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, Inc. ("Hyster-Yale" or the "Company") and its subsidiaries, including its operating company, Hyster-Yale Materials Handling, Inc. ("HYMH"), is a globally integrated company offering a full line of high-quality, application-tailored lift trucks and solutions aimed at meeting the specific materials handling needs of its customers. The Company's solutions include 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. On May 31, 2024, the Company changed its corporate name to Hyster-Yale, Inc. and the Company's wholly owned operating subsidiary, Hyster-Yale Group, Inc., changed its corporate name to Hyster-Yale Materials Handling, Inc. The Company, through HYMH, 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 Company's distribution network consisted of approximately 350 independent dealers as of September 30, 2024. The materials handling business historically has been cyclical because the order rate for lift trucks fluctuates depending on the economic activity level in the various industries and countries its customers serve. Lift trucks and component parts are manufactured in the United States, Northern Ireland, China, Mexico, the Netherlands, Brazil, the Philippines, Italy, Japan and Vietnam. As of September 30, 2024, the Company owned a 90% majority interest in Hyster-Yale Maximal Forklift (Zhejiang) Co., Ltd. ("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 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. In July 2024, Bolzoni acquired 60% of the equity interest of a machining business in Italy for an aggregate purchase price of $2.2 million. Bolzoni maintains an option to purchase the remaining 40% of the equity interest of the machining business for a period of five years, subject to certain terms and conditions. The results of operations of this acquired business have been included in the Bolzoni segment since the date of acquisition and are not material to the Company's results of operations, financial position or cash flows. 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 16 through 17 in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Critical Accounting Policies and Estimates have not materially changed since December 31, 2023. 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 2024 2023 % Change 2024 2023 % Change Revenues Americas $ 771.1 $ 716.5 7.6 % $ 2,422.3 $ 2,190.9 10.6 % EMEA 145.0 183.9 (21.2) % 532.2 599.4 (11.2) % JAPIC 51.3 51.6 (0.6) % 137.7 149.1 (7.6) % Lift truck business 967.4 952.0 1.6 % 3,092.2 2,939.4 5.2 % Bolzoni 97.6 92.8 5.2 % 296.2 288.0 2.8 % Nuvera 0.3 1.5 (80.0) % 1.0 4.1 (75.6) % Eliminations ( 49.2 ) ( 45.1 ) 9.1 % ( 148.7 ) ( 140.4 ) 5.9 % $ 1,016.1 $ 1,001.2 1.5 % $ 3,240.7 $ 3,091.1 4.8 % 20 Table of Contents THREE MONTHS ENDED Favorable / (Unfavorable) NINE MONTHS ENDED Favorable / (Unfavorable) SEPTEMBER 30 SEPTEMBER 30 2024 2023 % Change 2024 2023 % Change Gross profit (loss) Americas $ 147.8 $ 149.2 (0.9) % $ 528.0 $ 413.8 27.6 % EMEA 19.5 29.4 (33.7) % 85.9 83.4 3.0 % JAPIC 5.6 7.4 (24.3) % 14.0 21.4 (34.6) % Lift truck business 172.9 186.0 (7.0) % 627.9 518.6 21.1 % Bolzoni 23.3 19.5 19.5 % 67.5 62.8 7.5 % Nuvera (3.0) (1.9) (57.9) % (7.8) (5.8) (34.5) % Eliminations (0.3) — n.m. 0.3 0.3 — % $ 192.9 $ 203.6 (5.3) % $ 687.9 $ 575.9 19.4 % Selling, general and administrative expenses Americas $ 95.1 $ 83.8 (13.5) % $ 281.7 $ 235.7 (19.5) % EMEA 29.1 27.0 (7.8) % 85.5 77.3 (10.6) % JAPIC 9.7 10.1 4.0 % 29.3 30.2 3.0 % Lift truck business 133.9 120.9 (10.8) % 396.5 343.2 (15.5) % Bolzoni 17.1 16.6 (3.0) % 54.0 50.1 (7.8) % Nuvera 8.8 7.5 (17.3) % 24.9 22.6 (10.2) % $ 159.8 $ 145.0 (10.2) % $ 475.4 $ 415.9 (14.3) % Operating profit (loss) Americas $ 52.7 $ 65.4 (19.4) % $ 246.3 $ 178.1 38.3 % EMEA ( 9.6 ) 2.4 (500.0) % 0.4 6.1 (93.4) % JAPIC ( 4.1 ) ( 2.7 ) (51.9) % ( 15.3 ) ( 8.8 ) (73.9) % Lift truck business 39.0 65.1 (40.1) % 231.4 175.4 31.9 % Bolzoni 6.2 2.9 113.8 % 13.5 12.7 6.3 % Nuvera ( 11.8 ) ( 9.4 ) (25.5) % ( 32.7 ) ( 28.4 ) (15.1) % Eliminations ( 0.3 ) — n.m. 0.3 0.3 — % $ 33.1 $ 58.6 (43.5) % $ 212.5 $ 160.0 32.8 % Interest expense $ 8.4 $ 9.6 12.5 % $ 26.1 $ 28.2 7.4 % Other (income) expense $ (3.4) $ (3.6) (5.6) % $ (8.6) $ (7.5) 14.7 % Net income attributable to stockholders $ 17.2 $ 35.8 (52.0) % $ 132.0 $ 100.7 31.1 % Diluted earnings per share $ 0.97 $ 2.06 (52.9) % $ 7.47 $ 5.82 28.4 % Reported income tax rate 36.7 % 30.8 % 31.5 % 26.5 % n.m. - not meaningful The following is the detail of the approximate sales value of the Company's lift truck unit bookings dollar value and lift truck backlog dollar value. The dollar value of bookings and backlog is calculated using the current unit bookings and backlog and the forecasted average sales price per unit. As of September 30, 2024, 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 2024 2023 2024 2023 Bookings, approximate sales value $ 370 $ 580 $ 1,270 $ 1,950 Backlog, approximate sales value $ 2,300 $ 3,540 $ 2,300 $ 3,540 21 Table of Contents Third Quarter of 2024 Compared with Third Quarter of 2023 The following table identifies the components of change in revenues for the third quarter of 2024 compared with the third quarter of 2023: Revenues Lift Truck HY Americas EMEA JAPIC 2023 $ 1,001.2 $ 716.5 $ 183.9 $ 51.6 Increase (decrease) in 2024 from: Lift Truck Price 18.0 20.1 (1.9) (0.2) Other 6.7 5.6 0.6 0.5 Parts 0.2 0.4 (0.5) 0.3 Unit volume and product mix (8.0) 31.0 (37.9) (1.1) Foreign currency (1.5) (2.5) 0.8 0.2 Bolzoni revenues 4.8 — — — Nuvera revenues (1.2) — — — Eliminations (4.1) — — — 2024 $ 1,016.1 $ 771.1 $ 145.0 $ 51.3 Revenues increased 1.5% to $1,016.1 million in the third quarter of 2024 from $ 1,001.2 million in the third quarter of 2023. The increase in Lift Truck revenues was primarily due to improved pricing, higher fleet services and other revenues and a favorable sales mix shift in 2024 compared to 2023. These increases were partially offset by a decline in unit volume, mainly in EMEA, which more than offset unit volume increases in the Americas. Bolzoni's revenues increased in the third quarter of 2024 compared with the third quarter of 2023, primarily due to higher sales volumes. The following table identifies the components of change in operating profit (loss) for the third quarter of 2024 compared with the third quarter of 2023: Operating Profit (Loss) Lift Truck HY Americas EMEA JAPIC 2023 $ 58.6 $ 65.4 $ 2.4 $ ( 2.7 ) Increase (decrease) in 2024 from: Lift truck gross profit (13.4) (1.4) (9.9) (1.8) Lift truck selling, general and administrative expenses (13.0) (11.3) (2.1) 0.4 Nuvera operations (2.4) — — — Bolzoni operations 3.3 — — — 2024 $ 33.1 $ 52.7 $ (9.6) $ (4.1) The Company recognized operating profit of $33.1 million in the third quarter of 2024 compared with $58.6 million in the third quarter of 2023. The decrease in Lift Truck operating profit was primarily due to lower gross profit mainly from higher freight costs, lower sales margins and other cost inflation-related variances. These decreases were partially offset by higher pricing of $18.0 million, mainly in the Americas. Additionally, selling, general and administrative expenses were higher, primarily related to higher sales, marketing and information technology costs, as well as increased employee-related costs, including incentive compensation. Operating profit in the Americas decreased to $52.7 million in the third quarter of 2024 compared with $65.4 million in the third quarter of 2023, mainly as a result of higher selling, general and administrative expenses, primarily due to increased employee-related costs, including incentive compensation and higher sales, marketing and information technology costs. The Americas's gross profit decreased modestly, primarily due to higher freight costs and cost inflation-related variances. These decreases were partially offset by higher pricing of $20.1 million, higher unit volumes and a shift in sales to higher-margin lift 22 Table of Contents trucks, mainly as a result of increased sales of higher capacity models within Class 1 and 4 lift trucks and higher-priced Class 5 internal combustion lift trucks. EMEA recognized an operating loss of $9.6 million in the third quarter of 2024 compared with operating profit of $2.4 million in the third quarter of 2023. The decrease was primarily from lower gross profit from lower unit volume and pricing along with a shift in sales to lower-margin lift trucks, combined with higher selling, general and administrative expenses. The operating loss in JAPIC increased to $4.1 million in the third quarter of 2024 from $2.7 million in the third quarter of 2023, mainly due to lower unit volumes. Bolzoni's operating profit increased to $6.2 million in the third quarter of 2024 compared with $2.9 million in the third quarter of 2023, primarily due to favorable unit volumes, sales of higher-margin units and manufacturing efficiencies. The operating loss at Nuvera increased in the third quarter of 2024 compared with the third quarter of 2023, mainly due to lower revenues and an increase in selling, general and administrative expenses, primarily related to higher utility and lease expenses. In addition, Nuvera recognized a $0.2 million severance charge in the third quarter of 2024. The Company recognized net income attributable to stockholders of $ 17.2 million in the third quarter of 2024 compared with $ 35.8 million in the third quarter of 2023. The decline was primarily the result of lower operating profit in addition to a higher effective income tax rate in the third quarter of 2024 compared with the third quarter of 2023. See Note 5 of the Company's condensed consolidated financial statements for further discussion of the Company's income tax provision. First Nine Months of 2024 Compared with First Nine Months of 2023 The following table identifies the components of change in revenues for the first nine months of 2024 compared with the first nine months of 2023: Revenues Lift truck HY Americas EMEA JAPIC 2023 $ 3,091.1 $ 2,190.9 $ 599.4 $ 149.1 Increase (decrease) in 2024 from: Lift Truck Price 125.3 114.6 10.9 (0.2) Other 48.9 46.9 1.4 0.6 Foreign currency 5.1 (1.9) 7.8 (0.8) Parts (17.5) (9.1) (5.4) (3.0) Unit volume and product mix (9.0) 80.9 (81.9) (8.0) Bolzoni revenues 8.2 — — — Nuvera revenues (3.1) — — — Eliminations (8.3) — — — 2024 $ 3,240.7 $ 2,422.3 $ 532.2 $ 137.7 Revenues increased 4.8% to $3,240.7 million in the first nine months of 2024 from $ 3,091.1 in the first nine months of 2023. The increase was primarily due to improved pricing, higher fleet services and other revenue from lower customer and dealer incentive programs in 2024 compared to 2023. These increases were partially offset by lower parts volumes and a decline in unit volume in EMEA, which more than offset favorable unit volume in the Americas. Bolzoni revenues increased in the first nine months of 2024 compared with the first nine months of 2023, mainly from higher sales volumes and improved pricing. 23 Table of Contents The following table identifies the components of change in operating profit for the first nine months of 2024 compared with the first nine months of 2023: Operating Profit (Loss) Lift truck HY Americas EMEA JAPIC 2023 $ 160.0 $ 178.1 $ 6.1 $ ( 8.8 ) Increase (decrease) in 2024 from: Lift truck gross profit 109.3 114.2 2.5 (7.4) Lift truck selling, general and administrative expenses (53.3) (46.0) (8.2) 0.9 Bolzoni operations 0.8 — — — Nuvera operations (4.3) — — — 2024 $ 212.5 $ 246.3 $ 0.4 $ (15.3) The Company recognized an operating profit of $212.5 million in the first nine months of 2024 compared with $160.0 million in the first nine months of 2023. The increase in Lift Truck operating profit was primarily due to improved gross profit from higher pricing of $125.3 million, mainly in the Americas, partially offset by unfavorable manufacturing variances as result of lower unit volumes and higher freight costs. The increase in gross profit was partially offset by higher selling, general and administrative expenses related to increased employee-related costs, including incentive compensation, as well as higher marketing and product development costs. Operating profit in the Americas increased in the first nine months of 2024 compared with the first nine months of 2023, primarily due to improved gross profit from higher pricing of $114.6 million, favorable material costs and improved margin from lower dealer and customer incentives in the Americas compared with the first nine months of 2023. These improvements were partially offset by manufacturing inefficiencies tied to lower production volumes, lower parts sales and higher freight costs. In addition, operating profit was unfavorably impacted by higher selling, general and administrative expenses related to increased employee-related costs, including incentive compensation, as well as higher marketing and product development costs. EMEA's operating profit was $0.4 million in the first nine months of 2024 compared with $6.1 million the first nine months of 2023. The decrease was mainly due to an increase in selling, general and administrative expenses relating to higher employee-related costs, including incentive compensation, as well as higher marketing costs. JAPIC's operating loss increased to $15.3 million in the first nine months of 2024 from $8.8 million in the first nine months of 2023, primarily due to lower gross profit from material cost inflation, and lower unit volume, partially offset by favorable foreign currency movements and lower selling, general and administrative expenses. Bolzoni's operating profit increased to $13.5 million in the first nine months of 2024 compared with $12.7 million in the first nine months of 2023, primarily due to sales of higher-margin units, favorable unit volumes and manufacturing efficiencies, partially offset by higher selling, general and administrative costs, primarily related to higher employee-related costs. Nuvera's operating loss increased to $32.7 million in the first nine months of 2024 compared with $28.4 million in the first nine months of 2023, primarily from lower revenue and an increase in selling, general and administrative expenses, primarily related to higher utility and lease expenses. The Company recognized net income attributable to stockholders of $ 132.0 million in the first nine months of 2024 compared with $ 100.7 million in the first nine months of 2023. The improvement was primarily the result of the factors affecting operating profit, partially offset by higher income taxes. This higher income tax rate was due to the continued capitalization of research and development expenditures for U.S. tax purposes combined with the Company's inability to record deferred tax assets on its balance sheet given its U.S. valuation allowance position. 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 LIQUIDITY AND CAPITAL RESOURCES Cash Flows The following tables detail the changes in cash flow for the nine months ended September 30: 2024 2023 Change Operating activities: Net income $ 133.5 $ 102.4 $ 31.1 Depreciation and amortization 35.8 33.8 2.0 Stock-based compensation 21.9 14.0 7.9 Dividends from unconsolidated affiliates 4.4 10.5 (6.1) Other operating activities 24.2 15.1 9.1 Changes in assets and liabilities Accounts receivable (38.2) 1.8 (40.0) Inventories (41.5) (21.9) (19.6) Accounts payable and other liabilities (50.2) (44.1) (6.1) Other current assets 0.1 (6.5) 6.6 Net cash provided by operating activities 90.0 105.1 (15.1) Investing activities: Expenditures for property, plant and equipment (29.9) (18.9) (11.0) Proceeds from the sale of assets and business 1.4 2.3 (0.9) Business acquisition, net of cash acquired (2.2) — (2.2) Purchase of noncontrolling interest — (3.2) 3.2 Net cash used for investing activities (30.7) (19.8) (10.9) Business acquisition, net of cash acquired Cash flow before financing activities $ 59.3 $ 85.3 $ (26.0) Net cash provided by operating activities decreased $15.1 million in the first nine months of 2024 compared with the first nine months of 2023, primarily as a result of changes in assets and liabilities partially offset by higher net income. The unfavorable net changes in assets and liabilities were mainly due to a large increase in accounts receivable and inventories during the first nine months of 2024 compared with the first nine months of 2023. The increase in accounts receivable is mainly due to higher sales with longer payment terms during the first nine months of 2024 compared with the first nine months of 2023. In addition, inventory increased in the first nine months of 2024 compared to the first nine months of 2023 due mainly to changes in the timing of shipments to customers. The change in net cash used for investing activities during the first nine months of 2024 compared with the first nine months of 2023 was mainly due to higher capital expenditures in 2024. 2024 2023 Change Financing activities: Net increase (decrease) of long-term debt and revolving credit agreements $ (33.9) $ (50.2) $ 16.3 Cash dividends paid (19.2) (16.7) (2.5) Purchase of treasury stock (9.1) (0.1) (9.0) Other — (2.1) 2.1 Net cash used for financing activities $ (62.2) $ (69.1) $ 6.9 The change in net cash used for financing activities was primarily due to lower net payments during the first nine months of 2024 compared with the first nine months of 2023. Additionally, the Company purchased treasury stock in the first nine months of 2024 related to employee-related incentive stock compensation plans. 25 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 previously included a $25.0 million tranche, which terminated on May 1, 2024. 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 $1.3 billion as of September 30, 2024. 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, 2024, the Company was in compliance with the covenants in the Facility. Key terms of the Facility as of September 30, 2024 were as follows: FACILITY U.S. borrowing capacity $ 210.0 Non-U.S. borrowing capacity 90.0 Outstanding 75.6 Availability restrictions 4.7 Availability $ 219.7 Applicable margins, as defined in agreement U.S. base rate loans 0.25% to 0.75% SOFR, EURIBOR and non-U.S. base rate loans 1.25% to 1.75% SOFR adjustment, as defined in agreement 0.10% Applicable margins, for amounts outstanding U.S. base rate loans 0.50% SOFR loans 1.50 % Non-U.S. base rate loans 1.50% Applicable interest rate, for amounts outstanding U.S. base rate 8.50% SOFR 6.70% EURIBOR 5.09% 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 U.S. 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 $1.0 billion as of September 30, 2024. 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 26 Table of Contents 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, 2024, the Company was in compliance with the covenants in the Term Loan. Key terms of the Term Loan as of September 30, 2024 were as follows: TERM LOAN Outstanding $ 217.7 Discounts and unamortized deferred financing fees 2.8 Net amount outstanding $ 214.9 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 8.46% The Company had other debt outstanding, excluding finance leases, of approximately $152.7 million at September 30, 2024. In addition to the excess availability under the Facility of $219.7 million, the Company had remaining availability of $41.9 million related to other non-U.S. revolving credit agreements at September 30, 2024. 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, 2023, 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 page 24 in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Capital Expenditures The following table summarizes actual and planned capital expenditures: Nine Months Ended September 30, 2024 Planned for Remainder of 2024 Planned 2024 Total Actual 2023 Lift truck business $ 23.5 $ 15.6 $ 39.1 $ 26.8 Bolzoni 3.9 3.5 7.4 5.1 Nuvera 2.5 — 2.5 3.5 $ 29.9 $ 19.1 $ 49.0 $ 35.4 Planned expenditures for the remainder of 2024 are primarily for product development, improvements at manufacturing locations, manufacturing equipment improvements to information technology infrastructure. The principal sources of financing for these capital expenditures are expected to be internally generated funds and bank financing. 27 Table of Contents Capital Structure The Company's capital structure is presented below: SEPTEMBER 30 2024 DECEMBER 31 2023 Change Cash and cash equivalents $ 75.6 $ 78.8 $ (3.2) Other net tangible assets 847.4 729.4 118.0 Intangible assets 36.3 39.3 (3.0) Goodwill 58.2 53.3 4.9 Net assets 1,017.5 900.8 116.7 Total debt (468.5) (494.0) 25.5 Total temporary and permanent equity $ 549.0 $ 406.8 $ 142.2 Debt to total capitalization 46 % 55 % (9) % OUTLOOK AND LONG-TERM OBJECTIVES Consolidated Strategic Perspective The Company believes its strong 2023 and 2024 year-to-date financial performance benefited significantly from actions taken over the past few years to deliver on the Company's two promises: first, to provide optimal solutions for our customers and second, to provide exceptional customer care. These actions include implementation of key strategies, projects and significant process improvements, all of which better position the Company for substantial longer-term profitable growth. As part of this, the Company’s product development and process improvement efforts are leading to significant advantages, including: • more efficient lift truck production, which supports higher volumes on existing production lines; • leveraging modular and scalable product designs to produce similar high-volume trucks globally, enabling the Company to better meet customer demand while minimizing operational costs; • maximizing operational efficiency and factory utilization by enabling the Company’s plants to build internal combustion and electric trucks on the same production lines; and • phasing out Bolzoni’s lower-margin legacy component manufacturing, which creates manufacturing space for further profitable attachment growth. These improvements are leading to a more efficient and flexible organization which is now positioned to further optimize the Company’s operations and costs. As a result, in October 2024, the Company concluded that new programs should be undertaken in the Americas to lower costs, optimize its Americas’ manufacturing footprint, reduce lead times and better position the Company for increased margins and further growth. The Company expects to incur restructuring charges in the future as it fully executes these manufacturing improvement programs over the next 12 to 36 months. Since the details of these programs are still being finalized, an in depth estimate of charges and expected benefits has not yet been fully determined. The Company will provide more details with its Q4 2024 earnings results along with a more comprehensive 2025 market and business outlook. Lift Truck Business Lift Truck estimates that the Q3 2024 global lift truck market declined moderately from prior year levels. The rate of the year-over-year market bookings decrease accelerated compared to Q2 2024 as more regions experienced deterioration, including a reversal of positive trends previously seen in EMEA. The Q4 2024 global lift truck market is expected to decline further year-over-year, with the Americas and EMEA markets decreasing at an accelerating pace and JAPIC generally stabilizing. Importantly, these below-trend market booking levels are expected to accelerate the offset of the significantly above-trend market booking rates experienced between 2021 and 2023. These counterbalancing forces should return the market to more normalized long-term growth rates over the next several quarters. In 2025, the Lift Truck anticipates the global lift truck market will decrease modestly from 2024 levels, with a first-half decline mostly offset by a second-half increase. Regionally, the Americas and JAPIC markets are expected to lead to comparable year-over-year orders in 2025. In EMEA, second-half 2025 improvements are not expected to fully offset a first-half deterioration. Consistent with the market declines, the Company's factory bookings dollar-value decreased 3% to $370 million in Q3 2024 from $380 million in Q2 2024, broadly suggesting stabilization for Lift Truck at a lower rate. While Lift Truck's Q3 2024 overall bookings dollar-value declined compared with Q2 2024, Americas Q3 2024 bookings dollar-value improved 8% compared with the second quarter, primarily due to increased volumes of higher-priced, 4- to 6-ton 28 Table of Contents Class 1 and the Company's new modular, scalable 1- to 3-ton Class 5 lift trucks. EMEA and JAPIC bookings dollar-value declined 19% from Q2 2024. As a result of Lift Truck's warehouse penetration strategy, including advanced on-truck technologies, Lift Truck anticipates Q3 2024 Americas and EMEA bookings will reflect warehouse market share gains. These gains are expected to continue in Q4 2024 and 2025. Overall market share improvements are also expected in all regions as production rates ramp up on the new 1- to 3.5-ton modular, scalable products. Additional new modular, scalable products are expected to launch in the first half of 2025, as well as electric models of the 1- to 3.5-ton trucks later in the year, which should accelerate the pace of share gains over time. These Q3 and Q4 2024 and early 2025 bookings are expected to reflect continued extension of Lift Truck's roughly seven-month backlog. The new bookings should fill open 2025 production slots, largely in the second half of the year, where some lines are already in a solid backlog position. Rising market share and new bookings, along with Lift Truck’s $2.3 billion backlog, should provide a solid production foundation for the business with improving market levels in the second half of 2025, and set the stage for higher production in 2026. The current backlog should support 2025 shipment levels generally in line with 2024. The Company's global production levels may moderate in 2025 without expected market or share improvements. For much of the past two years, Lift Truck has benefited from strong pricing tailwinds and a significant order backlog. This led to product margins well above Lift Truck's targeted levels. Looking ahead, Lift Truck is focused on maintaining bookings of competitively priced products at or above targeted margin levels. Lift Truck expects to continue to achieve its targeted booking margins through a combination of new model introductions and ongoing cost and pricing discipline. In this context, Q4 2024 consolidated Lift Truck revenues and operating profit are expected to be roughly comparable year-over-year. Anticipated continued strong product margins, from the shipment of higher-priced, higher-margin backlog units, are expected to be offset by increased freight and material costs and higher operating expenses. Looking forward, Lift Truck's backlog is expected to remain healthy, while continuing to decline toward normalized levels. Despite a profitable backlog foundation and ongoing pricing discipline, the lower backlog and market levels could result in a 2025 year-over-year revenue decrease. Given a potential revenue decline, in combination with anticipated cost inflation and an operating expense run rate similar to the second half of 2024, Lift Truck expects an operating profit in 2025 significantly lower than the exceptionally strong 2024 full year. Bolzoni In Q4 2024, Bolzoni product margins are expected to modestly improve year-over-year, despite lower revenues, as increased production of higher-margin attachments more than offsets the planned phase out of lower-margin legacy component sales to the Lift Truck business. Higher material and freight costs, along with increased employee-related expenses, are expected to offset the improved product margins, leading to a substantial decrease in operating profit compared with Q4 2023. As Bolzoni continues phasing out legacy components, 2025's operating profit is expected to improve over 2024 despite anticipated lower sales volumes. Nuvera During Q4 2024 and in 2025, Nuvera will remain focused on increasing customer product demonstrations and orders, specifically for its new portable hydrogen fuel cell-powered generator. This product was introduced in May 2024 and began customer and dealer demonstrations in September 2024. Q4 2024 revenues are expected to increase year-over-year and be comparable quarter-over-quarter. The benefits from revenue growth are expected to be offset by higher product development costs, resulting in a modest increase in the Q4 2024 operating loss compared with Q4 2023. In 2025, Nuvera expects full-year revenues to increase due to higher fuel cell sales. The revenue benefits are likely to be partly offset by a modest increase in product development costs year-over-year to support further development on Nuvera’s more powerful 125Kw fuel cell engine. In total, 2025's operating results are expected to improve compared to 2024, in part due to benefits realized from the 2024 reduction in force action. Consolidated Consolidated Q4 2024 revenues and net income anticipated to be roughly comparable to robust prior year levels. The Company continues to make progress toward its goal of generating 7% operating profit margins across each business cycle in the Lift Truck and Bolzoni businesses. In periods of robust demand, like those experienced in recent quarters, the Company 29 Table of Contents exceeded its target margin levels. During the current environment of soft demand, the Company’s extended backlog of higher-margin trucks is providing a shock absorber for financial results. The Company expects production levels to continue to outpace bookings for the next several quarters, bringing the backlog to more normalized levels by mid-2025. Bookings are expected to accelerate in the second half of 2025 and the Company expects improved production levels in 2026. In the meantime, strategic actions to reduce costs, improve productivity and deliver high-quality, highly customizable products made consistently around the globe should enable the Company to be more profitable in all phases of the business cycle. These actions are ongoing and will gain momentum in the coming quarters. As a result of the aforementioned factors, the Company believes 2025 revenues may be lower than 2024 and operating profit and net income will decline significantly compared to 2024. The Company continues to focus on its cash generation and capital allocation priorities. The Company has made progress on working capital efficiency in 2024 to date, but the pace of improvement has been below management's objectives. Intense efforts to accelerate results in this area are underway and are expected to generate further improvements in Q4 2024 and 2025. Capital expenditures, including transformational product enhancements and manufacturing efficiency, are expected to be $49 million in 2024. This is below the initial estimate of $87 million which helps to ensure a strong liquidity position as working capital improvement efforts mature. Overall, the Company expects Q4 and full-year 2024 cash flows from operations to increase significantly year-over-year. 2025 cash flow from operations is expected to remain strong and at a high level, but decrease from 2024 levels. As the Company continues to generate cash, it will follow its disciplined capital allocation framework to reduce leverage, make strategic investments to support profitable business growth and generate strong returns for its shareholders. Long-Term Objectives The Company's vision is to transform the way the world moves materials from Port to Home. The Company strives to do this through its two customer promises. Ongoing execution of established strategic initiatives and key projects, as well as the restructuring measures previously mentioned, are expected to help the Company fulfill these promises and achieve long-term revenue and operating profit growth rates above the material handling market's expected growth rates. The Company believes these actions will contribute to an increased and sustainable lift truck and attachment competitive advantage over time. In addition, the Company believes that Nuvera's revenues will increase significantly over future years, bringing additional value to the Company's shareholders. Further information regarding the Company's strategic initiatives can be found in the Company's Q3 2024 Investor Deck. This presentation, currently available on the Hyster-Yale website, elaborates on the strategies that are critical for the Company's long-term prospects. The Company encourages investors to review this material to ensure a clear understanding of the Company's future direction. 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 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) reduction in demand for lift trucks, attachments and related aftermarket parts and service on a global basis, including any cyclical reduction in demand in the lift truck industry, (4) customer acceptance of pricing, (5) customer acceptance of, changes in the costs of, or delays in the development of new products, (6) the ability of the Company and its dealers, suppliers and end-users to access credit, 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) unfavorable effects of geopolitical and legislative 30 Table of Contents 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 the Company's imports from China, as well as armed conflicts, including the Russia/Ukraine conflict, the Israel and Gaza conflict and/or the conflict in the Red Sea, and their regional effects, (8) exchange rate fluctuations, interest rate volatility and monetary policies and other changes in the regulatory climate in the countries in which the Company operates and/or sells products, (9) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives and restructuring programs, (10) the successful commercialization of Nuvera's technology, (11) political and economic uncertainties in the countries where the Company does business, as well as the effects of any withdrawals from such countries, (12) bankruptcy of or loss of major dealers, retail customers or suppliers, (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.