HYSTER-YALE MATERIALS HANDLING, INC. Hyster-Yale Materials Handling, Inc. ("Hyster-Yale" or the "Company") and its subsidiaries, including its operating companyHyster-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 inthe United States ,China ,Northern Ireland ,Mexico ,the Netherlands ,Brazil ,the Philippines ,Italy ,Japan andVietnam . The Company owns a 90% majority interest inHyster-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 withY-C Hongkong Holding Co., Limited ("HK Holding Co"). InJune 2022 , the Company purchased 15% of the equity interest of Hyster-Yale Maximal from HK Holding Co for an aggregate purchase price of$25.2 million , which will be paid in annual installments of$8.4 million beginningJune 2022 throughJune 2024 . Subsequently, the Company will have an option to purchaseHK Holding Co's remaining interest in Hyster-Yale Maximal at any time prior toJune 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 operatesBolzoni 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 inthe United States ,Italy ,China ,Germany andFinland . 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
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Please refer to the discussion of Critical Accounting Policies and Estimates as disclosed on pages 15 through 18 in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 . Critical Accounting Policies and Estimates have not materially changed sinceDecember 31, 2021 . 21 --------------------------------------------------------------------------------
FINANCIAL REVIEW
The results of operations for the Company were as follows:
THREE MONTHS ENDED Favorable / SIX MONTHS ENDED Favorable /
JUNE 30 (Unfavorable) JUNE 30 (Unfavorable)
2022 2021 % Change 2022 2021 % Change
Lift truck unit shipments (in thousands)
Americas 13.9 13.0 6.9 % 28.5 25.3 12.6 %
EMEA 7.8 5.9 32.2 % 14.3 12.4 15.3 %
JAPIC 3.6 3.8 (5.3) % 6.4 7.3 (12.3) %
25.3 22.7 11.5 % 49.2 45.0 9.3 %
Revenues
Americas $ 596.6 $ 479.1 24.5 % $ 1,154.3 $ 938.8 23.0 %
EMEA 184.8 175.1 5.5 % 354.5 345.8 2.5 %
JAPIC 64.9 65.0 (0.2) % 116.6 125.5 (7.1) %
Lift truck business 846.3 719.2 17.7 % 1,625.4 1,410.1 15.3 %
Bolzoni 86.4 84.8 1.9 % 181.5 164.3 10.5 %
Nuvera 0.3 0.3 - % 0.9 0.3 200.0 %
Eliminations (37.6) (38.7) (2.8) % (84.8) (76.9) 10.3 %
$ 895.4 $ 765.6 17.0 % $ 1,723.0 $ 1,497.8 15.0 %
Gross profit (loss)
Americas $ 66.1 $ 70.4 (6.1) % $ 133.1 $ 145.7 (8.6) %
EMEA 11.3 26.6 (57.5) % 25.7 50.1 (48.7) %
JAPIC 3.9 6.2 (37.1) % 8.4 12.8 (34.4) %
Lift truck business 81.3 103.2 (21.2) % 167.2 208.6 (19.8) %
Bolzoni 18.9 15.8 19.6 % 37.7 32.2 17.1 %
Nuvera (1.6) (2.5) 36.0 % (3.5) (5.8) 39.7 %
Eliminations 0.5 (0.1) n.m. (1.1) (0.2) n.m.
$ 99.1 $ 116.4 (14.9) % $ 200.3 $ 234.8 (14.7) %
Selling, general and administrative
expenses
Americas $ 63.0 $ 56.8 (10.9) % $ 125.6 $ 117.5 (6.9) %
EMEA 22.1 22.9 3.5 % 47.9 46.3 (3.5) %
JAPIC 7.9 8.1 2.5 % 16.1 17.2 6.4 %
Lift truck business 93.0 87.8 (5.9) % 189.6 181.0 (4.8) %
Bolzoni 15.5 16.2 4.3 % 32.2 31.8 (1.3) %
Nuvera 6.3 6.5 3.1 % 12.5 13.0 3.8 %
$ 114.8 $ 110.5 (3.9) % $ 234.3 $ 225.8 (3.8) %
Operating profit (loss)
Americas $ 3.1 $ 13.6 (77.2) % $ 7.5 $ 28.2 (73.4) %
EMEA (10.8) 3.7 n.m. (22.2) 3.8 n.m.
JAPIC (4.0) (1.9) (110.5) % (7.7) (4.4) (75.0) %
Lift truck business (11.7) 15.4 (176.0) % (22.4) 27.6 (181.2) %
Bolzoni 3.4 (0.4) 950.0 % 5.5 0.4 1,275.0 %
Nuvera (7.9) (9.0) 12.2 % (16.0) (18.8) 14.9 %
Eliminations 0.5 (0.1) n.m. (1.1) (0.2) n.m.
$ (15.7) $ 5.9 n.m. $ (34.0) $ 9.0 n.m.
Interest expense $ 6.1 $ 3.8 (60.5) % $ 11.2 $ 6.6 (69.7) %
Other income (expense) $ - $ 2.2 (100.0) % $ (2.1) $ (6.0) (65.0) %
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 Favorable / (Unfavorable) JUNE 30 Favorable / (Unfavorable)
2022 2021 % Change 2022 2021 % Change
Net income (loss) attributable to
stockholders $ (19.4) $ 1.9 n.m $ (44.4) $ 7.5 n.m.
Earnings (loss) per share $ (1.15) $ 0.11 n.m. $ (2.63) $ 0.45 n.m.
Reported income tax rate 14.2 % n.m. 0.5 % - %
n.m. - not meaningful
Following is the detail of the Company's unit shipments, bookings and backlog of
unfilled orders placed with its manufacturing and assembly operations for new
lift trucks, reflected in thousands of units. Unit backlog as of June 30, 2022 ,
excludes 2,700 suspended orders, for which the Company has no currently defined
plans to fulfill. As of June 30, 2022 , substantially all of the Company's
backlog is expected to be sold within the next twelve months.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2022 2021 2022 2021
Unit backlog, beginning of period 114.1 60.7 105.3 40.6
Unit shipments (25.3) (22.7) (49.2) (45.0)
Unit bookings 23.2 46.9 55.9 89.3
Unit backlog, end of period 112.0 84.9 112.0 84.9
The following is the detail of the approximate sales value of the Company's lift
truck unit bookings and backlog, reflected in millions of dollars. The dollar
value of bookings and backlog is calculated using the current unit bookings and
backlog and the forecasted average sales price per unit.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2022 2021 2022 2021
Bookings, approximate sales value $ 760 $ 1,070 $ 1,710 $ 2,040
Backlog, approximate sales value $ 3,530 $ 2,070 $ 3,530 $ 2,070 Second Quarter of 2022 Compared with Second Quarter of 2021
The following table identifies the components of change in revenues for the second quarter of 2022 compared with the second quarter of 2021:
Revenues
2021 $ 765.6
Increase (decrease) in 2022 from:
Price 59.9
Unit volume and product mix 54.2
Parts 19.9
Other 12.5
Bolzoni revenues 1.6
Eliminations 1.1
Foreign currency (19.4)
2022 $ 895.4
Revenues increased 17.0% to $895.4 million in the second quarter of 2022 from
$765.6 million in the second quarter of 2021. The increase was primarily due to
improved pricing, mainly in the Americas , and higher unit and parts volumes in
the Americas and EMEA. The improvement in revenue was partially offset by
unfavorable currency movements from the translation of sales into U.S. dollars.
23
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America's revenues increased in the second quarter of 2022 compared with the
second quarter of 2021, primarily from improved pricing, higher unit volumes and
favorable aftermarket sales, including part sales.
EMEA's revenues increased in the second quarter of 2022 compared with the second
quarter of 2021 due to improved unit and parts volume and favorable pricing.
These improvements were partially offset by unfavorable foreign currency
movements of $22.1 million from the translation of sales into U.S. dollars.
JAPIC's revenues in the second quarter of 2022 were comparable with the second quarter of 2021, primarily as a result of lower unit and parts volumes, partially offset by improved pricing.
Bolzoni's revenues increased in the second quarter of 2022 compared with the second quarter of 2021 mainly due to improved pricing, partially offset by unfavorable foreign currency movements of$5.2 million from the translation of sales intoU.S. dollars. The following table identifies the components of change in operating profit (loss) for the second quarter of 2022 compared with the second quarter of 2021: Operating Profit (Loss) 2021 $ 5.9 Increase (decrease) in 2022 from: Lift truck gross profit
(21.3)
Lift truck selling, general and administrative expenses (5.2) Bolzoni operations 3.8 Nuvera operations 1.1 2022 $ (15.7) The Company recognized an operating loss of$15.7 million in the second quarter of 2022 compared with operating profit of$5.9 million in the second quarter of 2021. The change in operating profit (loss) was primarily the result of lower gross profit and unfavorable selling, general and administrative expenses in the lift truck business. The decrease in gross profit was mainly due to significant material and freight cost inflation as well as manufacturing inefficiencies due to supply chain and logistics constraints totaling$85.9 million , primarily in theAmericas and EMEA. In addition, unfavorable foreign currency exchange rates and the absence of$6.3 million for social contribution taxes previously imposed on material purchases inBrazil recorded in 2021 contributed to the lower gross profit. These changes more than offset the favorable impact of improved pricing of$59.9 million and higher unit and parts volumes. TheAmericas recognized an operating profit of$3.1 million in the second quarter of 2022 compared with operating profit of$13.6 million in the second quarter of 2021 due to an increase in selling, general and administrative expenses and a decrease in gross profit. Selling, general and administrative expenses increased mainly as result of increased employee-related expenses in the second quarter of 2022 compared with the second quarter of 2021, including$4.7 million of incentive compensation. Gross profit declined primarily due to material cost inflation of$43.0 million and higher manufacturing costs of$14.2 million resulting from inefficiencies associated with component shortages. The decrease in gross profit was partly offset by improved pricing of$50.5 million and improved parts and units volume. EMEA recognized an operating loss of$10.8 million in the second quarter of 2022 compared with operating profit of$3.7 million in the second quarter of 2021. Gross profit decreased primarily from increases in material and freight costs and higher manufacturing costs resulting from inefficiencies associated with component shortages and unfavorable foreign currency exchange rates. These decreases more than offset the favorable impact of improved pricing and higher unit and parts volumes. JAPIC's operating loss increased to$4.0 million in the second quarter of 2022 compared with$1.9 million in the second quarter of 2021, primarily due to lower gross profit from an unfavorable mix of sales of lower margin trucks, material cost inflation and unfavorable manufacturing variances. The decrease was partially offset by improved pricing.Bolzoni's operating profit increased to$3.4 million in the second quarter of 2022 from a$0.4 million operating loss in the second quarter of 2021, mainly due to improved gross profit from higher volume and pricing, partially offset by material cost inflation and unfavorable foreign currency exchange rates. 24 -------------------------------------------------------------------------------- Table of Contents Nuvera's operating loss decreased to$7.9 million in the second quarter of 2022 compared with$9.0 million in the second quarter of 2021 as result of improved margin from lower production costs in 2022. The Company recognized a net loss attributable to stockholders of$19.4 million in the second quarter of 2022 compared with net income attributable to stockholders of$1.9 million in the second quarter of 2021. The decrease was primarily the result of the factors affecting operating profit, higher interest expense and lower pension income.
First Six Months of 2022 Compared with First Six Months of 2021
The following table identifies the components of change in revenues for the first six months of 2022 compared with the first six months of 2021:
Revenues
2021 $ 1,497.8
Increase (decrease) in 2022 from:
Price 103.8
Unit volume and product mix 78.3
Parts 41.8
Other 24.8
Bolzoni revenues 17.2
Nuvera revenues 0.6
Foreign currency (33.4)
Eliminations (7.9)
2022 $ 1,723.0
Revenues increased 15.0% to $1,723.0 million in the first six months of 2022
from $1,497.8 million in the first six months of 2021. The increase was
primarily due to improved pricing in the Americas and higher unit and parts
volume in the Americas , EMEA and Bolzoni . The improvement in revenue was
partially offset by unfavorable currency movements from the translation of sales
into U.S. dollars.
America's revenues increased in the first six months of 2022 compared with the
first six months of 2021, primarily from improved pricing of lift trucks, higher
unit volumes and favorable aftermarket sales, including part sales.
EMEA's revenues increased mainly due to improved unit and parts volume and
favorable pricing. These improvements were partially offset by unfavorable
foreign currency movements of
JAPIC's revenues decreased primarily as a result of lower unit and part volumes and unfavorable foreign currency movements of$1.8 million , partially offset by improved pricing.Bolzoni's revenues increased mainly due to improved pricing and higher volumes, partially offset by unfavorable foreign currency movements of$8.2 million from the translation of sales intoU.S. dollars in the first six months of 2022 compared with the first six months of 2021.
The following table identifies the components of change in operating profit for the first six months of 2022 compared with the first six months of 2021:
Operating
Profit (Loss)
2021 $ 9.0 Increase (decrease) in 2022 from:
Lift truck gross profit
(42.3)
Lift truck selling, general and administrative expenses (8.6) Bolzoni operations 5.1 Nuvera operations 2.8 2022$ (34.0) 25
-------------------------------------------------------------------------------- Table of Contents The Company recognized an operating loss of$34.0 million in the first six months of 2022 compared with an operating profit of$9.0 million in the first six months of 2021. The decrease in operating profit was primarily due to lower gross profit in the lift truck business. Gross profit declined mainly due to material cost inflation of$119.3 million , higher manufacturing costs resulting from inefficiencies associated with component shortages, a shift in sales to lower-margin lift trucks and unfavorable foreign currency movements of$16.9 million . The decrease in gross profit was partially offset by favorable pricing of$103.8 million and improved unit and parts volume in theAmericas and EMEA. Operating profit in theAmericas decreased to$7.5 million in the first six months of 2022 compared with$28.2 million in the first six months of 2021 as a result of a decrease in gross profit and higher operating expenses. Gross profit declined mainly due to material cost inflation of$83.5 million , higher manufacturing costs resulting from inefficiencies associated with component shortages of$27.8 million , a shift in mix to lower-margin products, unfavorable foreign currency movements of$9.9 million and the absence of$6.3 million for social contribution taxes previously imposed on material purchases inBrazil in the first six months of 2021. The decrease in gross profit was partially offset by favorable pricing of$91.3 million and improved parts and unit volumes. The increase in selling, general and administrative expenses primarily resulted from higher employee-related expenses, including$4.7 million of incentive compensation. EMEA recognized an operating loss of$22.2 million in the first six months of 2022 compared with an operating profit of$3.8 million in the first six months of 2021 mainly as a result of lower gross profit. Gross profit decreased due to material cost inflation of$32.6 million , unfavorable foreign currency movements of$6.4 million and higher manufacturing costs resulting from inefficiencies associated with component shortages. The decrease in gross profit was partially offset by improved unit and parts volumes and improved pricing. JAPIC's operating loss increased to$7.7 million in the first six months of 2022 from$4.4 million in the first six months of 2021, primarily due to lower gross profit from material cost inflation, manufacturing inefficiencies and a shift in mix to lower-margin products, partially offset by improved pricing.Bolzoni's operating profit increased to$5.5 million in the first six months of 2022 compared with$0.4 million in the first six months of 2021 due to improved gross profit from improved pricing, partially offset by material cost inflation and unfavorable foreign currency exchange rates. Nuvera's operating loss improved to$16.0 million in the first six months of 2022 compared with$18.8 million in the first six months of 2021 as result of improved margin from lower production costs in 2022. The Company recognized a net loss attributable to stockholders of$44.4 million in the first six months of 2022 compared with net income attributable to stockholders of$7.5 million in the first six months of 2021. The decrease was primarily the result of the factors affecting operating profit, the absence of a$4.6 million gain related to the sale of the Company's preferred shares ofOneH2, Inc. in the first six months of 2021, higher interest expense, lower pension expense and unfavorable mark-to-market adjustments on an equity investment in a third party. 26 -------------------------------------------------------------------------------- Table of Contents LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following tables detail the changes in cash flow for the six months endedJune 30 : 2022 2021 Change Operating activities: Net income (loss)$ (42.9) $ 8.4 $ (51.3) Depreciation and amortization 22.1 23.3
(1.2)
Dividends from unconsolidated affiliates 15.6 5.5 10.1 Working capital changes Accounts receivable (100.4) (56.7) (43.7) Inventories (32.5) (172.4) 139.9 Accounts payable and other liabilities 153.9 120.0 33.9 Other current assets (7.1) (12.8) 5.7 Other operating activities (8.5) (16.0) 7.5 Net cash provided by (used for) operating activities 0.2 (100.7) 100.9 Investing activities: Expenditures for property, plant and equipment (15.3) (18.1) 2.8 Proceeds from the sale of assets and investment 0.8 18.9
(18.1)
Purchase of noncontrolling interest (8.4) -
(8.4)
Net cash provided by (used for) investing activities (22.9) 0.8
(23.7)
Cash flow before financing activities$ (22.7) $
(99.9)
Net cash provided by (used for) operating activities changed$100.9 million in the first six months of 2022 compared with the first six months of 2021, primarily as a result of changes in working capital items and net income (loss). The changes in working capital were mainly due to a smaller increase in inventory levels and an increase in other liabilities primarily from down payments for customer orders, partially offset by lower payments of accounts payable and higher accounts receivable from increased revenues in the first six months of 2022 compared with the first six months of 2021. The change in net cash provided by (used for) investing activities during the first six months of 2022 compared with the first six months of 2021 was due to the current year's installment purchase of Maximal's noncontrolling interest in 2022 and the absence of the proceeds from the sale of preferred shares of OneH2 in 2021. 2022 2021 Change Financing activities: Net increase of long-term debt and revolving credit agreements$ 44.6 $ 56.0 $ (11.4) Cash dividends paid (10.9) (10.7) (0.2) Financing fees paid - (7.6) 7.6 Other (0.2) (0.2) - Net cash provided by financing activities$ 33.5
Net cash provided by financing activities decreased to$33.5 million in the first six months of 2022 compared with$37.5 million in the first six months of 2021. The decrease was primarily due to a lower increase in borrowings during the first six months of 2022 versus the first six months of 2021, partially offset by the absence of financing fees paid in 2021.
Financing Activities
The Company has a$300.0 million secured, floating-rate revolving credit facility (the "Facility") that expires inJune 2026 . There were$165.7 million of borrowings outstanding under the Facility atJune 30, 2022 . The availability under the Facility atJune 30, 2022 was$130.0 million , which reflects reductions of$4.3 million for letters of credit and other restrictions. As ofJune 30, 2022 , the Facility consisted of aU.S. revolving credit facility of$210.0 million and a non-U.S. revolving credit facility of$90.0 million . The Facility can be increased up to$400.0 million over the term of the Facility in minimum increments of$10.0 million , subject to approval by the lenders. The obligations under the Facility are generally secured by a first priority lien on working capital assets of the borrowers in the Facility, which includes but is not limited to cash and cash equivalents, 27 -------------------------------------------------------------------------------- Table of Contents 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 ofJune 30, 2022 . Borrowings under the Facility bear interest at a floating rate, which can be a base rate, LIBOR or EURIBOR, as defined in the Facility, plus an applicable margin. The applicable margins are based on the total excess availability, as defined in the Facility, and range from 0.25% to 0.75% forU.S. base rate loans and 1.25% to 1.75% for LIBOR, EURIBOR and non-U.S. base rate loans. The applicable margins, as ofJune 30, 2022 , forU.S. base rate loans and LIBOR loans were 0.50% and 1.50%, respectively. The applicable margin, as ofJune 30, 2022 , for non-U.S. base rate loans and LIBOR loans was 1.50%. The applicable interest rates for borrowings outstanding under the Facility onJune 30, 2022 was 5.25% and 1.50% for theU.S. and foreign base rate loans, respectively. The applicable interest rates for borrowings for theU.S. LIBOR loans ranged from 2.56% to 3.10% atJune 30, 2022 . The Facility also required the payment of a fee of 0.25% per annum on the unused commitments as ofJune 30, 2022 . The Facility includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company subject to certain thresholds, as provided in the Facility. The Facility limits the payment of dividends and other restricted payments the Company may make unless certain total excess availability and/or fixed charge coverage ratio thresholds, each as set forth in the Facility, are satisfied. The Facility also requires the Company to achieve a minimum fixed charge coverage ratio when total excess availability is less than the greater of 10% of the total borrowing base, as defined in the Facility, and$20.0 million . AtJune 30, 2022 , the Company was in compliance with the covenants in the Facility. The Company also has a$225.0 million term loan (the "Term Loan"), which matures inMay 2028 . The Term Loan requires quarterly principal payments on the last day of each March, June, September and December in an amount equal to$562,500 and the final principal repayment is due inMay 2028 . The Company may also be required to make mandatory prepayments, in certain circumstances, as provided in the Term Loan. AtJune 30, 2022 , there was$222.8 million of principal outstanding under the Term Loan which has been reduced in the unaudited condensed consolidated balance sheet by$4.4 million for discounts and unamortized deferred financing fees. The obligations under the Term Loan are generally secured by a first priority lien on the present and future shares of capital stock,U.S. material real property, fixtures and general intangibles consisting of intellectual property and a second priority lien onU.S. working capital assets of certain borrowers of the Facility, which includes, but is not limited to cash and cash equivalents, accounts receivable and inventory. The approximate book value of assets held as collateral under the Term Loan was$770 million as ofJune 30, 2022 . Borrowings under the Term Loan bear interest at a floating rate, which can be a base rate or Eurodollar rate, as defined in the Term Loan, plus an applicable margin. The applicable margin, as provided in the Term Loan, is 2.50% for base rate loans and 3.50% for Eurodollar loans. In addition, the Term Loan includes a Eurodollar rate floor of 0.50%. The interest rate on the amount outstanding under the Term Loan atJune 30, 2022 was 5.17%. In addition, the Term Loan includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company subject to certain thresholds, as provided in the Term Loan. The Term Loan limits the payment of dividends and other restricted payments the Company may make up to$50.0 million in any fiscal year, unless the consolidated total net leverage ratio, as defined in the Term Loan, does not exceed 2.50 to 1.00 at the time of the payment. AtJune 30, 2022 , the Company was in compliance with the covenants in the Term Loan.
The Company had other debt outstanding, excluding finance leases, of
approximately
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
28
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Contractual Obligations, Contingent Liabilities and Commitments
Since December 31, 2021 , there have been no significant changes in the total
amount of the Company's contractual obligations or commercial commitments, or
the timing of cash flows in accordance with those obligations, as reported on
pages 25 and 26 in the Company's Annual Report on Form 10-K for the year ended
December 31, 2021 .
Capital Expenditures
The following table summarizes actual and planned capital expenditures:
Six Months Ended Planned for Planned 2022
June 30, 2022 Remainder of 2022 Total Actual 2021
Lift truck business $ 11.5 $ 12.4 $ 23.9 $ 30.6
Bolzoni 3.0 2.7 5.7 10.4
Nuvera 0.8 3.0 3.8 3.3
$ 15.3 $ 18.1 $ 33.4 $ 44.3
Planned expenditures for the remainder of 2022 are primarily for product
development, improvements at manufacturing locations and manufacturing equipment
and improvements to information technology infrastructure. The principal sources
of financing for these capital expenditures are expected to be internally
generated funds and bank financing.
Capital Structure
The Company's capital structure is presented below:
JUNE 30 DECEMBER 31
2022 2021 Change
Cash and cash equivalents $ 75.6 $ 65.5 $ 10.1
Other net tangible assets 630.5 728.7 (98.2)
Intangible assets 45.8 50.7 (4.9)
Goodwill 52.1 56.5 (4.4)
Net assets 804.0 901.4 (97.4)
Total debt (580.6) (518.5) (62.1)
Total temporary and permanent equity
72 % 58 % 14 %
OUTLOOK AND STRATEGIC PERSPECTIVE
Consolidated Outlook
Given the continued component shortages due to supply chain constraints and the consequent reduction in production plans, significant material and freight cost inflation, and, more recently, the impact of the COVID-19 lockdowns inChina and theRussia /Ukraine conflict, as well as continued losses at Nuvera, the Company, on a consolidated basis, expects a larger net loss in the third quarter of 2022 than previously projected, but a return to net income in the fourth quarter of 2022. However, the fourth quarter net income is not expected to offset the losses generated in the first nine months. Generally, results in the second half of 2022 are expected to be lower than anticipated when the 2022 first quarter earnings release was issued, mainly due to adjustments made to the Company's production schedule as a result of continued supply chain constraints. These expectations are based on the anticipated reasonable resolution of component shortages and relative stabilization of material and freight costs. The Company is managing 2022 capital expenditures, operating expenses and its production plans in a manner designed to protect liquidity. Capital expenditures are expected to be approximately$33 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 over time to make these capital expenditures and investments in the business, maintaining liquidity will continue to be a priority. During 2021 and the first half of 2022, 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 in the second half of 2022 by using current inventory to 29
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Table of Contents build trucks, for which production has been significantly delayed due to critical parts shortages, and to receive components as they are needed for production.
AtJune 30, 2022 , the Company's cash on hand was$75.6 million and debt was$580.6 million compared with cash on hand of$65.1 million and debt of$479.0 million atMarch 31, 2022 , and cash on hand of$65.5 million and debt of$518.5 million atDecember 31, 2021 . As ofJune 30, 2022 , the Company had unused borrowing capacity of approximately$156 million under the Company's revolving credit facilities compared with$218 million atMarch 31, 2022 .
Lift Truck Strategic Perspective
Over the remainder of 2022, the Company expects the global lift truck market to continue to decline from the historical highs of 2021, but remain above pre-pandemic levels. As a result of this market outlook and the Company accepting only orders with expected sound margins, the Lift Truck business is anticipating a substantial decrease in bookings during the second half of 2022 compared with the second half of 2021, particularly in theAmericas . During 2021, the Company experienced production and shipment levels which were substantially lower than its objectives due to supply chain logistics constraints and component shortages. Some moderation in the number of suppliers with shortages occurred in the first half of 2022, but shortages are anticipated to continue throughout 2022, and possibly continue to escalate in light of theChina lockdowns andRussia /Ukraine conflict. As a result, planned production schedules for the second half of 2022 and in 2023 have been reduced from what was expected at the time of last quarter's earnings release. Nevertheless, full-year shipments are currently expected to increase in 2022 over 2021, despite the normal third quarter plant shutdowns, given the Company's robust backlog and actions put in place to mitigate the impact of the supply chain constraints and shortages, with the expectation that supplies of products or commodities are not constrained further. The Company is hopeful that availability will improve and that consequently production can increase over current 2022 and 2023 production schedules. As a result of theRussia /Ukraine conflict, material costs continued to increase in the second quarter of 2022. However, recent signs have indicated some relief from additional material and freight cost inflation in the second half of 2022. In light of cost inflation in 2021 and what is expected over 2022, the Lift Truck business implemented several price increases in 2021 and in the first half of 2022, but many of the orders in the backlog slotted for production in the third and fourth quarters do not reflect the full effect of all these price increases. On the other hand, new bookings are being made at close to target margins based on expected future costs at the time of expected production. Further, the renewal of tariff exclusions is expected to partly offset the anticipated higher material cost inflation in the backlog over the remainder of 2022. Due to the lag between when unit price increases go into effect and when revenue is realized as the units are shipped, as the Lift Truck segment works through its low-margin backlog in the second half of 2022 and early 2023, margins are expected to improve, specifically in the fourth quarter, when the higher-margin, already-booked trucks are expected to be produced and shipped. In the meantime, the Company expects to continue to work aggressively to manage component availability in order to increase production rates and continue to adjust prices as costs change. As a result of these factors, the Lift Truck business expects a significantly lower operating loss in the second half of the year than in the first half, mainly driven by strong operating profit in the fourth quarter of 2022 in theAmericas segment. From a broader perspective, the Lift Truck business has three core strategies that are expected to have a transformational impact on the Company's competitiveness, market position and economic performance as it emerges from the current period of 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 enhancing 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 the remainder of 2022, enhanced prices and the renewal of tariff exclusions, the Lift Truck business expects to move from the significant operating loss in the first half of 2022 to operating profit in the fourth quarter. However, as a result of manufacturing inefficiencies expected in the third quarter due to the normal seasonal plant shutdowns and reductions in production volumes due to continued supply chain constraints, as well as unfavorable currency effects, the Company expects a significant operating loss at the Lift Truck business in the third quarter that is higher than the operating loss in the prior year third quarter, and an 30 -------------------------------------------------------------------------------- Table of Contents increase to a substantial operating profit in the fourth quarter that is lower than was anticipated at the time of the 2022 first quarter earnings release. Over the second half of 2022, the Company is projecting the stabilization of product and transportation costs and continued improvement in component and logistics availability, although this could change if the availability of commodities and/or components continues to be seriously affected by various market forces, including an economic recession, the lockdowns inChina and the ongoingRussia /Ukraine conflict. 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 in the longer term. Overall, as the Company's strategic programs mature, as costs and prices come in line over 2022 and 2023, and as production volumes increase, the Lift Truck business is expected to have an increase to a substantial operating profit in the fourth quarter of 2022 and in 2023. However, results for the remainder of 2022 and in 2023 are expected to be lower than projected in the 2022 first quarter earnings release due to lower productions levels than previously anticipated.
Bolzoni Strategic Perspective
As a result of lower sales and inefficiencies expected from the normal third-quarter seasonal plant shutdowns, reduced demand for legacy components for the Lift Truck business and additional material inflation caused by theRussia /Ukraine conflict,Bolzoni expects near break-even results in the third quarter of 2022.Bolzoni expects a return to profitability in the fourth quarter of 2022 as component shortages moderate, efficiencies return and benefits are realized from pricing actions.Bolzoni expects solid operating profit in the second half of 2022 compared with an operating loss in the second half of 2021. However, operating profit in the second half of 2022 is expected to be significantly lower than in the first half of 2022.Bolzoni continues to focus on implementing its "One Company - 3 Brands" organizational approach to help streamline corporate operations and strengthen itsNorth America and JAPIC commercial operations.Bolzoni is working to increase itsAmericas business by strengthening its ability to serve key attachment industries and customers in theNorth 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 itsSulligent, Alabama plant.Bolzoni is also increasing its sales, marketing and product support capabilities both inNorth America andEurope 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 strategy of placing 45kW and 60kW engines in niche, heavy-duty vehicle applications with expected significant fuel cell adoption potential. During the remainder of 2022, Nuvera expects to continue to focus on ramping up demonstrations, quotes and bookings of these products. In addition, Nuvera is developing 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, although losses in the second half of 2022 are expected to be higher than in the first half as a result of higher operating expenses. EFFECTS OF FOREIGN CURRENCY The Company operates internationally and enters into transactions denominated in foreign currencies. As a result, the Company is subject to the variability that arises from exchange rate movements. The effects of foreign currency fluctuations on revenues, operating profit and net income (loss) are addressed in the previous discussions of operating results. See also Item 3, "Quantitative and Qualitative Disclosures About Market Risk," in Part I of this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS
The statements contained in this Form 10-Q that are not historical facts are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are made subject to certain risks and uncertainties,
which could cause actual results to differ materially from those presented.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Among the factors that could
cause plans, actions and results to differ materially from current expectations
are, without limitation: (1) delays in delivery and other supply chain
disruptions, or increases in costs as a result of inflation or otherwise,
including materials and transportation costs and shortages, the imposition of
tariffs, or the renewal of tariff exclusions, on raw materials or sourced
products, and labor, or changes in or unavailability of quality suppliers or
transporters, including the impacts of the foregoing risks on the Company's
liquidity, (2) any preventive or protective actions taken by governmental
authorities related to the COVID-19 pandemic, and any unfavorable effects of the
COVID-19 pandemic on either the Company's or its suppliers plants' capabilities
to produce and ship products, (3) delays in manufacturing and
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Table of Contents delivery schedules, (4) customer acceptance of pricing, (5) unfavorable effects of geopolitical and legislative developments on global operations, including without limitation the entry into new trade agreements and the imposition of tariffs and/or economic sanctions, as well as armed conflicts, including theRussia /Ukraine conflict, and their regional effects, (6) the ability of the Company and its dealers, suppliers and end-users to access credit in the current economic environment, or obtain financing at reasonable rates, or at all, as a result of interest rate volatility and current economic and market conditions, (7) impairment charges or charges due to valuation allowances, (8) reduction in demand for lift trucks, attachments and related aftermarket parts and service on a global basis, including any reduction in demand as a result of an economic recession, (9) 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, (10) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (11) the successful commercialization of Nuvera's technology, (12) the political and economic uncertainties in the countries where the Company does business, as well as the effects of any withdrawals from such countries, (13) bankruptcy of or loss of major dealers, retail customers or suppliers, (14) customer acceptance of, changes in the costs of, or delays in the development of new products, (15) introduction of new products by, more favorable product pricing offered by or shorter lead times available through competitors, (16) product liability or other litigation, warranty claims or returns of products, and (17) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation.
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