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, Brazil, the Philippines, Italy, Japan and Vietnam. The Company owns a 75% majority interest in Hyster-Yale Maximal Forklift (Zhejiang) Co., Ltd. ("Hyster-Yale Maximal"). Hyster-Yale Maximal is a Chinese manufacturer of low-intensity and standard lift trucks and specialized material handling equipment. Hyster-Yale Maximal also designs and produces specialized products in the port equipment and rough terrain forklift markets. 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. ("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. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Please refer to the discussion of Critical Accounting Policies and Estimates as disclosed on pages 15 through 18 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Critical Accounting Policies and Estimates have not materially changed since December 31, 2021. 19 Table of Contents FINANCIAL REVIEW The results of operations for the Company were as follows: THREE MONTHS ENDED Favorable / (Unfavorable) MARCH 31 2022 2021 % Change Lift truck unit shipments (in thousands) Americas 14.6 12.3 18.7 % EMEA 6.5 6.5 — % JAPIC 2.8 3.5 (20.0) % 23.9 22.3 7.2 % Revenues Americas $ 557.7 $ 459.7 21.3 % EMEA 169.7 170.7 (0.6) % JAPIC 51.7 60.5 (14.5) % Lift truck business 779.1 690.9 12.8 % Bolzoni 95.1 79.5 19.6 % Nuvera 0.6 — n.m. Eliminations (47.2) (38.2) 23.6 % $ 827.6 $ 732.2 13.0 % Gross profit (loss) Americas $ 67.0 $ 75.3 (11.0) % EMEA 14.4 23.5 (38.7) % JAPIC 4.5 6.6 (31.8) % Lift truck business 85.9 105.4 (18.5) % Bolzoni 18.8 16.4 14.6 % Nuvera (1.9) (3.3) 42.4 % Eliminations (1.6) (0.1) n.m. $ 101.2 $ 118.4 (14.5) % Selling, general and administrative expenses Americas $ 62.6 $ 60.7 (3.1) % EMEA 25.8 23.4 (10.3) % JAPIC 8.2 9.1 9.9 % Lift truck business 96.6 93.2 (3.6) % Bolzoni 16.7 15.6 (7.1) % Nuvera 6.2 6.5 4.6 % $ 119.5 $ 115.3 (3.6) % Operating profit (loss) Americas $ 4.4 $ 14.6 (69.9) % EMEA (11.4) 0.1 n.m. JAPIC (3.7) (2.5) (48.0) % Lift truck business (10.7) 12.2 (187.7) % Bolzoni 2.1 0.8 162.5 % Nuvera (8.1) (9.8) 17.3 % Eliminations (1.6) (0.1) n.m. $ (18.3) $ 3.1 n.m. Interest expense $ 5.1 $ 2.8 (82.1) % Other income $ (2.1) $ (8.2) (74.4) % 20 Table of Contents THREE MONTHS ENDED Favorable / (Unfavorable) MARCH 31 2022 2021 % Change Net income (loss) attributable to stockholders Americas $ 1.1 $ 9.5 (88.4) % EMEA (7.0) 0.9 n.m. JAPIC (4.0) (2.2) (81.8) % Lift truck business (9.9) 8.2 n.m. Bolzoni 1.3 0.6 116.7 % Nuvera (8.1) (3.8) (113.2) % Eliminations (8.3) 0.6 n.m. $ (25.0) $ 5.6 n.m. Earnings (loss) per share $ (1.48) $ 0.33 n.m. Reported income tax rate (13.6) % 28.2 % 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. "Other adjustments" below represents lift truck orders from Russian and Ukraine dealers which the Company no longer expects to fulfill at March 31, 2022. As of March 31, 2022, substantially all of the Company's backlog is expected to be sold within the next twelve months. THREE MONTHS ENDED MARCH 31 2022 2021 Unit backlog, beginning of period 105.3 40.6 Unit shipments (23.9) (22.3) Unit bookings 35.9 42.4 Other adjustments (3.2) — Unit backlog, end of period 114.1 60.7 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 MARCH 31 2022 2021 Bookings, approximate sales value $ 950 $ 970 Backlog, approximate sales value $ 3,170 $ 1,520 21 Table of Contents First Quarter of 2022 Compared with First Quarter of 2021 The following table identifies the components of change in revenues for the first quarter of 2022 compared with the first quarter of 2021: Revenues 2021 $ 732.2 Increase (decrease) in 2022 from: Price 43.9 Unit volume and product mix 24.1 Parts 21.9 Bolzoni revenues 15.6 Other 12.3 Nuvera revenues 0.6 Foreign currency (14.0) Eliminations (9.0) 2022 $ 827.6 Revenues increased 13.0% to $827.6 million in the first quarter of 2022 from $732.2 million in the first quarter of 2021. The increase was primarily due to improved pricing in the Americas and higher unit and parts volume in the lift truck business and Bolzoni. The improvement in revenue was partially offset by unfavorable currency movements from the translation of sales into U.S. dollars. America's revenues increased in the first quarter of 2022 compared with the first quarter of 2021, primarily from higher pricing and higher unit and parts volume as well as a shift in sales to higher-priced products. EMEA's revenues in the first quarter of 2022 were comparable to the first quarter of 2021 as unfavorable foreign currency movements of $13.4 million from the translation of sales into U.S. dollars were offset by benefits from improved unit and parts volume. JAPIC's revenues decreased during the first quarter of 2022 compared with the first quarter of 2021 primarily as a result of lower unit and parts volumes, partially offset by improved pricing. Bolzoni's revenues increased mainly due to higher unit volume, improved pricing and a shift in sales to higher-priced products in the first quarter of 2022 compared with the first quarter of 2021. The following table identifies the components of change in operating profit for the first quarter of 2022 compared with the first quarter of 2021: Operating Profit (Loss) 2021 $ 3.1 Increase (decrease) in 2022 from: Lift truck gross profit (21.0) Lift truck selling, general and administrative expenses (3.4) Nuvera operations 1.7 Bolzoni operations 1.3 2022 $ (18.3) The Company recognized an operating loss of $18.3 million in the first quarter of 2022 compared with operating profit of $3.1 million in the first quarter of 2021. The change in operating profit (loss) was primarily as a result of lower gross profit and unfavorable selling, general and administrative expenses in the lift truck business. The decrease in gross profit was mainly due to significant material and freight cost inflation as well as manufacturing inefficiencies due to supply chain and logistics constraints totaling $68.6 million, primarily in the Americas and EMEA, which more than offset the favorable impact of improved pricing of $43.9 million and higher unit and parts volumes. 22 Table of Contents The Americas operating profit decreased to $4.4 million in the first quarter of 2022 from $14.6 million in the first quarter of 2021 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 $40.5 million and higher manufacturing costs of $13.6 million resulting from inefficiencies associated with component shortages. The decreases were partly offset by improved pricing of $40.8 million, higher unit and parts sales and $3.5 million of favorable retroactive tariff exclusion adjustments for certain components imported from China. Selling, general and administrative expenses increased mainly as result of increased employee-related expenses in the first quarter of 2022 compared with the first quarter of 2021. EMEA recognized an operating loss of $11.4 million in the first quarter of 2022 compared with operating profit of $0.1 million in the first quarter of 2021. The decrease in gross profit was primarily due to increases in material and freight costs and higher manufacturing costs resulting from inefficiencies associated with component shortages. In addition, the first quarter of 2022 includes a $2.5 million of charges related to inventory and accounts receivable for Russian orders which the Company no longer expects to fulfill or collect. JAPIC's operating loss increased to $3.7 million in the first quarter of 2022 from $2.5 million in the first quarter of 2021 primarily due to lower gross profit from material cost inflation and unfavorable manufacturing variances, partially offset by improved pricing. Bolzoni's operating profit increased to $2.1 million in the first quarter of 2022 from $0.8 million in the first quarter of 2021 mainly due to improved gross profit from higher unit volume and pricing, partially offset by increased selling, general and administrative expenses mainly from $0.7 million of charges for the establishment of reserves on Russian-related receivables and business closure. Nuvera's operating loss improved to $8.1 million in the first quarter of 2022 compared with $9.8 million in the first quarter of 2021 as result of improved margin from lower production costs in 2022. The Company recognized a net loss attributable to stockholders of $25.0 million in the first quarter of 2022 compared with net income attributable to stockholders of $5.6 million in the first quarter of 2021. The decrease was primarily the result of lower lift truck operating profit, the absence of a $4.6 million gain related to the sale of the Company's preferred shares of OneH2, Inc. ("OneH2") in the first quarter of 2021, higher interest expense and unfavorable mark-to-market adjustments on an equity investment in a third party and lower pension income. LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following tables detail the changes in cash flow for the three months ended March 31: 2022 2021 Change Operating activities: Net income (loss) $ (24.2) $ 6.1 $ (30.3) Depreciation and amortization 11.1 11.7 (0.6) Gain on sale of investment — (4.6) 4.6 Dividends from unconsolidated affiliates 11.0 5.5 5.5 Working capital changes Accounts receivable (33.0) (37.8) 4.8 Inventories (41.8) (88.1) 46.3 Accounts payable and other liabilities 154.4 84.2 70.2 Other current assets (11.0) (15.0) 4.0 Other operating activities (7.4) (9.1) 1.7 Net cash provided by (used for) operating activities 59.1 (47.1) 106.2 Investing activities: Expenditures for property, plant and equipment (9.7) (7.7) (2.0) Proceeds from the sale of assets and investment 0.4 17.2 (16.8) Net cash provided by (used for) investing activities (9.3) 9.5 (18.8) Cash flow before financing activities $ 49.8 $ (37.6) $ 87.4 23 Table of Contents Net cash provided by (used for) operating activities changed $106.2 million in the first quarter of 2022 compared with the first quarter of 2021, primarily as a result of changes in working capital items and net income (loss). The changes in working capital were mainly due to an increase in other liabilities primarily from down payments for customer orders and lower inventory purchases in the first quarter of 2022 compared with the first quarter of 2021. The change in net cash provided by (used for) investing activities during the first quarter of 2022 compared with the first quarter of 2021 was due to the proceeds from the sale of preferred shares of OneH2 for $15.7 million and lower capital expenditures in the first quarter of 2021. 2022 2021 Change Financing activities: Net decrease of long-term debt and revolving credit agreements $ (45.5) $ (2.7) $ (42.8) Cash dividends paid (5.4) (5.3) (0.1) Net cash used for financing activities $ (50.9) $ (8.0) $ (42.9) Net cash used for financing activities increased to $50.9 million in the first quarter of 2021 compared with $8.0 million in the first quarter of 2021. The increase was primarily related to repayments on the Facility (as defined below) in the first quarter of 2022 compared with the first quarter of 2021. In 2021, the Company had additional borrowings on the Facility primarily used to fund working capital needs. Financing Activities The Company has a $300.0 million secured, floating-rate revolving credit facility (the "Facility”) that expires in June 2026. There were $101.0 million of borrowings outstanding under the Facility at March 31, 2022. The availability under the Facility at March 31, 2022 was $194.5 million, which reflects reductions of $4.5 million for letters of credit and other restrictions. As of March 31, 2022, 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 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 March 31, 2022. 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 March 31, 2022, for U.S. base rate loans and LIBOR loans were 0.50% and 1.50%, respectively. The applicable margin, as of March 31, 2022, for non-U.S. base rate loans and LIBOR loans was 1.50%. The applicable interest rates for borrowings outstanding under the Facility on March 31, 2022 was 4.00% and 1.50% for the U.S. base rate, and foreign LIBOR loans, respectively. The applicable interest rates for borrowings for the U.S. LIBOR loans ranged from 1.81% to 1.95% at March 31, 2022. The Facility also required the payment of a fee of 0.25% per annum on the unused commitments as of March 31, 2022. 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 March 31, 2022, 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 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 March 31, 2022, there was $223.3 million of principal outstanding under the Term Loan which has been reduced in the unaudited condensed consolidated balance sheet by $5.1 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, U.S. material real property, fixtures and general intangibles consisting of intellectual property and a second priority lien 24 Table of Contents on U.S. working capital assets of certain 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 $750 million as of March 31, 2022. 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. 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 March 31, 2022 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. At March 31, 2022, the Company was in compliance with the covenants in the Term Loan. The Company had other debt outstanding, excluding finance leases, of approximately $131.7 million at March 31, 2022. In addition to the excess availability under the Facility of $194.5 million, the Company had remaining availability of $23.4 million related to other non-U.S. 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 June 2026. Contractual Obligations, Contingent Liabilities and Commitments Since December 31, 2021, there have been no significant changes in the total amount of the Company's contractual obligations or commercial commitments, or the timing of cash flows in accordance with those obligations, as reported on pages 25 and 26 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Capital Expenditures The following table summarizes actual and planned capital expenditures: Three Months Ended March 31, 2022 Planned for Remainder of 2022 Planned 2022 Total Actual 2021 Lift truck business $ 7.5 $ 12.3 $ 19.8 $ 30.6 Bolzoni 1.8 3.4 5.2 10.4 Nuvera 0.4 3.5 3.9 3.3 $ 9.7 $ 19.2 $ 28.9 $ 44.3 Planned expenditures for the remainder of 2022 are primarily for product development, 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. Capital Structure The Company's capital structure is presented below: MARCH 31 2022 DECEMBER 31 2021 Change Cash and cash equivalents $ 65.1 $ 65.5 $ (0.4) Other net tangible assets 661.1 728.7 (67.6) Intangible assets 48.9 50.7 (1.8) Goodwill 55.4 56.5 (1.1) Net assets 830.5 901.4 (70.9) Total debt (479.0) (518.5) 39.5 Total equity $ 351.5 $ 382.9 $ (31.4) Debt to total capitalization 58 % 58 % — % 25 Table of Contents OUTLOOK AND STRATEGIC PERSPECTIVE Consolidated Outlook Given the continued component shortages due to supply chain constraints, significant material and freight cost inflation, and, more recently, the impact of the Russia/Ukraine conflict, as well as continued losses at Nuvera and the lack of tax offsets against pre-tax losses for the Lift Truck business and Nuvera, the Company, on a consolidated basis, expects a larger net loss in the second quarter than in the 2022 first quarter, a lower but still substantial net loss in the third quarter and substantial net income in the fourth quarter of 2022. However, the fourth-quarter net income is not expected to offset the losses generated in the first nine months. Generally, results in the remaining three quarters of 2022 are expected to be lower than at the time of the 2021 fourth quarter earnings release, mainly due to the Russia/Ukraine conflict. These expectations are based on the expected reasonable resolution of component shortages and relative stabilization of material and freight costs. The Company is managing 2022 capital expenditures, operating expenses and its production plans in a manner designed to protect liquidity. Capital expenditures are expected to be approximately $29 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 over time to make these capital expenditures and investments in the business, maintaining liquidity will continue to be a priority. During 2021 and early 2022, 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 and receiving components as they are needed for production. At March 31, 2022, the Company's cash on hand was $65.1 million and debt was $479.0 million compared with cash on hand of $65.5 million and debt of $518.5 million at December 31, 2021. During the first quarter of 2022, the Company implemented a dealer advance deposit program on orders, which contributed to the reduction in debt levels. As of March 31, 2022, the Company had unused borrowing capacity of approximately $218 million under the Company's revolving credit facilities compared with $165 million at December 31, 2021. Lift Truck Strategic Perspective In the remainder of 2022, the Company expects the global lift truck market to continue to decline from the historical highs of 2021, in part due to the impact of the Russia/Ukraine conflict, but remain above pre-pandemic levels. As a result of this market outlook, the Lift Truck business is anticipating a substantial decrease in bookings during the remainder of 2022 compared with 2021, with the rate of decrease expected to moderate in the fourth quarter. During 2021, the Company experienced production and shipment levels which were substantially lower than its objectives due to supply chain logistics constraints and component shortages. Some moderation in the number of suppliers with shortages occurred in the first quarter of 2022, but shortages are anticipated to continue throughout 2022, and possibly escalate again in light of the Russia/Ukraine conflict. Nevertheless, full-year shipments are currently 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, but with the expectation that supplies of products or commodities are not constrained further as a result of the Russia/Ukraine conflict and recent COVID lockdowns in China. Prior to the Russia/Ukraine conflict, there were signs that material costs had peaked. However, as a result of that conflict, significant additional material and freight cost inflation is expected to keep the cost of components higher in 2022 than in 2021 and not moderate as previously expected. In light of cost inflation in 2021 and what is now expected in 2022, the Lift Truck business implemented several price increases in 2021 and in the first quarter of 2022, but many of the orders in the backlog slotted for production in the second and third quarters of 2022 do not reflect the full effect of all these price increases. On the other hand, new bookings are being made at close to target margins based on expected future costs at the time of expected production. Further the renewal of tariff exclusions is expected to partly offset the anticipated higher material cost inflation in the backlog over the remainder of 2022. As a result, the Company expects to experience lower margins in the second quarter of 2022 compared with the first quarter of 2022 due to the lag between when unit price increases go into effect and when revenue is realized as the units are shipped. Margins are then expected to increase over the second half of 2022 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. In the meantime, the Company expects to continue to work aggressively to manage component availability in order to increase production rates, and continue to adjust prices as costs change. As a result of these factors, the Lift Truck business expects larger operating and net losses in the second quarter, moderated operating and net losses in the third quarter and substantial profit in the fourth quarter. Overall, the Russia/Ukraine conflict, on a net basis, has reduced prospects 26 Table of Contents for the remaining quarters of 2022, particularly in the expectations for EMEA's second and third quarters, but has not changed the overall pattern of quarterly improvement expected in the second half of 2022. From a broader 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 enhancing 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, enhanced prices and the renewal of tariff exclusions, the Lift Truck business expects to move from the significant operating loss in the first quarter of 2022 to substantial operating profit in the fourth quarter, with the fourth-quarter profit expected to more than offset the losses in the first nine months of 2022. Over this period, the Company is projecting the stabilization of product and transportation costs and continued improvement in component and logistics availability, although this could change if the availability of commodities and/or components is seriously affected as a result of the ongoing Russia/Ukraine conflict and the recent lockdowns in China. 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 in the longer term. Overall, as the Company's strategic programs mature, as costs and prices come in line over 2022 and 2023, and as production volumes increase, the Lift Truck business is expected to have a strong operating profit and net income in the fourth quarter of 2022 and in 2023. Bolzoni Strategic Perspective Bolzoni has a small operation in Russia which is in the process of closing. As a result of adjusting its operations for the Russia/Ukraine conflict and adapting to the additional material inflation caused by the conflict, Bolzoni expects operating profit and net income in the second quarter of 2022 to be lower than the 2022 first quarter, but significantly higher than the loss realized in the prior-year second quarter. Over the second half of 2022, Bolzoni expects component shortages to moderate and the timing of pricing actions to permit improving operating profit in the third and fourth quarters. As a result, Bolzoni expects sizeable, but moderately lower than previously anticipated, 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 expects to 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. 27 Table of Contents 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 (loss) 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, 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) 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, as well as armed conflicts, including the Russia/Ukraine conflict, and their regional effects, (6) 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, (7) impairment charges or charges due to valuation allowances, (8) 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 an economic recession, (9) 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, (10) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (11) the successful commercialization of Nuvera's technology, (12) the political and economic uncertainties in the countries where the Company does business, as well as the effects of any withdrawals from such countries, (13) bankruptcy of or loss of major dealers, retail customers or suppliers, (14) customer acceptance of, changes in the costs of, or delays in the development of new products, (15) introduction of new products by, or more favorable product pricing offered by, competitors, (16) product liability or other litigation, warranty claims or returns of products, and (17) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation.