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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-02-24 · 228 added, 191 removed, 332 unchanged (56% of the section changed)

9 unchanged sentences

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.

Lift trucks and component parts are manufactured in the United States, China, Northern Ireland, Mexico, the Netherlands, Brazil, the Philippines, Italy, Japan and Vietnam.

The Company owns a 75% majority interest in Hyster-Yale Maximal Forklift (Zhejiang) Co., Ltd.

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Hyster-Yale Maximal also designs and produces specialized products in the port equipment and rough terrain forklift markets.

The results of Hyster-Yale Maximal are included in the JAPIC segment since the date of acquisition.

During 2021, the Company signed an Equity Transfer Agreement with Y-C Hongkong Holding Co., Limited (“HK Holding Co”), pursuant to which the Company expects to purchase 15% of the equity interest of Hyster-Yale Maximal from HK Holding Co for an aggregate purchase price of $25.2 million in June 2022, which will be paid in annual installments of $8.4 million beginning in June 2022 through June 2024.

Subsequently, the Company will have an option to purchase HK Holding Co's remaining interest in Hyster-Yale Maximal at any time prior to June 8, 2056 for $16.8 million.

If this option is exercised, the Company will own 100% of the equity interest of Hyster-Yale Maximal.

The Company operates Bolzoni S.p.A.

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The Company's aftermarket parts offerings compete with parts manufactured by other lift truck manufacturers, as well as companies that focus solely on the sale of generic parts.

The Company's mission is to be a leading, globally integrated designer, manufacturer and marketer of a complete range of lift truck solutions, offering the lowest cost of ownership and the best overall value by leveraging its high-quality, application-tailored lift trucks, attachments and power solutions.

The Company's objective is to be a leading, globally integrated designer, manufacturer and marketer of a complete range of lift truck solutions offering the lowest cost of ownership and the best overall value by leveraging its high quality, application-tailored lift trucks, attachments and power solutions in order to transform the way the world moves materials from Port to Home.

The Company’s core competency is lift truck manufacturing, but its goal is to become the lift truck solutions partner to the materials handling market, one customer and one industry at a time.

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be the leader in the attachments business and be a leader in fuel cells and their applications.

See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2019 Annual Report on Form 10-K for discussion of financial condition and results of operations for 2019 compared with 2018.

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.

3 unchanged sentences

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.

In addition, the Company

adjusted production levels 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 ensuring continuity as the market improved.

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 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.

See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2020 Annual Report on Form 10-K for discussion of financial condition and results of operations for 2020 compared with 2019.

Critical Accounting Policies and Estimates

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For instance, expected asset lives may be shortened or an impairment recorded based on a change in the expected use of the asset or performance of the related asset group.

The Company periodically evaluates long-lived assets, including intangible assets with finite lives, 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, assets and liabilities are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or liabilities.

The asset group would be considered impaired when the estimated future undiscounted cash flows generated by the asset group are less than carrying value.

If the carrying value of an asset group is considered impaired, an impairment charge is recorded for the amount that the carrying value of the asset group exceeds its fair value.

Fair value is estimated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The determination of asset groups and the underlying cash flows requires the use of significant judgment.

Goodwill is tested for impairment annually as of May 1, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired.

The Company completed the annual testing of impairment of goodwill as of May 1, 2021 and an interim impairment test as of December 31, 2021 at the reporting unit level for the related goodwill.

The Company uses either a qualitative or quantitative analysis to determine whether fair value exceeds carrying value.

An estimate of the fair value of the reporting unit is determined through a combination of comparable market values for similar businesses and discounted cash flows.

These estimates can change significantly based on such factors as the reporting unit's financial performance, economic conditions, interest rates, growth rates, pricing, changes in business strategies

and competition.

Based on the annual testing, the fair value of each reporting unit was in excess of its carrying value and no impairment existed.

During 2021, the Company continued to experience 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.

These items significantly impacted the Company's results of operations in 2021.

In addition, the timeframe for the expected easing of these factors impacted the Company's near and long-term forecasts.

Accordingly, in connection with the preparation of the 2021 financial statements, the Company conducted an interim goodwill impairment test as of December 31, 2021 for the JAPIC and Bolzoni reporting units.

As a result, the Company recognized a $55.6 million goodwill impairment charge for the JAPIC reporting unit in the fourth quarter of 2021, of which $11.7 million related to the non-controlling interest share.

No impairment of goodwill for the Bolzoni reporting unit was identified.

As of December 31, 2021, Bolzoni had $53.8 million of goodwill.

Based on the most recent interim impairment test, Bolzoni's fair value of equity exceeded the carrying value by $37.9 million or approximately 21%.

The Company has intangible assets, including customer and contractual relationships, patents and technology, and trademarks.

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Intangible assets with an indefinite life, including certain trademarks, are not amortized.

Indefinite-lived intangible assets are tested for impairment annually, and are tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired.

Indefinite-lived intangible assets are tested for impairment annually as of May 1, and are tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired.

An impairment loss generally would be recognized when the fair value is less than the carrying value of the indefinite-lived intangible asset.

In addition to the Company's annual testing of impairment, the Company completed an interim impairment test as of December 31, 2021.

Of the $50.7 million of net intangible assets, $17.0 million relates to indefinite-lived trademarks, related to the acquisition of Bolzoni.

3 unchanged sentences

If the resulting discounted cash flows are less than book value of the indefinite-lived intangible asset, an impairment exists and the asset would be adjusted to fair value.

Based on impairment testing as of March 31, 2020 and May 1, 2020, no impairment was identified.

Goodwill is tested for impairment annually as of May 1 and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired.

The Company completed an interim impairment test as of March 31, 2020 and the annual testing of impairment of goodwill as of May 1, 2020 at the reporting unit level for the related goodwill.

The Company uses either a qualitative or quantitative analysis to determine whether fair value exceeds carrying value.

An estimate of the fair value of the reporting unit is determined through a combination of comparable market values for similar businesses and discounted cash flows.

Based on this testing, the fair value of each reporting unit was in excess of its carrying value and no impairment exists.

Based on impairment testing as of May 1, 2021 and December 31, 2021, no impairment was identified.

The asset group would be considered impaired when the estimated future undiscounted cash flows generated by the asset group are less than carrying value.

If the carrying value of an asset group is considered impaired, an impairment charge is recorded for the amount that the carrying value of the asset group exceeds its fair value.

Fair value is estimated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The determination of asset groups and the underlying cash flows requires the use of significant judgment.

The continued high level of disruption to the Company’s manufacturing and logistics operations for 2021 and into 2022 and the effects of the COVID-19 pandemic, including border closures, halted Nuvera's progress on certain research and development agreements that were entered into prior to the start of the pandemic.

In anticipation of fulfilling these agreements, Nuvera made significant investments in manufacturing and equipment expansion, as well as increased inventory levels.

As a result, it was determined in connection with the preparation of the financial statements that the carrying value of the Nuvera fixed assets exceeded the undiscounted cash flows from the assets and the fair value of Nuvera's fixed assets exceeded the carrying value by $10.0 million.

Based on the Company’s analysis, all other remaining long-lived assets with finite lives were not impaired as of December 31, 2021.

Factors which could result in future impairment charges include, but are not limited to, changes in worldwide economic conditions, changes in competitive conditions and customer preferences.

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The Company will continue to monitor its reporting units and asset groups for any indicators of impairment.

Deferred Income Taxes:

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards on a taxing jurisdiction basis.

The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which it expects the temporary differences to be recovered or paid.

generally accepted accounting principles for income taxes requires a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined as a

likelihood of more than 50%) such assets will not be realized.

The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns and future profitability.

The Company's accounting for deferred tax consequences represents its best estimate of those future events.

Changes in the Company's estimates, due to unanticipated events or otherwise, could have a material effect on its financial condition and results of operations.

The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required or no longer needed.

At December 31, 2021, the Company had gross deferred tax assets of $113.7 million which were reduced by valuation allowances of $94.4 million and gross deferred tax liabilities of $28.3 million.

Product liabilities :

The Company is generally self-insured for product liability claims, although catastrophic insurance coverage is retained for potentially significant individual claims and the Company also has insurance for certain historic claims.

The Company provides for the estimated cost of personal and property damage relating to its products based on a review of historical experience and consideration of any known trends.

1 unchanged sentence

While the Company engages in extensive product quality reviews and customer education programs, the product liability provision is affected by the number and magnitude of claims of alleged product-related injury and property damage and the cost to defend those claims.

In addition, the estimates regarding the magnitude of claims are affected by changes in assumptions regarding medical costs, inflation rates and trends in damages awarded by juries.

In addition, the estimates regarding the magnitude of claims are affected by changes in assumptions regarding medical costs, legal defense costs, inflation rates and trends in damages awarded by juries.

Changes in the assumptions regarding any one of these factors could result in a change in the estimate of the magnitude of claims.

1 unchanged sentence

Although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change the estimates in the future.

Self-insurance liabilities :

The Company is generally self-insured for product liability, environmental liability and medical and workers’ compensation claims.

For product liability, catastrophic insurance coverage is retained for potentially significant individual claims.

The Company also has insurance for certain historic product liability 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, legal defense costs, 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 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.

Product warranties :

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The Company's past results of operations have not been materially affected by a change in the estimate of product warranties and although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change the estimates in the future.

Revenue recognition :

Revenue is recognized when obligations under the terms of a contract with the customer are satisfied which occurs when control of products or services are transferred to the customer.

Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services.

The satisfaction of performance obligations under the terms of a revenue contract generally gives rise for the right to payment from the customer.

The Company's standard payment terms vary by the type and location of the customer and the products or services offered.

Generally, the time between when revenue is recognized and when payment is due is not significant.

Given the insignificant days between revenue recognition and receipt of payment, financing components do not exist between the Company and its customers.

Taxes collected from customers are excluded from revenue.

The estimated costs of product warranties are recognized as expense when the products are sold.

See Note 16 for further information on product warranties.

The majority of the Company's sales contracts contain performance obligations satisfied at a point in time when title and risks and rewards of ownership have transferred to the customer.

Revenue for service contracts are recognized as the services are provided.

See Note 3 for further information on revenue recognition.

Retirement benefit plans :

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$ 3,075.7 $ 2,812.1 9.4 %

Favorable / (Unfavorable) % Change

2021 2020 2021 vs.

Gross profit (loss)

27 unchanged sentences

Income before income taxes $ (154.9) $ 42.2 (467.1) %

Favorable / (Unfavorable) % Change

2020 2019 2020 vs.

Net income (loss) attributable to stockholders

28 unchanged sentences

Increase (decrease) in 2021 from:

Unit volume and product mix (437.2)

Bolzoni revenues 64.1

Nuvera revenues (6.2)

Unit volume and product mix 53.7

Foreign currency 41.8

Eliminations 39.5

Unit price 27.7

Eliminations (21.8)

Nuvera revenues (3.2)

2021 $ 3,075.7

Revenues decreased 14.6% to $2,812.1 million in 2020 from $3,291.8 million in 2019, mainly due to lower unit and part volumes in all geographic segments of the lift truck business and Bolzoni, primarily due to the COVID-19 pandemic and the resulting significant decline in economic activity.

The decrease in revenue was partially offset by improved pricing in all geographic regions.

Nuvera's revenues decreased primarily due to reduced third-party fuel cell development services in 2020 compared to 2019.

The following table identifies the components of change in operating profit for 2020 compared with 2019:

Operating Profit

Revenues increased 9.4% to $3,075.7 million in 2021 from $2,812.1 million in 2020.

The increase was primarily due to higher unit and parts volume in the lift truck business and Bolzoni.

In addition, revenues increased from favorable currency movements from the translation of sales into U.S.

dollars, mainly in EMEA, as well as improved fleet service revenue and pricing in the Americas.

Revenues in 2020 were significantly impacted by the COVID-19 pandemic and the resulting significant decline in economic activity.

America's revenues increased in 2021 compared with 2020, primarily from favorable aftermarket sales, including parts sales, driven by an increase in customer demand, as well as the favorable impact of price increases and higher fleet service revenue.

EMEA's revenues increased mainly due to favorable foreign currency movements of $34.0 million from the translation of sales into U.S.

dollars and higher unit and parts volumes resulting from increased customer demand.

JAPIC's revenues increased primarily as a result of improved unit volumes and favorable foreign currency movements of $10.8 million, partially offset by a shift in sales to lower-priced lift trucks.

Bolzoni's revenues increased mainly due to higher unit volume resulting from increased customer demand.

Nuvera's revenues decreased primarily due to lower shipments of fuel cells and reduced third-party fuel cell development services in 2021 compared with 2020.

The following table identifies the components of change in operating profit (loss) for 2021 compared with 2020:

Operating Profit (Loss)

Increase (decrease) in 2021 from:

Lift truck gross profit (70.7)

Bolzoni operations (3.7)

Lift truck gross profit and eliminations (95.6)

Lift truck selling, general and administrative expenses (22.0)

Nuvera operations (26.2)

The Company recognized operating profit of $49.9 million in 2020 compared with $53.9 million in 2019.

The decrease in operating profit was mainly due to lower gross profit, primarily from lower unit and parts volume due to the COVID-19 pandemic and the resulting significant decline in economic activity in all geographic lift truck segments and Bolzoni.

The prior year also included $11.8 million of favorable retroactive tariff exclusion adjustments for certain components imported from China.

These items were partially offset by favorable pricing in all geographic lift truck segments.

The decline in gross profit was offset by lower selling, general and administrative expenses at all locations as the Company implemented cost containment actions to mitigate the impact of the COVID-19 pandemic, $7.8 million of COVID-related government subsidies in EMEA and lower provisions for estimated self-insurance claims during 2020 compared with 2019.

The reduction in selling, general and administrative expenses was slightly offset by restructuring charges of $4.4 million recognized in 2020, including $2.0 million in EMEA, $1.4 million in JAPIC and $1.0 million in the Americas.

The Company recognized net income attributable to stockholders of $37.1 million in 2020 compared with $35.8 million in 2019.

The increase was primarily the result of lower interest expense and favorable tax adjustments in 2020.

These items were partially offset by lower operating profit and lower equity earnings of unconsolidated subsidiaries.

See "Financial Review - Income Taxes" and Note 7 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of income taxes.

Bolzoni operations (2.8)

Goodwill impairment charge (55.6)

2021 $ (152.3)

The Company recognized an operating loss of $152.3 million in 2021 compared with operating profit of $49.9 million in 2020.

The change in operating profit (loss) was mainly due to lower gross profit, a non-cash impairment charge for goodwill of $55.6 million in JAPIC, unfavorable selling, general and administrative expenses in the lift truck business and a larger operating loss at Nuvera mainly from $26.1 million of non-cash inventory and property, plant and equipment adjustments.

The decrease in gross profit was primarily due to significant material and freight cost inflation due to supply chain and logistics constraints of $125.1 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.

See Notes 10 and 11 for further discussion of Nuvera's adjustments.

Americas recognized an operating loss of $19.7 million in 2021 compared with an operating profit of $102.1 million in 2020 due to a decrease in gross profit and an increase in selling, general and administrative expenses.

Gross profit declined primarily due to material cost inflation and increased freight costs of $107.5 million, net of price increases of $22.1 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 $8.5 million favorable adjustment for social contribution taxes previously imposed on material purchases in Brazil.

See Note 16 for further discussion of the adjustment in Brazil.

Selling, general and administrative expenses increased mainly as result of the reinstatement of pre-pandemic salaries and benefits that were suspended in 2020.

EMEA's operating profit declined from $3.1 million in 2020 to $0.3 million in 2021.

The decrease in operating profit was primarily the result of higher selling, general and administrative expenses partially offset by improved gross profit.

Selling, general and administrative expenses increased primarily as pre-pandemic salaries and benefits were reinstated, including $1.7 million of incentive compensation.

Gross profit increased from favorable foreign currency movements of $6.9 million, improved parts and unit volume and improved pricing, partially offset by material cost inflation and higher manufacturing costs resulting from inefficiencies associated with component shortages and the absence of $7.8 million of government subsidies received in 2020.

JAPIC's operating loss increased to $67.5 million in 2021 from $19.6 million in 2020 primarily due to a non-cash impairment charge for goodwill of $55.6 million.

The goodwill impairment was partially offset by lower selling, general and administrative expenses as a result of cost cutting-initiatives and the absence of prior year restructuring costs.

Bolzoni recognized an operating loss of $1.8 million is 2021 compared with operating profit of $1.0 million in 2020.

Volume improvements from higher customer demand were completely offset by higher material and freight costs as well as the reinstatement of pre-pandemic salaries and benefits that were suspended in 2020, including the absence of $5.2 million of government subsidies received in 2020.

Nuvera's operating loss increased to $62.3 million in 2021 compared with $36.1 million in 2020 as a result of non-cash charges of $26.1 million recorded in 2021 for Nuvera's inventory and property, plant and equipment.

See Note 10 and 11 for further discussion of these charges at Nuvera.

The Company recognized a net loss attributable to stockholders of $173.0 million in 2021 compared with net income attributable to stockholders of $37.1 million in 2020.

The decrease was primarily the result of lower operating profit and a valuation allowance of $58.6 million provided against deferred tax assets.

These items were partially offset by the non-controlling interest share of the goodwill impairment charge at JAPIC of $11.7 million, a $4.6 million gain related to the sale of the Company's preferred shares of OneH2 in 2021 and higher equity earnings in unconsolidated subsidiaries.

See "Financial

Review - Income Taxes" and Note 6 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of income taxes.

The income tax provision includes U.S.

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income taxes.

In determining the effective income tax rate, the Company analyzes various factors, including annual earnings, the laws of taxing jurisdictions in which the earnings were generated, the impact of state and local income taxes, the ability to use tax credits, net operating loss and capital loss carryforwards, and available tax planning alternatives.

In determining the effective income tax rate, the Company analyzes various factors, including annual earnings or losses, the laws of taxing jurisdictions in which the earnings or losses were generated, the impact of state and local income taxes, the ability to use tax credits, net operating loss carryforwards and carrybacks, capital loss carryforwards, and available tax planning alternatives.

Discrete items, including the effect of changes in tax laws, tax rates, and certain items with respect to valuation allowances or other unusual or non-recurring tax adjustments are reflected in the interim period in which they occur.

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Changes in the Company's estimates, due to unanticipated events or otherwise, could have a material effect on its financial condition and results of operations.

The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required.

After the utilization of existing tax credits, the Company will pay cash taxes, including state income taxes, of $17.7 million with respect to the transition tax payable, as a result of the Tax Reform Act, over an installment period of eight years beginning in 2018.

The Company provided for the anticipated withholding taxes on unremitted non-U.S.

earnings for which no reinvestment plan has been identified and that may be repatriated in the foreseeable future.

As such, the Company has provided a deferred tax liability with respect to these earnings of $1.0 million and $1.7 million at December 31, 2020 and 2019, respectively.

A reconciliation of the consolidated federal statutory and reported income tax is as follows for the years ended December 31:

Income before income taxes $ 42.2 $ 47.9

The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required or no longer needed.

During 2021, the Company recognized a tax charge of $24.8 million, for the establishment of a valuation allowance against the beginning of the year balance of the Company’s U.S.

and United Kingdom deferred tax assets, excluding the portion of assets available to be carried back to the prior tax year.

Based upon a review of the Company’s recent operations, including cumulative U.S.

pretax losses, lack of available tax planning strategies and declining forecasts due to supply and logistics constraints, the evidence available no longer supported a more likely than not standard for realization of these deferred tax assets.

Although the Company projects earnings over the longer term for these operations, due to the cumulative losses such longer-term forecasts are not sufficient evidence to support the future utilization of deferred tax assets.

Additionally, $32.5 million of valuation allowance expense, related to these operations, was provided against deferred tax assets generated in the current year.

A reconciliation of the consolidated U.S.

federal statutory rate and reported income tax rate is as follows for the years ended December 31:

Income (loss) before income taxes $ (154.9) $ 42.2

Statutory taxes at 21% $ (32.5) $ 8.9

Permanent adjustments:

Federal income tax credits (2.2) (2.8)

Equity interest earnings (1.0) (1.5)

rate differences (0.1) (0.9)

Valuation allowance 33.6 2.1

rate differences 8.8 (0.1)

Global intangible low-taxed income 5.2 1.9

Base-erosion and anti-abuse tax 0.8 1.4

Other 1.5 0.4

Tax controversy resolution 0.4 —

State income taxes (5.6) 0.3

Federal income tax credits (1.9) (2.2)

Equity interest earnings (1.8) (1.0)

Base-erosion and anti-abuse tax — 0.8

Discrete items:

Tax controversy resolution (5.8) (1.4)

Valuation allowance 25.0 0.8

Other 2.4 (1.5)

Tax controversy resolution (4.9) (5.8)

Provision to return adjustments (1.9) (0.9)

Valuation allowance 0.8 0.3

$ 20.6 $ (7.4)

Income tax provision $ 28.3 $ 3.7

Reported income tax rate (18.3) % 8.8 %

The Company's effective income tax rate differs from the U.S.

federal statutory tax rate primarily as a result of federal research and energy credits, income taxed in non-U.S.

jurisdictions, equity interest earnings, global intangible low-taxed income, base-erosion and anti-abuse tax and changes in valuation allowances primarily in non-U.S.

jurisdictions.

The Company's reported income tax rate differs from the U.S.

federal statutory tax rate primarily as a result of changes in valuation allowances, income taxed in non-U.S.

jurisdictions, global intangible low-taxed income, state income taxes, federal research and energy credits and equity interest earnings.

Other permanent adjustments include non-deductible compensation and anticipated withholding tax on unremitted non-U.S.

The effect of discrete items on the reported income tax rate include the change in tax reserves for controversy resolution primarily driven by the expiration of the applicable statutes of limitation.

During 2020, $4.3 million of the tax controversy benefit recognized relates to prior business acquisitions that was offset with the pretax reduction of the related indemnity receivable.

In addition, the Company recognized the effect of the Tax Reform Act as discrete adjustment in 2019.

The effect of discrete items on the reported income tax rate include the establishment of a valuation allowance on deferred tax assets and the change in tax reserves for controversy resolution primarily driven by the expiration of the applicable statutes of limitation.

The tax controversy benefits recognized relate to prior business acquisitions that were offset with the pretax reduction of the related indemnity receivable in the amounts of $3.2 million and $4.3 million in 2021 and 2020, respectively.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act") eliminates the option to deduct research and development expenditures immediately in the year incurred and requires U.S.

taxpayers to amortize such expenditures over five to fifteen years depending upon whether the activities were incurred in the U.S.

or outside of the U.S.

Without the option to deduct these expenses in the year incurred, the Company expects this change to have a material impact upon our future cash payments for taxes.

Under the assumption that this legislation is not modified or repealed, the impact will continue over the fifteen year maximum amortization period, but will decrease each year until the end of the fifteen year deferral period.

See Note 6 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of income taxes.

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Operating activities:

Net income $ 38.5 $ 36.6 $ 1.9

Net income (loss) $ (183.2) $ 38.5 $ (221.7)

Depreciation and amortization 46.2 42.9 3.3

Impairment charges 65.6 — 65.6

Stock-based compensation 4.0 1.3 2.7

Dividends from unconsolidated affiliates 5.5 7.3 (1.8)

Other 6.0 10.1 (4.1)

Working capital changes:

Net cash provided by operating activities 166.9 76.7 90.2

Accounts receivable (54.6) 68.9 (123.5)

Inventories (289.7) 66.6 (356.3)

Accounts payable and other liabilities 176.0 (61.0) 237.0

Other current assets (12.5) (3.6) (8.9)

Other operating activities (10.8) 6.0 (16.8)

Net cash provided by (used for) operating activities (253.5) 166.9 (420.4)

2021 2020 Change

Investing activities:

Expenditures for property, plant and equipment (44.3) (51.7) 7.4

Proceeds from the sale of property, plant and equipment 8.0 7.7 0.3

Proceeds from the sale of assets and investment 19.8 8.0 11.8

Net cash used for investing activities (24.5) (43.7) 19.2

Cash flow before financing activities $ (278.0) $ 123.2 $ (401.2)

Net cash provided by operating activities increased $90.2 million in 2020 compared with 2019, primarily as a result of the change in working capital items.

During 2020, working capital was significantly affected by the COVID-19 pandemic and the resulting significant decline in economic activity.

Accounts receivable and inventory were significantly reduced compared with 2019 as the Company adjusted to reduced demand.

In addition, other liabilities decreased during 2020 compared with 2019 mainly as a result of lower deferred revenue and accruals for employee-related compensation due to cost cutting measures.

Net cash provided by (used for) operating activities decreased $420.4 million in 2021 compared with 2020, primarily as a result of the change 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.

In addition, the Company recorded non-cash charges of $55.6 million and $10.0 million in goodwill and long-lived asset impairments, respectively, in the year ended December 31, 2021.

The change in net cash used for investing activities during 2021 compared with 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 reduction of long-term debt and revolving credit agreements $ (18.9) $ (29.8) $ 10.9

Net increase (decrease) in long-term debt and revolving credit agreements $ 223.0 $ (18.9) $ 241.9

Cash dividends paid (21.6) (21.3) (0.3)

Financing fees paid (7.6) — (7.6)

Other (0.2) (0.4) 0.2

Net cash used for financing activities $ (40.6) $ (51.6) $ 11.0

Net cash provided by (used for) financing activities $ 193.6 $ (40.6) $ 234.2

Net cash provided by (used for) financing activities increased $234.2 million in 2021 compared with 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 2021.

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.

Financing Activities

The Company has a $240.0 million secured, floating-rate revolving credit facility (the "Facility") that expires in April 2022.

There were no borrowings outstanding under the Facility at December 31, 2020.

The Company has a $300.0 million secured, floating-rate revolving credit facility (the "Facility") that expires in June 2026.

There were $155.0 million borrowings outstanding under the Facility at December 31, 2021.

The availability under the Facility at December 31, 2021 was $140.1 million, which reflects reductions of $4.9 million for letters of credit and other restrictions.

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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 $900 million as of December 31, 2020.

Borrowings bear interest at a floating rate based on a base rate or LIBOR, as defined in the Facility, plus an applicable margin.

The Facility replaced the Company's previous revolving credit facility, which was to expire April 28, 2022.

The Facility can be increased up to $400.0 million over the term of the Facility in minimum increments of $10.0 million, subject to approval by the lenders.

The obligations under the Facility are generally secured by a first priority lien on working capital assets of the borrowers in the Facility, which includes but is not limited to cash and cash equivalents, accounts receivable and inventory, and a second priority lien on the present and future shares of capital stock, fixtures and general intangibles consisting of intellectual property.

The approximate book value of assets held as collateral under the Facility was $1.1 billion as of December 31, 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 non-U.S.

base rate loans.

The applicable margins, as of December 31, 2021, for U.S.

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base rate loans and LIBOR loans was 1.25%.

applicable interest rates for borrowings outstanding under the Facility on December 31, 2021 was 3.75%, 1.60% and 1.50% for the U.S.

base rate, LIBOR and foreign EURIBOR loans, respectively.

The Facility also required the payment of a fee of 0.25% per annum on the unused commitments as of December 31, 2021.

The Facility includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company and its subsidiaries subject to certain thresholds, as set forth in the Facility, and limits the payment of dividends.

If average availability for both total and U.S.

revolving credit facilities, on a pro forma basis, is greater than 15% and less than or equal to 20%, the Company may pay dividends subject to achieving a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00, as defined in the Facility.

If the average availability is greater than 20% for both total and U.S.

revolving credit facilities, on a pro forma basis, the Company may pay dividends without any minimum Fixed Charge Coverage Ratio requirement.

The Facility also requires the Company to achieve a minimum Fixed Charge Coverage Ratio in certain circumstances in which total

excess availability is less than 10% of the total commitments under the Facility or excess availability under the U.S.

revolving credit facility is less than 10% of the U.S.

revolver commitments, as defined in the Facility.

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 December 31, 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 business day of each March, June, September and December in an amount equal to $2.5 million.

The final principal repayment is due on May 30, 2023.

The Term Loan replaced the Company’s previous term loan facility, which was set to mature on May 30, 2023.

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 December 31, 2020, there was $165.0 million of principle outstanding under the Term Loan which has been reduced in the consolidated balance sheet by $1.9 million of 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.

At December 31, 2021, there was $223.9 million of principal outstanding under the Term Loan which has been reduced in the consolidated balance sheet by $5.3 million of 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 and a second priority lien on working capital assets of the borrowers of the Facility, which includes, but is not limited to cash and cash equivalents, accounts receivable and inventory.

The approximate book value of assets held as collateral under the Term Loan was $700 million as of December 31, 2021.

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base rate loans and 3.50% for Eurodollar loans.

In addition, the Term Loan includes a Eurodollar rate floor of 0.50%.

The interest rate on the amount outstanding under the Term Loan at December 31, 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 regularly scheduled dividends and other restricted payments to $50.0 million in any fiscal year, unless the consolidated total net leverage ratio, as defined in the Term Loan, does not exceed 1.75 to 1.00 at the time of the payment.

The Term Loan limits the payment of dividends and other restricted payments the Company may make 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.

At December 31, 2021, the Company was in compliance with the covenants in the Term Loan.

The Company incurred fees of $0.4 million in 2019.

The Company incurred fees of $7.6 million and $0.4 million in 2021 and 2019, respectively.

No fees were incurred in 2020.

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revolving credit agreements.

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 April 2022.

Contractual Obligations, Contingent Liabilities and Commitments

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Total contractual cash obligations $ 1,428.0 $ 1,032.4 $ 54.9 $ 41.1 $ 32.4 $ 17.9 $ 249.3

After the utilization of existing tax credits, the Company will pay cash taxes, including state income taxes, of $17.7 million with respect to the transition tax payable over an installment period of eight years beginning in 2018.

The principal sources of financing for these contractual obligations are expected to be internally generated funds and bank financing.

The Company has a long-term liability of approximately $13.0 million for unrecognized tax benefits, including interest and penalties, as of December 31, 2021.

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$ 31.5 $ 44.3 $ 51.7

Planned expenditures in 2021 are primarily for product development and tooling, improvements to information technology infrastructure, improvements at manufacturing locations and manufacturing equipment.

The principal sources of financing for these capital expenditures are expected to be internally generated funds and bank financing.

Planned expenditures in 2022 are primarily for product development and tooling, improvements at manufacturing locations and manufacturing equipment and improvements to information technology infrastructure.

The primary sources of financing for these capital expenditures are expected to be internally generated funds and bank financing.

Capital Structure

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See Note 18 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of related party transactions.

BUSINESS PROSPECTS

Lift truck markets grew faster than anticipated during the fourth quarter of 2020, with markets ending the quarter significantly higher than pre-pandemic levels.

Excluding China, which increased 56% over the prior year fourth quarter, the global lift truck market increased 9.3% compared with the fourth quarter of 2019.

Compared to the third quarter of 2020, the global lift truck market, including China, increased 11.4% in the fourth quarter driven by a 28.1% increase in the Americas and a 22.9% increase in EMEA, as well as a 19.7% increase in China.

The market improvements over the third quarter, and additional large customer bookings, translated into a substantial increase in the Company's 2020 fourth quarter bookings.

The Company expects increased bookings in 2021 as a result of markets that are anticipated to continue to improve over pre-pandemic levels, and as a result of the strategic projects the Company continues to pursue at each of its businesses to generate sound long-term financial returns.

Although, definitive time frames for achieving the financial returns are still uncertain due to both the timing of the full impact of the strategic projects and the timing of the moderating financial impact of the pandemic.

Until COVID-19 cases are consistently at very low levels, the Company plans to continue to maintain procedures designed to limit the exposure of employees to the spread of COVID-19, including adjusting shift schedules to promote social distancing, enhancing cleaning and sanitation, promoting recommended hygiene practices, limiting workplace access and maintaining remote working where possible.

At the same time, the Company and its employees remain committed to meeting the needs of dealers and end customers by ensuring they receive equipment, parts and services in a timely manner to the degree reasonably possible.

While recent market and bookings activity is strong and growth since the 2020 second-quarter shutdowns has been better than expected, the level of future bookings and the resulting shipments are still uncertain.

Overall, the Company continues to operate on the assumption that the economic and market environment will remain difficult in 2021 until the COVID-19 vaccinations and alternative therapies are more widely available and cases decrease to substantially lower levels.

Beginning in March 2020, the Company put in place plans to mitigate the impact of declining markets and bookings and the consequential impact of reduced manufacturing activity from pandemic-related shutdowns by initiating cost reduction measures which were designed to lower costs and enhance liquidity.

These measures 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 further, which the Company expects to occur over the course of 2021.

In preparation for a return to more normal, pre-pandemic operations and expense levels, the Company performed an in-depth global review to help establish a more sustainable long-term cost structure.

As a result of this review, in the 2020 fourth quarter, the Company recognized a restructuring charge of approximately $4.4 million, largely for severance, related to optimizing global commercial operations.

These expensed severance amounts are expected to be paid in 2021.

The Company also anticipates it will incur subsequent charges of approximately $1.4 million in 2021 for additional costs related to the restructuring.

Estimated benefits from this restructuring program are expected to be approximately $10.4 million annually beginning in 2022.

The Company adjusted production levels at its manufacturing plants during 2020 to align them more closely with market demand and target bookings levels.

Throughout the fourth quarter, the Company increased production levels moderately to

adjust for improved market levels, but maintained its focus on establishing a strong, stable backlog level as a foundation for higher production rates in 2021 given market growth expectations and expected bookings and backlog, barring any new widespread COVID-19-related shutdowns.

However, certain new or intensifying headwinds are expected to present significant challenges for the Company in 2021.

The Company is anticipating further pandemic-related global supply chain constraints, component shortages, shipping container availability and higher freight costs, as well as anticipated significant material cost inflation resulting from the increasing pace of the expected market recovery and the likelihood of the non-renewal of tariff exclusions.

These items could affect both the costs of the Company's products and the ability to ramp up production rates.

The Company will continue to focus on carefully adjusting production levels to match market and bookings changes and supply availability by working closely with suppliers to help ensure adequate component supply levels as its production levels change.

The Company anticipates that commodity costs will continue to increase as the year progresses, although these costs, particularly for steel, remain volatile and sensitive to changes in the global economy and to tariffs.

The Company will continue to monitor potential future supply costs and tariffs closely and adjust pricing accordingly.

Given the above factors, the Company expects operating profit and net income in the first quarter of 2021, excluding the gain from the sale of the Company's OneH2 investment, to be moderately lower than the 2020 fourth quarter and lower than the 2020 first quarter.

The expected lower operating profit is due to the surge in commodity prices, and the resulting anticipated increases in material costs, and inefficiencies expected as a result of global supply chain challenges, as well as the elimination of certain cost containment measures, including the reinstatement of incentive compensation plans in 2021 that were suspended in 2020.

An anticipated favorable currency impact based on current currency rates is expected to partially offset these decreases.

While the Company's expectations for the 2021 first quarter have been based on the most recent information available, past quarters in 2020 have shown that the effects of the pandemic on the economic and lift truck market environments can change expectations rapidly.

Further shutdowns or supplier shortages could occur.

Lockdown measures are still in place in a number of European countries to mitigate the spread of the COVID-19 virus, and similar actions could be taken by other countries.

At this time, the lockdown measures in place have not required closure of the Company's plants.

The Company is monitoring this situation, including by closely monitoring a number of suppliers based in areas where COVID-19 cases are high.

The Company is prepared to take further action if necessary to maintain the health and safety of its global employees and to address production and supply chain issues which may develop.

More broadly, as a result, pandemic-related uncertainty and its effect on the supply chain continue to limit the Company's ability to forecast bookings and shipment levels beyond the first quarter of 2021.

Looking to the future in the context of an improving bookings trend, the Company expects to increase its investment in working capital and other expenditures to support growth in its business.

Capital expenditures were $51.7 million in 2020 and are expected to be approximately $71 million in 2021.

While the Company expects to make these substantial additional investments in the business during 2021, maintaining liquidity also continues to be a priority.

At December 31, 2020, the Company's cash on hand was $151.4 million and debt was $289.2 million compared with cash on hand of $89.9 million and debt of $297.7 million at September 30, 2020.

In addition, as of December 31, 2020, the Company had unused borrowing capacity of approximately $266.4 million under existing revolving credit facilities, compared with $260 million at September 30, 2020.

Despite the potential volatility of near-term economic activity, the Company continues to execute its long-term strategy by focusing on advancing its key strategic initiatives.

As the Company entered the COVID-19 crisis, it was in the midst of undertaking the largest set of strategic projects in its history with the expectation that they would collectively have a transformational impact on the Company’s competitiveness, market position and economic performance.

While essentially all of the projects required to execute these initiatives continue to move forward, in the context of the COVID-19 pandemic, the pace of certain projects has been given greater emphasis than others to reduce near-term operating expenses and capital expenditures.

In addition, certain accelerated projects have experienced delays as a result of the impact of pandemic-related challenges.

At Lift Truck, product projects are expected to lay the groundwork for enhanced market position by providing lower cost of ownership and enhanced productivity for the Company’s customers.

While the Company continues to introduce a number of new products during this period, Lift Truck's primary focus is on a new set of modular and scalable product families covering both internal combustion engine and electric trucks designed to provide customers with enhanced flexibility for meeting their application needs in addition to the benefit of lowest total cost of ownership.

The Company has been focused on maintaining, to the degree possible, the timing of the introduction of the first of these products, the standard version of the 2-to-3 ton internal combustion engine lift truck for the EMEA market, which is now expected to be launched in the second quarter of 2021.

The launch of this new range of the 2-to-3 ton counterbalanced trucks is expected to continue throughout 2021 and the early part of 2022.

The introduction of these new products will lead to significant changes in supply chain sourcing and in the Company’s various manufacturing facilities around the world as certain products are moved between plants.

Consolidated component volume sourced globally from reliable partners is expected to reduce long-term costs and improve quality as these new products are

brought to market over time.

Lift Truck’s largest manufacturing facilities, its Berea, Craigavon and Fuyang plants, are undergoing significant changes to accommodate these new products, and significant investments are being made to expand the Berea and Craigavon plants.

Further, the Company has accelerated plans to move certain production locations to provide permanent structural changes designed to reduce costs and optimize its manufacturing footprint.

The Company believes the modular nature of the new products being introduced will enhance its ability to meet customer needs at lowest cost and with more specificity, both at the industry level and at the individual customer level.

To capitalize on this capability, the Company has accelerated its focus on implementing comprehensive industry strategies, and investing in industry-focused sales capabilities to support its dealers.

Given the COVID-19 environment, the Company has also focused on enhancing its remote selling capabilities through technology and IT enhancements.

Bolzoni continues to focus on its Americas growth strategy by strengthening its ability to serve industries in the North America market by introducing a broader range of locally produced attachments with shorter lead times to serve its customer base and through continuing to sell cylinders and various other components produced in its Sulligent, Alabama plant.

Bolzoni is also implementing its "One Company - 3 brands" organizational approach to help streamline corporate operations and strengthen its North America and JAPIC commercial operations.

Nuvera continues to focus on serving heavy-duty applications, particularly bus and truck applications, with its 45kW and 60kW engines, which were both released for sale during 2020.

As a result of these milestones, Nuvera has accelerated the 45kW and 60kW engine commercialization operations for the global market and is focusing on ramping up bookings of these products in 2021.

Nuvera also continues to focus on the forklift truck market.

In summary, the Company believes it is at an inflection point in its businesses as a result of the momentum of its strategic projects as they move to full implementation.

While these initiatives may reduce the Company's near-term financial results, they are expected to position the Company with enhanced market position as market conditions return to more normal levels.

Nevertheless, since the Company recognizes that the timing and shape of the market recovery remains uncertain, it will maintain its focus on responding to changing conditions with agility based on contingency plans which are designed to respond appropriately to changing conditions.

Once the COVID-19 pandemic has abated and markets have returned to normal, the Company believes the full impact of these projects will lead to significant profitability improvements for a number of years to come.

OUTLOOK AND STRATEGIC PERSPECTIVE

Consolidated Outlook

Given the continued 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 a large net loss in the first quarter, a substantially reduced, but still large, net loss in the second quarter, approximately breakeven results in the third quarter and substantial net income in the fourth quarter of 2022.

These expectations are based on the expected reasonable resolution of component shortages and relative stabilization of material and freight costs.

However, the fourth-quarter net income is not expected to fully offset the losses generated in the first nine months.

The Company is managing 2022 capital expenditures, operating expenses and its production plan in a manner designed to protect liquidity.

Capital expenditures are expected to be approximately $31.5 million in 2022.

The Company has implemented a program of strict controls over operating expenses to reduce cash outflow, including delays in the timing of certain strategic program investments.

While the Company expects in time to make these capital expenditures and investments in the business, maintaining liquidity will continue to be a priority.

The Company's ability to build and ship trucks was significantly constrained by parts shortages of certain critical components while the remaining components needed to build trucks were received and added to inventory, causing inventory levels to increase substantially.

In this context, the Company expects to reduce inventory significantly by using current inventory to build trucks for which production has been significantly delayed due to critical parts shortages.

At December 31, 2021, the Company's cash on hand was $65.5 million and debt was $518.5 million compared with cash on hand of $61.4 million and debt of $428.0 million at September 30, 2021, and cash on hand of $151.4 million and debt of $289.2 million at December 31, 2020.

As of December 31, 2021, the Company had unused borrowing capacity of approximately $165.0 million under the Company's revolving credit facilities compared with $245.9 million at September 30, 2021 and $266.4 million at December 31, 2020.

Lift Truck Strategic Perspective

In 2022, the global lift truck market is expected to recede from the historical highs of 2021, but still be higher than pre-pandemic levels.

As a result of this market outlook, Lift Truck is anticipating a substantial decrease in bookings in 2022 compared with 2021, with the rate of decrease expected to moderate in the fourth quarter.

In 2021, the Company experienced production and shipment levels which were far lower than its objectives due to continued supply chain logistics constraints and component shortages.

These constraints are anticipated to continue into the beginning of the third quarter of 2022 but begin to moderate during the first half of the year.

Full-year shipments are expected to increase significantly in 2022 over 2021 given the Company's robust backlog and actions put in place to mitigate the impact of the supply chain constraints and shortages.

The significant material cost inflation and higher freight costs and the non-renewal of tariff exclusions are expected to continue to keep the cost of components and freight high in 2022 compared with 2021.

Inflation continued to rise in the fourth quarter of 2021, but at a slightly lower rate of change.

However, while more moderate cost increases are expected to continue in 2022, there are some signs that suggest material costs have peaked.

In light of this cost inflation, the Lift Truck business has implemented price increases several times over the course of 2021 and at the beginning of 2022, but many of the orders in the backlog slotted for production in the first nine months of 2022 do not reflect the full effect of all these price increases.

other hand, new bookings are being made at close to target margins based on expected future costs at the time of production.

As a result, the Company expects to continue to experience very low margins in the first quarter of 2022 due to the lag between when unit price increases went into effect and when revenue is realized as the units are shipped.

Margins are then expected to increase over the successive 2022 quarters with much stronger margins in the fourth quarter when the higher-margin, already-booked trucks, and trucks anticipated to be booked, are expected to be produced and shipped.

The Company will continue to work aggressively to try to manage supply chain and logistics costs, component availability and tariff exclusions, and will continue to adjust prices accordingly.

As a result of these factors, the Lift Truck business expects significant operating and net losses in the first quarter of 2022, moderated losses in the second quarter, profitability in the third quarter and substantial profit in the fourth quarter.

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 as it emerges from the current period of mismatch of costs and pricing.

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, the increased shipment volume potential of the current backlog and expected bookings in 2022, and enhanced prices, the Lift Truck business expects to move from significant operating losses in the first quarter of 2022 to substantial operating profit and net income in the fourth quarter, with the improvements in the second half of the year expected to more than offset the losses in the first half.

Over this period, the Company is projecting the stabilization of product and transportation costs and the continued expectation of improved component and logistics availability.

The Company is also anticipating the continued introduction of additional modular and scalable product families and the continued implementation of cost savings initiatives over this period and the longer term.

As the Company brings costs, price and production volumes in line over 2022, the Lift Truck business is expected to have a strong operating profit and net income in 2023.

Bolzoni Strategic Perspective

Over the course of 2022, Bolzoni expects component shortages to moderate and the timing of pricing actions to permit improved returns beginning with moderate operating profit in the first quarter and continuing with improving operating profit in the remaining quarters of 2022.

As a result, Bolzoni expects sizeable operating profit and net income in 2022 compared with operating and net losses in 2021.

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, third-party logistics and automotive industries.

Nuvera Strategic Perspective

Nuvera continues to focus on applying its 45kW and 60kW engines, which were both released for sale late in 2020, in niche, heavy-duty vehicle applications with expected near-term significant fuel cell adoption potential.

As a result of these releases, Nuvera accelerated its 45kW and 60kW engine commercialization operations for the global market.

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.

Excluding the impact of the inventory valuation and fixed asset impairment charges taken in 2021, the Company expects moderately reduced losses at Nuvera in 2022 as a result of enhanced fuel cell shipments.

RECENTLY ISSUED ACCOUNTING STANDARDS

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Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation:

(1) 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, (2) reduction in demand for lift trucks, attachments and related aftermarket parts and service on a global basis, (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) delays in delivery or increases in costs, including transportation costs, raw materials or sourced products, the imposition of tariffs, or the inability to renew tariff exclusions, and labor or changes in or unavailability of quality suppliers, (5) delays in manufacturing and delivery schedules, (6) the successful commercialization of Nuvera's technology, (7) customer acceptance of pricing changes, (8) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (9) the political and economic uncertainties in the countries where the

Company does business, (10) exchange rate fluctuations and monetary policy changes 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) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (16) unfavorable effects of geopolitical and legislative developments on global operations, including without limitation, the United Kingdom's exit from the European Union, the entry into new trade agreements and the imposition of tariffs, or the non-renewal of tariff exclusions, and/or economic sanctions.

(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, including the impacts of the foregoing risks on the Company's liquidity, (2) the duration and severity of the COVID-19 pandemic, any preventive or protective actions taken by governmental authorities, and any unfavorable effects of the COVID-19 pandemic on either the Company's or its suppliers plants' capabilities to produce and ship products, (3) delays in manufacturing and delivery schedules, (4) customer acceptance of pricing, (5) the ability of Hyster-Yale 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, (6) further impairment charges or charges due to valuation allowances, (7) 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, (8) exchange rate fluctuations, interest rate volatility and monetary policies and other changes in the regulatory climate in the countries in which the Company operates and/or sells products, (9) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (10) the successful commercialization of Nuvera's technology, (11) the political and economic uncertainties in the countries where the Company does business, (12) bankruptcy of or loss of major dealers, retail customers or suppliers, (13) customer acceptance of, changes in the costs of, or delays in the development of new products, (14) introduction of new products by, or more favorable product pricing offered by, competitors, (15) product liability or other litigation, warranty claims or returns of products, (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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis