(iii)
The Basic Excess 401(k) Benefits shall be credited to the Basic Excess 401(k) Sub-Account under this Plan and the Additional Excess 401(k) Benefits shall be credited to the Additional Excess 401(k) Sub-Account hereunder. The Basic and Additional Excess 401(k) Sub-Accounts shall be referred to collectively as the “Excess 401(k) Sub-Account.”

(c)
Consequences of Deferral Election . Any direction by a Participant to defer Compensation under Subsection (a) shall be effective with respect to Compensation otherwise payable to the Participant during the Plan Year for which the deferral election form is effective, and the Participant shall not be eligible to receive such Compensation. Instead, such amounts shall be credited to the Participant’s Excess 401(k) Sub-Account hereunder. Any such direction shall be irrevocable with respect to Compensation earned for such Plan Year, but shall have no effect on Compensation that is earned in subsequent Plan Years. A new deferral election will be required for each Plan Year.

Section 3.02     Excess Matching Benefits . A Participant shall have credited to his Excess Matching Sub-Account an amount equal to the Matching Contributions attributable to his Basic Excess 401(k) Benefits that he is prevented from receiving under the Savings Plan because of the limitations imposed under Code Sections 402(g), 401(a)(17), 401(k)(3), 401(m) and 415 or as a result of his deferral of Compensation under this Plan (the “Excess Matching Benefits”).

Section 3.03     Excess Profit Sharing Benefits . Each Employer shall credit to a Sub-Account (the “Excess Profit Sharing Sub-Account”) established for each Participant who is an Employee of such Employer, an amount equal to the excess, if any, of (i) the amount of the Employer’s Profit Sharing Contribution that would have been made to the Savings Plan on behalf of the Participant for a Plan Year if (1) such Plan did not contain the limitations imposed under Code Sections 401(a)(17) and 415 or any limits on the Profit Sharing Contributions provided to Highly Compensated Employees and (2) the term “Compensation” (as defined in Section 2.06 hereof) were used for purposes of determining the amount of Profit Sharing Contributions under the Savings Plan, over (ii) the amount of the Employer’s Profit Sharing Contribution that is actually made to the Savings Plan on behalf of the Participant for such Plan Year (the “Excess Profit Sharing Benefits”).

Section 3.04     Participants’ Accounts . Each Employer shall establish and maintain on its books for each Participant who is an Employee of such Employer an Account which shall contain the following entries:

(a)
Credits to a Basic or Additional Excess 401(k) Sub-Account (as applicable) for the Excess 401(k) Benefits described in Section 3.01, which shall be credited to the Sub-Account when a Participant is prevented from making a Before-Tax and/or Roth Contribution under the Savings Plan;

(b)
Credits to an Excess Matching Sub-Account for the Excess Matching Benefits described in Section 3.02, which shall be credited to the Sub-Account when a Participant is prevented from receiving Matching Contributions under the Savings Plan;

(c)
Credits to an Excess Profit Sharing Sub-Account for the Excess Profit Sharing Benefits described in Section 3.03, which shall be credited to the Sub-Account at the time the Profit Sharing Contributions are otherwise credited to Participants’ accounts under the Savings Plan;

(d)
Credits to all Sub-Accounts for the earnings and the uplift described in Article IV; and

(e)
Debits for any distributions made from the Sub-Accounts.

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Section 3.05     Statements . Participants shall be provided with statements of their Account balances at least once each Plan Year.

ARTICLE IV.
EARNINGS/UPLIFT

Section 4.01     Amount of Earnings.

Subject to Section 4.03, at the end of each calendar month during a Plan Year, the Excess 401(k) Sub-Account and the Excess Matching Sub-Account of each Participant shall be credited with an amount determined by multiplying such Participant’s average Sub-Account balance during such month by the blended rate earned during such month by the Fixed Income Fund. However, no earnings shall be credited for the month in which a Participant receives a distribution from his Sub-Account.
Section 4.02     Uplift on Plan Payments . In addition to the earnings described in Section 4.01, the balance of the Basic Excess 401(k) Sub-Account, the Excess Matching Sub-Account and the Excess Profit Sharing Sub-Account as of the last day of the month prior to the payment date shall each be increased by an additional 15%.

Section 4.03     Changes/Limitations .

(a)
The Company (with the approval or ratification of the Compensation Committee) may change (or suspend) (i) the earnings rate credited on Accounts and/or (ii) the amount of the uplift under the Plan at any time.

(b)
Notwithstanding any provision of the Plan to the contrary, in no event will earnings on Accounts for a Plan Year (excluding the uplift described in Section 4.02) be credited at a rate which exceeds 14%.

ARTICLE V.
VESTING

Section 5.01     Vesting A Participant shall always be 100% vested in the amounts credited to his Account hereunder.

ARTICLE VI.
TIME AND FORM OF PAYMENT

Section 6.01     Time and Form of Payment. All amounts credited to a Participant’s Sub-Accounts for each Plan Year (including the Excess Profit Sharing Benefits, earnings and the uplift that are credited after the end of a Plan Year) shall automatically be paid to the Participant (or his Beneficiary in the event of his death) in the form of a single lump sum payment on March 15 th of the immediately following Plan Year.

Section 6.02     Other Payment Rules and Restrictions .

(a)
Payments Violating Applicable Law. Notwithstanding any provision of the Plan to the contrary, the payment of all or any portion of the amounts payable hereunder will be deferred to the extent that the Employer reasonably anticipates that the making of such payment would violate Federal securities laws or other applicable law (provided that the making of a payment that would cause

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income taxes or penalties under the Code shall not be treated as a violation of applicable law). The deferred amount shall become payable at the earliest date at which the Employer reasonably anticipates that making the payment will not cause such violation.

(b)
Delayed Payments due to Solvency Issues . Notwithstanding any provision of the Plan to the contrary, an Employer shall not be required to make any payment hereunder to any Participant or Beneficiary if the making of the payment would jeopardize the ability of the Employer to continue as a going concern; provided that any missed payment is made during the first calendar year in which the funds of the Employer are sufficient to make the payment without jeopardizing the going concern status of the Employer.

(c)
Key Employees . Notwithstanding any provision of the Plan to the contrary, to the extent the payment of a particular Sub-Account is subject to the requirements of Code Section 409A, the distribution of such Sub-Account to Key Employees made on account of a Termination of Employment may not be made before the 1 st day of the 7 th month following such Termination of Employment (or, if earlier, the date of death) except for payments made on account of (i) a QDRO (as specified in Section 8.05) or (ii) a conflict of interest or the payment of FICA taxes (as specified in Subsection (d) below). Any Benefits that are otherwise payable to the Key Employee during the 6-month period following his Termination of Employment shall be accumulated and paid in a lump sum make-up payment within 10 days following the 1 st day of the 7 th month following Termination of Employment.

(d)
Acceleration of Payments . Notwithstanding any provision of the Plan to the contrary, to the extent the payment of a particular Sub-Account is subject to the requirements of Code Section 409A, the payment of such Sub-Account may be accelerated (i) to the extent necessary to comply with federal, state, local or foreign ethics or conflicts of interest laws or agreements or (ii) to the extent necessary to pay the FICA taxes imposed on Benefits hereunder under Code Section 3101, and the income withholding taxes related thereto. Payments may also be accelerated if the Plan (or a portion thereof) fails to satisfy the requirements of, or the exceptions to, Code Section 409A; provided that the amount of such payment from any Sub-Account that is subject to the requirements of Code Section 409A may not exceed the amount required to be included as income as a result of the failure to comply with Code Section 409A.

Section 6.03     Liability for Payment/Expenses . The Employer by which the Participant was last employed prior to his payment date under the Plan shall process and pay all Excess Retirement Benefits hereunder to or on behalf of such Participant, but such Employer’s liability shall be limited to its proportionate share of such amount, as hereinafter provided. If the Excess Retirement Benefits payable to or on behalf of a Participant are based on the Participant’s employment with more than one Employer, the liability for such Benefits shall be shared by all such Employers (by reimbursement to the Employer making such payment) as may be agreed to among them in good faith (taking into consideration the Participant’s service and Compensation paid by each such Employer) and as will permit the deduction (for purposes of federal income tax) by each such Employer of its portion of the payments made and to be made hereunder. Expenses of administering the Plan shall be paid by the Employers, as directed by the Company.

Section 6.04     Withholding/Taxes . To the extent required by applicable law, the Employers shall withhold from the Excess Retirement Benefits hereunder any income, employment or other taxes required to be withheld there from by any government or government agency.


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ARTICLE VII.
BENEFICIARIES

Section 7.01     Beneficiary Designations . A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable to the Plan Administrator) signed by the Participant and filed with and received by the Plan Administrator prior to the Participant’s death. A single Beneficiary designation must be made for the Participant’s entire Account hereunder. In the absence of such a designation and at any other time when there is no existing Beneficiary designated hereunder, the Beneficiary of a Participant for his Excess Retirement Benefits shall be (1) his surviving spouse or, if none (2) the Participant’s estate.. If two or more persons designated as a Participant’s Beneficiary are in existence with respect to a single Sub-Account, the amount of any payment to the Beneficiary under this Plan shall be divided equally among such persons unless the Participant’s designation specifically provides for a different allocation. Any change in Beneficiary shall be made by giving written notice thereof to the Plan Administrator and any change shall be effective only if received by the Plan Administrator prior to the death of the Participant.

Section 7.02     Distributions to Beneficiaries . The Excess Retirement Benefit payable to a Participant’s Beneficiary under this Plan shall be equal to the balance in the applicable Sub-Account on the date of the distribution of the Account to the Beneficiary. Excess Retirement Benefits payable to a Beneficiary shall be paid in the form of a lump sum payment on the date such Benefits would otherwise be paid to the Participant under Article VI.

ARTICLE VIII.
MISCELLANEOUS

Section 8.01     Liability of Employers . Nothing in this Plan shall constitute the creation of a trust or other fiduciary relationship between an Employer and any Participant, Beneficiary or any other person.

Section 8.02     Limitation on Rights of Participants and Beneficiaries ‑ No Lien . The Plan is designed to be an unfunded, nonqualified plan. Nothing contained herein shall be deemed to create a trust or lien in favor of any Participant or Beneficiary on any assets of an Employer. The Employers shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Employers for use in connection with the Plan. No Participant or Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of an Employer prior to the time that such assets are paid to the Participant or Beneficiary as provided herein. Each Participant and Beneficiary shall have the status of a general unsecured creditor of his Employer.

Section 8.03     No Guarantee of Employment . Nothing in this Plan shall be construed as guaranteeing future employment to Participants. A Participant continues to be an Employee of the Employers solely at the will of the Employers subject to discharge at any time, with or without cause.

Section 8.04     Payment to Guardian . If a Benefit payable hereunder is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Plan Administrator may direct payment of such Benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Plan Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Benefit. Such distribution shall completely discharge the Employers from all liability with respect to such Benefit.


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Section 8.05     Anti-Assignment/Early Payment in the Event of a QDRO .

(a)
Subject to Subsection (b), no right or interest under this Plan of any Participant or Beneficiary shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of the Participant or Beneficiary.

(b)
Notwithstanding the foregoing, the Plan Administrator shall honor a qualified domestic relations order (“QDRO”) from a state domestic relations court which requires the payment of all or a part of a Participant’s or Beneficiary’s Account under this Plan to an “alternate payee” as defined in Code Section 414(p).

Section 8.06     Severability . If any provision of this Plan or the application thereof to any circumstance(s) or person(s) is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby.

Section 8.07     Effect on other Benefits . Benefits payable to or with respect to a Participant under the Savings Plan or any other Employer-sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under this Plan.

ARTICLE VII.
ADMINISTRATION OF PLAN

Section 9.01     Administration . The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have the discretion to interpret where necessary all provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Participants, or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a person is a Participant, and (ii) to determine if a person is entitled to Excess Retirement Benefits hereunder and, if so, the amount and duration of such Benefits. The Plan Administrator’s determination of the rights of any person hereunder shall be final and binding on all persons, subject only to the provisions of Sections 9.03 and 9.04 hereof. The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Excess Retirement Benefits, to a named administrator or administrators. Pursuant to this delegation power, the Company has appointed the Administrative Committee under the Savings Plan (as it exists from time to time) as the Plan Administrator of this Plan.

Section 9.02     Regulations . The Plan Administrator shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. The rules, regulations and interpretations made by the Plan Administrator shall, subject to the provisions of Sections 9.03 and 9.04 hereof, be final and binding on all persons.

Section 9.03     Claims and Appeals Procedures .


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(a)
The Plan Administrator shall determine the rights of any person to any Excess Retirement Benefits hereunder. Any person who believes that he has not received the Excess Retirement Benefits to which he is entitled under the Plan must file a claim in writing with the Plan Administrator specifying the basis for his claim and the facts upon which he relies in making such a claim. Such a claim must be signed by the claimant or his duly authorized representative (the “Claimant”).

(b)
Whenever the Plan Administrator denies (in whole or in part) a claim for benefits under the Plan, the Plan Administrator shall transmit a written notice of such decision to the Claimant, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90 day period). Such notice shall be written in a manner calculated to be understood by the Claimant and shall state (i) the specific reasons for the denial; (ii) specific reference to pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Plan’s claim review procedure. and the time limits applicable thereto (including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

(c)
Within 60 days after receipt of denial of a claim, the Claimant must file with the Plan Administrator a written request for a review of such claim. If such an appeal is not filed within such 60-day period, the Claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his claim. If such an appeal is so filed within such 60 day period, a named fiduciary designated by the Plan Administrator shall conduct a full and fair review of such claim. During such review, the Claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. For this purpose, the named fiduciary shall have the same power to interpret the Plan and make findings of fact thereunder as is given to the Plan Administrator under Section 9.01 above. The named fiduciary shall mail or deliver to the Claimant a written decision on the matter based on the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the Claimant prior to the commencement of such extension). Such decision (i) shall be written in a manner calculated to be understood by the Claimant, (ii) shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and (iii) shall, to the extent permitted by applicable law, be final and binding on all interested persons. In addition, the notice of adverse determination shall also include statements that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records and other information relevant to the Claimant’s claim for benefits and a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.

Section 9.04     Revocability of Action/Adjustment . Any action taken by the Plan Administrator or an Employer with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the Employer as to payments not yet made to such person. In addition, the acceptance of any Excess Retirement Benefits under the Plan constitutes acceptance of and agreement to the Plan Administrator’s or the Employer’s making any appropriate adjustments in future payments to they payee (or to recover from such person) any excess payment or underpayment previously made to him.

Section 9.05     Amendment . The Company (with the approval or ratification of the NACCO Industries, Inc. Benefits Committee) may at any time (without the consent of an Employer) authorize the amendment

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of any or all of the provisions of this Plan, except that without the prior written consent of the affected Participant, no such amendment (a) may reduce the amount of any Participant’s Excess Retirement Benefit as of the date of such amendment or (b) may alter the time of payment provisions described in Article VI hereof, except for amendments (i) that are required to bring such provisions into compliance with the requirements of (or exceptions to) Code Section 409A or (ii) that accelerate the time of payment (in a manner permitted by Code Section 409A but solely with respect to those Sub-Accounts that are subject to the requirements of Code Section 409A). Any amendment shall be in the form of a written instrument executed by an officer of the Company. Subject to the foregoing provisions of this Section, such amendment shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution.


Section 9.06     Termination .

(a)
The Company, in its sole discretion, may terminate this Plan (or any portion thereof) at any time and for any reason whatsoever, except that, without the prior written consent of the affected Participant, no such amendment may (i) reduce the amount of any Participant’s Excess Retirement Benefit as of the date of such amendment or (b) alter the time of payment provisions described in Article VI hereof, except for a termination that accelerates the time of payment (in a manner permitted by Code Section 409A but solely with respect to those Sub-Accounts that are subject to the requirements of Code Section 409A). Any such termination shall be expressed in the form of a written instrument executed by an officer of the Company with the approval or ratification of the Compensation Committee. Such termination shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Written notice of any termination shall be given to the Participants at a time determined by the Plan Administrator.

(b)
An Employer that withdrawals from participation in the Savings Plan shall be deemed to automatically withdraw from participation in this Plan. Any Employer (other than the Company) may elect to separately withdraw from this Plan and such withdrawal shall constitute a termination of the Plan as to such Employer. Such separate withdrawal shall be expressed in an instrument executed by an authorized officer of the terminating Employer and filed with the Company, and shall become effective as of the date designated in such instrument or, if no such date is specified, on the date of its execution. Any withdrawing Employer shall continue to be an Employer for the purposes hereof as to Participants or Beneficiaries to whom it owes obligations hereunder. If an Employer (other than the Company) ceases to be a member of the Controlled Group, unless other action is taken by the NACCO Benefits Committee (in compliance with the requirements of Code Section 409A, to the extent applicable), the Sub-Accounts of the Employees of such Employer shall be paid as specified in Article VI hereof.


EXECUTED this 9 th day of December, 2015.

THE NORTH AMERICAN COAL CORPORATION


By: /s/ J.C. Butler, Jr.
Title: President & Chief Executive Officer



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Exhibit 10.72


AMENDMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT NO. 3 TO AMENDED AND RESTATED CREDIT Agreement, dated December 23, 2015 (this “Amendment No. 3”), is by and among Wells Fargo Bank, National Association, in its capacity as agent pursuant to the Credit Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, “Agent”), the parties to the Credit Agreement as lenders (individually, each a “Lender” and collectively, “Lenders”), Hamilton Beach Brands, Inc., formerly known as Hamilton Beach/Proctor-Silex Inc., a Delaware corporation (“Parent”), Weston Brands, LLC, an Ohio limited liability company, (“Weston” and together with Parent, each individually, a “US Borrower” and, collectively, “US Borrowers”) and Hamilton Beach Brands Canada, Inc., formerly known as Proctor-Silex Canada Inc., an Ontario corporation (“Hamilton Brands Canada” or “Canadian Borrower”, and together with US Borrowers, each individually, a “Borrower” and, collectively, “Borrowers”).
W I T N E S S E T H :
WHEREAS, Agent, Lenders and Borrowers have entered into financing arrangements pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in the Amended and Restated Credit Agreement, dated as of May 31, 2012, by and among Agent, Lenders and Borrowers, as amended by Amendment No. 1 to Amended and Restated Credit Agreement, dated July 29, 2014 and Amendment No. 2 to Amended and Restated Credit Agreement, dated November 20, 2014 (as the same now exists and is amended and supplemented pursuant hereto and may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Credit Agreement”) and the other Loan Documents;
WHEREAS, Borrowers have requested that Lender permit Parent to enter into an arrangement with Wells Fargo Bank, National Association (“Receivables Purchaser” as hereinafter further defined) under which Parent will sell the receivables to Receivables Purchaser at a discount arising from the sale of goods by Parent to Wal-Mart under the Receivables Purchase Agreement (as hereinafter defined);
WHEREAS, Borrowers have requested that Agent and Lenders agree to the foregoing arrangement and Agent and Lenders are willing to agree to the foregoing arrangements, subject to the terms and conditions contained herein; and
WHEREAS, by this Amendment No. 3, Agent, Lenders and Borrowers desire and intend to evidence such agreement pursuant to the amendments set forth herein;
NOW THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


1



1. Definitions .

(a) Additional Definition . As used herein, in the Credit Agreement or in any of the other Loan Documents, the following terms shall have the meanings given to them below, and the Credit Agreement and the other Loan Documents shall be deemed and are hereby amended to include, in addition and not in limitation, the following definitions:
(i) Amendment No. 3 ” shall mean Amendment No. 3 to Amended and Restated Credit Agreement, dated December __, 2015, by and among Agent, Lenders and Borrowers, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, and the Credit Agreement and the other Loan Documents shall be deemed and are hereby amended to include, in addition and not in limitation, such definition.
(ii) Receivables Purchase Agreement ” shall mean the Receivables Purchase Agreement, dated on or about the date of Amendment No. 3, between Receivables Purchaser and Parent, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
(iii) Receivables Purchase Agreements ” shall mean, collectively (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (A) the Receivables Purchase Agreement; (B) the Wal-Mart Intercreditor Agreement; and (C) the other agreements, documents and instruments executed and/or delivered in connection with the foregoing items in (A) or (B).
(iv) Receivables Purchaser ” shall mean Wells Fargo Bank, National Association, in its individual capacity, as the purchaser of the Purchased Assets (as defined in the Wal-Mart Intercreditor Agreement) and under the Receivables Purchase Agreement.
(v) Wal-Mart ” shall mean, collectively, together with their successors and assigns, Wal-Mart Stores, Inc., a Delaware corporation, Sam’s West, Inc., an Arkansas corporation and their Affiliates.
(vi) Wal-Mart Intercreditor Agreement ” shall mean the Consent to Sale of Receivables, dated as of the date hereof, among Agent, Borrower and Receivables Purchaser, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
(vii) Wal-Mart Receivables ” shall mean any and all Accounts of any Borrower with respect to which Wal-Mart is the account debtor arising from the sale by any Borrower of goods and services to Wal-Mart, together with the Purchased Assets (as defined in the Wal-Mart Intercreditor Agreement), and with respect to each of the foregoing, all proceeds thereof.
(b) Amendments to Definitions .
(i) The definition of “ Eligible Accounts ” set forth in the Credit Agreement is hereby amended by deleting the first sentence thereof and replacing it with the following:
“ ‘ Eligible Accounts ’ means those Accounts created by a Borrower (other than the Wal-Mart Receivables until such time that Agent has determined that (x) the Receivables Purchase Agreements have been terminated and are no longer in force and affect and the Wal-Mart Receivables are no longer subject to their terms and (y) the Receivables Purchaser has released, and the Wal-Mart Receivables are free and clear of, all of its security interests, liens and other interests in and to the Wal-Mart Receivables) in the ordinary course of its business, that arise out of a Borrower’s sale of goods or rendition of services, that comply with each of the representations

2



and warranties respecting Eligible Accounts made in the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the excluding criteria set forth below; provided , that such criteria may be revised from time to time by Agent in Agent’s Permitted Discretion to address the results of any field examination performed by (or on behalf of) Agent from time to time after the Closing Date. In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits, unapplied cash, taxes, discounts, credits, allowances, and rebates.”
(ii) The definition of “ Permitted Dispositions ” is hereby amended by (A) deleting the reference to “and” at the end of clause (u) therein, (B) deleting the period at the end of clause (v) therein and (C) adding the following new clause (w) at the end thereof:
“(w) sales of Wal-Mart Receivables by Parent to Receivables Purchaser in accordance with the terms and conditions of the Receivables Purchase Agreements (as in effect on December __, 2015) so long as the following terms and conditions are satisfied as determined by Agent: (i) the sale or transfer of the Wal-Mart Receivables to Receivables Purchaser shall be without any recourse, offset or claim of any kind or nature to or against Borrowers, Agent or Lenders; (ii) Agent shall have received, in form and substance satisfactory to Agent, (A) a true, correct and complete copy of all of the Receivables Purchase Agreements, duly authorized, executed and delivered by Receivables Purchaser and Parent and (B) the Wal-Mart Intercreditor Agreement, duly authorized, executed and delivered by Receivables Purchaser and Parent; (iii) further sales of the Wal-Mart Receivables will cease upon a written notice by Agent to Parent of a Default or Event of Default; (iv) Parent shall not, directly or indirectly, amend, modify, alter or change any terms of the Receivables Purchase Agreements; and (v) Parent shall furnish to Lender all notices or demands (if any) in connection with the arrangements made pursuant to the Receivables Purchase Agreements either received by Parent or any Guarantor or on its or their behalf, promptly after receipt thereof, or sent by Borrower or any other Borrower or Guarantor of its affiliates or on its or their behalf, concurrently with the sending thereof, as the case may be.”
(iii) The definition of “ Permitted Liens ” is hereby amended by (A) deleting the reference to “and” at the end of clause (r) therein, (B) deleting the period at the end of clause (s) therein and (C) adding the following new clause (t) at the end thereof:
“(t) security interests in the Wal-Mart Receivables in favor of Receivables Purchaser pursuant to the sales of Wal-Mart Receivables under the Receivables Purchase Agreements to the extent provided in and in accordance with the terms and conditions of clause (w) of the definition of Permitted Dispositions.“
(c) Interpretation . For purposes of this Amendment No. 3, all terms used herein which are not otherwise defined herein, including but not limited to, those terms used in the recitals hereto, shall have the respective meanings assigned thereto in the Credit Agreement as amended by this Amendment No. 3.

2. Representations and Warranties . Borrowers, jointly and severally, represent and warrant with and to Agent and Lenders as follows, which representations and warranties shall survive the execution and delivery hereof, the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Loan Documents, being a continuing condition of

3



the making of Loans and providing Letters of Credit to Borrowers:
(a) no Default or Event of Default exists or has occurred and is continuing as of the date of this Amendment No. 3;
(b) this Amendment No. 3 and each other agreement to be executed and delivered by Borrowers in connection herewith (together with this Amendment No. 3, the “Amendment Documents”) has been duly authorized, executed and delivered by all necessary corporate or organizational action on the part of each Borrower which is a party and is in full force and effect as of the date hereof, as the case may be, and the agreements and obligations of each of the Borrowers, as the case may be, contained herein and therein constitute legal, valid and binding obligations of each of the Borrowers, enforceable against them in accordance with their terms, except as enforceability is limited by equitable principals or by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights generally;
(c) the execution, delivery and performance of this Amendment No. 3 and the other Amendment Documents (i) are all within each Borrower’s corporate powers and (ii) are not in contravention of law or the terms of any Borrower’s certificate of incorporation, bylaws, or other organizational documentation, or any material indenture, agreement or undertaking to which any Borrower is a party or by which any Borrower or its property are bound which such contravention could individually or in the aggregate reasonably be expected to have a Material Adverse Effect; and
(d) all of the representations and warranties set forth in the Credit Agreement and the other Loan Documents, each as amended hereby, are true and correct in all material respects on and as of the date hereof, as if made on the date hereof, except to the extent any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct as of such date.

3. Conditions Precedent . The amendments contained herein shall only be effective upon the satisfaction of each of the following conditions precedent in a manner reasonably satisfactory to Agent:
(a) Agent shall have received counterparts of this Amendment No. 3, duly authorized, executed and delivered by Borrowers;
(b) Agent shall have received the consent or authorization from such Lenders as are required for the amendments provided for herein to execute this Amendment No. 3 on behalf of the Lenders;
(c) Agent shall have received, in form and substance satisfactory to Agent, an executed copy of the Wal-Mart Intercreditor Agreement, duly authorized, executed and delivered by the parties thereto;
(d) Agent shall have received, in form and substance satisfactory to Agent, copies of each of the Receivables Purchase Agreements, duly authorized, executed and delivered by the parties thereto;
(e) Agent shall have received a true and correct copy of each consent, waiver or approval (if any) to or of this Amendment No. 3, which any Borrower is required to obtain from any other Person, and such consent, approval or waiver (if any) shall be in form and substance reasonably satisfactory to Agent; and
(f) No Default or Event of Default shall exist or have occurred and be continuing.



4



4. Effect of this Amendment . Except as expressly set forth herein, no other amendments, changes or modifications to the Loan Documents are intended or implied, and in all other respects the Loan Documents are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof and Borrowers shall not be entitled to any other or further amendment by virtue of the provisions of this Amendment No. 3 or with respect to the subject matter of this Amendment No. 3. To the extent of conflict between the terms of this Amendment No. 3 and the other Loan Documents, the terms of this Amendment No. 3 shall control. The Credit Agreement and this Amendment No. 3 shall be read and construed as one agreement.

5. Governing Law . The validity, interpretation and enforcement of this Amendment No. 3 and any dispute arising out of the relationship between the parties hereto whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

6. Binding Effect . This Amendment No. 3 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

7. Further Assurances . Borrowers shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent to effectuate the provisions and purposes of this Amendment No. 3.

8. Entire Agreement . This Amendment No. 3 represents the entire agreement and understanding concerning the subject matter hereof among the parties hereto, and supersedes all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written.

9. Headings . The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 3.

10. Counterparts . This Amendment No. 3 may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment No. 3 by telefacsimile or other electronic method of transmission shall have the same force and effect as delivery of an original executed counterpart of this Amendment No. 3. Any party delivering an executed counterpart of this Amendment No. 3 by telefacsimile or other electronic method of transmission shall also deliver an original executed counterpart of this Amendment No. 3, but the failure to do so shall not affect the validity, enforceability, and binding effect of this Amendment No. 3.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

    

5



IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly executed and delivered by their authorized officers as of the day and year first above written.
 
US BORROWERS
HAMILTON BEACH BRANDS, INC.

By:  /s/ James H. Taylor    

Title: Vice President & Chief Financial Officer

WESTON BRANDS, LLC

By:  /s/ James H. Taylor    

Title: Vice President & Chief Financial Officer


CANADIAN BORROWER

HAMILTON BEACH BRANDS CANADA, INC.

By:  /s/ James H. Taylor    

Title: Vice President & Chief Financial Officer


6



AGENT AND LENDERS
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Agent and a Lender
By: /s/ Sangh H. Kim

Title: Authorized Signatory

WELLS FARGO CAPITAL FINANCE
CORPORATION CANADA, as a Lender
By: /s/ Raymond Eghobamien

Title: Vice President

BANK OF AMERICA, N.A., as a Lender
By: /s/ Kenneth B. Butler

Title: Senior Vice President     

KEYBANK, NATIONAL ASSOCIATION, as a Lender
By: /s/ Nadine M. Eames

Title: Vice President
            



7



Exhibit 10.77


AMENDMENT NO. 1
TO THE HAMILTON BEACH BRANDS, INC.
EXCESS RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2015)
Hamilton Beach Brands, Inc. hereby adopts this Amendment No. 1 to the Hamilton Beach Brands, Inc. Excess Retirement Plan (Effective January 1, 2015), effective January 1, 2016. Words and phrases used herein with initial capital letters that are defined in the Plan are used herein as so defined.
Section 1
Section 4.3(a) of the Plan is hereby amended in its entirety to read as follows:
“(a) The Company (without the consent of any Employer but with the approval or ratification of the Compensation Committee) may change (or suspend) (i) the interest rate credited to Sub-Accounts hereunder and/or (ii) the amount of the uplift credited to Sub-Accounts hereunder.”
Section 3
The first clause of the first sentence of Section 9.5 of the Plan is hereby amended to read as follows:
“The Company (without the consent of any Employer but with the approval or ratification of the NACCO Industries, Inc. Benefits Committee) may at any time amend any or all of the provisions of this Plan,”.

EXECUTED this 20th day of November, 2015.

HAMILTON BEACH BRANDS, INC.


/s/ J.C. Butler, Jr.
By: J.C. Butler, Jr.
Title: Assistant Secretary


1


Exhibit 21

SUBSIDIARIES OF NACCO INDUSTRIES, INC.

The following is a list of active subsidiaries as of the date of the filing with the Securities and Exchange Commission of the Annual Report on Form 10‑K to which this is an Exhibit. Except as noted, all of these subsidiaries are wholly owned, directly or indirectly.
Name
Incorporation
 
 
Altoona Services, Inc.
Pennsylvania
America Lignite Energy LLC
Delaware (50%)
Bellaire Corporation
Ohio
Bisti Fuels Company, LLC
Nevada
C&H Mining Company, Inc.
Alabama
Caddo Creek Resources Company, LLC
Nevada
Camino Real Fuels, LLC
Nevada
Centennial Natural Resources, LLC
Nevada
Coyote Creek Mining Company, LLC
Nevada
Demery Resources Company, LLC
Nevada
The Coteau Properties Company
Ohio
The Falkirk Mining Company
Ohio
GRENAC, LLC
Delaware (50%)
Grupo HB/PS, S.A. de C.V.
Mexico
Hamilton Beach Brands Canada, Inc.
Ontario (Canada)
Hamilton Beach Brands Do Brasil Comercializacao de Produtos Electricos Ltda
Brazil (99.5%)
Hamilton Beach Brands de Mexico, S.A. de C.V.
Mexico
Hamilton Beach Brands, Inc.
Delaware
Hamilton Beach Brands, (HK) Limited
Hong Kong (PRC)
Hamilton Beach Electrical Appliances (Shenzhen) Company Limited
China
Hamilton Beach, Inc.
Delaware
Housewares Holding Co.
Delaware
The Kitchen Collection, LLC
Ohio
Liberty Fuels Company, LLC
Nevada
Mississippi Lignite Mining Company
Texas
NoDak Energy Investments Corporation
Nevada
NoDak Energy Services, LLC
Delaware
The North American Coal Corporation
Delaware
North American Coal Corporation India Private Limited
India
North American Coal Royalty Company
Delaware
Otter Creek Mining Company LLC
Nevada
Red Hills Property Company LLC
Mississippi
The Sabine Mining Company
Nevada
TRU Global Energy Services, LLC
Delaware
TRU Energy Services, LLC
Nevada
Reed Hauling, Inc.
Alabama
Reed Minerals, Inc.
Alabama
Weston Brands, LLC
Ohio





Exhibit 23.1

Consent of the Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:
(1)
Registration Statement (Form S-8 No. 33-3422) pertaining to the 1975 and 1981 Stock Option Plans and Stock Appreciation Rights Plan,
(2)
Registration Statement (Form S-8 No. 333-139268) pertaining to the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan,
(3)
Registration Statement (Form S-8 No. 333-166944) pertaining to the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan, and
(4)
Registration Statement (Form S-8 No. 333-183242) pertaining to the NACCO Industries, Inc. Supplemental Executive Long-Term Incentive Compensation Plan;

of our reports dated March 2, 2016 , with respect to the consolidated financial statements and schedules of NACCO Industries, Inc. and Subsidiaries, and the effectiveness of internal control over financial reporting of NACCO Industries, Inc. and Subsidiaries, and of our report dated March 2, 2016 , with respect to the Combined Financial Statements of The Unconsolidated Mines of the North American Coal Corporation, included in this Annual Report (Form 10-K) of NACCO Industries, Inc. for the year ended December 31, 2015 .
 
 
 
/s/ Ernst & Young LLP
Cleveland, Ohio
 
 
 
March 2, 2016
 
 
 






Exhibit 24.1
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Scott S. Cowen
 
February 11, 2016
 
Scott S. Cowen
 
Date
 





Exhibit 24.2
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ John P. Jumper
 
February 12, 2016
 
John P. Jumper
 
Date
 





Exhibit 24.3
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Dennis W. LaBarre
 
February 12, 2016
 
Dennis W. LaBarre
 
Date
 





Exhibit 24.4
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Richard de J. Osborne
 
February 12, 2016
 
Richard de J. Osborne
 
Date
 





Exhibit 24.5
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ James A. Ratner
 
February 12, 2016
 
James A. Ratner
 
Date
 






Exhibit 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Britton T. Taplin
 
February 12, 2016
 
Britton T. Taplin
 
Date
 





Exhibit 24.7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ David F. Taplin
 
February 12, 2016
 
David F. Taplin
 
Date
 






Exhibit 24.8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of NACCO Industries, Inc. hereby appoints Elizabeth I. Loveman as the true and lawful attorney or attorney-in-fact, with full power of substitution and revocation, for the undersigned and in the name, place and stead of the undersigned, to sign on behalf of the undersigned as director of NACCO Industries, Inc., a Delaware corporation , an Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2015 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to said attorney or attorney-in-fact full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorney-in-fact substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ David B. H. Williams
 
February 12, 2016
 
David B. H. Williams
 
Date
 






Exhibit 31(i)(1)
Certifications
I, Alfred M. Rankin, Jr., certify that:
1.
I have reviewed this annual report on Form 10-K of NACCO Industries, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
March 2, 2016
 
/s/ Alfred M. Rankin, Jr.
 
 
 
 
Alfred M. Rankin, Jr.
 
 
 
 
Chairman, President and Chief Executive Officer
(principal executive officer)
 





Exhibit 31(i)(2)
Certifications
I, Elizabeth I. Loveman, certify that:
1.
I have reviewed this annual report on Form 10-K of NACCO Industries, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected , or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
March 2, 2016
 
/s/ Elizabeth I. Loveman
 
 
 
 
Elizabeth I. Loveman
 
 
 
 
Vice President and Controller
(principal financial officer)
 





Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of NACCO Industries, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
Date:
March 2, 2016
 
/s/ Alfred M. Rankin, Jr.
 
 
 
 
Alfred M. Rankin, Jr.
 
 
 
 
Chairman, President and Chief Executive Officer
(principal executive officer)
 
Date:
March 2, 2016
 
/s/ Elizabeth I. Loveman
 
 
 
 
Elizabeth I. Loveman
 
 
 
 
Vice President and Controller
(principal financial officer)
 





Exhibit 95

MINE SAFETY DISCLOSURES

NACCO Industries, Inc. and its wholly owned subsidiaries (the “Company”) believes that The North American Coal Corporation and its affiliated mining companies (collectively, “NACoal”) is an industry leader in safety. NACoal has health and safety programs in place that include extensive employee training, accident prevention, workplace inspection, emergency response, accident investigation, regulatory compliance and program auditing. The objectives for NACoal's programs are to eliminate workplace incidents, comply with all mining-related regulations and provide support for both regulators and the industry to improve mine safety.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, each operator of a coal or other mine is required to include certain mine safety results in its periodic reports filed with the Securities and Exchange Commission. The operation of NACoal's mines is subject to regulation by the Federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). MSHA inspects NACoal's mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. The Company has presented information below regarding certain mining safety and health matters for NACoal's mining operations for the year ended December 31, 2015. In evaluating this information, consideration should be given to factors such as: (i) the number of citations and orders will vary depending on the size of the mine, (ii) the number of citations issued will vary from inspector to inspector and from mine to mine, and (iii) citations and orders can be contested and appealed, and in that process, are often reduced in severity and amount, and are sometimes vacated.

During the year ended December 31, 2015, neither NACoal's current mining operations nor Bellaire's closed mines: (i) were assessed any Mine Act section 104(b) orders for alleged failure to totally abate the subject matter of a Mine Act section 104(a) citation within the period specified in the citation; (ii) were assessed any Mine Act section 104(d) citations or orders for an alleged unwarrantable failure (i.e., aggravated conduct constituting more than ordinary negligence) to comply with a mining safety standard or regulation; (iii) were assessed any Mine Act section 110(b)(2) penalties for failure to correct the subject matter of a Mine Act section 104(a) citation within the specified time period, which failure was deemed flagrant (i.e., reckless or repeated failure to make reasonable efforts to eliminate a known violation that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury); (iv) received any Mine Act section 107(a) imminent danger orders to immediately remove miners; or (v) received any MSHA written notices under Mine Act section 104(e) of a pattern of violation of mandatory health or safety standards or of the potential to have such a pattern. In addition, there were no mining-related fatalities at NACoal's mining operations or Bellaire's closed mines during the year ended December 31, 2015.







The following table sets forth the total number of specific citations and orders, the total dollar value of the proposed civil penalty assessments that were issued by MSHA, the total number of legal actions initiated and resolved before the Federal Mine Safety and Health Review Commission ("FMSHRC") during the year ended December 31, 2015, and the total number of legal actions pending before the FMSHRC at December 31, 2015, pursuant to the Mine Act, by individual mine at NACoal:
Name of Mine or Quarry (1)
 
Mine Act Section 104 Significant & Substantial Citations (2)
 
Total Dollar Value of Proposed MSHA Assessment
 
Number of Legal Actions Initiated before the FMSHRC for the year ended at December 31, 2015
 
Number of Legal Actions Resolved before the FMSHRC for the year ended at December 31, 2015
 
Number of Legal Actions Pending before the FMSHRC at December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
MLMC (Red Hills Mine)
 

 
$

 

 

 

Coteau (Freedom Mine)
 

 
308

 

 

 

Falkirk (Falkirk Mine)
 

 
208

 

 

 

Sabine (South Hallsville No. 1 Mine)
 
1

 
940

 

 
1

 

Demery (Five Forks Mine)
 

 
200

 

 

 

Caddo Creek (Marshall Mine)
 

 

 

 

 

Coyote Creek (Coyote Creek Mine)
 

 
200

 

 

 

Camino Real (Eagle Pass Mine)
 

 
100

 

 

 

Liberty (Liberty Mine)
 

 

 

 

 

Centennial:
 
 
 
 
 
 
 
 
 
 
Fishtrap Mine
 

 
100

 

 

 

Burton Bend Mine
 

 

 

 

 

Poplar Springs
 

 

 

 

 

Florida Limerock Operations:
 
 
 
 
 
 
 
 
 
 
White Rock Quarry - North
 

 

 

 

 

White Rock Quarry - South
 

 
138

 

 

 

Krome Quarry
 

 
200

 

 

 

Alico Quarry
 

 

 

 

 

FEC Quarry
 

 

 

 

 

SCL Quarry
 

 
100

 

 

 

 
 
 
 
 
 
 
 
 
 
 
Total
 
1

 
$
2,494

 

 
1

 


(1) Bellaire's closed mines are not included in the table above and did not receive any of the indicated citations.
(2) Mine Act section 104(a) significant and substantial citations are for alleged violations of a mining safety standard or regulation where there exists a reasonable likelihood that the hazard contributed to or will result in an injury or illness of a reasonably serious nature. Sabine's citation was reduced to non-significant and non-substantial after an agreement was reached with MSHA.








Exhibit 99









Audited Combined Financial Statements
The Unconsolidated Mines of
The North American Coal Corporation
Years Ended December 31, 2015, 2014, and 2013
With Report of Independent Auditors




The Unconsolidated Mines of
The North American Coal Corporation
Audited Combined Financial Statements
Years Ended December 31, 2015, 2014 and 2013


Table of Contents

Report of Independent Auditors ..................................................................................................    1    

Audited Combined Financial Statements

Combined Balance Sheets...........................................................................................................    2
Combined Statements of Net Income..........................................................................................    4
Combined Statements of Equity .................................................................................................    5
Combined Statements of Cash Flows..........................................................................................    6
Notes to Combined Financial Statements ...................................................................................    7





Report of Independent Auditors

The Board of Directors and Shareholders
NACCO Industries, Inc.
We have audited the accompanying combined financial statements of The Unconsolidated Mines of The North American Coal Corporation, which comprise the combined balance sheets as of December 31, 2015 and 2014, and the related combined statements of net income , equity, and cash flows for each of the three years in the period ended December 31, 2015, and the related notes to the combined financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of The Unconsolidated Mines of The North American Coal Corporation at December 31, 2015 and 2014, and the combined results of their operations and their cash flows for the each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.


March 2, 2016


1


The Unconsolidated Mines of
The North American Coal Corporation
Combined Balance Sheets

 
December 31
 
2015
2014
 
(In thousands)
Assets
 
 
Current assets:
 
 
   Cash and cash equivalents
 $ 25,159
 $ 17,556
   Accounts receivable
              28,181
               21,338
   Accounts receivable from affiliated companies
                6,813
                 1,029
   Inventories
              98,447
               97,054
   Other current assets
                1,179
                    992
Total current assets
            159,779
              137,969
 
 
 
Property, plant and equipment:
 
 
   Coal lands and real estate
            115,119
              112,063
   Advance minimum royalties
                1,331
                 1,308
   Plant and equipment
         1,064,678
              973,310
   Construction in progress
            110,034
               56,375
 
         1,291,162
           1,143,056
 
 
 
   Less allowance for depreciation, depletion, and amortization
          (554,303)
            (522,046)
 
            736,859
              621,010
Deferred charges:
 
 
   Deferred lease costs
                       –
                 4,714
   Other
                2,762
                    418
 
                2,762
                 5,132
 
 
 
Other assets:
 
 
   Note receivable from Parent Company
                2,104
                 3,625
   Other investments and receivables
            168,484
              145,540
 
            170,588
              149,165
Total assets
 $ 1,069,988
 $ 913,276
 
 
 
 
 
 
 
 
 












2


The Unconsolidated Mines of
The North American Coal Corporation
Combined Balance Sheets (Continued)

 
December 31
 
2015
2014
 
(In thousands)
Liabilities and equity
 
 
Current liabilities:
 
 
   Accounts payable
 $ 31,162
 $ 28,904
   Accounts payable to affiliated companies
                2,679
               57,752
   Current maturities of long-term obligations
              70,387
               70,736
   Current mine closing accrual
                       –
                    311
   Other current liabilities
              25,022
               20,138
Total current liabilities
            129,250
              177,841
 
 
 
Long-term obligations:
 
 
   Advances from customers
            222,716
              191,992
   Notes payable
            243,206
               78,827
   Capital lease obligations
            215,285
              246,043
 
            681,207
              516,862
Noncurrent liabilities:
 
 
   Deferred income taxes
              23,133
               24,779
   Mine closing accrual
            170,562
              128,782
   Deferred lease costs
                     86
                       –
   Pension and post-retirement benefits
              56,805
               55,452
   Other accrued liabilities
                4,720
                 5,340
 
            255,306
              214,353
Equity:
 
 
   Common stock and membership units
                   199
                    199
   Capital in excess of stated value
                   791
                    791
   Retained earnings
                3,235
                 3,230
 
                4,225
                 4,220
 
 
 
Total liabilities and equity
 $ 1,069,988
 $ 913,276
 
 
 
See accompanying notes.
 
 












3


The Unconsolidated Mines of
The North American Coal Corporation
Combined Statements of Net Income

 
Years Ended December 31
 
2015
2014
2013
 
(In thousands)
 
 
 
 
Lignite tons sold
             27,067

               26,676

               25,910

 
 
 
 
Income:
 
 
 
   Sales
 $ 603,872

 $ 572,680

 $ 570,864

   Other
                   289

                 1,300

                 1,038

 
           604,161

             573,980

             571,902

 
 
 
 
Cost and expenses:
 
 
 
   Cost of sales
           474,441

             442,419

             435,056

   Depreciation, depletion, and amortization
             59,202

               58,759

               63,491

 
           533,643

             501,178

             498,547

   Operating Profit
             70,518

               72,802

               73,355

 
 
 
 
Other income (expense)
 
 
 
   Interest
           (22,435)

(24,811
)
(27,403
)
   Gain on sale of assets
                   350

                    406

                    477

 
(22,085
)
(24,405
)
(26,926
)
Income before income taxes
             48,433

               48,397

               46,429

 
 
 
 
Income tax provision (benefit):
 
 
 
   Current
             11,839

               12,624

               12,868

   Deferred
              (1,802)

(1,556
)
(2,891
)
 
             10,037

               11,068

                 9,977

Net income
 $ 38,396

 $ 37,329

 $ 36,452

 
 
 
 
See accompanying notes.
 
 
 









4


The Unconsolidated Mines of
The North American Coal Corporation
Combined Statements of Equity

 
Years Ended December 31
 
2015
2014
2013
 
(In thousands)
Common stock and membership units:
 
 
 
   Beginning balance
 $ 199

 $ 199

 $ 199

 
 
 
 
Capital in excess of stated value
                    791

                     791

                     791

 
 
 
 
Retained earnings:
 
 
 
   Beginning balance
                3,230

                  3,468

                  1,375

   Net income
              38,396

                37,329

                36,452

   Dividends paid
(38,391
)
(37,567
)
(34,359
)
 
                3,235

                  3,230

                  3,468

 
 
 
 
Total equity
 $ 4,225

 $ 4,220

 $ 4,458

 
 
 
 
See accompanying notes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




















5


The Unconsolidated Mines of
The North American Coal Corporation
Combined Statements of Cash Flows

 
Years Ended December 31
 
2015
2014
2013
 
(In thousands)
Operating activities
 
 
 
Net income
 $ 38,396

 $ 37,329
 $ 36,452
Adjustments to reconcile net income to net cash
 
 
 
provided by operating activities:
 
 
 
   Depreciation, depletion, and amortization
             59,202

             58,759
           63,491
   Amortization of deferred financing costs
                    31

                    31
                  31
   Gain on sale of assets
                (350)

                (406)
              (477)
   Equity income received (earned) in cooperatives
                  500

                (858)
              (565)
   Mine closing accrual
6,348

               2,424
           (1,142)
   Deferred lease costs
               5,256

               3,899
             2,220
   Deferred income taxes
             (1,802)

             (1,556)
           (2,891)
   Post-retirement benefits and other accrued liabilities
                (778)

             (1,393)
           (7,608)
   Amortization of advance minimum royalties
                    28

                    49
                238
   Other noncurrent assets
           (18,621)

           (16,002)
           (7,383)
 
88,210

             82,276
           82,366
Working capital changes:
 
 
 
   Accounts receivable
           (12,684)

               6,850
           18,020
   Inventories
             (1,393)

             (6,047)
             2,204
   Accounts payable and other accrued liabilities
           (50,575)

             29,050
             7,084
   Other changes in working capital
                (426)

                (136)
                328
 
           (65,078)

             29,717
           27,636
Net cash provided by operating activities
23,132

           111,993
         110,002
 
 
 
 
Investing activities
 
 
 
Expenditures for property, plant, and equipment
         (128,906)

           (51,747)
         (15,330)
Additions to advance minimum royalties
                  (51)

                  (80)
              (151)
Proceeds from sale of property, plant, and equipment
               1,768

               2,771
             1,048
Net cash used for investing activities
         (127,189)

           (49,056)
         (14,433)
 
 
 
 
Financing activities
 
 
 
Additions to advances from customer, net
             22,791

             15,048
             1,602
Payments received (made) on note from Parent Company, net
               1,361

               1,540
              (870)
Additions to long-term obligations
           171,540

                      –
                    –
Repayment of long-term obligations
           (43,426)

           (44,373)
         (46,702)
Notes receivable
                  160

                  107
                    –
Financing fees paid
             (2,375)

                      –
                    –
Dividends paid
           (38,391)

           (37,567)
         (34,359)
Net cash provided by (used for) financing activities
           111,660

           (65,245)
         (80,329)
 
 
 
 
Increase (decrease) in cash and cash equivalents
               7,603

             (2,308)
           15,240
Cash and cash equivalents at beginning of year
             17,556

             19,864
             4,624
Cash and cash equivalents at end of year
 $ 25,159

 $ 17,556
 $ 19,864
 
 
 
 
See accompanying notes.
 
 
 

6

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



December 31, 2015, 2014 and 2013

1.
Organization

The Coteau Properties Company, The Falkirk Mining Company, The Sabine Mining Company, Demery Resources Company, LLC, Caddo Creek Resources Company, LLC, Camino Real Fuels, LLC, Coyote Creek Mining Company LLC, and Liberty Fuels, LLC (collectively, the Unconsolidated Mines) are each wholly owned subsidiaries of The North American Coal Corporation (Parent Company), which is a wholly owned subsidiary of NACCO Industries, Inc. (Ultimate Parent Company).
During 2003, the Parent Company adopted authoritative guidance issued by the Financial Accounting Standards Board (FASB) on Consolidation of Variable Interest Entities. The guidance clarifies the application of authoritative guidance on Consolidated Financial Statements for certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In accordance with the guidance, the Parent Company is not the primary beneficiary of the Unconsolidated Mines and does not consolidate these entities’ financial position or results of operations. The Unconsolidated Mines are still considered under common management of the Parent Company and, therefore, are reflected collectively in the Unconsolidated Mines’ audited combined financial statements.
The Coteau Properties Company : The Coteau Properties Company (Coteau), an Ohio corporation, was organized on May 23, 1972, pursuant to an agreement between the Parent Company and a wholly owned subsidiary of a diversified energy company (Buyer). Coteau is principally engaged in lignite mining through the operation of a surface mine in North Dakota.
On April 22, 1977, the Buyer exercised its option to enter into a coal sales agreement, as restated June 1, 1979. As of November 1, 1988, all of the Buyer’s rights, interests, and obligations under the coal sales agreement were assigned to Dakota Coal Company (Coteau’s Customer), a wholly owned subsidiary of Basin Electric Power Cooperative (Basin). This coal sales agreement was subsequently replaced with a coal sales agreement, as amended, between Coteau and Coteau’s Customer (Coteau Agreement) and provides Coteau with the option to extend Coteau’s agreement up to the year 2037 and provides for reimbursement of administrative and general expenses, included in cost of sales in the combined statements of net income, from actual costs to reimbursement at a fixed rate per ton.
Under the terms and conditions of the Coteau Agreement, Coteau is to supply coal to an electric generating station and a coal gasification plant, as well as to other third parties. The terms of a related option agreement, as amended, provide that, under certain conditions of default, Coteau’s Customer may acquire the assets, subject to the liabilities, for an amount equal to the equity of Coteau.
The Falkirk Mining Company : The Falkirk Mining Company (Falkirk), an Ohio corporation, was organized on August 22, 1974, to enter into a coal sales agreement (Falkirk Agreement) with an electric generation and transmission cooperative (Falkirk’s Customer). Falkirk’s agreement was restated effective January 1, 2007, to extend the agreement to 2045. Falkirk is principally engaged in lignite mining through the operation of a surface mine in North Dakota.

7

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



1.
Organization (continued)

Under the terms of the Falkirk Agreement, Falkirk’s Customer has agreed to provide, or procure from others, the financing required to develop, equip, and operate Falkirk’s mine for the life of the Falkirk Agreement. The Falkirk Agreement provides that, under certain conditions of Falkirk’s default, Falkirk’s Customer may acquire the assets, subject to the liabilities, for an amount equal to the equity of Falkirk.
Falkirk’s Customer has entered into an operating agreement with Falkirk whereby a dragline to be used in the production of coal (original cost of approximately $40,000) leased by Falkirk’s Customer has been made available to Falkirk without rent.
The Sabine Mining Company : The Sabine Mining Company (Sabine), a Nevada corporation, was organized on November 6, 1980, and entered into a lignite mining agreement, as restated, (Sabine Agreement) with a public utility (Sabine’s Customer) in 1981, which was subsequently amended and restated on January 1, 1996, December 1, 2001 and January 1, 2008. Sabine is principally engaged in lignite mining through the operation of a surface mine in Texas.
The Sabine Agreement provides that, under certain conditions of default, Sabine’s Customer may acquire the issued and outstanding common stock of Sabine for an amount equal to the equity of Sabine.
Other entities: Demery Resources Company, LLC (Demery), Caddo Creek Resources Company, LLC (Caddo), Camino Real Fuels, LLC (Camino Real), Coyote Creek, LLC (Coyote) and Liberty Fuels Company, LLC (Liberty) were all formed during 2008, 2009, and 2012 to develop, construct, and operate lignite surface mines under long-term contracts for their respective customers. The contracts with the customers allow for reimbursement of all costs plus a management fee. Demery and Caddo have had some minimal deliveries during the year. Camino Real, Coyote, and Liberty are building mines or developing plans to build mines and therefore do not currently mine or deliver coal.
Since each of the Unconsolidated Mines has an agreement to provide coal to their respective customers, a significant portion of each of the Unconsolidated Mines’ revenue is derived from a single source. The financial position of the Unconsolidated Mines and the Parent Company would be materially affected if the existing contractual relationship with any of the Unconsolidated Mines’ customers were terminated or significantly altered.
Management performed an evaluation of the Unconsolidated Mines’ activities through March 2, 2016 which is the date these financial statements were issued. No significant subsequent events have occurred that required recognition or disclosure in these financial statements.


8

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



2.
Significant Accounting Policies

Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition and Accounts Receivable
Under their respective mining agreements, the Unconsolidated Mines recognize revenue and a related receivable as coal is delivered. The sales price of the coal is based on costs, plus a profit or management fee per ton of coal delivered. As is customary in the coal industry, these agreements provide for monthly settlements. The Unconsolidated Mines’ significant credit concentration is uncollateralized; however, historically, no credit losses have been incurred. Management has reviewed the carrying value of its accounts receivable and has determined that a reserve for credit losses is not necessary based on amounts subsequently realized.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and highly liquid investments with initial maturities of three months or less. After considering the right of offset, outstanding checks net of their associated funding accounts, are classified as accounts payable.
Inventories
Coal and supply inventories are stated at the lower of cost or market. Cost is determined using the weighted-average method.
Property, Plant and Equipment
Property, plant, and equipment are recorded at cost. Depreciation, depletion, and amortization are provided in amounts sufficient to amortize the cost of related assets (including assets recorded under capitalized lease obligations) over their estimated useful lives or lease terms and are calculated by either the straight-line method or the units-of-production method based on estimated recoverable tonnage. In the course of preparing a mine for production, the Unconsolidated Mines incur mine development costs prior to initial production, as well as throughout the life of the mine. The Unconsolidated Mines capitalize these costs as a part of plant and equipment in the accompanying combined balance sheets. The Unconsolidated Mines amortize the development costs over their estimated useful life, which is generally a units-of-production method. Repairs and maintenance costs are expensed when incurred, unless such costs extend the estimated useful life of the asset, in which case such costs are capitalized and depreciated.


9

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



2.
Significant Accounting Policies (continued)

Advance Minimum Royalties
Advance minimum royalties are advance payments made to lessors under terms of mineral lease agreements that are recoupable against future production. These advanced payments are capitalized when paid and charged against income as the coal reserves are mined.
Long-Lived Assets
Upon identification of indicators of impairment, management compares the carrying value of its long-lived assets to the undiscounted cash flows of such assets. When the undiscounted cash flows are less than the related assets’ carrying value, the long-lived assets are adjusted to fair value (based on active market quotes, third-party appraisals, or discounted cash flows).
Accounting for Asset Retirement Obligations
Under certain federal and state regulations, the Unconsolidated Mines are required to reclaim land disturbed as a result of mining. Reclamation of disturbed land is a continuous process throughout the terms of the mining agreements. Current reclamation costs are charged to expense in the period incurred and are being recovered as a cost of coal tonnage sold. Costs to complete reclamation after mining has been completed are to be reimbursed under the respective mining or coal sales agreements.
Authoritative guidance on accounting for asset retirement obligations provides accounting requirements for retirement obligations associated with tangible long-lived assets, including: (i) the timing of liability recognition; (ii) initial measurement of the liability; (iii) allocation of asset retirement cost to expense; (iv) subsequent measurement of the liability; and (v) financial statement disclosures. The guidance requires that an asset’s retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method.
The Unconsolidated Mines’ asset retirement obligations are for costs to close its surface mines and reclaim the land it has disturbed as a result of its normal mining activities. The Unconsolidated Mines have estimated these costs and recognized a liability and associated asset in accordance with authoritative guidance. The Unconsolidated Mines determined these obligations based on estimates adjusted for inflation, projected to the estimated closure dates, and then discounted using a credit-adjusted, risk-free interest rate. The accretion of the liability is being recognized over the estimated life of the individual asset retirement obligations. The associated asset is recorded in property, plant, and equipment in the accompanying balance sheets.
Since the cost of reclamation is reimbursable under the provisions of the mining agreements, the difference between the capitalized asset retirement obligation and the reclamation liability is recorded as a long-term receivable from the customers. Additionally, the annual costs related to amortization of the asset and accretion of the liability of $10,321, $9,983, and $11,002 in 2015, 2014, and 2013, respectively, are included in cost of sales, and increases the sales to, and the long-term receivable from, the customers. The long-term receivable (see Note 4) will be reimbursed to the Unconsolidated Mines as the costs of reclamation are actually incurred.

10

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



2.
Significant Accounting Policies (continued)

There are currently no assets legally restricted for purposes of settling these asset retirement obligations. A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligations is as follows:
 
December 31
 
2015
2014
Beginning balance
$
129,093

$
126,669

   Liabilities incurred during the period
       33,386


   Liabilities settled during the period
          (311)

       (3,970)

   Accretion expense
        6,659

        6,394

   Revision in cash flows
        1,735


 
$
170,562

$
129,093

 
 
 

Financial Instruments and Derivative Financial Instruments
Financial instruments held by the Unconsolidated Mines include cash and cash equivalents, accounts receivable, accounts receivable from affiliated companies, accounts payable, accounts payable to affiliated companies and long-term debt. The Unconsolidated Mines do not hold or issue financial instruments or derivative financial instruments for trading purposes.
Reclassifications
Certain reclassifications have been made to the 2014 consolidated financial statements to conform to the 2015 reporting presentation.
3.
Inventories

 
December 31
 
2015
2014
Coal
$
28,041

$
29,970

Supplies
70,406

       67,084

 
$
98,447

$
97,054

 
 
 




11

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



4.
Other Investments and Receivables

Other investments and receivables consist of the following:
 
December 31
 
2015
2014
Long-term receivable from Unconsolidated Mine customers related to:
 
 
   Asset retirement obligation
$
59,639

$
49,627

   Pension and retiree medical obligation
         60,545

           57,459

   Reclamation bond
         20,622

           17,922

Investment in cooperatives
         15,883

           16,378

Other
         11,795

             4,465

 
       168,484

         145,851

Less asset retirement obligation included in current
 
 
  accounts receivable

                311

 
$
168,484

$
145,540

 
 
 

The long-term receivables will be reimbursed to the Unconsolidated Mines as the costs of reclamation, pension and retiree medical obligations are actually incurred or paid.
One of the Unconsolidated Mines holds investments in cooperatives that provide electrical service to the mine site. Patronage dividends from cooperatives are recorded as declared. The dividends declared are consistently paid out, but routinely several years after the declaration. These patronage dividends when declared are reflected as a reduction in the cost of coal under the mining agreements. In the event the cooperatives should become unable to pay the patronage dividends previously declared, the Unconsolidated Mines would be required at that time to record an impairment charge against the investment asset, which would be reimbursable under the mining agreement.
5.
Accrued Liabilities

Other current liabilities consist of the following:
 
December 31
 
2015
2014
Accrued payroll
$
17,579

$
13,578

Other
        7,443

        6,560

 
$
25,022

$
20,138

 
 
 




12

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



6. Advances From Customers and Notes Payable
Advances from Customers
Advances from customers represent amounts advanced to Coteau and Falkirk from their customers or their affiliates to provide working capital and to develop and operate the mines. These advances, which are not guaranteed by either the Parent Company or the Ultimate Parent Company, are secured by substantially all owned assets and assignment of all rights under the agreements. Coteau’s advances incur an average weighted interest rate of 3.878%. No repayment schedule has been established for Falkirk’s advances, which are noninterest-bearing, in accordance with the funding agreement with the customer.
Estimated maturities for Coteau for the next five years, including current maturities, and Falkirk’s customer advances with unspecified repayment schedules are as follows:
2016
$
6,627

2017
6,588

2018
6,588

2019
6,588

2020
6,588

Thereafter
95,973

                                                                                                                        
                128,952

Advances with unspecified repayment schedule
108,759

Total advances from customers
                237,711

Less current maturities
14,995

Total long-term advances from customers
$
222,716

 
 
 
 










13

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



6.    Advances From Customers and Notes Payable (continued)

Notes Payable
Notes payable primarily represents financing which customers arranged and guaranteed for Coyote and Sabine. Neither the Parent Company nor the Ultimate Parent Company has guaranteed these borrowings. Notes payable consist of the following:
 
December 31
 
2015
2014
KeyBank – Revolving line of credit due March 16, 2020, providing for borrowing up to $105.0 million. Interest is based on the base rate plus 1.00% at December 31, 2015 and on LIBOR plus 2.00% at December 31, 2015, on the unpaid balance (interest rate of 4.50% and 2.32% at December 31, 2015)
$
37,000

$

AIG – Secured note payable due December 28, 2040 with monthly principal and interest payments to begin on July 28, 2016 at an interest rate of 4.39% on the unpaid balance.
    134,540


Borrowings under a revolving credit agreement that expires July 31, 2016, to a bank providing for borrowings up to $10,000. Interest is based on the bank’s daily cost of funds plus 1.75% (2.10% and 1.80% at December 31, 2015 and 2014, respectively)


Secured note payable due August 21, 2031, with semiannual principle and interest payments at an interest rate of 4.58% on the unpaid balance
      53,625

     56,875

Secured note payable due October 31, 2024, with semiannual interest payments at an interest rate of 6.37% on the unpaid balance
 
 
      25,000

     25,000

Other
           256

          404

Total notes payable
$
250,421

$
82,279

Less current portion
        7,215

       3,452

Long-term portion of notes payable
$
243,206

$
78,827

 
 
 

Under the terms of all note agreements, substantially all assets of Coyote and Sabine are pledged and all rights under the mining or coal sales agreements are assigned.
Notes payable maturities for the next five years and thereafter are as follows:
2016
$
7,215

2017
12,566

2018
12,308

2019
12,239

2020
12,240

Thereafter
193,853

Total
$
250,421

 
 


14

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



6.
Advances From Customers and Notes Payable (continued)

Commitment fees paid to banks were approximately $223, $79 and $76 in 2015, 2014 and 2013, respectively, and are included in interest expense in the accompanying combined statements of net income.
7. Pension and Other Postretirement Plans
Defined Benefit Plans
Substantially all the Unconsolidated Mines’ salaried employees hired prior to January 1, 2000, participate in The North American Coal Corporation Salaried Employees Pension Plan (the Plan), a noncontributory defined benefit plan sponsored by the Parent Company. Pension benefits for certain management level employees were frozen effective December 31, 2004. During 2013, the Company amended the Combined Defined Benefit Plan for the Ultimate Parent and its subsidiaries (the Combined Plan) to freeze pension benefits for all employees effective as of the close of business on December 31, 2013. Employees whose benefits were frozen receive retirement benefits under defined contribution retirement plans. As a result of this amendment, the Company remeasured the Combined Plan and recorded a $1,622 pre-tax curtailment loss during 2013.
The Company also approved freezing all pension benefits under its Supplemental Retirement Benefit Plan (the “SERP”). In years prior to 2013, benefits other than COLA’s were frozen for all SERP participants. Effective as of the close of business on December 31, 2013, all COLA benefits under the SERP were eliminated for all plan participants.
Benefits under the defined benefit pension plans are based on years of service and average compensation during certain periods. The Unconsolidated Mines made contributions to this plan of $61, $2,213 and $11,337 in 2015, 2014 and 2013, respectively. The Unconsolidated Mines expect to make supplemental payments and pay benefits from the assets of the Plan of $7,568 in 2016, $8,384 in 2017, $9,177 in 2018, $9,834 in 2019, $10,460 in 2020, and $59,689 in the five years thereafter.
The following is a detail of the net periodic pension expense of the Unconsolidated Mines, using assumed discount rates of 3.95% and 4.00% in 2015 and 4.75% in 2014:
 
Year Ended December 31
 
2015
2014
2013
Service cost
$

$

$
3,988

Interest cost
7,968

                       7,983

                       8,202

Expected return on plan assets
                 (12,589)

                   (11,739)

                   (10,950)

Amortization of actuarial loss
                     1,066

                          105

                       4,592

Amortization of prior service cost
                             8

                            26

                          423

Curtailment loss


                       1,622

Net periodic pension (income) expense
$
(3,547
)
$
(3,625
)
$
7,877

 
 
 
 


15

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



7.
Pension and Other Postretirement Plans (continued)


The following is a detail of the changes in plan assets and benefit obligations recognized in long-term receivable from customers:
 
Year Ended December 31
 
2015
2014
2013
Current year actuarial loss (gain)
$
1,474

$
31,590

$
(60,533
)
Current year prior service credit
              (92)


            (540)

Amortization of actuarial loss
         (1,066)

            (105)

         (4,592)

Amortization of prior service cost
               (8)

              (26)

            (423)

Recognition of curtailment cost


         (1,622)

Asset transfer
            (147)

            (174)


Amount recognized in long-term receivable
$
161

$
31,285

$
(67,710
)
 
 
 
 

The following sets forth the Unconsolidated Mines portion of the changes in the benefit obligation and plan assets of the defined benefit plans of the Unconsolidated Mines at:
 
December 31
 
2015
2014
Change in benefit obligation:
 
 
   Projected benefit obligation at beginning of year
$
204,776

$
171,190

   Service cost


   Interest cost
                          7,968

                      7,983

   Actuarial loss (gain)
                      (11,603)

                    32,282

   Benefits paid
(6,827
)
                     (6,171)

   SERP transfer to Parent
(304
)
                        (508)

Projected benefit obligation at end of year
$
194,010

$
204,776

 
 
 














16

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



7.
Pension and Other Postretirement Plans (continued)

 
December 31
 
2015
2014
Change in plan assets:
 
 
   Fair value of plan assets at beginning of year
$
173,823

$
165,349

   Actual return on plan assets
(143
)
                    12,666

   Beginning of year adjustment
(268
)

   Employer contributions
61

                      2,213

   Benefits paid
(6,827
)
                     (6,171)

   Asset transfers
(77
)
                        (234)

Fair value of plan assets at end of year
$
166,569

$
173,823

 
 
 
Funded status at end of year
$
(27,442
)
$
(30,953
)
 
 
 

 
December 31
 
2015
2014
Amounts recognized in the combined balance sheets consist of:
 
 
Current liabilities
$

$
(25
)
Noncurrent liabilities
                   (27,442)

                   (30,928)

 
$
(27,442
)
$
(30,953
)
Components of long-term receivables from customers consist of:
 
 
  Actuarial loss
$
40,656

$
40,340

  Prior service cost

                         155

 
$
40,656

$
40,495

 
 
 

The actuarial loss and prior service cost included in long-term receivables from customers expected to be recognized in net periodic benefit cost in 2016 are $584 ($380 net of tax) and $0 ($0 net of tax), respectively.
The projected benefit obligation included in the table above represents the actuarial present value of benefits attributable to employee service rendered to date.
The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Ultimate Parent considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Ultimate Parent’s estimated rate of return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes.


17

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



7. Pension and Other Postretirement Plans (continued)
The Plan maintains an investment policy that, among other things, establishes a portfolio asset allocation methodology with percentage allocation bands for individual asset classes. The investment policy provides that investments are reallocated between asset classes as balances exceed or fall below the appropriate allocation bands.
The following is the actual allocation percentage and target allocation percentage for the plan assets at the measurement date:
 
Actual 2015
Actual 2014
Target Allocation Range
U.S. equity securities
52.2%
55.3%
41.0%–62.0%
Non-U.S. equity securities
12.3
11.3
10.0%–16.0%
Fixed income securities
35.1
32.9
30.0%–40.0%
Money market
0.4
0.5
  0.0%–10.0%

The fair value of each major category of plan assets for the Unconsolidated Mines’ pension plans are valued using quoted market prices in active markets for identical assets, or Level 1 in the fair value hierarchy. Following are the values as of December 31:
 
2015
2014
U.S. equity securities
$
87,181

$
95,327

Non-U.S equity securities
                        20,235

                    19,838

Fixed income securities
                        58,594

                    57,921

Money market
                             559

                         737

     Total
$
166,569

$
173,823

 
 
 


Postretirement Health Care
The Parent Company also maintains health care plans which provide benefits to eligible retired employees, including employees of the Unconsolidated Mines. Effective December 31, 2008, postretirement health care plan amendments for the Unconsolidated Mines eliminated all post-65 welfare coverage and Medicare reimbursements. The Unconsolidated Mines expect to pay benefits of $2,229 in 2016, $2,605 in 2017, $2,964 in 2018, $3,350 in 2019, $3,552 in 2020 and $16,545 in the five years thereafter related to these plans.







18

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)




7. Pension and Other Postretirement Plans (continued)
The following is a detail of the net periodic benefit expense for postretirement health care and life insurance for the Unconsolidated Mines, using an assumed discount rate of 3.25% and 3.85% in 2015 and 2014, respectively:
 
Year Ended December 31
 
2015
2014
2013
Service cost
$
653

$
674

$
733

Interest cost
             918

           1,050

             826

Expected return on plan assets
            (168)

            (227)

            (274)

Amortization of actuarial loss
             705

             672

             741

Amortization of prior service credit
            (247)

            (417)

            (825)

Net periodic postretirement expense
$
1,861

$
1,752

$
1,201

 
 
 
 

The following is a detail of the changes in plan assets and benefit obligations recognized in long-term receivable from customers:
 
Year Ended December 31
 
2015
2014
2013
Current year actuarial loss (gain)
$
3,698

$
718

$
(53
)
Amortization of actuarial loss
            (705)

            (672)

            (741)

Amortization of prior service credit
             247

             417

             825

Amount recognized in long-term receivable
$
3,240

$
463

$
31

 
 
 
 











19

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



7. Pension and Other Postretirement Plans (continued)
The following sets forth the changes in the benefit obligations and plan assets during the year of the postretirement health care and life insurance plans:

 
December 31
 
2015
2014
Change in benefit obligation:
 
 
   Benefit obligation at beginning of year
$
28,473

$
27,384

   Service cost
                    653

                     674

   Interest cost
                    918

                  1,050

   Actuarial loss
                 3,461

                     685

   Benefits paid
               (1,617)

                 (1,320)

Benefit obligation at end of year
$
31,888

$
28,473

 
 
 
Change in plan assets:
 
 
   Fair value of plan assets at beginning of year
$
3,399

$
4,293

   Actual (loss) return on plan assets
                    (68)

                     230

   Employer contributions
                    389

                     549

   Benefits and taxes paid
               (1,967)

                 (1,673)

Fair value of plan assets at end of year
$
1,753

$
3,399

 
 
 
Funded status at end of year
$
(30,135
)
$
(25,074
)
 
 
 
 
 
 

 
December 31
 
2015
2014
Amounts recognized in the consolidated balance sheets consist of:
 
 
   Current liabilities
$
(1,142
)
$
(551
)
   Noncurrent liabilities
                 (28,993)

                   (24,523)

 
$
(30,135
)
$
(25,074
)
 
 
 
Components of long-term receivables from customers consist of:
 
 
   Actuarial loss
$
10,277

$
7,284

   Prior service credit
                         (91)

                        (339)

 
$
10,186

$
6,945

 
 
 
 
 
 





20

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



7. Pension and Other Postretirement Plans (continued)
The actuarial loss and prior service credit included in long-term receivables from customers expected to be recognized in net periodic benefit credit in 2016 are $1,234 ($802 net of tax) and $145 ($94 net of tax).
Some of the Unconsolidated Mines established Voluntary Employees’ Beneficiary Association (VEBA) trusts to provide for future retirement benefits other than pensions. The Unconsolidated Mines made cash contributions to the VEBA trust of $0 in 2015 and 2014, respectively. Contributions made to an IRS-approved VEBA trust are irrevocable and must be used for employee benefits.
Assumed health care cost trend rates can have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects at December 31, 2015:
 
 
1-Percentage-Point Increase
1-Percentage-Point Decrease
 
 
Effect on total of service and interest cost
$
108

$
(101
)
 
Effect on postretirement benefit obligation
$
1,946

$
(1,840
)
 
 
 
 

Assumptions used in accounting for the pension and postretirement health care and life insurance benefit plans were as follows for the years ended:
 
December 31
 
2015
2014
2013
Weighted-average discount rates – pension
4.30%/4.20%/4.35%
3.95%
4.75%
Weighted-average discount rates – postretirement
3.40%
3.25%
3.85%
Rate of increase in compensation levels
NA
NA
NA
Expected long-term rate of return on assets-pension
7.75%
7.75%
7.75%
Expected long-term rate of return on assets-postretirement
6.00%
6.00%
6.00%
Health care cost trend rate assumed for next year
6.75%
7.00%
7.00%
Ultimate health care cost trend rate
5.00%
5.00%
5.00%
Year that the rate reaches the ultimate trend rate
2025
2021
2021

Defined Contribution Plans
For employees hired after December 31, 1999, the Parent Company established a defined contribution plan which requires the Unconsolidated Mines to make retirement contributions based on a formula using age and salary as components of the calculation. For employees hired after December 31, 2005, some of the Unconsolidated Mines contribute a set percentage of the employee’s salary. Employees are vested at a rate of 20% for each year of service and become 100% vested after five years of employment. The Unconsolidated

21

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



7. Pension and Other Postretirement Plans (continued)
Mines recorded contribution expense of approximately $6,879 in 2015, $6,469 in 2014, and $3,412 in 2013 related to this plan.
Substantially all the Unconsolidated Mines’ salaried employees also participate in a defined contribution plan sponsored by the Parent Company. Employee contributions are matched by the Unconsolidated Mines up to a limit of 5% of the employee’s salary. The Unconsolidated Mines’ contributions to this plan were approximately $6,448 in 2014, $5,750 in 2014, and $5,164 in 2013.
8.
Leasing Arrangements and Other Commitments

The Unconsolidated Mines lease certain equipment under cancelable and non-cancelable capital and operating leases that expire at various dates through 2037. Many leases are renewable for additional periods at terms based upon the fair market value of the leased items at the renewal dates.
Future minimum lease payments as of December 31, 2015, for all capital lease obligations are as follows:
2016
$
63,245

2017
                         41,638

2018
                         37,473

2019
                         33,562

2020
                         20,932

Thereafter
                       131,401

Total minimum lease payments
                       328,251

Amounts representing interest
(64,789
)
Present value of net minimum lease payments
                       263,462

Current maturities
(48,177
)
Long-term capital lease obligations
$
215,285

 
 

 
As of December 31, 2015, $121,617 of the long-term capital lease obligations and $13,887 of the current maturities in the table above are due to a customer of one of the Unconsolidated Mines.






22

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



8.
Leasing Arrangements and Other Commitments (continued)

Amortization of assets recorded under capital lease obligations is included in depreciation, depletion, and amortization in the combined statement of net income and comprehensive income. Assets recorded under capital leases are included in property, plant, and equipment and consist of the following:
 
December 31
 
2015
2014
 
 
 
Plant and equipment
$
468,029

$
477,213

Accumulated amortization
              (206,694)

          (193,776)

 
$
261,335

$
283,437

 
 
 

Under the provisions of the mining or coal sales agreements, the customers are required to pay, as a part of the cost of coal delivered, an amount equal to the annual lease payments. Interest and amortization expense in excess of annual lease payments are deferred and recognized in years when annual lease payments exceed interest expense and amortization. These excess costs are recorded as receivables from the customers and are included in deferred lease costs in the accompanying combined balance sheets.
Future minimum lease payments on long-term cancelable operating leases at December 31, 2015, are as follows:
2016
$
1,412

2017
                      395

2018
                       64

2019
                         1

2020
                      –

 
$
1,872

 
 

Rental expense for all operating leases was $7,887 in 2015, $4,642 in 2014, and $2,523 in 2013.



23

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



9.
Income Taxes

The Unconsolidated Mines are included in the consolidated federal income tax return filed by the Ultimate Parent Company. The Unconsolidated Mines have entered into a tax-sharing agreement with the Ultimate Parent Company under which federal income taxes are computed by the Unconsolidated Mines on a separate return basis. The current portion of such tax is paid to the Ultimate Parent Company, except that net operating loss and tax credit carryovers that benefit the consolidated tax return are advanced to the Unconsolidated Mines and are repaid as utilized on a separate-return basis. To the extent that these carryovers are not used on a separate return basis, the Unconsolidated Mines are required, under conditions pursuant to the tax-sharing agreement, to refund to the Ultimate Parent Company the balance of carryovers advanced and not used by the Unconsolidated Mines prior to the expiration of such carryovers.
The provision for income taxes consists of the following:
 
Year Ended December 31
 
2015
2014
2013
Current:
 
 
 
   Federal
$
11,839

$
12,624

$
12,868

Total current tax provision (benefit)
                11,839

                  12,624

                  12,868

 
 
 
 
Deferred:
 
 
 
   Federal
                 (1,802)

(1,556
)
(2,891
)
Total deferred tax benefit
                 (1,802)

(1,556
)
(2,891
)
Total provision for income taxes
$
10,037

$
11,068

$
9,977

 
 
 
 

A reconciliation of the federal statutory and effective income tax is as follows:
 
Year Ended December 31
 
2015
2014
2013
Income before income taxes
$
48,433

$
48,397

$
46,429

 
 
 
 
Statutory taxes at 35.0%
$
16,952

$
16,939

$
16,249

Percentage depletion
                 (5,580)

                  (5,480)

                  (5,575)

Other – net
                 (1,335)

                     (391)

                     (697)

Income tax provision
$
10,037

$
11,068

$
9,977

 
 
 
 
Effective income tax rate
20.72%

22.87%

21.49%



24

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



9.     Income Taxes (continued)
A summary of the primary components of the deferred tax assets and liabilities included in the accompanying combined balance sheets resulting from differences in the book and tax basis of assets and liabilities are as follows:
 
December 31
 
2015
2014
Deferred tax assets:
 
 
   Accrued expense and reserves
$
10,403

$
8,597

   Asset valuation
                          6,664

                      7,367

   Inventory
                          3,791

                      3,625

   Tax Attribute Carryforward
                          1,845


   Other employee benefits
                          3,633

                      1,751

Total deferred tax assets
                        26,336

                    21,340

Deferred tax liabilities:
 
 
   Property, plant, and equipment
                      (41,017)

                   (40,103)

   Pensions
                        (8,452)

                     (6,016)

Total deferred tax liabilities
                      (49,469)

                   (46,119)

Net deferred tax liability
$
(23,133
)
$
(24,779
)

The Unconsolidated Mines regularly review the need for a valuation allowance against deferred tax assets and recognizes these deferred tax assets to the extent that realization is more likely than not. Based on a review of earnings history and trends, forecasted earnings, and the relevant expiration of carryforwards, the Unconsolidated Mines believe that no valuation allowance was necessary at December 31, 2015 or 2014.
10.
Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, accounts receivable, accounts receivable from affiliated companies, and accounts payable and accounts payable to affiliated companies approximate fair value due to the short term maturities of these instruments. The fair value of notes payable and one of the Unconsolidated Mines advances from customer were determined based on the discounted value of the future cash flows and one of the Unconsolidated Mines advances from customer, which has no specified repayment schedule was determined based on the discounted value of the total payment at the end of the contract term, using borrowing rates currently available to the Unconsolidated Mines for bank loans with similar terms and maturities, taking into account company credit risk.

25

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



10.    Fair Value of Financial Instruments (continued)
The fair value compared to the carrying value is summarized as follows:
 
December 31
 
2015
2014
Fair value:
 
 
   Notes payable
$
(249,308
)
$
(88,422
)
   Advances from customers
$
(163,897
)
$
(149,235
)
 
 
 
Carrying value:
 
 
   Notes payable
$
(250,421
)
$
(82,279
)
   Advances from customers
$
(237,711
)
$
(214,920
)

11.
Equity
The components of common stock and capital in excess of stated value at December 31, 2015 is as follows:
 
 
Common Stock
Capital in Excess of Stated Value
 
 
Coteau common stock, without par value (stated value $10 per share) – authorized 1,000 shares; issued and outstanding 100 shares
 
 
 
$
1

$
791

 
Falkirk common stock, without par value (stated value $1,919.30 a share) – authorized 1,000 shares; issued and outstanding 100 shares
 
 
 
                              192


 
Sabine common stock, $1 par value – authorized, issued and outstanding 1,000 shares
 
 
 
                                  1


 
Demery membership units, $10 par value – authorized, issued and outstanding 100 shares
 
 
 
                                  1


 
Caddo membership units, $10 par value – authorized, issued and outstanding 100 shares
 
 
 
                                  1


 
Camino Real membership units, $10 par value – authorized, issued and outstanding 100 shares
 
 
 
                                  1


 
Liberty membership units, $10 par value – authorized, issued and outstanding 100 shares
 
 
 
                                  1


 
Coyote Creek membership units, $10 par value – authorized, issued and outstanding 100 shares
                                  1

 
 

 
 
$
199

$
791



26

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



11.
Equity (continued)

As noted previously, Demery, Caddo, and Camino Real were all formed in 2008, Liberty Fuels was formed in 2009, and Coyote was formed in 2012. These entities have been originally structured as single member limited liability companies primarily for the reduced administrative requirements, flexible profit distribution and pass-through tax attributes available with this form of entity.
12.
Supplemental Cash Flow Information

 
December 31
 
2015
2014
2013
Cash paid (received) during the year for:
 
 
 
   Interest
$
25,022

$
24,968

$
27,500

   Income taxes
12,214

12,087

(2,765
)
Property, plant, and equipment:
 
 
 
   Capital leases and land
7,548

4,808

10,354

   Deferred lease costs
456

(202
)
70

   Lease obligations
2,011

(7,606
)
(10,424
)
Accounting for asset retirement obligations:
 
 
 
   Change in property, plant, and equipment
35,115


(3,794
)
   Change in receivables from customers including depreciation billed
                  10,010

                    5,611

                    3,206

   Change in liabilities
(41,463
)
(2,424
)
4,932


13.
Transactions With Affiliated Companies
Costs and expenses include net payments of approximately $4,407, $3,274 and $2,822 in 2015, 2014 and 2013, respectively, for administrative and other services from the Ultimate Parent Company, the Parent Company, and their subsidiaries.
Accounts receivable and accounts payable with the Ultimate Parent Company and the Parent Company represent the timing of income taxes and dividends within the affiliated group. In addition accounts payable to affiliated companies includes a payable for a dragline sold from the Parent Company to one of the unconsolidated mines.
The note receivable from Parent Company of $1,446 and $2,807 in 2015 and 2014, respectively, is a demand note with interest of 0.55% at December 31, 2015 and 0.38% at December 31, 2014.

27

The Unconsolidated Mines of
The North American Coal Corporation

Notes to Combined Financial Statements
( In thousands, Except as noted and Per Share and Percentage Data)



13. Transactions With Affiliated Companies (continued)
The Parent Company is a party to certain guarantees related to Coyote. Under certain circumstances of default or termination of Coyote’s Lignite Sales Agreement (“LSA”), the Parent Company would be obligated for payment of a "make-whole" amount to Coyote’s third party lenders. The “make-whole” amount is based on the excess, if any, of the discounted value of the remaining scheduled debt payments over the principal amount. In addition, in the event Coyote’s LSA is terminated on or after January 1, 2024 by Coyote’s customers, the Parent Company is obligated to purchase Coyote’s dragline and rolling stock for the then net book value of those assets. To date, no payments have been required from the Parent Company since the inception of these guarantees. The Parent Company believes that the likelihood of future performance under the guarantees is remote, and no amounts related to these guarantees have been recorded.
14.
Contingencies
Various legal and regulatory proceedings and claims have been or may be asserted against the Unconsolidated Mines relating to the conduct of their businesses, including environmental and other claims. These proceedings are incidental to the ordinary course of business of the Unconsolidated Mines. Management believes that it has meritorious defenses and will vigorously defend itself in these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated. Although the ultimate disposition of these proceedings is not presently determinable, management believes, after consultation with its legal counsel, that the likelihood is remote that material costs will be incurred in excess of accruals already recognized and would not have a significant impact on the Unconsolidated Mines’ financial position or results of operations.



28