# HYSTER-YALE, INC. (HY) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from HYSTER-YALE, INC.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1173514/000117351422000013/hy-20211231.htm
Accession: 0001173514-22-000013
Filing date: 2022-02-28
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/HY/
All MD&A years: /company/HY/mda/
Next year: /company/HY/mda/fy2022/ (FY 2022)

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES

    (Tabular Amounts in Millions, Except Per Share, Percentage Data and as Otherwise Noted)

OVERVIEW

Hyster-Yale Materials Handling, Inc. ("Hyster-Yale" or the "Company") and its subsidiaries, including its operating company Hyster-Yale Group, Inc. ("HYG"), is a leading, globally integrated, full-line lift truck manufacturer. The Company offers a broad array of solutions aimed at meeting the specific materials handling needs of its customers, including attachments and hydrogen fuel cell power products, telematics, automation and fleet management services, as well as a variety of other power options for its lift trucks. The Company, through HYG, designs, engineers, manufactures, sells and services a comprehensive line of lift trucks, attachments and aftermarket parts marketed globally, primarily under the Hyster® and Yale® brand names, mainly to independent Hyster® and Yale® retail dealerships. The materials handling business historically has been cyclical because the rate of orders for lift trucks fluctuates depending on the general level of economic activity in the various industries and countries its customers serve. Lift trucks and component parts are manufactured in the United States, China, Northern Ireland, Mexico, the Netherlands, Brazil, the Philippines, Italy, Japan and Vietnam.

The Company owns a 75% majority interest in Hyster-Yale Maximal Forklift (Zhejiang) Co., Ltd. ("Hyster-Yale Maximal"). Hyster-Yale Maximal is a Chinese manufacturer of low-intensity and standard lift trucks and specialized material handling equipment. Hyster-Yale Maximal also designs and produces specialized products in the port equipment and rough terrain forklift markets. During 2021, the Company signed an Equity Transfer Agreement with Y-C Hongkong Holding Co., Limited (“HK Holding Co”), pursuant to which the Company expects to purchase 15% of the equity interest of Hyster-Yale Maximal from HK Holding Co for an aggregate purchase price of $25.2 million in June 2022, which will be paid in annual installments of $8.4 million beginning in June 2022 through June 2024. Subsequently, the Company will have an option to purchase HK Holding Co's remaining interest in Hyster-Yale Maximal at any time prior to June 8, 2056 for $16.8 million. If this option is exercised, the Company will own 100% of the equity interest of Hyster-Yale Maximal.

The Company operates Bolzoni S.p.A. ("Bolzoni"). Bolzoni is a leading worldwide producer and distributor of attachments, forks and lift tables marketed under the Bolzoni®, Auramo® and Meyer® brand names. Bolzoni products are manufactured in the United States, Italy, China, Germany and Finland. Through the design, production and distribution of a wide range of attachments, Bolzoni has a strong presence in the market niche of lift truck attachments and industrial material handling.

The Company operates Nuvera Fuel Cells, LLC ("Nuvera"). Nuvera is an alternative-power technology company focused on the design, manufacture and sale of hydrogen fuel cell stacks and engines.

Competition in the materials handling industry is intense and is based primarily on strength and quality of distribution, brand loyalty, customer service, new lift truck sales prices, availability of products and aftermarket parts, comprehensive product line offerings, product performance, product quality and features and the cost of ownership over the life of the lift truck. The Company competes with several global lift truck manufacturers that operate in all major markets, as well as other niche companies. The lift truck industry also competes with alternative methods of materials handling, including conveyor systems and automated guided vehicle systems. The Company's aftermarket parts offerings compete with parts manufactured by other lift truck manufacturers, as well as companies that focus solely on the sale of generic parts.

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The Company's objective is to be a leading, globally integrated designer, manufacturer and marketer of a complete range of lift truck solutions offering the lowest cost of ownership and the best overall value by leveraging its high quality, application-tailored lift trucks, attachments and power solutions in order to transform the way the world moves materials from Port to Home. The Company’s core competency is lift truck manufacturing, but its goal is to become the lift truck solutions partner to the materials handling market, one customer and one industry at a time.

The Company’s objective is to provide a wide-range of solutions to its customers to generate profitable growth through increasing volumes, which in turn are expected to generate market share gains and drive improved margins. The Company plans to accomplish these objectives by implementing its core strategic initiatives to: provide the lowest cost of ownership, while enhancing productivity for customers; be the leader in the delivery of industry- and customer-focused solutions; be the leader in independent distribution; grow in emerging markets; be the leader in the attachments business and be a leader in fuel cells and their applications.

During 2020, broad measures taken by governments, businesses and others across the globe to limit the spread of novel coronavirus ("COVID-19") adversely affected the Company. The resulting significant decline in economic activity also reduced the demand for the Company's products and limited the availability of components from certain suppliers. Production was significantly reduced or suspended at the Company's Chinese and European facilities for certain periods during the first and second quarters of 2020. The Company also initiated several cost reduction measures designed to ease liquidity pressure. These cost containment actions included spending and travel restrictions, significant reductions in temporary personnel, furloughs, suspension of incentive compensation and profit sharing, benefit reductions and salary reductions. Effective January 1, 2021, the Company reinstated pre-pandemic salaries, benefits and incentive compensation programs. The cost containment actions associated with hiring, use of contract and temporary workers, travel and meetings, as well as other discretionary spending, are continuing. These measures are expected to remain in place until market and economic uncertainty dissipates and results improve. In addition, the Company adjusted production levels in 2020 at its manufacturing plants to align more closely with the reduced levels of demand, and worked closely with suppliers to help ensure current needs were met while also promoting continuity as the market improved. However, despite these efforts, during 2021, the Company experienced further pandemic-related and other global supply chain constraints, component shortages, shipping container availability constraints and higher freight costs, as well as significant material cost inflation resulting from the accelerated pace of the market recovery, all of which have negatively impacted the Company.

See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2020 Annual Report on Form 10-K for discussion of financial condition and results of operations for 2020 compared with 2019.

Critical Accounting Policies and Estimates

The discussion and analysis of financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities, if any. On an ongoing basis, the Company evaluates its estimates based on historical experience, actuarial valuations and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

The Company believes the following are critical accounting policies. Certain of these are critical accounting estimates as they require significant judgments and estimates used in the preparation of the consolidated financial statements.

Long-lived assets, goodwill and intangible assets: Net property, plant and equipment, right-of-use ("ROU") assets, goodwill and net intangible assets at December 31, 2021 were $330.5 million, $68.8 million, $56.5 million and $50.7 million, respectively. The Company makes estimates and assumptions in preparing the consolidated financial statements for which actual results will emerge over long periods of time. This includes the recoverability of long-lived assets employed in the business, including assets of acquired businesses. These estimates and assumptions are closely monitored and periodically adjusted as circumstances warrant. For instance, expected asset lives may be shortened or an impairment recorded based on a change in the expected use of the asset or performance of the related asset group.

Goodwill is tested for impairment annually as of May 1, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. The Company completed the annual testing of impairment of goodwill as of May 1, 2021 and an interim impairment test as of December 31, 2021 at the reporting unit level for the related goodwill. The Company uses either a qualitative or quantitative analysis to determine whether fair value exceeds carrying value. An estimate of the fair value of the reporting unit is determined through a combination of comparable market values for similar businesses and discounted cash flows. These estimates can change significantly based on such factors as the reporting unit's financial performance, economic conditions, interest rates, growth rates, pricing, changes in business strategies

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and competition. Based on the annual testing, the fair value of each reporting unit was in excess of its carrying value and no impairment existed. During 2021, the Company continued to experience pandemic-related and other global supply chain constraints, component shortages, shipping container availability constraints and higher freight costs, as well as significant material cost inflation resulting from the accelerated pace of the market recovery. These items significantly impacted the Company's results of operations in 2021. In addition, the timeframe for the expected easing of these factors impacted the Company's near and long-term forecasts. Accordingly, in connection with the preparation of the 2021 financial statements, the Company conducted an interim goodwill impairment test as of December 31, 2021 for the JAPIC and Bolzoni reporting units. As a result, the Company recognized a $55.6 million goodwill impairment charge for the JAPIC reporting unit in the fourth quarter of 2021, of which $11.7 million related to the non-controlling interest share. No impairment of goodwill for the Bolzoni reporting unit was identified. As of December 31, 2021, Bolzoni had $53.8 million of goodwill. Based on the most recent interim impairment test, Bolzoni's fair value of equity exceeded the carrying value by $37.9 million or approximately 21%.

The Company has intangible assets, including customer and contractual relationships, patents and technology, and trademarks. Intangible assets with a definite life are amortized over a period ranging from one to twenty years on a systematic and rational basis (generally straight line) that is representative of the asset’s use. Costs related to internally developed intangible assets, such as patents, are expensed as incurred and included in selling, general and administrative expenses.

Intangible assets with an indefinite life, including certain trademarks, are not amortized. Indefinite-lived intangible assets are tested for impairment annually as of May 1, and are tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. An impairment loss generally would be recognized when the fair value is less than the carrying value of the indefinite-lived intangible asset. In addition to the Company's annual testing of impairment, the Company completed an interim impairment test as of December 31, 2021.

Of the $50.7 million of net intangible assets, $17.0 million relates to indefinite-lived trademarks, related to the acquisition of Bolzoni. The primary valuation technique used in estimating the fair value of indefinite-lived intangible assets is the present value of discounted cash flows. Specifically, a relief of royalty rate is applied to estimated sales, with the resulting amounts discounted using an appropriate discount rate of a market participant. The relief of royalty rate is the estimated royalty rate a market participant would pay to acquire the right to market and produce the product. If the resulting discounted cash flows are less than book value of the indefinite-lived intangible asset, an impairment exists and the asset would be adjusted to fair value. Based on impairment testing as of May 1, 2021 and December 31, 2021, no impairment was identified.

The Company periodically evaluates long-lived assets, including intangible assets with finite lives, for impairment when changes in circumstances or the occurrence of certain events indicate the carrying amount of an asset may not be recoverable. Upon identification of indicators of impairment, assets and liabilities are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or liabilities. The asset group would be considered impaired when the estimated future undiscounted cash flows generated by the asset group are less than carrying value. If the carrying value of an asset group is considered impaired, an impairment charge is recorded for the amount that the carrying value of the asset group exceeds its fair value. Fair value is estimated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of asset groups and the underlying cash flows requires the use of significant judgment.

The continued high level of disruption to the Company’s manufacturing and logistics operations for 2021 and into 2022 and the effects of the COVID-19 pandemic, including border closures, halted Nuvera's progress on certain research and development agreements that were entered into prior to the start of the pandemic. In anticipation of fulfilling these agreements, Nuvera made significant investments in manufacturing and equipment expansion, as well as increased inventory levels. As a result, it was determined in connection with the preparation of the financial statements that the carrying value of the Nuvera fixed assets exceeded the undiscounted cash flows from the assets and the fair value of Nuvera's fixed assets exceeded the carrying value by $10.0 million. Based on the Company’s analysis, all other remaining long-lived assets with finite lives were not impaired as of December 31, 2021.

Factors which could result in future impairment charges include, but are not limited to, changes in worldwide economic conditions, changes in competitive conditions and customer preferences. These risk factors are discussed in Item 1A, "Risk Factors," of this Form 10-K. In addition, changes in the weighted average cost of capital could also impact impairment testing results. The Company will continue to monitor its reporting units and asset groups for any indicators of impairment.

Deferred Income Taxes: Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards on a taxing jurisdiction basis. The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which it expects the temporary differences to be recovered or paid. U.S. generally accepted accounting principles for income taxes requires a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined as a

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likelihood of more than 50%) such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns and future profitability. The Company's accounting for deferred tax consequences represents its best estimate of those future events. Changes in the Company's estimates, due to unanticipated events or otherwise, could have a material effect on its financial condition and results of operations. The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required or no longer needed. At December 31, 2021, the Company had gross deferred tax assets of $113.7 million which were reduced by valuation allowances of $94.4 million and gross deferred tax liabilities of $28.3 million.

Product liabilities: The Company is generally self-insured for product liability claims, although catastrophic insurance coverage is retained for potentially significant individual claims and the Company also has insurance for certain historic claims. The Company provides for the estimated cost of personal and property damage relating to its products based on a review of historical experience and consideration of any known trends. Reserves are recorded for estimates of the costs for known claims and estimates of the costs of incidents that have occurred but for which a claim has not yet been reported, up to the stop-loss insurance coverage. While the Company engages in extensive product quality reviews and customer education programs, the product liability provision is affected by the number and magnitude of claims of alleged product-related injury and property damage and the cost to defend those claims. In addition, the estimates regarding the magnitude of claims are affected by changes in assumptions regarding medical costs, legal defense costs, inflation rates and trends in damages awarded by juries. Changes in the assumptions regarding any one of these factors could result in a change in the estimate of the magnitude of claims. A one percent increase in the estimate of the number of claims or the magnitude of claims would increase the product liability reserve and reduce operating profit by approximately $0.1 million to $0.5 million. Although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change the estimates in the future.

Product warranties: The Company provides for the estimated cost of product warranties at the time revenues are recognized. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, the warranty obligation is affected by product failure rates, labor costs and replacement component costs incurred in correcting a product failure. If actual product failure rates, labor costs or replacement component costs differ from the Company's estimates, which are based on historical failure rates and consideration of known trends, revisions to the estimate of the cost to correct product failures would be required. If the estimate of the cost to correct product failures were to increase by one percent over 2021 levels, the reserves for product warranties would increase and additional expense of $3.2 million would be incurred. The Company's past results of operations have not been materially affected by a change in the estimate of product warranties and although there can be no assurances, the Company is not aware of any circumstances that would be reasonably likely to materially change the estimates in the future.

Retirement benefit plans: The Company maintains various defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. Pension benefits are frozen for all employees other than certain employees in the Netherlands. All other eligible employees, including employees whose pension benefits are frozen, receive retirement benefits under defined contribution retirement plans. The Company's policy is to periodically make contributions to fund the defined benefit pension plans within the range allowed by applicable regulations. The defined benefit pension plan assets consist primarily of publicly traded stocks and government and corporate bonds. There is no guarantee the actual return on the plans’ assets will equal the expected long-term rate of return on plan assets or that the plans will not incur investment losses.

The expected long-term rate of return on defined benefit plan assets reflects management’s expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes.

Expected returns for the Company's U.K. pension plan are based on a calculated market-related value of assets. Under this methodology, asset gains and losses resulting from actual returns that differ from expected returns are recognized in the market-related value of assets ratably over three years.

The basis for the selection of the discount rate for each plan is determined by matching the timing of the payment of the expected obligations under the defined benefit plans against the corresponding yield of high-quality corporate bonds of equivalent maturities.

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The following illustrates the sensitivity of the net periodic benefit cost and projected benefit obligation to a 1% change in the discount rate or return on plan assets (in millions):

[[GREPCENT_TABLE]]
[["Assumption","","Change","","Increase (decrease) 2022 net pension expense","","Increase (decrease) 2021 projected benefit obligation"],["Discount rate","","1% increase","","$0.1","","$(29.5)"],["","","1% decrease","","(0.3)","","36.2"],["Return on plan assets","","1% increase","","(2.5)","","N/A"],["","","1% decrease","","2.5","","N/A"]]
[[/GREPCENT_TABLE]]

A change in life expectancy by one year would result in a $11.8 million change in the 2021 projected benefit obligation. See Note 9 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of the retirement benefit plans.

CONSOLIDATED FINANCIAL REVIEW

The following table identifies the components of change for 2021 compared with 2020 by segment:

[[GREPCENT_TABLE]]
[["","","Revenues","","Gross Profit","","Operating Profit","","Net Income Attributable to Stockholders"],["2020","","$","2,812.1","","","$","465.4","","","$","49.9","","","$","37.1"],["Increase (decrease) in 2021"],["Americas","","93.4","","","(96.3)","","","(121.8)","","","(129.2)"],["EMEA","","90.3","","","0.5","","","(2.8)","","","(4.6)"],["JAPIC","","40.8","","","0.9","","","(47.9)","","","(41.0)"],["Lift truck business","","224.5","","","(94.9)","","","(172.5)","","","(174.8)"],["Bolzoni","","64.1","","","8.1","","","(2.8)","","","(0.4)"],["Nuvera","","(3.2)","","","(14.5)","","","(26.2)","","","(33.8)"],["Eliminations","","(21.8)","","","(0.7)","","","(0.7)","","","(1.1)"],["2021","","$","3,075.7","","","$","363.4","","","$","(152.3)","","","$","(173.0)"]]
[[/GREPCENT_TABLE]]

FINANCIAL REVIEW

The segment and geographic results of operations for the Company were as follows for the year ended December 31:

[[GREPCENT_TABLE]]
[["","","","","","Favorable / (Unfavorable) % Change"],["","2021","","2020","","2021 vs. 2020"],["Lift truck unit shipments (in thousands)"],["Americas","54.5","","","53.1","","","2.6","%"],["EMEA","26.5","","","21.1","","","25.6","%"],["JAPIC","13.9","","","11.3","","","23.0","%"],["","94.9","","","85.5","","","11.0","%"],["Revenues"],["Americas","$","1,984.6","","","$","1,891.2","","","4.9","%"],["EMEA","678.9","","","588.6","","","15.3","%"],["JAPIC","233.9","","","193.1","","","21.1","%"],["Lift truck business","2,897.4","","","2,672.9","","","8.4","%"],["Bolzoni","347.8","","","283.7","","","22.6","%"],["Nuvera","0.7","","","3.9","","","n.m."],["Eliminations","(170.2)","","","(148.4)","","","n.m."],["","$","3,075.7","","","$","2,812.1","","","9.4","%"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","","","","Favorable / (Unfavorable) % Change"],["","2021","","2020","","2021 vs. 2020"],["Gross profit (loss)"],["Americas","$","221.8","","","$","318.1","","","(30.3)","%"],["EMEA","86.9","","","86.4","","","0.6","%"],["JAPIC","21.2","","","20.3","","","4.4","%"],["Lift truck business","329.9","","","424.8","","","(22.3)","%"],["Bolzoni","61.5","","","53.4","","","15.2","%"],["Nuvera","(26.7)","","","(12.2)","","","(118.9)","%"],["Eliminations","(1.3)","","","(0.6)","","","n.m."],["","$","363.4","","","$","465.4","","","(21.9)","%"],["Selling, general and administrative expenses"],["Americas","$","241.5","","","$","216.0","","","(11.8)","%"],["EMEA","86.6","","","83.3","","","(4.0)","%"],["JAPIC","88.7","","","39.9","","","(122.3)","%"],["Lift truck business","416.8","","","339.2","","","(22.9)","%"],["Bolzoni","63.3","","","52.4","","","(20.8)","%"],["Nuvera","35.6","","","23.9","","","(49.0)","%"],["","$","515.7","","","$","415.5","","","(24.1)","%"],["Operating profit (loss)"],["Americas","$","(19.7)","","","$","102.1","","","(119.3)","%"],["EMEA","0.3","","","3.1","","","(90.3)","%"],["JAPIC","(67.5)","","","(19.6)","","","(244.4)","%"],["Lift truck business","(86.9)","","","85.6","","","(201.5)","%"],["Bolzoni","(1.8)","","","1.0","","","(280.0)","%"],["Nuvera","(62.3)","","","(36.1)","","","(72.6)","%"],["Eliminations","(1.3)","","","(0.6)","","","n.m."],["","$","(152.3)","","","$","49.9","","","(405.2)","%"],["Interest expense","$","15.5","","","$","13.7","","","(13.1)","%"],["Other income","$","(12.9)","","","$","(6.0)","","","115.0","%"],["Income before income taxes","$","(154.9)","","","$","42.2","","","(467.1)","%"],["Net income (loss) attributable to stockholders"],["Americas","$","(57.6)","","","$","71.6","","","(180.4)","%"],["EMEA","1.0","","","5.6","","","(82.1)","%"],["JAPIC","(55.3)","","","(14.3)","","","(286.7)","%"],["Lift truck business","(111.9)","","","62.9","","","(277.9)","%"],["Bolzoni","(0.2)","","","0.2","","","(200.0)","%"],["Nuvera","(59.4)","","","(25.6)","","","(132.0)","%"],["Eliminations","(1.5)","","","(0.4)","","","n.m."],["","$","(173.0)","","","$","37.1","","","(566.3)","%"],["Diluted earnings per share","$","(10.29)","","","$","2.21","","","(565.6)","%"],["Reported income tax rate","(18.3)","%","","8.8","%"],["n.m. - not meaningful"]]
[[/GREPCENT_TABLE]]

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. As of December 31, 2021, substantially all of the Company's backlog is expected to be sold within the next twelve months.

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[[GREPCENT_TABLE]]
[["","","YEAR ENDED","","NINE MONTHS ENDED","","YEAR ENDED"],["","","December 31, 2021","","September 30, 2021","","December 31, 2020"],["Unit backlog, beginning of period","","40.6","","","40.6","","","41.2"],["Unit shipments","","(94.9)","","","(68.2)","","","(85.5)"],["Unit bookings","","159.6","","","126.4","","","84.9"],["Unit backlog, end of period","","105.3","","","98.8","","","40.6"]]
[[/GREPCENT_TABLE]]

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.

[[GREPCENT_TABLE]]
[["","","YEAR ENDED","","NINE MONTHS ENDED","","YEAR ENDED"],["","","December 31, 2021","","September 30, 2021","","December 31, 2020"],["Bookings, approximate sales value","","$","3,820","","","$","2,950","","","$","2,020"],["Backlog, approximate sales value","","$","2,880","","","$","2,450","","","$","1,070"]]
[[/GREPCENT_TABLE]]

2021 Compared with 2020

The following table identifies the components of change in revenues for 2021 compared with 2020:

[[GREPCENT_TABLE]]
[["","","Revenues"],["2020","","$","2,812.1"],["Increase (decrease) in 2021 from:"],["Parts","","65.5"],["Bolzoni revenues","","64.1"],["Unit volume and product mix","","53.7"],["Foreign currency","","41.8"],["Other","","35.8"],["Unit price","","27.7"],["Eliminations","","(21.8)"],["Nuvera revenues","","(3.2)"],["2021","","$","3,075.7"]]
[[/GREPCENT_TABLE]]

Revenues increased 9.4% to $3,075.7 million in 2021 from $2,812.1 million in 2020. The increase was primarily due to higher unit and parts volume in the lift truck business and Bolzoni. In addition, revenues increased from favorable currency movements from the translation of sales into U.S. dollars, mainly in EMEA, as well as improved fleet service revenue and pricing in the Americas. Revenues in 2020 were significantly impacted by the COVID-19 pandemic and the resulting significant decline in economic activity.

America's revenues increased in 2021 compared with 2020, primarily from favorable aftermarket sales, including parts sales, driven by an increase in customer demand, as well as the favorable impact of price increases and higher fleet service revenue.

EMEA's revenues increased mainly due to favorable foreign currency movements of $34.0 million from the translation of sales into U.S. dollars and higher unit and parts volumes resulting from increased customer demand.

JAPIC's revenues increased primarily as a result of improved unit volumes and favorable foreign currency movements of $10.8 million, partially offset by a shift in sales to lower-priced lift trucks.

Bolzoni's revenues increased mainly due to higher unit volume resulting from increased customer demand.

Nuvera's revenues decreased primarily due to lower shipments of fuel cells and reduced third-party fuel cell development services in 2021 compared with 2020.

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The following table identifies the components of change in operating profit (loss) for 2021 compared with 2020:

[[GREPCENT_TABLE]]
[["","Operating Profit (Loss)"],["2020","$","49.9"],["Increase (decrease) in 2021 from:"],["Lift truck gross profit and eliminations","(95.6)"],["Lift truck selling, general and administrative expenses","(22.0)"],["Nuvera operations","(26.2)"],["Bolzoni operations","(2.8)"],["","(96.7)"],["Goodwill impairment charge","(55.6)"],["2021","$","(152.3)"]]
[[/GREPCENT_TABLE]]

The Company recognized an operating loss of $152.3 million in 2021 compared with operating profit of $49.9 million in 2020. The change in operating profit (loss) was mainly due to lower gross profit, a non-cash impairment charge for goodwill of $55.6 million in JAPIC, unfavorable selling, general and administrative expenses in the lift truck business and a larger operating loss at Nuvera mainly from $26.1 million of non-cash inventory and property, plant and equipment adjustments. The decrease in gross profit was primarily due to significant material and freight cost inflation due to supply chain and logistics constraints of $125.1 million, mainly in the Americas. The increase in selling, general and administrative expenses in the lift truck business was primarily due to the reinstatement of pre-pandemic employee-related salaries and benefits. See Notes 10 and 11 for further discussion of Nuvera's adjustments.

Americas recognized an operating loss of $19.7 million in 2021 compared with an operating profit of $102.1 million in 2020 due to a decrease in gross profit and an increase in selling, general and administrative expenses. Gross profit declined primarily due to material cost inflation and increased freight costs of $107.5 million, net of price increases of $22.1 million, a shift in sales mix to lower-margin lift trucks and higher manufacturing costs resulting from inefficiencies associated with component shortages. The decrease in gross profit was partly offset by the realization of higher margins on parts sales and a $8.5 million favorable adjustment for social contribution taxes previously imposed on material purchases in Brazil. See Note 16 for further discussion of the adjustment in Brazil. Selling, general and administrative expenses increased mainly as result of the reinstatement of pre-pandemic salaries and benefits that were suspended in 2020.

EMEA's operating profit declined from $3.1 million in 2020 to $0.3 million in 2021. The decrease in operating profit was primarily the result of higher selling, general and administrative expenses partially offset by improved gross profit. Selling, general and administrative expenses increased primarily as pre-pandemic salaries and benefits were reinstated, including $1.7 million of incentive compensation. Gross profit increased from favorable foreign currency movements of $6.9 million, improved parts and unit volume and improved pricing, partially offset by material cost inflation and higher manufacturing costs resulting from inefficiencies associated with component shortages and the absence of $7.8 million of government subsidies received in 2020.

JAPIC's operating loss increased to $67.5 million in 2021 from $19.6 million in 2020 primarily due to a non-cash impairment charge for goodwill of $55.6 million. The goodwill impairment was partially offset by lower selling, general and administrative expenses as a result of cost cutting-initiatives and the absence of prior year restructuring costs.

Bolzoni recognized an operating loss of $1.8 million is 2021 compared with operating profit of $1.0 million in 2020. Volume improvements from higher customer demand were completely offset by higher material and freight costs as well as the reinstatement of pre-pandemic salaries and benefits that were suspended in 2020, including the absence of $5.2 million of government subsidies received in 2020.

Nuvera's operating loss increased to $62.3 million in 2021 compared with $36.1 million in 2020 as a result of non-cash charges of $26.1 million recorded in 2021 for Nuvera's inventory and property, plant and equipment. See Note 10 and 11 for further discussion of these charges at Nuvera.

The Company recognized a net loss attributable to stockholders of $173.0 million in 2021 compared with net income attributable to stockholders of $37.1 million in 2020. The decrease was primarily the result of lower operating profit and a valuation allowance of $58.6 million provided against deferred tax assets. These items were partially offset by the non-controlling interest share of the goodwill impairment charge at JAPIC of $11.7 million, a $4.6 million gain related to the sale of the Company's preferred shares of OneH2 in 2021 and higher equity earnings in unconsolidated subsidiaries. See "Financial

21

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Review - Income Taxes" and Note 6 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of income taxes.

Income taxes

The income tax provision includes U.S. federal, state and local, and non-U.S. income taxes. In determining the effective income tax rate, the Company analyzes various factors, including annual earnings or losses, the laws of taxing jurisdictions in which the earnings or losses were generated, the impact of state and local income taxes, the ability to use tax credits, net operating loss carryforwards and carrybacks, capital loss carryforwards, and available tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates, and certain items with respect to valuation allowances or other unusual or non-recurring tax adjustments are reflected in the interim period in which they occur.

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards on a taxing jurisdiction basis. The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which it expects the temporary differences to be recovered or paid.

The authoritative guidance for income taxes requires a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50%) such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns and future profitability. The Company's accounting for deferred tax consequences represents its best estimate of those future events. Changes in the Company's estimates, due to unanticipated events or otherwise, could have a material effect on its financial condition and results of operations. The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required or no longer needed.

During 2021, the Company recognized a tax charge of $24.8 million, for the establishment of a valuation allowance against the beginning of the year balance of the Company’s U.S. and United Kingdom deferred tax assets, excluding the portion of assets available to be carried back to the prior tax year. Based upon a review of the Company’s recent operations, including cumulative U.S. pretax losses, lack of available tax planning strategies and declining forecasts due to supply and logistics constraints, the evidence available no longer supported a more likely than not standard for realization of these deferred tax assets. Although the Company projects earnings over the longer term for these operations, due to the cumulative losses such longer-term forecasts are not sufficient evidence to support the future utilization of deferred tax assets. Additionally, $32.5 million of valuation allowance expense, related to these operations, was provided against deferred tax assets generated in the current year.

A reconciliation of the consolidated U.S. federal statutory rate and reported income tax rate is as follows for the years ended December 31: 

[[GREPCENT_TABLE]]
[["","","2021","","2020"],["Income (loss) before income taxes","","$","(154.9)","","","$","42.2"],["Statutory taxes at 21%","","$","(32.5)","","","$","8.9"],["Permanent adjustments:"],["Valuation allowance","","33.6","","","2.1"],["Non-U.S. rate differences","","8.8","","","(0.1)"],["Global intangible low-taxed income","","5.2","","","1.9"],["Other","","1.5","","","0.4"],["Tax controversy resolution","","0.4","","","\u2014"],["State income taxes","","(5.6)","","","0.3"],["Federal income tax credits","","(1.9)","","","(2.2)"],["Equity interest earnings","","(1.8)","","","(1.0)"],["Base-erosion and anti-abuse tax","","\u2014","","","0.8"],["","","$","40.2","","","$","2.2"]]
[[/GREPCENT_TABLE]]

22

Table of Contents

[[GREPCENT_TABLE]]
[["","","2021","","2020"],["Discrete items:"],["Valuation allowance","","25.0","","","0.8"],["Other","","2.4","","","(1.5)"],["Tax controversy resolution","","(4.9)","","","(5.8)"],["Provision to return adjustments","","(1.9)","","","(0.9)"],["","","$","20.6","","","$","(7.4)"],["Income tax provision","","$","28.3","","","$","3.7"],["Reported income tax rate","","(18.3)","%","","8.8","%"]]
[[/GREPCENT_TABLE]]

The Company's reported income tax rate differs from the U.S. federal statutory tax rate primarily as a result of changes in valuation allowances, income taxed in non-U.S. jurisdictions, global intangible low-taxed income, state income taxes, federal research and energy credits and equity interest earnings. Other permanent adjustments include non-deductible compensation and anticipated withholding tax on unremitted non-U.S. earnings.

The effect of discrete items on the reported income tax rate include the establishment of a valuation allowance on deferred tax assets and the change in tax reserves for controversy resolution primarily driven by the expiration of the applicable statutes of limitation. The tax controversy benefits recognized relate to prior business acquisitions that were offset with the pretax reduction of the related indemnity receivable in the amounts of $3.2 million and $4.3 million in 2021 and 2020, respectively.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act") eliminates the option to deduct research and development expenditures immediately in the year incurred and requires U.S. taxpayers to amortize such expenditures over five to fifteen years depending upon whether the activities were incurred in the U.S. or outside of the U.S. Without the option to deduct these expenses in the year incurred, the Company expects this change to have a material impact upon our future cash payments for taxes. Under the assumption that this legislation is not modified or repealed, the impact will continue over the fifteen year maximum amortization period, but will decrease each year until the end of the fifteen year deferral period.

See Note 6 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The following tables detail the change in cash flow for the years ended December 31:

[[GREPCENT_TABLE]]
[["","2021","","2020","","Change"],["Operating activities:"],["Net income (loss)","$","(183.2)","","","$","38.5","","","$","(221.7)"],["Depreciation and amortization","46.2","","","42.9","","","3.3"],["Impairment charges","65.6","","","\u2014","","","65.6"],["Stock-based compensation","4.0","","","1.3","","","2.7"],["Dividends from unconsolidated affiliates","5.5","","","7.3","","","(1.8)"],["Working capital changes:"],["Accounts receivable","(54.6)","","","68.9","","","(123.5)"],["Inventories","(289.7)","","","66.6","","","(356.3)"],["Accounts payable and other liabilities","176.0","","","(61.0)","","","237.0"],["Other current assets","(12.5)","","","(3.6)","","","(8.9)"],["Other operating activities","(10.8)","","","6.0","","","(16.8)"],["Net cash provided by (used for) operating activities","(253.5)","","","166.9","","","(420.4)"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","2021","","2020","","Change"],["Investing activities:"],["Expenditures for property, plant and equipment","(44.3)","","","(51.7)","","","7.4"],["Proceeds from the sale of assets and investment","19.8","","","8.0","","","11.8"],["Net cash used for investing activities","(24.5)","","","(43.7)","","","19.2"],["Cash flow before financing activities","$","(278.0)","","","$","123.2","","","$","(401.2)"]]
[[/GREPCENT_TABLE]]

Net cash provided by (used for) operating activities decreased $420.4 million in 2021 compared with 2020, primarily as a result of the change in working capital items and net income (loss). The changes were mainly due to the global supply chain constraints, component shortages, shipping container availability constraints and higher freight costs. In addition, the Company recorded non-cash charges of $55.6 million and $10.0 million in goodwill and long-lived asset impairments, respectively, in the year ended December 31, 2021.

The change in net cash used for investing activities during 2021 compared with 2020 is due to the proceeds from the sale of preferred shares of OneH2 for $15.7 million and lower capital expenditures in 2021.

[[GREPCENT_TABLE]]
[["","2021","","2020","","Change"],["Financing Activities:"],["Net increase (decrease) in long-term debt and revolving credit agreements","$","223.0","","","$","(18.9)","","","$","241.9"],["Cash dividends paid","(21.6)","","","(21.3)","","","(0.3)"],["Financing fees paid","(7.6)","","","\u2014","","","(7.6)"],["Other","(0.2)","","","(0.4)","","","0.2"],["Net cash provided by (used for) financing activities","$","193.6","","","$","(40.6)","","","$","234.2"]]
[[/GREPCENT_TABLE]]

Net cash provided by (used for) financing activities increased $234.2 million in 2021 compared with 2020. The increase was primarily related to additional borrowings from refinancing the Term Loan (as defined below) and on the Facility (as defined below) in 2021. The borrowings were primarily used to fund working capital needs. The increase was partially offset by financing fees paid in connection with the amendments of the Facility and Term Loan.

Financing Activities

The Company has a $300.0 million secured, floating-rate revolving credit facility (the "Facility") that expires in June 2026. There were $155.0 million borrowings outstanding under the Facility at December 31, 2021. The availability under the Facility at December 31, 2021 was $140.1 million, which reflects reductions of $4.9 million for letters of credit and other restrictions. As of December 31, 2021, the Facility consisted of a U.S. revolving credit facility of $210.0 million and a non-U.S. revolving credit facility of $90.0 million. The Facility replaced the Company's previous revolving credit facility, which was to expire April 28, 2022. The Facility can be increased up to $400.0 million over the term of the Facility in minimum increments of $10.0 million, subject to approval by the lenders. The obligations under the Facility are generally secured by a first priority lien on working capital assets of the borrowers in the Facility, which includes but is not limited to cash and cash equivalents, accounts receivable and inventory, and a second priority lien on the present and future shares of capital stock, fixtures and general intangibles consisting of intellectual property. The approximate book value of assets held as collateral under the Facility was $1.1 billion as of December 31, 2021.

Borrowings under the Facility bear interest at a floating rate, which can be a base rate, LIBOR or EURIBOR, as defined in the Facility, plus an applicable margin. The applicable margins are based on the total excess availability, as defined in the Facility, and range from 0.25% to 0.75% for U.S. base rate loans and 1.25% to 1.75% for LIBOR, EURIBOR and non-U.S. base rate loans. The applicable margins, as of December 31, 2021, for U.S. base rate loans and LIBOR loans were 0.50% and 1.25%, respectively. The applicable margin, as of December 31, 2021, for non-U.S. base rate loans and LIBOR loans was 1.25%. The

applicable interest rates for borrowings outstanding under the Facility on December 31, 2021 was 3.75%, 1.60% and 1.50% for the U.S. base rate, LIBOR and foreign EURIBOR loans, respectively. The Facility also required the payment of a fee of 0.25% per annum on the unused commitments as of December 31, 2021.

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

24

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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 December 31, 2021, the Company was in compliance with the covenants in the Facility.

The Company also has a $225.0 million term loan (the "Term Loan"), which matures in May 2028. The Term Loan replaced the Company’s previous term loan facility, which was set to mature on May 30, 2023. The Term Loan requires quarterly principal payments on the last day of each March, June, September and December commencing 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. At December 31, 2021, there was $223.9 million of principal outstanding under the Term Loan which has been reduced in the consolidated balance sheet by $5.3 million of discounts and unamortized deferred financing fees.

The obligations under the Term Loan are generally secured by a first priority lien on the present and future shares of capital stock, material real property, fixtures and general intangibles consisting of intellectual property and a second priority lien on working capital assets of the borrowers of the Facility, which includes, but is not limited to cash and cash equivalents, accounts receivable and inventory. The approximate book value of assets held as collateral under the Term Loan was $700 million as of December 31, 2021.

Borrowings under the Term Loan bear interest at a floating rate, which can be a base rate or Eurodollar rate, as defined in the Term Loan, plus an applicable margin. The applicable margin, as provided in the Term Loan, is 2.50% for U.S. base rate loans and 3.50% for Eurodollar loans. In addition, the Term Loan includes a Eurodollar rate floor of 0.50%. The interest rate on the amount outstanding under the Term Loan at December 31, 2021 was 4.00%. In addition, the Term Loan includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company subject to certain thresholds, as provided in the Term Loan. The Term Loan limits the payment of dividends and other restricted payments the Company may make 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 December 31, 2021, the Company was in compliance with the covenants in the Term Loan.

The Company incurred fees of $7.6 million and $0.4 million in 2021 and 2019, respectively. No fees were incurred in 2020. These fees related to amending the Facility and the Term Loan. These fees were deferred and are being amortized as interest expense over the term of the applicable debt agreements. Fees related to the Term Loan are presented as a direct deduction of the corresponding debt.

The Company had other debt outstanding, excluding finance leases, of approximately $106.4 million at December 31, 2021. In addition to the excess availability under the Facility of $140.1 million, the Company had remaining availability of $24.9 million related to other non-U.S. revolving credit agreements.

The Company believes funds available from cash on hand, the Facility, other available lines of credit and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments during the next twelve months and until the expiration of the Facility in June 2026.

Contractual Obligations, Contingent Liabilities and Commitments

Following is a table summarizing the contractual obligations as of December 31, 2021:

[[GREPCENT_TABLE]]
[["","Payments Due by Period"],["Contractual Obligations","Total","","2022","","2023","","2024","","2025","","2026","","Thereafter"],["Term Loan","$","223.9","","","$","2.3","","","$","2.3","","","$","2.3","","","$","2.3","","","$","2.3","","","$","212.4"],["Variable interest payments on Term Loan","56.2","","","9.0","","","9.0","","","8.9","","","8.8","","","8.6","","","11.9"],["Revolving credit agreements","165.3","","","165.3","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Variable interest payments on revolving credit agreements","4.2","","","4.2","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Other debt","106.4","","","79.9","","","14.0","","","8.1","","","4.4","","","\u2014","","","\u2014"],["Variable interest payments on other debt","3.4","","","2.4","","","0.8","","","0.2","","","\u2014","","","\u2014","","","\u2014"],["Finance lease obligations including principal and interest","28.2","","","10.2","","","8.6","","","6.0","","","3.0","","","0.4","","","\u2014"],["Operating leases","86.3","","","19.3","","","15.4","","","11.6","","","8.4","","","6.6","","","25.0"],["Tax Reform Act transition tax liability","11.9","","","1.4","","","2.6","","","3.5","","","4.4","","","\u2014","","","\u2014"],["Purchase and other obligations","742.2","","","738.4","","","2.2","","","0.5","","","1.1","","","\u2014","","","\u2014"],["Total contractual cash obligations","$","1,428.0","","","$","1,032.4","","","$","54.9","","","$","41.1","","","$","32.4","","","$","17.9","","","$","249.3"]]
[[/GREPCENT_TABLE]]

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The principal sources of financing for these contractual obligations are expected to be internally generated funds and bank financing.

The Company has a long-term liability of approximately $13.0 million for unrecognized tax benefits, including interest and penalties, as of December 31, 2021. At this time, the Company is unable to make a reasonable estimate of the timing of payments due to, among other factors, the uncertainty of the timing and outcome of the Company's audits.

An event of default, as defined in the agreements governing the Facility, the Term Loan, other debt agreements, and in operating and capital lease agreements, could cause an acceleration of the payment schedule. No such event of default has occurred or is anticipated under these agreements.

The Company's interest payments are calculated based upon the anticipated payment schedule and the December 31, 2021 applicable rates and applicable margins as described in the Facility and other debt agreements. A 1/8% increase in the LIBOR rate would increase the Company's estimated total interest payments on debt by $0.2 million.

The purchase and other obligations are primarily for accounts payable, open purchase orders and accrued payroll and incentive compensation.

Pension funding can vary significantly each year due to plan amendments, changes in the market value of plan assets, legislation and the Company's funding decisions to contribute any excess above the minimum legislative funding requirements. As a result, pension funding has not been included in the table above. Pension benefit payments are made from assets of the pension plans. The Company expects to contribute approximately $2.1 million to its non-U.S. pension plans in 2022.

In addition, the Company has recourse and repurchase obligations with a maximum undiscounted potential liability of $106.8 million at December 31, 2021. Recourse and repurchase obligations primarily represent contingent liabilities assumed by the Company to support financing agreements made between the Company's customers and third-party finance companies for the customer’s purchase of lift trucks from the Company. For these transactions, the Company or a third-party finance company retains a perfected security interest in the lift truck, such that the Company would take possession of the lift truck in the event it would become liable under the terms of the recourse and repurchase obligations. Generally, these commitments are due upon demand in the event of default by the customer. The security interest is normally expected to equal or exceed the amount of the commitment. To the extent the Company would be required to provide funding as a result of these commitments, the Company believes the value of its perfected security interest and amounts available under existing credit facilities are adequate to meet these commitments in the foreseeable future.

The amount of the recourse or repurchase obligations changes over time as obligations under existing arrangements expire and new obligations arise in the ordinary course of business. Losses anticipated under the terms of the recourse or repurchase obligations were not significant at December 31, 2021 and reserves have been provided for such losses in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. See also “Related Party Transactions” below.

Capital Expenditures

The following table summarizes actual and planned capital expenditures:

[[GREPCENT_TABLE]]
[["","","Planned 2022","","Actual 2021","","Actual 2020"],["Lift truck business","","$","21.2","","","$","30.6","","","$","44.2"],["Bolzoni","","6.2","","","10.4","","","5.3"],["Nuvera","","4.1","","","3.3","","","2.2"],["","","$","31.5","","","$","44.3","","","$","51.7"]]
[[/GREPCENT_TABLE]]

Planned expenditures in 2022 are primarily for product development and tooling, improvements at manufacturing locations and manufacturing equipment and improvements to information technology infrastructure. The primary sources of financing for these capital expenditures are expected to be internally generated funds and bank financing.

26

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Capital Structure

[[GREPCENT_TABLE]]
[["","December 31"],["","2021","","2020","","Change"],["Cash and cash equivalents","$","65.5","","","$","151.4","","","$","(85.9)"],["Other net tangible assets","728.7","","","615.7","","","113.0"],["Intangible assets","50.7","","","58.5","","","(7.8)"],["Goodwill","56.5","","","114.7","","","(58.2)"],["Net assets","901.4","","","940.3","","","(38.9)"],["Total debt","(518.5)","","","(289.2)","","","(229.3)"],["Total equity","$","382.9","","","$","651.1","","","$","(268.2)"],["Debt to total capitalization","58","%","","31","%","","27","%"]]
[[/GREPCENT_TABLE]]

RELATED PARTY TRANSACTIONS

See Note 18 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion of related party transactions.

OUTLOOK AND STRATEGIC PERSPECTIVE

Consolidated Outlook

Given the continued extensive component shortages due to supply chain constraints, significant material and freight cost inflation, as well as continued losses at Nuvera, the Company, on a consolidated basis, expects a large net loss in the first quarter, a substantially reduced, but still large, net loss in the second quarter, approximately breakeven results in the third quarter and substantial net income in the fourth quarter of 2022. These expectations are based on the expected reasonable resolution of component shortages and relative stabilization of material and freight costs. However, the fourth-quarter net income is not expected to fully offset the losses generated in the first nine months.

The Company is managing 2022 capital expenditures, operating expenses and its production plan in a manner designed to protect liquidity. Capital expenditures are expected to be approximately $31.5 million in 2022. The Company has implemented a program of strict controls over operating expenses to reduce cash outflow, including delays in the timing of certain strategic program investments. While the Company expects in time to make these capital expenditures and investments in the business, maintaining liquidity will continue to be a priority. The Company's ability to build and ship trucks was significantly constrained by parts shortages of certain critical components while the remaining components needed to build trucks were received and added to inventory, causing inventory levels to increase substantially. In this context, the Company expects to reduce inventory significantly by using current inventory to build trucks for which production has been significantly delayed due to critical parts shortages.

At December 31, 2021, the Company's cash on hand was $65.5 million and debt was $518.5 million compared with cash on hand of $61.4 million and debt of $428.0 million at September 30, 2021, and cash on hand of $151.4 million and debt of $289.2 million at December 31, 2020. As of December 31, 2021, the Company had unused borrowing capacity of approximately $165.0 million under the Company's revolving credit facilities compared with $245.9 million at September 30, 2021 and $266.4 million at December 31, 2020.

Lift Truck Strategic Perspective

In 2022, the global lift truck market is expected to recede from the historical highs of 2021, but still be higher than pre-pandemic levels. As a result of this market outlook, Lift Truck is anticipating a substantial decrease in bookings in 2022 compared with 2021, with the rate of decrease expected to moderate in the fourth quarter.

In 2021, the Company experienced production and shipment levels which were far lower than its objectives due to continued supply chain logistics constraints and component shortages. These constraints are anticipated to continue into the beginning of the third quarter of 2022 but begin to moderate during the first half of the year. Full-year shipments are expected to increase significantly in 2022 over 2021 given the Company's robust backlog and actions put in place to mitigate the impact of the supply chain constraints and shortages.

The significant material cost inflation and higher freight costs and the non-renewal of tariff exclusions are expected to continue to keep the cost of components and freight high in 2022 compared with 2021. Inflation continued to rise in the fourth quarter of 2021, but at a slightly lower rate of change. However, while more moderate cost increases are expected to continue in 2022, there are some signs that suggest material costs have peaked. In light of this cost inflation, the Lift Truck business has implemented price increases several times over the course of 2021 and at the beginning of 2022, but many of the orders in the backlog slotted for production in the first nine months of 2022 do not reflect the full effect of all these price increases. On the

27

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other hand, new bookings are being made at close to target margins based on expected future costs at the time of production. As a result, the Company expects to continue to experience very low margins in the first quarter of 2022 due to the lag between when unit price increases went into effect and when revenue is realized as the units are shipped. Margins are then expected to increase over the successive 2022 quarters with much stronger margins in the fourth quarter when the higher-margin, already-booked trucks, and trucks anticipated to be booked, are expected to be produced and shipped. The Company will continue to work aggressively to try to manage supply chain and logistics costs, component availability and tariff exclusions, and will continue to adjust prices accordingly. As a result of these factors, the Lift Truck business expects significant operating and net losses in the first quarter of 2022, moderated losses in the second quarter, profitability in the third quarter and substantial profit in the fourth quarter.

From a strategic perspective, the Lift Truck business has three core strategies that are expected to have a transformational impact on the Company’s competitiveness, market position and economic performance as it emerges from the current period of mismatch of costs and pricing. The first is to provide the lowest cost of ownership while enhancing customer productivity. The primary focus of this strategic initiative is the new modular and scalable product projects, which are expected to lay the groundwork for enhanced market position by providing lower cost of ownership and enhanced productivity for the Company’s customers, including low-intensity applications. Additional to this are key projects geared toward electrification of trucks for applications now dominated by internal combustion engine trucks, automation product options and providing telemetry and operator assist systems. The second core strategy is to be the leader in the delivery of industry- and customer-focused solutions. The primary focus for this strategic initiative is transforming the Company's sales approach by using an industry-focused approach to meet its customers' needs. The third core strategy is to be the leader in independent distribution. The main focus of this strategic initiative is on dealer and major account coverage, dealer excellence and ensuring outstanding dealer ownership globally.

As a result of these core strategies, the increased shipment volume potential of the current backlog and expected bookings in 2022, and enhanced prices, the Lift Truck business expects to move from significant operating losses in the first quarter of 2022 to substantial operating profit and net income in the fourth quarter, with the improvements in the second half of the year expected to more than offset the losses in the first half. Over this period, the Company is projecting the stabilization of product and transportation costs and the continued expectation of improved component and logistics availability. The Company is also anticipating the continued introduction of additional modular and scalable product families and the continued implementation of cost savings initiatives over this period and the longer term. As the Company brings costs, price and production volumes in line over 2022, the Lift Truck business is expected to have a strong operating profit and net income in 2023.

Bolzoni Strategic Perspective

Over the course of 2022, Bolzoni expects component shortages to moderate and the timing of pricing actions to permit improved returns beginning with moderate operating profit in the first quarter and continuing with improving operating profit in the remaining quarters of 2022. As a result, Bolzoni expects sizeable operating profit and net income in 2022 compared with operating and net losses in 2021.

Bolzoni continues to focus on implementing its "One Company - 3 Brands" organizational approach to help streamline corporate operations and strengthen its North America and JAPIC commercial operations. Bolzoni is working to increase its Americas business by strengthening its ability to serve key attachment industries and customers in the North America market through the introduction of a broader range of locally produced attachments with shorter lead times, while continuing to sell cylinders and various other components produced in its Sulligent, Alabama plant. Bolzoni is also increasing its sales, marketing and product support capabilities both in North America and Europe based on an industry-specific approach, with an immediate focus on the paper, beverage, appliance, third-party logistics and automotive industries.

Nuvera Strategic Perspective

Nuvera continues to focus on applying its 45kW and 60kW engines, which were both released for sale late in 2020, in niche, heavy-duty vehicle applications with expected near-term significant fuel cell adoption potential. As a result of these releases, Nuvera accelerated its 45kW and 60kW engine commercialization operations for the global market. In 2022, Nuvera will continue to focus on ramping up demonstrations, quotes and bookings of these products. In addition, Nuvera has initiated development of a new 125kW engine and continues to focus on applications in the forklift truck market. Excluding the impact of the inventory valuation and fixed asset impairment charges taken in 2021, the Company expects moderately reduced losses at Nuvera in 2022 as a result of enhanced fuel cell shipments.

RECENTLY ISSUED ACCOUNTING STANDARDS

For information regarding recently issued accounting standards refer to Note 2 to the Consolidated Financial Statements in this Form 10-K.

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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 are addressed in the previous discussions of operating results. The Company's use of foreign currency derivative contracts is discussed in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk,” of this Form 10-K.

FORWARD-LOOKING STATEMENTS

The statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere throughout this Annual Report on Form 10-K that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) delays in delivery and other supply chain disruptions, or increases in costs as a result of inflation or otherwise, including materials and transportation costs and shortages, the imposition of tariffs, or the renewal of tariff exclusions, on raw materials or sourced products, and labor, or changes in or unavailability of quality suppliers or transporters, including the impacts of the foregoing risks on the Company's liquidity, (2) the duration and severity of the COVID-19 pandemic, any preventive or protective actions taken by governmental authorities, and any unfavorable effects of the COVID-19 pandemic on either the Company's or its suppliers plants' capabilities to produce and ship products, (3) delays in manufacturing and delivery schedules, (4) customer acceptance of pricing, (5) the ability of Hyster-Yale and its dealers, suppliers and end-users to access credit in the current economic environment, or obtain financing at reasonable rates, or at all, as a result of current economic and market conditions, (6) further impairment charges or charges due to valuation allowances, (7) reduction in demand for lift trucks, attachments and related aftermarket parts and service on a global basis, including any reduction in demand as a result of a COVID-19 triggered economic recession, (8) exchange rate fluctuations, interest rate volatility and monetary policies and other changes in the regulatory climate in the countries in which the Company operates and/or sells products, (9) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (10) the successful commercialization of Nuvera's technology, (11) the political and economic uncertainties in the countries where the Company does business, (12) bankruptcy of or loss of major dealers, retail customers or suppliers, (13) customer acceptance of, changes in the costs of, or delays in the development of new products, (14) introduction of new products by, or more favorable product pricing offered by, competitors, (15) product liability or other litigation, warranty claims or returns of products, (16) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (17) 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.