CLEVELAND, Aug. 4, 2021
/PRNewswire/ --
Second Quarter NACCO Consolidated Highlights:
- Operating profit increased to $8.7
million, up 93.4% from Q2 2020
- Net income increased to $6.5
million, up 7.5% from Q2 2020
- Adjusted EBITDA increased to $15.3
million, up 39.4% from Q2 2020
- Diluted earnings per share increased to $0.91/share from $0.86/share in Q2 2020
- New branding and websites launched for the Company and each
of its businesses, and introduction of new NACCO Natural Resources
(nacco.com) brand identity
NACCO Industries, Inc.® (NYSE: NC) today announced
consolidated operating profit of $8.7
million and net income of $6.5
million, or $0.91 per diluted
share, for the second quarter of 2021 compared with consolidated
operating profit of $4.5 million and
net income of $6.1 million, or
$0.86 per diluted share, for the
second quarter of 2020. Improvements in consolidated operating
profit, Consolidated Adjusted EBITDA, Segment adjusted EBITDA and
Net income were primarily due to improved results in all three
operating segments, most significantly in the Minerals Management
segment. The improvement in operating profit was partly offset by
higher income tax expense. Non-GAAP numbers are defined and
reconciled on pages 11 to 13.
For the six months ended June 30,
2021, the Company reported consolidated net income of
$15.5 million, or $2.16 per diluted share, compared with net income
of $12.2 million, or $1.74 per diluted share, for the first six months
of 2020.
At June 30, 2021, the Company had consolidated cash of
$85.0 million and debt of
$32.0 million with availability of
$109.9 million under its $150.0 million revolving credit facility. The
Company believes that maintaining a conservative capital structure
and adequate liquidity are important given evolving trends in
energy markets and the Company's strategic initiatives to grow and
diversify, which are discussed further in the Growth and
Diversification section of this release.
Significant Second Quarter Events
As previously announced, on June 30,
2021, Great River Energy ("GRE") entered into an agreement
to sell Coal Creek Station and the adjacent high-voltage direct
current transmission line to Bismarck,
North Dakota-based Rainbow Energy Center, LLC and its
affiliates. The transaction between GRE and Rainbow Energy is
subject to the satisfaction of certain conditions, including
regulatory approvals associated with the sale of Coal Creek Station
and the related transmission assets, and the posting of a
performance bond related to final mine reclamation. If the
conditions are satisfied, the transaction is expected to close
before the end of 2021.
Upon completion of the sale of Coal Creek Station, the existing
Coal Sales Agreement, the existing Mortgage and Security Agreement
and the existing Option Agreement between GRE and Falkirk Mining
Company will be terminated. Falkirk and GRE have entered into a
termination and release of claims agreement. Upon completion of the
sale, GRE will pay Falkirk $14.0
million in cash, as well as transfer ownership of an office
building located in Bismarck, North
Dakota, and convey membership units in Midwest AgEnergy to
another wholly owned and consolidated subsidiary of NACCO.
If GRE's efforts to sell the power plant are successful, a new
Coal Sales Agreement ("CSA") between Falkirk and Rainbow Energy
will become effective and Falkirk will begin supplying all coal
requirements of Coal Creek Station concurrent with Rainbow Energy's
acquisition of the power plant. Falkirk will be paid a management
fee and Rainbow Energy will be responsible for funding all mine
operating costs and directly or indirectly providing all of the
capital required to operate the mine. The CSA specifies that
Falkirk will perform final mine reclamation, which will be funded
in its entirety by Rainbow Energy. The initial production period is
expected to run ten years from the effective date of the CSA, but
the CSA may be extended or terminated early under certain
circumstances.
In addition, on June 17, 2021, the
Company received notification that the contract mining agreement
between Bisti Fuels Company, a wholly owned subsidiary of NACCO,
and the Navajo Transitional Energy Company ("NTEC") will be
terminated effective September 30,
2021. Bisti Fuels currently supplies coal from the Navajo
Mine to the Four Corners Power Plant through the agreement with
NTEC. NTEC will assume control and responsibility for operation of
the Navajo Mine upon termination of the contract mining agreement.
All liabilities, including mine reclamation, are the responsibility
of NTEC. As required under the agreement, it is anticipated NTEC
will pay NACCO a termination fee of approximately $10 million.
Detailed Discussion of Results
Coal
Mining Results
|
Coal deliveries for
the second quarter of 2021 and 2020 were as follows:
|
|
2021
|
|
2020
|
|
Tons of coal
delivered
|
|
(in
thousands)
|
|
Unconsolidated
operations
|
|
6,076
|
|
|
5,947
|
|
Consolidated
operations
|
|
775
|
|
|
815
|
|
Total deliveries
|
|
6,851
|
|
|
6,762
|
|
|
Key financial results
for the second quarter of 2021 and 2020 were as follows:
|
|
2021
|
|
2020
|
|
(in
thousands)
|
Revenues
|
$
|
23,063
|
|
$
|
21,573
|
|
Earnings of
unconsolidated operations
|
$
|
12,392
|
|
$
|
12,800
|
|
Operating
expenses(1)
|
$
|
7,261
|
|
$
|
7,014
|
|
Operating
profit
|
$
|
8,542
|
|
$
|
7,498
|
|
Segment adjusted
EBITDA(2)
|
$
|
12,669
|
|
$
|
11,113
|
|
|
(1) Operating expenses consist of
Selling, general and administrative expenses, Amortization of
intangible assets and (Gain) loss on sale of assets.
|
(2) Segment adjusted EBITDA is a
non-GAAP measure and should not be considered in isolation or as a
substitute for GAAP. See non-GAAP explanation and the related
reconciliations to GAAP on page 12.
|
Coal Mining revenues increased in the second quarter of 2021
from the second quarter of 2020 primarily as a result of the
recognition of reclamation revenue from Caddo Creek. Caddo Creek is
now a consolidated entity due to the terms of its mine reclamation
contract.
The improvement in the second-quarter 2021 Coal Mining operating
profit over the prior year was primarily due to a reduction in
costs for outside services at Centennial Natural Resources and
income associated with mine reclamation at Caddo Creek. These
increases were partially offset by a decrease in earnings of
unconsolidated operations and a modest increase in operating
expenses. Operating expenses increased due to a substantial
increase in insurance expense mostly offset by lower
employee-related costs primarily attributable to the voluntary
separation program offered in late 2020.
The decrease in earnings of unconsolidated operations was
primarily the result of the expected reduction in fees earned at
the Liberty Mine, as the scope of final mine reclamation activities
declined, the termination of the Camino Real Fuels contract mining
agreement effective July 1, 2020 and
the cessation of coal deliveries at Caddo Creek effective
September 30, 2020. An increase in
customer demand at the Falkirk and Sabine
Mines partially offset the lower earnings of unconsolidated
operations.
Segment adjusted EBITDA for the second quarter of 2021 increased
over the second quarter of 2020 as a result of the increase in
operating profit and an increase in depreciation, depletion
and amortization expense, primarily at Mississippi Lignite Mining
Company.
Coal Mining Outlook - 2021
In the second half and for the full year of 2021, the Company
expects coal deliveries to decrease moderately from the respective
prior year periods based on current expectations of customer
requirements.
Despite the anticipated decrease in tons delivered, the Company
expects operating profit for the Coal Mining segment to increase
significantly in both the second half and for the full year of 2021
due to the anticipated cash receipt of approximately $24 million related to the termination of the
Falkirk and Bisti customer contracts previously discussed. In
addition, the fourth quarter of 2020 included charges totaling
$4.6 million that are not expected to
reoccur. Excluding the impact of these items, operating profit in
the second half and for the full year of 2021 is expected to
decrease from the respective prior year periods. The decrease is
primarily attributable to substantially lower earnings expected at
Mississippi Lignite Mining Company and reduced earnings at the
unconsolidated Coal Mining operations.
Mississippi Lignite Mining Company earnings are expected to
decrease in the second half of 2021 from the comparable 2020 period
and the first six months of 2021. This expected decrease is due to
an anticipated decline in the profit per ton of coal delivered, due
in part to an increase in depreciation expense from higher capital
expenditures in years subsequent to 2019. As a result of the
anticipated decrease in profit per ton, the 2021 full year results
are expected to be lower than the 2020 full year.
The anticipated reduction in earnings at the unconsolidated Coal
Mining operations is expected to be mainly driven by a reduction in
fees earned at the Liberty Mine, as the scope of final mine
reclamation declines compared with 2020, reduced earnings at Bisti
Fuels as a result of the contract termination effective
September 30, 2021, and lower
earnings at Falkirk, partially offset by improved earnings at
Coteau Properties Company. Changes in customer power plant
dispatch, including changes related to natural gas price
fluctuations and the continued increase in renewable generation,
particularly wind, could reduce customer demand below anticipated
levels, which could further unfavorably affect the Company's
second-half and full-year 2021 outlook.
Excluding the $24 million
termination-related payments expected in the second half of 2021
and the $1.1 million asset impairment
charge recognized in 2020, Segment adjusted EBITDA for the second
half of 2021 is expected to decrease from the second half of 2020
as a result of the reduction in operating profit. Segment adjusted
EBITDA for the full year is expected to be comparable to 2020 as
the reduction in operating profit will be offset by an increase in
depreciation expense.
Capital expenditures are expected to be approximately
$21 million in the second half of
2021 and approximately $26 million
for the full year. The elevated levels of capital expenditures in
the Coal Mining segment expected through 2021 relate to the
development of a new mine area at Mississippi Lignite Mining
Company. The increase in capital expenditures associated with mine
development will result in higher depreciation expense in future
periods that will unfavorably affect future operating profit.
Capital expenditures for Mississippi Lignite Mining Company are
expected to return to lower pre-2019 levels in 2022.
Premature closure or reduction in utilization of power plants
served by the Company's mines would have a material adverse effect
on the future Earnings of unconsolidated operations of the Coal
Mining segment and on the long-term earnings and cash flows of
NACCO. The owner of the power plant served by the Company's Sabine
Mine in Texas intends to retire
the power plant in 2023. Deliveries from Sabine to the power plant
are expected to continue until the first quarter of 2023 at which
time Sabine expects to begin final reclamation. Funding for mine
reclamation is the responsibility of the customer. Coteau operates
the Freedom Mine in North Dakota.
All coal production from the Freedom Mine is delivered to Basin
Electric Power Cooperative. Basin Electric utilizes the coal at the
Great Plains Synfuels Plant, Antelope Valley Station and
Leland Olds Station. The Synfuels
Plant is a coal gasification plant that manufactures synthetic
natural gas and produces fertilizers, solvents, phenol, carbon
dioxide, and other chemical products for sale. In June 2021, Basin Electric announced it was
evaluating the Synfuels Plant for possible sale.
North American Mining Results
|
|
|
|
|
|
|
Deliveries for the
second quarter of 2021 and 2020 were as follows:
|
|
2021
|
|
2020
|
|
(in
thousands)
|
Tons
delivered
|
13,511
|
|
|
10,834
|
Key financial results
for the second quarter of 2021 and 2020 were as follows:
|
|
|
|
2021
|
|
2020
|
|
(in
thousands)
|
Revenues
|
$
|
17,486
|
|
$
|
12,048
|
Operating
profit
|
$
|
783
|
|
$
|
544
|
Segment adjusted
EBITDA(1)
|
$
|
1,713
|
|
$
|
1,196
|
|
(1) Segment adjusted EBITDA is a
non-GAAP measure and should not be considered in isolation or as a
substitute for GAAP. See non-GAAP explanation and the related
reconciliations to GAAP on page 12.
|
North American Mining revenues increased primarily as a result
of higher reimbursed costs and a substantial increase in tons
delivered. Reimbursed costs have an offsetting amount in cost of
goods sold and have no impact on operating profit.
North American Mining's second-quarter 2021 operating profit
increased over the second quarter of 2020 primarily due to
favorable changes in the mix of customer requirements. This
improvement was partially offset by higher employee-related costs,
including medical costs, and an increase in business development
expenses. Segment adjusted EBITDA also increased compared with the
second quarter of 2020 due to an increase in operating profit and
an increase in depreciation expense as a result of more equipment
being placed in service to support activities related to newer
contracts.
North American Mining Outlook
North American Mining expects tons delivered, operating profit
and Segment adjusted EBITDA to increase in the second half of 2021
over the second half of 2020. Tons delivered and operating profit
are expected to be higher primarily as a result of increased
production under existing contracts and contributions from new
mining contracts, partially offset by an increase in operating
expenses mainly due to higher employee-related costs, including
medical costs, and anticipated higher business development
expenses. Full-year 2021 operating profit is expected to decrease
moderately compared with 2020 because of the lower first-quarter
2021 results. Segment adjusted EBITDA for the full year is expected
to increase compared with 2020 as the moderate reduction in
operating profit will be more than offset by an increase in
depreciation expense.
During the first quarter of 2021, North American Mining entered
into a 15-year mining services contract with a new customer at a
limestone quarry in Central
Florida. North American Mining is operating a smaller
dragline at this quarry for the next two years while it relocates
and commissions a larger dragline that will increase production
capacity. Deliveries are expected to be approximately 1.5 million
tons annually once mining commences with the larger dragline, which
is anticipated to occur in 2023. North American Mining also amended
a contract with a current customer to operate an additional
dragline at an existing limestone quarry in Florida. Early in the second quarter of 2021,
North American Mining entered into a one-year mining services
contract with an existing customer for a sand and gravel quarry in
Indiana. This customer, which is
among the largest aggregates producers in the United States, is hopeful that this new
quarry will operate for multiple years providing aggregates for a
multi-year transportation infrastructure project near Indianapolis. Deliveries are expected to be
between 0.6 million to 1.0 million tons during the term of the
agreement. North American Mining anticipates that these new or
revised contracts will be accretive to earnings in the second half
of 2021. North American Mining has a substantial pipeline of
potential new projects and is pursuing a number of growth
initiatives that, if successful, would be accretive to future
earnings.
In late July 2021, North American
Mining signed two contracts with a new customer to perform all
mining operations at two sand and gravel quarries located in
Texas and Arkansas. The initial term of each contract is
two years, and one of the contracts automatically extends an
additional two years provided North American Mining is not in
default under that contract. This customer is a leading supplier of
construction materials in North
America. These contracts are expected to be accretive to
future earnings, but due to the timing of contract execution are
not included in the Company's discussion of oulook for the 2021
second half or full year.
North American Mining originally forecasted capital expenditures
of $10 million for 2021. North
American Mining now expects full-year capital expenditures to be
$25 million, with approximately
$19 million expended in the second
half of 2021. In addition to capital expenditures for the
acquisition, relocation and refurbishment of draglines, forecasted
capital expenditures now include the acquisition of other mining
equipment to support the expansion of contract-mining services
beyond North American Mining's
historical dragline-oriented model.
In 2019, North American Mining's subsidiary, Sawtooth Mining,
LLC, entered into a mining agreement to serve as the exclusive
contract miner for the Thacker Pass lithium project in northern
Nevada, owned by Lithium Nevada
Corp., a subsidiary of Lithium Americas Corp. (TSX: LAC) (NYSE:
LAC). All major permits for the Thacker Pass Project are expected
to be received by the end of 2021.
Minerals Management Results
|
Key financial results
for the second quarter of 2021 and 2020 were as follows:
|
|
|
|
2021
|
|
2020
|
|
(in
thousands)
|
Revenues
|
$
|
5,608
|
|
|
$
|
1,987
|
|
Operating
profit
|
$
|
4,173
|
|
|
$
|
510
|
|
Segment adjusted
EBITDA(1)
|
$
|
4,695
|
|
|
$
|
1,412
|
|
|
(1) Segment adjusted EBITDA is a
non-GAAP measure and should not be considered in isolation or as a
substitute for GAAP. See non-GAAP explanation and the related
reconciliations to GAAP on page 12.
|
Minerals Management revenue, operating profit and Segment
adjusted EBITDA increased significantly in the second quarter of
2021 over the second quarter of 2020 primarily due to increased
royalty income generated from newer wells on legacy Ohio mineral interests, as well as royalty
income from the new Permian Basin mineral interests acquired in the
fourth quarter of 2020 and new Eagle Ford Shale mineral
interests acquired in early May 2021.
An increase in natural gas and oil prices also contributed to the
improvement in revenues and operating profit.
Minerals Management Outlook
The Minerals Management segment derives income from
royalty-based leases under which lessees make payments to the
Company based on their sale of natural gas, oil, natural gas
liquids and coal, extracted primarily by third parties.
In 2020, Minerals Management took impairment charges totaling
$7.3 million, $0.6 million and $6.7
million in the second and fourth quarters, respectively,
related to coal-related legacy assets. Excluding these charges,
operating profit and Segment adjusted EBITDA in the Minerals
Management segment is expected to decrease significantly in the
second half of 2021 from the second half of 2020 primarily due to
the natural production decline curve of certain newer wells in
Ohio. Royalty income generated
from the Permian Basin mineral interests acquired in the fourth
quarter of 2020 and the Eagle Ford Shale in May 2021, in addition to favorable changes in oil
and gas market pricing, are expected to partly offset the
reduced earnings in the second half of the year, and contribute to
the expected increase in full-year 2021 operating profit and
Segment adjusted EBITDA over 2020.
Minerals Management began 2021 with a plan to make investments
in mineral and royalty interests totaling approximately
$10.5 million. As part of this
strategy, Minerals Management completed acquisitions totaling
$5.0 million for interests in the
Eagle Ford Shale early in the second quarter of 2021. Minerals
Management is targeting to acquire additional similar investments
of approximately $5.0 million in the
second half of 2021. These investments, in addition to the Permian
Basin interests acquired late in 2020, are expected to continue to
be accretive, but each investment's contribution to earnings is
dependent on the details of each investment, including the size and
type of interests acquired and the stage and timing of mineral
development.
These acquired interests align with the Company's strategy of
selectively acquiring mineral and royalty interests with a balance
of near-term, cash-flow yields and long-term growth potential, in
oil-rich basins offering diversification from the Company's legacy
mineral interests.
Consolidated 2021 Outlook
Management continues to view the long-term business outlook
positively. The long-term outlook for growth in the North American
Mining and Minerals Management segments and in the Company's
Mitigation Resources of North
America® business is strong. Each of these
businesses continues to expand its pipeline of potential new
projects with opportunities for growth and diversification. In the
first half of 2021, North American Mining executed three new
agreements and Minerals Management completed two acquisitions,
demonstrating success in executing on their growth strategies.
The Company expects net income for the 2021 full year to be
significantly higher than 2020, with an anticipated effective
income tax rate between 13% and 15%, both resulting from the
expected termination and release settlements associated with
Falkirk and Bisti Fuels and the absence of the prior-year charges
totaling $12.1 million. Excluding
these items, the Company expects significantly lower net income in
2021 as a result of substantially lower operating profit primarily
due to significantly lower earnings in the Coal Mining segment and
higher unallocated employee-related and business development costs.
Consolidated Adjusted EBITDA in 2021 is expected to increase
moderately over 2020, excluding the termination and release
payments and prior-year impairment charges.
As a result of the termination and release payments, the Company
expects positive cash flow before financing activities in 2021 as
compared to a significant use of cash in 2020, but at a level below
the amount of cash generated in 2019. Consolidated capital
expenditures are expected to be approximately $61 million in 2021.
The extent to which COVID-19 impacts the Company going forward
will depend on numerous factors, including but not limited to the
duration of the ongoing pandemic, the severity of the COVID-19
variants, the effectiveness of actions taken to contain and treat
COVID-19 and its variants, the nature of, and the public's
adherence to, public health guidelines, the pace and acceptance of
vaccinations and subsequent achievement of herd immunity, as well
as the severity of pandemic-related supply chain and cost inflation
challenges and the pace and the extent of economic recovery. While
the Company's existing operations to date have not been materially
affected by the pandemic, future developments, which are highly
uncertain and unpredictable, could significantly and rapidly cause
a deterioration in the Company's results, supply chain channels and
customer demand.
Growth and Diversification
The Company is pursuing growth and diversification by
strategically leveraging its core mining and natural resources
management skills to build a strong portfolio of affiliated
businesses.
North American Mining is pursuing growth and diversification by
expanding the scope of its business development activities to
include potential customers who require a broad range of minerals
and materials and by leveraging the Company's core mining skills to
expand the range of contract mining services it provides. North
American Mining advanced these efforts in early 2021,
when it entered into a contract to mine sand and gravel in
Indiana, and in mid-2021, when it
signed contracts with a leading supplier of construction materials
in North America to perform all
mining operations at two sand and gravel quarries located in
Texas and Arkansas. The new contracts include
responsibility for all mining activities, including pre-strip,
blasting, excavation and load and haul operations. These new
contracts expand the range of contract mining services beyond the
traditional scope of North American Mining's core limestone mining
business and expand its geography beyond Florida. In addition, North American
Mining continues to pursue additional opportunities to
provide comprehensive mining services to operate entire mines, as
it expects to do at the new lithium project in Nevada. The goal is to build North American
Mining into a leading provider of contract mining services for
customers who produce a wide variety of minerals and materials. The
Company believes North American Mining can grow to be a substantial
contributor to operating profit, delivering unlevered after-tax
returns on invested capital in the mid-teens as this business model
matures and achieves significant scale.
The Minerals Management segment continues its efforts to grow
and diversify by pursuing acquisitions of additional mineral and
royalty interests in the United
States, in what the Company believes is a buyer-friendly
market. Once mineral and royalty interests have been acquired, the
Minerals Management segment will benefit from the continued
development of its mineral properties without additional capital
investment. This business model can deliver higher average
operating margins over the life of a reserve than traditional oil
and gas companies that bear the cost of exploration, production
and/or development. Catapult Mineral Partners, the Company's
business unit focused on managing and expanding the Company's
portfolio of oil and gas mineral and royalty interests, has
developed a strong network to source and secure new acquisitions,
and has a pipeline of potential acquisitions under review. The goal
is to construct a diversified portfolio of high-quality oil, gas,
mineral and royalty interests in the
United States that deliver near-term cash flow yields and
long-term projected growth. The Company believes this business will
provide unlevered after-tax returns on invested capital in the
low-to-mid-teens as the portfolio of reserves and mineral interests
grows and this business model matures.
Mitigation Resources of North
America continues to expand its business, which creates and
sells stream and wetland mitigation credits and provides services
to those engaged in permittee-responsible mitigation. This business
offers opportunity for growth and diversification in an industry
where the Company has substantial knowledge and expertise and a
strong reputation. The Mitigation Resources of North America business has achieved several
early successes and is positioned for additional growth. The
Company's goal is to grow Mitigation Resources into one of the ten
largest U.S. providers of mitigation solutions, largely focused on
streams and wetlands, initially in the southeast United States. While this business is in the
early stages of development, the Company believes that Mitigation
Resources can provide solid rates of return as this business
matures.
The Company also continues to pursue activities which can
strengthen the resiliency of its existing coal mining operations.
The Company remains focused on managing coal production costs and
maximizing efficiencies and operating capacity at mine locations to
help customers with management fee contracts be more competitive.
These activities benefit both customers and the Company's Coal
Mining segment, as fuel cost is a significant driver for power
plant dispatch. Increased power plant dispatch results in increased
demand for coal by the Coal Mining segment's customers.
The Company continues to look for opportunities to expand its
coal mining business where it can apply its management fee business
model to assume operation of existing surface coal mining
operations in the United States.
However, opportunities are very limited in the current environment.
Fluctuating natural gas prices and growth in renewable energy
sources, such as wind and solar, are likely to continue to
unfavorably affect the amount of electricity dispatched from
coal-fired power plants. In addition, the political and regulatory
environment is not receptive to development of new coal-fired power
generation projects which would create opportunities to build and
operate new coal mines.
The Company is committed to maintaining a conservative capital
structure as it continues to grow and diversify, while avoiding
unnecessary risk. Strategic diversification will allow for
increased free cash flow that can be re-invested to strengthen and
expand the businesses. The Company also continues to maintain the
highest levels of customer service and operational excellence with
an unwavering focus on safety and environmental
stewardship.
****
Conference Call
In conjunction with this news release, the management of NACCO
Industries will host a conference call on Thursday, August 5, 2021 at 8:30 a.m. Eastern Time. To participate in the
live call, please register more than 15 minutes in advance at
http://www.directeventreg.com/registration/event/6893808 to obtain
the dial-in information and conference call access codes. For those
not planning to ask a question of management, the Company
recommends listening to the call via the online webcast, which can
be accessed through the NACCO Industries' website at
ir.nacco.com/home. Please allow 15 minutes to register, download
and install any necessary audio software required to listen to the
webcast. A replay of the call will be available shortly after the
call ends through August 12, 2021. An
archive of the webcast will also be available on the Company's
website two hours after the live call ends.
Non-GAAP and Other Measures
This release contains non-GAAP financial measures within the
meaning of Regulation G promulgated by the Securities and
Exchange Commission. Included in this release are reconciliations
of these non-GAAP financial measures to the most directly
comparable financial measures calculated in accordance with U.S.
generally accepted accounting principles ("GAAP"). Consolidated
Adjusted EBITDA and Segment adjusted EBITDA are provided solely as
supplemental non-GAAP disclosures of operating results. Management
believes that Consolidated Adjusted EBITDA and Segment adjusted
EBITDA assist investors in understanding the results of operations
of NACCO Industries. In addition, management evaluates results
using these non-GAAP measures.
Forward-looking Statements Disclaimer
The statements contained in this news release 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. Among the factors that could
cause plans, actions and results to differ materially from current
expectations are, without limitation: (1) changes to or termination
of customer or other third-party contracts, or a customer or other
third party default under a contract, (2) a significant reduction
in purchases by the Company's customers, including changes in coal
consumption patterns of U.S. electric power generators, or changes
in the power industry that would affect demand for the Company's
coal and other mineral reserves, (3) the ability of the Company to
access credit in the current economic environment, or obtain
financing at reasonable rates, or at all, and to maintain surety
bonds for mine reclamation as a result of current market sentiment
for fossil fuels, (4) failure to obtain adequate insurance
coverages at reasonable rates, (5) the impact of the COVID-19
pandemic, (6) changes in tax laws or regulatory requirements,
including the elimination of, or reduction in, the percentage
depletion tax deduction, changes in mining or power plant emission
regulations and health, safety or environmental legislation, (7)
changes in costs related to geological and geotechnical conditions,
repairs and maintenance, new equipment and replacement parts, fuel
or other similar items, (8) regulatory actions, changes in mining
permit requirements or delays in obtaining mining permits that
could affect deliveries to customers, (9) weather conditions,
extended power plant outages, liquidity events or other events that
would change the level of customers' coal or aggregates
requirements, (10) weather or equipment problems that could affect
deliveries to customers, (11) failure or delays by the Company's
lessees in achieving expected production of natural gas and other
hydrocarbons; the availability and cost of transportation and
processing services in the areas where the Company's oil and gas
reserves are located; federal and state legislative and regulatory
initiatives relating to hydraulic fracturing; and the ability of
lessees to obtain capital or financing needed for well-development
operations and leasing and development of oil and gas reserves on
federal lands, (12) changes in the costs to reclaim mining areas,
(13) costs to pursue and develop new mining and value-added service
opportunities, (14) delays or reductions in coal or aggregates
deliveries, (15) changes in the prices of hydrocarbons,
particularly diesel fuel, natural gas and oil, (16) the ability to
successfully evaluate investments and achieve intended financial
results in new business and growth initiatives, (17) the effects of
investors' and other stakeholders' increasing attention to
environmental, social and governance ("ESG") matters, and (18)
disruptions from natural or human causes, including severe weather,
accidents, fires, earthquakes and terrorist acts, any of which
could result in suspension of operations or harm to people or the
environment.
About NACCO Industries
NACCO Industries® brings natural resources to life by
delivering aggregates, minerals, reliable fuels and environmental
solutions through its robust portfolio of NACCO Natural Resources
businesses. Learn more about our companies at nacco.com, or
get investor information at ir.nacco.com.
*****
NACCO INDUSTRIES,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
THREE MONTHS
ENDED
|
|
SIX MONTHS
ENDED
|
|
JUNE 30
|
|
JUNE 30
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(In thousands, except
per share data)
|
Revenues
|
$
|
45,896
|
|
|
$
|
35,355
|
|
|
$
|
91,001
|
|
|
$
|
72,999
|
|
Cost of
sales
|
36,911
|
|
|
31,515
|
|
|
74,324
|
|
|
64,078
|
|
Gross
profit
|
8,985
|
|
|
3,840
|
|
|
16,677
|
|
|
8,921
|
|
Earnings of
unconsolidated operations
|
13,542
|
|
|
13,778
|
|
|
28,884
|
|
|
29,781
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
12,878
|
|
|
12,591
|
|
|
26,641
|
|
|
25,318
|
|
Amortization of
intangible assets
|
911
|
|
|
792
|
|
|
1,893
|
|
|
1,569
|
|
Loss (gain) on sale of
assets
|
68
|
|
|
(247)
|
|
|
27
|
|
|
(247)
|
|
|
13,857
|
|
|
13,136
|
|
|
28,561
|
|
|
26,640
|
|
Operating
profit
|
8,670
|
|
|
4,482
|
|
|
17,000
|
|
|
12,062
|
|
Other (income)
expense
|
|
|
|
|
|
|
|
Interest
expense
|
359
|
|
|
330
|
|
|
715
|
|
|
733
|
|
Interest
income
|
(100)
|
|
|
(129)
|
|
|
(220)
|
|
|
(530)
|
|
Closed mine
obligations
|
364
|
|
|
390
|
|
|
747
|
|
|
824
|
|
Gain on equity
securities
|
(1,262)
|
|
|
(1,512)
|
|
|
(2,085)
|
|
|
(316)
|
|
Other, net
|
(127)
|
|
|
(181)
|
|
|
(257)
|
|
|
(329)
|
|
|
(766)
|
|
|
(1,102)
|
|
|
(1,100)
|
|
|
382
|
|
Income before
income tax provision (benefit)
|
9,436
|
|
|
5,584
|
|
|
18,100
|
|
|
11,680
|
|
Income tax provision
(benefit)
|
2,931
|
|
|
(466)
|
|
|
2,634
|
|
|
(536)
|
|
Net
income
|
$
|
6,505
|
|
|
$
|
6,050
|
|
|
$
|
15,466
|
|
|
$
|
12,216
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.91
|
|
|
$
|
0.86
|
|
|
$
|
2.17
|
|
|
$
|
1.74
|
|
Diluted earnings
per share
|
$
|
0.91
|
|
|
$
|
0.86
|
|
|
$
|
2.16
|
|
|
$
|
1.74
|
|
|
|
|
|
|
|
|
|
Basic weighted
average shares outstanding
|
7,153
|
|
|
7,024
|
|
|
7,123
|
|
|
7,010
|
|
Diluted weighted
average shares outstanding
|
7,153
|
|
|
7,024
|
|
|
7,147
|
|
|
7,034
|
|
|
CONSOLIDATED
ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
|
|
|
THREE MONTHS
ENDED
|
|
SIX MONTHS
ENDED
|
|
JUNE 30
|
|
JUNE 30
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in
thousands)
|
Net income
|
$
|
6,505
|
|
|
$
|
6,050
|
|
|
$
|
15,466
|
|
|
$
|
12,216
|
|
Long-lived asset
impairment charges
|
—
|
|
|
575
|
|
|
—
|
|
|
575
|
|
Income tax provision
(benefit)
|
2,931
|
|
|
(466)
|
|
|
2,634
|
|
|
(536)
|
|
Interest
expense
|
359
|
|
|
330
|
|
|
715
|
|
|
733
|
|
Interest
income
|
(100)
|
|
|
(129)
|
|
|
(220)
|
|
|
(530)
|
|
Depreciation,
depletion and amortization expense
|
5,617
|
|
|
4,624
|
|
|
11,202
|
|
|
9,168
|
|
Consolidated Adjusted
EBITDA*
|
$
|
15,312
|
|
|
$
|
10,984
|
|
|
$
|
29,797
|
|
|
$
|
21,626
|
|
|
|
|
|
|
|
|
|
*Consolidated
Adjusted EBITDA is a non-GAAP measure and should not be considered
in isolation or as a substitute for GAAP measures. NACCO defines
Consolidated Adjusted EBITDA as net income before long-lived asset
impairment charges, income taxes, plus net interest expense and
depreciation, depletion and amortization expense. Consolidated
Adjusted EBITDA is not a measure under U.S. GAAP and is not
necessarily comparable to similarly titled measures of other
companies.
|
NACCO INDUSTRIES,
INC. AND SUBSIDIARIES
|
FINANCIAL SEGMENT
HIGHLIGHTS AND SEGMENT ADJUSTED EBITDA RECONCILIATIONS
(UNAUDITED)
|
|
|
Three Months Ended
June 30, 2021
|
|
Coal
Mining
|
|
North
American
Mining
|
|
Minerals
Management
|
|
Unallocated
Items
|
|
Eliminations
|
|
Total
|
|
(In
thousands)
|
Revenues
|
$
|
23,063
|
|
|
$
|
17,486
|
|
|
$
|
5,608
|
|
|
$
|
910
|
|
|
$
|
(1,171)
|
|
|
$
|
45,896
|
|
Cost of
sales
|
19,652
|
|
|
16,206
|
|
|
956
|
|
|
1,235
|
|
|
(1,138)
|
|
|
36,911
|
|
Gross profit
(loss)
|
3,411
|
|
|
1,280
|
|
|
4,652
|
|
|
(325)
|
|
|
(33)
|
|
|
8,985
|
|
Earnings of
unconsolidated operations
|
12,392
|
|
|
1,150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,542
|
|
Operating
expenses*
|
7,261
|
|
|
1,647
|
|
|
479
|
|
|
4,470
|
|
|
—
|
|
|
13,857
|
|
Operating profit
(loss)
|
$
|
8,542
|
|
|
$
|
783
|
|
|
$
|
4,173
|
|
|
$
|
(4,795)
|
|
|
$
|
(33)
|
|
|
$
|
8,670
|
|
Segment adjusted
EBITDA**
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
(loss)
|
$
|
8,542
|
|
|
$
|
783
|
|
|
$
|
4,173
|
|
|
$
|
(4,795)
|
|
|
$
|
(33)
|
|
|
$
|
8,670
|
|
Depreciation,
depletion and amortization
|
4,127
|
|
|
930
|
|
|
522
|
|
|
38
|
|
|
—
|
|
|
5,617
|
|
Segment adjusted
EBITDA**
|
$
|
12,669
|
|
|
$
|
1,713
|
|
|
$
|
4,695
|
|
|
$
|
(4,757)
|
|
|
$
|
(33)
|
|
|
$
|
14,287
|
|
|
|
|
Three Months Ended
June 30, 2020
|
|
Coal
Mining
|
|
North
American
Mining
|
|
Minerals
Management
|
|
Unallocated
Items
|
|
Eliminations
|
|
Total
|
|
(In
thousands)
|
Revenues
|
$
|
21,573
|
|
|
$
|
12,048
|
|
|
$
|
1,987
|
|
|
$
|
327
|
|
|
$
|
(580)
|
|
|
$
|
35,355
|
|
Cost of
sales
|
19,861
|
|
|
11,408
|
|
|
558
|
|
|
355
|
|
|
(667)
|
|
|
31,515
|
|
Gross profit
(loss)
|
1,712
|
|
|
640
|
|
|
1,429
|
|
|
(28)
|
|
|
87
|
|
|
3,840
|
|
Earnings of
unconsolidated operations
|
12,800
|
|
|
978
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,778
|
|
Operating
expenses*
|
7,014
|
|
|
1,074
|
|
|
919
|
|
|
4,130
|
|
|
(1)
|
|
|
13,136
|
|
Operating profit
(loss)
|
$
|
7,498
|
|
|
$
|
544
|
|
|
$
|
510
|
|
|
$
|
(4,158)
|
|
|
$
|
88
|
|
|
$
|
4,482
|
|
Segment adjusted
EBITDA**
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
(loss)
|
$
|
7,498
|
|
|
$
|
544
|
|
|
$
|
510
|
|
|
$
|
(4,158)
|
|
|
$
|
88
|
|
|
$
|
4,482
|
|
Long-lived asset
impairment charges
|
—
|
|
|
—
|
|
|
575
|
|
|
—
|
|
|
—
|
|
|
575
|
|
Depreciation,
depletion and amortization
|
3,615
|
|
|
652
|
|
|
327
|
|
|
30
|
|
|
—
|
|
|
4,624
|
|
Segment adjusted
EBITDA**
|
$
|
11,113
|
|
|
$
|
1,196
|
|
|
$
|
1,412
|
|
|
$
|
(4,128)
|
|
|
$
|
88
|
|
|
$
|
9,681
|
|
|
*Operating expenses
consist of Selling, general and administrative expenses,
Amortization of intangible assets and (Gain) loss on sale of
assets.
|
**Segment adjusted
EBITDA is a non-GAAP measure and should not be considered in
isolation or as a substitute for GAAP measures. NACCO defines
Segment adjusted EBITDA as operating profit (loss) plus long-lived
asset impairment charges and depreciation, depletion and
amortization expense. Segment adjusted EBITDA is not a measure
under U.S. GAAP and is not necessarily comparable with similarly
titled measures of other companies.
|
NACCO INDUSTRIES,
INC. AND SUBSIDIARIES
|
FINANCIAL SEGMENT
HIGHLIGHTS AND SEGMENT ADJUSTED EBITDA RECONCILIATIONS
(UNAUDITED)
|
|
|
Six Months Ended
June 30, 2021
|
|
Coal
Mining
|
|
North
American
Mining
|
|
Minerals
Management
|
|
Unallocated
Items
|
|
Eliminations
|
|
Total
|
|
(In
thousands)
|
Revenues
|
$
|
46,802
|
|
|
$
|
33,628
|
|
|
$
|
11,108
|
|
|
$
|
1,053
|
|
|
$
|
(1,590)
|
|
|
$
|
91,001
|
|
Cost of
sales
|
41,254
|
|
|
31,671
|
|
|
1,643
|
|
|
1,367
|
|
|
(1,611)
|
|
|
74,324
|
|
Gross profit
(loss)
|
5,548
|
|
|
1,957
|
|
|
9,465
|
|
|
(314)
|
|
|
21
|
|
|
16,677
|
|
Earnings of
unconsolidated operations
|
26,796
|
|
|
2,088
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,884
|
|
Operating
expenses*
|
15,118
|
|
|
3,132
|
|
|
1,057
|
|
|
9,254
|
|
|
—
|
|
|
28,561
|
|
Operating profit
(loss)
|
$
|
17,226
|
|
|
$
|
913
|
|
|
$
|
8,408
|
|
|
$
|
(9,568)
|
|
|
$
|
21
|
|
|
$
|
17,000
|
|
Segment adjusted
EBITDA**
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
(loss)
|
$
|
17,226
|
|
|
$
|
913
|
|
|
$
|
8,408
|
|
|
$
|
(9,568)
|
|
|
$
|
21
|
|
|
$
|
17,000
|
|
Depreciation,
depletion and amortization
|
8,334
|
|
|
1,829
|
|
|
969
|
|
|
70
|
|
|
—
|
|
|
11,202
|
|
Segment adjusted
EBITDA**
|
$
|
25,560
|
|
|
$
|
2,742
|
|
|
$
|
9,377
|
|
|
$
|
(9,498)
|
|
|
$
|
21
|
|
|
$
|
28,202
|
|
|
|
|
Six Months Ended June
30, 2020
|
|
Coal
Mining
|
|
North
American
Mining
|
|
Minerals
Management
|
|
Unallocated
Items
|
|
Eliminations
|
|
Total
|
|
(In
thousands)
|
Revenues
|
$
|
42,501
|
|
|
$
|
23,672
|
|
|
$
|
7,228
|
|
|
$
|
353
|
|
|
$
|
(755)
|
|
|
$
|
72,999
|
|
Cost of
sales
|
41,135
|
|
|
21,989
|
|
|
1,256
|
|
|
496
|
|
|
(798)
|
|
|
64,078
|
|
Gross profit
(loss)
|
1,366
|
|
|
1,683
|
|
|
5,972
|
|
|
(143)
|
|
|
43
|
|
|
8,921
|
|
Earnings of
unconsolidated operations
|
27,827
|
|
|
1,954
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,781
|
|
Operating
expenses*
|
14,510
|
|
|
2,362
|
|
|
1,195
|
|
|
8,575
|
|
|
(2)
|
|
|
26,640
|
|
Operating profit
(loss)
|
$
|
14,683
|
|
|
$
|
1,275
|
|
|
$
|
4,777
|
|
|
$
|
(8,718)
|
|
|
$
|
45
|
|
|
$
|
12,062
|
|
Segment adjusted
EBITDA**
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
(loss)
|
$
|
14,683
|
|
|
$
|
1,275
|
|
|
$
|
4,777
|
|
|
$
|
(8,718)
|
|
|
$
|
45
|
|
|
$
|
12,062
|
|
Long-lived asset
impairment charges
|
—
|
|
|
—
|
|
|
575
|
|
|
—
|
|
|
—
|
|
|
575
|
|
Depreciation,
depletion and amortization
|
7,158
|
|
|
1,298
|
|
|
654
|
|
|
58
|
|
|
—
|
|
|
9,168
|
|
Segment adjusted
EBITDA**
|
$
|
21,841
|
|
|
$
|
2,573
|
|
|
$
|
6,006
|
|
|
$
|
(8,660)
|
|
|
$
|
45
|
|
|
$
|
21,805
|
|
|
*Operating expenses
consist of Selling, general and administrative expenses,
Amortization of intangible assets and (Gain) loss on sale of
assets.
|
**Segment adjusted
EBITDA is a non-GAAP measure and should not be considered in
isolation or as a substitute for GAAP measures. NACCO defines
Segment adjusted EBITDA as operating profit (loss) plus long-lived
asset impairment charges and depreciation, depletion and
amortization expense. Segment adjusted EBITDA is not a measure
under U.S. GAAP and is not necessarily comparable with similarly
titled measures of other companies.
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SOURCE NACCO Industries