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) NINE MONTHS ENDED Favorable / (Unfavorable) SEPTEMBER 30 SEPTEMBER 30 2023 2022 % Change 2023 2022 % Change Lift truck unit shipments (in thousands) Americas 17.1 13.9 23.0 % 51.5 42.4 21.5 % EMEA 5.9 7.1 (16.9) % 19.7 21.4 (7.9) % JAPIC 2.7 3.5 (22.9) % 7.4 9.9 (25.3) % 25.7 24.5 4.9 % 78.6 73.7 6.6 % Revenues Americas $ 716.5 $ 571.3 25.4 % $ 2,190.9 $ 1,725.6 27.0 % EMEA 183.9 159.4 15.4 % 599.4 513.9 16.6 % JAPIC 51.6 65.5 (21.2) % 149.1 182.1 (18.1) % Lift truck business 952.0 796.2 19.6 % 2,939.4 2,421.6 21.4 % Bolzoni 92.8 82.2 12.9 % 288.0 263.7 9.2 % Nuvera 1.5 1.2 25.0 % 4.1 2.1 95.2 % Eliminations (45.1) (39.5) 14.2 % (140.4) (124.3) 13.0 % $ 1,001.2 $ 840.1 19.2 % $ 3,091.1 $ 2,563.1 20.6 % 21 Table of Contents THREE MONTHS ENDED Favorable / (Unfavorable) NINE MONTHS ENDED Favorable / (Unfavorable) SEPTEMBER 30 SEPTEMBER 30 2023 2022 % Change 2023 2022 % Change Gross profit Americas $ 149.2 $ 60.2 147.8 % $ 413.8 $ 193.3 114.1 % EMEA 29.4 8.3 254.2 % 83.4 34.0 145.3 % JAPIC 7.4 6.1 21.3 % 21.4 14.5 47.6 % Lift truck business 186.0 74.6 149.3 % 518.6 241.8 114.5 % Bolzoni 19.5 13.7 42.3 % 62.8 51.4 22.2 % Nuvera (1.9) (2.0) 5.0 % (5.8) (5.5) (5.5) % Eliminations — 0.6 n.m. 0.3 (0.5) n.m. $ 203.6 $ 86.9 134.3 % $ 575.9 $ 287.2 100.5 % Selling, general and administrative expenses Americas $ 83.8 $ 59.3 (41.3) % $ 235.7 $ 184.9 (27.5) % EMEA 27.0 21.5 (25.6) % 77.3 69.4 (11.4) % JAPIC 10.1 9.0 (12.2) % 30.2 25.1 (20.3) % Lift truck business 120.9 89.8 (34.6) % 343.2 279.4 (22.8) % Bolzoni 16.6 15.0 (10.7) % 50.1 47.2 (6.1) % Nuvera 7.5 7.0 (7.1) % 22.6 19.5 (15.9) % $ 145.0 $ 111.8 (29.7) % $ 415.9 $ 346.1 (20.2) % Operating profit (loss) Americas $ 65.4 $ 0.9 n.m. $ 178.1 $ 8.4 n.m. EMEA 2.4 (13.2) n.m. 6.1 (35.4) n.m. JAPIC (2.7) (2.9) 6.9 % (8.8) (10.6) 17.0 % Lift truck business 65.1 (15.2) n.m. 175.4 (37.6) n.m. Bolzoni 2.9 (1.3) n.m. 12.7 4.2 202.4 % Nuvera (9.4) (9.0) (4.4) % (28.4) (25.0) (13.6) % Eliminations — 0.6 n.m. 0.3 (0.5) n.m. $ 58.6 $ (24.9) n.m. $ 160.0 $ (58.9) n.m. Interest expense $ 9.6 $ 7.7 (24.7) % $ 28.2 $ 18.9 (49.2) % Other (income) expense $ (3.6) $ (0.2) n.m. $ (7.5) $ (2.3) 226.1 % Net income (loss) attributable to stockholders $ 35.8 $ (37.3) n.m. $ 100.7 $ (81.7) n.m. Diluted earnings (loss) per share $ 2.06 $ (2.20) n.m. $ 5.82 $ (4.84) n.m. Reported income tax rate 30.8 % (13.0) % 26.5 % (5.3) % n.m. - not meaningful 22 Table of Contents 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 nine months of 2022 below represents suspended orders for which the Company has no defined plans to fulfill. As of September 30, 2023, unit backlog excludes 2,300 of these suspended orders. As of September 30, 2023, 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 2023 2022 2023 2022 Unit backlog, beginning of period 92.8 112.0 102.1 105.3 Unit shipments (25.7) (24.5) (78.6) (73.7) Unit bookings 18.2 20.7 61.8 79.8 Other adjustments — — — (3.2) Unit backlog, end of period 85.3 108.2 85.3 108.2 The following is the detail of the approximate sales value of the Company's lift truck unit bookings and backlog. 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 2023 2022 2023 2022 Bookings, approximate sales value $ 580 $ 680 $ 1,950 $ 2,390 Backlog, approximate sales value $ 3,540 $ 3,700 $ 3,540 $ 3,700 Third Quarter of 2023 Compared with Third Quarter of 2022 The following table identifies the components of change in revenues for the third quarter of 2023 compared with the third quarter of 2022: Revenues Lift truck HY Americas EMEA JAPIC 2022 $ 840.1 $ 571.3 $ 159.4 $ 65.5 Increase (decrease) in 2023 from: Unit volume and product mix 65.7 91.5 (14.0) (11.8) Price 58.7 33.2 25.1 0.4 Foreign currency 14.7 1.6 14.4 (1.3) Parts 14.2 16.2 (1.2) (0.8) Other 2.5 2.7 0.2 (0.4) Bolzoni revenues 10.6 — — — Nuvera revenues 0.3 — — — Eliminations (5.6) — — — 2023 $ 1,001.2 $ 716.5 $ 183.9 $ 51.6 Revenues increased 19.2% to $1,001.2 million in the third quarter of 2023 from $840.1 million in the third quarter of 2022. The increase in Lift Truck revenues was primarily due to higher unit and parts volumes in the Americas and improved pricing in all geographic regions. The improvement in revenue was partially offset by a decline in unit shipments in EMEA and JAPIC. Bolzoni revenues increased in the third quarter of 2023 compared with the third quarter of 2022 mainly from higher volume and improved pricing. 23 Table of Contents The following table identifies the components of change in operating profit (loss) for the third quarter of 2023 compared with the third quarter of 2022: Operating Profit (Loss) Lift truck HY Americas EMEA JAPIC 2022 $ (24.9) $ 0.9 $ (13.2) $ (2.9) Increase (decrease) in 2023 from: Lift truck gross profit 110.8 89.0 21.1 1.3 Lift truck selling, general and administrative expenses (31.1) (24.5) (5.5) (1.1) Bolzoni operations 4.2 — — — Nuvera operations (0.4) — — — 2023 $ 58.6 $ 65.4 $ 2.4 $ (2.7) The Company recognized operating profit of $58.6 million in the third quarter of 2023 compared with an operating loss of $24.9 million in the third quarter of 2022. The increase in Lift Truck operating profit was primarily due to improved gross profit from higher pricing of $58.7 million, mainly in the Americas and EMEA, favorable material costs in the Americas, a shift in sales to higher margin lift trucks and higher unit and parts volumes in the Americas. The increase in gross profit was partially offset by higher selling, general and administrative expenses primarily due to increased employee-related costs, including incentive compensation, as well as higher product development, product liability and marketing costs. Operating profit in the Americas increased primarily due to improved gross profit from higher pricing of $33.2 million, favorable material costs and higher unit and parts sales. The increase in gross profit was partially offset by higher selling, general and administrative expenses primarily related to increased employee-related costs, including incentive compensation, as well as higher product development, product liability and marketing costs. EMEA recognized operating profit of $2.4 million in the third quarter of 2023 compared with an operating loss of $13.2 million in the third quarter of 2022, primarily from higher gross profit from improved pricing of $25.1 million, partially offset by lower unit volume and higher selling, general and administrative expenses. Bolzoni recognized operating profit of $2.9 million in the third quarter of 2023 compared with an operating loss of $1.3 million in the third quarter of 2022 primarily due to higher gross profit from higher sales volume and improved pricing. The Company recognized net income attributable to stockholders of $35.8 million in the third quarter of 2023 compared with a net loss of $37.3 million in the third quarter of 2022. The improvement was primarily the result of higher operating profit (loss), partially offset by increased income tax and interest expense. See Note 5 of the Company's condensed consolidated financial statements for further discussion of the Company's income tax provision. 24 Table of Contents First Nine Months of 2023 Compared with First Nine Months of 2022 The following table identifies the components of change in revenues for the first nine months of 2023 compared with the first nine months of 2022: Revenues Lift truck HY Americas EMEA JAPIC 2022 $ 2,563.1 $ 1,725.6 $ 513.9 $ 182.1 Increase (decrease) in 2023 from: Unit volume and product mix 230.1 259.4 2.9 (32.2) Price 210.9 129.8 78.2 2.9 Parts 78.3 72.9 4.3 1.1 Bolzoni revenues 24.3 — — — Nuvera revenues 2.0 — — — Other 1.2 1.8 (0.5) (0.1) Eliminations (16.1) — — — Foreign currency (2.7) 1.4 0.6 (4.7) 2023 $ 3,091.1 $ 2,190.9 $ 599.4 $ 149.1 Revenues increased 20.6% to $3,091.1 million in the first nine months of 2023 from $2,563.1 million in the first nine months of 2022. The increase was primarily due to higher unit and parts volumes in the Americas, improved pricing and a shift in sales to higher-priced lift trucks in the Americas and EMEA. Bolzoni revenues increased in the first nine months of 2023 compared with the first nine months of 2022 mainly from improved pricing and higher volume. The following table identifies the components of change in operating profit for the first nine months of 2023 compared with the first nine months of 2022: Operating Profit (Loss) Lift truck HY Americas EMEA JAPIC 2022 $ (58.9) $ 8.4 $ ( 35.4 ) $ ( 10.6 ) Increase (decrease) in 2023 from: Lift truck gross profit 277.6 220.5 49.4 6.9 Lift truck selling, general and administrative expenses (63.8) (50.8) (7.9) (5.1) Bolzoni operations 8.5 — — — Nuvera operations (3.4) — — — 2023 $ 160.0 $ 178.1 $ 6.1 $ (8.8) The Company recognized an operating profit of $160.0 million in the first nine months of 2023 compared with an operating loss of $58.9 million in the first nine months of 2022. The increase in Lift Truck operating profit was primarily due to improved gross profit from higher pricing of $210.9 million, mainly in the Americas and EMEA, a shift in sales to higher margin lift trucks and higher unit and parts sales compared with the first nine months of 2022. These items were partially offset by higher selling, general and administrative expenses primarily due to increased employee-related costs, including incentive compensation, as well as higher product development, product liability and marketing costs. Operating profit in the Americas increased primarily due to improved gross profit from higher pricing of $129.8 million, a shift in sales to higher margin lift trucks and increased unit and parts sales. These improvements were partially offset by higher selling, general and administrative expenses, primarily related to higher employee costs, including incentive compensation, as well as higher product development, product liability and marketing costs. EMEA's operating profit improved mainly due to improved gross profit from improved pricing of $78.2 million, partially offset by material cost inflation and manufacturing inefficiencies. 25 Table of Contents JAPIC's operating loss improved to $8.8 million in the first nine months of 2023 from $10.6 million in the first nine months of 2022, primarily due to higher gross profit from a shift in mix to higher-margin products, partially offset by higher selling, general and administrative expenses. Bolzoni's operating profit increased to $12.7 million in the first nine months of 2023 compared with $4.2 million in the first nine months of 2022 primarily due to higher gross profit from improved pricing, lower material costs and higher volumes. The increase in gross profit was partially offset by higher selling, general and administrative expenses, primarily related to higher employee costs, including incentive compensation. Nuvera's operating loss increased to $28.4 million in the first nine months of 2023 compared with $25.0 million in the first nine months of 2022 primarily from higher selling, general and administrative expenses primarily related to product development and increased employee-related costs, including incentive compensation. The Company recognized net income attributable to stockholders of $ 100.7 million in the first nine months of 2023 compared with a net loss of $ 81.7 million in the first nine months of 2022. The improvement was primarily the result of the factors affecting operating profit (loss), 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 nine months ended September 30: 2023 2022 Change Operating activities: Net income (loss) $ 102.4 $ (79.5) $ 181.9 Depreciation and amortization 33.8 33.0 0.8 Dividends from unconsolidated affiliates 10.5 15.6 (5.1) Working capital changes Accounts receivable 1.8 (41.3) 43.1 Inventories (21.9) (43.6) 21.7 Accounts payable and other liabilities (44.1) 156.8 (200.9) Other current assets (6.5) (3.4) (3.1) Other operating activities 29.1 (3.3) 32.4 Net cash provided by operating activities 105.1 34.3 70.8 Investing activities: Expenditures for property, plant and equipment (18.9) (19.7) 0.8 Proceeds from the sale of assets and business 2.3 0.9 1.4 Purchase of noncontrolling interest (3.2) (8.4) 5.2 Net cash used for investing activities (19.8) (27.2) 7.4 Cash flow before financing activities $ 85.3 $ 7.1 $ 78.2 Net cash provided by operating activities increased $70.8 million in the first nine months of 2023 compared with the first nine months of 2022, primarily as a result of higher net income partially offset by changes in working capital items. The changes in working capital were mainly due to a decrease in accounts payable and customer deposits received related to down payments on orders in the first nine months of 2023 compared with the first nine months of 2022. The change in net cash used for investing activities during the first nine months of 2023 compared with the first nine months of 2022 was mainly due to the purchase of Bolzoni's noncontrolling interest in 2023 compared with the first installment purchase of the noncontrolling interest of Hyster-Yale Maximal Forklift (Zhejiang) Co., Ltd. in 2022. 26 Table of Contents 2023 2022 Change Financing activities: Net increase (decrease) of long-term debt and revolving credit agreements $ (50.2) $ 14.7 $ (64.9) Cash dividends paid (16.7) (16.4) (0.3) Other (2.2) (0.2) (2.0) Net cash used for financing activities $ (69.1) $ (1.9) $ (67.2) The change in net cash used for financing activities was primarily due to debt repayments during the first nine months of 2023 compared with additional borrowings in the first nine months of 2022. Financing Activities The Company has a $325.0 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 was amended in the second quarter of 2023 for the purpose of, among other items, (i) establishing a new tranche of revolving loans with aggregate commitments of $25.0 million under the Facility and (ii) changing the benchmark interest rate for U.S. dollar-denominated borrowings under the Facility from LIBOR to Term SOFR, each as defined in the Facility. The Term Loan was amended in the second quarter of 2023 for the purpose of changing the benchmark interest rate for borrowings under the Term Loan from LIBOR to Term SOFR, each as defined in the Facility. See Note 10 of the Company's condensed consolidated financial statements for further discussion. 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 September 30, 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 September 30, 2023, the Company was in compliance with the covenants in the Facility. The new $25.0 million tranche will terminate on May 1, 2024 unless otherwise terminated prior to such date by the Company in accordance with the terms of the Facility. Commencing December 1, 2023, the new $25.0 million tranche will amortize on a monthly basis in the amount of $4.2 million per month. 27 Table of Contents Key terms of the Facility as of September 30, 2023 were as follows: FACILITY U.S. borrowing capacity $ 235.0 Non-U.S. borrowing capacity 90.0 Outstanding 97.4 Availability restrictions 4.5 Availability $ 223.1 FILO LOANS LOANS OTHER THAN FILO LOANS Applicable margins, as defined in agreement U.S. base rate loans 2.25% 0.25% to 0.75% SOFR, EURIBOR and non-U.S. base rate loans 3.25% 1.25% to 1.75% SOFR adjustment, as defined in agreement 0.10% 0.10% Applicable margins, for amounts outstanding U.S. base rate loans — 0.50% SOFR loans 3.25 % 1.50 % Non-U.S. base rate loans — 1.50% Applicable interest rate, for amounts outstanding SOFR 8.67 % 6.93% EURIBOR — 5.35% 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 September 30, 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 September 30, 2023, the Company was in compliance with the covenants in the Term Loan. Key terms of the Term Loan as of September 30, 2023 were as follows: TERM LOAN Outstanding $ 219.9 Discounts and unamortized deferred financing fees 3.5 Net amount outstanding $ 216.4 Applicable margins, as defined in agreement U.S. base rate loans 2.50% SOFR 3.50% SOFR adjustment, as defined in agreement 0.11% SOFR floor 0.50% Applicable interest rate, for amounts outstanding 8.93% 28 Table of Contents The Company had other debt outstanding, excluding finance leases, of approximately $171.1 million at September 30, 2023. In addition to the excess availability under the Facility of $223.1 million, the Company had remaining availability of $30.6 million related to other non-U.S. revolving credit agreements at September 30, 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: Nine Months Ended September 30, 2023 Planned for Remainder of 2023 Planned 2023 Total Actual 2022 Lift truck business $ 14.0 $ 19.2 $ 33.2 $ 20.3 Bolzoni 3.2 2.0 5.2 5.5 Nuvera 1.7 2.0 3.7 3.0 $ 18.9 $ 23.2 $ 42.1 $ 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: SEPTEMBER 30 2023 DECEMBER 31 2022 Change Cash and cash equivalents $ 78.2 $ 59.0 $ 19.2 Other net tangible assets 662.2 625.0 37.2 Intangible assets 39.8 42.7 (2.9) Goodwill 51.0 51.3 (0.3) Net assets 831.2 778.0 53.2 Total debt (510.6) (552.9) 42.3 Total temporary and permanent equity $ 320.6 $ 225.1 $ 95.5 Debt to total capitalization 61 % 71 % (10) % PERSPECTIVES AND OUTLOOK Market Commentary Many external market factors, including geopolitical instability, most recently evidenced by the Israel/Gaza conflict, continue to create a significant amount of uncertainty within the global economic environment. As a result of this, as well as abnormally high volumes during the 2020 to 2022 pandemic period, market activity has been moderating in certain parts of the world across 2023, particularly in EMEA. The latest publicly available lift truck market data indicates that new unit, second-quarter 2023 booking activity decreased in all major geographies except China and India compared with the robust prior-year levels. Internal company estimates suggest that third-quarter 2023 global lift truck market bookings continued to decrease compared with the prior year, with the pace of decline accelerating in the Americas and decelerating in EMEA. 29 Table of Contents Looking ahead, the fourth-quarter 2023 global lift truck market is expected to decline from fourth-quarter 2022. In 2024, global market bookings are expected to be generally comparable to 2023 levels, with an anticipated first-half decline expected to be offset by a second-half increase. For both full-year 2023 and 2024, market unit volumes are projected to remain strong and above pre-pandemic levels in most regions. Consolidated Strategic Perspective The Company believes the improving 2023 results are due to actions taken since the global pandemic began. These actions include the implementation of key strategies, projects and significant process improvements, all of which better position the Company for substantial longer-term growth. The Company believes that its mature Lift Truck and Bolzoni businesses are the foundation for this improvement, while the Nuvera Fuel Cell business' substantial growth prospects are expected to be realized in future years. Operational Perspectives - Lift Truck Business The Company's third-quarter 2023 lift truck bookings decreased 15% from second-quarter 2023 and 12% from prior-year levels due to solid, but declining, global market demand and a continued company focus on booking orders with strong margins. Looking forward, fourth-quarter bookings are projected to increase year-over-year due to projected market share gains. In 2024, the Company expects bookings increases compared with 2023, after a moderate first-quarter 2024 decline, as a result of continued market share gains despite an overall flat global lift truck market. These anticipated increases are primarily the result of the Company's maturing strategic initiatives. Planned production increases combined with anticipated market level decreases in the first half of 2024 are expected to help the Company reduce its extended lead times and backlog closer to pre-pandemic levels over the course of 2024. However, given current expectations, improving lead times and backlog levels will likely remain above optimal levels for some time on some product lines. Certain lines, such as warehouse products, are expected to return to more normal lead time and backlog levels in 2024. The Company's extended backlog, valued at $3.5 billion, is almost a full year of revenue and should serve as an initial shock absorber for the business if bookings decline more than anticipated in 2024. Consolidated fourth-quarter 2023 shipments are anticipated to decrease modestly compared with the prior-year period, with a moderate increase in Americas, led by anticipated higher production rates, expected to be more than offset by fewer EMEA shipments as a result of continuing product launch issues. Full-year 2024 production and shipment rates are expected to increase compared with 2023 as component constraints dissipate and the Company focuses on maintaining a full production pipeline across its facilities in a moderated market environment. The trend of higher average unit backlog prices and margins continued in the third quarter largely due to benefits from prior-year pricing implemented to offset inflation. Third-quarter 2023 average booking prices were flat compared with second-quarter 2023 and declined modestly versus the prior year largely due to product mix. Material costs have generally stabilized. Forward economic indicators suggest some nominal inflationary increases, particularly for labor costs, in fourth-quarter 2023 and full-year 2024. The Company expects to maintain its strong price-to-cost ratio in the remainder of 2023 and into 2024 as the higher-priced backlog is shipped. Overall, the Company believes average unit margins will improve in fourth-quarter 2023 over the prior-year and remain at sound levels throughout 2024. Anticipated increases in labor and overhead costs are projected to erode the favorable price-to-cost ratio over 2024, resulting in modestly lower gross margins compared with 2023. The Company continues to monitor labor and material costs closely, as well as the impact of tariffs and competition, and will adjust forward pricing accordingly. The factors outlined above, as well as the benefits from the Company's maturing strategic initiatives, are expected to lead to an increase in fourth-quarter 2023 Lift Truck revenues and operating profit compared with the prior year. Fourth-quarter 2023 operating profit is expected to decrease from the strong third-quarter due to an anticipated mix shift toward lower margin sales channels, higher labor and manufacturing costs and increased operating expenses. Looking forward, the Lift Truck business expects an increase in 2024 revenues, while operating profit is expected to be similar to 2023. These forecasts, however, are highly sensitive to, in particular, the impact of global supply chain adjustments and the Company's production capabilities. 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: • Provide products that improve customer productivity at the lowest cost of ownership, 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 operator assist systems (OAS), power options and vehicle automation; 30 Table of Contents • Be the leader in the delivery of industry- and customer-focused solutions by transforming the Company's sales approach to ensure it meets 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. Over the past two years, the Company launched its heart-of-the-line modular, scalable 2- to 3.5-ton internal combustion engine lift trucks in the EMEA and Americas markets. The production ramp-up is occurring gradually given the current extended backlog. However, bookings and shipments accelerated in 2023. A fourth-quarter 2023 launch is expected for the JAPIC market. Similar enhancements to the 2- to 3.5-ton electric truck platforms are also expected over 2024 and 2025. The modular, scalable product platform is expected to enhance multiple areas of the business, including reducing supply chain costs, improving working capital levels and helping optimize the Company's manufacturing footprint, while providing customers with a more customizable product that better meets their needs. The Lift Truck business has key projects which include electrifying trucks used for applications now dominated by internal combustion engine trucks that capitalize on advancements in electric powertrain options. The Company currently has its first electrified fuel cell Container Handler operating at the Port of Los Angeles. During the 2023 third quarter, the Company delivered an electrified fuel cell Reach Stacker to the Port of Valencia, Spain. Hyster-Yale anticipates delivering a new electrified fuel cell Terminal Tractor and an electrified fuel cell Empty Container Handler to a customer in Hamburg, Germany in the first half of 2024. The Company is exploring options for additional electrification projects within the European Union and the United States. The Company also has key projects focused on applying its technology advancements to additional OAS and automated product options. Notably, during third-quarter 2023, the Company entered into an agreement with a technology-service provider to co-develop further robotics software technology for automated lift truck solutions. Operational and Strategic Perspectives - Bolzoni Bolzoni anticipates a modest revenue decline in fourth-quarter 2023 compared with fourth-quarter 2022 resulting from a projected market decline. Despite the anticipated revenue decrease, operating profit is expected to increase over the prior year fourth quarter due to ongoing strict cost controls. Fourth-quarter 2023 operating profit is projected to be comparable to third-quarter 2023. In 2024, Bolzoni expects comparable revenues to 2023. Operating profit is expected to increase year-over-year as improved unit margins are anticipated to more than offset higher costs. 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 global markets. As part of this approach, Bolzoni also intends to increase its sales, marketing and product 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 heavy-duty fuel cell market. Nuvera continues to focus on placing 45kW and 60kW fuel cell engines in heavy-duty vehicle applications for which battery-only electrification does not provide an adequate solution. As a result, these applications are expected to have significant and nearer-term fuel cell adoption potential. Nuvera has announced several projects with various third parties to test Nuvera ® engines in targeted applications, including the Port of Los Angeles and the Port of Valencia. Nuvera expects to have additional products being tested in bus applications in China and India, in marine applications in the Netherlands, and in a German port by mid-2024. Nuvera is also developing a new, larger 125kW fuel cell engine for heavier-duty applications, which is projected to be available in 2025, and plans to sell modular fuel cells for stationary and mobile generator applications. During the fourth quarter of 2023 and in 2024, Nuvera plans to focus on increasing customer product demonstrations and customer bookings. Nuvera is expanding its presence in Europe and China. Recurring orders from current customers have been booked and are expected to result in higher sales in fourth-quarter 2023 and in 2024 compared with the prior year periods. The business also expects to generate a lower loss in fourth-quarter 2023 compared with 2022 largely due to anticipated higher shipments combined with lower costs due to the expected receipt of government funding for fuel-cell research and development. In 2024, Nuvera expects higher sales with moderately higher development costs, resulting in comparable operating results compared with 2023. The increased volume of engine demonstrations should significantly enhance the foundation for future fuel cell engine technology adoption and improved financial returns. 31 Table of Contents Consolidated Outlook At the consolidated level, fourth-quarter 2023 operating profit and net income are expected to improve significantly over a profitable fourth-quarter 2022, although not to the level of third-quarter 2023. In 2024, the Company expects operating profit and net income to be similar to 2023. The Company made solid progress toward its 7% operating profit margin and greater than 20% return on total capital employed goals at both the Lift Truck and Bolzoni businesses in 2023, and further progress is expected in 2024. To meet these expectations, however, the Company will have to effectively manage its ongoing component and labor costs and achieve increased production levels. The programs to reduce inventory and generate cash are anticipated to show further progress in fourth-quarter 2023 and 2024. The Company is committed to reducing its leverage and enhancing its cash flows through ongoing working capital action plans and continued discipline over capital expenditures and operating expenses. Capital expenditures are expected to be approximately $42 million for full-year 2023. Working capital control continues to be an area of intense focus for the Company. Inventory levels remain elevated and above pre-pandemic levels but are slowly declining. Efforts to maximize the use of on-hand inventory are expected to help reduce excess inventory levels, especially in 2024. Supply constraints continue to be an issue intermittently, and labor constraints periodically cause certain production and inventory usage disruptions. However, the Company anticipates continued inventory improvements over the remainder of 2023 and 2024. As a result of these actions, the Company expects a significant increase in cash flow before financing activities for full-year 2023 compared with 2022, and further progress is expected in 2024. 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, critical components 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, including the Uyghur Forced Labor Prevention Act (the “UFLPA”) which could impact our imports from China, as well as armed conflicts, including the Russia/Ukraine conflict and/or the Israel and Gaza 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. 32 Table of Contents