HYSTER-YALE, INC. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Per Share and Percentage Data) Hyster-Yale Materials Handling, Inc. ("Hyster-Yale" or the "Company") and its subsidiaries, including its operating company Hyster-Yale Group, Inc. ("HYG"), is a leading, globally integrated, full-line lift truck manufacturer. The Company offers a broad array of solutions aimed at meeting the specific materials handling needs of its customers, including attachments and hydrogen fuel cell power products, telematics, automation and fleet management services, as well as a variety of other power options for its lift trucks. The Company, through HYG, designs, engineers, manufactures, sells and services a comprehensive line of lift trucks, attachments and aftermarket parts marketed globally primarily under the Hyster ® and Yale ® brand names, mainly to independent Hyster ® and Yale ® retail dealerships. The materials handling business historically has been cyclical because the rate of orders for lift trucks fluctuates depending on the general level of economic activity in the various industries and countries its customers serve. Lift trucks and component parts are manufactured in the United States, China, Northern Ireland, Mexico, the Netherlands, the Philippines, Japan, Italy, Brazil and Vietnam. The Company operates Bolzoni S.p.A. ("Bolzoni"). Bolzoni is a leading worldwide producer and distributor of attachments, forks and lift tables marketed under the Bolzoni ® , Auramo ® and Meyer ® brand names. Bolzoni products are manufactured in the United States, Italy, China, Germany and Finland. Through the design, production and distribution of a wide range of attachments, Bolzoni has a strong presence in the market niche of lift truck attachments and industrial material handling. The Company operates Nuvera Fuel Cells, LLC ("Nuvera"). Nuvera is an alternative-power technology company focused on the design, manufacture and sale of hydrogen fuel cell stacks and engines. During 2020, broad measures taken by governments, businesses and others across the globe to limit the spread of novel coronavirus ("COVID-19") adversely affected the Company. The resulting significant decline in economic activity also reduced the demand for the Company's products and limited the availability of components from certain suppliers. Production was significantly reduced or suspended at the Company's Chinese and European facilities for certain periods during the first and second quarters of 2020. The Company also initiated several cost reduction measures designed to ease liquidity pressure. These cost containment actions included spending and travel restrictions, significant reductions in temporary personnel, furloughs, suspension of incentive compensation and profit sharing, benefit reductions and salary reductions. Effective January 1, 2021, the Company reinstated pre-pandemic salaries, benefits and incentive compensation programs. The cost containment actions associated with hiring, use of contract and temporary workers, travel and meetings, as well as other discretionary spending are continuing. These measures are expected to remain in place until market and economic uncertainty dissipates and results improve. In addition, the Company adjusted production levels in 2020 at its manufacturing plants to align more closely with the reduced levels of demand, and worked closely with suppliers to help ensure current needs were met while also promoting continuity as the market improved. However, despite these efforts, during the third quarter and first nine months of 2021, the Company experienced further pandemic-related and other global supply chain constraints, component shortages, shipping container availability constraints and higher freight costs, as well as significant material cost inflation resulting from the accelerated pace of the market recovery, all of which have negatively impacted the Company. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Please refer to the discussion of Critical Accounting Policies and Estimates as disclosed on pages 15 through 17 in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Critical Accounting Policies and Estimates have not materially changed since December 31, 2020. See Note 2 to the unaudited condensed consolidated financial statements for a discussion of the new accounting pronouncements adopted on January 1, 2021. 25 Table of Contents FINANCIAL REVIEW The results of operations for the Company were as follows: THREE MONTHS ENDED Favorable / (Unfavorable) NINE MONTHS ENDED Favorable / (Unfavorable) SEPTEMBER 30 SEPTEMBER 30 2021 2020 % Change 2021 2020 % Change Lift truck unit shipments (in thousands) Americas 13.7 12.0 14.2 % 39.0 41.1 (5.1) % EMEA 6.2 5.4 14.8 % 18.6 15.1 23.2 % JAPIC 3.3 3.2 3.1 % 10.6 7.8 35.9 % 23.2 20.6 12.6 % 68.2 64.0 6.6 % Revenues Americas $ 494.3 $ 426.9 15.8 % $ 1,433.1 $ 1,432.4 — % EMEA 153.4 143.8 6.7 % 499.2 416.0 20.0 % JAPIC 56.1 48.0 16.9 % 181.6 140.6 29.2 % Lift truck business 703.8 618.7 13.8 % 2,113.9 1,989.0 6.3 % Bolzoni 90.0 63.3 42.2 % 254.3 215.4 18.1 % Nuvera 0.2 0.7 (71.4) % 0.5 2.8 (82.1) % Eliminations (45.8) (30.3) 51.2 % (122.7) (114.7) 7.0 % $ 748.2 $ 652.4 14.7 % $ 2,246.0 $ 2,092.5 7.3 % Gross profit (loss) Americas $ 44.5 $ 65.7 (32.3) % $ 190.2 $ 240.3 (20.8) % EMEA 18.5 22.4 (17.4) % 68.6 57.4 19.5 % JAPIC 3.9 6.2 (37.1) % 16.7 14.9 12.1 % Lift truck business 66.9 94.3 (29.1) % 275.5 312.6 (11.9) % Bolzoni 15.2 12.1 25.6 % 47.4 40.5 17.0 % Nuvera (16.5) (2.7) (511.1) % (22.3) (8.5) (162.4) % Eliminations (0.5) (0.3) n.m. (0.7) (0.9) n.m. $ 65.1 $ 103.4 (37.0) % $ 299.9 $ 343.7 (12.7) % Selling, general and administrative expenses Americas $ 61.4 $ 49.6 (23.8) % $ 178.9 $ 162.4 (10.2) % EMEA 19.4 19.1 (1.6) % 65.7 61.4 (7.0) % JAPIC 7.4 9.4 21.3 % 24.6 27.6 10.9 % Lift truck business 88.2 78.1 (12.9) % 269.2 251.4 (7.1) % Bolzoni 15.2 12.0 (26.7) % 47.0 38.2 (23.0) % Nuvera 16.0 6.0 (166.7) % 29.0 17.9 (62.0) % $ 119.4 $ 96.1 (24.2) % $ 345.2 $ 307.5 (12.3) % Operating profit (loss) Americas $ (16.9) $ 16.1 (205.0) % $ 11.3 $ 77.9 (85.5) % EMEA (0.9) 3.3 n.m. 2.9 (4.0) (172.5) % JAPIC (3.5) (3.2) (9.4) % (7.9) (12.7) 37.8 % Lift truck business (21.3) 16.2 (231.5) % 6.3 61.2 (89.7) % Bolzoni — 0.1 (100.0) % 0.4 2.3 (82.6) % Nuvera (32.5) (8.7) (273.6) % (51.3) (26.4) (94.3) % Eliminations (0.5) (0.3) n.m. (0.7) (0.9) n.m. $ (54.3) $ 7.3 n.m. $ (45.3) $ 36.2 (225.1) % Interest expense $ 4.1 $ 3.1 (32.3) % $ 10.7 $ 10.7 — % Other (income) expense $ (2.1) $ (2.2) (4.5) % $ (8.1) $ (2.3) n.m. 26 Table of Contents THREE MONTHS ENDED Favorable / (Unfavorable) NINE MONTHS ENDED Favorable / (Unfavorable) SEPTEMBER 30 SEPTEMBER 30 2021 2020 % Change 2021 2020 % Change Net income (loss) attributable to stockholders Americas $ (31.8) $ 10.7 n.m. $ (17.3) $ 52.0 (133.3) % EMEA 0.1 3.7 n.m. 4.9 (0.9) n.m. JAPIC (3.1) (2.8) (10.7) % (4.9) (8.5) 42.4 % Lift truck business (34.8) 11.6 n.m. (17.3) 42.6 (140.6) % Bolzoni 2.2 0.1 n.m. 2.2 2.2 — % Nuvera (38.1) (6.1) n.m. (48.5) (18.6) (160.8) % Eliminations (6.5) (0.5) n.m. (6.1) (2.2) n.m. $ (77.2) $ 5.1 n.m $ (69.7) $ 24.0 n.m. Diluted earnings per share $ (4.59) $ 0.30 n.m. $ (4.15) $ 1.43 n.m. Reported income tax rate (36.4) % 10.9 % (42.8) % 9.0 % n.m. - not meaningful Following is the detail of the Company's unit shipments, bookings and backlog of unfilled orders placed with its manufacturing and assembly operations for new lift trucks, reflected in thousands of units. As of September 30, 2021, substantially all of the Company's backlog is expected to be sold within the next twelve months. THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 2021 2020 2021 2020 Unit backlog, beginning of period 84.9 31.5 40.6 41.2 Unit shipments (23.2) (20.6) (68.2) (64.0) Unit bookings 37.1 22.7 126.4 56.4 Unit backlog, end of period 98.8 33.6 98.8 33.6 The following is the detail of the approximate sales value of the Company's lift truck unit bookings and backlog, reflected in millions of dollars. The dollar value of bookings and backlog is calculated using the current unit bookings and backlog and the forecasted average sales price per unit. THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 2021 2020 2021 2020 Bookings, approximate sales value $ 910 $ 545 $ 2,950 $ 1,360 Backlog, approximate sales value $ 2,450 $ 910 $ 2,450 $ 910 27 Table of Contents Third Quarter of 2021 Compared with Third Quarter of 2020 The following table identifies the components of change in revenues for the third quarter of 2021 compared with the third quarter of 2020: Revenues 2020 $ 652.4 Increase (decrease) in 2021 from: Unit volume and product mix 41.2 Bolzoni revenues 26.7 Parts 17.2 Other 14.5 Foreign currency 6.7 Price 5.5 Eliminations (15.5) Nuvera revenues (0.5) 2021 $ 748.2 Revenues increased 14.7% to $748.2 million in the third quarter of 2021 from $652.4 million in the third quarter of 2020. The increase was primarily due to higher unit and parts volume in the lift truck business and Bolzoni, in addition to improved fleet services revenue, pricing and favorable currency movements from the translation of sales into U.S. dollars. America's revenues increased in the third quarter of 2021 compared with the third quarter of 2020, primarily from higher unit and parts volume and higher fleet service revenue. EMEA's revenues increased mainly due to higher unit and parts volume and favorable foreign currency movements of $3.7 million from the translation of sales into U.S. dollars. JAPIC's revenues increased primarily as a result of improved unit volumes and favorable foreign currency movements of $1.9 million. Bolzoni's revenues increased mainly due to higher unit volume, partially offset by a shift in sales to lower-priced products. The following table identifies the components of change in operating profit for the third quarter of 2021 compared with the third quarter of 2020: Operating Profit (Loss) 2020 $ 7.3 Decrease in 2021 from: Lift truck gross profit (27.6) Nuvera operations (23.8) Lift truck selling, general and administrative expenses (10.1) Bolzoni operations (0.1) 2021 $ (54.3) The Company recognized an operating loss of $54.3 million in the third quarter of 2021 compared with operating profit of $7.3 million in the third quarter of 2020. The change in operating profit (loss) was primarily due to lower gross profit and unfavorable selling, general and administrative expenses in the lift truck business and a larger operating loss at Nuvera. The decrease in gross profit was primarily due to significant material and freight cost inflation due to supply chain and logistics constraints of $37.2 million, mainly in the Americas. The increase in selling, general and administrative expenses in the lift truck business was primarily due to the reinstatement of pre-pandemic employee-related salaries and benefits. In addition, the third quarter of 2021 included $24.7 million of inventory and property, plant and equipment adjustments at Nuvera. See Note 11 for further discussion of Nuvera's adjustments. Americas recognized an operating loss of $16.9 million in the third quarter of 2021 compared with an operating profit of $16.1 million the third quarter of 2020 due to a decrease in gross profit and an increase in selling, general and administrative 28 Table of Contents expenses. Gross profit declined primarily due to material cost inflation and increased freight costs of $32.8 million, net of price increases of $4.5 million, a shift in sales mix to lower-margin lift trucks and higher manufacturing costs resulting from inefficiencies associated with component shortages. The decrease in gross profit was partly offset by the realization of higher margins on parts sales and a $2.2 million favorable adjustment for social contribution taxes previously imposed on material purchases in Brazil. See Note 13 for further discussion. Selling, general and administrative expenses increased mainly as result of the reinstatement of pre-pandemic salaries and benefits that were suspended in 2020. EMEA had an operating loss of $0.9 million in the third quarter of 2021 compared to an operating profit of $3.3 million in the third quarter of 2020. The decrease in gross profit was primarily the result of increases in material and freight costs, higher manufacturing costs resulting from inefficiencies associated with component shortages and the absence of $1.5 million of government subsidies received in the third quarter of 2020. JAPIC's operating loss increased to $3.5 million in the third quarter of 2021 from $3.2 million in the third quarter of 2020 primarily due to lower gross profit from material cost inflation and unfavorable manufacturing variances, partially offset by increased volume and favorable foreign currency movements. Nuvera's operating loss increased to $32.5 million in the third quarter of 2021 compared with $8.7 million in the third quarter of 2020 as result of charges of $24.8 million recorded in the third quarter of 2021 on Nuvera's inventory and property, plant and equipment. See Note 11 for further discussion these charges at Nuvera. The Company recognized net loss attributable to stockholders of $77.2 million in the third quarter of 2021 compared with net income attributable to stockholders of $5.1 million in the third quarter of 2020. The decrease was primarily the result of lower operating profit and a valuation allowance of $38.4 million provided against deferred tax assets. See Note 5 for further discussion of the Company's income tax provision. First Nine Months of 2021 Compared with First Nine Months of 2020 The following table identifies the components of change in revenues for the first nine months of 2021 compared with the first nine months of 2020: Revenues 2020 $ 2,092.5 Increase (decrease) in 2021 from: Foreign currency 43.1 Parts 42.3 Bolzoni revenues 38.9 Other 30.6 Price 10.2 Eliminations (8.0) Nuvera revenues (2.3) Unit volume and product mix (1.3) 2021 $ 2,246.0 Revenues increased 7.3% to $2,246.0 million in the first nine months of 2021 from $2,092.5 million in the first nine months of 2020. The increase was mainly due to favorable currency movements from the translation of sales into U.S. dollars, primarily in EMEA, higher parts volumes in the Americas and EMEA, higher volume at Bolzoni and improved fleet service revenue in the Americas. America's revenues increased slightly in the first nine months of 2021 compared with the first nine months of 2020, primarily from favorable aftermarket sales, including part sales, driven by an increase in customer demand as well as favorable pricing of lift trucks. The increase was partially offset by lower unit volumes due to global supply chain constraints and component shortages. EMEA's revenues increased mainly due to favorable foreign currency movements of $36.5 million from the translation of sales into U.S. dollars and higher unit and parts volume resulting from increased customer demand. 29 Table of Contents JAPIC's revenues increased primarily as a result of improved unit volumes and favorable foreign currency movements of $9.9 million, partially offset by a shift in sales to lower-priced lift trucks. Bolzoni's revenues increased mainly due to higher unit volume. The following table identifies the components of change in operating profit for the first nine months of 2021 compared with the first nine months of 2020: Operating Profit (Loss) 2020 $ 36.2 Decrease in 2021 from: Lift truck gross profit (36.9) Nuvera operations (24.9) Lift truck selling, general and administrative expenses (17.8) Bolzoni operations (1.9) 2021 $ (45.3) The Company recognized operating loss of $45.3 million in the first nine months of 2021 compared with operating profit of $36.2 million in the first nine months of 2020. The decrease in operating profit was primarily due to lower gross profit and unfavorable selling, general and administrative expenses in the lift truck business and a higher operating loss at Nuvera. Gross profit declined mainly due to material cost inflation and increased freight costs of $50.6 million, a shift in sales to lower-margin lift trucks, and higher manufacturing costs resulting from inefficiencies associated with component shortages. The decrease in gross profit was partially offset by favorable parts volume in the Americas and EMEA, favorable foreign currency movements of $13.6 million and a favorable adjustment of $8.5 million for social contribution taxes previously imposed on material purchases in Brazil. In addition, the first nine months of 2020 included $6.5 million of government subsidies at EMEA and Bolzoni. Selling, general and administrative expenses increased as pre-pandemic salaries and benefits were reinstated, including $12.2 million of incentive compensation. Operating profit in the Americas decreased to $11.3 million in the first nine months of 2021 compared with $77.9 million in the first nine months of 2020 due to a decrease in gross profit and higher operating expenses. Gross profit declined mainly due to material cost inflation and increased freight costs of $45.5 million, higher manufacturing costs resulting from inefficiencies associated with component shortages of $10.0 million, a shift in mix to lower-margin products and lower volume. These items were partially offset by favorable parts sales and a favorable adjustment of $8.5 million for social contribution taxes previously imposed on material purchases in Brazil. The increase in selling, general and administrative expenses primarily resulted from the reinstatement of pre-pandemic salaries and benefits, including $8.9 million of incentive compensation. EMEA recognized operating profit of $2.9 million in the first nine months of 2021 compared with an operating loss of $4.0 million in the first nine months of 2020 mainly as a result of improved gross profit partially offset by higher selling, general and administrative expenses. Gross profit increased from favorable foreign currency movements of $6.5 million, improved parts and unit volume and improved pricing, partially offset by the absence of $6.5 million of government subsidies received in the first nine months of 2020. Selling, general and administrative expenses increased primarily as pre-pandemic salaries and benefits were reinstated, including $1.2 million of incentive compensation. JAPIC's operating loss decreased to $7.9 million in the first nine months of 2021 from $12.7 million in the first nine months of 2020 primarily due to improved gross profit from higher unit volume and favorable foreign currency movements of $5.0 million partially offset by material cost inflation as well as higher manufacturing costs and a shift in mix to lower-margin products. Operating profit at Bolzoni decreased to $0.4 million in the first nine months of 2021 compared with $2.3 million in the first nine months of 2020 mainly from material cost inflation, including freight, which offset the improved volumes. Operating profit was also unfavorably affected by the absence of government subsidies of $5.0 million and the reinstatement of pre-pandemic salaries and employee benefits, including $0.7 million of incentive compensation. Nuvera's operating loss increased to $51.3 million in the first nine months of 2021 compared with $26.4 million in the first nine months of 2020 as result of charges of $24.8 million recorded in the first nine months of 2021 on Nuvera's inventory and property, plant and equipment. See Note 11 for further discussion of these charges at Nuvera. 30 Table of Contents The Company recognized net loss attributable to stockholders of $69.7 million in the first nine months of 2021 compared with net income attributable to stockholders of $24.0 million in the first nine months of 2020. The decrease was primarily the result of lower operating profit and a valuation allowance of $38.4 million provided against deferred tax assets in the third quarter of 2021. These items were partially offset by a $4.6 million gain related to the sale of the Company's preferred shares of OneH2 in the first nine months of 2021 and higher equity earnings in unconsolidated subsidiaries. See Note 5 for further discussion of the Company's income tax provision. LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following tables detail the changes in cash flow for the nine months ended September 30: 2021 2020 Change Operating activities: Net income (loss) $ (68.4) $ 25.3 $ (93.7) Depreciation and amortization 34.7 31.8 2.9 Impairment charge 10.0 — 10.0 Dividends from unconsolidated affiliates 5.5 7.3 (1.8) Working capital changes Accounts receivable (70.6) 60.2 (130.8) Inventories (261.9) 71.1 (333.0) Accounts payable and other liabilities 173.1 (119.7) 292.8 Other current assets (12.2) (7.4) (4.8) Other operating activities (2.0) 7.5 (9.5) Net cash provided by (used for) operating activities (191.8) 76.1 (267.9) Investing activities: Expenditures for property, plant and equipment (29.5) (37.2) 7.7 Proceeds from the sale of assets and investment 19.4 7.4 12.0 Net cash used for investing activities (10.1) (29.8) 19.7 Cash flow before financing activities $ (201.9) $ 46.3 $ (248.2) Net cash provided by (used for) operating activities decreased $267.9 million in the first nine months of 2021 compared with the first nine months of 2020, primarily as a result of changes in working capital items and net income (loss). The changes were mainly due to the global supply chain constraints, component shortages, shipping container availability constraints and higher freight costs. The change in net cash used for investing activities during the first nine months of 2021 compared with the first nine months of 2020 is due to the proceeds from the sale of preferred shares of OneH2 for $15.7 million and lower capital expenditures in 2021. 2021 2020 Change Financing activities: Net increase (decrease) of long-term debt and revolving credit agreements $ 138.7 $ (2.7) $ 141.4 Cash dividends paid (16.2) (16.0) (0.2) Financing fees paid (7.6) — (7.6) Other (0.2) (0.4) 0.2 Net cash provided by (used for) financing activities $ 114.7 $ (19.1) $ 133.8 Net cash provided by (used for) financing activities increased $133.8 million in the first nine months of 2021 compared with the first nine months of 2020. The increase was primarily related to additional borrowings from refinancing the Term Loan (as defined below) and on the Facility (as defined below) in the first nine months of 2021 compared to the first nine months of 2020. The borrowings were primarily used to fund working capital needs. The increase was partially offset by financing fees paid in connection with the amendments of the Facility and Term Loan. 31 Table of Contents Financing Activities The Company has a $300.0 million secured, floating-rate revolving credit facility (the "Facility”) that expires in June 2026. There were $73.6 million of borrowings outstanding under the Facility at September 30, 2021. The availability under the Facility at September 30, 2021 was $222.0 million, which reflects reductions of $4.4 million for letters of credit and other restrictions. As of September 30, 2021, the Facility consisted of a U.S. revolving credit facility of $210.0 million and a non-U.S. revolving credit facility of $90.0 million. The obligations under the Facility are generally secured by a first lien on the working capital assets of the borrowers in the Facility, which include but are not limited to, cash and cash equivalents, accounts receivable and inventory (the "Facility Collateral") and a second lien on the Term Loan Collateral (defined below). The approximate book value of assets held as collateral under the Facility was $1.1 billion as of September 30, 2021. Borrowings under the Facility bear interest at a floating rate, which can be a base rate, LIBOR or EURIBOR, as defined in the Facility, plus an applicable margin. The applicable margins are based on the total excess availability, as defined in the Facility, and range from 0.25% to 0.75% for U.S. base rate loans and 1.25% to 1.75% for LIBOR, EURIBOR and foreign base rate loans. The applicable margins, as of September 30, 2021, for U.S. base rate loans and LIBOR loans were 0.25% and 1.25%, respectively. The applicable margin, as of September 30, 2021, for non-U.S. base rate loans and LIBOR loans was 1.25%. The applicable interest rates for borrowings outstanding under the Facility on September 30, 2021 was 3.50%, 1.32% and 1.25% for the U.S. base rate, U.S. LIBOR and foreign LIBOR loans, respectively. The Facility also required the payment of a fee of 0.25% per annum on the unused commitments as of September 30, 2021. The Facility includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company subject to certain thresholds, as provided in the Facility. The Facility limits the payment of dividends and other restricted payments the Company may make unless certain total excess availability and/or fixed charge coverage ratio thresholds, each as set forth in the Facility, are satisfied. The Facility also requires the Company to achieve a minimum fixed charge coverage ratio when total excess availability is less than the greater of 10% of the total borrowing base, as defined in the Facility, and $20.0 million. At September 30, 2021, the Company was in compliance with the covenants in the Facility. The Company also has a $225.0 million term loan (the "Term Loan"), which matures in May 2028. The Term Loan requires quarterly principal payments on the last day of each March, June, September and December commencing September 30, 2021 in an amount equal to $562,500 and the final principal repayment is due in May 2028. The Company may also be required to make mandatory prepayments, in certain circumstances, as provided in the Term Loan. At September 30, 2021, there was $224.4 million of principal outstanding under the Term Loan which has been reduced in the unaudited condensed consolidated balance sheet by $5.5 million for discounts and unamortized deferred financing fees. The obligations under the Term Loan are generally secured by a first priority lien on the present and future shares of capital stock, material real property, fixtures and general intangibles consisting of intellectual property (collectively, the "Term Loan Collateral") and a second priority lien on the Facility Collateral. The approximate book value of assets held as collateral under the Term Loan was $800 million as of September 30, 2021. Borrowings under the Term Loan bear interest at a floating rate, which can be a base rate or Eurodollar rate, as defined in the Term Loan, plus an applicable margin. The applicable margin, as provided in the Term Loan, is 2.50% for base rate loans and 3.50% for Eurodollar loans. The interest rate on the amount outstanding under the Term Loan at September 30, 2021 was 4.00%. In addition, the Term Loan includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company subject to certain thresholds, as provided in the Term Loan. The Term Loan limits the payment of dividends and other restricted payments the Company may make up to $50.0 million in any fiscal year, unless the consolidated total net leverage ratio, as defined in the Term Loan, does not exceed 2.50 to 1.00 at the time of the payment. The Term Loan also contains a provision requiring a premium to be paid in the event of a repricing of the borrowings under the Term Loan, whether by amendment or entry into new loans, within the six-month period following entry into the Term Loan. At September 30, 2021, the Company was in compliance with the covenants in the Term Loan. The Company incurred fees and expenses of $7.6 million in 2021 related to the amendment of the Facility and the Term Loan. These fees were deferred and are being amortized as interest expense over the term of the applicable debt agreements. Fees related to the Term Loan are presented as a direct deduction of the corresponding debt. The Company had other debt outstanding, excluding finance leases, of approximately $109.4 million at September 30, 2021. In addition to the excess availability under the Facility of $222.0 million, the Company had remaining availability of $23.9 million related to other non-U.S. revolving credit agreements. 32 Table of Contents The Company believes funds available from cash on hand, the Facility, other available lines of credit and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments during the next twelve months and until the expiration of the Facility in June 2026. Contractual Obligations, Contingent Liabilities and Commitments During the second quarter of 2021, the Company entered into an agreement providing for the amendment and restatement of the Term Loan, which is described above. As of September 30, 2021, the Company had additional borrowings under the Term Loan, revolving credit agreements and other debt of $130.1 million and higher purchase and other obligations of $145.2 million than the amounts reported on pages 23 and 24 in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Capital Expenditures The following table summarizes actual and planned capital expenditures: Nine Months Ended September 30, 2021 Planned for Remainder of 2021 Planned 2021 Total Actual 2020 Lift truck business $ 20.3 $ 18.2 $ 38.5 $ 44.2 Bolzoni 7.3 3.6 10.9 5.3 Nuvera 1.9 0.6 2.5 2.2 $ 29.5 $ 22.4 $ 51.9 $ 51.7 Planned expenditures for the remainder of 2021 are primarily for product development, improvements at manufacturing locations, improvements to information technology infrastructure and manufacturing equipment. The principal sources of financing for these capital expenditures are expected to be internally generated funds and bank financing. Capital Structure The Company's capital structure is presented below: SEPTEMBER 30 2021 DECEMBER 31 2020 Change Cash and cash equivalents $ 61.4 $ 151.4 $ (90.0) Other net tangible assets 712.2 615.7 96.5 Intangible assets 52.3 58.5 (6.2) Goodwill 112.3 114.7 (2.4) Net assets 938.2 940.3 (2.1) Total debt (428.0) (289.2) (138.8) Total equity $ 510.2 $ 651.1 $ (140.9) Debt to total capitalization 46 % 31 % 15 % OUTLOOK AND STRATEGIC PERSPECTIVE Consolidated Outlook Given the extensive component shortages due to supply chain constraints, significant material and freight cost inflation, as well as continued losses at Nuvera, the Company, on a consolidated basis, expects significant operating and net losses for the 2021 fourth quarter and in the first half of 2022. As the Company continues to evaluate the long-term future cash flow impacts of these issues, additional interim impairment testing may be necessary in future quarters and future impairment charges are reasonably possible. Consolidated results are expected to return to an operating profit in the second half of 2022 assuming reasonable resolution of component shortages and relative stabilization of material and freight costs. The Company also expects to have moderately reduced losses at Nuvera as a result of enhanced fuel cell shipments. While the Company expects to make additional investments in the business during the fourth quarter of 2021, and in 2022, maintaining liquidity will continue to be a priority. Capital expenditures in the fourth quarter of 2021 are expected to be approximately $22 million. 33 Table of Contents Lift Truck Strategic Perspective The global lift truck market is expected to decline in the fourth quarter of 2021 compared with the prior year fourth quarter, but still remain significantly higher than pre-pandemic levels. Markets in 2022 are expected to recede from the historical highs of 2021, but still be higher than pre-pandemic levels. As a result of this market outlook, the Lift Truck business is anticipating a substantial decrease in bookings in the 2021 fourth quarter compared with the third quarter of 2021, and in the succeeding 2022 quarters compared with the respective 2021 quarters. In the first nine months of 2021, the Company has experienced production and shipment levels which are far lower than its objectives due to supply chain logistics constraints. This is anticipated to continue in the 2021 fourth quarter and in at least the first half of 2022. Nonetheless, shipments are expected to increase over the prior year fourth quarter and the third quarter of 2021. Significant material cost inflation and higher freight costs, which continued to worsen in the 2021 third quarter, and the current non-renewal of tariff exclusions are expected to continue to affect the cost of components and freight negatively over the remainder of 2021 compared with the prior year fourth quarter. The Lift Truck business has implemented price increases several times over the course of 2021 to moderate the effect of material cost inflation, but many of the orders in the backlog slotted for production in the remainder of 2021 and the first half of 2022 do not reflect the full effect of all these price increases. As a result, the Company expects to continue to experience low margins in the fourth quarter of 2021 and, at best, in the first half of 2022, due to the lag between when unit price increases went into effect and when they are realized as the units are shipped. The Company will continue to work aggressively to manage supply chain and logistics costs and component availability and tariff exclusions, and will adjust prices accordingly. As a result of these factors, and the increase in costs associated with the reinstatement of pre-pandemic salaries and benefits, significant operating and net losses are expected in the Lift Truck business in the 2021 fourth quarter and in the first half of 2022. From a strategic perspective, the Lift Truck business has three core strategies that are expected to have a transformational impact on the Company’s competitiveness, market position and economic performance. The first is to provide the lowest cost of ownership while enhancing customer productivity. The primary focus of this strategic initiative is the new modular and scalable product projects, which are expected to lay the groundwork for enhanced market position by providing lower cost of ownership and enhanced productivity for the Company’s customers, including low-intensity applications. Additional to this are key projects geared toward electrification of trucks for applications now dominated by internal combustion engine trucks, automation product options and providing telemetry and operator assist systems. The second core strategy is to be the leader in the delivery of industry- and customer-focused solutions. The primary focus for this strategic initiative is transforming the Company's sales approach by using an industry-focused approach to meet its customers' needs. The third core strategy is to be the leader in independent distribution. The main focus of this strategic initiative is on dealer and major account coverage, dealer excellence and ensuring outstanding dealer ownership globally. As a result of these core strategies and the increased shipment volume potential of the current backlog and 2022 expected bookings, the Lift Truck business expects to return to an operating profit in the second half of 2022. Over this period, the Company is assuming the stabilization or reduction of product and transportation costs and the continued expectation of improved component and logistics availability. Over this period and the longer term, the Company is also assuming the continued introduction of the currently released and additional modular and scalable product families and the continued implementation of cost savings initiatives. Bolzoni Strategic Perspective Bolzoni expects increases in operating profit and net income in the fourth quarter of 2021 compared with both the prior-year period and the first nine months of 2021. Over the course of 2022, Bolzoni expects component shortages to moderate and pricing to permit improved returns as the year progresses despite higher costs. Bolzoni continues to focus on implementing its "One Company - 3 Brands" organizational approach to help streamline corporate operations and strengthen its North America and JAPIC commercial operations. Bolzoni is working to increase its Americas business by strengthening its ability to serve key attachment industries and customers in the North America market through the introduction of a broader range of locally produced attachments with shorter lead times, while continuing to sell cylinders and various other components produced in its Sulligent, Alabama plant. Bolzoni is also increasing its sales, marketing and product support capabilities both in North America and Europe based on an industry-specific approach, with an immediate focus on the paper, beverage, appliance, 3PL and automotive industries. 34 Table of Contents Nuvera Strategic Perspective Nuvera continues to focus on serving niche, heavy-duty vehicle applications with expected strong near-term fuel cell adoption potential, using its 45kW and 60kW engines, which were both released for sale late in 2020. As a result of these releases, Nuvera accelerated its 45kW and 60kW engine commercialization operations for the global market. In the fourth quarter of 2021 and in 2022, Nuvera will continue to focus on ramping up demonstrations, quotes and bookings of these products. In addition, Nuvera has initiated development of a new 125kW engine and continues to focus on applications in the forklift truck market. EFFECTS OF FOREIGN CURRENCY The Company 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 fluctuations on revenues, operating profit and net income are addressed in the previous discussions of operating results. See also Item 3, "Quantitative and Qualitative Disclosures About Market Risk,” in Part I of this Quarterly Report on Form 10-Q. FORWARD-LOOKING STATEMENTS The statements contained in this Form 10-Q 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) delays in delivery and other supply chain disruptions, or increases in costs as a result of inflation or otherwise, including materials and transportation costs and shortages, the imposition of tariffs, or the renewal of tariff exclusions, on raw materials or sourced products, and labor or changes in or unavailability of quality suppliers or transporters, (2) the duration and severity of the COVID-19 pandemic, any preventive or protective actions taken by governmental authorities, the effectiveness of actions taken globally to contain or mitigate its effects, and any unfavorable effects of the COVID-19 pandemic on either the Company's or its suppliers plants' capabilities to produce and ship products if COVID-19 continues to spread or quarantines are re-established, (3) the ability of the Company and its dealers, suppliers and end-users to access credit in the current economic environment, or obtain financing at reasonable rates, or at all, as a result of current economic and market conditions, (4) further impairment charges or charges due to the valuation allowances, (5) delays in manufacturing and delivery schedules, (6) reduction in demand for lift trucks, attachments and related aftermarket parts and service on a global basis, including any reduction in demand as a result of a COVID-19 triggered economic recession, (7) the successful commercialization of Nuvera's technology, (8) customer acceptance of pricing, (9) the political and economic uncertainties in the countries where the Company does business, (10) exchange rate fluctuations and monetary policies and other changes in the regulatory climate in the countries in which the Company operates and/or sells products, (11) bankruptcy of or loss of major dealers, retail customers or suppliers, (12) customer acceptance of, changes in the costs of, or delays in the development of new products, (13) introduction of new products by, or more favorable product pricing offered by, competitors, (14) product liability or other litigation, warranty claims or returns of products, (15) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (16) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (17) unfavorable effects of geopolitical and legislative developments on global operations, including without limitation the entry into new trade agreements and the imposition of tariffs and/or economic sanctions.