Leases
We recognize right-of-use assets (ROU assets) and lease liabilities for operating leases of real estate, mining and other equipment that expire at various dates through 2036. The majority of our leases are operating leases. NACCO does not recognize leases with a term of 12 months or less on the balance sheet. Instead, we recognize the related lease expense on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease component. Our lease agreements do not contain lease payments that depend on an index or a rate, as such, minimum lease payments do not include variable lease payments.
Leased assets and liabilities include the following at December 31:
| | | | | | | | | | | | | | |
| Description | Location | 2025 | 2024 | | | |
| Assets | | | | | | |
| Operating | Operating lease right-of-use assets | $ | 9,595 | | $ | 9,661 | | | | |
| Finance | Property, plant and equipment, net (a)
| 52 | | 79 | | | | |
| | | | | | |
| | | | | | |
| Liabilities | | | | | | |
| Current | | | | | | |
| Operating | Other current liabilities | $ | 2,470 | | $ | 1,973 | | | | |
| Finance | Current maturities of long-term debt | 29 | | 27 | | | | |
| Non-current | | | | | | |
| Operating | Operating lease liabilities | $ | 7,950 | | $ | 9,042 | | | | |
| Finance | Long-term debt | 28 | | 57 | | | | |
(a) Finance leased assets are recorded net of accumulated amortization of less than $0.1 million as of December 31, 2025 and December 31, 2024.
The components of lease expense for the years ended December 31 are as follows:
| | | | | | | | | | | |
| Description | Location | 2025 | 2024 |
| Lease expense | | | |
| Operating lease cost | Selling, general and administrative expenses | $ | 2,357 | | $ | 2,191 | |
| Finance lease cost: | | | |
| Amortization of leased assets | Cost of sales | 28 | | 28 | |
| Interest on lease liabilities | Interest expense
| 6 | | 8 | |
| Variable lease expense | Selling, general and administrative expenses | 1,989 | | 955 | |
| Short-term lease expense | Selling, general and administrative expenses | 4,136 | | 5,808 | |
| Total lease expense | | $ | 8,516 | | $ | 8,990 | |
Future minimum finance and operating lease payments were as follows at December 31, 2025:
| | | | | | | | | | | | | | | | | |
| | Finance Leases | | Operating Leases | | Total |
| 2026 | $ | 33 | | | $ | 3,202 | | | $ | 3,235 | |
| 2027 | 21 | | | 2,529 | | | 2,550 | |
| 2028 | 9 | | | 1,821 | | | 1,830 | |
| 2029 | — | | | 1,536 | | | 1,536 | |
| 2030 | — | | | 1,383 | | | 1,383 | |
Subsequent to 2030 | — | | | 2,557 | | | 2,557 | |
| Total minimum lease payments | 63 | | | 13,028 | | | $ | 13,091 | |
| Amounts representing interest | 6 | | | 2,608 | | | |
| Present value of net minimum lease payments | $ | 57 | | | $ | 10,420 | | | |
As most of our leases do not provide an implicit rate, we determine the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. We consider our credit rating and the current economic environment in determining this collateralized rate. The assumptions used in accounting for ASC 842 for the years ended December 31 are as follows:
| | | | | | | | |
| 2025 | 2024 |
| Weighted average remaining lease term (years) | | |
| Operating | 5.42 | 6.70 |
| Finance | 2.10 | 3.01 |
| | |
| Weighted average discount rate | | |
| Operating | 8.19 | % | 8.26 | % |
| Finance | 8.99 | % | 8.80 | % |
The following table details cash paid for amounts included in the measurement of lease liabilities for the years ended December 31:
| | | | | | | | |
| 2025 | 2024 |
| Operating cash flows from operating leases | $ | 2,887 | | $ | 2,509 | |
| Operating cash flows from finance leases | 6 | | 8 | |
| Financing cash flows from finance leases | 27 | | 25 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.