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 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 also produces components for lift truck manufacturers. 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 17 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Critical Accounting Policies and Estimates have not materially changed since December 31, 2022. FINANCIAL REVIEW The results of operations for the Company were as follows: THREE MONTHS ENDED Favorable / (Unfavorable) MARCH 31 2023 2022 % Change Lift truck unit shipments (in thousands) Americas 16.1 14.6 10.3 % EMEA 6.8 6.5 4.6 % JAPIC 2.3 2.8 (17.9) % 25.2 23.9 5.4 % Revenues Americas $ 685.9 $ 557.7 23.0 % EMEA 214.9 169.7 26.6 % JAPIC 47.9 51.7 (7.4) % Lift truck business 948.7 779.1 21.8 % Bolzoni 98.6 95.1 3.7 % Nuvera 1.6 0.6 n.m. Eliminations (49.6) (47.2) 5.1 % $ 999.3 $ 827.6 20.7 % 18 Table of Contents THREE MONTHS ENDED Favorable / (Unfavorable) MARCH 31 2023 2022 % Change Gross profit Americas $ 121.2 $ 67.0 80.9 % EMEA 26.9 14.4 86.8 % JAPIC 7.5 4.5 66.7 % Lift truck business 155.6 85.9 81.1 % Bolzoni 20.7 18.8 10.1 % Nuvera (2.1) (1.9) (10.5) % Eliminations 0.2 (1.6) n.m. $ 174.4 $ 101.2 72.3 % Selling, general and administrative expenses Americas $ 73.7 $ 62.6 (17.7) % EMEA 24.3 25.8 5.8 % JAPIC 9.8 8.2 (19.5) % Lift truck business 107.8 96.6 (11.6) % Bolzoni 16.3 16.7 2.4 % Nuvera 7.7 6.2 (24.2) % $ 131.8 $ 119.5 (10.3) % Operating profit (loss) Americas $ 47.5 $ 4.4 n.m. EMEA 2.6 (11.4) n.m. JAPIC (2.3) (3.7) 37.8 % Lift truck business 47.8 (10.7) n.m. Bolzoni 4.4 2.1 109.5 % Nuvera (9.8) (8.1) (21.0) % Eliminations 0.2 (1.6) n.m. $ 42.6 $ (18.3) n.m. Interest expense $ 10.2 $ 5.1 (100.0) % Other (income) expense $ (3.5) $ (2.1) 66.7 % Net income (loss) attributable to stockholders $ 26.6 $ (25.0) n.m. Diluted earnings (loss) per share $ 1.55 $ (1.48) n.m. Reported income tax rate 24.2 % (13.6) % 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" in the first quarter of 2022 below represents suspended orders for which the Company has no defined plans to fulfill. As of March 31, 2023, unit backlog excludes 2,600 of these orders. As of March 31, 2023, substantially all of the Company's backlog is expected to be sold within the next twelve months. THREE MONTHS ENDED MARCH 31 2023 2022 Unit backlog, beginning of period 102.1 105.3 Unit shipments (25.2) (23.9) Unit bookings 22.3 35.9 Other adjustments — (3.2) Unit backlog, end of period 99.2 114.1 19 Table of Contents 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 2023 2022 Bookings, approximate sales value $ 690 $ 950 Backlog, approximate sales value $ 3,690 $ 3,170 First Quarter of 2023 Compared with First Quarter of 2022 The following table identifies the components of change in revenues for the first quarter of 2023 compared with the first quarter of 2022: Revenues Lift truck HY Americas EMEA JAPIC 2022 $ 827.6 $ 557.7 $ 169.7 $ 51.7 Increase (decrease) in 2023 from: Price 74.3 45.3 27.7 1.3 Unit volume and product mix 72.6 51.3 27.3 (6.0) Parts 32.1 27.4 2.8 1.9 Other 4.8 3.3 1.0 0.5 Foreign currency (14.2) 0.9 (13.6) (1.5) Bolzoni revenues 3.5 — — — Nuvera revenues 1.0 — — — Eliminations (2.4) — — — 2023 $ 999.3 $ 685.9 $ 214.9 $ 47.9 Revenues increased 20.7% to $999.3 million in the first quarter of 2023 from $827.6 million in the first quarter of 2022. The increase in Lift Truck revenues was primarily due to improved pricing and higher unit and parts volumes, mainly in the Americas and EMEA. The improvement in revenue was partially offset by unfavorable currency movements, primarily in EMEA, from the translation of sales into U.S. dollars. The following table identifies the components of change in operating profit (loss) for the first quarter of 2023 compared with the first quarter of 2022: Operating Profit (Loss) Lift truck HY Americas EMEA JAPIC 2022 $ (18.3) $ 4.4 $ (11.4) $ (3.7) Increase (decrease) in 2023 from: Lift truck gross profit 71.5 54.2 12.5 3.0 Lift truck selling, general and administrative expenses (11.2) (11.1) 1.5 (1.6) Bolzoni operations 2.3 — — — Nuvera operations (1.7) — — — 2023 $ 42.6 $ 47.5 $ 2.6 $ (2.3) The Company recognized an operating profit of $42.6 million in the first quarter of 2023 compared with an operating loss of $18.3 million in the first quarter of 2022. The increase in Lift Truck operating profit was primarily due to improved gross profit from higher pricing of $74.3 million, mainly in the Americas and EMEA, a shift in sales to higher margin lift trucks and favorable parts sales compared with the first quarter of 2022. These items were partially offset by material cost increase of $20.9 million, higher selling, general and administrative expenses for increased employee-related costs, including incentive compensation, as well as marketing and product development and unfavorable currency of $5.2 million. 20 Table of Contents Operating profit in the Americas increased primarily due to improved gross profit from higher pricing of $45.3 million, a shift in sales to higher margin lift trucks and favorable parts sales and manufacturing efficiencies tied to higher production volumes, partially offset by material cost inflation, higher selling, general and administrative expenses and unfavorable currency. EMEA recognized operating profit of $2.6 million in the first quarter of 2023 compared with an operating loss of $11.4 million in the first quarter of 2022, primarily from improved gross profit from improved pricing of $27.7 million favorable sales mix and lower manufacturing costs, partially offset by material cost inflation and unfavorable currency. The Company recognized net income attributable to stockholders of $26.6 million in the first quarter of 2023 compared with a net loss of $25.0 million in the first quarter of 2022. The improvement was primarily the result of higher operating profit, partially offset by higher income taxes and interest expense. See Note 5 of the Company's condensed consolidated financial statements for further discussion of the Company's income tax provision. LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following tables detail the changes in cash flow for the three months ended March 31: 2023 2022 Change Operating activities: Net income (loss) $ 27.2 $ (24.2) $ 51.4 Depreciation and amortization 11.2 11.1 0.1 Dividends from unconsolidated affiliates 5.7 11.0 (5.3) Working capital changes Accounts receivable (12.7) (33.0) 20.3 Inventories (48.1) (41.8) (6.3) Accounts payable and other liabilities 25.4 154.4 (129.0) Other current assets (7.4) (11.0) 3.6 Other operating activities 7.7 (7.4) 15.1 Net cash provided by operating activities 9.0 59.1 (50.1) Investing activities: Expenditures for property, plant and equipment (3.3) (9.7) 6.4 Proceeds from the sale of assets and business 1.5 0.4 1.1 Purchase of noncontrolling interest (3.2) — (3.2) Net cash used for investing activities (5.0) (9.3) 4.3 Cash flow before financing activities $ 4.0 $ 49.8 $ (45.8) Net cash provided by operating activities changed $50.1 million in the first three months of 2023 compared with the first three months of 2022, primarily as a result of changes in working capital items partially offset by net income. The changes in working capital were mainly due to a decrease in customer deposits received related to down payments on orders and a smaller increase in accounts payable in the first three months of 2023 compared with the first three months of 2022. The change in net cash used for investing activities during the first three months of 2023 compared with the first three months of 2022 was due to lower capital expenditures and the purchase of Bolzoni's noncontrolling interest in 2023. 2023 2022 Change Financing activities: Net increase (decrease) of long-term debt and revolving credit agreements $ 3.2 $ (45.5) $ 48.7 Cash dividends paid (5.6) (5.4) (0.2) Other (0.1) — (0.1) Net cash used for financing activities $ (2.5) $ (50.9) $ 48.4 The change in net cash used for financing activities was primarily due to additional borrowings during the first three months of 2023 versus repayments in the first three months of 2022. 21 Table of Contents Financing Activities The Company has a $300.0 million secured, floating-rate revolving credit facility (the "Facility") that expires in June 2026 and a $225.0 million term loan (the "Term Loan"), which matures in May 2028. 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 and guarantors 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 $1.2 billion as of March 31, 2023. 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, 2023, the Company was in compliance with the covenants in the Facility. Key terms of the Facility as of March 31, 2023 were as follows: FACILITY U.S. borrowing capacity $ 210.0 Non-U.S. borrowing capacity 90.0 Outstanding 126.9 Availability restrictions 7.8 Availability $ 165.3 Applicable margins, as defined in agreement U.S. base rate loans 0.25% to 0.75% LIBOR, EURIBOR and foreign base rate loans 1.25%-1.75% Applicable margins, for amounts outstanding U.S. base rate and LIBOR loans 0.50%; 1.50% Non-U.S. base rate and LIBOR loans 1.50% Applicable interest rate, for amounts outstanding U.S. base rate 8.50% LIBOR 6.20% to 6.31% EURIBOR 4.40% Facility fee, per annum on unused commitment 0.25% The Term Loan requires quarterly principal payments on the last day of each March, June, September and December, which commenced 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. 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 and guarantors 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 $800 million as of March 31, 2023. 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 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, 2023, the Company was in compliance with the covenants in the Term Loan. Key terms of the Term Loan as of March 31, 2023 were as follows: 22 Table of Contents TERM LOAN Outstanding $ 221.1 Discounts and unamortized deferred financing fees 3.9 Net amount outstanding $ 217.2 Applicable margins, as defined in agreement U.S. base rate loans 2.50% Eurodollar 3.50% Eurodollar floor 0.50% Applicable interest rate, for amounts outstanding 8.36% The Company had other debt outstanding, excluding finance leases, of approximately $188.5 million at March 31, 2023. In addition to the excess availability under the Facility of $165.3 million, the Company had remaining availability of $20.2 million related to other non-U.S. revolving credit agreements at March 31, 2023. 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, 2022, 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 23 and 24 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Capital Expenditures The following table summarizes actual and planned capital expenditures: Three Months Ended March 31, 2023 Planned for Remainder of 2023 Planned 2023 Total Actual 2022 Lift truck business $ 2.3 $ 50.4 $ 52.7 $ 20.3 Bolzoni 0.7 8.9 9.6 5.5 Nuvera 0.3 3.6 3.9 3.0 $ 3.3 $ 62.9 $ 66.2 $ 28.8 Planned expenditures for the remainder of 2023 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: MARCH 31 2023 DECEMBER 31 2022 Change Cash and cash equivalents $ 64.6 $ 59.0 $ 5.6 Other net tangible assets 673.3 625.0 48.3 Intangible assets 42.7 42.7 — Goodwill 52.3 51.3 1.0 Net assets 832.9 778.0 54.9 Total debt (560.6) (552.9) (7.7) Total temporary and permanent equity $ 272.3 $ 225.1 $ 47.2 Debt to total capitalization 67 % 71 % (4) % 23 Table of Contents PERSPECTIVES AND OUTLOOK Market Commentary The global economic outlook remains constrained and economic activity appears to be decelerating in many parts of the world. This deceleration is due to several factors, including tight monetary policies, designed to contain inflation, in many countries, continued supply chain disruptions and the likelihood of increased unemployment rates as companies reduce expenses. Despite these challenges, the U.S. economy was more resilient in the 2023 first quarter than anticipated after a fourth quarter that included signs of a steeper potential downturn. The latest publicly available lift truck market data indicates that new unit, fourth-quarter 2022 booking activity decreased in all major geographies, particularly EMEA, compared with high prior-year levels. Internal company estimates suggest that the global lift truck market decline continued in the first quarter of 2023 with all major geographies experiencing booking declines compared with the prior-year quarter. Despite the decreases, market levels appear to be stronger than anticipated. Looking ahead, the Company expects the global lift truck market to decline in all regions for the full-year 2023 compared with 2022. By pre-pandemic historical standards, 2023's global market unit volumes are expected to remain relatively strong in all regions except EMEA. Several years of extraordinary lift truck market growth led to very significant supplier capacity constraints. A moderate market slowdown could put the lift truck component supply base in a position to meet their supply requirements more efficiently and effectively and allow the Company to work down its extended backlog more quickly. Operational Perspectives - Lift Truck Business First-quarter 2023 lift truck bookings decreased significantly from robust prior-year levels due to several factors, including a declining, but still large, global market and a focus on booking orders with strong margins in the context of the Company's extended lead times. First-quarter 2023 bookings increased moderately from fourth-quarter 2022 driven by better-than-expected market conditions and bookings performance in the Americas. Looking forward, 2023 bookings' levels are expected to decrease year-over-year due to the moderating market outlook and the Company’s continued focus on balancing higher-margin units with the need to maintain a full production pipeline for each of its product lines across its facilities. Together, the anticipated bookings' decreases and planned production increases should help the Company further reduce its backlog, which has now decreased over 13% from its peak in the first-quarter 2022. Full-year 2023 production and shipment volumes are expected to increase compared with 2022, reducing extended lead times as a result of anticipated reduced bookings and continued supply chain improvements. Despite the lower booking rate and expected production improvements, lead times and backlog levels will likely remain above desired levels for some time. However, this extended backlog should serve as a shock absorber for the business if bookings decline more sharply as 2023 progresses. The trend toward higher average prices and margins for both unit bookings and backlog continued in the first quarter largely due to enhanced pricing and order selectivity. The Company continues to experience material and labor cost increases, but the rate of increase has slowed substantially. Forward economic indicators suggest inflationary pressures are abating and cost inflation is expected to moderate throughout 2023. To offset the substantial inflationary pressure that occurred in 2021 and 2022, the Lift Truck business implemented several price increases. As of March 31, 2023, the Company has worked through a high proportion of its lower-priced, lower-margin backlog units booked before these price increases went into effect. In 2023, the Company expects a positive price-to-cost ratio, in part to address ongoing cost increases in certain areas. The Company will continue to monitor material and labor costs closely, as well as the impact of tariffs, and adjust forward pricing accordingly. As a result of slowing cost inflation and the current higher-priced backlog, the Company believes average unit margins will increase significantly in aggregate in 2023 compared to 2022. That improvement is expected to continue into 2024 as newer bookings, with higher margins, are scheduled for production. The factors outlined above, as well as the benefits from the Company's maturing strategic initiatives, are expected to lead to a significant revenue increase and a substantial operating profit in 2023. The Lift Truck business first-quarter 2023 operating profit increased more than the Company anticipated. However, second-quarter 2023 Lift Truck operating profit is expected to decrease compared with first-quarter 2023 but significantly exceed fourth-quarter 2022 results. The expected decrease in the second quarter from first-quarter 2023 is due in part to an expected shift in mix toward lower margin sales channels. Second-half 2023 operating profit is expected to be comparable to the first half of the year. However, these forecasts are highly sensitive to the effect of various factors, particularly those that impact global supply chains and production capabilities. 24 Table of Contents Strategic Perspectives - Lift Truck From a broad perspective, the Lift Truck business has three core strategies that are expected to transform the Company’s competitiveness, market position and economic performance over time: • To provide the lowest cost of ownership while improving customer productivity, including for low-intensity applications. The Lift Truck business' capabilities in this area are expected to be enhanced by bringing to market a wide variety of vehicle innovations including: new modular and scalable product families, truck electrification projects and technology advancements in product automation, power options, telemetry and operator assist systems; • Be the leader in the delivery of industry- and customer-focused solutions by transforming the Company's sales approach to meet a wide variety of customer needs across a broad set of end markets; and • Be the leader in independent distribution by focusing on effectively coordinating dealer and major account coverage, enhancing dealer excellence and ensuring outstanding dealer ownership globally. The Company continues to make progress on its high priority projects. The Lift Truck business launched its first modular, scalable lift trucks to the EMEA and Americas markets in 2022. Given the current extended backlog, the production ramp-up for this new product line is occurring gradually. The Company expects to launch these products in the JAPIC market in mid-to-late 2023. In addition to the new modular, scalable product lines, the Lift Truck business also has key projects geared toward electrification of applications now dominated by internal combustion engine trucks, as well as technology advancements in power options, automation product options, telemetry and operator assist systems. The Company delivered its first electrified fuel cell Container Handler to the Port of Los Angeles for testing in late 2022. In the first half of 2023, Lift Truck anticipates delivering an electrified fuel cell Reach Stacker to the Port of Valencia, Spain, and in mid-to-late 2023 delivering a new electrified fuel cell Terminal Tractor and an electrified fuel cell empty container handler to a customer in Hamburg, Germany. The Company is also exploring options for other electrification projects within the European Union. Operational and Strategic Perspectives - Bolzoni Building on its first-quarter 2023 performance, over the remainder of 2023 Bolzoni expects component shortages to continue moderating. Increased pricing is expected to offset higher input costs across 2023. As a result, margins are expected to improve year-over-year, leading to a significantly higher 2023 full-year operating profit compared with 2022, in large part due to the strong first-quarter 2023 performance. Bolzoni's core strategy is to be the leader in the Attachments business. In this context, Bolzoni continues to concentrate on driving its "One Company - 3 Brands" approach globally, increasing its Americas business and focusing on strengthening its ability to serve key attachment industries and customers in all global markets. As part of this approach, Bolzoni also intends to increase its sales, marketing and product support capabilities in North America and Europe to support its industry-specific sales strategy. Operational and Strategic Perspectives - Nuvera Nuvera's core strategy is to be a leader in the fuel cell business. Nuvera continues to focus on placing 45kW and 60kW fuel cell engines in niche, heavy-duty vehicle applications for which battery-only electrification will not provide an adequate solution. As a result, these applications are expected to have significant and nearer-term fuel cell adoption potential, at the same time that Nuvera is shifting from a product to solution-selling emphasis. Nuvera has announced several projects with various third parties to test Nuvera ® engines in targeted applications, including the Port of Los Angeles, which began testing in late 2022, and in multiple European ports, which are expected to begin testing in 2023. Nuvera is also developing a new, larger 125kW fuel cell engine for heavier-duty applications and plans to launch 360kW and 470kW modular fuel cell-powered generators for stationary applications. In 2023, Nuvera expects continued focus on increasing customer product demonstrations and customer bookings. Nuvera is expanding its presence in Europe and China. Shipments in the first quarter of 2023 were for demonstrations of its 45kW and 60kW fuel cell engines for bus, power supply and port equipment applications. Recurring orders for current customers are booked for the 2023 second and third quarters and are expected to result in higher sales in the latter half of the year. Overall, in the context of moderately higher costs, the business is expected to generate a loss in 2023 comparable to 2022 but the increased volume of engine demonstrations should significantly enhance the foundation for future technology adoption and improved financial returns. 25 Table of Contents Consolidated Outlook The Company is nearing completion of its program to build out the lower-priced, lower-margin backlog units held over from prior periods. As a result, continued margin expansion is expected to lead to substantial operating profit and net income for the 2023 full year, as well as solid progress toward the Company's 7% operating profit margin goals at both the Lift Truck and Bolzoni businesses. These expectations are based on the Company's ability to effectively manage its ongoing component and labor costs, increase its production levels and achieve reasonably stable material and freight costs. The programs to reduce inventory and to generate cash are expected to show substantial progress in the second half of 2023. The Company is committed to enhancing its cash flows through its ongoing action plans and continued discipline over capital expenditures and operating expenses. Capital expenditures are expected to be approximately $66 million for full-year 2023, with spending more heavily weighted toward the second half of the year. This full-year increase compares to significantly restrained 2022 levels and is necessary to adequately maintain the Company’s facilities and product development programs. Working capital continues to be an area of intense focus for the Company. Inventory levels remain elevated and above pre-pandemic levels as a result of slow component parts consumption due to prior-period production delays. Efforts to maximize the use of on-hand inventory, coupled with material purchases below expected production rates, are expected to help reduce excess inventory levels throughout the Company in the remaining 2023 quarters. Supply constraints continue to be an issue periodically, but the Company expects continued improvements as 2023 progresses. As a result of these actions, the Company expects a significant increase in cash flow before financing activities for the full-year 2023 compared with 2022. 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) delays in manufacturing and delivery schedules, (3) customer acceptance of pricing, (4) 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, (5) 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, (6) 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, (7) 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, (8) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (9) the successful commercialization of Nuvera's technology, (10) the political and economic uncertainties in the countries where the Company does business, as well as the effects of any withdrawals from such countries, (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, more favorable product pricing offered by or shorter lead times available through 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, (16) the ability to attract, retain, and replace workforce and administrative employees, (17) disruptions resulting from natural disasters, public health crises, political crises or other catastrophic events, and (18) the ability to protect the Company’s information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network breaches. 26 Table of Contents