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. Hyster-Yale Maximal Forklift (Zhejiang) Co., Ltd. ("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”). In June 2022, the Company purchased 15% of the equity interest of Hyster-Yale Maximal from HK Holding Co for an aggregate purchase price of $25.2 million, which will be paid in annual installments of $8.4 million beginning June 2022 through June 2024. The Company has 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. As of September 30, 2022, the Company owns a 90% majority interest in 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. 21 FINANCIAL REVIEW The results of operations for the Company were as follows: THREE MONTHS ENDED Favorable / (Unfavorable) NINE MONTHS ENDED Favorable / (Unfavorable) SEPTEMBER 30 SEPTEMBER 30 2022 2021 % Change 2022 2021 % Change Lift truck unit shipments (in thousands) Americas 13.9 13.7 1.5 % 42.4 39.0 8.7 % EMEA 7.1 6.2 14.5 % 21.4 18.6 15.1 % JAPIC 3.5 3.3 6.1 % 9.9 10.6 (6.6) % 24.5 23.2 5.6 % 73.7 68.2 8.1 % Revenues Americas $ 571.3 $ 494.3 15.6 % $ 1,725.6 $ 1,433.1 20.4 % EMEA 159.4 153.4 3.9 % 513.9 499.2 2.9 % JAPIC 65.5 56.1 16.8 % 182.1 181.6 0.3 % Lift truck business 796.2 703.8 13.1 % 2,421.6 2,113.9 14.6 % Bolzoni 82.2 90.0 (8.7) % 263.7 254.3 3.7 % Nuvera 1.2 0.2 500.0 % 2.1 0.5 320.0 % Eliminations (39.5) (45.8) (13.8) % (124.3) (122.7) 1.3 % $ 840.1 $ 748.2 12.3 % $ 2,563.1 $ 2,246.0 14.1 % Gross profit (loss) Americas $ 60.2 $ 44.5 35.3 % $ 193.3 $ 190.2 1.6 % EMEA 8.3 18.5 (55.1) % 34.0 68.6 (50.4) % JAPIC 6.1 3.9 56.4 % 14.5 16.7 (13.2) % Lift truck business 74.6 66.9 11.5 % 241.8 275.5 (12.2) % Bolzoni 13.7 15.2 (9.9) % 51.4 47.4 8.4 % Nuvera (2.0) (16.5) 87.9 % (5.5) (22.3) 75.3 % Eliminations 0.6 (0.5) n.m. (0.5) (0.7) n.m. $ 86.9 $ 65.1 33.5 % $ 287.2 $ 299.9 (4.2) % Selling, general and administrative expenses Americas $ 59.3 $ 61.4 3.4 % $ 184.9 $ 178.9 (3.4) % EMEA 21.5 19.4 (10.8) % 69.4 65.7 (5.6) % JAPIC 9.0 7.4 (21.6) % 25.1 24.6 (2.0) % Lift truck business 89.8 88.2 (1.8) % 279.4 269.2 (3.8) % Bolzoni 15.0 15.2 1.3 % 47.2 47.0 (0.4) % Nuvera 7.0 16.0 56.3 % 19.5 29.0 32.8 % $ 111.8 $ 119.4 6.4 % $ 346.1 $ 345.2 (0.3) % Operating profit (loss) Americas $ 0.9 $ (16.9) 105.3 % $ 8.4 $ 11.3 (25.7) % EMEA (13.2) (0.9) n.m. (35.4) 2.9 n.m. JAPIC (2.9) (3.5) 17.1 % (10.6) (7.9) (34.2) % Lift truck business (15.2) (21.3) 28.6 % (37.6) 6.3 n.m. Bolzoni (1.3) — n.m. 4.2 0.4 n.m. Nuvera (9.0) (32.5) 72.3 % (25.0) (51.3) 51.3 % Eliminations 0.6 (0.5) n.m. (0.5) (0.7) n.m. $ (24.9) $ (54.3) n.m. $ (58.9) $ (45.3) n.m. Interest expense $ 7.7 $ 4.1 (87.8) % $ 18.9 $ 10.7 (76.6) % Other (income) expense $ (0.2) $ (2.1) (90.5) % $ (2.3) $ (8.1) (71.6) % 22 Table of Contents THREE MONTHS ENDED Favorable / (Unfavorable) NINE MONTHS ENDED Favorable / (Unfavorable) SEPTEMBER 30 SEPTEMBER 30 2022 2021 % Change 2022 2021 % Change Net loss attributable to stockholders $ (37.3) $ (77.2) 51.7 % $ (81.7) $ (69.7) (17.2) % Loss per share $ (2.20) $ (4.59) 52.1 % $ (4.84) $ (4.15) (16.6) % Reported income tax rate (13.0) % (36.4) % (5.3) % (42.8) % 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. Unit backlog as of September 30, 2022, excludes 2,600 suspended orders, for which the Company currently has no defined plans to fulfill. As of September 30, 2022, substantially all of the Company's backlog is expected to be sold within the next twelve months. THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 2022 2021 2022 2021 Unit backlog, beginning of period 112.0 84.9 105.3 40.6 Unit shipments (24.5) (23.2) (73.7) (68.2) Unit bookings 20.7 37.1 76.6 126.4 Unit backlog, end of period 108.2 98.8 108.2 98.8 The following is the detail of the approximate sales value of the Company's lift truck unit bookings and backlog, reflected in millions of dollars. The dollar value of bookings and backlog is calculated using the current unit bookings and backlog and the forecasted average sales price per unit. THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 2022 2021 2022 2021 Bookings, approximate sales value $ 680 $ 910 $ 2,390 $ 2,950 Backlog, approximate sales value $ 3,700 $ 2,450 $ 3,700 $ 2,450 Third Quarter of 2022 Compared with Third Quarter of 2021 The following table identifies the components of change in revenues for the third quarter of 2022 compared with the third quarter of 2021: Revenues 2021 $ 748.2 Increase (decrease) in 2022 from: Price 81.7 Parts 22.5 Unit volume and product mix 10.9 Other 7.7 Eliminations 6.3 Nuvera revenues 1.0 Foreign currency (30.4) Bolzoni revenues (7.8) 2022 $ 840.1 Revenues increased 12.3% to $840.1 million in the third quarter of 2022 from $748.2 million in the third quarter of 2021. The increase was primarily due to improved pricing and higher parts volumes, mainly in the Americas. The improvement in revenue was partially offset by unfavorable currency movements, primarily in EMEA, from the translation of sales into U.S. dollars. 23 Table of Contents America's revenues increased in the third quarter of 2022 compared with the third quarter of 2021, primarily from improved pricing and higher part sales. EMEA's revenues increased in the third quarter of 2022 compared with the third quarter of 2021 due to improved unit and parts volume and favorable pricing. These improvements were partially offset by unfavorable foreign currency movements of $27.6 million from the translation of sales into U.S. dollars. JAPIC's revenues increased in the third quarter of 2022 compared with the third quarter of 2021, primarily as a result of higher unit volume and improved pricing, partially offset by unfavorable foreign currency movements of $2.3 million from the translation of sales into U.S. dollars. Bolzoni's revenues decreased in the third quarter of 2022 compared with the third quarter of 2021 mainly due to lower volume and unfavorable foreign currency movements of $5.5 million from the translation of sales into U.S. dollars, partially offset by improved pricing. The following table identifies the components of change in operating profit (loss) for the third quarter of 2022 compared with the third quarter of 2021: Operating Profit (Loss) 2021 $ (54.3) Increase (decrease) in 2022 from: Nuvera operations 23.5 Lift truck gross profit 8.8 Lift truck selling, general and administrative expenses (1.6) Bolzoni operations (1.3) 2022 $ (24.9) The Company recognized an operating loss of $24.9 million in the third quarter of 2022 compared with an operating loss of $54.3 million in the third quarter of 2021. The change in operating loss was primarily from the absence of $24.8 million of charges related to the impairment of Nuvera's property, plant and equipment and inventory losses recorded in the third quarter of 2021. Lift truck gross profit increased due to improved pricing of $81.7 million and higher unit and parts volumes. The increase in gross profit was partially offset by $68.4 million of material and freight cost inflation as well as manufacturing inefficiencies due to supply chain and logistics constraints, primarily in the Americas and EMEA. In addition, unfavorable foreign currency movements, including derivative contracts, of $13.6 million reduced the improvements in lift truck gross profit. The Americas recognized operating profit of $0.9 million in the third quarter of 2022 compared with an operating loss of $16.9 million in the third quarter of 2021 due to an increase in gross profit. Gross profit improved primarily due to higher pricing of $64.9 million and increased parts and units volume. The improvement in gross profit was partly offset by material cost inflation of $30.3 million, higher manufacturing costs of $15.3 million resulting from inefficiencies associated with component shortages and unfavorable foreign currency movements of $8.5 million. EMEA recognized an operating loss of $13.2 million in the third quarter of 2022 compared with $0.9 million in the third quarter of 2021. Gross profit decreased primarily from increases in material and freight costs and higher manufacturing costs resulting from inefficiencies associated with component shortages and unfavorable foreign currency movements of $5.2 million. These decreases more than offset the favorable impact of improved pricing and higher unit and parts volumes. JAPIC's operating loss decreased to $2.9 million in the third quarter of 2022 compared with $3.5 million in the third quarter of 2021, primarily due to higher gross profit from improved pricing and higher unit volume, partially offset by an unfavorable shift in sales to lower-margin trucks. Bolzoni's operating loss increased by $1.3 million in the third quarter of 2022 from the third quarter of 2021, mainly due to lower gross profit from material cost inflation partially offset by higher pricing. Nuvera's operating loss decreased to $9.0 million in the third quarter of 2022 compared with $32.5 million in the third quarter of 2021 from the absence of $24.8 million of charges related to the impairment of Nuvera's property, plant and equipment and inventory losses recorded in the third quarter of 2021. 24 Table of Contents The Company recognized a net loss attributable to stockholders of $37.3 million in the third quarter of 2022 compared with $77.2 million in the third quarter of 2021. The decrease in net loss was primarily the result of the factors affecting operating loss and the absence of $38.4 million provided against deferred tax assets in the third quarter of 2021. See Note 5 of the Company's condensed consolidated financial statements for further discussion of the Company's income tax provision. The improved net loss was partially offset by higher interest and pension expense. First Nine Months of 2022 Compared with First Nine Months of 2021 The following table identifies the components of change in revenues for the first nine months of 2022 compared with the first nine months of 2021: Revenues 2021 $ 2,246.0 Increase (decrease) in 2022 from: Price 185.5 Unit volume and product mix 89.2 Parts 64.3 Other 32.5 Bolzoni revenues 9.4 Nuvera revenues 1.6 Foreign currency (63.8) Eliminations (1.6) 2022 $ 2,563.1 Revenues increased 14.1% to $2,563.1 million in the first nine months of 2022 from $2,246.0 million in the first nine months of 2021. The increase was primarily due to improved pricing and a shift in sales to higher-priced lift trucks in the Americas and EMEA, higher unit and parts volume in the Americas, EMEA and Bolzoni and favorable aftermarket sales. 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 nine months of 2022 compared with the first nine months of 2021, primarily from improved pricing of lift trucks, favorable aftermarket sales, including part sales, higher unit volumes and a shift in sales to higher-priced lift trucks. EMEA's revenues increased mainly due to improved unit and parts volume and favorable pricing. These improvements were partially offset by unfavorable foreign currency movements of $63.1 million from the translation of sales into U.S. dollars. JAPIC's revenues increased slightly as a result of improved pricing, partially offset by lower unit and part volumes and unfavorable foreign currency movements of $4.1 million. Bolzoni's revenues increased mainly due to improved pricing, partially offset by unfavorable foreign currency movements of $13.8 million from the translation of sales into U.S. dollars in the first nine months of 2022 compared with the first nine months of 2021. The following table identifies the components of change in operating profit for the first nine months of 2022 compared with the first nine months of 2021: Operating Profit (Loss) 2021 $ (45.3) Increase (decrease) in 2022 from: Lift truck gross profit (33.5) Lift truck selling, general and administrative expenses (10.2) Nuvera operations 26.3 Bolzoni operations 3.8 2022 $ (58.9) 25 Table of Contents The Company recognized an operating loss of $58.9 million in the first nine months of 2022 compared with an operating loss of $45.3 million in the first nine months of 2021. The higher operating loss was primarily due to lower gross profit in the lift truck business partially offset by the absence of $24.8 million of charges related to the impairment of Nuvera's property, plant and equipment and inventory losses recorded in the first nine months of 2021. Lift truck gross profit declined mainly due to $222.9 million of material cost inflation and higher manufacturing costs resulting from inefficiencies associated with component shortages and unfavorable foreign currency movements, including derivative contracts, of $30.5 million. The decrease in gross profit was partially offset by favorable pricing of $185.6 million and improved parts volume in the Americas and EMEA. Operating profit in the Americas decreased to $8.4 million in the first nine months of 2022 compared with $11.3 million in the first nine months of 2021 as a result of higher operating expenses partially offset by an increase in gross profit. The increase in selling, general and administrative expenses primarily resulted from higher employee-related expenses, including $9.5 million of incentive compensation. Gross profit improved as result of favorable pricing of $156.2 million and improved parts volume. The increase in gross profit was partially offset as result of material and freight cost inflation of $113.8 million, higher manufacturing costs resulting from inefficiencies associated with component shortages of $43.1 million and unfavorable foreign currency movements, including derivative contracts, of $18.4 million. EMEA recognized an operating loss of $35.4 million in the first nine months of 2022 compared with operating profit of $2.9 million in the first nine months of 2021 mainly as a result of lower gross profit. Gross profit decreased due to material cost inflation of $54.5 million, unfavorable foreign currency movements of $11.6 million and higher manufacturing costs resulting from inefficiencies associated with component shortages. The decrease in gross profit was partially offset by improved pricing and higher unit and parts volumes. JAPIC's operating loss increased to $10.6 million in the first nine months of 2022 from $7.9 million in the first nine months of 2021, primarily due to lower gross profit from a shift in mix to lower-margin products, material cost inflation and manufacturing inefficiencies, partially offset by improved pricing. Bolzoni's operating profit increased to $4.2 million in the first nine months of 2022 compared with $0.4 million in the first nine months of 2021 due to higher gross profit from improved pricing and a shift in mix to higher-margin products, partially offset by material cost inflation and unfavorable foreign currency exchange rates. Nuvera's operating loss decreased to $25.0 million in the first nine months of 2022 compared with $51.3 million in the first nine months of 2021 from the absence of $24.8 million of charges related to the impairment of Nuvera's property, plant and equipment and inventory losses recorded in the first nine months of 2021. The Company recognized a net loss attributable to stockholders of $ 81.7 million in the first nine months of 2022 compared with $ 69.7 million in the first nine months of 2021. The increase in net loss was primarily the result of the factors affecting the operating loss, higher interest expense, the absence of a $4.6 million gain related to the sale of the Company's preferred shares of OneH2, Inc. in the first nine months of 2021 and higher pension expense. The increase was partially offset by the absence a valuation allowance of $38.4 million provided against deferred tax assets in the third quarter of 2021. See Note 5 of the Company's condensed consolidated financial statements for further discussion of the Company's income tax provision. 26 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following tables detail the changes in cash flow for the nine months ended September 30: 2022 2021 Change Operating activities: Net loss $ (79.5) $ (68.4) $ (11.1) Depreciation and amortization 33.0 34.7 (1.7) Dividends from unconsolidated affiliates 15.6 5.5 10.1 Impairment charge — 10.0 (10.0) Working capital changes Accounts receivable (41.3) (70.6) 29.3 Inventories (43.6) (261.9) 218.3 Accounts payable and other liabilities 156.8 173.1 (16.3) Other current assets (3.4) (12.2) 8.8 Other operating activities (3.3) (2.0) (1.3) Net cash provided by (used for) operating activities 34.3 (191.8) 226.1 Investing activities: Expenditures for property, plant and equipment (19.7) (29.5) 9.8 Proceeds from the sale of assets and investment 0.9 19.4 (18.5) Purchase of noncontrolling interest (8.4) — (8.4) Net cash used for investing activities (27.2) (10.1) (17.1) Cash flow before financing activities $ 7.1 $ (201.9) $ 209.0 Net cash provided by (used for) operating activities changed $226.1 million in the first nine months of 2022 compared with the first nine months of 2021, primarily as a result of changes in working capital items and the net loss. The changes in working capital were mainly due to a smaller increase in inventory, accounts receivable and accounts payable in the first nine months of 2022 compared with the first nine months of 2021. The change in net cash used for investing activities during the first nine months of 2022 compared with the first nine months of 2021 was due to the absence of the proceeds from the sale of preferred shares of OneH2 in 2021 and the current year's installment purchase of Hyster-Yale Maximal's noncontrolling interest in 2022. 2022 2021 Change Financing activities: Net increase of long-term debt and revolving credit agreements $ 14.7 $ 138.7 $ (124.0) Cash dividends paid (16.4) (16.2) (0.2) Financing fees paid — (7.6) 7.6 Other (0.2) (0.2) — Net cash provided by (used for) financing activities $ (1.9) $ 114.7 $ (116.6) The change in net cash provided by (used for) financing activities in the first nine months of 2022 compared with the first nine months of 2021 was primarily due to a smaller increase in borrowings during the first nine months of 2022 versus the first nine months of 2021, partially offset by the absence of financing fees paid in 2021. Financing Activities The Company has a $300.0 million secured, floating-rate revolving credit facility (the "Facility”) that expires in June 2026. There were $127.0 million of borrowings outstanding under the Facility at September 30, 2022. The availability under the Facility at September 30, 2022 was $168.8 million, which reflects reductions of $4.2 million for letters of credit and other restrictions. As of September 30, 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 27 Table of Contents 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 $1.0 billion as of September 30, 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 September 30, 2022, for U.S. base rate loans and LIBOR loans were 0.50% and 1.50%, respectively. The applicable margin, as of September 30, 2022, for non-U.S. base rate loans and LIBOR loans was 1.50%. The applicable interest rate for borrowings outstanding under the Facility on September 30, 2022 was 6.75% and 2.18% for the U.S. and foreign base rate loans, respectively. There were no U.S. base rates loans outstanding on September 30, 2022. The applicable interest rates for borrowings for the U.S. LIBOR loans ranged from 4.05% to 4.62% at September 30, 2022. The Facility also required the payment of a fee of 0.25% per annum on the unused commitments as of September 30, 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 September 30, 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 September 30, 2022, there was $222.2 million of principal outstanding under the Term Loan which has been reduced in the unaudited condensed consolidated balance sheet by $4.3 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 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 $730 million as of September 30, 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 September 30, 2022 was 6.62%. The Company holds $180.0 million of contracts that hedge interest payments of Term Loan borrowings. See Note 7 of the Company's condensed consolidated financial statements for further discussion. 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 September 30, 2022, the Company was in compliance with the covenants in the Term Loan. The Company had other debt outstanding, excluding finance leases, of approximately $170.2 million at September 30, 2022. In addition to the excess availability under the Facility of $168.8 million, the Company had remaining availability of $21.9 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. 28 Table of Contents 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: Nine Months Ended September 30, 2022 Planned for Remainder of 2022 Planned 2022 Total Actual 2021 Lift truck business $ 14.7 $ 10.5 $ 25.2 $ 30.6 Bolzoni 3.7 2.1 5.8 10.4 Nuvera 1.3 2.4 3.7 3.3 $ 19.7 $ 15.0 $ 34.7 $ 44.3 Planned expenditures for the remainder of 2022 are primarily for product development, improvements to information technology infrastructure and 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: SEPTEMBER 30 2022 DECEMBER 31 2021 Change Cash and cash equivalents $ 68.6 $ 65.5 $ 3.1 Other net tangible assets 519.5 728.7 (209.2) Intangible assets 43.1 50.7 (7.6) Goodwill 49.0 56.5 (7.5) Net assets 680.2 901.4 (221.2) Total debt (545.0) (518.5) (26.5) Total temporary and permanent equity $ 135.2 $ 382.9 $ (247.7) Debt to total capitalization 80 % 58 % 22 % PERSPECTIVES AND OUTLOOK Market Commentary The global economic outlook remains constrained due to several factors, including aggressive central bank actions designed to control inflation as well as the effects of COVID lockdowns in China and the ongoing Russia/Ukraine conflict. The latter, combined with forecasted oil production declines, have driven energy prices higher and lowered economic activity, particularly in Europe. The latest publicly available lift truck market data showed a 2022 second quarter global decline versus a robust 2021 second quarter period as decreases in China and EMEA were partly offset by growth in the Americas. Internal company estimates indicated a global lift truck market decline in the third quarter of 2022 across all geographic regions, compared with both the prior year quarter and 2022's second quarter. Looking ahead, the global lift truck market is expected to decrease further in the fourth quarter 2022 and full-year 2023 compared with the respective prior year periods. However, global market unit volumes in 2023 are expected to remain relatively strong and above pre-pandemic levels, despite an increasing possibility of a global or regional recession. After several years of extraordinary lift truck market growth that stretched supplier capacity to, and in some cases beyond, its limits, a market slowdown could allow the lift truck component supply base to meet the Company's requirements more effectively. 29 Table of Contents Operational Perspectives - Lift Truck Business The ongoing market decline and the Company's focus on booking orders with a strong margin profile resulted in a significant decrease in lift truck bookings from robust prior-year levels and a sequential decline from the 2022 second quarter. Looking forward, bookings levels are expected to decrease year-over-year in the fourth quarter 2022 and full-year 2023 due to the market outlook and the Company’s continued focus on booking higher-margin orders. These anticipated decreases combined with planned production levels should help the Company bring its backlog to more competitive levels over the course of 2023. Backlog levels have trended down modestly over the past two quarters as bookings have declined, but lead times are still extended. Incoming order selectivity has resulted in higher average prices and margins for both unit bookings and backlog. As the Company moves through its backlog in the fourth quarter of 2022 and in 2023, lower-margin units, priced in prior years, will have been shipped and the majority of 2023 shipments will be produced from the currently existing higher-margin backlog. As a result, average unit margins are expected to continue to improve. The Company believes that its current significant backlog level, including expected built-in margin increases over time, and anticipated continued selective bookings at higher margins will lead to improvements in operating profit in 2023. In addition, the Company's extended backlog is expected to help mitigate the strain on the business in a recessionary environment. The Company expects fourth-quarter 2022 production and shipment volumes to increase over the third quarter 2022 as a result of gradually diminishing supply chain bottlenecks and the substantial backlog level. Full-year 2023 production and shipment volumes are expected to increase versus 2022 given the current substantial backlog and as additional supply chain improvements are anticipated to be achieved, further reducing lead times. New bookings, consistent with the market outlook, are expected to have sound margins when those trucks are produced in late 2023 and 2024, particularly in the context of more competitive lead times as backlogs are reduced. The Company continues to experience cost increases, particularly in EMEA, in part due to higher energy costs as a result of the ongoing Russia/Ukraine conflict. In contrast, Americas and JAPIC cost increases have slowed significantly. Forward economic indicators suggest moderate cost inflation trends in 2023, absent any additional effects from the Russia/Ukraine conflict or COVID-related global supply chain constraints. Due to the substantial inflationary pressure over the past 18 months, the Lift Truck business implemented several price increases. Generally, these price increases are expected to more than fully offset inflationary pressures in 2022 and 2023, and are expected to provide higher margins for trucks which will be produced in upcoming quarters. As a result of the above factors, and the expected ongoing benefits from cost-savings initiatives, the Lift Truck business expects to generate operating profit in the 2022 fourth quarter. Further improvements are anticipated in 2023 as production volumes are expected to increase and margins are expected to rise due to an improving price to cost ratio. The Company's strategic programs are also expected to further enhance margins as they mature, including the further expansion of its modular and scalable product families. Therefore, the Lift Truck business expects to generate a substantial operating profit in 2023. These assumptions, however, are highly sensitive to the effect of various market forces, particularly those that impact global supply chains. Strategic Perspectives - Lift Truck 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 mismatched costs and pricing: (1) provide the lowest cost of ownership while enhancing customer productivity, with a primary focus on new modular and scalable product projects and projects geared toward electrification of trucks, automation product options and providing telemetry and operator assist systems, (2) be the leader in the delivery of industry- and customer-focused solutions, focused primarily on transforming the Company's sales approach to be industry focused to meet customers' needs, and (3) be the leader in independent distribution, focused on dealer and major account coverage, dealer excellence and ensuring outstanding dealer ownership globally. The Company continues to make progress on its high-priority projects. Notably, early in the fourth quarter of 2022, the Company announced that its first hydrogen fuel cell powered container handler, powered by Nuvera ® fuel cell engines, began its testing pilot in the Port of Los Angeles. Operational and Strategic Perspectives - Bolzoni In the fourth quarter of 2022, Bolzoni expects to return to profitability based on projected sales volume increases over the third quarter due to moderating component shortages and improved manufacturing efficiencies. Benefits are also expected from lower material cost inflation and ongoing strict cost controls. Over the course of 2023, Bolzoni expects component shortages to continue to moderate and increasing prices to help offset higher costs, resulting in increased margins over time and higher operating profit in 2023 versus 2022. 30 Table of Contents Bolzoni continues to focus on implementing its "One Company - 3 Brands" approach and increasing its Americas business by strengthening its ability to serve key attachment industries and customers in the North America market. Bolzoni is also increasing its sales, marketing and product support capabilities both in North America and Europe based on an industry-specific approach. Operational and Strategic Perspectives - Nuvera Nuvera continues to focus on applying its strategy of placing 45kW and 60kW fuel cell engines in niche, heavy-duty vehicle applications with expected significant fuel cell adoption potential. Over the first nine months of 2022, Nuvera has announced several projects with various third parties who are testing, or planning to test, Nuvera ® engines in heavy-duty applications, including the Port of Los Angeles and European ports. Nuvera is also developing a new 125kW fuel cell engine for heavier-duty applications. During the fourth quarter of 2022 and in 2023, Nuvera expects continued focus on ramping up demonstrations, quotes and bookings of these products. The Company expects moderately reduced losses at Nuvera in the fourth quarter of 2022. In 2023, Nuvera expects higher sales with moderately higher costs, resulting in comparable losses to 2022. Consolidated Outlook On a consolidated basis, the Company continues to project a modest operating profit and income before tax in the fourth quarter of 2022. However, the Company expects a modest net loss in the fourth quarter due to tax expense on profits in areas where a valuation allowance is not currently provided. In future periods, tax benefits currently offset by valuation allowances are expected to be recognized. The Company's ongoing efforts to build out its layers of lower-priced, lower-margin backlog in the remainder of 2022 and early 2023 are expected to lead to improving margins and a return to solid operating profit and net income for the 2023 full year. These expectations are based on the Company's continuing ability to manage component shortages at planned production levels and reasonable stabilization of material and freight costs. The Company is laser-focused on its cash flows, with detailed action plans to improve future results. These actions include tightly managing capital expenditures, operating expenses and production plans to maintain adequate liquidity levels. Capital expenditures are expected to be approximately $35 million for full-year 2022. The Company expects to continue its disciplined approach to cash outflows, including some delays in the timing of certain strategic program investments. These capital expenditures and investments will be made over time to support profitable growth. Working capital continues to be an area of intense focus for the Company. Inventory levels remain above normal levels due to production delays created by parts shortages. Reducing inventory levels in the fourth quarter of 2022 and in the first half of 2023 by focusing on the use of current inventory coupled with limited inventory purchases to build trucks, remains a top priority. As a result of these cash conserving actions, the Company expects solid cash flow before financing activities for the full-year 2022 compared with a significant use of cash in 2021. 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 31 Table of Contents 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) delays in manufacturing and delivery schedules, (3) customer acceptance of pricing, (4) any preventive or protective actions taken by governmental authorities related to the COVID-19 pandemic, and any unfavorable effects of the COVID-19 pandemic on either the Company's or its suppliers plants' capabilities to produce and ship products, (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 interest rate volatility and current economic and market conditions, including inflation, (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 an 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) impairment charges or charges due to valuation allowances, (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, more favorable product pricing offered by or shorter lead times available through competitors, (16) product liability or other litigation, warranty claims or returns of products, (17) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (18) the ability to attract, retain, and replace workforce and administrative employees.